530R83004
COST IMPACT ON SMALL ENTITIES
OF PROPOSED CHANGES IN THE
DEFINITION OF SOLID WASTE AND
MANAGEMENT STANDARDS FOR WASTES
THAT ARE USED, REUSED,
RECYCLED OR RECLAIMED
Prepared for
OFFICE OF SOLID WASTE
ENVIRONMENTAL PROTECTION AGENCY
401 M STREET, S.W.
WASHINGTON, DC 20460
Prepared by
INDUSTRIAL ECONOMICS, INC,
30 BOYLSTON STREET
CAMBRIDGE, MA 02138
March 1983
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INTRODUCTION CHAPTER 1
The Environmental Protection Agency is proposing to amend
the definition of solid waste and management hazards for wastes
that are used, reused or reclaimed I/ under the Resource Conser-
vation and Recovery Act (RCRA), in order to target the hazardous
waste regulations more directly at those recycling activities
that have the potential to pose a substantial hazard to human
health or the environment. The proposed changes will reduce
regulatory requirements under RCRA for establishments engaged in
a number of recycling activities and will increase requirements
for establishments engaged in other such activities.
Industrial Economics Inc. (lEc) has prepared an analysis of
the cost impact of the proposed changes in the definition of
solid waste and management standards for wastes that are re-
cycled, the results of which are presented in a separate re-
port. 2/ The purpose of this report is to determine whether the
proposed changes in regulatory requirements will impose signifi-
cant costs on small entities.
I/These various types of activities are referred to generally as
"recycling" throughout this report.
2/Industrial Economics, Inc., Cost Impact Analysig for Proposed
Chances in the Definition of Solid Waste and Management Standards
for Wastes that are Used, Reused. Recycled or Reclaimed, prepared
for EPA Office of Solid Waste, March 1983.
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This analysis was performed to comply with the requirements
of the Regulatory Flexibility Act. This Act requires agencies to
prepare a Regulatory Flexibility Analysisl/ for any regulation
that will have "a significant economic impact on a substantial
number of small entities." This report assesses whether the
proposed changes in the definition of solid waste and management
standards for wastes that are recycled will impose significant
costs on small entities and hence whether any of the conditions
requiring a full Regulatory Flexibility Analysis apply. The
report concludes that the proposed changes are unlikely to have a
significant economic impact on a substantial number of small
entitles in any of the industry categories which may experience
increased costs.
The remainder of this report is organized as follows:
Chapter II describes the requirements of the
Regulatory Flexibility Act and the criteria for a
Regulatory Flexibility Analysis in more detail.
Chapter III describes the changes in requirements
associated with the proposed changes in the def-
inition of solid waste and management standards
for wastes that are recycled, and the costs asso-
ciated with those changes.
Chapter IV discusses the cost impacts of the
proposed changes on small entities potentially
experiencing increased costs.
2/A Regulatory Flexibility Analysis must assess economic
impacts on small entities, identify alternative regulatory
approaches that might reduce adverse impacts on small enti-
ties, and describe the reasons for the choice of the pro-
posed regulatory approach.
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REQUIREMENTS OF THE
REGULATORY FLEXIBILITY ACT CHAPTER 2
INTRODUCTION
This chapter describes the requirements of the Regulatory
Flexibility Act (hereafter referred to as "the Act") and the
criteria for determining whether a regulation will have a "signi-
ficant economic impact on a substantial number of small enti-
ties", and discusses the conditions under which a regulation is
likely to have such an impact.
REQUIREMENTS OF ACT
AND CRITERIA USED
For regulations under development which are subject to the
provisions of the Act!/, agencies must either
certify that there is not a significant impact on
a substantial number of small entities, or
prepare a Regulatory Flexibility Analysis (RFA)
and make a special effort to involve small
entities in developing the regulation.
I/Any rule or regulation that must undergo "notice and comment"
under Section 553(b) of the Administrative Procedure Act or any
other law
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Thus, agencies must make a preliminary evaluation of whether a
regulation will have a "significant impact on a substantial
number of small entities." EPA has developed guidelines which
establish criteria for making this determination.2/ Each of the
elements of these guidelines, and the approach taken in this
analysis to implement the guidelines, is discussed below.
Definition of "Small Entity"
The act defines "small entities" by reference to the Small
Business Administration's (SBA's) definitions of small business
issued under Section 3 of the Small Business Act.!/ Where no
specific definition is issued for an industry, the SBA uses a
generic cutoff of 250 employees. The Act provides for flexibili-
ty in the definition of small business, however, by allowing
agencies to propose alternative definitions (after opportunity
for notice and public comment and consultation with the SBA).
EPA has decided not to propose alternative definitions applicable
to all of its regulations, but instead will consider the appro-
priate definitions on a case-by-case basis.
The definitions specified in the Act were used for purposes
of this preliminary evaluation. These definitions are generally
so high that virtually all of the firms under consideration are
defined as "small". Where the firms in question fall under the
standards specified in the Act, they are assumed to be small.
However, this analysis also considers differential impacts on
size groups within the "small" category, in keeping with the
spirit of the Act.
%
Definition of "Substantial Number"
EPA has defined "substantial number" to mean more than 20
percent of the affected small entities. One or a few firms may
2/EPA, guidelines for Implementing the.Regulatory Flexibility
Act.
3/"Small entities" may include not-for-profit enterprises or
governmental jurisdictions as well as small businesses. No non-
profit organizations or governmental jurisdictions were found to
be affected by the proposed changes in the definition of solid
waste and management standards for wastes that are recycled.
Thus, only small businesses are considered in this analysis.
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be subject to substantial economic impacts, therefore, without
requiring the Agency to prepare a complete RFA. This analysis
attempts to identify if there are any extreme conditions under
which individual firms may be subject to significant impacts,
even where the average small firm is not seriously affected. In
addition, the analysis attempts to determine whether these ex-
treme conditions would apply for more than a few firms.
Definition of "Significant Economic Impact"
EPA has defined the following criteria for determining that
a significant economic impact occurs:
if annual compliance costsA/ increase total
production costs for relevant products or
processes by more than five percent, or
if compliance costs as a percent of sales for
small entities are ten percent or more higher than
for large entities, or
if capital costs for compliance are a significant
portion of capital available (considering internal
cash flow and external financing opportunities),
or
if closures of small entities are likely to
result.
Applying these criteria directly requires a substantial amount of
information on production costs, internal cash flow, financing
opportunities, and profits for small businesses, which is often
difficult or impossible to obtain. The required information is
especially difficult to obtain where the affected establishments
are in small subsets of industry categories as defined by
Standard Industrial Classifications (SICs), as is the case for
some of the establishments that experience cost increases under
the proposed changes. For purposes of this analysis, then, it
4/Annual compliance costs include- annualized capital, operating,
financing, reporting, testing, recordkeeping, legal, and consult-
ing costs.
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was necessary to make a judgment about whether any of the
criteria for a "significant economic impact" are likely to apply
by analyzing the level and nature of cost increases. The factors
considered in making these judgments are described in the next
section.
It was assumed in this analysis that small businesses sub-
ject to decreased requirements would not experience significant
economic impacts. Therefore, only those establishments that are
expected to experience increased regulatory requirements were
considered as potentially subject to significant economic im-
pacts.
CONDITIONS LEADING TO
"SIGNIFICANT IMPACTS"
Small entities may be significantly affected by regulations
either because the costs of compliance are large in absolute
terms or because small entities incur costs proportionately
greater than those incurred by large entities with which they
compete. Small entities will be subject to disproportionately
large compliance costs under one of two conditions.
First, if small entities are subject to more stringent
requirements or if the costs of meeting the same requirements are
higher for small entities, the absolute costs may be higher than
those incurred by larger entities.
Second, if compliance costs have substantial fixed compo-
nents costs which do not vary with the size of the facility or
with the volume of waste handled smaller entities will bear
larger relative costs than those incurred by larger entities,
which can spread those costs over a larger business base.
On the other hand, small entities are often exempt from
regulation or are subject to fewer requirements than large
entities. In the case of the hazardous waste management
regulations, generators who generate less than 1000 kg per month
of hazardous wastes or 1 kg per month of acutely hazardous wastes
are conditionally exempt from Subtitle C control.
