Pollution Prevention Benefits Manual, Volumes 1 and 2, Phase 2

. «.••• •.•::•••••<:••:•: i-:VV-' ->^ •;;^.V- ;•;-:-;;;>;;•:. •.:-:::-:.;-V " ..::^' ...•:.:, :KV.....:.V.V.. ..:-:::.::!' .:'..•.....-,' >'• •^.-••;:..Sa*;:- ^' S:;v::;.:::::m- ,•.•:•••'•.- . ' • • . • ,-, fE,?^.:;^:.^ Lifetlm* (n. years) • " •- •• '- ' '-'• :^ •••••• -• • ...,..-... ......K...-t..,......-....y.:.-.. fl jg ..'.,. . .,,...;, , :s?A-:?:'::;?v-;. .I...:-:.:-.....: .::;:.,..::.. .,.'.•' ', .;.-.•.-. •.•.• :*i6 ^.y,,,. .:.:::•::,.;••. •$•.!•>?• .: , , , ': :•:•; -• Cash Flow Estimate (C.aj) • , ;;-•-', ;,:;:;.';'V,::;;; - ........................................ iJiP-iis? :^';f:;;J;:|:;:v:-: ..,,,,,,,,;,,.-;,,,, : ..:;•..:•:•:...:• •.•.•»:...>:.:v:.:.. :''•;?.':'.. '"'•!:'':'::;:''''.';:' vS^-'Sii :;'vs;:.:-:.;3||| Will " • ANNUAL3ZED CASH FLOW. r»S% a - • •! - .;;...;.; . '::;;l%:::'l'v:h .•;&;'. : .;:: -.•«:;.:.• ., ,:. "'v^Yvi. ':v;';":. ...•-:•.:•..••. .'•-: ,- ....•.-.•••• -• .• ":&a >« ^ ' rd= 10% •I--*:.'-,::;::-:----' %'-:|:v ::.••• -.v"^': 'W.r ;".::••:«• ^•^rk".^:: :•...: ,..:v;... 1 '••• ..';---.;-?.-k-i:.-. ..,.., ,,,, . rd«1S% • . ....•.;.;....•.....•<....;• iEi! '^••:'->'" 'iv::.?^'";:'??:'- ''i?.::.".:^:',;:. ,::•:. _ ;•.'•'•••>'•;•?•.;• '::]:;:.:.' "W'l W.":v^.:, rd* .:::.:.:.y.V-.;-. '•'-:•:.£.•"'• tft- ...x.;.:.;.:...^..... ill. •I *m?w lyiiiJai, ••:•:.::•..•.•.•.••. 1P/T .sfe;. '' ' A I — ' ' * '' In thousands of year-0 dollars

-------
    Worksheet I
Tier 1  • Hidden Costs
D Current Practice

D Alternative Practic

D Incremental
ITEM DESCRIPTION 	 "

A. DEPRECIABLE CAPITAL
EXPENDITURES
Al Monitoring Equipment
A2 Preparedness and Protective
Equipment
• A3 Additional Technology
A4 Other
B. EXPENSES
Bl Notification
BZ Reporting
B3 Monitoring/Testing
.. . ..-.-.• ••.-.]. •..• .-• ; •••" £??•;>:•.;
B4 Recordkeeping , ,. ''"^.','7t^
B5 Planning/Studies/Modeling
B6 Training,/' .••.- ' ••;•?. , "v'.;.> .••.
B7 Inspections
B8 Manifesting ; •; -•..•."-. -K;
B9 Labeling
BIO Preparedness and
Protective Equipment ;
Bll Closure/Post Closure Care
B12 Medical Surveillance
B13 Insurance/Special Taxes
B14 Other.-"; V^ , :A v, -i fiiC^S






"\ CASH FLOW INFORMATION
Escalation
Rat*

-,.- .... •-.




, . .•-•. -. 	 •••'•'.':•.
First Year
of Cath Flow
(tr y»ar»)

• •.'

;;;;;;;•: ..;;./;vj;?o;|.;,,
,....,.,..,, ...

^.•:.:0:v;j:,;::-S'
.:.•;.;•.::•; •-•.••.,^,:.

Llfatltrw
(n, years)
•


••;';'•'• .' ' vf:T.
• ::«.,. :.•"•":,:
,,,.'.,. ".<•;',-:

Cash Flow
Estlmat*
(C.aj)



..... ....... v,.,.
,:..,'.,„.., .".,:.,:.:





-
"ANNUAUZED CASH FLOW-2
r«S%



:•-:;:•• •••

rd= 10*



&%,:' ••'.
"^Fv .'
rf 15<*



.. -: '" ^""
•g:,^i
rde
-
it

S'i'y*!-' :'--'<:->'
;:'T.'.':-T '•'• r.;;
._;;.;!';•:-;;>-:.•
v^:"'^;!:
'^^.
;:ii^
^ In thousands of year-0 dollars

-------
     Worksheet II
Tier 2 • Liability Costs
ITEM .DESCRIPTION \ ,
-
A.
B.
BI
B2
B3
B4
PENALITIES AND FINES
FUTURE LIABILITIES
Treatment or Storage. in Tanks •
Transportation
, Disposal in Landfills
Other

a| ' '
— ' In thousands of year-0 dollars
- -: - CASH "FLOW INFORMATION

Escalation
Rate
(r , %)
«


/'.iifeSt
First Year
of Cash Flow
(t , years)



Lifetime
(n, years)
... ^ •;:_ :*.

ifcl
Cash Flow
Estimate
(C.aj)
; .

."•-.. ••-..-;4.?.
O Current Practice

D Alternative Pract
D Increments)
, ANNUAUZED CASH FLOW

r«5%
d
.:..:;p:.-:,,x. ...

||§.:-:.;::
r • « 10%
, a


;>x.:.;:v--:: ::;:
f ' « 15%
a


;.:},:'
rdV


'•V-;.::.

-------
     Worksheet II
Tier 2 • Liability Costs
ITEM rOESCTIPTlON^

A.
B.
BI
B2
B3
B4
PENALITIES AND FINES
FUTURE LIABILITIES
"Treatment or Storage, in Tanks
Transportation
Disposal in Landfills
Other

•^ In thousands of year-0 dollars
CASH FLOW INFORMATION

Escalation
Rat*
(V %)


-
First Y»ar
of Cach Flow
(t , yaars)



Llfatlnw
(n, year*)
•; . •••'

^
Cash Flow
Estlmata
(C.aj)


. .. •;':<-;;
I I Current Practice

O  Alternative Practic

CH  Incremental
-ANNUAUZED'CASH FLOW-

r » 5%
d
;' • v

';;£::••,:;:.;;:
r = 10V.
d


•••'•'••*• ' '
rd*



'„-
•''.' "

*> ;•••

-------
ITEM DESCRIPTION

A.,
B.
ADJUSTMENT TO
EXPENSES
ADJUSTMENT TO
OPERATING REVENUES
                         Worksheet HI
                  Tier 3 'Less Tangible Costs
' *' CASH FLOW INFORMATION - - :

Escalation
•Rat*
 , , \- [, . , ^
Consumer Acceptance
• ... n::'.. QI
YES. NO:::
-( f *
Justification (Please./ustifyJ

' - • .-•• " ' •-•''••• • , • •
.• • - • , "-? '. '
i . .,
• , . ..:r..-.;;:::>;;:.r ;•; ?-m ;;; :%f::si:;:W;S:;;JUstification (Please justify) ' -"
Employee/ Union Relations:^
r .....;-, 	 ••; . :..;.,... , '. ...•.•v.,,>'..,ss;:
••.:;•;• .'•'^^^n^Ov
'•'• ' ' ' ' •'•. '>'-S YES" C;; NO«:.
',•./'.; 'v":'--'-^;^----:;-V.:"':-:v-
. , Corporate Jmage.ss;
•::-:"".-i:fiSini;
;;,' ';;.;.• •;_;:YEs:v;';Nb.^
'
' ' '. '• : ' ."•.••'.'. ' • -:; ( '-•'..
- . ' ,.' " '-- .'.-.- "
. ' ' -- '• ' ' • ' ' •-.'..'
Justification (Please justify) •
\ .-• . • -

':'*:' ' . ,

-------
                                   Worksheet 111
                           Tier 3 • Less Tangible Costs

ITEM DESCRIPTION

•
A.
B.
ADJUSTMENT TO
EXPENSES

ADJUSTMENT TO
OPERATING REVENUES
'- CASH FLOW INFORMATION
Escalation
Raw
(r . */•)


First Yaar
of Caen Flow
(t yaars)


Lltatlm*
(n, y«ar»


Estimate
(C.aj)


Q Alternative Practici

C3 incremental
    ^  In thousands of year-0 dollars
                                   TIER 3 COST FACTORS
                        Justification (Please justify)
    Consumer Acceptance

              D    a:.
              YES    N0;
Employee/Union Relations

              D    D
              YES   NO
                         Justification (Pieast justify)
                         Justification (Please justify)
        Corporate Image -

               D;   a..

-------
Worksheet IV
Cost Summary
(In thousands ofyear-0 dollars)
Tier
' ITEM DESCRIPTION
Alternative
a. DEPRECIABLE CAPITAL
EXPENDITURES
. b;::
-------
WorKsheetiV
Cost Summary
(In thousands ofyear-0 dollars)
Tier
JTEM DESCRIPTION
Alternative
a.
b;
c.
d.
e.
DEPRECIABLE CAPITAL
EXPENDITURES
^EXPENSES i''
OPERATING REVENUES
PENALTIES AND FINES
FUTURE LIABILITIES
ANNUAUZED -CASH FLOW

r-5%
Q.

v 10
-------
Worksheet IV
- Cost Summary
(In thousands ofyear-0 dollars)
Tier
ITEM DESCRIPTION
Alternative
a.
b.
c.
d.
e.
DEPRECIABLE CAPITAL
EXPENDITURES
EXPENSES
OPERATING REVENUES
I PENALTIES AND FINES
FUTURE LIABILITIES
Current
a.
b.
c.
d.
e.
DEPRECIABLE CAPITAL
EXPENDITURES
•EXPENSES.::-; :. :":" 'V
OPERATING REVENUES
^PENALTIES ;AND FINES
FUTURE LIABILITIES
ANNUAUZED CASH FLOW

V*%

rd= 10%

..-.-..;•;>
f
rd= 15%
. ;

rd= ,

-------
Worksheet IV
Cost Summary
(In thousands ofyear-0 dollars)
Tier
- * ITEM DESCRIPTION
Alternative
a. DEPRECIABLE CAPITAL
EXPENDITURES
•b. EXPENSES
c. OPERATING REVENUES
d. PENALTIES AND FINES-
e. FUTURE LIABILITIES
Current
a. DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES .
c. OPERATING REVENUES
d. .PENALTIES AND FINES
e. FUTURE LIABILITIES

ANNUAUZED CASH FLOW

rcT

"•*

-------
Worksheet V
Financial Worksheet
(In thousands ofyear-0 dollars)
Tier
ITEM DESCRIPTION
Alternative Less Current
^DEPRECIABLE CAPITAL
/EXPENDITURES
-b. EXPENSES
^'OPERATING REVENUES
d. PENALTIES AND FINES
,.,-A • •. .'.'T^T TTTTTTJ T? -*T T A'"DTT -TT*I PC' "'"
C* ••'.'*-. LJ. J. \_/ jc g*x. JL^irfiiJ | li'i*l j ii fa-fcf -;

"ANNUAUZED CASH FLOW^

rd* s^*
•^•••'

A':;.: ; .,-.
Vio%-
• •

6-.- •

f. TAX LIABILITIES
:£1;NETVSAVINGS FOR TIER
Total Savings
THROUGH TIER 0
! THROUGH TIER 1 :.,:..
• THROUGH TIER 2
.;V|;:;THROUGH'TIER' :3\:^''^

"K.-:
:-.'•;: • • ' ••:•.*?.
..X'.v.,.- •...;••,;•
'•:*T !'.'.'"'• ' '••:-:'-:-
.•'• ': •• •"

••:f:r;v :

':.;?••' ':: •'. ,

IRR

•A;K;;;,:i.;,i,4

il Cash flow tstimates for alternative less current, by definition* is the same
as cash flow estimates for incremental analysis.
-------
Worksheet V
Financial Worksheet
(In thousands ofyear-0 dollars)
Tier
j -< ITEM DESCRIPTION
Alternative Less Current
a;: DEPRECIABLE: CAPITAL
: EXPENDITURES
b. EXPENSES
COOPERATING REVENUES
d. PENALTIES AND FINES
eis FUTURE LIABILITIES
^ANNUALJZED CASH FLOW'-11

r* $%
o
-::"" .

rd« 10%

rd= 15%

6 =

f. TAX LIABILITIES
•prNET SAVINGS FOR TIER
Total Savings
IRR
THROUGH TIER 0
THROUGH :TIER;I .
THROUGH TIER 2
j: THROUGH TIER 3

.if::::'':,-:

:•.:;.::, ••.:•.:•;_
-

%.:•: • :-;•:.;.:

' !:?.;:"!': ~ . '.'', .'•' .•;':"

!':• J:':*': • *!":V V:':"'
iJ C«A /7ow estimates for alternative less current, by definition, is the same
as cask flow estimates for incremental analysis.
-------
Worksheet V
Financial Worksheet
(In thousands of year-0 dollars):
Tier
ITEM DESCRIPTION
Alternative Less Current
a,DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
COOPERATING REVENUES
d. PENALTIES AND FINES
;; FUTURE LIABILITIES.:
ANNUAUZED CASH FLOW"^

r « 5%
a

rd='lO%
'•.:••'

• •••'„
V 1S%

• &=

f. TAX LIABILITIES
SAVINGS FORTTIER
Total Savings
£\ Cash flow estimates for alternative less current, by definition, is the same
• as cash flow estimates for incremental analysis. *
IRR
THROUGH TIER 0
THROUGH TIER I'
THROUGH TIER 2
I!! THROUGH TIER 3

-'*•.'.

'.•::.:••• :- • •.

-------
Worksheet V
Financial Worksheet
(In thousands of year-0 dollars)
Tier
- ' ITEM DESCRIPTION
Alternative Less Current
a. :DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
c. OPERATING REVENUES
d. PENALTIES AND FINES
e. FUTURE LIABILITIES

v|$NNU^ZED:;JM
r«5%
d

1
•y. 10%

rd= 15%

& =

f. TAX LIABILITIES
g. .NET SAVINGS FOR TIER
IRR
THROUGH TIER 0
THROUGH TIER 1
THROUGH TIER 2
THROUGH TIER 3

•

Cashflow estimates for alternative less current, by definition, is the same
as cash flow estimates for incremental analysis.
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APPENDIX B

HIDDEN COSTS OF SELECTED REGULATIONS
-------
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APPENDIX B

HIDDEN COSTS OF SELECTED REGULATIONS •
' ' * • ' ' '

This appendix presents a brief description of each specific requirement included in the hidden
regulatory cost protocol. The specific requirements are categorized by regulatory program (and sub-
categorized by the type of requirement). The regulatory programs included in .this analysis are:

• Resource Conservation and Recovery Act,

• Comprehensive Environmental Response, Compensation, and Liability Act,

• Superfund Amendments and Reauthorization Act, Title III, .

• Clean Air Act, -

• Clean Water Act, and

• Occupational Safety and Health ACL

B.I RESOURCE CONSERVATION AND RECOVERY ACT (RCRA)
' • / . . • ' " " '
The Resource Conservation and Recovery Act (RCRA) was designed to provide technical and
financial assistance for the development of management plans and facilities for the recovery of energy and
, other resources from discarded materials and for the safe disposal of discarded materials, and to regulate
the management of hazardous waste.

In accordance with these goals, Federal regulations have been promulgated, many of which may
involve hidden costs to your facility. Many of the specific cost creating requirements can be found in Title
40 of the Code of Federal Regulations Parts 262, 263, 264, 265, and 268.

Exhibit B-l-1 indicates the specific requirements associated with particular types of requirements
that might create costs at your facility. For example, notification costs under RCRA are driven by the
notification requirements found in Sections 262.12, 262.53, 264.12, and 26437. Note that the Exhibit cites
only the general provisions of the RCRA regulations. More specific requirements may apply to your
particular facility, but are not listed in Exhibit B-l-1.

Finally, you should note that there may be additional, State- or local-level requirements for your
facility under this regulatory program. These requirements usually do not lessen impact of the federally
dictated Ones. Indeed, they can require additional activities on your part and, therefore, costs that may
help justify waste minimization implementations. You should remain aware of any such additional
requirements imposed locally.
•. ' ' ' , ' > ,-.',•• N
B.1.1 Notification

• §262.12 You must apply for an EPA identification number and notify EPA of your generator
status by submitting a Notification of Hazardous Waste Activity form (8700-12). This
is a one time cost ••-..• ,

•_ §262J53 You must notify EPA of your intention for exporting hazardous waste.

• §264.12 (a) As a TSDF owner/operator, you must notify EPA'in
§265.12 writing that you will be receiving waste from a foreign source at least four weeks prior
to initial arrival of the waste to your facility.
-------
B-2
. §264.12

• §264.12
(§265.12(b))

• §26437
§26537

• §264.72
§265.72 .

B.1.2 Reporting

• §262.41

• §262^5

• §262.56

• §262.43
§264.75
§265.75

§264.76
§265.76

§264.77
§265.77
(b) You must inform the generators of the waste received at your facility that you have
the appropriate permit

(c) Before transfer of ownership of your facility, you
must inform new owners of the requirements of 40 CFR 264 and 40 CFR 270.

You must notify and familiarize local authorities and
emergency response teams of your operations.

You must notify the Regional EPA office of an improper
manifest receipt if not reconciled with the waste generator or transporter.
A Biennial Report (Form 8700-13A) must be submitted by March 1 every even-number
year to the regional EPA.office if hazardous-waste.i&^ent-off *ite*

If you receive an improper manifest or if you do not receive confirmation of manifest
receipt at all, you must file an Exception Report.

Primary exporters of hazardous waste must file an Annual Report summarizing
hazardous waste activities no later than March 1 of each year.

Additional reporting related to the quantity and disposition of your waste may be
required according to RCRA sections 2002(a) and 3002(b).

Each TSDF must submit a Biennial Report (Form 8700-13B)
outlining waste activities.

Any non-exempt waste received without an accompanying
manifest must be reported to the regional EPA

Additional reporting is required for releases, fires,
explosions and facility closures, etc.
B.1.3 Monitoring/Testing

• §264.13 TSDFs are required to obtain a detailed chemical and
§265.13 physical analysis of the wastes present at the facility.

• §264.97 Ground-water monitoring is required at all final status TSDFs.

• §265.90 Ground-water monitoring is required at land-based units of Interim Status TSDFs.

B.1.4 Recordkeeping '

• §262.40 Generators must keep records of all manifests, Biennial Reports, Exception Reports,
and any test results or waste analyses for a period of three years.

• §262^7 For all hazardous waste exports, a primary exporter must maintain a three year record
of notification forms and Annual Reports along with a record of EPA's
Acknowledgement of Consent and confirmation of delivery of your hazardous wastes.

• §263.22 RCRA Transporters must keep a three year record of all manifests signed by the
generator and the next designated transporter or designated facility.
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B-3
• §264.73 TSDFs must maintain comprehensive operating records until ~-
§265.73 closure of the facility.
t • • •.--'„. ; , • • >'
B.1.5 Planning/Studies/Modeling

• §264.98 A detection monitoring program is required at all Final Status TSDFs.

• §265.93 An outline of a ground-water quality assessment program is required at all Interim
Status TSDFs.

• §264.99 A compliance monitoring program is required at all Final Status TSDFs.

• Pan 264 Subpart D TSDFs must develop a Contingency Plan and
Pan 265 Emergency Procedures and submit copies to local fire departments, police departments,
hospitals, and emergency response teams.

• §264.142 TSDFs must have developed a cost estimate for facility,
§265.142 , closure. '._'.-

• §264.144 TSDFs must have developed a cost estimate for facility
§265.144 ' post-closure care.

B.1.6 Training

• §26234 At least one person at all generator facilities must be trained to coordinate emergency
• response measures.

• §264.16 TSDFs must provide a facility personnel training program. •
§265.16 ' , :

• §264.55 An emergency coordinator must be trained to coordinate
§265.55 emergency response measures at TSDFs.
B.1.7 Inspections
Specific types of TSDFs have their own inspection regulations, which can be found in
§264.174, §264.195, §264.226, §264.253, §264.254, §264303, §264.347.
• §265.201 Small quantity generators have a series of requirements if they accumulate waste in
tanks. . •

* §265.195 Generators may store hazardous waste in tanks provided that they inspect daily the
tanks and document this in operations records.

B.1.8 Manifesting

• Part 262 Subpart B A completed copy of each manifest must be given to each transporter and
the owner/operator of the designated facility as well as the generator.

• §263.20 Transporters must complete and "distribute copies of the manifest to the next delivery
point and to the designated facility handling the waste.

• §264.71 TSDFs must sign all manifest copies, note any significant
§265.71 discrepancies, give the transporter an immediate copy, and send a copy to the generator.
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B-4
B.1.9 Labeling -

. §26231 As a generator, each package shipped must be labeled as part of a pre-transportation
requirement

§26232 Each package of hazardous waste must, be marked by the generator before sending.

§26233 Before transporting hazardous waste or offering the hazardous waste for transportation
off site, the generator must placard or offer the appropriate placard to the transporter.

B.1.10 Preparedness/Protective Equipment

• §26432 TSDFs are required to have an internal communicating
§26433 alarm system, devices for summoning local assistance,
§26434 fire control equipment, and a water supply system. You
§26532 must also have a 24-hour surveillance system, a physical •
§26533 facility barrier, and a means of controlling entry to
§26534 your facility (including sufficient warning signs).

B.1.11 Closure/Post-Closure Assurance

. §264143 A TSDF owner/operator must establish financial assurance ,.'.,. .,.>
§265:143 for dosure of the facility through the selection of one of the options listed m this
section.

• §264.145 The owner/operator of a hazardous waste management unit
§265.145 must establish financial assurance for post-closure care.

B.1.12 Insurance and Special Taxes

. s?64147 TSDFs are required to demonstrate financial
§265147 responsibility for injuries and property damages to third parties either through
§ SSrance oT through some other trust .fund that will provide at least $1 nuuior,Mfor
accidental occurrences with an annual aggregate of $2 million exclusive of legal defense
costs.
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B-5
EXHIBIT B-l-1

REGULATORY COSTS UNDER THE RESOURCE CONSERVATION
AND RECOVERY ACT (RCRA)
Type of Requirement
Specific Requirement in 40 CFR
Notification

Reporting

Monitoring/Testing

Recordkeeping

Planning/Studies/Modeling

Training

Inspections

Manifesting

Labeling

Preparedness/Protective
Equipment ,

Closure/Post-Closure Assurance

Medical Surveillance

Insurance and Special Taxes
§262.12, §26153, §264.12, §26437, §264.72, §265.12, §26537,
§265.72

§264.75, §262.41, §26143, §262^5, §262^6, §264.76, §264.77,
§265.75, §265.76, §265.77

§264.13, §264.97, §265,13, §265.90

§262.40,. §26237, §262.73, §263.22, §265.73

§264.142, §264 Subpart D, §265 Subpart D, §264.98,
§264.99, §264.144, §265.93, §265.142, §265.144

§26234(d)(5)(i), §264.16, §264.55, §265.16, §265.55

§264 Subparts I - X, §265.201, §265.195

§262 Subpart B, §263.20, §264.71, §265.71

§26231, §26232, §26233

§264.32, §26433, §264.34, §26532, §26533, §265.34

§264.143, §264.145, §265.143, §265.145

NA " V ' •• • • ' - '. ' " . -.

§264.147, §265.147 '•.-..'
NA = Not Applicable
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B-6
B.2 COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY
ACT (CERCLA)
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)
.as enact J I to'provide for liability, compensation, cleanup, and emergen cy respo ** f<» hazardous
substances released into the environment and the cleanup of inactive hazardous waste disposal sites.
The subsequent promulgation of Federal regulations may involve hidden * ft^J"?! « Smer
facffitv Although the primary impact of CERCLA cost considerations will be addressed ro Chapter
e Se UabS CosteTS H) section of this benefits manual), there are some factors that should
fert here. Namely, Ae tax on certain chemicals could be considered a hidden overhead cost at
facility. The Section 4661 taxes are listed in Exhibit B-2-1 and appear in Subtitle A, Subchapter B
of CERCLA.
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B-7
EXHIBIT B-2-1

TAX ON CERTAIN CHEMICALS UNDER CERCLA SECTION 4661
Chemical
Acetylene
Ammonia
Antimony
Antimony trioride
Arsenic
Arsenic trioxide
Barium sulfide
Benzene
Bromine
Butadiene
Butane
Butylene
Cadmium
Chlorine
Chromite
Chromium
Cobalt
Cupric oxide
Cupric sulfate
Cuprous oxide ,
Ethylene
Amount of Tax
(S per Ton)
4.87
2.64
4.45
3.75
4.45
3.41
230
.4.87
4,45
. 4.87
4.87
4.87
4.45
2.70
1.52
4.45
4.45
3.59
1.87
3.97 .
4.87
Chemical
Hydrochloric acid
Hydrogen fluoride
Lead oxide
Mercury
Methane
Naphthalene
Nickel
Nitric acid
Phosphorous
Potassium dichromate
Potassium hydroxide
Propylene ,
Sodium dichromate
Sodium hydroxide
Stannic chloride
Stannous chloride
Sulfuric acid
Toluene
Xylene
Zinc chloride .
Zinc sulfate _
Amount of Tax
($ per Ton)
0.29
4.23
4.14
4.45
3.44
4.87
4.45
0.24
~ 4.45
1.69
0.22
4.87
1.87
0.28
2.12
2.85
0.26
4.87
4.87
2.22
1.90
SOURCE: SARA (PL 99-499) Subtitle A, Subchapter B Section 4661.
t. • • • ' . , •

NOTE: The majority of costs associated with CERCLA are considered within

the Future Liabilities (Tier II) section of this benefits .manual
Only the Section 4661 taxes are included in Tier I.
-------
B-8
B3 SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT, TITLE HI (SARA TITLE

Title III of the Superfund Amendments and Reauthorization Act, which is also known as the
Emergency Planning and Community Right-to-Know Act of 1986, is intended to encourage and support
emergency planning efforts at the State and local levels and provide the public and local governments with
information concerning potential chemical hazards present in their communities. The emergency planning
requirements of SAPA Title III recognize the need to establish and maintain contingency plans for
responding to chemical accidents which can inflict health and environmental damage as well as cause
significant disruption within a community.

Federal regulations designed to produce these goals have been promulgated and could possibly
involve hidden costs at your facility. Many of the specific cost creating requirements can be found in Title
40 CFR Parts 350, 355, 370, and 372.

The most important requirements are Sections 312 and 313 of SARA. Section 312 covers emergency
preparedness for accidental releases while Section 313 calls for reporting. alL environmental releases of
Section 313 chemicals. The regulations corresponding to these two sections are found in 40 CFR §370.25
and §37230, respectively, and are presented in Subsection B3.2 below. The reports submitted under SARA
Section 313 have begun to bring scrutiny on facilities from the communities where the facilities are located.
EPA feels that this reporting requirement will have a major influence on pollution prevention.

Exhibit B-3-1 indicates the specific requirements associated with particular types of requirements that
might create costs at your facility. For example, notification costs under SARA Title III are driven by the
specific notification requirements found in Sections 35530 and 355.40.

Finally, you should note that there may be additional, State- or local-level requirements for your
facility under this regulatory program. These requirements usually do not lessen impact of the federally
dictated ones. Indeed, they can require additional activities on your part, and, therefore, costs that may
help justify waste minimization implementations. You should remain aware of any such additional
requirements imposed locally.

B3.1 Notification

• §35530 (b) You are required to notify the State emergency response commission (or
Governor if no commission exists) that your facility is subject to the provisions of Part
355.

• §35530 (d)(l) You must inform the local emergency planning committee of any facility
changes that will affect emergency planning, and
(2) you are required to furnish information relevant to emergency planning upon
request.

• §355.40 (b)(l) You are required to inform the community emergency coordinator or the local
emergency response committee of the area most likely to be affected by a release.
(3) You are also required to submit a written follow-up emergency notice after
a release.
(2) and (4) give information regarding what the notices should include and what
exceptions exist

• §372.45 If you sell or distribute a mixture or trade name product to a facility described in
§372.22, you must inform each person who receives the material of toxic chemical
information as described in §372.45(b).
-------
B-9
B3.2 Reporting

• §370.21
§37025
§37230
(a) You may be required to submit a Material Safety Data Sheet (MSDS) for each
hazardous chemical present at your facility to the local emergency response committee,
the State commission and the local fire department (Note: there are alternative
reporting methods in lieu of the MSDS report -see §370.21(b))

(c) Significant additional information concerning the hazardous chemical must be
submitted in a revised MSDS report • , •

(d) You must submit a MSDS. report upon request by the emergency response
committee.

(a) , If you are subject to Part 370 then you must submit an inventory form to the
emergency response commission, committee and local fire department The report must
contain Tier I information and shall be submitted before March 1 of each year, starting
in 1988. (Note: a Tier II form may be submitted in lieu of the Tier I form - see
§370.25(b))

(a) For each toxic chemical known to be manufactured (including imported),
processed, or otherwise used in excess of an applicable threshold quantity (see §37225),
the owner/operator must submit EPA Form R (EPA Form 9350-1) to EPA and to the
, State in which the facility is located (the chemicals for which this requirement currently
applies are found in Part 372 Subpart D).

(b) A Form R report also may need to be completed for a toxic chemical known
to be present as a component of a mixture or trade name product that exceeds
thresholds as defined in paragraph (a). *

Note: .§37230(b)(2) provides guidelines for determining threshold amounts if the
concentration or identity of a chemical is unknown in a trade name product
Note also: Certain reporting exemptions exist for de minimis concentrations of a toxic
chemical, articles, specific uses, laboratory activities, certain owners of leased properties,
and certain operators of establishments on leased property. Details of these exemptions
can be found in §37238.

B33 Recordkeeping ~ "

• §372.10 (a) If you are subject to Part 372 you are required to keep records of the following
for 3 years:
(1) the report you submit under §37230
(2) compliance determination materials and documentation under §372.22 or §372.45
(3) documentation supporting the Form R (§37230) report (for documentation
details see §372.10(3)) '

(b) If you are subject to the notification requirements of Part 372 then you are
required to keep records of the following for 3 years:
(1) . all supporting materials and documentation used to determine whether a notice
is required under' §372.45
(2) all supporting materials and documentation used in developing each required
notice under §372.45 and a copy of each notice.
-------
B-10
B.3.4 Inspections .

§370 25 If you submit an inventory form under §37025 then you are required to allow on-site
inspection by the fire department having jurisdiction over the facility upon request of
the department, and shall provide specific location information on hazardous chemicals
at the facility.
-------
B-ll
EXHIBIT B-3-1 .
REGULATORY COSTS UNDER TITLE HI
THE SUPERFUND AMENDMENTS'AND REAUTHORIZATION ACT (SARA)
Type of Requirement
Specific Requirement in 40 CFR
Notification
Reporting
Monitoring/Testing
Recordkeeping
Planning/Studies/Modeling
Training
Inspections
Manifesting
Labeling
Preparedness/Protective Equipment
Closure/Post-Closure Assurance
Medical Surveillance
Insurance and Special Taxes
§35530, §355.40, §372.45
§370.21, §370.25, §370.28, §37230
NA '
§372.10 -
NA '',...;
NA -. .'
§370.25
NA
NA"
NA
NA
NA
NA = Not Applicable
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B.4 CLEAN AIR ACT (CAA) '
t - '
Section 101(b) of the Clean Air Act (CAA) states that the purposes of the Act are to protect and
enhance the quality of the nations air resources so as to promote the public health and welfare and the
productivity capacity of its population; to initiate and accelerate a national research and development
program to achieve the prevention and control of air pollution; to provide technical and financial assistance
to State and local governments in connection with the development and execution of their air pollution
prevention and control programs; and to encourage and assist the development and operation of regional
air pollution control programs. . *

Federal regulations have been promulgated pursuant to these goals, several of which may involve
hidden costs at your facility. Many of the specific cost-creating regulations include 40 CFR Parts 58, 60,
61, 66, and 67.

