PB-243 811
REGION X
i
RELATIONSHIP OF EFFLUENT
LIMITATIONS TO FUTURE
PULP MILL CLOSURES
ENVIRONMENTAL
PROTECTION
AGENCY
REGION X
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RELATIONSHIP OF EFFLUENT LIMITATIONS
TO FUTURE PULP MILL CLOSURES
Robert L. Coughlin
Economist
Working Paper No. 88
U.S. Environmental Protection Agency
Region X
Seattle, Washington 98101
December 1972
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TABLE OF CONTENTS
Page
INTRODUCTION 1
CONCLUSIONS 3
I. INDUSTRY BACKGROUND 5
Raw Materials 6
Organizational Trends 10
Competition for Raw Materials 13
Trends, 1963-1972 17
Employment and Productivity 24
Appendix 29
II. WASTE PRODUCTION FACTORS 31
III. WASTE REDUCTION COSTS 42
IV. COST OF WASTE TREATMENT TO REGION X
PULP AND PAPER MILLS 50
Investments 50
Annual Charges 53
Impact on Firms 60
Appendix 66
V. IMPACT OF EFFLUENT STANDARDS 68
VI. LIKELIHOOD OF ADDITIONAL MILL CLOSURES .... 73
Factors Related to Closures 74
Ways in Which Waste Treatment Costs
May Influence Closures 79
Relative Vulnerability to Closures .... 83
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LIST OF TABLES
Page
Table 1 - Pacific Northwest Timber Cut, 1963 .... 6
Table 2 - Prospective 1985 Timber Cut 9
Table 3 - Indicated Pulp - sustaining capacity of
PNW Forests in 1985 10
Table 4 - Concentration Trends 11
Table 5 - Average Stumpage Prices - Sawtimber Sold
from National Forests 16
Table 6 - Capacity and Location of Pulp Mills,
1963-1972 20
Table 7 - Shifts in Product Mix 1963-1972 25
Table 8 - Shift in Process Mix 1963-1972 26
Table 9 - Employment and Productivity Trends .... 28
Table 10 - Capacity and After Treatment Waste
Discharge of Region X Pulp and
Paper Mills 32
Table 11 - Effluent Characteristics - Northwest
Pulp and Paper Mills 33
Table 12 - Waste Characteristics by Categories of
Pulping Activities 35
Table 13 - Wastewater Characteristics of Region X
Pulp Mills Grouped by Process/
Treatment Classes 40
Table 14 - General Model of Waste Production for
Woodpulp Mills 41
Table 15 - Examples of Construction and Operating
Costs for Various Levels of Flow ... 46
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Table 16 -
Table 17 -
Table 13 -
Table 19 -
Table 20 -
Table 21 -
Table 22 -
Table 23 -
Table 24 -
Table 25 -
Table 26 -
Table 27 -
Table 28 -
Table 29 -
Table 30 -
Cost to Flow Relationships of Basic Waste
Treatment Practices 49
Current Replacement Value of Installed
Facilities 52
Incremental Investment Required to Achieve
Treatment Norms 56
Current Level of Annual Waste Treatment
Costs 57
Incremental Annual Cost of Treatment
Upgraded to Industry Norm 58
Estimated Increase in Production Costs
Attributable to Waste Treatment 59
Inter-Firm Impact of Meeting Waste Treatment
Norms 63
Values Added by Waste Treatment by Product
and Process Categories 65
Comparison of Reported or Modelled
"Secondary Equivalent" with Proposed
"Best Practicable Treatment" Guidelines . 67
Illustrative Cost Increments Associated with
BPT Effluent Quality Guidelines 72
Mill Closures, 1957-72 75
Regional Growth Characteristics, 1963-72,
Compared to Waste Treatment & Discharge
Characteristics 76
Characteristics of Industry Development,
1963-72 78
Status of Major Firms' Waste Treatment, 1972,
as Reported by Council on Economic
Priorities 80
Correspondence Between Average Waste Treat-
ment Costs and Other Expansion/Decline
Characteristics 81
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Table 31 - Waste Treatment Costs Ranked by Product Groups . . 85
Table 32 - Plants Ranked From Highest to Lowest in
Indicated Exposure to Closure 88
Table 33 - 'Vulnerable1 Mills Ranked According to Indicated
Exposure to Closure 94
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INTRODUCTION
Section 302 (b) of the Federal Water Pollution Control
Act of 1972 stipulates that under some circumstances the eco-
nomic and social costs of achieving effluent limitations shall
be taken into account in determining the nature of such limita-
tions.
That is a particularly difficult directive for the eco-
nomist to grasp. He operates from an intellectual base that
dictates that every human action, every human choice has a
cost (and that there are ultimately only social and economic
costs). His creed is contained in the maxim that "there are
no free lunches."
It is probably the case that the law requires that what
is to be evaluated is the magnitude of the implicit income
transfer involved in setting a particular effluent limitation.
In effect, the question becomes: how many jobs, how much pro-
duction, and how much environmental amenity must competitive
producers and consumers be asked to forego_ in the event that
a. substandard effluent limit is required to maintain the status
quo at a. particular site? Phrased in that fashion, the question
becomes intelligible. Obviously, however, it is no longer a
technical economic question. It is the essence of the political
dilemma, the basic problem in social morality that government
exists to resolve.
The legitimate task of the economist, then, can be little
more than to establish the economic context for each such
political decision. He is to set in place the series of func-
tions whose relative dimensions and interplay bear upon the
social and political decision process—price effects, temporal
dimensions, raw materials and labor supply, capitalization,
demand trends. Understanding these, the decision maker may
better understand the probable consequences of his decisions,
the amount of continued employment and its extent in time that
can be transferred from the global and national communities to
relieve or postpone distress for a particular firm, establish-
ment, or community.
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This study is an effort to draw that economic context fo
the industry that is generally conceded to be most significan
to water pollution in Federal Administrative Region X. It is
pointed to the solution of a single problem, determining the
impact of waste treatment on production costs of the Region's
pulp mills, and relating it to fundamental industry dynamics
in order to forecast the likelihood of plant closures.
Hopefully, this technical exercise will assist the broader
minds and larger responsibilities of those who may be forced to
determine the relative economic and social costs of setting
particular effluent limitations.
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CONCLUSIONS
1. Growth of the Pacific Northwest woodpulp industry will
be constrained in the future by the relatively complete utiliza-
tion of raw materials that already exists. The industry is
undergoing a process of concentration that features vertical
integration of forest products output; fewer firms; fewer, larger,
and more specialized pulp mills. Labor requirements are dropping
steadily, and employment can be expected to fall significantly—
4000 to 7000 jobs— over the next decade.
2. Pulp production, and related paper manufacturing, is
the largest single source of waterborne waste discharge in Region
X. Daily waste discharge of the industry amounts to almost a
billion gallons of water, more than 3.5 million pounds of five
day biochemical oxygen demand, and 1.3 million pounds of settle-
able, floating, and suspended solids. There is enormous inter-
mill variation in discharge per unit of product, due to differ-
ences in production processes employed, degree of bleaching, and
amount of waste treatment provided prior to discharge.
3. Costs of treating wastes to reduce their polluting
strength vary with volume of water to be treated, the concen-
tration, specific gravity, and rate of decay of potentially
polluting materials to be reduced or counteracted, and the
degree of waste reduction that is required. There are economies
of scale and of complementarity in waste treatment that provide
definite cost advantages to larger dischargers. The treatment
strategy is basically modular, so that treatment cost increases
tend to occur as a series of interrupted plateau functions rather
than a continuous progression.
4. Region X mills had invested about $96 million (1967
purchasing power) in waste treatment by August, 1972 and were
incurring more than $18 million a year of waste treatment costs.
To achieve what has been the generalized waste treatment goal,
i.e., "the equivalent of secondary waste treatment," will re-
quire the investment of another $82 million and impose an incre-
mental annual cost of $13 million. Mean current cost of waste
treatment per ton of output Is $2.80, and another $2.00 a ton
will be added if the equivalent of secondary waste treatment
is to be achieved. These costs are divided very unevenly among
operating mills according to their size, product mix, and degree
of waste treatment currently provided.
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5. Substitution of the specific effluent limits that con-
stitute the current interpretation of "best practicable control
technology" for the more general technological requirements
utilized under prior law may add more than $90 million to Region
X pulp mills investment requirements over the next five years
and about $12 million, $1.70 per ton of output, to annual costs.
Total investment, then, may amount to about $260 million, total
annual costs to $41 million, or $6.50 per ton of pulp output.
6. Although pulp mill closures that may be anticipated over
the next five years are to be construed largely as accommodation
to fundamental economic forces—industry concentration, relocation
to patterns of raw material availability, adjustment to economies
of scale and to technological influences—water pollution control
will play a part in such closures by (1) reinforcing competitive
advantages, and (2) modifying the timing and purpose of invest-
ment programs. Two Region X pulp mills are thought to be almost
certain to close by July 1, 1977, two more have a definite pro-
bability of closure, and closure is possible though less likely
in two other cases. Gross capacity involved is slight, a minimum
of 206 tons per day, a maximum of 971 tons per day, of a total
current capacity of 19,968 tons per day.
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I. INDUSTRY BACKGROUND
The imperatives of water pollution control law would appear
to demand that Region X pulp mills provide about $260 million
worth of capital facilities for the treatment of wastewater by
1977, and that they add at least $41 million a year to the sell-
ing prices of their products in order to meet the costs of waste-
water treatment. (Actual price increases will probably come
closer to $52 million, assuming maintenance of the industry's
characteristic markups. It should be noted, too, that all values
are presented in terms of 1967 purchasing power, so convey no
more than 70 to 75 percent of their August 1972 impact.)
These are very significant sums. As a rough calculation,
it would require more than $3 billion to reproduce the region's
pulp producing physical capital (with complete air and water
pollution control facilities), and the region sells about a
billion dollars worth of pulp each year. Water pollution control
then, could account for as much as 9 percent of the capitalization,
and 5 percent of the product value of Pacific Northwest and
Alaskan wood pulping by the end of the current decade.
Quite obviously, expenditures of the indicated magnitude
will have influences on the behavior of firms, and these will
extend to availability of employment opportunities and the com-
mercial prospects of the communities in which pulp mills are
presently located.
It should be equally obvious, however, that those impacts
cannot be isolated from other influences that bear upon the
industry. The position that is often advanced (mercifully, it
is heard with increasingly less frequency as time passes) that
pollution abatement costs are so great that they will cause
plants to close can be considered blatant nonsense. But so
can the claim of the emotional environmentalist that pollution
control costs should have no influence on operational circum-
stances, or that they can be entirely met out of profits.
Conventional economic theory dictates that pollution con-
trol is a cost that, like any other value added to a product,
will be passed on to the consumers of that product to the extent
possible, even to the extent of marking it up and deriving a
profit from it if at all possible. And like any other incremental
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cost, it carries with it the possibility of closing some plants,
depending on their innate profitability and their ability to con-
trol that cost relative to the abilities of competing plants.
If one is to gage the response of Region X pulp mills to environ-
mental regulation, he must consider regulatory cost in the con-
text of industry trends, raw materials availability, market pro-
spects, and inter-plant variations in efficiency. It seems un-
likely that water pollution abatement has, by itself, closed or
will ever close a pulp mill in Region X; it is even more unlikely,
however, that water pollution abatement, because it imposes a
capital demand and imposes shifts in costs structures, has not
been a consideration in capitalization decisions, or that it will
not affect such decisions over the next few years.
Raw Materials
The ultimate constraint on volume and location of woodpulp
production is the availability of the basic raw material, wood.
Although Pacific Northwest forests are abundant and prolific,
their production capacity is already very fully utilized. In
western Washington and northwest Oregon, cutting has for some
years been geared to sustained yield considerations. In south-
western Oregon, where old growth forests still predominate, the
current cut is well in excess of the sustained yield. In response
to the growing squeeze on raw materials, the U. S. Forest Service
has relaxed allowable cut formulae several times in the last de-
cade, as have other land management agencies. Forest products
industries have made serious adaptations to accommodate increas-
ing scarcity, notably by broadening utilization of raw materials
through by-product development (hardboard, "lignosite" talloil,
bark mulch), utilization of residues, and by industry concentration.
The location of pulp producing capacity reflects, in a very
general way, the location of raw materials supplies. (cf. Table 1).
Table 1
Pacific Northwest Timber Cut, 1963
Millions of Board Feet
24 hour Pulping Capacity
Western Oregon
Western Washington
Eastern Oregon
Eastern Washington
Idaho & W. Montana
TOTAL (tons & %)
Nat'l
Forest
2,340
1,280
1,079
414
1,194
5,307
Other
Public
1,470
640
90
343
—
2,543
Private
Forest
4,170
3,980
685
370
1,035
10,240
Total
7,980
5,900
1,854
1,127
2,229
19,090
%
42
31
10
6
12
100
1963
3,225
9,120
—
510
1,350
14,205
1972
7,431
9,447
—
732
2,000
19,610
%
1963
23
64
0
4
10
100
%
1972
38
48
0
4
10
100
6
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That the correlation of pulping and logging activity is not
closer is not surprising. Pulp mills are initially located
where there is opportunity for intensive logging, but trees
once cut down take, a long time to grow back, and pulp mills
are not portable. In the nature of things, then, timber cut
moves progressively further from the physical capital upon
which it is based. Because each mill embodies a large amount
of capital, it is not apt to be closed as its timber supply
grows more remote. The long run adjustment of pulp produc-
tion to wood production has been dependent on growth of the
industry—the new mill invariably locates at the nexus of then
current logging activity—and the overall composition of the
industry at any point in time necessarily reflects the past
rather than the then current locational optimum.
If one considers the Pacific Northwest in terms of wood
supply areas, three broad regional groupings compose themselves
quite naturally. The largest (in size, not in forest supply)
is the area between the Cascades and the Rockies—eastern
Oregon and Washington, plus the state of Idaho, and western
Montana. West of the Cascades, the Columbia River divides the
Douglas Fir region into an Oregon and a Washington segment—
the one extending into northern California, the other into
southern British Columbia so far as forest utilization arrange-
ments are concerned.
Within these rough borders, there is a distinct difference
in the ratio of timber cut to pulp production, a difference that
is largely a reflection of the locational lag. If one reviews
the ratio of timber cut to pulp output of each area in 1963, he
finds that western Washington produced twice as much pulp as
Western Oregon, and 3.5 times as much as the area east of the
Cascades, for each unit of timber cut within the respective areas.
The 1963 pulp production per unit of logging output was:
Pacific Northwest—1 ton of pulp per 4000 board feet cut.
East of Cascades—1 ton of pulp per 8400 board feet cut.
Western Oregon—1 ton of pulp per 4800 board feet cut.
Western Washington—1 ton of pulp per 2400 board feet cut.
West of Cascades—1 ton of pulp per 3400 board feet cut.
(The ratios for western Oregon and western Washington assume that
lower Columbia River mills were supplied equally from either state.)
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Obviously enough, such general relationships include a broad
variety of detail, notably the relative forest products specializa-
tion in each area and inter-supply area exchanges of wood. Western
Washington's pulp and paper industry, and western Oregon's to a
lesser extent, subsist to a considerable degree on inshipment of
roundwood and pulp residue from areas east of the Cascades, and
from British Columbia as well in the case of western Washington.
There are, in addition to prevailing westward movements of raw
materials, significant north and south exchanges between western
Oregon and western Washington. Price, ownership of forest lands
and of wood products establishments, contractual arrangements,
and custom establish links between the forest sources of wood and
the ultimate pulp producing activities in a balance of arrange-
ments that is shifting and irregular, but tends to be based in
large measures on intra-firm considerations.
Two very basic production/raw material trends can be discerned.
In the short run, movement of wood is from the forests, wherever
located, to the pulp mills, wherever they may be located. But
over the longer run, the location of pulping capacity has been
shifting to accommodate the configuration of wood supplies. (In
the past, growth has been the force that shaped the correspondence
of new mills to available wood sources. Increasingly, however,
replacement of obsolescent mills causes the accommodation to take
the form of locational change rather than unequal expansion.)
Increasing strain on available wood supplies has led to progres-
sively more intense use of wood. Twenty years ago, lumber, ply-
wood, and pulping competed actively for the same log. In the
Pacific Northwest today, more than 60% of wood imputs to pulp
mills are the residues of lumber mills and plywood mills. Logs
tend to be separated according to species and quality for best
use and maximum yield. The probable Pacific Northwest timber
cut in 1972 will be about 20.5 Billion board feet—7.5% above
the 19.1 billion board feet of 1963. But the 6.5 million tons
of pulp that will be produced in the area (includes western Mon-
tana) is about 38% greater than 1963's output. That increase
did not come primarily from diverting logs from lumber and ply-
wood production, but from fuller use of the available wood supply.
Since wood is in short supply—at least relative to its past
abundance—and since there is a propensity to locate pulp mills
at the point of supply, the future locational situation of the
industry can best be gaged by assessing prospects for wood sup-
ply. The U. S. Forest Service has provided such an assessment.
(Prospective Economic Developments Based on the Timber Resources
of the Pacific~Northwest; USDA, Portland, Oregon, 1966.) That
evaluation is not an optimistic one. It suggests that by 1985
the Pacific Northwest can sustain a timber harvest of about 21.3
billion board feet—very little above the current cutting rate.
(cf. Table 2).
8
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Table 2
Prospective 1985 Timber Cut
Millions of Board Feet
Nat ' 1
Forest
Western
Western
Eastern
Eastern
Idaho &
TOTAL
Oregon
Washington
Oregon
Washington
W. Montana
2
1
1
2
7
,550
,400
,150
441
,044
,585
Other
Public
1,860
640
102
366
—
2,968
Private
Forest
3,
4,
1,
10,
840
710
708
376
194
828
Shift From
TOTAL
8
6
1
1
3
21
,250
,750
,960
,183
,238
,381
1963
+3%
+14%
+6%
+5%
+45%
+12%
Some basic trends and assumptions .underlie the projection.
Forest management will be significantly more intense as time
passes. The age composition of southwestern Oregon forests will
continue to impose a cut above the sustained yield rate through-
out the period. Western Washington and northwest Oregon forests
will achieve increasing productivity through the period as a
function of regrowth of cut over lands, but will be very near
the ultimate sustained yield optimum by 1985. Productivity of
private and state owned forest tracts will approach that of
national forests—a questionable assumption, in view of urban
and recreational encroachment and the permanent passage of many
farm wood lots into pasture. And, wood supplies will continue
to be diverted from lumber for production of plywood, hardboard,
and woodpulp—also debatable, as discussed below, in terms of
price and demand relationships evolving in forest products
industries.
Quite clearly, limitations on available wood supplies are
becoming a progressively more significant determinant of pulp
and paper output in the Pacific Northwest. Projected cutting
rates for 1985 could not have supported 1972 output of the
industry at the 1963 rate of conversion of timber cut to pulp
output. Even the very high 1972 pulping to cut ratio provides
little room for expansion over the succeeding thirteen years.
If the whole region were, by 1985, to sustain western Washington's
rate of pulp output to timber cut for 1963, growth in that thir-
teen year period would no more than equal that of the last decade.
(The probability of such growth must be considered slight, in
that western Washington could only sustain its pulp output in
1963 by deemphasizing lumber and plywood production and by imports
of raw materials from Canada and from logging east of the Cascades.)
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Table 3
Indicated Pulp-sustaining
Capacity of PNW Forests in 1985
Western Western East of
Oregon Washington Cascades
1. pulp-producing capacity
@ regional 1963 conver-
sion rate 6,200 T/D 5,100 T/D 4,800 T/D
2. pulp-producing capacity
@ regional 1972 conver-
sion rate 8,000 T/D 6,500 T/D 6,200 T/D
3. pulp-producing capacity
@ western Washington
1963 conversion rate 10,300 T/D 8,500 T/D 8,000 T/D
Industry Capacity, 1972 8,450 T/D 8,500 T/D 2,700 T/D
In summary, it would appear that future growth of the in-
dustry must be limited for the region as a whole, and that the
western Washington element of the industry can only be sustained
at the expense of other parts of the region or at the expense of
timber and plywood production.
Organizational Trends
As raw materials supplies have become characterized by
scarcity relative to demand, the operation characteristics of
Region X's pulping industry have also changed. The number of
plants has shrunk, their average size has increased, and owner-
ship has shifted into fewer hands. (cf. Table 4)
A decade ago, major forest products firms had already come
to dominate the industry. The degree of their control has in-
creased—though their composition has broadened. Crown Zeller-
bach and Weyerhaeuser Co. accounted for 43% of the region's
pulping capacity in 1963 (includes the latter firm's relation-
ship with Potlach Forests based on common dominant stockholders).
By 1972, the two Pacific Northwest giants accounted for only 35%
of capacity. Boise Cascade and Georgia Pacific had become their
10
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Table 4
Concentration Trends
1- Establishments Operated by Firms with Sales In Excess of $1 Billion
FIRM
Indicated
1972 Sales
($ Billions) Establishment Capacity Establishment Capacity
American Can
Boise Cascade
Crown Zellerbach
Georgia Pacific
International Paper
International Telephone &
Telegraph
Weyerhaeuser Company
TOTAL
Percent of Total
2.0
1,7
1.1
1.8
2.1
N.A.
1.6
--
1
7
1
—
--
5
14
39%
--
375 T/D
3150 T/D
600 T/D
--
—
2460 T/D
6585 T/D
45%
1
4
6
2
1
2
4
20
63%
330 T/D
1936 T/D
3098 T/D
1569 T/D
600 T/D
990 T/D
2211 T/D
11,334 T/D
58%
2. Establishments Operated by Firms Controlled by Other Firms with Sales in Excess of $1 Billion
Ketchikan Pulp
Potlatch Forests
TOTAL
Percent of Total
N.A.
