United States
           Environmental Protection
    Office of Water
    Program Operations (WH
    Washington, D.C. 20460
          Report to Congress
          Industrial Cost Recovery
          Volume VII —  Transcripts of
          Public Meetings
          (Regional and
          Town  Public Meetings)
N> 51
                  o 5' X ~ S
Coopers & Lybrand
1800 M Street, N.W.
Washington, D.C. 20036
                  o i<
                  01 O

                               United States Environmental
                                  Protection Agency
                               215 Fremont  Street
                               San Francisco, California

                               Monday, October 23, 1978
           The public meeting was convened at 10:10 a.m.,

Frank Covington presiding.
                    748 THIRD STRUT. I. W.
                   WASHINGTON. O.C. 20024
                       (202) 554-9148


      Introduction by John  Randolph                     6

      Presentation by Alan  Brown                        9

S  II  Presentation by Ed  Donahue                       15

      Discussion  of  16  Alternatives                    24

Statement of William Hyde, Water Quality

  Division, Dept of Public Works, Sacramento      37

Comments by John Pai                              38

Questions and answers                             41


                Jack Barron,  636 Van Ness Avenue, San Francisco,

      94102, California,  representing City and County of San


                Ed Barry,  9660 Ecology Lane, Sacramento, California

|     95827, representing WQD - Sacramento County

                Robert D.  Bottel, Drawer J, Stockton, California,

      95201, representing Tillie Lewis Foods

o               C. W. Caron,  555 Capital Mall, Sacramento, Californ

|     98514, representing Peat, Marwick, Mitchell & Company,

 '               Joseph Damas, Sr., P.O. Box 24055, Oakland,

      California, 94623,  representing EB Mud, SD 401

                W.S. Hyde,  9660 Ecology Lane, Sacramento, Cali-

      fornia, 95827, representing County of Sacramento, Department

jjj     of Public Works.

                Christopher W. Jens, 450 N. Wiget Lane, Walnut

      Creek, California,  94598, representing John Carollo Engineers

_               Jocelyn Rempe, 575 Market Street, San Francisco,

m     California 94105, representing Chevron Chemical Company.

                Barry M.  Landa, P.O. Box 8345, Stockton, California

      95209, representing Del Monte Corporation

                Joseph A.  Maldari, One Post Street, San Francisco,

      California 94104, representing Foremost-McKesson, Inc.

          L. J. Naua, 1 Post Street, San Francisco, Calif-
ornia* 94104, representing Foremost Foods Company
          Norman A. Olson, 1950 Sixth Street, Berkeley,
California, 94710, representing National Food Processors
          Bob Parod, P.O. 3327, Modesto, California 95353,
representing Tri/Valley Grocers
          Nicholas S. Pateraon, P.O. Box 4557, Haywood,
California 95440, representing Hunt-Wesson Foods,
          Lloyd Sawchuk,  2130 Adeline St., Oakland, Califoriiij,
94623, representing East  Bay Mud
          H.E. Stone, P.O. Box 3575, San Francisco, Calif-
ornia, 94119,  representing Canners League California
                 MR.  COVINGTONr   Let's  get  underway.
                 It is  a  few  minutes  after  ten.   I can say good
       morning to all of  you.
                 I am Frank Covington.   I am the  Director of the
       Region IX Hater.  Programs  Division.   Our  region out here is
 |     responsible for  the EPA activities throughout California
       and Arizona and  Nevada on the  mainland.  We also  have responsi-
       bilities out in  Hawaii and Guam, American  Samoa Trust
                 I would like to welcome you here and to thank you

for coming to participate with EPA in this meeting on our

Proposed Industrial Cost Recovery.  EPA sincerely hopes that

today's public meeting combined with the numerous surveys

which conducted earlier 'this year will help to incorporate

your concerns into the EPA final report to Congress in


          As the agenda shows, the first portion of the

meeting will be explanatory, and followed by the presenta-


5     tion of any formal statement and concluding then with


                On my immediate left is Mr. John Randolph, our
questions and answers.
      regional User Charge and Industrial Cost Recovery specialist

      here in this office.  He will briefly explain the purpose

      of the ICR study and to moderate today's meeting.

                Following him will be several representatives

      from Coopers & Lybrand, the management consulting and account-

      ing firm hired by EPA to assist in the study.  Mr. Alan

      Brown will describe the study's scope and methodology, while

      Mr. Ed  Donahue will focus on the study's findings and conclu-


      sions, as well as possible recommendations which could result.

                Additionally we have with us this morning Mr.

      John Pai from EPA Washington Headquarters.

                We were to have Mr. Don Ro^henbanm. from California

      Water Resources Control Board—yes, he is sitting up front.

                During the discussion portion of the meeting

      we will first hear those people with previously scheduled

      testimony.  Next those with written statements and then

      conclude with a question and answer session.  Since many
      ICR questions have been raised previously, we will certainly

      stay as long as necessary to conclude the discussion.

      The court reporter is on hand today and a transcript of the
      meeting will be appended to the final report to Congress.
y               Just one further note I happen to think about
      if you find the need for public telephones, the closest:
,     location is on the first floor just to the right of that eleva
c     tors.
|               So without further ado, I would like to turn the

      meeting over to Mr. John Randolph.
                MR. RANDOLPH:  I am John Randolph, and as Frank
      stated, I have responsibility for reviewing and recommending

      approval or further review of proposed ICR User Charge sys-

      tems  for Region IX.
                Before  getting into my spiel,  there are a couple
      points I would'Iike to clarify.  There was a bit of misinfor-
      mation that was passed out.  There were  a series of three
      meetings.  I  was  led  to believe  that  the meeting tomorrow



      would be different than the two being held today,

      *nd thatis incorrect.  All three of the meetings will be the

      same.  So if anybody had planned to come tomorrow, thinking

      there would be a separate series of meetings held, that

      is incorrect.  All three of the meetings will consist of

      basically the same information.

                By way of background, ICR and User Charge, common-

u     ly referred to as revenue programs, were established via

Q     Public Law 92-500, consisted of basically two methods of

M     acquiring revenue, the first being User Charge which all

      users are required to pay.  The second, which we are

      here to discuss today, is Industrial Cost Recovery or ICR.

      The ICR portion or ICR cost, if you will, relates to

      those costs which industry is required to pay, based on

      their proportionate use capacity-wise for waste treatment

      systems.   Normally the pro rate share of capital cost is

      determined based on flow as well as strength parameter.

                Needless to say, ICR has been a very.controversial

      subject, and as a result of this, there is a study mandated

      by the Congress in December of last year.  Coopers & Lybrand,
       the public accounting  firm, was commissioned to do the study

       through EPA or working through EPA.

                Several reasons that Coopers & Lybrand were

       selected, the first being they do have a significant degree


      of experience and expertise in revenue programs within the


                Secondly,  they did have adequate personnel to do

      the job within the time constraints that were permitted by

      the Congress, which is primarily an 18-month period.

                The scope of the work for Coopers 6 Lybrand is

      determined by the information contained in the Congressional

      Record published December 15, 1977.

o  ||            i would like to take a moment to highlight those

      areas that will be addressed in the study.
—  IL

'  "            The first concerns any potential discrimination

      between and among any particular industries or plants within

      a geographic region with respect to ICR.

S   I            Secondly, are there any differences between the

      charges levied by grantees because of ICR User Charge

      requirements?  We found that this varies from region to


                Does ICR force industry to relocate?

 •»  I           Obviously ICR payments represent a cost of doing

      business  and in certain instances are significant costs.

                Has ICR increased  the cost of pollution abatement?

                Obviously there may be possible duplication in terms

      of procedures and technology that  is employed in waste


                Another area that is of obvious concern,  especially
      in California,  what is the impact of ICR on conservation,
      primarily water conservation.   Again does ICR program encouragje
      cost effective  solution control alternatives?
9               Something that will  be of interest to the people
      in the meeting  today, how is this ICR money spent,  both
      by the grantee  and by the federal government?
                Something that is probably also of a great deal
      of interest, what is the administrative cost of the ICR pro-
      gram and in and of itself, is the cost of the program effecti
      in terms of the objectives?
                The last subject we will be discussing which has
      been considered part of the study, purported exemptions for
      "small industries."  What constitutes a small industry and
      how does an industry go about obtaining an exemption?
                Those are fairly technical subject, and without
      any further ado, I would like to introduce Mr. Alan Brown
 j    from Coopers & Lybrand who will present the contractor's
      portion of the study,
 5   "           Alan.
                MR. BROWN:   Good morning.  May name is Alan Brown.
      I was  responsible  for the data collection effort in the western
      half of the country  for the survey.

                When EPA first asked  us  to  conduct  the  ICR  study,

      the first thing we did was to go back and  read  the  1972

      legislative history related  to  User Charge and  Industrial  (

      Recovery.  Our purpose wan to find out exactly  what ICR was

      supposed to do and what it was  supposed  to accomplish.

8               Stated very briefly,  there  are two  major  ideas

      contained in the legislative history.
                The first idea concerned equity  or  an attempt to
§     equalize the assumed economic advantage  for those industries
3J     that use public sewer advantages as opposed  to  those  indus-
      tries treating their own waste.

                The assumed economic advantage was one of less
8   I!
o     expensive sewage cost,  if you discharged to  a POTW or Publicl
s     Owned Treatment Works.

12               The second idea contained in  the legislative his tor

      was that of capacityor  the  appropriate  sizing of wastewater

      treatment plants with adequate but not  excess future

j   I!  capacity.
a               And the  third idea we  found,  but not  as central to

-     ICR as  the  first  two, was an attempt  to encourage water


                After reading the legislative history, this back-

      ground  material together with  the  legislative history relativ




      to the 1977 Act and especially Congressman Roberts' questions

      which John briefly summarized today, and CongresBwoman

      Heckler's statements on ICR, serves as a frame of reference

      for the plan of study.

                Now the initial step that we took in late May

      of this year was to sit down with EPA personnel, including
•«   H  John Pai, John Gall from Region I in Boston and Ted Horn

      from Region v in Chicago, and put together a shopping list
      of every piece of data that we could think of that would

      help us in answering specific questions already asked

      about ICH, and some of those questions related to User-Charge

                We took this list of data that we developed and

8   ||  converted it into two draft survey questionnaires, one

      questionnaire for industry and one for grantees.

J2               The draft industrial questionnaires were reviewed

      with such organizations as the National Pood Processors Assoc

      tion, National Association of Manufacturers, and other public

      and industrial associations.

                After refining the questionnaires, we developed a

      list of people to survey.  With EPA assistance we compiled
 |  "
     ' a  list of approximately 100 cities which we plan to visit in

      person.-  These cities ranged in size from Ravenna, Nebraska,

      with a population of approximately 560, to cities as large as

      New York and Chicago.


                We eventually visited approximately 120 cities,

      some of them twice, if there was strong local interest in the


                Our standard procedure was to meet with the agency

      responsible for wastewater treatment in the morning, and

      then with industrial groups or civic associations,if there

      was sufficient interest,in the afternoon.  We mailed survey

      questionnaires out ahead of time to the people we were going

      to meet with, so that they knew the kind of data we were

|     looking for and could attempt to prepare for our visit
      We stressed thatparticipation in the survey was voluntary.

      In many cases people mailed in the completed questionnaires

      rather than meet with us in person.

                After we compiled our list of 100 cities for

      personal visits, we came up with a list of 200 additional

      cities for telephone surveys.  The same questionnaires

      were used in the telephone surveys and were mailed in advance

      to the people that were to be surveyed.

                A group of five, later expanded to six industries

      was selected for detailed study.  Although we were interested

      in the impact of User Charge/Industrial Cost Recovery on

      industry in general, we were particularly interested in

      industries which met one or more of the following criteria.

          Tha industry was labor-intensive, operated on a

low margin, high water users, were seasonal industrie3,

or were particulc.L-ly impacted by the extent of the pre-

treatment regulations.

          The industries eventually selected for detailed
S     study were meat packing  industry, dairy products,  paper  and   '

i                                                                    i
      allied products,  secondary metal products, canned  and  frozen  j
o                                                                   !
      fruits and vegetables and textiles.                           j

2               A  list  of  selected  establishments  in  those industries
i                                                                   I
M     located  in the cities where we planned to visit or telephone  !

1      survey was prepared  and  survey forms mailed  to  those estab-

      lishments.   The entire data collection effort was  accomplished

      in  six weeks using ten teams  of C&L consultants.              i

                The second step in  the study after data  collection  |

10     and just as  important as the  first step, was to develop

      a mechanism  for public participation in the  study.  We

«     wanted grass roots involvement and we wanted an open study.

J     We  put together an ICR Advisory Group of approximately 40

      individuals  representing industry, environmental concerns,

      civic and local governments.  Congressional interests, and

      relied upon  tham  to  keep their local chapters involved

      in  the study. Monthly meetings were held in Washington

      and transcripts of the meetings were mailed  to  anyone wanting




      it means, and what the possi^e alternatives could be suggest:

      for ICR.

                MR. DCIT7.:iu£:  Good morning.  I am Ed  Donahue, and

      I am the Project Manager for Coopers&Lybrand on the study. I

      am here to tell* you what we found during the course of the

      study, what we think it means, and then to present soms

      possible alternatives.

3               The data and statistics that I will be using are


      based on our study and are currently being studied, validated

      and refined in our Washington office.

                Rather than hand out raw data or computer printouts

      that are understandable to only a few people, we have summarised

      our data into a handout entitled "ICR Study Data-," dated

      October 10, 1978.  You should have received copies of this

      handout earlier.

                The final and much more detailed version of the data

<     analysis will be appended to and included in our final report.

3               Without further delay, let's look at the data.

z     Remember, though, the data is mostly average data, requires


u     careful thought before using it, because it can be very



                We eventually got data from 241 grantees.  The best

      data came from places we actually visit.  The data obtained


      through telephone surveys was useful but not nearly as complet

      or precise as data gathered through on-site visits.  We  also

      obtained data from 397 industrial facilities, most of it

      through the effort of tra4e associations.  The  industrial date

5     is at plant level rather than at company level.

                Looking at the major issues before looking at  specii

1      data, the first thin we want to address is the  issue of  equity

      or assumed economic advantage; namely, less expensive sewage

      treatment costs for industries using Publicly Owned Treatment

      Works versus those industries treating and discharging their

      own waste.  We used a computerized tax model which we develop*

      for industrial clients and modified it to reflect User Charge

      and ICR situations.  Basically the model incorporates equatior

      which reflect the cost of doing business and enabling a  compar

      to evaluate alternatives, in essence a "make or buy" decision,
u     Should a  company use aPiiblicly Owned Treatment  Works or  shoulc

"*     it treat  its own sewage?

2               What we found was  for some medium or  large industries

      having compatible waste,  it  is cheaper in the long run to

Z      self-treat,  even without  including any ICR cost, just including

       User  Charges.   This  is  a  very  significant finding.  What it

       means is  that  even without  ICR or pretreatment  cost  added to

       sewage  treatment  cost,  large industries  should  from  an economic





      viewpoint treat their own sewage.  This is based on several

      tax changes that were not really known to the Public  Works

      Committee at the time that Public Law 92-500 was passed,

      because the tax changes were enacted after the passage  of

      Public Law 92-500 and were written by other committees  in the

8  |  congress.

                Basically those tax changes are three.

                The first is an accelerated depreciation over a
I  ||  five-year period for pollution  control equipment

                The second is investment tax credit for capital


                And the third is the  use of tax-free Industrial

      Development Bonds, IDBs,  to  finance  self-treatment facilities,

                The proposed tax law  changes now pending before

      Congress, in addition to  the ones recently enacted, will,if
5>     enacted,  make it even more attractive for industries  to self-
*     treat because of the  increased  investment tax credits which

a                                                                   i
d     are proposed.                                                 !
o               what  this  finding  says  is  that for many industries
       it is cheaper  to  self-treat  than  use POTW.   If this  is  the

       case, why don't.more industries self-treat?  There can  be

       several reasons.

                 Firstr  and probably the most  common  sense  one, they


      are  not geographically located on a river,  stream or other

      receiving body to which they can discharge  and so must use


                Or they don't want the hassle of  self-treatment.

      They do not want to have to get a NPDES permit.  They donl.t

      want to have to bill a sewage treatment plant.

                The third thing is probably the most influential,

      that User Charge/Industrial Recovery requirements have not


      been in effect long enough to really see their impact.

|   (I            The significant thing to bear in  mind, though, is

1                                                            -       i

*     that if ICR and pretreatment costs are added on top of User   j

"     Charges, they could be the final straw that drives industry

5   ||  out of POTWs, thus making it more expensive for the remaining

      customers in the POTW to use the. public sewer system, in

OT   II  particular, EPA's application of pretreatment standards is

      likely to make many industries give serious consideration to
•*     self-treatment.

s   i.           The second major issue is that of POTW capacity.

^     Based on the survey of 241 wastewater treatment facilities

5     from which we obtained data, the average POTW uses only 68

      percent of its design capacity.  The usage ranges from a low

      of 4 percent to a high of 120 percent.  It appears that

      Industrial Cost Recovery, as presently formulated, has not


      acted to put a ca? on the construction of excess future

      capacity in Publicly Owned Treatment Works,

                The third issue, that of water conservation, is not

      as clear.  Based on industries we surveyed, water consumption

      has dropped an average of 29 percent, but the industries with

S  ||  whom we talked attributed the water conservation to higher

      water rates and to User Charges, not to Industrial Cost

      Recovery, -because Industrial Cost Recovery as a percentage

      of water bills and User Charges, is not that significant at

      this time.
                The economic impact of Industrial Cost Recovery to
      date is not significant in most locales;

                Because ICR has not been in effect for more than a

      year or two.

S3   I            Most grantees have suspended ICR billings while the

      moratorium is in effect.
                The exception to the insignificance^cR is those cases

      where  there are seasonal users and/or AWT, Advanced Wastewater
      Treatment.  In those cases, total sewage costs for industries

      have increased by several times.

                The incremental impact of ICR above User Charges is

      generally not great with the exception of the two cases just

      mentioned? the combined impact of User Charge/Industrial Cost


                                                                21    !

      User Charge systen, is small when  compared  with  the  total

      cost of sewage treatmentf averting  about $15,000  per          j

      grantee per year.  Average  ICR  revenues per grantee  per year

      are approximately  $88,000,  of which  $8,800  is  retained for

3     discretionary use  by the grantee.

§               There  is more data which might be of interest to you

      that is included in the handout.   We would  be  pleased  to

o     discuss specific data during the question and  answer period

|     at the end of the  meeting.
5               To summarize our  findings  and conclusions  very


                ICR is not doing  what it was supposed  to do.

                Relatively few cities have implemented ICR,  and

      those  that have  have pretty much suspended  collections.       j
                ICR to date has had no significant impact  on  employ--

P,     ment,  on  plant closings, on industrial growth, on  import/expo::t

      balances, or on  local tax bases.
                ICR is not proving cost  effective in producing

      revenues  for local or federal governments,  at  least  in  most
      cities.   We must realize, however, that the Clean  Water Act

      had  social as .well as economic  objectives.   Among  other

      things, Congress was attempting to avoid the appearance of

      using  public money to subsidize industries  that  discharged to



 grant funded POTTJs.   While our studies have shown that many

 of the economic objectives of the Act have not been met, the

scsial objectives remain.  Accordingly, it is appropriate to

 consider a series of alternatives to Industrial Cost Recovery

 as it now exists.

           At this time, I will ask everyone to turn their

 attention to a document entitled "Preliminary Compilation of

 Possible Study Alternatives," dated October 10, 1978, which

 should have been distributed already.

           The document presents 16 alternatives to Industrial


      Cost Recovery, ranging from leaving ICR as  it now  is,  to

      outright elimination of Industrial Cost Recovery.  These

      alternatives are not necessarily mutually exclusive, and  they

      are not ranked in any order of preference.  Some of them  coulc

S   1  be combined for concurrent use.

o   [I             I would like to adjourn the meeting for  about 15

a   ||  to 20 minutes to allow everyone the opportunity to read this

      documentf  come up with some initial comments on it, and give ylou

      an opportunity to stretch your legs.  If we can, we will  come
~   "  back here  in about  20 minutes, and while we stand  adjourned,

      if anybody has .any  specific questions about things on  that

      list of  alternatives, we will be glad to discuss them  with you

              We will come back at quarter of eleven.

                 (Brief recess)


                MR. RANDOLPH:  If we could, we would like to

      reconvene the meeting at this time.

                A couple of points to get out of the way.  For

      anyone who hasn't registered today, there is a card at the

      rear of the room we would like to have you fill out,

3     for two purposes:  first of all, so we know who is here,

      and secondly, for those of you who have prepared statements

u     which you.would like to read, we want to afford you an oppor-

      tunity to do that.  So if you haven't filled out a card,
please do so before the end of today's meeting.  EPA is
      soliciting comments regarding the meeting.  The comment's,

      however, have to be forwarded or transmitted not later  than

      the 31st of October.


5               There are a couple of addresses to where you  can

S     sand that information; that  isf your comments.

o               The first is Mr.  John T. Pai, P-A-I, and beside

«     his name should go in parenthesisf WH-547.  The next  line,


      Municipal Construction Division.  Next line, United States

      Environmental Protection Agency.  Address is 401 M Street,

      Southwest, Washington, D.C. 20460.

                Let me, give you John's number in the event  you want

      to call him,  Area Code 202.  No. 426-8945.

                As an alternative you can send your comments  here

      to EPA Region IX.  In that  event, they should be addressed




     participation there  is  in  formulating  recommendations,  the

     more substantive Congress  will  realize public support is

     for* the recommendations presented.

                I would  like  AjLan  to  go  through the alternatives.

                MR. BROWN:  We have got  16 alternatives listed

3  I here.  Under each  we  have  tried to list some advantages and

     disadvantages for  the alternatives.  Now the advantages

     and the disadvantages once again are not all-inclusive. They


g    are just  included  here  to  give  us  a basis for discussion.

x    We  realize there are  many  more  advantages and disadvantages


 i    that probably could  be  listed for  each alternative.

                Before we  go  too far, I  think you will notice under

     many of the alternatives,  one of the disadvantages listed

     is  that it would reduce revenues to the federal  government,

     and to state and local  governments.  I think that deserves
      some  comment.   Based  on  one  of  the  handouts  that you have  seen,



a   I we project that total ICR collections over a 30-year period

     are going to be between $1 billion and $2 billion •»  Half of

     that money would be returned to the federal government.  Ten

     percent would be used by grantees at their discretion, and

     the other 40 percent would be used to expand or"upgrade the

     treatment works,

               When you take a look at that money over a 30-year

     period, you are really not talking about any significant

                Alternative No. 1 on your sheet is  the one  that
      immediately comes to mind, is simply to abolish ICR.
  annual dollars.  As Ed told you earlier, v/e estimate  average
  collections for ICR are going to be about  §83,000  a year,  and
  it is going to  cost grantees on the average about $15,000 a  j
  yoar just to maintain an ICR system.
            So thosa are the kinds of dollars we are talking
  about when we talk about reducing revenues.
            Some of the advantages that we have seen with that
  would be, number one, it is going to eliminate complaints from,

grantees • that ICR is not cost effective and difficult to monitdr
  and administer.                                               |
            Another advantage would be to eliminate ccr.->laints
  from industry that ICR is double taxation and adds an unfair  ;
  economic burden depending upon what part: of the country you  j
  are in,                                                       '
            And the third advantage would be to eliminate

  inconsistent ICR charges from grantee to grantee and 'to region
      to region,
            Some of the disadvantagest if you will remember
  earlier, one of the reasons for ICR was to attempt to put a
  cap to design capacity of plantsf and without some control
  over design parameters allocated to industry, abolishing ICR
  may encourage some grantees to plan and construct treatment

  works that are larger than necessary,

                And  another disadvantage  is  to reduce revenues.

                Alternative No.  2  is  to base grant funding for

      eligible  project costs,  including industrial capacity, on a

      sliding scale, funding current  needs at 75 percent and reducing

X     the  federal  share of  total project  costs as grantees plan trea

I     ment works larger than current  needs indicate.   ICR would be

      based on  the current  regulations, and  there would be no change

     from  what  there is today.

2               I  think some discussion is necessary on what current

«     needs means  here.  Current needs would be only the treatment  ]

      works the grantee needs to provide  capacity for the people in j
      the  industry that are in the area today up to secondary treat-i
S     ment.  If you design  capacity for future use or if you design i
      a treatment  works that is in excess of secondary, those project
K     costs would not be grant eligible and would have to be borne

S     by the grantee

                One of the advantages of this Alternative would be

      to encourage more front end planning, and it would reduce the
      amount of excess capacity and over design.

                Another thing it would do is encourage industry to

      participate ear-ly on in planning and identifying treatment

      works needs.

                A disadvantage is that it may not be cost effective

      w hen you are designing a treatment works in an area that is



      large and rapidly expanding.

                Ano'oher disadvantage would be to increase  the  total

      allocable share of costs for grantees that build  treatment

      works for future capacity or that build treatment works  with

      treatment level in excess of secondary.

                Alternative No. 3 is largely like No, 2r that  is,

      to base grant funding for eligible project costs  on  a sliding

      scale, orrce again, funding those particular needs only at 75

      percent and reducing the federal share of the total  project   i
      costs as grantees plan treatment works  larger  than  currently

      necessary.  This Alternative differs  greatly from No.  2  in

      that eligible project costs would not include  a  component for

      industrial capacity.  There would be  no funding  for industriaJJ


      capacity, and therefore  there would be  no  ICR, because there i
      would be  no grant  allocable  to  industrial  capacity.

                Now,  some  of  the advantages  here would  be.  No.  1,

      it would  eliminate grantee complaints  about  ICR,  because  there



j     would be no ICR.
S   I
                 It would eliminate complaints from  industry about

      double taxation and on  an unfair economic burden, because once

      again there would be  no ICR.

                 B-would eliminate the costs  associated with

      implementing and  monitoring ICR systems for  both EPA and

      local grantees.

                 It would  tend  to  encourage  better facility planning

                 The major disadvantage  we can see here is that it

      is going  to increase the 'local  share  of project costs.  These

S     added costs may  be  passed through to  industrial users and

§     would esceed ICR costs,  there is  going to  be no federal funding

      for  industrial capacity.

                 Alternative No, 4 is  to leave ICR as  it is today,

      however,  change  the basis which it is charged and charge ICR

      only on treatment works, eliminating  ICR charges for inter-

'.     ceptor sewers,

                 We have heard  from several  grantees that it is

      very difficult in a large area  with a large number of seg-

2     mented projects  to  determine which industry actually

IJ     discharges to which interceptor.   It  is an administrative

      burden and. it is  difficult to handle.

                 The advantage  of  eliminating charges  on interceptor

      sewers would be  to  reduce administrative work grantees  often

      have to perform  and the  disadvantage  would be to reduce


                 Alternative No, 5 would be  to base industry's

      share of  the federal grant  on incremental  cost  basis rather

      than on a proportional cost basis as  is done presently

                What this would allow, this would allow industry

      to receive the benefits of economies of scale in using an

      incremental cost basis.  For instance, if you design a 10

      MGD plant, 8 of which are allocated to residential and

      commercial users, then the cost of designing the additional

8  I  2 MGD would be based on an incremental cost basis rather than

      proportionately dividing total cost of the project by 10.

                The major disadvantage would be that  it is going

      to be very difficult to determine exactly what  the incrementa:.

      cost of building  industry's capacity.is.

                Alternative No.  6 would.be  to allow the cost^of

      constructing  industry's portion of the treatment works  to be J

      grant eligible  as it  is today, based  on a grantee's option.   j
      If  the  grantee  elects  to  have  industry's capacity grant      j

      funded,  then  he also  elects  to choose ICR   at the same  time.
°      If the grantee uses alternative sources of funding to build
       industry capacity, then there would be no ICR requirement
K                                                                   ,
M      because there would be no federal grant for industrial capacity

                 The major advantages here would be to allow
       grantees to make ICR a local option, depending upon the

 k     community's decision and the availability of alternative

       sources of funding for industrial capacity.

                 Another advantage would be to encourage industrial

       participation early on in planning and constructing the


      treatment works.
                A disadvantage here would be that industry may still

      complain of the double taxation and the • unfair economic

      burden of ICR, depending 'upon whether the grantee elects

      to use ICR or not.

                Alternative Ho. 7 is to establish a uniform ICR

      rate, and everything you see listed there in No. 7 are possible
§                                                                   I
      alternatives for developing a uniform rate.   For instance,

      the rate could be based nationally; everyone from Maine to
3     California would pay the same rate.  The rate could be

      established regionally, for instance.  People in the Northeast
      would pay one rate, people in the Southwest would pay

      another rate.  The rate might be developed on a state

      basis or on an SMSA basis.  The rate could be modified,

      based upon uniform adjustments from area to area through

      their treatment level, treatment type, or level of discharge

      from the POTW.

                One of the complaints we have heard and we have
      sen evidence of is that ICR rates are going to be higher for
a.     people that discharge to an AWT plant;because ICR  rates

     are going to be'higher if you discharge to an AWT plant, it

      would be possible  to adjust the rates nationally or on a

      regional basis  to  take  that into account.



                The majcr ^vantage hsre \:ould be to reduce incon-

      sistencies in ICR rates, depending upon the level of uniformity

      that EPA decides to adopt.

                The major disadvantage- is that it is going to ba

5  I  extremely difficult to administer and develop these uniform

2  II  rates.

                Alternative No. 8 is to establish what we call

      a circuit -breaker  OCR exemption.  What you see listed

      there are possible thresholds for that circuit breaker.

      Now, a circuit breaker means that once conditions reach, a cer-

      tain threshold level, ICR payments would no longer be

      collected, and once you drop below that threshold, then ICR

 S   "  would once again be collected.  An example of this is EPA's
      current regulations concerning  the  25,000  gallon per day
      equivalent  sanitary waste exemption  for  industry.  An  industry1,

      below  25f000 gallons per day does  not  pay  ICR;  if  you  go

      above  25,000 gallons per day,  industry does.  That is  an

 M  " example  of  a circuit breaker.

                Possible alternatives  for  establishing a circuit

 :u  " breaker  would  be,  for  instance,  extraordinary circumstances

       in the local community;  local  economic conditions—for

       instance ,if unemployment went above a certain  level,  ICR

       would no longer be collected  and if  unemployment goes  below

       a certain level, you would  collect ICR.   The circuit breaker

       might be determined based upon the characteristics of

       one particular industry group, on the geographic area, or

       upon a. dollar level of ICR payments,   EPA currently has

       a circuit breaker based upon a level of pollutant discharge.
                 Some of the advantages hwere would be to reduce
i       the number of industries required to pay ICR, and it will
§      allow flexibility which doesn't currently exist, based on
0      special circumstances.
                 A large disadvantage would be that it is going

       to be difficult to develop and administer and it is going
 *-      to result in inconsistent ICR charges because you are going  '.
 ?      to have a circuit breaker and not everyone is going to be
       paying the same thing,

                 Alternatives No. 9 and 10 are very similar.
 S               No,  9 would be to allow tax credit for any ICR
      pretreatment costs that industry currently pays, and  this

      would include both capital investment and Operation and

      Maintenance cost.

                A major advantage here would be to encourage

      industry to pretreat waste.

I               The disadvantage would be, once again, that it

      is going to be difficult  to administer and it  will reduce


                Alternative No,  11 is to return to the requirements

      of Public Law 84-660, abolishing ICR.   One of the complaints

      that we have heard is that if industry discharges to a

      plant funded by Public Law 84-660, there is no requirement

      for Industrial Cost Recovery, and it is cheaper to discharge

      to an 84-660 plant.  One way to eliminate that complaint is

      to eliminate ICR and go back to the requirements of Public

      Law 84-660, which just required a proportionate repayment

      of the local share of project costs.

                The advantages here would be it would eliminate

•   I  complaints of inequitable charging for ICR, depending upon

      what kind of funding was involved in the plant, and it

S'  1
      should reduce administrative burden on grantees because Pub-

      law Law  84-660  is  normally  less complex  and difficult to

      administer  than 92-500.

                 The major  disadvantages here are  that  it  is going




to reduce revenues and it may encourage development of excess

apacity, lacking other controls.

          Alternative No, 12 is to abolish ICR and require

that the local share of project costs be recovered through

a proportionate User Charge, and what this would do,  it

would achieve equity in the method of establishing ratesr

if it is thoroughly and consistently monitored, but

it is going to have some disadvantages also.  It is going

to reduce the grantees' flexibility in designing rates.  It

is going to increase the grantees' administrative costs

because User Charges would now be more complex.  You  wduld

have another component added.  It is going to increase

costs to large users, where the grantee currently uses a

sliding  scale rate  or block discount rate to  recover debt

service charges, and it may require major changes in

bond covenants where the  local community has used either

revenue bonds or general  obligation bonds to fund the local


           Alternative  No.  13  would be  to add an  interest

component  to  the current  ICR requirements,   What this :would (.o,

No,  1,  it  woul

     industry's participation  in  facility  planning,  because you

     are going to potentially  increase  ICR costs.

               The major  disadvantage here is  that it may,  by

     increasing ICR  costs,  encourage industry  to seek other

     alternatives to discharging  to POTW,  which would tend  to

     increase the cost  for  those  remaining on  the  system.

               Alternative  No.  14 is simply to extend the  ICR

N.    moratorium.  We feel that the advantages and disadvantages

a  1

     of this alternative  are the  same.  It  simply postpones  the

     date  for making a  decision on ICR,  and you really don't-

     accomplish too  much.

               Alternative  No.  15 is to maintain ICR in its

     current form, the  advantage  being  it  would require no  legis-

     lative or administrative  regulatory changes.

               The disadvantage is that you don't  solve any of the

     problems  that are  currently  associated with ICR.

               Alternative  16  would be  to  require  a letter  of

     ommitment from  industry on a contractual  basis, as the POTW

      is sized.   That is a typographical error  there; it is  not

      "signed"  but "sized."

                What  this would do would be to  encourage more pre-

      cise planning up front and require the grantees and industry

      to get together in identifying needs.

                The major disadvantage  would be it  is going to

      tend to commit industry for a longer term contract than

      most businesses are willing to commit themselves  to-today.

                Nowf as Ed told you before, any of these alterna-

      tives can basically be combined, shuffled around.  You can

      have a combination of several.  We are looking  for your reac-

S     tion to the ones we developed, and comment on some possible

      alternatives we haven't considered as yet.

                MR, DONAHUE;  Before we get to discussion of alter-

      natives and modifications and revisions and refinements,

      if anyone has statements that they want to make for the.

      record, this would be the appropriate time to do  that,

                MR. RANDOLPH:  I have an indication that a Mr. Hyde

      wished to have time.



                OF SACRAMENTO

«               MR, HYDE:  :My name is Bill Hyde.  I  am with the
      Water Quality Division, Department of Public Works,county

m     of Sacramento.  We are responsible for the operation of the
      Sacramento County Sanitation District'.
                I know this is old hews to Coopers &  Lybrand,

      but I would like to read a couple of very brief paragraphs

      in a letter we sent them:


                "Absent ICR, and with equitable allocation of

                 costs for sewer service, the cost to some major

                 elements of our local industries is marginally

                 above their costs for alternative remote dis-

                 posal ."

                I think this is reflected or confirmed in the

      comments Mr, Donahue made more broadly.


|  I            "With  inclusions of the requirement for ICR,

      industry'-s costs will be higher by staying within the munici-

      pal system than  they would be for separate disposal, and some

      of our industrial customers will either relocate their

      plants or convey their wastes to disposal sites at the

 5   ',',
 !j     urban margin."
          I think in general this would be a counterproductive

set; that is, to persist in the use of ICR.  The exodus

of industry will, I think, tend to aggravate existing core

city problems, because in some cases at least both industry

and its working force will move.

          It I think will also have adverse environmental

e~£ fee teg, because we will, among other things, wind up with a

small group of discrete disposal areas at the urban fringe,

and the day after tomorrow, as the crow flies or as time

flies, they are going to be built around, so we have a leap

frog process;going on again.

                I think for these reasons that the perpetuation

      of ICR is inconsistent with Congress's apparent intent to

      encourage joint use of municipal facilities.

                Lastly, and again this nay be a bit redundant on the

      national scale, but we are a small member of the Association

      of Metropolitan Sewerage Agencies, AMSA, and I will leave

      with you folks a copy of a resolution that they passed at

      their meeting in Anaheim earlier this month.  The resolution



                "The Association of Metropolitan Sewerage Agencies

 ,   I  calls upon Congress to enact legislation amending the Clean

      Water Act by removing the Industrial Cost Recovery provisions
      from the law,"

                There are some attached comments on rationale and

     background which support that position.

                Those I think are the only comments I would make.

                Thank you,
 «   ||

 5   I           MR. RANDOLPH:  Thank you, Mr. Hyde.

 *               is there anyone else attending today that wishes
      to make a statement?

                If not, Tt would like to introduce Mr. John Pai

      from EPA in Washington, who has a few comments.


                MR. PAI:  Thank you, John.

                Good morning.  My name is John Pai from Washington,

      EPA, and I am the Project Officer for the study,  I want to

      thank "Rerfion IX for setting up this meeting so we can bring

•  I!  some of our issues of concern to you here in Region IX.

                The purpose of this meeting is trying to form a

      group decision-making process that we can relate the issue

      to the Congress representing the will of the people.

                This meeting in a way is a little different than

      any other public meeting we have, in a way that we do not

      have a set mind as to what the recommendations are.  We

      want to show you what we think are possible alternatives?, and

      we want your opinions as to which ones you like betterf or

 g     if anything at all you may want to amend or make an addition

      or revise any of the alternatives that we may have.

                From all these alternatives we can find the key

      thrust that we are trying to address in any one of the

      following four issues:
          No. 1 is simplification of the administrative pro-

cedures for the grantees and for industrial users.

          No, 2 is encouraging industrial users to participate

early in the planning stage so that plant size can be properly

sized and designed.

          No. 3f we try to give the grantee more discretion

to fit his local conditions.

                No.  4  is trying to hold down the cost to existing

      users,  be it industrial users or domestic users.

                So these are the four major issues that we try

      to address in all our alternatives.  If you have any alterna-

      tives,  plese try to focus on any of these four issues.

                I think as John pointed out, we have extended the

      comment period to October 31.  The reason is, we understand

      that you received the notice kind of late, and you don't have

o  |  enough time to respond'.  I want to take the blame for that,

-  1
      because I know REgion IX has a policy of at least 30 days

      advance notice of the meeting.  Due to circumstances oi the

      study, we could not give that much time for Region IX

      and again I want to thank Region IX for accommodating us in

      that regard,  My point is even with short notice" it is

     better than no meeting at all.  Under any other circumstances

     we would not have time for a meeting and still meet the dead-

     line of the Congressional mandate,

               Another thing  I want to bring out is that we have

     10 meetings, one in each regional office over the country.

s    So any comment or recommendation you make here as an individua
      or at the regional level will be considered in conjunction

      with other comments we receive in our other regional offices,

      and a final  recommendation will be made by EPA in view of the

      input from the  ten public meetings and other input we receive


      from interested  groups.

                Of course  the ultimate  decision will be made by the

      Congress, which  may  be different  than any of us has recommend4d

                But again  I think  Congress in any case would con-

      sider your opinions  in the circumstances, and I encourage

8     you not to hesitate  to express  your  preference.

                I think  in addition to  your written comment, many
*"     of you may still have more questions, if not today, maybe
       tomorrow  or  some other  time  before  you finalize  your written

       comments,  so John  has given  you  my  numbers  in D.C.  and.,I am

i       available to discuss with  you any particular issues that you
       want to discuss before  you finalize your comments,  or you

       can call  Coopers & Lybrand here, or call John here, to get

       some initial discussions as  to some of the  questions before

_      you-send  in  your written comments.   In addition,  I  want to

o      say your  written1 comments'can be on a very  informal basis.
       Just jot  down what you  think, and you don't have to try to

       write  it  in  legal  language or try to write  a law for us.
ri      Whatever  you have  in mind, jot it down and  we will  be pleased
i      to receive it.
1/1                Thank you.

                 MR, RANDOLPH: Thank you,  John.

                 At this  point in the meeting we  would like to

       proceed with questions, and  to the  extent we can,  to answer  j








those questions.  I will open the floor up to questions  at

this time.

          MR,  DONAHUE:  Somebody must have some questions

or some comments.  I am certain that even though  I  think

we are doing   a good study,  I am certain we  haven't answered

everybody's concerns about all the  issues that are  important

to them.  So please don't be bashful. If you have comments

or questions,  please make them.  That is why we are here.

          Yeaf air, if you will identify yourself for the

court  reporter.

          MR,  CARON;  Bill Caron, Peat', Warwick,  Mitchell,


          How  many  operations  are  fully on  Industrial Cost

 Recovery systems  across  the  nation, fully  implemented?

           MR-  DONAriifEi  Let  me answe*  tnat  in  a couple pieces.

Approximately  400 grantees have approved  User  Charge and

 Industrial  Cost Recovery systems.   Of  those, perhaps a hundred

 had implemented them before  the ICR moratorium went into

 effect.  Right now there are only two  or  three cities that

 are collecting ICR.

           MR,  CARON:  Two or three?

           MR-. DONAHUE*  Two or three.

           MR, CARON;  Really you don't have much operating


                fLl. td::r."'J3:  We have the rates that people preparec

      for ICR when they had their system approved, and of  course

      unless they modified their treatment works, their  ICR rates

s     would not change.  So we could project what ICR costs

      to industries would be based upon rates that grantees had

S     prepared for ICR.

                What we did, it was so difficult to compare
sewage rates from one city to another, because some people
§     pay debt service on User Charge basis.  Some pay for it mostly

      through User Charges, but maybe some out of property taxes,
      some strictly out of property taxes,  Some use a flat rate,
S     some use a declining block rate.  What we did was reduce

      everything to rate parameters, what is the cost per gallon

      or per pound kind of thing, and used that £or making compari-

}2     sons.  That is about the only way you can possibly do it.

o               we think we have enough data to draw some conclu-
«     sions.
J               MR, CARON:  Those conclusions are what would be
 d      instead of wha^t actually  is?

                MR.  DONAHUEj  That's right.  All  things being

       equal, if we ware doing work  in  the private sector here,

       we would say you don't want to really do  the study at  this

       time.  It is too soon.  But Congress said you will do  the

       study, therefore we  are doing the  best job  we can with the


      data that is available.

                MR, HYDE;  One of the things that emerged at the

      AMSA meeting was that in a few cases where municipalities

      have started ICR, they have done it at the bottom end of the

      scale, because that coincided with those grants that were

      completed, and the first grants were perhaps small.  So

      they have got a curve that lies still ahead of them in terms

      of determining what total ICR will be.

                MR. DONAHUE:  That's right.  If what we are getting

5     here is, if you have a large sewage treatment system, you
      have to start collecting ICR on pieces of the sewage treat-
      ment system as they become operational, so some studies
"     that have implemented ICR, the rates they have used, the
      rates developed are only for those pieces of the system that

u     are operational, and  ICR rates will go up as additional

      pieces of  sewage treatment works become operational.

                 We  have gathered as much data as we can from as

j     many people,  and really it is hard to compare from one city

      to ^another because of problems like that.
u                MR, CARON;  How many questionnaires did you send

      out just  in round figures?   You said you went to about 120


                 MR. DOHAH'Off:  We actually visited 120 cities, we gd:

      data  from additional—we sent questionnaires out to almost


      400 cities,  We sent 1500 industrial questionnaires out, and

      we got so far, as of the date we drew this data we had  about

      400 industrial responses; and we had 240 city responses.

                MR. CARON:  In a general judgment, were the

      industrial responses—did they give you a feeling that  the

3     industries understood what the impact would be, that there

      were rates to be established, what they would be and how that

      would impact their operations?

                MR. DONRHOBt  For the most part they did.  The

      survey questionnaires took a lot of time to answer.  It was

i     not something you-sit down and fill out in 20 minutes.  Some
      of the industrial people came back to us and said, we

      discovered things that we didn't realize before, like we

      asked them what their total cost of sewage was, including

      any portion of their property taxes that they could identify

      being used for sewage treatment, and pay off bonds, whatever,

**     and we made them go back and go through all those calculations

      plus what was the cost of any self-treatment capacity they

      had, what pretreatment capital costs they had incurred,

x     what modifications to manufacturing processes they had made

      For those three things, what capital costs were, what operat-

      ing costs were, how they financed them, all those kinds of


                They were pretty much up on what was going on


                Sometimes they had to stop and think about property

      taxes being used to pay for sewage, but other than that, they

      pretty much realized what was going on.

                MR. CARON:  I "am asking not so much—that is what

      they do for themselves now?

-               MR. DONAHUE:  Yes.





          MR. CARON:  Did they have a good feel of what ICR

cost impact would be on them, coming out of this process?

          MR. DONAHUE:  No, because grantees really can't

always give them a good feel for that.  They come up with

some rates early on.

          MR. CARON:  So actually there was nothing coming

out from the ICR system to industry that gave them something

to make a good valid judgment to fight it, live with it, or

do something?

          MR, BROWNj  You can't say"nothing."

          MR. CARON;  Or very little?

          MR, BROWN;  In most casesr you are going to find

the grantee designed his rates early on, simply to get past

the 80 percent funding level, and industry oftentimes doesn't

have enough concrete information to make a decision on.  Some

communities make an all-out effort to go out and bring all

their industries in and educate everyone all at one time, all


       the  way through the process.   In those kinds of cases industry

       does have the information,  so you can't say that there are no

       cases where industry can make a decision, but in the bulk of

       the  cases it is very difficult.