Exhibit B-4rl indicates the types of hidden costs associated with specific CAA regulations. For
example, reporting costs attach to the reporting requirements in Sections 60.7, 61.09, and 61.11. Note that
this Exhibit cites only the general provisions of the CAA regulations. Other, industry-specific requirements
may apply to you but are not listed in Exhibit B-4-1. -

Exhibit B-4-2 provides a list of the industries with specific regulations on standards of performance
for new stationary sources of air emissions, and gives the location in 40 CFR Pan 60 where they can be
found. You should be aware of these regulations when determining regulatory costs at your facility.

Specific regulations may also apply if you emit hazardous air pollutants as defined by Section 112
of the CAA. Exhibit B-4-3 lists these pollutants.

In addition to the hazardous air pollutant regulations, industry- and chemical-specific National
Emissions Standards for hazardous air pollutants (NESHAPS) may also apply to your facility. The
industries and chemicals as well as their location in 40 CFR are listed in Exhibit B-4-4.

Not included in this general overview are the requirements surrounding" the Prevention of Significant
Deterioration (PSD) permits or the nonattainment permits. These programs are driven in most areas by
State implementation plans and consequently vary from region to region. There may be reporting,
monitoring, and recordkeeping costs associated with these permits and Other local regulations, which you
should be aware of when calculating your hidden O&M costs. ,

B.4.1 Notification

• §60.7 (a) You are required to furnish the Administrator of the Environmental Protection
Agency or the appropriate State agency with written notification of:
(1) the date that construction of an affected facility (a facility with applicable
stationary source standards) is commenced;
(2) the anticipated date of initial startup of an affected facility,
(3) the actual date of initial startup of an affected facility;
(4) any physical or operational change to your facility that increases the emission
rate of any air pollutant;
(5) the date of your continuous monitoring system initial demonstration;
(6) the anticipated date for conducting opacity observations; and
(7) the use of your continuous opacity monitoring system data results to determine
compliance with the applicable capacity standard during a performance test.

• §61.09 You are required to provide notification of the anticipated and actual startup of a
facility with hazardous emissions (Exhibit B-4-4).

• §61.13 If your facility emits hazardous pollutants to the air (Exhibit B-4-2), there are further
notification requirements, including notice of startup and notice of all emissions tests.
-------
B-13
B.4.2 Reporting

• §60.7 (c) You are required to submit a Compliance and Monitoring Assessment Report
every calendar quarter. The report should contain compliance data and relevant
monitoring and process data. ......

• §60.8 Performance test results are to be reported as indicated by the appropriate regulatory
agency. _ .

• §60.11 All opacity test results are to be reported to the appropriate regulatory agency.

• §61.10 If you are the owner or operator of an existing source or a new source which had an
initial startup before the effective date of the regulation, then you are required to
submit a report that includes identity of the hazardous pollutants, amounts emitted,
control devices used, etc.

• §61.14 The results of any performance test of your hazardous pollutant monitoring system must
be recorded. \

B.4.3 Monitoring/Testing

• §60.13 Each operator of an emissions producing facility must install a continuous monitoring
- •"• , ' • "'system.' -' •. ' - • ' • • , .

• §60.8 Also required is emissions control performance testing, for which you must provide
sampling ports, sampling platforms, safe access to sampling platforms, and utilities for
sampling equipment. ,

• §60.11 Your facility may employ a Continuous Opacity Monitoring System (CQMS) in order
to demonstrate compliance with opacity regulations.

• §61.14 Hazardous pollutant emissions (Exhibit B-4-3) require additional monitoring.

• §61.13 Additional emissions tests are also required for hazardous pollutants (Exhibit B-4-3).

B.4.4 Recordkeeping

• §60.7 (b) You are required to maintain records of the following:
the occurrence and duration of any startup, shutdown, or malfunction of the
- facility;;
- the occurrence and duration of pollution control equipment failure or monitoring
equipment failure.

• §60.8 All performance test data must be recorded.

• §60.11 All opacity test data must be recorded.

• §61.14 Hazardous pollutant monitoring data must be recorded.

• §61.13 Hazardous emissions test results must be recorded. ,

B.4.5 Inspections

• §60.11 Part of regulation compliance enforcement includes the inspection of point sources of
pollution. .
-------
B-14
EXHIBIT B-4-1

REGUIATORY COSTS UNDER THE CLEAN AIR ACT (CAA)
Type of Requirement
Notification

Reporting

Monitoring/Testing

Recordkeeping

Planning/Studies/Modeling

Training

Inspections

Manifesting

Labeling

Preparedness/Protective Equipment

Closure/Post-Closure Assurance

Medical Surveillance

Insurance and Special Taxes
Specific Requirement in 40 CFR a/
. §60.7, §61.09, §61.13 ,b/

§60.7(c), §60.8, §60.11, §61.10, §61.14 b/

§60.8, §60.11, §60.13, §61.13, §61.14 b/

§60.7(b), §60.8, §60.11, §61.13(g), §61.14 b/

NA .

§60.11

NA .

NA '.

NA
NA - Not Applicable; i.e., no general (i.e., not industry-specific) requirements apply to this cost
category.

a/ Citations to general regulatory provisions only, i.e., industry-specific requirements are not cited
in this exhibit

b/ Chemical-specific standards apply.
-------
B-15
EXHIBIT B-4-2

CLEAN AIR ACT INDUSTRY-SPECIFIC REGUIATIONS
ON STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES
Affected Industry
Reference in 40 CFR
Ammonium Sulfate Manufacture
Asphalt Concrete Plants
Asphalt Processing and Asphalt Roofing Manufacture
Automobile and Light-Duty Truck Surface Coating Operations
Coal Preparation Plants
Electric Utility Steam Generation (Construction commenced
after 9A8/78) „
Ferroalloy Production Facilities
Fossil-Fuel Fired Steam Generators (Construction commenced
after 8/17/71)
Glass Manufacturing Plants
Grain Elevators
Graphic Art Industry: Publication Rotogravure Printing
Incinerators
Industrial Surface Coating: Large Applications
Industrial-Commercial-Institutional Steam Generating Units
Kraft Pulp Mills
Lead-Acid Battery Manufacturing Plants
Lime Manufacturing Plants
Metal sCoil Surface Coating
Metallic Mineral Processing Plants
Nitric Acid Plants • ,
Petroleum Refineries
Phosphate Fertilizer Industry:
Phosphate Fertilizer Industry.
Storage Facilities
Phosphate Fertilizer Industry:
Phosphate Fertilizer Industry:
Phosphate Fertilizer Industry:
Phosphate Rock Plants
Portland Cement Plants
Pressure Sensitive Tape and Label Surface Coating Operations
Primary Aluminum Reduction Plants
Primary Copper Smelters
Primary Emissions from Basic Oxygen Process Furnaces
(Construction commenced after 6/11/73)
Primary Lead Smelters
Primary Zone Smelters
Secondary Brass and Bronze Ingot Production Plane
Secondary Emissions from Basic Oxygen Process Steelmaking
Facilities (Construction commenced after 1/20/83)
Sewage Treatment Plants
Secondary Lead Smelters
Stationary Gas Turbines
Triple Superphosphate Plants
Granular Triple Superphosphate ,

Diammonium Phosphate Plants'
Superphosphoric Acid Plants
Wet-Process Phosphoric Acid Plants
§60, Subpart PP
§60, Subpart I
§60, Subpart UU
§60, Subpart MM
§60, Subpart Y
§60, Subpart Da

§60, Subpart Z
§60, Subpart D

§60, Subpart CC
^eO^Subpart DD
§60, Subpart QQ
§60, Subpart E
§60, Subpart SS
§60, Subpart Db
§60, Subpart BB
§60, Subpart KK
§60, Subpart HH
§60, Subpart TT
§60, Subpart LL
§60, Subpart G
§60, Subpart J
§60, Subpan W
§60, Subpart X

§60, Subpart V
§60, Subpart U
§60, Subpart T
§60, Subpart NN
§60, Subpart F
§60, Subpart RR
§60, Subpart S
§60, Subpart P
§60, Subpart N

§60, Subpart R
§60, Subpart Q
§60, Subpart M
§60, Subpart Na

§60, Subpart O
§60, Subpart L
§60, Subpart GG
-------
B-16
EXHIBIT B-4-2 (continued)

CLEAN AIR ACT INDUSTRY-SPECIFIC REGULATIONS
ON STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES

Affected Industry ' Reference in 40 CFR

Steel Plants: Electric Arc Furnaces §60, Subpart AA
Steel Plants: Electric Arc Furnaces and Argon-Oxygen §60, Subpart AAa
Decarburization Vessels (Constructed after 8/17/83) .
Storage Vessels for Petroleum Liquids (Construction, §60, Subpart K
reconstruction, or modification commenced between 6A1/73
and 5/19/78)
Storage Vessels for Petroleum Liquids (Construction, §60, Subpart Ka
reconstruction, or modification commenced between 5/18/78-
and 7/23/84) ' ,
Sulfuric Acid Plants §60, Subpart H
Surface Coating of Metal Furniture §60, Subpart EE
Synthetic Organic Chemicals Manufacturing: Equipment Leaks §60, Subpart W
ofVOC
Volatile Organic Liquid Storage Vessels (Construction, §60, Subpart Kb
reconstruction, or modification commenced after 7/23/84)

SOURCE: 40 CFR Part 60.
-------
B-17
EXHIBIT B-4-3 .

HAZARDOUS AIR POLLUTANTS WITH PARTICULAR EMISSIONS STANDARDS
UNDER THE CLEAN AIR ACT
The following list presents the substances that, pursuant to Section 112 of the Clean Air Act, have
been designated as hazardous air pollutants; Special emissions standards apply to these substances which
may be significant in determining hidden costs at your facility.

Asbestos Inorganic Arsenic
Benzene Mercury
Beryllium Radionuclides
Coke Oven Emissions Vinyl Chloride

The following list presents other substances for which a Federal Register notice has been published
that included consideration of the serious health effects, including cancer, for ambient air exposure to the
substance. .Special emissions standards may also apply to these substances.

Acrylonitrile Hexachlorocyclopsntadiene
1,3-Butadiene Manganese
Cadmium Methyl Chloroform _
Carbon Tetrachloride Methylene Chloride
Chlorinated Benzenes Nickel
Chlorofluorocarbon Perchloroethylene
Chloroform Phenol
Chloroprene Polycyclic Organic Matter
Chromium Toluene
• • • Copper Trichloroethylene
Epichlorhydrin Vinylidine Chloride
Ethylene Dichloride Zinc and Zinc Oxide
Ethylene Oride

SOURCE: 40GFRPaft61 ^
-------
B-18
EXHIBIT B-4-4

INDUSTRIES WITH PARTICULAR NATIONAL EMISSIONS STANDARDS
FOR HAZARDOUS AIR POLLUTANTS UNDER THE CLEAN AIR ACT
Industry
Asbestos
Beryllium
Beryllium Rocket Motor Firing
Equipment Leaks (Fugitive Emission Sources)
Equipment Leaks (Fugitive Emission Sources) of Benzene
Inorganic Arsenic Emissions From Arsenic Trioride and
Metallic Arsenic Production Facilities
Inorganic Arsenic Emissions From Glass Manufacturing
Plants ' '
Inorganic Arsenic Emissions From Primary Copper Smelters
Mercury «>«T5\
Radionuclide Emissions From Department of Energy (DOE)
Facilities
Radionuclide Emissions From Elemental Phosphorous Plants
Radionuclide Emissions From Utilities Licensed by the
Nuclear Regulatory Commission (NRC) and Federal
Facilities Not Covered By Subpart H
Radon-222 Emissions From Licensed Uranium Mill Tailings
Radon-222 Emissions From Underground Uranium Mines
Vinyl Chloride
Reference in 40 CFR
«.^«iMM«B•—^^— -

§61, Subpart M
§61, Subpart C
§61, Subpart D
§61, Subpart V
§61, Subpart J
§61, Subpart P

§61, Subpart N

§61, Subpart O
§61, Subpart E
§61, Subpart H

§61, Subpart K
§61, Subpart I
§61, Subpart W
§61, Subpart B
§61, Subpart F
SOURCE: 40 CFR Part 61.
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B-19
B.5 CLEAN WATER ACT (CWA) •

Section 101.(a) of. the Clean Water Act (CWA) states that the objective of the Act is to restore and
maintain the chemical, physical and biological integrity of the Nation's waters.

In an attempt to achieve these goals, Federal regulations have been promulgated which include isuch
provisions as monttoring and treatment standards, effluent ^^.^^.^^rd^a^'
etc. Many of these regulations may involve hidden costs to your facility. In particular, 40 CFR Parts 117,
122, 123, 129, and 403 are significant in defining hidden regulatory costs. ;
Exhibit B-5-1 indicates the types Of hidden costs associated iia-
example, notification costs attach to the notification requirements of Section 122.41, 117.21 and 129.5.
Note that the Exhibit presents only general CWA provisions. Pollutant- and industry-specific regulations
may apply to you that are not listed in this Exhibit

Exhibit B-5-2 provides a list of toxic pollutants with particular effluent guidelines found in 40 CFR
§401.15. Regulation of these pollutants could mean additional costs at your facility.

Industry-specific effluent guidelines may also apply to your facility, and could mean added regulatory
cost Industries subject to these guidelines are listed in Exhibit B-5-3. The list also includes the location
in 40 CFR.
, ! ' . , -
Finally, you should note that there may be additional, State- or local-level requirements for your
, facility under this regulatory program. These requirements usually do not lessen impact of the federally
dictated ones. Indeed, they can require additional activities on your part, and, therefore, costs that may
help justify waste minimization implementations. You should remain aware of any such additional
requirements imposed locally.
B.5.1 Notification

• §122.41
§117.21
§129.5
• §403.12 .

B.5.2 Reporting

• §122.41
(to If YOU are the owner/operator of a facility that directly discharges into navigable
waterways or discharges into Privately Owned Treatment Works (POTWs), you have
the duty to provide discharge information to the EPA or to the appropriate State
agency for decision making purposes. This notification requirement is described within
the National Pollutant Discharge Elimination System (NPDES) permitting process.

You have notification responsibilities following the direct discharge pf a reportable
quantity of any hazardous pollutant (Exhibit B-5-2) that exceeds promulgated standards.

(a)(l) You must notify the Administrator that you have a toxic pollutant discharge
within 60 days of the promulgation of the standard.
(2) You must also notify the Administrator if you intend to commence any activity
which would result in the discharge of a toxic pollutant that has specific effluent
standards.

(f) The Industrial User must notify the POTW of any slug loading as defined by
§403.5(b)(4).
(1) The EPA or the appropriate State agency requires a report of the following:
(1) Planned changes to the permitted facility;
(2) Anticipated noncompliance;
,(3) Notice of transfer of permit;
(4) Monitoring results;
(5) Compliance schedules;
-------
B-20
(6) 24-hour reporting of unanticipated discharges that present an immediate health
threat to the public,
(7) Other noncompliance; and
(8) Relevant facts not initially reported (supplemental reports).

• §122.44 The frequency of these reports depends on the nature and effect of the discharge, but
will be performed at least once yearly.

• §129.5 (d)(2) You are required to file annual compliance reports if you are subject to any
toxic standard or prohibition (unless already included in your NPDES permit)

• §403.12 Industrial Users discharging to POTWs have further reporting requirements, which
include:

(b) Baseline Monitoring Reports (performed once; it provides general information
about your facility and process);

(d) report on compliance with categorical pretreatment standard deadlines (also
performed only one time);

(e) periodic reports on continued compliance (performed twice yearly, in June and
December). .

• §129.5 (d)(l) Reporting compliance conditions is required upon the compliance date for any
Exhibit B-5-2 toxic pollutant effluent standard or prohibition.
(2) Within 60 days following the close of each calendar year, each owner or operator
of a discharge subject to any toxic standard or prohibition must report to the
appropriate agency.

B.5.3 Monitoring/Testing

• §122.41 Q) to order to meet comprehensive reporting requirements, you must perform
monitoring and sampling of your effluent streams for the purpose of increased
compliance.

• §403.12 (g) Monitoring is also required to demonstrate continued compliance with
pretreatment standards for discharges to POTWs.

• §129.5 (d)(3) For toxic effluents, you must take 5 discharge samples at approximately equal
intervals throughout the working day.

B.5.4 Recordkeeping

• §122.41 0) You are required to keep accurate records of all monitoring information under
the NPDES.

• §403.12 (1) All Industrial Users of POTWs are required to maintain records of all
information resulting from monitoring activities.

• §129.5 (d)(l>2) You are ako required to provide records of all toxic pollutants (Exhibit B-
5-2) and toxic effluent discharge compliance.

B.5.5 Inspections <
. §122.41 (i) The EPA or the appropriate State agency has legal authority to enter your
facility for the purposes of inspection and investigation of compliance.
-------
B.5.6 Preparedness/Protective Equipment • •
:• ' . I . ' .'. .., • . , ' _ ' '•
• §122.41 (e) This provision requires the operation of backup or auxiliary facilities or similar
systems which are installed by a NPDES permittee only when the operation is necessary
to achieve compliance with the conditions of the NPDES permit
-------
B-22
EXHIBIT B-5-1

REGULATORY COSTS UNDER THE CLEAN WATER ACT (CWA)
Type of Requirement
Specific Requirement in 40 CFR a/
Notification

Reporting

Monitoring/Testing

Recordkeeping

Planning/Studies/Modeling

Training

Inspections

Manifesting

Labeling

Preparedness/Protective Equipment

Closure/Post-Closure Assurance

Medical Surveillance

Insurance and Special Taxes
§117.21, §122.41(h), §129.5(a)(l,2)

§122.41, §122.44, §129.5(d)(l,2), §403.12

§122.410), §129.5(d)(13), §403.12

§122.410), §!29.5(d)(U), §403.120)

§122.41(i),

§122.41(6)

NA
NA = Not Applicable; i.e., no general (i.e., not industry-specific) requirements apply to this cost category.

a/ Citations to general regulatory provisions only, i.e., neither industry- nor chemical-specific
requirements are cited in this exhibit.
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B-23

EXHIBIT B-5-2
: . ' ' / • ' •r '

TOXIC POLLUTANT^ UNDER THE CLEAN WATER ACT
The following list is comprised of the toxic pollutants designated pursuant to Section 307(a)(l) of
CWA • .' '• ' • :' .".-.. .' ... '; . ' : -' ,- ' - •• "

Effluent standards have been promulgated for substances in bold. General and chemical-specific
standards for these toxic pollutants can be found in 40 CFR 129.
s ' ' ,

Effluent standards are to eventually be promulgated for all substances on this list
Acenaphthene .
Acroiein
Acrylonitrile ,
Aldrin/Dieldrin
Antimony and compounds >
Asbestos
Benzene
Benzidine
Beryllium and compounds -••' '
Cadmium and compounds
Carbon tetrachloride ;
Chlordane (technical mixture and metabolites)
Chlorinated benzenes (other than
dichlorobenzenes)
Chlorinated ethanes (including 1,2-
dichlbroethane, 1,1,1-trichloroethane, and
hexachloroethane)
Chloroalkyl ethers cnloroethyl and mixed ethers)
Chlorinated naphthalene
Chlorinated phenols (other than those listed
elsewhere, includes trichlorophenols and
chlorinated cresols) '
Chloroform
2-chlorophenol
Chromium and compounds
Copper and compounds
Cyanides
DDT and metabolites
Dichlorobenzenes (1,2-, 1,3, and 1,4-
dichlorobenzenes)
Dichlorobenzidine .
Dichloroethylenes (1,1-and 1,2-dichloroethylene)
2,4-dichlorophenol
Dichlprppropane and dichloropropene
2,4-dimethylphenol
Dinitrotoluene
Diphenylhydrazine
Endosulfan and metabolites
Endrin and metabolites
Ethylbenzene -••-•-,-
Fluoranthene
Haloethers (other than those listed elsewhere,
includes chlorophenylphenyl ethers,
bromophenylphenyl either, bis(dichloroisopropyl)
ether, bis(chloroethoxy) methane and
poiychlorinated diphenyl ethers)
Halomethanes (other than those listed elsewhere;
includes methylene chloride, meihylchloride,
methylbromide, bromoform, dichlorobromo-
methane) '
Heptachlor and metabolites
Hexachlorobutadiene
Hexachlorocyclohexane
Hexachlorocyclopentadienelsophorone
Lead and compounds
Mercury and compounds
Naphthalene ,
Nickel and compounds
Nitrobenzene *
Nitrophenols (including 2,4-dinitrophenol,
dinitrocresol)
Nitrosamines .
Pentachlorophenol '
Phenol
Phthalate esters
Poiychlorinated biphenyls (PCBs)
Polynuclear aromatic hydrocarbons (including
benzanthracenes, benzopyrenes, benzofluoranthene,
chrysenes, dibenzanthracenes, and indenopyrenes)
Selenium and compounds
Silver and compounds
23,7,8-tetrachlorodibenzo-p-dioxin (TCDD)
Tetrachloroethylene
Thallium and compounds'
Toluene
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B-24

EXHIBIT B-5-2 (continued)

TOXIC POLLUTANTS UNDER THE CLEAN WATER ACT
Toxaphene
Thchloroethylene
Vinyl chloride
Zinc and compounds
SOURCE: 40 CFR Part 401.
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B-25
EXHIBIT B-5-3

INDUSTRIES WITH PARTICULAR EFFLUENT GUIDELINES
AND STANDARDS UNDER THE CLEAN WATER ACT
Industry Reference in 40 CFR.

Aluminum Penning ' §467
Asbestos Manufacturing §427
Battery Manufacturing Point Source Category §461
Builders Paper and Board Mills §431
Canned and Preserved Fruits and Vegetables, .. . .. ..§407
Canned and Preserved Seafood §408
Cement Manufacturing §411
Coil Coating . §465
Copper Forming §468
Dairy Products §405
Electrical and Electronic Components §469
Electroplating §413
Explosives Manufacturing §458
Feedlots . §412
Ferroalloy Manufacturing §424
Fertilizer Manufacturing . §418
Glass Manufacturing §426
Grain Mills . _ §406
Gum and Wood Chemicals Manufacturing §455
Hospitals v . §460
Ink Formulating §447
Inorganic Chemicals ". • §415
Iron and Shell Manufacturing §420
Leather Tanning and Finishing §425
Meat Products §432
Metal Finishing §433
Metal Molding and Casting §464
Mineral Mining and Processing §436
Nonferrous Metals §421
Nonferrous Metals Forming and Metal Powders §471
Offshore Oil and Gas Extraction . , §435
Ore Mining and Dressing §440
Organic Chemicals §414
Paint Formulating §446.
Paving and Roofing Materials §443
Petroleum Refining §419
Pharmaceutical Manufacturing §439
Phosphate Manufacturing §422
Photographic Processing . §459
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B-26
EXHIBIT B-5-3 (continued)

INDUSTRIES WITH PARTICULAR EFFLUENT GUIDELINES
AND STANDARDS UNDER THE CLEAN WATER ACT
Industry
Reference in 40 CFR
Plastics Molding and Forming
Porcelain Enameling
Pulp, Paper and Paper Board
Rubber Processing
Soaps and Detergents
Stream Electric Power Generating
Sugar Processing
Textiles
Timber Products
§463
§466
§430
§428
§417
•§423
§409
§410
§429
SOURCE: 40 CFR.
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B-27
B.6 OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA)

The Occupational Safety and Health Act (OSHA), developed under the Department of Labor, was
written to preserve employee health and safety in the workplace. OSHA was enacted under P.L. 91-596,
December 29,1970, and was amended by Public Law (PX.) 93-237, January 2,1974, P.L. 95-251, March 27,
1978, P.L. 97-375, December 21, 1982^ and P.L. 98-620, November 8, 1984. The act assures safe and
healthful working conditions for working men and women by authorizing enforcement of the standards
developed under the act; by assisting and encouraging the States in their efforts to assure safe' and healthful
working conditions; by providing for research, information, education, and training in the field of
occupational safety and health; and for other purposes.

OSHA regulations occur in Title 29 of the Code of Federal Regulations in Parts 1900 to 1999.
These Parts include regulation on all employee-related provisions, many of which are unrelated to (and
unaffected by) hazardous materials manufacturing, processing, repackaging, release, handling, or storage.
The OSHA regulatory requirements outlined in this appendix-concern only general and chemical-related
occupational/safety and health provisions. Many of the specific cost creating requirements can be found
in Title 29 CFR Parts 1904 and 1910.
• ' ' '. ' \
Exhibit B-6-1 presents specific requirements associated with particular types of requirements that
might create costs at your facility. For example, notification costs under OSHA are driven by the specific
notification requirements found in Sections 1910.1200(g)(8) and those associated with the chemical-specific
requirements for chemicals listed in Exhibit B-6-2. ;

The special chemical requirements in OSHA include 30 chemicals and chemical types (see Exhibit
B-6-2). The additional requirements for these substances can be very extensive (for instance, requiring that
a closed or isolated system be constructed for 4^Nitrobiphenyl) but usually fall within the same regulatory
cost categories as the previous regulatory costs. These 30 chemical and chemical types are not included in
the cost protocol due to their specificity. If you have any of these species, you can quantify any reducible
costs by understanding the additional requirements imposed on your facility. Exhibit B-6-2 presents the
chemicals/chemical types that have special provisions in OSHA and their section location in Title 29 of the
Code of Federal Regulations.

Finally, you should note that you are required, according to §1904.10 of 29 CFR, to comply with any
State plans that are in place. These plans can not be less stringent than the federal requirements.
However, they can be a source of even more requirements. You should remain aware of any additional
requirements imposed locally.

B.6.1 Notification

• §1910.1200 (g)(8) You must maintain copies of the required material safety data sheets (MSDSs)
for each hazardous chemical in the workplace readily available to employees during each
work shift.

-••..• There are notification requirements associated with the constituents located in Exhibit
B-6-2 that may be reduced if the material is removed from usage and handling at your
facility. ' , . .

B.6.2 Reporting '„,.

• §1904.4 You must make available a record of all injuries and illnesses having occurred at the
site upon the occurrence of an incident ;

• §1904.5 You must post an annual summary of occupational injuries and illnesses for each
establishment t *
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B-28
• §1904.8 You must, within 48 hours of the occurrence of an employment accident which is fatal
to one or more employees or which results in the hospitalization of one or more
employees, report the incident.

• §1904.21 • You must, upon receipt of an Occupational Injuries and Illnesses Survey Form, fill it
out and return it .

• §1904.15 Companies with less than 10 employees are exempt from §1904 except for the previous
three requirements, Le., §§1904.5, 1904.8, and 1904.21.

• §1904.16 Establishments in SICs 52-89 (excluding 52-54, 70, 75, 76, 79, and 80) are exempt from
part 1904 except for the previous three requirements: §§1904.5, 1904.8, and 1904.21.

• There are additional reporting requirements associated with the constituents located in
Exhibit 1-2 that may be reduced if the material is removed from usage and handling
at your facility.

B.63 Monitoring/Testing

• There are monitoring requirements associated with the constituents located in Exhibit
B-6-2 that may be reduced if the material is removed from usage and handling at your
facility.
B.6.4
Recordkeeping

§1904.2 You must

§1904.6
'" a log and summary of occupational injuries and illnesses.
§1904.7
You must keep the records specified in §§1904.2, .4, and 5 for a period of five years
following the end of the year to which they relate.

You must provide, upon request, the records specified in §§1904.2, .4, and .5 for
inspection and copying by authorized officials.
• §1910.120 (o)(2) An accurate record of the medical surveillance program must be kept.
Information to be kept includes name and social security number of the employee, the
physician's written opinions, employee medical complaints, and a copy of the
information provided to the examining physician.

• There are additional recordkeeping requirements associated with the constituents
located in Exhibit B-6-2 that may be reduced if the material is removed from usage and
handling at your facility.

B.6.5 Planning/Studies/Modeling

• §1910.1200 (e) You are required to have a written hazard communication program, available
to employees, their designated representatives, and authorized officials.

• §191038 You must develop an emergency action plan.

• §1910.120 (o)(3) A safety and health program must be developed and implemented for employees
involved in hazardous waste operations. The program must be designed to identify,
evaluate, and control safety and health hazards in their facilities for the purpose of
employee protection.
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B-29
§1910.120
§1910.120
B.6.6 Training

• .§1910.1200
§1910.120
B.6.7 Inspections
B.6.8 Labeling
(1) An emergency response plan must also be developed and implemented by
employers to handle anticipated emergencies prior to the commencement of hazardous
waste operations.

(o)(4) A decontamination procedure must be developed, communicated to employees
and implemented before any employees or equipment may enter areas on site where
potential for exposure to hazardous substances exist (r,ee §1910.120(k)).

There are additional planning requirements.associated with the substances located in
Exhibit B-6-2 that may be reduced if the material is removed from usage and handling
at your facility.
(h) You must supply your employees with information and training on hazardous
chemicals in their work area upon initial assignment, and upon addition of a new
hazard. ' . • .

(o)(5) A training program must be developed and implemented for employees involved
with hazardous waste operations. Initial training must be for 24 hours and refresher
training must be 8 hours annually. .

There are additional training requirements associated with the substances located in
Exhibit B-6-2 that may be reduced if the material is removed from usage and handling
at your facility. ^
There are inspection requirements associated with the constituents located in Exhibit
B-6-2 that may be reduced if the material is removed from usage and handling at your
facility.
• §§1910.1200 (f)(4)-(8) You must label each container of hazardous chemicals in the workplace with
the appropriate information.

• There are additional labeling requirements associated with the substances located in
Exhibit B-6-2 that may be reduced if the material is removed from usage and handling
at your facility. " , : -
- - \ • i •
B.6.9 Preparedness and Protective Equipment

• §1910.1000 An Employee's exposure to many substances is restricted by substances level and
duration of exposure - see tables Z-l, Z-2, and Z-3 in 29 CFR, Part 1910, Subpart Z.

• There are additional requirements (i.e., isolated or closed chemical systems, clothing,
restricted areas, washing and showering facilities, equipment maintenance, breathing
apparatus, etc) associated with the substances located in Exhibit B-6-2 that may be
reduced if the material is removed from usage and handling at your facility.
t • • ' ' . .
B.6.10 Medical Surveillance

* §1910.120 (o)(2) A medical surveillance program must be instituted for all employees exposed
to hazardous substances or health hazards above permissible limits for 30 days or more
a year, as well as for those on respirators for 30 days or more a year and all hazardous
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B-30
materials (HAZMAT) employees. Medical examinations and consultations must be
made available to employees eveiy 12 months, as well as prior to and at the termination
of employement (see §1910.120(f)).

There are medical surveillance requirements associated with the substances located in
Exhibit B-6-2 that may be reduced if the "material is removed from usage and handling
at your facility.
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P-31
EXHIBIT B-6-1 .
REGULATORY COSTS UNDER THE OCCUPATIONAL SAFETY
AND HEALTH ACT (OSHA)
Type of Requirement
Specific Requirement in 29 CFR a/
Notification
Reporting
Monitoring/Testing
Recordkeeping
Planning/Studies/Modeling ,
Training
Inspections
Manifesting
Labeling
Preparedness and Protective Equipment
Closure/Post-Closure assurance
Medical Surveillance
Insurance and Special Taxes
§1910.1200(g)(8) b/ ... ' . • "' •
§1904.4, §1904.5, §1904.8, §1904.21 by
NAb/
§1904.2, §1904:6, §1904.7, §1910.120(o)(2) b/
§191038, §1910.1200(6), §1910,120(o)(3),(4) b/
§1910.1200(h), §1910.120(o)(5) b/
NAb/
'•NA ; _.',.' -...--
§1910.1200(i)(4).(8) b/
§1910.1000, §1910.1200(g)(8) b/
NA ,. - . ..." "
§1910.i20(o)(2) b/
NA
NA = Not Applicable; i.e., no general (i.e^ not chemical-related) requirements apply to this cost category.
a/ These regulatory cites cover only OSHA provisions concerning chemical-related occupational safety
and health.
b/ Chemical-specific requirements apply (see Exhibit B-6-2).
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B-32
EXHIBIT B-6-2

OSHA CHEMICALS AND ASSOCIATED REQUIREMENTS
Cherrical/Chemical Type
Reference in 29 CFR
l,2-dibromo-3-chloropropane
2-acetylaminofluorene
3,3'-dichlorobenzidine
4-aminediphenyl
4-dimethylaminoazobenzene
4-nitrobiphenyl
Acetylene
Alpha-naphthylamine
Asbestos

Benzidine
Beta-naphthylamine
Beta-propiolactone
. Bis-chloromethyl Ether
Coke Oven Emissions
Cotton Dust
Dip Tanks Containing Flammable and Combustible Liquids
Ethyleneimine
Explosives and Blasting Agents
Flammable and Combustible Materials
Hydrogen
Inorganic Arsenic
Lead
Methyl Chloromethyl Ether
Nitrous Oxide
N-nitrosodimethylamine
Oxygen
Spray Finishing Using Flammable and Combustible Materials
Storage and Handling of Anhydrous Ammonia
Storage and Handling of Liquefied Petroleum Gasses
Vinyl Chloride
§1910.1044
§1910.1014
§1910.1007
§1910.1011
§1910-1015
§1910.1003
§1910.102
§1910.1004
§1910.1001,
§1910.1101
§1910.1010
§1910.1009
§1910.1013 •
§1910.1008
§1910.1029
§1910.1043
§1910.108
§1910.1012
§1910.109
§1910.106
§1910.103
§1910.1018
§1910.1025
§1910.1006
§1910.105
§1910.1016
§1910.104
§1910.107
§1910.111
§1910.110
§1910.1017
SOURCE: 29 CFR
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APPENDIX C
1
FUTURE LIABILITY COSTS
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APPENDIX C

FUTURE LIABILITY COSTS

This appendix presents the cost calculation sheets for estimating future liabilities. Estimating future
liability costs is judgmental in nature. You are encouraged to be conservative in your estimates thus
reflecting your emphasis on PP as a goal and not profit maximization. Your estimates of future liability
costs will reflect subjective corporate policy and not precise scientific calculations.

