440/9-75-005-d
FINAL REPORT
VOLUME J2 - COMPARATIVE ANALYSIS
DETERMINATION OF HARMFUL QUANTITIES AND
RATES OF PENALTY FOR HAZARDOUS SUBSTANCES
JANUARY 1975
ENVIRONMENTAL PROTECTION AGENCY • OFFICE OF WATER PLANNING AND STANDARDS
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EPA-440/ 9-75—005-d
FINAL REPORT
VOLUME IV - COMPARATIVE ANALYSIS
DETERMINATION OF HARMFUL QUANTITIES AND
RATES OF PENALTY FOR HAZARDOUS SUBSTANCES
by
Gaynor W. Dawson
Michael W. Stradley
Alan J. Shuckrow
CONTRACT 68-01-2268
Project Officer
C. Hugh Thompson
JANUARY 1975
Prepared for
HA7J4 XXJS SUPST.NCES BRA H
OFFICE OF WATER PLhNNING AND STANDARDS
U. S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D. C. 20460
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402- Price $10.10 per et of 4 Vols Sold In sets only,
Stock Number 055 -001-01028-1
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TABLE OF CONTENTS
Page
I. INTRODUCTION . iv-i
II. EXECUTIVE SUMMARY IV-3
ECONOMIC IMPACTS ON STATIONARY
SPILL SOURCES. * . . . . . . . . . . . . . . . IV—3
Cost to Representative Producers. . . . . IV-3
Size Distribution and Impacts of
the Maximum Liability IV-5
Cross Product Elasticity - Effects
on Productive Price IV-6
MOBILE SPILL SOURCES IV-6
ENVIRONMENTAL IMPACT IV-lO
GENERAL COMPARATIVE EVALUATION IV-13
SPECIALISStJES. . . Iv—14
Insurability Iv—18
Jurisdiction and Litigation . . . . . IV— 18
Compliance of the Methodologies with
Congressional Intent IV—19
III. ECONOMIC IMPACT ON STATIONARY SOURCES. . . . . IV-21.
INTRODUCTION . IV—21
POTENTIAL ECONOMIC EFFECTS ON SULFURIC
ACIDPRODtJCERS. . •. . . . . . . . . . . . . 1V-22
The Representative Producer . . . . . . . IV-22
Cost Effects of Alternative Penalties . . IV—23
The Marginal Firm IV—25
Price Effects of Alternative Penalties. IV-27
Maximum Liability . IV—30
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TABLE OF CONTENTS (Cont’d.)
Cross-Product Elasticity. . . . . . • • . iv-n.
POTENTIAL ECONOMIC EFFECTS ON AMMONIA
PRODUCERS IV-32
The Representative Producer . Iv-32
Cost Effects of Alternative
Penalties IV-32
The Marginal Firm IV-34
Price Effects of Alternative
Penalties Iv-34
Maximum Liability IV—34
Cross-Product Elasticity IV—37
POTENTIAL ECONOMIC EFFECTS ON
CAUSTIC/CHLORINE PRODUCERS . . . . . IV-37
The Representative Producer • • • . . . . IV-37
Cost Effects of Alternative
Penalties • • . . . . Iv—38
The Marginal Firm . . . Iv—38
Caustic Soda IV—38
Chlorine • . . . . . IV—38
Price Effects of Alternative
Penalties Iv—43
Caustic Soda . • • • • • • . . . . . IV—43
Chlorine • • • • • . . . . . . . . Iv—43
Maximum Fine. . . . . . • Iv—46
Cross—Product Elasticities. . • • • . . . IV—46
CausticSoda. • • . . . . . . . . . IV—46
Chlorine . . . . IV—47
ii
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TABLE OF CONTENTS (Cont’d.)
POTENTIAL ECONOMIC EFFECTS
ON BENZENE PRODUCERS . P1-47
The Representative Producer . IV—47
Cost Effects of Alternative
Penalties 1V47
The Marginal Firm IV-49
Price Effects of Alternative
Penalties . . . . IV—49
Maximum Fine 1V49
Cross—Product Elasticity. . . 1V52
POTENTIAL ECONOMIC EFFECTS
ON PHENOL PRODUCERS . . . . . . 1V52
The Representative Producer . 1V52
Cost Effects of Alternative
Penalties . • 1V52
Marginal Firm . . . . . . . . . . . . . . IV—52
Price Effects of Alternative
Penalties . . 1V55
Maximum Fine . . . . IV—55
Cross—Product Elasticity. . . IV-57
POTENTIAL ECONOMIC EFFECTS ON
METHYL PARATHION PRODUCERS . . . . IV-57
IV. ECONOMIC IMPACT ON MOBILE SOURCES. . . . . . . IV-61
MOTOR-CARRIER OPERATIONS . . . . . . . . . . . Iv-62
Average Motor Carriers. . . . IV-64
Estimated Impacts of Penalty
Rates . . . . . . . . . . . . . . . . . . IV—65
Summary of Impacts on Motor
Carriers. . . . . . . . . . . IV—74
iii
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TABLE OF CONTENTS (Cont’d.)
RAILROAD OPERATIONS
Estimated Impacts of Penalty
I ates
Summary of Impacts on Rail Carriers
The Barging Industry
Cost Estimates for Barge Operations
Impacts of Penalty Rates
Summary of Impacts on Barge Operators
V. ENVIRONMENTAL IMPACTS
INTRODUCTION
Clinch River. . .
Roanoke River
Pond Lick . .
FEATURES OF ALTERNATIVE APPROACHES
WHICH MAY EXERT AN ENVIRONMENTAL IMPACT.
Harmful Quantity. .
Rates of Penalty. . . . . . . .
SU 4 4.ARY
VI. GENERAL COMPARATIVE EVALUATION .
SPECIFICITY TO WATER BODY TYPE .
SPECIFICITY TO WATER BODY SIZE .
SPECIFICITY TO PHYSICAL/CHEMICAL
CHARACTERISTICS. . . . . . . . . .
ABILITY TO DEAL WITH MIXTURES. . .
ASSUMPTIONS AND RATIONALE. . . . .
Assumptions and Rationale Common
to all Methodologies. . . . .
• . IV—75
IV—78
• . IV—80
• . IV—85
• • IV—85
• . IV—87
IV—89
• . IV—91
IV—91
• • IV—94
• . IV—94
• IV—94
• . IV—96
IV—96
IV—lll
IV—114
IV—1l7
IV—117
IV— 119
IV—120
IV— 122
IV—124
IV— 125
• • . •
• I I •
• I • I
• . • S
• I I •
• I I I
• I • I
I I I I
lv
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TABLE OF CONTENTS (Cont’d.)
DOHM Methodology . IV-126
Resource Value Methodology IV-129
IMCO Methodology IV-132
Unit of Measurement Methodology . . IV-135
SEVERITY OF PENALTY IV-137
SIZE OF HARNFUL QUANTITY . IV-140
SUMMARY OF GENERAL COMPARISONS . IV-140
ADMINSTRATIVE EVALUATION . . . . . . IV-140
asic Approach to the Administrative
Analysis IV—143
Direct Implications . IV—143
Intermediate Criteria . . IV— 143
Inducement for Preventive
Action . . IV—143
Ease of Technical Application. . . . IV—145
Equitability of Treatment of
risch&r i Iv—148
Likelihood of Avoiding Legal
Challenges iv—149
Adaptability to Changes in Technical
Criteria, Standards, and Hazardous
Substance Listings IV—149
Summary of Intermediate Criteria . . IV-150
Output Criteria . . . . IV—150
Staff and Equipment Costs. . . . . . IV-154
Litigation and Negotiation Costs . . 1V-154
Ease of Administration IV-154
V
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TABLE OF CONTENTS (Cont’d.)
Acceptability to Industry IV—156
Acceptability to Local Government. IV-158
Acceptability to State Government. IV-l58
Effectiveness. IV-158
Summary of Output Criteria IV-l61
VII. SPECIAL ISSUES IV—165
BRIEF . IV—l65
INTRODUCTION IV-l65
BACKGROUND . . . . IV—166
FEDERAL MARITIME COMMISSION IV-166
WATER QUALITY INSURANCE SYNDICATE. . . . IV-l67
PROTECTION AND INDEMNITY CLUBS . . . . . . . . IV-l71
RADIOACTIVE SUBSTANCES . . . . . . . . . . IV-171
CONCLUSIONS ON INSURABILITY IV-172
JURISDICTION AND LITIGATION. . . . . . . . . IV-172
EXIHIBIT A IV—174
FOOTNOTES TO EXHIBIT A . . . IV-178
COMPLIANCE OF THE METHODOLOGIES WITH
CONGRESSIONAL INTENT . . . . IV-l79
UNIT OF MEASUREMENT. . . . . . . . . . . . . . IV-l81
‘APPENDIX A, DERIVATION OF REPRESENTATIVE
BARGE OPERATION. . . . . . . . . . . . . . . . IV—185
vi
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LIST OF FIGURES
Number Page
1 1 1-1 CUMULATIVE DISTRIBUTION OF
SULFURIC ACID PRODUCERS . . . IV—26
111-2 PRODUCT CHAIN FOR SULFURIC ACIC. . . . . . IV-28
111-3 CUMULATIVE DISTRIBUTION OF
ANHYDROUS AMMONIA PRODUCERS. . . . . . . . IV-35
111-4 PRODUCT CHAIN FOR AMMONIA. . . . . . . . . IV-36
111-5 CUMULATIVE DISTRIBUTION OF CAUSTIC
SODAPRODUCERS •... IV—41
111-6 CUMULATIVE DISTRIBUTION OF CHLORINE
PRODUCERS • • 1V42
111-7 PRODUCT CHAIN FOR CAUSTIC SODA . . . . IV-44
111-8 PRODUCT CHAIN FOR CHLORINE . . . . . . . . IV-45
111-9 CUMULATIVE DISTRIBUTION OF BENZENE
PRODUCERS • • • . . 1V50
111-10 PRODUCT CHAIN FOR BENZENE. . . . . . . . 1V51
11 1-11 CUMULATIVE DISTRIBUTION OF PHENOL
PRODUCERS . . . . IV—54
111-12 PRODUCT CHAIN FOR PHENOL . . . . . . . . IV-56
IV-1 IMPACTS OF FINES ON MOTOR CARRIERS
(A) RESULTING FROM THE SPILLAGE OF
ANHYDROUS AMMONIA. • • . . . . IV-70
IV-1 IMPACTS OF FINES ON MOTOR CARRIERS
(B) RESULTING FROM THE SPILLAGE OF
CHLORINE ... IV—71
IV-1 IMPACTS OF FINES ON MOTOR CARRIERS
(C) RESULTING FROM THE SPILLAGE OF
CAUSTICSODA. . . . . . . .. . . . . .. IV—72
IV-1 IMPACT OF FINES ON MOTOR CARRIERS
(D) RESULTING FROM THE SPILLAGE OF SULFURIC
ACID . . . . . . . . . . . . . . . . . . .
V3 3.
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LIST OF FIGURES (Cont’d.)
IV-2 POTENTIAL IMPACTS ON NET PROFITS OF
(A) RAIL CARRIERS RESULTING FROM THE
SPILLAGE OF ANHYDROUS AMMONIA INTO
A RIVER . . . . . . . . . . . . . . . . . IV—81
IV-2 POTENTIAL IMPACTS ON NET PROFITS
(B) OF RAIL CARRIERS RESULTING FROM THE
SPILLAGE OF CHLORINE INTO A RIVER . . . . . IV-82
IV-2 POTENTIAL IMPACTS ON NET PROFITS
(C) OF RAIL CARRIERS RESULTING FROM THE
SPILLAGE OF CAUSTIC SODA INTO A RIVER . . . IV-83
IV-2 POTENTIAL IMPACTS ON NET PROFITS
(D) OF RAIL CARRIERS RESULTING FROM THE
SPILLAGE OF SULFURIC ACID INTO A RIVER. . . IV-84
IV-3 PROCEDURE FOR ESTIMATING LARGE
OPERATINGCOSTS . . . . . IV—86
V-i PROFILE OF SULFURIC ACID SPILLS . . . . . . IV-98
V-2 PROFILE OF BENZENE - TOLUENE -
XYLENE(BTX)SPILLS . .. IV—99
V-3 PROFILE OF CAUSTIC SODA SPILLS. . . . . . . IV-lOO
V-4 PROFILE FOR AMMONIA SPILLS . . . IV-iO1
V-5 PROFILE FOR PHENOL SPILLS . . . . . . a . . IV -102
V-6 VOLUME PROFILE FOR SULFURIC ACID SPILLS . . IV-106
V-7 VOLUME PROFILE FOR BENZENE -
TOLUENE - XYLENE (BTx) SPILLS . . . . . . . IV-107
V-8 VOLUME PROFILE FOR CAUSTIC SODA SPILLS. . . IV-108
V-9 VOLUME PROFILE FOR AMMONIA SPILLS . . . . . IV-109
V10 VOLUME PROFILE FOR PHENOL SPILLS. . a a a a 1V110
V-il DESIGNATED HAZARDOUS SUBSTANCES
SHIPPED IN BULK BY BARGE. . . . . . . . . . IV-113
A-i PROCEDURE FOR ESTIMATING BARGE
OPERATING COSTS . . . . . . . . . . . . . . 111 -186
viii
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LIST OF TABLES
Number Page
11-1 SUMMARY OF IMPACTS ON REPRESENTA-
TIVE PRODUCERS IV-4
11-2 POTENTIAL IMPACT OF THE MAXIMUM
LIABILITY 1V5
11-3 CROSS PRODUCT ELASTICITY FOR
SELECTED MATERIALS tV-7
11-4 SUMMARY OF FINANCIAL AND OPERATING
CHARACTERISTICS FOR REPRESENTATIVE
MOTOR, RAIL, AND BARGE OPERATIONS IV-1O
11-5 RANGE OF IMPACTS OF FINES ON NET PROFITS
OF MOBILE SOURCES RESULTING FROM THE SPILL-
AGE OF SELECTED HAZARDOUS MATERIAL INTO
A RIVER IV11
11-6 PERCENTAGE OF MOTOR CARRIERS AND RAIL
CARRIERS WHOSE NET PROFITS ARE EQUALED
OR EXCEED BY FINES FOR THE SPILLAGE
OF THE LARGEST BULK CONTAINER SIZE . . . . iv-12
11-7 SUMMARY OF GENERAL COMPARATIVE
EVALUATION IV—15
1 1-8 SUMMARY OF INPUT, INTERMEDIATE AND OUTPUT
CRITERIA • • • . . . . . IV—16
11-9 SUMMARY OF OUTPUT CRITERIA IV-17
111-1 FINES FOR THE SPILLAGE OF SULFURIC ACID
FROM A STATIONARY SOURCE INTO A RIVER. . IV-24
111-2 ANALYSIS OF PASSTHROUGH OF PHOSPHATIC
FERTILIZERCOSTS.. IV—29
111-3 QUANTITY OF SULFURIC ACID SPILLED
TO REACH MAXIMUM LIABILITY IV-30
111-4 FINES RESULTING FROM THE SPILLAGE
OF ANHYDROUS AMMONIA FROM A STATIONARY
SOURCE INTO A RIVER IV-33
111-5 QUANTITY OF AMMONIA SPILLED TO
REACH MAXIMUM LIABILITY IV-37
ix
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LIST OF TABLES (Cont’d.)
111-6 FINES RESULTING FROM THE SPILLAGE OF
CAUSTIC SODA FROM A STATIONARY
SOURCE INTO A RIVER • • IV-39
111-7 FINES RESULTING FROM THE SPILLAGE
OF CHLORINE FROM A STATIONARY SOURCE
INTO A RIVER. . . . . . . . IV—4 0
111-8 QUANTITY OF CAUSTIC SODA AND CHLORINE
SPILLED TO REACH MAXIMUM LIABILITY. . . IV-46
111-9 FINES FOR THE SPILLAGE OF BENZENE FROM
A STATIONARY SOURCE INTO A RIVER. . . . . . IV-48
111-10 QUANTITY OF BENZENE SPILLED TO REACH
MAXIMUM LIABILITY . IV—49
Il l-li FINES FOR THE SPILLAGE OF PHENOL FROM
A STATIONARY SOURCE INTO A RIVER. . . . . . IV-53
111-12 QUANTITY OF PHENOL SPILLED TO REACH
MAXIMUMLIABILITy. . .. . . .. .. ... IV—55
111-13 ESTIMATED REVENUES AND NET PROFITS FOR
METHYL PARATHION PRODUCTION UNITS . . . . . IV-57
111-14 POTENTIAL IMPACTS OF PENALTY PATES
ON PRODUCERS ON METHYL PARATHION. . . . . . IV-59
IV-1 HARMFUL QUANTITIES AND PENALTY RATES
FOR RIVERS. . . . . . . . . . . . . . . IV—63
IV-2 FINANCIAL AND OPERATING STATISTICS FOR
SELECTED CLASS I AND II MOTOR CARRIERS
OF SULFURIC ACID, CAUSTIC SODA, AND
ANHYDROUS AMMONIA FOR 1971. . . . . . . . . IV-66
IV-3 CHARACTERISTICS OF AVERAGE AND MARGINAL
FOR-HIRE MOTOR CARRIERS . . . . . . . . . . IV-67
IV-4 SUMMARY OF FINE IMPACTS ON AVERAGE MOTOR
CARRIER RESULTING FROM THE SPILLAGE
OF SELECTED HAZARDOUS MATERIALS INTO A
RIVER . . . . . . . . . . . . . . . . . . . IV—68
IV-5 MOTOR CARRIERS RANKED BY NET INCOME . . . . IV-69
x
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LIST OF TABLES (Cont’d.)
IV-6 PERCENTAGE OF MOTOR-CARRIERS WHOSE EQUALED
OR EXCLUDED BY FINES FROM THE SPILLAGE
OF 30 TON TRUCKLOAD OF VARIOUS HAZARDOUS
MATERIALS IV-75
IV-7 1972 SELECTED STATISTICS FROM CONDENSED
INCOME STATEMENTS FOR 63 CLASS I RAIL-
ROADS IV—76
IV-8 CHARACTERISTICS OF AVERAGE ND MARGINAL
RAIL CARRIERS IV-78
IV-9 SUMMARY OF FINE IMPACTS ON AVERAGE
RAIL CARRIER RESULTING FROM THE
SPILLAGE OF SELECTED HAZARDOUS
MATERIALS INTO A RIVER. . . . . . . . . . . IV—79
IV-10 SUMMARY OF IMPACTS ON THE AVERAGE
BARGE OPERATOR RESULTING FROM THE
SPILLAGE OF SELECTED HAZkRDOUS
MATERIALS INTO A RIVER . 1V88
V-i HISTORICAL FISH KILL DATA REPORTED
FOR THE U. S . . . IV—92
V-2 NATURE OF KILLS REPORTED IN 1970 . IV-93
V- 3 SUMMARY OF ENVIRONMENTAL IMPACT
IMPLICATIONS FOR HARMFUL QUANTITIES . . . . IV-105
V-4 AVERAGE RATES OF PENALTY FOR ALL
HAZARDOUS SUBSTANCES ($/lb) . IV—i12
VI-i RANKING OF METHODOLOGIES WITH
RESPECT TO SPECIFICITY TO WATER
BODYTYPES IV—119
VI-2 RANKING OF METHODOLOGIES WITH
RESPECT TO SPECIFICITY TO WATER BODY
SIZE 1V121
VI-3 RANKING OF METHODOLOGIES WITH RESPECT
OT PHYSICAL CHEMICAL CHARACTERISTICS
SPECIFICITY . . . . . . . . . . . . . . IV—i23
VI-4 RANKING OF METHODOLOGIES WITH RESPECT
TO ABILITY TO DEAL WITH MIXTURES. . . . . . IV-124
VI-5 RANKING OF METHODOLOGIES WITH RESPECT
TO RATIONALE AND TECHNICAL ASSUMPTIONS. . . IV-137
x i
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LIST OF TABLES (Cont’d.)
VI-6 AVERAGE RATES OF PENALTY AS DERIVED BY
EACH METHODOLOGY FOR GENERIC GROUPS
$/lb) Iv—139
VI-7 AVERAGE HARMFUL QUANTITIES BY GENERIC
GROUP(lbs) IV—141
VI-8 SUMMARY OF GENERAL COMPARATIVE EVALUATION. . IV-142
VI-9 SUMMARY OF INPUT, INTERMEDIATE AND OUTPUT
CRITERIA . IV—144
VI-lO RANKING OF METHODOLOGIES WITH RESPECT
TO INTERMEDIATE VARIABLE 1 - INDUCEMENT
FOR PREVENTIVE ACTION. . . . . . . . . . . . IV-146
VI-li RANKING OF METHODOLOGIES WITH RESPECT
TO INTERMEDIATE VARIABLE 2 - EASE
OF TECHNICAL APPLICATION IV-147
VI-12 RANKING OF METHODOLOGIES WITH RESPECT
TO INTERMEDIATE VARIABLE 3 - EQUITABILITY
OF TREATMENT OF INVOLVED PARTIES . . . . . . IV—148
VI-13 RANKING OF METHODOLOGIES WITH RESPECT TO
INTERMEDIATE VARIABLE 4 - LIKELIHOOD
OF AVOIDING LEGAL CHALLENGES . . . . . . . . IV-151
VI-14 RANKING OF METHODOLOGIES WITH RESPECT TO
VARIABLE 5 - ADAPTABILITY TO CHANGES . . . . IV-152
VI—15 SUMMARY OF INTERMEDIATE CRITERIA •. . . . . . IV-153
VI-16 RANKING OF METHODOLOGIES WITH RESPECT
TO OUTPUT VARIABLE I - STAFF AND EQUIPMENT
COSTS. . . . . . . . . . . . . . IV—155
VI-17 RANKING OF METHODOLOGIES WITH RESPECT TO
OUTPUT VARIABLE III - EASE OF ADMINISTRA-
T ION . . . . . IV—157
VI-18 RANKING OF METHODOLOGIES WITH RESPECT TO
OUTPUT VARIABLE IV - ACCEPTABILITY TO
INDUSTRY . . . . . . . . . . . . • , . . . . Iv—].59
VI—19 RANKING OF METHODOLOGIES WITH RESPECT TO
OUTPUT VARIABLE V - ACCEPTABILITY TO
LOCALGOVERNMENT.. ... ......... IV-160
X13.
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LIST OF TABLES (Cont’d.)
VI-20 RANKING OF METHODOLOGIES WITH RESPECT
TO OUTPUT VARIABLE VII - ADMINISTRATIVE
EFFECTIVENESS IV—162
VI-21 SUMMARY OF OUTPUT CRITERIA IV-163
VII-1 SUBSCRIBERS TO THE WATER QUALITY
INSURANCE SYNDICATE. IV-168
VII-2 PREMIUM PATES FOR POLLUTION INSURANCE
SET BY THE WATER QUALITY INSURANCE
SYNDICATE . IV—169
A-i 1972 ESTIMATED COSTS OF OPERATING COMMON
CARRIER TOWBOATS ON MISSISSIPPI RIVER
S Y ST EM . . i r— 18 8
A-2 1972 ESTIMATED COSTS OF OPERATING BARGES
IN THE MISSISSIPPI RIVER SYSTEM--LIQUID
CHEMICAL . . . IV—193
A-3 TOTAL TRIP HOURS FOR A REPRESENTATIVE
SAMPLE OF TRIP LENGTHS IV-194
A-4 LIST OF TOW TYPES CONSIDERED IV-195
A-5 BARGE OPERATING COSTS PER TON AND PER
TON-MILE AT DIFFERENT TOW TYPES FOR A
LINE HAUL DISTANCE OF 300 MILES IV-196
A-6 BARGE OPERATING COSTS PER TON AND PER TON-
MILE AT DIFFERENT TOW TYPES FOR A LINE
HAUL DISTANCE OF 400 MILES . P1-197
A-7 BARGE OPERATING COSTS PER TON AND PER
TON-MILE AT DIFFERENT TOW TYPES FOR A
LINE HAUL DISTANCE OF 500 MILES. . . . . . . IV-198
A-8 BARGE OPERATING COSTS PER TON AND PER
TON-MILE AT DIFFERENT TOW TYPES FOR A
LINE HAUL DISTANCE OF 1000 MILES . . . . . . IV-199
A-9 BARGE OPERATING COSTS PER TON AND
PER TON-MILE AT DIFFERENT TOW TYPES
FOR A LINE HAUL DISTANCE OF 1500 MILES . . . IV-200
A-b BARGE OPERATING COSTS PER TON AND PER TON-
MILE AT DIFFERENT TOW TYPES FOR A LINE
HAUL DISTANCE OF 2000 MILES . . . . P/-201
xiii
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This report was initiated by the Environmental Protection Agency
to gather additional information and to complete several con-
cepts developed by the technical staff of the Agency. This
report is one of the series dealing with hazardous materials
and the prevention and/or removal of spills of these materials
into or upon the navigable waters of the United States. The
methodologies were determined to be necessary to provide a
technical basis for the development of regulations under
Section 311 of Wa ,ber Pollution Control Act as amended in 1972
(PL 92—500). This report is a result of several man years of
work by the Government, industry, and the contractor. It
should he understood that the methodologies explained here may
be used in son-te modified form in regulations to be developed
and/or revised as appropriate to implement Section 311.
This document should be regarded as a technical reference docu—
m nt ‘hich may be used as appropriate by this Agency and others
p’n i.mtrily in the development off the regulatory coidrol program
for hazardous substance spills. The, principal regulations for
which these meti odniogics w re developed are required to be
proinhilga ed under Sction 31 1(b) (2) (B) (i’v) and Section 311(b) (4)
which require that j ‘nnalty Lates for nonremovable hazardous
substances shall he prescribed and that quantities determined
to be harmful to public liedth and welfare be identified. The
other regulations as reqii’i ud by Section 311 deal inq with
ha does substances ‘i evolve: the designation and determination
of vehility; the determination of removal and mitigating
rn h;dr; Lhe determination of procedures and equipment for
: iHl juevention; the determination of email facility spill
c ’Leanup liabilities; the determination of nonharmful quantities;
and appropriate revision to the National Oil and Hazardous
Substance Pollution Contngency Plan. This information is
thought to be of use of assessing the environmental benefits
and potential economic impacts in the development of regulations
dealing with methods for removal and mitigation of hazardous
substances and procedures and equipment for prevention of
hazardous substance spills from transportation, production and
use facilities.
At the time the j..coject was conceived the Agency had participated
in nterna i.onai hazardous material control negotiations and
had gained considerable experience working with industry in the
production, distribution and use of materials which may be
designated as hazardous substances. Late in 1972 and early in
1973, it became the concern of this Agency that several alter-
native methods should be examined in detail to allow equitable
regulatory development. This concern was keyed to be pending
designation regulation which would list elements and compounds
as hazardous substances.
x v
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It is anticipated that the information that has been gathered
during this study which involved the National Hazardous Materials
Conference in San Francisco, August 1974, and the Regulation
Symposium in Washington, DC in October 1974 will be utilized
in part in the development of regulations to be published in
the Federal Register . Once the regulations are promulgated,
going through the process of Advance Notice of Rule Making,
Proposed Rule Making, and Final Promulgation, the program
will be implemented nationwide. This program implementation
is anticipated to be in conjunction with the United States
Coast Guard and to be implemented at the EPA Region and Coast
Guard District Level. It is further anticipated that areas
for the Administrator’s discretion in evaluating penalties may
be established as appropriate through EPA Guidelines and/or
Enforcement Regulations formulated by this Agency.
Particular thanks should be expressed to the primary authors
of this Report with special emphasis to acknowledge the coop-
eration provided by the chemical manufacturing industry, the
chemical transporting industry and others who supplied basic
information upon which this study is built. An individual
appreciation is expressed to Dr. Allen L. Jennings of the
Hazardous and Toxic Substances Branch for his technical
participation and enthusiasm is seeing this job completed.
Others who helped in the review and editing for EPA included
Dr. Gregory Kew, Messrs. Robert Sanford, James Cating, and
Charles Gentry. It should he recoçjnized that this project
was possible due to he foresight in planning, funding, and
the staff assistance of Messrs. Walter Miguez, Robert Suzuki,
John Cox, and others of the Division of Oil and Special
Materials, without whose help this project would have been
impossible.
Dr. C. Hugh Thompson
Chief
Environmental Protection Agency
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I. INTRODUCTION
Preceeding volumes (I—Ill) of this report describe in detail
the development of four alternative technical approaches for the
designation of harmful quantities and rates of penalty for non-
removable hazardous materials as mandated in Section 311(b) (2)
(B) (iv) and 311(b) (4) of the 1972 Federal Water Pollution Control
Act 7 xnendments (PL 92-500). All approaches were designed to
comply with the law, but each offers unique features which vary
the degree of resolution and ease of administration achieved.
The mix of these two basic elements greatly affect both the
acceptability of resulting regulations to various parties and
the facility with which this section of the law can be adminis-
tered. Similarly, each alternative is likely to have a different
level of impact on potential spillers as well as the environment.
It is these differences that must be characterized and considered
as part of the final selection of an optimal approach.
Volume IV has been written to address these and other issues.
Its two major objectives are: 1) to provide a direct comparison
between alternative methodologies, and 2) to assess the economic
and environmental impacts likely to result from institution of
required regulations. The latter objective is accomplished
first by detailing the characteristics of each approach. These
are then interpreted with respect to such administrative con-
siderations as effectiveness, equitability, ease of implementation
and enforcement, and cost.
The former objective, that dealing with impacts, is discussed
in terms of both differential economic effects on generic spill
source types and overall impact levels on industry. Similarly,
potential environmental effects are detailed both with respect
to incremental effect and the estimated overall impact on the
environment. The impact analyses, of necessity, deals with
specific hazardous materials. Since it would be prohibitive
to address all designated substances, representative chemicals
from commercially important generic groups were employed.
A final section dealing with special issues related to adoption
and enforcement of a regulation has been included in this volume.
Of special interest here is the discussion of insurability and
the response of the insurance industry to the maximum civil
penalty provisions.
It is assumed that the reader has at least cursory knowledqe of
the technical approaches developed in the previous volumes. As a
minimum, the Executive Summary (Volume I) should be read and
understood prior to reviews of this analysis.
-------
II. EXECUTIVE SUMMARY
ECONOMIC IMPACTS ON STATIONARY SPILL SOURCES
For purposes of this report, stationary spill sources included
production, storage, and transfer facilities which handle hazard-
ous materials. Substances selected for analysis in this section
included the following:
• Sulfuric Acid
• Ammonia
• Methyl Parathion
• Caustic/Chlorine
• BTX (benzene—toluene-xylene)
• Phenol
These are economically important substances representative of
a number of generic groups, and, with the exception of methyl
parathion, are produced in large quantities at a number of
locations throughout the United States. For each chemical or
family of chemicals, the potential economic impacts of the
penalty rates from each of the four technical approaches
developed in Volume II were assessed with respect to the
following items:
• Cost to the representative producer
• Size distribution of producers and potential
impacts on smaller operations
• Effects on production price
• Cross production elasticity
Also discussed were the implications of the $500,000 maximum
liability.
Cost to Representative Producers
For each of the materials considered, a representative size
production operation was selected. Typically this operation
was close to the average for the industry. Net profits for
this size operation were calculated on the basis of the market
price of their product and on an assumed profit margin of 6.5
IV-3
-------
percent. Annual spillage from each operation was computed as
a percentage of production. Penalty rates from each of the four
methodologies were then applied to the annual spillage figure
to determine the total expected fines for each operation over
a one year period. Table 11-1 below summarizes the results of
this portion of the analysis. With the exception of chlorine*
impacts of calculated fines on the representative producers
were small to negligible. The figures used to compute the per-
centage of production spilled are considered high since they
were based on reported spillage from all sources (including
transportation). Computed fines are considered to be at the
high end of the range for this reason, especially since many
of the reported spills never reach water. Furthermore, it is
likely that a portion of the annual spillage will be in small
increments less than the harmful quantity; hence, no reporting
(or fines) for these spills will be required.
TABLE 11-1
SUMMARY OF IMPACTS ON REPRESENTATIVE PRODUCERS
REPRESENTATIVE PERCENTAGE OF RANGE OF PERCENTAGE OF NET
PRODUCTION CALCULATED PRODUCTION PENALTIES PROFITS REPRESENTED
UNIT NET PROFIT SPILLED (METHODOLOGY) BY PENALTIES
MATERIAL
Sulfuric
Acid
640
—
ton per
day
$ 694,000
.0029
468—$58,000
(RV) (DONM)
0.07 — 8.33
Ammonia
600
.
ton per
day
$1,774,500
.0025
& 5,985$75,600
(tiM) (DONM)
0.34 — 4.26
Caustic
Soda
495
ton per
day
$1,351,350
.0025
160—$20,356
(RV) (DONM)
0.01 — 1.51
Chlorine
450
ton per
day
$1,023,750
.
.0025
$38,587—$500,000
(DONM) ) IrICO)
3.77 — 48.80
Ben zene
50
million
per year
gal
$2,535,000
.0025
$ 339—s 54,981
(UM) (DONM)
0.01 — 2.17
Phenol
200
million
per year
lbs
$3,510,000
.0025
$ 1,564—$ 40,377
( 1W) (IMCO)
0.04 — 1.15
Methly
Parathion
30
million lbs
per year 2
$ 936,000
Harmful
Quantity 3
$ 226—S 2,475
(VN) (00MM)
0.02 — 0.26
1 MV = Resource Value Methodology
UM — Unit of Measurement Methodology
2 Only three operations presently producing methyl parathion. The 300 million pound per year
operation is the middle of the three.
3 Determination of the percentage of production spilled from methyl parathion percents was not
possible.
*The physical properties of chlorine are such that a major
spill into water from a stationary source is unlikely.
iv-4
-------
Size Distribution and Impacts of the Maximum Liability
Although potential impacts on representative producers were not
determined to be very severe, size distribution of operations
within the various industries considered in this study are such
that a major spill* by some of the smaller operations could
produce a severe impact when measured against profits asso-
ciated with these operations. Quantifications of the likeli-
hood of such an event was not possible. However, it is possible
to depict the size distribution and expected profits of the
various (under each methodology) required to incur fines equal
to net profits for various size operation. Figures depicting
industry size distribution for each of the chemical evaluated
in this study (are contained) in Chapter III of this volume.
Impacts of the $500,000 maximum liability can also be assessed.
Table 11-2 below shows the expected percentage reduction in
net profits of the representative producer (in a single year)
if this maximum liability were imposed. Also shown in this
table is the percentage of operation with estimated profits
less than or equal to $500,000.
TABLE 11-2
POTENTIAL IMPACT OF THE MAXIMUM LIABILITY
PERCENT REDUCTION PERCENT OF OPERATIONS
IN NET PROFITS WITH NET PROFITS
RESULTING FROM LESS THAN OR EQUAL
PRODUCT $500,000 FINE TO $500,000
Sulfuric Acid 72 57
Ammonia 28 18
Caustic Soda 37 41
Chlorine 49 41
Benzene 20 35
Phenol 14 0
Methyl Parathion 53 33
*Although spillage for the representative producer was calcu-
lated as a percentage of annual production — a reflection of
long term potential impacts the oo aibi1ity of a large i1l
from one of the smaller operations could lead to severe short
term impacts.
IV-5
-------
Cross Product Elasticity - Effects on Production Price
Cross product elasticity refers to the shifts or substitutions
which can occur in the rise of competing materials as the prices
of the materials vary. Potential liabilities associated with
materials designated as hazardous and non—removable under
Section 311 may necessitate price increases for the materials
by manufacturers. Thus, it is necessary to consider the impacts
of any price increases on the competativeness of these materials.
Precise quantification of these shifts are not possible due to
the probalistic nature of spill events as well as the responses
of individual producers and consumers. However, it is possible
to. identify those materials which could experience some loss
of market position as a resuLt of potential fines. Table 11-3
summarizes these potential impact and includes the price
increase by the representative producer if he were €o pass all
costs associated with the fines calculated in Table 11-1 forward.
MOBILE SPILL SOURCES
Procedures used to determine economic impacts on the transporters
of hazardous materials are similar to those for stationary
sources. A financial and operating profile for representative
operators in each of the three major transportation modes (motor
carriers, rail carriers, and barging) were derived. The repre-
sentative motor carrier was derived from a sample set of 39
common carriers who had experienced a spill of one or more of
the hazardous materials considered in this section. The repre-
sentative rail carrier was derived from the average of the
financial and operating statistics of 65 Class I railroads.
The average barge carrier was derived indirectly from information
on barge operating expenses in the lower Mississippi area.
This approach was necessary due to the non-availability of
financial and operating data for the vast majority of barging
operations engaged in the transport of bulk chemicals. Table
11-4 summarizes the financial and operating characteristics used
in the analysis.
Potential impacts on these size operations were estimated for
four designated hazardous materials (ammonia, chlorine, caustic
soda, and sulfuric acid). Impacts were assessed on two spill
levels -- the harmful quantity and a spill equal to the largest
single bulk “container” handled by the particular mode. For
the motor carriers a 30 ton tank truck was used as the largest
container, for rail a 60 tank car and for barges a 1150 ton
tank barge. Ranges of potential impacts on the net profile of
these operations under the four penalty schedules are shown in
Table 11-5. As evidenced by the figures in this table, potential
impacts of fines on barge operators are particularly severe.
IV-6
-------
TABLE 11—3
CROSS PRODUCT ELASTICITY FOR SELECTED MATERIALS
Price Increase’
(percent change in
Material product price) Competing Products
Sulfuric Acid $0.0021-$0.26 per ton 1. Sulfur dioxide and sulfur trioxide -
(0.00) (0.54) in activities where sulfur content is
of major interest (e.g.; production of
surface active agents, pulping, and
synthetic petroleum sulfonates). Neither
of these materials are designated non-
removable hazardous substances.
2. Hydrochloric Acid - in iron and
steel pickling process. Hydrochloric
acid is a designated non—removable
hazardous material.
3. Hydrofluoric Acid - substitutable
for sulfuric acid in alkylation re-
actions such as those employed in
petroleum refining. HF is a designaged
substance with penalty rates equivalent
to or greater than sulfuric acid de-
pending on the methodology used.
4. Glychol - substitutable for sulfuric
acid as a dehydrating agent during manu-
facture of organic chemicals. Glychol
is not a designated hazardous substance.
-------
Material
Sulfuric Acid
(Cont’ d.)
Price Increase 1
(percent change in
product price )
Competing Products
CONCLUSION: Actual impact on sulfuric
acid consumption is predicted to be
small because:
a. substitution in major use
(phosphoric acid production) is
unlikely
b. overall price effects of penalties
are expected to be small
Ammonia
$O.03-$O.35 per tort
(O.02)—(O.28)
CONCLUSION: No substitutes for ammonia
in its major uses.
Caustic Soda
$O.0009-$O.12 per ton
(O.OO)—(O.lO)
1. Soda ash (sodium carbonate) - Corn-
petition is for sodium alkali content
rather than hydroxide content.
CONCLUSION: Price effects estimated for
caustic soda are very small, suggesting
incentives for substitution are
insignificant.
Chlorine
$O.25—$3.17 per ton
(O.25)—(3 .17)
1. Oxygen — oxygen has been a success-
ful competitor to chlorine in pulping
operation.
H
-------
Competing Products
2. Ozone - Presently being marketed as
a replacement for chlorine for disin-
fection purposes.
CONCLUSION: Spillage of chlorine into
water is expected to be significantly
less than that predicted by the analysis.
Despite potential high fines for the
spillage of this material, significant
loss of market position for this product
is not expected to result from imple-
mentation of Section 311 regulations.
Price Increase’
(percent change in
Material product price)
Chlorine
(Cont’d.)
H
Benzene
“O.OO-$.OOl per gal
( 0.O0)(.14)
CONCLUSION: No substitutes for benzene
in its major uses.
Phenol
$O.Ol $.4O per ton
( 0.OO)(.07)
CONCLUSION: There are no competitive
substitutes for phenol.
Methyl Parathion
$0.02_$O.172 per ton
(‘ 0.OO) (0.02)
CONCLUSION: Competitors include other
organo - phosphate pesticides which are
subject to Section 311 regulation. Most
pesticide plants are capable of shift-
ing operations to produce a wide variety
of formulations. Potentially service
penalties for very toxic pesticides may
cause some shifts in these operations.
1 Based on fines, annual productions, and market prices shown in Table 11-1
2 Based on spillage of the harmful quantity
-------
TABLE 11-4
SUMMARY OF FINANCIAL AND OPERATING CHARACTERISTICS
FOR REPRESENTATIVE MOTOR, RAIL, AND BARGE OPERATIONS
Motor Rail Barge
Carrier Carrier Carrier
Net Income $ 1,119 $ 6,220 $ 325
(103 dollars)
Total Operating $ 36,376 $212,854 $ 2,325
Revenue (103 dollars)
Total Expenses $ 33,956 $167,562 $ 2,000
(103 dollars)
Operating Rates 93.35 78.7 85.0
(expense/revenues)
As in the analysis for stationary sources, precise determination
of the operators which would be rendered marginal by the imple-
mentation of Section 311 was not possible, due primarily to the
probalistic nature of spill events and the lack of sufficient
historical spill data. However, it was possible to estimate
the size distribution of rail and motor carriers,* and from
these distribution estimates the percentage of the industry
whose annual net profits are equaled to exceeded at various
fine levels.
Table 11—6 depicts the percentage of the industries whose net
profits are equaled or exceeded at the $500,000 maximum liability
level and for a spill equal to the largest container size. The
reader is referred to Chapter IV for impacts at other fine levels.
ENVIRONMENTAL IMPACT
Insufficient data presently exists to quantify the environmental
damage presently sustained as a result of hazardous material
spills. Therefore, the impact of alternate approaches to setting
harmful quantities and rate of penalty must be reviewed in a
comparative manner. Some sense of the magnitude of effect can
be gained by analyzing reported fish kill data and documented
spills.
*DeterminatiOfl of the size distribution of barge operators was
not possible since financial and operating statistics for these
operations will not generally be available.