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CHANGES IN REGULATORY REQUIREMENTS
AND ASSOCIATED CHANGES IN COSTS CHAPTER 3
The nature of the changes in requirements resulting from the
proposed changes in the definition of solid waste and management
standards for wastes that are recycled is discussed in detail in
the JRB reportl/ and in the Cost Impact Analysis which is a
companion to this report.2/ The latter report calculates the
average increase in costs experienced by establishments in four
industry categories that are potentially subject to increased
requirements as a result of the proposed changes. These are:
Contract Solvent Reclaimers: 100-150 establish-
ments subject to additional storage facility re-
quirements for non-listed solvents accepted for
reclamation (assumed not to accept solvents under
batch tolling agreements);
Paint and Allied Product Producers: 42 establish-
ments subject to increased requirements as genera-
tors and "short storers" (40 CFR 262.34) for non-
listed solvents being sent to off-site reclaimers;
I/JRB Associates, Impact on the Regulated Community of Possible
Changes in the Definition o_£ SoJ^id. Waste: Use. Reuse. Recycling f
Reclamation, February 1983.
^/Industrial Economics, Inc., Qp. cit.
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Secondary Lead Smelters: 60-80 establishments
subject to additional storage facility require-
ments associated with storage of spent lead-acid
batteries prior to cracking; and
Independent Battery Crackers: 20-50 establish-
ments also subject to additional storage facility
requirements associated with storage of spent
lead-acid batteries.
The Cost Impact Analysis concluded that none of these
establishments are likely to incur significant cost increases as
a result of the proposed changes. This conclusion was based on
estimated costs for the "average" establishment.
Exhibits III-l through III-8, which are taken from the Cost
Impact Analysis, present the costs associated with the generator,
"short storage", and storage facility requirements that are
subject to change. The nature of these requirements and the
associated costs are discussed for each type of requirement
below. The extent to which costs are likely to differ for large
and small entities is then considered.
DESCRIPTION OF REGULATORY
REQUIREMENTS
Generator Requirements
Generators who are regulated for an increased volume of
wastes will incur additional costs associated with manifest
preparation, container labelling, and reporting. Other require-
ments impose costs which are assumed to be fixed with respect to
the volume of waste handled (as shown in Exhibit III-l), includ-
ing the fixed costs of the manifest system and the costs of
various recordkeeping and reporting requirements. A substantial
portion of the costs associated with generator requirements are
one-time initial expenditures (for reviewing wastes to determine
whether they are hazardous and for establishing compliance pro-
cedures) . Therefore, only establishments which are regulated for
the first time as a result of the proposed changes will incur
significant cost increases, due to the initial requirements and
the fixed costs associated with recurring requirements.
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Storage Facility Requirements:
General
Establishments regulated as storage facilities are subject
to a number of administrative and operating requirements which
apply to all types of facilities. These requirements include
applying for permits, designing and documenting compliance pro-
cedures , personnel training, waste analysis, routine inspections,
and recordkeeping and reporting. In addition, all facilities
must obtain liability insurance, must close their sites properly
at the end of site life, and must provide assurance of financial
capability to close sites properly. The requirements for clo-
sure, and therefore the cost of providing financial assurance,
vary depending on the types of storage used.
As shown in Exhibit III-2, most of the costs applicable to
all storage facilities are fixed with respect to the quantity of
waste stored. These fixed costs will not be affected by the
proposed changes unless- facilities are newly-regulated. A sub-
stantial portion of the fixed costs are one-time initial costs.
Storage Facility Requirements:
Containers
Storage facilities using containers will be subject to in-
creased costs if the quantity of wastes stored increases. First,
unless the facility already has sufficient storage capacity which
meets the requirements of the hazardous waste management regula-
tions, it will have to provide for secondary containment for a
larger storage area. This requirement applies, however, only if
the facility is storing waste containing free liquids. In addi-
tion, the facility's closure costs will be higher, because a
larger number of containers will have to be emptied and recondi-
tioned and a larger volume of residue will have to be disposed.
Finally, because closure costs will increase, the costs of
providing financial assurance for those closure costs will also
increase. The costs of secondary containment and closure also
include fixed components which are assumed to be incurred by any
regulated storage facility, regardless of the quantity of waste.
These fixed costs will not be affected by the proposed changes
unless a facility is newly-regulated as a result of the changes.
The costs associated with these requirements are shown in Exhibit
III-3.
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Storage Facility Requirements:
Tanks
Storage facilities using tanks will also incur additional
costs if the volume of waste increases. Tanks which do not
currently meet the design standards will have to be recoated, if
the facility does not have sufficient capacity in tanks which
comply with the standards to handle additional quantities of
waste. In addition, facilities must perform periodic compre-
hensive inspections as well as routine weekly inspections. The
facility has two options for performing these period inspections.
If the tanks are inspected visually (rather than with an ultra-
sonic gauge), more or larger tanks will have to be emptied and
decontaminated prior to the inspection if the quantity of waste
increases. Finally, closure costs and the costs of financial
assurance for closure will increase. Costs specific to tank
storage are shown in Exhibit III-4.
Storage Facility Requirements:
Waste Piles _
Storage facilities using waste piles must construct a larger
impermeable base if they do not have sufficient area to store
additional quantities of wastes. These facilities will also be
subject to additional costs for closure and for providing finan-
cial assurance for closure if handling larger quantities of
wastes. These costs are presented in Exhibit III-5.
l'Short_Storaae" Requirements
Generators who store wastes for less than 90 days in tanks
or containers are subject to a reduced set of requirements under
the hazardous waste managements regulations. These requirements
are a subset of the requirements for storage facilities using
containers or tanks and are summarized in Exhibit III-6. All of
the costs borne by "short storers" are estimated as fixed costs.
These costs are in addition to the costs applicable to all gen-
erators, which are shown in Exhibit III-l.
DIFFERENCES IN COMPLIANCE COSTS
FOR LARGE AND SMALL ENTITIES
In most cases, the absolute costs incurred to meet the
regulatory requirements described above are the same for large
and small establishments. However, if small firms are farther
from complying with the hazardous waste management regulations to
begin with/ and hence must make larger expenditures to comply
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with the requirements, absolute costs will be higher for those
small firms. This might be the case, for example, if small firms
had to install additional secondary containment for containers or
had to recoat tanks to meet the requirements more often than did
large firms. Similarly, if fewer small firms already carry the
required liability insurance, they will face larger incremental
costs than will large firms. In the absence of any information
to the contrary, lEc assumed that small firms are as likely to be
in compliance with the various RCRA requirements under baseline
conditions as are large entities.
Small firms may bear higher absolute costs than large firms
to provide financial assurance for closure costs. In the Cost
Impact Analysis, a certain percentage of facilities were assumed
to use each of the available instruments for providing financial
assurance (trust funds, letters of credit, insurance policies,
and a financial test). Small firms will often not pass the
financial test, however, and may not be able to obtain insurance
policies or letters of credit. These facilities would therefore
have to rely on a trust fund, which is the most expensive mechan-
ism for providing financial assurance.
Other than the costs of financial assurance, there is
nothing intrinsic in the hazardous waste management requirements
or their associated costs which appears to impose higher absolute
costs on small firms. To take account of potential differences
in financial assurance costs, costs in this report are calculated
assuming that all small firms rely on trust funds to provide
financial assurance for closure, while large firms are assumed to
use a variety of less-expensive mechanisms as well as trust
funds.
Even if absolute costs do not differ for large and small
firms, relative costs may differ if compliance costs do not vary
with the size of the firm. Where costs are fixed with respect to
the volume of wastes (and hence presumably to the size of the
establishment as well), small firms will incur higher costs
relative to their sales or production.
The cost estimates presented in Exhibits III-1 through III-6
include substantial fixed costs, and therefore small firms incur-
ring these costs are potentially more seriously affected than
large firms subject to the same requirements.
