United States
Environmental Protection
Agency
Industrial Environmental Research
Laboratory
Research Triangle Park NC 27711
EPA-600/2-79-025
January 1979
Research and Development
A Cost Index Format
for BATEA Achievement
by the Iron and Steel
Industry
-------
RESEARCH REPORTING SERIES
Research reports of the Office of Research and Development, U.S. Environmental
Protection Agency, have been grouped into nine series. These nine broad cate-
gories were established to facilitate further development and application of en-
vironmental technology. Elimination of traditional grouping was consciously
planned to foster technology transfer and a maximum interface in related fields.
The nine series are:
1. Environmental Health Effects Research
2. Environmental Protection Technology
3. Ecological Research
4. Environmental Monitoring
5. Socioeconomic Environmental Studies
6. Scientific and Technical Assessment Reports (STAR)
7. Interagency Energy-Environment Research and Development
8. "Special" Reports
9. Miscellaneous Reports
This report has been assigned to the ENVIRONMENTAL PROTECTION TECH-
NOLOGY series. This series describes research performed to develop and dem-
onstrate instrumentation, equipment, and methodology to repair or prevent en-
vironmental degradation from point and non-point sources of pollution. This work
provides the new or improved technology required for the control and treatment
of pollution sources to meet environmental quality standards.
EPA REVIEW NOTICE
This report has been reviewed by the U.S. Environmental Protection Agency, and
approved for publication. Approval does not signify that the contents necessarily
reflect the views and policy of the Agency, nor does mention of trade names or
commercial products constitute endorsement or recommendation for use.
This document is available to the public through the National Technical Informa-
tion Service, Springfield, Virginia 22161.
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EPA-600/2-79-025
January 1979
A Cost Index Format for BATEA
Achievement by the Iron
and Steel Industry
by
L.L Huff and J.D. Stockham
NT Research Institute
10 West 35th Street
Chicago, Illinois 60616
Contract No. 68-02-2617
Task No. 2-4
Program Element No. 1BB610
EPA Project Officer: John S. Ruppersberger
Industrial Environmental Research Laboratory
Office of Energy, Minerals, and Industry
Research Triangle Park, NC 27711
Prepared for
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Research and Development
Washington, DC 20460
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ABSTRACT
The formulation of a format for BATEA cost analysis and inclusion of per-
tinent cost data were the objectives of this study. Such a format is to serve
as an aid to regional U.S. Environmental Protection Agency personnel who
evaluate economic appeal cases for BATEA.
Through discussion with U.S. Environmental Protection Agency regional
personnel and review of cost engineering literature, two sample formats, one
for capital investment and one for operating costs, were developed. These
cost analysis formats were designed specifically for application to the iron
and steel industry, although, with modification, such a format could be
utilized for other industries as well.
General information regarding various cost components is provided as a
basis for analyzing cost estimates presented by specific iron and steel plants.
This report was submitted in fulfillment of Contract No. 68-02-2617,
Task No. 4, by IIT Research Institute under the sponsorship of the
U.S. Environmental Protection Agency.
11
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CONTENTS
Abstract ii
Figures and Tables iv
1. Introduction , 1
2. Summary and Conclusions 2
3. Presentation of Cost Guideline Format 3
Guidelines for Cost Evaluation 3
Description of Capital Cost Items 4
Land 4
Storage Facilities 4
Piping 4
Instrumentation 4
Site Preparation 4
Equipment 6
Engineering Costs 6
Construction Costs 6
Contingency 9
Description of Operating Costs Items 9
Fixed Costs 9
Description of Variable Costs 14
Cost Information 16
References 33
Exhibits 34
Appendix
A. Comments from US-EPA Regional Personnel Regarding
Draft Cost Format 38
iii
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FIGURES AND TABLES
Figure Page
1 Piping Cost Curves 5
2 Pump Cost Curves 7
3 Aeration System Cost Curves 8
4 BATEA Operating Costs for By-Product Coke Process 17
5 BATEA Operating Costs for Iron-Making Blast Furnace 18
6 BATEA Operating Costs for Basic Oxygen Furnace 19
7 BATEA Operating Costs for Electric Arc Furnace 20
8 BATEA Operating Costs for Open Hearth Furnace 21
9 BATEA Operating Costs for Beehive Coke Plant 22
10 BATEA Capital Investment for Open Hearth Furnace 23
11 BATEA Capital Investment for Electric Arc (Wet) Furnace 2^
12 BATEA Capital Investment for By-Product Coke 25
13 BATEA Capital Investment for Sintering Strands 26
14 BATEA Capital Investment for Blast Furnace 27
15 BATEA Capital Investment for Basic Oxygen Furnace 2^
16 BATEA Capital Investment for Electric Arc Furnace (Semi-Wet) 29
17 BATEA Capital Investment for Continuous Casting 30
18 BATEA Capital Investment for Vacuum Degassing 31
Table . !§ge.
14
1 Chemical Costs
32
2 Treatment Technology
iv
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SECTION 1
INTRODUCTION
To formulate a cost index and accompanying explanatory guideline for use
by U.S. Environmental Protection Agency (EPA) regional personnel in evaluation
of Best Available Technology Economically Available (BATEA) appeal cases was
considered the primary goal of this effort. Consultation with the regional
offices, review of the iron and steel cost literature, and analysis of avail-
able cost formats were the most important activities in the development of a
cost format.
The actual format developed, comments by regional personnel, and a des-
cription of the limitations and utilization of such a cost format are
presented herein. Such discussions of the format should provide a perspective
of the feasibility and applicability of the cost format as it pertains to the
iron and steel industry.