IV— 10
-------
TABLE 11—5
RANGE OF IMPACTS OF FINES ON NET PROFITS OF
MOBILE SOURCES RESULTING FROM THE SPILLAGE
OF SELECTED HAZARDOUS MATERIAL INTO A RIVER
MOTOR CARRIER RAIL CARRIER BARGE CARRIER
Spillage of Spillage of the Spillage of Spillage of the Spillage of Spillage of the
Spilled the Harmful Largest Size the Harmful Largest Size the Harmful Largest Size
Material Quantity Container Quantity Container Quantity Container
Percentage
Decrease in
Annual Net
Prof its
H Annydrous 0.02 — 0.30 2.85 — 35.81 0.00 — 0.06 1.10 — 8.04 0.09 — 1.09 >l00%2
Ammonia (1314) (114C0) (UM) (DONM) (tIM) (IMCO) (tIM) (IMCO) (tIM) (IMCO)
Chlorine 0.00 — 0.38 24.68_41.701 0.00 — 0.07 0.91 — 8 04 L 0.02 — 1.40 >l00%2
(00MM) (IMCO) (D0NM (00MM) (IMCO) (DONI4) (DONM) (IMCO)
CaustiC 0.03 — 3.72 0.19 — 23.27 0.01 0.07 0.07 1.16 0.11 — 17.72 26.35 >100%
Soda (tIM) (DONM) (RV) (DONN) (RV) (DONM) (RV) (IMCO) (tIM) (DONM) (RV) (00N1)
(tIM) (IMCO) (I MCO)
Sulfuric 0.03 — 4.42 0.18 — 22.27 0.01 — 0.08 0.07 — 1.16 0.11 — 21.07 25.65 — ‘100%
Acid (tiM) (DONM) (RV) (D0N ’ .1) (RV) (00MM) (RV) (IMCO) (tIM) (D0NM) (DONM)
(U 1) (IMCO)
1 Level of fines reaches maximum liability for IMCO, 1W, and tIM methodologies.
2 Fines under all methodologies exceed annual net profits.
-------
TABLE 11-6
H
PERCENTAGE OF MOTOR CARRIERS AND BAIL CARRIERS
WHOSE NET PROFITS ARE EQUALED OR EXCEED BY FINES
FOR THE SPILLAGE OF THE LARGEST BULK CONTAINER SIZE’
MC = Motor Carriers
RC = Rail Carriers
‘For motor carriers a 30 ton tank truck. For rail carriers a
60 ton tank car.
Material
DOHM
IMCO
Resource
Value
Measurement
Liability
MC
RC
MC
RC
MC
RC
MC
RC
MC
RC
Ammonia
57
31
48
38
29
32
23
30
57
47
Chlorine
50
31
57
47
57
47
57
47
57
47
Caustic Acid
50
31
21
31
11
28
12
28
57
47
Sulfuric Acid
50
31
21
31
11
28
12
28
57
47
-------
In general, fish kills from various sources displayed a 257 per-
cent increase in the number of fish effected in the decade 1960—
1970. Similarly, total acreage of lakes and reservoirs increased
2,257 percent and river mile affected increased 55 percent over
the same time period. Review of the Clinch River, Roanoke River,
and Pond Lick spill incidents indicated Lhat a single spill can
have devastating effect on a localized ecosystem as well as
interfere with basic water uses. Impact periods vary considerably
with the nature of the material spilled.
Technical approaches to required regulations were determined to
have an environmental impact directly associated with their
propensity to accelerate reporting, and subsequent response
and mitigation; and with the degree to which they will provide
incentive to prevent spills. The latter point requires some
assertions as to the extent of industrial response to monetary
penalties. Written cormnents to date indicate that industry
as a whole feels that public relations and cost considerations
presently provide ample incentive to prevent spills. They
insist that additional penalties will only provide an economic
burden with no commensurate decrease in spill events.
Harmful quantities will have an impact via both the accelerated
reporting and added prevention incentive. In order to compare
harmful quantities resulting from alternate approaches, spill
data was evaluated for sulfuric acid, caustic soda, benzene—
toulene-xylene (BTx), ammonia, and phenol. It was demonstrated
that use of the IMCO, Unit of Measurement, or Resource Value
Methodologies would lead to reporting requirements for spills
constituting greater than 99 percent of the total volume of
material spilled annually. The DOHM approach was somewhat less
effective because of large harmful quantities for estuarine
spills. Only in the case of ammonia were additional reports
required for spills representing a very small percentage of the
total volume spilled.
In order to assess the relative impact of rates of penalty
with respect to incentive for instituting better prevention,
a composite measure of the ratio of rate of penalty/price was
devised for a list of most commonly spilled materials. Results
of this comparison indicate that the IMCO and DOHM approaches
offer the greatest incentive for preventing spills. The com-
bined impact of harmful quantities and rate of penalty are
likely to be most favorable with the IMCO Methodology, which
offers the smallest harmful quantities but high rates of
penalty relative to product price.
GENEBAL COMPARATIVE EVALUATION
The first section of this evaluation entailed a direct com-
parison of the four technical approaches. Specific aspects
IV—l3
-------
of the methodologies addressed in the direct comparison include:
• Specificity to waterbody type
• Specificity to waterbody size
• Specificity to chemical groups
• Ability to deal with mixtures containing more than
one designated hazardous material
• Assumptions and rationale
• Severity of penalty schedule and size of harmful
quantity
Table 11—7 summarizes the results of the direct comparisons
as well as the ranking factors assigned to each methodology
under each of the six direct evaluation criteria. A ranking
factor of 1 indicated that a methodology is considered to be
the most desirable of the four under the particular evaluation
criteria. Two numbers (e.g., 1—2 or 3-4) indicates a “tie”
between two methodologies.
In the second section of the general comparative evaluation,
the administrative implications of each of the four methodologies
were examined to determine the relative merits of the various
approaches as they affect implementation and enforcement.
Direct comparison results from Table 11-7 were used as the
basic inputs to this analysis. From these inputs, intermediate
criteria (or variables) were derived through a summation of
appropriate direct comparison ratings. Methodologies were then
tanked under each of the intermediate criteria. Output criteria
were then derived in a similar fashion using as inputs, the
direct comparison rankings and the ranked intermediate criteria.
Table 11—8 describes the direct intermediate, and output criteria
used in this portion of the analysis. Table 11—9 summarizes the
relative rankings of the four methodologies under the seven out-
put criteria.
SPECIAL ISSUES
During the course of the evaluation, it became apparent that
certain special issues falling outside the context of a com-
parative analysis needed to be addressed. These were issues
that had a bearing on any regulation developed to comply with
Section 311. As such, they should be reviewed prior to selection
of a technical approach. The pertinent issues fall into three
categories: insurability, jurisdiction and litigation, and
compliance with congressional intent.
IV—14
-------
TABLE 11-7
SUMMARY OF GENERAL COMPARATIVE EVALUATION
Resource Unit of
0 0 14J4 IMCO Value Measurement
Methodology Methodology Methodology Methodology
o 8 0 9
Criteria
H
1 ’-’
A. Specificity to water
body type
(1 = most specific)
(7’ Two harmful quan- Three harmful quan-
“ ‘ tity and two ratej tity and four rate
of penalty categories of penalty categories
(ij Three harmful quan—
tity and four—plus
rate of penalty catego-
.
ries
One to two harmful
quantity and four
rate of penalty catego—
ries
B. Specificity to water
body size
(1 = most specific)
Special harmful
quantities for
stationary sources and
barges
None
Q Extrinsic adjust-
ment factor (Loc)
for penalty rate
8 None
C. Specificity to physi—
cal/chemical charac-
teristics
(1 = most specific)
Harmful quantity
and rate of
penalty assigned to
materials individually
( ‘ Four categories for
‘—“ harmful quantity
and base rate of penalty.
Fourteen physical/chemi-
cal groups
Harmful quantity
and iase rate of
penaT ’assigned
individually. General
classification used for
dispersion & degradability
Same as IMCO
D. Ability to deal with
mixtures
U greatest ability)
None
Within each of four
categories
9 None
Within each of four
categories
E. Assumptions and
rationale
(1 = strongest
rationale)
,, Strong handling
of Stream and
critical volume
selection. Inadequate
for lakes & rivers,
Poor data base for seb-
ting rates of penalty
,. C.ood data base for
21 rates of penalty.
““ Weak rationale for
defining threshold of
harm. Persistence is
underrated,
Good data for pen-
alty rates. Weak
rationale for defining
threshold of harm
Complies with the
letter of the law.
Lacks underlying teehni-
Cal rationale and
supporting data.
F. Severity of penalty
rates
(1 = greatest severity)
High for major
threat materials
but comparatively low
for many metal salts
and pesticides
Typically higher
than Resource Value
except for certain metal
salts and pesticides
Relatively low for
major threat matl.;
however, extremely high
for pesticides and car-
thin metal salts
(7 Uniformly lower
“ than IMCO except
in coastal waters
G. Size of harmful Follows same
quantity pattern as ResV
(1 smallest size) methodology differing
by the rati of criti—
cal volumes
Typically smaller
than ResV except
for certain metal salts
and pesticides
(73 Typically large for
major threat matl.;
however, quite small for
certain pesticides and
metal salts
Typically smaller
than other method—
ologies. Substantially
smaller for coastal
waters.
-------
TABLE 11-8
SUMMARY OF INPUT, INTERMEDIATE AND OUTPUT CRITERIA
Intermediate Criteria (inputs )
1. Inducement for Preventive
Action (A, B, C, D, F, G)
2. Ease of Techrical Applica-
tion (A, B, ()
3. Equitability of Treatment
(A, B, C, D, E)
4. Likelihood of Avoiding Legal
Challenges (P, B, C, D, E,
F, C)
5. Adaptability to Change
(A, B, C, D, E)
Output Criteria (inputs)
I. Staff and Equipment Costs
(1. 2)
II. Litigation and Negotiation
Costs (4)
III. Ease of Administration
(1, 2, 3, 4, 5)
IV. Acceptability to Industry
(F, G, 3, 5)
V. Acceptability to Local
Government (1, 3, 5)
VI. Acceptability to State
Government (1, 3, 5)
VII. Administrative Effective-
ness (1, 4, 5)
H
Input Criteria
A. Specificity to Water Body Type
B. Specificity to Water Body Size
C. Specificity to Chemical Groups
D. Ability to Deal With Mixtures
D. Assumptions and Technical
Rationale
F. Severity of Penalty
G. Size of Harmful Quantity
-------
TABLE 11-9
SUMMARY OF OUTPUT CRITERIA
Variable Relative Rankings
Number Output Criterion DOHM IMCO RV UM
I Staff and Equipment Costs 1 2 4 3
(1 = minimum costs)
II Litigation and Negotiation 3 2 1 4
Costs (1 = minimum costs)
III Ease of Administration (1 = 3 2 1 4
maximum ease of administra-
tion)
IV Acceptability to Industry 4 2 1 3
(1 = maximum acceptability)
V Acceptability to Local 3 2 1 4
Government (1 = maximum
acceptability)
VI Acceptability to State 3 2 1 4
Government (1 = maximum
acceptability)
VII Administrative Effectiveness 3 2 1 4
(1 = maximum effectiveness)
IV— 17
-------
Insurability
The underlying problem with which this section is concerned
involves determining who is going to be responsible and pay for
harmful actions against society. This section examined the
insurance industry and determined the extent of risks that
they are willing to assume based on water pollution.
With respect to PL 92-500, a consensus of insurance underwriters
indicated that coverage for water pollution will not be extended
beyond $50,000 for civil penalties and $14,000,000 for clean—up
costs. The consensus represents a large sample of the world-
wide market. It was the feeling of the insurance industry that
civil penalties are not going to reduce hazardous spills. Also,
if the hazardous spill were caused by negligence, and if the
civil penalty were based on negligence 1 the insurance industry
would not take responsibility for a punitive cost due to care—
lessness.
Jurisdiction and Litigation
The potential for duplication and concurrent jurisdiction in
the regulatory actions relating tO hazardous materials spills
exists between the Federal government, international conventions
and state governments. Examples of potential conflicts included
the Florida Water Quality Law which imposes very severe fines
for oil spills as well as requiring evidence of financial respon-
sibility above and beyond Federal requirements for transporters
of oil. It was noted that similar legislation is being considered
by the state of New York.
International activities beginning with the 1954 Convention for
the Prevention of pollution of the Sea by Oil may also lead to
jurisdictional conflicts. The Inter-Governmental Maritime Con-
sultative organizatioll (IMCO) now spearheads efforts in this
area and has expanded in scope to consider hazardous materials.
Recent developments include two new conventions: The Intervention
Convention, and The Convention on Civil Liability for Oil
Pollution Damage. The former ratified by the United States, is
pertiment to oil in that it gives national governments the right
to take drastic measures, even on the high seas, when the threat
of dangerous pollution is imminent.
It is likely that international conventions will not lead to the
complications evident from state regulations. This is due
largely to the fact that international conventions must be
ratified by member countries and have typically been modified
to meet the desires of the participants. State regulations,
however, may differ greatly from Federal ones. Indeed, when
the three judge federal Court in Florida struck down the
IV— 18
-------
Florida statute on the grounds that it violated the principle
that admiralty law should be uniform, the Supreme Court took
exception. At that time, it was asserted that many of the
law’s provisions could be maintained inc1udinc those imposing
unlimited clean-up liability. The combined effect of multiple
civil liabilities and varying maximum liability limits has
served to overwhelm shippers and frighten off insurers.
This section also notes certain enforcement difficulties facing
the regulatory agency. The bulk of these stem from the liti-
gation aspects of assessing civil penalties and are most clearly
demonstrated in a recent case in Louisiana. In United States
vs LeBouf Bros. Towing Co. , F. Supp. CE. D. LA. 1974) the
court held that civil penalties could not be assessed solely
on the basis of information received in the initial report
from the discharger. Rather, independently derived information
was necessary to avoid claims of “self—incrimination.”
Compliance of the Methodologies with Congressional Intent
Legislative intent is normally determined by a thorough reading
of the applicable statute, by application of established rules
of construction, and by consideration of the legislative history
of the statute. The language in Section 311 of the Federal
Water Pollution Control Act lunendments of 1972 leaves much
discretion to the Administrator of the Environmental Protection
Agency and does not make clear exactly how a methodology for
determination of harmful quantities and an appropriate penalty
schedule for hazardous substances should be determined.
Examination of the legislative history of the Act provided
some insight as to congressional intent.
The legislative history of the Act is helpful in one area because
it indicates that Congress was concerned that the penalties in
Section 311 might be too severe and that a preferable means of
control would be regulations clearly defining requirements for
safe handling and shipment of hazardous substances.
The report of the Conference Committee (PL 92-500) indicated
that it was their hope that other committees of Congress would
consider the need for legislation to improve hazardous materials
handling, storing, and shipping procedures and that is such,
legislation could be enacted then the conference agreed that
the liability provisions of Section 311 should be reviewed and
changed as necessary.
IV— 19
-------
III. ECONOMIC IMPACT ON STATIONARY SOURCES
INTRODUCTION
This section considers the economic impacts of the penalty rates
derived from the four methodologies on stationary spill sources.
For purposes of this discussion, stationary spill sources include
production, storage, and transfer facilities which handle hazard-
ous materials. The Environmental Protection Agency has proposed
a list 1 of well over 300 substances as being nonremovable hazard-
ous substances under paragraph(b) (2) (B) (i), Section 311 of the
1972 Federal Water Pollution Control Act Amendments. From this
list generically representative substances, used avidly through-
out industry, and produced in large quantities were selected.
The substances selected for analysis in this section are:
• Sulfuric acid
• Ammonia
• Methyl parathion*
• Caustic/chlorine
• BTX (Benzene-Toluene-Xylene)
• Phenol
For each chemical or family of chemicals, the potential economic
impacts of the penalty rates fron each of the four methodologies
were assessed with respect to the following items:
• Cost to the representative producer
• Size distribution of producers and potential
impacts on smaller operations
• Effects on production price
• Cross product elasticity
The general procedure followed in this section begins with a
representative production unit against which each of the four
penalty rates is applied assuming 1) annual spillage equal to
1 Federal Register, Vol. 39, No. 164, Part IV, August 22, 1974.
*Methyl Parathion is not produced in large quantities re].ative
to the other fine material, however, the authors believe that
inclusion of a pesticide in this analysis was important.
IV—2l
-------
the harmful quantity, and 2) a spillage equal to the reported
(or assumed) annual percentage of production spilled by a
particular industry. This approach was necessitated by the
general lack of data regarding the frequency and size distri-
bution of spills of specific materials by stationary sources
into navigable waters.
Where applicable, the size distribution of operations engaged
in the production of a given material is presented and used
to estimate the potential impact on the industry as a whole.
Precise determination of the marginal firm is not possible
for stationary sources. Rather, the size distribution figures
must be used to suggest those operations which may be rendered
marginal by the various penalty schedules.
Additionally, impacts of the $500,000 maximum liability are
discussed as well as the possibility of product shifts which
might result from price increases required to offset potential
or actual fines.
Production units for each of the chemical substances are assumed
to have river locations, thus only the penalty rates associated
with river spills are calculated for the examples presented in
this analysis. For the DOHM and Unit of Measurement Methodologies
variations in penalty rates between rivers and the three other
water body types considered in this study are small. Under the
IMCO and Resource Value Methodologies fines for lakes and
estuaries would be close to those for river spills (within a
factor of 2) . Fines for spills into coastal waters would be
substancially less under the latter two methodologies, typically
by a factor of 40 or more.
POTENTIAL ECONOMIC EFFECTS ON SULFURIC ACID PRODUCERS
The Representative producer
The selected representative production unit is a plant that
produces 640 tons of sulfuric acid per day. The average size
production unit is 700 tons per day, but this average includes
the very large producer, 4800 tons per day, at Uncle Sam,
Louisiana. The 640 ton per day plant produces about 224,000
tons of sulfuric acid annually (350 days per year operation).
Revenues associated with sale of this output are estimated to
be $10,707,200 based on a $47.80 per ton current quoted price. *
2 Chemical Marketing Reporter , October 7, 1974.
*There is often a significant departure from the current
“quoted sales price” and the price for large bulk trans-
actions. Generally, most sales of sulfuric are made at a
substantial discount from the “quoted price,” reflecting,
among other things, large volume purchase and costs among
other things, large volume purchase and costs assignable
for internally consumed production. For example, in
1972 when the quoted price for sulfuric acid was $35/ton,
the average commercial shipment price was $19/ton.
IV— 22
-------
A profit margin on sales of 6.5 percent has been selected to
measure potential effects of various penalty schedules.* Based
on this percentage, annual after tax profits for the repre-
sentative firm would be about $696,000.
Cost Effects of Alternative Penalties
The representative sulfuric acid producer is assumed to spill
approximately 13,000 pounds of sulfuric acid per year. This
number was derived by dividing the reported spillage 3 (1.7
million pounds) of sulfuric acid by total production for the
year 1971 to obtain a percentage of annual production spilled.
Annual 6
1.7 x 10 lbs spilled
Percentage 58.6 x 109 lbs produced = 100 = 0.0029%
Spilled
This number is then used to derive the annual spillage for tl:.e
archetypical producer as follows:
Annual = 640 tons 350 day x (.000029) 6.5 tons
Spillage day year = 13,000 lbs
Anticipated fines for the spillage of this amount as well as
for the spillage of the harmful quantity under each of the
four methodologies are summarized in Table 111—1. It should
be noted that the 0.0029 percent figure is for total spills
and therefore is somewhat high for stationary sources, since
transportation related spills will also occur. Hence, use of
13,000 represents a maximum average annual spillage.
Of the four penalties, only the DOHM penalty is likely to have
any significant impact. The $58,000 fine for the spillage of
13,000 pounds of sulfuric acid translates into an annual profit
reduction of 8.3 percent. This calculation of the reductionF
in profits assumes that penalty “costs” cannot be absorbed else-
where. Clearly the plant has a variety of options including
passing costs forward to consumers and/or backward into the
factors of production.
*This is probably a bit high for sulfuric acid, but assumes
that sulfuric acid sales are at least as profitable as the
rest of the operations of typical integrated chemical firms
(see, for example, Chemical and Engineerir4g News , Vol. 52,
No. 22, June 3, 1974.)
3 Attaway, L. D. “Hazardous Materials Spills -- The National
Problem,” Proceedings of the 1972 National Conference on
Control of Hazardous Material Spills, Houston, TX, March 21-
23, 1972.
IV— 23
-------
TABLE 111-1
FINES FOR THE SPILLAGE OF SULFURIC ACID
FROM A STATIONARY SOURCE INTO A RIVER
IMCO
Resource Value
Unit of Measurement
DOHM
Harmful Quantity
7,600 lbs
17,000 lbs
5,000 lbs
12,000 lbs
Penalty
Rate
$0. 600/lb
$0. 036/lb
$0 .073/lb
$4,500/lb
Fine for the
Spillage of 13,000 lbs
( Percent of Net Profits )
$ 7,800 (1.12)
$ 468 (0.07)*
$ 949 (0.14)
$58.000 (8.33)
Methodology
I -I
1::
Fine for the
Spillage of the HQ
( Percent of Net Profits )
$ 4,560 (0.66)
$ 612 (0.09)
$ 365 (0.05)
$54,000 (7.76)
*Average spillage is less than harmful quantity, so no penalty is likely to be charged.
-------
The Marginal Firm
In the case of stationary sources, the term “marginal firm” is
perhaps a misnomer since most chemical manufacturing firms are
usually engaged in the production of more than one chemical.
Perhaps a better term would be the marginal operation. Under
such an approach the profitability of a particular chemical
manufacturing operation can be compared to the potential fines
associated with the spillage of that material. Figure 111-i
shows a cumulative distribution of sulfuric acid production
units in the United States. Superimposed on this distribution
is a scale which depicts the expected profitability of these
operations under the assumptions stated at the beginning of
this section. Additional scales show the amount of sulfuric
acid which would have to be spilled under each of the four
methodologies in order to incur fines equal to estimated profits.
For example, Figure Ill-i (point A) shows that seven percent of
the sulfuric acid producing facilities are the 25,000 ton per
year size. Estimated annual profits for this size operation
are $77,675 (point B) Figure 111—1. Spillage of approximately
8.6 tons of sulfuric acid under the DOHM Methodology (point D)
Figure Ill—i size operation. Under the Resource Value Method-
ology, (pointC) Figure 11 1-i, 1079 tons of product would have
to be spilled.
This figure can also be used to assess the impact of the $500,000
maximum liability on sulfuric acid operation. From the figure
it can be seen that 56 percent of the operations would have
annual* net profits equaled or exceeded by a fine equal to the
maximum liability. The lower “tons spilled” scales can be
used to determine how much sulfuric acid would have to be spilled
under each methodology in order to reach the maximum liability
level.
Thus, in the case of stationary sources whEre annual spillage
has been estimated as a percentage of annual production, the
approach is not one of precisely defining a marginal firm (in
terms of production) but rather one of profiling the industry
so that potential impacts on the smaller size operations can be
accurately assessed.
*The reader is reminded that it is considered extremely unlikely
that any given operation would experience spills of the magni-
tude required to reach the maximum liability level year after
year . Thus, the figure alone represents a situation that
could occur in “any given year,” and does not imply that 56
percent of the sulfuric acid industry would be bankrupted by
spills at the maximum liability level.
IV—25
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100
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PPOPITS (DOLL RS)
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FIGURE 11 1—i,
CUMULA .TIVE DISTRIBUTION OF
SULFURIC ACID PRODUCERS
-------
Price Effects of Alternative Penalties
For the representative firm, a price pass-through of $0.26/ton
would be required to offset fines resulting from the spillage
of 13,000 pounds under the DOHM Methodology (highest fines).
As the quoted price of $47.80/ton, this represents a price
increase of 0.54 percent.
Impacts on the prices of other products produced from sulfuric
acid can be estimated by passing the assumed price increases
along through various product chains. A typical product chain
for sulfuric acid is illustrated in Figure 111-2. Consider,
for example, the production of phosphatic fertilizer the major
use of sulfuric acid. Assume that this 0.54 percent price
pass—through is effected by the sulfuric acid producer to cover
anticipated fines. This price increase applied to phosphoric
acid production would increase phosphoric acid prices (assuming
phosphoric acid producers also pass the price increase along)
by about 0.82 percent. That is to say:
• 2.5 tons of sulfuric acid are required to produce one
ton of phosphoric acid,
• at $0.26 per ton increased price of sulfuric acid,
$0.65 is the increased cost of the amount of sulfuric
acid required to produce one ton of phosphoric acid, and
• at $79.44 total cost per ton of phosphoric acid,
$0.65 represents a 0.82 percent price increase. 5
At the next production stage, production of diammonium phosphate,
passing along the higher phosphoric acid price, results in an
increased fertilizer price of about 1.29 percent, i.e.,
• 1.175 of phosphoric acid are required to produce
one ton of diammonium phosphate,
• at $0.65 per ton increased price of phosphoric acid,
$0.76 is the total increased cost of the amount of
phosphoric acid required to produce one ton of
fertilizer, and
• at $59.03 total cost per ton of diammonium phosçhate,
$0.76 represents a 1.29 percent price increase.
From Table 111-2 it can be seen that phosphatic fertilizers
comprise an estimated 11.7 percent of variable costs in crop
production. However, these variable costs translate into only
5 ”Phosphatic Fertilizers, Properties and Processes,” Sulfur
Institute, Washington, DC, 1974.
IV—27
-------
Sullur or Sulfur dioxicli! or Sludge Acids
+
Production Uu j
Internal Fertilizer
Production
No. I Use — J Agriculture j —J Food
Other Phosphatic
Fertilizer
Production
No. 2 Use Petroleum Refining —
Acetone
No. 3 Use Alcohols Acetaldehyde
No. 4 Use [ Ammonium Suirate Agriculture j- [ Food
Titanium Dioxide
FIGURE 111-2. PRODUCT CHAI! I FOR SULFURIC ACID
IV— 28
-------
TABLE 111—2
ANALYSIS OF PASSTHROUGH OF PHOSPHATIC FERTILIZER COSTS
Percent of
Price of Variable Average Variable Percent of
Average Average Phosphorus - Average Costs Attri- Cost Per Market Price
Price Yield Average Quantity Variable buted to Usage Acre Measured Based on Usage
Per Per Used Per Acre Cost Per of Phosphorus at Market Prices of Phosphorus
Crop Bushel’ Acre 2 ( Based on Crop) Acre Fertilizers ( Percent) Fertilizers
Corn for Grain $1.26 $108.34 $4.84 $40.73 11.9 34.4 4.5
Wheat $1.53 $ 54.03 $4.43 $28.83 18.6 44.1 8.2
Soybeans $4.16 $113.50 $0.50 $22.03 2.3 19.4 4.5
Oats $0.75 $ 41.60 $2.14 $15.24 14.0 36.6 5.1
Average 11.7
Source:
This analysis is based on data from six major agricultural producing areas. The areas are: Southern Minnesota, Western
Iowa, Northwestern Missouri, West Central Illinois, Southern Indiana, and Northwestern Ohio.
‘Average price per bushel is based on the agricultural prices reported by the Department of Agric lture. 6/73, for each
growing area.
2 Average yield per acre is bushels per acre multiplied times market price of specific crop taken from 1973 price index
for each region.
-------
a 5.6 percent of the market price of agricultural production.
With farmers spending an estimated 5.6 percent of total pro-
duction costs on phosphatic fertilizers to produce agricultural
products, the 1.29 percent price increase of the fertilizer
translates into a market price increase for the crops of 0.07
percent.
Maximum Liability
In the event of the imposition of the maximum fine of $500,000,
the representative producer with calculated annual net profits
of $696,000 would experience a profit reduction of 72 percent.
The quantities of sulfuric acid which would have to be spilled
to reach the $500,000 maximum liability are shown in Table 111-3
below.
TABLE 111-3
QUANTITY OF SULFURIC ACID SPILLED
TO REACH MAXIMUM LIABILITY
Methodology Quantity Spilled
IMCO 417 tons
Resource Value 6945 tons
Unit of Measurement 3425 tons
DOHM 56 tons
Spills into water of this magnitude from a stationary source,
with the possible exception of the DOHM figure of 56 tons, are
considered rare events especially if spill prevention measures
are in effect. Data on sulfuric acid spills collected for a
recently completed Environmental Protection Agency study 6
indicates that approximately 10 percent of the reported sulfuric
acid spills are of this size or greater (see Chapter V for
details on spill size distribution).
For the representative firm, this fine translates into a price
increase of $2.23 per ton —— a 4.67 percent increase. Using
the same procedure as before, this price translates into an
11 percent increase in diammonium phosphate and a 0.61 percent
average increase in market price of crops.
6 Buckly, J. L. and S. A. Weiner. Data collected during
performance of Contract No. 68-03-0317, “Historical Docu-
mentation of Hazardous Material Spills,” Transmitted
November 1974.
IV—30
-------
Cross—Product Elasticity
Whereas many materials may be substituted for sulfuric acid to
achieve acidity, the major uses for sulfuric acid are based on
the sulfur content. This minimizes substitution considerably.
The areas where competition is a real concern include: 7
• In activities where the sulfur content is of major
interest, such as pulping and the production of
surface active agents and synthetic petroleum sul-
fonates; sulfur dioxide and sulfur trioxide are
presenting increased competition. Neither of
these materials are designated hazardous substances,
and hence both will become increasingly attractive
if proposed spill penalties lead to subsequent
price increases for sulfuric acid.
• Iron and steel pickling processes may not be
designed around the use of hydrochloric acid
based on new technology. The proposed penalties
will most likely encourage this shift if they
have any effect since rates of penalty for all
methodologies are relatively the same, but
hydrochloric acid offers more acidity per
pound of chemical than sulfuric acid. The
difference is slight, however, and not likely
to be a major factor.
• Hydrofluoric acid can be substituted for sulfuric
acid in alkylation reactions such as those employed
in petroleum refining. Hydrofluoric acid is a
designated hazardous substance with rates of penalty
similar to, in the case of the DOHM Methodology, or
up to five times as large as those for sulfuric acid.
Like hydrochloric acid, hydrofluoric acid offers
more acidity per pound but not five times as much.
Therefore, while the DOHM Methodology may encourage
hydrofluoric substitution, the Resource Value Method-
ology would discourage it.
• Glycol can be used as a dehydrating agent in place
of sulfuric acid during the manufacture of organic
chemicals. Since glycol is not a designated hazard-
ous substance, this substitution would be encouraged
by institution of any rate of penalty regulation.
7 Little, A. D., Inc. “A Modal Economic and Safety Analysis
of the Transportation of Hazardous Substances in Bulk,”
Contract No. C-76—446, U. S. Maritime Administration, May
1974.
IV—31
-------
While the majority of these uses for sulfuric acid show a
trend to higher substitution if penalties are enforced, the
actual impact on sulfuric acid production is predicted to be
small for two reasons: 1) substitution is not likely in the
major use of sulfuric acid-phosphoric acid production for
phosphate fertilizers, and 2) overall price effects of penalties
on sulfuric acid are predicted to be quite small.
POTENTIAL ECONOMIC EFFECTS ON AMMONIA PRODUCERS
The Representative Producer
For ammonia a 600 ton per day plant has been selected as the
representative production unit. This size plant is close to
the average for the industry. The 600 ton per day facility
produces about 210,000 tons per year annually (350 days per
year operation). Revenues associated with the sale of this
output are $27.3 million, based on a $130 per short ton sales
figure.* For the $27.3 million in sales, annual after tax
profits at 6.5 percent of sales would be about $1,774,500.
Cost Effects of Alternative Penalties
For the representative ammonia producer, it is assumed that an
average of 0.0025** percent of annual production is spilled.
At this level, 5.25 tons (10,500 pounds) per year would be
spilled. Fines which would result from the spillage of this
amount as well as the harmful quantity under the four method-
ologies are summarized in Table 111-4.
Of the four methodologies, only the IMCO and DOHM are likely
to have significant impacts. For the IMCO Methodology annual
spillage of 5.25 tons translates into fines equal to 2.78 per-
cent of profits; for the DOHM Methodology 4.26 percent of
profits. This reduction in profits is calculated assuming
that penalty costs are not passed forward or backward.
*The October 1974 quoted wholesale price for ammonia delivered
east of the Rockies was $130 -- $155 subtracting freight costs
of $5 —- $10, a figure of $130 is used for calculating revenues.
As with sulfuric acid, large commercial shipments are trans—
acted at prices substantially lower than the quoted price.
**The percentage of production spilled annually is an assumed
number based on the average of 0.0029 percent for sulfuric
acid, 3 0.0025 percent for phenol 3 and 0.002 percent estimated
for oil in general. Once again, this is a maximum annual
figure since some of the 0.0025 percent is actually spilled
during transport when the shipper may not be responsible.
IV—32
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TABLE 111—4
FINES RESULTING FROM THE SPILLAGE OF
ANHYDROUS AMMONIA FROM A STATIONARY
SOURCE INTO A RIVER
Fine for the Spillage
of the Harmful Quantity
____________ ( Percent of Net Profit )
$3,572 (.20)
$ 506 (.03)
$ 285 (.02)
$2,376 (.13)
Methodology
H
L)
IMCO
760
lbs
$4.70/lbs
Resource
Value
460
lbs
$1.10/lbs
Unit of
Measurement
500
lbs
$0.57/lbs
DORM
330
lbs
Fine for the Spillage
of 5.25 Tons (Percent
of Net Profit)
$49,350 (2.78)
$11,550 (0.65)
$ 5,985 (0.34)
$75,600 (4.26)
-------
The Marginal Firm
As in the case of sulfuric acid, the analysis of the marginal
firm is in essence an evaluation of the size and profitability
of an operation in light of potential fines which may result
from a spill. Figure 111-3 shows a cumulative distribution of
ammonia production units in the United States. Superimposed
on this distribution is a scale depicting the profitability of
these operations under the assumption (e.g., financial and
operating characteristics) stated at the beginning of this
section. Additional scales show the amount of ammonia that
would have to be spilled under each of the four methodologies
in order to incur fines equal to esti.mated profits. Inspection
of Figure 111-3 reveals that approximately 10 percent of the
ammonia production units are in the 35 thousand ton per year
or smaller category. Under the highest penalty rate schedule
(DOHM), a spill size of 20.5 tons would be required to incur
fines equal to the estimated profits of these size operations.
Operations with production capacities in excess of 59 thousand
tons per year ( 2l percent) would have annual profits in excess
of the $500,000 maximum liability.
Price Effects of Alternative Penalties
For the representative firm a price pass—through of $0.35 per
ton would be required to offset penalties anticipated from the
spillage of 5.25 tons per year under the DOHM (high) penalty
schedule. Under the Unit of Measurement Methodology (low)
a price pass-through of approximately $0.03 would be required.
These would equate respectively to a 0.3 and 0.02 percent
increase in the quoted price of anhydrous ammonia. Such price
increases are considered insignificant. The product chain
for ammonia is presented in Figure 111-4.
Maximum Liability
The effects of the maximum liability of $500,000 on the repre-
sentative operation are substantial. Imposition of such a
fine would result in a 28 percent reduction in profits —- as
noted previously firms with annual production less than 59
thousand tons per year would have profits less than the
$500,000 fine. To offset the $500,000 fine, the representative
producer would have to raise prices $2.38/ton or about 1.83
percent. This price increase assumes that the producer would
be incurring this fine annually -- a rather improbable situation.
The quantities of ammonia which would ahve to be spilled to
incur maximum penalty under each of the four methodologies
is shown in Table 111—5.
IV— 34
-------
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90
80
70
60
50
40
30
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FIGURE 111-3. CUMULATIVE DISTRIBUTION OF ANHYDROUS AMMONIA PRODUCERSk
-------
No. 1 Use
No. 2 Use
FIGURE 111—4.
PRODUCT CHAIN FOR AMMONIA
IV—36
No. 3 Use
No. 4 Use
No. 5 Use
-------
TABLE 111-5
QUANTITY OF AMMONIA SPILLED
TO REACH MAXIMUM LIABILITY
Methodology Quantity Spilled
IMCO 53.2 tons
Resource Value 227.2 tons
Unit of Measurement 438.6 tons
DOHM 34.7 tons
With the exception of the IMCO and DOHM quantities, spills of
this size from a single facility are considered unlikely. Data
from a previous study 6 indicates t.hat 38 percent of reported
ammonia spills are 35 tons or greater.* The same study indicates
that less than 20 percent of reported ammonia spills are larger
than 220 tons.
Cross—Product Elasticity
There are no substitutes available for ammonia in its major
uses. 7 Consequently, price effects will likely be absorbed
with no shift in use patterns.
POTENTIAL ECONOMIC EFFECTS ON
CAUSTIC/CHLORINE PRODUCERS
The Representative Producer
A 495 ton per day caustic/450 ton per day chlorine plant has
been selected as the representative production unit. The
process is assumed to be a electrolysis of brine operation
which yields a strict 1.1:1 ratio of caustic soda to chlorine.
The representative producer compares favorably with U. S.
average size plants, which includes . procedures using all
processes. For the U. S., the average chlorine production unit
is 440 tons per day, and the average caustic production unit is
493 tons per day. 8
The representative operation produces 173,250 and 157,500 tons
of caustic and chlorine respectively per year (350 days per
year operation). Revenues associated with sale of these co—
products are $20.79 million for caustic based on $120/ton 2
*Calculations assume spillage is 2870 solution.
8 Current Industrial Reports , Inorganic Chemicals, Series
N28A, Bureau of Budget, 1972.
IV—37
-------
for 50 percent liquid, 76 percent Na 2 0 (76 percent Na 2 0 = 98.390
NaOH) with freight equalized. Revenues for chlorine are esti-
mated at $15.75 million based on $100/ton 2 liquid with freight
equalized.
Applying the 6.5 percent profit margin on sales, annual after
tax profits are $1,351,350 for caustic and $1,023,750 for chlorine.
Cost Effects of Alternative Penalties
As with ammonia an average figure of 0.0025 percent of production
spilled is used for caustic and chlorine. For caustic this
results in an annual spillage of 4.33 tons from the archetypical
production unit. For chlorine the annual spillage is estimated
at 3.94 tons.* Tables 111-6 and 111-7 summarize expected fines
for these two materials.
Cost effects resulting from the spillage of caustic soda are
negligible under all methodologies except the DOHM Methodology.
Expected annual spillage is actually less than the harmful
quantity for the Resource Value and DOHM Methodologies. Even
under the DOHM Methodology expected decrease in net profits is
less than 2 percent with the spillage of the harmful quantity.
Penalties resulting from the IMCO and Resource Value Methodology
for the spillage of chlorine are substantial.
The Marginal Firm
Caustic Soda
Figure 111-5 shows the cumulative distribution of caustic soda
production units in the United States. Approximately 20 percent
of these units are of the 25 thousand tons per year (or smaller)
size with many of the units in this range associated with pulp
mill operations. Under all methodologies except the DOHN Method-
ology, even these smaller operations would have to experience
very large spills in order to incur fines equal to net profits.
Under the DOHM Methodology a spill of 20.7 tons would be
required to eliminate annual profits for a 25 thousand ton
per year operation.
Chlorine
Penalty rates under all methodologies for the spillage of chlorine
are high (Figure 111-6). For this material the marginal operations
might well be those which could not sustain the $500,000 maximum
is quite likely that spillage of chlorine is much less than
0.0025 percent of production due to the more rigorous material
specifications and operating procedures associated with the
production, handling, and storage of chlorine.
IV—38
-------
TABLE 111—6
FINES RESULTING FROM THE SPILLAGE
OF CAUSTIC SODA* FROM A STATIONARY
SOURCE INTO A RIVER
Fine for Spillage of
Harmful Quantity (%
Reduction in Profits )
$ 2,280 (0.17)
$ 240 (0.02)
$ 182 (0.01)
$22,560 (1.67)
Fine For Spillage
of 4.33 Tons (%
Reduction in Profits )
$ 2,599 (0.19)
$ 160 (0.01)
$ 316 (0.02)
$20,356 (1.51)
H
0
Methodology
Harmful Quantity
Rate of Penalty
IMCO
$0.600/lbs
7,600
lbs
Resource
Value
13,000
lbs
$0.037/lbs
Unit of
Meas rement
5,000
lbs
$0.073/lbs
DOHM
9,600
lbs
4.70/lbs
*Calculatjons based on 50% solution.
-------
TABLE 111—7
FINES RESULTING FROM THE SPILLAGE
OF CHLORINE FROM A STATIONARY
SOURCE INTO A RIVER
Me thodo logy
H IMCO
I Resource Value
Unit of Measurement
DOHM
harmful Quantity
69.0 lbs
14.0 lbs
50.0 lbs
9.7 lbs
Rate of Penalty
$66. 00/lbs
$37.00/lbs
$ 8.40/lbs
$ 4.90/lbs
Fine for Spillage of
Harmful Quantity (Percent
Reduction in Profits)
$4,554 (.44)
$ 518 (.05)
$ 420 (.04)
$ 48 (.00)
Fine for Spillage of
3.94 Tons (Percent
Reduction in Profits )
$500,000 (48.80)
$291,375 (28.50)
$ 66,150 (6.46)
$ 38,587 (3.77)
-------
1 10 100
Production (10
Tons/Year)
PROFITS (DOLLARS)
7.63 x 1O
( RES Vj
U OF N ‘ ‘ ‘
53.4
TONS I ________________________________
SPILLED\ IMCO
10
83
FIGURE 111-5. CUMULATIVE DISTRIBUTION OF CAUSTIC SODA PRODUCERS’
I I
1.0
‘
-. I I I
I II
.)
10_ 10
3
1
i
I I I
111111 I
132
I
:
I
I I I I
I I
6
10
I I I I II II I I I I lIlt
I
100
90
80
70
60
so
40
30
20
10
‘0
04 )
0
4)
“-I
zo
44
S
on
no’
0
1 4 1 . .
0.0
o .t
441- ’
c
So)
00 )
140 )
0.