2                MR. DONAHUE:   The other problem is that industry is

8      waiting until they get  the  total cost.  Industry knows that

       its  sewer bill has gone up  through the User Charges, and ICR

o      may  or may not have hit them.  A lot of them are really holdirig

o      off  until they find out what it*.g going to cost them to complj
in      in treatment funds, depending on how EPA is going to apply
       those regulations, it will  be more:or less expensive.

                 Basically, what we have seen is industry is willing

       to pay a small premium  to use a public sewer system.They don1 :

       want the hassle of having their own self-treatment.  If you

       make it too expensive to use the public sewer system, they

o      might start to reconsider,  particularly if you start building
«      new  industrial plants.   You have an existing industrial plant
       people probably tend to stick with the public sewer system
o      But  over time, as you build new ones or modify things that
a      will incorporate all these  kinds of costs into plant design

*"      and  decision—making, also over time you may be driving them .

       out  of the POTW.  It is hard to tell.

                 MR. CARON;  This  is what Bill brought up.  All of


      a sudden conceivably you have got huge expensive plants,  and

      1 say that, gentlemen, I can save mon^y because the  three

      things that you said, I will go out and build my own.   Then

      we sit with this huge faoility here that  somebody  has  got to

3     support, and local government just is not going to be  in  a

      position to support it without charges.

                MR. DONAHUE:  That is why the issue of sizing is so

      important.-  All of them are important, but  if you  build a

      plant, a sewage treatment  facility, and it  has capacity in

2     there for industrial use that you are counting on, and that

      usage doesn't materialize, you're operating costs  for  the

      sewage treatment are pretty much fixed, with some  flexibility,

      so the User Charges for residential and commercial customers

      are  going to go up.  Debt  service costs are slightly fixed

£     in most every case.  This  is going to be  more expensive for

°>     everybody else.  If you drive industry out  of a Publicly
*   I  Onwed Treatment Works, you are going to make it that much
      more expensive for everybody else to use  it.

                MR. HYDE:  Unless my auditors thi'nkL I a™ about  to

      go broke, I should comment that we have a couple candidates

      in our  industrial  group who may well find that ICR is  simply

      more than they can tolerate, and this will  encourage a move

      not  of  their plants, but of their waste treatment  locale  out




      really a valid statement?  At least with my knowledge of the

      method of reviewing the grant applications, design  facilities

      here in Region IX, the ability  to  construct a  facility  far in

      excess of what might be an immediate  need, at  least as  far as

      the industry  side of it is concerned,  I think  that-those

S     grant funds are  really not going to be available.   Generally

      speaking, the facility is sized for the existing  facility  wit

      some reasonable  anticipation of growth, and that  anticipation

      of  growth is  based upon a plan  developed by the region,

      approved by the  State Department of Finance with  regard to

      population expansion, and so on.

                I would be a little bit  suspicious  that abolishing
       ICR would lead to the construction of some very large facilit
       that previously hadn't been planned or perhaps available.

                 MR, PAI:  Let me answer that,  The basic disadvanta

      is- addressed on a national issue that in different regions,

       even in different localities, that disadvantage may not be

 •jj     there,  There are many, many good regions or grantees that

       have a good handle on what is proper sizing of the plant.
 y     Generally, there are also communities or regions where they

       have a different concern about what is a reasonable growth

       in that area, and there have been cases of capacity which has

       been designed for future growth, which so far has not


      materialized and  so far existing users are paying a tremen-

      dously high cost  in anticipating future growth.

                So the'.two «quest'ions      arising from that is,

      number one, where does future growth actually materialize;

      and number two, who is paying for it now?  That is the questiqn

      we try to address here.  The disadvantage is not saying every

      grantee in every  region is overdesigning their sewage treat-

      ment plant;.  To answer your question, yes, there are certain


p   ||  areas where that  is a tremendous issue of concern.  If you

      read newspapers in different areas of the country, you find

      a lot of people saying they are paying too much for future

 N-   II  capacity.

                Another reason we mention that is one of the intents

      of putting ICR as an additional cost to industrial users, that1.

IS   ||  they would think twice before they say how much their capacity)

o   I  will be using, in the planning stage.  Evidently, as the studyj


      indicates, because the cost impact in most cases is not that

      important, so it really doesn't serve as a purpose in trying

      to discourage industrial users to acquire additional capacity

 s   I  or acquire a very optimistic projection of their usage

 w               So that is one of the things that we found out in

      the study is that ICR does not really do that job.

                MR. DONAHUE:  The other thing is that we are talking

      about the California League of Canners.  Not every state has

      the fairly orderly and organized process for planning popula-

      tion growth as California does,  I can think of a whole bunch

      of states.  If you add up-population projections for the major

      metropolitan areas of a state, if you add them together, they

      are much greater than the population projected for the state

      as a whole.  If you start building highways or sewage treatment

      plants or anything, on projections like that,you are in trouble

o               MR. STONE:  The suggestion should be that EPA should

      develop or publish a better set of guidelines that can be

 1     followed on a national basis.                                 i
 >                                                                   |

                MR. PAI:   To answer your question, yes.  I think

      more or less you have the view that EPA is trying to cut down i

 S     the growth of industry or for local development that is not

^     the case.  It is very much to the contrary,  EPA is trying to

      accommodate at least for reasonable growth, either in the

      residential or industrial user.   What happens here is if you

      have too high a cost for a sewage treatment plant; you don't

      promote growth.  In other words, people are saying extra


      capacity will promote growth.  The indication is the other'way

      If you have too--high a sewage cost,» it -discourages ^growth.

                So what we try to do is try to make people realize

      that we do want to provide enough funding for reasonable


       growth in which people can come in and say, here, if I come

       in this area, I have enough capacity for me.  Number twor if

       the cost is not too expensive for me to join a new community.

       That is our point.

S                if you have any feeling that EPA is trying to cut

§      down growth or trying to discourage growth, I want to clarify

       that point.  We are actually trying to approach the problem

       more constructively.

                 MR. STONE:  I didn't have any feeling about EPA's

       limiting growth or the future of the given area.  I mean I

recognize the fact that you also have the obligation to not
       just provide for additional capacity, but make a determinatio

S      whether or not that additional capacity would have some other

       effects in the area, air pollution problems that might result

^      from it, or solid waste disposal or things of that nature.

8                MR. PAI:  Yes, that is true.  I think you are very

       fortunate that you are in Region IX, the State of California,

       to have one of the best regions and states we have over the

°      country.  Generally we try to address the issue on a national

       level, and there are areas that need this issue addressed.

       It is not particularly relating to the State of California

       Region IX.

                 MR. RANDOLPH:  Are there any further questions?


                 MR.  PAI:   I know some of you, you have your national

       representatives in  Washington, D.C., particularly like the

       Food Processors, so I guess you are in tune with what we have

       done so fir up  to this point from your national representative:

                 I also want to say, referring to the gentleman there

       on behalf of AMSA,  that this is not a hunting statement that

       industrial users say, I am going to move out of the area; I

       am going  to do this, do that.  That is one of the very reason:

2      that Congress  is very concerned to ask us to do this study,

       asking is that the  case?  One of the things we want too do in

 1      this study is  to find out whether anybody did relocate*

       whether anybody did close down their plant, whether anybody

       did cut down their  expansion.

                 We have an adequate chance for all these people to

{if      respond.   We work with the National Association of Manufac-

       turers, which  is one of the leading manufacturing association^

««      in D.C.  We work with the National Food Association which

       again has many,many members, and we couldn't find anybody

coming out and making that statement.  Yet we always hear

these people saying, we are going to move out, we are going

to cut down our. expansion, we are going to close down plants.

The point I am trying to make here is that we are looking at

what actually happened.  We don't look at what he wants to do


      or intend to do or threatens to do.  So  if you  have  any cases

      of that, we are still open for that, to  put  in  our data up to

      October 31.  But literally saying he may want to move out is

      just not going to hold water.

                MR. HYDE:  Mr. Pai, it seems to me that we are

§     getting a little geared up to fight the  last war.  The decisions

      that are going to result from departure  have yet to  be made.

      A case in point, Campbell Soup.  Campbell Soup  is a  large

      contributor, a year-round canner.  During the non-tomato

I     season, four million gallons a day; during the  tomato season, \

 i     say,eight million gallons a day.  That is a large industrial  I

      customer.  Now, I don't know  that they  have declared them-

      selves to you.  Maybe they will, maybe they won't.  What they

      have done is to get the zoning law changed, as  a result of

u     a study they supported almost three years ago.  That zoning

,     law has reached culmination and will result in  a hearing on a

"*     change in zoning for an area adjacent to our treatment plant.

      That will come next week.   That has been three years on  the

      train.  They bought 1500 acres of land in that  area.  That is
      an investment behind them.  The decision is not made yet.

      They are waiting.  They are waiting to hear from you and from


                I strongly urge that you look not at a bunch of data

      from an inconsequential sample—and it is—don't survey the

      past,  because  the  future  is  not written  there.   The  future    !

      lies-ahead,  and  you will  have  to  evaluate  on tha basis of     j
      projections  of doubts,  of all  the imponderables of what are

      going to make  people move in the  future.

                As fer  as I am concerned, Campbell Soup's conclusion!
      will  be, if  ICR  goes, I will move.  It is  as simple  as that,  j
      It is economic for them to do so.                            j
                I  want strongly to encourage that you don't take a  J
      very small sample, which is random, which is nonrepresentativ^,

      out of the past, and kite it into a decision about the future;

      because the scope of that decision is not there.

                MR.  PAI:   Your point is well taken.  Basically,

      even as you will notice in the study at this point,  large    j

      industrial users know at this point, they may even do better, .
       just go out  and provide  their  own treatment.    We  recognize   j

       that fact.   This is not  even talking about future  additional  i

       costs to them.   Particularly you in California, we understand

       the cannery  has been one of the industries from my experience  on

       this program for three years,which I feel are the  ones who
       have been impacted at the very most, not only on ICR,  but also
       on User Charge.                                              !

                 Again, on the other hand, they have tremendous

       impact on grantees to provide treatment for them,  too.  The





      issue involved is really  a very delicate  and very 'complicated

      one,  I am saying it would be hard  for  us to imagine a grantee

      providing that capacity for  them without  knowing whether they

      are going to use it or not,  or without  knowing how long durinc

      the year they are going to use it.   What  happens the rest of

      the nine months of the year, when the capacity is there?

                On the other hand, we also understand the cannery  is

      operating-on a very low marginal basis, and they don't get hii

      so hard by all this pollution control.  We understand the

      issue on both ends of it.

                MR, DONAHUE:  We've got sort  of a double-edged swore

      here.  We are trying to base our findings and conclusions

      on hard data, but recommendations really  are going to hae/e to

      be drawn about something  that is going  to happen in the futurt
       So we are  trying  to  answer  the questions  that  Congressman

o                                                                   ,
       Roberts  raised  and specifically  entered into the  Congressional

       Record last December,  and those  really are  the starting point
       for our study.    We have to answer those questions.   We can

       only answer them based on data we have so far,  and so far we
       can find no evidence of plant closings and very little loss o

       jobs and very little economic impact.   That is because ICR

       hasn't been in effect that long,  and even where it was, people

       suspended it,  The recommendations,  though, are going to take



      into account the kinds of projections we are tafclrigj  based
      on data we now have.   Those recommendations are going to say
      that somewhere underlying them is going to be the thought
      that there could ba some significant impact, not just on
      industry, but also on residential and commercial users of
      public sewer systems, if industry pulls out.
                MR. PAI:  I think the key thing about this Industrie
5   1  users decision is not that much of relocation, but rather
      providing their own treatment or joining a POTW.  That is my
~     feeling.  In other words, they were not relocating because of
*     ICR.  They will probably try to provide their own treatment
      because of ICR or because of sewer costs, loss of revenue in
      the local area as far as the tax base goes, I don't think that
      would be a tremendous impact there.
                MR. CARONt  Ed. would I be reasonably accurate in
      assuming that in your report you will have words similar to
      those that were just discussed and really the final decisions
      cannot be told because they are in this processing stage, so
      somebody doesn't take the quote "hard data" that you have got
      and move from that without qualification?
                MR. DONAHUE:  Yes, that's true.  No question about
      that.  From your own experience, working for a CPA firm, we
      will qualify very carefully the data we have, and say it is
      limited data, and to say this is all that's going to happen,



      this is the impact, it would ba  naive.  We  are  going  to

      qualify the data.

                MS. KEMPE:  Jocely Kempe,  from  Chevron  Chemical

      Company.  Will a federal share go back  to the Treasury or
                MR. DONAHUE:  Back to the Treasury.   The original
     projections for that revenue, one of the handouts we have here

      made by some staff people from the Public Works Committee

      when 92-500 was passed, was that it would be  $4-1/2 billion

      to $7 billion and just based on data we have  so far/  we can't

      see  it' being that large,
                MR, PAI:  One of the reasons is that a  lot of

      industries are tremendously reducing their water  usage.

                MR, DONAHUE:  There has- been significant reduction

      in water usage.  The original intent was that money that went

      to the Federal Treasury was going to be earmarked for some

      kind of disaster relief fund.  That has not happened.  There

      has been very little collected.   Total ICR collection to date

      has not been more than a million dollars.
 |               MR.  STONE:   May I  also echo  the  sentiments  raised

 te  I
       Mr,  Hyde regarding the continuing review of  these  nonproductivja

       costs which we pay for in going to a municipal  wastewater

       treatment system.   Managements do look at  them  regularly, and





      then the decision is made,

                MR.  DONAHUE:  One of the concerns, particularly whcr,

      you get into economically depressed areas, I guess the textile

      industry was a good case, of this, those people up in the

      Northeast are competing not only with other parts of this

      country, textile mills in the South, but foreign producers

      as well,  They say that ICR is cost of production—you normally

      expect when a manufacturer( supplier has cost that goes up,

      he is going to raise his prices eventually.  But in some casesj,

      what they are saying is that ICR is a cost we just can't pass

      along because the price for our products, our textiles, is

      pretty much fixed by what the market will bear, not by what

a     they cost.  If we really factored all these costs, including

      ICR, into the cost of our product, we would not be competitive

      with foreign goods or with goods from other parts of this


                So that is something that has to be considered.     i

                MR. PAI:  I think the general statement that can be

      made is other than seasonal industries or tremendously high

      water usage industries, ICR cost is anywhere from 10 to 20

      percent of your total sewer bill.  That includes the User

      Charge, local debt service and everything.  For canneries,

      seasonal users, or some of the seafood processors, the costs

      probably may be a little higher than 10 to 20 percent.  We are

      concerned with seasonal users, and come of these  low-profit

      marginal industries.

                MR. MALDARI:  I am Joe Maldari  from  Foremost.  In

      the consideration of ICR. charges, has anything been  thought oi
*     with regard to the character of waste?  If one industry
3     required just secondary treatment, will he pay as  if he necdcc

      full treatment or is that something  that hasn't been conaideijec
*"               MR. DONAHUEi  That is approached  indirectly, because
*     ICR charges are supposed to be based upon not  just  volume  of
      your discharge, but  Strength  as well.   If  you  take  the .cost  of

      building a  sewage  treatment plant,  and  allocate  it  to rate
      components, what part of  the  cost  of  building  a  sewage  treat-

      ment plant  is  used to remove  BOD or remove  suspended solids or

      whatever  it is you are  removing, then that  will  impact  the

 13  I rate charged for specific customers depending  on the compositian

 §    of their  sewers.   Indirectly  that  is  considered  under the
 "*    existing  ICR regulations,
 £               Can  we have  some comments from the state?  The State
       of California  is probably one of  the  more aggressive and
active state governments as far as environmental issues.

          MR, ROTHENBAUM;  It is hard for me to give a State

Board opinion, except for those working within the State Board

we have a lot of opinions, personal staff opinions.  The staff


      of the State Water Resources Control Board personally feel

      that ICR has not been as constructive as it was intended to

      be in the first place.  The only thing I would have any

      questions on any of these alternatives is No. 16 which requir

      a letter of commitment from the industrial user.  Does that
S   1  mean it abolishes ICR?

                MR. DONAHUEs  Not necessarily.


~   I            MR, BROWN:  ICR would stay the same way it is today,

d   I

      only we would have a contract that is binding,

                MR. ROTHENBAUM:  We would rather  see his  letter  of

5   II
 1   "  commitment, but  in case of the  letter of commitment war would

      like to see ICR  abolished.

 "               MR. PAI:  What would  that commitment do then?

 3               MR. ROTHENBAUM:  Well,  we were talking about sizing
 **   I                                                                i

 S3     of the treatment works. A"letter  of commitment would basically

       say to a  grantee that so much capacity is  set aside for  this

       one industry.   By doing that,  if  the  industry only  utilizes

       that capacity which they reserve, it  prevents utilization  of

       that capacity by, say, the rest of the municipality or  for
other industries, thus putting a factor limitation on growth.

That was one of.your concerns.  Let's say industry says we

want a 20 percent increase? they only increase by 20 percent.

Therefore an additional 10 percent is there for the grantee to



      use for expansion purposes.  Wa don't want to see that happen.

                MR. PAI:  VTho is paying for that extra 10 percentage

                MR. ROTHENBAUM:  The industry.

                MR. PAI:  Through User Charge and local debt service!?

                MR. ROTHENBAUM:  They would have to pay that capita]

§     portion allocated to them through the letter of commitment.

                MR. PAI:  Local capital portion or federal?

                MR. ROTHENBAUM:  Local capital portion,


6               MR, PAI:  That is/good point.

"               I want to also comment on just a side issue, non-

      productive cost.  I think we always look at nonproductive cost

      from the industry point of view or society's point of view,

      I understand water pollution or any pollution effort is a

«     nonproductive cost to industry.  But as the study indicates,

|3     all these things also have social value.  What is nocproductivja

      cost+-to society?

                I am not trying to say that industry is responsible,

      I am saying industry should take heart that whatever money

      they put in to abate pollution, it is productive cost.

£               That may help you to persuade your management to

ft   II
      allocate money for pollution control.  It is not a total waste

      even to industry itself,

                MR, DONAHUE:  One of the things we did find,


       comparing rates is difficult to do.  Even if you go back and

       look at the unit cost for a gallon of sewage or pound of

      pollutant, if people change the basis upon which they chargs

       people, many industries say, our sewage costs are going up

5      phenomenally.  They are charging everybody a flat unit cost

-      basis.  That is one thing.

                 Another thing, a lot of people have been complaining
"      about ICR and User Charges, but if you go back and really pin
§      them down to what they are paying in total cost, and find out
ij      particularly in a couple of Northeastern states there has

       been state legislation passed mandating that the cooling
       water be discharged directly, not into the sewer system,

a      that while industry's rate may have gone up phenomenally, I

3      can think of one place where the average industrial rate was

J3      $9.21 per thousand gallons for everything.  But their total

       sewer bill had gone down, because they are no longer paying

       any sewage charges on cooling water which they used to pay.

3      You really have to be careful or data can trap you if you

       are not careful in how you use it.


       the time to express your preference herej we want to hear

       about it.   If you don't have it, then you lost your chanca—

       seriously.   I would prefer to see people tell the Congress

       what they want,  instead of when the Congress takes soma

       action,  say they don't like it.  This generally is too late.

       This is  the very purpose of this meeting.

                MR. SAWCHUK:  The comments received through October
o      31 will  be  recorded as if they were spoken in this meeting,

       will they not?
                 MR,  PAI:   Yes,

                 MR. DONAHUE:  If we get responses after the 31st of

       October, we will try to factor them into drawing up the final

       data, and drawing up recommendations,   We can't guarantee it.

i   I
2      If we get them through the end of this month, we can.

       Congress did not allow very much time for the study.  That

       study I started in the middle of May and the final report is

       due at the end of December.  It is a legislative deadline,  W.


J      can't get an extension.  You have to amend the Clean Water


o      Act to give an extension for the deadline of the study.  We

       intends  to meet that deadline, • So we have a really short

       time.for this whole thing.

                 MS, KEMPE:  Will all participants at this meeting

       get a copy of your draft report?


                MR, DON.V.IUE;  They will be available  in  the  region*:

      office.  It is a public document.

                MR. rANDOLPH:   If you desire a copy,  write to ma

      of the Office of External Relations, specifying the  report

      you are after, and I am sure they can accommodate  you. If

8  1  you have a problem, feel  free  to call me and  I  will  do what


S     I can.

o               MR. DONAHUE:  What we are planning  to do is  to have

|     the draft report, or at least  the summary  part  of  it,  which

3     we look at as being 25,30,35 pages  long, available to  anybody

 1     who wants it.   If anybody wants a copy, fine.  The final


 j;     report is probably going  to be 2,000 to 3,000 pages  long,

 S     We have transcripts and a whole bunch of public meetings,


 S     pages and pages of computer printouts, computer generated

§     curves and  that kind of stuff. We  weren't planning  to make

      whole bunches of copies of  that,  I think  what  people  are

      interested  in are findings  and recommendations.  That  is what

      we plan  to  distribute.

 d   fl           MR. PAI:   For this  public meeting,  we will make  a

 u    I
 £      summary  of  this public  meeting,  and make  copies available  to

      whoever  registered here.   We  will make a  transcript  of this

       public meeting available  in regional offices; however, we

       don't know whether they are going to make it available to

       everybody,   You will have a summary of this public meeting.


                MR. ROTHENBAUM:  Oh Alternatives No. 2  and  3, has

      Coopers&Lybrand considered maybe recommending that  current

      capacity be funded higher than 75 perdant, say, 85  percent

      federal funding for current capacity, and dropping  it lower

      to future capacity, therefore giving an additional  incentive,

      a better incentive for planning future needs, because the

      fact remains you will get a higher percentage for present

      capacity than dropping it drastically for future  capacity.

                MR. DONAHUE:  We said 75 percent because  that is    j
^     being done now.  But we said pick some percentage of  funding  j
*                                                            "       !
      for billing for present capacity, and drop that percentage on j











cut-off point, more than the current need.  Again the current

need is, you can work vwith that number.  The current number is

after a plant is constructed or whatever.  Basically this

gives you the concept of/what we are trying to do.  We try

to make sizing more reasonable,

          MR, DONAHUE:  The idea behind Alternatives 2 and 3

also, and this is another thing which isn't said specifically,

the idea was, okay, the federal government, Congress has

enacted the Clean Water Act.  EPA is administering it for the

Congress, we will help your local community get to where you

should be right now to comply with these requirements, After

that,you are on your own,  We are not going to be in the

business forever of handing out grants.  There is only so much

money we have,  A lot of people are complaining about federal

intervention in local affairs.  We will help on a one-shot

basis.  After that, you are on your own,  That is one of the
      ideas underlying that kind of recommendation.

          MR, RANDOLPH:  Any further questions?

          If not, thank you very much for attending.  I would

ask you once again, if you have not filled out a registration

card, to do so,

          MR< DONAHUE:  If anybody would like to meet with us,

we will be back here this afternoon to do that.

          We have another session tonight at seven o'clock and

      one tomorrow at ten o'clock.

                (Whereupon, the meeting adjourned,  to be

           reconvened at 7:00 P.M. the same date.)









                               United States Environmental
                                  Protection Agency
                               215 Fremont Street
                               San Francisco,  California

                               Monday Evening,  October 23, 1978
          The  public meeting  was reconvened at 7:10 p.m.,

John Randolph presiding.
                     745 tHIHB STRICT. •. W.

                    WASHINGTON D.C. 10014
                        (202) 554-9148








Introductory  Rena"i;rs by rir. Randolph

Presentation  by  Alan Brc-./n

Presentation  by  Ed Donahue

Questions and answers







                Eugene Boone,  P.O. #3111,  Zip Code 95353,
      representing John Inglis Company
                MR. RANDOLPH:  'Good evening.  I am John Randolph,
      and I have been asked by the Regional Administrator to welcom
      each of vou as participants to the public hearing concerning
      the subject of Industrial Cost Recovery.  It is EPA's sincere
      intention- that the public be involved in the study and that
I     the study's statements and  concerns be reflected in the final
      report to the Congress in December of this y«"»r.
                There will be a briefing on the project and scopa
      by Coopers  & Lybrand, management consultant and accounting
      firm hired  by EPA to assist in  the study.  The presentation
      by Coopers  & Lybrand will present the  findings and conclusion:;
B     of the  study as well as some of the  possible  recommendations
      which  could be  made  a result of the  study.  Prepared  state-
      ments  by those  individuals  who  have  scheduled a  statcii-cnt in
       advance will be entertained in  the  latter portion  of  the
       meeting .
                 Questions  and answers and an open but orderly dis-
       cussion will be, invited again at the close of the meeting.
                 As I stated earlier,  I am John Randolph, and my
       responsibility in Region IX is to review coordination of all


      proposed Industrial Cost Recovery systems as well as User

      Charge systems.   As you are familiar with, users of Publicly

      Owned Waste  Treatment Systems  are required to pay their

      Proportionate share of all operations and maintenance costs.

      In addition, industrial users  pay a proportionate share of

      the capital  cost of the project.

                Parameters for establishing the ICR c6sts are

      basically two:  flow and strength.

                With respect to the  study that we will be discussing

|     this evening, it is mandated by the Congress in 1977.  A

      contract was awarded in May of this year to Coopers & Lybrand,

_.     public accounting firm.  The reasons for the selection of

jj     Coopers & Lybrand are primarily that Coopers & Lybrand had

      experience in the area of revenue programs, previous experi-

13     ence with EPA.  In addition, they had the personnel available

      in order to comolete the task.

                The scope of work is defined in the Congressional


j     Record of December 15, 1977.  Some of the issues that were

      addressed in the REcord include any possible discrimination


i     against particular industries  or plants as a result of

      Industrial Cost Recovery, what differences there may have been

      in charges by various communities -ecause of ICR or User

      Charge requirements.

                The question was raised, does ICR 'force industry

      to relocate?

                Again,  does ICR increase the cost of pollution con-

      trol or thereby duplicate the cost to industry?

                Several questions were raised by the Congress with

      respect to the effect of ICR on conservation efforts, pri-

§  II  warily water conservation.

                Congress was interested in ascertaining whether or

      not ICR encourages cost effective alternatives for pollution
      abatement projects.

                And finally how are the revenues spent, once they

      are derived from the ICR system?

                At this time I will introduce Mr. Alan Brown to dis-

      cuss the contractor's portion of the study.

                MR. BROWN: My name is Alan Brown.  I was respons-

»>     ible for the ICR data collection effort conducted in the

    I! western half of the country.

                When EPA first asked us to collect ICR data, the

      first thing we did was go back and look at the 1972 legisla-
 ^    tive history, to find out what. ICR was supposed to accomplish

      and get our bearings oh what the study was supposed to

      consist of.

                Stated briefly, we found there were two major

      ideas contained in the legislative history or two purposes

      behind Industrial Cost Recovery.



      encourage water conservation.




                The first idea was thr.t of equity or equalising

      assumed economic advantage, end by that I mean less expen-

      sive sewage cost for those industries that use a Publicly

      Owned Sewage Treatment plant as opposed to those industries

      that have to treat their own sewage.

                The second idea was that of capacity or appropriate

      sizing of the treatment facilities with adequate but not

      excess future capacity.

                The third idea we found in the legislative history,

      but not essential to.ICR as the others, was an attempt to
                Now the background material from the  1972

      legislative history, together with the legislative history
      related to the 1977 Act, Congressman Roberts' Questions

      and Congresswoman Heckler's statements on ICR basically serve

      as the frame of reference for us in this study.

                Our initial step that we took in late May of this

      year was to sit down with EPA and that included John Pai

      from Washington, John Gall from Region I in Boston,

      and Ted Horn from Region V in Chicago and put together a

      shopping list of- all the data that we thought would be

      pertinent to help us answer the questions that Congressman

      Roberts raised about ICR and some other questions related






to User Charges.  We took this list of data elements and

converted it into two draft survey questionnaires, one for

industry and one for the grantees.

          The industrial' questionnaire was reviewed with

associations like National Association of Food Processors

in Washington, National Association of Manufacturers and

other  industrial groups to be sure that  the information

was available.

          AFter refining our questionnaires, we  developed

a list of people to survey, and we compiled with EPA

assistance,  a  list  of  approximately  100  cities which we

planned to visit  in person, and  these ranged  in  size from

the  little town of  Ravenna, Nebraska, population of  about

560,  to towns  as  large as  New York and Chicago.

          V7e eventually visited  120  cities  in person,  some

of them twice.  Our standard  procedure was  to qo into the

city and attempt to meet first  with  the local agency respons-

 ible for the wastewater treatment facility and then meet

 later in the day with any interested industrial groups,  civic

 groups or other associations.

           We mailed out our survey questionnaires ahead of
                ,»• *

  time  so people would have an idea of what information we

 were  looking for, and would be able  to prepare prior to our


                We also stressed that participation in the survey

      was voluntary.  In many caseo people took our completed

      questionnaires and mailed them back to us rather than

      meeting in person.

8               In addition to the 100 cities that we visited

      in person, we came .up with a list of 200 additional cities

      to be surveyed over the telephone.  We used basically the

      same procedure.  We mailed out the same questionnaires in

      advance to the people we surveyed by telephone.

                We then came up with a group of five, later

      expanded  to six, industries for detailed study.  Although

      we were interested in the impact of UC/ICR on industry

      in general, we were particularly interested in industries

      which met one of the  following criteria;  whether  the industr->

      was  labor-intensive,  had a low operation margin, was a high

      water user, was particularly seasonal or impacted  by the

      extent  of the pretreatment regulations.  The  industries  that

 s   1
 m   || we eventually selected  for detailed  studv were:  meat pack-

       ing industry, dairy products,  paper  and  allied  products,

       secondary metal.products,  canned and frozen vegetables  and

       fruit,  and  textiles.

                 A list of selected establishments in  the industries

       I just mentioned was  put together,  establishments  located in

      cities we were going to visit in person, and telephone

      interviews; and the survey forms were mailed out to those


                Our entire data collection effort was conducted

      in six weeks, using ten teams of C&L consultants across the

-     country.

g               The second step in the study, just as important as

      enough data to be able to formulate some possible alterna-

      tives to ICR as it is presently constituted and the purpose

      of the meeting this evening is for us to relate to you what

      we found and to get your 'reaction to it.

                AFter these ten regional meetings are held, we

8     will put together a draft final report which we plan to

      circulate widely and the draft report will be written in

      mid-November.  In December we will begin to write our final

5     report which will be delivered to Congress in late December.

      The final report will contain recommendations to Congress,

      and we cannot of course guarantee that Congress is going to

      act on our recommendations.

8               I will turn the meeting over now to Ed Donahue

      who will discuss with you what our findings and conclusions

J2               MR. BOONE:  Are you with EPA yourself?

                MR. BROWN: No, I am with Coopers & Lybrand.

*               MR. PAI:  Both of these gentlemen are with Coopers
-1     & Lybrand.

                MR. DONAHUE:  I am Ed Donahue.  I am the Project

      Manager with Coopers & Lybrand in the ICR study.  I am here

      to tell you what, v/e found during the course of the study,

      what we think it means, and then to present some possible

      alternatives.  The data and statistics that I will be using,

      based on our study,are currently being studied, validated










and refined in our Washington office.  Rather than hand out

raw data or computer printouts that arc understandable to

only a few people, we have summarized our data into a handout

entitled "ICR Study Data." dated October 10, 1978.  You should

have received a copy of this handout earlier.

          The final version of'the data analysis, much more

detailed and much more extensive, will be appended to and

included in our final report.

          without any further delay, let's look at the data.

Remember, though, the data is mostly average data and

requires careful thought before using it or it can be mis-

leading.  We eventually got data from 241 localities.  The

best data came from places we actually visited.  The data

I obtained through telephone surveys was not as complete or

precise, but it was still useable.  We also obtained data

from 397 industrial facilities, mostly through the effort

of trade associations.  The industrial data is at plant

level rather than company level.

                Looking at the major issues before looking at


      specific data, the first thing we want to address is the

      issue of equity or the assumed economic advantage; namely,

      less expensive sewage 'treatment costs for industries using

      Publicly Owned Treatment Works versus those treating and

      discharging their own waste.  We used a computerized tax model),

      which  we had developed for industrial clients,  and modified

      it to  reflect User Charge and ICR situations.

                Basically the model incorporates a series of

      equations which reflect the cost of doing business and

      enable the company to evaluate alternatives; in essence,

      a "make or buy" decision.  Should a company use Publicly

      Owned  Treatment Works or should it treat its own sewage?

                'What we found was for some medium or  large indus-

      tries, having comDatible waste, it is cheaper in the long

      run to self-treat, even without including ICR costs, just

      including User Charges.  This is a very significant finding.

B               What it means is that without ICR or  pretreatmcnt



      cost considered, a large industry should from an economic

      viewpoint treat its own sewage.  This is based on several

 £   I!  tax changes that were not really known to the Public Works

      Committee since they were enacted after the passage of

      Public Law 92-500 in 1972.

                The  three tax situations which make it attractive

      to self-treat  sewage are:   first, accelerated depreciation

      over a five-year period for pollution control equipment;

      second, investment tax credit  for capital equipment; and  third

      use of tax-free Industrial  Development Bonds, IDBs to

      finance self-treatment facilities.


          The proposed tax law changes now pending before

Congress, those recently enacted and those which will be

acted on in early January when the new Congress convenes,

will, if enacted, make it more attractive to industry to

self-treat their sewage because of the increased investment

tax credits.  What this finding says is that for many indus-

tries it is cheaper to self-treat than to use Publicly Owned

Treatment- Works.  If this is the case, why don't more

industries self-treat?  There can be several reasons.
      The  first is, they are not  located on a river or stream or

other receiving body and must use a Publicly Owned Treatment

Works.  Second* is they don't want the hassle of treatment,

they do not want to get an NPDES permit.  They do not want

to build and operate their own sewage treatment plant or

similar kind of things.  The third thing, which is probably

the most common, is that User Charge and Industrial Cost

Recovery have not been in effect long enough to see their


          The significant thing to bear in mind, though, is

that if Industrial Cost Recovery and pretreatmeht costs are

added on top of..User Charges, they could be the final straw

that drives industry out of Publicly Owned Treatment Works,

thus making it more expensive for the remaining Publicly






Owned Treatment Works customers to use the public sewer

System.  In particular, EPA's application of pretreatment

standards is likely to make many industries seriously con-

sider self-treatment.

          The second major issue is that of sewage treatment

works capacity.  Based on the survey of 241 wastewater

treatment facilities from which we obtained data, the

average Ptfblicly Owned Treatment Works uses only 68 percent

of its design capacity.  Usage ranges from a low of 4 percent

to a high of 120 percent.  It appears ICR, as presently

      formulated, has not acted to put a cap on the construction

      of excess future capacity in public sewer systems.

                The third issue, that of water conservation, is

      not as clear.  Based on industries we surveyed, water con-
sumption has dropped an average of 29 percent.  But industries

with whom we talked attributed the water conservation to

higher water rates and to User Charges, not to Industrial

Cost REcovery because Industrial Cost Recovery as a percentage

of water bills  and User Charges is not that significant

at this time.

          The economic impactrf ICR  to date is not signifi-

cant in most locales, because:

          ICR has not been  in effect for more than a year

      or two.

                Most grantees have suspended ICR billings while

      the moratorium is in effect.

                The exception to the insignificance of ICR is

«     those cases where there are seasonal users and/or AWT.  In

      those cases, total sewage costs for industries have increased

      by a factor of several tiroes.

                •The incremental impact of ICR above User Charges

£     is generally not great with the exception of the two cases

      just mentioned; the combined impact of User Charge and

      Industrial Cost Recovery can be very significant.

£               We can find only a few scattered instances of
      plant closings due to sewage costs and none attributable

      solely to ICR.  Total jobs lost in the plants that did close

H     was less than 1,000.  In every case there were other factors
8     such as plant age which affected the plant closing also.

                The impact of ICR appears to be greatest in older

      cities, particularly in the Northeast, and particularly in

0     small to medium sized cities, and particularly in
^     agricultural communities.
                There"does not appear to be any impact of Indus-

      trial Cost Recovery on national industrial growth patterns to






          We were not able to differentiate the impact of

ICR on small versus large businesses, because very few

industrial plants were willing to disclose production or

sales data.

          The cost to industrv of sewage treatment is

much greater by about 50 percent per gallon in AWT plants

as compared with secondary plants.

          The incremental cost to the grantees to maintain

and operate Industrial Cost Recovery systems, that is,

the "eliminatable cost" above and beyond the cost of main-

taining and operating User Charge systems, is small when

compared  to the  total cost of sewage, averaging about  $15,000

per grantee per  year.  Average Industrial  Cost Recovery

revenues  per  grantee per  year are approximately $88,000,

of which  $8,800  is  retained  for  discretionary  use by  the


           There  is more  data which  might be  of interest  to

 you that is included in  the  handout.  We would be pleased to

 discuss psecific data during the question and answer period

 at the end of our discussion.

           To  summari-fce our Bindings:

           ICR is not doing what it was supposed to do.

           Relatively few cities have implemented ICR.





                Most  of  those  who  have  implemented ICR have sus-

      pended collections.

                ICR to date has  had no  significant impact on

      employment,  plant  closings,  industrial growth,  import/export

      balance, or  local  tax bases.

                Third, ICR is  not proving cost-effective in

      producing revenues for local or federal governments, at

      least in most cities.

                We must realize, however, that the Clean Water

      Act had social as well as economic objectives.   Among other

    "   things,  Congress is attempting to avoid the appearance of
5  I  using public money to subsidize industries that discharged

      sewage to grant-funded Publicly Owned Treatment Worksi

      While our studies have shown that many of the economic

      objectives have not been met, the social objectives remain.

      Accordingly, it is appropriate to consider a series of

      alternatives to ICR as it now exists.

                At this time I will ask you to turn your attention

      to a document entitled "Preliminary Compilation of Possible

      Study Alternatives," dated October 10, 1978.  The document

      presents  16 alternatives, ranging from leaving ICR as it

      now is to outright elimination of Industrial Cost Recovery.

      These alternatives are not necessarily mutually exclusive.










Nor are they ranked in any order of priority or preference.

Some of them could be combined for concurrent use.

          What I would like to do at this time is to ask

Alan to take these 16 alternatives, go through them one at

a time, and tell you a little bit about each of them, and

tell you the advantages and disadvantages of them. If you

have any questions as we are going through these, feel free

to ask them.  If you can suggest some other alternatives

or some variation or refinement of these alternatives,

we would be pleased to hear that also.

          Alan, if you would like to discuss the alternatives

          MR. BOONE:  Before you start on that, if I may,

you are from District IX?

          MR. RANDOLPH:  Right.

          MR. BOONE:  What cities in California are actually

involved in this ICR program?

          MR. RANDOLPH:  It is my understanding, I believe

there is a winery in Modesto, E & J Gallo.  They are involved

That is the only one that comes to mind right now.

          MR. DONAHUE:  Any city that has taken a grant

from EPA and ha'S industry has to have an ICR system, and

at present in California, I don't know how many cities have

actually implemented Industrial Cost Recovery.

                MR.  RANDOLPH:  I am sure Modesto or at least

      the Gallo Winery—

                MR.  BOOT1E:  They have their own treatment plant.

                Did  you ever hear of Boone's Farm Wines?

      That is named  after me.  I used to work with thr-m years ago.

      I went to school with E.and J. Gallo.  That i& Ernest

g  |  and Julio.  I  know them real well.  They have their own pri-
      vate treatment plant.

                MR. DONAHUE:  They are also paying Industrial

      Cost Recovery.  Somebody in the regional office is getting




      some kind of payments from them.  Basically any city in

      California or any city in the country that took a grant

      from EPA to build sewage treatment works and has any kind of

      industrial usage of their sewage treatment system has to -

 H  II  set up an ICR system.

 rt  „            MR. RANDOLPH:  Let me say something.  I am involved

 *  || with the review and in most cases the approval of the ICR
      proposal, and that is at the 80 percent completion point.

    „ At the point where the plant is 100 percent completed and
the grantee starts collecting payments from industrial users,

those payments are remitted directly to the financial manage-

ment officer, and we in the Grant Section are no longer

associated with the ICR per Re.  We are only involved in


      preliminary phaces in terms of approving the financial schema,

      if you will.

                MR.  DONAHUE:  Alan could probably tell you off the

      top of his head a list of most cf the cities we visited in


§               MR.  BOONF.:  Do they have these charges going on?

                MR.  BROWN:  No.

                MR.  BOONE:   We have plants in Banta Maria, Salinas,

      Santa Cruz, Watsonvilla, Modesto; Ogden, Utah; Bellingham,
i     Washington and Grandview, Washington.  I am not familiar

 i     with this paying anything in this form.   At Modesto, we get
"     a fairly sizeable bill every month there, but it is for

*     volume and strength.

 «               MR. BROWN:  Let me go through this and talk a little

J3     bit about what User Charges are, what Industrial Cost Recovery

      is, and maybe I can explain to you why you are not paying it

      and maybe why you do not recognize it on some of your bills
 j  || now.

 0  „           MR. BOONE: We have a hard time keeping up with the

 y  " user part of it, like at Modesto this last month we got a

      bill for $19,000 for one month, and we have two meters,

      Meter "A" and Meter "B."  Keter "A° reads in cubic feet.

      Meter "B" reads in gallons.  So the wise girl down at city


      hall  does  the  Meter  "A" prope-rly,   because she has to

      multiply the cubic  feet by 7.40  gallons  per cubic foot.

      But she goes over end multiplies  the gallons by 7.48,  so

      she owed us 16,000  *°™P odd dollars,  which she has to now

      give  us back.   We have to catch  them at  this.   We are so busy

      just  watching  use,  and for example at Santa Cruz, I am lookinq

      at it from the practical  viewpoint now,  how it affects the

      guy who is trying to make a living in this racket. We

      have  cut our usage  down over there; we have actually  had some

      related data to water usage and  pounds of product put out

      and we are running  about  17 gallons of water for each

      pound of finished product out the back door.  Now we  have that

      down  to 3-1/2.

                MR.  DONAHUE: Pretty sizeable  reduction.

                MR.  BOONE:  It  wasn't  worth a  Rod damn because

      the sons of bitches turned around and raised our water bill

*     50 percent because  the city wasn't selling enough water.




                MR. PAI:  In the line of your thinking, this

      is the thing we try to avoid in wastewater treatment practice

                When usage goes down, the rate has to go up to

      support the overhead.

S               MR. BOONE: We would rather use more water and pay

      less for it.  Why try to conserve?  There's no point.

                MR. PAI:   Exactly.  The point we are trying to

g     address, on the sewage treatment plant we are in the process

      of doing some planning through which we may be able to avoid

3     that kind of situation.  In other words, if we size the
      thing right, with the water conservation, with this kind of

S     thing in mind, we may not have to size a plant which is too
S   1
      big, and when you start to conserve water, your sewer  rate •

      goes up.  You see my point.  The reason why the water rating
£     goes up—

                MR. BOONE:  I know why it goes up.

                MR. PAI:  What we are trying to do is size sewage

       treatment plants  more reasonably, so when anybody conserves

      water,  to reduce  their water  into the sewer system, they

       are not going  to  be penalized by a higher rate.  It may work.

       Give  it a chance.   It may work.  The problem is you have a

       big,  big water plant here.  When everybody  uses  less,  you

       still have  to pay the  same  amount  to pay O&M cost.  We are


      trying to say don't build a sewage treatment plant too big,

      because when you build it too big, no matter how much sewer

      you arc going to une, you are going to eventually pay that

      amount of money to keep that plant operational.

                MR. BOONE:  Are you from Washington?

                MR. PAI:  Yes.

g  [I            MR. BOONE:  Go back and tell them to get busy

      and write'their 301(h) Resolution, because we had all these

      hearings and all the rest.  This is our only salvation.  In

      Santa Cruz we have  four industries.  We have a tannery, we




have Lipton's Tea, we have ourselves, and Pacific Foods,

which is a cannery.  The cannery is.seasonal.  We are scan-


onal.  The Mnnory is year-round/Lipton's Tea is year-round.-
 *                           So you have two year-round, two
       seasonal.  We are  the only  four industries in the City of
v>   |  Santa  Cruz,  and  they  are  talking  about  at  the  top a  $65

       million  sewage treatment  plant, and  at  the bottom, $35 million


       Here are four industries.

                 You say you're  looking  for a  town  that is  going
to close industries down, so look at Santa Cruz.  There's

one that is, I will guarantee you, if they have that

$65 million one.  Our sewer bill would be based at the present

time somewhere around R250,000 a year.  We'll sell the plant


      off,  sell the proparty, and we will move to some place else,

      no quastion.

                MR. PAI:  The alternative is either to go to

«  I!  secondary or go to primary—

S  |            MR. BOONE: We have primary already.  We want

      your approval of ocean outfall.  We have ocean outfall already

      We want your approval.

                •MR. DONAHUE: When they talk about a $65 million

      plant, are they talking AWT?

                MR. BONNE: Secondary.

                MR. DONAHUE:  Not advanced, not tertiary treatment?

      Secondary treatment?
 I              MR. BOONE:  Thirty-five to 65 is the range.  I

      won't be at  the meeting, but on Wednesday morning, at seven

      o'clock, they are meeting  again in Santa Cruz.

                MR. PAI:  Do you  feel they sized the plant properIv?

