Cost Effectiveness Analysis of Effluent Limitations and Standards for the Pharmaceutical Industry Prepared for: U.S. Environmental Protection Agency Office of Analysis and Evaluation Washington, DC 20460 by Meta Systems Inc Cambridge, MA Under Contract No. 68-01-6162 November 1982 ------- Table of Contents Page No. Chapter I: Background Methodology on Cost Effectiveness 1 Chapter II: Cost Effectiveness of the Pharmaceutical Industry . . 4 Proposed BPT Regulation 4 Proposed PSES Regulation 5 Cost Effectiveness Comparison of Industry Effluent Regulations . . 6 Proposed BCT, BAT, and NSPS Regulations 6 ------- Chapter 1 Background Methodology on Cost Effectiveness Cost-effectiveness (CE) is defined as the incremental annualized cost of a pollution control option in an industry or industry subcategory per incremental pound equivalent of pollutant removed by that control option. CE offers a useful way of quantifying comparisons among alternative pollution control options. Cost effectiveness analyses account for differences in toxicity among the pollutants by computing toxic weighting factors. These factors are necessary because different pollutants have different potential effects on human and aquatic life. For example/ a pound of zinc in an effluent stream has a significantly different potential effect than a pound of PCBs. Toxic weighting factors for pollutants are derived using ambient water quality criteria and toxicity values. In the majority of cases/ toxic weighting factors are derived using chronic freshwater aquatic criteria. However, in cases where a human health criterion has also been established for the consumption of fish, then the sum of both the human and aquatic criteria are used in deriving toxic weighting factors. These factors are then standardized by relating them to a particular pollutant. Copper is selected as the standard pollutant for developing weighting factors since it is a toxic metal pollutant and is commonly detected and removed from industrial effluents. Some examples of the effects of different aquatic and human health criteria on weighting factors are shown in Table 1. Table 1. Weighting Factors Based on Copper Freshwater Chronic Criteria 1 Criteria Pollutant I (uq/1) Copper Hexvalent Chromium Nickel 100 Cadmium — Benzene . 400 I Criteria 1 (ug/1) 5.6 .29 96.00 .025 1 1 Weighting I 1 Calculation 1 5.6/5.6 S.6/.29 5.6/100 + 5.6/96 5.6/.025 . 5.6/400 , I Final 1 Weight 1.00 19.30 0.114 224.0 , 0.014 *Based on ingestion of 6.5 grams of fish products/day. As indicated in Table 1, 224 pounds of copper pose the same relative hazard in surface waters as one pound of cadmium since cadmium has a toxic weight 224 times as large as the toxic weight of copper. Benzene, on the ------- other hand, is less potentially toxic than copper, as 71 pounds (I/.014) of benzene would pose the same hazard as one pound of copper. The final weights are then used to calculated the "pound equivalent" unit: a standard measure of toxicity. Pound equivalents are calculated as the number of pounds of pollutant multiplied by the weighting factor. Thus, in CE analyses, the amount of pollutant removed by a control option is weighted by its relative toxicity. Cost-effectiveness is calculated as the ratio of incremental annual cost of an option to the incremental pound equivalents removed by the option. Indirect dischargers are treated differently from direct dischargers in the CE analyses since the POTW removal efficiency of a pollutant is re- flected in the incremental pounds removed to surface waters. For example, if a plant is discharging 100 pounds of cadmium in its effluent stream to a POTW and the POTW has a removal efficiency for cadmium of 38 percent, then the cadmium discharged to surface waters is only 62 pounds. If the regula- tion results in a reduction of cadmium in the effluent stream to 50 pounds, then the amount discharged to surface waters is calculated as 50 pounds multiplied by the POTW removal efficiency factor (1 - .38 = .62), i.e., 31 pounds (50 x 62 percent). Cost-effectiveness calculations reflect the fact that the reduction of pollutant discharge to surface waters is not 50 pounds (the change in the amount discharged to the POTW), but 31 pounds (the change in the amount actually discharged to surface waters) . The pollutants include in CE analyses are the regulated pollutants and selected non-regulated'ones. Non-regulated pollutants are included because they can be removed incidentally as a result of a particular treatment technology, even though they are not specifically limited. Some of the factors considered in selected non-regulated pollutants include toxicity, frequency of occurence, and amount of pollutant in the wastestream. Data sources for CE analyses include development documents from the Effluent