H
I- ’
I _I I_ _ I
.1 I £ I I 11111
1000
I I 1 I_I I_I_SI
-------
I I UI UIIIJ I I I I 11111
I I I I I I I J II
10*
‘4
74
6*
5*
4’
34
2’
C
0
4’O
o.C
•0
04
14
-C
4 ’
ll
1
P FITS (DOL lARS) jIll I
6.5 x 10
• •tI
Dolsit
.663 0.1
U OFM
.386
.11
RES V
.087
D O
0.1
• 049
io2
Production Tons/Year)
I I I I I liii
I I
I
I
10
I I
II
11111
I I
1
I I liii
10
III I I
1.0
I
I Iii
I I I I 11111
I I
1.0
H
t.’)
10
I
I I I I 11111
10
I I I I I iii
FIGURE 111—6.
CUMULATIVE DISTRIBUTION OF CHLORINE PRODUCERS
-------
liability. For example, under the IMCO Methodology (highest
penalty rate) only 3.79 tons of chlorine need be spilled into
water in order to reach the maximum liability level. There are,
however, a number of inherent factors associated with the pro-
duction of chlorine which would tend to mitigate the amount of
this material that would be spilled or reach water when spilled.
Material specifications for the equipment used in the production
of chlorine are typically more stringent than those associated
with the manufacture of many other industrial chemicals. This
is a direct result of the toxic properties of this material.
For the same reason, operating procedures and safety precautions
associated with the handling and storage of this material are
tight. Both of these factors should work to minimize the spill-
age of chlorine. Furthermore, if and when a large quantity of
chlorine is inadvertently released, it is likely the major
portion of this release will be to the atmosphere —- that is,
the only situation in which large quantities of chlorine could
be transported from a stationary source to a nearby watercourse
is one whereby the chlorine is dissolved in a medium which will
flow to the watercourse. Thus, although the potential fines for
the spillage of chlorine are high, the stationary source, due
to its inherent properties, is less likely to experience a
major spill of chlorine into a waterbody.
Price Effects of Alternative Penalties
Caustic Soda
For the representative production unit, a price pass-through of
$0.12 (0.1 percent) per ton would be required to offset expected
annual fines under the DOHM Methodology (highest fine). This
pass-th.rough is considered insignificant.
Chlorine
Due to the high penalty rates, the price pass-through to com-
pensate for the spillage of chlorine from the representative
production unit is conservatively estimated on the basis of the
$500,000 maximum liability.* Such an approach would result in
a $3.17 per ton (3.17 percent) increase in the price of chlorine.
Such an estimate is a worst case assessment. Actual price
increases (if any) would fall somewhere below this level.
Production chains for caustic soda and chlorine are presented
in Figures 111—7 and 111—8.
*Note from Table 111—7, this level was reached only under the
IMCO Methodology.
IV— 4 3
-------
No. 1 Use
No. 2 Use
No. 3 Uce
No. 4 Use
No. 5 Use
FI tiPE 111-7. PRODUCT CHAIN FOR CAUSTIC SODA
IV— 44
-------
NaCI
FIGURE IIT . 8. PRODUCT CHAIN FOR CHLORINE
No. 1 Use
No. 2 Use
No. 3 Use
No. 4 Us.
IV—45
-------
Maximum Fine
Imposition of the $500,000 maximum penalty would result in a
37 percent reduction in profits to the representative caustic
operation and a 49 percent reduction in profits to the repre-
sentative chlorine operation. The quantities of these two
materials, which would have to be spilled to reach this level,
are summarized in Table 111-8 below.
TABLE 1 1 1-8
QUANTITY OF CAUSTIC SODA AND CHLORINE
SPILLED TO REACH MAXIMUM LIABILITY
Quantity Spilled
Methodology ( Caustic/Chlorine )
IMCO 833/ 3.8 tons
Resource Value 13,513/ 6.8 tons
Unit of Measurement 6,849/29.8 tons
DOHM 106/51.0 tons
For caustic soda, spills of this size from a stationary source
are considered unlikely especially if spill prevention measures
are in effect. Results of the Factory Mutual Research 6 study
indicate that approximately 10 percent of the reported caustic
soda* spills were greater than 106 tons —- the amount required
to reach the maximum liability level under the DORM approach.
Although the sizes of chlorine spills required to reach maximum
liability are substantially smaller, it is still considered
unlikely that even these quantities would reach water.
Cross—Product Elasticities
Caustic Soda
Most caustic soda is employed for the sodium alkali content rather
than its hydroxide content. Consequently, soda ash -- sodium
carbonate -- is the prime bulk chemical competitor. 7 Soda ash
is not a designated hazardous substance and, therefore, its
use may be encouraged by institution of rates of penalty. However,
the price effects estimated for caustic soda are very small,
suggesting that the additional incentive for substitution may
be insignificant.
*Agsuming as 7570 solution.
IV—46
-------
Chlorine
Substitutes have sought to replace chlorine in many of its
present uses. Oxygen has been a successful competitor in pulping
processes. 7 This trend is likely to be enhanced by institution
of rates of penalty since price effects for chlorine can be
significant. Ozone, another non-designated material, is being
marketed as a replacement for chlorine for disinfection purposes. 7
The price differential is quite high, however, and will not be
reversed by the rates of penalty developed here.
Price effects on chlorine are likely to be carried through to
hydrochloric acid. This would upset any substitution for sulfuric
acid uses otherwise predicted strictly from comparison of rates
of penalty.
POTENTIAL ECONOMIC EFFECTS
ON BENZENE PRODUCERS
The Representative Producer
Of the BTX family, benzene has been selected to illustrate the
effects of spill penalties. A 50 million gallon per year (470
tons per day) light oil reformer production unit has been set up
as the representative. The average size unit for 60 smaller
plants is 30 million gallons per year, but reflects 16 smaller
plants that produce only a small proportion of total output.
The size distribution for all production units ranges from
200,000 gallons per year to 185 million gallons per year. Total
1973 production was 1,419 million gallons per year. Total
1973 production was 1,419 million gallons while capacity was
1,767 million gallons. 9 More than half of total production is
produced by the light oil reformer process.
Annual revenues for the archetypical plant are estimated at $39
million, based on a $0.78 per gallon sales price 2 for nitration
grade with freight equalized. Applying the 6.5 percent profit
margin on sales, annual after tax profits would be about $2,535,000.
Cost Effects of Alternative Penalties
Spillage from the representative benzene operation is calculated
to be 1250 gallons per year (4.58 tons), once again assuming that
0.0025 percent ofproduction is spilled. 3 Anticipated fines for
the spillage of this amount as well as the harmful quantity are
shown in Table 111-9.
9 Chemical and Engineering News , January 1, 1974.
IV—47
-------
TABLE 111-9
FINES FOR THE SPILLAGE OF
BENZENE FROM A STATIONARY
SOURCE INTO A RIVER
Fine for the Spillage of
a Harmful Quantity
( Percent of Net Profits )
$ 2,052 (.08)
$ 202 (.01)
$ 149 (.01)
$18,000 (.71)
Fine for the Spillage
of 4.58 Tons (Percent
of Net Profits)
$ 2,474 (0.10)
$ 404 (0.02)
$ 339 (0.01)
$54,981 (2.17)
Methodoloqy
I -I
1::
IMCO
Resource Value
Unit of Measurement
DORM
Harmful Quantity
7,600 lbs
4,200 lbs
4,032 lbs
3,000 lbs
Rate of Penalty
$0. 270/lbs
$0. 048/lbs
$0.037/lbs
$6. 000/lbs
-------
Of the four penalty schedules, only the DOHM penalty is likely
to have any impact. The $54,981 fine for the estimated annual
spillage of 4.58 tons translates into an annual profit reduction
of 2.17 percent. As with the other materials discussed in this
chapter, this reduction is based on the assumption that penalty
“costs” are not absorbed elsewhere.
The Marginal Firm
Figure 111-9 displays the cumulative distribution of benzene
production facilities in the United States. Associated scales
are included to show estimated profits from these operations
and spill sizes under each methodology which would result in
fines equal to these profits. It is noteworthy that over 20
percent of the benzene production facilities have capacities
of less than 5 million gallons per year. Under the DOHM
Methodology (worst case) a spill of 21 tons would eliminate
net profits from the 5 million gallon per year operation.
Under other approaches, these size operations are not nearly
as threatened. For example, under the Resource Value Method-
ology a spill of over 2600 tons would be required to eliminate
profits from the 5 million gallon per year unit.
Price Effects of Alternative Penalties
Under the DOHM penalty schedule a price increase of $0.OOll/gallon
(0.14 percent) by the representative production unit would be
required to offset fines from the expected annual spillage of
4.58 tons per year. This price increase is considered insignif-
icant as are price increases associated with other methodologies,
all of which have penalty rates substantially lower than that
of the DOHM Methodology. The production chain for benzene is
illustrated in Figure 111-10.
Maximum Fine
Table V—l0 below summarizes the quantities of benzene which would
have to be spilled from a stationarysource in order to reach
the maximum penalty level.
TABLE 111-10
QUANTITY OF BENZENE SPILLED
TO REACH MAXIMUM LIABILITY
Methodology Quantity Spilled
IMCO 926 tons
Resource Value 5208 tons
Unit of Measurement 6757 tons
DOHM 42 tons
IV— 49
-------
U
£2
*3
ii
Os
C
0e
U.
1 .S
a.
1-4
Production (10 q /y )
P r1Ts ( wLk ) - -; .
5.07 z 10
{ gui
U U
6.03 10
52 8
RTI i o
. 31
a . a I .1
.422 1.0
ii liii
I I I 111111
I I 11111
10
1
_ I _ I I iiiil
to 6
I I I Ij
I I iiii.I i I
to 2 I
I 111111 I I
I I 1114
to 2 I
I I 1111111 I
I I
10
.1
10 100
FIGURE 111—9.
CUMULATIVE DISTRIBUTION OF BENZENE PRODUCERS k
-------
FIGURE 111-10. PRODUCT CHAIN FoR BENEZENE
Petroleum Reformer or Toluene or Coke Oven Gas
Primary Production Unit
No. 1 Use
No. 3 Use
No. 2 Use
No. 6 Use
No. 4 Use
No. 5 Uie
IV— 51
-------
With the possible exception of the DOHM Methodology, it is
unlikely that these spill levels will ever be reached. Data
from the Factory Mutual Research 6 study indicates that approx-
imately 13 percent of the reported BTX spills are of the 42
ton size or greater.
Price increases required by the archetypical firm to offset the
maximum liability are $0.01/gallon (1.27 percent).
Cross-Product Elasticity
In essence, there are not competitive substitutes for benzene
with respect to the bulk of its uses. 7
POTENTIAL ECONOMIC EFFECTS
ON PHENOL PRODUCERS
The Representative Producer
A 200 million pound per year plant has been selected as the repre-
sentative production unit. The average size production unit is
about 183 million lbs/year. In 1973, there were only 14 pro-
duction facilities that had a total annual production of 2.25
billion pounds (with a total capacity of 2.563 billion pounds).”
Annual revenues for the representative plant are estimated
at $54 million, based on a $0.27 per pound sales figure. 2 Annual
net profits are estimated to be $3.51 million.
Cost Effects of Alternative Penalties
Annual spillage of phenol has been calculated at 0.0025 percent
of production. This figure was derived by taking reported annual
spillage 3 and dividing this figure by annual production.* For
the representative plant this equates to 2.53 tons per year.
Fines for the annual spillage of this amount and the harmful
quantity under each of the four methodologies are shown in
Table 111—11.
The figures in Table 111—11 indicate that none of the penalty
rates severely impact the representative producer. The two
highest penalty rates, those for the IMCO and DOHM Methodologies,
result in net profit reductions of less than one percent.
Marginal Firm
Figure Ill—li indicates that the 50 million found per year (70
tons per day) plant is the smallest phenol production unit in
*This figure represents a maximum average annual spillage, since
the 0.0025 percent includes spillage during transport for which
the shipper is not the responsible agent.
IV—52
-------
TABLE 111—11
FINES FOR THE SPILLAGE OF
PHENOL FROM A STATIONARY
SOURCE INTO A RIVER
Fine for the Spillage
of a Harmful Quantity
( Percent of Prof its) _
$6,090 (.17)
$ 496 (.01)
$ 490 (.01)
$6,120 (.17)
Fine for the Spillage
of 2.53 Tons (Percent
of Profits)
$40,377.96 (1.15)
$ 1,564.03 (0.04)
$ 4,946.55 (0.15)
$25,739.70 (0.74)
Methodo loqv
H
U’
Harmful Quantity
Rate of Penalty
IMCO
760
lbs
$8.00/lbs
Resource Value
1,600
lbs
$0.31/lbs
Unit of Measuretent
500
lbs
$0.98/lbs
DOHM
1,200
lbs
$5.l0-/ lbs
-------
. . •1 ‘ I
. I I I Jill! I I I I Jill
100
•0
SO
70
•0
SO
40
30
20
10
I
C
P ITS ( t .il9)
1.75 x
,lll
( RES V I
I 28.3
uc rii :1
J 8.95
s / ii
$PTT \ DQ I
1.72
i.O
. I
10
100
Production (106 po ./yr)
A I
ill I
I I I.
———
... I It
—-—
I
jo 2
I I tutu
102
II
I
— I
I
I ittul
10
:
I
I
I I 111111
I
I
10
io6
‘-4
I I I _11IIII I I I 111111
I I 111111
1000
10 • 000
FIGURE Il l-il. CUMULATIVE DISTRIBUTION OF PHENOL PRODUCERS¼
-------
the United States. Calculated net profits for this size operation
are $877,500 per year. This size operation could sustain the
maximum liability and still show a profit. Even then, 31.25
tons of phenol would have to bespilled to reach this fine level
under the highest penalty schedule (IMCO). This eqpates to
0.125 percent of annual production for the 50 milliOn pound per
year plant. This figure is over two orders of magnitude larger
than the average annual spillage. The data available indicates
that it is highly unlikely that any of the facilities presently
engaged in the production of phenol wculd be irreversibly damaged
by the penalties derived under any of the four methodologies.
Price Effects of Alternative Penalties
In order to cover anticipated fines which would result from
the spillage of 2.53 tons per year, the representative producer
would have to raise the prices of phenol $0.0001/lb (0.05 percent)
if the worst case penalty schedule (IMCO) were used. This
price increase, along with those associated with the other three
methodologies is considered insignificant. The product chain
for phenol is presented in Figure 111-12.
Maximum Fine
The quantity of phenol which would have to be spilled under each
of the four methodologies to reach the $500,000 maximum penalty
is shown in Table 111—12.
TABLE 111—12
QUANTITY OF PHENOL SPILLED TO
REACH MAXIMUM LIABILITY
Methodology Quantity Spilled
IMCO 31 tons
Resource Value 806 tons
Unit of Measurement 255 tons
DOHM 49 tons
A price pass—through of $0.0025 (0.93 percent) would be required
by the representative producer to offset this maximum liability.
Data from the Factory Mutual Research 6 study indicates that
approximately 13 percent of the reported phenol* spills were 31
tons or larger.
*Assuming 84 percent solution.
IV—55
-------
+ NaOH or Cumene
No. 1 Use
No. 2 Us.
No. 3 Us.
No. 4 Us.
No. 5 Us.
FIGURE 111-12. PRODUCT CHAIN FOR PHENOL
IV—56
-------
Cross-Product Elasticity
There are no competitive substitutes for phenol.
POTENTIAL ECONOMIC EFFECTS ON
METHYL PARATHION PRODUCERS
presently there are only three units actively engaged in the
production of methyl parathion. For purposes of this report,
these three plants have been labeled as Plant A (30 million
pounds per year capacity); Plant B (12 million pounds per year
capacity); and Plant C (50 million pounds per year capacity).
In addition, another firm has a potential 28 million pounds
capacity at Warners, New Jersey. A facility at Plaquemine,
Louisiana, was deactivated in 1972. While the three active
production units had 92 million pounds total capacity, only
68 million pounds were actually produced in 1972.2 Capacities
are flexible, and in many cases, can be used to make other
organophosphorus pesticides.
Current prices range between 48—50 per pound, (80 percent
methyl parathion) freight allowed. 2 At 48 per pound realized
by the producer, annual revenues associated with the three
operations are shown in Table 111-13 along with net profits
estimated on the basis of a 6.5 percent* profit margin.
TABLE 111-13
ESTIMATED REVENUES AND NET PROFITS
FOR METHYL PARATHION PRODUCTION UNITS
Capacity Estimated Estimated
Production (Million Pound Revenue Net Profit
Facility Per Year) ( 106 Dollars) ( 103 Dollars )
Plant A 30 $14.40 $ 936.0
Plant B 12 $ 5.76 $ 374.4
Plant C 50 $24.00 $1,560.0
Spill history data from pesticide manufacturing facilities
is unavailable. Furthermore, it would be misleading to assume
that spill levels from these facilities are the same as those
from facilities engaged in the production of less toxic materials.
Material specifications and operating procedures at these facilities
*It is likely that profit margins associated with this product
are higher than 6.5 percent.
IV—57
-------
are judged to be stringent enough so as to substantially reduce
the spill potential and hence preclude the use of the average
spill figure (0.0025 percent of production) employed for some
of the other materials.
Since an acceptable estimate of annual spillage from this type
of facility is not available, Table 111—14 has been provided
for use to estimate potential impacts on the profitability of
these three operations for various size spills. Among other
things, this table shows that spill sizes two to three orders
of magnitude greater than the 0.0025 percent of production
level would be required to incur fines equal to net profits
or reach the $500,000 maximum penalty.
IV— 58
-------
TABLE 111-14
POTENTIAL IMPACTS OF PENALTY RATES*
ON PRODUCERS OF METHYL PARATHION
Methodology Plant A Plant B Plant C
1. TMCO
A. Fine for Spillage of $2,432 $2,432 $2,432
HQ (Percent of Net (0.26) (0.65) (0.16)
Profits)
8. Percent Reduction in 0.43 1.07 0.26
Net Profits Per 1000
lbs Spilled
C. Quantity Spilled to 62.50 tons 46.80 tons 62.50 tons
Incur Fines Equal to (0.26) (0.65) (0.16)
Net Profits or to
Reach Maximum Liabil-
ity. (Percent of Pro-
duction)
II. Resource Value
A. Fine for Spillage of $ 304 $ 304 $ 304
HQ (Percent of Net (0.03) (0.08) (0.02)
Profits)
B. Percent Reduction in 0.04 0.10 0.03
Net Profits Per 1000
lbs Spilled
C. Quantity Spilled to 641 tons 480 tons 641 tons
Incur Pines Equal to (4.27) (8.00) (2.56)
Net Profits or to
Reach Maximum Liabil-
ity. (Percent of Pro-
duction)
III. Un,.t of MeaSurement
A. Fine for Spillage of $ 226 $ 226 $ 226
HQ (Percent of Net (0.02) (0.06) (0.01)
Profits)
B. Percent Reduction in 0.04 0.10 0.02
Net Profits Per 1000
lbs Spilled
C. Quantity Spilled to 6 7 tons 514 tons 687 tons
Incur Fines Equal to (4.58) (8.56) (2.75)
Net Profits or to
Reach Maximum Liabil-
ity. (Percent of Pro-
duction)
liv. DOHM
A. Fine for Spillage of $2,475 $2,475 $2,475
HO (Percent of Net (0.26) (0.66) (0.16)
Profit.)
B. Percent Reduction in 0.48 1.20 0.29
Net Profit. Per 1000
lbs Spilled
C. Quantity Spilled to 56 tons 41.6 tons 56 ton.
Incur Fines Equal to (0.37) (0.69) (0.22)
Net Profits or to
Reach Maximum Liabil-
ity. (Percent of Pro-
duction)
5 penalty Rates are for the in.oLu 1e form 80 percent methyl parathion.
IV— 59
-------
REFERENCES
1. Federal Register , Vol. 39, No. 164, Part IV, August 22,
1974.
2. Chemical Marketing Reporter , October 7, 1974.
3. Attaway, L. D. “Hazardous Materials Spills -- The National
Problem,” Proceeding of the 1972 National Conference on
Control of Hazardous Material Spills, Houston, TX, March
21—23, 1972.
4. Stanford Research Institute, 1973 Directory of Chemical
Producers, USA , SRI Chemical Information Service.
5. “Phosphatic Fertilizers, Properties and Process,” Sulfur
Institute, Washington, DC, 1974.
6. Buckly, J. L. and S. A. Weiner. Data collected during
performance of contract No. 68-03—0317, “Historical
Documentation of Hazardous Material Spills,” Transmitted
November 1974.
7. Little, A. D., Inc. “A Modal Economic and Safety Analysis
of the Transportation of Hazardous Substances in Bulk,”
Contract C-76-446, U. S. Maritime Administration, May 1974.
8. Current Industrial Reports , Inorganic Chemicals, Series
N28A, Bureau of Budget, 1972.
9. Chemical and Engineering News , January 1, 1974.
IV—60
-------
IV. ECONOMIC IMPACT ON 1OBILE SOURCES
More than 300 chemical substances have been proposed’ as poten-
tial candidates for designation as non-removable hazardous
substances under paragraph (b) (2) (B) (i), Section 311 of PL
92— 500.
For this study representative substances from the proposed list
were selected for detailed analysis on the basis of annual
production, chemical characteristics, and handling by three major
transportation modes.
Based on these considerations, the following four chemical
substances were chosen for impact analysis:
• Caustic Soda
• Sulfuric Acid
• Anhydrous .P xnInonia
• Chlorine
The impact of penalty levels developed under the four methodo-
logies is analyzed with respect to an “average” carrier that
is representative of a typical operator. Potential impacts
or smaller, “marginal” operators in each mode are assessed
by inspection of the distribution of carrier within each mode.
Impacts are analyzed by comparing the total yearly expected
cost of penalties with the net income and the operating ratio
of each average carrier. Comparison with income levels indi-
cates the ability of the carrier’s income to sustain the ex-
pected annual penalties. The operating ratio, on the other
hand, shows the ratio of the expenses of doing business to
the total income generated by the business. The analysis of
the operating ratio shows the extent of “loss” in profitability
due to penalties.
The annual penalty cost to an average carrier is the penalty
rate per unit multiplied by the total units spilled summed
for all spill incidents in a year. Although penalty rates
per unit are known, spill quantities per incident as the
number of spill incidents per year for an “average” and a
“marginal” carrier are difficult to estimate. Historical data
‘Federal Register, Vol. 39, No. 164, Part IV, August 22, 1974.
IV—61
-------
in these areas are not available in sufficient detail and breadth
to permit accurate estimates of spill quantities and number of
spill incidents. Therefore, it was decided to analyze the im-
pacts of penalty levels upon the net income and operating ratio
for a range of spill sizes and for an incidence of one spill
per year.
The lower value for the range of spill quantities is taken to
be equal to the harmful quantity levels shown in Table ri-i.
The upper limit of the range is based on the largest size of
the vehicle used in shipping the chemical. Additionally,
the percentage decrease in net profit and absolute increase
in operating ratio per 1000 pounds of material spilled is also
computed.
Recent published financial and operating statistics of indivi-
dual carriers were used in computing the net income and operat-
ing ratio of an average and marginal carrier engaged in motor
and rail transport. For the motor carriers a sample of 39
common and contract operators transporting the four chemicals
was selected and the average net income and operating ratio
for 1971 were computed. For the rail carriers, 1972 net income
and operating ratio for an average carrier were computed from
data published by the AAR for 63 Class I railroads. These
companies represent 99 percent of the railroad industry in
terms of traffic, 96 percent in terms of rail mileage, and 93
percent in terms of workers employed by railroad companies.
Because most inland waterway operators are not regulated by
ICC they are not subject to the commission’s reporting require-
ments. Therefore, no published financial and operating data
are available to compute net income and operating ratio for an
average and marginal barge operator. In the absence of pub-
lished data the following approach was used: operating condi-
tions of typical barge movement in the New Orleans area in-
cluding different tow types and barge configurations were
determined. From these descriptions annual operating cost
estimates per tow and barge operator were made. In the follow-
ing discussions the impacts are analyzed separately for motor
carriers, railroads, and barge operators.
MOTOR-CARRIER OPERATIONS
Intercity movements of chemicals and allied products by truck
has been largely confined to short distances. In 1970, 42.8
percent of intercity tons of chemicals were moved by for-hire
and private trucks. On the other hand, the share of intercity
ton-miles attributed to trucks was only 19.7 percent. Note-
worthy is the fact that shorter hauls are generally performed
by private carriers, whereas longer hauls are generally done
IV— 62
-------
TABLE IV - 1
HARMFUL QUANTITIES AND PENALTY RATES FOR RIVERS
Anhydrous
Ammonia
Chlorine
Caustic
Soda
Sulfuric
Acid
Resource Value
Unit of Measurement
IMCO
Resource Value
Unit of Measurement
330.00
760.00
460.00
500.00
9.30
0.68
7.20
4.70
1.10
.57
9 . 70
69.00
14 . 00
50.00
6.40
0.47
4.90
66.00
37.00
8.40
9,600.000
7,600.000
13,000.000
5, 000. 000
6.000
0.440
4.700
.600
.037
.073
12,000.000
7.600.000
17, 000. 000
5,000.000
5.800
0.420
4.500
.600
.036
.073
Harmful Quantity
(ibs)
DOHM
IMC 0
0•i
Penalty Rate
($/ lb)
Cost of Prevention
Barge
Rail
Truck
-------
by for—hire common and contract carriers. The average length
of haul for private and for—hire carriers has been 150 and
211 miles, respectively. Approximately 67 percent of the total
tons that move by truck are shipped by for-hire carriers, and
72 percent of tone—miles are generated by for-hire carriers. 2
The reason for this difference in length of haul appears to
be the preference of chemical manufacturers to use their
private fleets for interplant transfers of products to their
nearby processing facilities.
These figures indicate that the for-hire carrier is the prin-
cipal motor carrier both in terms of tons and ton-miles.
For this reason and because the private carriers are owned and
operated by chemical manufacturers (against whom any fines
would be levied), the impact analysis in this section is
directed toward the for—hire motor carriers.
Average Motor Carriers
Data on the financial and operating statistics for Class I
and II motor carriers are available form the American Truck-
ing Association, Inc.. The annual statistics for the years
1970 and 1971 indicate that 3,034 contract and common motor
carriers were operating in the United States. The annual
report presents operating and financial statistics for
2,643 carriers. The statistics do not provide a means of
identifying the average finanical and operating statistics
for motor carriers that transport caustic soda, chlorine,
sulfuric acid and anhydrous ammonia. To generate an average
profile of common and contract motor carriers that handle
these materials, a list of carriers was prepared from the
U. S. Department of Transportation spill data for 1971.
This data afforded the following information on the four
materials of concern.
(a) Anhydrous Ammonia . The Office of Hazardous Materials,
U. S. Department of Transportation (DOT/OHM) reports a total
of 36 spills of anhydrous ammonia in 1971. Of these, 16
were from for-hire motor carriers, 19 from railroads, and one
from a private hauling company.
(b) Chlorine . Of the 11 spills of chlorine reported
in the same source for 1971, none were attributed to for-
hire motor carriers.
(c) Caustic Soda . Twenty-five spills of caustic soda
were reported for 1971. Of these, 12 were from railroads,
2 U. S. Department of Transportation, Transportation Projections,
1970—1980 , July, 1971.
IV— 64
-------
one from a private barge operator, and 12 from for—hire motor
carriers.
(d) Sulfuric Acid . Of the 78 spill incidents of sulfuric
acid in 1971, 56 were from for—hire motor carriers, 20 from
railroads, and 2 from private operators.
From these incidents a set of 39 motor carriers involved in
the spillage of the four hazardous materials was obtained.
Consolidated financial and operating statistics for these 39
motor carriers are contained in Table IV-2.
From the financial and operating statistics of the firms
shown in Table IV—2, characteristics of the average motor—
carrier were derived. These characteristics are summarized
in Table IV-3. It should be noted that none of these carriers
exclusively specializes in moving caustic soda, anhydrous
ammonia, or sulfuric acid. Furthermore, the list is not an
exhaustive sample of all for—hire motor carriers moving these
chemicals. Nevertheless, the list provides a sample of motor
carriers that handle the subject materials containing both
large and small carriers with a broad geographic coverage.
Estimated Impacts of Penalty Rates
Impacts of the various methodology penalty rates on the average
motor carrier’s profits and operating ratio are summarized
in Table IV—4. This table depict the impacts which result
from the spillage of the harmful quantity and the maximum
container size (30 ton truck) in terms of the percentage
decrease in net profits and the increase in operating ratio
for the average carrier. Additionally, the change per 1000
pounds of material spilled is also computed and can be used
as a linear rate constant to compute the impacts of any size
spill. Calculations were performed assuming spillage into
a river.
From these tables the following specific conclusions can be
drawn:
• None of the penalty rates for the four materials
studied, even with the spillage of a 30 ton truck
load, is high enough to completely eliminate annual
net profits.
• The $500,000 maximum liability was reached by all
methodologies except the DOl-IM Methodology for the
spillage of a 30 ton truckload of chlorine.
• For all chemicals the impact on net profits exceeds
20 percent under the DOHM Methodology from the
IV—65
-------
TABLE 1-2
i INANCIAL AND OPERATING STATISTICS FOR SELECTED CLASS I AND II MOTOR CARRIERS OF
SULFURIC ACID, CAUSTIC SODA, AND ANHYDROUS AMMONIA FOR 1971
Revenues Net Total
Intercity Total Operating Oper- Vehicle Total Expense Per
Freight Total Expenses Revenue Net Ino3se ating Miles Tons Vehicle Mile
( l0 dollars) ( l0 dollars) (i dollars ) (lOs dollars) (10 dollars) Ratio (103) (l0 ) (dollars)
11lyn Transportation Co. 3,560.6 5,259.0 5,088.5 110.5 95.0 96.8 5,105.5 690.9 .9967
Associated Transportation, Inc. 128,171.4 128,224.6 127,026.8 1,191.8 —262.0 99.1 114,571.7 2,581.4 .8217
Arisona Tank Lines, Inc. 4,303.3 4,396.6 4,314.8 81.9 30.2 98.1 9,027.9 1,932.0 .4779
Barton Truck Line, Inc. 2,583.1 2,603.4 2,390.8 212.6 144.8 91.8 743.1 147.9 2.5224
DowBan Transportation, Inc. 54,949.2 54,949.2 47,962.2 6,987.0 3,269.7 87.3 61,405.4 1,639.7 .6491
Bridges Brothers 804_a 804.0 739.7 64.3 9.2 92.0 1,853.1 137.1 .3992
Briggs Transportation Co. 22,625.4 22,657.5 20,916.1 1,741.5 1,057.7 92.3 14,326.9 521.6 1.0187
Chenical Haulers, Inc. 1,365.2 1,451.7 1,397.9 59.8 26.2 95•9 1,727.2 124.0 .8093
Consolidated Freight Ways 303,335.1 305,519.1 278,430.8 27,088.4 13,183.2 91.1 257,481.8 3,883.0 .7931
Daklen Transport, Inc. 3,981.4 4,813.2 4,528.2 285.0 167.1 94.1 7,095.8 1,006.0 .6382
Delta Lines, Inc. 32,336.8 32,415.1 30,951,9 1,463.2 924.2 95.5 12,258.1 714.3 1.7665
Garrett Freight Lines, Inc. 62,312.4 62,371.6 56,664.7 5,706.9 2,972.2 90.9 51,354.2 1,086.2 .8120
General Expressways, Inc. 23,104.2 23,105.2 22,005.2 1,100.0 472.7 95.2 21,377.5 578.7 .8894
Georgia Highway Express, Inc. 29,291.0 29,368.4 26,760.1 2,608.2 1,404.4 91.1 14,904.0 852.6 1.2547
Gordons Transports, Inc. 48,511.1 48,698.3 45,017.5 3,580.7 1,905.2 92.6 38,786.6 1,019.3 .8704
Greenleaf Motor Express, Inc. 801.0 811.3 821.0 —9.7 —36.3 101.2 1,141.7 65.8 .7100
Groendyke Transport, Inc. 16,701.5 18,026.0 16,432.3 1,593.8 897.2 91.2 36.863.0 3,336.2 .4458
Jones Motor 63,600.4 63,687.2 63,628.3 54.9 122.0 99.9 62,724.8 1,668.6 .7993
Elipech Hauling Co. 348.3 784.6 778.3 6.3 —5.0 99.2 426.6 32.5 1.8244
Matlock, Inc. 60,933.8 61,996.5 57,749.4 4,247.1 2,376.3 93.1 84,109.6 11,065.5 .6866
McLean Trucking Co. 178,961.1 179.1 53.0 165,536.5 13,616.6 6,313.9 92.4 164,011.4 2,885.1 .7635
Miller Transporters, Inc. 13,886.8 13,940.5 12,890.2 1,050.3 624.8 92.5 24,792.6 3,391.8 .5199
Navajo Freight Lines, Inc. 47,122.4 47,548.5 45,044.3 2,504.2 1,096.8 94.7 51,022.3 686.9 .7183
01C Motor Freight Systan 41,375.8 41,439.1 38,131.3 3,307.8 1,882.7 92.0 25,122.2 775.0 1.1372
Reading Transportation Co. 4,125.4 4,358.3 4,067.1 291.2 279.5 93.3 2,304.4 209.8 1.4006
Med Ball Motor Freight, Inc. 53,357.5 53,457.5 52,585.5 872.0 357.0 98.4 36,440.6 1,334.0 .9855
110 Grands Motorway, Inc. 10,456.4 11,487.5 11,462.4 25.1 19.6 99.6 6,896.9 337.2 1.1711
Soadsay Express, Inc. 8,976.8 8,976.8 7,030.0 1,946.8 1,242.3 78.3 5,088.7 257.9 .8979
BehertsOn Tank Lines, Inc. 18,266.0 18,30l. 17,266.6 1,035.3 486.6 94.3 34,811.4 3,646.0 .4855
Sogere Cortege Co. 16,120.6 17,372.4 16,555.7 816.7 466.0 95.3 22,420.1 1,754.4 .7384
ReaD Transport Corp. 31,871.7 31,933.9 29,775.9 2,158.0 155.2 93.2 50,313.3 8,411.2 .5918
Shiui Motor Lines, Inc. 1,299.5 1,372.9 1,320.4 52.5 20.5 96.2 2.241.l 165.4 .5814
Sctiwerase Trucking Co. 44,093.2 48,524.6 44,738.3 3,786.3 1,802.1 92.2 69,811.4 10,205.5 .6804
South Bend Freight Line, Inc. 4,075.6 4,308.7 4,281.4 27.4 59.8 99.4 2,139.6 280.7 1.7109
South Western Motor Transport 5,386.5 5,434.0 4,486.4 947.6 478.2 82.6 3,175.3 197.4 .9215
Steer. Tank Lin.s, Inc. 6,434.8 6,446.0 6,458.6 —12.6 —95.6 100.2 12,633.4 1,388.1 .5112
Strickland rransp. Co.. Inc. 43,415.7 43,422.3 40,064.2 3,359.1 2,630.6 92.3 12,845.0 655.1 .7180
itfie1d Tank Lin.s, Inc. 4,077.2 4,080.8 3,839.7 241.2 120.3 94.1 8,120.5 877.7 .4728
younger Brothers. Inc. 5,264.1 5,280.9 5,170.7 110.3 36.5 97.9 10,322.3 666.9 .5009
IVTAL 1,402,595.3 1,418,689.1 1,324,309.7 94,37S.8 46,760.8 1,372,097.3 71,201.2
AV AGE PSh cA X 35,964.0 36,376.6. 33,956.7 2,420.0 1,199.0 93.3 35,182.0 1,825.7 .7645
2 Fu11 Year 1971-1970 Report of the American Trucking Association, Inc.
-------
TABLE IV-3
CHARACTERISTICS OF AVERAGE AND MARGINAL
FOR-HIRE MOTOR CARRIERS
Net Income 1,119.000
(l0 dollars)
Total Oper 9 ing 36,376.600
Revenue (10 dollars)
Total Expenses 33,956.700
(lOs dollars)
Total Tons 1,825.700
(103 Tons)
Income/Ton .657
(dollars)
Revenue/Ton 19.920
(dollars)
Expenses/Ton 18.60
(dollars)
Operating Ratio 93•35
(expenses/revenues)
spillage of a 30 ton truck. With the other method-
ologies, substantial impacts (>20%) result only
from the spillage of chlorine and in the case of the
IMCO Methodology, ammonia.
• For all methodologies and chemicals, the spillage of
one harmful quantity does not substantially impact
the average motor carrier.
Although the average net income of the 39 motor carriers
comprising the sample set appears sufficiently high to ab-
sorb the penalties, a significant portion of carriers have
income levels so low that their full year’s net income could
be eradicated by a major spill. Table IV—5 ranks the 39
motor carriers comprising the sample set from lowest to
highest on the basis of annual net income. From this table
a cumulative distribution based on annual net income can
be plotted for these motor carriers. This curve shown in
Figures IV-l (A-D) can then be used to assess the impacts of
various size spills of each material for each methodology on
IV— 67
-------
Anhydrous M onia
Chlorine
Caustic Soda
Sulfuric Acid
2. Increase in Operating
Ratio
TABLE IV-4
SUMMARY OF FINE IMPACTS ON AVERAGE MOTOR
CARRIER RESULTING FROM THE SPILLAGE OF
SELECTED HAZARDOUS MATERIALS INTO A RIVER
Spilled Material
1. Percentage Decrease
in Annual Net Profit
H
0.20
0.00
3.72
4.42
35.81
24.68
23.27
22.27
0.60
0.41
0.39
0.37
0.30
0.38
0.38
0.38
23.42
41.70
3.01
3.01
0.39
5.50
0.05
0.05
0.04
0.04
0.04
0.05
5.43
41.70
0.19
0.18
0.09
3.07
0.00
0.00
0.02
0.03
0.03
0.03
2.85
41.70
0.37
0.37
Anhydrous Iu nia
Chlorine
Caustic Soda
Sulfuric Acid
0.05
0.70
0.01
0.01
0.00
0.00
0.12
0.14
1.18
0.81
0.76
0.73
0.02
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.77
1.37
0.10
0.10
0.01
0.18
0.00
0.00
0.00
0.00
0.00
0.00
0.18
1.37
0.00
0.00
0.00
0.10
0.00
0.00
0.00
0.0o
0.00
0.00
0.09
1.37
0.01
0.01
0.00
0.02
0.00
0.00
-------
TABLE IV- 5
MOTOR CARRIERS RANKED BY NET INCOME
Motor Carrier Net Income ($000 )
Associated Transportation, Inc. —262.0
Steere Tank Lines, Inc. — 85.6
Greenleaf Motor Express, Inc. — 36.3
Klipsch Hauling Company — 5.0
Bridges Brothers 9.2
Rio Grande Motorway, Inc. 19.6
Schilli Motor Lines, Inc. 20.5
Chemical H u1ers, Inc. 26.2
Arizona Tank Lines, Inc. 30.2
Younger Brothers, Inc. 36.5
South Bend Freight Line, Inc. 59.8
Allyn Transportation Company 95.0
Whitfield Tank Lines, Inc. 120.3
Jones Motor 122.0
Barton Truck Line, Inc. 144.8
Ruan Transport Corporation 155.2
Dahlan Transport, Inc. 167.1
Reading Transport Company 279.5
Red Ball Motor Freight, Inc. 357.0
Rogers CdLLCyC Company 466.0
General Expressway, Inc. 472.7
South Western Motor Transport 478.2
Robertson Tank Lines, Inc. 486.6
Miller Transport, Inc. 624.8
Groendyke Transport, Inc. 897.2
Delta Lines, Inc. 924.2
Briggs Transportation Company 1,057.7
Navajo Freight Lines, Inc. 1,096.8
Roadway Express, Inc. 1,262.3
Georgia Highway Express, Inc. 1,404.4
Schwerman Trucking Company 1,802.1
ONC Motor Freight System 1,882.7
Gordon’s Transports, Inc. 1,905.2
Matlock, Inc. 2,376.3
Strickland Transport Company, Inc. 2,630.6
Garrett Freight Lines, Inc. 2,972.2
Bowman Transportation, Inc. 3,269.7
McLean Trucking Company 6,313.9
Consolidated Freightways 13,183.2
IV—69
-------
r
Q I .-
-i
1
“I
) l
z
—
I-
I .-
I-
I .-
—
I-
v
z .
— a
of N j t
I Rascurce I I I ii I _
QUANTITY ) Value 1.0
SP1LLL
(tonsj INCO
eiIt .l 0.2
FIGURE IV— ]. (A).
I I I III
2.0 5.0
i i i ii II I
0.2 0.5 1.0
10
I I I I II
2.0 5.0
• 11.1
I I I 1 11111 I I I I IiiI
0.5 1.0 2.0 5.0 10
I I Illil
2 0
I I I I I iiil
20 30
IMPACTS OF FINES ON MOTOR CARRIERS RESULTING
FROM THE SPILLAGE OF ANIrIDROUS AMMONIA
H
.4
0
I I I I iiiil I I I I 11111
2.0 5.0 10 20 30
___________ I I I I
20 30
-------
I I I I 11111
2.0 5.0 10
I I I II III
0.2 0.5 1.0
1 0.1 0.2 0.5 1.0 2.0
2 I i 11111
.0 5.0
I I I I liii
FIGURE IV-1 (B). IMPACTS OF FINES ON MOTOR CARRIERS RESULTING
FROM THE SPILLAGE OF CHLORINE
•3
=
I )
il
I .-
I-
— I
0
0
L) A
I-
I.—
uJ
= w
I-
I—
—c
—
U, J
—
I. J
Resource
Value
I I ._ __It III
.02 .05 1.0 2.0
ooI.lI I I I I I iiiil
0.2 0.5 1.0
II
‘ ° r .01
U of H t ‘ III
5.0 1.0 2.0 5.0
I I I I I I ill
20 30
i I I I 11111
.02 .05 0.1
I I_ I 1 I liii
5.0 10 20 30
-------
100
4. .