To illustrate the concept of timing and magnitude of future liability costs, this appendix presents a
number of cost equations. All the cost equations are based on a number of implicit assumptions which
are not spelled out in this manual. Some of these assumptions may not be applicable to your firm.
Furthermore, because the timing and magnitude of liability costs are inherently uncertain, they are best
represented by probability distributions (i.e., likelihood of various levels of costs at various times in the
future) and not by single point estimates as presented in this appendix. Simple cost equations thus may
not represent accurately the potential for liability costs associated with waste management at your firm. For
these reasons, you should not use the numbers and equations presented in this appendix without detailed
analysis and scrutiny.

Future liability (FL) costs can attach to both the current practice and the PP alternative. Future
liability costs are strictly equal to zero if and only if your company generates no hazardous waste and
releases no hazardous materials. Opportunities for future liabilities can arise from non-permitted potential'
releases as well as permitted releases. This appendix outlines methods for calculating the potential liabilities
associated with the following waste management activities:

• Treatment or storage'in tanks;
• Transportation; and
• Land disposal (on-site or off-site)..

There are seven types of future liability costs that are potentially associated with each waste or
materials management activity:

FL1: Soil and waste removal and treatment . ,
FL2: Ground-water removal and treatment
FL3: Surface sealing
FL4: Personal injury
FL5: Economic loss ' -
FL6: Real property damage
FL7: Natural resource damage. N '

This appendix suggests the form of the cost equation for estimating future liability of each type.
While the cost equation basically has the same form across waste management activities for a given liability
type, the values of the parameters entering in the cost equation may vary from one waste management
activity to another. Exhibits C-l to C-7 contain the equations and management-specific parameter values
for estimating FL1 through FL7, respectively. For example, Exhibit C-l suggests the form of the equation
for estimating the costs of soil arid waste removal and treatment Exhibit C-l also suggests values or ranges
of values for the parameters of the cost equation for tanks and transportation separately (there are no costs
for soil and waste removal and treatment for landfill disposal). Exhibit C-8 illustrates the calculation of
the year when liabilities are expected to be incurred, i.e., the first year of cash flow; - •
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C-2
EXHIBIT C-l

SOIL AND WASTE REMOVAL AND TREATMENT
(FL1, in thousands of dollars)

FL1 =: 8.9 x a x b x Q

FL1 gives the general equation for estimating the costs of soil and waste removal and treatment
This same equation applies to potential releases from tanks and transportation (this cost is not applicable
to landfill disposal). However, you will need to select different values of the parameters a, b, and Q (as
provided below) depending on the waste management practice analyzed. For example, if you are analyzing
the costs of soil and waste removal and treatment associated with storage in underground tanks, you will
set a equal to 2, select a value of b between 0.0001 and 0.1, and set Q equal to the total annual quantity
of waste stored in tanks. •
Tanks;

a = correction factor
— 2 (if underground)
= 1 (if above ground),

b = fraction of the total annual quantity (treated or stored in tanks) expected to be released
= 0.0001 to 0.1 depending on the type of tank (above ground or under ground; carbon, concrete,
stainless, or fiberglass) .

Q SB total quantity of waste treated or stored in tank (kgal/yr)

Transportation;
b = fraction of the annual quantity (transported) expected to be released
« 9.5x10-* x D + 7.6xlO"* (tanker truck for bulk liquids)
» 2.4xlff6 x D -f 2.9x10^ (flatbed truck for drums)

D SB distance to treatment or disposal facility (miles)

Q = total quantity of waste transported (kgal/yr)

Landfill Disposal;

Not Applicable: Because landfills contain a large volume of waste and excavation costs are very high,
excavation is unlikely to be the preferred option for remediating a leaking landfill
Leaking landfills result in costs for pumping arid treating ground water (see Exhibit C-
2).
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C-3
EXHIBIT C-2 '
* ' --•--,

GROUND-WATER REMOVAL AND. TREATMENT
(FL2, in thousands of dollars) .......

FL2 = a •»- (bx'c)

FL2 gives the general equation for estimating the costs of ground-water removal and treatment
This same equation applies to potential releases from tanks and landfill disposal (this cost does not apply
to transportation practices because releases during transportation generally do not result, in ground-water
contamination). The values of a and c are given below as a function Of other parameters whose values
depend on the waste management practice considered.
' ' ,; . " •
a = capital costs ,
= 91 + [(0-25 x D x W) + 0.08 D2 '+ 137 W * 91 D +
(0.015 x CC x V x W) -+ (0.005 x CC x V x D)] / 1,000

b = O&M cost
= 92 + [11 W 4- 8 D + (0.015 x OM x V x W) + (0.005 x OM x V x D)] / 1,000

D = distance to nearest drinking water well (meters) ' ' j, " ' ' '
= 150m to 3^00 m '

W = , width of ground-water plume at facility boundary (meters)

V= ground-water velocity (meters/year)
= 30 m/yr to 3,000 rn^yr

CC = unit capital cost of ground-water treatment (S/cubic meter/day)

OM = unit operating and maintenance cost of ground-water treatment
(($#ear/)/(cubic meter/day))

Tanks;

c = multiplicative factor to determine present value of all O&M costs
= 4 to8 ;

CC = 440 S/m3/day .
OM =120 T$/year)/(m5/day)

W = 3m to 10pm

Transportation:

Not Applicable

Landfill Disposal;

c =_ 5 to 25 . ' .

CC = 340 $/m5/day
OM =85
W= 500m to 700m
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C-4
EXHIBIT C-3 .

SURFACE SEALING
(FL3, in thousands of dollars)

FL3 = CS x A-

FL2 gives the general equation for estimating the costs of surface sealing. This cost applies to
landfill disposal and not to tanks and transportation. CS and A are given below.
Tanks and Transportation;

Not Applicable

Landfill Disposal;

CS - unit cost of surface sealing landfills (kS/acre)
^ 7 to 46 k$/acre

A = area of the landfill (acres)
» 65 to 150 acres
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C-5
EXHIBIT C-4 ,

PERSONAL INJURY
' (FL4, in thousands of dollars)

FL4 = a x b

.'• - FL4 gives.the general equation for estimating the costs of personal injury. This same equation
applies to potential releases from tanks and landfill disposal (this cost does not apply to transportation
practices). Potential values of a and b are given below.

Tanks or Landfill Disposal; • .1
• . . v '•••.-•
a = average claim per person for lost time due to disability and mortality, medical costs related to illness,
and medical monitoring costs •
= $56,000 per person (default value) • ' • • v • ' , .

b = potentially affected population
= 15,000 (worst case default value)
= 3,500 (typical case default value)
= 10 (best case default value) . ,

Transportation; •

Not Apph'cable
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C-6
EXHIBIT C-5

ECONOMIC LOSS
(FL5, in thousands of dollars)

FL5 = cost to replace a water- supply source

Tanks and landfill Disposal;

As a first approximation, ELS may be assumed to be a strict function of the size of the population
served. In reality, the cost to replace a water supply source varies with many other parameters such as
distance to nearest alternative source of water, cost of purchasing water from an alternative source, etc.
• •• • .; ' t

Cost to Replace Water Supply Source 2
Population Served (Thousand 1986$) _

50-99 343 ;
100-499 412
500-999 617
1,000- 2,499 1.040
2^00- 4,999 1.812
5,000- 9,999 2,424
10,000- 99,999 10,443
100,000-999,999 . 51,747
1,000,000 + 333,947

Transportation!

Not Applicable
1 U.S. EPA, Technologies and Costs for the Removal of Fluoride from Potable Water Supplies," Final
Draft, July 1983, pp. 58-78.
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C-7
EXHIBIT C-6 •

REAL PROPERTY DAMAGE
(FL6, in thousands of dollars)

FL6 = a x bx'c

FL6 gives the general equation for estimating the costs of property damage due to contamination of
ground water underlying private property. This same equation applies to potential releases from tanks and
landfill disposal (this cost does not apply to transportation practices). The values of a, b, and c are given
below as a function of the width of the ground-water plume, W, which is a function of the management
practice considered.

a = devaluation factor . .
0.15 to 030
- . "\ /..''•••'•'. •." '• ••.:•-"•.•
b = land value (kS/acre)
0.9 to 3.5

c= area of the off-site plume \ • •
F [033 D2 + p x W) - OJ W2] / 4047

D= distance to nearest drinking water well (meters)
150 m to 3200m .

W = width of ground-water plume at facility boundary (meters)

Tanks; , v
" * tr ' • "
W as 3 m to 100 m
Transportation;

Not Applicable

Landfill Disposal;

W = 500 m to 700 m
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C-3
EXHIBIT C-7

NATURAL RESOURCE DAMAGE
(FL7, in thousands of dollars)

FL7 = a x b

EL7 gives the general equation for estimating the costs of natural resource damage due to
contamination of surface water. This same equation applies to potential releas.es from tanks, transportation,
and landfill disposal. The values of a and b are given below as a function of the management practice
considered.

a = the unit cost of dredging and disposing of contaminated material plus the cost of fish killed (k$/acre)

b ««" area of surface water contaminated (acres)

•'' ' '
Tanks and Landfill Disposal;
/ ' : '
as 692 (default value, 1986 kS) .

b = 1 acres to 3 acres

Transportation!

as 692 (default value, 1986 kS)

b s 1 x d to 3 x d (default values) ,

d = quantity expected to be released, expressed as a fraction of the annual quantity transported
s 0.5xl(T* x D + 7.6XKT*5 (tanker truck for bulk liquids)
» 2.4xl(T(5 x D + 2.9XKT* (flatbed truck for drums)

D ** distance to treatment or disposal facility (miles)
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C-9
EXmBIT C-8 •

EXPECTED YEAR IN WHICH LIABILJTIES ARE INCURRED

Year = Time + (D x KF)/V

Time = the ejcpected time lapse between the start of the project and the initial release (years) (range
from one to twenty years) . ,
i , • '~ ^. ' ,
D= distance to the nearest drinking water well (meters)
= 150 (worst case default value)
SB 1,500 (typical case default value)
= 3,200 (best case default value)

RF = retardation factor for waste constituents (range from 1 to 1,000)

V = the:ground-water velocity (rn^r) "
= 3,000 (worst case default value)
=, 300 (typical case default value)
= 30 (best case default value)

Tanks;

Time = 1 to 20 years

Transportation; *

Time = 1

D = 0 -; :.:: . ' . ' ': ._.•." . , . '••' ";: . '-

Landfill Disposal: •

Time = 1 to 40 years
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APPENDIX D
• f

HYPOTHETICAL FIRM EXAMPLE
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APPENDIX D

HYPOTHETICAL FIRM EXAMPLE .

This appendix illustrates the use of the manual with a hypothetical firm example. This analysis is
presented to demonstrate:

, (1) the mechanics of the cost and financial protocols; and

(2) the usefulness of the results; for evaluating the economic feasibility of PP
projects. .

The example calculations presented are only meant to be illustrative of the manual's use. Furthermore,
these calculations are limited in general to the types of costs identified in this Phase II Manual. In all
worksheets (in this appendix as well as in the entire manual), positive cash flows correspond to cash inflow
(i.e., the firm makes money) and negative cash flows correspond to cash outflow ,(Le., the firm loses money).
This rule does not apply in the cost tables of Tier 0 (usual costs, Exhibit D-2), Tier 1 (hidden regulatory
costs, Exhibit D-4) and Tier 2 (future liability costs, Exhibit D-5); because these cost tables are used to
estimate costs only (i.e., dollars out), all costs are represented as positive numbers for convenience. When
reporting cost numbers from the cost tables to the worksheets, the hypothetical user is very careful to place
a minus sign (-) before all cost estimates (i.e., cash outflow)

This appendix is organized in six sections. Section D.I introduces the hypothetical firm's current
practice and PP alternative. Section D.2 presents the "standard" or usual (Tier 0) calculations for evaluating
the economic feasibility of the PP alternative. Sections D3 through D.5 present the Tier 1, Tier 2, and
Tier 3 calculations, respectively. Section D.6 presents a summary of the calculations done by the
hypothetical firms. The worksheets completed by the hypothetical user are attached at the end of this
appendix as well as in separate form to faciu'titate going back and forth between the text of this appendix
and the numbers presented in the worksheets.

D.1 PRESENTATION OF HYPOTHETICAL FIRM "

The hypothetical firm, Auric Jewelry Inc. (AJI), owned by J.F. Auric, is a participant in the metal
finishing industry (SIC 3910) and is a producer of gold-electroplated jewelry. AJI has annual revenues of
$10 million per year and employs 40 people. The firm has been in the plating business for two decades
and has continued to be profitable. The company operates a single plating facility that is located in an
industrial park on the outskirts of a large city. Exhibit D-l summarizes the characteristics of waste
management practices under the current practice and the PP alternative.

Description of Current Practice

The electroplating process used by AJI plates gold onto a nickel base. Before entering the plating
operation, the metal settings to be plated are precleaned at room temperature (i.e., cold cleaned) with the
chlorinated solvent 1,1,1-trichlorOethane (TCA) in an open top vapor degreaser.

The AJI gold plating bath is maintained indefinitely by protection from contamination through
continuous filtration, and by replenishment of the depleted plating chemicals. After plating, the parts are
dipped in two consecutive still rinse baths (rinse baths that are not supplied with a continuous stream of
water), and then a running rinse bath. Dragout is minimized using standard good housekeeping practices
(e.g., hanging parts over tanks). Because gold, cyanide, and other contaminants accumulate in the still bath
rinsewater, the rinsewater can be recycled to the plating baths, and the cyanide (or more importantly for
Mr. Auric, the gold) can be recovered. Furthermore, because the rinse in the still bath captures most of
the cyanide, the cyanide level of the running rinsewaters .is low enough to allow the Stream to be discharged
to a POTW (Publically-Owned Treatment Works).
-------
D-2
. EXHIBIT D-l

SUMMARY OF CURRENT AND ALTERNATIVE PRACTICES
Current Practice
PP Alternative
1,1,1-Trichloroethane used in the precleaning
process. Spent solvents from the precleaning step
(2,100 Ib/month, F002 waste) are shipped off-site
to solvent reclamation facility. Still bottoms from
reclaimer incinerated and ashes are landfilled.

No other precleaning effluent
Cyanide-gold electroplating bath is continuously
filtered to be indefinitely maintained, but would
be an F007 waste if disposed.

Filtrate from the plating bath (<100 kilograms
per month of F008 waste) is generated and
disposed as a hazardous waste.

Rinsewater from the electroplating process, also
an F007 waste, is discharged to local POTW.
Aqueous alkali cleaning process is used. The
spent cleaner is taken back by the vendor at
system maintenance.
Additional rinsewater (ultimately discharged to
local POTW) is produced in the precleaning
process upon exiting the cleaning step.

Cyanide-gold bath is unchanged in the PP
alternative.
Filtrate is unchanged in the PP alternative, but is
not disposed as hazardous waste due to
elimination of large quantity generator status.

Rinsewater production and handling unchanged in
PP alternative.
-------
D-3
Characteristics of Waste Streams
. • • . • • • . . - - • • . v
The firm uses 60,000 pounds of solvents per year for the precleaning operation. Despite practices
to minimize evaporation, a large proportion (58 percent) of the solvents is lost to evaporation. The
remaining 42 percent becomes spent solvents containing 1,1,1-trichloroethane (TCA) with 10 percent
suspended solids and 5 ppm nickel. The facility therefore generates about 2,100 pounds per month of
spent TCA (2,100 Ibs/mo = 0.42 x 60,000 ibsyyr '+ 12 mo/yf) or about 2^50 gallons per year (at a density
of 10.7 pounds per gallon). Under the Resource Conservation arid Recovery Act (RCRA) directives
regulating the disposal of hazardous waste, TCA is a "listed" F002 waste and, therefore, AJI is a hazardous
waste generator. , .

The filters on the gold plating bath are changed biweekly and sent off-site for reclamation of gold
and possible filter reuse. The generated filtrate amounts to just below 100 kilograms per month (i.e., about
200 pounds). The filtrate is also a listed waste under RCRA (F008). Since the facility generates more than
liOOO kilograms or 2^20 pounds per month of hazardous waste (2,100,lbs of F002 waste plus about 200 Ibs
of F008 waste), AJI is classified as a large quantity hazardous waste generator.

The plating bath (if it were riot indefinitely maintained) and any rinsewaters generated in the process,
would be considered RCRA F007 wastes, if disposed of as solid wastes. However, since they are discharged
to a POTW, they fall under the jurisdiction of the Clean Water Act (CWA). As mentioned above, the
cyanide level (the only constituent of concern in the rinsewater waste stream) is low enough-to allow
rinsewater discharge without pretreatment. .
• ' - ' '- , . . S \ : -~ '
Waste Management Practices

There are two hazardous waste streams disposed in the current practice, the spent solvent (2,100
Ibs/m'o) and the plating bath filtrate (200 Ibs/mo). The spent solvent waste stream is temporarily stored on
site in an above ground tank with a 600-gallon capacity. At least once every 90 days, the tank is emptied,
and the waste is manifested, picked-up, and transported off site in a tank truck by a solvent reclamation
facility.2 The solvent recycler reclaims the solvent through a distillation process. The still bottoms from
this process are still classified as an F002 waste and must be dealt with further by the reclamation facility,
these bottoms are incinerated to meet the land disposal restrictions and the ashes landfilled. The
reclamation facility has the distillation process, incinerator, and landfill on site.

The filtrate is placed in a drum, also sent off site at least once every 90 days. The drum is stored
in a secure area and is kept closed except when adding the filtrate. The solvent reclamation facility also
takes this waste and places it in its landfiU after incineration.

Description of Alternative Practice

Following the procedures of the EPA Waste Minimization Opportunity Assessment Manual, the
operating personnel of this facility have conducted a waste minimization audit and proposed a PP
alternative. The PP alternative chosen is characterized as source reduction through raw material
substitution. This proposed project entails the replacement of the chlorinated solvent precleaner with a
conveyorized, aqueous based spray-cleaning system. The proposed process equipment varies greatly from
the batch solvent cleaner, and, therefore, AJI must purchase new equipment when substituting for the
chlorinated solvent
In the PP alternative, the only waste stream generated and disposed as a solid waste is the filtrate
from the gold plating bath which, as mentioned previously, amounts to less than 100 kilograms per month.
2 F002 solvent wastes are restricted from land disposal as explained in Appendix E. Economics dictate
that the spent solvent be recycled off-site.
-------
D-4
Again, the plating bath (indefinitely maintained) is not a source of waste; and any rinsewaters produced in
the process are discharged to a POTW and fall under the authority of the CWA,

Upon regular maintenance of the aqueous based cleaning system, the producer of the aqueous
cleaning chemicals takes back the spent cleaning solution in order to recover some of the proprietary
chemicals used in the formulation. Therefore, this waste is not disposed by AJI. The additional rinsewaters
produced in the rinsing portion of the aqueous cleaning process are also discharged to the POTW.

Waste Management Practices '

In the alternative, the only hazardous waste stream is the filtrate. However, since the quantity of
the waste stream is less than 100 kilograms per month, the facility is conditionally exempt under federal
RCRA regulations and the filtrate may be disposed of as a non-hazardous waste. Note, however, that the
facility could be regulated under certain state RCRA programs (e.g., California has no small quantity
generator status).

In addition, preliminary engineering calculations indicate that the wastewater effluent from the
aqueous cleaning system will contain 2 percent suspended solids and 1 ppm nickel and can be discharged
to a POTW, like the plating bath rinsewater (without pretreatment).

D.2 TIER 0: USUAL COSTS

Mr. Auric decides to perform the Tier 0 analysis once for the current practice and once for the PP
alternative. That is, he chooses to calculate the costs of the current practice and the PP alternative
separately. Alternatively, he could have chosen to estimate the difference in costs between the current and
alternative practices.

D.2.1 Tier 0 Cost Calculations

Mr. Auric summarizes his estimates of usual costs for the current and alternative practices in Exhibit
D-2. He then uses these estimates of Tier 0 cash flows to complete the middle blocks of one Worksheet
0 for current practice and another Worksheet 0 for the alternative practice.

Mr. Auric Estimates Costs under the Current Practice
*
Mr. Auric, who is the plant engineer as well as the plant owner, realizes that the open top vapor
degreaser and other related process equipment are very old and hve a market value of close to zero.
Therefore, he considers capital costs under the current practice as "sunk" costs, and therefore equal to zero.

The current practice operating expenses are comprised of raw material, maintenance, and disposal
costs. The annual raw material cost for TCA is $45,000, based on purchasing 60,000 pounds at $0.75 per
pound. The solvent cleaner is serviced four times a year at a cost of $1,000 for parts and labor, for a total
annual maintenance cost of $4,000. The facility sells the spent solvents to an off-site reclaimer at 94 cents
per gallon (roughly 9 cents per pound); hence a total annual revenue from sales of spent solvents (a by-
product) equal to $2£00 per year.

Mr. Auric Estimates Costs under the Alternative Practice

The vendor of the equipment and materials submits a bid with quoted capital costs for the PP
alternative of $155,000. This includes $100,000 for the cleaning system, $40,000 for the dryer, and $1,500
to install the equipment The lifetime of the cleaning system and dryer is 20 years.
-------
-•. •• -. ,D-5 ' - •• -' '.

- : EXHIBIT D-2

SUMMARY OF USUAL COST ESTIMATES
Cash Flow
Description
Current Practice
Capital Costs
Raw Materials
Maintenance
Item and Quantity .
i . •

NA
60,000 Ibs/yr of TCA
Servicing of solvent
Unit Cost

NA
$0.75/lb
@ $1,000
Cash Flow
Estimate

SO
$45,000 /yr
, $4,ooo yyr
cleaner 4 times a year

By-Product Revenues 2350 gal/yr of spent
TCA sold to recycler
$0.94/gal $2^00 /yr
Alternative Practice

Capital Costs
r1 . •

Raw Materials

Maintenance

Disposal

Energy
Cleaning System
Dryer
Installation

Water and Chemical

Servicing of Aqueous
cleaner 6 times a year

Permit fee for POTW
discharge of wastewater
effluent from aqueous
cleaning system

Electricity to operate
conveyor and spraying
systems
NA
NA
NA
NA
@ $2,000
$100,000
$40,000
$1,500
$5,000 /yr
$12,000 /yr
NA
NA
$2,000/yr
$10,000 /yr
-------
D-6
The operating expenses for the PP project are comprised of raw material, maintenance, disposal, and
energy costs. The annual raw material cost includes the cost of water and chemical cleaner for a total of
• about $5,000. The aqueous cleaner requires maintenance six times a year at a cost of $2,000 each time, for
a total annual maintenance cost of $12,000. The annual disposal cost for the proposed project is $2,000;
this cost represents increased permit fee for POTW discharge of the effluent from the aqueous cleaning
system. The annual energy cost of this new equipment is $10,000 of electricity charges to operate the
conveyor and spraying systems. The PP project will not affect the labor costs of the facility.

Mr. Auric Completes the Middle Blocks of Two Tier 0 Worksheets

The first step in analyzing the economic benefits of the PP alternative is to complete the cost
worksheets for Tier 0. Mr. Auric has chosen to complete one Worksheet 0 for the current practice and
one Worksheet 0 for the PP alternative. Alternatively, Mr. Auric could have chosen to complete only one
Worksheet 0 by focusing on the difference in costs between the current and alternative practices.

Mr. Auric first checks the •Current Practice* box in the upper right corner of one Worksheet 0 (page
D-31); he will use that worksheet for the current practice. Likewise, he checks the "Alternative Practice"
box in the upper right corner of another blank Worksheet 0 (page D-32) which he will use for the
alternative practice.

Mr. Auric then copies the cash flow estimates for the current and alternative practices from Exhibit
D-2 into the appropriate columns of the two worksheets. For example, Exhibit D-2 indicates raw materials
costs of $45,000 per year under the current practice. Hence, Mr. Auric writes -45 on the current practice
Worksheet 0 in the cash flow estimate column on line B8 (Raw Materials). Note that Mr. Auric is careful
to (1) convert the cash flow estimates in Exhibit D-2 into units of thousands of dollars (e.g., 45 is $45,000
divided by 1,000), and (2) place the minus sign before cash flow estimates corresponding to cash outflow
or money spent (e.g., -45).

The next step for Mr. Auric is to complete the other middle-block columns of the two Tier 0
worksheets; i.e., escalation, first year of cash flow, and lifetime of each cash flow item. To keep the example
as straightforward as possible, Mr. Auric assumes the same escalation rate (i.e., expected future inflation),
same first year, and same lifetime for all cash flows. Mr Auric assumes an escalation rate of 4 percent, a
first year of cash flow of 0 (i.e., starting this year), and a lifetime of 20 years (i.e., lifetime of the PP
equipment). Taking advantage of this simplifying assumption and of the fact that he does not have one-
time expenses mixed with his recurrent expenses (see notes 1 and 2 below), Mr. Auric sums upward all cash
flows within the same category (i.e., expenses, operating revenues) and writes the sum totals in the
approriate lines of the worksheets (e.g., -49 for expenses under the current practice, -29 for expenses under
the alternative practice).

In general, you may not sum cash flow estimates in the middle block of a cost worksheet as Mr.
Auric does in this example if

(1) You assign different values to either escalation, or first year of cash flow, or
lifetime for different cash flows within the same category (e.g., expenses). For
example, if you assign a higher escalation rate to hazardous waste disposal costs
than to energy costs, then you will need to keep those two cash flows separate
for purposes of the financial calculations (i.e^ for completing the right-hand
block of Worksheet 0); or

(2) You have both one-time expenses and recurring expenses. As explained in
Exhibit 6-1 of Chapter 6 of this manual, one-time expenses (line items Bl
through B6) and recurring expenses (line items B7 through B14) are treated
differently in the financial calculations and thus must be kept separate when
completing the cost worksheets. For example, if you have both a salvage value
cash flow (line item B3) and a labor cash flow (line item Bll), then you may
-------
D-7
, not sum the estimates of cash flows associated with those two items in the
middle block of Worksheet 0. .

D.2.2 Tier 0 Financial Calculations ' >'

In order to perform the financial analysis of the PP. project, Mr Auric assumes the following

(1) The minimum rate of return that he is willing to accept is 15 percent; Le., the
hurdle rate or minimum acceptable rate of return to his firm is 15 percent; and

(2) The federal corporate tax rate is 34 percent and the state corporate tax rate is
10 percent for a total corporate tax rate of 44 percent

With these two assumptions, and the results of the cost calculations (Le., escalation rate is 4 percent, first
year of cash flow is year 0 or 1989, lifetime is 20 years, and cash flow estimate as calculated), Mr. Auric
is now equipped to apply the financial calculations described in Chapter 6 of this manual Following the
procedures described in Chapter 6, Mr, Auric completes first the right-hand blocks of the two Tier 0
worksheets, then Worksheet IV for Tier 0, and finally Worksheet V for Tier 0.

Mr. Auric Completes the Right-Hand Blocks of the Two Tier 0 Worksheets •

J.F. first completes the right-hand blocks of the two Tier 0 worksheets by annualizing the cash flows
of the middle block. For that, he uses as appropriate Equations (6.1) through (6.5) and Exhibits 6-J
through 6-3 of Chapter 6. For example, in Worksheet 0 for current practice, J.F. calculates annualized
expenses for three values of the discount rate (5%, 10%, and 15%). From the middle block, J.F. knows
that the current practice costs $49,000 a year in 1989. Next year, the expenses associated with the current
practice will increase due to inflation and will amount to 550,960 (Le., 1.04 x $49,000). In the following
year, the expenses associated with the current practice will amount to $53,000 (Le., 1.042 x $49,000 = 1.04
x $50,960). In year 2010 (Le., 20 years from now), these expenses are expected to increase to $107,400 due
to inflation (i.e., 1.0420 x $49,000). The purpose of the annualization is to find the constant annual amount
that would have the same value in present terms as this stream of cash flows just described. The
calculation of this annualized cash flow requires that a factor, referred to as the discount rate, be specified.
At a 5% discount rate, J.F. calculates the annualized expenses under current practice using Equation (6.1):

Annualized Expenses = PVF1 x AF x $49,000. ,

Because all his expenses are of the recurrent type (line items B8 and B14, see Exhibit 6-1), PVF1 is given
by Equation (63):

PVF1 = p*xPVF2

where

p m (1 + re) / (1 + rd) = (1 + 0.04) / ( 1 + 0.05) = 0.99 (Equation (6.5))

t/= 0 (first year of cash flow); therefore p° = 1 ^
- • •, v - ' " • '• -- '
PVF2 = (1 - p") / ( 1 - p) = 183 (Equation (6.4) or Exhibit 6-2)

Therefore

PVF1 = 1 x PVF2 = 183
-------
D-8
On the other hand, for a discount rate rd of 5 percent and a lifetime of 20 years, AF is equal to 0.08
(see Exhibit 6-3). Hence the annualized expenses under the current practice for a discount rate of 5%:

Annualized Expenses = 183 x 0.08 x $49,000 = $71,900

Mr Auric writes this value (-71.9) in the Worksheet 0 for" current practice under the column V* = 5%."
Using the same procedures, Mr. Auric calculates annualized cash flows for discount rate values of 5 percent,
10 percent, and 15 percent for all cash flows estimated in the middle blocks of Worksheet 0 for the current
practice and Worksheet 0 for the alternative practice. Note that the annualized cash flows decrease (in
absolute terms) with higher values of the discount rate.5 For example, the annualized expenses under the
current practice are -71.9, -712, and -70.9 for rd values equal to 5 percent, 10 percent, and 15 percent,
respectively This is because as the discount rate increases, the present value of the stream of cash flows
associated with each cash flow item decreases. That is, as the discount rate increases, future cash flows
have less value in present terms.

Mr. Auric Completes Worksheet IV for Tier 0

Having completed the two Tier 0 worksheets, Mr. Auric now takes a blank Worksheet IV and writes
0 in the tier box in the upper right corner to indicate that he is doing the Tier 0 analysis. Mr. Aunc wiU
use Worksheet IV to summarize the annualized cash flow results. He copies the annualized capital
expenditures, expenses, and operating revenues from lines A, B, and C of the two Tier 0 worksheets on the
corSpondingTb, and c lines of Worksheet IV. For example, he copies -71.9, -71.2, and -70.9 on line b
(expenses) of the current box of Worksheet IV. As discussed in Chapter 6, Step 2, Mr. Aunc would not
have had to complete Worksheet IV if he had chosen to perform the Tier 0 analysis incrementally.

