Role of Clean Air Aet Requirements
In Anaeonda Copper Company's Closure
  of Its Montana Smelter  and Refinery
                ENVIRONMENTAL PROTECTION
                        AGENCY
                       REGION VIII
               June 24, 1981

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 ROLE OF CLEAN AIR ACT REQUIREMENTS
IN ANACONDA COPPER COMPANY'S CLOSURE
OF ITS MONTANA SMELTER AND REFINERY
U.S. Environmental Protection Agency
             Region  VIII
         1860 Lincoln  Street
          Denver, Colorado
            June 24,  1981

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                                    FOREWORD
     This  report  has  been  prepared  by  the  EPA Region  VIII  office,  Denver,
Colorado, under authority of  Section  321  of the Clean Air Act.  In response to
several written requests from representatives of workers  affected  by Anaconda
Copper  Company's  closure  of  its  Montana  smelter  and  refinery,  Region VIII
conducted a thorough  investigation  of the  Company's  claim that  Clean  Air Act
requirements forced the closures.

     On March  19, 1981, a  preliminary report  was  issued in  order to solicit
public  comments  and  additional  information  on  the  proposed  findings  and
conclusions.    Three  parties   submitted   written    comments.    All   comments
(included  in  an   Appendix   to  this   report)   were   evaluated  and  clarifying
responses  to  the  comments  have been  integrated  into the body of  the report.
Generally, no  new information or specific  data appeared  in  the  comments that
warrant further investigation or modify EPA's findings and conclusions.

     As a  result  of the investigation,  EPA  has concluded that Clean  Air Act
requirements were not  the  overriding factor  that  led  to  the demise  of the
smelter.  Rather,  a  host of  economic  factors contributed to making the smelter
a  marginal  operation  even  in  the   absence  of  environmental controls.  The
analysis suggests the  Clean Air Act  requirements have  triggered  an inevitable
company  decision  that  would  ultimately  have  been   made  in  any   event.
Nonetheless,  the   report  points  out  that  many  of  the  problems  facing  the
Anaconda  smelter  are  symptomatic   of   problems   confronting  the  industry,
particularly  the  competitiveness  of  the  U.S.  copper  industry  with  foreign
producers.
                                                         Mams
                                                     Administrator

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                                TABLE  OF CONTENTS

                                                                     Page


I.     Introduction                                                     1



II.   Background                                                       1



III.  Findings and Conclusions                                         2



IV.   Anaconda's Environmental Problems in Perspective                 4



V.     Discussion of Basis for Findings  and Conclusions                10



     A.  Efforts to Explore Alternatives with EPA                     10
     B.  Evaluation of Anaconda's Estimates of Costs for
          Environmental and Health Requirements                       12
     C.  Anaconda's Internal Environmental Policies                   20


     D.  Economic Factors Affecting the Anaconda Smelter              21


Appendix:  Comments Received on Preliminary Report                    30

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I.  INTRODUCTION

     This  report  presents  findings  and  conclusions  from  EPA's  investigation
and evaluation  of  the decision  by Atlantic  Richfield  Company  (ARCO)  and  its
subsidiary, Anaconda Copper Company, to  terminate  operations at its smelter  in
Anaconda,  Montana  and refinery  in Great  Falls,  Montana.   Under  authority  of
Section  321  of  the Clean  Air  Act, EPA's  investigation  examined the company's
claim that requirements of the Act,  as well  as  other regulatory  requirements,
forced the closures.

     The  report's  findings and conclusions are  based primarily on  information
received from Anaconda Copper  Company  as well as  information  contained in  the
public  domain.   During the  course of  many years  of dealing  with  the copper
industry  and the Anaconda  smelter  in particular, EPA has gathered considerable
relevant   information   and  data.   EPA  used  this   experience   and  recent
information to  perform the analysis  and  formulate  its conclusions.  The Agency
was  aided  in   the  data   collection  and  analysis  by  independent  consultants
knowledgeable  in   the  industry.   The   information available   to  EPA  and  its
consultants has convincingly led to a number of findings  and conclusions.

     EPA  issued a preliminary  report  on  March  19,  1981 in order  to  solicit
public  comments and  additional  information  on  its  findings  and  conclusions.
The Agency  has  evaluated  these comments,  which  are  included  in the Appendix,
and has  included  clarifying responses  to the comments  throughout the  report.
No new  information  or  specific  data  surfaced in the  comments  that would  alter
EPA's preliminary position resulting from the investigation.


II.  BACKGROUND

     On  September  29,  1980,  Anaconda Copper  Company,  a  subsidiary of  Atlantic
Richfield  Company  (ARCO), publicly  announced  the  closure  of  its   Anaconda
smelter  and  Great  Falls   refinery,  affecting approximately 1500  employees  at
the  two facilities in Montana.    The  company cited  the  costs  to  comply with
State  and  Federal environmental  and  occupational  health  standards  at  the
smelter  as  the  reason for closing these  facilities.  Despite  efforts by  the
Governor,  State   Legislators,   Congressmen,   and   EPA  to  have  the   company
reconsider  its  decision,   ARCO  refused to  initiate discussions to  reopen  the
smelter   and   in   December  1980   indicated   its  decision   was   "final   and
irrevocable."   In  the   meantime,  the  company   made   arrangements   with   a
consortium  of  Japanese  smelters  to  process  the   concentrates from  its  U.S.
mines,  including the mine  in Butte,  Montana.   Details of this  arrangement have
not been made available by ARCO.

     Subsequent to  the announcement of  the  closure,  three unions representing
employees  at the  two facilities  requested  EPA  to  conduct  an  investigation
under  authority of  Section 321   of the Clean  Air  Act  into   the  reasons  for
terminating  the smelter   and  refinery  operations.   The   unions  requesting  the
investigation were:   1)   Local  Lodge #29  of  the  International Association  of
Machinists  and  Aerospace  Workers,  2)   Locals  6002  and 16-A of  the United
Steelworkers    of   America   (AFL-CIO-CLC),   and    3)    Local   #88   of    the

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United  Brotherhood  of  Carpenters  and  Joiners  of  America.   At  the  time  of
ARCO's announcement, the facilities  had  been closed for  three  months due  to  a
labor strike.   Labor-management negotiations continued  after the announcement
and a labor settlement was reached in November 1980.

     Section 321  of the  Clean Air Act  empowers  EPA to conduct, at  the  request
of  affected  employees,   a   full   investigation  of  cases  where   industrial
facilities are closed allegedly  due  to  requirements of the  Act.  The report  of
the investigation  is to make  findings of fact  on the role expenditures  for air
pollution  control  played  in  the  closure  of   the  facilities  and   to   make
recommendations.   Any affected party can  request EPA to  hold  public  hearings
requiring  the  company and other  parties  to  present information  relating  to
the  effects of  these  requirements  on  employment and the  detailed  reasons  or
justification for  the  company's action.   However,  if EPA  determines there  is
no  reasonable  ground  for conducting  a  public   hearing,  no  hearing  need  be
held.   In  connection  with   the  investigation,  Section  321  gives   EPA the
authority  to issue  subpoenas  for the production of  relevant papers, books and
documents  and   testimony   of   witnesses  needed  to  reach  conclusions   on the
reasons for  the  closure.   Nothing  in  the  section  is construed  to  require  or
authorize  EPA  to modify or withdraw any requirement  imposed  under  the Act  in
order to keep the  facility open.  Thus, the investigation  itself is likely  to
have little impact  in reopening a closed facility.


III. FINDINGS AND CONCLUSIONS

     During  the  course   of   the  investigation,  EPA assembled  and   analyzed
publicly  available  information relating  to the  Anaconda  smelter.   Though the
company did not  supply all requested data relating  to the matter, EPA's review
of the information  and the circumstances surrounding the  closure  has led  to  a
number  of  findings  and  conclusions   that  are  fully  supportable   by the
information available to the  Agency.  These findings put the environmental and
health requirements  for continued  operation of  the  smelter in perspective and
strongly  suggest that  other  factors  were  more  crucial  in  affecting  the  long
term operation of the smelter.

     1.  While  requirements   of the  Clean  Air  Act  played  a  role  in ARCO's
         assessment of the future  viability of  the smelter, evidence indicates
         the  requirements  were  not  the overwhelming  or even  most important
         factor  influencing the  decision.   Rather, other economic,  operational
         and  occupational  health  factors  contributed   significantly   to the
         company's  decision.    In   order  to  understand  the  context   of the
         ultimate  decision,   all  factors  have  to  be  viewed  collectively  as
         contributing to  the  weak competitive position  of  the  smelter in the
         world market.  The  Clean Air Act  requirements  apparently  triggered  a
         decision that would  have been made in  the near  future based solely  on
         economic considerations.

     2.  Even  in the  absence of  Federal  and  state environmental  and health
         regulations, the  smelter  was a marginal  operation  that may not  have
         been economically viable  in the long  run due to numerous economic and
         operational  factors  affecting   the   continued   operation   of  the
         facility!These  factors  include:historically low profitability  of

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    the  company's  copper   operations;   high  operating  costs  associated
    primarily with  operating  energy-intensive  technology  and  processing
    low  grade  concentrates;  cost  of  needed  process  improvements;  high
    mining  costs;  underutilization  of  smelter  capacity   resulting  from
    reduced supply  of  concentrates; and marketing  problems with sulfuric
    acid.   These  factors eroded  and  would have  continued  to  weaken the
    economic  position  of  the  smelter   to  the  point  that only  minimal
    investments in  pollution  control,  far  short of meeting the Clean Air
    Act  requirements,  were  practical  from  an  economic  standpoint.   If
    prospects for  future  economic and  operational  parameters had  been
    more  favorable,   the   company  could  possibly   have  afforded  the
    necessary  pollution  control   investment   while  maintaining   the
    competitive position  of the smelter.

3.  Anaconda's estimated cost  of  $400  million for  complying with  Federal
    and  State  environmental   and  health  regulations  is   misleading  and
    overstated.   The  company's  cost  estimate  includes  more  than  just
    improvements   needed  to comply  with  Clean Air  Act requirements.  The
    estimate also  includes  the  costs  of  the  company's  desired  process
    improvements,   costs   of  the  company's   internal   environmental
    requirements,   and  costs   to  meet   OSHA's    occupational   health
    requirements.   EPA  believes   nearly half  of  the  anticipated  plant
    modification   cost  can  be  attributed  to  plant process improvements,
    while  $120-160  million may be attributed  directly  to  the  Clean Air
    Act.

4.  Anaconda's   internal   environmental  and   health   policies  may  have
    imposed sufficient financial  burdens on  the  smelter to significantly
    contribute to  the  closure decision.   The  company  has  conceded the
    smelter  did   not  meet  its  own  internal  standards   and  continued
    operation  of  the   facility  was  not  in   keeping  with  the  company
    policies.    In   particular,   concern  exists  on  the   part   of  all
    associated with  the  smelter regarding  the potential  health hazards of
    processing concentrates with  a high  content  of  arsenic, a   listed
    carcinogen.   In order  to  upgrade the  facility to protect  worker and
    public  health  to a  conscionable level  consistent with  the company's
    policies,   EPA   believes   considerable   and    costly   engineering
    modifications were needed.

5.  Institutional problems  confronting the copper industry place domestic
    producers  at  competitive disadvantage  with  foreign   producers  and
    contribute  to  the  weak   economic  position  of  some   companies.   In
    addition to  having to  compete in a  dynamic  world copper market, U.S.
    producers  do not  benefit from governmental  incentives as do  their
    foreign counterparts.   Some  foreign  governments  support their copper
    industry  through a  variety  of  institutional  incentives.   In  Japan,
    for  instance,  where environmental  requirements   are   more  stringent
    than  in the  U.S.,  the  government  aids, its  industry with  greater tax
    benefits, protective tariffs,  and  low  interest loans  that  allow the
    Japanese copper industry to effectively compete  in  the world  market.
    Nonetheless,   despite   the  institutional   disadvantages  confronting

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         domestic producers, prospects  for  the U.S. copper  industry look much
         improved in  the near  future  because  of  continued  strengthening  of
         copper prices and reduced excess capacity in the industry.

     6.   The Clean Air  Act  Amendments  of  1977  recognize the  special  problems
         facing  nonferrous  smelters   like  Anaconda's  and   contain  unique
         provisions  that  give  companies an extended  period  of time  to comply
         with  requirements  of  the  Act.Underanonferroussmelterorder
         (NSO),asmelterexperiencing  difficulties  can  extend  compliance
         until  January 1, 1988 by committing  to  make necessary improvements to
         meet applicable emission  limitations.

     7.   Within the flexibility granted in administering the  NSO  provision of
         the  Act,   EPA   demonstrated   its  willingness   to   explore  possible
         solutions  with  Anaconda.  However,  the company  chose  not  to pursue
         this option.   Through  negotiations  EPA  believes a  workable  solution
         could  have   been  found  whereby   the  company  could  have  continued
         operating  the  smelter  consistent  with  requirements  of  the  Clean  Air
         Act.   At  the  same time,  the  company  could have  pursued  the  other
         alternatives  it was considering.