      Is the plant too big?

 ^   H           MR. BOONE: We don't  think secondary treatment  is

      necessary at all.   We  meet eight criteria of 301(h) waiver

      perfectly.   Allwe want is  your approval.  Instead of wasting

  &  II
      your time out here, why don't  you go back there and get  those

      people on the ball?

                MR. PAI:   I'm glad your statement  is on the record.

                MR.  BOONE:  You came out to find out what our

      problems are and I am telling you.

                MR.  PAI:  Give us some more on ICR and User


                MR.  BOONE: I don't know anything about them.   I

      haven't experienced them.  I am paying for strength and

3     volume.  If somebody is charging me for ICR, I don't know
B               MR. DONAHUE:  Let Alan explain what the two types
I   |  of charges are.  You may be paying them but not realizing

y   II            MR. BROWN:  Basically if the community took a
      grant under Public Law 92-500 to upgrade or expand their

      treatment facility, the law required that the grantee

      establish a charge to recover operations—

                MR. BOONE:  Does that mean they are doing it?

*   I  Does  that necessarily follow that they are following that?
                MR. BROWN: In most cases, yes.
                 MR.  BOONE:  In Modesto are  they doing  that?

£               MR. BROWN:  Yes.
                 MR.  BOONE:  You are sure?

                 MR.  BROWN:   Modesto is one of those places we






          MR. BOONE:  They do have  an  ICR?

          MR. BROWN:  I  am not  talking about ICR.

          MR. BOONE:  I  am talking  about ICR.

          MR. BROWN:  Let me tell you  what the two charges

are.  Then you  can ask  me all the questions you want.

          The first charge  is the User Charge, which requires

the grantee collect back from all the  users on the system

in proportion to their flows and strengths, loadings to the

plant.  The operation and maintenance cost of the plant.

          MR. BOONE:  We are doing that.

          MR. BROWN:  That  is probably the charge you are talk

 ing about that bills you on flow and  strength.

          MR. BOONE:  Flow  and strength.

          MR, BROWN:  That  is  the  User Charge.  The other kind

 of charge that  Congress required in Public Law 92-500  is

 the Industrial  Cost  Recovery Charge.   Let's just  take  a

 hypothetical example.

           MR.  BOONE:  Take  Modesto, so I can identify  with it.

           MR.  BROWN: I am not familiar with Modesto. How large

 is the plant there?

           MR.  BOONE:  What plant?

           MR. BROWN:  Sewage treatment plant.

           MR. BOONE: It is big.   I don't know what the total is




It cost $14 million, I know that.

          MR. BROWN:  Let's assuma it is a 10 MGD plant and

it cost $14 million, and that industry's share of that plant—

industry contributes roughly 10 percent of the flow, the BOD

and solids.

          MR. BOONE:  We got $7.2 million from Washington,

and we raised $7.2 million, and we built the thing about

eight or nine years ago.  We were the No. 1, we were the first

place in the United States to do this.

          MR. RANDOLPH:  Off the record.
           (Discussion off the record)

           MR.DONAHUE: I think we should put this on the


           MR. BOONE: I have to get on the same wave length;

you are talking about something that there is no use to me—

I am  too nervous to steal, too stupid to lie—I have to be

able  to identify.  I don't think we are involved with this

God damn thing.

           MR. PAI: You may not be involved with it right now,

which.is probably the case.  You are paying a User Charge

which is for operation and maintenance of the plant.  ICR

is basically what you would have to pay if your city, or

whatever they may be, applies for new federal money.  In your





example, building a secondary plant for anywhere from

$55 million to $65 million, generally 75 percent will come

from the federal government.  Okay?  I am trying to use your

situation, and explain how this ICR may affect you.

          MR. BOONE:  What we want to do is we want to get

approval of the 301 (h) waiver, and we don't want to build

a God damn secondary plant in either Watsonville or Santa

Cruz.  We1 don't want any part of it.

          MR. PAI:  If that is the case, you don't need any

federal money.

          MR. BOONE:  I want you to get back to Washington

and get busy and get on with the work.
 a                MR.  PAI:   Let me  get  on ICR itself.   In  case

your waiver is not approved or you have another plant you

want to relocate, in which they would have to reauire some

federal money from this point, then that money, 75 percent,

will come from the federal government, which is different
       than 84-660 which you only received  50  percent grant,
_   11

to   I   The new Water Pollution Act is  under 92-500  or 95-217.   You


jjj   I   can receive up to 75 percent of federal money to build

    "   that plant.

                 MR. BOONE:  I don't know if we can afford to  accept


                MR. PAI:  That's up to you.

                MR. BOONE: Have you read Simons' new book,

      "A Time for Truth"?

5               MR. PAI:  I heard about it.  I heard it is an excel

      lent book.

§               MR. BOONE:  You better read it

                MR. PAI: In case you receive that grant,  the law

      requires  that industrial users who use that federally funded

      facility  would  have to be required to pay your share of

      usage  of  the construction costs back to the federal

^     government.  That is what is called Industrial Cost Recovery

      You are not  affected by ICR right now.  But in case any

|     of  your plants  are in a city which is applying for  or

      receiving federal money,  then you will be  subjected to the
"     ICR requirement if the  law doesn't change.  However, there

      are enough  industrial users  in  the country saying that ICR

*     is  an additional or unfair  financial burden to them, I

      would say like  in Sacramento.   A lot of canneries or canners

      have a problem because  they know they are going  to  pay ICR
gj      sometime along the line if  the  law doesn't change.
                 So there is  enough concern raised  to  the

       Congress that Congress  was  responding  to  this concern.

       The said, hold down the ICR implementation part, don't


      collect money for 18 mbnths and let's do a study and sec

      now ICR actually affects industrial users.

                If you are not involved with ICR, you are lucky at

      this point, compared to any of the other canneries or

*     frozen food processors in the country.  Many of them have

      said that ICR makes for them a very, very hard decision as to

s     relocation, to close down a plant, to cut down expansion

      and everything else.  So this studv is trying to find out

      what indeed has ICR impacted.  Basically we have six major

iS     industries and other minor industries that we are concerned

      with.  The study up to this point is what Ed just briefed you

      on, that it shows that a large industry probably would'

|     better off by going to self-treatment.

                MR. BOONE:  Suppose that a city like Modesto,


u     let's say, instead of doing it ourselves, on a 50-50 basis,

      suppose there had been 75-25.  So 75 percent of the $14 milliojn,

*     we would have gotten from the federal government, which really

d     means we paid it ourselves.  There is no such thing as a free
      lunch.  We understand that real well.  We would put up 25

      percent on a direct basis.  What would my charges be on ICR

      on that basis?*"'

                MR. DONAHUE:  If you used 10 percent of capacity

      of the sewage treatment system, if your company used 10




      percent of total  capacity—

                MR.  BOONS:   Based  on what?

                MR.  DONAHU3:  Based on flow and strength,

      how many pounds of EOD is the sewage treatment designed

      to handler-if vou use 10 percent of that design capacity—

      okay, that is 10  percent of  the BOD; if you use 10 percent

      of the flow that the plant was designed to handle, okay—

                'MR. BOONE:  We don't get in trouble on BOD.   It is



*     the damn volume that we get in trouble on.
                MR. DONAHUE:   Whatever portion of the sewage

      treatment plant you use, whatever percentage of it it is,

      thatpercent of the federal grant dollars has to be repaid

      by vou over a 30-year basis, so it could be sizeable dollars,

                MR. BOONE:  Do you have to pay interest?


                MR. DONAHUE:   No interest.

to               MR. PAI:  To give you an example, $14 million,

K   II  75 percent of that—$9.8 million.  Assuming you are using 10

      percent of capacity, you owe the federal government practic-

      ally $1 million, payable over 30 years.  So each year you
      would nay approximately $33,000.  That is the extent of


                MR. BOONE:  That would double my charge at Modesto.

      Last year I paid  $36,000.










top of that, you are certainly going to drive industry

°ut of the public sewer system.  That is one of the concerns,

if you build those big sewage trcatraant plants and you build

thorn to handle industrial sewage, and industry sees it is

more expensive to use the public sewer system than to treat

their own, you are going to be stuck with these big sewage

treatment plants and somebody is going to have to pay for it.

That is ome of the concerns.

          That is why some of the 16 alternatives have been

put together.  I think if you would let Alan go through, some

of them—

          MR. BOONE:  I like the first one "abolish it."

          MR. DONAHUE:  A lot of people have said that.  If yoju

go back to the statement I made, though, if you were looking

at this from purely the legislative Intent, is Industrial

Cost Recovery doing what Congress wanted1 it to do, we say

it apparently is not.  The simple solution would be to

suggest eliminating it.

          You have to remember Congress operates in a

political kind of situation.  If we said that, eliminate

Industrial Cost-Recovery, we are reasonably certain that they

would not follow our recommendations.

          What we are saying is, if you make the assumption

      their original objectives of water conservation and sizing

      sev/age treatment plants apparently are still valid objectives

      then we should propose some other ways of accomplishing those

      instead of having this additional cost recovery charge.  That

      is what these alternatives are supposed -to address.
-               Alan, if you could briefly go through some of them.

                MR. PAI: Do you want us to go through some of these
5               MR. BOONE:  We are meeting with Congressman Mineta

<     on Wednesday at noon in Watsonville.  That is the largest
      concentration of food plants in the United States, Watson-

s     ville Freezers.  There are 15 of them, including ourselves,

|     and we naturally are going to try to get over  our stor.y.

s     That is why I came 'down here tonight to try to find out what
5     the story was.
gj               MR. PAI:  Let me give you another numerical "example

      of ICR impact, possible iranact.
£               Assuming that you would have to build your second

      plant, okay, say at $50 million, and the federal government

&     put out  75 percent, which means the grant money is $27.5

      million, okay? ""Assuming again that you are using 10 percent

      of the plant capacity—

                MR. BOONEt I hope you said $37 million, not






        $27  million.   Your arithmetic is not good if you said 27.

                  MR,.  PAI:  I'm sorry.  It's $37.5 million.

                  MR,  BOONE:  You talk in these millions like they

        are  water,

                  MR.  PAI:  Assuming you are still using 10 percent

        of the capacityr  then your ICR share would be $3,75 million

        over a 30-year period, and you divide that by 30.  You would

        pay  about $120f000 a year.

                  MR,  BOONE:  Plus: User Charge,

                  MR.  PAI:  Definitely.  User Charge is always there,

                  MR.  BOONE:  We have to; we have no choice.

                  MR.  PAI:  I tried to give you some idea why ICR

        should interest you.

                  MR,  BOONE:  Is no good,  I didn't drive over here
}!!       for the God damn beer I just drank,  I came here to a meet in
        to learn something.  We have to tell Mineta what the hell we

                  MR. PAI:  I did want to tell you the-possible

        impact on you,  I am not saying that you will have to do thaft

        certainly.  I'm not saying that ICR will not be charged, I'm

        giving you this number cased on the assumption if you do

        that 50 MGD plant, and if your, discharge is 10 percent, and

        if ICR remained the way it is, you eventually will pay over

      a 30-year period of time a total of $3.7 million.  That is
      above, in addition to the User Charge, on a local debt sorvict
      that you are going to pay,  So ICR in this case is of vital
      interest to you, and I was really saying that if you don't
      have the time today, at least let Alan go through—
§               MR. BOONE:  I didn't say I didn't.  I have to get
      it in my language here.  You fellows are too far ahead of me.
                MR, PAI:  Are you up with us now?
                MR, BOONE:  What other ways have we got of getting
1     around this thing, Alan?

                MR, BROWN:  Well, that's what the Alternatives are,
                MR, BOONE:  Eliminate it.  That would be one,
                MR, BROWN:  That is the first one, the one that
      comes to mind first.  It is going to eliminate a lot of
12     problems industry has.
                The second alternative would be to change the grant
      funding mechanism.  Currently EPA will fund 75 percent of a
      construction project.  One possible alternative is to base
       the grant  funding mechanism on a different scale and fund the
UJ      current needs of the community at 75 percent and have a slidii
os      downward scale  so that  the federal siare  is reduced, as the
       community  builds a plant  larger than is  needed  today.
                 That  is one alternative.


                MR. BOONE:  Hdw will that help me  in  industry?

                MR, BROWN:  What that is going to  do,  it  is  going  to

      encourage the community, whichever community is  building  the

      treatment works, to sit down and plan properly  in the  beginning

      so they don't build a plant with excess capacity that  costs

      you more money to operate.:'.lt is also going  to affect  you

      because it is going to bring you into the planning process.   I:

      you plan to expand your operations and your  industrial facili'

§     you need more capacity in the treatment works.   It  is  going  to

      make it more beneficial to you to go down and start talking

t      to these people and get involved in the planning process.

*               MR. PAI:  To answer you question,  before  they finisl
      the design and send you a bill.

5               MR. BROWN:  You-  will be involved  early"on'-in the
-     treatment works.  You will know what it is going to cost and
      how much is out there, and how much to build.

                MR. PAI:   I want to again try to keep the same wave

      length with you.  The reason we wanted to emphasize the

4     sizing is not what  I just mentioned on the water works.  If

      it is built so big,  saving water  is not going  to help your

      total money, you  are going to pay.

                MR. BOONE: The only big one going through is the

      Santa Maria,  They  had some big ideas, some local  politicians






       to size it properly is one key to reduce -cost to everybody,

       not only you.

                 Another thing, as Alan pointed out, there are areas

       in which they would just'go ahead and build a plant, without

       letting anybody know why they want a size this big.  In other

      words,we have to go through a due process of public participa

       taion.  Without generating enough public interest in the

       sizing, if they size a plant, as you point out, somebody may

       have some rosy picture of the growth in that area, and they
       size it too big, and maybe it is reasonable, maybe it is very

       good planning, but the thing about it is, those people footing

       the bill should have the knowledge of how much they are going

       to pay.  That is another thing we tried to get industry

       involved in at an early stage of the planning, not necessariljy

       saying that the existing planning process is not working

       right; it is just saying that though they are working right,

       those people who are going to pay for it,  including industrial


"      users, and anybody should know in advance, whyf how and when

       and if the plant should be built,
                 MR, BOONE:  We're trying to keep up with you guys,

       trying to watch,you,

                 MR', PAI:  We are trying to keep up with you,too.

       This is one reason we came all the way from D.C. and we have




                MR, BROWN:  We have.


      meetings like this in all ten regions in cities around the

      country.  We try to get people involved in the decision makinc

      process.  And as I say, you know we find out there is not as

      much interest as there should be.

                MR. BOONE?  Have you had quite a few of these meetir

      already, Alan?
                •MR, BOONE:  Did you get some pretty smart people

      there that really know something about it? Hell, I don't know



      anything about this thing.


                MR, PAI:  We got a lot of smart people from the fooc


      industry ,
                MR, BOONE:  Now, what, out of this list of 16, where

      do they put their money?
                MR. BROWN:  No, 1.

                MR, BOONE:  That's what I thought.  That's what I

      liked right off the bat,

                MR, BROWN:  You don't have to be a genius to pick

      the one people like.  It doesn't cost them money.  As Ed tried

      to explain earlier, the purpose of the study was to find out

      what kind of impacts these charges have had on industry, and

      then to propose some workable alternatives.  For instance,

      ICR is not doing what it was intended to do, and we feel it is


*                MR. BOONE:  Six?


       a means to attain the Congressional intent.  We feel the


not.  The alternatives that we have got here are possible

ways to remedy the situation.

          MR. BOONE:  Which one of them was kind of in second


          MR. BROWN:  I think No. 6.
          MR. PAI:  The point here is that the Congressional

intent is still valid, and I think is still good.  The appro ajch

is what is under study.  Again, the approach is using ICR as
intent is still valid, and it is still the intent that we

should pursue,

          Alternative No, 1 of course would say give up ICR,

but if we just abolish ICR, we would not have a mechanism to

fulfill the intent of the Congress.  So as you may see from

Alternatives 2 through 16, there are other means which are

not ICR, but however would still fulfill the intent of


          MR. DONAHUE:  We feel if we tell Congress they

should eliminate Industrial Cost Recovery, that we have, we

are obligated .to suggest to them some other ways they can

accomplish the same thing we were trying to do with Industriajl

Cost Recovery,


                MR.  PAI:   Well,  I  think  the  original intent was a

      very  good  one,

                MR.  BOONE:  Maybe  if these new Congressmen get back








will be.  If people are in a spending mood, Congress will be.

There is no doubt Congress is the people's Congress.

          MR. BOONE:  This No. 2, allow the cost of construc-

ting the industrial portion of the treatment works to bo

grant eligible based on the grantee's option, if industry's

share La elected to be grant eligible, industry would be

required to pay ICR,  If the grantee uses alternative sources

of funding for the industrial share, there would be no  ICR.

What is that alternative?  You mean pay it yourself?

          MR. BROWNs  It would be basically the same situatic

you went through in Modesto.

          MR, BOONE:  I understand that.  What is in third


          MR. BROWN:  What's in  third place?  I'm not sure

we can pick one that is in third place.  No.  4 is fairly

popular with everyone.

          MR, BOONE:  No. 4?  That is a nice  little one.   Lei

me look at that.   "Charge ICR on treatment works only,

eliminating  ICR charges for  interceptor sewers."  That

eliminates some of  it.  I don't  think in our  case that  would

do us—we're not  in a great  big  city, we're all  in  little

 towns.   If you  are  in Chicago,  it would be valid.

          MR.  PAI:   You  are  like this.  Why don't  I just




      tell you what the main thrust of these alternatives are.  And

      give you some idea of how these things can be done.   If you

      have any other ideas, we are looking for simplicity,

                MR. BOOIT2:  I guarantee I won't have  any other  idea

      because I don't know enough about it.

                MR. DONAHUE:  Ycuj might—

                MR, BOONE:  At least not tonight.

                •MR. DONAHUE:  It doesn't have to be tonight.

                MR. BOONE:  Maybe after a few days.
                MR. PAI:  Anyhow I want to tell you our basis.  We

      tried to simplify the problem from the grantee's point.  We

      tried to §at-Industrial users to participate early  for  a  better

    planning, process,

                MR, BOONEi  You have no. trouble convincing us.  We

      are up to our necks.  Our whole frozen  food industry, I think

      has been very active.

                MR. PAI:       Last time I had a meeting  with some

      of your reps in D.C., I was very impressed about the activity

      Somebody even told me that they hired their own consultant to

      do their planning just like grantees are doing. They come

      back and say, listen, my engineer told  me that this facility

      can be done with half the cost, so get  on the stick.

                MR, BOONE:  We,at the City of Watsonville here,


      we have two engineering firms.  Brown and Caldwell is one,

      and we have one other one.  We are checking one against the

      other.  They are a mile apart.  We want a second opinion all

      the time.

                MR, PAI:  Like a doctor.

                The next thing is we want to give the grantee some

      discretion as to fitting his local conditions.  In other words,

      if you have- a lot of other contributions to the community like

2     unemployment, like other things, maybe the grantee will want

      to give a deal and that is fine with us.

                Another item of course is very, very—

                MR. BOONE:  I think that day is gone.i

|               MR. PAI:  For the grantee's discretion?
                MR. BOONE-:  For the grantee to say, you come in and

1=     we will give you free sewage, something like that.

                MR. PAI:  On construction cost, you never know.

*               MR, BOONEt  I am not bumping into any of them that

-i     are talking that way now.

                MR. PAI:  I don't know,

                MR, BOONE:  They may be around, but I don't bump

      into them.

                MR. PAIi  Who Knows"? Another item, we try to hold

      down existing cost.


                 MR,  BOONE:  Amen.  That's good.

                 MR.  PAI:  So going back, these are the four bases,

       four major items that we try to get done with our alternative^.

       You may not be aware of aj.1 these .alternatives, what they

       really mean.  When you get down to the bottom line, all these

       alternatives are trying to serve any of these four purposes

       here.  As you point out, you may not have any input to us

"!      today, but as we announced in the morning session, we will


       extend the comment period to all these alternatives until the

       end of this month, October 31.

                 MR,  BOONE:  What is this law—

"                MR.  BROWN;  92-500,

                 MR,,  PAI;  That is the one enacted in 1972.  Then

       in 1977 is the new law called 92-217.

                MR.^  BOONE?. That is the amendment.  What is the one




       was amended by 92-500f and further amended,

                 MR';  BOONE;  This is the 1972 Clean Water Act, and

       9.5-217 is an amendment.

                 MR.  PAI;  The 1972, it is called the Federal Water

       Pollution Act Amendment.

                 MR, BOONE; Tfiat's the one that's got ^11 ,i,in; ^
       in Modesto?
                 MR,  PAJ;  84i-660.   That is the original law, and it


                MR,  PAI:   Yes,  you  got  that  right.   So  if  you don't'

       have  any  comment or—

                 MR.  BOONE:   I  came here  to  learn something,

                 MRn  PAI;   I  hope you did.

                 MR.  BOONE:   We are trying to make  a living in this

8      thing,  and sewage  is just one ofour headaches.   We've  got  a

       lot of  other  ones.

                 MR.  PAI:   One  of the things, the public meetings

§      serve two purposes. Number  one  is for. those people who haye

M      a knowledge of the  actual impact,  give us  what they think

       about it; and the  number two purpose, which  is as important a

       the other one is,  is for a basic discussion  and  education

       purpose.   We  tell  you  what they  are,  and I think you know  mor

       about ICR than when you  cams in.  That is  one of the purposes

J3      this  public meeting.

                 So  we would  be glad to sit  down  with you  to  talk
      more  about  ICR.  But basically you have up to October"31 to
3      send  in any comment or any other thought you have, and we wil


       look  into  any  thought you send to us

                 MR.  BOONE:  Whose department does this come under

       back  there?

                 MR.  PAI:  Mr.  Jorling and under John Rhett.  Jorlin

       is  our Assistant Administrator, and Mr. John Rhett,  as a




       have  too muclr'smarts about  the technical  side.

                 MR, PAI;  She  tries very hard.

                 MR. BOONE:  Good  coordinator.

                MR. PAI:  If she doesn't have the answer, she always
      calls me and she says, John, one of our members asked me this
      question and I don't have the answer.  I generally give her
      the answer.
                MR. BOONE:  She is good about leg work, doing stuff
"     like that.
                MR. PAI:  She is very responsive to members' requests
                MR, BOONE:  Good looking, too.
                MR. PAI:  rf-you have"any more;-questions...
;«               MR, BOONE:  She's Greek.  A good looking Greek girl.
                MR, PAI:  Anyhow, as I said, you can think about
      it, and if you have more questions, call us on the phone, writ

1     letters to us.
*               MR. BOONE:  I have given you fellows a bad time here
                MR. DONAHUE:  No.
                MR, PAI:  We are enjoying the meeting.
                MR, BOONEi  I have to pick your brains in my own waj
      here,  But to go down through all 16 of these things—bave
      you  got  any other one in a position anywhere close to the top
ui     here?
                MR, DONAHUE:  Most people never get past the first
      one  and  maybe at a  couple of others.
                MR, BROWN:  No. 9, 10,  and  11.


                   MR. BOONE:  So many of these things, they  assume

         that you're going to do itf like No. 9, allow tax  credit

         for ICR payment.  That assumes you are going to  have the

         damn thing,

                   MR. PAI;  -mac is not positive thinking.

§                  MR, BOONE:   "Abolish ICR and require local share

         of project cost be  recovered through proportionate User

         Charges."  I don't  think 84-660 is available any more, is

         it?  That half and  half deal?  It is my understanding you

         can't do that any more.

*                  MR, DONAHUE:  Most all the alternatives  that are

"'        set forth here would require some kinds of  legislative

         action.  If Congress doesn't act to do something about


         Industrial Cost Recovery, Congress has said that cities,

         grantees, did not have  to collect Industrial Cost Recovery

         for an  19-month period, 12 months while the study  was t-  .

         supposed to be done, and six months for Congress to  make

         up  its  mind.'  IE Congress doesn't do something by  next

         July,  then Industrial  Cost Recovery will  come back into

         effect,  and you, maybe not in Modesto, but  those cities

         with  recent  federal grants will have to start paying

          Industrial Cost  Recovery.

                    MR.  BOONE:   The worst enemy  back  there is, I

          think,  that  Muskie.


                 MR.  PAI:   I  don't think so.   I think as far as ICR

       goes,  this Congress  asked  us to  do a very,  very open study.

       In  other  words,  Congress evidently wants to find out for

       themselves what  is the impact, and if  there is enough input

       to  indicate—

                 MR,  BOONE:   Isn't he kind of the  ring leader of thi

I       thing? He keeps, stirring, the pot all the time.

*•                MR.  PAI:   I  don't think so.

                 MR.  BOONE:   Who  is the worst one  we've got back



                 MRi  PAI:   At this time I think people feel the Hous

       is  on  one side and the Senate on the other  side a little bit.

5                MR.  BOONE:   The  Senate has been the rough one,

„                MRt  PAI:   On this ICR  study  we got a clear signal

«n      to  do  -a veryf  very open study.   We have no  biased opinion,

       eitherr from EPA,  Some people think EPA is on the other side


       of  the fence.  In this case, I can guarantee this is going to

       be  a fair game.  The reason of course  is Congress wants to

       find out  what  is going on,  and this is the  very reason when

       we  come here today we  don't have a recommendation in mind.

       We  show you what are the possible recommendations.  On the

       net, the  public  tell us or tell  Congress, for that matter,

       what they feel about ICR itself, and what they would like to

       replace ICR, if  there  is any at  all.


                                                                53   :

   I                                                                 '
   1(             So unless people or the public  indicate  what  their  |

      preferenca is, and a good reason behind it,  then Congress    |


      will again ba at a loss  to determine what  to  do with  ICR.    I

      So we really try vary hard to get a public  reaction to  the

      things we have'here.  It really is to the public's benefit    \


      that they react to it, whatever the favorable  alternatives    j

      are   But they have to make it known through us  to the  Congress.

*  I                                                                i
1  I  Then in this  case, maybe Congress will do  something that

0  I                                                                !
°.  i  everybody likes for a change.

I  :                                                                !

z  I            MR.  BOONE:  My guess right now  from  visiting those  i

*  jl  felloivs all  the time back there   is that  Sam llayakawa would  |
 i   i                                                                i
       be  with us,  and Cranston would be against us.

                I think John  McFall,  ve  hive  plants  in  his  territory/j


     he'd be  with  us.   There's no  question Mineta will be  with us.   \

                MR.  PAI:  I think Congress has  a very good  grip of
      what  ICR is  doing  now.   At  this  time  I  am looking forward that

"     they will  take  some  action  on ICR itself.   I think it will not
split the House or party line or that kind of thing.

          MR. BOONE:  I don1t think it is a party line thing,

except as you might interpret Democrats being Liberal and

Republicans being Conservatives.  The Conservatives will be on

our side and the Liberals of course will be against us.

          MR. PAI:  On the other hand, people always say





         things about Muskier}  let me say without Muskie we probably

       would not have the money to do this pollution control effort.

                MR.  DONAHUE:  The thing also on political lines,

       Liberals, Liberals versus Conservatives, one of our concerns

       in the study  was the reaction to whatever we might say by

       environmental groups,  fearing that they might think we were

       trying to railroad through some kind of something which was

       not to their  best interest.  So we have paid particular

       attention to  the concerns of the environmental groups.

                 MR. BOONE:  We have to, and we need the environmenta

       groups.  I am  a member of the Sierra Club, have been for all

       my life.  I don't agree with everything they do, because they

       are tugging one way, and in industry we are tugging the other

       way here.  I  am all for conservation.  I feel like the guy wh

       goes out and  buys a $100,000 automobile, and spends all his

       money for the damn car and doesn't have any money to travel

       in it, and no gas, no anything.  So what is to be gained?

       You can make  laws tough, and you can put a $65 million sewer

„      system at Santa Cruz, people can't pay for it, industry moves

       out.  And so  what have you gained?

                 So  you have to get it down to what is affordable.

                 MR. DONAHUE:  Our concern there was that we

       would recommend something that the environmental groups would


     be very opposed to, and we wanted to make sure that they under-

     stood what we were doing and why.  Basically their perspective

     on Industrial Cost Recovery is pretty much the same as ours.

     They said, well, the objectives of it, conserving water and

*    building sewage treatment plants of appropriate size are good,

     and Industrial Cost Recovery was a means to get to that end;

     and if Industrial Cost Recovery isn't the way to get to that
     end, and you can suggest some other ways to get there, then we
     don't really object to that.  I think they will not try to

|    prevent some changes to Industrial Cost Recovery,

 i              MR. PAI:  One thing we can point out to you in the

"    Advisory Group-; we have about an equal number of environmental
5    groups as industrial groups, and after a few monthly meetings

     we hadf they seemed to become good friends.  In other words,

a    they all understand the importance of industry in our society

     as well as environment in our society.  Some misunderstanding

"*    has been clarified between the two groups.

               MR. BOONE:     Th& original group that went to work
     for EPA back in 1972f a  lot of them were pretty theoretical

     and so on, and just like in the meeting up in Seattle, Jorling

tJi    was conducting the meeting, a big crowd there, about 175 people

     there, and it started in the morning.  It was a real hot,

     muggy day in Seattle.  No  air conditioning,  they don't have


      it up there.  The room was full of people, you know.  They

      had television and all that stuff, and lights.  Our little

      group from Watsonville and Santa Cruz—we had five—we had

      the mayors of two towns and we had the city Public Works

      Director, and I was there, and a couple fellows from some othe

     plants there.  There are five of us going to testify, anyway;

      and we were scheduled for like 3(30, in the afternoon.  The

      thing went on from nine in the morning, they didn't even stop

      for lunch, went right on through.  I went out and looked up a

      hardware store, and I bought a lamp, like a miner wears on

      his head, with a band around his head and a battery on-his

B     belt, and so I put that in my briefcase and instead of gettinc


      to us at 3:30, it was about five o'clock before they got to
      us.  These people were all asleep  up there.  The panel looked

      like they were wrung out.  I didn't say anything.   I just

      opened my briefcase.  I had a stand like that one,  and I set

      my battery up on the bench, uncoiled the wire, and a few of

J     them began to wake up.

                What is that silly bastard doing?

                I put the red, white and blue band around my head,

      and got  it adjusted and didn't say anything, turned the light

      on, and  went over and looked Jorling over real good with my

      light and looked them all over down the line, looked over the



                Pretty soon they were all laughing, and they were al

      awake,  having a lot of fun.

                I told them some stories and kept my light on all

      during  the meeting.  It got down so it wasn't—these guys-,wore

      all reading from-papers, and hell, everybody was asleep.
1                We got to talking to each other, and Jorling said,

      I would like to see that.  I never saw anything like that. I
      said, well,  you come up here and we will let you try it on at

      the end of the meeting, and then Lisa said, I want to try it,

*     too.  I said, I'll let you try it on one condition,  Let me

      take your picture.  We got Jorling and Lisa with the lamp on
      and, got their pictures,  I said, I am sorryr folks, I am an

jj     impostorr I am really not an industrialist at all.  I'm from

in     the gahta Cruz Examiner,  This will be in the paper tomorrow

      morning,  They looked kind of funny,  I go back to Washington

      here a few weeks- ago and walked into Jorling's office and said





      bill.  I made a"deal with those people over there years  ago.

      I go with what they call industrial drain, and it goes out

      and the farmers pump water out, and they irrigate ground with

      it, and if there is anything left, it goes down to the ocean

                They bring them from all over the country to see my

°     separating system.  We have palm trees and benches where the

      people eat their lunch out by the sewer thing.  They keep it
0     clean.  We have a steam cleaner out there.  Every four or five
      hours they steam the screens off.

                We have low BOD and we keep the solids out.  We

 '     put it right in this ditch.  The farmers use water and we are

      the frozen food plait in town that did it.   My competitors

n     over there were paying 60,000 bucks a year for a sewer bill,

5     going into the city system,

ij]               MR. DONAHUE:  You were foresighted in doing that.

                MR. BOONE:  We had to get the city charter changed,
     and*, a lot of the stuff was goofy.  It worked out.  Santa Maria,
J     we're right in the throes of this thing.  We are in the plannijnc

i               MR'. PAI:  We appreciate that you bring this  issue

      back to your members' or other  industrial users 'in  frozen  food,

      or in the geographic area.  Again, we will be here tomorrow



               MR. BOONE:   I have to go back, I have a Board of

      Directors meeting  at nine in the morning.  I have to drive

      home  tonight*

               MR. PAI:  Call-us on the phone, write us  letters,

      and I will  give you my address and number. I am glad you

8   ||  dropped  by  today.  I think you are asking a very, very good

      question.     I hope we gave-you  the  answers  that  will help

      you.   We are  not rushing you.
o               How far a  distance?
                MR.  BOONE:   It takes an hour and a half.

                MR.  PAI:  At 55 miles an hour?


 a   |            MR.  DONAHUE:  When you have your meeting  on Wednesday

 2     I think the thing you want to talk about,  you want  to make

 w     gure—

                MR,  BOONE:   Where is your car,  John?

                MR.  PAI: Yes, I'll give you mine.

                MR,  DONAHUE:  When somebody is  building a sewage

 «   | treatment plant, you  want .to make sure they don't build a

 Ul   M
      secondary plant if they don't need one.  That is one concern.
 g   I
 '  "           MR,BOONE:  That's what we're fighting in Watsonville

      and Santa Cruz.  That's why we want this 301 (h) thing, and

      haven't written the regulations.  They haven't written them.

                MR.  DONAHUE:  The second concern is, whatever they





build, anythingf make sure they build it the right size;

one that's big enough to have a little bit of room for

expansion, you're going to be stuck now ..paying for sewage

capacity they aren't going to use for 20 years.

          MR. BOONE;  At my age I can't worry about 20 years.

          MR. DONAHUE:  You never know.

          Thank you very much.

          (Whereupon, at 8:32 p.m., the meeting was adjourned,

      to be reconvened at 10:00 a,m,, the following day, Tuesday,

      October 24, 1978.J




ir •••
                                  United  States Environmental
                                    Protection Agency
                                  215 Fremont Street
                                  San Francisco, California
                                  Tuesday,  October 24,  1978
           The public meeting was reconvened at 10:05  a.m.,
John Randolph presiding.
                      745 THIRD STRICT. *. W.
                    WASHINGTON. D.C. 20024
                        (202) 394-9146

      Questions and Answers





       this at all.

                How does  this get started and what  is the purpose

       originally  and what do you do  after you take  the water  and

       process it? VThat do you do with  that water?

K               MR. DONAHUEs  A little  bit  of background.   The

       subject of  this  meeting is Industrial Cost Recovery,  which

       is an  issue related to User Charges.  Basically what  hap-

       pens is, If you  are a city or  sanitary district or whatever,

5      take a federal grant to help you  build Ta  wastewater
*      -treatment facility, you have to agree to  a lot of  terras

 ,      and conditions.  You don't have to take  the money  it  you

 |      don't  want it.   If you  take  it, you have  to agree  to  terms

 1      and conditions  that go with  it.

                 One of the terms  and conditions that goes with

       federal grant funds that go to build  a  sewage treatment

       plant requires you to set up two  kinds  of charges  to your


                 One is a User Charge and what that does  is guar-
       antee that the wastewater treatment system will be self-

supporting for operating and maintenance costs.   Whatever

it cost you to-operate the facility,  you have to collect

from users of the facility on a basis related to volume and

strength of their sewage.  Somebody that dumps in more


sewage and stronger sewage is going to pay more to operate

the thing than a home owner for example.

          That is one thing.

          The other kind of charge you have to set up is

what the purpose of this meeting was to talk about. Indus-

trial Cost Recovery which says that whatever portion of the

grant that you took to build the sewage treatment facility

can be identified as being allocated to industry.  If

industry accounts for 10 percent of your usage,for example,
      you have  to recover  that portion  of  the  federal grant  funds

      from those  industrial customers over a  30-year period.

                So what you are doing is really  getting back part

|     of the federal grant dollars  from industrial  customers.


'               The reason for Industrial  Cost Recovery,  the

jj     reasons were really  three, if you go back  and look  at  the

       legislative history  back in 1972  when Public  Law 92-500 was

      passed.  The theory  was  that  if you  were an industry some-

=     where out in the country and  had  to  build  your own  sewage

00      treatment plant to treat your own waste because you didn't


      have access to a public  sewer system, you  would have to put

       up 100 percent of that cost of building that  plant  and operat

       ing it.  If you are  the  same industry and  located in town

      with a public sewer  system and that  town takes federal money

       to build the sewage  treatment plant, in this  case the  federal

      government would pay 75 percent of  the cost.  You as  indus-

      try in that  town are supposedly getting  a  subsidy because you

      are only paying 25 percent  of  the cost of  building the

      sewage treatment plant instead of 100 percent.

10  "            It was perceived  by  members of Congress and their

       staff people  that  this was  an unfair subsidy being given

8   H   to  industries that use public sewer systems.   So what they

       did was  say,  okay, we will  effectively  not give them a grant;
I      whatever part of the grant  was  used to  build sewage treatment
9     facilities for industry in town, we will recover from thbse
      industries.  That will equalize the supposed advantage they

      have versus their rural competitors.  That'was one reason.

                The second reason was capacity.  If you don't

      have some kind of mechanism to regulate the size of the sew-
S     age treatment plant, industry would typically tell the local
!2     government, I need an extra 10 million gallons of sewage

Q     capacity for plant expansion; and they may or may not build

      it, and in the meantime somebody else is paying for it.
 0   ||
                So one of the ideas was to try to encourage industry

 J5  || not to get communities to build sewage treatment plants that
 V) N II

      were too big.  If they are too big, they don't get used and

      everybody else gets stuck paying for them.

                The third thing, not as important as the first

      two, was to encourage water conservation by an additional











          The more sewage you have got, the more you are

going to pay.

          Well, the study that we are currently doing and the

purpose for this meeting was to  tell people what we fb'u'nd a

what w-n think it meansj basically we have compared Industrial

Cost Recovery to what its legislative intent was, to

three considerations:  equity in sewer rates, capacity; propc

sizing of sewage treatment plants, and water conservation.

          We have concluded that it does not appear to do any

of the three things it was supposed to do. and since it Vias bejjn

such a controversial issue and so many local governments have

been opposed to it and so many industries have been opposed

to it, we think it is appropriate to propose some alternatives

That is why we came up with that list of 16 alternatives, and

we are  looking for comments on those alternatives, and

maybe people can  suggest some other alternatives.

          Based upon  the comments and  suggestions we get,

plus our own analysis when we have  finished all  of  it, EPA

will decide and prepare  a set of  recommendations that will go

 to Congress in December  because Congress directed that EPA

 do this study,  and give  Congess  a report by  this December.

           After we give  Congress  the report.  Congress has  six


        months until the end of next June to act on it.  If they

        don't act oh it, the collection of these Industrial Cost

        Recovery payments, which has been suspended since last

§       January, will go back into force if Congress doesn't act on

        the recommendations by next June.

                  We can't guarantee that Congress will act on

S       recommendations we make, but we think we have got enough

d       data and-enough, through all these transcripts, enough publi

5       sentiment expressed that Congress will act on the recommenda

*                 That is basically the prupose of the meeting.  Thajt

        is how 
       Arizona where water is real scarce, they self-treated sewage

       effluent and use it for mining purposes to blast ore out and

       use it for irrigation because they know what's in it.  You

       have to be careful with what is in it.  If there is something

       with heavy metals or something gets into the food chain, you
S      can't use it for agriculture.  Sometimes you can.  You can

„      sell it;  If the community sells it, they should reduce tho
       sewer fees by the same amount of money.
                 MR. LIM:  Do you have a plan  in your program  that

      the water you are  going to clean is  going to be good  for

 I .    drinking?
 i                MR. DONAHUE:  Not directly.
                 MR. PAI:  It depends on your  local treatment

      standards.  In your case, you discharge  into a public system.

       It goes to the city or county sewage treatment plant.  Each

       plant 'has a standard to meet.  In other words, they may have

       to reduce, for instance, 85 percent of  the pollutants or 95

       percent of the pollutants.  Each plant may be different.

 %      That's where the permit comes in.  Each discharge, whether

 ^      it's a municipal discharge or private discharge, you have to

 x      apply for a permit.  The permit will stipulate what degree of
       treatment it should provide for the sewer.  Each area may be

       a little different.

                 MR. DONAHUE:  That is because different locales,


      depending on where you are going to discharge sewage, you

      have to clean up more or less because of the condition of the

      water that is going to receive it.  If you are discharging a

      lot of sewage into very fragile marsh land or something  like

      that, you are probably going to have to clean up a  lot more

      than if you were dumping into the Mississippi River or vay

      out into the ocean.  It depends on where you are going to

      discharge, your system, how much you have to clean it up.

o               MR. PAI:  At this point in this country there  is

v>   «  no place where they directly take treated effluent  into
      drinking water.  Some places they recharge into the ground

      water, then take it out.  This is not directly connected.

                MR. DONAHUE:  You could, theoretically, clean  up

      sewage adequately  so that you could take sewage in  one end of

|2     the sewage treatment plant and the drinking water out of the

o     other end.  But esthetically and politically people get  very


      alternatives that people from Coopers&Lybrand came up with,

      people from EPA came up with, or from some trade associations

      The alternatives are not ranked in any order of preference.

      Some of them could be combined.

                There are ways that you could devise variations on

S     them, refinements or modifications, but that is just basically

      a shopping list of things we think are some recommendations
      that could be made.
                MR. VERLANDER:  I would like to make a comment.  I

|     will introduce myself.  My name is Michael Verlander.  I work

      as a rate consultant for the consulting firm of Browns Caldwel

      Consulting Engineers and perform User Charge and Industrial

      Cost Recovery rate studies for numerous communities throughout

      California, Oregon, Washington, Idaho, and currently doing

jjj     one in Michigan.

                After just a very quick review of your alternatives,

      I agree that you have pretty much really hit the gamut of the

      choices that are available. I also do agree from my experience

m     with your findings that ICR doesn't appear to be satisfying

z     the goals that were originally intended by Congress.

w               The various alternatives that are proposed seem to

      treat the three goals intended by Congress to certain degrees

      or at a certain level.  Some may provide equalization so that


       all industrial users are treated equally as long as they are

       discharging into Publicly Owned Treatment Works.  It appears

       as though, with the tax laws, these types of alternatives are

       going to be very difficult to administer.

                 MR. DONAHUE:  Yes, several of the alternatives—any

       of the alternatives there,except for the one that says leave

|      Industrial Cost Recovery as it is, would require some kind of







       over the long run than it was to use  the public  sewer  system

       That is because of tax changes, because you  have accelerated

       depreciation for pollution control facilities, you  have invent-

       ment tax credits for purchase of capital equipment;  and if

«      you are large enough, this is the limiting factor on medium

       and large size firms.  You can place  Industrial  Development

       Bonds, tax-free IDE's, with a balloon principal  payment at
v      the end.

                 Ok} a present national value basis,  for many compan:
*g      it would appear to be  less expensive.


 1                MR. VERLANDER:  I am not sure all of  that  is
       attributable to Industrial Cost Recovery.  In general, I fine

       ICR is kind of like the straw on the camel's back.  Ordinaril

       in most of the study I have prepared, it has not amounted to


       a lot, or to- a high charge.

                 Frequently, and I think a case, possibly by Mr.

       Hyde, who spoke yesterday, a case in point in Sacramento, the

       added increment of Industrial Cost Recovery to the User Charga

       that was developed for that community is enough to provide
_   ii

a!   ||   incentive to a major industry who is charging about 5 MGD of

       processed wastewater to the municipal system, to, in fact,

       construct his own treatment facilities, which would of course

       add another discharge to the Sacramento River and would reall


      be a- very economic  move  for  the  community of Sacramento as a

      whole,  in that  5  MGD  of  capacity roughly would be made avail-

      able to the community, could cause growth pressures that the

      community doesn't really'desire.   In  other words, it is kind <

2     looking backwards.

                What  I  would encourage is that Industrial Cost
«     Recovery be abolished, that  the  User  Charges be developed
       throughout  the  planning process  of the  grant program.   I thin):

2      that  can  provide  a  lot of  economic incentive for the industrial

       users to  request  a  more reasonable sizing of the treatment

       works for their specific needs.

                I found it is typical  with industry when they haven

|      got economic constraints nor even letters  of intent or

       contractual restraints, to request more capacity in what they

       think they  are  really going to need to  add a buffer.

                I think,of course, one of the goals of ICR is
       eliminate  that kind of buffering technique.   I think this can

       be easily  done by getting into the economics of the project at:

™      an earlier stage, and obviously EPA under Public Law 95-217 is

       making a very good attempt at doing this.

