Economic Impact.
of Anticipated Pollution Abatement Costs
Primary Copper Industry
Report to
Environmental Protection Agency
Part 1 Executive Summary
Arthur D Little, Inc
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ECONOMIC 'IMPACT 'OF ANTICIPATED
POLLUTION ABATEMENT COSTS ON THE
PRIMARY COPPER INDUSTRY
Report to
ENVIRONMENTAL PROTECTION AGENCY
PART I - EXECUTIVE SUMMARY
Arthur D Little Inc
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PART I - EXECUTIVE SUMMARY
TABLE OF CONTENTS
List of Tables and Figures
CHAPTER
PREFACE 1
I. INTRODUCTION 2
II. FINDINGS AND CONCLUSIONS 5
A. INDUSTRY STRUCTURE 5
B. FINANCIAL PERFORMANCE 11
C. MARKET CHARACTERISTICS 11
D. TECHNOLOGICAL CHARACTERISTICS 16
E. ISSUES 16
F. POLLUTION CONTROL TECHNOLOGY 17
G. GENERALIZED COSTS OF EMISSION CONTROL 18
H. DIRECT IMPACT ON THE PRIMARY COPPER INDUSTRY 21
I. INDIRECT IMPACTS 32
III. SUMMARY OF POLLUTION ABATEMENT COST ESTIMATES 35
APPENDIX A
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PART I - EXECUTIVE SUMMARY
LIST OF TABLES
Table No. Page
1 Approximate Flow of Concentrates Between Copper
Mines and Smelters 6
2 Copper Smelting Works of United States 7
3 Cross-Flow of Materials Between Primary Copper,
Lead and Zinc Industries 9
4 1968 Statistics Regarding By-Products and Co-Products
from U.S. Cu-Pb-Zn Industry 10
5 Reference Data - Non-Ferrous Metals Companies 13
6 Financial Performance Data - Copper, Lead and Zinc
Companies 15
7 Selected Primary Non-Ferrous Metals Companies Pollution
Abatement Costs 31
8 Estimated Capital Investment Necessary to Adapt Existing
Copper Smelters for Air Pollution Abatement 36
9 Estimated Direct Operating & Maintenance Costs at
Existing Copper Smelters for Air Pollution Abatement 39
10 Estimated Investment Costs for Water Pollution Control
in the Copper Industry 40
11 Estimated Direct Operating Costs for Water Pollution
Control in the Copper Industry 41
LIST OF FIGURES
Figure No. Page
1 Diagrammatic Representation of Variation in Concentrate
Value with Changes in Wirebar Price 12
2 Generalized Cost for Different Degrees of Emission Control 19
3 Out-of-Pocket Operating Costs and Production of 19
Underground Uranium Mines 22
111 Arthur D Little Inc
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PREFACE
This report was prepared in rough draft form during March-May 1972. At that
point in -time, as required by law, the states had submitted their respective
plans for implementation of pollution control (SIP or State Implementation
Plans) but EPA had not decided whether or not these plans would be acceptable.
Because of this, we evaluated the economic impact of pollution control legis-
lation based on control standards that were judged by us to have a high
probability of being enforced.
The acceptable SIPs were released by EPA on July 27, 1972 (Federal Register
37, 145, July 27, 1972, pp. 15094-15113). These standards vary significantly
from the standards assumed by us for the "base case" in our economic impact
analysis. Because of this, our analysis of economic impact, though consistent
with the assumptions used by us, is somewhat dated. An analysis of the economic
impact of the July 27 regulations would require rewriting of major portions
of this report and the analysis would still be incomplete since the require-
ments for meeting the Secondary Ambient Standards will not be available for
another 18 months.. Also, these standards have been challenged in court by
the industry.
In Appendix A we have included a summary of the major differences between
our assumptions and the July 27 regulations and the general consequences.
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I. INTRODUCTION
This analysis provides an assessment of the economic impact on the primary
copper industry that will result from air and water pollution control
requirements anticipated through 1976. The information presented here was
developed in a period of seven weeks under a contract with the Environmental
Protection Agency to provide information that could be used in formulating
Federal policy for pollution abatement programs affecting the non-ferrous
metal industry over the next five years.
There are several topics that Federal policy-makers must consider when
setting regulatory standards. The scope of the present study was basically
limited to an analysis of the impact or consequences of a certain set of
air and water pollution standards. Topics outside the scope of the present
study but relevant to policy-making would include a cost vs. benefits
analysis of pollution control, impact on the industries from Federal regula-
tions in other areas, e.g. Occupational Health and Safety and means for
resolving the differences in philosophy on how best to achieve a set of
environmental goals.
The information contained in this analysis is based upon our knowledge and
experience with the non-ferrous metal industry plus data derived from a
number of sources. These were:
• The staff at Environmental Protection Agency who provided con-
siderable background material and the basis for their calculations
which have been reported in the Cost of Clean Air, March 1972, and
other earlier publications.
• Knowledgeable executives within the non-ferrous metal industry
who provided details of their plans for air and water pollution
abatement and provided cost breakdowns during personal inter-
views and/or telephone conversations.
• Partial transcripts of hearings in several western states; when
available.
• The United States Bureau of Mines
• Boards of Health in several western states
• Published data in the technical literature
The approach used in this study has been to assess the impact of air and
water pollution control legislation on the industry using a plant-by-plant
analysis. Capital investment costs were obtained from the individual
companies or estimated by ADL. Data obtained from the individual companies
were analyzed for consistency and were reduced to a common basis. The
incremental operating costs resulting from air and water pollution control
were also estimated in a similar fashion. All costs reported, in the body
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of the report are In current 1972 dollars and do not include corrections
for inflationary changes. In general, the capital cost estimates reported
are of the "pre-engineering" type, i.e., costs estimated by using scaling
factors without detailed material or energy balances (at best + 30%).
The impact of these costs was evaluated under two extreme conditions, one
representing excess of supply over demand (which would not permit a price
increase) and an excess of demand over supply, in which case, a price
increase would permit the costs of pollution control to be passed completely
on to the consumer. The underlying economic assumption was a real growth in
GNP of 4% per year through 1976.
The following assumptions have been made in this study regarding pollution
abatement standards.
• Federal ambient air quality standards were assumed to apply in
all cases. These standards refer to sulfur dioxide concentrations
at ground level outside plant boundaries. These standards are:
Primary Ambient (to protect human welfare)
3
annual arithmetic mean 80 yg/m
Secondary (to protect property)
3
annual arithmetic mean 60 yg/m
• Emission standards limit the emission of sulfur dioxide from a
plant to a certain rate and require the recovery of a certain
percentage of sulfur in the feed materials. In general, emission
standards as a means for achieving ambient concentration targets
are "restrictive" in the sense that certain lower cost strategies
(tall stacks, preheated dilution air, etc.), which would other-
wise be adequate for achieving these targets, can no longer be
used. However, these lower cost strategies may not be optimal
for meeting ambient standards in all cases; for example when fre-
quent occurrence of adverse weather conditions results in substantial
curtailed production.
Because the emission standards are in a state of flux, they were
examined under two sets of assumptions. The first was the uniform
application of a 90% sulfur recovery or 10% sulfur emission stan-
dard. The second was based on State Implementation Plans which
had been submitted to the EPA. The costs developed under this
latter case have been termed "local" and this is the base case
for the financial analysis. These assumed "local" emission stan-
dards (which would apply in addition to ambient standards and
dictate the pollution control strategy) are as follows:
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Assumed % Sulfur Recovery
State for "Local" Case
Arizona 90
Idaho 0*
Missouri 0*
Montana 90
Nevada 60
New Mexico 60
Oklahoma 0*
Pennsylvania 0*
Texas 43
Utah 0*
Washington (Puget Sound) 90
*Zero denotes Federal Ambient Standard is more stringent
than local emission standard, or no local emission standard.
The cost figures for the uniform 90% standard have been presented
in the report for comparison purposes only and the economic impact
analysis considers only those costs listed as "local." Emission
standards requiring sulfur above 90% were not considered.
Particulate control standards considered were those that would
require recovery of particulates of over 99.8% of the through-
put (Federal Register, _36-158, August 14, 1971, p. 15495-6.).
(This standard affects only those smelters with old Cottrells
on their reverb offgases when these gases are vented directly
via the stack.)
The water pollution standards were assumed to be those based on
the removal of suspended solids by settling and permitting a
level of- residual heavy metal concentrations in discharge streams
that might be obtained after heavy metal ion removal as the
hydroxides. Filtration systems for removal of suspended solids
were not considered.*
1 The July 27, 1972 standards require over 90% sulfur recovery at three
copper smelters.
2 It appears that this technique might not be adequate to meet the latest
guidelines from Federal and state agencies in all instances.
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II. FINDINGS AND CONCLUSIONS
A. INDUSTRY STRUCTURE
The United States has been the largest copper producing country in the
world since before the turn of the century. Most of the copper mined in
the United States is produced in five western states—Arizona, Utah, New
Mexico, Montana.and Nevada. There are 27 major mines that account for over
95% of the copper output. A major, portion of the mine production is
accounted for by producers such as Kennecott, Phelps Dodge, Anaconda, New-
mont and Inspiration, who are integrated from mining through fabrication.
Numerous small companies participate only in mining and beneficiation
sectors of the copper industry and sell or. arrange for toll treatment of
their concentrates at the custom smelters of Asarco. Some of the larger
mining companies are Duval and Pima.
Traditionally the smelters have been situated near the mines in order
to minimize transportation costs for concentrates. The approximate flow
of concentrates between mines and smelters in early 1972 is shown in
Table 1.
At the present time, there are 15 primary smelters in the U.S., thirteen
of them west of the Mississippi. Table 2 is a list of the primary
smelters arid their approximate capacities in 1970. By 1976 the capacity
at Magma is expected to increase to about 200,000 tons of copper per year.
Depending on a variety of pollution-related factors, the capacity at Ana-
conda might increase, that at Douglas will decrease, while the capacities
at the remaining smelters will not change significantly. It appears that
the only new copper smelter to be constructed will be built by Phelps Dodge
in Southern Hidalgo County, New Mexico. The smelter capacity will be
about 100,000 tons of copper per year.