     8.   With  the  economic  and  operational  problems  facing  the  smelter  in
         Anaconda,  ARCO's long-term  solution  appears to  be  construction of a
         new smelter  somewhere  in the  world.   If ARCO decides to  build  a  new
         facility,  the  smelter would  probably be a  large-scale operation with
         state-of-the-art  technology,  in   a   location   closer  to  the  major
         markets for  copper and by-products,  and accessible  to  low-cost  water
         transportation.  Up  to  seven years  would  be  required  to  plan  and
         construct  such   a  plant.  Consideration  of this  ultimate  long-term
         plan  influenced  Anaconda's  decision   not to make  appreciable capital
         investments  in the  existing smelter.

     9.   ARCO  expedited  the  closure  of the  smelter  in  order  to  seize  the
         current  opportunity  of  securing   reasonable   terms with  Japanese
         smelters.   Even  though the smelter could have  continued  operating  for
         another  two  years  without  making  capital  investments  to  install
         pollution  control equipment,  the  company chose to  close  now  in  order
         to  take advantage  of  excess  smelting capacity currently  in Japan  and
         to  guarantee  a  place  for   its   concentrates.   Anaconda  and  ARCO
         apparently view  this  as  an interim  measure  that will keep  the  mines
         operating   while  long-term  options   are  explored.   This  option  is
         economically   feasible   despite   Japan   imposing   more   restrictive
         environmental controls for copper  smelters than found in the U.S.


IV.-  ANACONDA'S ENVIRONMENTAL PROBLEMS  IN PERSPECTIVE

     Like  all  other   copper  smelters  in  the  country,  Anaconda's  smelter  was
subject   to  several  requirements  established  by  the  Clean  Air  Act.   The  Act
represents  one  of  many pieces  of   environmental   legislation  Congress  has
enacted  in response to  the  public's  concern over the environmental  and health
effects  of pollution.

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     The  Clean  Air Act  requires  industrial  sources  to  control sulfur  dioxide
(S02)  emissions  to meet  health-based ambient  air  quality standards.   Control
of  S02 emissions  is  a  major problem  at the  Anaconda  smelter.   In 1970  the
State  of  Montana  adopted regulations  that  required  the Anaconda  smelter  to
achieve  90  percent  control   of  S02  by  June  30,   1973.   Over  the  last  seven
years, the smelter has operated  under variances granted  by the  State while  the
company investigated compliance alternatives.

     Soon after  the merger  of ARCO  and Anaconda  in 1977,  negotiations  were
initiated by  representatives  of  ARCO and Anaconda with EPA  and  the State  of
Montana in  order to develop  emission  limitations  for the  smelter  that  would
provide  for   attainment  of  the  S02  ambient standards  in the  Anaconda  area.
As  a  result  of   these  negotiations,  Montana  submitted  a  revised   state
implementation plan  (SIP)  in April 1979  that  would meet the objectives  of  the
Clean Air Act in what was agreed to be a  reasonable manner.

     In  January 1980,  EPA  approved  Montana's  SIP  revision  that  included  a
schedule  for  the   smelter   to   comply  with  S02  emission  requirements   by
December  31,   1982.    The compliance plan  would  have  required  Anaconda  to
install  a continuous  control  system  which would  achieve  85  to  90  percent
control of S02 emissions.

     When it  was operating,  the smelter  achieved  less than 30  percent  control
of  S02   and  was   one   of  the   largest  sources  of   S02  emissions   in  the
country.  The smelter  caused  violations of  the 24-hour ambient  health  standard
45  days  in  1979 and 67  days during  the  first  six  months of 1980.   Violations
increased  in  1980  due  partly  to   relocation  of ambient  monitors  around  the
smelter.   Hourly  S02  concentrations  exceeded the  more  stringent emergency
episode warning  level  251 times  in  1979 and  170  times during the first  six
months of  1980.   During  these episodes,  operations  had  to be curtailed  at  the
smelter because  of the immediate danger  to public health.

     Like other  forms  of air  pollution,  sulfur oxides have been  shown  through
scientific  and   epidemiological  studies  to  pose  significant  harm  to  human
health and  public  welfare.   High  levels of sulfur oxides  in  the  air cause  an
obstruction of  breathing, a  choking  effect  that doctors  call   "pulmonary  flow
resistance".  The  amount  of  breathing obstruction  has a direct  relation  to  the
amount of sulfur compounds in the  air.   Many types  of respiratory  disease  are
aggravated by exposure to oxides:   coughs  and  colds,  asthma,   bronchitis,  and
emphysema.   The  harmful  effects   of sulfur  pollution  are  enhanced   by  the
presence  of  other  pollutants,  especially  particulates  and  oxidants.   Some
researchers believe  that  the  harm  is  mainly due not  to  the sulfur  oxide  gases
but  to other  sulfur compounds  that  accompany  the oxides:   sulfur acids  and
sulfate  salts.   While   there  have   been  significant  strides  in  controlling
industrial  air   pollution  in  recent  years,  there  have  been  catastrophic  air
pollution  incidents  over  the  last  30  to  40 years   that   demonstrate  the
potential magnitude  and  severity of  air  pollution  episodes.  Marked  increases
in  respiratory   distress  cases and  fatalities  attributable  to  air pollution
have  been evident  during episodes  in  heavily  industrialized  areas  such  as
London,   New   York  City,   Detroit  and  the   Monongahela   River  Valley   in
Pennsylvania.

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     Though the  company  has  made attempts  since  1972  to address the  smelter's
significant environmental problems,  the  control  efforts have not been  adequate
as the smelter remained  one  of the  industry's worst controlled facilities  (See
Table 1  and  Figure 1).  A modernization  program undertaken  at  the smelter  in
the  mid  1970's  that  was  supposed  to  enhance  pollution control  efforts  did
little  to   reduce emissions   to  necessary  levels.   Other  companies  in   the
country  have made considerable efforts to  control  emissions at their  smelters
and  are  continuing to take  appropriate  measures to  further reduce emissions.
In  the  last  ten  years,   three  Western  smelters  in  addition   to   Anaconda
installed   more   modern   smelting   technology   to    replace    conventional
reverberatory furnaces.  While Anaconda  achieved less than 30 percent  control,
these other  smelters  have  achieved S02  control levels  of 80  to  90  percent.
The  Inspiration  smelter  in Miami,  Arizona, which is the  only other smelter  in
the  U.S. to  employ electric  furnace technology  similar  to that which  existed
at Anaconda, currently achieves close to  80 percent control efficiency.

     Of  the  ten  remaining  Western  smelters  that  still  utilize reverberatory
furnaces, one is  achieving close to  90 percent control, seven range in  control
from  35  to  70  percent  control,  and  two  currently have  no control  of  S02-
Recently  two  companies  operating  three  of  these  smelters  entered   into
agreements  with  EPA  to install control  equipment  to  meet clean air standards.
Phelps Dodge  Corporation agreed to  install $150 million  of pollution  control
equipment at  its Morenci smelter  by January 1,  1985 and  to spend $45  million
at  its Ajo  smelter by the end of  1985.    In agreeing to  drop its  challenge  to
the  standards,  the  company  conceded   that   the  standards  can   be   achieved
economically  with current  technology.   Asarco,  Inc.,   agreed  to  spend  $133
million  at its Hayden  smelter to replace existing furnaces with new units  that
generate less  air pollution.   Thus, while  most smelters  have  committed  over
the  years  to  make  capital   investments  to  control  their  pollution   control,
Anaconda kept delaying the  necessary commitment to undertake the modifications
needed for pollution control.

     Even  though  several  smelters   have  made great  strides  in  air  pollution
control  in  recent years, it  is  significant to note the  comparison of  control
achievements in  the  U.S. with  that  in Japan  (see Figure 2).  The  Japanese  not
only have a more  stringent ambient  standard (0.1 ppm 24-hour value versus  0.14
ppm  in U.S.), but several  smelters  capture and recover greater  than 98 percent
of the sulfur in  their feed.   By combining pollution control  improvements  with
modernization  of  the  facilities,   the   Japanese  copper  smelting   industry  has
been able  to  achieve a high  degree  of  environmental control  while becoming  a
world leader in the production  of copper.

     While  the  S02  problems  at  the Anaconda  smelter  were  considerable,  the
smelter  was  also plagued by  arsenic emission problems  that  might have  caused
the  smelter  to  become subject to  requirements  under Section 112 of  the  Clean
Air  Act  to  control the  emissions.   The   Butte  concentrates  that are  processed
at  the  smelter   contain extraordinarily  high   levels  of  arsenic,   which  is
emitted  with  process  off-gases  during  the  smelting  of  the  concentrates.
Arsenic  was  listed  as  a  hazardous  pollutant  under  Section  112  after  EPA
determined  from   scientific  evidence that  the  compound  is  a carcinogenic  air

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                                     Table  1

       COMPARISON OF SULFUR CONTROL EFFICIENCY AT WESTERN COPPER SMELTERS

                                             Annual Capacity    Percent
                                             of Blister Copper  Sulfur Removal
       Company/Location                         (tons)          	
       Anaconda Copper
            Anaconda, MT                       195,000           .    20%-30%

       ASARCO
            El Paso, TX                        115,000               70%
            Hayden, AZ*                        180,000               40%
            Tacoma, WA                         100,000               35%

       Inspiration
            Miami, AZ                          150,000               80%

       Kennecott
            Garfield, UT                       280,000               85%
            Hayden, AZ                          80,000               90%
            Hurley, NM                          80,000               60%
            McGill, NV                          50,000                0%

       Magma Copper
            San Manuel, AZ                     200,000               45%

       Phelps Dodge
            Ajo, AZ*                            70,000               55%
            Douglas, AZ                        127,000                0%
            Hidalgo, NM                        140,000               90%
            Morenci, AZ*                       177,000               55%
*These  smelters  recently  announced  plans  to  upgrade their  pollution control
facilities in order to comply with Clean Air Act Standards.

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                                              FIGURE  2


                     COMPARISON OF JAPANESE COPPER  SMELTERS WITH U.S. SMELTERS
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                                                                             Major Japanese Copper Smelters
                                                                             range from 90-99% control


                                                                             Western  U.S.  Copper Smelters
                                                                             range from 0-90% control
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-------
pollutant that  poses significant  risks  to public  health.   Though regulations
do not currently exist, the Agency  is  in  the  process of establishing  limits  on
arsenic emissions from  primary  copper  smelters.   Anaconda's smelter might have
been one of only two  smelters,  the  other  being the ASARCO-Tacoma smelter, that
would have been subject to the  limitations.

     In addition to  requirements under the Clean  Air Act, the Anaconda  smelter
was also  subject  to  standards  promulgated in 1978  by  the Occupational Safety
and  Health  Administration  (OSHA)  for worker exposure  to  inorganic  arsenic.
The regulations  require the use of engineering and  work  practice controls  to
limit  occupational   exposure  to 10 ug/rn^,  averaged over  any  8-hour  period.
The  10 ug/m^  limit  was  exceeded   in  some work  areas  at  the  smelter.   These
regulations  were  challenged  in  court  by Anaconda  and  the  requirement  for
engineering  controls has  been  temporarily stayed  pending resolution  of the
challenge.   Nonetheless,   in   its  compliance  plan  for  the   smelter  Anaconda
included  installation of  engineering  controls to  meet the  OSHA standards  in
its work areas.
V.   DISCUSSION OF BASIS FOR FINDINGS AND CONCLUSIONS

     A.  Efforts to Explore Alternatives with EPA

         ARCO's announcement  that  it was indefinitely suspending operations  at
the  Anaconda  smelter  and  Great  Falls  refinery came  as  a  surprise  to  EPA.
Although public  statements by Anaconda  officials  over  the  past several years
included  speculation  that  the  costs  of   pollution   control   could   force   a
shutdown,  EPA's   understanding   developed   through  communications  with  the
company  and  state  officials was  that two alternatives  were being  considered.
The first involved adding  air  pollution  controls to the existing facility; the
second was building  a new smelter  in Montana.  Throughout  development of its
compliance  plan,   Anaconda   indicated   that   the   economic  feasibility   of
compliance would have to be considered  prior to making a decision.   However,
the determination  that  compliance was not feasible  was first announced  at the
same time ARCO announced its decision  to suspend operations.

     Serious  discussions  with EPA  concerning the prospect  of alternatives  to
shutdown were never   initiated by  Anaconda.   During discussions  with  Anaconda
following  the   shutdown,   EPA  indicated   its  willingness  to  negotiate   a
reasonable solution  which would  permit  continued  operation of  the facility,
but  Anaconda  was  unwilling  to  explore the options  presented.   EPA  firmly
believes that if  Anaconda  had come  to  EPA  prior   to   its  final  decision and
public announcement,  EPA and the company could  have explored all alternatives
and found a workable  solution through  the process.

     Within the flexibility  contained in the Clean  Air  Act,  Anaconda had three
options  for continued operation of  the  smelter. The  most obvious, short-term
approach was  the  negotiation of a  consent  agreement that would  have permitted
the  smelter  to  operate until the  end of December  1982.  Under this solution,
the  company   would  have continued  using the  interim  controls  it  now has  in
place  and would  not  have been required to make  any  capital commitments  to add
                                      10

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pollution control  equipment.   Anaconda rejected  this  option  since the company
did not consider operation of the smelter for  only  two more years to be in the
best interests of  the  company's  overall  operations.  As Anaconda stated in its
comments, the company acted in October 1980  in  order  to secure a place for its
Butte  concentrates,  which  are  high  in  impurities  and difficult  to process.
The company  did  not  want to  run  the risk of  not being able  to find smelting
capacity for the concentrates two years later.