Guidelines Division, economic impact analyses from the Off ice-of* Analysis and Evaluation, ambient water quality criteria documents from the Criteria and Standards Division, and POTW removal efficiency data from the Monitoring and Data Support Division. The data set for an industry specific CE analysis contains the following information for each subcategory within the industry: o Wastewater pollutants; o The pollution control options identified by EGD; o Annual volume of loadings by pollutant—currently, and at each BAT or PSES control level; o Toxic weighting factor for- each pollutant; -2- ------- POTW removal efficiencies (applicable to indirect dischargers only); and Annualized costs for each control option (where results are adjusted to 1981 dollars for all industries). Criteria for toxicity- values have been developed for all of the priority pollutants and were taken from data in the 1980 Ambient Water Quality Criteria Document (EPA-440/5-80 Series) . Criteria for a few of the non-conventional pollutants were taken from the Quality Criteria for Water, EPA-440/9-76-023, EPA 1976 (the Red Book). -3- ------- Chapter II Cost Effectiveness for the Pharmaceutical Industry The proposed regulations control the discharge of COO, BOD5, TSS, and the priority pollutant cyanide. The control of total toxic organic chemicals was also considered under the PSES regulation but was not proposed. Cost effectiveness analyses cover non-conventionals and priority pollutants only; thus/ for the pharmaceutical industry, the cost effectiveness analysis will focus on cyanide and total toxic volatile organics only. Proposed BPT Regulation The proposed revision in the BPT regulation requires direct dis- chargers to limit cyanide concentrations to 207 ug per liter of effluent (long-term average) . The estimation procedure used for this CE is as follows: 1) Find total number of pounds of priority pollutants (cyanide) removed from pharmaceutical effluent streams per year due to regulatory compliance (provided by EPA) ; 2) Convert the value for (1) to pounds-equivalent using the copper-based weighting factors (for cyanide: ''Pounds Equivalent = 1.6 x (1's value)); 3) Calculate the annualized costs of compliance using total capital costs, annual operation and maintenance costs, and a capital recovery factor: Annualized Costs = 0.22 (Capital Costs) + O&M. 4) Divide the annualized cost of compliance by pounds-equivalent of priority pollutants removed per year to get CE of proposed regulation. -4- ------- Table 2. Cost-Effectiveness of Effluent Regulations+ for Cyanide Removal from Direct Dischargers in the Pharmaceuticals Industry Ibs. equiv.l I total I I currently libs, equiv.l extimated I CE I CE Proposed discharged I removed lannualized I (1979$) I (1982$) Regulations annually I annually (cost (1979$)libs, equiv.lIbs. equiv. BPT 32,184 27,149 j 557,000 ( $20.52 ( $26.~64 Regulation standards set at 207 ug/liter for cyanide (long-term average). Note: Conversion factors for dollars: 1979 to 1980 = 1.127 (from technical contractor). 1980 to 1982 = 1.152 (from ENR Construction Cost Index). The proposed BPT regulation for cyanide requires the installation of treatment facilities at six Pharmaceuticals plants. Together these plants must spend an estimated $685,000* annually to comply with the regulation, including amortization of capital. An effect of this expenditure is the removal of 16,968 pounds of cyanide (or 27,149 pounds equivalent.of pollutant) each year from the wastestrearns of these plants. The unit removal cost of cyanide—or the cost effectiveness of the regulation—is $26.64* per pound equivalent of cyanide removed (see Table 2). Proposed PSES Regulation Two options were considered for the proposed PSES regulation. The proposed regulation requires indirect dischargers to limit cyanide concentrations to 207 ug per liter of effluent (long-term average). The other option considered, but not proposed, added a limitation on total toxic volatile organics to the cyanide limit. The CE estimation procedure for indirect dischargers is the same as that described for direct dischargers, with the addition of one step. The pounds-equivalent removed is multiplied by (1- POTW removal efficiency) to obtain the reduction in pollutants discharged to surface waters. *In 1982 dollars. -5- ------- It is estimated that nine plants will bear costs under the proposed regulation, for a total annualized treatment cost of $379,000*. Associated with this expenditure is an annual removal of 2828** pounds of cyanide (or 4525 pounds-equivalent). The unit cost of removal—or the cost effective- ness of the regulation—is $83.78 per pound-equivalent of cyanide removed (see Table 3). The removal of toxic organic chemicals, as required by the second PSES option, would impose additional