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SECTION 2
SUMMARY AND CONCLUSIONS
A cost index format to be utilized by the iron and steel industry in
preparation of Best Available Technology Economically Available (BATEA) appeal
cases is valuable to U.S. Environmental Protection Agency regional personnel
if it provides a consistency for presentation, backup cost data sources, and
explanations of the cost elements.
Flexibility in cost estimating is important but also a range of costs and
cost elements which are considered appropriate should be defined.
Continued expansion and inclusion of cost data in the guideline for
treatment processes other than those designated for BATEA would be beneficial.
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SECTION 3
PRESENTATION OF COST GUIDELINE FORMAT
A uniform and consistent approach to cost estimation is important in
evaluating economic appeal cases for BATEA requirements. The steel-making
industry is perhaps one of the most complex and most significant in terms of
pollution requirements. Therefore, the age and layout of individual steel-
making facilities may lead to BATEA appeal cases. This guideline has been
developed to aid in the evaluation of the cost elements presented by industry.
There are two major cost categories, capital cost and operating expense.
Each is needed to present a complete characterization of the economic hardship
to be incurred. Because each plant has unique treatment requirements for
achieving BATEA levels, it is difficult to provide cost information which can
be meaningfully applied. Rather, by stipulating a complete and fully detailed
cost estimate from the appealing facility and comparing this to established
cost values, areas for discussion or investigation may appear. The attached
forms, Exhibits 1 and 2, should be completed by the steel company according
to accompanying instructions.
For both cost categories detailed, guidelines are presented in the
following section as well as a description of each unit cost item. This
should provide the EPA reviewer with an understanding of the costs being
incurred and insight into the manipulation of the data presented by the
company. These guidelines are .based upon the needs and concerns expressed by
regional US EPA personnel and some of their comments in Appendix A.
GUIDELINES FOR COST EVALUATION
The capital and operating costs submitted by the appealing steel company
should be itemized in Exhibits 1 and 2. To analyze these submitted costs, it
is helpful to have background information regarding expected ranges for cer-
tain cost components. In the following sections data are presented to aid in
the evaluation of costs presented in the BATEA appeal process.
The first section describes the characteristics of the capital cost
items, provides general information, cost curves, and references useful for
evaluating capital costs. The second section presents similar data for
operating cost elements. This information provides a general background for
understanding the costs incurred for BATEA.
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DESCRIPTION OF CAPITAL COST ITEMS
Land
When additional pollution equipment is required, land may be needed to
layout the treatment process, especially for settling and biological activity.
In space limited facilities, a premium upon space may be stipulated in terms
of the price perceived.
Storage Facilities
The only type of storage facilities which may be included would be for
chemicals used in pollution treatment, such as lime, activated carbon, soda,
and so forth.
Piping
There will be piping changes required for additional equipment, redirect-
ing waste streams, and handling recirculation of treated water. Depending
upon the plant configuration, a wide range of costs may be anticipated. The
following descriptions of piping costs depict the range of values available:
a) Piping costs for process units vary from 0.9% to 8.9% of
the equipment cost, and this does not include inter-
connecting piping costs.1
b) Process piping costs may run as high as 100% of the
f\
purchased-equipment cost.
c) Typical cost curves for piping cost are presented in
Figure 1. These costs represent 1968 values and can be
upgraded to 1977 by use of the Marshall and Swift Cost
Index, which results in an adjustment factor of 1.47.3
Instrumentation
Additional controls for level, flow, pH, temperature, pressure and
nutrient addition may be added as the treatment of waste streams is upgraded.
Site Preparation
These costs include all grading and preparation work for use of land for
pollution control facilities. Both equipment and labor costs are incorporated
into this value.
1Popper, H. Modern Cost Engineering Techniques. McGraw Hill Book Co.
New York, 1970.
2Hasellparth, J.E. and J.M. Berk. Chem. Eng., 67_ (10):158 (1960).
3Popper, H. Modern Cost Engineering Techniques. McGraw Hill Book Co.
New York, 1970. pp. 163.
-------
100
Carbon Steel (a)
f 10
0.1
1,000
V
7
t 100
^.
vt
TZ
8
= 10
2 34 6 810 14 IS 24
Nominal size, in,
Chrome/Moly (b)
2 34 6 810 1418 24
Nominal size, in.
A Standard weight, sen. 40
B Extra strong, sch. 80
C Double extra strong, sch. 160
100
field Erection (a)
1 V/2 2345 £30 1< IE 24
Nominal size, in.
Includes storage, handling, cutting, fining, aligning on pipe
racks. No line welds, stress relief or X-ray.
Yard and Offsile (b)
100
10
|
0.1
-f-H
1 1V4 2 34 6 8101418 24
Nominal size, in.
Includes storage, handling, cutting, fitting, aligning on ptp*
racks. No line welds, stress relief or X-ray.
Figure 1. Piping Cost Curves.
Source: Popper, Herbert, Modern Cost Engineering, 1972, p. 163
(Used with permission of McGraw-Hill Book Co.)
-------
Equipment
To achieve BATEA levels various pieces of pollution equipment will be
required. Each piece can be specifically categorized by use of the detailed
list. These equipment costs should include installation expense since instal-
lation varies with the location and nature of the additional equipment.
Specific cost information for various pieces of equipment is included in
Figures 2 and 3.
Engineering Costs
The effort expended in development, design, and procurement of the treat-
ment facility are costs incurred by the company. A breakdown of the elements
considered in these costs could be as follows:
Percent of Cost
Project engineering 14.3
Process engineering 4.5
Design and drafting 26.8
Procurement 2.7
Home office construction 0.8
Office indirect and overhead 50.9
TOTAL 100.00
The relationship of engineering costs to the project cost has been
typically considered to be 10% of the equipment costs of Item 6. There can be
a considerable variability in these values depending upon the specific project.