     The  other  two  alternatives  involve  nonferrous  smelter  orders  (NSOs),
which are unique provisions contained  in  Section 119 of the Clean Air Act that
allow   copper    smelters   flexibility   in   meeting   air   pollution  control
requirements.   Section  119  authorizes  issuance of  two  NSOs —  the  initial
order could  delay compliance until January 1, 1983; the  second until
January  1,  1988.  In  June  1980,  EPA  issued  regulations outlining eligibility
requirements   and  application   procedures   for  obtaining   an   initial   NSO.
Although  copper  industry  representatives  voiced  some  concerns  regarding the
highly  detailed  application   procedures   included   in  these  rules, EPA  has
received several NSO applications and expects to  issue  NSOs in the near future.

     Anaconda,   in  particular,  may  have  had   some   concerns   regarding  the
practicability  of  obtaining   the  initial   order  because  of  the   legal  and
regulatory   requirements.   In  order  to  qualify  for  an  initial  NSO,  the
smelter's off-gases from major process equipment must be treated with constant
control  technology.   Since this  is  essentially what  Anaconda proposed  in its
retrofit plan  to comply  with  the Montana SIP, the  initial  NSO probably offered
little  relief  for Anaconda's existing  smelter.   Nonetheless,  Anaconda  never
approached EPA to discuss flexibility that might  exist  in  administering an NSO.

     Even  though in  its comments  Anaconda  claims  the company  "explored all
options  presented  to  it,"   EPA  believes  the  company did  not  consider  all
options  due  to a  lack  of  appropriate communication  with  the Agency prior  to
announcement  of  the  closure.    Subsequent   to  Anaconda's announcement,  EPA
indicated  its  willingness  to negotiate  a solution  and brought  forth  a  third
option  that  would have  allowed  continued  operation  of  the  existing  smelter
while  the  company pursued  its  long-range  plans.   Under this  option, Anaconda
could  have   entered  into a consent decree  until  December  31,   1982 and  then
applied for  a  NSO  effective until  January 1,  1988.   Entry of  a  consent decree
would not have  affected  Anaconda's  ability  to apply for that  NSO.  Even though
specific  regulations  for   the   second  NSO  have  not  been developed,  enough
flexibility  is  afforded  by  the Clean  Air  Act  whereby  the  existing  smelter
could  have  continued  operation  beyond  1982  with  certain   conditions.   For
instance,  if more time  was  needed  to install  air pollution controls  on the
smelter economically,  this  could  likely  have been covered.  Alternatively, the
NSO  could have  permitted  continued operation  of the  existing  smelter beyond
1982  without  requiring  the  complete retrofit   spending  program  if Anaconda
committed to build a  new smelter at Anaconda or  possibly  elsewhere in the U.S.
by  1988.  Of  course,  such   an  NSO  would  have  had   to contain  a   compliance
schedule  for the completion of  the  replacement smelter  and its  compliance with
applicable air pollution limitations.
                                      1.1

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     As  indicated  previously,  Anaconda  made  no  effort  to  explore  this  or
similar  options  with  EPA prior  to  its  public announcement  of  the  closure.
Subsequently,  attempts  by  EPA  and   the  Montana  Congressional  delegation  to
negotiate  a  solution  with  Anaconda  around  these  options  proved   fruitless.
Since the  company  had  already initiated  its  decision  to ship the concentrates
to Japan,  the  company reaffirmed  that  the smelter  and  refinery  would not be
reopened.

     In  its  comments  on  the  preliminary  report, Anaconda did not address  the
option of  building a  new smelter by combining  a  consent decree  with  an NSO.
Instead,  the  company   indicated  an  NSO  did  not  furnish  relief  from   other
environmental  requirements,   namely   current   and  pending  OSHA   standards.
However, implementation of the engineering  controls  that were required as part
of OSHA's  arsenic  regulations  has  been  stayed.  Even  though there is   still
question as  to whether the engineering  controls will  ultimately be required,
OSHA maintains that  such  controls would  not  require the  level  of expenditure
claimed by Anaconda.

     Anaconda's  lack  of consideration   of   the   consent  decree/NSO  option
strongly suggests  that the company  did  not  view  continued operation  of  the
smelter  in Anaconda  as a long  term  option.  In addition,  Anaconda  has stated
publicly that  while  it   is  considering  building  a  new  smelter  it  does  not
intend  to  locate  the  smelter  in Montana  for   a  variety of  reasons,  none of
which are  related  to  environmental  requirements.   As  discussed  later  in this
report,  economic  factors dictate  that  if  Anaconda   re-enters   the  smelting
business,  its operations  would be located in  other  areas  in the  United States
or the world.

     In  summary, even  though  EPA advanced  an option whereby the company  could
have  maintained   its  operations  in   Montana  by building  a  new  smelter  and
continuing  to  operate  the   existing  smelter   in   the   interim,  the  company
obviously did  not  consider  continued operation  in Montana a reasonable course
of action for solely economic, and not environmental, reasons.


     B.  Evaluation of ARCO Estimates of Costs
         for Environmental and Health Requirements

         1.  The $400 Million Cost Claim

             ARCO  and  Anaconda  stated  publicly  when  announcing  the   plant
closure that the  cost  to retrofit the  smelter  was  approximately $400 million.
This cost  figure  has  its basis  in  a  comprehensive  six month engineering  study
done  by American  Lurgi  Corporation.   Tables  2  and  3  summarize  the   major
components  of  the Lurgi  system,  the  corresponding capital  cost for the  major
areas, and Anaconda's basis for  its $400 million estimate.

     The Lurgi cost estimate  for equipment  and  installation for the  30 million
pound per  month  copper  smelter was $379 million.   Anaconda adjusted the  Lurgi
estimate  to $358  million by  removing  the  Lurgi  contingency  estimate  of  $21
                                       12

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                                                    TABLE 2

                                    SUMMARY  FOR  LURGI  SMELTER   MODIFICATIONS
                                          AND ESTIMATED  CAPITAL COSTS
              Area/Major  Equipment  Components
                            Roaster  System
   .  4 new  secondary cyclones
   .  Afterburner
   .  Evaporative  cooler
.  2 hot ESPs  (1 spare)
.  ESP natural gas heating
    system
.  High velocity flue gas
   handling system
                        Electric Furnace System
   .  2 evaporative coolers in series
   .  Mixing chamber
   .  2 hot ESPs (1 spare)
.  ESP natural gas heating
   system
.  High velocity flue gas
   handling system
                       Primary Converter System
   .  6 water cooled primary hoods
      ducting
   .  3 hot ESPs (1 spare)
                           Slag Cleaning,
   .  Slag feed system
   .  2 slag furnaces in parallel
   .  2 hot ESPs (1 spare)
  ESP natural gas heating
  High velocity flue gas
   handling system
  2 evaporative coolers
  ESP natural gas heating
    system
                              Anode Furnace

   . 4 afterburners in parallel            . Gas handling & cooling
                                                   Capital Cost
                                                For Equipment and
                                                   Installation
                                                   (S millions)

                                                        41.4
                                                                                                   17.5
                                                                                                   62.8
                                                                                                   27.9
                                                                                                    6.2
                         Fugitive 'Gas System

   A.   1 new baghouse system collecting the following:
                                                        55.6
       .  6 secondary hoods & ducting
          in parallel
       .  4 anode furnace canopies
       .  2 slag return launder canopies
.  1 skull breaker
.  1 ladle dump area
.  1 new stack
   B.   Modify existing baghouse system to control following:

       .  1 matte tap on electric furnace  .  2 slag furnace mat tap
       .  1 slag tap on electric furnace   .  2 slag furnace slag tap
                     Met Gas Cleaning System
   .  4 venturi  scrubbers
   .  2 drying towers
. Wet gas coolers and
   precipitators in series
                       Sulfuric Acid Plant
   .  2 new acid plants handling
       160,000 scfm.
.  2 new acid plant stacks
.  3 new storage tanks
                  Waste Water Treatment Plant

                         Utilities

   .  flux and reverts handling system
   .  furnace reverts handling system
   .  cooling water supply and return

Total Equipment and Installation
 50.1





 59.1





 13.6

 23.4






357.6
                                                           •13

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                              TABLE  3
           SUMMARY OF  ANACONDA'S  ESTIMATED  CAPITAL  COSTS
                                                        ($ Millions)
Total Lurgi equipment, installation, and                   357.6
       field costs
Plus cost escalation during construction                    53.3
Plus owner's cost and construction management                6.3
       Subtotal                                            417.2
Plus Contingency (15%)                                      62.5
       Total                                               479.7
Subtract "possible" modifications                           84.5
       to Lurgi system                                   	
       Total                                               395.2
                                 14

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million.   Anaconda  then  added  their  own  estimates  of additional  cost  items
such as escalation and  15%  contingency and arrived at a total cost estimate  of
approximately  $480  million.  Anaconda also  estimated that  approximately $80
million might  be  saved  by the  inclusion of possible modifications to  the  Lurgi
system, resulting in  the  $400  million  publicly  reported  by ARCO and  Anaconda.
Anaconda estimated that  an  additional  $80 million  would  be required  for  items
not included in the Lurgi study such  as dust treatment, relocation of the  flux
system, demolition,  zero water  pollution  discharge,  and  materials   handling.
The zero water discharge  cost  estimate of  $20 million is  the only additional
environmental  cost item.

         2.  Other Cost Estimates

             Cost estimates  for Anaconda  smelter plant modifications  have  been
made over the years and are summarized  in Table  4.

     In 1977,  SRI  International  completed an  analysis  for  EPA of the economic
impact of environmental regulations  on the Anaconda smelter.  The capital  cost
of compliance  with  the Clean Air Act  and  the Water Pollution Control Act  used
in the  report  was  $35.8  and $7.8  million,  respectively.   In  its  report SRI
International  concluded:    "...it   is   highly improbable  that  Anaconda  would
decide  to  close the  smelter and other closely  associated  facilities,  rather
than comply with the EPA  regulations".

     The  1977-78  Kaiser  Engineering  study  for  the Anaconda  Company proposed
many alternative control  strategies  to achieve desired sulfur dioxide emission
characteristics for the main stack at  the smelter.  The needed emission
characteristics  were  determined  by  Environmental  Research  and  Technology,
Inc.,  and  were claimed  to   be  necessary to  meet the  sulfur  dioxide national
ambient standards.   Alternative  control strategies were  developed  for  various
smelter production levels and ranged in cost  from $21 million  to  $40 million.

     In  1978  Anaconda contracted  with  Fluor  Mining  and  Metals,   Inc., and
Furukawa Company, Ltd.  and  also the American Lurgi  Corporation  to do separate
engineering  studies  to develop  a  modification   plan  of  the  smelter  and its
operation  to  comply  with   EPA's  environmental  regulations  for ambient air
quality and OSHA's regulations for worker exposure to arsenic.

     The Fluor-Furukawa  study  evaluated  the most  advanced smelter technology
as developed  and  applied at the  Ashio, Toyo, Tamano  and  Onahama  smelters  in
Japan.  Their  January 1979  report  estimated  the capital  cost  of  the  smelter
modification to be  $96.6  million  (+ 25%).   In March 1979,  the  American  Lurgi
Corporation  reported  on   its engineering  study and estimated  the capital  cost
to be $135.8 million (+ 25%).

     Anaconda  combined elements  of  the  Fluor-Furukawa  and  Lurgi  studies  to
come up with a final  smelter modification  plan.   With the modifications to the
studies, contingency  and  escalation,  Anaconda estimated  the capital   costs for
the  system  to be approximately  $185  million,   which  was  included   with the
company's SIP  compliance  plan  submitted to  the  State  of  Montana in July  1979.
On  the  basis  of  Anaconda's   compliance   plan,  Lurgi  conducted  a  detailed
                                        15

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                      TABLE 4
COMPARATIVE HISTORY OF ESTIMATES OF COMPLIANCE COSTS
Date
1977
1977
1978
1978
1979
1979
1979
1979
1980
1980
Estimate
Prepared
For
EPA
ARCO
Anaconda
ARCO
Anaconda
Anaconda
Anaconda
ARCO
Anaconda
ARCO
Source of
Estimate
SRI Report
10-K Report
Kaiser Eng. Report
10-K Report
Fluor-Furukawa Report
Lurgi Report
SIP Compliance Plan
10-K Report
Lurgi II Report
Public Announcement
                                                    Cost
                                                $ 43 Million
                                                $ 65 Million
                                                $ 40 Million
                                                $145 Million
                                                $ 97 Million
                                                $136 Million
                                                $185 Million
                                                $200 Million
                                                $378 Million
                                                $400 Million
                     of Plant Closures
                          16

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engineering  study  of  the   specific  modifications  needed  at  the  plant  and
estimated  the  resulting  cost.   The  April   1980  Lurgi  report  estimated  the
capital cost to be $378,987,000 (+ 20%).

         3.  The Existing Smelter

             In order  to  appreciate  the magnitude of the proposed  modification
it is  necessary to  understand  the condition of  the  existing facility.   In  the
early  1970s, Arthur 6.  McKee and  Company was requested by  the  Anaconda  Company
to conduct an engineering study to develop  a plan to modernize the  smelter  and
to  bring  the  facility   into   compliance   with  a  sulfur  dioxide  emission
regulation adopted by the State of Montana  in June of 1970.  The McKee  smelter
modification plan included  a change  in smelting technology and installation  of
sulfuric acid plant capacity sufficient  to capture 90% of the sulfur dioxide.