1.4
1
1
2
6%
450 T/D
650 T/D
1
1
630 T/D
1000 T/D
1100 T/D 2 1630 T/D
8% 6% 8%
3. Other Firms
Alaska Pulp & Timber
Firbreboard Paper Pdts
Inland Empire Paper Company
Columbia River Paper Company
Longview Fibre Company
Menasha Company
Publishers Paper Company
Puget Sound Pulp & Timber
Rayon ier
St. Regis Paper
Simpson Lee
Washington Pulp & Timber
Western Kraft
West Tacoma Newsprint
Scott Paper Company
Spaulding
N.A.
0.2
N.A.
--
N.A.
N.A.
N.A.
--
--
0.9
N.A.
--
N.A.
--
0.8
--
1
1
1
2
1
1
1
1
2
1
1
1
1
1
3
1
600 T/D
105 T/D
135 T/D
300 T/D
1455 T/D
125 T/D
420 T/D
570 T/D
775 T/D
750 T/D
80 T/D
65 T/D
250 T/D
165 T/D
990 T/D
150 T/D
1
--
1
—
1
1
2
—
—
1
--
--
1
--
2
— ~
725 T/D
--
66 T/D
—
1850 T/D
150 T/D
1094 T/D
—
--
887 T/D
--
--
770 T/D
--
976 T/D
--
TOTAL
20
6835 T/D 10
6518 T/D
Percent of Total
56%
47%
31s
ALL ESTABLISHMENTS
36
14,520 32
19,482
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peers, largely through acquisition of existing mills. Other
major forest products firms, American Can and International
Paper, had staked out a claim in the Northwest by constructing
new mills. And a major conglomerate, ITT, had moved into the
region and into the industry by acquisition of Rayonier, Inc.
But while some were becoming giants and other giants were
moving in, lesser forest products firms were disappearing from
the area. Fibreboard Paper Products and Simpson-Lee concentrated
their pulp and paper operations in other parts of the west.
Columbia River Paper, Puget Sound Pulp and Timber, Rayonier,
and Spaulding disappeared in the acquisition process. The
region will go into 1973 with almost 70% of its pulping capa-
city owned or controlled by seven major firms. Nor are the
eight smaller firms that remain minor competitors. St. Regis
and Scott Paper companies are powerful national forces whose
annual sales hover around a billion dollars. Longview Fibre
operates the largest pulp mill in the Northwest, one of the
largest in the nation. Publishers Paper is owned by the Los
Angeles Times Co., and Alaska Lumber and Pulp by a consortium
of Japanese chemical and paper firms. In less than a decade,
the industry has shifted from one composed of 22 firms operating
36 establishments of a mean productive capacity of 403 T/D to
one of 17 firms operating 32 establishments of 541 T/D average
capacity. Growth, concentration, and enormous cash flow have
been its characteristics.
The same characteristics may be observed within the oper-
ations of individual firms. Both Weyerhaeuser and Crown Zeller-
bach have divested or are in the process of divesting themselves
of one establishment, the former by closure of a mill, the latter
by a sale. Some pulping operations have been discontinued at
two Crown Zellerbach Mills (at West Linn and Port Angeles), at
Inland Empire Paper Co., and at one Boise Cascade mill (at Van-
couver, Washington). Fewer mills, of larger size and greater
specialization, would appear to be the order of the day.
Dependence on residuals as the prime raw materials source
has reinforced the tendency to concentration. Ownership of
lumber and plywood mills contributes to the movement of raw
materials from the forest through the various production pro-
cesses in a manner that allows for optimum utilization of each
log and adjustment of production flows to the varying demand
configurations of the several markets for wood products. Much
of the growth of the Oregon pulping industry can be traded to
that sort of integrated production, in that the chipped resi-
dues of the State's vigorous Douglas Fir lumber and plywood
12
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industry have provided an attractive raw material supply for
sulfate pulping. Conversely, Alaskan spruce and Washington
hemlock, less desirable lumber species, have produced a special-
ization pattern that combines sulfite pulping, a monopoly of
the regional output of dissolving pulps, and a considerably
greater reliance on roundwood inputs. Integration in their
case tends to be from forest to pulp mill, without the inter-
mediate stage of lumber and plywood production that is common
in Oregon, southwest Washington, and east of the Cascades.
Integration and specialization have extended to marketing
as well as production patterns. When Fibreboard Paper Products
and Simpson-Lee decided to close obsolete mills, production was
shifted to locations closer to major markets rather than replaced
in the Pacific Northwest. The imminent closure of the Weyerhaeuser
dissolving pulp mill at Everett can be traced to the opening of
a mill at New Bern, North Carolina—again, a location closer to
markets. Production of market pulp has almost ceased, with the
obvious exception of dissolving pulps. Though several mills
have experienced an increase in degree of specialization, output
tends to be converted into paper products at owned mills in the
Pacific Northwest. (Two exceptions to the pattern of production
integration persist. The Scott Paper Co. mills and the Georgia
Pacific sulfite mill at Bellingham continue to produce pulp well
in excess of regional marketing requirements. The surplus,
however, is utilized almost entirely in owned paper mills in
eastern States.)
Competition for Rag Materials
It has been indicated that concentration in the pulping
industry extends into other phases of forest products output.
That relationship can be considered critical in appraising the
future prospects of the industry. Sales of wood products and
of wood fibre products are in approximate balance for Boise
Cascade, Crown Zellerbach, Georgia Pacific, Weyerhaeuser, and
Potlatch Forests. Wood products account for a lesser, but
significant, portion of the sales of International Paper and
St. Regis Paper. American Can, Longview Fibre, and Western
Kraft all operate in circumstances in which the availability
and price of their raw materials supply, which is substantially
derived from chipped residuals, is strongly affected by markets
for lumber and plywood.
Traditionally, lumber has been a relatively low priced com-
modity with a cyclical demand pattern. It has been the variable
that determined the price structure for wood as an industrial
raw material. The values added and the profits derived from
13
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pulping, plywood production, and paper-making have rested in large
measure on the initial low raw material price established by
lumber demand. And the presence of literally thousands of small
entrepreneurs—"gyppo" loggers and sawmill operators—provided
flexibility and price competition in forest exploitation that
virtually insured a favorable raw materials cost for the pulp
and paper industry.
With increasing scarcity of sawtimber and with replacement
of entrepreneurial lumbering by concentrated ownership—the U.S.
Forest Service has estimated that the number of firms active in
Pacific Northwest lumbering has declined to 25% of the 1950 level
—the umbrella over raw materials prices has sprung holes. Entry
of Japanese firms as active, eminently competitive log buyers has
further reduced the advantage provided by relative price control
with respect to raw materials previously enjoyed by pulp mills.
In the past, the decentralized structure of the industry
had acted to increase supply of wood at each cyclical increase
in demand, and for slight or no price increase. Over capacity
in lumbering was endemic, and response to demand immediate. To
that structural advantage, the pulping industry added political
pressure on the Forest Service, ownership of timberland,
integration, utilization of residues, and control of the access
of small wood lot owners to markets as institutional mechanisms
to promote control of raw materials costs. Above all, constantly
growing markets permitted the industry to install increasingly
larger plants, increasingly faster paper machines. The practical
consequence was that fixed—and thus apparently controlled—capital
costs have become an increasingly larger share of the total cost
of the product; while inherently less controllable raw materials
costs were relatively de-emphasized. Cost control was primarily
a matter of sustaining a high volume of output per unit of capital.
The strategy served the industry well when demand was rising.
There are growing signs of discomfort with it, however. A new
generation of forest products managers is finding itself a
prisoner of a situation predicated upon the expectation of
continuing growth of demand, with volume production an imperative.
But production targets have often been achieved without generating
either the dollar sales or the profits they were projected to
obtain.
Apparent over-capitalization of paper production capacity
thus created a high level of fixed costs that must be serviced
by volume production; and that led to recurring periods of
market saturation and depressed sales prices at the same time
that it reduced the raw materials base. Reduced availability
of raw materials created upward pressure on their prices.
14
-------
Paper producers, caught in the noose of over-production, have
had difficulty passing such cost increases forward. It is a
cycle that the major firms appear to be trying to break,
cutting back paper production by closing less profitable mills.
(The trend is industry-wide, and not a Region X phenomenon.
Much of the retrenchment is taking place under a guide of
response to environmental pressures. Industry spokesmen have
been quoted in both Paper Mill News and Chemical Engineering
as welcoming the influence of environmental protection costs
for precisely the reasons indicated above.) Forced to review
their capital and production status, managements have taken the
opportunity to conduct some fundamental pruning aimed at relieving
over-production through elimination of high cost operations.
Unstated, but implicit, is the opinion that environmental
regulation provides management with a cover to conduct such
pruning and at the same time to avoid the onus of consequent
unemployment and other frictions by shifting responsibility to
the shoulders of government.
In distinction to the trend in pulp and paper, sales prices
for lumber have been able to fluctuate in direct response to stumpage
prices and to sustain profitable mark-ups. Historical relationships
have been reversed, in large degree as a consequence of the integration
of forest products production in the hands of fewer and stronger
firms. Now it is pulp and paper production that suffers from over-
capacity and an inability to pass on higher raw materials prices,
where formerly it was the small lumberman who was in excess supply.
Increasing scarcity of logs and a reduced number of producers has
strengthened the ability of the lumber industry to pass on and markup
raw materials costs, even while constant pressure is exerted on
paper prices by industry over capacity. In recent periods of
buoyant construction, lumber and plywood prices have moved sharply
upward, pulling wood costs with them. (cf. Table 5) Paper
industry profits were concurrently depressed as a result of
competition with lumber for raw materials and general over capacity.
The shift in relative advantage cannot have been unnoticed
by management. The incentive to cut a tree early in order to
turn it into pulp is progressively reduced as the profit on that
tree's fibre yield sinks below the discounted profit to be gained
by letting it grow another five years and turning it into two by
fours. The net rate of return on the added growth has been
rising relative to the compounded profit to be anticipated from
early pulping. Indeed, forest products firms are finding with
increasing frequency that they lose money by pulping their
potential lumber and plywood supplies.
In short, the increasing cost of wood, the growing scarcity
of sawtimber, the perennial over-production of paper, and the
increasing integration of forest products firms would all seem
to argue against sustaining the trend that has emphasized production
15
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Table 5
AVERAGE STUMPAGE PRICES
SAWTIMBER SOLD FROM NATIONAL FORESTS
Dollars oer thousand board feet Percent of 1960
Year
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
Douglas
Fir
6.40
5.40
5.70
7.60
10.60
9.20
10.30
10.80
26.90
25.40
7.50
10.10
Western
Hemlock
2.10
2.20
2.10
4.60
5.50
7.10
7.20
5.20
27.40
26.30
1.70
2.90
Ponderosa
Pine
18.60
7.70
11.60
11.30
16.00
14.00
13.50
11.00
35.80
41.90
19.10
11.20
Douglas
Fir
100
84
89
119
166
44
61
169
420
397
117
158
Western
Hemlock
100
105
100
219
262
338
343
248
1305
1252
81
138
Ponderosa
Pine
100
41
62
61
86
75
73
59
192
225
103
60
-------
of paper at the expense of lumber and plywood. In the future,
Region X may anticipate more balanced operation of the various
sectors of the forest products industries, within the limits of the
natural resource. While total employment opportunities provided
by that kind of equilibrium will depend on the balance of demand
and the relative productivity rates in the separate sectors, one
may conclude—particularly in view of the nearness ot che ultimate
limits of the raw materials supply—that there will be at least
a relative reduction in pulp and paper employment in the future.
Trends, 1963-1972
The net result of the various influences that bear on the
regional wood pulping industry has been a drastic reshuffling of
its components with respect to location, product mix, gross size,
production processes, and productivity. Region X's pulp and
paper industry will be very differently composed as it enters
1973 than the industry of a decade earlier.
Locational patterns have shifted significantly, the nature of
the shift corresponding generally to the distribution of wood supplies
Puget Sound, the leading pulp producing area of 1963, has slipped
behind the lower Columbia River area in production, and is only
slightly ahead of the Willamette River Valley where productive
capacity has almost doubled over the course of the decade.
The southward shift of the focus of production could be seen,
too, in the relative ten year growth of capacity at Oregon and at
Washington coastal plants The two dissolving pulp mills on
Grays Harbor, Washington, added about 150 tons per day to capacity.
In comparison, a new kraft mill was brought on stream at Gardiner on
the southern Oregon coast and subsequently doubled its capacity to
600 tons per day during the decade, while an existing mill at
nearby Toledo was adding 400 tons per day to capacity.
Both the Oregon coast and the Willamette Valley expansion
can be interpreted to reflect the intensifying exploitation of
the forest resources of southwestern Oregon. The Willamette
basin's growth was concentrated in the lower half of the valley,
more than 80% of its new capacity occurring as a new 300 ton per
day at Halsey and incremental additions of 700 tons per day at an
existing mill at Springfield, and another mill in Albany • In sum,
half of the total growth of Region X's pulp and paper industry was
fueled by logging in southwest Oregon.
East of the Cascades, growth was probably retarded by a
continued westward pattern of raw materials movement, but was
significant. Sulfate pulp mills at Wallula, Washington, and
Lewiston, Idaho, each added about 300 tons per day to capacity.
Outside the regional boundaries, but drawing on elements of the
same wood supply, the Waldorf Hoerner plant at Missoula, Montana,
17
-------
augmented output by some 400 tons per day. The sMft in location
of the industry tended, then, to be eastward to scattered but
still relatively abundant wood supplies, as well as southward.
(cf. Table 6)
Productive units grew larger through the decade. While gross
capacity increased by a third, there was one less pulp mill
operating at the decade's end than at its beginning, and three
less factory complexes producing pulp. Average capacity per
establishment increased very nearly 5070. Three new factories
come on stream, at Gardiner, at Halsey, and at Wauna, all in
Oregon. Three others closed, one announced an impending closure,
and one paper mill discontinued production of pulp, all in the State
of Washington—at Port Angeles, at Everett, at Longview, and at
Vancouver. (In the interest of clarity, it should be noted that
the presence of more than one pulp mill at a factory site is not
uncommon. For the purposes of this discussion, each of the
specific production processes present at a location is considered
to constitute a pulp mill. Thus, for example, Crown Zellerbach's
factory complex at Wauna, Oregon, includes a groundwood mill and
a sulfate mill.)
Changes in product mix generated by the evolution of demand
patterns and by changes in pulping technology were at least as
significant as the magnet exerted by raw materials supplies in
altering the makeup of the industry.
While capacity to produce all grades of pulp increased during
the decade, the increase was very unevenly distributed. Two thirds
of incremental capacity was installed in mills producing packaging
products. (It was probably the expansion of demand for packaging
more than any other factor that promoted the growth of pulping
in southwestern Oregon. Douglas fir does not produce a good
grade of pulp, but high quality is less important to packaging
pulps than are toughness and volume. Vast quantities of Douglas
fir residuals generated by Southern Oregon.1 s lumber and plywood
expansion proved to be an ideal raw materials base for precisely
the kind of pulps that experienced the most vigorous demand
growth during the nineteen-sixties.)
Dissolving pulps, the highest quality products and the most
demanding in terms of raw materials controls and processing steps,
have been a speciality of the Region for four decades. Based
on northern Washington hemlock and Alaskan spruce, dissolving
pulp production has been responsible for the Region's high
proportion of sulfite pulp mills; and the cyclical shifts in
demand occurring in chemical markets have keyed the commercial
18
-------
fortunes of northern Washington communities since the nineteen-
tbirties to a larger extent than any factor other than the
operations of the Boeing Company. Yet in spite of the significance
of the product to the regional economy, it is difficult to
determine the current trend of production.
During the decade, production of dissolving pulps increased
healthily, if not spectacularly. The pronounced depression in
demand that coal and petroleum based synthetic materials imposed
on cellophane and rayon products finally worked itself out in the
late nineteen-fifties, and demand for dissolving pulps began to
rise. Between 1963 and 1972, productive capacity moved gradually
upward in Region X, and current capacity of 3,055 tons per day
is more than 20% greater than the level, roughly double the 1958
low point in the fortunes of the industry when the Rayonier Mill at
Shelton was closed, other mills were working well below capacity,
and the new Alaskan mills had begun their operations with deficits.
But the apparent return to health of the dissolving pulp
industry is, from the regional standpoint, uncertain. Between 1963
and 1972 existing mills added 580 tons to daily productive capacity,
more than ten percent of the industry's regional tonnage increment
and a larger share than any product component other than packaging.
But more than half of that growth is to be cancelled by the
announced closure in the spring of 1974 of Weyerhaeuser's Everett
sulfite mills. That closure will continue the long term relative
decline of Region X dissolving pulp output.
While markets and profit margins for chemical grade pulps
seem secure, advances in sulfate pulping and bleaching technology
would seem to be counteracting the advantage in raw material quality
that has allowed Region X to dominate dissolving pulp production.
The Weyerhaeuser closure amounts to a transfer of production to a
new sulfate mill at New Bern, North Carolina, one that is closer
to east coast and European markets that take the bulk of output.
Given the technology for production of dissolving pulps from
inferior raw materials by the sulfate process, the significance
of transportation costs, and the enormous importance of economies
of scale in pulp production, it would seem distinctly possible
that one or two east coast mills could prempt domestic markets for
dissolving pulp within the next decade, and that they could also
make considerable inroads on the significant export market--which
is largely European for Washington, Japanese for Alaskan mills.
Whether Washington's dissolving pulp industry can survive without
significant consolidation is beginning to be a valid question.
19
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Table 6
Capacity & Location of Pulp Mills, 1963-1972
Aggregate 24hr. capacity, tons
Alaska
Puget Sound*
Washington Coast
Lower Columbia
Oregon Coast
Willamette
Upper Columbia
Region X Total*
Alaska
Puget Sound*
Washington Coast
Lower Columbia
Oregon Coast
Willamette
Upper Columbia
Region X Total*
Alaska
Puget Sound*
Washington Coast
Lower Columbia
Oregon Coast
Willamette
Upper Columbia
Region X Total*
1963
1,050
4,430
750
4,380
815
2,035
1,160
14,620
Number of
2 (2)
16 (12)
2 (2)
10 (7)
3 (3)
9 (7)
4 (3)
46 (36)
Mean Dail
525
369
375
626
272
291
387
406
1972
1,355
4,219
904
5,644
1,750
3,878
1,732
19,482
Mills & (
2 (2)
12 (9)
2 (2)
10 (5)
3 (3)
11 (8)
4 (3)
44 (32)
y Capacity
673
469
452
1,129
583
485
577
609
tons
+305
-211
+154
+1,259
+935
+1 ,843
+572
+4,862
shift
percent
+29%
5%
+21%
+29%
+115%
+91%
+49%
+33%
Establishments)**
-
-4
-
-
-
+2
_
-2
Per Establ
+148
+100
+77
+503
+311
+194
+190
+203
-
-25%
-
-
-
+22%
_
2%
ishment (tons)
+28%
+27%
+20%
+80%
+114%
+67%
+49%
+50%
* Excludes both Simpson Lee and Weyerhaeuser sulfite, Everett for 1972
** A mill is considered to be a facility that produces pulp by a given process.
An establishment is considered to be one or more pulp mills at a given site.
(.e.g., Publishers Paper Co. at Oregon City is viewed as an establishment
Consisting of a sulfite and groundwood mill.)
-------
The general purpose pulp mills that dominated the output of the
Region in 1963 have lost considerable ground in a relative sense in
the last few years. Specialized production in progressively
eating into the range of products produced at any pulping establish-
ment. It has been found that variable final product requirements
can be met by inter-plant exchanges and by keeping each mill
within a rather narrow range of production almost as conveniently,
and at lower cost, as they can by adjusting outputs internally.
In general, the comparative decline in general purpose pulping
has not involved either plant closures or reduction of output.
Instead, there has been a progressive sharpening and specialization
of the production focus in existing mills. One aspect of the
shift, then, has been an apparent increase in the relative output
of groundwood production and discontinuing production of chemical
pulp at several general purpose mills. Small general purpose
plants employing both a chemical and groundwood process have become
groundwood mills only. (In distinction, one massive sulfate/
groundwood complex was initiated at Wauna on the lower Columbia;
and the two rather small Publishers Paper mills were expanded
significantly--from a total capacity of 300 tons per day of ground-
wood and 270 tons per day of chemical pulps to 695 tons per day of
goundwood and 399 tons per day of chemical pulps.)
The trend in general pupose pulp production seems very clear.
The number of plants is shrinking—six of them disappeared, either
through closure or by relegation to specialized production,
between 1963 and 1972. Their size is increasing markedly:
between 1963 and 1972, average daily capacity of general purpose
pulp plants rose from 411 tons per day to 632 tons per day. A
lesser number of larger plants, each somewhat more specialized
than before, is sustaining production of the full range of pulp
grades, and depending on purchase and internal transactions to
provide the demanded range of final products. At this point in
time, only one paper mill, Boise Cascade at Vancouver, Washington,
is in operation without pulping capacity at the same site. (The
pulp mill was closed during the decade.) But as specialized pulp
mills become more prevalent, it is not unlikely that other paper
machines will remain operational in spite of elimination of an
obsolete pulp mill, or one whose raw material supply is insufficient
to permit expansion.
Production process mix proved to be very sensitive to the
change in product mix. In 1963, sulfate pulping already constituted
the largest block of processing capacity in the region. In the
next ten years, eighty percent of the gross shift of industry
capacity was in the form of addition to sulfate pulping; so
that the sulfate process now accounts for well over half of total
regional capacity.
