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111
CD
COST
W OF
CLEANING
THE
ENVIRONMENT
ENVIRONMENTAL PROTECTION AGENCY
REGION IX
SAN FIANCISCO CA 84111
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"COST OF CLEANING THE ENVIRONMENT"
presented by the
United States
Environmental Protection Agency
AMBASSADOR HOTEL
Los Angeles, California
Friday, March 30, 1972
PARTICIPANTS;
PAUL DE FALCO JR.
WILLIAM D. RUCKELSHAUS
THOMAS E. CARROLL
ROBERT SANSOM
ELLISON BURTON
MARK PISANO
JOHN HILL
Moderator, Regional Administrator
Administrator
Assistant Administrator,
Planning and Management
Deputy Assistant Administrator,
Planning and Evaluation
Chief, Air & Radiation Program
Systems Division
Chief, Water Program
Systems Division
Director, Program Development
Management Staff
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Mr. PAUL DE FALCO: I am Paul De Falco, Jr., the Regional
Administrator of the Environmental Protection Agency for Region
Nine, and the Region includes California. I'd like to take this
opportunity to welcome you all to this meeting. And I'd like to
start the meeting off very rapidly by introducing Mr. William D.
Ruckelshaus, the Administrator of the Environmental Protection
Agency who will introduce the subject to you. Mr. Ruckelshaus.
MR. WILLIAM D. RUCKELSHAUS: Thank you, Paul.
Ladies and gentlemen, we are delighted that you could get
an opportunity this morning to meet with us. We have here with
us today representatives from our Agency here in Region Nine
and also from Washington, and I think that the gentlement that
you will hear from after me represent as fine a collection of
economists, managers, and people who understand the full impact
of the problems of the environment as are anywhere in the country,
We have been wrestling with this problem now for the last
16 months as an agency and I believe that the reports that you
have been given which are the results of studies conducted by
the Environmental Protection Agency and also by other Federal
agencies are as good on the economics of pollution abatement as
any studies that have ever been made. They're by no means per-
fect. There are and will continue to be problems that need
analysis and that need consideration.
But I believe that this is the best start and foundation
that we've ever had to discuss this extraordinarily complex
problem of cleaning up the environment. And I would like to say
on behalf of our National Agency that we're extremely pleased to
have as a Regional Administrator someone of the capability and
quality of Paul De Falco.
We have created as an agency the strongest Regional organi-
zation of any agency in Government, strong in terms of the
delegation of authority and power to our Regional offices. We
hope that the citizens and Governmental units located in the
Regions around the country will see as their major focal point
for questions, for problems, for solutions, the Regional office.
-It's an experiment in Government, and it's an experiment
that I think is extremely important as a concept if we're going
to be ultimately successful as a pluralistic complicated society
in solving some of our problems.
Never in the history of this country has any movement
caught on so fast as the wave of environmentalism that has
swept over our people during these last two or three years.
The average citizen — that includes anyone who has ever
breathed foul air, observed the turbid flow of our filthy
rivers, or driven a car in traffic; anyone who has ever tried
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to find a little peace and quiet; anyone who has ever had doubts
about the purity of his food and drink — this average citizen
demands action on the part of business and government to clean
up the mess we have made.
And the fact is that together we have taken important
initial steps and are about to do much more under the aegis
of existing and proposed legislation. But just as in physics
there can be no action without a reaction, so in economics
there can be no benefit without a cost.
Anyone who tells the American people that we can'clean
this country up cheaply or that it is practical to remove every
ounce of pollution from the environment is simply practicing
the same old demagogy of overpromising, which guarantees under-
performing and angry disappointment.
It has been my belief from the very beginning that the
environmental, economic, social and aesthetic benefits of any
government policy should be at least equal to its costs. We
should undertake no action whose costs and benefits have not
been carefully weighed and we should make every effort to pre-
dict the effects of a given policy on society as a whole.
Admittedly, we have just begun that kind of planning. We
must examine the long-range consequences — in terms of resources,
employment, technology, population control, land-use and urban
design — of a gradual shift from quantity to quality as our
national purpose.
So the question may be raised at this point whether our
economy, oriented toward production and consumption per se,
can accommodate new social requirements and do so at a reason-
able cost.
At first glance, pollution control looks like a prohibi-
tively expensive proposition. For example, in our annual EPA
report to Congress on the economics of clean air we forecast
expenditures of around $42 billion in the period fiscal
1973-77 just to control air pollution alone. The Council on
Environmental Quality estimated that the combined cost to
industry and government of air and water clean-up plus better
management of solid wastes would amount to around $105 billion
between 1970-75. In other words, about one percent of the
cumulative gross national product in those years.
. But this Administration recognized at the outset that we
needed additional independent confirmation of the total dollar
cost of a national effort to clean up the air and the water.
Last year the Council on Environmental Quality, the Department
of Commerce and the Environmental Protection Agency commissioned
a task force of impartial consultants to get the answers.
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The results of their computer study were released on
March 13, and I think they should be reassuring to all who have
wondered whether this nation can actually afford the costs of a
major environmental renovation.
The panelanalyzed eleven major industry groups and found
that current pollution control requirements will compell the
closing of 200 to 300 plants by the end of 1976. However,
none of the eleven will be hurt severely as a whole.
Most of the 12,000 plants now operating will stay in
business and be profitable, except for 800 that are expected
to close down due to obsolescence or other reasons not connected
with the environment. Our task force estimates that the over-
whelming majority of plants that will close to avoid installa-
tion of expensive pollution control equipment would fold up
anyway in the period 1976-1980 because they are outmolded and
unprofitable.
With regard to employment, 50,000 to 125,000 jobs may be
wiped out, many of them in smaller communities where the
economic impact will be substantial. However, that amounts
to only one to four percent of the workers in the 11 industries
— in other terms, about 0.5% (five hundreths of one percent)
of the U. S. labor force in 1970.
We in EPA are already cooperating with the Labor Department
to ensure that those who lose their jobs will be retrained or
relocated if they wish. Federal development loans will be offered
to the communities affected.
What about other industries? Will their experience be
different? We think not. The task force reached similar
conclusions in a broader study of 25 industries representing
80-90% of our national factory output. Existing and antici-
pated pollution controls would reduce the average annual GNP
about 0.6% (six tenths of one percent) between 1972 and 1980.
Unemployment overall would rise one tenth of one percent,
which amounts to 80 to 100,000 jobs.
However, it is possible under optional conditions that
the pollution control industry will provide more jobs than are
lost in premature shut-downs.
Naturally the foregoing calculations are tentative. Not
all industries will be affected in the same way. The magnitude
of control expenses depends to a large degree upon the nature
of production technique, abatement processes, volume of pollu-
tants, feasibility of waste by-product recovery and the size
and location of a given plant.
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Some companies have discovered that there is great wealth
in what we throw out, burn up and pour down the drain —
possibly enough in certain cases to pay for a substantial part
of conttrol equipment. The very act of redesigning factory
processes to incorporate clean technology opens up opportunities
for higher productivity, expanded profits, rising real wages,
better products and growing tax revenues.
Dow Chemical's experience offers encouraging evidence that
well-managed companies can save money right now by controlling
or recovering various effluents. At Midland, Michigan the
company is building 28 cooling towers at a cost of $7.2 million
to reduce the thermal load on the Tittabawassee River. The
towers will more than pay for themselves by reducing corrosion
and cutting daily water intake by 100 million gallons.
Indeed, anti-polluion efforts at Midland have saved
chemicals worth more than $6 million over the past 3 years. At
Dow plant in Texas, $900,000 put into controls saves $265,000
worth of chemicals every year. Not every anti-pollution project
results in net savings, but in a highly-competitive industry,
Dow's profit margin of 24.5 percent is well above the industry
average of 18.7 percent.
It should be noted that companies which find the initial
control expenditures too burdensome can often finance their
equipment with tax-exempt industrial development revenue bonds.
Finally, in calculating outlays we must not overlook the
social and personal savings that will accrue once our air and
water are reasonably pure. Air contamination alone may cost
this country $16 billion a year in damages to human health,
materials, crops and urban vegetation and may rise to $25
billion per annum by 1977. These figures are only approximate.
But the AMA estimates that disease induced by the environment
as a whole costs $38 billion each year.
The overwhelming majority of the American people, as
attested by the pools, believes that a cleaner environment is
worth a little inconvenience and temporary expense. I'll admit
this sentiment has not really been put to the test. We haven't
held the ultimate consumer's feet to the fire long enough. But
EPA is betting that the new public awareness is not for sale.
I think the average man and woman will look forward to a
world free of smog, roadside litter, and putrid waterways, a
world liberated from noise, ugliness, stench and urban decay.
And that expectation ought to become outright enthusiasm when
they realize that the cash savings alone may total $200 per
year family by 1980.
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Considering the total evidence, therefore, I think all
this talk about environraentalism ruining the economy is just
nonsense. We are going to get back much more than we pay out.
Far from retarding progress an ecological sensibility, carried
to its logical conclusion, will guarantee the good life indef-
initely.
However- to ensure such a prospect we must conserve and
recycle our resources. The average lifetime of industrial and
private capital must increase, that is we must get more for our
money — our machine tools, cars and appliances should last
longjer and be cheaper to repair.
Higher priority must be assigned to social equality,
because discrimination and inequality are wasteful as well as
immoral. Services like education, health care and creative
leisure must be esteemed more than speed, glitter and gadgetry.
Population growth, as the President's commission found, must
stop and the sooner the better.
This is not to denigrate our achievements as a nation.
Indeed, our very success compels us to drop those prodigal
habits which alone can threaten what we have accomplished here.
We must learn to manage the earth as one cultural and biological
system.
If we boldly grasp this historic opportunity, peace and
prosperity and social justice will be ours. Once restored to
harmony with the natural world that gave him birth, man will be
free to develop his highest intellectual, spiritual and aesthetic
potentials. Our environmental investments — generously committed
— will ensure a timely transition to a new epoch in the history
of the human race.
MR. DE FALCO: Thank you, Bill.
If we can, I'd like to introduce Mr. Tom Carroll, our
Assistant Administrator for Planning and Management, to discuss
with you the details of the Federal Environmental Protection
Program and its relationship to the Private Sector.
But before I have Tom come to the mike, I'd like to raise
the item of mechanics of the meeting. Since we're going to be
going into rather detailed statements, figures and what have
you, and questions have more substance if they relate to the
specifics, we're going to have three young ladies from my staff
walk the aisles with 3 by 5 cards. As you hear something you
desire to raise a question on, would you please signal for a
card, make your question known on the card, and pass it up
through the young lady to the table here. And at the end of
the presentation, in each case, we'll have whoever is handling
that material review those questions and try to answer them.
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Tom.
MR. THOMAS E. CARROLL: When we started this agency a year
ago, we knew what we wanted to do, but we just didn't know
where to start. Well, we've been taking great strides during
the past year. Today, in discussing with you some of the con-
clusions that we have reached, which will indicate some of the
new directions we might take, that the condition of the issues
will be tested against your questions. If we're wrong, we'll
be ready to admit it. We want this to be a cooperative session.
We hope that you will give us your very best expertise and help
us come together in solving these problems.
Before I get into the subject of my talk, I'd like to place
two historical things in perspectives that I think are necessary
for the context of what we're going to deal with today. We're
dealing with something that is unique as an issue, as you all
know, and as Bill indicated.
The environmental awareness is a rather recent phenomenon.
The Federal Government took an approach to establishing EPA.
This was unique. It is the only Agency in the Federal estab-
lishment which is at once regulatory. It is non-adjudicatory.
It is independent. It does not sponsor a development, any
mission, or product.
Given that uniqueness of the issue and of the entity with
which we are dealing, we spent much time in our first year
structuring EPA internally. Our three guiding precepts are
also unique and different from those of the Federal Government.
Firstly, there is a very strong localization or regionalization
of the Agency. Bill has already indicated this to you.
Secondly, we are a highly functionalized Agency. Indeed,
that is one of the reasons why EPA was formed. We do want to
integrate the problem-solving techniques of voters and skills
in the areas of air, water, pesticides, and the like.
Thirdly, we have been most concerned with the balance of
our decision-making process. When EPA was formed in December
of 1970, we were faced three weeks later with the Clean Air
Act Amendments of 1970, which placed a variety of very stringent
timetable deadlines on us to issue legislative regulations.
There were many who said that we were just a bunch of ego
freaks in Washington having fun issuing this regulation and
that regulation. With hindsight, we did have to make a few
intelligent guesses. At the same time we were attempting to
organize and structure EPA so that as we grew and as we matured,
we would achieve balance in our decision process.
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This is best exemplified in the way we now approach regu-
lations. They are sponsored by the Program Office. They are
independently appraised by our scientific personnel who tell
us whether there is scientific validity for the problem that
we are trying to solve. Whether technology to solve that problem
is available. We make independent appraisals to determine whether
the approach taken is enforceable. Whether it is within our
legislative mandate. Also, we have independent appraisals of
the cost impact on the regulated as well as studies to determine
whether we're taking the most cost effective strategy to achieve
the desired goal.
Now, I mention this because we would like to extend this
structuring in the balancing of problem-solving within EPA to
all those concerned with the environmental movement.
We feel that we have had very good relations with the State
and local Public Sector as well as with the public interest
groups, and the conservation and environmental organizations.
One of the reasons that we are holding a series of meetings like
this around the country is because we feel it is time for us to
establish a better rapport with the other side of those involved
with this problem so that we can maintain balance in our decision
processes. That brings us to the role of industry.
In the past year, it has been very apparent that industry
has been quite reticent to deal with the Federal Government, and
I well understand that having been on the other side of the fence
during my entire business career. There is always some bureaucrat
who will say, "Well, just give me your figures today and I will
go in with them." but he'll be replaced a year from now and they're
come back to haunt you.
I think it's important for industry to recognize that EPA
sets its standards based, in the case of primary standards,
purely and solely on health effects.
Secondly, the secondary standards are based on environ-
mental effects. Now, this is a little different from dealing
with the SEC, the FTC or the FCC, because we take cost and
technological problems into consideration in adopting the most
cost effective strategy to meet that primary health or that
secondary environmental standard.
Traditionally, industry has dealth with this issue through
the Department of Commerce and the National Industrial Pollution
Control Commission. Our relationship with them have been very
good. They have aided us in calculating some of the figures
that we're going to talk about today, but we would encourage
you to help us with your figures.
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Secondly, over the past year we have seen evidence in the
changing of the attitudes of business towards the theory of
pollution. There has been a reappraisal of the theory of process
control in their operations where they no longer can consider
the air and the water as free inputs to their manufacturing
process or free, at least, as disposal outlets. Bill talked
about one example, which was Dow Jones (Dow Chemical) . We have
other examples such as Johns Manville. Dow Jones (Chemical) is
a service industry, which I'll discuss later.
But we are encouraged by this rethinking in a positive atti-
tude on the part of industry. We think that we see industry
starting to think in terms of pricing their product fully
what my economist associates call the "internalization of the
costs of pollution control." We feel that this marketplace
determinator of costs is much better than anything we can impose,
or do, form the Federal level or, indeed, the State and local
level. And finally, we talk about the industrial or manufac-
turing companies who are the polluters and who are the ones who
must deal with the problems.
It has become very apparent to me in the last four to six
weeks that it is a service organization principally, locally —
your media; radio, television, newspaper; it is your banks.
And those who have a general concern in the well-being of a
community in which they live, who, because they are local and
service oriented, cannot move a plant across country or across
the state border — these are the organizations who must be
concerned with the quality of life in that community.
It is these organizations that we would hope would take a
leadership role in their communities to help solve the control
problems. I mention particularly banks because we have seen
some examples of two or three industries or cities, river basins,
where banks have taken a role to try to involve all the indus-
tries in that community to keep them aware of what must be done
to make that community a good place to live and to work.
Now, I wish finally to come to the study that we're going
to be talking about today. There have been during the course
of the past year four studies, one of which Bill mentioned,
which was jointly undertaken by the Council of Environmental
Quality, the Commerce Department, EPA, and the Council of Economic
Advisors. There have been three others that we have undertaken
within EPA in the air, water and solid waste areas.
We're going to discuss each of those four with you in detail
in the course of the day.- but before we do, I just want to give
you some background of an oversight.
What these studies collectively have shown us is that the
dollars, as Bill indicated again, are large. They are much
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larger than anybody thought they were going to be a year ago.
Of course, new legislation is the prime reason. The cost dollars
are large.
