RESEARCH TRIANGLE INSTITUTE
Contract No. 68-02-0088
RTI Project No. 4IU-649
August 1972
FINAL REPORT
FR-41U-649
Volume I
COMPREHENSIVE STUDY OF SPECIFIED AIR POLLUTION SOURCES TO
ASSESS THE ECONOMIC IMPACT OF AIR QUALITY STANDARDS
Edited by
D. A. LeSourd
Research Triangle Institute
and
F. L. Bunyard
Environmental Protection Agency
Prepared for
Division of Effects Research
Environmental Protection Agency
RESEARCH TRIANGLE PARK, NORTH CAROLINA
27709
-------
RESEARCH TRIANGLE INSTITUTE
ENVIRONMENTAL STUDIES CENTER
RESEARCH TRIANGLE PARK, NORTH CAROLINA
FINAL REPORT
FR-41U-649
Volume I
Comprehensive Study of Specified Air Pollution Sources to
Assess the Economic Impact of Air Quality Standards
Edited by
D. A. LeSourd
Research Triangle Institute
and
F. L. Bunyard
Environmental Protection Agency
Prepared for:
Division of Effects Research
Environmental Protection Agency
-------
ACKNOWLEDGHENTS
This report is the combined result of the efforts of many persons
working for the Environmental Protection Agency and the Research Triangle
Institute.
At least 15 people have participated in the writing of
sections of the report and a larger number shared in the research or
reviewed the analysis and the written results.
Those on the staff of
EPA whose contributions were especially significant include the following:
Allan C. Basala Dr. P. A. Kenline
Paul A. Boys Fred Lawrence
Ellison Burton Melvin Meyers
Stanley T. Cuffe John R. O'Connor
John M. Dement Dale Slaughter
Robert Duprey Dr. John Smith
Robert J. Elias Eric O. Stork
Gary F. Evans Robert Walsh
Walter E. Gilbert
Major contributors from the staff of RTI include the following:
Franklin A. Ayer
Tayler H. Bingham
Alex B. Cole
Hark E. Fogel
Richard E. Paddock
ii
-------
/\
ABSTRACT
Estimates are made of the costs of controlling and reducing
the emissions of selected pollutants from mobile sources and
selected stationary sources within the conterminous United States.
Air pollution control costs for mobile sources are presented
on a national basis in terms of unit investment and annual operating
and maintenance costs as well as total annual operating and maintenance
costs. The analyses cover the estimated emissions and control costs
for light-duty and heavy-duty road vehicles only. Mobile-source
control costs are given for the model years 1968 through 1977 to show
the relative impact of the increasingly more stringent Federal
Standards. The pollutants from mobile sources selected for analysis
are hydrocarbons (HC), carbon monoxide (CO), and nitrogen oxides (NO ).
x
Three general classes of stationary sources are considered: Solid
waste disposal (open burning and incineration), stationary fuel combus-
tion (heating and power generation), and industrial processes.
Industrial processes sources studied are: asphalt batching, cement, coal
cleaning, grain plants, gray iron foundries, iron and steel, kraft
(sulfate) pulp, lime, nitric acid, petroleum products and storage,
petroleum refineries, phosphate, copper, lead, zinc, aluminum, secondary
nonferrous metallurgy, and sulfuric acid. Under the assumed implementa-
tion plan, stationary source control costs are projected for the five
Fiscal Years 1973 through 1977. The stationary source pollutants for
which control cost estimates are made are: particulates, sulfur oxides
(SO ), hydrocarbons (HC), carbon monoxide (CO), and nitrogen oxides (NO ).
x x
An extended analysis is made to determine the economic impact of
control costs on each industrial source or group of industrial sources
studied. In addition, the aggregate effects of the impact of individual
industries upon buyer industries and consumer prices are examined. An
examination of the impact on families of different income levels is also
provided.
Fiscal Year 1967 was selected as the baseline year so that the
estimated costs and reductions in emissions would be those occurring
after the passage of the Clean Air Act. Therefore, the costs incurred
are assumed to be attributable to the economic impact of program
implementation under the Act. All dollar amounts are expressed in
1970 prices and constant 1970 dollars. Emissions and cost estimates
are computed through Fiscal Year 1977 using projected growth for source
production and capacity. It was assumed that new capacity coming into
existence after 1967 would have 1967 control levels, so that control
costs attributed to the Clean Air Act would be only those required to
go from 1967 control levels to those levels required by the Act.
iii
-------
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
Chapter 1:
I.
II.
III.
Chapter 2:
I.
II.
III.
Chapter 3:
I.
II.
III.
IV.
Chapter 4:
I.
II.
.. .. .. .. .. .. .. ..
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
.. .. .. .. .. ..
.. . . . .
. . . . . . . .
. . . . .
Introduction
. . . . .
. . . .
. . . . . .
. . . . . . .
PURPOSE OF RESEARCH.
SCOPE OF RESEARCH.
. . " . .
. . . . .
. . . . . .
. . . .
. . . . . . .
LIMITATIONS OF THE ANALYSIS.
. . . . .. .. .. .. ..
Summary--Economic Cost and Impact
.. .. .. .. ..
.. .. .. ..
METHODS OF COST ESTIMATION AND IMPACT ANALYSIS
.. .. .. .. .. ..
SOURCES OF DATA. . . . . . . .
SUMMARY OF COSTS AND IMPACTS
.. .. .. ..
.. .. .. .. .. .. ..
.. .. .. ..
.. .. .. .. ..
A.
B.
C.
Mobile Sources. . . . . . . . . . . . . . . . . . . .
Stationary Sources. . . . . . . . . . . . . . . . . .
Aggregate Economic Impact. . . . . . . . . . . . . .
Mobile Sources
.. .. .. .. ..
.. .. .. .. .. ..
.. .. .. .. .. .. ..
INTRODUCTION
EMISSIONS. .
.. .. .. .. .. ..
.. .. .. .. .. .. ..
.. .. .. ..
.. .. .. .. .. ..
.. .. .. .. .. ..
.. .. .. ..
.. .. .. ..
A.
B.
Nature and Sources of Emissions. . . . . . . . . . .
Emission Levels With and Without Standards. . .
STATE-OF-THE-ART OF CONTROL TECHNOLOGY FOR
MOBILE SOURCES. . . . . . . . . . . . .
.. .. .. .. .. .. ..
A.
B.
C.
Conventional Engine Control
Unconventional Power Sources. . . . . .
New Vehicle Testing and Factory Surveillance.
.. .. .. ..
.. .. .. ..
.. .. .. ..
COSTS OF COMPLIANCE WITH THE 1970 CLEAN AlP. ACT AJ1ENDMENTS.
A. Types and Sources of Costs. . . . . . . . . . . . . .
B. Unit Costs of Control on New Vehicles. . . . .
C. National Costs Throu~h 1977 . . . . . . . . . .
Stationary Sources
.. . .. ..
.. .. .. ..
........
INTRODUCTION
.. .. .. .. ..
.. .. .. ..
.. .. .. .. ..
SOLID WASTE DISPOSAL
......
.......
.. .. .. .. .. ..
A.
B.
C.
D.
E.
F.
Introduction. . . . . . . . . . . . . . . . . . . . .
Engineering Basis of the Analysis. . . . . . . . . .
Emissions and Control Techniques. . . . .
Scope and Limitations of Analysis. . . . . . . . . .
Cost of Control. . . . . . . . . . . . . . . .
Economic Impact. . . . . . . . . . . . .
iv
Page
vi
xi
1-1
1-1
1-2
1-2
2-1
2-1
2-2
2-2
2-8
2-9
2-10
3-1
3-1
3-2
3-2
3-3
3-7
3-7
3-15
3-17
3-18
3-18
3-20
3-23
4-1
4-1
4-4
4-4
4-4
4-10
4-11
4-11
4-12
-------
III.
Chapter 5:
II.
III.
Appendix
Appendix
IV.
I.
Appendix III.
TABLE OF CONTENTS (Continued)
STATIONARY FUEL COMBUSTION
.......
.........
A.
B.
Introduction. . . . . . . . . . . . . . . . . . . . .
Residential, Commercial, Industrial, and Small
Utility Boilers. . . . . . . . . . . . . . . . .
Steam-Electric Power Plants. . . . . . . . . .
C.
INDUSTRIAL PROCESSES
. . . . .
. . . . .
......
A.
B.
Introduction. . . . . . . . . . . . . . . . . .
Asphalt Batching . . . . . . . . . . . . . . . .
C em en t . . . . . . . . . . . . . . . . . . . . . . . .
Coal Cleaning . . . . . . . . . . . . . . . . .
Gr ain Handling. . . . . . . . . . . . . . . . . . . .
Iron Foundries. . . . . . . . . . . . . . . . .
Iron and Steel. . . . . . . . . . . . . . . . .
Kraft (Sulfate) Pulping. . . . . . . . . . . . . . .
C.
D.
E.
F.
G.
H.
I.
J.
Lime. . . . . . . . .
.....
. . . .
.......
Nitric Acid . . . . . . . . . . . . . . .
Petroleum Refining and Storage. . . . . . . . . . . .
Phosphate Industry. . . . . . . . . . . . . . . . . .
Primary Aluminum. . . . . . . . . . . . . . . . . . .
Primary Copper, Lead, and Zinc . . . . . .
Secondary Nonferrous Metals. . . . . . . . . . . . .
Sulfuric Acid. . . . . . . . . . . . . . . . .
K.
L.
M.
N.
O.
P.
Aggregate Price Impact
...........
INTRODUCTION
.......
. . . . .
. . . . . .
. . . . .
THE PRICE MODEL.
.............
. . . .
. . . .
PROJECTED PRICE INCREASES.
. . . . . . .
......
A.
B.
C.
I.
Gener al .. . . . . . . . . . . . . . . . . . .
Impact on Consumer Prices. . . . . . . . . . . . . .
Impact on the other Components of Final Demand.
Assumed Emission Standards. .
. . . .
. . . .
. . . .
II.
State Inspection Programs and Retrofit Devices
. . . .
Assembly Line Testing and Surveillance
. . . .
. . . .
v
Page
4-14
4-14
4-16
4-21
4-30
4-30
4-35
4-48
4-63
4-78
4-90
4-102
4-113
4-127
4-144
4-156
4-175
4-192
4-203
4-223
4-247
5-1
5-1
5-3
5-5
5-5
5-5
5-10
I-I
II-I
III-l
-------
Table
2-1
3-1
3-2
3-3
3-4
3-5
3-6
3-7
3-8
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
4-10
LIST OF TABLES
National Emission Reductions and Costs Under
Assumed Standards for Fiscal Year 1977 .
. . . .
Growth of Vehicle Populatio~1967-77
. . . .
. . . .
Effects of Controls on Emission Levels, All Vehicles.
Control Techniques and Estimated Control Costs for
Autos and Light-Duty Trucks, 1967-77 . . . . .
Control Techniques and Estimated Control Costs for
Heavy-Duty Vehicles, 1967-77 . . . . . .
. . . .
. . . .
Annualized Unit Cost Increases for Light-Duty Vehicles
Annualized Unit Cost Increases for Heavy-Duty Trucks
National Costs for Mobile Source Compliance.
. . . . . . .
National Costs of Mobile Source Control and Emission
Reductions from 1967 Baseline. . . . . .
Stationary Sources -- Estimates of Potential and
Reduced Emission Levels and Associated
Costs in 1967 and 1977 . . . . . . . . . . . . . . . .
Cost of Upgrading Municipal Incinerators
......
Municipal Incinerator Control Costs. .
. . . .
. . . . . .
Emission Rates for Various Solid Waste
Disposal Practices. . . . . . . .
. . . . . . .
Estimated Emission Levels for Stationary Fuel
Combustion Sources Nationally. . . . . .
. . . . . .
Stationary Fuel Combustion Sources - Estimates
of Potential and Reduced Emission Levels
and Associated Costs. . . . . . . . . . .
. . . . . .
Summary of Estimated Capacity, Fuel Use, and
Emissions, 1967 . . . . . . . . . . . .
. . . . . . .
Summary of Estimated Projected Capacity Fuel Use
and Emissions, 1977 .. . . . . . . . . . . . .
Electrical Energy Production and Fuel Consumption
. . . . .
1967 Statistics for Industrial Process Sources
(National) . . . . . . . . . . . . . . . .
. . . . . .
vi
Page
2-5
3-4
3-6
3-9
3-12
3-22
3-22
3-24
3-25
4-2
4-5
4-8
4-10
4-15
4-17
4-18
4-20
4-22
4-31
-------
Table
4-11
4-12
4-13
4-14
4-15
4-16
4-17
4-18
4-19
4-20
4-21
4-22
4-23
4-24
4-25
4-26
4-27
4-28
4-29
LIST OF TABLES (Continued)
Industrial Process Sources - Estimates of Potential
and Reduced Emission Levels and Associated
Costs (National) . . . . . . . . . . . . . . .
. . . .
1977 Expected Annual Control Costs for Industrial
Process Sources Relative to Capacity, Production,
and Value of Shipments (National) ..........
Control Costs for Asphalt Batching Plants.
.....
Model Asphalt Plant Financial Analyses
. . . .
Assumed Uncontrolled Emission Factors
. . . .
. . . .
o & M Cost Assumptions for Kilns
.....
. . . . .
o & M Cost Assumptions for Coolers and Dryers. . . . . . .
1967 Control Level and Required Investment for
Rotary Kilns. . . . . . . . . . . . . . .
......
1967 Control Level and Required Investment for
Raw' Dryers. . . . . . . . . . . . . . . .
......
Sample Cost Calculation for a Model 2.5 Million
Barrel Plant, Wet or Dry. . . . . . . . . . . .
Basic Descriptions and Income Statements for
Model Cement Plants. . . .
.......
Uncontrolled Particulate Emission Rates from
Coal Cleaning Processes. . . . . . . . .
Estimated Gas Data and Selected Controls
......
Cost Requirements ($1000's) for Three Coal Cleaning
Processes by Plant Size. . . . . . . . . . . .
National Production of Larger Coal Firms
. . . .
.....
Size Distribution of Coal Cleaning Plants
.....
. . . .
Major Markets for Coal
.....
.....
. . . . .
Capacity Distribution and Control Costs
for Country Elevators, 1967
..........
Capacity Distribution and Control Costs for
Terminal Elevators, 1967 . . . . . . . . . . . .
vii
Page
4-32
4-33
4-38
4-43
4-51
4-51
4-53
4-53
4-54
4-54
4-59
4-66
4-67
4-68
4-69
4-70
4-71
4-82
4-82
-------
Table
4-30
4-31
4-32
4-33
4-34
4-35
4-36
4-37
4-38
4-39
4-40
4-41
4-42
4-43
4-44
4-45
4-46
4-47
4-48
4-49
4-50
4-51
4-52
LIST OF TABLES (Continued)
Model Elevator Description
. . . .
. . . . .
. . . .
Model Income Statements. . . . . . . . . .
.....
Emission Factors for Gray Iron Foundries
.........
Cupola Emission Control Costs.
......
.....
Model Plant Financial Analysis
. . . .
. . . .
Uncontrolled Particulate Emission Rates. . . .
. . . . . .
Particulate Control Levels (1967) .
. . . .
. . . .
. . . .
Cost Estimating Parameters
...........
. . . . .
Particulate Emissions from Kraft Processes, Based
on 1967 Control Level. . . . . . . . . . .
. . . . .
Engineering Parameters, Unit Basis (Air Dry Ton
Pulp), for Control Requirements Calculations.
. . . .
Control Requirements for a 500-Ton-Per-Day Mill.
. . . . .
Control Requirements for a 1000-Ton-Per-Day Mill
. . . . .
Control Requirements for a l500-Ton-Per-Day Mill
. . . . .
Kraft Industry Mill Distribution by Size and Capacity
Model Plant Process Units
. . . . .
. . . . . . . . .
Capacity Distribution and Control Costs for
Rotary Lime Kilns. . . . . . . . .
Number and Production of Domestic Plants,
1967 .
. . . . .
Lime Sold or Used in the United States, 1967
. . . .
Basic Description, Lime Plants
. . . .
. . . .
Income Statements, Lime Plants
......
.....
Basic Plant Description, Nitric Acid
........
Annual Income Statement.
. . . .
.....
.....
Sulfur Plant and Tail Gas Scrubbing Costs.
.....
viii
Page
4-85
4-87
4-93
4-94
4-98
4-103
4-104
4-105
4-116
4-116
4-117
4-117
4-118
4-118
4-123
4-132
4-133
4-135
4-138
5-139
4-151
4-152
5-157
-------
Table
4-53
4-54
4-55
4-56
4-57
4-58
4-59
4-60
4-61
4-62
4-63
4-64
4-65
4-66
4-67
4-68
4-69
4-70
4-71
4-72
4-73
4-74
4-75
LIST OF TABLES (Continued)
Petroleum Storage Emission Factor. .
........
Control Costs for Gasoline Storage at Both Refineries
and Bulk Storage Locations. . . . . . . . . . . . . .
The Petroleum Refining and Storage Industry, 1967 .
.. .. .. ..
Model Plant Emission Data for the Phosphate Industry
Distribution of Plant Capacity for Granulation Plants. . .
Model Fertilizer Plant Production Data and
Control Requirements. . . . . . . .
.. .. .. .. ..
.. .. .. ..
Fertilizer Industry Statistics
.......
.. .. .. ..
Basic Description, Fertilizer Plant
......
Annual Income Statement, Fertilizer Plant.
.. .. .. ..
.. .. .. ..
Required Control Efficiency. . . .
.. .. .. .. ..
.. .. .. ..
Control Systems for Aluminum Reduction Cell Potrooms
Units Costs for Complete Control System. . .
.. .. .. ..
Particulate Emission Capture by Cell Hoods
.. .. .. ..
.. .. .. ..
Primary (Cell Hood) Emission Control Systems
.. .. .. ..
Emissions of Sulfur Dioxide for U.S. Nonferrous
Smelters, 1969 ...............
.. .. .. ..
Emissions of Particulates for U.S. Smelters, 1967
.. .. .. ..
Model Plant Descriptions for Copper Smelters
.. .. .. ..
Cost Compositions for Copper Model Plants. .
.. .. .. ..
Lead Smelter Model
...........
.. .. .. ..
Zinc Smelter Model
......
.....
Control Costs for Brass/Bronze Reverberatory Furnaces
. . .
Control Costs for Secondary Aluminum Reverberatory
Furnaces.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
.. .. .. ..
Average Cost of Control - Secondary Nonferrous Metals
. . .
ix
Page
4-163
4-166
4-170
4-178
4-179
4-180
4-187
4-188
4-189
4-193
4-194
4-194
4-196
4-196
4-207
4-208
4-209
4-211
4-213
4-214
4-229
4-231
4-244
-------
Table
4-76
4-77
4-78
4-79
4-80
5-1
5-2
I-I
1-2
1-3
1-4
II-I
II-2
II-3
II-4
III-l
LIST OF TABLES (Continued)
Sulfuric Acid Emission Control Costs:
Dual Absorption
Sulfuric Acid Emission Control Costs:
Eliminators. . . . . . . . . .
Mist
........
Sulfuric Acid Emission Control Costs:
Eliminators. . . . . . . . . .
Mist
. . . .
. . . .
Plant Capacity Size Distribution for Sulfuric Acid
Indus try, December 31, 1969 . . . . . . . . . . .
Model Sulfuric Acid Plants
..........
Projected 1977 Price Increases in Stationary
and Mobile Sources. . . . .
. . . .
Projected Increases in Consumer Prices, 1977
. . . .
Allowable Rate of Particulate Emissions Based
on Process Weight Rate. . . . . .
. . . .
Current and Projected Emission Control Requirements
for Automobiles 3nd Light Trucks (6000 lb.
GVW or less) . . . . . . . . . . . . . . . . .
. . . .
Current and Possible Emission Control Requirements
Heavy-Duty Vehicles (over 6000 lb. GVW)
. . . .
Motor Vehicle Production (Domestic Production Plus
Net Imports) . . . . . . . . . . . . . .
. . . .
Candidate Inspection Procedures for State Vehicle
Emission Inspection. . . . . . . . .
Page
4-250
4-250
4-251
4-251
4-258
5-6
5-8
1-4
1-5
1-6
1-7
. . . . . 11-8
Jurisdictions with Cities Over 200,000 Population,
Based on 1970 Census. . . . . . . . . . .
Vehicles, 1967 Model Year or Older. . . .
. . . .
. . . .
Cost of State Emission Inspection Programs and
Associated Costs. . . . . . . . . . . . . . .
II-IO
. II-14
. . . . II-17
. .III-13
Assembly-Line Testing and Associated Costs
x
-------
Figure
3-1
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
5-1
LIST OF FIGURES
Approximate Distribution of Emissions by Source for a
Vehicle Not Equipped with Any Emission Control
Sys terns. . . . . . . . . . . .
......
Estimated Electrostatic Precipitator Costs for Wet
Process Kilns. . . . . . . . . . .
. . . .
Control Method Costs for a 99% EFF. Venturi Scrubber Added
to an Existing 90% EFF. Precipitator - Recovery
Boiler (99.8% A.O.E.) . . . . . . . . . . . . . .
Comparison of Abatement Costs for Rotary Lime Kilns
. . . .
Annual and Installed Costs for Electrostatic Precipitators.
Cost of Carbon Monoxide Boilers
......
........
Installed Cost of Floating Roofs on Petroleum Storage Tanks.
Equipment Cost for Venturi Scrubbers
.....
.......
Equipment Cost for Venturi Scrubber
.........
Annual Direct Operating Cost for Venturi Scrubber
.....
Distribution of 1970 Gross National Product in
Billions of Current Dollars. . . . . . .
.......
xi
Page
3-2
4-52
4-119
4-130
4-160
4-161
4-164
4-181
4-182
4-183
5-7
-------
Chapter 1:
Introduction
This report is submitted in fulfillment of the requirements
of the Environmental Protection Agency (EPA) Contract No. 68-02-0088.
The research results presented herein were developed in part by
the Research Triangle Institute and in part by EPA personnel.
were prepared for the Fourth Annual Report of the Administrator
of the Environmental Protection Agency to the Congress of the
United States, February 1972. That report, "The Economics of
Clean Air", provides estimates of air pollution control costs and
They
economic impact that will result from the implementation of
Public Law 91-604, The Clean Air Amendments of 1970.
section of PL 91-604 reads:
The pertinent
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J..nctudJ..ng an ana.ly~J..f.J 06 the. nCLtional lLe.qu.J..lLe.me.rLt6 60IL
and the. c.o~:t 06 c.on:tJc.of.Ltng e.m-<-6~io VL6 :to Ovtta.in ~ uc.h
~:tanda.lLdf.! 06 aile. qu.a.lily a.6 may be. e.f.J:tabllihe.d pWL6uant
:to tl1.M Ad OIL applic.able. s:ta.:te. law. The. AdmiVLi6:tJta.:toft
~ haU ~ u.b mil ~ uc.h de.:taile.d eo :tJ..ma.:te. and th e. fte.f.J lLtt6
a 6 ~ uc.h c.omplLe.he.VL6ive. ~ :tudy 06 c.o~:t 60IL the. Mve.- ye.a.IL
pe.Jc.J..od be.ginMng July 1, ;969, and the. lLeou.lU 06 ~uc.h
o.thvc. ~:tu.dJ..e.f.J, to .the ConglLeo~ not la:te.IL :than Janua.Jc.y 10,
196 9, and ~ haLt ~ u.b mil a lLe - e. va.f.u.a;t[o n a 6 ~ uc.h e6 wna.:te.
and ~tudieo annuatty .thvc.e.a6:te.IL."
1-1
-------
II.
SCOPE OF RESEARCH
Estimates have been provided of emissions, control costs,
and economic impact on a national basis for mobile sources,
solid waste disposal, stationary fuel combustion, and 19 industrial
process sources.
Analysis of mobile sources was limited to
automobiles, and on the highway trucks, and buses.
The analysis
of solid waste disposal covered open burning and incineration.
Stationary fuel combustion sources were divided into residential
heating, intermediate boilers (commercial and industrial heating),
and steam-electric power plants.
The 19 industrial process
sources covered are:
asphalt batching, cement, coal cleaning,
grain handling, feed milling, gray iron foundries, iron and steel,
kraft (sulfate) pulp, lime, nitric acid, petroleum products and
storage, petroleum refineries, phosphate, primary nonferrous
metallurgy (copper, lead, zinc, aluminum), secondary nonferrous
metallurgy, and sulfuric acid.
Emission and cost estimates were made covering particulates,
sulfur oxides, carbon monoxide, and hydrocarbon pollutant emissions
from all sources.
In addition, emission and cost estimates
related to oxides of nitrogen were made for mobile sources and for
nitric acid plants.
This report includes the emission, cost, and economic impact
analyses published in "The Economics of Clean Air" and provides,
in addition, discussion of the technical analyses underlying the
estimates and pertinent technical data and references as appropriate.
III.
LIMITATIONS OF THE ANALYSIS
The quality of the analysis that supports the annual report
on "The Economics of Clean Air" has improves significantly each year
as new data are added and the results of many private and federally-
funded studies are incorporated.
There are, however, still significant
gaps in the available data that have limited the precision and
coverage of this report.
Many of these are noted specifically
1-2
-------
in the analyses of individual sources in later chapters of this report.
Only the general study limitations are discussed in this section.
The analysis of mobile sources is based in part on estimates
of the existing vehicle population and projections of the distribution
of vehicles for future years.
Neither the current population nor
expected future life can be determined with complete accuracy.
Vehicle use patterns are not known precisely and, since they
determine emissions, in part, this reduces the accuracy of emission
estimates.
Similarly, emission rates are variable, depending
on a number of factors, and these data are quite limited.
Finally,
control system configurations, efficiencies, and costs are still
under development and manufacturers are able to provide only limited
estimates of these factors.
There is, as a result, considerable
difference of opinion over the accuracy of all estimates of mobile
source control, including that contained in this study.
In analyzing stationary source controls and their economic
impact, RTI and EPA have utilized all the published and unpublished
data available.
It has not been possible, however, to identify
the location, capacity, production, process units, and present
control levels of all plants in all industries.
Hherever gaps
were present in these data, indirect estimating techniques had
to be employed.
These included the use of averages, model plants,
and "best estimates" provided by industry experts.
Analysis of the economic impact on specific industries was
limited by the fact that data were generally not available on the
revenue and profit attributable directly to individual plants,
processes, and products for most of the firms involved. Information
was also lacking on the elasticity of demand in product markets,
making it necessary to utilize qualitative judgments of probable
impacts on market prices.
This was particularly difficult when
some sectors of an industry faced costs differing from those
affecting other sectors.
The macroeconomic analysis is based on the use of input-output
1-3
-------
analysis with all the limitations inherent in that technique.
include especially the assumptions of constant technology and
unchanging trade relationships.
1-4
These
-------
Chapter 2:
Summary-~Ecdnomic Cost and Impact
The detailed analyses of mobile and stationary source control
costs and economic impacts on industries are given in Chapters 3 and 4.
4.
The cumulative effect of these upon the aggregate economy is discussed
in Chapter 5.
These materials are summarized here to indicate the general
approach and methodology used and to provide an overview of the study.
I.
METHODS OF COST ESTI~~TION AND IMPACT ANALYSIS
A.
Control costs are estimated in terms of the initial investment
required to establish control and the continuing annual expenses related
to that investment. The investment cost is the total expense of purchasing
and installing control equipment. The annual cost is the ultimate yearly
charge for capital-related costs (interest on the investment funds, property
taxes where applicable, insurance premiums, and depreciation charges)
plus operating (labor, utilities, and supplies) and maintenance costs.
All
costs are given in 1970 dollars.
Fiscal Year 1967 (model year 1967 in the case of motor vehicles) was used
as a baseline year.
Control costs were combined for two groups of stationary
sources:
those that were operating when the November 1967 amendments to the
Clean Air Act became law and newer sources that have begun operations since
that time or are expected to do so by June 30, 1977.
This latter group was
calculated on the basis of industry production and capacity data as well as
relevant information on industry growth patterns.
Control costs for mobile
sources are estimated for new cars starting with model year 1967 and including
model year 1977.
In general, control costs were estimated by calculating the expenditure
required to increase the levels of emission control from an assumed baseline
level to the level required for compliance with the selected emission control
regulations by adding or upgrading control equipment. This approach is based
on the premise that the costs properly attributable to the implementation of
the Clean Air Act, are those incurred in reaching control levels not commonly
being achieved at the time of the passage of the 1967 amendments to the Act.
2-1
-------
The number and type of installations currently controlling pollutants,
the level of efficiency each is achieving, their capacity, and other
characteristics are bases for determining the extent and types of control
methods needed to meet the selected standards.
Assumptions, including
the set of control regulations, are identified in this report in the
discussion of each emission source.
In addition, this report presents estimates of the impact of industry
costs both on the industries themselves, in terms of profits and business
operation, and on the consumers of the products produced.
Price increases
are developed and their impact on the final purchasers of the Nation's
output are estimated.
Although the primary focus is on prices to individual
consumers,
investment, Government, and export prices are also examined and
impact estimated.
II.
SOURCES OF DATA
A wide variety of data sources was used in the preparation of this
analysis.
The lists of references found at the end of various sections
and subsections of this report indicate the primary materials used for specific
analyses. General data sources and materials used throughout the study
included industry data from the financial and industrial reports issued by
Dun and Bradstreet, Standard and Poor, and Moody, from the Bureau of the
Census and the Internal Revenue Service and control and cost data from the
reports of the Environment41 Protection Agency and studies reported by the
International Gas Cleaning Institute.
In addition, a large number of technical
and business journals were reviewed for specific data and for acquiring a general
understanding of the industries covered a~d the appropriate control systems.
III.
SUMMARY OF COSTS AND IMPACTS
A private outlay of about $35 billion is estimated over the period
Fiscal Years 1973-1977 to implement the stationary and mobile source emissions
reductions postulated in this study. Mobile source controls are projected
to cost $24.7 billion for the 1973-1977 model years ($26.9 billion for the
1968-1977 model years). The investment cost of controlling the stationary
source types considered in this report is projected to be $10.1 billion.
All cost estimates are given in 1970 dollars.
2-2
-------
The Environmental Protection Agency air program budgets for Fiscal
Years 1972 and 1973 are estimated to be $134.2 million and $158.7 million,
respectively.
From these totals, grants to State and local agencies
during those two years are expected to be, respectively, $42.9 million
and $51.5 million.
State and local funding for those years is estimated
at $56.8 million and $64.5 million, respectively~
In last year's report a total private outlay of about $10.5 billion
was estimated for mobile ($4 billion) and stationary source ($6.5 billion)
controls for the 5-year period, Fiscal Years 1972-76. These amounts-differ
widely from the corresponding totals in this report for the following reasons:
The $3.6 billion increase to $10.1 billion in the 5-year
investment cost of controlling the emissions of t~e
stationary source types studied directly reflects increasing
the number of plants in each source type to the national
total in this report.
This is in contrast to the number of
plants existing only in the- 298 metropolitan regions studied
in last year's report. This extension is compatible with
the national scope of the 1970 Clean Air Act Amendments, but
does not recognize possible differences in emission control
levels sufficient to achieve national primary and secondary
ambient air quality standards under abatement implementation
plans submitted by States pursuant to Section 110 of the Act.
The $20.7 billion increase to $24.7 billion in the 5-year
cost of mobile source controls in this report results
from the higher expected cost of emission controls to
meet the more stringent automobile emission standards
mandated by the 1970 Clean Air Act Amendments for
implementation in 1975 and 1976.
Specifically, Alternative 1
in Table 3-3 is assumed in the cost analysis as the
combination of emission controls adopted by automobile
manufacturers.
Under this assumption, for example, the
FY 1976 mobile source control costs in this report (Table 3-3)
amount to $7.16 billion while the costs reported last year for
1976 were $3.94 billion.
2-3
-------
Table 2-1 compares the source emission reductions achieved in
FY 1977 under the emission standards assumed in Appendix I with
potential emissions from these source types if no controls were
implemented beyond those normally found in practice.
Comparison with last year's report will show that four industry
types (brick and tile, elemental phosphorus, rubber tires, and
varnish) were not included in this report. The brick and tile, and
the elemental phosphorus industries are mainly sources of fluoride,
at this time.
for which no new information is available to justify further reporting
A reexamination of last year's data on the rubber tire
industry indicates that too little quantitative information is
available from which to generate reliable cost estimates.
The varnish
industry is not included this year because information shows it to be
a minor and disappearing source of HC due to declining market conditions.
Also given in Table 2-1 are estimated pollutant emissions in
1977 from all other industrial and miscellaneous classes for which
controls were not studied in this report.
The "Industries Not Studied"
group in Table 2-1 accounts nationally for about 28 percent of the
particulates, 3 percent of the SO , 4.5 percent of the CO, 4 percent of
x
the HC, and a negligible amount of NO. These excluded industries
x
account for the following approximate amounts of the 10.2 million tons of
particulates attributed to them in Table 2-1:
Crushed stone, sand, and gravel
Other steel processes
Clay products
. . . . . .
. . . .
Lime crushing and screening
Ferroa1loys
Forest products
. . . .
. . . .
. . . . . .
Carbon black. .
. . . . .
. . . .
Subtotal
Other small sources
. . . .
Total
2-4
5.8 million tons
1.0 " "
0.6 " II
0.3 " II
0.2 " II
0.2 " "
0.1 " "
8.2
2.0
II
"
"
"
10.2 million tons
-------
TABLE 2-l. NATIONAL EHISSION REDUCTIONS AND COSTS UNDER ASSUMED STANDARDS FOR FISCAL YEAR 1977
(COST IN 1970 DOLLARS)l/
Emission Reductions and Cost Under
Assumed Standards
Emission Level 2 Total Control
Source Class without further control-I Decrease of Emiss~7n Cost (Millions of3/
Type (Thousands of Tons Per Year) Level (Percent)- Dollars in FY 77)-
Part SOx CO HC NOx Part SOx CO HC NOx Investment Annual
Mobile Sources~/ 450 1,490 165,000 28,000 9,900 ~/ ~/ 66 72 44 $ ]j $ 8,38sZ1
Solid Waste Disposal 1,830 260 6 , 720 2,530 510 96 0 92 86 0 472 224
Stationary Fuel Combustion:
Small & intermediate boilers 2,330 7,660 4,800 84 83 0 879 1,116
Steam-electric power 5,600 27,600 6,000 49 90 0 4,660 1,360
TOTAL 7 ,930 35,260 10,800 72 88 0 $ 5,539 $ 2 ,476
Industrial Process Studied:
Asphalt Batching 403 86 $ 272 $ 63
Cement 908 93 89 35
Coal Cleaning 342 97 21 9
Grain Plants: Handling 1,430 93 395 83
Feed 362 94 19 4
N Gray Iron Foundries 260 3,800 88 94 348 126
~ Iron and Steel 1,991 96 841 306
Kraft (Sulfate) Pulp 536 85 132 40
Lime 609 94 29 7
Nitric Acid 230 89 37 14
Petroleum Products & Storage 1 , 34 9 78 378 73
Petroleum Refineries 241 3,010 12,100 197 59 99 99 94
Phosphate 350 54 31 15
Primary Nonferrous Metallurgy:
Copper 314 3,335 9 84 313 100
Lead 39 213 33 86 65 16
Zinc 71 555 0 75 41 18
Aluminum 49 89 923 256
Secondary Nonferrous Metallurgy 34 83 32 9
Sulfuric Acid 38 920 74 81 169 39
TOTAL 7,977 8,033 15,900 1,546 230 86 89 98 80 89 $ 4,135 $ 1,213
Industries Not Studied 10,150 1,530 9,750 1,610 0 0 0 0 0 0 0
Miscellaneous Sources Not Studied 5/ 7,940 280 19,740 7,750 5,250 0 0 0 0 0 0 0
National Total ~/ 36,280 46,850 217 , no 41,440 26,690 39 81 57 17 60 $10,146 $12,298
-------
TABLE 2-1. - FOOTNOTES
1/ Assumed standards given in Appendix I. Blanks in the table indicate that emission levels
meet applicable regulations or that emissions are negligible or do not exist.
2/ Emission abbreviations are: particulates (Part), sulfur oxides (SO ), carbon
;onoxide (CO), hydrocarbons (HC), nitrogen oxides (NO ). x
x
3/ Projected costs are the initial investment expenditures for purchasing and
installing control equipment (total investment) and the continuing annual costs for
interest, property taxes, insurance, depreciation, etc., and for operating and maintaining
of equipment (ultimate annual cost). Cost of government programs is not included.
~/ Includes light-duty and heavy-duty road vehicles only. Control of particulates and
sulfur oxides from mobile sources was not considered in this study.
N
I
Cj\
2/ Forest fires, structural fires, solvent evaporation, agriculture burning, natural
gas production and transmission, coal refining, etc.
E../
To nearest 10,000 tons.
2/ All mobile source emission control investment costs are assumed to be expended in
FY 1977. Annual costs are based on Alternative 1 in Table 3-3 for meeting 1975 and 1976
vehicle emission standards.
-------
The "Miscellaneous Sources Not Studied" account nationally for
about 22 percent of the particulate emissions.
These come mainly
from forest fires and structural fires and are not subject to the
same kind of control programs applicable to the other sources discussed
above.
Some or all of the controllable sources of emissions mentioned
above may be subject to control under abatement implementation
plans developed by the States to meet the national ambient air quality
standards.
The inclusion or exclusion of source types in this report
is not to be construed as a recommendation for inclusion or exclusion
of these source types in State plans submitted to EPA for approval
under Section 110 of the Act.
The FY 1977 costs of ,the control technology likely to be used
by the sources studied are given both as total investment in that
year (purchase plus installation cost) and as annualized cost
(capital charges plus operating and maintenance costs). Federal,
State and local subsidies (accelerated amortization, investment tax
credit, etc.) have not been considered in calculating private
industrial emission control costs.
The aggregate price impact of private investment in air pollution
control is projected to result in less than a one percent cumulative
increase in consumer prices through 1977, with over half of the
increase caused by a 10 percent rise in the price of new automobiles.
Other key price increases projected are 4 percent for electric power,
and 2.5 percent for iron and steel, cement, and sulfuric acid.
The
remaining projected industrial price increases are 1.5 percent or
less.
An examination of the impact on families of different income
levels indicates that middle income groups would be affected
relatively more than low or high income groups.
New construction is the investment activity most heavily affected
by projected price increases.
New public utility construction is
affected most because of increased prices for copper, electricity,
iron and steel, iron castings, and passenger cars and trucks.
Higher
2-7
-------
passenger car and truck prices will increase investment costs for
transportation.
Projected price increases will also raise prices for
machinery, electric industrial equipment and apparatus, and
communications equipment.
Export prices for agriculture products, chemicals and chemical
products, and passenger cars and trucks would increase, but the net
impact on exports and balance of payments is difficult to predict
because the relationship of demand to projected price increases is
unknown.
Thus, the net adverse economic impact of the stipulated air
pollution controls,is projected to be small.
The economic effects
of the concurrent costs for water pollution control, solid waste
disposal, noise abatement, and esthetic improvem~nts, will be
considered in a separate EPA report now in preparation.
A.
Mobile Sources
National standards are in effect or anticipated for emissions of
hydrocarbons, carbon monoxide, and nitrogen oxides for motor vehicles.
Particulates are not considered this year on the assumption that the
coming widespread use of unleaded or low lead gasoline will eliminate
the major motor vehicle particulate source.
The cost of controlling motor vehicle emissions for Fiscal Years
1968 through 1977 totals almost $26.9 billion (Table 3-8).
Tables 3-5
and 3-6 exhibit the additions to annual operation cost that can be
expected because of design changes and equipment for the control of air
pollution.
Adverse emissions will decrease substantially through model year 1977.
Hydrocarbon emissions will be reduced to about 28 percent of the potential
emissions of that year.
Carbon monoxide will be about 35 percent of its
potential and nitrogen oxides down to about 56 percent.
In addition to reduced emissions, some reductions in maintenance
costs can be expected as a result of control measures.
The useful lives
of some components will be increased and the intervals between engine oil
changes and tune-ups extended.
Engine reliability will be improved.
The
net increase in operating and maintenance costs by 1977 is expected to be
2-8
-------
about $65 for light-duty vehicles and $100 to $300 for heavy-duty vehicles.
The full cost of air pollution control equipment on automobiles will be
passed on to consumers.
This price increase is estimated to be about 10
percent or $350 by 1977.
B~
Stationary Sources
The economic impact of the control of air pollution from stationary
sources has been examined for solid waste disposal, stationary fuel
combustion, and industrial processes.
The examination covered 22. source
categories, deriving information that was aggregated in ChapterS to
find the effect of control costs on the U.S. economy.
If the solid waste disposal pr~ctices existing in 1967 continued
unchanged through Fiscal Year 1977, the projected level of emissions
will reach 1,830 million tons of particulates, 2.53 million tons of
hydrocarbons, and 6.72 million t~ns of carbon monoxide. By eliminating
all open burning by municipal and private disposal agencies and.equipping
all municipal incinerators and 80 percent of the large commercial incin-
erators with electrostatic precipitators, scrubbers, and other control
devices, 1977 emissions will be reduced to 65,000 tons of particulates,
360,000 tons of hydrocarbons, and 512,000 tons of carbon monoxide. About
25 percent of the waste collected by municipal agencies and 75 percent of
that collected by private agencies will be disposed of by means requiring
air pollution controls. This will require an investment of $472 million
and annualized costs of $224 million.
Control of emissions from fuel combustion in small and intermediate
boilers and steam-electric power plants will require a total investment
of $5,539 million by the end of Fiscal Year 1977.
The associated
annualized cost will be $2,476 million.
Particulates and sulfur oxides
will be reduced by 72 percent and 88 percent respectively for steam-electric
power plants.
In this category steam-electric plants will require the
major investment, $4,660 million with an annualized cost of $1,360 million.
This will result in a rate increase for electrical power of about 4 percent
which will be diffused in the economy and have significant effect on other
price patterns in only a few cases.
The total investment expenditure for the 15 industrial sources at the end
of FY 1977 will be $4,135 million and the associated annualized cost will be
2-9
-------
$1,213 million.
This covers the cost of controlling five pollutants:
particulates, sulfur oxides, carbon monoxide, hydrocarbons, and nitrogen
oxides.
Price increases will average about 7 percent for primary nonferrous
metallurgy, about 10 percent for automobiles, about 4 percent for
electrical power, and about 2.5 percent for iron and steel, cement, and
sulfuric acid. Other price increases are 1.5 percent or less.
c. Aggregate Economic Impact
This chapter examines the impact of industry cost and price increases
on the final purchasers of the Nation's output.
The focus is primarily on
consumer prices, but the impact on investments, Government, and exports is
also examined.
Consumer prices in 1977 are projected to increase by about 0.72 percent
and employment will show no appreciable change as a result of the cost of
controlling air pollution.
Well over half of this increase results from
the projected 10 percent price increase for new automobiles.
Other key
price increases having a significant impact are those for electrical
power, aluminum, iron and steel products, and iron foundry products.
An examination of the impact on families of different income levels
indicates that middle and upper income groups would be affected more than
lower or high income groups.
New construction is the investment activity most heavily affected by
projected price increases.
New public utility construction is affected
most, because of increased prices for copper, -electricity, iron and steel,
iron castings and passenger cars and trucks.
Increased passeng~r car and
truck prices will increase investment costs for transportation and ware-
housing.
Projected price increases will also increase prices for machinery,
electric industrial equipment and apparatus, and communications equipment.
The impact of price increases on Government services is projected to
be quite small because the largest share of Government cost is for employee
compensation.
The net impact on exports and balance of payments is difficult to
predict because the size of the response of the quantity demanded to the
projected price increase is unknown.
Export prices for agriculture products,
chemicals and chemical products, and passenger cars and trucks would increase.
2-10
-------
Chapter 3:
Mobile Sources
I.
INTRODUCTION-
This chapter analyzes the cost of complying with current and pro-
jected Federal standards for motor vehicle air pollution emissions and
presents estimates of the cost to purchasers and users of motor vehicles
due to air pollution control for Fiscal years 1967-77. The analysis
covers only automobiles and on-the-highway trucks and buses. Other en-
gines and transportation forms are excluded. The cost estimates are based
on current and anticipated standards and other available data as of
August 15, 1971.l/The standards cover or will cover emissions of hydro-
carbons, carbon monoxide, and nitrogen oxides from motor vehicles.
for diesel vehicles is also covered by standards.
Smoke
This chapter compares projected emissions under the anticipated
standards with potential emissions which would be expected if no standards
were in effect.
1967 conditions.
Comparison is also made of emissions under standards with
The estimates and projections of emissions contained in
this chapter are different from previously published estimates due to
changes resulting from the Clean Air Act Amendments of 1970.
The costs of meeting
the standards are expressed in terms of additional initial costs to vehicle
consumers, increases in operating and maintenance costs, and an annualized
combination of increased operating and maintenance costs.
Only costs di-
rectly associated with control of vehicular emissions are included.
Costs
or price increases from controls on supplier industries, such as steel-
making, are considered in Chapter 5.
Costs in the form qf Government pro-
grams are discussed in Chapter 2.
Costs due to use of unleaded gasoline
have been included in total costs presented in this chapter.
l/ EPA announced on February 11, 1972, that the 1973 heavy-duty vehi~le
standards proposed on October 5, 1971, were being withdrawn and that new
standards would be imposed for the 1974 model year instead. There was
insufficient time to change this report to reflect either this new
effective date or likely changes in the technical nature of the
control requirements.
3-1
-------
II.
EMISSIONS
A.
Nature and Sources of Emissions
Motor vehicles are a major source of air pollution in the United
States.
The four major pollutants from motor vehicles are hydrocarbons
(HC), carbon monoxide (CO), nitrogen oxides (NOx)' and particulate mat-
ter. In 1967, motor vehicles accounted for approximately one-half of
the hydrocarbon and two-thirds of the carbon monoxide emissions to the
atmosphere in the United States. Motor vehicles also contributed about
one-third of the nitrogen oxides and nine-tenths of the lead-bearing
particulate matter to the total national emissions of these po11ut~nts.
~
OD~~
.........-.. :'1
...r . ";.;:1
,..----. - "', ,.-,""1'1,. . ...: r' r"t r~ rJ :;~
t- . :1''''.--''\'-, _. _. - - .- - ...-.1. -~'~'/J~. ~~~~
" ' J /' '\..........-.--"-.''--'' " --------"n--- . -:.:.-
--==:::,:::-;:-:=.:./ ,--------------_.....-- '"..........11"_,, ..t.
- - /-I-¥.... ..~.....)
~'-/
FUEL TANK AND
CARBURETOR EVAPORATION
HC 15%
EXHAUST
HC 70%
CO 100%
NOx :00%
Figure 3-1.
Approximate Distribution of Emissions by Source for a
Vehicle not Equipped with any Emission Control Systems.
3-2
-------
Emissions from gasoline-powered vehicles occur in several ways.
Hydro-
carbon emissions from evaporation in fuel tanks and carburetors, blowby, and
leakage in engine crankcases are present in exhaust gases.
Incomplete com-
bustion is the source of hydrocarbons in the exhaust gases and also produces
carbon monoxide.
In the internal combustion engine some of the atmospheric
oxygen and nitrogen combine to form nitrogen oxides which are emitted in the
exhaust. Unfortunately, conditions which favor more complete and efficient
combustion (thereby reducing exhaust emissions of hydrocarbons and carbon
monoxide) tend to increase the formation of nitrogen oxides.
Figure 3-1 il-
lustrates the sources and approximate relation of these emissions.
The emissions from diesel engines are principally nitrogen oxides and
smoke.
The nitrogen oxides are a natural result of the high combustion
temperatures in diesels.
small carbon particles.
Diesel engine smoke consists almost entirely of
Based on present knowledge, the total amount of
emissions from diesel engines represents much less of an environmental prob-
lem than that from gasoline engines.
Diesel smoke, however, may be highly
visible and produce soiling because of its sooty nature. For these reasons
(and because of odors), public attention is drawn to diesels.
B.
Emission Levels With and Without Standards
As has been previously noted, changes have been made in the standards
and measurement techniques in effect for Fiscal years 1968-77.
In the
emission estimates reported herein, corrections have been made so that the
data are comparable for the entire period.
Crankcase emission controls were already standard on new automobiles
at the beginning of the time frame considered here. The crankcase contri-
butions of the older vehicles which are not equipped with blowby control
devices are included in the emission estimates presented here.
1.
Potential Emissions without Standards
Table 3-1 gives the expected number of automobiles, trucks, and
buses in use for Fiscal years 1967-77.
This table indicates the
potential problem which could be expected if no control regulations
or standards were in effect.
The total number of vehicles in use
shows an expected growth of approximately 40 percent.
Total annual
emissions would increase approximately the same percentage without
controls.
In Table 3-1, the vehicle populations have been projected on
3-3
-------
TABLE 3-1. - GROWTH OF VEHICLE POPULATION 1967-77
Millions of Vehicles Percent Controlled
Gasoline-Powered Diesel-Powered Gasoline Diesel
Fiscal Autos Autos
Year and Heavy- Heavy- and Trucks Trucks
Light- Duty Buses Duty Buses Light- and and
Duty Trucks Trucks Duty Buses Buses
Trucks Trucks
1967 81.8 5.6 0.28 0.46 0.06 - - -
1968 84.6 6.0 0.29 0.50 0.06 9.0 - -
1969 88.1 6.3 0.30 0.55 0.07 20.5 - -
1970 91.1 6.6 0.30 0.60 0.07 31.5 7.5 1/
1971 93.8 6.8 0.31 0.65 0.07 42.0 17.0 -
1972 96.8 7.1 0.32 0.70 0.07 52.0 26.0 -
1973 100.1 7.5 0.33 0.77 0.07 61.0 34.5 -
1974 103.5 7.8 0.34 0.84 0.07 69.0 42.5 -
1975 106.9 8.3 0.35 0.91 0.08 76.0 49.5 7 .:J:j
1976 110.5 8.7 0.36 0.99 0.08 82.0 55.5 17.0
1977 114.2 9.1 0.37 1.08 0.08 87.0 61.0 26.0
1/
Smoke control began in 1970 for diesels. Since some prior model ve-
hicles meet standards with careful operation (and perhaps in-service
modifications) percent controlled is applied only to gaseous emissions.
Assume same age distribution for diesels as for HD gasoline trucks.
~/
the basis of the best information on the number of vehicles actually
in use rather than on the number of vehicle registrations. This
method eliminates multiple counting of some vehicles due to redundant
registration transactions.
Vehicle growth has been based on popula-
tion projections of the Census Bureau and historical trends in growth
of total vehicle numbers and vehicles per capita.
The vehicles shown in Table 3-1 are divided into two basic cate-
gories; the first comprises automobiles and light-duty trucks. Light-
duty (LD) trucks are 6,000 pounds or less in gross vehicle weight (GVW),
and the second category, heavy-duty (HD) vehicles, consists of those
over 6,000 pounds GVW.
The vehicle data shown include diesel trucks
3-4
-------
and buses of the gasoline and diesel varieties.
Based on the best
data available, buses (of all types) and diesel trucks constitute a
small fraction of the total vehicle population.
Diesel trucks con-
tribute less than 4 percent of the Nation's annual vehicle travel
mileage.
Buses contribute less than 0.5 percent of the annual vehicle
miles.
Since these small percentages are difficult to discern in ef-
fects on national emissions and control costs within the accuracy of
available data, buses are included with HD trucks under the proper
engine categories.
2.
Emission Levels with Standards in Effect
Table 3-2 illustrates the effects of anticipated controls on
emissions for Fiscal years 1967-77. In making the projections shown
in Table 3-2, current and anticipated standards detailed in Appen-
dix I were used.
These standards either have been promulgated or are
under consideration by EPA.
The anticipated 1975-77 standards for
heavy-duty vehicles are still under study and development.
been assumed that all standards will be met by FY 1977.
It has
Table 3-2 shows projected emissions as percentages of the un-
controlled potentials. Approximately 82 percent of the motor vehicles
in use should be controlled to some degree by FY 1977. In project-
ing emissions and the percentages of vehicles under control, the age
distribution of vehicles in use has been considered with older vehicles
being removed from service and new vehicles being added with time. Age
and use distribution within the vehicle population are based on 1969
data.
It is assumed that a comparable distribution will hold through
FY 1977.
The emissions level of nitrogen oxides with controls is expected
to rise above the uncontrolled level for a period of several years.
This is due to the fact that the controls for hydrocarbons and carbon
monoxide, which were implemented earlier than those for nitrogen oxides,
tended to produce an increase in nitrogen oxides. This effect has been
partially offset by reductions in engine compression ratios beginning
with 1971 models.
The first Federal standard
for nitrogen oxides take
effect in FY 1973. With these standard8 in effect, the levels of
nitrogen oxides emitted by new vehicles will begin to show a decline.
However, not until the last 3 years of the time period will national
3-5
-------
TABLE 3-2.
EFFECTS OF CONTROLS ON EMISSION LEVELS,
ALL VEHICLES
W
I
C\
Potential Emissions With- Emissions with Controlled Emissions as
out Controls in Effect Controls in Effect Percent of Potential
Fiscal (Thousands of Tons) (Thousands of Tons) Mithout Controls in Effect
Year HC CO NO HC CO NO 1/ HC CO NO 2/
x x- x-
1967 20,000 118,000 7,000 20,000 118,000 7,000 100.0 100.0 100.0
1968 20,800 122,000 7,400 19,200 114,000 7,400 92.5 93.5 100.0
1969 21,700 127,000 7,700 18,500 111,000 7,800 85.5 87.5 101. 5
1970 22,400 132,000 7,900 17,300 105,000 7,900 77.0 79.5 100.0
1971 23,300 138,000 8,200 16,000 100,000 8,000 69.5 72.5 97.5
1972 24,000 142,000 8,500 14,600 93,000 7,900 61.0 65.5 93.0
1973 25,000 147,000 8,800 13 ,200 89,000 7,600 53.0 60.5 86.5
1974 25,600 151,000 9,100 12,000 84,000 7,300 47.0 55.5 80.5
1975 26,500 156,000 9,400 10,500 74,000 6,900 39.5 47.5 73.5
1976 27,400 161,000 9,600 9,000 65,000 6,200 33.0 40.0 64.5
1977 28,000 165,000 9,900 7,700 57,000 5,500 27.5 34.5 55.5
}j
NO emissions are increased through 1972 as a side effect of HC and CO controls.
x
'!:)
NO controls are planned to begin in 1973.
x
-------
vehicular emissions of nitrogen oxides actually fall below those ex-
pected if hydrocarbons and carbon monoxide are not being controlled.
In projections in Table 3-2, consideration was given not only to
the age distribution within the vehicle populations each year, but
also to the usage of vehicles according to age.
Based on total mile-
age estimates and the number of cars in use, the average mileage
driven per year is about 10,800 miles; for HD vehicles, the average
is about 12,500 miles (however, the usage of certain classes of HD
vehicles deviates greatly from the average).
Based on Bureau of Public
Roads surveys, the trend is for annual mileage to decrease with the
age of the vehicle.
Thus, newer vehicles contribute a significantly
larger portion of the total mileage and fuel consumption than the
older vehicles.
III.
STATE-OF-THE-ART OF COIITROL TECHNOLOGY FOR MOBILE SOURCES
A.
Conventional Engine Control
1.
General
During the past year no dramatic innovations have been observed
in control technology for conventional internal combustion enginep.
Some progress has been made, but in general the concepts and ap-
proaches appear the same as previously reported.
The ability of in-
dustry to meet the 1976 nitrogen oxides standards is still in question.
Even proposed unconventional engines may not be capable of meeting
this stringent requirement in vehicular service.
There is considerable
confidence that the 1975 hydrocarbon and carbon monoxide emission stand-
ards can be met, although possibly with penalties in driveability and
economy.
Problems in driveability and fuel economy have significance be-
yond questions of mere comfort, convenience, and the user's budget.
Driveability problems can include starting difficulties, poor or un-
certain acceleration, hesitation and stalling.
To the extent that
driveability affects safety in traffic these problems influence se-
lection of control techniques.
To some degree fuel economy must also
be considered in control technique development. Since automobiles
comprise a large portion of the Nation's petroleum consumption, unduly
large increases in vehicle consumption rates would constitute a drain
3-7
-------
on national resources.
Thus the total effects of various approaches
must be considered in achieving control of emissions.
Plans for accommodating unleaded gasoline, which were introduced
after last year's report was assembled, have influenced control tech-
no logy and necessitated engine design changes.
Manufacturers are mak-
ing changes in design and materials for valves and valve seats to pre-
vent damage when using unleaded gasoline. The use of unleaded gaso-
line will be a necessity for any type of catalytic reactor system.
In addition, unleaded gasoline will make exhaust gas recirculation sys-
tems more reliable and trouble free.
Unleaded gasoline will also re-
duce the expense of maintaining exhaust systems since corrosion prob-
lems will not be as severe. Some engine components give longer life
and require less maintenance with unleaded gasoline.
2.
Light-Duty Vehicles
The chief developments in control technology for 1971 models ap-
pear to lie in the areas of new techniques for regulating carburetion,
choking, and engine ignition characteristics.
For further progress in
this area manufacturers will employ new electronics technology in ig-
nition systems and control of carburetion or fuel injection processes.
Manufacturers feel that this is necessary for them to reduce the
maintenance requirements for automobiles in order to meet the Govern-
mentIs requirement for a 50,000 mile warranty of emission control per-
formance.
One manufacturer has stated that his goal is a "sealed
hood" vehicle which would require no service or maintenance of the en-
gine or associated components for at least 50,000 miles.
This would
require special lubricants and cooling fluids as well as stable, long-
life ignition and fuel systems. This goal has not been met yet, but
seems possible in light of current technology.
Table 3-3 summarizes the typical control techniques and engine
changes expected as a result of emission control requirements for
Fiscal years 1967-77.
The technology is well established and manu-
facturers are committed to certain approaches through 1974.
However,
in order to meet the stringent 1975 and 1976 standards, certain techni-
cal problems must be resolved.
Three alternative possibilities for
meeting these standards are shown in Table 3-3.
3-8
-------
tABLE 3-3. CONTROL TECHNIQUES AND ESTIMATED CONTROL
COSTS FOR AUTOS AND LIGHT-DUTY TRUCKS, 1967-77
Model
Year
1967
1968-
1969
1970
1971
1972
1973-
1974
1975
.....
'"
>
...
'"'
'"
"
1976- ~
1977 .::
..:
1975
N
'"
>
...
'-'
'"
"
...
1976- ~
1977 ~
<")
1975 '"
>
.....
'"'
'"
1976- E
1977 ~
.....
..:
11
~I
Autos and Light-Duty Trucks
Additional
Cost~/
Per New
Vehicle
(Dollars)
Typical Changes or Controls .\c!ded
None
0.00
Closed PCV system, carburetor changes, ig-
nition timing changes, inlet air tempera-
ture control
5.40
Additional carburetor changes, idle con-
trol solenoid, ignition timing changes
7.40
Evaporative emission control, improved idle
control solenoid with overheat protection
(including transmission spark control), low
compression ratios, additional carburetor
changes
19.70Y
Valve and valve seat changes for unleaded
gasoline
2.00
Exhaust gas recirculation for NOx control,
speed controlled spark timing
48.00
Catalytic oxidation of HC and CO (includes
long-life exhaust system), unitized ignition
systems for 50,000 mile service-free per-
formance, air injection for catalytic unit
163.50
105.00Y
Dual catalyst units for HC, CO, and NOx; or
tandem NOx and CO-HC catalytic units; modi-
fied manifold reactors to reduce catalyst load
Cumulative 1974
Extremely lean fuel mixtures (unitized elec- 160.0J
tronic ignition with electronic control of
spark timing), electromechanical fuel in-
jection, special valves and intake design
Low temperature NOx decomposition catalyst
unit
85.00Y
Cumulative 1974
Catalytic oxidation of exhaust HC and CO, 133.00
.air injection to assist catalytic unit
14.0CU
Exhaust gas recirculation increased to
maximum for NOx control. Modulation of
recirculation
No Federal Excise Tax included
Above the costs of controls or simpler system replaced
3-9
Total Cost.Y
Per Vehicle
(Cumulative)
(Dollars)
0.00
5.40
12.80
32.50.Y
34.50
82.50
246.00
351.001/
82.00
249.'10
334.00l/
82.00
215.00
229.00 ?./
Emissions Per Vehicle
as Percent of 1967
Vehicle Level
HC
100
100
53
40
25
20
20
12
3
12
3
12
3
CO
NOx
100
45
111
32
85
32
85
28
69
28
42
16
42
3
6
16
42
3
6
16
42
3
6
-------
Alternative 1 requires progress in the development of both
an oxidizing catalytic reactor and a reactor for decomposing
nitrogen oxides.
Alternative 2 requires research and development work in
the use of extremely lean fuel mixtures. The literature reports
progress in this area during the last year and offers hope that
this approach is not yet exhausted. Extremely lean operating
engines would probably use some type of fuel injection system
along with improved ignition systems. This second alternative
requires progress in development of a satisfactory nitrogen
oxide decomposing catalyst which can work with a lean operating
engine. It will be necessary to have a catalyst system such
that water as well as nitrogen oxides, and ammonia will be produced
in the exit gases.
If carbon dioxide is reduced, carbon monoxide
will be produced in the exit gases or carbon may be formed in
the reactor, causing it to eventually malfunction.
Alternative 3 is based on expected developments in oxidizing
catalyst reactors and the extension of known principles in exhaust
gas recirculation for reduction of nitrogen oxides.
Thus, Alterna-
tive 3 is the most achievable of the three alternatives considering
current technical knowledge. However, it seems unlikely that Alterna-
tive 3 can meet the 1976 nitrogen oxides standard even with an elabo-
rate exhaust gas recirculation system.
It is likely that a level of
0.8 to 1.0 grams per mile of nitrogen oxides is the minimum level
that can be reached with this appraoch.
This is approximately twice
the level permitted by the 1976 nitrogen oxides standard
using pro-
posed test cycles.
With the exhaust gas recirculation, a catalytic
oxidizing unit would be necessary to achieve the 1975 standards for
hydrocarbons and carbon monoxide.
The projected controls shown in Table 3-3 may not be applied by
all manufacturers, especially on exactly the same time schedule.
There are differences of opinion among the manufacturers on the suit-
ability of controls for the 1975-77 period.
However, the techniques
3-10
-------
tabulated here can be considered typical prospects.
Current
consensus among domestic manufacturers appears to lean toward
Alternative 1 or some variant.
Foreign manufacturers seem to
show greater expectations for Alternative 2 than do U.S.
manufacturers at present; but this may change.
In any case,
as the most suitable control techniques develop, competitive
pressures will tend to make the technology and costs fairly
uniform among manufacturers.
3.
Heavy-Duty Vehicles (See footnote, page 3-1)
a.
Gasoline Engine
Although the assumed emission standards through FY 1977
for heavy-duty gasoline-powered vehicles do not appear as stringent
as those for automobiles, considerable effort will be required to achieve
compliance on the 1975-77 models. The fact that heavy-duty vehicles
at nearly full power much of the time increases the problems of emis-
sion control. Most U.S. automobiles have considerable power reserve
operate
which is seldom used.
As a result, small losses in performance may
be of little concern. In a heavy-duty vehicle, a small loss in per-
formance may make an engine inadequate for previous applications.
This problem could be accentuated by proposed DOT standards for
horsepower-to-weight ratios or acceleration capabilities for trucks.
Thus operators of heavy-duty vehicles may be forced to move up in an
engine line through use of supercharging or larger displacement engines.
Assumed emission standards for heavy-duty gasoline vehicles
through FY 1977 are given in the Appendix T. Table 3-4 lists the
anticipated controls through FY 1977.
Exhaust emission standards
for heavy-duty gasoline vehicles can be met through 1974 by minor
modifications to current design engines.
Such modifications include
carburetion improvements, operation with leaner fuel mixtures, and
changes in the timing of valve and ignition operation.
maximum power output may result.
Some loss in
Evaporative emission standards, which are assumed to become
effective in 1973, can be met with relative ease.
The control system
will be very similar to that for automobiles with differences due to
3-11
-------
TABLE 3-4. CONTROL TECHNIQUES AND ESTIMATED1/
CONTROL COSTS FOR HEAVY-DUTY VEHICLES, 1967-77-
Gasoline Trucks and Buses Additional Emissions Per Vehicle
Cost ]) Total Cost]) as Percent of 1967
Per New Per Vehicle Vehicle Level
Model Vehicle (Cumulative)
Year Changes or Controls Added (Dollars) (Dollars) HC CO NOx
1967-69 None 0 0 100 100 100
1970-72 Lean operating carburetion, ignition
timing changes 9 9 67 62 100
1973-74 Evaporative emission controls 32 41 32 33 100
1975-77 Exhaust gas recirculation for NOx' 201 242 13 23 35
w
I plus air injection for HC, CO,
f-'
N 15-25% increased displacement
Diesel Trucks and Buses
1967-69 None 0 0 100 100 100
1970-74 Improved fuel injectors and careful
operation to prevent excess smoke 0 0 100 100 100
1975-77 Extensive derating of operational 1000 1000 48 100 48
horsepower range. Larger engines
required for some applications
compared to previous engines.
Injection system design modifications.
1/ See footnote, page 3-1.
2:../ No Federal Excise Tax included.
-------
fuel system layout and multiple tanks on trucks.
Assumed exhaust standards for 1975-77 are expected to com-
bine hydrocarbons and nitrogen oxides as a composite total limit.
The assumed standard is expressed in terms of emission weight per
unit of engine work (grams per horsepower hour).
This expression
takes into account the fact that heavy-duty vehicles make greater
utilization of engine work potential than do automobiles and that
trucks are powered according to load needs rather than subjective
motivations.
With exhaust gas recirculation, air injection in ex-
haust manifolds will be needed to hold down hydrocarbon and carbon
monoxide emissions.
The use of exhaust gas recirculation for 1975-77
models will cause a loss in performance and fuel economy.
b.
Diesel Engine
Diesel engines operate with an excess of air in the com-
bustion cylinders.
This accounts largely for diesel engines' lower
emissions of hydrocarbons and carbon monoxide, compared with gaso-
line engines.
The air-fuel ratio is varied by the driver rather
than being controlled by carburetor design, as in a gasoline engine.
Smoke from diesel engines is a function of the engine load-
ing, speed, the air-fuel ratio, combustion chamber, and fuel injector
design.
Since some of these factors are the control of the diesel
operator, many diesel engines now on the road may be able to meet
smoke standards through 1976 if properly maintained and operated.
Design changes, such as improved fuel injectors, are currently being
incorporated into diesel engines to further improve the performance
in terms of smoke and odor emissions.
Engine manufacturers are mak-
ing available smoke reduction kits (with improved fuel injectors)
as retrofits which may be required by State regulation.
Possible standards for the 1975-77 period, shown in the Ap-
pendix I, will require additional efforts in diesel control.
The
possible standards in the Appendix are included for completeness,
but, at this writing, are illustrative only.
As with heavy-duty
gasoline vehicles, the assumed 1975 standard for diesels contains a
limit of the sum of the hydrocarbon and nitrogen oxides in terms
of mass per work done.
Opinions vary among diesel manufacturers on
the difficulty of meeting the 1974 standards, tending to reflect
the experience with the manufacturer's own engine line.
3-13
-------
Some diesel engine designs can be modified to achieve 1975
standards (in the manufacturer's opinion).
Meeting
the standards with these engines would involve derating or operating
engines below their full potential output (in the absence of control
requirements). To maintain a given power level in specific application,
it will be necessary to go to a larger engine (25-30% greater displacement)
or to use superchargers (with engines engineered for low emissions).
Simply adding superchargers or using a bigger engine does not guaran-
tee lower emissions; other factors must be controlled also.
New "pre-
chamber" diesel engines now under development appear capable of meet-
ing the 1975 hydrocarbon, nitrogen oxides standard.
Howevert these
engines are presently more smoky and use more fuel than comparable
direct injection types. The "prechamber" engines are expected to be
more expensive to manufacture than comparable displacement engines
using direct injection.