In many of the cases discussed in this report, however,
firms will already have incurred these fixed costs because their
affected establishments are currently regulated for handling some
hazardous wastes. Where an establishment is regulated for the
first time, all of the initial costs associated with compliance
will be incurred, as well as the recurring costs which do not
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vary with volume. Some initial fixed costs will also be incurred
by establishments which are currently regulated for hazardous
wa-stes being treated or disposed on-site which become regulated
for wastes being sent off-site. In such cases, establishments
would have to incur the fixed costs of setting up a manifest
system and establishing off-site shipping procedures, but would
already be in compliance with other requirements. Only one of
the affected industry categories discussed in the next chapter
(paint and allied products) is expected to be newly-regulated as
a result of the proposed changes, however, and hence only estab-
lishments in that industry will incur additional fixed costs.
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Exhibit III-l
UNIT COSTS FOR GENERATOR REQUIREMENTS
(all ISS; before-tax)
Requirement
Obtain EPA ID Number1
Test for Characteristics
Compliance Review for Waste
Designations
Document Waste Inventory
Establish Off-site Shipping
Procedures5
Design Shipping System5
Manifest Preparation and
Container Labeling5
Manifest Signing, Handling,
Filing5
Exception Reports5
Report Storage
4
Biennial Report
Initial Costs
Fixed Variable
Annual Costs
Fixed
Variable
838.00/
non-listed waste
102.OO/waste 138.00
152.00
478.00
926.00
955.00
407.00
152.00
88.007
report
.22/MT'
.06/MT-
Included in storage facility and "short storage" unit costs only, to avoid
double-counting.
2
$4.40/shipment, assuming 20 MT per shipment.
$25.40/report, assumed to be incurred once every 20 shipments, assuming
20 MT per shipment.
The cost of completing the report is equal to the annual report cost
reported in ADL. This cost will be incurred every other year.
Applies only to generators shipping wastes off-site. Generators shipping
wastes to off-site facilities for recycling under non-batch tolling agree-
ments are exempt from manifest requirements. Where the costs reported by
ADL include both container labeling and manifest requirements, generators
who are exempt from the manifest requirements are assumed to incur only
half of the reported costs. In addition, spent lead-acid batteries being
sent for reclamation are also exempt from generator requirements.
Source: ADL, op. cit., Appendix B, updated to 1981 dollars using inflation
indices in Exhibit III-7.
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Exhibit IIX-2
UNIT COSTS FOR STORAGE FACILITIES: GENERAL REQUIREMENTS
(all ISS except where noted; before-tax)
Requirement
Obtain EPA ID No.1
Prepare Waste Analysis
Prepare Inspection Plan
Part A Permit
Part B Permit (FSS)5
Closure Plan
Systems Design
Regulation Review
Design Training Coursel
Prepare Contingency Plan1
Contingency Equipment
Training1
Maintain Training Records
Testing of Wastes -
On-Site3
Testing of Wastes -
Off-Site2*^ »8
Inspections1
Manifest Handling2.4'8
Incident Reporting
Biennial Report"
Liability Insurance'
Initial Costs
Capital Costs
Annual Costs
Fixed
44
1 7,763
130
5,041
8,373
1,902
1,515
597
14,726
1,890
Variable
Fixed
Variable
Fixed
Variable
12,000
5,850
179
4,420
1,040
940
407
141
51
1,500
3.25/MT
See attached for notes.
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Exhibit III-2
NOTES
Applies to "short storage" under 40CFR262.34 (see Exhibit III-6).
2
Applies only for wastes sent to off-site facilities.
Applies only for wastes managed at on-site facilities.
4
Does not apply to wastes recycled under non-batch tolling arrangements.
An estimate of the cost of preparing a Part B permit application was
obtained from Pope-Reid Associates, who developed the estimate in con-
nection with their current work on the costs of container and tank
requirements. Pope-Reid's estimates of the costs of specific parts of
the Part B application were summed, using the following assumptions:
seismic standard compliance is not required because only
new facilities must meet the standards and only existing
facilities are considered in this report;
where different options for compliance were costed by
Pope-Reid, lEc used a simple average of the costs of the
alternatives;
lEc assumed that half of the affeced facilities would
have to develop new information to evaluate the applica-
bility of flood plain requirements and that 10% of the
facilities are located in flood plains.
The cost of completing the report is equal to the annual report cost
reported in ADL. This cost will be incurred every other year.
EPA has promulgated requirements for liability insurance. Land-based
disposal facilities are required to obtain coverage for damages resulting
from non-sudden events, while storage facilities must obtain coverage
only for sudden events. Costs for the required coverage were obtained
from the Regulatory Impact Analysis of the Financial Assurance and Liability
Insurance Regulations, prepared by Putnam, Hayes & Bartlett, Inc., and
Industrial Economics, Inc. (11 September 1981). That report assumes that
three-fourths of facilities already have the required sudden event coverage
under normal commercial policies. That assumption is adopted here.
Does not apply to storage facilities which subsequently reclaim spent
lead-acid batteries.
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Exhibit III-3
UNIT COSTS FOR STORAGE FACILITIES: CONTAINERS
(before-tax)
Requirement Initial Capital Annual Closure
Fixed Variable Fixed Variable Fixed Variable Fixed Variable
Secondary Containment1 2360 0.11/MT
(includes runoff
control) (FSS)
Closure2 0.22/MT
Financial Assurance ~~. 033/MT
for Closure3
See attached for notes.
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Exhibit ni-3
NOTES
Secondary containment is required only for wastes containing free liquids.
Estimates of secondary containment costs for facilities with 100, 200
and 500 containers per facility were obtained from OSW personnel. These
costs were estimated as a function of facility lifetime capacity (con-
verted from numbers of 55 gal. containers per facility to metric tons per
facility using the conversion factors developed in Exhibit III-8) by fitting
a linear function to obtain the following cost function for secondary
containment:
cost = $2360 + $0.11/MT
Closure for container facilities requires removal of wastes and resi-
dues, decontaminating containers, and disposal of residues in approved
facilities. It is assumed that materials in containers are recycled
prior to closure, and therefore no costs for disposal of materials other
than residues are included in closure costs. The following closure costs
are calculated based on estimates provided by OSW personnel:
drum reconditioning $6.50/container (55 gal.)
transportation and $6.53/container (.125 x 55 gal. = 6.875 gal.
disposal of residue residue/container; $.50/gal. disposal +
$ .45/gal. transportation)
total closure costs = $13.03/container
Closure costs as a function of facility lifetime capacity (converted from
number of containers to metric tons using the conversion factors shown in
Exhibit III-8 are calculated as follows;
lifetime capacity = 55 gal./container x 12 times per year turnover
x 20 year lifetime = 220 gal./MT
= 60 MT per container
cost = $13.03/container -r 60 MT lifetime capacity per container
= $ .22/MT lifetime capacity
Facilities must provide financial assurance for the costs of closure
assuming the maximum anticipated inventory has to be removed at the
time of closure. For storage prior to recycling, removai of wastes is
not included as an incremental closure cost but financial assurance
must be demonstrated for both the incremental costs of closure and the
costs of removing and disposing of the stored materials in approved
facilities.
The amount for which financial assurance must be provided includes the
costs estimated for closure (note 2 above) plus an estimated $.95/gal.
or $52.25/container for disposal of materials (estimate obtained from
OSW personnel). This equals $.87 per MT of lifetime capacity, where
lifetime capacity is calculated as shown in note 2 above. Assuming that
all containers are full at the time of closure, the cost for which financial
assurance must be provided is therefore:
cost - $ .87/MT + .22/MT
- $1.09/MT lifetime capacity
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Exhibit III-3
NOTES
(con't)
The annual cost of providing financial assurance for this amount depends
on the instruments used to provide assurance (trust funds, financial tests,
insurance, letters of credit, or surety bonds).
