INITIAL ANALYSES OF THE ECONOMIC IMPACT
OF
ANTICIPATED WATER POLLUTION CONTROL COSTS
UPON SELECTED INDUSTRIES
A Summary of Recent Studies
Prepared by,.
The Economic Analysis Division
Environmental Protection Agency
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15466
The Economic Analysis Division of the Environmental
Protection Agency has recently completed a series of studies
designed to provide an initial analysis of the economic impact
of anticipated water pollution control costs upon selected
industries. The industry studies completed to date include:
Beet Sugar, Beverages, Cane Sugar, Coal Mining, Dairies,
Fertilizers, Fiberglass, Inorganic Chemicals, Meat Products,
Motor Vehicles, Plastics, and Textiles.
This paper summarizes the findings of those studies.
Individual summaries of the industry studies are attached.
A tabular summary of key economic impact figures is presented
in Exhibit I.
This series of economic impact studies was initiated in
the summer of 1972 to provide an initial economic impact
analysis of the industrial effluent limitation guidance being
prepared at that time by the EPA Office of Permit Programs.
Since that time, the Water Pollution Control Act
Amendments of 1972 have become law. These direct EPA to
establish effluent limitation guidelines for each industry
requiring "best practicable control technology" by 1977,
and "best available control technology" by 1983. Although
the effluent limitation guidance prepared in 1972 was designed
to anticipate "best practicable control technology" as much as
possible, these studies do not provide a complete analysis of
the economic impact of the new legislation.
They should be regarded instead as preliminary analyses
of the effluent guidance developed for the Refuse Act Permit
Program, guidance which is likely to approximate, in most cases,
but not be identical to the effluent guidelines required by the
new water bill to be proposed in the fall of 1973.
Methodology
Analyzing the economic impacts of pollution controls upon
specific industry segments involves first an estimation of the
costs that are likely to be incurred by industry; and then an
analysis of how these costs would affect prices, profits, pro-
duction, employment and the other economic variables that are
critical to an industry.
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Costs for these studies were developed by the EPA
Economic Analysis Division on the basis of treatment tech-
nologies assumed necessary to meet the EPA Office of Permit
Programs' effluent limitation guidance. A summary of these
assumed technologies and costs is presented in Exhibit II.
Costs are related to the reduction in biochemical oxygen demand
for those industries in which this is a significant pollutant.
The analyses of the impact of these costs upon each
industry were performed on contract by consulting firms with
recognized industrial expertise. A list of these contractors
is provided in Exhibit III. Because of the limitations of
time (approximately two months) and information available,
neither phase (i.e., cost estimates or economic impact analysis)
of these studies was able to be performed with complete accuracy
and rigor. Sufficient resources were available, however, to
provide a good indication of the kinds of impacts to be
expected, and to highlight possible problem areas.
Summary of Findings
These studies, like the previous inter-Agency economic
impact studies? found that no industry studied would be
seriously threatened by the requirements of pollution control.
Price increases could be expected in most industries, but these
would generally be in the order of %% per year for five years.
Some plant closings could be expected in those industries
characterized by the existence of small, marginal plants com-
peting against much larger, and much more efficient plants.
In no industry, however, were these closings expected to have
a significant impact upon productive capacity. Similarly, the
direct unemployment resulting from these plant closings could
be expected to present economic difficulties for some localities,
but was not judged to be a significant part of total industry
employment. In no instance were the increased costs associated
with water pollution control requirements found to have any
significant impact upon international trade.
* See The Economic Impact of Pollution Control, Government
Printing Office, Washington, D.C., 1972
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- 3 -
Prices
Price increases associated with the costs of water pollution
control were anticipated to be in the order of l%-3% for most
industries. Over the five year period, this would average
out to approximately ij%-%% per year.
For some industries, and especially for some products,
the anticipated price increases were much higher. Some table
wines, for example, were anticipated to undergo a price increase
of as much as 22% or about 4% per year for five years at the
retail level. Relatively high price increases were also antici-
pated in the food processing industries for cane sugar and
cottage cheese. The only other price increases approaching
10% were anticipated for certain products in the inorganic
chemicals industry, most notably chlor-alkali.
For two industries, beet sugar and wool fiberglass, no
price increases are anticipated, because major portions of
these industries have already installed the necessary pollution
control equipment. In both cases, this involves 100% recycling
of process waters.
Plant Closings
In reviewing the findings of the recent studies on plant
closings and unemployment, it is important to keep in mind that
these economic impacts are based on the effluent guidance
developed for the Refuse Act Permit Program. Since this effluent
guidance was developed to apply primarily to major dischargers,
it may not represent "best practicable control technology" for
certain segments of the industries studied. In developing the
effluent guidelines required by the new water bill, industries
will be segmented on the basis of such factors as age, size,
and technology; and separate effluent guidelines developed for
each segment. Hence, it is possible that the economic impact
of the new water bill effluent guidelines will be even less
severe than that of Refuse Act Permit Program guidance.
Plant closings are expected in 8 of the 12 industries
studied, with a possibility of one plant closing in a ninth
industry. For these industries, the closing of a maximum of
approximately 1,100 processing plants and 3,000 small coal
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mines were judged to be possible as a result of water pollution
control requirements. This compares to an estimated total of
25,100 plants and 5,600 coal mines currently existing
in the industries studied.