     The   Anaconda   Company   implemented    only   portions   of   the    McKee
recommendations.   The  reverberatory  furnaces  were   replaced   by  a  fluid  bed
roaster and  an  electric  smelting  furnace.   The existing  process gas handling
system, converters,  and  remaining  smelter   process  equipment  continued to  be
used.

     Pollution  controls  added  to  the  smelter  since   1971   consisted  of  a
baghouse  and an  acid plant.   Since  the  antiquated converter hoods  and  the
existing  gas handling  system  permitted excessive  leakage, the  baghouse  was
capable of treating only  a  portion of  the process gases.   For  the  same  reason,
the acid plant never performed at design  capacity.   At design capacity,  the
acid  plant  could  handle  less  than  50% of  the  process  gases.   However,  in
actual  operation  of  this  smelter,  only 20 to  30  percent  of  the S02  gases
were controlled.
     The  1979  ARCO 10K Report  on page 22  stated:   "Anaconda has invested
million  in  environmental  protection at  the smelter  since  1971."   The  Rocky
Mountain  News  on January  25,  1981  contained an  article which stated:   "Since
1972,  Anaconda has spent  $65 million  on  steps  to upgrade  environmental  and
health  performance at  the  plants.   In  1979-80,  the  firm  spent  another  $15
million  on   research   for   technology  that  would  reduce  plant   emissions   to
legally  acceptable levels."  The $65 or  $68 million cost  was  the result of  a
two-phased modification  undertaken  at the  smelter.  The  Phase  I modification
was  completed   in  1974   at  an  approximate  cost  of  $29  million.    Major
improvements at  the  smelter consisted of an  acid  plant  (cost  of $18 million)
and  a  baghouse  (cost  of   $11  million).    Addition of  this  pollution  control
equipment resulted  in some  particulate  and sulfur  dioxide pollution control.
The  Phase II  modification  was completed  in 1976  at an approximate cost  of  $36
million.  Major  improvements at the smelter  consisted of  a  fluid bed  roaster
and  an  electric furnace.   The  Phase II  modification  was primarily a smelting
technology change  that resulted in  little  to  no  additional pollution control.
The  $15 million spent  on   research  and  engineering in  a worldwide  search  for
technology consisted  of  the Fluor-Furukawa  and  Lurgi studies and also resulted
in no additional pollution  controls at the  smelter.
                                        17

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         4.  Cost Allocation and Perspective

             It  is  often  exceedingly  difficult   to  differentiate  between
process  improvements  and   pollution  control  in  many  industrial  facilities,
particularly  in metallurgical  industries  where  significant emissions  occur
throughout   the  process   and   where   product   recovery   is   important  and
cost-effective.  Many  process  changes will  not  only make  the  overall process
more efficient  strictly  from a  metallurgical  standpoint, but such changes will
also enhance pollution  control  efforts by generating  less  pollution  or making
the  pollution   more  amenable  to   effective   control.   Likewise,    improved
pollution  control  equipment  and  practices  will  many  times  result  in  more
efficient  operations by  reducing   the  loss  of  valuable  raw materials  or  by
producing useful by-products.

     In   instances   where   pollution   control  and  process  improvements  are
interrelated,   EPA   uses   Internal   Revenue  Service   regulations   for  rapid
amortization   of   pollution   control    facilities    as   a  guide    in   the
differentiation.  Under  Section  169 of the Internal  Revenue Code,  a pollution
"treatment  facility" is defined as one used to abate  or  control  atmospheric
pollution  or contamination  by  removing,  altering,  disposing  or  storing  of
pollutants,  contaminants,   waste,  or  heat.   Further,  if  a  facility  performs
multiple  functions,  only  the   cost  "attributable  to  abating   or  controlling
pollution"  may  be amortized.   Under  Section 169,  EPA may  not  certify that a
modification  constitutes a  "treatment  facility"  if  the  modifications  would
significantly  (more  than 5%)  extend  the  useful  life or  reduce the  operating
costs at the facility.

     With   this   allocation   perspective   in    mind,    EPA   evaluated   the
Anaconda/Lurgi  smelter  modification plan from the standpoint of what could be
considered   controls   to  meet   the  Clean   Air   Act  requirements  and  what
constituted  process  improvements needed  to make  the smelting  system operate
more  efficiently  and   profitably.    Anaconda  attributed  all  of  the  smelter
improvements  in the Lurgi  study  to  environmental   and  health   requirements
without  any recognition for the benefit to  the metallurgical  processing that
would  result.   EPA,   on   the   other  hand,  believes  that  many  of. these
modifications were  in  fact process improvements that would have significantly
extended  the useful  life of the  smelter  and resulted  in  some  operating cost
savings  that  have  not  been recognized by  Anaconda.   Admittedly, separation or
allocation  of  costs between process  improvements  and  pollution  is  difficult
and  influenced  by a variety of interrelated factors.  Since  the  company did
not  support their  claim with  the   detailed  information  which would  have been
necessary  to make  such an allocation  for rapid  tax writeoff,  only a coarse
estimate was made from the  Lurgi report cost summary.

     To  meet the  Clean Air Act  requirements,  the  smelter  would  have needed
additional  acid plant  capacity to  control   all process off-gas  streams.   In
addition,  control  of fugitive   emissions  from the  converters  and the  electric
furnace  matte  and slag  tap launders  would   have  been  required.   Thus,  costs
associated  strictly  with pollution control  equipment are estimated  to be the
total  of  the  Lurgi modification   cost  for  the  fugitive,  wet  gas  cleaning,
                                     18

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sulfuric acid,  waste  water, and  50% of the  utilities  areas, with appropriate
modifications  (refer   to  Table   2).   First  of  all,   the   Lurgi  modification
included fugitive  control  in  areas other than  the  converters and the electric
furnace matte  and  slag  tap  launders.   EPA estimates that  $20 million  of the
total cost  for this area  is  not attributable to the Clean  Air Act.  Instead,
these costs pertain, to equipment  needed  for  either  OSHA requirements or  simply
the  company's  desire  to  improve  worker conditions.  Further,  possible  design
changes  in  the  acid  plant  could  reduce  the  cost.   EPA  estimates  that
approximately  $50  million  should be deducted from  the  Lurgi modification cost
estimate for  the  combined  wet gas  cleaning  and acid  plant areas  because of
possible design changes.

     In  the Lurgi  report  the  total  equipment  and  installation  cost  for the
fugitive, wet  gas  cleaning, sulfuric  acid  plant, waste  water  and  50%  of the
utilities  was   approximately   $190  million.    EPA's  estimate for  those  items
needed  to   comply  with  the  Clean Air  Act  is  then  $190-$70 million  or $120
million.    When   adjusted   for   Anaconda's   contingency   and  escalation  the
estimated total cost is $160 million.

     The remainder  of  the  modifications to the  other  areas   (roaster, furnace,
converters,  slag  cleaning, and  anode  furnace)  is  the source  of disagreement
between  EPA  and   Anaconda.    In  its  comments  on   EPA's preliminary   report,
Anaconda argues that "the  cost for  the roaster, electric  furnace  and converter
modifications  were  to  transport gases  to the  acid  plant  with minimum dilution
in  order   to  maximize  S02  recovery,"  while  the  slag cleaning   and   anode
furnace  modifications   were   made  to  reduce   in-plant  arsenic   emissions.
However, other  than the  anode  furnace,  EPA considers these modifications  to be
primarily plant process  improvements since the changes  upgrade deficiencies in
the process equipment instead  of  adding pollution control equipment.

     The existing  smelting  process  had  operational  and  equipment problems that
made  metallurgical  processing  as  well  as  pollution  control  difficult and
inefficient.   The  existing  ducting  was in such  disrepair that  gas capture was
ineffective  and  resulted in too  much dilution  air  going  to   the acid plant for
efficient operation.   Anaconda's  smelting process did  not  effectively  recover
valuable  metals from  the  flue   dust  because the  process   could  not separate
arsenic  and   other  impurities.    For   instance,  the   use  of   electrostatic
precipitators  after  the  major  process  units  is  obviously   for   separating
arsenic  and other  impurities  from  recoverable metal,  even though  the  ESP's
also  aid  in the transport  of  gases  to the acid  plant.   It   is EPA's technical
judgement that  the  proposed  modifications  for the roaster,  furnace,  converter,
and  slag  cleaning  areas are not  for pollution  control  purposes but  rather for
the  purposes of process  improvements  to lower the cost and  to  extend the  life
of  the  basic  smelting  operation.   While  some  of  these improvements  to the
process  may  need   to  be  made  before  the  pollution   control   equipment will
operate  properly,  EPA  believes  it  is  inappropriate  to  attribute  these  to
pollution control.

     Finally,  Anaconda  indicates  the anode furnace  improvements were needed to
achieve  compliance  with   OSHA  standards.    Of  course,   this  assumes  the
engineering controls  that  have  been stayed  will in fact  take effect.   While
                                       19

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EPA is not  in  a position to judge  whether  the modifications would be required
for OSHA compliance,  EPA  included  the cost of  the  anode furnace modifications
($6 million) with other fugitive controls  needed  to comply with OSHA standards
or improve worker conditions.

     In conclusion, the cost estimates can be summarized as follows:

     - Plant process equipment improvements           $162 million

     - Clean Air Act                                   120 million

     - OSHA/Other Fugitive controls                      26 million

     - Acid Plant Overdesign                             50 million

     - Total Equipment and Installation                358 million
             for Lurgi modification

     - Anaconda Contingency and Escalation            $122 million

     - Total                                          $480 million

     - Anaconda's "possible" modifications to            84.5 million
             reduce costs

     - Anaconda's publicly announced estimate            400 million
                                                         (approximately)

     - Anaconda estimate for additional items            $83 million
              not in Lurgi study

     C.  Anaconda's Internal Environmental Policies

         Public concern  over the health  and  welfare effects  of pollution are
well founded in  American  society today.  Significant  environmental  laws, such
as  the Clean  Air  Act,  enacted  by  Congress   in  the last decade  reflect this
public support for pollution control  efforts.   Citizens  want the environmental
impact of  government  and  corporate  actions  and  decisions  factored  into the
normal   process   of   conducting   corporate    and   governmental   business.
Environmental  laws  are  not  mere   whims  of   a  few;  rather  the   public has
indicated  through   its  support  for environmental  control  measures that the
costs  for  minimizing  serious  environmental  impact  should be  considered  as  a
necessary  cost  of  doing business.   These  measures  that protect public health
cannot be disregarded during the course of corporate and governmental business.

     Many  corporations  have  willingly  undertaken  considerable   and  costly
efforts  to  control pollution  and  minimize  the environmental  impact  of  their
operations.   In testimony  before  the Montana Select  Committee  on  Economic
Problems  in  December  1980,  Anaconda  officials  indicated  the  company  has  its
own  health,  safety  and  environmental  policies  that  govern operation  of  its
                                      20

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facilities.  The  officials  conceded the  smelter at Anaconda  did not meet  the
company's  minimum  standards  at  the   time  and  continued  operation   of   the
substandard facility was not in keeping with the company's policies.

     In   its   comments   on   EPA's  preliminary   report,   Anaconda   recognized
improvements were  needed at  the plant,  but  maintained  its  internal policies
could  have  been  implemented   at  the   smelter  without   imposing  significant
financial burdens.  While Anaconda  did  not analyze the case of retrofiting  the
smelter  to  conform with its policies,  the company  indicated  both engineering
controls as well  as  intermittent  ambient or workplace controls would have been
employed.

     Given  the   significant  S02  emission   problems  and  ambient  standard
violations  around  the   plant,  coupled  with  the  potentially serious  health
harzards  of arsenic emissions  in the  plant,  it  is  evident  that considerable
improvements  were  needed  at  the  facility  to  correct  the   problems.    If
Anaconda's  internal policies  were  in  fact  adequate  to  protect  health,   EPA
doubts  whether the  environmental and  health  problems  at the  facility could
have  been  satisfactorily   corrected  to  comply  with  those   policies   without
making  considerable  engineering  modifications to the  plant.   EPA believes  the
Federal  ambient  standards  are  set at a  level  necessary  to  protect  public
health  and  the compliance  plan for the smelter  developed by  Anaconda  and  the
State  of Montana  represented  a  reasonable  and  necessary means  to  attain  and
maintain the standards.

     Thus,  EPA contends that  to  protect public health,  even  to the company's
minimum  standards,  engineering controls were  needed  at the  smelter  to reduce
S02   and   arsenic   emissions.    Contrary  to   the  company's   claim,  this
undoubtedly would  have  required  some  level  of capital investment.  The  already
marginal  position of  the  smelter  indicates  that  this investment,  which   EPA
believes would have been needed  to  meet even  the company's policies  to  protect
public  and  workers  health, probably   would  not have  been  undertaken  at   the
smelter.    Coupling  this   with  needed  process   improvements,   the   capital
investment  required for the  smelter  to continue  operations,  irrespective  of
regulatory  environmental requirements, may  have  been  too much for ARCO  to
accept.   From  the company's economic standpoint,  additional  investment  in  the
marginal facility was unwarranted.