                 I find many of the users, major users are involved

       in the rate-making process very early.   They see what the cost[s

       are going  to bef and they are beginning to encourage the


       communities  not  to size.   We  had a case  in the  City of Stockt
       which you may have heard  about,  where we have designed a rate

       structure that does give  industry an incentive  to basically
       contract for what they need each year.  This could have been

       broadened at the time  the plant  was designed, so that the
S      plant wouldn't have been  oversized.  In  fact, it was over-
       sized,  it was based on typical engineering decisions that wer
       made in the early seventies,  where you looked five or ten
o      years at historical growth and just trended those on out with
5      out giving consideration to the cost,  the increasing cost of
 1      treatment.
                 MR. DONAHUE:  Stockton is also an AWT plant, isn't
                 MR. VERLANDER:  Yes.  The City of Stockton presents
       a lot of problems.  It is an oversized plant, Advanced Waste
       Treatment Plant.   User Charges are very high.  Industrial
*      Cost Recovery charges are not very high at all.  The major
-*      industry discharging to the City of Stockton has elected to
       discontinue operations there and move  to a valley town that i
       located further up the river that Stockton is discharging to,
       which has lower treatment requirements.  They virtually have
       almost a modified primary treatment system which is very
       inexpensive to operate.  Their water costs are less expensive


for a major seasonal water user industry.  It was advantageous

for them to at least temporarily relocate all their canning

operations to this other community. This1' of course does have

a negative impact on employment, tax base and so forth to

the community of Stockton.
                I haven't assessed those myself, and  I  suppose you
     may have.
                MR. DONAHUE:  One of the things we did  find  every-
      vhere we visited, and we visited  120 cities  and  talked  to  another

       200 on the  telephone and got data from a'little better than 4

 ,      industrial  plants, everywhere we talked to  people, we  asked

       about plant closings, employment impact kind of thing.

       Vie found  several places, five or six  plants that  had closed

       allegedly because of increased sewage costs

M               When  we pursued  the matter, even  anybody who allege

       that a plant closed because of sewage cost—when  we  pursued t

       matter,  typically we got a letter from the  company,  we closed

       the plant because of increased sewage costs.  Here are press

       releases, newspaper articles.  This shows how many jobs were

       lost.   I would  write them  a letter and thank them for  it  and

       ask them if I could specifically include their, letter  and pre  s

       releases and clippings  and whatever,  in our final report, as

       an appendix. Without exception, they wrote back  and said of

       course,  it is a matter  of  public record, we have  no  objection



to including that as part of your final report.  However, we

would point out there are other factors to affect decisions t

close the plant.  And usually it was plant age that was the


          MR. VERLANDER:  I found that was true in Albany

 where   we instituted new rates and the plant did close, and

basically it was an old plant and it was right at that border-

line where it was economic to make that decision to close it.
5     I think the case in Stockton, though, is an unusual one, and

|   I  the Tillie Lewis plant there is relatively new, and they put

 *     in some new lines, new processing lines, and lots of very new

 i     equipment.  They are landlocked; they can't really treat their

 i     own waste.  And I believe they are using it pretty much as

 "la warehousing space now, but it may be one.of those exceptions
 jc     to the rule that a lot of other things entered into the decision

 $   [I           MR. BROWN:  I have talked to the people from Tillie

 K     Lewis, and maybe I am confused on which city, because P have

 ^   | been to several.  I thought they just closed down or modified

 z     their production at Stockton.  I didn't realize they moved it

 Si   || some place else.

                MR. VERLANDER:  I believe it was a major modificatior

      We were told, and I have not followed through on this.  You

      may be more up to date than I, but at the time that I was

      preparing their final set of rates, Tillie Lewis had reduced

      discharges in Stockton by about 70 to 80 percent, and the

      primary case of that reduction was not modifications to  lines

      to their canning lines, but in fact relocation of a lot  of th

      canning operations.

                MR. BROWN:  I know they dropped a whole line.  I

      don't  remember whether it was tomatoes or peaches.

d               MR. VERLANDER:  I don't believe they are canning


*~     peaches there any more.  It has just been moved.

                MR. DONAHUE:  What we found also was that the  impac

»     incremental impact of Industrial Cost Recovery, as you said,

      above  and beyond the User Charge is not all that great in

      most cases.  The combined impact of User Charge and Industria

      Cost Recovery can be very great, particularly when you add to

      that,  whenever it is really defined, pretreatment costs  that


w     EPA  may be forced to impose on industry.

                Those things could really push an industry to

i     consider self-treatment or whether it relocates or not,  just

      pulling out of the municipal treatment system

a              The other thing is that User Charges and Industrial

      Cost Recovery cost is phenomenally higher in AWT plants  than

      secondary plants, by a factor of at least 50 percent.

                One of the alternatives, if you read very carefully


      Alternative  No.  2 or  3,  Iforget which  one,  says  that one of

      the possible recommendations would be  for EPA to fund current

      needs only.  When we  say current  needs we basically mean

      funding secondary treatment.   Later  if a locale  wants to go  to

      AWT, that would  be  their decision to make.   They would have  t<

      pay for it.  That could  cause  some jurisdictions, state and

§    .locales,, a problem.

                MR. VERLANDER:   That's  for sure

                MR. PAI:  It seems like wine is an emerging industr;'

I     in this area.  How  much  would  it  be  affected by  ICR?
 *               MR. VERLANDER:   What was that?

                MR. PAI:  Wine industry

 §               MR. VERLANDER?   It looks to  me like the biggest
      problem they will have is  with the User Charges.  Industrial

<     Cost Recovery dsntordinarily  that large of a charge,  but

      together they are phenomenal.

                The thing that r would  like  to get across in my
      statement is that I don't  wish to see  EPA institute regulatiox

      that will require User Charges and Industrial Cost Recovery

£     charges to be so high that it  will be  economic for industry  t

      construct its own treatment.   It  seems just inherently more

      efficient and more  economically beneficial to me  that a municipal

      treatment works  serve a  general area and that pretreatment be

      used to eliminate any noncompatible  pollutants prior to the


       discharge of—into a publicly Owned Treatment Works.

                 Again, in Sacramento, I think  it would  be a very

       unfortunate -situation if the major industrial  user there doe|s

»      elect to treat his own waste.  I don't know whether they  are

       going to be able to get environment*!clearance  to do  so.   It

       is not quite as easy as the industry makes it sound,  but  therje

0     is that potential, and it is just more administration  for  the
jj      state to.monitor another discharge point.  When you have  the

0     treatment capacity in one local place, it makes  a  lot  more senjse
<      rather than having several treatment works.

                 MR. DONAHUE:  In one of the handouts  that we had,

       and this was of particular interest yesterday to  the  people

      from -acramento, was the three-page handout on food processor

       sewage treatment costs, and we got the statistics by  running
141      through data that the National Food Processors  Association hajs
      furnished us, and as we said, we rely-on  them giving us accurate

*      data.  Since the sample is so l&rge, I think it would factor

       out any problems.  What it appears is that for  seasonal users

       it is generally—for large seasonal users, it appears generally

jjj      cheaper to treat their own sewage.  If you look at the three

       variations here, self-treatment, discharge into a receiving

       body of water, self-treatment with land  discharge of  the

       effluent, or using Publicly Owned Treatment Works, they are

       both noticeably less expensive than using self-treatment

       or water or land discharge,  considerably less expensive than

       a public sewer system.

S                MR.  VERLANDER:   That's right.
                 MR.  DONAHUE:   If Congress and EPA really want to
       encourage industrial participation,  the public sewer system

       is not that much less expensive.

£                One of the things we say,  if it's cheaper for

       a large industry to self-treat,  why don't they do it?
<                There reasons were:

                 Some of them are landlocked or aren't on a receiv-

       ing body of water they can use to discharge to.

                 The second reason is probably just as prevalent

9      as the first. They just don't  want the hassle of the NPDES
"      permit.    They don't want to build a sewage treatment capacit
*                The third thing and probably the real reason
       they don't want to operate the darn thing.

-1      is because neither the User Charge nor Industrial Cost

80      Recovery have been around long enough to see any  economic
u     results.

                 It takes several years for industries to start

       migrating to do something.

                 It would appear in the long run industry will pull


      out of Publicly Owned Treatment Works, if you make it that

      much more expensive.  Just a little bit more expensive than

      self-treatment, they will probably stay in, because they  doi

      want a hassle.  But if you make it a lot more expensive they

      will probably pull out.

                MR. BROWN:  Don, do you have any comments?

g               MR. PERRIN:  No, not on the record.

                MR. DONAHUE:  Don, does the state have any particul4?

      feelings about ICR even informally?

                MR. PERRIN:  There has been no formal expression of

*   [I  any feelings pro or con.  I have my.own personal feelings that

      I would like to talk about off the record.

.   I
i               MR. DONAHUE:  Well, from experience, people in  the

      state, we said reading legislative history, the three purposes

<   J  for Industrial Cost Recovery were equity between those people

      using public sewer systems and those people self-treating,

      and that is not something you can affect.

                The second thing was encouraging proper sizing  of

      treatment plants, and you want enough capacity but not too

"   " much.
                And the third thing was water conservation. From

      your experience, looking at revenue programs, for whatever

      number of communities out here, does ICR seem to be an

      efficient way to do that?


                 MR.  PERRIN:   As far as equity goes,  I dcn't feol this

       ICR system is  equitable in that it is based" on tha capital

       cost,  and the  capital  cost, for example, varies depending on

      what type of facility you have.  As a matter of equity, I woulfl

*      say it really  doesn't  solve that question.  ICR probably does
a      have something to do with the sizing, of the plant, but that
«      can be accomplished anyway without ICR.  You don't need ICR

d      to accomplish that purpose.

                 What was the third?

53                MR. DONAHUE:  Water conservation.

                 What we found was that when we talked from the survey

       of the 400 industrial plants, they all said yes, since it is

       an additional charge, and it is related to the quantity of

       water we use, it encourages water conservation.  But we found

H      the average industrial reduction of 29 percent in water

       consumptionrafter they went to ICR, which is pretty significant

*      but what almost all industrial people said, almost without

       exception, is that it encourages water conservation, but it

0      is not very significant, because compared to the User Charge
oj      water cost is so small, it can still be a lot of money, but
fc                  the
       compared to/other two items, water charges, it is still reall^

       small.  They said they couldn't attribute water conservation

       to Industrial Cost Recovery;  it was more likely the water




       like California, I would appreciate that you  state  either  on
                 MR. PERRIN:  I will agree with Mike, the  thing  that-






       charges than the User Charges.

                 MR. PAI:  Don, I want to point  out,  I  know you don1

       want to be on the record at this time,  because you have not

       had a chance to review this with your Board, but we have

       extended the comment period to October  31,  so  with a state
       your own or from the Board's point, give us  some comment.

                 MR. PERRIN:  I would be glad to.

                 MR. PAI:  We would like to see what your comments

       are.  So please use the time and send us something.
       ICR by itself isn't that serious, if you look at the total

       User Charges they are paying, but it might just be an incremcjnl

       of an additional cost that, so to speak, breaks the camel's

       back.  I don't think the amount of,the dollars is so critical

       as to what effect it has on the overall cost.

<*>                MR. PAI:  Of course _T3 have pretreatment cost coining

       and other cost.  We are concerned with total cost.  We are
       only authorized to study ICR, the total effect of ICR.

       Pretreatment is very much on everybody's mind at this time.

       But the way we look at it is, ICR may not serve its purpose,

       but the intent of ICR is still a valid one.  So what we are

       looking for is to find other ways to fulfill the intent of






                Basically it  is  just  a morass of  administration,

      and local interpretation is going  to  really be  the  final  line

                MR. DONAHUE:  We would like, if anybody has  any

      comments on the  alternatives that  we  proposed or can think  of

      other alternatives, or  can toss some  out the window or think

      of some new ones, we would really  like to hear,  because the

      more comments we get, the  more  people get involved  in  the

§     thing, the more  palatable  recommendations will  be.   Before  we

Q     make any recommendations to Congress, we want to be able  to


z     hand with them,  the transcripts of the meeting  like this, plus;

*     whatever other kinds of public  support we can show, to show

 *     a decision, was arrived  at  with  lots of public input.

                MR, PAI:  Don, can I  ask you a question?   I  hate  to

      put you on the spot. Look at Alternative 16.  Is that going  to

      be a big administrative problem for you?

                MR. PERRIN:   Requires a  letter of commitment?

                MR. PAI:  Yes.

                MR. BROWN:  That is  a contractual letter   of commit

      ment as opposed  to  the  way it  is handled now.

 u  „           MR. PERRIN:   I believe that was one of our recommendja

 H  1  tions  that we made  in June, during the hearing  process on the
 in  II

       regulations,  that the letter of commitment  be substituted for

       the  letter  of  intent,  if we were  going  to  continue  with


       Industrial Cost Recovery.

                 MR. PAI:  How about without ICR?

                 MR. PERRIN:  Without ICR--

                 MR. PAI:  Just the letter of commitment,  for  instanbt
       requiring them to pay a fixed amount of User Charge.

8                MR. PERRIN:  I don't see any problem with that.

                 MR.PAI:  Administratively would you have any probleja

       getting a letter of commitment from the industrial user?
o                MR. PERRINr:  In general, I would say no.  There are
5      always going to be one or two industries that would probably
       caise some hackles with that.

                 MR.VERLANDER:  I would like to comment on Alternative
       16.  I think in theory it is a very good idea in tonns of

       treatment plant and sizing.  I think it has also got its

       problems in that yqu are now talking about a contract between
       a municipality and an industry, whereby the municipality wouljd

*      provide-  a certain amount of treatment capacity.  And with
d      that, of course, would have to be associated cost that the

       industry would have to pay.

                 During the planning stages of the treatment works

       where sizing is determined, it is very difficult to ascertain

       the costs, what they are going to be to that particular industi

       It would be very difficult to draw a contract which would





      stipulate cost.

                MR. PAI:  The contract may stipulate the portion of

      the cost, not the exact amount.

                MR. VERLANDER:  I think unless industry saw what ho

      was going to pay, he would be very reluctant to commit himsel

      to a specific capacity.

                MR. DONAHUE:  I have seen charges just skyrocket

      in two years, from the initial planning period, where things

      look very reasonable, to a point where they are so large that

      it would, if I put myself in industries' shoes, probably make

      me rethink a few things, such as maybe I should put in more

      water conservation type processing equipment, because now it

      more economic for me to do it.  But the original cost that

      they told me, it wouldn't have been.  So I want less capacity

      but I have already committed for this large capacity.

                MR. PAI: That is two sides of the coin.  I guess

      we talked about this before, Mike. If you want to go to water

      conservation, you should do it earlier, before the plant was

      constructed.  That is one of the key things we are concerned

      with, is industry can always go ahead and reduce their water

      useage by 20 percent, 30 percent, the municipality is holding

      an empty V -T with excess capacity, and most ordinary people

      have to pay  for it.




                MR. VERLANDER:  What I would like to see, and  I

      think it has worked fairly well here in California, at least

      the way I view it, maybe EPA doesn't see it this way, but

      anyway, California on their treatment plant design has a ten-

      year growth design period and the growth limitations are fairly

a  I  stringent, I find.  So you take your existing capacity and you

      add whatever zero population would be, or whatever the growth

      factor is that the state allows, and you come up with a  design

      capacity that the state and EPA will grant fund.
                 I think then it is a matter of the local community
 *   1
 1     to allocate its  treatment capacity resources to whichever

      user class it wishes to allocate them to, recognizing that if

      they go beyond the design capacity, they are going to end up

      with grant ineligible costs.
 H               More importantly, if they fill out their future

 S>     capacity or excess capacity immediately, that means they are

 *     going to have to enter an expansion phase which may not  be

      grant funded.  In other words, they have a resource that they

      have got to identify as such, and they-have to allocate.
 z   II
      I think it is important that we don't just look at user  class,

      but we let the ...community  look at its needs and allocate  its

      resources accordingly.

                As  I  said, John,  I do like the idea of a contract.


                                                               30   I

      I think it has got problems that night be very difficult to

      resolve when you get right down to it, because industry or no

      user is going to do anything to conserve water where hs has to

      outlay money or more money than it would cost him not to conserve

      water, unless it is legislated.

3  ||            MR. DONAHUE:  One of our alternatives, Alternatives

      2 and 3 say basically that EPA would fund present needs, ho-./-
      ever; you design that.  That would be present useage plus
     some  small  amount of  growth,  and anything the  community wanted

     to build  as far  as  sewage  treatment  capacity above  and beyond

     that, would not  be  grant eligible, and it would be  up to the

     community to come up  with  money to pay for it.

               The  idea  behind  that is a  couple things.   We don't

     want.to build  sewage  treatment plants  bigger than they have to

     be.   But  the othar  may be  a philosophical one, and  this came
o   || from  some people in EPA in Washington, that, okay,  the federal
     government. Congress  enacted  this law  saying these  are standarc

     for water cleanliness that you will  have  to meet.  We passed
oi   I the law,  so we will help you  get to  where you  should be right
i   I now.  We  will  help  you build  enough  sewage treatment capacity
m   " to handle the  present situation. And  then we're going to get

     out of  this.  We won't interfere any more in your community

     affairs.  We are not  going to give you any mpre money, either.


 o •





       You are on your o;m after that.   That is the thinking behind

       a couple alternatives.

                 MR.  VERLANDER:   Maybe  I don't fully understand this

       on Alternative 2,  but it looks like at the point the cosanunit}

       applies for a  grant, current needs are established.  Whatever

       their discharge is, is  probably  what the plant would be

       upgraded to, and ICR would be retained.

                 MR.  DONAHUE:   You could also build something with

       present capacity and not have Industrial Cost Recovery.  That

       would be a variation on that alternative.

                 MR.  VERLANDER:   In this alternative it does say it
       plant operating well and get the water quality standard up,
      would  be  retained.   What I would like to see is that No. 2 be

      modified  to  allow a reasonable growth  and not an extensive

      design period,  but  something that would get the community ove

      the  hump  and give them a couple  years'  breathing time to get
       and  then  make  the  community responsible  for an additional
       treatment plant, expansions and upgrade as may be required.

0      I would like to see discontinuance of Industrial Cost Recover)/,

       again leaving it to the community to allocate its resources

       among its users as it sees fit.

                 I think that industry now is kind of being discrimijna

       against with Industrial Cost Recovery becasue ICR is not


      meeting its intended purposes.   So  in  fact,  all  it is,  it is

      an added charge to one group of  users  that has been isolated.

                There is an interesting decision made  by the  Supreme i

      Court of the State of New York of which you.may  be aware,  in

      March, 1978.  I could provide you with that  decision.   It had

      to do with a power company, and  the establishment  of tiraa-of-

      day rates, and their the Appellate Court of  New  York found th4t

      the rate structure was discriminatory  and would  not allow the

5     rates to be instituted because these rates were  only applied

      to certain sizes of users.  Of course  that makes sense  because

9     you have to be a certain size before it is economic to  instal]

      certain kinds of meters to institute time-of-day rates,

                There it was, a clear  case this was discrimination

      in the isolation of certain users that were  receiving identica(l

5     services by the utility.

                I 'don't know if it would have any  application here,

_     but I think it is an interesting point.

                MR. BROWN:  I am not a lawyer but  ICR  is  written

z     into the law.  It is a law that  you charge it.   Now if  it  is

      discriminatory, well—

                MR, VERLANDER:  Laws can be  inequitab-lex  i don't

      think that is the intent of Congress.  It appears what  was

      intended to be equitable is now  discriminatory,  and I think




      it should be eliminated.

                MR. PAI:  I think some of the things we  see  in  othex

      parts of the country are not reflected in the State  of Calif-

      ornia, which is a credit to the State of California  and the

      State "fater Pollution Control Board.  Generally you  have  a

      very good process to size the plant properly and get your

      revenue system down properly.  Some of the alternatives or

      some of the things we intend to correct are reflected  in
£     other areas of the country.


                MR. VERLANDER:  I am well aware of that.   That  is

      why I would like to use California as a model in terms of siz-

      ing i-of treatment works.  I think that is one of the critical

      things here we are looking  at.  Of course it does tie into

      water .conservation.

0               MR. PAI:  California has everything going  for it.

<     It is not only the people, it has a whole environment,  the

u     social circumstances here, and it is just blended right.

                MR. VERLANDER: It is interesting.  I am doing a

      job in the fixate of Oregon where a group of users has  asked


      us to review the User Charge rate structure that is  proposed,

      and that treatment plant is now operating at a third of

      capacity.  It is a brand new treatment plant.

                MR. PAI:  Where is this?






                MR. VZHLAIIDSR:  It is in a suburb outside of Portlar

      and I find it Eicolutely incredible that a community would

      design a treatment plant that is three times as large as

      its current needs and won't be fully utilized possibly until

      beyond the year 2000.

                MR. PAI:  This is our major concern at this point;

      I can reasonably doubt that people will ever use that much

      water throughout their planning period.

                One thing particularly in this area is the water

      conservation effort.  Of course the population always grows,

      but water usage does not always grow.

                MR. DONAHUE:  We got data from 241 wastewater

      treatment facilities, and the average utilization was 68

      percent of design capacity.  That was average.  The range was

      from 4' percent to 120 percent, and that 68 percent is very

      misleading.  All the data is misleading, because it is average

      and it is that kind of stuff; but the problem is you get a

     big'-city like Chicago or New York, and you have an extra

      hundred MGD capacity, only a small percentage maybe, and

-x   II you go to some small town with a 5 MGD plant that is only

    I using 1 MGD and you have a problem.  You are building a sew»

      age treatment plant that somebody has to pay for.

                The problem of excessive future capacity is really

      something that has to be faced up to.  You don't want to build

       a treatment plant that is too small.  You don't want one

       that is too big, either.  It is a really difficult kind of

       thing to determine what is the right size.

2   '             MR.  PAI:  Don, in your facility planning, do you

       generally follow the cost effective guidelines or something

       in addition to that?


°                MR.  PERRIN:  We are now just following cost

       effectiveness  guidelines, as far as grant eligibility for

       future capacity.

                 MR.  PAI:  Sizing?

                 MR.  PERRIN:  Sizing, yes.   We have had   popu-

       lation projections we have been using for the last three or

       four years.

«                MR.  PAI:  So your major control point is popula-

u      tion growth? How about industrial growth?

                 MR.  PERRIN:  We haven't been funding—the new

       regulations now allow for an additional 25 percent increase.

       Our state regulations have allowed for a 10 percent increase,

                 MR.  PAI:  Do you give anything in addition to that

<«      10 percent?

                 MR.  PERRIN:  Not for industry.  We do give an

       additional capacity depending on what the project is for

       domestic/commercial, not for industrial.

                MR. PAI:  Even if they send you a letter of


                MR. PERRIN:  In our state grant regulations we

      have existing industrial capacity plus we do allow a letter

      of commitment for future capacity.

If            MR. PAI:  Five and 10 percent?

                MR. PERRIN:  There is another additional 10 percent

     above tihat:

£   |            MR. PAI:  In your case, you are allowed 10 percent

|     of the design capacity for industrial growth, any kind of

      industrial growth;in addition to that 10 percent, you require

      a letter of commitment?
          MR. PERRIN:  We require a letter of commitment for

any additional industrial growth, and then a combination of

that plus existing, we allow another 10 percent on top
 5>  I of that for unforeseen industrial growth

 *  I!           MR.TAI:  That is a good way to do it.  That is what

 j  | we feel is the right thing to do.  The cost effective

      guidelines of course do not have that requirement of commit-

     M ment for you to go beyond 25 percent of the industrial

 fe   ..
      growth.  That is..the letter of commitment we are talking

      about here.  In that regard we more or less try to bring the

      national standard to that.

                MR. PERRIN:  I think that one of our other reasons

      for proposing a letter was because the additional industrial

      capacity, and if all you had was a letter of intent, and at

      some point in time that industry pulled out, it would really;

*     be a heck of a burden on domestic/commercial users to have
to pay for additional industrial plus the unforeseen that

is included.
1               MR. PAI:  As I said, EPA at one tine tried to go
a     that route, and I guess the opportunity wasn't there at that

te     time.  How long have you been doing this?

                MR. PERRIN: Since 1977.  About a year and a half

      now.  Those regulations went into effect in May of 1977.

                MR. VERLANDER:  Actually that is a relaxation of

      your initial sizing criteria, because at the time 92-500

      went in, growth was allowed for the noninduatrial sector, and

5     the industrial sector was red lined.  No growth was allowed.

                I think the approach that the state is now using

      really is a good, happy medium.

I               MR. PAI:  Can you send me a copy?

z   ||           MR. PERRIN:  Yes, I can. I will mention, however,

      there is talk going on of revising our guidelines or regula-

      tions, and bringing them into conformance with the federal.

      If that does occur, we will be funding for 20 years for

      treatment plants according to cost effectiveness guidelines.

      Appendix A, and of course that will bring into account the


      25 percent increase in industrial capacity.

                MR.  PAI:   Still,  in Appendix A,  they don't require

      a letter of commitment for  above and beyond that 25 percent.

      If you do have to go to 25  percent, it is  not necessary that

?  I  you have to go with a letter of intent versus a letter of
      commitment difference.  I am not arguing about 10 percent

      or 25 percent, but it is an addition above 10 or 20 percent

      that is what:really matters.  You can argue about reasonable-
      ness of growth.  Ten percent or 25 percent is reasonable.
      But anything above and beyond that, you should have certain

 ,     control.  That is our feeling at this time.

                MR.  VERLANOER:  It has been our  experience that the

      industrial sector,  existing industrial sector, once you do

     institute User Charges, do reduce their loadings and discharge

      to treatment works.  So it seems to me that 10 percent number

<3     has a lot of latitude for the community.

                I surely could concur with that.  It seems like

      25 is very broad.

                MR. PAI:  BAsically as we pointed out, there are

      pretreatment costs involved and User Charges involved, and we

      may see a lot of industrial users decide to treat their own

      waste, which again would give you a lot of latitude there for

       what is planned for their growth.

                MR. PERRIN:  I believe you are aware we have

      dropped the E-0 projection that was effective in April.

      We are now funding on the basis of E-150, which is the

      Department of Finance baseline projection.

                MR. PAI:  The Department of Commerce has population


§               MR. PERRIN:  We are in the process of writing a

<=     letter to the Administrator requesting the use of Department

      of Finance E-150, as a basis for grant eligibility.
i               MR. PAI:  Can you explain that a little bit?

*.     What is the difference?

                MR, PERRIN:  Appendix A of the cost effectiveness
§     guidelines allows you to use state projections, if it is

      within 5 percent of the BEA projection.  The Department of

      Finance E-150 is about 9 percent above, which keeps it out
«     of that category.  Therefore we are requesting a waiver of

      that condition from the Administrator, and this letter will

      be going out hopefully sometime next week.
_               MR. PAI:  So instead of having a 5 percent variance

jjj     you ask for a 9 percent variance?

                MR. PERRIN: Right.  We requested a 10 percent vari-

      ance in the regulations.   We didn't get it.  So now we are

      requesting individual variance for the Stata of California to

      use E-150.

                MR.  PAI:   You don't have a lot of 208 planning

      agencies here, do you?

                MR.  PERRIN:   Five of them.

                MR.  PAI:   la their plan finished?

                MR.  PERRIN:   The State Board Thursday approved

      208 plans for  San Diego and AMBAG, without a population

1     factor, and Ventura, which means we still have SCAG and ABAC

      left to do, which are the two big ones.

                MR.  PAI:  Anything else?

*               Again, October 31 is the cut off for written connnen1

      and if you have any questlwis in. the meantime, we will be

      back in D.C. next -week.  Call me or call these other gentlemen

      here for any other discussions.
                MR.  RANDOLPH: Thank you very much.  The meeting is
J2   "

"*   "  adjourned.
<   I)             (Whereupon, the meeting was adjourned.)

                                    Federal Building
                                    Seattle, Washington
                                    Wednesday,  October 25,  1978
          The public  meeting was  convened at 10:05 a.m.,
Bob Kussman presiding.
                     T4S THIRD STRflT. >. W.
                    WASHINGTON.  D.C. 20024
                       (202) 354-9148


                Bruce Brown, P-I

                John J. Bonn, Nalley's Fine Foods,  3303  S.  35th  St,

u     Tacoma, Washington 98411

j               Jerry Clarke, Safeway Milk Department

3                H.O. Davis, Safeway Stores,  Inc.

„               James M. Davia, John Fluke Mfg. Co., Inc.

jj               William T. Dehn, CH2M Hill, 1500 -  114th St. S.E.,

o     Bellevue, Washington 98004

                Howard Donelson, Boeing
                Jim Downing, Ch2M Hill,  1500-114th Ave. S.W.,
s-     Bellevue, Washington  98004
S               Howard Edde, Howard Edde,  Inc., Bellevue, Washing-

2      ton

{3               Tony  Harber, Brown &  Caldwell

                Douglas  A.  Hilderbrand,  Municipality of Metro-

^      politan Seattle, 821  Second Avenue,  Seattle,  WAshington

a      98104

                George Houck,  Washington State  Department of
       Ecology,' Olympia,  Washington  98504

                 Travis Keeler,  Overall  laundry  Services

                 A.  R.,  Van Kleeck, Sr. Environmental  Engr.,

       Design & Construction Department,  Safeway Stores,  Inc.,

       425 Madison St,f Oakland, California 94660

                Gary Krahmer, Unified Sewerage Agency, Hillsboro,


                Stanton LeSieur, Unified Sewerage Agency,

      Hillsborof Oregon

                Charles F. Liebert, Unified Sewerage Agency,

      Hillsboro( Oregon

§               Robert McGuire, Agripac Inc., P,0. Box 5346,  Salem,

      Oregon  97304

5               Bob Meyers   Olympia Brewing Co., Box 947,
*   |  Olympia,  ashington 98507

                Elwood W. Ott, Seattle Engr.  Dept., Room 910

      Municipal Bldg., Seattle, Washington  98104 Tel. 206-625-2354

 _               Larry L. Petersen, Metro,  410 W. Harrison,
       Seattle, Washington  98119

                Mike  Price,  City  of  Tacoma  Sewer Utility

                Judy  piley,  Metro

                Bill  Schow,  Magic Valley  Foods,  Inc., P.O.  Box

       475, Rupert,  Idaho 83350

 z               W.  T, Sprake, Gordner Engineers,  Inc.,  3rd  &  Cherry,
 £j     Seattle, Washington  93103

                 John D.  Thomas,  Metro Wastewater Management Com-

       mission, P.S,B.,  125 Eighth Ave,,  Eugene,  Oregon  97401

                 Bill Whittom, Mayor, Rupert,  Idaho 83350

                Gary C.Young, P.E.,  City  Engineer,  City of Twin

      Falls,P.O. Box 1907, Twin Falls,  Idaho  83301

                M.R. KUSSMAN:  Good morning.   My name  is Bob Kussman

      On behalf of the Regional Administrator I would like to

      welcome you for this meeting,  which is  a part of EPA's

      Industrial Cost Recovery, a task mandated by Public  Law

      95-217 enacted last December.

                It is our intention  that the  public be involved  in

«     the study and that the public's comments and concerns be

      reflected in the final report  to Congress.

«j               In order to make certain that everyone  has  the

      opportunity to be heard, we must have a simple,  understandable

      orderly meeting,  To assure this, we will observe the followir

      order of procedure.

                First we will have an explanation of  the purpose of

      the ICR study and of this meeting by Christine  Noah-Nichols,

      our Regional Specialist for User Charge and Industrial Cost
y               Secondly, there will be a briefing of the project


      scope and methodology by Alan Brown of Coopers & Lybrand, the

      management consulting and accounting firm hired by EPA to

      assist in the study.

                 Thirdly(  we will have a presentation by Ed Donahue

       of  Coopers &  Lybrand,of the findings and conclusions of this

       study,  as  well as some of the possible recommendations which

       could be made as a result of the study.

                 Wh  will then follow with prepared statements by

§  I   those individuals who have scheduled a statement in advance,

       followed by prepared statements by anybne else who has a
*•  ||   written-statement,
z                Finally,  we will have a question and answer period
\      and an  open but orderly discussion.

                 We  intend for everyone to be heard who wishes to
       speak.  I must insist that we follow the format just outlined

                 ICR is a topical issue and we want the Congress to

 «      be aware of the grass roots concern related to ICR.  We will

 j3      stay as long as necessary to conclude the discussion.

                 We have a court reporter with us today, and a trans

       cript of the meeting will be appended to the final report
       which goes to Congress
 _    II
                 For that reason, I must ask you to speak clearly

 S   |  and slowly and one at a time.
 55   I            i would now like to present Christine Noah-Nichols,

       our Regional ICR Specialist, who will explain the purpose of

       the study and this meeting.

                 MS, NOAH-NICHOLS:  I am Christine Noah-Nichols from

        the Wastewater Operations Branch.  I coordinate User Charge •

       and ICR  reviews in Region X.  I don't do all of them but I

       have been involved in several of them.

                 I would like to tell you briefly why the study is

3      being conducted and why we are having the meeting today.

                 As we all know, with Public Law 92-500, Congress

       intended that wastewater treatment facilities be operated as

       well-supported nonprofit public utilities.

                 To achieve this, Section 204(b) of the 1972 Act

 i      required grantees to develop and maintain two kinds of rate


       systems.  One of these was User Charge systems and covers

       operating, maintenance and minor replacement cost, all of

 5      which are needed to keep the treatment plant operating up to
u      standard.  The requirements went one step further and also

       specified that User Charges be proportional to the usage of
       the system.
3                The other system is Industrial Cost Recovery, and

       its intent is to recover from industrial users the portion of

       the grant identified with construction of capacity for those

"      industries.

                 Now, although some jurisdictions may disagree with

       particular EPA regulations and guidelines related to User

       the impact of ICR on rural communities and on industries in

       Charges, most grantees agree in principle with the idea of

       economic self-sufficiency, for the wastewater treatment systeijp

                 ICR on the other hand is a topic which has created

       a great deal of debate over the last six years or so.  As you

       know, in December, Congress enacted the Clean WAter Act of

       l"977"-f Public Law 95-217.  This Act made several modifications

       to the 1972 Act.  One of these was Section 75 which specified

       that EPA would study the efficiency of and the need for ICR.

                 The study was at least to include an analysis of
       economically distressed areas or areas of high unemployment.

                 The report is to be delivered to Congress by
a      December 31 of this year, and that isn't too far away.  This
       last May EPA contracted with Coopers & Lybrand to conduct the

       ICR study for the agency.

                 Coopers &• Lybrand is a management consulting and

       accounting firm, for those of you who are not familiar with

       the name, one of the largest of the big 8 CPA firms.  The

       firm was- selected for several reasons,.  I will just highlight
       a couple of the key reasons,

                 For one thing,they had the necessary expertise

       and familiarity with User Charge and ICR requirements, havinc

       performed User Charge/ICR work for grantees and done some

      regulatory evaluating  for  EPA.

                And also they  had  sufficient  experienced  personnel

      available to perform the study within the  very short time

      period necessary.

5               Secondly, Coopers  & Lybrand is highly regarded by
§     industrial communities and local  governments,  both of which

      have had previous exposure to CPA firms as objective and

°     disinterested auditors and as management consultants.
                The purpose  of the study was  to  carry out the
      instructions of  Congress.  The basis for the  scope of the

 ,     work was a set of questions  inserted in the Congressional

      Record of December 15, 1977  by Congressman Roberts.   Some of

      you have received copies of  those questions already.

                He says, and I will quote the first  paragraph:

                 "It has long been  the  intent  of  Congress to

      encourage participation  in Public Owned Treatment  Works  by

      industry.  The conferees are most concerned over the impact

      with which the Industrial  Cost Recovery provision  of existing

      law may  have on  industrial participation in these  public

5     systems.  Accordingly,the  Industrial Cost  Recovery,  Section

      75, has  been.-incorporated  in the  Conference Report and EPA is

      encouraged to  submit ttie  results  of the  study  as soon as

      possible so  that Congress  can  take action  on  any recommendati


      that are forthcoming,

                "It is expected that the Administrator will  consult

      with all interested groups in conducting this  study  and  that

      the study will address at least  the  following  questions,"  and

      I will paraphrase a few of these for you,

o               $,  Does ICR discriminate  against  particular

«     industries or industrial plants  in different locations?
i   I
"!               2,  What is the combined impact  of User  Charge and
§     ICR requirements?  Do they cause some communities  to charge
5   I!
      much higher  costs  for waste  treatment than other communities

      in  the  same  geographic  area?

 „-                3   Does the ICR program drive industries out of

 s      municipal systems?

                 4.  Do industries tying into municipal systems pay

       more or less for pollution control than direct discharges?

                 5.  Does the ICR program encourage conservation and

       what is its economic and environmental impact?

                 6.  Does the ICR program encourage cost effective

       solutions to water pollution problems
       What are the costs and side benefits of monitoring industrial

       effluent for ICR purposes?

                 What about tracking the number of industries?

                 What are the impacts of seasonal discharges or othei

       changes in strength and quantity of effluents discharged by

       individual industries?

                 And lastly, should small industries be exempted

       from ICR?   How small, and is there a reasonable cut-off

§      based on percentage flow?

jj                Coopers & Lybrand has been busy for the past five

       months speaking with and gathering data from a cross-section
       of interests in order to address these very questions,
"                As a final action, in their data collection phase,

3      ten.meetings are being held, one in each EPA region and this

u      is one of those meetings.
                 There are four general purposes for inviting you

4      here today.  One is to present a summary of the data gathered
       to date and some preliminary conclusions.
                 Another is to present some potential alternatives

-      to the current   .ICR system for your consideration.
                 The 'other two are to answer as many of your questicjr

       as possible and to get statements and information from all

       interested parties, especially those who have not yet had

       direct input into the study,


                The last purpose is no doubt the main reason you

      are here today,  I know it is our primary purpose.

                After our short presentation, the remainder of our

      time today will be spent just listening to what you have to


                Now, here to give you an idea of. how the study is

     being conducted is Alan Brown of Coopers &  Lybrand and he will

S     tell us-briefly what they have been doing  for the past five


      months.  Thank you,

1               MR, BROWN:  Good morning.   My name is Alan Brown.






      I am with Coopers  & Lybrand,  and  I was  responsible  fior  the

      data collection effort  in  the western half  of  the country.
                 When  EPA first asked us to -.conduct an ICR study,  th
       first  thing  that  we  did  when  EPA asked  us  to  conduct the  stud

       was  to go  back and look  at the  1972  legislative history

       related to Public Law 92-500  and the specific sections  that

       addressed  the User Charge and Industrial Cost Recovery  in

       order  for  us to find out exactly what ICR  was supposed  to


                 Now, stated briefly,  we found after reading the

       legislative  history  that there are two major  ideas contained

       in there.   One idea  is an idea of equity or an attempt to

       equalize the assumed economic advantage; namely, less

          sewage costs for those industries that have the
ability to use publicly owned sewage systems, as opposed to
those.'industries that have to great their own sewage,
          The other idea that Congress was very concerned
about was that of capacity, or the appropriate sizing of
wastewater treatment facilities with adequate but not excess
future capacity.
          The third idea that we found was not quite as centr.
to ICR as the first "two, was an attempt to encourage water

          Now, this background material from the legislative
history together with legislative history related to the 1977
Act and Congressman Roberts' questions which Chris read for
you and Congresswoman Heckler's statements on ICR served as
the frame of  reference  for us to plan the study,  The initial
step  we took  in  late May of  this year was to sit down with
EPA representatives  like John Pai,  John Gall from Region  I,
and Ted Horn  from Region V and  basically put together a
shopping  list of every  piece of data  that we thought would
help  us  in  answering the  specific  questions  that have been
asked about ICR and some  of  the more  general questions  related

 to User Charges.
           Now, we took this  shopping list of data  elements  an
8     tion of Manufacturers, an

      ahead of time to  the people we were  going to meet with,  so

      they would know the kind of data  we  were  lookin§ for and be

      able to prepare a little before we showed up.  We stressed

      that participation in  the  survey  was voluntary and in many

^     cases people mailed in completed  questionnaires rather than
      meeting with us personally,
                The  second  category  of  people we  were  going to talk

o     to were  a list of  200 additional  cities that  we  surveyed by

8     telephone.   The  same  questionnaires were  used and these
w     questionnaires were mailed  out in advance to  the people that

      we were  surveying.
E                Next  we  came  up  with a  group of  five  which was later
S      expanded  to  six industries for detailed study.  Although we

       were Interested in the  impacts on industry in  general,  we wer<

      particularly"  interested in industries which met one or more

       of the following criteria.  We were looking at industries thai

*      were particularly labor-intensive, that had low operating
d      margins,  were high water users, that were particularly

       seasonal  or  were particularly impacted by the  extent of

_   M   pretreatment regulations

                 The industries that we  eventually selected for

       detailed study were the meat packing industry, dairy products

       paper  and allied products, secondary metal products,canned


       and frozen fruit and vegetalbes and the textile industry,

                 A list of selected establishments in those industri

       that I just mentioned located in the cities which we planned

       to visit in person and'in a telephone survey was prepared and

5   I   survey forms mailed to those establishments.

                 Now, our entire data collection effort was

       accomplished in six weeks, by using ten teams of c 6 L

       consultants across the country.

                 The second step in the study, and we felt just as

       important as the first,  was to develop a mechanism for public

 ,   I!   participation in the study.  Our primary concern was that we
 *   II
       have grass roots involvement in the study and we wanted the
       study to be/open one.

 I   I!             We put together an ICR Advisory Group of approximate!


      reached some preliminary conclusions as  to what  the data  means

                We performed several computerized  statistical

      analyses and these are currently being refined.

                We feel that we have looked at enough  data to  -be

j     able to formulate some possible alternatives to  ICR as it is

      presently constituted, and the purpose of this meeting today

      is to relate to you what we have found and to get your reactic
      to it.

o               After these ten regional meetings are  held, we  will

      put together a draft final report which will be widely circu-

 '     lated.  Our time schedule for this is to have the draft final

      report completed by mid-November.  Then in December we will

      begin to write our final report which will be delivered to

      Congress in late December.  The final report will contain

u     recommendations to Congress.  We cannot, however, guarantee

      that Congress will act on our recommendations.
                Since you are all interested in our findings and
j     conclusions, I will turn the meeting over to Ed Donahue, who
m     will relate to you what we have found, what we think it means
      and some possible alternatives to ICR.
                MR. DONAHUE?  Good morning, my name is Ed Donahue,

      I am Project Manager for Coopers & Lybrand in the ICR study

      I am here to tell you what we found in the course of our study


       what we  think  it means  and present some possible alternative

                  The  data and  statistics that I will be using are

       based  on our study and  are currently being studied, validate

       and refined in our Washington office.  Rather then hand out

$      raw data or computer printouts that are understandable to
m  II

       only a few people, we have summarized our data into a handou

       entitled "ICR Study Data" dated October 10, 1978.  You shoul

       already have received copies of this handout.

                  The  final version of the data analysis will be
        much more detailed,  much more extensive/  to be appended to

        and included in our  final report.
                  There is also a one-page summary of findings and

        conclusions which we just had reproduced and it will be

        available for anybody who wants it.

m   I              Without further delay, let's examine the data.

        RHmember, though, the data is national data and it is ayerag

        therefore requires careful thought before using it, because

        it can be very misleading.  We eventually got data from 241

        municipalities, sanitary districts, EPA grantees.  The best

        data came from places we actually visited.  Data obtained

        through telephone surveys was not as complete or precise but

        was still useable.

                  We also obtained data from 397 industrial faciliti


      mostly through efforts  of  trade  associations.   The industrial

      data  is at plant  level  rather  than at company  level.

                Looking at  the major issues before looking  at speci

      data, the first thing we want  to address  is the issue of

      equity or the assumed economic advantage;  namely,  less

      expensive sewage  treatment cost  for industries UaingJthe

      Publicly Owned Treatment Works,  POTWs,- versus  those treating
™   "
    "  and discharging their own  waste.   We used  a computerized tax

     model  which we developed for industrial clients, and modified
      to reflect the User Charges and  ICR situation.

                Basically the model  included a  series of equations

      which reflect the cost  of  doing  business,  and  enable  the

5     company to evaluate alternatives in a sense, a'i".mAke  or buy"
 *      decision.   Should the  company use a POTW or treat its own

       sewage?   What we found was for some medium or large industries

       having compatible waste,  it is cheaper in the long run to

       self-treat, even without  including ICR charges,  just includin

 u   |  User Charges.  This is a  very significant finding.  What it

       means without ICR or pretreatment cost, large industries '

       should,  from an economic  viewpoint, treat their  own sewage.
 Hi      This is  based- on several  tax changes that were not really

       known to bhe Public Works Committee when they wrote Public Law

       92-500,   Several have  been enacted since 1972 when 92-500 was



     enacted.   Basically these  tax changes axe three.

                The  first is  accelerated depreciation over a five-

     year  period  for  pollution  control equipment.

                The  second is investment tax credits for capital


                And  the third is the use of Industrial Development

     Bonds,  tax-free  IDBs to finance self-treatment facilities.

                The  proposed  tax law changes, some  were just recentl

     enacted and  some which  will be addressed when Congress

3;    reconvanves   in  January, will, if enacted, make it even more

     attractive for industries  to self-treat because of the increas

»-•    tax credits  which are proposed.  What this finding says is


     that for many  industries it is cheaper to self-treat than to

     use .POTW.  If this is  the case, why don't more industries

u    self-treat?   There can  be  several reasons.  The first and most

     obvious one  is that they are not located on a river or stream j

     o r other receiving body of water where they can discharge

     directly,   So  therefore they must use a POTW

oa               The  second and probably fairly common.,is they just

     don't want the hassle of self-treatment.  They don't want a

      NPDES permit,  they don't want to operate and build a sewage

      treatment facility.

                The third reason and probably the greatest one at


       the momentf  is that the User Charge and Industrial Cost

       Recovery have just not been around long enough to see their

       effects.   The second thing to bear in mind, though, is if

^      ICR and pre'treatment costs are added on top of User Charges,


       they could very well be the final straw that drives industry
      out of POTWs, thus making  it more expensive  for  the remaining

3     POTW dustomer§ to use the  public sewer  system,

                In particular, EPA's  application of pretreatment

      standards is likely to make many industries  give serious

      consideration to self-treatment.