Emissions of carbon monoxide are not considered a serious
problem with diesels.
Little difficulty is anticipated in meeting
standards through FY 1977.
Diesel engines are finding steadily increasing application
are are virtually supplanting gasoline power in long-haul vehicles
over 20tOOO pounds GVW. There has been a trend to larger diesel en-
gines in these vehicles, with ratings over 200 horsepower becoming
common.
On the other hand, a trend is also developing for applica-
tion of diesels in "medium" size trucks.
The result of both trends
will be more diesels on the road unless control costs shift the
trends.
4.
Unleaded Gasoline
It appears that sufficient unleaded gasoline of 91 to 93 re-
search octane can be made available for automobiles equipped with
catalytic reactors for 1975 and beyond.
Automobile manufacturers
have already lowered compression ratios to permit nominal acceptance
of 91 octane fuel, but not all 1971 models operated satisfactorily
at this octane level.
As a result of the lower compression ratios,
fuel economYt performance, or both must be compromised.
Manufac-
turers have struck different compromises here, with fuel economy be-
ing the predominant 10s8 overall. Table 3-7 is illustrative of possible
operating cost increases.
3-14
-------
B.
Unconventional Power Sources
There appear to be two widely polarized opinions concerning the po-
tential for development of unconventional power sources through FY 1977.
The minority opinion, holding hope for new engines in use by 1975, is held
by several groups of inventors and manufacturers, most of whom are outside
the automotive industry. The major automotive manufacturers hold that un-
conventional power sources can have no significant impact through FY 1977.
Major design changes in vehicles require 3 to 5 years of leadtime for pro-
totype testing, production engineering, and tooling.
This is the case with
well-developed concepts.
At present most of the unconventional power
sources would require several additional years of preliminary development.
Therefore, unconventional power plants will be discussed only for informa-
tion purposes.
Although hybrid power systems consisting of internal combustion en-
gines with electric driving motors repr~sent a combination of well-
developed technologies, the problems of the internal combustion engine
still exist in this system.
Meeting the 1975-76 Federal standards with
any internal combustion engine, hybrid or otherwise, will be difficult.
Considerable work is required for developing the controls and auxiliary
equipment of such a hybrid vehicle.
Considering the time required for
prototype testing, tooling development, and production setup, it would
probably be in the early eighties before hybrid systems could be brought into
significant service. This view is reflected in the deemphasis of hybrids
in Federal R&D programs.
Gas turbine engines are probably the most well developed and poten-
tially imminent of the alternative power sources. (Indeed, demonstration
vehicles powered by turbines have been prepared in previous years by vari-
ous segments of the auto industry).
However, problems still exist with the
gas turbines, the chief ones being high manufacturing costs and poor fuel econ-
omy at partial load. In addition, it has not been proven that turbines can
meet 1976 nitrogen oxides standards.
If the reciprocating internal combus-
tion engine is able to achieve the required 1975-76 emission levels, it is
unlikely that the additional control costs will be great enough to offset
the higher prices of gas turbines for automobiles.
It is likely that gas turbines may find their first application in
3-15
-------
heavy-duty vehicles where the long life and low maintenance requirements of
the turbines will make them more competitive with reciprocating engines.
Commercial truck users are conservative in their approach to new equipment.
A thorough demonstration of reliability and operating and maintenance
economies is needed before wide acceptance is achieved. Engine manufac-
turers are currently planning to expand the use of turbines in stationary,
marine, and off-road applications to build confidence for truck use. It is
doubtful that turbine trucks will present a significant national impact
through FY 1977.
One manufacturer in particular is investing heavily in development of a
small stearn turbine engine which he feels could be brought into mass production
before FY 1975. However, engineering refinements are needed to
make the power plant usable by the general public.
This company is following
the approach of building a direct interchange unit for use in vehicles
basically designed for conventional reciprocating engines. Such an approach
is the only one which would offer any hope for radically new engine designs to be
brought into production through FY 1977. Major redesign and new concepts in
structural components require a leadtime of as much as 5 to 7 years.
Al-
though there is some possibility that the steam turbine engine may be
brought into production by 1975 or 1976, it does not appear that a major
impact would be felt in the automotive industry by FY 1977.
Another area of new engine design involves the Wankel rotating in-
ternal combustion engine. The basic design of this engine has been avail-
able for a number of years, but the engine has not found significant pro-
duction application due to problems with its internal seals. Progress is
apparently being made in overcoming these problems, however.
A Japanese
manufacturer has released a production vehicle in the United States with
a Wankel engine. For the past several years a European manufacturer has
been producing a limited number of Wankel powered cars. Another highly
respected European manufacturer is nearing production with Wankel engines
for its luxury-priced sports cars; this manufacturer reportedly feels the
seal life problems have been solved. Major American manufacturers have
been investing millions of dollars in licenses for the right to develop and
sell Wankel engines.
This is an indication of the seriousness with which
3-16
-------
the engine is being examined in the auto industry.
It may be possible to produce the Wankel engine at a somewhat lower
cost due to its mechanical simplicity, compared to a reciprocating engine.
Also, the Wankel engine is much smaller for a given horsepower than the
conventional reciprocating engine.
This would provide more vehicle room
for new safety and emission control features which will be required on
automobiles.
The Wankel engine is not inherently a low emission engine. In general,
its nitrogen oxides emissions are less than that for a reciprocating engine,
but its hydrocarbon and carbon monoxide emissions are considerably higher.
The automotive industry, however, is approaching the Wankel engine with a
higher degree of confidence (than other new concepts) because of its simi-
larities to other internal combustion engines and the fact that much of the
same emission control technology appears applicable.
At the present, the
outcome of the development work on the Wankel engine through FY 1977
cannot be predicted.
C. "New Vehicle Testing and Factory Surveillance
The purpose of motor vehicle assembly line testing is to insure that
motor vehicles as manufactured meet emission standards.
Section 206 of the
Clean Air Act Amendments of 1970 provides for the testing of new vehicles
or engines being manufactured, to determine whether they conform with the
regulations prescribed under Section 202 of the Act.
Assembly line testing is actually a program of quality control and
assurance with two essential parts:
the control and assurance program car-
ried out by the manufacturers and the surveillance function carried out by
EPA. Federal requirement of assembly line testing may begin with the 1973
model year. Requirement of some form of assembly line testing will con-
tinue through 1977 and beyond.
It is assumed that automobile manufacturers, both foreign and domes-
tic, will conduct their own quality control and assurance work to insure
that they are in compliance with emission standards. EPA's staff will ap-
prove the test methods and procedures, set standards, and monitor the as-
sembly lines by independently selected samples and tests, in addition to
auditing test data from the manufacturer.
3-17
-------
IV.
COSTS OF COMPLIANCE WITH THE 1970 CLEAN AIR ACT AMENDMENTS
A.
Types and Sources of Costs
Costs for mobile source compliance with the 1970 Clean Air Act Amendments
are of three broad types.
First is the increase in prices of new vehicles due
to emission controls.
Second is the cost of compliance assurance for new ve-
hicles.
(This includes factory testing and inspection and regulatory agency
monitoring of factory testing.)
purchase prices for consumers.
Both types may be reflected in increased
A third category is increased costs for
maintaining and operating vehicles.
Several difficulties are encountered in determining price increases
due to emission regulation.
One source of difficulty is the differing
pricing policies and cost accounting procedures among automobile manufac-
turers. Variations may occur for example in the allocation of overhead,
development costs, and profits to control equipment.
The final company de-
cis ions in these areas will be dictated by competitive pressures, the com-
pany's profit levels and financial position, and Government requests for
cost information on a uniform comparable basis.
Costs for controls cannot a priori be equated to prices for automobiles to
consumers, even if costs are passed on to the consumer. The response of
prices is determined by price elasticity of consumer demand for the basic
vehicle and optional features. The basic utility of a low-priced, 5-
passenger sedan is the same as that of a 5-passenger luxury car with every
novelty and convenience feature.
Thus consumers may choose fewer optional
features in automobiles to offset the cost of emission controls, thereby
holding their vehicle purchase price nearly constant. This would cause
the impact to occur as shifts within the product mix of industry. Alternatively,
consumers may extend the useful life of vehicles (i.e., buy fewer) or buy
smaller vehicles.
Although estimates of demand elasticity may be made, only
experience will determine the actual response of consumer prices.
Research and development (R&D) for emissions control in the auto indus-
try is another source of costs.
Industry reports to EPA claim large R&D
expenditures for emission control.
The reported expenditures cannot now be
properly evaluated since the methods of accounting and reporting the figures
are not fully explained or uniform from company to company.
R&D costs can
3-18
-------
reasonably be expected to rise over the next few years in response to the
major 1975 and 1976 deadlines.
As mentioned in the preceding paragraph;
manufacturers' policies in recovering these costs cannot be predicted at
present.
In the absence of some external equalization factors, the R&D
burden will obviously lie unevenly on manufacturers according to size and
profitability.
Another source of costs for new vehicles is the quality assurance as-
pect of emission standards.
These costs include testing and certification
of engines and vehicles, inspection and testing of vehicles under produc-
tion, and Government efforts in factory surveillance, enforcement and moni-
toring.
hicles.
Certification represents an additional development cost for ve-
Testing is an additional cost per unit of production.
Government
enforcement costs are transferred to the public through taxes.
Increases in the continuing expenses of operating and maintaining ve-
hicles are the remaining major compliance cost area.
Operating cost in-
creases are due to increased fuel consumption rates and increased prices for
fuel.
Maintenance cost increases are due to service required by control
equipment or to otherwise keep a vehicle at the emission levels permitted
by age and design.
Section 207(b) of the Clean Air Act Amendments of 1970 requires that manu-
facturers warrant the emission performance of vehicles for their "useful life".
(A proposed definition of "useful life" was given in the Federal Register,
May 11, 1971.)
This and related provisions of the Act are being variously
interpreted by industry. Regardless of the final mechanism for providing
warranty service, it is likely that the purchaser will pay for maintenance
and service either at the time of purchase or during the warranty period as
mandated by warranty stipulations.
Of course, maintenance expenses will
continue beyond the warranty period when the Federal cognizance stops
(under the current Act provisions). However, in some cases responsibility
for enforced maintenance will devolve to the State level.
EPA has recently completed a study of the feasibility of various time
schedules for reducing the lead content of gasoline.
Several schedules con-
sidered reasonable were examined.
Consumer prices did not show a great
sensitivity to choices among the most likely schedules. The price for un-
leaded 93 octane gasoline was estimated to range from 1.1 to 3.5 cents per
3-19
-------
gallon higher than leaded 94 octane regular gasoline over the 1972-80 period.
However, approximately 40 percent of the gasoline now sold is premium
grade.
The need for premium will steadily decline.
The basis of cost com-
parison should be the national average price per gallon (combined premium
and regular).
On this basis it was indicated that the national average
price per gallon would increase slightly less than 2 cents.
Certain benefits (other than emissions reduction) or negative costs
can be expected as a result of control measures for gasoline engines.
Ex-
haust systems, spark plugs, and certain other components will have longer
lives with the use of unleaded gasoline. Engine oil change intervals can
also be extended. The use of electronic (breakerless) ignition and fuel
control systems will reduce the frequency of tuneups and will improve en-
gine reliability.
A final benefit, difficult to evaluate in dollars, is
the stimulus to improve overall manufacturing quality control and to in-
novate in design and production methods in the automotive industry.
B.
Unit Costs of Controls on New Vehicles
Estimated unit control costs (per vehicle) are given along with an-
ticipated controls in Table 3-3 for light-duty vehicles and in Table 3-4
for heavy-duty vehicles.
The tables give the incremental costs for con-
troIs added through FY 1977 and the cumulative or total cost attribut-
able to control features for each model year.
Costs are at retail level
and in 1970 dollars.
As pointed out in the previous discussion of control
technology, the 1976-77 costs are least well defined for light-duty vehi-
cles. For the heavy-duty vehicles, the 1975-77 costs are least well de-
fined, especially for diesels.
None of the costs consider combined effects
of emission controls and possible new safety requirements which may increase
vehicle weights and cause other costs.
Control cost estimates are based on interviews with industry repre-
sentatives, published prices where available, and engineering estimates of
specific features.
Estimates for 1968-71 vehicles have been revised on the
basis of new information available.
Cost information available directly from manufacturers is presently
very limited.
In addition, variations in pricing and cost accounting, as
previously mentioned, make cost and price data difficult to assess.
The
fact that industry list prices do not reflect actual selling prices is
3-20
-------
another complication.
Cost data given here are based on estimates of typi-
cal sales markups rather than list prices.
Because actual response of prices has not been determined, costs for
value of capital and interest charges on investment are not included in the
cost reported here.
It should be noted that truck purchasers have less
ability to maintain prices by rejecting options than do automobile pur-
chasers.
For this reason interest values should be considered in a de-
tailed cost analysis when better data are available.
Tables 3-~/and 3-6 give estimated unit cost increases for operation
and maintenance of light- and heavy-duty vehicles respectively.
The in-
creases in operating costs are due to increased fuel consumption.
For
light-duty vehicles, annual fuel consumption is based on a reference of
760 gallons per vehicle.
The baseline for fuel consumption comparisons is
Model Year 1967.
Consumption increases are estimated to be 6 percent be-
ginning Model Year 1971, an additional 2 percent beginning Model Year 1973,
and an additional 7 percent beginning Model Year 1975.
For heavy-duty gasoline vehicles, increases are based on annual av-
erages of 1,380 gallons of fuel with a 15 percent increase in consumption
beginning Model Year 1975. Price changes for gasoline are reflected in
later tables and not here.
For heavy duty diesel vehicles, fuel cost in-
creases are based on an annual average of 10,660 gallons of fuel with an
8 percent increase in consumption beginning Model Year 1975.
In evaluating operating costs for heavy-duty vehicles, it should be
noted that the averages include two greatly different groups of vehicle
users.
The averages are loaded at the low end by a large fraction of
trucks used only in urban and short haul applications. These vehicles
have low annual mileages. The other group (usually larger and heavier)
of heavy-duty vehicles comprises the interurban, long haul services.
Although these vehicles are a small fraction numerically, they contribute
large annual mileages per vehicle, with 100,000 to 200,000 miles not un-
common.
Annualized investment costs, which may be of greater concern to cor-
porate truck owners than to private automobile owners, are shown in Table 3-6.
The amortization schedule is somewhat arbitrary since the life of many
1/ Alternate 1, Table 3-3, for 1975-76 model light-duty vehicles, is assumed
in all calculations and estimates presented.
3-21
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TABLE 3-5.
ANNUALIZED UNIT COST INCREASES FOR LIGHT-DUTY VEHICLES
(Dollars)
1968 1969 1970 1971 1972 1973 1974 1975 1976 1977
Increased 15.90 15.90 21. 50 21. 50 40.60 40.60 40.60
Fuel Use
Maintenance 6.10 6.10 6.10 12.70 12.70 15.50 15.50 50.10Y 60. 401J 60.40Y
Maintenance -36.3~/-36.3~/-36.3~/
Offsets
Total Annual 6.10 6.10 6.10 28.60 28.60 37.00 37.00 54.40 64.70 64.70
Operating
and i
Haintenance I
1/ Alternative 1 for 1975-77 shown in Table 3-3.
- Based on average of
2/ requirements for present type tune ups and exhaust
- Offsets for reduced system
maintenance.
TABLE 3-6.
ANNUALIZED UNIT COST INCREASES FOR HEAVY-DUTY TRUCKSl/
(Dollars)
~
Cost Year
Type 1968-69 1970-72 1973 1974 1975 1976 1977
Gasoline Engines
Increased Fuel Usd/ None 68.40 68.40 68.40
Maintenance None 9.90 9.90 31. 70 31.70 31. 70
Total Operating and None 9.90 9.90 100.10 100.10 100.10
Maintenance Penalties
Annualized Control None 1. 80 8.20 8.20 48.40 48.40 48.40
Investment Costs 1/
Total Annualized None 1.80 18.10 18.10 148.50 148.50 148.50
Cost Increase
Diesel Engines
Increased Fuel Us€ i/ None None :~one 222.00 222.00 222.00
Annualized Control None None None 200.00 200.00 200.00
Investment Costs 1/
Total Annualized None None None 422.00 422.00 422.00
Cost Increase
})
3-/
~/
See footnote, page 3-1.
Based on average of 1380 gal. of fuel per year as baseline, fuel at 33~/gal.
Based on S-yr. engine life, annualized straight line basis, no Federal Excise Tax
included.
Ii./
Based on average of 10,660 gal. of fuel per year as baseline, fuel at 26~/gal.
3-22
-------
heavy-duty vehicles extends through several engine replacements.
Replace-
ment engines may also carry some cost changes as a result of emission con-
trols, but data are not sufficient for evaluation. Interest values or
value of capital have not been included in heavy-duty vehicle annual costs
because of these amortization complications.
Tables 3-5 and 3-6 also show annual figures for maintenance cost in-
creases.
Maintenance cost increases are based on 1970-dollar value esti-
mates of labor and parts requirements.
In some cases maintenance cost off-
sets are expected (as previously explained).
cluded.
No inflation factors are in-
To provide perspective on the annualized cost increases shown in
Tables 3-5 and 3-6, comparisons may be made with present costs of vehicle
purchase and operation.
An average 1970 model, U.S.-made automobile re-
tailed for about $3,470, including Federal tax, accessories and other costs
except State taxes and fees. For an automobile of this price, the Bureau
of Public Roads (BPR) has estimated an individual owner's annual costs at
$2,060 for the first year and $1,470 for the second, decreasing to $1,140
for the ninth year of vehicle life.
The BPR data includes depreciation,
maintenance, operating costs, garaging costs, taxes, fees, insurance, and
all other costs directly attributable to automobile ownership and use,
except financing costs or value of capital.
In 1970 heavy-duty diesel truck tractors in the 18- to 38-ton rating
range, ready for road hauling, typically were priced at $19,000 to $24,000.
A representative 20-ton diesel dump truck (with dump body) cost $22,000 in
the same year. Gasoline engine trucks typically cost $4,000 to $5,000 less
than comparably rated diesel trucks, and weigh about a ton less. (Few new
gasoline trucks in the sizes above 13 tons are anticipated in the next few
years, however.)
C.
National Costs Through 1977
Table 3-7 summarizes national costs by vehicle class through FY 1977.
Investment costs are purchase price increases for new vehicles during the
indicated year.
Annual operating and maintenance costs are the increased
costs due to controls for all controlled vehicles in use for the specified
year.
Gasoline price increases due to unleaded gasoline cover all vehicles
and consider the projected change in demand patterns due to controls, as well
3-23
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W
I
N
.t>-
TABLE: 3- 7.
NATIONAL COSTS FOR HOErLE SOURCE COMPLIANCE
(Hillions d Dollars)
~ Totah, 1968
~ost Type .
[(Increases) 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1 Q 7 .
,
LiRht-Dutv Vehicles
New Investment1.! 40.6 52.9 114.6 267.5 369.5 809.5 954.0 2,528.0 4,061.0 4,463.0 13,660.6
Assembly Line Testingll 2.5 34.8 35.4 36.3 36.9 37.8 183.7
Annual Operating and 3,267.3 11,511. 5
}jaintenance 41.5 97.2 154.4 379.3 662.6 1,016.1 1,394.7 1,916 . 8 2,581.6
L.D. Total 82.1 150.1 269.0 646.8 1,034.6 1,860.4 2,384.1 4,481.1 6,679.5 7,768.1 25,355.8
Heavy-Duty Gasoline
Vehicles 1J
New Investmentl/ 4.2 5.4 5.7 22.9 28.6 147.1 185.2 195.0 594.1
Annual Operating and
Haintenance 5.3 12.5 72.6 153.4 236.6 480.4
H.D. Gas Total 4.2 5.4 5.7 28.2 41.1 219.7 338.6 431. 6 1,074.5
Gasoline Pric~/ Increases 67 8
due to Lead Removal 10.7 22.3 34.8
Total all Gasoline
Vehicles 82.1 150.1 275.2 652.2 1,040.3 1,888.6 2,425.2 4,711.5 7,040.4 8,234.5 26,498.1
Heavy-Duty Diesel
Vehicles 1/
New Investment!/ 68.0 92.0 101.0 261. 0
Annual Operating 15.1 31.5 49.5 96.1
H.D. Diesel Total 83.1 123.5 150.5 357.1
All Vehicles Total 82.1 150.1 273.2 652.2 1,040.3 1,888.6 2,425.2 4,794.6 7,163.9 8,385.0 26,855.2
;
1/
Y
No Federal Excise Tax included in investment costs.
Assumes inspection program (partially implemented 1972) with 3 percent of production tested beginning 1973, average
cost $3.00 per vehicle produced (includes foreign and domestic production for U.S. consumption).
1/
!:/
See footnote, page 3-1.
Considers changes in demand patterns and fuel penalties as a result of controls as well as added costs of producing
gasoline.
-------
TABLE 3-8. - NATIONAL COSTS OF MOBILE SOURCE CONTROL
AND EHISSION REDUCTIONS FROM 1967 BASELINE 1./
Reduction from 1967
National Mobile National Costs 1/
Source Emissions Level of Controls
(percent) (Millions of Dollars)
Year HC CO NO For Year Cumulative
x
1967
1968 4.0 3.5 ( 5. 5) 1/ 82.1 82.1
1969 7.5 6.0 (11. 0) 150.1 232.2
1970 13.5 11.0 (12.5) 273.2 505.4
1971 20.0 15.0 (14.0) 652.2 1,157.6
1972 27.0 21.5 (12.5) 1,040.3 2,197.9
1973 34.0 25.0 ( 8.5) 1,888.6 4,086.5
1974 40.0 29.0 ( 4.0) 2,425.2 6,511. 7
1975 47.5 37.5 1.5 4,794.6 11,306.3
1976 55.0 45.0 11.5 7,163.9 18,470.2
1977 61.5 53.0 21.5 8,'385.0 26,855.2
}) See footnote, page 3-1.
]) No Federal Excise Tax included in costs.
1/ Figures in parentheses are increases.
3-25
-------
as the fuel consumption penalties.
The changes in national average gaso-
line prices are not as great as might be expected because the drop in de-
mand for premium gasoline tends to offset both the cost and demand in-
creases for unleaded regular gasoline.
National costs given in Table 3-7 are only those directly resulting
from Federal requirements.
Costs from State activities and indirect costs
due to Federal expenditures are not included.
Cost changes for vehicles
or fuel due to emissions control in supplier industries are also not in-
cluded. Possible interrelationships with costs of Federal safety standards
are not included.
Table 3-8 shows the reductions in national mobile source emissions
compared to 1967 levels and gives the costs of achieving these reductions.
This table illustrates that improvements will be achieved compared to 1967
conditions and not just relative to the potential emissions from vehicle
population growth through FY 1977.
Detailed discussions of the problems of State inspection programs
and assembly line testing are appended at the end of this report. These
analyses, originally prepared as separate reports, are reprinted here as
Appendixes II and III, respectively.
3-26
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Chapter 4:
?tationary Sources
1.
INTRODUCTION
The impact of air pollution controls on 20 categories of stationary
sources is discussed in this chapter.
The analyses of each category
cover the significant combustion and process steps, the emissions bv
type and quantity, the methods of controlling emissions to comply with
standards established under the Clean Air Act Amendments of 1970, the expected
costs of controls, and the economic impact of these costs.
The assumed
standards are those presented in Appendix II of the instruction for
preparation of State implementation plans which appeared in the Federal
Register on August 14, 1971.
If States adopt other emission standards,
the actual costs will vary accordingly.
The 20 categories of stationary sources are grouped below under three
headings--solid waste disposal (Section II), stationary fuel combustion
(Section III), and industrial processes (Section IV).
Five types of
emissions discussed are particulates, oxides of sulfur, carbon monoxide,
hydrocarbons, and oxides of nitrogen.
Table 4-1 sUITffilarizes the quanti-
ties and control costs for the five emission types and the three source
groupings.
Control costs shown are the total investment requirements
through FY 1977 and the annual costs for sources estimated to be
operating in FY 1977.
Annual costs, including both operating and
capitalization expenses, are those forecast under the assumption that
the standards established under the Clean Air Act will be fully
implemented.
The year 1967 was selected as the data baseline so that costs and
changes in emissions would be those occurring after the passage of the
Clean Air Act and, therefore, are assumed to be attributable to the
economic impact of program implementation.
All dollar amounts are ex-
pressed in 1970 prices and constant 1970 dollars.
By using 1967 as a data base, emission and cost estimates for
FY 1977 for solid waste disposal and for residential, commercial,
industrial, and small and intermediate utility boilers were computed
using projected growth of the source capacities and fuel-use trends.
For all other sources (steam-electric and industrial processes), emissions
and cost estimates for FY 1977 were computed using projected growth
for source production and capacity, respectively, since it was not
possible to determine accurately whether growth would result from
4-1
-------
TABLE 4-1.
STATIONARY SOURCES -- ESTU1ATES OF POTENTIAL AND REDUCED EHISSION LEVELS AND ASSOCIATED COSTS
IN 1967 AND 1977
Q . f E' . 11
uant~ty a m~SSlons-
(Thousands of Tons per Year)
Source Year Part SO CO HC NO
x x
Solid Waste Disposal 1967 1,210 170 4,440 1,670 34 o?:.1
FY 77 Wloll 1 ,830 260 6,720 2 , 5 30 510
FY 77 rj!..1 65 260 512 360 510
Stationary Fuel 7, 200'!:..!
Combustion 1967 7 ,710 23,900
FY 77 wlo 7,930 35,000 10,800
~ FY 77 W 3,180 4,020 10,800
I
N
Industrial Processes 1967 6,620 6 , 2 80 12,500 1,190 145
FY 77 wlo 7 ,9 80 8,030 15,900 1,550 230
FY 77 W 1,050 939 279 308 25
Total 1967 15,500 30 , 300 17,000 2,860 7 , 690~j
FY 77 wlO 17,700 43,300 22,600 4,080 11,500
FY 77 H 4,300 5,220 791 668 11,300
Control Costs
(Millions of Dollars)
Investment
Annual
472
224
5,539
2,476
4,135
1,213
10,100
3,900
])
Emission abbreviations are: particulates (Part), sulfur oxides (80 ), carbon monoxide (CO), hydrocarbons
and nitrogen oxides (NO). Blanks in the table indicate the emission 1e~e1s meet the applicable regulation
(Appendix I) or that em!ssions are negligible or do not exist.
]j
31
!!..I
51
(HC),
TI1ese estimates are included herein but are discussed no further in Chapter 4.
Estimates without implementation of the Clean Air Act, as amended.
Estimates with implementation of the Clean Air Act, as amended.
An additional 2,300,000 tons of NO were emitted in 1967 from natural gas production and its transmission.
This estimate is projected to be 3,440,000 tons in 1977.
-------
expansion of 1967 plants and installations or from construction of new
facilities.
For all source categories, it was assumed that new capaci-
ties coming into existence after 1967 would (without requirements of the
Clean Air Act) be operated on 1967 control levels, so the control costs
attributable to the Act would be only those required to go from 1967
control levels to the levels implemented under the Act.
The approach
described implicitly assumes that equipment costs and operating expenses
remain unchanged, expressed in 1970 prices.
Within the limits of these
assumptions, this approach provides a reasonable approximation of the
increased emissions and costs associated with real economic growth
from FY 1967 through FY 1977.
Some of the tables in this chapter include a column headed
"Associated Emission Control Level."
The percentages shown in this
column reflect estimates of the extent to which potential emissions
are controlled.
For example, in Table 4-6, pertaining to fuel combus-
tion sources, the 4,310,000 tons of particulate emissions from small
and intermediate boilers in 1967 are estimated to be about 56 percent
of potential emissions of particulate matter.
That is, if there had
been no control, the emission level would have been 7,750,000 tons.
Thus, the level of associated emission control is 44 percent (100 per-
cent minus 56 percent).
The discussions of solid waste disposal and stationary fuel combus-
tion (Sections II and III) emphasize the amounts of emissions and the
controls necessary for their abatement.
The discussion of industrial
processes (Section IV), in addition to emissions and controls, emphasizes
the economic impact of control costs on each industry or group of indus-
tries studied.
Consideration is given to the probable effects on
individual firms in each industry, to potential changes in prices,
profits, and the structure of the industry, and to market changes.
Finally,
Section V summarizes the conclusions derived from the economic analyses.
4-3
-------
II.
SOLID WASTE DISPOSAL
A.
Introduction
It was estimated in 1967 that 364 million tons of solid waste were
generated in the United States by households~ institutions~ and commercial
and industrial enterprises.
The amount generated appears to vary in
proportion to population and is generally predicted as a per capita
rate. In 196~ total solid waste equalled 10.2 pounds per day per capita
for a population of just under 196 million. By 197~ the rate is expected
to increase to 13.7 pounds per day per capita.
If the population is
222 million, the total will reach 554 million tons.
In 1967~ it was estimated that
for each 10.2 pounds of waste
generated~ 5.5 pounds were collected and disposed of by municipal
systems and 4.7 pounds by nonmunicipal systems. The latter included
industrial incinerators and dumps~ building incinerators~ and open
burning or dumping by households and farms. Municipal systems took the
form of incineration (10 percent)~ open burning (44 percent), and others
(46 percent), including sanitary landfill, ocean dumping, and composting.
Air pollution emissions resulted from open burning and from incinerators.
B.
Engineering Basis of the Analysis
1.
Methodology
Air pollution control costs for solid waste were obtained
by:
(a)
Determining the quantity and method of disposal of
collected refuse.
The total collected refuse generated in any State
was computed on the basis of 5.5 pounds per capita
per day.
The amount of refuse incinerated was obtained
from incinerator listings obtained from previous studies.
All incinerators were assumed to be operating at their
stated capacity, and the balance of the refuse which
4-4
-------
was not incinerated was assumed to be disposed of by
other methods:
landfill, burning dumps, ocean dumping,
composting, etc.
\llien no detailed information on the
method of disposal existed, it was assumed that 33 per-
cent of this remaining amount was open burned.
(b)
Determining the quantity and method of disposal of un-
collected refuse.
Uncollected refuse was estimated using a rate of
4.7 pounds per capita per day.
This refuse was assumed
to be presently disposed of by 50 percent landfill, 25
percent open burning, and 25 percent domestic and
commercial incineration.
(c)
Determining incinerator control costs.
._---------
All existing municipal incinerators must be up-
graded to some extent to comply with regulations.
The cost for this upgrading is presented in Table 4-2.
(d)
Determining open burning control costs for collected
refuse.
All present open burning must be discontinued.
It
was assumed that 25 percent of this amount would go to
new incinerators at a cost of $5,600 per daily ton for
furnaces in the 300-ton-per-day or larger size, and
$7,500 per daily ton for furnaces smaller than 300 tons
per day. The annualized cost of operating an incinerator
TABLE 4-2.
COST OF UPGRADING MUNICIPAL INCINERATORS
Cost of Upgrading
Year of ($ per daily ton of capacity)
Construction Investment Annual
Before 1961 500 360
1961-1964 400 330
1965-1967 200 310
<'1-5
-------
was based on $6 per daily ton and 300 days per year.
The
remaining 75 percent of open burning would go to sanitary
landfills at an additional cost of $0.30 per ton.
This is
the only cost above that required to operate a burning
dump.
No initial investment costs were included since land
and personnel for the burning dump were already cn hand.
In metropolitan areas where there are no municipal
incinerators, all open burning would be converted to
sanitary landfill; that is, no new incinerators will
(e)
be built in these areas.
Determining control costs for uncollected refuse.
Uncollected refuse control costs were based on all
current open burning (25 percent of all solid waste)
going to sanitary landfill at a cost of $0.40 per ton,
and existing incineration (also 25 percent of the total)
requiring upgrading at an investment cost of $1000 per
daily ton of capacity with an annualized cost of $259
per daily ton.
Presently, twenty percent of existing
small incinerators were assumed to meet the New
York State regulation, and 20 percent were assumed to
convert to landfill at no additional cost.
(f)
Determining additional costs incurred by 1976.
These costs were based on the 1967 disposal prac-
tices, but were varied to accommodate population changes
as well as a 3 percent yearly increase in the amount of
solid waste generated per capita.
These increases were
then treated in the same manner as the 1967 values to
(g)
arrive at a control cost.
Assuming that all California incinerators were controlled
through local efforts and any costs incurred were due to
Federal action.
The major single factor is the cost for new incinerators re-
quired to control 25 percent of the existing open burning.
The
high initial costs and the high yearly costs accounted for about
4-6
-------
50 percent of the total annual costs for this metropolitan area.
The installation of electrostatic precipitators (ESP's) in
place of scrubbers on existing municipal incinerators was also
investigated.
Annualized costs for ESP's are about 50 percent of
scrubber costs.
However, since no ESP's are currently used for
controlling particulate emissions from incinerators, they were
not considered in this analysis.
Assuming some of the larger
incinerators were to go to ESP's as a means of control, typical
annualized cost would be reduced by about 10 percent.
Cost estimates for disposing of junked auto~obiles in con-
trolled incinerators were based on an assumption that 50 percent
of these automobiles were now being open burned.
Based on data
presented later in this section, the costs of controlling partic-
ulates from auto body incinerators would add only about 1 to 3
percent to the investment cost and even less to the annualized cost.
Therefore, separate estimates of the cost of controlling junked
auto disposals were not made because the percentage contribution of
these costs was less than the expected error of the major cost
estimates.
2.
Control Costs
The following air pollution control costs were utilized in
estimating solid waste disposal expenditures.
a.
Municipal Incinerator Control Costs
Table 4-3 presents the cost of controlling municipal
incinerators with wet scrubbers.
Since installed costs did not vary by more than about
10 percent, an average cost of $500 per daily ton was used. For
incinerators built between 1961 and 1964, 80 percent of the control
costs were used.
For units built after 1965, a control cost of
$200 per daily ton was arbitrarily used since these units were
assumed to have some type of acceptable control device already
in place.
4-7
-------
Annualized costs were based on a 13.3 percent capital charge
and on the following operating cost equation:
C = S [0.745HK (Z + 1~~0) + WIlL + H] = 0.3985
where:
S = acfm;
H = 7200 hours/year;
K = $O.Ol/kwh
Q = 0.01 gals/acfm;
Z = 0.006 hp/acfm;
W = 0.005 gals/hr acfTI;
}1 = $0.03/acfm;
h = 30 feet"
, -3
L = $0.05 x 10 /gal.
Operating costs for a wide range of incinerator sizes were
calculated and an average cost was based on dollars per ton used for
cost estimating purposes.
TABLE 4-3.
HUNICIPAL INCINERATOR CONTROL COSTS
Size Flue C~S V01~TIe Collection Installed Cost Annualized Cost
(tons/day) (1000 acfm)l) Eff. (percent) (51000 total) ($/daily ton) '~lUOO) (:ojdaily ton)
50 40 85 28 560 20 400
100 80 85 52 520 39 390
200 160 85 100 500 77 380
300 240 85 150 500 115 380
500 350 90 250 500 172 340
600 420 90 300 500 207 340
700 420 95 350 500 213 300
1000 600 95 480 480 302 300
1/ For sizes 50 - 300 tons per day, use 800 acfm/ton.
For sizes 500 - 600 tons per day, use 700 acfm/ton.
For sizes 700 tons per day and larger, use 600 acfm/ton.
b.
Control Costs for Smaller Sized Incinerators
A one-ton-per-day model size unit operating for 5 hours per
dav and 360 days per year (1800 hours per year) was used as a base for
calculating control cost.
Installed cost of a scrubber for this size
unit (400 pounds per hour capacity) designed to meet the New York
4-8
-------
State regulation is about $looo.l/ Particulate control efficiencies
on the order of 60 to 80 percent are required.
Annualized control costs were calculated as follows:
C ; S[O.7457HK
z + ~ + WHL + M] ; 920 (0.119)
1980
; $109/year/daily ton
where:
2/
S := 920 acfnr- ;
H := 1800 hours/year;
K := $0. 01/hlh;
Z := 0.006 hp/acfm;
Q := 0.01 gals/acfm;
h := 30 feet;
W := 0.005 gal/hr acfm;
L := $0.05 x 10-3!gal;
M := $0.03/ acfm.
Capital charges at 15%, (.15 x $1000) ~ $150/year!daily ton
TOTAL Annualized Cost = $259/dai1y ton
c.
Auto Body Disposal Costs
Calculations to determine investment and annual costs of auto
body disposal for a metropolitan area are presented below.
incinerator handling 30 cars per day costs about $25,000.
A controlled
(1)
Investment Cost:
Investment $25,000 - $2 8/" /
Cost/Car - 30 cars/day x 300 days/year - . car year.
Metropolitan Area := metropolitan area population x 27 cars
Investment Cost 1000 1 year
3/
x 0.5~ x $2.8/car/year := $39/1000 population.
(2)
Operating Cost, assuming $4/car:
" metropolitan
Metropolltan Area "
o t" C := area populatlon x 27 cars/l000 population
pera lng ost 1000 1 year
x 0.5~/x $4/car := $56/1000 population/year.
1/ An average value; control costs for small incinerators vary from
$600 to $1300 per daily ton of refuse burned.
2/ Based on 16,000 ft3 of flue gas per 106 Btu of heat input, and 5000
Btu/lb of refuse.
3
5000 Btu x 4000 lb/hr x 1 x 166000 ft
lb. 60 min/hr 10 Btu
or about 920 acfm at 450°F.
:= 535 ft3/min at 70°F,
1/
Assuming 50 percent of all scrapped cars are presently being burned.
4-9
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All uncontrolled emissions were based upon the emission
rate shown in Table 4-4.
TABLE 4-4.
EMISSION RATES FOR VARIOUS SOLID WASTE DISPOSAL PRACTICESl/
Process Particulate Hydrocarbon~/ Carbon
Monoxide
Open Burning 17 30 85
Municipal Incinerators 17 1.5 1.0
Domestic & Commercial
Incinerators 12 7 15
Sanitary Landfill 0 0 0
1/
2/
Pounds per ton of refuse.
As Methane.
C.
Emissions and Control Techniques
Open burning and incineration of solid waste result primarily in
air pollutant emissions of particulates, hydrocarbons, and carbon
monoxide.
It is estimated that the 1967 totals in the United States
amounted to 1,207,000 tons of particulates, 1,670,000 tons of hydro-
carbons, and 4,438,000 tons of carbon monoxide.
If the disposal practices
existing in 1967 continued unchanged through FY 1977, the projected
level would reach 1,829,000 tons, 2,530,000 tons, and 6,720,000 tons,
respectively.
For the purpose of estimating contro~ costs and reduction efficiencies,
the following control techniques were designated:
(1) all of the open
burning by existing municipal systems would be discontinued--25 percent
would be disposed of in new municipal incinerators and 75 percent in
sanitary landfills; (2) all open burning by private disposal agencies
would be discontinued; (3) all municipal incinerators and 80 percent
of the large commercial incinerators would be equipped with electrostatic
4-10
-------
precipitators to control particulate emissions; (4) all of the existing
small residential and commercial incinerators would either be replaced
by reallocation to sanitary landfills (25 percent) or upgraded by addition of
electrostatic precipitators, scrubbers, or other control devices.
Implementation of these controls would, it is estimated, reduce
particulates to 65,000 tons, hydrocarbons to 360,000 tons, and carbon
monoxide to 512,000 tons in FY 1977.
These reductions would
represent 96.4 percent control of particulates, 85.8 percent control
of hydrocarbons, and 92.4 percent control of carbon monoxide.
D.
Scope and Limitations of Analysis
There are several sources of emissions, such as open burning of
leaves, burning at construction sites, and disposal of wood wastes
in wigwam burners, which have not been included in thi~ analysis.
The trend among State and local regulatory agencies is to prohibit
such practices, resulting in up to 100 percent control.
Since there
are several alternatives for each type of disposal, it is difficult
to project an ultimate disposal pattern and the costs (if any) which
are involved.
Costs and emissions considered in this analysis are limited to
collected municipal refuse (incinerated and open burned), other open
burning dumps, and onsite incinerators.
E.
Cost of Control
For the Nation as a whole, the 1967 level of waste generation would
require a capital investment of approximately $311 million to implement
the control plan, and holding prices at the 1970 level, the growth of
solid waste by FY 1977 would increase the capital investment to
approximately $472 million. The annual operating cost of these controls
would be approximately $147 million in FY 1967 and is estimated
to rise to $224 million by FY 1977.
The public share of the costs required to implement these controls
by FY 1977 would be $354 million for capital investment and $165
million for annual operating expenses, including interest and depreciation.
Private households, institutions and businesses would bear the remaining
$118 million for capital investment and $59 million for annual operating
expenses.
4-11
-------
The significances of these figures may be indicated, in part, by the
investments and annual costs required for specific installations and
operations.
For example, applying controls to a small incinerator,
such as one in an apartment building, will require a capital investment
of approximately $1,115 per ton of daily capacity, and an annual operating
cost of $295 per ton of daily capacity. To provide sanitary landfill
as an alternative to incineration or open burning would require an annual
operating cost of $0.46 for each ton of waste.
Controlling an existing
municipal incinerator would require a capital investment of $225 to
$600 per ton of daily capacity and an annual cost of $350 to $410 per
ton of daily capacity.
F.
Economic Impact
If the municipal costs shown are averaged over the entire U.S.
population for 1977, an investment of approximately $6.40 per family
and annual costs of approximately $3.00 per family are indicated.
Such figures are somewhat misleading, however, since actual costs
will vary widely from one community to another.
Sanitary landfills
are generally considerably more economical for smaller communities
outside major metropolitan areas, but incinerators will probably prove
less costly for large cities. The break-even point between incineration
and landfill, relative to municipal population, is determined by the
cost of the disposal facilities in combination with such other factors
as availability and price of land, distances over which waste must be
transported, population density, and the possibility of sharing facilities
with other municipalities.
these factors.
The current analyses do not include all
4-12
-------
REFERENCES FOR SECTION II
1.
R. J. Black et a1. "The National Solid Was tes Survey." Paper
presented at American Public Works Association, Miami, Florida,
October 24, 1968.
2.
A. J. Muhich ~ ale 1968 National Survey of Community Practices,
Dept. of Health, Education, and Welfare, PHS, ECA, Solid Waste
Program, 1968, and Combustion Engineering Company Incinerator
Study, 1967 PHS Contract.
3.
C. Smallwood, Jr.
Private communications, August 12, 1969.
4.
Elements of Solid Waste Management, Training Manual.
Washington, D.C.: PHS, March 1969.
ECA,
S.
T. Casberg. Department of Defense, Washington, D.C.
communication, October 1968.
Private
6.
Control Techniques for Particulate Air Pollutants. PHS Publication
No. AP-5l. Washington, D.C.: National Air Pollution Control
Administration, (PHS), January 1969.
7.
R. E. Zinn and W. R. Niessen. "The Commercial Incinerator Design
Criteria," ASHE, 1968, National Incinerator Conference, New York,
May 5-8.
8.
E. R. Kaiser and J. Tolciss. "Smokeless Burning of Automobile
Bodies," Journal of the Air Pollution Control Association.
Vol. 12, No.2 (February 1962), pp. 64-73.
9.
A. B. Walker. "Electrostatic Precipitators," American City, September
1964.
4-13
-------
III.
STATIONARY FUEL COMBUSTION
A.
Introduction
Stationary fossil fuel (coal, oil, and gas) combustion sources
analyzed in this study are residential, commercial, industrial, and
steam-electric power plants.
The opportunities for abatement control are quite apparent in
fossil fuel combustion because these sources account for a substantial
majority of the most significant pollutants, in terms of their economic
damages.
The relative magnitude of emissions of fossil fuel combustion
is
shown in Table 4-1.
Carbon monoxide and hydrocarbon pollutants
are not emitted in significant quantities when the combustion equipment
is operating properly.
No reliable basis was available for estimating
costs of NO pollutant reductions.
x
of particulate matter and sulfur oxides contributed by each combustion
Table 4-5 indicates the amount
source.
Two standards were selected as the bases of estimating the cost
of controlling emissions from fuel combustion sources.
The first is
the combustion regulation, which limits particulate emissions to 0.10
pound per million Btu input (based on the source test method
described in the AppendixI). The second limits sulfur oxide emissions
from fuel combustion sources
to 1.50 pounds per million Btu input.
In the past it has been assumed that the control of particulate
and sulfur oxide emissions from stationary fuel combustion sources could
be achieved by switching fuel--that is, by using low sulfur oil in place
of other fuels. Further study has indicated that the availability of
low sulfur oil and natural gas should satisfy the present and future require-
ments for small and intermediate boilers.
However, for steam-electric
power plants, a complete switch from high sulfur coal and oil to low
sulfur oil is not feasible because of long-term fuel supply and demand
requirements.
Accordingly, a mix of alternatives was assumed including
dependence to a large degree on the use of stack gas cleaning devices
for the control of both sulfur oxides and particulate emissions.
Limited fuel switching has been included for the control of smaller
boilers only--below 50 megawatt ratings--and located in power plants
with a total rated capacity of less than 200 megawatt.
4-14
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TABLE 4-5.
ESTIMATED EMISSION LEVELS FOR STATIONARY FUEL
COMBUSTION SOURCES NATIONALLY
[Calendar Year 1967)
Quantity of Emissionsl/
Total Number (Thousands of Tons per Year)
Source of Boilers Part SO NO
x x
Residential, Commercial,
and Indus trial Heating
Plants 31,300,000 4,310 8,480 3,200
Steam-Electric Power
Plants.V 2,600 3,400 15,400 4,000
Total
7 , 710
23,880
7,200
11
Emission abbreviations are:
nitrogen oxides (NO ).
x
Power plants shown are investor and municipally owned plants of 200
megawatts and larger.
particulates (Part), sulfur oxides (80 ), and
x
])
4-15
-------
As noted in Table 4-1, the control plan projected to FY 1977
in this study would reduce the potential particulate emissions from
7,930,000 to 3,180,000 tons and sulfur oxide emissions from 34,960,000
to 4,020,000 tons--reductions of 59.9 percent and 88.5 percent, respect-
ively.
Total investment for FY 1977 for this control plan would be
$5,539 million and annual costs would be $2,476 million.
The impact of
the control plan on each fuel combustion source is shown in Table 4-6
and discussed in the sections that follow.
Section B covers small
and intermediate stationary combustion sources.
large steam-electric utility sources.
Section C covers the
B.
Residential, Commercial, Industrial, and Small Utility Boilers
1.
Introduction
Residential, commercial, industrial, and small utility
boilers are further divided between the residential sector and
the others which will be called intermediate boilers.
The
intermediate boiler sector includes all steam-raising equipment,
hot water heaters, and hot air furnaces used for space heating.
The capacity ranges from 200,000 Btu per hour to 500,000
pounds per hour of steam (approximately 50 megawatts [electric]).
All sources which could be subject to a fuel switching emission
control scheme are discussed. In the residential secto~ gas ranges,
air conditioners, clothes driers, and other appliances are fuel
consumers which are not included oecause they contribute a very small
portion of the emissions and are not amenable to any control scheme.
Utility boilers in the 25 to 50 megawatt (electric) size range, which
are located at plant sites with a total capacity of 200
megawatts
(electric) or more, are included in the steam-electric section
since we assume that these boilers will be controlled by flue gas
cleaning rather than by fuel switching.
2.
1967 Summary
Table 4-7 shows the 1967 summary of estimated capacity, fuel
use, and emissions from the residential sector and from intermediate
boilers.
The capacity estimate is a result of a survey of sales data
and other statistical data on lifespans for the various boiler types.
The fuel use and emission estimates were calculated from capacity,
4-16
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TABLE 4-6.
STATIONARY FUEL COMBUSTION SOURCES-- ESTIMATES OF POTENTIAL AND
REDUCED EMISSION LEVELS AND ASSOCIATED COSTS
Source
Year
Quantity of Emissions !/
(Thousands of Tons
per Year)
SOx
Part
Associated Emission
Control Level Y
(Percent)
Part SOx NOx
Control Costs
(Millions of Dollars)
Investment Annual
NO
x
Small and
Intermediate
Boi Ie rs 1967 4,310 8,480 3,200 45 0 0
FY 77 Wlo 2:..1 2,330 7,360 7,100 58.9 0 0
.~ FY 77 W '}j 380 1,260 7,100 93.3 83 0 879 1,116
I
I-'
-...j
S team- Ele c t ric
Power Plants 1967 3,400 15,400 4,300 78 0 0
FY 77 Wlo 5,600 27,600 7,200 78 0 0
FY 77 W 2,800 2,760 7,200 98.5 90 0 4,660 1,360
11
2:)
21
Emission abbreviations are: particulates (Part), sulfur oxides (SO ), and nitrogen oxides (NO ).
x x
Estimates without (W/O) implementation of the Clean Air Act are shown.
Estimates with (W) implementation of the Clean Air Act are shown.
-------
TABLE 4-7.
SUMMARY OF ESTIMATED CAPACITY, FUEL USE, N~D EMISSIONS, 1967
(RESIDENTIAL AND INTERMEDIATE BOILERS)
.j::-
I
I-'
00
Capacity Fuel Use Emissions
Residual Distillate SO NO Particulates
x x
Sources Coal Oil Oil Gas 06 106 106 Tons
106 pph 106 Tons 106 Bbl 106 Bbl 1012 d tons tons Potential Actual
Residential 2,117 --- --- 355 3.15 ~.24 0.2 0.09 0.09
Intermediate
Boilers 3,290 148 340 120 3.87 8.24 3.2 7.66 4.22
Source:
John R. Ehrenfeld ~ al., Systematic Study of Air Pollution From Intermediate-Size Fossil-Fuel
Combustion Equipment. Contract No. CPA 22-69-85. Cambridge, Mass: Walden Research Corp., July 1971.
-------
load factor, boiler efficiency, collector efficiency, emission
factors, and fuel-heating value information.
were further broken down by user, fuel,
size,
The capacity numbers
firing type, and
age.
The residential sector was dropped from the analysis for the
following reasons: (1) coal is rapidly declining as a residential
fuel }) due to linatural at tri tion, II and emissions from other
residential fuels (distillate oil and gas) fall within the standards;
and (2) essentially all new growth in the residential sector is
expected to use gas or electricity for heating.
Thus no costs were
attributed to control of residential heating units.
3.
Projections for FY 1977
Table 4-8 shows the estimated capacity in FY 1977 and the
estimated fuel use patterns and emissions with and without the
effect of the Clean Air Act.
The projections are based on past
trends, without placing supply limitations on fuels.
Capacity was
derived from correlations of boiler sales with economic indicators
such as GNP, and the fuel-use pattern, with the Clean Air Act, was
based on the fuel-switching strategy discussed below.
4.
Control Strategy
Fuel switching is the most cost-effective strategy for reduc-
ing emissions from intermediate boilers.
The best alternate
approach appears to be alkaline scrubbing of the flue gas, but
this approach is not as effective in reducing emissions, and the
capital cost is nearly twice as high as for fuel switching.
The basic approach of fuel switching is to replace coal and
high sulfur residual oil with gas, distillate oil, or low sulfur
residual oil, depending on the feasibility for each boiler.
The
costs of the fuel-switching strategy for 565,000 boilers will result
in total reductions of sulfur oxides and particulates by 84 percent.
The investment cost is $879 million, and the annual cost is $1,116
million, based on 1967 fuel prices and 1967 dollars in capital
costs.
1/
The rapid decline in the use of coal as a residential fuel has
been going on for a number of years, and the cause should not be
attributed to the Clean Air Act.
4-19
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TABLE 4-8.
SUMMARY OF ESTIMATED PROJECTED CAPACITY FUEL USE N~D EMISSIONS, 1977
(RESIDENTIAL AND INTERMEDIATE BOILERS)
I
Capacity Fuel Use Emissions
Distillate Residual SO I NO Particulates
x x 6
Sources Steam Coal Oil Oil Gas 106 1106 10 Tons
106 pph 106 Tons 106 Bbl 106 Bbl 10l2cf I Potential Actual
tons! tons
Intermediate
Boilers I
WIO the
Act 4,530 102 530 220 7.43 7.36 3.2 5.67 2.33
Intermediate
Boilers
with the
Act 4,530 0 714 245 8.80 1.26 3.2 0.92 0.38
"'"
I
N
o
Source:
John R. Ehrenfeld, ~ al. Systematic Study of Air Pollution From Intermediate-Size Fossil-Fuel
Combustion Equipment. Contract No. CPA 22-69-85. Cambridge, Mass: Walden Research Corp., July 1971.
-------
Several important assumptions were made in determining the
feasibility of the fuel-switching strategy.
The 1967 price structure
for the various fuels was used, and no restrictions on fuel supply
were assumed, although at the present time the future supply and
price level of fuels are somewhat unc.ertain. As the supply of
"clean fuels!! becomes more restricted and the prices rise, the
advantage of fuel switching over flue gas cleaning will become
less.
However, fuel switching still appears to be the most feasible
solution for intermediate boilers in the near future.
In order for
flue gas cleaning to become attractive by FY 1977, fuel prices
for oil and gas will have to rise to twice the 1967 levels.
5.
Costs
The costs, as stated above, to implement the fu~l-switching
strategy include capital costs for converting the boilers to burn
a different fuel and additional operating costs for burning more
expensive fuels.
The capital cost includes costs for burner
modifications, fuel supply system changes, and necessary fuel
storage facilities.
The annual cost includes the annualized
capital cost based on IS-year straight line depreciation and
8 percent interest, and the additional fuel costs.
Steam-Electric Power Plants
c.
1.
Introduction
In 1967, there were 940 steam-electric utility stations
representing 397 companies, both investor and municipally owned.
In that year, these plants produced some 970 billion kilowatt-hours
of energy for sale in the United States. In addition, utility
companies produced some 220 billion kilowatt-hours by hydroelectric
and nuclear generating stations.
Trends in electric energy pro-
duced by fossil fuels consumption are shown in Table 4-9 for the
most recent 5 years for which data are available.
2.
Present and Projected Emissions
Recent trends and projected plans for fossil fuel power plants
suggest that coal and residual oil consumption should grow at an
annual rate of about 6 percent. Thus, the 1967 level of 3.40
million tons of particulates, 15.4 million tons of sulfur dioxide,
4-21
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TABLE 4-9.
ELECTRICAL ENERGY PRODUCTION ~~D FUEL CONSUMPTION
Net Gereration, Energy Consumed, Fuel Consumption
Year Billion KWH Quadrillion Btu Mix, Percent
(1015) Btu Coal Oil
Gas
1965 837 8.7 65.9 7.7 26.4
1966 928 9.7 64.5 8.6 26.9
1967 970 10.2 63.4 9.5 27.1
1968 1067 11. 2 61. 9 9.6 28.5
1969 1151 12.2 59.0 12.3 28.7
Source:
National Coal Association
4-22
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and 4 million tons of nitrogen oxides should increase to 5.60 million
tons of particulates, 27.6 million tons of sulfur dioxide, and
7.1 million tons of nitrogen dioxides by FY 1977 without imple-
mentation of the Act. This projection assumes no control of sulfur
dioxide and a collection efficiency of 78 percent for particulates
in the base year 1967.
By FY 1977, steam-electric utilities are
projected to emit 64 percent of all sulfur dioxide emissions (without
implementation of the Act).
Average sulfur content of coal and residual oil consumed by
utilities in 1967 was 2.5 percent.
Indications are that sulfur
contents in these fuels have been increasing because of increased
demands for low-sulfur fuels by other consumers (i.e., metallurgical
coal buyers and industrial and commercial power plants) and because
of the distance of the western States and Alaska from the sources
of low sulfur coal.
The higher trends in sulfur contents are not
reflected in the projected 1977 emissions.
Implementation of the Clean Air Act would reduce particulates
to 2.80 million tons and sulfur dioxide to 2.76 million tons by
FY 1977. No control of nitrogen oxides is postulated.
3. Control of Emissions and Estimated Control Costs
Utilities will be able to choose among alternative control
schemes in attaining SOx emission standards. Their decisions will
weigh heavily on the relative economics of the options available
to them.
Rather than attempt to arrive at a national cost estimate
by means of delineating the option each plant would follow, the
national cost was approximated using only two options.
It was
assumed that large plants would employ flue gas desulfurization
and that small plants will employ fuel switching.
This approach
yields a realistic approximation of the national expenditures
expected to be made by utility companies.
For power plants having a rated capacity in excess of 200
megawatts and with an overall plant load factor in excess of
30 percent, the assumed control strategy was the installation of
wet limestone injection scrubbing systems to provide simultaneous
control of particulates and sulfur oxides.
Depending on the
number and size of individual boilers within each plant, several
scrubbers may be required along with a central waste disposal
4-23
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system.
Such technology is presently being tested on a small
number of existing and new installations throughout the United
States.
Model plant costs used in developing industry estimates
for retrofitting of equipment were:
Investment Cost
Annual Cost
Model Plant Size
200 row
1000 row
$ 6.08 million
$19.10 million
$1.77 million
$5.83 million
All coa~ and oil-fired utility plants through 1977 requiring lime-
stone scrubbers were assumed to be built without sulfur removal
equipment~ and therefore
would incur the retrofit costs.
Federal
Power Commission data indicate
that the great majority of new
plants built by 1975 will not have sulfur removal equipment.
Costs
are based on commercial availability of scrubbing.
They do not
take into account operational problems that are coincidental with
pilot and prototype
plant testing.
Some recent experience with
actual plant operators indicates that 150 to 200 megawatt units
are experiencing costs twice the above figures, because of problems
with equipment scaling, inadequate foundation support, and equip-
ment oversizing.
Based on limestone-injection scrubbing, the steam-electric
utility industry would have to invest $4.66 billion in equipment
and incur an annual expense of $1.36 billion for full implementation
by FY 1977. These costs are based on a 10-year depreciation
schedule and 8 percent interests. These estimates apply to 109,000
mw capacity existing in 1967, with growth raLes applied to estimate
increase to 1977.
For high sulfur coal and for residual oil-burning power plants
of less than 200 megawatts, switching to low sulfur fuels will
be cheaper. These plants and their costs of compliance are
discussed in Section B for small and intermediate boilers.
Engineering Basis of Analysis
Based on cost engineering studies of the Tennessee Valley Authority
limestone scrubbing process, cost equations have been developed to
calculate costs for power plants to retrofit limestone scrubbers.
Generally, economic analysis shows that plants greater than 200 megawatt
4.
4-24
-------
capacity and an operating load factor of 30 percent would be suitable to
scrubbing technology.
The cost equations including the latest up-to-date unit costs
revisions available within the Environmental Protection Agency for cal-
culating investment and operating costs are as follows:
(1)
Investment ($1000) = 27,307.8 (MW) - 11.57 (MW)2 + 2358.5(S)(}~)
- 1. 20 (S) (MW) 2
Annual Cost ($1000) = L[112.67(MW)(S) - 8.33(MW)] + 1.3M[0.018
MW + 0.595(S) + 0.0015(MW)(S) + 7.38]
+ 1.2W(0.36(S) (HW» + 1.2K[0.0548(MW)
- 0.00945(S)(MW) + 0.0020(MW) (S)2]
+ T[(11.799MW) - 0.00536(MW)2] + 0.23[In-
vestment]
MW = Megawatt rating of power plants
(2)
Where:
S = Sulfur content of fuel as a %
L = Cost of Limestone, $2.05 per ton
M = Labor costs, $/1000 manhours, based on $5.00 per man-
hour
W = Water costs, $100.00 per million gallons
K = Electricity Cost (Individual Plant Production Cost),
$6000 per million kilowatt-hours
T = Cost of technical labor (professional), $7.50 per
man-hour
The above cost calculations are based on coal fossil-fired genera-
ting stations, operating at a 91 percent load factor.
To determine
investment costs for oil-fired installations, the sulfur content in the
investment equation must be divided by 1.35, and the megawatt rating
multiplied by 0.95.
To determine annual costs (A) for facilities where the load
factor (LF) varies from 30 to 91 percent,the following cost correction
equations were used:
If 64% ~ plant factor < 91%:
r, J r actual coal tons consumed]
Acoal = (costs @ 91%) x r + (91%-LF) 0.0064j x [ 3000 (MW)
A 01
01
r 1 [actual bbl oil consumed]
= (costs @ 91%) x r + (91%-LF) 0.0064~ x 12,808 (MW)
4-25
-------
If plant factor 2 63%:
A 1 = (costs@9l%)xf1.23+(63%-LF)0.02561x [actual tons. coal consumed]
coa L ~ 3000 (MH)
A .1
01
= (costs@91%)xrl'>3+(63%-LF)00'>561 [actual bbl oil consumed]
o l: . - 0 . - J x 12,808 (HH)
~~ere LF is plant load factor, %, in all above equations.
The requirements for limestone scrubbing were determined for a
total standing generating capacity of 109,000 megawatts for the year
1967.
As a matter of interest, fossil fuel-fired generating capacity
of plants greater than 200 megawatts was 146,000 megawatts for the
same year.
The estimation of control costs for implementation by 1977 assumes
that all new plants built after 1967 were without limestone or any other
byproduct
recovery or sulfur throwaway equipment.
Hence, these plants,
included in the industry growth picture through 1977, would require the
same retrofit costs as those plants existing in 1967. No allowance has
been made for attrition of those plants existing in 1967.
The emissions data for particulates and sulfur dioxide are based on
plant-by-plant data from the Federal Power Commission for sulfur and ash
contents of respective fuels.
The emission rate for sulfur is based on
the premise that 95 percent of the sulfur in the fuel is liberated into
the flue gas from a utility station.
The estimate for particulate
emissions is based on an emission factor of 18 pounds of fly ash
generated per 20 pounds of total ash available in the coal.
This is the
performance characteristic in all pulverized coal-fired furnaces for
utility stations.
Emissions of particulates to the atmosphere were
calculated on the assumption of a nationwide collection efficiency
of 78 percent for 1967. The basis for nitrogen oxides
emissions is the Esso Research and Engineering Study conducted for
National Air Pollution Control Administration.
5.
Impact of Nuclear Fuel Generators
As of 1970, one percent of electric utility generation was
produced by nuclear reactors.
Some 120,000 megawatts of light-
water, nuclear reactor, generating capacity will be added during
the 1971-80 period. This compares with the 200,000 megawatt
capacity of fossil fuel-fired power plants. Considering the
delivery lag time of nuclear plants, the high investment for
nuclear reactor plants ($350 per kw versus $200 per kw for coal),
4-26
-------
and the environment problems, acceleration of new nuclear plants
cannot be expected to replace any of the existing or proposed
coal- or oil-fired power plants. Fast breeder reactor technology,
which can utilize uraniu~ concentrates more efficiently than
light-water reactors, is not due to have any significance until
the 1990's.
6.
Impact on the Utility Industry
During the 1960's, the utility industry enjoyed steady fuel
prices.
Through increased fuel conversion efficiency, utilities
were able to produce cheaper electricity.
For example, the
following table shows this decline in the average price per kwh
for three classes of consumers (sales by privately-owned Class A
and B utilities):
Residential, Commercial, Industrial,
Year cents/kwh cents/kwh cents/kwh
1965 2.39 2.18 1.00
1966 2.34 2.13 0.98
1967 2.31 2.11 0.98
1968 2.25 2.07 0.97
1969 2.21 2.06 0.98
Starting in 1967 with the acceleration of general inflation,
increased construction costs and higher interest rates on borrowed
money had an impact on the utilities.
Large schedules for financing
new plant capacity, high debt-to-equity ratios, and
refinancing of
maturing low-interest loans
increased operating costs for the
industry.
The shortage of coal production in 1969 and 1970 raised
general coal prices by 50 percent or better.
Contributing factors
to this shortage were shortage of skilled labor, decreased productiv-
ity at mines because of requirements of the Federal Mine Safety Act,
the pessimistic attitude of the coal mining industry toward mine
expansion as a result of reading too much into trends toward nuclear
reactors, and the depletion of economically minable reserves in the
eastern United States.
Some substitution to residual and crude oil and
natural gas has occurred, but supplies of gas are now so tight in
many areas that any further purchases are not possible.
As a result of all these factors, increased electric rates on
4-27
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the order of 10 to 20 percent have been granted to some companies
in recent months.
It is still too early to document any price trends
on the national average for the years 1970 and 1971.
However, all
forms of energy are expected to rise in price, including natural gas.
It is doubtful that any significant substitution from electricity
to other energy forms will occur.
For an individual model plant (800 to 1000 mw), expenditures
of $30 per kw for air pollution control amount
to 15 percent of
overall plant investment.
The full cost increase of 0.90 mills
per kwh for pollution control compares significantly to the industrv-
wide fuel costs of 2.65 mills per kwh in 1967 and 2.77 mills in
1969. Capital investment ($4.66 billion) in sulfur dioxide control
amounts to 5 percent of total electric utility investment projected
($90 billion) for the 1970-75 period. In this perspective, the
required investment does not represent a significant impact.
7.
Impact on the Consumer
The impact upon the electric po'ver industry of full implementa-
tion would be most severe in the coal competitive regions of the
United States.
In these areas, the average price of a community's
electric bills (a mix of residential, commercial, and industrial)
would increase by 5.8 percent, based on a 1967 price of 1.56 cents
per kilowatt-hour (total electrical revenues divided by kilowatt-
hours sold).
Regions such as California and the Pacific Northwest
would be exempt from this penalty.
Nationwide, the impact of
implementation would call for an increase of 4.3 percent in the
average price of electricity (1.56 cents/kwh).
It is anticipated that utility companies will pass on the full
cost of air pollution control as rate increases.
Based on past
experience, utility companies have obtained increases readily from
State regulatory authorities and the Federal Power Commission
(having jurisdiction over intrastate and interstate utility pricing,
respectively) for such reasons as more costly fuels, increased
plant costs, and increased interest rates.
4-28
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REFERENCES FOR SECTION III
1.
Private communication, Division of Control Systems,
Stationary Sources Pollution Control, Office of Air
Environmental Protection Agency, 1971.
Bureau of
Programs,
2.
"Comprehensive Study of Specified Air Pollution Sources to Assess
the Economic Effects of Air Quality Standards", Research Triangle
Institute, Contract CPA70-60, Prepared for Environmental Protection
Agency, December 1970.
3.
Private communication, Economics and Statistics Division, National
Coal Association, 1971.
4.
Private Communication, Federal Power Commission, 1971.
5.
"Statistics of Privately Owned Electric Utilities in ,the United
States", Class A and B Companies, Federal Power Commission, October
1969.
6.
"Steam Electric Plant Factors, 1970 Edition", National Coal Associ-
ation, November 1970.
7.
"Sulfur Oxide Removal from Power Plant Stack Gas, Use of Limestone
in Wet-Scrubbing Process", Prepared by the Tennessee Valley
Authority for the National Air Pollution Control Administration,
U. S. Department of Health, Education, and Welfare, 1969.
8.
"Control Techniques for Nitrogen
Sources", Publication No. AP-67 ,
Administration, U. S. Department
Harch 1970.
Oxide Emissions from Stationary
National Air Pollution Control
of Health, Education, and Welfare,
9.
Standard and Poor's Industry Survey, Standard and Poor's Corporation,
New York, 1971.
10.
John R. Ehrenfeld et al., Systematic Study of Air Pollution From
Intermediate-Size Fossil-Fuel Combustion Equipment. Contract No.
CPA 22-69-85. Cambridge, Mass: Walden Research Corp., July 1971.
4-29
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IV.
INDUSTRIAL PROCESSES
A.
Introduction
The economic impact of the Clean Air Act of 1967, as amended, on
17 industries or industry groups is presented in this section.
Cover-
age includes plants in operation in 1967 and additional facilities
expected to be functioning by the end of FY 1977.
Industry statistics on the number of sources, capacity, production,
and value of shipments for calendar year 1967 are shown in Table 4-10.
Table 4-11 gives a comparision emission for FY 1967 and FY 1977, with
and without implementation, along with associated costs of control.
These estimates vary, sometimes significantly, from the report of
last year due to revisions of emission factors and to the nationwide
scope of this report.
Table 4-12 presents ratios relating annual abate-
ment control costs to capacity, production, and value of shipments for
faciliti~ operating in FY 1977.
These ratios indicate the general
economic impact of emission control.
For each industrial category, a detailed analysis of the financial
impact of emission controls is presented.