Even more surprising perhaps is the ability, however, of
industry to absorb these large amounts of money. You combine
that with the fact that we have discovered, even though we're
in the very early stages of this sort of analysis, that the bene-
fits to be achieved to society from this sort of cleanup exceed
the costs of the cleanup. Not only on a current basis, but over
a period of four or five years here, we are trying to clean up
and turn around the wastage and the damage of years and years,
and hopefully, even change a societal epic or a way of problem
solving; whereas those costs are one-shot, the benefits will be
permanent and enduring.
The studies also show that in the industries whose studies
we selected since they were the ones with the most impact on
the pollution problems, the ones which were also the most cost
affected by the types of control necessary to solve their prob-
lems, have, as individual industries, a capability to finance
these added costs, if they are added into the line costs, and
they aren't purely process controlled internally which may
improve their efficiency.
Having demonstrated that we will not impact the profits
in a major way of these industries, this obviously improves
the opportunities for private financing.
Now, underlying these reports is the assumption, which, I
think Bill also alluded to, that this concern for environmental
quality is not a passing fad. That in many cases, Americans
feel a better life is worth a short-term cost - the trouble it
takes to clean up the environment. But we have not yet tested
this in the marketplace. That moment of truth is yet to come.
We feel (we're optimistic) it will come in a genuine way and the
American public will accept it.
But, granting that we can no longer freeload on the environ-
ment, can American industry itself meet pollution control require-
ments- without inflation, without unemployment, or triple inter-
national trade? The responsibility of the Federal Government to
protect the environment, to abate various forms of pollution is
written in the law.
These deadlines — these types of pollutants to be controllec
are mandated. Projections of what this is going to cost to the
Nation have been made by others. We feel that the figures that
we're going to give you today are the definitive works that's
been done to date on a broad basis in this field. To understand
the figures, we must understand the ground rules for these pro-
jections. The first and the most important rule we must set is
simply: What do we mean by economic impact?
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By our definition — and we picked the broadest that we
could — it is the sum and total of all of the changes in the
Nation that occurs as a result of pollution control. It includes
any change in the rate of growth of the gross national product,
inflation, unemployment, interest rates, our position in inter-
national trade. It includes such private items as personal
income, per capita consumption, personal investment, and the
like. It means price increases, plant shutdown, shifts in employ-
ment, and the repercussions of economic change in individual
communities.
One caveat, however: keep in mind that national income
accounting, like private industrial accounting, does not reflect
quality of life types of items. When you go to a hospital because
of a respiratory ailment some smoggy day in Los Angeles, that
increases the gross national product left by it just increases
the revenue of the hospital, and those gross national income
figures do not, are not netted down from your loss of wages or
your time off the job.
Economics aside, the name of the game is environmental
cleanup, not the maintenance of the status quo. In many cases,
pollution is already costing society more than the cost to install
and maintain the controls. Certainly.- this is true of the case
of air pollution. It may be true of other forms of pollution,
and we don't as yet have definitive data.
I am not suggesting that society will make these necessary
changes smoothly. There will be rough spots. There have been
rough spots. We do expect as a response to these changes wrought
by environmental controls that the vast majority of Americans will
call into play the individual and corporate resilency which has
contributed so much to making us both individually, and collec-
tively, a nation of leaders in so many fields.
Society cannot achieve the benefits of a cleaner environment
without economic impact. But it is vitally important that we
understand the significance of that impact.
Therefore, the second ground rule on which to base our dis-
cussion is: through what framework do we discuss the impact?
The changes that result from pollution controls go beyond mere
costs. The cash flow problems can be serious. Financial insti-
tutions will, in some cases, be unable to finance the investment
needed for control equipment. There may be return on investment
problems and opportunities. Installed controls offer benefits
to society, but frequently they offer no increase in productivity.
On the other hand, control measures may require more streamlined
operations, and to this extent, both productivity and return on
investment will be improved.
A case in point, not because of environmental considerations,
but the gradual evolution and change in the steel industry from
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open hearth furnaces to basic oxygen furnaces, is one which has
not only made the industry more efficient, but certainly served
to clean up the environment and minimize our problems and con-
cerns with that industry.
The consequences of price increases are often widespread,
causing repercussions in many segments of society. Plant shut-
downs represent very real problems to people out of work, and
on a large enough scale, very serious problems to other secondary
industries.
A complex problem to be faced is what can be done when
entire communities are upset through plant closing or high
unemployment. And, in what is probably the most complex problem
of all, cleanup costs may aggravate our balance of payments
position.
Now that the Federal Government has formed a framework
through which the economic impact of pollution control can be
arrested, what are the results?
As Bill indicated, in the larger studies, the inter-agency
study, we tried to quantify the problems through the macro of
economics, and the 11 micro economic studies, the projected
control cost to the Nation through 1972 - 1976. Our focus in
this study was water pollution abatement costs, air pollution
abatement costs, and the years in which the costs will be
absored. We have assumed that all costs will be incurred by
the year 1976, when the current for both air and water take full
effect. Water costs will be absorbed in equal increments over
the five-year period, but about 75 percent of the air costs will
be absorbed in the two-year period 1974 and 1975.
The important note here is that EPA estimates that the
1976 standard, or best practicable technology, specified in
the current draft of the Water Bill, in both Senate and House
versions, is essentially the same as the equivalent of secondary
treatment assumed in our figures when these studies were under-
taken almost a year ago.
Hence, the effect of the current draft of the Water Bill,
and the one reported out of the House, if it is passed, on
these findings, would be nil as far as the Industrial Sector is
concerned between now and 1976. After that date, the impact
will be significant when the bill requires higher standards
than best practicable technology.
A second important note is that not all abatement costs
are included in our projections. Only those associated with
Federal standards. If localities implement stricter standards,
State or local, abatement costs will be higher.
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Also, while some solid waste costs were included in the
projections we're discussing today, in all likelihood they are
underestimated because at the moment there are no Federal
standards on solid wastes. In other words, the national cost
of controlling trash and garbage on the local level are not
included in our figures. Certainly, a very significant item.
This study shows that the Nation will not suffer major
dislocations as a result of pollution control in the sense of
causing a recession or doubling the rate of inflation, but we
do expect these six changes to occur during the '72 - '76
interval.
The Consumer Price Index is likely to rise at an annual
rate of .3 to .5 percent. Employment declines result in an
increase of .1 to .2 percent in the aggregate unemployment
rate. The rate of growth of the gross national product will
fall marginally during 1972 to 1976 from 5.2 percent to some-
where between 4.7 and 4.9 percent. Impact on selected industry
profitability will vary, but generally is not severe enough to
discourage private financing.
Per capita consumption will fall in this period from 5.3
percent to a range between 5.0 and 5.1 percent. The most
serious identified consequence of pollution control expenditures
may be in the area of international trade with an average annual
decline in the current account balance exceeding 1.9 billion
dollars per year. This assumes that no pollution control costs
will be incurred in any foreign country between now and 1980,
which is a conservative assumption that we took, and, obviously,
if equivalent costs are incurred in other countries, this deficit
will be reduced accordingly.
These points are the substance of the economic impact
that this Nation will experience during the next several years.
They and the underlying details are covered in the grey booklet
which we handed out to you. Bob Sansom is going to discuss the
individual industry studies with you next on this panel.
Turning now to air in the first of the three EPA studies,
we calculate a total private outlay of 42 billion dollars will
be needed during fiscal years '73 - '77 to implement necessary
controls for mobile and stationary sources of air pollution.
The estimate for mobile source control is 24.7 billion dollars
and takes into account the stringent emission standards mandated
by the Clean Air Act of 1970.
The estimate for stationary source controls is 17.2 billion
dollars and reflects the national air quality standards set by
EPA in accordance with that Act in April of last year.
Both of these figures are much higher than a year ago, as
I indicated. As a result of a change of the Act in the case of
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the stationary source control, we are now covering all 248 Air
Quality Control Regions the prior laws had not covered so
broadly on a national scale.
The costs calculated for mobile source include controls on
three pollutants — carbon monoxide, hydrocarbons and nitrogen
oxide. For stationary sources, five pollutants are covered —
particulat matter, sulphur oxides, carbon monoxide, hydrocarbon,
and nitrogen oxide. We based our projections on three categories
of stationary sources — solid waste disposal, which includes
open burning and incineration; fuel combustion, which includes
heating and power generation; and 17 types of industrial pro-
cesses .
The most strinking feature is the cost benefit data. The
direct cost of human mortality and morbidity are in the neigh-
borhood of 9.3 billion dollars annually. Damage to property
values ranks about 8 billion dollars annually. And damage to
materials and vegetation amounts to about 7.6 billion a year,
a total annual damage cost of about 45 (sic) billion dollars.
Not included in this figure are such things as noise damage
costs from those reduction of property values along highways
and airports; health costs ascribable to carbon monoxide, hydro-
carbons and nitrogen oxide and photochemical oxygen because
virtually, a complete lack of data is available to us.
Also not included are the costs of air pollution effects
on commercial and cultural property, esthetic visibility and
soiling, so the 25 (sic) billion dollar a year figure that we
are using is highly conservative.
It is also significant in terms of this benefit cost ratio,
to keep in mind that whereas the highest costs are in the mobile
source area, the 24.7 billion dollar figure, the pollutants
caused by automobiles — carbon monoxide, hydrocarbons and nitro-
gen oxide, are the very ones for which we have no data in our
damage cost figures.
Projections of the cost to reduce air pollution damage
come to about half of these damage costs when we annualize our
figures in 1977. The result is a 12.3 billion dollar annual cost
figure in 1977 for emission control that will generate 14.2
billion dollars worth of benefits. A cost benefit ratio of
better than one to one. And our evaluations as to exactly what
air pollution is costing us in damages, still leaves many un-
studied.
Now, let us turn to water pollution control costs. The
Executive Branch has reported to Congress, and just about every-
body else, on the cost to abate water pollution for the last
five years, a period in which the condition of the Nation's water
bodies have grown progressively worse. However, our indexes
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show that we just about held our own in 1971 over 1970 without
playing the economics game that one little figure means a trend.
We are hopeful that in a year where we had growth in the economy
and growth in population, the fact that our measures held about
constant, is a good omen.
The tools used to measure these costs and the facts have
been very imprecise. To develop greater precision in assessing
the costs is so complex and extensive a problem, we have devised
a new method of evaluation — what we call a pollution index.
This particular technique enables us to gauge the utility of
past abatement efforts by determining the degree to which the
Nation's waters deviate from established standards.
Historically, this is only a measure of numerical mileage
counting, and we are now in the process of attempting to improve
the index by adding duration and intensity factors. We have
only one year's experience with this, therefore, we cannot yet
be comparative. We are hopeful that we will be able to be com-
parative and use this index a year from now.
The need for investment in the treatment of manufacturers'
waste between 1968 — in the case of water, we have to go back
a little bit for our base year — and 1976 is calculated at
about 10.2 billion dollars, and there is no question that to
us such a schedule will be very difficult to achieve. Why do I
say that?
Here are some of the critical problems: Manufacturers are
responding to waste treatment requirements at the same time the
Public Sector is increasing its capitalization of waste treatment
works. Total sewage starts had not reached one billion dollars
by 1967, but in 1971 manufacturers and municipalities, together,
initiated about two and a half billion dollars worth of sewage
and waste treatment contracts. This increase in both Private
and Public Sectors has presented the economy with some very
sticky problems — higher construction costs, 14 percent last
year in the municipal sector; lengthened construction schedules;
delayed deliveries; and greater demand on the supply of suitable
construction services.
Expansion of the level of investment will be necessary in
the future. Growth and replacement demands account for more
than half of the needed capital requirement through 1976, and
their level is in large measure determined by the dimensions of
the capital base of it.
A slower rate of economic growth would permit the attain-
ment of tolerance with a lower rate of increase, but internal
growth of a specific industry or system has greater influence
on annual level of investment than the external imposition of
treatment requirements.
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In summary then, over the next five years the Nation will
experience somewhere over 50,000 and 135,000 direct job losses,
and if as many as two other jobs could be lost from a secondary
ripple effect for each one person directly unemployed, the
average annual unemployment might be 50,000 persons, or slightly
under a tenth of a percent of the 1970 labor force. To alleviate
the problem of displaced workers, the Department of Labor has a
number of programs that can meet the requirements of the unem-
ployed. EPA and the Department of Labor have entered into an
early warning system in which we intend to notify industries
and/or communities that may be affected by job losses. Also
State employment services provide for relocation allowances or
public service employment.
From 70 to 120 communities in the Nation may also be severely
affected. Generally, these will be smaller communities and
generally they are one industry towns.
Bill indicated to you earlier the number of firms that
will be closed due to pollution control damages — the cost of
pollution control equipment — over the next five years, and
it's interesting to note in passing that only two Amendments
were added to the reported version of the Water Bill that was
voted on by the House. One of these two Amendments was a require-
ment with regard to plant closing attributed by the mangement or
labor unions involved to environmental concerns, EPA will hold
public hearings to determine if, in fact, that was the reason
for the closing.
I think you all are well aware that in many cases environ-
ment is blamed for some actions which, on closer examination
of the fact, turn out not to have been the case. The fact
usually turns out to be that it was a marginal plant to start
with; that the sources of raw material have changed; that the
market has moved on; and the product has become obsolete in
the life.
Basically, there are two categories of these firms which
were closed. Those for which pollution abatement costs will
eliminate profit margins. Most of these plants are marginal
now. Abatement costs will merely accelerate closings that
would have occurred anyway. And in these cases, the Federal
Government will not perpetuate failing firms.
The second category is those plants which could remain
somewhat profitable after absorbing abatement costs, but they
cannot finance the necessary investment or they lack the tech-
nical know-how to engineer cost effective abatement techniques.
These firms, because they have a long-run viability, will be
helped.
Here is a sample of some ways in which they might be helped.
EPA construction grants for municipal treatment plants will
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assist those firms which hook up to municipal disposal systems
by providing financial assistance. Such arrangements, even
when they provide for user charges to recover costs, afford
the firms economies a scale for municipal interest rates, thereby
reducing capital and operating costs. The accelerated deprecia-
tion provisions of the Tax Report Act of 1969 subsidizes plants
that make a profit by reducing the effective capital costs on
air, water, pollution abatement equipment.
Industrial development bonds — a very exciting development
— likewise subsidized firms by eliminating the initial capital
requirements and providing for lease payments based on a lower
municipal bond rate. This form of aid is one which I think is
very pertinent to the comment I made earlier about the service
industry's support in a community. The media or the banks, if
they can help get industrial bonds through, can get them voted
in a community; they can help through this medium to improve
the industry that's in their own home town.
Similarly, the loans and the loan guarantees made by the
Small Business Administration and the Economic Devleopment
Administration provides financing at the low market interest
rates for pollution abatement equipment to those firms that
qualify.
Faced with these problems, how do we allocate the costs
that are incurred by the Nation over the long term? Obviously,
to date the Nation has not done well at this.
It is in the process of restructuring elements of the
economy to meet the new demands of environmental controls.
The process is continuing. The Federal Government can make
some changes directly. A recent example is the first proposed
tax on pollution — the sulphur oxides tax that was sent to the
Congress this year. This is an example of an alternate incen-
tive strategy, one that obviously must be coupled to reduction
in the tax if it is to be a success in the abatement program,
but in order of strategy to the current regulation and then
lawsuit on top of that approach which is being taken today.
We can sponsor at the Federal level a development of tech-
nology. For example, to convert solid waste to fuel, sulphur
oxide control, advances automotive power systems, EPA is under-
taking, as well as other Federal agencies, the Bureau of Mines,
and Interior, AEC and the like, a variety of this technological
research.
We can restructure the depletion allowance to include
secondary materials in competition with virgin materials. We
could end discriminatory freight charge. Until now then, having
not priced the environment at its full value to society, we
have not put a high enough value on pollution-free surroundings.
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Now, we are at the point in our environmental revolution where
traditional measurements are inadequate. We face tough problems
ahead. The demand is for leadership.
I submit that it is time for the business community and the
industrial community to take this leadership role in a balanced,
considered and meaningful approach to environmental cleanup.
In the long run, an improved quality of life is good for
all citizens, corporate and private.
We enlist your aid, and I thank you.
MR. CARROLL: (in question and ajiswer session)
Q. Referring to the Georgetown University Report on five well
known bottling companies having water samples showing the bac-
teria and viruses in the Potomac River — reading this report,
the Supreme Court stopped using bottled water. Does the EPA
intend to submit tests on all bottled water, insist on some
sort of regulatory policy which will protect users? Assurance
of clean drinking water. Will there be distillation plants
implemented as this is the only method of obtaining pure water?