The figure of 3,000 coal mines represents the total of
those small, 3-4 employee, mines estimated to be located in
particularly difficult pollution control areas. These mines
are so small that it is difficult to estimate how they will
actually be affected by pollution control regulations. Because
their capital investment is minimal and their financial position
is probably marginal, however, it was judged that these mines
would be forced to close if any significant investment in pol-
lution control equipment were required.
The other two industries in which more than 100 plant
closings were judged to be possible were Dairies and Meat
Products. Both of these industries are characterized by the
existence of a number of small, marginal operations which must
compete with much larger, more efficient plants. Because the
profits of the small producers were estimated to be low, it
was anticipated that many would not be able to make the required
pollution control expenditures.
Plant closings were anticipated also in the cane sugar
industry. The small, older plants in this industry were found
to be in a situation similar to those in the other food process-
ing industries discussed above. Another dimension was added
in this case, however, for some mills were found to be so
situated - on the edge of a cliff, for example - that pollution
control was judged to be inordinately expensive.
Few problems were indicated for most producers in the
Fertilizer, Inorganic Chemicals, Plastics and Textiles Industries,
However, it was anticipated that some producers of products
which present special pollution control problems would be forced
to close. Generally, the products involved were also those for
which the market prospects are poor.
In four industries - Beet Sugar, Beverages, Fiberglass and
Motor Vehicles - no plant closings were anticipated. This was
due to a variety of factors. In the case of Beet Sugar and
Fiberglass, most plants in the industry have already installed
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complete recycling systems for their process waters. Only
one plant in the Beet Sugar industry was judged to require
additional expenditures sufficient to list this plant as
a possible closure.
The Beverage industry presents a special case in that
for the two products studied, wine and distilled spirits, no
plant closings were anticipated even though the anticipated
costs were very large in some cases, and the industry contains
a number of small, old plants. This was because the market
for the products was judged to be so strong currently that
all plants could remain profitable even in the face of these
difficulties.
The direct costs of water pollution control in the Motor
Vehicle industry were estimated to be so low ($10-$13 per
vehicle) that they were judged to be insignificant.
Unemployment and Community Impacts
As a result of these plant closings a maximum possible
direct unemployment of approximately 100,000 was anticipated.
This compares with an estimated total employment in the industries
studied of 2,400,000. Almost all of the direct unemployment
was anticipated to occur in four industries - Cane Sugar,
Coal Mining, Dairies, and Meat Products.
Half of the total possible unemployment accounted for by
the Cane Sugar industry. In this industry, plant closings were
expected to have an impact not only upon the plant employees,
but also upon all of the farm workers involved in producing
the raw sugar cane. These workers comprise almost all of the
industry. Three states - Hawaii, Louisiana, and principally
Puerto Rico - contain almost all of the plants which might be
forced to close.
Community impacts were also judged to be possible in the
two other food processing activities in which plant closings
were anticipated, Dairies and Meat Products. However, in neither
of these cases was the secondary unemployment of farm workers
expected to result. The regions that might be affected by this
unemployment were identified as the Great Lakes in the case of
dairies; and the Midwest, California, Pennsylvania, and New
York in the case of Meat Products.
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Because of the possible closing of small coal mines, a
maximum unemployment of 11,000 was estimated, principally in
the states of Kentucky, Pennsylvania, Virginia, and West
Virginia.
Community impacts were judged to be possible only in one
other industry, textiles. The state principally affected would
be North Carolina.
International Trade Impact
In none of the industries studied was it anticipated that
the costs of pollution control requirements would have any
significant adverse impact upon the balance of international
trade. In general, this was because the price increases
resulting from pollution control activities would be incon-
sequential, and/or that the amount of international trade in
those industries is itself insignificant.
In two industries where high pollution control costs
might be expected to result in increased imports, beverages
(wines) and cane sugar, other circumstances mitigated against
such increases. Although the price of some wines is expected
to rise significantly, the demand for this product was judged
to be growing so rapidly that the consumption of neither
domestic nor imported wines would be significantly affected.
In the case of cane sugar prices and imports are controlled
by Congress in such a way that no significant increase in
imports was judged likely.
For one industry, Coal Mining, it was proposed that price
increases might actually have a positive effect upon the balance
of trade. This was because the demand for U.S. export coal
is such that the volume of exports was not expected to decrease
even though prices would rise. The total dollar volume of
exports, therefore, would be expected to increase.
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EXHIBIT I
INITIAL ANALYSES OF THE ECONOMIC IMPACT OF
VTATER POLLUTION CONTROL COSTS PIT' SELECTED INDUSTRIES
SUMMARY
Industry
Beet Sugar
Beverages
Cane Sugar
Coal Mining
Dairies
Fertilizers
Fiberglass
Inorganic Chemicals
Meat Products
Motor Vehicles
Plastics
Textiles
TOTAL - All
Industries Studies
Possible
Price
Increases
-
1% - 22%
10% - 18%
1% - 3%
2% - 10%
3% - 6%
-
3% - 9%
1% - 2%
0.3%
"l Oj/
1%
-
Maximum
Plant
Closings
1
-
55
3,000
420
40
-
47
440
-
40
70
1
4,100
Estimated
Total Number
of Plants !