Estimates of the annualized
costs and investments required to achieve compliance are superimposed on
a description of the economic setting, breadth, and unique characteris-
tics of each group.
Where there is sufficient information on size,
operation, and financial variables, a model plant (or plants) is con-
structed to show the potential impact of control costs on company
operations.
Emphasis is placed on the issue of whether the industry
must absorb control costs or whether costs can be passed on as higher
product prices.
This issue is discussed in relation to the competitive
patterns of the affected industry, the distribution of market strength
among sellers and buyers, and the trends of prices, production, and
capacity through FY 1977. When appropriate, expected changes in
product price, sales, company profit, and the number and size of firms
in the industry are presented.
4-30
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,XABLIL-A....l.O,.~...-.",~96 7-SX AX;rSXI~S-.FOR --INDU8X RI ALP ROCE 8S., SOURCES.,-(NATIONAL),
Capaci tyY Production~J Value of Shipments
Emission Number of Unit of (Millions of (Mill ions of (Billions of
Source Sources Measurement Units per Year) Units per Year) Dollars per year)
Asphalt !latching 4,000 tons of paving mixturJ/ 441 216 1.10
Cement 178 barrels 502 369 1. 20
8/ 181 tons 119 93 N/Af.:..I
Coal Cleaning-
Grain: Handling 9,173 bushels;!! 5,110 10,180 N/AY
Milling 2,364 tons 98 49.11 4.83
tons of 2/ 17 14.3 2.70
Gray Iron Foundries 1,730 castings-
Iron and Steel 142 tons of raw steel 165 127 13.30
Kraft (Sulfate) Pulp 116 tons 32.1 23.9 3.60
Lime 209 tons 21.11. 17.97 0.24
Nitric Acid 83 tolUi 8.0 6.12 0.45
Petroleum:
Products and Storage 29,039 barrel,)./ 214 1,873 22.50
Refineries 256 barrels 4,210 3,580 20.30
Phosphate 42 r)../ tons P205 7.0 4.7 0.98
Primary Nonferrous 6/
Metallurgy: Aluminum 24 t 'ms-r; / 3.5 3.3 1. 56
-i:' Copper 19 tons-- 1.63 1.46 1.12
I Lead 6 tons'Q.~ 0.50 0.45 0.13
V,)
I-' Zinc 15 tonsQ 1.56 0.94 0.26
Secondary Nonferrous Metallurgy 55b tons 2.8 2.4 1.48
Sulfuric Acid.2./ 254 tons 38 29 N/Af.:..I
1/
:!:)
Capacity and production are in millions of units (tons, etc.) unless otherwise footnoted.
Capacity is calculated assuming 1,000 operatin!'
:,-s per year.
'}j
Y
Capacity is In million bushels of storage space; production, million bushels of throughput.
Not applicable.
2/
Y
Capacity is in million barrels of gasoline storage space; production, million barrels of gasoline handled.
Production and capacity are given in terms f I
o meta output and production is adjusted to remove effect of a labor strike.
2/
~/
Excludes phosphoric acid plants.
Only 26 percent of coal cleaning plants use processes which lust be controlled.
production is reflected here.
That percentage of industry capacity snd
.2./
Includes smelter acid plants and chamber plants.
-------
TABLE 4-11.
INDUSTRIAL PROCESS SOURCES-- ESTIHATES OF POTENTIAL AND REDUCED
EMISSION LEVELS AND ASSOCIATED COSTS (NATIONAL)
Quantity of Emissionsl/ Associated Emission Control Costs
(Thousands of Tons Contro] Level 01111ions of
per Year) (Percent) uollar1:i)
Sour ce Year Part SOX CO HC NOX Part SOX CO HC NOx lnvest- Annual
ment
Asphalt Batching 1967 243 95
FY77 1,1 /oll 403 95
FY77 1,1].1 56 99 272 63
Cement 1967 813 92
FY77 1,1/0 908 92
FY77 1,1 65 99 89 35
Coal Cleaning 1967 225 58
FY77 1,1/0 3:'2 58
FY77 II 9 98 21 9
Grain: Handling 1967 1,014 28
FY77 11/0 1,430 28
FY77 II 99 95 395 83
Feed 1967 256 42
FY77 II /0 362 42
FY77 1,1 22 95 19
Gray Iron
Foundries 1967 217 3,200 12 18
FY77 11/0 260 3,800 12 18
FY77 II 30 230 90 95 348 126
Iron and Steel 1967 2,310 55
FY77 11/0 1,991 5S
FY77 II 89 98 8:.1 306
Kraft (Sulfate)
Pulp 1967 380 85
FY77 11/0 53h R5
FY77 II d\.I 98 132 40
Lime 1967 393 72
FY77 11/0 60:! 72
FY77 II 32 98 29
Nitric Acid 1967 145 0
FY77 11/0 230 0
FY77 II 25 90 37 14
Petroleum: 1967 1,038 50
Products and FY77 11/0 1,349 50
Storage FY77 II 296 89
Refineries 1967 185 2.310 9,300 153 20 37 20 20
FY77 W /0 21.1 3,010 12,10a 197 20 37 20 20. 378 73
FY77 II 98 21 49 12 f9 100 100 95
Phosphate 1967 260 89
. FY77 11/0 350 89
FY77 1,1 1&0 95 31 15
Primary Nonferrous
Metallurgy:
Aluminum 1967 32 73
FY77 1,1/0 49 7J
FY77 1,1 5 98 923 256
Copper 1967 243 2,580 55 19
FY77 11/0 314 3,335 5~ 19
FY77 II 286 535 59 87 313 10U
Lead 1967 34 185 82 26
FY77 1,1/0 39 213 82 26
FY77 II 26 29 88 90 65 16
Zinc 1967 57 446 93 59
FY77 1,1/0 71 555 93 59
FY77 II 71 138 93 90 41 ]8
Secondary Non-
ferrous
Metallurgy 1967 2. 66
FY77 11/0 34 66
FY77 1,1 6 95 32 9
Sulfuric Acid 1967 25 600 .5 97
FY77 11/0 38 920 .5 97
FY77 II 10 170 88 100 169 39
1/ Emiasiona abbrevisted are: Particulstes (Part), sulfu~oxidea (SO ), carbon monoxide (CO), hydrocsrbons (HC) '
and nitrogen oxides (NO). Blanks in the table indicste th.t emission levels meet the applicable regulation
(Appendix 1) or that emIssions are negligible or do not exi6t.
1/ Estimates without implementation of the Clean Air Act are shown.
1/ Estimates with implementation of the Clean Ai r Act are shown.
y Not available.
4-32
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T 1\13 T_El,----"l 2
11
1977 EXPECTED ANNUAL CONTROL COSTS FOR INDUSTRIAL PROCESS SOURCES RELATIVE TO CAPACITY, PRODUCTION, AND VALUE OF SIIIPMENTS-
(NATIONAL)
Source Totals Annual Cost Ratios
Control
. 2/ Production~/ Value of Cost Cost per Unit Cas t per Unit Cost per
CapacHy-
(Millions (Millions of Shipments (Mi.ll ions of Annual Cap. of Annual Prod. Dollar of
of Units) Units) (Billions of (Dollars per (Dollars per Shipment
Source and Unit of Measuc of Dollars) D()ll.lr~) Un it) Uni t) (Percent)
Asphalt Batching tons of paving mixture1/ 714 357 2.1 b3.0 0.09 0.18 3.0
Cement barrels 572 477 1.6 34.6 0.06 0.07 2.2
Coal Cleaning tons 160 125 N/AY 9.3 0.058 0.074 N/AY
Grain: Handling bushelsY 8,548 14,360 N/AY 83.0 0.006 0.01 N/A~/
Milling tons 98 64.1 6.3 4.0 0.041 0.062 0.1
Gray Iron Foundries tons of 3/ 7.24 3.3
castings- 20.7 17.4 3.8 126.0 6.10
Iron and Steel tons of raw steel 203 163 17.0 306.0 1.51 1.88 1.8
Kraft (Sulfate) Pulp tons 45.3 33.7 5.08 40.0 0.88 1.19 0.8
Lime tons 34.43 29.27 0.41 7.2 0.21 0.25 1.8
Nitric Acid tons 11.6 9.83 N/Af!..1 14.0 1. 21 1,42 N/AY
Petroleum:
.;:-. Products and Storage barre1s~/ 278 2,435 29.25 ~ N/Af!../ N/Af!../ N/AY
I 73.3
w N/AY N/AY N/AY
W Refineries barrels 5,473 4,654 26.39
Phosphate tons P 205 10.0 7.1 1.48 15.0 1.50 2.11 1.0
Primary Nonferrous 44.2 9.4
Metallurgy: Aluminum tons 5.64 5.80 3.36 256.4 43.9
Copper tons 2.12 1.90 2.13 100.0 47.2 52.6 4.7
Lead tons 0.57 0.52 0.15 15.6 27.4 30.0 10.4
Zinc tons 1. 94 1.17 0.32 17.7 9.1 15.1 5.5
Secondary Nonferrous Metallurgy tons 4.10 3.40 2.16 8.7 2.12 2.56 0.4
Sulfuric Acid tons 43 N/AY 39.0 0.91 1.18 N/A2.I
)j Estimated costs for controlling particulate, sulfur oxide, carbon monoxide, hydrocarbon and nitrogen oxide emissions from facilities expected to
be operating in Fiscal Year 1977.
~/
1/
Capacity and production are in millions of units (tons, etc.) per year unless otherwise noted in footnotes.
Capacity is calculated assuming 1,000 operating hours per year.
!!/
2/
Capacity is in million bushels of storage space; production, million bushels of throughput.
Y
Capacity is in million barrels of gasoline and crude oil storage space; production, million barrels of gaso:ine and crude oil handled.
Not applicable.
-------
Several assumptions and approaches underly the analyses.
The
year 1967 was used as the data base for all industry statistics.
All costs are shown in 1970 dollars.
Model plants either depict
industry averages or show a representative distribution of industry
characteristics.
Sales figures for the models are normally generated
by multiplying production by 1970 average product prices.
General
operating and other expenses are based upon industry averages
generated as a percentage of sales.
Investment costs reflect not
only equipment outlays but also expenses related to installation and
start up.
Annualized costs are the summation of three items:
oper-
ating and maintenance, depreciation of the original investment, and
capital costs (such as interest, taxes, and insurance) on the original
investment.
Depreciation was assumed to be straight line over the
life of the control equipment. Unless otherwise specified, the follow-
ing control equipment lives were assumed: scrubbers, 10 years; pre-
cipitators, 15 years; baghouses, 20 years.
to be 10 percent per year unless specified.
Capital charges were assumed.
Along with other financial variables, "cash flows" and "rates of
return" are intermittently presented throughout the discussions when
possible.
For the sake of clarity, cash flow i~ this report is net
earnings plus depreciation and/or depletion.
When compared with control
costs, cash flow gives some indication of the capability of the company
to meet annualized control expenses from internally generated funds.
"Rate of return" is the interest rate which equates cash outflows
(e.g., plant investment) with discounted cash inflows (e.g., yearly
cash flows from operations). Rate of return before control, calculated
for most model plants, shows the return for the plant before any abate-
ment steps are taken.
Rate of return after control is calculated
assuming no product price increases.
Comparison of the two provides a
measure of the effect to be expected on the long run profitability of
the plant if abatement costs were to be absorbed.
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B.
Asphalt Batching
1.
Introduction
a.
Nature of Product and Process
Asphalt concrete is a mixture of crushed stone
aggregate and asphalt cement that is used for paving roads,
driveways, parking lots, etc. In general, the crushed stone
makes up about 95 percent by weight of the mixture. The (
material is transported by truck from the bat ching plant to
the paving site where it is loosely spread while still hot and
then compacted or rolled into a smooth surface.
At the batching plant, the following operations are
performed:
(1) cold aggregate is conveyed from storage bins by
means of a belt and an elevator; (2) the aggregate is heated and
demoisturized in a rotary kiln dryer; (3) the heated aggregate
is conveyed by a bucket elevator to a vibrating screen; (4) the
course and fine fractions are separated and stored in a com-
partmented bin; (5) weighed quantities of the sized aggregate
are blended with hot asphalt and mineral filler in a paddle-type
mixer;
and (6) the hot mix is discharged into trucks for delivery
to the paving site.
b.
Emissions and Cost of Control
The primary air pollution problem in the industry is
the emission of particulates from the rotary dryer.
The dryer
is exhausted by an induced draft fan to remove gases from fuel
combustion and to remove water vapor from the crushed stone.
of the fines in the aggregate are inevitably entrained in the
Some
exhaust.
The type and size distribution of the particulate emissions
vary with rotation rate, air mass velocity, feed rate, and feed
composition.
Secondary sources of particulates include the aggregate
elevators, vibrating screens, storage bins, weigh hopper, mixer,
and transfer points.
It is common practice to combine the dryer
exhaust with the ventlines from the secondary sources into a single
collection and fan system.
Virtually all plants are equipped
4-35
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with cyclone collectors which economically return material to the
process and also preclean the exhaust before it reaches more effi-
cient air pollution control devices.
Particulate emissions from the industry in 1967 were esti-
mated at 243,000 tons. If the 1967 control level of 95 percent
were maintained, emissions would increase to 403,000 tons by FY
1977 .
The assumed process weight regulation could best
be achieved through the installation of high efficiency, yenturi
scrubbers in smaller plants (less than 150 tons per hour capacity) and
of
fabric filters in larger plants (150 tons per hour or greater
capacity) .
This would reduce emissions to 56,000 tons in FY 1977
and would require an investment of $272 million \vith an annual
cost of $63 million in that year.
c.
Scope and Limitations of Analysis
Data for this report were derived from trade associations,
trade journals, Government reports, and financial documents. No
trade association or Government agency tabulates statistical infor-
m,tion for the entire industry and, therefore, information regarding
industry size, production, and capacity should be considered
approximate.
Financial analysis was hampered by the fact that
most firms are small and locally oriented in nature, causing great
variations in operating parameters from firm to firm.
2.
Engineering Basis of the Analysis
As previously noted, the primary air pollution problem in the
industry is the emission of particulates from the rotary dryer.
Secondary sources of particulates include the aggregate elevators,
vibrating screens, storage bins, weigh hopper, mixer, and transfer
points.
Plants usually combine the exhaust from the dryer with
vent lines from the secondary sources into a single fan and collection
system.
Cyclone collectors are normally installed to economically
return fines to the pr~cess.
For this analysis, it was assumed that
all plants are equipped with cyclones which have a removal efficiency
of 70 percent.
Table 4-13 presents a distribution of asphalt batching plants on
the basis of mixer capacity.
This approximate distribution was
derived from knowledge of the mean capacity, the range of the capacities,
4-36
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and the statistical nature of the distribution.
For each size
classification, a calculation was made at the capacity midpoint
of the efficiency required of the secondary collector (downstream
from the cyclone) in order to comply with the process weight standard.
To make this calculation, it was assumed that 45 pounds of particulates
are emitted per ton of product.
Fabric filters and high-energy wet scrubbers have been most
frequently chosen as secondary collectors.
In this analysis, it
was assumed that an efficiency of less than 98 percent could be
achieved through the installation of a venturi scrubber, while an
efficiency in excess of 98 percent would require a fabric filter.
As
Table 4-13 shows, this assumption means that plants with capacities of
less than 150 tons per hour can be adequately controlled with venturi
scrubbers, while plants greater than 150 tons per hour will require
fabric filters for adequate control.
Gas volumes to be treated by the secondary control device were
calculated by assuming that 215 ACFM are required for each ton of
hourly production (see Reference 2).
Installed costs for venturi scrubbers were then determined
based on installed costs versus gas volume relationships developed
by U.S. Dept. of Health, Education, and Welfare (Publication AP-5l,
Figure 6-11). The highest efficiency curve was used for this
application.
Installed costs for fabric filters were determined
from Publication No. AP-5l, Figure 6-20.
The cost curve
representing high temperature synthetic bags was chosen.
It is estimated that there were 4,000 plants operating in
1967 and that 35 percentd these were adequately controlled.
Growth in capacity is expected to average 5.25 percent for the
lO-year period (1967-77). Using these ~igures, it was
calculated that $272 million in investm~t would be required
by 1977 with an annual cost of $63 million in that year.
4-37
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TABLE 4-13.
CONTROL COSTS FOR ASPHALT BATCHING PLANTS
Capacity % Plants Required Efficiency Control Device Investment Annual Cost
(Tons /Hour) (%) ($1000) ($1000)
50-100 20 96.1 Venturi Scrubber 30.0 9.4
100-150 35 97.6 Venturi Scrubber 44.0 13.8
150-200 30 98.3 Fabric Filter 82.0 15.6
200-250 10 98.7 Fabric Filter 105.5 20.0
250-300 5 98.9 Fabric Filter 129.0 24.5
3.
Industry Structure
a.
Characteristics of the Firms
In 1967, the industry was comprised of some 1,300 firms
operating an estimated 4,000 plants.
Approximately one-third of
the firms operated a single plant and most of the remainder fewer
than five plants.
Integration of activities varies widely from firm to
firm.
The following shows how firms are involved in operations
supplemental to asphalt batching:.
Activity
Lays asphalt concrete
Contractor for road construction projects
% Firms Engaged
86
84
Contractor for other construction projects
Operates gravel pit or quarry
55
46
18
18
Produces portland cement concrete
Distributes liquid asphalt
About 75 percent of the plants are permanently installed
and the remainder are portable.
Permanent plants are primarily
located in urban areas where there is a continuing market for new
4-38
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paving and resurfacing work.
in highway paving projects.
Portable plants are usually involved
These plants may be disassembled and
relocated to shorten hauling distances as highway construction
proceeds.
Plant capacities generally fall within the range of 50 to
300 tons per hour with an average capacity of 150 tons per hour.
The
average plant employs four persons.
The trend in recent years has
been toward the construction of larger plants with a greater degree
of automation.
b.
Operating Characteristics
Based on production and capacity figures for a 35 percent
sample of plants, it is estimated that the industry operated at 49
percent of capacity of 1967.
Capacity in this case was based on
the normal maximum plant operation.
Due to the seasonal nature of
the paving business, the average plant operates 150 days per year
at 8 hours per day. Inclement weather, inetficiencies in truck sched-
uling, time consumed in relocating portable plants, and the fact
that the industry operates on a project basis are factors that con-
tribute to the low-operating ratio in this industry.
c.
Resources
The raw materials used in the production of asphalt paving
are generally grouped into three classes:
aggregate, filler, and
asphalt.
Aggregate is the mixture of course mineral material such
as sand, stone, and gravel, which serves as the load-bearing con-
stituent of asphalt paving.
Fine mineral filler consisting of either fly ash, lime-
stone, hydrated lime, or portland cement is added to the mix to fill
spaces between larger aggregate particles.
The proportions of the
above materials employed vary with the grade of asphalt desired
for particular end uses. Asphalt cement (finally added as the bonding
agent) usually constitutes 3 to 7 percent of the mix by weight.
The availability of these resources is important
to the asphalt batching industry. While aggregate and fill
4-39
-------
materials are available almost an~vhere, there is an acute short-
age of asphalt itself, ~n indirect result of current efforts
to control air pollution.
The demand, and consequently the
price, for low-sulfur fuel oil has increased markedly in the
past year since it emits less pollution than coal.
However,
fuel oil competes with asphalt for the last fractions of
crude oil, so an increasing number of suppliers are squeezing
all possible fuel oil out of their crude, leaving little.
or no asphalt.
Many suppliers have curtailed asphalt production
altogether since it is economically unattractive at current
market prices.
While adequate supplies of asphalt are available in the
oil-producing regions--Texas, California, and adjoining States--the
number of asphalt producers on the east coast has declined from eight
to tWD. The Midwest and other regions are also experiencing shortages.
Total national production has fallen below total national demand.
Consequently, steps are being taken to increase import quotas on
both asphalt and asphalt-rich crude oil.
In reaction to the shortage, asphalt prices have risen
sharply across the country.
For the Nation as a whole, the average
price has increased 33 percent in the past year.
The average
price has risen more than 10 percent in California, where no
shortage exists1 but even greater price increases are essential to
induce the production of sufficient asphalt to meet demand. Therefore,
prices of both fuel oil and asphalt are expected to continue to
rise rapidly as the enforcement of air pollution control regulations
continues to increase the demand for fuel oils.
As a result of the shortage, many asphalt batching plants
are being forced to reduce operations or close down completely.
certain areas, highway construction projects are being halted or
In
slowed, and other demands are not being met.
However, after the
shortage is overcome, the consequent increase in asphalt prices
will have little impact on the demand for asphalt paving, as asphalt
4-40
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constitutes only 2.5 percent of the final cost of a highway paving
contract.
4 .
Market
a.
Major Markets
Highway paving accounts for about 70 percent of the hot-
mix asphalt market, parking lot paving accounts for another 24 per-
cent, and airports and private paving make up the remainder. The
interstate highway system, which has expanded rapidly during the
past decade, currently accounts for 15 percent of asphalt paving
consumption. Upon completion of the system, State highway depart-
ments are expected to turn their attention to secondary highway
construction and maintenance which have been deemphasized during
interstate construction.
Thus, the loss of interstate demand should
be partially compensated.
b.
Competitive Products
The only alternative product to asphalt paving is portland
cement.
But it is 20 to 40 percent more costly per mile than asphalt
paving, and consequently accounts for only 10 percent of all highway
mileage.
However, it has superior wear characteristics and thus
has been used extensively--60 percent of the mileage--in the inter-
state highway system.
Cement may further displace asphalt in this
market if the asphalt shortage persists forcing States to contract for
concrete construction.
Cement is also able to compete with asphalt in
the private market when special promotion campaigns are undertaken.
Otherwise, upon completion of the interstate system, there will be
little competition between the two products. .
c.
Competition Among Firms
A major limiting factor in competition between asphalt firms
is the limited radius which a plant can serve due to transportation
costs and the necessity of delivering the asphalt mix while still
hot. Permanent plants cannot generally compete on jobs outside
a radius of 50 miles from the plant. Mobile plants can, of course,
move to the site of major jobs, thus increasing their potential market
4-41
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radius to about 500 miles.
Most highway and commercial projects are contracted on a
competitive bid basis to a general contractor.
lfuile many general high-
way contractors own asphalt batching plants, some subcontract the asphalt
concrete production to another firm, again on a competitive bid basis.
In large urban areas, numerous asphalt batching firms contribute to
aggressive competitive bidding.
However, in small municipalities
served by only one or a small number of firms, there is little competi-
tion except for an occasional large job which warrants an outside
plant moving to the area.
5.
Trends
Since 1961, hot-mix asphalt sales have grown at an annual rate
of 6.5 percent.
The industry experienced two periods of asphalt
shortage in the past 10 years, during which no growth occurred--one
in 1966-67 and the other in 1970-71. The interim years
realized very rapid growth, expanding by 13 percent per year for 1967
to 1970.
As the interstate highway system nears completion, growth is not
expected to exceed 2 percent per year at least through 1975.
More
rapid growth will probably resume in the long run, as the automobile
population continues to grow at over 3 percent per year, requiring addi-
tional highway mileage and replacement of dirt and gravel roads.
6.
Economic Impact of Control Costs
a.
Impact of Plants
"Model" plants have been developed from aggregated Internal
Revenue Service data to depict the financial operations of small,
medium, and large asphalt bat ching plants before and after implementa-
tion of air pollution control. Lack of detailed data on individual
plants made it impossible to determine the compatibility of the data.
However, the aggregated data on model plants presented in Table 4-14
should suffice to indicate the order of magnitude of impact.
Also given in Table 4-14 are the added costs attributable
to air pollution control.
The range of control costs is not great,
4-42
-------
TABLE 4-14.
MODEL ASPI~LT PLANT FINANCIAL ANALYSES
Operating
Characteristics
Small Plant
Before After
Control Control
Medium Plant
Before After
Control Control
Large Plan t
Before After
Control Control
Capacity (tons/hr)
68
194
Plant Investment ($103)
Other Investment ($103)
Control Investment ($103)
78
18
68
78
18
23
134
126
70
134
126
70
56
194
134
96
134
96
94
Net Investment
($103)
96
324
119
196
252
230
Sales ($103)
Cost of Goods Sold
154
88
o
Control Cost
Gross Income
66
54
Administrative Cost
Income Before Tax
12
2
Income Tax
Net Income
10
26
Cash Flows
Control Cost/Ton
1Control Cost (% Sales).!.!
!% Reduction of Income
I
iRate of Return~/
I
IROI
!
20
10
.
~
154
88
7
59
54
5
1
4
22
.26
4.6
60
5
3
474
355
o
119
87
32
6
26
38
17
13
474
355
14
105
87
18
3
15
33
.17
3.0
42
8
6
668
460
o
208
146
62
7
55
82
28
24
668
460
18
190
146
44
5
39
71
.15
2.7
29
16
15
]1
l' Assumes an average selling price of $5.60 per ton FOB plant. Both the price
?nd model plant data are for the year 1969.
I
W As . . f 1
J sumes a remalnlng use u life of 15 years. Fixed investment is written off
pn a straight-line basis at the depreciation rate indicated by the IRS data
jfor each plant size.
!
4-43
-------
radius to about 500 miles.
Most highway and commercial projects are contracted on a
competitive bid basis to a general contractor.
\.Jhile many general high-
way contractors own asphalt batching plants, some subcontract the asphalt
concrete production to another firm, again on a competitive bid basis.
In large urban areas, numerous asphalt batching firms contribute to
aggressive competitive bidding.
However, in small municipalities
served by only one or a small number of firms, there is little competi-
tion except for an occasional large job which warrants an outside
plant moving to the area.
5.
Trends
Since 1961, hot-mix asphalt sales have grown at an annual rate
of 6.5 percent.
The industry experienced two periods of asphalt
shortage in the past 10 years, during which no growth occurred--one
in 1966-67 and the other in 1970-71. The interim years
realized very rapid growth, expanding by 13 percent per year for 1967
to 1970.
As the interstate highway system nears completion, growth is not
expected to exceed 2 percent per year at least through 1975.
More
rapid growth will probably resume in the long run, as the automobile
population continues to grow at over 3 percent per year, requiring addi-
tional highway mileage and replacement of dirt and gravel roads.
6. Economic Impact of Control Costs
a.
Impact of Plants
"Model" plants have been developed from aggregated Internal
Revenue Service data to depict the financial operations of small,
medium, and large asphalt bat ching plants before and after implementa-
tion of air pollution control. Lack of detailed data on individual
plants made it impossible to determine the compatibility of the data.
However, the aggregated data on model plants presented in Table 4-14
should suffice to indicate the order of magnitude of impact.
Also given in Table 4-14 are the added costs attributable
to air pollution control.
The range of control costs is not great,
4-42
-------
TABLE 4-14.
MODEL ASPI~LT PLANT FINANCIAL ANALYSES
Operating
Charac ter is tics
Small Plan t
Before After
Control Control
Medium Plant
Before After
Control Control
l..a rge Plan t
Before After
Control Control
Capacity (tons/hr)
68
68
134
134
194
194
Plant Investment ($103)
Other Investment ($103)
3
Control Investment ($10 )
($103)
Net Investment
78
18
96
78
18
23
119
126
70
196
126
70
56
252
134
96
230
134
96
94
324
Sales ($103)
Cost of Goods Sold
Control Cos t
Gross Income
Administrative Cost
Income Before Tax
Income Tax
Net Income
Cash Flows
Control Cost/Ton
Control Cost (% Sa1es)l/
% Reduction of Income
Rate of Return~/
ROI
154
88
66
54
12
2
10
26
20
10
o
154
88
7
474
355
o
119
87
32
6
26
38
17
13
474
355
14
105
87
18
3
15
33
.17
3.0
42
8
6
1/
r Assumes an average selling price of $5.60 per ton FOB plant.
. and model plant data are for the year 1969.
F/Assumes a remaining useful
, on a straight-line basis at
! for each plant size.
59
54
5
1
4
22
.26
4.6
60
5
3
668
460
o
208
146
62
7
55
82
28
24
668
460
18
190
146
44
5
39
71
.15
2.7
29
16
15
Bo th the price
life of 15 years. Fixed investment is written off
the depreciation rate indicated by the IRS data
4-43
-------
varying only from $0.15 to $0.26 per ton, representing 2.7 to 4.6
percent increases in value of shipments.
Such minimal economies of
scale for larger plants indicate that control costs will affect
plants relatively uniformly.
However, these cost increases will
reduce net profit by 30 percent for large firms and 60 percent for
small firms if costs cannot be passed on in higher prices.
Likewise,
the rate of return would decrease considerably, although it would not
decrease below attractive levels except for small plants.
Due to heavy depreciation charges within the industry, cash
flows are reduced very little.
Since depreciation represents such a
major portion of cash flows, the remaining accounting life of a given
plant is important.
Plants near the end of their accounting lives will
probably be closed and replaced with new plants regardless of size or
ability to pass control cost on.
Conversely, relatively new plants
will probably control and continue to operate because of large cash flows.
The decision to close a plant rests not only on the remaining
accounting life and the required control investment, but on the salvage
value and tax writeoff attainable upon closing the old plant.
Finally,
the internal rate of return on an alternative investment (possibly a
new batching plant) must exceed the rate attainable on the old plant
after control. Such a determination must be made by each old plant con-
sidering closing.
The information necessary to determine the number of
pla?ts which would close or new plants to be built was not available.
However, many plants older than 10 years will probably find it economi~
cally advantageous to close.
b.
Impact on Firms
For firms engaged solely in asphalt batching, the impact would
be identical to the impact on individual plants.
However, most firms
which operate batching plants are involved in general contracting,
portland cement manufacture, petroleum refining, or other diversified
operations. In each case, the impact of air pollution control would
be less than that for an independent batching plant, However, the extent
of impact would vary with the proportion of total revenues and invest-
4-44
-------
ment which asphalt batching plants represented.
c.
Elasticity of Demand and Cost Shifting
The total demand for paving materials is determined by long-
range plans for highway and commercial construction.
Asphalt paving
enjoys a considerable economic advantage over its only close substitute,
concrete.
This economic advantage will be little affected by air
pollution control, as both industries incur control costs of similar
magnitude.
Also, since asphalt concrete constitutes only 20 to 40 per-
cent of highway construction costs, small changes in its price will
probably have little effect on demand.
In view of such relatively inelastic demand, most firms
will be able to pass on the full cost of control.
Firms in more
isolated and less competitive areas will be able to adjust prices regard-
less of their control costs.
In more competitive metropolitan areas,
the price of hot-mix asphalt will probably reflect the average cost of
control for firms within the area.
Only the relatively small plants
would have to absorb a portion of their control costs.
d.
Impact on the Industry
An average price increase for the industry of about $0.17 per
ton (3 percent) is expected.
The small model plant faced with an average
market price increase would have to absorb $0.09 per ton of its control
cost.
While this represents only a 1.6 percent price increase, it
results in a reduction in profits of almost 20 percent.
Such a decline
in profits would not be devastating even for a small firm.
However,
it might reduce the income of a sole proprietor below the level at which
he preferred to live, and induce him to sell the plant to a larger firm.
Although for most firms there will be no reduction in profits
as a result of pollution control, many firms will experience diffi-
culty in acquiring the necessary capital for the control investment
which may be as great as 50 percent of net worth for some individual
plants. Large multiplant firms and plants owned by general contrac-
.
tors, portland cement manufacturers, refineries, and other related
4-45
-------
industries will have little difficulty acquiring capital due to their
diversity and greater financial stability.
However, smaller firms
having only one or two batching plants will encounter considerable
difficulty unless they are very sound financially.
Both the need for capital and the cost of control will
accelerate the trend toward merger and acquisition within the industry.
Few, if any, new plants will close as a result of air pollution control
regulations.
Only those plants near the end of their accounting lives
will close rather than control.
Many of these, however, will be
replaced by new plants, and little displacement of employees will
result.
4-46
-------
REFERENCES FOR SUBSECTION B
"Background Information for the Establishment of National Standards
for Performance for NeVl Sources," Environmental Engineering, 1971.
"Air Pollution Control Practices for Hot-Mix Asphalt Paving Batch
Plants," Journal of the Air Pollution Control Association, Dec. 1969.
1.
2.
3.
4.
National Asphalt Paving Association, private communication.
National Air Pollution Control Administration, "Air Pollutant Emission
Factors," 1970.
5.
Control Techniques for Particulate Air Pollutants,
U.S. Department of Health, Education, ~r.d Welfare,
Control Administration, January 1969.
4-47
Publication No. AP-5l,
National Air Pollution
-------
C.
Cement
1.
Introduction
a.
Nature of Product and Process
Portland cement, which accounts for a?proximately 96
percent of cement production in the United States, is a blend
of various calcareous ~~d argillaceous materials such as chalk,
clay, limestone, and shale.
As the binder in concrete, portland
cement is the most widely used construction material in the United
States and the world.
The four major steps for producing portland cement are:
(1) quarrying raw materials and reducing their size, (2) grinding
and blending these materials to obtain proper composition and
uniformity, (3) heating the materials in a rotary kiln to liberate
carbon dioxide and cause fusion, and (4) fine grinding the
resultant clinker, which is sold in bulk or bagged.
All portland
cement is produced by either a wet or dry process with the chief
difference being whether the raw materials are introduced into the
kiln as a dry mixture or as a wet slurry.
b.
Emissions and Cost of Control
Particulate matter is the primary emission in the manu-
facture of portland cement.
Emission sources include:
(1) raw
material crushing, (2) raw material drying and grinding, (3) kiln
operation, (4) clinker cooling, (5) finish grinding and packaging,
and (6) various other points such as material conveyance and
storage.
Sulfur oxides are also formed from the combustion of
fossil fuels during kiln operations, but these are mostly eliminated
through combination with calcined lime within the kiln.
The raw drying-grinding mill (dry process only), the
rotary kiln, and the clinker cooler are the major points of
emission.
Other sources are already controlled to high degrees
for economical reasons as the collected material is usually returned
to the process. For 1967, the portland cement industry is estimated
to have controlled particulate emissions to an overall level of
91.5 percent.
Emissions from the three processes considered total
an estimated 813,000 tons.
Rotary kilns were controlled to an
4-48
-------
average of 91 perce!lt, raw material dryers to an average of 95 per-
cent and clinker cQolers to an average of 91 percent in 1967.
Projected growth within the cement industry would push
FY 1977 emissions to an estimated 908,000 tons if the 1967
control level were maintained.
With installatioDs of fabric
filters at 99.5 percent efficiency on raw drying mills, clinker
coolers, and dry process kilns, and with installations of electro-
static precipitators at 99 percent efficiency on lvet process
kilns, it is estimated that an overall control level of 99.3
percent could be achieved reducing total emissi~ns to 65,000 tons
by FY 1977.
This would require an investment of $89 million
with an annual cost to the industry of $34.6 million for FY 1977.
c.
Scope and LiIT~tations of Analysis
This analysis uas based on data from Government, trade,
and financial reporting sources.
Financial data were available
for only a limited numbf:r of firms.
~lany firms engage in other
business activities, such as the sale of readymix concrete and
cement blocks, or are parts of conglomerates.
\.Hthout more
detailed information, it was not always possible to estimate
the portion of revenues, costs, profits, or taxes attributable
to cement alone in such firms.
For this and similar reasons, the
relationships assumed for the financial variables should be
considered approximations.
2.
Engineering Basis of Analysis
The three major sources of particulate emissions in a
portland cement plant are the rotary kiln, the clinker
cooler, and (for dry process plants only) the raw material
dryer.
Other sources are normally controlled to high degrees
for recovery of valuable product and are not considered in
this study.
Emission factors for the three processes are
shown in Table 4-15.
Investment and operating cost curves were developed for
each of the processes to be controlled.
(1) For dry process
rotary kilns it was assumed that glass fabric filters would
be used.
Investment data were taken frem Department of Health,
4-49
-------
Education, and Welfare Publication AP-51 and updated to
reflect inflationary effects.
(2) For wet process rotary
kilns it was assumed that electrostatic precipitators would
be used.
Investment costs for wet process kilns were
estimated by assuming a migration velocity of .35 ft/sec and
a gas volume as predicted by a linear regression equation,
by
making use of cost data furnished by a large precipitator
manufacturer. Figure 4-1 shows the resulting cost curve.
Operating and maintenance cost curves for both types of kilns
were estimated by using the assumptions shown in Table 4-16.
(3) The assumed controls for raw material dryers and clinker
coolers were glass fabric filters.
For the clinker cooler
it was further assumed that only the secondary section
would be vented to a control syste~while air from the
primary section would be returned to the kiln.
Investment
cost curves for these two processes were updated from costs
taken from Department of Health, Education, and Welfare
Publication AP-5l.
Operating and maintenance costs were
estimated by using the assumptions given in Table 4-17.
A total cost estimate for all facilities in production in
1967 was now developed by using a plant size frequency distribution
for both wet and dry process plants.
Costs were estimated by
assuming that plants in each size category were controlled
to the degrees shown in Tables 4-18 and 4-19; i.e., each
plant in each frequency range requires an average investment
of 60 percent of new equipment cost.
For clinker coolers,
it was assumed that pre-1960 plants required total new equipment
costs, while plants built after 1960 required no control costs.
Depreciation was assumed to be straight line over 20 years.
Interest expense was estimated to be 7 percent of investment.
A sample calculation for a 2.5 million barrel plant is
shown in Table 4-20.
4-50
-------
TABLE 4-15.
ASSU}ffiD ill~CONTROLLED EMISSION FACTORS
Process
Emissions
Dry Process Kiln plus Clinker Cooler
Dry Process Dryer
Wet Process Kiln plus Clinker Cooler
46 lb/BBL
12 lb/BBL
38 Ib/BBL
TABLE 4-16.
O&M COST ASS~WTIONS FOR KILNS
1.
Operating and Haint~mance Cost Assumptions for Fabric Filters on
Process Kilns
Pressure drop, inches H20
Bag Haterial
Air/Cloth Ratio
Bag Costs, $/bag
Bag Life, mos.
Annual Maintenance Costs, $/ac£rn-yr
Power Costs, $/KWH
Annual Operating Hours
Calculated Total Annual O&M Cost,
$/acfm-yr
5
Fiberglass
1.7
20
18
.30
.012
7200
.455
II.
Operating and Maintenance Cost Assumptions for Precipitators on
Wet Process Kilns
Pressure drop, inches H20
Fan Efficiency, %
Annual Maintenance Cost, $/acfm-yr
Precipitator power density, watts/acfrn
Power Costs, $/KWH
Annual Operating Hours
Calculated Total Annual O&M Cost,
$ / acfm-yr
.75
75
.025
.35
.012
7200
.043
~----
4-51
-------
~
I
\J1
N
900
DESIGN EFFICIE~CY
99.9%
700
BUO
600
500
1100
JOO
:.? ~)f)
KIUl CAPACITY 1{)3 BEL PER DAY
ll)U
2
3
4
5
6
7
R
9
10
11
12
Figure 4.1.
Estimated Electrostatic Precipitator Costs for Wet Process Kilns.
-------
TABLE 4~17
O&M COST ASSUMPTIONS FOR COOLERS AND DRYERS
Pressure drop, inches H20
Air/Cloth atio
Bag Material
Bag Cost, $/bag
Bag Life, mos.
Annual Maintenance Cost, $/acfm-yr
Baghouse Air/Cloth Ratio
Power Costs, $/KWH
Annual Operating Hours
Calculated Total Annual O&M Cost, $/acfm-yr
4
1.7
Fiberglass
16.50
24
.24
1.7
.012
7200
.361
TABLE 4-18
1967 CONTROL LEVEL AND REQUIRED INVESTMENT FOR ROTARY KILNS
% of Total
No. of Plants
On Kiln Emissions
%
Required Investment
as a % of New
Equipment Cost
20
10
10
10
10
40
. 99
.97-99.5
95-97
93-95
90-93
75-90
o
20
40
60
80
100
4-53
-------
TABLE 4-19
1967 CONTROL LEVEL AND REQUIRED INVESTMENT FOR RAW DRYERS
% of Total
Control Efficiency
On Kiln Emissions
%
Required Investment
% of New'
Equipment Cost
50
50
96-98
90-96
40
80
TABLE 4-20
SAMPLE COST CALCULATION FOR A MODEL 2. 5-MILLION-BARREL PLANT WET OR DRY
Plant
Source
Control
Device
Total
Investment
Total Annualized
Cost**
Process
Kiln
Raw Dryer
Cooler
Fabric Filter
Fabric Filter
Fabric Filter
$552,000
60,000
95,000
$707,000*
$181,200
16,200
46 , 400
$243,800*
\.J'et Process
Kiln
Cooler
E. Prec.
Fabric Filter
$565,000
95,000
$660,000*
$ 79,800
46,400
$126,200*
*Based upon the average degrees of control shown in Tables 4-18 and 4-19,
60 percent of these costs were incorporated into the total cost estimates
for the industry.
**Includes operating and maintenance, depreciation, and interest.
No costs were allocated to cement plants built between
. .
1968 and 1971. This can be rationalized by considering that
virtually all new facilities established between 1960 and 1967
were well controlled for various reasons--production efficiency,
occupational health, State and local ordinances, and company
concern for the community.
Such industry self-standards
4-54
-------
were assumed to continue, and no costs were attributable to
the Clean Air Act, as amended.
For plants to be built during 1972-76, compliance with
Federal standards of performance for new sources would be
required.
To meet these standards, new wet process plants
only would have to switch from precipitator to baghouse controls
on their kilns. The net cost difference (baghouse control costs -
precipitator control costs) was allocated to two new wet process
plants estimated to begin production in each of the years
1972-76.
3. Industry Structure
a.
Characteristics of the Firms
The cement industry is estimated to have 58 firms and
178 plants in the United States in 1967.
Approximately 45 percent
of the firms operated more than one plant, and approximately half
of those firms had capacities of over 10 million barrels of cement
per year.
In recent years there has been a significant increase
in the rate of integration, mergers, and diversification among
firms to reduce their dependence on the cyclical cement and
construction business.
Cement plants in recent years have added large kilns,
computerized their operations, and improved integration of equipment
to increase operating efficiencies. The range of capacities for
all plants listed in operation in 1967 was from 0.5 to 16 million
barrels per year, with the.average plant having a capacity of
approximately 2.5 million barrels per year.
b.
Operating Characteristics
The United States capacity for the cement industry was
502 million barrels in 1967.
With production at 369 million
barrels, the industry operated at 73.5 percent of capacity.
Operation at 85 to 90 percent tends to produce maximum profits,
but the industry has operated between 70 and 80 percent of capacity
over the past 10 years and has been faced with a chronic excess
capacity.
4-55
-------
c.
Resources
The raw materials used in manufacturing cement are
abundant and widely dispersed throughout the country, and material
costs are stable because most companies own their sources and have
ample reserves.
However, the rising costs of fuel, labor,
and transportation, the other major cost variables, in recent
years have coupled with an inability to raise prices proportionately
and accounted for the generally below-average profit of this industry.
Labor accounts for approximately 20 percent of total cost.
Producers have tried to reduce labor costs by switching to higher
capacity equipment combined with automated computerized controls.
Although output has regularly increased, the number of employees,
particularly production workers, has steadily decreased. As of
1967 the cement industry employed 32,400 people, down from 39,400
in
1960.
4.
Market
a.
Distribution
Since raw materials for cement production are widely
distributed throughout the country, cement plants generally locate
close to major markets. Normally, cement is not shipped more than
200 to 300 miles from the plant, because transportation costs tend
to price a firm out of more distant markets.
Cement sales are historically related to construction
activity; therefore, the performance of the cement industry will be
set by the general performance of the construction industry.
Cement purchases represent about 1 percent of the dollar inputs
of the construction industry, based on the 1963 input-output
relationships.
for 1967 was:
The distribution of cement sales by purchasers
Ready-mixed concrete producers
Concrete product manufacturers
60%
13%
10%
Highway contractors
Building materials dealers
Other contractors
8%
Miscellaneous users (including Government)
5%
4%
4-56
-------
b.
Competition
Portland cement is a standardized product; thus competition
among sellers depends on small price differentials within a clearly
defined price pattern.
Most customers can choose among a number
of cement producers, and price shading and partial freight absorption
by the producers may be necessary to clinch a sale. This competitive
pressure has caused many firms to close their less efficient plants
or to modernize them in order to maintain profits.
External competition in general does not cause extensive
pressures' (see Asphalt Batching--Competitive Products). However,
for some uses (building and structural materials), the consumer
has considerable choice, and cement does compete with brick, steel,
and aluminum. Foreign trade has never assumed much national
importance.
Imports and exports of cement account for less than
5 percent of the United States market and are significant only in
markets on the Atlantic Coast and the Canadian border.
5.
Trends
a.
Capacity and Production
For over a decade the cement industry has been plagued with
overcapacity.
However, producers have begun to achieve a better
operating ratio and this is expected to continue through the
seventies.
For the next five years, net capacity should grow at a
rate of I to 2 percent per year.
Production and shipments have been increasing on an average
of 2.2 percent yearly. 1910 was a discouraging year--actual shipments
decreased 5 percent to 388 million barrels from the record 1969
total of 407.5 million barrels.
Prospects look better, and most
companies are beginning to report optimism as construction activity
increases.
Growth of both production and shipments from the cement
industry over the next 5 years should approximate 3 percent per
year.
b.
Price, Sales, and Profits
Prices declined slowly from a 1961 average level of $3.35
4-57
-------
per barrel at the mill to $3.05 per barrel in 1966 but have since
risen gradually to $3.25 in 1970. Less than optimum operating
ratios, a slowly growing market) and competition with other building
materials will probably keep prices rising at a R1~J ~~~e through
1977. Profits are expected to show improvement, and prospects for
1972 and later look reasonably optimistic.
6. Economic Impact of Control Costs
a.
Industry Composite
Plants built since 1960 have, almost without exception,
been equipped with high efficiency control equipment. It is the
older plants, therefore, that will feel the greatest effects of
the costs for air pollution control.
It is estimated that by 1967
the portland cement industry had already invested approximately
$50 million in equipment for control of kilns, raw mills, and
clinker coolers and was experiencing an annual cost of $18 million.
b.
Impact on a Plant
The impact of the additional cost of air pollution control
is developed using "model" plants, constructed to represent typical
operating patterns. The plants described (Table 4-21) do not actually
exist~ but are based on average characteristics within the industry.
The relationships shown in Table 4-21 indicate
the
magnitude of air pollution control costs for both a wet and dry
process "mouel" plant of average capacity.
The "model" assumes
no preexisting-partial control. Therefore, full costs are shown.
These cost figures indicate the impact which may be expected for
sing1e-p1ant firms. The above costs have a~so been calculated
without giving credit for recovered materials. Such an allowance
is difficult to estimate, but should, in the normal case, produce
some savings.
c.
Impact on the Firm
The majority of cement manufacturers are conglomerates
in the building materials industry, deriving income from broad
product lines including concrete blocks, piping, wallboard, and
related items.
Pollution control costs will hamper earnings, but
the effect will be diluted for most firms because of their
diversification and a brighter outlook for the whole industry.
4-58
-------
TABLE 4-21.
BASIC DESCRIPTIONS AND INCOME STATE}lliNTS
FOR MODEL CEMENT PLANTS
"Model" Plants (Wet and Dry Process)
Capacity (Thousands of BBL per year)
Kilns (Number and Size)
Plant Construction Cost, Without Control, 1967
2,500
1-520 ft.
$16.7 mil.
Production (Thousands of BBL per year)
Average Mill Price per BBL
2,000
$ 3.25
$0.660 mil.
$0.126 mil.
$0.707 mil.
$0.244 mil.
Control Investment, Wet Process
Annualized Control Cost, Wet Process
Control Investment, Dry Process
Annualized Control Cost, Dry Process
Income Statement
(Thousands of Dollars)
Without Control With Con trol With Control
Wet and Dry Dry Process Wet Process
Sales $6,500 $6,500 $6,500
Cost of Goods Sold 5,543 5,543 5,543
Added Control Cost 0 244 126
Net Income Before Tax 957 713 831
Income Tax 431 321 374
Net Earnings 526 392 457
Cash Flow 1,194 1,095 1 , 158
Net Earnings/BBL $0.263 $0.196 $0.229
Cash Flow/BBL 0.597 0.548 0.579
Control Cost/BBL 0 0.122 0.063
Rate of Return 5.08% 3.34% 4.40%
4-59
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Although capital requirements are increased roughly 5 to 10
percent per new plant installation due to particulate control~
it appears that the capability of most firms to raise necessary
capital has not diminished. Most firms have continually invested
substantial amounts of money in modernizing and replacing outmoded
facilities~ and they should be able to continue to do so in the
future.
Demand Elasticity and Cost Shifting
To the extent that demand for cement is derived from the
demand for public and private construction~ which is not highly
d.
elastic with regard to price, the overall demand for cement would
not be very sensitive to small price changes. In recent years
cement has had a fairly advantageous price position relative to
competing building materials, and price increases for cement and
cement products may effect substitution somewhat.
However~ cement
is a basic~ unique product, and the cement industry should lose
little of its market in the construction area, assuming the added
control costs are passed on.
Within the industry, an attempt by some firms to raise
prices as a means of shifting control costs would almost certainly
lead other cement firms to move into the market.
The market for
anyone firm is usually small geographically. Selective price
increases in some local markets will encourage large firms to expand
their selling radii.
For the past decade, demand for cement has fallen short
of supply. Competition for sales has been stiff, prices have been
low, and consequently air pollution control costs have generally
been absorbed by the industry.
For the future~ however, demand is
expected to increase~ and prices should rise.
Average control cost per barrel amounts to $.07~ indicating
a price increase of 2.2 percent based upon an existing price of
$3.25 per barrel. With a favorable outlook, it is expected that by
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1977 the cement industry in general should be able to shift most
of this control cost into product prices.
e.
Effect on Industry
Many individual plants are still obsolete from both an
operating and a pollution point of view. }ffiny of the older plants
are estimated to have labor costs per barrel 3 times that of the
newer (usually computerized) mills. Strict enforcement of pollution
legislation and regulations could cause closings in the years
immediately ahead.
Pollution control has proceeded at a rapid rate within
the industry during the past several years. 1970 set an all-
time record when at least 17 precipitators and 7 baghouses
were installed, most of them on kilns.
There was also a sharp
increase in the number of smaller collectors added.
These
expenditures are purely costs of production and do affect earnings,
but in no case does it appear that these costs alone have caused or
will cause a firm to fail.
The cement industry has made considerable progress in
combatting several of its major handicaps. There should be an
appreciable increase in shipments in the immediate future.
Price
increases made early in 1970 held up fairly well throughout the
country. Overcapacity has been lessening and there should be good
improvement in the production/capacity ratio. Pollution control,
then, may hold down industry growth and profits to some extent,
but the effect is expected to be small.
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REFERENCES FOR SUBSECTION C
1.
Air Pollution Emission Factors, Preliminary Document, U.S.
Environmental Protection Agency, April 1971.
Control Techniques for Particulate Air Pollutants, Publication
No. AP-51, U.S. Department of Health, Education, and Welfare,
Public Health Service, Environmental Health Service, January
1969.
2.
3.
"Cement Capacity in North America,u Rock Products, Vol. 72, No.5,
May 1969, pp. 49-54.
National Emission Standards Study, U.S. Department of Health,
Education, and Welfare, Public Health Service, National
Air Pollution Control Administration, Harch 1970.
4.
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D.
Coal Cleaning
1.
Introduction
a.
Nature of Product and Process
Coal cleaning removes undesirable materials such as
sulfur compounds, dirt, clay, rock, shale, and other inorganic
impurities from raw, mine-run, bituminous and anthracite coal.
Cleaning improves the quality of the coal by reducing ash and
sulfur content and increases the Btu output per pound of
coal.
or water.
Coal cleaning may be accomplished by washing with air
Air washing is generally done Ul pneumatic cleaners.
Wet washing techniques sometimes use thermal driers to decrease
the moisture content of the final product.
Approximately 7 percent
of the coal cleaned in the-United States is produced in pneumatic
cleaners; the remaining 93 percent is cleaned by wet washing.
Approximately 21 percent of the wet washed coal is dried in
thermal driers--predominately the flash or fluidized-bed type.
b.
Emissions and Cost of Control
Particulates in the form of dust are the major emission
from coal cleaning plants. Emissions result from handling,
cleaning, and drying operations. The major emission sources
are the thermal driers and pneumatic cleaners.
Available data on the current level of control indicate
that 87 percent of the thermal coal driers and 16 percent of the
pneumatic cleaners are controlled at an efficiency of 80 percent,
resulting in a composite control level of 58 percent for the
industry.
At this control level, it was estimated that 1967
emissions totaled 225,000 tons. If that level were maintained
through 1977, the estimated total would be 342,000 tons. With the
application of venturi scrubbers to thermal driers and pneumatic
cleaners, it is estimated that an overall control level of 98.4
percent would reduce 1977 emission to 9,300 tons.
Because of the coal dust content of the off-gases from coal
cleaning, a fire and explosion hazard exists.
For these reasons,
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wet scrubbers rather than
Venturi scrubbers of 20-,
for fluidized-bed driers,
baghouses are the preferred control devices.
15-, and 10-inch pressure drops were assumed
flash driers, and pneumatic cleaners,
respectively.
Due to the sulfur content of the particles collected,
it was assumed that these scrubbers would be of stainless steel
construction.
With these assumptions, it was estimated that an
investment of $21 million would be required by 1977 with annual
costs of $9.3 million.
c.
Scope and Limitations of Analysis
Although there is a relatively large number o£ coal
cleaning plants in the United States, data on plant locations,
~apacities, and production are available.
However, it was not
possible to determine the coal cleaning process used in each plant.
For this reason, cleaning plants were grouped according to size,
average values were applied to production and capacity, and control
costs were based on model plants for each size range. Financial
and market data for the industry were fairly complete.
Engineering Basis of Analysis
Coal is cleaned by both wet and dry methods. In this analysis only
the three predominant processes within the coal cleaning industry were
considered: flash and fluidized-bed thermal driers (£or coal cleaned
2.
by wet methods), and pneumatic cleaners.
These three processes are
significant sources of particulate emissions mostly in the form of coal
dust.
Uncontrolled emission rates from these three processes are
shown in Table 4-22.
Available data on the current level of control show that 87
percent of both types of thermal driers and 16 percent of pneumatic
cleaners are controlled at an efficiency of 80 percent. Almost all
pneumatic cleaners and 50 percent of the thermal driers are equipped
with cyclones, 49 percent of the thermal driers have cyclones plus
low energy scrubbers, and I percent of the thermal driers have cyclones
plus high energy scrubbers.
The composite level of control in 1967 was
estimated to be about 58 percent.
To comply with the process weight standard and an opacity regulation,
it was estimated that flash driers, fluidized-bed driers, and pneumatic
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cleaners would have to be controlled at efficiencies of 99 percent,
99 percent, and 97 percent, respectively. These efficiencies are
based on a grain loading requirement of 0.03 grains per standard
cubic foot of exit gas.
Due to fire and explosion hazards of off-gases from coal cleaning,
wet cleaning devices are the preferred control devices.
For this
study, venturi scrubbers were assumed for each of the cleaning pro-
cesses.
Estimated gas volumes and assumed controls for the processes
are shown in Table 4-23.
With the assumptions in Table 4-23 and the cost curves shown
in Figures 4-11 and 4-12 (Subsection L, Phosphate Industry), investment
cost curves for the three processes were developed.
Installed costs
were taken at 250 percent. of the equipment costs for the three
processes.
size.
Table 4-24 shows investment costs as a function of plant
Operating costs for the assumed control devices were estimated
by assuming that the annual operating time for the equipment would
be 3750 hours per year (2 shifts per day, 7.5 effective hours per
shift, 5 days per week, and 50 weeks per year). Total annual
operating costs, including capital charges are shown in Table 4-24.
In order to make a national estimate of control costs for coal
cleaning it was assumed that all existing high-energy scrubbers were
placed in service after 1967.
Thus the cost estimate given represents
the total cost to the industry.
A national cost estimate was determined by grouping all plants
into size categories according to production capacity. By knowing
the total number of plants and total production capacity for each
size category, a model plant of average size was determined.
Cost
estimates for each size category were then made by assuming that 7.1
percent of the plants used pneumatic methods with the remaining plants
using wet wash methods.
It was further assumed that 21 percent of
the wet cleaning plants made use of thermal driers with 56.5 percent
of the driers being of the flash type and the remaining 43.5 percent
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TABLE 4-22
UNCONTROLLED PARTICULATE EMISSION RATES
FROM COAL CLEANING PROCESSES
Process
Flash drier
Fluidized-bed drier
Pneumatic Cleaner
Uncontrolled Emissions
(lb/ton coal feed)
16
20
3
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TABLE 4-23
ESTIMATED GAS DATA AND SELECTED CONTROLS
Initial Final
Temp. To Prod. Prod. Selected
Collector Moisture Moisture Gas Volume Control
Process of % % acfm/ton per hour Equipment
Flash Drier 250°F 10.5 2.8 576 15" W.G. Venturi
Fluidized-bed
Drier 159 of 10.5 2.8 480 20" W.G. Venturi
Pneumatic
Cleaner Ambient N.A. N.A. 357 10" W. G. Venturi
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TABLE 4-24
COST REQUIREMENTS ($1000'8) FOR THREE COAL CLEANING PROCESSES BY PLANT SIZE
Plant Capacity, Fluidized Flash Pneumatic
Tons Pe r Hour Bed Driers Driers Cleaners
Investment Annual Investment Annual Investment Annual
40 34.0 16.8 37.0 17.0 28.0 10.1
100 57.0 35.0 62.0 36.4 50.0 21.5
200 140.0 73.0 160.0 77.0 74.0 36.8
'-"
500 275.0 145.0 330.0 153.0 220.0 93.0
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being of the fluidized-bed type.
The total cost estimate was then
determined by summing the costs for each size category and adding
costs due to growth between 1967 and 1977.
3.
Industry Structures
a.
Characteristics of the Firms
Coal cleaning is an integral part of the coal-mining
industry. Although currently there are approximately 5,300 active
coal mines controlled by approximately 3,800 firms, the majority
are small operators.
During recent years, the trend has been to .
larger mines and consolidation of companies into relatively large
groupings of mines to effect greater efficiencies in management,
mechanized operation, and marketing. The concentration of industry
production in the largest operating groups can be seen in Table 4-25.
In 1967, the coal industry produced 553 million tons of coal having
a value of shipments of $2.6 billion.
TABLE 4-25.
NATIONAL PRODUCTION OF LARGER COAL FIRMS
Operating Groups
largest 50
largest 15
largest 2
Percent
of National Production
69
52
22
Generally only the larger mines and operating groups under-
take coal cleaning.
Consolidation of the production from one large
mine or a group of neighboring mines into one large cleaning plant
is so prevalent that the 471 plan~s which existed .in 1967 processed
81 percent of all raw coal mined. (The Minerals Yearbook for 1967
reports the production of 334 million tons of cleaned coal or 62.3
percent of the total tonnage mined. However, 81 percent of all raw
coal that underwent cleaning yielded 17.8 percent refuse.) The distri-
bution of outputs indicates that the largest plants again account for
a disproportionate share of total output (Table 4-26).
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TABLE 4-26.
SIZE DISTRIBUTION OF COAL CLEANING PLANTS
Plant Output Range Percent of Percent of National
Tons/Year All Plants Production
>1,500,000 7 30
500,000-1,500,000 23 39
100,000-500,000 50 27
<100,000 20 4
Most of the thousands of small mines and mining companies
which produce less than 100,000 tons per year undertake little or
no coal cleaning. At most they may sort coal by size, but frequently
it is sold "mine run" or unsorted.
b.
Resources
About two-thirds of the U.S. coal reserves are low sulfur.
Unfortunately, less than 10 percent of the known reserves of low sulfur
coal lie east of the Mississippi, and a large portion of that
is eat:m? l
-------
TABLE 4-27.
MAJOR MARKETS FOR COAL
Market Sector
% of Total
Coal Demand
Coal as % of Sector
Value of Shipments
Electric Utilities
Steel
59
19
4
35
4.5
Chemicals
Pulp and Paper
Cement
3
1
4
10
<1
<1
5.5
Other Domestic Sectors
Exports
Total
100
The largest and. fastest growing market for coal is the
electric utility industry.
The electric industry utilizes over half
of the coal production, and coal accounts for almost 35 percent of
the value of the electric power produced.
The second largest market,
steel, utilizes 19 percent of coal production, but coal comprises
only 4.5 percent of the value of steel production.
In only one other
major market does coal comprise more than 5 percent of the value of
shipments--cement industry--where about 5.5 percent of the input
is coal.
Coal is essential to production in both the electric power
and steel industries to such an extent that many firms in these
industries own coal companies to provide their supplies. Long-term
contracts, some as long as 20 years, are also used for this purpose.
b.
Competitive Fuels
As the basic uses of coal are for heat and power, it has
faced competition in all of its markets from other energy resources.
Principal among the competitive energy resources are fuel oil,
natural gas, and nuclear power.
In large-volume commercial markets
coal has to compete intensively on the basis of price, efficiency
in utilization, and convenience.
Despite a continued increase in the demand for coal, its
share of the total energy market has declined substantially reflecting
the increasing interchangeability among energy sources.
Recent air
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pollution regulations requiring the use of low sulfur fuels have
accelerated the utilization of both natural gas and low sulfur fuel
oils, especially by most small users who cannot employ stack gas
cleaning methods. However, the rapidly rising cost of these alterna-
tive fuels, their limited supply and the high cost of conversion are
expected to restrict further growth by these fuels.
Nuclear power generation has the greatest potential for pro-
viding low cost electrical energy in the future.
At this time,
however, nuclear power contributes less than 1 percent of the
Nation's electric generating capacity.
The extent of utilization of alternative fuels varies greatly
by region.
The region east of the Mississippi accounts for 80 per-
cent of all coal consumptions, whereas, the Southwest and Pacific
coast regions produce negligible amounts of coal and rely almost
entirely on natural gas or oil. West North Central States produce
and consume small amounts of coal, with over half of their consumption
being imported from the Eastern region.
c.
Competition Among Sellers
The concentration of an industry's output in a few large firms
tends to create an oligopolistic market where individual firms
can influence market price.
Firms in such industries m~y either
consciously collude on price levels or follow the price levels
established by one or more leading firms or trade associations in
the industry.
Failure of such overt or tacit price agree'1ents fre-
quently leads to open price warfare during periods of slack demand,
driving prices down to unprofitable levels.
The coal industry to a large degree faces an oligopolistic
market in which competing firms face a kinked demand curve. Small
upward price changes generally result in large tonnage shifts away
from the firm that is raising prices. Below the going price, a
firm's demand curve is inelastic; that is, lower price offers are
met by competitors anxious to retain their market shares. The
industry has largely overcome its price-cutting practices of the
fifties and tends, within each regional market, to conform to
price levels established by the major producers or associations.
4-72
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However, the sizeable number of large firms and many competitive
small firms within the industry insure a considerable degree of
competition within the industry. The bargaining strength of
industrial and utility consumers as well as the availability
alternative fuels lends further competition to the market.
large
of
5.
Trends
a.
Price Trends
Rising costs of labor and materials, largely compensated
by increasing productivity during the late fifties and early sixties,
resulted in an actual decline in the price of coal.
By 1967,
expanded utilization of continuous mining and mechanical loading
in underground mines, and increased application of surface mining
had increased output per man-day from 6.8 tons in 1950 to 19.2 tons.
However, no further breakthroughs in technology are expected which
would enable productivity to keep pace with increases in costs.
In fact, the average price of coal reversed its downtrend in 1963
and had risen from $4.39 per ton to $6.20 in 1970.
The most significant factor affecting future coal prices
is the Mine Health and Safety Act of 1969, whereby mines can be
closed down if they do not comply with safety standards.
The
imposed standards will not only require considerable investments
in safety equipment and supplies but will require far more rigid
operating practices, which will result in reduced productivity,
at least in the short run.
Coal prices are expected to rise by $1.50
to $2.50 per ton as a direct result of compliance with the new
regulations.
On the basis of these mine safety costs and projections
of current trends in labor, material, productivity, and other cost
factors, the price per ton of coal in the year 1980 is expected
to be '$9.55 compared to $6.20 in 1970.
b.
Demand Growth Trends
The demand for coal has been projected by the Bureau of
Mines through the year 2000 to reflect the range of possible
growth rates for each market sector.
The range of compound annual
growth rates for coal demand is from 3 to 5.3 percent. The high
demand forecast reflects the production of large volumes of
synthetic gas from coal, the solution of air pollution problems
4-73
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related to coal burning, and severe limitations on the supplies
of alternative fuels. None of these assumptions applies to the
immediate future. Instead, the role for coal is likely to be
curtailed during the next 5 years by sulfur content restrictions.
Replacement of high sulfur coal with low sulfur coal from western
mines will require new mine developments and the expansion of coal
transportation facilities.
Fuel costs, even to midwestern
utilities, will increase substantially. Other approaches to the
clean utilization of coal, gasification and stack-gas cleaning
are now being developed, but are at least 5 to 10 years from
widespread commercial applications. The lower growth forecast
is theref?re more relevant to the conditions of the time period
through FY 1977.
c.
Production Trends
To meet a 3 percent annual growth rate in demand, the
coal industry would have to increase production to 610 million
tons by 1977. At the 1970 average price of $6.26 per ton, the
value of shipments would be $3.8 billion.
Capacity will have to be increased at an even faster
rate than demand growth since requirements for low sulfur coal
have significantly reduced the available productive capacity and
will in time precipitate further reductions by effectively closing
high sulfur mines as regulations become more widespread.
Coal desulfurization through extensive cleaning may be
more widely applied to reduce the sulfur content of coal from
existing mines and to thereby retain their productive capacities.
However, desulfurization is limited to those coals which are of
suffi~iently low sulfur content «1.5 percent) and high washability
to be cleaned below the 1 percent sulfur level. Less limited
cleaning techniques have yet to be developed. Only after commercial
developrent of stack-gas cleaning devices will many high sulfur
coal mines again be productive.
In the short run, development
of new low sulfur coal reserves is essential.
More conventional coal cleaning practices will continue
to be employed due to the economic benefits to be derived through
. - . .
increasing the Btu content of coal. The percentage of coal
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cleaned has declined since 1965 from 63.7 to 59.7 percent in 1969,
and yet the absolute tonnage of raw coal undergoing cleaning has
not declined significantly. Whether the recent downtrend represents
a reversal of the long-term trend of expanding coal cleaning or
whether it is merely a short-term adjustment is uncertain.
Therefore,
for purposes of this analysis, it is ass umed that coal cleaning
will account for approximately a constant share of total coal
production.
Because of the trend of consolidation in the industry,
coal cleaning will be carried out by fewer but larger plants.
The total number of coal cleaning plants has declined from 535
in 1960 to 435 in 1968, while the annual tonnage of coal cleaned
increased from 270 to 335 million short tons.
6.
Economic Impact of Control Costs
a.
Elasticity of Demand and Cost Shifting
The demand for coal is derived from the demand for the
end products in which it is used.
As a result, changes in coal
prices have little effect on the demand for coal. The extent this
relatively inelasticity prevails depends on the markets under
consideration.
Demand is less price-inelastic in utility markets
than in manufacturing industries where coal costs represent a
smaller percentage of total production costs.
Cross elasticities
among alternative fuels are moderately high, but they are modified
by the increasing scarcity of natural gas and fuel oils, and by
contract arrangements that distort the picture.
b.
Impact on the Industry
Control costs are incurred by only 28 percent of all coal
cleaning plants--those using pneumatic cleaning or thermal drying.
Also, since coal cleaning is undertaken predominately by large
mines and consolidated corporations, the many small mines and
mining companies within the industry are unaffected.
The average control cost per ton of coal is only 7.4 cents
or 1.2 percent of the average 1970 market price of $6.20 per ton.
This is insignificant compared to the cost increase associated with
the Mine Safety Act, and is less than the average annual increase
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in labor costs.
The coal industry should be able to easily pass
on these additional costs, especially in view of the relatively
inelastic total demand for coal.