Will water in municipal plants have upgraded methods?
A. Bottled water is essentially a province of the Food and Drug
Administration. We are obviously concerned in our water hiking
programs about the quality of municipal water supply. There is
a bill in the House to set guidelines and standards. We feel
that that is essentially a local problem and the role of the
Federal Government is to merely backstop through technical
expertise and technical assistance the local programs.
Q. Will the cost for cleaning the environment, given in Bill
Ruckelshaus' statement, be in agreement with the recent Admin-
istration reports on the costs of a clean environment? I
assume that the recent Administration reports are probably the
so-call Recap Reports which came out of the Office of Science
and Technology, again a study in which EPA participated, that
was primarily directed at mobile source pollution control, and
I think it also included safety factors for automobiles, didn't
it? -
A. On the cost to society of pollution control devices on auto-
mobiles, yes, EPA is in agreement, certainly, with that report.
Some of the variations we naturally will hear a little bit more
from Elli Burton-later when he talks about air.
Q. Let's ask how EPA decides what an impartial consultant is?
A. I guess you're looking at them up here right now.
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Q. How can EPA really be effective if it has no control over
resource exploitation?
A. That's an excellent question, and I think that's really one
of the virtues that we have. EPA does not have the conflict of
interest which historically existed in the Department of Interior,
for one example, or the AEC, for another example, where they were
trying to protect society generally and, at the same time, trying
to develop a specific and limited resource.
It is primarily through the Environmental Impact Statement
comments under the National Environmental Policy Act of 1970
that we do impact the other agencies. We do not have any legal
authority over their activities, but we certainly have a great
opportunity for publicity. The ultimate decision must be made
by those resource agencies. But, under the law of that Act,
they must consult with us, among others, and the general public.
They must hold public hearings. And I think it's that publicity
which is the most effective route that we have for control.
Q. Does the Regional Administrator have control over research
and development funds? If not, why not?
A. He does not, and the answer is that we thought that research
was the prime area where we could get the sort of integration
that EPA was formed to meet, the expertise required to solve
pesticide problems in determining tolerance petitions or regis-
trations — to appraise registration requests, is much the same
as you're doing when you're analyzing how those pesticides flow
through water or through air, either of those two media, and
the research people were trying to give an opportunity to take
a total look at the environment, where those pollutants come
from, how they flow through the environment, and where they go.
If we were to do this at the regional level, it will be
very difficult for us to integrate a conservative approach of
study of the environment as a whole, and that is probably the
most centralized activity that we have.
Q. Mr. Ruckelshaus mentioned setting standards and enforcing
them. Has EPA enforced by penalizing any polluter? If so,
what was the penalty?
A. Well, as I indicated earlier, EPA is non-adjudicatory. We
can request the Department of Justice to bring an action, and
it's the courts who determine the penalties. I think we have
filed something like - requested 233 enforcement actions in the
15 months of EPA's life. Generally, we take the approach that
we prefer a civil action to a criminal action. There are some
who disagree with this. But our feeling is that a criminal
action is really punitive, and our goal to clean up the water
and enter a civil action if we can get a remedy in equity, the
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ultimate goal will be better achieved, which is a cleanup abate-
ment schedule of some kind.
Q. Are there any environmental descriptives for measuring
intangible, unquantifiable values in impacts that are not sus-
ceptible to cost measurements in dollars alone? For example,
time, social conflict, political impacts, esthetic choice.
A. These really aren't. Time is the interesting one, because
when EPA started these micro and macro economic studies, we
tried to look at two other things. What is the cost of delay
on society by going through the court holdups and the Environ-
mental Policy Act requirements? There are those who were saying
even within the Administration that the environmentalists were
doing damage to the opportunity for industrial growth by holding
up such things as the Alaska Pipeline and the Florida Barge Canal
and power plants and the like. We found there was just no way
that we could quantify that time delay factor. I think the
problem was mainly that it's such a localized condition that you
have to just measure one zoning situation, one power plant sitting
situation. And there's no way we could accumulate all these
factors at any national level.
I think some of that, as we go into 1972, and expand on our
studies, as we regionalize them and try to determine in each of
our regions where we will have economists coming on board, what
the effects are there, we can get a little closer to that sort
of a question.
The other question that we tried to grapple with was the
one, from a quantifying standpoint, of productivity. Are
pollution controls productive assets or not? The extent that
you put a control technology device on the end of a manufacturing
process, it obviously does not increase productivity.
As I indicated, if you change that process earlier in the
stream, it may improve productivity. An argument can be made
to the extent that we are forcing an accelerated closedown of
old and outmoded plants, and forcing those products to be manu-
factured in more efficient plants; we may be on a large scale
increasing society's productivity, or industry's productivity.
We could not qualify that either.
Social conflict, political impact and esthetic choice are
even harder yet. We have looked at those, we've talked about
them, and we just simply don't know how to measure them in
dollars alone.
Q. Can someone explain the reason for the difference of almost
three billion dollars in accumulative '72 - '76 investment esti-
mated for the electric power industry between the EPA '72 report
and the micro economic study?
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A. Bob, you're going to cover electric power, aren't you?
Q. Industrial revenue bonds. Did you suggest that these would
be Federally guaranteed?
A. No, I did not. The public obviously can't have a completely
clean environment and continued economic growth. The cleanup
will have an impact on growth.
Q. How does EPA determine where the cleanup is sufficient and
that the public will accept the associated retardation in growth?
A. I think that's really apples and oranges a little bit, but
it represents the sort of real problem that we must deal with;
where we're measuring and whether the cleanup is sufficient.
We're measuring health impact from a primary standpoint, and
we're measuring environmental impact from a secondary standpoint.
That does not relate to cost per se.
Yes, there are some pieces of the Act - various pieces of
legislation - where we do have to take account of economic
impact in setting standards. The Noise Bill that we proposed
is one example. We are hopeful the public works at the associated
retardation and growth, because we don't see that there is going
to be any measure of retardation. It is important to remember
in all the projections that we're giving you today, you tend to
take today's costs and literally project them because that's
what you know. When you get into mass production techniques,
when you have four to five years to change the technology and
improve the processes, it is historically true that those costs
tend to be reduced.
On the benefit side, there is so little there that we feel
very weak and very conservative. We think that the more research
we do on this field, the minimal impact we're going to find even
compared to the data that we're giving you today.
Q. Please elaborate on the benefits of Federal assistance on
waste treatment to industries. We're under the impression that
industry must pay its own way.
A. That's exactly true by user charges, but when an industrial
plant can hoop up to a municipal system even contracting to pay
user fees over 10 to 20 years, they are avoiding the initial
capital requirement which that firm would otherwise have to
finance its own treatment facilities and they are getting the
advantage of the lower Federal rate — the lower public bond
interest rate.
Q. Why did you slough off the question about partial consul-
tants?
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A. Unless EPA can assure that the consultants are impartial, why
should this or any other audience believe your figures?
Q. How did we select the consultants.
A. We have to talk about what kind of consultants. If you're
talking about the consultant that did the micro studies, they
were selected by an inter-agency panel made up of membership from
the Department of Commerce, the Council on Environmental Quality-
the Council of Economic Advisors and EPA. And, while you can't
please everyone, the prime criterion here in selecting these
people was that they had to have experience in the industry. We
had to do these studies on a very short fuse. They were done
within about 90 days. And the Department of Commerce, which we
think does have some appreciation of what the industry thinks,
had in effect a veto power over the consultants selected.
I think there will be people who aren't pleased with all
the consultants. But I think on balance, if you look at A. D.
Little, Booz-Allen, Charles River Associates; Chase Econometrics,
the people who did the studies, you would be hard put to find a
more reputable and competent group than those selected.
But in some cases, and I'll discuss this later, we will
be extending studies because the studies didn't precisely hone
in on key problems, nonferous metals is an example, steel is
another example, and petroleum is a third example.
MR. DE FALCO: There's also, Bob, a list of the consultants
that were used in these studies in that handout that we gave you
so that you know who they are.
MR. CARROLL: I guess I was reading that question a little
more broadly. I was thinking about scientific consultants too.
That's an even more difficult field. On many of these questions
you can find as many different answers as you can find academic
science types.
Clearly, that is a continuing problem. One other way that
we can find out if these people are impartial is by trying to
open ourselves up to audiences like this and other agencies in
town.' Let's see if anybody can come up and show us where we're
wrong. If that can be done specifically, we'd welcome it and
we'd be the first to admit it.
Q. What is the estimated percent caused contribution of indus-
try to total pollution? To what extent, if any, will public
caused pollution be controlled?
A. This is a question I have some trouble with. I think the
first part of that question is referring to where does pollu-
tion come from. There are different percentage ratios depending
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on what pollutant you're talking about in the sense we talked
about in the stationary source of air that's free from automo-
biles. I think when we come to air, Elli is going to refer to
that a little bit this afternoon. If there is some specific
pollutant that that question refers to, come up later and I'll
give you a figure.
Q. To what extent, if any, will public caused pollution be
controlled?
A. That refers to the Federal level. I think the figure is
about $500 million dollars in this Fiscal Year's budget for
Federal facilities to be cleaned up. This is mainly plants
and installations of the Federal Government. It does not
include such things as the cost to the Navy if, and when, we
impose our vessel waste treatment regulations, for example.
Q. Your statement that 75 percent of the cost of air cleanup
will be accomplished by '74 - '75 — it is possible to achieve
this in the way of adequate hardware supply or capacity,
engineering capacity and construction time? This would appear
to be a very short time for implementation.
A. I believe that figure is a little misleading in a way because
almost all of that is the automotive that hits you in the middle
of '74, doesn't it, Elli?
MR. ELLISON BURTON: 25 billion.
MR. CARROLL: The 25 billion, that's 50 percent of the
total pollution cost, and almost all of that automobile does
come in '74 and '75. Lead time is a very significant problem
for automobiles, obviously. Our automobile extension request
hearing open on April 10th in Washington. The ability of indus-
try, even if it has the devices to meet the deadlines by 1975
because of the estimated 30 to 36 months manufacturing lead
time, will be the subject of those hearings. And one of the
major subjects of those hearings.
MR. BURTON: Tom. The major crunch comes in '75, '76 for
the automobile.
MR. CARROLL: Well, then you'll have to figure out between
now and when you're on this afternoon where the 75 percent comes
from.
Q. Should U.S. industries and foreign nations be required to
meet U.S. environmental standards, which are probably stricter
than those of the foreign nations involved?
A. The answer is clearly, "no," although we're certainly trying
to encourage them to undertake this sort of activity through the
Stockholm Conference of next June.
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Q. If EPA regulations will cause several industries to close,
can't the Federal Government give them long-range loans to
subsidize new equipment?
A. I have indicated it depends on whether that business itself
is a viable business. We don't want to keep a marginal business
alive which would otherwise close just because we happen to be
the straw that broke the carmel's back.
But there are areas where this has been proposed in the
Administration. We have seriously considered the question of
long-term loans with some sort of Federal guarantee question.
We have ruled it out, for now, on the basis that the impact is
not that large and the alternate sources of accomplishing that
objective through the Private Sector and public bond financing
have not been fully utilized.
Q. What alternate solutions were considered before Standards
was adopted as a method of pollution control? Standards as
opposed to what?
MR. CARROLL: The Clean Air Act of 1970 said that we must
adopt Standards to protect the public health the six Ambient
Air Quality Standards that they put out in April of 1971.
There has to be some bench-mark against which to measure
the problem. I think there are different incentives in how to
achieve that Standard. But the Standard itself is no more than
a qualification and measurement of the problem.
MR. SANSOM: Tom, in the water area, there were public
health standards that were promulgated at the turn of the cen-
tury that did offer an incentive to construct many facilities
in the water sector construction of pollution control equipment.
In water this is not a recent phenomenon. It does date back to
the turn of the century.
MR. CARROLL: Does the macro study include cost benefits
of agricultural waste control.
I think it does not, is that correct, Bob?
MR. SANSOM: Correct.
MR. CARROLL: How would you propose to handle agricultural
water pollution? Are loans and grants in order?
We don't yet know really what the agricultural problem is.
It's easily identifiable in the case of feed lots which have
sole point source emissions. We are trying to study things now,
such as the problem of pesticides agricultural run-off — one
of the alternative methods of controlling it — and we're trying
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to solve that problem. Until we know what the control require-
ments are, it's premature, at this date, I think, to finance
something that we don't know what it is.
Q. With industrial bonds coming under the umbrella of taxes,
exemptions — what will the effect be upon the market for muni-
cipal bonds? And how will the Treasury Department look at
industrial bonds?
A. We have not yet been able to resolve that problem. The
industrial bond device is being used, because it tends to come
at the local level, but we found no place where any data is
collected. It's a rather recent phenomenon in terms of its
growth. We have checked o'ut several estimates that one tends
to read and ban, so_ the Private Sector is reporting in industrial
journals, and we have found when we have tried to trace all their
reports down that their data was even as iffy as ours. The
reports only gave someone's back-of-the-hand estimate.
We have talked to the Treasury Department. We are trying
to get a handle on this. When we find out how large it is, we
will then be able to talk to Treasury as to what kind of an
impact it will have. I think we still feel in terms of the
huge magnitude of municipal bonds in this country that this
increment on top of what has already been issued has no price
interest rate impact to date.
MR. SANSOM: Tom, we might give them the one estimate that
was put together by a Boston bank was last year, I think, was
65 million and this year, 500 million and projected in '73 to
2 billion. But that's just somebody's guesstimate, and is
someone who has a vested interest in selling the bonds.
MR. CARROLL: Since one of the goals is for us to become
better acquainted with EPA leadership, I will give a brief
background on each speaker.
I have the pleasure of introducing your next speaker.
Dr. Robert Sansom.
Bob is currently Deputy Assistant Administrator for Plan-
ning and Evaluation of EPA. This is one of the offices in my
Planning and Management Shop. Bob graduated from the Air Force
Academy in 1964 first in his class. From Georgetown University
in 1965, he received his Master's in Economics.
He was a Fullbright Fellow to Argentina in 1965. From 1965
to 1968, he was a Rhodes Scholar to Oxford University where he
received his Bachelor of Philosophy in 1966, and a Doctor of
Philosophy (Economics) in 1968. After all that education, Bob
became a White House Fellow, was assigned to Assistant to the
President for National Security Affairs in 1968. In 1969, he
became a member of the National Security Council Program Analysis
Staff, and he joined us in October of last year.
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And, I want you to know how we find highly qualified people:
Bob did a publication called "The Motor Pump: A Subsistance
Investment."
And if that doesn't equip him to talk about the environment,
I don't know what does.
MR. ROBERT SANSOM: Thank you, Tom.
I think you probably heard George Bernard Shaw's verdict
on economists. He said if you lay all the economists end to
end, they'd never reach a conclusion. And I think from what
Mr. Ruckelshaus and Mr. Carroll said today, we have reached a
few conclusions, albeit they are tentative.
My remarks will be addressed to two points: First, how did
we obtain the industry impact results Mr. Ruckelshaus and Mr.
Carroll have summarized for you today. That is, what happens to
industries to produce the plant closures, unemployment, and so
on we project? In addressing this point I will highlight some
of the results we expect in specific industries.
Second, I will review the macro-economic findings of the
impact studies, that is the aggregate impacts on prices, employ-
ment, trade and growth. And following that I want to examine
briefly the hotly debated issue, in some circles at least, of
growth versus the environment, asking the question — is a no-
growth policy required to preserve the environment?
It is necessary to begin with a brief review of the con-
ceputual underpinnings of the industry impact analysis.
The objective of our environmental policy is to improve
the quality of the environment and thereby save the society the
cost of pollution damage it is now bearing. This is the benefit-
cost test my colleagues will subsequently discuss in their
remarks.
The method of achieving our environmental objective,
enunciated repeatedly by the President, is to internalize the
cost, for example, by imposing regulations or taxes, so that
production-decision makers and consumers act in a way that
causes the reallocation of resources to less polluting activi-
ties. Such al alteration in our production and consumption
patterns will increase the total national product obtainable
from the labor and capital resources available to the economy.
Technically, the Environmental Protection Agency could
favor complete subsidization of the private cost of cleanup.
We are interested in cleaning up the environment but it would
not make economic sense for us to do so, except in cases of
acute social hardship. A subsidy to private industries would
represent a burden on the general taxpayer, whereas it is
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clearly the task of the producers and consumers of polluting
products to bear these costs. Moreover, subsidization would
only serve to delay the economic adjustments required to maxi-
mize the total national product obtainable from the resources
available to the economy and it would also discourage the
development of new techniques for pollution control.