     D.  Economic Factors Affecting the Anaconda Smelter

         Despite  modernization efforts  at  the  Anaconda  smelter  in  the early
i970's,  the facility   remained  a marginal  operation  economically.   Numerous
economic  and  operational  factors  which  contributed  to  this   weak economic
position  made  the  smelter's  future somewhat  dubious, even in  the  absence  of
environmental  requirements.   Collectively, these  factors  are   probably  more
significant  than regulatory environmental  requirements.  Whether  the  capital
costs  are  $400 million, $120  million,  or  even much  less,  these  other  factors
are  of  sufficient  magnitude  that  it   is doubtful  the smelter could become  a
cost effective operation over  the long  run, given other alternatives available
to the  company.
                                        21

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     Following Anaconda's  announcement  of  the closure, the Montana Legislature
appointed a  special  committee  to  assess  the situation as  it relates  to the
state.  The committee was  to  determine  if  the circumstances warranted remedial
action by the Legislature.   In  a  report  issued  April  10, 1981  the committee
came to the following conclusion which is  consistent with  EPA's findings:

         "The  Committee  found   no  conclusive  evidence   that  air
         pollution  restraints  were  solely  responsible  for  the
         closure of the Anaconda Company's facilities at
         Great Falls  and  Anaconda.   Rather,  the closure appears to
         have been the  culmination of a  long and complex  series of
         factors  including not  only environmental  laws  but also
         declining  profit  levels  with   resulting  reductions  in
         investment  capital  available,  modernization  costs,  tax
         policies,  diminishing  quality   of  ore,  and  management
         decisions on the most fruitful  use of capital."

     These other economic factors are discussed in further detail below.

     1.  Smelter in the Production Chain

         Even  though  Anaconda  Copper  Company  is an  integrated  producer  that
handles all aspects of  copper production  (mining, milling, smelting, refining,
and  fabricating),  the   company's  main  business  is  mining.   For   integrated
companies, it is general industry practice to operate smelters and refineries
as  service   centers  to   the  owned  mines   by  processing  the  concentrates
essentially at cost.  This  acts  to shift  profits of  an integrated operator to
the mines  where depletion  allowances  for the  ore  can be claimed to maximize
profits for the overall operation.

     When discussing  factors  affecting  the continued operation of the smelter,
it  is  important  to  recognize  the role  of  the  smelter  in  the production  chain.
While  one  could conceivably argue  that  profits  from  mining  operations or
improvements  in  future  copper prices might   be  used  to subsidize  the  smelter
operations, Anaconda  and  ARCO obviously viewed  the  smelter  as a "stand  alone"
operation.   If  the  company could  find  a  lower cost  alternative  to operating
its  own  smelter  and  refinery  without  adversely  affecting  its   mining or
fabricating operations, management would  do  so on strictly economic  grounds in
order  to  reduce overall  costs  and  maximize  profits.   Thus,  when Anaconda
states in its  comments  that the pollution control  costs  were prohibitive, the
company  is  no  doubt  looking at  the  decision  in  the  relative  sense  and in
comparison  with  alternatives  to operating  the  smelter   in  Anaconda.    ARCO's
action  was  strictly  a  business decision made  with  full recognition  of the
relative  position  of the  existing  smelter in  the  company's  copper  operations
and with other future smelting alternatives.

     2.  Financial Condition  of  Anaconda Copper Company

         While  an  assessment  of the economic  position of  the  smelter  should
focus  on the  smelting operation  and  its  position in the overall operation, the
economic  viability  of the smelter at Anaconda was  nonetheless affected  by the
                                        22

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condition of Anaconda Copper  Company in particular and  the  copper industry in
general.   Throughout  the  1970's   Anaconda   was   in  a  comparatively  worse
profitability  position  than  other  companies  in   the  industry.   During  the
decade  between  1966  and  1976,  the  company  consistently exhibited  lower  net
profit margins  and  return  on  net worth  than  the industry average.   Since  the
company  was  bought  by  ARCO  in  1977,  independent  profitability  data  has  not
been  available  for  the  copper  operations.   However,  there  is  no  reason  to
believe the company's position in the industry has  improved appreciably.

     Lower profitability indicates the  company  had  some inefficient operations
resulting  in  relatively  higher  costs.   In  addition,  the  company  suffered
appreciable  losses   in  the  early  1970's  when  Chile  nationalized  Anaconda's
copper mines, resulting in  a  weak  financial  condition for the company.  During
merger proceedings  in  1976, ARCO management conceded  that Anaconda Copper  had
some serious problems  that  required  a  significant  infusion  of capital to make
the overall operation  viable.  Information presented  during  the  Federal  Trade
Commission suit  to  prevent  the  merger  indicated that  Anaconda  was a marginal
company  that,  at  the time,  was  unable  to compete  efficiently and effectively
in  the  industry.   Since   the  merger,  ARCO  has   been  trying  to  strengthen
Anaconda's position as a mining company.

     3.  General  Industry Problems

         Anaconda's  internal  financial  problems were further  exacerbated  by
the general  economic  and  institutional  problems confronting  many  companies in
the copper  industry during  the  1970's.  These problems  included  slack demand
for  copper,  weak  and  widely  fluctuating  prices,  escalating  capital  and
operating  costs,  environmental  controls,  and  foreign  competition.   Foremost
among  the problems   is  foreign  competition,  which   the International  Trade
Commission in  a 1978 report  concluded  seriously threatens  the domestic copper
industry.  While  most foreign producers have higher  grade ore bodies and more
modern  facilities that result  in  lower costs  of  operation,  the competitive
advantages   that   foreign  copper   producers   enjoy   also   point   out   the
institutional differences under  which U.S.  copper  companies  are operating.   In
a  1979  report  to  Congress,  the  General Accounting Office concluded  that the:
"cumulative  effect  of U.S.  government  actions,  which  although  in response to
legitimate public concerns,  have tended  to  discourage  investment in domestic
mineral  projects.   By contrast,  many foreign governments encourage development
of their minerals production."

     The  institutional  incentives  offered by  foreign governments  take various
forms.   In  some countries,  less restrictive  laws,  such  as  in the anti-trust,
worker  safety  and health,  and environmental  laws,  place fewer requirements on
companies  that make the  cost  of   doing  business  less.   In addition,  many
foreign   governments  support   their   domestic  industry   through  financial
incentives  such  as  tax  benefits,  subsidies,  and  tariffs.   In Japan,  for
instance,  where  environmental  requirements  are more  stringent  than  in  the
U.S.,  the  government aids   its industry  with  tax benefits,  protective tariffs,
and low  interest  loans  that  allow the  Japanese  copper industry to effectively
compete  in the world market.
                                       23

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     Despite the depressed conditions  that  have  confronted the domestic copper
industry for the  past few  years and  thus  far  in  1981,  future  prospects for
U.S.  producers  appear   improved.   Based  on  steadily  increasing  demand for
copper,  the price  of   refined   copper,  as  estimated  by  EPA  for  its  NSO
regulations, should  rise seven  percent  per  annum  in real  terms  between 1981
and  1986.   The  effect  of   this  should  be  to   increase  mining  capacity  of
domestic and foreign  mines  and provide necessary capital  for  smelters to make
environmental   and  process  improvements   in   order  to  service  increased  mine
output.  Some additional domestic smelting capacity may also be constructed.

     4.  Costs  of Operation

         In  testimony   before  the  Montana  Select  Committee  on  Economic
Development on  December  20,  1980,  representatives  of Anaconda  Copper Company
indicated  that  80  to  85 percent  of  their  competitors  world-wide  produced
copper cheaper  than  Anaconda's Montana operations.    Higher  costs  of mining at
Butte coupled with relatively  higher  operating costs  at the smelter results in
a competitive disadvantage for the company.

     The relatively  high cost of the Butte mining operations has an indirect
effect  on  the  continued  operation  of the  Anaconda  smelter.   Because  of the
declining yield  of copper from  the Butte ores,  the  costs  of mining  in  Butte
are higher  than  the  costs for most major mines  in  the  country.   In order for
the  Butte  mine to  remain competitive,  Anaconda -must  be  able  to  operate its
smelter  and refinery  at  relatively  lower costs  to  offset the higher  costs of
mining,  which  did  not appear  possible at the Anaconda  smelter.  Anaconda has
to  look  elsewhere  for more  favorable  smelting and  refining terms  to  keep the
Butte mining operations  in a competitive posture.

     Contributing significantly  to  the higher cost at  the Anaconda smelter is
the electric furnace  technology  utilized at  the  smelter.   In  an assessment of
alternative  smelting  technologies,  EPA's   Industrial   Environmental  Research
Laboratory  in  Cincinnati has  shown electric furnace technology  to  have many
disadvantages  and  higher  costs.   The  higher   costs  are  due  principally  to
higher energy consumption and rising electricity costs.

     Another  factor  influencing  the  higher  operating  costs  concerns  the
operational  problems  at  the  smelter  resulting  in   inefficiencies   in  the
process.  Many  of  the problems  are due to  the  high  level  of contaminants in
the Butte  concentrates.   Metallurgical processing of the  concentrates is more
difficult and expensive  because  of  the existence of  appreciable quantities of
arsenic, bismuth  and  other   impurities.   In  its  comments  on EPA's  preliminary
report,  Anaconda recognizes  this  point as a  problem  in  operating the smelter.
The presence of these contaminants  also  results in  a  lower grade copper that
cannot  command  as  high  a  price  in  the  market  place.   In   addition,  metal
recovery in the  process  was made exceedingly difficult  by these contaminants,
to  the extent  that  copper  and  other  valuable  metals  and minerals  normally
recovered  at  other  smelters  were  lost  in   the  process,  resulting  in  higher
overall  costs  of  production.   As  discussed  in a  previous  section of  this
report,  the smelter  needed  significant capital  improvements  in the process to
overcome operational problems  and become an efficient operation.
                                      24

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     5.  Supply of Concentrates

         Also contributing to  the  unfavorable economic position of the smelter
is  Anaconda's  supply  of  concentrates.   First of  all,  over  50 percent  of
Anaconda's  concentrate  supply  comes   from  company-owned  mines  in   Utah   and
Arizona.   Transportation  costs  of the  concentrates,  which  are  comprised  of
65-75  percent waste material, are  increasing and  result in  higher  costs of
operation  in  Montana.   In fact, most  smelters  in  the  U.S. are  close  to mines
in order to minimize the transportation costs of the material.

     While  Anaconda's  current  supplies  of  concentrates  are  adequate  to
effectively  utilize  the  capacity  of  the  smelter,  the  condition  will be less
favorable  within  three years.  As  a result of merger terms set  forth  by  the
Federal  Trade Commision  in  the merger of  Anaconda Copper  Company  and ARCO,
ARCO must  divest  of its  share of  the Anamax Twin  Buttes mine  in  Arizona by
1984.  Loss of  the Twin  Buttes mine would reduce the  supply  of  concentrates to
the  Anaconda smelter  by  20  percent  and  would result  in only a  70 percent
utilization  of  the  smelter's capacity  while utilization  of  the  Great Falls
refinery  would  be  less   than  60  percent.    A   smelter   or  refinery  cannot
generally  operate  on an  economic  basis for  long  periods  of time  at  such  low
utilization rates.

     Development  of new  mines  is  not a  near-term  option  since mines  take
several years to  develop  and require  a  large  capital  investment.  Anaconda is
not  in  a  good  position  to  secure  concentrates  from other  mines  for  toll
smelting to make up for the  loss of concentrates.   In  addition  to higher costs
of  operation,  the smelter is  not  favorably  located with  respect to  receiving
copper concentrates  from  other parts  of  the country  or  overseas.   Other toll
smelters  in   this  country can  process the concentrates  cheaper and  are  in  a
better  position  to  receive  concentrates.   At one  time  40  percent  of   the
Anaconda's production  was toll  business,  but in  recent  years  the smelter  has
had  no toll business.

     6.  Marketing Problems

         The  smelter's  location  in Montana also creates marketing problems  for
copper  and by-products such  as sulfuric  acid.  Since  the  major  markets  for
sulfuric  acid are  in  the  industralized regions  of  the  country,  Anaconda is
unable to  compete  with other  producers  since it  costs more  to ship   acid from
Montana  to these  markets.    Acid  produced in  the major producing area of  the
Southeast  U.S.  commands  a  price   six  to eight  times  higher   than  the price
Anaconda  is  able to receive,  mainly  because  of  transportation costs.  Higher
prices for its  acid  would mean that the company could recover portions of  its
operating  costs that would make the operation  more economic.

     7.  Feasibility of a New  Smelter

         An  option  under serious  consideration by the company  is construction
of  a  new  smelter  somewhere  in  the  U.S.   ARCO  has  indicated  it  does   not
necessarily   want   to  get   out   of   the   smelting   and   refining   business
                                         25

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permanently.  For  many of  the  reasons  stated  above,  Montana  is  an unlikely
location for a new  smelter.   Other  areas of the country such  as the  Gulf Coast
offer better access  to copper and by-product markets  as well  as  proximity  to
low-cost water transportation for receiving concentrates from abroad.  A large
smelter will realize  economies  of scale while  more  efficient state-of-the-art
technology such  as flash furnaces will result in lower operating costs.