The major portion of the smelter output of blister copper is electro-
refined, while a smaller portion is fire refined. Fabricating companies
are the principal consumers of refined copper. They work the metal into
semi-finished form such as sheet, strip, rod, tube, wire and extruded or
rolled shapes which are the raw materials for the manufacturing industries.
Many large domestic producers through subsidiaries or stockholdings
operate foreign properties in both the developed and developing countries
and are also involved domestically in the production of other nonferrous
metals such as aluminum, lead and zinc. The financial posture of some of
the companies has been changed by expropriation of certain foreign holdings
and nationalization in other countries continues to be a threat.
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. TABLE 1
APPROXIMATE FLOW OF CONCENTRATES BETWEEN COPPER MINES AND SMELTERS
SMELTERS
MINES
Kennecott Utah Copper
Ray, Ariz.
Chino, N.M.
Veteran, Tripp, Nev.
Phelps Dodge Morenci, Ariz.
New Cornelia, Ariz.
Lavender Pit, Ariz.
Tyrone, N.M.
TUT O Mrt 1 A -t
Magma, Ariz.
A J TV -I T5*-4- A •»•-! M
Anaconca~ iwin ijiiLLes, Ariz.
Berkeley, Mont.
Yerington, Nev.
Butte Hill, Mont.
Tl J T* J A _— J —
Inspiration Inspiration, Ariz.
Chris tmas , Ar iz .
A M-I -t s\*+ A-*- -I
Silver Bell, Ariz.
T\ 1 C -J -J *•
Mineral Park
Esperanza
Battle Mtn. , Nev.
Cities Service - Copper Cities, Ariz.
Copper Hill, Tenn.
Bagdad Cu Bagdad, Ariz.
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1 1
1 - major flow
2 - minor flow
* Flows to Asarco Smelters can vary month to month
SOURCE: ADL Estimates based on data in ABMS Yearbook 1970 and Annual Reports.
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ArthurD Little Inc.
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TABLE 2
COPPER SMELTING WORKS OF UNITED STATES
Approximate Capacity
Tons of Copper Annual Capacity ,... Number of
Company Location Per Year (4) Tons of Material Employees
American Smelting & Refining Co. El Paso, Texas 100,000 576,000 975
American Smelting & Refining Co. Hayden, Ariz. 180,000 960,000 450
American Smelting & Refining Co. Tacoma, Wash. 110,000 600,000 1,000
Anaconda Company Anaconda, Mont. 210,000 1,000,000 2,000
Cities Service Company
Copperhill Operations Copperhill, Tenn. 15,000 90,000 *
Inspiration Consolidated Copper Co. Miami, Ariz. 140,000 450,000 *
Magma Copper Company
San Manuel Division San Manuel, Ariz. 100,000 403,000 *
Kennecott Copper Corporation:
•li Nevada Mines Division McGill, Nev. 70,000 400,000 *
1 (2)
Chino Mines Division Hurley, N.M.v' 90,000 400,000 *
Ray Mines Division Hayden, Ariz. 80,000 420,000 *
Utah Copper Division Garfield, Utah 300,000 1,000,000 *
Phelps Dodge Corporation:
Douglas Smelter Douglas, Ariz. 110,000 875,000 650
Morenci Branch Morenci, Ariz. 190,000 900,000 *
New Cornelia Branch Ajo, Ariz. 70,000 300,000 *
White Pine Copper Company White Pine. Mich. 90,000 90,000^ ' *
§- (1)At end of 1970. In tons of 2,000 Ib.
C (2)
"* Produces fire-refined copper as well as blister.
D (3)
CT 'Tons of product.
•"* (4)
/T> ADL estimates.
3" *Not available separately; included in Table IV-3
SOURCE: American Bureau of Metal Statistics Yearbook, 1970
ADL estimates
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The domestic copper, lead and zinc industries are interdependent to
the extent that by-products or residues from one industry form a part of
the input to the other as indicated in Table 3. A consequence of this
interrelationship is that if one industry were eliminated, a significant
impact would be felt by the others.
The western copper, lead and zinc industry is a significant producer
of by-products. In certain instances, especially at the western lead
smelters, the value of by-products can equal or exceed that of the primary
product—lead. In Table 4, we present the estimated quantity of by-products
produced by these industries in 1968, the latest year for which consistent
data were available. This quantity has been put in the perspective of
domestic mine production, domestic refinery production and domestic demand
in order to indicate the relative importance of the by-products. Also in-
cluded in the table is a gross value of these by-products. The value of the
by-products as contained in the primary metal is considerably below this—
perhaps as low as 50% of the gross value in some cases. In general, the
by-product supply and production is inelastic, i.e., not dependent on demand
or price of the by-product but dependent only on the primary metal production.
Any .factor (pollution related or otherwise) that changes the output of
the primary product would automatically affect by-product output. An apparent
exception might be the western lead smelter where, because of the high
volume of co-products, higher co-product prices (e.g. silver, bismuth, etc.)
can decrease the sensitivity of primary metal production to primary metal
price.
An important aspect of the entire primary non-ferrous industry is
that traditionally the smelters and refineries have been operated as
service operations at a fixed and relatively low profit margin which is
not very sensitive to the price of the finished product. Hence, the impact
of any change in price of the primary metal has to be reflected back and
affects directly the value of the concentrate. In the 1960's, the tradi-
tional rule-of-thumb in determining concentrate value in the copper industry
was to assume 4<:/lb. for smelting charges and 5C for refining charges so
that the value of copper contained in the concentrate is very approximately
9c/lb. below the cathode or wirebar market price. (The current operating
margin in the copper industry is about 10c/lb., in the lead industry
about 4-6c/lb.—and complicated by co-product values—and that in the zinc
industry is about 8-10
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TABLE 3
CROSS-FLOW OF MATERIALS BETWEEN PRIMARY COPPER, LEAD AND ZINC INDUSTRIES
A) Mining and Milling
B) Smelting
C) Refining
Source
Cu mills
Pb-Zn mills
Pb mills
Pb-Zn mills
Cu smelter
Pb smelter
Pb smelter
Pb smelter
Zn-Pb smelter
Zn Horizontal
retorts
Zn electrolytic
Cu smelter
Pb smelter
Ag-Pb-Sb-Cu cone.
Pb refinery
Pb refinery
Pb refinery
Cu refinery
Cu refinery
Material Produced
By Source
Pb-Zn concentrate
Cu concentrate
Cu concentrate
Pb cone.; Zn cone.
Pb-Zn converter dust
ZnO fume from slag
Pb-Cu dross
Au, Ag Cu matte
Cd fume
Pb-Zn residue
Pb-Zn residue
Cu-As-Sb converter dust
Cu-As-Sb speiss
Cu-As-Sb speiss
Bi dross
Au-Ag skimmings
Pb-Cu dross
Slag fume & residues
anode slimes
Industries Where Treated
Western Pb smelter; Zn smelter
Cu smelters
Cu smelters
Pb smelter; Zn smelter
Western Pb smelter
Electrolytic Zn plant
Pb smelter
Cu smelter
Cd refinery
Western Pb
Western Pb
Cu smelter
Cu smelter
Cu smelter
smelter
smelter
(Tacoma)
(Tacoma)
(Tacoma)
Bismuth refinery
Au.Ag refinery
Pb smelter
Cu &/or Pb smelter
By-product refinery
(Au, Ag, Pt, Se, Te, Ni)
c
-t
D
SOURCE: ADL
—
O
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TABLE 4
1968 STATISTICS REGARDING BY-PRODUCTS AND
CO-PRODUCTS FROM U.S. Cu-Pb-Zn INDUSTRY
Estimated
Quantity Gross
of By-Product Value
By-Product . in Million
or Co-Product Source Short Tons $
Antimony lead-silver 1,019 1.1
Arsenic copper-lead 2,900 0.4
Bismuth lead-zinc 350 2.8
Cadmium zinc-lead 1,890 11.3
Gallium zinc NA NA
Germanium zinc 10 1.8
Gold copper 510* 30.6
Indium zinc 230* 0.7
Manganese zinc 8,000 5.3
Molybdenum copper 11,700 46.8
Nickel copper 2,000 5.0
Platinum copper 5* 0.6
Rhenium copper 1.2 2.9
Selenium copper 316 5.7
Silver lead-zinc-
copper '
Tellurium copper 60 0.7
Thallium zinc 1.3
Quantity of
By-Product
as % of
Domestic Mine
Product ionl
58
100
100
100
NA
100
34
100
NA
25
13
100
100
100
59
100
100
Quantity of
By-Product
as % of
Smelter/
Refinery
Pro duct ion2
8
47
88
35
NA
84
30
49
NA
25
13
8
100
100
31
100
49
Quantity of
By-Product
as % of
Domestic
Demand-^ '
2
12
30
28
NA
25
6
42
NA
42
1
1
310
29
11
55
40
*Thousand Troy Ounces
1. 100% indicates all of domestic production is a by-product; less than
100% indicates other production from a
other than Cu-Pb-Zn mining.
2. 100% indicates absence of ore imports;
column 5) indicates ore or concentrate
primary source
less than 100%
imports .
3. Greater than 100% (or greater than column 6) indicates
4. NA: not available.
or a source
(and less than
exports .
SOURCE: Adapted from Mineral Facts and Problems, U.S. Department of
Interior, Bureau of Mines, Bulletin 650 (1970).
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However, essentially the mechanism operates in the case of producers
integrated from mining through smelting and refining since the concentrate
transfer price is related to the primary metal price and again the mines
would have to absorb the increased smelting and refining costs under ad-
verse market conditions. Figure 1 illustrates this mechanism based on
actual custom smelting contracts that were in effect several years ago.
B. FINANCIAL PERFORMANCE
Given generally similar operating, tax, and pricing structures; and
because of the overlap in company participation in copper, lead and zinc
mining, smelting, and/or refining; we found it meaningful and convenient
to group the major companies together to study from the financial viewpoint.
Tables 5 and 6 summarize the financial performance of these companies.
