ECONOMIC IMPACT ANALYSIS OF
ALTERNATIVE POLLUTION CONTROL
TECHNOLOGY FOR THE WOOD
PRESERVING SUBCATEGORIES OF
THE TIMBER PRODUCTS INDUSTRY
report to
U.S. ENVIRONMENTAL PROTECTION AGENCY
CONTRACT NO. 68-O1-4194
Arthur D Little, Inc.
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DRAFT
C21723
ECONOMIC IMPACT ANALYSIS OF
ALTERNATIVE POLLUTION CONTROL TECHNOLOGY
FOR THE WOOD PRESERVING SUBCATEGORIES
OF THE TIMBER PRODUCTS INDUSTRY
U.S. ENVIRONMENTAL PROTECTION AGENCY
NOVEMBER 1978
Submitted by:
Arthur D. Little, Incorporated
Acorn Park
Cambridge, Massachusetts 02140
Contract No. 68-01-4194
Arthur D Little Inc
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DRAFT
NOTICE
This document is a DRAFT CONTRACTOR’ S REPORT. It includes technical
information submitted by the Contractor to the United States Environ-
mental Protection Agency (EPA) regarding the subject industry. It is
being distributed for review and coimnent only. The report is not an
official EPA publication and it has not been reviewed by the Agency.
Some data in this report was received by the Technical Contractor too
late for inclusion in this report (or the Technical Contractor’s report
dated September 1, 1978). Therefore there may be some inconsistencies
between the data in this draft report and the Technical Contractor’s
draft report.
The report will be undergoing extensive review by EPA, Federal and
State agencies, public interest organizations, and other interest groups
and persons during the coming weeks.
The regulations to be published by EPA under Sections 301(d), 304(b),
and 306 of the Federal Water Pollution Control Act, as amended, will
be based in part, on the report and the comments received on it. Upon
completion of the review and evaluation of the technical, economic,
and environmental information, an EPA report will be issued at the
time of proposed rule—making setting forth EPA’s preliminary conclusions
regarding the subject industry. These proposed rules will include
proposed effluent guidelines and standards, standards of performance,
and pretreatment standards applicable to the industry. EPA is making
this draft contractor’s report available to encourage broad, public
participation, early in the rule—making process.
The report shall have standing in any EPA proceeding or court proceeding
only to the extent that it represents the views of the Contractor who
studied the subject industry and prepared the information. It cannot be
cited, referenced, or represented in any respect in any such proceedings
as a statement of EPA’s views regarding the subject industry.
U.S. Environmental Protection Agency
Office of Water and Hazardous Materials
Office of Analysis and Evaluation
Washington, D.C. 20460
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TABLE OF CONTENTS
PAGE
I. EXECUTIVE SUMM&RY I-i
II. INDUSTRY CHARACTERIZATION 1 1- 1
A. INDUSTRY DEFINITION 1 1 - 1
B. TYPES OF FIRMS 1 1— 1
1. Size of Firm I l— i
2. Integration 1 1—2
3. Ownership Characteristics 11—4
C. PRODUCT DESCRIPTION 11—6
1. Type of Products 11—6
2. Market Size 11—7
3. Future Demand Growth 11—7
D. PLANT CHARACTERISTICS OF THE EXISTING INDUSTRY 11—12
1. Process Technology 11 —12
2. Product Diversification Within Plants 1 1—13
3. Size of Plants 11—14
4. Location 11—14
5. Employment 11—17
E. CHARACTERISTICS OF NEW PLANTS 11—17
1. Plants Constructed Since 1971 11—17
2. Capital and Operating Costs for New Plants 11—21
F. COMPETITIVE STRUCTURE OF THE INDUSTRY 11—24
1. Market Structure 11—24
2. Pricing Mechanism 11—26
3. Price Elasticity of Demand 11—26
C. PRICE AND COST HISTORY 11—27
1. Income and Asset Analysis 11—32
2. Investment Criteria 11—37
III. COST OF COMPLIANCE 1 1 1—1
A. PURPOSE 1 1 1—1
B. CURRENT EFFLUENT STATUS 1 1 1 — 1
C. CONTROL OPTIONS 1 1 1-1
D. COST OF COMPLIANCE FOR EXISTING INDUSTRY 11 1 —4
E. COST OF COMPLIANCE FOR NEW SOURCES 1 1 1— 11
i
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TABLE OF CONTENTS (cONTINUED)
PAGE
IV. ECONOMIC IMPACT ASSESSMENT tV—i
A. ECONOMIC CHARACTERISTICS OF IMPACTED PLANTS tv—i
B. ECONOMIC IMPACT ON EXISTING INDUSTRY IV-3
1. Price Impacts IV—3
2. Demand Shifts IV—8
3. Financial Impact 1V8
4. Plant Closures tVl4
5. Employment Effects IV—16
C. ECONOMIC IMPACT UPON NEW SOURCES AND CAPACITY IV-18
EXPANS IONS
V. LIMITATIONS OF ANALYSIS V-i
A. EPA REGULATION AFFECTING WASTE DISPOSAL V—i
B • RETURN ON INVESTMENT CRITERIA V-2
C. COST VARIATIONS FROM PLANT TO PLANT V—4
D. FUTURE GROWTH IN DEMAND V-4
E. LOCAL CONDITIONS OF IMPACTED PLANTS V—5
APPENDIX A — Supplementary Discussion A—i
APPENDIX B — Responses to EPA Financial 308 Survey B—i
APPENDIX C — References C—i
APPENDIX D - EPA Financial 308 Survey D—l
ii
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LIST OF TABLES
TABLE DESCRIPTION PAGE
1 1 -1 PRESSURE CYLINDER CAPACITY OF THE TEN LARGEST 1 1-3
WOOD PRESERVING FIRMS, 1976
1 1-2 WOOD PRESERVING PLANTS FORM OF BUSINESS 11—5
ORGANIZATION, 1976
11-3 PRESERVED WOOD PRODUCTS AND THEIR POTENTIAL 11—8
SUBSTITUTES
11-4 WOOD TREATED WITH PRESERVATIVES 11 —9
1 1-5 VALUE OF SHIPMENTS FOR THE WOOD PRESERVING 11—10
INDUSTRY 1958 TO 1976
1 1-6 DISTRIBUTION BY ANNUAL SALES VALUE 11-16
11-7 NUMBER OF PRODUCTION EMPLOYEES PER PLANT 11—19
11-8 AGE DISTRIBUTION OF WOOD PRESERVING PLANTS 11-20
11-9 PROFITABILITY OF NEW PLANTS VERSUS OLDER PLANTS 11—21
11-10 ESTIMATED FIXED CAPITAL REQUIREMENTS FOR THE 1 1—2 3
MANUFACTURE OF PRESERVED WOOD (ORGANIC TREATMENT)
1 1- 11 ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF 11—25
PRESERVED WOOD
11—12 CONCENTRATION RATIOS IN THE WOOD PRESERVING 11—26
INDUSTRY 1963—1976
1 1-13 SELECTED OPERATING RATIOS FOR THE WOOD PRESERVING 11—30
INDUSTRY: 1964 TO 1976
11-14 PRO-FORMA INCOME STATEMENTS WOOD PRESERVING PLANTS 11—34
1 1-15 WOOD PRESERVING PLANTS ASSET TURNOVER BY SALES/ 11—35
SERVICE CATEGORY
11-16 WOOD PRESERVING PLANTS DISTRIBUTION OF ASSETS BY 11—3 7
SALES AND SERVICE COMPANY
11-17 CAPITAL EXPENDITURES AND PRODUCTIVITY IN WOOD 11-39
PRESERVING INDUSTRY
11-18 TARGET RATE OF RETURN FOR INVESTMENTS MADE BY WOOD 1 1-41
PRESERVING INDUSTRY
1 1 1 —1 CURRENT DISCHARGE STATUS BY TYPE OF PROCESS 11 1—2
111-2 COST OF COMPLIANCE OPTION 1: ENHANCED BIOLOGICAL 111—5
TREATMENT
1 11—3 COST OF COMPLIANCE OPTION 2 111—6
1 1 1—4 COST OF COMPLIANCE OPTION 3 111—7
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LIST OF TABLES (coNTINuED)
TABLE DESCRIPTION PAGE
111-5 TOTAL COST OF COMPLIANCE WOOD PRESERVING INDUSTRY 111—9
INSTALLING OPTION TECHNOLOGY
111-6 TOTAL COST OF COMPLIANCE WOOD PRESERVING INDUSTRY 111—10
INSTALLING LEAST COST TECHNOLOGY
111-7 MODEL PLANTS FOR NEW SOURCE PERFORMANCE STANDARDS 111-13
111-8 COST OF COMPLIANCE NEW WOOD PRESERVING PLANTS 111-14
IV-1 LAND AVAILABILITY FOR DISCHARGING PLANTS IV—2
IV-2 PRICE INCREASES REQUIRED TO RECOVER COSTS OP IV-4
COMPLIANCE OPTION 1: ENHANCED BIOLOGICAL TREATMENT
IV-3 PRICE INCREASES REQUIRED TO RECOVER COSTS OF IV-5
COMPLIANCE OPTION 2
IV-4 PRICE INCREASES REQUIRED TO RECOVER COSTS OF IV-6
COMPLIANCE OPTION 3: TOTAL RECYCLE/NO DISCHARGE
IV-5 WOOD PRESERVING PLANTS PROFITABILITY WITH NO PRICE IV-9
INCREASES BEFORE AND AFTER COMPLIANCE
IV-6 FORM OF BUSINESS ORGANIZATION BY DISCHARGE STATUS IV-13
IV-7 POTENTIAL PLANT CLOSURES UNDER BAT ALTERNATIVES IV-15
IV-8 WOOD PRESERVING INDUSTRY EMPLOYMENT LOSSES FROM IV-17
PLANT CLOSURES
IV-9 IMPACT OF BAT REQUIREMENTS UPON LONG-RUN REVENUE IV-2O
REQUIRED TO SUPPORT NEW SOURCES
V-i REVENUE REQUIRED BY DISCOUNT RATE V-3
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LIST OF FIGURES
FIGURE DESCRIPTION PAGE
I l —i SALES TRENDS FOR PRESERVED WOOD PRODUCTS It-li
1 1—2 WOOD PRESERVING PLANTS IN DIE UNITED STATES 1 1- 17
1 1—3 WOOD PRESERVING INDUSTRY PRICE INDICES OF RAW 11-29
MATERIALS
11-4 LIST PRICES OF SELECTED PRESERVED WOOD PRODUCTS 11-32
tv-i INVESTMENT REQUIRED FOR BAT ALTERNATIVES AS A IV-ii
PERCENTAGE OF CASH FLOW
V-i REVENUE REQUIREMENT AS PERCENT OF SALES BY ROR FOR V-3
SAMPLE PLANTS
V
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I. EXECUTIVE SUMMARY
(Not Included in this Final Draft)
I—1
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II. INDUSTRY CHARACTERIZATION
A. INDUSTRY DEFINITION
As defined in Standard Industrial Classification (SIC) 2491, the wood
preserving industry “comprises establishments primarily engaged in
treating wood, sawed or planed in other establishments, with creosote
or other preservatives to prevent decay and to protect against fire
and insects. This industry also includes the cutting, treating, and
selling of crossties, poles, posts, and piling.”
B. TYPES OF FIRNS
The wood perserving industry is composed of a large number of small,
privately—owned plants and a few larger establishments. Larger
establishments are generally either:
• Owned by companies whose major source of income is not wood
preserving; e.g., Koppers, Kerr—McGee Chemical Corp., Southern
Wood Piedmont Co., and International Paper Company.
• Owned by companies who are primarily wood preservers; e.g.,
J. H. Baxter & Co., Wyckoff Co.
‘Each of these firms operates at numerous locations. There were approx-
imately 302 companies and 415 wood preserving plants in the country
in 1976. The Environmental Protection Agency Financial 308 Letter 1 was
answered by 337 plants.
1. Size of Firm
The wood preserving companies vary considerably in both sales and number
of wood preserving operations. Of 302 wood preserving companies, 263
(87%) are single—plant firms, 39 (13%) are multi—plant firms. Koppers
Company operates 25 plants, the other multi—plant firms operate 10 or
or fewer plants.
1 Survey conducted by EPA under Section 308 of the Federal Water Pollution
Control Act, as amended. Response summaries and tabulated data are
in Appendices B and B.
11—1
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Available information shows that total annual sales of these companies,
including sales from other operations, range from less than $200,000
to over $1 billion.
The wood preserving industry has a large number of small firms. However,
the ten largest firms represent approximately 51% of the total industry,
based upon pressure tank capacity. While actual production may not
be directly correlated with pressure tank capacity because capacity
utilization may vary and different products and different species of
wood require varying treating times, pressure tank capacity is an
indicator of production capacity. As shown in Table Il—I, Koppers Co., Inc.
represented 20% of total industry capacity, while the four largest firms
represented 37% of total capacity in 1976.
2. Integration
Wood preserving companies tend also to vary with respect to vertical
integration. Some plants are part of lumber operations or associated
with a company sawmill. In such cases, the wood treating operation
may be an additional service for lumber customers. In other cases,
such as Koppers Company, Weyerhaeuser, and International Paper, where
the company is involved in wood products and/or chemicals, the treat-
ment of wood for customers Is a natural expansion of its existing
resources. In a few cases, railroads and utility companies own wood
treatment facilities. These plants serve as captive suppliers of
poles, ties, crossarius, etc., and frequently do not sell to others. The
Atchison, Topeka & Sante Fe Railway Company, Burlington Northern,
Southern California Edison Company, Texas Electric Cooperatives, Inc.,
and Utah Power & Light are examples of this type of firm.
By far the greatest number of companies, however, are not integrated
back to wood; i.e., they do not own their own timberland, and they purchase
wood. A number of plants treat wood for customers on a service basis
only, while other plants both treat purchased wood and treat wood for customers
on a service basis.
11—2
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TABLE Il-i
PRESSURE CYLINDER CAPACITY OF THE TEN LARGEST
WOOD PRESERVING FIRMS, 1976
Total Pressure
Tank Capacity Percent of Total
Company ( thousand cubic feet) Industry Capacity
Koppers Co., Inc. 415 20%
Kerr—McGee Chemical Co. 127 6%
Southern Wood Piedmont Co. 123 6%
J. H. Baxter 108 5%
Wyckoff Co. 73 3%
Atlantic Creosoting Co., Inc. 57 3%
International Paper Company 51 2%
McCormick & Baxter Creosoting Co. 50 2%
Crown Zellerbach Treated Wood Products 45 2%
Cascade Pole Co. 34 2%
All others 1,023 49%
Total Industry 2,105 100%
SOURCE: Arthur D. Little, Inc., estimates based upon Ernst and Ernst
Wood Preservation Statistics — 1976 .
11—3
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3. Ownership Characteristics
Both privately and publicly—held companies are represented in this in-
dustry segment. In general, the smaller, single—plant companies are
privately—held and the largest companies tend to be publicly held.
There are basically two different patterns of ownership and management
in the industry. In the first category are plants owned by publicly—
held corporations which may or may not have wood preserving as the
primary activity. These plants are managed by individuals with little
or no equity in the corporation. Plants following the second pattern
are owner—managed and may be proprietorships or privately held cor-
porations. They may have even been owned by the seine family for several
generations. Table 11—2 lists the organizational breakdown of companies
in the industry as of 1976 based upon responses received from the EPA
financial 308 survey.
The ownership and management patterns in an industry are important for
an assessment of how the industry will be impacted by pollution control
costs. Profitability requirements are very different between an owner—
manager and a corporation which more critically views the return on
investment from one of many plants. The former may accept an increase
in abatement costs as a necessity for staying in business, while the
later may decide that the increased cost is not justified by the expected
returns. On the other hand, a closely-held company may have difficulty
obtaining capital investment funds and thus be unable to continue in
operation.
Among plants primarily treating with organic preservatives, 25% of the
plants are owned by publicly—held corporations. Among the plants primarily
treating with inorganic preservatives, only 10% of the plants are owned
by pubicly—held corporations. While publicly—held corporations owned
only 22% of the total number of plants responding to the EPA financial
308 survey, according to 1972 Bureau of Census statistics, publicly—held
corporations accounted for 73% of the total value added of the wood pre-
serving industry.
11—4
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TABLE 11—2
WOOD PRESERVING PLANTS
FORM OF BUSINESS ORGANIZATION. 1976
Primary Total
Organic Preservatives
Proprietorship 23 10%
Co—op 1 0
Privately—Held Corporation 158 65
Publicly—Held Corporation 59 25
241 100%
Primary
Inorganic Preservatives
Proprietorship 5 8%
Co—op
Privately—Held Corporation 54 82
Publicly—Held Corporation _j 10
66 100%
Total
Proprietorship 31 9%
Co-op 1 0
Privately—Held Corporation 230 69
Publicly—Held Corporation 72 22
Number of Respondents to Question 334 100%
SOURCE: Derived from EPA 308 Financial Survey
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C. PRODUCT DESCRIPTION
1. Type of Products
The wood preserving industry in the United States has developed based on
the need for prolonging life in wooden structural products. Historically,
railroads ties, utility poles, and pilings treated with creosote have been
the major products of the industry. In recent years, lumber and plywood
treated for fire retardancy, insect resistance, and rot resistance have
experienced rapid growth.
The industry’s products include:
Bridges and trestles of wood, treated
Creosoting of wood
Cross ties, treated
Flooring, wood block, treated
Mine props, treated
Miliwork, treated
Piles, foundation and marine construction, treated
Piling of wood, treated
Poles, cutting and preserving
Poles and pole crossarms, treated
Structural lumber and timber, treated
Vehicle lumber, treated
Wood products, creosoted
The industry can be segmented in several different dimensions correspond-
ing to size, product, technology, and location. Generally speaking, the
firms that are located in the South are treating mostly Southern Pine,
and those in the West are treating mostly Douglas Fir. The industry
uses oil—borne (organic) or waterborne (inorganic) preservatives. The
products treated with oil, such as poles, piling, and railroad ties,
have a distinct odor and “oiliness,” which makes them unsuitable for
use where odor is objectionable. The waterborne preservatives are used
for preserving plywood and lumber, and especially for treating with fire
retardants.
Competition is normally very keen within the wood preserving industry and
price is usually the major basis of competition. A large number of suppliers
11—6
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exist to serve regional markets, although some regions are served by only
one or two suppliers. Some limited competition exists from other materials
such as steel, concrete, and aluminum. There are advantages and dis-
advantages to each type of material, in addition to price differentials.
Generally the type of use dictates the type of material required. For
example, treated wood piles must be used in acid soil (such as in a sanitary
landf ill) because acid conditions corrode steel and concrete. Table 11—3
lists some preserved wood products and their potential substitutes. Of
particular interest is the possibility of concrete railroad ties becoming
a more vigorous competitor. Currently, concrete ties are being used in
several locations in the United States and this use is growing.
2. Market Size
Table 11—4 shows historical shipments data by product category. From 1955
to 1976 the volume of wood treated with preservatives fluctuated from a low
of 213.9 million cubic feet in 1962 to a peak production of 286.4 million
cubic feet in 1967. Production was 257.2 million cubic feet in 1976, the most
recent year for which data are available. The industry’s historical peak
production level was 356.6 million cubic feet in 1947, indicating that the
long—term trend is down.
The value of shipments from 1958 to 1976 are shown in Table 11—5. The value
of shipments rose from $344.2 million in 1967 to $761 million in 19741, the
peak year. Both 1975 ($647.7 million) and 1976 ($704 million) were below this
peak level. Typically, about 85% of the value of shipments is from owned
wood, with the remainder contract work.
3. Future Demand Growth
Figure 11—1 depicts the historic production and future growth trend for
the preserved wood products In total and for ties, poles, and timbers.
During the early sixties, the demand for preserved wood products increased
dramatically compared with levels existing in the fifties. Since then there
have been wide swings in total annual production but discernable trends
for individual product categorie3.
1 Annual Survey of Manufactures, 1967—1976.
11—7
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TABLE 11—3
PRESERVED WOOD PRODUCTS AND THEIR POTENTIAL SUBSTITUTES
Preserved Wood Product Potential Substitute ’
Piling In—place concrete
Driven concrete
Steel piling
Hollow I beans
Marine piling In—place concrete
Driven concrete
Interlocking iron sheets
2 x 4 ’s, etc. Metal studs
I—Beams
Prestressed walls
Plywood Concrete
Cinder block
Sheetrock
Particleb oard
Fire—retardant lumber, plywood, etc. Asbestos
Gypsum
Metal sheets
Poles Metal poles
Prestressed concrete
Railroad ties Concrete ties
1 Not all substitutes have been proven to be reliable. The potential for
substitution is limited because material selection is often dictated by
specific uses.
SOURCE: Arthur D. Little, Inc. estimates.
11—8
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TABLE 11—4
WOOD TREATED WITh PRESERVATIVES
By Product
(millions of
cubic feet)
1955
1956
1957
1958
1959
Crossarms
4.3
4.7
4.6
3.4
3.6
Crossties
85.9
83.2
101.5
73.9
52.1
Fence
Posts
16.2
12.8
13.4
14.9
15.7
Lumber &
Timbers
39.4
41.0
41.9
38.4
39.9
Piling
13.9
16.8
16.3
16.2
14.7
Poles
74.8
85.8
84.0
73.8
78.3
Switch
Ties
7.3
8.1
8.1
6.7
4.5
Miscellaneous
Total
3.8
3.6
4.8
5.6
5.7
248.4
257.9
274.5
232.8
214.5
1960
1961
1962
1963
1964
3.7
3.6
3.5
3.4
3.6
57.2
55.8
42.9
47.4
55.7
13.5
15.0
17.1
18.2
18.6
39.5
38.8
42.6
43.5
47.3
16.1
14.3
17.8
15.9
16.5
75.1
76.4
78.7
77.0
80.6
4.9
4.7
4.3
5.3
6.8
6.0
6.6
6.9
6.7
8.0
216.1
215.4
213.9
217.4
237.0
1965
1966
1967
1968
1969
4.9
5.5
4.6
3.3
3.2
63.7
70.4
80.4
78.5
71.3
18.4
19.7
21.0
16.5
15.7
50.3
60.4
62.2
62.6
59.6
17.8
21.1
16.6
17.4
14.7
83.9
87.1
84.3
76.2
74.4
7.5
7.8
8.3
7.9
6.4
9.2
8.6
8.9
9.4
8.2
255.7
280.6
286.4
271.9
253.5
1970
1971
1972
1973
1974
1975
1976
3.5
3.1
2.4
2.6
2.4
1.4
4.6
79.4
87.0
85.9
67.6
75.9
93.1
95.3
15.1
16.7
18.2
15.2
17.3
15.3
13.8
55.7
59.9
64.0
68.9
77.8
61.5
67.1
15.1
13.7
14.3
13.0
13.3
9.4
8.5
76.8
74.4
74.5
75.4
73.8
49.1
53.1
7.9
6.2
6.0
5.0
6.5
8.0
5.7
6.9
7.7
7.2
6.9
8.5
6.4
9.0
260.3
268.6
272.6
254.4
274.7
244.1
257.2
include
wood
treated
with
fire—
1. Data for 1966—1971 are not comparable with previous years because they
retardent chemicals under each category rather than under MISCELLANEOUS.