21
-------
In some degree, sulfate pulping growth was due to a broadening
participation in markets for general purpose pulps (e.g., expansion
at Boise Cascade's St. Helens' plant and installation of the Crown
Zellerbach plant at Wauna). In such cases, ability to deal with
resinous Douglas fir, the predominant wood species, and advantages
with respect to control of water pollution may be considered to have
dictated the use of the process. But to a very considerable
extent, the use of the sulfate process was a function of the growth
of packaging markets, where sulfate pulps have been dominant since
the nineteen-twenties.
Growth of packaging markets is also responsible for the
vigorous—more than 10070—expansion of semi-chemical pulping
capacity. Although there is only one exclusively NSSC mill in
the region, five paperboard plants include NSSC mills. (The
predominant output of such mills is the corrugating medium that is
commonly sandwiched between kraft board walls in heavy duty paper
boxes.)
Capacity to produce sulfite pulps was almost static over the
period, if allowance is made for the impending closure of the
Weyerhaeuser mill at Everett. Unfavorable unit costs and water
pollution control difficulties as compared to the sulfate process
probably combined in equal measure to retard growth of sulfite
pulping. But within the group of mills using the process, major
changes took place. Mills were closed at Port Angeles, Millwood,
and Vancouver, Washington, and at West Linn, Oregon. Of the
remaining mills, all but one abandoned calcium sulfite pulping
and converted to one of the recoverable chemical bases—magnesium,
soda, or ammonia. Though the conversion may be considered to
have reduced the unfavorable unit production cost gap with sulfate
pulps of an equal grade, there can be little question that the
conversions were in every case to be attributed to water pollution
control regulations. Significantly, three of the four plants that
were closed rather than converted had a capacity to produce less
than one hundred tons of pulp per day, and all were associated
with a groundwood mill. Their closures, then, accommodate to the
pattern of specialization in larger productive units, with water
pollution control considerations playing a contributory role in
the adjustment decision.
22
-------
Groundwood production, too, was marked by a static aggregate
situation with considerable reshuffling of constituents. Three
small mills were closed in Washington, and production was reduced
at a fourth. Two large (290 tons per day) mills were opened in
Oregon, and production was reduced at a third. The shifts
were associated in large measure with Crown Zellerbach Company,
which reduced its penetration of groundwood markets substantially
to concentrate on the growth opportunities to be found in
packaging.
Crown Zellerbach Groundwood Mills
Daily Production Capacity, tons
West Linn
Port Angeles
Camas
Wauna 298
TOTAL 885 744
Percent of Region Total 54% 43%
23
-------
The slack that resulted from Crown Zellerbach's partial withdrawal
was more than taken up by Publishers Paper Company's installation of
a groundwood mill at the site of an acquired sulfite mill at Newberg,
Oregon. By increasing groundwood capacity from 300 tons to 695
tons per day, the smaller firm achieved near parity with Crown
Zellerbach in markets utilizing groundwood pulp. Acquisition and
internal expansion of sulfite pulping brought Publishers Paper's
total capacity from 420 to 1,094 tons per day, gave the firm tight
internal control of pulp output, and made it a significant factor
in western markets for newsprint and speciality papers.
Employment & Productivity
Changes that Region X pulping has experienced over the last
decade have not exercised any significant aggregate impact on labor
markets. Gross capacity and output have increased vigorously
enough to obscure the effects on productivity of fewer and larger
plants. Local gains in areas of expansion have tended to cancel
out losses in areas of contraction or improved efficiency. There
has been localized hardship (the more severe because it was concentrated
in the general area of northwestern Washington State, where other
elements of the regional economic base were undergoing simultaneous
contraction of employment opportunities). There has been localized
boom. But the overall effect of the industry's development on the
regional employment pattern was slight. Through an initial period
of vigorous expansion that ended in 1967-68, the industry's
employment requirements increased about ten percent, just about
stabilizing its share of regional employment. Since that time,
employment has been declining, gradually, but inexorably.
Productivity, measured in terms of capacity per unit of
employment, increased by a third in the course of the decade. The
gain was greatest, as was growth of capacity, in the first half of
the period, when total capacity increased about ten percent faster
than productivity. Since 1967, however, productivity has risen
almost twice as fast as capacity--hence, a decline in employment.
As might be anticipated, productivity increase has been most
rapid in Oregon, where the bulk of investment took place in 1963-
1972. Capacity per worker rose almost 80 percent as total capacity
rose 130 percent. And by the end of the decade, Oregon's labor
productivity was within 89 percent of that of Idaho, even though
the average age of Oregon plants was more than twice--and the
average size little more than half--that of Idaho's only pulp mill.
24
-------
Table 7
Shifts in Product Mix 1963-1972
Product
Packaging & Board
Multi -Grade Chemical Pulp
Chemical Plus Groundwood
Pulp
Groundwood
Dissolving Pulp
All Products
State
Oregon
Washington
Region X
Oregon
Washington
Idaho
Region X
Oregon
Washington
Region X
Oregon
Washington
Region X
Alaska
Washington
Region X
Establishments
1963
4
2
6
5
10
1
16
2
3
5
0
2
2
2
4
6
1972
6
2
8
3
8
1
12
3
0
3
1
3
4
2
3
5
Shift
+2
+2
-2
-2
-4
+1
-3
-2
+1
+1
+2
-1
-1
24 Hour Capacity
1963
1,375
1,830
3,205
845
5,405
650
6,900
1,005
735
1,740
0
230
230
1,050
1,425
2,475
14,550
1972
4,005
2,516
6,521
1,149
5,241
1,000
7,390
2,097
0
2,097
180
552
732
1,355
1,390
2,745
19,485
Tons
Shift
+2,630
+ 686
+3,316
+ 304
- 164
+ 350
+ 490
+1 ,092
- 735
+ 357
+ 180
+ 322
+ 502
+ 305
- 35
+ 270
+4,935
Percent of Capacity 1963
Packaging & Board 22%
Multi-Grade Chemical 47%
Chemical-Groundwood 12%
Groundwood 2%
Dissolving Pulp 17%
Percent of Net Capacity Increase
Packaging & Board67%
Multi-Grade Chemical 10%
Chemical-Groundwood 7%
Groundwood 10%
Dissolving Pulp 5%
1972
~33f
38%
11%
4%
14%
-------
Table 8
Shift in Process Mix
1963-1972
PULPING PROCESS
SULFATE
CALCIUM
SULPHITE
OTHER
SULPHITE
GROUNDWOOD
NSSC
STATE
Idaho
Oregon
Washington
REGION X
Oregon
Washington
REGION X
Alaska
Oregon
Washington
REGION X
Oregon
Washington
REGION X
Oregon
Washington
REGION X
MILLS 24 HOUR CAPACITY
1963
1
4
8
13
6
11
17
2
—
2
4
2
7
9
1
3
4
1972
1
7
7
15
—
1
1
2
4
8
14
4
4
8
2
6
8
SHIFT
--
+3
-1
+2
-6
-10
-16
—
+4
+6
+10
+2
-3
-1
+1
+3
+4
1963
650
1625
4505
6780
790
3105
3895
1050
--
750
1800
685
945
1630
125
325
450
1972
1000
5160
4805
10,965
—
527
527
1355
748
3359
5462
1173
574
1747
350
744
1094
, TONS
SHIFT
+ 350
+3535
+ 300
+4185
- 790
-2578
-3368
+ 305
+ 748
+2609
+3662
+488
-371
+117
225
+419
+644
PERCENT OF CAPACITY
Sul fate
Calcium sulfite
Other sulfite
Groundwood
NSSC
1963
47%
27%
12%
11%
3%
1972
55%
3%
28%
9%
6%
PERCENT OF NET CAPACITY SHIFT
Sulfate 80%
Calcium Sulfite -64%
Other Sulfite 70%
Sulfite, all 6%
types
Groundwood 2%
NSSC 12%
-------
In Washington, which has historically provided the bulk of the
area's employment in pulping, productivity increase was slower and
more painful. Without the assistance of material new investments,
the state's industry dragged its productivity tortuously upward
by minor (in comparison with the massive reworking of the Oregon
industry) capital improvements to existing plants and by accepting
the trauma of closure of the three old plants. Labor productivity
in the Washington segment of the industry; 114 percent of Oregon's,
at the beginning of the decade, had fallen to 71 percent of Oregon's
by the end of the period.
In total, the substitution of capital for labor reduced
aggregate employment opportunities in Region X by 9,000 to 10,000
jobs, depending upon whether one uses regional or individual State
capacity to employment ratios to assess the number of jobs that
might have been available in the absence of productivity improve-
ments. Fortunately, increased output was sufficient to hold actual
reduction of jobs to just over 1,000.
The fact must be faced that productivity improvements will
continue to take place; and that raw materials are not available to
sustain sufficient expansion to offset its employment retarding
effects. During 1972, elimination of another 1,100 jobs by closure
of two Everett, Washington, mills was announced. Since the gross
ratio of employment to capacity of the mills was almost precisely
that of all Washington mills, no indicated improvement in
Washington's lagging productivity occurred.
The difference in labor costs imposed by the differences in
productivity of the Washington and Oregon segments of the industry
amounts to more than $3.50 per ton of product. The difference
traces, obviously enough, not to differences in the quality of
either State's labor force, but to the effective capitalization
commanded by the worker in either State. As the relative capital
deficiency of Washington mills is supplied in the future, employ-
ment will drop in the absence of offsetting increases in output;
and forces that act to increase the rate of investment will
accelerate the pace of employment loss.
Given static production capacity, Washington will lose up to
5,000 jobs in pulp and paper if the industry moves up to the
efficiency standard of its southern neighbor.
Also in a situation of production parity, Washington would
lose 6,000 jobs, Oregon 1,000 jobs by achieving the level of labor
productivity of the one mill in Idaho.
27
-------
TABLE 9
EMPLOYMENT & PRODUCTIVITY
TRENDS
OREGON 1963
No. of Establishments 11
Mean Age (years) 38.1
Gross Capacity (tons/day) 3225
Gross Employment 7200
Mean Capacity 293
Mean Employment 655
Mean Employment per ton 2.23
WASHINGTON
No. of Establishments 21 20 18
Mean Age (years) 37.7 41.7 45.1
Gross Capacity (tons/day) 9630 10499 10182
Gross Employment 18800 19900 17700
Mean Capacity 459 522 566
Mean Employment 895 995 983
Mean Employment per ton 1.95 1.90 1.74
IDAHO
No. of Establishments 1 1 1
Mean Age (years) 7 11 15
Gross Capacity (tons/day) 650 769 1000
Gross Employment 900 900 1100
Mean Capacity 650 769 1000
Mean Employment 900 900 1100
Mean Employment per ton 1.38 1.17 1.10
-------
Taking raw material considerations into account, the real world
situation is apt to be even harsher. Growth prospects are limited,
but there is no reason to assume that existing Idaho employment to
capacity levels represent any ceiling on labor productivity. Since
the obvious means to reduce labor costs is to replace small, old
plants with adequately capitalized plants, and since raw material
supplies may be more promising elsewhere, northwestern Oregon and
western Washington may anticipate significant employment loss in
the pulp and paper industry over the course of the next few years.
Appendix
Mr. Ralph Scott, Chief, Paper and Forest Industries Research,
National Waste Treatment Research Program, in reviewing this study
has called attention to longer term factors that have the ability
to modify the conclusions that may be drawn from the foregoing
materials. His remarks are included here because of their per-
tinence and because of Mr. Scott's really extraordinary knowledge
of the industry. The analyst is forced to note, however, that
raw material factors based on recycling and alternate material
sources are at least as apt to retard as to foster relative
growth in Region X. Nor should log exports be considered in
isolation as an influence on growth prospects, in that net
materials flows for raw wood, lumber, pulp and paper between the
U. S., Canada, and Japan is the significant variable. Thus the
shift to Canada of the U. S. export market for logs, if balanced
by an equal reduction of wood imports from Canada, would result
in an equilibrium with respect to raw materials that could easily
damage U. S. producers—particularly in the logging industry—
by limiting their flexibility in production and marketing.
Mr. Scott's comments follow.
While not directly pertinent to immediate mill
closure possibilities, the report contains assumptions
concerning future development of increased production
in the Northwest. One concludes, from this information,
that production capacity is not likely to show sign-
ificant growth—this derived from statistics on
available wood supply and competition by lumber and
plywood. Several possibilities make any firm con-
clusion unlikely. Briefly, these are as follows:
a. Present and coming restraints on slash burning
suggest this fiber tonnage, formerly left in the woods
and destroyed, must now find other avenues of disposal.
For years the Forest Service has pointed to added
fiber tonnage in this fraction of the tree. With
burning prohibited and increased fiber costs, it
seems likely that a large share of this raw material
source will be salvaged as chips available for added
pulp production.
29
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b. There is a world-wide competition for fiber
among industrialized countries. European and U.S.
companies are moving into tropical hardwoods and
bamboo—as is Japan. Much research, even at OSU,
is being directed at fiber sources other than wood.
Principally these sources are bagasse (cane sugar),
rice straw, and wheat straw. One principal hurdle
preventing use of such materials is the seasonal
supply for a year-round industry.- Storage losses
and deterioration may eventually be solved. Cereal
or seed straw could well provide added fiber tonnage
to the Northwest industry. It is estimated that
50 million bone dry metric tons of wheat straw are
available in the U.S. alone. The Agricultural
Economics Department at OSU estimates there are
1.5 million tons of grain and seed straw available
in the Willamette Valley.
c. There is a growing world-wide tonnage of synthetic
fiber from petrochemicals. This is principally now
in Europe and in Japan. Crown Zellerbach has patent
rights from Japanese sources—but does not evidently
consider the process economically feasible today—
which is only to say wood fiber is presently cheaper.
The future potential is nonetheless a reality.
d. Recycled fibers, while not a new source, looms
larger as increasing percentages of used fiber are
required in product lines.
e. We cannot discount the hardwood reserves re-
presented by oak, maple, and alder in the North-
west. These can be handled by some modified sulfate
processes and are especially adaptable to neutral
sulfite semichemical pulping. For example, Georgia
Pacific at Toledo will add 150 T/D neutral sulfite
pulping of unbarked alder—suitable pulp for their
product. The potential for NSSC pulping in the
Northwest is significant.
f. Chip and log exports from the Northwest must
be considered. The second quarter report (1972)
on the Northwest forest industries, Forest Service,
shows chip shipment of 460,000 short tons from
the Oregon customs district and 29,000 tons from the
Washington district. This tonnage could be processed
to pulp in the Northwest. Hardwood log exports from
Oregon and Washington were 2.4 million board feet in
the second quarter. Softwood log exports totalled
708 million board feet for the same period. In
conclusion, future growth in pulp and paper production
in the Pacific Northwest can be significant.
30
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II. WASTE PRODUCTION FACTORS
There were thirty-four pulp and/or paper manufacturing estab-
lishments active in Region X in June 1972. Those plants—which do
not include wet process hardboard, felting, or paper converting
establishments not associated with a paper mill—supported an aggre-
gate daily production capacity of well over 19,000 tons of pulp.
They also discharged, according to data reported by the mills them-
selves, almost a billion gallons of waste a day, close to three
times that discharged by the sewered population of the four state
area and far more than the total discharged by all other manufactur-
ing establishments in the Region. The oxygen demanding Strength of
those wastes, after treatment, was roughly equal to that of the un-
treated wastes of 21 million people—about eight times the strength
of the total waste discharge, after treatment, of the sewered popu-
lation of Region X—or almost 40% of that of the total sewered
population of the United States. (Table 10)
The production and waste discharge characteristics of the
industry are distributed without apparent pattern through the region
and between establishments, one seeming to have little proportional
relationship to the other. Obviously, gross production of woodpulp
is an indifferent guide to waste discharges of pulping.
Sub-Area
Alaska
Puget Sound
Washington Coast
Oregon Coast
Lower Columbia
Willamette
Upper Columbia
Percent of Re
Pulp
Production
6.8
23.6
4.5
8.8
28.3
19.4
8.7
Waste-
Water
9.7
28.9
6.6
2.9
35.1
12.5
4.2
gional Total
BOD
11.0
55.1
12.0
2.0
15.8
1.2
3.0
Solids
12.0
20.8
2.9
3.9
51.0
4.9
4.3
31
-------
Table 10
Capacity and After Treatment Waste Discharge
of Region X Pulp and Paper Mills
FIRM
Alaska Lumber & Pulp
Ketchlkan Pulp
Boise Cascade
Crown Zellerbach
Georgia Pacific
ITT Rayonler
St. Regis
Scott Paper
S1mpson-Lee
Meyerhaueser
ITT Rayonler
Weyerhaueser
Georgia Pacific
International Paper
Menasha
Boise Cascade
Crown Zellerbach
Longview Fibre
Weyerhaueser
American Can
Boise Cascade
Crown Zellerbach
Publishers Paper
Western Kraft
Weyerhaueser
Boise Cascade
Inland Empire
Potlatch Forest
LOCATION
Sitka, AK
Ketchlkan, AK
ALASKA
Stellacoom, WA
Pom Angeles, WA
Port Townsend, WA
BelUngham, WA
Port Angeles, WA
Tacoma, WA
Anacortes, WA
Everett, WA
Everett, WA
Everett, WA
Everett, WA
PUGET SOUND
Hoquiam, WA
Cosmopolls, WA
WASHINGTON COAST
Toledo, OR
Gardiner, OR
North Bend, OR
OREGON COAST
St. Helens, OR
Wauna, OR
Camas, WA
Longview, WA
Longview, WA
LOWER COLUMBIA
Halsey, OR
Salem, OR
Lebanon, OR
West Linn, OR
Newberg, OR
Oregon City, OR
Albany, OR
Springfield, OR
WILLAMETTE
Wallula, WA
Millwood, WA
Lewis ton, ID
UPPER COLUMBIA
REGION X
24 hour capacity
725 Mg
630 Mg
1355
220 G
266 G
405 S
527 Ca
45 N
486 Am
887 S
140 Am
814 Am
22 G
173 S
410 S
310 Am
4705
504 So
400 Mg
904
1000 S
600 S
150 N
1750
800 S
705 S
298 G
730 S
415 Mg
1600 S
250 N
331 S
290 Mg
225 N
5644
330 S
250 Am
99 Am
180 G
210 Mg
290 G
189 Mg
405 G
570 S
200 N
1155 S
3878
442 S
224 N
66 G
1000 S
1732
19,968
24 hoi
Flow (G)
43,500.000
52,900,000
96,400,000
6,000,000
11,900,000
16,300,000
52,500,000
34,500,000
30,400,000
9,100,000
59,100,000
9,100,000
31,100,000
27,700,000
287,700,000
36,700,000
29,400,000
66,100,000
13,000,000
14,000,000
2,230,000
29,230,000
32,200,000
53,300,000
104,000,000
61,400,000
98,500,000
349,400,000
13,400,000
19,200,000
5,250,000
22,100,000
10,400,000
30,900,000
6,200,000
17,000,000
124,450,000
7,000,000
3,110,000
32,200,000
4
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Table 11
Effluent Characteristics
Northwest Pulp & Paper Mills
FIRM
1. NO WASTE CONTROL
*f
Georgia Pacific^
ITT Rayonier
LOCATION
S
Bellingham, WA
Port Angeles, WA
2. EVAPORATION OF PULPING LIQUORS
Georgia Pacific
Crown Zellerbach
Simpson-Lee
Weyerhaueser
Alaska Lumber & Pulp
Ketchikan Pulp
Toledo, OR
Port Townsend, WA
Everett, WA
Everett, WA
Ketchikan, AK
Ketchikan, AK
3. SEDIMENTATION ONLY CONTROL
Scott Paper
Scott Paper
Weyerhaueser
Anacortes, WA
Everett, WA
Everett, WA
4. EVAPORATION & SEDIMENTATION PROVIDED
Potlatch Forest
International Paper
St. Regis Paper
ITT Rayonier
Crown Zellerbach
Boise Cascade
Longview Fibre
Weyerhaueser
Crown Zellerbach
Lewis ton, ID
Gardiner, OR
Tacoma, WA
Hoquiam, WA
Wauna, OR
Wallula, WA
Longview, WA
Lonqview, WA
Camas , WA
5. GROUNDWOOD MILLS, SEDIMENTATION ONLY tt
Boise Cascade
Crown Zellerbach
Menasha
Inland Empire
Steilacoom, WA
Port Angeles, WA
North Bend, OR
Millwood, WA
6. STABILIZATION, AFTER PRIOR TREATMENT
Crown Zellerbach
American Can
Boise Cascade
Weyerhaueser
Boise Cascade
Crown Zellerbach
Weyerhaueser
Publisher's Paper
Publisher's Paper
Western Kraft
West Linn, OR
Halsey, OR
St. Helens, OR
Springfield, OR
Salem, OR
Lebanon, OR
Cosmopolis, WA
Newberg, OR
Oregon City, OR
Albany, OR
DISCHARGE PER TON OF PULP
Flow
91 ,800
71 ,000
13,000
40,200
52,600
75,900
60,000
84,000
65,000
70,700
89,400
32,200
23,300
34,300
72,800
53,100
10,500
33,200
116,400
90,800
NTROL
27,300
44,700
14,900
47,100
122,800
40,600
40,300
14,700
76,800
53,000
73,500
20,800
52,100
8,100
BOD
230
1105
30
39
91
57
378
178
814
689
897
78
43
69
629
71
34
58
214
150
44
44
90
84
39
4
31
2
32
53
260
12
14
3
Solids
75
80
21
17
223
49
141
85
56
33
53
38
34
15
58
21
25
35
600
40
51
83
62
.13
183
5
28
6
15
30
22
16
14
7
MILLIGRAMS/LITER
BOD
300
1870
280
115
210
90
755
255
1505
1170
1205
290
220
240
1040
160
390
210
220
200
195
120
726
215
40
12
90
16
50
120
425
70
30
45
Solids
115
135
195
50
510
80
280
120
105
55
70
140
175
55
95
50
285
125
620
55
225
225
500
35
180
15
85
50
25
70
35
90
30
105
*By-product recovery is practiced, but effect 1s less
than evaporation of pulping liquors.