In analyzing financial assurance costs for the Regulatory Impact Analysis
for the land disposal regulations, OSW assumed the following distri-
bution of facilities by type of instrument used:
50% financial test
18% trust fund
18% insurance
14% letters of credit and surety bonds
This distribution is also assumed for this cost analysis. Annual costs for
the individual instruments as a function of the amount of funds assured
were obtained from the Regulatory Impact Analysis of the Financial Assur-
ance and Liability Insurance Regulations, as follows:
Instrument 1931 Annual Cost (before tax)
financial test $78
trust fund $514 + .1424 x C
insurance $514 + .0142 x C
letters of credit .0174 x C
and surety bonds
where C equals the before-tax amount for which financial assurance
must be provided. Weighting the cost functions by the distribution of
facilities by instrument used provides the following weighted average
cost function for financial assurance:
annual cost = $224 + .0306 x C
Since C for container facilities is $1.09/MT, the annual cost of financial
assurance is:
cost - $224 + .0306 ($1.09/MT)
= $224 + $.033/MT
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Requirement
Exhibit III-A
UNIT COSTS FOR STORAGE FACILITIES: TANKS
(before-tax)
Initial
Capital
Annual
Closure
Fixed Variable Fixed Variable Fixed Variable Fixed Variable
Recoating (FSS)
(retrofit)
Inspections: (FSS)
Inspection Gauge
Decontamination
for Inspection
2
Closure
Financial Assurance for
Closure (ISS)4
6,470 .126/MT
1,150
310 .085/MT
243 .007/MT
620 .031/MT
See attached for notes.
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Exhibit III-4
NOTES
Comprehensive inspections may be performed without emptying tanks by using
an ultrasonic gauge (cost = $2300) or by emptying and decontaminating the
tank and inspecting the inside visually (see note 2 for cost of decontami-
nation) . Half of tank storage facilities are assumed to inspect with a
gauge and half by visual inspection. Periodic inspections are assumed to
be made once a year. Therefore, one-half of the facilities incur a capital
cost of $2300 for purchase of a gauge (or an average of $1150 for all faci-
lities) and one-half incur annual costs of $620 + .17/MT for decontaminating
tanks (or an average for all facilities of half that amount$310 + .085/MT).
The cost of the inspections themselves is included in general storage faci-
lity costs (Exhibit IIX-2).
Closure requires removing and disposing of materials and residues in
tanks and decontaminating the tanks. Since materials are removed
and recycled, no incremental closure cost for disposal of materials
was estimated. OSW's estimates of decontaminating costs per tank
are:
Tank Size Capital Cost/Tank
(gals)
10,000 $1,000
20,000 1,300
50,000 2,200
In order to develop a cost function for decontaminating tanks, lEc
calculated costs for various facility sizes assuming different tank
sizes and numbers of tanks. It was assumed that the maximum tank size
used for waste storage was 50,000 gallons based on conversations with
OSW personnel.
Number Size of Annual
Tanks Tanks Decontamination Capacity
(gals) Cost (MT)
2 10,000 $ 2,000 2,000
50,000. 4,400 25,500
5 50,000 11,000 63,750
10 50,000 22,000 127,500
25 50,000 55,000 318,750
A linear function was fit to costs and lifetime capacity (20 years x annual
capacity) to provide the following cost function for tank decontamination
at the time of closure:
coat » $620 + $.008/MT lifetime capacity
The same costs were also expressed as a function of annual capacity to
calculate the costs of decontamination for annual inspections (see note 1
above). The resulting cost function is:
cost = $620 + .17/MT annual capacity
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Exhibit III-4
NOTES
(con1t)
2
Estimates of costs for disposal of residues were also obtained from OSW
personnel, as follows:
.125 x tank capacity = amount of residue; cost of transport and
disposal of residues = $.95/gal.
Calculating costs for a 50,000 gal. tank (assuming 12,750 MT/annual capacity
per 50,000 gal. tank, from Exhib.it III-8)yields the following estimate for
residue disposal:
cost = (amount of residue/tank x cost of residue disposal) T lifetime
= (.125 x 50,000 gal. x ..9.5/gal.) T 255,000 MT/tank capacity
= ,023/MT per tank
The total cost of closure is therefore:
cost = $620 + $.031/MT
If tanks do not meet the design standards specified in Part 264, the
tanks must be replaced or recoated. For this analysis, it was assumed
that onethird of the storage tanks would have to be recoated to meet the
Part 264 standards. OSW personnel provided the following unit costs
for recoating tanks.
Tank Size
(gals)
10,000
20,000
50,000
Cost/Tank
$ 11,166
17,588
32,397
lEc calculated the following costs for different facility sizes, assuming
different numbers and sizes of tanks:
Number
Tanks
2
5
10
25
Size of
Tanks
(gals)
10,000
50,000
50,000
50,000
50,000
Recoating
Cost
$ 22,332
64,794
161,985
323,970
809,925
Annual
Capacity
(MT)
2,000
25,500
63,750
127,500
318,750
A linear function was fit to these costs and lifetime capacity to provide
the following cost function for recoating:
coat - $6470 + $0.126/MT
-------
Exhibit III-4
NOTES
(con1t)
As described in note 3 to Exhibit III-3 , financial assurance must be
provided for the maximum potential cost of closure, including removal
and disposal of materials stored in tanks at the time of closure.
For tanks, the costs for which assurance must be provided include
the closure costs calculated above plus the cost of removing and
disposing of materials at a cost of $ .95/gal. removed. Based on
the facility sizes used previously, and assuming that tanks are full
at the time of closure, the cost of materials disposed (expressed as
a function of lifetime capacity) is:
cost = (amount to be disposed/tank x cost of disposal) ^ lifetime capacity
= (50,000 gal. x .95/gal.) T 255,000 MT/tank
= .186/MT
The total amount for which financial assurance must be provided is
therefore:
cost = 620 + $.217/MT
Assumptions used to estimate the annual cost of providing financial
assurance are described in note 3 to Exhibit III-3 . The annual cost
developed in that note as a function of the amount for which assurance
must be provided (C) is $224 + .0306 x C. The annual cost of financial
assurance for tanks is therefore:
cost = $224 +
= $243 +
.0306 (620
.007/MT
.217/MT)
-------
Exhibit III-5
UNIT COST FOR STORAGE FACILITIES: WASTE PILES
(before-tax)
Requirement
Sturdy Base (FSS)
Groundwater Monitoring
2
Closure
3
Financial Assurance
Initial
Fixed Variable
2,140
Capital
Annual
Closure
Fixed Variable
17,168 .021/MT
15,000
Fixed Variable Fixed Variable
750
2,693 .027/MT
80,690 .249/MT
Storage facilities storing in waste piles have several options for complying with the land disposal
regulations. For this cost analysis, it was assumed that all facilities install the sturdy (impermeable)
base and that half inspect by moving the waste pile for visual inspection. No incremental costs are
assumed for inspection because it is assumed that the base will be inspected when wastes have been removed
for recycling. The other half of the facilities do not inspect the base visually and, therefore, must
conduct groundwater monitoring. Therefore, only half of the facilities will incur the groundwater monitoring
costs (initial costs of $4,280, capital costs of $30,000, and annual costs of $1,499).
Closure of waste piles requires excavation, transport and disposal of the contaminated base. No incremental
cost is assumed for disposal of materials in the waste pile, which are assumed to be recycled prior to closure.
Financial assurance must be provided for the cost of disposing of materials in the waste pile as well as for
the incremental closure costs estimated above. These disposal costs are $.625 per metric ton of lifetime
facility capacity. Therefore, financial assurance must be provided for a total of $80,690 plus $.874 per
metric ton. As described in note 3 to Exhibit III-3, the annual financial assurance costs are $224 + .0306 x C,
where C is the cost for which financial assurance must be provided. Therefore, the annual cost of financial
assurance for waste piles is:
cost = $224 + .0306 ($80,690 + .874/MT)
= $2,693 + .027/MT
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Requirement
Exhibit III-6
UNIT COSTS FOR "SHORT STORAGE" REQUIREMENTS
(all ISS; before tax)
Initial
Capital
Annual
Closure
Fixed Variable Fixed Variable Fixed Variable Fixed Variable
EPA ID Number
Design Training Course
Contingency Plan
Training
Training Records
Inspections
Contingency Equipment
44
14,726
1,890
5,850
179
940
12,000
Source: See Exhibits III-3, III-4 and III-5.
-------
Exhibit III-7
INFLATION INDICES
M&S Equipment
Cost Index^-
CE Plant
Labor Rates^
Cost Index Supervisory Technical Clerical
1979 599.4
1980 659.6
1981 721.3
238.7
261.2
308.4
(October)
27.50
39.80
29.00
37.60
9.00
13.25
"Source: Chemical Engineering.
>
"Source: JRB, Macro Profile: Cost Factors for Storage Facilities,
March 1982, p. 5-2 (for 1981) and ADL, Economic Impact
Analysis of RCRA Interim Status Standards, November 1981,
Vol. 2 Appendix B, p. B-2 (for 1979).