Construction Costs
4,
The costs of construction as itemized in Exhibit 1 includes labor costs
for dismantling, or removing existing structures, field labor, and overhead
costs associated with the direct field labor. Overhead costs typically are
60% to 80% of direct labor costs, although such costs vary from project to
project, and the following is an example of the cost breakdown associated
with this item:5
Overhead Elements Percent
Fringe benefits
Labor burden
Field supervision
Temporary facilities
Construction equipment
Small tools
Miscellaneous
TOTAL CONSTRUCTION OVERHEAD 100.0
"ibid, pp. 85-86.
5Ibid, pp. 84-85.
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100000
CAPACITY (GPM)
10
100
g
C-J
i—
en
o
u
ca
10000
1000
100
DESIGN ADJUSTMENT
Type Curve
Simplex
Duplex
Triplex
Diaphragm
Slurry
Rotary
Gear
A
A
A.
B
B
B
B
000
298
960
000
104
0.466
O.S90
REGIONAL ADJUSTMENT
Region
1
2
3
4
S
6
7
8
9
10
000
064
0.978
1.034
1.076
1.027
1.066
1.029
1.067
1.033
Figure 2. Pump Cost Curves
Source: U.S. Environmental Protection Agency, Capital and Operating Costs
of Pollution Control Equipment Modules, No. 2.
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1000000
o
a
K
cr>
o
o
m 100000
s
10000
10.5 HOURS RETENTION TIME
0.1
] .0
CAPACITY (MGD)
10.0
REGIONAL ADJUSTMENT
Region
1
2
3
4
5
6
7
8
9
10
1.000
1.04S
0.947
1.043
1.133
041
066
065
067
1.029
Figure 3. Aeration System Cost Curves
Source: U.S. Environmental Protection Agency, Capital and Operating Costs of
Pollution Control Equipment Modules, No. 2.
-------
The specific description of the items listed in the overhead is as
follows:
Fringe Benefits: Employer's contribution to union funds for health and
welfare, vacations, holidays, sick leave, retirement. Add monies for travel
and subsistence when required.
Labor Burden: Employer's mandatory contributions for Federal Social
Security (FICA), Federal Unemployment Insurance (FUE), State Unemployment
Insurance (SUI) Workmen's Compensation.
Field Supervision: Salaries, fringe benefits and burden items for super-
visory and field personnel. Add travel and subsistence when necessary.
Temporary Facilities: Buildings, roadways, parking yards, work areas,
scaffolding, rigging, utilities, fencing, and miscellaneous.
Construction Equipment: Equipment rental and handling, plus freight to
and from the jobsite.
Small Tools: Expendable construction tools, usually valued at $200 or
under.
Miscellaneous Field Costs: Job cleanup, watchmen, minor equipment
repairs, medical services, welder tests, consumable supplies, warehousing,
vendor services, job insurance such as public liability (PL), public damage
(PD), automobile, and all-risk.
Contingency
The contingency fund covers unexpected expenses and is usually a standard
percentage of the project cost. Such a fund should be minimized for these
pollution projects.
DESCRIPTION OF OPERATING COST ITEMS
These costs are defined as the incremental costs of achieving BATEA
levels. Operating costs include not only variable costs but also fixed costs,
such as overhead, depreciation, and cost of capital. Guidelines for both of
these items will be described herein.
Fixed Costs
Depreciation—
Depreciation is "an accounting procedure for allocating outlays for capi-
tal assets such as buildings and equipment over a reasonable and acceptable
life."6 Companies charge an annual cost for depreciation in their operating
expenses as a standard practice; however, the method of computing the depre-
ciation cost may vary significantly. Three variables, salvage value,
6Uhl, V.W., Draft, "A Standard Procedure of Economic Evaluation for Pollution
Control Operations," IERL/RTP, U.S. EPA, November, 1977.
-------
equipment life, and depreciation method, determine the size of the annual
costs of depreciation. Salvage value is the market price or usefulness
remaining in a piece of equipment at the time of replacement. Pollution
equipment is typically considered to have a "0" salvage value after full
depreciation. An equipment life or depreciation period of 10 to 18 years has
usually been selected for pollution control equipment; however, for integrated
steelmaking facilities considering closure, a shorter life span may be
required. The effect of a change in the useful life can best be illustrated
for three different methods of depreciation.