-------
It is an article of faith even more than a technical evaluation
that waste treatment is one of the influences that account for vari-
ability in the production/waste discharge relationship. The data
support that faith, in that waste strength per unit of production—
more precisely, strength per ton of 24 hour rated capacity—declines
progressively with the degree of waste treatment currently available,
as indicated by mean waste to product values of the mills grouped by
waste reduction practices:
Waste Reduction
Practices
None
Sedimentation
Evaporation of
Pulp Liquors
Evaporation and
Sedimentation
Stabilization after
prior treatment
Mean Per^Ton Discharge
Flow (G)
71,000
75,000
59,600
48,800
50,300
Lbs
BOD
1105
800
143
127
45
Lbs
Solids
80
47
87
84
33
Milligrams /Liter
BOD
1870
1293
286
330
90
Solids
135
77
193
178
69
It is apparent, however, that waste treatment alone does not ade-
quately explain variation in waste loading rates. Solids loadings
and concentrations show little apparent variation with treatment in
the illustration above, and BOD concentrations for the sample of
plants presented in the region behave perversely in the case of the
contrast between chemical pulping plants providing evaporation of
strong pulping liquors and those which add sedimentation following the
evaporation process. The absence of a consistent pattern is even more
striking when comparisons are drawn on a piant-by-plant basis rather
than in terms of aggregated groups. (Table 11)
Just as prevalence and degree of waste treatment fail to explain
adequately all of the water polluting potential of the operations of
any particular pulp and paper mill, so does the cliche that "it is
the small, old plants that cause the worst problems."
Older plants and smaller plants do tend to discharge more waste-
water containing more biochemical oxygen demand and more solids per
unit of output than larger or newer mills. (Table 12) But the tendency
is not undeviating as one moves in stages from smallest to largest or
from oldest to newest. Indeed, Region X mills of less than 300 tons
per day capacity, on average, discharge less BOD and solids per ton
34
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Table 12
Waste Characteristics by Categories
of Pulping Activities
Category
Mean Waste Discharge per Ton
1. Product Difference
Paper grade & dissolving pulps
Newsprint
Packaging
2. Process Differences
Predominantly sulfite
Predominantly sulfate
Predominantly groundwood or
NSSC
3. Age of Plant
Constructed before 1925
Constructed 1925 - 1945
Constructed 1946 - 1960
Constructed after 1960
4. Size of Plant
Less than 300 T/D
300 - 500 T/D
501 - 800 T/D
Greater than 800 T/D
5. ALL PLANTS
Flow (G)
75,200
52,500
35,000
67,800
35,700
49,400
63,200
61 ,900
37,000
39,000
54,400
65,300
36,400
46,000
54,100
BOD (Ibs)
398
40
49
407
47
60
137
360
120
39
133
391
51
151
202
Solids (Ibs)
79
60
27
52
40
78
71
92
43
20
53
57
32
96
68
-------
of output than do mills larger than 800 tons per day. And while
mills built since 1960, i.e., mills put in place when concern for
water pollution control was high and was represented by vigorous
state regulatory programs, discharge far less wastes per unit of
output than older plants, the oldest class of mills, those initially
installed in 1925 or earlier, manifest distinctly less wastes per
ton than mills built in the period 1926-45, and are not very dif-
ferent in waste/output relationships than post World War II mills
installed prior to 1961.
More significant than age of plant, size of plant, or even
level of waste treatment are basic product and production process
distinctions. Waste per unit of output levels are roughly an order
of magnitude greater for plants producing high grade pulps and for
plants producing by the sulfite process (they are, of course, pretty
much the same plants) than for others. Indeed, it is a recapitula-
tion of those fundamental market-technology interactions that seems
to produce such meaningful distinctions as one may find in the age
and size differences. The oldest and the smallest mills in Region X
tend to be groundwood mills. Sulfite mills cluster in the 300 to 500
ton per day range; and it was market conditions of the late twenties
and the thirties that produced the heyday of sulfite pulping.
To understand the pollutional aspects of pulp and paper produc-
tion as they relate to water, it is necessary, then»to examine pro-
cessing and waste treatment technology, the activities that produce
wastes and reduce their polluting effects.
If one strips away the accompanying phenomena, such as age and
size of plant or tonnage and quality of pulp production, waste dis-
charge per ton of output may be found to correlate rather directly
with three factors: (1) efficiency of recovery of pulping chemicals,
(2) amount of bleaching, and (3) degree of waste treatment performed.
For all practical purposes, at least when analyzing wastewater,
all chemical pulping processes initially produce roughly the same
amount of wastes. There are, to be sure, wide absolute variations in
strength of wastes that are caused by factors such as length of cook,
species of wood pulped, mean age and moisture content of wood pulped,
formulation of cooking liquor, employment of mechanical or hydraulic
barkers or of purchased wood chips, method of pulp washing, boiler
efficiency, operating rate, etc. But those have but slight proportion-
al influence on inter-plant comparisons. All chemical pulping processes
do essentially the same thing. In enormous pressure cookers ("digesters")
they cook out of wood, with the use of a chemical solution, heat, and
pressure, the components of wood fiber that are something other than
cellulose in order to separate those components, together with the
36
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cooking chemicals, from the cellulose, which is sprayed in liquid
suspension onto a moving belt to be dried into sheets. To produce
a ton of wood pulp or of paper—which is little more than a special-
ized form of pulp, sometimes containing other materials to improve
opacity, texture, strength, etc.,—it is necessary to dispose of
roughly seventeen tons of water, chemicals, and wood waste products
that have been separated from the pulp. Since only about half of
the wood that goes into the mill is utilizable as product, each ton
of pulp generates another ton of wood waste products, more or less.
By reducing the moisture content of the large share of that
wastewater that originates in digestion until it is combustible, burn-
ing off the organics, capturing and redissolving the cooking chemicals,
most present day pulp plants also eliminate the majority of their
waterborne wastes. Since chemical recovery—which is a basic feature
of sulfate pulping—is so clearly the key to the industry's water pol-
lution control, most sulfite plants have been forced to abandon cal-
cium sulfite cooking liquors in favor of recoverable bases (magnesium,
ammonia, soda) and are no longer necessarily distinguishable in terms
of water-borne wastes per unit of product from sulfate mills.
Bleaching carries on the process of separation that begins with
digestion of wood fibers into cellulose and non-cellulose components.
The limits of purity that apply to digestion are set by the character-
istics of wood fibers, and fall well short of requirements for many
pulps. In bleaching, "impurities" are dissolved away from the more
resistant cellulose to create pulps of higher purity. Those wastes,
including the wasted bleaching solutions that carry the wood products,
are in many cases substantially stronger than the wastes of pulping,
after chemical recovery.
Waste treatment processes applied to pulp mill wastes are modifi-
cations of conventional sewage treatment. In general, clarification
and stabilization are all that is required to produce an effluent of
a quality that matches secondary waste treatment of normal sewage.
(Batch processing may sometimes impose a need for equalization; neutra-
lization—particularly of bleach mill wastes—is occasionally demanded;
and fertilization is an almost invariable operational requirement to
accomplish effective stabilization.) It should be noted, however, that
biological treatment of chemical pulping wastes is ineffective—for
all practical purposes, impossible—in the absence of chemical re-
covery or an analogous procedure; unmodified digester waste liquors
are too strong and too plentiful to be susceptible to conventional
biological treatment methods.
37
-------
It must be recognized that there is great variability possible
in the application and effectiveness of any of the three major de-
terminants of waste strength. The more intensive the pulping cook
or the bleach—that is, the higher the quality of pulp produced—
the greater the production of wastes. The more complete the col-
lection and combustion of cooking liquors, the less the strength of
the waste produced. (Unfortunately, the financially optimum degree
of chemical recovery is distinctly below the limits of recovery tech-
nology. To achieve an environmentally desirable result, the mill
must collect, condense, and incinerate more pulping liquor than it
would prefer from the standpoint of the profit and loss statement.)
When aggregated into processing/treatment groupings that reflect
those basic distinctions, Region X pulp mills show the dramatic va-
riation that is possible in the production/waste discharge relation-
ship. The most pollutional process combination (no chemical recovery
and heavy use of bleaching) produces 280 times as much oxygen demand
per ton of product—even with some waste treatment—as does the com-
bination of chemical recovery, minimum bleaching, and maximum em-
ployment of waste treatment. (Table 13)
Three Region X mills—American Can at Halsey, Oregon; Weyerhaeuser
Company at Springfield, Oregon; and Western Kraft at Albany, Oregon—
have often been cited in the technical literature or by environmental
interests as outstanding examples of what can be done to reduce water
pollutants from pulp and paper production. As Table 13 indicates,
those plants are at least a full order of magnitude better in terms
of wastes per unit of product than other Region X mills. It is im-
portant to note, though, that regardless of the excellence of their
waste treatment procedures or the design of the plants to minimize
production of water-borne wastes, a significant part of the expla-
nation for their relatively "clean" operations is to be found in their
product mix. High yield, coarse, largely unbleached paper board just
does not result in the wasting of as much material as does the pro-
duction of better grades of pulp or paper. It is unreasonable, then,
to expect similar levels of waste reduction efficiency from all pulp
and paper plants, in the absence of significant modifications in
processing technology.
The data submitted through the Waste Discharge Permit system by
Region X pulp and paper mills are sufficient to permit the develop-
ment of an approximate but useful general model of the liquid waste
production characteristics of those mills. The relationships were
derived by grouping the plants into sets distinguished by common prop-
erties and tracing routes between the values of capacity, waste dis-
charge, BOD, and solids for any set and other, different sets to
38
-------
establish mean production to discharge effects of the significant
variables. By no means precise (addition of enough additional vari-
ables to improve precision might add little utility), the model does
provide an approximate description of the effects of major process
variables on waste strength.
The model, whose components are presented in Table 14, provides
both fairly reliable means of predicting waste discharges and a use-
ful tool for estimating size, and thus costs, of pollution abatement
facilities. Comparison of flow and waste strength values synthesized
from the model with reported values suggests that variation in waste
production is to some degree explainable in terms of random individ-
ual differences between one plant and another, but even more by such
quantifiable matters as inputs of purchased pulp; production of pro-
ducts utilizing significant amounts of sizes, pigments, and coatings;
and use of hydraulic barkers (which produce significant increases in
solids production). Given the necessary information about such mat-
ters, the model could probably be used to indicate by a process of
elimination, the significant variations in waste discharge that re-
sult neither from processing nor from treatment, but from controllable
operating and design features. Application of such knowledge could
not only significantly reduce waste discharge, but could also reduce
the costs of waste treatment.
(N.B. It should be emphasized that all values are provisional,
in that they represent a generalization of the existing situation.
Thus changes in production processes and controls would impose shifts
in the waste production values, and increases in the average effici-
ency of treatment components—for example, larger treatment plants
and detention times—would impose shifts in waste reduction values.)
39
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Table 13
Wastewater Characteristics of Region X Pulp Mills
Grouped by Process/Treatment Classes
24 Hour aggregate characteristics
4 (sulfite) mills, no chemical recovery
7 (sulfite) mills, w/ chemical recovery & heavy bleaching
10 (sulfate) mills, w/ chemical recovery & little bleaching
3 showcase mills
Tons of Gallons of
Pulp Wastewater
1772 130,400,000
3180 239,500,000
7541 246,700,000
2255 36,600,000
Lbs of
BOD
1
,505,000
952,300
403,800
6,400
Lbs of
Solids
90,600
243,600
262,100
9,700
Mean per ton characteristics
4 (sulfite) mills, no chemical recovery
7 (sulfite) mills, w/ chemical recovery & heavy bleaching
10 (sulfate) mills, w/ chemical recovery & little bleaching
3 showcase mills
Gallons of
Wastewater
73,600
75,300
32,700
16,200
Lbs of
BOD
849
299
54
3
Lbs of
Solids
51
77
35
4
Percent of Region X Chemical Pulping
4 (sulfite) mills, no chemical recovery
7 (sulfite) mills, w/ chemical recovery & heavy bleaching
10 (sulfate) mills, w/ chemical recovery & little bleaching
3 showcase mills
Tons of
Pulp
12.0%
21.6%
51 . 1%
15.3%
Gallons of
Wastewater
20.0%
36.7%
37.8%
5.6%
Lbs Of
Solids
15.0%
40.2%
43.3%
1.6%
Lbs of BOD
52.5%
33.2%
14.1%
0.2%
-------
Table 14
General Model of Waste Production
for Woodpulp Mills
Waste per ton of Product
Pulping and Drying
process yield miltiplier:
(dissolving pulp)
(other chemical pulps)
(semichemical pulps)
(groundwood pulps)
Heavy bleaching
Light bleaching
Strong liquor evaporation
Sedimentation**
Stabilization**
Flow (G)*
+42,000
1.00
.85
.65
.50
+32,000
+20,000
-13,000
BOD (Ibs)
+850
1.00
.85
.65
.50
+250
+100
-750
-30%
-65%
Solids (Ibs)*
+60
1.00
.85
1.55
1.90
-30
-45%
-30%
* strongly affected by barking process
** applied to residual of previous stage
-------
III. WASTE REDUCTION COSTS
Treatment of liquid wastes is not a complex or costly process.
For the most part, waste treatment consists of nothing more than
introducing water to a vessel that is designed to facilitate
natural processes. Those processes--settling, overflow,
decomposition--separate water from the introduced materials
considered to be pollutants. The latter are drawn off in a thin
slurry ('sludge1). The processed water is returned to the
natural environment.
Since treatment consists largely of holding water until natural
reactions have advanced to some desired point, waste treatment
facilities are little more than containment structures—tanks or
ditches—linked by pipes, pumps, and valves. Given sufficient
holding capacity and appropriate design, a sealed, shallow hole
in the ground in which natural life systems develop in response to
the characteristics of the water that is introduced can entirely
'purify1 a waste stream. In practice, land is seldom available
in sufficient quantities at a price that makes such wholly natural
treatments advantageous. So capital is supplied in the form of
aerators, compressors, digesters, chemical feed devices, pumps,
centrifuges, screens, beaters, thickeners to speed up reactions and
reduce land requirements.
The state of the art is such that possible trade-offs between
land and capital have been reduced to a limited and well-understood
series of design alternatives. Basic waste treatment processes
consist of a relatively small number of controlled reactions in
which land, capital, operating circumstances, and degree of
'purification' can be manipulated with a high probability of
success in terms of achieving a predictable design effectiveness'
at a stipulated cost.
Though a number of variations in technique are possible within
the basic land/capital trade-off, the magnitude of costs is deter-
mined by three inter-related factors: volume of water to be treated
concentration of materials to be reduced, and reaction rates of the
materials to be reduced. The design problem is essentially one of
determining how much water must be held over how long a time to
achieve a desired set of results.
42
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There are definite efficiency plateaux, and marginal costs
tend to rise steeply beyond them. As a consequence, waste treat-
ment engineering has been adapted to a modular strategy ('primary,'
'secondary,1 and 'tertiary' treatment). When the effective
marginal efficiency of one kind of reaction has been achieved,
it is less costly to transfer wastes to another kind of specialized
vessel in which a separate reaction series is engaged than to in
increase the reaction period within a less specialized reactor.
The modular strategy is an effort to come to grips with two
principles, consecutive and specialized processing of a parcel
of water, and speeding the accomplishment of natural reactions
that are progressively more difficult to achieve--i.e., naturally
slower. Thus each module requires an added reactor, and each
reactor tends to be either larger or more capital intensive than
the one before. The predictable consequence is that as increasingly
higher degree of treatment effectiveness becomes necessary, costs
rise more than proportionately. (The rule of thumb is that as
each efficiency plateau is attained, costs to reach the next
technological plateau will be equal to the sum of all previous
costs, for example:
BOD Reduction Asspclated Cos t
30-40% (primary treatment) 100%
80-90% (secondary treatment) 200%
90-98% 400%
> 98% 800%
Like most rules of thumb, that one is deceptive. It rests on
generalizations about the relationship between conventional
primary and secondary sewage treatment and some fragmentary data
about a series of 'advanced1 or specialized waste treatment
processes that may or may not have BOD reduction ffects. Actual
costs in any situation will be a function of the reactor configura-
tion imposed by the wastes received, and the progression of costs
seem more likely to be higher or lower than to consist of the
progressive doubling suggested by the rule of thumb.)
Unit costs are strongly affected by volume of water to be
treated. In general, increase in component size is directly
proportional to increase in flow volume; while increase in
component cost is less than increase in component size. Depending
on design and function, capacity increments have been determined
to involve cost increments of 0.6 to 0.85. (This fonr. of economy
43
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of scale seems to hold through a treatment plant size of about
100 million gallons per day capacity, regardless of kind of
treatment. Beyond 100 million gallons per day, diseconomies
begin to assert themselves and the cost to size curve has been
demonstrated to turn back on itself.)
The fact that unit costs decrease with the size of the plant
and increase with the level of treatment effectiveness that is
required confers an incremental marginal cost advantage on large
pulp and paper mills that enjoy similar economies of scale with
respect to productive capital and labor. It will cost about two
to three times as much per ton of output for a 200 ton per day
mill to treat its wastes as for a 2,000 ton per day mill,
assuming equal efficiency in water use. (Figure 1 and Table 15)
There has been an enormous volume of research devoted to
waste treatment costs over the last couple of decades. Crude
average cost per gallon or per capita values utilized in the
nineteen-fifties and earlier have been superseded by the
regression techniques that have attempted to correlate dollar
values with each of the many variables involved in waste treat-
ment-flow, detention time, influent concentrations, decay rates--
over a range of conditions. Unfortunately, the breadth of
observation has not been sufficient to permit useful multiple
correlation techniques to be employed. Unhappily, too, observa-
tions have tended to be made, and results expressed, in terms
of completed, multiple component facilities. Further, the bulk
of such research has been devoted to the case of treatment of
sewage, a fairly homogenous waste treatable with a narrow range
of processes. Industrial waste treatment costs have tended to be
reviewed through case studies or excessively generalized models.
In 1970 and 1971, EPA developed an industrial waste treatment
cost model that is intended to relate a series of specific variables--
wastes characteristics of manufacturing processes, location, plant
size, and intensity of water use--to twelve standard waste treatment
procedures. The model itself is extraordinarily complex, in that
it synthesizes a waste flow for all manufacturing plants inventoried
by Dun and Bradstreet, and more than a little abstract, in that it
operates in terms of average values weighted for location. While
the model is believed to provide an accurate general assessment
of national industrial waste treatment costs and can probably
predict the response of those costs to changes in regulatory,
operational, or technological conditions with acceptable precision,
its reliability tails off exponentially with degree of disaggregation0
Components of the general model can be utilized, however, to
estimate costs of waste treatment for specific plants with acceptable
precision when information about their waste discharges is available.
44
-------
FIGURE 1: Construction Costs of Separable Waste
Treatment Modules Employed in Chemical Pulping
10.0
in
i.
a
in o
-
OI-.
CJ VD
en
c «—i
•?*-
-t-> o
o
3
S-
4->
t/)
C
o
u
-
0
0.1
o
CJ
Flow in Million
Gallons per day
o
o
-------
Table 15
Examples of Construction and Operating Costs
for Various Levels of Flow
Treatment Provided
Combustion
Sedimentation
Stabilization
Total
Dollars per gallon
Construction Cost in 1967 Dollars for
Flows in Million gallons per day
0.10
1.0
10.0
100.0
155,000
80,000
27,000
262,000
2.62
682,000
282,000
110,000
1,074,000
1.07
3,000,000
1,011,000
523,000
4,534,000
0.45
13,200,000
3,616,000
2,300,000
19,116,000
0.19
Annual Operating Cost in 1967 Dollars for
Flows in Million gallons per day
Treatment Provided
Combustion
Sedimentation
Stabilization
Total
Dollars per year per 1,000 gallons per day
0.10
1.0
10.0
100.0
31,300
2,300
1,200
34,800
0.99
133,000
15,400
4,400
152,800
0.44
564,700
102,500
23,000
690,200
0.20
2,397,400
682,500
172,800
3,252,700
0.09
-------
The procedure is quite simple and straightforward, and while it
cannot predict what a firm will spend for waste treatment, it does
establish one set of costs that is compatible with solution of a
waste treatment problem.
The essence of the method is (1) to define the appropriate set
of treatment reactions for a waste of a given composition, (2) to
determine the flow-based capacity necessary for each component
(equalized daily flow multiplied by a strength factor), (3) to
multiply the value obtained by cost to size factors determined by-
observation, and (4) to modify the products by additional factors
that assess instiallation costs in excess of primary construction
costs and regional price variations. (cf. Table 16 for the
treatment process series and calculation factors.)
(N.B. While a number of the processes apply to sewage
treatment as well as to industrial waste treatment, the cost
to size equations reflect common industrial preferences with
respect to handling of peak flows, and sizing to current loads.
The dollar values obtained, then, are consistently below those
for a municipal waste treatment series of similar description.)
That simplified waste treatment cost model has been applied
to the effluent descriptions of Region X pulp and paper mills to
assess three possible conditions:
1. The situation in which all mills utilize what has
become an almost standardized treatment sequence for the industry:
evaporation and burning of concentrated pulping wastes, mechanical
clarification, and biological stabilization by use of aerated
lagoons.
2. Addition of added treatment steps to the basic set
where reported discharges either do not currently, or are unlikely--
in terms of average efficiency--to achieve BOD and solids per ton
values that meet preliminary guidelines for pulp mill effluents;
the additional treatment measures include some combination of (a)
incremental combustion capacity, (b) secondary sedimentation, or
(c) incremental stabilization capacity for BOD removal.