I-
(#1
In I-
U I Z
In
U I
I-
I-
I— In
UI
UI
x
I-
I -
—
I-
Il , J
-
U. UI
0
/‘;esotIrce I
Va’ue 20
QUMTIfl ) UofN
SPILLED
(tons) INC0( 0
I liii
I 1.111
5.0 10 20
FIGURE IV-1 (C).
IMPACTS OF FINES ON MOTOR CARRIERS RESULTING
FROM THE SPILLAGE OF CAUSTIC SODA
I-I
-4
30
I I I I
2030
I I I I I
2.0 5.0 10 20 30
I I I I titil p
0.2 0.5 1.0 2.0
.1
-------
4- .
C
4 )
r U
1 .
4)
a- .
Q a-
‘U Z
U4<
I—
a—
“4
I-
I-
I-
kO J
14.”4
C
(Resource
Value
) UofM 1 - 10
DOHM
I I a I iiajj
20 30
I I I a IIII
2.0 5.0 10
i I a i ii aal
0.2 0.5 LU
_I_ I
20 30
I I I. •Il
I I I aiiiil i I I 111111
FIGURE IV-1 (D). IMPACT OF FINES ON MOTOR CARRIERS RESULTING
FROM THE SPILLAGE OF SULFURIC ACID
H
L I)
i i I I
20 30
QUANTITY
SPILLED
(tons)
-------
1) the individual firms of the sample set, 2) the industry
(as represented by the sample set), or 3) any other motor
carriers whose net income is known. As an example, con-
sider Figure IV-l(A) for anhydrous ammonia. For a given
size spill the fine under each of the four methodologies
can be readily determined by simply reading between any one
of the four lower scales, quantity spilled (tons), and the
net income scale (dollars). Additionally the curve in this
figure can be used to estimate the percentage of motor
carriers whose annual net profits would be equaled or ex-
ceeded by 1) a fine equal to a given dollar amount (net
income scale) or 2) for a given methodology, the spillage
of a given amount of material (quantity spilled scale).
Points A, B, and C, for example, show the percentage of
carriers whose profits are equaled or exceeded by fines
resulting from the spillage of a 30 ton tank truck of
anhydrous ammonia under the IMCO, Resource Value, and
Unit of Measurement Methodologies respectively. Under
the DOHM Methodology the spillage of a 30 ton truck results
in a fine of $432,000 (Point D). Similarly, curves given
in Figures iv—l (B-D) can be used for chlorine, caustic
soda, and sulfuric acid, respectively.
Summary of Impacts on Motor Carriers
For the average carrier, as derived in this section, the max-
imum effect on net income is a 41.7 percent loss resulting
from the imposition of the maximum $500,000 fine. Of the
four methodologies and the four chemicals studied, this level
was reached by three of the four methodologies when a 30
ton truck load of chlorine was spilled. However, even at the
maximum fine level, the loss could be fully recovered by
increasing the motor freight cost per ton by $0.27 to $18.87.
It is not expected that the average motor carrier would
experience a serious loss of business to other modes due
to a rate increase of $0.27 per ton. The average F.OB.
cost for commercial shipments of the four chemicals in 1969
was $33.73 per ton, a figure judged sufficiently high to
absorb a $0.27 increase in motor freight costs.
Depending on the methodology use, the impacts of penalty
rates on the smaller firms can be quite severe. Table IV-6
shows the percentage of firms whose annual net profits would
be equaled or exculded by fines resulting from the spillage
of a 30 ton truckload of a given material into water. This
table was derived from Figure IV-1 (A-D) which uses the
sample set of 39 motor carriers to represent the industry size
distribution.
IV — 74
-------
TABLE IV-6
PERCENTAGE OF MOTOR-CARRIERS WHOSE ANNUAL NET PROFITS
ARE EQUALED OR EXCLUDED BY FINES FROM THE SPILLAGE
OF 30 TON TRUCKLOAD OF VARIOUS HAZARDOUS MATERIALS
Methodology
Hazardous Resource Unit of
Materials DOHM IMCO Value Measurement
Anhydrous
Ammonia 58* 49 28 23
Chlorine 50 5 * 5 * 58*
Caustic
Soda 48 22 11 12.5
Sulfuric
Acid 48 22 11 12.5
*Maxim Liability Reached
This table indicates that a significant number of the smaller
operators could be severely impacted (at least in any one
given year) in the event that they were found to be res-
ponsible for the release of a full truckload of any one of
the four materials.
RAILROAD OPERATIONS
All transporation of chemicals by rail is regulated by the
Interstate Commerce Commission. About 56 percent of inter-
city tons and 65 percent of ton-miles are moved by rail. The
average rail length of haul for chemicals is approximately
600 miles. Compared to the average length of haul for
motor carriers (280 miles), it is clear that the rail mode
is preferred over trucking for longer distances.
Table P1-7 presents selected statistics from the condensed
income statements for 63 Class I railroads for 1972. These
companies represent about 99 precent of the railroad industry
in terms of traffic. Of the 63 carriers 19 had a net loss
ranging from $14 thousand (Greenbay and Western) to $233
million (Penn Central). The average annual net income is $6.2
million per carrier; the average operating ratio is 78.7.
Characteristics for the average rail carrier used in this
study are shown in Table P1-8.
1974 Yearbook of Facts , American Association of Railroads,
AAR, Washington, DC , February 1974.
IV— 75
-------
TABLE IV—7
1972 SELECTED STATISTICS FROM CONDENSED INCOME STATEMENTS FOR 63 CLASS I PAILROADSk
District and Road
Avg. Miles
of Road
Operated
Total
Operating
Revenues
Total
Operating
Expenses
Net Railway Operating Income
Rate of Return
on Average
Net Investment
Net Income 5
EASTERN DISTRICT
Akron, Canton S Youngstown MR
171
$ 7,613,886 $
6,917,020
$ 550,090
2.93%
$ 81,465
Ann Arbor MR
299
11,002,965
10,239,935 Def
1.104,768
Def
Def
1,958,226
Baltimore & Ohio RR
5,501
502,383,559
367,697,239
36,509,994
3.67
10,444,902
Bangor a Aroostook MM
542
13,752,357
14,720,125
2,744,297
4.42
2,057,354
Bessemer Lake Erie RE
220
47,600,188
35,377,275
5,045,257
6.51
5,346,931
Boston & Maine Corporation
Canadian Pacific (Lines in ML)
1,463
234
77,298,220
8,885,643
69,289,126 Def
7,504,380 Def
5,504,101
5ll,07
Def
Def
D E
Def
11,641,058
—
Central MR of New Jersey
402
41,504.088
39.015,446 Def
6,328,7°.
Def
Def
5,501,291
Central Vermont My
382
10,062,021
8,193,376
1,185,093
5.40
595,571
Chesapeake & Ohio Ry
4,994
451,330,041
343,948,922
52,412,001
5.84
32,869,313
Chicago & Eastern Illinois MR
Delaware S Hudson My
Detroit S Toledo Shore Line MR
Detroit. Toledo & Ironton MR
Elijin , Joliet S Eastern My
Erie Lackawanna My
643
717
50
476
205
2,864
39,578,470
41,833,059
8,264,867
41,724,400
72,544,409
263,594,164
29,166,827
33,278,922
5,775,641
30,850,853
53,577,188
223,168,658 Def
3,339,744
1,240,749
877,868
3,997,777
4,608,603
7,744,375
4.84
1.45
5.84
5.68
7.24
Def
Def
2,715,395
1,067,981
815,944
3,415,553
6,342,631
23,541,107
Grand Trunk Western MR
Illinois Terminal MM
946
391
89,887,540
12,390,078
80,185,08. Def
9,672,781
13,943,533
1,313,163
Def
6.56
Def
18,306,702
831,980
Lehigh Valley MR
972
51,129,082
47,786,668 Def
8,941,873
Def
Def
17,693,020
Long Island MR
327
94,311,703
146,694,173 Def
65,987,179
Def
Def
63,395,559
Maine Central MR
908
28,209.093
25,205,952
1,028,792
1.67
124,553
Missouri—Illinois RB
334
7,666,965
6.403,391
3,152,030
7.88
2,705,281
Monongahela My
184
8,378,908
5,204,812
1,920,249
4.05
Def
337,609
Norfolk S Western Ry
7,616
795,010,000
565,835,670
130,275,020
6.43
32,149,728
Penn Central Transportation Co.
19,861
1,825,456,301
1,535,027,115 Def
105,238,001
Def
Def
222,829,250
Penna—Reading Seashore Lines
311
9,043,719
11,184,498 Def
5,065,453
Def
Oaf
5,690,211
Pittsburgh S Lake Erie MM
211
37,531,775
39,684,419
10,661,114
4.83
9,195,265
Reading Company
1,171
111,150,115
102,755,748 Def
12,125,587
Def
Def
20,083,342
Richmond, Fred’burg S Potomac
110
25,192,484
14,598,555
5,511,873
9.53
9,302,269
Western Maryland Ry
861
48,880,278
42,033,203
4,759,303
3.10
Def
630,156
TOTAL EASTERN DISTRICT
53,366
3,910,993,003
3,910,993,003
38,638,333
0.37
Def
271,545,415
SOUTHERN DISTRICT
Clinchfield MR
295
40,214,621
24,814,496
10,816,311
9.13
—
Florida East Coast My
530
39,511,843
23,306,700
5,469,889
7.30
6,267,365
Georgia MR
Illinois Central Gulf RRb
322
9,658
11,189,131
472.606.516
9,285,624
373,439,460
196,709
27,443,335
0.95
*274
—
*27,937,290
Louisville S Nashville RE
6,588
458,478,204
359,795,562
46,578,173
4.39
29,002,328
Norfolk Southern
622
15,362,715
12,778,072
566,800
1.55
18,979
Seaboard Coast Line MR
9.099
563,136,507
420,662,316
49,800,649
4.62
50,606,325
Southern Railway Systemc
TOTAL SOUTHERN DISTRICT
10,022
723.798.000
509.135,000
120.937.000
7.73
85,335,000
36,595
2,301,405,733
1,716,438,804
258,762,609
*5.32
*208,451,582
I-I
0
3 Axnerican Association of Railroads. 1974 Yearbook of Facts , AAR, Washington, DC,
February 1974.
-------
TABLE IV—7 (Cont’d)
District and Road
Amount
: et Incomea
WESTERN DISTRICT
Atchison, Topeka & Santa Fe Ry
12,653
$ 831,695,396
$ 647,310,185
$ 86,763,954
5.31%
$ 80,866,023
Burlington Northern Inc. -
Chicago & North Western Trans.Co.°
23,420
10,556
1,000,516.581
360,709,287
827,620,927
286,657,349
48,200,339
18,855,224
2.08
3.96
40,961,158
11,299,652
Chicago, Milwaukee, St. Paul&Pac.RR
10,373
312,831,667
265.410.661
Def
6,783,161
Del
Def
8,643,1.11
Chicago, Rock Island & Pacific PR
7,495
305,290,186
246,338,116
Del
5,502,501
Def
Def
5,855,299
Colorado & Southern Ry
692
27,181,642
18,639,60]
5,362,310
6.84
T346,545
Denver & Rio Grande Western RR
1,899
112,670,867
77.571,785
17,910,163
6.96
17,036,257
Duluth, l4issabe & Iron Range Ry
507
46,232,376
31,137,073
4,836,272
5.31
5,781,679
Duluth, Winnipeg 6 Pacific Ry
170
13,149,590
9,376,074
2,256,834
21.28
1,811,684
Fort Worth & Denver Ry
1,201
24,099,406
20,022,509
Del
1,584,852
Del
Def
1,743,551
Green Bay & Western RR
255
7,843,192
6,606,381
Del
7,304
Del
Def
14,109
Kansas City Southern Ry
1,672
106,414,911
.77,830,222
10,423,376
5.18
7,793,309
Lake Superior & Ishpeming PR
117
5,453,729
5,459,471
Del
74,650
Def
Def
130,940
Missouri—Kansas—Texas PR
2,609
78.968,276
59,415,963
Def
968,637
Del
Del
2,559,819
Missouri Pacific PR
8,903
451,081,347
343,796,894
38,681,455
4.49
16,786,413
Northwestern Pacific PR
321
14,079,694
8,871,775
1,845,191
6.15
2,360,784
Oregon Electric Ny
185
6,910,867
4,142,504
97,894
0.78
405,863
St. Louis—San Francisco Ry
4,728
229,692,903
176,174,569
22,588,569
5.10
14,340,405
St. Louis Southwestern Ry
1,513
152,272,289
116,607,740
30,1.80,469
9.55
31,826,754
Soo Line PR
Southern Pacific Transportation Co.
4,647_,
1f 1
140,651,034
1,119,929,894
102,409,487
861,599,773
13,808,510
93,118,770
5.56
4.60
10 264,282
93 79,59l
Texas 6 Pacific Ny
2,134
108,432,793
87,820,956
11,894,265
4.79
7,485,383
Toledo, Peoria & lOestern PR
239
11,433,411
8.621,606
.
619,030
4.99
610,038
Union Pacific RR
9,483
769.623,333
567,161.927
132,085,097
7.04
122,940,857
Western Pacific NRC
1,490
88,034,603
72,376,626
5,678,219
3.62
3,986,822
TOTAL WESTERN DISTRICT
118,786
6,325,199,274
4.928.980,174
530,284.556
4.24
454,940,670
1 ’OTAL UNITED STATES
208,747
13,409,815,385
10,556,411,981
827,685,498
*2.96
*391, 954,837
*RevjSed to include final Illinois C
entral Gulf statistics
aInc e after fixed and contingent charges and after extraordinary and prior period items and federal income taxes thereon.
blncludes former Gulf, Mobile and Ohio and Illinois Central merged to form Illinois Central Gulf August 10. 1972.
CSouthern Ry System figures include Class II and switching and terminal companies not included in district total.
dpepresents Chicago & North Western Railway Company at December 31, 1971 and Chicago & Worth Western Transportation Company at
December 31. 1972.
Avg. Miles Total Total
of Road Operating Operating
Operated Revenues Expenses
Net Railway Operating Income
hate or Return
on Average
Net 1nvestment
- 1
-J
elncludes Sacramento Northern Ry. and Tidewater Southern Ry. Company.
-------
TABLE IV-8
CHARACTERISTICS OF AVERAGE
AND MARGINAL RAIL CARRIERS
Net Income 6,220.0
(iO dollars)
Total Operating 212,854.0
Income (l0 dollars)
Total Expenses 167,562.0
(iO dollars)
Operating Ratio 78.7
(%)
Estimated Impacts of Penalty Rates
Table IV-9 summarizes the impacts of penalty rates on the
net profits and operating ratio of the average rail carrier.
The table presents the impact of the various penalty rates
at two spill levels, the harmful quantity and the maximum
container size (60 ton tank car) for the four materials
considered. Also included is the change per 1000 pounds of
material spilled. This number can be used to readily compute
the impacts on the two parameters for any size spill. From
the information in these tables, the following conclusions
can be drawn.
• Impacts of the penalty rates on the average rail
carrier are not nearly as severe as the impacts on
the average motor carrier. The maximum liability
represents an 8 percent decrease in net profits or
an increase in the operating ratio of 0.26 (from 78.7
to 78.96).
• Under the DOHM Methodology, the $500,000 maximum
liability is reached for ammonia and chlorine when
a 60 ton tank car is lost.
• For the Unit of Measurement and Resource Value
Methodologies, the maximum liability is reached
for chlorine when a 60 ton tank car is lost.
From the above analysis it appears that the average rail
carrier, can sustain a relatively large spill of any one of
the materials and still continue to operate; however, closer
inspection of the actual distribution of Class I railroads
indicates that a substantial percentage ( 28%), based on
1973 statistics are operating in the red and hence any penalty
IV— 78
-------
Anhydrous Ammonia
Chlorine
Caustic Soda
Sulfuric Acid
2. Increase in Operating
Ratio
TABLE IV-9
SUMMARY OF FINE IMPACTS ON AVERAGE RAIL
CARRIER RESULTING FROM THE SPILLAGE OF
SELECTED HAZARDOUS MATERIALS INTO A RIVER
Spilled Material
I -I
- 1
i. percentage Decrease
in Annual Net Profit
0.01
0.00
0.07
0.08
1.31
0.91
0.85
0.81
0.01
0.01
0.00
0.00
0.08
0.06
0.07
0.07
0.07
8.04
8.04
1.16
1.16
1.06
0.01
0.01
0.01 2.09
0.01 8.04
0.01 0.07
0.01 0.07
0.02
0.59
0.00
0.00
0.00
0.01
0.01
0.01
1.10
8.04
0.14
0.14
0.01
0.13
0.00
0.00
Anbydrous Ammonia
Chlorine
Caustic Soda
Sulfuric Acid
0.00
0.00
0.00
0.00
0.04
0.03
0.03
0.03
0.00
0.00
0.00
0.00
0.02
0.02
0.02
0.02
0.26
0.26
0.06
0.06
0.02
0.05
0.02
0.02
0.02
0.02
0.02
0.02
0.08
0.26
0.02
0.02
0.02
0.04
0.02
0.02
0.02
0.02
0.02
0.02
0.05
0.26
0.03
0.03
0.02
0.03
0.02
0.02
-------
imposed as the result of a hazardous material spill would
only aggravate an already weak business position. The
cumulative distribution of Class I railways based on 1973
net income is shown in Figures Iv-2 (A-D). These graphs
can be used to assess the impacts of various size spills
on the industry or industrial carriers under the various
methodologies in a manner similar to that discussed for the
trucking industry.
It should be noted that these figures represent the bulk
of rail carriers whereas the curves for the trucking industry
(Figure IV-l) were derived from a representative sample set.
This figure indicates approximately 37 percent of the rail
carriers would have one year’s worth of profits eliminated
by a $500,000 maximum liability over and above the 28 percent
(of the total) presently operating in the red.
Summary of Impacts on Rail Carriers
Based on 1971 statistics, revenues per ton for Class I and
II railroads averaged $8.15/ton. 5 For the average carrier
derived in this study, freight rate increases of $0.66 per
ton (8 percent) would be required to offset the $500,000
maximum liability assuming one spill of this magnitude per
year.
Average potential impacts of penalties on the rail industry
are generally not as severe as those on the trucking industry.
However, the current profit situation of many 2.5 Class I
railroads is much that the threat of imposition any fines
for the spillage of hazardous material would most likely have
a negative effect in that these operations (30 percent) are
not even generating profits which could be used to institute
spill prevention measures.
Only 15 percent of all barge transportation in the United
States is regulated by the ICC. Moreover, the degree of
non-regulation for chemical transportation by larqe is ap-
proximately 97 percent. Of this 97 percent, 60 percent of
the non-regulated movement of chemicals is done by for-hire
carriers (common and contract); the remainder being carried
by industry owned and operated private fleets.b Since most
barge operations are unregulated, reporting of financial and
operating data to the government is not required. Hence, in
assessing the economic impacts of spill regulations on barge
operators, an approach different from that used for the
5 ”Statjstjca]. Abstracts of the United States,” 9th Annual
Ed., U. S. Department of Commerce, 1973.
6 American Waterways Operators, 1972 Inland Waterborne Commerce
Statistics (1973).
IV— 80
-------
C
U of
QJANTITY ) D0Ijlli
SPILLED (
(tons) \ Resoircea’ I I I I I _______________________
Value 10
FIGURE IV-2 (A). POTENTIAL IMPACTS ON NET PROFITS OF
BAIL CARRIERS RESULTING FROM THE SPILLAGE
OF ANHYDROUS AMMONIA INTO A RIVER
60
I I I I jijil
20 60
I I I 111111
2.0 5.0 10
20
H
co
H
NET INC (dollars)
I I 111111
20 60 NOT?: Not shown as smooth curve since
all Class I railroads are represented.
I I I I 11111
20 60
-------
1--I r I I U I IIII
I U I I lIIJ I
C
I,
z u
I-
‘,, I-
-J
I a
H
100-
80.
60
40
20
I I I I II liii
106 101
NET INC E (dollars)
60 pIorE: Not shown as seooth curve since
all Class I railroads are represented.
11111 I I I 111111 I I I iiiiil
U øf N 1 1.0 2.0 5.0 10 20
I I
Vi liae 0.2 0.5 1.0 2.0 5.0
n.j I
0.1 0.2 0.5 1.0 2.0
FIGURE IV-2 (B). POTENTIAL IMPACTS ON NET PROFITS OF
RAIL CARRIERS RESULTING FROM THE
SPILLAGE OF CHLORINE INTO A RIVER
H
I . .,
U I I 11.111 I U I I 11111 II I I
n
• ‘ i 20
-------
4.P
C
I ,
r C)
I-
I- .
U,
U, I-
OW
r —
— U,
0
=
I-
—
a
—
U, -
0
(Resource
Va’ue
135
I UofM
QUANTITY I
SPILLED 68
(tons)
FIGURE Iv-2 (C).
I
20
I I
60
‘ 0I
0
I
20
I I
I I
60
I I I_I
NOTF: Not shown as smooth curve since
all Class I railroads are represeoted.
POTENTIAL IMPACTS ON NET PROFITS OF
RAIL CARRIERS RESULTING FROM THE SPILLAGE
OF CAUSTIC SODA INTO A RIVER
H
-------
I I JIIIII I I IIIIII I I II IIII I I IIII
100
I
80
In—
U, —
U Z
60
= I-
.40
H_
.
I I I .11111 I I I I 11111 II 11111 I I I 1 111
106 108
NET INC l( (dollars)
esource
Value TF: Not shown as sooth curves since
135 all Class I railroads are represented.
QUAIITITY 1 UofN
SP ILLED(
(tons) \ o oqI i i i ii i I
I 20 60
IlcoIio ii
20 60
FIGURE IV-2 CD). POTENTIAL IMPACTS ON NET PROFITS OF
RAIL CARRIERS RESULTING FROM THE SPILLAGE
OF SULFURIC ACID INTO A RIVER
-------
regulated motor-carriers and railways must be employed.
Specifically it is necessary to derive by indirect methods an
approximate financial and operating profile for barge opera-
tions and then use the derived profile as a basis for assess-
ing the impacts of the various proposed penalty rates. This
derivation is performed in the next sections.
The Barging Industry
Approximately 1,700 companies 7 are engaged in commercial
barge operations on inland waterways of the United States:
113 companies are certificated by the Interstate Commerce
Commission (ICC) to provide service as regular route common
carriers; 32 companies hold ICC permits to provide services
under contract with a shipper; 1,150 companies are engaged
in transportation of commodities which are exempt from regula-
tion under provisions of the Interstate Commerce Act; and
about 400 companies are engaged in private transportation
of their own commodities.
The 1,700 companies operate 14,000 dry cargo barges and scows
with total cargo capacity in excess of 14 million tons;
2,600 tank barges with total cargo capacity of approximately
5,150,000 tons; and 3,800 tow boats and tugs with a total
aggregate power in excess of 2,700,000 horsepower. 7
Cost Estimates for Barge Operations
It is customary to estimate operating and fixed costs for
barges and tow boats on an hourly basis. In Appendix A,
hourly operating costs for barges and tow boats in the lower
Mississippi River are estimated. From these estimates trans-
port costs per ton and ton—mile for a representative list
of distances and tows is computed. These costs are the
basic starting point for deriving operating and financial
characteristics for the average barge operator.
Figure IV-3 provides a description of the step—by-step pro-
cedures in Appendix A used to derive financial and operating
data for the average large operator. The reader is referred
to Appendix A for the details of this derivation. Figures
derived in this appendix indicate that operating costs for
an average large operator are $2,000,000. Assuming an
operating ratio of .85 this translates to an operating
revenue of $2,325,000. per year leaving an estimated
operating income of $325,000. The following analysis of the
impacts of the four penalty assessment methods is based on
these figures. It should be recongnized that impact analyses
based on indirectly generated average data give only a rough
7 American Waterways Operators, Inc., Bi9Load Afloat .
IV— 85
-------
1
Total Revenues =
Total Operating
Costs
• 85
Profits Before Taxes
= Total Revenues
— Total Operating
Costs
Assume Operating
Ratio of .85
(OR — expenses!
revenues)
FIGURE IV-3.
PROCEDURE
OPERAT ING
List Typical Towboat
and Barge Configurations
Used to Transport
Hazardous Materials
Determine Hourly
Operating Costs
for Various Types
of Barges
Determine Hourly
OperaLing Costs
Associated With
Each Configuration
for Various
Trip Lengths
Determine Hourly
Operating Costs
for Various
Sized Towboats
Average the Cost
Computed in the
Previous Step
to Get Average
Hourly Operating
Costs
Determine Average
Number of Towboats
and 3arges Per
Company
Multiply Average
Hourly Operating
Costs by Number of
Towboats and Barges
Per Company and By
Thi;&ber of lays Per
Year Expected to
Operate —>
Total Annual
Operating Expenses
FOR ESTIMATING LARGE
COSTS
IV—86
-------
assessment. However, in the absence of specific operating
and financial data for barge operators, derived data is the
only available alternative. The impact assessment can be
made more precisely when specific company data becomes
available.
The only comparison that can be offered at this time between
the average income and expense figures derived by the above
method and published data sources is the ICC statistics for
a total of 177 certified carriers of Class A, B, and C operat-
ing in inland and coastal waterways. The total operating
revenue for 1971 of these carriers was $435.3 million or an
average of $2,459 thousand per certified carrier. Although
97 percent of chemical transportation by water is not regu1z ted
by the ICC, it it believed that published data for 177 carriers
provides a good sample of the broad spectrum of inland water
carrier operations. Therefore, it can be concluded that the
average revenue of $2,325 thousand derived in this study is
a good representation of an average barge operator’s revenue
at least in the Mississippi River system.
Impacts of Penalty Rates
Impacts of penalty rates on the average barge operator (as
derived above) are summarized in Table IV-lO. As with the
other modes, impacts are assesed on the basis of net profit
and operating ratio for various size spills. Since repre-
sentative data on the distribution of barge operators is
not available it was not possible to determine the size
of the marginal operator. However, inspection of Table IV—1O
shows that in most instances even the average firm is severely
impacted by the loss of a whole barge load of material. For
example:
• Under the DOHM and IMCO Methodologies, loss of a
single barge load of any one of the four materials
results in severe economic impacts.
• Under the Resource Value and Unit of Measurement
Methodologies loss of a chlorine or ammonia
barge would result in equally severe impacts. How-
ever, financial impacts resulting from an equal
loss of caustic soda or sulfuric acid would not
be severe enough to eliminate annual net profits.
• Penalty rates under the DOHM Methodology are suff i—
ciently high for all chemicals to raise some question
as to whether barge operators would be willing to
handle these materials.
IV— 87
-------
TABLE IV-1O
SUMMARY OF FINE IMPACTS ON THE AVERAGE BARGE OPERATOR RESULTING
FROM THE SPILLAGE OF SELECTED HAZARDOUS MATERIALS INTO A RIVER
Anhydrous Ammonia
Chlorine
Caustic Soda
Sulfuric Acid
2. Increase in Operating
Ratio
I-I
1. Percentage Decrease
in Annual Net Profit
0.94
0.02
17.72
21.07
1538.46
1538.46
1538.46
1538.46
2.85
1.96
1.85
1.77
1.09
1.40
1.41
1.41
1538.46
1538.46
425.75
425.75
1.44
20.30
0.19
0.19
0.15
0.15
0.18
767.33
1538.45
26.35
25.45
0.33
11.34
0.01
0.01
0.09
0.13
0.11
0.11
403.74
1538.46
51.91
51.91
0.18
2.58
0.02
0.02
Anhydrous Ammonia
Chlorine
Caustic Soda
Sulfuric Acid
0.15
0.02
2.50
2.97
215.08
215.08
215.08
215.08
0.42
0.30
0.28
0.27
0.17
0.22
0.22
0.22
215.08
215.08
59.54
59.54
0.04
0.04
0.04
0.22
2.86
0.05
0.05
107.28
215.08
3.71
3.58
0.07
1.61
0.02
0.02
0.03
0.04
0.04
0.04
56.46
215.08
7.28
7.28
0.05
0.02
0.02
0.02
-------
• Penalty rates for chlorine are quite high under all
four methodologies so that even small spills of this
material could result in rather severe financial impacts
on the barge operators.
• In addition to these impacts, the barge operator
must also pay for the product loss incurred.
Since financial and operating statistics are not available
for the majority of barge operators, it is not possible to
determine the percentage of the industry severely impacted by
various penalty rates. In light of the potential $5,000,000
maximum liability and the large quantities handled, it is
likely that a majority of the operators would face severe
financial impacts under any of the four penalty schedules.
For example, the loss of a 1150 ton barge would result in
the maximum fine of $3 million for any material with a rate
of penalty equal to or exceeding $2.17 per pound. Average
net profits ($325,000 per year) would be eliminated with
the loss of the 1150 ton barge for any material with a rate
of penalty exceeding $0.14 per pound.
Summary of Impacts on Barge Operators
Impacts of the penalty rates under the four methodologies
on the average barge operator range from moderate to extreme
severity for barge spills. Although financial and operating
data on barge operators are generally unavailable, it i
doubtful that any operators are large enough to absorb a
5 million dollar penalty. Even the American Commercial Barge
Line Co., the largest regulated carrier for 1971 in terms of
revenue operating in the Mississippi and tributaries with
total revenue of $42 million and net income of $1.5 million
cannot bear a penalty level of $5 million. The regulated
carrier who had the highest net income for 1971 ($3.5 million)
in the Mississippi and Tributaries Area (Ohio Barge Lines,
Inc.) would record a loss of $1.5 million for its yearly
operations if faced with the maximum liability.
IV—89
-------
REFERENCES
1. Federal Register , Vol. 39, No. 164, Part Iv, August
22, 1974.
2. U. S. Department of Transportation, Transportation
Projections 1970—1980 , July, 1971.
3. Full year 1971—1970 Report of the American Trucking
Association, Inc.
4. 1974 Yearbook of Facts , American Association of Railroads,
AAR, Washington, DC, February 1974.
5. “Statistical Abstracts of the United States,” 9th Annual
Ed., U. S. Department of Commerce, 1973.
6. American Waterways Operators, 1972 Inland Waterborne
Commerce Statistics , (1973).
7. “Big Load Afloat,” American Waterways Operators, Inc.
IV— 90
-------
V. ENVIRONMENTAL IMPACTS
INTRODUCT ION
While it is generally accepted that environmental damage is
one of the major impacts of hazardous material spills, few data
are available to quantify these impacts. Moreover, no estimates
have been made of the national impact of these spills. Conse-
quently, the following attempt to measure the differential
environmental impact of alternative approaches for establishing
harmful quantities and rates of penalty will deal with relative
measures rather than absolute ones. Before exploring the
nuances of such an undertaking, however, it is instructive to
discuss briefly those few incidents for which environmental
impacts have been quantified on the national impact level.
The Public Health Service and, more recently, the Federal Water
Quality Administration and the Environmental Protection Agency
have reported data on pollution caused fish kills in the United
States.’’ 1 Some of the pertinent historical information is
presented in Tables V--l and V-2. In general, the trend has
been towards greater numbers of fish affected, (an increase of
257 percent) a manifestation of both an increase in incidents,
and a more efficient reporting process. The former factor is
the dominant of the two. Similarly, the total acreage of lakes
and reservoirs affected has increased substantially over the
reporting period (2257 percent). Total river miles affected,
however, have displayed a much slower rate of growth (55 percent).
The breakdown between game and non—game species varies greatly
from year to year. Table V-2 shows the nature of sources of
spills fcr 1970. It is clear from this data that stationary
sources are far and away the most imp ctive. This suggests
1 ”Pollution-Caused Fish Kills in 1960,” U. S. Department of
Health, Education, and Welfare; Public Health Service, 1960.
2 ”Pollution—Caused Fish Kills January-September 1961,” U. S.
Department of Health, Education, and Welfare; Public Health
Service, Washington, DC, November 1961.
3 ”Report of Pollution-Caused Fish Kills, January-June 1962,”
U. S. Department of Health, Education, and Welfare; Public
Health Service, Washington, DC, September 1962.
‘ “Pol1ution—CauSed Fish Kills in 1963,” U. S. Department of
Health, Education, and Welfare; Public Health Service, Wash-
ington, DC, 1964.
5 ”pollutjon-Caused Fish Kills in 1964,” U. S. Department of
Health, Education, and Welfare; Public Health Service, Wash-
ington, DC, 1964.
6 ”Pollution-CauSed Fish Kills in 1965,” U. S. Department of
the Interior, Federal Water Pollution Control Administration,
Washington, DC, 1965.
IV— 91
-------
TABLE V-i
HISTORICAL FISH KILL DATA REPORTED FOR THE U. S. 1 ’ 1
year 1960 1961 1962 1963 1964 1965 1966 1967 1968
Wu er of state. Reporting 39.00 45.00 37.00 39.00 40.00 44.00 46.30 40.00
Total E.tiated Fi.5 Rill 6.379.000.00 15.910.000.05 7.119.000.03 7.860.000.00 18.387.000.00 11.784.000.00 9.115.007.30 11.501.020.00 15.236.000.00 41.004.000.00 22.760.82000
Reported Ciii. From Source.
of Potential ch ,ca1 Spulls 3.195.817.00 (‘6,000.000.00 4,864.953.00 6,356.035.33 9,212.298.00 8,000,744.00 39,245,417.00 16,700,441.00
of C ercia1
Value)
Average Duration of r,}
Day. 2.95 2.64 2.59 3.18 2.44 2.57 3.34 2.99 3.11 3.25
For Report. Where Retent of
0.age Wa. Reported
River
N er *2 Report. 189. 240. 259. 271. 339. 292. 251. 219. 264. 356. 487
88 1as of sIre.. 1,204.00 1,686.00 1,448.00 2,203.00 1,440.00 1,300.00 989.00 1,039.00 1,565.00 2,358.00 1,065.00
Lake. and Reservoir.
88 er of Report. 25. 50. 25. 49. 57. 38. 46. 33. 37. 98.
Acrel Affected 1,407.00 5,907.00 2,581.00 5,644.00 12,637.00 4,630.00 21,504.00 1,996.00 2,400.00 6,068.00 33,168.00
-------
TABLE V-2
NATURE OF KILLS REPORTED IN 197011
Source Game Fish Killed Non-Game Fish Killed
Agricultural Pesticides
and Fertilizers 264,391 1,149,472
Swimming Pools
(Hypochlorite-Chloririe
Spills) 73 1,763
Industrial 3,250,252 6,569,241
Transportation 284,782 3,616,348
Other 177,409 305,996
that if differential harmful quantities or rates of penalty
are to be employed, those for stationary sources should be
more restrictive.
Few spill incidents have received any form of environmental
damage assessment.* Those which have, include the Clinch River
Fish Kill, an ethyl benzene-creosote spill into the Roanoke
River, and the deliberate poisoning of Pond Lick Reservoir in
Ohio. A brief synopsis of each of these incidents is included
on the following page.
*1i should be noted that the EPA has now published a field
detection and damage assessment manual designed for this
12
purpose.
1 ”Fish Kills by Pollution in 1966,” U. S. Department of the
Interior, Federal Water Pollution Control Adr inistratiOn,
Washington, DC, 1966.
8 ”Pollution-CauSed Fish Kills in 1968,” U. S. Department of
the Interior, Federal Water Pollution Control Admini tratiOfl,
Washington, DC, 1967.
9 ”PollutionCaused Fish Kills in 1968,” U. S. Department of
the Interior, Federal Water Pollution Control Administration,
Washington, DC, 1968.
101.1969 Fish Kills Caused by Pollution,” Federal Water Quality
Administration, USGPO, Washington, DC, 1970.
‘ “Fish Kills Caused by Pollution in 1970,” U. S. Environmental
Protection Agency, USGPO, Washington, DC, 1972.
12 Field Detection and Damage Assessment Manual for Oil and
i’iazardous Material Spills, Environmental Protection Agency ,
Washington, DC, June 1972.
IV—93
-------
Clinch River . In 1967, a fly ash holding pond dike maintained
by the Appalachian Power Company’s 700-megawatt steam power
generating plant near Carbo, Virginia, collapsed discharging
130 million gallons into Dumps Creek which joins the Clinch
River 0.5 miles downstream. The caustic plug equalled 40
percent of the existing flow. The pond waters had an estimated
pH of 12—12.7 compared to 8—8.5 in the naturally alkaline
receiving waters. The plug proceeded downstream for 4.5 days at
a speed of 0.85 miles an hour killing virtually all of the fish
in its path. During that time, 216,000 sport and rough fish
died in a 90 mile stretch of the river through Virginia and
Tennessee. The plug finally became diluted to a level where
it was no longer severely toxic. Damage assessment studies
revealed that in addition to the fish, bottom dwelling fish
food organisms were completely eliminated in the 3-4 mile
stretch immediately below the spill site and were drastically
reduced in the succeeding 77 miles. Snails and mussels were
eliminated in the first 11.5 miles. A follow up study two
years after the event revealed that while bottom fauna had
recovered considerably, and benthic organisms were returning
in significant numbers, the molluscs once abundant in the
area had yet to reestablish themselves. Different species
of minnows and darters had recolonized the area, but were at
lower density levels than those noted upstream of the spill. 12
Roanoke River . On October 10, 1970, a primary storage tank
operated by the Koppers Company in Salem, Virginia, released
approximately 2000 gallons of ethylbenzene mixed with creosote
into an open cooling water ditch. Some 400-600 gallons of
that total reached the Roanoke River which, at the time, was
flowing at approximately 42 cfs. This resulted in a concen-
tration of 1000 ppm at the point of discharge. A fish kill
followed resulting in the death of a total of 7,979 rough fish
and 5,302 sport fish. It was estimated that biological damage
extended seven miles downstream. Recovery studies conducted
six months after the spill revealed that the major effect had
been a decrease in the density and diversity of aquatic life
for approximately three miles below the plant outfall. An
apparent differential response in fish life left a viable
population of minnows while all other major species were
eliminated. Bottom fauna was eliminated, but mayf lies and
stonef lies were staging a comeback at the time of the study.’ 3
Pond Lick . On June 2, 1971, approximately 1.5 pounds of endrin
solution mixed with strychnine treated corn in a one gallon
plastic container was purposely dumped into Pond Lick Reservoir
3 Cairns, J. Jr., K. L. Dickson and J. S. Crassman. “The
Response of Aquatic Communities to Spills of Hazardous Materials,”
Proceedings of the 1972 National Conference on Control of
Hazardous Material Spills , Houston, TX, March 21-23, 1972.
IV—94
-------
near Portsmouth, Ohio. The effects on the aquatic life in the
nearly 50 acre-feet impoundment were disastrous. All life was
destroyed except f or tadpoles which are resistent to this type
of pesticide. Because of endrin’s known persistence, no attempt
was made to allow the lake to restore itself naturally. Rather,
it was determined that positive action should be taken. Con-
sequently, water from the lake was pumped through activated
carbon to remove dissolved contaminant while the bottom sediments
were scraped off and buried to eliminate all residual endrin.
Three months later the lake was restocked for recreational use.
While the destruction of aquatic life noted in these three
events is the most common form of damage observed during spill
incidences, it is by no means the only environmental effect
resulting from spills. Spills may also impair the recreational
and aesthetic value of waters. The flushing of acetic acid
wastes from a plant in Pennsylvania forces swimmers from the
water downstream as a result of excessive odor and a burning
sensation in and around the eyes.l4 Further, the threat to
species other than aquatic life has been demonstrated on
numerous occasions. A spill of acetone-cyanohydrin at Dunreith,
Indiana led to the poisoning of several head of livestock,
and posed a public health hazard to a downstream municipal
water intake. 15 Similarly, aniline spilled from a train wreck
in Texas caused the hospitilization of several private citizens
after inhalation of toxic vapors. Extensive loss of vegetation,
fish kill, and the blinding of several head of cattle was re orted
in Arkansas when an ammonia pipeline broke in a remote area. 6
Finally, many spills are accompanied by a general reduction of
amenities. This reduction may result from the appearance of
dead fish at the water surface and along shorelines, or it may
stem directly from the presence of odors, discoloration,
turbidity, sludges, or slicks which can accompany or precede
fish kills.
From this brief account of documented impacts, it is clear that
hazardous material spills can have a large and varied impact
on the environment. As noted earlier, it is possible to charac-
terize the relative effects that each methodology might have,
and in so doing develop a sense of the relative benefit to be
gained through implementation. Pursuant to this, it is first
necessary to establish the manner in which the alternatives
themselves can exert an environmental impact.
Minutes of Pennsylvania Sanitary Water Board, Vol. 46—10,
p. 01.3, October 16, 1968.
‘ 5 Moore, S. L. and S. R. Kin. “Cyanide Pollution and Emergency
Duty Train Wreck, Dunreith, Indiana, January 1961,” Division
of Sanitary Engineering, Indiana State Board of Health,
January 1965.
‘ 6 op 4SIRs File, Environmental Protection Agency, Washington, DC.
IV—95
-------
FEATURES OF ALTERNATIVE APPROACHES WHICH
MAY EXERT AN ENVIRONMENTAL IMPACT
If it is assumed that some spills now occuring can be prevented
or these effects reduced, the technical alternatives developed
will have an environmental impact in so much as they provide
incentive for subsequent action which may change the number
and/or severity of spills and provides for emergency response,
damage mitigation, and clean-up. Positive incentive will
result either from the harmful quantities designated or the
rates of penalties established by each approach. Any impact
analysis, therefore, must look at the potential effects of each
of these factors.
Harmful Quantity
The relative size of harmful quantity is most likely to impact
the environment through subsequent responses which would reduce
the severity of spills that occur. This may occur via either
of two mechanisms: 1) moves by industry to reduce the potential
size of spills and 2) more rapid reporting and response. The
former of the two reflects the practical reality that harmful
quantities in addition to being a self-reporting threshold,
are also likely to function as an acceptable spill level. That
is, spills of less than a harmful quantity are likely to go
unreported and consequently may receive much less attention from
industrial management since first party reporting is not
required, and therefore, discharges can feel relatively safe
from penalty assessment. This provides incentive to reduce
the size of potential spills below the harmful quantity level
and thereby minimize incidences where reporting is necessitated.
These objectives could be accomplished with smaller storage
tanks, limited holding pond capacity, modified operating pro-
cedures, or other devices.