2. WOOD BLOCKS: Data for 1957—1969 are included in MISCELLANEOUS.
3. MISCELLANEOUS: Includes all wood products treated with fire—retardant chemicals in
2.8 million cubic feet of wood were treated with fire retardants.
Source: Ernst and Ernst, Wood Preservation Statistics — 1976 .
1955—1965. In 1965,
D
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TABLE 11-5
VALUE OF SHIPMENTS FOR THE WOOD PRESERVING INDUSTRY 1958 TO 1976
Value of Capital
Shipments Expenditures
Year ( $ Million) ( $ Million )
1958 203.0 3.7
1959 218.1 (D)
1960 225.1 3.7
1961 220.1 4.1
1962 230.0 4.9
1-4 1963 247.3 5.5
1964 270.9 5.8
0 1965 279.6 11.4
1966 326.0 10.4
1967 344.2 10.7
1968 375.1 9.3
1969 386.1 13.2
1970 387.8 8.4
1971 416.9 10.4
1972 475.8 14.8
1973 557.4 11.6
1974 761.2 28.1
1975 647.7 27.5
1976 704.3 22.3
Source: U.S. Department of Co erce, Bureau of the Census, Annual Survey of Manufacturers , 1958—1976
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300
293
110
100
90 -
80
70
6U
50.
30
20
10
IQL
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
—I I I. • $ IS • I I I • -,
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
YEAR
SALES TRENDS FOR PRESERVED WOOD PRODUCTS
(THOUSAND CUBIC FEET)
110
100
90.
80.
70
60
SO
40
30
20
10
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
YEAR
Wood Preservina Techniques and Possible
280
270
DRAFT
CROSS TIES
r
2,0.
40
220
210.
200
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
YEAR YEAR
110 . TIMBER AND LUMBER
I, -.
70
60
50
30
20
10
SOURCE: Historic Data — Ernst 6 Ernst data cited in The Analysis of Existiflg
Substitutes , June 1977.
Forecast — Arthur D. Little Inc. estimates. Il—il
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The annual production volumes of ties, poles and timbers also exhibit
wide swings but there are definite trends in each of the major categories
shown in Figure lI—i. In addition, the industry characterization 1 and
other studies of the industry have concluded that the trend in individual
products shown in Figure I l—i are likely to continue over the next ten
years.
The forecast values from 1978 through 1988 were derived by analyzing the
trend in production incurred from 1963 to 1976 for each product category
as well as the variation around trend. The growth rate (or decline) under-
lying the trend was compared with forecast growth rates in other studies to
check for reasonableness and establish a range. All other preserved wood
products as a group exhibited no trend and were assumed to remain stable at
about 42,000 cubic feet per year. The forecast for total preserved wood
products is the sum of the individual product forecasts.
The reason for doing this analysis was to identify product areas that might
be declining in deinand,as well as those that are not, to assess the willing-
ness of impacted plants to make an investment in pollution control expenditures
given the future outlook for the products they produce. Product growth areas
were also examined to gauge the extent to which they would take up the slack
In the production of declining products and also to evaluate the potential
for any price increase.
On balance,the future outlook for preserved wood products appears good,
with the decline in pole demand being offset by the increase in demand
for ties and timbers. The decline in pole demand will occur as a result
of slowdowns in growth of utilities and the fact that new transmission
lines will be of the size requiring steel. 1 Also,the demand for poles in
new urban areas is being affected by the requirement to place utility
distribution lines underground. The demand for railroad ties is a result
of rebuilding roadbeds, which will produce an upward trend over the next
ten years, but with a leveling off point occurring as the railroad in-
dustry goes from a rebuilding to a maintenance mode. The growth in demand
for timbers and lumber is In part a consequence of F}IA requirements 2 for
1
Reference 4, pgs. 21—22.
2 0p. cit., p. 36. 11—12
-------
DRAFT
preserved wood in home construction. While the average annual growth in
timbers for 1963 to 1974 was 5.4%, a future real growth rate of 3% is
forecasted to reflect the expected level of single family units to be
constructed in the 1978 to 1988 period.
D. PLANT CH.ARACTERISTICS OF THE EXISTING INDUSTRY
1. Process Technology
Wood preserving is a two—stage process consisting of, first, precondition—
ing the wood to reduce its moisture content and, secondly, treating wood
with preservatives.
Any one of several methods can be used to precondition, including: season-
ing in large, open yards; kiln drying; pressure steaming in a retort
followed by vacuum drying; heating in a preservative bath under reduced
pressures (Boulton Process); or vapor drying. Pressure treatment is the
most common form of processing. It is also widely recognized that this
form of treatment provides a superior product to that resulting from the
brush or dip application of preservative.
The wood treating step can employ either a pressure or non—pressure process.
Non—pressure processes use open tanks containing the preservatives in which
the wood is immersed. Pressure processes are classified as either “full—
cell” or “empty cell”. In the “full—cell” process, a vacuum is created
in the retort and the preservative is added and forced into the wood under
pressure. In the “empty—cell” process, preservative is added to the retort
and forced into the wood under pressure followed by the application of a
vacuum. The “full—cell” process is commonly used with aqueous solutions.
The typical pressure treatment facility includes three major processing
areas:
• Treating cylinder or pressure vessel with the necessary pumps,
tanks, and control equipment.
• Boiler plant to provide for heated solution and pressurization of
the cylinder.
11—13
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DRAFT
• Seasoning and storage yard including the cylinder loading
track and ancillary transportation facilities.
• Support equipment such as hoists and lifts for handling
timber; finishing equipment for incising, boring, blocking,
framing and shaving materials; and kilns or other processing
facilities for artificial seasoning of selected products.
The treating cylinders are the most important component of a wood
treatment plant. These steel cylinders (retorts) typically used in
pressure treatment range in size from 4 to 10 feet in diameter and up
to 175 feet in length. As an indication of the “charge” size held by
a treating cylinder, the average charge for a 6 foot by 36 foot cylinder
can be 6,000 board feet (500 cubic feet) of lumber for a facility in the
Northeast.
Wood preserving plants can also be categorized, based on the types of
preservatives used, as follows:
• plants treating with organic materials, such as pentachiorophenol,
oil, and creosote solutions;
• plants treating with waterborne inorganic salts principally zinc,
copper, arsenic, and chromium;
• plants treating with both organic and inorganic preservatives.
Of the plants identified by the 1976 AWPA Wood Preservation Statistics ,
49% are organic treaters, 27% inorganic, and 24% treat with both types
of preservatives.
2. Product Diversification Within Plants
Although there is a wide range of wood products treated within the
industry, individual plants tend to concentrate on a limited range of
products. Inorganic (waterborne) treaters treat mostly dimension
lumber, posts, and poles for insect and rot resistance and fire retar—
dancy; organic (oil—borne) plants treat primarily poles, posts, pilings,
and railroad ties with some other products such as cross arms and bridge
timber. Poles and ties are the major production items of organic plants
whereas inorganic treaters have a greater variety of treated wood products,
although volume may be smaller.
11—14
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DRAFT
3. Size of Plants
There are no published data on individual plant capacities or production,
because capacity varies with the type of wood treated and the type of
treatment. For example, Douglas Fir requires a considerably larger
residence time than species found in other parts of the country. Although
the numbers of cylinders and types of processes are known, there is not
necessarily a correlation between these and either plant capacity or pro-
duction. Some industry members 1 reported that a typical 80—ft. cylinder,
operating with an organic process, has an output of 30,000 to 45,000 board
feet per day (based on 15,000 board feet per charge, 2 or 3 per day).
Daily inorganic production may be somewhat higher due to shorter treat-
ment times. Reported annual operating rates (time used for treating as
a percent of total time available for treatment, not including loading and
unloading time) for the industry range from 40—70%.
Table 11—6 shows a distribution of plant sizes using 1976 annual sales
value as a indicator of size. The plants are very uniformly distributed
among the value of sales size categories shown in the table. The median
plant size lies in the $0.7 to $1.2 million annual sales range. Six
of the 319 plants responding to the EPA Financial 308 Letter had sales
of over $11.5 million, while 25 plants had sales of less than $70 thou-
sand.
4. Location
Figure 11—2 shows the national distribution of wood treatment facilities.
Although there are no statistics available on the geographical distri-
bution of consumption, both production and consumption follow the distri-
bution pattern of facilities. Plants are most heavily distributed in
the Southeast region with 45% of all plants in that region. Of the
plants responding to the EPA Financial 308 survey, 30% described their
plant site as urban while 25% were suburban and 45% rural.
1 As reported by AWPI in private conversations.
11—15
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DRAFT
TABLE 11—6
DISTRIBUTION BY ANNUAL SALES VALUE
1970 Sales Planta Built Plants Built
( $000) Since 1970 1970 or Earlier Total
d i w
It I. It 0 It
0—70 8 16 17 6 25 8
71—155 4 8 21 8 25 8
156 — 300 10 20 19 7 29 9
301 — 700 8 16 40 15 48 15
701 — 1200 5 10 45 17 50 16
1201 — 2400 5 10 37 14 42 14
2401 — 3200 5 10 21 8 26 8
Over 3200 5 10 69 25 74 23
TOTAL
RESPONDING 50 100% 269 100% 319 100%
SOURCE: Derived by Arthur D. Little, Inc., from EPA Financial 308
survey.
11—16
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FIGURE II-
WOOD PRESERVING PLANTS IN THE UNITED STATES
SOURCE: American Wood Preservers Association.
I -I
- S *GI( •f
w C S E OP C S
WOOD PRESERVING PLANTS IN THE UNITED STATES
D
m
-I
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DRAFT
5. Employment
Table 11—7 shows the distribution of plants by the number of production
employees per plant. The median sized plant employs 10 to 19 production
workers. Two plants employ more than 125 workers, while 22% of all plants
employ fewer than 3 workers. The Bureau of the Census estimated the total
employment of the wood preserving industry to be 9,700 in l976 Due to
increased use of materials handling equipment, employment has decreased
from the peak of 12,800 in 1968.
E. CHARACTERISTICS OF NEW PLI NTS
1. Plants Constructed Since 1971
Of the 337 plants responding to the EPA 308 Letter, 56 plants began oper-
ation in the 1971 to 1977 period. Table 11—6 showed the size distribution
of these 50 new plants based on their 1976 value of sales. The average size
of new plants is smaller than the older plants, possibly suggesting
that existing facilities typically expand over their production life.
Comparing the plant size distribution of the new plants to the size dis—
tribtulon of all plants (as shown in Table 11—6), one may determine that
the new plants are smaller than all plants. The median annual sales of
the new plants is $0.3 to $0.7 million, while the median annual sales of
older plants is $0.7 to $1.2 million.
Table 11—8 shows the age distribution of 315 plants responding to the EPA
Financial 308 survey. The median age of the plants is approximately 20
years, while 55 plants were built before 1930 and 56 plants began oper-
ation between 1971 and 1977, or an average of 7 per year. A majority
of the plants responding were built in the 1950’s and 1960’s.
The profitability of new plants versus older plants is compared in Table 11—9.
The profitability of the two groups is roughly comparable. Both older
plants and new plants have a median profitability after tax of 2% of sales
value.
‘Reference 2
11—18
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DRAFT
TABLE II— 7
NUMBER OF PRODUCTION EMPLOYEES PER PLANT
Nuthber of Production
Employees per Plant Number of Plants Percentage of Plants
1—3 73 22
4—6 39 12
7—9 26 8
10—19 56 17
20—34 55 17
35—48 27 8
49—75 36 11
76—99 8 2
100—125 6 2
Over 125 2 1
Subtotal 328 100%
No Response 10
Total 337
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency
financial 308 survey.
11—19
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DRAFT
TABLE II—
AGE DISTRIBUTION OF WOOD PRESERVING PLANTS
Year of Initial Operation Number of Plants Percentage of Plants
Before 1930 58 17
1931 — 1940 13 4
1941 — 1950 46 14
1951 — 1960 83 25
1961 — 1970 76 3
1971 — 1977 56 17
Subtotal 332 100%
No Response 5
Total 337
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency
financial 308 survey.
11—20
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DRAFT
TABLE II- 9
PROFITABILITY OF NEW PLANTS VERSUS OLDER PLANTS
1976 Profit New Plants 1 Older Plants’
After Tax 2 Number Percentage Number Percentage
Under 1% 16 37 56 25
6 14 58 25
3%—4% 7 16 47 21
5%—7% 7 16 38 17
Over 7% 7 16 26 11
Subtotal 43 100% 227 100%
No Response 7 60
Total 50 287
1
New plants are those beginning operation between 1971 and 1977, while
older plants began operation before 1971.
2 Profit after tax as a percentage of sales value.
Source: Derived by Arthur D. Little, Inc., from Environmental Protection
Agency Financial 308 Letter.
11—21
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DRAFT
When industry capacity utilization is low, or demand growth is slow, a
competitor has difficulty entering the industry. As the industry has
become more automated and hence more capital intensive in recent years,
the capital cost for entry, in real terms, is significantly higher now
than five or ten years ago.
2. Capital and Operating Costs for New Plants
Capital and operating costs were developed for model new source plants
proposed by the technical contractor. Two plants sizes were selected,
with each assumed to be producing one of four preserved wood products.
The plant sizes are:
1. Two cylinders, each seven—foot diameter by 130 feet long.
2. Five cylinders, each seven—foot diameter by 130 feet long.
The product, location and process relationships are shown below:
Product Location Process
A. Railroad ties South Central Boultonizing
B. Southern Pine poles South Central Steaming
C. Douglas Fir poles West Coast Boultonizing
D. Southern Pine lumber South Central Inorganic
Capital costs for each of these two facilities is shown in Table 11—10
indicating that the total installed cost for the larger facility is about
$4.6 million, in comparison to $2.2 million for the two—cylinder plant.
Table 11—11 summarizes the operating costs for eight operating conditions——
f our products being produced at each of the two plants. Appendix A
offers supplementary tables on each of the 8 conditions.
The two-cylinder plant has 25 operating, 7 maintenance and 13 supervisory
and office employees, at an average annual cost of $15,000 per employee.
The five—cylinder plant is assumed to have 65 operating, 17 maintenance
and 33 supervisory and office personnel. Taxes and insurance are estimated
at 4% of the capital cost. While maintenance and other consummable
supplies, such as packaging, do vary based on the operating volume of
each plan; these variations are too small to affect overall operating
costs and have been assumed to be constant.
11—22
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DRAFT
TABLE 11—10
ESTIMATED FIXED CAPITAL REQUIREMENTS FOR THE MANUFACTURE OF
PRESERVED WOOD (ORGANIC TREATMENT )
Location: South, new facility or replacement value 3
Cylinder Size: 7—foot diameter, 130 feet long, 5000 cubic feet in volume
Installed ’ Installed ’
Bare Cost Cost of a Cost of a
of Equipment Two Cylinder Five Cylinder
Per Cylinder Plant Plant
($1,000) ($1,000) ($1,000)
Site Preparation 200 400
Yard Equipment 2 300 400 800
Pressure Cylinder 250 700 1,700
Storage Tanks and Pumps 100 250 400
Utilities: Boiler and
Compressor 100 150 300
Primary Oil—Water
Separation 4 NA 32 58
Subtotal $750 $1,732 $3,658
Engineering, Construction
and Contingency at 25% 433 917
Total Fixed Capital $2,165 $4,575
1 lnstallation includes piping, instrumentation, electrical, structures,
foundations, erection labor, and allocated portion of shops and offices.
2 Yard Equipment includes track and trams for cylinder loading, trimming
and framing equipment, and mobile equipment. Processing is based on
receipt of rough sawn wood, and specifically excludes debarking and
rough sawing.
3 Acici 10% for West Coast construction cost differential.
4 For the primary oil—water separation system, 50% of the cost is included
in the cost of the plant.
SOURCE: Arthur D. Little, Inc., estimates based on industry interviews.
11—23
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TABLE 11-11
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
Annual Operating Costs in Thousand Dollars for Model Plants :
A—l A—2 B—i B—2 C—i C—2 D—l D—2
Wood 2,064 5,160 5,400 13,500 3,264 8,160 6,480 16,200
Preservatives 672 1,680 378 945 307 768 594 1,485
Total Raw Materials 2,736 6,840 5,778 14,445 3,571 8,928 7,074 17,685
Labor 596 1,491 596 1,491 596 1,491 596 1,491
Supplies* 132 326 132 326 132 326 132 326
Fuel and Power* 132 326 132 326 132 326 132 326
Taxes and Insurance 87 182 87 182 95 200 87 182
Total Operating Cost 3,683 9,165 6,725 16,772 4,526 11,271 8,021 20,010
Case A — Railroad ties, boultonized, South Central location, 30 hours per charge
Case B — Southern pine poles, steamed, South Central location, 16 hours per charge
Case C — Douglas fir poles, boultonized, West Coast location, 30 hours per charge
Case D — Southern pine lumber, CCA treated, South Central location, 16 hours per charge
Case 1 — 2 cylinders, each 7—foot diameter, 130 feet long, 5,000 cubic feet
Case 2 — 5 cylinders, each 7—foot diameter, 130 feet long, 5,000 cubic feet
*Includes 50% of the operating cost of oil—water separation.
SOURCE: Arthur D. Little, Inc., estimates based on industry interviews. D
-n
-1
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DRAFT
The following additional assumptions were made:
• A one—product operating mode was assumed, although most facilities
have variable and constantly changing mixes, depending on specific
and local market conditions.
• Capital requirements for the West Coast facility is estimated
to be 10% greater than for the Southern plants.
• Land requirements are 30 acres and 50 acres, respectively, for
the two plants.
• Raw wood and preservative costs are obtained from accepted,
published industry references.
• 40% of the cylinder volume is used for each charge, plants
operating three shifts a day and 300 days per year.
• While cycle time depends on wood specie, mositure content,
type of process employed and degree of preservation required,
the following,possibly conservative, cycle times were used:
Railroad ties (Boultonized) — 30 hours
Southern Pine poles (steamed*) — 16 hours
Douglas Fir poles, green (Boultonized) — 30 hours
Southern Pine lumber (CCA) — 16 hours
F. COMPETITIVE STRUCTURE OF THE INDUSTRY
1. Market Structure
Table 11—12 shows concentration ratios for the industry between 1963
and 1976. Although the industry is composed of a large number of small
firms, the four largest firms had 37% of the total market in 1976, and
the eight largest firms had 47% of the total market. The size of the
firms various considerably. The top company has about 20% of the market,
the next three companies have 5% to 6% each, and the next four about
2% each. The balance of the top 20 have market shares of 1% each and the
next 30 have shares averaging about .6%. The level of concentration has
not changed significantly since 1963, indicating a stable market structure.
*Only when frozen
11—25
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DRAFT
TABLE 11-12
CONCENTRATION RATIOS IN THE WOOD PRESERVING INDUSTRY 1963-1976
Percent of Value of Shipments accounted for by— —
4 8 20 50
largest largest largest largest
Year companies companies companies companies
1963 34 44 64 84
1967 35 44 63 84
1970 34 NA NA NA
1972 35 44 60 78
1976 37 47 NA NA
Source: 1963—1972: U.S. Bureau of Census, Annual Survey of Manufactures ,
1976: Arthur D. Little, Inc. estimates.
11—26
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DRAFT
Preserved wood is largely a connnodity market modified by transportation
costs which give regional advantages to some producers. While some
interregional competition exists in the industry, the cost of inbound
and outbound transportation results in predominantly regional markets
For some applications, a particular wood specie is preferred and wood
may be shipped over longer distances in these cases; more often, a
suitable wood specie may be found locally.
2. Pricing Mechanism
Pricing mechanisms appear to be quite varied. For some products (mostly
lumber), wholesalers and commission firms conduct continuous pricing and
bidding between the preserving plants and the final customers on the
telephone. Some of the preserved lumber is sold from price lists. On
the other hand, most poles, piling, and railroad ties are sold through
formal bids for specific projects directly to the customer. Purchase
decisions are made on the basis of price, availability, and delivery
of future production, since most preservers only keep small inventories
and make the products only on order.
3. Price Elasticity of Demand
Demand elasticity in the wood preserving industry varies somewhat among
products. The major factors governing demand are competition within
the industry and the economic climate of user industries. Demand for
those products with high demand growth potential (such as dimensionalized
lumber) will probably not be affected by a rise in prices because growth
in demand will offset declines due to price increases. Those products
which are threatened by lower demand growth potential (such as utility
poles) have higher price elasticity and will be less likely to pass
along cost increases as increases in price.
At the present time, growth of demand for railroad ties is expected to
be strong because of tightened federal railroad safety regulations and
the Northeast Railroad Reorganization Act. However, concrete ties are
now being used for some of the replacements. Inorganically treated
products (using inorganic salts), although a small portion of all treated
11—27
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DRAFT
products, have recently had rapid growth, even up to 20% per annum, and
are expected to continue at a growth rate higher than GNP as the con-
struction market improves and demand for dimension lumber and plywood
increases. The market f or utility poles is not expected to grow strongly,
as previously discussed. It is currently nearly a replacement market and
it is also threatened in the future by the requirement for underground
wiring. Although there are economic and technical difficulties with
underground wiring, if these are worked out they may replace wooden poles
for some applications. Other products, such as construction and marine
pilings, face some pressure from substitute products. In summary, it
appears that although some products will have high growth rates, production
for the whole industry will continue to have little long—term growth. This
situation will make it difficult for producers to increase prices.