3. Substitution of the conventional activated sludge
treatment process, with separate sludge handling and return systems
and secondary settling, for aerated lagoons in all cases where
preliminary guidelines are not or may not be met by the standard
treatment configuration.
47
-------
The product of the calculations is three series of construction
and annual cost values for Region X pulp and paper mills, providing
estimates of both existing levels of capitalization and probable
costs of total compliance with regulation under (1) the most likely
technological assumptions, (2) the most likely modification of
conventional technology for conditions that fail to meet stringent
regulatory requirements, and (3) the most extreme technological
adaptation to regulations that is possible, short of moving to
kinds of waste treatment or internal controls that remain
experimental.
All costs are presented in constant (August 1967) dollars.
The most recent cost indices available suggest that construction
costs were 40.5% higher by July 1972 and operating costs were about
327o higher by March 1972 than the quoted values. While interest
and replacement rates are substantially unchanged from those used
for the analysis, values should be adjusted in both cases to
reflect inflation of the capital base upon which they operate.
48
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Table 16
Cost to Flow Relationships of
Basic 'teste Treatment Practices
(all costs in 1967 dollars)
Log (Cost) A + Log (Flow) (B + Log (Flow))
Capital Cost Factors
1. Oil Separation
2. Equalization
3. Coagulation-Sedimentation
4. Neutralization
5. Flotation
6. Sedimentation
7. Aeration
8. Biological Stabilization
9. Chlorination
10. Evaporation
11. Combustion
12. Activated Sludge
B
4.74702
4.62325
,52401
.69097
5.
4.
4.59106
45089
54407
07555
17609
6.11227
5.83373
5.73240
0.92844
0.74646
0.61843
0.98560
0.44964
0.55368
0.23408
0.64300
0.66317
1.00000
0.64339
0.78430
Operating Cost Factors (product in cents per 1000 gallons)
1. Oil Separation
2. Equalization
3. Coagulation-Sedimentation
4. -^Neutralization
5. Flotation
6. Sedimentation
7. Aeration
8. Biological Stabilization
9. Chlorination
10. Evaporation
IT. Combustion
12. Activated Sludge
Regional Cost Factors
Construction cost multiplier:
Operating cost divisor:
0.64345
-0.30103
0.86923
0.24304
0.64345
0.64345
-0.30103
0.00934
0.24304
-0.71120
1.57978
0.92940
-0.17671
-0.51016
-0.11755
-0.10083
-0.17671
-0.17671
-0.51016
-0.36057
-0.10083
-0.24314
-0.37205
-0.23730
Pacific Northwest = 1.085
Alaska 1.377
Washington
Oregon
Idaho
Alaska
0.840
= 0.896
= 0.993
= 0.669
0.22100
-0.22358
0.00842
-0.52716
-0.02748
0.06646
0.00586
0.06646
0.07879
Installation Cost Factors (land acquisition, connection costs, production losses:)
1. Oil Separation
2. Equalization
3. Coagulation-Sedimentation
4. Neutralization
5. Flotation
6. Sedimentation
7. Aeration
8. Biological Stabilization
9. Chlorination
10. Evaporation*
11. Combustion
12. Activated Sludge
0.25
0.15 X
0.25-0.35 X
0.15 X
0.15-0.35 X
0.35
0.15
0.25
0.15
0.10*
X construction costs
0.45
X
X
X
X
X
X
0.25-0.35 X
(*note: land costs basic in capital evaluation)
-------
IV. COST OF WASTE TREATMENT
TO REGION X PULP AND PAPER MILLS
Investments
Application of the waste discharge data available for
Region X pulp and paper mills to the evaluation process
described in the previous section of this report indicates
that those mills have invested the equivalent of $96 million
(1967 = 1.00) in capital facilities whose primary or only
purpose is the treatment of liquid wastes. (cf. Table 17)
The values are not, of course, reflections of balance
sheet values. They are approximations of the cost of installing
facilities of the indicated descriptions, based on national
average experience weighted for Region X conditions. Variations
from actual expenditures may be substantial for any given plant,
due to one or more of these influences:
1. Price level changes in construction have been
significant over the period in which facilities have been
installed. A clarifier constructed in 1972 would have cost
almost twice as much as a similar unit installed in 1960. (For
the purposes of this report, all dollar values are expressed in
1967 purchasing power equivalents.)
2. The evaluation assumes that all facilities were
designed to achieve standard reduction efficiencies and were
constructed to materials and reliability specifications as
rigorous as those employed in municipal sewage treatment. In
fact, plants may in some instances be underdesigned and construc-
tion may be of a different quality than that upon which the
evaluation procedures are based. (N.B. Underdesign may be
anticipated to reduce the effectiveness of treatment in all cases
in which it occurs. That is not true of cost-cutting construc-
tion methods and materials, where the deviation from evaluation
norms must be assumed to be neutral with respect to efficiency
in the absence of specific information. The technical literature
is full of imaginative, cost-cutting approaches to industrial
waste treatment that equal or exceed the effectiveness of
standardized methods.)
3. The evaluation is based on the quantity and
strength of discharge into components of the waste treatment
system. It does not, and cannot, account for processing
50
-------
modifications that affect those variables ahead of the treatment
system. Such modifications—or initial design features—absorb
a greater or lesser proportion of the cost of treatment, but
impose costs in themselves in most cases. Whether rigorous
waste control engineering throughout a plan reduces the total
cost of waste handling and treatment or not, its effect on
net cost of treatment is invariably to reduce it. For this
reason, investments and annual costs may be presumed to be
significantly understated in the cases of some establishments
that provide very effective waste reduction (e.g., Western Kraft
and Weyerhaeuser, Springfield), just as they may be overstated
in the cases of establishments with underdesigned and inadequately
operated systems.
The bulk of the capital outlay made to date has been expended
in the Willamette and Lower Columbia Basins (55 percent for 48
percent of regional capacity) and for primary treatment and
pretreatment measures.
For those plants that have been forced to convert from
calcium sulfite pulping to a recoverable chemical base as an
operational precondition to treatment, investments for evapora-
tion and burning of digester wastes have utilized the largest
share of the capital that has been invested—and estimated $25
million compared to $17 million for primary and secondary treat-
ment. Actual cash outlays may confidently be assumed to have
been significantly greater than the indicated $25 million, in
that the value represents only the cost of equipment for the
evaporation and burning itself, with no recovery except of
potential heat values. In practice, the establishments have in
every case installed the additional equipment necessary for
recovery of pulping chemicals, and have modified digesters as
necessary for that kind of operation. The cost of additional
air pollution control devices may also be attributed to the
installation of the chemical recovery step. It is probably
not at all unreasonable to assess the total capital commitment
involved in the conversion from calcium sulfite pulping at very
close to $50 million for the five Region X mills that have
undertaken it. It should be noted, however, that investment
in chemical recovery systems - whether motivated by waste
control regulation or not - may be expected to reduce the cost
of pulp production and to add to profits. While management
might prefer to make alternative dispositions of capital funds
in the absence of regulatory pressures, losses can be inferred
only in a relative sense, so that the only economic cost
associated with chemical recovery is probably the opportunity
cost it represents.
51
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Table 17
Current Replacement Value of
Installed Facilities
VALUE OF INSTALLED FACILITIES (1967 dollars)
Alaska Lumber &
Pulp
Ketchikan
Location
Sitka
Ketchikan
Evaporation
Pdtn. Comp.*
Pdtn. Comp.
Sedimentation Stabilization
-.
TOTAL
—
ALASKA
Boise Cascade
Crown Zellerbach
Georgia Pacific
Rayonler
St. Regis
Scott
Simpson Lee
Weyerhaeuser
Steilacoom
Port Angeles
Port Townsend
Bcllingham
Port Angeles
Tacoma
Anacortes
Everett
Everett
Everett
Everett
N.A.
N.A.
Pdtn. Comp.
By-Pdt.Rcvy.
--
Pdtn. Comp.
—
—
Pdtn. Comp.
Pdtn. Comp.
__
1,100,000
1,600,000
-
--
-
2,700,000
1,400,000
4,000,000
—
„
2,600,000
1,100,000
1,600,000
--
--
--
2,700,000
1,400,000
4,000,000
--
--
2,600,000
Rayonier
Weyerhaeuser
Georgia Pacific
International
Menasha
Boise Cascade
Crown Zellerbach
Longview Fibre
Weyerhaeuser
American Can
Boise Cascade
Crown Zellerbach
Publishers
Western Kraft
Weyerhaeuser
Boise Cascade
Inland Empire
Potlatch
PUGET SOUND
Hoquiam
Cosmo polls
'WASH. COAST
Toledo
Gardiner
North Bend
OREGON COAST
St. Helens
Wauna
Camas
Longview
LonRview
LOWER COLUMBIA
Halsey
Salem
Lebanon
West Linn
Newberg
Oregon City
Albany
Springfield
WILLAMETTE
Wallula
Millwood
Lewiston
UPPER COLUMBIA
REGION X
Pdtn. Comp.
Pdtn. Comp.
Pdtn. Comp.
Pdtn. Comp.
N.A.
Pdtn. Comp.
Pdtn. Comp.
16,000,000
Pdtn. Comp.
Pdtn. ComD.
16,000,000
Pdtn . Comp .
2,900,000
1,400,000
N.A.
2,300,000
2,100,000
Pdtn. Comp.
Pdtn. Comp.
9,700,000
Pdtn. Comp.
«. A.
Pdtn. Comp.
25,000,000
13,000,000
3,000,000
2,700,000 1,400,000
5,700,000 1,400,000
„
1,700,000
660,000
2,400,000
2,800,000 1,500,000
3,700,000
5,400,000
4,000,000
5,200,000
21,000,000 1,500,000
1,700,000 860,000
2,100,000 1,100,000
1,000,000 470,000
2,300,000 1,200,000
1,500,000 730,000
2,800,000 1,500,000
1,100,000 520,000
2,000,000 1,000,000
15,000,000 7,400,000
1,200,000
770,000
2,800,000
4,800,000
62,000,000 10,000,000
13,000,000
3,000,000
4,100,000
7,100,000
—
1,700,000
660,000
2,400,000
4,300,000
3,700,000
21,000,000
4,000,000
5.200,000
39.000,000
2,600,000
6,100,000
2,900,000
3,500,000
4,600,000
6,400,000
1,600,000
3,000,000
31,000,000
1,200,000
770,000
2,800,000
4, EDO, 000
96,000,000
-------
The value of facilities installed to date represents something
more than half of the total required to provide all plants with the
sequence of treatment measures generally thought by regulatory
authority to be necessary for pulp and paper mills. Another $82
million of investment would be required to bring all plants up to
the facility availability standard utilized for evaluation purposes—
generally expressed as 'the equivalent of secondary treatment of
municipal wastes.' (cf. Table 18) More than half of the unmet
requirement—$43 million—is associated with the Puget Sound component
of the industry. (Although closure of two mills at Everett will
eliminate about $6 million of that requirement.)
The investment that remains to be made is associated largely
with installation of secondary easte treatment procedures. No
evaporation and burning equipment defici-encies exist outside of
Puget Sound. (At least in a gross sense: substandard efficiency
is indicated in several cases—particularly for sulfite recovery
systems.) Only $7 million worth of investment in primary waste
treatment is indicated for mills outside of Puget Sound and Alaska—
and in two of the three cases of deficiency, primary treatment
has been installed, but reported solids concentrations in the
effluent are so high as to indicate the need for added capacity.
As with existing treatment works, investment requirements are
dominated by evaporation and burning in those mills that do not
currently practice chemical recovery. An estimated $18 million
of the toal $28 million treatment investment required by five such
mills represents the cost of the combustion stage, and it is safe
to assume that the $18 million represents little more than half of
the investment that will be expended to meet the waste treatment
requirement in a manner that is operationally profitable and that
complies with air pollution control requirements.
Annual Charges
Investments are not costs. It is inappropriate, both technically
and realistically, to speak of the $180 million worth of waste treat-
ment works required for Region X's pulp and paper industry as costs
to the firms that constitute the industry. Rather, that investment
constitutes a transfer of assets from some other form—cash, inventory
reduction, claims on future earnings—into other assets, the
specialized items of fixed capital that are required to continue
to operate under existing and contemplated environmental regulations.
Costs are incurred through the production and exchange processes.
They must be added to the price of the product (or otherwise transferred
from consumers, owners, or other social elements) if the establishment
is to continue to operate. As calculated and presented here, the
costs of waste treatment are assumed to be incremental costs of
production that include:
53
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1. Payments for labor, for chemicals, for electricity,
for transportation (sludge disposal), and for routine maintenance
that are imposed by the operation of waste treatment facilities;
2. Replacement or extraction of capital invested in
treatment facilities at the rate of 5 percent a year;
3. Opportunity costs, or capital service costs, of
waste treatment works calculated at 7.7 percent a year, the
prevailing rate for long-term industrial bonds.
(N.B. Neither operating and maintenance nor capital replace-
ment charges for chemical recovery facilities have been added into
annual costs for those establishments that have converted, or are
expected to convert, to chemical recovery systems as a consequence
of water pollution abatement requirements. Such charges are
considered to be production costs, and their net effect on the
total costs and waste treatment costs of the establishment are
thought to be negative in most cases. Interest charges for such
facilities are, however, included in the annual cost values presented
here, on the basis that the failure of management to install such
facilities in the absence of regulatory pressure is a clear
indication that higher returns on the necessary capital were
elsewhere available. Under those circumstances, opportunity costs--
assumed to be equal to interest charges—should be charged against
waste treatment, even though charging either the gross costs or
net savings associated with such facilities against waste treatment
would distort those costs, by overstatement or understatement,
respectively. In particular, the relative cost burden between
sulfite and sulfate production processes would be seriously distorted,
in that chemical recovery is invariably associated with production
costs in the sulfate process.)
Given those definitions of costs, Region X pulp mills are
currently paying more than $18 million (1967 = 100) a year to treat
their wastes, (cf. Table 19)
On the assumption that 350 days is a normal operating year and
that the mean operating rate is 95 percent of rated capacity over
the operative period, waste treatment currently adds $2.80 a ton
to the cost of producing wood pulp in Region X.
The degree of waste treatment performed appears to have little
influence on unit costs of waste treatment. Those mills that provide
no treatment (including chemical pulping plants that practice
chemical recovery but no specific waste treatment operations) incur
no waste treatment costs. But sulfite mills that only provide
primary treatment would seem to have higher charges per ton of
54
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output on average than do mills that accomplish significantly
greater waste reductions:
Waste Treatment
Cost Per Ton
No Waste Treatment $ 0
Primary Treatment only, groundwood 3.20
Primary Treatment only, chemical pulping 4.20
Burning of Digester Wastes and
Primary Treatment 3.00
Burning of Digester Wastes, Primary and
Secondary Treatment 3.85
The data should not be interpreted to mean that waste
treatment costs do not rise with degree of treatment accomplished.
Rather, they indicate that other variables—plant size, product
and process composition, internal controls of water and of waste
products—have an even greater influence on waste treatment costs
than does the degree of treatment.
Given that fact, it is surprising to find that the mills
that have installed waste treatment are not in all cases the ones
for whom it would be cheapest. The model indicates that if all
Region X mills were to install and operate the full range of
treatment processes currently required, they would incur another
$13 million a year in charges. (cf. Table 20) Thus the industry
has supplied 55 percent of the necessary investment, but already
incurs 58 percent of the ultimate annual costs. At least two
explanations come readily to mind. On the one hand, there are
intensive as well as extensive economies of scale in the waste
treatment process, such that operating costs do not increase
proportionally with capital investment--at least through the
conventional pretreatment—primary treatment, secondary treatment
sequence. Another possible explanation is to be found in regulatory
behavior. Some relatively expensive treatment decisions have been
implemented in Grays Harbor and the Willamette Valley, where the
environmental payoff could be expected to be high; while Puget
Sound and the Oregon Coast, where less costly opportunities for
treatment are available, seem to have been given less emphasis.
Whatever the reason may be, the costs to the industry of
servicing the additional waste treatment investment that will be
required to reach secondary treatment capabilities will not be
proportional to increase in investment. The ratio of annual costs
to investment for facilities currently in place is about .19 to
1.0; for incremental investment it is about .16 to 1.0, or 15
percent lower.
55
-------
Table 18
Incremental Investment
Required to Achieve
Treatment Norms
Firm Location
Alaska Lbr&Pulp
Ketchikan Pulp
Boise Cascade
Crown Zellerbach
Georgia Pacific
Rayonier
St. Regis
Scott
Simpson Lee
Weyerhaueser
Rayonier
Weyerhauese^
Georgia Pacific
International
Menasha
Boise Cascade
Crown Zellerbach
Longview Fibre
Weyerhaueser
American Can
Boise Cascade
Crown Zellerbach
Western Kraft
Weyerhaueser
Boise Cascade
Inland Empire
Potlatch
Sitka
Ketchikan
ALASKA
Steillacoom
Port Angeles
Port Townsend
Bellingham
Port Angeles
Tacoma
Anacortes
Everett
Everett
Everett
Everett
PUGET SOUND
Hoquiam
Cosmopolis
WASH. COAST
Toledo
Gardiner
North Bend
ORE. COAST
St. Helens
Wauna
Camas
Longview
Longview
LOWER COLUMBIA
Halsey
Salem
Lebanon
West L1nn
Newberg
Oregon City
Albany
Springfield
WILLAMETTE
Wallula
Millwood
Lewiston
UPPER COLUMBIA
REGION X
Value of Required Facilities (1967 dollars)
Evaporation Sedimentation Stabilization
—
—
---
...
---
4,100,000
3,900,000
—
1,900,000
5,500,000
—
...
2,900,000
18,000,000
—
—
—
—
—
—
—
—
—
—
—
— -
...
...
—
—
—
—
—
—
—
—
—
—
—
—
18,000,000
4,200,000
4,700,000
8,000,000
...
---
1,900,000
2,900,000
2,600,000
—
---
—
1,600,000
2,800,000
—
12,000,000
—
—
—
1,700,000
—
300,000
2,000,000
— -
...
—
—
4,900,000
4,900,000
—
...
—
—
...
—
—
—
—
—
—
...
—
28,000,000
2,300,000
2,600,000
4,900,000
510,000
800,000
1,000,000
1,600,000
1,400,000
1,500,000
580,000
2,000,000
700,000
1,500,000
1,000,000
13,000,000
2,300,000
—
2,300,000
840,000
880,000
280,000
2,000,000
—
2,100,000
3,100,000
2,300,000
3,100,000
11,000,000
—
—
—
—
—
—
—
...
...
560,000
330,000
1,500,000
2,400,000
36,000,000
Total
6,500,000
7,300,000
14,000,000
510,000
800,000
1,900,000
8,600,000
7,900,000
1,500,000
2,500,000
7,500,000
2,300,000
4,300,000
3,900,000
43,000,000
2,300,000
...
2,300,000
2,600,000
880,000
580,000
4,000,000
—
2,100,000
3,100,000
2,300,000
8,000,000
16,000,000
—
...
...
—
—
—
—
—
—
560,000
330,000
1,500,000
2,400,000
77,000,000
-------
Table 19
Current Level of Annual Waste
Treatment Costs
Annual Cost of Waste Treatment (1967 dollars)
Firm
Alaska Lumber & Pulp
Ketchikan Pulp
Location
Sltka
Ketchikan
Operations
--
—
Replacement
—
—
Interest
—
—
TOTAL
—
—
Per Ton of Output
—
—
ALASKA
Boise Cascade
Crown Zellerbach
Georgia Pacific
Rayonier
St. Regis
Scott
Simpson Lee
Weyerhaeuser
Rayonier
Weyerhaeuser
Georgia Pacific
International
Menasha
Boise Cascade
Crown Zellerbach
Longview Fibre
Weyerhaeuser
American Can
Boise Cascade
Crown Zellerbach
Publishers
Western Kraft
Weyerhaeuser
Boise Cascade
Inland Empire
Potlatch
Stellacoom
Port Angeles
Port Towns end
Bellingham
Port Angeles
Tacoma
Anacortes
Everett
Everett
Everett
Everett
PUGET SOUND
Hoquiam
Cosmopolis
WASH. COAST
Toledo
Gardiner
North Bend
ORE. COAST
St. Helens
Wauna
Caroas
Longview
Longview
L. COLUMBIA
Halsey
Salem
Lebanon
West Linn
Newberg
Oregon City
Albany
Springfield
WILLAMETTE
Wallula
Millwood
Lewis ton
UPPER COLUMBIA
REGION X
80,100
140,800
—
—
—
304,800
112,900
526,900
—
—
282,400
1,447_,900
356,000
363,800
719,800
—
150,900
34,000
184,900
367,900
453,700
839,200
543,800
802,400
3j007,000
178,100
239,600
83,500
269,100
144,700
355,500
94,900
216,700
1,582,100
91,000
46,500
407.900
7,349,600
41,300
60,400
—
—
—
101,500
52,000
146,600
—
—
96,400
498,200
112,600
156,400
269,000
—
66,100
24.300
90,400
164,900
138,500
200,500 •
149,700
194,500
848^100
98,700
121,800
57,400
132,300
85,100
161,000
62,900
113.500
45,000
28,700
178.500
2,716,900
84,700
123,200
—
—
~
207,900
107,800
308,000
—
—
200,200
1,031,800
231,000
315,700
546,700
—
130,900
50^800
181,700
331,100
284,900
1,617,000
308,000
400,400
3,789,500
200,200
469,700
223,300
269,500
354,200
492,800
123,200
231.000
92,400
34,700
342.700
8,256,300
206,000
324,400
—
—
~
614,200
272,700
981,500
—
—
579,000
2,977,900
699,600
835,900
1,535,500
—
347,900
109,100
457,000
863,900
877,100
2,656,700
1,001,500
1^397,300
7,644,600
477,000
831,100
264,200
670,900
584,000
1,009,300
281,000
228,400
109,900
18,322,800
2.80
3.70
—
—
—
2.10
5.90
3.50
—
—
5.60
1.90
4.20
6.30
5.10
—
1.70
2.20
0.80
3.20
2,60
7.00
1.60
5.00
4.10
4.30
10.00
11.10
11.20*
3.50
5.10
1.10
1.00
5.00
2.80
*Based on pulping capacity. A substantial portion of costs is attributable to paper production.