Mr. Auric Completes Worksheet V for Tier 0

Having completed Worksheet IV, Mr. Auric will now estimate the key financial indicators of the
PP project using a blank Worksheet V where he writes 0 in the Tier box in the upper right corner.
Following the procedures described in Step 3 of Chapter 6, he first calculates the incremental annualized
cash flows; i/, the difference between the annualized cash flows under the PP alternative and the
annualized cash flows under the current practice as summarized in Worksheet IV, Tier 0. For example, Mr.
Auric calculates incremental expenses of 29.4 (i.e., -42.6 -(-71.9)) for a discount rate value of 5 percent.

Mr. Auric then calculates the tax liabilities of the PP alternative relative to the current practice using
Equation (6.7) of Chapter 6:

Incremental Tax Liability = - r, x [(FD x a) + b + c + e]

where r. is the corporate tax rate (federal plus state, equal to 44 percent for Mr. Auric) and FD is a
depreciation factor given by Equation (6.8) or Exhibit 6-4 as a function of the discount rate id. For id
equal to 10 percent, for example, FD is equal to 0.72 and the tax liability is -$4,500 per year since

- 4.5 = - 0.44 x [(0.6274 x -24.8) + 28.9 -3.2 + 0]

Under the PP project, Mr. Auric would pay $4,500 worth of taxes more than under the current practice
assuming a discount rate of 10 percent
3 Due to rounding, the annualized operating revenues under the current practice appear to remain
constant (equal to 3.2) as the .discount rate varies. In reality, these annualized operating revenues do
•decrease as the discount rate increases.
-------
D-9
Mr. Auric then computes the net annualized savings at Tier 0 by adding lines a through f of
Worksheet V. For example, the net annualized savnigs for a 5 percent discount rate is equal to $6,800
since ' -.' ^ ' • . .•- ' ' ' ....-• • ' • .-.-.'

6.8 = - 12.4 + 29,4 - 3.2 - 6.9 •

This means that if Mr. Auric was willing to accept a return on his investment equal to 5 percent, the PP
alternative would seem accpetable since it would save an equivalent amount of $6,800 annually. However,
Mr. Auric has determined upfront that he would not invest in the PP project unless it gave a return on his
money of at least 15 percent As Worksheet V indicates, at a discount rate of 15 percent, the PP project
loses an estimated $3,500 annually compared to the current practice and therefore is not cost-justified.

Mr. Auric reaches the same conclusion by estimating the Internal Rate of Return (IRR) of his PP
project at Tier 0. The IRR is the discount rate value that results in total annualized savings equal to SO.
Mr. Auric repeats the previous calculations iterating 14 in order to determine the internal rate of return
(IRR). He estimates that the IRR of the PP alternative relative to the current practice is equal to 12
percent and confirms that the alternative, at this level of examination, is not economically justified given
his firm's minimum acceptable rate of return of 15 percent

Because Mr. Auric is keenly aware of his paperwork, reporting, and other regulatory requirements,
and because the project is close (12% vs. 15%), he decides to pursue the analysis a bit further. Also, Mr.
Auric decides to perform the Tiers 1, 2, and 3 analyses on an "incremental" basis because he feels he can
better estimate these cash flows incrementally rather than separately for the current practice and PP
alternative. Therefore, he will use only one Worksheet I, one Worksheet II, and one Worksheet ni and
check the "Incremental" box in those worksheets.
DJ TIER 1: HIDDEN REGULATORY COSTS

D.3.1 Tier 1 Cost Calculations

Mr. Auric uses the Tier 1 protocol incrementally to more accurately estimate the "true" cost of his
current practice. In a first step, Mr. Auric fills out the regulatory status questionnaire to reflect both his
current and alternative practices (see Exhibit D-3). The purpose of this first step is to highlight the specific
regulatory requirements that he has to comply with currently and under the PP alternative. For example,
J.F. circles status Number 1 under the current practice but not under the PP,alternative to indicate that,his
firm is currently a large quantity generator but would no longer be one under the PP alternative. In this
exercise, Mr. Auric finds that he is subject to regulatory requirements in several programs (i.e., RCRA,
SARA Title III, CWA, and QSHA), which include numerous types of requirements (i.e., notification,
reporting, recordkeeping, planning, training, inspections, manifesting, labeling, and protective equipment).

His next step is to estimate the incremental annual costs of complying with each applicable
requirement, using the Tier 1 cost tables. As shown in Exhibit D-4, J.F. circles on the cost tables the status
numbers established in Step 1. For each requirement, he then estimates the cash flows using the formulae
and default values provided in the cost tables. In several .cases Mr. Auric,could directly estimate the
incremental Annual Cost for the requirement from his personal experience; instead of using the cost
equations and defaults provided. He sums the estimates on each cost table and reports this cost estimate
into the "Cash Flow11 column of Worksheet L As shown in Worksheet I, his incremental bidden O&M
expenses equal $2,490 per year.

The next step is to analyze the financial implications of the $2,490 (+2.49) in estimated lower
regulatory compliance costs.
-------
D-10
EXHIBIT D-3

REGULATORY STATUS QUESTIONNAIRE
(for current and alternative practices) a/
Status Number
Current Practice PP Alternative
. Does/Is Your Facility:
Resource Conservation and Recovery Act
.-—fl) 1 A RCRA large quantity generator?
** 2 2 A RCRA small quantify generator?
3 _^ A 3 A primary exporter of hazardous waste?
""" " 4 Have hazardous waste storage, tank(s) on site?
5 Transport hazardous waste?
6 W"\JP 6 A final status TSD facility?
7 7 An interim status TSD facility?

Comprehensive Environmental Response, Compensation, and Liability Act b/
g s Have CERCLA Section 4661 chemicals (see Exhibit B-2rl)
Superfund Amendments and Reauthorization Act, Title
10
10
Clean Air Act
13
14
• Sf
Sf
£/
13
14
Si.
s/
s/
Clean Water Act
15
15
Handle any 40 CFR §355 Appendix A and B extremely hazardous
substances at of above their Title III threshold?

Occasionally release reportable quantities (see 40 CFR §302 and
Table 302.4) of CERCLA hazardous substances or any 40 CFR §355
Appendix A and B extremely hazardous substances?

Maintain any material safety data sheets under 29 CFR
§1910.1200(g)(8) (see (22) under OSHA)?

Have 10 or more employees and fall within SIC codes 2000 to 3999
and within the current calendar year handle 40 CFR §372.65 toxic
chemicals above thresholds stated in 40 CFR §372.25?

A new stationary source (see Exhibit B-4-2 of Appendix B)?

Emit Section 112 hazardous air pollutants (see Exhibit B-4-3 of
Appendix B)?

Within an industry listed in Exhibit B-4-4 of Appendix B?

Have a PSD permit?

Have a nonattainment permit?

Discharge wastewaters directly to surface water?

Discharge wastewaters to a publicly owned treatment works
(POTW)?
-------
.D-ll
EXHIBIT D-3 (continued)

REGULATORY STATUS QUESTIONNAIRE
(for current and alternative .practices) a/
Status Number
Current Practice PP Alternative . Does/Is Your Facility:

Clean Water Act (continued) ;
17 17 Occasionally discharge reportable quantities of hazardous substances
as defined in 40 CFR §117?

'({jp Have toxic pollutant discharges listed in Exhibit B-5-2 of Appendix
B for which chemical-specific standards have been promulgated?
__
Within an industry listed in Exhibit B-5-3 of Appendix B?
(grfuK^—tg>

Occupational Safety and Health Act
19 19 Have less than 10 employees or is it within SICs 52-89 (except 52-
54,70,75,76,79,80)? \

20 20 Have 10 or more employees and is it not within SICs 52-89 (except
52-54,70,75,76,79,80)?

Have OSHA air contaminants as per 29 CFR §1910.1000, Table Z-
Handle any hazardous chemicals as defined, in 29 CFR
§1910.1200(c)?

23 23 A hazardous waste treatment, storage, and disposal facility (regulated
under 40 CFR Parts 264 or 265), or a large quantity generator of
hazardous waste, or a facility accumulating hazardous wastes for 90
or more days (as defined in 40 CFR §26234)?
. • ' •' : •.'.''..'- '•<.'.••'.•".• -..'•
c/ c/ Handle any OSHA chemicals listed in Exhibit B-6-2?
a/ For funher information about the regulatory programs, see Appendix B or the appropriate sections
of the Code of Federal Regulations. Other Federal Programs (e.g., Toxic Substances Control Act,
Safe Drinking Water Act) and state programs (e.g., New Jersey ECRA) may apply but were not
analyzed in this manual due to resource'limitations. Note that SARA Section 312 (reporting on
emergency preparedness) is covered by Status Number 11 and SARA Section 313, (reporting on
environmental releases) is covered under Status Number 12.

b/ Most of these costs are covered in Tier 2, Liability Costs - Chapter 4.

c/ These questions apply to additional chemical or industry-specific requirements that can impose
significant costs, and should be considered. Due to their specific nature, however, these costs are
not quantified in this manual . - ,
-------

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D-26
D.3.2 Tier 1 Financial Calculations

After completing his Tier 1 cost calculations (i.e., middle block of Worksheet I), Mr. Auric proceeds
to Chapter 6, where he again uses the financial calculations to discern whether or not his PP alternative
is economically justified at the Tier 1 level.

Mr. Auric maintains the escalation rate at four percent, the first year of cash flow at the current year
(year 0), and the project lifetime at 20 years. As in Tier 0, after entering cash flows into the worksheet,
Mr. Auric calculates the annualized costs for each Of the non-zero expense items, then sums the costs onto
line B (note that no currently foreseeable regulation would require incremental capital expenditures in Tier

1>'
He reports onto Worksheet V the incremental annualized costs from Worksheet I (J.F. does not
need Worksheet IV in Tier 1 because he performs the analysis incrementally). Using the procedures
described in Step 3 of Chapter 6, Mr. Auric calculates the tax liability and the net annualized savings of
the PP alternative relative to the current practice, taking into account hidden regulatory costs only (Tier
1). With annualized cash flow increasing by S3,600, the Tier 1 tax liability is -$1,600 per year so that the
net'annualized savings for Tier 1 are $2,000 per year (i.e., hidden regulatory costs are about $2,000 less per
year with the PP alternative than with the current practice after considering $1,600 increase in taxes). Net
savings through Tier 1 are -$1,500 at a 15 percent discount rate. The NPV through Tier 1 is -$9,400 (i.e.,
total annualized savings of -1,500 divided by an annualization factor of 0.1598). Mr. Auric then determines
the internal rate of return (IRR) which equals 13.7 percent. Mr. Auric concludes that the alternative is still
not economically justified through Tier 1. Therefore, Mr. Auric proceeds to higher-level tiers of the cost
protocol; Le., liability costs in Tier 2 and less tangible costs in Tier 3.

D.4 TIER 2: LIABILITY COSTS

D.4.1 Tier 2 Cost Calculations

This hypothetical example does not include in Tier 2 the penalties and fines discussed in Chapter
3. Due to resource limitations in developing this example, only future liability costs are assessed. Please
note that if your firm is found to be in violation of any environmental laws, the fines and penalties can be
severe.

Mr. Auric first identifies the waste management activities that may impose some liability on his
firm. Chapter 4 identifies the following three hazardous waste management activities:

• Treatment or storage in tank(s);

• Transportation; and
' • - - i • '
• Disposal in a landfill (on-site or off-site).

Mr. Auric determines that as a result of his current activity, he has undertaken and still undertakes each
of the three activities and is, therefore, subject to potential liabilities for each. His alternative practice,
however, would not require any of these activities in the future.

Having determined the waste management activities he currently engages in, Mr. Auric uses Appendix
C to estimate the costs of future liabilities. Since AJI is subject to aU types of liabilities under the current
practice, all of the equations in Appendix C are applicable. Using these equations, Mr. Auric completes
Exhibit D-5). That is, he estimates the total liability costs attached to each waste management practice, his
-------
D-27

EXHIBIT D-5

TIER 2 COST TABLES (FUTURE LIABILITIES)
Type of Liability

Soil and Waste Removal
and Treatment

Ground-Water Removal
and Treatment

Surface Sealing

Personal Injury

Economic Loss

Real Property Damage

Natural Resource Damage

Total Liability (TL)

Your Share of Total
Liability (fL)

Cash Flow Estimate
(=TLxfL)
Exhibit* Tanks Land
in Appendix C a/ Treatment/Storage Transportation Disposal
C-l

C-2

C-3

C-4

C-5

C-6.

C-7

NA
o

o
O
$13-
0. o;
2/2.
First Year of Cash Flow b/
C-8
NA = Not Applicable

a/ Refer to Appendix C, Exhibits C-l through C-8, for preliminary illustrative guidance on how to
estimate each type of liability and the first year of cash flow. Note, however, that Appendix C is
meant only to be illustrative of the concept and mechanics of future liabilities associated with
hazardous materials and waste management. Appendix C cannot and should not be used for definite
answers to the very complex problem of liabilities. ,

b/ The timing of future liabilities is very important because, other things being equal, liabilities incurred
in a distant future have a smaller net present value, and therefore a lesser impact on' the economic
feasibility of a PP alternative, than liabilities incurred in the near future.
-------
D-28
decision.

D.4.2 Tier 2 Financial Calculations

annualized costs of projected liabilities is still $84,000 per year.
far exceeds his 15 percent minimum acceptable rate of return.

D.43 By-Difference Technique

Mr Auric performs the by-difference calculations because he does not have great

costs are taken into account

At this Doint in the analysis, Mr. Auric could stop the economic analysis of the PP alternative.
« fre'addressed next as an illustration of the Tier 3 cost analyse

liabilities (as uiustraiea in ^ppeuuiA v^/, "»~ ..~i-~
estimated "by difference.' Section(s) D.4.1 and D.4.2 present
predictive modeling framework for estimating liability costs.
technique.
-------
D-29
D.5 TIER 3: LESS TANGIBLE COSTS •

• Mr. Auric recognizes that less tangible potential costs such as adverse community and labor relations,
and unfavorable loan rates to facilities managing hazardous waste, if favorably controlled, will result in an
increase in revenues for Auric Jewelry Inc. He proceeds to the Tier 3 level to estimate the potential
revenue increase. , _ " .

, D.5.1 Tier 3 Cost Calculations

To estimate the economic impact of less tangible costs on his gold plating operation, Mr. Auric
completes Worksheet III incrementally. Mr. Auric first describes qualitatively the less tangible benefits of
his PP project He recognizes that the project will improve his firm's public image and thus increase net
revenues from sales of gold-plated jewelry. According to a marketing survey conducted by ids trade
association, Mr. Auric estimates that an improved corporate image resulting from innovative hazardous
waste management will increase his gross sales by 03 percent. Based upon his 1989 annual revenues of $10
million, he thus estimates that the PP alternative will increase his annual operating revenues by $30,000.
He also knows that his pre-tax net revenues are roughly equal to 10 percent of his gross revenues.
Therefore, he estimates that the PP alternative will increase his net revenues by $3,000 a year. He thus
writes +3 under 'cash flow estimate" in the "adjustment to operating revenues" line of Worksheet IIL

D.5.2 Tier 3 Financial Calculations

After completing his analysis of Tier 3 costs, Mr. Auric proceeds a final time to Chapter^. Using
the financial calculations, he finds that less tangible benefits can be as high as $2,400 a year at his minimum
acceptable rate of return and would bring the IRR of the PP project up to 34 percent The PP project
looks even better than before. , ,

D.6 SUMMARY OF MR. AURICS CALCULATIONS

Exhibit D-6 summarizes the cost savings or benefits to the hypothetical firm at each of the four
'tiers' or levels of analysis. For the hypothetical firm, the cost savings from raw materials are not large
enough to compensate for increased costs such as the capital expenditure for purchase and installation of
the mechanized aqueous-based cleaner. At the Tier 0 level, the PP project costs an additional $3,500 a
year compared to the current practice and has an Internal Rate of Return (IRR) of 12 percent, which is
less than the 15 percent rate of return required by Mr. Auric for investing in new projects. Therefore, the
PP project is not justified using usual costs only.

The PP project continues to be not cost-justified when considering hidden regulatory costs (Tier .1)
in addition to usual costs. Despite the additional cost savings associated with reduced regulatory
requirements (e.g., less inspections), the PP project continues to cost $1,500 more than the current practice
each year with an IRR of 13.7 percent (still less than the 15 percent minimum acceptable rate of return).

The PP project becomes cost-justified when liability costs (Tier 2) are added to usual costs and
hidden regulatory costs. Compared to the current practice, the PP project is estimated to save $45,600 a
year in the form of reduced future liabilities associated with the management (especially solvent storage in
tanks and ash disposal in landfill) of hazardous waste and materials. The PP project has an estimated IRR
of 33 percent, which far exceeds the 15 percent minimum rate of return acceptable to Mr. Auric.

The PP project looks even better when less tangible benefits (Tier 3), such as increased sales
resulting from improved corporate image, are also taken into account At the Tier 3 level, the PP project
is estimated to save $48,000 a vear compared to the current practice. Because the IRR estimate (34
percent) is greater than 15 percent, the PP project is cost-justified.
-------
D-30
EXHIBIT D-6

BENEFITS TO THE HYPOTHETICAL FIRM OF SWITCHING
FROM CURRENT PRACTICE TO PP ALTERNATIVE
Level of Analysis/
Benefits
Project Justification
Cost Item
Net Savings or

(in $ per year) a/
Tier 0: Usual Capital Costs and O&M Costs
PP alternative not cost-
justified. Fails to meet
the firm's 15% minimum
rate of return on investment
Tier 1: Hidden Regulatory Costs

PP alternative not cost-
justified. Fails to meet
the firm's 15% minimum
rate of return on investment.
Tier 2: Liabilities

PP alternative is cost-
justified. Has an IRR of 33%,
which is greater than 15%
minimum rate of return on
investment
Tier 3: Less Tangible Benefits

PP alternative is cost-
justified. Meets the firm's
hurdle for investments
(34% > 15%)
Equipment and installation
Raw Materials
Energy
Disposal
Maintenance
Revenues

Tier 0 Taxes
After-Tax Savings Through Tier 0
IRR Through Tier 0
Reporting
Inspections
Other

Tier 1 Taxes
After-Tax Savings Through Tier 1
IRR Through Tier 1
Treatment or Storage in Tank
Transportation
Disposal in Landfill

Tier 2 Taxes
After-Tax Savings Through Tier 2
IRR Through Tier 2
Net Increase in Operating Revenues

Tier 3 Taxes
After-Tax Savings Through Tier 3
IRR Through Tier 3
-$24,800
$57,900
-$14,500
-$2,900
-$11,600
-$3,200

.$4,500
-$3,500
12%
$930
$1,800
$870

-$1,600
-$1,500
13.7%
$47,500
$1300
$35300

-$37,000
$45,600
33%
$4300

-$1,900
$48,000
34%
a/ All savings are before tax except when in bold. A discount rate of 15 percent is assumed. Negative
estimates represent a cost increase or net loss. Positive estimates represent a cost decrease or net
benefit All numbers may not add up due to rounding.
-------
Worksheet 0
Tier 0 • Usual Costs
Buurrent Practice

D Alternative Practice

O Incremental
ITEM DESCRIPTION *
" *' ',
A. DEPRECIABLE CAPITAL
EXPENDITURES
. ';;.-:.-A3 . ..Equipment •• '-V '
.'' -:... ' .- ..•••: , '.. :. '" ..'• '. ••'. •-••'•:
A2 Materials
:?:>A'3 viSUliBty Connections ' •: '.'.^..
A4 Site Preparation
•• vA5 Installation •-'. } '•.' • > ,;K:;L.
A6 Engineering & Procurement
B. EXPENSES
Bl Start-up

:B2 Pennitling •.;. '':';^'f$jj*--
B3 Salvage Value
B4 •• 'Training . • ; - '' ' " • , :''?.:;if;:;
B5 Initial Catalysts
B6 Working Capital i;
B7 Disposal
B8 Raw Materials
B9 Utilities
BIO Catalysts & Chemicals
Bll Labor

B12 Supplies
B13 Insurance .
B14 Other t ^fl.CU'nf
^?:::f:v>;.::.;%:::,

.....,.....:.:...;.;;.:.:..:.
l'-:^ .:''!". ',.5 *:.'

'^I^fe:>^.
, /
tep

A
/ \

..;%.-: ... - •' v
' •••'': 7- "'

Lltetirrw
(n, years)
io '

?«f^'f

zo
/
...;;.. :,.,:...:.....:.:..y.,.
K'7%
/

.;;;;';l''. ^ff'

\
., V..
•^•Vi-'
V
.C: ":^
20

Cash Flow
• Estlmat*
(C.aj)
0

.-•-.• - .'.••••'

*:T^m

-43

• '.' ••-•-'•''••'• •'• ••'•''•'-. '' ' '•;
''•:-,•' t^'--1 •"•"•:'•':••-••••:"/*

—45"
•

,•>••.• ...'....

•— 4 •
±.2.
2:2."

ANNUA1JZED CASH FLOW^I

'd"6*4
,: >- •
1 -•

,.x.:;;,,;,,.

->/.S
\
\
\
\
III

'•'• • ••••••"' " '• ' .•:.',,.

/'•".IV: -K '•',.'.

',.; /
//
/
/ •
3.2

. 0

' .:i •'• - • '

-7/.Z

f^-^.
V
":l^:
\
./
/
f:

3. 2 ._
-- • '

V«*
0"' '

-?p.S

.:';: --'i

\
;\
^

3.2.

.r.,.

' .'.. ':i:l

-~ * /
/

m-2,M

uf."^-

V" ....>::
A
\
,;. A

•2J in thousands of yeor-0 dollars
-------
Worksheet 0
Tier 0 • Usual Costs
O Current Practice

Q^AIternative Practice

Q Incremental
ITEM OESOtfPTlON _ ; .

A. DEPRECIABLE CAPITAL
EXPENDITURES
Al Y.-Equiproenl ' '••"<"..•' "'",.
A2 Materials
A3 Utility Connections' ; ..,.;.-
A4 Site Preparation
AS installation : , :'-;-' ';';:; ••"•..,::&-.
A6 Engineering &. Procurement
B.. EXPENSES
Bl Start-up
B2 Permitting < '- '- •'-• -'['^ \.
B3 Salvage Value
B4 Training - . •;.. :.: j: *'lj;. f
..:,.. . :.:'.*•:.".."•>•••• v-'-i'i :i
B5 Initial Catalysts
B6 Working Capital , f '•
B7 Disposal
B8 Raw Materials
B9 Utilities
BIO Catalysts &. Chemicals
Bll Labor
BX2 Supplies
B13 Insurance
B14 Other i ^WQj/nJ&Jrtja/njyc.-
C. OPERATING REVENUES
Cl Revenues
C2 By-product Revenues

^ , ,15ASH -FLOW ' INFORMAliON^ J
Escalation
Rat*
:'^
-2.
-5";;.
- 10
•'•;?!.•,.. •.•-.'••-

-72.

ANNUAUZED CASH FLOWJ^
V^
-"12-4
^N

ifc/£
/
-42.6
\
Wi
\
,:M:1

'••;•"' • :'i;iii

/
/
/

v»
-lg.2.

\,
/x
•;-v^ •'••'-:-«V

-42J

*S 5

&a
X--
iSli
\

r^lS^
-24.^
/
/
^

-42.

'';'-':-' " . :•:>.

JI-S
/.
•pS
/
\
\

rd-
]>
x<

s*^s
7\

J
Hi
/
Bl

S:ifC

•
-
•S-
\

•^•l In thcutf"1' of ytar-0 dollars
-------
Worksheet IV
Cost Summary
(In thousands ofyear-0 dollars)
Tier
ITEM DESCRIPTION
Alternative
a. DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
c. OPERATING REVENUES
d. PENALTIES AND FINES,
e, FUTURE LIABILITIES
Current
a. DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
c. OPERATING REVENUES
e. FUTURE LIABILITIES
ANNUALJZED CASH FLOW

r * 5%
Q
-/2.V
-Hi
— '
—
.-—
Tf 10*
-/J.2
-4*-X
—

- — -
Vs 1S%
-^/.?

«*i
, —
— ,
• —
V

•I
•-•

0
yi$-
3.2.
— ,
—
0
|pS
3.2.
—
r— .
0
SKI
3.Z
—
— - '

'li.;;^;::'!

-------
Worksheet V
Financial Worksheet
(In thousands of year-0 dollars)
Tier
ITEM DESCRIPTION
Alternative Less Current
a. DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
c; OPERATING REVENUES
d. PENALTIES AND FINES
e. FUTURE LIABILITIES
ANNUAUZED CASH FLOW"11

rd.6%
-12.4
23.4
-3.Z
—
::
rf 10%
-18.2.
2.3
-3.Z
—
'.. —
rd= 15%
-24.£
2.2.3
-3.2.

- —
- 6-/Z
-2o.?
2.3
-3.2.

— —
f. TAX LIABILITIES
-£-3
-&
-4.5
-$.!•
g. NETISAVINGS FOR TIER
Total Savings
0
IRR
THROUGH TIER 0
THROUGH TIER 1
THROUGH TIER 2
THROUGH TIER 3

6.8

Z.I

-3.5

12-%

Cashflow estimates for alternative less current, by definition, is the same
as cash flow estimates for incremental analysis.
-------
Worksheet!
Tier 1 • Hidden Costs
ITEM [DESCRIPTION ''',*>

A. DEPRECIABLE CAPITAL
EXPENDITURES
. ; :iAl Monitoring Equipment
A2 . Preparedness and Protective
Equipment '
•A3 Additional .Technology -.;^i :.';£&,..
= •.".".. ' •• . !: .-:-':'-:-:;'-'::::::'- "'
A4 Other
B. EXPENSES
Bl Notification
-:B2 Reporting
B3 Monitoring/Testing
^ B4 iRecordkeeping
B5 Planning/Studies/Modeling
B6 ; ^Training
B7 Inspections
•' BS Manifesting . ';:;':-:>:V;«V¥J^-
B9 Labeling
.'BIO ".Preparedness .and
Protective Equipment
Bll Closure/Post Closure Care
B12 Medical Surveillance
B13 Insurance/Special Taxes '
B14 Other

CASH FLOW INFORMATION ^ „,
* ' ' '
Escalation
Rat*

,-•/•'• • ' : . ••
4
w:
.Je
^
-.

/
/
/
/
First Y«ar
of Cash Flow
(tr y»ars)

'<:, " • ' ' '••;
••••• '•'' .•.•1;.;i:;
0
' ". . .... '-• -:;:••.:•.
^:'^SK?,

\
x
/\

Lifetime .
(n, years)
•
'•'•'.."- .
' " ' ••'•!''•
2.0
tfi
ms
1
•

Cash Flow
Estlmat*
(C.aj)

• ;..':
••• .••,-,,;;::,,.
2.45
0. 003
'Zo-J&b
iip-

0.33
0,o3
o.io

f
•^ In thousands of year-0 dollars '.,,'.
D Current Fvacxvce

CI Alternative Practic

E^lncremental
ANNUAUZED CASH
rd.S%
3.?
3.6
-------
Worksheet V
. Financial Worksheet
(In thousands ofyear-0 dollars)
Tier
'* ITEMfDESCRIPT1pN "' "
Alternative Less Current
, a. ^DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
c: OPERATING ^REVENUES
d. PENALTIES AND FINES
e. 1FUTURE LIABILITIES

"ANNUA1JZED CASH FLOW-11
r • » BV»
o
'—
3.?
__•;

'::
rd« 10%
.• —
3.^
••——..
— —
•" '; — .
rf 16%
: — '
3.6
. — — '
—
•-.:>».
rl&
•••—•*
3.6"
•• — _
—
• — ; ,
f. TAX LIABILITIES
-u
g; NET SAVINGS TOR TIER
Total Savings
IRR
THROUGH TIER 0
THROUGH :TIER i
THROUGH TIER 2
THROUGH TIER 3 / "

^.f
?,3

2. 1
4

--34T
-/.S"

-2.
a

/2JT
«?4

il Cashflow estimates for alternative less current, by definition, is the same
as cash flow estimates for incremental analysis.
-------
Worksheet II
Tier 2 • Liability Costs
D Current Practice
D Alternative Practio

B^Tnbremental
ITEM DESCRIPTION \

A. VENALITIES AND FINES
B. FUTURE LIABILITIES
B I. .Treatment .or. Storage, in 'Tanks
B2 Transportation .
B3 Disposal in Landfills , ../. .,
B4 Other

, CASH FLOW INFORMATION ]
Escalation
Rate

' —
""4V;-
4:
First Year
of Cash Flow
(t . years)

**.
Lifetime
(n, years)

**£
Casn Flow
Estimate
(C.aj)

• ~
— —

al ' ' - ' • ' ' •'-.,'• . -•
— ' In thousands of year-0 dollars • -' ' '^

:
ANNUAUZED CASH FLOW-"1
r * 5%
d

-/w.f.
5S.2

re 10%'
a

34, S
1.4

P4. 1
''•3

r K

-., •:;'•

-------
Worksheet V
Financial Worksheet
(In thousands ofyear-0 dollars)
' ' ITEM DESCRIPTION
Alternative Less Current
;a. ^DEPRECIABLE CAPITAL
EXPENDITURES
b.
C.:'
d.
•e..
EXPENSES
OPERATING
PENALTIES

REVENUES
AND FINES
FUTURE LIABILITIES
ANNUAUZED CASH FLOW-
Vs*
•ri-~-
•
_-_.
•.
1QO.B
rd«10%
•.'•-

: _'"

34.5-
rd= 15%
-•.:__

•- •
'
^4.!
&=33
;..': ;

'_ — •

to
Tier
f. TAX LIABILITIES
-44-4
-4I.6
-3?
-I3.4
g. .NET SAVINGS FOR TIER
Total Savings
THROUGH TIER 0
THROUGH TIER 1
THROUGH TIER 2
THROUGH TIER 3
€.%
S..3:
£>$.?>

Z.I
4'
$7

-3.5"
-/.C
4S1.6

—
-24.?
0
""'••••;.' '•'
i! Cashflow estimates for alternative less current, by definition, is the same
as cash flow estimates for incremental analysis.
IRR
-------
- ITEM DESCRIPTION' ,

A.
B.
ADJUSTMENT TO
EXPENSES

ADJUSTMENT TO
OPERATING REVENUES
Worksheet HI
Tier 3 •Less Tangible Costs
O Current Practice

D Alternative Practic

Incremental
CASH FLOW INFORMATION

Escalation
Rat*

';4:: '
First Y«ar
of Cash Flow
(tr years)

0 :
Lifetime
(n, yoarc) •
.'
dZO...:.
Cafh Flow
Estimate
(C.aj)

v3 "';
ANNUAUZED CASH FLOW-2

r «5%
d

4.4
rd« 10%

4-4'^
^.,16%

4-3.
•y

1 In thousands of year-0 dollars

' ' % "

Consumer Acceptance
r-, W
n s
YES /NO'

.,-,...

Employee/Union Relations:
n Isf
YES 'NO

Corporate Image , :
'YES* NO ::

' , ' • ' ;'i:-

TIER 3 COST FACTORS /
Justification (Please justify)
'," •'•'•' '

-.---': - '• . ' • ' ' ' - . .
Justification (Please justify) ,• -

- ' - - " ''"-•".- • ' ,

Justification (Please justify) ' ' (
TA^ '72^6^ ^JUM&ff*-~ i^^ff' UK& •
MKtArtX^ <*JK^ ^^#17 /fJ^L OVtL
. ' ...-'/"••' /f/
- • *• ' !/ ' .. • "
•:; :/ ••'••. , :..:..- •:•'•-:•• . •• .'" • • •:.; . -•;••••• -v.-:; •• '••:"' ;.'. /:;• /" ...'•:. 'y.';^-'- '"•''•'-•.'- ^:^:: : •'

-------
Worksheet V
Financial Worksheet
(In thousands ofyear-0 dollars)
Tier
^-|TEM^SCR.PT.ON^ ^
Alternative Less Current
a. DEPRECIABLE CAPITAL
EXPENDITURES
b. EXPENSES
•COOPERATING REVENUES
d. PENALTIES AND FINES
el FUTURE LIABILITIES

ANNUAUZED CASH FLOW^1
T = 5% '
d

4r&.