An index of growth rate is not presented, since sales and earnings of the
primary nonferrous metals companies are cyclical. A major influence on
earnings are the operating rate and metal prices. The latter fluctuate
more than annual consumption or demand since prices tend to be sensitive to
small imbalances between supply and demand and varying international situa-
tions. In most cases, 1971 was a year of depressed operating margins due to
strikes, price declines and other adverse factors.
C. MARKET CHARACTERISTICS
1. Supply and Demand
Over the past 20 years, world consumption of copper has been in-
creasing at an average annual rate of 4 to 4-1/2% to its present level
of 7.9 million tons per year of refined metal. Despite competition from
plastics and aluminum, consumption is expected to increase at about the
same rate worldwide over the next decade with a slightly lower rate in
the industrialized countries. The U. S. is a leading producer and con-
sumer of primary copper, accounting for about one-third of Free World
production and consumption. Despite this, the U. S. has been in a posi-
tion of undersupply since the early 1960's. Domestic mine production
has been increasing recently at an adjusted rate of about 3-1/2% per year
whereas the consumption has yet to regain the 1966 level. In line with
the assumption of a 4% real growth in GNP made for this study, we would
expect a growth in copper consumption at an average annual rate of about
3%.
Primary copper mine capacity worldwide is expected to increase at
the rate of about 6.2% per year based on announced and planned projects
up to 1975. Barring serious upheavals which can limit mine capacity,
future demand may not be strong enough to absorb all of the additional
output that is planned.
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1500
1400
1300
a 1200
•o
.1 1100
c
"o 1000
o
S 900
CO
800
700
600
500
Refinery
Operating
Margin
Smelter
Operating
Margin
50
30 40
LME* Wirebar Copper Price (U.S. i Per Lb)
* (London Metal Exchange)
Source: Arthur D. Little, Inc.
60
70
FIGURE 1 DIAGRAMMATIC REPRESENTATION OF VARIATION IN CONCENTRATE
VALUE WITH CHANGES IN WIREBAR PRICE
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TABLE 5
C
•n
D
Aeerco
Percent Change
In Earn^ir*
Due to 1« copper
price change: (low)
Due to Pb-Zn Batata
price change: (low)
Doe to alomlnuB
price change:
Reported Incoeje
Tax Bate. Percent
1971 11.01
1970 22.31
Hlne Prodnctlon-
D.S.A.
Copper (thoua. abort
tone)
1971 75.8
1970 83.4
Lead (thoua. abort
tons)
1971 IB. 7
1970 28.4
Zinc (thoua. abort
tone)
1971 43.1
1970 63. 3
Silver (nillion
troy ouncea)
1971 6.66
1970 6.84
Alumlnua Production
(thoua. abort tona)
1971 33. 6T In-
terest in
1970 Revere Cop-
per and
Brass
REFERENCE DATA
NON-FERROUS METALS COMPANIES*
Copper Inspiration Kennecott Newnont Phelps
Aaaconda Co. 'Bange Consolidated Copper Mining Dodge
(high) ( high) ( Bed-high) (low) (lov-med) (iw)
(high) (high) (>ed.) (low) • (low)
(low) (low)
$440 Ml D.S. (credit) 27.71 151 19.31 35. 071
tax loaa carry
forward 1971-81 29.41 33.11 301 32.21 37.61
(and $190 Ml
foreign tax
credits)
182.0 58.6 54.4 456.1 101 1 281.2
242.1 67.8 67.1 518.9 112 ]. 313.5
16.41 Toole 68.6 Joint Note:
r Shelter venture P-D
18.11 Cloeed '71 83.7 with owns
' Aaarco. 772,500
Alao holds aharea
8.11 of Aemx stock
St. Joe
O.?l Great Palls 17.4 Mlnerela
^Closing '72
0.1] 21.7
3.87 3.7
5.02 4.3
171.7 owns 925,000 401 Interest
shares in Consolidated
177.3 Kaiser Aluminum Aluminum Corp.
(Conalco)
St. Joe Gulf Resources
Minerals Anax (Bunker Hill)
(high) (low) («ed..- high)
(«d.)
29.81 17x1 exclodea nil
f dividend
29.61 22X] Incow 27Z
Hote:
Alao 201 Equity In
Copper ftange Co.
182. ol
1 cuatoa
215.0 | BBelter
J refined
303.2 H. A. 44-own
85-othera
318.4 75.0 40-own
83-othera
144.0 N.A. 67-ovn
(cone, produced) 53-others
66.4 Bine 32.0 50-ovn
64-others
20.0 9.6]
[refined
40.0 7.8
J
260.0
247.0
believed to be reliable, but its accuracy and completeness are not guaranteed.
For • discussion of New Jersey Zinc Company, a subsidiary nf Gulf and Western Industries, sor text.
-------
TABLE 5 (Continued)
Anaconda Co.
Copper
Range
Inspiration
Consolidated
Nevmont
Mining
St. Joe
Minerals
Gulf
Resources
Cyprus
Min
Estimated Revenue
Breakdovn
Copper
Mining 13-171
Fabrication
Custom Smelting 13-171
subtotal 26-341
5-101
60-651
75-851
15-202
95+T
94-981
2-061
1001
50-551
10-151
60-701
nom.
85-901
40-651
40-451
5-101 .
90-931
441
351
25-30*
** 2500T
J«- 1 10-151
Includes \
•liver . [
Coal
131
All
15-171
7-101
351
rrlmary
fabrication
Other Sales
All Other, n.e.c. 66-741
loot
Approximate Earnings
Distribution
Copper
mnlng-U.S.
Mining-Foreign
subtotal
Fabrication
Custom Smelting
Total, Copper
Zinc
Lead
20-251
40-451
60-701
21
51 "-
70-751
8-201
Tboi
60-701
15-201
80-851
2- 41
1- 21
84-881
nom.
1001
95-1051
95-1051
(nil)
95-1001
8-111
1001
92+1 68-721
10Z
92+1 78-821
noa. noa.
nom.
951 85±1
10-151
1001
40-451
-30-351
70-801
70-801
211
1001 1001
79-831
51
85±1
5-101
nom.
95±1
30±1
65±X
351 111
1001 1001
•
7-101 [Lead, zinc
and allver
account for
411 of profit
in 1970, and
a loaa in
1971)
55-601
100X
45-551
50-601
10-151
Coal
rr
5
Al'Tninif™
Primary
Fabrication
Other Sales
All Other, n.e.c.
including intefeai
and dividends
25-301
Approximate Source
of Pre-tax Profits
U.S.A.
Canada
Mexico
South America
Australia
Africa
Other
nil
10-151
70-801
15-201
(nom.)
1551
3- 51
100%
nil
nil
57
(nom.)
20-30
looz
80+1
95%
11
80-90%
5+Z
>5t
40-50'.
10-157.
10-207.
10-20%
100Z
-------
TABLE 5 (Cont'd)
I
SELECTED FINANCIAL DATA: MAJOR U. S. NON-FERROUS METALS COMPANIES
1971
Sales (in millions of dollars)
Pre-tax Profit
(in Billions of -dollars)
Hat Income
(In ni 11 loot of dollars)
Cash Flow from Operations and
Holdings (in mflllons of dollars)
Increase (Decrease) in Debt
Dividends Paid
Current Ratio: Assets'Liabllitlea
Net Working Capital
Capital Expenditures
Long-term Debt, year end
Equity, year end
Debt f (debt and equity)
Percent based on book values
Scheduled Debt Repayment
(1972 payment excluded from long-
term debt at year and 1971)
1972
1973
1974
1975
1976
Long-term Financing
(in Billion, of dollar:, 1971)
Employment, year end
Notes: D - nrellmlnarv: e • estlma
Aoarco
656.8
51.7
46.0
60.0
14.4
46.2
2.1
174.0
37.4
38.1
673.3
5.4
3.6
3.6
3.6
5.2
1.6
13,600
te
Anaconda
946.5
(5.2)
(8.7)'
84.5
25.0
10.9
3.1
265.0
89.9
391.5
821.0
32.3
24.6
19.2
35.5
58.1
64.0
27,481
Copper
Range Inspiration Kennecott
88.6
(6.1)
(3.5)
4.9
12.0
0.6
3.2
30.3
11.9
36.3
101.7
•
27.3
1.3
7.0
7.0
S.A.
H.A.
20.0
3,644
66.2 1,066
12.1 102
8.7 87.
14.6 180
(0.1) SI.
4.8 58.
3.7 2.
19.0 269.
9.8 150.
(net
. nil 314.
69.7 1,192.
nil 20.
43.
43.
62.
5.
21.
200.
2,009 30,400
0
.9
.9
.2
.0
.0
.0
4
.0
0
:)
.6
9
9
4
,2
3*
1°
7e
0
Nevaont
0
240.5
67.5
54.5
86.0
93.2
28.2
-3.5
79.3
129.1
201.6
444.1
31.2
8.7
26.7
31.8
44.3
33.5
101.9
H.A.
Phelps
Dodge
703.6
113.7
73.8
110.3
78.7
42.9
3.4
209.0
75.5
166.0
710.2
19.0
0.1
0.1
12.9
0.1
O.lc
150.0
15,500
St. Joe
194.4
27.9
19.6
29.1
(1.0)
13.7
3.0
46.5
21.2
10.7
171.3
5.9
1.0
4,503
(USA)
Amax
756.9
65.8
55.4
86.5
130.6
36.5
3.3
302.0
139.5
392.0
625.2
38.5
35.7
23.4
27.5
20.6
29.7
156.9
16,000
9
Gulf
Resources
0
116.2
(3.5)
(3.9)
d
1.2
4.6
1.1
1.9
18.3
7.4
48.6
28.4
63.1
2.9
6.5
6.0
5.9
5.9
22.0
2.7CC
1,940
Bunker
Bill
Cyprus
Mines
203.2
58.6
27.8
S2.5
(5.5)
9.1
1.8
35.8
38.1
34.9
20T.5
U.3
a' Before extra-ordinary charge due to write-off of Chilean properties and other expense.
b/ Agreement for $13MM advances from toll customer.
el Above before $27 MM to be received from Conalco debentures.
d/ $19.7MM wr He-downs and reserves, net, excluded.
o/ Includes other revenues and/or income, as reported.