METHOD 1
STRAIGHT LINE DEPRECIATION
Base Data
Value of equipment = $10,000
Salvage value = 0
Equipment Life = 5 years (A) or
10 years (B)
Calculation Method
, _ " . . „ equipment price - salvage value
Annual Depreciation Cost = —*—c rvi j : *r
v life of equipment
METHOD 2
SUM-OF-THE-DIGITS DEPRECIATION
Calculation Method
Depreciation cost = ["T^TwJ * (C-S)
in year "t" -
where:
n = equipment life in number of years
C = initial cost
S = salvage value
10
-------
METHOD 3
DOUBLE-DECLINING DEPRECIATION
Calculation Method
1 t-1 •)
Depreciation cost in year "t" = 2(-)(C -. S - I D ) or C(l - -)n
n r=l r n
where:
n - equipment life in years
C = initial cost
S = salvage value
ED = sum of the depreciation in year "1" through t-1
Case A: Five Year Equipment Life
Annual Depreciation Annual Depreciation Annual Depreciation
Cost for Sum-of- Cost for Straight- Cost for Double-
Year Digits Calculation Line Calculation Declining Depreciation
1
2
3
4
5
$3330
2670
2000
1330
670
$2000
2000
2000
2000
2000
$4000
2400
1440
860
520
Case B; Ten Year Equipment Life
Annual Depreciation Annual Depreciation Annual Depreciation
Cost for Sum-of- Cost for Straight- Cost for Double-
Year Digits Calculation Line Calculation Declining Depreciation
1
2
3
4
5
6
7
8
9
10
$1820
1640
1450
1270
1090
910
730
550
360
180
$1000
1000
1000
1000
1000
1000
1000
1000
1000
1000
$2000
1600
1280
1024
819
655
524
419
336
269
11
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There are five specific depreciation techniques which may be used by
companies in calculating the depreciation expense. In addition to the
straight line, double-declining, and sum-of-the digits depreciation methods,
the rapid amortization and additional first year depreciation offer other
variations. The following description of these two variations was taken from
a U.S. Technology Transfer document:7
The Tax Reform Act of 1969 provides for the rapid amortization
of certified pollution control facilities over a 60-month period,
irrespective of the guideline useful life of the equipment. This
amortization is available under certain conditions outlined in
Article 169 of the Internal Revenue Code (IRC). The rapid write-
off was provided to encourage capital investment in pollution
control. Significantly, a process change, even if it results in
lower pollution, does not qualify as a pollution control device
and cannot be rapidly amortized.
As originally legislated, the eligibility period for rapid
amortization would have expired January 1, 1975. However, addi-
tional legislation extended that period for 1 year. Further
extensions are currently being considered.
The rapid amortization applies to the first 15 years of
equipment life. The portion of the asset value with a useful life
of over 15 years can be depreciated by any method under Article 167
and depreciation can be taken immediately on that portion. The
rapid amortization can begin the month after installation and con-
tinue for a full 60 months, or it can begin in the next fiscal
year. For the intervening months until the next fiscal year
begins, a traditional depreciation method can be used.
An additional first year depreciation (Section 179, IRC)
amount of 20 percent of a maximum asset value of $10,000 or a
maximum deduction of $2,000 can be taken in the first year of an
asset purchase. The "bonus" first year depreciation can be taken
if a taxpayer elects to take the rapid amortization or any other
method of depreciation.
The difference in depreciation techniques is important in estimating
cash flows and annual costs to the company. With the double-declining and
sum-of-the digits depreciation techniques, the first year depreciation costs
for Case A are 100% and 66% greater, respectively. In Case B, the longer
equipment life increases the difference in depreciation method with the
double-declining and sum-of-the digits depreciation methods resulting in 100%
and 82% greater costs than straight line depreciation in the second year.
Thus, in reviewing the annual operating costs, the depreciation method,
salvage life, and average equipment life should be specified.
7U.S. Environmental Protection Agency. Choosing Optimum Financial Strategies,
Technology Transfer. June, 1976. p. 6.
12
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Cost of Capital and Method of Financing —
The method of financing pollution control equipment affects the cost at
which the monies can be utilized (cost of capital) . The choice of using
retained earnings, long-term bonds, or a stock issue is associated with
different interest rates, and thus there can be some variation in the cost of
capital used for pollution control. The steel industry presently finances
capital expenditures through a combination of internal and external tools;
however, in the last ten years only 5 percent of the total financing require-
ment has been external to the company. This means retained earnings and
depreciation have been primary sources of capital.8 The capital requirements
of pollution control and modernization will cause a greater use of external
financing through bond and stock issues according to the US EPA draft economic
impact report. The average industry capital costs associated with yields on
common stock and interest rate on long-term bonds are 3.5 percent* and 9 per-
cent respectively. If the profitability of the steel industry does not
improve and especially for individual plants even higher rates may be required
to attract investors. Thus, in evaluating the cost of capital for an indivi-
dual plant, there will be a range of values, depending upon the method of
financing and profitability of the firm. Acceptable rates of return for
manufacturing facilities are approximately 15% and 8% for support facilities.
Computation of the annual capital expense associated with the pollution
control capital expenditures depends upon the cost of capital (interest rate)
and number of years for the investment recovery. The capital formula for
calculating capital and interest recovery in equal, annual payments is the
following :
where i = interest rate on project (8% to 15% would be
acceptable range)
n = number of years
C = capital investment
The average interest rate "i" is a combination of the external financing
methods utilized to obtain the required capital.
*This is the historical real rate of return the steel industry has achieved:
however, the average manufacturing rate of return is 7%. To externally
finance pollution expenses a return of 7% is necessary.
8Temple, Barker, Sloane, Inc. Draft, Economic Analysis of Proposed and
Interim Final Effluent Guidelines for Integrated Iron and Steel Industry.
March, 1976.
13
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Description of Variable Costs
Chemicals—
Several types of chemicals may be used to treat wastewaters satisfac-
torily. Lime, chlorine, and soda are the ones most commonly used. The
appealing company will provide the quantity and type of chemical required.
In Chemical Marketing Reports the prices of bulk chemicals are printed weekly.
In Table 1 the present prices and coding system is provided. For specific
cost information it is best to contact manufacturers for a direct quote. A
listing of manufacturers is contained in the Chemical Week's 1978 Buyer's
Guide.
TABLE 1. CHEMICAL COSTS9
Chemical Units Price Qualification
Chlorine ton $135.00 f.o.b., tanks
Lime (pebble) ton 25.00 bulk of 50,000 Ibs.,
f.o.b.
Soda ash ton 57.00 58%, paper bags, c.l.