G. PRICE AND COST HISTORY
Figure II- 3 shows the price trend in current and constant dollars of raw
materials used by the wood preserving industry. In the 1970—78 period
wood preservative chemicals have shown the greatest increase in cost,
followed by that of wood costs (lumber, piles, and ties), and finally
labor. All of these inputs have increased at a rate greater than that
of general inflation, as shown in the graph of real price increases for
the chemical and wood materials. (Figure II—3B).
The cost of labor in the wood preserving industry has been increasing
steadily; the average payroll per worker was more than 60% higher in
1978 than in 1970, which is an annual increase of 6.2%. However, since
1970, labor as a percent of value added and per dollar of shipments has
declined, as shown in Table 11—13. In fact, employment in the industry
as a whole has declined, from 12,000 in 1970 to 9,700 in 1976, and the
percentage of the workforce classified as production workers also declined,
from 84% to 79% for the same period (shown in Table 11—17). This is
principally due to the greater use of materials handling equipment in
order to reduce labor costs.
11—28
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FIGURE 11-3
OD PRESERVING INDUSTRY
PRICE INDICES OF P , W MATERL\LS
DRAFT
250.0 1....
r
150 . 0 L
lO0. )L.
1967 1970
1972 Values:
Creosote
Pen tach lorophenol
Lumber
Labor
1980
$3. 31/hour
Creosote
Pen tachiorophenol
Lumber
Labor
Average
Annual
Increase
1970—78
12.6%
1967 1970
1975
SOURCES: (chemicals) Chemical Marketing Reporter
(wages) Employment and Earnings , US Department of Labor, BLS
(lumber) Wholesale Prices and Price Indexes , US Department of Labor, BLS
(GNP. deflator) Economic Indicators , Council of Economic Advisors
A. Current $: 1972 — 100
S.....
I
I
11.1%
13.7%
/
Is i • ••
S..
I...
—
50.0
__________ I a
1972 1975
creosote, 27c/gallon; peatachlorophenol 18c/pound; labor
B. Co:tstarit $: 1972 10fl
200.0
6.2%
1970—78
3.7
6.7
0. 9 .
150.OL
I
S
S
100.0
75.0
50.0
J
/
I
• / 5
. S
I
% I—
1980
11-29
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DRAFT
TABLE 11—13
SELECTED OPERATING RATIOS FOR
THE WOOD PRESERVING INDUSTRY: 1964 TO 1976
Cost of Cost of
materials materials & Value Payrolls
per payrolls added as percent
dollars of per dollar per of value
shipments shipments employee added
Year ( dollars) ( dollars) ( dollars) ( percent )
1964 .63 .81 8,788 49
1965 .64 .81 9,050 48
1966 .63 .80 10,479 45
1967 .62 .80 11,103 46
1968 .61 .79 11,540 45
1969 .64 .81 11,818 47
1970 .63 .81 12,017 51
1971 .64 .82 13,800 48
1972 .64 .80 15,557 42
1973 .67 .80 18,446 40
1974 .63 .75 30,783 29
1975 .64 .78 24,548 38
1976 .68 .81 23,608 41
SOURCE: U.S. Department of Commerce, Bureau of the Census,
Census of Manufactures , 1967, 1972, and Annual Survey of
Manufacturers , 1973, 1974, 1975, 1976; and Arthur D. Little,
Inc., estimates.
11—30
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DRAFT
Naturally, the most significant raw material cost is that for wood,
which represents from 40 — 75% of the selling price of the preserved
wood product. The selling prices of untreated ties and piles (shown in
Figure tI—3A) and lumber (shown in Figure 11—4) have respectively increased
12.4%, 8.8%, and 13.7% annually in the 1970—78 period, or faster than
the rate of overall inflation. The higher rate of increase for
ties versus piles is attributable in part to favorable demand levels
for railroad ties. The proportion of wood cost to total sales dollars
has remained roughly constant over the 1970—78 period and except for
the 1974—75 recession, the combined cost of all raw materials has been
a stable proportion of the sales dollar as shown in Table 11—13.
Thus, producers have been able to pass on increased costs of wood in
the form of increased selling prices. This relationship is apparent in the
Figure 11—4 where selling prices closely track wood costs.
After years of relatively constant prices, the price of major chemical
preservatives, pentachiorophenol and particularly creosote oil, have
increased dramatically since 1973. The price increase for these
chemical preservatives over the 1970—78 period, 11.1 and 12.6%
respectively, is greater than that of the final products. This indicates
their increased importance as an input cost, although still a smaller
portion of the total than are wood or labor.
The previous discussion of potential industry growth suggests
that future demand will be weaker, and the industry will have a more
difficult time in passing along increased costs in the form of price
increases. However, the nature of the pollution abatement cost is
predominantly fixed rather than variable. A change in fixed cost
represents a change in long—run average total cost, and therefore it
is likely that the cost per unit of production for a larger, more
efficient plant will set the maximum amount of price increase assuming
the historic supply/demand balance. Since the effluent abatement cost
per unit of production will be greater for smaller plants, smaller plants
-------
FIGURE 11—4
DRAFT
LIST PRICES OF SELECTED PRESERVED WOOD PRODUCTS 1
Price
$12
I/Il
7.
11
10
9
8
6
5
4
3
2
1
I
- Treated
1970
1975
Untreated
Value Added in Wood
Preserving
Ties
S/each
I
Average
Annual
Increase
12.3%
12.4%
9.4%
I
I
1
I
Pile 2
—. 8.8%
1978
‘List prices are given because they provide a comparable basis for analysis over an
extended period of time. The majority of contracts specify prices which provide substantial
discounts from list prices.
2 Piles: Points : 12” — 3 ft. from butt 7 in.; Length : 40 to 50 ft., truck lots, New York
3 Ties: 6” x 8” x 8’6”, Chicago, Red Oak, Carload lots
SOURCE: Engineering News Record .
11—32
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DRAFT
may not recover the entire cost increase through higher prices. Market
factor will determine whether this cost increase may be passed along
through price increases or will be absorbed by reducing profits.
H. FINANCIAL PROFILES
1. Income and Asset Analysis
In assessing the economic impact of an EPA regulation upon a specific
industry, the impacted industry is examined on a stand—alone basis
without regard to the other businesses associated with it or to resources
available to the parent companies of industry plants. For this reason,
it is important to have an accurate picture of the revenues and expenses
associated with the plant operations in the impacted industry as well as
the assets used by the plants. The source of financial profile data
is the Environmental Protection Agency 308 Letter.
Table 11—14 contains pro—f orma income statements developed for seven
sales and service categories of wood preserving plants. Sales level
categories were selected to represent the distribution of plant sales,
profit and loss, and cash flow. There are sales categories in Table 11—15
that could be grouped if one were interested in the pro—f orma distribution
of expenses alone. Pro—f orma income statements were developed for five
categories of plants treating owned—wood products (TOWP) and two categories
of plants providing a treating service only (TSO). The number of plants
providing TSO represents 13% of the total respondents to the EPA Financial
308. Two sales categories were sufficient to adequately represent this
group for the purpose of an economic impact assessment.
Some cost elements vary with the size of plant and service offered. Wood
cost as a percent of sales increases as sales increase for plants treat-
ing owned—wood products. The reasons for this could be that the larger
plants tend to have greater portion of their sales derived from items
such as ties and poles whereas smaller plants tend to treat more specialty
11—33
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TABLE 11—14
PRO-FORMA INCOME STATEMENTS
WOOD PRESERVING PLANTS
Treating Service
Plants Treating Owned—Wood Products Only
Sales ($000 ) 200 700 1,800 3,500 7,500 250 1,000
7. Sales 1007. 100% 100% 100% 100% 100% 100%
Wood Cost 44% 44% 55% 50% 55% 8% 252
Payroll Cost 19% 17% 13% 12% 19% 20% 19%
Other Expenses 18% 17% 15% 20% 12% 39% 34%
Depreciation 4% 2% 2% 2% 2% 52 2%
Gross Margin 15% 20% 15% 16% 122 28% 21%
G6.A 11% 12% 11% 9% 57. 11% 15%
Interest 3% 2% 1% 1% 1% 2% 1%
Profit Before Tax 1% 6% 3% 6% 6% 12% 6%
Profit After Tax .5% 3% 2% 3% 3% 6% 4%
Survey Plants 50 81 40 50 50 6 31
(327 Responses)
7. Total 1 15% 25% 12% 15% 15% 2% 11% D
113 plants (4%) had sales equally split between TSO and TOWP.
SOURCE: Derived by Arthur D. Little, Inc., from Environmental Protection Agency financial 308 Letter
-ri
-I
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TABLE 11-15
WOOD PRESERVING PLANTS
ASSET TURNOVER BY SALES/SERVICE CATEGORY
1976
Return on
Sales/Service Total Sales/ Sales/ 2 sales Total
Category ($000) Plants Total Assets Net Assets Fixed Assets Capital
TOWP
$ 200 50 2.5 3.8 5.0 1.9%
700 81 3.0 4.7 8.0 11.1
1,800 40 3.0 4.3 10.0 8.6
3,500 50 2.5 3.1 10.0 9.3
7,500 50 2.5 3.1 8.0 9.3
TSO
$ 250 6 3.0 4.0 5.0 24.0
1,000 37 5.0 8.0 10.0 32.0
LBased on 327 responses; 13 plants were equally split between TSO and TOWP.
2 Total assets less current liabilities.
3 Prof it After—Tax (Table II—14) Margin
Sales/Net Assets = Turnover; Net Assets = Total Assets — Current Liability
Rate—of-Return on Total Capital Margin x Turnover
SOURCE: Derived by Arthur D. Little, mc, from Environmental Protection Agency Financial 308 Letter reponses.
m
-l
-------
DRAFT
lumber and timbers; ties and poles are more of a commodity product
and thus price would be lower relative to cost of goods sold.
Another reason is that plants with higher sales volume have a larger
base over which to spread fixed cost (note that general and administra-
tive expense are a lower percentage of sales for large plants) and thus
can afford to have a higher ratio of wood cost to sales. As would be
expected, plants primarily engaged in providing treating service only
have low wood costs as a percent of sales.
Margin on sale increases with sales for plants treating owned—wood
products while the reverse is true for plants providing a treating
service only. However, as shown in Table 11—15, sales turnover
(Sales/Net Assets) decreases with sales. The net effect is that,
with the exception of the smallest sales category, return on total
capital (Margin x Turnover) is higher for smaller plants than for
larger plants.
Plants engaged in treating service only have substantially higher
rates of return on total capital, as calculated in Table II—l5,than
plants treating owned—wood products. This could be artificial if
TSO plants have older, more fully—depreciated equipment and associated
lower book values than comparably sized plants treating owned—wood
products.
The distribution of assets at wood preserving plants (as opposed to
parent companies) was analyzed to determine working capital requirements
associated with compliance investment. The distribution of assets
varies with size of plant, as shown in Table 11—16. Fixed assets
as a percent of total assets generally decline as sales level Increases
for plants engaged in treating owned—wood products. While the reverse
is true for TSO plants in Table 11—16, the variability and small total
number of plants are such that the two plant sizes are not statistically
different In the percentage of assets in plant and equipment.
11—36
-------
TABLE 11—16
‘Based on 327 responses;
WOOD PRESERVING PLANTS
DISTRIBUTION OF ASSETS
BY SALES AND SERVICE COMPANY
13 plants were equally split between TSO and TOWP.
Treating
Service Only
$250 $1,000
35.0% 26.0%
25.0 24.0
60.0 50.0
40.0 50.0
100.0% 100.0%
1.3 751
6 37
D
-n
-I
‘ -I
Sales Category ($000)
Treating
Owned—Wood Products
$200
35.0%
$700
35.0%
$1,800
30.0%
$3,500
20.0%
$7,500
20.0%
Accounts Receivable
Other Current Assets
20.0
30.0
40.0
55.0
50.0
Total Current Assets
55.0
65.0
70.0
75.0
70.0
Fixed Assets
45.0
35.0
30.0
25.0
30.0
Total Assets
100.0%
100.0%
100.0%
100.0%
100.0%
Average Value of
Total Assets
270
320
617
1,805
3,710
Number of Plants in
Sample 1
50
81
40
50
50
SOURCE: Derived by Arthur D. Little, Inc., from Environmental Protection Agency Financial 308
Letter data.
-------
DRAFT
The “other current asset” category in Table 11—16 includes inventory
items. As expected, plants treating owned—wood products, with the
exception of the smallest plants, have a higher percentage of assets
in this item than plants engaged in treating service only. For both
plant categories, accounts receivable decrease as a percent of total
assets as sales increase.
In recent years, over 85% of the industry’s capital expenditures have
been on new machinery and equipment to reduce labor costs, as shown in
column 3 of Table 11—17. This investment has resulted in a reduction
of total employment and raising the level of industry productivity (shown
as a real increase in value added per employee in 1967 dollars in column 7)
by about 25% in the 1967—76 period. However, there are a number of firms
which have not made the expenditures to reduce labor costs; their compara-
tively less favorable cost structure will make the financing of major
capital expenditures for pollution control especially difficult.
2. Investment Criteria
As part of the Environmental Protection Agency Financial 308 Letter, wood
preserving plants were asked to provide their criteria for investment in
wood preserving plant and equipment. This information is used in the
economic impact assessment to estimate the required price increase to
recover the cost of pollution control investment. A total of 119 (35%)
of the plants Indicated an investment criterion; 22% provided target
internal rate—of—return values, and 6% provided payback criteria.
Plants providing rates—of—return criteria represented a cross section of
the wood preserving plants responding. There were too few responses
to the question to subcategorize the rate—of—return by plant character-
istics. However, respondents to the question were distributed similarly
to the total sample with respect to sales level, current discharge status
and type of preserved wood product. The distribution of target rates of
return was used to represent the total industry.
11—38
-------
TABLE 11-17
CAPITAL EXPENDITURES AND PRODUCTIVITY IN WOOD PRESERVING INDUSTRY
(5) (6) (7)
Production VaiJ!ue Added Value Added
(1) (2) (3) (4) Workers of Per Man Hrs. Per Man Hrs. of
Total New New Structures and New Machinery and Total % of Total of Production Production
Year Expenditures Additions to Plants Equipment Employment Employment Workers Worker
(millions of (millions of current (millions of current (000s) (percent) (current $) (1967 $)
current dollars) dollars) dollars)
1967 10.7 1.4 9.3 12.2 84 6.25 6.25
1968 9.3 1.4* 7 9* 12.6 84 6.58 6.03
1969 13.2 NA NA 12.1 83 6.78 5.77
1970 8.4 1.4 7.0 12.0 81 7.14 5.78
1971 10.4 .5 9.9 11.3 82 7.94 5.94
1972 14.8 2.2 12.6 11.3 81 9.35 6.35
1973 11.6 2.0 9.6 10.1 83 10.41 6.34
1974 28.1 3.9 24.2 10.6 81 17.63 9.94
1975 27.5 4.9 22.6 9.3 80 14.54 7.57
1976 22.3 2.4* 19.9 9.7 79 14.87 7.74
*Indicates the standard error is greater than 15%.
NA - Means not available.
SOURCE: U.S. Department of Commerce, Bureau of the Census, Annual Survey of Manufacturers——1967—1976 .
-Ti
-I
-------
DRAFT
The distribution of target pre—tax rates—of—return is shown in Table 11—18.
The average and median pre—tax rates of return are in the 20—24% category.
Using midpoints of the categories, the weighted average after tax rate—of—
return is about 12%, assuming a 48% tax rate. The impact assessment in
Chapter IV was done using the weighted average value and a sensitivity
analysis was done to determine the impact of different rate—of—return
on the results. (See Chapter V).
11—40
-------
DRAFT
TABLE 11—18
TARGET RATE OF RETURN FOR
INVESTMENTS MADE BY WOOD PRESERVING INDUSTRY
Pre—Tax
Rate of % of
Return I! Respondents
0-4% 0 0%
5—9 2 4
10—14 7 13
15—19 11 21
20—24 8 15
25—29 12 25
30—40 8 15
40 or rire 4 7
52 100%
II
Distribution of Samj4e Total Respondents
Plants Using Rate—of—Return Criteria: 22% 75
Plants Using Payback Criteria: 6 21
Plants Using Other Methods 7 23
Not Answering Question 65 218
100% 337
SOURCE: Environmental Protection Agency Financial 308 Survey.
11—41
-------
DRAFT
III. COST OF COMPLIANCE
A. PURPOSE
The costs of compliance for a number of alternative BAT regulations has
been developed by the EPA Technical Contractor, Environmental Science
and Engineering, Inc ). The purpose of this Chapter is to summarize the
costs of compliance associated with each option, review the current
status of the industry, and describe the investment and operating costs
that will be incurred under each alternative.
B. CURRENT EFFLUENT STATUS
Table 111—1 describes the current effluent status of wood preserving
plants by type of process. Ten plants currently discharge into navi-
gable waters (direct discharge), while 42 discharge into municipal
systems (indirect discharge). Inorganic plants are currently required
to be at no discharge; all remaining organic plants do not discharge.
The plants that will be required to make expenditures represent a minority
of the industry. In total, the 52 potentially impacted plants represent
15% of the respondents.
All ten direct discharge plants are primarily steaming plants. An
additional 31 plants In the organic category and 11 Boulton plants dis-
charge into municipal systems.
The cost of compliance developed by the EPA technical contractor were
developed based upon a separate EPA TechnIcal 308 Letter as well as on
plant visits and sampling data. The technical contractor was in the
process of developing cost of compliance data for two of the plants
at the time this report was written; therefore, the cost of compliance
for those facilities was based on plants for which cost data were
available. In addition, the technical contractor developed cost data
for 5 plants that did not provide economic data. Costs of compliance
are based upon plants for which costs were available at the time, using
extrapolation for plants for which cost data were lacking.
1 Reference 1 111—i
-------
DRAFT
TABLE 111—1
CURRENT DISChARGE STATUS
BY TYPE OF PROCESS
Technical Financial Composite
Indirect Discharges Contractor 308 Survey 1 /
Steaming 29* 29 31 9%
Boulton 11 11 11 3
Direct Discharges
Steaming 10 7 10 3
No Discharge
TOTAL 337 342 100
SOURCE: Environmental Protection Agency Financial 308 Survey, and
follow-up calls by the EPA Technical Contractor.
* Number of plants for which cost was available at the time of writing.
Costs for the two additional plants were in the process of preparation.
111—2
-------
DRAFT
C. CONTROL OPTIONS
At the time of writing, costs of compliance were available individually
for 50 of the 52 impacted plants identified by the economic and technical
contractors. Types of compliance treatment differ somewhat by plant.
The treatment subcategories used were:
• Organic — Boulton Process
• Organic — Steaming Process, indirect discharge
• Organic — Steaming Process, direct discharge.
All impacted Boulton plants are indirect dischargers.
Three categories of control options were developed for indirect die—
chargers (steaming process):
• Option 1: Enhanced biological treatment
• Option 2: Enhanced biological treatment with heavy metals removal
• Option 3: Total recycle/no discharge.
Under Option 1, all but three of the steaming indirect dischargers will
incur additional compliance costs, while nine of eleven Boulton plants
will be affected. If Option 2 (heavy metals removal) is required, eight
steaming and three Boulton plants will be affected. Under Option 3, more
than one method is feasible to achieve “no discharge” for some plants
and the low cost option has been used in the analysis.
Three control options were also developed for direct dischargers:
• Option 1: Enhanced biological treatment
• Option 2: Enhanced biological treatment with carbon absorption
• Option 3: No discharge
111—3
-------
DRAFT
Only two plants of the ten would incur additional cost under Option 1,
and only one of the two would incur additional costs under Option 2.
Under Option 3 (no—discharge) all ten direct discharges will incur
costs.
The cost of effluent monitoring were generated by the EPA and not the technical
contractor. These costs will add $5,000 to $10,000 per year to operating
costs.
D • COST OF COI’fi’LIANCE FOR EXISTING INDUSTRY
Tables 111—2 through 111—4 contain the investment and operating costs
associated with each of the three levels of control. The land invest-
ment has been broken out separately because it enables a comparison of
the relative amount of land required for each of the control options
studied. A cost of $5,000 per acre was used as the cost of land and,
thus, the number of acres required for each can readily be determined.
Land investment was separated from other investment in the economic impact
assessment because land is not a depreciable asset and, therefore, must
be treated separately.
Since costs of compliance were generated for 50 individual plants, a
range of costs of compliance is shown in Tables 111—2 to 111—4 for each
sales category where costs of compliance apply. As can be seen from the
tables, considerable variability exists from plant to plant in compliance
cost. The source of variablility relates to volume of water effluent.
For indirect discharge steaming plants the cost of compliance, in terms
of both Investment and monitoring cost, increases with the stringency of
the pollution control requirement. In contrast, for most Boulton plants,
the cost of Option 3, no discharge, is lower than the cost of Option 1
or Option 2. (The obvious exception to this are the two Boulton plants
who would Incur zero cost under Options 1 or 2).
111—4
-------
TABLE 111—2
O80&IIC -I0UL?
Annual
Operating
Coat.
Plant Type!
Sale.
COST OF C L1A1 E
OPTICU 1; IBAIHZD BIOLOGICAL TRE& T
- ($000)
of Plant. Total
NIM1e Coat Plant High Coat Plant Low Coat Plant
Invea ent
Other
Land Inveat.ent
Annual Invea nt
Operating Other
Coat. Total ! Inveatnent
Inves ant
Other Operating
Total Land Inveaneant Coate
I. ’
p4
I ;.