The information presented above has been obtained from company annual reports and SEC filings, statistical services, financial manuals, and nther >ouf'»
believed to be reliable, but its accuracy and completeness are not guaranteed.
-------
TABLE 6
!•>•>!
r>;i>
i'i(."
116K
Anaci>ndn
1171
1970
1160
Asarco
1971
117')
106"
1"68
Coppnr Ran^e
1971
1070
1061
1168
Inspiration
Consol idated
1971
1170
1169
l°68
Kennccott Conner
1971
I970
1160
1168
Cyprus Mines
(Incl. Pirns Consol
1171
P70
|06°
1968
Phclps Dodfte
1071
1970
116"
1968
St. Joe Minerals
1971
1170
1969
1968
Gulf Resources
Chemical
7971
1970
1969
1968
Neumrnc Mining.
1971
1070
1069
1968
NOTE: While rcaa
ue cannot
Ings , and
knowledge
The Infora
financial
•For a dls
•This tab]
••Excludes
FINANCIAL PERFORMANCE DATA
COPPER, LEAD AND ZINC COMPANIES*
Nft Sales Operating Incos* Earnings (Before Capital Operating Income As A Return On
756 9 97.9 55.4 139.5
640:? H5.2 83.6 110.2 (.«. RST)
753.5 99.8 69.1 63.0
Avg. IT! Avg. I8H -g. 13.61
946.5 66.9 (6.7) 89.9
077.4 108.9 ' M.I 90.5
A...IB Av,.ite -°-"-41 N.t ^,.1.. A- 4-n
656.8 26.3 46.0 37.4
717.8 57.5 88.8 68.7
771.0 60.1 99.4 ".0
634.1 38.1 Avg. &f Avg. 4TTT . *vg. 6.5% AV,. 11.01 Avg.. 13. li
88.6 4.7 (3.24) 11.9
97.5 21.9 9.6 14'°
10.23 27.8 15.9 ».l
82'1 "•' Av.. -H Avg. TTT AV,. M.fl *vg. 1.67.
65.8 16.9 8.7 9.8
88.8 30.5 17.8 9.7
69.5 22.5 13.4 9.4
"•' '•'• Av,. iH A... H Avg. 2S.lt Avg. 21.0X
,0534 1914 87.2 162.5] Includes Av.
{"3 1 322.3 185.0 163.2 of 34.8/V«.r
0500 286.9 1=5.4 152.0 Capitalised
"" »'•' ^m Avg.Tgi1"1"'"80"" Avg. 24.U Avg. ,3.n
202 5 [141. 8 I 74.2 [32.6 1 27.4 ^l]^-
1,3.5 L« «»-J 24-* L«« "-J »•? "•! 1"" (Including Pl.a
113.0 21.2 ^ £2 Avg -ji^ Avg. 2,.5l ,,70-197.) Avg. 15.2%
703.6 140.5 '3.8 ".5
716.2 Restated 184.7 Restated 108. 0 89. 1
672.1 628.9 138.4 N.A. 89.5 87.3
550.4 531.7 ,8.1 N.A. ^ _6£4 ^ 2£Z ^ ^ „ Avg. w.n
,04.4 2,. t 19.* 21.Z
161.3 35.2 26.2 15.2
179.0 33.1 J7.3 »•*
"•8 AV.. iH »..- ftS Avg. 22.8X
,,,.2 7.8 (>.W) '•»
114.4 13.1 *-56 4"J
113.7 12.1 3.77 5.4
1. To the beat of our
latlon presented above has been obtained from company annual reporta and SEC filings, ststlstlcsl services,
manuals, and other eourcee believed to be reliable, but lt« accuracy and completanaaa are not guaranteed.
icuaalon of New Jersey Zinc Company, a aubeldiary of Gulf and Western Industries, aee te»t.
.e ahould be read In conjunction with Table V1I1-1.
dividends, Intereat, net gain on sales of aecuritlee and other Income in th« following aaounta:
1968 - $39.3
1969 - 40.4
1970 - 43.6
1971 - 43.0
Ratio of Cspltsl
Expenditures
To Cross Plant At
Avg. 14.67.
Avg. 8.17.
AVR. O.OT
AVR. 7.97.
Avg. 0.6-
Avg. 10. 57
AvB. 14. 4',
AVR. 10.17
AVR. 6.87
AVR. 6.2V
Avg. K.A.
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Arthur D Little, Inc.
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2. Prices
During the 1960's, the annual average copper (f.o.b. domestic re-
finery) price varied from a low of 29.90 per pound in 1961 to a high of
57.7c per pound in 1970. During 1970, the price was 59.7
-------
• The 90% sulfur recovery standard. This standard is disputed
on the basis that it is more stringent than the degree of sulfur
recovery necessary to meet Federal ambient standards and hence
imposes unnecessary financial burden on the industry. A related
issue is that the 90% sulfur recovery standard was recommended
on the basis of unproven lime-limestone scrubber technology.
• The estimated cost of pollution control. The early estimates
have varied a great deal since they were based on differing
accounting and cost-estimating basis (e.g. inclusion or non-
inclusion of gas collection facilities) and on the basis of
either industry-wide models or plant-by-plant summations. Over
the past two years, differences between industry and EPA cost
estimates have narrowed.
• The superimposed time table. The industry feels that this does
not permit orderly development of new technology. The repeated
revision of pollution control targets within the guidelines
hinders or prevents the selection of an optimum strategy.
• Strategies for meeting ambient standards. The industry favors
using a variety of techniques including tall stacks, preheated
dilution air and closed-loop control for meeting ambient air
quality standards. EPA appears to favor the use of permanent
SOx emission control techniques to achieve ambient air quality.
• The ability to raise the necessary capital. This is an issue
because the industry believes that capital required on pollu-
tion control equipment could not be justified on a conventional
return-on-investment basis.
F. POLLUTION CONTROL TECHNOLOGY
Given the time scale required for implementation of pollution abatement
plans, industries would have to rely on proven technologies.
1. Air Pollution
a. Add-on equipment - proven from an operational viewpoint.
• improved converter gas collection; acid manufacture
• above method, plus roasting; acid manufacture
• tall stacks; preheated dilution air
• production curtailment with/without "closed-loop" control,
i.e. production rate controlled by ambient concentrations
measured by sensors in the field.
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ArthurD Little, Inc.
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b. Major process changes or innovations (acid plant necessary)
• Hoboken converters or tight water cooled hoods
• flash smelting
• electric furnace smelting
• direct smelting of concentrates in a converter
c. Add-on equipment - not proven on this scale from an opera-
tional viewpoint
• DMA (dimethylaniline) scrubbing; followed by liquid S0»,
or elemental sulfur production
• lime, limestone or caustic scrubbing
d. New processes - not proven
• continuous smelting
• hydrometallurgical treatment of sulfide concentrates
2. Water Pollution
a. Proven
• removal of suspended solids by settling and filtration
• partial metal removal as hydroxides with lime
• high degree of plant water recycle
b. Unproven on a large scale
• ion exchange
• reverse osmosis
G. GENERALIZED COSTS OF EMISSION CONTROL
The several options for pollution control listed above are associated
with differing degrees of emission control and result in different ambient
SOx concentration since the latter are affected by stack height and local
weather patterns.
We have prepared Figure 2 in order to show the costs associated with
different degrees of emission control. The figure is based on the sequen-
tial selection of emission control strategy since a particular technology
can be an optimum within a particular range of emission control objectives.
We have selected collection of converter gases and acid manufacture as
the basic strategy (Technology A) since these gases are a major source
of SOx emissions that can be obtained in adequate concentrations for acid
manufacture. This strategy can recover from about 45% to perhaps 70%
of the sulfur in the feed materials, the exact recovery depending on the
nature of the concentrate and type of reverb operations. The vertical
axis in Figure 2 has been labelled "relative costs"; however, these
are approximate costs in C/lb. of copper incurred in direct operating
-18-
ArthurD Little, Inc
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10
8
RELATIVE
COSTS
\
A + D
A + C
•
A + B ^
^. • ^^
TECHNOLOGY A
20
40 60
% SULFUR REMOVAL
80
100
Note: Technology A
Technology B
Technology C
Technology D
— Acid manufacture from converter gases
— Roasting and acid manufacture in addition
— Scrubber technology such as lime-limestone or DMA
scrubbing plus acid plant
— Scrubber technology such as caustic or DMA scrubbing
plus elemental sulfur production
FIGURE 2: GENERALIZED COST FOR DIFFERENT DEGREES OF EMISSION CONTROL
-19-
ArthurD Little Inc
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costs plus 20% per year of capital costs for fixed charges. For example,
the horizontal bar for Technology A extends from 0% to 50% and indicates
the range of emission control assured by this technology. Its dotted
extension to 70% denotes the area where it might be applicable but where
its performance could not be guaranteed. The cost range denoted by this
bar is the range of total costs (i.e. direct operating plus fixed costs)
expected when this technology is used to obtain the maximum recovery it
is capable of or about 50% sulfur removal.
We have selected roasting of concentrates (Technology B) as the second
strategy. We believe that the use of this approach in conjunction with
the converter gas collection—acid manufacture approach will recover over
80% of the sulfur and might approach 90% sulfur recovery, though the
latter could probably not be guaranteed. (The numbers in the McKee report*
can be manipulated to show a "sulfur recovery" of over 90% by assuming a
double absorption acid plant and assuming "sulfur recovery" to include sulfur
leaving the plant with reverb slag.)
Removal of over 83% of the sulfur requires the application of a variety
of technologies in both the smelting operations and the sulfur oxide re-
moval processes. A variety of decision paths are possible and we have
chosen such removal technologies as lime-limestone scrubbing or DMA ab-
sorption with recovery of liquid sulfur dioxide for sale or for additional
acid production as representative of Technology C. Since these techno-
logies do not as yet have a firm basis for detailed engineering and opera-
ting costs, their application to any specific smelter would result in a
wide variation of costs as shown by the bar for Technology A plus C.