,
4,41

:;v::: •;>,
V«v.
': "" ."'•..}

•^3-

:&=34

^.5-

f. TAX LIABILITIES
-/.3
-/.f
-/.3
-Z
g;:;NET.:;SAVINGS .FOR TIER;
IRR
j[ utut, ut*vt/t5»>
THROUGH TIER 0
THROUGH TIER 1
THROUGH TIER 2
THROUGH TIER 3 V

6.8
2.2
6S. 3
&.9
Z.I
*--:.-
s*
S9S
-s,r
±i&
4S.6
' -4* •"•••
— :
— .
-z.y
"*>-

tZ#
&*%
33%
34-%
•J Cashflow estimates for alternative less current, by definition, is the same
as cash flow estimates for incremental analysis.
-------
APPENDIX E

TREATMENT STANDARDS UNDER THE
LAND DISPOSAL RESTRICTIONS

In the 1984 Hazardous and Solid Waste Amendments (HSWA) to the Resource Conservation and
Recovery Act (RCRA), Congress mandated restrictions on .the land disposal of hazardous wastes. Under
the land disposal restrictions (LDRs), most hazardous wastes can no longer be land disposed without prior
treatment Treatment standards may be one of two types: concentration-based standards or technology-
based standards. To comply with the land disposal restrictions, you must:

(1) Treat your waste to reduce the concentration of each hazardous constituent to
below its respective concentration standard if a concentration-based treatment
standard has been issued for your waste type; or

(2) Treat your waste by the specified technology if a technology-based treatment
standard has been issued for your waste type.

Hazardous wastes have been divided into three main classes for the purpose of scheduling and issuing
the LDR rulemaking:

• Solvents and diodns;
• California list wastes; and ,
• The scheduled wastes. • . '•

The scheduled wastes are subdivided into thirds based on the quantity generated nationally and the waste's
toxicity. For example, the first-third of the scheduled wastes is comprised .of the highest quantity, highest
toxicity waste types. EPA has promulgated final rules restricting the land disposal of solvents, dioxins,
California list wastes, and First and Second Third wastes. EPA will propose and finalize the Third Third
land disposal restrictions no later than May 8,1990. In the future, the land disposal restrictions program
may be applied to a much broader range of wastes under the Toxicity Characteristic (TC) rule now being
developed. "

For information on treatment standards and effective dates for all hazardous wastes, please contact
EPA's Office of Solid Waste or the RCRA Hotline (1-800-424-9346 or 1-202-382-3000). Note that guidance
on the LDRs and an outline of the process to determine if the LDRs are applicable to a waste are also
available from two sources:

• Superfund LDR Fact Sheets. OSWER Directives 93473-01FS - 06FS (July, 1989); and

• Superfund LDR Appendices. Appendices A-l through A-6 of the Draft Superfund Guidance
on Complying With the RCRA Land Disposal Restrictions (LDRsl OSWER Directive 9347.2-
01 (draft version, not yet published).

Following is a summary of each of these two documents with information on obtaining a copy for each.

Superfund LDR Fact Sheets

The following fact sheets are available in this series: '

. 1- Overview of the RCRA Land Disposal Restrictions N ".
2 - Overview of California List Wastes
3- Overview of LDR Treatment Standards and Minimum Technology Requirements
4- Overview of Soft and Hard Hammer Restrictions
5 - When are the LDRs Applicable Requirements?
6- Obtaining an LDR Treatability Variance During Superfund Remedial Actions
-------
E-2
Copies of these fact sheets are available from the EPA Headquarters Public Information Center, 202-
475-7751.

Superfund LDR Appendices to the Draft Superfund Guidance on Complying With the LDRs

The Office of Emergency and Remedial Response (OERR) has prepared six appendices that ^
summarize the LDRs in effect as of June 8,1989. These appendices summarize the LDRs in effect for
each RCRA hazardous waste, and if a treatment standard is in effect, what the treatment levels or method
of treatment are for each constituent The appendices also provide a list of the constituents found in each
restricted waste (organized by constituent), and effective dates for soil and debris wastes subject to the
LDRs.

Copies of the appendices will be available when the Guidance document is published, and the
appendices will be updated when the Third Third LDR rule is published in May, 1990.
J-
-------


&EPA
             United,States      Office of Policy, Planning
             Environmental Protection  and Evaluation
             Agency
Pollution Prevention
Benefits Manual
             Volume I:  The Manual
             Volume II: Appendices

                          Phase II
                          EPA/230/R-89/100
                          October 1989
                                      Printed on Recycled Paper

-------

-------
Pollution Prevention Benefits Manual

               Volume!: The Manual

                              Phase II
                             Prepared for: Office of Policy, Planning and
                                       Eyaiuation and
                                       Office of Solid Waste

                                       U.S. Environmental Protection
                                       Agency
                                       October 1989
                                           EPA

-------

-------
      .                      TABLE OF CONTENTS


                              VOLUME I, THE MANUAL
   f                       •       •       •        ,                     _••=,"#

                       • r  '  ;  '      ' •   -.'••••     ..•-:.•   -. .     •  .    Page

ACKNOWLEDGEMENTS : . . .". . . • • •. ---- '•_••• .>........ ..... ...... .... ... .....   fe
PREFACE  -i
CHAPTER 1:  iNTRODUCTION  ........

     .   1.1  What Is Pollution Prevention?
            1.1.1   What Does EPA Mean By Waste Minimization?  ---- ... ...... • •• •  w
            "l.li   What Does EPA Mean By Pollution Prevention?  ........>.... ----   1-1

        1.2  Why Should You Undertake Pollution Prevention?  ...... ......... .....   1-2

        13  What Approach .Is Used In This Manual?  ........ ..... .............   1-3

            13.1   Four-Tier Cost Protocol   ... ...... . ..... -.-... ----- ..........   1-3
            13.2   Common financial Protocol  ...... ........... — ...........   1-5-

        1.4  What Will You Get Out Of This Manual? . . . ...................... ^   1-5

        1.5  How Is This Manual Organized? '. . . ... . . . .;...-. ... .... .,. • • • • • •'•-• ••-.... *•*


 CHAPTER 2:  TIER 0 COST PROTOCOL: USUAL COSTS  . ... .... . . ... . . . . *•;: .... . . .   2-1

        Introduction  .............. -^ •••'••••••••••'• 'V; ••••••••••••••" •

        Step 1: Identify PP Alternatives ...  .».-..'., ---- . ..... .................   2-2

        Step 2: Estimate The' Usual Costs Of Current And Alternative Practices  ........   2-3

        Step 3: Complete  The Tier 0 Cost Worksheet .................•••..••••   2-7


 CHAPTER 3:. TIER i COST PROTOCOL: HIDDEN REGULATORY COSTS . . ... . . . . . . .   3-1

       7  Step 1: Establish Your Fadlity's Regulatory Status . . . . . . . . ..... ..'. ..... . . .  .3-2

         Step 2: Estimate Hidden Capital Expenditures  .................. ..... "... «   3-2

         Step 3: Estimate Hidden Expenses  . ... . . ... . . . . ...... .-.• • > •  • « • • • • ••-.«• • •   3*5

         Step 4: Complete Middle Block of Worksheet.!  ............ ---- ...........   3-6

-------
                                            ii
                        TABLE OF CONTENTS (continued)



                           VOLUME I, THE MANUAL (continued)
 CHAPTER 4: TIER 2 COST PROTOCOL:  LIABILITY COSTS . .' ......... ...... ____ . .    4,1



         Introduction  . ............ . ............ .........'. ....... .......    4-2



         Step 1: Identify Regulatory Programs Under Which Penalties and/or Fines

                Could Be Incurred  ......... ............ . . . ................    4.2



         Step 2: Estimate the Expected Annual Penalties and Fines Associated with

                Each Program/Requirement  ..... ................... ..........    4-2
   •                     ,                               '      ,


         Step 3: Identify Waste Management Components to Which Liabilities Can Attach   . •    4-4



         Step 4: Estimate Total Expected Liabilities  .... ..... . ..................    4^ '



         Step 5: Estimate Year When Liabilities are Expected to be Incurred ..;,.......    4-6



         Step 6: Estimate Your Share of Total Future Liabilities  ..... ..............;    4-6





CHAPTER 5:  TIER 3 COST PROTOCOL:. LESS TANGIBLE COSTS ......... ........  '  5-1



         Introduction   . . ..... ° ....... . . . , ........ . ....... ..... . . . ..... ....    5-2



         Step 1: Qualify Less Tangible Benefits Of Pollution Prevention  . ... . . . ..... ___    5-2



         Step 2: Quantify Less Tangible Benefits Of Pollution Prevention   ..... . .......    5-2





CHAPTER 6:  FINANCIAL PROTOCOL   ______ . ____ ..... ........ "...'.'...';.....';    6-1



         Step 1: Evaluate Arinualired Cash Flows For Each Cash Flow Item  ......'....;    6-2      v-



         Step 2: Evaluate Incremental Annualized Cash Flows ...... ..... . . . ........    6-7
    i                                         -  • .                             '


         Step 3: Evaluate Key Financial Indicators Of Your PP Alternative  ....... .....   6-7



         Step 4:  Evaluate Economic Feasibility Of Your PP Alternative  ..... ........    6-12

-------
                                        iii
                      TABLE OF CONTENTS (continued)

                              VOLUME IL APPENDICES
APPENDIX As  BUNK WORKSHEETS
APPENDIX B:  HIDDEN COSTS OF SELECTED REGULATIONS . . . ... . ..... ..... . . . ."  B-l

        B.I  Resource Conservation and Recovery Act (RCRA)  .... .-. . . ... .... .*• ...   B-l

             B.1.1  Notification  ....;... ...v.v... ---- ....................   B-l
             B.1.2  Reporting  .^... .....••.;•••• — «••«.••••«.«•-••••*•••
             3.13  Monitoring/Testing  ........ ---- ,.... ----- , ..... .........
             B.1.4  Recordkeeping  .... . ------ .:............ ------ ...... ----
             B.1.5  Pianning/Studies/Modeling  . . ........ — "... ... . . • . ...... .*•••-
             B.1.6 Training  - ........ • ---- •••• ---- ....... ...... '....,..,... i'.   B-3
             B.1.7  Inspections  ' ....... ..... ...........'.............. ----   B-3
            • B.1.8  Manifesting  . ... .'.. ........... ..... ...... ---- ...........   B-3
             B.1.9  Labeling   .'.../ ..... ................. *..-. .... ----- ......   f-4
             B.1.10 Preparedness/Protective Equipment  . . ......... .................   B-4
             B.l.ll Ciosure/Post-Closure Assurance  .......*..;..............••: B-4
             B.1.12 Insurance.and Special Taxes  . . .-. . . ... .......... . : . .... • ... .  B-4

      .  B.2  Comprehensive Environmental Response, Compensation, and Liability
             Act (CERCLA) -'.. , .. .. . . • ....... ..» ... ..... • . •> ..« > • • :-• • • ••••
         B.3  Superfund Amendments and Reauthorization Act Title HI (SARA Title III)  . .   B-8
             B3.1  Notincation  .,
             B.3.2  Reporting ...
             B3.3  Recordkeeping .
             B3.4  Inspeaions  ..
         B.4  .Clean Air Act (CAA)
                          •      •      : i    , ... -„„ ,.,; „       " •     •';"'•     •   ..   ' • *> <<7 "
             B.4.1  Notification  .:../. ;>.^ /.-...; -.'ij-'.-.v-'. '....... ; ...... .-.vi;.,..v. ,  »-iz
             • B;4.2  Reporting  '                ............ .'•• ..............   B-13
              B.43   Monitoring/Testing  . ----- ...............••••••.•.••-•.•«
              B.4.4   Recordkeeping  ........ ,..v. ....-.......-..•;_•...••.•• -v- .;-i •-•
                    Inspections   .............. ---- ........................   B-13
         B.5  Qean Water Aa(CWA)
              B.5.1   Notification  ... ...... '"..
              B.5.2   Reporting  ...,............
              B.5.3   Monitoring/Testing^. ---- .....
              B.5.4   Recordkeeping^ . ...... . , — ..
              B.5.5   Inspections  ...........:....
              B.5,6   Preparedness/Protective Equipment

-------
                         TABLE OF CONTENTS (continued)

                           VOLUME n, APPENDICES (continued)
                                                                   .
        .  B.6  Occupational Safety and Health Act (OSHA)  .... ____ . ... . . . . . . ......   B-27

              B.6.1  Notification  ........ ..... .......... ........ ...........   B-27
              B.6.2  Reporting  . ............ ........ ............ ......... . .   B-27
             ' B.63  Monitoring/Testing  ........ ........... ................ ...   B-28
              B.6.4 ' Recordkeeping  ......... ... .......... ............. ....   B-28
              B.6.5  Planning/Studies/Modeling  ................... . .. ....... . ..   B-28
              B.6.6  Training  .................... . ......................   B-29
              B.6.7.  Inspections   . ................. . ..................... .   B-29
            ,  B.6.8  Labeling  . ...................................... ....   B-29
              B.6.9  Preparedness/Protective Equipment  ..... . . ............. .....   B-29
              B.6.10 Medical Surveillance  . .' ................ '. . . . .............   B-29


 APPENDIX C-  FUTURE UABELTIY COSTS  ......... ..... , ____ .;......... .....   C-I


 APPENDIX D.:  HYPOTHETICAL FIRM EXAMPLE   . . . ..... ........ ............. ''-  D-I

         D.I  Presentation Of Hypothetical  Finn  ____ .......... ...... ...... ....   I>4
                                                         1 '  ,  -         ' '       .       ' *'
         D.2  Tier 0:  Usual Costs  ... ........  . ......... ____ ............. . .
              D.2.1  Tier 0 Cost Calculations  .......... ............. ..... .:,...   b-4
             . D.2.2  Tier 0 Financial Calculations  ... ...... ............. .......   D-7

         D3  Tier 1:  Hidden Regulatory Costs  ........ ..... ..... ____ .........   D-9

              D3.1  Tier 1 Cost Calculations  ..................... ..... ......   D-9
              D3.2-  Tier 1 Financial Calculations  ....... .............. ........   D-26

         D.4  Tier 2:  Liability Costs  ____ ........ '. ..... ........ ........ _____   D-26

           •   D.4.1  Tier 2 Cost Calculations  .................... ..... :......   D-26
       •  •    'D.4.2  Tier 2 Financial Calculations  ... ........ .... ............ . .   D-28
              D.43  By Difference Teclmique  ... ____ .. ____ ... i ...... ____ . ......   D-28

         D^  Tier 3:  Less Tangible Costs  ... ....... .' . . . .  .............. ......   D-29
                                             *              •     '
              D.5.1  Tier 3 Cost Calculations  ......... ..... ... .. ......... . ...   D-29
              D^.2  Tier 3 Financial Calculations  ....... . .....................   D-29

         D.6  Summary of Mr. Auric's Calculations   ................ ..... .......   D-29


APPENDIX E: TREATMENT STANDARDS UNDER THE LAND DISPOSAL RESTRICTIONS    E-l

-------
                          LIST OF EXHIBITS
                          VOLUME X THE MANUAL
                                                                   Page
EXHIBIT 1-4-   APPROACH AND ORGANIZATION OF MANUAL: FOUR-TIER        '
             COST PROTOCOLS AND FINANCIAL PROTOCOL  .........'....   1-4

EXHIBIT 1-2-   BENEFITS TO THE HYPOtHETICAL FIRM OF SWITCHING
             FROM CURRENT PRACTICE TO PP ALTERNATIVE ..............   1-7


EXHIBIT 3-1:   REGULATORY STATUS QUESTIONNAIRE	••••   *-*


EXHIBIT 4-1-   SUMMARY OF PENALTIES AND FINES UNDER EPA FEDERAL
             PROGRAMS (FISCAL YEAR1987)	....	....>..........   4-3

EXHIBIT 4-2:.   COST TABLE FOR FUTURE LIABILITIES  ...........-,....". .'..   4-5


EXHIBIT 6-1:   TYPE OF CASH FLOW FOR.EACH CASH  FLOW ITEM  ,'.. .. .	   6-4

EXHIBIT 6-2:   TABLE OF VALUES OF PRESENT VALUE FACTOR 2 (PVF2) .....   «

EXHIBIT 6-3:   TABLE OF VALUES OF ANNUAU2ATION FACTOR (AF)  ...... /   6*

EXHIBIT 6-4:   TABLE OF VALUES OF DEPRECIATION FACTOR (FD)  ........   641

                          VOLUME II, APPENDICES

EXHIBIT B-l-1:   REGULATORY COSTS UNDER THE RESOURCE CONSERVATION.
  ,            AND RECOVERY ACT (RCRA) /.......... .... ...V. .........  B-5 ;

EXHIBrr B-2-1:   TAX ON CERTAIN CHEMICALS UNDER CERCLA SECTION 4661  ..   B-7"

EXHIBIT B-3-1:   REGULATORY COSTS UNDER TITLE III               .
              THE SUPERFUND AMENDMENTS AND REAUTHORIZA.T1PN ACT    B-ll

EXHIBIT B^4-i:   REGULATORY COSTS UNDER THE CLEAN AIR ACT^CAA) .. v..   B-14

EXHIBIT B-4^2:   CLEAN AIR ACT INDUSTRY-SPECIFIC REGULATIONS ON
              STANDARDS OF PERFORMANCE FOR NEW STATIONARY
              SOURCES  ......I........:.....	••	   ^15
                  -.'-'."      .''*•'     .        .-'..'.- '-rv-1 y   -••..•

EXHIBIT B-4-3:   HAZARDOUS AIR POLLUTANTS WITH PARTICULAR EMISSIONS     7
              STANDARDS UNDER THE CLEAN AIR ACT  ..I..	   B-17

EXHIBIT B-4-4:   INDUSTRIES WITH PARTICULAR-NATIONAL EMISSIONS         v
              STANDARDS FOR HAZARDOUS Am POLLUTANTS UNDER THE
              CLEAN AIR ACT  .......>..v.......... J. r...-V	......   B-18

-------
                                    vi
                      LIST OF EXHIBITS (continued)

                       VOLUME n, APPENDICES (continued)
                                                                     Page
. EXHIBIT B-5-1:   REGULATORY COSTS UNDER THE CLEAN WATER ACT  . _______   B-22

 EXHIBIT B-5-2: ,  TOXIC POLLUTANTS UNDER THE CLEAN WATER ACT  . ....... . , B-23
                                          s          .'..-'    "      ' '
 EXHIBIT B-5-3:'  INDUSTRIES WITH PARTICULAR EFFLUENT GUIDELINES
               AND STANDARDS UNDER THE CLEAN WATER ACT  ..........   B-25

 EXHIBIT B-6-1:   REGULATORY COSTS UNDER i THE OCCUPATIONAL SAFETY
              •AND HEALTH ACT (OSHA) .....; ..... . ........... •••••••   B-31

 EXHIBIT B-6-2:   OSHA CHEMICALS AND ASSOCIATED REQUIREMENTS  . . ......   B-32


 EXHIBIT C-l:    SOIL AND WASTE REMOVAL AND TREATMENT  ......... ____   C-2

 EXHIBIT C-2:    GROUND.WATER REMOVAL AND .TREATMENT ..............   C-3

 EXHIBIT C-3:   . SURFACE SEALING  . .... ..... . ........ '. ..... ..... . .....   O4

 EXHIBIT 04:    PERSONAL INJURY  ...... ............. ............ •.•-••   C-5

 EXHIBIT C-5:    ECONOMIC LOSSES  . . ..... ........ .......... . ____ .... . .   O6

 EXHIBIT C-6:    REAL PROPERTY DAMAGE . ..... ......... . . ............. ,  C-7

 EXHIBIT C-7:    NATURAL RESOURCE DAMAGE  ............. .............   OS

 EXHIBIT C-8:   • EXPECTED YEAR IN WHICH LIABILITIES ARE INCURRED   ____ .09


 EXHIBIT D-l:    SUMMARY OF CURRENT AND 'ALTERNATIVE PRACTICES   ______  D-2

 EXHIBIT D-2:    SUMMARY OF USUAL COST ESTIMATES  ..... ........ ,, ____  D-5
         .-                ,            '                  '
 EXHIBIT D-3:    REGULATORY STATUS QUESTIONNAIRE  ...... .'.-....'... ____  D-10

 EXHIBIT D^t:    TIER 1 COST TABLES (HIDDEN REGULATORY COSTS) . ____ ....  D-12

 EXHIBIT D-5:    TIER 2 COST TABLES (FUTURE LIABILITIES)  ................  D-27

^EXHIBIT D-6:   -BENEFITS TO THE KtYPOTHETICAL FIRM OF  '         '
               SWITCHING FROM CURRENT PRACTICE TO'PP ALTERNATIVE .  .  D-30

                                    '          ••••'.••.••               '
 EXHIBIT E-l:    TREATMENT STANDARDS FOR WASTES AFFECTED BY THE
               LAND DISPOSAL RESTRICTIONS  ... ..... . ......... .... ----   E-2

 EXHIBIT E-2:    TYPICAL TREATMENT AND .DISPOSAL COSTS . . V. ...... . .....   E-7

-------
            - '. •  ;   ; -.     :    •   '   '•    vii     -     •••..-.."     '"    •- . ''




                             LIST OF COST TABLES


                               VOLUME i, THE MANUAL




              " -•'.     •     '  '    •'"'.'-'.-'     -   :     ''"'; ''-'•"-'  "  '.  -.       Page


 TABLE 3-1": Notification  	............_'..............	.......-..-...:-....   ' 3-9'


 TABLE 3-2:" Reporting  ...'....'..."...'.............'.... ....,...........•...".    3-11


 TABLE 3-3: Monitoring/Testing  .....	:.........	;	......    3-13


 TABLE 3-4: Recordkeeping  ........-.	•._...... ...'..•	................    3-15
*    •   '                   :         '                                   i
 TABLE 3-5: Planning/Studies/Modeling  ......	._.	    3-}7


 TABLE 3-6: Training  ..................... • -.- • • >'• •'••• ••• •........;...',.. .•>    3-19
         '       '    -     ' -                 r                    -             ' ^ '' ~ '•

 TABLE 3-7: Inspections "	.'......"..    3-21


 TABLE3-8: Manifesting  .....:.............	..........................    3-23


 TABLE 3-9: Labeling  ..... .... V. .......'...... ... .... ..'.'....".......	,..   . 3-25


 TABLE, 3-10:Preparedness/Protective  Equipment (Maintenance)  ;.-......... — ...-•••••.• ?*27


 TABLE 3-ll:Closure/Post Closure Assurance Facility-Specirlc Costs  ......... ...... .. .-,.    3-29


 TABLE 3-12:Medica! Surveillance  ....... '..........	.....»;•....... .. ..-, ...... .3-31


 TABLE 3-13:Insurance and Special Taxes Requirement-Specific Costs  ..-......;,.......    3-33


 TABLE 3-14:Other	 .•-........... . .>.•..*.'.''  3-35

-------
                                   via





                         LIST OF WORKSHEETS


                           VOLUME I, THE MANUAL
WORKSHEETO:  TIER 0 - USUAL COSTS  .....'. ..... ..;.... ...... .........   2-9


WORKSHEET I:  TIER 1 - HIDDEN COSTS  ... . ............. .... ......... . ..  '3.37


WORKSHEET 11:. TIER 2 - LIABILITY COSTS .... ...........................   4.7
       \      «                        ,                                .


WORKSHEET W: TIER 3 - LESS TANGIBLE COSTS  .. ......... .; ..... . .......   54



WORKSHEET IV: 'COST SUMMARY , ......... . .............. ........ ......   6-13


WORKSHEET V:  FINANCIAL WORKSHEET  ........... ............... . ____   5.14



     :                     VOLUME n, APPENDICES




WORKSHEETO:  TIER 0 - USUAL COSTS  ..... ............ ...... ....... ____   A-l



WORKSHEET I:  TIER 1 - HIDDEN COSTS  .... ........ . ...... ............ i   A-3



WORKSHEET II:  TIER 2 - LIABILITY COSTS  ..... . . ____ ...... ______ .........' A-5



WORKSHEET III: TIER 3 - LESS TANGIBLE COSTS  , _____ . ..... ...... ____ . ____   A-7


WORKSHEET IV: COST SUMMARY  .......;........ ..... . . . . 1^ . . . ..;..... '  A^9



WORKSHEET V:  FINANCIAL WORKSHEET  ......... ..................... .  ''A-il

-------
      This manual was produced under the direction .of Dr. Ron McHugh, Office of Policy, Pluming aad
•Evaluation, U.S. EPA by ICF Incorporated.   The ICF  project .team included James Faufetich, James
Dickson, Lew French, .Michael Lochhead, James Verderese, and Joseph Karam who servo) as Project
Manager. ''Additional project direction and support was  provided by Michael Levin, Barry Korb, James'
Lbunsbury and Roben Dellingefot EPA.                 .      "  .       .......

      Initial project ideas are attributable to Dr. Gregory HoUod (Conoco Inc.), Mr. Ryan Dekambie
(Dow Chemical), and Mr. Richard  McLean (General. Electric Company).  Far too many people provided
useful insights to list all of them, but the following merit special thanks: Jack Campbell, General Electric
Capital -Corporation;  Terry  Foecke, Minnesota Technical Assistance Program; Nancy Grnndahl, EPA;
Richard Kashmanian, EPA; Tapio Kuusinen, EPA; Roger Schecter, North Carolina Pollution Preventioa
Pays; and Ned Smith, Natural Resources Defense Council.  .        .    •          .      •         .

-------

-------
PREFACE
It is the policy of EPA that the reduction or elimination of discharges and/or emissions to the
environment through source reduction and environmentalry-sonnd recycling is preferable to controliing such
releases after they are generated or produced. Furthermore, source reduction, or elimination of releases
at the source, is more desirable than recycling. It will be EPA's policy to aggressively implement pollution
prevention (PP>.through source reduction and environmentally-sound recycling as an integral pan of its
programs to protect all aspects of our nation's environment - air, water, land, and ground water (policy
, proposed in Federal Register, January 26,1989).

EPA has produced this manual to simultaneously achieve increased environmental protection and
reduced environmental compliance costs, Tie purpose of the manual is to promote a complete and
objective analysis of the economic benefits of PP projects. Since the passage of the RCRA Hazardous and
Solid Waste Amendments (HSWA) in 1984, EPA has been developing a program to meet the statutory goal
to reduce or eliminate the generation of hazardous waste as expeditiousty as possible. EPA has extended
the waste minimization (WM) concept to include releases to all environmental media. This manual refers
to PP as the more meaningful concept. .

EPA has met with corporate managers to discuss how PP can be achieved without recourse to
additional regulations. -A major theme has been that PP projects frequently do not get undertaken because •
the benefits of the project in terms of reduced raw materials, regulatory compliance, and environmental
liability costs are poorly understood. EPA has unique experience in understanding the impacts and
interrelationships of regulatory requirements, some of which can legitimately be avoided or mitigated
through PP. The discussion of regulatory costs is intended to provide only an estimate of costs associated
with regulatory compliance. The .manual is not designed to provide regulatory guidance.

This manual enables you to calculate the true cost of the current materials and waste management
practice and then evaluate the financial payback of the PP alternative. .Until these true costs, often
underestimated by managers by an order of magnitude, are correctly understood, more hazardous material
and waste will be managed/released than need be - thus imposing additional costs on the generator; the
environment, and society as a whole. EPA believes this manual to represent an extraordinary commonality
of interests between economic self-interest and environmental protection. ••> .'

-------

-------
CHAPTER 1
INTRODUCTION
This manual is intended to help you evaluate the economic feasibility of pollution prevention (PP)
or waste minimization (WM) alternatives to your current practice. This introductory chapter is organized
in five sections as follows: . . . ;

' (1.1) What is pollution prevention? " . . . "-.
: ' " (12) Why should yon undertake/pollution prevention? -- .. ' .. '.
(13) What approach is used in this manual?
(1.4) What wfll you get out of this manual? . •
(l!s) How is this manual organized?

1.1 WHAT IS PQU-imON PREVENTION? . •

Pollution prevention is an extension of the concept of waste minimization. While pollution
prevention includes waste minimization, it broadens the concept to include minimising the generation and
release of all hazardous materials and wastes to all environmental media.

' 1.1.1 What Does EPA Mean by Waste Minimization?

Waste minimization means the reduction, to the extent feasible, of any solid or hazardous waste that
you generate or subsequently treat, store, or dispose ot Waste minimization techniques focus on xxati
reduction or recycling activities that reduce either the volume or the tanrity of your waste. •

Source reduction means the reduction or elimination of hazardous waste at the source; before it is
generated. Recvcline. on the other hand, means the Use, reuse, or reclamation of a hazardous waste as an
effective substitute for a commercial product or as an ingredient or feedstock in a process. Recycling by
use or reuse involves returning a waste material either to the originating process or another process as a
substitute for an input material. Reclamation is the recovery pf a valuable material, or removal of
impurities from a waste. Because it is significantly more efficient and less expensive to prevent the
generation of hazardous waste in the first place, you should consider source reduction to be the most
preferable waste management Cption.. Source reduction is followed, in order of decreasing preference, by
' recycling, treatment, and land disposal. ... - ; • .-v

•"...' 1.1.2 What D6es EPA Mean by PollutionPrevention? .

Recently, EPA launched a major new effort to reduce the threats posed by environmental pollution.
The Agency proposed a policy statement that established pollution prevention as an official Agency policy:

•EPA believes that developing and implementing a new multi-media prevention strategy,
' focused primarily on source reduction and secondarily on environmentally sound recycling,
offers enormous promise for improvements in human health protection and environmental
quality and significant economic benefits. (Federal Register, January 2fr, 1989, Page 3845)."

This new approach is profoundly simple and yet radically different from the Agency's past efforts to
protect health and the environment. This approach recognizes that many of the benefits of controlhnc
pollution have already been achieved. Further environmental gains must come from preventing the release
of pollutants. , ' '. -.''.• . ;

The Agency created the Pollution Prevention Office, which will be the Agency's focal point for an
integrated, cross-media approach to pollution prevention, both inside and outside the Agency. .EPA wfll

-------
1-2
be actively promoting an environmental ethic stressing the prevention of pollution before it becomes a
problem. . • •

.L2 WHY SHOULD YOU U>IDERTAKE POLLUTION PREVENTION? "
, s',»

Your finn should investigate and implement PP alternatives to your current practice for several
, reasons. Pollution prevention can help you achieve the following: • • • .

(1) Improve your firm's "bottom line;' •'•'.•

(2) Make compliance with environmental regulations easier; and

(3) ' Demonstrate a proactive commitment to genuinely pursuing a PP program

EPA has developed a system of federal regulations to protect human health and the environment
from dangerous wastes and materials. Although EPA has tried to avoid imposing unnecessary costs upon
private industry as a result of these regulations; EPA understands that private industry may still face
significant compliance costs.. Pollution prevention can improveyour firm's bottom line as a result of:

• Reduced process costs;

• Reduced regulatory costs; ' " . '

• Reduced liability costs; and •

• Less tangible benefits resulting from improved customer satisfaction and
enhanced corporate image. " . •.'--•

If you are like most owners or operators of businesses regulated by the US. EPA and/or at state
environmental agency, you have complied with the new regulations by adding equipment to deal with wastes
after they are generated. For example, you may have added wastewater and process-water treatment
equipment or air pollution control equipment like stack scrubbers or electrostatic precipitators and filters.
Also, you may have contracted with vendors who have permits to dispose of. your hazardous wastes.
However, many manufacturers have found that the most cost-effective approach to complying with
environmental regulations'is to minimize or avoid generating or releasing hazardous materials or wastes in
the first place; «., to prevent the pollution before it occurs. Many firms have found that by "couplinc"
pollution prevention with other corporate goals (e.g., efficiency, R&D, health and safety) not only haw
costs been cut, products been improved, or processes been enhanced, but also compliance with regulations
has become easier! For example, a search for a less expensive, more effective cleaning solvent may lead to
use of an aqueous cleaner that also generates less hazardous waste. Attempting to reduce the down-time
cue to cleaning and rinsing of equipment associated with batch-processing may result in rearranrine the
process sequence so that the wastes from the previous batch are compatible with the inputs for the next
batch, which may also reduce the amount of wastewater generated.

Furthermore, you must certify on your hazardous waste manifests that you have a program in place
to reduce the volume and toxicity of the waste you generate and you must describe this program in your
biennial reports. Any waste minimization or pollution .prevention efforts you take now will not only result
in immediate economic benefits to your firm, but wall also serve to demonstrate a proactive commitment
to genuinely pursuing a pollution prevention program.