costs on an estimated 47 plants. The footnote to Table 3 lists the pollutants involved. The incremental annualized cost for the removal of toxic organic chemicals is estimated at $5,453,000*, with an annual incremental pollutant removal of 179,303 pounds-equivalent. The incremental cost effectiveness of removing toxic organics would be $30.41 per pound-equivalent (see Table 3). Cost Effectiveness Comparison of Industrial Effluent Regulations The CEs of effluent regulations for a variety of industries have been calculated and are presented in the tables at the end of this report. The 1981 dollar values range from less than one dollar to $420.00 per pound equivalent of pollutant removed. Of the industries with CEs for PSES, there are only three industries with higher CEs than the pharmaceutical industry. Proposed BCT, BAT, and NSPS Regulations There is no incremental removal of non-conventionaj.. or priority pollutants under the proposed regulations listed above. Therefore, no cost effectiveness analysis was performed. *In 1982 dollars. ** The total amount of cyanide removed from the effluent of indirect dischargers is 5892 pounds. Allowing for the POTW removal efficiency results in a reduction in cyanide discharged to surface waters of 2828 pounds. -6- ------- Table 3. Cost-Effectiveness of Effluent Regulatory Options for Indirect Dischargers in the Pharmaceuticals Industry Ibs. equiv.l I total I I currently libs, equiv.l extimated I CE I CE discharged I removed*1 annualized I (1979$) I (1982$) annually I annually (cost (1979$)libs, equiv.lIbs. equiv, 6,539 ___ 4,525 179,303 1 292,000 4,200,000 1 1 $64.53 $23.42 1 $83._78 $30.41 Proposed Regulations PSES* PSES++ Note: Conversion factors for dollars: 1979 to 1980 = 1.127 (from technical contractor.) 1980 to 1982 = 1.152 (from ENR Construction Cost Index). ""Proposed regulation setting cyanide limit at 207 ug/liter (long-term average). Reflects POTW removal efficiency of 52 percent for cyanide. * From discharge to surface waters. ++ Incremental cost and removals of total toxic organic chemicals** over the cost of cyanide destruction. The CE numbers refer to this increment only. **Effluent of 47 plants before regulation = 19.7 million Ibs/yr. Effluent of 47 plants after regulation = 236,000 Ibs/yrs. Incremental removal of effluent to POTW =19.5 million Ibs/yrs. Specific pollutants included are: 19, Chemical Methylene Chloride 1,1,1 trichloroe thane Toluene Chlorobenzene Chloroform Ethylbenzene 1,2 Dichloroethane Benzene Methyl Chloride % of 500,000 Ibs. 59.3 23.2 8.9 4.2 1.8 1.2 0.9 0.3 0.3 1 - POTW X Removal X Efficiency .42 .13 .10 .33 .39 .16 .09 .29 .08 Toxic Weighting = Factor .03566 .0000054 .000013 .00037 .04017 .00170 .00258 .014 .03566 Pounds Equivalent 173,189 3 2 100 5,499 64 41 238 167 179,303 -7- ------- Industry Aluminum Forming Battery Manufacturing Coil Coating Coal Mining Copper Forming Electronics Foundries Inorganic Chemicals Iron & Steel Leather Tanning Metal Finishing Nonferrous Metals Organic Chemicals, & Plastics and Synthetics Pesticides Pharmaceuticals Porcelain Enameling Petroleum Refining Pulp & Paper* Steam Electric Textile Mills Timber Industry Comparison Cost Effectiveness for Direct Dischargers (Toxic and Nonconventional Pollutants Only) Copper Based Weights (1981 Dollars) Pounds Equivalent Currently Discharged (OOP's) 1,319 4,134 2,289 BAT=BPT 70 9 32,503 40,746 2,012 148,386 BAT=BPT BAT=BPT 1,330 BAT=BPT Pounds Equivalent Remaining at Selected Option (OOP's) 90 7 9 BAT=BPT 8 3 1,290 1,040 2,012 4,448 BAT=BPT BAT=BPT 748 BAT=BPT Cost Effectiveness of Selected Option(s) ($/pound equivalent) 107 21 49 BAT=BPT 126 406 2 NA BAT=BPT 6 BAT=BPT 18 BAT=BPT ++ Less than a dollar. * PCB control for Deink subcategory only. ------- Industry Comparison Cost Effectiveness for Indirect Dischargers (Toxic and Nonconventional Pollutants Only) Copper Based Weights (1981 Dollars) Industry Aluminum Forming Battery Manufacturing Coal Mining** Coil Coating Copper Forming Electronics Inorganic Chemicals Iron & Steel Leather Tanning Metal Finishing Nonferrous Metals Foundries Organic Chemicals, & Plastics and Synthetics Pesticides Petroleum Refining Pharmaceuticals Porcelain Enameling Pulp & Paper Steam Electric Textiles* Timber Pounds Equivalent Currently Discharged (To Surface Waters) (OOP's) 1,434 1,159 N/A 2,503 34 23 3,971 5,599 11,680 105,754 7 N/A N/A Pounds Equivalent Remaining at Selected Option (To Surface Waters) (OOP's) 24 10 N/A 10 4 22 3,004 1,404 675 2,196 2 N/A N/A Cost Effectiveness of Selected Option(s) ($/pounds equivalent) 8 149 N/A * 10 420 10 9 6 152 7 79 14 N/A N/A ** * N/A: Pretreatment Standards not promulgated, or no incremental costs will be incurred. Coal mining has no known or expected indirect dischargers. ++ Less than a dollar. ------- |