In the case of certain smelters—where local acid markets are non-
existent, where disposal of calcium sulfate from acid neutralization or
scrubbing might create potential water pollution problems, or where greater
than 90% removal might be required to insure meeting ambient air quality
standards—the use of caustic scrubbing, DMA absorption with elemental sulfur
production and so on might be required. This Technology D would be expected
to have even higher costs and variability from smelter to smelter and the
total cost is shown as Technology A plus D.
To show approximately the rapid increase in costs of sulfur removal
as higher and higher percentage recoveries are required, a dotted line has
been drawn on Figure 2 connecting the mid-points of the estimated ranges.
This line is characteristic of operating processes as higher and higher
recovery efficiencies are required while reflecting the variability that
exists between smelter locations.
*Arthur G. McKee and Co., "Systems Study for Control of Emissions - Primary
Nonferrous Smelting Industry", Volumes I-III, National Technical Information
Service, PB 184 884, PB 184 885 and PB 184 886.
-20-
Arthur D Little Inc
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H. DIRECT IMPACT ON THE PRIMARY COPPER INDUSTRY
1. Introduction
The cost of production of nonferrous metals, as is the case with
most natural resource based commodities, can vary over a wide range within
the industry. The smelters, presently based on similar operating practice,
have similar costs and are essentially "service operations" for transforming
the concentrates to the primary metal. The major variations in production
cost occur at the mines and mills.
As an illustration of the magnitude of this variation, we include
Figure 3, which shows out-of-pocket operating costs of 19 uranium mines
plotted versus cumulative production of U^OQ. The mines have been ranked
so that the lowest cost mines are on the left. Figures such as this can
be read in two ways:
• to find the probable production when the price is fixed by
external factors; and
• to determine the costs associated with a certain level of
production; for example, when production is to be increased,
the price has to rise to at least cover the costs of the
highest cost producer.
Cost data for individual mines and mills in the primary copper
industry are proprietary and were not available to us directly from the
industry and could not be estimated by us in detail within the scope of this
study. Had these cost data been available for the non-ferrous industry, a
figure similar to Figure 3 would have been obtained. Recently, security
analysts have indicated^ that copper production costs (from mining to
primary metal) vary from about 33
-------
OUT-OF-POCKET
OPERATING COST
($/lb U0)
_r
FIGURE 3:
2345 67
PRODUCTION (MM Ib U00Q)
j o
OUT-OF-POCKET OPERATING COSTS AND PRODUCTION
OF 19 UNDERGROUND URANIUM MINES
-22-
ArthurD Little Inc.
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an excess of demand over supply, in which case, a price increase would
permit a complete pass on of pollution costs. Based on past market behavior,
we would expect both types of supply-demand imbalance to occur at different
times through and beyond 1976 and hence have considered both types of im-
balances to be equally likely and have addressed ourselves to the implica-
tions of these alternatives in each case. Thus, the two cases which we have
considered for the impact analysis can be described as:
• Full pass on, i.e., the market price is increased enough to
cover the cost experienced by the marginal producer who has
the highest overall cost; i.e., lies on the right-hand extreme
of a figure such as Figure 3; and
• zero pass on, i.e., all pollution abatement costs are absorbed
by the primary producers.
Conceptually, the consequences of the full pass on assumption would be a de-
crease in consumption (as predicted by long-term elasticity of demand), sub-
stitution by other materials (the cross elasticity phenomenon), increased
profits for the lower cost producers and a disruption in the traditional
trade pattern (imports of primary copper, recently at about 5% of primary
consumption, would increase if overseas prices are lower than domestic prices).
Also, the increased price would affect the fabricators, the major consumers
of primary copper and this impact would have to be analysed in the context
of their ability to absorb or pass on these increased costs.
On a more practical level, the following factors appear to be more
significant. Based on information developed in the main body of the report,
it appears that the full pass on assumption would require the major marginal
or high cost copper producer to increase the price by about 4-5c/lb above
present levels. Costs for transporting copper internationally rarely' exceed
2(?/lb and adding the current tariff of 0.8(?/lb, a ceiling of about 3c/lb
above the international (LME) price would be established. This ceiling
would influence the ability of the domestic producers to fully pass on
their costs. This price increase is such that its effects would be of the
same order of magnitude as the normal background of supply-consumption
irregularities, cyclical variations and long-term growth patterns, though
it may be argued that pollution control costs affect the baseline rather
than the cyclical variations.
The zero pass on assumption has numerous consequences and these are
discussed in detail in the remainder of this section. Basically, because
smelting and refining are low profit "cost plus" operations, the pollution
abatement costs could be borne mainly by the mines. However, they also
affect the smelters, stockholders (via reduced income) and government entities
(via reduced tax collections). Under the present tariff situation, minimal
impact is felt by the fabricators or other subsequent consumers, since their
demand would be fulfilled either from domestic or foreign sources under this
assumption.
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ArthurD Link Inc.
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2. Capsule Findings
• Industry-wide impact ("local" case; see page 3 for assumptions)
Air pollution control:
estimated capital investment $ million 522
estimated direct operating costs $ million/year 40.6
Water pollution control:
estimated capital investment $ million 30.5
estimated direct operating costs $ million/year 4.8
• Smelter closings
High probability: Tacoma (Asarco)
Douglas (Phelps Dodge)
Medium probability*: McGill (Kennecott)
Low probability: rest
• Impact of smelter closing:
- Net potential industry-wide capacity shortage - tons
copper/year - 100,000-200,000
- Impact on non-integrated mines from lack of smelter capacity...
export of a large amount of concentrates and reimport of
primary metal unlikely.
- Loss of ability to handle arsenical materials if Tacoma closed...
severe impact on northwestern copper, lead and silver mining
industry.
• Company impact: increased operating cost at domestic operations...
possible effect on internal long-range planning.
• Employment:
- Direct employment loss (from Douglas and Tacoma closings)- 1250
- Direct employment gains - 400-800
• Industry will be impacted by government regulations in other
areas...these effects tend to be additive.
*Probability reported to be higher if emission standards in Nevada
exceed 60% sulfur recovery.
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Arthur D Little; Inc
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• Enforcement of air pollution regulations industry wide could
lead to a net power consumption as high as 80-100 megawatts.
• Capacity shortage would lead to a balance of payment deficit
of up to $400 million if we assume primary metal is imported to
fulfill this demand. Deficit would be greater if copper is im-
ported in the form of higher value-added semi-finished or
finished goods.
• Availability of smelter byproduct acid would be in excess of
current and projected demand and would severely impact the
western merchant acid industry.
3. Plant Shutdown Probabilities
• Introduction
The closing of any plant is a decision based on a wide variety of
factors and includes consideration of factors other than just the
incremental cost of pollution control. These decisions include
comparisons of the cost of production from a refitted plant versus
alternatives such as producing at other domestic or international
plants or new locations, purchasing unfinished or semifinished
products for down-stream operations or stopping production al-
together. Also, increased production costs at mines usually imply
a loss of reserves. These decisions have to be made on the basis
of anticipated future capital and operating expenses and they are
particularly difficult for an outsider to predict because they
require access to the company's highly sensitive, direct out-of-
pocket cost information and full knowledge of the alternatives
open to the company's management.
In the absence of this information for the entire industry, our
judgments have to be necessarily qualitative. However, we believe
that we have isolated the areas where the maximum impact would
occur under the zero pass-on assumption.
• General Considerations
The increase in the cost of air pollution control with increasing
degrees of sulfur recovery at the smelter was discussed earlier.
As expected, the maximum impact of this cost occurs on smelters
when 90% sulfur recovery or more is required. (Because of poor
location, one or two smelters might have to approach 90% sulfur
recovery to meet Federal Ambient standards or utilize production
curtailment under adverse weather conditions which could result
in a significant reduction in output.) Only one Arizona smelter
has low incremental costs. The reason for this is that this
particular smelter has been moving in the direction of increasing
sulfur recovery for many years and a major portion of the funds
have already been spent.
-25-
Arthur D Little Inc.
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These increased costs at the smelter have to be considered in
the context of the mine-mill-smelter interrelationship and
generally, this increased cost has to be passed back to the mines
since we have assumed zero pass-on to the consumer*. Under these
conditions, the general alternatives open to the mine management
(of both independent or integrated companies) are:
a. divert concentrates to a smelter offering better netbacks;
b. absorb the increased costs;
c. shut down because the increased costs cannot be absorbed;
d. selectively mine high grade portions of the ore (this
decreases reserves and mine life);
e. significantly increase the capacity to take advantage of
the economies of scale.
The mines can also be affected by decisions at the smelter; for
example:
f. The shutdown of marginal mines or diversion of concentrates
to other smelters can leave a smelter with insufficient feed
materials and lead to a smelter shutdown. This, in turn,
can result in closing of mines that cannot ship their con-
centrates to more distant smelters.
g. If mine production is in excess of smelting capacity, mines
have to curtail production or shutdown because of the absence
of a concentrate outlet.
In the period through 1976, we believe that there will be little
or no excess smelting capacity; instead there is a strong possi-
bility of a smelter bottleneck (discussed separately). Under
these conditions, alternatives (a), (e) and (f) have a low
probability of occurrence.
• Smelter Closings
Assuming the requirements of 90% sulfur recovery, we believe that
the Douglas, Arizona smelter of Phelps Dodge and the Tacoma,
Washington smelter of Asarco will be severely affected and might
shutdown. Although the impact on the remaining smelters will be
less severe and is not expected to lead to a smelter shutdown under
the present assumption, more stringent standards could have a severe
impact on these remaining smelters and the mines supplying them.
For example, recent Kennecott testimony in Nevada indicates that
any standard requiring over 60% sulfur recovery at the McGill
smelter (and therefore requiring other technology in addition to
acid manufacture from converter off-gases) would push the mine-
smelter complex into a sub-marginal situation and lead to the
termination of the Nevada operations.
*It should be noted that even if we make the questionable assumption
that the smelters forego all profit in order to decrease the pass-back
to the mines, this does not provide significant relief to the mines—
the pass-back decreases by less than 10%.