-------
Tanks
Exhibit III-8
CAPACITY CONVERSION FACTORS
FOR TANKS AND CONTAINERS
Size of Tanks
(gals)
10,000
30,000
50,000
Annual Capacity
(metric tons)
range
0-2000
2001-5500
5501-20,000
mid-point
1000
3750
12,750
Source: Arthur D. Little, Inc., Economic Impact Analysis
of RCRA Interim Status Standards, November 1981,
and OSW personnel.
Containers
No. of Containers
per Facility
50
100
200
500
Annual
Capacity^-
(gals)
33,000
66,000
132,000
330,000
Annual
Capacity2
(MT)
150
300
600
1500
Assuming 30 day turnover and 55 gallons/container capacity.
Assuming 10 Ibs/gal conversion factor; gals ^ 220 = MT.
-------
ANALYSIS OF COST IMPACTS
ON SMALL ENTITIES CHAPTER 4
INTRODUCTION
This chapter analyzes the cost impacts of the proposed
changes to the definition of solid waste and management standards
for wastes that are recycled for four industries which poten-
tially experience increased costs. For each industry group, the
nature of the affected activities and the affected establishments
are described, evidence on the economic characteristics of the
affected establishments is presented, and the cost impacts are
calculated for different establishment size categories.
While the SBA definitions of "small entity" apply to firms
rather than to establishments, this cost analysis is based on
costs per establishment throughout. Most of the hazardous waste
management regulations are applied at the establishment level
rather than at the firm level.I/ Therefore, costs may vary
I/The exception is the cost of obtaining liability insurance.
The required amount of coverage is established for each firm
rather than for each establishment. Therefore, a multi-estab-
lishment firm may incur lower costs per establishment than
single-establishment firms, unless the premiums charged by insur-
ance firms for the required coverage are proportional to the
number of establishments owned. This is the only cost which is
likely to exhibit economies with the number of establishments
owned. Because none of the establishments discussed in this
chapter are newly-regulated as storage facilities as a result of
the proposed changes, however, none will incur these liability
insurance costs as a result of these changes.
4-1
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for large and small establishments and cost differences for large
and small firms will depend on whether they own large or small
establishments. Small firms could incur higher costs than large
firms (1) if there are economies of scale at the establishment
level (that is, if compliance costs per ton of waste are higher
for small establishments than for large establishments), and (2)
if small firms typically own smaller establishments than large
firms do. This analysis focuses on the first condition: whether
small establishments incur significant cost increases: If small
establishments do not experience significant economic impacts as
a result of the proposed changes, then it is assumed" that small
firms even those owning small establishments will not
experience significant economic impacts.
SECONDARY LEAD SMELTERS
Description of Affected Activities
and Establishments .
Secondary lead smelters (SIC 33413) who crack spent lead-
acid batteries and recover lead will be subject to increased
requirements as storage facilities under the proposed changes.
These facilities are already subject to the hazardous waste
management regulations because other wastes associated with lead
smelting (e_.g.. emission control dust/sludge from secondary lead
smelting, sulfuric acid, etc.) are hazardous. However, they will
be subject to the storage facility requirements for additional
volumes of wastes because spent lead-acid batteries will be
regulated prior to the cracking operations. Battery crackers
(both secondary lead smelters and independent crackers) will not
be required to handle manifests for the spent batteries (because
the suppliers of spent lead-acid batteries are proposed to be
exempt from the hazardous waste management regulations) and will
not be required to meet the waste analysis requirements.
According to industry experts, some battery crackers do not
store batteries prior to cracking. These facilities move the
spent lead-acid batteries directly from' trucks to battery break-
ing equipment on.conveyors. Other facilities store these batter-
ies in trucks in parking lots for up to several days if the
supply of batteries exceeds the capacity of the breaking facil-
ity. Still other facilities may store spent lead-acid batteries
in piles or in containers prior to breaking. lEc was not able to
determine how many battery crackers operate continuously and
4-2
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therefore do not store batteries. Therefore, for purposes of
this analysis it was assumed that all secondary lead smelter
facilities do store batteries prior to breaking. Further, it was
assumed that facilities must expand or upgrade their storage
areas to comply with the hazardous waste management regulations
for battery storage, although trade association officials ex-
pressed the belief that most facilities would already be in
compliance with the design standards to the extent that they
store spent lead-acid batteries. Therefore, the cost impacts
estimated in this analysis are likely to be substantially over-
stated for some facilities.
JRB estimated that 60-80 secondary lead smelters crack spent
lead-acid batteries and hence will be subject to additional
requirements. This estimate was based on information provided by
in-house data and by the National Association of Recycling
Industries (NARI). An official of the Secondary Lead Smelters
Association estimated that there are 30-40 establishments whose
primary business is secondary lead smelting and who are cracking
batteries. In order to provide an upper-bound estimate of cost
increases resulting from the proposed changes, the larger esti-
mate provided by JRB was used in this analysis.
The SBA defines any firms with fewer than 250 employees as
small in SIC 3341. The 1977 Census of Manufacturers reported
that 98 percent of all SIC 3341 secondary non-ferrous smelting
establishments (449 fo 460) had 250 or fewer employees. There-
fore, any firm owning a single secondary lead smelting establish-
ment is also likely to be small by the SBA standard.
An official of the Secondary Lead Smelters Association
contacted by lEc provided the following size ranges for secondary
lead smelters, based on the amount of lead recovered per year:
Small 8,000 - 12,000 MT lead/year
Medium 15,000 - 30,000 MT lead/year
Large 30,000 - 60,000 or 70,000 MT lead/year
The same official stated that the degree of reliance on spent
batteries for lead varies, with the smaller facilities recovering
most of their lead (90 percent) from batteries and the larger
facilities recovering as little as 60 percent from batteries
(with most of the remainder recovered from battery manufacturing
scrap). Assuming that a battery yields 50 percent by weight in
lead and that the average battery weighs 30 pounds, the size
ranges provided above can be translated into size by number and
weight of batteries processed, as shown in Exhibit IV-1.
4-3
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A study performed in 1977 for EPA by Calspan provided the
following size distribution for 82 secondary lead smelters, based
on capacity expressed in metric tons of lead recovered per
Capacity
250- 1,000
1,000-10,000
10,000-30,000
30,000-50,000
not reported
Number of
Plants
15
20
16
1
30
Percent of 52
Plants Reporting Capacity
29%
38
31
2
82
100%
Calspan also estimated that the "typical" smelter recovers
approximately 20,000 MT/year of lead. While this typical
facility size is consistent with the distribution estimated in
Exhibit IV-1, Calspan 's data also include some much smaller
smelters. Therefore, a category for "very small" smelters was
added to the categories shown in Exhibit IV-1, based on an
assumed capacity (in metric tons of recovered lead) of 500
MT/year and assuming that all lead recovered at these facilities
is from spent lead-acid batteries. The size categories assumed
for this analysis (using the mid-points of the distributions in
Exhibit IV-1 and the additional "very small" category) are
therefore:
2/ Calspan Corp., Assessment of Industrial Hazardous Waste
Practices in the Metal Smelting and Refining Industry; Volume
II: Primary and Secondary Nonferrous Smelting and Refining.
April 1977, p. 263.
4-4
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J3atteries_Cracked/Year
Category
Very Sraalll/
Small
Medium
Large
Economic Characi-pri
Weight
(metric tons)
1,000
18fOOO
33,750
60,000
Number
(millions)
0.07
1.30
2.50
4.40
An official of the Secondary Lead Smelters Association
contacted by lEc provided the following average economic
characteristics of battery cracking by secondary smelters:
Paid for spent batteries
Cost of lead in spent
batteries (assuming 50% of
battery by weight is lead)
Production costs per pound
of recovered lead
Total cost per pound of
recovered lead
8 1/2 cents per pound
17 cents per pound
13 cents per pound
30 cents per pound
According to this official, the current market price for
recovered lead is 27 cents per pound. Hence, he stated that
secondary lead smelters are currently losing money, and four
members of his association have closed since the beginning of
1982. He attributed the poor economic condition of the industry
to the current recession.