I have said that this process of internalization should
and indeed will involve significant alterations in production
and consumption patterns. Therefore, profits in some industries
will decline, causing capital to move to new types of production,
and some prices will rise, causing consumers to switch consump-
tion patterns to less polluting products. As a result of this
process some plants will close and there will be some localized
unemployment. In other words, to capture the environmental
benefits some short-run dislocation costs will be borne.
The purpose of the industry impact studies was to assess
the magnitude and significance of these dislocation costs.
These impacts were estimated for 14 industries (micro studies).
Let me review the assumptions and cost data used in our
analysis: The time period for the micro studies was 1972-1976.
The standards for air were the assumed EPA guides to states for
achievement of 1975 ambient air standards. The standards for
water were the industrial equivalent to secondary treatment,
otherwise known as best practicable technology. It is important
to note that we have not studied the economic impact of the no
discharge provision currently incorporated in the Senate water
legislation.
Costs: The table in your hands entitled Cost Input for
Macro Model summarizes the cost used in our analysis. You see -
Investment costs. (Explain chart ...) Total annualized costs.
(Explain chart ...)
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COST INPUT FOR MACRO MODEL
(1971 Billions of Dollars)
25 Industries
Investment
Air
Water
TOTAL
Annualized
Air
Water
TOTAL
Total Cost
•
1972
.8
1.2
2.0
Costs:
.14
.87
1.01
1973
1.3
1.3
2.6
.39
1.13
1.52
: (Adjusted
1974
3.6
1.4
5.0
1.19
1.48
2.67
1975 1976
4.3
1.5
5.8
2.11 2
1.87 2
3.98 4
2.0
1.5
3.5
.36
.19
.55
1972-76
12.0
6.9
18.9
6.19
7.54
13.73
1972-80
17.3
8.9
26.2
"
for depreciation)
2.95 4.03 7.48 9.48 7.70
31.64
-27-
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Caveats on Cost. These costs are our best estimates at
this time. They do not account for:
Technology and process change, which could lower cost
substantially. This is a conservative assumption for
1972-1976 and would not apply to the long run.
Price changes which could alter the levels assumed by
our models.
Different methods of financing while technically not
cost reducing, do reduce impacts, such as: (1) Indus-
trial development bonds which permit tax exempt financing
of pollution abatement control investment. Corporations
can save 1 to 2% on the prevailing interest rate, gain
access to new sources of capital, and in some cases
extend the length of time over which they can pay for
pollution control investments. (2) Use of section 169
of the Internal Revenue Code which permits some pollution
control investments to be depreciated over 5 years.
It should be noted in this regard that the Price Commission
has ruled that price increases due to pollution control costs
are exempted from the Phase II guidelines (Ruling No. 53).
Turning to the quantitative results, here is our general
assessment of 14 industry studies: (1) No industries will be
serverely impacted. This means their long run viability is not
threatened and that most plants will continue to produce and be
profitable. (2) But profits will decline for firms that cannot
pass on the full cost of pollution control. The most serious
problem arises with small and old plants. Small plants cannot
take advantage of the economies of scale associated with pollu-
tion treatment techniques. (3) These effects can be summarized
as follows: Prices - Zero percent to 10% for the 1972 to 1976
period, depending on the industry, or about 0 to 2% per year
average for 1972 to 1976. Closures - Of the approximately
12,000 plants now operating in the industries studied, 800 are
expected to close in the 1972-1976 period even if no pollution
control costs. The impact analysis estimates an additional
200 to 300 can be expected to close because of pollution require-
ments in the 1972 to 1976 period, and the vast majority of these
were likely to have closed in the 1976 to 1980 period in any
case. Plant closings are likely in 7 of the 14 industries
studied — fruit, vegetable canning and freezing, paper, iron
foundries, petroleum, cement, copper, and steel. Job Losses -
Direct job losses are projected to be 50,000 to 125,000 for the
entire 1972 to 1976 period. This translates to 1% to 4% of the
total employment in the industries covered. It also represents
roughly .05% of the 1970 total national work force. On a net
national basis offsetting employment opportunities will occur,
but not necessarily in the same industry or communities.
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Community Impact - A portion of the 200 to 300 additional plant
closings will take place in small communities in which these
plants are a dominant economic factor. It is estimated that
50 to 150 communities will be substantially impacted.
Our current assessment is that the job losses and community
impacts associated with plant closures can be dealth with by
existing government programs including: Economic Development
Administration loans to impacted communities and industries,
Small Business Administration loans, and Department of Labor
assistance to assist in job transfers.
Adverse international trade effects are possible in the
following industries: steel, paper, petroleum, automobiles, and
non-ferrous metals, given our conservative assumption that
additional pollution controls are not imposed on foreign pro-
ducers.
Four industries of 14 studied are expected to make total
investment of $1 billion or more in 1972-76 period. These are
steel, paper, petroleum, and electric utilities. Greatest
requirement is for electric utilities at $8-11 billion followed
by steel at $2.4-$3.5 billion, and paper at $3.3 billion.
In terms of the consumer, the impact of these costs will
be most evident for electric utilities than for any other indus-
try. As noted, electric utilities will invest about $11 billion,
3/4 for air, 1/4 for water. Annual cost will rise from $338
million in 1972 to $2.5 billion in 1976.
Average control costs in 1976 will be about 10% of 1970
revenues. In accordance with regulatory practice, justified
utility costs are passed on to consumers in higher rates. Thus
we can expect by 1976 or shortly thereafter, consumers could be
paying roughly 10% more for electricity. In the west where
more low sulfur fuels are available, increases of 5% or less
can be expected. But in the high sulfur coal burning east,
particularly the TVA area, increases of up to 15% can be
expected.
For the average consumer, the 10% nationwide average could
add $12.00 per year to his electricity bill.
Of all industries studied, pulp and paper can expect the
most plant closures and unemployment impacts. For this indus-
try as will price increases will hit the top of the 10% range
for 1972-76 found in the industry studies.
The $3.3 billion capital expenditure represents an annua-
lized cost burden of $5.50 to $12.50 per ton of paper or a rise
of 3.5% to 10%.
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Most mills will manage control expenses easily but 329
marginal plants will have difficulty. Even without pollution
control expenditure requirements, 30-35 of these will close
during the next five years. Pollution control requirements
will close another 60-65 mills by 1976 with an associated job
loss of about 15,000 jobs. Some of these closings will occur
in rural areas where significant community impacts are expected,
Now to the question of growth versus the environment. The
appropriate point of departure is our estimate of the macro-
economic or economy wide impact of the costs to meet 1976 stand-
ards. In our macro analysis, done for 1972-80 period, we
employed an econometric model of the economy. It reported the
following impacts:
Increased pollution control costs will increase industry
(capital goods) prices and the overall (consumer) price
level. Such increases will slow down demand over other-
wise projected levels. This drop in consumption and
investment demand will be greater in the aggregate than
the increase in the investment demand generated by the
increased pollution control investments.
Thus, the rate of growth of the real GNP will be retarded
and the economy will fall from its full employment growth
patch causing increased unemployment. There will also be
trade losses as a result of higher prices.
Compensatory, monetary, and fiscal policies can offset the
retarding effect of these expenditures so as to bring
growth and employment back to full utilization levels.
But this return to the full employment growth path will
be at the expense of some price increases and negative
trade effects.
The actual quantitative estimate for these impacts are as
follows:
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Annual Average 1972-1980
(1958 Dollars)
Pollution Control
Pollution Control and Offset
-$6.0B 0
-1% 0
(-.3% '72-'76)
(+.2% '77-'80)
3. Prices +3.9% 0% +.3%
(+.3% '72-'76)
(-.3% '77-'80)
4. Unemploy- 4.6% +.1% 0
ment
5. Trade: - -.7B -$1.9B
Current
Account
Balance
I believe the most significant conclusion that can be
drawn from these studies is that the economy will adjust to
the dislocations resulting from pollution control costs with
little aggregate impacts, except possibly in the trade area.
The consumer and the producer at large will hardly notice the
aggregate impacts on growth, employment, and prices. While
some industries will experience substantial impacts, all
industries will survive.
As environmentalists we can take comfort that not only do
the benefits of our activity exceed their costs for the levels
of control presently contemplated for this decade, but the
economic impact of these changes in production and consumption
in the economy will not bring general economic and general
environmental goals in conflict.
Will these conclusions apply for the long run? Are there
environmental limits to growth?
The short answer is we don't know. But the issue is worth
pursuing for a moment if for no other reason than that there
has been recently published a pamphlet titled the Limits to
Growth. It reports the results of MIT computer simulations on
the subject done for the Cluf of Rome. Limits examines four
scenarious. To save time I will address two of these.
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The first, which I will call the "Resource Exhaustion
System Collpase Secenario" projects continued growth until
limited natural resources are exhausted, e.g., coal in 150
years. Industrial production halts and highly mechanized
agricultural output which is dependent on industrial produc-
tion also collapes. The world starves.
The second scenario assumes resource saving technology
permits growth to continue but rising pollution eventually
poisons the environment so that either we stop growth or die.
Under either scenario these bleak results are expected
within about 150 years.
Limits concludes: (1) GNP and population growth must stop,
(2) Comprehensive planning must be employed to enforce an
"Equillibrium" no growth state.
This is very serious business. Massive income redistri-
bution would be required or otherwise income differences of
multiples of 150 would remain common between poor and rich
countries. More standardized and routinized living might be
in order.
How valid are these results? Are they mere mathematical
truisms or do they have empirical content?
My analysis is that these projections should be given
little weight at this time. My suspicion is that these results
are the product of good computer modeling but poor history and
poor economics.
Why do I say this: (1) We do not know that technology
will not continue to make natural resources available or sub-
stitutes therefor at an exponential rate. It has thus far.
(2) Market pricing is not incorporated in the model (reference
first scenario). (3) We are not sure that pollution cannot be
controlled without bankrupting the economy (reference scenario
two) . The results we have reviewed today suggest it can. If
these costs result in 80% abatement in air and water pollution
by 1990 — on the order of what we project — a 4% economic
growth rate — which doubles the size of the economy every
18 years, would yield an equivalent level of pollution to what
we have today in the year 2012.* (4) Even with our results,
while the global and U. S. outlooks are good, some localities,
+ 20% = 40%
* 1972-1990
1990-2008
2008-2012
2008-2026
18 years
18 years
1/4 (18)
18 years
20%
80%
100%
160%
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including this one, must employ land use planning, transporta-
tion innovations and other techniques to achieve ambient
standards. In other words, they, must go beyond the 80% to
90% reduction planned nationwide.
Finally, avoidance of noise, visual congestion and other
types of environmental impacts may dictate a slower growth
rate than dictated by present air and water goals.
In sum, I conclude that: (1) Our environmental and eco-
nomic goals are not presently in conflict nor are they likely
to be so at positive growth rates as far as we can see into
the next century.T2) Growth for growth's sake has no place
in a society that values its environment. We must be more
precise. [Maybe 2% which doubles the economy every 35 years is
better than 4%. Maybe at 4% or 2% we need more services and
fewer automobiles.] (3) We badly need a better empirical
understanding of the relationship between growth and pollution.
The Environmental Protection Agency is undertaking to assist
in developing this understanding. We would welcome any ideas
you have and urge that serious private as well as public analy-
sis be undertaken on these issues.
Thank you.
MR. DE FALCO: You know, sitting up here is really quite
exciting. If you saw the diversity and the very intelligence
of some of these questions — I haven't had an audience like
this in a long time, so, we're going to have to run through
some quickly — we'11 try to bring them down by categories.
Are you ready, Bob?
MR. SANSOM: Yes
MR. DE FALCO: Since when can a competitive firm pass on
its increased costs through price?
MR. SANSOM: Well, that depends upon the market.
A perfectly competitive firm can pass on its costs be-
cause all firms in the industry have the same costs, and
nobody reaches a competitive advantage. If anybody doesn't
pass them on, he goes out of business. That's a definition
of a perfectly competitive firm.
MR. DE FALCO: Was Leontoff's I-O Table employed in the
micro analysis?
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MR SANSOM: We didn't use Leontoff's work but the Chase
Econometric model used an input-output table to pass through
price effects from one industry to the other. For example,
if you have an increase in electricity prices, that affects
the price of aluminum which affects the price of a lot of
consumption goods and is reflected in the price index. So
we didn't use input-output models to get the passer effect
of prices.
MR. DE FALCO: Why didn't the micro economic study of
electric power consider NOX, whereas, the February EPA report
did?
MR. SANSOM: I think the answer to that is we didn't
have good cost estimates. El, do you have anything to say
on that?
MR. BURTON: (Inaudible).
MR. DE FALCO: Why did the micro economic study of
electric power consider NOX whereas — did not consider —
whereas the February EPA report on air did?
MR. SANSOM: Let me say one thing on this. We know
in the State implementation plans, because of the problems
in finding an appropriate technology to control nitrogen
oxides from stationary sources, that the states are not
demanding reductions beyond what the technology will permit.
Therefore, the impact studies tried to make a real world
estimate of the actual costs and actual impacts. And in this
sense, the impact studies are reflective of what's going on
in the real world.
MR. DE FALCO: Within the limits of present technology,
it is practical to establish harmful limits of air pollutants
and then for each community or region determine a maximum
population of people and industry which should be permitted
under Health and Safety Codes to avoid injury to the health
of the community or region?
MR. SANSOM: I think that given our present knowledge
of the kind of things I was just discussing, like the rate
of technological progress to control pollution, the pollution
effects of various types of production, that we are not now
in the position to say, this is the optimum population — the
optimum growth rate in the optimum set of social circumstances
for a community.
MR. DE FALCO: Here, Bob, your past is going to haunt you.
Do you see a basic public interest conflict between the secrecy
considerations of national security, for instance about which
you are knowledgeable, and the achievement of a balance of
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national resources and the development of a realistic policy
of industries related to national security?
MR. SANSOM: I thought at first the question was related
to the environment, I think it's related to the defense
industry. Read it again.
MR DE FALCO: Well, it is a lengthy question. The word
environment doesn't show up.
MR. SANSOM: Send that to Henry Kissinger.
MR. DE FALCO: Are copies of the economic studies made
by the various consultants available to the public? If so,
where and how do they get them?
MR. SANSOM: The summary is available through the EPA
Public Affair Office. You've got to recognize that each one
of these studies is about a three-volume work on each industry,
and we have a document available in the press office, as does
the Department of Commerce, and the Council of Environmental
Quality, that contains only the Executive Summary to these
multi-volume studies. If you want the full studies, the Depart-
ment of Commerce technical information service will make these
available to you.
MR. DE FALCO: What counter bill in economic impact, new
gross product, new jobs, etc., do you predict coming from the
pollution control industry?
MR. SANSOM: That effect is accounted for in the model:
First, we crank in these pollution abatement control expendi-
tures. They create employment. They create the additional
price pressure on the price index that give you the rise in
prices. So the net — the macro-economic model includes the
net effects of both the negative effect on an industry and
the positive effect on new industries to build the devices
for these plants. So the aggregate results from the table
that you have, encompass both the facts. I think one simple
and not totally unreliable way to look at this is that the
average product of labor in the plants that close is probably
much lower than the average product of labor in the plants
that open.
And therefore the aggregate labor effects are negative
in the absence of compensatory monetary and fiscal policies.
MR. DE FALCO: Has EPA investigated the use of social
impact analysis as well as economic impact analysis to arrive
at a better understanding of environmental impact? Should
you not help to perfect this methodology?
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MR. SANSOM: I think the first question is social impacts
— that's what all the benefits analysis we've talked about
today and we'll subsequently talk about concerns.
We're looking at the benefits. There is the effects on
mortaility and lifetime income that we can put a value on.
There's the human grief associated with a death or an early
death or an illness that you can't put a value on. There's
a value that we would like to assign, but we cannot very
precisely assign to esthetics, but we are trying to devise
measures, we're trying to look at ways to revise the National
Income Account System to take into account more the quality
as opposed to the quantity of life. So we're working on it.
MR. DE FALCO: My other question here is that somebody
doesn't understand the 3 billion dollar difference between
our investment estimate of the electric power industry and
the February '72 EPA report and the micro study and is refer-
ring pages.
MR. SANSOM: Whoever that is, it might be better to have
him come up and discuss it with us.