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Douglas is in part a custom smelter but it also smelts material
from Phelps Dodge's Bisbee and other mines. (The open pit
Bisbee mine is scheduled to close in 1973, due to exhaustion of
reserves.) Phelps Dodge believes that this smelter could be
modified to meet ambient standards (by permanent reduction of
sulfur input plus intermittent curtailment of operations), but
feels that conversion of the smelter for SO- recovery, as would
be required for emission standards, is not justified. Therefore,
this smelter would remain open only if an emission standard is
not imposed in Arizona.* The imposition of an emission standard
in this case would hasten the demise of an old smelter which other-
wise has years of available operating life. Phelps Dodge
has announced plans for a new smelter in Hidalgo County, New
Mexico, which is being sized to meet Phelps Dodge's mine output
in Tyrone. Thus, the closing of the Douglas smelter would not
affect PD's capability for smelting its own concentrates in the
long term but only affect its toll and custom smelting customers
(Pima and others) and Phelps Dodge mine expansion plans.
The other smelter in danger of shutdown (again, as a result of
emission control regulations) is the Tacoma smelter of Asarco.
This decision-making process is complicated by the fact that
Asarco as the major custom smelter, is dependent on outside
sources for smelter feed, cannot participate directly in decisions
affecting its supply of concentrates, and has to compete in an
international market for them. Already, Asarco cannot compete
for certain concentrates out of British Columbia because Japanese
smelters offer better netbacks to the Canadian mines. With in-
creased pollution abatement costs**, we expect Asarco to be even
less competitive internationally for concentrates, except per-
haps the high arsenic concentrates unacceptable to other smelters.
Also, because of Tacoma's urban location, some of the lower cost
pollution abatement technologies might not be usable.
Based on discussions with Asarco's management, we believe that
the decision regarding the Tacoma smelter will not be reached
before the end of 1973 and a major factor will be whether or
not a 90% emission standard will be imposed in the Puget Sound area.
Tacoma is the only processor of arsenical materials in the U.S.
The concentrates or residues from lead, silver and copper pro-
ducers in the northwest contain arsenic. The economics at these
*The latest Arizona regulations do not impose such a standard, but
the regulation has not been approved by the EPA.
**Asarco is sharing the costs of pollution abatement measures already
undertaken with the mines by requiring a "pollution surcharge" of
l-1.5
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plants are strongly dependent on obtaining a credit for values
contained in the arsenical stream and this is presently possible
since Tacoma accepts these materials (see Table 3). Thus, Tacoma's
arsenic handling capacity is irreplacable and should Tacoma close,
an arsenic treatment facility, similar to Tacoma's would have to
be provided. In general, these arsenical residues contain soluble
arsenic compounds and would have to be stored in silos.
If an arsenic treatment facility is not available, a severe impact
would be felt by the Montana smelter of Anaconda and a large
portion of the northern Idaho mines. (In the remainder of this
discussion, we assume that in the event that Tacoma closes, an
alternative arsenic treatment facility will be constructed and
will be available to the northwestern producers.)
Capacity Impact
A shortage of smelting capacity in the U.S. would occur if the
two smelters—Douglas and Tacoma—are closed. This loss in
smelting capacity is for "custom smelting" and the non-integrated
mines would suffer a major impact since the new smelter (Phelps
Dodge in New Mexico) will primarily treat the output of PD's
Tyrone mine. Because of this potential shortage, the non-integrated
mines have recently proposed to form a consortium to consider the
building of a new smelter. Except for the PD smelter, we do not
expect serious consideration of other smelter construction plans
until after all uncertainties relating to Douglas and Tacoma have
been resolved.
It should be noted that (^cid leaching of oxide ores, waste dumps
or tailings might substantially increase the domestic production
of primary copper. This would tend to maintain the equilibrium
or narrow the gap between the demand and domestic production.
However, this would not directly solve the problem confronting the
independent mines—finding a smelter for treating their sulfide
concentrates.
In recent years, the export of concentrates (and the accompanying
pollution) to foreign smelters and reimport of primary copper
has been proposed as a solution to domestic environmental
problems. The implications of this suggestion are discussed in
the next section.
Mine Impact
As mentioned under "General Considerations", when the lack of
excess smelter capacity freezes mine-to-smelter concemtrate flow
patterns, an impact can occur on a mine from two general causes:
pass-back of increased smelter costs, or absence of concentrate
outlets.
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Arthur D Little, Inc.
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We believe that the mines of Duval Corporation (who ship their
concentrates to Asarco) and of the Anaconda Company will suffer
a large impact. This impact arises primarily from the fact that
the concentrates produced by these mines would be treated at
smelters with higher-than-average incremental pollution control
costs and because the mines are medium to high cost mines. We
believe that these increased costs alone will not be severe
enough to cause mine closings. The other mine is the Ruth,
Nevada mine of Kennecott that can suffer a potentially severe
impact if more stringent standards are imposed in Nevada.
There are many small mines that might also be affected but nothing
is known about their operating costs or operating margins. Data
from the Census Bureau indicate that these mines produce less
than five percent of the domestic mine output of copper and employ
less than five percent of the total employment in copper mining.
Thus even if this segment were eliminated completely, the impact
on mine production or total industry employment will riot be severe.
We believe that the proposal for large-scale export of concentrates
(and pollution) abroad is not realistic over the short-term for
several reasons. The only country with a reservoir of excess .
smelting capacity at the present time is Japan, the excess
capacity being a result of decreased copper consumption from a
slowdown in Japan's industrial activity. In the past, the
Japanese smelters have been able to offer better terms for con-
centrates because of lower labor costs and because they obtained
positive netbacks from acid sales. The latter is no longer true.
Also, the Japanese smelters are faced with pollution regulations
as stringent as the United States and would be reluctant to
import pollution above and beyond what is unavoidable in obtaining
copper for its internal use. The expansion of Japanese smelting
capacity has been undertaken as a means of assuring the supply
of copper for their domestic fabricating industry. A significant
amount of new mine capacity in the world results from tie-ins or
long-term contracts with Japan and these projects would have
priority over U.S. concentrates for toll smelting. Thus, we
believe that it will be easy to sell concentrates to Japan when
their domestic demand is high and reimport semifinished or
finished, high value-added products but that Japanese smelters
will undertake only a minimal amount of toll smelting (i.e.,
returning significant quantities of lower value-added primary
metal.)
The transportation costs involved in shipping Arizona concentrates
to Japan and reimporting the copper are of the order of 3-4c/lb.
This is about the same as the incremental cost of pollution control
at most locations in the U.S.; hence, the netback to a U.S. mine
is lower after a Japanese pollution abatement surcharge is taken
into account.
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In the long term, increased operating costs at domestic plants
would increase the attractiveness of locating smelters abroad,
preferably in remote locations, and could accelerate a trend for
the major nonferrous metal companies to invest abroad.
• Water Pollution
The water pollution control costs affect mainly the Coastal
refineries since the scarcity of water in the west has required
proper water management at western mines, mills, smelters and
refineries. Assuming that the effluent water standards corres-
pond to the type of residual concentrations obtainable after
heavy metal ion removal as hydroxide, and suspended solids
removal by settling, we find these costs to be small when com-
pared to the air pollution costs and are not expected to have
any significant impact. Furthermore, the impact is more or
less uniform within the industry.
4. Impact on Individual Companies
In general, the capital and operating costs to achieve pollution
abatement would not be incurred by the companies in the absence of pollution
abatement regulations, i.e., they cannot be justified on the basis of con-
ventional return-on-investment criteria.
We assessed the factors affecting the individual plants during our con-
sideration of plant shutdown probabilities. In this section, we assess the
impact on the corporate entities of the decision to invest in the pollution
abatement facilities. In general, we would assume that a large industrial
corporation which is clearly viable has access to substantial capital—in
the form of debt and/or equity.
In a plant-by-plant and company-by-company analysis of pollution abate-
ment impact, two viewpoints have to be considered. The availability of
capital for pollution abatement equipment at each plant has to be viewed from
the standpoint of the resources available to the entire corporation.
However, the justification for spending this capital at a particular plant
would result from "a study of that particular plant's economics which would
take into account alternatives such as the cost of production from a refitted
plant, shifting production to other plants, and most important, the
probability that this particular plant will remain a profitable entity.
The impact on individual companies was analyzed by aggregating the
company-by-company capital expenditures and operating and maintenance cost
requirements for the "local" case for meeting air and water pollution
abatement standards. These were then compared with each company's sources
of revenues, earnings, cash flow, debt-equity structure, and record of
performance in terms of operating margin, return on equity, capital expen-
duture, etc. Table 7 places future pollution abatement costs in the per-
spective of total company operations. These costs estimated by us for
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TABLE 7
SELECTED PRIMARY NONFERROUS METALS*
-i
D
COMPANIES POLLUTION ABATEMENT COSTS
[From perspective of total company operations]
Annualized
1971
Sales Level
X
AMAX
ASARCO
Anaconda
Gulf Resources &
Chem.
Inspiration
Kennecott
National Zinc
Newmont
Phelps Dodge
St. Joe Minerals
1968-71
Operating
757 x
657 x
947 x
115 x
66 x
1,053 x
N.A
198 x
704 x
194 x
Avg.
Margin
13.6%
11.0%(a)
15.4%
10.0%
28.1%
24.4%
39%
20.7%
22.87.
Base Level or
"Normal"
Operating
Income
Pre-Tax
$MM/Year
103
72
146
11.5
19
257
0.2-2.0**
77.4
146
44
Avg.
Capital
Spending
Rate
1968-71
$MM/Year
103
42
102
7
10
157
el.O
95.0
82
15
Cum. Capital
Outlay for PA"
1972-1975
(Estimated)
$MM
9.3
119.6
93.0
5.0
45.5
111.0
<10.8
40.5
90.5
10.9
•f 4 =
$MM/Year
2.2
30.0
23.3
1.25
11.4
27.8
<2.7
10.1
22.6
2.7
Rate as
Percent of
Avg. Capital
Spending
%
(Rounded)
2
71
23
18
114
18
large
10.6
27
18
Probable
Oper. & Maint .
Costs of
Pollution
Abatement Equip.