Cost Impacts
As described above, secondary lead smelters cracking spent
lead-acid batteries will be subject to increased regulatory
requirements as storage facilities as a result of the proposed
I/Assumes 500 MT of lead recovered per year, all from spent lead-
acid batteries, or that 1000 MT of batteries by weight or 71,500
batteries are cracked (assuming that half of batteries by weight
are recoverable as lead and that the average battery weighs 30
Ibs.)
4-5
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changes in the definition of solid waste and management standards
for wastes that are recycled. The additional costs associated
with these requirements are derived from Exhibits III-2, III-3
and III-5. Two sets of cost estimates were derived from those
exhibits, as follows:
Eeouirement
Secondary Containment
(containers)
Sturdy Base
(waste piles)
Closure
(containers)
(waste piles)
Financial Assurance
(containers)
(waste piles)
TOTAL
(containers)
(waste piles)
Before-Tax
High Average
SO.ll/MT
021/MT
.22/MT
.249/MT
,155/MT .033/MT
,124/MT .027/MT
After-Tax Annualized4/
High Average
$0.004/MT
.001/MT
.004/MT
.005/MT
,077/MT ,016/MT
,062/MT ,013/MT
.085/MT .024/MT
.074/MT ,019/MT
The "high" case costs reflect the "worst case" assumption
that all small facilities will have to use trust funds to meet
the financial assurance requirements. The standard mix of trust
funds and other instruments (described in the notes to Exhibit
IIX-2) is assumed for the "average" cost case. In both cases, it
is assumed that all (large and small) facilities must install
secondary containment (for container storage) and a larger sturdy
base (for waste pile storage).
As described in the Cost Impact Analysis, some secondary
lead smelters will be subject to decreased storage facility
requirements associated with on-site reclamation of lead from
listed emission control dusts and decreased storage facility
requirements associated with reclamation of lead from non-listed
sludges from other sources. The Cost Impact Analysis concluded
4/Assuming a twenty year facility life, a 3% real rate of return,
and a 50% tax rate (federal and state).
4-6
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that a "typical" secondary lead smelter which is subject to
increased and decreased requirements for all affected activities
would achieve a net savings in compliance costs of $2,977 (after-
tax, annualized). While JRB 'estimates that virtually all
secondary lead smelters will be subject to reduced requirements
for both activities described above, any facilities which recover
lead only from spent lead-acid batteries will not experience
these cost savings.
Facilities which experience no off-setting cost savings and
which must rely on trust funds to provide financial assurance for
closure will be the most adversely affected by the proposed
changes. Since smaller facilities are more likely than larger
facilities to rely solely on spent lead-acid batteries as a
source of lead and to use trust funds, smaller facilities could
be placed at a competitive disadvantage as a result of the pro-
posed changes.
To consider differences in costs for larger and smaller
facilities, taking into account all of the proposed changes
affecting secondary smelters, lEc calculated cost impacts in two
ways.
Exhibit IV-2 shows cost impacts resulting solely from the
added requirements for storage of spent lead-acid batteries.
Assuming that total production costs equal 30 cents per pound of
recovered lead, the cost increases calculated in that exhibit
would increase production costs by less than 0.01 to less than
0.03 percent. Even using the "high cost" assumptions, cost
increases for small facilities are less than 0.03 percent of
total costs..
Similarly, assuming sales revenues of 27 cents per pound of
recovered lead, the estimated costs are less than 0.03 and 0.01
percent of revenues for small and large facilities respectively.
Exhibit IV-3 calculates cost impacts resulting from all of
the changes affecting secondary lead smelters. These cost
impacts were calculated assuming that all sources of lead, other
than spent lead-acid batteries, are subject to reduced
requirements that is, that the only other sources are emission
control dusts and non-listed sludges. To the extent that
facilities reclaim lead from other sources which are not affected
by the proposed changes, the affect of this assumption is to
overstate the difference in cost impacts for large and small
facilities.
Onder the "high cost" assumptions used in Exhibit IV-2, the
"very small" size category experiences slight increases in costs,
while facilities in all other size categories experience net
4-7
-------
decreases in compliance costs. Because the degree of reliance on
batteries is assumed to be greater for the smaller facilities,
the estimated net savings increase with the size of facility.
The estimated cost increases and savings are minor when compared
with estimated revenues per metric ton of recovered lead, how-
ever. Thusf although small facilities may experience greater
cost increases (or smaller savings) than large facilities under
the "high cost" conditions, the small differences in compliance
costs are unlikely to affect the competitive position of small
facilities.
lEc was not able to compare required capital expenditures
with available capital. However, the required initial capital
expenditures for facilities in the "very small" size category
represent only five percent of the annualized after-tax cost
increases. These one-time capital expenditures are not likely to
pose a burden for capital availability.
As noted above, secondary level smelters are currently re-
ported to be losing money on battery cracking and lead smelting.
If current economic conditions continue, some of these smelters
might go out of business. Assuming that the market for lead
recovers (or that the price secondary lead smelters must pay for
batteries decreases), however, the costs resulting from the pro-
posed changes will not cause a significant economic impact for
small secondary lead smelters. While some secondary lead
smelters may cease operations, these closures would be attributa-
ble to general economic conditions and not to the effects of the
proposed changes. The cost increases resulting from the proposed
changes are simply too small to cause an otherwise-viable
secondary lead smelter to close, based on the estimated economic
characteristics used in this analysis.
In summary, the cost increases resulting from the proposed
changes may be somewhat higher (or net savings lower) for small
facilities than for large facilities, because of differences in
the raw materials used. However, the cost increases experienced
by small facilities are unlikely to have a significant economic
impact on small facilities according to any of the criteria
established in the EPA Guidelines.
INDEPENDENT BATTERY CRACKERS
Description of Affected Activities
and Establishments
Independent battery crackers perform essentially the same
battery cracking activities as do secondary lead smelters, but
they ship the recovered lead elsewhere for smelting and refining.
4-8
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The changes in requirements for independent battery crackers are
the same as for secondary lead smelters.
u ,official of the Independent Battery Breakers Association
described the operations of his members much the same as the
description of secondary lead smelters' activities above. He
stated that many facilities used to break batteries with
unmechanized techniques and with few protective measures.
However, OSHA requirements and EPA air and water standards have
required most independent battery crackers to change their
operating methods. Many use automated methods , do not store
batteries prior to cracking (but instead unload batteries
directly from incoming trucks to the breaking equipment) , or
store only for short periods, often inside buildings. This
official stated that storage is typically done in concrete bins
which would comply with the hazardous waste management regulation
design standards.
lEc was not able to obtain financial data or data on size
distribution for independent battery crackers. An official of
the Independent Battery Breakers Association informed EPA that
the largest firm processes approximately 25,000 batteries per day
and the average facility processes 3,500 batteries per day.
Assuming 260 operating days per year, the largest and average
producers would handle 6.5 million and 0.9 million batteries per
year, respectively. The largest producer is larger than the
"large" size category assumed for secondary lead smelters in the
previous section, but the average producer is quite small even
compared with the "small" category of secondary level smelters.
It may be, then that a larger proportion of independent battery
crackers are in the smaller size categories than are secondary
lead smelters, but lEc was not able to obtain any additional
information on sizes to confirm this.
Economic Characteristic^
lEc was also not able to obtain data on the financial
characteristics of independent battery crackers. Because
independent battery crackers and secondary lead smelters compete.
directly in battery breaking activities, it is likely that the
typical economic characteristics reported in the previous section
for secondary lead smelters apply to independent battery breakers
as well.
Cost Impacts
The increased requirements for independent battery breakers,
and the costs associated with those requirements, are the same as
4-9
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those for secondary lead smelters cracking batteries. Therefore,
the cost impacts calculated in Exhibit IV-2 are likely to be
representative for independent battery crackers as well.
The official of the Independent Battery Breakers Association
contacted by lEc confirmed that the costs associated with the
proposed changes in requirements are not likely to be
significant. He stated that the major difficulty faced by
independent battery crackers is competing with integrated
facilities for a limited supply of spent batteries. Since both
groups are subject to identical requirements for their battery
cracking activities, and since the added costs for both are small
in absolute terms, it is unlikely that independent battery
crackers will suffer adverse economic impacts as a result of the
proposed changes.