     With  all  the  problems  associated  at  the  existing facility,  it appears
that construction  of  a  new smelter  is  the company's  long  term  solution  for
remaining   economically   competitive   in   the   industry.    Even   without
environmental   expenditures   the   inefficient   existing   smelter   may   have
inevitably succumbed  to  the competition  within a short period of  time.   The
expenditures required for  compliance with the  Clean   Air  Act,  whether  $120
million or  $400  million,  forced the  company to make  a  decision that it  would
have  preferred   to  postpone,  but  would ultimately  have  to be  made  in  any
event.   When  publicly  discussing  the  prospects  for a  new  smelter, company
officials cite the  efficiencies  that can be gained without  indicating whether
the environmental  requirements  for  a new  smelter  would be  any  different than
current  requirements.   This suggest  that  these economic factors  dictated  the
ultimate long range plan, while  environmental expenditures  for the old smelter
accelerated the  inevitable  decision.   As discussed previously, EPA was willing
to work out a solution with  the  company  whereby the  company's long range plans
would be  accommodated while  continuing  to  operate  the existing  smelter with
some modifications.

     Of  course,  construction of a  new  smelter will  require a  large capital
investment that will  have  to be weighed against other  alternatives.   For this
reason  and  since a  new  smelter  appears  to be a  feasible  long term economic
solution,  ARCO   chose not   to  invest  considerable  capital   in  the Anaconda
smelter  when the capital can be put to  other  uses,  including  building  a  new
smelter or supporting other corporate investments.

     8.  Opportunities with Japanese  Smelters

         Since Anaconda expects  it  may take up to seven years  to  build  a  new
smelter,  the  company  had  to find  an interim  means  to have its  concentrates
smelted  and  refined.   Since the option  of  continuing to operate  the existing
smelter was  discarded, the company  investigated many  possibilities for having
its concentrates processed on a  toll  basis  elsewhere  in the U.S. or  abroad.
After  months  of  negotiations,  Anaconda  finally  reached   an   agreement   in
December  1980  with   several   Japanese   smelters   to  have   its  concentrates
processed  overseas  for   the next  seven  years.  Historically,  Anaconda   has
shipped  a  portion  of its  concentrates  from the  Anamax Twin  Buttes  mine   to
Japan for smelting and refining.

     Although Anaconda has  not  disclosed   all   the details  of this  agreement,
apparently the Japanese copper  producers  will  toll-smelt and  refine  Anaconda's
concentrates.  The  finished copper  may  be  returned  to the  United  States  for
fabrication, but  the Japanese firms  also  have   an option  to  purchase some   of
the finished copper.
                                         26

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     Several  factors  enable  Japanese  copper  smelters  to be  an economically
attractive  alternative   to   a  domestic   copper  producer  with   high   cost
operations.   Even  though  the  cost  of transporting  concentrates to  Japan  is
high,  the  increased   cost  is   offset  significantly  by  lower  smelting   and
refining  charges  of  the  Japanese  firms.   A  major  reason  is  lower  costs  of
operation,  due  to the  fact  the Japanese  copper  industry has  newer  and  more
efficient  facilities  than those generally  found in  the  United States.  These
smelters  incorporate  the  latest  state-of-the-art technology  that  makes   for
efficient  operations,  while  still  meeting  environmental   requirements  more
stringent  than  those  in  the  U.S.   A  recent  article  in the  Engineering  and
Mining  Journal  (May  1981)  reports  that most  Japanese  smelters  are  extremely
efficient  in  the  recovery of metal  and other  by-products, aided  in large  part
by  air  pollution  control  equipment.   Revenues  generated  from  the  sale  of
su If uric  acid  and  the   recovery  of  metals  from  flue  dust  reduce  smelter
operating  costs by  one-half.   Anaconda's existing  process,  on  the other hand,
was unable  to realize these  savings because of  inefficient metal recovery due
mainly  to  arsenic contamination and  inefficient operation of  the  acid  plant.
As a result,  Anaconda's  net  operating costs at  its smelter were significantly
higher  than those at  the  more  efficient Japanese smelters.  Finally,  since the
Japanese view the smelting operation  as  a  potential profit center, they  strive
to  operate their  smelters at  full  capacity  in  order  to reduce  unit  costs.
Anaconda's  smelter  did  not operate at full  capacity and  thus  unit costs  were
affected.

     Governmental   support   of   the   copper    industry   also   contributes
significantly to  the  favorable  cost  situation  in  Japan.  In  addition to  tax
benefits,  Japanese  smelters  are aided by a high import duty on refined  copper
and no  duty on  copper concentrates  coming  into  the  country.   The high duty on
refined  copper  protects  the  Japanese  producers from  foreign  competition  and
allows  them to  charge artificially high prices  for fabricated copper  products
within  Japan.  Thus,  Japanese  smelters  can  charge  toll customers  at  a  rate
below the  actual  cost of processing  because the loss  is  covered  by the extra
margin  of profit realized  by  charging  prices  for  domestic  refined  copper  at
competitive import  levels.   The combination of  low smelter and refinery costs
with  a protective  tariff enables   the  Japanese   to  offer competitive  terms  to
foreign suppliers of  concentrates.

     Anaconda's  decision  to ship  concentrates  to  Japan  indicates  the  company
believed this alternative was  more  economical  in the interim than  retrofitting
and  continuing  to operate its own  smelter.   Although the total  transportation
and  processing  costs  associated with  the Japanese alternative may be  somewhat
higher  than  Anaconda's  cost   of   operations  before  closure,  apparently  the
difference  does not  significantly  affect  the viability  and  profitability  of
the company's mining  operations.

     The opportunity  to  secure  reasonable  terms  with Japanese  smelters  at  this
time  accelerated  Anaconda's  decision to  suspend  operations  at  the  smelter.
Although  the  smelter  could  have remained  open  for  at  least another  two years
with  minimal  or  no  investment in  pollution control   equipment,  the  company
apparently acted  at  this time  in  order to  obtain  capacity  somewhere  in the
world  to  have  its  concentrates  processed.   While  there  is  currently  excess
smelting   capacity  in  Japan,   Anaconda  believes  this   excess  will   soon  be
consumed  by supplies  from other  U.S.  or foreign  mining  companies.
                                        27

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     9.  Financial Analysis of Anaconda's Smelter

         All the  economic  and  operational factors  discussed  above contributed
to making  the Anaconda  smelter  a  marginal  operation, a  condition  that would
have  no  doubt   continued  in   the  future.    The  effect  of  these  factors
collectively influenced  the smelter's future  economic viability and Anaconda's
consideration of options for having its concentrates processed.

     In  order  to  gain  a better  understanding   of   the  baseline  financial
condition  of  the   smelter   and  the  relative   magnitude  of  environmental
expenditures  for  the  plant,  EPA  contracted  for  a financial  analysis  of  the
smelter's operations based on  publicly available  information  in the absence of
actual data from  Anaconda.  While  the analysis  is  based upon limited data,  the
data are sufficient to  produce results that  provide insight into the smelter's
financial condition.   The analysis employed  a discounted  cash flow technique
that represents a quantitative method for objective decision-making.

     The analysis results in a  range of capital  investment  the company could
make for  process  improvements  or  pollution  control  equipment  at  the smelter
and  still  remain   competitive  with  the   other   alternatives  available  to
Anaconda.   Because  of  uncertainties  surrounding  the  economic  and operational
factors  affecting  the  continued   operation   of   the   smelter,  the  range  of
affordable investment does not indicate definitively conclusive results.

     As discussed previously,  the  factors affecting the continued operation of
the  smelter  do not appear  to  be  favorable.   With the smelter underutilized,
with  operating   costs   continuing  to  escalate,   and  with   more  attractive
alternatives  for  a new  smelter  and  toll  smelting  in  Japan,  the  analysis
indicates  the  smelter  was  an   unprofitable  or   only marginally  profitable
operation  even   in  the  absence  of  additional   expenditures  for  process
improvements  or   pollution control.   Under  a  reasonable and plausible  set of
assumptions, the  analysis  suggests  the smelter was marginal  to the point that
it could  afford   little  or  no  investment in  process  improvements or pollution
control  without  placing  the   smelter  in   an  uncompetitive  position  with
Anaconda's  more   favorable alternatives.   The smelter  could  possibly afford  a
minimal investment  of  up to $25 million, a  level  that would  be  far short of
what  would  be required  for  basic  process  improvements, for Clean  Air  Act
requirements,  or  for possibly  even  the  company's own  internal  environmental
and health requirements.

     On  the  other  hand,  if  all  the  factors  discussed  previously  were more
favorable for  future operation of  the smelter,  the company could have possibly
afforded up to $200 million  in process improvements and environmental controls
at the  smelter.   This  amount  would  have  been  sufficient  to  cover  investment
for  the  Clean Air  Act  requirements  alone,  but when  coupled with the desired
process  improvements the  total  investment  required  at  the  facility  was  not
warranted on  strictly  economic  grounds.  However,  for as  much  as $200 million
to be justified,  an unlikely  and unrealistic  combination of  factors would have
to result to make the prospects  for continued operation more  favorable.
                                        28

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     In  conducting   the   analysis,   all  of   the   non-environmental  factors
influencing the  smelter  were included in the  baseline  condition of the plant,
with expenditures for process  improvments  and  environmental  requirements added
as  the  last   increment.   All  of  these  other factors  led  to  the  baseline
marginal condition of the smelter in  the first  place.   If not viewed in proper
context,  this  approach  may  lead  to  the  erroneous  conclusion  that  the  last
factor  added was  the only basis for  the decision  to close  the  smelter.  When
so  many crucial  factors  affect  the  economic  viability  of the  smelter,  all
factors have to be  viewed  as incremental problems  contributing collectively to
the  weak  economic  state,  without  singling  out any one  factor as  being  the
primary reason for  closing the plant.   If  other factors  were  more favorable,
the  last  incremental factor, which  in this  case was  process improvements and
pollution control, may not have been  the deciding factor.  For this reason, it
is  imprudent  to  single  out  environmental  requirements  as  the sole,  or  even
overriding, reason  leading to the closure  of  the smelter when numerous factors
were involved.
                                         29

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                                    APPENDIX

                     COMMENTS  RECEIVED ON PRELIMINARY REPORT

     EPA  issued  a preliminary  report on  the  results  of  its investigation  on
March  19,  1981.   A  five-week  public  comment  period  followed  in  order  to
receive  reaction  and  additional  information  regarding  the  report.    Three
parties submitted comments on the report:

          . Anaconda Copper Company
          . United Steel workers of America
          . Mr. Garry L. Preston, Past President, Local Lodge  #29,
              International Association  of Machinists and
              Aerospace Workers

     The  comments  are   included  in   this  Appendix.   EPA  has  evaluated  the
comments  and  responses  to the  pertinent points  are  included  throughout  the
text  of  the  report.   None  of the  comments  offered specific new  information
that would cause EPA to alter its findings and conclusions.

     Both union  representatives urged EPA to  conduct  a  public hearing on  the
matter.   After carefully considering  the requests,  EPA has determined there is
no  reasonable  ground  for conducting  a  hearing  at  this  time.    Interested
parties had an opportunity to offer  comments  and additional  information during
the public  comment period.   Since no new information refuting the  findings and
conclusions  was  received,  EPA  believes  that   the report   is supported  by
currently available  information.  Therefore,  EPA does not see the  need  to hold
a public  hearing on this matter.
                                        30

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ANACONDA Copper Company                              APR P

          555 Seventeenth Street                        7  .•   / <
          Denver, Colorado 80217
          Telephone 303 575-4302                              •' --

          J. F. Anderson
          Senior Vice President
          Research, Engineering and Development



           April 24, 1981
           U.S. Environmental Protect!on
             Agency
           Region VHI
           1860 Lincoln Street
           Denver, Colorado 80295

           ATTENTION:   Mr. Robert A. Simmons
                          Director, Analytic Center (8M-AE)

               RE:       Role of Clean Air Act Requirements in Anaconda
                          Copper Company's Closure of Its Montana Smelter
                          and Refinery, Preliminary Report, March 19, 1981.

           Dear Bob:

           Anaconda would like to make some summary comments on your report for
           the record. We are not requesting a public hearing.

           Our  comments  will  be  confined to  those  "Preliminary  Findings  and
           Conclusions"  which we feel  need clarification.  We will not  attempt to
           cover the report line by line.

                 *•     While requirements of the  Clean  Air Act  played  a role in
                        ARCO's assessment  of the  future  viability  of the  smelter,
                        evidence   indicates   the   requirements   were   not   the
                        overwhelming factor  influencing the decision?

           The scope of Anaconda's smelter studies  were limited to determining the
           capital  and operating  costs that would  have been associated  with the
           installation of engineering controls required to meet Federal health and
           environmental standards.  The studies resulted in a capital cost estimate of
           some  $400MM  and  increased  operating  costs   of  3.8C/lb  of  copper
           produced.  We  found that these capital and operating costs  to  meet the
           Federal health  and environmental  regulations  were prohibitive to the
           continued operation of  the smelter.