$MM/Year
(Rounded)
0.8
14.5
7.0
0.2
2.8
7.4
1.4
4.9
7.5
1.0
O&M Cost
As Percent
of Normal
Base
OP Income
7»
(Rounded)
1
20
5.0
2
15
3
large
6.4
5.1
2
Annual
O&M +
Outlay
Normal
Income
%
1.8
37
11.2
6.1
39.0
7.2
large
11.7
11.6
4.8
PA
10%
OP
^The ratio of net income to sales was used as a more meaningful figure for ASARCO in this context.
*For a discussion of New Jersey Zinc Company, a subsidiary of Gulf and Western Industries, see text.
**Estimated.
SOURCE: The information presented above has been obtained from company annual reports and SEC filings, statistical services,
financial manuals, and other sources believed to be reliable but its accuracy and completeness are not guaranteed.
ADL estimates.
o
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copper, lead and zinc were adjusted to reflect post-1972 costs by deducting
the amount already spent and reported in individual company annual reports.
Table 7 highlights those companies which appear to be most impacted by
pollution control costs in relation to their normal pattern of earnings,
capital spending and financial position. Of the copper producers, Asarco
and Inspiration will be affected the most. The impact on Inspiration is
the result of the smelter reconstruction project. In Asarco's case,
presumably its extremely low debt-to-equity ratio and its earnings record
will enable the company to raise long-term debt if it so chooses. However,
the impact of pollution abatement operating costs could be large., especially
in the absence of the ability to pass along the costs. The impact on the
other companies is less severe.
5. Employment Impact
• Employment Loss
The closing of the Tacoma smelter would directly affect its
employees, estimated at 600, and indirectly affect 1200 other
jobs (on the assumption of a 2:1 multiplier). Because of
Seattle-Tacoma's urban environment, the local impact would be
diffuse.
The closing of the Douglas smelter (employment of 650) will
have a major impact on the surrounding area since, after the
mines close in 1973, it would be the remaining major industry
in the towns of Douglas (population 12,000) and Bisbee
(population 10,000). Similarly, the closing of small mines
could have a large local impact on isolated mining communities
in the west.
• Employment Gains
The pollution abatement equipment at smelters would increase
employment by about 25 to 60 employees at each plant or 330 to
780 employees in the western U.S. (This would indirectly lead
to 660 to 1560 more jobs.) The employment gains at copper
refineries will be relatively small.
The installation of pollution abatement equipment will increase
the demand for construction labor and severe shortages could
occur in Arizona. These could lead to construction delays and/or
increase in costs significantly above those estimated in this
report.
I. INDIRECT IMPACTS
1. Domestic Mine Production and Strategic Considerations
We believe that government policy in other areas affecting exploration
and access to mineral deposits would have a much more serious impact on future
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domestic mining activity than the reduced netbacks to the mine resulting
from pollution abatement costs. Since copper is a material which is stock-
piled, any policy that affects domestic mine production has strategic
implications. Current trends in government policy impact these industries
at many levels and, in general, these impacts tend to be additive.
2. Fuel, Energy and Raw Material Availability
At present, smelters generate most of their internal electricity require-
ment by utilizing waste heat. The increased energy consumption resulting
from pollution abatement will result in a net power consumption as high
as 80-100 megawatts for the entire copper industry. Also, should the demand
for limestone for S0» control in the fossil fuel power plants affect its
availability and cost, an impact will be felt by the nonferrous metal
industry.
3. Balance of Payments
An adverse change in the balance of payments, amounting up to about
$400 million, could occur if the Douglas and Tacoma smelters were closed
before new smelting capacity were available since this would lead to a
smelter bottleneck and the incremental refined metal needed by the fabri-
cators would have to be imported. This is based on a 3% growth in demand.
If these smelters are not closed prematurely, the impact on the balance of
payments will be much smaller. The balance of payment deficit can be
larger than shown if copper is imported in the form of higher value-added
semi-finished or finished goods.
4. Alternate Materials
Plastics and aluminium are considered substitutes for copper. These
industries are also being severely impacted by changing raw material costs,
increases in other operating costs and new pollution abatement costs. In
the absence of detailed comparative impact studies on the latter commodities,
we are unable to reach firm conclusions regarding the possibilities of
substitution of copper by these materials.
5. Merchant Acid Industry
Our survey of sulfuric acid markets indicates that the acid has a
negative value at the smelter and in some instances neutralization of smelter
acid would be cheaper than sale in direct competition with merchant acid
production. The leaching of oxide copper ores, waste piles and tailings is
an attractive alternative to neutralization with limestone and would be
pursued wherever possible since this approach (besides disposing the acid)
has the potential for increasing copper production. Should the demand for
limestone (for S02 removal and other purposes) substantially increase its
price and the smelter acid is not all used up for leaching, the sale of
smelter acid would force the closing of the western merchant acid industry.
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6. Financial and Tax Aspects
If the "passing-back" of the pollution abatement cost were to either
decrease the value of the concentrate or raise the cost of mining, this
could have the effect of lowering the amount of depletion allowed for tax
purposes. Other things being equal, this would have the effect of further
reducing net after tax income from mining and decreasing the cash flow.
To the extent that effective tax rates are relatively low for the
major primary npnferrous metal companies, they may have more incentive to
use investment tax credit provisions than rapid amortization for pollution
abatement facilities.
Industrial development bonds could be advantageous for the financing
of pollution abatement equipment since they allow a corporation to conserve
cash over the short term (by taking advantage of the leasing provisions
typically incorporated) and serve as a source of "off-balance-sheet"
financing. The tax-exempt feature generally means a lower effective interest
cost; one to two percentage points less than regular commercial financing.
At this point in time, it is not clear what percentage of total pollution
abatement cost could be financed in this fashion.
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III. SUMMARY OF POLLUTION ABATEMENT COST ESTIMATES
The basic premise in our approach to estimating the capital investment
requirements for pollution control was to accept the fact that the age
and physical condition of many of the plants would require a judicious
play-off of capital and operating expenses at each location to meet air
and water quality or emission standards at "minimum" expense and dis-
ruption of an operating facility. The short timetable for achievement
of environmental goals and the unproven nature of some of the SOx re-
covery and new smelting technology (and an apparent absence of strong
economic incentives for a rapid change in favor of the latter) would
mean that in most instance proven add-on pollution control equipment
would be utilized.
A plant-by-plant approach was used in our analysis since capital invest-
ment and operating costs are highly dependent on the nature of specific
plants and there are only a small number of plants. The capital cost
estimates for air pollution abatement at the thirteen western smelters
are shown in Table 8, and the basis for cost estimation used is pre-
sented in Part III of the report. The Michigan smelter was not con-
sidered since it already meets the Federal ambient primary and second-
ary standards and the Cities Service smelter was not considered because
the plant is undergoing extensive modernization and will presuma.bly meet
all the anticipated requirements after the modernization is completed.
The cost estimates in Table 8 refer to three standards: the Federal
ambient, "local" and 90% sulfur recovery. The technology selected for
achieving these standards is indicated in the footnotes. Technologies
for dilution of SOx discharges were included where appropriate as a
means of meeting the ambient standards. "Local" emission standard was
assumed to be 90% in Arizona*, Montana and the Puget Sound area in
Washington and lower in all other locations. Details of the various
assumptions for this case were presented earlier on page 3. For the
financial impact analysis of the previous chapter, this "local" cost
was considered as the base case. The final column is the estimate of
capital costs if a uniform 90% sulfur recovery standard were applied
to all smelters. In states with 90% emission control, the "local"
cost is based on the use of lower cost alternative technology, in some
cases.
ie
Subsequent to the writing of this report, Arizona regulations were
amended so that 907o sulfur recovery was not required by the State
regulations. These have not been approved by EPA.
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TABLE 8
ESTIMATED CAPITAL INVESTMENT NECESSARY TO ADAPT EXISTING COPPER
SMELTERS FOR AIR POLLUTION ABATEMENT
(millions of $)
For Federal
Ambient Standards
Total Cost with Emission
Standards in Addition
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
•12.
13.
Cost
27
134
82
45
36
30
15
23
24
45
20
17
16
Approximate
% S Recovery
90
0
55
55
65
60
90
60
60
70
55
55
55
2 3
'Local" 'J
27
-
85
90
46
45
15
23
24
45
20
50
52
90% S Recovery
27
74 (Plant will close)
122
90
46
45
15
35
36
78
33
70
52
Total Capital Investment 393
522
723
Actual recovery might vary + 15% from the number shown.
2
In states with 90% control, local includes alternate technology.
3
Local costs have been considered as the base case in evaluating the
economic impact. "Local" assumes 90% sulfur recovery in Arizona, Montana
and Washington.
Plant output will decrease significantly.
SOURCE: ADL Estimates
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TABLE 8 (Cont'd)
ASSUMED TECHNOLOGY FOR EACH PLANT
PLANT NO.
1. Dust collection, precipltators, DMA and acid plant
2. Ambient; Roaster, reverb, converter gas handling and gas cleaning, field
monitoring equipment.
90%: Company estimate.
3. Ambient: Reverb modernization (1), converter aisle changes, gas handling and
gas cleaning, acid plants.
Local; Roasters, converter aisle changes, gas handling and gas cleaning, acid
plants, slag flotation.
90% Sulfur Recovery; Closed-in reverbs, waste-heat boilers, gas handling and
cleaning, acid plants.
4. Ambient; Converter gas handling, gas cleaning, dust collection, acid plant.
Local; Roasting, electric furnace, converter gas handling, gas cleaning, dust
collection, acid plants.
5. Ambient; Converter gas handling, gas cleaning, dust collection, acid plant,
neutralization.
Local; Converter gas handling, gas cleaning, dust collection, acid plant,
neutralization, limestone scrubbing.
6. Ambient; Converters, converter gas handling, gas cleaning, dust collection,
acid plant.
Local; Electric furnace, converters, converter gas handling, gas cleaning,
dust collection, acid plant.
7. Ambient; Converter gas handling, gas cleaning, dust collection, slag flotation,
acid plant expansion, monitoring equipment.