SOLVENT RECLAIMERS
Description of Affected Activities
and Establishments
Contract solvent reclaimers will be subject to additional
requirements as storage facilities for non-listed solvents
accepted for reclamation, unless those solvents are handled under
batch tolling agreements. At the same time, solvent reclaimers
will no longer be subject to requirements for listed spent
solvents accepted under batch tolling agreements.
As described in the Cost Impact Analysis, the preliminary
results of a survey conducted by the National Association of
Solvent Recyclers indicate that on the average 80 percent of
solvents accepted by the respondents are handled under batch
tolling arrangements. In the Cost Impact Analysis, this result
was assumed to apply only for 50 solvent reclaimers who are
members of the Association. These facilities are expected to
experience net savings as a result of the proposed changes. An
additional 150 reclaimers were assumed not to operate under batch
tolling agreements and hence to be subject to requirements for
all listed and (as a result of the proposed changes) non-listed
solvents accepted. These facilities experience net increases in
cost.
To provide an estimate of the maximum cost impact on small
establishments, this report calculates costs only for the in-
creased requirements associated with non-listed solvents,
assuming no exemptions for batch tolling. It is also assumed
that all affected facilities are currently regulated under the
hazardous waste management regulations. Since it is estimated
that a large percentage of all industrial solvents used are
4-10
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listed solvents, it is unlikely that any contract reclaimer is
accepting only (previously-unregulated) non-listed solvents.
lEc was able to obtain only limited data on the size distri-
bution of solvent reclaimers. An official of the National Asso-
ciation of Solvent Recyclers reported that the facilities which
had responded to their survey ranged in size from 200,000 gals.
of annual solvent processing capacity to 12 million gals, per
year. This range is equivalent to 726 to 43,500 metric tons of
solvent per year, assuming 8 Ibs. per gal. and 2205 Ibs. per
metric ton.
In addition, a report prepared for EPA by WAPORA, Inc. in
1975 reported the following size distribution for contract
solvent reclaimers:5/
Number of Reclaimers
Capacity Accepting Halogenated Accepting All Types
(MT per year) Hydrocarbons Only of Solvents
Less than 730 30 - 38 11 - 13
730 - 3648 0 13-16
3648 and over 0 16-33
Based on this information, lEc chose the following range of
facility sizes for analysis:
Capacity
Size Category (MT/year)
very small 350
small 700
medium 2000
large 4000
5/WAPORA, Inc., Assessment of Industrial Hazardous
Practices. Paint and Allied Products Industry. Contract Solvent
Reclaiming Operations. and Factory Application of Coatings. pre-
pared for EPA Office of Solid Waste, 1975. Capacity figures
converted from liters to metric tons by lEc, assuming 0.96 kg/1.
4-11
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Economic Characteristics
lEc was not able to obtain financial data for contract
solvent reclaimers. However, based on estimates that approxi-
mately 70 percent of the solvent volume sent to a reclaimer can
be reclaimed and that reclaimed solvents sell for 20 percent less
than virgin solvents,&/ and assuming an average price of $3.00
per gallon of virgin solvent, lEc calculated sales revenues for
the facility sizes listed above. These estimates are presented
along with estimated cost impacts in Exhibit IV-4.
Cost Impacts
As described above, contract solvent reclaimers will be
subject to increased requirements as storage facilities for non-
listed solvents accepted for recycling, other than those solvents
accepted under batch tolling agreements. The additional costs
associated with the increased requirements, derived from Exhibits
III-2, III-3, and III-4, are:
Requirement
Secondary Containment
(containers)
Recoating (tanks)
Inspections (tanks)
Closure
(containers)
(tanks)
Financial Assurance
(containers)
(tanks)
Testing of Wastes
Before-Tax
High Average
SO.ll/MT
.126/MT
.085/MT
.22/MT
,031/MT
,155/MT .033/MT
.031/MT .007/MT
3.25/MT
After-Tax
Annualized?/
High Average
$ .004/MT
.005/MT
.042/MT
.004/MT
.001/MT
.077/MT ,016/MT
.016/MT .003/MT
1.625/MT
Newsletter (Technomic Publishing Co., Westport,
CT.) , April 1981.
7/Assuming a twenty year site life, a 3% real rate of return, and
a 50% tax rate (federal and state) .
4-12
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To provide an estimate of the maximum added costs, it is
assumed that all facilities using containers must provide
secondary containment for a storage area sufficient to store the
additional volume of solvents and that facilities storing in
tanks must recoat all tanks used for non-listed solvents. In
addition, it was assumed that "very small" and "small" facilities
must use trust funds to provide financial assurance (the "high"
estimate of costs), while larger facilities use the less-costly
distribution of instruments assumed in the Cost Impact Analysis
(the "average" estimate of costs). Finally, it was assumed that
none of the 150 facilities accept non-listed solvents under batch
tolling agreements.
The costs listed above were applied for the range of facil-
ity sizes estimated above and are shown in Exhibit IV-4. It was
assumed that the affected non-listed solvents represent 10 per-
cent of total capacity at each facility size, since listed
solvents account for most of all industrial solvents used. It
was also assumed that half of the affected facilities store in
containers and half in tanks.
The calculations presented in Exhibit IV-4 show that the
added costs associated with the increased requirements represent
less than 0.05 percent of estimated revenues in all size cate-
gories. Even if only smaller facilities were subject to the
increased requirements, while larger facilities were exempt be-
cause they use batch tolling agreements, the small added costs
would be unlikely to affect the competitive position of the
smaller facilities.
lEc was not able to compare capital expenditures with
available capital, but the required initial capital expenditures
represent only 0.2 to 0.3 percent of the annualized, after-tax
additional costs for container and tank storage, respectively.
These one-time capital expenditures are not likely to pose a
burden for capital availability.
PAINT AND ALLIED PRODUCTS
Description of Affected Activities
and Establishments
Some paint and allied product producers will be newly-
regulated as generators and "short storers" because they send
non-listed solvents to off-site reclaimers. These establishments
would be exempt from the requirements to the extent that they
contract for reclaiming under batch tolling agreements, however.
In addition, establishments now .regulated because they send
4-13
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listed solvents off-site for recycling will no longer be regu-
lated for solvents reclaimed under batch tolling agreements.
JRB estimated that 56 paint establishments would be
regulated because they send non-listed solvents off-site for
recycling, before taking into account the batch tolling
exemption. lEc assumed conservatively that only 25 percent of
these establishments would be exempt from additional requirements
by virtue of batch tolling agreements/ and therefore that 42
establishments are potentially newly-regulated as a result of the
proposed changes.
An official of the National Paint and Coatings Association
informed lEc that most paint producers are currently regulated as
generators under the hazardous waste management regulations be-
cause a number of the wastes generated by these establishments
are hazardous (usually because of their ignitability). Hence, it
is likely that most, if not all, of the 42 establishments will be
regulated for an increased volume of waste and will not be newly-
regulated. The exception would be establishments now exempt as
small volume generators who exceed the small generator cut-off as
a result of the proposed changes. Some establishments that are
currently regulated for on-site activities may also be subject
for the first time to manifest and shipping requirements for
solvents sent off-site. To provide a "worst case" estimate of
cost impacts, lEc assumed that all 42 establishments would be
newly-regulated for all categories of requirements.
The 1977 Census of Manufacturers provides the distribution
of Paint and Allied Product establishments (SIC 2851) by size of
establishment (see Exhibit IV-5) . That exhibit also provides
information on the economic characteristics of establishments in
each size category, again taken from the 1977 Census.
Cost Impacts
Paint producers who are newly-regulated as generators and
"short storers" will incur a number of initial costs to establish
compliance procedures, as well as recurring costs to comply with
shipping and reporting requirements. All of the costs shown in
Exhibits III-l and III-6 will be incurred by newly-regulated
establishments. The total includes fixed costs of $5576 'plus
$0.14 per metric ton of waste (after-tax, annualized).
In the Cost Impact Analysis, the average paint establishment
storing in containers was assumed to send 154 metric tons of non-
listed solvents to off-site reclaimers per year. The average
assumed for establishments storing in tanks was 506 metric tons
per year. Assuming that 37 of the 42 establishments store in
4-14
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containers and 5 in tanks, a weighted average volume of 196
metric tons per establishment was calculated. In the absence of
information on generation rates by establishment size category,
lEc assumed that all establishments send the average volume site
reclaimers. The effect of this assumption is to overstate costs
for small establishments and understate costs for large
establishments.