53
509
123
5,600
5,000
315
34
720
10,700
180 3
400
7,100
31,000
Maximum
Unemployment
45
-
50,000
11,000
15,000
770
-
5,000
18,000
-
400
700
100,000
Approximate
Total
Emolovment ^
13,250
26,000
160,000
140,000 ,
200,000
22,000
17,500
115,000 2
225,000
320,000 3
SO 000
1,050,000
2,400,000
Possible
Community
Imoacts
-
-
La., Hawaii,
Puerto Rico
Ky. , Pa., Va.
W.Va.
Great Lakes
-
.
-
Midwest, Cal
Pa., N.Y.
-
North Carolina
-
Unless otherwise noted estimates are taken from the studies themselves, and include only those industry segments
covered in the studies.
Derived from 1967 census of manufacturers. Equivalent to 37% of total industry employment in SIC 281, Industrial
Cr.emicals, where 37% is equal to the portion of total value added accounted for by the ten chemicals studied.
Taken from 1967 census of manufacturers - includes all plants and employees for SIC 371, Motor Vehicles.
Derived from 1967 census of manufacturers, equivalent to 400/771 of total employment in SIC 282, Plastics and
Synthetics, where 771 equals the total number of plants in that industry, and 400 equals the estimated number
of plants ..in the industry segment studied.
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EXHIBIT II
CPST/KFFICTEUCY ESTIMATES
INDUSTRIAL WATER POLLUTION CONTROL
IDySTRY
Spgar
ra^cc
Sugar
Mining
ies
i-lizcrs
rglass
ganic
mljcals
Ittets
-cles
.ics
lies
Assumed
Treatment
Process
Lagoon &
Recycle
Activated
Sludge
Lagoons or
Activated
Sludge
Lagoons &
Neutrali-
zation
Activated
Sludge
Neutraliza-
tion, Act.
Sludge,
Piltr. ,Amm.
Stripping
Filtration
Flocculation
Recycle
Neutraliza-
tion, Lagoons,
Chemical
Precip.
Activated
Sludge
Neutrali-
zation,
Lagoons,
Chemical
Precip.
Oil Separ-
ation,
Neutrali-
zation &
Activated
Sludge
Act Sludge
& Chemical
Precip.
BOD CONCENTRATION
Influent
(mq/1)
400-500
1000-1300
600-700
N/A
1200-
10,000
N/A
N/A
N/A
2000-
3000
N/A
0-4100
350-550
Effluent
(mq/1)
0
30
20-30
N/A
30
N/A
N/A
N/A
30
N/A
20-30
28-44
Assumed
Percent
Removal
100%
97%-98%
95%~97%
N/A
979^-99%
N/A
N/A
N/A
905^-99%
N/A
90%- 99%
87%-94%
UNIT TREATMENT COSTS
Ccipital
($/.lb BOD/dnv)
$500-$!, 050
$195-$445
$12-$80
N/A
$585-$2,335
N/A
N/A
N/A
$30- $700
N/A
$30- $10, 000
$150- $375
Annual
($/lh BOD/d.ay)
$3- $10
$45-160
$5-$32
N/A
$160-$685
N/A
N/A
N/A
$7-$92
N/A
$12-$775
$50-$115
Projected
Price
Increase-
-
l%-22%
10%- 15%
l%-3%
2%-10%
3%-7%
-
3^-9%
l%-2%
0.3%
1%
1%
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EXHIBIT III
LIST OF CONTRACTORS
Industry Studied
Beet Sugar
Beverages
Cane Sugar
Coal Mining
Dairies
Fertilizers
Fiberglass
Inorganic Chemicals
Meat Products
Motor Vehicles
Contractor
Development Planning and
Research Associates
Manhattan, Kansas
Booz-Allen Public Administration
Services, Inc.
Washington, D.C.
Economic Research Service
U.S. Department of Agriculture
Washington, D.C.
Arthur D. Little, Inc.
Cambridge, Massachusetts
Economic Research Service
U.S. Department of Agriculture
Washington, D.C.
Development Planning and
Research Associates
Manhattan, Kansas
Arthur D. Little, Inc.
Cambridge, Massachusetts
Booz-Allen Public Administration
Services, Inc.
Washington, D.C.
Development Planning and
Research Associates
Manhattan, Kansas
Booz-Allen Public Administration
Services, Inc.
Washington, D.C.
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Exhibit III - Page 2
Industry Studied
Plastics
Textiles
Contractor
Arthur D. Little, Inc.
Cambridge, Massachusetts
Booz-Allen Public Administration
Services, Inc.
Washington, D.C.
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INDUSTRY |SUMMARIES - Page 1
BEET SUGAR
The majority of the beet sugar industry seems to be in
compliance with proposed water pollution guidance. The cost
of that compliance has affected the profitability of the
industry and indications are that the added cost of possible
future requirements could place additional pressure on the
industry, resulting in significant restructuring of ownership,
but only one possible plant closing.
Estimates of past expenditures for compliance with water
pollution guidelines are in the range of $18 to $20 million.