                The second issue is that of POTW capacity.   Based

      on our survey of 241 wastewater treatment facilities,  from

      which we obtained data, the average POTW uses only 68  percent

      of its design capacity.  The useage ranges from  a low  of  4

H   I  percent to  a high of 120 percent.  It appears Industrial  Cost

      Recovery as presently formulated has not acted to put  a cap

      on construction of excess  future capacity in POTWs.

                The third issue  is that of water conservation,  and

      the outcome is not as clear.  Based on  industries we surveyed,
 _   ii

 CL   I  water consumption has dropped an average of  29 percent, but

      industries  with whom we talked,attributed the water conservation

      to higher water rates and  to User Charges, not to Industrial

      Cost Recovery, because  Industrial Cost  Recovery  as a percentagfe

       of water costs and User Charges is not that significant at

       this time.

                 The economic impact of Industrial Cost Recovery to

       date is not significant in most locales, because ICR has not

S      been in effect for more than a year or two, and most grantees

       have suspended ICR billings, while the ICR moratorium is in

e      effect.  The exception to insignificance of Industrial Cost

d      Recovery is those cases where there are seasonal users and/or
Q      advanced waste treatment.  In those cases, the total sewage

<     costs for industry have increased by a factor of several times

       The incremental impact of ICR above User Charges is generally

       not great, with the exception of the two cases just mentioned

       The combined impact of User Charge and Industrial Cost

       Recovery can be YerY significant. We can find only a few

       scattered instances of plant closings due to sewage cost, and

       non attributable solely to Industrial Cost Recovery.

*                The total jobs lost in the plants that did close

       was less than a thousand.  In every case there were other

       factors such as plant age which affected the plant closing
Q      decision, also.
                 The impact of Industrial Cost Recovery appears to

       be greatest in older cities, particularly in the Northeast,

       and particularly in small' to medium size cities, and I think


      in agricultural communities.  There does not appear to be

      any impact of ICR on industrial growth patterns to date.  We

      were not able to differentiate the impact of ICR on small

      versus large businesses, because very few industrial plants

S     were willing to disclose production or sales data.

8               The costs to industry of sewage treatment is much
      greater by a factor of about 50 percent per gallon in AWT

      plants as compared with secondary plants.

o               The incremental cost to grantees to maintain and

      operate Industrial Cost Recovery systems; that is, the

      "eliminatable" cost above and beyond the cost of maintaining

      the- User Charge systems is small when compared to the total

     cost of sewage treatment, averaging about $15,000 per grantee

      per year.  The average ICR revenues per grantee per year are

w     approximately $88,000, of which $8,000 is retained for

      discretionary use' by the grantee

                There is more data which might be of interest to

      you that'is'included in the handout and we would be pleased

      to  discuss specific data during the question and answer perioc

      at  the end of our meeting.

                To summarize our conclusions and our findings very

      briefly,  ICR is not doing what it was supposed to do.

       Relatively few cities have implemented ICR,  Those that have,


      have suspended billings during the moratorium.

                ICR to date has had no  significant  impact  on employ'

      ment, on plant closings, on  industrial  growth,  import/export

      balances or in local tax bases.

*               ICR is not proving cost effective in  producing


§     revenues for local or federal governments, at least  in most

I     cities,
N               We must realize, however,  that  the  Clean Water  Act

z     had social as well as economic objectives.  Among other things


I     Congress was attempting to avoid  the appearance of using  publ:

 i     money to subsidize industries that discharge  to grant-funded
      public  sewer  systems.

                While our  studies have  shown  that many of  the

      economic  objectives  have  not  been met,  the social objectives

JJJ     remain, and accordingly it .is appropriate to  consider a  series

      of  alternatives to Industrial Cost  Recovery as  it now exists.

                At  this time I  will ask everyone to turn their

      attention to  a document entitled  "Preliminary Compilation of

^      Possible  Study  Alternatives,"  dated  October  10,  1978, which

i      you should already  have  a  copy of.   The document presents  16

"      alternatives  to Industrial Cost Recovery,  ranging  from  leaving

       ICR as  it is  now to outright elimination of  Industrial  Cost

       Recovery,  These alternatives  are  not ranked in  any order  of

      preference.  They  are  not  necessarily  mutually exclusive.

      They could be  combined.  They  could be refined.   They could

      be modified.

                What I would like  to do  is adjourn  the meeting for

3     15 or  20 minutes to  allow  people to look through those

      alternatives and get some  initial  feelings  about them.  I

      would  like to  reconvene the  meeting and have  Alan Brown go

      through those  alternatives,  one at a time,  explaining the

2     advantages of  each,  and the  disadvantages.  After that, we

      will take prepared statements. Unless somebody at the table

      has  something  to say right now, I  would like  to adjourn to

      about  10:45, or ten of eleven,

                MS,  NOAH-NICHOLS?   One point.  I  have several

      questions on where to turn in written  statements, and within

j*!     what time period,  if you don't have them today; and the word

       is that they should be sent  to Coopers & Lybrand by October

       31 •
                 MR,  BROWNi  Anybody that is  interested come by and

       we can give  you an address

                 MR.  DONAHUE:  Also you  can send written comments to
       Chris in the regional office,

                 MS,  NOAH-NICHOLS;   I will send them on.

                 MR,  DONAHUE:  Barring anything else, we will adjourr




  for 15 or 20 minutes.

            (Brief recess)

            MR. DONAHUE;   If we could  reconvene  the meeting.

  As I mentioned before we adjourned,  we prepared  a list  of  16

  possible alternatives to Industrial  Cost  Becovery.   We

  prepared some of them, we got some ideas  from  people in EPA

  and some people from the trade  associations, and as  I said,

  we don't' have any  preference,   We are not endorsing  or

  rejecting any of the recommendations at this point.   They

  are not in  any order of  preference and they are  not  necessari

  mutually exclusive.  You  could  combine  some of  them.   They  are

  all subject to being modified  or changed  or whatever,  What I

  would like  to do is  ask  Alan to go through the 16  alternative
M   and discuss some of the advantages or disadvantages of each o

   them.   Alan.

             MR, BROWN:  What we have got here are 16 alternativ

   Please keep in mind that the advantages and disadvantages are

   not tremendously extensive.  We tried to put down a few ideas

   so that people would have something to discuss and what we

   thought were the major considerations for each alternative.

   We realize that these lists could be much longer.

             If you will look under some of the disadvantages,

   frequently it is mentioned that it is going to eliminate ICR


^      and 50  percent  is  returned to  the  federal government,  then






     revenues  to the federal government and to local and state

      governments.  What we are talking about here,  I think we

      Shouid be familiar with itf based on our projections over  a

      30-year period, the total amount to be collected from ICR  wii:

      range from $1 billion to $2 billion.  That  is  total ICR

      revenue collected over 30 years.  This varies  significantly

      from earlier projections of roughly $4-1/2  billion to $7

      billion.  When you consider that local communities or grantees

      can keep ten percent of this money to do with  as they want,
       you divide  everything by 30  years.   You are really not talking

       about huge  amounts  of money  every year in most cases.   So when

       you see that listed as a disadvantage just keep that in mind,

       that .is what we are talking  about there.

                Alternative No. 1  and probably the first one to com*!

       to everyone's mind  is to simply abolish ICR and replace it

       with nothing.

                 The advantage here would  be to eliminate complaints

       that we hear frequently from grantees that ICR is not cost

       effective,  that it  is difficult to  monitor and difficult to

       administer,  it would eliminate complaints from industries

       that ICR is double  taxation and that ICR adds unfair economic

       burdens to the industry, depending upon what part of the


       country they are inf and what kind of plant they discharge


                 It would also eliminate the inconsistent ICR rates

       that we see from region to region and from different parts

S      of the country,

p                Some of the major disadvantages here are keeping

       in mind that ICR, one of the intentions of ICR was to help

j      put a cap on the ffi-ze of treatment works.  Without some contiJo

       over the design parameters allocated to industry, abolishing


5      ICR may encourage grantees to plan and construct treatment

 1      wrks that are larger than necessary, the other disadvantage

 _      being it would reduce revenues.

                 Alternative No. 2 is to attempt to base grant


 S      funding for elibible project costs, including the industrial

       components on a sliding scale, funding current needs at 75

       percent and reducing the federal share of total project costs

       as grantees plant the treatment works larger than current

j      needs indicate,  ICR would be based on the current regulations

                 Let me talk a little bit first of all about current

       needs.  This has been discussed in other meetings.  Current

       needs could be defined as the capacity and need today with a
       reasonable period or a reasonable amount allocated to future

       growth.  Now,basing the grant funding on a sliding scale and


      reducing the total project costs  as  the plant  becomes  larger

      than current needs indicate.- would do  several  things,

                One would be to encourage  more  front end  planning,

      and reduce the amount of excess capacity  that  is  being built


                Another advantage would be to encourage industry to

      participate early in the planning process and  become involved

      in the sizing and designing of treatment  plants early  on.

o   II
x-               The major disadvantage  here  is  that  it  may not  be

I     cost effective to build a plant based  strictly on current nee<

*     when you are attempting to design a  plant for  an  area  that is

»     large and rapidly growing.

                Another disadvantage is that it is going  to  increas

      the total local  share of cost for grantees if  the grantee

«     decides to build a plant with excess capacity.

y   ||            Alternative No.  3 is a  great deal similar to No. 2,

      with  one major difference,  the difference being that there

u     would be no grant  funding  for the industrial component in the


u               Alternative No.  3 is to base grant funding for

      eligible project costs  on  a sliding  scale, funding  current

      domestic  needs  only  at  75  percent and  reducing the  federal

       share of  total  project  costs  as  treatment works is  designed.



       burden.   It would  eliminate  costs  associated with implementing

       and raonitorin-j  the ncft systems  both at the grantee level and


           As  I said before,  this differs from No. 2 in that

 there  ig no federal grant funding for the industrial component

 Since  there would be no federal grant allocated to industry,

 there  would be no ICR,   So ICR would be abolished in this


           The advantage here would be to eliminate the grantees

 complaints about ICR not being cost affective and difficult to

 monitor and administer.  It  would eliminate complaints from

 industry that there is  double taxation and an unfair economic
 the EPA level.   And it would tend to encourage better facilit;


           The disadvantage here is that it is going to increase

 the local share of project costs, because there would be no

 federal funding for industry, and the additional cost may be

 passed through to industrial users and should exceed ICR costs

 because of the fact that there is no federal funding for


           Alternative No. 4 is to charge ICR strictly on the

 treatment works and eliminating any ICR charges that have

 been developed for interceptor sewers.

           This has the advantage of reducing administrative


       work  that grantees have to perform oftentimes in an attempt

       to  identify specific industries discharging to specific inter

       ceptor  sewers,   The grantees have complained it is very,  very

       difficult when  you have a large service area with many

3      segmented projects, it is awfully tough to figure out which

       industry discharges where,  and how much to charge them for

       ICR on  the interceptor.

                 The major disadvantage here  would be to reduce


                 Alternative No.  5 would be to base industry's share

       of  the  federal  grant on an incremental cost basis rather  than

       on  proportional cost basis as is the case  now.

8             A  hypothetical instance would  be,  say, you design a

       10  MGD  plant to meet needs of the total community,  and two

H      million gallons per day of that would  be allocated to industr

       What  you try to do is determine what it would cost if you

       built an 8 MGD  plant and what it would cost if you built  a

       10  MGD  plant, and  the difference there,  the incremental cost

       between 8 and 10,  would be the amount  that would have to  be

       paid  through ICR for industry.   What this  would do would  be

       to  allow industry  to receive benefits  of economies of scale,


       using/incremental  cost basis.  And I think most of you can se

       the major disadvantage would be it is  going to be extremely


      difficult to determine  just  exactly what the incremental cos-

      actual ly is.

                Alternative 6 would be to allow cost of constructii

      industry's  portion  of the  treatment works to be grant eligib]

      based on the grantee's  option,  If the grantee elects to have

3     the  industrial  component of  the treatment facility be grant

      eligible, industry  would be  required to pay ICR just as they

      are  today,  based on current  regulations.  If the grantee uses

o     alternative sources of  funding for the industrial share, ther


5     would be no ICR.
                 Now, grant eligibility here, once again, could be

       either incremental or proportional.   Some of the advantages

       here would be to allow grantees to make ICR a local option,

       depending upon availability of alternative sources of funding,

w      and it would t-eird1 to encourage industrial participation in

       planning early on.

                 The disadvantage, once again, if the grantee elects

j      to have the federal  conrponenit- grant funded, it is not going

       to reduce any of the complaints you hear today about ICR,

       because ICR would be just as it is now.

                 Alternative No. 7 is to attempt to establish some

       sort of uniform ICR rate, and the things we have listed there

       are different alternatives for a uniform rate.   For instance,


         could develop  a  national  rate.   The  people in Boston would

      pay the same  thing  as  the  people  in Seattle.   You could attem; >t

      to develop  a  regional 'rate.   Maybe the  people in the Northeas

      would pay one rate,  and  people  in the Southwest would pay

3     another,  You could take it  down  almost as far as you wanted

«|     to go,  state  or city level.

                These rates  could  be  modified, based upon uniform

      adjustments depending  upon the  treatment level, treatment typ

      or level of discharge  that the  grantee  is allowed to make.

                What we are  talking-about here, for instance, we

      have  already  heard and seen  that  ICR tends to be more an

      industry that discharges to  a tertiary  plant than it is to an

      industry that discharges to  a secondary plant.

                 So  you  could make  it a  uniform adjustment across

jjj      the  country so that everyone, no  matter what kind of plant yo

      discharge  to, whether it is  activated sludge, trickling filte

      or what, everybody would pay basically  the same kind of rate.

HJ   1             The major advantage would be  to reduce the inconsis

m   I   tencies of ICR that you see  from plant to plant and from regi
 =      to region.

 OT                The major difficulty here, once again, is it is

       going to be difficult to develop and administer such a rate.

                 Alternative No. 8 is to attempt to establish what w<


      call a circuit breaker ICR exemption.  Once a condition

      reached a certain threshold, ICR would be collected and if yov

      drop below that threshold, then ICR would not be collected.

                Now, EPA's current 25,000 gallons per day exemption

      is a circuit breaker exemption.   Once industry's discharge

      exceeds the equivalent of 25,000 gallons per day of sanitary

      waste, industry is required to pay ICR.  If industry's dlschai


a     drops below 25,000 gallons per day, they are not required to


     pay ICR.  So that is an example- of a circuit breaker.
                Some other possibilities for setting up circuit

*     breakers would be based on local economic conditions, for

      instance, if unemployment goes above a certain level, ICR is

      no longer collected.  If unemployment goes below a certain

      level, then ICR once again is collected.

                You could base it upon industry groups, geographic

      areas.  EPA currently has a level of pollutant discharge

      exemption, and for instance, a dollar level of ICR payments

      if the amount to be collected drops below a certain dollar

      level, you don't collect it, if it goes above it, you do.  The

      advantages here would be to reduce the number of industries

      required to pay ICR, and that would reduce the grantee's

      administrative costs associated with the program.  It would

      also allow flexibility based on special circumstances.


                The major disadvantages are to make it very, very

      difficult to administer and monitor one of these kinds of

      circuit breaker exemptions, and it will result in an incon-

      sistent charge from area to area, because you are going to paj

      your circuit breaker on special circumstances.

S               Alternative No. 9 and Alternative No. 10 are very

      similar.  No. 9 is to allow a tax credit for ICR payments.
      The tax credit would be in addition to normal business.write-

      off that industry gets for ICR as a business expense.  It
jjj     would tend to eliminate industry's complaints that there is
 1     double taxation involved.

                The major disadvantage is it is going to be difficu!

      to administer, it is going to reduce revenues, and also

      requires administrative change

LJ               Alternative No. 10 would be to allow a tax credit

      for pretreatment cost, to include both capital investment and

      operation and maintenance cost that an industry must pay to

                The major advantage here is it is going to encourag

i     industry to  pretreat waste, and  the disadvantages are, it

      would be hard"to administer,  it  is going to reduce revenues

      and  require  legislative  change,

                Alternative  No.  11  would be to return  to the


      requirements of Public Law 84-660, abolishing ICR as  it  is

      today.  One of the things that we have heard from  industry  am

      from grantees is that charges are lower in plants  that  were

      funded under Public Law 84-660, and that it is inequitable,

      depending upon which type of funding was provided  to expand

a  I
S     your treatment works.

*               The advantage here would be you would return  to the
j     requirements of 84-660 which required that industry  repay thei

o     proportional share of the grantee's local capital  costs.
i     This would eliminate the complaints of inequitability in
1     charges depending on the type of funding involved, and  it
5     should tend to reduce the administrative burden on grantees,
g     because 84-660 was less complex and easier to comply with.
5               The disavantages are to reduce revenues  and lacking

|8     other kinds of controls it may encourage excess capacity to b


                Alternative 12 is to abolish ICR as it is  today,

j   || get rid of it, and require the local: share of project cost

      be covered through proportionate User Charge.

x   |           Currently EPA only looks at operation and  maintenanc^e

10   " and replacement cost in their User Charge systems.   What this

      alternative would do would be to include local debt  service

      in the User Charge.


               The advantage would be  to achieve equity  in  the

     medthod of establishing rates if  it is  thoroughly and  consis-

     tently monitored.

               There are several disadvantages  here,  however.   It

     would reduce the grantee's flexibility  in  designing rates. It

     is going to increase the grantee's administrative cost, becaus

     the User Charges now would be more complex,   It  is  going  to

     increase cost to large users where the  grantee currently  uses

     a sliding scale or discount block rate  to  fund debt service.

»    And it may require major changes  in bond covenants  if  the

*    grantees use revenue or general obligation bonds to fund  the
*   I local share of the treatment works.

               Alternative  13 is to add an interest component  to

 |   | the current ICR requirements.

 3   I!
               The major advantage here is that it would eliminate

     the perceived subsidy  of industry by  allowing an interest-free

     loan  component  in  ICR,  and  it would also  tend to increase

     industrial participation in  facility  planning, because you are

     going to increase  the  ICR  cost  to be  paid by  industry.

                The major  disadvantage  we can see  is  that it would

      tend  to encourage  industry to  seek  other alternatives to

      discharging to a POTW because you are increasing the cost to

                Alternative 14 is to extend the ICR moratorium.  We


      feel the advantages and disadvantage of this are  the  same.

      It just postpones the date for making hard and final decisions

      on ICR.

                Alternative 15 would be  to maintain ICR in its

      current form, doing nothing with it.

                The advantage here  is that it  would require no

      administrative or regulatory  changes, and the disadvantage

      would be that it would eliminate none of the  problems that we

      currently see associated with ICR.

                And Alternative  16  is to require a  letter  of

*     commitment  in the  form of  a contract from industrial users of

5     POTWs when  a POTW  is  sized,   There is a  typographical error

      there—it is "sized," rather  than  "signed,"   This would tend

      to  encourage more  precise  planning early on,  and the disadvan

co     would be that it is  going  to  commit industry  for a longer ter^n

      than most businesses  are willing to sign up for.  It would

      be  difficult to administer and difficult to get  industry's


                MR. DONAHUE:   Thanks,  Alan.

5                These  alternatives, as  I said, are  just a  prelimina^


v>      list of  possible  alternatives.   During  the  discussion period

       after the  statements, if anyone  can come up with additional

       alternatives or  variations on these alternatives, we would li


       to hear them, because we really have no preconceived notion

       of what the outcome, of what our final recommendation will be

                 I would like to turn the meeting over to John Pai

       for a few seconds,

                 MR, PAI;  Good morning.  My name is John Pai, I

       am frcmEPA, Washington, D,C.  I am the Project Officer for

       this study,

                 A few things I would like to go over with you.

o      Number one, this public meeting is what we call or we attempt
i/i      to try a group decision making process.  We come here with
       an open mind and a few suggestions to you, and hopefully  that

       you would help us or we could make a decision together to mak

       a recommendation to the Congress.

                 As was pointed out, Chris pointed out, there are

J3      ten such public meetings held in this country.  What you  saic
       today or what you recommend from any individual in this regie
       will be considered together with the remaining nine public

       meetings rinpufcthat we have.  EPA of course will make the
a      final recommendation to Congress, and then the Congress will

i      make the necessary legislative change.
                 What I am saying here is that the final recommendat i

       you see may or may not respond to all your concerns.  Howevei,

       the recommendations are based on the general concern of all


      the concerned parties over the country.

                As you go through these alternativesf  I  would  like

      to point out all these alternatives  try  to  address one of the

      following four major concerns we have on ICR.

2               Number one, all these alternatives are trying  to

?     attain some administrative simplicities  for the  grantees and

      for the industrial users,

                Number two, trying to encourage industrial  users to

      participate early in the planning stage  for better planning

w     of the facility.

 1               Number three is trying to  give the grantee  more

      discretion to fitting his local conditions.

                And number four, and it certainly is not the least,

      we try  to address  the cost problem to  the existing  users.

      Let me explain a little bit on the last  item.  Basically you


      the situation in this region, but in many other regions or

      areas,  where the existing user feels the financial pinch of

      the total cost to him, even"though"they have a well-planned

      future  growth projection,  So ICR hopefully or it was intendee

      to put  some more cost considerations in there for people to

      design  their facilities, but in all these alternatives we all
    n  try to address the excess capacity not in avay of whether it
^   I!  ia cost effective in the long run, but whether the cost can be
p   1  bearable for existing users,

                If any of you have a problem of a high cost for

      existing users, be it to industrial users or be it to domestic

      users, we would like to hear about them.

                The point is that the-; cost effective solution for
      the Long run may not be the best solution in the short run.

2               With that in mind, I would also like, as Chris

      mentioned, because some of you received the material a little
      latef to provide us with a written response, we have extended

      the written response period to October 31, 1978.  Any written

      response can be forwarded to me, and my address is John Pai,
-   "  CWH 5471 and the next line is U.S. EPA, address is 401 M Stree

      Southwest, Washington, D.C., 20460.

                My phone number is 202-4268945.

                In case you have any further questions or answers

      after you have had a chance to review this material in more


       detail,  please feel free to call me on the phone and discuss

       with me  before you send your comments.  It is very important

       that you show your preference or your suggestions to us

       because  this is a time that you ca,n really impact the outcome

5  I   of the study,

                 You can give them your address, too, Ed.

                 MR, DONAHUE:'  We would like to get copies of

       comments and suggestions, too.  You can send them to either

    „   Alan Brown or to me,,Ed Donahue.  Our address is Coopers &

 2   I   Lybrand, 1800 M Street, Northwest, Washington, D.C.  Our zip

    I   code is 20036.  Please feel free to call us, too.

                 If there is something we said that isn't really cle^r

 1   ||   or something you would like us to expand upon or just some
       questions or ideas you would like to bounce off us, our phone

 5  |  number is 202-223-1700.

                 I think John mentioned, if he didn't, whatever

       written comments you have, even a handwritten half a sheet of

       paper kind of thing is fine.  We are not looking for people t<

 a  1  draft laws, sit down and hire a lawyer or consulting engineer

       to write a long and detailed and very technically correct and
      precise kind of thing.  We are just looking for ideas and

      suggestions.  So just off the top of your head kind of ideas

      that you thought out are fine.











          I think we will turn the meeting back to Chris, ana

she will preside over any kind of prepared statements people


          MR. PAI:  We have a list of people who, I guess,

telephoned in to reserve time for making a prepared statement

I will just go down in the order that we have here.

          Mayor Whittom,! suppose you want to begin.

          MR. WHITTOMr  This is something new to me.  I  am

Mayor of Rupert, Idaho.  My name is Bill Whittom.

          The industrial portion of our sewage treatment

facility at our lagoon project which is about 97 percent

complete now is very  important to us in the  small agricultural

community where we  live.  Idaho, for example, produces  26

percent of the nation's potatoes.  The majority of  those

potatoes are produced and processed in areas such as  Rupert,

Idaho,  And  for the city and the industrial  users to  grow

together is  very  important. It is  asinine  in my estimation

to have industry  building a treatment  facility and  a  mile away

have the  city  build a treatment  facility.

           So this has been helpful to  us,  but I can see

industry's side,  too,   I asked one of  our  major industrial

users to  come  and state some  comments  concerning his  position

on it,  too,   I would  like  to  call  on him in  a minute, but we

will have  written testimony,  and I talked  to. Joim-«ar!Ldjer.


       He  gave me  his  address,  and we will be sending that testimony

       to  him.

                The one  thing  that we are concerned about, as far

       as  a  city operating this facility,  is that some of our income

       is  derived  from the payments that our users are making, and


       that  it could be/financial burden on us in some of the smalle :

      communities where  we have large industrial users participating


       in  this, if we  lose that payment.


                 I  would hope you would consider that and figure out

       some  way to  reimburse the local  units of government for the

       funds that we might lose in the  future on projects such as


                 Several alternatives that I have reviewed there, I

       think a lot  of them have merit.   I can appreciate the work an{l

       time  and effort put into them, just in reviewing them briefly

       I am  sorry I am not better versed on this, because the first

       I heard about it was the letter  I got,  I called over here anl
       made arrangements to be here,  because I think it is important
       not only to our city but to many other municipalities and
       industrial users of facilities such as this.

                 We have the first treatment facility of its kind

       in Idaho.  We have just taken the effluent of a large Kraft

      cheese, processing plant, one of the larger dehydrated potato

       firms in Idaho, and all the city schools, schools outside of


       the city and so forth, it is being pumped out of  the  river

       now, and into a lagoon system for land application  later  on.

       I don't know how long that might be.  It will be  several  yeai

       I am sure.  We have a pretreatment plant near our city where

       the effluent is treated prior to going into the lagoons,  and

|      most of the systems just have a lagoon system.  We  are prettj

       proud of it.  If any of you ever get over that wayf you are

u      welcome to stop in-.-  We will show you how to build  one and
       get the users behind us, too

                 We have had real cooperative working relationships
1       with our industrial users,

                 1 would like, John, if you would permit, because

      for the time factor involved, and our plane was  late and every-

       thing else, we are very unprepared.  We will have a written

u      statement,
• •
o                I would like to ask Bill Schow, who  is the Comp'tro]

       for Magic Valley Foods, a large potato processing plant,  shij

       potatoes all  over the world, by the way, and the latest is

B      going to Japan—I don't know how many loads they ship over

       there—but they are dehydrated potatoes made into  something
w      like Pringles potato . chips.  Proctor and Gamble have dealt

        through  this  firm.   You  have probably .sampled  their products

        somewhere  along  the  line.


                 MR. PAI:  Thank you, Mayor.



                FOODS, INC,

j                MR, SCHOW:  'Bill is quite right about being prepare^

S      I got a call from our President yesterday and he said to be

       on the plane this morning.  We are currently, as Bill stated,

       about 97 percent finished with the project, and it has been

o      funded under the Federal Water Pollution Control Act, 92-500.

One of the problems that we are facing at this poin
       in time concerns double taxation,  I think industry in general

       is probably not in favor of their being doubly taxed, but whe

       the problem arises is in additional funding for nonfederally

       granted monies to start with.  It is kind of like renting a

jjj      house and paying for it at the same time.  We have $100,000

       initial construction cost down payment which at this point

«      in time we are financially unable to make it out of working

       capital.  So we have tried to get financing for it,but since

od      the system isn't ours, it is not viable collateral, as

       collateral as such.

                 Anyway, a specific item.  If industry isn't going to

       use it, who are they going to foreclose on to get payment?

       Federal monies, I thinkr need to be funded for these costs

 0      system is not ours, and it cannot be capitalized, and there
 o      are no investment tax credits available.   It  is being rented
       to us.


if industry is going to go along with municipalities.

          If the system was ours, under 92-500 we would be

funded, but since it is not our system, it is tbe City of

Rupert's, they are the sole owner, so we are ineligible for

this extra funding.

          I am in agreement with Alternative No, 9 which we

just went over, about tax credits along the same lines.  This
          I would like to see Alternative 9 be implemented.

I think as far as industrial users are concerned, the breaker

as it was called, 25f000 gallons a day, I think there was a

fallacy in some instances that industry has the ability to

repay.  Sometimes industry does mot have the ability to

repay.  Twenty-five thousand gallons a day does not give an

exact parameter of the type of discharging into the system.

For example, a car wash could use 5fOOO gallons of water a

day easily, dischargining lots of grease and oil, which is

definitely harder to treat than our potato waste which is

very much biogradable, and we settle a lot of stuff out of i :.

So I do not feel that that parameter is exact.  Also going
        industry's ability to    _, -
back to/repay, the 25f000 gallons is not really very much

water.  I think the  average home owners in our area are


       using 8,000 gallons a month, and it is not—

                 MR, PAXi  What do you feel  , trying to see that

       number increased or refined?

                 MR. SCHOW:  I am sliding off here, losing my train

       of thought,  I think you are right.   The definition,you know

S      the actual building and use of the system is being repaid th

^      way,  It is not per se the number of  gallons being discharge
       it is the type of effluent being discharged.  There should b<
o      some balance there with that type,

                 And we are not saying that industry  should not pay
       its fair share, but  I think  industry in general  feels  they an
 B      double taxed, because not only are they paying it  through

 o      first time, why  should  the  industry  that uses 25,000 gallons

 3      or mote have to pay!  for the guy who  uses 20,000 gallons  that

 13      is still making  a buck  off  the system, -too,

                  MR. DONAHUEt   You had to come up or have to  come

       up with $100,000 as  your contribution  for construction cost.

       Is that towards  the  local cost of construction or  is that

       Industrial Cost  Recovery or is it both?  Or  are you sure?

 x  I             MR, SCHOWs  I am  not sure,  I think it's the initi

       stages of  the project  incurred, our  share was $100f000 down

       payment,  in three payments  in three  stages of construction,

       The  final  payment was  supposedly  to  be paid  upon  approval  of




  the  system.   But what has happened is we were trying to get

 under this Act,  92-500,  one of the eligible requirements whicl

 i.£your number 2; if your business discharges into a publicly

owned works and the city  and county required treatments of our
                 and so on --

wifcte diachaegck'y' when we initially went into the project we
  felt we would have long-term low-interest money available to

 u s.

            But through a quirk or however it is written up,

  we were ineligible, because the system is not ours.  We were
         cited.  The city was  cited,

 ,   I]            We are going to pay probably  50  percent  of  the cost

 "     of the lagoon over a period  of  it,   The SBA was willing to loa
 H   I
 •   11                          •»
 5     us money through jconventioEial:  resources with  raising a bank

      9 percent guaranteed loan,   That  is  where  collateral  comes.

      It is not ours.  How do  you  use collateral that is not yours?

      We are stuck between the rock and the hard place,

                MR, DONAHUE;   I can't imagine too many people would

      want to have a sewer system  as  collateralf anyway,

 x   1
    M            MR, WHITTOM;   Excuse  me for interrupting. I think
  this is important,  we are a classic example again of one of

  the problems that has been created here.  They are put on the

  spot because they don't have the bucks to initially invest in

  it, especially a small business,  They are not HtJ, Heinze or


      the Hunt Corporation  or  something else,   it is a small

      family-owned corporation or  operation and it puts us in a

      bind because we have  to  to to  the home owner then and say

      they can't pay their  $ioOfOOO,   We are going to borrow from

      you to p?y their bill to the contractors  that have already

      done the work.  The home owner  says,  Hold it, why are we

      paying their bill?  If I don't  pay my water bill or my light

      bill--in this case we own our electricity system,  too, in our
z      city—you turn my lights or water off.  Why don't you turn

I      them off?  I am in the middle of the damn thing.  It is reall

 ,   II   a puzzling situation to be in, because they employ 100 people

"   "   in our community, 'a payroll of—it is sizeable—one of those

       things you can't win at,  They are either mad at me or the

"   "   people are mad at met

v>                MR, DONAHUE:  You are put into the middle of abiding

       by the environmental kind of things and at the same time

       worried by the economic impact.
                 MR. WHITTOM:  The only good thing is I have three
       years before I have to run again.


                 MR; 'DONAHUE;  If you all, when you have the time,

       before the end of the month, if you-could reduce something

       to writing about what it is doing to you, we are not looking

       for proprietary or confidential information, anything you cou


      give to us as part of the public  record  if  somebody wants to

      see it if they canf but  if you  could put something in writing

      just a couple»page letters saying what this is  doing to you,

      and what kind of alternative you  would suggest,  it would be

      helpful.  For the  -more  things  like that we can show to

§     Congress, the more likely they  are to do something.

1                MR. SCHOW;  That is our basic  purpose.
°   I            MR. DONAHUEi   When you  have some  time  to reduce it

      to writing, we would appreciate it,

                MR. SCHOW:  We feel we  do use  the system,  but why

      is someone who has his limits set up for repayment,  why is th(

      industry always stuck with the  bill? Bill talked about the
      economic impact? industry does  carry the majority of the load
       for  everything.   Every  time  something  comes  along,  they hit

      industry  up  for a  little more,

                I think it is well known  that  industry  profits are

       lower  than  private—if  industry  makes  3  percent on  the  buck

 5     after  taxes,  they are doing  quite well.   If  a  small business

       had  to do that, they would be  out of business.

                Thank you for your time.

 ti  I           MR, WHITTOM:   He is  not only representing Magic

       valley Foods, but another affiliate! they have is Magic West,

       located  in  Glens  Ferry, and  they have  treatment problems there


        or have had in the past,  I don't know whether they are solv

        or not,

                  MR, SCHOWj  EPA didn't close us down totally.

                  MR, WHITTOMs  The things he and I point out, not

        only affect Rupert and Magic Valley Foods, but I think we arle

|       representative of many small ihduatdAs-; and small communities

        and without them we wouldn't have as big a .system as we have

        Without' us they wouldn't have a system to go to, it is
o       doubtful that they could come up with the bucks to treat  it


5       way EPA is indicating they tfaVc? to.


1                 I thank all of you for your time.  I am sorry we

        are so disorganized.  We are from Idaho, you have to excuse

o       us.  we walk around here and look at these buildings and  thejy

3       are bigger than our haystacks,

j2                 MRiv DONAHUE.'  Thank you,

                  MR. PAI>  The next gentleman is Mr. Mike Price,



                  TACOMA, WASHINGTON.

                 MR. PRICE:   I am Mike Price, Chief of the Sewer

        Utility Division, Department of Public Works, Tacoma,

        Washington. I have a  letter here addressed to the Regional

        Administrator of Region X, and signed by R,D. Sparling,


      Utility Services Superintendent of the City of Tacoma:

                "Dear Mr, Duboisj

                "This statement represents the position of the City

      of Tacoma regarding the Federal Industrial Cost Recovery

      Program mandated by the Federal Water Pollution Control Act.

8     it is our understanding that this public meeting is being held

      to obtain public comments which will be the basis for a

      decision'on implementation or non-implementation of the

      Industrial Cost Recovery portion of the Federal Water Pollutidn

z     Control Act,

                "As a member agency in the Association of Metropolitja

      Sewerage Agencies, we participated in the drafting of a

      resolution regarding Industrial Cost Recovery at the annual

5     AMSA conference in Anaheim, California earlier this month.

u     Tacoma fully supports that resolution by the Association of

      Metropolitan Sewerage Agencies.  The resolution reads as


                'The Association of Metropolitan Sewerage Agencies

0     supports the elimination of ICR provisions from the Federal
      Water Pollution Control Act (Pi 92-500)  and the Clean Water

w     Act of 1977 (PL' 95-217).  Until the ICR requirements of the

      law are eliminated, AMSA urges EPA to develop regulations for

      the program that are consistent with the spirit and intent of


       Congress'  recent amendments to GPL 92-500),

                 "We have enclosed for jour use the complete AMSA

       position paper from which this resolution was developed.

                 "Tacoma has currently suspended all further work on

       an  Industrial Cost Recovery study and program development and

S      will  hold  further such work in abeyance until this issue is

       resolved by EPA during the Congressionally mandated moratorium

       period  provided in PL 95-217.   This action is in conformance

p      with  Condition 4, Moratorium Reviews  and Approvals, which is

_      contained  in your February 3r  1978, Region X Interim Policy

       on  User Charges and Industrial Cost Recovery.   This particular
      paragraph  provides  that  grantees  will  not  be  required to
       develop  nor  submit  ICR systems  during  the  moratorium.
•                f!  We  thank  you  for  the  opportunity  to  submit  this

53      statement  into  the  record,  and we trust  that  the testimony

       presented  today will  be utilized  in developing a reasonable

f      and  rational approach to  the  question  of Industrial  Cost



^                I  might add, if I understand your schedule for  today


i      there will be later a question and answer and general comment

"      period, because after reading your alternatives,  I have some

       other comments  I would like to make.

                 MR. PAIs  Thank you.





                 The next  gentleman  is  Mr,^  Bonn,

                 STATEMENT OF  JOHN J, BONN,

                 TECHNICAL SERVICES  P,E,

                 MANAGER,  NALLEY'S FINE FOODS,

                 DIVISION  OF CURTICE-BURNS, INC,,

                 TACOMA, WASHINGTON

                 MR. BONN: Since I  am  not  going  to read the  whole

       report,'you may want to follow me.   My name  is  John Bonn,

       I  am Technical Services Manager  of Nalley's  Fine  Foods in
x       Tacoma, Washington,

i                  What I  handed out there  was  an impact statement


        that  this  has  on  Nalley's  Fine  Foods,   In the form of an

"       introduction,  basically we discharge approximately 800,000

3       gallons of water  to  1,000,000 a day.   The cost of this servi<

        is  $163,000.   That is  in addition  to $64,000  for the  water


^                 The  City of  Tacoma has an ordinance that is being


        drafted and will  be  presented in January that will increase
        this cost to $726,000  annually.   This  is  all  in  the  name  of

i       the Clean Water Act.
                  Our"recommendations are fairly simple.   We  believe

        industries should not be assessed for repayment of EPA grant

        In addition,  we encourage EPA not to burden treatment plants



      with nonproductive administrative cost and  regulations  that

      detract f,rom the intent of the Clean Water  Act.

                fcet me give you a little background,   The  gist  of

      it here, I guess, is we would like to continue negotiating

      working with treatment plants.  Nalley's is sort of  locked in

      and we have no choice.  We think that the conditions in the

      local leyel could best be handled by people at the local  leve
      that understand each procurement situation.  Now, Nalley's









~     been down there recently you have  seen how we  have  grown,
      was started down in Nalley Valley  in  1940.   If you  have  ever
                On Figure 1 there—the original has a glossy—it  is

     pretty hard to Xerox—is an aerial photograph of Nalley's  and

      Nalley Valley showing we are locked in an area and have no

      room to expand.  So if we are to install our own  treatment

      plant, we would have to disassemble or do away with some of

      our existing facilities.

                The next layout, shows the trunk  lines  and our

      discharge points at Nalley Valley, and we have seven of them.

      So it is almost cost prohibitive to funnel  this water or  pump

      this water to a central location.

                What''we have been doing with the  treatment plant,

      though, is providing that type  of treatment that  would help

      the municipal facility,


                 For  example,  of  concern was  the high acidity of our

      pickle  brine,  We  installed neutralization plants,  neutrali-

      zing plants, to  bring pH's to an acceptable level.

                 In addition,  it  was mentioned earlierf  the high cos

      of  removing grease,  we.  have installed  grease recovery in

      grease  traps in  order to alleviate this problem at  the treat-

      ment plant.  We  have solid screens removal for larger particlos

      to  assist  them down  there.  We have installed sampling stations


                 MR, BONN;  All right,  That $434,000 in the report

       is from $ consultant report to the city, but they did not

       take into consideration our recent strength.  So the $712,000

       there is our calculation of our recent strength and that  has

       been unofficially confirmed,

                 MR, DONAHUE;  Why is the increase so great?  All

       that increase isn't due to Industrial Cost Recovery,

                 MR. BONN;  None is due to Industrial Cost Recovery

                 MR, DONAHUE;  You are saying you are going to have

<      these costs whether or not there is Industrial Cost Recovery?

                 MR. BONN;  This hasn't been approved by the Council

                 MR, DONAHUE;  What has happened to the rate structu

|      the way they're charging, to make it go up that way?  Have

       you'had a declining block rate or something?

£                MR. BONN:  No, we were charged a surcharge based on

       the highest strength.  Now they are charging it on all

       suspended solids grease.

^                MR. DONAHUE:  Do you have any idea how much


gj                MR, BONN:  No, I don't.  We had an estimate in

       19--I don't know the portion of industrial cost, but the

       total estimated in 1975, we predicted would be about $350,00(

                 MR. DONAHUE:  Per year?
       Industrial Cost Recovery would cost you on top of this?




                MR, BONNi  Per year.  Not industrial, that was

      total, including the user cost.  What portion of that,  I  don't


                MR, DONAHUE:  In the plant modifications that you

      have made, have you been able to reduce significantly your

      water consumption, BOD, or—

                MR. BONN:   My gut feeling says yes, but we haven't

      been able to monitor or come up with a quantitative measure.

                MR, DONAHUE:  That is a pretty significant increase

      in sewage cost,

                I don't have any other questions.

                Thank you  very much.  Appreciate it.

                MS. NOAH-NICHOLS:  The next person to speak will be

      Robert Maguire, from Agripac,



                SALEM, OREGON,

                MR, MAGUIRE:   My name is  Robert  Maguire,  technical

      Director for Agripac,  Inc?, Salem,  Oregon,   Agripac is  a food
      processor operating three C3J  vegetable canning and freezing

      plants in the Willamette Valley in Oregon,   All three  of these

      plants are currently discharging to POTW's.

                Of particular concern to us is the situation that

      now exists in Eugene, Oregon,   Over the years our'Eugene plant


       has discharged to the Eugene City treatment plant which has

       been operating under a NPDES permit allowing 60/34 BOD/SS

       during the low water period.  Under a new DEQ permit, the

       cities of Eugene and Springfield have formed a Metropolitan

       waste water district which will be required to maintain a

       10/10 discharge during the low water period.  In addition,

       Agripac as the only major seasonal industrial discharger

I      will not be permitted during the low water period to discharge

       either through the POTW or direct to the Willamette River.

                 As a result of these restrictions, Agripac will

*      have to make a decision whether CD close this plant, (2) movje

*      to another location, which will involve both cost of moving

       plus additional construction cost, (.3) construct the lowest

       cost waste disposal system at the present location.  If the

m      latter course is followed, it-will involve a nine (9) mile

<      pipeline with the necessary acreage for spray irrigation or

       land flow.  The original CH2M Hill estimate for spray irriga-

       tion based on January It75 construction and adjusted for

       inflation is $6.3 MM for mid 1980 construction costs.  A
5      second estimate made by Brown and Caldwell came in at $7,8 fojr

{•;      spray irrigation.  They also estimated an alternative system

       of lagoon storage with land flow at $6.3 MM.

                 Using the above $6.3 MM Figure as the lowest cost

       alternative  and with a 1977  flow rate the replacement costs

       is  $92.55  per M gallon of effluent.   The annualized cost is

       obtained using 30 years ICR  funds for 75 percent of the cost

       and the  remaining 25 percent payable to the Metro district at

       5-1/4  percent for 20 years,   This cost is $340,075 per year

8      compared with $75,000 for 1977  treatment costs.   The cost per

       M gallon of  effluent is $1.09 under  the old system and using

       the 1977'flow rate the estimated cost under the  new system is

o      %5.00.   For  comparison, our  Salem plant with roughly the same

       product  line and volume had  a 1977 cost per thousand gallon

       effluent of  $1,25.  Our best estimate is that other vegetable

       canners  discharging to the Salem POTW will  have  the same cost
o      per thousand gallon.
                 This case history  is  submitted to illustrate how

u      extraordinary circumstances  and level of pollutant discharge

       will result  in excessive ICR payments.   It  illustrates the

       high cost  of obtaining extremely low level  BOD/SS  effluent  as

J      prescribed by the Oregon DEQ.   It also  points out  the  inequit;

       arising  when one seasonal  industrial user is  required  to spem

i      $6.3 MM  for  a waste water  treatment  system  that will only be

       used for 140 days per year.

                 In conclusion,  our first chioce with respect to ICR

       payments would be to  eliminate  them  as  "double taxation'1 and


     unfair economic burden,  In the event ICR payments are not

     suspended, the "circuit breaker1" exemption should be

     established to give relief to thosecdischargers coraing-under

     the  "extraordinary circumstances" category as illustrated

     in this case history.

               Thank you,

               MR, DONAHUE: It sounds like your problem isn't just

     ICR,.   It  is a problem of total cost of  sewage, and ICR just

     makes  it  that much worse,  You are being faced with  the proble

     of not being able to discharge into the POTW or direct dischar

     ICR, that is just so much more of a problem.  Your basic

     problem  is where you are going to discharge.

               MR. MAGUIRE;   Correct, coupled with  severe Oregon

     DEQ  requirements,

               MR,  DONAHUE-,   Water quality standards where POTW

     will discharge  or  you  will  discharge?

                MR,  MAGUIRE:   No,  I am not  saying ICR payments  are

      totally the charge of  these high future—

z   ||
to   1            MR.  DONAHUE:   But 1hey  contribute?

                MR,  MAGUIREt  Very definitely.   Out of  a $340,000

      estimated 1988 cost per year effluent, only $51,000was O&M

      cost, so , correct, on this $340,000 that was Brown and Calde

      I assume that their estimate is somewhere in the ball park,


       SO  $290,000  out of $340,000  ICR—

                 MR.  DONAHUE;   Either capital repayment or ICR kind

       of  cost.   That is really significant.