-------
                                               1-3
       WHAT APPROACH IS USED IN THIS MANUAL?
       Your decision to select a PP alternative to current practice, however, is often an economic one.  To
 Bake a particular selection you may need to know how much a PP alternative wffl costj rda y itoyour
 OTiem practice. The purpose ttf ^manual is. to help you make tfus companion* the baas of the •me
 costs and benefits of preventing poOution.  '            ' .                              . ,      .  .

       Exhibit 1-1 Illustrates the general approach taken by this manual. As jrbu can see, the economic
 evaluation  of a PP alternative can be performed at four levels. or tiers.  At each tier, the economic..;
 evaluation is  a two-step process:       •                     •                                 ;      ;
                 »          '      ,                ..•,.."'._.
         SteD v  .   Aecnnnt for »ii costs associated with current practices and with the alternative
         ?  "•- '     pfproiect: This manual  describes  four tiers or levels of costs associated with
                    hazardous wastes and materials management:   usual costs, hidden regulatory
                   • costs, liability costs, and less tangible costs.                    '

     .   steo2-    'Estimate' kev financial indicators of the economic viability of the PP project on
         — *—'•    thf hasis of Step 1 costs:  This manual describes the financial calculations for
                    estimating net present value, internal rate of return, and annualized cost savings    .
                    of a PP project

 In Exhibit  1-1 the four peripheral boxes represent the four tiers of the cost calculations (Lt, Step 1). The
 £rS5 *L repaints the Ibuttl calculations (Le., Step 2). Note that the same financial calculauons are.
 performed  in each tier of the economic evaluation.

       The manual describes procedures or protocols for performing the cost and financial calculations.
 After performing the cost protocol associated  with a tier, you should use the financial protocol to evaluate
 the e^nomTmerits of the PP alternative.  Each tier is evaluated using the same basic techniques.  Qnry
 you SI deSne S>e appropriate level of analysis to employ; not everyone will need or choosfc to employ ,
 all four tiers of the analysis.                  ,                       :     "

     N 13.1  Four-Tier Cost Protocol               1                   :,                      ;

        The manual describes four "tiers' or levels of costs associated with hazardous materials and 'waste
  management. You may go through as many tiers as necessary to demonstrate ti* economic ^viability  of
  SpP^rqjea:  The four costfe are summari^  next.-  Note that. Tiers 2 and 3 are judgmental .to
•  nature   You are encouraged to be conservative in your cost «timates thus reflecting youremphasis raPP
  S ft ?goal i £ not profit nfaximization.  If you get to Tiers 2 and 3, your estimates of Uabihty costs and less
  tangible benefits will reflect subjective corporate , policy vand not, precise, saentific calculations.   .

        Tier 0-addresses the -usual' capital and O&M costs associated. with new technology and operating
  practices ~  labor costs, equipment costs, raw materials 'costs, etc.  In this manual, EPA has assumed that
            conducted or will conduct an evaluation of usual costs by  using other EPA guidance, internal,
            SJerience, or outside consultants.  To use this manual, you wfll need to prov,de the Tier 0 cost
  estimate.
         tier   1  includes  Tudden'  costs  associated  with  pollution  practices  -  permitting  costs,
       itorinErtesting costs, training costs, inspection costs, and other regulatory costs.  In some cases, these
        «Tbe"Scant and pollution prevention can lower them. These costs aret
-------
                                         1-4
                                     EXHIBIT 1-1       .

                      APPROACH AND ORGANIZATION OF MANUAL:
                 FOUR-TIER COST PROTOCOL AND FINANCIAL PROTOCOL
{.ess Tangible Costs
 Consumer Responses
 Employee Relations
 Corporate Image
                                  Usual Costs
                               Process Equipment
                               Process Materials
                               Direct Labor
                              Jnanctel Protocol
Key Financial Measures
• Net Present Value
• Internal Rate of Return
• Annualized Cost
   Savings
                                Liability Costs
                               Penalties and fines

                               Future Liabilities
Hidden Costs
Monitoring
Paperwork
Permit Requirement
-------
current operations.  Using your current accounting records and the procedure in this manual, you should
be able to estimate Tier 1 costs feirty accurately:"     r~"'

   -    Tier 2 considers potential liability costs. As you are probably aware, environmental liability claims
are becoming more common,-and more expensive.  By avoiding pollution, you may be able to avoid liability
costs.   This manual presents a protocolto  estimate two  types pf liability costs:  .penalties  and fines
•associated with' non-compliance, and other liabilities referred to as future liabilities.  •         '      '    .

       Tier 3 includes- less tangible* benefits that .your company may achieve-as a 'result of reducing  or
eliminating pollution.  Less tangible benefits include increased revenues or decreased expenses due  to
improved consumer acceptance, employee relations, and corporate image.  Although it is difficult to predict
the extent of these benefits with certainty, it is reasonable to assume that these benefits may be significant
For example, several States are currently offering 'excellence* awards to businesses for  outstanding PP
efforts (e.g.,  CA,  MN, NC, TN).  Winning such an award may result in favorable publicity (Lc^ free
advertising), which  may promote consumer acceptance and interest in, a firm's  products or services.
Likewise, by drawing attention to efforts to reduce the amount of hazardous .materials or hazardous wastes
handled 'at a facility, thereby making the facility a safer workplace and a  safer neighbor, employee
productivity and product acceptance by consumers may be enhanced.   This manual  discusses some of the
benefits that may  be realized by reducmg or eliminating pollution,  pnty you, however, can estimate the
value of these benefits. -    .                             .    ,
/               _;           .           ••-.•'.           =           -

       1.3.2 Common Financial Protocol •           -         ,

       The results  from each tier are evaluated using the financial protocol.' The financial protocol assumes
that a PP project is economically viable if its implementation will result in overall net savings for the plant
or company.  The  financial protocol will guide you through the calculation of three key financial indicators
of the economic feasibility of your PP alternative:                                      .         :

       •     Annualized Savings - the equal amounts of dollar savings (or losses) expected     ":'•
             every year over the lifetime of the project (e.g., $2,000 per year over 20 years);    :   ' -
                        '                             -•            ,- '     •'"'•''-.,•'"!  f L ;'••.'
       •     Internal Rate  of Return HRRt - the expected long-term return on investment
             in the PP project (e.g., 12 percent); and                     •.,•;„•

;•••'•   •  Net  Present Value YNPV) - the present value of cash inflows minus the present
    •"    "   value of cash outflows (e.g.,: $5,000).                     •  ..'••'.••'.

Each-of these financial measures recognizes that one dollar earned or spent today is worth more than one
dollar earned or spent tomorrow; even in the absence of inflation. Financial experts acknowledge this time
value  of money by discounting  future cash flows in order to compare them to present cash flows. 'The
financial measures..presemed above are commonly used by firms; they are all based on discounting of future
cash flows. Using discounted cash flows, you will be able to compare costs or cost savings expected to be
incurred at different times in the  future.                •"'•_.   :      :.             •


 1.4    WHAT WILL YOU GET OUT OF THIS MANUAL?

       Using this  manual,  you will  be able to summarize the expected savings  from  choosing a PP
alternative to your current practice.  To illustrate this, Appendix D' of this manual presents'the economic
benefits to a hypothetical firm of switching from current practice to a PP alternative.  The hypothetical firm
is an electroplater of gold jewelry. Currently, the firm uses 1,1,1-tricholoroethane (TCA) in a pre-cleaning
.step which generates spent Solvents.   The firm,ships  the spent solvents off-site  for recycling.  After
distillation for the spent solvents, the off-site recycler incinerates the still  bottoms and disposes of the ash
-------
                                                  1-6
•  in a landfill.  Under the PP project, the hypothetical  finn would replace the TCA predeaner with a
  mechanized aqueous based cleaner.  The finn would not generate any spent solvents nnder the PP project.

        Exhibit 1-2 summarises the cost savings or benefits to the hypothetical firm at each of the four tiers'
  or levels of analysis. For the hypothetical firm, the cost savings from raw materials are not large enough
  to compensate far increased costs such as the capital expenditure for purchase and installation of the
  mechanized aqueous-based, cleaner/ At the Tier 0 level, the.PP project costs an additional  53,500 a year
  compared to the current practice and  has  an Internal Rate of Return (IRR) of 12 percent, which is less
  than the 15 percent minimum rate of return acceptable to the hypothetical firm. Therefore, the PP project
  is not justified using usual costs only.          .  •   •      .  '                                      .

        The PP project continues to be  not  cost-justified when considering hidden regulatory costs (Tier 1)
  in addition to usual costs.   Despite the additional cost savings  associated with  reduced regulatory
  requirements (e.g., less inspections), the PP project continues to cost $1,500 more than the current practice
  each year with an IRR of 13.7 percent (still less than the 15 percent minimum acceptable  rate of return).

        The PP project becomes cost-justified when liability costs (Tier 2) are added to usual costs and
  hidden regulatory  costs.  Compared to  the  current practice, the  PP project is estimated to save $45,600 a
  year in the form of reduced future liabilities associated with the management (especiaily solvent storage in
  tanks and ash disposal in landfill) of hazardous waste and materials. The PP project has an estimated IRR
  of 33 percent, which.far exceeds the 15 percent minimum acceptable rate of return.

       The  PP  project looks  even better when less tangible benefits (Tier 3), such as  increased sales
  resulting from improved corporate image, are also taken into account  At the Tier 3 level, the PP project
  is  estimated to save $48,000 a year compared  to the  current  practice.  Because the ERR  estimate (34 "
  percent)  is greater than 15 percent, the PP project is cost-justified.


  l£   HOW IS THIS MANUAL ORGANIZED?

       The remainder of this manual is arranged in five chapters and  five appendices.  Each  chapter first
. summarizes the steps to be covered in the chapter and the approach taken, and then provides more detailed
 information on  how to perform the steps.                                  -   .

       Chapter 2 discusses the Tier 0 cost protocol for usual costs.

       Chapter 3 discusses the Tier 1 cost protocol for hidden regulatory costs.

       Chapter 4 discusses the tier 2 cost protocol for liability costs.

    .   Chapter 5 discusses the Tier 3 cost protocol for- less tangible costs.                     ''"..'

       Chapter 6 describes the steps needed .to perform  the financial calculations for each tier.
      Note that the purchase and installation of PP equipment will cost an additional $24,800 a year over
the entire lifetime of the equipment.  As demonstrated in Appendix D, this annualized cost corresponds to
a capital investment of $155,000 in equipment with a 20:year lifetime, and assumes a 4 percent annual
-------
                                              i-7
                                          EXHIBIT 1-2             '

                   BENEFITS TO THE HYPOTHETICAL FIRM OF SWITCHING
                       FROM CURRENT PRACTICE TO PP ALTERNATIVE
  Level erf Analysis/
 Project Justification
                                             Cost Item
 Tier 0: Usual Capital Costs and O&M Costs
 PP alternative not cost-
 jBStified. Fails to meet  .
 the firm's 15% minimum
. nte of return .on investment.
 Tier 1:  Hidden Regulatory Costs

 PP alternative not cost-
 justified.  Fails to meet
 the firrf1- 15% minimum
 rate of return on investment.
                                 Equipment and installation
                                 Raw Materials
                                 Energy
                                 Disposal     ;  .
                                 Maintenance
                                 •Revenues
Net Savings or Benefits
  (in $ per year) g/
        -524,800
         $57,900
        -514,500
         -$2,900
        .$11,600
         -53,200
                                    Tier 0 Taxes
                                    After-Tax Savings Through Tier 0
                                    IRR Through Tier 0
                                  Reporting
                                  Inspections
                                  Other

                                  Tier 1 Taxes
                                  After-Tax Savings Through Tier 1
                                  IRR Through Tier 1
         .$4,500

         ••  ' - 'l2%


         /

            $930
          $1,800
            $870

         .$1,600

            13.7%
 'Tier 2:  Liabilities

  PP alternative is cost-
  justified.  Has an IRR of 33%,
  which is greater than 15%
  minimum rate of return on
  investment.  • •     .   ,       ;
  Tier 3:' Less Tangible Benefits

  PP alternative is cost-
  justified. Meets the firm's
  hurdle for investments
  (34% >  15%)
                                  treatment or Storage in Tank
                                  Transportation
                                  Disposal in Landfill

                                  Tier 2 Taxes
                                  After-Tax Savings, Through Tier 2
                                  IRR Through Tier 2
                                   Net Increase in Operating Revenues

                                  .Tier 3 Taxes   ..   V'   '-.   '.- ^./v.:::''
                                   After-Tax Savings Through Tier 3
                                   IRR Through Tier 3
          $47,500
          $1300
          $35300

         -$37,000
          $45,600
              33%
          $ 4300
          $48,000
              34%
a/
         All savings are before-tax except when in bold. A discount rate of 15 peram is assumed
         estimates Represent a cost increase or net loss.  Positive estimates represent a cost decrease or net
         benefit.  -All numbers may not add up due to. rounding.
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                                          1-8
Appendix A contains blank worksheets to be used in completing each tier of the analysis.

Appendix B provides information on the regulations that are Am-nt^^ under Tier 1.  '
Appendix C provides additional information on the future liability costs discussed under Tier


Appendix D illustrates the manual's approach with a hypothetical firm ^sample.

Appendix E introduces  the treatment standards promulgated  under  the land disposal
restrictions and provides  reference for additional guidance on the subject
-------
                                        CHAPTER?

                               HER 0 COST PROTOCOL:
                                       USUAL COSTS
       Tnis chapter discusses the steps needed to perfonn the Tier 0 analysis of usual costs.  As discussed
 in Chanter 1  the tier 0 analysis includes analyzing facility operations, developing options, and estimating
'"SeSect expenses of the options.  For purposes of this manual, it is assumed that you have conducted or
              be Tier 0 analysis by following other EPA fuidance, by using  yoiirjnttrnal  coipome
              Sy using outside consultants.  This chapter lists the types of costs that EPA anticipates will
               Ite 0'analysis of pollution prevention (PP) alternatives, but does not describe the process
 of obtaining the cost estimates.                                   •
                     STEPS              .

 1. Identify  one or  more  PP  alternatives;  i.e.,
    alternatives to the current practice expected to
    result in less hazardous waste generated or less
    hazardous materials disposed or released.

 2. Estimate the •usual".costs (capital  equipment,
    direct  operating and  maintenance, and other
    direct   costs)  associated  with  current  and
    alternative practices.7

 3. Report estimates  on the Tier 0 cost worksheet
    for  the current  practice and for  each  PP
    alternative separately.
                  APPROACH

•1. Conduct  a PP  audit, or consult the. EPA
   Manual for Waste Minimization Opportunity
   Assessments for further guidance.


2. Consult   the   EPA  Manual   for. Waste
   Minimization   Opportunity  Assessments,
   engineering handbooks, trade associations, or
   outside consultants.         .-.".'

3. Use  the  blank  Tier  0  cost  worksheet
   (Worksheet 0)  provided at the, end of this
   chapter and in  Appendix A of this manual.
      ' It is important to emphasize that you must estimate capital and operating costs for both tte current  ,
  andaltemativiTpraciices.  Frequently the capital costs associated with the current practice^ not^^>
  This is became easting equipment either may Still have depreciation charges against it or may be made
  obsolete by new regulations on pollution control within a few years.  .     .    -  -     -
-------
                                                 2-2
 INTRODUCTION

        The first step in reducing the costs associated 'with pollution and waste management is .to conduct
 a facility assessment to determine where waste is generated and which processes lead  to  the regulated
 discharge of pollutants.  Frequently, waste-generating processes will be found to date from a time when
 waste disposal and pollution control was less costly, so that changes in the process, which may be simple
 •housekeeping" changes or those requiring more significant time and planning, can result in immediately
 identifiable cost reductions through decreased energy, materials, labor, and disposal costs.' Assessment of
 these costs is considered' to be "Tier 0,* because the review of these •usual* costs is assumed  to be.*
 necessary pan of doing business.                                                              ;

        As discussed in Chapter 1, however, waste reduction need not begin as a separate, full-blown program
 nor even as an attempt to minimise pollution.  Instead, the initial steps can come about through simple
 awareness that waste, and pollution are costly, and that minimising waste and pollution  can save money.
 Pollution prevention also can result from attempts to optimize certain plant processes, e-g^ installation of
 a floating roof tank to control evaporative loss of volatile liquids during storage. Although PP audits would
 provide the most comprehensive information through a detailed, full-facility review, simply reviewing plant
 operations as pan of periodic inspections can also provide valuable information on waste stream generation.
 Similarly, it is not necessary to  redesign an entire plant, but if process modifications are being «*ratni«u»
-------
                                              2-3
the nature of the practices. Trade associations, state officials, outside consultants, and vendors can often
provide suggestions based on prior experience in reducing pollution.                             ,

      (2) Collect Data           "   _            .                 '   .    •

      The second step in the process is to collect data on the facility operations to identify the wast?
      tine steos "Material balances' showing the amount of raw materials, going into and the.aioount of
          steos
          odu*  and waste coming out -of a process will often help to pinpoint the. fergesi :
Records from waste disposal operations (air and water treatment plants and sohd «nd jiazardpus waste
dfenosal costs} will surest the  largest  volumes of waste.  • In  many cases, you can find  examples of
              ution ofwaste generation by simply walking through the plant to find leaking valves, open
                f excessive dragoff from chemical baths and cleaning operations, and uncovered containers.
A useful squree of data for this purpose may be your SARA 8313 data submissions.

       (3)  Develop PP Alternatives                  .                                          •

       The next step is to develop PP alternatives.  For example, your records may show extensive use of
organic solvents tha? are not matched by equivalent records of disposal or recycling.  Alternatives tq reduce
Se fugitive losses of solvent include enclosing the process or switching to a different cleaning mechanism
                                                               w   a show that most water is used
  e   gtve  osses o  s
jToaVu«ius solvents or mechanical abrasion). A review of water flows may show that most water is
only once but that all water is mixed before discharge. In many cases, non-contact cooling water (water
routed through jackets to cool equipment) can be used for washing purposes Many plants have found that
hichlv toxic waters (e.g., rinse waters from cyanide baths) are drained to the floor, where they can ma with
fe£ * biZtasmlirtfcr cleaning purposes. Some facilities have found that -counter-current' rinsing,
where the effluent rinse water from one step is used as the source to. a preceding step, conserves water
usage and decreases chemical usage and operating costs;

       (4) Determine the Feasibility of the Alternatives             ,         .              ,

       the final step in the audit process is to determine if the alternatives are feasible - wffl they work
at your plant.  In some  cases,  the  alternatives merely require good housekeeping practices or minor
alteration^ (e.g., using a drain board  to drain solutions back into baths, rather than letung the flui I drip
                                                                        -
 to the ground or contaminate the next step in the process).  In other ^» a^ditio^^f **,!?L^
 necessary to determine whether the change will have an adverse effect on quality. (e,g., recycling wastes back
•into:a process).  .'..'•'•   '''''••   •-       "   -•.' :•' -'V,'  '•:  '. .">•': :'.'••; '"-.'..•   .•.'  '  \.  ~  '''


 STEP 2:  ESTIMATE THE USUAL COSTS OF CURRENT AND ALTERNATIVE PRACTICES

 .  •' '  Concept and Purpose  ."   -    -   '   '    -•..»•;•  ''••••;',;:•,-•    ; -;;.;:'v-'•-. ;  •; •_  •

    -   Once alternative practices have been identified, you can estimate the •usual' cats associated with
 them  As discussed in Chapter 1; •usual' costs include those that are directly associated with the polluting
 or aliernative practice, and typically include equipment costs, material and energy cost^and direo^tobor
 costs  As shown in" Worksheet 0, costs can be put into two major categories:  capital expenses that must
 be depreciated for tax purposes, and other expenses that can be deducted from tax« in «J^gle year.  Some
 of the other expenses shown in Worksheet 0 (e.g., start-up costs) we commontycalculated as 'capital - costs
' because they are one-time costs that are needed before the process can bemed.  Because they are treated
 aTexpense for tax purposes, however, Worksheet 0 includes, them  under 'expenses.'  Worksheet 0 also
 provides room for recording any changes in revenues expected as a result of using an atornauve practice
• End provides room to record the estimated annualized cash flows to be developed following the financial
 protocol discussed in Chapter 61            ..     . •         .  ,.   •   .'• .   .;    ,'
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                                                 2-4
        Actions

        (1) Estimate Capital Cost Items           .    •                                   •
                                                                       •     '
  Worksheet 0 shows the 6 elements of depreciable capital costs commonly agodatfd with process changes.

  Equipment  This cost item represents the investment in new equipment needed to.implement the PP
  alternative. -The cost element should include the price (to.b. factory), taxes, freight, and insurance needed
  for delivery, and the cost for the initial spare pans inventory. You should include any additional equipment
  needed to supper? the PP alternative, such as additional storage and material handling 'equipment or .
  additional laboratory and analytical equipment

  Materials. Materials costs include piping, electrical equipment, new instrumentation, and changes in the
  structure.  These costs are those  incurred in purchasing the materials needed to connect the new process
  equipment (or to revise the use of existing equipment) to implement a waste minimization alternative.

  Utility Connections.  This item  includes costs, for connecting the new  equipment (or for  making new
  connections to existing equipment) as pan of implementing the waste minimisation option., Typical utilities
  include electricity, steam, cooling water, process water, refrigeration, fuel.(gas or ofl), plant  air (e.g., for
  process control),  and inert gas.                 '                             .              .  .

  Site Preparation.  This item includes the costs for any necessary site preparation - demolition,  site clearing,
  paving.                          •                                                                  '

  Installation.  This item includes  the costs incurred during the installation of the  process equipment or
  process change.  Be sure to include charges by the vendor as well  as by in-house staff.

  Engineering and Procurement.  This item includes the costs incurred to design the process equipment or
  process change and  to purchase  any  new equipment   Charges for .consultants used in designing and •
  procuring equipment would be included here.

       (2)  Estimate Expenses   •'               *                         .                .  .

       Worksheet 0 shows the 14 operating cost elements commonly associated with process and procedural
  changes. The costs in this category include both one-time costs and on-going costs that are deductible for
  income-tax purposes.  For consistency with the approach used in the Tier 1,2, and 3 analyses, the costs are
  presented as total current'costs and total costs after the change;  the evaluation of economic feasibility
  presented in Chapter 6 will show how to perform the comparative analysis.
                                                     ,''•'•}''      , :•.  •       '       '            " •  '.
'  Start-up  Costs. •  Start-up costs include labor and material costs incurred during the start-up of the
 equipment.  ..                      .                ,                                            .

 Permitting Costs.  These .costs include both fees and the costs incurred by in-house staff in documenting .
 the process change to meet permit requirements.                .

 Salvage Value.  Estimate the net amount (in today's dollars) that the used equipment will be worth at the
 end of its useful lifetime. Include the value of working capita! and catalysts and chemicals that will remain
 at the completion  of the equipment's life.

 Training Costs. Training costs include' the costs for on-site and off-site training related to the use of the
 new equipment or for making  sure the process change achieves its  goal.

 Initial Chemicals.  The initial charges for chemicals and catalysts can be considered a capital  item.
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                                               2-5
 WoridntGfflital.  TWs category includes ill elements of working capital (required inventories  of raw
 materials, in-process inventories, materials and supplies) not already included as charges for chemicals and
 catalysts or for spare parts.   .

 Disoosal Cost  Tlie disposal cost includes all of the direct costs associated with waste disposal, including
 solidwaste disposal, hazardous waste disposal, and off-site recycling. Exhibit 2-1 presents typical treatment
 and disposal costs (in 1985) by type of waste and technology.   .                  :        ...

 Raw MaterialsCosts,  You should include both" the raw materials directly affected (e.g-, chemicals for which'
 more effective or less toxic substitutes are being found) and other raw materials affected by the change £
 Se prooS(eig; ifi change in cleaning agent changes the rqectionrateof metal parts, then there may be
 a change in the total  materials costs for raw metal).

 Utilities Cost  Utilities costs include electricity, any process steam, water, compressed air, and heating on
 ornatural gas. It is important to consider whether a process change causes downstream effects as well aj
 toed w£S effects. For example, if a process is modified to recycle aqueous streams, then there maybe
 uSefc^forS process (different costs to adjust the temperature of the stream to match the process
 requirements) and different costs associated with the downstream water treatment process.

 r*tMyst< and  Chemicals.  In this category, you. should include any chemicals or catagts necessary to tte
 orocess that are not raw materials.  For example, cyanide makeup for metal plating, pH adjusters forwater
 treatment, and catalysts used to speed chemical reactions all are necessary to the process, but do not become
 an integral pan of the final, product.  .                 ~

  np«H.tirip and M^H.U fQAMV tabor Costs.  This cost elements includes  the labor needed to run the
  affected processes.                   •                                   ,  :•"•.  •'••/           '

  ^r.ra.in „ and Materiai< Sunnlies Costs.  TOs cost element includes suppliesaeeded on a regular basis, such,
  as glassware, buckets, cleaning agents, uniforms, air and dust filters, protective equipment.

  Tn»,rar.^ and Liability Costs. In some cases, your insurer will review your insurance and make *lj»s«ii«ns
  baSdS i changes in the risk associated with you plant. For example, if you  replace a process with a high
  history of accidents or health problems, your rates should go down.        -
   ' ' -  " -          - ,'        •   - , '    '      •   '               v- •      "-'•"•-',*•-)  ' •    " "    '
  other' Operating Costs. ..TOs cost element includes other operating costs that have not been specifically
!• included above.            '    ..  '  .   -.           ,.               .     ;            •'•-•"'  •

         (3)  Estimate Operating Revenues     •   '          .

 •'••'•'•    In  sonic cases, adopting a PP alternative wfll lead u>  changes in the revenue from operates.
   Worksheet 0 provides room for two categories:  revenues from primary products, and.revenues from
   marketable' by-products.           .  -                 .                       ,        •     :

   Primaiv Products.  If the process or procedural change wfll change the production rate-of the process, then
   the  revenues before  and after the change should be calculated.
   M^ketable Bv-Produos.  One butcome of many PP projects is an increase in the amount of
   bv-nroducts  For example, precious metal platers in Massachusetts have found that concentrating the plating
   batS 1nSud£ S alKd them to sell the sludge to recycling fecflities for the precious metal content
-------
                                           2-6
                                       EXHIBIT 2-1

                       TYPICAL TREATMENT AND DISPOSAL COSTS
Waste, Management > ..
Technology ;*
landfill
. Land Treatment/
Solar Evaporation
Incineration
Chemical Treatment
Resource Recovery
Deep Well Injection
'Transportation •
Type/Form of Waste •
• 55-gallon drum
• Bulk
• All
• Clean liquids, high
BTU value
• Clean liquid, low
BTU value
* Sludges and solids
• Highly toxic liquids
• PCB liquids .
• PCB solids
• Acids/alkalies
• Cyanides
• Highly toxic wastes
• Heavy metals
• Organic
•• Mixed Halogenated
• Oil
• Oily wastewaters
• Toxic rinsewaters
, . .•
Price |/ Price f .
(1985 $ Per Canon) (1987 $ Per Gallon)
5D-i37/Urom
69-140/ton .
03WL83
0.10-1.93
133-4.17
2.75-4.75
2.10-830
. 250-3.50
4.50-1Z50
0.12-2.00
0.50-0.90
0.80-6.00
0.20-1.00
(0.25)-3.00
230-4.20
0.00-0.42 ' ,
0.08-0.50
0.50-1.20
0.18-0.22/ton-mile
2.70-4.5/loaded mile
(20 tons per load)
1 •'';.•• -•/ '•. '••• -...'' ' ' •
64-186/dnun
97-166Aon
.
135-2.95 .
133-338
5.40-&56
236-5.02
236^34
3*4-8.17 ,
N/A
N/A
WA .
N/A
N/A "
N/A •'••
0.20-1.13
0.09-OJO
0.15-0.63 .
0^3/ton-mfle . '
335-3^1/loaded mfle
(20 tons per toad)
NA = Type of waste not included in 1987 survey.

      €/ U.S. EPA, '-1985 Survey of Selected Firms in the Commercial Hazardous Waste Management
Industry,' Final Report, November 6, 1986.

      &' US. EPA, '1986-1987 Survey of Selected Firms in the Commercial Hazardous Waste Management
Industry," Final Report, March 31, 1988.                   ,           '            '
                                                         •V.
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                                             2-7
STEP 3:  COMPLETE THE HER 0 COST WORKSHEET

      •me final step is to complete the Tier 0 cost worksheet, ie, Worksheet 0. .The worksheet basjtaee
   •   ^U^Ti-Etand block has summary descriptions of each cost item. These descriptions, which
major blocks The Irft-hand ™^ '^^^ 4^^ Opportunity Assessment Manual, have

ZZ3SE* iS sSTi  The mSe block provides room to enterUlues fof the elements of the cash
S.  S *££** bio*  ^be.disco^ed in Chapter 6.  The following discussion pemins to  the

elements in the middle block. ••••'..•    '       '   .  .      _••              "...••   •   •
•    •'     .'.'••'    •  ,  '  r~ •  ,,_           • •    ,       " • -  . -  '  ;     /'-..-.   '_.,..    _:''••
   '•  Concept and Pnrpose     "     •                    •                               •

                 0 orovides a way to summarize the costs obtained in Step 2 using a standard format that
      For each tier voa may perform the cost calculations either (1) once; ie. for your PP alternative

                                                                                                '
                         current practice and Sc^r the PP alteniatrve and check the^cunent and
 your PP alternative, then you need not enter the amount of revenues at all                 :.


       Actions  ,                         ,  .•

       (1)  Record the Cash Flow Amount            .              •   ^                         .

       For each cash flow item, report your ash flow estimate in current dollars, as obtained in Step 2.


       (2)  Estimate and Record the Escalation Kate   .         ,












  ^1Sffl£ L^W  increases in rates *«* observed for **£*»£ SS5 "
  MorVrecently, the costs of TSD services' have continued to rise  at a rate of 10 i«rcent to 20 peront p«

  year, .      '_••-_..     .     '•.••'     •._   .'.''•      ;•''-'      ;\  ',       .        '. '  •'
                        -            '         4           '      --;,,.-,       ,  -       • . •  •     i
        (3)  Record the First Year Of Cash Flow

        The secor^ element is the year when ^



  record  a \Sue of 10. In mo7t cases, the first year of cash flow, however, will be year 0 (today).
-------
                                                2-8
      (4) Estimate and Record the Lifetime                                               .          _

      The third element is the lifetime associated with the cash flow. For equipment costs (Al through
A6) you should use the expected equipment lifetime.  For other costs, you should use the estimated project
lifetime.  As a general rule, a good value to use for lifetime is the estimated lifetime of the longest-lived
equipment item.
                                      After completing Worksheet 0, you should proceed to Chapter &
                                      Chapter 6 provides the financial protocol, which wfll  give you
                                      instructions to (1) complete the right-hand block of the Tier 0
                                      Cost Worksheet (Le, annualized cash flows), and (2) calculate the
                                      ?nnnaii7«i cost savings, net present value, and internal rate of
                                      return of each alternative PP practice relative to current practice.
                                      These values will allow you to assess the economic feasibility of
                                      your PP alternatives).
-------
          2-9
    Worksheet 0
Tier 0 • Usual Costs
D Currant Practice
D Alternative Practice
D Incremental
^" •> "ITEM WESCftiPTION " " "A

A. DEPRECIABLE CAPITAL
EXPENDITURES
Al Equipment • •' '
A2 ' Materials
A3 Utility Conneetiotu
A4 Site Preparation • ' .
A5 Installation
A6 Engineering & Procurement
B. EXPENSES
Bl Start-up .
. B2 Permitting '• •
B3 Salvage Value
B4 Training •
B5 Initial Catalysts *
B6 Working Capital
B7 Disposal
B8 .. Raw Materials •' .
B9 Utilities. ' . ' •
BIO CaUlyiu A. Cbemicais
fill • 'Labor •
BJ2 Supplies
• B13 Insurance
B14 Other *
C. OPERATING REVENUES
Cl Revenue* •
C2 By-product Revenues .





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-------
-------
                                       CHAFFER 3

                              TIER 1 COST PROTOCOL:
                           HIDDEN REGULATORY COSTS
      this chapter presents the protocol for estimating the hidden regulatory costs, associated with yow
current and alternative practices.  You may perform the cost calculations described in. this chapter either
(1) once; i.e., for your alternative practice relative to current practice, or (2) twice, Le., once far yoor
current practice and once for your PP alternative.