An estimated additional $3.0 million investment is needed by
the industry is to be in total compliance with the proposed
guidance. The cost for total industry compliance with possible
future requirements (zero discharge and control of air and
solid waste) have been estimated as high as $44 million for
investment, with a $6.5 million increase in annual cost.
No immediate price changes are expected as a result of
water pollution controls. The prices for sugar produced from
sugar beets are in effect regulated by the U.S. Department of
Agriculture. Any price increases that occur as a result of
past or future pollution control cost will take place only as
the result of policy decisions by the Secretary of Agriculture.
The price increase that would be needed to affect the cost of
possible future pollution requirements (water, air and solid
waste) has been estimated at about 3%.
Five plant closings have occurred in the last four years
but it is felt in each case that pollution control requirements
were not the major considerations in the shut down decision.
There is only one existing plant that might close due to pro-
posed water pollution regulations.
The generally low profitability of the beet sugar industry
combined with recent expenditures for water pollution control
has led several large companies (representing about 15 plants
out of a total of 53 for the industry) to seriously consider
selling out to producer on gfocer co-ops. The intent of the
co-ops has been to buy the plants, at highly discounted values,
in order to maintain a market outlet for their crops. The cost
of future pollution control requirements could be expected to
accelerate this restructuring of ownership so that subsequent
impacts of control cost would fall more directly on the growers.
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INDUSTRY SUMMARIES - Page 2
Total production in the beet sugar industry has been
stable over the last few years in spite of five plant closings.
Any future closings would probably not affect total production
since sugar demand is relatively stable and production levels
are ultimately controlled by the Secretary of Agriculture.
Employment effects due to pollution control requirements are
not expected to be significant. Only one potential plant closing
has been postulated. The employment in this plant averages
about 45 permanent and up to 200 seasonal.
Since import quotas are controlled, the ratio of imported
to domestic sugar is expected to remain unchanged. Thus, there
v/ould be no appreciable balance of trade effects from pollution
control requirements in this industry.
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INDUSTRY SUMMARIES - Page 3
BEVERAGES
Two segments of the beverage industry were analyzed:
wines and distilled spirits.
WINES
The cost of water pollution control in the wine industry
is expected to result in noticable price increases; however,
no significant effects are expected insofar as total consump-
tion, plant closings or balance of trade are concerned.
Total annual cost increase for the wine industry for
water pollution control have been estimated at $1.20 to $1.95 per
gallon, or approximately $90 million in total for the nation.
There is a great deal of uncertainty in this estimate due to
lack of accurate data on water usage and due to incomplete
data on existing pollution control practices.
The cost of control in this industry are expected to
result in price increases to the consumer ranging from 3.3%
to 22% on table wines, 1.3% to 5.3% on brandies and 4.8% to
20% on distilled wines. The wide range of estimated price
increases is due to the differences in winery sizes and in
treatment alternatives available.
No plant closings are expected as a result of pollution
control costs. It is expected that a high degree of price
inelasticity will allow full recovery of cost through price
increases. Traditionally high profit margins would allow
most facilities to continue operations even if full cost
recovery did not occur. Some small winsries may have dif-
ficulty in raising needed capital. This would make them vul-
nverable to acquisition by larger firms, but shut downs would
he unlikely.
Pollution control cost are not expected to affect the
balance of trade in the wine industry. The California market
is well protected from European imports by transportation cost.
The New York market affords some protection on this basis. The
role of imports is expected to increase, especially on the east
cost, but for reasons other than pollution control, e.g., lim-
ited U.S. capacity and rapidly growing demand.
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INDUSTRY SUMMARIES - Page 4
Thermal pollution and odor were not addressed under this
study. They could result in additional cost under future
regulations. Rising land cost in certain parts of California
are also placing pressure on some wineries to relocate.
DISTILLED SPIRITS
The cost of water pollution control are expected to have
no noticable impacts on the distilled spirits industry insofar
as price increases, plant closings, or balance of trade are
concerned.
Total annual cost increases for the industry have been
estimated at $0.06 to $0.39 per proof gallon, or approximately
$3 to $12 million nationally. The uncertainty in the estimates
is due mainly to lack of accurate data on existing waste treat-
ment facilities.
A maximum retail price increase of 1% has been estimated.
This represents full recovery of cost. Due to high profit
margins and stiff foreign competition in certain product lines
these cost in some cases may instead be absorbed rather than
recovered.
No plant closings are expected as a result of pollution
control requirements. Over the last few years the industry
trend has been toward elimination of small facilities. This
consolidation has been mostly for reasons of marketing, pro-
duction efficiencies, and excess capacity rather than high
pollution control cost.
The cost of water pollution control are not expected to
affect the balance of trade for distilled spirits. The maximum
expected price increase is less than 1.0%. Only in the case
of bourbon is foreign competition considered serious and in
that case pollution control cost could be absorbed internally
if necessary to prevent losses to imports.
The impact of pollution control cost on rum manufacturing
has not been addressed in this study. It is felt that the
waste treatment problems for rum (concentrated mostly in Puerto
Rico) are significantly different than for the rest of the dis-
tilled spirits industry, and that the impact of control costs
could be quite different.