Soda caustic ton 140.00 liquid, 50%, f.o.b.,
76% Na20 basis
c.l. (car lot)
f.o.b. (free on board)
Labor—
Additional labor may be required to operate pollution control facilities
and handle analytical requirements. Both maintenance and operating labor have
been aggregated, although different labor rates are likely.
The labor rates utilized by A.D. Little were based on 1972 costs of
$7.10 per hour or 1975 costs of $10.20 per hour. In terms of 1977 dollars,
this value is now $12.00 per hour in the iron and steel industry.
Maintenance—
Maintenance costs are composed of labor and material expenses. Mainte-
nance requirements for pollution control equipment can be estimated based upon
previous experience, as a percentage of plant investment, or as a percentage
of labor requirements. Below are examples of the range of values used in
estimating maintenance costs.
9Chemical Marketing Reporter, November 14, 1977.
14
-------
Maintenance Cost Estimation Techniques
a) Total maintenance cost may be 3.5% of plant investment.10
b) Maintenance material cost may be 4% of plant investment.11
c) Total maintenance cost may be between 4% and 8% of plant
investment depending upon plant conditions.12
d) Total maintenance cost may be 0.5% of plant investment
13
Supervision —
A portion of the costs of supervision may be included in the incremental
operating costs of pollution control equipment. This may be estimated by
typical costs through experience or calculation rules. The following examples
depict the range of costs which would be appropriate.
1) Supervision costs equal 10% of all labor costs. **
2) For quick estimates and in the absence of other infor-
mation, supervision can be assumed to average between
10 and 25% of the operating labor. Higher figures are
for complex processes or a multiplicity of small units.15
Utilities—
To operate pollution control facilities will require electricity, steam,
water, air, and fuel. For each region these costs will vary depending upon
the source of power and fuel type. In the monthly publication by the
U.S. Department of Commerce, Survey of Current Business , wholesale price indi-
ces for electricity, coal, oil, and natural gas are printed for each month.
These indices can be used to update regional cost information on fuel costs.
To determine regional utility prices the Federal Power Commission pub-
lishes the prices of natural gas, oil and coal as purchased by the electric
generating industry. (These prices must be closely watched since contract
prices represent low, long term rates and would serve as a minimum value while
spot market prices represent current fuel prices.) The FPC publication No. 22
contains this fuel information. Industrial power costs can be obtained from
the FPC publication Typical Electric Bill Rates for any region in the United
States.
10U.S. Environmental Protection Agency. Draft Development for Effluent
Guideline Limitations for the Iron and Steel Industry.
11 Arthur D. Little. Steel and the Environment: A Cost Impact Analysis.
May, 1975.
12Popper, H. Modern Cost Engineering Techniques. McGraw Hill Book Company,
New York. 1970, p. 243.
13Tihansky, D. "Polution Control in Steelmaking: Fact or Fiction?" January,
1971.
" Arthur D. Little. Ibid.
15Popper, H. Ibid., p. 249.
15
-------
In addition to the charge for gas, oil, and power consumed by pollution
control facilities, there can be an allocation charge for the portion of
capital costs associated with production of utility services. For example,
if there were an on-site generator which serviced the manufacturing facility,
a portion of the capital cost could be allocated to the pollution control
project.
Overhead—
Overhead may be defined in various ways depending upon plant/company
cost accounting techniques. There are direct and indirect overhead expenses.
Direct overhead may include plant supervision (this is considered a separate
item in the cost format) as well as the fringe benefits associated with
employees. These include insurance costs, sick days, vacation, and pension
expenses. These fringe benefits could also be incorporated into the labor
costs.16 Indirect overhead includes auxiliary services, such as secretaries
(plant office expenses), guards, cafeteria, accounting, purchasing, and plant
engineering (plant engineering is a separate item). Indirect overhead varies
from 40% to 60% of the sum of direct labor, repair labor, and direct overhead
labor costs.17
Waste Disposal—
Solid wastes may be generated during wastewater treatment. These
materials can be either hauled away to landfill, or stored on-site. The costs
for landfill disposal depend upon the waste content, percent solids, and pH of
the 'material.
COST INFORMATION
In addition to the general discussion of each cost element, specific cost
information is included as a reference guide. In the Arthur D. Little,
Incorporated report, Steel and the Environment: A Cost Impact Analysis,
capital and operating cost data were formulated based upon the steel industry
input. Cost curves derived from these data represent the most definitive and
complete information available regarding BAT expenses. Where US-EPA cost
estimates are available, these have also been included to provide a basis for
comparison.
Table 2 summarizes the treatment technology upon which cost estimates
were formulated. In Figure 4 through Figure 9 the BAT operating costs for
various plant sizes are derived, and in Figure 10 through Figure 18 the BAT
capital cost curves are illustrated. These 1.5 curves are based upon 1972
dollar values, and to update these costs to 1977 dollars, the construction
and operating cost indices can be used, which are taken from Chemical
Engineering magazine.
16Popper, H. Modern Cost Engineering Techniques. McGraw Hill Book Company,
New York. 1970, p. 243.
17Ibid., p. 242-244.
16
-------
CO
o
u
00
d
•H
4-1
CO
l-i
0)
n)
c
$1,000,000
$300,000
$200,000
1000
2000
10,000
tons/day
Figure 4. BATEA Operating Costs for Byproduct Coke Process
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis
May, 1975. (Table B-9.)
17
-------
to
o
00
4J
Cfl
(!)
O
rH
fl
3
I
?1,000,000
$200,000
1000
2000
3000
10,000
tons/day
Figure 5. BATEA Operating Costs for Iron-Making Blast Furnace
Source: Arthur D. Little, Steel and the Environment: A Cojst Impact Analysis,
May, 1975. (Table B-9. )
18
-------
200
300
Source:
tons/day
Figure 6. BATEA Operating Costs for Basic Oxygen Furnace
Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975.(Table B-9.)