‘a
$3300
I/A
1
1
68.8 0
54.2 1.0
2
$ 700 3
45.4
0.7
44.8
16.0
54.2
0.8
53.4
17.5
u
U
U
U
ieoo 4
69.1
1.1
68.1
19.2
236.3
3.9
232.4
34.3
64.1
1.0
67.2
18.3
3300 11
108.4
1.8
106.7
23.4
207.5
3.4
204.1
42.3
48.6
1.7
48.0
16.3
7500 9
117.5
1.9
115.6
3.4.2
322.3
3.8
118.4
52.5
42.6
—
42.6
4.7
hA
29
uIC-ST!A 0-D1 ?
68.8
22.8
XX
U
U
U
U
U
U
U
53.2
13.5
U
U
U
U
U
U
U
U
1.3
79.8
22.9
U
X X
U
X X
XX
U
U
U
0.9
59.4
17.1
U
XX
U
U
U
U
U
U
1.7
101.7
23.3
XX
U
U
XX
U
U
U
U
2.8
168.4
29.0
U
XX
U
X X
102.3
1.7
101.7
23.3
4.0
230.0
34.7
956.0
20.0
936.0
93.1
132.3
2.2
130.2
25.7
SCURCE: Environnental Science and
Engineering,
Inc.
$ 200
700
1800
3500
7500
TOE
1
1
1
2
4
9
81.0
60.3
1 02i3
171.1
234.0
D
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TA8LE 111-3
COST OP C(1(PLIANCE
OPTION 2*
($000)
Middle Cost Plant High Coat Plant Lem Coat Plant
Investment Investment Investment
Annual Annual Annual
PLANT TYPE! Other Operating Other Operating Other Operating
Sales • of Plants Total Land Inveatment Costs Total Land Investment Coats Total Land Inveatment Costa
OPGAN10—STEAXING— IRECT
$ 700 2 128.7 0.7 127.1 27.8 U U XX U U U U U
1800 1 166.0 1.0 165.1 33.1 U XX U XX fl fl U
3500 4 306.0 2.6 303.4 55.9 366.2 3.4 362.8 73.8 190.6 1.3 189.3 36.8
7300 1 289.1 2.0 286.7 53.6 389.1 — 389.1 65.1 XX U XX U
TOTAL 8
I. .
O80AMC—STEAJaNG-DIUCT
N/A 1 112.8 2.0 li0.8 27.9 XX XX U U U U U U
C80ANIC—IOULTON
$ 100 159.1 1.7 157.5 32.1 XX XX XX XX U U U
3500 2 176.2 1.7 172.6 51.7 318.3 4.0 314.3 59.1 U XX U XX
7500 3 400.9 5.3 395.7 70.3 528.3 7.8 520.6 87.6 270.1 3.4 266.7 52.4
TOTAL 6
*Option 2: Incremental coats of heavy metals removal for organic steaming, indirect diacharger and Boulton plants were added to Option 1 coats • Costs
for direct discharges represent a higher level of biological treatment than Option 1. Costs for impacted plants only.
SOUR : Enviroemental Science and Engineering, Inc.
-I
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TABLE 111—4
Inve atnent
Annual
Other Operating
__________ I of Plants Total Land Inveatnent Coat.
o &NIC—STWW O-I IUCT
Plant Typel
Sale. ($000 )
Middle Coat Plant
COST OP COMPLIANCE
OPTION 3: ZERO DISCEARCE
($000)
High Cost Plant low Cost Plant
Inveatnent Inveat.met
Annual
Other Operating Other
Total Lend Inveatnent Coats Total Lend Inves nt
‘4
‘4
.4
11
10
2
31
S
1
1
Annual
Operating
Coats
$ 700
1800
3500
7500
N/A , .
TOTAL
o &1Ic-sTwIING-DIREcr
$ 700
1800
3500
N/A
TOTAL
OROANIC-BOULTON
$ 200
700
1800
3500
7500
TOTAL
4
98.7
1.3
97.5
15.9
188.8
1.9
186.9
19.4
27.1
—
27.1
0.6
4
128.3
—
128.5
16.5
312.4
10.4
302.8
22.0
26.4
—
26.4
0.6
183.3
4.8
178.4
17.9
287.3
9.3
278.0
32.5
68.8
—
68.8
22.8
122.2
——
122.2
18.0
403.4
—
403.4
34.9
78.3
0.8
77.6
15.4
72.7
—
72.7
1.6
134.9
—
134.9
3.1
27.1
—
27.1
0.6
26.4
—
26.4
0.6
X X
X X
ER
ER
ER
U
U
X X
176.6
—
176.6
15.3
U
XX
XX
XX
XX
U
U
ER
1
10
109.2
—
109.2
2.5
XX
XX
ER
ER
XX
U
XX
ER
1
62.1
—
62.1
25.7
XX
XX
XX
U
XX
X X
U
U
1
50.6
—
50.6
23.5
ER
XX
XX
ER
ER
ER
U
U
1
71.9
—
71.9
28.4
XX
XX
XX
ER
XX
U
U
U
92.0
—
92.0
35.8
127.0
—
127.0
23.2
XX
U
U
U
110.4
—
110.4
42.3
178.2
—
178.2
89.2
81.6
—
81.6
31.1
2
6
11
Source: Environmental Science and Engineering, Inc.
D
‘1
-I
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DRAFT
Most direct dischargers incur no cost under Options 1 and 2. However,
for the two plants that are impacted, Option 1 is less costly than
Option 3. For the one plant affected by Option 2, the no—discharge
Option 3 is less costly than Option 2.
Table 1 11—5 shows the total costs of compliance that will be incurred
by the direct and indirect dischargers in the wood preserving industry.
In addition, for Option 2, (heavy metals removal, for indirect dischargers;
carbon absorption for direct), the cost of that component was included
only for the estimated 15 plants requiring it, while all other plants
impacted incur Option 1 costs. Total investment cost, based on the
42 plants evaluated will be $4.2 million for Option 1, $7.1 million for
Option 2, and $6.8 million for Option 3. The total investment costs for
direct dischargers under each of the three options are $128,000, $240,000,
and $742,000, respectively.
The cost shown in Table 111—5 are on a worse case basis, assuming plants
install the control technology related to the stated option. Since “no
discharge” is generally less expensive for Boulton plants and steaming
plants than heavy metals removal, the six Boulton plants would presumably
install the Option 3 control equipment under Option 2. Table 111—6
illustrates the total cost of compliance assuming plants will install
Option 3 (no discharge) control equipment where Option 1 or 2 are more
costly. Total compliance costs assuming Installation of the least cost
treatment, are shown in Table 111—6. Under Option 1, indirect dischargers
will incur investment costs of $3.8 million or 27% less than that of
strictly applying Option 1 technology; likewise, costs under Option 2
for indirect dischargers are $4.2 million or 41% less. Costs for direct
dischargers decrease only sightly, from $184,000 to $178,000 when the
least cost treatment is utilized.
111—8
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DRAFT
TABLE 111—5
TOTAL COST OP CO LIANCE
WOOD PRESERVING INDUSTRY
INSTALLING OPTION TECHNOLOGY
(000s)
Investments Annual
I / Other Operating
INDIRECT DISCHARGES Plants Total Land Investment Costs
OPTION 1
Enhanced Biological Treatment
Organic—Steaming 29 2,986 35 2,951 663
Organic—Boulton 9 2,190 40 2,150 300
TOTAL 38 5,176 75 5,101 963
OPTION 2
Heavy Metals Removal
Organic—Steaming 29 3,876 35 3,841 820
Organic—Boulton 9 3,180 95 3,085 450
TOTAL 38 7,056 130 6,926 1,270
OPTION 3
Total Recycle
Organic—Steaming 31 5,691 95 5,596 602
Organic—Boulton U 1,110 —— 1,110 290
TOTAL 42 6,801 95 6,706 892
DIRECT DISCHARGES
OPTION 1: Enhanced Biological
Treatment 2 128 1 127 35
OPTION 2: Enhanced Biological
Treatment with Carbon
Absorption 2 240 4 236 51
OPTION 3: No Discharge 10 742 742 43
SOURCE: Estimated by Arthur D. Little, Inc.using cost of compliance data
developed by Environmental Science and Engineering, Inc.
111—9
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DRAFT
TABLE 111—6
TOTAL COST OF COMPLIANCE
WOOD PRESERVING INDUSTRY
INSTALLING LEAST COST TECHNOLOGY
(000s)
Investment
___________________________ Annual
Other Operating
INDIRECT DISCHARGES Plants Total Land Investment Costs
OPTION 1
Enhanced Biological Treatment
OrganIc—Steaming 29 2,986 35 2,951 663
Organlc—Boulton 9 862 —— 862 340
TOTAL 38 3,848 35 3,813 1,003
OPTION 2
Heavy Metals Removal
Organic—Steaming 29 3,348 35 3,314 585
Organic—Boulton 885 885 _____
TOTAL 38 4,223 35 4,199 1,035
OPTION 3
Total Recycle
Organic—Steaming 31 5,690 95 5,596 602
Organic—Boulton 11 1,110 —— 1,110 290
TOTAL 42 6,880 95 6,706 892
DIRECT DISCHARGES
OPTION 1: Enhanced Biological
Treatment 2 128 1 124 35
OPTION 2: Enhanced Biological
Treatment with Carbon
Absorption 2 178 178 25
OPTION 3: No Discharge 10 742 742 43
SOURCE: Estimated by Arthur D. Little, Inc. using cost of compliance data
developed by Environmental Science and Engineering, Inc.
111—10
-------
DRAFT
E. COST OF COMPLIANCE FOR NEW SOURCES
Costs of compliance for new sources were generated by the technical contractor
for organic plants using the Boulton process and organic steaming methods. New
wood preserving plants using inorganic processes are required to have zero
discharge under BPT guidelines and thus were not analyzed.
The treatment technology for new Boulton plants consists of: 1
• Primary gravity oil—water separation;
• Flocculation followed by rapid sand filtration; and
• Evaporation in cooling tower, with provisions for
additional heat input through a heat exchanger.
The treatment technology for a new steaming plant consists of: 2
• Primary gravity oil—water separation;
• Flocculation followed by rapid sand filtration; and
• Containment and spray evaporation.
Cost of compliance estimates were based upon the plant types and sizes shown
in Table 111—7. Two sizes of Boulton plant are shown (one with two 130’ x 7’
cylinders, and the larger with five cylinders), each treating Douglas fir
poles, which require a long residence time in a retort. Costs were also
developed for two sizes of organic steaming plants treating southern pine
poles. Boulton plants treating southern oak railwood ties would have
production rate and wastewater flows similar to those for the organic steaming
plants,but the treatment technology shown for the Boulton plant.
The cost of compliance with the new source treatment technology is shown
in Table 111—8 for each model plant. The compliance investment and operating
costs reflect only one half of the cost of primary oil—water separation and
the remainder has been included in the new plant baseline data described
1 Reference 1
“I—il
-------
DRAFT
in Chapter II and included in Chapter IV. The total cost of primary oil—water
separation is also shown in Table 111-8; these costs differ by size of plant
but not by treatment method.
111—12
-------
DRAFT
TABLE 111—7
MODEL PLANTS FOR NEW SOURCE PERFORMANCE STANDARDS
Design Production Wastewater
Cubic Feet/ Product Flow
Plant Type Day Type ( Gal. / Day)
Boulton Process
Plant A 3,200 Douglas Fir 4,000
Poles
Plant B 8,000 10,000
Organic Steaming Plants
Plant C 6,000 Southern Pine 2,500
Poles
Plant D 15,000 7,000
SOURCE: Environmental Science and Engineering, Inc.
1 11—13
-------
DRAFT
TABLE 111—8
COST OF COMPLIANCE
NEW WOOD PRESERVING PLANTS
Model Total Operating Acres of Land
Plant Type Investment Cost Required
Boulton Plant A’ $163,530 66,260 1.0
Boulton Plant B ’ 227,560 99,260 1.5
Organic Plant C’ 274,140 73,640 2.0
Organic Plant D 1 437,750 105,300 .8
Total Requirement
Primary Oil—Water
Separation
2—Cylinder Plant 80,000 8,000
5—Cylinder Plant 113,500 9,500
‘Half the investment and operating cost of primary oil/water separation
has been excluded.
SOURCE: Environmental Science and Engineering, Inc.
111—14
-------
DRAFT
IV. ECONOMIC IMPACT ASSESSMENT
This chapter discusses the results of the economic impact assessment of
the costs of complying with the BAT options studied. It also contains
a description of plants that will be required to install or modify
equipment (thus incurring higher costs of operation) to comply with the
studied control options,and compares these plants with those that cur-
rently have self—contained or no discharge.
A. ECONOMIC CHARACTERISTICS OF IMPACTED PLP NTS
As described In Chapter III, only 15% of the plants in the wood preserv-
ing industry will be impacted by the BAT alternatives studied because
the remaining 85% of the industry is currently not discharging a liquid
waste into navigable water or into a municipal system. The impacted
plants were compared with the balance of the industry in several areas
important to determining the impact of the alternatives on the industry:
• Sales
• Process
• Profitability
• Profit Mix
• Location
With the exception of plant sales, size, and location, impacted plants
are not significantly different from non—impacted plants. (See Tables
A—li through A—l4 In Appendix A.) In general, plants impacted by BAT
requirements are larger than non—impacted plants.
Impacted plants also tend to be more highly concentrated in urban areas
than the no discharge plants (71% versus 21%) which are more likely to
be found in a suburban area, as shown in Table IV—i. The impacted plants
located In urban areas account for nearly all of the respondents which
cited a lack of available adjacent land for an effluent treatment system
(18 out of 42 Impacted respondents). Hence, land availability does not
appear to be a problem In suburban or rural locations.
IV-l
-------
TABLE P1-i
LAND AVAILABILITY FOR
DISCHARGING PLANTS
DISCHARGING PLANTS No
Land Availability - Discharge
Type of Available Unavailable No Answer Total Plants
Location II % II % II % 1!
Urban 12 52 21 95 5 50 38 60 60 21
Suburban 7 30 0 0 2 20 9 16 76 27
Rural 4 18 1 5 2 20 7 13 146 52
NoAnswer —— —— —— —— 1 10 1 2 —— ——
Total 23 100% 22 100% 10 100% 55 100% 282 100%
% of Total
Sample (337 Respondents) 7% 7% 3% 16% 84%
SOURCE: EPA Financial 308 Letter.
NOTE: This table includes three plants as “DISCHARGING PLANTS” which the EPA has learned are
“No Discharge” plants.
m
-•1
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DRAFT
B. ECONOMIC IMPACT ON EXISTING INDUSTRY
The economic impacts of the compliance costs for each studied alternative
were analyzed with respect to:
• Price impacts
• Demand reduction/shifts
• Financial effects
• Plant closures, and market structure
A discussion of the sensitivity of the economic impact assessment to
assumptions used is contained in Chapter V, Limitations of Analysis.
1. Price Impacts
The question of potential long—run price impacts resulting from the control
alternatives studied was addressed by estimating the long—run price increases
associated with the costs for each control alternative. The term “long—run
price increase” is used to describe that price increase necessary to recover
all coats associated with a control option, including a normal rate—of—
return on investment. As discussed in Chapter II, the rate—of—return on
investment used was the average value found for the plants responding to the
rate—of—return criteria question posed in the EPA financial 308 Letter.
Chapter V contains a discussion of the sensitivity of the results to rate—
of—return criteria.
Rather than allocate compliance costs and impact among the wood preserving
industry’s products, an estimate was made of the revenue required for the
plant to recover the total cost of compliance. Tables IV—2 through IV—4 contain
the revenue required to recover the costs associated with each of the con-
trol options studied. 1 Since the costs of compliance were developed by
plant, the required revenue for each option is shown for middle cost, high
cost, and low cost plants in each category. The relative increase in
revenue required to recover compliance costs varies with size of plant.
In Tables IV—2 through EV—4, the X’s indicate that there are no relevant
LSee Chapter III for a discussion of the components of each control option.
IV—3
-------
TABLE IV-2
PRICE INCREASES REQUIRED
TO RECOVER COSTS OF COMPLIANCE
OPTION 1: ENHANCED BIOLOGICAL TREATMENT
PLANT TYPE! MIDDLE COST IMPACT HIGH COST IMPACT LOW COST IMPACT
Sales ($000) 11 Plants $000 % Revenue $000 % Revenue $000 % Revenue
INDIRECT STEAMING
$ 700 3 36.7 5% 439 6% X X X X
1800 4 54.1 3 137.5 8 54.1 3%
3500 11 75.1 4 139.8 8 42.3 1
7500 9 88.2 1 207.4 3 36.7 1
N/A 2 N/A N/A xx xx xx xx
TOTAL 29
BOULTON
$ 200 1 59.4 30% xx xx xx xx
700 1 41.0 6 xx xx xx xx
1800 1 70.8 4 xx xx xx xx
3500 2 110.2 3 xx xx 70.8 2%
7500 4 151.5 2 618.2 8 85.6 1
TOTAL 9 D
DIRECT STEAMING
$3500 1 56.4 2% X X xx xx xx
Not Available 1 41.1 XX X X xx xx xx
TOTAL 2
Source: Arthur D. Little, Inc. estimates .INI
-I
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TABLE IV-3
PRICE INCREASES REQUIRED
TO RECOVER COSTS OF COMPLIANCE
OPTION 2
PLANT TYPE! MIDDLE COST IMPACT HIGH COST IMPACT LOW COST IMPACT
Sales ($000) 1/ Plants $000 % Revenue $000 % Revenue $000 %Revenue
INDIRECT— HEAVY METALS
$ 700 2 $88.4 13% $265.8 38% XX XX
1800 1 107.8 6 XX XX XX XX
3500 4 167.9 5 200.0 6 124.2 4%
7500 1 185.1 2 247.0 3 XX XX
TOTAL 8
BOULTON
$ 200 0 XX XX XX XX XX XX
700 1 103.8 15% XX XX XX XX
1800 0 XX XX XX XX XX XX
3500 2 113.5 3 219.8 6% XX XX
7500 3 257.9 3 340.3 5 173.7 2
TOTAL 6
DIRECT-CARBON ABSORPTION 1 78.4 XX XX
* Shown for plants impacted by Option 2, only, assuming installation of Option 2 treatment technology.
Source: Arthur D. Little, Inc. estimates 111
-1
-------
TABLE IV-4
PRICE INCREASES REQUIRED TO RECOVER COSTS OF COMPLIANCE
OPTION 3: TOTAL RECYCLE/NO DISCHARGE
PLANT TYPE/ MIDDLE COST IMPACT HIGH COST IMPACT LOW COST IMPACT
Sales ($000 ) i /Plants $000 % Revenue $000 % Revenue $000 % Revenue
INDIRECT— STEAMING
$ 700 4 54.2 8% 135.2 19% 41.5 6%
1800 4 69.5 4 146.9 8 XX XX
3500 11 97.8 3 154.6 4 55.5 2
7500 10 68.8 1 191.6 3 51.6 1
Not Available 2 N/A N/A XX XX XX XX
TOTAL 31
BOULTON
$ 200 1 48.0 24% XX XX XX XX
700 1 43.9 6 XX XX XX XX
1800 1 66.4 4 XX XX XX XX
3500 2 57.5 2 88.0 3 XX XX
7500 6 75.1 1 114.9 2 61.0 1
a’ TOTAL 11
DIRECT
$700 5 23.7 3 44.2 6 8.8 1
1800 1 8.6 <1 XX XX XX XX
3500 1 75.7 2 XX XX XX XX
Not Available 3 9.7 N/A 35.7 N/A 4.9 NIA
TOTAL 10
Source: Arthur D. Little, Inc. estimates D
-I
-------
DRAFT
plants in that sales/control option category. Also, monitoring costs
used in the analysis were $5,000 and $10,000 per plant per year, as sug-
gested by the Environmental Protection Agency; since EPA has not finalized
its requirements, these costs are likely to change.
The revenue required to recover compliance costs can be viewed as the
average price increase across all products required by a plant in a given
sales category. Obviously,small plants have a higher revenue requirement
due to the fact that compliance costs for a given option are disproportionately
higher for small plants than for large plants.
Since only 15% of the plants in the industry will be impacted by the regu-
lation, the price increases expected from the regulation are likely to
range from 0% to that for the larger plants. The rationale for this is
the fact that the wood preserving industry is competitive and while the
industry demand curve for most preserved wood products is relatively in-
elastic, the demand curve facing individual firms is quite elastic. There
are some factors and circumstances which may enable these plants to obtain
price increases to recover cost including:
• The impacted plants are generally larger than the industry average
• Impacted plants may be in isolated geographic markets
• The general price level inflation in the U.S. (6—8% per year)
may facilitate partial cost recovery.
Prices of preserved wood products have outpaced general price inflation
during the 1970’s. Given “customary”, inflation related, price increases
of 6—8%, impacted wood preservers may be able to recover an additional
1—2% of increased cost associated with pollution control. Also, larger
plants are often associated with multi—plant companies which have some
market power and may be able to obtain a price increase to recover a
portion of the cost of compliance. Finally, plants in locations where
there are few or no competing firms may be able to raise prices, limited
by the cost of transporting products from the nearest plant that is not
impacted.
IV-7
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DRAFT
2. Demand Shifts
The future growth rates in the demand for preserved wood products affect
the ability of impacted plants to obtain price increases. Plants pre-
dominantly producing poles will be unlikely to obtain higher prices
for this product than the industry in the face of a declining demand.
Shifting from poles to other products will increase capacity for other
products which will,in turn, further inhibit the impacted firms’ ability
to increase price.
While the selection of preserved wood versus steel or concrete materials
is predominantly based upon structural requirements, this could change
for railroad ties in the future. If concrete ties prove out technically
and can be produced economically, a portion of the market expansion fore-
cast for ties could be captured by concrete substitutes, especially if
the life cycle costs become more competitive. While this may not be a
factor until the mid—1980’s, that would coincide with the deadline for
BAT compliance and would further prevent the impacted plants from recover-
ing costs of compliance through price increases.
3. Financial Impact
It is unlikely that the impacted plants as a group will be able to
recover the costs of complying with BAT regulations through higher prices.
If they elect to install the pollution control equipment, profitability
is likely to decline. Table IV—5 shows the impact of increased operating
costs and investment upon profitability in the absence of price increases.