I think the point is we used a range in all of our micro
studies just to cope with this kind of uncertainty about the
price effects. I gave you the most probable cost estimates,
but we in every case included a range, and in electric
utilities we went all the way up to 17 billion to examine the
impact. But our conclusions^ are drawn not only from the best
guesstimate, or the best estimate cost, but also the high. So
the conclusions that were drawn do account for the 17 billion
dollar figure in electric utilities industry. I'd be glad to
discuss it.
MR. DE FALCO: Will the cost to the public be monitored?
Or will the cost of clean air — cost of cleanup be an excuse
for price increases?
MR. SANSOM: I refer that to the Council of Economic
Advisors and the Price Commission and Pay Board.
I think that to the extent that there is competition,
the issue will resolve itself. To the extent that there
is not competition, that's an issue for the Department of
Justice and other people who are concerned about that problem.
•MR. DE FALCO: Isn't the possibility of offset based on
currently high unemployment? In this case, zero cost is mis-
leading since effective stabilization policy without pollution
control would increase gross national product.
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MR. SANSOM: That's not true. The problem is that we
assume a full.employment baseline case, and then once you
crank in the investment costs, you get a falling off from
that growth path. But, if you'd take the compensatory mone-
tary and fiscal policies on the baseline case, you wouldn't
have had more employment because you're already fully employed.
What you would have had was higher price rises and more imports.
MR. DE FALCO: Are you suggesting that recent MIT studies
utilized bad economics and bad history in reaching its findings?
MR SANSOM: Yes.
MR. DE FALCO: Wow! In EPA's cost incentive for calcula-
tions , does EPA use the present value concept of costs and
benefits which stream forward in time? If so, what discount
rate is used and what is its rationale?
MR. SANSOM: The answer to that is we don't use discounting
as much as we ought to. But when we do, we use 10 percent.
MR. DE FALCO: Based on your pollution control cost esti-
mates , what would be the impact on the economy if it were not
a full employment base? Say the base for unemployment is 5.5
percent.
MR. SANSOM: It would be positive and bring the economy
toward full employment without the requirement for compensatory
monetary and fiscal policies.
MR. CARROLL: Well, just before we break for lunch, here
are some random questions for you to think about during lunch:
How can industries feel competent that they've satisfied
pollution regulations as long as local Governments have the
ability to legislate in this area.
It can't be very comfortable.
We can spend thousands to satisfy Federal regulations,
then have the equivalent become obsolete. That is a risk and
we can't control at the Federal level what the locals do.
Here is somebody who says that they know about a radical
departure from the present methods of feeding fuel to an inter-
nal combustion engine, and that they feel they can prove it
to us. And I would invite him to appear before our Air Testi-
mony Hearing starting April 10th in Washington.
This says, why are we ignoring radiation hazards in this
meeting? We're not. We had to start from scratch last year.
We took those pollutants which had the highest cost in benefit
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impact, those on which we had some data base. That was air,
water and solid waste. Next year we will be including more
in the pesticides, radiation, noise and other areas.
FROM THE FLOOR: Excuse me, sir. Why don't you read that
question in full — regarding the radical departure?
MR. CARROLL: Well, I'd be delighted — It says, "—the
radical departure from the present method of feeding fuel to
an internal combustion engine has been developed to the point
of pre-production models. It allows for any unadulterated
hydrocarbon fuel that is free flowing to be used on the auto-
mobiles that are now on our highways with a simple mechanism
that replaces the present pipes of carburetors as well as
being adaptable to new automobiles. Virtually complete com-
busion is performed if the combusion chamber is in good con-
dition. "
FROM THE FLOOR: Thank you.
MR. CARROLL: You're welcome.
Poisoning of predators by the Federal Government and health
effects. Would I discuss lead and heavy metals?
And would I discuss permits to spread insecticides by air-
planes without safeguards? And what are we doing about safe
handling, storage and disposal of pesticides and atomic waste?
And discuss Alaska Pipeline statement.
Each one of those is very complicated. We have had to
take the predator action, which is a broader based action than
we had hoped for. There is a pesticides bill which is past
the House now pending the Senate, which will allow us to be
more selective in our controls. So we don't have to go for
total suspension or total ban.
And on the safe handling, storage and disposal of atomic
wastes? Yes, we are doing some research on that as is the
Atomic Energy Commission. In both cases, we file public state-
ments on any proposal through the Environmental Impact State-
ment process.
Here is a question that says, should we talk about data,
but the type that is needed, both physical and for clinical
health is not being gathered. Therefore, should not we have
more monitoring stations at ground level, monitoring of all
stationary resources?
Absolutely, we think so.
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One of the problems that we've had in EPA is to try to
coordinate our monitoring activities. We've had air and water
monitoring in the States and the Federal Government and the
State and localities have had it, and the U. S. Geological
Service, Department of Interior. We're trying to integrate
all that monitoring now with common measurements — common
technology so that we can leverage what limited resources we
have available to us. We're expanding in that area signifi-
cantly in 1973 and '74.
What are the expected contributions to pollution control
and such devices as the Environmental Impact Statement in the
face of entrepreneurial aggressiveness? Some other nasty words.
We feel that the Environmental Impact Statement has been
an absolutely marvelous device, because it has brought to the
public awareness what must go into the decision process, both
for short-term and long-term effects of the decision-making
process.
Yes, we're having some trouble with the courts these days,
but we don't feel that that's particularly a problem.
How can our current annualized fiscal budgeting solve
problems that continue over several years? If you're referring
to the water problem, and the funneling of the municipal waste
treatment plan, the Senate Bill and the House Bill both have
contract requirements which will be outside the annual budgeting
process. If we base our regulations on health, or does that
consider chronic long-term effects on health? Yes, it does.
Not just short-term.
You have mentioned that you have no product as such, but
your research is a product. What method of private industry
research funding do you use?
On the first question, what I meant by product is that we
don't have the remission or the responsibility such as the
Department of Commerce to increase industrial profits and growth
or such as the Interior to develop public lands, be it timer
cutting or oil shell development or the like.
Yes, research is a product. The sort of study you had
today is a product. We use both grants, contracts, and any
method we can to best achieve the research end.
Here's a question that says: How can the Government
through EPA expect the citizen to clean up if they don't? It
refers to Admiral Zumwalt's memo of the other day in which he
advised his new officers to spend some money this year so they
won't get cutbacks.
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It is interesting that we are now considering proposed
vessel regulations, as I think I mentioned earlier- but it's
the Navy who stepped out even before that regulation was pro-
mulgated, and announced last week that in San Diego Harbor they
are under a program where they will have holding tax and abso-
lutely no discharge on their vehicles — or on their ships
within three years.
Why is not noise abatement and safety considered as
important as the mentioned subjects?
Again, it's a question that we started on what base we
had. During the course of 1970, pursuant to the Clean Air
Act of 1970, we did a study on noise, which again we feel is
one of the most comprehensive ever undertaken. One of the
weaknesses of that study was economic data. We found that
we had very little economic data on noise. We found in the
literature and other activities, in both Private and Public
Sectors, very little data on the chronic damage of noise —
and that report, if anybody is interested in it, we'll be
happy to submit to you. We have that at the EPA Public
Affairs Office and we'll have something on noise economics
for your year-end benefits.
And this asks — it says: Don't we sometimes have trouble
with the Commerce Department or other departments of the Govern-
ment who don't want to do the same things that we want to do?
And it says: Who has the final say, particularly in the case
of pesticide legislation?
Well, obviously, the final say is the Congress, and it's
one of the marvelous things of EPA — we're cross-cutting across
the Federal Government that we do involve ourselves quite often
in adversary relationship between the Department of Commerce
or the Department of Interior, Agriculture, and the like, but
that is one form that we go through and we have sort of a
melting pot process to try to represent a diversity of points
of view before that regulation comes out in the first place.
That's the general questions, Paul.
MR. DE FALCO: Thank you, Tom.
Before we break for lunch, I have an announcement.
We will reconvene promptly at 1:30. The meeting stands
adjourned.
-4 0.-
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Afternoon session.
MR. DE FALCO: May we reconvene please.
Ladies and gentlemen, I have several announcements before
we get into the afternoon session of the program.
One, there are some, I understand, urgent telephone
messages on the bulletin board in back for the following indi-
viduals: Harry Griffin; Arthur Sutton; Dr. Moorehead; Phil
Voorhees; Alec Stenman; Dr. Joseph Meltzer. There are messages
on the board in back. Would you please consult them.
Two, in the handouts this morning, you received two
individual sheets of paper. One in particular is headed, "Annual
Average 1972 - 1980, 1958 Dollars." There is a correction to
be made on Line 2 — a rather significant correction. Item 2,
Growth, the base is plus 4.8 percent. Pollution Control is
minus .1 percent. Not minus 1 percent, as it appears. Which
in other words, would bring the base down 4.7 percent. So if
you'll correct your handouts.
Thirdly, we've had a number of requests for a transcript
of the meeting, including the questions and answers to be made
available. Could I get a showing of hands as to those who
would be interested in receiving such to determine whether we
should go through the works?
MR. DE FALCO: I guess it isn't even close. Okay.
There is another item here: What system do you use for
distribution of information on current research or needs for
research, etcetera?
Most of our studies, and in particular all of our research
studies, are filed in Government depository libraries which are
usually University libraries in most of the major cities in the
country and are available from same. They are also available,
in most cases, from the Government Printing Office.
Now I shall start the program.
Tom, would you introduce the next member of your staff?
MR. CARROLL: Ellison Burton is now Director of the.Air
and Radiation Program Systems Division in the Office of Plan-
ning and Evaluation, in the Office of the Assistant Administra-
tor for Planning and Management, in the Office of the Adminis-
trator of EPA. And that just shows you that we haven't for-
gotten how to be bureaucratic.
He graduated in 1951. Bachelor of Arts cum laude in
mathematics from Amherst. He received in 1957 a Diploma in
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Mathematical Statistics from Cambridge University, Trinity
College.
Ellison started his work career in 1951 as an analyst in
input-output studies at the Bureau of the Budget. He had a
tour of duty in the Navy. He had a variety of positions in
administrative management and technical management with con-
sulting firms through 1966, but since 1966 until last year, he
has been with Erust & Erust as Director of the Environmental
Studies Group of that management consulting firm. It has always
intrigued me that as consultnat to the then National Air Pollu-
tion Control Administration, Ellison wrote the first report to
Congress on the cost of clean air. I think we're now up to our
seventh, is that right? This here is number 7?
MR. BURTON: No, it's the fifth.
MR. CARROLL: Fifth? Well, that shows that he's been with
us for quite a while. He's done work in tax incentives in
mobile source pollution control submission alternative strate-
gies, computerized simulation approach to analysis of regional
plan, both air and solid waste, and is now responsible for all
of our planning for air pollution control and for radiation.
Elli Burton.
MR. DE FALCO: While Ellison is getting up to the podium,
I have two other announcements for those of you who came in
late in the day or this afternoon.
Questions to the panel: If you have any questions, would
you please raise your hand. I have staff walking the aisles
with three by five cards. Put your questions on those cards,
return it to them and they'll be sent up here.
And secondly, I must apologize this morning for keeping
you seated as long as I did. We'll try and take a break some-
time midway this afternoon. Thank you.
MR. BURTON: You have already heard the welcome news that
pollution control programs, while entailing substantial costs,
are not going to turn the country" into an economic wasteland.
It is possible to be somewhat more positive than that, however.
I will discuss evidence that implementation of the Federal Clean
Air Act is likely to provide net economic benefits to the public
in the form of better health, and a cleaner, more enjoyable
environment.
First, let me briefly review some major provisions of the
Federal Clean Air Act.
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The law defines clean air in terras of attaining national
primary and secondary air quality standards for pollutants
judged to pose a threat to public health and welfare. Attain-
ment of a primary standard is protective of public health,
while attainment of a secondary standard protects from all
other air pollution damage. On April 30, 1971, EPA promulgated
primary and secondary national air quality standards for sul-
phur oxides, particulate matter, carbon monoxide, photochemical
oxidants, hydrocarbons, arid nitrogen dioxide. These standards
are based on the levels at which these pollutants have been
observed to have adverse effects on human health, property,
materials, animals, vegetation, and safety.
By the end of January 1972 the states were to have submit-
ted plans providing for implementation, maintenance, and
enforcement of the primary standards. Almost all states have
submitted such plans. The law allows up to an additional 18
months for states to submit plans for attaining the secondary
standards.
A major provision of the Act having an important bearing
on any discussion of costs and benefits requires that emission
of carbon monoxide, hydrocarbons, and nitrogen oxides from
1975 and 1976 autos be reduced at least 90% from 1970 to 1971
levels.
EPA's assessment of the costs and benefits of implementing
the Act are contained in an annual report to the Congress.
The summary chapter of this year's report has been distributed
to you for reference. The full report, entitled "The Economics
of Clean Air", is available as a Senate Public Works Committees
print from the Superintendent of Documents in Washington, D. C.
Five Fiscal Years, 1973 through 1977, are covered in the
report. Coincidentally, 1977 is the year in which any major
extensions which might be granted under the law run out. So
it is a good year to use as a basis for cost-benefit analysis.
What will be the size of the national air pollution problem
in 1977? Table 1-1 shows if further controls were not required,
1977 emissions would exceed 36 million tons of particulate,
46 million tons of sulfur oxides, 217 million tons of carbon
monoxide, 41 million tons of hydrocarbons, and 26 million tons
of nitrogen oxides. We estimate that these uncontrolled
emissions will cause 25 billion dollars damage to public health
and welfare in 1977 alone. Table 1-2 and 1-3 show how this
potential damage is distributed. It is important to note that
over 21 billion of this damage is attributable to particulate
and sulfur oxides emissions. But this is not to say that oxidant,
nitrogen oxides and carbon monoxide cause only the remaining
4 billion of damage. In Table 1-2 please note footnote 3,
which says that no health and property damage is included for
these three pollutants because of lack of information. There
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are reasons to believe that the economic damage caused by these
pollutants is substantial however. In 1977, mobile sources,
if controlled, would contribute about 3/4 of the CO, over 1/3
of the NOX, and about 2/3 of the HC. Since NOX and HC interact
in the presence of sunlight to produce photochemical smog,
mobile sources probably cause most smog formation. Stationary
fuel combusion sources emit most of the balance of these pollu-
tants. Some health and property damage is ascribed to mobile
sources in Table 1-3 but only from minor amounts of particulate
and SOx emitted. Compliance of stationary and mobile sources
with EPA guideline standards will produce about a 40 percent
reduction in particulate emissions, an 80 percent reduction in
sulfur oxides, a 60 percent reduction in carbon monoxide, a
20 percent reduction in hydrocarbons, and a 60 percent reduction
in nitrogen oxides. These national emissions and reductions are
shown in the bottom line of Table 1-1.
The total fixed plus operating cost in 1977 to achieve
these emission reductions is estimated to be 12.3 billion dollars
annually, in 1970 dollars. You will note that of this total,
stationary source control costs are estimated at about 4 billion
dollars annually, while the mobile source control costs are
estimated at over 8 billion dollars. Cumulative costs during
1973-77 will total 24.7 billion for mobile sources and 17.2
billion for stationary sources. A few words about the reli-
ability of these estimates.
The stationary source control costs are based on the
application of reasonably available technology. In most cases
this is technology about which we have considerable engineered
cost information on purchase, installation, maintenance, and
operation. An important point is that the designers and
suppliers of stationary source emission controls are highly
competitive and usually independent of their customers. As a
result, there is much more advertising of wares, more open
literature, and many more sources of reliable opinion upon which
to base cost estimates. In short, we regard the 4 billion dollar
figure as a fairly reliable estimate of the 1977 annual cost
of stationary source compliance with EPA guideline standards.
The automobile is a source of a different color, as it
were. Here we are requiring direct modification of the
product rather than the production facility. The 1975 and
76 standards are stringent, however, and reliable control
technology capable of meeting those standards is still under
development. We are therefore almost wholly dependent on the
industry for information on the final emission control design
and cost factors for 1976 and 1976 cars. A wide-range of
estimates have been provided to us by the manufacturers for
the various technical approaches they are considering. In
computing national costs we selected a single technical approach
which appeared to us to be most likely to meet all requirements
through 1976. We used 350 dollars per car as our working esti-
mate.
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I want to emphasize that this cost applies to a rapidly
developing technology. You should accept it with the under-
standing that it may change considerably.