      Worksheet I for the Tier 1 Cost Protocol has  three major blocks (see end of chapter).  Ite left
block has summary descriptions of each cost item. The middle block provides room to enter values for the
elements of the cash flow.  The right block allows for the Her 1 financial calculations (see Chapter 6).
                    STEPS

   For the current practice and each PP alternative:

1.  Establish what regulations are applicable to your
   facility.         .

2.  Estimate hidden capital expenditures expected
  • to be incurred by your facility,

3.  Estimate hidden expenses incurred or expected
   to be incurred by your facility.
4.  Complete Middle Block of Worksheet I.
                  APPROACH
1.  Fill  out  Regulatory Status  Questionnaire
   (Exhibit 3-1).

2.  Analyze technology-forcing requirements of
   existing or anticipated regulations.

3.  Using  results from the Regulatory  Status
   Questionnaire (Step 1), fill out Cost  Tables
 .  3-1  to 3-14 and  report  your cash flow
   estimates on Worksheet I.
•'•"!*••    ,       .   _ -  . ' ' , - . _       . ' .  _   . -
4.  Use guidelines presented.;     x 	   .
-------
                                               3-2
 STEP 1:  ESTABLISH YOUR FACE-TITS REGULATORY STATUS

    •   Concept and Purpose                        .

       The Regulatory Status XJuestionnaire (Exhibit 3-1) has been developed .to determine yonr acuity's
 reeulatory status for purposes of this analysis. The tenh •questionnaire* does not impry that the government
 wffl ask for any information from this exercise.  It will not!  This questionnaire is for your .use only,
 ' Likewise, the regulatory descriptions provided in this manual may not be comprehensive, they are intended
 to- be used only as guidelines. "•'.-'         •         .    '              .       •           •   .  .

       The Questionnaire spans all of the regulatory  programs covered in this manual (Le., RCRA,
 CERCLA, SARA Title HI, Clean Air Act, dean Water Act,  OSHA) and presents questions to aid in
 establishing which specific requirements are applicable to your facility (for both your current practice and
 PP alternative).  To answer the questions,  you may need to tocate further regulatory information.  This
 information can be obtained  by:                    .                .

     " •     referring to Appendix B of this manual; •

       •     'contacting facility personnel familiar with the regulatory aspects of your fecilit/s     •
             operations; or             •       • '

       •     referring to the regulations .or acts pertaining to the programs for which you
             need information,   . •

       Actions

       (!) Complete the Regulatory Status Questionnaire                                  .        .

       Complete the questionnaire (Exhibit 3-1) by reviewing each of the questions on the right-hand side.
 If you answer the question affirmatively for your current practice, circule the status number under current
 practice.  If you answer  the question affirmatively for your PP alternative, circle the status number under
 PP alternative.  For example, if your facility is a large quantity generator in the current practice (U-> you
' produce more than 1000 kilograms of hazardous waste per month), yet in your proposed PP alternative you
 will  completely eliminate your hazardous wast€ generation, you  will circle the status number  1 in the
 column under the heading 'Current Operation" and will not circle the status number T under the heading
 " 'PP Alternative.' The circled status numbers will be needed in Step 2 when estimating costs for the specific..
 requirements applicable to your facility.  '                                                      .!

 STEP 2:  ESTIMATE HIDDEN CAPITAL ISCPENDITUKES          .

      ,  Concept and Purpose

        EPA's approach to environmental regulations over the past years has emphasized the need to install
  new technologies in order to protect the nation's environment.  Provisions of the Resource Conservation
  and Recovery Act, the Clean Air Act, and the  dean Water Act provide examples of technology-forcing
  requirements and regulations promulgated by EPA. In addition to .the technology-based federal regulatory
  requirements, there arc  many state regulatory programs-that can also impose technology-forcing regulatory
  requirements.                   •         • '   i '                 .

        Your firm may incur  capital expenditures in  the  near  future, to satisfy technology-forcing
  requirements.  For example, if you have an on-site surface impoundment, you may have to retrofit it with
  a double-liner  in order to meet the  minimum technology requirements of the land disposal restrictions.
  The costs of retrofitting will likely be significant and, therefore, you must consider them in the economic
  evaluation of any PP alternative to your current practice.                     •     .,     .       "   .
-------
                                             3-3
                                         EXHIBITS-!
                                                   • _  ' •_   ^    ;s.
                           REGULATORY STATUS QUESTIONNAIRE
                             (for current and alternative practices) a/
         Status Number
Current Practice .   PP Alternative
                        Does/Is Your Facility:
Resource Conservation and Recovery Act          .                             .
       1              1           A RCRA large quantity generator?
       2              2           A RCRA small quantity generator? .
       3              3           A primary exporter of hazardous waste?
    •  4         ..    4           Have hazardous waste storage tank(s) on site?
       5              5           Transport hazardous waste?       '       '   .       •
       6         '     6           .A final status TSD facility?
       7              7           An interim status TSD facility?

Comprehensive Environmental Response, Compensation, and Liability Act j/
       8              8           Have CERCLA Section 4661 chemicals (see Exhibit B-2-1)
                  V                         .',•'•       -                     '
Superfund Amendments and Reauthorization Act, Title
      10
      11
      12
Clean Air Act
      13
Clean Water Act
       15

       16
10



11'


12



13

14


Sf'

Sf




15

16
 Handle any 40 CFR §355 Appendix A and B extremely hazardous
 'substances at or above their,Title III threshold?         .

 Occasionally release reportable quantities (see 40 CFR 5302 and
 Table 302.4) of CERCLA hazardous substances or any 40 CFR $355
 Appendix A and B extremely hazardous substances?

 Maintain  any  material safety  .data  sheets  under  29  CFR
 §1910.1200(g)(8) (see (22) under OSHA)?

 Have 10 or more employees and foil within SIC codes 2000 to 3999
 and within the current calendar year handle 40 CFR §372£5tone
 chemicals above thresholds stated in 40 CFR §372.25?  '    • '

 A new stationary source (see Exhibit B-4-2 of Appendix B)?

 .Emit Section 112 hazardous air pollutants (see Exhibit B-4-3 of
 Appendix B)?                                 ;
. '   • •   M    •'• ',  ~ --•' -,'-•-''-      - ••      «•      '    .
 Within an industry listed in Exhibit B-4-4 of Appendix B?

 Have a PSD permit?      ,              ' •                   .

 Have a nonattainment permit?                           ,
     - ' * .      '•     -   ,        '   *•'    '          ' --     -  .

 Discharge wastewaters directly to surface water? '

 Discharge wastewaters  to  a publicly: owned  treatment  works
 (POTW)?      :  .                           ..'          .
-------
                                             3-4
                                   EXHIBIT 3-1 {continued)

                           REGULATORY STATUS QUESTIONNAIRE
                             (for current and alternative practices) §/
                                                          Does/Is Your Facility;'
Clean Water Act (continued)
                      18


                      cf
                       •  i •
Occupational Safety and Health Act
20 '


21


22


23
                      20


                      21


                      22


                      23
                                   occasionally discharge repbrtable quantities of hazardous robstances
                                   as defined in 40 CFR 5117?                            .

                                   Have toxic pollutant discharges listed in Exhibit B-5-2 of Appendix
                                   B for which chemical-specific standards have been promulgated?

                                   Within an industry listed in Exhibit B-5-3 of Appendix B?
                                                        .                ,                '   • .
                                                                fc ft
                                   54,70,75,76,79,80)?

                                   Have 10 or more employees and is it not within SIOs 52-89 (except
                                  .52-54,70,75,76,79,80)?

                                   Have OSHA air contaminants as per 29 CFR §1910.1000, Table Z-
                                   1, Z-2,orZ-3?
                                                   • .                         t
                                   Handle  any  hazardous   chemicals  as   defined  in  29  CFR
                                   «1910.1200(c)?

                                   A hazardous waste treatment, storage, and disposal facility (regulated
                                   under 40 CFR Parts 264 or 264), or a Tlarge quantity generator of
                                   hazardous waste, or a facility accumulation of hazardous wastes for
                                   90 or more days (as defined in 40 CFR 826234)?
                                      •          '  '   • *
                                   Handle any OSHA chemicals listed in Exhibit B-6-2?
 a/   -For-fu'rther information about the regulatory programs,.** Appendix B or
       t>fthe Code of Federal Regulations.  Other Federal Programs (e,g. Tone Substances Control Act,
       SffDrlrSnfWaTeTi«'»d  suite programs (e,g. New Jersey ECRA|.may appry bm we« »ot
       analyzed in this manual due to resource limitations. Note that SARA Secuon 312 (reportmg on
       toerlency preparedness) is covered  by Status Number  11 and SARA Section 313 (reporting on
       environmental releases) is covered under Status Number 12.

 b/    Most of these costs are covered in Tier 2, Liability Costs - Chapter 4.         ;

 cf    These questions apply "to  additional chemical or industry-specific requirements that can topose
       significant costs, and  should, be considered.  .Due to their specific nature, however, these costs are
       not quantified in this manual.            .     .                                   .      -
-------
                                               3-5
      Actions                                                  .      '                            .
                                       .-""','• i     '      ''    . , .             . '   .    • .
      (1) Identify Technology-Farting Requirements     . •    -   :       .

      .Your responses to the regulatory questionnaire should give you a food picture of existing regulations
applicable to your firm under current and alternative practices. To find out about the technology-farcing
nature of these requirements, either consult the regulations  themselves  (see Appendix B for a brief
summary),  read specialized literature (e.g., newsletters-and magazines),  consult the State's" technical
assistance program, or consult any environmental or legal experts available to your firm.      .       •  ••

      By establishing treatment standards, for hazardous wastes and minima™ technology requirements for
land disposal, the land disposal restrictions provide a good example of technology-forcing requirements.
Appendix E contains, the treatment standards established under the land disposal restrictions for solvents,
dioxins, and California list  wastes. Treatment standards also have been or wfll be established for those
hazardous wastes not included in Appendix E (the so-called remaining wastes).       .

      (2) Estimate the Costs of Future Technologies                                       ,,        >.

      Estimate the capital outlay necessary to satisfy these technology-forcing requirements and report your
estimates on Worksheet I either for the current and alternative practices separately, or incrementally for
the PP alternative relative to the current  practice. Remember, all cash outflows (costs) must be reported
as negative numbers.  As suggested in Worksheet I, you can categorize your hidden capital expenditures into
the following items: monitoring equipment, preparedness and protective equipment, additional technology,
and other.  Of course, you  can create your own items if these categories do not fit your needs.     •


STEP 3: ESTIMATE HIDDEN EXPENSES^                                          v        ,

      Concept and Purpose                                      '          ;.

      This step allows you  to estimate the hidden expenses resulting from complying with the regulations
applicable to the type of operations at your facility (e.g., having hazardous waste storage tanks, having
various  SARA  Title  III hazardous substances  on site, etc.);   Therefore, you will  start by taking  the
regulatory status numbers determined in Step 1 and transferring them onto each of the Cost Tables, (Tables
3-1 to .3-14) to  help you limit the calculations to only those costs directly applicable to your facility.    •
                            . _ '    ."   /      '    "      f      •         '           .I.''1    ' .. ',
    '  Actions ."'.'...-     .             •'/,.•';       -    '....'    •;.''.••."   '.  •   .          .

      For  each of the 'fourteen types of regulatory requirements (Le., for each of Tables 3-1 to 3-14),
perform the following three actions:                                               .

      (1)  Identify Applicable Regulatory Requirements     .                   .      "

      For the  current practice and  the  PP alternative, circle applicable status numbers by referring to
Exhibit 3-1 as completed in Step 1. For example, if you have a  hazardous waste storage tank on Site under
current practice, then you will have circled Status Number 4 under current practice in Exhibit 3-1.  In this
case, you will circle Status Number 4 under current practice every time this status number appears in the
first column of Tables 3-1 to 3-14.                                      .             .
-------
                                                3-6
       (2) Estimate the Cost of Each Applicable Regulatory Requirement

       Having identified all specific regulatory requirements applicable to your facility (e.g,, all notification
 requirements using Table 3-1), you will now estimate the costs of complying with those requirements as
 follows:  •          .       •  ,                    :                      '    -     '•'••.

             (a)   if yon do not recognize the requirement, took it up either in Appendix B under   .
        :   " •       ^ regulatory program heading, or directly in the Code of Federal Regulations      :
   .   '  . '       to see what the requirement entails;      .      .                 .  .   .    '..

             (b)'  Calculate the Annual Cost of the specific requirement by one of
                   the three following methods:   •

                    •    If you have access to the total annual.amount your facility
                         is spending tinder this requirement, enter it in the Annual
                         Cost Column.          '.'••,•.'

                    .    if you do not know the annual cost, use the cost equation
                         .provided with parameter values specific to your facility (Le.,
                         facility-specific values  of frequency t, non-labor  costs m,
                         time t,  and loaded wage w for the specific regulatory
                         requirement). -Enter the cost estimate in .the Annual Cost
               ,      -    column.    •                                .-..•'...

                    •     if you have neither the-annual cost nor a basis on which to
                          estimate your facility-specific parameter values, use or adjust
                          the defaults provided in Tabjes 3-1 to 3-14.  When either       •   •   .   .
                          equations or defaults/estimates are not provided, you must
                          rely on facility-specific information and  best professional          .   .
                          judgement to make estimates.  Place your cost estimate in
                         'the Annual Cost column.                   .

        (3)    Sum All Costs

        Sum all costs in the Annual  Cost column and place the total in the space provided at the bottom
"  right of the cost table. After completing the applicable cost tables, transcribe, the total annual costs from
  each table onto Worksheet I in the Cash Flow Estimates column of the middle block.


  STEP 4:  COMPLETE MEDDLE BLOCK OF WORKSHEET I                   .     .

    '  •. Concept and Purpose                   .                         .

        Having estimated  the total annual costs associated with each type of regulatory requirement (e.g.,
  notification, reporting),  you now will report these cost estimates onto Worksheet  I and specify the
  escalation rates and lifetimes associated with these cash flows.  For a brief overview and discussion of the
  concepts of escalation rate and lifetime, please refer to Chapter 2, Step 3.                       -
                                       \     "     •          .             '""'!''      •   .   -  '
        Actions            .'•'.-•

        (1)  Record the Cash Flow Amount

      •  For each cash flow item, report your cash flow as estimated in Step 3.
,-f.
-------
                                         3-7
(2) Estimate and Record the Escalation Rate

(3) Record the First Year of Cash Flow   .

(4) Estimate and Record the Lifetime
                               After completing Worksheet I, yon should proceed to Chapter 6.
                               Chapter 6 provides the fi^neM protocol, which wfll give yon
                               instructions-on how to (1) complete the right-hind block of the
                               Tier  1  Cost  Worksheet (Le,  tennmifasd  cash  flow),  and
                               (2) calculate the annuitized  costsavings, net  present value, and
                               internal rate of return o'f each PP alternative practice relative to
                               your current practice. These values wfll allow you to assess the
                               economic feasibility of your PP alternative^) taking into account
                               usual costs, in addition to hidden regulatory costs.
-------
-------
-------
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-C JTCM DESCRIPTION

A. DEPRECIABLE CAPITAL
EXPENDITURES '
Al Monltorfnj Equipment
A2 Preparedne« tad Protective
Equipment
A3 Additional Teetmoiojy
A4 Other
B. EXPENSES
Bl Notification
B2 Reporting
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B6 Training
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BIO Preparedness mod
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Bll Closure/ Post Closure Care
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-------
-------
                                         CHAPTER 4

                                TIER 2 COST PROTOCOL:
                                     LIABILITY COSTS
       This chapter describes the cost protocol for estimating potential liability costs associated with
•hazardous waste'and materials management, two types of liabilities are addressed: ..penalties and fines
associated with noi-compliance, and other liabilities  referred to as future liabilities.  .The steps and
approach outlined below will assist you in completing  the  middle block .of. the: Tier  2 worksheet
(Worksheet II) attached to the end of this chapter.  ;                          .   .
            ; -   / - .  -STEPS • ,•• .    /  --"-.:

 For the current practice and each PP alternative:

 Penalties and Fines

 1.  Identify the regulatory programs and specific
    requirements for which your.facility could be
    penalized for non-compliance.

 2.  Estimate the expected annual penalties and fines
    associated with each program/requirement.
   \       *  -    ,  -    .      •.  ,     -

 Future Liabilities       .

 3.  Identify those waste and materials management
    activities to which  future liabilities can attach.
•4. Estimate the total expected'liabilities associated
    •with each activity.  .  .   ..    " _•"•-.  '
 5. For each "activity, estimate the year in which
   •these liabilities are expected to be incurred.
 6.  For each activity, estimate your company's share
     of total  expected liabilities.   •          •
                                                                        APPROACH
Penalties end Fines

1. Check the applicable regulatory programs and
   requirements in Exhibit 4-1.      •
2. Use  statistics  on   penalties  and   fines
   summarized in Exhibit 4-1.   Compare to
  ' historical penalties and fines at your facility.

Future Liabilities

3 Focus on  activities  that  potentially could
   cause personal injury and property damage
   (e.g., past and current tank storage. and
   treatment,  transportation, and land disposal
   practices).     .        ','  '
A.
    Compare to .dafrnsi awards, and settlements
    under known liability cases, or use predictive
    modeling approach outlined in this chapter..
5..  Estimate time of travel  to exposure points
    (e.g., drinking water well) or damage areas
    (64., river).                          \

6.  Pro-rate total liabilities as a function of your
' .  company's  relative  ability  to  pay  and
   . contribution to waste handled.     .
-------
                                               4-2
 INTRODUCTION     "                                                         •             '

       Liability costs include penalties and fines due to non-compliance, and future liabilities for remedial
 action, personal injury, and property damage associated'with routine and accidental hazardous releases. Ijfce
 the bidden regulatory costs of Tier 1 (see Chapter 3), liability costs are hidden because you may not believe
• that you will incur them or  you may underestimate their amount-
                   i      *                 "            •  -  '   .                          f
       The likelihood  and amount of liability costs can  be very significant  For this reason, yon are
 •encouraged to factor estimates of expected liability costs into the aggregate costs for your current practice
 and your PP alternative.  The Tier 2 analysis described below will assist you in estimating the likelihood
 and amount of lability costs at your facility.                    '


 PENALTIES AND FINES

 STEP 1:  IDENTIFY REGULATORY PROGRAMS UNDER WHICH PENALTIES AND/OR FINES
         COULD. BE INCURRED

       Exhibit 4-1 shows the major EPA environmental programs and specific requirements (in footnote)
 prescribing penalties and fines for non-compliance or violations.7  Under the Clean Water Act (CWA), for ~
 example, Exhibit 4-1 references penalties for NPDES violations, oil or hazardous material spills violations
 (Section 311(b)), and dredge and fill violations, including wetland  protection (Section 404(s)).   Check
 Exhibit 4-1 for those regulatory programs where you could be  penalized or fined for non-compliance.
 Supplement  this exhibit with your knowledge of plant operations and any previous penalties and. fines
 imposed on your  plant.                              '

 STEP 2: ESTIMATE THE EXPECTED ANNUAL PENALTIES AND FINES ASSOCIATED
         WITH EACH PROGRAM/REQUIREMENT

       For each regulatory program, you can use Exhibit 4-1 to estimate the expected annual value of
 penalties and fines that may  be assessed on your plant as follows:

 (1)    Select a value of the penalty or fine from the range indicated: Exhibit 4*1 shows broad ranges
       of penalties and fines  imposed in Fiscal Year 1987.  For example, penalties and fines under
       RCRA in Fiscal Year  1987 ranged between S500 and SI 15,000, with a median penalty or fine
      value of 57,550.  Actual penalties and fines will depend on the severity of the violation.  Note  .
 .*  .   that Exhibit 4-1 is for Federal  enforcement actions only; in particular,  Exhibit 4-1 does not
      reflect penalties and fines imposed by states and local governments. State and local penalties
      and  fines potentially can be higher than Federal'penalties and fines.

 (2)    Enter  a value for the probability that you will be penalized or fined in a given yean Exhibit
      4-1 provides a column for you to enter your estimate of the probability that your plant will
      be penalized or  fined  for non-compliance with this program.  The value of the  probability
       must be between 0 and 1 and must reflect past violations at your plant or other similar plants.

 (3)   Multiply your estimates of dollar value and  probability of penalties/fines to obtain the expected
      value of penalties and fines.

 (4)   Sum the calculated expected penalties or fines over all programs/requirements and enter the total in
      the spaces provided at the right-hand column in Exhibit 4 and in Worksheet II.
    1  Exhibit 4-1 is based on 'Overview of EPA Federal Practices, FY 86 and 87,* Compliance Policy
and Planning Branch, Office of Enforcement and Compliance Monitoring, March 1988.
-------
                                            4-3
                            :           EXHIBIT 4-1

                           SUMMARY OF PENALTIES AND FINES
                             UNDER EPA FEDERAL PROGRAMS
                                   .(FISCAL YEAR 1987)
  Check    .
    if
Applicable  - Regulatory Program
  Range of Penalties/               .   ...      -       •;.
   • Fines Assessed (3)  ~      -  ~  '                 '     ..
                        Probability of  'Eipected Value of
.Low   High    Median  Penalties/Fines    Penalties/Fines
            RCRA

            CAA, Stationary Source
            Judicial
            Administrative

            CAA, Mobile-Source
                                      500   115,000   7,550
 1,270.
600,000   65,750
  1,270   1,270
juuiuai
Administrative
._ 	 ' CWA • : ' ".'.' ' "'
	 	 SDWA
i - Judicial
Administrative , ' ,
•; 	 	 TSCA
	 	 	 FIFRA
100 2,600,000
-. 1,000,000
1,000 •' 6,200
2,050 10,000
- 1,000,000"
- \ 25,000
«
1.000
SOJDOO
5.000

1300 ' "'", " - ' • • •/•-"-•' "'.:' •
780 •:••"'•••'' ' •••" ' - : " '" .
" Total
. ' " . .""'-'-. • • '.,"." . • ,'•'"'
       Seaion 3008(a) of RCRA authorizes a»e«ment
  eTes may be assess* up to $25,000 per day of violation,
" to comply with the appropriate-requirement*. ,      ,  "
                   l«^ ^ l^tk» of Subtitle
                                                                                        CM
                                        limited to $25.000 per"
 rAA St..ion.w S<.uree ProgtM.: TVro «OUTCB of dvil penilty «uthority: (1) <** J*** MderSeetk» 11.  mte to   .
^ ,Uy of vKjUUon, «nd (2) avfl adminutntiye under Seatoi 120. desipicd u> recover the economic benefit pined ttaoujh non^jopj

 C/ULMobUe Sources. V»l«ions of the •ntiumperini pcwMon, of Section 203 .re »bjeci to . $10^00 penalty (for new or. tote.
 .n7m«nut»eturrrolr » SWOO pei«lV (for Oeet7p«ton and irp«r UcOitia). V«Uto» of tbe bieb refulauom promulpted under
 Section 211 are potentially subject to $10,000 per day per violation.
''^jff^ s ss^ssriK J^^HSsFsr^ sSS
 vioUtio^mduding»ie^ndsUpTOection.  Under Section 4«^»n;
      licm 15 of the Act. Criminal penalties of not more than $25.000 tor each day of vwtotion may also be imposed I
'FIFRA. Qvfl penalties not to exceed $5.000 for each offense are authorial under Section 14(a) of FIFRA.  Violations of ihe Act
 are also subject to criminal penalties of no more than $25,000 or one year in jail,                              .  •... .
-------
  FUTURE LIABILITIES                                                .
                                                            *..••'                        •
  STEP 3:  IDENTIFY WASTE MANAGEMENT COMPONENTS TO WHICH LIABILITIES CAN ATTACH

        Future liability (FL) .costs can attach to. both current and alternative wastemanagement practices.
  Future liability costs are strictly equal to zero if and only if your company generates QD hazardous waste
  and releases no hazardous materials. . Opportunities  for future liabilities can arise from non-permitted
  potential releases as well as permitted releases. In particular; you may want to focus your attention on the
  following waste management-activities to which significant future liabilities can attach:

        •     Treatment or storage in tanks;
        •     Transportation; and                                 '                           .
        •     Land disposal (on-site or off-site).
            \

  STEP 4: ESTIMATE TOTAL EXPECTED LIABILITIES

        There are seven types of liability costs that are potentially associated with each waste or materials
  management  activity:

              Soil and waste removal and treatment  (FL1, Exhibit C-l, Appendix C):
            • Ground-water removal and treatment (FL2, Exhibit C-2, Appendix C);  '.
              Surface sealing .(FL3, .Exhibit C-3, Appendix C);                             .
              Personal injury (FLA, Exhibit C-4, Appendix C);
              Economic loss (FL5, Exhibit C-5, Appendix C);                                 .*
              Real property damage  (FL6, Exhibit C-6, Appendix C); and"
             Natural resource damage (FL7, Exhibit C-7, Appendix C).                         ;

       You can estimate the magnitude of  total liabilities associated with  each  waste  and  materials
 management activity by comparing your particular activities to other known activities where actual claims,
 awards, or settlements have been documented.  Real-life liabilities generally are reported in specialized
 literature, such as environmental newsletters, as well as newspapers.

       You can also use the conceptual framework outlined in Appendix C for developing these liability
 costs. If you choose to use the methodology described in Appendix C, you must be careful in handling the.
 numbers presented.  Specifically,  keep in mind the uncertainties inherent to the problem at hand and the
'numerous assumptions made to  establish a predictive modeling approach.   Because  Tier 2 is judgmental
 in nature, your estimates of future liabilities will reflect subjective corporate policy and not precise, scientific
 calculations.                                                  .                      .

       To assist in estimating the costs-to be used in Worksheet n (Page 4-7), an intermediate worksheet
 is presented in Exhibit 4-2.  You should complete Exhibit 4-2 for your PP alternative compared to yom
 current  practice,  taking into account any residual future  liabilities due to current and past practices.
 Exhibits C-l to C-8 of Appendix  C illustrate how you can estimate the magnitude of future liability costs
 for each of the seven types of future liabilities for each applicable waste management practice, and the first
 year of cash flow.                                       .                     .
-------
                                               4-5    ;         t




                                          EXHIBIT 4-2

                            COST TABLE FOR FUTURE LIABILITIES
    Type of'Liability
                               Exhibit*   •            Tanks         '         ;       '.    Land :
                             in Appendix C a/    Treatment/Storage     Transportation    Disposal
Soil and Waste Removal
and Treatment           s

Ground-Water, Removal
arid. Treatment       .

Surface Sealing   '."..'.

Personal Injury

Economic Loss

Real Property Damage   ,

Natural Resource Damage ^


Total Liability (TL).

  - . V   " .         ,    ,

Your Share of Total
Liabiliry
                                  C-l


                                  C-2
                                  C-4

                                  C-5 .

                                  C-6

                                  C-7


                                  NA


                                  NA
 Gash Flow Estimate
 (=TLxfL)
                                  NA
 First Year of Cash Flows b/
 NA «= Not Applicable

 §/    Refer to Appendix C, Exhibits C-l through C-8, for preliminary illustrative guidance on how to
       estimate each type of liability and the first year of cash flow.  Note, however, that Appendix C is
       meant only to be illustrative of the concept and mechanics of future liabilities associated, with
       hazardous materials and waste management.  Appendix C cannot and should not be used for definite
      ; answers to the. very complex problem of Abilities.                             ,

•by    The timing of future Uabilities is very important because, other things being equal, liabilities incurred
       in a distant future have a smaller net present value, and therefore a lesser impact on the economic
     •  feasibility.'of a PP alternative, than Uabilities incurred in^ the near future.               .
-------
                                               4-6
STEPS: ESTIMATE YEAR WHEN LIABILITIES ARE EXPECTED TO BE INCURRED        .   .

       Because you have calculated penalties and fines on an expected annual basis, penalties and fines are
expected to be incurred annually starting from the first year (year 1), and until the end of the PP project.
Therefore, set the first year equal to 1 for penalties and fines in Worksheet ft     .

       For future liabilities, the first year of cash flow is obtained by completing the last fine in Exhibit 4-
2,  This calculation  is presented .in.Exhibit C-9 for each waste management  pradtce.  Perform the
calculations and enter your results on Exhibit 4-2 and on Worksheet IL        •

STEP 6: ESTIMATE YOUR SHARE OF TOTAL FUTURE LIABILITIES

      This step applies only to future liabilities.  For off-site disposal or transportation, where not all of
the waste disposed or transported is yours, you are not necessarily liable for all the waste. To account for
this you should calculate a liability fraction, alpha, which ranges from 0 to 1.  As a first approximation for
calculating alpha, you can use the following formula:          '                                   •

             alpha e Q / Q,
where                   , • .                 •                          '

      Q  =  Your'waste quantity contributed; and     •                   .                   .
      Q, «=  The total quantity of waste managed.

A factor of zero would mean that you are not liable (perhaps for financial reasons) for your waste,, whereas
a factor of one would  mean that you are, fully liable for the waste involved in the activity. Enter your valne
for this factor in Exhibit 4-2  for each activity.                                  .

      The final step in filling out Exhibit 4-2 is summing for each waste management practice the seven
types  of future liability costs and multiplying them by their corresponding liability factors, alpha. Enter this
product as the 'Cash'plow Estimate* in Exhibit 4-2 as well as in the appropriate  cells  of Worksheet IL
                                      After completing Worksheet II, you should proceed to Chapter 6.
                                      Chapter  6 guides  you  through the  financial  protocol with
                                      instructions on how to (1) complete the right-hand block of the
                                      Tier 2  Cost  Worksheet (Le.,  annualized cash  flows),  and
                                      (2) calculate the annualized cost savings, net present value, and
                                      internal rate of return of each alternative PP practice relative  to
                                      current  practice.   These values will  allow you to  assess the
                                      economic feasibility of your PP alteraative(s) taking into account
                                      liabilities, in addition to usual and hidden costs.
-------
            4-7
     Worksheet II
Tier 2 -Liability Costs
Q Current Practice
D Alternative Practta

D incremental
^/fTEhSOESCRKmbr;^!

V ' '
A. PENALITIES AND FINES
B. 'FUTURE LIABILITIES .
Bl ,Tr»»tment or Storage in Tasks .
62* Transportation
BJ Disposal Jn Landfills
B4 Other ,



'^•^'ttiiSH'iiow INFORMATION ^, *•
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^ANNUAUZEO CASH RjOW-ll
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-------
-------
     •                               CHAPTER 5
                        .;    -^            .      -   -^  ,  ^ ^  -           '-"","•

                            TIER 3 COST PROTOCOL:
                              LESS TANGIBLE COSTS


      This chapter outlines the steps for assessing the less tangible costs of pollution generation and,
conversely, the less tangible benefits of pollution, prevention.  The steps and approach outlined below wffl
assist you in completing the middle block of the Tier 3 worksheet (Worksheet HI) attached at the back of
this chapter.6                                 ,      •  .      >        .