                 2.     Even in the absence  of Federal and State environmental and
                        health regulations, the smelter was a  marginal operation that
                        may not have been economically viable in the long run due to
                        numerous  economic  and  operational factors affecting the
                        continued operation of the facility.
                                     A-l

             <3-V Cooutft Comaanv Division of "r.e ANACONDA Co

-------
Mr. Robert A. Simmons
Page 2
April 3, 1981
Anaconda Copper Company regarded the smelter as one of the process steps in the
production of copper, not  as  a profit center.   As such, the words  "marginal
operation" can only refer to the smelter being marginal in  comparison to other
treatment facilities available.  In its  current configuration, without  the added
burden  of environmental regulation, the  Anaconda smelter provided the least
expensive  alternative for  the smelting  and could  have  continued  operating
indefinitely.  In other words without new environmental costs, the smelter was the
most economical option available and would have continued operating.

       3.     Anaconda's estimated cost of $400MM for complying with Federal
             and State environmental  and health regulations is  misleading  and
             overstated.

EPA states on Page 12 of the report that a "cost estimate for the roaster, electric
furnace, converter, slag cleaning,  anode furnace and 50% of utilities areas  are
considered to be for plant  process  improvements since these costs are not for
pollution control equipment".  Actually, the cost for the roaster, electric furnace
and  converter modifications  were  to  transport  gases to  the acid  plant  with
minimum  dilution in order to maximize  SOo recovery. Slag cleaning was added to
eliminate the practice of returning converter slag to the electric furnace, which
generated high levels of in-plant arsenic emissions. In-plant tests showed that the
anode  furnaces had to be hooded and  ventilated to achieve OSHA compliance.
The new equipment in the utilities area  is all required to support the new pollution
control equipment.  Thus,  each of the  items  that EPA  characterized  as process
improvements were in fact required for  environmental reasons.

       4.     Anaconda's internal  environmental  and health policies  may have
             imposed sufficient financial burdens on the smelter  to significantly
             contribute to the  closure decision.

Anaconda's Health, Safety and Environmental Protection policies  were developed
for the purpose of protecting  workers'  health and the environment.  We did not
analyze the economics of retrofitting  the smelter to conform to  these policies.
Because we  would have considered both  engineering controls as well as other
methods of protection.  We  doubt that the implementation of these policies would
have imposed significant  financial burdens on the smelter.

       6.     The  Clean Air  Act  Amendments  of 1977  recognize the  special
             problems facing  nonferrous  smelters like Anaconda's and contain
             unique provisions that give companies an extended period  of time to
             comply with requirements  of the act.

This statement  refers to  the  section  of  the  Clean Air Act permitting certain
smelters to be granted a Nonferrous Smelter Order (NSO).  Anaconda may or may
not have  been able to meet the eligibility requirements for an NSO, but if NSO's
had  been applied  for and  granted,  Anaconda  still would  have been required to
make the complete retrofit capital expenditures.
       7.     Within the flexibility granted in administering the NSO provision of
             the  Act,  EPA  demonstrated  its  willingness  to explore  possible
             solutions with Anaconda.

                                A-2

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Mr. Robert A. Simmons
Page 3
April 3, 1981
In a letter to Senator Melcher dated October  28, 1981, EPA stated that possible
extension of the compliance date could be attained in two ways— either through a
consent decree  or a Nonferrous Smelter Order. Under a consent decree,  the EPA
stated that "the smelter would  have  to  post  a bond  assuring that it would shut
down  by December  31, 1982". Under an initial NSO, if granted, "a smelter's off-
gases   for  major process  equipment  must  be  treated  with constant  control
technology."  One method proposed by EPA would have required shutting down at
the end of 1982, and the other would have required the complete retrofit spending
program.  Anaconda explored all of the options presented to it, but none of them
provided any new alternatives that had not already been considered. In any event,
even if an NSO  or a consent decree were  available, neither of these avenues would
have  provided  relief from  Federal Ambient  Standards,  nor from  other major
environmental requirements— OSHA lead  and the pending OSHA arsenic and sulfur
dioxide standards.

       9.     ARCO expedited the  closure of the smelter  in order  to seize the
             current  opportunity of  securing reasonable terms  with  Japanese
             smelters.

Under EPA's consent decree option,  Anaconda apparently could have operated
until the end of 1982 without fully complying with the Clean  Air Act. However,
we then would have faced the question of when to shut down during that two year
period. As we have stated on several occasions, the Butte concentrate has a high
level  of impurities and is a difficult concentrate to process in a smelter.  Thus, we
decided to attempt to place  this concentrate  now rather than run the risk in two
years  of not being able to  find smelting capacity and thus having to shut down the
Butte mining operations as well.

Although  the purpose of  your  inquiry is only to ascertain to what extent the
requirements of the Clean Air Act were responsible for the closure of the smelter,
we think it important to  reiterate  that the  impact  of  the entire  array of
environmental  and  workplace  regulations,  and  not  the Clean  Air Act alone,
dictated the shutdown decision.  Thus,  although some of the avenues of relief
under the Clean Air Act which your report enumerates  may have been available to
Anaconda, they would not have enabled us to keep the smelter open because of the
continued requirements of other  environmental regulations.

Clearly,  there  may  be some conflicts between our beliefs and EPA's;  however,
Anaconda concurs with EPA in its conclusion  that "this report should be used to
help refocus our attention away from this  one smelter to the problems of the
copper industry".
Yours sincerely,
    , Anderson
J. F
JFA/pjn
                               A-3

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                                                        o
                                                                Phone: (412) 562-2400

                                                           APR  24 1931
                 FIVE GATEWAY CENTmVJjPMsBWlpGH, PA. 15222
                            April 23, 1981

Mr. Robert A. Simmons, Director
Analytic Center  (8M-AE)
U. S. Environmental Protection Agency
1860 Lincoln Street
Denver, Colorado 80295

                   Re:  Anacojida^ Copper Company

Dear Mr. Simmons:

     Attached are the comments of the United Steelworkers of
America, AFL-CIO, on the preliminary report of EPA covering the
role of the Clean Air Act in the shutdown of Anaaonda's Montana
smelter/refinery operations.

     Based on our review of the report and the preliminary economic
impact assessment of JACA Corp., it is our position that EPA must
pursue this matter further before a final report is issued by
obtaining, through subpoena if necessary, the specific information
noted in our comments that Anaconda has not provided.  This matter
of plant closures being blamed on environmental costs is always  a
matter of concern, but it is of even greater concern given the
Reagan administration's fixation on economics and regulatory relief.

     If Anaconda refuses to comply with the request for the necessary
information thereby making a final report impossible or useless, we
would renew our initial request for a public hearing at which time
the company would be subject to a request to produce the requested
information and be subject to cross-examination.

     We request that if EPA decides not to act on our request for
seeking additional information with or without a hearing that we
be provided with a written statement of reasons for that denial.
If you have any questions, please let me know.

                                     Sincerely,

                                               ~ 6k	.

                                     Mary-Win 0'Brien
MWOrlmb                              Assistant General Counsel
     ,                                Five Gateway Center
Attacnment                           Pittsburgh, Pennsylvania 15222
cc:  Frank McKee                     Telephone:  412-562-2531
     Jack Sheehan
     Ed Ayoub
     Linus Wampler
     Robert Petris              «^^>«
     Barney Rask       •
                                  A-4

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                           USWA COMMENTS





I.   Introduction



          Based on our review of the EPA preliminary report, it is



clear that EPA has concluded that..."the smelter was an unprofitable



or only marginally profitable operation even in the absence of



additional expenditures for process improvements or pollution control."



(p. 20)  This conclusion is fully supported by the JACA economic



analysis.  (p. 67)





          However, on April 8, 1981, J. F. Anderson, senior vice-



president for Anaconda and the corporate contact with EPA, stated in




a letter to the Montana legislature the following:  "Without new



environmental costs, the smelter was the most economical option



available and would have continued operating."  (See attached article).





          It appears, therefore, that the information available to EPA



to date has not reached to the heart of this matter so that the workers



and the public can know with a reasonable degree of certainty whether



the closure was in fact due to pollution control regulations or to a



more general economic decay in the copper industry that hit Anaconda



particularly hard by reason of the nature of its mining and smelting



operation.





          It is the Steelworkers.1 position that there is only one way



to get at the truth in this case and that is to include in the



analysis the actual data available to and used by Anaconda but not



provided to EPA.




          Agencies such as EPA and OSHA continue to rely on contractor
                                 A-5

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studies based on publicly available data plus selective data

supplied by industry and unverified assumptions about industry

decision-making.  Inevitably this approach leaves the agencies

vulnerable to charges that the analysis understates the impact on

industry, especially when the agency makes conservative assumptions

to counter the uncertainty in the data base.

        Given the current revolutionary change to regulatory relief

and reliance on cost/benefit analysis by the Reagan administration,

it is even more imperative that companies such as Anaconda be com-

pelled to provide the assumptions and supporting data that they rely

upon for decision-making.  When such evidence is not forthcoming,

the lack of cooperation must be clearly and publicly stated so that

any subsequent company claims that dispute the agency's conclusions

can be discredited in terms of both legal and public relations'

challenges.


II.  Specific Comments

     A.  JACA Analysis

        1.  Lack of Specific Data
                                                      /
            Throughout the report the consultants note that they do

not have specific data from Anaconda for the smelter and refinery.

This is a serious, if not fatal, deficiency and was directly counter

to Anaconda's assurances of full cooperation as set out in your

exchange of correspondence with Ralph Cox, president of Anaconda,

of November 4 and 7, 1980.


                                - 2 -
                                 A-6

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     As JACA states:

          "6.  The analysis of affordability depends upon
               limited data and leaves considerable doubt
               as to the true financial health of the smelter.
               To improve the assessment of financial health
               and effect of Clean Air Act expenditures, actual
               operating data from Anaconda would be needed,
               covering production costs, revenue, capital
               expenditures, salvage value, and terms of the
               Japanese smelting contract.  To date, this data
               has not been supplied by Anaconda."  (p~ x)


          (a)  The specific information that is covered by this

statement is listed at p. 68 of the -report and it appears that in

order to be of value, it must relate to the smelting and refining

operations and not be company-wide as is the case with the 10K

reports or annual reports.  (p. 11 and p. 40)


          (b)  Transportation costs must also be included since they

appear to play an important role in the options available to Anaconda.

(p. 44, 50-51)


          (c)  In addition, the reason why Anaconda lost its toll

smelting contracts and who they were with should be provided since

that is an important source of the decrease in the smelter's utiliza-

tion rate.   (p. 45)


          (d)  With regard to the terms of the Japanese contract,

information must also be provided on when the negotiations started.

Since Anaconda, as part of Anamax, already has such a contract, we

would assume that these negotiations were interrelated to some extent.

(p. 45-46)


          (e)  It v/ould also be important to note if Anaconda uses the

discounted cash flow method for its analysis (p. 53) along with what

the corporate accounting method is.  (p. 63)

                                 - 3 -
                                  A-7

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     2.   Foreign Competition
          There are several areas where the report states that other
countries have an advantage over domestic producers.  The main example
given is the protective tariff in Japan.  (p. 52)  The report  (at p.
viii) also mentions more lenient environmental standards.  We believe
that for a full assessment of the impact of the control expenditures
on Anaconda the foreign standards, especially those for Japan, should
be included along with a discussion of compliance in those other
countries.

          Besides pollution control, it is also important to assess
the efficiency of the Japanese smelters in recovery of other metals
besides copper.  It is our understanding that most copper smelters
also recover gold, for example.  If the Japanese smelters are better
at this recovery and if Anaconda benefits from this under the terms
of its contract with the Japanese, then that could also explain why
that option was chosen.  (p. 48)

     3.   ARCO/Anaconda
          Given the large sale and profit base of ARCO (p. 29), it
is important to know just how much of ARCO's funds were used by Ana-
conda since the merger in 1977 to cover any expenses, such as mineral
exploration.  This information is necessary to determine if ARCO was
willing only to provide Anaconda with funds for production and not
for the internalization of other costs, such as pollution control.
(p. 40)  See the attached article on the relationship between oil and
copper companies.
                                 - a -
                                 A-8

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     4.   Smelter Compliance Status



          The comparison to other smelters in terms of compliance



with EPA requirements should be expanded to include the recently



signed consent decrees with ASARCO and Phelps-Dodge.






     B.   EPA Preliminary Report



          1.   Allocation of Costs



               Given the dispute between EPA and Anaconda about which



improvements are for production versus pollution control  (.see attached



article), the final report should include both listings so that the



worker and the public will know precisely what items are being in-



cluded in each category and the associated cost.  As the report makes



clear, there has been a continuing dispute over this matter going back



over the past three years.  (pp. 9-10)  We realize that EPA has



attempted to present its allocation of these items, but we would also



suggest that Anaconda provide EPA with specific information and reasons



where EPA's allocation is disputed.