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INDUSTRY SUMMARIES - Page 5
CAME SUGAR
While the impact of water pollution control cost on the
total cane sugar industry capacity and balance of trade is not
expected to be severe, there are certain segments which may
have difficulty dealing with those costs.
Total industry cost increases on an annual basis have been
estimated between $2.0 and $8.9 million for refineries and
$11.7 and $14.8 million for mills. These costs average approx-
imately 30 for refineries/ and 25£ for mills per hundred pounds
of product. The uncertainty in these estimates stems mainly
from lack of accurate data on existing controls and uncertainty
about the required technology for refineries.
Assuming total recovery of pollution control costs, price
increases must be expected as high as 18% of the wholesale level.
However, it is not expected that full cost recovery would occur.
Ultimately, control of price increases of the wholesale level on
raw material cost lies with Congress and the Department of
Agriculture.
Approximately 30 small mills and refineries in the mainland
U.S. have been identified as potential closings due to pollution
control cost. In addition, approximately 5 small mills in
Hawaii, and all 20 of the mills and refineries in Puerto Rico
are expected to have difficulties.
The maximum industry capacity expected to have serious
trouble meeting pollution control requirements has been
estimated at 25%. Even at this level, however, it is not
expected that any long term shortages would occur. The maximum
employment impact has been estimated at 1200 for refinery workers,
6000 for mill workers and 44000 for farm workers.
The regions most likely to experience plant closings and
employment impacts are Louisiana, Hawaii and Puerto Rico. The
bulk of the potential unemployment impact derives from the
Puerto Rican sector where approximately 2800 mill and refinery
workers and 32000 farm workers are employed^
Imports of sugar are tightly controlled by the Congress
through the Department of Agriculture. Any potential balance
of trade impact resulting from production losses in the main-
land or in Puerto Rico and Hawaii could be compensated for by
policies on quotas and acreage allotments. Thus, no balance
of trade impact are expected as a result of pollution control costs,
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INDUSTRY SUMMARIES - Page 6
COAL MINING
The cost of water pollution control in the coal mining
industry are not expected to seriously affect the medium to
large operations. However, it is anticipated that for a large
number of small operations (less than 50,000 tons/yr) the cost
could prove to be prohibitive to continued operations.
While accurate cost information has been difficult to
generate because of inadequate flow information, estimates of
total industry cost for water pollution control range from $16
to $78 million per year. Based on 1970 production levels, this
amounts to about $0.03 - $0.13 per ton of coal. The cost are
expected to vary considerably within all size groups due to
variability in volume and ph of water flows.
The cost estimates given above represent an increase in
total production cost of 0.5%-2.6%. It is felt that these
cost will be passed on to the consumer with the large producers
setting the lead on actual price increases.
There are an estimated 3,000 small mines (less than
50,000 tone/yr) located in areas that are considered subject
to problems of acid mine drainage. Not all of these mines
are expected to incur significant control cost since in some
cases the volume of discharge might be quite low. However,
it is felt that most of them would incur some cost and that
they would have difficulty in abosorbing these costs or in
passing them on to consumers.
The total production represented by these small mines is
not significant in terms of the total production capacity of
the industry. The employment represented by small mines is
more significant, however, especially in certain counties.
Total employment in small mines that are considered subject
to high control cost is estimated at 11,000.
It is felt that the Appalachia and Central regions will
be most affected by the closing of small mines. In the states
of Kentucky, Pennsylvania, Virginia and West Virginia, eleven
counties have been identified where the cost of control are
expected to be significant and where a high percentage of the
population (1.0%-3.5%) is employed in.small mines. Seven other
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INDUSTRY SUMMARIES - Page 7
counties have been identified v/here the number of small mines
is significant but where the percent of the population employed
in small mines is less than 1.0%.
No significant impact on the balance of trade is
anticipated as a result of pollution control co,st in the coal
mining industry. The major product in the case of trade is
metallurgical coal which is higher priced than normal coal
and in which the U.S. is already in a strong competitive posi-
tion.
Several other regulations may add to the cost of coal
production. These include regulations on air pollution, strip-
mining and health and safety. The cost on health and safety
regulations alone have been estimated from $1.91 to $2.15
per ton. These additional costs were not considered in this
study.
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INDUSTRY SUMMARIES - Page 8
DAIRIES
While the impact of pollution control costs on this
industry is not expected to be significant in terms of prices,
balance of trade, and total industry capacity; it is expected
that in some product groups the cost of controls will tend to
accelerate the existing trends of consolidation and speciali-
zation.
Increases in total annual costs for the total industry
to meet the proposed water effluent guidance by 1977 have been
estimated at 0.1£ per gallon of fluid milk, 0.15£ to 2.0C per
pound of butter, 0.1£ to 1.0£ per pound of cheese, and from
1.0£ to 10.0£ per pound of cottage cheese. The total annual
cost of producing dairy products for the nation is expected to
rise approximately $110 million.
Price increases due to pollution control cost are
expected in all product groups to be less than 2%, except for
cottage cheese where increases could be as high as 10%. Prices
for non-fat clry rr.ilk fould decrease dus to an increased siinplv
resulting from efforts to recover the cost of treating whey.