                   STEPS                  •                     APPROACH

1.  Qualify  less tangible benefits of pollution      1. Ask yourself whether corporate commitment
   prevention.                                       to pollution prevention would  favor and
                                                   .strengthen'   consumer  acceptance,
               •                      ,             employee/union  relations,  and  corpoxate
   •   '      '• ''   ''•••'.'     •      .     '    ,   image.    •  .     '.'.-'..'•    •

2.  Quantify less tangible benefits of pollution         2. Estimate dollar impacts on operating and
   prevention.         '                              maintenance expenses  and revenues  of
                                •  •  ''••'.-.     anticipated qualitative effects.
-------
                                                5-2 .
 INTRODUCTION                              -            .
                                                                  .'..,,                  :      •
       You will need to perform the Tier 3 analysis if the. PP project is not cost-justified through Tier 2.
 •Less tangible" costs are included in this fourth tier of the analysis because (1) the likelihood Of incurring
 these costs, and conversely of benefitting from avoiding them, is relatively uncertain; and (2) the magnitude
 of these costs is difficult to quantify.  Like Tier 2, therefore, Tier 3 is judgmental in nature and wOl reflect
 subjective corporate policy and not precise scientific calculations.  One way to perform the Tier 3 analysis
 is to determine what the Tier  3 benefits would have to be (by difference) to just match, the required.
 financial payback (e.g., your firm's minimum acceptable rate of return). For cample, if a PP project yields
 an estimated 16:9 percent return through Tier 2, then the Tier 3 analysis would have to thow additional
 net revenues sufficient to achieve the minimum acceptable rate of return (say 18 percent). For a PP project
 with annnalized costs of $100,000 and a 10-year lifetime, this would mean  that the net after-tax. Tier 3
 impact on sales, customer/community relations, etc would have to be at least $3,000 per year.  It would then
 be up to the corporate decision makers to determine whether less tangible benefits associated with improved
 corporate image, increased sales, etc. are worth $3,000 per year. Alternatively, EPA knows of certain firms
 who, because of inability to correctly specify all Tier 3 types of impacts, have explicitly sanctioned the use
 of a'tower hurdle rate (e.g., 16  percent instead of 18 percent) for investment in PP projects.        -
 STEP 1: QUALIFY LESS TANGIBLE BENEFITS OF POLLUTION PREVENTION

       Corporate commitment to pollution .prevention can have a positive impact on many intangible actors
 such as product acceptance by the consumer, employee/union relations, and corporate image.  Qualitatively .
 describe the benefits of pollution prevention in the bottom part of Worksheet IIL  In particular, provide
*a qualitative description  of which factors are significant, the basis for which they are considered to be
 significant, and the anticipated impact.                   •

       Although it is very difficult to say with  certainty, that intangible factors will affect costs, it is
 reasonable to assume that they may.  For example, by publicizing PP efforts, a service or product may be
 better accepted by the consumer, resulting in more articles being sold. Firms may improve employee/union '
 relations by reducing or eliminating the amount of waste managed in the workplace, thereby making the
 -workplace safer and reducing the  likelihood of potentially costly employee/union demands for health benefits
• and safety improvements.   Finally, if a firm can  use an innovative pollution  prevention program to
 distinguish itself from its competitors, for  example, by being nominated for a local, state, or  private
 environmental excellence award, the firm may receive  favorable publicity or attention that can serve to
 further  promote its services. or products..  Each of these factors r consumer acceptance, employee/union
'•relations, and corporate image -can be favorably affected by an innovative PP effort  .  .
 STEP 2: QUANTIFY LESS TANGIBLE BENEFITS OF POLLUTION PREVENTION
       *                         -                    t •         ,'..•-•"        • '      ._•-,-
       •If your firin has performed marketing analyses or has other relevant information, you may be able
 to  quantify the benefits of pollution prevention.  Worksheet ffl allows you to adjust the estimates of
 .expenses and/or  revenues  calculated  in previous tiers in order to reflect. the less tangible benefits of
 pollution prevention. As with previous tiers, you will need to enter the escalation rate, the first year of
 cash  flow, lifetime, and the adjustment to the cash flow estimate.  For example, if.your PP alternative will
 result in a two percent increase in sales, you will report the corresponding net (Le,, after subtracting total
 additional costs of production) increase in sales as an adjustment to the cash flow estimate for operating
 revenues.                                            .            .
-------
          5-3
After completing Worksheet HI, yon should proceed; to Chapter
6.  Chapter 6 guides yon  through the financial protocol with
instructions on how to (1) complete the right-hand block of the
Tier  3  Cost  Worksheet  (Le^  annualized  cash  flows), wj
(2) calculate'the annualized cost savings, net present value, *no
internal rate of return of each alternative PP practice relative to
current practice.   Tnese values will .allow  yon to •sse**.*e
economic feasibility of your PP alternative(s) taking into account
less tangible costs, in addition to future liabilities, and. usual and
hidden costs.                                          v
-------
   fITEM
A. ADJUSTMENT TO
	EXPENSES
                             ;  •    5-4         .'•--.'".   ,  •
                             Worksheet III              Ddurrem *«**.
                       ^rZ^ss Tangible Costs    -'•%££?'*
B. ADJUSTMENT TO
   OPERATING REVENUES
\* CASHFLOW 'INFORMATION **'*'
Etcautien
(r^%)
• , . •

Firtt Y««r
Of CB** Flow
(tr y*vt) .

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CasnFlow
iMImaw
(C.£J)


ANNUAU2EO CASH FLOW-i

V"

:w-f.-.. : ' * _r;
y.10%

•.•'.„• : -•'•..
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:•• •
V ,

• '
      //i thousands ofytar-0 dollan
>*•* * ** * \ * ~> . - ,<- - , TipR"Vvcn^T •PA< i ' / 4 iltrt 4 v/Uol JvU^JUno --^^-^""W^-^o^ *^ 'A%/*'XN ''X-t^^'.fC

Consumer Acceptance
D a
YES NO
Employee/Union Relations
D D
YES NO;
Corporate Image ••
: . D D
. ' YES NO
Justification (Pitast /usiify) ' .
' .
• • • '
• ' ' ' • ,

Justification (Pitasi justify] ' • . ' •
. •• , \ .
• ....'•


Justification .(Pttait justify) • • . • ' . . ... '
• ' ' • ' . ' ' .• ' •
. . '. ...'•••• . ..--'•'



\
-------
                                          CHAPTER €
                                  FINANCIAL PROTOCOL
       Ibis chapter presents the financial protocol for  evaluating the economic feasibility of your PP
.alternative based on the cash flow estimates obtained using the cost protocol Yon will evaluate .financial
 indicators commonly used by firms; these' financial 'indicators allow you to compare costs occurring at
 different times in' the future. Specifically, Chapter 6 will show yon how to estimate the net present value,
 internal rate of return, and mimialiTcd cost savings of your PP alternative at each tier of the analysis.

 ..     You wOl perform  the financial calculations after completing each of the four tiers of the cost
 calculations, ie., after each of Chapters 2 through 5. That is, you wfll estimate key financial indicators of
 the economic feasibility of your PP alternative on the basis of your costs estimates through Tier 0,  1,2,
 and 3.; For the Tier 2 analysis, for example, you will estimate key financial indicators taking into account
 (Tier 0) usual costs, '(Tier 1) hidden regulatory costs, and (Tier 2) liability costs.
 -..-.•'           STEPS  '      ' --'   ' •"."

    For the tier whose cost calculations you have
    just completed:                      ;
f  _   '    '      .                     _  -
1.  For the current practice and the PP alternative,
    evaluate annualized cash  flows associated with
    each cash flow item.
2. Evaluate incremental annualized cash flows; Le.,
   annualized  cash  flows  for the  PP alternative
   relative to the current practice. ....,'

3. Evaluate  key financial indicators of your PP
   alternative; i.e., after-tax total annualized savings,
   net  present value (NPV), and internal rate of
   return (IRR).'-

4. Assess   whether   ydur  PP  alternative  ..is
   ecpnoinicaUy feasible.    . •
                   APPROACH
1.  Using equations provided, complete the right-
    hand block of the cost worksheet .(Worksheet
    0, I, II, or HI)  for current  and alternative
   .practices.

2.  Complete  the cost summary worksheet; i«L,
    Worksheet IV.
3.  Complete the financial worksheet (Worksheet
    V) using the equations provided.      '
A.  Compare your estimates of financial indicators
    to standard financial criteria or hurdles for
    investing in pollution prevention or similar
    projects.    .
     1  You nee
-------
                                                6-2
 STEP 1:  EVALUATE ANNUAL1ZED CASH FLOWS FOR EACH CASH FLOW ITEM

       Concept and Purpose

       This section first discusses the concept and rationale for discounting and  annuMiring future cash
 flows.  Because annualization requires the selection of a "discount rate,* this section then explains how to
                          •                 '            •     •                 '••"
 choose -the discount rate..

       piscountinp "•"*'
       In order to properly evaluate the economic merits of your PP alternative relative to your current
 practice, it is important to make sure that all costs are considered on. an equal basis.  In particular, you
 must take into account the lifetime of equipment purchased and the cost or earnings potential of money.
 For example, your PP alternative may require equipment costing $100 while it would save annual labor and
 supplies costs of $25  per year.  Over four years, the total dollar savings would equal the cost of the
 equipment.  Because you could otherwise invest the money (e.g., in a savings account earning 5-1/4%
 interest), your PP alternative in this case would be attractive only if the equipment lifetime is longer than
 4 years, 'if the lifetime of your new equipment is less (e.g.,  2 years) then you may be financially better off
 not changing your current practice and instead investing the money, in the savings account.  To account for
 lifetime and other considerations, this financial protocol uses a general approach based on 'discounting" and
 "annualization* of cash flows. 'The result of this approach is an estimate of the average, uniform cash flow
 that would be needed  each year to obtain the same net present value (value in dollars today) of the cash
 flows of a PP alternative.

       Choosing the Discount Rate. TJ           •                                          .        -

       As you may have already noted, all Worksheets (i.e., Worksheets 0 through V) contain four columns
 for estimating annualized cash flows:  three columns for discount rate values of 5 percent, 10 percent, and
 15 percent, and a fourth  column for  an unspecified value of the discount fate.  This is done to  give you
 maximum  flexibility in choosing your own discount rate.                                  .

       You will need  to do the calculations for a  discount rate value, equal  to your  firm's minimum
. acceptable rate of return. i.e, the minimum return on  investment that your firm expects before investing
 in a new project.  See Action  2 of this step for information on how to determine your firm's minimum
 acceptable rate of return.  .              ..                 ,
      - You will also 'need to determine the Internal Rate of Return (IRR) of your PP project, ie., the
 discount rate value that gives you total annualized savings through the tier equal to.$0.  Typically, you will
 do the- financial calculations many times, using a different  value of the discount rate every time, until you
 determine the discount rate that wfll gfve you total annualized savings through the' tier of $0. This is the
 IRR of your PP project.  Step 3 of this chapter explains how you can determine the economic feasiblity of
 your PP alternative using the minimum acceptable rate of return and the Internal Rate of Return.

       Actions                            \   .   .                 -.  .

       (J)  Combine Common Cash Flows    • '                                •     •
                         .                         •                •
       You  may combine certain cash flows  before annualizing them in order to reduce the number of
 calculations that are required to complete the  financial protocol.  Specifically, you may combine cash flows
 under the same cash flow category (e.g., expenses) provided these cash  flows have the same:

       •     escalation rate, r«  .                    •.                             •  .  '
       •  '   beginning year, t/ ''••'•'          .  ,                     .    '.
-------
                                             6-3
cash flows:
            lifetime, n
            cash flow type (Le., one-time or recurring).

      For purposes of calculating annualized cash flows (see Action 3 in this W)£^'m'*™HSj£-
casn liows-  •onetime- and -recurring." One-time cash flows happen onry once.  For sample, the initial
ourchase and the salvage value of any equipment are both 'one-time' costs; they dp not occur i*!*"6^
Recurring cash flows are cash flows that ire paid out or received on a repeating basis.  ^*™£*> J»
Mmualeost of onrehasing chemicals or of maintaining equipment are both recurring, because they are
SL^S ySn^tiTe project lifetime.  Eihibit 6-1 identifies the type of cash flow for each cash flow
item in the cc«rworksheets  Note that the types of cash flow are distinct from the cash flow categories
recognized in the' cost worksheets (Le, depreciable capital expenditures, expenses, operating revenues, and
SSSS.  to example, some expenses are one-time erases «A as permitting costs, winkBothers are
«^m-ino «B*«SCS such as operating and maintenance costs of labor and supplies.  Place the totals for
SStoed 3h ttows toto the cost worksheet (i*. Worksheet 0,1, n, or ID) and proceedio the calculation
of annualized cash flows (Action 2 in this step)...

       (2)   Determine Your Firm'i•Minimum Acceptable  Kate nfRaum

       You need to pinpoint the minimum rate of return that your company is willing to accept before
investing in pollution prevention projects. Technically, the minimum acceptable rate of return is^the ate.
£To£of tEingmoSey from investors  and lenders.  If the project has a high, enough return to provide
Sv^ors and lenders vrfth the money they expect, they wffl continue  to invest, and your firm should
continue to invest in projects that provide that rate of return.

       If yours is a moderately large, multi-plant company, then you are likely to have a finance department.
with guidelines on investment decisions.  In this case, you should consult witivyourfinance ™yP**a*
the hurdles they use for decisions, regarding investment projects.  These hurdles typically are described to
the form of minimum rate of return. Your firm may be willing to accept r lower rate of return 011 a rr
project simply because of the difficulty in quantifying the benefits of Tier 3 (see Chapter 5, Introduction).

       If you are a small firm with no structured policy guidelines for investment decisions, then you need
 to find out what other similar businesses  do (e.g., check with your trade association). In the absence of any
 information, a  minimum rate of return  of 12 to  17 percent may be acceptable provided jnflation is no
 greater than about 5 percent.

       (?)  Calculate Annualized Cash Flows                                                  .. '

       For each cash flow item or combination of cash, flow items (as per Action 1), calculate annualized
 cash flows for various values of the discount rate using Equations  (6.1) through (6.6) and Exhibits 6-1
 through 6-3 as appropriate. In particular, calculate annualized cash flows for a discount rate  equal to your
 firm's minimum acceptable rate of return (see Action 2 above).  Report your estimates of annualized cash
 tow in the fight-hand block of the cost worksheet; Le^'Worksheet 0,1, n, or HI depending on whether you
 have just completed Tier 0,1, 2, or 3 of the cost protocol.

        F-
-------
                         EXHIBIT 6-1

     TYPE OF CASH FLOW FOR EACH CASH FLOW ITEM
"   Cost     Cost..           -Type of Cash Flow
    Tiers Worksheet   One-Time     .      Recurring
   TierO      0    Al to A6, Bl to B6   B7 to B14, Cl to C2


   Tierl      I    AltoA4, B5         Bl to B4, B6 to B14


   Tier 2      II    Bl, B3               A, B2


   Tier 3     III    None    '            All
   •One-time* cash flows are those that occur only once, such as
   purchasing  equipment  or  selling  ..equipment for  salvage.
   •Recurring* costs are those that happen every year, or on a
   repeating basis, such as annual maintenance costs, or the* costs
   of labor and consumable supplies. .References in the exhibit are,
   to the line numbers of the specific cost worksheets...
-------
                                               6-5
      For each cash flow item in the cost worksheets (Worksheets 0, 1, II, or HI), you can calculate the
annualized cash flow using the following formula:         - _  -

             ACF = PVF1 x AF x CF                                                        (6.1)
where '   •      .'••'''       ••_.-•   •    '              :"   :           •••.••-

      ACF  is the Annualized  Cash Flow,
      PVF1 is a Present Value Factor;    .                                                      .
      AF  is an Annuahzation Factor, and
      CF  is the Cash Flow Estimate.

      The «nimnlJ7ed cash flow (ACF) is the constant amount that would have tn he paid nr reoaiwrf gvety
year to have a value equal to the economic value of the PP alternatives  Because the amount does not
increase with inflation, it is considered to be in "nominal* dollars. In other words, an ACF of $100 would
mean that the PP alternative has the same value as an investment that would provide a .check each year of
$100 over the lifetime of the PP alternative.  With a fixed-rate mortgage, for example, the monthly payments
are in 'nominal" dollars - the payments stay the same in spite of any inflation.

      The cash flow estimate (CF) is in the fourth column of the middle block of the cost worksheets
(Worksheets 0, 1, II, and III). Because it has the potential to rise with inflation, it is considered in *year-
0" or 'current" year  dollars.  For example, assume that a cash flow estimate corresponds to paying a
technician for 10 hours of labor per year.  In developing -the cash flow estimate CF, you would use the
current pay rate for a technician, multiplied by 10 hours.  The financial calculations described in this chapter
account for the fact that inflation will lead  to increased wage levels, and higher labor costs in the future,
for 10 hours of labor per year.

      PVF1 and AF are "dimensionless." That is, they are simply factors that are used to transform the.
actual cash  flow  estimation to  annualized cash flow estimates; they do not  have a unit  of measure, or
"dimension,* such as dollars. The equations and  tables for determining  both the present value factor and
the annualization factor are provided next.

      The present value factor PVF1 depends on the  beginning year,  lifetime, discount  rate, escalation
rate, and the type of cash flow. For a one-time cash flow, the present value factor is equal to:
             PVF1 = p°'

For a recurring cash flow, the present value factor is equal to:                            ,

             PVF1 = p°' x PVF2                                                              (63)

where       PVF2 = (1-p") / (1-p)                                                            (6.4)

and          p >  (l+rj/p+rj) ' .                                                             (6-5)

The parameters in Equations (6.2) through (6.5) are defined as follows:

      t,- is the first year of cash flow (the first year  it starts or the only year it occurs);
      Te is the escalation rate (the estimated rate at which prices will rise, or the inflation rate); and
      r
-------
                                             6-6
                                         EXHIBIT 6-2

                  TABLE OF VALUES OF PRESENT VALUE FACTOR 2 (PVF2)
Lifetime
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
Parameter p •* (l+re)/(l4r
-------
                                               6-7
      The annualization factor is a function of tbe discount rate and .lifetime. The annualization factor
is equal to the following:
Exhibit 6-3 presents pre-calculated values of AF for various values of the discount rate r* and lifetime B.
You may use this exhibit instead of Equation (6.6) to determine AF.                           .

       (4) Swn Annualized Cash Flows fy Category

       When all the nnnualired cash flows have been calculated on the cost worksheet, add them together
in order to obtain total annualized cash flows for each of the cash flow categories on the worksheet  For
instance, after calculating annualized cash flows for all cash flow items on Worksheet 0, sum all •nnnatfami
cash flows under depreciable capital expenditures, expenses, and revenues and report these sums in fines
A, B, and C, respectively. "                 ,


STEP 2: EVALUATE INCREMENTAL ANNUALIZED CASH FLOWS

       Concept and Purpose
                     ,          .             x                   ,             .
       You use this step to determine the incremental annualized cash flows for your PP alternative relative
to your current practice; i.e., the cash  flows of  your PP alternative minus those of your current practice.
If you have  completed the cost protocol (Tier  0, 1, 2 or 3) incrementally, then you need not complete
Worksheet IV and you may proceed to Step/ 3 directly.

      .Actions                         •".-.:•

       (1) Report Total Annualized Cash Flows  by Category on Worksheet IV.

       If you performed the tier just completed  using two worksheets for current and alternative practice,
transcribe onto Worksheet IV the annualized cash flows by cash flow category. Do this  for the alternative
and current practices and for different  values of the discount rate. For example, upon completing Tier 0,
copy the total annualized cash flows  from lines  A, B, and C  of the Tier 0 worksheets (Worksheet 0
completed once for alternative and once for current practices) onto lines a, b, and c of the cost summary
worksheet (alternative and current blocks of Worksheet TV, respectively).         ,


STEP 3: EVALUATE KEY FINANCIAL INDICATORS OF YOUR PP ALTERNATIVE

       Concept and Purpose

       This step will guide you through the calculation of key financial indicators of the economic feasibility
of your PP alternative. You will calculate the following financial indicators:       ,

       e    total annualized savings (TAS);

       •    net present value (NPV); and

       «    internal rate  of return (IRR).   v  • •  .                   -

In order to calculate these financial indicators accurately, you must account for tax effects on your change
in cash flow.  Once tax is accounted for, you then may directly calculate the TAS and NPV at any discount
rate, and iteratively calculate the IRR. Worksheet V does three things, it:  (1) takes the incremental
-------
                                             6-8
                                         EXHIBIT 6-3

                    TABLE OF VALUES OF ANNUALIZATION FACTOR (AF)
Lifetime
(n,Yrs)
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
Discount Rate (14, %)
25
0.5188
02658
0.1815
0.1395
0.1143
0.0975
0.0855
0.0766
0.0697
0.0641
0.0596
0.0559
0.0528
0.0501
0.0478
5.0
05378
0.2820
0.1970
0.1547
0.1295
0.1128
0.1010
0.0923
0.0855
0.0802
0.0760
0.0725
0.06%
0.0671
0.0651
75
05569
0.2986
02130
0.1707
0.1457
0.1293
0.1178
0.1094
0.1030
0.0981
0.0942
0.0911
0.0885
0.0864
0.0847
10.0
05762
03155
0.2296
0.1874
0.1627
0.1468
0.1357
0.1278
0.1219
0.1175
0.1140
0.1113
0.1092
0.1075
0.1061
125
05956
03327
02467
02048
0.1806
0.1652
0.1548
0.1474
0.1420
0.1381
0.1351
0.1329
0.1311
0.1298
0.1288
I
15.0
0.6151
03503
02642
0.2229
0.1993
0.1845
0.1747
0.1679
0.1632
0.1598
0.1573
0.1554
0.1541
0.1531
0.1523

175
0.6348
03681
02823
02415
02186
02045
0.1954
0.1893
0.1852
0.1822
0.1802
0.1787
0.1777
0.1769
0.1764

20.0
0.6545
03863
03007
0.2606
02385
02253
02169
02114
0.2078
02054
02037
0.2025
0.2018
02012
02008
Values on this table were calculated using Equation (6.6). Generally, your firm selects a discount
rate based on the cost of raising additional money from investors and by borrowing. Typical project
lifetimes depend on the expected lifetime of the equipment  In some cases, equipment may become
obsolete and be replaced before wearing out. If you expect that to happen, you should use the
expected time before the equipment will be replaced.
-------
                                                6-9
                                              . •   . •                 ' •        \'     •  •      •   •
  annualized cash flows (developed either incrementally in the cost worksheet or by subtraction in Worksheet
  IV), (2) estimates the tax effects on cash flows, and (3) allows the direct calculation of the net savines for
  the tier just completed.  The worksheet then allows the calculation of the IRR.        v
        Actions

        (1)  Report the Incremental Annual Cash Flows on Worksheet V.
        If you completed Worksheet IV, (ie., you performed the tier just completed using current and
 alternative practice worksheets), subtract each cell in the current block from the corresponding cell in the
 alternative block and transcribe the difference into the corresponding cell in Worksheet V. For example,
 the hypothetical facility in Tier 0 (see Appendix D, Section D.12) subtracted 0 from -4.41 and arrived at -
 4.41 (corresponding to alternative less current on line a, rrf « 5%) and placed it in Worksheet V on Mae
 a, id e 5%. If you performed the tier analysis incrementally, yon would directly transfer the values by cash
 flow category onto Worksheet V.
                                             '"'
       (2) Cfl?mlate the Tax JSn
       Taxes make an important difference in the actual costs or benefits of a P? alternative.  Because
 expenses can be deducted from revenues, some of the costs of a PP alternative are paid for through reduced
 taxes.  There is, however, a big difference in the tax treatment  of different types of expenses.  Current
 expenses, such as labor and material costs, can all be deducted in  the year they are incurred.  Capital
 expenditures, such as the purchase of equipment, must be deducted  gradually by estimating depreciation
 Because the tax reduction for capital expenditures is spread out over a longer time period than the tax
 reduction for current expenditures, the value of the tax benefit is less.

       For each value of the discount rate id, calculate your company's incremental tax liability due to the
 PP project using the following Equations (6.7) and (6.8) and report your tax liability on line e of Worksheet
(6.7)
                   TAX = -r,x[(FDxa) + b + c + e]   where

       TAX is .the incremental tax liability for the PP alternative;
       r, is your company's effective tax rate (Federal and State taxes);
       FD is a factor to allow for depreciation of capital expenditures; and
       a, b, c, and e correspond to the lines on Worksheet V.

Note that Equation (6.7) assumes that penalties and fines do not decrease your tax liability.  That is, W
equation assumes that penalties and fines may not be deducted from income for tax purposes.

       You need to obtain the effective tax rate (r,) applicable to your company from your finance or
accounting managers.  The effective tax rate is the sum  of applicable Federal and State tax rates.  In
general, you may assume a Federal tax rate of 34 percent under the new tax law (Tax Reform Act of 19861
State tax rates vary from state to state and generally are around ten percent

       Under the tax laws passed in 1986, equipment similar to pollution control equipment may be
depreciated over a 7-year period using the 200-percent double-declining-balance method.  The depredation
factor, FD, for this depreciation schedule may be calculated using the following formula:2
       Equation 6.8 works by calculating the value today of the depreciation from Si worth of investment
For example, the first term, Q.14/(l+ij), divides the fraction of the investment that can be deducted after
the first year (14 percent), and "discounts" it to the beginning of the year.
-------
                                               6-10
             FD ^ 0.14 / (Hr
-------
                        6-11
                    EXHIBIT 6-4

TABLE OF VALUES OF DEPRECIATION FACTOR (FD)
     Discount Rate          Depreciation Factor
           fcf)                    (FD)
           25%                  O9159
           5.0%                  O8426
           75%                  0.7784

           10.0%                 0.7219
           125%                 0.6719
           15.0%        '  ,       0.6274

           175%                 05877
           20.0%                 05521
           225%     ,            05200

           25.0%                 0.4910
           275%                 0.4646
           30.0%                 0.4406
    This exhibit was calculated using Equation (6.8).
    The exhibit clearly shows that FD decreases as
    the discount  rate  increases.   That is, as the
    discount rate increases, the present value of the
    stream  of  depreciation allowances over, seven
    years decreases.
-------
                                              6-12
STEP 4:  EVALUATE ECONOMIC FEASIBILITY OF YOUR PP ALTERNATIVE

      Concept and Purpose                           .

      You have finished calculating key financial indicators for the PP alternative through the tier just
completed. You must now compare these estimates of total savings, net present value, and IRR to financial
criteria or hurdles for investing in new projects. You may either (1) conclude that your PP alternative is
or is not economically feasible or (2) move to the next tier  of the cost protocol

      Actions

      (1)  Compare Estimates of Financial Indicators to Financial Criteria

      If, for a discount rate value equal to the mininmm nte of return, the total annualized savings (or,
equrvalentiy, the net present value) through the tier are positive, then your PP alternative is economically
feasible on the basis of the cash flow items considered up through the tier just completed. Alternatively,
if the IRR of your PP alternative is greater than or .equal to your firm's minimum acceptable rate of return,
then your PP alternative is economically feasible.

      (2)  Conclude Analysis or Move to Next Tier of the  Cost Protocol
                                     If Action 2  above  concludes  that  your  PP  alternative  is
                                     economically feasible, or if you have just completed Tier 3 of the
                                     cost protocol, then the analysis of your PP alternative can stop
                                     here for all practical purposes.' Otherwise, move to the next tier
                                     of the cost protocol, which will help you take into account other
                                     types of costs and cost savings than those considered thus far.  If
                                     you  are moving to Tier  1, 2, or 3 of the cost protocol,  go  to
                                     Chapter 3, 4, or 5 of this manual, respectively.
-------
                     6-13
               WorkSheetIV
               Cost Summary
        (In thousands ofyear-0 dollars)
Tier
D
   /ITEM OESCRIPTK)k^
 Alternative
a. DEPRECIABLE CAPITAL
  EXPENDITURES
b. EXPENSES
c. OPERATING REVENUES
d. PENALTIES AND FINES
e. FUTURE LIABILITIES
 Current
a.
b.
c.
d.
DEPRECIABLE CAPITAL
EXPENDITURES
EXPENSES
.OPERATING
PENALTIES

REVENUES
AND FINES
e. FUTURE LIABILITIES
,£ "fry- *••• o^.,,. >f f fff ff f
ANNUAUZEO CASH FLOW £

r-i%
• -Q

"• '>'.-'• ...-••'



iy»io%
! ',


_ . ...,:.

rft»<*





V





-------
                         6-14
                  Worksheet V
              Financial Worksheet
           (In thousands ofyear-0 dollars)
Tier
^4** x>~ * ""5 %<* - -' '(> '' '•? ' '
V£vH?rrEMOeSCRJf*nOhr<^ \
Alternative Less Current
•. DEPRECIABLE CAPITAL
. EXPENDITURES
b. EXPENSES
cJ; .OPERATING REVENUES
d. PENALTIES AND FINES
e. FUTURE LIABILITIES

lANNU AO ZED CASH FUDW"11

v«*
/*-

.-:•:• _•...

..;:•''":«•
tftW.
-

'':•!•', •:'•','.".

"'>;••••".-
y.W%
-




6-





f. TAX LIABILITIES
g. NET SAVINGS FOR TIER
Total Savings
 IRR
THROUGH TIER 0 .
THROUGH TIER 1 .
THROUGH TIER 2
THROUGH TIER 3




;,:..•••:;.;







' , • ' ' :'.'









   Cashflow tsttmatti for alternative Itis currtnt. by dtfinltion. is tht tame
   as cash flow tstimatts for incrtmtnial analysis.
-------
Pollution Prevention Benefits Manual

              Volume II:  Appendices

                              Phase II
                             Prepared for:  Office of Policy, Planning and
                                        Evaluation and
                                        Office of Solid Waste

                                        U.S. Environmental Protection
                                        Agency
                                        October. 1989
                                        &EPA
-------
-------
   APPENDIX A




BLANK WORKSHEETS
-------
-------
    Worksheet 0
Tier 0 • Usual Costs
LJ Current Practice    I

O Alternative Practic

H3 Incremental
ITEM DESCRIPTION ' \' " \


A. DEPRECIABLE CAPITAL
EXPENDITURES
Al Equipment ;... , .
A2 Materials
A3 Utility Connections - -
A4 Site Preparation
,A5 :, Installation^, ..;;v. ;.;,{;;.'.;;. v.:;.^.:,v:..
t. *- ' '' ..'•'* • "'"- ••*•'• :' .,;• . . .• ..•••;'-
A6 Engineering &. Procurement
B. EXPENSES
Bl Start-up
-B2 Permitting. .Y. , rf'^'^hl:-
B3 Salvage Value
B4 Training,..,. -:"• Vs'i^^-V?
BS Initial Catalysts
B6 Working Capital . :- ;• ; ;;H
B7 . Disposal
B8 Raw Materials, . .-.
B9 Utilities
BIO Catalysts &. Chemicals
Bll Labor
B12 Supplies s
B13 Insurance
BI4 Other
C. OPERATING REVENUES
Cl Revenues ;
C2 By-product Revenues






'," CASH FLOW INFORMATION 1
Eccalation
Rat*



'"• ' x
••' •;'. v. :


Fir«t Y«ar
f Cash Flow
(tr yaar«)

,.





Lltetlnw
In, yaan)



,.,, . , ,


Ca*h Flow
Ettlmata
(C.aj)



::.:;;:•:;.......„,...:;:.







-


^NNUAUZED-CASH FLOW^
V"

'.'•I-'-,', _ ^ ' ;_

,-.:wfc:-....


V 10%



?S;:-:i:;t


rd*



.,i:fe;.":O

,
6"
-
• ; .'.-•••:•'_

life'
m-: •<:•:
.;{:::.::•••

££iii;>
•^ In thousands of year-0 dollars
-------
                              Worksheet I
                                1  '• Hidden Costs
                                                             D Current Practice

                                                             D Alternative Practi

                                                             LH Incremental
, ITEM DESCRIPTION



A. DEPRECIABLE CAPITAL
EXPENDITURES
:A1 si Monitoring Equipment
A2 Preparedness and Protective
. . Equipment

A3 Additional .Technology
A4 Other
B. EXPENSES
Bl Notification
B2 ••• Reporting-.: ;• -..^J
B3 Monitoring/Testing

B4 Recerdkeeping
B5 Planning/Studies/Modeling
B6 Training
B7 Inspections

,BS Manifesting ,
=-
B9 Labeling
BIO Preparedness and : ;.::.::.i'::
'.;;.: .. Protective Equipment:::; ,;:::.,:;.;.Vv
Bll Closure/Post Closure Care
....... , ..!. , ..„..,,.,,,,.......;,....,. ;...;.;_. V,, ;.;.v.
'• B12 Medical SurveHIancer: ,:v:;W ;

, !
B13 Insurance/Special Taxes
• • ''B^ A ' f*\tt*m^ • •••' '' " '•'••' ".•'''•'.'•'-.•'''••'• :'•'.•'•'.: ':•;•:•:•'•' •'••"'. -,
. ' ,-,D 1^ ' '•-. UutCf .•'• • , ,.,.,.";' -;':':•:•;•:•" ';'.' • '• **: ••••>:":•.•:', >,";'; ;'






























, 0 .CASH FLOW INFORMATION

Escalation
Rate
(r , %)


' .->? '•: '




.:."•:



'
.•.•;.:.....,.;...:......,:•...•.


::iF-:;-:,:i

•»ff------ ..;K;
.'$•?:'•"'•'?'$?
, .,........v.........y...-.l

"••..':'•:'>::. ......
::'iH?:ir: :•.•:. K^V;^

.: •:•:-". ;j ••' ' V;::
- :V '".'.'• V. •'.'-". ''•
•:*W.W..,, :.-{


.':ft.;''Sl
•First Y«ar
of Cash Flow