-------
Table 20
Incremental Annual Cost of
Treatment Upgraded to Industry Norm
Incremental Annual Cost (1967 Dollars)
Per Ton
FIRM Location Operations Replacement Interest Total of Cutout
Alaska Lbr.& Pulp
Ketchikan Pulp
Boise Cascade
Crown Zellerbach
Georgia Pacific
Rayon ier
St. Regis
Scott
Simpson Lee
Weyerhaeuser
Rayonier
.Jeyerhaeuser
Georgia Pacific
International
Menasha
Boise Cascade
Crown Zellerbach
Longview Fibre
Weyerhaeuser
American Can
Boise Cascade
Crown Zellerbach
Publishers
Western Kraft
Weyerhaeuser
Boise Cascade
Inland Empire
Potlatch
Sitka
Ketchikan
ALASKA
Steilacoom
Port Angeles
Port Townsend
Bellingham
Port Angeles
Tacoma
Anacortes
Everett
Everett
Everett
Everett
PUGET SOUND
Hoquiam
Cosmopolis
WASH. COAST
Toledo
Gardiner
North Bend
ORE. COAST
St. Helens
Wauna
Camas
Longview
Longview
LOWER COLUMBIA
Halsey
Salem
Lebanon
West Linn
Newberg
Oregon City
Albany
Springfield
WILLAMETTE
Wallula
Millwood
Lewiston
633,600
746,500
1,380,100
18,400
31,500
223,200
416,700
351,300
69,300
21,400
105,000
165,600
381,300
44,300
1,828,000
135,700
--
135,700
173,700
33,700
21,200
228,600
—
107,200
202,500
130,200
202,700
642,600
--
--
--
--
--
--
--
—
--
20,700
11,300
61,600
UPPER COLUMBIA 93,600
REGION X
4,308,600
249,700
433,000
682,700
20,400
31,700
110,700
172,000
152,600
58,000
23,200
78,300
86,900
161,600
41,400
936,800
93,800
--
93 ,800
97,000
35,200
23,500
_ 15 5 7700
—
83,200
123,400
91,100
318,100
615,800
—
—
--
--
--
--
—
—
—
22,600
13,400
60,200
96,200
2,581,000
500,500
562,100
1,062,600
1,383,800
1,741,600
3,125,400
39,300 ' 78,100
61,600 124,800
223,300 557,200
662,600 1,251,300
608,300 1,112,200
115,500 242,800
192,500 237,100
577,500 760,800
177,100
331,100
292,500
3,281,300
177,100
—
177,100 ~
200,200
67,800
44,700
312,700
—
161,700
238,700
177,100
616,000
1,193^500
—
--
--
--
--
—
—
--
—
30,800
25,400
115,500
171,700
6,198,900
429,600
874,000
378,200
5.70
8.30
6.90'
1.10
1.40
4.10
6.60
6.90
0.80
5.10
2.70
7.50
6.40
3.70
6,046,000 3.90
406,600 2.40
--
406,600
470,900
136,700
89,400
697,000
—
352,100
564,600
398,400
1,136,800
2,451 ,900
--
—
—
—
—
—
—
—
--
74,100
50,100
237,300
361,500"
13,088,500
..
"Oo ~
1.40
0.70
1.80
1.20
--
1.10
1.50
0.60
4.00
1.30
--
--
—
—
—
—
—
—
0.30
2.30
0.70
750
2.00
-------
TABLE 21
Estimated Increase in Production Costs
Attributable to Waste Treatment
Region
Alaska
Puget Sound
Washington Coast
Oregon Coast
Lower Columbia
Willamette
Upper Columbia
Region X
W.T. Costs Per Ton of Output (1967 Dollars)
Current
0
1.90
5.10
0.80
4.10
3.70
1.60
2.80
Indicated
Increment
6.90
3.90
1.40
1.20
1.30
0
0.60
2.00
Total
6.90
5.80
6.50
2.00
5.40
3.70
2.20
4.80
Percent
Expected
Increase
00
205%
27%
150%
32%
0
38%
71%
-------
Impact on Firms
There are presently eighteen firms active in pulp and paper
production in Region X. Three of them—Weyerhaeuser, Crown
Zellerbach, and Boise Cascade--dominate the industry, operating
fifteen of the thirty-four plants and accounting for more than
40 percent of total capacity. Among them, they have invested more
than $60 million in waste treatment, and bear more than $10 million
a year of waste treatment costs.
Such aggregate figures have little meaning, however. Tiny
Inland Empire Paper Company appears to have invested more dollars
per ton of production capacity in waste treatment works than any
of the big three--more than twice as much as giant Weyerhaeuser--
and its values added by waste treatment are, and will probably
continue to be, significantly larger than those of the major firms.
The point is not that Inland Empire is more virtuous or deals
with harsher regulatory treatment than bigger firms, it is that
gross values have little meaning with respect to the competitive
standing of individual firms. Such values must be related to some
objective standard of comparison to properly gage their significance.
When waste treatment outlays are expressed in terms of
capacity or output, the variability in inter-firm impact of Region X
operations is found to be great. (cf. Table 22) Total invest-
ment requirements vary from $2,100 per ton of capacity for Western
Kraft to almost $16,000 per ton for Scott Paper Company; incremental
capital requirements range from zero for three firms to more than
$10,000 per ton for four others. Current additions to operating
costs imposed by waste treatment range from nothing to $5 a ton.
If all plants meet the secondary waste treatment requirement,
treatment costs per ton of output will vary from $1.10 for Western
Kraft to over $8.00 for Ketchikan Pulp.
Location obviously affects the costs that can be anticipated
by the two Alaskan producers, but other elements also influence
the expectations of firms.
Size composition of establishments clearly plays a significant
role in determining inter-firm cost distribution. While the
association is by no means direct, there is a definite relationship
between average size of plan and waste treatment costs absorbed.
(cf. Figure 2)
60
-------
The inverse correlation of unit cost with size of plant could
have been predicted from a knowledge of the homogenity of waste
treatment procedures and of the general principle of economy of
scale. (Refer back to Figure 1.) The correlation should not be
over-emphasized, however. Though the larger plant has a distinctly
advantageous cost structure in comparison with the smaller plant,
those advantages are to some extent associated not with size per se,
but with size as an expression of product specialization. And,
as has been noted in Section 1 of this report, products and
processes have a major influence on the volume and strength of
waste produced per ton of product output.
Volume and strength of waste quite obviously affect the cost
of waste treatment, even though the same waste treatment methods
apply to most of the product/process groupings. Those relationships
become quite clear when product class aggregated unit waste treat-
ment costs are calculated and arrayed. It would appear that values
added by waste treatment are distinctly greater than those that
trace directly to plan size; although size of plant may be a
significant determinant of cost within a product or process category.
(cf. Table 23)
The significance of these factors to the financial conditions
and competitive standing of firms would appear to be obvious. It
is probably safe to assume that waste treatment costs will ultimately
be imbedded in product prices. Given that hypothesis, several
postulates emerge.
1. If all pulp and paper prices reflect waste treatment
costs, firms may be expected to bargain aggressively for subsidies
that permit some or all of the price component to be diverted to
profits. Obviously, the largest possible subsidy is evasion of
regulation; but both delay and substandard performance are profitable
modes of behavior—and their degree of profitability will increase
directly with the increase in overal costs of waste treatment and
the conversion of those costs into product prices.
2. Average cost per firm is a poor guide to the relative
impact of pollution control regulation on profits and competitive
standing. Because costs vary with process and product groupings,
price adjustments may be anticipated to take place within specific
product lines. Where a product may be developed through application
of alternative processes and one of those processes has a distinctly
lower waste treatment cost, the viability of mills employing other
processes will be reduced, all other things being equal.
61
-------
3. Because of the economies of scale inherent in waste
teatment, application of across-the-board treatment requirements
will accelerate the trend to larger mills. The consequences will
include larger point source residual discharges, more extensive
forest exploitation, greater expenditures of energy and materials
displacement in the production of pulp and paper. These unfortunate
environmental consequences of direct environmental regulation (not
to mention their social side effects) must be recognized by both
mill management and regulatory authorities; and measures to counter
them must be developed if a positive balance is to be achieved from
environmental outlays.
4. Within any product category the comparison of unit
waste treatment costs for a specific mill with the industry average
for mills of that type could provide a useful guide to expectation
for continued operation. Mills distinguished by higher than average
waste treatment costs may be assumed to be vulnerable to closure
in the absence of substantial recapitalization measures. That does
not imply that waste treatment costs are, in themselves, critical
to the operations or profitability of any mill. It must be recognized,
however, that relative waste treatment costs recapitulate, and are a
consequence of, a whole series of influences--age, size, market
growth, capitalization—that determine the efficiency of a given
plant. Waste treatment costs, then, are an incremental effect
in a cumulative process that determines which plants will survive.
62
-------
Table 22
Inter-Firm Impact of
Meeting Waste Treatment Norms
OUTLAY PER TON IN 1967 DOLLARS
Plants Required
FIRM Capacity Investment
Alaska Lbr & Pulp
American Can
Boise Cascade
Crown Zellerbach
Georgia Pacific
Inland Empire
International
Ketchikan Pulp
Longview Fibre
Menasha
Potlatch
Publishers
Rayon ier
St. Regis
Scott
Simpson Lee
Western Kraft
Weyerhaeuser
Less
Everett Sulfite
REGION X
1
725 T/D
1
330 T/D
4
1936 T/D
6
3018 T/D
2
1572 T/D
1
66 T/D
1
600 T/D
1
630 T/D
1
1850 T/D
1
150 T/D
1
1000 T/D
1
1094 T/D
2
990 J/D
1
887 T/D
2
976 T/D
1
173 T/D
1
770 T/D
5
3121 T/D
4
2811 T/D
34
19.965
9,000
7,900
7,100
13,400
7 , 100
16,000
4,300
11,600
3,400
8,000
4,300
10,000
13,300
4,700
15,800
13,200
2,100
10,000
8,800
8,900
Existing
Investment
0
7,900
6,600
10,000
0
11,700
2,800
0
2,200
4,400
2,800
10,000
3,000
3,000
5,500
0
2,100
4,800
4,400
4,800
Required
Annual Cost
5.70
4.30
3.50
6.30
3.40
7.30
2.40
8.30
2.20
4.00
2.50
4.60
6.70
2.90
6.80
7.50
1.10
5.50
5.10
4.80
Existing
Annual Cost
0
4.30
3.30
4.80
0
5.00
1.70
0
1.60
2.20
1.80
4.60
2.10
2.10
3.90
0
1.10
3.30
3.00
2.80
TOTAL Annual
InvestmentCost
9,000
0
500
2,800
7,100
5,000
1,500
11,600
1,200
3,600
1,500
0
10,300
1,700
10,300
13,300
0
5,200
4,400
4,100
5.70
0
0.20
1.50
3.40
2.30
0.70
8.30
0.60
1.80
0.70
0
4.60
0.80
2.90
7.50
0
2.20
1.90
2.00
Less Two
Everett Mills
32
19,485
8,700
4,800
4.60
2.80
3,900 1.80
*Everett counted as sunken capital loss and not reflected.
-------
FIGURE 2
Generalized Relationship
of Mill Size to
Waste Treatment Cost REGION X Mills
s_
3
o
-C
CM
S-
cu
Q.
ioo :
200
300
400
500
600
700
800
u, 900
c
•? 1000
£ 1100
2-1200
c 1300
£ 1400
| 1500
£ 1600
1700
1800
1900
1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0
Waste Treatment Costs per ton output (1967 dollars)
Curve = Average cost per ton across valid size range
Points = Cost per ton of specific mills
-------
Table 23
Values Added By
Waste Treatment by Product
and Process Categories
ESTABLISHMENT CATEGORY
Fine paper, tissue, dissolve pulp
Sulfite pulps
Groundwood-NSSC pulps
Newsprint
Packaging
Sulfate pulps
All Mills
Mean 24 Hour
CAPACITY
485T
477
176
222
788
836
587
Cost per Ton
MEAN RANGE
$8.00
7,
5,
2.
2
70
10
4.10
90
80
4.80
$6.20-11.20
5.70-11.10
3.90- 7.30
3.50- 5.10
1.10- 6.40
1.10- 6.40
1.10-11.20
Number
of Mills
10
13
5
4
14
13
34
*Some multi-product and/or multi-process mills are not included in the tabulation
-------
Appendix
The artificial nature of the treatment cost values that form
the basis of this report must be acknowledged. Use of models
inevitably causes doubts, and in situations that have the great
potential for variation that waste treatment presents, those doubts
may be large. It may be useful, then, to compare the calculated
construction costs of specific facilities with the reported costs
of the same facilities, where they have appeared in industry
publications:
Establishment
Boise Cascade,
Steilacoom
Salem
Crown Zellerbach
Camas
West Linn
Publishers Paper,
Oregon City
Newberg
Rayonier, Hoquiam
St. Regis, Tacoma
Investment
Reported
$ 800,000
6,400,000
2,500,000
15,500,000
2,500,000
3,600,000
6,300,000
2,700,000
1,900,000
Calculated
$ 1,100,000
6,100,000
1,900,000
16,000,000
3,500,000
4,300,000
2,300,000
3,000,000
2,700,000
Nature of Facility
primary treatment
total treatment
system
primary treatment
recovery system
secondary treatment
secondary treatment
recovery system
primary treatment
primary treatment
Eight treatment
facilities
$42,200,000
$40,900,000
Although the total reported value is somewhat higher than the
calculated value, modelled costs are higher in six of nine cases. Two
of the three cases in which reported costs exceed calculated costs
involve the installation of chemical recovery systems, where modelled
values extend only to those engineering features essential to liquid
waste treatment. There would seem, then, to be a distinct tendency
for the modelling procedure to assess costs at a level somewhat in
excess of those encountered in reality.
66
-------
Table 24
Comparison of Reported or Modelled "Secondary Equivalent"
with Proposed "Best Practicable Treatment" Guidelines
FIRM
Alaska Lumber & Pulp
American Can
Boise Cascade
Crown Zellerbach
Georgia Pacific
Inland Empire
International Paper
(etchikan Pulp
.ongview Fibre
fenasha
Potlatch
Publisher's Paper
ITT Rayonier
St. Regis
Scott Paper
Western Kraft
Weyerhaeuser
LOCATION
Sitka, AK
Halsey, OR
Steilacoom, WA
St. Helens, OR
Salem, OR
wallula, WA
Port Angeles, WA
Port Townsend, WA
Wauna, OR
Camas, WA
Lebanon, OR
West Linn, OR
Bellingham, WA
Toledo, OR
Spokane, WA
Gardiner, OR
Ketchikan, AK
Longview, WA
North Bend, OR
Lewis ton, ID
Newberg, OR
Oregon City, OR
Port Angeles, WA
Hoquiam, WA
Tacoma, WA
Anacortes, WA
Everett, WA
Albany, OR
Everett, WA
Longview, WA
Cosmopolis, WA
Springfield, OR
CURR
E&B
X
X
NA
X
X
X
NA
X
X
X
X
X
?
X
NA
X
X
X
NA
X
X
X
X
X
X
X
X
X
X
INT TREA'
P
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
MENT
S
X
X
X
X
X
X
X
X
X
X
BOC
BPT
60
9
4.5
n
35
8
4.5
9
9
<35
35
20
35
9
10
9
60
11
14
11
20
26
60
60
9
35
>35
9
9
23
60
9
/TON
RPTD
378
4
44
31
32
34
44
39
71
150
53
39
230
30
84
43
178
58
90
78
12
14
1105
629
69
814
689
3
57
214
260
2
MOLD
92
15
12
15
10
25
53
56
7
29
15
43
20
32
27
87
215
24
101
57
14
75
SO
BPT
80
10
6
12
40
12
6
10
10
<40
40
23
40
10
12
10
80
15
25
12
23
29
80
80
10
40
>40
10
10
25
80
10
.IDS/T N
RPTD
141
5
51
28
15
25
83
17
21
40
30
183
75
21
13
34
85
35
62
38
16
14
80
58
15
56
33
7
49
600
22
6
MOLD
54
36
18
58
7
15
28
12
8
9
24
14
25
43
27
19
41
10
28
12
19
420
VIOL
BOD
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
AT I ON
Solids
X
X
X
X
X
X
X
X
X
X
X
X
l
E&B = Evaporation & burning of concentrated pulping liquors
P - Primary
S = Secondary
BPT = Best Practicable Treatment
RPTD - Reported as Current Discharge
MOLD = Modelled Discharge, Given Incremental
Treatment as Necessary to the Secondary
Level
-------
V. IMPACT OF EFFLUENT STANDARDS
Both administrative practice and legislative enactments
in the environmental management area have demonstrated an
increasing tendency to ignore direct consideration of the
environmental effects of economic activities and to concentrate
instead on technological features that relate to kinds of waste
products and the nature of their disposal. (This analysis is
a reflection of that tendency, in that it relates costs to
specific water processing procedures rather than to modifica-
tions required to protect the quality of specific waste re-
ceiving waters.)
The tendency is probably strongest in water pollution
control, where 1972 amendments to existing Federal legislation
shifted the thrust of regulatory programs away from achievement
of stipulated water quality criteria and toward the achievement
of a series of broadly stated technological standards for
direct waste discharges. The language of the legislation is
less than precise as it relates to industrial waste discharges,
requiring that they receive "best practicable waste treatment"
by July 1, 1977, and "best available waste treatment" there-
after. The responsibility for defining the objective corre-
latives of "best practicable" and "best available" waste
treatment has been left to the Administrator of EPA.
Given the variety of products and processes involved,
not to mention the enormous possible variation in the
efficiency of processes and their possible combinations, that
task of definition is probably the most significant and
difficult duty ever imposed in the environmental management
field in the United States. The consequences of those
definitions will be great—not only with respect to water
quality, but also to quality of soils and air which will
become the necessary repositories for materials extracted
from wastewater, and with respect to product prices,
competitive structure, and international trade prospects
of American firms.
In practice, EPA has—understandably enough—avoided
questions of environmental and economic side-effects and
concentrated on providing definitions that relate to pro-
duction and waste treatment technologies, linking them in
68
-------
terms that reflect waste constituent parameters known to be
significant in particular industry categories, maximum employ-
ment of waste treatment, and output levels. Effluent guidelines
developed to date take the form of allowable waste to product
ratios for categories of products for which the effect of a
high degree of waste treatment has either been demonstrated or
can be calculated. In the case of pulp and paper, the effluent
guidelines embody the assumption of the availability of the set
of treatment measures previously embodied in this analysis,
together with a high degree of wastewater control within the
production process.
They prove to be very stringent standards. Ten of the 34
Region X pulp mills currently (August 1972) provide the full
sequence of waste treatment measures upon which the effluent
guidelines ("A" schedule "best practicable treatment") are
based. But when the reported discharges of those mills are
compared with the effluent limits that appear on the basis of
the product-process mix to apply to them, six mills meet the
standard, two mills appear to violate allowable limits for
BOD, and two mills appear to violate allowable limits for both
BOD and Solids. It seems clear that the availability of the
technological equivalent of best practicable treatment is
not enough in itself to guarantee compliance with effluent
limits.
Application of the process/discharge relationships
presented in Table 14 to the 22 mills that do not currently
provide the process sequence that is considered to constitute
best practicable treatment (two mills are closing) suggests
that 19 of them may not meet appropriate effluent guidelines
after the standard waste treatment sequence is installed.
Assuming that situation, the $180 million investment post-
ulated for the regional industry will not be sufficient to
assure its compliance with existing interpretations of
Federal law. (c.f. Table 24)
It must be noted that the analytical values presented in
this section are far less reliable than those in preceding
sections. They must be considered to be provisional—almost
illustrative—for a number of reasons, notably:
1. The ultimate effects of waste treatment are calculated
rather than reported values in most cases, and they include the
more conservative assessment—i.e., mean rather than median
effectiveness reported for plants currently reporting waste
treatment—of treatment effects.
69
-------
2. There is only the most general relationship between the
incremental treatment measures evaluated in this section and their
intended effects. The sequence of additional facilities illustrates
the general shape of the cost curve that may be anticipated as
increasingly greater waste reductions are required; it does not
necessarily present the optimum—or even feasible—response to the
indicated circumstances.
3. Most significantly, there are compelling indications that
waste reductions sufficient to meet effluent limitations must be
achieved in good part through process management and stringent
reduction of water use. It is entirely possible that no incremental
waste treatment measures will prove to be adequate to meet the pre-
liminary effluent guidelines in the absence of such process water
controls, and equally possible that such controls may obviate the
necessity to install additional waste treatment. *
* Ralph Scott's comments on the matter present the issue cogently:
The report contains some excellent information relative to
satisfaction of present suggested guidelines by Pacific Northwest
mills. Largely it is assumed that added treatment, above secondary,
will be needed to meet standards. This is not necessarily so.
Standards were developed, and will be subsequently redeveloped,
employing averages of best operated mills. Treatment is SOP through
secondary and we can forecast that result. The main issue is raw
waste loading per ton and mill variation therein. Recovery overload
has been responsible for much of the higher per ton waste values.
Air pollution control will be a significant aid in correcting this
situation. In chemical pulping about one-third of the load per ton
derives each from recovery, condensate load and bleaching. In un-
bleached production, naturally this load is less. In any case,
advances in reduced loading must revolve around control or improve-
ment in unit processes, coupled with good housekeeping. Many mills
are leaky-teaky operations. Management can well decide to pay for
tight maintainence and control rather than inflated treatment costs.