Approximately 367 small (less than $250,000 assets) and
59 medium ($250,000 to $5,000,000 assets) plants in the butter,
cheese, and condensed and evaporated product groups have been
classified as vulnerable to closing because of water pollution
control costs. These represent the maximum number of closings
that could be expected. For these two product groupings the
vulnerable plants represent about 14% and 6%, respectively, of
total industry capacity.
A maximum potential unemployment resulting from pollution
controls has been estimated at 15,000 for the dairy industry.
These are from the processing sectors only. No milk suppliers
are expected to be affected adversely.
These impacts (possible closings and unemployment) are
expected to be scattered throughout the U.S. with the highest
concentration in the Great Lakes region - especially in small
rural communities.
No significant balance of trade effecgs are expected to
result from pollution control costs in this industry.
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INDUSTRY SUMMARIES - Page 9
.FERTILIZER INDUSTRY
The cost of water pollution control for the fertilizer
industry is expected to be significant, due to a general lack
of past abatement efforts. Although these costs may cause a
number of plant closings within specific segments of the industry,
the overall impact on the fertilizer industry in terms of pro-
duction curtailment, regional and community effects, balance
of trade, and employment will be minor.
Pollution control investment costs associated with the
proposed EPA guidance ranges from $2 per annual ton capacity
for a 1,000,000 TYP ammonia plant to $30 per annual ton capacity
for a 50,000 TYP phosphoric acid plant. Comparative total
capital investment figures for these plants range from $22 per
ton for ammonia to $140 per ton for phosphoric acid.
Due to a relatively low price elasticity within the
fertilizer industry, it is expected that the above costs will
be passed on in the form of price increases. Assuming nitric,
...-.7 f". .-.--' .-, -.-.-? .O. . .- . ,- . ."U ,-, -~- •! .--. -..-.! .'i I-.-. 1-^,-, -! x , -!- /-, -^~, ,^ f~! 1 -. 4 , , ~~. -_..-. .1 .. ^..'
the following price increases are expected:
% Increase $/Ton
Ammonia 2.9 0.95
Ammonium Nitrate 5.0 2.05
Urea 4.4 2.50
Diammonium Phosphate 5.7 4.00
Ammonium sulfate is excluded. Because 30-40% of ammonium
sulfate is produced at by-product, the increased costs of pro-
ducing the primary product are not expected to be reflected in
the price of ammonium sulfate. Due to the competitive nature
of this segment, excepting unique local advantages, U.S. pro-
ducers will probably absorb any cost increases.
It is estimated that, due to these increased costs, as
many as 40 plants may be expected to close. For the most part,
these closures represent the small, inefficient plants maintain-
ing only a minor portion of the industry's productive capacity.
These plant closings range from 2% of productive capacity and
3% of manpower for ammonium sulfate, to 15% of production and
29% of manpower for ammonium nitrate. Aggregate unemployment
for these segments may total 770 workers representing 0.6% of
all workers employed in these segments of the industry.
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INDUSTRY SUMMARIES - Page 10
Dislocations caused by these closings are expected to be
spread evenly over the seven fertilizer regions, with resulting
minor impact. Texas will be the hardest hit with projected
unemployed at 132; however, new plant construction is expected
to negate any effect of plant closings in this area. With little
concentration of expected plant closings, no severe community
impacts are anticipated.
Although the U.S. is a major exporter of fertilizers,
expected price increases and plant closings are not expected
to affect the U.S. balance of trade. This is because the expected
price increases (3%-5%) over a five year period are insignificant
when compared with the normally wide variations experienced in
foreign fertilizer prices from year to year.
This study did not undertake an analysis of the remaining
major products, which include TSP, NSP mixed fertilizers and
nitrogen solutions from ammonium nitrate and urea.
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INDUSTRY SUMMARIES - Page 11
FIBERGLASS
The impact of the costs of water pollution abatement
upon the fiberglass industry must be broken into two sub-
categories: Wool Glass Fiber and Textile Fiberglass.
WoolGlass Fiber
The costs of water pollution abatement in a given wool
fiberglass plant will vary from 0.20 to 1.20 per pound of glass
wool produced. Incremental costs as a percentage of the selling
price will average 0.65% to 3.8%. The capital investment related
to water pollution abatement represents 1% to 3.8% of total plant
investment. In all cases the impact of these costs is most
severe on the smaller plants.
It is felt that these cost increases will not result in
price increases, but will be absorbed by the producers. The
effects on profitability of the industry will be minimal, both
because of the low cost increases expected, and because of
anticipated increases in operating efficiency.
Most plants currently maintain a 10% to 15% return on
investment, which will not be effected by these cost. There
are no plants currently operating which have been judged to
be earning only a marginal return on investment of 5% or less.
In addition, present demands are fully utilizing the capacity
of the wool glass industry and future growth projections are
optimistic. Thus, no plant closings or production curtailment
are expected in this industry because of water pollution control
costs.
Because no price increases are anticipated in this industry,
water pollution control costs will have no effect upon the
balance of international trade.
Textile Fiberglass
Water pollution control costs are axpected to vary from
0.120 to 0.210 per pound of product for the largest plant and
from 1.40 to 3.10 per pound for the smallest plant in this
industry. Associated investment costs are expected to heavily
impact plants with capacities of less than five million pounds
per year, but will have little effect on the larger plants.