19
-------
CO
•u
CO
3
00
c
ct)
(-1
(U
rH
CO
3
$100,000
1000
tons/day
Figure 7. BATEA Operating Costs for Electric Arc Furnace
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Table B-9. )
20
-------
o
o
o
«\
o
o
m
o
o
o
•4
O
o
o
o
o
ft
o
o
CM
O
O
O
$100,000
1000
10,000
tons/day
Figure 8. BATEA Operating Costs for Open Hearth Furnace
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Table B-9.)
21
-------
w.
8
n)
M
0)
PH
O
$100,000
200
300 400
1000
tons/day
2000
3000 4000
Figure 9. BATEA Operating Costs for Beehive Coke Plant C
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Table B-9.)
22
-------
10,000,000
5,000,000
100 000
1
1- -H
i
H
i
i
i
1
i
i '
1
j
i
l
* !
i
i
i j
i
! i
\
!
i i
! 1 i
! ! 1 ! i
; !983- Y- 24, 349 X
0.57
.J
__1
1977-.Y-18.730X0-53
O MEETS PRESENT
• DOES NOT MEET
REGULATIONS.
PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - 1977
X-2 EPA ESTIMATE -1983
1,000
5,000 10,000
X-TONS PER DAY
50.000
100,000
Figure 10. BATEA Capital Investment for
Open-Hearth Furnace (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis
May, 1975. (Used with permission of American Iron and Steel Institut
23
-------
IU,UUU,UUU
5000,000
<*
e
0
•w
H
Z
UJ
«j> 1,000,000
>
z
_j
a.
0 500,000
i
>
100,000
o
X
xj
X
X1
X
x
•/"
^
/*
X
X1
X
x
1
,-T
J>
X
'
h
/*
>
1983-
•X
x^^
_yX >"
^ S ~.
/ *^
§
X^i-
1
1
>
/-
)77
f
1983: Y- 8966 X0-66
1977: Y=5856X°'69
O MEETS PRESENT REGULATIONS.
• DOES NOT MEET PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - 1977
*-Z EPA ESTIMATE -1983
100 300 IjOOO 5,000 10,0
X-TONS PER DAY
Figure 11. BATEA Capital Investment for Electric Arc
Furnace - Wet Process
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis
May, 1975. (Used with permission of American Iron and Steel Institute.)
24
-------
100,000,000
50000,000
f
I
10,000000
U 9,000,000
1.000000
ALT U'
,-2 ALT i'
i ALTH.
1ALT I
IjOOO 5,000 10,000
X-TONS PER DAY
ALT. I-PHYSICAL/CHEMICAL TREATMENT
ALT. U- BIOLOGICAL TREATMENT
1983 ALT I
1983 ALT n
1977 ALT I
1977 ALTH
ALT
n fl983: Y=55,523X°-6°
IJ977: Y-40,040X0-60
{1983: Y = 83,285X°-60
1977: Y=49,450X
0'58
O MEETS PRESENT REGULATIONS.
• DOES NOT MEET PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - I9T7
X-2 EPA ESTIMATE-1983
50,000
100,000
Source:
fcT
Figure 12. BATEA Capital Investment for
By-Product Coke (1972 Basis).
Arthur D. Little, Steel and the Environment: A Cost Impact Analysis
May, 1975. (Used with permission of American Iron and Steel Institute.)
25
-------
10,000,000
5JOOO.OOO
1983= Y- 8909X0 62
1977=Y = 6551X0'64
O MEETS PRESENT REGULATIONS
• DOES NOT MEET PRESENT
REGULATIONS.
EPA ESTIMATE - 1977
EPA ESTIMATE -1983
100,000
too
500 1,000
X-TONS PER DAY
5,000
10,000
Figure 13. BATEA Capital Investment for
Sintering Strands (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Used with permission of American Iron and Steel institute.)
26
-------
100,000,000
50POO.OOO
«/> 10,000,000
>
a.
<
o 5,000,000
1,000,000
X
r
X
^
^
•
/
/
198V
X^-1977
,
1983: Y= 33,207 X065
1977: Y-25.795X0-66
O MEETS PRESENT REGULATIONS.
• DOES NOT MEET PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - t97T
X-2 EPA ESTIMATE -1Ȥ3
5,000 . 10,000 500 100,000
X-TOHS PER DAY
Figure 14. BATEA Capital Investment for
Blast Furnace, Iron (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Used with permission of American Iron and Steel Institute.,)
27
-------
10,000,000
5000,000
1983: Y-12.833X0-58
1977. Y=6607 »0-60
O MCETS PRESENT REGULATIONS.
• DOCS NOT MEET PRESENT
REGULATIONS.
EPA ESTIMATE - l»77
EPA ESTIMATE -1M3
100,000
I flOO
5,000
10,000
X-TONS PER DAY
50,000
100,000
Figure 15. BATEA Capital Investment for
Basic Oxygen Furnace (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
Q May, 1975. (Used with permission American Iron and Steel Institute.)
28
-------
5^00,000
O
o
i
•>
bl
U 500,000
i
x
100,000
too
*^
X""
^
**
**
**
^
*
^m^m*^^—****mtlil**mmmmmmmmmmmm
-I,-
.-f^
r^ 7
19776
1983
O
-
••
_.***
f^^
>
Y-24
VhMHMMI—m—
^
,089
w
x°
mtmtt^f
36
^i^m
••tv
•M
O MEETS PRESENT REGULATIONS.