Even the relative competitive position of firms should
be little affected, as control costs are only 7 and 12 cents per
ton for the largest and smallest size plants, respectively. Large
plants realize some economies of scale in air pollution control
costs, but the differential will have little impact on the trend
toward fewer and larger cleaning plants.
The investment required to open a new optimum size mine
is $10 to $20 million. The requirement of an additional investment
of $200,000 for control equipment will hardly inhibit the develop-
ment of new mining capacity.
Of far greater significance to the coal industry_are the
recent restrictions imposed by many States on sulfur content of
fuels.
In such States consumers of high sulfur coal will find it
necessary to switch to alternative low sulfur fuels until stack-gas
cleaning can be employed. The markets of many high sulfur coal
mines will thereby be restricted or even eliminated, forcing them
to close.
Many intermediate sulfur coal mines will have to implement
more extensive and costly coal cleaning technologies to desulfurize
their coal sufficiently.
Since existing low sulfur mines and coal
cleaning technology cannot meet the growing demand for low sulfur
coals, the restriction of supply will result in higher prices of
coal and consequently greater profi ts for surviving mines.
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10.
11.
12.
13.
REFERENCES FOR SUBSECTION D
1.
E. Northcott, "Dust Abatement of Bird Coal", Mining Congress Journal,
(Nov. 1967), pp. 29-34; 36.
2.
Bituminous Coal and Lignite, Mineral Facts and Problems, Bureau of
Mines Bulletin 650, 1970.
3.
Coal-Bituminous and Lignite, Minerals Yearbook, Bureau of the Census,
U. S. Department of Commerce, 1960-1969.
4.
Corey, Richard C., "Air Pollution Research in Relation to Coal's
Future in the Electric Energy Market", Combustion, April 1968, pp. 21-
29.
5.
Bituminous Coal Facts 1960, National Coal Association, Washington, D. C.
6.
futuser, L. G. and Potter, .R. F., "More Escalation Seen for Coal Costs~',
Eiect'rIcal~WorId-;August Is, -1970,.- pp.' 45-48. - ..
7.
Dole, Hollis M., "America's Energy Needs and Resources", Department of
the Interior, News Release, January 13, 1971.
8.
Moyer, Reed, Competition in the Midwestern Coal Industry, Harvard
University Press, Cambridge, Massachusetts.
9.
Broderich, Grace N., Supply and Demand for Energy in the United States
by States and Regions, 1960 and 1965, Part 1. Coal, Bureau of Mines,
Washington, D. C. pp. 1-21.
Frankel, Richard J., "Economic Impact of Air Pollution Control on Coal
Preparation", Mining Congress Journal, October 1968, pp. 56-63.
Schrecengost, H. A. and Childers, M. S., "Fire and Explosion Hazards in
Fluidized-Bed Thermal Coal Dryers", Bureau of Mines Information Circular
8258, Department of the Interior, Washington, D.C., 1965.
Combustion Engineering, Inc., Combustion Engineering, New York, 1967.
Keystone Coal Buyers Manual, 1967, New York:
McGraw-Hill Co., 1968.
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E.
Grain Handling
1.
Introduction
This section will focus upon country and terminal elevators.
Elevator operators have the responsibility for handling~ cleaning~
and storing of grains~ and provide the distribution link between
the farmer and various grain processors or the export market.
Two processing industries~ flour milling and feed milling~
were also surveyed but will not be discussed extensively. Emissions
from flour production are well controlled and will not need a
significant additional cost outlay. Modern flour mills are normally
flanked by a battery of wheat elevators, which can be a pollution
source, so these storehouses have been included in the terminal
elevator category.
The formula feed industry is covered only in
the section concerning emissions and cost of control.
The industry
will require additional particulate abatement, but the cost burden
involved is small and the economic impact upon prices and industry
earnings is minimal. Briefly, to meet the assumed standards an
average control cost of 8.4 cents per ton of feed is expected.
This amounts to only 0.1 percent of a precontrol 1970 selling price
of nearly $84 per ton.
Such a small cost increase should eventually
be passed on to the consumer.
a.
Nature of Product and Process
The bulk of cash crops (normally wheat, corn, oats, barley,
rye~ or soybeans) is transported from the farm to the country
elevator operator. Grain is unloaded from farm trucks, weighed,
inspected, and transferred to a storage bin. Once a buyer has been
found, the grain is loaded (normally by spouting) into a prepared
railroad car, truck, or barge. The function of the elevator is not
primarily to store, but to hold the grain until a market can be
found in the large centers of accumulation--at processing plants,
large mills~ and terminal elevators.
simple.
The physical process is quite
If the grain is not sold to a local mill, exporter, or
other outlet, it is transferred to the terminal elevator operator.
Terminals are very large elevators generally located at significant
grain trade cities.
The function of a terminal merchant is to
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store the grain without deterioration in quality and to bring it
to commercial grade 80 as to conform to the needs of buyers.
Handling parallels that at the country location, but terminal
merchants are the first to thoroughly clean, dry, separate, and
store the grain at proper temperature and humidity.
Grain moving
out from terminals is ultimately used for food, feed, export,
or industrial purposes.
b.
Emissions and Cost of Control
Large quantities of particulates are airborne during the
handling of grains, principally due to mechanical abrasion between
kernels and the loosening of adhered dirt from the field.
Because
operations are normally located in rural areas, there has historically
been little emphasis placed on air pollution control practices
which exceed the level Tequired for economical recovery of materials,
reduction of explosion hazards, and general good housekeeping.
Consequently, low efficiency cyclone separators have been the most
commonly employed control devices in the industry.
For this analysis, it has been assumed that country elevators
are only responsible for unloading, weighing, storing, and loading
grain and that terminal elevators do the cleaning, drying, blending,
and occasional turning to prevent deterioration.
From these
assumptions, particulate emissions from both elevator types were
estimated to be 1,014,000 tons in 1967, and if the 1967 control
level of 28 percent were to be maintained, emissions would increase
to 1,430,000 tons by 1977.
The assumed process weight limitation
could best be achieved by the installation of fabric filters; such
practice would reduce 1977 emissions to 99,000 tons and would achieve
a control level of 95 percent.
The investment cost is estimated to
be $395 million with an annual cost of $83 million in that year.
Thorough cleaning, dehydration, grinding, blending, and
pelletizing occur at formula feed mills along with extensive
conveyance of materials.
These operations generate dust.
Particulate
emissions were estimated to be 256,000 tons in 1967.
If the 1967
control level of 42 percent were maintained, emissions would reach
362,000 tons by 1977.
Fabric filters are assumed to be the most
feasible means of achieving the process weight code; this would
reduce 1977 emissions to 22,000 tons at an investment of $19 million
4-79
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and an annual cost of $4 million for that year for a control level
of 95 percent.
c.
Scope and Limitations of Analysis
This analysis was based on data available from Govern-
ment, trade, and financial reporting sources.
Because of the large
number of firms involved in grain handling, data descriptive of
industry size, production, and capacity should be considered
approximate. Separation of country from terminal elevators was
accomplished by dividing elevator capacity data above and below
the l-million-bushel point. Cash grain prices and operating
results vary widely, and the relationships assumed for financial
variables should be considered averages.
2. Engineering Basis of the Analysis
A distribution of grain elevators on the basis of capacity was
available from the Department of Agriculture for the year 1967 and
appears in Tables 4-28 and 4-29.
For this analysis, elevators with capac-
ities less than one million bushels were defined as country elevators,
while those with capacities in excess of one million bushels were
defined as terminal elevators, with the exception that there weTe 251
terminal elevators identified with capacities ranging from 750 thou-
sand to one million bushels.
Country Elevators:
For the purpose of this analysis, country elevators are assumed
to unload, weigh, store, and load grain.
All of these operations give
rise to airborne particulates and a total emission factor of 8 pounds
per ton was assumed.
Control costs were based on installing a single
fabric filter system to control all operations.
In Table 4-28, the average production rate for each size range was
computed by assuming that the annual throughput of the average elevator
was 220 percent of the capacity and that the average elevator operated
2500 hours per year. Thus, the average production rate was calculated
by multiplying the midpoint of the capacity range by 2.2 and dividing
by 2500 hours.
The gas volume to be treated was determined by assuming
that 60 ACFM are required for each bushel per hour processed [quoted by
Cargill Corporation].
The investment for installation of a fabric
filter system was computed using a factor of $2 per cubic foot per
minute (cfm) of gas handled.
The following assumptions were used in
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calculating the annual cost:
Depreciation: straight line over 20 years,
Interest: 10 percent of investment,
Operating & Maintenance: 6 percent of investment.
The total investment and annual costs computed from Table 4-28 were
inflated by an estimated 2 percent annual growth rate to arrive at the
1977 estimated investment requirement of $271 million with an annual
cost of $56.9 million in that year.
Terminal Elevators:
In addition to the functions performed by country elevators,
terminal elevators .clean, dry, blend, and occasionally turn the grain
to prevent deterioration.
An emission factor of 14 pounds per ton of
grain processed was assumed for these elevators.
Table 4-29 presents the calculation of control cost requirements
for terminal elevators.
In this case, it was assumed that annual
throughput was 150 percent of capacity and that the average terminal
elevator operated 8,000 hours per year.
Because of the additional
operations performed, the gas volume requirement was assumed to be
90 ACFM for each bushel per hour processed.
The cost factors and
growth rate applied were the same as those used for country elevators.
The 1977 investment requirement calculated was $124 million with
an annual cost of $26 million in that year.
Feed Mills:
Thorough cleaning, dehydration, grinding, blending, and pelletizing
are operations performed by formula feed mills which give rise to partic-
ulate emissions. It is estimated that these emissions total 18 pounds
per ton of feed produced. It was again assumed that a single fabric
filter system would be provided to treat the combined gas volume from
these operations.
The gas volume requirement was estimated to be 1.38 ACFM per
hundred weight (cwt) production per day.
The fabric filter cost factors
applied were the same as those used for grain elevators.
The 1967 Census of Manufactures estimates that the production of
formula feed was 49 million tons in that year. It was assumed that
capacity in the industry is twice the production rate.
Using these assumptions and an estimated growth in capacity of 3.5
percent per year, a required 1977 investment of $19.4 million was
calculated with an annual cost of $4 million in that year.
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TABLE 4-28.
CAPACITY DISTRIBUTION AND CONTROL COSTS FOR COUNTRY ELEVATORS, 1967
Average
Capacity Production Operating Depreciation Total
Range No. of Rate Gas Volume Installed & & Annual
(1000 bu) Elevators (bu/hr) (ACFM) Cost Maintenance Interest Cost
0-25 291 10 660 $ 1,320 $ 80 $ 200 $ 280
25-75 ll08 40 2,640 5,280 320 790 1,110
75-150 1691 90 5,289 10,560 630 1,580 2,210
150-250 1815 180 10,560 21,120 1,270 3,170 4,440
250-500 2096 330 19,800 39,600 2,380 5,940 8,320
500-1,000 1002 640 38,280 76,560 4,590 11,480 16 ,070
TABLE 4-29.
CAPACITY DISTRIBUTION AND CONTROL COSTS FOR TERMINAL ELEVATORS, 1967
Average
Capacity Production Operating Depreciation Total
Range No. of Rate Gas Volume Installed & & Annual
(1000 bu) Elevators (bu/hr) (ACFM) Cost Maintenance Interest Cost
750-1,000 251 160 14,310 $ 28,620 $ 1,720 $ 4,290 $ 6,010
1,000-2,500 634 330 29,520 59,040 3,540 8,860 12,400
2,50r)-5,O()O 177 660 59,040 ll8,ORO 7,080 17, 710 24,790
5,OOO-10,noo 73 1410 126,540 253,080 15,180 37,960 53,140
>10,000 35 2810 253,080 506,160 30,370 75,920 106,290
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3.
Industry Structure
a.
Characteristics of the Firms
Country elevators of commercial importance numbered
8,003 in 1967. Although scattered throughout 48 of the 50 States,
these were concentrated in the major grain-producing areas. The
capacities ranged from 10,000 to 1 million bushels with an average
of approximately 260,000 bushels. Approximately 2,000 small
facilities (capacities of less than 5,000 bushels, or equivalent
to storage found on many farms) were not included.
Ownership of country elevators can be cooperative,
independent, or line.
Cooperative ownerships are established
by laws and controlled by farmer associations.
Independent
elevators are owned by individual merchants.
Line ownerships are
chains of elevators owned-by large handling or processing firms.
For 1967, 4,853 country elevators (61 percent of the total) were
controlled by 2,579 cooperative associations.
A majority of the
remaining 3,150 elevators were independently owned; a small number
were line elevators controlled from a central office.
Terminal elevators numbered 1,170 in 1967.
Ownership
is difficult to trace, but it is expected that control belongs
to some 600 companies, chiefly the large grain merchandisers,
processors, and firms oriented toward the export market.
The
capacity range for terminals in 1967 was 1 to 18 million bushels
with an average storage capacity of over 2.5 million bushels.
b. Operating Characteristics
Total country elevator storage capacity was estimated
at 2.10 billion bushels in 1967. The amount of grain and soybeans
sold from farms amounted to 6.06 billion bushels; approximately
83 percent of wheat and feed grains sold off farms went directly
to country elevators--5.03 billion bushels. With capacity at
2.10 billion bushels, the average industry turnover rate was
2.4 times. Terminal capacity was approximately 3.01 billion
bushels, grain throughput 5.15 billion bushels, and turnover
rate of 1. 7.
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In many areas the country elevator derives a large part
of its revenue from sideline businesses and customer services.
Considerable revenue is also received from Government price-support
programs since virtually all elevators are registered under the
Uniform Grain Storage Agreement and are eligible to store Government-
owned grains and oilseeds.
Several surveys conclude that gross
income from marketing grain make up only 25 percent of total gross
income from all sources.
4.
Market
Depending upon location, country elevators sell grain to terminals,
to exporters, and/or to processors. If there is a choice of more
than one market, it is necessary for the operator to have contacts
in several directions, although often one cash-grain commission
merchant keeps him informed on alternative outlets. This gives
the elevator operator advantages in buying, for he can pay prices
in accordance with the best outlet and attract more grain to his
elevator.
Competition between elevators can be classified as moderate.
In grain-producing areas there are normally several elevators within
a county and most farmers are within easy transportation distance
of two or
more elevators.
Nevertheless, there are product, service,
and location attributes which can insulate a country elevator from
the competition of others.
Empirical studies have found that most
farmers do not show the propensity to shop around for better prices.
Competition, then, is partly on service and partly on price, with
customer loyalty providing a certain moderation.
5.
Trends
Although erratic, national output of food grains has been
growing at an approximate rate of 3.5 percent per year. It is
expected that grains handled by country and terminal operators
have and will continue to follow this same pattern.
The number of elevators decreased through the forties and fifties;
then construction began to increase and the number of facilities
increased at a relatively slow rate of 2 percent per year during
the sixties. Many elevators are still relatively old, but it is
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expected that they will be replaced by modern units more rapidly
than in the past. Many recent country elevator additions have
been large (storage capacities of 200 to 500 thousand bushels),
and there is some concern that excess capacity may become a major
problem.
Profits have been historically low.
Inefficient operations,
poor hedging policies, underutilization of facilities, and erratic
changes in the futures market can cause losses.
A survey of the
operating results of some 50 cooperative elevators during the
period 1965-67 showed an average net savings dt 3.5 percent of
sales.
Profit levels for the next 5 years are expected to remain
at the same level.
6.
Economic Impact of Control Costs
a.
Impact on a Plant
Operating statements for three model elevators--A, B,
and C--were constructed.
Table 4-30 shows the first two plants
(A and B) with rated storage capacity at 100,000 and 260,000
bushels, as representatives of small and medium-large country
elevators, and the third model as representative of a typical
terminal operator.
The operating statements for the three models
are based on six assumptions:
(1) The turnover rate for Models
A and B (country elevators) equals 2.4 times storage capacity;
(2) Country elevator volume is 58 percent wheat and 42 percent
TABLE 4-30.
MODEL ELEVATOR DESCRIPTION
Elevators
Characteristic Model A Model B Model C
Capacity (Bushels) 100,000 260,000 2,500,000
Grain Throughput (Bushels) 240,000 624,000 4,250,000
Plant Investment Cost $120,000 $ 300 ,000 $3,000,000
Control Investment Cost $ 10,560 $ 27,456 $ 264,000
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corn--wheat is bought at $1.39 per bushel and sold at $1.50;
corn is bought at $1.05 per bushel and sold at $1.16 ,and both
buy prices were estimated at average nationwide levels received
by farmers in 1967, with the cash basis profit at 11 cents per
bushel; (3) Operating costs, fixed and variable, were estimated
at 8.8, 6.0, and 4.0 cents per bushel for Models A, B, and C,
respectively; (4) The turnover rate for }1odel C (terminal
elevator) is 1.7 times storage capacity; (5) Terminal volume
is entirely in wheat, purchased at $1.50 per bushel and sold
at $1.59 for a cash basis profit of 9 cents per bushel; and
(6) Results of the statements are in terms of savings--that is,
income before taxes.
Many elevators are cooperatively owned and
savings are normally refunded to patrons.
Results of the operating
statements, based on these assumptions, are shown in Table 4-31.
b.
Impact on the Firms
Most country elevators have interests in marketing a
wide variety of farm supplies. Grain handling often amounts to
only 25 percent of terminal volume.
Most country elevators, however,
are relatively small companies operating at very low profit margins.
If the burden of control is not passed on in the form of price
increases, it would normally lower grain-handling income by some
20 to 40 percent, and in the worst situations, could compound
existing losses from precontrol operations.
Terminal elevators,
because of their larger sizes, financial strengths, and/or captive
ties to major processors, should feel less impact.
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TABLE 4-31.
MODEL INCOHE STATEMENTS
Elevators
Hodel A Hodel B Model C
Item (Dollars) (Dollars) (Dollars)
Sales 326,000 847,600 6,757,500
Grain Purchase Cost 299,600 778,960 6,375,000
Operating Cost 21,120 37,400 170,000
Annualized Control Cost 2,218 5 , 767 55,450
Savings Before Control 5,280 31,200 212,500
Per Bushel 0.022 0.050 0.050
Savings After Control 3,062 25,433 157,050
Per Bushel 0.0128 0.0408 0.037
Control Cost Per Bushel 0.0092 0.0092 0.013
Demand Elasticity and Cost Shifting
Country and terminal elevators have historically been an
integral part of the Nation's grain distribution system. As such,
demand for their handling and storage services would be inelastic
c.
with regard to price.
It is expected that elevator owners should
be able to shift most of the control cost on to consumers.
This
conclusion is supported by several considerations:
(1) All
elevators have been or will be affected by pollution control,
and costs per bushel are reasonably constant for most elevators
(approximately 1.0 cent per bushel handled); (2) The industry
in general would not be able to tolerate the relatively severe
effect on earnings; and (3) Competition is considered moderate,
with many elevators isolated from competitive pressure.
There is some question about whether costs would pass
upward to grain consumers or downward to the farmer. Historically,
cost increases in the grain distribution system have been passed
forward, as in the case of increased transportation expenses, and
farmers have been partly protected by Government price support
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programs.
Some 60 percent of all country elevators are farmer-
controlled cooperatives.
Thus, it is expected that costs will
be passed on to the consumer.
With respect to international grain trading, the effect
of price increases on American exports must be viewed relative
to the policies of the U~S. Government.
Because the current
level of domestic grain prices would necessitate a selling price
well above that which could be offered by other competitive exporting
countries, the Federal Government has instituted two general types
of programs to encourage commercial exports: (1) The first involves
sales by the Government from grain stocks acquired under the domestic
price support program; such sales are made to private exporters
at levels below the domestic market price; (2) The second involves
direct financial assistance in the form of export payments.
ill
general, then, the export market is being subsidized, and the
Government would be expected to assume the price increase due to
air pollution control.
.
Based on the 1967 export volume of grains,
such costs should amount to approximately $17 million.
Relative
to the current level of Federal support for grain export programs,
this additional burden is minimal.
d.
Effect on Industry
Many elevators are old and inefficient from a profit
and volume point of view and may be replaced if faced with control
costs. Replacements will probably be larger units, which may
cause some excess capacity pressures.
On the other hand, several industry journal~/ have indicated
that air pollution control may increase operating efficiencies in the
long run. Compliance with standards can help reduce the dangers of
explosion and thereby reduce insurance premiums, can. lower grain
wastage, can reduce maintenance and cleanup costs, can improve rodent
control, and can improve work force efficiency through better
plant environment.
1/
- See References 4,5, and 6 at end of this subsection.
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REFERENCES FOR SUBSECTION E
1.
The Cargill Corporation, private communication.
2.
National Air Pollution Control Administration, "Air Pollutant
Emission Factors", 1970.
3.
Uriited States Department of Commerce,. "Census of Manufactu.res",'
196 i.
4.
Anderson, Thomas H., "How We Are Meeting the Challenge of Air
Pollution", Feeds Illustrated, pp. 12-14, August 1967.
5.
"Clean Air Is Profitable", Feeds Illustrated, pp. l5-l~,
. August "1967.
6.
"Prevention of Dust Explosion in Terminal Grain Elevators",
National Board of Fire Underwriters, Pamphlets 61 Band 61C,
New York.
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F.
Iron Foundries
1.
Introduction
a.
Nature of Product and Processes
Iron foundries produce castings~ such as machine and
automobile parts~ from gray iron, pig, and scrap.
The industry
utilizes four types of furnaces to melt iron for casting--electric
arc~ electric induction, reverberatory, and cupola furnaces.
Cupolas currently account for over 85 percent of all castings,
with electric arc and induction accounting for most of the
remainder.
Electric induction and reverberatory furnaces emit
relatively small quantities of pollutants and thus require little
or no air pollution control expenditures.
Since electric arc
furnaces account for less than 5 percent of industry production~
an analysis of their control costs is not presented.
The report focuses on control of pollutants from
cupola furnaces.
Cupolas are vertical, cylindrical furnaces in
which the heat for melting is provided by burning coke in direct
contact with the metal charge. Most foundry emissions emanate
from this metal-melting operation.
b.
Emissions and Costs of Controls
Particulates, in the form of dust and smoke, and carbon
monoxide are the significant emissions from cupolas.
Particulates
arise from fines in the coke and flux charge, from metal fuming,
and from dirt and grease introduced with scrap.
In 1967, foundries with cupolas emitted 217 thousand
tons of particulates and 3,200 thousand tons of carbon monoxide.
With industry growth, these emissions would increase to about
260 and 3,800 thousand tons respectively in FY 1977.
Implementa-
tion of controls would reduce them to 30 thousand tons of
particulates and 230 thousand tons of carbon monoxide in FY 1977.
Carbon monoxide emissions can be reduced by the use of
afterburners which oxidize them to carbon dioxide.
Afterburners
in combination with gas-cleaning equipment, such as wet scrubbers
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or fabric filters, can achieve compliance with stringent process
weight regulations for particulates and a 95 percent removal rate
for carbon monoxide.
The regulations selected for this report
would require the industry to increase its present average removal
efficiency of 12 percent for particulates to 90 percent and control
of carbon monoxide, from 18 to 95 percent.
Of the control equipment capable of particulate removals
at or above the 90 percent level, only high-energy wet scrubbers
have been used on cupolas without difficulty. Several foundries,
especially in the Los Angeles area, are using fabric filter bag-
houses with some degree of success.
Successful operation of fabric
filter systems requires afterburners, gas-cooling equipment, high-
temperature filtration material, and decreased filtration velocities.
Maintenance costs are high, and the costs of using them are greater
than for wet scrubbers except in the case of very small cupolas.
The total investment required to meet the proposed
standards by FY 1977 using wet scrubbers, would be $348 million.
The corresponding annual cost would be $126 million.
c.
Scope and Limitations of Analysis
This report is limited to control of the melting operations
because nonme1ting operations within foundries are consistently
controlled with high efficiency equipment.
The analysis of economic impact is limited to independent
jobbing foundries, since the financial structure of captive
foundries is indistinguishable in publicly available data from
that of their parent company. Impact on a captive foundry
cannot therefore be determined and its control costs are passed
on to purchasers through the final product(s) of the parent company.
2.
Engineering Basis of Analysis
The emission rates for type of melting furnaces and various
control applications are shown in Table 4-32.
Nationally, the overall control levels for particulates and
carbon monoxide are 12 and 18 percent, respectively, based on a
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comprehensive questionnaire survey conducted jointly by the
National Air Pollution Control Administration and the Department
of Commerce in 1968.
Cost equations have been developed (National Air Pollution
Control Publication No. AP-74) relating investment and annual costs
to melting rates.
Annual depreciation charges from this report
were adjusted to reflect an equipment life of nine years for both
fabric filters and wet scrubbers.
Control costs have been developed
for each of ten model plants to represent the broad range of cupola
size and operational practice within the industry.
For each plant
size, the control system was chosen to meet both process weight and
opacity regulations.
Only high energy scrubbers and fabric filters
can meet these regulations.
The survey data and least cost solutions, based on Publication
No. AP-74 (joint NAPCA-Department of Commerce survey), suggest that
high energy wet scrubbers are ideal for cupolas the size of 14 tons
per hour or greater melting capacity.
Fabric filters are the choice
for smaller cupolas.
Fabric filters are also suggested for electric
arc furnaces.
Costs were developed based on this rationale.
Included
in these costs are requirements for afterburner control to destroy
carbon monoxide.
Table 4-33 shows unit and total cost for the ten
plant sizes in industry, for both investment and annual expenditures.
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TABLE 4-32.
EMISSION FACTORS FOR GRAY IRON FOUNDRIES
Type of Furnace
Particulates,
1b/ton metal charged
Carbon Monoxide,
1b/ton metal charged
Cupola
Uncontrolled
Ivet Cap
Impingement Scrubber
High-Energy Scrubbers
Electrostatic Precipitator
Baghouse
Electric Arc Furnace
17.0
8.0
5.0
0.8
0.6
0.2
7.5
2.0
145
Reverberatory
Electric Induction
1.5
SOURCE:
Environmental Protection Agency
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TABLE 4-33.
CUPOLA EMISSION CONTROL COSTS
Melt Rate Number Unit Total Unit Total
(tons/hr) of Controls Investment Investment Annual Annual
$ $ $ $
1-4 80 52 4160 18 1440
5-6 80 92 7360 32 2560
7-8 140 132 18480 46 6440
9-14 420 212 89040 73 30660
15-17 120 262 31440 95 11400
18- 21 140 303 42420 111 15540
22-26 100 378 37800 136 13600
27-30 40 447 17880 162 6480
31-40 60 515 30900 185 11100
>40 16 721 11536 248 3968
1200 291016 103188
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3.
Industry Structure
a.
Characteristics of the Firms
The iron foundry industry consisted of approximately 1,730
plants in 1967 with 2,250 cupolas.
The total national capacity for
the industry was 17 million tons of castings per year.
Production
was 14.3 million tons per year with a value of shipments of $2.7
billion.
Although there are many small establishments in the
industry, production is dominated by a few large firms.
The four
largest companies accounted for approximately 27 percent of the
industry's value of shipments in 1967, and the eignt largest
accounted for 37 percent.
Many of the largest firms are "production foundries",
which have the capability of economical production of large lots
of closely related castings.
Most of their output is captive
(owned and controlled by other businesses); in fact, almost half
of all iron comes from captive plants which do not generally
produce for the highly competitive open market.
Iron foundries range from primitive, unmechanized hand
operations to heavily equipped plants in which operators are
assisted by electrical, mechanical, and hydraulic equipment.
Captive plants are more likely to be mechanized and better
equipped with emission control equipment than are noncaptive
. plants.
The nature of the iron foundry industry is such that
foundries can be found in almost all urban areas.
The economies
of scale for the industry do not prohibit the continued existence
of relatively small foundries.
Since many foundries are operated
in conjunction with steelmaking facilities, they are concentrated
in the "steel States": Pennsylvania, Ohio, Michigan, Illinois,
and Alabama.
4 .
Market
a.
Competition Among Sellers
The iron foundry industry is characterized by intense price
competition among the many small jobbing foundries which has spurred
4-95
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a drive for lower operating costs and productivity gains. Other
areas of increasing competition are casting quality along with
engineering design services available to the customers. Unforunately,
many (smaller) foundries have had capital only for additions to
capacity; investments in cost-saving and quality improvement
facilities have been bypassed or postponed. Larger foundries
also have competitive advantages in that they usually can offer
the services of better sales and engineering staffs, are more
mechanized, and have more sophisticated quality control equipment.
The net effect of these conditions is that many small
foundries that cannot cope with increasing needs for capital,
demands for better quality and service, and rising labor costs
are being forced out of business, but the larger, more stable
firms are increasing their capacities in order to reduce unit
costs and absorb the additional demand.
Also, an increasing
number of large purchasers of castings are establishing captive
foundries in order to gain a ready supply of quality castings;
however, since these additions to capacity have been unable to
keep pace with the expansion of demand and the loss of capacity
caused by closed foundries, users are finding it increasingly
difficult to obtain an adequate supply of specialty iron castings.
b.
Customer Industries
The major customers of the iron foundry industry are also
major constituents of the national economy. The health of the
industry is therefore closely related to the health of the gross
national product (GNP). The major markets for foundry castings
include motor vehicles, farm machinery, and industries that build
equipment for the construction, mining, oil, metalworking, railroad,
and general industry markets; these industries are considerably
larger and more powerful than the iron foundry industry. Each
customer firm has many times more assets than the foundries from
which it buys. With financial strength and generally greater
management expertise, such firms can play many small fotmdries
against each other to maintain severe price competition even under
4-96
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conditions of high demand for castings.
c.
Foreign Competition
Direct imports of castings as well as castings in
imported machine tools, autos, textile machinery, and diesel
engine parts do enter the AIrerican market. However, Department
of Commerce statistics indicated a volume of only $2.25 million
for direct imports in 1967. This is estimated by the industry as
approximately one-quarter of the actual total. Even if a total
import volume of $9 million is assumed, imported castings and
component castings would have been equivalent to less than one
percent of the $2.7 billion total value of shipments in 1967.
Imports, therefore, do not constitute a major threat to the
American iron-casting market.
The high cost-per-ton of shipping
compared to the relatively low cost-per-ton of production is
probably the most significant barrier to imports.
5.
Trends
The number of iron foundries in the United States has
declined from about 3,200 in 1947 to 1,670 in 1968, with a trend
of reducing by about 70 installations per year.
From 1967 to
1969, the net decrease slowed to 42 annually.
In accordance with
the historic trend, the number of iron foundries is projected to
be approximately 1,100 by 1980; in addition, the average size of
iron foundries has been increasing steadily, with average annual
production per foundry increasing from 3,800 tons in 1947 to
8,700 tons in 1969, and by 1980 the average annual production
per iron foundry is projected to be approximately 16,500 tons.
The tonnage of malleable iron castings is expected to remain
relatively constant.
Ductile iron tonnage has increased every
year and is expected to double the 1969 tonnage by 1980.
Total
production of iron castings, excluding ingot molds made directly
from blast furnace iron, has been projected to about 17 million
tons per year by 1980, an average growth rate of 2 percent per
year.
From 1958 to 1967, the average price of gray iron castings
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rose steadily at the rate of 2 percent per year.
At the same
time, the prices of the t\W major raw materials--pig iron and
scrap iron--have fallen at an annual rate of 2.3 percent.
However, while material costs have declined, labor costs have
advanced more rapidly than the prices of castings and have
. .kept a continued upward pressure on prices.
6.
Economic Impact of Control Costs
a.
Impact on Plants
Model plants have been developed in a separate stud~/
to demonstrate the impact on foundries if control costs cannot be
passed on in higher prices.
presented in Table 4-34.
The results of this analysis are
TABLE 4-34.
HODEL PLANT FINANCIAL ANALYSIS
Operating Size Range by Value of Shipments ($ million)
Characteristics .5 .5-1 1-2 . 5 2.5-10 10
Melt Rate (tons/hr) 4 6 8 12 20
No. of Cupolas 1 1 1 2 2
Production 1,050 3,000 6 , 300 12,900 40,000
(ton/yr)
Control Cost 14.60 9.50 6.50 4.90 2.60
($ /ton)
Control Cost 2.9 3.2 2.8 1.6 .7
(% Sales)
Reduction in Income 59 49 41 23 11
(%)
Control Inves tment 19 30 26 12 5
(% Net Investment)
Air pollution control costs would increase the value of
shipments for large foundries by about 0.7 percent, and for small
single-cupola foundries, as much as 3.2 percent.
To small foundries,
control costs represent an income reduction of about 60 percent,
while margins for larger firms would be reduced by only 11 percent
5:../ "Economic Impact of Air Pollution Controls on Gray Iron Foundry
Industry". National Air Pollution Control Administration publication
AP-74.
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if costs could not be passed on to customers.
Investment in control
equipment would equal approximately five percent of the value of
capital for the largest firms and as much as 30 percent for small
firms.
While large foundries will be affected less severely by
pollution control costs than will small foundries, the industry
generally can little afford a reduction in profit rate, since
its 6.8 percent return on investment is already below the overall
manufacturing average of 8.1 percent.
Because the investment in control equipment is large
compared to the book value and profitability of many foundries,
a serious problem is how to finance the investment. This applies
particularly to the small independent jobbing foundry which cannot
generate sufficient capital internally. The foundry industry
generally is not an attractive investment in stock or bond markets
due to its low rate of return and its slow profit growth.
Neither
is it a good risk for commercial banks due to the high ratio of
control investment to book value and the low cash flows of many
small foundries. The Small Business Administration (SBA) is
currently the only source of funds available to many foundries;
it prefers to guarantee loans made by banks, but it will loan
funds directly in some cases, but not for firms with insufficient
cash flows.
b.
Demand Elasticity and Cost Shifting
The economic impact of pollution control costs varies
with the industry's ability to pass cost on to the consumer in
higher prices. This ability is largely dependent on elasticity
of demand for the product--the degree to which the volume of sales
declines in response to price increases.
Demand for castings
is relatively inelastic--in that demand will not decline appreciably
with increases in price--because most castings are inputs for the
production of more complex final products and thus constitute a
small portion of the cost of the final product.
However, possible
substitute products, (e.g., aluminum, steel, and other metals) are
4-99
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somewhat more costly than iron castings and are usually subject
to similar upward price pressures such as rising labor and pollution
control costs. Thus, a small price increase due to pollution
control will have little effect on the market for gray iron.
c.
Impact on the Industry
Despite inelastic demand, sharp competition among the
many jobbing foundries will make price adjustments difficult
for those that experience higher than average control costs.
Large mechanized firms will incur lower control costs than will
smaller or older foundries.
To the extent that they compete for
the same market sectors, the lower-cost foundries will establish
price levels that prevent the less efficient firms from raising
prices sufficiently to fully cover their control costs.
The
average price of castings is expected to increase by about 2.7
percent in response to stringent air pollution control regulations;
such a price increase would leave approximately one-fourth of the
firms in the industry with reduced profit margins, and many of
these firms would be forced into marginal or submarginal financial
positions.
The nonuniformity of control costs, along with the lack
of investment capital, will force most foundries to postpone imple-
mentation of control for as long as possible.
Many small foundries,
faced with reduced profit margins and an inability to raise
investment capital, will be forced to merge or to go out of business.
Some remaining firms will continue to operate at reduced profit
rat es.
However, the large, more stable foundries will increase
capacities to meet expanding demand, will improve efficiency, and
will continue to operate profitably. In effect, the costs of
pollution control will accelerate the trend toward fewer and larger
foundries.
It is apparent that the iron foundry industry will
be among those industries most severely affected by air pollution
control.
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REFERENCES FOR SUBSECTION F
1.
"Systems Analysis of Emissions Control by the Iron Foundry Industry",
by A. T. Kearney, CPA 22-69-106, Air Pollution Control Office,
Environmental Protection Agency, February 1971.
2.
"Economic Impact of Air Pollution Controls on the Gray Iron Foundry
Industry", Publication No. AP-74, National Air Pollution Control
Administration, U. S. Department of Health, Education, and Welfare,
November 1970.
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G.
Iron and Steel
1.
Introduction
The iron and steel industry consists of hundreds of firms
engaged in one or more of the processes involved in transforming
iron ore into fabricated steel products. These processes include:
coking, in which coal is reduced to coke in coke ovens; sintering,
in which iron ore is beneficiated and prepared for charging into
blast furnaces; smelting, in which pig iron is produced from iron
ore, coke, and limestone in blast furnaces; refining, in which iron
ore is refined into steel (and alloyed if desired) in open hearth,
basic oxygen, or electric furnaces; rolling, in which raw steel
is shaped into blooms, billets, slabs, and other basic shapes;
finishing, in which basic shapes are rolled, drawn, coated, or
otherwise treated to produce sheet, strip, tin plate, pipe, wire,
and other products for use in manufacturing; and fabrication of
finished products. Blast furnaces are always well controlled to
prevent the emissions of particulates, while the gaseous emissions
are fully utilized in the production of process heat. At present,
very little is known about the emissions or present control patterns
for the scarfing machines that are used to clean the surface of
billets before rolling.
Control of coking operations at existing
facilities, which constitute significant sources of both particulate
and gaseous emissions, does not appear to be either technologically
or economically feasible before FY 1977.
There does not appear
to be adequate technology to significantly reduce particulate
emissions during coal charging and coke pushing operations from
byproduct coking.
Required technology consists of sealed ovens
and offgas collection of particulates vented to scrubbers, such
as are installed on modern coke ovens.
However, mos t older ovens
are not structurally designed for this approach. Therefore, total
replacement of many coking plants would be required. The steel
industry expects technological developments in a few years to
improve the coking process itself ("third generation" technology)
which will require large amounts of new capital. This is a deterrent
to investing heavily in modern facilities which will become obsolete
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within a few years.
Cost estimates of $1 to $1.5 billion for
control of current facilities have been mentioned by various
sources, but these estimates are of questionable reliability.
For these reasons, control cost and emission estimates for
coking have not been included in this report.
This report focuses on the emissions and air pollution
control costs of the sintering and steelmaking operations.
2.
Engineering Basis of the Analysis
This analysis was limited to control of particulate
emissions from open hearth, basic oxygen, and electric arc
furnaces and from sintering operations.
Potential emissions
of other pollutants are normally controlled to acceptable
levels.
The uncontrolled rates of particulate emissions
are presented by process- in Table 4-35.
TABLE 4-35.
UNCONTROLLED PARTICULATE EMISSION RATES
Process
Emission Rate
(lb/ton produced)
Open hearth (nonoxygen lanced)
Open hearth (oxygen lanced)
Basic oxygen
12
22
Electric furnace
46
11
Sintering (windbox)
Sintering (discharge)
20
22
In estimating present emission levels it is necessary
to adjust the uncontrolled emission rates to allow for
controls already in use.
is not readily available.
Detailed information on these
On the basis of limited datal,2,3
estimates of controls in place in 1967 were made and are
given in Table 4-36.
It was assumed that open hearth furnaces
are controlled only where oxygen lancing is used.
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TABLE 4-36.
PARTICULATE CONTROL LEVELS (1967)
Process
Controlled Production
(percent)
Average Control
Efficiency (percent)
Electric furnace
Sintering (windbox)
Sintering (discharge)
27 90
100 95
61 90
90 75
o
Open hearth furnace
Basic oxygen furnace
Required particulate removal efficiencies for each
process were calculated as a function of process size, based
on the emission standards shown in Appendix I.
in Table 4-36.
These are shown
All types of furnaces and sintering machines were
assumed to require additional control.
Costs were calculated
on the basis of using high energy wet scrubbers for 50
percent of open hearth and basic oxygen furnaces and electrostatic
precipitators for the other 50 percent of these furnaces;
filters were assumed for electric arc furnaces, and medium
fabric
energy wet scrubbers for sintering machine windboxes and
discharges. The cost estimating parameters are shown in Table 4-37.
The cost relationship for electric arc furnaces was
calculated on the assumption that two furnaces exhaust into
a single control system with appropriate staggering of
operations.
If possible, two furnaces of equal capacity
were paired; if not, furnaces with no more than a 25 percent
difference were paired.
When two furnaces of different
capacities were controlled, the larger capacity was assumed.
Control costs for single furnaces were calculated by dividing
the control cost for two furnaces (each of which has a
capacity equal to the single furnace) by 1.4 to allow for a
reduced ducting and blower requirement as well as reduced
average load.
4-104
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TABLE 4-37.
COST ESTIMATING PARAMETER3*
-I'-
I
f-I
a
111
Units Cost Estimating Parameters*
Unit Control of "ail "b"
Operation Equipment Capacity Investment Annual Investment Annual
Open hearth Furnace high energy venturi scrubber~ tons/melt 8,308 6,576 0.7 0.7
electrostatic precipitator
Basic oxygen furnace high energy venturi scrubber~ tons/melt 35,77 5 16,318 0.7 0.8
electrostatic precipitator
Electric arc furnace fabric filter tons/melt 12,902 8,400 0.7 0.7
Sintering (windbox) medium energy venturi
scrubber tons of sinter/day 837 518 0.8 0.7
Sintering (discharge) medium energy venturi
scrubber tons of sinter/day 15,835 5,541 0.3 0.3
* The cost function is y = axb, where y = control cost, x . capacity, and "a" and "b" are cost parameters that depend
on the type of process. The same function was applied to the calculation of both annual and investment costs by simply
using the appropriate a's and b's. To illustrate the use of the parameters, suppose that it is required to determine the
investment and annual cost of controlling a basic oxygen furnace with a capacity of 400 tons per melt. The investment cost
(y) is therefore $35,775 (400)0.7 = $2.36 million with an annual cost(y) = $16,318 (400)0.8 = $1.96 million.
-------
3.
Emissions and Costs of Control
This analysis deals only with emissions and controls for
particulates from sintering and furnace operations.
Carbon
monoxide is essentially completely controlled in blast furnaces
by process air preheating and in basic oxygen furnaces by flaring.
Because sintering is gradually being replaced by the pelletizing
process in the industry, it declined more than 10 percent over
the last 3 years even though production of pig iron increased
by slightly more than 10 percent. This trend will lower potential
emissions over the next 5 years and reduce the required investment
and annual costs correspondingly.
Neither emissions nor control
costs for pelletizing have not been included in this analysis,
nor have the costs been added, due to the lack of some of the
data essential to these calculations.
Based upon the best available data, the average level of
particulate control in 1967 is thought to have been about 55
percent for sintering and steelmaking operations.
To comply with
the Clean Air Act by FY 1977, an average level of particulate
control of 98 percent will be required to reduce particulate
from a potential of 1,991 thousand tons in FY 1977, with the
same controls as in 1967, to 89,000 tons, with the 98 percent
control and the decline in sintering.
emissions
To implement the required increases in air pollution control
levels by FY 1977, it estimated that an investment of $841
million will be required, and that total annual cost will be
$306 million.
~. Scope and Limitations of Analysis
This analysis focuses on integrated basic steel firms which
produce nearly all the raw steel made and account for more than
90 percent of steel output. Air pollution emissions that exceed
the standards assumed for this study are produced primarily by
the sintering plants and open hearth or basic oxygen furnaces of
basic steel producers. Electric furnaces are also emission sources
to a lesser extent. However, when used by secondary steel producers
making specialty high alloy steels, electric furnaces are normally
4-106
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controlled to a high level of efficiency to avoid loss of valuable
alloying metals and, therefore, are not generally faced with
additional control costs.
Data on the operations of the steel industry are more available
than for most industries.
Nevertheless, the steel market is
complicated by the vast variety of distinct products and the
variations in product mix from one company to another, 50
comparison of the impacts of changes in the cost of producing
raw steel, as they affect different companies is difficult.
Detailed data are not available on such aspects of financial
management as depreciation policy, net value of investment,
pricing policy, and tax accounting; thus it is especially
difficult to estimate profit potentials for these firms.
5.
Industry Structure
In 1967 there were 142 steel plants in the United States
with a total capacity, production, and value of shipments of
165 million tons, 127 million tons, and $13.3 billion, respectively.
There were 86 steel firms in the United States in 1967.
Of
these, 21 accounted for more than 90 percent of production; they
included all of the largest integrated firms in the industry,
with outputs ranging from just under 1 million to more than
30 million tons and with sales varying from $85 million to more
than $4 billion, and with profits ranging from $172 million for
one firm to a loss of nearly $7 million for another. Of the 21,
the two largest firms produced 40 percent and eight produced over
75 percent of
6. The Market
The steel industry is usually described as an oligopoly
the industry output.
characterized by administered prices and price leadership.
Typically, list prices are virtually the same for all firms
and remain unaffected by minor changes in market conditions.
Individual prices may be shaded through the use of special
discounts or premiums, but primarily firms adjust prices to
4-107
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short-term market changes by varying output. When price changes
do occur, they are usually initiated by one of the largest firms
and all other firms quickly follow the pattern.
Competition
emphasizes product quality and customer service more than price.
Steel is sold to customers in every major industrial sector
of the economy.
The major purchasing industries, however, are
motor vehicles, heavy equipment and machinery, containers, and
appliances.
These industries strongly follow the swings of the
business cycle, and as a result cyclical changes in the national
economy tend to have magnified effects on the market for finished
steel.
The basic position of steel in the economy also indicates
the probability that the long-run trend of the domestic market for
steel will be steady expansion and gradually rising prices.
The steel industry is subject to significant foreign
competition.
During the sixties, foreign participation in the U.S.
steel market increased and posed a real threat to the market for
some products, because the export market for U.S. steel did not
balance imports.
This competitive pressure was eased by the
signing of an informal agreement in December 1968, with the
Japanese Iron and Steel Exporters Association and with the
Association of Steel Producers of the European Coal and Steel
Community to limit exports to the United States to not more than
5 percent increases annually for 1969 through 1971.
7.
Trends
Investment in new steel capacity has been heavy over the last
decade and is predicted to continue at a high level, but with a
slower rate of growth.
The trend is away from the older open
hearth furnaces in favor of more efficient basic oxygen and
electric arc furnaces.
The trend of profits is difficult to determine because net
income after taxes for steel firms varies substantially from
year to year. Among the factors causing these fluctuations are
the heavy "startup" costs for new facilities, the impact of
4-108
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strikes, the changes in accounting and tax practices, and the
tendency of firms to change output rather than price in response
to short-term market changes.
In the past several years the steel industry has experienced
difficulty in maintaining a satisfactory rate of profit due to
the general economic slowdown of the Nation, the strong foreign
competition, and the competition from other materials.
Prices
have continued strongly upward, while production has been below
the optimum rate of 85 percent of capacity.
Both reactions to
lower-than-desired overall sales indicate the oligopolistic
character of the steel market.
The basic competitive pattern of the steel market is not
expected to change during the seventies, although lesser changes
are occurring and will persist through FY 1977. The largest
firms will continue to dominate and to set price patterns.
However, the pattern of price leadership by one or two firms
seems to have been weakened, and more flexible prices and more
open price competition may be expected.
Foreign competition is increasing and may become considerably
stronger when the voluntary agreement limiting exports to the
United States from Europe and Japan expires at the end of 1971.
Even with this agreement, competition has been increasing,
especially in the speciality steels and high profit items.
Lower average profits on sales have resulted for U.S. firms
and have caused some to abandon markets for particular items.
Steel faces strong competition from other metals and plastics
in many uses, also. This, combined with the foreigp competition,
largely explains the fact that the annual growth rates projected
for the industry through FY 1977 of 2.07 percent for capacity and
2.46 percent for production are lower than those used in last
year's report.
8.
Impact of Control Costs
The required investment and annual costs of air pollution
control for each steel firm will vary depending on the number and
4-109
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sizes of its plants and on the types and capacities of its
steelmaking furnaces. Cost estimates are calculated on the
following equipment designations:
high energy wet scrubbers
for 50 percent of open hearth and basic oxygen furnaces, and
electrostatic precipitators for 50 percent; fabric filters for
electric arc furnaces; medium energy wet scrubbers for sintering
machine windboxes and discharges.
Both the required investment and the annual costs for each
control device vary in relation to the capacity of the furnace
or machine and have been costed on the basis of data specifying
individual capacities. Other than capacity, a major determinant
of cost differences among plants and firms is the number of each
type of furnace in use.
It appears that basic oxygen furnaces,
in the range of sizes most commonly used, cost substantially less
to control per unit of production than open hearth or electric
furnaces. Costs for basic oxygen furnaces amount to about $1.00
per ton of annual production with utilization at 85 percent of
capacity. Medium-sized open hearth furnaces may require annual
costs of about $1.50 per ton of annual production at 85 percent
utilzation.
Very large electric arc furnaces may be expected
to approximately match the annual cost per ton of open hearth
furnaces, but will probably be somewhat more expensive to control
when a number of small electric furnaces are used.
The impact of control costs on firms may be shown by comparison
of three hypothetical examples designed to show the range of costs
per ton of steel production. A steel company with total annual
capacity of 9 million tons and production of 6.4 million tons of
finished steel per year in 1970, one-third from basic oxygen
furnaces and two-thirds from open hearth furnaces, would incur
estimated costs as follows:
total investment, $30 million;
total annual cost of $9.8 million; annual cost per ton of raw
steel $1.30; and annual cost per ton of finished steel $1.53.
Estimated costs for a small firm having an annual capacity of
2.24 million tons and production of 1.58 million tons of finished
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steel, entirely from open hearth furnaces, shows an investment
requirement of $8.4 million and a total annual cost of $2.9 million,
or $1.83 per ton of finished steel. Similarly, a small firm
producing 1.7 million tons of finished steel in 1967 with a
capacity of
2.3 million tons, using only basic oxygen and
electric arc furnaces, would have an estimated investment of
$7.0 million and an annual cost of $3.5 million, or $2.03 per
ton of finished steel; for this firm, the high cost per ton
of finished steel results from the use of 19 small electric
furnaces.
Comparison of these cost estimates indicates that the
impact of control costs will probably be greatest on firms using
many relatively small electric arc furnaces, great for firms
producing primarily with open hearth furnaces, and gradually
less as the percentage of basic oxygen furnaces increases.
The
estimated costs are small in relation to the price of finished
steel ($170 per ton in 1967), but cost differentials of the size
indicated may accelerate the existing trend in the industry to
retire older open hearth furnaces.
The trend of prices in the steel industry and the characteris-
tically oligopolistic pricing pattern strongly suggest that
control costs will be almost entirely reflected in price soon
after they are felt by the firms. The result may be to limit
sales slightly below the level that could have been obtained
at lower prices.
This effect would be very small.
A price
increase of $1.50 to $2 per ton is small relative to a selling
price of $170 upward, per ton. The impact of control cost on
the profitability of firms will depend largely on the general
state of the economy at the time and will be significant
only in a time of depressed demand for steel.
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REFERENCES FOR SUBSECTION G
1.
R. L. Duprey, Compilation of Air Pollution Emission Factors.
Public Health Service Publication No. 999-AP-42. Durham,
North Carolina: U.s. Department of Health, Education, and
Welfare, National Center for Air Pollution Control, 1968.
" A System Analysis of Process Technology and Air Quality
Technology in the Integrated Iron and Steel Industry,"
Preliminary Report. Batelle Memorial Institute, Columbus,
Ohio, March 31, 1969.
Proceedings: The Third National Conference on Air Pollution
(Washington, D.C. - December 12-14, 1966). Washington, D.C.:
U.S. Department of Health, Education, and Welfare, (PHS), 1967.
2.
3.
4.
Systems Analysis of the Integrated Iron and Steel Industry
(Appendix C), PH22-68-65. Pittsburgh, Pennsylvania:
Swindell-Dressler Company, March 31, 1969.
4-112
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H.
Kraft (Sulfate) Pulping
1.
Introduction
a.
Nature of Product and Process
The pulp industry manufactures pulp from wood and other
materials for use in making paper and related products.
The meth-
ods used to produce pulp from wood may be classified as chemical or
mechanical; only the chemical methods cause significant air pollu-
tion problems, and two of these, the sulfite and sulfate (kraft)
methods, account for approximately 75 percent of the total industry
output.
Sulfite pulping is a potentially serious source of sulfur
dioxide when waste liquor incineration without chemical recovery is
practiced.
In some cases, control costs can be offset by the valu-
able recovery of heat and chemicals.
Only kraft pulping, which ac-
counts for approximately 64 percent of the industry output, is con-
sidered in this report.
In the kraft process, woodchips are cooked in a liquor
composed of sodium hydroxide and sodium sulfide to separate the
lignin from the cellulose.
Pulp is produced from cellulose.
The
lignin is burned as a fuel in the recovery furnace.
This satisfies
the energy requirements for the pulping process. The chemicals re-
covered from the salt cake solution (black liquor) are recycled.
b.
Emissions and Cost of Control
In the kraft pulping industry, three main processes emit
significant quantities of particulates:
recovery furnaces, lime
kilns, and bark boilers.
The level of sulfur dioxide emissions from
the main source, the recovery furnace, generally does not exceed 500
parts per million.
The economics of the kraft pulping method depend upon rec-
lamation of chemicals from the recovery furnace and lime kiln; hence,
emissions from these processes are controlled to minimize losses of
chemicals.
Particulates from the bark boiler are also controlled,
but controls fall short of the assumed standards in this study.
Based on a total emission factor of 34 pounds of particulates per
ton of air-dried pulp, the total emissions for the kraft industry
were 380,000 tons for 1967. Based on a growth rate of 3.5 percent
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annually from 1967, the emissions in FY 1977 without the Act
would be 536,000 tons. With controls adopted in this study, the
level of emissions would be 80,000 tons.
By FY 1977, the kraft industry will have expended
$132 million in air pollution control investments for scrubbers
added to furnace facilities, lime kiln venturi scrubbers, and
mu1titube cyclones for bark boilers; annualized costs will be
$40 million.
c.
Scope and Limitations of Analysis
Data sources include Government, trade, and financial
publications.
Analysis was aimed primarily at the entire kraft
paper industry because most pulp production is captive and finan-
cial statements for independent producers of market pulp are gen-
erally not detailed enough to warrant meaningful impact analysis.
Impact analysis was limited by the degree of horizontal integration
in some firms within the industry and by lack of information on the
type and quantity control expenditures since 1967.
Analysis of control requirements was limited to abatement
of particulates emissions. Odor pollution has been recognized in
this industry; however, at the present time no odor standards have
been promulgated by the EPA so no realistic analysis could be made.
Engineering Basis of Analysis
For kraft pulping, the recovery system, which includes the
furnace, smelt tanks, and lime kilns, emits significant quantities
2.
of particulates.
In addition, bark boilers, which are disposal
devices for bark wastes emit quantities of fly ash and perhaps some
bark char.
Table 4-38 shows particulates emission factors and rates
for these sources.
The control of these sources was based on application of the
assumed process weight standard to the recovery furnace--smelt tank
as one system and the lime kiln and bark boiler as separate
individual units.
Normally kraft mills will recover valuable
chemicals with control devices on recovery furnaces and lime kilns.
Increasing the control level on these two sources will be partially
compensated by values of the chemicals, which will be returned to
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process of liquor rejuvenation.
boilers have no economic values.
Particulates recovered from bark
For the purposes of analysis, it was assumed that venturi
scrubbers would be added to existing recovery furnace electro-
static precipitators.
All other equipment installed would be
considered replacements.
The basic data for determining control requirements in
pursuit of the process weight standard were taken from the three-
volume study, "Control of Atmospheric Emissions in the Wood Pulping
Industry", by Environmental Engineering and J. E. Sirrine. The
engineering data used are stated in Table 4-39.
Based on the cost
curves in the same study similar to that shown in Figure 4-5, unit
equipment and annual costs were developed and scaled to 1970
dollars (via use of Chemical Engineering's Plant Cost Index).
The
technical cost requirements for the three model plants are shown
in Tables 4-40 to 4-43. Depreciable lives used in the annual costs
are based on eight years for scrubbers and sixteen years for
multiple cyclones.
The development of national cost requirements derived on the
models was based on the mill size distribution shown in Table 4-43.
Rather than perform a mill-by-mill cost calculation, estimates
were determined by proportioning the model plant costs to the
number of mills and average mill size representative of each model
plant.
Average mill size was corrected to model plant size by
scaling model plant capital related costs by use of the six-tenths
rule. For example, an investment for a 300 tpd* mill would equal
the investment for a 500 tpd mill raised to the G.G. power.
* Tons per day.
4-115
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TABLE 4-38.
PARTICULATE EMISSIONS FROM KRAFT PROCESSES,
BASED ON 1967 CONTROL LEVEL
Potential Actual Particulate
Particulates, Emissions,
Source (lbs/ton air dried pulp) (lbs/ton air dried pulp)
Recovery Furnace 129 14
Lime Kiln 65 15
Bark Boilers 15 5
TOTAL 209 34
TABLE 4- 39.
ENGINEERING PARAMETERS, UNIT BASIS (AIR DRY TON PULP),
FOR CONTROL REQUIREMENTS CALCULATIONS
Process Unit
Process Weigh t,
(lbs/ton air dried pulp)
Typical Gas Volume,
(ACF/ton air dried pulp)
Recovery Furnace
5400-5900
420,000
Smelt Tank
5400-5900
45,000
Lime Kiln
1100-1200
68,000
Bark Boiler
900-1000
100,000
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TABLE 4-40.
CONTROL REQUIREMENTS FOR A 500-TON-PER-DAY MILL
Allowable
Emissions,
1bs. per ton Operating
Source air dry pulp Control Device Efficiency (%) Inves tmen t Annual Cost
Recovery Venturi 90 $322,000 $120,000
Furnace 1.5 Scrubbers (2)
Lime
Kiln 0.8 Venturi 99 101,000 34,300
Smelt Orifice
Tanks 0.1 Scrubbers (2) 97 76,000 32,800
Bark Sin gle- Stage
Boiler 1.0 Multicyc10ne 90 92,000 24,800
TOTAL 3.4 $591,000 $211,900
TABLE 4-41.
CONTROL REQUIREMENTS FOR A 1000-TON-PER-DAY MILL
Allowable
Emissions,
1bs. per ton Operating
Source air dry pulp Control Device Efficiency (%) Investment Annual Cost
Recovery Venturi
Furnace 0.8 Scrubbers (2) 95 $460,000 $188,700
Lime
Kiln 0.6 Venturi 99 201,000 67,500
Smelt Orifice
Tanks 0.1 Scrubbers (2) 97 104,000 48,600
Bark 2-Stage
Boiler 0.7 Multicyc10ne 94 253,000 67,900
TOTAL 2.2 $1,018,000 $372,700
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TABLE 4-42.
CONTROL REQUIREMENTS FOR A l500-TON-PER-DAY MILL
Allowable
Emissions,
lbs. per ton Operating
Source air dry pulp Control Device Efficiency (%) Investment Annual Cost
Recovery Venturi
Furnace 0.6 Scrubbers (3) 99 $ 621,000 $338,700
Lime
Kiln 0.5 Venturi 99 247,000 81,400
Smelt Orifice
Tanks 0.0 Scrubbers (3) 97 127,000 66,000
Bark 2-Stage
Boiler 0.6 Mul ti - cy clone 94 299,000 90,300
TOTAL 1.7 $1,294,000 $576,400
TABLE 4-43.
KRAFT INDUSTRY MILL DISTRIBUTION BY SIZE AND CAPACITY
Hodel Plant,
tons pe r day
air dry pulp
Total Daily Capacity,
tons air dry pulp
Mills, Number
Average Mill Size,
tons per day
air dry pulp
500
11,905
38
313
1000
38,556
51
756
1500
37,812
27
1400
4-118
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:::J
Z
Z
< 8
f-
\..LI
-p
#-
4
10 20 30
GAS VOLUME (CFM X 10,000)
40
I I
3
I
4
I I I I
6 7 8 9
AOT/DAY X 100
BASED ON 350 CFM/AOT/OAY
I
5
I
10
I
l'
Source:
Environmental Engineering, Inc., and J. E. Sirrine Company
Figure 4-2. Control Method Costs for a 99% Efficient
Venturi Scrubber Added to an Existing 90% Efficient
Precipitator - Recovery Boiler (99.8% A.a.E.)
4-119
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3.
Industry Structure
The kraft pulping industry is a segment of the kraft pulp and
paper industry, which is part of the pulp and paper industry. Many
kraft pulping firms do have papermaking facilities and some have
mills and plants for producing nonkraft types of pulp and paper.
In 1967, there were 116 kraft pulp mills representing the U.S.
pulping capacity of 72 firms. Over half the firms operated only
one pulp mill and the seven largest firms accounted for over 40 per-
cent of productive capacity.
Despite the high degree of concentra-
tion, competition in quality, service, and price was keen, and these
relationships are generally the same today.
For this report, kraft pulp mills are classified into three
classes:
capacity of 500, 1000, and 1500 tons of air-dried pulp per
day.
The classification is useful to show variations in needed air
pollution control expenditures and devices. Most of today's capacity
is in mills producing about 1,000 tons of air-dried pulp per day; 500-
ton mills are next, followed by those with 1,500 tons. The trend in
size and location has been toward the small to medium sized mills 10-
cated in the southeast.
a.
Operating Characteristics
The average operating rate for the production of paper
grade kraft pulp for 1959 through 1969 was about 92 percent. The
operating rate in 1967 was 88 percent. It rose to 92 percent again
in 1968 and then to 94 percent in 1969.
89 percent.
For 1970, it declined to
The relation of operating rate to price, and thus to prof-
its, is clouded.
Prices exist only for market pulp and 92 percent
of kraft pulp production is captive.
However, higher prices for
market kraft pulp appeared usually the same year or the year after
an operating rate that was between 88 and 92 percent.
b.
Resources
Kraft mills are located primarily in the northwest and
the southeast near the raw materials of wood and water.
For wood,
the quality of trees and the length of growing time are important.
The typical firm has its own forest reserves, thereby
controlling this portion of materials' cost and in some instances
exploiting it.
However, the cost of labor and required chemicals
4-120
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are not entirely within the industry's control.
Attempts to off-
set the increases in them have been seen in product price rises
and in adoption of techniques, such as computerized controls, which
increase operating efficiency.
4.
Market
Most kraft pulp production is captive.
The eight percent that
is marketed comes from firms without papermaking facilities and
from integrated firms producing surplus for market.
Kraft pulp is produced in three forms:
bleached, semibleached,
and unbleached.
Unbleached pulp finds uses in wrapping and bag
paper, shipping sacks, and linerboard; semibleached in printing
papers; bleached in sanitary food board.
Competitive products include plastic containers and wrappings,
glass containers, aluminum foil, and in some instances recycled pa-
per.
The kraft industry should maintain its share in most markets.
Fewest problems are expected in sanitary food board markets where
virgin paper is required.
Continued stiff competition, first re-
alized in the sixties, is expected to continue in the folding car-
ton market.
Demand for kraft pulp is derived from the demand for kraft pa-
per and paper products which are related positively to the demand
for consumer nondurables.
While demand for some kraft paper prod-
ucts which are necessities is better explained by such indicators
as population, demand for other kraft products follows more closely
the indicators of economic activity such as unemployment rate and
real disposable income.
Foreign trade exists in the kraft paper and products as well
as the kraft pulp markets.
The United States is and should
continue to be the major exporter of kraft paper and board used
for packaging; this is explained not only by raising economic
activity trends abroad but also by the lack of adequate forest
reserves in some nations.
The United States is, however, a net
importer of newsprint, most of which comes from Canada, and a net
importer of market sulfate pulp, even though the United States
exports about 40 percent of its market pulp. Market sulfate pulp
4-121
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imports provide about 7 percent of this country's sulfate pulp
requirements. The market sulfate pulp exports are explained
primarily by the increased level of economic activity and the
limited quantity and inferior quality of forest reserves in the
importing nations.
Sulfate pulp imports into the United States,
98 percent of which come from Canada, are explained mainly by
the substantial investments that some American firms have in
Canadian pulp mills.
Capacity, Production, Prices, Sales, Profits, Trends
In the past, the industry has been characterized by the investment-
price cycle. After heavily investing in new facilities to meet
actual and anticipated growth in demand, the industry was faced with
5.
overcapacity. Firms tried to run plants at least at break-even
levels, but prices declined especially as firms continually tried
to produce at economic production levels and thus added to the over-
supply problem.
As a result of the lower prices, profits declined
and the investment was cut back.
With demand increasing fairly
steadily, the relationship between supply and demand tightened,
prices increased, profits rose, and new investment was undertaken.
Although the industry appeared to be in the rising-price
phase of the cycle in 1969 and 1970, recent capital outlays have
not expanded production capacities as they did in past cycles.
Capital outlays were made in cost reducing processes of production
and distribution, along with outlays for product diversification
and pollution control facilities.
This has reduced the growth in
supply.
In the face of a steadily growing demand, this will main-
tain a closer relationship between supply and demand, and should
reduce the cyclic variations in prices and profits.
Product diversification has been instigated by the realization
that land and forest reserves could be another source of revenue.
Firms have entered the recreation, real estate, and lumber markets.
On the other hand, pulp and paper products hold promise for those
outside because firms in the lumber and plywood industries, along
with some producing competing container products, have diversified
into pulp and paper products.
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6.
Economic Impact of Control Costs
a.
Impact on Plants
To determine the control costs and financial impact for
the kraft industry, model plants were derived for mills of 500,
1,000, and 1,500 tons per day.
The assumptions for the model
plants include the number of process units shown in Table 4-44.
TABLE 4-44.
MODEL PLANT PROCESS UNITS
Process Units
Model Plant Size
(Tons Air-Dried Pulp/Day)
500 1000 1500
Recovery Furnaces - Smelt Tanks
Lime Kilns
2
1
2
2
3
2
1
Bark Boilers
1
1
To determine control costs for the model plants, the re-
covery furnace was assumed to be the only source where the present
control equipment, operating at an economic optimum of 90 percent
efficiency, was kept intact; venturi scrubbers were the assumed re-
quired equipment additions. Control equipment for lime kilns, smelt
tanks, and bark boilers were considered replacements of existing gas
cleaning equipment.
The cost parameters for the model plants are:
Model Plant Investment Annual Cost Unit Control Cost
(Tons Per Day Pulp) ($ Per Ton of Pulp)
500 $ 590,000 $212,000 1.28
1000 $1,020,000 $373,000 1.13
1500 $1,300,000 $576,000 1.16
The basis for the unit control cost is 330 operating days per year,
24 hours of production per operating day.
4-123
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Impact on Typical Firm
The sample of firms from which the analysis in this sec-
tion was made came from firms with disclosed financial statements.
Since these were primarily large firms, the analysis of firm impact
may have a built-in bias. Cash flows for each firm were approxi-
b.
mated in the following manner.
First, net income was subtracted
from net income before taxes to determine the level of taxes; then
the tax figure was subtracted from operating income to determine
cash flow. Based on the number of plants existing in 1968 and the
model which each approximated (i.e., 500, 1,000, or 1,500 tons per
day), the annualized and investment control costs were determined.
Then these were related to cash flows for each firm.
average relationships were developed.
From these,
Because of the relatively large magnitude and recent vin-
tage of many long-term debt issues in the capital structures of
sampled firms, cash flows were related not only to annualized costs
but also to the initial investment costs.
Annualized costs as a
percentage of cash flows averaged 2.0 percent and ranged from 0.3
percent to 4.2 percent.
The investment costs as a percent of cash
flows averaged 5.4 percent and ranged from 0.9 percent to 10.9.
It is apparent that sufficient cash flows could be gen-
erated to meet the estimated cost of pollution control. The effect
of costs on growth (net additional annual productive capacity) is
expected to be small.
Assuming that investment in control equip-
ment is at the expense of other investment, the estimated decrease
in growth would range from 0.07 percent to 0.17 percent depending
on whether the annualized cost or the initial investment cost
figures are applied.
c. Industry Composite
The most severe impact of control costs probably will be
borne by the uncontrolled, marginal, nonintegrated firms.
These
firms are relatively few in number and are not among the larger
producers in the industry.
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Demand Elasticity and Cost Shifting Effect on the Industry
The weighted average cost of control per unit of product
produced is $1.20, or about 0.7 percent of the selling price of
$167.30 per ton of air-dried pulp. Although no quantitative analy-
sis of the responsiveness of supply and demand functions to a
change in cost and price of this magnitude has been attempted, a
d.
qualitative analysis of responsiveness has been made. Recent capi-
tal outlays have had the effect of reducing the growth in supply.