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'NDU3TRY SUMMARIES - Page 12
The average annual cost increase in pollution control
for this industry is estimated to be 1.5% of selling price.
This increase would probably not be passed on in the form of
price increases by the larger firm. Hence, most smaller firms
will probably have to absorb their much larger -costs (3%-6%).
Only one plant of less than five million annual pounds
capacity exists. It is felt that only this plant will be
severely impacted by pollution abatement costs, precipitating
a decision to close. If this one plant were to close, less than
25 employees v/ould be effected in the New York metropolitan
area. Thus, no community or egional impacts are expected to
result from water pollution control costs in this industry.
Because no price increases are anticipated in this
industry, there should be no impact upon the balance of
international trade.
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INDUSTRY SUMMARIES - Page 13
INORGANIC CHEMICALS
The study of pollution abatement costs in the inorganic
chemical industry covered 10 major chemicals - aluminum chloride,
aluminum sulfate, chlor-alkali, hydrochloric acid, hydrofluoric
acid, hydrogen peroxide, lime, nitric acid, phosphorus, and
sulfuric acid. These 10 chemicals represent approximately 50%
of the total domestic production tonnage of all inorganic
chemicals and 37% of the total annual value of production.
Although water pollution abatement costs for some of the
producers of the ten chemicals studied are significant, few
plants will be forced to close with little resulting impact
on any of the industry segments. In all cases of plant
closings over-capacity, declining markets, obsolescent tech-
nology, and air pollution control are major influences, with
water pollution abatement only serving to add to an already
unmanageable burden.
Total capital costs associated with water pollution
aDatGiTicnt; for me ten cheiu.n_:ciitj at? csLima'LGci t;o £c vi^O ^^'jij
million, or 10 to 20 percent of this segment of the industrial
chemical industry's income in 1971. Annual costs are small,
less than 3% of sales, for many of the chemicals studied, but
significant - 6% to 9% of sales - for aluminum sulfate,
chlor-alkali, lime, and hydrochloric acid.
Generally, due to such factors as low capacity utilization
and substitution of other products, it is unlikely that the
above costs can be passed on entirely in the form of price
increases. For those chemicals where the costs are significant
the smaller plants which are in direct competition with large
plants may be forced to close. At a maximum, it is estimated
that 47 plants may be forced to close. In addition., plant
closings may occur in those segments v/here water pollution
abatement costs are not significant, due to the overall
dynamics of the markets.
Assuming 100 employees per plant closing, a total unemploy-
ment of 4,700, representing 1.5% of total employment, may be
effected. Since most of the plants are located throughout the
United States, no community or regional impacts are expected
as a result of anticipated plant closings.
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INDUSTRY SUMMARIES - Page 14
Since production curtailment and price increases are
expected to be minimal, no balance of trade problems should
arise.
Although it has been determined that waterrpollution
abatement will have little impact on the viability of the
ten chemicals studied in this report, other factors, such as
air.pollution control, energy shortages and power costs may
have significant impact. Further studies should attempt to
quantify these effects.
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INDUSTRY SUMMARIES ~ Page 15
MEAT PROCESSING
While the costs of water pollution control on the meat
industry are not expected to result in significant price or
balance of trade impacts, they may result in the closing of
a significant number of small slaughter, processing and
packing operations.
Total annual cost increases for the entire industry to
meet water pollution control requirements have been estimated
at $1.25 per thousand pounds of live v/eight killed, or approx-
imately $135 million nationally. A significant factor in
these costs is the charge for the use of municipal systems.
It is believed that a significant number of meat packing
operations use municipal sewers (approximately 70%) . Pre-
treatment requirements and user charges will significantly
affect the total industry cost for waste treatment.
requirements are expected to be less than one cent per pound
retail on the average or approximately l%-2%.
Given the available data on control cost and on the
industry financial structure, it is felt that a number of
small and medium size facilities could close as a result of
pollution control requirements. Estimates of actual numbers
range as high as 70 for process only operations, 250 for
slaughter only and 120 for packing houses (slaughter and
process). In most cases, these would be small size facilities;
between 2.0 and 25.0 million live v/eight kill per year for
slaughter only and packing houses and between 0.3 and 2.5
million pounds per year processed for process only operations.
These closings would represent about 7% of total industry
capacity. It is expected that this capacity loss could easily
be made up by the remaining plants. - -
The unemployment resulting from these potential closings
has been estimated at about 18,000 for the entire industry.
Many of the potential plant closings would be in small
communities; i.e., less than 50,000 population in which cases
the community impact would be significant. Data is not
available to help in identifying specific communities; however,
it is felt that the states of California, New York, Pennsylvania
along with most of the mid-western states would have the high-
est concentration of closings.
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INDUSTRY SUMMARIES - Page 16
It is not felt that any significant balance of trade
impacts v/ill result from pollution control cost and the
associated price increases. This holds true even should
the current suspension of the impact quota be extended.
This is because most imported meat consists of boneless, frozen,
lean beef v/hich doesn't compete v/ith the major, segments of the
market for meat in the U.S.