The analysis considered the impact on operating costs due to out—of—pocket
expenditures; i.e., while potential interest payments on debt are included
as a cost, the total cost of capital is not included in the figures in
Table IV—4. Also, the lowest—cost means of achieving compliance was used
in the Table IV—l5; i.e., if Option 3 is less expensive than Option 2 for
a plant, it is assumed the plant will install Option 3.
IV-8
-------
TABLE IV-5
WOOD PRESERVING PLANTS
PROFITABILITY WITH NO PRICE INCREASES
BEFORE AND AFTER COMPLLANCE
Sales ($000) $200 $700 $1,800 $3,500 $7,500
Precompliance Profit
Before Tax (% Sales) 1% 6% 3 6% 7%
_____________ Post—Coiup]i ance Profit Before Tax _________
OPTION/PLANT TYPE Middle Low Middle Low Middle Low Middle Low Middle Low
Value Value Value Value Value Value Value Value Value Value
Option 1
Steaming—Indirect XX XX 3% 1% 4% 5% 4% 6%
Boulton* (14%) —— 2 —— 1 —— 5 —— 6 ——
Steaming Direct** XX XX XX XX XX XX 5% XX XX
Option 2
Steaming Indirect* XX XX 3% 1% 1% —— 5% 4% 7% 6%
Bou lton* XX XX 2 —— XX XX 5 —- 6 ——
Steaming_Direc.t** XX XX XX XX XX XX XX XX XX XX
Option 3
Steaming—Indirect XX XX 3% 1% 1% 5% 4% 7% 6%
Boulton (14%) —— 2 —— 1 5 —— 6 ——
Steaming—Direct XX XX 4 5 3 4 XX XX
* Option 3 cost of compliance used where less expensive than Option 1 or Option 2.
** Sales data not available.
SOURCE: Arthur D. Little, Inc. estimates
m
-I
-------
DRAFT
Since the costs of compliance are relatively higher for small plants,
small firms will suffer the greatest decline in profitability as a result
of compliance. The small plants with lowest sales volume would be in a
negative profit situation under all of the control options studied. Plants
in the other sales categories would suffer a decline in profitability but
would still be profitable under each alternative.
The average plant with sales from $700,000 to $3.5 million would not be
subject to as great a reduction in profitabiity. Further, any price
increases the impacted plants are able to obtain would mitigate the re-
duction in profitability for small and medium size plants. However, as
discussed above, price increases that do occur (barring a tight market)
will reflect the cost structure of the larger plants. Even with price
increases, many plants with less than $1.8 million in sales are likely
to become unprofitable if they make the compliance expenditures.
Reduction in profitability is not the only financial impact of the regu-
lation. If one were to assume that all impacted plants could recover the
pollution control expenditures through price increases, it is still likely
that a number of impacted plants would be unable to finance the required
investment.
Figure IV—l depicts the investment required for each of the control
options studied relative to cash flow. For small plants in the $700,000
category, the investment required for all options studied exceeds annual
plant cash flow for all but one plant. Even for larger plants, the
studied alternatives require investment exceeding a single year’s cash
flow, Considering the fact that a portion of the plant’s cash flow must
be used for expenditures other than associated with BAT regulations,
impacted plants will not generate sufficient cash flow to self—finance
compliance with these regulations.
tV—b
-------
FIGURE IV—l
INVESTMENT REQUIRED FOR BAT ALTERNATIVES
AS A PERCENTAGE OF CASH FLOW
Direct
Option 1:
500 Option 3: ‘
Direct
Option 1:
Investment Option 3:
LI
as_a 400
Percent
of
Cash Flow
.
300
0
0
0
200..
a.
.
• Do
• © DO LI
•. C
100.
U
• •
©
• @ 0 Q : o 13 D
•1 1 30 13 o
c i
SALES CATEGORY 700 1,800 3,500 7,500 200 700 1,800 3,500 7,500
($000) “— — ________________ -——-- -
PLANT TYPE ORGANIC - STEAMING ORGANIC - BOULTON
SOURCE: Arthur D. Little, Inc. estimates.
-I
-------
DRAFT
This statement can be placed in perspective by referring to the discussion
of financial characteristics in Chapter II. The impacted plants generate
an annual cash flow equivalent to approximately 4% of sales.’ Table 11-5
indicated that about 3% of sales is reinvested to maintain industry assets,
leaving about 1% of sales for dividends, retained earnings, and other
purposes. Wood preservers would be required to accumulate four years cash
flow in excess of maintenance investment requirements to have available
the equivalent of one year’s cash to Invest in pollution control. There-
fore, any plant with a pollution control investment requirement in excess
of one year’s cash flow will probably have to obtain external financing
between 1979 and 1983 to fund pollution control expenditures if BAT reg-
ulations are required in 1984.
Assuming a plant is viable——i.e., prices will eventually increase to cover
the BAT investment expenditures——a plant will be required to seek f in—
ancing from a parent company or the financial community. As seen in
Table IV—6, the wood preserving Industry is dominated by privately—held
corporations (78% of all plants) and a minority of plants (22%) are pub-
licly—held. Many of the privately—held corporations and proprietorships
are one—plant corporations and effectively the plant and corporate cash
flows are one and the same. Plants that will be impacted by BAT regula-
tions are similar in form of ownership to the industry overall, with 36
(58%) of the direct and indirect dischargers organized as privately—held
corporations.
It is more likely that the privately—held corporations will require ex-
ternal financing to a greater extent than the publicly—held corporations.
In either case, it is less likely that the financial community or parent
corporations would be willing to make investments in financially—nonviable
plants. Based on the financial criteria, any but the larger impacted
plants would make the investment required to satisfy BAT requirements.
LBased upon responses to the EPA Financial 308 Survey.
IV—12
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TABLE IV-6
FORN OF BUSINESS ORGANIZATION BY DISCHARGE STATUS
Primarily Discharging Plants Total Plants
Organic Preservatives Number Percent Number Percent
Proprietorship 1 ‘27 23 10%
Co—op 1° 1 0
Privately—held Corporation 27 53 158 65
Publicly—held Corporation . 2. 45 25
Total 50 100% 241 100%
Total
Proprietorship * * 31 9%
Co—op * * 1 0
Privately—held Corporation 36 58 230 69
Publicly—held Corporation
62 100% 334 100%
NOTE: Totals do not add due to non—response on one question.
This table includes three plants as “DISCHARGING PLANTS” which the EPA has learned are
“No Discharge” plants.
SOURCE: Derived from EPA Financial 308 Survey.
-n
-I
-------
DRAFT
4. Plant Closures
The impacted wood preserving plants (especially the small ones) will be
unable to fully recover costs through price Increases. Further, a
number of plants will have cash flow shortfalls relative to pollution
control investment requirements. These factors point to the likelihood of
plant shutdowns in the wood preserving industry.
An evaluation of whether or not a plant will shut down rather than make
the investment required to comply with pollution control regulations
is imprecise. In the first place, the evaluation is made externally
to the corporate environment and without knowledge or consideration
of corporate goals and objectives. Secondly, the evaluation is based
on financial criteria and,while they are based upon industry data and
a distribution of wood preserving plant rate—of—return criteria,
the criteria may not reflect the actual parameters that will be used
in the individual decision—making process, especially since few plants
provided Information on financial decision criteria. With those caveats
in mind, the analysis indicates that a iumber of plants are likely
to shut down rather than make the investment required for compliance.
Table IV—7 shows the number of plants impacted by the BAT alternatives
studied that are likely to close down rather than make the required
compliance investments. The closure candidates can be characterized
as having:
• Low Sales
• Low Profitability
• Negative Cash Flow
The profitability and cash flow of each discharging plant, derived from the
EPA Financial 308 Letter, was used as the basis for the plant closure evaluation.
The change in operating cost and relationship of investment required
to cash flow was examined under each control option. In this analysis
plants were assumed to install the least costly treatment technology
that would achieve compliance, and thus Option 3 (no discharge) costs
were used if less costly than Options 1 or 2 costs.
IV— 14
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DRAFT
TABLE IV-7
POTENTIAL PLANT CLOSURES UNDER BAT ALTER}TATIVES
Probability of Closure
PLANT TYPE/ Total Option 1 Option 2 Option 3
SALES Plants High Moderate High Moderate High Moderate
ORGANIC- STEAMING— INDIRECT
$700 4 2 1 1 1 2
1800 4 1 1 1 1 2 1
3500 11 1 3 4 1 5 2
7500 10 —— 1
N/A 2 -- - - - - -- - - - -
TOTAL 31 2 6 6 3 8 6
ORGANIC-STEAMING-DIRECT
$700 5 —— —— 2 2
All Others _ -— -— —- —-
10 2 2
ORGANIC-BOULTON
$200 1 1 1 1
700 1 1 1 —— 1
1800 1 —— —— —— —— ——
3500 2 — — —— —— 1 — 1
7500 6 —— —— — — — — —— — —
TOTAL 11 1 1 1 2 1 2
*Assuming inorganic total recycle option will apply, regardless of organic options.
Source: Arthur D. Little, Inc. Estimates
‘v—is
-------
DRAFT
If a plant could finance the pollution control investment from cash flow
and maintain a positive profit margin in the absence of price increases
then the plant was judged likely to remain open. A plant was designated
as a high probability of closure where required investment was on the
order of 200% of annual cash flow and/or post—compliance profit margins
would be negative. Plants judged to have a moderate probability of
closure were those whose investment was 100% to 200% of annual cash flow
but which would still have a positive profit after tax.
Since compliance costs fall disproportionately on smaller plants, plants
with low sales volumes are more highly impacted. Under the control
options studied, up to 12 plants with sales under $3.5 million would
be unlikely to make the investment in control equipment for financial
reasons——i.e., the plant is likely to incur operating losses as a
result of compliance costs or be unable to finance the investment. Under
Option 1, a total of 3 indirect discharge plants have a high probability
of closure and an additional 7 plants have a moderate probability of
closure. Under Option 3 (no discharge) 11 plants would most likely
close down and a potential shut down of 10 others could occur.
5. Employment Effects
Table IV—8 shows the impact on the employment in the wood preserving
industry due to plant closures under the three compliance options.
The decrease in the number of production workers due to plants with
a high probability of closure under each of the options are 68, 136, and
308, production workers (0.9%, 1.8%, and 4.0% of the industry total)
respectively. The estimated loss in production employment if both
plants with high and moderate probabilities of closure were to shut
down are 219, 335, and 618 workers, respectively, or a reduction of
2.9%, 4.4%, and 8.0% in production worker employment for the industry
as a whole.
IV—l6
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DRAFT
TABLE IV—8
WOOD PRESERVING INDUSTRY
EMPLOYMENT LOSSES FROM PLANT CLOSURES
CONTROL OPTION/CLOSURE PROBABILITY
1 2 3
Moderate High Moderate High Moderate High
Steaming 137 54 158 122 215 253
14 14 41 14 41 14
Direct 0 0 0 0 54 41
Total Decrease in
Production Workforce 151 68 199 136 310 308
Combined Moderate and
High 219 335 618
% Reduction for Industry
High Probability Only 0.9% 1.8% 4.0%
Moderate plus High 2.9% 4.4% 8.0%
SOURCE: Based upon 7,700 production workers in 1976, Department of
Commerce, Bureau of Census, Annual Survey of Manufacturers:
General Statistics . Plant production employment data from
EPA Financial 308 survey.
IV—17
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DRAFT
C. ECONOMIC IMPACT UPON NEW SOURCES AND CAPACITY EXPANSIONS
1. Potential for New Plants
The wood treating industry is not capital intensive compared with the average
manufacturing industry; the sales turnover ratios for existing plants in 1976
was found to range from 3.0 to 10.01 or more while the ratio of sales to assets
for most process industries is on the order of 1.0 to 2.5.2 While considerable
excess capacity exists among existing plants, based upon maximum operating
capacities, transportation and other factors make it likely that new capacity
will be built in growing regions (e.g., the South) before excess capacity is
fully utilized in others.
While most new capacity may take the form of Incremental expansion (e.g., the
addition of a new retort at an existing site), some 17% (or 56 out of 338) of
the respondents to the financial 308 letter indicated that their wood treating
plant have begun operation since 1970.
2. Impact Upon New Plants
As described in Chapter II, a number of new wood preserving plant models
were developed to evaluate the impact of new source performance standards.
Process economic models were developed for four different plant types:
• Boulton plants treating Douglas fir poles in the Northwest;
• Organic steaming plants treating southern pine poles;
• Boulton plants treating oak railroad ties in the South;
• Inorganic plants treating southern pine lumber.
Two plant sizes were created for each type: one with two cylinders and
one with five (See Chapter II). As mentioned in Chapter III, existing
standards for new inorganic plants will have no incremental costs of
compliance from BAT revisions. Further, costs of compliance for Boulton
1 Financial 308 letter.
2 Based on data from FTC—SEC, Quarterly Financial Reports .
IV—18
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DRAFT
plants treating oak railroad ties were not generated by the technical contractor.
Table IV—9 depicts the baseline revenues on each model plant as well as the
incremental revenue required to recover costs of compliance (where available).
The model plants are large by industry standards, with production and revenue
levels at the upper end of the spectrum. The revenue required to recover
costs of compliance in the long run is similar to that for existing plants
for Option 3 in the higher sales categories displayed in Table iV—2 through IV—4 which
is the no discharge option. The cost of pollution control equipment per se
would not appear to hinder the addition of new capacity.
If the existing industry BAT requirements are defined as Option 1, then
it is possible that incremental expansion will be favored as a means of -
capacity expansion, especially given the incremental land requirements of a
no discharge new source standard.
IV—19
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DRAFT
TABLE IV-9
IMPACT OF BAT REQUIREMENTS UPON LONG-RUN REVENUE
REQUIRED TO SUPPORT NEW SOURCES
Revenue Required
Annual Baseline for BAT
Plant Type/ Production Revenues Compliance Costs
Product ( 000 Cubic ft.) ( $000) ( $000) % Baseline
A. Boulton/Douglas Fir $ 960 $ ? i834 $154 2%
Poles
B. Boulton/Douglas Fir 2,400 19,328 226 1
Poles
C. Steaming/Southern 1,800 11,345 198 2
Pine Poles
D. Steaming/Southern 4,500 28,082 298 1
Pine Poles
E. Boulton/Oak R.R. 960 6,487 Not Available
Ties
F. Boulton/Oak R.R. 2,400 15,962 Not Available
Ties
C. Inorganic/Southern 1,800 13,413 Not Available
Pine Lumber
H. Inorganic/Southern 4,500 33,276 Not Available
Pine Lumber
SOURCE: Arthur D. Little, Inc. estimates.
IV—20
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DRAFT
V. LIMITATIONS OF ANALYSIS
The results of economic impact assessment are subject to certain lintita—
tions. The factors to which the results are sensitive or which limit
their application include:
1. EPA regulations which affect waste disposal;
2. Return—on—investment criteria;
3. Cost variation from plant to plant;
4. Future growth in demand;
5. Local conditions of impacted plants.
Consideration of the first item was beyond the scope of the technical
contractor’s or economic contractor’s work. It is discussed here because
the economics contractor has developed information in conjunction with
another study that could potentially be useful to the EPA in its eval-
uation of the alternatives studied.
Items 2 through 5 are limiting factors in every analysis of this type,
but the importance of these factors in influencing the results of a study
varies from case to case, and thus requires discussion.
A. EPA REGULATION AFFECTING WASTE DISPOSAL
Subtitle C of the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 (RCRA), creates a regulatory frame-
work to control hazardous wastes. Section 3004 addresses standards for
owners and operators of hazardous waste treatment, storage and disposal
facilities. The regulation impacts the analysis of alternative control
options since it specifies the technical and monitoring requirements for
each disposal method, as well as restrictions on disposal of waste by
method. These in turn, may limit the application of some of the control
options studied, or result in higher costs for an alternative than
indicated by the technical contractor in this report. Further, wood
preserving plants which dispose on—site (28%) may be impacted, in that
the current method of disposal may no longer be environmentally adequate.
V-i
-------
DRAFT
The application of both no—discharge and discharge options studied in
this report will be affected by RCRA regulations. The lagoons associated
with enhanced biological treatment and the impoundment associated with
spray evaporation will both be considered methods of hazardous waste
disposal or storage, and thus plants will be required to monitor ground-
water and surface water as well as to install leachate collection and
monitoring systems.
A leachate collection and monitoring system is not included in the cost
of compliance. Assuming the two aerated lagoon cells combined, or an
impoundment, are analogous to small landfills (5,000M 3 /year) In size,
then the incremental compliance cost per plant could be as follows: 2
Initial Investment: $129,000
Annual Operating Costs: $ 42,200
Another source of additional cost are monitoring requirements. The
cost of analysis for soil and water samples would be on the order of
$60,000 per year.
Consideration of whether or not the sludge and effluent of wood pre-
serving plants were hazardous wastes was beyond the scope of the technical
contractor’s report, 1 although it was discussed in the draft report. For
off—site disposers, the costs of disposal are expected to double or triple
as a result of Section 3004.2 Therefore, that component of the technical
contractor’s operating cost (amounting to about 3% of operating costs)
will be two to thime times as high, but this cost component will not
change the results of the economic impact assessment.
B. RETURN ON INVESTMENT CRITERIA
Table V—i illustrates that the use of a higher or lower target rate of
return than the median value (12%) produces noticeably higher or lower
required revenue to cover cost of compliance. Table V—i compares the
revenue increase requirement for the low and high ROR scenarios for the
sampled plants. The change In requirement from 12% to 5% is relatively
iReference 1.
2 Reference 5. V—2
-------
TABLE V—i
REVENUE REQUIRED BY DISCOUNT RATE
($000s)
DRAFT
Revenue
Required
(1)
12%
Discount Rate
(2)
5%
_.L % Change
(3)
20%
Change
5
3
—40%
39
30
—23
52
73
75
52
—31
113
117
89
59
—22
121
75
108
78
—28
156
100
173
118
—32
258
119
178
130
—27
255
96
FIGURE V—i
REVENUE REQUIREMENT AS PERCENT OF SALES
BY ROR FOR SAMPLE
PLANTS
10
a)
c j
(a
1-i
a)
..-I
0 )
0)
0 )
SALES VOLUME ($000s)
U
0
x
o ROR = 20%
o ROR 12%
XROR 5%
0
0
0
0
x
0
o 0
0O
o 0
x
0
x
1000
xx
2000
3000
4000
x
5000
6000
7000
8000
V- 3
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DRAFT
constant for most sample plants, a decrease of 25%. There is more vari-
ation in the change of requirements from 12% to 20%, the average being
an increase of 120%.
Figure V—2 shows that there is relatively little variation in the revenue
requirement as a percent of sales due to ROR target. The requirement
seems to be higher for either plants of smallest size or after very large
plants with high expenditures, but even these requirements are less than
10% of sales. The bulk of the increases In revenue to maintain target
ROR are within the 1—5% range; on the average, they differ 1% point
by ROR scenario. Therefore the economic impact assessment is Insensitive
to the return on investments.
C. COST VARIATIONS FROM PLANT TO PLANT
In any study of this type, the costs of compliance estimated by the
technical contractor will overstate or understate the costs applicable
to an individual plant by virture of plant—specific conditions. The
technical contractor indicated that cost estimates could vary for an
individual plant between 75% and 150% of the costs for the control options
presented in Chapter III. Sources of the cost difference could include
usable treatment in place, land availability, cost of controls and addi-
tional plant—specific conditions which apply. The cost of compliance
Is based upon land cost/acre and this cost will vary considerably depend-
ing upon the plant location (see responses to Question 7f In Appendix C).
Those plants with lower costs will be less severely impacted by the
alternatives studied. In addition to the understatement of compliance
cost caused by EPA regulations on hazardous waste, there could be plant—
specific conditions (e.g., terrain) which contribute to higher costs.
Plants with higher costs will be more severely impacted by the regulation.
D. FUTURE GROWTH IN DEMAND
If the future growth forecast for railroad ties and timbers does not
materialize or if the rate of decline in poles is greater than forecast,
the number of potential closure candidates will increase. If, on the
V- 4
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DRAFT
other hand, demand growth is greater by virtue of a strong housing market
growth and accellerated repair of railroads, then the number of plant
closures will be fewer than indicated. This happens because the supply/
demand balance is such that high cost plants (including plants impacted
by the regulation) determine price and therefore can recover costs of
pollution control investment.
E. LOCAL CONDITIONS OF IMPACTED PLANTS
The analysis of plant closures in Chapter IV is subject to the limitations
of any plant closure analysis (described in Chapter IV). In addition,
local market conditions of some impacted plants will determine to a
significant extent whether a plant will shut down rather than comply
with a regulation. For example, if an impacted plant were in a market
area where there were virtually no competing firms, it may be able to
increase its price and recover the cost of installing control equipment,
limited by the cost of transportation of the closest competing firm.
This would also be the case if all the plants in an area were required to
make equivalent expenditures to comply with pollution control require-
ments. Local conditions could produce a worse impact than described in
Chapter IV, if for example, most of the firms in the area are not impacted
and thus the impacted plant would have very little chance in recovering
costs of a pollution contol.
V- 5
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DRAFT
APPENDIX A
SUPPLEMENTARY DISCUSSION
1. Industry Characterization
2. Pro Forma New Source Models
3. Characteri3tiCs of Impacted and Non—Impacted Plants
-------
DRAFT
A-i. INDUSTRY CHARACTERIZATION
(Supplement to Chapter II)
Product Diversification
It is primarily the largest companies in the industry which produce a
wide range of products. Most firms in the industry operate only one
plant. In these cases, the plant produces organically treated products
or inorganically treated products, although some single plant firms
produce both organically and inorganically treated products. Furthermore,
smaller firms tend to specialize on particular preserved wood products.
For example, a firm may produce only preserved railroad ties or posts
or pilings or dimensional lumber. For many of the smaller firms,
wood preserving is a service offered by a company in the lumber and wood
products business.