The whole aspect of internal control versus external treatment
is presently clearly before the industry. Add-on treatment at the end
of the sewer has reached limits for many industry waste treatment
groups. Production people are involved. New processes are being
considered. Research on new pulping methods, condensate stripping,
oxygen bleaching, and bleach alterations is underway. National Council
is funding a study to determine costs of internal control, step-wise,
related to reduced external treatment costs. Management needs this
information to make informed decision concerning capital expenditures.
Whatever is done will cost money. Obviously older high cost mills
will suffer. Capital for either treatment or internal control will
be difficult to obtain or justify. However, to presume that any
mill has only a choice of external added treatment costs to meet
effluent standards is in error.
70
-------
Given the probability that standardized treatment constructs
are not sufficient in themselves to ensure compliance with the
waste to product performance standards that are embodied in
current regulatory policy, it follows that additional treatment
measures and consequent higher costs will be necessary in some
cases. In order to gage the approximate magnitude of such costs,
an arbitrary schedule of incremental waste treatment measures has
been applied to the calculations presented in Table 24. The
logic of the schedule does not rest on any technical evaluation,
but on the generalization that the greater the indicated
deviation of an effluent from the appropriate standard, the more
intensive the incremental treatment required for that effluent.
Thus:
Where calculated BOD and/or Solids values are 50% or
less in excess of the standard, it is assumed that
secondary clarification must be added to the treatment
schedule;
Where calculated BOD and/or Solids values are more
than 50% and no more than 75% in excess of the standard,
it is assumed that stabilization capacity must be augmented
50%;
Where calculated BOD and/or Solids values are greater
than 75% and no more than 100% in excess of the standard,
it is assumed that both supplemental stabilization capacity
and secondary settling must be added to the standardized
treatment schedule;
Where calculated BOD and/or Solids values are more than
100% in excess of the standard, it is assumed that the
conventional activated sludge process must be substituted
for the mechanical clarification plus aerated lagoon
treatment sequence assumed in the standard analysis.
(Full salvage value is allowed for the standard system.)
The evaluation process indicates that a significant price
tag may be placed on implementation of effluent standards. The
added investment of more than $90 million exceeds the total
requirement remaining to be made under the less precise re-
quirement of "the equivalent of secondary waste treatment."
Increase in annual costs of about $12 million also just about
doubles the amount of such charges that management might have
anticipated under earlier regulatory interpretations.
(c.f. Table 1)
71
-------
Table 25
Illustrative Cost Increments
Associated with BPT Effluent Quality Guidelines
FIRM
Maska Lumber & Pulp
Joise Cascade
Crown Zellerbach
Seorgia Pacific
:nland Empire
International Paper
.ongview Fibre
tenasha
Potl atch
ITT Rayonier
St. Regis Paper
Scott Paper
Weyerhaeuser
Affected Mills
All Region X Mills
LOCATION
Sitka, AK
Steilacoom, WA
St. Helens, OR
Wall ill a, WA
Port Angeles, WA
Wauna, OR
Camas, WA
Lebanon, OR
West Linn, OR
Bellingham, WA
Millwood, WA
Gardiner, OR
Long view, WA
North Bend, OR
Lewis ton, ID
Port Angeles, WA
Hoquiam, WA
Tacoma, WA
Anacortes, WA
Everett, WA
Everett, WA
Long view, WA
Cosmopolis, WA
TR ATMENT INCREMENT
Secondary
Settling
X
X
X
X
X
X
X
Added
Stabilization
X
X
X
X
X
X
X
X
Activated
Sludge
X
X
X
X
X
X
X
X
X
X
X
INVESTMENT
Total
1,200,000
1,400,000
10,700,000
600,000
2,700,000
10,800,000
2,500,000
500,000
4,800,000
1,000,000
700,000
1,300,000
1,100,000
450,000
2,100,000
1,200,000
13,900,000
6,500,000
1,500,000
1,000,000
700,000
13,600,000
10,900,000
91,200,000
91,200,000
Per
Ton
1,700
6,400
13,400
800
10,200
10,800
2,200
4,800
27,000
1,700
10,600
2,200
600
3,000
2,100
2,500
27,600
7,300
10,700
1,200
1,800
16,100
27,300
6,600
4,600
ANNUAL COST
i
Total
180,000
160,000
1,350,000
100,000
300,000
1,100,000
670,000
80 ,000
520,000
160,000
110,000
220,000
180,000
60,000
380,000
270,000
1,700,000
700 ,000
310,000
150,000
75,000
1,400,000
1,350,00_Q_
11,525,000
11,525,000
Per
Ton
0.70
2.20
5.10
0.50
3.40
3.30
1.80
2.50
8.70
0.80
5.00
1.10
0.30
1.30
1.10
1.70
10.10
2.40
6,70
0.60
0.60
5.00
10.10
2.50
1.70
-------
VI. LIKELIHOOD OF ADDITIONAL MILL CLOSURES
Pulp mills are, on the whole, unlikely to close. Since 1866,
forty-eight pulp or pulp and paper plants have come into operation
in Region X. As 1972 ends, thirty-three of those forty-eight sites
continue to hold operating pulp mills, and at a thirty-fourth site
paper production continues even though the pulp mill has closed.
Over the period of record, then, the Region has averaged the
construction of one new mill every 2.2 years, and only one
closure every 7.6 years. Quite clearly, in the long run
perspective closure has been perverse behavior; expansion has
been the norm.
The reasons are not difficult to lay out. Both population
and income are increasing, therefore demand for products, in the
aggregate, is increasing. Paper is one of those products for
which specific demand has been growing, and much faster than the
consuming population--per capita usage of paper has grown faster
than per capita income in the U.S. since World War II. Westerr
Mills are particularly favored, in that they have direct entree
to markets where average income is distinctly above national
standards and where population growth is well in excess of the
nation's. Abundant forests provide raw materials and intense
forest utilization provides sustained flow of those raw materials
at prices that are favorable to the industry.
If such fundamental supply/demand relationships explain
aggregate expansion, the capital structure of the industry provides
at least a partial explanation for the persistence of plants
once they have opened. Pulp mills are among the most capital-
intensive of all modern factories. Chemical pulping plants built
in the U.S. and Canada over the last decade have included $150,000
to $180,000 of investment per ton of capacity installed; ground-
wood and semichemical pulping plants have been capitalized at
$70,000 to $90,000 per ton of installed capacity. With such enormous
investments tied up in plants, there is an obvious reluctance to
abandon operational plants. Further, each plant effectively
commands access to a certain market and a certain block of raw
materials. To abandon it is often to abandon the raw material
supply, if not the market. There is compelling reason, then, to
improve an existing plant that has become, or threatens to become,
unserviceable, in preference to searching for a new production site.
73
-------
Yet the rate of closure has accelerated over the last two
decades. Two pulp plants closed between 1953 and 1962; three
plants closed between 1963 and 1972; and four other pulping opera-
tions were discontinued, although sites remained active with a
modified product process mix. Only three new plants came on
stream in the last decade—though the higher than average rate
of starts in the previous decade helped to sustain the long
term rate of plant starts. In sum, it would appear that the
industry is undergoing a process of concentration, at once
pruning away marginal mills and expanding more profitable
product lines at existing mills, but is opening new mills with
greater discretion than in the past.
Factors Related to Closures
The opinion was registered in the initial section of this
report that additional pulp mill closures are likely to occur in
Region X. That opinion was based on variability in labor
productivity, raw materials distribution, and shifts taking
place in the product and process mix.
Waste treatment costs are often distinguished as another
influence that may influence mill closures. Indeed, if management
statements on the occasions of closure can be credited, no other
reason for closing a pulp mill can be conceived.
Certainly a review of the mills that have closed in Region X
over the past fifteen years lends some credence to the view that
waste treatment costs have had an influence on decisions to be
shut down. (cf. Table 26) Most of the casualties were sulfite
mills, the most difficult and costly to serve with waste treatment.
Fully half were within the purview of a Federal Water Pollution
Abatement Conference. Three others' were under heavy State
regulatory pressure to remedy their effluent strength. No
closure was free of water pollution control associations.
But to counter the evidence that the cost of water pollution
control is a significant variable with respect to ability to sustain
the operations of a pulp mill, one needs only to shift his view
from the mortalities to the survivors. In general, the higher the
degree of waste treatment installed in a geographic sector, the
more vigorous the growth of pulp mill output. (cf. Table 27)
Costs of waste treatment, then, have proved not only not to be
an invariable source of closure, but actually to be no barrier
to growth.
The evidence is contradictory, at least on the level of
propoganda or of advocate argumentation. We find that (1) plants
are forced to close as a result of the costs of water pollution
control, and (2) the more that is spent for water pollution control,
the more vigorous the growth of the industry.
74
-------
TABLE 26
MILL CLOSURES, 1957-72
Establishment Capacity Product Group Process
Year of Initial Raw Materials
Operation Area
Boise Cascade,
Vancouver
Crown Zellerbach,
West Linn
Crown Zellerbach,
Port Angeles
Fibreboard Paper,
Fort Angeles
Inland Empire
Paper
Rayonier,
Shelton
Simps on-Lee,
1- vere 11
Weyerhaeuser,
Everett
150 T/D gen'l chemical ca. sulfite 1921 S.W. Wash.
200
90
90
65
310
173
310
gen ' 1 chenical
& groundwood ca. sulfite
gen'1 chenical
£ groundwood ca. sulfite
gen'l chenical ca. sulfite
£ groundwood groundvood
gen'l chenical
a groundwood ca. sulfite
dissolving ca. sulfite
gen'l chenical sulfate
dissolving ca. sulfite
. fl 3 9
1919
1917
1911
1926
1891
1936
N.W. Ore.
N.W. Wash
S.W. Wash.
E . of Cascades
H.W. Wash
II. W. Wash
N.W. Wash
-------
TABLE 27
REGIONAL GROWTH CHARACTERISTICS, 1963-72
COMPARED TO WASTE TREATMENT
& DISCHARGE CHARACTERISTICS
Location
Washington Coast
Puget Sound
Alaska
Lower Columbia
Upper Columbia
Oregon Coast
Willamette
Region X
Capacity
Tons/day
154
272
305
1329
572
935
1843
5410
Growth
Percent
21
6
29
31
49
115
91
36
Effluent Characteristics June 1972
BOD5/T
Output
520
470
320
110
68
45
12
200
Percent Treatment Provided *
Combustion
100
43
100
100
100
100
100
86
Primary
100
58
0
100
100
43
100
79
Secondary
44
0
0
14
0
0
100
26
* Based on number of mills providing the service rather than amount of waste water
treated or intensity of treatment service provided.
-------
Quite obviously, other factors must provide the explanation
for plant closures. To this time, the effect of accommodation
to waste treatment requirements would seem to have been random, or
to have been dependent on other circumstances.
Again, we may look to the plants that closed for common
features that distinguish them. These appear immediately. All
were of less than average size; all but one were of greater than
average age; seven of the eight were calcium sulfite plants;
all produced general chemical pulps or dissolving pulps; and
five of the eight were located in northwestern Washington State.
If the focus is shifted from the plants that closed to the
relative performance of all Region X pulp mills over the last
decade, it is possible to isolate some characteristics that have
been associated with growth or decline of a pulp mill. (cf. Table 28)
Though patterns are irregular, definite generalizations emerge .
Location: Plants located in northwest Washington were most
apt to experience declining fortunes. A location in Alaska or on
the lower Columbia River was neutral. Plants located in south-
western Oregon or east of the Cascades were likely to expand.
Size: In general, the larger the plant, the more likely
it was to expand; the smaller the plant the more likely to remain
static or decline.
Age: In general, the older the plant the more likely that it
would remain static or decline and conversely.
Product mix: Mills producing packaging expanded in all cases--
and in most cases at a rate greater than average per plant expansion
for all regional plants. Dissolving pulp mills and groundwood mills
showed little propensity to expand. Mills producing general
chemical pulps tended to remain static or decline. (And in other
cases of plants operating both groundwood and chemical pulps, the
chemical pulp mill was likely to decline.)
Another correlation is apparent, but of little direct use in
determining expectations for future performance. Calcium sulfite
mills were almost invariably closed or significantly recapitalized,
while sulfate mills were likely to expand. With impending closure
of the Everett, Washington, sulfite mill, however, only'a single
calcium sulfite mill will survive in the region. Nor is there
enough experience with the various recoverable base sulfite
processes to indicate if their performance is apt to be more like
that of the calcium sulfite mills from which most of them were
converted or the sulfate mills that they now resemble.
77
-------
TABLE 28
CHARACTERISTICS OF INDUSTRY
DEVELOPMENT, 1963-1972
Relative Growth
New Plants
Expansion>.205 T/D*
Expansions" 205 T/D
Capacity unchgd or Declined
Plant Closures
New Plants
Expansion^ 205 T/D
Expansion< 205 T/D
Capacity Unchanged or Declined
Plant Closures
New Plants
Expansion^ 205 T/D
Expansion< 205 T/D
Capacity Unchanged or Declined
Plant Closures
New Plants
Expansion>205 T/D
Expansion-^ 205 T/D
Capacity Unchanged, Declined
Plant Closures
1. No. of Plants, by Location
N.W. Wash.
0
0
10
2
3
800 T/D
1
1
1
2
0
1954-63
3
5
2
0
0
Packaging
Packaging
2
6
1
0
0
Alaska
0
0
2
0
0
2. No. of Pla
600-799
0
2
2
0
0
3. No. of Pla
1944-53
0
1
2
0
0
4. No. of Pla
Dissolving
Pulp
0
0
5
0
1
N.W. Ore
S.W. Wash
1
3
3
3
1
nts, by Size (
400-599
0
1
4
3
0
nts, by Age of
1924-43
0
3
7
3
1
nts, by Produd
Grdwd.
0
0
1
0
0
S.W.
Ore.
2
4
1
0
0
[n 1963)
200-399
2
4
3
0
1
Construction
1914-23
0
0
2
1
2
: Mix (in 1963)
Gen'l Pulp,
Chem.
0
2
8
3
2
E. of
Cascades
0
2
0
1
0
200
0
1
6
1
3
Prior to 1914
0
0
3
3
1
Gen'l Pulp,
Chem & Grdwd
1
1
1
3
1
*Average for all Region X mills over the period.
-------
If, however, one evaluates calcium sulfite mills not in terms
of a process set, but as a set of mills that encountered significant
capital requirements and added production costs as a consequence of
water pollution control regulation, then an additional vulnerability
parameter is available to us. For with a single exception, the mills
that closed faced an investment in excess of $20,000 a ton of daily
capacity to meet the goal of providing the equivalent of secondary
waste treatment. Moreover, all of them would have encountered
waste treatment costs in excess of $8.50 a ton of output.
Ways In Which Waste Treatment Costs May Influence Closures
Recognizing, then) that waste treatment costs, like any other
operational variable, can play some part in decisions to continue
to operate, to expand, or to close a particular mill, it is
desirable to examine those factors associated with waste treatment
that have a direct bearing on such decisions.
The most obvious conclusion that one can draw is that waste
treatment costs are not in themselves sufficient to cause mills to
close. The intra-regional evidence has been provided in this report.
On a national scale, the Council on Economic Priorities has
presented similar evidence in Paper Profits: Pollution Audit 1972
(New York: July 1972). The Council has found that 106 of 123 pulp
mills operated by 22 major paper companies either have installed
or have planned to install primary waste treatment, and that 85
of them have or have planned to install secondary waste treatment
(cf. Table 29). It is clear that the industry has been able to
adapt to regulation. Indeed, it would have been surprising to
discover anything else. Once regulation had become more or less
effectively standardized for pulp mill effluents throughout the
nation, treatment costs became a general component of values added
for the industry. Mills providing waste treatment no longer
experience significant competitive disadvantage vis 11 vis other
pulp and paper mills as a consequence of treating wastes.
But if waste treatment as a class of cost-imposing phenomenon
is not sufficient to cause productive facilities to be taken out
of operation, relative waste treatment costs must be considered
to be a significant factor in capital elimination decisions.
This is considered to be probable for two reasons: (1) A
waste treatment charge greater than that of a competitor will
reduce relative profit on each unit of output by precisely the
amount of the difference, all other things being equal 5 (2) but
all other things are not equal, which is, in fact, the prime
reason that waste treatment costs are significant in mill closures.
79
-------
TABLE 29
STATUS OF MAJOR FIRMS'
WASTE TREATMENT, 1972, AS
REPORTED BY COUNCIL ON
ECONOMIC PRIORITIES
Waste Treatment Provided
Firm Mills Primary Secondary Closures 1970-72
American Can 42 2
Boise Cascade 66 4
Champion International 33 3
Consolidated Papers 5 2 1
Continental Can 4 3 3
Crown Zellerbach 98 3
Diamond International 42 2
Fibreboard 1 1
Georgia Pacific 9 5 2
Great Northern Nekoosa 6 3 2
Hammerhill 422 1
Hoerner Waldorf 32 2
International Paper 16 15 13
Kimberly Clark 22 2
Marcor 3 3 1
Owens-Illinois 44 4
Potlatch Forests 2 2
St. Regis Paper 963 2
Scott Paper 10 7 3 2
Union Camp 33 2
Westvaco 641 2
Weyerhaeuser 10 9 7
t
Total 123 94 61 8
Scheduled for 1973 or later 12 24
-------
TABLE 30
Correspondence Between Average Waste Treatment Costs
And Other Expansion/Decline Characteristics
Mills ranked from most vulnerable
to closure, 1953 - 1972, to least
vulnerable to closure.
Average waste treatment cost
per ton of output for mills
active in 1972 (best
practicable treatment)
1; Location: Northwest Washington
N.W. Oregon/S.W. Wash.
Alaska
East of Cascades
Southwest Oregon
2. Age: Constructed prior
to 1924
1924-43
1944-53
1954-63
Constructed since
1963
3. Size: Less than 200
T/D capacity
200-399 T/D
400-599 T/D
600/800 T/D
Greater than
800 T/D
t . Product General Chemical
Mix: Pulp
Dissolving pulp
Groundwood pulp
Gen'l chem/grwd
pulp
Packaging &
board
$ 8.40
7.50
7.30
3.20
2.10
9.50
7.50
5.70
3.60
5.40
14.20
9.60
6.90
5.20
5.40
8.00
10.60
10.90
5.70
2.20
-------
Waste treatment is simply an incremental processing step that adds
to and recapitulates the sum of the relative efficiency of all
prior operating factors. Thus the mills with higher waste treat-
ment costs tend to be the same mills that have higher labor costs,
higher material costs, and even less advantageous raw material
situations. There is a startling correlation between the average
waste treatment costs of plant grouping and the relative growth
or decline of the same groups of plants in Region X over the
last decade. (cf. Table 30)
These concepts are unexceptionable, and trace to the second
mechanism by which waste treatment may affect the survival of
factories. Waste treatment is, after all, no more than a minor
alteration of much larger operational environment. The principal
feature of that environment is relative capitalization--the time--
conditioned amount of structure, machinery, and energy available
per unit of labor or raw material input. A high relative unit
waste treatment cost is invariably associated with relatively
wasteful use of water as a raw material and a high rate of loss
of wood inputs. It is, then, a useful indicator of an amount
of capital and energy insufficient to convert those raw materials
into product as efficiently as do other mills.
Other characteristics of a mill--age, size, product and
process mix--may also be seen as inexact,surrogates for the
basic datum, relative capitalization. Greater age suggests less
current capital per unit of capacity—a simple function of
depreciation. But a mill like the Scott Paper Company mill at
Everett, which is undergoing its third sweeping recapitalization
"since its acquisition in the nineteen-forties, cannot be considered
an old mill in any comparative sense. Conversely, the Scott Paper
Mill at Anacortes has received no significant capital expenditures
for more than a decade. It is an old mill by any practical
standard--and its waste treatment cost per unit of product
demonstrates spectacularly what that must mean to its profitability.
The waste treatment cost model indicates that Region X mills
must invest roughly $200 million in waste treatment facilities
over the next five years in order to be in compliance with effluent
standards; and another $25 - 30 million will be required for
capital maintenance for waste treatment facilities. That capital
is a substantial segment—roughly one-fourth—of the $170 million
a year required to maintain the existing stock of productive
.capital installed in the Region by the woodpulp industry. (Assumes
current replacement value of capital of $175,000 per ton of capacity
and a five percent capital recovery rate.) Quite obviously, the
reduction in discretionary capital utilization means (and particularly
82
-------
in view of the high cost of capital) that the industry must
exercise austerity in alloting its investment funds.
Since waste treatment requirements include a rigorous schedule
and progressivity, management is unlikely to install the facilities
in mills that are due to be phased out. And without the requisite
facilities, phase-out schedules become extraordinarily transparent.
The lease on life of mills that are too small, too old, or otherwise
too unprofitable to be renovated runs only through June 30, 1977,
when best practicable treatment becomes an operational requirement.
In practical terms, then, waste treatment costs will influence
mill closures in two ways:
1. By reinforcing existing marginal advantage, waste
treatment costs make profitable mills even more profitable relative
to their competition. Thus they contribute to existing trends that
favor concentration, specialization, less and larger productive units.
2. By placing an effective time limit on the productivity
of capital invested in mills slated for closure, Federal water
pollution control law deters interim investments that might prolong
the operating life of such mills. Capital will be diverted, then,
to favorable locations; and the closure/concentration process is
again accelerated.
Relative Vulnerability to Closure
Given the set of parameters that correlate with past mill
closures--size, age, location, and product mix—it is possible to
array the mills that compose the Regional woodpulp industry in a
manner that displays the distribution of those relative vulnerability
to closure variables. Any such ranking could be considered to
constitute a very gross indicator of probability of closure.