                 Thank you,

5                MS,  NOAH-NICHOLS,   Thank you very much.

                 The  next person to speak will be Howard  Donelson

       from the  Boeing Company.

                 Mr.  Donelson,

2                He is not here.

                 Okay, then.   George Houck,  from the Department of

       Ecology,  State of Washington,





H                MR.  HOUCK:   I am with the Washington State Departme

       of  Ecology in  the WAter Quality Management Section.

*                The  following comments represent the position of th

J      Washington State Department  of Ecology,  We are the pollution

       control agency which administers much of the municipal  con-

       struction grant program in Washington.  We hope our comments
       will be considered in the light of our intimate involvement

       in this program.   The 1977 Clean Water Act set up the machine

       by which qualified states could be delegated the entire



      program is warranted.  In particular, the regulations  should

      attempt to free the cities of any nonproductive,  cumbersome

      requirements,  The 1977 Clean Water Act, in changing the

„     definition of industrial user from the former  2,500 gallons

      per day to 25,000 gallons per day, was a step  in  the right

N               To do away with Industrial Cost Recovery without
      payback by industry of its fair share of the capital costs

      would result in some serious inequities.  Two examples that

w     come to mind arei
                1.  The incentive for an industry,  faced with  the

      capital costs of upgrading its treatment  facilities, to  conne<

      to a municipal plant could be overwhelming and not really

      cost effective when total cost to the consuming public is

£     considered.  In effect, the industry would be served by  a new

      facility whose cost was borne by the American taxpayer in

«     contrast to constructing its own plant,
                2.  Competing industries which  must provide their
      own  treatment plant  are  at  a disadvantage as compared to an

       industry connected to a municipal plant where the capital
       costs  of  treatmet of  the capacity are provided free of charge

                 Our  department provides a  15 percent EPA grant, for

       a  total 90 percent  grant.   Under the provisions of a recently


      adopted state regulation, Chapter  173-255 Washington  Administ:

      tive Code, we discontinued providing  the 15  percent grant for

      the industrial portion.  We did  not want to  upset projects

.     which were well on their way,  so cities which had already

      received a state grant award'">  to do the design phase, prior  t<

      September 23 of this year, were  "grandfathered in" by the

      regulation.  Our definition of industrial user in the regula-

      tion was made compatible with  the  EPA definition. Thus,

o     d iscontinuing or making substantial changes  to the ICR progran

      will impose a hardship/administration of the municipal

 1     construction grant program in  Washington Statef to a  degree,

                The reason for our recent regulation was that in

o     a few years the state bond money will run out,and we  wish to

5     provide the supplementary state  grant to as  many worthwhile

       municipal  projects  as  possible.   We  did  not initiate and

       industrial cost recovery program of  our  own because we

«      believed the  administrative costs of the smaller state  progran

       15  percent as compared to the 75 percent federal grant, would

       be  too cumbersome.

•jj                Now that  we  have seen  the  preliminary findings  of

       the consultant's study of Industrial Cost Recovery this

       morning, we do have some additional  comments to provide in

       writing,in a day or so.  We hope they will receive the  same

       consideration as these presented this morning.

                 Thank you.


                 MR,, DONAHUE t  Mr, Houck, if it were shown that the

       cost of self-treatment were lower than the cost of using

       Publicly Owned Treatment Works—I am making an assumption you

       want to encourage industry to use the public sewer system

 «      rather than create their own sewage, because of economies of

       sealer- If it were shown it was cheaper to treat your own

       sewage than to use the public sewer system, would the state

       feel the same way about Industrial Cost Recovery?  In other

 2      words, if, assuming what appears to be an economic advantage

 w      from using a 75 or 90 percent funded facility versus building

       your own, if that were shown—if tax law changes made that

       economic advantage disappear, would the state still feel that

       ICR was a good thing to have?  There are other reasons for

       having ICR as well.

                 MR, HOUCK:  I am not really prepared to answer that

       this morning.  That is something I am not familiar with.  You

       brought out these changes in the tax laws that some are
       proposed and some are in place,

°>                MR, DONAHUE;   When we  discussed that with some

       people on the House Public Works Committee staff and they

       were sort of flabbergasted when  we told them what we had done

       and the reason they were assuming, and it just makes common

       sense, using a facility that is  three-quarters paid by


        somebody  else  it is going to be cheaper than what you pay

        for   by^yo»|paelf-*-^/ it looks that way on the surface,  We

        went  through the tax law kind of things and discussed .this W|LX

       leople on  the House Public Work staff,

3  I              They were amazed.   They were in the Public:

        Works Committee writing environmental law, and the Finance

3  |1    Committee is writing tax law,  And their objectives don't


u  J|    always mesh.  The Public Works people weren't aware of what

«  ||    the Finance Committee was doing or how extensive were the


        tax law changes which had been made.  They were pretty

        surprised when we went to them with this computer model and

 c       showed them what was happening.  Our final report will


 8       include all kinds of cost curving on different size industri4s

 5                 MR,  HOUCK;  You don't have tax laws here today.


        discussion of  tax laws.  We  took a couple of our tax partners

        and locked them up with some of our economists, and our peopl

        from  Camp Dresser McKee who  did cost curves for us.  It

        surprised me,  too,

 _   n             Thank you,

                  MS.  NOAH-NICHOLS:   Now we will be taking statements

        from  anybody else who is ..here this morning to make a statemen-

                  Those who haven't  called in in advance,
                  MR.  DONAHUE:  Our report will have a detailed



                TWIN FALLS, IDAHO

                MR, YOUNG;  It seems small Idaho municipalities are

      rather well represented here,  I am Gary Young, City Engineer

      City of Twin Falls, Idaho,  We are an agriculture/light

      industry based city of about 25,000 not too far from Rupert.

      We have the same general types of problems with food processoi

      It was interesting to me, the categories of industries that

      were studied in detail.  Twin Falls has five of the six

      categories with the exception of the metal industry, we had


      every  other  category of light industry in our ICR program.

                 We do  have a going ICR program.  It has been in
 g      operation  since 1976.   We have had quite a few dealings with

 s   II
       EPA and the Idaho State Health and Welfare over not specifica
                 I would like to po£nt up a couple items specificall
       ICRr  but wastewater treatment in general.
      where the City of Twin Falls has made good use of the ICR

      program., rftattiwr than  worrying about its bad paurtia^. wet*? feel

      it does have some very good points.

?               Number one. I think most of the HtefiSrt X people are

      familiar with the Rock Creek Pump Station.  Everyone I talked

      to, when I say I am from Twin Falls, they say, oh, yes, Rock

      Creek Pump Station.  We have some sort of pending lawsuit tha


      is out 0f my hands at  this point,  concerning illegal dischar

      from that area.  We did  use  ICR funds  to  abate that discharge

      Without that source of funding,  we would  still be maintaining

      the alleged illegal discharge.

                This specific  case Shows that the  50 percent retain

      funds from the ICR payback is an extremely valuable tool for

      cities.  We didn't have  the  money  to fix  that thing.  It was

      an emergency situation,  not  emergency  enough to get state or

§  I  federal funding on a quick response basis,  and I think in
ui  I  practically all emergency cases  state  and federal "emergency
      money" is not available  on a timely basis.

 (.-               These ICR funds that  are in  the city's hands but
 "     under direct control of  the  EPA are a  quick  source of funds

      for .emergency<.-caij>ifeal .improvements.    To  me  that is one of the

 u     nsa§tfrbenefits of this  program.   I  think I can speak for the

      taxpayers in the Twin  Falls  area that  they are not keen,

      they would not be keen on funding  85 to 90 percent of the

 J     total cost of the treatment  plant  expansion  that we recently
 BJ   |[ underwent out of the general taxpayer  fund.

 x   I!           One of your  alternatives I believe alluded to the

      public picking up the  industrial cost. In our cases, and

      I think possibly in Rupert's, the  industrial portion

      of the plant, this  incremental  cost funding  thfct you are










 talking about gets the cart before the horse, in the

 case where industries are discharging 85 percent to 90 percent

 of the total discharge, and we are operating under those


           There are several averages involved, and I would

 have to say in some of those average costs, cases we must have

 been on the other side as far as'average conditions on your


           But that was one point.

           Contingency money, I don't think you will see

 a local government entity, i.e., city council or whatever type

 of form you have, that is willing to put money in the pot,

 that when the pump station breaks, that the money is there

Ito fix it.  They are not oriented in that way.   Emergency

jcapital expenditures are a real nightmare to local agencies.

 This is one area where we are well served by this program.

 I can vouch for the fact that our program, ICR program has

 given the industries a new awareness of water use and discharge

           Now that is certainly a dollar-related situation,

 but  I have had our industry people come and tell me we -real-ly

 |cut  down  on our water use, and we are making attempts to

 decrease  their discharge.  Certainly the dollar is a terrific

 incentive to cut  down on your discharge.   I feel that we




      benefit of the whole community, particularly in reference

      to discharge  because at least two major industries were

      discharging their industrial waste directly into Rock

      Creek.  Those wastes are now picked up by an interceptor

      sewer and go into the famous Rock Creek pumping Station

g     and are treated.

                So I think with some minor revisions this is

      basically a good program. I feel I can represent Twin Falls,

      I can speak for Twin Falls on that subject,

                Thank you.

 i               MR, BROWNj  Mr^ Young, how much do you collect

 K     in  ICR every year total?

 *               MR. YOUNG:  About $100,000,  That is a rough'-


 w               MR. BROWN:  Of which  10 percent is kept  by the


                MR. YOUNG:  Yes.

 §   I!            MS. NOAH-NICHOLS: Fifty percent.

                MR. YOUNG:  Forty percent money is money I am

 |      referring to  on  this  Rock Creek situation.  Certainly 10

 »   I   percent  would1 not  have  done the job.

                Another  point is  that the monitoring, both in  flow

       and strength  is  a  good  tool for the operation  of  the plant,

       and if you  knocked out  ICR  today, we  would  still make an








          The capital cost recovery  should  actually reflect

the fact that industry  is only  using a  percentage of the

total  amount, but  the operation and  maintenance coat in

Particular  of a 10 MGD facility, for example, doesn't

reflect the fact that the  plant is only receiving 4-1/2

to 5  MGD.   The  operating costs  tend to  approach more to the

coat  of operating the full  facility. This  is not taken

account of.

          Any attempt by the municipality to recover costs

from  some other method  than  ICR—I have seen in several

places through  here—you mention removing some or all of

the ICR system  and actually  putting the responsibility for

capital cost recovery back on the community.  There again the

tendency is they pay for a 10 million gallon facility, of

which only  5 is being presently used, but they are having

to make repayments on 10,  Therefore they look to industry,

[whoever, to actually provide the repayments to cover their

[repayments  for  that.

          I think  this  is something  you should consider in

((anything that is involved with  abolishing ICR or modifying

|it in some  form to make sure that industry—industry tends,

 ay and large, to know how much  waste it is  going to produce,

 roughly what strength.   That is not  completely true.   It is

  are  true than  trying to anticipate  population growth.   They




generally know how much capacity they want and how much

capacity they may want to have in addition, if they wanted

to expand,  It is generally fairly predictable, so they,  I

think, feel they should be able to go to the municipality,

saying, we need this much, we would like to know how much it

is going to cost us in terms of capital recovery.

          Once they get committed into the program, then

they find that if costs get out of hand, it is very hard to

make a certain decision,  I think their involvement in

facility planning would be valuable.

          MR, DONAHUE;  Since you work with Brown & Caldwell,

what kind of pressures to you get when you are talking

with a community and trying to design a wastewater treatment

plant facility, trying to size it?  What kind of pressures

do you get?  What do you do to try to build for them one

that will be big enough to handle their needs, but not

to run at 45 percent capacity?  What are good ways to get

industry  involved,  since industry frequently bears a fair
z      share of the local capital cost?  What are ways to get

       industry involved?

                 MR. HARBER:  I think the growth question has been

       addressed by EPA now to the point at which it is fairly

       well controlled.  The problem with the treatment plant


      design aspect is there is an economical expansion size, so

      you must build increments of a certain size and therefore

      some surplus capacity gets built in, in service.  It is

      generally based on a fairly' sound engineering decision.

                I don't believe plants are now getting built—they


    ||  shouldn't be any longer, anyway—that have this 40, 50 percent

      capacity.  That should be corrected now, anyway.

8               MR. DONAHUE:  If you are building a plant, you

      are talking about one with a 10 MGD plan, and only getting

±   II  4 MGD flow, and operating costs are fairly fixed.  What

      would be some way, if you don't put it on a proportional

      basis, what ways will you use to recover operating cost?
      Who would pay for it?
*               MR, HARBER;  Capital costs I would feel should be
r%   II

vt   1 brought in,  in the way of front end costs,   As many munici-

      palities have a connection charge as well  as a yearly charge,

      I think that can be related to industry as well as general

u     domestic connections.  The operation and maintenance cost,

      I don't honestly have an answer for, unless you back them

3   I  off financially so that people coming into the system later

      pay a larger share of O&M to represent what has already been

      spent.  It is difficult for me to put the  idea over.

                MR. DONAHUE:  This is a feeling, but administratively

      I think it would be difficult.

                MR. HARBER:  That's the only way 1 can see doing it

      I assume we, as a compnyf will be putting in information,

                MR. DONAHUE: We would be glad to get one from your

      local office.

                MR, PAI;  Can I ask you, just from your knowledge

      in this area, how common is this plant operating around 50

      percent of capacity?  How common?  Is it an isolated case

      or what?

o  ||            MR, HARBER;  It is not uncommon.  It tends to be


      more the smaller plants than larger ones,

                MR, DONAHUE: The figure we have on average utili-


jj     zation, 68 percent, is very misleading, because if you take


o     a big city like Chicago, if they throw in an extra 50 MGD,

      it's.only a small percentage excess,

u               MR. HARBER: Is your 68 percent figure based

      on flow?

                MR, DONAHUE:  Flow.

j               MR, HARBER;  It is really biased to a larger


x               MR. DONAHUE;  It is frightening when you get to

      a small town.
                  .-'Eai;  Is there any other lady or gentleman

      who wishes to make a comment' here?











          MR, SPRAKE:  My name is W. T. Sprake.  I am

with Gardner Engineers in Seattle, civil and structural

engineers, and we are involved in water and sewer system


          Wfe prepare rate studies when we can't avoid it,

for clients, of course, that need the service.

          My guess is that they would favor Alternative

No. 12, which pays their obligations to the federal govern-

ment for the grant, but allows them to determine for

themselves the way in which they would like to do it.

          When I make a presentation on rates, I say that

the characteristics are of course adequacy, equity, simplicity

and durabiliy; and you can't possibly achieve all of them.

It is a matter of trying to get a balance, and that means

you must understand the local situation in order to achieve

the best you can in simplicity and equity, and of course by

state law they must be adequate,

          So without being authorized to speak for them, but

understanding what they have told me in the past, my sugges-

tion would be, I would like to tell you that I think No. 12

would be fayored,

          MR. DONAHUE   Thank you very much.


                If anybody has any questions or  comments—I  can't

      believe we have done so good a  job that everybody is satis-

      fied with what we have said.  If somebody  has  a question

3     or a comment, we would like to  hear it,


in               MR, PRICE;  I can make a few more comments on

      your alternatives.
I               MR. DONAHUE;  Sure,


0               MR. PRICE:  I would like to point out some of the

      particular concerns that a company would have.  I believe
<     earlier in the presentation someone mentioned that the average

      administrative cost would run in the neighborhood of  $15,000

      to  $20,000 per year for a typical ICR program, and I  believe

1     it  was also stated that the average discretionary 10  percent

      funding would be approximately  $8,800 a year.  That

      says that the discretionary funds that the typical munici-

      pality receives are approximately half or less of what it

      will cost that municipality to  run that program to get

      those funds.  That says that the difference  is coming out

      of  the municipality's own pocket, because they can't  use


£3     the other 40 percent that they  get for specific capital


                From that standpoint  I think the program is,

      contrary to some of the statements I have heard, your own


     study has pointed out that  the  cost  of  administration

     exceeds the benefits that the municipality is  going to


               MR.  DONAHUE;   There have been a  couple  recent

     changes in EPA regulations  which  allow  taking  the administra-

     tive cost/ incremental  administrative cost off the top of

§  I the ICR collections.  But that  doesn't  change  very signifi-

     cantly the cost effectiveness situation.  It still costs
^  " you a  fair amount of money  to collect a not much  greater
"*   "  amount of money.
 *   II            MR.  PRICE:   As an example,  Tacoma Central Treat-
      ment Plant is a 27 MGD plant.   It is primary.  We have,

      including the industrial representative that was here today,

      we have approximately 3 million gallons of that which is
    "  industrial that would qualify for ICR.   When regulations

      were changed from a 2,500 to a 25,000 gallon cut-off point,

~     we decreased from about 60 industries to approximately 50

      that would fall under the ICR provisions.  We have about
      five or six large ones that account for approximately 2

 w     million gallons a day of that 3 million.  That means that

      there are some 40 to 45 additional small dischargers that

      would still fall under those provisions, but only represent

      approximately one twenty-seventh of the total capacity


      the last moment eliminate  someone's bill,  but  you  have  gone

      through all the administrative procedures,  and you will

      have to continue  to watch  that industry, because the

      next six months or a  year  or  whatever  your billing period

3     is, they may  again fall  above the  line and have to be


                 MR. BROWN;   One  question that we have had for

      grantees oftentimes  is f  assuming you  have  to monitor

 |     for your User Charge  system and  you have  to charge for

      excess  strength,  you  have to know what flow is, what addi-

      tional monitoring do  you have to do for ICR that you don't

      have  to do to maintain a User Charge  system?

                 MR, PRICE?   First you have  to calculate  that

       industry's share of the plant,  and you have got to separate

       out each billing period, whether or not he is really using

       that part of the plant,  In other words,  Nalley's represen-

 *   1  tative has stated that their wastewater flow comes in at

 j   ||  several locations.   It varies by some 25 percent annually.

       It may vary  considerably more than that in a one-month

 u   !!
       industrial billing period.

                 We are keeping records of how much we should charge

       them, but I  assume we would  have to compare each month how

       much  of their fair share  of  the treatment plant they actually

       used  and  bill them accordingly, or are we going to  bill  them


      once a year on the basis of their maximum potential use  of

      the plant?

                I would assume if Nalley's cut their  flow in half

      permanently, we would have to reduce their  ICR  charge.

      So then you can carry that down to an every'month basis.

3     We bill every month,  Do we figure their ICR payment

      on the basis of water use each month, strength  each month?

                So we see the potential for some  pretty significant

      administrative costs.

I               I too am drawn to Alternative 12, but I think

 i     that so far we are missing the same point we missed
      on the User Charge studies, and that is that local municipali-

      ties ought to have the right to decide based on their load

      conditions how they are going to recover those charges.
                As an example, the major increase in Nalley's
      bill that you have been told about came about partially

      from the fact that in 1971 when the last rate package was

3     developed for Tacoma, the city fathers elected at that

      time that industry would be in essence subsidized by the

      local residents? that is to say, they would not pay their

      full cost of"treatment,  That was their prerogative at

      that time,  It no longer is, and consequently we have had

      to place more of the burden for industrial treatment

      on industry.  We have had to place all of it on industry,






which means that the residential rate is going up very little

and the industrial rate is going up astronomically,  We

don't have a choice,

          Those  figures that Mr. Bonn gave you were for

User Charge changes based upon the federal requirements and

they do not include going to secondary treatment.  That is

just a primary treatment plant.

          I see no reason why the local government should

be precluded from determining that lower capital cost charges

to industry is not a viable option.  Why shouldn't they be

able to decide that they would rather encourage industry

to come in, encourage jobs, and make that decision on a

local basis?  Right now I think that our city council

      will probably, even if they were given that option, would
very likely say they wouldn't want to pay the full share.

But under Option 12, just as under the User Charge program

currently, they don't have that choice.

          I don't think it is necessary to take away from

the local municipality.

          MR, DONAHUE:  I think the idea in that alternative

was if recommendations coming from the study were just to

abolish Industrial Cost REcovery, that recommendation may

or may not get favorable reception on Capitol Hill.

^      federal  regulatory authorities  is  such  that we  are  not


          If that were your recommendation, that Industrial

Coat Recovery isn't doing what it is supposed to do, but

there are other things that can do the same things ICR is

supposed to do, abolishing ICR and recovering a portion

of the local share would be a definite incentive for cities

to build appropriate sized treatment works without a whole

lot of excess capacity, and would also encourage them

to conserve water,

          MRF PRICE:  Our experience with the state and
particularly concerned about the opportunity to gold plate

our treatment plants.  We have been very Closely monitoredf

and we feel we have developed a sewage plant that gives

us what we need without a lot of surplus capacity,  That

decision was a very hard fought one, but we are satisfied

with  it as I believe the state and federal organizations

are,  also,

          MR. DONAHUE: I think in the case of AMSA meetings,

the 43 cities that belong to AMSA, by definition being

metropolitan sewage agencies, the problem of excess capacity

isn't as severe as it  is in small cities,

          MR, PRICE;   We are in AMSA by  the skin of our

teeth,  We  fall below  the minimum definition.of a


       metropolitan sewage agency,  tfe are on the lower end of the

       scale.  A 5 MGD surplus capacity is still a pretty sizeable

       chunk for us.

                 I would like to point out one other avenue that

       perhaps could be explored,  Tacoma operates as a public

       utility in their sewage facilities.  Many of the smaller

       communities do not,  We don't have the problem of contin-

       gency funding, because we are required to make enough to

9      recover our costs, and set aside funds,  We cannot

<      borrow from general government nor can we loan to general

       government.  If you go to a self-sustaining private

       business approach to the operation of a sewage utility,

       you eliminate a lot of that. But we still have, under


*      public utilities laws, we could still adjust our rates to

H      place the burden on one or another group a little more

       selectively than we are allowed to under federal regulation.

                 MR, DONAHUE;  Do you have to go to the state
       for approval of your rates, go to the state PUC or something

       like that for approval of rates?


                 MR. PRICE:  No,

                 MR, DONAHUE:  Do you have a city veto over rates?

                 MR. PRICE;  Yes.  The city council will have to

       approve or disapprove,  If they disapprove of our rates,


       all  we can do is cut our budgets and reduce our operating

      e xpenses.   We cannot operate in the red.

                 I think that is probably the critical item

       that if you are  operating as a utility, you are going to

2      have to get all  of your revenue and that  includes local

8      capital cost recovery.   It has to come from sewer rates.

                 MR, DONAHUE:   Do you have provisions in bond

       covenants  to set aside—

§                MR, PRICE:  We have to have a minimum set aside.

       As I say,  the state PUC law requires us to  be  self-
 i      supporting,  which means that we are going to recover what-
^      ever our local costs  are,  both for operation and  maintenance

       and  capital  recovery,   They will have to  be recovered from

5      the  sewer  user,  not from the general taxpayer.

                 MR. PAI:  Mike,  if the city vetoed your rate

       increase request,  and you  have to cut your  budget,  would

       your plant still be operated properly and maintained ade-


                 MR, PRICE:  Something would have  to  go,  and since
x      the  vast majority of  our budget is for operation  and mainten-

"      ance,  we can believe  that  we are operating  fairly austerely

       now,  and if  we cut  back any further,  something  is  going  to

       suffer.  They are going to have sludge piling up  on us or

       something-  that will eventually get us into  regulatory


      difficulty with the state.

                MR. PAI;  It may happen, though,

                MR, PRICE:  I think it definitely will happen.

                MR, PAI:  What you are saying, the system you have,

=  II
55     there is no guarantee that you will always generate sufficient




          MR, PRICE:  Yes, we will always generate sufficient

revenue.  We have to, by law,

          MR, PAI»  I mean    sufficient revenue is for propel
      operation and maintenance of  the plant, not  sufficient  revenue

      to  cover your expense.

                MR. PRICE;  The state PUC  law doesn't  speak to  that
That is a matter of judgment on the part of the regulatory

agencies.  It is a matter of local government having to decidi

for themselves whether they are willing to possibly breach

state ofc federal law, and in the area of pollution control, in

an effort to keep the rates to local residents now.

          MR. PAI:  Just a question, how much of a percentage

of your plant is being utilized now?  Just flow?

          MR. PRICE:  We have dry weather flow in the neighborj-

hood of 20 million to 22 million gallons a day, and we have

plant capacity of 27 million gallons a day,  For wet weather

flow, we utilize the entire plant easily.



                 MR t  PAI»   I  have  no more,   Thank you.

                 For  the record, ICR paybacks,  you can retain actual

       50  percent,  of which only 10 percent of  that 50 percent is

       for discretionary use.  Forty extra  percent can be helpful to

       many communities.   It  is not what I  call highly profitable.

                 MR.  PRICE:  Within our budget  we have to set aside

       those contingency monies when we are operating a public

       utility.   So the extra money, since  it can only go for capita

       construction,  has pretty limited benefit for us.

                 MR.  PAIj   I  just  wanted to say on record you did

       actually keep 50 percent.

                 I think we will  just continue  to solicit comments

       Because of the fact that we adjourn  for  lunch, we may lose

       continuity of the discussion.  It is subject to your preferen

       If you feel we should  take  a lunch break, we will.  But any-

       body who would like to make a commentf I would feel this is

       a better time, rather  than after lunch.   I am sure some of
^      the people will have other engagements in the afternoon.  We

       may just use this lunch break and get every comment in and
I!      have a larger audience,
                 I will entertain comments  from the floor.  Does

       anybody wish to make one?

                 MR, MAGUIRB;  I would like to ask a question, not




                  MR,  HOUCKs   The  report gets turned into EPA in mid-


                  MR.  PAI:  Mid-November.  They will send it to me in


                  MR,  HOUCX:   The  report that goes to Congress, has

 S      the  report been edited by  EPA?

                  MR.  PAI:  EPA is responsible for the final product.

                  MR.  DONAHUE':  EPA is  going  to edit the  report,  I

        think  what you are  implying is  EPA going to censor the report


 I      No,  EPA is very open.

                  MR,  HOUCK:   I didn't  mean censor.   I was wondering
        if  EPA was  going  to  put  their judgment on  the  report?

                 MR,  DONAHUE:   Absolutely,   EPA has l«gal  responsi-


        bility to conduct the  study and  make  the decision.

y                MR,  PAI;   What I  am trying  to point  out to you,

        EPA will not have prejudiced the judgment.  The  EPA judgment


        was more or less  in  line with what this meeting  reflected,


        and as far  as  in  other-parts of the country, EPA  has a  very

        open mind at this point. That is one of the things that

        Congress  instructed  us,  and that is why we instructed  the

<*       contractor  to  keep an  open  mind  on the final recommendations

                 We came out  here  with  an open mind.  Whatever your

        preference  may be at this point, be  sure to let  us  know, I


       think that is the only way to make' a "decision1-by' the majority

       or by consensus.

                 MR. WHITTOM;  Just for clarification, on the commen

       from the gentleman fronv the State of Washington, it doesn't

       set too well with me.  I am not criticizing you personally.

       When someone, the attitude, like in this case referring to

       industries as not being'a taxpayer,  In our community they

S      are a taxpayer.  Not only that, that cost that we are


       incurring on thenrls being passed on to you and me as consume


       and those of us who criticize the system such as this, are th

       first men to say it's the middle man that causes a price

       increase, in the grocery store, in this case potatoes or beans
       or whatever it might be,
                                                    passing on incre

                MR.  DONAHUE:  You are talking about/" to consumers,

       that is true,  That is certainly what industry would like to

       do if they are hit with increased price.  One of our concerns

       with industry, particularly the textile industry, where we ha


*      a big problem with foreign competition, what we have been
       hearing from industries, some industries, is their prices are

5      not really set by the cost of production, but really what.

fc      the market will bear to pay  for  it,  They are not able  to

       pass along the cost, which is why  some of them are concerned

       in closing down.


                 MR, WHITTOM:  When that happens, you end up with

       more monopolies, a particular type of processing firms,

       In other words, they can dictate the price more to us than if

       you have a whole bunch of them,  We will end up with a. food

*      chain like we have with oil cartels now,

S                MR, PAI:  Let me make a comment on that.  I think

       we all understand, once total cost is committed, somebody is

       going to pay it.  And this indirectly or directly is paid
       by taxpayers at large.  One of the major concerns we have,
       as I pointed out, is trying to see if the total cost committe

       is palatable for us, either for the industrial users or

       consumers.  Because eventually it is coming down to all of

       them,  What we are most concerned with is total cost committe

       Can we hack it?  That is our key question because once you

w>      have that cost there, somebody is going to pay for i-t, and

       it wouldn't be fair for anybody to take an extra burden of

^      that chunk of the cost.
                 What we are trying to do, and this is the way we

       try to solicit your comment, if you think there are better

™      ways that we can have a more reasonable commitment of the •

       total cost, capital cost, O&M cost, that is what we have to

       look at.  I am saying in line of reasonable growth.  I am

       not saying that we will cut down growth of industry or




      the law.

                MR. WHITTOM:   Sometimes regulatory  agencies—we are

      getting off the subject—they expand beyond what  the

      Congressional intent wa'sf

                MR, OTTi  I am Elwood  Ott from  Seattle  Engineering

§  If  Department,  Could regulations be written so  that if  administ

      tive costs actually exceed  the cost that  you  recover  that you

      could abandon the program or cut it off at some point?
      Because in -our particular case the grants we  got  were just a
o  »
      small increase to our—we had all the  sewers  and  everything,

*     and just  had a apiall increase, so that we will be lucky  to
      break even with  50 percent,   If  I put  like  today's  meeting,

      which should  be  part of  this  cost into it,  we  lose  another

      couple  hundred dollars,

                MR. PAI;  There  is  a possibility  that administrativ
       cost exceeded the total  cost to be  recovered,

                 MR, OTT:  If that could be made flexible-, ,then we

       could cut it off.

                 MR. PAIj  That is one of  the circuit breakers we

       are talking about.

                 Again the difficult problem is how do you adjust

       administrative cost, and whether it would be reasonable to

       estimate that portion.   That is one of the alternatives here.


                 If you  look at Alternative  8—

                 MR, DONAHUE:  It wasn't  clearly  said,.but;in

      Alternative 8, that  is one of  the  things that  falls  under  tha

      kind of alternative.  It wasn't  specifically mentioned.

                 MR, PAI:   Or the last  one is very related,  the

      dollar  level of  ICR payments.
                MR, OTT:  We had  that  in  our  ordinance,  got  thrown

      out by EPA.

                MR, PAIi  The  law does not  allow us  to approve

      systems  that cut out  after  this  time,   That  is one of  the
      viable  alternatives,

».               MR.  SPRAKE:  What do you do  in  a  situation where  40
      percent or  so  of  the sewage in the community  is produced by

      federal facilities?

u               MR.  PAI:  The  federal  facility  basically  is under

      another separate  requirement, in the way  that a federal

      facility has to put out  front money,

                MR,  SPRAKE:  We  are in the situation in several

      communities where that is  the case.  The  size of the sewage
~     treatment plant—is  enormous compared to the requirement of

      the  citizens.  It is r federal agencies'who are there, not

      only producing large quantities  of sewage,  but the  kind of

      sewage  which requires expensive  treatment.


                 Can we  get money back from them under ICR?

                 MR, BROWN:  YOu charge them up front for what it

       cost  to  build their  portion of the treatment plant.

                 MR. SPRAKE:  How about operation and maintenance?

5                MR, PAI:   They pay through the User Charge system.

                 MR,  SPRAKE|   You are saying we can get from them

       their 40 percent?

                 MR.  DONAHUE:   Yes,  sir,


                 MR,  PAI:   Their 40  percent was not paid by you.



                         WASHINGTON COUNTY

                              HILLSBORO, OREGON 97123
                                  (503) 648-8621

BOARD OF COMMISSIONERS                                                   Joe| Wesselman
MILLER M DURIS. Chairman                                                      General Manager
BILL BLOOM                                                              Room 302
RICHAHDC HEISLER                   October 18, 1978
        Environmental Protection Agency
        Region X
        1200 Sixth Avenue-
        Seattle, WA  98101

        Attention:  Ms. Chris Noah-Nichols

        SUBJECT:  Industrial Cost Recovery  (ICR)

             The Unified  Sewerage Agency of Washington County, a re-
        cipient of substantial federal grants in terms of the State
        of Oregon, takes  the position of favoring the abolition of
        the ICR program provided for under  the Clean Water Act of 1977.
        We have determined preliminarily that we serve 17 industries
        chat fall into the "industrial user" category.  Further, we
        have determined that our recovery will be less than $50,000
        annually and,•therefore, question the economic feasibility of
        such a program.   Assuming we can use 20 percent of our share
        of the recovered  funds for administrative costs, there is no
        possibility of offsetting our actual administrative costs.  If
        the program is implemented, it is possible that some industries
        will construct pretreatment facilities, thereby causing signi-
        ficant adverse effects on the regional sewerage plan.

             EPA's contractor, Coopers & Lybrand, have identified two
        disadvantages in  the event the program is abolished, they are
        as follows:

             1.  Without  some control over  the design parameters allocated
             to industry, abolishing ICR may encourage grantees to plan
             and construct treatment works  that are larger than necessary;

             2.  Abolishing ICR would eliminate ICR revenues retruned to
             the federal  government.

        We suggest that the control suggested in number 1 above can be
        imposed at the time facility planning is being accomplished and
        during construction plan review.  Regarding number 2, if EPA

Environmental Protection       -2-               October 18, 1978

grants $45 billion, the best estimate suggests a return of $0.5
to $1.0 billion to the federal government over a 30-year period.
We feel this $33.3 million annual return is insignificant in
terms of the federal budget.

     Finally, the local funding for this Agency is provided
through ad valorem taxes paid by all properties whose tax rate
is based on property value.  Industries also pay taxes to the
federal government.  If one assumes these taxing formulas to be
equitable, then industry has already paid its share toward the
sewerage facilities.

     In summary, we believe the costs to implement and administer
the ICR program will be as great or greater than the actual dollars
recovered and, further, believe industry has already, and will
continue, to pay its share of the clean water program.

                               Very truly yours,
                                Jary ». Kranmer
                               General Manager

            Electro Scientific Industries. Inc.
                                                    13900 N.W SCIENCE PAIR DRIVE
                                                    PORTLAND. OREGON 97229
                                                    (wao cod* Sta) 441-4141
                                                    TE1EX No MOOT
October 16, 1978
Mr. Gary F. Krahmer,  General Manager
USA Of Washington  County
Administration Building
150 N. First Avenue
Hillsboro, Oregon" 97123

SUBJECT:   ICR regulations regarding industrial users of
           USA System.

Dear Mr. Krahmer:

We are strongly  against EPA recovering their costs for services
rendered.  Tax money  was used to primarily take care of  indus-
trial users and  some  75% of that tax money came from industrial
users.  The bill has  been paid.  For EPA to ask us to pay  it  twice is
beyond our comprehension.  Please express our views in Seattle  with
your meeting with  EPA.

Yours very truly,

Don Dennis
Facilities and Maintenance

            HALEY'S  FOODS
            P.O. BOX 200 - HILLSBORO, OREGON 97123 • phone (503) 648-1181
October 19, 1978
Mr. Gary F. Krahmer
Unified Sewerage Agency
150 N. First Avenue
Hillsboro, OR   97123

Dear Mr. Krahmer:

Thank you very much for your letter and notice  of  the public
meeting to discuss industrial cost recovery payments.

As I mentioned to you in our phone conversation, I,  as general
manager of HALEY'S FOODS a food processing  facility  located in
Washington County, Hillsboro, Oregon,  am very concerned with
the potential cost to not only our company  but  other industries
of the county and the nation.  In the  2% years  that  I  have
been general manager of HALEY'S FOODS,  I have seen our sewer
costs nearly double without an increase in  production  but
actually a reduction in cases produced.

We employ approximately 100 people on  a year round basis in this
manufacturing facility.   I am sure you  are  aware that  the food
business is a very competitive industry.  We are a relatively
small concern and are finding it more and more  difficult to
maintain our competitive position against many  of  the  larger
corporations.  Any further charges with the impact that is
mentioned in the rules and regulations  of the Federal  Register
of September 27, 1978 would have a tremendous economic impact
upon our company.

I would please ask you,  Mr.  Krahmer, if  you could  represent our
company namely, HALEY'S  FOODS,  and pass  our message  on at the
public hearing in Seattle,  October 25,  1978.  I would  further
compliment your agency on your ability  to handle the enormous
amount of growth that our area is currently experiencing.

 Mr. Gary F. Krahmer
Page 2
October 19, 1978
 Again,  I would  like  to  thank you for Informing me of this
 important  public meeting; and I feel quite pleased we have a
 professional  representing our company's views.  I would appre-
 ciate hearing your comments pertaining to this meeting, so I
 will call  sometime after the meeting.
  R.  Gern  Nagler

  Division of  C.H.B.  Foods,  Inc.


                          PUBLIC  WORKS  -  UTILITY SERVICES
                            SEWER UTILITY DIVISION
      October 24,  1978
      Mr. Donald P. Dubois
      Regional Administrator
      U.S. Environmental Protection Agency
      Region X
      1200 Sixth Avenue
      Seattle, Washington   98101

      Subject:  Industrial  Cost Recovery -  Position Statement

      Dear Mr. Dubois:

      'This statement  represents the position of  the City of Tacoma regarding
      the Federal  Industrial  Cost  Recovery  Program mandated by the Federal
      Water Pollution Control Act.  It  is our understanding that this public
      meeting is being held to obtain public comments which will be the basis
      for t\ decision  on  implementation  or non-implementation of the Industrial
      Cose Recovery portion of the Federal  Water Pollution Control Act.

      As a member  agency in the Association of Metropolitan Sewerage Agencies,
      we participated in the  drafting of a  resolution regarding Industrial
      Cost Recovery at the  annual  AMSA  conference in Anaheim, California
      earlier this month.   Tacoma  fully supports that resolution by the Asso-
      ciation of Metropolitan Sewerage  Agencies.  The resolution reads as
           •"The Association of Metropolitan Sewerage Agencies supports the
           elimination of ICR provisions from the Federal Water Pollution
           Control Act (PL  92-500) and  the  Clean Water Act of 1977 (PL 95-217).
           Until  the  ICR refluirements of the law are eliminated, AMSA urges
           EPA  to  develop regulations for the program that are consistent
           with the spirit  and "intent of Congress' recent amendments to
           PL 92-500.~ '                  C

      ' We have enclosed for  your use the-'complete AMSA position paper from which
      this resolution was developed.

      ''Tacoma  has  currently  suspended  all further work on an Industrial Cost
      Recovery  study  and program development and will hold further such work
      in abeyance  until  this  issue is resolved by EPA during the Congression-
      ally mandated moratorium period provided in PL 95-217.  This action is


Mr. Donald P. Dubois
October 24, 1978
Page 2
in conformance with Condition 4, Moratorium Reviews and Approvals, which
is contained in your February 3, 1978, Region X Interim Policy on User
Charges and Industrial Cost Recovery.  This particular paragraph provides
that grantees will not be required-to develop nor submit ICR systems
during the moratorium.

We thank you for the opportunity to submit this statement into the record,
and we trust that the testimony presented today will be utilized in
developing a reasonable and rational approach to the question of Industrial
Cost Recovery.

Utility Services


Enclosure:  AMSA Position Paper



    "The Association of Metropolitan Sewerage Agencies supports the elimination
of ICR provisions from the Federal Water Pollution Control Act (PL 92-500) and
the Clean Water Act of 1977 (PL 95-217).  Until the ICR requirements of the law
are eliminated, AMSA urges EPA to develop regulations for the program that are con-
sistent with the spirit and intent of Congress1 recent amendments to PL 92-500."


    1.  No practical benefits will be gained from making the program more
        complex, or from expanding the definition of ICR-eligible dis-
        chargers to include sewerage customers that are not normally con-
        sidered "industrial."

    2.  Major changes in the present regulations -- outside of those man-
        dated by Congress -- could be invalidated by the findings of the
        ICR study and subsequent actions of Congress and would, in the
        meantime, only delay fulfillment of final requirements as treatment
        agencies struggle with yet another series of regulatory revisions.

    3.  ICR requirements will work against the general objective of revita-
        lizing America's center cities, since the ICR program makes joining
        or staying in municipal systems more expensive than would otherwise
        be true.  As all industries are federal taxpayers, it is unfair to
        require them -- and only them -- to reimburse the federal government
        for 201 grant money spent on their behalf if other users are not
        asked to do the same.


    The Clean Water Act of 1977 revised ICR provisions in PL 92-500 to exempt
small dischargers from ICR payment and to allow calculation of ICR charges on
a  system-wide, rather than a project-by-project basis.  In the law, Congress
also ordered the Agency to undertake a study- of the feasibility of ICR systems
and the economic impact of ICR charges.  AMSA urges EPA to use these opportuni-
ties to revise existing ICR regulations so the program requirements that treat-
ment agencies must comply with are simpler, clearer, and more likely to foster
the smooth administration of the programs developed.

                                                            '''/».-„ _

                                 Chapter  173-255 WAC
173-255-010   Purpose and scope.
173-255-020   Effective date
173-255-030   Definitions
173-255-040   Limitation of programs eligible for funding under
             Referendum Bill No 26
173-255-050   Limitation on grant awards within the municioal
             grants program
173-255-060   Provision of guidelines
  WAC 173-255-010   Purpose and scope. The purpose
of this chapter is lu set forth ihc limitations on uses of
money* administered by the department or ecology pur-
suant to chapter 43 83A RCW (Referendum Bill No.
26)  The  limitations arc necessary  to insure that these
funds will be used to their optimum extent to protect the
resources and environment of the state of Washington
and the health and safety of its people by providing ade-
quate publicly owned  facilities and systems Tor the col-
lection, treatment and disposal of solid and liquid waste
materials [Statutory Authority  RCW 43.2IA.080. 78-
09-066 (Order  DE   78-12),  §   173-255-010. filed
8/24/78 ]
  WAC 173-255-020  Effective date. All projects,  or
phases of projects, which have not received a federal  or
state grant award for design, before the effective dale of
this chapter will be subject to provisions contained here-
in [Statulory Authority  RCW 43 21A 080. 78-09-066
(Order DE 78-12). §  173-255-020. filed  8/24/78.]
   WAC 173-255-030  Definitions.  For  the purpose of
this chapter.
   (I) "Department''  means the Washington slate  de-
partment ol ecology
   (2) "Agricultural  pollution  grants program"  means
the program of grants administered by the department
for the  planning, design  and  construction of publicly
owned or operated  agricultural  pollution  abatement
   (3) "Lake  restoration  grants prograinVmeans  the
program of state grants administered by thq department
for the planning, design and implementation of lake res-
toration projects.
   (4) "Marina pumpout  grants program"  means  the
program of state grants administered by the department
for the design  and construction of sewage pumpout fa-
cilities and dump stations at publicly owned or operated
   (5) "Municipal waslcwatcr treatment works construc-
tion  grants program" (hereinafter  referred, to  as  the
construction grants  program)  means the federal/state
matching program of grants under Tille I! of Public
Law 95-217 to municipal entities for the purpose of up-
grading their treatment works to meet the effluent re-
quirements of stale and federal law.
  (6) "Water supply residual  waste  treatment works
grants program"  means the program of state grants ad-
ministered by the department for the design and  con-
struction of pollution  abatement facilities for publicly
owned  or operated water supply  plants in existence on
February 3.  1976. that discharge residual wastes to the
waters of the state
  (7)  "Individual systems" means  privately owned
treatment works serving one or more principal residences
or small commercial establishments constructed prior to
and inhabited on or before December 27,  1977, to abate
an existing water pollution or public health problem.
  (8) "Industrial cost recovery  program" means the
program established under Title II section 204(b) of the
Federal Water  Pollution  Control Act  Amendments
(Public  Law 92-217)  to recover  the cost of municipal
treatment systems attributed to industrial users, when  a
municipal treatment system has been funded with feder-
al funds under Title II
  (9) Industrial user*
  (a) Any  nongovernmental  user of publicly owned
treatment  works which discharges more than twenty-
five  thousand gallons  per day of sanitary waste,  or  a
volume  of process waste or combined  process and  sani-
tary waste, equivalent to twenty-five  thousand gallons
per day of sanitary waste.
  (b) Any  nongovernmental  user of a publicly owned
treatment  works  which  discharges wastcwatcr to the
treatment works  which contains  toxic  pollutants or poi-
sonous solids, liquids, or gases in sufficient quantity ci-
ther singly or by interaction with  other wastes, to injure
or interfere with any sewage treatment process, consti-
tute a hazard to humans or animals, create a public nui-
sance, or create any hazard in or  have an adverse effect
on  the waters receiving  any  discharge from the treat-
ment works.
  (c) All commercial users of an  individual system con-
structed with grant assistance under section 201 (h) of
the Clean Water Act  of 1977 (P.L. 95-217).
  (10) "Innovative and alternative technology projects"
means  those projects  employing innovative and alterna-
tive  wastcwaler treatment  processes and techniques as
defined  by EPA guidelines in 40  CFR 35. Appendix E.
and which arc eligible for federal grants under 40  CFR
35.908  promulgated  on  April  25, 1978. or  hereafter
modified (Statutory Authority  RCW 43.21A 080. 78-
09-066 (Order  DE  78-12),  §  173-255-030.  filed
                                [Ch. 173-255 WAC—p I)

I7j-*,j;j'-0mi                       Limimlions un use 01 neicrcnaum 26 tunas

  WAC  173-255-040  Limitation of programs eligible
for  funding under Referendum Bill No. 26. (I) The fol-
lowing programs shall  be eligible Tor slate  matching
grants in an amount  not to exceed fifty percent of the
 otal eligible cost of a project as determined by the de-
partment' The marina pumpout grants program, the wa-
ter  supply plant residual waste  treatment  works grants
program, the lake restoration grants  program, and the
agricultural  pollution grants program. The department
may authorize a matching grant less  than fifty percent
of the total eligible COM of u project in I hose cases where
it would be  in  the  public interest,  or where .federal
matching  funds  are available and it would be  in the
public interest to secure a local matching portion.
  (1) The construction grants program  shall be eligible
for  slate matching  grants  in an amount  not  to exceed
fifteen percent of the total eligible cost of a project as
determined  by  the department  except us  provided in
WAC  173-255-050(1)  [Statutory Authority: RCW 43-
 21A 080. 78-09-066  (Order DE 78-12). §  173-255-
040. filed 8/24/78.)