Imports and Exports
Import and export statistics do not distinguish preserved wood products
from other wood products. However, piling, utility poles, and railway
crossties are likely to be preserved when imported or exported. Table A—i
and A—2 show U.S. imports and exports of these products for the period
1970 through 1977. Imports, primarily from Canada, have been in the range
of $10 million to $15 million per year in recent years. Exports, primarily
to wood poor regions such as the Middle East and Japan, have totaled $20 million
to $35 million in recent years. It is estimated that 10% to 15% of the
U.S. production of utility poles are exported. With this exception,
imports and exports do not constitute a sizeable portion of any other
preserved woo 1 markets.
A-l
-------
TABLE A-i
U. S. IMPORTS OF PRESERVED WOOD PRODUCTS 1
Timber, Poles, Piling, Posts,
and Other Wood in the Rough Railroad Ties Total
Value 2 Quantity Value 2 Value 2
($1,000) (MBF) ($1,000) ($1,000)
.
1970 7,733 8,418 717 8,450
1971 8,633 3,363 385 9,018
1972 9,369 7,924 757 10,126
1973 8,654 11,308 1,505 10,159
1974 15,069 13,916 2,566 17,635
1975 9,868 12,475 2,625 12,493
1976 10,615 8,164 2,314 12,929
1977 10,011 7,367 1,370 11,381
‘U.S. import statistics do not distinguish preserved wood products from other wood products, but the
products shown are predominantly preserved wood products. D
Values shown are f.a.s. (free alongside ship) values.
Source: U.S. Department of Commerce, Bureau of the Census, U.S. Imports - Schedule A, Commodity by
Country , FT 135.
-n
-I
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TABLE A-2
U.S. EXPORTS OF PRESERVED WOOD PRODUCTS 1
Railway Crossties & Railway Crossties &
Year Piling Utility Line Poles Mine Ties—Softwood Mine Ties—Hardwood Total
Quantity Value 2 Quantity Value 2 Quantity Value 2 Quantity Value 2 Value 2
(LFT) ($1,000) (Nuniber) ($1,000) (MBF) ($1,000) (MBF) ($1,000) ($1,000)
1970 5,055,702 1,935 160,526 5,526 4,052 353 11,626 2,065 9,879
1971 3,119,931 1,646 71,717 2,385 4,343 509 7,486 1,320 5,860
1972 2,231,276 1,355 102,869 3,935 6,027 1,131 11,568 1,937 8,358
1973 3,210,603 1,931 151,661 6,631 4,209 631 4,979 858 10,051
1974 7,802,427 5,730 169,602 12,163 33,113 3,900 21,617 3,977 25,770
1975 4,104,573 4,090 202,012 15,872 28,224 3,196 47,319 9,636 32,794
1976 2,599,684 2,251 298,439 16,350 15,903 1,859 1.5,003 3,242 23,702
1977 3,096,484 3,124 250,936 16,708 9,355 1,015 9,855 2,423 23,270
0
‘U.S. export statistics do not separate preserved wood products from other wood products, but the
products shown are predominantly preserved wood products.
2 Values shown are f.a.s. (free alongside ship) values at U.S. port.
Source: U.S. Department of Commerce, Bureau of the Census, U.S. Exports — Schedule B, Commodity by
Country , FT 410.
-I
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A-2. PROaFORMA NEW SOURCE MODELS
A-4
DRAFT
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__ DRAFT
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD - ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $2,165,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 30 hours per charge (Boultonizing)
3 shifts per day, 300 days per year.
Product: 960,000 cubic feet per year of Railroad Ties
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wood Cubic feet $2.15 1.0 2,15 2,064
Creosote Gallons $0.70 1.0 0.70 672
Total Raw 2.85 2,736
Materials
Processing:
Labor,
Operating Man hours $6.00 0.324 311
Labor,
Maintenance Man hours $6.50 0.090 86
Mace
Supplies 0.090 86
Consumable
Supplies 0.046 46
Fuel and
Power 0.135 132
Plant
Overhead 50¼ of Labor 0.207 199
Taxes and
Insurance 4% of Capital 0.090
Total Processing 0.982 943
Total Cost,
F.O.B. Plant 3.832 3,683
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A-5
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__ DRAFT
PLANT A-2
ESTiMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD — ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $4,557,000 (1978)
Location: South Central -
Production: 2000 cubic feet per charge; 30 hours per charge (Boultonizing)
3 shifts per day, 300 days per year.
Product: 2,400,000 cubic feet per year of Railroad Ties
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wood Cubic feet $2.15 1.0 2.15 5,160
Creosote Gallons $0.70 1.0 0.70 1,680
Total Raw 2.85 6,840
Materials
Processing:
Labor,
Operating Man hours $6.00 0.012 0.324 778
Labor,
Maintenance Man hours $6.50 0.003 0.090 216
Maintenance
Supplies 0.090 216
Consumable
Supplies 0.046 110
Fuel and
Power 0.135 326
Plant
Overhead 50% of Labor 0.207 497
Taxes and
Insurance 4% of Capital 0.075 182
Total Processing 0.967 2,325
Total Cost,
F.O.B. Plant 3.817 9,165
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A—6
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__ DRAFT
PLANT B—i
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD - ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each V diameter x 130’ long, 5000 cubic feet
Capital Cost: $2,165,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year.
Product: 1,800,000 cubic feet per year of Southern pine poles
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Woc d Cubic feet $3.00 1.0 3.00 5,400
Pentachloro—
phenol Pounds $0.42 0.5 0.21 378
Total Raw
Materials 3.21 5,778
Processihg:
Labor,
Operating Man hours $6.00 0.173 311
Labor,
Maintenance Man hours $6.50 0.048 86
Main ten ance
Supplies 0.048 86
Consumable
Supplies 0.024 46
Fuel and
Power 0.072 132
Plant
Overhead 50% of Labor 0.111 199
Taxes and
Insurance 4% of Capital 0.048 87
Total Processing 0.524 947
Total Co’st,
F.O.B. Plant 3.734 6,725
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A- 7
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__ DRAFT
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD — ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $4,557,000 (1978)
Location: South Central -
Production: 2000 cubic feet per charge; 1.6 hours per charge (Steaming)
3 shifts per day, 300 days per year.
Product: 4,500,000 cubic feet per year of Southern pine poles
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wood Cubic feet $3.00 1.0 3.00 13,500
Pentachioro—
phenol Pounds $0.42 0.5 0.21 945
Total Raw
Materials 3.21 14,445
Processing:
Labor,
Operating Man hours $6.00 0.173 778
Labor,
Maintenance Man hours $6.50 0.048 216
Maintenance
Supplies 0.048 216
Consumable
Supplies 0.024 110
Fuel and
Power 0.072 326
Plant
Overhead 50% of Labor 0.111 497
Taxes and
Insurance 4% of Capital 0.041 182
Total Processing 0.517 2,325
Total Cost,
F.O.B. Plant 3.727 16,770
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A-8
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TABLE A-7
PLANT C-i
ESTiMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD — ORGANIC TREATMENT
DRAFT
Cylinder Size:
Capital Cost:
Location:
Production:
Product:
Raw Materials:
Wood
Pentachioro—
phenol
Total Raw
Materials
Processing:
Labor,
Operating
Labor,
)la in tenance
Maintenance
Supplies
Consumable
Supplies
Fuel and
Power
Plant
Overhead
Taxes and
Insurance
Total Processing
Total Cost,
F.O.B. Plant
Source : Arthur D. Little, Inc., estimates based on industry
Item
Units
Per
Dollars Per
Thousand
Dollars
Cubic
Foot
Cubic Foot
Per Year
2 cylinders, each 7’ diameter x ].30’long, 5000 cubic feet
$2,382,000 (1978)
West Coast
2000 cubic feet per charge; 30 hours per charge (Boult0 d)
3 shifts per day, 300 days per year.
960,000 cubic feet per year of Douglas fir poles
Units Unit Cost __________ ___________
Cubic feet $3.40 1.0
Pounds $0.42 0.75 ____
Man hours $6.00
Man hours $6.50
50% of Labor
4% of Capital _____
3.40 3,264
0.32 307
3.72 3,571
0.324 31].
0.090 86
0.090 86
0.046 46
0.135 132
0.207 199
0.099 95
0.991 955
4.711 4,526
interviews.
A-9
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TABLE A-8
PLANT C—2
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD — ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $5,013,000 (1978)
Location: West Coast
Production: 2000 cubic feet per charge; 30 hours per charge (Boultonized)
3 shifts per day, 300 days per year.
Product: 2,400,000 cubic feet per year of Douglas fir poles
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wood Cubic feet $3.40 1.0 3.40 8,160
Pentachioro—
phenol Pounds $0.42 0.75 0.32 768
Total Raw
Materials 3.72 8,928
Processing:
Labor,
Operating Man hours $6.00 0.324 778
Labor,
Maintenance Man hours $6.50 0.090 216
Maintenance
Supplies 0.090 216
Consumable
Supplies 0.046 110
Fuel and 326
Power 0.135
Plant
Overhead 50% of Labor 0.207 497
Taxes and
Insurance 4% of Capital 0.084 200
Total Processing 0.976 2,343
Total Coit, 4.696 11,271
F.0.B. Plant
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A-l0
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TABLE A—9
PLANT D-l
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD - ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $2,165,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year.
Product: 1,800,000 cubic feet per year of Southern pine lumber
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wogd Cubic feet $3.60 1.0 3.60 6,480
CCA Pounds $1.00 0.33 0.33 594
Total Raw
Materials 393 7,074
Processing:
Labor,
Operating Man hours $6.00 0.173 311
Labor,
Maintenance Man hours $6.50 0.048 86
Maintenance
Supplies 0.048 86
Consumable
Supplies 0.024 46
Fuel and
Power 0.072 132
Plant
Overhead 50% of Labor 0.111 199
Taxes and
Insurance 4% of Capital 0.048
Total Processing 0.524 947
Total Cost,
F.O.B. Plant 4.454 8,021
Source : Arthur D. Little, Inc., estimates based on industry interviews.
A-li
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___ DRAFT
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF
PRESERVED WOOD — ORGANIC TREATNENT
Cylinder Size: 5 cylinders, each 7’ diameter x 130’ long, 5000 cubic feet
Capital Cost: $4,557,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year.
Product: 4,500,000 cubic feet per year of Southern pine lumber
Thousand
Units Per Dollars Per Dollars
Item Units Unit Cost Cubic Foot Cubic Foot Per Year
Raw Materials:
Wood Cubic feet $3.60 1.0 3.60 16,200
CCA Pounds $1.00 0.33 0.33 1,485
Total Raw a .
J .7J LI ,
Materials
Processi g:
Labor,
Operating Man hours $6.00 0.173 778
Labor,
Maintenance Man hours $6.50 0.048 216
Maintenance
Supplies 0.048 216
Consumable
Supplies 0.024 110
Fuel and
Power 0.072 326
Plant
Overhead 50% of Labor 0.111 497
Taxes and
Insurance 4% of Capital 0.040 182
Total Processing 0.516 2,325
Total Cost,
F.0.B. Plant 4.446 20,010
Source : Arthur D. Little, Inc., estimates based on industry interviews.
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DRAFT
A—3 CHARACTERISTICS OF IMPACTED
AND NON-IMPACTED PLA}iTS
(Supplement to Chapter IV)
The impacted plants were compared with the balance of the industry in
several areas important to determining the Impact of the alternatives
on the industry. TableA—il depicts the distribution of wood preserving
plants by sales level, type of preservative, and current water effluent
status. As described in Chapter III, direct discharge plants predominantly
use organic preservatives. Additionally, they are larger, with 55% of
the direct discharge plants in the highest sales category compared
with 14% of the “no discharge” plants in the organic category. Indirect
discharge plants in the organic category also tend to have a higher sales
volume than the average “no discharge” plant in the industry ($3.8 million
versus $2.1 million).
A-13
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LABLE A-li
SALES LEVEL MID PRESERVATiVE CATEGORY
DRAFT
BY CURRENT WATER EFFLUENT STATUS
Indirect
Dis charge
II
No Discharge/
Other Total
II ¼
Direct
Discharge
II ¼
6 54%
1 10
2 18
2 18
11 100%
1
5
4
11
17
38
3%
13
10
29
45
100%
Sales ($000)
ORGAN IC*
Under $300
$30 1—$ 1, 200
51,201—52 ,400
$2 ,401—$4 ,800
Over $4,800
TOTAL
INORGAN IC
Under $300
$301—Si, 200
$1, 201—52,400
$2, 401—$4 ,800
Over $4,800
TOTAL
TOTAL
Under $300
5301—51,200
$1,201—$2 ,400
$2,401—$4 ,800
Over $4,800
—— —— 3 75%
—— — — 1 25
—- —— 4 100%
1!
42
58
26
31
27
184
20
23
9
4
3
59
62
81
35
35
30
243
23%
32
14
17
14
100%
34%
39
15
7
5
100%
26%
33
14
14
13
100%
43
69
31
44
46
233
23
23
10
4
3
63
66
92
41
48
49
296
18%
29
13
19
21
100%
36
36
16
6
6
100%
22
31
14
17
16
100%
6
1
2
2
11
54%
10
18
18
100%
4 10%
5 12
5 12
11 26
17 40
42 100%
TOTAL
*piaflt3 classified according to predominant category of preservative
used.
NOTE: Totals in this and following tables may not add to number of
responses (337) as some respondents did not answer every
question.
This table includes three plants as “DISCHARGING PLANTS” which
the EPA has learned are “No Discharge” plants.
SOURC: EPA Financial 308 Letter.
A- 14
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DRAFT
Table A—i2 contains the distribution of wood preserving plants by pro-
fitability and discharge status. Indirect dischargers’ profit before tax
is comparable to the “no discharge” group. Direct discharge and Boulton
plants, though few in number, are less profitable than all plants in
their industry and other plants at comparable sales levels. A lower
cash flow than average is generally associated with lower profitability.
Analysis of historic data 1 and other reports on the wood preserving
industry 2 led to the conclusion that poles are a declining product.
Table A—].3 contains the distribution of direct and indirect discharge
plants by the portion of their sales derived from treating poles. Seven-
teen plants that will be impacted by the BAT alternatives derive under
30% of their sales from poles while 6 plants have between 30 and 70%
of their sales derived from poles. Twenty impacted plants derive over
70% of their sales from poles.
Since the name and location of respondents to the Environmental Protection
Agency Financial 308 Letter were unknown in this analysis, the plant loca-
tions cannot be directly ascertained. Therefore, the origin of the pre-
dominant portion of wood treated has been used as a proxy for location.
As seen in TableA—14, wood origin for discharging plants is distributed
similarly to that for “no discharge” plants and it is dispersed over all
regions.
‘Reference 2
2
Reference 3,4
A-15
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TABLE A—12
PROFIT BEFORE TAX
BY CURRENT WATER EFFLUENT STATUS
1976 Profit Before steaming
Tax as a Percent Direct Indirect Boulton No Discharge Total**
ofSales % % % II % II
Under 1% 4 58% 4 15% 3 43% 64 28% 76 28%
= : :: :: :
9% — 12% 8 31 34 15 45 16
Over 12% 2 8 30 13 33 12
TOTAL 7 100% 26 100% 7 100% 229 100% 273 100%
4 Not broken out to prevent disclosure of confidential information.
*Inc].udes five inorganic plants currently not in compliance with BPT.
SOURCE: Derived by Arthur D. Little, Inc., from Environmental Protection Agency Financial D
308 Letter.
-n
-I
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DRAFT
TABLE A-l3
PORTION OF TOTAL SALES
CONTRIBUTED BY POLES AND PILINGS
IN PLANTS USING ORGANIC PRESERVATIVES*
Discharging No Discharge
% of Sales in Plants Plants Total
Poles 6 Pilings % I JL _L
Under 30% 17 39% 36 32% 53 34%
31—70% 6 14 30 27 36 24
Over 70% 20 47 45 41 65 42
Total Respondents 43 100% 111 100% 154 100%
*None of the impacted plants in the inorganic category derived more
than 30% of their sales from poles.
SOURCE: Derived by Arthur D. Little, Inc., from Environmental
Protection Agency Financial 308 Letter.
A-17
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DRAFT
TABLE A-14
WOOD ORIGIN
BY CURRENT WATER EFFLUENT STATUS
Impacted Plants Total
I! % __ __
Northeast 1 2 15 4%
Northwest 8 15 65 20
Southeast 31 57 146 45
Southwest 7 13 39 12
Midwest 4 7 40 12
Other 4 6 24 7
TOTAL 55 100% 330 100%
SOURCE: Derived by Arthur D. Little, Inc., from Environmental
Protection Agency Financial 308 Letter data.
A-18
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APPENDIX B
RESPONSES TO EPA FINANCIAL 308 SURVEY
DRAFT
-------
DRAFT
RESPONSES TO EPA FINANCIAL 308 SURVEY
*
1/ 70
Total Mailed 601 ——
Total Responses 451
less duplicates 27 ——
Net Responses 424 87.1%
Total Applicable Responses 337 69.2%
Total Non—Applicable Responses 87 ——
No Answer 150 30.8%
*Based on sum of “Total Applicable” and “No Answers” (487)
Source: Arthur D. Little, Inc., analysis.
B—i
-------
APPENDIX C
REFERENCES
DRAFT
-------
DRAFT
REFERENCES
1. Revised Technical Review of Best Available Technology, Best Demon-
strated Technology and Best Demonstrated Technology and Pretreatment
Technology for the Timber Products Point Source Category , report to
the Environmental Protection Agency, Project No. 78—052, September 1,
1978.
2. Annual Survey of Manufactures , U.S. Department of Commerce, various
years.
3. The Analysis of Existing Wood Preserving Techniques and Possible
Substitutes , report to the U.S. Environmental Protection Agency,
Contract No. 68—01—4310, The MITRE Corporation, June 1977.
4. Wood Preservation Statistics , 1976, Ernst and Ernst.
5. Trend Impact Analysis Study of the Wood Preserving Market , Dow
Marketing Research Reports, February 1976.
6. Economic Impact of Section 3004 of the RCRA upon Hazardous Waste
Management Facilities , draft report to the U.S. Environmental
Protection Agency, Office of Solid Waste, March 1978.
7. Subpart D, Standards for Owners and Operators of Treatment, Storage,
and Disposal Facilities, Resource Conservation and Recovery Act ,
draft regulations, U.S. Environmental Protection Agency, Hazardous
Waste Management Division, September 1978.
C—i
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APPENDIX D
EPA FINANCIAL 308 SURVEY
DRAFT
-------
DRAFT
308 QUESTIONNAIRE
WOOD PRESERVING
Company Code #______________
(for EPA use)
NOTE: Upon receipt by EPA, this page will be separated from the remainder of the questionnaire so
that data processing and use of the data is conducted on a coded basis by its contractor.
i. Name of Plant
ii. Plant Site Address
Street
City State Zip
iii. Name of Respondent*
iv. Address of Respondent
Street City State Zip
v Telephone of Respondent
vi. Parent Company
vu. Total number of wood treating wood plants owned by parent
viii. Is this plant engaged in treating wood products?
Yes 0 Continue with Questionnaire
No 0 Do not fIll out the questionnaire but return after completing this page, through Question
viii with a cover letter describing the nature of your business.
ix. To assert your claim of confidentiality, please check off the box corresponding to the questions,
which, in the company’s opinion, require confidential treatment.
10 50 100 140 180 220 260
20 70 lID 150 190 230
3 0 80 12 0 16 0 20 0 24 0
4 0 90 13 0 17 0 21 0 25 0
*Person to be contacted in case of questions.
D- 1
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DRAFT
308 QUESTIONNAIRE
WOOD PRESERVING
Company Code ______________________
(for EPA use)
A. GENERAL INFORMATION
1. What is the form of business organization of this plant?
Proprietorship or Partnership 0
Co-op 0
Privately-held Corporation D
Publically-held Corporation 0
2. Is this wood treating plant a stand-alone operation or part of a multi-plant complex at this
location?
Stand-alone 0
Multi-plant complex 0
3. Approximately what percent of total sales at this complex or plant was from wood treating
inFY l976? ____%
4. Is this plant at an urban, suburban, or rural location?
Urban 0
Suburban 0
Rural 0
5. What year did the wood treating plant begin operation?
D— 2
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DRAFT
B. EFFLUENT INFORMATION
6. How does this plant dispose of liquid process waste’
a. Discharge into navigable water £3
b. Discharge into municipal sewer 0
c. Disposed on plant site 0
d. Disposed off plant site 0
e Process waste is recycled (no discharge) £3
f. This plant does not generate liquid process waste 0
g. Other 0 Please specify
IF THE ANSWER TO QUESTION 6 IS (c), (d), (e), OR(f), YOU MAY OMIT ANSWERS TO THE
FOLLOWING QUESTIONS
7,10,20, 21b, 22,25
7.a If you do not discharge liquid process waste into a municipal sewer, do you have the option to
connect
Yes 0 No 0 Don’t Know 0
b. If you do have the option to connect to a municipal sewer, what is the initial capital mvestment
cost 1
$ ___________________ Don’t Know 0
c. If you discharge any wood treating process waste into a sewer system, on what basis are your
sewer charges made?
Flat annual fee 0
Gallon of effluent 0
Other 0 Please Specify
d. If you discharge into a municipal sewer, what were your total sewer charges in 1976? $ _________
e If you discharge liquid process waste into navigable waters, do you have an NPDES permit?
Yes 0 No 0 Don’t Know £3
f. Do you own or have available for purchase about one acre of land at or adjacent to this facility
that could be used for an effluent treatment system?
YesD NoD
If yes, what is the current market value per acre? $ ______________
C. SALES AND PRODUCT MIX
8. Fiscal year 1976 wood treating plant sales (thousands of dollars).
Under 70 0 301-700 0 1,801-2,400 0 4,801-7,200 0
71-155 0 701-1,200 0 2,401-3,200 0 7,201-11,500 0
156-300 0 1,201-1,800 0 3,201-4,800 D More than 11,500 0
D- 3
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DRAFT
9. Which of the following product types are treated at this plant
Treated As a percent of Plant Sales
Treated Wood Products at Plant Under 10 11-30 31-50 51-70 71-90 Over 90
a. Orgamc (Oil or Dual Oil
and Salt Treatment)
(1) Railroad Ties 0 0 0 0 0 0 0
(2) Pilings, Poles 0 0 0 0 0 0 0
(3) Timber, Lumber,
andOther 0 0 0 0 0 0 D
b. Inorganic (Salt Based)
(1) Pilings, Poles 0 0 0 0 0 0 0
(2) Timber, Lumber,
andOther D 0 0 0 0 0 0
10 a. Are any changes (other than normal business fluctuations) planned in production process or product
mix?