Assuming an affected volume of 196 metric tons, newly-
regulated establishments are subject to cost increases of $5603
after-tax, annualized ($5576 + .14 x 196). Exhibit IV-6 compares
these costs with the average value of shipments and the average
cost of materials per establishment for each establishment size
category.
Because the added costs incurred by generators and "short
storers" are estimated as fixed with respect to the volume of
waste handled, the relative cost burden is greater for small
establishments than for large establishments. As shown in Exhi-
bit IV-6, very small establishments (1-4 employees) may be sub-
ject to additional costs as high as 3.3 percent of the value of
shipments. All other size categories experience costs increases
of less than one percent of the value of shipments. The cost
increases experienced by the smallest size category represent 5.6
percent of the average cost of materials per establishment.
Since cost of materials represents only a portion of total
production costs, the added costs for this category are expected
to fall below the "five percent of production costs" criterion
for a "significant economic impact."
While the costs experienced by the smallest establishments
are not significant in absolute terms, these establishments do
incur larger relative costs than do larger establishments. Be-
cause of the highly conservative assumptions used in this
analysis, however, IEC believes that it is unlikely that more
than a few establishments will incur the higher relative costs.
The assumptions used in the analysis (that solvents are not being
reclaimed under batch tolling agreements and that the affected
establishments are not currently regulated) are quite conserva-
tive in light of evidence that most paint producers are in fact
currently regulated and that a large percentage of recycled
solvents are handled under batch tolling agreements. Therefore,
while very small establishments characterized by those worst-case
assumptions may experience relatively large cost increases com-
pared with larger establishments, it is not likely that there
will be a substantial number of such establishments. lEc there-
fore concluded that the additional requirements imposed on paint
producers as a result of the proposed changes will not cause
significant economic impacts on a substantial number of small
entities.
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Exhibit IV-1
SIZE CATEGORIES FOR SECONDARY LEAD SMELTERS
Small Medium Large
Amount of Lead Recovered 8,000-12,000 15,000-30,000 30,000-70,000
(metric tons/year)
Estimated Percent of Lead 90% 75% 60%
from Spent Lead Acid Batteries
Amount of Lead Recovered 7,200-10,800 11,250-22,500 18,000-42,000
from Batteries
(metric tons/year)
Weight of Batteries 14,400-21,600 22,500-45,000 36,000-84,000
Cracked
(metric tons/year;
assuming that lead repre-
sents half of the weight
of the battery)
Number of Batteries 1.1-1.6 1.6-3.3 2.6-6.2
Cracked
(millions/year,
assuming 30 Ibs
per battery)
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Exhibit IV-2
COST IMPACT ON SECONDARY LEAD SMELTERS :
INCREASED REQUIREMENTS FOR BATTERY STORAGE
Size of Facility
Very Small Small Medium Large
Quantity of Materials 1,000 18,000 33,750 60,000
Stored (Batteries,
in MT/year)
Added Costs due to
Proposed Change 1 $84 $1512 $776 $1380
Estimated Total $331 $5,958 $11,171 $19,860
Production Costs
(Thousand $)
Added Costs as a < .03% < .03% <.01% < .01%
Percent of Production
Costs
Assuming 70 smelters store wastes in containers and 10 in waste
piles, and that the distribution of facilities by type of storage
used is the same in all size categories. All "very small" and "small1
facilities are assumed to use trust funds for financial assurance
(and therefore incur the "high" costs described in the text). A
mix of the trust fund and lower cost alternatives is assumed for
"medium" and "large" facilities (and thus "average" costs) as des-
cribed in the text.
2
30c/lb. of recovered lead x % Ib. of recovered lead per Ib. of
battery stored x 2205 Ibs./MT - $331/MT of batteries stored.
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Exhibit IV-3
COST IMPACT ON SECONDARY LEAD SMELTERS:
ALL PROPOSED CHANGES
Size of Facility
Amount of Lead Recovered
(MT/year)
Amount of Lead Recovered
from Non-Battery Sources
(MT/year; based on assumptions
in Exhibit IV-1)
Quantity of Stored Wastes
Other than Batteries
(Subject to Reduced
Requirements)^
Increase in Costs for Storage
of Spent Lead-Acid Batteries
(from Exhibit IV-2)
Decrease in Costs Associated
with Non-Battery Wastes^
Net Increase (Decrease) in
Compliance Costs
Increase (Decrease) in Costs
as a Percent of Revenues^
Very
Small
500
0
Small
10,000
1,000
Medium
22,500
5,625
Large
50,000
20,000
$84
$84
<.03%
4,000 22,500 80,000
$1,512
$776 $1,380
0 ($1,892) ($9,540) ($33,920)
($380) ($8,764) ($32,540)
(.06%)
(.10%)
Assuming that one-fourth of non-battery wastes is recoverable lead, on
the average.
"As described in the Cost Impact Analysis, facilities reclaiming lead on-
site from listed emission control dusts are subject to reduced generator
and storage requirements. These dusts are typically stored in waste
piles. Hence, facilities experience after-tax annualized cost savings of
$.018-$.067 per metric ton of dusts stored due to reduced closure and
financial assurance costs, depending on assumptions about the instruments
used for financial assurance. Facilities reclaiming lead off-site from
non-listed sludges are subject to reduced storage facility requirements.
These facilities avoid closure and financial assurance costs of $.018-
$.067 per metric ton stored plus $1.625 per metric ton (after-tax
annualized) for waste analysis requirements. Costs are calculated assum-
ing that three-quarters of the non-battery raw materials are emission
control dusts and one-quarter are sludges. Further, as was assumed in
the Cost Impact Analysis, approximately 40 percent of the affected facili-
ties are assumed to store sludges in containers and 60 percent in waste
piles.
Assuming 27c/lb. of recovered lead and 2205 Ibs./MT, or revenues of $595
per metric ton of recovered lead.
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Exhibit IV-4
COST IMPACTS FOR SOLVENT RECLAIMERS
Size Category
Very Small Small Medium Large
Estimated Volume of
Affected Waste
(10% of total capacity)
35MT
70MT
200MT 400MT
Estimated Additional
Costs
$59
$118 $332
$664
Estimated Revenues'
(Thousands)
$162
$324
$926
$1,852
Additional Costs as a
Percent of Estimated
Revenues
<.05%
<.05% <.05%
<.05%
Assuming that half of the reclaimers store in containers and
half store in tanks in each size category.
$2.40/gal. of reclaimed solvent ($3.00/gal. for virgin solvent.
with a 20 percent discount)-
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Exhibit IV-5
ECONOMIC CHARACTERISTICS OF
PAINT AND ALLIED PRODUCT ESTABLISHMENTS
Number of
Employees per
Establishment
Number of
Establishments
Value
Added per
Establishment
Cost of
Materials
per Establishment
Value of
Shipments
per Establishment
1 -
5 -
10 -
20 -
50 -
100 -
250 -
500 -
4
9
19
49
99
249
499
999
408
247
271
330
178
107
29
9
66.9
250.2
518.4
1,201.8
2,889.9
7,267.3
20,069.0
35,688.9
\ Y J. 1 IW V-*-JtLfcl<-t -J /
100.2
392.3
783.4
1,725.5
4,156.2
9,950.5
25,137.9
43,999.0
\y j.j.iwut3utAUw>/
169.4
639.3
1,292.6
2,905.8
7,023.0
17,170.1
44,831.0
78,444.4
Total
1,579
Source: 1977 Census of Manufacturers
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Exhibit IV-6
COST IMPACTS FOR
PAINT AWD ALLIED PRODUCT PRODUCERS
Added Costs as a Percent of
Number of Employees Average Value Average Cose
per Establishment o£ Shipments of Materials
1 -
5 -
10 -
20 -
50 -
100 -
250 -
500 -
4
9
19
49
99
249
499
999
3.3% 5
0.9 1
0.4 0
0.2 0
<0.1 0
<0. 1 <0
<0. 1 <0
<0.1 <0
.6%
.4
.7
.3
.1
.1
.1
.1
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