Let's assume though that 12.3 billion dollars is_ the
national cost in 1977 of bringing both stationary and mobile
sources into compliance with the Clean Air Act. What benefit
will we derive from this huge expenditure? Table 1-4 shows an
estimate of over 14 billion dollars in reduced damage costs in
1977 as the economic benefit resulting from the national emis-
sion reductions shown in Table 1-1. In other words, the annual
economic benefits exceed annual control costs by about 2 billion
dollars in 1977. Over the 5 year period 1973-77 we estimate
that economic benefits will total around 60 billion dollars
while the cumulative control costs amount to 42 billion dollars.
In Table 1-4 we see that the separate economic benefits
from controlling incineration of solid waste, stationary fuel
combustion (including electric power generation), and seventeen
major industrial process industries are greater than the control
costs for each of these source classes. For mobile sources,
though, the opposite appears to be the case—costs outweigh
economic benefits. The appearance is grossly misleading. You
recall those very important footnotes in Table 1-2 and 1-3 which
say that we have essentially no information on the health and
property damage done by mobile source-related pollutants, except
for that ascribed to minor amounts of particulate and SOX-
Mobile source-related damage data thus refer almost wholly to
materials and vegetation damage. Economic benefits shown for
mobile source emission controls, therefore, is derived only from
reduction of damage to materials and regetation. Although, we
have little or no data on the economic costs of health damage
from CO, NOx °x/ we can cite specific adverse physical effects
of these pollutants on people. But we are not very well informed
on the changes that occur in health damage as concentrations
increase above the primary standards. We also do not know very
precisely the portion of health effects attributable to mobile
sources and portion attributable to stationary sources of
these pollutants. Moreover, that apportionment is probably
differenct for every city in the nation.
There are, in addition, for mobile as well as stationary
sources, non-economic damages caused by air pollution, including
aesthetic insults, degraded quality of life, and pain and
suffering caused by pollution-related health effects. Although
non-quantifiable, these effects are no less real to those
affected and must be taken into account in any discussion of
the benefits of pollution control. For all of these reasons
it is presently impossible to carry out even a crude cost-
benefit analysis of mobile source pollution control. Such an
analysis must:
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1. Determine the damages resulting from exposure to
pollutants at various concentration levels, not just
at the level of effect providing the basis for our
standards.
2. Determine the relationship between emissions and
pollutant concentrations that impact on health.
3. Calculate the costs associated with emission control.
4. Utilize a correct benefit-cost methodology (e.g. cost
streams, discount rates, etc.).
A proposal that has recently received some notice involves
a two-car strategy. By this is meant stringent controls on
cars operated in highly polluted areas but less stringent con-
trols on cars operated in relatively clean areas. This proposal
is put forward by some who believe that the national controls
mandated by the Clean Air Act may not be economically justifi-
able even though auto emissions are a severe problem in some
cities. However, no cost-benefit analysis has been offered to
justify the optimism that significant cost reductions could be
realized by a two car strategy. Since new legislation would be
required, several important questions affecting costs and bene-
fits would have to be answered before a legislative proposal is
considered seriously. First, can auto manufacturers design and
make twice the number of models at a reasonable cost? Second,
how could people be prevented from buying high emission cars in
unpolluted areas and operating them in polluted areas? The
third, and perhaps controlling, question is whether the cost
savings of a two car strategy justify the political, technical,
and administrative difficulties of implementing and enforcing
it? If, as may be the case, the additional cost to meet the
1975-76 standards is only 50 dollars per car, the answer is
probably no. If it were, say, $1000 per car, the answer might
be different.
The lack of information on mobile source-related pollutant
damages and benefits means'that the gross cost-benefit compari-
son made earlier of 42 billion of costs vs. 60 billion of bene-
fits over 5 years is very conservative since we included all
mobile source control costs but almost no benefits of such
control.
I would like to mention in closing that we are studying
less costly ways of achieving clean air. For example, we are
exploring such concepts as regional least cost strategies,
which may be on the order of only a fourth as costly as typical
strategies now proposed. It is possible that least cost strate-
gies could be implemented through the use of effluent fees or
other incentives for effecting self-regulation. The ideal system
would achieve substantial benefits from air pollution abatement
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not only at minimum cost but also with minimum regulatory inter-
vention. We will have to "go some" to achieve the ideal, but
in the meantime, while the level of cost and regulation may be
substantial, we are convinced that on balance cleaner air will
produce substantial net benefits for our whole society.
MR. DE FALCO: What is the cost in terms of air pollution
damages to urban dwellers? Can you suggest any research done
in this area?
MR. BURTON: What is the cost?
MR. DE FALCO: What is the cost in terms of air pollution
damages to urban dwellers?
MR. SANSOM: Do we have anything in the micro studies on
that?
MR. BURTON: No, I think the cost to intra-city dwellers,
estimated in the Lave & Seskin studies on which our 16 and 25
billion figures were based, were cross-sectional econometric
analyses of urban areas. So these damage figures are based
upon damages measured across urban areas.
MR. SANSOM: We haven't broken it down by cost per family.
I thought that was what was asked.
MR. BURTON: You mean — I see, the allocation of the costs
MR. SANSOM: Yes.
MR. BURTON: No, we haven't distinguished between urban
and non-urban.
MR. BURTON: There was a question from this morning that
I was holding to answer. Someone asked, "Why didn't the micro
economic study of electric power consider nitrogen oxides
control whereas the February Economics of Clean Air did?"
Well, the February report did not. We included the emissions
and they're shown in Table 1-1, but we applied no emission
control technology model against that, so there was no reduc-
tion of NOX from stream electric power plants.
MR. CARROLL: Why don't we have data on the effects of
single and total pollutants CO, NOX, HC? And how much money
is being spent to find out?
MR. BURTON: Well, I think we have not because the studies
were not fielded long ago, and these have to be long-term
studies. Nothing has paid off yet that gives us the kind of
damage information that we need, but EPA has increased its
budget in this area this year.
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MR. CARROLL: We're planning to do it in fiscal year '73.
UNIDENTIFIED SPEAKER: That starts in three months.
MR. CARROLL: Will you relate the costs of clean air to
individuals by income class? I.e., one group cannot pay and
the other extreme can pay. However, it seems that to a large
number of low middle-income people, this will mean a large drop
in their standard of living — no car at all instead of a
cheaper one, no trailer to enjoy the environment.
MR. BURTON: Well, these have been considerations. In
some economic circles it's been pointed out that lower income
groups are capital goods oriented; that's what they would go
for with increased income. So, I guess in that sense, pollu-
tion control costs might tend to raise the costs dispropor-
tionately with regard to that group. But I think that the
longer term considerations are that improvements in health and
welfare for the total population bnefit all classes, increasing
productive life, reducing medical costs, and so forth.
MR. SANSOM: Also/ that the lower income classes in urban
areas where the concentration of air pollutants are located,
stand to benefit more.
MR. CARROLL: What percentage or removals of five primary
air pollutants are contemplated in the 8 to 11 billion dollar
figure? What considerations are given to switching from fossil
fuels to nuclear or other sources?
MR. BURTON: What was the first part of that?
MR. CARROLL: What percentage removals of five primary air
pollutants are contemplated in the 8 to 11 billion dollar figure?
MR. BURTON: The reductions that we played for this cost
report are given in that Table 1-1, if I understand the question.
MR. CARROLL: That's right.
MR. BURTON: As to shifting from fossil to nuclear, this
is certainly an active program. EPA does not have a position
as such on nuclear power. I think that under the National
Environmental Protection Act, our position, if it can be called
one, relates to each individual environmental impact statement
that we review. I think that probably this issue is under con-
sideration. We don't have any pronouncements to make about it,
but we're certainly concerned and aware and looking into trade-
offs between fossil and nuclear power.
We have an inter-agency committee that relates to the State
implementation plan. We're concerned about the State implemen-
tation plan's being technically implementable and, therefore,
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we're concerned about what Federal policies might have to change
in order to free cleaner fuels, and so on, into the future. We
are working with other Federal agencies in trying to develop
answers to some problems and we have on this committee a couple
of nuclear experts from my staff and these problems of trade-
off between fossil fuel and nuclear power will be considered.
MR. CARROLL: Elli, what is the status of power station
pollution control devices converting sulphur to sulphuric acid?
Wouldn't these devices have an impact on keeping down the price
of electricity?
MR. BURTON: The effject of sulphuric acid on these — on
the cost of these devices? You mean by —
MR. CARROLL: AS I read the question, I think they're
asking if you remove the sulphur, convert it to sulphuric acid,
isn't that a net reduction in your cost?
MR. BURTON: Well, the idea of by-product recovery has
been around the landscape for a long time, and very much talked
about. I think that it depends upon where the plant is and what
its capabilities are for marketing the by-product. Some people
are optimistic in some areas about this and not so optimistic
in others. It's been pointed out more than once that people
that are in the business of selling electric power probably are
not going to put their best people on the problem of selling
sulphuric acid.
MR. CARROLL: I think, also, the sulphuric acid market is
quite down today —
MR. BURTON: Yes, I think so.
MR. CARROLL: What specific damage does particulate and
sulphur oxide do to residential property? This is in reference
to Table 1-4 and 1-2. Is this new paint jobs, corrosion —
seems awfully high to this —
MR. BURTON: Well, there were at least two studies done
on property damage. One by Anderson and Crocker and another
one by Ridker in St. Louis, and actually among all the damage
studies that have been done, the Ridker and the Anderson-
Crocker studies are considered to be among the better quality
studies. It's hard to say that any studies of damage are really
what you'd like to see, but it's what's around and they're really
at the mercy of the data that are available.
But, I think those two studies were fairly decent studies.
And I think that the numbers that they've come up with are
fairly believable. I don't have as much trouble with the
property damage estimates that they came up with through the
use of multiple regression analysis as I do with the possibility
that we might be double counting, that we might be-crediting
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damage to property on one hand but then also looking at other
impacts on welfare. There's one theory that by looking at
damage to property you are automatically taking into account
other damage impacts on welfare. But this is just another
debate.
MR. CARROLL: Why does not EPA research new motor power
such as the steam engine to eliminate problems of various con-
trols on a single engine more polluting as internal combustion?
How -about steam?
MR. BURTON: How about steam?
MR. CARROLL: Well, the real question is, what research
are we doing on alternate power sources?
MR. BURTON: I think our budget is 11 — 10 or 11 million
dollars.
MR. CARROLL: 10.2 million.
MR. BURTON: Searching for the low-pollution vehicle,
that's what it's called.
MR. CARROLL: It's 10.2 million in each year. There's
a variation of about 50 thousand dollars between years.
MR. BURTON: Here we're talking about a near-term and a
longer term problem. In the near-term, we're talking about
meeting the 1975 - '76 or '76 - '77 deadlines for model year
cars in those two years. It's very unlikely that any of these
new technologies could really be mass produced in time to meet
the demand for those years.
In the longer term, if you look at projections of auto
emissions into the future, you see, given the '75 - '76 standard,
that HC, CO, NOX peak out and then go down until about the
middle '80's, and then they start going up again, even with
these very stringent '75 - '76 standards, and the reason for
that projection is based upon the projected automobile sales
in the future, which steadily increase and the fact that 50
percent of the cars are still on the road after nine and a
half years. All of the used cars don't disappear from the
road until close to 20 years. So even after 10 or 11 or 12
years, you still have a substantial number of cars on the road.
If you look ahead then to 1985, you still have a lot of
pre-'75, '76 cars on the road then, and just the sheer numbers
in addition to that are going to start raising these emission
levels by the mid-'80's and into the 1990's. Then the curves
would start going up more sharply. So, I think that the low-
pollution vehicle research program is going to have to come up
with something p.d.g. in order to head off that problem.
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MR. CARROLL: Would it be workable to phase out all lead
and gasoline by 1975 or 1976? How would this affect individual
car owners?
MR. BURTON: Well, the regulations out provide for at least
one grade of unleaded gasoline by, I think the onset date is
'74, to be ready for the '75 model year cars, which would be
delivered along about the end of '74, and a gradual reduction
in the lead levels of premium grade gasoline. Now, the require-
ment for at least one grade of unleaded gas was put there in
order to facilitate the use of catalytic after-burners to reduce
HC, CO and perhaps NOX from the '75-76 automobiles. Lead poisons
most of the catalysts that are being considered for the '75-'76
cars. You'd have to do something then to insure that we're not
simply decommissioning all these catalytic systems by allowing
too much lead in the gasoline the people buy.
Now, there is a possibility that there might be some
increase in gasoline consumption as a result of the use of
unleaded gasoline. Probably, it will increase our crude oil
consumption somewhat, and may increase the amount of fuel re-
quired per car somewhat. I think that the figures we have,
which I don't have right here, unfortunately, show that the
increased costs are not that substantial.
MR. CARROLL: How do you see the gap between standards for
NOX and CO and the technology available being closed? Are you
optimistic about future developments coming more rapidly than
in the past?
MR. BURTON: I think there's no question that developments
are going to come more rapidly. How optimistic I am, I'll be
in a better position to tell you after our forthcoming hearings
on the Volvo application for a suspension of the 1975 standards.
Those hearings begin April 10th. We're looking into everything
we can look into in order to be as fully informed as we can be
so that we can ask the right questions. I think that when you
put two EPA people in a room and ask them their opinion on
meeting the '75 - '76 standards, you're going to get at least
three different opinons.
I think we're very open minded at this point. Well, that's
all I can say. We don't have any preconceived ideas. We want
to "get the facts, Ma'am." That's what we want to do at these
hearings. We don't think that they're a charade. We're really
trying to get the facts.
MR. CARROLL: Your arriving at your $350 manufacturing
cost for pollution control on '75 - '76 cars, are you including
such items as the cost to the dealer for capital to buy and
stock such cars?
-------
MR. BURTON: No.
MR. CARROLL: Other selling costs to dealer?
MR. BURTON: No.
MR. CARROLL: Shipping cost to the added weight?
MR. BURTON: Well — it's hard to get awfully excited about
that.
UNIDENTIFIED SPEAKER: — But coming back, $350 is not a
manufacturing cost. That's an estimated sales cost, isn't it?
MR. BURTON: Well, no, that's with markups. It's sales
cost.
MR. CARROLL: Are trade-offs being considered for the
Private Sector of air pollution control? I.e., allow power
companies to build new plants as necessary if they will convert
all of their motor vehicles to the LPG or other low emission
type fuels?
UNIDENTIFIED SPEAKER: You got a question.
MR. BURTON: That's really out of our purview, I guess —
or our legislative mandate —
MR. CARROLL: Next question: Has it occurred to anyone
at EPA that there may be systems of organizing cities that do
not require each individual to own his own vehicle? What would
be the economic effect of such modifications?
UNIDENTIFIED SPEAKER: I was told they were creative in
California.
MR. BURTON: All of the above.
MR. CARROLL: I think that deserves a serious answer, Elli.
We are thinking about a variety of alternatives, and as we look
at the State's implementation plan, aiming toward 1975, very
many of them are assuming a dramatic reduction in the amount of
vehicles brought into the central core cities. They are assuming
some form of public transportation, but they're just saying that
that's a plan and an intent. As of today, they have not yet
considered how they're going to achieve that intent. Whereas,
indeed, intent can always change. This is a concern that we
have with those implementation plans. We are trying to work
with the Department of Transportation on it.
Now that is another version of the two-car strategy that
might apply- as suggested in that question. You may have just
certain low emission vehicles that don't have all the perfor-
mance characteristics of today's cars, but would be the ones
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used in central cities. Now, that is a form of a — could be
a form of a taxi type of a public transportation system. We
are thinking about those.
MR. BURTON: Right. If you're talking about —
MR. CARROLL: We are sort of in a just-thinking sort of
stage, however,
MR. BURTON: If you're talking about meeting the '75 - '76
standards, we are actively involved. I thought the question
was referring to organizing future cities. You know, building
fresh or something.
Some of the things that are being considered by some states
and their implementation plans have included such things as
mass transit, retrofitting cars, banning downtown parking in
some or all areas, synchronizing traffic lights in order to
increase the traffic flow and thereby reduce the number of
grams per vehicle mile that are emitted per vehicle — various
concepts.
There are many complex questions here, and the first problem
really is to understand'that some of the things that you do for
air pollution control purposes may work against things that you
might do for transportation purposes, so in sort of analytical
terms, you have to constrain the whole problem with the payoff
that you want from all of these things. You have a transporta-
tion system to carry people from A to B, loss of different A's
to B's. And air pollution control is one of the things that
you want to try to optimize. You can't really build the system
to minimize air pollution control. The way to do that is to
have everybody walk.