• DOES NOT MEET PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - (977
X-Z EPA ESTIMATE -19«
SOOt 1.000 9.000 10,000
X-TONS PEA MT
Figure 16. BATEA Capital Investment for Electric Arc
Furnace - Semi-Wet Process (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975. (Used with permission of American Iron and Steel Institute.)
29
-------
10,000,000
5000,000
1983'. Y=26,490X
1977: Y= 23,335 X
O MEETS PRESENT REGULATIONS.
• DOES NOT MEET PRESENT
REGULATIONS.
X-1 EPA ESTIMATE - 1977
X-Z EPA ESTIMATE-1983
100,000
100
500 1000
X-TONS PER DAY
5,000
10,000
Figure 17. BATEA Capital Investment for
Continuous Casting (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
^ May, 1975. (Used with permission of American Iron and Steel Institute.)
30
-------
10,000,000
500
1000
X-TONS PER DAT
5000
10,000
Figure 18. BATEA Capital Investment for
Vacuum Degassing (1972 Basis).
Source: Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
(c} May, 1975. (Used with permission of American Iron and Steel Institute.)
31
-------
TABLE 2. TREATMENT TECHNOLOGY*
Process
In-plant Change
End-of-pipe Treatment
Coke-making
By-product
Beehive
Burden Preparation
Sintering
Blast Furnace
Iron
Ferro
Manganese
Steelmaking
BOF-semi-wet
BOF-wet
Open Hearth
Electric arc-wet
Vacuum Degassing
Continuous Casting
Alkaline Chlorination
pressure filtration,
Carbon Adsorption
pH neutralization
none
none
none
Treat blowdown to activated
alumina
Recycle water within Treatment of blowdown and
plant after cleanup sludges
Recycle water within Treatment of blowdown and
plant after cleanup sludges
Same as BPT
Blowdown treatment
Blowdown treatment with
anaerobic nitrification
pH neutralization
Blowdown treatment pH
neutralization
Blowdown treatment
anerobic denitrification
pH neutralization
Blowdown filtration
*These processes are the basis of the cost estimates shown in Figure 4
through Figure 18.
32
-------
REFERENCES
1. US-EPA Development Document for Effluent Guidelines for the Iron
and Steel Industry, PB 238837, NTIS.
2. Arthur D. Little, Steel and the Environment: A Cost Impact Analysis,
May, 1975.
3. Popper, Herbert, Editor, Modern Cost Engineering Techniques,
McGraw Hill Book Company, New York, 1970.
4. US-EPA, Choosing Optimum Financial Strategies, Technology Transfer
Seminar Publication, June, 1976.
5. Jelen, F.C. Editor, Cost and Optimization Engineering,
McGraw Hill Book Company, New York, 1970.
6. Chemical Marketing Reporter, November 14, 1977.
7. Chemical Engineering, vol. 84, no. 20. November, 1977.
8. U.S. Department of Commerce, Survey of Current Business, published
monthly-
9. Temple, Barker, Sloane, draft copy, Economic Analysis of Proposed
and Interim Final Effluent Guidelines for Integrated Iron and Steel
Industry, March, 1976.
33
-------
EXHIBIT 1
BAT CAPITAL COST SPECIFICATION
1. Process Category:
2. Process Subcategory:
3. Process Capacity:
4. Design Basis:
5.
6.
CAPITAL COST ITEM
Land
Site Preparation
IN-PROCESS
COST
END-OF-PIPE
COST
TOTAL COST
Grading
Sewers
Roads-Walks
Foundations
Structures Supporting
Equipment
7. Equipment
Pumps
Tanks-storage
Tanks-treatment
Filters
Compressor Fans and
Blowers
Conveying Equipment
8. Instrumentation
9. Piping
10. Insulation
11. Electrical equipment
12. Construction expense-
a. Dismantling; demolition
b. New construction
13. Engineering Services
14. Insurance
15. Taxes
16. Contingency
17. Total Capital Cost
34
-------
EXHIBIT 2
BAT OPERATING COST SPECIFICATION
1. Process Category:
2. Process Subcategory:
Process Capacity:
Treatment Design:
VARIABLE COSTS
3.
4.
5.
a) Chemicals
b) Labor
c) Maintenance
d) Supervision
e) Utilities
electricity
air
water
steam
f) Overhead
g) Waste Disposal
6. FIXED COSTS
a) Cost of Capital
Interest rate
b) Depreciation
average equipment life
salvage value
method of depreciation
c) Taxes
d) Insurance
7. CREDITS
UNIT COST
UNITS
TOTAL ANNUAL COST
8. TOTAL ANNUAL COST
35
-------
INSTRUCTIONS FOR COMPLETING EXHIBIT 1 and EXHIBIT 2
The forms attached are to be completed by the appealing company for each
process category which may be affected under the appeal.
EXHIBIT 1 INSTRUCTION
1. and 2. Name the process category and subcategory for which the costs
have been estimated.
3. Specify the total process capacity in ton per day for which waste
treatment is required. This capacity should represent the maximum
monthly level achieved in the last five years.
4. Specify the treatment technology and design basis for the costs pre-
sented. Include flow rates, detention times, and a flow sheet of the
proposed system.
5. thru 13. Capital cost items are broken down into typical elements of
estimation. For cases where in-process changes are required in addition
to the effluent treatment, these values should be segregated into the
appropriate columns.
7. thru 11. Indicate equipment and instrument costs based upon installed
cost estimates with minimum auxiliary supports.
12. Construction costs incurred, such as dismantling fixtures to prepare
the site, demolition, or repair work should include labor and material
charges.