Consideration of adjustment to waste treatment regulations
probably sharpens the probabilities very significantly. It allows
a plant-by-plant comparison, within product lines, of the relative
operational efficiency of competing mills with respect to at least
one cost factor. Even more valuable, perhaps, is the indication
that such an analysis provides of management's ability and
willingness to invest at a particular site. (cf. Table 31)
The indicator value of relative costs and relative capitaliza-
tion of waste treatment is, nevertheless, somewhat blurred by
other factors. Lack of investment in waste treatment is a possible
83
-------
measure of reluctance to invest at a particular site. It is also
a possible measure of regulatory slackness or of a company policy
that dictates resistance to imposed investment, up to the point of
ultimate confrontation. Similarly, a high waste treatment cost may
measure nothing more than the fact that investment has been deferred,
since installation of treatment may be accompanied by modifications
of water use practices that substantially reduce treatment costs.
Nonetheless, a plant-by-plant review of the regional industry
in terms of the distribution of six parameters that either have in
the past or may be expected to contribute to closure must suggest
in a broad manner whether any particular plant is more likely to
be closed within the next five years than any other particular
plant.
Such an array is presented in Table 32. Plants were graded
from one (least likely to close) to five (most likely to close)
with respect to the four general categories developed in Table 28.
They were further graded according to relative cost of waste treat-
ment and relative availability of waste treatment capital. 'Vulner-
ability ranking was as follows:
84
-------
TABLE 31
Waste Treatment Costs
Ranked by Product Groups
Treatment
Year Cost Capital
FIRM Location Daily Capacity Constructed Per Ton Installed
Western Kraft
Georgia Pacific
Weyerhaeuser
Boise Cascade
Longview Fibre
Albany, OR
Toledo, OR
Springfield, OR
Wallula, WA
Longi vew , WA
International Paper Gardiner, OR
American Can Halsey, OR
i
Menasha N. Bend, OR
1. Packaging & Board Group
Boise Cascade
Crown Zellerbach
Inland Empire
Crown Zellerbach
Steilacoom, WA
Port Angeles, WA
Millwood, WA
• West Linn, OR
2. Groundwood Group
Alaska Lumber & Pul]
Ketchikan Pulp
Rayonier
Weyerhaeuser
Rayonier
Sitka, AK
Ketchikan, AK
Port Angeles, WA
Cosmopolis, WA
Hoquiam, WA
3. Dissolving Pulp Group
Publishers Paper
Crown Zellerbach
Newberg, OR
Oregon City, OR
Wauna, OR
4. General Pulps, Chemical & Groundwood
Potlatch Forests
Crown Zellerbach
St. Regis Paper
Scott Paper
Weyerhaeuser
Georgia Pacific
Boise Cascade
Crown Zellerbach
Weyerhaeuser
Scott Paper
Lewiston, ID
Port Townsend, WA
Tacoma, WA
Everett, WA
Everett, WA
Bellingham, WA
St. Helens, OR
Salem, OR
Camas, WA
Lebanon, OR
Longview, WA
Anacortes, WA
5. General Chemical Pulp Group
6. All Mills
770 tons
1000
1155
666
1850
600
330
150
815
220
226
66
180
183'
725
630
486
400
504
549
500
594
1003
699
1000
405
887
836
410
572
800
250
1145
99
846
140
616
609 Tons
1955
1958
1949
1959
1926
$1.10
1.40
1.50
1.80
2.50
1964 I 3.50
1970
N.A.
1954
4.30
5.30
2.20
I
1919
6.10
1919 j 8.50
1911
1889
1910
1956
1958
1930
1951
1928
1945
1927
1908
1967
1934
1956
1927
1926
1928
1953
1926
1926
1920
1883
1889
1931
1924
1924
1934
12.30
100%
0
100
50
54
44
100
39
59
37
31
43
19.90 42
10.90 38
6.40 0
8.30 0
8.60 0
16.40 27
16.70 16
10.60 12
3.50 100
5 . 10 100
7.00 22
5.70
3.60
4.10
5.30
6.80
7.00
7.40
8.30
10.00
10.30
13.60
14.00
17.70
8.00
$6.50
53
44
0
25
32
0
0
29
100
79
85
19
26
39
36-/.
-------
CLOSURE TENDENCIES
RANK
LOCATION
SIZE
AGE
PRODUCT MIX
Southwest
Oregon
East of
Cascades
^800 T/D 600-799 T/D
1961 or later 1951-60
Alaska
400-599 T/D
1931-50
Packaging General Chemical Groundwood
& Groundwood
TREATMENT INVESTMENT 100% installed >61%
Lower
Columbia
200-399
1921-30
Northwest
Washington
< 200 T/D
1920 or before
Dissolving General Chemical
31-60%
^30%
00%
TREATMENT COST
(Based on Equivalent of Secondary Waste Treatment)
Lowest in Group ^75% Product 76-125% Product ^126% Pro- Highest in Group
Group Mean Group Mean duct Group
Mean
(Group Means are: Dissolving Pulp $10.60/T
General Pulp and Groundwood $ 7.40/T
Packaging $ 2.20/T)
-------
As one might expect, given the logic of the rankings, the
most vulnerable third of all mills, when parameters consistent
with past closures is considered, is composed predominantly of
plants located on Puget Sound. Their location, their average
age, their average size consigns the Puget Sound Mills to that
position. Consideration of the specific indicators provided by
accommodation to waste treatment considerably alters the order
of the components, however. (cf. Table 32)
One may expect with a high degree of confidence that closures,
if any, will come from mills in the highest third of the adjusted
ranking. Two plants—the first and third in the adjusted ranking--
have, in fact, already announced closures. Two other plants seem
very likely to close. At least two more must be considered to
be vulnerable to the interaction of effluent limits with other
trends in force in the industry. The index numbers certainly
are not precise enough to provide a defensible grip on closure
probabilities for specific plants, though consideration of
qualitative factors may sharpen our insights.
1. Simpson-Lee, Everett, Washington, closed in the
fall of 1972.
2. Scott Paper Company, Anacortes, Washington, would
seem to be an almost certain candidate for closure. There have
been no avoidable capital expenditures at the site for over a
decade. It is the second smallest chemical pulp mill in the
region. Its specialized raw material requirements are in
uncertain supply. It is not an integrated mill--little more
than an operational appendage of Scott Paper's Everett Mill,
in fact, and with the inconvenience and cost of an added
transportation step between pulp production and paper machine.
One must speculate that the decision to close this mill has
probably already been made. The company is currently undertaking
a $60 million construction program at Everett. Ostensibly, the
investments are for environmental purposes. But it is inconceivable
that so great an amount could possibly be invested in air and
water pollution control, even with the most incompetent engineering
available. (Sixty million dollars is, after all, 20 percent
more than Weyerhaeuser spent to build a totally new 500 T/D mill
in North Carolina only last year.) In all probability, the
Everett Mill is undergoing a complete refurbishing from which it
will emerge with a significant (150 T/D or more) capacity incre-
ment that will allow the closure of the Anacortes mill with no
loss of capacity and no surrender of raw material sources by
the firm.
87
-------
Table 32
Plants Ranked From Highest
To Lowest in Indicated
Exposure to Closure
RANK
1
2
3-6
7-11
12-17
18-20
21-22
23-24
25-26
27
28
29-30
31-33
34
PLANT
Simpson Lee,
Everett
Scott Paper,
Anacortes
Boise Cascade,
St . Helens
Crown Zellerbach,
Port Angeles
Crown Zellerbach
West Linn
Boise Cascade,
Salem
Weyerhaeuser,
Everett
Georgia Pacific,
Belllngham
Crown Zellerbach,
Port Townsend
Crown Zellerbach,
Lebanon
Publishers Paper,
Oregon City
Rayonier,
Hoquiam
St. Regis,
Tacoma
Inland Empire,
Millwood
Scott Paper,
Everett
Crown Zellerbach,
Camas
Publishers Paper,
Newberg
Weyerhaeuser,
Everett
Rayonier,
Port Angeles
Boise Cascade,
St. Helens
Weyerhaeuser,
Longview
Weyerhaeuser,
Cosmopolls
Ketchlkan Pulp,
Ketchlkan
Alaska Lumber & Pulp
Sltka
Menasha ,
North Bend
Crown Zellerbach,
Wauna
Longview Fibre,
Longview
Boise Cascade,
Wallula
American Can,
Halsey
Western Kraft,
Albany
International Paper,
Gardiner
Pot latch Fibre,
Lewlston
Weyerhaeuser,
Springfield
Georgia Pacific,
Toledo
General Parameters
Age
5
4
5
5
5
l>
3
4
4
5
5
4
4
5
4
5
4
2
3
4
3
2
2
2
4
1
4
2
1
2
1
2
3
2
Size
5
5
4
4
5
4
4
2
2
5
2
2
1
5
1
1
2
2
2
1
1
2
3
3
5
1
1
3
4
3
3
1
1
1
Location
5
5
5
5
4
4
5
5
5
1
4
5
5
2
5
4
4
5
5
4
4
5
3
3
1
3
4
2
1
1
1
2
1
1
(Enclosed Plants Announced Shut Down in 1972)
* Gives effect to current construction program
PDT MIX
5
5
3
3
3
5
4
5
5
5
5
4
5
3
5
5
5
5
4
5
5
4
4
4
1
5
1
1
1
1
1
1
1
1
Index
1.000
.950
.850
.850
.850
.d50
.800
.800
.800
.800
.800
.750
.750
.750
.750
.750
.750
.700
.700
.700
.650
.650
.600
.600
.550
.550
.500
.400
.350
.350
.300
.300
.300
.250
Investment
Relative
Vulnerability
5
3
2
2
1
1
4
5
3*
1
1
3
3
2
2-*
2
1
5
2*
1
4
1
5
5
3
2
2
2
1
1
2
2
1
5
Indej
l.OOC
.88C
.761
.761
.720
.720
.800
.840
.760
.680
.680
.720
.720
.610
.680
.680
.64
.76
.64
.600
.680
.560
.680
.680
.560
.520
.480
.400
.320
.320
.320
.320
.280
.400
ost
Relative ^r
ulnerabillty
4
4
3
4
5
4
4
3
2
4
2
5
3
<,
3
4
2
3
2
3
4
4
2
1
5
3
3
2
4
I
4
1
2
2
Lndex
.967
.867
.733
.767
.767
.733
.800
.800
.700
.700
.633
.767
.700
.700
.600
.700
.600
.733
.600
.600
.700
.600
.633
.600
.633
.533
.500
.400
.400
.300
.400
.300
.300
.400
Adjusted
>ank
1
2
8-10
5-7
5-7
d-10
3-4
3-4
11-16
11-16
17-19
5-7
11-16
11-16
20-25
11-16
20-25
8-10
20-25
20-25
11-16
20-25
17-19
20-25
17-19
26
27
28-31
28-31
32-34
28-31
32-34
32-34
28-31
-------
3. Weyerhaeuser Company, Everett, Washington, sulfite
mill is scheduled for closure at such time as it can no longer
secure a waste discharge permit (apparently March 1974). The
mill would seem to be a casualty of raw material constraints in
Northwest Washington, the corporation's decision to de-emphasize
Pacific Northwest operations relative to those in British
Columbia and the Southeast, and Weyerhaeuser's traditional
financial conservatism. A cash flow squeeze brought on by continuing
expansion in other areas, a probable fundamental recapitalization
of the Longview, Washington, complex, and the pressure of environ-
menatal regulation at a number of locations probably led to the
decision to allow this unit--which would have been unlikely to be
able to expand to the optimum size for operation of modern mills
by reason of raw material scarcity--to lapse. It should be
noted that the eventual release of the mill's raw materials
requirements improves the relative probability of survival of
other mills on Puget Sound and Grays Harbor, and in particular
of the Weyerhaeuser sulfate mill at Everett and the other dissolving
pulp mill at Cosmopolis.
4. Georgia Pacific Company, Bellingham, Washington,
is vulnerable to closure in terms of the indicator factors used
in determining the index of likelihood of closure, but those
factors must be viewed in terms of management philosophy.
Location and age are apparently unfavorable factors, but the
effective age of the plant, giving effect to a series of capital
improvements over the years, is well below its chronological age.
Location, too, must be interpreted in terms of the inter-relationship
among producers. This report has concluded that Northwest
Washington is an unfavorable location largely because of strictures
on expansion imposed by the high level of raw material utilization.
As weaker units close, the unfavorable situation of the survivors
in Northwest Washington will be altered. So the closure of the
Simpson-Lee and Weyerhaeuser mills improves the relative viability
of this mill.
Finally, the waste treatment factors that enter into the
Bellingham mill's high apparent vulnerability ranking are very
deceptive. On the one hand, Georgia Pacific's management philosophy
produces an impression of unwillingness to risk capital at the mill
that is almost certainly false, and on the other hand, a novel
technological approach to waste controls understates the effects,
and may overstate the costs, of waste controls already achieved.
89
-------
Georgia Pacific has the reputation of being the swinger of the
forest products industry. It spreads its capital thin and employs
maximum leverage. It is recognized for its efforts in the direction
of short run output volume, profit maximization, and product develop-
ment, not for its prudence or attention to long run side effects of
its activities. If that is an adequate description of the corporate
psychology, it is only to be expected that Georgia Pacific would
defer waste treatment investments—or any other diversion of capital
from profit making purposes—as long as it possibly might. Viewed
in that light, the lack of environmental protection capital at
Bellingham (as at Toledo, Oregon) cannot be taken as an indicator
of vulnerability so much as an expression of corporate policy.
Similarly, the dimensions of the treatment deficiency and of
treatment costs associated with the Bellingham Mill are probably
overstated. The mill has attempted to recover pulping liquor
wastes as salable products rather than in the form of recyclable
raw materials. The apparent deviation from the standardized
treatment procedure may suggest a degree of deficiency and exposure
to cost that is well beyond actual limits of performance. Whether
Georgia Pacific can eventually meet Federally imposed effluent
guidelines by following the heterodox technological route it
has adopted is an open question. Certainly there is no reason
to assume an adverse result.* In any case, the mill is not
considered likely to close.
5,6,8,11, Crown Zellerbach at Port Angeles, Washington;
West Linn, Oregon; Boise Cascade at Steilacoom, Washington; and
Inland Empire Paper Company at Millwood, Washington, Region X's
four groundwood mills, must all be considered to be vulnerable
to closure. In their cases, the association of possible closure
with water pollution control regulation is far more direct than
in others. With the exception of the Boise Cascade unit, the
groundwood mills appear to face investments equal to one fourth
to one fifth of their current replacement value if they are to
* With respect to this, Ralph Scott has noted:
The utilization of SSL by Georgia Pacific at Bellingham
is, conservation-wise, a much preferable mode of operation
than low value heat recovery With about one half of
input wood substance in solution in sulfate or sulfite
cooking liquor, a mill with a strong by-product research
and development effort should enjoy a preferred position.
This may also be true of Boise Cascade at Salem after
they solve current problems. It may also well explain
the continued operation of Crown Zellerbach at Lebanon.
The main hurdle mills face is breaking into the by-product
field from the marketing standpoint. Many chemicals and
products are possible. Development of significant markets
in competition with petrochemicals or other organic
chemical sources is a principal hangup.
90
-------
meet "best practicable treatment" levels of performance. The mills
are old, they are small, they survive in large part because they
supply a near proprietary local market with a low grade product
(mostly newsprint, some specialty packaging) in whose production
they are competitive because (1) products incorporate a low capital
cost component because of near total depreciation of facilities,
and (2) negligible transportation charges. They appear, then, to
be caught in a squeeze between an operating regimen based on low
current capitalization, location and size and age characteristics
that do not favor expansion, and a regulatory demand for significant-
at least in terms of groundwood capitalization standards—new
investments.
The difficulty of their conditions is the more extreme, in
that it is uncertain that the stringent effluent limitations set
for groundwood pulp can be met with even the most expensive
treatment process combinations. No groundwood mill in the
Northwest even approaches the treatment effectiveness levels
set under the best practicable treatment guidelines. Those
groundwood mills that do appear to meet the standards incorporate
groundwood wastes with those of chemical pulping, achieving both
a masking effect and economies of scale not available to these
four small mills.
The past is, perhaps, a good guide to the future. Three
of the same four plants have already met the imposition of waste
treatment requirements by closing a pulp mill. Inland Empire
Paper Company and the two Crown Zellerbach mills found it less
expensive to buy chemical pulp inputs than to continue to produce
calcium sulfite pulps with the added cost of waste treatment. It
is entirely logical that the same decision will be followed for the
groundwood pulping operations. The addition of waste treatment
could raise the cost of groundwood produced on site above the cost
of purchased chemical pulp, in which case the paper machines might
continue to operate after the pulp mills go down.
The best opportunity for these mills to stay in operation
would appear to be found through resort to a technical loophole.
Given primary treatment—which all four provide—the wastes of
the three Washington mills could be discharged to available
municipal sewage handling systems, where the effluent requirements
might better be met. The relative cost of such a situation—
and the risks to municipalities of installing the significant
added capacity to accommodate a single waste source —remain to
be thoroughly investigated.
91
-------
At any rate, the probability of closure is considered to be
high in every case. Inland Empire Paper Company's pulp mill is
thought to be almost certain to close. The groundwood mill at
West Linn (not the paper mill) must be considered to rank next
in line in relative vulnerability, because of the ready availability
of pulp from other Crown Zellerbach mills in the immediate area.
Boise Cascade's Steilacoom plant is probably the least vulnerable
of the four groundwood mills, on the basis of recent capital
improvements, relatively low waste treatment costs, and lack of
immediate owned sources of pulp. But even it cannot be considered
fully safe.
7. ITT-Rayonier, Hoquiam, Washington, would appear to
be vulnerable on the basis of adjustments in dissolving pulp
technology and an extraordinarily high waste treatment cost.
But while the mill is probably not so well situated as the same
firm's Port Angeles mill, there are indications that the suggested
waste treatment costs are deceptive. On the basis of reported
values, one must conclude that accommodations to waste treatment
requirements that have been made to date have been perfunctory;
and that actual capitalization and costs incurred are well below
those calculated. If so, adjustment to the more stringent
treatment requirements that are currently imposed would prove
to require less total capital and cost than is indicated by the
treatment cost models. The competitive and raw material situation
of the mill is in the process of being improved as other mills
are being weeded out. It would not seem likely that this plant
will close.
9. Boise Cascade, Salem, Oregon, would appear, on the
basis of capital improvements made by Boise Cascade since its
acquisition of the plant, to hold a firm position in the corporate
operating structure. Environmental protection problems, and
consequent added production costs, appear to be a continuing
source of friction, but management appears to be moving consis-
tently in the direction of accommodation to air and water pollution
control standards, accepting costs that would be avoided if early
closure were contemplated. Closure seems most unlikely.
10. Weyerhaeuser Company's Everett, Washington, sulfate
mill would also seem relatively immune to closure. If anything,
the closure of the sulfite mill in the same town strengthens this
plant's situation, in that implies Weyerhaeuser's obvious
production reorientation in the Pacific Northwest will include
emphasis on this mill as the focus of its Puget Sound operations.
92
-------
12. Crown Zellerbach, Lebanon, Oregon, is a continuing
anomaly. It has operated for eight decades without significant
expansion. It is the smallest calcium sulfite mill in the nation
to be converted to a recoverable base pulping process. It has
adjusted to environmental controls that have resulted in the
closure of mills that were much better situated—at least on paper.
The plant seems to have survived as a specialty mill, producing
production runs too small and too specialized to be handled
conveniently by major plants. It also serves as a sort of opera-
tional laboratory, in which product and process modifications--
including pollution control methods--are tested on a prototypical
scale. Its pollution control adjustments, then, have in some
measure been underwritten by the corporation for the utility they
might provide in the broader context of the firm. They seem, too
to have been made on the cheap, if the Council on Economic Priorities
estimate of a total investment of $600,000 for air and water
pollution control is reliable.
In spite of the complete adjustment to water pollution control
requirements and the favorable location from a raw materials
standpoint, the mill must be presumed to be highly vulnerable to
closure on the basis of size, age, and product mix. The same
judgment might, however, have been made at any time in the last
twenty years. The normal analytical conclusion throughout that
period would have been that Crown Zellerbach must either expand
or close the Lebanon mill. And yet the firm has shown no
disposition to do either to this time.
93
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Table 33
'Vulnerable' Mills Ranked According to
Indicated Exposure to Closure
1. Closures announced:
Simpson-Lee, Everett, Washington, 173 T/D sulfate mill,
paper mill, and paper converting mill
Weyerhaeuser, Everett, Washington, 310 T/D sulfite pulp mill
2. Closure probable:
Scott Paper Company, Anacortes, Washington, 140 T/D sulfite
pulp mill
Inland Empire Paper Company, Millwood, Washington, 66 T/D
groundwood mill.
3. Closure a definite possibility:
Crown Zellerbach Company, West Linn, Oregon, 180 T/D
groundwood pulp mill
Crown Zellerbach Company, Port Angeles, Washington, 266 T/D
groundwood pulp mill
4. Closure possible, less likely than above:
Boise Cascade Company, Steilacoom, Washington, 220 T/D
groundwood pulp mill
Crown Zellerbach Company, Lebanon, Oregon, 99 T/D sulfite
pulp and paper mill
5. Closure unlikely in spite of unfavorable factors:
Georgia Pacific Company, Bellingham, Washington, 572 T/D
sulfite pulp mill
ITT-Rayonicr, Hoquiam, Washington, 504 T/D sulfite pulp mill
Boise Cascade Company, Salem, Oregon, 250 T/D sulfite pulp mill
Weyerhaeuser Company, Everett, Washington, 410 T/D sulfate
pulp mill
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