So, you have to have your head screwed on right before
you just sort of haul off and say, "Do this because it seems
to look good from the air pollution point of view." In the
first place, when we talk about mass transit, we're talking
about buying buses or digging holes in the ground for subways
or whatever we're going to do, we're talking about lots of
money. And there is a real question of cost effectiveness here,
and we are trying to lay out the problems and what the alterna-
tives are for solving these problems.
But here again, those are state initiatives with Federal
help. The Feds can infuse money into these areas to help them
buy buses and synchronize lights and so on. But we can't —
except in those cases where we promulgate plans we can't
really say, "do that or don't do that."
MR. CARROLL: We have a question here that asks that we
touch on the health cost of the air pollution and the amount of
L.A. revenue lost due to individuals having to leave the Basin.
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Obviously, all of our studies have been national so far,
but we did have it indicated to us at lunch that Dr. Lester
Lees at Cal Tech has done some work on this Basin, and whoever
wrote this question, I'd suggest you talk to Dr. Lee.
MR. CARROLL: Before we break for about 10 minutes, I'd
like to make one other announcement.
A number of you who arrived late did not receive a copy
of the booklet. Your names and your registration cards have
been set aside, and you will receive them by mail.
We can break now for about 10 minutes please.
MR. CARROLL: Well, now we turn to water. A little more
difficult area, but as J. indicated to you this morning, the
benefit data here is even more difficult to collect, to measure,
to define, much less quantify.
To talk to you about water is Mark Pisano. Mark is one of
the youngest and newest members of our staff, but I hope you
won't hold that against him because he's from California. He
received his Bachelor's from Georgetown in Economics in 1964.
Came home, and studied at the University of Santa Clara where
he received his MBA in 1966. He received his Master's in
Economics in 1969 from Georgetown, and he optimistically says
he's going to receive his PhD from Georgetown in Economic this
fall.
He has worked for EPA off and on on a part-time basis for
a number of years. He has worked on the Cost, now the Economics
of Clean Water for three years. His specialty has been modeling
and non-linear programming. I would just like to say in passing
that Mark's work in this economic area and analysis of the
construction industry for municiapal waste treatment, and the
pricing out of the various bills that were proposed in the
Congress and by the Administration has played a very major
factor in getting us to the legislative position where we are
today, where we feel that — especially the House bill is a much
workable solution than the one in the Senate. That's not going
to be up for us to decide, but I just want you all to know —
to share with me the good work I feel that Mark has done in
this area, and now why don't you tell us a little more broadly
about water.
MR. MARK PISANO: Thank you, Tom.
I'd like to start my talk off with a little analogy com-
paring Washington, D.C., with California. It's often said that
when Bob Hope jokes, he gets a rather roaring response in turn,
and in Washington it is often said that when Congress makes a
joke, we end up with a bill.
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MR. CARROLL: I appreciated it, Mark.
MR. PISANO: On a more serious vein, Jim Kreiger mentioned
at lunch today the importance of 1972 and the Water Program.
And truly, 1972 does mark a change in the thrust of our Clean
Water Program. During this year, a new Water Bill is pending
which could alter the scope and course of action for cleaning
up our nation's water. The requirements of this legislation
would make the attack on water pollution one of the largest
public works programs ever undertaken.
The Environmental Protection Agency is attempting: first
of all, to assess the required magnitude of resources that are
truly needed to be expended; second of all, the most cost effec-
tive way of expending these resources such that the levels of
water pollution reduced are commensurate with the benefits that
our society will gain.
The starting point of this analysis is an assessment of
what magnitude of expenditures are needed. We attempted to
conduct a national survey of the extent of water pollution. To
assess the trends in water quality improvement, we are developing
an indexing procedure which measures both the prevalence of
pollution, that is, how many stream miles are polluted as well
as the duration and intensity of pollution. This index uses
as a basis, data which meausres deviations from the existing
water quality standards. The water quality standards for those
of you who might not be familiar with them, basically have three
criteria. The first criteria are biological criteria that indi-
cates the extent of pollution in the water. The second criteria
are the uses that can be derived from various levels of ambient
water quality criteria. And the third part of the standards
are implementation programs required to achieve the desired
uses or benefits.
In 1970 the first assessment of water pollution was made.
It was indicated that 27 percent of America's waterways were
polluted. A similar assessment was conducted in 1971, and
that survey found that approximately 29 percent of the water-
ways were polluted. Every part of the nation had some pollu-
tion, however, the shares were quite unevenly distributed.
In 1971, there were almost twice as many miles polluted
in a relative sense in the East than there were in the West,
using the Mississippi as the dividing line.
If you turn to Table 6 of the handouts for the water talk,
you can get an indication of the relative distribution of the
number of miles polluted. Furthermore, if you take the first
five regions as opposed to the last five regions, you can get
an indication of relative incidence of pollution throughout
the nation.
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One of the possible explanations of why the West fared
better than the East could be that the pollution problems were
not as severe to begin. We recently came across a study con-
ducted in 1937 where they conducted the same exercise that we
did. It is interesting to see the relative distribution of
pollution. To a certain extent the trends that were with us
in 1937 are with us today. Another possible explanation for
the differences in the distribution of pollution is that in
the Western states water is a scarcer resource, and because
of this, it', s more likely to be conserved or used more produc-
tively.
The percentages of the prevalence of pollution is actually
not a very satisfactory figure — or very comforting. It's
much like comparing common colds with cancer when assessing
health conditions. For this reason, we attempted to assess not
just the prevalence, but also the duration — how long pollution
occurred — and the intensity of that pollution.
When this duration and intensity factor was taken into
account, the relevant prevalence of pollution across the country
held, i.e., the same trend continued. This also can be seen by
looking at Table 6 and looking at the duration and intensity
factor as a percentage of the U. S. mean.
In sum of this assessment of how bad pollution is in the
country today, I'd like to say that there were several data
anomalies that might have influenced that change from 27 to 29
percent. In the latter year assessments, states were more
careful concerning their measurements, moreover, we then consi-
dered third order water sheds in the later survey. Basically -
because of these alterations, we concluded that pollution in
1971 was probably just about as bad in 1971 as 1970. Further-
more, we noted that there are real pockets or concentrations of
pollution. And for this reason, we felt that we wanted to tailor
and gear our program such that we attack the problems. We don't
want to spread our resources so evenly across the country or
uniformly that we don't accomplish anything. For this reason,
the Administration has been supporting an allocation formula
based upon needs, i.e., the need to construct pollution facili-
ties.
Concerning the level of expenditures required to reduce
the percentage of our waters that are polluted, we conducted
an assessment of the costs of industrial and municipal expendi-
tures .
But before I get into a discussion of these costs, I'd
like to start off with a general premise that we utilize in
assessing the required level of expenditures, namely, we want
the marginal benefits and costs of the various treatment levels
to be considered.
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From a national point of view, it is necessary to insure
that the water pollution goals that are sought are defensible.
We don't want water pollution goals that don't give the public
the benefits that are commensurate with the expenditures that
they're going to have to make. Analysis of the marginal costs
at different levels of treatment suggests that as you go to
higher levels of treatment, the costs rise almost exponentially.
This fact can be seen on Figure 2 in Table 9 of the handout.
In a rather gross sense, I can't say that we've gotten
cost functions that indicate levels of pollution controlled to
percentage of costs for particular plants. Rather, it's more
an envelope type curve. We can see that as we go to higher
levels of treatment, 98 and 99 percent, that the costs are
extremely high. For those last few percentage points of pollu-
tion removed, the cost increases from 50 to 250 percent per each
unit of residual removed.
In light of this exponentially increasing cost function,
we assessed what level of expenditures are needed? What level
of expenditures can the Administration support at this time?
Well, in general the water quality standards that I men-
tioned before require an equivalent of secondary treatment or
best practical treatment which is basically in the 85 to 95
percent range. The improvement in beneficial uses of water
from such expenditures are likely to be great compared to the
cost, particularly when you consider this in light of high
levels of expenditure. Cost benefit studies that have been
performed — one of the classic cases in the water area is the
Delaware River Study — have demonstrated that the benefits at
this 80 to 95 percent range are greater than the costs.
For this particular reason, it was felt that the Phase I
levels of expenditure in both the House and the Senate bills,
that is the Phase 'requiring best practical treatment in the
Senate and best practical treatment available in the House,
could be supported by our knowledge of benefits today. How-
ever, to go to high levels of treatment, to go to the Phase II
levels of treatment, it was felt that before we ask society
to pay for these costs given in that exponential curve, we
ought to subject those expenditures to a cost benefit test.
I ought to note in the derivation of this exponential
cost curve we have not taken technological changes into full
consideration. At this point in time, it's difficult for us
to assess all the technological implications, so while this
might appear static, it's our best estimate of the costs at
this point in time.
On the other hand, some water quality expenditures and
some water quality standards at this point in time do require
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us to go to higher levels of treatment. I can give examples,
such as Lake Erie, Lake Tahoe, etc. Thus, in some instances
we are going to be requiring municipalities and industries to
be going into these higher levels of treatment.
The strategy that we employed is one of supporting a base
level where the benefits appear to be greater than the costs,
and as we go to higher levels of treatment to insure that we
have taken into full consideration the social and economic
implications of going to that higher level. Thus our first
concern in all of these expenditure requirements is that we
improve the ambient environment.
The Phase I expenditures, or the costs for providing for
the necessary facilities for meeting water quality standards
have been estimated at about 18.1 billion for municipalities.
This cost estimate was obtained by surveying state and local
communities, ascertaining what levels of expenditures, they
estimate are going to be required to meet water quality stan-
dards for the period 1972 through 1976.
However- another estimate has been made by EPA, which is
somewhat lower, 14.3 billion. This estimate was obtained from
an economic projection model that we have developed. Basically,
this model takes into consideration the backlog of facilities
needed, the growth rate in particular states, and the replace-
ment value of facilities already in place.
The difference between these two estimates are, the State
survey indicated what communities felt that they needed to build,
and in many instances did not take into consideration many of
the supply constraints in building these in the stated time
period. Furthermore, in many instances they were not based upon
fully priced-out engineering estimates or plans or specifica-
tions. Rather, they were guesstimates of what was likely to
happen in the future.
The EPA estimating model did try to adjust for this by
using nationally derived cost functions in pricing-out the
facilities. Therefore, we are able to get a better estimate
of facilities to be constructed.
At the current time, we're trying to get a better under-
standing of some of the supply considerations. We're trying
to understand why we have an increase in new starts, but our
current level of completions is the same as it was three or
four -years ago. We're also trying to assess why we're exper-
iencing a 14 to 15 percent price increase in this particular
construction sector. If this is allowed to occur, then much
of the increased expenditures will just be eaten up in price
increases. We want to have a better understanding and a better
control of the allocation process in this construction sector.
Furthermore, we're trying to understand why it's taking us longer
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to build facilities. The average lag for construction of facil-
ities has gone from about 22 months 5 or 6 years ago to almost
50 months today. The longer it takes to construct projects,
the longer it's going to take us to achieve our national goals.
An analysis has also been made of the cost and planned
investment for the industrial sector. We used a cost model and
data from the Census of Manufacturing 1968. In this evaluation,
we found the total capital required to meet the water quality
standards for industry by 1976 was found to be 8.1 billion,
however, but it could go as high as 12.2 billion The variation
takes into account the efficiency of industry in dealing with
their pollution problems. - We found definite trends in terms of
water productivity and water efficiency in industry- Because
our information on industrial expenditures in pollution control
is not that good, i.e., we do not have a survey of industrial
expenditures, nor do we have a complete industrial data base,
we took these trends into consideration and provided a range
of 8 to 12 billion.
These expenditures are broken down for you in the handouts
in Table 1. Furthermore, on this Table you can see the varia-
tions between industrial sectors. The food and kindred pro-
ducts which is rather prevalent in California, the paper and
allied products and primary metals are clearly going to be
required to expend more money than the other areas.
Aside from the capital expenditures, it was found in the
industrial sector that approximately 20 billion dollars would
have to be spent during the time periods 1968 through 1976.
And the reason they're for that period is that our data base
went from 1968 to 1976. I have made adjustments to bring this
up to 1972, and the expenditures would be approximately 16
billion during the 1972-76 period.
Before completing the presentation of the costs that we
feel that are going to be required to meet the first Phase of
these particular bills, I'd like to make a few comments that
might help to answer some of the questions later on. The
respective bills call for 14 billion dollars in the Senate for
municipal treatment, and 20 billion dollars for municipal
expenditures in the House version. Added to the 14 and 20
billion are monies for reimbursable commitments.
Another objective of EPA in assessing water'expenditures
is the whole question of cost effectiveness. It is our feeling
that the numbers we presented are possibly the outside costs
and that if we use cost effective criteria, we could possibly
lower the costs. The achievement of the goal at lower cost
depends on the trends in manufacturing water use and on the
cost effectiveness of municipal construction activities.
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A number of economic and institutional changes in the
last decade have led to the expectation that incentives have
been provided for industry to curtail its treatment of liquid
waste. These incentives have producted behavior on the part
of industry. We do see that they're curtailing their waste
producing activity and see definite trends in better water use.
Furthermore, the scarcity of water itself as a resource is also
producing trends in industrial activity. This trend is witnessed
in the amount of recycling of waste today by industry.
In recycling of water, what happens is that we have a con-
centration of waste in which the industrial waste water is dis-
charged. Given the concentration in wastes it becomes easier
and also less costly to treat the industrial waste. There's
less volume. Furthermore, there's a greater chance of by-product
recovery- Some facts that bear out this trend are that during
the 1959 to 1968 time period, the Federal Reserve Board index
of industrial production for manufacturing increased 59 percent.
During the same time period, the increase on water use was 24
percent, this difference indicates either one of two things
happened: an increase in water use productivity by industry or
a change in the composition of products towards less water using
products. We tried to do more analysis in understanding this
difference, and the Industrial Conference Board conducted a
survey for us. They found that 27 percent of all capital expendi-
tures for water pollution by industry was used for manufacturing
process change to reduce water pollution and not for end of pipe
treatment. That's a very helpful statistic in terms of under-
standing how industry is responding to pollution today. It
implies that a lower cost in achieving water quality standards
does depend upon the industrial response to the problem.
There are several factors that I'd like to discuss with
you that might be helpful in either altering industry's response,
or better understanding industry's response to the waste handling
problem. The first is that alternative approaches to waste
reduction can produce similar efficiencies within a wide range
of costs. The 8 billion to 12 billion dollar comparison demon-
strates that point. Therefore, we're encouraging a policy of
flexibility in approach to the issue. One of the things that
we're trying to encourage in our regulatory policies is to avoid
specifying particular types of treatment. Rather, we establish
limitations that we want industry to meet, and it's up to indus-
try to find thjs least cost method of getting down to that level.
Another thing that economists are traditionally looking at
is the utilization of financial incentives either through user
charges or effluent fees. It's a very powerful avenue for
encouraging industry to respond to reducing their waste problems.
I won't go into the pros or cons of an effluent fee or user
charge mechanism at this time, but as economists, we're trying
to look at alternative ways where incentives can be created so
that industry will modify their behavior.
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In the municipal sector, the way that we alter behavior
is through subsidization or through construction grants. Up
to now, EPA has supported a categorical grant program specifying
that certain facilities can be constructed and other facilities
can't. Under the new legislation, the categories of eligibility
are broadened. Collection systems would be eligible for grants
as well as combined storm sewers.
To obtain a least cost and cost effective solution in the
municipal area, requires that we plan and that we use these
grants effectively. Care must be given such that we don't
promote activities that aren't need, i.e., promote sewering and
over design of facilities. We're beginning to find in our
sewering trends that there is an emphasis toward sewering every-
body- Our analysis demonstrates to the point that the assimilate
capacity of soild is not exceeded, the use of ground disposal
could be a viable alternative for treatment. If we don't con-
taminate the ground, there's no reason why we have to connect
septic tanks to sewage systems. However, at that point in
time where health conditions are violated, or where it's found
that ground water cannot assimilate the wastes, then it should
be transported to a liquid waste system. This in our municipal
systems we face the planning challenge of finding out which
media can best handle our wastes, water or land. We're trying
not to develop a closed mind concerning these alternatives, but
to really broaden our planning horizons by considering alterna-
tives .
Concerning the design of plants, this is an area where up
to 80 percent of the expenditures are coming from, or could
come from Federal and State grants to the local communities.
I think we have to be very careful not to design excess or idle
capacity- The money that we spend in idle capacity could be
used elsewhere for more productive pollution control measures.