The second mechanism, more rapid reporting, bears directly on
the severity of impacts resulting from spills. Since rapid
notification of spills with volumes greater than the harmful
quantity is required, response mechanisms are likely to be
energized more quickly than they presently are and consequently
whatever prospects there are for amelioration will be minimized.
Therefore, small harmful quantities will influence, rapid
reporting for more spills. Because of other provisions in the
law, money will also be made available to finance clean—up
mitigation should the responsible party not be able to accomplish
this himself.
In both cases, however, there are other considerations which may
minimize the extent to which these mechanisms will have effects.
In the first case, the considerations are, for the most part,
IV—96
-------
economic ones. For potential spill sources, economics of size
and process factors will take precedence in determining the
dimensions of facilities. The authors feel that the existence
of harmful quantity thresholds are not likely to be an active
determinant except in the form of minor process modifications
and tighter operating procedures. The second mechanism, rapid
reporting, is more likely to have a favorable environmental
impact. The level of both these effects, however, is very
difficult to estimate. Therefc5re, rather than attempt to
quantify the impact, it appears more appropriate to illustrate
where the harmful quantity derived by each approach falls on
the distribution of spills. Such an approach will at least
show how much spillage is likely to be reported.
To perform the latter analysis, it is first necessary to develop
the characteristic relation between spill frequency and spill
size. Very little data have been published in this area. The
most comprehensive information available is that compiled by
Factory Mutual Research, Inc. ’ 7 in a recent study for the
Environmental Protection Agency. In this study the data from
1500 spill reports, during the period 1969—1974, were analyzed.
Portions of the data collected during this study were used to
construct spill size vs frequency curves (Figures V-l thru
V—5) for the representative substances. No spills of parathion
were reported. Similarly, only one spill of chlorine was
reported with a known release quantity. Consequently, relations
for these materials are not included. Data for benzene, xylene,
and toluene were combined under t1 e general heading BTX materials.
Harmful quantities, as designated by each methodology, are also
shown in the Figures V-l thru V-5.
Figure V-l contains the relation for sulfuric acid which is based
on 105 spills (into all environments) of known size. There is
little variation between methodologies in harmful quantities
for rivers and lakes with respect to the fraction of spills that
wculd or would not be reported. [ The total span in harmful
quantities from low (Unit of Measurement MetIodology) to the
high (Resource Value Methodology) encompasses 12 percent of
total spills.] This figure further indicates that an average
of 40 percent of all sulfuric acid spills in freshwater will
be reported under any of the four methodologies. In this
respect the differential impact between methodologies is minimal.
The same is true with respect to estuaries, except for the
DOHM Methodology. In this case, the DORM harmful quantity is
significantly larger than those for the other approaches.
Similarly, the harmful quantities for coastal waters are
tightly grouped except for the Unit of Measurement Methodology
17 Buckley, J. L. and S. A. Weiner —- data collected during
conduct of Contract No. 68—03—0317 —- “Historical Documentation
of Hazardous Material Spills,” transmitted November 1974.
IV—97
-------
-——-I iii ’1i 1 I I 1111111 I I 1111111 I I IIII I I I I IIIlI I I 1111111
Total Reported Spillage
5 2,928,677 liters
Annual Production
82 x 1O 9 lbs
o
Total Reportc pi11s — 105
I ;
0
A — IMCO. Estuaries HO
B - U of H, Freshwater, Estuaries
a Coastal Waters HO
C - IMCO, Freshwater HQ
° D - DOHI4, Freshwater HO
a E — Res V, Estuaries HO A
- F - Res V, Freshwater HO
G — IMCO. Coastal Waters HQ c
w U) H - DOHM. Estuaries, Coastal Waters HO
I — Res V, Coastal Waters HO D
F
a
0’ - )‘
a
4 )
C
U
2’-
0
a
>
G HI
— I I 1111111 I 11111111 I I iiiiiil 11111111 I I 111111
10 l0 io 5 106
Spill Size in Liters
FIGURE V-i. PROFILE OF SULFURIC ACID SPILLS
DATA TAKEN FROM REFERENCE 16.
-------
I I t JJ I1J
I 1 1111111 I I I 111111 I I 1111111
U I I 11111 I U U 11111
a)
4 - ,
100
I 4 ________________
I,
90
a
P1
80
A — Res V, estuaries HQ
• B - DOW4, Freshwater HQ
- 70 C - Res V , Freshwater HQ
0 - IMCO, Eatuaries HO Total Reported Spillag4
E - U of M, Freshwater Estuaries A 1,183,403
60 Coastal Waters HO B Annual Production
o F - IMCO, Freshwater C E 18 x lO lbs
G - DOHP4, Estuaries, Coastal Waters HO Tota Reported Spills
H 50 H - Res V, Coastal Waters HO F
— 32
--4
I - IMCO, Coastal Waters HO
‘ 0
i 40
0
. 4- .
30
a
4J
20
I -I
a)
l0 “
.4
H 1
4J
IIIII I I 1111111 I I IIIIII& II I 111111 I I 1111111 I liii
a i ii
10 io 2 l0 i 0 6
U
Spill Size in Liters
FIGURE v-2. PROFILE OF BENZENE - TOLUENE - XYLENE (BTX) SPILLS
DATA TAKEN FROM REFERENCE 16.
-------
s - I
as I IIIIIIIJ I. I IIIIIIJ I I III IIj I IIIIII I I IIIIII J I 111111
. 5- )
a
Total Reported Spillage
831,347
Annual Production
22 x iO lbs
0
• Total Petorted Fpi)1: — 39
-I
U)
8(
0
—4
5
a A - 114C0, Estuaries HO
B - Res V. Estuaries HO
C - U of “, Fres swater. Coastal Vaters,
o 6( -
Estuaries. E
a
D - INCO, FresJwater, RQ
-
-.1 - DOBP4. Freshwatcr HO
F - Res V. Freshwater HQ
In
G - INCO. Coastal Waters HO
A
H - DORM, Estuaries, Coastal Waters HO c
I - Res V, Coastal Waters HO D
as E
F
as
U
u 20
as
a.
as
10 G
—4
4’
a
I I I 111111 I I 1111111 I I 1111111 I I 11 11511 I I 111111
10 102 io 106
Spill Size in Liters
FIGURE V-3. PROFILE OF CAUSTIC SODA SPILLS
DATA TAKEN FROM REFERENCE 16.
-------
a
4J
‘ctal e orted Spillage
I II! j I 1111111 I IlIIFI 1 I !IlIl If I II —
ioo 1.976,586 liters
An iual Pr uction
36 x ii’ lbs
‘ I
0
N
Total reported Spills — 13
80
I ,
>
- ‘-I
A - 1 es V, Estuaries HO
B - DORM, Freshwater HO
C - IMCO, Estuaries HO
‘ 60 D - Res V, Freshwater HO
G - OID , Estuaries, Coastal Waters HQ
E — U of M, Frsshwater, Estuaries
H
.-1 Coastal Waters HO
-4
F - IMCO, Freshwater HO
1- ’
o H - Res V, Coastal Waters HO
40 I - IMCO, Coastal Waters 110
•4-1
a
a.
.4
I I iiiiiil i iiiiiiil I I IIIIII I I II1 iiiiii
20 -
p.
a
4,
‘a
10 io2 l0 l0 io6
Spill Size in Liters
FIGURE V-4. PROFILE FOR AMMONIA SPILLS
DATA TAXFN FROM RFFFRENCE 16.
-------
I I 1111111 I I 1111111 I I IJlI 1 1 I I 11 11 11 1 I 111111
lo0
14
0
S
11
Total Reported Spillage
80 293,181 Liters
S Annual Production
2.6 x lO lbs
Total Rep rtod Spills - 19
A - IMCO, Estuaries HQ
o 60 B - U of M, Freshwater,
H Estuaries, Coastal
Waters HQ
a C - IMCO, Freshwater HO A
to D - DOUM, Freshwater HO B
o E — Res V, Freshwater, Estuaries HO C
40 F - IMCO, Coastal Waters HQ E
G - DOHM, Es- uaries, Coastal Waters HQ
H - Res V, Coastal Waters HQ
a,
0
20- F
0.
a, G
- -4
a)
I I 1111111 I I 1111111 I 11 11 1 11 I I 111 11 11 I 111111
10 102 lC 1O 4 1O 5
Spill Size in Liters
FIGURE V5. PROFILE FOR PHENOL SPILLS
DATA TAKEN FROM REFERENCF 16.
-------
which is significantly smaller. In this case, however, the
difference in size will be of less importance since coastal water
shipments are such a small portion of total sulfuric acid move-
ments. Therefore, in terms of environmental impact, the IMCO,
Unit of Measurement, and Resource Value approaches are preferred
with regard to sulfuric acid, because they will result in the
reporting of more spills.
Data has been reviewed from the OHM-SIRS files to estimate the
number of spills into water occuring annually. From this data,
there were 21 spills of sulfuric acid in 1974.18 Thus, it
appears from Figure V-i that an average of 8.4 spills (40 per-
cent of oil spills) in excess of the harmful quantity will
occur in a year.
The characteristic spill profile for combined benzene, toluene,
and xylene (BTX) is presented in Figure V-2 and represents data
from 32 reported spills. Once again, there is little difference
for the freshwater harmful quantities, with the total span
covering only ten percent of total spills.
As in the case of sulfuric acid, the DOHM estuary value is
extremely high, and the Unit of Measurement coastal water value
is quite low in comparison to other approaches. Since most BTX
materials are used as raw materials, shipments are short, inter—
plant transfers. Therefore, coastal water spills are once again
of very low probability and the deviation of the Unit of Measure-
ment harmful quantity is considered insignificant. Hence, the
IMCO, Resource Value, and Unit of Measurement approaches are
considered to have an equal environmental impact, while the
DOHM approach will allow significantly more unreported damage
to occur in estuaries. On the average, harmful quantities
designated by the three preferred approaches will lead to the
reporting of nearly 50 percent of all BTX spills. There were
20 BTX spills reported in 1974,18 and therefore approximately
10 spills in excess of harmful quantities can be anticipated
per year.
The characteristic spill relation derived from 39 spills of
caustic soda appears in Figure V—3. As with the first two
materials, the freshwater harmful quantities for caustic soda
are tightly grouped with a total span that covers only eight
percent of total spills. The DOHM estuary value remains high
and the Unit of Measurement coastal water value remains low.
‘ 8 Personal Communication with Dr. A. L. Jennings, Hazardous and
Toxic Substance Branch, U. S. EPA, Data developed from OHM-
SIRS files 1974, transmitted March 7, l975.*
*The OHM-SIRS files are presently based on voluntary reports
submitted to EPA or USCG and do not necessarily indicate the
actual magnitude of the problem.
IV—103
200 SW
C,u ti1 . L) .qo l 33O
-------
Coastal water shipments of caustic do occur and, therefore,
the Unit of Measurement Methodology is the preferred approach
while the IMCO and Resource Value Methodologies are given an
intermediate status. Approximately 30 percent of all spills
will be reported under the porposed methodologies. Since there
were 12 reported spills in 1974,18 this is comparable to an
average of 3.6 spills in excess of the harmful quantity per year.
Reported data from 13 ammonia spills is profiled in Figure V-4.
Freshwater harmful quantities show no significant difference,
with a total spread of only four percent of total spills.
Estuary harmful quantities are similarly bunched with the
exception of that for the DOHM Methodology. For coastal waters,
the Unit of Measurement approach once again stands apart in its
tendency to reduce environmental impact. For all but coastal
waters, 80 percent of all spills will be reported with institution
of any of the four approaches. This indicates mandatory reporting
of 12.8 of the 16 ammonia spills reported for 1974.18
Data from 19 reported phenol spills is presented in Figure v—s.
The same pattern between approaches as noted in earlier profiles
is evident here. The difference in freshwater harmful quantities
is small, having a total spread of six percent of total spills.
The DOHM estuarine harmful quantity remains much higher than the
tight group formed by those for the remaining approaches. The
Unit of Measurement coastal water value remains much lower.
Excluding coastal waters, the approaches will result in the
reporting of approximately 40 percent of all spills which is
equivalent to 6.4 of the 16 spills reported in 1974.18
The profiles presented here can also be analyzed with respect
to volume of spills as a percentage of total volume spilled per
year. These regulations are presented in Figures v-6 thru V-b.
The observations made concerning the relative converage provided
by methodologies are well born out. There are no significant
differences between freshwater harmful quantities. In fact, in
terms of the fraction of total spillage coverage by freshwater
harmful quantities, the differences are of a much smaller magni-
tude than those measured for total spill events. The DOHM
estuarine values remain significantly high for all materials
but ammonia, where the volume difference is less than three
percent. Similarly, Unit of Measurement coastal water harmful
quantities are significantly lower than those for other approaches
except in the case of ammonia where the incremental difference
is only four percent of total spillage. It is interesting to
note that for sulfuric acid, BTX, caustic soda, and phenol, the
harmful quantities of most approaches occur near the shoulder
of the curve where spill volumes become a significant portion
of total spillage. Occuring here, the harmful quantities
promise to mandate reporting on spills representing better
IV—104
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TABLE V-3
SUMMARY OF ENVIRONMENTAL IMPACT
IMPLICATIONS FOR HARMFUL QUANTITIES
Percent of Percent of Volume Amount of Material
Spills Reported Number of Spills Spilled Reported Spilled Reported
By Preferred Reported Per Year By Preferred Per Year (Preferred
Material Approaches * ( Preferred Approach)* Approaches* Apptoach)*
Sulfuric Acid 40 4.0 99 2,050,000 lbs
BTX 50 3.6 99 450,000 lbs
‘ -I
0 Caustic Soda 30 1.8 99 550,000 lbs
Anunonia 80 7.0 99 900,000 lbs
Phenol 40 1.7 99 65,000 lbs
*pref erred approaches are Unit of Measurement, and Resource Value and
IMCO excluding coastal water values.
-------
I I IIIIIIJ I I IIIIII I I IIIUII I I 1111111 I 1TiIIII
A B C DEF
l0 . •• •
I ,
m
w
90
I 4
A — IMCO, Estuaries HO
80 B — U of M, Freshwater, Estuaries
Coastal Waters HQ
C - IMCO, Freshwater HQ G
0 70 - D - DOHM, Freshwater HO
E — Res V, Estuaries HO
F - Res V, Freshwater HO
U)U ) 60 G - IMCO, Coastal Waters HQ H
H - H — DORM, Estuaries, Coastal Waters HO
I — Res V, Coastal Waters HO
0 50
I- ’ E-.O
“-i 40
0’
4’ —4
- 4 30
e ---4
op.
4 U)
a
e . 20
a
---4
4) 10
- I I 1111111 I I 1111111 I I 1111111 I I IIIIIII_ I I 111111
io 2 1o 1O 5
Spill Size in Liters
FIGURE V-6. VOLUME PROFILE FOR SULFURIC ACID SPILLS
-------
I I IIIIII I I IIIIII I I 1111111 I IIIIII I I I II I
AS C DE F
4;
4;
I I
I 90
o A - Res V, Estuaries HQ
w B — DOIU4, Freshwater HO
• 80 C - Res V, Freshwater HO
U) 0 - IMCO, Estuaries HO
E — U of M, Freshwater, Estuaries,
70 Coastal Waters HO
F - IMCO, Freshwater HO G
G - DOWI, Estuaries, Coastal Waters HO
60 H — ReS V, Coastal Waters HO
H I - IMCO, Coastal Waters HO
4;
— 50
I.- ;
i 111111 1 1 ii ;iiiL I I IILJIII I I 1IIIII
10 io2 10
Spill Size in Liters
FIGURE V-7. VOLUME PROFILE FOR BENZENE - TOLUENE - XYLENE (BTx) SPILLS
-------
I I j u l 1 1 1 I I IIIIII I I 1111111 I 1111111 I II’ II
V I I
ABC D EF
.‘. S
80
A - IMCO, Estuaries EQ G
B - Res V, Estuaries EQ H
o 70 C — U of U, Freshwater, Estuaries,
Coastal Waters EQ
D - IMCO, Freshwater EQ
u u 60 E - DOHE, Freshwater EQ
F - Res V, Freshwater EQ
C - IMCO, Coastal Waters HO
SO B - DOHM , EStuaries, Coastal Waters EQ
I - Res V, Coastal Waters EQ
I — ,
O 43
43-4
C.-4 30
5. — ’
V
D.. 20
V
-4
43 10
V
—I
I I 1111111 I I 11 11111 I 1111111 I I,ul jL _ I 11111111 ‘
1 102 c
Spill Size in Liters
FIGURE V8. VOLUME PROFILE FOR CAUSTIC SODA SPILLS
-------
C)
S
C)
S
C,
Ii
0
0
-4
- .4 N
cl)tI)
‘-4 5
.1. )>
o -.
l 4(5
0
0
5 —4
C) .-4
$. 4C1)
C)
C)
--4
4.)
-.4
0
Spill Size in Liters
i 0 6
I I I I 11111
I I I EJ IIII
A BCDE F
100
90
80
60
40
20
A - Res V, Estuaries HQ
• B - DOHM, Freshwater EQ
C - IMCO, Estuaries EQ
- Res V, Freshwater EQ
E — i J of M, Freshwater, Estuaries EQ
Coastal Waters EQ
F — IMCO, Freshwater HQ
• G — DO 4, Estuaries, Coastal Waters
H - Res V, Coastal Waters EQ
I — IMCO, Ccastal Waters EQ
HQ
I I IIIIJj - I I I 111111 I I I IIIIJ
G HI
liii I Il _ 1!i 1 _ 1 I I till’
10
I I I 111111 I I I 111111 I I i ii
102
10
FIGURE V-9. VOLUME PROFILE FOR AMMONIA PILL
-------
.1— 1—-r I lIIj I I I I IIIIJ
I I 1 11 1 111 I—Il 1 11 11
I I I I I
A - 1 14C0, Estuaries HO
B — U of M, Freshwater, Estuaries,
Coastal Waters HQ
C - IMCO, Freshwater HQ
D — DOHM, Freshwater HO
E - Res V, Estuaries HQ
F — Res V, Freshwater HO
G — IMCO, Coastal Waters HQ
H — 001D4, Estuaries, Coastal Waters HQ
I — Res V, Coastal Waters HO
I I I 111111
I I 11111 I I I I liii
l0 10
Spill Size in Liters
DEF
H
H
H
0
.3
100
a
3.’
90
.3
we
II 80
‘-I.’,
0
0
60
o •-i
50
0
‘44
40
—l
a
0.>
20
43
.2 10
I I 11 1331 I I I IlI_I_1_I_
2
10 10
FIGURE v10. VOLUME PROFILE FOR PHENOL SPILLS
-------
than 99 percent of the volume of material spilled each year, but
do not tax limited response resources for the many small spills
that also occur. In this respect, the size of the harmful
quantities offers balance between administrative costs and
environmental benefits. Only for ammonia are the harmful
quantities much lower, and in no case were they greater than
that point. Significant data with respect to the relative
environmental impact of harmful quantities is summarized in
Table V—3. The preferred approaches are Unit of Measurement,
Resource Value, and IMCO for all but coastal waters. For
coastal waters, the Unit of Measurement approach has the least
environmental impact. The assumed annual spillage reported
is based on average annual losses of 0.0025 percent of production.
Rates of Penalty
Environmental impacts associated with rates of penalty are
directly a function of the degree of spill prevention induced
through promulgation of an individual approach. Unfortunately,
it is next to impossible to predict industry’s actual response
to individual rates of penalty. To date, industry has claimed
that the additional incentive will not alter their present
course of action, although it may terminate the marketing of
some products.’ 9 If, however, one assumes that higher rates
of penalty w .ll provide incentive for proportionately greater
expenditures on spill prevention, then the environmental impact
related to rates of penalty will be most favorable for method-
ologies with the highest rates of penalty. Therefore, method-
ologies can be ranked in order of preferrence once they are
characterized by an average rate of penalty.
To provide for such a compariscin, rates of penalty defined by
a methodology for all designated hazardous substances were summed
and averaged. Rates for the DOHM Methodology were calculated
using a weighted average for the various sources based on the
percent of total spillage originating from that source category:
Rate of Penalty (R of P) = 0.26 (R of P) rail + 0.62
(R of P) stationary source and motor carrier
Results of the averaging process are presented in Table V—4.
From the relative averages, the Resource Value Methodology would
appear to offer the most protection to the environment, followed
by the IMCO Methodology, and then the Unit of Measurement and
DOHM approaches. This analysis may be somewhat skewed, however.
‘ 9 Transcripts of the Conference on Hazardous Materials Regulations
held in Washington, DC, October 21-23, 1974. Sponsored by
Battelle—Northwest and the Environmental Protection Agency.
IV— 111
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TABLE V-4
AVERAGE RATES OF PENALTY FOR
ALL HAZARDOUS SUBSTANCES ($/lb)
Methodology Lake River Estuary Coastal Waters
DOHM 4.71 4.71 4.53 4.53
IMCO 36.56 34.32 90.66 0.65
Res V. 603.70 107.39 1349.85 0.69
U of M 4.63 4.35 5.92 4.48
Implicit in the straight averaging of all designated hazardous
substances is the assumption 1) that all materials have an equal
spill probability and 2) that a given penalty level has an equal
impact on all hazardous substances. Clearly, these generalizations
are dangerous. Many materials such as pesticides, chlorine, and
heavy metals are not spilled often or in large quantities. These
same materials are very toxic and therefore have a very high
rates of penalty before levels of incentive equivalent to those
of lower cost chemicals are approached. From these considerations,
it would appear that the optimal measure of penalty rate severity
would be the ratio of rates of penalty to chemical price weighted
for all hazardous substances by spill probability.
Lacking spill probability statistics on a per substance or even
a per generic group basis, grosser levels of differentiation are
required. The most easily applied approach is the consideration
on those hazardous substances shipped in bulk by barge. These
are selected on the premise that spill probability increases
with the level of production and size of shipments, and that
bulk barge commodities include the majority of all hazardous
materials shipped in bulk. Utilizing December 1974 prices as
reported in the Chemical Marketing Reporter and the hazardous
substance enumerated in Figure v—il, the penalty to price
ratios are those presented in Table V-5.
TABLE V-5
RELATIVE SEVERITY OF RATES OF PENALTY USING
PENALTY/PRICE RATIOS FOR BULK COMMODITIES
Methodology Lake River Estuary Coastal Waters
DOHM 37.0 36.0 35.0 41.0
IMCO 52.0 56.0 35.0 6.4
Res V. 35.0 19.0 470.0 1.5
U of M 6.4 7.0 8.4 6.3
IV—112
-------
Acetaldehyde Cyclohexane
Acetic Acid Dimethylamine
Acetic Anhydride Ethylbenzene
Acetone Cyanohydrin Ethylenediamine
Acrylonitrile Formaldehyde
Adiponitrile Formic Acid
Allyl Alcohol Furfural
Allyl Chloride Hydrochloric Acid
Ammonia Hydrofluoric Acid
Amyl Acetate Napthalene
Aniline Phenol
Benzene Phosphorus
Butyl Acetate Phosphoric Acid
Carbon Disulfide Propyl Alcohol
Caustic Soda Styrene
Caustic Potash Sulfuric Acid
Chlorine Toluene
Chlorobenzene Vinyl Acetate
Chloroform Xylene
Cresol
FIGURE V-il. DESIGNATED HAZARDOUS SUBSTANCES
SHIPPED IN BULK BY BARGE
IV— 113
-------
From this index, the IMCO and DOHM Methodologies provide the
most incentive for spill prevention followed by the Resource
Value and Unit of Measurement Methodologies. Once again, it is
important to emphasize that this implies lower environmental
impact only if one accepts the premise that industry will respond
directly to the severity of penalties proposed by investing in
accordingly more or less spill prevention equipment. Industrial
representatives claim that this is not the case. The authors
believe, however, that it may well be the case for many smaller
operators who are not as publicity conscious as the major firms
and who have not led the industry in terms of investment in
prevention equipment
SUMMARY
It is postulated that each of the four methodologies developed
in the technical portion of this report may have a characteristic
effect on the environmental impact of hazardous substance spills.
This effect is likely to be a reduction in total spills and total
spillage resulting from increased incentive to prevent spills and
the rapid reporting of spills in excess of the designated harmful
quantity. If this assumption is accepted, it would appear that
the IMCO Methodology is optimal with respect to environmental
effects because of relatively low harmful quantities and high
penalty to price ratios.. The remaining three approaches have
strong incentives in one area, the harmful quantity designation
or rate of penalty determination, and offsetting weak incentives
in the remaining areas.
This analysis, notwithstanding, it is generally believed that
the differential environmental impacts from any of the approaches
offered here is likely to be small compared to the effects of
having a law in force which focuses attention on spills and pro-
vides for systematic response to spills. Industry presently
feels that incentive over and above those presently perceived
will not increase their efforts to prevent spills. If this is
in fact the case, then a comparative analysis such as that
offered here is rendered a moot point.
Aside from the latter points, it is also important to emphasize
that there are no data available today to provide estimates of
what the present level of environmental effects from hazardous
substance spills really is. While estimates can be made as to
the volume and number of spills occurring, translation of
that into environmental impact is a very problematic exercise.
At the same time, however, the promulgation of these regulations
will provide the data base necessary to make such a translation.
The analysis provided here offers an indication of potential
differential effects that would result from implementation of
the various methodologies, and in so doing gives a sense of
benefits to be derived as a result of the costs indicated in
the chapter on Economic Impact.
IV—114
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REFERENCES
1. “Pollution—Caused Fish Kills in 1960,” U. S. Department of
Health, Education, and Welfare; Public Health Service, 1960.
2. “Pollution-Caused Fish Kills January—September 1961,” U. S.
Department of Health, Education, and Welfare; Public Health
Service, Washington, DC, November 1961.
3. “Report of Pollution —— Caused Fish Kills January—June 1962,”
U. S. Department of Health, Education, and Welfare; Public
Health Service, Washington, DC, September 1962.
4. “Pollution-Caused Fish Kills in 1963,” U. S. Department of
Health, Education, and Welfare; Public Health Service, Wash-
ington, DC, 1963.
5. “Pollution—Caused Fish Kills in 1964,” U. S. Department of
Health, Education, and Welfare; Public Health Service, Wash-
ington, DC, 1964.
6. “Pollution—Caused Fish Kills in 1965,” U. S. Department of
the Interior, Federal Water Pollution Control Administration,
Washington, DC, 1965.
7. “Fish Kills by Pollution in 1966,” U. S. Department of the
Interior, Federal Water Pollution Control Administration,
Washington, DC, 1966.
8. “Pollution—Caused Fish Kills in 1968,” U. S. Department of
the Interior, Federal Water Pollution Control Administration,
Washington, DC, 1967.
9. “Pollution—Caused Fish Kills in 1968,” U. S. Department of
the Interior, Federal Water Pollution Control Administration,
Washington, DC, 1968.
10. “1969 Fish Kills Caused by Pollution,” Federal Water Quality
Administration, USGPO, Washington, DC, 1970.
11. “Fish Kills Caused by Pollution in 1970,” U. S. Environmental
Protection Agency, USGPO, Washington, DC, 1972.
12. Field Detection and Damage Assessment Manual for Oil.
and Hazardous Material S flls , Environmental Protection
Agency, Washington, DC, June 1972.
IV- 115
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13. Cairns, J. Jr., K. L. Dickson, and J. S. Crassman. “The
Response of Aquatic Communities to Spills of Hazardous
Materials,” Proceedings of the 1972 National Conference on
Control of Hazardous Material Spills , Houston, TX, March
21—23, 1972.
14. Minutes of Pennsylvania Sanitary Water Board, Vol. 46—10,
p. 01.3, October 16, 1968.
15. Moore, S. L. and S. R. Kin. “Cyanide Pollution and Emergency
Duty Train Wreck, Dunreith, Indiana, January 1961,” Division
of Sanitary Engineering, Indiana State Board of Health,
January 1965.
16. OHM-SIRS File, Environmental Protection Agency, Washington,
17. Buckley, J. L. and S. A. Weinen -— data collected during
conduct of Contract No. 68-03-0317 -— “Historical Docuinen—
tation of Hazardous Material Spills,” Transmitted November
1974.
18. Personal Communication, Dr. A. L. Jennings, Hazardous and
Toxic Substance Branch, U. S. EPA, data developed from
OHM/SIRS files 1973, transmitted October 21, 1974.
19. Transcripts of the Conference on Hazardous Materials
Regulations held in Washington, DC, October 21-23, 1974.
Sponsored by Battelle-Northwest and the Environemtnal
Protection Agency.
IV— 116
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VI. GENERAL COMPARATIVE EVALUATION
This chapter presents a general comparison of the four
technical approaches developed for setting harmful quanti-
ties and rates of penalty under Section 311 of PL 92—500.
Comparisons made in this section are for the most part
direct, attempting to evaluate the four methodologies at
face value. These comparisons, when coupled with the Execu-
tive Summary (Volume I), will provide the reader with a
working knowledge of the technical aspects of the four
methodologies. Specific aspects of the methodologies address-
ed in the following direct comparison include:
• Specificity to water body type
• Specificity to water body size
• Specificity to chemical groups
• Ability to deal with mixtures containing more than
one designated hazardous material
• Assumptions and technical rationale
• Severity of penalty schedule and size of harm-
ful quantity.
The comparisons are developed from each perspective in turn,
then summarized for convenient reference.
SPECIFICITY TO WATER BODY TYPE
Initially, all approaches except the Unit of Measurement Metho-
dology are keyed to four basic water body types lakes
rivers, estuaries, and coastal zones. However, in the final
analysis none of the methodologies maintain this distinction
between four water bodies in computing harmful quantities
and rates of penalty as can be seen from inspection of Volume
III, Appendix N.
The DOHM Methodology distinguishes only between fresh water
and salt water bodies. Harmful quantities are calculated
for rivers and estuaries using simplified plug flow models.
Since lakes and coastal zones are not amenable to description
by plug models, harmful quantites for these two water body
types are equated to those derived for riverc and estuaries
respectively. Base rates of penalty derived from various
costs of prevention can be adjusted by as much as a factor
of two. Of the three multiplicative factors used to adjust
IV— 117
-------
penalty rates, only two, the toxicity and dispersibility
factors, are affected by the water body type. The differ-
ences occurring here result from variations in toxicity
between fresh and salt waters. The third factor, that is
based on the material’s ability to persist in the enivron-
ment is constant between water types. Finally, a “locational
factor” is suggested as a means of adjusting harmful
quantities to the actual flow conditions reported for specific
rivers and estuaries. This site—specific adjustment has not
been fully developed, and would not be applicable to spills
in lakes or coastal zones.
Harmful quantities and base rates of penalty as derived by
the Resource Value Methodology are calculated from represent-
ative values for water bodies on a per unit volume basis.
Separate values are derived for lakes, estuaries, and coastal
zones. Values for rivers are equated to those for lakes.
Hence, only three distinct water body types —- freshwater
(lakes and rivers), estuaries, and coastal zones - — are
defined for the purpose of calculating harmful quantities
and base rates of penalty. In the determination of the
final rate of penalty, intrinsic adjustment factors for
persistence (ANF) and dispersion (DIsP) are applied to the
base rate of penalty. Since both of these adjustment factors
distinguish between the four water body types, the Resource
Value Methodology final rates of penalty distinguish be-
tween all four water body types. This approach also offers
optional site-specific adjustment factors which account
for actual resource use (ResU) and site specific dispersion
(Loc) characteristics. Only the latter of the two extrinsic
factors adds any further degree of differentiation with
respect to water body types.
The IMCO Methodology calculates harmful quantities and rates
of penalty on the basis of the water body values derived in
the Resource Value Methodology. This results in the same
three distinctions in terms of harmful quantity and base
rate of penalty. Despite this similarity, harmful quantities
and base rates of penalty derived from these two methodologies
generally differ by substantial amounts because of the differ-
ent approaches to determining critical concentration for
individual substances. Adjustment factors to compensate
for dispersion and degradability under the IMCO Methodology
clearly distinguish between the four water body types. In-
deed, the water body into which a hazardous material is
spilled determines which adjustment factor is employed.
Hence, final rates of penalty under the IMCO Methodology dis-
tinguish between the four water body types.
The Unit of Measurement Methodology makes no distinction
between water body types in deriving the harmful quantity.
IV— 118
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That is, a single harmful quantity is applied across the
board for all water bodies. It should be noted, however,
that in some cases substantial differences between fresh
and salt water aquatic toxicity levels can lead to different
harmful quantities for the two types of water. Similarly,
base rates of penalty exhibit a distinction between water
types only when fresh and salt water toxicities differ
greatly since
Base Rate of Penalty = $1000/HO.
However, since the IMCO adjustment factors are used to deter-
mine final rates of penalty, ultimate consideration of all
four water body types is afforded in the final determination
of the penalty rate.
In summary, the methodologies might be ranked with respect
to water body type specificity as indicated in Table VI-l.
TABLE VI-1
RANKING OF METHODOLOGIES WITH RESPECT
TO SPECIFICITY TO WATER BODY TYPES
Number of Categories Disting uiShed Rank
Methodology Harmful Quantity Rate of Penalty (1 = most specific)
DOHM 2 2 4
IMCO 3 4 2
UM 1—2 4 3
RV 3 4+ 1
SPECIFICITY TO WATER BODY SIZE
For the most part, the methodologies do not give extensive
consideration to the size of the water body as a factor
in determining the harmful quantity or the rate of penalty.
This is predictable since, except for the stationary source
and perhaps barge spills, it is impossible to pre-determine
the size of the water body which will receive a spill.
Nevertheless, the approaches do, in a number of instances,
recognize that the assimilative capacities of water bodies
vary directly with their size as does the impact of a given
size spill.
In the development of the DORM model, for example, there is
provision made for a “locational factor” which, when incor-
porated, would adjust harmful quantities for specific station-
ary sources on the basis of actual flow rates. Similarly,
IV—119
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the approacn would designate harmful quantities for barge
spills using a much larger flow rate representative of the
routes typically plied by barge operations. No modification
of the penalty rate for water body size is suggested in the
DOHM Methodology although the larger harmful quantities
which in most instances would result from the site specific
determinations outlined above would reduce the total fines
payed by stationary sources and barge operators.
The Resource Value Methodology, through the use of the
optional extrinsic factor (Loc), attempts to give recogni-
tion to some of the unique dispersive characteristics of
various water bodies. Independent variables utilized in
the four water body models include:
• Average depth and angle of descent for lakes
• Flow rate and velocity for rivers
• Current velocity and depth for coastal zones
• Estuaries are treated as rivers or coastal
water depending upon the locations of the spill.
It should be noted that, with the exception of the river,
these variables are not directly proportional to the size
of the water body. Further, these factors were designed
such that they can be applied to the penalty rate of any one
of the four methodologies and, therefore, are not specific
to the Resource Value approach.
Under the IMCO and Unit of Measurement Methodologies, there
is no recognition of water body size in determining harmful
quantity or rate of penalty.
Table VI—2 summarizes the comparison of the methodologies
with respect to specificity to water body size.
SPECIFICITY TO PHYSICAL/CHEMICAL CHARACTERISTICS
The law requires that consideration of the toxicity, degrad-
ability, and dispersibility be given in determining the rate
of penalty for each substance. Specificity to chemical
characteristics then refers to the level of resolution afford-
ed by each methodology to these three characteristics.
Both the IMCO and Unit of Measurement Methodologies can be
classified as low level of resolution systems at least
with respect to their consideration of these characteristics.
The toxicity of a material under these four systems is used
IV—120
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TABLE VI—2
RANKING OF METHODOLOGIES WITH RESPECT
TO SPECIFICITY TO WATER BODY SIZE
Rank
Methodology Distinction With Water Body Type (1 = most Specific)
DOHM Harmful Quantity for Stationary 2
Sources and Barges
IMCO NONE 3-4
UM NONE 3-4
RV Extrinsic Adjustment Factor (Loc) 1
for Penalty Rates
to assign materials to one of four hazard categories -— harm-
ful quantities and base rates of penalty are then determined
for the group rather than the individual material through
use of a single critical concentration to represent all
material in the group. Thus, loss of resolution is especially
noticeable for extremely toxic materials (those with LC5O’s
<1 ppm) in hazard category A. However, it should be noted
that these two methodologies do recognize hazard potentials
other than aquatic toxicity including bioaccumulatiOfl,
human health aspects, and reduction of amenities, whereas
for the other two methodologies, aquatic toxicity (LC 50 ) is
the only determinant of hazard potential.
With both the IMCO and Unit of Measurement Methodologies,
degradability and dispersibility are considered through use
of a physical/chemical characteristics grouping scheme.
Fourteen physical/chemical groups are created which describe
general behavior patterns of materials when spilled into
water. Each designated material is assigned to one of these
fourteen groups based on its persistence (resistance to natu-
ral degradation), volatility, solubility, and specific gravity.
Each group is then assigned an adjustment factor between 0
and 1 based on a “subjective determination” of the effects
a group’s physical/chemical properties will have on the ability
of its materials to exert various hazard potentials in given
water body types. These adjustment factors are ultimately
used to convert base rates of penalty to final rates of penalty.
These approaches are also capable of accounting for multiple
hazards.
Under the DOHM Methodology, harmful quantities are selected
on the basis of a material’s aquatic toxicity as represented
by 96 hr LC 50 data. Base rates of penalty derived from the
cost of prevention also reflect the specific properties of
individual materials through use of three multiplicative
IV—121
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adjustment factors:
• A Dispersion-solubii.ity Factor — function of
material’s critical concentration and solubility
• A Toxicity Factor - function of material’s
critical concentration
• A Degradability Factor - function of environmental
half-life of the material.
Computation of harmful quantities by the Resource Value
Methodology is similar to that employed in the DOHM Metho-
dology. That is, the critical concentration employed are
specific to individual materials. Since the base rate of
penalty, under the Resource Value Methodology, equals
$lO,000/HQ, each material is assigned an individual base
rate of penalty. Although not specifically stated, the
Resource Value Methodology procedures for factoring in
dispersibility and degradability are actually grouping
procedures similar to those used in the IMCO Methodology.
Degradability is accounted for in the intrinsic annuity
factor which is assigned on the basis of material classifi-
cations (e.g., , inorganic-bioaccumulative)
Hence, all materials with similar properties of persistence
receive the same annuity adjustment factor. Procedures for
assigning the dispersion factor are roughly the same.
General material classifications such as “miscible” or “in-
soluble sinks” are used to describe the general dispersive
characteristics of various groups of materials. All materials
classified under a given heading are assigned the same die-
persion adjustment factor for a given water body type.
The ranking of methodologies with respect to physical/chemical
characteristics specificity is shown in Table VI—3.
ABILITY TO DEAL WITH MIXTURES
Hazardous substances will not always be spilled in pure form
or in the absence of other chemicals which might react with
them. In these cases, the net effect of the combination of
chemicals may be additive, antagonistic, or synergistic.
In addition, spills might occur in which two or more hazard-
ous substances are released, each in quantities less than
those disignated as harmful, but jointly creating a harmful
effect. For all of these circumstances, a methodology is
needed which will accommodate mixtures in the calculation
of harmful quantities and rates of penalty.
IV—122
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TABLE VI-3
RANKING OF METHODOLOGIES WITH RESPECT TO
PHYSICAL CHEMICAL CHARACTERISTICS SPECIFICITY
Rank
Methodology Level of Distinction (1 = most specific)
DOHM Harmful Quantity and Rate of Pen ilty 1
assigned to materials individuaL y.
IMCO Four hazardous categories and fo ir 3—4
and water body types; 16 possible ha ni-
UM ful quantities and base raLes of
penalty; 14 physical/chemical grups
to adjust for degradability and us-
peLsabllity.
RV Harmful quantity and base rate o 2
penalty assigned to materials in ii—
vidually. Dispersion and degrad-
bility adjustment factors assigned
based on general material classifi
cation.
None of the methodologies developed in this study are capable
of considering antagonistic or synergistic effects, a direct
consequence of the pure compound approach adopted at the onset
of the program. Two of the methodologies, the IMCO and the
Unit of Measurement, have a limited capability to handle
situations in which mixtures or multiple substances are
spilled. Since both of these methodologies use a grouping
approach, situations involving the spillage of materials
in the same hazard categories can be handled on a strictly
additive basis. For example, if the harmful quantity for
category X material was 1,000 pounds and a mixture containing
600 pounds of material A and 500 pounds of material B, both
members of category X, were spilled, then the harmful quantity
would have been exceeded. However, the penalty for this
spill will still have to be computed as the sum of the fines
for the individual materials.
If one were willing to accept the assumption that hazards
associated with individual materials were strictly additive,
then a concept of “partial harmful quantities” could be used
with all four methodologies to deal with spills of mixtures.
Such an approach, although not developed in the technical
document section of this report, would be relatively easy
to administer provided that the constituents and quantities
comprising given mixtures were known. Fractions of the harm-
ful quantity for each substance would be summed and if the
sum exceeded a value of 1.0, a harmful quantity would be
IV—123
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said to have been spilled. The major drawback with such an
approach is, of course, the need to calculate harmful quanti-
ties after spills have occurred, and failure of this approach
to recognize antagonisms or synergisms resulting when indivi-
dual hazardous materials are mixed together. The alternative
to this is the determination of separate harmful quantities
and rates of penalties for specific mixtures. Such a deter-
mination for the more common industrial mixtures (e.g., un-
treated pulp mill effluents, pickling liquors, etc.) would
afford more equitable treatment of materials relative to a
strictly additive approach, but would not comply directly
with the mandate in Section 311 to address “compounds and
elements.” As noted in the administrative evaluation section
of this volume, the limited ability of the present methodo-
logies to deal with mixtures may be an indication of future
regulatory problems.
Table VI—4 summarizes the raning of the various methodologies
with respect to capability to deal with mixtures.