Moreover, some kraft products are necessities and insulated, for
the most part, from fluctuations in economic activity.
These fac-
tors, along with vertical integration from tree cultivation to final
products, the market outlook, and the nature of pulp production as a
captive operation, indicate the control cost will be passed on to
the consumer.
4-125
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REFERENCE FOR SUBSECTION H
1.
"Control of Atmospheric Emissions in the Wood Pulping Industry",
Environmental Engineering, Inc., Gainesville, Florida, and J.E.
Sirrine Company, Greenville, South Carolina, Volumes I-III,
Contract No. CPA 22-69-18, U. S. Department of Health, Education,
and Welfare.
4-126
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I.
Lime
1.
Introduction
a.
Nature of Product and Process
Limestone consists primarily of calcium carbonate or com-
binations of calcium and magnesium carbonate with varying amounts
of impurities.
The most abundant of all sedimentary rocks, lime-
stone is found in a variety of consistencies from marble to chalk.
Lime is a calcined or burned form of limestone, commonly divided
into two basic products--quicklime and hydrated lime. Calcination
expels carbon dioxide from the raw limestone, leaving calcium oxide
(quicklime).
With the addition of water, calcium hydroxide (hydrated
lime) is formed.
The basic processes in production are (1)
limestone raw material, (2) preparing the limestone
crushing and sizing, (3) calcining the feed, and (4)
quarrying the
for kilns by
optionally pro-
cessing the quicklime further by additional crushing and sizing and
then hydration.
The majority of lime is produced in rotary kilns
and shaft (vertical) kilns; both can be fired by coal, oil, or gas.
Rotary kilns have the advantages of high production per man-hour
and a uniform product but require higher capital investment and have
higher unit fuel costs than most vertical kilns.
The open market
lime industry shows a trend toward installation of larger rotaries
with a far higher capacity than vertical kilns.
b.
Emissions and Costs of Control
Air pollution in the lime industry consists primarily of
particulate emissions in the form of limestone and lime dust.
The
main source of these emissions is the calcination process; the pe-
ripheral processes of crushing, pulverizing, sizing, and conveying
of the feed material are also significant potential sources. Since
most modern plants adequately control the peripheral processes for
economic and industrial hygiene purposes, only the kiln emissions
will be considered in this analysis.
Approximately 80 percent of the lime produced in the United
States is calcined in rotary kilns. The kilns vary in capacity from 50
to 700 tons per day and it is estimated that in the absence of control
4-127
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10 percent by weight of the lime produced in rotary kilns is re-
leased to the atmosphere as particulate matter.
Most rotary kilns
are equipped with dry mechanical collectors which remove an average
of 75 percent of the particulate effluent. The application of low-
energy venturi or two-stage dynamic scrubbers to the smaller rotary
kilns (less than 500 tons per day) and fabric filters to the larger
rotary kilns (500 tons per day and larger) would allow this segment
of the industry to achieve the assumed process weight rate standard
at an overall control efficiency of 98.9 percent.
Vertical shaft kilns account for virtually all of the re-
maining lime production.
These kilns tend to be smaller in capacity
and to emit significantly less dust, about 1 percent of the lime pro-
duced. Few, if any, vertical kilns are presently equipped with con-
trol devices.
The assumed process weight rate standard could be met
by adding cyclonic scrubbers, resulting in an 88.5 percent overall
control efficiency.
Particulate emissions from the lime industry in 1967 were
estimated at 393,000 tons. Predicted growth of the industry would
increase emissions to 609,000 tons by 1977 if control levels re-
mained unchanged.
Achievement of the assumed emission limitation
by the industry would reduce 1977 emissions to 32,000 tons.
The
investment required to accomplish this is estimated at $28,600,000,
with an annual cost in 1977 of approximately $7,200,000.
Scope and Limitation of Analysis
The technical and cost analysis in this section deals with
the entire lime industry except plants captive to the paper industry.
The analysis of economic impact is focused on those firms in the
c.
open market, since it is here that the economic effect is most clearly
defined.
Financial data were available for a limited number of firms;
thus the financial impact of air pollution control costs had to be
stated in somewhat general terms. Lime plants are almost invariably
either small, closely held companies or divisions of large, highly
diversified corporations. With the former, information is private;
with the latter, information concerning the lime division cannot be
readily segregated and analyzed.
4-128
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2.
Engineering Basis of the Analysis
As pointed out in the previous discussion, the air pollution
problem in the lime industry consists primarily of particulate
emissions in the form of limestone and lime dust. Although crushing,
pulverizing, sizing, and conveying of the feed material all contribute
to these emissions, the exhaust gases from the kilns represent the
largest source in the industry and the only one considered in this
analysis.
Rotary Kilns:
Approximately 80 percent of the lime produced in the United States
is calcined in rotary kilns. A sample distribution of rotary kilns on
the basis of capacity appears in Table 4-45. This table also shows, for
each kiln size, the estim~ted control efficiency required to meet the
process weight standard, the control device assumed most applicable to
achieve that efficiency, and the estimated installed and annual costs
of the control device.
In calculating the required control efficiencies, it was assumed
that, in the absence of control equipment, 10 percent by weight of the
. .
lime produced in rotary kilns is released to the atmosphere as partic-
ulate matter.
It was further assumed that the process weight rate for
these kilns is 180 percent of the lime production rate.
An Industrial Gas Cleaning Institute study of past installations
of control systems for rotary lime kilns indicates that wet scrubbers
(especially two-stage dynamic scrubbers) have been successfully
applied to many small kilns while fabric filters have been the most
common control device installed on larger kilns.
For this analysis,
it was assumed that required control efficiencies of less than 99
percent could be achieved with a two-stage dynamic scrubber, while
required efficiencies greater tnRn 99 percent would necessitate the
use of a fabric filter.
As Table 4-45 shows, this assumption means
that kilns of capacities less than 500 tons per day may be adequately
controlled by wet scrubbers while those in excess of 500 tons per day
will require fabric filters.
The estimates of installed costs for control devices came from
data developed by the Industrial Gas Cleaning Institute.
Figure 4-3
4-129
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500
800 -
(J)
~ 300
a:t
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0
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~
0 200 '" ...--" .~ -. .
en
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. : . : ~ .: ~: :: : : : : . : : .; : . . . : '.:.::: ~ - : :.' - . : .' .' : .. . . . . . : . : . : : . :; ::::.:.::.':: .. ::; : : : : : : : : . ; . : . - : ~ . : :
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25
50
125
1000
250
500
Capacity,
Ton/Day
Figure 4-3.
Comparison of Abatement Costs
Rotary Lime Kilns.
for
4-130
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is a graphical summary of that data.
Operating and maintenance cost
estimates were derived from the same information source. Annual
depreciation expense was calculated by dividing the installed cost
by the expected useful life of the control device (10 years for wet
scrubbers and 25 years for fabric filters). Annual interest was
assumed to be 8 percent while annual property taxes were assumed to
be 2 percent of the installed cost.
Total annual expense is the sum
of operating and maintenance, depreciation, and interest and property
taxes.
From the data in Table 4-45, a weighted-average installed cost
of $485 per ton of daily capacity and a weighted-average total annual
cost of $118 per ton of daily capacity were calculated.
Bureau of Mines estimates put the 1967 production of lime at
17.88 million tons (excluding production by plants captive to the
pulp and paper industry). . Using the cost factors derived above and
assuming that 80 percent of lime production comes from rotary kilns,
that these kilns operate at an average production/capacity ratio of
0.85, that 30 percent of the kilns are already adequately controlled,
and that capacity will grow at an annual rate of 5 percent, it was
calculated that achievement of the process weight standard by rotary
kilns will require an investment of $26.6 million by 1977 and an
annual cost of $6.5 million in that year.
Vertical Kilns:
Vertical shaft kilns account for virtually all of the remaining
twenty percent of the lime production. These kilns tend to be smaller
in capacity and emit significantly less dust, amounting to only 0.4
. percent of the lime produced. Satisfactory control of these kilns
can probably be achieved with the installation of cyclonic scrubbers.
Last year's report indicated that the weighted average installed cost
of this control was $179 per ton of daily capacity and the weighted
average annual cost was 564 per ton of daily capacity.
In the absence
of any new information, these cost factors were used again in this
analysis. Applying these factors to the production of lime in vertical
kilns (20 percent of the total) and assuming that the average production/
capacity ratio is 0.85, the 40 percent of the kilns are already adequately
controlled,
and that capacity will grow at an annual rate of 5 percent,
a required investment of $2.1 million by 1977 and an annual cost of
$0.7 million in that year were calculated.
4-131
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TABLE 4-45.
CAPACITY DISTRIBUTION AND CONTROL COSTS FOR ROTARY LIME KILNS
Operating Interest
and and Total
Capacity No. of Required Control Installed Maintenance Property Annual
(Tons/Day) Kilns Efficiency Device Cost Cost Depreciation Taxes Cost
100 1+ 98.1 2-Stage S 65,noo $ 4,800 $ 6,500 $ 6,500 $17,800
Dynamic
150 3 98.3 Scrub- 80,000 5,100 8,000 8,000 21 ,100
.s:-- ber
I
f-' 200 16 98.5 92,000 5,400 9,200 9,200 23,800
UJ
N
250 8 98.6 105,000 5,600 10,500 10,500 26,600
300 10 98.7 115,000 5,800 11 , 500 11,500 28,800
350 9 QS.7 123,000 6,100 12,300 12,300 30,700
400 14 98.8 131,000 6,300 13 ,100 13 , 100 32,500
450 4 98.9 140,000 6,500 14,000 14,000 34,500
500 18 99.0 Fabric 315,000 30,000 12,600 31,500 74,100
550 6 99 .1 Filter 330,000 32,400 13,200 33,000 78,600
600 2 99.1 345,000 34,800 13 , 800 34,500 83,100
650 4 99.2 360,000 37,200 14,40Q 36,000 87,600
700 2 99.2 370,000 39,600 14,800 37,000 91,400
-------
3.
Industry Structure
Characteristics of the Firms
a.
The United States lime industry is conventionally divided
into two sectors--open market and captive. For 1967 approximately
75 firms sold lime commercially from 121 active plants (one in Puerto
Rico).
Very small pot kiln plants that operate sporadically and on
a local basis were not considered. Open market production for the
year amounted to 11.46 million tons of lime, or nearly 64 percent of
the output for the entire industry. The captive sector of the lime
industry was represented by 104 active plants in 1967. Captive pro-
duction totaled 6.51 million tons for the year, equaling 36 percent
of total output.
The sizes of plants in the lime industry, classified using
production records for 1967 by the U.S. Bureau of Mines, are shown in
Table 4-46. The numbers of commercial (121) and captive (104) plants
are not additive, since 16 plants produce for both sectors.
TABLE 4-46. NUMBER AND PRODUCTION OF DOMESTIC PLANTS, 1967
Annual Production Number Production Percent
(Short Tons) of Plants (1000 Tons) of Total
Less than 10,000 56 284 2
10,000 to 25,000 37 604 3
25,000 to 50,000 29 1,020 6
50,000 to 100,000 29 1,890 10
100,000 to 200,000 25 2,810 16
200,000 and over 33 11,366 63
TOTAL 209 17,974 100
Some of the larger producers have been covered in the trade
journals and several have reported capacities of 1,000 to 1,500 tons
per day, with the largest known at 3,000 tons per day (over 900,000
tons per year). Very small plants are seldom mentioned in the lit-
erature,but it is almost certain that some of these plants operate
with only a single, small capacity (5 to 20 tons per day) vertical
kiln. The average plant for 1967 produced approximately 86,000 tons
per year (roughly 275 tons per day). Average plant size has increased
4-133
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throughout the sixties, and for 1969 it had increased to 100,000
tons per year (330 tons per day).
b.
Operating Characteristics
Based upon production and capacity figures for a sample
of 42 plants, it is estimated that lime producers operated at slightly
over 85 percent of capacity in 1967. This is a healthy operating rate,
especially considering that quicklime is quite perishable and should
be consumed within a month or two after manufacture.
Before 1962, the industry normally faced excess capacity
(65 to 70 percent operating ratio) and low profitability.
With the
massive introduction by the steel industry of the basic oxygen pro-
cess, however, lime for steel flux usage nearly tripled and in gen-
eral lime producers recorded a prosperous decade.
c.
Resources
Raw limestone occurs in virtually every State of the United
States, and the country's supply is so vast that a total is incalcu-
lable.
However, the deposits of some States lack the necessary qua1-
ity or economic accessibility and do not warrant further processing.
Both captive and open market lime were produced in 41 States in 1967.
Most lime producers own their sources of supply and have ample re-
serves, but the cost of obtaining stone or kiln feed varies widely
and is an important segment of overall manufacturing costs.
Labor costs represent on the average slightly under 20
percent of sales.
Rising wages in recent years have caused a trend
toward capital intensiveness and automation, a trend that is expected
to continue. In 1960 the open market sector employed 6,200 workers
at an average wage per man-hour of $2.35. For 1967, these figures
were 5,800 and $3.02.
Over the same period, production rose from
8.2 to 11.5 million tons.
4.
Market
a.
Distribution
Since raw materials are widely distributed and transporta-
tion costs can quickly become prohibitive for a low value-to-bulk
produce, lime plants tend to locate near major markets.
In contrast
to cement, for example, most lime is shipped directly from the plant
4-134
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instead of from distribution terminals. Normally, lime is shipped
not more than 200 to 300 miles from the plant. A few firms have de-
veloped cheap water transportation, and shipments from the Mississippi
River to east and west coast cities occur.
Lime, now regarded as a basic industrial chemical, is used
for a variety of purposes. The distribution of output by consumers
for 1967 is shown in Table 4-47 below.
TABLE 4-47.
1/
LIME SOLD OR USED IN THE UNITED STATES, 1967-
(Thousand of Short Tons)
Percent
Use Open Market Captive Total of Total
Agriculture 174 0 174 1
Construction 1,433 2/ 1,433 8
Chemical & Other Industrial 1,593 4,369 5,962 33
Metallurgical 4,452 1,148 5,600 31
Paper and Pulp 878 92 970 5
Sewage Treatment 322 49 371 2
Sugar 27 536 563 3
Water Softening & Treatment 1,019 4 1,023 6
Refractory Lime 1,565 315 1,880 10
TOTAL 11,461 6,513 17,974 100
1/ of rounding.
- Totals may not add because
'l:../ Data withheld to avoid disclosing individual confidential data.
b.
Competition
Traditionally, the lime industry has been reported to be in-
tensely intracompetitive. There are several possible reasons to ex-
plain this condition: (1) Historically, the industry often functioned
at low operating rates (65 to 70 percent of capacity) and this in-
variably led to higher costs per ton of output and a "buyers' market";
price wars, even to the extent of prices falling below the cost of
production, have been documented. (2) Because quicklime is reactive
to atmospheric moisture and should be used quickly--within a month
or two after manufacture--or become waste, the firms faced some
pressure to dispose of it.
(3) Variance in quality and consistency
4-135
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of the final lime product from producer to producer is an added
factor in the competitive picture.
External competition is minimal.
Lime has few contenders.
For its use as an alkaline reagent in chemical production, as a
flux in steelmaking, and as a cheap source of carbon dioxide, there
are no alternate materials to replace lime or limestone within a
comparable price range. In the construction sector, however, lime
has lost considerable ground to cement, gypsum plaster, and gypsum
wallboard, and finely crushed limestone has largely replaced lime
in agricultural uses because it lasts longer in the soil and re-
quires less frequent application.
Foreign trade has little importance to the U.S. lime
industry. Net imports for 1967 amounted to only 70,000 tons (less
than 1 percent of the market). Trade is significant only near the
Canadian a1.1 Mexican borders.
5.
Trends
a.
Production
Excluding a slight decline in 1967, the lime industry has
set a record level for production in every year over the past decade.
For 1970, output stood at an estimated 21.15 million tons, an im-
pressive increase of nearly 64 percent from the 1960 level of 12.94
million tons--a compounded growth rate of just over 5 percent an-
nually.
Open market production has led the way with a 5.5 percent
increase per annum; captive tonnage meanwhile increased 4.5 annually.
This remarkable record in the sixties was spurred by several new
and expanded uses of the product, chief of which was the change to
the basic oxygen furnace in the steel industry. Open hearth fur-
naces require about 20 pounds of lime for each ton of steel produced;
the basic oxygen furnaces require about 150 pounds.
Increased usage
of lime was also seen in soil stabilization, sewage and water treat-
ment, and water softening.
Optimism prevails in the industry and
open market production is expected to continue to grow at a healthy
pace into the seventies.
b.
Price, Sales, and Profits
Lime has always been a low-price product, and rapid
4-136
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increases in price have not occurred. The average F.G.B. plant
price per ton on a bulk basis stood at $13.35 in 1960. Small in-
creases occurred yearly until a peak of $13.87 was reached in 1965.
Average price then dipped back down to $13.27 in 1966, and since
then has risen back up to $13.89 per bulk ton in 1969. The 1966
depression in the price level may partially have been the result
of hard bargaining by steel firms for lower prices, or that a
number of new efficient .plants went on line during this period, as
well as new and larger capacities at established firms. Continua-
tion of depressed prices is unlikely, considering a strong demand
and rising production.
6.
Economic Impact of Control Costs
a.
Industry Composite
Many of the older, less efficient plants in the industry,
which have not installed high efficiency control equipment, are ex-
pected to feel the greatest effect from the outlays for pollution
abatement.
It is estimated that by 1967 the lime industry had al-
ready invested approximately $10 million in equipment for control
of kilns and was experiencing an annual cost of $2.7 million.
b.
Impact on a Plant
The impact of the added costs of air pollution control
was analyzed for four model plants, constructed to represent typi-
cal operating patterns over a wide range of capacities with a va-
riety of kiln combinations. The plants described here do not nec-
essarily exist, but are based on known characteristics within the
lime industry.
Basic descriptions and financial data for these model
plants are shown in Tables 4-48 and 4-49.
4-137
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TABLE 4-48. BASIC DESCRIPTION, LIME PLANTS
Model Plants
Characteristic Plant 1 Plant 2 Plant 3 Plant 4
Capacity (Tons per
year) 89,100 89,100 173,250 330,000
Construction Cost,
Without Control,
1969 $2.0 mil. $2.6 mil. $4.3 mil. $7.7 mil.
Kilns (Number,
Type, Size in
Tons/Day) 3-Vertical- l-Rotary- 6-Vertica1- I-Vertica1-
90 270 50 400
1-Rotary- l-Rotary-
225 600
Production at 90
Percent Operating
Rate (Tons/Year) 80,190 80,190 155,925 297,000
Average Price Per
Ton (F.O.B. Plant,
Bulk, 1969) $13.89 $13.89 $13.89 $13.89
Control Investment
Cost $51,000 $115,000 $170,000 $385,000
Annualized Control
Cost $18,600 $ 25,200 $ 45,000 $ 86,500
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TABLE 4-49. INCOME STATEMENTS, LIME PLANTS
(Thousands of Dollars)
Plant 1 Plant 2
Before After Before After
Control Control Control Control
Sales 1,114 1,114 1,114 1,114
Cost of Goods Sold 1,068 1,068 1,066 1,066
Added Control Cost ° 19 ° 25
Taxable Income 46 27 48 23
Income Tax 12 7 12 6
Net Earnings 34 20 36 17
Cash Flow 134 125 166 159
Net Earnings/Ton 0.424 0.249 0.449 0.212
Cash Flow/Ton 1.671 1.559 2.070 1.983
Control Cost/Ton 0 0.237 0 0.312
Return on Investment 2.97% 1.96% 2.45% 1. 56%
Plant 3 Plant 4
Before After Before After
Control Control Control Control
Sales 2,166 2,166 4,125 4,125
Cost of Goods Sold 2,000 2,000 3,879 3,879
Added Control Cost 0 45 0 86
Taxable Income 166 121 246 160
Income Tax 55 35 91 52
Net Earnings 111 86 155 108
Cash Flow 326 318 540 511
Net Earnings/Ton 0.712 0.552 0.522 0.364
Cash Flow/Ton 2,091 2.039 1. 818 1.721
Control Cost/Ton 0 0.289 0 0.290
Return on Investment 4.34% 3.62% 3.46% 2.35%
4-139
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The relationships shown in the preceding income state-
ments indicate the magnitude of air pollution control costs for
lime plants with vertical kilns (Plant 1), a rotary kiln (Plant 2),
and various kiln combinations (Plants 3 and 4). These figures in-
dicate the impact which may be expected for the large number of
single plant firms.
Multiple plant firms may be approximated by
multiplying individual plant costs by the number of plants.
c.
Impact on the Firms
Approximately 20 percent of the firms in the open market
sector of the lime industry have interests in other areas such as
construction materials, cement, gypsum, chemicals, and drugs.
How-
ever,
the vast majority (80 percent) are relatively small companies
which base most of their sales on lime and lime products.
If not
passed on in the form of price increases, the added costs of air
pollution control would in general have a detrimental effect on the
earning power of these smaller firms due to low profit margins (3
to 5 percent of sales before control is shown in the examples of
the preceding
section), and quite a few of the firms occasionally
show losses from operations.
The additional burden of air pollu-
tion control would normally lower income by at least 20 to 40 per-
cent and. in the worst situation, could swallow all profits. The
captive sector of the industry would probably feel less effect as
their lime plants are only small parts of much larger operations.
Based on a study of the balance sheets of approximately
20 open market firms, it does not appear that most companies will
face difficulties in raising the necessary capital for pollution
control.
The typical balance sheet shows a strong current ratio,
adequate working capital, and low levels of debt.
Lime producers
have several ways to raise funds including cash flow from opera-
tions, term loans. and bank revolving credit agreements; most com-
panies have reasonable credit arrangements and good relations with
their bankers.
There are some, however, who do appear unprofitable.
have poor credit relations. and would probably have trouble raising
the necessary capital.
4-140
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d.
Demand Elasticity and Cost Shifting
Lime is one of the starting materials for a wide variety
of products. Because lime is essential in the manufacture of chemi-
cals, metals, and thousands of other industrial products, its de-
mand is not highly elastic with regard to price; therefore, the
lime industry should lose little of its market to substitute prod-
ucts, even if the entire added costs of pollution control are passed
on to purchasers.
Intraindustry competition is normally characterized as
severe, and selective price increases by some firms would likely
cause others to move into the market.
There are exceptions; for
example, in some marketing areas, isolated producers face little com-
petition and should be able to pass on the added costs.
With a rise
in prices, lime producers in general would find their marketing areas
expanding or contracting depending upon the efficiency of their op-
erations.
For the past several years the demand for lime has been
strong and output has been increasing, and these trends are expected
to continue.
With a favorable outlook for the coming decade, it is
expected that by 1977 the lime industry in general should be able
to shift most of the control cost into price. This conclusion is
bolstered by the following considerations: (1) all lime producers
will be affected by pollution control, and the annual cost per unit
of output is reasonably constant for most plants (i.e., in the
range of $0.25 to $0.30 per ton); (2) with the costs of control
having a moderate to severe effect upon the earnings of most firms,
the industry in general should not be able to tolerate the decline
in income; (3) if the cost of control were to be passed on, the re-
sulting price increase would be rather small (about 2 percent per
ton, based upon the 1969 average bulk price at the mill of $13.89
per ton); (4) price increases would be little affected by external
competition and substitution; and (5) competition within the industry
is keen but by no means uniform throughout the country. To the ex-
tent that some firms are larger and more efficient, they may be bet-
ter able to raise prices.
4-141
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e.
Effect on Industry
Many of the older or very small plants are obsolete from
both efficiency and profit points of view and may be abandoned if
faced with high control costs.
To compensate, production should
increase from the larger kilns and the industry operating ratio
would thereby increase. Firms which have been operating close to
capacity may launch expansion programs as a result of increased
demand.
A second effect of control may be a renewed interest in
vertical kilns.
The lower relative costs associated with controlling
the large vertical kilns coupled with their excellent thermal prop-
erties and lower investment costs may make them more attractive in
some applications.
slowed somewhat.
The trend toward high capacity rotaries may be
The open market sector of the lime industry may benefit
by the imposition of control costs.
The added expense may make
captive production less desirable for those industries needing
large amounts of lime--most notably steel and pulp and paper.
It should also be noted that the lime industry could bene-
fit greatly from the national concern for the environment.
Speci-
fically, the power industry may require large amounts of lime by
1980 in the form of an additive to control sulfur oxides from the
burning of fossil fuels.
Although the amounts to be used are far
from certain, it is possible that such pollution control efforts
will make a significant new market for the lime industry.
4-142
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REFERENCES FOR SUBSECTION I
1.
Industrial Gas Cleaning Institute~ "Study of Technical and Cost
Information for Gas Cleaning Equipment in the Lime and Secondary
Non-Ferrous Metallurgical Industries"~ 1970.
2.
Midwest Research Institute, "Handbook of Emissions, Effluents, and
Control Practices for Stationary Particulate Pollution Sources",
1970.
3.
National Air Pollution Control Administration~ '~ir Pollutant Emis-
sion Factors", 1970.
4.
United States Department of the Interior~ "Bureau of Mines Yearbook",
1967.
4-143
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J.
Nitric Acid
1.
Introduction
a.
Nature of Product and Process
Nitric acid is an important material in the manufacture
of fertilizer-grade ammonium nitrate and explosives.
The acid is
produced by oxidation of ammonia, usually under high pressure and
temperature over a platinum catalyst, forming nitrogen dioxide
(NOZ) and nitric oxide (NO). The gaseous products are removed
from the reactor, cooled to form more NOZ' and are sent to an
absorption tower to form the acid product. The process forms an
acid of approximately 60 to 65 percent strength, which is sufficient
for ammonium nitrate production, and may be upgraded to 99 percent
strength by one of several concentration processes.
Both the
ammonia reactor and the absorption tower are operated under high
pressure, which favors heavy production of NO and NOZ with minimum
amounts of equipment. Oxidation of ammonia and final reduction
of tail gas compounds are highly exothermic reactions which
produce the heat and energy needed to satisfy demands in other
parts of the plant.
b.
Emissions and Cost of Control
Nitrogen oxides, the primary pollutants of concern in
the production of acid, are essentially emitted from the absorption
tower. The purpose of this tower is to absorb NOZ with water in
countercurrent flows. The original gas stream, containing about
8 percent NOZ' possesses 0.3 to 0.5 percent NOZ and NO combined on
leaving the tower. The balance of the gas contains 2 to 4 percent
oxygen and 95 to 97.5 percent nitrogen.
Many plants practice partial pollution abatement
(decolorization) in accordance with local regulatory agencies.
The N02' which produces a characteristic reddish-brown plume,
is reduced to NO by reaction of the tail gas with methane or propane
over a catalyst.
Abatement of NO is required by the assumed emission
standard.
uncontrolled emissions before decolorization are 45
pounds of NO per ton of product.
x
The assumed emission standard
4-144
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is 5.5 pounds per ton of acid produced for existing plants.
New plants are assumed to perform at least as well.
Nitric acid plants emitted 145,000 tons of NO in
x
1967. Without the Act, the emissions would be 229,500 tons
in FY 1977 based on a 4.5 percent growth rate through 1970,
and 5 percent thereafter. Implementation of the Act would
reduce the emissions to 25,000 tons by FY 1977. The nitric
acid industry would be required to spend $37 million for
investment and $14 million for annual expenditures for full
implementation by FY 1977.
These estimates are based on
catalytic reduction technology. For many pre-1960 plants, it
is doubtful whether this technique will be used. More likely,
such plants will be shut down.
2. Engineering Basis of Analysis
The application of catalytic reduction technology was
based on the assumption that only modern, large plants would
and could accept such technology without a significant overhaul
in the original plant equipment.
For the purpose of cost
estimation, plants built before 1960 were assumed to shut
down rather than add the necessary equipment for abatement.
Based on a total industry population of 194 nitric acid
plants in 1970, encompassing some 85 establishments, 10
plants are considered to have met the assumed emission standard.
An additional 52 plants practice decolorization and hence
are in a position to abate the full route because of their
existing power recovery capabilities, which are necessary
to de colorize via a catalytic combustor.
Of the remaining
132 plants, which are totally uncontrolled, 63 were assumed
to add the necessary control equipment to their existing
plants.
This decision was a compromise to separate those
who would shut down production altogether; those who would
go to great expense and add such equipment as new absorption
towers, heat exchangers, waste heat boilers, and turbine
expanders; and those who would build new plants with the
4-145
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necessary abatement equipment to meet all required emission
standards.
The model plants and attendant costs are stated as follows:
Model Plant
Plants Investment Annual
63 $300,000 $ 80,000
52 $400,000 $120,000
150 ton per day
300 ton per day
The costs include investments for a single high temperature
combustor, waste heat boiler, catalysts, piping, and instrumen-
tation.
It is assumed that sufficient make-up power is available
from the compressor.
No credit was given for stearn exports
available from the waste heat boiler.
Estimates for a typical 300-ton-per-day plant that does
not practice power recovery (plants built before 1960) have
been as high as $1.5 million for application of high temperature
or dual combustion technology.
If a plant were faced with
such an investment, obviously it would shut down.
For such plants,
molecular sieve absorption offers an attractive alternative.
Investment for this alternative is approximately $250,000 for
a 300-ton-per-day plant.
Operating .costs are comparable to
those for catalytic reduction abatement.
In addition, collected
NO pollutants can be recovered as usable nitric acid.
x
3.
Industry Structure
a.
Characteristics of the Firms
Nitric acid is almost entirely a captive industry,
producing an intermediate for manufacturing fertilizers, commercial
explosives, and other goods. In addition, the Federal government
owns many plants for producing ordnance products. Present ownership
of acid plants (1970) is 80 percent controlled by large, integrated
firms--chemical producers and oil and gas companies. The remaining
20 percent are owned by farm cooperatives and small, chemical
fertilizer-oriented companies.
4-146
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firms.
As of 1970, there were 87 commercial plants owned by 35
Many plants are owned by firms with ammonia and ammonium
nitrate facilities. Companies producing fertilizer often have
urea and ammonium phosphate plants as well as nitric acid and
ammonium nitrate facilities at the same location.
Urea is produced
directly from ammonia, bvpassing the acid process, and its
use provides flexibility to a firm's fertilizer operations. Thus,
horizontal and vertical integration is evident in the character
of the firms owning acid plants.
b. Operating Characteristics
The nitric acid industry maintained a balance between
productive capacity and output from 1960 to 1968.
Profits were
maintained with operations running at 80 to 90 percent of capacity.
During the sixties, expansion grew at an annual rate of 9.5 percent,
in step with demand for ammonium nitrate.
Additions to capacity
surged in 1967, with a 13.7 percent increase over 1966.
However,
sales of fertilizers sagged in 1968 and 1969, and the industry
was faced with idle facilities. Apparently, sagging prices for
grains and bad weather were responsible for the slowdown in sales.
c.
Resources
Ammonia is the most important compound in the production
of nitric acid. Based on a price of $35 per ton, ammonia constitutes
51 percent of the manufacturing costs.
Availability of ammonia
at low cost depends on the hydrocarbon fuel source used in its
synthesis.
Natural gas, refinery off-gas, and naptha are the
important feed sources used in this country. Improved technology
geared to large production of ammonia through the application of better
catalysts and turbine-driven centrifugal compressors has lowered
the costs of manufacture; these vary from $35 per ton produced in
an economical captive plant to $75 per ton for the delivered,
merchant product.
Catalysts of platinum-rhodium formulations are used in
the oxidation of ammonia and the reduction of tail gas nitrogen
4-147
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oxides.. Catalyst losses as a result of the ammonia oxidation
may vary from $0.40 to $2.20 per ton of acid. Based on the
manufacturing cost of acid at $19.50 per tont catalyst losses may
vary from 2 to 11 percent of the manufacturing costt plus interests
and renewal costs. The impact of abatement adds significance to
the catalyst requirementst as catalysts for nitrogen oxides must
be carefully monitored during process operation. In additiont
the catalyst units for abatement must be renewed at least once
every two years.
Fuelt utilitiest and labor appear to be insignificant
items in the acid manufacture itself.
Transportation costs are
important.
For the firm producing both ammonia and nitric acidt
it is much cheaper to ship ammonia; one ton of 57 percent nitric
acid requires only 0.17 tons of ammonia. Hencet an ammonia plant
located near feedstock sources and nitric acid facilities located
near end use points would result in transportation savings.
4.
Market
a.
Distribution
Synthetic ammonia is normally produced near oil and gas
fields in California and the gulf coast of Texas and Louisiana.
Ammonia is usually stored in pressure tanks as a liquid.
It is
more easily stored and it is cheaper to ship to end use points
than nitric acid.
The distribution of nitric acid consumption is as follows:
Ammonium nitrate fertilizers
Ammonium nitrate explosives
62.4%
8.0%
2.4%
1.4%
~liscellaneous fertilizers
Dinitrotoluene (urethanes)
Nitrobenzene (rubber chemicalst
urethanest etc.)
Commercial explosives and
propellants
1.4%
Miscellaneous direct uses
Miscellaneous compounds
16.8%
5.2%
2.4%
4-148
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Nitric acid plants for the most part are concentrated near markets
in the Midwest for nitrate fertilizers. Plants often convert
the acid directly, at the same location, into ammonium nitrate.
Pri11ed nitrate can be mixed with granulated concentrates of
phosphate and potash to produce complete fertilizers.
Fertilizer-grade ammonium nitrate can be converted into
explosives for commercial uses such as coal mining, all types of
construction, mining, and quarrying.
Nitric acid destined for final industrial consumption
goes into manufacture of urethane foams, both rigid and flexible;
aniline for rubber, chemieals, dyes, pharmaceuticals, and hydro-
quinone; and nitrous oxide for anesthetics and food aerosols.
b.
Competition
Nitric acid is not a merchant chemical of any significant
volume; that is, approximately 10 percent is sold in a competitive
market. The marketability of its end products determines the degree
of competition for the industry.
Use of ammonium nitrate in fertilizer seems to be the
most competitive area.
A very close substitute is urea.
It is
high in nitrogen content, can be prilled for intimate mixing with
other fertilizer materials, and is not as subject to leaching as
ammonium nitrate.
Therefore, nitric acid usage in fertilizers
is price competitive with urea.
Nitric acid is used to a small
extent in acidulation of phosphate rock; however, its use on a
large scale is limited due to an abundant supply of sulfuric acid
at much lower cost than for nitric acid.
Nitric acid usage in the fertilizer business seems limited
due to the growing use of anhydrous ammonia applications in mixed
liquid fertilizers. As liquids gain more acceptance with farmers,
anhydrous ammonia can be used directly in preparing a liquid
application, thus foregoing the expense of acid production.
In the industrial applications of nitric acid, there
seems to be little potential for substitution. Products such
4-149
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as explosives, dyes, and the urethane foams can be produced only
from nitric acid derivatives.
5.
Trends
a.
Capacity and Production
Since 1967, the nitric acid industry has been faced
with excessive capacity due to overexpansion of capacity and a
sagging market for fertilizers.
Few new plant additions are
expected during the next 5 years as the industry is expected to
rationalize the present imbalance in supply and demand.
Although demand for acid is expected to grow at an
annual rate of 5 percent, growth in capacity is expected at an
annual rate of only 1 percent.
Demand for fertilizers and
explosives will be consistent with the 5 percent growth pace.
Urethane demand is expected to grow at a rate of 25 percent
through 1975; however, its portion of the acid market is small.
Above average growth rates are expected for dyes, pharmaceuticals,
etc., but again these absorb only a minor portion of acid production.
If nitric acid remains available at present low prices,
possible new uses may become a reality.
Because of its chemical
reactivity, nitric acid does offer itself as a potential in
formulating new plastic products.
b.
Prices, Sales, and Profits
Prices for nitrogen nutrients paid by farmers have steadily
declined during the 10 years ending in 1970.
Ammonium nitrate,
for example, has dropped from $2.44 per unit (1 unit = 20 lbs.)
in 1960 to $1.79 in 1970. Most of this price erosion has been due
to the increasing availability of cheap ammonia through improved
technology, but nitric acid price erosion in the late 1960's has
been due to overcapacity. Prices for ammonium nitrate, as paid
by farmers, are a good barometer of trends in nitric acid prices.
As the operating ratio of the industry improves, prices
and profits should recover during the next 5 years.
In 1969, output
was only 72 percent of capacity.
The break-even point occurs when
4-150
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production runs at about 80 percent.
Assuming that nitric acid
sales grow by 5 percent and annual capacity by 1 percent, industry
production should exceed the 80 percent operating ratio sometime
in 1972 or 1973.
6.
Economic Impact of Control Costs
a.
Impact on Plant
Since a viable nitric acid market does not exist, the
impact of control must be related to the end products.
For purposes
of illustration, ammonium nitrate was selected because it comprises
two-thirds of the market for nitric acid.
The impact of added costs for pollution control was
determined for a 380-ton-per-day
ammonium nitrate facility with
its own captive nitric acid support facility (300 tons per day)
under two options. One option (Plant A) represents an existing
acid plant requiring a high temperature combustor addition to the
original plant. The second aptian (Plant B) assumes a new acid
plant designed for required abatement via high temperature
combustion. Although not sho,Vll here, other designs in combustion
technology, such as the dual stage combustion syste~may be expected
to perform effectively at comparative cost.
The control costs per ton of nitric acid under the two
options are shown below in Table 4-50.
TABLE 4- 50.
BASIC PLANT DESCRIPTION, NITRIC ACID
Nitric Acid - Ammonium Nitrate Systems
Plant A Plan t B
Nitrate Capacity (Tons/Yr)
Nitrate Production (Tons/Yr)
Plant Investment
125,400
112,900
$5,400,000
$ 400,000
125,400
112,900
$5,400,000
$ 50,000
Control Investment
Added Control Cost!! ($/Ton
Acid)
$
1.34
$
(0.05)?:.../
1/ Includes depreciation and interest charges calculated at 20 percent
- before taxes on control investment.
~ Steam credits will more than compensate for capital and catalyst
changes.
4-151
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The existing acid plant would incur an added cost of $1.34 per ton of
nitric acid versus no cost for a new plant.
The impact of pollution control on the ammonium nitrate-
nitric acid complex under the two options is shown in the following
income statement exhibited in Table 4-51.
The cash flow decreases only by a negligible amount
as
a result of added control costs.
This is important to an industry
which already experiences a low return on investment (on the order
of 5 percent after taxes). The significant drop in earnings for
the facility with an existing acid plant will certainly discourage
similar firms from upgrading existing facilities, especially older
acid plants with little or no book value.
TABLE 4-51. ANNUAL INCOME STATEMENT
(THOUSANDS OF DOLLARS)
Plants A&B Plant A Plan t B
(Without Control) (After Control) (After Control)
Sales $4,853 $ 4,853 $4,853
Cost of Goods
Sold 4, 470 4,590 4,531
Added Control
Cost 0 120 (4)
Net Income Before
Tax 384 264 388
Income Taxes 173 119 175
Net Earnings 211 145 213
Cash Flow 751 725 758
Net Earnings/Ton $2.05
Product $2.05 $1.28
Change in 0
Earnings,% 0 -29
Control Cost,
% of Sales 0 2.5 0
---
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b.
Impact on Firm
Well over 80 percent of the firms involved in nitric acid
production have interests in many other areas including oil, natural
gas, and a wide variety of chemicals. Because of this diversification
and the size and financial strength of the firms involved, abatement
costs should have little impact on total earnings.
c. Demand Elasticity and Cost Shifting
Fertilizers in general and nitrogen fertilizers in
particular have been among the hardest hit of the chemical categories
over the past few years. Overcapacity and retarded sales have combined
to produce poor returns and restricted profits.
The future is
expected to be a little better, but producers remain pessimistic
and there seems little hope for substantial improvement before 1973.
For the past several years, demand for nitric acid and
ammonium nitrate has fallen short of supply capabilities. Competition
has been stiff, prices have been at a low level, and consequently,
air pollution control costs have generally been absorbed by the
manufac turers .
With an uncertain future ahead, it is expected that
abatement costs will continue to be absorbed.
Demand for ammonium
nitrate is elastic with regard to price, because the farm community
can be expected to switch to substitutes such as anhydrous ammonia
and urea if ammonium nitrate prices increase relatively; in fact,
production and consumption patterns of nitrogenous fertilizers
in the past several years have shown a movement toward such
substitues.
Ammonium nitrate and nitric acid both face strong
competition and must be expected to absorb pollution control
expenses.
d.
Effect on Industry
Pollution control equipment including catalytic reduction
has been included in virtually all new nitric acid expansions in
the past few years. Added expenses for catalysts and capital
changes for the most sophisticated designs are more than compensated
for by heat recovery.
On the other hand, upgrading pre-1960 plants
4-153
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may prove uneconomic.
Costs for these plants will be in excess
of estimates shown in Table 4-50 and Table 4-51; hence, many such
-- ..
plants will be shut down. Plants bUilt since 1960 that incorporated
partial abatement (decolorization) will incur costs similar to the
estimates shown in this analysis for existing plants.
The fertilizer supply and pricing situation of the past
few years has had severe financial effects on the smaller producing
companies, and a spate of mergers and takeovers has followed to
consolidate and rationalize the industry. It is expected that
obsolete plants will be replaced with new modern plants capable
of meeting the assumed emission and new source performance standards.
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REFERENCES FOR SUBSECTION N
1.
2.
"Nitric Buildup Begins Again", Chemical Week, October 12, 1968.
Private Communication, Chemical Construction Corporation,
September 14, 1971.
3.
4.
Private Communication, D. M. Weatherly Company, Atlanta, Georgia,
CODtrol Techniques Document for Reduction of NO Pollutants
for Nitric Acid Plants, in support of New Sourc~ Performance
Standards, Section III of 1970 Clean Air Act Amendments.
Private Communication, Union Carbide Corporation, 1971.
1971.
5.
6.
Hahn, Albert V. G., Petrochemical Industry Markets and Economics,
McGraw-Hill Book Company, New York, 1970.
Elias, R. F., and Bunyard, F. L., "Financial Impact of Air Pollution
Control Upon the Nitric Acid Industry", Economic Data for New Source
Performance Standards, S~ction Ill, Clean Air Act Amendments of 1970,
March 16, 1971.
7.
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K.
Petroleum Refining and Storage
1.
Introduction
Three processes in petroleum refining have been identified as
the major sources of atmospheric pollutant emissions.
These are
storage of crude oil or refined products, combustion processes,
and catalyst regeneration.
In addition, significant emissions are
released by certain bulk storage tanks where petroleum products
are stored for distribution. The analysis in this section is
limited to the nature, control, and costs of these four sources.
2.
Engineering Basis of the Analysis
a.
Petroleum Refining
(1)
Sulfur Recovery Plants
Sulfur oxide emissions were controlled by
installing sulfur recovery plants at those refineries
which did not already have them. The size of the
sulfur recovery plants was based on each refinery's
capacity and on estimated sulfur oxide emissions.
Since specific data on the composition of
a refinery's crude oil or its exact processing
techniques were not available, a general sulfur
dioxide emission factor of 70 long tons per 100
thousand barrels of crude oil throughput was used.
Variations in this emission factor were made
based on crude oil sulfur content.
Thus, in the
gulf coast and California areas, this factor
was reduced by 6 percent; on the east coast it
was increased by 42 percent; and it was not changed
for the balance of the country.
Since operation
of sulfur plants smaller than 4 tons per day is
not economically feasible, the smaller refineries
(sulfur dioxide emissions less than 13.8 tons per
day) were not included in the cost estimates.
To meet the sulfur recovery standard denoted
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in Appendix I, tail gas scrubbing was casted. Table 4-52
indicates the investment and annual costs developed.
Note that annual costs are calculated only for the
scrubbing section. It is assumed that sulfur plants
result in a zero total net annual cost.
For the scrubbing
section, the relationship Annual Cost = 0.28 Investment
was used.
TABLE 4-52.
SULFUR PLANT AND TAIL GAS SCRUBBING COSTS
Sulfur Plant
Capacity
Long Tons/Day
10
100
300
1000
Sulfur Plant Costs
(With Tail Gas .Scrubber)
($1,000)
410
1,500
3,400
8,400
Scrubber Alone
($1,000)
Annual Cost
($1,000)
48
182
400
1,000
176
640
1,420
3,600
Sources of Data:
(a) Oil and Gas Reporter, October 28, 1968.
(b) Private communication with Dr. D. K. Beamon of
the Ralph M. Parson Company.
(c) Paper presented at 8th Annual Meeting of Southern
California Sector of AIChE, April 20, 1971.
(2) Catalyst Regenerators
To meet the particulate regulation, only
fluid catalytic cracking (FCC) units larger than
10 thousand barrels per day required additional
controls. All smaller FCC units and all Thermofor
(TCC) and Houdriflow (HCC) catalytic cracking units
can meet the regulations with existing controls.
Control costs were based on using a high-efficiency
electrostatic preciipitator; operating and maintenance
costs were based on the size of the unit; and a
4-157
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20 percent capital plus depreciation charge was
used to derive the annual costs.
For controlling carbon monoxide and hydrocarbon
emissions,
the cost of a carbon monoxide (CO)
boiler was estimated for each FCC unit.
The RCC
units already have CO boilers, and Tee units with
their lower co emissions are not generally amenable
to control with a co boiler and were not included
in the cost estimate.
Only 50 percent of the capital
investment for these boilers was charged as an
air pollution control cost since steam is generated
in these units for inp1ant purposes.
Annual charges
were also not included as an air pollution cost since
they are a general plant cost.
CO boiler costs were estimated according to the
heat content of the exit gas stream and the available
boiler cost as indicated by Babcock & Wilcox, and
Bauman.
Locations of existing CO boilers, when known,
were taken into account.
The installed cost of retrofitting a CO boiler
into an existing installation would be 1.2 x Installed
Cost (I) of a CO in a new facility.
These are the
usually quoted cost figures.
Annual cost (A) of
CO boilers was calculated using the following
relationship:
A = 0.2 x 1.2 x 0.5 I .
This relationship reflects the following factors:
(1)
An offset equal to the annual
OMR is allowed.
(2)
Only 50 percent of boiler installed
costs is considered as an air
(3)
pollution control expenditure.
Depreciation and other capital
charges of 20 percent per annum.
4-158
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In previous reports in this series it was
assumed that recovered catalyst would offset
operation and maintenance costs.
However, after
consultation with EPA personnel, it was determined
that this is not a completely valid assumption.
Therefore, a factor of 0.16 x Installed Cost
was included in all precipitator cost calculations.
Sulfur dioxide is also emitted at concentrations in
the 500 to 1000 ppm range, but these emissions are currently
not controlled, since it is claimed that no economical means
exists for reducing this emission.
Precipitator cos~s were based on the gas flow rate
leaving the catalyst regenerator. Based on limited
data (See References 1,3, and 4 at end of this Subsection),
the following relationship between barrels of total feed
and exit gas rate was determined:
acfm = 2830 acfm . x feed rate (in 1000 bbl/day) + 75,000 acfm .
1000 bbl/day
With the exit gas rate known, cost functions relating
cost and feed rate were prepared and used to determine total
and annual charges. (See Figure 4-4.)
Emissions of particulates from FCC units with normal
process controls, but without electrostatic precipitators
for air pollution abatement purposes, were based on 6.25
pounds of particulate per 100 barrels (0.10 pounds
per ton of catalyst); particulate emissions from
Thermofor and Houdriflow units were based on 0.52
pounds per 1000 barrels (0.04 pounds per ton of
catalyst).
Estimates of controlled emissions
were based on an electrostatic precipitator
collection efficiency of 82 percent.
CO boiler costs are shown in Figure 4-5.
These costs could vary depending on the amount of
supplementary fuel used to generate plant steam;
however, the costs shown do represent that portion
of the cost chargeable to air pollution control.
4-159
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100
80
,.....,
a
a
a
r-I
-------
1,400
/
1,200 /
/
,.... /
o
0
0
.-I /
qr
'-'
~ 1,000 /
(I)
o /
u
'1:j /
Q)
rl
rl
~
~
rn
c:: 8.00
H
4-<
0
~
c::
Q)
cJ
1-4
Q)
A-o 6,00
»
~
4-<
'.-1
~
4,00 /
/
/
2.,00
o
o
40
80 120 160 200
Catalyst Regenerator Capacity (1000 bbl/day)
Figure 4-5. Cost of Carbon Monoxide Boilers.
4-161
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Uncontrolled emissions of CO from FCC units
were based on 5.6 tons of CO per 1000 barrels total
feed.
Uncontrolled emissions from Thermofor units
were based on 1.2 tons of CO per 1000 barrels total
feed.
There are no significant CO or hydrocarbon
emissions from Houdriflow units since they are all
presently controlled.
In all cases units were
assumed to operate 360 days per year. CO and
hydrocarbon emissions from controlled units were
assumed to be zero.
Uncontrolled HC emissions from fluid units
were based on 180 pounds HC per 1000 barrels total
feed and those from Thermofor units were based on
57 pounds HC per 1000 barrels total feed.
These
figures can be converted to 32.4 and 10.3 tons
HC per year per 1000 barrels total daily feed,
respectively.
In all cases, emissions from controlled
units were assumed to be zero.
(3)
Crude Oil and Gasoline Storage
The total crude oil storage capacity for each
refinery was based on a 24.4-day refinery supply,
and gasoline storage capacity was based on 25 days of
production.
A model tank size of 80 thousand barrels
was selected, and the total storage capacity in
each refinery was divided by 80 thousand to determine
the equivalent number of model tanks.
Three-fourths
of these tanks were assumed already to have floating
roofs and submerged fill lines; therefore, no
further control was required.
Since the cost for
converting to a floating roof tank and installing
submerged filling techniques was considerably less
than installing a new tank, it was assumed that all
tanks would be converted and not replaced.
4-162
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Figure 4-6 presents the data used to determine tank
conversion costs.
Operating and maintenance costs were
not determined, since these are low and are usually equal
to or less than the value of the recovered gasoline and
crude oil.
Emissions of hydrocarbons result from refinery
activities including crude oil storage, gasoline storage,
and gasoline transfer.
The emission factors and percent
control attainable with current technology are shown in
Table 4-53.
TABLE 4-53.
PETROLEUM STORAGE EMISSION FACTORS
Emissions
Breathing Working Loss
Loss
(tons/yr / (tons/lOOO bbls)
Receptacle Description and Controls 1000 bbls)
Fixed roof, w/vapor recovery -0- -0-
Fixed roof, w.o. vapor
recovery, splash fill F = 8.5 Fb = 0.242
a
Fixed roof, w.o. vapor
'T'ank recovery, submerge fill F = 8.5 F = 0.152
a e
Conservation, w/vapor
recovery -0- -0-
Conservation, w.o. vapor
recovery Fd = 0.87 -O-
w/vapor recovery -0- -0-
~ank Vehicle w. o. vapor recovery splash
fill -0- F = 0.172
c
IW.O. vapor recovery submerge Ff = 0.102
Ifill -0-
4-163
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150 /
,-.. /
o /
o
o
~ /
.(J}-
'""
~ 100 /
en
0
u
'"
(l)
.-i
.-i
t\3
.j..J
en 50
t::
H
o
50
100
150
(103 bbl.)
200
Tank Capacity
Figure 4-6. Installed Cost of Floating Roofs on Petroleum
Storage Tanks.
4-164
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In determining current emissions, the following assumptions
were made for each refinery:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Three-fourths of all crude oil storage tanks are
controlled.
Three-fourths of all gasoline storage tanks are
controlled.
One-half of all gasoline transfer operations are
controlled.
All gasoline produced is transferred to refinery
storage tanks.
Thirteen percent of gasoline is transferred to
bulk. plants by pipeline.
All gasoline storage facilities are utilized to
60 percent of capacity.
Gasoline production is 51 percent of crude oil
input.
All storage facilities in California are fully
controlled.
4-165
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The basis for calculating the control costs for gasoline
storage tanks, both at refineries and at bulk terminals,
is shown in Table 4-54.
Table 4-54.
CONTROL COSTS FOR GASOLINE STORAGE AT BOTH REFINERIES
AND BULK STORAGE LOCATIONS
Average Capacity Hodel Tank Number Cos t/ Total Control
of Es tablishment Number of Size of Hodel Tank Cost
(Gallons) Establishments (Gallons) Tanks ($1.000) ($1,000)
29,435 3643 29,435 1 12.0 9,849
52,646 5805 52,646 1 12.5 16,325
71,693 4318 71,693 1 13.0 12,636
93,292 1649 93,292 1 1 .5 5,008
134,586 1338 134,586 1 14.0 4,214
310,000 303 155,000 2 14.5 1,972
744,525 137 248,175 3 15.0 1,395
1,949,000 338 324,833 6 15.5 7,068
4,472 ,000 271 1,118,000 4 18.0 4,482
11,079,000 264 2,769,000 4 35.0 8,330
39,631,000 57 6,605,000 6 111. 0 8,470
E 79,740
3.
Emissions
Both crude
tend to give off
in storage tanks
oil and refined products, especially gasoline,
hydrocarbon emissions due to evaporation while
and in transfer. Other hydrocarbon emissions
result from the operation of catalytic crackers.
For simplicity of analysis, all storage of refined products,
whether at the refinery or at bulk terminals, has been grouped.
The hydrocarbon emissions from these sources were estimated to be
1,038,000 tons in 1967, allowing for 50 percent existing control.
At the same control leve~these would rise to 1,349,000 tons by
FY 1977. Installation of floating roofs on all uncontrolled
storage tanks by FY 1977 would reduce these emissions to 296,000
tons, equal to 89 percent control.
Refinery emissions of hydrocarbons from catalytic crackers
4-166
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and regenerators were estimated at 153,000 tons in 1967, at 20
percent control. Industry growth would increase this to 197,000
tons by FY 1977 if control practices remained unchanged. Use
of carbon monoxide-hydrocarbon boilers on crackers could effect
a 95 percent control level, reducing emissions to 12,000 tons in
FY 1977.
Sulfur dioxide (S02) emissions in refineries may occur from
many sources, including internal combustion engines for compressors,
boilers, catalyst regenerators, acid plants, hydrogen sulfide
incinerators, and sulfur plants.
Engines and boilers are commonly fueled by sulfur-bearing
gases or liquids that cause scattered, relatively dilute, sulfur
dioxide emissions. Catalyst regenerators have sulfur oxides in
exit gas streams, depending on the sulfur content of the coke
deposited on the catalyst. Spent alkylation acid (H2S04) sludge
may be shipped away for regeneration, but if it is regenerated
at the refinery, the emissions of sulfur oxides should be similar
to those for other nonsulfur-burning acid plants. Hydrogen
sulfide (H2S) incineration, at refineries producing H2S not used
for acid sludge regeneration or sulfur plant feed, is a large
concentrated source of S02
used on the H2S stream (in
sources of S02 emissions.
The primary source of
emissions; when sulfur plants are
place of incineration), they are strong
S02 in most refineries results from
processing the H2S-rich stream generated from various desulfurization
and sweetening processes. The H2S stream is most commonly produced
in the regeneration of spent amine scrubbing liquors used to
sweeten product, process, or exhaust streams.
The stream may be
incinerated, sent to a spent acid regeneration plant, or sent to
a sulfur recovery plant. All three processes result in significant
emissions of sulfur oxides. Incineration of hydrogen sulfide to
sulfur dioxide is normally controlled by recovery as sulfuric
acid; these and spent-acid plant emissions are included in Section
P on sulfuric acid. Sulfur plants and their tail gas streams are
4-167
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considered below. The H2S-rich stream is amenable to partial
recovery by conventional Claus sulfur plants.
Hydrogen sulfide emissions in refineries are best controlled
by use of sulfur recovery plants.
The available data indicate
that many of the refineries had sulfur plants in 1967 and that
overall these provided control of 37 percent of emissions. Thus,
the plants emitted 2,310,000 tons of sulfur oxides per yea~ and
it is estimated that industry growth would increase this to
3,010,000 tons by FY 1977 with the same sulfur contents and
level of control. Installation of sulfur plants and tail gas
cleaners on all refineries could reduce the FY 1977 emissions.
of sulfur oxides from these sources to 20,800 tons per year,
which is a 99.5 percent level of control.
There are additional
sulfur oxide emissions that result from operations involving
the combustion of natural gas and/or fuel oils for process purposes.
These are not generally amenable to control.
Regeneration of the catalysts used in catalytic cracking units
results in emission of catalyst fines (particulates) and carbon
monoxide.
An estimated 240 pounds of particulates per thousand
barrels of total feed are emitted from fluid catalytic cracking
unit regenerators in the absence of air pollution control equipment,
and an estimated 12.5 pounds per thousand barrels of total feed
from thermofor and houdriflow unit regenerators.
Installation
of electrostatic precipitators provides the maximum control now
available, and should easily meet the assumed process weight rate
standard. In 1967, the regenerators in the refineries emitted an
estimated 185,000 tons of particulates at an average industry
control level of 20 percent. Normal growth of the industry
would increase this to 241,000 tons by FY 1977.
Installation
of precipitators in all plants would reduce FY 1977 emissions
to 98,000 tons, at 67 percent control.
Carbon monoxide in the exit gas of regenerators was controlled
by carbon monoxide boilers in many refineries in 1967, but there
4-168
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were still as estimated 9,300,000 tons emitted in that year (20 per-
cent controlled). The carbon monoxide boiler burns the carbon monox-
ide into carbon dioxide (and also burns hydrocarbon emissions from
the catalytic cracking unit) and provides a substantial source of
heat for process use in addition to controlling pollution. Installed
in all the subject refineries, they would control all but a negli-
gible amount of carbon monoxide and hydrocarbon emissions from the
cracking process. Without this control, it is estimated that carbon
monoxide emissions would increase to 12,100,000 tons per year in
FY 1977.
3.
Scope and Limitations of Analysis
Analysis of refinery emissions and control equipment was, in almost
all cases, based on data for each refinery involved.
Control costs have
been estimated on a less rigorous basis, as indicated below, by two
model firms, but are representative of actual cost expectations.
Because the total annualized cost is not estimated to be large enough
to influence prices, no analysis of market patterns is presented.
4.
Industry Structure
Nearly all bulk storage plants are owned by producers of petro-
leum products. Although approximately 256 plants are listed as petro-
leum refiners, the industry is concentrated in 30 to 35 firms; of these,
16 are fully integrated international corporations making up the so-
called "large majors" of the industry, another eight firms are fully
integrated "small majors, rr and the remainder are somewhat smaller and
either not fully integrated or operative in a limited market. Salient
statistics concerning refineries and bulk storage plants are given in
Table 4-55.
Petroleum is an oligopolistic industry characterized by sharp
retail competition that usually concentrates on competitive adver-
tising at the retail level, but it experiences frequent price wars as
well. In its purChases of crude oil from independent producers, it
is much less likely to compete on price.
" b" t to fore1gn competition, but at
The entire industry 1S su Jec .
d h h tas under the oil import program.
present this is minimize t roug quo
4-169
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The effect of the quota system is to set a base price higher than would
probably be set, were unlimited imports permitted.
TABLE 4-55.
THE PETROLEUM REFINING AND STORAGE INDUSTRY, 1967
Refining Plants Bulk Storage Plants
Capacity Production Value of capacitylproduction Value of
No. Shipment No. Shipment
million bbl (billions) million bbl (billions.
256 4,210 3 ,580 $ 20.29 t8,123 214 1,873 $ 22.50
)
5.
Economic Impact of Control Costs
a.
Cost Factors
Floating roofs for refinery tanks are estimated to require an
investment ranging from $12,000 to $111,000 each, with most costing less
than $18,000.
Since this control reduces vapor loss of a valuable pro-
duct by more than 90 percent, there is a saving that more than offsets
the total operating and maintenance costs.
capitalization costs is minimal.
The impact of the annualized
Sulfur recovery plants vary in cost depending on size,
which is a function of the daily quantity and the sulfur content of
crude oil refined.
For those refineries not listed as having sulfur
recovery plants in 1967, this cost was calculated on the basis of
plant size necessary for the listed capacity of the refinery and on
its estimated sulfur oxide emissions. Sulfur recovery plants of 4-ton-
per-day capacity or larger were considered economically feasible;
these require investments ranging from slightly over $100,000 for 4-
ton
capacity to $630,000 at 100 tons.
Annual costs were considered
to be offset by the value of sulfur produced.
The value of
sulfur is, of course, subject to change if large additional supplies
are marketed.
However, since it appears that the sulfur recovery
plants now in use at petroleum refineries are operated at or above
the break-even point, it is assumed for this analysis that additional
4-170
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plants could produce revenues at least equal to annual costs.
The tail gas from the sulfur plant contains some sulfur
oxide which must be removed by a cleaner. For the average sulfur
plant this is estimated to require an investment of $370,000 and
annual cost of $103,600.
Electrostatic precipitators for control of particulate
emissions from catalyst regenerators on fluid catalytic cracking units
vary in cost depending on size. It is estimated that the average
refinery would invest approximately $642,000 for each precipitator.
The total annualized cost per precipitator is estimated to average
$128,000.
Carbon monoxide boilers to control carbon monoxide and hydro-
carbon emissions from catalyst regenerators were estimated on the
basis of the heat content of the gas stream for each affected refinery
and the price of boilers.
The average investment required would be
approximately $3 million per boiler, of which 50 percent is charged to
air pollution control, since the steam generated is usable in the normal
operating processes of the refinery.
Similarly, the operating and main-
tenance costs may properly be considered production cost rather than
cost of pollution control.
b. ~~~regate Industry Costs
For the petroleum industry as a whole, installation of the
controls specified in this analysis would require, by the end of
FY 1977, a total investment of $378 million. Given the assumptions
stated above, annual cost to the industry would, however, amount to
only an estimated $73.3 million per year upon completion of installa-
tion of controls in FY 1977.
Two Model Firms as Examples of Economic Impact of Control
Costs
Two hypothetical petroleum companies are used to illustrate
the impact of the investment requirements and the annual costs
explained above.
c.
4-171
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Description of Model Firm A
A fully integrated national producer, operating 10 refineries
Total crude oil refining capacity: 877,000 bled.
Gasoline production of crude oil: 52.6 %
Capacity utilization: 88.6 %
Gross revenue, $7,860 million
Net income, 640 million
Costs for Air Pollution Control Equipment (Model Firm A)
Equipment No. Investment Annual Cost
Carbon monoxide boiler 4 $7,200,000 $ 720,000
Sulfur plant 12 7,560,000 756,000
Tail gas cleaner 20 9,800,000 2,740,000
Electrostatic precipitator 9 6,350,000 1,270,000
Storage tank (crude) roofs 40 530,000 53,000
Storage tank (gasoline) roofs 441 7,100,000 710,000
TOTAL $38,540,000 $6,249,000
Description of Model Firm B
A small independent partially integrated firm, operating one
refinery
Total crude oil refining capacity:
Gasoline production of crude oil:
Capacity utilization:
53,000 bled.
51 %
85 %
Gross revenue, $57 million
Net income, 11 million
COsts for Air Pollution Control Equipment (Model Firm B)
Eauipment No. Investment Annual Cost
Carbon monoxide boiler 1 $1,500,000 $ 150,000
Sulfur plant 2 960,000 96,000
Tail gas cleaner 2 740,000 207,000
Electrostatic precipitator. 1 550,000 110 ,000
Storage tank (crude) roofs 3 40,000 4,000
Storage tank (gasoline) roofs 28 453,000 45,000
TOTAL $4.243.000 $ 612,600
4-172
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d.
Impact on the Industry
If the total annualized cost of air pollution control for the
petroleum industry, as estimated here, were added to the price of gas-
oline production projected for FY 1977, it would increase that price
by approximately $0.022 per barrel($73.3 million i 3,300 million barrels).
Costs of this magnitude are not likely to affect the final prices of
petroleum products or to reduce the profits of the refiners.
More significant is the magnitude of the investment.
It
appears that this industry will be required to invest $378 million by
FY 1977. At the same time, it appears that there will be a substan-
tial excess of demand for petroleum products, so producers will be under
pressure to expand their exploration expenditures and to increase pro-
duction capacities.
Some small companies may find it difficult to raise
the capital essential to their total investment program.
In general,
total control investment costs probably do not, at the most, exceed
10 percent of any company's annual investment outlay, and are generally
much less.
Considering the general pattern of low debt-to-equity
ratios in this industry and that the return on investment is higher
than that of the average industrial firm, the costs indicated are not
likely to threaten the financial stability of the industry.
4-173
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REFERENCES FOR SUBSECTION K
1.
2.
Bulletin G-87A.
Barberton, Ohio:
Babcock and Wilcox Co., 1956.
H. S. Bauman, Fundamentals of Cost Engineering in the Chemical
Industry. New York: Reinhold Book Corp., 1964.
J. A. Danielson (ed.). Air Pollution Engineering Manual. Public
Health Service Publication No. 999-AP-40. Cincinnati, Ohio: U.S.
Department of Health, Education, and Welfare, 1967.
R. P. Hangebrauck, et al. Sources of Polynuclear Hydrocarbon in the
Atmosphere. Public Health Service Publication No. 999-AP-33. Washington,
D.C.: U.S. Department of Health, Education, and Welfare, 1967.
Control Techniques for Particulate Air Pollutants. Public Health
Service Publication No. AP-5l. Washington, D.C.: National Air
Pollution Control Administration, (PHS), January, 1969.
3.
4.
5.
6.
Atmospheric Emissions from Petroleum Refineries. No. 763. Washington,
D.C.: U.S. Department of Health, Education, and Welfare (PHS), 1960.
Bureau of Mines Minerals Yearbook (editions of 1964-1967). Washington,
D.C.: U.S. Government Printing Office.
7.
4-174
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L.
Phosphate Industry
1.
Introduction
a.
Nature of Products and Processes
Phosphate rock is processed into many products used in the United
Chiefly, these are agricultural fertilizers (7S percent), animal
States.
feed supplements, elemental phosphorous, and phosphoric acid.
Complete or balanced fertilizers involve producing P20S
("phosphate") from phosphate rock and mixing this chemically and/or
mechanically
with nitrogen and potassium nutrients.
Plant foods are
produced in various NPK (nitrogen, phosphorus, potassium) grades to fit
varying soil requirements.
The manufacture of the phosphate for fertilizers begins with the
preparation of rock for processing.
Ground rock is treated with sulfuric
acid to produce either nor~l superphosphate fertilizer (20 percent
P20S) or wet process phosphoric acid. This acid intermediate (about
S4 percent P2US) may be used to produce diammonium phosphate (18 percent
nitrogen and 46 percent P20S) or triple superphosphate (46 percent P20S).
Superphosphoric acid (about 70 percent P20S) is produced by dehydration
of wet process phosphoric acid and used in the preparation of mixed
liquid fertilizers for direct application to the soil.
b.
Emissions and Costs of Control
Dusts, acid mists, sulfur dioxide, fluorides (gaseous and parti-
culate), and ammonia are emitted from various proc~sses in the phosphate
fertilizer industry.
Dusts are emitted from drying and grinding of phosphate
rock, calcination, drying and cooling in the granulation process (the
major source), and conveying, bagging, and other handling operations.
Sulfur dioxide is emitted from the sulfuric acid plants owned by some
major phosphate processors that produce wet process phosphoric acid.
(Sulfuric acid production is discussed in detail under Section Pj the
control costs described in that section have their major economic impact
on the fertilizer industry.)
Although fluorides and ammonia are emitted,
they are not considered in this study; primary producers of concentrated
phosphates have been affected by state statutes limiting fluoride emissions
to such an extent that they have installed the most stringent controls
in the industry.
4-17 S
-------
For 1967, the phosphate fertilizer industry emitted about
260,000 tons of particulates, with an overall control level of 89 per-
cen t .
Of this amount, 170,000 tons came from drying and cooling steps
following granulation, and another 45,000 tons came from phosphate rock
preparation. Growth of demand for phosphate products in fertilizers is
estimated to be 4.2 percent annually. Extrapolation of industry trends
show that emission of particulates would increase at a lower rate than
production due to shifts toward liquid fertilizers and diammonium
phosphate production and away from normal superphosphate, triple super-
phosphate, and the ammoniator-granu1ation processes. Due to implementa-
tion of the Act and these changing industry trends, the particulates
loading should level out at about 160,000 tons in 1977. Without the
Act, the emissions would probably increase to 350,000 tons by 1977.