Furthermore, when we design excess or idle capacity, we subject
municipalities to financial penalties, higher operation and
maintenance costs and higher interest payments for capacity
that they're not using. In last year's report, the Cost Effec-
tiveness of Clean Water we estimated that the penalties for
municipalities due to increased interest rates and for higher
operation and maintenance was approximately 37 million dollars.
Finally, when we look at the cost effective solution for
a municipality, we don't want to look just at the treatment
alternatives. Rather, we want to look at the total system. It
was mentioned at our luncheon today that we've got to start
considering total systems approaches to the problem. Well, one
of the things that we are encouraging is considerations -of alter-
natives, e.g., alternative methods of treatment such as land
disposal. We now have a project in Muskegon County in Michigan
for land disposal projects. This project is a series of con-
ventional primary and secondary treatment with spray irrigation
for higher levels of treatment.
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Also, we need to look at such phenomenon as conservation
of water. This is a particularly acute problem today in Los
Angeles, and one of the things that our research efforts are
now doing, and the new legislation requires us to go further,
is to find out different ways through which we can conserve
water. This includes different household facilities, different
ways of conserving rain water, etc. Our approach is one of
looking at long-run trends and the overall long-run plan, and
not just concentrate on immediate stop-gap procedures, such as
a treatment plant here or an add-on there.
We are trying to encourage a total environmental system
purview.
In sum, I'd like to say that the foregoing analysis was
useful in the legislative process with regard to helping us
establish the level of treatment costs that could be supported.
As I mentioned before, that basic level is equivalent to sec-
ondary treatment or best practical technology as a base level,
and where needed, higher levels of treatment. However, we
opposed a blanket high level of treatment, and the effort to
go to zero discharge now as an operational policy. Rather, we
felt that as we went to higher levels of treatment we should
in fact balance these higher level costs with benefits that
will be derived.
Furthermore, we've also supported the idea of water
quality standards. In the Senate version of the bill, we find
that the water quality standards are not retained as an opera-
tional tool, in the House version, they are retained. And in
our application effluent limitations, which embody the defini-
tions of "best practical technology: and "best available techno-
logy" we want to be able to tailor those effluents to the
ambient water quality criteria.
In the past, we might not have been successful in these
efforts, but we're hoping through the planning requirements of
the new legislation both basin and on a metropolitan area that
we will be able to make the linkage between effluents and ambi-
ent conditions.
Through such an approach, we hope that the number of stream
miles in future reports will not be 27 or 29 percent, but will
be substantially lowered. Furthermore, we will be able to
lower these percentages of stream mile polluted in the most
cost effective manner possible.
Thank you.
MR. CARROLL: All right, Mark. I'll see how much you really
know about water.
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A mechanical question here, referring to Table 6, Column
No. lf Percentage of U. s. Miles Polluted for reasons 1 through
10 adds up to 293 percent. It appears the heading needs to be
corrected. What should the headings be? Please explain what
they mean. For example, how is duration intensity defined?
MR. DE PALCO: That question may have come in before you
commented on that, but you want to check the heading?
MR. PISANO: The person is a good editor. It actually
should be percentage of miles polluted in that particular region.
For instance — let's take San Francisco, 23.5 percent of the
stream miles or waterways in this particular region are polluted.
Concerning the duration and intensity factors the way we've
defined those are as follows: If pollution occurs in four
quarters, then we have a weight of one to four, and those were
considered and summed. That's the duration factor. The inten-
sity factor — if pollution was not very bad, etc., it was given
a weight of 1. If it was extremely bad, it was given a weight
of 10.
There's a certain amount of subjectivity in developing
this index. We asked our regional people to give us their best
assessment in putting together these duration and intensity
factors. I'd like to point out that we did have a very large
data base in helping them to develop these subjective factors.
We do have measurements of when standards are violated, and
these are taken throughout the year. However, a standard viola-
tion is a standard violation and the intensity factor, we find,
is one of the more difficult ones to put a rating on. In other
words, how bad is bad?
Here, again, that's a highly subjective matter.
MR. CARROLL: Mark, I have quite a few questions for you
here and the range is very good, so let's try to see if we can't
go through them kind of quickly in the hope people will indulge
us and think we aren't being arbitrary here.
Do you feel that base level secondary treatment, 80 to 95
percent removal will meet cost benefit tests for deep ocean
disposal as now used?
MR. PISANO: Well, the two are rather separate. The 80 to
95 percent is for treatment removal, whereas, ocean dumping is
the actual dumping of wastes into the ocean, e.g., sludges into
the ocean. EPA actually has an ocean disposal policy and this
policy will be strengthened in the new legislation. This policy
requires permits justifying that we aren't impairing the ocean,
and aren't altering the biological life in the ocean, etc.
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MR. CARROLL: Costs of clean water invariably revolve
around treatment of sewage and industrial wastes. The case
of estuarine and costal waters, surface runoff of urban and
agricultural areas, appears to be of significance, yet there
is little Federal action. Why not?
MR. PISANO: On that particular point, coastal areas within
the continguous zone and estuarine areas are considered in our
municipal and industrial regulatory activities. So, to that
extent, I would have to defend our current posture as saying
that we are concerned with these, and we are dealing with them.
Where I won't defend our policies is in the area of non-point
source pollution control. We don't have completely adequate
programs in this area.
So, to that extent, where these problems are occurring,
we might not have fully developed programs. But that's not to
say we're not interested. We are looking into the questions
such as agricultural, mining and other pollution sources. We
have fully developed research programs in those areas and the
new legislation requires us to in fact develop operating pro-
grams in this area. I didn't mean to say that we aren't looking
at non-point problems, but in the past, they haven't been taken
into full consideration.
MR. CARROLL: Why does EPA continue to promulgate blanket
standards for water and air without regard to regional implica-
tions?
MR. PISANO: I think that was the point of my talk — that
in the water area, EPA is supporting the policy of water quality
standards that vary according to river mile. If you go through
the water quality standards for any particular river, you'll
notice that the DO levels vary- the temperature levels vary,
and it's this policy that we want to be able to continue. We
want to be able to ascertain what is the level of pollution or
the level of pollution elimination that we want, which could
vary according to the rather heterogenous water masses that
we're dealing with.
MR. CARROLL: In the case of air,
MR. PISANO: We set ambient national levels, but it's the
states themselves that are covering the 248 air quality control
regions. They are submitting their own implementation strat-
egies.
MR. CARROLL: On what basis, Mark, is EPA requiring local
agencies to discontinue the discharge of sludge to the ocean?
MR. PISANO: I think I answered that earlier, through a
permit program for ocean dumping.
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MR. CARROLL: Do we now have available standards and regu-
lations upon which cost effectiveness and preparation of plans
for industries to make these installations and new construction,
guidance to obtain permits?
MR. PISANO: The basic guidelines for the industrial sector
will be effluent guidelines which will stipulate the levels of
residuals per unit of product that will be permitted to be
discharged. How industry achieves this, we hope, as I mentioned
before, they'll do it in the most cost effective way possible.
We don't have a guideline for the design of industrial treatment
facilities.
Now, on the municipal side, we do have guidelines for cost
effectiveness. We're very concerned with this area, and the
reason we're concerned is because of the large portion of Federal
and State monies that will be going to local communities. There-
fore, we are promulgating cost effectiveness guidelines that
would try to produce some of the objectives that I talked about
this afternoon.
MR. CARROLL: One major deterent in meeting 1976 clean
water goals is the emerging tendency for EPA to make environ-
mental impact statements required on waste water treatment
projects.
What is EPA's current position in making environmental
impact statements on all clean water projects? I assume the
distinction is between municipal and industrial.
MR. PISANO: That is correct. In the industrial area —
let me handle that first — the basic regulatory mechanism
that we're using is the permit program. We've asked Congress
— and in the House version of the bill, there's an Amendment
— to exempt environmental impact statements for permit applica-
tions. The reason being that the permit itself can be considered
as a form of an environmental impact statement, i.e., taking into
consideration those factors that an environmental impact state-
ment would. Because of the Kalur Decision we have asked for an
exemption of the EIS on the permit so that we can proceed as
rapidly as possible in granting permits and in imposing regula-
tions on industry.
Now then in the municipal area, the number of plans, etc,
are not large. There aren't that many municipal facilities
that will require impact statements. Furthermore, I think it^
would be a help in our whole planning process to have the envi-
ronmental impact statement, and we're trying to develop pro-
cedures where, in fact, we can promulgate these as quickly as
possible.
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MR. CARROLL: In your talk Mark, did you define the best
practicable technology in the secondary treatment?
MR. PISANO: The definition of best practical and secondary
treatment stated that secondary treatment basically applies to
municipal systems. It's a term that sanitary engineers have
used traditionally for the high level of treatment, 85 to 95
percent removal.
Now, in the industrial area, we have a more difficult
time defining an equivalent of secondary treatment. There's
such a heterogenity of processes and precedures whereby indus-
try can remove wastes that we found that the term secondary
treatment didn't have very much meaning. So we conined a word
(sic) called "best practical treatment," which means the level
of treatment activities that are used for residual removal.
In some industries, the best practical treatment is equi-
valent to tertiary treatment in the municipal sector. However,
in other areas the best practical treatment might not be as high
as secondary treatment, so what we're saying is that level of
technology which is being used today.
MR. CARROLL: What is current and probable final policy
on municipal grant funds for reimburseable construction pro-
jects without Federal grant offer?
And I assume the reference is to the 1972 fiscal year
projects that have been held up. If the Feds renege, how will
this credibility gap affect promises to industry?
MR. PISANO: Let me answer that second question first.
EPA doesn't make any promises to industry. EPA is a regulatory
industry, and I think that Bill Ruckelshaus clearly laid out
our regulatory policy toward industry. The only promise that
we want is from an industry to get to what we hope are reason-
able regulations on a level of reductions.
Concerning the first question, EPA carries out legislative
mandates and charters. We initially had a provision for reim-
burseables in the Public Law 84660. When that law expired, the
reimburseable provision also expired, and our extensions to that
bill did not provide for full payment of reimburseable projects.
However, the pending legislation, both the House and Senate do
contain provisions that will allow EPA to honor those commit-
ments made for reimbursables.
MR. CARROLL: You mentioned the allocation formula based
upon needs. To establish this need, you are using nationally
applicable formula. I fear from what you said that California's
tax money will not be used to help maintain good water quality
in California, but rather to clean up dirty rivers elsewhere
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that the people there should have done themselves. Will Cali-
fornia be sacrificing for the rest of the nation?
MR. PISANO: That's a good question. We do have a national
program, and the national program requires us to address the
problem nationally. I'll answer this in a rather circuitous
way and then I'll answer it directly.
In a certain sense, there are benefits to the people in
California for clean water throughout the nation. The resi-
dents of California recreate elsewhere, not just in the waters
of California. Therefore, there is a reason why we have a
national program. These are, as economists call them, exter-
nalities, that is, benefits that accrue elsewhere that might
affect the person in that particular state. I happen to put
a name on that called spacial externalities. Thus to a certain
extent, there is some rationalization for spending money col-
lected in one state for problems elsewhere.
Now, in a more direct way of answering that question: The
State of California has a lot of facilities that they've built
and that are wearing out and depreciating. And to a certain
extent, the recapitalization of these investments probably will
constitute a large portion of California's needs.
So that when we really balance off on a population basis
and on a need basis because of the investment activities in
this state, I don't find a great disparity in tax dollar
expenditures.
Furthermore, I think that in previous years when the State
of California had a more accelerated program than other states,
tax dollars from those states went to California.
MR. CARROLL: Do the high quality levels achieved by the
Lake Tahoe Project cost as dearly for the final purification
as shown on your Table 9? If not, what is the difference? I
assume you aren't that unfamiliar with Lake Tahoe.
MR. PISANO: Lake Tahoe uses a lime calcification process
for phosphorus removal, which removes up to 99 percent. In
establishing the cost function that we've put together in
Figure 2, lime calcification is one of the forms of tertiary
treatment in the 95 to 99 percent removal. It's not the most
expensive of those processes, but it was considered in devel-
oping this cost function.
Other higher cost solutions in the tertiary treatment
level would be on exchange or carbon adsorption, which is not
being implemented in Lake Tahoe.
MR. CARROLL: All right, I saved one of your favorites
for the last Mark.
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As an alternative to ocean disposal, what particular prob-
lems are inherent in land disposal of domestic and industrial
sewage sludge with regards to nitrates concentration and ground
water contamination? Isn't it probable that this alternative
of land disposal could be more detrimental to the overall ecolo-
gical balance than ocean disposal?
MR. PISANO: On that particular point, nitrate contamina-
tion and saturation is one of the questions in the whole land
disposal alternative. And nitrate absorption in the soils
depends upon the amount of humus and the absorptive capabili-
ties of the soils. It is true that through growing of crops,
etc., much of the nitrates can be absorbed. I'm not techni-
cally familiar with this process, but it is my understanding
that through these cropping activities the nitrates can be
absorbed, the crops harvested and the nitrates taken elsewhere.
If cropping activities are not present, there could be
nitrogen contamination, and this nitrogen contamination in
ground waters could be far more harmful than the element that
we're trying to circumvent in general discharge into water.
And in our design of land disposal facilities — or in
our consideration of this alternative, this question of nitrate
contamination is one of the factors that we place high impor-
tance on investigating.
MR. CARROLL: Now, I have just a couple of general ques-
tions here that I didn't know to whom I should assign, so before
Paul closes, I'll just try to respond to them.
When we figure benefits against costs, what benefits are
we calculating and to whom and how do benefits to future genera-
tions figure in our calculations?
Well, we only started for the five years out. That's as
far as we've been able to get so far this year.
What rules or guidelines exist to assist the person respon-
sible for environmental impact statement preparation?
Each major agency has its own guidelines which have been
prepared under guidelines in turn promulgated Government-wise
by the Council of Environmental Quality. Those guidelines for
each agency would indicate how they are to be prepared, by whom
and at what stage in the process. If you are dealing with any
particular agency, I would suggest you consult with that agency.
What kind of technical, professional or financial aid can
EPA provide to municipalities and their attempts at local envi-
ronmental protection?
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This is mainly in the air area and in the water area, I
would assume. In the case of air, EPA does support municipali-
ties and the states by what we can a control agency grant. In
the case of water, we support the State programs. We provide
technical assistance to both municipalities and states, and we
provide manpower — I think this year we have 150 people working
in the states on the air implementation plans, and that's
scheduled to go up to 300 people next year.
Are there any epidemiological data to support recreational
water quality standards? Are there any plans to implement
beach studies as was done by the Public Health Service in the
1950's? Are there any plans or studies to support consistent
recreational water quality standards on a national level?
I believe we're in the midst of a National Academy of
Science Study which will update the PHS study of the 15th.
Paul is a little more familiar with it than I. He tells me
it's about in draft stage, therefore, we would hope to have
it out fairly soon.
How large is the total staff of EPA? And the staff for
analysis, planning and implementation?
EPA has a staff in the fiscal year '72 with a year-end
target of 8,000. Next year,- it'll be 8500. In the planning
and evaluation shop, there are about 35 to 38 professionals
and some secretarial support.
Has EPA taken a stand pro or con concerning the pollution
initiative on the June 6 election?
We received a number of questions that relate to the
strictly local matters, the regulations that the various boards
should or should not adopt here in Los Angeles as to our posi-
tion on the initiative. I decline answering those since we
feel that those are purely local matters. We do not wish to
impose, even if we could, our authority on your choice here as
local citizens.
I want to — first, to congratulate you who have survived
this long day. If there is this sort of interest in California
in these matters, it's really an awfully good sign that you can
put up with all this.
In the interest of fairness, I want to close with just^one
question here that, when we get all through with our speechify-
ing and even from extemporizing up here, gives food for thought.
Summing up: A simplistic appraisal? If what is workable
is that which business will accept; if a consultant is recruited
from the industry involved; if no administrative agency can
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exceed the will of its sponsor; if political parties and leaders
cannot divorce themselves from dependence upon private financing;
if industry will jeopardize whatever competitive position it
might have; if economic growth and resource utilization is not
radically reduced; and if citizens cannot sue for pollution
damages; how valid is the assumption that we can begin to get
ourselves in order by 1976?
I thank you. Paul.
MR. DE FALCO: Just one closing announcement. All who re-
gistered will receive a copy of the proceeding. I hope we can
transcribe and have them reproduced within the next six weeks.
It will be a tall order.
I would like to indicate that we've convened this meeting
in keeping with Mr. Ruckelshaus1s principle that the workings
and the decisions of the Agency be fully reported to the public.
We have attempted "to do that today.
Thank you for coming.
(Meeting adjourned)
GPO 983-019
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