  WAC  173-255-050   Limitation on  grant  awards
within the municipal  grants program.  (I) The state
matching grants for innovative and alternative technolo-
gy projects shall be limited to nine percent which is the
same portion of the nonfcderal  share as other types of
projects funded under the construction grants program.
  (2)  Expenditure of funds under  the  provisions of
chapter 43 83A  RCW is limited to public  bodies which
arc  defined in the statute to  mean any agency, political
 ubdmsion.  uxing district,  or  municipal  corporation
thereof, and those Indian tribes  now or  hereafter recog-
nized as  such  by the federal government for  participa-
tion in the federal land and water conservation program
and which  may  constitutionally  receive grants or loans
from the state of Washington. This provision and defini-
tion prohibits the expenditure of state funds for match-
ing  grants for. among others:
  (a) Individual systems; and
  (b)  That  portion of the construction of a municipal
treatment works attributable  to industrial  users.  Such
portion is to be  determined through (he Environmental
Protection  Agency's industrial cost  recovery  program.
[Statutory  Authority RCW 43 2IA.080. 78-09-066
(Order DE 78 12), §  173-255-050. filed 8/24/78.J

  WAC  173-255-060  Provision of guidelines. The dcr
partmcnt will  publish guidelines which  establish proce-
dures, under  each  of  the Referendum  26  grant
programs, for  the grant  application :md  award process.
[Statutory  Authority  RCW 432IA.080. 78^09-066
(Order DE 78 12). §  173-255-060. filed 8/24/78.)
|Ch. 173-255 WAC—p 2)                                                                                  (8/24/78)

                                                                    STEPHEN W BUCKLEY
                                                                   Supervising Sanitary Engineer
                                               SEWER COMMISSION
                                               ONE GOVERNMENT CENTER               TEL
                                               FALL RIVER. MASSACHUSETTS          617-675*011
                           FALL RIVER GOVERNMENT CENTER
                              MONDAY, AUGUST 21, 1978
                            LflfflTT  RMTINC  SfflVICt  INC.
   26 BROAD STREET                      c      ^                                AREA CODE 6.7
WEYMOUTH. MASS.  O2I88                  Ottnoltfpe ±KepO\ttng                             333-6791


    MONDAY, AUGUST 21, 1978

          MR. GEORGE DARMODYs  If I can have

your attention, ray name is George Darmody.  Z

have the honor this afternoon of introducing

Congresswoman Heckler to this group who are

all interested in the elimination of the cost

recovery clause in the Clean Water Act.  Z

might say that Z represent the Zndustrial

Commission, and within our office Congress-

woman Heckler is indeed an asset for not only.

her District, but the country in economic


          Our purpose here today is to allow

the Fall River Industrialists the opportunity

to present their cases to EPA officials and

how the cost recovery portion of the Clean

Hater Act will affect them.  Cost recovery

payments in this city amount to approximately

$134,000 annually to be shared by many busi-

nesses, w.lth the major portion being paid by

eight manufacturing firms, most of whom are

represented here.  These eight companies

employ 1,810 people which breaks down to a

           coat of approximately  $75 per  parson.   I  point

           this out to show that  we not only  are  talking

           EPA, but economics.  It would  simply cost the

           Federal Government far leas dollars to  eliminate

           the cost recovery clause of the legislation than

           to suffer tax loss and subsidized  unemployment

           which potentially could result by  the  imposing

           of the cost recovery clause upon industry.

           Therefore, the Industrial Commission respectively

           requests that the cost recovery portion of the

c-r>         Clean Water Act of 1977 be eliminated.

                     Prior to turning the program over to

           Congresswoman Heckler,  I might point out that

           the Congresswoman has led the fight for Pall

           River manufacturers and manufacturers within

           her district to get a moratorium for a study of

           this cost recovery clause,  has been instrumental

           in contacting the proper people to give our

           industry an opportunity to present their case

           to the proper federal officials.   I think she

           deserves a round of applause for  the work she

           has done.

                     The Honorable Congresswoman Margaret M.



          CONGRESSWOMAN HECKLER:  Thank you

very muchr, George, and for your help on behalf

of industrial development in Fall River.  It's

been invaluable.

          I would like to say this is a business

session.  I am not going to take the time to

make a speech.  However, there are a few remarks

that I think are in order.  First of all, I would

like to thank all of the-Industrialists and the

Chamber of Commerce and their leadership here.

Z an very sorry the Mayor is detained elsewhere

in a very beautiful place, but he is well

represented by his staff and by his assistant,

Mr. Zenni.  At the same time I am grateful that

the EPA is here, and the consulting firm engaged

in this important work is present.

          One of the recurring problems we have

in the Congress is the fact that we are often

asked to enunciate policy, and we find that

the regulatory agencies contradict the intent

of Congress.  When we return to our constituencies.

           we learn that the policies aa we have devised

           them have boon interpreted with a little

           different flavor and, in fact, an unacceptable

           twist on the local level.  It has occurred so

           often that today Z felt it was very important

           to be present so that this particular study

           which was originated as a result of an amend-

           ment' that Z proposed to the Congress and

           struggled hard to achieve and which was passed

           in the Congress will not be misunderstood by

C_r3         the regulatory agency involved.

                     Z do know that there is a sense of

           cooperation here among the Zndustrialists, and

           for all present Z would like to recite very

           briefly the chronology of what brought us to

           this point and why we see this as a major problem

           in the city.

                     Let me just say that in terms of the

           issue, the issue came to me on December 16,

           1976, when Z met with many of the people in

           this room*; former Zndustrialists, to discuss

           the implementation of the cost recovery imposed

           by PL 94-500.  The Federal Water Amendment of

1972, Section 204B1, states that the EPA

Administrator shall not approve any grants or

treatment works unless payment is provided to

applicant, by the industrial user for that

portion of the federal construction.  Seventy-

five percent would be allocable to treatment

of such industrial waste.

          On March 24, 1977, after the meeting

with the local Industrialists who explained to

me the dire straits that they would face in

this City which has faced economic distress for

some time and is fighting its way around the

corner to a renaissance economically, the

prospect of having heavy charges imposed on

local Industrialists which would force them to

leave the City would raise such a serious

problem in my mind and for the people of the

City and for the City itself that I then asked

for this special study.

          This was proposed in the Congress,

and on March 24, 1977 the House Public Works

Committee reported out the bill containing my

amendment which imposed an 18 month delay on

collection of payment by industrial users for

their portion of the 75 percent share of costs

of construction of waste water treatment

facilities.  Now, it's this mandated study that

we are embarking upon at this moment.

          On April 5, 1977, the House passed

the Water Pollution Control Act Amendments of

1977'with the Heckler Amendments intact.

August 4, 1977, the Senate passed the bill

exempting from cost recovery industrial dis-

charges with flow rates not exceeding 2500

gallons per day.  The Senate version of the

bill which was considered a compromise has no

effect on Fall River, since we are here talking

about dyeing and finishing industries using

heavy amounts of water.  So, the Senate's

answer was not an answer for this City.

          Zn the fall of 1977 the Extended

Conference Committee deliberated on the Z.C.R.

approach.  This amendment became one of the

chief controversies in the bill, and after

extensive lobbying the House Proposal did pass,

and the House Proposal mandated that the

assessment of the economic impact in these

older cities particularly where the level of

distress could be exceedingly high would have

to be made, and this would include industry

such as the textile industry.

          December 27, 1977, the President

signed into law the Clean Water Act Amendment

of 1977 with the Heckler Amendment intact.

          Now we are here today implementing

the laws, and we're now starting the study.

I would say if the textile industry and the

dyeing and finishing industry were to be

excluded from serious consideration, Z would

not have embarked on this long struggle to have

some economic impact study.  So that I would

feel that it's a Congressional intent, as Z

fought for it in the Congress as the chief

sponsorer of this legislation, to have this

industry taken into account with its particular

problems in the northeastern section of the

United States.  And, this is what has brought

us here today, and tomorrow we will be in

Taunton and, gentlemen, Z will be with you again,

                      How,  so  that we start out on the right

            track,  this  is  our track and we will be follow-

            ing  this  study  and we want the emphasis,  the

            kind of evidence that you're going to get from

            the  Industrialists here today, to be taken very

            seriously by EPA because that is what this

            amendment is all about.  We ask for your  serious

            consideration of the  economic and human problems

            of this City and the  problems of the business.

            survival  in  the City,  a City that has seen many

c~°          businesses go southward and find brighter

            horizons,  leaving  unemployment that the City

            can  hardly absorb.  These businessmen want to

            stay.   They  need some  help.  We have to find a

            way  to  find  a compromise between ecology  and

            the  economy,  and I  support both.

                      That  is  the  end of my remarks.   What

            I would like to do  is  to proceed with having

            each person  around  the table introduce them-


                      Ralph, would you like to say something?

                      MR. RALPH GUERRIEROs   Thank you very

            much, CongresBwoman Heckler.

          Thank you everyone for attending


          My name is Ralph Guerriero, and Z am

Co-chairman of the Fall River Textile Processors

Waste Water Treatment Committee.  Our group

came together in a common causes survival.  We

are truly an endangered species, the textile

finishers,  while we do not represent everyone

in this room, Lou D'Araico and Z co-chaired this

committee, there are other people here, labor

leaders and government people and other indus-

tries in the City that this industrial cost

recovery will affect.

          Political leaders today need more

help than ever before.  Some of them know it,

as Congreaswoman Heckler said a minute ago, and

others need to be persuaded.  Most of them are

faced with enormously complicated problems way

beyond anything for which they were prepared by

prior experience.  Our group has pledged to

help them.

          The reason we are here today is to do

away with industrial cost recovery, if possible.

It ia important.  Everyone in this room ia in

favor of clean water.  We join with other

citizena in Fall River in the need to preserve

our natural resources for future generations.

          Our group was instrumental in this

City creating a Sewer Commission which made it

more comfortable for the City Council to approve

the original bond issue which got the project

started in the first place.  The textile

processors will be faced with 57 percent of the

total annual charge for the waste water treat-

ment facility.  For an industry that works on

low margins and is faced with competition in

the south and our new competition from imports,

we are disadvantage*, to be sure.

          Hill Z.C.R. be the last straw to break

our backs?  If the existing industries are

burdened with the cost of constructing waste

water treatment facilities, some of us will

literally go down the drain.

          We are in favor of a user charger

according to the amount and relative harmfulness

of. the discharges.  This will be our incentive

           to reduce pollutions recycling,  changes  in  our

           processes,  shifting to less polluting materials

           as well as  development of more efficient pollu-

           tion removal technology.  We are asking  that

           I.C.R.'s portion of the law be eliminated,  that

           ad valorem  taxes be used to cover the industrial

           users' share of the cost of the  treatment plant.

                     Zf the law cannot be changed,  we  do

           not intend  to  stop here.  We intend  to go to

           Washington, if necessary, to ask that Fall  River

CL-i"5         be exempted from the law.  EPA has made  such

           exemptions. We will not stop here.

                     I will be back later to speak  about my

£=         cdmpany. Swan  Finishing Company.  Z  will turn
±1^         the meeting over now to Mr. Pat  Harrington  who

           represents  United Merchants, then I  will be back

           to speak about Swan.

                     CONGRESSWOMAN HECKLERs  May Z  suggest

           that we go  around the  table and  have each one

           introduce themselves so we will  all  know who is

           talking and then proceed with Pat Harrington?

                     Mr.  Brian James, Massachusetts

           Dlvison of  Water Pollution Control.

          Martin Zenni, the Special Assistant

to the Mayor.

          Dan Began, City Council Chairman and

Acting Mayor.

          Bill Torpey, President of Pall River

Area Chamber of Commerce.

          Richard Levesque, Assistant Manager

of United Merchants and Manufacturera.

          Pat Harrington, Counsel for United


          Paul Horvitz, Counsel to Sterling Pile


          Leonard Ansin, President of Sterling

Pile Fabrics.

          Jim Lenehan, National Representative

of United Textile Workers.

          Tony Cabral, President of the Local.

          Fred Canuel, Plant Manager.

          Frank Stetkiewic2, representing Bristol

Finishing Company*

          Irwin Shaw, General Counsel of

Providence Pile Fabrics.

          Lionel Corriveau, Providence Pile

           Corporation, Engineering Department.
                     Leonard Ansin, Sterling Pile Fabrics.
                     Louis D'Amico, Duro Finishing.
                     Ralph Guerriero, Swan Finishing
                     John Friar, Sewer Commission, Fall
                     CONGRESSWOMAN HECKLER«  And Private
           Consultant  to Margaret Heckler.  John advised
           me on many  stages of our legislation.
                     Ed Donahue, Coopers & Lybrand.
r rp
^                   Paul Flax, Coopers* Lybrand.
                     Steve Buckley, Supervising Sanitary
           Engineer, Pall River Sewer Commission.
                     John Noel, Cost Recovery  Specialist
           for  EPA  Region Onej Technical Advisory  Committee
           on National Stady.
                     Dennis  Orvis, Chamber  of  Commerce.
                     Ken Dufault,  Amalgamated  Clothing and
           Textile  Workers,  Textile  Division General
                     John  Sullivan,  Providence Journal.
                      Bob  Luttman,  Plant Manager,  Frito-Lay.

          Russell Borden, Frito-Lay.

          Jack Robertshaw, President of United

Labor Council and Massachusetts State Building

Trades, Vice President of Fall River Building


          Edward Hyles, Jackson Company,


          Roland Mercier, Engineering Manager,

Aluminum Processing.

          Edward Schultz, Plant Engineer,

Aluminum Processing Corp.

          Edward Capuano, President of Capri


          Bob Capuano, Capri Textiles.

          CONGRESSWOMAN HECKLERI  Pat, we can

get  started.

          MR. PAT HARRINGTONt  I think it

should be primarily an industrial type input.

          MR. RALPH GOERRIEROt  We  are here

today  to give input to the Coopers & Lybrand

study  on how  it  affects  our industry.  Well, X

can  speak for Swan Finishing Company.  I have

a  statement I will read.  I will give you a

copy of my statement on how it affects Swan

Finishing Conpany.

          The title of ny little talk is

Endangered Species.

          Swan Finishing Company was formed in

1958 by Mr. Ralph Guerriero, Sr., who cane fron

New York.  Re La still a major stockholder.

The company's primary purpose was to serve the

textile industry by performing dyeing and

finishing on various fabrics, Halloween costumes,

drapes and home furnishings.  Swan was originally

located in Swansea, Massachusetts, a suburb of

Fall River, until 1973.

          Prior to 1973 Swan was discharging

its affluent into the Lees River which empties

into the Taunton River Basin.  Under mandate

by EPA to stop polluting the Lees River, the

company decided to relocate to Fall River,

where after neutralization its affluent would

be handled by the City's sewerage treatment


          The company was without debt in  1972

and employed approximately 180 persons.  There

were no fedoral programs to help us relocate,

so we financed our new building at a high

intereot rate fron a local bank.  Our debt

exceeded $2.5 Million by the end of 1973.  The

stockholders had pledged everything to help

the company stay alive.  It would be necessary

to increase production 40 percent in order to

meet the company's obligations in a new

facility.  We see our whole building as a

pollution device.

          Then came the Arab Oil Embargo and

economic recession which we are all familiar

with.  We sustained large losses in the follow-

ing two years, and it was necessary to again

refinance.  We also had to make investments in

other processes such as textile printing to

diversify ourselves to be able to survive.

Our debt increased to $4 Million.  Our interest

expenses were staggering.

          Has Swan paid its share to help

clean water?  You bet it has.  Today, the waters

in the Lees River run clear and clean.  Shell-

fish are bountiful, and the species of fish

            that  has  not been  seen  for nany  yeara  has

            returned.  Wo have paid our  ohare,  but it  did

            not coat  Fall River  the joba that  Swan provided.

            We could  have gone south  like other companies

            have  done* but we  felt  an obligation to the

            area  and  to our  employees who had  been with us

            for many  years.  Today  we employ 250 people,

            mostly male, in  a  City  that  provides mostly

            jobs  for  females.  They are  low  skilled and

            hard  working.  Some  cannot even  speak English.

            Where will these people find jobs?  Ours are

,—          not  low paying jobs  either.
Fj-.                   Our average wage is over $5.00 an

;—          hour  and  going up.  Many  of  our  employees drive
 i -~
            late  model cars  and  own homes and pay taxes in

            the  City. Our annual payroll is over $3 Million,

            We also spend  $2 Million  for supplies and

            services  in  the  Fall River area.  This amount,

            I believe, turns over at  least five times in

            this area and  adds $25  Million to  the economy

            of Fall River.

                      You may  ask at  this point what is the

            problem,  why are you complaining.  Swan has

overcome all its problens so far, why not one

more?  For Swan the cost of I.C.R. is approxi-

mately $40,000.  This is not a lot of money

until yovrconsider what our profit was, about

80,000.  Our financial statements have been

made available to Coopers & Lybrand, and they

speak for themselves.  The $40,000 does not

include the tax rate effects of the City's

share of the proposed waste water treatment

facility or the operations and maintenance

costs associated with industrial employees'

domestic waste water generated while at work.

I am sure the Union will be happy to hear Z

will not allow my employees to go to the bath-

room.  What will all that cost?  No one knows.

          The textile dyeing and finishing in-

dustry is in trouble.  If you don't believe me,

then ask the 350 employees who lost their jobs

when Newport Finishing closed in 1977 or the

150 employees who lost their jobs when Midland

Print closed, or maybe teven ask the employees

of Swan Finishing Company who didn't get a wage

increase last year in last year's union negotia-

            tions.   If you're still  not convinced,  then

            call Mr. Robert Donovan  from the Department of

            Environmental Quality Engineering in Lakeville.

            Ask him why he has had to be so patient with

            Swan in regard to their  air pollution problems.

                      Through the efforts of Congresswoman

            Heckler and Kenney Dufault Swan was able to

            secure  a direct loan from S&A for approximately

            $100,000 at low interest to purchase air

            pollution equipment.  This equipment is being

c-°          installed and will be operational soon.

                      We are trying  to be a good neighbor

            and live with other people and citizens in the

            City.   Will the Z.C.R. be the last straw to

            break our backs?  We believe we cannot  afford

            to  pay  I.C.R.,  and it should be eliminated.

                      We are also in favor of Senate Bill

            2710 that would change the present law  to allow

            the use of ad valorem taxes for industry's


                      Even if Z.C.R.  is eliminated, there

            is  no guarantee that we  will survive.  There

            are many new storms on the horizon.   We are

           fighting imports.  What will  the effect of

           deregulation of gas mean  to us?   Will  the taxes

           in this City go up or  down?   Z  leave you with

           that question.  Thank  you.

                     CONGRESSWOMAN HECKLERt  You  know  Z

           can give an answer to  that question, Ralph.

           Very good statement.

                     What would you  like?   Would  you like

           to ask questions  as you go along?  Z think,  to

           get the right information, you would like to

           hear front all these witnesses because  each  has

           his own specifics.

                     MR. PAT HARRZNGTONt May Z say,

"~*~         Congresswoman, that we have spent some time and

^=         effort trying to  prepare  for  the record the

           basic background  data  which hopefully  you will

           find useful later on in Washington.  Z think

           maybe we should get the people on the  record,

           maybe not as extensively  as Ralph, but at least

           let's find out what it is we  are dealing with

           so that later on  when  we  have that record we

           can point to it.  Zt may  be 2 inches thick,  but

           at- least we can point  to  it.

                     CONGRESSWOMAN HECKLZRi  All  right.

                     MR. GOERRIEROi  Let's proceed with

           the formal presentation, and we will make  the

           whole transcript available to you.

                     MR. NOEL:  Could I quickly say some-

           thing?  As you know, previously C & L  was  in

           Fall River at an introductory meeting  to this

           follow-up meeting, I guess, as it turns out.

           In addition to the field work that was done at

           that time I understand they have made  available

c-°         to Mr. Buckley copies of industrial user survey

           forms which are nost constructive for  our  pur-

           poses in terms of gathering hard, factual  data

           to plug into our study.  So, certainly, today

           we are glad to hear your presentation.  I  would

           like to alert you to the form.  The form will

           probably be made available to you to provide

           some additional data that is useful to C & L

           for the specific approach that they're taking.

           I just wanted to alert you that the form was

           available or was going to be made available,

           so hopefully we could get some more information,

                     MR. riARRIHGTO!7:  I think maybe,  for

the record, it might be worthwhile to point out

that one of our problems with the prior meeting

was the fact that the copies of the contract

between Coopers & Lybrand and the Environmental

Agency were not available, nor were the 24

questions that had been raised, and X think

very legitimately raised, by Congress available

at the time.  So we had to sort of put those

things together, so that the prior meetingcould

hardly be called a meeting where we had some

sort of informed understanding of what we were

talking about.  So that I think that we now have

disseminated this information and copies sub-

sequently.  I  think all of the industries are

in a better position to present their cases.

We still would like to reserve the right to

present in depth the economic impact because

filling out the answers to the questions that

raised —  It  was your contract, your contract

with Coopers &  Lybrand, right?

          MR.  NOBLs  I am with EPA.

          MR.  HARRINGTONi  In any event, the

EPA and Coopers & Lybrand have indicated  in a

            five-page or  six-page  study  here — nine-page

            study what they want,  you  know,  to discuss,

            what  they want to  develop.   That was not avail-

            able  to  uff until two weeks ago.   Whatever it

            was we mimeographed here in  Ralph's office

            because  we didn't  have that  nor  did we have  the

            questions which the Congress had raised in

            connection with this whole bill  that apparently

            brought  the Coopers 6  Lybrand effort with EPA

            into  effect.   So that  Z think that we would

c~°          like  to  reserve at this point,  if it is permis-

            sible, the right to submit detailed factual

            data  based upon your contract in answer to the

            contract between EPA and Coopers & Lybrand.

            Is that  acceptable to  you?

                      MR.  NOELs  Most  certainly.  The intent

            of the survey forms of which I  spoke is to try

            to codify the scope of the contract in a kind

            of form  that  C & L can use to try to make a

            national assessment, but certainly anything

            that  you can  submit to us  that  is going to

            further  our understanding  of your situation  is

            going to be most constructive to us.

                     MR.  HARRINGTON:   I think that Ralph

           has really,  you know,  keyed this thing off

           very well, but Z would submit that the first

           question raised by Congress and whoever did this,

           and Z assume somebody  on the staff does it for

           the most part, but it's really very, very


                     First, whether the industrial cost

           recovery program discriminates against parti-

           cular industries or industrial plants in

c-°         different locations;  and,  do small town busi-

           nesses pay more than  their urban counterparts?

           What is the combined  impact on such industries

           of a usage charge and  Z.C.R. requirements?

           Whoever wrote that first question went to the

           heart, it seems to me, of the whole problem.

                     Z think that basically what we have

           asked, we have disseminated this to all of the

           people here in the room, and Z think that what

           we ought to really do  now is to have them

           briefly discuss how the answer to that question

           affects their own industry, having in mind

           where they're located, what their charges are

here and how they relate to national organiza-

tions and all the rest.


you seen a^ copy of their survey?

          MR. BUCKLEYi  Re couldn't have.  I

received this questionnaire last week.  I was

on vacation, and I didn't know about it until

this morning.  So by tomorrow or Wednesday all

industry representatives should have a copy of


          CONGRESSWOMAN HECKLER:  And it can

be amended, if they have further information.

          MR. HARRINGTON:  I think with that,

if it's all right with you, I think we should

run through that scenario.  I wanted this to be

primarily an industry type approach.  They have

spent a lot of time and effort.  I don't want

this to be a legalese type operation.


point of this is to have the industry speak,

and that is what we need, that data and that


          MR. HARRINGTON:  Ultimately the

request Z would like to make with respect to

information we need coming from this conference,

which X think would be provided either through

your office or through the Freedom of Informa-

tion Act, but, in any event, Z think we need

some follow-up things from Coopers & Lybrand

and the EPA.  Z think Z can sum that up when we

get all through.

          CONGRESSWOMAN HECKLERI  All right.

          Lou, do you have a statement.

          MR. LOO D'AMICOt  Z would like to

address myself to that first question because

Z think that is the most important question


          Zf we can go back to the 1950*s, the

south in their efforts to attract the textile

industry, which they did very successfully,

in most of the small towns and many of the

large cities in the south adequate sewerage

plants were built.  Some of these were built,

Z would say, if they were built in the late

sixties and early seventies, probably were

financed somewhat with government money.   The

south has a user charge, but there is no

industrial cost recovery.

          We now cone to the Fall River area,

an old urban area that certainly was behind

the times.  They had a diminishing tax base

and a host of problems, did not bother with

updating their sewerage plants.  It's now been

mandated that they do upgrade their sewerage

plants.  You're now going to add, as the

previous speaker said, 57 percent of this

industrial cost recovery which would be assessed

to the textile industry.

          The major question that management

is going to ask, why should we stay here when

transportation charges are higher in the north,

energy charges are higher, workman's compensa-

tion, taxes, payroll taxes, property taxes.

So now it becomes another cost that really

cannot be absorbed.

          The thing that worries me with Z.C.R.

is that if any of these major plants, textile

plants should leave, number one, you have now

a facility larger than it should be.  That means

user costs, maintenance costs are going to have

to increase.  Secondly, you erode the tax base.

Then you have a problem how do you attract

industry to cone in when you tell then, if

you're a water user, hey, buddy, we've got an

industrial cost recovery clause that you're

going to have to absorb.

          Our plants employ — our group of

plants are made up of three plants in Fall Rivers

Duro Finishing, Duro Textile Printers and Pyro

Finishing — over 700 people.  Our payroll is

about $9 Million.  Big number.  We pay out

group insurance of approximately $700,000 a year,

over a quarter of a million dollars in pensions,

plus at least a hundred thousand in health and

welfare.  Zf you knock out those 700 people,

what in heaven's name are you going to do with

them?  Then it seems that Z.C.R. is counter-

productive.  Then the United States Government

will probably step in and say why are these

people out of jobs, was it foreign import, and

they will now receive some money per year.  But

that isn't adequate.

          What do you do at the end of the

year?  What do you do with the hospitals that

will have to absorb these people when they come

in for services?  What do you do with some of

these workers that are depending on a

supplementary pension in addition to Social

Security?  No nore money will be going into the

pension fund.  This is the main concern.

          We are really at our wit's end in

New England.  If you're going to survive as a

textile plant in Mew England, you must work

twice as hard as the other guy because not only

do you have domestic competition from the south

where everything is lower, but you have foreign

imports.  Our government has a free trade

policy or a policy that is based on voluntary

quotas.  If you continue along this line, to

add costs, you're going to cause the death of

textiles in New England.  I think that is going

to be tragic.

          That is basically my statement on one.

I reserve the right at a later time to give you

more information.

                     !7c<.r will  this  affect our suppliers?

           Uo  looked at our  costs the other day.   There

           is  over  $4 Million  a  year  paid out to  local

           people,  people who  supply  us  with paper tubes,

           electrical contractors,  people v/ho supply us

           with all sorts of supplies that we need to run

           our plant.  That  will cause a secondary problem

           of  layoffs in other parts  of  the City,  something

           that this City cannot afford.  It seems to- me

           that somewhere there  should be some wisdom by

c-r3         the government that there  should be a  circuit-

           breaker  for urban cities that do have  problems,

           that Z.C.R. should  be waived.  It just does not

           make sense that you would  have the same formula

           apply  to all areas.

                     We have led the  nation in unemploy-

           ment.  We have led  it in industry moving out.

           We  have  got every problem  imaginable.   Just

           look out the window and  see.  You can see the

           problems.  And to cause  a  further flight of

           people who want to  stay  here, sincerely want

           to  stay  in this area, just doesn't make sense.

                     CONGRESSV7OMAN  RKCKLERi  Mr.  D'Amico

                                        J f.
was so pcrouaoive, he nada this same speech to

me.  That I think was more of a reason that Z

continued all of this.  You really summarised

the problem.

          Zs there another Industrialist who

would like to speak?

          MR. RICHARD LEVESQUEt  (United

Merchants and Manufacturers)  As a little bit of

background. United Merchants as of June 30th

pulled out of Chapter XZ bankruptcy.  That

leaves us running our own company again, but

in a good need of a lot of cash and capital.

United Merchants at the moment has been cut in

half in terms of its total size.  It's a multi-

national company, and cash requirements are in

the six figures plus.  Any drain of cash on a

nonproductive basis at the moment would threaten

the existence of the Fall River complex to the

point where United Merchants would not hesitate

to pull out of Fall River.

          Up until a year ago just prior to the

bankruptcy United Merchants employed a thousand

people in this area.  We closed down one operation

in the last I?, conths. Midland Print, and our

current cnpioyncnt is 836 people.  That con-

tributes over $8 Million in terras of wages

and salaries earned by people in this area.

          Profitability in the textile indus-

try as everyone knows is in the one and two

percent area.  How, you tack on an estimated

$60,000 for us based on the 73 proposal, and

considering we have increased productivity

about a third since then, you've got to consider

80,000 in expenses between I.C.R. and O ft M

charges.  Take that off of profitability and

you don't have a good reason to stay here.

          The effect on Fall River is interest-

ing.  You know, there is a considerable amount

of money which our company puts into this City.

In terms of property taxes we put in $150,000

alone, just property taxes.  Like Z said,

wages earned are $8 Million.  That generates

in terms of state and federal taxes well over

a million dollars.  And, on an average basis

in terms of Fall River property tax, well over

70 percent of our people live in the area.

we're talking about another, let me see,

$800 to $900,000 in terns of City taxes. City

property taxes, which are collected.  You know,

that is not even to mention the other effects

of the waste treatment, not that we*re opposed

to waste treatment, but this is all adding to

the burden of expenses.

          We will probably have to install

pre-treatment.  Pre-treatment for us may go

anywhere from a quarter of a million dollars

up to two-and-a-half million dollars.  There is

no way at the moment that the company would

spend two-and-a-half million dollars on waste

treatment in this City.  It*s not that we want

to leave, but we can't afford to stay under

those conditions.  And, as Mr. Harrington said,

we do feel that this I.C.R. charge is discriraina-


          We reserve the right to submit addi-

tional information.

          CONGRESSWOMAN RECKLERt  Any other

Industrialists who would like to speak?

          MR. LEONARD ANSHit   (Sterling Pile

Fabrics)  Uo have a statement that we put in.

We have a statement front Sterling Pile that we

would file with the record.

          I prepared a few brief remarks in

here.  I don't want to be redundant on what

has already been said.  Z think the case has

been very, very well established already.

          Let me just go through this letter

and, if Z read too quickly, slow me down.

          Sterling Pile Fabrics Corporation is

a Pall River based textile dyeing and finishing

company involved primarily with the manufacture

of dyed finished corduroy fabrics.  Within the

confines of our wet processing operation we

employ the use of water combined with various

dye stuffs and chemicals.  These mixture solu-

tions are controlled by our staff of employees

in such a manner that the resulting effect on

a processed corduroy fabric is a desirable one

in the eyes of our customer.  Once we have

completed our use of a particular wet solution

of dye stuffs and chemicals the remaining

solution is discharged.  For 30 years — Z say

again 30 years -- we have been operating in

such a nanner here in Fall River with a reason-

able degree of continuing success.

          Zn recent years we all have had to

react to forces somewhat beyond our immediate

control, and these forces have had a significant

undesirable impact on our daily lives.  Rising

inflation and skyrocketing energy costs,

unaffordable nodical expenses and insurance

coverage premiums that lend a new dimension to

the stretching of the imagination are a few

such forces that are zapping our morale ^and

resources, be they physical, financial or other-


          Our 30-year-old company employing

200 Fall River area residents is having to

fight the war aqainst all of these undesirable

forces, and at the same time it's necessary

for us to cultivate the marketplace, encourage

growth and expand at home.  As a result of our

involvement to date with the Z.C.R. program

development based on our present volume of

affluent and its nature we interpret the

financial impact on our company to be approxi-

mately $18,000 par year with a user charge

ranging anywhere from 35,000 per year to

$50,000 par year.  This means our company can

potentially expect to spend somewhere in the

vicinity of $60,000 per year to help make our

area water clean, and this is providing we do

nothing to increase our present volume of

affluent  or alter its nature in such a way

that it would have a negative financial impact.

          Our market distribution is worldwide,

and in the same respect so is our competition.

We are certain that if our product manufacturing

cost is increased as adversely as these potential

I.C.R. and user charge figures suggest, the

results to a company such as ours will be a

lesser competitive selling price, lower sales

volume, fewer jobs and eventually an overall

undesirable economic scene for our area citizens.

          We feel that it is absolutely necessary

that our area citizens be totally knowledgeable

of what can happen, if the burden on clean water

here in Fall River and the surrounding areas is

           not distributed on a fair and equitable basis,

           each one shouldering its fair share.

                     MR. HARRINGTONS  Will you submit that

           as part of the record?

                     MR. ANSIK:  Yes.

                     CONGRESSWOMAN HECKLERi  Are there fur-

           ther statements for the record?

                     MR. GUERRZERO*  Your Union representa-

           tive is here.

                     Is Eddio Cabot still here?

c~°                   Eddie Cabot, would you like to say

           something here because we seem to be taking

           the textile people first and then there are

           others.  Would you like to say something?

                     MR. EDWARD CABOTz  (Textile Processors)

           We are a new company that sprang out of the

           ashes left from the fire at Newport Finishing.

           Z was involved with Newport Finishing.  I know

           first-hand the effect of having non-productive

           costs laid upon a company.  The I.C.R., as Z

           see it, is a very unfair system of extracting

           payment from the people in this area and older

           areas particularly.  Zn my business especially

           today we see our costs rise almost by the

           month, but this is a cost that won't go away

           and that we can't pass on because our competi-

           tion doesn't have this cost, people outside of

           this area, people who have relocated in the

           south or people who live in an area that had

           the foresight or the affluence to build this

           type of facility before 1972.

                     There is only so far you can go as a

           straw in the wind.  Someday even the straws

           stop bending, and they break.  I think Congress-
           woman Heckler and you, sir, from the Environmental

           Protection Agency and anyone who has something

           to say should speak out for the people here who

           are being discriminated againat.  We are new and

           we are struggling.  We certainly don't have some

           of the problems that are built into some of the

           older businesses, but with this cost and any

           other costs that come along, if we are in a

           position that — I will speak for my own company.

           I knov; it's true for the most part of Duro and

           true of Swan and most of the other textile

           processors.  Our competition doesn't come from

a guy in Taunton who might be faced with the

same problems.  It cones from imports.  It

comes from people who are in a more advantageous

location who don't have the costs and don't

have to worry about passing it on.  If we have

an erosion of profits, obviously we won't be

able to run a business.

          CONGRESSWOMAN HECKLERi  It is a fact

of geography that our region of the country was

settled earlier.  That is part of our colonial

heritage.  Because of the age of the City we

are dealing with older plants, older systems,

and we have not been able to build from scratch,

          PROM THE FLOORi  May I say something?

Everybody is talking about the companies, but

we've got to keep in mind the people, too,

because they will be out of a job and where are

they going to go?  I mean,  I don't think it's

fair.  I don't think it's fair at all.  That

is all I have to say.

          CONGRESSWOMAN HECKLERi   You are with

the Textile Workers Union?

          PROM THE FLOOR:  Yes.

          CONGRESSWOMAN HECKLERi  If you have a

written statement that you would like to have

put into the record, you may submit it.

         -FROM THE FLOOR*  No.

          MR. HARRINGTON:  May we reserve the

right to submit one later on?

          MR. EDWARD MYLES:  (Jackson Company)

May Z say something?  I am one of those companies

that is supported by these other companies like

Ralph and Lou D'Amico have been talking about*

i manufacture paper tubes* and I believe that

most all of the factories that are here I

represent as their supplier.  If they go, my

business goes with it.  Though we are a small

company, there could be 30 to 50 jobs that will

leave this area, if these businesses go down

the drain, as Ralph says.  I am sure that all

the supporting industries will feel this amount

of impact and that the total loss of jobs will

be double what the industries themselves use.

Thank you.

          MR. ROLAND MERCIERi   (Aluminum

Processing Corp.)  We are not textile labor at

all.  We are a (3 i via ion of Lite-o-lear,

New Jersey.  We have to eonpote with satellite

divisions in Mew Jersey, Illinois, California.

This area- has already been pointed out as

having the highest utility rate.  We feel we

would have qualified under the secondary metal

products group which was one of the groups to

be considered.  However, the decision has been

made to cancel out on a complete electroplating

line which had been established in this area

because of the water waste, what have you.

          CONGRESSWOMAN HECKLER*  You cancelled

out a whole expanse in the area?

          MR. MERCIERt  Yes.  There would have

been at least ten jobs to start and probably

tripling very rapidly.  The other problem is

our expertise is in the fact that we are con-

sidered the best in what we do in Lite-o-lear.

This is why we employ roughly 550 people.  We

do it better than our other divisions.  We do

it better because we hire technical people.

Technical people cost money.  If the decision

were made to have X.C.R. the cutbacks more than

likely would have to come from these technical

people.  Cutbacks in the technical people would

result in us not possibly being as competitive

as our other divisions, and as a result of that

X am sure Fall River could lose jobs in that

area also.  Z do have a statement which I will

submit later.

          MR. NOELi  Could Z ask a question?

You indicated that you deferred expanding your

operating line because of these proposed charges?

          MR. MERCZERs  Yes.  Zt makes us non-

competitive with some of our other divisions.

          CONGRESSUOMAN HECKLER:  Are there

further statements?  Mr. Stetkiewicz.

          MR. FRANK STETKIEWICZr  (Bristol

Finishing Co.)  Z operate a little plant called

Bristol Finishing Company.  We are a small

business.  There was a time when a fellow who

had a little knowledge and not too much money

could go into the textile business, he could

run a plant.  Zf he wanted water, he took it

out of the river.  This is dead.  As time went

on he grew, but was still small.  We only

employed 40 people, but this is a payroll of

$550,000.  When Z say 40 people, it's really

40 families.  Many of the advantages that they

have at the other plants we haven't been able

to afford.

          As time went on, we were hit with

the oil, practically went down.  We had to go

to the bank, mortgage all our property, and we

managed to survive.  We paid off most of our

problems.  We're starting to give the employees

some advantages, and now we're faced with maybe

$10,000.  Our profit at the end of the year

may be this $10,000.  We are not in good shape.

We can't very well afford this.  So, small busi-

nesses should be considered.

          That is all I have to say.  I have no


          CONGRESSWOMAN HECKLER:  Mr. Shaw had

something to say.

          MR. IRWIN SHAW i   (Providence Pile

Fabrics Corp.)  We are a major textile manufac-

turer in Pall River.  Although we do not do any

dyeing and  finishing in this area, we do it in

Woonsocket, Rhode Island with another company.

All of the comments which have been mentioned

here today apply to that operation, and we are

extremely., concerned and are looking at this

thing on a day-by-day basis.  However, to get

back to the Fall River area, since we do not

have this type of activity here, I will say

that our presence in this City has been very

nice and we have grown.  This is our world head-


          I can't say that at this moment Z have

some of the problems here that you other gentle-

men have.  However, Z would like to mention why

maybe we are here from another point of view.

As Z mentioned, the company has grown and we

hope to continue to grow.  In some of our growth

areas it does use water processing and finishing

techniques.  Zn view of what is happening here

and our observations of what is going on in

Woonsocket, it would not be in our best interest

to make any commitment of any type until this

matter were resolved.

          We currently are considering other

            locations in tho south.   By the way,  for those

            of  you who haven't been  exposed to this — Z

            have mentioned this before, and Z will say it

            again — bur company continues to get courted

            by  various utilities and local governments in

            the south who come up here, and they're offer-

            ing us a lot of good dice including much lower

            utility rates, and we certainly would not have

            the effect of this industrial  cost recovery.

            Zt's extremely tempting, and Z think  it cer-

c-°          tainly is in everybody's best  interest, not

            just from a where we are now point of view, to

            look forward to try and  get a  good handle on

^          this and realize that, if this type of legiala-

!z!zi          tion does get implemented,  what the effect is

            going to be on this area from  this time forward.

                      MR. NOELi  Could  Z answer the question

            not only of you, Mr. Shaw,  but of several other

            people who mentioned a regional inequity, if

            you would, between the north and south?

                      Z would like some information because

            there is a general concensus in the agency that

            everybody has to meet water quality standards

and that we did appropriate — not we. Congress

appropriated $18 Billion in 1972 to build waste

water treatment facilities, and most recently

has extended that to 24.5.  The original 18

billion was spent, and I know a lot of it was

spent in the northeast.  Any money that was

expended under that Z.C.R. program is subject

to industrial cost recovery.  What I am inter-

ested in, is there a particular locality in

the south that you think is where the textile •

industry will go?

          MR. LOU D'AMZCOs  Winston-Salem and

Sampson, North Carolina do not have Z.C.R.

          FROM THE FLOOR:  Raleigh, North


          MR. LOU D'AMXCOs  They have modern

plants, no user charges.  That is only two that

Z know of, but there are many.  Z think

Charlotte is another area that does not have

it.  Also, Z find the EPA uses a much softer

sponge in the south than they do in the north.

They're not as aggressive, and things do not

happen the way they do here.  Z think enforcement

of EPA in all areas is much nore rigid in

New England than it is in the south, and it

may be because we are so-  concentrated it's

easy for your?A people to be out in the field.

It doesn't take four hours to drive to another

city or two hours to drive to another city.

But you have a different approach.  The

approach here, it seems to me, is a penalizing

approach to industry.  It's not as cooperative.

          The south did not grow because it has

a better work force or better land.  In fact,

the first site I saw in the south I told the

Town Manager that we had better land that we

let cows graze on than they wanted to give us

for an industrial area.  Their key point is

that they welcome industry.  They're there

every day.  It's not a one time --  It's not a

fast honeymoon.  The honeymoon lasts a long,

long time in most of these southern communities.

They are aggressive.  I think if you look at

the record, a great deal of money, federal

money, went into the south in the fifties and

sixties.  It was poured into that area.  It

just didn't happen.  It was poured into that

area.  Now wo*re being made to pay.  This

City has had every imaginable problem tossed

at it and-has now been thrown a new curve.

You're saying now, fellows, come up with the

money for Z.C.R.  I don't think it's going to

work.  I think you're going to build a mon-

strosity of a plant that is going to be much

larger than you can use.  That is why I say

it's counterproductive.  We're not thinking

ahead.  What is going to be the end result?

          We have people who will have to live

not only in '78, but in 1990 who must have jobs

to support themselves and their children.  You

just can't put everyone on the state, city and

federal payroll.  Industry is your best vehicle

for keeping people happy, keeping them employed.

It's not government.  The government can help,

but the government cannot provide the jobs.

You're talking about a small amount.

          You know, when I look at themoney that

is going to be thrown out, if these people

become unemployed, it's going to be ridiculous.

There is no bottom lino.

          MR. NOEL:  I think clearly that  ia

the concern that has been stated  in the mandate

of the legislation.  That is why  we are here.

          CONGRESSWOMAN HECKLER:  Exactly,

because the record is pretty clear.

          There must be other statements.  The

Union people that are here wish to speak,  but

I would like the companies to at  least present


          Mr. Began, if you would like to  speak


          MR. DAN BOGAHs  I'm wearing three

hatsi  the Acting Mayor, the President of  the

City Council and also involved In the business community.

It's unusual in Fall River for a  businessman to

be avowed in politics because it  seems to  be

the evil word, but what you're witnessing  really

is a commitment from the business community to

get themselves involved in government until a

solution can be arrived at.

          Business has been criticized.  There

was a statement which said Fall River was  behind

the tiroes.  That is true, but we all bear a

part of that responsibility because we, all

the business people, neglected the political


          You mention the south.  The south

got involved in politics and said that is how

it's going to be done.  They're no smarter, no

more aggressive.  We have a plant in the south.

The same thing is involved there.  They're after

you.  They cone after you.  They put on a good

PR approach.  They become involved in the

community.  What has happened here is we're

paying for it now because we didn't become

involved.  This sewerage treatment plant would

have gone through unless people did become

involved.  This involvement, Z believe, is a

new dimension in towns like Pall River, Lowell,

this part of the area.  But I think the main

thing is the fact that the business community

realizes they have  to work with the political

community and work  together for a common goal

or common cause and by treating all equal.

          The way it stands now it would seem

that the government is saying that the textile

related industry ia being discriminated against,

That is what it is.  He are being discriminated

against here.  Z think we have admitted to our-

selves that the business community — Z am

speaking now as part of the business community •

has neglected the political community.  Now we

are going to pay for it, now wo are going to

change it, we are going to be more involved.