          2.   Internal Policies
               In the April 8, 1981 letter Anaconda denies that its



internal safety and health and pollution control policies contributed



to the closure.  These policies should be provided with detailed



verifiable cost estimates based on actual implementation wherever



possible.  (p. 14)





          3.    Conclusions



               As set out in our introduction, in the absence of



specific data from Anaconda to justify its position, EPA is obligated



                                 - 5 -





                                  A-9

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to take a very strong public position that environmental costs
were not the key factor in the plant closure.  Further, under
321(a) EPA should recommend that Anaconda be required to retract
its continued assertions that environmental costs caused the. plant
shutdown and to send such retraction to all former employees of
the affected facilities, to the press (.local and national), and to
the State and Federal legislatures.
                                 ~ 6 —
                                  A-10

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^c//spu#es;vc/osurs;  reports

   Standard State Bureau
   'HELENA    —-'A
  legislative  report  on
  closure of  the  Anaconda
  smelter and  Great .Falls
  refinery  was  released
  Wednesday,  but  may
  already  be 'outdated
 '; because of a letter from an
,;Anaconda  Copper  Co...
  official received, too late
 •for inclusion.
   T-be  study   by  -the
  Legislature's  Select
  Committee on .Economic
  Problems,  appointed last
  fall  in the wake of  the
.  closure,  -"found  no-
  conclusive  evidence  that
  air. pollution restraints
  were solely responsible „.
  but  also declining  profit
 "levels with resulting
•} reductions  in investment
  capital    available,
 ; modernization costs;,  tax
  policies,  diminishing
" quality  of ore,  and
' management decisions on
  the  most:  fruitful use of
  capital."       - .  '•
    In that regard, the
  committee conclusion was
 > much like- a recent
  1 Environmental Protection
  Agency  report which
  downplayed the  effect of
  'environmental regulations
  and said a combination of
 [ factors were behind  the
 1 closure.     - *••
  .  But appended to  the
 ': committee report  is an
  April  8  letter to the
  committee from J.F.
  Anderson, senior  vice
  president of the Anaconda
  Copper Co., which states:
  :* "Without       new
  environmental  costs,  the
  smelter  was  the  most
  • economical   option
  available and would have
  continued operating."
    Rep. Joe Quilici, D-
 Butte^chairman  of the
- select committee, said the
 letter was received too late
 to be worked into the main
ireportit  •; •  •  ..  •  -.•;
  Quiljci   requested
 Anderson to write when the
 EPA report  contained
 some findings that Quilici
 believe  did not  square
 with w at the committee
 had bee'i told in a series of
 public-Bearings.
 : In oiw  finding, the EPA
 stated; /'Even  in the
 absenc^  of:, federal and
 state-xjeivironmental and
 health| regulations, the
 smelter  was a marginal
 operati m that may .not
 have-:'.b:en  economically
 viableii i the "long run due
 to numJE rous economic and
 operatii nal. factors.....""  .: '
'..-. Ande rson wrote the
 commit ;ee: "In its current
 configuration, without the
 addedj  .burden    of
 environmental regulations,
 the  Anaconda .smelter
 provided  the  least
 expensive - alternative for
 the  sn elting  and could
 have v.o mtinued operating
 indefinitely."
  The'EPA  also said the
 company's? claim  that  it
 would|have  cost  $400
 million} to  comply  with
 federal   and  state
 environmental  and health
 regulations      was
 "misleading     and
 overstated."
  Anderson,  however, said
 the  EPA  reached  that
 conclusion  by  contending
 that some of the items
 Anaconda  listed as
 pollution control costs
 were'Actually simple
 improvements in the plant.
 And he.. said, the  federal
 agencyjmade a mistake in
 that regard. "Each of the
  items    that    EPA
  characterized  as process'
  improvements were in fact
  required for environmental
  reasons," he wrote.
   Anderson also took issue
  with other EPA findings:
   • That  the  company's
  own          internal-
  environmental  and health.
  policies  may   have
  contributed to the closure.
•   "We  doubt that the
•'-  implementation  of  ; these
.policies  would . have
  imposed -significant
  financial  burdens on  the
v smelter," Anderson wrote,
  adding the company ''did
 .not analyze the economics
  of retrofitting the smelter
  to  conform* to  these
:  policies.";  %  .:       'I'.
1 • That the federal Clean
  Air - Act; Amendments  of
Atfn provided - companies
  like Anaconda  extra time
  to meet the clean-air rules.
H1 Anderson responded the
; company "may or may not
  have been able to meet the
  eligibility  requirements"
  for the extra time, but even
-.if- it had,  it still "would
:'••  ha ve  been required:  to
  make the complete retrofit
  capital expendituhat bad
  not   already    been
  considered." And the
  options  would not  have
.provided  "relief  from
  federal  ambient  (air)
  standards, nor from other
.major  environmental
  requirements —  OSHA
  lead and the pending OSHA
  arsenic and sulfur dioxide
  standards,"   Anderson
  wrote.
   • That  the company
  "expedited" the closure of
  the smelter  in order  to
  seize the chance to secure
  "reasonable terms"  with
  Japanese smelters,  to
.  where  the ore formerly
  smelted in Anaconda now
-  is being shipped.
  Anderson responded the
 "Butte concentrate has  a
 high level of impurities and
 is a difficult concentrate to
 process in a smelter. Thus,
 we  decided to attempt to
 place this concentrate now,
 rather than run the risk in
 two years of not being able
 to find smelting  capacity
 and thus having to shut-
,'down  the Butte  mining
 operations as well."  ~ i
  Anderson,.in concluding.
 his letter, • said  "it is
 important to reiterate that
 the impact-of the entire
 array  of  environmental
 and workplace regulations,
 and not the Clean Air Act
 alone,  dictated  the
 shutdown decision. Thus,.
 although  some of  the.
 avenues of relief under the
 Clean  Air Act  which the
 EPA report enumerates
 may have been available to
 Anaconda ,\ they would not
 have enabled us to keep the
 smelter open  because of
 the  ;       continued
 requirements  of other
 environmental X": • *• r;:;V
 regulations,^ .v>;,^ X.^-^::
         ••'*"'-=:-"" •"-* -•£
                                       A-ll

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                                                                                    y
                      •'
            O -f"> /H
           HliU-
        By SIMON D.'STTRAUSS   *

  J£';?3HE ancient saw is that one can't
    I'i  mix cii ujd water. How about oil
    £i  and ccppe'r? The question is espe-
  cially relevant now. Standard Oil  of
  Ohio plans :o zierge with the Kennecott
  Corporation. Standard Oil of California
  seeks to accuirs ^.-.e SO percent of Aznax
  shares it ci>=5 sot now own. These huge
  acquisition involve billions of dollars
  and  also buiicns of tons of mineral re-
  serves cornicing many  millions  of
•.u-tonsofmstai.                    .
>"•  These are ±e latest developments in
.  a process that started in  196?  when'
•V;.Cities Service acquired the Tennessee
 '-Corporation, controlling copper mines
  -in Tennessee  and  Arizona.  Subse-
  "quently four other domestic  copper-
 imining companies have been absorbed
, :by oil companies        . •: •'/
,£•' Should  the  Kennecott  and  Amax
(. .deals be completed, more than 55 per-
  ^'cant of  domestic  copper-mining ca-
 ^pacity..will be in oil-industry hands —
l about 1.15 million  tons a year out  of
^ something over 2 million tonSjt
:,"'  Two qv.esticrs naturally arise: Why
'./did it happ-si? Is it  a  good or a bad
.  .'thing?      '   .         -;".       ~-
 '"..  The first question is easily answered.
;.. Shares of copper companies have been
•'.. selling at low prices  in relation to re-'
". placement  ccst.  Oil  companies are
.. strong financially; They see an pppor-
 '".tunity to gain control of e.Ttensiveinin-
•' eral  resources at a fraction of the cost
'.. of finding and developing comparable
  capacity in a business  they believe  to
  be compatible with their own experi-
,". enca and experMse.
  •  Why have copper shares sold at  a
  large discount from asset value? The
  industry is highly cyclical. Its earnings
  fluctuate sharply in response to the
  price of copper. Although  the copper
  price is normally determined by world
  market conditions, during recent boom
  periods  United Staf.ss producers have
.  h«en unable to hen^flc ircm high prices
 . c^cause.oi Gov^r^.rt-.ent policies — an
 . actual price .Tee?? in ;he 1971-74 peri-
 • c."!;  restrnint 'liro-.igh "jawboning"
  during the soaring -markets of the late
  1C50'3.
    Moreover,   co.srly   environmental
  rc-ijuiHtions  havs  irncosed  a  heavy
  -rain  on  the  iniluscry's  lir-.ancial
       D. .Verses; is a dirsctar  of
sa.'co Inc.. a ip^dir.g producer o/cop-
                                        r~^T^	rr:—^	^—i	
                                      J^   ~,  * ^4^_> »,* , .^ \.»^^,  _  ^_. ,^^j
                                      ?-;
                                      tt
                                           DuvalCorp,
                            Fennzoil
                                           Copper Bang 9-
                            Lcubiana Lanji&;
                                                                                                    a.- n/ti l^>V.Jka.
                                                    iroA-rraxeaci
                                         eqt»a {•/  Hcvie/e/ ureJer FTC  decree Araco.iaa mu-»t cf vast ;tse'J
                                         of «te by ^9£5
                                         "'Prooosed
                                                                             iiwr^-K^-i,
   strength. In the late 1360's a govern-
   msnt agency study estimated the cost
 {to domestic nonferrous smelters of con-
. t trolling air pollution at 560 million to
 | 380 millionln capital expense. To date
 I  the copper industry has actually made
jl  capital investments exceeding 31.25 bil-
\\ lion and as yet is unable to comply fully
 \V.with the standards.
     Phelps Ccdge  in  late March  an-
   nounced it would spend S195 million
   more at  two of its smelters and might
 I/have to  close a third plant. Another
   leading domestic producer.  Anaconda
   — O'ATied  by  Atlantic  Richfieid —
   closed .its smeltar and refinery in Mon-
   tana  last ysar rather than spend an
   estimated  .>.!
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  'discouraged by the low price-or copper
  (expressed in constant dollars). -.    ..
-•'/  If demand  for copper  resumes the
 / growth shown  in the 1950's and LftW's,
 • new productive capacity will be need-.
 I ed. But since 1974 no major nsvv oopprsr-
 i mine project  had been   definitely
 ' started anywhere in the  non-Corarna-
 \ r.ist world, with one exception: the Ok
 \JTedi project in Papua, New Guinea, in
  which Standard Oil of Indiana has: a 30
  percent interest. That decision was fa-
  cilitated by the gold content of the rock
  overlying the copper ore body.     .
   ..Most, of the  major  new  copper;
  projects  initiated prior to 1974  were
  conceived of and financed  by'mining
  companies — not oil companies. This
  includes  Bougainville in  Papua, New
  Guinea, Lornex in Canada; Cuajone in
  Peru; Ertsberg in  Indonesia; Caridad
  in Mexico, and Anamax, Tyrone and
  Metcalf in the United States.
    Despite some similarities, there are
  major differences between oil and cop-
  per. For decades world demand for oi!
  grew at a fairly constant rate, little jn-
  fiuenc^d by cyclical economic  swings.
  V/orld demand for copper may fluctu-
  ate by as much as 20 percent from one
  year to the next with the tides  of busi-
  ness sentiment.
    Copper  prices  are  fundamentally
  determined on. commodity exchanges,
  cpen to anyone to trade and  subject to
  immediate and sharp .movements re- .1
  suiting fron* unexpected political or  ;
  military developments. Oil prices are  i
  administered — originally by major oil
  companies, now by the Organization of
  Petroleum Exporting Countries..
    Copper  is an enduring material;  it
  ccvn te recycled, time after time. Scrap
  supplies, moving through the hands of
  an  astute: coterie  of  dealers,  play a
  major role in influencing the copper,
  ;r;uie. Only a  tiny fraction of  cii  sup-i.
  piiss can be recycled and the oil mar-1
  ikKer has little reason :o calculate thej
 ' market influence from salvage.   .     |
  s  To have the copper industry  com-i
  .^pietely under :he influence of chief ex^j
,' hiouciv" officers whose main concern is'
 • (-.  ;i-vill, i.Tjny judgmeni.'undermiheChe:
'l}-j:?msstitivs .posture- of  the  Up.itsdi
  | ::.ci:i?5 p'roducsrs.  in other  countries,!
  :'r.z copper industry is managed by cop- \
  ~3r miners — not  by oil men.  They";
  rr\\
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                                 Garry L.Prestoa
                               4034 Wynne Avenue
                               Butte, Montana 59701
                               Phone (406) 494-4396

                                            2? March,  1981
                                              vi   "
Mr. Rodger L. Williams  Regional Director
United States Environmental Protection Agency
Region VIII
1860 Lincoln Street
Denver, Colorado  80295
                                                                      
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Rodger L. Willaims                   (2)                   27  March,  1981


I have also become very aware of some highly compliant research people  in the
Eastern Seaboard who now question the validity of the damage done by  the so
called acid rains and 302 problems.   As these become better known, and  the
research more complete, the viability of the harsh  302 requirements may  be
exposed as unnessisary.   Time will  tell, but much  of the standards are  arbitrry
and not based on sufficant research.  While your techinical  staff will say they
have the fixed proof, I feel they may find themselves with some  problems they
cannot answer.

I do feel there should be a public hearing in the City of Anaconda, I am not
certain if you will do such.  Or if  I could be there, as  my  employment keeps
me on the road.  Nevertheless, your  report is not complete,  and  is rather a
brief of apologetics on the part of  The EPA.

I cannot feel that any agency can justify itself when our country is  loosing
so much of its ability to compete with other nations.  Not only  is our national
economy become caotic, but our ability in national  defence in these hard days
has droped far too much.

I therefore ask for a public hearing for the city of Haaconda,Montana by the EPA.
With Respect, I remain yours
Carry L. Preston
Past President Local Lodge #29  International Association of Machinists and Aerospace
                                Workers International   AFL/CI07CLC
                                       A-15

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