TABLE VI-4
RANKING OF METHODOLOGIES WITH RESPECT
TO ABILITY TO DEAL WITH MIXTURES
Rank
Methodology Ability to Deal with Mixtures (1 = greatest ability)
DOHM NONE 3-4
IMCO Within each of 4 categories 1-2
UM Within each of 4 categories 1-2
RV NONE 3-4
ASSUMPTIONS AND RATIONALE
Each of the methodologies for determining harmful quantities
and rates of penalty is constructed within an avowed technical
rationale which in turn relies on supporting data and simpli-
fying assumptions. Some commonality exists between all of
the methodologies but each one also offers a unique approach
or orientation to the problem of finding a rational basis
for the forthcoming spill regulations under Section 311.
Discussion in this section will analyze the rationale for each
methodology including the underlying assumptions and data.
Following the discussion of elements common to all methodo-
logics, each methodology is analyzed in the following cate-
gories:
IV— 124
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1) Basic orientation and rationale
2) Technical basis for calculation of harmful quantity
3) Technical basis for calculation of rate of penalty
4) Technical basis for adjustment factors.
Assumptions and Rationale Cormrion
to all Methodologies
A basic underlying concept common to all methodologies is
that the penalty assessed for a spili of hazardous material
be of a civil as opposed to a criminal or punitive nature.
Such a philosophy is in accord with Congressional intent --
namely that of encouraging spill prevention by providing
financial sanctions designed to deprive offenders of any
economic advantage from non—compliance with the “no dis-
charge” objective stated in the preamble to Section 311.
As noted in the following sections, some methodologies are
more successful than others in meeting the spirit and/or
intent of the law.
All methodologies use a pure compound approach, and in so
doing appear to be consistent with congressional intent,
specifically Section 311 (b) (2) (A) of the law which instructs
that elements and compounds be designated as hazardous
substances. From a technical perspective a pure compound
approach is by far the most practical due to the general lack
of specific data on mixtures of hazardous substances and the
transient nature of mixture compositions. For all practical
purposes the number of mixtures of hazardous substances or
mixtures of non—hazardous substances that are hazardous is
infinite. Nevertheless, as noted in the previnus section,
the use of a pure compound approach to develop spill regula-
tions may lead to future administrative and regulatory dif f-
iculties as hazardous wastes and other non-standard materials
grow in number and volume.
A third concept common to all four methodologies is that of
“critical concentration”. Closely related to this concept
is the problem of determining what constitutes substantial
harm. The convention adopted by all methodologies is that
when a significant volume of water is exposed to the critical
concentration, substantial harm to the environment has
occurred. Therefore, definition of substantial harm (in
the absence of specific Congressional guidance) involves two
distinct issues:
1) how much material is required to damage water; and
IV—125
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2) how much water, when damaged, represents substantial
harm to society.
The first issue is addressed through the use of a critical
concentration defined, where possible as the 96 hr LC5O for
a median receptor. Implicit herein is the notion that 50
percent mortality to an aquatic community constitutes sub-
stantial harm. This is, of course, debatable as it entails
value judgments on the part of the authors. The second issue
is addressed through the concept of critical volume, except
in the case of the Unit of Measurement Methodology. This
concept is used in each methodology by employing means to
derive and designate significant volumes of water. Once
again value judgments are a necessity and each is evaluated
with respect to the methodology in which it is used.
Finally, it should be noted that the toxicological data for
the various materials considered in this study are not corn—
plete. In many instances where data were unavailable, assumed
values were used. The assumptions are well documented in
Appendix A of Volume III.
While the preceding considerations bear heavily on the
ultimate nature of derived harmful quantities and rates of
penalty, they are common to all four methodologies and,
therefore, do not affect the relative merits of the indivi-
dual approaches taken.
DOI 4 Methodology
Orientation and Rationale - The orientation and rationale for
determining harmful quantity and for deriving rates of penalty
are completely separable in the DOHM Methodology. The harm-
ful quantity determination is based on simplified plug flow
models and statistical analysis of U. S. water bodies. The
former operation (plug flow model) is used to determine how
much of a given material it takes to contaminate a unit vol-
ume of water to the critical concentration. The latter
operation (statistical analysis) is used to select a signi-
ficant volume of water which, when contaminated to the
critical concentration, constitutes substantial harm to the
environment. The derivation of penalty rates under this
methodology is based on estimated costs of spill prevention
from various spill sources. Conceptually, this approach
comes closest to complying with congressional intent in that
the penalty rates are specifically structured to provide
incentive for investment in spill prevention.
Technical Basis of Harmful Quantities — The simplified plug
flow models used in this meth5dology to determine harmful
quantity are crude approximations of real world water bodies.
IV— 126
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In the final analysis they constitute a model of instantan-
eous, homogeneous mixing to a predetermined concentration
level. An obvious alternative to the use of the simplified
plug flow models is the use of sophisticated computer models
to simulate the movement of spilled hazardous materials in
various water bodies. Many of these types of models are
available. They have proved to be useful for predictive
purposes. However, in almost all cases, they are very
site-specific requiring actual physical, chemical and
hydrodyanmic data from the appropriate water body. If
such a model were to be considered for general regulatory
use, “universal parameters” for all water bodies of a given
type would have to be assumed. It is doubtful that such an
approach would add sufficient resolution to the plug flow
model to justify its use. The plug flow models are deemed
to be consistent with the level of resolution required in
this work. This is especially true when one considers that
substantial harm and its determination is a very elusive
concept requiring subjective value judgments if quantita-
tive caluclations are to be performed.
The statistical analysis used to derive the critical volumes
for rivers and estuaries in the DOHM approach provides a
good estimate of the size distribution of these water bodies
in the United States. The selection of the 95th percentile
as the threshold of substantial harm is somewhat arbitrary.
Since the basic data is provided in the text, any alternative
percentile can be selected and used as the basis for determin-
ing the critical volume.
The assignment of identical harmful quantities for all fresh
waters and all saline waters is highly arbitrary with no
real technical justification. This stands a major weakness
in overall rationale.
Technical Basis for Rate of Penalty — Conceptually, the
derivation of penalty rates form spill prevention costs is
a well founded approach; however, problems associated with
the adequacy of the data base for cost of prevention calcula-
tion and additional problems inherent in the calculation
procedure detract from the credibility of the final numbers.
Estimates on costs associated with various spill prevention
techniques were derived for the most part from data received
from representative industries engaged in the manufacture
and/or transport of hazardous materials. Response to these
requests was somewhat discouraging. Many of the industries
contacted stated that they were unable to separate spill
prevention costs from other costs associated with their
operation. Additionally many industries could not estimate
I v— 127
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how much of their product was spilled on an annual basis
since, with the exception of catastrophic spills, no histori-
cal data had been collected.
Two MCA member firms did respond to the request by providing
data on 1) the cost of providing containment for a single
facility and 2) the average reduction in spillage resulting
from those measures taken. Similar data was provided by a
member firm of the American Association of Railroads for
improving the integrity of tank cars. MCA member firms also
provided cost of prevention data on their chemical barge
operation. (This information was supported in part by an MCA
survey of barge spill probabilities.) No useable data was
received from the trucking industry other than an indication
that most spills originating from that sector occur at
transfer stations. The details of this data are contained
in the technical portion of the report. While there is no
reason to believe these data are inaccurate, they represent
a very small portion of the total industry and may simply
not be representative. Furthermore, since the firms which
did respond were often exemplary ones in terms of their
progressive attitudes towards spill prevention it is likely
that the limited data received are biased toward higher
penalty rates. Specifically, the cost of prevention, as
derived in this approach, is really a ratio of the dollars
spent on spill prevention to the realized reduction in
spillage. Costs associated with various spill prevention
measures are relatively fixed and can be determined in a
straight forward manner. For example, costs of diking tank
farms are relatively constant with most variations result-
ing from differences in geographic location. Similarly,
the cost differential between double and single hulled barges
is well known. However, these costs are only half of the
required data base. The other half, spill reduction, is
very much a function of the level of spillage is much smaller
than it would be for a firm which had a high frequency of
spills prior to the installation of special equipment. The
net effect, then, of using data from exemplary firms i.s that
the denominator of the cost of prevention ratio is made
smaller thus increasing the apparent dost of prevention.
Finally, it should be noted that costs of prevention derived
in this study are average costs for all hazardous substances.
In reality some variation exists between costs associated
with the prevention of spillage of different generic groups
of hazardous materials. These are often a function of such
properties as volatility, corrosivity, and flammability.
Technical Basis for Adjustment Factors - The adjustment factor,
rk, is essential to the DOHM Methodology since the cost of
prevention is determined without any consideration of the
Iv— 128
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toxicity, dispersibility, and degradability of the material.
Indeed, without this adjustment factor all designated
materials would have identical rates of penalty when spilled
from the same source type.
The adjustment factor, rk, is formed as the product of three
independent variables which individually account for the
three aforementioned considerations required by the law. The
relationships used to derive-these variables can be described
as follows:
• Toxicity Factor (T) - Increases with decreasing 96
hr LC 50
• Dispersion-Solubility Factor - Increases with increas-
ing solubility to 96 hr LC 50 ratio
• Degradability Factor - Increases for more persis-
tent non—degradable materials.
The exact relationships for these factors are contained in
the technical report. Largely, these relationships reflect
the general trends in hazard potential that the authors
felt to be appropriate functions of toxicity, dispersibility,
and degradability of a given material. The three are treated
as multiplicative and no weighting factors are included.
There is no technical basis either for the relations themselves,
or for their combination in a multiplicative manner. However,
the impact of these factors on final rates of penalty is rela-
tively insignificant since the final rate of penalty can only
vary from the derived cost of prevention by a factor of two.
Resource Value Methodology
Orientation and Rationale - The Resource Value Methodology
takes its name from the underlying rationale that fines
assessed for hazardous materials spills should be proport-
ional to damages to aquatic resources resulting from the
spill. The philosophy then is one of requiring the spiller
to remit to society an amount equal to the damages caused
by his action. Such an approach is similar to what one
would encounter in a civil liability suit.
The method for defining substantial harm under this method-
ology is couched in an attempt to set the harmful quantity
at a level where the probability of significant spills being
reported is optimized. The decision analysis leading
to the selection of $5,000 worth of damages to the environ-
ment as the threshold of harm has little to do with the actual
level of harm although arguments are made in the technical
IV—l29
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documentation as to the significance of the $5,000 level
in the eyes of Congress. This subject is discussed more
fully in the next section.
Technical Basis for Harmful Quantity — The procedure for the
determination of the harmful quantity as the product of
critical concentration and critical volume is the same as
in the DOHM Methodology. Indeed, the same critical concen-
trations are used in both methodologies; however, the deter-
mination of critical volume between the two is quite different.
In the Resource Value Methodology the threshold of harm is
an ecomomic one derived from assumptions concerning legis-
lative intent and from a desire to set harmful quantities
at a level that would encourage reporting of major spills.
The assumption that Congress, in setting the criminal fine
for non-reporting of harmful quantity size spills at maximum
of $5,000, felt that damage on the order of $5,000 represents
substantial harm, is questionable. However, from other
sections of the law,* it would apperar that $5,000 is
high if anything.
The second basis for the selection of $5,000 in damages
as substantial harm, although probably desirable from a
practical point of view, does not bear on the issue of
significance. It serves more as a convenience taken for
pragmatic reasons unrelated to defining substantial harm.
Technical Basis for Rate of Penalty - The calculation of
base penalty rates in this methodology is simple and direct.
Fines for spills of individual materials are based on the
toxicity of the material which is viewed as a measure of
how much water a unit mass of the material is capable of
damaging. The penalty rates are computed by simply dividing
the value of the water body types (given on a per unit
volume basis) by the critical concentration (96 hr LC5O)
of the material. Such a procedure assumes instantaneous and
complete mixing of the spilled material -— a worst case
assumption.
Much of the effort in this methodology was devoted to deter-
mining how and at what levels aquatic resources are valued.
Results reported in the technical portion of the study
indicate that there is a wide variation in the values placed
on various water bodies throughout the United States. Much
of the spread in the data resulted from the fact that the
values were based on different end uses. A key simplifying
assumption made in the Resource Value approach was that
*For example, $5,000 under Section 311(b) (6) - the Coast
Guard maximum fine for the discharqe of a harmful quantity.
Also $500 — $5,000 under Section 311(b) (2) (B) (iii) (aaa).
IV— 130
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only values based on recreation use for freshwater bodies
be used. The authors contend that this is the only use
most consistently affected by hazardous materials spills.
Furthermore, they imply that damages to other uses of the
water (e.g., municipal water supply) are more easily re-
covered through civil court actions since the damaged parties
are more easily identified and the actual amount of damages
more easily ascertained. Both of these assumptions are
a bit naive.
It should also be pointed out that the unit value of the
“water t ’ is not constant at least for lakes. 1 ’igure IV—4,
Volume II, for example, shows a decreasing marginal unit
value as lake size increases. Thus for larger size lakes
it is quite possible that the estimate of $200/AF (based
on a 50 acre-foot lake) is too high.
Finally, it is believed that the assumption equating river
water to lake water values is not particularly strong from
a technical standpoint. The valuation procedure for estuaries
and coastal waters employs a much stronger rationale.
Technical Basis for Adjustment Factors — rifle Resource Value
Methodology includes two intrinsic adjustment factors to
account for degradability and dispersibility, and two optional
extrinsic adjustment factors which can be applied on a
site—specific basis.
The first intrinsic factor , Anf, accounts for the persistence
of various general classes of materials in each of the four
body types. Since the base rate of penalty is derived from
the present worth of the water bodies it is quite logical
to adjust this value downward for those materials which,
due to their non-persistent characteristics, are not capable
of permanently damaging the water body. Additionally, the
factors recognize the ability of water bodies such as rivers
with high dispersive capacities to remove ecologically and
chemically persistent materials. Actual values assigned
to each of the material classifications and water body types
(see Table IV-2, Volume II) were derived by estimating the
number of years the adverse effects of a spill of a given
class of material would persist. Since this is an estimate
of “effect persistence” as opposed to the actual presence
of the material, a minimum duration of one year is used
for the least persistent materials.
The second intrinsic factor (Disp) is quite similar to the
IMCO adjustment factor except that persistence is not includ-
ed as part of the material classification. Eight general
material classifications are used to describe the dispersive
IV— 131
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characteristics of various materials in the four water body
types, a factor of 1.0 for “miscible” substances was used
as a datum in all four water body types. Adjustment factors
for other classes of materials were assigned based on a
subjective estimation of the extent to which they were
capable of being dispersed relative to the “miscible” sub-
stances. Values for these dispersion factors ranged between
0.27 and 1.35 (see Table IV-4, Volume II).
The product of these two adjustment factors was then applied
to the base rate of penalty ($5,000/HQ) to arrive at a
final rate of penalty. Since no weighting factor was used,
there is an implicit assumption that degradability and dis—
persibility are of equal importance.
Both extrinsic factors are optional and are intended for
use as after the fact adjustments to account for local
variances from the average water body values and water body
characteristics used to derive the rates of penalty. The
first factor, ResU, reflects the extent to which the value
of the spill environment deviates from the average value
used to derive the base rate of penalty. Application of this
factor requires a relatively subjective judgment on the part
of the regulatory authority. It is envisioned that in some
situations, utilization of this factor may lead to contro—
ver sy.
The second factor (Loc) is more easily applied. It is
intended to consider local dispersive forces and hence
offset the simplify assumption of instantaneous uniform
mixing to the critical concentration as a function of key
physical and hydrodynamic parameters. This volume was then
compared to the volume potentially exposed under the instan-
taneous mixing assumption. The Loc factor is equated to the
ratio of these two volumes reflecting the percentage of poten-
tially, critically contaminated volume, actually contaminated
(as predicted by the computer model). After the fact applica—
tion of this factor is relatively easy, provided that the
key parameters are known. For example, for spills into a
river, flow rate, velocity, and critical concentration must
be specified to select the appropriate Loc adjustment factor
from the tables provided in the technical report. The
adjustment factor from these tables is then applied directly
to the rate of penalty. Since determination of the key
parameters requires no subjective judgment on the part of
the regulatory authority, it is unlikely that utilization
of this factor will meet the type of resistence potentially
associated with the ResU factor.
IMCO Methodology
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Orientation and Rationale - In some respect, the concepts
underlying the IMCO Methodology are identical to those of
the Resource Value Methodology. Substantial harm is defined
as $10,000 worth of damages to the environment and penalty
rates are based on the rationale and values formulated in
the Resource Value Methodology. A substantial difference
occurs between the two methodologies in the determination
of critical concentration. In the IMCO Methodology materials
are grouped on the basis of five hazard potentials and a
critical concentration is assigned to represent each group
of materials. The net effect of this grouping procedure
is to increase the ease of administration at the price of
a lower level of resolution.
It is also of importance that the IMCO Methodology considers
hazards other than toxicity to aquatic life in determining
the harmful quantity and rate of penalty of a given material.
This consideration is extended in two ways:
1) In the determination of which hazard category a
material is assigned to, and
2) In the physical/chemical adjustment factor.
Finally, and most noteworthy, is that the IMCO Methodology is
compatible with the proposed regulations of the 1973 Interna-
tional Convention on Marine Pollution in that it adopts the
hazardous materials profiling and categorization system
contained in the proposed convention.
Technical Basis of Harmful Quanti - Under the IMCO system,
Ehe level of harm associated with a given material is a
function of the category to which it has been assigned.
Assignment to a particular category is in turn a function of
the relative hazards of the material under the five hazard
potentials considered by the IMCO system. Once a material
has been assigned to a hazard category, it is treated like
all other materials in that category. That is, since all
materials in a given hazard category have the same way as
in the Resource Value Methodology, the number of possible
harmful quantities is reduced to four per water body —-
one for each hazard category.
A few comments on the implications of the IMCO grouping
system are in order. The profiles used to assign materials
to hazard categories are quite simple to apply, each having
a well-defined set of guidelines (with the possible exception
of amenities) for assigning profile ratings. However, the
system used to assign materials to cateqories n the basis of
IV—133
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these profiles is subjective embodying in the final analysis the
value iudqments of the international body that formulated the
original IMCO rating/classification system. Such value
judgments are,of course, unavoidable when one chooses to
consider multiple hazards since there is no rigorous or
quantitative way of comparing such hazards as bioaccumulation
potential, damage to living aquatic organisms, and human
health. There simply is no common denominator. Hence the
acceptability of the IMCO Methodology is, to a large extent,
a function of the acceptability of the value judgments
inherent in the classification system.
The grouping procedures for the IMCO system also tend to
reduce or mitigate the harmful quantities and rates of penalty
assigned to extremely toxic materials -- specifically those
with 96 hr LC 50 values below 0.1 ppm. This occurs in hazard
Category A where the critical concentration is set at 0.5
ppm but where constituents are all materials with 96 hr LC 50
values in the parts per billion range, the ratio of their
toxicity to the representative critical concentration can
span several orders of magnitude whereas in the other three
categories, the maximum difference is one order or magnitude.
This factor is quite apparent when one compares IMCO and
Resource Value penalty rates for some of the more toxic
pesticides and heavy metals. This relative insensivity of
the IMCO methodology to individual critical concentrations
is considered to be a weakness especially for highly toxic
materials.
Technical Basis for Rates of Penalty - The technical bases
for the IMCO rates of penalty are identical to those of
the Resource Value Methodology.
Technical Basis for Adjustment Factors - Adjustment factors
for dispersion and degradability are derived subjectively
through the use of a DELPHI technique. No adjustment factor
for toxicity is defined since toxicity is accounted for in
the base rate of penalty. Adjustment factors in the IMCO
Methodology are applied to the base rate of penalty as
compensating mechanisms. They are intended to reflect
the extent to which the dispersion and degradability of a
material affect its ability to exert its full hazard poten-
tial. Since the base rate of penalty is an expression of
full hazard potential (essentially a worst case premise),
the net effect of the adjustment factors in most instances
is to reduce the base rate of penalty.
The use of a DELPHI procedure to derive the adjustment factors
is based on the assumption that there is no rigorous way
of determining how a material’s physical/chemical properties
affect its toxicity in a spill situation. In the general
IV— 134
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case this is probably a valid assumption.
The format of the adjustment factors is consistent with the
multiple hazard approach of the methodologies. Adjustment
factors are derived for each hazard potential in each of
the four water body types. It is also noteworthy that for
materials with multiple hazard potentials of the same order
of magnitude the individual adjustment factors related to
each hazard are additive. This means that for materials
exerting multiple hazards of the same intensity, final rates
of penalty can exceed the base rate.
Unit of Measurement Methodology
Orientation and Rationale — The Unit of Measurement repres-
Kts a strict interpretation of the law. The rate of penalty
is the ratio of an independently derived unit of measurement
and the fixed monetary amount specified by Congress. Here, an
attempt is made to recognize units that are specific to cer-
tain trade practices (e.g., tank cars, drums, tons, etc.).
This attempt, in the final analysis, is not completely
successful. Although harmful quantities are specified in
round lot units used in the trade (e.g., 55 gallon drum,
4000 gallon tank car), final rates of penalty are still given
in terms of standard units.
The Unit of Measurement Methodology is developed within the
context of the IMCO system. That is, the IMCO Methodology
is used to differentiate between materials on the basis of
toxicity, dispersibility, and degradability. The two systems
differ in their determination of substantial harm and the
bases for the rate of penalty.
Technical Basis of Harmful Quantity — In the Unit of Measure-
nt Methodology, derivation of the unit of measurement and
harmful quantity are closely related. One of the constraints
placed on the unit of measurement is that it be large enough
so that when spilled it is likely to result in substantial
harm. This convention leads to the selection of a 4000
gallon tank truck as the harmful quantity for IMCO Category
D materials. Harmful quantities for other IMCO category
materials are derived to reflect the ratio of their res-
pective critical concentrations to that for Category D and
then are rounded off to more standard quantities.
Unlike the other methodologies, no attempt is made to define
substantial harm in the Unit of Measurement Methodology.
Rather large harmful quantities were selected under the stated
assumPtiOn that there would be little disagreement as to
the ability of these quantities to cause substantial harm.
IV— 135
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Hence, instead of setting a threshold of harm, the Unit
of Measurement Methodology proposes harmful quantities
that are “no less than and probably greater than” the
quantities actually required to cause substantial harm.
It is of interest that for some materials the Unit of
Measurement harmful quantities are less than the harmful
quantities derived by other methodologies. This, of course,
raises some doubts as to the validity of the underlying
assumption that all harmful quantities in the Unit of Measure-
ment Methodology exceed the amount actually required to cause
substantial har: n, or conversely, that the other methodologies
are operating above the avowed threshold of harm.
Technical Basis for Rates of Penalty - The most compelling
aspect of the Unit of Measurement penalty rates is that
they were derived in the precise manner prescribed by Congress
-— the simple association of a fixed monetary rate to an
independently derived unit of measurement. The selection
of the units of measurement is arbitrary and difficult to
defend. For that matter, any unit of measurement would be
difficult to defend since, in the actual trade practice,
hazardous materials are dealt with in many different and
constantly changing units which, for the most part, have
little relation to the materials’ hazard potentials. If
penalty rates are to be scaled to the level of hazard posed
by a given material, such a procedure places a severe
constraint on the ability of penalty rates to reflect the
order of magnitude differences that exist between the hazards
of designated materials.
The Unit of Measurement Methodology does not adhere strictly
to its stated objective of deriving uints of measurement
common to the usual trade practice. Only the IMCO Cateqory
D unit of measurement, the 4000 gallon tank truck, is derived
in this way. Units of measurement for the other three
categories are derived from this base to reflect, to a limit-
ed degree, the higher levels of hazard potential associated
with other categories.
While the use of the methodology prescribed by Congress is
the major strength of the Unit of Measurement Methodology,
it is also its major weakness with respect to underlying
rationale and technical basis. There simply is no technical
justification for the system beyond as assumed basis for the
wording in the law itself. Therefore, in the absence of
any evidence to the contrary, one must assume that the entire
approach is rather arbitrary.
Technical Basis for Adjustment Factors - Unit of Measurement
adjustment factors for dispersibility and degradability
IV—136
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are identical to those of the IMCO Methodology.
Relative Assessment of Assumptions and Rationale - Each
methodology has been shown to have its own strengths and
weaknesses with respect to the underlying rationale and the
technical data used to support that rationale. It is
difficult, therefore, to make a direct comparison between
the four approaches without relying heavily on judgment
factors. With that in mind, the methodologies were ranked
as summarized in Table VI-5. The Unit of Measurement
Methodology was given the lowest rating because of the
lack of any strong technical rationale in the construction
of its rate of penalty.
TABLE VI-5
RANKING OF METHODOLOGIES WITH RESPECT TO
RATIONALE AND TECHNICAL ASSUMPTIONS
Methodology
-- Strengths
Weaknesses
Rank*
DOUM
Strong in handling of streams.
Good data base for selection
of critical volume,
Poor data base for setting rates
of penalty; inadequate for lakes
and coastal waters.
3
IMCO
Good data for rates of penalty
base,
Weak rationale for defining
threshold of harm; subjective
treatment of persistence.
2
UM
Complies with the letter of
the law.
Lack of underlying technical
rationale and supporting data.
4
RV
Good data for rates of penalty
base,
Weak rationale for defining
threshold of harm.
1
*1 = strongest rationale.
While the DOUM Methodology is considered to have a very
strong base for harmful quantity derivation, it was ranked
behind the IMCO and Resource Value Methodologies because the
supporting data for the rates of penalty are too limited and
rates of penalty are considered by the author to be more
irnpactive part of the regulation than harmful quantities.
The IMCO and Resource Value Methodologies differ only in
the grouping concept and the adjustment factors. The
grouping approach in the former methodology was required
to replicate the IMCO/GESAMP rating/classification system.
The IMCO adjustment factors are similar to those of the
Resource Value Methodology; however, it is relieved that
under the IMCO Methodology the importance of persistance
is underestimated. For these reasons, the Resource Value
Methodology is conceded a slight edge.
SEVERITY OF PENALTY
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Many of the impacts associated with an approach, and the
ease with which the approach can be implemented and enforced,
are direct results of the severity of its rates of penalty.
High penalties may motivate greater precautions for spill
prevention, but will also have commensurately higher economic
impacts on industry when assessed. Furthermore, higher
rates of penalty are more likely to be challenged. Since
many comparisons between approaches will draw heavily upon
the severity of associated rates of penalty, it is important
to establish a general measure of overall penalty severity
and apply this measure to the four approaches evaluated
herein.
The obvious choice in seeking a general measure is the
average rate of penalty for all of the designated hazard-
ous substances. Such an average, however, gives equal weight
to all substances with no regard for the probability of a
spill of that material. A much more desirable measure would
be a weighted average with each value adjusted according to
the spill potential of the specific material. Unfortunately,
information required to calculate a weighted average is not
availbale. Historical data and knowledge of industrial
operations does, however, suggest trends in spill probability
for generic groups of materials. Therefore, if average
rates of penalty are derived for generic groups of chemicals,
a subjective ranking of approaches based on severity of penalty
can be made. The average rates of penalty assocaited with
the four methodologies are given in Table VI-6 for each of
seven generic groups encompassing all of the designated
hazardous substances.
Of the groups listed, only the first three are considered major
threats to navigable water. The fourth group, inorganic gases
and liquids, does contain ammonia which has been spilled
in large quantities, but for the most part this group
contains gases or other reactive materials shipped in special
containers (e.g., chlorine and phosgene). Group V materials,
for which the probability of a major release is considered
to be quite low, are inorganic salts which are typically
shipped as solids in small lots. While pesticides and
metal salts (Groups VI and VII) have recieved a great deal
of attention recently, neither are typically shipped or
spilled in large amounts. Therefore, only the first three
groups were used to determine relative severity. Rating on
this basis, the order of ascending severity for the four
approaches is Unit of Measurement, Resource Value, IMCO,
and DOI-IM. Therefore, on the average for materials with the
greatest spill potential, the Unit of Measurement Methodology
assesses the lowest rates of penalty, and the DOHM Methodology
the highest.
IV—138
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TABLE VI-6
AVERAGE RATES OF PENALTY AS DERIVED BY EACH METHODOLOGY FOR GENERIC GROUPS ($/lb)*
1-4
(4) (2) (1 (3)
4.93 84.43 3,127.84 10.70
(3) — (1) (2) (4)
5.00 38.99 12.43 4.94
(4) (2)
4.93 78.56
(2) (1 (3)
220.19 6,737.12 14.48
- (2) (3)
59.13 6.22
(2) (4) (3) (1)
5.02 1.45 3.12 10.09
(2) (3) (4) (1;
4.60 0.74 0.02 5.12
Lake
River
Estuary
Coastal Waters
Group
1
DOHM IMCO ResV WI
— —____
DOHM IMCO csV ) M DOHMIMCO ResV OW
DOHM IMCO ResV UM
Acids azid Bases
(3) (2) (1) (4)
3.71 5.52 8.12 0.70
(3) (1) (2) (4) (3) (2) (l) (4)
3.71 7.04 4.55 0.89 3.61 15.30 430.60 1.00
(1) (4) (2) (3)
3.61 0.08 1.00 0.56
Organic Materials
(2) (1) (4) (3)
4.25 8.55 1.31 1.88
(2) (1) (4) (3) (3) (2) (1) (4)
4.25 9.07 0.62 1.14 4.24 19.90 65.56 1.29
(1) (4) (3) (2)
1.24 0.13 0.18 0.89
Detergents
(1) (2) (3) (4)
3.55 0.53 0.31 0.07
(1) (2) (3) (4)
3.55 0.60 0.19 0.07
(2) (1) (3) (4)
3.664.122.45 0.25
1) (3) (4) (2)
3.66 0.03<0.01 0.13
Inorganic Gases (4) (1 ) (2) (3)
and Liquids 4.30 35.08 28.33 4.45
(3) (1) (2) (4)
4.30 31.55 15.57 4.00
(3) (2) (1)
4.19 63.01 70.01 4.12
(3) (1) (2) (4)
4.45 16.41 12.68 1.06
(3 (4) (2)
4.19 0.50 0.16 3.47
(1, (3) (4) (2)
4.45 0.11 0.02 0.77
Inorganic Salts
(non—metals)
(2) (1) (3) (4)
4.54 9.63 4.04 1.22
(2) (1) (3) (4)
4.54 10.25 2.30 1.29
Pesticices
Iletal Salts
(1) (3) i (4)
553.45 9.96 5.02
(2) (1) (4) (3 4) (1)
5.00 36.00 2.85 4.56 4.60 95.25
*For rankings in parentheses, 1 = highest rate of penalty
-------
SIZE OF HARMFUL QUANTITY
The size of derived harmful quantities will also affect the
impact and ease of administration of any individual approach.
The same considerations made for severity of penalty hold
for the size of harmful quantities. Therefore, a similar
analysis by genericgroup was performed. The averages ob-
tained are presented in Table VI—7.
As in the case of severity of penalty, only the first three
groups are considered of major spill significance. Averag-
ing the ranking from these groups, the four approaches in
order of ascending size of harmful quantity are Unit Measure-
ment, DOHM, IMCO, and Resource Value, respectively. Therefore,
on the average for materials with the greatest spill potential,
the Unit of Measurement Methodology yields the smallest
harmful quantities and the Resource Value Methodology, the
largest.
SUMMARY OF GENERAL COMPARISONS
For reader convenience, the results of the general compara-
tive evaluation are summarized in tabular form in Table VI-8.
These results are used as “direct inputs” to the administra-
tive evaluation which follows.
ADMINSTRATIVE EVALUATION
In comparing the various aspects of the four methodologies
developed in the technical portion of this study, it is
important to consider (in addition to the economic and environ-
mental implications) those aspects of each methodology relat-
ing to the ease of implementation and enforcement. This
section attempts such as assessment by presenting an analysis
of the alternative methodologies from an adminstrative
point of view.
This comparison begins with a review of the basic character-
istics of the respective methodologies and p:oceeds to a
discussion of results in terms of varibles of direct signifi-
cance to administrative decision makers. The output of the
analysis includes consideration of the costs of adminstra—
tion, acceptability to industrial firms and to state and
local governments, and anticipated effectiveness in the
prevention of spills of hazardous substances.
The following analysis of rnethodologiesfor determining
harmful quantites and rates of penalty provides a semi-
quantitative assessment of the adminstrative aspects ass-
ociated with the implementing of hazardous material spill
regulations. Methodologies are compared on a relative
IV—140
-------
‘-4
TABLE VI-7
AVERAGE HARMFUL QUANTITIES BY GENERIC GROUP ,1bs)*
Lake
River
Estuary
Coastal Waters
Group
DOWI IMCO ReSV UM
DORM IMCO ResV UM
DORM IP4CO ResV UM
DORM IMCO ResV U I ’ >
Acids and Bases
(3) (2) (4) (1)
34,469 13,146 48,211 9,655
(3) (2) (4) (1)
34,408 13,146 48,211 9,655
(4) (1) (3) (2>
2,853,228 11,972 31,985 18,880
(3) (2) (4) (1)
2,883,228 1,312,370 4,046,802 18,880
organic MaterialS
(1) (4) (3) (2)
8,253 13,375 11,564 9,983
(1) (4) (3) (2)
8,253 13,375 11,564 9,983
(4) (1) (3) (2)
1,103,258 6,469 12,239 9,850
(3) (2) (4) (1)
1,103,258 703,267 1,548,495 9,850
Detergents
(1) (4) (2) (3)
1,936 7,600 2,712 5,000
(1) (4) (2) (3)
1,936 7,600 2,712 5,000
(4) (2) (1) (3)
67,365 3,116 747 4,100
(2) (4) (3) (j)
67,365 328,000 94,551 1,100
Inorganic Gases
and Liquids
(1) (4) (2) (3)
4,413 9,516 6,184 7,100
(1.) 4) (2) (3)
4,413 9,516 6,184 7,100
(4) (2) (1) (3)
614,845 10,074 6,820 16,100
(2) (4) 3) (1)
614,845 1,107,900 562,976 16,100
Inorganic Salts
(non—metals)
(3) (2) (4> (1)
26,076 20,159 36,536 15,486
(3) (2) (4) (1)
26,076 20,159 36,536 15,486
(4) (1) (3) (2)
1,689,237 10,692 18,739 16,801
(3) (2) 4) (1)
1,689,237 1,171,053 2,70,956 16,802
Pesticides
(3) (2) (4) (1)
4,312 3,051 6,043 2,206
>3) (2) (4) (1)
4,312 3,051 6,043 2,201
(4) (1) (3) (2)
228,194 791 2,53] 1,119
(3) (2) (4) (1 )
228,194 84,672 320285 1,119
Metal Salts
(1) (4) (3) )2)
4,835 8,594 6,775 6,344
(1) (4) (3) (2)
4,835 8,594 6,775 6,344
(4) (1) (3) (2)
1,692,327 6,161 12.117 9,570
(3) (2) (4) (1.)
1,092.327 672,977 1.533.159 9,570
br rankings in parentheses, 1 = lowest harmful quantity
-------
TABLE VI-8
SUMNARY OF GENERAL COMPARATIVE EVALUATION
Resource Unit of
DOHI4 IMCO Value Measurement
Methodology Methodology Methodology Methodology
e e e e
Criteria
A. Specificity to water
body type
(1 = most specific)
Two harmful quan-
tity and two rate
of penalty categories
Three harmful quan-
tity and four rate
of penalty categortes
Three harmful quan—
tity and four-plus
rate of penalty catego—
rtes
One to two harmful
quantity and four
rate of penalty catego-
ries
B. Specificity to water
body size
( I most specific)
Special harmful
quantities for
stationary sources and
barges
None
Extrinsic adjust—
mont factor (Loc)
for penalty rate
None
C. Specificity to physi-
cal/chemical charac-
teristics
(1 most specific)
Harmful quantity
and rate of
penalty assigned to
materials individually
Four categories for
harmful quantity
and base rate of penalty.
Fourteen physical/chetni—
cal groups
® Harmful quantity
and base rate of
penatt 7 assigned
individually. General
classification used for
dispersion & degradability
io e . s IMCO
D. Ability to deal with
mixtures
U greatest ability)
None
Within each of four
“—i categories
None
Within each of four
categories
E. Assumptions and
rationale
U strongest
rationale)
Strong handling
( ) of strean and
critical volume
selection. Inadequate
for lakes & rivers,
Poor data base for set-
ting rates of penalty
Good data base for
1’? rates of penalty.
Weak rationale for
defining threshold of
harm. Persistence is
underrated.
(i3 Good data for pen-
alty rates. Weak
rationale for defining
threshold of harm
Complies with the
letter of the law.
Lacks underlying techni-
cal rationale and
supporting data.
F. Severity of penalty
rates
(1 = greatest severity)
Nigh for major
threat materials
but comparatively low
for many metal salts
and pesticides
Typically higher
than Resource Value
except for certain metal
salts and pesticides
Relatively low for
major threat mati.;
however, extremely high
for pesticides and cer—
tam metal salts
Uniformly lower
than IMCO except
in coastal waters
C. Size of harmful
quantity
U = smallest size)
(, 3 Follows same
pattern as ResV
methodology differing
by the ratio of criti-
cal volumes
( ) Typically smaller
than Re8V except
for certain metal salts
and pesticides
( ) Typically large for
major threat matI.;
however, quite small for
certain pesticides and
metal salts
( ) Typically smaller
than Other method-
ologies. Substantially
smaller for coastal
waters.
-------
basis since sufficient data for an absolute comparison are
not available. Thus, although it concluded from this analysis
that the Resource Value Methodology is the best overall
approach, it remains to be determined how much better it
is in relation to the other three methodologies as well
as in relation to other EPA efforts to reduce pollution
resulting from hazardous material spills.
Basic Approach to the Administrative Analysis
For the purposes of this analysis, the four methodologies
for determination of harmful quantities and rates of penalty
are viewed initially in terms of their inherent characteris-
tics, or “direct implications” (see Table VI-8). From
these implications are derived a number of “intermediate
criteria”. In turn, these intermediate criteria form
the basis for estimates of the “output criteria”. Table VI—9
displays the various direct implication categories as well
as intermediate and output criteria. It also indicates
the relationships among these variables.
Direct Implications
As indicated previously, the details of the direct implica-
tions of the four methodologies are contained in a preced-
ing section on direct comparison. The results of this
direct comparison are summarized in that section by relative
rankings of the methodologies with respect to each criterion.
The ranking factors shown in Table VI-8 are used as inputs
to the intermediate and output criteria in this section.
Intermediate Criteria
The intermediate criteria considered in this analysis are
listed in Table VI-9. They are derived for each of the
methodologies through the aggregation procedure, individual
input criteria are sometimes weighted to account for their
relative importance. The results of these evaluations are
then used to assign relative ranks to the various methodo-
logies with respect to each intermediate criterion.
Inducement for Preventive Action
one of the prime objectives of the hazardous substances
legislation iS to cause handlers of hazardous substances
to take measures to prevent discharges of these materials
to the environment. In the present analysis, handlers of
hazardous substances are considered to be responsive to the
following direct implication variables:
IV—143
-------
TABLE VI—9
SUMMARY OF INPUT, INTERMEDIATE AND OUTPUT CRITERIA
Intermediate Criteria (inputs )
1. Inducement for Preventive
Action (A, B, C, D, F, G)
2. Ease of Technical Applica-
tion (A, B, C’
3. Equitability cf Treatment
(A, B, C, D, E)
4. Likelihood of Avoiding Legal
Challenges (A, B, C, D, E,
F, G)
5. Adaptability to Change
(A, B, C, D, E)
Output Criteria (inputs)
I. Staff and Equipment Costs
(1, 2)
II. Litigation and Negotiation
Costs (4)
III. Ease of Administration
(1, 2, 3, 4, 5)
IV. Acceptability to Industry
(F, 0, 3, 5)
V. Acceptability to Local
Government (1, 3, 5)
VI. Acceptability to State
Government (1, 3, 5)
VII. Administrative Effective-
ness (1, 4, 5)
‘-1
I- . ,
Input Criteria
A. Specificity to Water Body Type
B. Specificity to Water Body Size
C. Specificity to Chemical Groups
D. Ability to Deal With Mixtures
E. Assumptions and Technical
Rationale
F. Severity of Penalty
G. Size of Harmful Quantity
-------
• Input Variable A - Specificity to Water Body Type
• Input Variable B - Specificity to Water Body Size
• Input Variable C - Specificity to Chemical Groups
• Input Variable D - Ability to Deal With Mixtures
• Input Variable F - Severity of Penalty Schedule
• Input Variable G - Size of Harmful Quantity
The specificity variables and the ability of a methodology
to deal with mixtures are considered to affect the induce-
ment for preventive action by tailoring the penalty schedule
to the specific set of circumstances surrounding a hazardous
material spill. The more specific the methodology, the
less likely that chemicals or spillers can slip into a
loophole where they will not be subject to adequate penalties.
Specificity also provides inducement to locate in less
sensitive areas. At the same time, a high degree of
specificity will make firms or individuals who handle hazard-
ous substances less resistant to the idea of a penalty
schedule. They will not be likely to consider that they as
individuals are being treated unfairly relative to other
firms or individuals.
As important as the specificity criteria are, it is likely
that the severity of the penalty schedule will have a
stronger impact upon the decisions of potential spillers
of hazardous substances to act to prevent such spills.
Assuming as a constraint that no penalty schedule will be
implemented which threatens the viability of any significant
number of firms, it follows that the higher the penalty
schedule is, the greater will be the tendency to prevent
spills. Low harmful quantities will have a similar effect
vs. higher, less restrictive harmful quantities.
Following the above rationale, the four methodologies for
determining harmful quantities and rates of penalty can be
compared as shown in Table V110. Note in the table the
Variable F - Severity of Penalty Schedule has been weighted
at twice the value of other direct inputs.