To
control drying and cooling processes in granulation plants, the phosphate
industry will have to invest about $31 million for additional control
eq uipment and spend $15 million annually for full implementation of the
assumed emission controls.
c.
Scope and Limitations of Analysis
This analysis was based on data available from government,
trade, and financial reporting services.
Financial data are available
only for a limited number of firms--mostly conglomerates deriving major
portions of their revenues from non fertilizer-related businesses.
Data
were sparse for firms which rely heavily on the fertilizer business.
Without more detailed information, estimation of revenues, costs, profits,
and taxes attributable to fertilizer was not possible.
For this reason,
the relationships assumed for the financial variables depict the general
condition of the industry, and do not relate to any specific enterprises.
Engineering Basis of Analysis
Pollutants from drying and cooling steps during granulation
are emitted from three characteristically different plants--triple
superphosphate, concentrated ammonium superphosphates (such as
diammonium superphosphate), and mixed fertilizer (NPK) products.
Based on available data, granulation in 1967 contributed 170,000
2.
tons of particulates, or 65 percent, of the total emissions from the
4-176
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phosphatic fertilizer industry.
The emission factors and average
industry emissions produced are as follows:
Process Step
(a) Dryer
(b) Cooler
Pollutants Generated,
Lbs Per Ton Product
Actual Emissions,
Lbs Per Ton Product
105
90
10.5
9.0
Source:
Midwest Research Institute
Single-size model plants were developed for three plant types to
cover all aspects of chemical fertilizer product (bulk blending excluded).
The concentrated phosphates, with and without ammoniation, are represented
by the triple superphosphate and diammonium phosphate models. The NPK
model includes normal superphosphate, as well as processors of mixed
acids, ammonia, potash, and other nutrients.
Emission factors, rates
of emission, and allowable emissions under the assumed process weight
rate standard are shown in Table 4-56 for the three models.
Investment costs for the model plants were built from cost data
for stainless
steel venturi scrubbers shown in Figures 4-7 and 4-8.
Investments were corrected to 1970 dollars. Operating costs, mostly
chargeable to energy consumption for fan pressure drops in the range
of 20 to 35 inches water column,were developed from the curves in
Figure 4-9.
Annual maintenance costs were estimated at five percent
of original investments.
presented in Table 4-58.
All cost related data per model plant are
The total population of granulation plants is described by the
size distribution shown in Table 4-57. There were some 350 of these
plants in 1967. Generally, the smaller plants are those that may
be considered NPK plants. The large-sized plants, over 100,000 tons
per year, are the concentrated producers, as discussed earlier.
Based
on the size distribution presented here and the three models shown in
Table 4-58, aggregate costs were calculated for the industry as it
existed in 1967. To estimate the growth through 1977, it was assumed
that only diammonium phosphate plants would be built as new sources.
A growth rate of 4.2 percent in ammonium phosphates production was
used.
Fifteen such new plants were used as new sources in the
estimation of total costs through 1977.
4-177
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TABLE 4-56~
MODEL PLANT EMISSION DATA FOR THE PHOSPHATE INDUSTRY
TYPE OF GRANULATION PLANT
Triple Diannnonium
Process Variables Superphosphate Phosphate NPK
Production Rate,
tons per hour 40 25 17.5
Process Weight Rate,
tons per hour 280 175 123
Em' . F 1/
l.SS1.on actor,-
lbs per ton product 120 300 340
AlE" 1/
ctua m1.SS1.ons,-
lbs per ton product 6.0 15.0 17.0
Allowable Emissions,l/
lbs per ton product 1.0 1.4 2.1
1:/
Combined Dryer and Cooler Effluents
Source:
Chemical Construction Corporation
4-178
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TABLE 4-57.
DISTRIBUTION OF PLANT CAPACITY
FOR GRANULATION PLANTS
Plant Capacity,
Ton Per Year
1/
No. of P1ants-
0-10,000
11-20,000
21-30,000
31-40,000
41-50,000
51-60,000
61-7(),000
71-80,000
81-90,000
91-100,000
101-110,000
125,000
300,000
5
19
20
18
9
18
8
3
2
3
7
2
1
115
1/
Plants with reported capacity only.
Source:
National Emission Standards Study, Report to the U. S.
Congress in Compliance with P. L. 90-148, by Secretary
of U. S. Department of Health, Education, and Welfare,
March 1970.
4-179
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TABLE 4-58. MODEL FERTILIZER PLANT PRODUCTION DATA AND CONTROL REQUIREMENTS
TYPE OF GRANULATION PLANT
Triple Diammonium
ITEM Superphosphate Phosphate NPK
Type of Product 0-48-0 18-46-0 13-13-13
Production Rate, Tons Per Hour 40 25 17.5
Gas Volumes, ACFM
(a) Dryer 120,000 36,000 12,000
(b) Cooler --- 27,000 18,000
(c) Screens 65,000 ---
Purchase Cost $100,000 $30,000 $20,000
Installed Cost $390,000 $125,000 $75,000
Annual Cost $177,000 $64,000 $34,000
Hours of Operation
(per year) 4800 4800 2900
Fertilizer Production,
tons per year 190,000 120,000 50,000
Control Cost,
per ton product $0.93 $0.53 $0.68
4-180
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100
90
80
70
60
50
40
30
20
10
9
8
7
6
5
A
4
B
3
C
2
1
1
Source:
2
4
5
6 7 8 9 10
3
Inlet Gas Volume
Poly Con Corporation.
A = 316 ELC Stainless Steel
B = 304 Venturi/MS Concrete
Separator
C = All Mild Steel
Lined
20
30
40
50 60 70 80 90
3
(10 acfm)
Figure 4-7.
Equipment Cost for Venturi Scrubbers.
4-181
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1000
800
A = 316 ELC Stainless Steel
B = 304 Venturi/MS Concrete Lined Separator
C = All Mild Steel
600
400
200
100
80
60
A
40
B
20
C
20
40
60
80
100
(103 acfm)
200
400
600
Inlet Gas Volume
Source:
Poly Con Corporation.
Figure 4-8.
Equipment Cost for Venturi Scrubber.
4-182
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1000
800
600
500
400 PRESSURE DROP
300 40 lnd
35
30
200 25
20
r- 15
o
0
~ 100 10
{J)-
'-' 80
~
UJ 60
0
u 50
co 40
t::
'..1
~
(1j 30
,..
-------
4.
Market
a.
Distribution
Most of the phosphate fertilizers are consumed in the North
Central States, primarily for corn and wheat grain production.
The
PZ05 content for fertilizers consumed in this region is above the
national average. Most of the normal superphosphate (low analysis
PZ05) is consumed in the southeast. An advantage of normal superphosphate
over its higher analysis rivals is its high sulfur content, a necessity
for tobacco soils.
Operations of NPK granulation plants are especially designed to
chemically mix fertilizer materials, mainly for local use. They pur-
chase phosphoric acid, run-of-pile triple superphosphate, phosphate rock,
run-of-pile normal superphosphate, ammonia, potash, and sulfuric acid
and various other raw materials.
Their product is a highly water
soluble, balanced plant food of guaranteed analysis in nitrogen,
phosphate, and potash ingredients. These NPK plants serve as dis-
tributors of products from the primary phosphate producers.
Another group of dis tributors is the bulk blenders.
Bulk blender
operations mechanically mix granulated products, whereas NPK plants
chemically mix and granulate. They, like NPK plants, offer special
recipes mixed for the individual farmer and thus guarantee a complete
plant food in terms of nitrogen, phosphate, and potash.
b.
Competition
The fertilizer industry markets some thousand grades of products
throughout the country.
Distributors with bulk blending operations
will favorably compete with NPK producers because of the low investment
required for blending equipment, low operating cost of bulk blenders,
and the ability to offer both liquid and dry fertilizers.
The NPK
producer could do the same but would still have heavy fixed costs in his
chemical dry-mix plant.
From the primary producer's view, competition is severe as the
result of overexpansion in phosphoric acid and concentrated phosphate
capacities. Only those firms with both large processing facilities and
vertical integration with ownership of rock and/or sulfur resources can
4-185
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have a price advantage.
The
cooperatives enjoy a special situation--
they have a captive market and they have certain tax advantages. In
the late 1960's, exports have served as an outlet for surplus production:
in 1968, exports accounted for 30 percent of triple superphosphate produced
and 32 percent for ammoniated phosphates.
5.
Trends
a. Capacity and Production
Since 1965, the phosphate industry has been plagued with over-
capacity. Growth in production between 1960 and 1965 was substantial
for the concentrated products--notably, wet phosphoric acid, triple
superphosphate, and ammoniated phosphate. (Normal superphosphate
sharply declined during the same period). Growth was stimulated by
advances in wet phosphoric acid technology and by government restriction
on land under cultivation.
The restriction on cultivation sharply
increased demand for concentrated nutrients for increased crop yields.
Indications of overcapacity in wet phosphoric acid are shown in the
following data:
Production Operating Ratio Capacity
Year (1000 Tons P205) (Percent) (1000 Tons P205)
1961 1,213 61.0 1,981
1965 2,682 52.0 5,148
1969 3,067 60.5 5,979
1970 4,165 69.5 5,979
Apparently at the expense of the ammoniated phosphates, triple
superphosphate, which had grown rapidly through the early 1960's,
topped out in 1965 and declined through 1970. Its use in mixed ferti-
lizers has sharply declined, but by bulk blenders use is still rising. The
rise in ammoniated phosphates has been good for both NPK and bulk blenders
since both groups deal in this product. Bulk blenders seem to be gain-
ing in their share of the markets.
Statistics for 2 comparable years
show that bulk blenders rose in number from 200 in 1950 to 4,140 in
1968.
4-186
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Because of the low price of ammonia and improvement of phosphoric
acid technology, ammoniation of phosphates will continue to increase for
some time in the future. As a partial supplier of available nitrogen,
diammonium phosphate will cut into nitric acid production for nitrate
fertilizer, discussed elsewhere in this report.
b.
Price, Sale~ and Profits
Prices have declined for all phosphate fertilizers during the
1960's. Diammonium phosphate fell from $120 per ton in 1962 to $94
in 1970; triple superphosphate, from $84 per ton in 1967 to $75 in 1970;
phosphoric acid, from $79 per ton in 1963 to $55.50 in 1970. Price
declines, also present in nitrogen and potash, have obliterated profits.
According to the Fertilizer Institute, basic fertilizer producers
(excluding distributors) suffered losses from 1967 through 1969.
In
1970, the industry finally turned the corner to making a profit.
A
comparison of financial facts for 1969 and 1970 from the Institute is
shown in Table 4-59.
TABLE 4-59,
FERTILIZER INDUSTRY STATISTICS
Average retail price
Average time between
payment (days)
per ton
sale and
~----,--
1969 1970
$1,430 $1,680
175 308
253 317
7 24
-70 15
-4.3% 0.8%
53.26 56.25
116 119
Net Sales (millions)
Gross Profit (millions)
Selling, general and administrative
expenses (millions)
Other Income (millions)
Net earnings before interest and
taxes (millions)
as percentage of sales
6.
Economic Impact of Control Costs
a.
Impact on a Plant
To show the impact of air pollution control costs, a model
plant approach was used to typify operating patterns of two competitive
situations--namely, an NPK plant and a diammonium phosphate plant.
4-187
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The latter sells its product directly to a distributor (fertilizer,
feed, and grain dealer) or to a bulk blender. The former may be its
own distributor. The basic model plant descriptions are shown in
Table 4-60, and abbreviated income statements are shown in Table 4-61.
The magnitude of air pollution control costs is shown in the
income statements for two model plants. Both plants are assumed to
purchase necessary raw and intermediate materials from outside sources.
The NPK plant may be representative of many granulation plants--
granulating either run-of-pile normal or triple superphosphate.
The
diammonium phosphate model plant may typify an efficient, large plant;
however, integrated firms with corporate reserves of raw materials would
TABLE 4-60.
BASIC DESCRIPTION, FERTILIZER PLANT
Plant Type
DORR-OLIVER TVA
Product
Capacity, Tons/hour
12-12-12
17.5
16-48-0
25
Construction Cost, without Dust Control
1966*
$1,700,000 $1,950,000
$ 75,000 $ 125,000
$ 50,000 120,000
$ 58.70 $ 86.70
$ 66.00 $ 94.00
Control Investment
Production, Tons/year
Average Price to Distributor, 1970
Farmer's Price, 1970
*
Excludes land1 offsite facilities1 and railroad siding
4-188
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TABLE 4-61.
ANNUAL INCOME STATEMENT, FERTILIZER PLANT
(Thousands of Dollars)
NPK Dianunonium Phosphate
Without With Without With
Control Control Control Control
Sales 2 ,935 2,935 10,400 10,400
Cost of Goods Sold 2,910 2 , 910 9,985 9 ,985
Added Control Cost 0 34 . 0 64
Net Income Before Tax 25 -9 415 351
Income Tax 12.5 0 207 175
Net Earnings 12.5 -9 208 176
Cash Flow 182.5 168.5 403 383.5
show better profitability than the model plant.
c.
Impact on the Firm
A few large firms, possibly a dozen, produce the majority of
concentrated phosphate fertilizers in this industry.
These firms are
usually involved in natural resource exploration and development, in
support of their phosphate production.
Depletion allowances for the
resources used provide a source of funds over and above production
activities.
Their need to raise capital for emission control equipment
does not pose a serious problem.
The smaller firms engaged heavily in the mixed fertilizer
business may be seriously hampered. Much of the older, inefficient
equipment will be shut down. (This trend was noted in recent experience
in the questionnaire survey of the phosphate industry.) NPK plants in
general will face the brunt of the economic impact of air pollution
control requirements for the industry.
Whether or not they continue
operations will depend on the financial resources of the firms owning
the plants. Many of these firms, including regional cooperatives, are
involved in other agricultural operations such as marketing of commodi-
ties and distribution of agricultural goods.
They usually operate on
a county or statewide basis and control prices in the areas they serve.
Their financial positions would allow them to support investments for
emission control for existing operations or to convert existing facili-
ties to bulk blending, which is not a significant pollution source.
4-189
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d. Demand Elasticity and Cost Shifting
The aggregate demand for phosphate fertilizers appears bright
for the future. As population increases, acreage for cultivation will
decrease as urbanization takes up much of the land su~ted for high crop
yields; remaining usable land will require larger nutrient additions.
Thus, because no substitutes exist for readily available, water-soluble
phosphate, nitrogen, and potash, the future of the mixed fertilizer
business looks good.
Air pollution control costs will be shifted to the farmer to
the extent reflected in the full increment for diammonium phosphate--
namely, $0.53 per ton of fertilizer or the equivalent of $0.008 per
unit of nutrient (1 unit equals 20 Ibs.). This will result in a price
increase of only 0.5 percent for average commercial fertilizer products.
Triple superphosphate and granulation operations will have to absorb
at least half of the added cost of control due to the capacity growth of
diammonium phosphate as new diammonium phosphate plants replace triple
and normal superphosphate plants.
e.
Effect on the Industry
Normal superphosphate is declining significantly.
Since the
cost of pollution control is minimized by incorporating it into a
concentrated product, diammonium phosphate, economic benefits should
accrue to the bulk blenders and eventually the farmer.
This will re-
inforce the present competitive advantage bulk blending has over gran-
ulating NPK.
According to the Bureau of Census manufacturers' data
for 1967, the average price of mixed goods sold by bulk blenders was
$54.20 per ton. Mixed goods produced by NPK plants sold for $55.19
per ton.
Prices of products rose in 1970 for the first time in 4 years;
thus, the overcapacity situation in the industry is improving, although
profits may be slow in following.
As long as supplies of raw materials
remain in abundance, pollution control should not restrict the industry
from regaining former profitability.
4-190
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REFERENCES FOR SUBSECTION L
1.
"Phosphates Are Moving Again", Chemical Week, March 10, 1971.
2.
Chemical Economics Handbook, Stanford Research Institute.
3.
Economic and Marketing Study of U. S. Phosphate Industry, Chemical
Construction, Interim report prepared for Environmental Protection
Agency under Contract No. 70-156, 1971.
4.
Preliminary technical data prepared for Environmental Protection
Agency, under Contract No. 70-156, Chemical Construction Corporation.
5.
"Fertilizer Financial Facts and Figures", The Fertilizer Institute,
1969.
6.
Phosphatic Fertilizers, Properties and Processes, A Study of
Technological, Economic, and Agronomic Considerations, Technical
Bulletin Number 8, The Sulphur Institute, 1966.
4-191
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M.
Primary Aluminum
1.
Introduction
a.
Nature of Product and Process
Aluminum does not occur naturally in metallic form, but
as an oxide in a wide variety of ores.
Although it can be produced
from almost any ore, bauxite is most economical, and virtually all
aluminum is produced from this source.
The ore is processed to
remove impurities and chemically combined with water, leaving alumina
(aluminum oxide), from which aluminum is produced by an electrolytic
process.
Metallic aluminum is produced by passing an electric
current through a molten bath of alumina dissolved in cryolite
(Na3AlF6) which serves as the electrolyte. This is accomplished
in a large carbon-lined steel pot holding the alumina solution,
with carbon anodes suspended from above and extending down into
the solution.
The carbon combines with the oxygen in the alumina,
gradually consuming the anode. The aluminum gathers at the bottom
of the pot and is periodically syphoned off. The pots are run
continuously over long periods of time with alumina added as
necessary to maintain the necessary solution and the anodes
gradually lowered into the bath to maintain the required position.
Three types of pots are employed, distinguished by
the type of anode and the location of the spikes through which the
current is fed to the pot.
Prebaked systems use anodes that are
carbon blocks separately formed and baked before use. In the
Soderberg syste~an unbaked carbon paste is fed into a casing in
which it is baked by the heat of the process as it is lowered, with
additional paste feeding in constantly from above. Two types of
Soderberg pots are used: horizontal spike, with the spikes on the
side of the pot, and vertical spike, with the spikes on the top.
All three types of pots are currently in use in the
industry.
Their differences are noted here because they directly
affect the rate of pollutant emissions and the efficiency and cost
of control. The pots are operated in large cell rooms containing
lines of up to 180 pots arranged in a row or loop to provide close
spacing for economical electrical connections.
4-192
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2.
Engineering Basis of the Analysis
On the basis of the process weight rate.limitation in Appendix
I, required control efficiencies for the three cell types were
calculated. These are shown in Table 4-6~ On the basis of the
latest information provided by EPA (research under progress by
Singmaster and Breyer), the control system chosen to provide
the above control levels was selected and is shown in Table
4-63.
It should be noted that although fluoride control require-
ments were not considered explicitly, the choice of control
systems was made to provide partial control of fluorides.
TABLE
4...62.
REQUIRED CONTROL EFFICIENCY
Control Efficiencies Required (percent)
Plant Capacity Vertical Spike Horizontal Spike
(1,000 tons/year) Prebaked Soderberg (VSS) Soderberg (HSS)
50 94.4 97.6 95.9
100 95.6 98.3 97.0
150 97.1 98.8 98.0
200 97.8 99.1 98.5
250 98.3 99.3 98.8
4-193
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TABLE 4-63.
CONTROL SYSTEMS FOR ALUMINUM REDUCTION CELL POTROOMS
Cell Type
Primary Control Systems
Secondary Control
Systems
Prebaked
Primary Collection
Coated Filter
Dry Scrubber
Cross flow
Packed-bed
Water Treatment
VSS
Primary Collection
Dry ESP
Cross flow
Packed-bed
Water Treatment
As ab ove
HSS
Primary Collection
Wet ESP
Cross flow
Packed-bed
Water Treatment
As ab ove
Based upon Singmaster and Breyer's analysis, unit cost estimates
for these systems were developed and are shown in Table 4-64.
TABLE 4-64. - UNITS COSTS FOR COMPLETE CONTROL SYSTEM
(Dollars per Ton of Aluminum)
Vertical Spike Horizon tal
Cost Item Prebaked Soderberg Spike Soderberg
Capital Cost $125.47 $154.06 $274.36
Total Annual Cost 41.12 49.78 86.95
1/ 30.84 48.94 86.95
Net Annual Cost-
J)
Allows for chemical recovery.
4-194
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3.
Emissions, Controls, and Cost of Control
Particulates are the only emissions considered in this study.
Particulate emissions from the potlines in primary aluminum plants
in 1967, with 73 percent control, were 31,800 tons.
At the same
level of controls, there would be 48,700 tons of particulates
emitted by FY 1977.
The emission control systems required for even close
approach to the applicable standard are very complex because of
the extremely fine nature of the particulates and the large gas
volumes which must be handled. Each pot must be hooded and vented
to a primary collection system to capture as much of the emission
as possible with minimum.gas flow. The proportions of particulates
captured by the best possible hooding systems are shown in Table
4-65 for each pot type.
Also shown in the table are the overall
control efficiencies attainable for each pot type.
an average control of 97.2 percent for the industry.
These provide
To meet the
applicable standard,each plant should achieve an overall removal
efficiency of approximately 98 percent. As the table shows,
only newer prebaked plants will do so.
The type of pot in use determines what type of primary
control system is required; these systems and the associated removal
efficiencies, are listed in Table 4-66.
For the remaining emissions
the pot room itself acts as a hood and is vented to a secondary
control system.
All pot rooms require use of cross flow
packed-
bed wet scrubbers with appropriate water treatment, achieving a
90 percent removal of entrained particulates.
Costs of control for Soderberg pots are significantly
higher, even at the lower overall efficiencies shown in Table 4-66,
because the hooding is relatively inefficient.
In addition,
gaseous hydrocarbons from the anode slurry are driven off as the
anode bakes during pot operation.
These hydrocarbons must be
flared to avoid fouling the emission control systems, thereby
greatly increasing gas handling problems. These hydrocarbons also
affect the fluorides in the gas stream; only fluorides recovered
from prebaked pots are reusable.
Cost savings from reuse of these
fluorides are included in the control costs presented below.
4-195
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TABLE 4-65.
PARTICULATE EMISSION CAPTURE BY CELL HOODS
Pot Type
New prebaked
Older prebaked
Vertical spike
Soderberg
Horizontal spike
Soderberg
Amount of particulates captured
by best available hooding (%)
95
79
Overall control efficiency
attainable (%) *
98.2
97.1
50
94.5
80
97.2
*Only systems on new prebaked potlines are capable of meeting the
process weight rate standard.
.TABLE 4-66.
PRIMARY (CELL HOOD) EMISSION CONTROL SYSTEMS
Pot Type
Control Systems
Removal
Efficiency (%)
Prebaked
Vertical Spike
Soderburg
Fluidized-bed dry scrubber
99
Dry electrostatic precipitator
followed by crossflow packed-
bed wet scrubber*
99
Horizontal Spike
Soderburg
Wet electrostatic precipitator
followed by cross flow packed-
bed wet scrubber*
99
*Scrubbing water must be treated for water pollution control.
4-196
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At the control levels indicated, it is estimated that
particulate emissions from the primary aluminum industry would be
5,090 tons in FY 1977.
Required investment and annualized control costs have been
estimated, by company, on the basis of projected FY 1977 capacity
and summed for the industry as a whole. The required investment
through FY 1977 is estimated to total $922.8 million, and the
annual cost of control for that year is estimated to total $256.4
million.
Net annual control cost per ton of capacity, after
allowance for recovery of valuable materials from the control
devices, is lowest for firms using the prebaked process--vertical
spike Soderberg cells cost 1.6 times as much per ton,and horizontal
spike cells cost 2.8 as much.
Depending on the proportions of
systems used, firms with some Soderberg cells will experience an
average annual control cost ranging from 10 to 100 percent higher
per ton of capacity than those required of firms using prebaked
cells only.
For the industry as a whole, annual control cost per ton of
production in FY 1977 is estimated to average $44.14.
For firms
using only the prebaked process, it is estimated to be $14 less per
ton.
4.
Scope and Limitations of Analysis
The engineering and control cost data summarized above
give a firm basis for estimating the costs of central of particulate
emissions for individual firms and the total industry.
Besides
particulates, there are other significant pollutant emissions from
aluminum plants (e.g., flourides), but because they are not at this
time subject to specific emission standards, they have not been
included.
Adequate financial data on which to base the estimation
of the impact of these costs on firms and the markets are also
available; however, because relatively few firms are involved,
hypothetical model firms were not used to illustrate cost impact.
To avoid specifying costs for actual individual firms (a procedure
which may involve factors such as the overall financing program
of the firm and the intricacies of its tax position not considered
in this study), the impact is discussed in relation to general trends
and patterns which are expected within the industry and the markets.
4-197
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5.
Industry Structure
In 1967 there were eight primary producers of aluminum, operating
24 plants. Between 1967 and 1971, five firms entered the industry
and a sixth is scheduled within the next year. Each of these new
firms will operate only one plant during the period covered by this
study, according to their announced plans.
Plant capacity ranges from 35,000 to 335,000 tons per year.
Plants using the prebaked process cover the whole size range;
horizontal spike Soderberg plants range from 195,000 to 220,000
tons per year, and vertical spike Soderberg plants range from
100,000 to 195,000 tons per year.
The industry continues to be dominated by the three largest
primary producers, but their share of productive capacity has fallen
from more than three-fourths in 1967 to less than two-thirds in 1971
and may approach one-half by 1977.
Among the new firms entering
the market since 1967
are several that are primarily engaged in
the production of other nonferrous metals, strongly indicating
continuation of the trend toward an integrated nonferrous metals
industry.
More steel firms are also entering the industry.
Several
other new firms are wholly or partly owned by major foreign producers
of aluminum.
New construction and expansion of existing facilities caused
a rapid expansion of capacity in 1969 and 1970.
A strong but some-
what slower expansionary trend is indicated through 1977. The
average growth rate from 1967 to 1977 in capacity has increased to
5.25 percent annually from the previous 4.4 percent. The growth
rate for production remains unchanged at 5.8 percent annually.
6.
Market
11arket growth for aluminum has resulted from the development
of new aluminum-using products and from intensive competition to
replace other metals with aluminum in traditional uses.
However,
aluminum faces strong competition from various plastics in some
uses.
A major factor in the sales growth of aluminum has been its
ability to deliver a fully satisfactory substitute for copper or
steel at a significant cost reduction.
4-198
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Important markets for aluminum include automobiles, construction,
electrical products, consumer durables, and containers.
In each
of these industries, aluminum has significant advantages in cost
and technical factors for certain uses, but seldom has sufficient
advantage to forestall competition from other materials.
Therefore,
despite its concentration, the industry faces a highly competitive
market with substantial price sensitivity.
The major areas of strong competition between aluminum and
plastics are motor vehicles and equipment and miscellaneous
transportation equipment (primarily small boats).
Aluminum and
plastics usage in motor vehicles is growing at the expense of
various other metals, textiles, hardboard, glass, and nonmetal
materials.
Applications of aluminum include trim, motor blocks,
housings for differentials, transmissions and generators, power
steering and brake assemblies, and radiators.
Plastics are used,
or are expected to be used, for gas tanks, steering wheel housings,
engine oil pans, battery trays, fan blades, lights and lenses,
cowel panels, glove compartment doors, fender extensions, exterior
trim, wheel covers, and air intake filters.
The greatest competition
between aluminum and plastics is for interior and exterior trim items.
The miscellaneous transportation industries include shipbuilding and
boatbuilding
and repairing and the railroad equipment industries.
More aluminum is expected to be used because of its high strength
to weight ratio.
Currently plastics and aluminum account for over
90 percent of all materials used in small boats.
A continuation
of the upward price trend for aluminum and the downward trend for
plastics will cut into this market for aluminum.
Exports account for approximately 8 percent of shipments
of aluminum. This market is not expected to grow in the next
5 years because capacity in other countries is expected to
increase about 60 percent. Imports have risen sharply this year,
and a trade deficit of about 900 million pounds is projected.
This compares to a surplus of 296 million pounds in 1970.
It is anticipated that the use of aluminum will again increase
as the total economy picks up strength.
In addition, it is
anticipated that the price of primary aluminum would continue
4-199
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to rise over the next 6 years, even in the absence of control
costs, following the trend set in the 1960's.
Because this
pattern of price increases has been more moderate than that for
copper and steel, aluminum has enjoyed a competitive price
advantage that has been reflected in the substitution of aluminum
for other materials, particularly in the electrical and automobile
industries. Continuation of this pattern justifies the projection
of a higher rate of growth of production of aluminum than for copper,
particularly, through FY 1977.
Within the industry, prices tend to be very similar from
firm to firm, since four firms in the United States and Canada
control approximately 65 percent of the world's output.
7.
Economic Impact of Control Costs
Many of the firms in the aluminum industry have recently been
operating as much as 20 percentage points below their best operating
ratio of close to 100 percent, indicating excess capacity for the
present market.
normal. It is
several years,
For these firms, profit levels are well below
probable that these conditions will persist for
until demand more nearly matches capacity, which
will depend in part on how rapidly the general economy improves.
For this analysis it has been assumed that the industry will
be back on its longrun
growth curve before FY 1977.
Implementation
of controls will probably take place between Fiscal Years 1973 and
1975, so until then, profits of some firms may be temporarily
depressed. In the longer run, however, it is expected that most
firms will shift the major share of annual control cost into
price.
The history of the industry clearly indicates that cost
increases are translated into price increases, usually within 3
years, reflecting the substantial market power of these firms.
One factor acting against too rapid a price increase for
aluminum is its competitive position with other metals and with
plastics. Steel and copper in particular are competitors in
several markets for aluminum, and the price advantage which
aluminum has enjoyed in electrical products and certain structurals
has contributed to the growth of aluminum sales more than propor-
tionately to the 25 to 30 percent of the aluminum market that
they represent.
The percentage increase in the price of aluminum
4-200
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depends on the percentage rise in the price of copper.
In steel-
competitive markets, aluminum prices will probably not rise as much
as in copper-competitive markets. These are reasons why the increase
in aluminum price is expected to be less than the average control
cost per pound of metal.
Other factors may limit price increases in the aluminum
marke t.
The differential cost of production processes is such
that a company operating prebaked cells would need a price increase
of only $0.018 per pound to maintain its revenue from sales.
Since plants of this type dominate the industry, it is unlikely that
the price of aluminum can increase by $0.024, the average control
cost for the industry.
Without an increase of at least this
magnitude, however, it appears that at least two major firms will
find earnings from one-third to one-half of their production
significantly cut and their overall profits thereby reduced.
These firms have significant production capacity in horizontal
spike cells which are expensive to control relative to other cell
types.
The worldwide nature of the aluminum market is also a factor
militating against price increases in excess of those induced by
marke t demand.
Foreign producers may increase marketing in the
United States to an extent sufficient to limit price increases.
The most likely conclusion of this analysis is, therefore,
that by FY 1977 the price of aluminum will rise by not more
.
than $0.02 per pound over the price that otherwise would prevail.
This price increase may have a significant adverse effect on the
competitive position of aluminum versus competing materials and
at the same time will not permit all firms to recover their control
cost.
All the firms involved appear to be strong enough, however,
to absorb a part of the required cost and adjust to market changes
without the necessity of basic changes in structures or operations.
All firms also appear able to absorb the required control investment
outlays into their investment programs without substantial financial
difficulties.
4-201
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1.
Duprey, R. L.
Public Health
U.S. Dept. of
Air Pollution
2.
REFERENCES FOR SUBSECTION M
Compilation of Ait Pollutant Emission Factors.
Service Publication No. 999-42. Durham, N. C.:
Health, Education, and Welfare, National Center for
Control, 1968.
Danielson, J. A. (ed.). Air Pollution Engineering Manual. Public
Health Service Publication No. 999-AP-40. Cincinnati, Ohio: U.S.
Dept. of Health, Education, and Welfare, 1967.
3.
Control Techniques for Fluoride Air Pollutants. Prepared by
Singmaster and Breyer for U.S. Department of Health, Education,
and Welfare, PHS, Consumer Protection and Environmental Health
Service, NAPCA, Washington, D. C., February 13, 1970.
4.
Systems Study for Control of Emissions in the Primary Nonferrous
Smelting Industry (3 vols.). San Francisco, California: Arthur
G. McKee and Company, June 1969.
5.
Lund, H. F. "Industrial Air Pollution Control Equipment Survey:
Operating Costs and Procedures." Journal of the Air Pollution
Control Association. Vol. 19, No.5 (May 1969), pp. 315-321.
4-202
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N.
Primary Copper, Lead, and Zinc
1. Introduction
Nature of Product and Process
a.
Primary copper, lead, and zinc metals are produced from
beneficiated mineral ores through process steps involving roasting,
high temperature smelting, oxidation, and finally, refining. The
mineral ores contain the metals in very small quantities--natural
mineral cupric sulfide ores in the u.s. contain about 1.0 percent
metallic copper--and are beneficiated to produce metal concentrates
for the economic extraction of the respective minerals.
Copper ores
also contain iron, sulfur, silica, and minute quantities of arsenic,
cadmium, antimony, bismuth, gold, and silver.
Lead and zinc ores
contain a higher percentage of the metal and fewer impurities.
For this study the process considered is extraction or
smelting.
In copper extraction, the smelter consists of a
reverberatory furnace and converters (some smelters also have
roasters).
The reverberatory furnace melts the metal charge to
form copper matte containing silica and iron along with the copper.
In the converters, air charges blown into the liquid matte separate
the remaining iron and produce resulting blister copper, 99 percent
pure, which is either cast or shipped to other plants for final
refining.
Zinc sulfide concentrates are roasted in Ropp, multiple-
hearth, or other types of roasters to separate the sulfur from zinc.
In the roasting step, the zinc sulfide is converted to zinc oxide
calcine.
Sintering machines are then used to agglomerate the
calcine material.
Recycled dusts and other valuable materials
are added to the sintering to produce the final zinc-bearing
agglomerates.
Metallic zinc is extracted by electrolytic
deposition or by distillation in retorts or furnaces. Electrolytic
deposition requires a preliminary step of leaching zinc calcine
with sulfuric acid to form zinc sulfate for the electrolysis step.
Primary lead smelting is similar to zinc smelting in that
the first treatment is sintering for separation of sulfur from the
desired metal.
The sintered product is lead oxide, which is reduced
4-203
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to lead in a blast furnace and further purified in a lead refining
furnace.
b.
Emissions and Cost of Control
Sulfur dioxide is the primary pollutant emitted from the
smelting of copper, lead, and zinc ore concentrates.
Sources of
emission are roasters, reverberatory furnaces, converters, and
sinter machines.
The emissions are characterized by heavy mass
rates and relatively weak flue gas concentrations from reverberatory
furnaces and uneven pulsating flows from converters. In addition,
the flows are contaminated with small quantities of materials
harmful to human health, such as arsenic, bismuth, cadmium, and
mercury.
These factors also make the collection of sulfur
pollutants difficult and costly.
COPPER SMELTERS - Generally, sulfur dioxide emissions
from reverberatory furnaces and converters are uncontrolled.
Control techniques depend on the size of the furnaces, gas flows,
emission rates, plant condition, and degree of obsolescence of
present smelters. (Average age of existing smelters is 40 years.)
For some plants, reverberatory furnaces may have to be replaced
with flash smelters; flue ventilation systems will have to undergo
extensive modification, and converters may have to receive oxygen
enrichment to produce gas volumes sufficiently small for less
expensive control facilities.
Control techniques costed for this
report take into account the costs of calcium sulfate and sulfuric
acid recovery and modifications of dry precipitators and flue
gas flows.
included.
Other production and process improvements are not
The investment required for copper smelters is $313
million. Annual costs are $100 million by FY 1977 with full
implementation of controls. Assumed for all three primary nonferrous
industries
was depreciation of 15 years, interest rate of 8 percent,
and taxes ~ld insurance of 2 percent. No credits were assumed for
collected byproducts for any of the three industries.
The 1967 emission level of 2.58 million tons of sulfur
dioxides will increase to 3.34 million tons in 1977 without new
4-204
-------
controls; full implementation will reduce the level to 535,000 tons.
The 1967 emission level of particulates of 243,000 tons will
increase to 314,000 tons in FY 1977 without net controls;
full implementation of the abatement strategy for sulfur dioxides
will reduce particulates to 286,000 tons.
LEAD SMELTERS - The emission of sulfur oxides is
primarily from sinter machines which account for about 98 percent
of total lead smelter emissions. The gas volume flow is steady
from the sinter machine and is of sufficient sulfur dioxide
strength (about 5 percent) for acid recovery. Unlike the copper
industry, lead smelters have already installed sufficiently
efficient particulate collectors, and replacements are not
required.
The cost estimates are therefore lower by the amount.
The investment for sulfur acid recovery plants to control
emissions in the lead industry is estimated to be $65 million,
and annual costs are estimated at $15.6 million for full implementation
by FY 1977.
In 1967, lead smelters emitted 185,000 tons of sulfur
oxides.
As a result of abatement, the industry's emissions should
decrease from a projected 213,000 tons to 29,000 tons annually
by FY 1977. The 1967 level of particulates was 34,000 tons.
Particulates should be reduced from a potential 39,000 tons in
FY 1977 to 26,000 tons as a result of implementing the abatement
strategy for sulfur dioxide.
ZINC SMELTERS - The emissions of sulfur oxide from zinc
smelters are basically from those plants that emit dilute off-gas
from roasters and sinter machines. These gas st.reams usually
contain about 0.5 to 1.0 percent in sulfur dioxide strength.
Recovering sulfuric acid from such a diluted gas is costly.
(Zinc plants that do recover sulfuric acid have concentrated
sulfur dioxide gas streams.) Like the lead industry, dry collectors
are not included in the cost estimates, and it is assumed that the
limestone scrubbers used for removing sulfur dioxide emissions will
also sufficiently remove particulates.
Investment required for the
4-205
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zinc industry amounts to $40.7 million, and annual costs under
full implementation are estimated to be $17.7 million by FY 1977.
The assumed controls should reduce the estimated FY 1977
emission level of 555,000 tons of sulfur dioxide to 138,000 tons.
(Emissions for 1967 were 446,000 tons.) Particulates emitted in
1967 were 57,000 tons; the FY 1977 level of 71,000 tons will
not be affected significantly by the abatement strategy for sulfur
dioxide.
Scope and Limitations of Analysis
Data for this report were obtained primarily from trade,
industry, financial, and government documents, journals, and
c.
newspapers. Financial analysis of firm impact was hampered by
the diverse nature of firms within the industry, and by the failure
of integrated firms to disclose profit by product. Because of the
variance of integration--degree as well as kind--within the industry,
construction and incorporation of a model firm to gauge financial
impact was not included in this report. In its place are conclusions
drawn from a firm-by-firm financial analysis which included
examination of capital structure and cash flows.
2.
Engineering Basis of Analysis
a.
Emissions
The basis for determining present emissions (1967) and
control levels was the Arthur G. McKee Study for sulfur dioxide and
the Midwest Research Institute Study for particulates. Typical sulfur
dioxide emission rates for the various smelters are shown in Tables
4-67 and 4-69.
The breakdown of sulfur oxides is available for 1969
and has been adapted as shown in Table 4-69 to project backward to 1967
to determine emissions for that year.
Emission rates for various sources of particulates are shown
in Table 4-68, as well as the emission levels and associated percent of
control. In the analysis, only those sources contributing to sulfur
oxides were considered for reduction of particulates. The control
strategies for sulfur oxides will have the added benefit of achieving
particulate control levels on the order of 96 to 98 percent for copper
4-206
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TABLE 4-67.
EMISSIONS OF SULFUR DIOXIDE FOR U.S. NONFERROUS SMELTERS, 1969
S02 GENERATED,
1000 TONS PER YEAR
S02 EMISSIONS,
1000 TONS PER YEAR
TYPE SHELTER
Copper
Roasters
Reverb Furnaces
Converters
720 466
782 782
2129 1694
1394 472
120 120
45 45
5 5
341 246
6 6
11 11
5553 3847
Zinc
.l:"-
I
N
o
.....,
Roasters
Sinter-Roast Machines
Sintering Machines
Cokers and Retorts
Lead
Sintering Machines
Blast Furnaces
Other
TOTAL
Reference: Semrau, Konrad T., "Sulfur Oxides Control and Metallurgical
Technology", Presentation to EMD-AIME Copper Metallurgy Institute, Denver,
February 17, 1970.
-------
TABLE 4-68.
EMISSIONS OF PARTICULATES FOR U.S. SMELTERS, 1967
~
I
N
o
00
EMISSIONS, CONTROL LEVEL,
TYPE SMELTER EMISSION FACTOR, 1000 TONS PER YEAR PERCENT
Copper
Roaster 168 1b/ton copper 7 85
Reverb Furnaces 206 lb/ton copper 28 81
Converters 235 lb/ton copper 33 81
Ore Crushing 2 1b/ton ore 170 0
Handling 10 lb/ton ore 5 32
Zinc
Roasters (Fluid) 2000 lb/ton zinc 15 96
Roasters (Ropp) 335 lb/ton zinc 4 85
Sintering 180 1b/ton zinc 3 95
Ore Crushing 2 lb/ ton ore 18 0
Distillation 50 lb/ton zinc 15 0
Handling 7 lb/ton zinc 2 32
Lead
Sintering 520 1b/ton lead 17 86
Blast Furnaces 250 1b/ton lead 10 83
Ore Crushing 2 lb/ton ore 4 0
Dross Reverberatory I 20 lb/ton lead 2 50
Material Handling 5 1b/ton lead 1 32
Source:
Midwest Research Institute
-------
TABLE 4-69. MODEL PLANT DESCRIPTIONS FOR COPPER SMELTERS
MODEL MODEL MODEL
A B C
Processes Roaster, Reverbera- Reverberatory and Reverberatory artd
tory, Converters (2) Converters (2) Converters (4)
Production, Tons Copper/Year 75,900 75,900 150,000
Present Control 45% 0 0
Required Control Scheme Limestone Scrubbing Acid Plant Acid Plant
Tons Sulfur in Ore Feed per Day 367 256 512
~
I
N Tons Sulfur Captured in Slag or Other 201 12 24
o
\0
Sulfur Emissions, Tons Per Day 166 244 488
Allowable Plant Emissions, TPD 36.7 25.6 51.2
Required Additional Removal, % 77.9 89.5 89.5
Reverberatory Gas Volume,
(a) Before Control (SCFM) 52,000 90,000 180,000
(b) After Control 30,000 48,500 97,000
Converters, Peak Volume, SCFM
(a) Before Control 67,000 70,000 140,000
(b) After Control 40,000 40,000 80,000
-------
roasters, converters, and reverberatory furnaces, and zinc Ropp
roasters, and lead sinter machines.
b.
Copper
The control costs for the primary copper smelting indust.ry
were based on three model plant configurations shown in Table 4-7Q. The
relationships for gas volumes, production rates, and sulfur emissions
are taken from the Arthur
shown are consistent with
G. McKee study. The reduced gas volumes
the methodology for concentration of sulfur
in the Fluor-Utah study. Cost data developed
in flue gases as outlined
for each model plant configuration were based on unit costs presented
in the Fluor-Utah study report.
These data are shown in Table 4-70.
Although the unit costs for various elements such as acid plants,
precipitators, and scrubbers
are the same as those presented in the
Fluor-Utah study, the selection of control strategies for each model
and hence, the total costs, will differ from data presented in the
latter study.
The rationale for selecting control strategies assumes
scrubbing of dilute gas streams with limestone slurries and processing
concentrated sulfur-laden gases into sulfuric acid.
Based on this
rationale, Model A uses limestone scrubbing for both reverberatory
and converter gases.
Model A is applied to smelters smaller than
76,000 tons per year and to smelters that practice some degree of
control. Model B combines one-half of the reverberatory furnace gas
with the converter gases for processing in a single acid plant.
The
remaining half of the reverberatory off-gas goes to a limestone scrubber
unit. For Model C, all gases are treated in an acid plant. Wherever
limestone scrubbing is used, two scrubbers in parallel are assumed for
costing purposes.
This is to assure operation in case of breakdown in
the one unit under operation.
Investment and operating costs were developed individually
for 15 smelters based on data reported by the McKee study. To
determine control requirement costs, a combination of 5 plants for
Model A, 7 plants for Model B, and 3 plants for Model C was used to
develop the aggregate costs.
New sources were casted out on the basis of the Model C
4-210
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TABLE 4-70. COST COMPOSITIONS FOR COPPER MODEL PLANTS
MODEL MODEL MODEL
A B C
Investments ($ millions)
(a) Dry Precipitators 4.99 7.36
(b) Flues Modification 1.07 1.12 1. 70
(c) Waste Heat Boiler 0.17 0.18 0.26
(d) Limestone Grinder 3.17 1.40
(e) Gypsum Disposal 0.33 0.20
(f) Scrubbers (2) 1.50 1.26
(g) Wet Gas Cleaning 3.35 5.37
(h) Acid Plant 3.08 4.77
(i) Acid Storage 0.73 1.27
(j) Site Preparation 0.70 1.63 2.07
(k) Off-Site Facilities 0.70 1.63 2.07
TOTAL 7.64 19.57 24.87
Annual Costs ($ millions)
(a) Labor 0.08 0.20 0.16
(b) Power 0.50 0.43 0.46
(c) Chemicals 2.36 0.51
(d) Water 0.26 0.05
(e) Steam 0.07
(f) Maintenance 0.22 0.59 0.30
(g) Depreciation 0.50 1.30 1.66
(h) Interest, Taxes, Insurance 0.75 1.96 2.49
TOTAL 4.67 5.11 5.07
4-211
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smelter, after removing costs for dry precipitators, flue modifications,
and their related
offsite facility and site clearance costs.
It is
not known at the present time what type of furnaces will be included
in any expansion program. However, it is assumed that any new type of
furnace will require an acid plant and its ancillary facilities. For
new sources, a total annual capacity of 490,000 tons of copper was
projected for the necessary expansion.
c.
Lead
Lead smelters basically have a problem of sulfur oxides from
their sintering machines.
Most of the machines in operation are of
the downdraft type.
Their design allows for a large amount of air
leakage, which results in a sulfur dioxide concentration too low for
economic production of sulfuric acid.
A model plant was developed
which would incorporate some recycling of gases to enrich the sulfur
dioxide to 5.0 percent. The basis for unit costs was taken from the
Fluor-Utah study. The model plant description and costs are shown in
Table 4-71. Costs were scaled to individual plants in accordance with
production and capacity characteristics of each.
Five smelters were
assumed to install control facilities.
No additional controls for
particulates, other than the wet gas cleaning units shown in Table 4-71,
were assumed to be required.
d.
Zinc
Zinc smelters have roasting and sintering operations, both
of which are conductive to sulfur emissions and particulates.
Roasters
which remove sulfur from the zinc sulfide concentrates may be Ropp
suspension, multiple-hearth, and fluidized types.
The Ropp roasters
which are employed in the older smelters give rise to dilute gas
streams, in terms of S02 concentrations. For these types of roasters,
only limestone scrubbing could be considered a viable solution to
meeting the emission limitation. The model plant shown in Table 4-72
shows the engineering data and costs for meeting the assumed emission
limitation imposed for sulfur dioxide. Again, the data source for
costs is the Fluor-Utah study.
Six zinc smelters were assumed to
undergo investments for limestone scrubbers.
4-212
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TABLE 4-71.
LEAD SMELTER MODEL
Production
47,000 TPY
68,000 TPY
85,000 SCFM
S02 Emission
Gas Volume to Acid Plant
S02 Concentration
5%
Investment ($ millions)
Flue Gas Modification
Offsite
Facilities
1. 76
2.65
2.93
0.39
0.77
0.77
Wet Gas Cleaning
Acid Plant
Acid Storage
Site Preparation
TOTAL
9.28
Annual Costs ($ millions)
Labor
Power
0.079
0.227
NIL
Water
Maintenance
Depreciation
Interests, Taxes
0.240
0.518
0.928
TOTAL
2.092
4-213
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TABLE 4-72.
ZINC SMELTER MODEL
Production
92 ,000 TPY
90,000 TPY
100,000 SCFM
S02 Emission
Gas Volume to Scrubbers
S02 Concentration
2%
Investment ($ millions)
Flue Gas Modification
Offsite
Facilities
1.94
2.81
0.28
1.17
0.62
0.62
Limestone Grinder
Gypsum Storage, Disposal
Scrubber
Site Preparation
TOTAL
7.44
Annual ($ millions)
Labor
Power
0.079
0.690
1. 490
0.391
0.174
0.495
0.744
Limestone
Water
Maintenance
Depreciation
Interest, Taxes
TOTAL
4.063
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3.
Industry Structure
a.
Characteristics of the Firms
In 1967 there were 19 copper smelters, 6 lead smelters,
and 15 zinc smelters in the United States. At present (1971) there
are 16 copper smelters representing the U.S. smelting capacity of
8 firms; 7 lead smelters representing the U.S. smelting capacity
of 6 firms; and 8 zinc smelters representing the U.S. smelting
capacity of 7 firms. Estimation of smelting capacity is hindered
by variations within the industry of the quantity and quality of
ores, roasting and sintering capacity, and blast furnace capacity
at individual smelters.
The annual mill capacity in terms of materials handled
for U.S. copper smelters-for 1970 was 8,689,000 short tons. Copper
smelter annual capacities for 1967 ranged from 16,000 to 330,000
tons and averaged 101,000 tons. U.S. capacity in 1970 in terms
of materials handled for smelters of non-Missouri lead was
1,530,000 tons. Plant capacities range from 300,000 to 420,000 tons
with an average of 382,500 tons. Smelting and refining operations
of Missouri lead had an annual capacity of 415,000 tons of pig lead.
Smelter capacities ranged from 90,000 to 225,000 tons with an
average of 138,333 tons. Capacity of zinc smelters for 1970 in the
United States was 904,000 tons of slab zinc. Capacities for smelters
ranged from 16,000 to 250,000 tons with an average of 90,000 tons.
Unlike zinc smelters, copper and lead smelters are located
near the mine sites.
Most copper smelters are in the western
part of the United States, with the largest amount of copper, in terms of
tonnage of materials handled, being smelted in Arizona. Most
lead smelters are also found in the Western United States, with the
largest smelter capacity located in Missouri.
Copper smelting firms are, for the most part, vertically
as well as horizontally integrated.
Among the 8 firms, 7 are
principal sellers and refiners of copper, and 3 are also smelters
of lead and zinc.
Some also have operations in foreign countries.
b.
Resources
COPPER - The major raw material (are) of copper smelters
4- 215
-------
has been declining in grade.
The average recoverable content of
u.s. ores declined to an alltime low of 0.60 percent in 1968. This
is explained in part by the increasing demand for copper which
made production from lower grade ores economical and, in turn, by
an increase in the quantity of materials handled at the mine and
smelter and thus the costs that go with deeper mines and benefication
required to produce copper from these ores.
As production has
increased, the work force has remained constant for about the last
2 decades.
LEAD - Lead ores are obtained primarily from underground
mines. The cost is a function of grade, location, and coproducts.
Although higher in grade, the ores in the far Western States are
more expensive to mine than those in Missouri.
Increased use of
mechanized equipment has increased the skill level required in
the industry.
The more capital intensive techniques and the more
highly skilled work force have, in turn, resulted in an upward
trend in productivity.
ZINC - Zinc ores too are obtained primarily from underground
mines. Mining costs vary widely depending on ore quality, quantity,
and location. Labor accounts for about 50 percent of the direct
mining costs. Productivity has increased, but the labor force
employed has decreased due to newer technologies which require
a smaller but more highly skilled labor force.
3.
Market
The form of copper, lead, and zinc coming out of the smelters
requires further refining and processing, which is done in many
cases by the same firm that smelts the ore.
Competitive Products
COPPER - Aluminum, plastics, steel, and glass serve as
close substitutes for copper. Superconductive alloys for cables
in the communications area will add to the increased competition
a.
copper receives from aluminum.
Aluminum and stainless .steel also
compete
with copper in the building industry.
Plastics,a substitute
for copper primarily in the tubing area, may find an even more
4-216
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favorable competitive position if building codes are relaxed to
allow use of plastics as well as copper.
The industry has sought recently to comhat this competition
with increased efforts in market development activities.
Projects
undertaken include the copper electric car, the sovent plumbing
system, the desalting test loop, and a copper data information
center.
In addition, more economical ways are being sought to
metallurgically bond copper with other materials.
LEAD - Lead substitutes include cadmium, nickel, silver,
zinc, titanium, polyethylene, plastics, galvanized steel, copper,
cement, and aluminum.
Cadmium, nickel, silver, and zinc are
substitutes for lead in the production of specialized storage
batteries.
Titanium and zinc pigments are steadily replacing
lead in interior as well as exterior house paints, but not in
paints used to provide for rust and corrosion protection.
Polyethylene, along with metallic and organic materials has
served as replacement for lead in underground cable coverings.
Plastics,galvanized steel, copper, aluminum, and cement compete
with lead in construction needs.
The industry has attempted to create new products and to
improve existing ones.
In the vehicle propulsion field, the battery-
powered vehicle used for short driving distances seems to present a
future market for lead acid batteries.
In most of the other market
development areas, industry has sought to combine the advantages of
lead with those of other materials to create a highly competitive
product.
Examples include lead-plastic sheathing materials, lead-
plastic container materials, lead-plated steel (processed at high
speeds), and lead-bearing enamel for aluminum.
ZINC - Aluminum, magnesium, plastic9,cadmium, and specialty
steels are substitutes for zinc.
Aluminum and magnesium, along
with plastics, compete with zinc in die casting.
For low tonnage
anticorrosion requirements, ceramic and plastic coatings, specialty
steels, and electroplated cadmium and aluminum are substitutes.
Aluminum competes with zinc in roofing and siding.
In the paint
and ceramic industries, titanium pigments are a close substitute.
4-217
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Zinc has been replaced to some extent as a reducing agent in chemical
reactions by aluminum and magnesium.
Research efforts have been underway to develop applications
of zinc coatings in areas not only where its corrosion protection
characteristics are required, but also where cyclic loading and
welding are importan t.
Other areas of research include zinc-fin
radiators, zinc wheels, and wrought zinc tubing.
b.
Distribution
The major end uses of copper are in electrical equipment
and supplies, used in construction, industrial machinery, transporta-
tion, and ordnance.
Lead is used primarily in transportation,
construction, ordnance, packaging, communications equipment, and
printing and publishing. End users of zinc include construction,
transportation, pigments and compounds, plumbing and heating, and
industrial machinery.
Other supplies of these metals include secondary smelting
and importing.
Imports are in the form of ore and/or refined metals.
About 16 percent of the copper produced in the United States is from
secondary smelting.
Of the total U.S. refined copper production,
about 12 percent is from foreign ores.
The United States is a net importer
of unrefined copper and a net exporter of refined copper.
About half of the lead produced in the United States is from
secondary smelting.
Approximately 20 percent of the lead refined
in the United States is from imported ores.
net importer of lead.
The United States is a
Secondary smelting accounts for 20 percent of the U.S.
zinc prod uction .
About 50 percent of the U.S. refined slab
zinc production is from imported ores, and the United States is also a
net importer of refined zinc.
c.
Protection:
Taxes, Tariffs, Government Stockpiling
COPPER - U.S. copper producers receive a 15 percent
depletion allowance for their domestic as well as foreign
operations.
Duties on copper ore and metal imports suspended
to July 30, 1970,by Public Law 90-165 will be lowered yearly
to January 1, 1972?when 0.8 cents per pound will be charged on
4-218
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ore and unwrought copper, waste, and scrap.
The government
stockpile was about 260,000 tons at the end of 1968 with no
order at present for enlarging the stockpile.
LEAD - The lead industry receives a 23 percent depletion
allowance on domestic production and 15 percent on foreign production.
Present import duties on ore are 0.75 cents per pound of lead in
ore and 1.0625 cents per pound of lead metal. A price support of
75 percent of the difference between 14.5 cents per pound of
contained lead and the average monthly market price for common
lead at New York is maintained. Lead is also a stockpiled mineral
with a present surplus position.
ZINC - The zinc industry also receives a 23 percent
depletion allowance on domestic production and a 15 percent
allowance on foreign production.
The free world duty on zinc
ore and fume is 0.67 cents per pound and for zinc metal is 0.7
cents per pound. (The respective duty for some communist countries
is 1.67 cents per pound and 1.75 cents per pound.) The government
stockpile of zinc is nearly double the target set in 1969.
The
price support level is 75 percent of the difference between 14.5
cents per pound of contained zinc and the average monthly market
price for prime western zinc at East St. Louis.
4.
Industry Trends
Investment funds have been expended for mine exploration
and development at the expense of smelter modernization.
The tax
advantages of the depletion allowance encourage mining large
quantities of ore and building ore reserves.
a.
Copper
Near record output from domestic mines and smelters
plus a general slowdown of the world economy have led to an
easing of copper prices. However, current nationalization
actions and industry strikes may be expected to cause prices to
rise somewhat in the future.
b.
Lead
Uninterrupted production from new mines and smelters
in the late 1960's put U.S. ore and refined lead output at record
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levels in 1969.
However, the slowdown of the national economy
together with increased lead supplies has resulted in a softening
of lead prices. Moreover, the possible regulations against the
usage of tetraethyl and tetramethyl lead in gasoline will adversely
affect prices over the next 5 years.
c.
Zinc
Production and consumption of zinc was up in 1968, although
zinc prices have not declined as have those of copper and lead,
but the demand has been weakened recently due primarily to the
slowdown in the national economy, the auto strike, and the trend
toward smaller cars. The price rise has not been enough to offset
the declining demand. The result has been the closing of some
marginal smelting operations and, in some cases, moving these
operations to mine sites abroad.
5.
Economic Impact of Control Costs
a.
Impact on Firms Within the Industry
Examination of balance sheets and income statements for
most of the firms engaged in primary copper, lead, and zinc
smelting has led to the overall conclusion that sufficient cash
flows could be generated to pay the annualized control costs.
Effects of control costs on profits and return on investment
(ROI) vary throughout the industry, but they would not be severe
enough to warrant plant closing. With the additional burden of
air pollution control costs, smelters located away from mine
sites may try to reduce total operating costs by moving the plant
to the mine site.
b.
Impact on the Industry
Industry impact is a function not only of economic and
market development trends but also the air pollution control
expenditures incurred by the producers of close substitutes and
the cost-shifting practices of these competitors (some primary
nonferrous firms also produce substitute products).
Projected annual U.S. growth in demand through FY 1977
for copper, lead, and zinc is 2.6 percent, 1.4 percent, and 2.2
percent, respectively. The primary producers' share of the market
will depend on the product mix and the extent of the air pollution
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control cost shifting by secondary producers. The market share
of primary copper producers should remain the same. The likelihood,
however, of requirements for unleaded gasoline and the loss of a
large portion of the current market for primary lead indicate that
most of the growth forecast for lead consumption will be satisfied
by secondary producers. The shares of primary and secondary zinc
producers in satisfying projected demand should remain the same;
however, it is likely that more primary needs will be satisfied
by smelters located near mine sites in foreign countries.
c.
Demand Elasticity and Cost Shifting
Most of the factors affecting demand elasticity and
cost shifting have been discussed earlier in this report, but
no mention has been made" of the control costs for producers of
close substitutes and whether these costs would be shifted.
Producers of secondary copper, lead, and zinc will probably
pass on fully their control costs.
Producers of close substitutes
such as primary aluminum and steel will also be faced with
rather significant cost increases.
Control costs to be
experienced by most primary smelters of copper, lead, and zinc
are 3.2 cents per pound, 2.2 cents per pound, and 2.2 cents
per pound, respectively.
Producers will probably be able to pass on only a portion
of these added costs. This will depend primarily upon future
world market conditions, and as such is highly unpredictable.
The future market for copper will be dependent primarily upon
the action of the foreign governments which have recently
nationalized production.
The lead industry currently faces
a longrun decline in demand because of the expended trends
toward low-lead gasoline and smaller cars. The future demand
for zinc appears to be growing steadily. This suggests that
zinc producers will have the least difficulty in passing on
cost increases; and lead producers the most difficulty. No
statement can be made about the magnitude of such increases.
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REFERENCES FOR SUBSECTION N
1.
"Systems
Smelting
Company,
Study for Control of Emissions, Primary Nonferrous
Industry", Vol. I, II, and III, Arthur G. McKee and
San Francisco, 1969.
2.
"The Impact of Air Pollution Abatement on the Copper Industry",
Fluor Utah Engineers and Constructors, Inc., Sponsored by
Kennecott Copper Corporation, San Mateo, California, April 1971.
3.
Handbook of Emissions Effluents and Control Practices for
Stationary Particulate Pollution Sources, Midwest Research
Institute, Contract No. CPA 22-69-104, National Air Pollution
Control Administration, U.S. Department of Health, Education,
and Welfare, November 1970.
4.
Semrau, Konrad T., "Sulfur Oxides Control and Metallurgical
Technology", Presentation to EMD-AlME Copper Metallurgy
Institute, Denver, February 17, 1970.
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O.
Secondary Nonferrous Metals
1.
Introduction
Four industries encompassing those firms that reprocess copper,
aluminum, lead, and zinc scrap will be covered in this section.
Although mutually integrated to some extent, each will be individually
considered where practical.
a.
Nature of Product and Process
COPPER - The secondary copper industry produces about 35
percent of the total copper consumed in the United States.
Most
output in the form of unalloyed metal is reclaimed by the primary
copper producers as electrolytic copper and is not considered in
this section of the report.
Of the remaining secondary production,
virtually all of the metal is recovered in alloy form.
Almost all the copper-based alloys are brass or bronze,
although several are actually misnamed.
Technically, brass is a
copper-based alloy with zinc as the major secondary component.
Bronze is copper-based with tin as the major secondary component.
Lead, iron, aluminum, nickel, silicon, and manganese appear in
certain classifications.
The choice of the specific alloy com-
position is dependent upon the stress, corrosion, and machining
conditions to which the product will be subjected.
The basic raw material of the brass and bronze industry is
copper-bearing scrap from obsolete consumer and industrial products.
The scrap is often contaminated with metallic and nonmetallic
impurities and thus usually requires some preprocessing.
Common
techniques include hand sorting, magnetizing to remove tramp iron,
stripping or burning to remove insulation, sweating to remove
low-melting-point metals, and gravity separation in a water medium
to concentrate fine copper-bearing materials.
Cleaned scrap is charged into a furnace where it is melted,
smelted, refined, and alloyed to meet the specifications for one of
several standard brass and bronze products.
The most common type of
furnace in use in the industry is the stationary reverberatory
furnace which can vary from 10 to 100 tons in batch capacity and
from 24 to 48 hours in batch processing time.
Cylindrical rotary
furnaces are used for smaller batches, seldom exceeding 30 tons,
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and crucible furnaces are used for even smaller quantities or for
special purpose alloys.
ALUMINUM - The secondary aluminum industry produced
18.7 percent of the nation's aluminum supply in 1967. It
processes scrap into finished alloys of varying consistencies.
Approximately 90 percent of output is consumed by the casting
sector of the aluminum fabricating industry, represented by nearly
2,800 small, independent and captive foundries.
There are four major steps in processing:
(1) sorting
and preparing the scrap; (2) smelting the feed in reverberatory
furnaces or, occasionally, in small rotary furnaces; (3) cleansing
and refining the molten metal by fluxing and filtration; and
(4) pouring the finished alloy into molds for cooling and
hardening.
LEAD - The secondary lead industry accounted for 59 per-
cent of domestic production and 44 percent of the nation's lead
consumption in 1967.
It processes lead scrap into lead oxide and
various alloys and fabricates the recovered metal into many final
products, including storage batteries, paint pigments, solder and
type, cable coverings, and castings.
There are four major steps in the rec~very of lead:
(1) sorting and preparing the scrap; (2) smelting the feed in
reverberatory furnaces or, occasionally, in cupolas; (3) refining
and purifying the molten metal by oxidation of impurities and, if
lead oxide drosses are charged to the furnace, reduction to metallic
lead with the addition of carbon; and (4) intermittently tapping
the finished metal for molding.
ZINC - In 1967, zinc recovered from scrapped materials
accounted for 17 percent of the national output of that metal.
Slightly over half of this recovery was performed by primary zinc
producers and chemical plants, and the remainder by firms
principally engaged in secondary smelting. Only the latter are
considered in this section.
Most of the zinc recovered by the secondary industry is
in the form of redistilled slab or zinc dust. The metal is sold
in the same markets as primary zinc--construction, transportation,
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electrical equipment and supplies, plumbing and heating, industrial
machinery, and pigments and compounds.
The principal steps in
processing zinc scrap are as follows: (1) sorting and preparing
the scrap; (2) melting or sweating; and (3) refining the zinc metal
through distillation.
b.
Emissions and Cost of Control
COPPER - The refining furnace is the principal source of
particulate emissions in the brass and bronze industry.
Refining
is a process in which a flux is used to remove metallic impurities
from the metal.
By far the most commonly used flux is compressed
air (oxygen), which is bubbled through the molten metal to oxidize
impurities.
The oxides so formed are lighter than the molten metal
and are removed from the melt by entrapment in the slag covering
or by entrainment in the-gases leaving the furnace.
The most vola-
tile metal oxides (especially zinc and lead) condense to form very
fine (submicron) fumes which are extremely difficult to collect.
In addition to the metallic oxides, fly ash, carbon, and mechanically
produced dust are often present in the furnace exhaust gases.
The
exact composition of the particulate matter depends upon the fuel
used, alloy composition, melting temperature, furnace type, and
many operating characteristics.
Particulate emissions from the brass and bronze industry
were estimated to be 11,000 tons in 1967.
Maintenance of the 1967
control level of 57 percent would increase emissions to 14,000 tons
by FY 1977. The insta]}~t::.:ipn of - fabric-_-f~it~~~-.wo.u'~~ achieve the
process weight code requirements by reducing emissions to 1,600
tons in FY 1977; the imp~ementation of these control systems
would require approximately $2.6 million in investment costs and
$.5 million in annual costs.
ALUMINUM - The most severe air pollution problem in the
processing of secondary aluminum occurs when chlorine is used as a
fluxing agent. As chlorine is bubbled through the molten metal,
it both agitates the bath and combines with certain impurities such
as magnesium and dissolved hydrogen.
The fumes vented from the
furnace include AlC13' A1203' and HCl and unreacted chlorine.
This presents an extremely difficult control situation because
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of the corrosiveness of the acid mist and the fact that much of
the particulate matter is in the submicron size range.
Aluminum sweating furnaces present a smaller but still
significant problem: to control the smoke caused by the incomplete
combustion of the organic constituents of rubber, oil and grease,
plastics, paint, cardboard, and paper.
Particulate emissions from secondary aluminum operations
were estimated to be 6,000 tons in 1967.
Assuming that the 1967
control levels of 60 percent for reverberatory furnaces and 20 per-
cent for sweating furnaces were maintained, emissions would in-
crease to 11,000 tons by FY 1977. The installation of high-
efficiency venturi scrubbers on reverberatory furnaces, and fabric
filters on sweating furnaces, would allow the industry to achieve
the process weight standard.
This would reduce FY 1977
emissions to 2,500 tons.
The investment cost is estimated to be
$28 million with an annual cost estimated at $8 million.
LEAD - Purification in reverberatory furnaces constitutes
the most serious air pollution problem in the secondary lead indus-
try. Air is passed through the molten metal to oxidize impurities
such as iron, zinc, and antimony. While most of the metallic oxides
are removed as a dross from the bath surface, some fine particulate
matter escapes with the flue gas.
The reduction of lead oxide in blast furnaces or cupolas
is another significant source of air pollutants.
The primary
emission from this operation is particulate material entrained by
the turbulent flow of gases upward through the charge materials
(lead, oxide, coke, and limestone).
Because of the toxic nature of lead compounds, the secondary
lead producers have achieved a fairly high degree of control.
It
is estimated that the ~967 level of control was 90 percent, and emissions
amounted to 6,100 tons.
If this control level was maintained, emissions
would grow to 8,200 tons by FY 1977. The process weight code could
be achieved by installing fabric filters on reverberatory and blast
furnaces which are not already well controlled. This would reduce
emissions to 1,600 tons in FY 1977 for~n investment cost estimated
at $764,000 and annual cost of $150,000.