8. Ambient; Converter gas handling, gas cleaning, dust collection, acid plant,
neutralization, monitoring equipment.
90%; Ambient plus lime/limestone scrubbers.
9. Ambient; Converter gas handling, gas cleaning, dust collection, acid plant,
tall stack, monitoring equipment.
90%: Ambient plus lime/limestone scrubbers.
10. Ambient; Roasters, converter gas handling, gas cleaning, monitoring equipment.
90%; Roasters, dryer, new furnace (1), converter gas handling, gas cleaning,
dust collection, slag flotation, monitoring equipment.
11. Ambient; Converter gas handling, gas cleaning, dust collection, acid plant,
monitoring equipment.
90%: Ambient plus acid plant expansion, lime/limestone scrubbing.
12. Ambient: Converter gas handling, gas cleaning, dust collection, acid plant,
monitoring equipment.
Local: Ambient plus roasters, acid plant expansion, slag flotation, furnace
modernization.
90%; Ambient plus closed-in furnaces, DMA scrubbers, SO- plant, elemental
sulfur plant.
13. Ambient; Converter gas handling, gas cleaning, DMA scrubbing, liquid SO-
plant, monitoring equipment.
Local; Ambient plus closed-in reverb, gas cleaning, DMA scrubbing, SO- plant,
elemental sulfur plant.
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Estimated yearly direct operating and maintenance expenses (exclusive
of amortization and debt service charges) are shown in Table 9. In
preparing these estimates we made allowance for maintenance as a func-
tion of capital investment varying this according to the severit}r of
the operation. A survey of sulfuric acid markets indicated that sur-
plus acid would be available which would have to be disposed of by
sales to distant customers, neutralization or oxide ore leaching --
its equivalent from an acid disposal viewpoint. We have assumed a
uniform negative netback of $4 per ton of surplus acid.
Although air pollution abatement costs predominate in the copper industry,
investments in water pollution control will be required at mines, smelters
and refineries. In general, the mines and smelters have excellent water
management programs because there are largely located in arid regions
where such practices are mandatory. On the other hand, refineries are
often located in water plentiful regions and have not incorporated such
good water management programs. Our estimates for water pollution con-
trol are based on very little data from the industry since, except in a
few isolated instances, the paramount problem in capital and operating
costs lies in air pollution control and most of their internal work has
been concentrated in that area. Also, the costs are based on the assump-
tion that neutralization with lime and settling will be adequate. It is
seen that the figures shown are an order of magnitude less than for air
pollution control. The results of our estimates are shown in Tables 10
and 11.
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TABLE 9
ESTIMATED DIRECT OPERATING & MAINTENANCE COSTS
AT EXISTING COPPER SMELTERS FOR AIR POLLUTION ABATEMENT*
Millions of Dollars/Year
Plant
Number
1
2
3
4
5
6
7
8
9
10
11
12
13
Total
Total Costs
For Federal with Emission Standards in Addition
Ambient Standards
1.6
0.4
2.7
3.2
3.9
2.2
1.2
1.9
1.6
2.2
2.4
2.3
0.9
26.9
Local
1.6
• -
5.1
7.6
5.0
2.7
1.2
1.9
1.6
2.2
2.4
3.6
5.7
40.6
90%S Rec.
1.6
- (Plant will close)
7.3
7.6
5.0
2.7
1.2
2.8
2.4
2.9
3.6
6.1
5.7
48.9
SOURCE: ADL Estimates
No indirects, amortization or debt service charges
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TABLE 10
ESTIMATED INVESTMENT COSTS FOR WATER POLLUTION CONTROL*
IN THE COPPER INDUSTRY
Company Number Millions of Dollars
1. 3.0
2. 10.0
3. 0.5
4. 3.0
5. 4.0
6. 5.5
7. 4.0
8. 0.5
Total 30.5
The technology selected might not be adequate to meet
latest Federal and state guidelines in all cases.
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TABLE 11
ESTIMATED DIRECT OPERATING COSTS FOR WATER POLLUTION CONTROL*
1.
2.
3.
4.
5.
6.
7.
8.
IN THE COPPER INDUSTRY
Company Number Millions of Dollars /Year
1.50
1.00
0.05
0.50
0.50
0.75
0.50
0.05
Total 4.85
No indirects, amortization or debt service charges.
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Arthur D Little Inc
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APPENDIX A
IMPACT OF EPA REGULATIONS OF JULY 1972
The purpose of this appendix is to assess qualitatively the effects of the
new regulations promulgated by EPA in July 1972. (See Federal Register -
July 27, 1972, Volume 37, No. 145, Part III).
These new regulations have the following features:
• The regulations are of the "emission type", i.e. they limit SO^ emissions
from each smelter (in Ib. SCWhour) to a specified amount. Thus, they
require the recovery of a substantial fraction of sulfur in the feed
materials when the smelters are operating at capacity and/or require a
production curtailment.
• We understand that the permissible S0» emission rates for each smelter
were calculated on the basis of available air quality data and atmos-
pheric dispersion models. We also understand that "emission type" regu-
lations were adopted because EPA believes that other S02 control
philosophies such as "closed-loop" control (based on measuring ambient
SC>2 concentrations and utilizing this information to control the smelter
operating rate), might be more difficult to enforce and would lead to
degradation of air in areas where air quality is superior to the Federal
standards. However, recent conversations with EPA indicate that it would
accept a "closed-loop control" scheme if it can be shown that these sys-
tems are workable.
• The proposed regulations are for achieving Primary or health-related
ambient air quality standards only, and EPA believes that these would be
achievable by the utilization of acid plant technology and production
curtailment. If the standards cannot be met by this technology but
require scrubbers, a two-year extension, until July 31, 1977, is available.
• An 18-month extension has been granted to the states for submitting
implementation plans acceptable to the EPA for meeting the Secondary ambient
air quality standards. Presumably, these standards would be more stringent
and might be based on the further utilization of then available technology
(e.g., scrubbers) and production curtailment.
• All SO^ emissions have to be captured and vented via a stack. This
presumably includes low level emissions such as "converter aisle emissions."
A. GENERAL CONSEQUENCES
In general, the adoption of fixed emission standards is more expensive because
it eliminates certain lower cost strategies which could be used for meeting
ambient standards. For example, tall stacks and preheated dilution air can
no longer be used even in cases where they might be the lowest cost strategy
for meeting the Federal ambient standards.
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Arthur D Little Inc.
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The other aspect of these fixed emission standards is that in most, cases
they require sulfur recoveries considerably in excess of those achievable
by using acid plants and would require scrubbers and/or a permanent production
curtailment. This is because under a fixed emission standard, the smelter
cannot increase its operating rate under favorable weather conditions. The
closed-loop control approach, on the other hand, provides such a mechanism
so that a smelter can make up to some extent the production lost during un-
favorable weather.
The regulation on low level emissions can have a major impact if they are
interpreted to apply to all low level emissions. For example, if converter
aisle emissions are included, the air in the aisles will have to be collected
and vented via a stack.
A detailed and complete analysis of the impact of these regulations is not
possible with the scope of the present effort. Furthermore, such an analysis
would be incomplete since new and presumably more stringent standards would
be passed in 18 months for meeting Federal Secondary Ambient standards. Also,
because of litigation and the fact that the specific approach for meeting
the secondary standards has not been delineated, the smelters could not
properly plan their compliance schedules.
We have evaluated the extent of the permanent production curtailment required
at each smelter by the new regulations under the assumption that scrubbers
are not used and this has been presented in Table A-l. The table shows the
percent SO- recovery required when the plant is operating normally, the
approximate sulfur recovery that might be achieved by using acid plants
(using converter gases and roaster gases if roasters are already present)
and an estimate of the extent of the permanent production curtailment.
In our opinion, permanent production curtailments of greater than, about
10-15% are serious and, if enforced, indicate a high probability of plant
shutdown.
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Arthur D Little Inc.
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TABLE A-l
% SOx Recovery at
Normal Plant Throughput
Required by
New Regulations
% SOx Recovery
Achievable with
Acid Plants
Estimated Degree
of Production
Curtailment - %
Copper Smelters
1. Phelps Dodge, Douglas, Ariz.
2. Phelps Dodge, Morenci, Ariz.
3. Phelps Dodge, Ajo, Ariz.
4. Kennecott, Garfield, Utah
5. Kennecott, Hayden, Ariz.
6. Kennecott, McGill, Nev.
7. Kennecott, Hurley, N.M.
8. Asarco, Hayden, Ariz.
9. Asarco, El Paso, Texas
10. Asarco, Tacoma, Wash.
11. Anaconda, Montana
12. Newmont, San Manuel, Ariz.
13. Inspiration, Ariz.
Lead Smelters
1. St. Joseph Minerals, Mo.
2. Missouri Lead, Mo.
3. Asarco, Mo.
4. Asarco, El Paso, Texas
5. Asarco, E. Helena, Mo.
6. Bunker Hill, Idaho
Zinc Plants
1. Asarco, Corpus Christi, Texas
2. Bunker Hill, Idaho
3. Amax, E. St. Louis, 111.
4. National Zinc, Bartlesville, Okla.
5. Asarco, Amarillo, Texas^
6. Amax, Blackwell, Okla.
7. New Jersey Zinc, Pa.
8. St. Joseph Minerals, Pa.
90
90
70
76
96.7
60
60
96.7
43
90
89
94.5
73
-
55-60
NA
65-70
90
60
60
55
55
55-60
55-60
65
NA
4
100
15-25
0
5-10
5-8
0
0
35-45
0
20-30
30-35
25-30
0
75I
751
751.
A.P.'
87
96
A.P.
96
A.P.
85;
85-
75"
756
756
NA
70-80
70-80
85-95
85-95
85-95
80-90
85-95
85-95
0
0
0
0
10-20
15-25
0-10
Estimated; regulations for 2000 ppm of SOx
2
A.P. - acid plant will be adequate
3
Estimated; regulations for 500 ppm of SOx
4
Plants will close
N.A. - not applicable - plant modified for a higher recovery
Acid plants modified
SOURCE: ADL Estimates.
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Arthur D Little Inc
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