Ease of Technical Application
Specificity is highly desirable in a methodology for several
reasons, but it is achieved only at a cost. The more specific
a methodology is, the greater the information necessary to
apply the methodology. Highly specific methodologies will
IV—145
-------
TABLE VI-lO
RANKING OF METHODOLOGIES WITH RESPECT TO
INTERMEDIATE VARIABLE 1 - INDUCEMENT FOR PREVENTIVE ACTION
Sum of
Ranks for Relevant Direct Variab1e ; (weighting factors ) Direct Rank Score for
Var A Var B Var C Var ii Var F Var C Implication Intermediate
Methodology - (1) ( 1) ( 1) _ (l ) - ( 2) ( 1) Ranks Variable 1 a
DOHM 4 2 1 3 54) 2 2 14.5 1
I-J
IMCO 2 35 b 35 b i.5 4 3 17.5 2—3
RV 1 1 2 3 • 5 b 6 4 17.5 2—3
UM 3 35 b 8 1 20.5 4
a 1 = greatest inducement.
bTie rank scores (e.g., 3-4) are indicated as decimals (e.g., 3.5) for computational
purposes.
-------
require substantially greater post—spill investigations
than will less specific methodologies , and these investiga-
tions will require highly trained individuals and expensive
jnstrumentaion. At the same time, handlers of hazardous
substances will need greater information in order to determine
when they must report spills. They will also need to keep
more detailed records as substantiation for actual or
potential spills. In effect, high specificity results in
relatively high implementation costs for both hazardous
substance handlers and public officials charged with imple—
menting hazardous substance regulations.
In this study, the ease of technical application is consid-
ered to be equally responsive to each of the following
direct implication variables:
• Input Variable A - Specificity to Water Body Type
• Input Variable B - specificity to Water Body Size
• Input Variable C - Specificity to Chemical Groups.
The ranking of the four methodologies with respect to ease
of technical application is shown in Table VI-il.
TABLE VI-li
RANKING OF METHODOLOGIES WITH RESPECT TO INTERMEDIATE
VARIABLE 2 - EASE OF TECHNICAL APPLICATION
Sum of
Ranks for Relevant Direct Direct Rank Score for
Implication Variables Implication Intermediate
Methodology Var A Var B Var C Ranks Variable 2 a
DOHM 4 2 1 7 3
IMCO 2 3 5)) 9 2
RV 1 1 2 4 4
UM 3 35 b 10 1
a 1 = greatest ease of technical applicatLon.
bTje rank scores (e.g., 3—4) are indicat2d as decimals (e.g., 3.5) for
computational purposes in this table.
IV—147
-------
Equitability of Treatment of c ischarges
In considering the relative worth of the four methodologies
in this study, it is necessary to make an explicit comparison
of the degree to which various parties would be treated
fairly under the methodologies. Herein, equitability is
deemed to be equally responsive to each of the following
direct implication variables:
• Input Variable A - Specificity to Water Body Type
• Input Variable B - Specificity to Water Body Size
• Input Variable C - Specificity to Chemical Groups
• Input Variable D - Ability to Deal With Mixtures
• Input Variable E - Assumptions and Technical Rationale.
Variables A-D, the “specificity” variables, are important
to equitability for the reasonsdiscussed above in connection
with Inducement for Preventive Action. Variable E — Assurn-
tion and Technical Rationale is considered to be twice as
important as Variables A through D. Assumptions which
oversimplify the hazards of designated substances may re—
suit in inequitable penalization of potential spillers.
Additionally, if rationale of questionable validity are
used to support the development of a methodology, errors
in these rationale may be beneficial to some handlers and
detrimental to others.
TABLE VI-12
RANKING OF METHODOLOGIES WITH RESPECT TO INTERMEDIATE
VARIABLE 3--EQUITABILITY OF TREATMENT OF INVOLVED PARTIES
Ranks for Relevant Direct :rnplication Swn of
Varinbics (wci ht jE ctors ) Direct Rank Score for
Var A V r U V.ir C Vur D Var E Implication Intermedjat
Mcthodo1 ( 1) ( 1) ( 1) ( 1) ( 2) Ranks Variable 3 a
DOI i 1 4 2 1 6 16.5 3
IMCO 2 35 b 35 b 1 rb 1.4.5 2
IW 1 1 35 b 9.5 1
UM •s 3 .s a 19.5 4
a 1 greatest degree of equitability.
bTio rank scores (e.g., 1—2) arc indicated as ecimala (e.g., 1.5) for computational purposes.
IV—148
-------
Likelihood of Avoiding Legal Challenges
In the following analysis, it is assumed that questions of
constitutionalitY of the basic hazardous substance legis-
lation and the right of the federal government and designated
agencies to implement the legislation will not come up
in legal challenges. Given this assumption, the likelihood
of avoiding legal challenges in the implementation of the
hazardous substance legislation will be dependent in large
part upon the equitability of the methodology used in
establishing penalty schedules —— as perceived by hazardous
substance handlers. Challenges might also be based specifically
upon the validity of the assumptions and rationale supporting
the methodology. The degree to which affected individuals and
firms seek to make such challenges, however, will be depend-
ent upon the severity of the penalty schedule.
In accordance with the above discussion, the likelihood of
avoiding legal challenge is considered here to be responsive
to the following direct implication variables:
• Input Variable A - Specificity to Water Body Type
• Input variable B - Specificity to Water Body Size
• Input Variable C - Specificity to Chemical Groups
• Input Variable D - Ability to Deal With Mixtures
• Input Variable E - Assumptions and Technical Rationale
• Input Variable F - Severity of the Penalty Schedule
(inverse)
• Input Variable G - Size of Harmful Quantity (inverse).
variables E and F are considered to be more important in
determining the likelihood of challenge and hence these
variables have been assigned weighting factors of 2.
Table VI-13 presents the ranking of the four methodologies
on the basis of this intermediate variable.
Adaptability to Changes in Technical Criteria,
Standards, and Hazardous Substance Listings
Regulation of hazardous substances is a relatively new
dertaking. There can be little doubt that numerous changes
will be made in technical criteria, standards, and hazardous
IV— 149
-------
substance listings. Accordingly, it is very important that
any methodology selected for use in determining harmful
quantities and rates of penalty be readily adaptable to
such changes.
As viewed here, adaptability to changes is responsive
equally to each of the following direct implication
variables:
• Input Variable A - Specificity to Water Body Type
• Input Variable B - Specificity to Water Body Size
• Input Variable C - Specificity to Chemical Groups
• Input Variable D - Ability to Deal With Mixtures
• Input Variable E - Assumptions and Technical Rationale.
Since changes may occur in some factors while others remain
unaltered, highly specific methodologies will tend to be
more readily adaptable to these changes than relatively
unspecific methodologies. Changes can be made in the affect-
ed aspects of the highly specific methodologies while leav-
ing the other aspects intact; changes in the unspecific
methodologies would tend to affect large portions of the
methodologies if the changes could be made at all.
Where assumptions supporting methodologies are arbitrary,
they cannot be sensitive to many kinds or degrees of changes.
Similarly, methodologies based upon rationale of questionable
validity cannot be meaningfully adjusted since the margin
of error is likely to be large relative to the magnitude
of desired adjustment.
Table VI-14 presents the rankings of the four methodologies
with respect to adaptability to changes in technical
criteria, standards, and hazardous substance listings.
Summary of Intermediate Criteria
Table VI-15 presents a summary of the rankings of the four
methodologies with respect to the five intermediate criteria.
Output Criteria
The four methodologies considered in this study are evalu-
ated in terms of the output criteria in a manner similar
to that used for evaluating them in terms of the intermediate
criteria. The result is a set of relative rankings of the
four methodologies regarding each output criterion.
IV— 150
-------
TABLE VI-13
RANKING OF METHODOLOGIES WITH RESPECT TO INTERMEDIATE VARIABLE 4 -
LIKELIHOOD OF AVOIDING LEGAL CHALLENGES
Ranks for Relevant Direct Implication Variables Sum of Rank Score
( weighting factors ) Direct for
Var A Var B Var C Var D Var E Var Fa Var G Implication Intermediate
Methodology ( 1) ( 1) ( 1) ( 1) ( 2) ( 2) ( 1) Ranks Variable 4 b
H DOHM 4 2 1 6 8 3 27.5 4
I.-’
IMCO 2 35 c 35 C 15 C 4 6 2 22.5 2
RV 1 1 2 2 4 1 14.5 1
UM 3 35 C 35 C 15 8 2 4 22.5 3
aDue to the inverse relationship between this variable and the likelihood
of avoiding legal challenge, the rankings for this variable are converted
for use in this table by subtracting each score from 5.
b 1 = least likelihood of legal challenge.
CTie rank scores (e.g., 1—2) are indicated as decimals (e.g., 1.5) for computational
purposes.
-------
TABLE VI-14
RANKING OF METHODOLOGIES WITH RESPECT TO VARIABLE 5 -
ADAPTABILITY TO CHANGES
Rank Score
Ranks for Relevant Direct for
Implication Variables Implication Intermediate
Methodology Var A Var B Var C Var D Var E Ranks Variable 5 a
DOHN 4 2 1 3 • 5 b 3 13.5 3
IMCO 2 35 b 15 b 2 12.5 2
RV 1 1 2 1 8.5 1
UM 3 35 b 35 b 15 b 4 15.5 4
a 1 = greatest adaptability to changes.
bTie rank scores (e.g., 1—2) are indicated as decimals (e.g., 1.5) for computational
purposes in this table.
-------
TABLE VI-15
SUMMARY OF INTERMEDIATE CRITERIA
Variable Relative Rankings
Number Intermediate Criterion DOHM IMCO RV UM
i. Inducement for Preventive 1 2.5 2.5 4
Action (1 = greatest induce-
ment for preventive action)
2. Ease of Technical Application 3 2 4 1
(1 = greatest ease of tech-
nical application)
3• Equitability of Treatment of 3 2 1 4
Involved Parties (1 = greatest
equitability of treatment)
4. Likelihood of Avoiding Legal 4 2 1 3
Challenges (1 = greatest like-
lihood of avoiding legal chal-
lenges)
5. Adaptability to Changes (1 3 2 1 4
greatest adaptability to
changes)
IV— 153
-------
Staff and Equipment Costs
Staff and equipment costs are considered in this analysis
to be equally responsive to each of the following variables:
• Intermediate Variable 1 — Inducement for Preventive
Action
• Intermediate Variable 2 — Ease of Technical Applica-
tion.
In general, the greater the inducement for preventive action
on the part of individuals or firms handling hazardous
substances, the smaller the requirement for public of ficia].s
to deal with actual spills. On the other hand, methodologies
which are difficult to apply may require more officials to
implement them. Furthermore, these officials may need to
be highly trained and to be equipped with expensive, sophis-
ticated instruments.
Table VI-16 presents the rankings for the four methodologies
with respect to staff and equipment costs.
Litigation and Negotiation Costs
In this analysis, litigation and negotiation costs are only
responsive to Intermediate Variable 4 - Likelihood of
Avoiding Legal Challenges. Hence this output variable is
equalled to Intermediate Variable 4. The development of the
rankings for this intermediate variable is presented in the
preceding section.
Ease of Administration
Ease of administration connotes considerations of administra
tive costs. However, in this analysis it also reflects other
variables. Those intermediate criteria areas involved
follow:
• Intermediate Variable 1 - Inducement for Preventive
Action
• Intermediate Variable 2 - Ease of Technical
Application
• Intermediate Variable 3 - Equitability of Treat-
ment of Involved Parties
• Intermediate Variable 4 - Likelihood of Legal
Challenges
IV—154
-------
TABLE VI-16
RANKING OF METHODOLOGIES WITH RESPECT TO OUTPUT VARIABLE I -
STAFF AND EQUIPMENT COSTS
Ranks for Relevant Sum of
Intermediate Criteria Intermediate Rank Score
Methodology Var 1 Var 2 Criteria Ranks for Output Variable
DOHM 1 3 4 1
H
IMCO 2.5 2 4.5 2
01
RV 2.5 4 6.5 4
UM 4 1 5 3
a 1 = lowest expected cost
-------
• Intermediate Variable 5 - Adaptability to Changes.
Methodologies which provide a high degree of inducement for
preventive action tend to minimize the need for administra—
tive work. Those which are relatively easy to apply from a
technical point of view minimize administrative difficulty
by minimizing the needs to search for details and to maintain
extensive data files. Equitability and likelihood of legal
challenges affect the ease of administration by indicating
the extent to which administrative efforts might be hindered
by negotiations and litigation. Finally, adaptability consider-
ations are relevant because of the expected need to accom-
odate frequent changes in technical criteria, standards,
and hazardous substance listings.
Rankings for the four methodologies resulting from consider-
ation of these factors as they affect ease of administra-
tion are presented in Table VI—17.
Acceptability to Industry
The acceptability of a methodology to industry is viewed
in the present study as responsive to the following
variables:
• Direct Input Variable F - Severity of Penalty
Schedule (inverse)
• Direct Input Variable G - Size of Harmful
Quantity (inverse)
• Intermediate Variable 3 - Equitability of
Treatment of Involved Parties
• Intermediate Variable 5 - Adaptability to
Changes.
The sensitivity of industrial firms to the severity of the
penalty schedule and harmful quantity is readily understood
and has been discussed earlier in this report. Similarly,
industrial concern with equitability has been discussed in
earlier portions. Finally, since some adjustments in the
hazardous substances regulations (made in response to changes
in technology) might favor the interests of industry, firms
have reason to prefer methodologies which are adaptable.
Variables F and 3, Severity of the Penalty Schedule and
Equitability, are probably of greater importance to indus-
trial firms than are Variables G and 5; hence, the former
two variabales have been assigned a weighting factor of 2.
IV— 156
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TABLE VI-17
RANKING OF METHODOLOGIES WITH RESPECT TO OUTPUT VARIABLE III -
EASE OF ADMINISTRATION
Ranks for Relevant Sum of Rank Score
Intermediate Criteria Intermediate for Output
Methodology Var 1 Var 2 Var 3 Var 4 Var 5 Criteria Ranks Variable 111 a
DOHM 1 3 3 4 3 14 3
H
IMCO 2.5 2 2 2 2 10.5 2
I—I
—I
RV 2.5 4 1 1 1 9.5 1
UM 4 1 4 3 4 16 4
a 1 = easiest to administer
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Table VI—18 presents the rankings for the four rnethodolo—
gies with respect to acceptability to industry.
Acceptability to Local Government
In some respects, local government is sensitive to the same
variables discussed for industry, and for largely the same
reasons. It is not in the interest of local government to
allow industrial firms to become dissatisfied with the
circumstances in which they operate, especially if these
circumstances vary from one location to another. In addition,
however, local government is interested in achieving adequate
control of hazardous substances to prevent destruction of
the environment or risks to human health. Accordingly, in
this analysis, acceptability to local government is consider-
ed equally responsive to the following variables:
• Intermediate Variable 1 - Inducement for Pre-
ventive Action
• Intermediate Variable 3 - Equitability c f
Treatment of Involved Parties
• Intermediate Variable 5 - Adaptability to
Changes.
Table VI—l9 presents the rankings for the four methodolo-
gies with respect to acceptability to local government.
Acceptability to State Government
Though threatened somewhat less directly by the consequences
of industrial firm dissatisfaction than local government,
the state governments are responsive to the same variables as
the local governments and in essentially the same way.
Consequently, the rankings and the supporting rationale
for the rankings of the four methodologies are the same with
respect to local and state governments.
Effectiveness
Administrative effectiveness is a measure, in this analysis,
of the extent to which administration of the hazardous
substances regulation program is successful in preventing
the discharge of hazardous substances into the environment.
It is considered equally responsive to the following variables:
• Intermediate Variable 1 - Inducement for Pre-
ventive Action
• Intermediate Variable 4 - Likelihood of Avoiding
Legal Challenges
Iv— 158
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TABLE VI-18
RANKING OF METHODOLOGIES WITH RESPECT TO OUTPUT VARIABLE IV -
ACCEPTABILITY TO INDUSTRY
Ranks for Relevant Variables
( weighting factor ) Rank Score
Var F Var G Var 3 Var 5 Sum of Ranks for for Output
Methodology ( 2) ( 1) ( 2) ( 1) Relevant Variables Variable iVb
DOHM 8 3 6 3 20 4
I . -’
IMCO 6 2 4 2 14 2
RV 4 1 2 1 8 1
UM 2 4 8 4 18 3
a 1 order to make the rankings for this variable comparable with the others in this
analysis (i.e., 1 = greatest acceptability to industry), the rankings for this
variable are converted for use in this table by subtracting each score from 5.
= most acceptable to industry
-------
TABLE VI—19
RANKING OF METHODOLOGIES WITH RESPECT TO OUTPUT VARIABLE V -
ACCEPTABILITY TO LOCAL GOVERNMENT
Ranks for Rank Score
Relevant Variables Sum of Ranks for for Output
Methodology Var 1 Var 3 Var 5 Relevant Variables Variable Va
H DOHM 1 3 3 7 3
I-J
IMCO 2.5 2 2 6.5 2
RV 2.5 1 1 4.5 1
UM 4 4 4 12 4
a 1 = most acceptable to local government
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. Intermediate Variable 5 - Adaptability to Changes.
Inducement of preventive action is of obvious importance.
Legal challenges must be minimized in order that the resourc-
es available to the private and public sectors can be devoted
to preventing hazardous material spills. It is also important
that no legal challenge occur which might result in a legal
ruling disallowing the program entirely. Adaptability is
important to prevent the gradual deterioration of the
regulation program over time as conditions and needs change.
Rankings for the four methodologies with respect to adminis-
trative effectiveness are presented in Table VI—20.
Summary of Output Criteria
Table VI—21 presents a summary of the rankings of the four
methodologies with respect to the seven output criteria.
From this table, it is clear that the Resource Value Methodo-
logy is the most desirable one in all areas except staff
and equipment costs. This follows since it is logical that
the most effective methodology would be one requiring greater
efforts on the part of the regulatory agency.
IV— 161
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TABLE VI-20
RANKING OF METHODOLOGIES WITH RESPECT TO OUTPUT VARIABLE VII -
ADMINISTRATIVE EFFECTIVENESS
Ranks for
Relevant Variables Sum of Ranks for Rank Score for
Methodology Var 1 Var 4 Var 5 Relevant Variables Output Variable vila
DOHM 1 4 3 8 3
IMCO 2.5 2 2 6.5 2
RV 2.5 1 1 4.5 1
UM 4 3 4 11 4
a 1 = greatest administrative effectiveness
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TABLE VI-21
SUMMARY OF OUTPUT CRITERIA
Variable Relative Rankings
Number Output Criterion DOHM IMCO RV UM
I Staff and Equipment Costs 1 2 4 3
(1 = minimum costs)
II Litigation and Negotiation 3 2 1 4
Costs (1 — minimum costs)
III Ease of Administration (1 = 3 2 1 4
maximum ease of adxninistra—
tion)
IV Acceptability to Industry 4 2 1 3
(1 = maximum acceptability)
V Acceptability to Local 3 2 1 4
Government (1 = maximum
acceptability)
VI Acceptability to State 3 2 1 4
Government (1 = maximum
acceptability)
VII Administrative Effective— 3 2 1 4
ness (1 = maximum effective—
ness)
IV— 163
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VII. SPECIAL ISSUES
BRIEF
During the course of this evaluation, it became apparent that
certain special issues falling outside the context of a com-
parative analysis needed to be addressed. These issues will
have a bearing on any regulation developed to comply with
Section 311. As such, they should be reviewed prior to selection
of a technical approach. The pertinent issues fall into three
categories: insurability, jurisdiction and litigation, and
compliance with congressional intent.
INTRODUCTION
The Water Quality Improvement Act (PL 91—224) and the Water
Pollution Control Act (PL 92-500) were primarily designed to
protect the rights of every individual from the harmful effects
of water pollution. Through the determination and administration
of the Environmental Protection Agency, violators of Section 311
of the latter law will be subjected to both clean-up costs and
civil penalties based on the toxicity, degradability, and dis-
persal characteristics of spilled materials. Pertinent to the
civil penalties, PL 92-500 stipulates that the owner of any
vessel, onshore facility, or offshore facility, from which
there is a discharge of any hazardous materials determined not
removable, and not caused by an act of omission in combination
with an act of God, nor an act of war, nor negligence on the
part of the United States government, will be liable for a
civil penalty not to exceed $5,000,000 from a hazardous spill
due to a vessel, or $500,000 from a hazardous spill originating
from an onshore or offshore facility.
Owners and operators must prove financial responsibility for
the clean—up costs and civil penalties arising from PL 92-500
before the operation of any vessel, onshore facilities, or off-
shore facilities that are potentially hazardous to water e—
sources. Financial responsibility for property damage and other
liabilities has traditionally been provided by the insurance
industry. This section examines the modern insurance associ-
ations formed to underwrite the risk of water pollution.
Through an examination of the United States insurance market
and the London insurance market a response can be determined
as to what future position will be taken on the underwriting
of direct water pollution risks stemming from operating in
accordance of PL 92_500.*
*The combined United States and London Insurance markets under-
write 85 percent of the world’s commercial liability coverage.
IV—165
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BAC KGROUND
Under the Water Quality Improvement Act of 1970 (PL 91-224),
the forerunner of the Federal Water Pollution Control Act of
1972 (PL 92—500), spilling oil in harmful quantities into or
upon the navigable waters of the United States and adjoining
shorelines was prohibited. Furthermore, this statute imposed
liability on all vessels or boat owners for oil pollution
clean-up costs incurred by the United States government. This
liability was based upon $100 per gross ton of the vessel, or
$14,000,000, whichever was the lesser. PL 92—500 has extended
the Water Quality Improvement Act to cover hazardous substances
along with oil.
Pending designation of specific hazardous materials by the U. S.
Environmental Protection Agency, however, enforcement of spill
regulations for the last two years has been directed to oil spills
and has involved a civil penalty limit of $50,000. As of October
18, 1974, that limit is no longer operable. Consequently, enforce-
ment is proceeding under the 1899 Refuse Act until a period
within 180 days of the date of designation at which time the
$500,000 and $5,000,000 maximum liabilities will come into force.
Key elements in assessing the likely response of the insurance
industry are:
• Federal Maritime Commission
• Water Quality Insurance Syndicate
• Protection and Indemnity Clubs
• Radioactive Substances
• Onshore and Offshore Facilities.
These items are individually discussed below.
FEDERAL MARITIME COMMISSION
On August 3, 1973, President Nixon delegated to the Federal
Maritime Commission the responsibility to administer the financial
responsibility requirements imposed by PL 92-500. Under the
proposed FMC rules, financial responsibility for payment of
clean-up costs and civil penalties must be shown by filing an
application form (FMC-32l) supported by certificates of insurance
(FMC—322). No vessel is allowed to operate in the United States
or its territories without FMC certification.
IV— 166
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FMC-321 requires that proof of financial responsibility be shown
by operators or owners by either showing self insurance, or by
being insured by a reputable underwriter. Since the Commission
will accept an insurance polity as evidence of financial respon-
sibility, underwriters feel that most vessel owners have found
this procedure the least time—consuming and least expensive.
Also, many large marine underwriters have Master FMC certificates.
For the entity seeking marine insurance, this serves as an
instant FMC certificate upon the purchase of the insurance.
WATER QUALITY INSU1 ANCE SYNDICATE
In response to PL 91—224, the insurance companies which comprise
virtually the entire American marine insurance market formed an
insurance pooi —- the Water Quality Insurance Syndicate (WQIS).
The Water Quality Insurance Synidcate is an association of 27
private insurance companies of which no one company has more than
5 percent interest in the total syndicate (see Table VII—l).
The WQIS provides the capacity of insure high risks for pollution
on a pool basis. Most of the syndicate’s business comes from
coastal tugs and barges and from ships using the inland water
system. A quarter of its business is written on ocean going
vessels.
The purpose of the WQIS is to provide the insurance necessary
for vessel owners and operators to show financial responsibility
for impingements against PL 91-224. The WQIS has been under-
writing pollution insurance up to a limit of $14,000,000 or $100
per gross ton of the vessel, whichever is lesser, for clean—up
costs which may be imposed by the Department of the Interior or
any state of the United States. The WQIS has also underwritten
up to $50,000 for civil penalties due to hazardous material
spills. 1
The WQIS handles most of the pollution insurance written in the
United States. Their rates are competitive both at home and
internationally. Since they underwrite most of the pollution
insurance in the United States, they are the price leader in
the American segment of the industry (see Table VII—2).
A representative of a large insurance syndicate handling most
of the pollution insurance written in the United States was
interviewed to assess the reaction to the possibility of under-
writing the $5,000,000 civil penalty that may fall upon shippers
for spills after the effective date of October 18, 1974. When
1 Louis, F. A. “Water Quality Insurance Syndicate,” addressed
before the Houston Marine Seminar, October 1971.
IV—167
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TABLE Vu-i
SUBSCRIBERS TO THE WATER QUALITY INSURANCE SYNDICATE 2
Percent
Subscriber of Pool
The Aetna Casualty and Surety Company, Hartford, CT 5.0
Aetna Insurance Company, Hartford, CT 3.0
Albany Insurance Company, New York, NY 1.0
American Home Assurance Company, New York, NY 5.0
American Motorists Insurance Company, Chicago, IL 1.5
Arkwright—Boston Manufacturers Mutual Insurance Company, Waltham, MA 5.0
Atlantic Mutual Insurance Company, New York, NY 4.0
Commercial Union Insurance Company, Boston, MA 2.5
The Continental Insurance Company, New York, NY 5.0
Einmco Insurance Company, South Bend, IN 2.0
Federal Insurance Company, Short Hills, NJ 2.5
Fireman’s Fund Insurance Company, San Francisco, CA 5.0
The General Insurance Company of Trieste & Venice, U. S. Branch, New York, NY 1.0
Great American Insurance Company, New York, NY 2.5
Hartford Fire Insurance Company, Hartford, CT 5.0
Highlands Insurance Company, Houston, TX 5.0
The Home Insurance Company, Manchester, NH 5.0
Insurance Company of North America, Philadelphia, PA 5.0
The New Zealand Insurance Company, Limited, U. S. Branch, San Francisco, CA 1.5
National Fire Insurance Company of Hartford, Hartford, CT 3.0
Northwestern National Insurance Company, Milwaukee, WI 4.0
Reliance Insurance Company, Philadelphia, PA 2.5
Royal Insurance Company, Limited, U. S. Branch, New York, NY 5.0
St. Paul Fire and Marine Insurance Company, St. Paul, MN 5.0
Sun Insurance Company of New York, New York, NY 4.0
United States Fidelity & Guaranty Company, Baltimore, MD 5.0
United States Fire Insurance Company, New York, NY 5.0
___________________________ Total 100.0
2 Correspondence with WQIS, September 1974 (also available
in Best’s Insurance Guide).
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TABLE VII-2
PREMIUM RATES FOR POLLUTION INSURANCE SET BY
THE WATER QUALITY INSURANCE SYNDICATE 2
Minimum
Category Type of Vessel Premium* Rate
A Vessels carrying oil as cargo $375 75 /gross ton
B Vessels carrying hazardous substances as cargo 400 80 /gross ton
Except if hazardous substance is determined
removable as established by the EPA 375 75 /gross ton
H
C Tugs and towboats (if over 100 gross ton) 250 5O /gross ton
(if under 100 gross ton) 100
D Self-propelled vessels (excluding A, B, and C)
trading exclusively within U. S. navigable waters
(if over 100 gross ton) 200 40 /gross ton
(if under 100 gross ton) 100
E Other self-propelled vessels (excluding (given upon
categories A, B, and C) application)
F Non-self--propelled vessels (excluding A and B) 25 /gross ton
(if over 100 gross ton) 125
(if under 100 gross ton) 100
*A11 premiums are for annual policies.
-------
asked if WQIS is likely to extend their coverage to maintain
civil penalty, the representative responded:
“Definitely not. There is no question that we are
interested in our share of the market, but we are
also interested in staying in business. Coverage
for the $50,000 civil penalty was just barely
extended to shippers. There is no chance of us
underwriting any more than $50,000 for civil
penalties.”
Additionally, the representative noted that:
“The effect of 92—500 in its present state will
be to put some of the small shippers out of
business or to stop shipping altogether. The
effect of the Florida Water Quality Law was to
increase by four times the price of oil in Florida.
Everyone was afraid to go into Florida for fear
of paying those outrageous penalty costs. Who
really paid the cost? Anyone down there who
needed to heat their home or needed oil for any
purpose. It will be the same with this law.
Unless the law is more realistic, I can see the
cost being carried by you and me.” 2
The point raised by the insurance industry on specific state
laws bears thought. Along with being subjected to Federal Laws
which may lead to a civil penalty, shippers, vessel owners, of f—
shore and onshore installations have to comply with state regu-
lations or face additional civil penalties. The Florida Act
requires that a vessel, even though it has satisfied the
financial responsibility requirements of the Federal Act insofar
as trading to the United States ports were concerned, would be
obliged to give additional evidence of financial responsibility
to the Florida authorities. The Florida Act imposed absolute
and unlimited liability. Since there was no insurance available,
shippers could not give the required evidence and, therefore,
could not trade. During the past few months it has become
clear that the Florida legislature will have to do something
with respect to its legislation. 3
The New York assembly is currently considering several pieces
of legislation which deeply concern the insurance industry:
Assembly Acts 9954, 9966, and 10452(a). Many insurers feel
that laws such as these are an overreaction in the name of
ecology. A consensus shows that most of the spokesmen for
3 lnterview with Gordon Paulsen, Haight, Gardner, Poor and
Havens, New York, New York, September 5, 1974.
iv—170
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the insurance industry feel that punitive legislation does not
prevent hazardous spills or threats to ecological structure,
but will terminate shipping activities since insurance cover-
age will not be extended.
PROTECTION AND INDEMNITY CLUBS
A large share of the property and liability insurance has been
written by tLe London Property and Industry Clubs (P & I Clubs).
(The word “clubs” is simply a term handed down from many years
ago based upon an association of shipowners getting together
as a “club” to mutually insure one another’s risks; those
risks which were not covered by hull insurance but which were
imposed by the laws of the various countries to which the
vessels traded.) The London P & I Clubs are by far the largest
and most influential. They are organizationally associated
with members from England, Norway, Sweden, Japan, Bermuda, and
Luxembourg.
Gordon W. Paulsen, 3 the attorney representing the London Clubs
in the United States, has stated that the P & I Clubs will offer
moderate coverage up to and including the recent limits of the
law, or a civil penalty maximum of S50,000. However, he could
not see anyone in the world underwriting $5,000,000 for punitive
damages. He further noted that in his opinion, civil penalties,
or punitive costs, do not and will not prevent the incidence of
hazardous material spills.
RADIOACTIVE SUBSTANCES
Radioactive materials were not included in the advance list of
hazardous substances designated by the Environmental Protection
Agency. However, the EPA has specified that radioactive sub-
stances may be considered in the future.
During 1972 a total of 13,256 tons of radioactive material
(including associated materials and wastes) were transported
over navigable U. S. waters. Of that amount, just over 10,000
tons were international movements (6,000 import and 4,000 export)
and 3,209 tons were domestic (2,811 tons on inland waterways
and 398 tons in coast—wide traffic) .*
The transport of radioactive materials in the United States (all
modes) has not led to death or physical injury in twenty-five
years. The insurance industry categorizes the property damage
from radioactive transport as “extremely low.” Damages have
been kept to a minimum because of the severe packaging rules
*statistics concerning radioactivity were provided by the
insurance industry.
IV—171
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(administered by the Department of Transportation) that have
been implemented in radioactive transportation. Generally,
the packing design and construction must provide for “no signi-
ficant” release to the environment and the effectiveness of
this packing cannot be reduced in transit. When moving more
than token amounts (about three curies), it is also required
that the packing withstand hypothetical accidental conditions;
i.e., the criteria is that the package must not release any
radioactive material if exposed to the severest strains of the
particular transport path. The possible spill of a radioactive
substance (escape from its transportation containment system)
is remote.
Radioactive substances have a proven safe transport record,
primarily because of the mystique associated with the substance
itself in the last two decades. And yet, while the P & I Clubs
and Lloyds are noted internationally for insuring high risks,
both have been hesitant in the past about underwriting anything
having to do with radioactive substances. This attitude may
well prevail for hazardous materials in general.
CONCLUSIONS ON INSURABILITY
The problem of developing a program to prevent the incidence of
water pollution by public policy (in this case, PL 92—500) lies
in the determination of the responsibility of potential spillers
to society. If left unpolluted, clean water represents a social
value enjoyed by everyone. However, if pollution of water
resources is left unchecked, this social benefit can very
quickly be transformed into a social cost.
The underlying problem with which this section is concerned
involves determining who is going to be responsible and pay for
harmful actions against society. This section examined the
insurance industry and determined the extent of risks that they
are willing to assume based on water pollution.
With respect to PL 92-500, a consensus of insurance underwriters
indicates that coverage for water pollution will not be extended
beyond $50,000 for civil penalties and $14,000,000 for clean—up
costs. The consensus represents a large sample of the worldwide
market. It is the feeling of the insurance industry that civil
penalties are not going to reduce hazardous spills. Also, if
the hazardous spill were caused by negligence, and if the civil
penalty were based on negligence, the insurance industry will
not take responsibility for a punitive cost due to carelessness.
JURISDICTION AND LITIGATION
There are two other special issues deserving comment: the inter-
face of regulations promulgated by various authorities, and the
Iv—172
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complexities of litigation in assessing civil penalties. The
former refers to past and present efforts by state, Federal,
and international bodies to control the discharge of materials
into the sea. Many times, these efforts are duplicative and/or
contradictory in nature. At other tines, they prove to be
excessively restrictive. The example of the State of Florida
has already been stated. Many other states also maintain various
laws and regulations on marine pollution.
International activities began with the 1954 Convention for the
Prevention of Pollution of the Sea by Oil. The inter-Govern-
mental Maritime Consultative Organization (IMCO) now spearheads
efforts in this area and has expanded in scope to consider
hazardous materials. Recent developments include two new
conventions: The Intervention Convention, and The Convention
on Civil Liability for Oil Pollution Damage. The former
ratified by the United States is pertinent to oil in that it
gives national governments the right to take drastic measures,
even on the high seas, when the threat of dangerous pollution
is imminent.
It is likely that international conventions will not lead to
the complications evident from state regulations. This is due
largely to the fact that international conventions must be
ratified by member countries and have typically been modified
to meet the desires of the participants. State regulations,
however, may differ greatly from Federal ones. Indeed, when
the three judge federal court in Florida struck down the
Florida statute on the grounds that it violated the principle
that admiralty law should be uniform, the Supreme Court took
exception. At that time, it was asserted that many of the law’s
provisions could be maintained including those imposing unlimited
clean-up liability. The nature of the problem resulting from
this type of allowance is more clear when it is realized that
there are presently three state statutes in force, and other
actions being planned. The combined effect of multiple civil
liabilities and varying maximum liability limits has served to
overwhelm shippers and frighten off insurers.
The preceding corrunents reflect the operating difficulties faced
by industry. It would be remiss not to mention similar enforce-
ment difficulties facing the regulatory agency. The bulk of
these stem from the litigation aspects of assessing civil
penalties and are most clearly demonstrated in a recent case
in Louisiana. In United States vs LeBouf Bros. Towing Co. ,
F. Supp. (E. D. La. 1974) the court held that civil penalties
could not be assessed solely on the basis of information
received in the initial report from the discharger. Rather,
independently derived information was necessary to avoid claims
of “self-incrimination.” An abstract of this case is included
here as Exhibit A.
iv—173
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EXHIBIT A
UNITED STATES VS LE BEOUF
BROTHERS TOWING COMPANY
(377 F. Supp. 558, 1974)
(E. D. La. June 14, 1974)
Brief Abstract of Case
FACTS:
1) The United States Coast Guard notified the defendant (Le Beouf)
that the government proposed a penalty of $3,000 under Section 1161
(b) (5) of the Water Pollution Control Act against Le Beouf due
to gasoline spillage that occurred on approximately June 3, 1972.’
2) Just shortly after the United States Coast Guard hearing con-
vened, the penalty that had been assessed was compromised to
$2,500.
3) Le Beouf denied the propriety of the penalty owed the United
States and the united States Coast Guard referred the matter to the
United States Attorney who filed the lawsuit to collect the $2,500
penalty.
4) Le Beouf complied with the notification proviso upon discovery
of the gasoline spillage and argues that said self-disclosure
provided the United States Coast Guard with sufficient data by
which the Coast Guard could substantiate the so-called “civil
penalty” subsequently assessed against the defendant.
5) Le Beouf maintains that this type of connexity between Sub
part (b) (4) of 1l61 and Title 33, U. S. Code, § 1161 (b) (5)
(See Footnote 1) makes both criminal in nature and invalidates
Paragraph 5 as being unconstitutional, and, the defendant has
incorporated this logic into a motion to dismiss and/or for
summary judgement. 2
LEGAL POSTULATE OF DEFENSE:
1) Paragraph 5 of the Water Pollution Control Act although
stating “civil penalty” prescribes criminal penalty and ergo
is penal , and not a remedial provision.
2) The immunity granted in Paragraph 4 must extend to cover
Paragraph 5, since, to do otherwise would abrogate constitutional
protections afforded by the 5th, 6th, and 14th amendments to the
United States Constitution, and thus unduly circumscribe statutory
immunity as it is stated in Paragraph 4.
IV—174
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B) This is a complete denigration of the statutory purpose
in fostering self-disclosure -- ONE WOULD FACE PUNITIVE SANCTIONS
WHETHER HE COMPLIED WITH NOTIFICATION PROCEDURES OR NOT.
4) Thus, the government’s position here encourages the offender
not to report the spillage. He who notifies the United States
Coast Guard has no odds to play, so — discouragement of reporting
jills is inconsistent with the overall regulatory purpose of the
Act, which requires the detection of the maximum number of spills,
and, therefore, is not compatible with the claim that Paragraph
5 is remedial rather than punitive .
5) The monetary penalty here of $10,000 has been traditionally
a measure of criminal punishment.
6) Mandatory imposition, a fact admitted by the United States
Coast Guard, the Administering Agent of the Water Pollution Control
Act, further convinces the court that Paragraph 5 is a comple-
mentary means to criminally punish the wrongdoer rather than
regulate “purposeful public policy”.
7) The two paragraphs (4, 5) are inextricably intertwined. This
could impair the potential offender’s guarantee of statutory
immunity:
A) The monetary penalty lodged against Le Beouf improperly
was sustained upon information obtained via self—disclosure ——
this does not support the statutory immunity in Paragraph 4.
Actions such as these are prevented by the 5th amendment to
the United States Constitution.
B) Although there are cases in which certain civil assess-
ments may connote punishment and be sound, none of these are
initiated by a self-disclosure mandate .
C) Paragraph 5 is civil in form but quasi-criminal in nature,
because any penalty authorized pursuant to Paragraph 5 is incurred
by the commission of offense against the Rivers and Harbors Appro-
priation Act of 1899 .
*“BARRED FROM PROSECUTING AN OFFENDER UNDER THE RIVERS
AND HARBORS APPROPRIATION ACT OF 1899 DUE TO THE FIFTH
AMENDMENT AND THE STATUTORY IMMUNITY CLAUSE THE GOVERN-
MENT CANNOT AFFIX MONETARY PENALTY FOUNDED UPON FRUITS
OF SELF-DISCLOSURE”
PRINCIPLE OF LAW:
The Congress may impose both a criminal and civil sanction
in respect to the same act.
IV— 175
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The Court concurs with the above position in that the penalty
granted in §1161 (b) (5) is infirm unless it comports with the use
and derivative use of immunity granted in Paragraph 4.
DISPUTE:
The nub of disagreement focuses on the categorization of
Paragraph 5, that is, if the penalty authorized by Paragraph 5
is civil in nature, as is contended by the government, or is a
criminal sanction, as averred by the defendant and amici curiae.
Moreover, the effect of a determination that Paragraph 5 of § 1161
is criminal in nature would subject this penalty to the legislative
immunity limitations enumerated in Paragraph 4.
REASONING OF THE COURT:
The burden was on the Court to define the regulatory or
penal character of the statute, or whether it was civil or criminal.
They asked themselves, “Was the aim of legislation to regulate
this activity or was the intent to punish the party for engaging
in the activity?”
1) There is no clear legislative history to precedent this
instance. So the Court used one other case (Kennedy vs Mendoza—
Martinez) in its attempt to acquire some more relevant criteria
by which to decide. They, thus, did interpret Paragraph 5 as
punitive.
2) The Court refers to the term “civil penalty” as merely a label.
It says that to be guided by superficial implements such as word
classification or legal jargon would be an analytical pitfall, and
that in the field of law there is a weakness in dependency on names.
3) This is a Catch 22 situation:
A) Dual penalties are being imposed
1) failure to notify authorities
ii) penalty for spill occurrence
A hypothetical situation was posed, in re: drug abuse
(dual penalties)
1) failure to notify authorities of possession
ii) fine for possession
Say the hypothetical voilator turns himself in, thus immunizing
himself from initial criminal punishment -- he still could be
penalized by the government under “civil” assessment.
IV— 176
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However, this case is in violation of this principle of
law because there is no clear legislative expression indicating
that Paragraph 4 and 5 of § 1161 are penal and remedial respectively,
but the Court finds them both disciplinary penalties intended to
punish and deter.
DECISION OF COURT:
Paragraph 5 of Section 1161 is criminal in nature. The
penalty under Paragraph 5 can only be enforced if supported by
independent information, other than via self—disclosure.
$2,500 penalty waived.
Motion for summary judgement grated.
IV— 177
-------
FOOTNOTES TO EXHIBIT A
1. The relevant portions of the law are:
Title 33 U. S. Code, Section 1161
(b) (4) The person in charge of vessel, or onshore or
offshore facility, upon knowledge of the dis-
charge of oil (or other such violation) must
immediately notify the appropriate U. S. agency.
Failure to notify lends (upon conviction) to a
criminal offense - a fine of not more than
$10,000 or imprisonment for less than one year,
or both.
Notification received pursuant to this paragraph
or information obtained by exploitation of such
notification shall not be used against any such
person in any criminal case, except in prosecution
for perjury or false statements.
(b) (5) The owner or operator of vessel, or onshore or
offshore facility, upon knowledge of the dis-
charge of oil (or other such violation) shall
be assessed a CIVIL PENALTY by the secretary
of the department in which the United States
Coast Guard operates of not more than $10,000
for each offense.
No penalty assessed unless the owner or operator
charged is given notice and the opportunity for
hearing on such charge.