          Z think the City of Fall River as far

as on a political basis has had problems from

1920 on.  That is when it first started.  We

are trying to survive and let it grow.  Our

industry is growing.  The more growth we put

into it down there, in a few short years this

could hamper us.

          That is a three-way speech.

          COHGRESSWOMAN HECKLERs  Are there

other Industrialists?  The Chamber of Commerce.

          MR. WILLIAM TORPBTt  (Chamber of

Commerce)  Z really feel and Z appreciate what

Dan Bogan has just stated here.  Zn fact, he

probably stole exactly what Z wanted to say.

           but I might be able to emphasize  it.

                     The business and professional groups

           or individuals and/or organizations we now have

           in the Chamber of Commerce is almost  1000.  We

           have reached a pinnacle of success, in spite of

           the tremendous problems of business today, all

           the way from energy costs, payroll costs, all

           that you have heard here today.   The  support of

           the business community here in this City is

           unbelievable.  It's tremendous and it's still-

ed         growing.

                     What Dan has just said  is there has

           been a major or there has not been an  input by

           the business community into the political

           arena.  This is where the decision-making powers

           come.  But to see this kind of a  meeting and

           this kind of force which has not  previously

           occurred, to my knowledge, to have the kind of

           one industry, textile industry group, represented

           as you are today and the satellite industries

           such as Ed. Myles represents hero  at a table to

           tell the political arena in the name of Congress-

           woman Margaret Heckler and the regulatory

            agencies,  the  EPA,  and  study  group,  the

            consulting group. Coopers  & Lybrand,  the

            message has got  to  get  across of  the  tremendous

            damage" that all  of  these people had  added  up

            together.   In  my own  sheets I have added up

            two  figures.   That  is the  number  of  jobs and

            the  amount of  annual  payroll. Unbelievable.

            If it  occurs,  I  think we might as well close

            shop.   That is not  going to happen.   We are not

            going  to let that happen.

c-°                    As far as speaking  for  the  Chamber  of

            Commerce,  the  Chamber only reflects what we

            have here,  what  the business  people  think.  If

            you  don't  support your  Chamber, you don't

            support your City.  That is my personal belief.

                      By numbers, by grouping ourselves

            together,  it's just what others have  said: that

            it's the north versus the  south.  In  the south

            there  is a unanimity  of thought and action.

            They get together.  They do things together.

            We are going to  change  that.  We  have changed

            that.   That is why  we are  sitting here today.

            We hope you qot  the message.

          CONGRESSWOMAN HECKLER:  Ralph, do you

have other speakers?

          MR. GUERRIEROs  We would like to hear

from Kenny  Dufault.

          MR. KENNETH DUFAOLT:   (General Manager,

Amalgamated Clothing and Textile Workers,

Textile Division)  I am in a very unique position

today as a person from labor.  I am in total

agreement with everything that has been said by

management.  I know first-hand how we got here

more than most people in the room.  I was

formerly employed on the staff of Congress-

woman Heckler when the first team came in from

Georgia which wasn't even considering the

economic impact.  Through her personal effort

we have arrived at where we are today.

          Z won't go over all the problems that

you gentlemen have brought up.  Z totally agree

with all of them.  Z would just like to add,

if we lose, oh, one major or a couple of our

medium-sized plants, all the rest will go because

of the fact they're all sharing costs.  There

are all various kinds of commodities that they're

buying from the local area.  X view as the

biggest problem a complete, total insensitive

approach fron EPA, from state and federal.

Outside of this meeting, which Z am very happy

to be at, I haven't seen any evidence that

they're trying to understand the problem.

They finally came to the source, and Z am very

grateful that they have now.  Maybe now we can

get down to the base of the problem.

          Z only view this as step one.  Zf

you're able to knock out Z.C.R., it's still

only going to leave you status quo on many of

the companies here.  The Union has done their

part.  We forewent raises at Swan Finishing.

Labor is playing its part which it has to.

The old phase of the two sides of the table is

gone, if we have any intelligence.  Zf we

don't get any help beyond the Z.C.R. from the

EPA, c-ean air is important, but eating is

more important.  Zf you don't eat, what is the

difference if the water is clean or not.  You

could close off Fall River and make it a

national monument.  You're never going to fill

the jobs again.  You're never going to re-employ

the people, you Know, so it's time to really

sit down and knock it out because you're right

on the verge.

          Z know personally three or four

different plants here.  I won't mention their

names.  One in particular was contemplating a

very large expansion, and right now this is

not only the reason, but- it's a major reason —

it's not one that has been mentioned, so I won't

reveal the confidence.  They simply don't want

to.  Z know of also a couple of others of the

associates that I deal with that are looking in

the states right now that are being relocated.

I don't blame them.  They're not getting any

concentrated effort or any show of sensitivity

to their problems from EPA.  So, Z am very glad

that today is a definite step in the right

direction, but they have got to go even far

beyond what we are trying to accomplish here


          That is all Z have to say.

          MR, GUHRRZEROs  Mr. Robertshaw..

          MR. JACK RODCRTSHAWi  (United Labor

Council, Mass. State Building Trades and

Fall River Building Trades)  Z want to say first

of all that we in the Labor Union here in

Fall River — I am in a very unique position,

Z can speak for the building trades and Building

Labor Council and also the State Labor Council —

wish to express our support for these Indus-

trialists, and we will go all the way with you

and support you all the way.

          We think the industrial cost recovery

is a burden that these people cannot tolerate

and cannot survive with.  We think it's unfair

to this area where we are forced to import

80 percent of our oil, where we are forced to

pay very high energy costs, where we are getting

killed by foreign imports.  These people have

got all they can do to stay in business.

          By staying in business they*re pro-

viding jobs for the people in this community.

They're keeping this community alive.  This

community was the largest textile producer in

the United States, in fact in the world.

several years ago.  What are we now?  Look out

the window, as someone oaid, and look at the

empty mills.  We need help in this community.

We don't need further burdens placed upon these

fair people who negotiate with their unions,

pay them a fair wage, who are competing with

the Japanese, the Indonesians, the Philippines,

Thailandera.  It will surely be the Belgian

Congo before we're through with low wages

coming up here knocking their pants off.  We

don't need the federal government here knocking

their pants off.

          We hear out of Washington and we hear

from President Carter that he wants to help the

older cities.  This is not helping them by plac-

ing this additional cost on these people who

are trying to survive.  You have heard every

one of them speak.  I didn't hear one of them

here saying they're rolling in dough.  I heard

every one of them say they are trying to survive

here.  They're a part of this community.  They

want to remain a part of this community.

          I would direct a question to EPA.

            It  concerns  the  environnent.   If  you  look  in

            Webster's  dictionary you will  aee that

            environment  means  the  surroundings in which we

            live.   The surroundings in which  we live is not

            only ecological, it's  not only clean  air,  it's

            not only clean water.  There is a social

            environment.  People employed  making  money,

            people  not having  to go to Parkersburg,

            West Virginia, or  Marguette, Michigan, like

            my  members have  to do  because  there is no

c-°          growth  here.  There is a social environment.

            When you lay people off and put them  on the

            streets, you're  crime  rate goes up.   That  is a

            proven  fact.  These are statistics.   We can

            have clean water,  but  we'll also  have crime

            because of the unemployment rising in our  City.

            Then what  is  the advantage of  clean water?

                      Row about the economic  environment?

            How about  people doing a simple thing like

            eating? Making  a  living?  Being  able to send

            their kids through college?  I come from a

            union with 50 percent  unemployment.   We're told

            the unemployment rate  in the City is  dropping.

Try to tell that to some of my members.  Try

to tell it to the people in the building trade.

We don't neod any bureaucratic hogwash.

          This cost recovery system is going

to be harmful to these people in the City.  We

in the labor realize what is harmful to them is

harmful to this City and is harmful to us.  So

I would like to respectively go on record as

saying that we, and X can speak for 90 percent

of the labor movement in this City, we are

unalterably opposed to the industrial cost

recovery.  We shall stand with these Indus-

trialists.  We shall be of every assistance we

can here in this City, in Boston and in Washing*


          We ask   to reserve the right to sub-

mit a written statement.  Thank you.

          CONGRESSMAN HECKLERt  Well, we have

heard from both sides of the aisle, labor and

management.  Do you have other Industrialists?

          MR. JAMES LENNOMt  (United Textile

Workers of America)  I concur with what my

brother from the labor movement just said here.

It's interacting to note that in our society

today we seen to concentrate on cures of every-

thing.  There is always a euro, but there

doesn't seen to be too much along the lines of

preventive action in terras of whatever, so they

make their evaluations of situations such as

this and the necessity for clean water and what-

ever else the environment proves necessary here

and throughout the country, but we don't very

often hear of any cold statistics or rather

projections as to what will happen, you know,

in terms of unemployment as we are all aware of


          It reminds me somewhat of a parallel

situation where up in Maine, Bruster  Forest,

which Z understand was donated somewhere along

the road to the State of Maine and wasto be

preserved in perpetuity so we would have some-

thing of the wildlife and so forth, and for

some reason or another we had a storm a couple

of years ago and it devastated the forest at

least to the point where many trees had been

falling, and it created a fire hazard in terms

of, if anything should happen  there,  how do  you

get into sort of fight this  fire,  and so forth.

So the environmentalists went  to court.  They

were upheld by the court.  The  fire occurred.

You know what happened to  Bruster Forest.

          The point I an bringing  out here,  we

are not opposed to our environment being managed

in a way that will be beneficial to us all, but

I think that we are overlooking many  times

concentrating on our objective, you know, and .

ignoring and making some real hard evaluations

of what the results might be.  Basically when

we're talking Pall River —  incidentally, I

come from Rhode Island.  It's very serious there,

the unemployment.  That is nothing to  be looking

forward to.  I am talking about unemployment

benefits of supplementary unemployment or this

training program and that training program.  X

am not opposed to these things, understand.

What I am saying, the key to our economy and our

society is people — without people we need

nothing because none of us need to be here and

nothing needs to exist without people.  People

are tho  key to our wholo society, the whole

civilization.  It would seem to me that probably

these people are pushing some of these things

here, and^it's been ray observation to some

degree that there is no logic in terms of —

again, I am not saying I am opposed to the

progress that we should endeavor to accomplish

for our environment, but if you look at it, you

don't see anybody coming up and saying what


          Out in the vest there was a steel mill

that was closed up because of the environment.

Now they're trying to get it going again.  It's

the same way here on the East Coast and all of

these things that we are involved in.  I think,

yes, we can do these things, but we have to be

practical.  We cannot go along and say this must

be done, let's try to prevent what the results

might be and give an evaluation and give

priorities to where they should be, particularly

here in New England, as we all agree here.  This

is very serious in many areas.

          In regard to my brother here from the

           Chamber of Commerce and  others  commenting  about

           the textile group being  here, everybody in this

           City here and  in the State  of Massachusetts and

           wherever is part of this thing  here  because

           it's a domino  effect.  You  know what happens

           when people get unemployed.  It just goes  down

           the line.  So  I think that  we should back  up and

           support the people here  in  the  City  of  Fall River,

           all of them, no matter what business they're in

           because we're  all in the same boat.

                     MR.  JACK ROBBRTSHAWs   Can  I just make
f '->
           an additional remark?
                     We are in favor of building  that

            sewerage treatment because we  are  in favor of

            clean water.  What we are opposed  to is asking

            these gentlemen to pick up the cost which they

            can't afford to pick up.  They can't afford

            that extra 40,000, this gentlemen  with 10,000

            and that gentleman with 8.  We don't think

            there is any need for it.  We  think there is

            plenty of money there without  ruining  the

            economy of this City to accomplish it.  We

            believe it can be done in other ways.

                      COIIGRESSWOMAN  HECKLER I   Further

            comments?   John  Friar.   Re  was  one of the

            original experts,  and I  think is  a most eligible

            person  speaking  for both the industry and govern*

            ment  here.

                      HR.  JOHN FRIARi   (Sewer Commission

            Chairman)   As  has  been indicated,  we  have had

            comments from  what might be termed both sides of

            the table,  that  is labor and management.

            Perhaps, we should also  consider  government on

            the local  level  as being, perhaps,  in the middle

            of the  whole thing.  The Sewer  Commission is

Q-          squarely in the  middle of that.   There are a

            couple  of  specific points that  I  would like to

            have  taken  care  of at this  time,  if Z could.

                      One  of the problems that bothered me

            at the  last meeting was  the apparent  fact that

            neither the textile industry as an industry nor

            the City of Pall River as a city  would be

            formally included  in the  statistical  work that

            was done on this project.   That was an impres-

            sion  that  I had  as a result of that meeting.

            I would like to  find out once and  for all if

that, in fact, continues to be the case.

          MR. NOELi  Two issues.  First of all,

the reason we had the meeting previously was

because Fall River was one of the cities that

was being statistically studied.  Zf we were

not going to study you statistically, we wouldn't

even have been here.

          MR. FRZARs  Well, I thought there was,

as a matter of fact, supposed to be sort of

narrative type of input.

          MR. PAUL FLAXi  (Coopers « Lybrand)

Z spent the morning with Steve.  We spent three

or four hours completing a survey form that we

are doing for a number of cities across the


          CONGRESSWOMAN HECKLERI  Fall River was

one of them?

          MR. FLAXl  Yes.


certainly hope so.  As the author of the amend-

ment that wanted the study, Z would be terribly

unhappy with EPA if this City were not number

one on the list and fully analyzed.

          MR. HARRINGTONi  If she*a unhappy,

you're going to be unhappy.

          COHGRESSWOMAN HECKLER:  You're going

to be very unhappy.  Heckler in Congress is not

to be minimized.

          MR. NOEL:  Which was why Fall River

was on the list.

          MR. DONAHUEi  He are gathering informa-

tion about industries in all of the three

hundred cities that we are visiting.  We were.

paying particular attention and doing a little

bit additional research in five industries

because our scope of work said that we would

pick out several industries that were particularly

impacted by industrial cost recovery.  The

criteria that we used to select these industries

was the total number of employees, the number of

establishments in the country, those kinds of

things, criteria that EPA approved.  When wo

took the industries that were considered as

potential, candidates, the textile industry was

not one of them.  However, because of the

interest that was shown by Congresswoman Heckler

and Congressman Studda and Senator Chaffey, we

went back and got EPA*a approval to expand that

from five industries for a specific kind of

study to six, and the sixth one was textiles.

          CONGRESSWOMAN HECKLERi  Let me just

say this shows you how far the agency strayed

from what the Congress intended because on the

House side I fought hard for this amendment,

and Senator Chaffey was extremely active in

fighting for the amendment.  This was the origin

of the whole idea, and Congressman Studds

supported this.  Now to have the FPA overlook

that central fact is just amazing to me.  It's

really almost shocking, but I am glad we recti-

fied it and I am glad we had the preliminary

meeting so we knew a secondary meeting was in

order.  We are glad you revised your setting of

priorities because I hope again this, too, will

go to the head of the list.

          MR. JOHN PRIARj  (Sewer Commission

Chairman)  I think it is important that it

be understood here that it has taken place.

The second point that I would make would be a

            suggestion as to the execution of that study.

            Z am not sure that this situation of two

            clearly separate geographical areas being in

            competition with each other for a particular

            industry is the same for almost any other type

            of industry that you would look at.  You might

            say that Boston and California would compete

            to some extent for the electronics trade, but

            I am not sure that that is really one of the

            industries that is going really to be nailed.

CL-°          I don't know.  Maybe the geographic separation

            is enough there so there is not that much in the

            way of  competition any more.   But I consider

            the textile industry in my mind as being some-

            what unique in that regard.   So I would  suggest

            that the study show the relative impact  within

            the textile business.   In other words, what

            would happen not just  to the  industry as a

            whole — maybe the industry as a whole will

            still have 200-or 300,000 jobs,  but will those

            jobs suffer displacement as  a  result of  this

            cost situation.

                      The final point that Z would make

           has to do with sort of a coat benefit ratio

           consideration of what is happening here.  Z

           have read some of the deliberations that the

           committee, undertook or at least a summary of

           the rationale they used in developing Public

           Law 92500 and particularly the method of

           addressing charges.  I can understand that

           rationale.  I think anybody who reads it would

           say that their thinking was reasonably clear.

           The problem is that it was not in any way all

c_n         encompassing for all situations.  It was

           necessarily general and limited to the extent

           of detail, I think.  So there is some justifica-

           tion to ask for this to be considered and with

           the specific problems of either the textile

           industry or, perhaps, even some cities in the

           northeast or even the problems of Fall River

           rather than the general questions raised during

           their deliberations, particularly with an idea

           what is the cost to benefit ratio.  If the

           federal government succeeds in recovering some

           of its capital by way of the I.C.R., will it on

           the other hand end up expending much larger sums

            of  money because  of  the  displacement or losses

            or  what have you  and will  it  also have done it

            or  what should it do to  protect its investment

            in  a  $45 Million  project.   It doesn't make a

            lot of  sense to have a 32  or  31 million gallon

            a day plant that  is  only going to be serving

            an  effective 23 or 24 million gallons a day

            because the other eight  or nine million gallons

            a day have moved  south or  someplace else.   So

            it  doesn't make a lot of "sense to build a  big

c~°          plant and not have a flow  to  make it work

            properly which might occur as a result of  an

            industrial slowdown.

                      MR. NOEL:   I think  Ed would like to

            address a few things.

                      MR. DONAHUE»   The degree of geographic

            competition we are addressing not only for

            textiles, but also for pulp,  paper.  You have

            New England versus the midwest.   So there  are

            two industries.  The cost  benefit side, we have

            hired Camp, Dresser  & McKee as subcontractors

            to  help develop some cost  equations and to

            look  at what is the  most cost effective way to

treat sewerage.  Will I.C.R. with pretreatment

regulations load industry to go to a elf  treat-


          MR. FRIARi  We worried about that


          MR. DONAHUEi  We are coning to that

problem, too, if you have got a plant with

excess capacity, then everything is going to

suffer because those people who are left are

going to pay higher sewer rates.  Yes.  We are

worried about that and, yes, those are things

we are looking at.

          MR. FRIARi  Is there some way the

City could, at least the governmental aspect of

it, be kept abreast of what is going on?

          MR. DONAHUE:  We have periodic public

meetings which include industrial people and

manufacturers, several trade associations,

environmental groups, league of cities, whatever.

Those meetings are public.  There are transcripts

available, and we will be glad to give transcripts

to anyone as to what  is going on.  We are also

going to have a series of ten regional meetings

in late September or October in Boston relating

to what we've found in this geographic part of

the country, offering those cities we did not

visit the.opportunity to see what we have and

to put additional statements in the record.  We

will have transcripts for all those meetings.

Those transcripts are going to be appendixed

to the report to Congress.  Then there will be

the draft reports which will be ready in aid-


          MR. FRIAR:  Can we put that on an

active basis rather than passive?  Could we

request this be forwarded to us actively rather

than have us —

          CONGRESSWOMAN HECKLER:  You mean the

draft reports?

          MR. PRIAR:  Yes.  With a draft there

is usually a period of review where comments

can be made.

          MR. DONAHUEi  We can certainly give

you copies.  There are deadlines set by Congress

which are very short.

          MR. FRIARt  We don't want to wait for


          MR. DONAHUES  You * re going to have

to respond very quickly.

          MR. GUERRIEROj  When is your draft

report due?

          MR. DONAHUE:  It is due out mid-

November.  We are supposed to have it done by

early December.  We are supposed to have meet-

ings on a regional level in October without any

recommendation.  Based on those regional meet-

ings plus the data we have gathered from the

300 cities, we will have a month to put together

a draft report, and then December is the dead-

line for the final report to Congress.

          MR. NOELi  Which brings me to a point

Z would like to make.

          CONGRESSWOMAN HECKLERt  Could we take

a brief recess for the stenographer first.

           (Brief recess.]

          CONGRESSWOMAN HECKLERt  Are we ready

to resume?

          MR. FRIAR:  There was one point I

would like to make  I mentioned it to a couple

of people that I had talked to.  That is, if

there is anyone who doesn't want to make a

formal presentation now either because they're

uncomfortable doing so or because of financial

disclosure or what have you/ I had guaranteed

to such people that you would be available

afterwards to hear whatever they might have to

say.  So, if you would stay around for a few

minutes afterwards to give someone an opportunity

to come up, if they want to.

          FROM TEE FLOORs  We will be advised

of the public hearing that will follow, so state-

ments can be added at that time?

          MR. BUCKLEY:  There will be a public

notice in the paper.

          MR. NOEL:  Just before we broke Ed

brought up the problem of time constraints that

both he and the agency are under by Congres-

sional Mandate.  That is, we have to report to

them by December of this year.  So that any

information that you can provide us either by

way of this survey form or supplemental types

of- correspondence is most important*  We have a

very short time frame in order to integrate it

into the whole flow of the project.

          MR. GUERRIERO:  Are they to send

this information in?  Does everyone know?

          MR. BUCKLEYs  Once I give them the

form, if they will return it to me, I will

make sure that Coopers & Lybrand receive

completed forms.

          MR. GUERRIEROt  Are you going to pass

those out?

          MR. BUCKLEYs  I will have copies

drawn up and make sure they're distributed.

          MR. GUERRIEROs  We have made our

presentation, and we would like to have

Mr. Pat Harrington sum up most of what we had.

          MR. BUCKLEYs  Would you like to say


          MR. DONAHUES  Z don't care when.  I

have a few feelings I would like to express

also when he is done.

          MR. PAT HARRINGTONS  (Attorney,

United Merchants)  I am an attorney.  I have a

law office in Fall River.  I represent United

            Merchant a,  but I think trhat I am going to say

            that I represent nost of the people around tho

            table hero  who got together the other day to

            sort of go  through and try to prepare for tho

            meeting here with the Congresswoman.  Z would

            like to say at the outset that having had some

            little knowledge about government,  I think that

            CongresBworaan Heckler should bo thanked profusely

            for  being on top of this particular issue, and

            I  personally know what it takes to  know all of

c-°          the  facts about a particular thing  where you have

            got  100 things in your office and the like.  I

            think you have done a great job here today.  Z

            think without her we would not be here today in

            this particular delicate political  natter.

                     One of the things that was of some

            interest since it was first introduced to us at

            a  meeting with Coopers & Lybrand the other day

            was  this scope of the work on this  Industrial

            Cost Recovery Study that Coopers 6  Lybrand is

            doing.   At  that time we  obtained from them a

            copy of this thing,  and  thanks to Ralph we got

            a  mizneographer,  so we have had a chance to

exanine it to some degree.  It's a nine page

contract, and it's a very interesting contract.

I think the first paragraph or the first sentence

is worth quoting.  "Primary objective of the

study is to examine with full public participa-

tion the efficiency of and need for the

industrial cost recovery provisions of the

Federal Waste Water Pollution Control Act."

Without going through the other nine pages of

things that you are supposed to change, Messrs.

Coopers & Lybrand, if you study those things in

the way they're set out here, we are convinced

that you're going to cone out with the conclusions

which have been expressed around this table today

because v/e think that the Congress and

particularly Congresswonan Heckler who raised

these various questions, which incidentally were

not available at the tine Coopers & Lybrand

originally cane in to talk to us, but wore sub-

sequently made available, if you address those

questions and you answer then fairly and honestly

with reference to the Fall River situation as has

been enumerated here today by people better

qualified to speak about this than I am, I

think you're going to cone out with a report

that indicates that obviously this particular

I.C.R. does discriminate against us, does

discriminate against Fall River, and I think

all of the subjective, all of the statistical

data that you need should be there and available,

In that connection, however, we have some

reservations.  We, at least I personally, have

had some experience with consulting firns, and

I realize they're doing a. big job and naybe

sor.etimes a broad brush treatment of a

particular subject which requires some inten-

sive on-the-scene examination.  Therefore, I

would like to request and get a public commit-

ment, if I can, that before this report gets

put into concrete forn that a draft report of

this thing will be made available to this group,

a draft report of what Coopers & Lybrand is

going to submit, so that we can make some

intelligent comments upon that ^raft report.

          We will make available to you the

record of this meeting, so that you will have.

since you haven't taken it down yourselves,

all of the input that has cone through this

meeting.  T7c would like to have a chance to

sit down with you and with the EPA before this

report gets sot in concrete because Z realize,

you know, the effect of these type reports on

the future action on this, and I don't want

the kind of report that says, well, we ran

through Fall River, you know, one Monday after-

noon, we listened to a lot of people, everything

was fine, and basically we give EPA what they

originally commissioned us to do.  We don't want


          We want to have what we have said to

you here today in the record, and we want to

have a chance to comment on that record before

it becomes a Coopers & Lybrand report to


          Can we get that sort of commitnent

out of you?

          MR. DONAHUE:  First of all, I would

like to take the transcript of this meeting and

include that as part of our final report to the

Congress because I think, if any significant

number of communities have spoken out as

forcibly as you all have about this issue,

it wouldn't be an issue.

          MR. HARRINGTONS  No problem with


          MR. DONAHUE:  Secondly, the drafts

of all our final reports will be available to

you, and we will be glad to meet with you.  I

cannot guarantee that the recommendations we

put in will bo to your liking.  I am not trying

to prejudice this, but we call shots as we see

them.  We will be certainly glad to sit down

with you with our draft report which should be

available by November 15th.

          MR. HARRINGTONS  That is fine.  We

have no problem with that.

          Who are you going to contact so we

will not have any problems with that?

          MR. DONAHUE:  Whoever you would like,

          MR. BUCKLEYS  I will.

          MR. DONAHUES  Fine.  We will contact

Steve Buckley.

                     MR. BUCKLEY:   I will  make  those

           copies of the report  available  to  all  of you.

                     MR. HARRINGTONi   I would like to

           offer this thought, too.  That  granted that

           you're going to  have  a  transcript  of this record,

           but  if there are other  matters  or  questions  that

           are  raised that  we haven't  been able to go  into

           in detail, given the  limitations of  time and the

           rest of  it, I would hope that Coopers  & Lybrand

           would feel obligated  somewhat to corae  back  and

c-°         ask  some other questions on the basis  of the
*_ *"»
           transcript that  has been presented here today

           of the various industries that  are represented

           and  also the other industries which  were going

           to file briefs with you  who  maybe are support

           industries of the industry  which we  are now

           talking  about, but I  would  hope that you would,

           instead  of leaving something up in the air,

           come back to us  and ask us  for  our thoughts  and

           opinions on that thing  before you  put  this

           thing in concrete and it goes back to  EPA and

           to the Congress.

                     MR. DONAHUEt   Yes, sir.

           MR.  HARRINGTON:   We would also like

 to  have available to  us  any meetings that you

 are going to have anyplace  in connection with

 this matter.   We  would like to know when they're

 going to be  hold  and  what the subject is going

 to  be.   We would  like to be on your mailing

 list on all  of those  particular matters.

           MR.  DONAHUE:  All of those are in

 public.   We  have  court reporters  for all  of

 them and transcripts  available for  anyone who

 wants them.

           MR.  HARRINGTON:   So  they  may be

 available.   If  somebody doesn't tell  us, we

 don't know.

           MR.  DONAHUE:  Our next public meeting

 is on the  31st  of August in Washington, D.C. at

 EPA  headquarters at 1:30 in the afternoon.

 That  is  a  progress report by Coopers  & Lybrand

 to the Advisory Committee made up of  the

 trade associations, the civic groups, the

 industrial groups and EPA.

          MR. HARRINGTONi  What will that

progress report be comprised of?

          Mil. DONAHUE:  To tell them what we

have done, what we have found, and we also

would like to give a discussion of the engineer-

ing and economic approach in looking at some of

the cluster industries.

          MR. HARRINGTON!  Will there be a

written report for that group at that tine?

          MR. DONARUEs  There will be documents

distributed, yes.

          MR. HARRINGTONi  Can we get a copy of

those documents prior to that time?

          MR. DONAHUEs  I am not sure how far

prior to the meeting it will be finished.  It's

not going to be finished until a couple of days


          MR. HARRINGTONS  We have some interest

in attending some of these meetings.  I don't

think you're going to get rid of us.  (Laughter.)

          MR. DONAHUES  We're certainly not.

We are encouraging public participation.

          MR. HARRINGTON:  Do you have a list

now of the various meetings?

          MR. DONAHUES  The dates for the ten

            regional  meetings will  be  in  late  September

            and  early October.

                      MR.  HARRINGTONS   You're  going  to go

            back to your advisory committee  in Washington --

                      MR.  GUERRIERO:   When is  the  one in


                      MR.  DONAHUES  We don't have  a  date


                      MR.  HARRIWGTONs   Let me  say  one thing.

            We have a very strong feeling that what  input.

            we give to you and  what comes out  of your shop
f '"«
;=          is going  to raake a  great deal of difference to

            this City and  to the industries  represented here

            today, and so  consequently, if ever there was a

            report or a consultant  type thing  which  requires

            some real expertise, this  is  it.  X think that

            we would  like  to be part of that process all

            along the way  because we think,  if we  are part

            of that process, we are going to coma  out of

            this with positive  conclusions.

                      MR.  DONAHUEs  We would like  you to  be

            part of that process.   That is why we  are here.

                      One  thing 1 would like to point out

as a caution is that as enthusiastic as

Congressworaan Heckler is about the issue,

industrial cost recovery, we are going to raako

a report to Congress through EPA --


enthusiastic about removing industrial

recovery cost.

          MR. DONAHUEt  I'm sorry.  I nean.

Congress as a whole may or may not act on any

of our recommendations.  She can speak very

vocally as far as removing industrial cost,

but it will be up to Congress to decide.

          MR. HARRI>TG7Ol«:  One other thing we

xrould like to address ourselves to is this.

There are two major issues.  Can we get rid

of the Industrial Cost Recovery?  Maybe that

la beyond the state of the political art.  If

we can't get rid of it overall, can we get

a formula which takes into account all of the

factors which have been plugged in around this

table so that those older, urban areas where

they have a significant problem because of

everything you have heard here, because of

            imports,  because of taxes,  because of energy,

            because of transportion problems,  because of

            energy problems, you name it,  whatever it is

            vre've got it,  can there be a formula cranked

            through in terras of a recommendation that says,

            look, it nay be great,  it's probably not going

            to impact some communities in  the  Midwest that

            is going to build a $10 Million sewerage treat-

            ment plant ten years from now,  it's not going to

            be a problem,  but for us right now you have a

            $50 Million plant.   As  John Friar  very eloquently
P=          addressed himself to that problem, we might wind
            up with two different things.   We might wind up,

j—          you know,  nunber one, with a totally unacceptable

*-!-;          thing as far as local industry is concerned and,

            secondly,  not any industry there to support the

            plant.   So you have  those  two  things going.

                      Can we ask your  agency to specifically

            address yourselves to alternatives or* exceptions,

            whatever words you want  to use,  and that is

            spelled out in your  contract right here.

                      MR. DONAHUE:   The recommendation that

            we are going to make can range anywhere from

doing nothing, leaving the law as it is presently

written, to outright abolition or, you know,

somewhere in between.

          MR. HARRINGTON:  My guess, speaking

contrary to some of the other people around this

table, knowing something about how the federal

government works, all-out abolition does not

happen on any sort of thing you're doing. So

the question comes down to the final analysis

can we make through what we are doing here a

persuasive case for being —  As  President Carter

has said, you know, he is in favor of helping

urban areas and so on — can we make a persua-

sive case for exempting places like Pall River

from the impact of that I.C.R.

          MR. DONAHUEt  That could be one of

the recommendations we make.  To  use a formula

that says unemployment is over a  certain level.

          MR. HARRINGTONi  Well,  will you commit

yourselves to your oxen deliberations going

through that thinking?

          MR. DONAHUE:  Yes, sir.  We have to.

We wouldn't be doing  a good job if we didn't.

                      MR.  HARRINGTON:   I  just wanted to have

            it  on the record  that  you  are going  to do that,

            whether  it's  an affirmative or negative state-

            ment  in  this  report  as to  whether or not we

            should be exempted or  one  way or  the other.  I

            would like to  see that in  the draft  report.  If

            we  haven't made a case and we have lost, okay.

            I want that said, but  I want  somewhere in that

            record a statement that you people have reviewed

            comments that  we  are making today.   I an speaking

c~°          on  behalf of  everybody, I  think,  in  this group,

            that  you reviewed those statements and that you

            have  either agreed with them  or don't agree

            with  them, but we should have affirmative state-

            ments so when  we  go  back to Mrs.  Heckler back

            there in Congress we can say,  okay,  we either

            did or didn't  make the case.   Then,  at least,

            we  know  there  won't  be a question whether you

            did or did not address the issue.

                      CONGRESSWOMAN HECKLER:   That issue

            seems to be settled.

                      MR.  DONAHUE:  There would  be no doubt

            we  would address  the issue in the report.

          l!n. GOERRIF1RO:  You said there was

public hearings.  Was there a notice in any of

the Pall Hivor papers?  If there are public

hearings, who is directed in your office to

notify people?

          MR. BUCKLEY!  It wasn't a public


          MR. NOELt  I think it needs explana-

tion.  We have two levels of study that we are

operating on here.  One at the local level where

we come out to Pall River or Woonsocket or

Taunton, Fitrhburg, r'emnleton, Massachusetts or

Portland, Maine.  I presume, although I am not

too sure, Steve,    you have a public notice to

inform interested parties prior to the meeting.

The meetings we are having in Washington, we

have an advisory group of people that are at

the Washington level, the American Frozen Food

Institute, the American Canned Food Association,

a whole list, if you would, of lobbyists at that

level including the environmentalists such as

the Sierra Club and Clean Water Action Project

and such things as the Association of

Metropolitan Sewer Works Agencies, some national

and county officials, associations, and that is

the public hearing  that Ed is alluding to that

is going to take place on August 31st and that

have taken place in the past.

          CONGRESSWOMAN HFCKLER:  So how can you

hope to get the true story from the people?

          MR. 110EL:  By coming here as we have


          COTIGRESSWOMAN HECKLER:  Have you had

any other meetings like this?

          MR. DONAHUE:  Yes.


          MR. DONAHUE:  All over.  There is

another meeting going on out in Stockton,

California.  Wherever there has been any inter-

est on the part of industry to sit down and

talk, we have net.

          MR. NOEL:  The other point, the

operation that is going on now ostensibly  is

a data gathering one.  Clearly, we are going to

listen to you as you speak to us, but the  real

point to discuss the issue is going to be  at the

            regional meetings.

                      CONGRBSSWOMAN HECKLERs   The law was

            passed a year  ago.   A year has gone by.   When

            did  you cone up with this  survey?  Two weeks


                      MR.  NOEL I   No.

                      MR.  OONAHUEt   EPA gave  a contract to

            us in mid-May.  It  took us six weeks to  try to

            gather information  which was the  basis for the

            scope of work  for the contract.   The beginning

c-°          of July we went out to  collect data, visiting


                      CONGRESSWOMAN HECKLERI   You can do it

            in six months?

                      MR.  DONAHUE:   What?

                      CONGRESSWOMAN HECKLERs   Your job.

                      MR.  DONAHUEz   Well,  we're a big

            company.   We think  we can  do it in six months.

                      MR.  NOELi   We have no choice.   By law

            it has to  be in Congress in December.

                      CONGRESSWOMAN HECKLERI   Like

            Mr.  Harrington said,  we are not going away.


          MR.. DONAHUEi   You know, we have an

interest.  This isn't a conflict of interest.

We have an interest in Fall River.  We are the

auditors-of the City of Fall River.  We have

an interest in seeing that the City survives

financially.  We would like to bo paid.

          COHGRESSWOMAN HECKLER:  Then you know

our facts are accurate.

          MR. DONAHUE:   We are heavily involved

in the private sector.   All of our business is

with the private sector, very little with

government.  It was an uphill battle to persuade

the EPA we weren't biased in favor of industry

as opposed to the environmentalists.  So we

are trying to be objective about it.  So we do

understand the business world because we are in

the business world.

          MR. HARRINGTON:  But you stand the

chance the EPA could submit a report which is

different from yours on the basis that it is

difforent'fron what the agency hires you to do.

          MR. DONAHUE:  We do not intend to let

EPA sanitize our recommendations.  We wouldn't

sit otill for that.

          MR. NOELs  If we did try to do it,

I know what would happen.  The report ia being

done for Congress, not for EPA.

          COMGRESSWOMAN HECKLER:  I will say

I have not heard of this advisory group, and

I want to know what is the membership on this

advisory group, was there anyone from this

sector of the economy included, can it be

expanded, because I am quite surprised to know

that that group exists.

          MR. DONAHUE:  It is a group of 35


          COHGRESSWOMATJ HECKLER:  I am just

worried about what the relative weight of

various individual interests would be on a

competitive  basis.  I am going to look at that

list very carefully.  I would just like to say

I  think we are all about finished.

          MR. KEN DDFAULTi  I take exception

to the faet  that I had to be notified by my

Congressman, which I appreciate very much, but

1  don't think it's your responsibility, and I

            got a call from one  of  the  industries.   I

            figure it's important enough for my people,

            if  you're doing a  study,  that you should at

            least communicate  with  the  people by whatever

            method to let us know what  is going on,  so I

            think we're starting off  on the wrong foot,

            number one.

                      number two, does  your study include

            looking into the requirements of EPA itself?

            I mean, we're talking everything after  the

c-r3          fact.   One of their  requirements is take dye

            out of water which is scientifically impossible.

            It  can't be done.  It's not a question  of want-

            ing to be done.  It  can't be done.   Someone

            front EPA in their  wisdom, whether it was a

            consultant firm, did an in-depth study,  I

            assume in a phone  book, and cited Duro  as one

            of  our more serious  polluters.   They're  monitor-

            ing on their property,  and  they haven't  violated

            anything yet,  which  leads to insurmountable

            problems,"'and they're not polluting.  I  took

            part with Mr.  D'Amico from  Duro with EPA, so

            we're assuming the gods have spoken.  You can't

take dye out of water.  How can this study be

effective If you're not even checking what

they're doing?

          MR. DOMAHUEs  We're not environmental-

ists.  We're businessmen.  The study asked us

to address the cost to industry and to local

governments to administer because of the cost

recovery.  We are asking people what they're

paying for pro-treatment and what you're liable

to pay for pre-treatraent.  We're making the

assumption that is one of the costs that has to

be factored in determining whether the cost

recovery is there.  We can't change pre-treatment


          CONGRESSWOMAN HECKLER:  That is not

within the purview of the study, unfortunately.

          MR. DUFADLT:  Well, it should be.

          MR. DONAHUEt  We're accountants, not


          MR. DENNIS ORVIS:  (Chamber-of

Commerce)  Three quick comments to back up what

Pat has said about the modifier because that

is probably where this Z.C.R. might end up.

One is that the majority of our larger companies

in Fall River are owned someplace else, and the

decisions on those companies will not be made

in Pall River.  We have many splendid plant

managers fighting very hard to keep the companies

going in Pall River, but the decisions aren't

being made here.  Industry makes its decisions

down the road four or five years.  This new

plant won't be on line for three or four years

or whatever the time is, so the decisions being

made today affect the companies that are in town

now, and we hope they will be here five years

from now.

          The second point is that I have been

in Pall River 19 years.  The lowest unemployment

rate Z have seen was 5.9 percent.  It's been as

high as 14.  We haven't been the highest in

Massachusetts, but we have been in that

distressed area for as long as my memory will

serve in Pall River.  At the same time, CETA

is spending over $7 Million a year in Pall River

training and finding jobs for people, so it's

been said before and it probably ought to be

repeated here that we're walking on thin ice

here in Pall River.  It nakos no sense for the

government to spend $15 Million finding people

jobs when we're talking about a small item to

keep the jobs here in the first place.  I think

these are all important to what we are trying

to do.

          MR. DONAHUEi  Someone mentioned plants

that were considering expansion or having

second thoughts about it because of this and

other factors.  That is particularly on this

industrial survey form one of the things we are

looking for.  If you read the legislative

history that goes with the act, unemployment

particularly in older cities with distressed

economies is something we are really looking

for, so somebody, please, come up with informa-

tion showing v/here somebody has decided not to

expand production or cut back on production.

We really would like to get it.  We cannot say

it's going to be confidential because one of

the disclaimers we have to put up front in

order to make this a convincing report, the

information supporting it has to be public.

We can't say to them this is the way it is and

then we can't give them any of the financial

data to back it up.  Z realize people may be

disclosing information they don't like to dis-

close.  They have to make that tradeoff.  Any

information we get we don't Intend to identify

specific companies in our report, not without

their approval anyway, but the general counsel

office from EPA has Informed us under the

Freedom of Information Act anything we collect

in this study, if sonebody asks for it, we can

give it to them the same way you're asking for

transcripts.  Anybody can ask for it.  So if

you have got the data and you don't want it

disclosed, then, please, don't give it to us.

          CONGRESSWOMAN HECKLERS  Hell, I think

we have covered —

          MR. BRIAN JAMES:  (Mass. Divison of

Water Pollution Control)  I have worked with

Mr. Swan... be fore.  I don't know if you remember

me when I used to be out taking samples in the

Lees River area.

          Industries are going to have to be
burdened with coots which have been, you know,
intimated here, not just on the I.C.R. system,
but enforcement of the sewer use ordinances.
These are very basic.  We have to protect the
collection system.  We have to protect the
treatment plant, the pumping stations.  Next in
line is going to be possibly even more stringent
pro-treatment standards.  There are a lot of
costs that these industries are going to have
to be bearing.
          As far as the Division is concerned,
the I.C.R. system is a cost which we consider
probably at this point in time very excessive
because a lot of the industries are going to be
hit in a relatively short period of time with
major expenditures.  We are more concerned with
getting the treatment plant on line, getting the
various industries to have compatible waste*
so that a $45 Million project down  there is
going to do what it is supposed to  do.  Other-
wise, we are just going to be blowing away that
$45 Million.

           I  feel that the  Division has attempted

over the past 10 years to  assist industry at

least to a certain degree.  We tried several

years ago  to have low interest loans for

industries,  and apparently it was ruled

unconstitutional.  Chapter 700 and 701, these

are where  incentives are given as far as defray-

ing taxation and write-offs of equipment

associated with pre-treatnent facilities.

The Commonwealth is very much concerned with

industry.  We are also very much concerned with

the large urban centers.  We are developing our

priority list.

          Right now we are basically taking the

federal money which has been assigned to the

Commonwealth of Massachusetts and allocating

it throughout the Commonwealth.   A very large

amount of this money has gone to the major

cities.  Fall River is one of two major

projects for relocation work as well as for

waste water treatment facilities. . I can

sympathize with you.  We have our job to do.

We are mainly concerned with getting the plant

built, trying to protect the environment and

something we can all live with.

          I feel that as far as where we are

going at this point in time, Z think Z would

take a hard look to see what the ramifications

are going to be.  We have had several major

treatment plants in Massachusetts where they

were designed for such loadings from industry,

and then all of a sudden the industry folded and

moved out of state.  Zt creates a lot of problems,

          Z think Z would also like to submit —

we will be submitting a formal statement for the


          CONGRESSWOMAN HECKLERs  Z do appreci-

ate that.  Z would like to say really for myself

we are going to have to take a very hard look

to see where we are going to place our priorities,

We do need a pure environment, as pure as it can

be compatibly with a growing economy.  Frankly

speaking, as one who has served, Z voted for

environmental bills in Congress and with great

interest and firm support.  I feel very strongly

that we squandered some of our best assets, but

I really have to say that ultimately on this

issue and on other issues at this point the

survival of the economy is my first priority.

This has to be made compatible with the

environment.  But, if people don't have jobs,

pure air and pure water are simply a luxury

they can't afford.  Frankly, I think that this

is going to be the priority that many members of

Congress feel, but certainly any of us from

Massachusetts will have to take a hard look at

where our people will be employed, what job

opportunities are open for them and how we can

preserve that while seeking environmental goals,

and we do have to seek the environmental goals.

          I am personally delighted the Indus-

trialists came today and the members of labor

and the labor representatives who spoke.  I am

grateful to the representatives from the state

EPA and our regional office.  He hasn't given

me his full title.

          Mr. Donahue,  I am delighted that you

are involved with the auditing of the City of

Pall River because you can verify the accuracy

of the comments made.

          I feel very strongly the purpose of

the amendment thai; I introduced was to force

EPA to take a hard look at the environmental

consequence of the X.C.R.  I have received an

education from    the people at this conference

table.  As the figures emerged and as my

enlightenment proceeded, I could see there was

a tremendous struggle for survival in the City,

and this was a major factor.  I am not inter-

ested in having a hearing for the Cityi I am

interested in finding a process of problem

solving.  I am a bottom lines person.  I want

to know how we are going to get from here to

there and how we are going to find an answer.

So, I guess we're going to look for certainly,

barring all-out success, the elimination of the

I.C.R.  Barring that, we will look for alterna-

tives and options.  The problems of the City and

the accuracy of the statements here we don't

need to enumerate on.  I do feel that there is

going to be a sincere effort on the part of

both EPA and the consultants and all of us to

            work together to resolve the problem.   As I

            see it,  the crux of  the matter is the  data

            gathering and the suggestions, solutions, the

            options  because this is a critical natter that

            is  critical for the  future of the City, and

            without  it we are not going to have a  tax base.

            Massachusetts will not have tax revenues.  We

            will not have the money which we would need to

            do  the good things that need to be done in

            society  including improving the quality of the

c-°          air. So,  I will continue to work with you, and

            I thank  all of you for your time today.


                      [Whereupon,  the meeting was