Yes 0 No 0 (If No, Go to Part D)
b. Process change towards
More Organic 0 More Inorganic 0
Less Organic 0 Less Inorganic 0
c. Product Mix Change
More Ties 0 More Poles 0 More Other 0
Less Ties 0 Less Poles 0 Less Other 0
d. Other, please specify nature of change
D. PLANT CAPACITY AND PRODUCTION
11. What is your peak design capacity (or peak capacity as modified)? ______________________ cu. ft.
Cubic Feet/24 hour periodt
12.a. What region of the country is the origin of most of the wood treated at this facility?
Northeast 0 Southeast 0 Midwest 0
Northwest 0 Southwest 0 Other 0
b. Is the wood mostly:
Hardwood 0 or Softwood 0
1f unable to calculate peak (design) capacity by the formula shown in “DEFINITIONS” attach a separate sheet describing
the radius and length of each cylinder.
D-4
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DRAFT
13 Typical number of production days per
1-40 50 60 70
14. Number of weeks at each shift level (total should add to 52 weeks):
No. of Weeks
a. ________________ at 0 shifts (shut down or no wood preserving)
b. ________________ at I shift
c. ____________________ at 2 shifts
d. _________________ at 3 shifts
e. __________________ at 4 shifts
52 Weeks TOTAL OF (a)+(b)+(c)+(d)+(e)
15. 1976 Production (Thousands of cubic feet)
16. Typical number of production workers in 1976:
1-3 0 7-9 0 20.34 0 49-75 D 100-125 0
4-6 0 10-19 0 35-48 0 76-99 0 Over 125 0
17. This facility is primanly engaged in (a) treating service only (TSO), and or (b) treating owned wood
products for sale to others
Approximate Percent of Sales
Under 10 10-25 26-50 51-75 Over 75
a. Treating Service Only 0 0 0 0 0
b. Treating Owned Wood Products 0 0 0 0 0
18. What proportion of owned wood is from company-owned timberland?
Approximate Percent of Owned Wood Supply
None 1-24 2549 50-74 75.100
0 0 0 0 0
D-5
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DRAFT
E. FINANCIAL STATEMENT
19. Revenue and Expenses
Check the box for each item which most closely approximates your 1976 fiscal year expenses as a
percent of sales.
Cost as a Percent of Plant Sales
Under 10- 16- 22- 29- 39- 49- Over
10 15 21 28 38 48 60 60
a.WoodCost 0 0 0 0 0 0 0 0
b. Other Materials Cost 0 0 0 0 0 0 0 0
c.PayrollCost 0 0 0 0 0 0 0 0
Under 1 1-2 3-5 6-8 Over 8
d. Depreciation 0 0 0 0 0
Under 10 11-15 16-25 26-30 Over 30
e.GrossMargin 0 0 0 0 0
Under 1 1-5 6-10 11-15 Over 15
f. General andAdministrative Cost 0 0 0 0 0
Under 1 1-4 5-8 9-12 Over 12
g. Interest Expense 0 0 0 0 0
Under 1 1-4 5-8 9-12 Over 12
h. Profit Before Tax 0 D 0 0 0
Under 1 1-2 3-4 5-7 Over 7
i. Profit After Tax 0 0 0 0 0
20. How representative was this plant’s 1976 profit before tax experience versus the average for 1971-1975?
About the same 0
Better than Average 0
Worse than Average 0
D-6
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DRAFT
21. Factors related to Revenues and Expenses
a. Fixed Costs: If the plant faces lease, rental or mortgage commitments beyond 1976, (for build-
ings or equipment), indicate the average annual charges and the year the commitments expire.
Leases! Wood Debt
Rental 0 Contracts 0 Payment 0 Other* 0
(1) Average AnnualCharge: $_________ $__________ $__________ $___________
(2) Commitment Expires: 19 19 19 19
(if other commitments attach separate sheet)
b. What Depreciation Method is Used: Equipment Buildings
(1) Book Basis:
Straight-Line 0 0
Double-Declining Balance 0 0
Sum of Year’s Digits 0 0
Other 0 0
(Please Specify)
(2) Tax Basis:
Straight Line 0 0
Double-Declining Balance 0 0
Sum of Year’s Digits 0 0
Other: 0 0
(Please Specify)
(3) Pollution Control Equipment Amortization:
Accelerated Over 5 Years 0
Same method as other equipment 0
22. Unusual Production Costs
Are there any circumstances peculiar to this plant which result in unusual production costs?
Yes 0 NoD
If Yes, please descnbe:
D-7
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DRAFT
23. Historical/Annual Cost of Pollution Control and Other Environmental Regulations:
Don’t
Know None Fiscal Year Ending
1975 1976
(1) Water Pollution Regulations:
(a) Annual Operating Costs 0 0 $_________ $
(b) Annual Depreciation Charges 0 0 $_________ $_________
(2) Solid Waste Disposal (including waste
water sludge and wood waste, con-
tract hauling):
(a) Annual Operating Costs 0 0 $_________ $ _________
(b) Annual Depreciation Charges 0 0 $ _________ $ _________
(3) Other Environmental Regulations Air OSHA
Affecting Production Processes
and Production Costs 0 0
(Please Specify)
(a) Annual Operating Costs 0 0 $ _________ $ _________
(b) Annual Depreciation Charges 0 0 $ __________ $ _________
(4) Other Administrative Costs:
Environmental department,
research, litigation, consultants,
additional administrative costs. 0 0 S _________ $ __________
24. Value of wood treating plant Assets and Liabilities (as of the end of the most recent fiscal year).
a. Net Fixed Assets (Gross Fixed Assets
less cumulative depreciation) $ _______________ Don’t Know 0
b. Total Assets: (Net Fixed Assets, Cash
receivables, inventory, other assets) $ _________________ Don’t Know 0
c. What was the value of this wood treating
plant’s accounts receivable? $
d. What was the value of this wood treating
plant’s accounts payable? $
e. Current Plant Debt (i.e., debt maturing in
current year or payable on demand). $
1. Long-Term Plant Debt (debt maturing
beyond the current year (1977]) $
g. Total Plant Liabilities (long-term debt,
accounts payable, deferred taxes, other
debt, etc.) $
D-8
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DRAFT
25. Capital Investment Criteria for the Plant
a. What investment criteria do you use?
Return on Investment (ROl) 0
Pay back 0
Discounted Cash Flow 0
Other 0
b. If you use return on investment criteria:
(1) What is the target internal pre-tax rate of return on capital required for investment in
this plant?
(2) At what RO! would you consider plant shutdown? ______________________________
c. If you use pay back period criteria, what is the required payback period for investment?
years
d. What is the current long term interest rate you must pay for new capital?
percent per year
26. Capital Investment for the Plant (not including capitalized operating or maintenance expenses).
(1) (2) (3)
Other Environmental
Total Capital Water Pollution Regulation (State or Federal)
Investment Control Impacting Production Processes
(Actual) 197 1-76 S _________ S _________ $ __________
(Planned) 1977 $ _________ S _________ $ _________
D—9
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STRAIGHT TABULATION OF WOOD PRESERVING INDUSTRY RESPONSES
DRAFT
A. GENERAL INFORMATION
1. What is the form of business organization of this plant?
Number Percent
31 9.28
1 .30
230 68.86
72 21.56
334 100.00
operation or part of
Proprietorship or Partnership
Co—op
Privately—held Corporation
Publically—held Corporation _____
Total
2. Is this wood treating plant a stand—alone
a multi—plant complex at this location?
Number
268
67
335
Stand—alone
Multi—plant complex
Total
Percent
80.00
20.00
100.00
D—1O
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DRAFT
3. Approximately what percent of total sales at this complex or plant was
from wood treating In FY 1976?
0 1—9 1O— 9Z 20—29 30—3 41 —4
I I I I I I
11 211 101 51 61 5
£ 3.2971 6.2311 2.967! 1.4841 1.7ROT I.4b4
I I I I I
1 21 10 5 6 5
0.297 6.231 2.967 1.484 1.78J 1.4 34
6O—69 70—7° t d0—R9 90—99
£ I 1 I I I
1 171 21 151 221 581 number
I i.J451 0.5931 4.etS II 6. 28I 17.2111 percentage
I I I I I I
17 15 22 number
5.J4t 0.593 4.451 6.528 17.211 percentage
Na ROW
10O ANSWER SUMS
I I I
I I5 I 201 337
I 45.1941 5.9351 100.000
I I I
155 20 337
45.994 5.935 100.000
D-11
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DRAFT
4. Is this plant at an urban, suburban, or rural location?
Number Percent
Urban 98 29.38
Suburban 85 25.22
Rural 153 45.40
Total 336 100.00
5. What year did the wood treating plant begin operation?
t FUR t
1930 i931—1940 1941—1950 L951—1’ 60
I I 1 1 I
1 581 131 461 831 number
1 17.4561 3.8461 13.o09 1 24.5561 percentage
I I I I I
59 11 46
17.45o 3.8’,6 13. 09 24.556
NO R0.4
1961—1970 1971—1977 OTHER ANSWER SUMS
I I I I
761 561 I .1 337 number
22.4851 16.5681 I 1.4791 100.000 percentage
I I I I
76 56 5 337 number
22.485 i6.56R 1.479 100.000 percentage
D- 12
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DRAFT
B. EFFLUENT INFOBMATION
6. How does this plant dispose of liquid process waste?
Number Percent
Direct discharge 10 2.9
Indirect—steaming 30 7.8
Indirect—Boulton 10 2.7
Disposed on plant site 98 26.2
Disposed off plant site 18 4.8
No discharge (recycled) 126 33.8
No liquid waste 60 16.1
Inorganic 5 1.3
Other 7 1.9
No entry 9 2.4
Total 337 100.0
IF THE ANSWER TO QUESTION 6 is (c), (d), (e) OR (f), YOU MAY OMIT
ANSWERS TO THE FOLLOWING QUESTIONS:
7, 10, 20, 2lb, 22, 25
7.(a) If you do not discharge liquid process waste into a municipal
sewer, do you have the option to connect?
Number Percent
Yes 2 6.67
No 19 63.33
Don’t Know 9 30.00
Total 30 100.00
D-13
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DRAFT
7 (b) If you do have the option to connect to a municipal sewer, what is the
initial capital investment cost?
5,00J— 10,000— 15,000— 0,000-
0—5,000 10,000 15,000 20,000 25,000
I I I I I I
I I 1 1 I I I number
I I 0.296 1 I I percentage
0.2 6
25 ,00 J- 30,000— 35,000— 40,000— 45,000— )
jfl,0J0 35,000 ‘tO, 000 45,J00 50,000 50 ,000
I I I I I I
I I 1 1 1 I number
I I I I I I percentage
I I I I I I
NO ROW
DONT N0W ANSWER SUMS
I I I
I I II 3251 337 number
I 3.2541 96.4 0L 100.000 percentage
I I I
11 325 337 number
3.254 96.450 100.000 percentage
7.(c) If you discharge any wood treating process waste into a sewer
system, on what basis are your sewer charges made?
Number Percent
Flat annual fee 7 17.07
Gallon of effluent 21 51.22
Other 13 31.71
Total 41 100.00
D- 14
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DRAFT
7. (d.) If you discharge into a municipal sewer, what were your total
sewer charges In 1976? $___________
7.(e) If you discharge liquid process waste into navigable waters,
do you have an NPDES permit?
Number Percent
Yes 10 62.50
No 4 25.00
Don’t Know 2 12.50
Total 16 100.00
D- 15
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DRAFT
7• (f)DO you own or have available for purchase about one acre of land at or
adjacent to this facility that could be used for an effluent treatment
system?
500— I,00 )— J,5C0— 2,000—
0—500 1,000 1.,50 0 2,00 ?,50 0
I I 1 I I I—
I 21 11 21 21 21 number
I 0.592 1 0.2 6I 0.5 2I 0.5’ 2I .59 T percentage
i I I I I I—
2 1 2 2 2 number
0.592 0.296 0.59? 3.5 2 percentage
,5Cu— 3,000— 3,5( 0— 4,030— 4,5 0U— >
,0fl’j 1, 0C . ,, 000 4,500 5,000 5,000
• I I I 1 I I
i I I 1 2 1 2 1 12 I number
I 1 0.5921 0.c921 3.8461 percentage
• 1 I I I I I
3 2 2 13 number
0.592 0.592 3.846 percentage
NO R0i
O LAND A ’:SWER SUMS
I I I
1 321 2771 337 number
I .467I 31.953I 10U.0OL percentage
I I 1
3 277 337 number
9..,67 ioo.ooo percentage
D- 16
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DRAFT
C. SALES AND PRODUCT MIX
8. Fiscal year 1976 wood treating plant sales (thousands of dollars).
Number Percent
Under 70 25 7.86
71 — 155 25 7.86
156 — 300 29 9.12
301 — 700 48 15.09
701 — 1,200 50 15.72
1,200 — 1,800 21 6.60
1,801 — 2,400 21 6.60
2,401 — 3,200 26 8.18
3,201 — 4,800 24 7.55
4,801 — 7,200 30 9.43
7,201 — 11,500 13 4.09
More than 11,500 6 1.89
Total 318 100.00
9. Which of the following product types are treated at this plant:
a. Organic (Oil or Dual Oil and Salt Treatment)
(1) Railroad Ties Number Percent
Under 10 35 34.65
11 — 30 19 18.81
31—50 7 6.93
51 — 70 10 9.90
71 — 90 10 9.90
Over 90 20 19.80
Total 101 100.00’
D- 17
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DRAFT
(2) Pilings. Poles Number Percent
Under 10 23 15.43
11 — 30 30 20.13
31 — 50 21 14.10
51 — 70 15 10.07
71 — 90 25 16.78
Over 90 35 23.49
Total 149 100.00
(3) Timber, Lumber, and Other Number Percent
Under 10 64 30.77
11 — 30 48 23.07
31 — 50 33 15.86
51 — 70 14 6.73
71 — 90 19 9.13
Over 90 30 14.42
Total 208 100.00
9b. Inorganic (Salt Based)
(1) Pilings, Poles Number Percent
Under 10 33 70.21
11 — 30 11 23.40
31—50 0 .00
51—70 0 .00
71—90 1 2.13
Over 90 2 4.25
Total 47 100.00
(2) Timber Lumber, and Other Number Percent
Under 10 13 9.92
11 — 30 26 19.85
31 — 50 13 9.92
51—70 6 4.58
71 — 90 14 10.68
Over 90 _ji 15.04
Total 131 100.00
D—18
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DRAFT
Number Percent
9c. Other 1 100.00
lOa. Are any changes (other than normal business fluctuations) planned
in production process or product mix?
Number Percent
Yes 11 8.21
No 123 91.79
Total 134 100.00
lOb. Process changes towards:
Number Percent
More Organic 1 10.00
Less Organic 6 60.00
More Inorganic 3 30.00
Less Inorganic 0 . 00
Total 10 100.00
lOc. Product Mix Change
Number Percent
More Ties 2 33.33
Less Ties 0 .00
More Poles 0 .00
Less Poles 0 .00
More Other 4 66.67
Less Other 0 . 00
Total 6 100.00
D—19
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DRAFT
D. PLANT CAPACITY AND PRODUCTION
12a. What region of the country is the origin of most of the wook
treated at this facility?
Number Percent
Northeast 15 4.55
Northwest 65 19.75
Southeast 146 44.37
Southwest 39 11.85
Midwest 40 12.16
Other 7.29
Total 329 100.00
12b. Is the wood mostly:
Number Percent
Hardwood 62 18.84
Softwood 267 81.16
Total 329 100.00
13. Typical number of production days per week?
Number Percent
1 — 4 days 32 9.79
5 days 252 77.06
6 days 26 7.95
7 days 17 5.20
Total 327 100.00
D— 20
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DRAFT
14. Nrlber of weeks at each shift level (total should add to 52 weeks):
at 0 shifts (shut down or no wood preserving)
0—9 10—19 20—29 30—39
I I I I I
1 2811 121 10! 6! number
1 83.1361 3.5501 2.959! 1.7751 percentage
I I I I I
281 12 10 6 number
83.136 3.5 0 2.959 1.775 percentage
POUR ROW
50—62 DATA SUMS
I I I
11 11 271 338 number
o.29 6r 0.2961 7.9831 100.000 percentage
I I I
1 1 27 338 number
0. 96 0.296 7.988 ioo.ooo percentage
D—2 1
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DRAFT
14. Number of weeks at each shift level (total should add to 52 weeks):
(cont) at 1 shift
0—9 10—19 2U—29
I I I I
I 9b1 101 111 number
I 30.8681 3.215! 5.46b1 percentage
I i r
9 i 10 17 number
30.868 3.215 5.46o percentage
3O—3 1 40—49 5Q—S SUMS
I I I
161 191 1531 311 number
5.1451 .109T 49.1 161 100.000 percentage
i I I
16 19 153 311 number
5.145 6.109 49.196 103.300 percentage
D-2 2
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DRAFT
14. Number of weeks at each shift level (total should add to 52 weeks):
(cont)
at 2 shifts
0—9 10—19 2u—29
I I I I
I 2611 1.91 8! number
I 83.9231 6.109 1 2.5721 percentage
I I I I
261 1.9 d number
83.923 6.109 2.572 percentage
30—3 40—’t 9 50—52 SLiMS
I I I
5! ‘tI 141 311 number
1.6uRI 1.28b 1 4.5021 IflO.000 percentage
——1 I I
5 14 311 number
1.608 1.286 4.502 100.000 percentage
D—23
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DRAFT
14. Number of weeks at each shift level (total should add to 52 weeks):
(cont) at 3 shIfts
0—9 10—19 20-29
I I I I
I 2311 41 number
I 74.2771 1. 6I 1.60 5I percentage
I I I I
231 4 5 number
74.277 l.2d6 t.ooa percentage
ROW
30—39 40—49 50—52 SUMS
I I I
51 71 591 311 number
1.6381 2.2511 L .97lI 1 0.000 percentage
I I I
5 7 311 number
1.608 2.251 1 8. 7 l ioo.ooo percentage
D-24
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DRAFT
14. Number of weeks at each shift level (total should add to 52 weeks):
(cOnt) at 4 shIfts
0—9 10—19 20—29
I I I I.
I 3071 21 I number
I 98 .l1’sI O.6’i31 1 percentage
I I I 1
307 2 number
9d.714 0.643 percentage
R 0
30—39 40—49 50—52 SUMS
I I I
I 1 21 311 number
I I 0.6 t3I ir,o.000 percentage
— I I I
2 311 number
(1.6t3 ioo.ooo percentage
D—2 5
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DRAFT
15. 1976 Production (Thousands of cubic feet).
250 ,000—
0 250,00C 00,0O0
I I I I
I i oi s i number
1 1 35.61 1 16.6171 percentage
I i £ I
12C 56 number
.35.61 16.617 percentage
50U.U00- 750,J03— > NO
750,030 1, 0J.000 i.uOO,000 ANSWER
I I I I
301 171 5 I 551 number
R.902 1 .044I 17.7511 16.3201 percentage
I I I I
30 number
e.9o2 5.044 17.751 16.320 percentage
RJW
SUMS
I
I 337 number
I 100.030 percentage
I
337 number
ioo.ooo percentage
D-26
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LJKAFT
16. Typical number of production workers in 1976:
Number Percent
1—3 73 22.32
4—6 39 11.93
7—9 26 7.95
10 — 19 56 17.12
20 — 34 55 16.92
35 — 48 27 8.26
49 — 75 35 10.70
76—99 8 2.45
100 — 125 6 1.83
Over 125 2 . 61
Total 327 100.00
17. This facility is primarily engaged in (a) treating service
only (TSO), and/or (b) treating owned wood products for sale
to others:
a. Treating Service Only Number Percent
Under 10 134 52.55
10 — 25 49 19.22
26 — 50 30 11.76
51 — 75 14 5.49
Over 75 28 10.98
Total 256 100.00
b. Treating Owned Wood Number Percent
Products
Under 10 21 6.80
10 — 25 20 6.47
26 — 50 17 5.50
51 — 75 39 12.12
Over 75 212 68.61
Total 309 100.00
D- 27
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DRAFT
18. What proportion of owned wood is from company—owned timberland?
Number Percent
None 256 77.81
1 — 24 59 17.93
25—49 3 .91
50—74 2 .61
75 — 100 9 2.74
Total 329 100.00
E. FINANCIAL STATEMENT
19. Revenue and Expenses
a. Wood Cost Number Percent
Under 10 17 5.67
10 — 15 10 3.34
16 — 21 10 3.34
22 — 28 15 5.02
29 — 38 49 16.39
39 — 48 59 19.73
49 — 60 69 23.08
Over 60 70 23.41
Total 299 100.00
b. Other Materials Cost Number Percent
Under 10 65 21.60
10 — 15 74 24.50
16 — 21 72 23.92
22 — 28 44 14.62
29 — 38 27 8.97
39 — 48 13 4.32
49—60 1 .33
Over 60 5 1.66
Total 301 100.00
D-28
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DRAFT
c. Payroll Cost Number Percent
Under 10 103 33.66
10 — 15 102 33.23
16 — 21 45 14.71
22 — 28 36 11.76
29 — 38 13 4.24
39—48 4 1.30
49—60 1 .33
Over 60 2 . 65
Total 306 100.00
d. Depreciation Number Percent
Under 10 59 19.22
10 — 15 117 38.11
16 — 21 85 27.69
22 — 28 26 8.47
29 — 38 20 6.51
39—48 o .00
49—60 o .00
Over 60 o . 00
Total 307 100.00
e. Gross Margin Number- Percent
Under 10 102 33.33
10 — 15 53 17.32
16 — 21 87 28.43
22 — 28 27 8.82
29 — 38 37 12.09
39—48 0 .00
49—60 0 .00
Over 60 0 . 00
Total 306 100.00
D—2 9
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DRAFT
f. General and Administrative Number Percent
Cost
Under 10 18 6.10
10 — 15 88 29.83
16 — 21 31.52
22 — 28 48 16.27
29 — 38 48 16.27
39—48 0 .00
49—60 0 .00
Over 60 0 . 00
Total 295 100.00
g. Interest Expense Number Percent
Under 10 171 59.37
10 — 15 84 29.01
16 — 21 24 8.33
22 — 28 5 1.73
29—38 4 1.38
39—48 0 .00
49—60 0 .00
Over 60 0 . 00
Total 288 100.00
h. Profit Before Taxes Number Percent
Under 10 68 23.53
10 — 15 83 28.72
16 — 21 61 21.11
22 — 28 46 15.92
29 — 38 31 10.73
39—48 0 .00
49—60 0 .00
Over 60 0 . 00
Total 289 100.00
D- 30
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DRAFT
1. Profit After Tax Number Percent
Under 10 76 27.84
10 — 15 63 23.08
16 — 21 56 20.51
22 — 28 45 16.42
29 — 38 33 12.04
39—48 0 .00
49—60 0 .00
Over 60 0 . 00
Total 273 100.00
20. How representative was this plant’s 1976 profit before
tax experience versus the average for 1971—1975?