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ZINC - Sweating processes separate zinc from metals having
higher melting points and from nonmetallic residues.
Sweating,
usually conducted in kettle furnaces," reverberatory furnaces, or
rotary furnaces, may cause emissions of smoke and oily mists from
the combustion of organic material, zinc or zinc oxide particles,
other metallic oxides, and the products of fuming fluxes
(e.g., ammonium chloride).
Distillation of zinc in retort furnaces purifies the
metal and produces powdered zinc or zinc oxide.
In this operation,
zinc is vaporized in the retort and then passed through a condenser,
where it may be either rapidly cooled to below the melting point
to produce powdered zinc or slowly cooled to above the melting
point to produce liquid zinc for manufacturing slabs.
When zinc
oxide is produced, the condenser is bypassed and excess air is
introduced to both cool and oxidize the zinc vapor; a baghouse is
usually employed to collect the oxide.
Zinc and zinc oxide fumes
are the primary emissions from the distillation and oxidation
processes.
Particulate emissions from the secondary zinc industry
were estimated to be 800 tons in 1967.
If the 1967 control levels
of 20 percent for sweating furnaces and 60 percent for distillation
furnaces were maintained, emissions would increase to 1,200 tons by
FY 1977.
The installation of fabric filters on both types of
furnaces would achieve the process weight code.
This would reduce
FY 1977 emissions. to 100 tons and would require an investment of
$526,000 with an annual cost of $62,000.
c.
Scope and Limitations of Analysis
Because many of the firms are small, locally oriented, or
subsidiaries of major corporations, data describing several of the
characteristics of the secondary metals industries were often lacking.
Voids were particularly prevalent in capacity and financial data.
For several firms it was not possible to estimate key parameters
such as operating ratios and profits per ton of output before and
after control.
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2.
Engineering Basis of the Analysis
a.
Copper
Effective control of the reverberatory furnaces in
the brass and bronze industry can be achieved through the
installation of fabric filters.
Cooling equipment must be
provided to lower the temperature of the gas stream below the
critical point for the glass fabric selected as the filter
medium.
Table 4-73 shows a distribution of furnace capacities
and the required control efficiency, investment, and annual
cost for each furnace size.
The Industrial Gas Cleaning Institute
Study (Reference 2) was used as the source for cost information.
d - -
Uncontrolled emissions were estimated at 70 lb. of particulates per
ton of metal.changed. Depreciation was assumed to be straight line
over 15 years, and an interest rate of 10 percent was applied. From
Table 4-73, average cost factors weighted by ,capacity were calculated
to be $1273 investment and $246 annual cost per ton of daily capacity.
Production in 1969 was 70,000 tons and is expected to
grow at 3 percent annually.
It is estimated that 60 percent
of the industry is currently controlling to an average level
of 95 percent. These assumptions were used to compute the
additional investment and annual cost required to bring the
entire industry into compliance by 1977.
b.
Aluminum
Secondary aluminum is most often refined in reverberatory
furnaces.
When chlorine is used as a fluxing agent, the
evolution of submicron AlC13 abd A1203,along with gaseous
HCl and unreacted chlorine, requires that a highly efficient
. .
wet control system be installed.
It is assumed that the
system will consist of a cooling chamber, a venturi contactor,
and a gas absorption tower using caustic liquor.
Capacity data are available for the 20 largest plants
which accounted for some 70 percent of the 1967 industry
output of 684,000 tons.
Furnace capacities were estimated
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TABLE 4-73.
CONTROL COSTS FOR BRASS/BRONZE REVERBERATORY FURNACES
Capacity No. Furnaces Required Efficiency Investment Annual Cost
(Tons/Day) (%) ($1000) ($1000)
12 4 93.7 36 7.3
25 3 95.1 50 9.7
30 4 95.4 54 10.4
60 7 96.3 73 13.9
70 4 96.5 78 15.0
75 6 96.6 80 15.5
80 2 96.7 82 15.9
Source:
Industrial Gas Cleaning Institute, 1970
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for these plants, and this distribution appears in Table 4-74
along with required control efficiencies and the associated
costs.
Particulate emissions are estimated at 21 lb. per
ton of metal reclaimed.
Costs were based on information in
Reference 2 with the assumptions of straight-line depreciatio~
over a 10-year life and an interest rate of 10 percent.
was estimated that the 68 smaller plants have an average
capacity of 20 tons per day, and the same ~~thodology was
used to derive control cost estimates for these plants.
It
Twenty-five percent of the reverberatory furnaces are currently
controlled to a satisfactory degree.
Growth in the industry
is expected to average 6 percent per year through 1977.
Aluminum is frequently separated from higher melting
materials through "sweating" in reverberatory furnaces with
sloping hearths.
Particulate emissions from this operation
are estimated at 14.5 lb. per ton of aluminum reclaimed.
An effective control system for this process consists of
an afterburner, U-tube heat exchangers for gas cooling, and
a baghouse. It is estimated that there were 18 such furnaces
in 1967 with an average capacity of 24 tons per day.
Costs
for controlling these furnaces were derived from data in
Reference 2 with the assumption of 10 percent interest and
straight-line depreciation over the 25-year life
of the control system.
c.
Lead
Reverberatory furnaces are used for sweating, melting,
and purification of secondary lead.
The most satisfactory
device for controlling the particulate emissions from these
furnaces is a fabric filter.
In most cases it is necessary
to cool the gas stream prior to filtration.
It was assumed
that this would be accomplished with a "U-tube" cooling
section followed by a dilution air damper.
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TABLE 4-74.
CONTROL COSTS FOR SECONDARY ALUMINUM REVERBERATORY FURNACES
Capacity No. Furnaces Required Efficiency Investment Annual Cost
(Tons/Day) (%) ($1000) ($1000)
15 1 63 127 39.6
35 2 72 155 53.8
40 9 73 160 57.0
50 9 75 170 62.8
60 8 76 178 67.6
70 4 79 185 72.5
100 2 80 200 85.5
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Capacity data for these furnaces were not available.
It was assumed that there were 125 such furnaces in 1967
having an average capacity of 25 tons charge per day.
Particulate emissions are estimated at 130 lb. per ton
processed.
Reference 2 was used as the basis for control
costs.
Straight-line depreciation over 25 years and a 10
percent interest rate were assumed.
Blast (cupola) furnaces are another significant source
of air pollution in the industry.
These furnaces are used
to reduce lead oxides contained primarily in furnace drosses
and slags.
An afterburner is normally used to remove carbon
monoxide, hydrocarbons, and odors from the exhaust gas.
Once again, fabric filters provide the most effective par-
ticulate control. Precooling is achieved through the
introduction of dilution air.
It was assumed that there were 18 blast furnaces in operation
in 1967 with an average capacity of 32 tons charge per day.
Emissions are estimated at 190 lb. per ton processed.
Cost
information was obtained from Reference 2.
Depreciation
was assumed to be straight line over a la-year life, and the
interest rate was assumed to be 10 percent.
Growth in the industry is expected to average 3 percent
per year through 1977.
It is estimated that 95 percent of the
industry capacity is already adequately controlled.
d.
Zinc
Zinc is frequently reclaimed from higher melting
point metals in reverberatory or kettle-type furnaces.
rate of emissions from this operation depends upon the
The
amount and type of impurities in the feed stock. The presence
of carbonaceous material in the effluent usually requires
that an afterburner be provided.
The remaining particulate
emissions may be effectively controlled by a fabric filter
installation.
It is estimated that 12 lb. of particulates
are generated for each ton of metal processed.
It was
assumed that there were 20 reverberatory furnaces exhausting
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an average of 8,000 cubic feet per minute of gas each and five
combinations of kettle furnaces exhausting 10,000 cu. ft. per
minute of gas each in use in the industry in 1967.
The purification of secondary zinc is normally accomplished
through distillation in a retort furnace.
Although the
furnace-condensor combination is normally a closed system,
significant quantities of particulates are emitted when
scrap is charged or residue removed. Satisfactory control
of these emissions is achieved with a fabric filter. The
emission rate is estimated at 45 lb. per ton of metal
processed.
It was assumed that in 1967 there were 10 banks
o~ 10 reto~t furnaces in the industry, each
10,000 cu. ft. per minute of exhaust gas.
Fabric filter installation and annual
bank requiring
costs were derived
from Publication No. AP-S1 (Reference 7). It is expected that
the industry will experience a 4 percent annual growth rate
through 1977.
3. Industry Structure
a.
Characteristics of the Firms
COPPER - The secondary copper industry may be divided
into two segments:
(1) Brass and bronze manufacturers account for
most of output--60 plants produce brass and bronze ingots and 125
brass mills produce copper alloy sheets, rods, plates, and tubing;
in 1967, brass and bronze manufacturers produced 898,000 tons of
copper-based alloys.
into unalloyed copper.
(2) Secondary smelters refine scrap back
They tend to be small, independent operators
and often reclaim other metals as well as copper; in 1967, these
produced 63,000 tons of refined copper.
ALUMINUM - The secondary aluminum industry is commonly
divided into three sectors:
(1) Secondary smelters generally process
scrap to ingot form, which is then sold to fabricators.
Comprising
by far the largest portion of the industry, secondary smelters
normally refine around 70 percent of total processed scrap. For
1969, these companies accounted for 708,000 tons of the total
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reported 1,057,000 tons of scrap consumed.
(2) Nonintegrated
fabricators, the second largest group, normally process 15 to 17
percent of the scrap supply; for 1969, these accounted for 151,000
tons of the total reported scrap consumed.
(3) The primary aluminum
industry itself processes scrap generated from its own operations
and accounts for the remaining 13 to 15 percent of total scrap
consumed.
For the base year 1967, the secondary aluminum industry was
represented by 73 firms and 88 plants, exc!uding primary producers.
Of the 88 plants, 30 are strictly aluminum smelting operations, and
the remainder have only minimal interests in this particular metal.
Eight companies control most of the capacity and are considered to
be the major smelters.
LEAD - The secondary lead industry is normally divided
into two sectors:
(1) Primary lead refiners use a small amount of
scrap as raw material input; for 1967, these consumed only 2 per-
cent of the total reported scrap and produced about 10 thousand
tons of secondary metal. (2) Secondary smelters and remelters
processed 98 percent of consumed scrap in 1967 and produced nearly
544,000 tons of secondary lead with 235 firms and 268 plants;
only 32 firms (owning 65 plants) are of significant size, with the
remainder being small, local firms of under 20 employees or having
minimal interests in lead. Two of the large firms control 33 plants
and almost )0 percent of the secondary capacity.
ZINC - The secondary zinc industry is composed of 12
firms and 15 plants.
Most of the firms process other metals as
well as zinc.
Five of the plants produce zinc dust only, while the
remainder produce a mixture of slab zinc, zinc dust, zinc oxides,
and zinc alloys.
In 1967, the industry produced a total of 73,000
tons of zinc products.
b.
Operating Characteristics
COPPER - As the supply of recoverable scrap has grown,
capacity in secondary smelters (for producing unalloyed copper) has
increased accordingly.
Most of this expansion has been through the
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addition of new furnac~s in existing plants, rather than the entry
of new firms into the industry.
The operating ratio in this segment
of the industry is high, probably approaching 90 percent.
Brass and bronze production is more directly related to
the demand for copper alloy products than to the supply of copper-
based scrap. Since World War II, there has been little increase
in capacity for this segment of the industry.
is estimated at 80 percent.
The operating ratio
ALUMINUM - Complete capacity data for the aluminum
industry is unavailable and operating ratios cannot be calculated.
However, the industry normally operates at healthy rates.
Markets
have been favorable. The scrap supply has grown rapidly. The
industry has expanded greatly over the past decade. Growth in
recent years has been chiefly through enlargement of existing
plants rather than the building of new ones; the trend has been
larger reverberatory furnaces, with capacities ranging up to 100
short tons of aluminum per day.
The industry is technologically
advanced and is able to maintain a high degree of control over
alloy content, impurities, and heat.
LEAD - Major producers of secondary lead normally
operate in the range of 85 to 90 percent of smelting capacity.
Production is cyclical, depending on final product need and the
health of the economy, but it fluctuates less than primary produc-
tion.
Unlike many other secondary metal industries, the secondary
lead industry normally accounts for over half of the domestic lead
production and has a substantial influence on market trends. These
firms are well integrated and use much of their production in the
fabricating of final consumer products. In times of strong demand,
secondary producers call on primary producers to supply lead for
fabricating operations; when demand slackens, secondary producers
can supply a much greater percentage of their own fabricating needs.
ZINC - Complete capacity data for the zinc industry are
not available. It was therefore difficult to determine operating
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ratios accurately, but it is assumed that they are quite low,
probably close to 70 percent. During the past few years, little
new capacity has been added. Production rates (particularly for
redistilled slab zinc) have declined, due mainly to a shortage of
scrap suitable for reclaiming.
c.
Resources
COPPER - Copper-bearing scrap is usually classified as
either new or old.
New scrap refers to newly manufactured materials--
drosses and residues from smelting processes as well as turnings,
clippings, punchings, and defective articles from fabrication
operations.
In 1967, new scrap accounted for 56 percent of total
scrap copper consumption.
Old scrap consists of obsolete, domestic,
and industrial products of high copper content; examples include
copper wire, cable, pipes, valves, radiators, and ship propellers.
Brass and bronze manufacturers purchase most of their
scrap through dealers who classify it by type and provide an
approximate chemical analysis of each lot.
Major raw materials
of these manufacturers include primary copper (10 percent of the
total copper in their products), zinc, tin, lead, and other alloying
constituents as well as fuel oil or natural gas.
ALUMINUM - Aluminum scrap is also classified as new and old.
New scrap, a byprod~ct of current fabricating operations, includes
borings and turnings, clippings and forgings, and residues from
various melting operations.
Major suppliers are the aircraft,
automobile, aluminum fabricator, and primary aluminum industries.
New scrap accounts for approximately 85 percent of the smelter's
mix. Old scrap comes from used or outdated products; examples
are dismantled automobiles, household appliances, junked airplanes,
scrap aluminum foil, wire' and cable, and beverage cans.
The av.aila-
bility of old scrap is expected to increase or maintain its percentage
(15%) of the smelter's supply.
Both types are normally gathered by
dealers, who segregate and bale it and then ship bulk loads to
the secondary smelters.
For 1967, reported scrap consumption by
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secondary producers amounted to 883,000 short tons (760,000 tons if
consumption by primary producers is excluded).
Fuel consumption, a major cost input, is natural gas
or fuel oil, depending on economic conditions and availability.
Es~imates of fuel consumption vary in the literature but seem to
range from 4 to 7 million Bt~'s per short ton of metal treated.
Variances may be explained by the melting properties of the
different alloys being formulated. For aluminum, the low melting
point (1220°F) and high thermal conductivity imply easy melting;
however, it is an excellent reflector of radiant energy--a property
that hampers thermal transfer in reverberatory type furnaces. Fuel
efficiency for melting is considered good at 30 percent of input.
LEAD - Because lead has a high resistance to corrosion, it
readily lends itself to reclamation through scrap processing. Lead
scrap, like copper and aluminum scrap, may be classified as new and
old.
New scrap is a byproduct of current fabrication operations;
for 1967, lead oxide drosses and residues from manufacturing and
foundry sources amounted to 101,000 tons of new scrap. Old scrap
. .
comes from obsolete or wornout products--batteries, cable coverings,
piping, type metal, solder, common babbit, and lead sheet; in 1967
electric storage batteries were the major source, 73 percent of the
625,000 tons of old scrap.
Although products such as tetraethyl-lead gasoline additives
and paint pigments are not recoverable, it is estimated by the Bureau
of Mines that roughly 50 percent of consumed lead can be reclaimed
and that recoverable lead-in-use has increased to over 4 million
tons to provide adequate supply.
ZINC - The extensive usage of zinc in galvanizing and in
compounds in which the metal is lost has limited the availability
of zinc suitable for reprocessing. Scrap is again classified as
new and old. New scrap which accounts for about 75 percent of the
total consumption, consists primarily of skimmings and drosses from
galvanizing operations, clippings, and chemical residues; old scrap
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includes die castings (chiefly from dismantled automobiles), rod and
die scrap, used dry cells, engraver plants, and other rolled zinc
articles. Most old scrap is purchased by the secondary producers
from dealers.
In some cases, the dealer will concentrate the zinc
content through sweating prior to shipment to the secondary plant.
4.
Market
a.
Distribution
COPPER - Both the secondary smelters and the brass and bronze
manufacturers tend to locate in metropolitan areas primarily in the
Northeastern, Pacific Coast, and East North Central States.
This
places them in close proximity to both the largest sources of scrap
and the major outlets for their products.
Copper-base alloys are characterized by high strength, work-
ability, and corrosion resistance.
Because of these properties, brass
and bronze are widely used in the production of hardware, radiator
cores, condensers, electrical equipment, ship propellers, and many
other devices.
Production by form of.secondary recovery of copper
for 1967 was as follows:
Alloy Type and Other Forms
Copper Recovered
(Short Tons)
Unalloyed Metal (Secondary producers
only)
Brass and Bronze Ingots
Brass Powder
63,337
311,892
531,139
54,342
978
961,688
Brass Mill Products
Brass and Bronze Castings
ALUMINUM - Although primary producers tend to locate near
cheap power sources, secondary aluminum producers generally cluster
in the heavily industrialized areas--chiefly near Los Angeles,
Chicago, Cleveland, and New York to Philadelphia. These locations
provide good proximity to suppliers of scrap as well as to the market.
Secondary producers sell to a limited market, primarily
casters of the metal.
Approximately 90 percent of secondary output
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is consumed by the casting industry, which in turn depends upon
secondary smelters for the major portion of its raw materials.
Secondary producers supply 70 to 80 percent of all of the aluminum
used by the casting industry. Primary producers supply the remainder.
For 1967, about 698,000 short tons of aluminum were recovered from
scrap. Output by type of alloy is as follows:
Brass and Bronze
Aluminum Recovered
(Short Tons)
53,656
628,848
643
Alloy Type and Other Forms
Unalloyed Metal
Aluminum-Based Alloys
Zinc-Based Alloys
Magnesium Alloys
Chemical Compounds
8,304
1,195
5,105
697,751
LEAD - Most secondary lead producers are in metropolitan
areas throughout the country, with ready access to sources of scrap
and to the marketplace. In contrast, primary lead smelters are
generally near sources of lead ore to minimize transportation costs
from mine to mill.
Storage batteries for home, leisure, industrial, and
automotive purposes are by far the largest single use for lead.
Most important, virtually all battery manufacturing plants are
operated by major secondary lead producers.
For 1967, this product
class accounted for 37 percent of total U.S. lead consumption, a
ratio which has been on the rise.
Although a rather cyclical market,
depending to a large degree on new car production and the number of
total vehicles on the road, battery consumption has proved to be
one of the two major growth areas for the entire lead industry. By
1969, battery usage of all types was about 42 percent of U.S. lead
consumed.
Typically, a secondary firm manufactures a broad
line of industrial and commercial batteries.
Most of the output
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is sold to oil and tire companies and mass merchandisers for resale
under private labels, although a substantial amount is sold under
proprietary brand names of the original manufacturer. Two-thirds
to three-fourths of all batteries are sold in the replacement market.
Lead alkyl manufacture (production of tetraethyl and
tetramethyl lead for use as gasoline antiknock agents) has been
the other major growth area for lead metal.
No secondary producers
manufacture lead alkyls per se, although they probably do supply
small amounts of lead raw materials to chemical concerns which do
manufacture these products.
Thus if environmental concerns lead
to the curtailment of lead additives, the secondary lead industry
would be directly affected to a minimal extent.
Other markets for secondary lead include paint pigments,
bearings, brass and bronze alloys, type, solder, piping, and cable
covering for the construction, transportation, printing, and
communication industries.
The lead content of these products
accounts for 40 percent of secondary production.
Sales in these
areas show cyclical patterns and on the average have shown small
downtrends over the past several years.
ZINC - Secondary zinc smelters are primarily located in
metropolitan areas of the Northeastern, Pacific Coast, and East
North Central States.
The major consumers of zinc are the iron and
steel industry (galvanizing); the automobile industry (die castings
for carburetors, grilles, trim, etc.); the brass and bronze industry
(alloying constituent); the rubber and industrial chemical industries
(pigments and compounds); and the manufacture of dry cells and
lithographic plates.
b.
Competition
COPPER - The quality of secondary copper, reclaimed as
unalloyed metal, is in no way inferior to that of primary copper.
Secondary smelters compete directly with the primary producers.
In contrast, the majority of the end products made of brass and
bronze requires the unique properties of these alloys either in the
4-240
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machining process or in the final application.
Little substitution
is likely in the traditional outlets for brass and bronze manufacturers,
if price increases should occur.
ALillUNUM - The term "secondary" refers not to excellence
or quality but to origin and is generally defined as "aluminum which
has lost its original identity as to source."
Because their prices are normally lower than those of
primary producers, secondary producers supply most of the casting
alloys.
They also have gained favor by doing custom tailoring for
their customers.
Primary and secondary producers do compete for
sales of hot metal and aluminum slot and notch bar for destructive
uses, but these markets are not particularly significant for either.
The secondary producers do not face direct external
competition in the form of substitute products, except in the general
sense that aluminum does. compete with other materials such as copper,
steel, and plastics.
Secondary smelters are, however, dependent upon
the fortunes of the casting industry, which has shown dramatic growth
over the past decade in the markets that are very broad; major customers
include the transportation, machinery, defense, home appliances, office
equipment, and photographic industries.
LEAD - The secondary lead industry faces a mixed pattern
of external competition in the form of substitute materials.
The
most significant market, batteries, would not be threatened in the
short term.
Several combinations of alternate materials, such as
nickel, zinc, silver, cadmium, and mercury, can provide stored
electric energy; however, most of these are limited in quantity or
electrical characteristics and at present are not considered viable
substitutes to meet the large volumes required for transportation and
industrial power requirements.
Manufacturing efficiencies and
technological improvements, including improvements in battery life,
have maintained the superior position of lead-based power storage.
Other product areas face stiffer competition:
(1) Lead
continues to hold its market in structural and highway painting, but
lead-based pigment for paint manufacture has not been a growing
market; development of substitutes has advanced rapidly, particularly
4-241
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those for interior and exterior house paints.
(2) Products for
the construction sector, an area in which lead has had much histori-
cal significance, have faced strong competition; that is, sales of
piping, lead calking, and sheet lead have been on the downtrend
because of substitutions from plastics, stainless steel, ceramic
products, and plasterboard.
(3) Demand for lead as type metal in
the printing industry has shown a slight decline in recent years
due to technological shifts, particularly with regard to new photo-
graphic methods. (4) Use of lead for cable covering in the communi-
~ations industry has been slowly receding, as alternate materials,
principally plastics, have been introduced. (5) Lead packaging in
the form of collapsible tubing, foil, and solder has shown a level
demand pattern because of substitutive techniques and materials
such as plastics, tinplate, and paper.
ZINC - Zinc has several unique
properties that make it
particularly suitable for many applications:
its resistance to
corrosion makes it useful for the galvanizing of iron and steel,
its low melting point makes molds or dies last longer, its hard-
ness is required in brass, and its ductility is suited for rolling
or drawing.
Nevertheless, zinc competes with ceramic and plastic
coatings for anticorrosion applications; with aluminum, magnesium,
and plastics in die casting; and with titanium pigments in the
paint and ceramics industries.
5.
Trends
COPPER - Production and prices for secondary copper are related
to the historical fluctuations inherently found in the copper industry
as a whole.
Total secondary copper recovered in alloy form grew from
571,000 short tons in 1960 to 737,000 short tons in 1967, for a
growth rate of 3.7 percent per year. Output was cyclical, with
bottoms shown in 1961 and 1966 and a peak at 790,000 short tons in
1965.
Due to uncertaint\es in the supply and demand for all copper,
intermittent labor disputes, and probable slackening in demand
for defense purposes, growth in secondary copper is estimated at
3 percent through FY 1977.
ALUMINUM - Recovery of secondary aluminum set a new record every year
4-242
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from 1960 to 1969--a period when production grew from 329,000 to
856,000 short tons, for a healthy growth rate of 11 percent per
year. Operations for ~he past 2 years have been sluggish
because of the general downward trend of the economy and the
consequent lessening in demand for castings; the long term future
for castings appears favorable, however, and the demand for secondary
a aluminum should grow at a rate of approximately 6 percent through
FY 1977. Average prices for secondary aluminum, in cents per
pound, for the period 1960-69 compare with those for primary
aluminum as follows:
pr ima ry
Secondary
1962
23.9
2L2
1963
22.6
21.3
1964
23.7
22.3
1965
24.5
24.3
1966
24.5
24.7
1967
25.0
24.3
1968
25.6
25.5
1969
27.2 '
26.8
LEAD - Production of secondary lead increased from 453,000
short tons in 1961 to 604,000 in 1969 for a yearly growth rate of
3.7 percent. Demand for storage batteries contributed substantially
to the upward trend, while other product areas showed relatively
level or slightly declining output. . Production trends in the automo-
bile industry are important as lead is a major component in original
and replacement equipment. A growth rate of 3 percent is expected
for secondary lead production through IT 1977 . Prices generally
follow those of primary lead, but are somewhat obscure because of the
captive nature of secondary output for further fabrication.
ZINC - Secondary zinc output rose from 57,000 short tons in
1963 to 73,000 in 1967 for a yearly growth rate of 5.0 percent. A
growth trend of 4.0 percent is expected through FY 1977. Gains
reflect the upward trend in the economy, particularly in the automo-
bile industry.
Zinc prices fluctuate chiefly due to heavy reliance
on the automotive and construction industries, but the swings normally
have not been severe--between 11.5 and 15.5 cents per pound over the
past decade.
6.
Economic Impact of Control Costs
a.
Impact on Plant
Operating statements for model plants within the secondary
4-243
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metal industries were not developed because of the lack of sufficient
financial information.
Many are small, family-controlled operations;
others are owned by large metal conglomerates.
Without more detailed
information, it was rot possible to estimate accurately the appropriate
revenues, costs, and profits.
As an approximation of the impact of
compliance with standards, the average costs per unit of output have
been developed and are shown in Table 4-75.
As shown, secondary
aluminum faces by far the highest control cost per unit of output
and, consequently, the greatest potential impact of the four metals.
TABLE 4-75.
AVERAGE COST OF CONTROL--SECONDARY NONFERROUS METALS
Average Price/ Control Cost/ Percent
Industry Short Ton (1969) Short Ton of Price
Copper $960 $0.54 0.1
Aluminum $530 $6.34 1.2
Lead $298 $0.21 0.1
Zinc $292 $0.59 0.2
b.
Demand Elasticity and Cost Shifting
Secondary copper smelters compete with primary producers
and are subject to the cyclical nature of the copper industry as a
whole. However, both the primary and the secondary sectors are
expected to pass on the added costs of pollution control in the
long run. Supporting this conclusion are the facts that control costs
for secondaries are minimal, in absolute terms and in comparison to
those of the primary producers. Assuming full implementation,
secondary copper producers should actually have greater competitive
advantage; comparative costs are 3.2 cents per pound for the
primary producers and 0.03 cents per pound for the secondary copper
producers. For secondary lead and zinc producers cost increases
are minimal for each in the absolute sense and with respect to
primary producers.
Secondary aluminum faces an average control cost of
0.3 cents per pound, which is well below primary costs, at 2.4 cents
4-244
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per pound.
This implies that secondary producers will be able to
maintain their prices below primary metal prices even if costs
are passed on to their customers, and in turn will be able to
maintain their market in providing ingots for the aluminum casting
industry. With a favorable longterm outlook for castings and
mild external competition, secondary aluminum producers should be
able to pass on the costs.
c.
Effect on Industry
All four secondary nonferrous industries contain a great
number of small firms--over half of them with fewer than 20 employees.
For the 10 percent that operate close to the break-even
point;
control costs could be relatively more severe and could cause a
few firms to drop out of the market.
In general, however, air
pollution control should have little impact on the structure and the
competitive patterns of these secondary industries because of the
small cost burdens involved.
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REFERENCES FOR SUBSECTION 0
1.
"Air Pollution Aspects of Brass and Bronze Smelting and
Refining Industry", National Air Pollution Control
Administration, 1969.
"Study of Technical and Cost Information for Gas Cleaning
Equipment in the Lime and Secondary Non-ferrous Metallurgical
Industries", Industrial Gas Cleaning Institute for the National
Air Pollution Control Administration, 1970.
"Air Pollutant Emission Factors", National Air Pollution
Control Administration, 1970.
Bureau of Mines Minerals Yearbook"; "1967.
.~. ,. ...;.,.,. - . ....~ ~ - n . --.. .
"Handbook of Emissions, Effluents, and Control Practices
for Stationary Particulate Pollution Sources", Midwest Research
Institute for the National Air Pollution Control Administration,
1970.
2.
3.
4.
5.
6.
"Secondary Zinc Industry Emission Control Problem Definition
Study", Environmental Protection Agency, 1971.
"Control Techniques for Particulate Air Pollutants", National Air
Pollution Control Administration,1970.
u.S. Department of Health, Education, and Welfare, National Air
Pollution Control Administration, Publication No. AP-5l, 1969.
7.
8.
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P.
Sulfuric Acid
1.
Introduction
Nature of Product and Process
a.
Sulfuric acid is the largest single chemical product in the
United States. It is used in the production of phosphate fertilizers
and other industrial chemicals, in the purification of petroleum, the
leaching of copper ore, and the pickling of steel.
Almost 97 percent of all sulfuric acid is produced by the
contact process. Generally in this process, sulfur or pyrite is burned
to form sulfur dioxide (S02) which is then catalyzed to sulfur trioxide
(S03). Sulfur trioxide is absorbed in sulfuric acid to form more con-
centrated grades of sulfuric acid and oleum. An increasingly important
source of sulfur dioxide is that liberated during the smelting of
sulfide ores bearing copper, nickel,
zinc,
and lead.
The final
3 percent of acid is produced by the obsolete and costly chamber
process, but because this process is rapidly being phased out, it will
not be emphasized in this analysis.
b.
Emissions and Cost of Control
Pollutants consist of sulfur dioxide escaping catalytic con-
version and acid mists emitted from the absorption tower.
Most plants
today operate with a single absorption step resulting in a sulfur dioxide
to sulfur trioxide conversion of 96 to 98 percent.
Compliance with the
assumed emission standard requires upgrading the conversion efficiency to
99.5 percent or tail gas scrubbing with alkaline solutions. (New acid
plants are expected to achieve 99.7 percent conversion efficiency.)
This would result in a reduction of 86 percent from the existing emission
level of a typical acid plant.
To accomplish 99.5 percent conversion
requires partial removal of the sulfur trioxide formed, via primary
absorption, which improves the oxygen-to-sulfur dioxide ratio for favor-
able conversion of the residual sulfur dioxide.
Secondary absorption is
required to complete the recovery of sulfur trioxide as acid.
Due to the high cost and technical difficulties of converting
an existing single absorption plant to dual absorption, the latter
method will probably not be used for control of existing facilities.
However, its application to new contact process acid plants is consider-
ably less costly than tail gas recovery methods.
Hence, this study
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reflects use of dual absorption for new facilities and tail gas recovery
methods for existing facilities.
Acid mists are produced due to the presence of residual water
from incomplete drying of the air feed to the sulfur burner or due to
the impurities that liberate water during the combustion in the sulfur
burner. The water combines with the sulfur trioxide in the absorption
tower to form fine acid mists which escape in the tail gas unless
captured by a mist eliminator.
For 1967, the industry emitted 600,000 tons of sulfur dioxide
and 25,000 tons of mist particulates.
Without the implementation of the
Act, emission levels in FY 1977 would increase to 920,000 tons of
sulfur dioxide and 38,000 tons of acid mist. Implementation of the Act
will reduce these levels in FY 1977 to 170,000 tons of sulfur dioxide
and 10,000 tons of acid mist. The demand for sulfuric acid is expected
to grow at an annual rate of 3 percent.
In order to control these emissions, the industry will have to
invest $169 million in controls and $39 million in annual costs by
FY 1977.
Engineering Basis of the Analysis
The emission of sulfur dioxide is dependent upon the degree
of conversion of sulfur dioxide (502) feed to sulfur trioxide
(50 ) in the catalytic converter. The chemical reaction kinetics
3
dictate that the conversion depends upon the oxygen to sulfur
dioxide ratio in the converter feed gas. Other factors for emission
formation include the rate of acid production, quantity of catalyst
2.
used, and feed temperature in the final catalyst stage. Most
standard contact plants in operation today using the single absorber
ca~ vary in conversion efficiency from 94 to 98 percent.
Acid mists are formed as a result of hydrocarbon impurities in
the sulfur feed material, especially in elemental sulfur-based plants.
Combustion of these hydrocarbons in the sulfur burner produces water
which combines with 503 to produce very fine mists particulates.
Acid mists are particularly a problem with oleum production, where
80 to 95 percent by weight of the mists particles are smaller than 2
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microns in diameter.
This situation presents an opacity problem for
the tail gas.
For plants producing acid of 98 percent strength, only
30 percent by weight of the mists particles are smaller than 2 microns.
The emission factors for determining the control level and re-
quirements under the assumed standards for sulfur dioxide and par-
ticulates are as follows:
S02
ACID MISTS
Uncontrolled Emissions,
pounds per ton (100%) acid
1967 Emission Rate,
pounds per ton
60
43
(a) 4.0 (nonoleum)
(b) 6.0 (oleum)
1.8 (oleum and nonoleum)
Allowable emissions,
pounds per ton (100%) acid
6.5
0.5 (oleum and nonoleum)
Investment and annual control costs were developed from a .
comprehensive cost engineering study performed by the Chemical
Construction Corporation for the sulfuric acid industry to meet
requirement in Air Quality Control Regions.
The cost data were
corrected to 1970 dollars.
Cost requirements for control of sulfur
dioxide via dual absorption are shown in Table 4-76.
Investment
costs include an absorption tower, a converter stage, coolers,
blower, pump, tank, and piping.
Additional heat to bring the
reaction mixture up to reaction temperature for the second converter
(added to base plant and included in investment) is supplied by the
sulfur furnace. Tail gas scrubbing systems for removing S02 are
an acceptable alternative to dual absorption and are considered
in the economic analysis later in this section.
The abatement strategy for control particulates included dual
mesh pads for nonoleum plants and tubular fiber demisters for oleum
plants. Investment and annual costs for mesh pads and tubular demisters
are shown in Tables 4-77 and 4-78, respectively.
The size distribution of plant capacity for determining pollution
control costs is shown in Table 4-79. These plants represent non-
smelter acid plants that are assumed to be faced with controlling S02'
Smelter acid plants would be allowed to maintain their existing
performance under the assumed abatement strategy for the primary non-
ferrous metals industry. However, control costs would be required for
acid mists. Again, dual mesh pads and tubular fiber demisters were
assumed to be required with the same rationale as for the contact
acid plants.
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TABLE 4-76.
SULFURIC ACID EMISSION CONTROL COSTS: DUAL ABSORPTION
Costs ($1,000)
Plant Size (100% H2S04' tons/day)
Investment
Annual *
50 312 68.2
250 578 133.1
750 1104 249.7
1500 1740 434.2
*Without supplementary production of acid
TABLE 4-77.
*
SULFURIC ACID EMISSION CONTROL COSTS: MIST ELIMINATORS
Costs ($1,000)
Plant Size (100% H2S04' tons/day)
Investment
Annual
50
250
15.6 2.2
30 6.8
42 6.4
57.6 6.9
750
1500
*Dua1 wire or Teflon mesh pads
4-250
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TABLE 4-78.
*
SULFURIC ACID EMISSION CONTROL COSTS: MIST ELIMINATORS
Costs ($1,000)
Plant Size (100% H2S04' tons/day) Investment Annual
50 93.6 23.7
250 120 31.2
750 180 48.1
1500 288 57.2
*Tubu1ar fiber demisters for oleum plants
TABLE 4-79.
*
PLANT CAPACITY SIZE DISTRIBUTION FOR SULFURIC ACID INDUSTRY
DECEMBER 31, 1969
Daily Capacity, Tons
Nonoleum Plants, No.
Plants with
Oleum Facilities, No.
0-150 36 9
151-250 20 10
251-500 30 23
501-750 18 5
751-1000 11 4
1001-1500 9 4
1501-2000 5 2
>2000 2 0
TOTALS 131 57
*Exc1uding smelter acid plants
4-251
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3.
Industry Structure
a.
Nature of the Firms
In 1967, there were 254 sulfuric acid plants owned by 94
firms. Their combined capacity was 38 million tons. Of the total
number of plants, 213 were contact process plants and 41 were chamber
process plants. Of the total contact process plants, 24 were smelter
acid recovery operations. Chamber process plants are predominantly
small, ranging in capacity from 40 to 100 tons per day, while contact
process plants range from 10 to almost 5,000 tons per day.
Total acid output for 1967 was 29 million tons, of which
only 13.5 million tons were shipped. The difference between produc-
tion and shipments indicates the extent to which acid production is
"captive" and serves as an intermediate product within the same
establishment.
MOst sulfuric acid plants are owned by sulfur
producers, chemical companies, petroleum refineries, fertilizer
plants, and smelters which use some, if not all, of their production
internally for the production of their final product. Of the acid
shipped, 90 percent was sold commercially. The remainder was inter-
plant transfers.
b. Resources
The raw material consumed in sulfuric acid production is
elemental sulfur, smelter or refinery waste gas, spent acid, acidic
sludge, and pyrites.
In all but the first case the raw material is a
necessary byproduct and can, therefore, be considered free for the
production of acid.
Elemental sulfur is produced largely from mines on the gulf
coasts of Texas and Louisiana.
Considerable amounts of sulfur are
also produced from operations which find it economical to recover
elemental sulfur rather than produce acid directly.
Sources of recov-
ery include waste gas streams of coke oven processes and petroleum
refineries.
Most of the recoverable sulfur is converted directly to acid
due to the higher costs of processes for recovering elemental sulfur
from most sources.
Sulfur dioxide in smelter stack gases is increasingly
being recovered in the form of acid as an air pollution control measure.
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Similarly, hydrogen sulfide emitted by petroleum refineries is recovered
and burned to produce sulfur dioxide and subsequently either elemental
sulfur or acid.
Also, large quantities of acid used in the refining
process are recovered from acidic sludge since the sludge cannot be dis-
charged into streams or disposed of economically.
burned to sulfur dioxide.
This sludge is also
Processes are under development for the recovery of sulfuric
acid or elemental sulfur from sulfur dioxide emissions in electric
power plant stack gases.
Such processes will not reach wide commercial
application for at least 5 years and thus will have little impact on the
supply or price of sulfur before that time.
The final major source of sulfur, pyrites (sulfur-bearing
impurities in coal), are removed by coal-cleaning processes, then roasted
to emit sulfur dioxide.
This source of sulfur amounts to approximately
4.5 percent of the U. S. production of sulfuric acid.
Of far greater immediate significance is the flood of low-
cost sulfur which has entered the United States market from Canada,
driving the price down from $38 per ton in 1968 to only $18 per ton in
1971. The sulfur has been removed from sulfur-laden natural gas as a
byproduct in order to meet the air pollution control requirements of the
U.S. fuel markets. U.S. sulfur~ining companies have been forced to
drastically cut back production, halt exploration, and layoff employees.
The displacement of most U.S. sulfur-mining is inevitable even
without imports.
More sulfur is emitted into the air each year than is
consumed in the United States.
Air pollution laws requiring the recovery
of most of this sulfur will result in the domestic recovery of sufficient
byproduct sulfur and acid to meet demands.
4.
Markets
a.
Major Markets
Phosphate fertilizer production accounts for approximately 40
percent of all sulfuric acid consumed in the United States. An additional
8 percent is used in the manufacture of ammonium sulfate, which is also
used extensively in fertilizer manufacture.
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Since the early sixties, the utilization of highly concentrated
superphosphate fertilizer has increased rapidly, displacing normal
phosphate.
Disproportionately greater quantities of sulfuric acid are
required for production of superphosphate than were required for production
of normal phosphate.
The demand for sulfuric acid by the fertilizer
industry has, therefore, grown even more rapidly than the demand for
fertilizer itself.
Although fertilizer demand has slowed since 1968, the
industry's consumption of acid is expected to grow at an annual rate of
5 percent.
The petroleum industry reclaims a large portion of its own
spent acid, and therefore relies only partially on outside sources for
acid. Compared with sulfuric acid's use in fertilizers, the remaining
markets are quite small.
Of the latter, petroleum refining is the largest
single end-user, accounting for 8 percent of consumption, and the use of
acid for this purpose is expected to experience little growth.
The use
of sulfuric acid in the manufacture of pigments also amounts to about
8 percent of consumption; however, this market is expected to decline
to only 4 percent by 1975. The only rapidly growing segment of the
market is the leaching of copper ores, which is expected to grow at a
rate of 16 percent. Yet, as recovery of acid by smelters increases,
this demand will be met by internal production and will, therefore,
contribute little to the open market demand for acid. Other major
markets, the production of fabrics, hydrofluoric acid, and steel pickling,
account for between 3 and 6 percent of consumption.
The majority of commercial acid sales are under long-term
contractual agreements and at prices considerably below the published
market spot price. For large volumes, these prices may be as low as
one-half to two-thirds of the published price. Only small consumers
must pay the open market price.
b.
Competitive Products
In most of its markets, there are substitutes for sulfuric
acid; however, because they are either economically or technologically
inferior to sulfuric acid, they have not significantly penetrated the
market.
In the manufacture of phosphate fertilizer, nitric acid is a
technological substitute but it is considerably more costly.
Substitu-
tion of phosphoric acid for sulfuric as an acidulating agent in fertilizer
4-254
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production has been offset by the use of sulfuric acid in treating
phosphate rock to produce phosphoric acid.
The only market sector in which sulfuric acid is being dis-
placed is steel pickling. Hydrochloric acid's superior pickling and
easier treatment (after use in the pickling process) qualities outweigh,
at least for the present, the lower price advantage of sulfuric acid.
Competition Among Sellers
The relative competitive advantages of the various sulfuric
acid processes are variable, depending primarily on the prevailing prices
c.
of sulfur.
Even for a given process, there is considerable variation in
cost between individual plants--costs vary with size, age, and plant
design as well as the type of sulfur feed stock used. Production costs
for conventional sulfur-burning contact process plants vary from $10
to $20 per ton of acid, while costs for smelter acid recovery vary from
$4 to $25 per ton.
In conventional plants,buying sulfur is the major
cost; therefore production costs vary with the price of sulfur.
For a
typical 1,OOO-ton-per-day contact process plant, the total cost of acid
production would vary from $14 per ton to $7 when sulfur prices varied
from $38 per ton to the current price of $18.
In contrast, the sulfur
raw material from recovery operations is free, yet the capital equipment
necessary to recover it from waste gas streams results in a fixed
investment of 2 to 5 times that of a contact plant.
Production cost is critical to conventional plants.
They will
not produce acid if prices fall below variable costs.
If the industry
were comprised primarily of conventional plants, overcapacity would soon
be rationalized and a balance of supply and demand would be achieved at
a reasonable profit level. However, the advent of many sulfur dioxide
recovery plants in the market has changed competition considerably.
Recovery plants must continue to operate at full capacity, regardless
of market price, to conform to air pollution control regulations. They,
therefore, dispose of acid at any obtainable price and might go so far
as to sell at a zero dollar price and even to subsidize transportation
costs to the extent of alternative disposal costs.
Conventional plants
4-255
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can, therefore, compete with recovery plants only when they are outside
of the shipping radius of the recovery plant.
Fortunately for the
conventional sulfuric acid producers, most recovery plants are now
associated with smelters in the Western States, quite remote from the
large eastern and midwestern markets.
Transportation cost is obviously an important element in the
competitive pattern within the industry.
The bulk of sulfuric acid is
so great relative to price that shipping costs are exorbitant. It is
usually impossible to sell acid profitably beyond a radius of 150 miles
if shipments must be made by rail.
Barge shipments, where possible,
would permit somewhat greater shipping distances.
Economics of scale attainable from large plants are also
quickly overcome by transportation costs in commercial markets.
The
high cost of shipping permits a wide range of plant sizes to operate
throughout the country; small plants generally serve remote or captive
markets.
5.
Trend
The sulfuric acid industry is so closely tied to the market for
sulfur and phosphate fertilizer that the three must be examined simul-
taneously. In the early sixties, both the sulfur and sulfuric acid
industries experienced excess capacities.
With rapid increases in the
demand for superphosphate fertilizers came increases in the demands for
sulfur and sulfuric acid.
Not until 1965 did demand overtake supply and
cause actual shortages. At that time, the price of both sulfur and
sulfuric acid began to rise rapidly--sulfur prices from $25 per ton in
1965 to $38 in 1968, and sulfuric acid prices from $26 per ton to $35.
Since 196E, the growth in demand for fertilizers has slowed, as has
the demand for sulfur and sulfuric acid.
Yet, high prices and corres-
pondingly high profit rates have encouraged the development of excess
capacity in each industry.
Capacity utilization in the sulfuric acid
industry has declined from 95 percent in 1965 to less than 80 percent
in 1969. The excess supply has driven gulf coast prices from their
high of $35 to $31 per ton in 1971. .
The aggregate demand for sulfuric acid is expected to grow at an
annual rate of 3 percent during the 1970-77 period. This demand can
be absorbed by existing capacity and new smelter acid recovery plants.
4-256
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Addition of acid plants to copper, lead, and zinc smelters will add
5 million tons of acid production capacity to the 38-million-ton capacity
existing at the end of 1969. Acid consumption is expected to reach
43 million tons in 1977. Incorporation of the new smelter capacity will
allow the industry to meet demand operating at only 88 percent of
capacity. As only moderate profits are earned at this operating rate,
no further additions to capacity are expected before 1977.
Any new
plants constructed before that time will represent replacements of
existing capacity due to obsolescence or shift in demand patterns and
will, therefore, not increase the total cost of pollution control
incurred by the industry.
Since most new plants will be larger and
controlled by dual absorption, the control costs will actually be less
than would be required to implement gas cleaning in existing plants.
6.
Economic Impact of Control Costs
a.
Impact on Plants
Only sulfur-burning contact process acid plants are considered
in this analysis.
The economic impacts of sulfur recovery are presented
in the analyses of the individual industries concerned.
A major determinant of economic impact on a plant is size.
Larger plants realize considerable economics of scale over small plants,
both in production and in air pollution control costs.
The unit produc-
tion cost for a standard 1,500-ton-per-day plant is 23 percent less
than the cost for a 250-ton-per-day plant, given the same raw material
cost.
Table 4-80 presents the financial impact of an investment
in air pollution control on two typical sulfuric acid plants--one
representing a small 250-ton-per-day plant and the other representing
a larger 1,500-ton-per-day plant.
For each model plant, an acid price
was selected which would approximate the contract or tran&fer price
that might be obtained by that plant in the current depressed market.
The table presents operating results for standard plants without pollu-
tion control with the results for identical plants controlled by tail
gas recovery systems and new dual absorption plants of the same
capacity.
4-257
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TABLE 4-80.
MODEL SULFURIC ACID PLANTS
.l:-
I
N
V1
00
250 TonS/Day 1,500 Tons/Day
Standard Tail Gas Net-1 Dual Standard Tail Gas Net-1 Dual
Plant Recovery1/ Absorption Plant Recovery~/ Absorption
Capacity 82500 82500 82500 495000 515000 495000
Production 82500 82500 82500 495000 515000 495000
Fixed Investment 1320 1320 1800 3600 3600 5100
Horking Capital 264 264 264 720 720 720
Control Investment 0 342 N/A 0 1900 N/A
Net Investment 1584 1926 2064 4320 6220 5820
Sales 1650 1650 1650 7920 8240 7920
Cost of Goods Sold 1327 1327 1429 6166 6166 6409
Control Cost 0 211 N/A 0 691 N/A
Income Before Tax 323 112 221 1754 1383 1511
Income Tax (50%). .... .. .." ,161. . . . , . .. 56 .,. .,. 110, ,. .." 877. ....,.. 691. ". 755
Net Income 162 56 111 877 692 756
Cash Flow. . . . . . .. 294 ... ..,,222 ..,.,.., ,291,... ." .1237"",. " .1210. .. 1266.
Selling Pric~/($/Ton) 20 20 20 16 16 16
Control Cost ($/',ron) 0 2.56 1.24 0 1~34 ,49
Control Cost (% of Sales) 0 12.8 6.2 0 8.4 3.1
Decrease in Earnings (%) 0 65 31 0 21 14
Rate of Return. ," ", '13 2.5 6.,8 26 15,,5 22,5
l~ssumes lime absorption. No additional acid is recovered.
~/Ar,sumes control by the Wellman-Power Gas sodium sulfide process. Sales reflect
l~pproximntion of the bulk contract price attainable by each plant size.
acid recovery.
-------
Installation of a tail gas recovery system for control of
the 250-ton-per-dar m~del plant reduce~ earnings by 63 percent. Since
earnings represent less than half of the cash flows of such small firms,
cash flows are reduced less severely than earnings.
However, the
increased investment for control, coupled with reduced cash flows,
reduces the rate of return far below attractive levels.
Many small
plants will be forced to consider closing rather than implementing
controls.
It becomes advantageous for a plant to close if the present
value of its potential cash flows is less than the sum of the control
investment, salvage value, and the tax writeoff attainable from closing
the plant.
With such low cash flows after control, few plants of 250
tons per day or less will find it economical to continue operation.
The dual absorption plants do not incur such drastically
reduced earnings as do the tail gas recovery plants, but the rate of
return is still reduced to an unattractive level, so new plants of
this size would not be considered.
In contrast, the 1,500-ton-per-day model plant demonstrates
that large acid plants enjoy attractive rates of returns at relatively
low contract prices for acid.
Unit control costs are much lower for
these high volume plants.
Consequently, earnings and rates of return
are less severely affected by the imposition of air pollution control
costs. Those plants controlled by tail gas recovery systems realize a
reasonable rate of return.
Large new dual absorption plants realize an
even higher rate of return.
Large acid plants could operate profitably unless market over-
supply conditions become worse,forcing further trimming of profit margins.
The high probability of this makes investment in contact acid plants
risky.
b.
Impact on Firms
Virtually all sulfuric acid production is by large diversified
corporations or captive intermediate processes of manufacturing firms.
Such firms will experience little difficulty in acquiring the necessary
investment capital to undertake the control investment if they find it
economical to do so.
Control costs represent such a small portion of
the total costs incurred by these firms that they will cause little
impact on corporate profits.
4-259
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Also, in any case where it is economical to construct a new
plant, the additional investment required for control equipment would
have little influence on the firm's ability to raise capital.
Although the control investment increases the total investment
to 50 percent, virtually all sulfuric acid plants are owned by
diversified corporations which would have little difficulty in
ing the additional capital.
by 20
large
acquir-
c.
Demand Elasticity and Cost Shifting
The demand for sulfuric acid is derived from the demand for
the products in which it is used; thus its demand is relatively in-
elastic in the short run.
Since sulfuric acid is combined, in almost
fixed proportions, to other inputs, small price changes have little
effect on its consumption.
Even moderate changes in sulfuric acid
prices are unlikely to induce short-term adjustments in the amount
used because shifting to an alternative input would involve changes
in plants, processes, products, and expenditures that would generally
exceed any savings likely to result from substitution.
In the long run, the demand for sulfuric acid is probably
more elastic, at least to sizable changes in price.
Substantial
increases in price might outweigh the economic and technological
advantages which sulfuric acid currently enjoys over substitute products.
Some degree of process change and product substitution would undoubtedly
result from sustained high prices.
Persistent high prices of sulfuric acid are increasingly
unlikely as the number of firms recovering and producing acid expand
and as competition intensifies.
High prices would also induce many
additional firms to enter the market since sulfur, in various forms,
is widely available and capital costs are not prohibitive.
increased, prices would soon be driven down.
As supply
Despite relatively inelastic demand for sulfuric acid, the
current oversupply and intense competitive pressures indicate that it
will not be possible for most firms to pass on the full cost of
pollution control, at least until a balance is attained between supply
and demand.
Firms serving isolated or captive markets will probably
adjust price to cover control costs.
However, those serving the
4-260
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open market will adjust price only to the extent that the most
efficient firms adjust their prices.
It is assumed, therefore, that
for the period through FY 1977, the open market price of sulfuric
acid will increase by only $0.50, or 1.5 percent, reflecting the
control costs of large dual absorption plants.
d. Effect on the Industry
Many small firms--primarily those of less than 250-tons-per-
day capacity--which serve the open market will be unable to generate
sufficient cash flows to warrant an investment in control equipment.
Only those firms which serve isolated markets at higher than average
prices will find it economical to control and to continue operating
their acid plants.
However, firms which produce sulfuric acid as a necessary
byproduct will be forced to implement controls and to continue operat-
ing their acid plants regardless of the unprofitability of that invest-
ment.
Their only recourse would be to close their entire facility,
which is unlikely.
Captive sulfuric acid plants will continue to produce unless
the cost of control makes it more economical to buy acid.
Again, many
firms with captive contact process acid plants of less than 250-tons-
per-day capacity will close their plants and purchase acid on the open
market.
Virtually all chamber process plants will be closed because
they experience considerably higher control costs than do contact
process plants.
Also, many large acid plants older than 10 years will be
shut down and replaced with new, larger, dual absorption plants.
The limited accounting life of such an old plant would not warrant
installation of gas-cleaning equipment. The adaitional investment
required for renovation and higher operating costs of an old plant
make
it an unattractive alternative to a new plant.
4-261
-------
Of far greater significance to the industry than control
cost is the effect of air pollution control laws requiring control of
sulfur oxide emissions into the atmosphere. Smelters have already
begun to recover large quantities of sulfur oxides in the form of
sulfuric acid. Technology is under development whereby electric power
companies will eventually be able to produce large volumes of recovery
acid for the open market. Were it not for the oversupply created by
this byproduct acid, existing conventional plants could pass on the
full cost of pollution control in higher prices.
Instead, byproduct
acid not only prevents the recovery of control costs but threatens
to displace much of the conventional acid production.
4-262
-------
REFERENCES FOR SUBSECTION P
1.
"Engineering Analysis of Emissions Control Technology for Sulfuric
Acid Manufacturing Processes", Chemical Construction Corporation,
Contract No. CPA 22-69-81, National Air Pollution Control Adminis-
tration, Department of Health, Education, and Welfare, March 1970.
2.
"u. S. Industrial Outlook 1971 with Projections Through 1980",
U. S. Department of Commerce, Bureau of Domestic Commerce.
3.
Private communication with Chemical Construction Corporation, 1971.
4.
"Guidelines for Limitation of Contact Sulfuric Acid Plant Emissions",
Air Pollution Control Office Publication No. APTD-0602, Environmental
Protection Agency, January 1971.
5.
Hazelton, Jared E., "The E~onomics of the Sulfur Industry", Resources
for the Future, Inc., Johns Hopkins Press, Baltimore, 1970.
6.
Connor, John M., "Economics of Sulfuric Acid Manufacture", Chemical
Engineering Progress, Vol. 64, No. 11, November 1968.
7.
Oil, Paint, and Drug Reporter, 1971.
4-263
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v.
CONCI1JSIONS
General Economic Impact of Air Pollution Control
The foregoing analyses indicate that control of air pollution
emissions from solid waste disposal, stationary fuel combustion, and
industrial processes will require an investment of approximately
$10,086 billion to control the capacity estimated to be in existence
in FY 1977. This estimate is based on projected industrial and
population growth, which will substantially increase the sources
of pollution and required investment in control equipment over that
required for 1967. The total estimated annual cost of these controls,
A.
including depreciation, finance, and operating expenses, would then
amount to approximately $3.885 billion per year by FY 1977. Both
figures are based on 1970 prices.
These figures are large in absolute amounts; however, their
significance can be shown more clearly by comparing them with the
related figures for the national economy. Similarly, if the gross
national product (GNP) of the United States in FY 1977 is $1.3 trillion,
the annual cost of $3.885 billion in that year will take approximately
0.3 percent of the Nation's gross output.
4-264
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Chapter 5:
Aggregate Price Impact
I.
INTRODUCTION
The aggregate or macroeconomic impact of expenditures for air pollu-
tion control on the national economy includes effects on the levels of
demand and supply of total production and on prices, employment, and eco-
nomic growth. For example, the majority of investment expenditures for
pollution control will raise costs without proportionally increasing out-
put.
Although some of the higher costs are expected to be transferred
into higher consumer prices, they will also affect profits in some indus-
tries. Since the rate of investment is usually considered a function of
expected profits, prospects for reduced profits due to the costs of con-
trolling emissions may make some firms in some industries reduce their
rates of investment.
Such behavior by a substantial number of firms
could reduce employment opportunities in the affected industries.
Further, if the demand for capital to finance investments for pollu-
tiqn control causes interest rates to increase, expected profits could be
reduced wqich would also discourage investment.
Reduced rates of invest-
ment would reduce economic growth. The rate of economic growth might also
be depressed if the nonproductive pollution controlling investment sig-
nificantly reduced the economy's overall rate of productivity.
For some products, higher prices may alter established supply and de-
mand conditions and eventually change resource allocation.
For example,
if consumers choose to substitute purchases of other goods and services
for those with increased prices, the reduced demand for the products of
several industries will shift employment and income distriQutions.
Higher
prices may also decrease the amount of exports and the rate of investment
and require a higher level of Government revenues to finance the same
level of Government expenditures.
However, even a comprehensive study of
production, prices, employment, and economic growth would not be complete
since it would include only the benefits to the industries fabricating
control equipment, not the social benefits derived from cleaner air.
5-1
-------
Such a comprehensive analysis would be a complex task.
The necessary eco-
nomic methodology is available but is beyond the more limited scope of this
study.
This analysis is primarily confined to the projection of the impact of
expenditures for air pollution control on prices paid by final purchasers
of the Nation's output. The focus is on consumer prices. However, invest-
ment, Government expenditures, and export prices have been examined briefly
and the direct impact of price increases on these sectors of the economy
has been projected.
The emphasis on prices reflects the major role they play in a com-
petitive economy where they reflect values and determine what is to be
produced as well as the organization and distribution of production.
For
example, significant changes in the relative prices of products will alter
the patterns of resource allocation.
Such alterations would feed back
through the economy and possibly affect the distributions and levels of
production, employment, and income; the profitability of investment; the
U.S. competitive position in foreign markets; and the productivity and
rate of investment thereby influencing the rate of economic growth.
For
this reason, therefore, this analysis focuses on projecting price impacts.
The impacts projected are initial, once-and-for-a11 increases in the
1977 price level due to the costs of emission control for the industrial
and mobile sources.
The projected increases more closely resemble cost-
push inflation rather than the classic demand-pull type. The consumer
price index used is the Implicit Price Deflator for Personal Consumption
Expenditures (PCE) , which is a Paasche-type measure of consumer price
changes; that is, the current composition of expenditures is used to
weight and compute the index.
(In this case, the 1977 distribution of
personal consumption expenditures has been projected and used for weighting
the price increase.)
Although more reflective of the "cost of living"
than the fixed weight or Laspeyres-type of index, the Implicit Price De-
flator index is not a true measure of the cost of living to the extent
that consumers substitute one purchase for another or to the extent that
any consumer differs from the arithmetic average.
Neither does it in-
c1ude income and property taxes and interest paid by consumers.
Never-
the1ess, the measure is a good indicator of price movements and a fairly
good surrogate for the cost of living.
On the basis of the analysis presented below, it appears that the
5-2
-------
costs of meeting emission standards for both the stationary and mobile
sources will increase by less than 1 percent over the 1971-77 interval.
In the aggregate it appears that there will not be significant impact
on the prices of exports, the prices of investment expenditures for new
plant and equipment, or on the prices of goods and services purchased by
Government. This is, in part, because the projected changes in prices
are quite small and would occur over several years, rather than
instantaneously, as calculated here.
Although consumer response to the projected higher prices is not ex-
plicitly examined, it appears, with one exception, that there would be
only a minimal shifting of consumer expenditures, since the projected
price increases are fairly small.
The exception is consumer expenditures
for automobiles.
New car prices are projected to increase significantly.
As a result of the higher prices, consumers may defer purchases of a new
car, extend the service life of their old vehicles, "buy down" in the
product line, forego the purchase of optional equipment (e.g., air condi-
tioners), or substitute other forms of transportation. These possibili-
ties were not examined in this study.
The impacts of the projected price changes due to higher prices for
controlling air pollution will probably not significantly affect the
balance of payments, the rates of investment and economic growth, or the
levels of Government expenditures and taxation.
However, if the full
spectrum of pollution control measures were evaluated together rather than
air alone, the aggregative impacts are likely to be significantly different.
II.
THE PRICE MODEL
Using input-output relationships, a price model has been developed
to project the impact of the estimated initial price increases for each
of the subject industries on the prices of goods and services purchased
by consumers, by businesses for investment, by Federal, State, and local
governments, and by foreign countries.
Input-output analysis uses a table or matrix which shows, for a spe-
cific point in time, the distribution of sales and purchases by each in-
dustry.
The basic table of transactions can be mathematically transformed
into a table of interindustry coefficients which represent the direct and
5-3
-------
indirect output of each industry required to deliver a dollar's worth of
output of any other industry to consumers, investment, Government, or ex-
ports. Since it identifies the structure of each industry's inputs, the
table can be used to estimate the impact of a price increase in any input
to any industry, on each industry's price. Further, by developing the
structure of consumer, investment, Government, and export purchases on an
industry-by-industry basis, the impact of industry price increases on the
prices paid by those final demand categories can also be estimated.
The U.S. Department of Commerce input-output table of the 1963 econ-
omy was used to project price impacts.
The basic table has 364 industries
and 4 components of final demand.
However, consumer demand sector of
final demand was extensively augmented--it now contains 12 categories and
80 subcategories of personal consumption expenditures.
Coefficients
necessary to expand the consumption sector were developed from data pro-
vided by the Office of Business Economics.
The entire model was subse-
quently programmed for computer manipulations.
Since the input-output table is for 1963 and does not represent the
1977 structure of production, the projected price changes are approximate
only, even given the validity of the assumptions stated above.
Between
1963 and 1977 changes in prices, technology, and product mix will alter
the interindustry coefficients.
Although some of these changes can be
projected, such an effort is beyond the current scope of this study.
Nevertheless, the results of this analysis do provide a useful first ap-
proximation of the projected price changes.
Because this analysis of prices represents a substantial increase in
the depth of analysis over that presented in the 1970 report, direct com-
parisons are difficult.
For example, the computer solution has permitted
examinations of the price relationships of 364 industries rather than
last year's 72; further, this year's analysis has focused on final demand
prices, whereas last year's emphasized industry prices (especially the
prices in two major industries, construction and motor vehicles). Also,
the initial price increases projected for the industries have been updated,
on the basis of new data and analysis.
This analysis is, therefore, not
comparable to that presented in the 1970 Congressional Report.
5-4
-------
III.
PROJECTED PRICE INCREASES
A.
General
Gross national product (GNP) is the final value of all goods and
services produced in 1 year.
It was assumed that the price increases
projected for the industries will be passed along to the four components
of GNP:
consumer expenditures, business expenditures for investment,
Governmental expenditures, and purchases of U.S. products by foreigners.
The extent to which the prices of any component will increase is dependent
on the size of the price increases in the industries and the components'
industrial structure.
Table 5-1 shows the 1977 price increases projected
for the stationary and mobile sources if all control costs were passed on.
However, the actual price increases that will occur will depend
on the
supply and demand conditions, both within each industry and in other
industries competing for major markets.
are discussed in Chapter 4.
These supply-demand analyses
Figure 5-1 shows the 1970 distribution of GNP and indicates the rela-
tive importance of each of the 4 final demand components in the economy.
Personal consumption expenditures (63%) are the largest and would be even
higher if residential construction were included as a consumer purchase
rather than as an investment expenditure. Government expenditures (23%)
have been the second largest since 1952 when they surpassed investment ex-
penditures. Investment (14%) and net exports of goods and services (0.4%)
are the smallest and most volatile components.
B.
Impact on Consumer Prices
Personal consumption expenditures (PCE) consist of consumer purchases
of durable and nondurable commodities and services and comprise two-thirds
of GNP (Figure 5-1).
The distribution of PCE has been shifting and is
expected to continue to shift due to economic and demographic changes
as well as changes in consumer tastes. To weight the price increases
for 1977, it was necessary to project the 1977 distribution of PCE.
If the full price increases projected in Table 5-1 occur, then consumer
prices in 1977 are projected to increase about 0.7 percent. Well over half of
the increase is due to the projected 10 percent higher prices for passenger
cars; the remainder is primarily due to higher prices for electricity.
5-5
-------
TABLE 5-1. PROJECTED 1977 PRICE INCREASES IN
STATIONARY AND MOBILE SOURCES
Sources
Projected
Price Increases
(percent)
Mobile Sources
New Automobiles
New Trucks
Solid Waste Disposal
Stationary Fuel Combustion
Small & Intermediate Boilers
Steam Electric
10.0
4.0
1.1
1/
4.3
Industrial Processes
Asphalt Batching
Cement
Coal Cleaning
Grain Plants:
Secondary
Copper
Lead
Zinc
Aluminum
Nonferrous: Aluminum
Copper
Lead
Zinc
3.0
2.2
1.5
1.3
0.1
2.6
1.2
0.7
1.8
0.0
0.0
0.0
0.5
5.7
8.2
7.1
7.0
1.2
0.1
0.1
0.2
2.4
Handling
Milling
Gray Iron Foundries
Iron and Steel
Kraft (Sulfate) Paper
Lime
Nitric Acid
Petroleum Products & Storage
Petroleum Refineries
Phosphate Fertilizer
Primary Nonferrous:
Sulfuric Acid
1/ Projected price increases are not estimated due to
lack of sufficient data.
Only a few of the stationary sources (steam-electric power plants, iron
and steel, aluminum reduction, and iron foundries) are large enough, .
--,
and are projected to have high enough price increases to signficantly
influence consumer prices.
As Table 5-2 shows, the largest increase in consumer prices is
5-6
-------
1970
GNP = $974
I.J1
I
.......
PERSONAL CONSUMPTION
EXPENDITURES
NET EXPORTS OF
GOODS a SERVICES
$4
0.4%
GROSS
EXPORTS
Producers
Durable
Equipment
$65
/'
/"
Residential a
Nonresidential
Structures
$ 67
Changes in
Business Inventories
$3
2%
GROSS PRIVATE DOMESTIC
I NVESTM ENT
GOVERNMENT
PURCHASES OF
GOODS a SERVI CES
Source:
Distribution of 1970 Gross National Product in Billions of Current Dollars.
Fig. 5-1.
u. S. Department of Commerce, Survey of Current Business
-------
TABLE 5-2.
PROJECTED INCREASES IN CONSUMER PRICES, 1977
III.
IV.
VII.
VIII .
XI.
XII.
I.
II.
Personal Consumer
Expenditure
Category
Food and Tobacco
0.1
0.1
0.1
0.0
0.5
Price
Increase
(percent)
Clothing, Accessories, and Jewelry
Personal Care
V.
VI.
Housing
Household Operation
Medical Care Expenses
0.1
0.1
4.3
0.1
Personal Business
IX.
X.
Transportation
Recreation
Private Education and Research
Religious and Welfare Activities
0.2
0.2
0.2
0.7
Foreign Travel and Other, Net
E d. 1/
Personal Consumption xpen 1tures-
l/ weighted total
projected for transportation, which is expected to comprise 14 percent of
PCE in 1977, or about the same as its current share. The 4.3 percent pro-
jected increase in transportation prices is primarily due to the increase in
motor vehicle prices, but to some extent also due to higher electricity,
iron and steel, iron foundries,and aluminum prices.
The projected price increases for six of the twelve PCE categories
are expected to be about 0.1 percent primarily due to higher electricity
and motor vehicle prices. For clothing, accessories, and jewelry, higher
prices for shoes, clothing, cleaning, jewelr~ and watches all contribute
to the increase.
For food and tobacco the increase is primarily due to
higher prices for food purchased for off-premise consumption and purchased
meals and beverages.