13. Engineering services include costs for research and development, pilot
plant work, consulting fees, and other costs for designing and directing
the installation of treatment facilities. Cost items would be supplies,
labor, administrative, and overhead expenses.
.'
14. Insurance costs associated with the project addition should be included.
15. Taxes incurred on a one-time basis are itemized here.
16. A contingency fund for the pollution project can be specified but should
not exceed 10% of the total project cost.
17. The total capital cost is the sum of items 4 through 15.
36
-------
EXHIBIT 2 INSTRUCTIONS
1. and 2. Name the process category, subcategory for which costs have been
estimated.
3. Specify process capacity in tons per day for which waste treatment is
required. This capacity should represent the maximum monthly average
in the last five year period.
4. Specify the treatment technology and design basis for the costs presented.
Include flow rates, detention times, and a flow sheet of the proposed
system.
5. Variable costs of operating the BAT pollution facilities are itemized in
a) through g) . Please list the unit cost, total units required, and
total annual cost for each of these items.
6. Fixed costs of operating pollution control equipment costs of items a)
through d) . The cost of capital a) and depreciation expense b) may be
combined into one amortization rate if desired.
6a. List the interest rate utilized in determining the cost of
capital and the financing method which is considered for
obtaining funds.
6b. Please specify the depreciation method, the average number
of years for equipment life, and salvage value used in
calculating the depreciation expense.
6c. List the incremental taxes increase associated with this
project.
6d. List the incremental insurance costs associated with this
project.
7. Costs savings due to reduced chemical usage or other expenses should be
entered as a credit to pollution control costs.
8. Add items 5 and 6 and subtract the value of item 7 to determine the
total annual cost.
37
-------
Appendix A
COMMENTS FROM US-EPA REGIONAL PERSONNEL REGARDING DRAFT COST FORMAT
Aspect of Format
1. Type of Cost
Information
Presented
Comment
2. Nature of Cost
Format
3. Specific Cost
Elements
Region V - The most useful cost information would be
general cost curves for various production levels or
plant sizes. These costs should also be presented on a
per unit production basis if possible.
Region III - With the proposed 301C regulation implemented,
cost verification would not be required. It is important,
however, to develop cost curves associated with BATEA
treatment processes and treatment processes not specified
as BATEA by the US-EPA. The BATEA treatment processes do
not necessarily represent the most cost-effective way of
achieving BATEA effluent levelsN and perhaps other methods
and their costs could be presented.
Region V - It is good to specify the format for cost
elements and to identify as particularly as possible the
cost elements included5. Separation of in-plant versus
end-of-pipe costs is vital.
Region III - A format for the cost presentation is useful
if all cost elements are broken down and identified.
Verification of costs will not be a major regional respon-
sibility but understanding and analyzing elements is
important.
Region V - Presentation of specific equipment cost data
would be useful. Designate the installed versus purchase
price of equipment. Specific inclusion of site prepara-
tion such as dismantling of existing equipment is an
important cost. It is important to have reference for
verifying or obtaining additional cost information.
Region III - Equipment costs are valuable but also the
cost presentation must be viewed in terms of the economic
analysis. Discussion of financing, depreciation, and
interest rates are important to the actual use of such a
format. Inclusion of cost credits in the format is
important.
38
-------
TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
. REPORT NO.
EPA-600/2-79-025
2.
3. RECIPIENT'S ACCESSION NO.
AND SUBTITLE
A Cost Index Format for BATEA Achievement by the
Iron and Steel Industry
5. REPORT DATE
January 1979
6. PERFORMING ORGANIZATION CODE
AUTHOR(S)
L.L. Huff and J.D. Stockham
8. PERFORMING ORGANIZATION REPORT NO
9. PERFORMING ORGANIZATION NAME AND ADDRESS
IJT Research Institute
10 West 35th Street
Chicago, Illinois 60616
10. PROGRAM ELEMENT NO.
1BB610
11. CONTRACT/GRANT NO.
68-02-2617, Task 2-4
12. SPONSORING AGENCY NAME AND ADDRESS
EPA, Office of Research and Development
Industrial Environmental Research Laboratory
Research Triangle Park, NC 27711
13. TYPE OF REPORT AND PERIOD COVERED
Task Final; 8/77 - 1/78
14. SPONSORING AGENCY CODE
EPA/600/13
15.SUPPLEMENTARY NOTES JERL-RTP project officer is John S. Ruppersberger, Mail Drop
62,919/541-2733.
16. ABSTRACT
The report describes a study to develop a format for Best Available Tech-
nology Economically Achievable (BATEA) cost analysis, including pertinent cost
data. The format is to aid Regional U.S. EPA personnel in evaluating economic
appeal cases for BATEA. Through discussion with U.S. EPA Regional personnel anc
a review of cost engineering literature, two sample formats were developed: one
for capital investment; the other for operating costs. The cost analysis formats were
designed specifically for application to the iron and steel industry; although, with
modification, they could be used for other industries as well. General information
regarding various cost components is provided as a basis for analyzing cost esti-
mates presented by specific iron and steel plants.
17.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.lDENTIFIERS/OPEN ENDED TERMS
c. COSATI Field/Group
Pollution
Iron and Steel Industry
Cost Analysis
Cost Engineering
Capitalized Costs
Operating Costs
Pollution Control
Stationary Sources
BATEA
13B
11F
14A
05A
18. DISTRIBUTION STATEMENT
Unlimited
19. SECURITY CLASS (This Report)
Unclassified
21. NO. OF PAGES
43
20. SECURITY CLASS (Thispage)
Unclassified
22. PRICE
EPA Form 2220-1 (9-73)
39
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