Number Percent
About the Same 70 40.69
Better than Average 36 20.93
Worse than Average 66
Total 172 100.00
D- 31
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21. Factors related to Revenues and Expenses
DRAFT
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
(1) Average Annual Charge: $
Leases/Rental
25,000— 50,000—
0 25,000 50,000 75,000
I I 1 I I
2471 oRI 101 41 11
73.3771 20.11 I 2.9 ,1 1.1831 U.29 I
1 I I I I—
247 66 10 4 1
73.077 20. IIR 2.959 1.1d3 J.2 9 o
I0f ,000— 1?5,000— 150,000— 175,000— 200,000— 225,000—
125,000 150,000 175,000 200,000 225,000 250,000
• I I I I I I
31 2! 31 I I I
0.8e3RI 0.592! 0.88R1 I I I
1 T I I I I
3
0.888
>
250,000
I I
I I
I
I I
RUW
S U 11 S
335 number
100.0i O percentage
33P number
100.000 percentage
I
I
1———
75 ,00’ —
100,000
I-
number
percentage
number
percentage
3
0.888
2
0.592
number
percentage
number
percentage
D-3 2
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Wood Contracts
(1) Average Annual Charge; ____________
2S,’ltJ O— SO,OOJ—
0 25,Ou0 5tJ, 00u 7c,030 l00,00 )
I I I I I I
1 3251 51 IT 1 31 number
I 9 .1541 1.4791 J .c Q 6 J I O.o8 T percentage
I I i
325 1 3 number
96.15 1.479 0.2ge o.a a percentage
130,000— I?5,30J— 150,000— 175,000— 200,000— 2?5,000—
l ,0u0 1 0,303 175,000 200,000 225,000 250,003
I I I I I I
£ 11 31 1 1 1 number
I 0. 961 fl.88P 1 I I I percentage
I I I I I I
1 number
0.296 0.888 percentage
250,000 SU 1S
I I
I I 338 number
I I 100.000 percentage
I I
338 number
100.000 percentage
D-3 3
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont) a. Fixed Costs: If the plant faces lease, rental or mortage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Debt Payment
(1) Average Annual Charge: $__________
< 2 ,000- 50,000— 75,000—
0 25,000 53, 00J 75,000 100,000
I I I I I I
I 2571 311 241 111 2 lnumber
i 75.03b1 9.1721 (.1011 3.2541 J.’ 21percentage
I I I T I I
257 31 2’i Ii 2 number
lo.036 9.172 7.101 3.254 percentage
1U0,000— 125,000— 150,000- 175,300— 200,000— 2?5.300—
126,030 150,003 175,000 200,000 225,000 250,300
I I I I I I
51 II 31 I ii I number
l.47Q 1 0.29b1 0.9881 1 0.216 1 1 percentage
I I I I I I
5 1 3 1 number
1.47q 0.206 0.888 0.296 percentage
> pow
250,000 sU 1S
I —1
1 .3! 333 number
I 0.d981 100.000 percentage
I I
33 number
i.388 100.000 percentage
D-34
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont) a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equi inent), indicate the
average annual charges and the year the commitments expire.
Other
(1) Average Annual Charge: $_________
( 5,CW0— 50,uOO—
() 25,030 5 ,O0U 75,000 100, OflO
i i i I £ I
I 3331 21 I 11 T number
I 9a.5211 0.5921 T 0.? 61 I percentage
I I I I I I
333 2 i number
9d.521 0.5)2 0.?96 percentage
100,000— 1?5,000— 150,0J0— 175,000— ?O0,000— 225,000—
125,000 15u,J0Q 175,030 200,000 225,000 250,O0 ,)
I I I I I I
1 r i number
r percentage
I I I I I
>
250,000 SUMS
I I
I 338 number
I 0.592 1 100.000 percentage
I I
33 number
0.592 100.000 percentage
D- 35
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Leases/Rental
(2) Commitment Expires: 19
3EFO AFTtR Nfl c fli
1985 1995—1995 1995 ANSWI.R SUMS
I I I I I
1 551 141 41 2b51 338 number
1 1 .2721 4.1zt 21 I..1P31 78.40?1 lO .00u percentage
I I I I 1
55 14 4 265 33 number
16.272 4.142 1.183 78.402 103.000 percentage
D—36
-------
DRAFT
21. Factors related to Revenues and Expenses
(cOnt) a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Wood Contracts
(2) CommItment ExpIres: 19
BEFORE ITLR NO r(O
1985 1985—1995 1995 ANSWER SUMS
£ I I I I
1 ill I I 3271 336 number
1 3.2541 1 1 96.7461 1OJ.OOL) percentage
I I I I
11 327 338 number
3.254 96.746 100.OOu percentage
D—37
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont) a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Debt Payment
(2) CommItment Expires: 19
AFTER NO q O4
1985 1 9 85 —19 5 1 5 ANSWER SUMS
I I I I I
I 541 201 3! 2611 3 a number
1 15.9161 5.9171 0.8RdI 77.2111 io .ooo percentage
I 1 I I I
54 20 261 338 number
15.976 5.917 ).8Rt 77.219 100.000 percentage
D-38
-------
DRAFT
21. Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipuent), indicate the
average annual charges and the year the commitments expire.
Other
(2) CommItment Expires: 19
BEFORE AFTER \ O RO .
1985 1985—1995 1995 ANSWER SU
I I I I 1
1 61 ii I 3 11 33t number
1 1.7751 0.2961 1 97.9 ?91 i0 J.O00 percentage
I I 1 I I
o 1 331 335 number
1.175 0.296 97.929 100.000 percentage
D- 39
-------
DRAFT
b. What Depreciation Method Is Used:
Equipment Buildings
(1) Book Basis Number Percexit Number Percent
Straight—Line 109 73.65 121 87.60
Double—Declining 35 23.65 13 9.48
Balance
Sum of Year’s Digits 2 1.34 2 1.46
Other 2 1.35 2 1.46
Total 148 100.00 137 100.00
Equipment Buildings
(2) Tax Basis Number Percent Number Percent
Straight—Line 81 52.26 99 72.26
Double—Declining 68 43.87 31 22.63
Balance
Sum of Year’s Digits 4 2.58 4 2.92
Other 2 1.29 3 2.19
Total 155 138 100.00
(3) Pollution Control Equipment Amortization
Number Percent
Accelerated Over 13 11.92
5 Years
Same method as 96 88.08
Other Equipment
Total 109 100.00
22. Unusual Production Costs——Are there any circumstances peculiar
to this plant which result in unusual production costs?
Number Percent
Yes 17 9.77
No 157 90L23
Total 174 100.00
D-40
-------
DRAFT
23. Historical/Annual Cost of Pollution Control and Other Environmental
Regulations
(1) Water Pollution Regulations
a. Annual Operating Costs Number Percent
Don’t Know 145 63.60
None 83 36.40
Total 228 100.00
b. Annual Depreciation Number Percent
Charges
Don’t Know 125 57.07
None 94 42.93
Total 219 100.00
(2) Solid Waste Disposal (including waste water sludge and wood
waste, contract hauling )
a. Annual Operating Costs Number Percent
Don’t Know 134 56.07
None 105 43.93
Total 239 100.00
b. Annual Depreciation Number Percent
Charges
Don’t Know 126 51.63
None 118 48.37
Total 242 100.00
(3) Other Environmental Regulations Affecting Production Processes
and Production Costs
Number Percent
Air 49 40.83
OSHA 33 27.50
Both 38 31.67
Total 120 100.00
D-41
-------
DRAFT
a. Annual Operating Costs Number Percent
Don’t Know 129 64.82
None 70 35.18
Total 199 100.00
b. Annual Depreciation Number Percent
Charges
Don’t Know 122 58.94
None 85 41.06
Total 207 100.00
(4) Other Administrative Costs: Environmental department, research
litigation, consultants, additional administrative costs.
Number Percent
Don’t Know 126 59.43
None 86 40.5.1
Total 212 100.00
D-4 2
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
most recent fiscal year).
a. Net FIXED ASSETS (Gross FIXED ASSETS
less cumulative depreciation). $_____________
0 1 2 3 4
I i i I I I
L 861 ‘t?I 321 151 171
25.’,4 tI 12.4261 9.4671 4.4381 5.03U1
I I I I I I
86 ‘i2 32 15 17
25.444 12.426 9.467 4.438 5.030
1 , 00 q p000—
5 6 7 8 2,000,000
I I I I I
L i i 41 71 41 31 191
.254I 1.1831 2.0711 1.1P3 1 1.18 1 1 5.6211
i r I I I
11 4 4 19
1.183 2.071 L.1A3 1.183 5.621
> i . 0 k0 ,
2,000,000 ANSWER SUMS
I I I
1 71 901 337
I 2.0711 26.6 7I 100.000
I I 1
7 90 337
2.071 26.627 100.000
D-4 3
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont)
most recent fiscal year).
b. Total Assets: (Net FIXED ASSETS, Cash
receivables, Inventory, other assets) $_____________
0 1 2 3 4
I I I I I I
1 32! 261 P;T Ill 22!
1 9.467! 7.6921 . 21I .254I 6.5091
I 1 I I 1 I
32 26 l 11 22
9.467 7.6?2 5.621 3.254 6.509
1 ,000 ,000—
3 6 7 8 9 2,000,000
I I I I I I
7 ! d l 71 81 31 35!
2.0711 2.3671 2.0711 2.367! 0.8 iRI 10.3551
i I I I I
7 a 7 8 3 35
2.071 2.367 2.071 2.367 0.Rd 3 10.355
> i JO RO
2,000,000 ANSWER SUMS
I I I
I 401 1191 332
1 12.130! 35.2071 100.000
I I I
40 11 337
12.130 35.207 100.000
D-44
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont)
most recent fiscal year).
c. What was the value of this wood treating
plant’s accounts receivable? $_______________
?5,.J0U— 5r,OCJO—
25,000 5’ ,0O 7 ,,O00 100,000
I I I I 1•
I 471 181 23! 181
I 13.905! 5.3251 o.8 05 1 5.3251
I I I I I.
47 1 23 18
13.905 5.325 ó.8fl5 5.32c
00,000— 1 5,000— ) NO i fl,J
125,000 150,000 150,000 ANSWER SUMS
I I I I
1*1 131 Q8 1 1061 337
‘t.1 42 I 3.R46 1 ? . 0I 31.3611 103.000
- I I I I
14 13 98 l0& 337
4.142 3.846 29 , 2 qo 31.361 100.000
D-45
-------
DRAFT
24. Value of wood treating plant Assets and Liabiflties (as of the end of the
(cont)
most recent fiscal year).
d. What was the value of this wood treating
plant’s accounts payable? $_____________
25,00U— 50,OCjC— 75,003—
25,000 50,0u0 75,00u 100,0)0
I I I I I
1 681 28L 141 151
I 20.11 1 8.2ts41 ‘t.142 1 4.4381
I I I I I
2. i’. 15
20. l lb B.2ø’i .142 4.438
100.00 )— 1 5,0 J0— ) Nr
125,000 150,C00 150,00 ANSWER SUMS
I I I 1
li i 41 701 1271 337
3.bA’1 1.1i3 1 20.4141 37. 74I 100.003
I 1 I I
13 ‘I 70 127 3 7
3. i4b 1.183 2U.414 37.574 100.300
D—46
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont)
most recent fiscal year).
e. Current Plant Debt (i.e., debt maturing
In current year or payable on demand) $_____________
25,C0i— 0,000— ,u00—
25,00tJ 50,OJO 75, 00 100,300
I I I I I
I 5JT 241 121 81
I 14.7931 7. lu l l 3.5 01 2.3S7I
I I I I
50 4 U
1’..793 7.101 2.3b7
10u,Jr10_ i c,ouo—
125,300 150,0J0 L5O ,UO ) ANSWER SUMS
I I I I
91 II 471 1b61 33?
.663T ( .‘96I lj.9r I 5c.’2c1 iOO.0 0 0
I I I I
9 1 47 186 337
2.663 0.296 l3. O5 55.325 103.003
D—41
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont) nost recent fiscal year).
f. Long-Term Plant Debt (debt maturing
beyond the current year [ 1977]) $_____________
0 2 3 4
I I I I 1 I
1 651 251 51 71 91
1 19.2311 7.3961 1.4791 2.’7l1 2.66. T
1 I I I I I
65 25
19.231 7.3 6 1.47’ 2.071 2. 63
1,000,000—
6 7 9 2,000,000
z i I I I
51 1 11 1 1 21
J.47q1 1 0.2961 1 I 0.5 21
I I
5 1 2
1.479 0.29 O.5 2
> NO
2,000,000 ANSWER SUP’S
I I I
I 11 2171 .37
I J.29 1 54 .4z171 100.J0U
I I I
1 217 337
3.296 64.497 100.000
D-4 8
-------
DRAFT
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont) most recent fiscal year).
g. Total Plant Liabilities (long-term
debt, accounts payable, deferred
taxes, other debt, etc.) $_____________
0 1 3 4
I I I I I I
1 631 291 1 JI 141 91
1 18.6391 .5 OL 5.3751 4.1’t?1 2. f3T
1 I I I I I
63 29 18 14 9
18.639 8.5 0 4.14? 2.663
1,000 ,000—
6 1 8 2,000,000
I I I I I I
81 5! 41 31 21 131
2. 1671 1.4791 1.1d31 0.8881 0. 92I 3.8461
I I I I I I
R 5 4 3 2 13
2.367 1.479 1.183 0.888 fl. 92 3.84b
> NM ROW
2,000,030 ANSWER SUMS
I I I
I 41 1651 337
I 1.1831 49.1L21 1OU.J0O
1 I I
4 165 337
49.112 ICU.L) OJ
D—49
-------
DRAFT
25. Capital Investment Criteria for the Plant
a. What investment criteria do you use?
Number Percent
Return on Investment (ROt) 75 63.02
Payback 21 17.64
Other 23 19.34
No Answer 218 ______
Total 337 100.00
D-50
-------
DRAFT
26. Capital Investment Criteria for the Plant
(cont) b. If you use return on investment criteria:
(1) What Is the target Internal pre—tax rate of return on
capital required for investment In this plant?___________
0—4% 5—9 1 .)—14 15 — 19% 20—Z4
i I T
I 21 71 111 81
1 0.5921 2.’)711 3.2541 2.3671
I I I I I I
2 7 11 8
0.592 2.071 3.254 2.3 7
50 .
OR
3¼)—34 35—39% 40—444 45—49% GREATER
I I I I I I
121 d l 1 3! I 11
3.R46 1 2.367r 1 0.8881 1 0.2961
1 i I I I I
12 8 3
3. 8 ’tó 2.36? 0.888 0.29b
NOT
APPLIC ANSWER SUMS
I I I
1 2651 201 3fl
1 78.4021 5.9171 100.000
I 1
265 20 33
78.’,02 5. 17 100.U0O
D-51
-------
DRAFT
26. CapItal Investment Criteria for the Plant
(cont) b. If you use return on Investment criteria:
(2) At what ROl would you consider plant shutdown?____________
O—4 5—9 lu—14 t 15—19 ?024
I I I I I_——— I
I 51 81 61 9 1 71
1 1.4791 2.3671 i.17 ..I l.77 L 2.367!
I I I I I I
5 6 6 7
2.367 1.775 l.77 2.3 7
50
OR
30—34 35-39 40—’t4. 4 —4 (.,REATER
I I I I I I
1 1 11 1 1 11
1 1 0.2961 1 1 O.2°6 1
i i I
1
0.296 0.2 6
NOT NO RO
APPLIC ANSWER SUMS
I I I
I 2651 3 I 37
I 7 8.40fl 11.2431 100.000
I I I
265 38 s37
78.402 11.2’,3 100.000
D-52
-------
DRAFT
26. Capital Investment Criteria for the P’ant
(cont) c. If you use payback period criteria, what Is the required payback
period for Investment? years
2 YRS 2 3 4 5
£ I I I I I
I 11 21 21 21 61
0.296! 0.c921 O.5°2! C.5921 2.0711
I I I I I
1 2 2 2
0.296 0.592 .i.592 0.592 2.071
>
6 7 8 q 10 tO YRS
I T I I I I
I I I I 31 31
I I I I 0. d I O.o88I
I I I I I I
3 3
0.8d8
NOT NO ROw
APPLIC ANSWER SUMS
I I I
I 3171 ii 337
1 93.7871 0.2961 ICO.U00
I I I
317 1 337
93.787 0.296 100.000
D—5 3
-------
DRAFT
26. CapItal Investment Criteria for the Plant
(cont) d. What is the current long term Interest rate you must pay for
new capital? percent per year
( 7% 7 3 9 10
I I I I I 1
I 31 11 liT 201 251
I 0.88B1 0.2961 3.5501 7.396!
I I I I 1 I
3 I Ii 2C 25
0.888 0.216 3.550 5.917 7 .3q5
P lO Raw
11 12 > l? ANSWER SUMS
I I I I
31 51 171 2 2I 337
0.8681 1.4791 5.0301 74.55b1 100.000
I I I I
3 5 17 2S2 337
0.888 1.479 5.030 74.556 100.000
D-54
-------
DRAFT
26. Capital Investment for the Plant (not Including capitalized operating
(cont)
or maintenance expenses).
(1)
Total Capital Investment
(Actual) 1971-76 $______________________
ZERO 250,00’J—
ENIRY 1—25C,JCO 50fl,00()
I i I
1 1 1131 561
I I J3. ,i2i 1(,.568 1
I I I I
113 56
16.568
0O,00J— 753,003— 40
750,00 1.,tJOO, 000 ANSWER
I I I I
241 341 I I IPI
7.1011 IP.355 1 I 3?.544 1
I I I I
34 110
7.101 10.355 32.544
I 0w
S U MS
I
1 337
I 1 j0.0O0
I
337
100.000
D—5 5
-------
DRAFT
26. Capital Investment for the Plant (not including capitalized operating or
(cont)
maintenance expenses).
(1)
Total Capital Investment
(Planned) 1977 $_______________________
LERO
ENTRY ii 1 2
I I I I I
1 3! 931 32!- 91
I 3.38 1 7.5ISI 9.4 7! 2.6631
1 I I I 1
3 9 32 9
0.a88 27.515 9.467 2.663
ROW
3 SUMS
I 1 I
131 1 18d 1 337
3.8461 1 55.o?1I 100.000
I I I
13 183 337
3.846 5.621 100.000
D—56
-------
DRAFT
26. CapItal Investment for the Plant (not including capitalized operating or
(COflt)maintenance expenses).
(2)
Water Pollution Control
(Actual) 1971-76 $__________________
L E RJ
ENTRY 0 1 2
I I I I I
I 1 1011 161 11
I 1 29.8821 4.1341 0.2961
I I I I £
101 16 1
29.882 ‘i. 134 0.296
NJ ROW
3 ANcWER SUMS
I I I
51 1 2151 337
1.4791 1 63.609! 100.000
I I I
5 215 337
1.479 63.60i 100.000
D-5 7
-------
DRAFT
26. Capital Investment for the Plant (not including capitalized operating or
(cont)
maintenance expenses).
(2)
Water Pollution Control
(Planned) 1977 $_______________________
LERO
ENTRY 0 1 2
I I 1 I I
I 31 671 31 1
I 19.8221 0.d U1 I
I I I I I
3 67 3
0.t388 19.822 0.a88
NO ROW
3 Ar SWER SUMS
I I I
1 1 1 2641 339
J.29o1 I 7ES. IOTT 100.000
I 1 I
1 2 ’4 33R
0.296 78.1’ 7 100.OUO
D-5 8
-------
DRAFT
26. Capital Investment for the Plant (not including capitalized operating or
(cont) maintenance expenses).
(3)
Other Environmental Regulation (State
or Federal) Impacting Production Processes
(Actual) 1971-76 ________________
ZERO
ENTRY 0 1 2
I I I I I
I II 431 31 11
1 0.2961 1?.722 1 O. 388T 0.2961
I I I I I
1 3 1
0. 96 12.722 0.888 0.296
ROW
3 ANSPJER SUMS
I I I
LI I 289! 338
0. 9à1 I 8 .503I 100.000
I I I
1. 2R9 338
0.296 .503 100.000
D-59
-------
DRAFT
26. Capital Investment for the Plant (not Including capitalized operating or
(cont)
maintenance expenses).
(3)
Other Environmental Regulation (State
or Federal) Impacting Production Processes
(Planned) 1977 $_____________________
ZERO
ENTr(Y U I
I I I I I
I 5! 261 21 1
I 7.6121 u.5921 I
I I I I I
5 26
1.47) 7.692 0.59
NU ROW
3 A S FR SUMS
I I I
11 1 3041 338
J.293 1 I 9.94II 100.0U
I 1 I
1 304 338
89.941 100.000
D-60
------- |