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INDUSTRY SUMMARIES - Page 17
MOTOR VEHICLES
While the total cost of water pollution control for the
major producers in the auto industry are expected to be sub-
stantial, it is also expected that these cost can be recovered
with no significant impact on producers, plant ..operation,
employment, communities or foreign trade.
The investment cost for water pollution control for the
four major manufacturers in the auto industry has been
estimated between $228 and $332 million. Total annual cost
are expected to rise by $70 to $89 million. These cost cover
only about 70% of the total water usage of the big four, but
they also fail to give credit for control expenditures that
have already been made by the industry.
It is expected that the full cost of water pollution
control will be passed on to the consumer. Estimates of the
resulting average price increase range from $10 to $12 per car.
Actual increases will probably be less for low priced cars
and higher for high priced cars. It is not anticipated that
these increases (veen if they were twice the expected amount)
would have any significant effect on domestic sales.
The cost of water pollution control for the four major
manufacturers are not expected to result in any plant closings.
Similarly, no effects on employment are expected.
No impact on the balance of trade is expected as a result
of price increases for recovery of v/ater pollution control
cost. The projected price increases are not expected to be high
enough to affect the consumers decision to purchase an import.
Moreover, several factors other than price are felt to have an
equal if not greater influence on the market penetration being
achieved by imports.
The cost of air pollution control (both stationary and
mobile) and the cost of health and safety requirements were
not addressed in this study. It is recognized that those
cost are expected to be significant and would completely over-
shadow the cost of v/ater pollution control.
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INDUSTRY SUMMARIES - Page 19
SYNTHETIC POLYMERS
Although some plant closings are expected to occur in
the synthetic polymer industry, water pollution abatement costs
will not be a major factor. Such variables as technological
obsolescence, declining markets, economic plant size, and raw
material costs will have a far greater effect on prices,
profitability, and plant closings.
With the exception of polypropylene and polyacetal, water
pollution abatement costs for this industry represent less than
0.2^ per pound of product, or less than 1% of the selling price.
These costs will vary within the industry according to a multitude
of variables, but will be considerably greater for the smaller
plants.
With few exceptions these costs will be passed in the form
of price increases, but will be overshadowed by price changes due
to traditional market variations and the increasing costs of
raw materials.
Few pleats die e.^peu-Leu i.<~> close iii fie syntnatic pcj.yrr.cr
industry as a result of pollution abatement expenditures.
Since the cost estimates by EPA were based on no present waste
treatment for the industry, the impact on those plants with
waste treatment facilities is overstated. However, as a con-
servative estimate, not more than 5 major producers will close
rather than invest in abatement facilities. Some small non-
integrated producers will close, particularly small phenolic
resin producers which are lacking technology and capital to
install the necessary pollution abatement facilities. At a max
imum, plant closings might number 30-40 plants in the entire
synthetic polymer industry. These plants would represent less
than 1% of the industry's productive capacity.
Since many of the small plants which may close employ less
than 10 workers, employment effects will be negligible. How-
ever, skilled labor in this industry is not easily transferable
to other industries, and some community effects could result
from a plant closing in a small community. Synthetic polymer
plants are located throughout the country. Thus, it is not
anticipated that plant closings will have any regional impact.
Due to the negligible effect of pollution abatement on
this industry in terms of prices and production, no significant
effect is expected on the U.S. balance of trade.
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INDUSTRY SUMMARIES - Page 20
This study did not include cellulosic production, which has
been severely impacted by declining market demand. Pollution
abatement costs may significantly hasten plant closings in this
segment.
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INDUSTRY SUMMARIES - Page 21
TEXTILES
Although some textile manufacturing facilities will close
during the next few years, water pollution abatement costs will
not be the major economic factor. Competition from imports and
changing demand characteristics have placed the textile industry
in an unstable economic position. Water pollution control costs
will directly effect only the wet process mills, which represent
less than 10% of the textile industry. Of these plants, approxi-
mately 90% will be able to defray much of the abatement costs
through the use of existing municipal or private treatment
facilities.
A conservative cost estimate for this industry, assuming
no present abatement facilities places capital investment
requirements control at $641-$!,015 million, with annual expend-
itures of $220-$350 million. Given that the relatively small
proportion of the industry actually requires further investment,
however, this estimate greatly overstates the actual expected
cost to the industry.
pollution control, assuming no present control, would be 0.9%
to 1.4%. It is estimated, however, that manufacturing costs
will increase at a rate of 3% per annum over the next five
years. In terms of cumulative cost pressure through 1977,
pollution abatement costs are only a minor part of the total.
Although maintenance of current return-on-investment goals
would probably require price increases for those investing in
pollution abatement facilities, it is doubtful that the overall
dynamics of the industry would permit such short-term increases,
In the long-run, the increasing cost squeeze will probably
dictate higher prices, but these will not be brought about by
pollution control efforts.
Increased operating costs, coupled-with extraordinary
needs for investment capital may force some small, old mills
to close. If we assume that all wet process mills which
presently have no abatement facilities will close, approxi-
mately 70 mills would be affected. This represents a maximum
figure. It does not take into account possible local market
situations which will either lessen the costs or enable the
mill to remain open in spite of increased costs.
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