For personal care, higher prices for toilet articles
are the main reason for the increase.
For medical care, prices are ex-
pected to increase due to higher hospital and sanitarium rates.
For per-
sonal business, higher prices for brokerage and banking services, life in-
surance, legal, and funeral and burial expenses all contribute to the
5-8
-------
projected increase.
Recreational prices,
the sixth category with a
0.1 percent price increase, will have higher prices due to higher radio
and television receiver, records, and musical instruments prices.
Three small PCE categories are expected to have price increases
of about 0.2 percent primarily due to higher electricity prices.
These are private education and research, religious and welfare
activities, and foreign travel and other, net.
Household operation prices are projected to increase 0.5 percent
due to higher electricity prices. Housing prices, however, which are
primarily actual or inputed rents, are not projected to increase.
The prices of new houses (residential construction) are expected to
increase (0.2%), but they are included in investment in accordance
with the conventions used in national income accounting.
To determine whether or not there would be a differential effect
of the price increases on families in different income classes,
the distribution of family expenditures by income class was examined.
Since the percentage of income spent on food and tobacco, personal
care, housing, household operation, and medical care expenses generally
declines with increases in family income, price increases in these
categories would weigh most heavily on families in the lower income
brackets. On the other hand, the percentage of income spent on clothing,
personal business, recreation, education, and religious and welfare
activities increases with increases in family income, so price increases
in these categories would weigh most heavily on consumers in the higher
income groups.
Expenditures for transportation are largest for the middle income
groups on a percentage basis; the lower 24 percent of families and the
upper 2 percent of these groups spend about three-fifths and four-fifths
respectively of the middle income group's percentage of transportation
expenditures. Because transportation costs are projected to increase
the most (4.3%) and because they are a significant share of all income
groups' PCE, the differential impacts of the price increases by income
groups tend to be dominated by the distribution of transportation
5-9
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expenditures.
For this reason, the middle and upper income groups
would probably be affected to a greater extent on a percentage basis
than those families in the lower and the very highest income groups.
C. Impact on the Other Components of Final Demand
Gross private domestic investment, Government purchases of goods
and services, and net exports of goods and services comprise the
remaining one-third of GNP.
Since the price increases by the industries
will also be passed along to these three components (as well as to PCE),
some tentative conclusions have been drawn regarding the impact of the
industry price increases on these other components of final demand.
The structure of investment, Government expenditures, and foreign
trade presented in the 1963 input-output table has been used for these
analyses.
1.
Impact on the Prices of Gross Private Domestic Investment
Gross investment includes expenditures for residential and
nonresidential structures and for producers' durable equipment.
(Net change in business inventories, also a part of investment,
is not included in this price analysis.)
These expenditures
are a volatile component of GNP--their level and distribution
shift in response to anticipated business profits.
Since many
of these expenditures are for residential structures or for
equipment to make consumer goods, most of the changes in invest-
ment prices will probably be passed on to consumers.
This analysis projects the price increases in the major
investment producing industries and identifies the major industries
purchasing each major investment product.
As with consumption,
higher investment prices may discourage some marginal investment
projects, postpone others and may encourage substitution of some
investment goods for others.
These possibilities are not
investigated. However, the magnitude of the projected price changes
offers a basis for drawing some inferences regarding the changes
in the demand for investment goods.
The changes in resource
allocation are not likely to be significant as the result of
higher prices for investment goods since the projected price
increases are about 0.5 percent for all investment goods.
5-10
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New construction is the largest investment producing industry
with over half of total sales for investment.
Construction prices
are projected to increase by 0.2 to 0.4 percent, depending on the
specific construction industry, primarily as results of higher
copper, electric, iron and steel, iron foundries, and motor vehicle
prices.
Every industry in the economy, including consumers who
purchase houses, is a purchaser of new construction and would be
affected to some extent by higher construction prices.
Motor vehicles and equipment is the next largest investment
producing sector, and like construction, motor vehicles are
purchased by virtually every sector in the economy. Projec ted
higher prices for automobiles (about 10.4%) and for trucks
(about 4.4%) are primarily due to the costs of emission control
devices which will be installed.
The major motor vehicle purchasing
industry is transportation and warehousing. Major affected industries
within the transportation industries include trucking, busline
operations, and taxi cabs.
The machinery industries are frequently cited as key elements
in investment activities since they frequently embody technological
innovations.
These industries together are responsible for 15
percent of investment expenditures.
All major industries in
the economy purchase machinery products.
The price increases
projected for the machinery industries are about 0.4 to 0.7
percent, depending on the specific type of machinery. Higher
electricity, truck, iron and steel, iron foundries, copper, lead,
zinc, and aluminum prices are the primary reasons for the higher
prices.
The implications of the effects on investment are compounded
by uncertainties regarding the availability of investment funds
and the impact on capital markets of additional spending for
air pollution control. For example, this study has projected
the investment requirements of 17 industrial sectors, for the
steam-electric generating industry, and for public and private
solid waste disposal through FY 1977--the projected total public
5-11
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investment is approximately $300 million, and the total investment
for private enterprises is estimated at $9,076 million (steam-
electric $3,960 million; other industries $5,416 million).
Some analysts have questioned the capability of the
capital market to absorb demands of this magnitude and the
willingness of investors to provide funds in these amounts for
investments that do not, of themselves, increase the productive
capacity of business. However, it should not be assumed that
the entire $9,076 million will be invested in 1 year; this
is the total required to provide the controls described for
plants in existence in 1967 plus those built through FY 1977,
so part of the total has already been invested.
Such industries
as paper, steel, nonferrous metals, cement, petroleum, and iron
foundries have already made substantial expenditures on pollution
control, and the portion that remains will probably be financed
over at least 3 years, and not more than half, at most, of the total
will be raised in 1 year, say, not more than $4 billion.
A substantial
share of the funds will come from internal financing (out of
retained earnings) although it is difficult to estimate how much
this may be.
Of the remainder, perhaps as much as 80 percent may
come from increased debt and 20 percent from equity funds. Thus,
probably no more than $2.5 billion may be drawn from the bond
market in any 1 year.
We feel that the market should be able to absorb
demand of this magnitude, especially if (as indicated in the analysis
of some industries in Chapter 4)
postponed.
other investment demands may be
Assuming that municipal voters will approve the required bond
issues, the reaction of the financial markets to new bond offerings
will probably be the same as for any other municipal borrowings
because the amounts projected are not large relative to other public
debt issues.
If
control costs are passed on to consumers in the form of
higher prices in many of the industries requiring the greatest
5-12
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investments~ investors should be able to obtain funds, so long as
revenues, in those instances, increase by enough to service
the debt or to maintain dividend rates. The greatest difficulties
will be experienced by small~ financially weak firms with limited
capabilities for raising funds. Those dependent on a limited
line of bank credit, in particular~ may find it virtually impossible
to raise even modest amounts for investments that contribute nothing
to earnings.
2.
Impact on the Prices of Government Expenditures
Purchases of goods and services by Federal~ State, and local
governments have been the second largest component of GNP since 1952.
Prior to 1952 the relative positions of Govemnent and investment
alternated several times reflecting the level of business and
military activity.
The impact on prices paid by the Federal Governnent for goods
and services is projected to be about 0.1 percent.
Defense
expenditures
would be more affected than other prices due to
higher prices for military hardware.
The increase is small because
a large share of expenditures is for employee compensation which
will not be affected and because of the lack of a substantial
increase in the price for any major industry producing goods or
services which are Federal Government budget items.
a.
Federal Government
Federal Government expenditures for goods and services
include compensation of employees (46% of total 1970 expenditures)~
structures (3%), and other purchases (51%). Higher industry
prices will be reflected in higher prices paid by Government for
structures and other purchases.
The composition of two categories
of Federal Government purchases--defense and other--were examined.
Defense accounted for 78 percent of 1970 Federal Government purchases
of goods and services. The projected price increase in the major
defense purchases are 0.1 to 0.3 percent excluding motor vehicles.
(Although new automobile prices are projected to increase about
10%, defense spending for all motor vehicles is only about 1%,
5-13
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of defense expenditures.)
The industry with the largest share of
defense purchases (3%) is radio and TV communications equipment;
its prices are projected to increase about 0.17 percent.
Other programs make up the remaining 22 percent of
Federal Government expenditures.
Major functions include
space research and technology; general government; international
affairs and finance; education; health, labor, and welfare;
veterans benefits and services; commerce, transportation, and
housing; agriculture and agricultural resources; and natural
resources.
Price increases here are expected to be small.
The largest increase is projected in aircraft and aircraft
equipment prices due to higher aluminum and electricity prices.
b.
State and Local Government
State and local government purchases resumed the pre-
World War II position of being larger than Federal Government
purchases in 196~/ and are expected to continue to be for the
foreseeable future.
Major nonemployee
compensation expenditures
by State and local governments are currently for education
(44%); health, welfare, and sanitation (16%); safety (8%); and
others including general government, transportation, agriculture
and natural resources (32%).
Compensation of employees represents
over half of current State and local government purchases of goods
and services.
The remaining share is about equally divided
between structures and other purchases.
The cumulative effect of the industry price increases
projected on the prices of State and local government's expenditures
is expected to be minimal. This is due to the fact that compensa-
tion of employees, the largest budget item, would be unaffected
and that the price increases in the major affected industry,
construction, is projected to be less than 0.5 percent.
The largest nonemployee compensation component of
educational expenditures is for new buildings construction, which
1:../
Measured in current dollars.
5-14
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is projected to increase about 0.3 percent.
Higher electricity
and iron and steel prices are the primary causes of the increase.
Most other categories are projected to increase about 0.1 or 0.2
percent.
State and local government expenditures for health,
welfare, and sanitation are primarily for construction; meat,
chemicals, drugs, electric power, miscellaneous business services;
hospitals; and other medical and health services.
Price increases
of about 0.1 to 0.4 percent are projected for all but electricity,
where an increase of about 4.3 percent is projected.
State and local government expenditures for safety are
for police, fire, and correction services.
These primarily
include new construction, 'petroleum and related products, motor
vehicles and parts, and miscellaneous business services.
Motor vehicles and parts expenditures show the largest
projected price increases.
Since they comprise 2.5 percent of
State safety expenditures, they will have the most significant
impact on the price on safety related expenditures.
The remaining component of State and local government
expenditures is for other goods and services.
The largest
expenditures are for maintenance and repair construction.
3.
Impact on the Prices of U.S. Foreign Trade Items
Foreign trade, currently the smallest component of GNP,
contributes less than 1 percent of total U.S. output. Net
exports have generally been declining since 1964 due to the
inability of the growth in exports to match the growth in imports.
There are many sources of the decline in the U.S. trade surplus;
however, an element frequently cited is the inflationary pressures
which have priced some U.S. goods out of world markets. It is
interesting to note that export prices have risen 13 percent in
the last 6 years after remaining virtually constant from 1951 to
1964. Prices of imports have risen also since 1964, but by only
two-thirds of the increase in export prices.
Our trade position
will be further aggravated to the extent that air pollution control
5-15
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expenditures by industry cause increases in the prices of U.S.
exports and in the domestic substitutes for imports.
The extent to which the U.S. trade position is affected by
air pollution control will depend
on changes in the relative
prices of U.S. and foreign goods competing for world markets.
Since most industrialized countries have some type of air pollution
control program, any estimate of the increase in the prices of
U.S. exports probably overstates the situation and is not reflective
of the change in relative prices.
We do not here consider the
possible impact of rising U.S. prices due to pollution control
on import demand.
To the extent that rising domestic prices
increase import demand, the balance of trade position will
deteriorate.
Major U.S. exports are agricultural products, food and
kindred products, chemicals and selected chemical products, and
motor vehicles and equipment.
In 1968, agricultural products including foods, feeds, and
grains comprised over 18 percent of U.S. exports. Most agri-
cultural products are sold to the developed countrie~/especially
the Common Market countries, Canada, and Japan. The highest price
increase projected for agricultural products is 0.07 percent
for cotton primarily due to higher electricity prices. Western
European countries and Japan purchase almost all U.S. cotton
exports.
Chemicals and chemical products were about 8 percent of 1968
U.S. exports. Chemicals and chemical products are primarily sold
to the Common Market countries, Canada1and the Latin American
countries. The major chemical products which are exported include
industrial inorganic and organic chemicals, agricultural chemicals,
and miscellaneous chemical products. The prices of industrial
inorganic and organic chemicals are projected to increase by
0.3 percent, primarily due to the impact of higher iron and
steel prices.
];./
Western Europe, Canada, Japan, Australia, New Zealand,
and Republic of South Africa.
5-16
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Motor vehicles and equipment exports consist of new and
used passenger cars, trucks, buses, special vehicles, and parts,
bodies, and accessories.
Together, they comprised 10 percent of
u.s. exports in 1968. Canada and the Latin American countries
are the largest purchasers of U.S. exports of motor vehicles--
together purchasing 80 percent of total exports of this category.
To the extent that Canada and the Latin American countries require
motor vehicles to meet the same or similar emission standards
as assumed for the U.S. in 1977, prices of exported automobiles
would increase about 10 percent and trucks about 4 percent.
If emission control devices are not installed on motor vehicles
for export and the only price increases projected are due to
higher input prices, the projected impact on motor vehicle
production prices would be about 0.4 percent.
5-17
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Appendix I
Assumed Emission Standards
-------
I.
INTRODUCTION
Under the Clean Air Act» as amended in 1970» air quality standards
have been established for the whole country.
Each State is required to
adopt and to submit implementation plans to the Administrator of the
Environmental Protection Agency for the emission reduction strategy
and enforcement thereof to achieve national standards for particulates»
sulfur oxides» nitrogen oxides» hydrocarbons» and carbon monoxide.
For this report» uniform emission standards were selected without
going through the various steps of emission inventories and diffusion
calculations to determine acceptable emission standards for achieving
air quality standards in each air quality control region.
The basis for
the selections was the sample limitation procedures promulgated in the
Federal Register» Volume 36» Number 158» Part II» "Requirements for
Preparation» Adoption» and Submittal of Implementation Plans"»
August 14» 1971.
Newly constructed and modified sources are subject to national
standards of performance based on adequately demonstrated control
technology in accordance with Section III of the Clean Air Act» as
amended.
In this report» steam-electric power plants» nitric and
sulfuric acid plants» cement plants» and municipal incinerators
scheduled for construction after January 1» 1972» were assumed to be
subject to national standards of performance promulgated in the
Federal Register» Volume 36, Number 159» '~ational Standards of
Performance for Stationary Sources"» August 17, 1971.
II.
STATIONARY SOURCES
A.
Standards for Particulates
For industrial processes» the process weight rate regulations
(Table I-I) are the bases of control cost estimates.
These regulations
limit the weight of particulate emissions per hour as a function of the
total weight of raw materials introduced into a process operation.
sulfuric acid plants» the allowable mist emission is 0.5 pounds per
ton of acid produced; for incinerators» the particulates are limited
For
I-I
-------
to 0.10 pounds per 100 pounds of refuse charged; for fuel-burning equipment,
the particulates are limited to 0.10 pounds per million Btu of heat
input.
Limitations for incinerators and for fuel-burning equipment are based on
the source test method for stationary sources of particulate emissions published
by EPA in 40 CFR-Part 60, December 22, 1971, Federal Register!
B.
Standards for Sulfur Oxides
For fuel-burning equipment, cost estimates are based on mass emission
rate of 1.50 pounds of sulfur dioxide per million Btu input.
This
limit is approximately equivalent to a sulfur content of 1.0 percent
by weight in coal and 1.4 percent by weight in oil. For sulfuric
acid plants, a mass rate of 6.5 pounds of sulfur dioxide per ton of
acid is used for existing sources.
Primary copper, lead, and zinc
smelters are assumed to limit sulfur oxide emissions to 10 percent
of sulfur (measured as sulfur dioxide) in the ore.
Sulfur recovery
plants at refineries are limited to 0.01 pounds of sulfur emissions per
pound of input sulfur.
C.
Standards for Carbon Monoxide
Cost estimates were based on treatment of all exhaust gases to
reduce the weight of carbon monoxide emissions by at least 95 percent.
D.
Standards for Hydrocarbons
For industrial processes, cost estimates were based on treatment
of all exhaust gases to remove organic material by 90 percent (or more)
by weight.
For petroleum products storage, it was assumed that all
stationary tanks, reservoirs, and containers with more than a 40,000-
gallon capacity and with a vapor pressure of 1.5 pounds per square inch
absolute (or greater) must be equipped With floating roofs, vapor recovery
systems, or other equally efficient devices.
In addition, it was
assumed that submerged filling inlets must be installed on all gasoline
storage tanks with a capacity of 250 gallons or more.
E.
Standards for Nitrogen Oxides
No specific cost estimates were made pertinent to the reduction of
nitrogen oxides.
Limestone injection scrubbing, assumed for power
plants, can reduce some oxides of nitrogen by 20 percent.
Existing
1-2
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nitric acid plants are restricted to 5.5 pounds of nitrogen oxide per
ton of acid produced.
III.
MOBILE SOURCES
Table 1-2 summarizes the current and projected emission control
requirements for reducing hydrocarbons, carbon monoxide, and nitrogen
oxides emissions from passenger cars and light-duty trucks through
Fy 1977.
This table is based on information available through
August 15, 1971.
Table 1-3 is the forecast of emission control
requirements for reducing the same pollutants for heavy-duty trucks
through Fy 1977.
The assumed standards no longer include
particulates.
This change was brought about by the assumption that
unleaded or low lead gasoline will be in widespread use during the
next 5 years; removal of lead reduces particulates from gasoline
engines by 75 to 80 percent (by weight).
Table 1-4 provides the reports and estimates of motor vehicle
production that served as a basis for cost estimates.
1-3
-------
TABLE 1-1. ALLOWABLE RATE OF PARTICULATE EMISSIONS BASED ON
PROCESS WEIGHT RATE !/
Process Weight Rate
(lbs/hr)
Emission Rate
(lbs/hr)
50
100
500
1,000
5,000
10,000
20,000
60,000
80,000
120,000
160,000
200,000
400,000
1,000,000
0.30
0.55
1.53
2.25
6.34
9.73
14.99
29.60
31.19
33.28
34.85
36.11
40 . 35
46 . 72
l/ To interpolate the data for the process weight rates up to
60,000 1bs/hr, use the equation
E = 3.59PO.62
p :: 30 tons/hr ;
to interpolate and extrapolate in excess of 60,000 1bs/hr, use
the equation
E = 17.31PO.16
p > 30 tons/hr ;
where E is emissions in pounds per hour, and p is process
weight rate in tons per hour.
1-4
-------
TABLE 1-2. CURRENT AND PROJECTED EMISSION CONTROL REQUIREMENTS
FOR AUTOMOBILES AND LIGHT TRUCKS (6000 LB. GVW OR LESS)
Model Test Exhaust Emissions, Gm/Ui Evaporation Assembly
Year Procedure 1/ HC CO NOx Grams/Test Line Test
19681./ FTP (275 ppm) (1.5 vo1.%) NR NR NR
19691./ FTP (275 ppm) (1.5 vol.%) NR NR NR
1970 FTP 2.2 23 NR NR NR
1971 FTP 2.2 23 NR 6 NR
1972 CVS 3 . 4 3/ 39]J NR 2 NR
1973 CVS 3.4 39 3.0 2 !if
1974 cvs 3.4 39 3.0 2 4/
19752/ CVS 0.41 3.4 3.1 2 4/
19762/ CVS 0.41 3.4 0.4 2 !if
19772/ CVS 0.41 3.4 0.4 2 4/
Notes:
NR
GVW
- No Requirement
- Gross Vehicle Weight
1/
- Federal Test Procedure (FTP), 7-mode cycle.
- Constant Volume Sampler (CVS) using 1372-second driving cycle.
Standards for 1968 and 1969 are expressed as parts per million
(ppm) or volume percent.
- The larger numbers for HC and CO standards beginning 1972 are due
to the fact that the CVS procedure gives larger readings than FTP.
On an equal test procedure, 1972 standards are more stringent than
1971 and do not represent a relaxation of previous requirements.
- Assumes Federal requirement for test on 3 percent of nationwide
sales expected starting 1973, using a new short test cycle now
under development.
2/
]j
4/
5/
Definition of standards was published by EPA on 7-2-71. A hot start
cycle is added to the procedure beginning in model year 1975.
1-5
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TABLE 1-3.
CURRENT AND POSS1BLEl/EM1SSION CONTROL REQUIREr~NTS
HEAVY-DUTY VEHICLES (OVER 6000 LB. GVW)
GASOLINE ENGINES
Model
Year
Test 2/
Procedure-
Exhaust Emissions 3/
Concentration-ppm or % Mass-gm/ghp hr
HC CO HC+NOx CO
Evaporation
Grams/Test
1967-69
1970-71
1972
1973-74
1975-77
Hodel
Year
NR
Eng. Dyn.
Eng. Dyn.
Eng. Dyn.
Eng. Dyn.
Test 5/
Procedure-
~ Vol. %
NR NR NR
275 1.5 NR
275 1.5 NR
275 1.5 10~/
5 25 10
DIESEL ENGINES
Exhaust Emissions
Hass-gm/bhp hr Smoke 6/
HC+NOx CO %Obscure-
NR NR NR
NR NR 20-40
5 25 20-40
1967-69
1970-74
1975-77
Eng. Dyn.
NOTES:
NR
GVW
1/
2/
3/
!!!
5/
~
- No Requirement
Gross Vehicle Weight
EPA announced on February 11, 1972, that the 1973 heavy-duty
vehicle standards proposed on October 5, 1971,were being
withdrawn and that new standards would be imposed for the
1974 model year instead. There was insufficient time to
change this report to reflect either this new effective
date or likely changes in the technical nature of the
control requirements assumed in the table.
HEW engine dynamometer test cycle (steady 2000 rpm, various loads).
- Concentrations are expressed on a volume portion basis through
1974, parts per million (ppm) or volume percent. After 1974
a mass basis of grams per brake horsepower-hour is used.
- Evaporative control requirements may possibly be delayed until
model year 1975.
- EMA engine dynamometer test cycle (various stabilized speeds
and loads).
- HEW engine dynamometer test -- acceleration and lugging modes.
1-6
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TABLE 1-4. MOTOR VEHICLE PRODUCTION
(Domestic Production Plus Net Imports)
Calendar Numbers of Vehicles (Millions)
Year }) Autos L. D. Trucks H.D. Trucks & Buses Total
1967 8.1 1.0 0.6 9.7
1968 10.0 1.1 0.8 11.9
1969 9.7 1.1 0.8 11.6
1970 10.0 1.2 0.8 12.0
1971 10.0 1.2 0.8 12.0
1972 10.1 1.2 0.9 12.2
1973 10.2 1.3 0.9 12.4
1974 10.4 1.4 0.9 12.7
1975 10.7 1.4 0.9 13.0
1976 10.9 1.4 0.9 13.2
1977 11.2 1.4 0.9 13.5
!/Reported numbers through 1968, estimated thereafter. Source: U.S.
Department ~f Transportation, Federal Highway Administration, Bureau
of Public Roads, with light-duty truck numbers estimated from total
truck and bus numbers.
1-7
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Appendix II
State Inspection Programs and
Retrofit Devices
-------
I.
INTRODUCTION
Section 107 of the 1970 Clean Air Act Amendments requires that States,
in which air quality control regions have been designated, develop air
quality standards and subsequently prepare implementation plans
for achieving air quality meeting those standards.
Since motor
vehicles contribute major fractions of the emissions of carbon
mono~de, nitrogen oxides, and hydrocarbons, plans for effective
control of these pollutants must include controls for motor vehicle
emissions.
The Federal Government has preempted the right to set emission
standards for new motor vehicles prior to initial sale.
After transfer
of ownership, a State has the right to require that pollution emission
restrictions are met by the vehicles registered in that State.
Under
Section 210 of the 1970 Clean Air Act Amendments, financial assistance in
the form of Federal grants is available for planning, establishing,
and maintaining vehicle emission inspection programs.
Several levels of vehicle emission inspection are considered
as they relate to existing types of safety inspection programs. "Also,
because the use of retrofit devices for older vehicles has been a
measure frequently proposed for emission reduction, data have been
developed for this strategy.
II.
EXISTING STATE MOTOR VEHICLE SAFETY INSPECTION PROGRAMS
~he current State motor vehicle safety inspection programs were
developed in response to the conclusion that automobiles in
various stages of disrepair contribute significantly to the death
toll and the injury rate of the American driving public.
The
acceptance of a program providing for safer automobiles through
the administration of an inspection program designed to detect
unsafe operating components has been slow and varied across the
States.
Present inspection requirements are not uniform through-
out the States.
Several States have very. rigidly enforced safety
standards, others have programs that require annual inspection of
different components, and still others do not have formal safety
inspection programs.
11-1
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One major consideration in planning for air pollution control is
the feasibility of incorporating, within existing and planned State
motor vehicle inspection programs, an inspection to determine the level
. of emission of pollutants from automobiles and light-duty trucks.
An
essential step is the review of present State motor vehicle inspection
programs.
This section briefly cutlines the characteristics of existing
State motor vehicle safety inspection programs, particularly those
characteristics that relate to the issue of involving emission control
measures along with the present inspection [Refs. land 2].
A.
Current Inspection Programs
Inspection programs are generally described in terms of the
regularity with which the inspections are required and the type of
vehicles included.
Classifications include periodic motor vehicle
inspection, random spot inspection, inspection limited to certain
vehicle classes, and no 'State-required inspection.
Currently, 32 jurisdictions (31 States and the District
of Columbia) have laws which require periodic motor vehicle inspection
of all motor vehicles. Only three States (Delaware, District of
Columbia, and New Jersey) have State-owned inspection systems repre-
senting approximately 3.9 percent of the national motor vehicle total.
The other 29 States have State-appointed systems (private
service stations) representing approximately 50.9 percent of the
national motor vehicle total.
In each of these States, a motor vehicle must pass a safety
inspection to be permitted to operate on the highways.
Seven ~tates have some form of random spot inspection and
account for about 28.0 percent of the national total.
These inspections
usually involve stopping and checking vehicles on a public highway
in a temporary inspection lane.
The quality of the inspection required under these random spot
programs may very well be superior to some of the periodic inspection
programs.
However, the overwhelming advantages lie with periodic
inspection in that all vehicles are inspected.
Under a random spot
inspection not only is the number of vehicles inspected much smaller,
but the probability that a vehicle owner will take measures to correct
minor deficiencies so that his car will pass an inspection that mayor
may not occur are undoubtedly much smaller.
11-2
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Three States (Illinois, Maryland, and Arizona) have limited
inspection laws at the present time and account for about 7.6 percent
of the national total.
Illinois only requires commercial vehicles
. be inspected, Maryland requires used cars to be inspected before
sale, and Arizona only requires school buses to be inspected.
Essentially, these States do not have inspection requirements that
can be expected to exert much influence upon safe driving conditions
of motor vehicles nor can it be expected that emission control
measures are likely to be incorporated voluntarily along with this
limited safety inspection. .
The 9 re~ining States, which account for approximately 9.6
percent of the national total, do not have any ~tate law which
requires motor vehicle inspection.
Therefore, it is doubtful that
emission control inspection will be undertaken in these States on a
voluntary basis.
B.
Administration of Inspection Programs
The department or commission responsible for providing safety
inspections within the States includes a wide assortment of agencies.
However, the departments of Motor Vehicles, State Police, and Public
Safety account for 38 of the programs or have authority to initiate
programs .
These departments will probably be the departments through
which the control of emissions must ultimately be coordinated.
However,
it is possible that other agencies in the States may take the initiative
in the emission control part of an inspection.
In New Jersey, for
example, the Department of Health has been the agency responsible for
much of the developmental work in vehicle emission control and that
State is moving forward in developing a statewide emissions control
program.
C.
Operation of Periodic Motor Vehicle Inspection Program
There are two general organizational methods of operating an
inspection program.
The ptate can establish State-operated inspection
stations or it can license private stations to conduct the inspections.
1.
State-Operated Stations
Currently the three States or jurisdictions that have State-
operated stations (New Jersey, Delaware,.aqd Washington, D. C.)
11-3
-------
have facilities owned by the State, are staffed by State
employees, and usually are involved only with the task of pro-
vi ding the inspection function.
Characteristics of operation of
these stations include:
(1) relatively small number of stations,
(2) large volume of total vehicles inspected for each station,
(3) standardization of quality of inspection, and (4) limited to
inspection only. Items (1) and (2) essentially are two statements
of the same fact, yet each is important in discussing the feasibility
of including within existing inspection programs the emissions
inspection that under given alternatives could involve large
outlays for capital equipment.
Standardization of quality of
inspection may also become more critical when the remedial steps re-
quired may include a maj or engine tune-up.
Many rejections for safety are overcome by a minor correction, such
as adjusting a headlight or replacing a bulb that has burned out; but
in the inspection programs that are State operated, the inspector cannot
also serve as a mechanic. Thus a minor deficiency that can be corrected
in two minutes may require the vehicle owner to spend considerably more
total time in having the deficiency repaired and then waiting to go
through the inspection process .again.
State-Appointed Stations
.Of the 32 States which have periodic inspection programs, 29
operate a "State-appointed system," under which the State licenses or
2.
grants to private service stations (or to owners of vehicle fleets)
the authority to inspect vehicles.
The specific requirements for
becoming an "official inspection station" vary somewhat among States,
but can be summarized as (1) having the "necessary" tools and equip-
ment and (2) having in the employment of the establishment a person
sufficiently competent to carry out the inspection.
The relevant characteristics of the inspection stations that
are State-appoint~d are: (1) A large number of stations operate across
the State. For example, North Carolina has over 4,000 inspection
II-4
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D.
stations compared to New Jersey's (State-operated) 38 stations.
(2) A relatively small number of vehicles are inspected per
inspection station. A rough comparison being an average of 800
vehicles per station under State-appointed systems and 50JOOO
vehicles per station under State-operated systems [Ref. 2].
(3) Increased enforcement and standardization problems result
in inspection being perhaps less thorough under State-appointed
systems. (4) There is opportunity for the inspector to also serve as
the repairmanJ especially in the on-the-spot correction of minor
discrepancies. (5) A multipurpose use of the area in which
the inspections are conducted.
For exampleJ the area or space in
which the inspection is carried out is also used for general
servicingJ lubricationJ and oil changes when not being used for
inspection purposes.
Components Inspected
The equipment on the motor vehicles that is required to be inspected
in safety programs differ among~the v~rious States.
A review of the
thirty-two States which have periodic.motor vehicle inspection [Ref. 1]
shows that the following items of equipment are most commonly. inspected:
l.
2.
3.
4.
5.
6.
7.
8.
9.
10.
ll.
12.
13.
14.
15.
16.
Equipment Item
Number of States
Inspecting
Horn
Reflectors
Brakes
Windshield Wipers
Clearance Lights
Headlights
Steering
Tires
Turn Indicators
Glass
Tail Lights
Exhaust System
Stop Lights
License Place Lights
Side Marker Lights
Lighting Equipment
32
31
30
30
29
29
29
29
29
28
28
27
25
22
22
20
--continued
11-5
-------
Equipment Item
Number of States
Inspecting
17.
18.
19.
20.
21.
22.
Windshield
Wheels
Beam Indicator
Mirrors
Suspension
\.Jheel Alignment
19
17
16
16
16
16
Lights
In some States there are several items of equipment or components
of particular importance in controlling emission that are also
inspected [Ref. 2].
These are listed below:
Equipment Items Related
to Emission Control
Number of
States
Inspecting
States Inspecting
1.
2.
3.
Crankcase Ventilation
Fuel System
Fuel Tank
System
3
3
8
Colorado, Missouri, New York
Louisiana, New Hampshire, Wyoming
Idaho, Maine, Nebraska, New
Hampshire. South Dakota, Utah,
Vermont, District of Columbia
4.
5.
6.
Fuel Lines
Exhaust Emission System
Mufflers
1
1
9
Utah
Texas
Arkansas, Colorado, Indiana,
Louisiana, New Hampshire,
South Dakota, Virginia,
West Virginia
Missouri
7.
Pollution Control Devices
1
There are a large number of other items that are inspected in one
or more States.
Generally, however, these are items that are inspected
visually and do not require special tools, measurements, or evaluation.
E.
Cost of Inspection
The fee charged for an inspection varies from a $1.00 charge in
District of Columbia, Louisiana, Maine, -Massachusetts, New York, New Jersey,
Rhode Island, and Vermont to a high of $3.50 per inspection in West Virginia.
In the majority of these States, a small part of the total fee is
passed on to the State and the remainder is retained by the inspecting
station.
The total revenue generated for a given State-appointed station
II-6
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will seldom support the full-time employment of a man just to inspect
vehicles.
This requires, therefore, that the majority of the men
inspecting vehicles also have other duties and tasks.
Enforcement of Vehicle Inspection Requirements
The majority of the States with inspection programs provide for
the removal of vehicles from the highways if they do not meet the
inspection requirements. This is usually implemented by giving a 10-
F.
to l4-day grace period in which the motorist is required to have
deficiencies corrected.
When a vehicle has been inspected and has
passed the inspection, a certificate in the form of a windshield
sticker is normally issued.
G. Flexibility of State Programs
Many of the State statutes are stated in a manner that permits
the commissioner or director of the agency charged with the responsibility
for conducting. the inspection to determine which items or components
will be inspected.
Addition of items or equipment to be inspected could be realized
in 34 of the 39 States, given that the additional items do not involve
issues that may arouse the public.
The authority to add additional
items is clearly stated in many of the statutes but this should not be
interpreted as involving only the decision of the director or commission,
particularly if the additional inspection requirements (for the purpose
of emission control) call for a tune-up or other major corrections in
order to pass the inspection.
III.
VEHICLE EMISSION INSPECTION PROGRAMS
A.
Candidate Programs
Numerous test or inspection procedures exist for possible use
in a State vehicle emission inspection program.
These range in
complexity from a simple visual inspection to a detailed measurement
of emission products under certain driving conditions.
The selection
of the particular test procedure that is feasible, practical, and
11-7
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usable for a particular State depends upon many factors, and what is
suitable for one State will not necessarily be suitable for another.
This variation of needs from State to State can result from such
factors as the vehicle density, existing inspection resources, pre-
vailing meteorological conditions and the political "climate."
Candidate inspection procedures for State vehicle emission inspection
programs are listed and described in Table II-I. Each category represents
Table 11-1.
CANDIDATE INSPECTION PROCEDURES FOR STATE VEHICLE
EMISSION INSPECTION [REF. 2]
Visual Inspection
Determine that required control
devices are present and intact; check
for rough idle and unusual sounds
from engine or exhaust system; check
exhaust smoke density. Reject if
defects observed.
Check idle RPM, idle air-fuel mixture,
ignition timing, and other important
engine parameters. Reject if parameters
out of manufacturer's specifications.
Engine Tune-up Check
Mandatory Tune-up
Perform minor tune-up consisting of ad-
justing idle RPM, idle air-fuel mixture,
ignition timing, and other engine
parameters to manufacturer's specifications.
Reject if parameters cannot be brought
into specification limits.
Emission Measurement
at Idle
Measure exhaust HC, CO, NO , opacity,
and perhaps crankcase presgure of HC emissions
at idle (and/or possibly at some higher
RPM). Reject if emissions are above
established standards.
Measure exhaust HC, CO, NO , opacity
x
and perhaps crankcase pressure or HC
emissions while vehicle is driven
through a predetermined short cycle on
a dynamometer. Reject if emissions
are above established standards.
Emission Measurement,
Short Cycle
II-8
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a broad classification which may include, from program to program,
more than one test procedure. For examplet the procedures associated
with the well-known Clayton key mode cyclet the New Jersey ACID cyclet
and the General Motors EXIT cycle all conform to the last category:
Emission Measurementt Short Cycle.
All of the designated procedures have been proposed at one time
or another as appropriate for State inspection programs. Emission
measurements with a long dynamometer cycle such as the Federal test
were not included as candidate procedures. They were ~led out
as being too expensive and complex for a State inspection procedure.
B.
Program Selection
The decision to establish an emission inspection program will
be based on projections of the needed reduction in aggregate emission
in a particular State to maintain healthful air quality levels.
Emission inspection programs may be required in some States as air
quality standards and implementation plans for achieving air quality
are developed as required under Sections 109 and 110 of the 1970
Clean Air Act Amendments.
Under the "wors t region" concept, which is expected to be part
of the Federal Guidelines for State implementation plans, the
implementation plan developed for a high density urban industrialized
region may be acceptable as applicable to all the air pollution control
regions of the State.
Based upon ~he 1970 Censust t~ere are 29 States and the
District of Columbia with city populations of over 200tOOO people,
as listed in Table 11-2. Using this criteriont the assumption is made
that these cities constitute "worst regions" requiring the strategy of
vehicle emission inspection and that this requirement is also
applicable to other air pollution control regions within these
respective States.
Thereforet approximately 85 percent of the national
motor vehicle total will ultimately be subjected to some form of
emission inspection.
Table 11-2 also gives the 1970 vehicle density per square mile and
present safety inspection program although no correlation appears to exist.
11-9
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Table II-2.
JURISDICTIONS WITH CITIES OVER 200,000 POPULATION,
BASED ON 1970 CENSUS
1970
Vehicle Present Vehicle Present
Densit2 Safety Densit~ Safety
State per Mi Ins ection State per Mi Inspection
L Alabama 37.1 None 16. Hissouri 34.5 Yes
2. Arizona 9.6 Limited 17. New Jersey 466.0 Yes
3. California 75.5 Random 18. New Mexico 5.2 Yes
4. Colorado 13.7 Yes 19. New York 135.0 Yes
5. Florida 70.3 Yes 20. North Carolina 53.7 Yes
6. Georgia 44.5 Yes 21. Ohio 146.0 Random
7. Hawaii 61. 3 Yes 22. Oklahoma 24.3 Yes
8. Illinois 94.5 Limited 23. Oregon 14.3 Random
9. Kansas 19.1 None 24. Pennsylvania 131.2 Yes
10. Kentucky 43.7 Yes 25. Tennessee 48.0 None
11. Louisiana 37.0 Yes 26. Texas 25.5 Yes
12. Haryland 178.0 Limited 27. Virginia 50.5 Yes
13. Massachusetts 304. ° Yes 28. Washington 32.9 Random
14. Michigan 80.5 Random 29. Wisconsin 37.9 Random
15. Hinnesota 26.2 Random 30. District of Columbia 3750.0 Yes
Of the thirty jurisdictions listed, two have State-owned inspection,
fifteen have State-appointed inspection, three have limited inspection,
seven have random spot inspection, and three have no inspection at all.
For the purpose of this analysis it will be assumed that 17
jurisdictions will incorporate emission inspection into their existing
safety inspection programs and that the other thirteen states will be
required to develop emission testing facilities probably in conjunction
with safety inspection programs.
Permanent test stations, State-owned
or State-appointed, rather than mobile units will qJsq pe assumed.
~
No provision has been made for visual inspection because this
method is considered too crude and relatively ineffective for a suitable
inspection procedure.
The inspection procedure is assumed to consist of
some type of engine tune-up check or emission measurement, at either idle
or with short dynamometer cycle, with the same rejection rate for all to
determine the requirement for mandatory tune-up.
II-10
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IV.
RETROFIT EMISSION CONTROL DEVICES
One emission control strategy for pre-1968 model yea~ automobiles
is the use of retrofit devices. Although it is not likely that used-
car owners will install these devices on a voluntary basis to any great
extent, it is probable that they may be required by some States as air
quality standards and implementation plans for achieving air quality
are developed as required by Sections 109 and 110 of the 1970 Clean Air
Act Amendments.
The California Air.Resources Board has established
standards for pre-1968 model year automobiles of 350 ppm HC, 2 percent
CO, and 800 ppm NO. The law provides for approval of any used-car
x
device which meets two of the three prescribed standards without
increasing the third.
The law further states that a used-car device
to be approved must sell for $65 or less.
The California standards
and criteria are serving as the primary bases for the design of
retrofit emission control devices being made available to owners of
older vehicles [Ref. 2].
Emission control devices or modification kits, are in various
stages of development by the automotive manufacturers and independent
companies [Ref. 3].
The systems developed by the auto manufacturers
follow a somewhat similar approach, consisting of some combination of
modifications and adjustments to the carburetor, the distributor
vacuum advance, and the engine operating temperature.
A.
Review of Retrofit Control Devices
1.
Description
The General Motors Emission Control System for used cars
contains a thermo-vacuum switch with associated hoses and clamps,
sealant and tags for idle adjustment screws, and new specifica-
tions for engineope~ating parameters.
The kit specifies an
.
idle mixture adjustment to lower the carbon monoxide content of the
exhaust gas, an idle speed increase to promote smooth engine operation,
and a timing adjustment to raise the engine operating temperature.
II-II
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A thermo-vacuum switch is included to make the ignition vacuum
advance inoperative during normal operating conditions and
operative if the engine tends to overheat.
The Ford Motor Company emission control kit contains a
thermo-vacuum switch with associated hardware, new engine operating
specifications, and for some six-cylinder engines which were
not equipped with centrifugal advance distributors, a new
distributor with both vacuum and centrifugal advance modes.
Idle and choke settings are changed to reduce carbon monoxide
in the exhaust gas, and idle speed is again increased to promote
smooth engine operation.
Timing is retarded to increase the
engine operating temperature, and the thermo-vacuum switch makes
the vacuum advance inoperative unless the engine overheats.
The Chrysler Corporation Used-Car Cleaner Air Package
contains essentially the same hardware as the GM and Ford kits,
except for the addition of leaner main jets in some specific
cases.
The kit again functions to raise the engine operating
temperature, and to reduce carbon monoxide in the exhaust gas.
The vacuum advance is made inoperative unless the engine
experiences an overheated condition.
2.
Availability and Acceptance of Retrofit Emission Control
Devices
The General Motors Exhaust Emission Control Kit is designed
to fit most domestic passenger cars and light-duty trucks built from
1955 through 1967.
The Ford Motor Company and Chrysler Corporation
kits are designed strictly for their respective makes of cars
through the same production years as previously mentioned.
The General Motors Kit, which offers emission reductions of
approximately 50 percent for hydrocarbons, 35 percent for carbon
monoxide, and 35 percent for nitrogen oxides is currently offered
for sale in all States except California [Ref. 4].
A test marketing program was conducted by General Motors
in Phoenix, Arizona last year to determine if customers were willing
to purchase the GMkit.
Phoenix was chosen for the test market
11-12
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because it was a photochemical smog area and contained an
estimated 334,000 cars which were 1967 model year or older that
would have been improved by use of the kit, materially reducing
automobile pollution in the Phoenix basis.
Despite extensive marketing efforts where it was determined
that approximately 90 percent of the potential users were aware
of the cost and availability of the kit, only 528 were sold and
installed.
Less than 1/4 of one percent of the potential users
of this particular kit were willing to spend approximately $20
for purchase and installation to control emissions of their
older cars [Ref. 5].
This would indicate that some enforcement regulation will
probably be required.
3.
Cost Factors
Purchase cost will range from $10 to $15 for the three kits
that are available.
Installation of the GM and Ford kits may be performed by
the individual purchaser with the exception of the adjustment of
the CO content in the exhaust gas, for which special equipment is
required and which is usually found only at well-equipped com-
mercial garages. To avoid possible mistakes by unskilled and
untrained persons, installation of the device at a dealership is
recommended. Since the Chrysler kit requires drilling a small
hole in the intake manifold, and in some cases replacement of the
main jets in the carburetor, installation of the kit by a skilled
mechanic is a necessity. Installation time for the GM device is
approximately three-quarters of an hour; the Ford device requires
one hour, and the Chrysler kit may take from one to two hours.
All these suggested installation times are for trained mechanics
who are familiar with the installation procedures of the devices
[Ref. 2].
Installation costs may range from about $5 to about $15,
depending upon which device is involved.
There are no maintenance costs directly associated with the
emission control kits themselves.
However, for these kits to
11-13
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function properly, the automobile must be in good operating
condition.
To assure top performance of the emission control
device, a complete motor tune-up should be performed on an annual
basis. One manufacturer [Ref. 6] reported a decrease in gas
mileage of .2 to .3 miles per gallon on a fleet of test cars.
The cost per year for this decrease in gasoline mileage would be
about $5. It is also reasonable to expect that all kits' would
cause some decrease in gas mileage due to the removal of the
ignition vacuum advance.
The cost of retrofit devices has been estimated for passenger
cars and light~uty trucks and does not include heavy-duty motor
vehicles over 6,000 pounds.
It has been assumed that due to the simplicity of these
devices, they should last the life of the vehicle.
Based on several industry estimates, it is concluded that
the average purchase and installation unit cost for retrofit
control devices will be approximateiy $30. In addition, the
average annual gas mileage penalty after installation will be
about $5 per year.
The national population of vehicles of 1967 model year
or older is, of course, steadily declining so that the effectiveness
of the retrofit strategy is reduced each year.' Table 11-3 .indicates
this anticipated reduction through 1977 based on current vehicles
in use by age groups [Ref. 7].
Table 11-3.
VEHICLES ~ 1967 MOD.EL YEAR OR. OLDER
Vehicles Vehicles Percent of
Year In Use 1967 or Older Total
1971 93,800,000 54,300,000 58.0
1972 96,800,000 46,500,000 48.0
1973 100,100,000 39,000,000 39.0
1974 103,500,000 32,100,000 31.0
1975 106,900,000 25,600,000 24.0
1976 110,500,000 19,900,000 18.0
1977 114,200,000 14,900,000 13.0
II-14
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As indicated earlier, it is doubtful that very many retrofit devices
will be installed on a voluntary basis.
If one percent of the
vehicles (1967 or older) in 1971 were to install devices, this
cost would be approximately $16,290,000 based on $30 per unit.
If, however, air quality standards and implementation plans
so dicta,te i~. fut_\J!~- years, this cost would b,e much la~ger:-- !or
example, as implementation plans are developed under the "worst
region" concept within each State and these plans become models
for other regions within these States, increased population and
traffic density in the urban industrialized cities will be
important considerations.
Based upon the 1970 Census there are twenty-nine States and
the District of Columbia with city populations of over 200,000
people.
If the assumption is made-that these cities constitute
"worst regions" requiring the retrofit strategy and that this
requirement is also applicable to all other air pollution control
regions within these respective States, then approximately 85
percent of model year 1967 or older vehicles would be required
to install retrofit devices. Allowing time for development,
-;approval, and enforcement in these States by 19T5', it can be seen
. - . -- - ..-
from Table 11-3 that there will be 25,600,000 vehicles nationally
- - -
that will be candidates for retrofit devices or about 21,800,000
vehicles in the twenty-nine States and the District of Columbia
that would be required by law to have retrofit devices installed.
At a unit cost of $30, this w~uld amount t?:approximatelj ~654,OOO,OOO
if enforcement occurred during 1975.-
Annual gas mileage penalty of $5 per vehicle per year would
amount to $109,000,000 for 1975, $84,500,000 for 1976, and $63,000,000
for 1977 based upon 85 percent of the candidate vehicles as shown
in Table 11-3.
v.
COST ANALYSIS AND SUMMARY
Consumer cost of State vehicle emission-inspection programs and
associated costs likely to occur as a result- of air quality standards
II -15
-------
and implementation plans in accordance with the 1970 Clean Air Act
Amendments are summarized in Table 11-4 for the years through 1977.
The analysis and cost estimate are based upon available information
as of August 15, 1971.
Autos and 1i2ht-duty trucks in the 30 jurisdictions likely to be
subjected to compulsory emission inspection have been projected through
1977. These projections do not include trucks and buses (gasoline or
diesel) with gross weight over 6,000 pounds.
The cost of establishing an emission control program (including
equipment) for the entire United States has been estimated at over
$100 million [Ref. 8]. For the 85 percent of this national total in
the 30 jurisdictions likely to be subjected to compulsory emission
.~ ' .
inspection. through 1977, the cost of capital equipment will be about
$85 million. It is assumed that emission testing will be done in
the same facility as safety inspection and therefore no land or facility
costs have been included.
The estimated cumulative percent of implementation through 1977
shown in Table 11-4 becomes the basis for estimating both emission testing
and mandatory tune-up on an annual basis.
It has been assumed that
some type of engine tune-up check, or emission measurement at either
idle or with a short dynamometer cycle will be required.
Since there
is a wide variation of estimated unit test costs for these different
procedures, an average cost of $2.00 per test has been used.
In addition, a 30 percent rejection rate from all test procedures
has been assumed which will result in a mandatory tune-up for those
rejected vehicles.
The average cost per tune-up is assumed to be $20
with an offsetting annual savings of $10 resulting from improved gas mileage.
Inspection costs are shown increasing annually because vehicle popula-
tion and the cumulative percent of implementation are both increasing.
Pre-1968 vehicles have been projected through 1977 and it has been
assumed that retrofit devices will also be required on the same
implementation schedule.
Based on several industry estimates, it is concluded that the
average purchase and installation unit cost for retrofit control devices
will be approximately $30 for pre-1968 model vehicles. Once installed,
II-16
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Table II-4.
COSTS OF STATE EMISSION INSPECTION PROGRAMS AND ASSOCIATED COSTS
(All costs and number of vehicles shown in millions)
Cumulative
Percent Manda-
of tory Pre-1968 Gas
Motor 1/ Capital Imp le- Emission2/ Tune3/ Models 1 Retr~fit4/ Mileage5/ Annual
Year Vehicles- Equipment mentation Testing - up - Vehic1es-/ Dev1ces- Penal ty-- Totals
1972 82.3 39.5
1973 85.1 $ 8.5 10% $ 17.0 $ 25.5 33.2 $ 99.6 $ 16.6 $ 167. 2
1974 87.5 17.0 30% 52.5 78.8 27.1 162.6 40.5 351. 4
1975 90.8 34.0 70% 127.1 190.7 21. 8 249.6 75.0 676.4
H 1976 94.0 17.0 90% 169.4 253.8 16.9 101. 4 75.0 616.6
H
I 1977 97.1 8.5 100% 194.2 291. 3 12.6 37.8 63.0 594.8
I-'
-..J
Totals $85.0 $560.2 $840.1 $651. 0 $270.1 $2,406.4
Vehicles in 30 jurisdictions subject to compulsory regulation (85 percent of projected national total).
Average Test Cost of $2.00.
Thirty percent rejection rate at Average Tune-up Cost of $20 with offsetting annual savings of $10 for
gas mileage improvement.
~/ Average cost of $30 includes purchase and installation.
i/ $5 per vehicle per year.
1/
Jj
1.1
-------
these devices should last the life of the vehicle but will impose a
gas mileage penalty of $5 per year.
Table 11-4 shows all costs aggregated on an annual basis with totals
through 1977.
Other costs that exist but which were not detailed are:
inconvenience
costs to the motorist, program administration costs, recruitment and
. ~ -
training of inspectors, program_~on~to~ing, and emission reduction
surveillance. The inconvenience cost could certainly be significant
considering travel and drivers' time required for inspection.
However,
the other costs would be relatively small on a per vehicle basis.
11-18
-------
.4.
VI.
REFERENCES
1.
"Compilation of State Motor Vehicle Inspection Laws and Regulations."
Automobile Manufacturers Assoc., Inc. January 26, 1970.
2.
"State Motor Vehicle Inspection."
Report to NAPCA. July 1970.
Research Triangle Institute Final
3.
California Air Resources Board Bulletin Vol. 2, No.5, Sacramento,
California, March-April.1970.
Research Triangle Institute meeting with representatives of General
Motors Corporation, July 8, 1971.
5.
Progress in Areas of Public Concern, General Motors Corporation,
Feb ruary 1971.
6. ".;' The General Motors Used-Car Emission Control, General Motors
Corporation, December 1969.
7.
Automobile Manufacturers Association, 1970 Automobile Facts and
Figures.
8.
"Governmental Approaches to Automobile Air Pollution Control."
Institute of Public Administration, March 1, 1971.
11-19
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Appendix III
Assembly Line Testing and Surveillance
-------
I.
INTRODUCTION
The purpose of motor vehicle assembly line testing is to insure that
motor vehicles as manufactured meet emission standards.
Section 206 of the 1970 Clean Air Act Amendments provides for testing new
vehicles or engines being manufactured to determine whether they con-
form with the regulations prescribed under Section 202 of the 1970 Clean
Air Act Amendments.
Assembly line testing is actually a program of quality control and
assurance with two essential parts:
the control and assurance program
carried out by the manufacturers and the surveillance function carried
out by EPA.
To achieve meaningful reductions in motor vehicle emissions, controls
must be established in the design, manufacture, and operation of these
vehicles.
These points of control are:
(a)
Design--Prototype certification testing.
(b)
Manufacture--Assembly line testing and surveillance.
(c)
Operation--State inspection programs and retrofit devices.
The following sections are addressed only to control point (b) assembly
line testing and surveillance.
111-1
-------
II.
CURRENT TESTING PRACTICES
The motor vehicle industry has been conducting assembly line
testing of vehicles as part of their own in-house quality assurance
program.
The quantity of production tested is in the range of 1 to
2 percent of the production of the plants where sampling is done
[Ref. 1].
The test cycle used by most domestic manufacturers is the Federal
7-mode,7-cycle test run on a cold-start procedure.
Foreign manufacturers generally check a large portion of their
U.S. production for idle CO emission levels and conduct a cold-start
Federal emission test on a small sample of the U.S. production.
III-2
-------
III.
SHORT TEST CYCLES
It is likely that certification tests will continue to require de-
tailed and involved testing procedures which include a large number of
modes of operation.
However, in both assembly-line testing and State
inspection programs, control may be possible with shortened and abbre-
viated versions of the test cycle and there are many advantages that
would result from using the same test for both.
Most importantly, if
this were done, standards set by various States for in-use testing would
produce data comparable to that which would be produced by manufacturers
during assembly-line testing.
As a result of studies by manufacturers and independent labora-
tories, several short tests are now available for appraisal.
Procedures
associated with the Clayton KEY MODE cycle, the New Jersey ACID cycle,
and the General Motors EXIT cycle are potential candidates for assembly-
line testing application.
(In these short test cycles the vehicle is
operated through a predetermined series of operating modes such as
acceleration, cruise, deceleration, and idle using a chassis dynamometer.
During the test cycle a proportional part of exhaust emissions are
continuously collected and analyzed.)
However, their approval is con-
tingent upon establishing good correlation with the Federal certifi-
cation test [Ref. 2].
If this correlation is established, 100 percent assembly-line testing
might be feasible using one of these short tests with unit cost in the
range of $20 to $30 per test.
Despite the technical feasibility of a short test procedure for
100
percent assembly-line testing, current Federal and California exhaust
emission test procedures indicate compulsory requirements for longer more
comprehensive tests as detailed in Sections IV and V.
111-3
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IV.
FEDERAL TEST PROCEDURE
The Federal test procedures in effect prior to July 2, 1971, were first
used to test the 1972 model year vehicles for conformance with the
standards.
This exhaust emission test was designed to determine mass
emissions of exhaust pollutants while simulating an average trip of 7.5
miles in an urban area from a cold start.
The test consists of engine
startup and vehicle operation on a chassis dynamometer through a specified
driving schedule.
A proportional part of the exhaust is collected in a
bag, and the composite sample is analyzed for the various gases.
As a result of experience with the testing procedures, and based on
recent studies of vehicle operational experience, some changes in the
procedure have been made to become effective with the 1975 model year testing
program.
Most of these are technical changes, but one bears mentioning.
Under current test procedures, which had originally been proposed to
be applicable to 1975 and 1976 vehicles, the entire test was composed of a
single vehicle-run on a dynamometer that begins with the vehicle completely
cold.
Analysis of vehicle operation data shows that in addition to the
usual early morning cold start, vehicles make several hot starts each day.
A test procedure was developed that also includes a hot start (which
presents special engineering problems to assure that emissions are controlled
under these conditions), and that is weighted to reflect the emissions from
a car over a 24-hour period (instead of solely during the morning commuter
trip as in the present procedure).
Analysis of results obtained shows
that, for purposes of protecting air quality in the most critical areas,
the new test procedure will more accurately weight the cold-start operation
of vehicles during the early morning hours.
111-4
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The new procedure, issued by EPA, and covered in the July 2, 1971,
Federal Re~ister, will involve a dynamometer run that will consist of
two tests--a "cold" start test begun after the vehicle has been shut
off for 12 hours, followed by a "hot" start test
begun after the
same engine has been turned off for ten minutes following the first cold
test.
The samples for each test will be collected in separate bags, the
contents analyzed, and the results combined in a weighted manner so that
the total result to be compared with the standard will consist of 43
percent of the cold-start emissions and 57 percent of the hot-start emissions.
In addition to the final regulations published, there also was published
a notice of proposed rule-making that would make the changes in test pro-
cedures applicable beginning with the NO
x
emission controls for the 1973
model year.
These are the same changes that have been finalized for the
1975 model year.
It may be noted that, because of the difference in test
procedures, there is a necessary revision of the numerical value of the
standards.
Thus, if the revised test procedures are used beginning in
1973, the numerical value of the carbon monoxide standard will be changed
from 39~0 to 28.0 grams per mile, the hydrocarbon standard from 3.4 to
3.0 grams per mile, and the nitrogen oxides standard from 3.0 to 3.1
grams per mile.
These do not represent actual changes in the standards,
but rather numerical revisions needed to.proper1y relate the standards
to the testing and measuring method used [Refs. 3 and 4].
1II-5
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v.
CALIFORNIA TEST PROCEDURES
A waiver of Section 209 of the Federal Clean Air Act, as amended,
was granted by the Administrator of the Environmental Protection Agency
on April 27, 1971, allowing California to enforce motor vehicle emission
regulations more stringent than Federal regulations.
California test procedures specify the exhaust emissions testing and
reporting requirements for manufacturers of vehicles for sale and registra-
tion in the State of California.
Two types of tests are required:
(a) a
short inspection test to be applied to every vehicle before sale, and
(b) a quality audit test according to the Official Exhaust Emission Test
Procedures for the model year in production.
Manufacturers of limited production vehicles are exempt from the pro-
visions of these procedures.
A vehicle which fails the inspection test may be repaired and, if
it passes a retest, may be sold without penalty.
Any manufacturer who
sells, offers for sale, or attempts to sell a new motor vehicle that
fails to meet the inspection standards shall be subject to a civil
penalty of five thousand dollars for each such action.
A.
Short Inspection Test
1.
App Ii cabiIi ty
The test procedures are applicable to all manufacturers of
gasoline powered light-duty motor vehicles having an engine
displacement greater than 50 cubic inches.
111-6
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The inspection test becomes applicable August 31, 1971, beginning
with the 1972 model year vehicles to be sold in California, and the
penalty provisions of this procedure become effective with the 1973
model year vehicles.
At least 25 percent of the vehicles of each engine
size produced during 1972 model year will be subject to the inspection
procedures.
These vehicles shall be randomly selected as far as
practical from representative equipment combinations (i.e., exhaust
control systems, transmissions, carburetor, and air conditioners) in
proportion to production for sale in California.
All vehicles for the 1973 model and subsequent years will be
subject to the inspection procedure.
2.
Emission Standards
Exhaust emission standards for the 1972-73 model year assembly-
line test are:
1.4 grams per mile hydro carbons,
19.0 grams per mile carbon monoxide,
3.2 grams per mile oxides of nitrogen.
3.
Inspection Test Procedures
The inspection test for the 1972 model year shall comprise one
hot 7-mode cycle as specified in the "California Exhaust Emission
Standards and Test Procedures for 1971 and Subsequent Model Gaso1ine-
Powered Motor Vehicles under 6,001 Pounds Gross Vehicle Weight."
Instrumentation equivalent to that specified in the "California
Exhaust Emission Standards and Test Procedures for 1971 and Subsequent
Model Gasoline-Powered Motor Vehicle under 6,001 Pounds Gross Vehicle
Weight" shall be used.
Preconditioning or warm-up of the engine shall
approach, as closely as practical, official procedure 6th cycle
III-7
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conditions.
Variations from the above procedure which produce equiva-
lent results may be authorized by the Executive Officer and reported
to the Board.
For 1973 and subsequent model years, the inspection
test procedure shall be the same as for 1972.
If a new exhaust con-
trol system is introduced in which the relationship between hot- and
cold-start emissions is markedly different from current systems,
alternative appropriate procedures may be approved by the Executive
Officer and reported to the Board.
B.
Quality Audit Test (Assembly-Line Testing)
1.
Applicability
This procedure is applicable, beginning July 1, 1971, to all
manufacturers of gasoline-powered, light-duty motor vehicles having
an engine displacement greater than 50 cubic inches.
Any vehicle
manufactured for sale in California in quantities of less than
1,000 units per year will be exempt from the quality audit test
procedure.
2.
Test Procedure
The sampling and analytical procedure shall be that described
in the Official California Exhaust Emission Test Procedure for the
model year in production, with the specific exceptions stated as
follows:
(a)
The evaporative emission control system may be disconnected
during the test.
(b)
The engine shall be adjusted to the manufacturer's speci-
fications for delivery to customers.
(c)
For the 1972 model year only, the Quality Audit tests may
be performed by the 7-mode,7-cycle Test Procedure or the
optional Constant Volume Sampling (CVS) procedure or a
combination thereof.
111-8
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3.
Vehicle Sample Selection
The number of vehicles in the sample shall be not less than
two percent of each engine displacement size.
They shall be equipped
with exhaust controls as for California and shall be representative
of at least 80 percent of each manufacturer's total California sales
of each engine-size category.
Vehicles shall be selected that are
equipped with exhaust control systems, transmissions, carburetors,
and air conditioners in proportion to production for California, and
shall be randomly selected as far as practical.
C.
Access for California Air Resources Board Personnel
Air Resources Board .personnel and mobile laboratories shall have access
to vehicle assembly plants or distribution facilities for the purpose of
vehicle selection, testing, and observation.
The frequency of access shall
be proportional among manufacturers in relation to California vehicle sales,
as far as practical.
Scheduling of access shall be arranged with the plant
or facility manager and shall not unreasonably disturb normal operations
[Ref. 5].
111-9
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VI.
EPA SURVEILLANCE
It is assumed that automobile manufacturers, both foreign and domestic,
will conduct their own quality control and assurance work to determine that
they are in compliance with emission standards.
EPA's staff will approve
the test methods and procedures, set standards, and monitor the assembly
lines by independently selected samples and tests in addition to auditing
test data from the manufacturer.
(In addition, for California automobiles
only, the California Air Resources Board will have access to vehicle
assembly plants or distribution facilities for the purpose of vehicle
selection, testing, and observation.)
Although surveillance might be achieved using mobile test vans,
which would visit final assembly and major unloading points of foreign
imports on a monthly basis, it is probable that the monitoring program
will require at least one full-time EPA representative at each major
assembly plant for the first year or so.
After procedures are implemented
and working properly, the num&er of field representatives may De reduced.
The total cost, including equipment and support, has been estimated at
approximately $5 million annually [Ref. 2].
EPA may assume another vital role in monitoring the assembly-line
testing--namely, making sure that accrued costs of testing are not
inflated when they are passed on to the purchaser of the automobile.
The modest increase in cost to the purchaser should be sufficient to
take care of the testing operation alone.
In connection with EPA's
overall objectives, it is important that these costs are not utilized
as an excuse for increases in automobile costs.
III-lO
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Since cost estimates are only estimates based on the best information
available, one objective of monitoring should be to provide better
cost figures and to maintain and abate the actual costs found to
accrue under the assembly-line testing program.
111-11
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VII.
COST ANALYSIS AND SU}~RY
Consumer cost of assembly-line testing of vehicles as a result of
California and Federal regulations, compulsory in 1972 and 1973
respectively, and associated EPA surveillance costs have been summarized
in Table 111-1 for the years through 1977.
The analysis and cost estimates are based upon available information
as of August 15, 1971.
The cost of assembly-line testing done voluntarily by auto
manufacturers prior to these compulsory dates and the cost of engine
certification testing are not included.
Domestic automobile and light-duty vehicle production plus net
automobile and light-duty vehicle imports have been projected for 1972
through 1977 [Ref. 6].
No testing costs have been included for trucks and buses (gasoline
or diesel) with gross vehicle weight over 6,000 pounds.
Beginning with the 1972 model year vehicles, California will require
assembly-line testing (quality audit test) on 2 percent of those vehicles
sold in California.
In addition, a short inspection test will be required
for 25 percent of the vehicles sold in California.
These requirements are
described in Section V.
For 1973 model year vehicles, California will
require 100 percent of the vehicles sold in California to have a short
inspection test.
The unit cost of this short inspection test has
been estimated at $40.
Compulsory Federal assembly-line testing will
include vehicles sold in California in 1973 and subsequent years.
California-bound vehicles represent between 7 and 8 percent
of the national total {Ref. 6].
111-12
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Table III-I.
ASSEMBLY-LINE TESTING AND ASSOCIATED COSTS
Domestic 1
Motor Vehicle-/ Assembly£/ California-~/
Production California!!/
Plus Net Line Inspection EPA Annual
Year 1m orts Testin Automobiles Test Surveillance Totals
1972 11,400,000 $ 2,500,00ol/ 835,000 $ 8,350,00oE-/ $ 5,000,0007../ $ 15,850,000
1973 11,600,000 34,800,000 850,000 34,000,000 5,000,000 73,800,000
1974 11,800,000 35,400,000 865,000 34,600,000 5,000,000 75,000,000
1975 12,100,000 36,300,000 880,000 35,200,000 5,000,000 76,500,000
1976 12,300,000 36,900,000 900,000 36,000,000 5,000,000 77,900,000
1977 12,600,000 37,800,000 920,000 36,800,,000 5,000,000 79,600,000
H
H
H
I Totals $183,700,000 $184,950,000 $30,000,000 $398,650,000
I-'
UJ
];./
2/
1/
4/
5/
6/
7/
1970 Ward's Automotive Yearbook (Autos and light-duty trucks).
Assume 3 percent of production at $100 per test--Avg. $3/car.
Required for California vehicles.
7.33 percent of National Production.
Hot Seven-Mode Cycle Test $40/car.
Twenty-five percent testing for 1972,
then 100 percent testing.
Provides startup time in advance of 1973.
-------
Federal compulsory assembly-line testing will begin with the 1973
model year.
The exhaust emission test was designed to determine mass
emissions of exhaust pollutants while simulating an average trip of 7.5
miles in an urban area from a cold start using a chassis dynamometer as
described in Section IV.
This test procedure is also specified for 1974
model year.
Beginning with 1975 model year, a new test procedure, also described
in Section IV, will involve a cold start followed by a hot start using a
dynamometer and similar exhaust sampling techniques.
This new test pro-
cedure is also specified for 1976 model year as set out by the July 2, 1971,
Federal Register.
It is assumed that this same test procedure will remain
in effect for 1977 model year.
The unit cost for both assembly-line testing procedures has been
assumed at $100.
This would make it appear that 100 percent testing
would not be feasible because the annual cost would exceed $1 billion
annually.
However, no EPA sampling guidelines have been issued for
these tests.
Although a variable sampling rate dependent upon the number of
vehicles meeting the emission standards may be feasible, a fixed 3
percent sampling rate has been assumed for all model cars through 1977
including those to be tested for California in 1972.
The cost of EPA surveillance has been estimated at $5 million per
year, assuming representatives at each major assembly plant rather than
the use of mobile test vans.
EPA surveillance is described in Section VI.
Table 111-1 shows all costs aggregated on an annual basis with totals
for the period of 1972 through 1977.
111-14
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VIII.
REFERENCES
1.
Report on Assembly Line Emission Testin~ of Motor Vehicles.
Bureau of Abatement and Control, April 8, 1970.
NAPCA,
2.
Motor Vehicle Assembly-Line Testing. Final Report prepared by
Research Triangle Institute for the National Air Pollution Control
Administration, July 1970.
3.
"Exhaust Emission Standards and Test Procedures." EPA.
Register, Part II, Volume 36, Number 128, July 2, 1971.
Federal
4.
EPA.
June 30, 1971.
Environmental News.
S.
California Assembly-Line Test Procedures. Adopted September 16,
1970, Amended February 17, 1971, California Air Resources Board.
6.
1970 Ward's Automotive Yearbook. .
III-IS
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