The civil penalty may be compromised by the
Secretary.
Each violation is a separate offense.
2. Summary Judgement:
A motion for summary judgement is not a trial.
It assumes that scrutiny of the facts will dis-
close that the issues presented by pleadings need
not be tried because they are so insubstantial
as to not be genuine issues at all.
IV—178
-------
COMPLIANCE OF THE METHODOLOGIES WITH CONGRESSIONAL INTENT
When it can be determined, the controlling criterion for inter-
preting legislation should always be the intent of Congress.
Legislative intent is normally determined by a thorough reading
of the applicable statute, by application of established rules
of construction, and by consideration of the legislative history
of the statute. The language in Section 311 of the Federal
Water Pollution Control Act Amendments of 1972 leaves much
discretion to the Administrator of the Environmental Protection
Agency and does not make clear exactly how a methodology for
determination of harmful quantities and an appropriate penalty
schedule for hazardous substances should be determined. Con-
sequently, examination of the legislative history of the Act is
appropriate. The legislative history of the Act is helpful in
one area because it indicates that Congress was concerned that
the penalties in Section 311 might be too severe and that a
preferable means of control would be regulations clearly
defining requirements for safe handling and shipment of hazard-
ous substances.
Each of the four methodologies developed in the technical portion
of this report utilizes various approaches to grouping hazardous
substances, selecting harmful quantities, and deriving a penalty
schedule. In addition, two of the methodologies offer locational
variables which further refine penalty assessments based upon
the circumstances of particular spills. The language in Section
311 applicable to each of these categories is rather general and
leaves further development up to the Environmental Protection
Agency. For example, in determining the penalty schedule,
Section 311(b) (2) (B) (iv) of the Act provides that the EPA admin-
istrator shall establish a fixed unit of measurement for each
hazardous substance based upon usual trade practices, and for
each unit a fixed monetary penalty falling between $100 and
$1000 based upon “the toxicity, degradability, and disposal
characteristics of the substance.”
As noted above, the one area where Congressional intent is
indicated to some extent in the legislative history of the Act
is the philosophy of penalty application. No guidance is avail-
able from the reported legislative history to aid in the grouping
of hazardous substances or the selection of harmful quantities.
The Congressional intent regarding penalty schedules is indicated
in a statement by Representative Robert Roe during debate in the
House of Representatives on the Joint Senate—House Conference
Bill, which later became the Act, and in the report of the
Conference Committee. Representative Roe was one of the House
managers in the Conference Committee. His statement regarding
Section 311 is quoted in its entirety on the following paqe.’
“House Consideration of the Report of the Conference Committee,
as reported in Committee on Public Works , 93rd Congress, 1st
Session, A Legislative History olthe Water Pollution Control
Act Amendments of 1972 , p. 271 (Committee Print, January 1973).
IV— 179
-------
“Section 311 of the report establishes very stringent
penalties on the discharge of hazardous substances.
The managers did this reluctantly because they feel
strongly that clear and effective regulations and
laws on the control of the methods of shipping hazard-
ous substances is more desirable than the severe
penalty approach which the managers adopted and which
commences two years after the enactment of this act.
“The protection of our water resources requires that
hazardous substances be closely controlled, and in
the absence of st;bsequent legislation by those
communities having control of this matter, the
stringent penalty provisions would come into effect.
The managers recognize, and I emphasize this, that
the strict penalty provision is undesirable and we
urge the other committees in the Congress with juris-
diction in this area to initiate hearings and develop
necessary legislation to control the shipping of
hazardous substances at the earliest possible time.
“The shipment of hazardous substances is an absolute
necessity for our complex industrial economy; thus,
it is incumbent upon the Congress to clearly define
the controls and requirements for the safe shipment
of these hazardous substances.”
Representative Roe’s statement indicates that the Conference
Committee was generally opposed to a strict penalty schedule
and favored regulations to control the handling and trans-
portation of hazardous substances. His statement is con-
sistent with the report of the Conference Committee:
“The conferees hope that during the next two years
the appropriate committees of the Congress will
consider the need for legislation to improve methods
of storing, shipping, and handling hazardous sub-
stances which cannot be removed from the water. If
such legislation is enacted, the conferees agree that
the liability provisions of this section will be
reviewed and necessary changes proposed by the Com-
mittee on Public Works.” 5
The preceding remarks suggest that less severe penalty schedules
may be deemed as the most responsive to Congressional intent
regarding the imposition of penalties if, at the same time, they
can be shown to have a positive effect.
5 Senate Conference Report No. 92—1236, 92nd Congress, 2nd Session,
as reported in Committee on Public Works , 93rd Congress, 1st
Session, A Legi Th Eive History of the Water Pollution Control
Act Amendments of 1972 , p. 317 (Committee Print, January 1973).
Iv—180
-------
UNIT OF MEASUREMENT
During the development of the technical approaches contained in
Volume II, questions arose relating to the interpretation of the
phrase, “ unit of measurement based upon the usual trade practice.”
Section 311(b) (2) (B) (iv) states that rates of penalty for
individual materials be established as the ratio of this unit
of measurement to a fixed monitary amount ranging between $100
and $1000. The law does not relate the procedure to be followed
in deriving this rate of penalty. In the technical portion of
the report, two alternatives were utilized.
1. In the DOHM, IMCO, and Resource Value Methodologies the
rate of penalty was derived as an integral quantity.
That is, the ratio of the monitary amount and the unit
of measurement were derived together as a single entity.
2. In the Unit of Measurement Methodology the ratio com-
prising the rate of penalty was formulated from two
separate quantities —- a dollar amount of $1000, and
a unit of measurement equal to 4000 gallons of IMCO
Category D material.
In retrospect, the unit of measurement approach comes closest
to complying with the wording of the law; however, as indicated
in Chapter VI of this volume, certain technical problems
relating to the ability of such an approach to reflect the
degree of hazard associated with individual materials are
encountered.
The other three approaches rely on a less stringent interpretation
of the law. That is, the unit of measurement criteria is applied
to t.he final rate of penalty but is not employed in the derivation
of the rate of penalty. Thus, although penalty rates in the DORM,
IMCO, and Resource Value Methodologies are expressed in dollars
per kilogram or pound (where the unit of measurement common
to the usual trade practice is the kilogram of pound), a unit
of measurement as a separate identifiable entity is not present
in the derivation of penalty rates under these three approaches.
Correspondence 6 received from the staff of the Senate Subcommittee
on Environmental Pollution indicates that Congressional intent
was that liability be assessed on a dollar/per unit basis and
that the units be expressed in terms which are commonly used
in the trade for a particular substance. Correspondence from
6 Letter from Mr. Leon G. Belling, Senior Staff Member of Senate
Subcommittee on Environmental Pollution, March 25, 1974.
‘V—is’
-------
the Manufacturing Chemists Association 7 verifies the elusiveness
of “common trade units” and states that such a unit is not a
practical measure for establishing penalties under Section 311.
Based on the discussion of the technical problems associated
with the derivation of the rate of penalty as a ratio of two
separate quantities and the supporting documentation received
from the Senate Subcommittee staff and the MCA, it is concluded
that the approaches used in the DOHM, IMCO, and Resource Value
Methodologies meet both the letter and intent of the law and
provide a much sounder technical basis for the rates of penalty.
7 Letter from Manufacturing Chemists Association, January 24, 1975.
iV—182
-------
REFERENCES
1. Louis, F. A. “Water Quality Insurance Syndicate,” addressed
before the Houston Marine Seminar, October 1971.
2. Correspondence with WQIS, September 1974 (also available
in Best’s Insurance Guide).
3. Interview with Gordon Paulsen, Haight, Gardner, Poor and
Havens, New York, New York, September 5, 1974.
4. House Consideration of the Report of the Conference Committee,
as reported in Committee on Public Works , 93rd Congress, 1st
Session, A Legislative History of the Water Pollution Control
Act Amendments of 1972 , p. 271 (Committee Print, January 1973).
5. Senate Conference Report No. 92—1236, 92nd Congress, 2nd
Session, as reported in Committee on Public Works , 93rd
Congress, 1st Session, A Legislative History of the Water
Pollution Control Act Amendments of 1972, p. 317 (Committee
Print, January 1973).
6. Letter from Mr. Leon G. Belling, Senior Staff member of
Senate Subcommittee on Environmental Pollution, March 25, 1974.
7. Letter from Manufacturing Chemists Association, January 24,
1975.
IV— 18 3
-------
APPENDIX A
DERIVATION OF REPRESENTATIVE BARGE OPERATION
As indicated in Chapter IV, annual financial and operating
statistics on U. S. barging operations are for the most part
not a matter of public record since most barging companies are
not regulated by the Interstate Commerce Commission. For this
reason it was necessary to “derive” these figures and from
this derivation construct a profile for an average barge
operator. As an aid to the reader, Figure IV-3 (shown here
as Figure A—i) from Chapter IV has been included in the
Appendix as an aid to the reader in following the step of the
derivation. Steps in this figure are numbered in the order they
appear in the text.
TOWBOAT AND BARGE OPERATING COSTS
The size of towboats operating in the lower Mississippi Area
is quite varied, ranging from 800 to 6600 horsepower. There-
fore, it was felt necessary to estimate hourly operating costs
of towboats for a variety of sizes. The hourly operating costs
are assumed to be made up of two components:
1. Fixed Costs which are a function of time, rather than
the level of activity. These costs relate to the invest-
ment based for a towboat and contain the following items:
• Return on Investment
• Depreciation
• Administration and Supervision
2. Operating Costs are a function of the level of activity
and include the following seven items:
• Wages and Fringe Benefits
• Fuel
• Maintenance and Repairs
• Supplies
• Subsistence
• Insurance
• Miscellaneous Operating Costs
Iv —185
-------
-p
Average the Cost
Computed in the
Previous Step
to Get Average
Hourly Operating
Costs
T
2
FIGURE A-i.
PROCEDURE FOR ESTIMATING BARGE OPERATING COSTS
List Typical Towboat
and Barge Configurations
Used to Transport
Hazardous Materials
La
Determine Hourly
Operating Costs
for Various Types
of Barges
L
Determine Hourly
Operating Costs
Associated With
Each Configuration
for Various
Trip Lengths
I.!
Determine Hourly
Operating Costs
for Various
Sized Towboats
L .
Determine Average
Number of Towboats
and Birges Per
Company
17
Multiply Average ‘—
Hourly Operating
Costs by Number of
Towboats and Barges
P iL Company and By
N 1Lbcr of Days Per
Year Expected to
Operate =>
Total Annual
Oper iting Expenses
Total Revenues =
Total Operating
Costs
.85
Profits Before Taxes
= Total Revenues
- Total Operating
Costs
Assume Operating La
Ratio of .85
(OR expenses/
reve flues)
IV—186
-------
Table A-i presents estimated costs as of 1972 of operating
common and contract carrier towboats on the Mississippi River
system.
The variety of barge sizes makes it necessary to estimate
hourly operating costs for a selected sample of barge types.
For ammonia, caustic soda, and liquid sulfur barges, costs are
estimated for a small and a large size barge. For chlorine
only the most typical size is considered. The hourly operating
costs are presented in Table A-2.
TOW COST ESTIMATES
Transportation costs by barge vary as the trip length changes.
This is because of the spread of fixed loading and unloading
times at ports for different levels of ton-miles per trip.
For a specific barge configuration, per ton transportation
costs, can be estimated for different trip lengths by using the
cost data from Tables A—i and A-2, and trip hour data from
Table A-3. Costs would also vary by the tow type assumed. For
example, given the same trip length an 800 HP towboat pushing
two 900 ton ammonia barqes would have a cost different from a
1200 HP towboat pushing the same configuration of barges. A
representative set of two types are developed to calculate trans-
port costs per ton, and ton—mile. Table A-4 shows the typical
tow types considered and hourly operating costs in the Lower
Mississippi Area. For each tow type and line haul distance
combination, a transportation cost per ton and ton—mile is
computed. Tables A-5 thru A-lO present the details of these
cost estimates. These tables show that given a specific trip
length costs per ton or ton—mile significantly change as the
type of tow is changed. For example, Table A-5 shows that,
of the six anhydrous ammonia tows considered, cost per ton-mile
for a trip length of 300 miles changes from 8.9 (for tow type
6) to 23.1 (for tow type 5) mills. The corresponding figures
per ton are $2.67 and $6.94. Costs for chlorine, sulfuric acid,
and caustic soda tows shows similar variations.
AVERAGE REVENUES AND EXPENSES
Representative hourly barge operating expenses were derived
by averaging the costs associated with selected tow types shown
in Tables A-5 thru A—b. For ammonia, tow types 5 and 6 were
used; for chlorine, 9 and 10; for caustic soda, 14 and 15; and
for sulfuric acid, 20 and 21. Close inspection of these
tables will indicate that these two types represent the high
and low ends of the cost range for each of the four chemicals.
These numbers are averaged over trip length and chemical type
to yield a final average operating cost of $93.30 per hour.
This figure can be broken down as follows:
IV— 187
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TABLE A-i
1972 ESTIMATED COSTS OF OPERATING COMMON CARRIER
TOWBOATS ON MISSISSIPPI RIVER SYSTEM 1 ’ 2
HORSEPOWER
800
1,000
1,200
1,400
INVESTMENT (Average New Cost) $:30,000
$375,000
$450,000
$500,000
FIXED COSTS :
Return on investment (8%)
Depreciation (20 year straight line; 5%
salvage)
Administration and supervision ___________________________________________
OPEBATING COSTS :
Wages & fringe benefits
Fuel
Maintenance, repairs & electronics
Supplies
Subsistence
Insurance
Miscellaneous ______________________________________________
TOT2’ L COSTS:
HOURLY OPERATING COST : (Rounded)
(345 days)
ESTIMATED CREW (Average):
1 jacobson, I. B., System Analysis of Obstructive Bridges , U. S. Coast Guard Academy
2 U. S. Department of Transportation, DOT Superp rt Study, Interim Report , Appendix G.
$ 30,000
$ 26,400
15,675
21, 400
63,475
Sub—Total
,-
$ 36,000
$
17,813
22,700
70,513
$
21,375
25,000
82,375
$ 40,000
22,500
26,100
88,600 -
$
Sub—Total
$156,000
$156,000
$169,000
$169,000
27,000
34,000
41,000
48,000
15,600
18,800
21,900
25,000
6,400
7,000
7,500
7,800
8,000
8,000
9,200
9,200
6,000
7,000
8,000
9,000
600
600
750
750
19, 600
$231 ,400
$257, 350
$268 , 750
$283,075
$301,913
$339,725
$357,350
$ 34.00
$ 37.00
$ 41.00
$ 43.00
7
7
8
8
-------
TABLE A-i (Cont’d,,)
1972 ESTIMATED COSTS OF OPERATING COMMON CARRIER
TOWBOATS ON MISSISSIPPI RIVER SYSTEM
HORSEPOWER
1,600
1,800
2,000
2,200
2,400
INVESTMENT (Average New Cost)
$575,000
$625,000
$675,000
$750,000
$800,000
FIXED COSTS :
Return on investment (8%)
Depreciation (20 year straight line;
5% salvage)
Administration and supervision
Sub—Total
Wa jes & fringe benefits
Fuel
Maintenance, repairs & electronics
Supplies
Subsistence
Insurance
M i scellaneous
Sub—Total
TOTAL COSTS:
HOURLY OPERATING COST : (Rounded)
(345 days)
ESTIMATED CREW (Average)
H
OPERATING COSTS :
I-I
$ 46,000
$ 50,000
$ 54,000
$ 60,000
$ 64,000
27,313
29,688
32,063
35,625
38,000
29,500
30,600
34,000
35,200
36,300
$190,000
$190,000
$210,000
$210,000
$210,000
55,000
62,000
68,000
75,000
82,000
28,200
31,200
34,000
36,600
39,400
8,300
8,700
9,200
9,700
10,000
10,300
10,300
11,400
11,400
11,400
10,000
11,000
12,000
14,G00
15,800
850
850
950
950
950
$302,650
$314,050
$345,550
$358,250
$369,550
$405,463
$424,338
$465,613
$489,075
$507,850
$ 49.00
$ 51.00
$ 56.00
$ 59.00
$ 61.00
9
9
10
10
10
-------
TABLE A-i (Cont’d.)
1972 ESTIMATED COSTS OF OPERATING COMMON CARRIER
TOWBOATS ON MISSISSIPPI RIVER SYSTEM
HORSEPOWER
2,600
2,800
3,000
3,200
3,400
INVESTMENT (Average New Cost) $850,000
$875,000
$950,000
$1,000,000
$1,050,000
FIXED COSTS :
Return on investment (8%)
Depreciation (20 year straight line;
5% salvage)
Administration and supervision
Sub-Total
OPERATING COSTS :
Wages & fringe benefits
Fuel
Maintenance, repairs & electronics
Supplies
Subsistence
Insurance
Miscellaneous
Sub-Total
TOTAL COSTS:
HOURLY OPERATING COST : (Rounded)
(345 days)
ESTIMATED CREW (Average)
C
‘-I
0
40,375
39,4)0
$147,775
41,563
40,500
$152,063
$ 68,030 $ 70,000 $ 76,000 $ 80,000 $ 84,000
47,500
49,875
42,000
43,800
45,125
41,300
$162,425
$ -
$
$228,0)0
88,0)0
42,5)0
10,5)0
12,6)0
16,8)0
1,1)0
$228,000
95,000
45,000
11,000
12,600
17,900
1,100
$228,000
102,000
47,500
11,400
12,600
18,800
1,200
$
228,000
106,000
50,000
11,500
12,600
20,000
1,200
$
228,000
115,000
52,500
11,500
12,600
21,000
1,200
$399,5)0
$410,600
$421,500
$
431,300
$
441,800
$547,2’5
$562,663
$583,925
$
600,800
$
619,475
$ 66.0()
$ 68.00
$ 71.00
$
73.00
$
75.00
11
11
11
11
1].
-------
TABLE A-i (Cont’d.)
FIXED COSTS :
1972 ESTIMATED COSTS OF OPERATING COMMON CARRIER
TOWBOATS ON MISSISSIPPI RIVER SYSTEM
Return on investment (8%)
Depreciation (20 year straight line;
5% salvage)
Administration and supervision
Sub-Total
OPERATING COSTS :
Wages & fringe benefits
Fuel
Maintenance, repairs & electronics
Supplies
Subsistence
Insurance
Miscellaneous
TOTAL COSTS :
Sub-Total
HOURLY OPERATING COST : (Rounded)
(345 days)
ESTIMATED CREW (Average)
HORSEPOWER
3,600
3,800
4,000
4,200
4,800
INVESTMENT (Average New Cost) $1,100,000
$1,150,000
$1,200,000
$1,250,000
$1,375,000
H
I-I
I-J
52,250
45,000
185,250
r
$ 88,000 $ 92,000 $ 96,000 $ 100,000 $ 110,000
54,625
46,200
192,825
$
57,000
47,200
200,200
$
59,375
48,200
207,575
$
65,313
54,200
229,513
$
$ 228,000
$
228,000
$
228,000
$
228,000
$
248,000
122,000
129,000
135,000
142,000
164,000
55,000
58,700
61,300
63,800
71,300
11,500
11,500
11,500
11,500
15,000
12,600
12,600
12,600
12,600
13,700
22,000
23,200
24,200
25,000
27,500
1,200
1,200
1,200
1,200
1,800
452,300
$
464,200
$
473,800
$
484,100
$
541,300
$ 637,550
$
657,025
$
674,000
$
691,675
$
770,813
$ 77.00
$
79.00
$
81.00
$
84.00
$
93.00
11
11
11
11
11
-------
TABLE A-i (Cont’d.)
1972 ESTIMATED COSTS OF OPERATING COMMON CARRIER
TOWBOATS ON MISSISSIPPI RIVER SYSTEM
HORSEPOWER
5,000
5,
600
6,000
6,500
7,200
8,500—9,000
INVESTMENT (Average New Cost) $1,450,000
$1,62
5,000
$1,725,000
$1,900,000
$2,000,000
$2,400,000
FIXED COSTS :
Return en investment (8%)
Depreciation (20 year straight line;
5% salvage)
Administration and supervision
Sub-Total
OPERATING COSTS :
Wages & fringe benefits
Fuel
Maintenance, repairs & electronics
Supplies
Subsistence
Insurance
Miscellaneous
TOTAL COSTS :
Sub—Total
140(JRLY OPERATING COSTS : (Rounded)
(345 days)
ESTIMATED CREW (Average)
$116,000
68,875
‘ —4
‘ 0
$i:o,00o $138,000 $152,000 $160,000 $192,000
7,l88 81,938 90,250 95,000 114,000
55,600
!. 8,000
62,700
65,600
67,900
78,700
$240,475
$2(5,188
$282,638
$307,850
$322,900
$384,700
$248,000
$2 8,000
$270,000
$270,000
$270,000
$318,000
173,000
114,000
200,000
218,000
230,000
250,000
74,500
2,500
87,500
93,800
100,000
125,000
15,000
16,000
16,500
18,500
19,000
23,000
13,700
13,700
14,800
14,800
14,800
18,300
28,800
2,500
34,500
37,500
40,000
47,500
1,800
1,800
2,000
2,100
2,200
3,600
$554,800
$5 8,5O0
$625,300
$654,700
$676,000
$785,400
$795,275
$843,688
$907,938
$962,550
$998,900
$1,170,100
$ 96.00
$1C2.00
$110.00
$116.00
$121.00
$141.00
12
12
13
13
13
15
-------
TABLE A-2
1972 ESTIMATED COSTS OF OPEBATING BARGES IN THE
MISSISSIPPI RIVER SYSTEM--LIQUID CHEMICAL’’ 2
TYPE
DOUBLESKIN
LPG-AMJ4ONIA
CHLORINE
CAUSTIC
SODA*
LIQUID
SULFUR
SIZE
1200 NT
195 ’x35 ’
3000 NT
290’xSO ’
900 NT
210’x44 ’
2500 NT
240’x50’
1100 NT
195 ’x35
1200 NT
195 ’x35 ’
3000 NT
260 ’x50 ’
1200 NT
195 ’x35’
3000 NT
230 ’xSO
INVESTMENT (Average
New Cost)
$115,200
$298,000
$355,000
$850,000
$318,000
$150,000
$375,000
$240,000
$600,000
FIXED COSTS :
Return on investment (8%) $ 9,200 $ 23,000 $ 28,400 $ 68,3C0 $ 25,440 $ 12,000 $ 30,000 $ 19,200 $ 48,000
Depreciation (20 years— 5,470 13,680 16,832 40,375 15,105 7,125 17,813 11,400 28,500
5% salvage)
Administration (.75% mv.) 864 2,160 2,663 6,375 2,385 1,125 2,813 1,800 4,500
Sub—Total $ 15,534 $ 38,840 $ 47,925 $114,750 $ 42,930 $ 20,250 $ 50,626 $ 32,400 $ 81,000
OPERATING COSTS :
Maintenance & repairs $ 3,456 $ 8,640 $ 10,650 $ 25,500 $ 9,540 $ 4,500 $ 11,250 $ 7,200 $ 18,000
(3% of mv.)
Insurance (2% of mv.) 2,304 5,760 7,100 17,000 6,360 3,000 7,500 4,800 12,000
Taxes (.5% of mv.) 576 1,440 1,775 4,250 1,590 750 1,875 1,200 3,000
Miscellaneous 200 400 500 1,200 500 300 500 400 1,000
Sub—Total $ 6,536 $ 16,240 $ 20,025 $ 47,950 $ 17,990 $ 8,550 $ 21,125 $ 13,600 $ 34,000
TOTAL COSTS : $ 12,070 $ 55,080 $ 67,950 $162,700 $ 60,920 $ 28,800 $ 71,751 $ 46,000 $115,000
HOURLY OPERATING COST : $ 1.50 $ 6.70 $ 8.20 $ 19.70 $ 7.40 $ 3.50 $ 8.70 $ 5.60 $ 13.90
(Rounded) (345 days)
*Coiled, insulated, and rubber lined
+Cojled and insulated
-------
TABLE A-3
TOTAL TRIP HOURS FOR A
REPRESENTATIVE SAMPLE OF TRIP LENGTHS
1/ Loading time varies from 24 hours for ammoni.i, sulfuric acid
and caustic soda barges to 50 hours for chlorine barges.
The hours estimate is based on the average for these com-
modities.
2/ Average speed estimates are taken from Table 7.
3/ Average of 24 hours for caustic soda, ammonia, and sulfuric
acid and 72 hours for chlorine.
/ Delay due to weather, river, and other condi:ions.
H
TRIP LENGTH (Statute Miles)
Loading Time (Hours) 1 ’
Running Time, upbound at 5 MPH (Hours)Y
Unloading Time (Hours) /
Running Time, downbound at 12.0 MPH (Hours)V
Total Hours
Delay Factor (15%) (Hours) ”
Total Hours for Trip
30
30
30
30
30
30
60
80
100
200
300
400
37
37
37
37
37
37
25
33
42
84
126
168
152
180
204
351
493
635
23
27
31
53
74
95
175 207 240
404
567
730
-------
TABLE A-4
LIST OF TOW TYPES CONSIDERED
—
—
—
I
B e
Co €s Por
I Towboat ’
Tow
Type
No.
Size of Tow
Boat (lIP)
I
j
Si ze(NT
Number
In_Tow
1
1000
Double Skin
1200
2
37,00
2
2000
Double Skin
3000
3
56.00
3
1000
Ammonia
900
2
37.00
4
4000
Ammonia
900
3
91.00
5
6000
Ammonia
900
4
110.00
6
1000
Ammonia
2500
2
37.00
7
4000
Ammonia
2000
3
81.00
8
6000
Ammonia
2500
4
110.00
9
1000
Chlorine
1100
2
37.00
10
4000
Chlorine
1100
3
81.00
11
6000
Chlorine
1100
4
110.00
12
1000
Caustic Soda
1200
2
37.00
13
4000
Caustic Soda
12u0
3
81.00
14
6000
Caustic Soda
1200
4
110.00
15
1000
Caustic Soda
3000
2
37.00
16
4000
Caustic Soda
3000
3
81.00
17
6000
Caustic Soda
3000
4
110.00
18
1000
Sulfuric Acid
1200
2
37.00
19
4000
Sulfuric Acid
1200
3
81.00
20
6000
Sulfuric Acid
1200
4
110.00
21
1000
Sulfuric Acid
3000
2
37.00
22
4000
Sulfuric Acid
3000
3
81.00
23
6000
Sulfuric Acid
3000
4
110.00 55.60 165.60 12,000
3.00
20.10
16.40
24.60
32.80
39.40
59.10
78.80
14.80
23.40
29.60
7.00
10.50
14.00
17.40
26.10
34.80
LI .20
16.80
22.40
27.80
41.70
To to 1
40.00
76.10
53.40
105.60
142 . 80
76.40
140.10
188.80
51.80
104.40
139.60
44 .00
91.50
124 .00
54.40
107.10
144.80
48.20
97.80
132.40
64.80
122.70
Total
Carry i og
Capacity (NT )
2,400
9,000
I , 800
2,700
3,600
5,000
7 • 500
0,000
2,200
3, 300
4 , 4 00
2,400
3,600
4,800
6,000
9.000
12,000
2,400
3,600
4,800
6,000
9,000
1/ From Table Iv-l4
2/ From TabLc IV-15
IV—195
-------
TABLE A-5
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 300 MILES
!/ For a description of the tow types see Table A-4
/ From Table A-i and A-2
/ Total tons multiplied by trip length
From Table A-3
Tow Typq Chemical Cost P r Total Total Total Coat Per
Nuaber!f Substance Hour / TOns / Ton Miles Hourel’ Ton($)
(1000)
Cost Per Total
Ton Mile $
(Mug)
1
——
40.00
2,400
720
175
2.92
9.7
7,000
2
——
76.10
9,000
2,700
175
1.48
4.9
13,317
3
Ammonia
53.40
1,800
540
175
5.19
17.3
9,345
4
Ammonia
105.60
2,700
810
175
6.84
22.8
18,480
5
Ammonia
142.89
3,600
1,080
175
6.94
23.1
24,990
6
Aaunonia
76.40
5,000
1,500
175
2.67
8.9
13,370
7
Ammonia
140.00
7,500
2,250
175
3.27
10.9
24,618
8
Aaimcnia
188.80
10,000
3,000
175
3.30
11.0
33,040
9
Chlorine
51.80
2,200
600
175
4.12
13.7
9,065
10
Chlorine
104.40
3,300
990
175
5.54
18.5
18,270
11
Chlorine
139.60
4,400
1,320
175
5.55
18.5
24,430
12
Caustic Soda
44.00
2,400
720
175
3.21
10.7
7,700
13
Caustic Soda
91.50
3,600
1,090
175
4.45
14.8
16,013
14
Caustic Soda
124.00
4,800
1,440
175
4.52
15.1
21,700
15
Caustic Soda
54.40
6,000
1,800
175
1.59
5.3
9,520
16
Caustic Soda
107.10
9,000
2,700
175
2.08
6.9
18,743
17
Caustic Soda
144.80
12,000
3,6( 0
175
2.11
7.0
25,340
18
Sulfuric Acid
48.20
3,400
720
175
3.51
11.7
8,345
19
Sulfuric Acid
97.80
3,600
1,080
175
4.75
15.8
17,115
20
Sulfuric Acid
132.40
4,800
1,440
175
4.83
16.1
23,170
21
Sulfuric Acid
64.80
6,000
1,800
175
1.89
6.3
11,340
22
Sulfuric Acid
122.70
9,000
2,700
175
2.39
9.0
21,473
23
Sulfuric Acid
165.60
12,000
3,600
175
2.42
8.1
28,980
IV—196
-------
TABLE A-6
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 400 MILES
Tow ry
NumberL’
Chemical
Substance
Cost P r
Moura’
($)
Total
TonS- J
Total
Ton Miles
(1000)
Total
Hours J’
Cost Per
Ton(S)
Cost Per
Ton Mile
(Mile)
Total Cost
$
1 40.00 2,400 960 207 3.45 8.6 8,280
2 —— 76.10 9,000 3,600 207 1.75 4.4 15,753
3 Ammonia 53.40 1,800 720 207 6.14 15.4 11,054
4 Anunonia 105.60 2,700 1,080 207 8.10 20.3 21,859
5 Anuiv nia 142.80 3,600 1,440 207 8.21 20.5 29,560
6 Anw nja 76.40 5,000 2,000 207 3.16 7.9 15,815
7 Ammonia 104.00 7,500 3,000 207 3.87 9.7 29,000
8 Animonia 188.80 10,000 4,000 207 3.91 9.8 39.082
9 Chlorine 51.80 2,200 880 207 4.87 12.2 10,723
10 Chlorine 104.40 3,300 1,320 207 6.55 16.4 21,611
11 Chlorine 139.60 4,400 1,760 207 6.57 16.4 28,897
12 Caustic Soda 44.00 2,400 960 207 3.80 9.5 9,108
13 Caustic Soda 91.50 3,600 1,440 207 5.26 13.2 18.941
14 Caustic Soda 124.00 4,800 1,920 207 5.35 13.4 25,668
15 Caustic Soda 54.40 6,000 2,400 207 1.88 4.7 11,261
16 Caustic Soda 107.10 9.000 3,600 207 2.46 6.2 22,170
17 Caustic Soda 144.80 12,000 4,800 207 2.50 6.3 29,974
18 Sulfuric Acid 48.20 3,400 960 207 4.16 10.4 9,977
19 Sulfuric Acid 97.80 3,600 1,440 207 5.62 14.1 20,245
20 Sulfuric Acid 132.40 4,800 1,920 207 5.71 14.3 27,407
21 Sulfuric Acid 64.80 6,000 2,400 207 2.24 5.6 13,414
22 Sulfuric Acid 122.70 9,000 3,600 207 2.82 7.1 25 ,. 99
23 Sulfuric Acid 165.60 12,000 4,800 207 2.87 7.2 34,279
For a description of the tow types see Table A-4
/ From Table A-i and A-2
Total tons multiplied by trip length
4/ From Table A-3
iv— 197
-------
TABLE A-7
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 500 MILES
1
2
3
4
5
6
7
Animonia
Ammonia
Asunonia
Ammonia
Ammonia
B Ammonia
9 Chlorine
10 Chlorine
11 Chlorine
12 Caustic Soda
13 Caustic Soda
14 Caustic Soda
15 Caustic Soda
16 Caustic Soda
17 Caustic Soda
18 Sulfuric Acid
19 Sulfuric Acid
20 Sulfuric Acid
21 Sulfuric Acid
22 Sulfuric Acid
23 Sulfuric Acid
240
240
240
240
240
240
240
240
240
240
240
240
240
240
240 2.18
240 2.97
240 290
240 4.82
240 6.52
240 6.62
240 2.59
240 3.27
240 3.31
8.0 9,600
4.1 18,264
14.2 12,816
18.8 25,344
19.0 34,272
7.3 18,336
9.0 33,624
9.1 45,312
11.3 12,432
15.2 25,056
15.2 33,504
8.8 10,560
12.2 21,960
12.4 29,760
4.4 13,056
5.7 25,704
5.8 34,752
9.6 11,568
13.0 23,372
13.2 31,776
5.2 15,552
6.5 29,448
6.6 39,744
1/ For a description of the tow types see Table A—4
From Table A-i and A-2
/ Total tons multiplied by trip length
/ From Table A-3
Tow Type
Number!!
Chemical
Substance
Cost r
Hours’
($)
Total
Tons J
Total
Ton Miles
(1000)
Total
Hours 4 !
Cost Per
Ton(S)
Cost Per
Ton Mile
(Mile)
Total Cost
$
4.00
2.03
7.12
9. 39
9.52
3,67
4.48
4.53
5.65
7.59
7.61
4.40
6.10
6.20
76.10
9,000
4,500
53.40
1,800
900
105.60
2,700
1,350
142.80
3,600
1,800
76.40
5,000
2,500
104.00
7,500
3,750
188.80
10,000
5,000
51.80
2,200
1,100
104.40
3,300
1,650
139.60
4,400
2,200
44.00
2,400
1,200
91.50
3,600
1,800
124.00
4,800
2,400
54.40
6,000
3,000
107.10
9,000
4.500
144.80
12,000
6,000
48.20
2,400
1,200
97.80
3,600
1,800
132.40
4,800
2,400
64.80
6,000
3,000
122.70
9,000
4,500
165.00
12,000
6,000
IV— 198
-------
TABLE A-B
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 1000 MILES
Total tons multiplied by trip length
From Table A-3
Tow Typo
Numberlf
Chemical
Substance
Cost Per
HourY
($)
Total
TonsY
Total
Ton Miles
(1000)
Total
Hours!,’
Cost P r
Ton($)
Cost Per
Ton Mile
(Mils)
Total Cost
S
1
40.00
2,400
2,400
404
6.73
6.7
16,160
2
——
76.10
9,000
9,000
404
3.42
3.4
30,744
3
Ammonia
53.40
1,800
1,800
404
11.99
12.0
21,574
4
Ammonia
105.60
2,700
2,700
404
15.80
15.8
42,662
5
Anunonia
142.80
3,600
3,600
404
16.02
16.0
57,691
6
Ammonia
76.40
5,000
5,000
404
6.17
6.2
30,866
7
Ammonia
140.00
7,500
7,500
404
7.55
7.6
56,600
8
Ammonia
188.80
10,000
10,000
404
7.63
7.6
76,275
9
Chlorine
51.80
2,200
2.200
404
9.51
9.5
20,927
10
Chlorine
104.40
3,300
3,300
404
12.78
12.8
42,178
11
Chlorine
139.60
4,400
4,400
404
12.82
12.8
56,398
12
Cau.tic Soda
44.00
2,400
2,400
404
7.41
7.4
17,776
13
Caustic Soda
91.50
3,600
3,600
404
10.27
10.3
36,966
14
Caustic Soda
124,00
4,800
4,800
404
10.44
10.4
50,096
15
Caustic Soda
54.40
6,000
6,000
404
3.7
3.7
21,978
16
Caustic Soda
107.10
9,000
9,000
404
4.81
4.8
43,268
17
Caustic Soda
144.80
12,000
12,000
404
4.87
4.9
58,499
18
Sulfuric Acid
48.20
2,400
2,400
404
8.11
8.1
19,473
19
Sulfuric Acid
97.80
3,600
3,600
404
10.98
11.0
39,511
20
Sulfuric Acid
132.40
4,800
4,800
404
11.14
11.1
53,490
21
Sulfuric Acid
64.80
6,000
6,000
404
4.36
4.4
26,179
22
Sulfuric Acid
122.70
9,000
9,000
404
5.51
5.5
49,571
23
Sulfuric Acid
165.60
12,000
12,000
404
5.58
5.6
66,902
/ For a description of the tow types see Table A-4
From Table A-i and A-2
1/
IV—199
-------
TABLE A-9
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 1500 MILES
Tow Typq
Number&/
Cheniical
Substance
Cost Pqr
Houra’
( 5)
Total
Tons /
Total
Ton Miles
(1000)
Total
Hours ’
Cost Per
Ton(S)
Cost Per
Ton Mile
(Mile)
Total Cost
5
3.
——
40.00
2,400
3,600
567
9.45
6.3
22,680
2
——
76.10
9,000
13,500
567
4.79
3.2
43,149
3
Ammonia
53.40
1,800
2,700
567
16.82
11.2
30,278
4
Ammonia
105.60
2,700
4,050
567
22.18
14.8
59,875
5
Ammonia
142.80
3,600
5,400
567
22.49
15.0
80,968
6
Ammonia
76.40
5,000
7,500
567
8.66
5.8
43,319
7
Ammonia
140.00
7,500
11,250
567
10.59
7.1
79,437
8
Ammonia
188.80
10,000
15,000
567
10.71
7.1
107,050
9
Chlorine
51.80
2,200
3,300
567
13.35
8.9
29,371
10
Chlorine
104.40
3,300
4,950
56
17.94
12.0
11
Chlorine
139.60
4,400
6,600
567
17.99
12.0
79,153
12
Caustic Soda
44.00
2,400
3,600
567
10.40
6.9
24,948
13
Caustic Soda
91.50
3,600
5,400
567
14.41
9.6
51.881
14
Caustic Soda
124.00
4,800
7,200
567
14.65
9.8
70,308
15
Caustic Soda
54.40
6,000
9,000
567
5.14
3.4
30,845
16
Caustic Soda
107.10
9,000
13,500
567
6.75
4.5
60,726
17
Caustic Soda
144.80
12,000
18,000
567
6.94
4.6
92,102
18
Sulfuric Acid
48.20
2,400
3,600
567
11.39
7.6
27,329
19
Sulfuric Acid
97.80
3,600
5,400
567
15.40
10.3
55,453
20
Sulfuric Acid
132.40
4,800
7,200
567
15.64
10.4
75,071
21
Sulfuric Acid
64.80
6,000
9,000
567
6.12
4.1
36,742
22
Sulfuric Acid
122.70
9,000
13,500
567
7.73
5.2
69,571
23
Sulfuric Acid
165.60
12,000
18,000
567
7.82
5.2
93,895
For a description of the tow types see Table A-4
/ From Table A-l and A-2
/ Total tons multiplied by trip length
/ From Table A-3
IV—200
-------
TABLE A-b
BARGE OPERATING COSTS PER TON AND PER TON-MILE
AT DIFFERENT TOW TYPES FOR A LINE HAUL
DISTANCE OF 2000 MILES
Tow Tyçq
Number /
Chemical
Substance
Cost P r
Hour
($)
Tota ,
Tons /
Total
TOn Miles
(1000)
Total
Hours J
Cost Per
Ton($)
Cost Per
Tol , Mile
(Mils)
Total Cost
$
1
——
40.00
2,400
4,800
730
12.17
6.1
29,200
2
——
76.10
9,000
18,000
730
6.17
3.1
55,553
3
Ammonia
53.40
1,800
3,600
730
21.66
10.8
38,982
4
Ammonia
105.60
2,700
5,400
730
28.55
14.3
77.088
5
Ammonia
142.80
3,600
7,200
730
28.96
14.5
104,244
6
Ajwiv nia
76.40
5,000
10,000
730
11.15
5.6
55,772
7
P ,nsnonia
140.00
7,500
15,000
730
13.64
6.8
102,273
8
Ajmi nia
188.80
10,000
20,000
730
13.78
6.9
137,924
9
Chlorine
51.80
2,200
4,400
730
17.19
8.6
37,814
10
Chlorine
104.40
3,300
6,600
730
23.09
11.5
76,212
11
Chlorine
139.60
4,400
8,800
730
23.16
11.6
101,908
12
Caustic Soda
44.00
2,400
4,800
730
13.38
6.7
32.120
13
Caustic Soda
91.50
3,600
7,200
730
18.55
9.3
66,795
14
Caustic Soda
124.00
4,800
9,600
730
18.86
9.4
90,520
15
CaustiC Soda
54.40
6,000
12,000
730
6.62
3.3
39,712
16
Caustic Soda
107.10
9,000
18,000
730
8.69
4.3
78,183
17
Caustic Soda
144.00
12,000
24,000
730
8.81
4.4
105,704
18
Sulfuric Acid
48.20
2,400
4,800
730
14.66
7.3
35,186
19
Sulfuric Acid
97.80
3,600
7,200
730
19.83
9.9
71,394
20
Sulfuric Acid
132.40
4,800
9,600
730
20.14
10.1
96,652
21
Sulfuric Acid
64.80
6,000
12,000
730
7.88
3.9
47,307
22
Sulfuric Acid
122.70
9,000
18,000
730
9.95
5.0
89,571
23
Sulfuric Acid
165.60
12,000
24,000
730
10.07
5.0
120,888
1/ For a description of the tow types see Table A-4
2/ From Table A-i and A-2
3/ Total tons multiplied by trip length
4/ From Table A-3
Iv— 201
-------
• Towboat $70.00 per hour
• Barges $ 8.33 per hour per barge
• Average barges per tow $ 2.88
It was previously noted that a total of 1700 companies operate
3800 towboats and 16,600 barges in the United States. The
national average per company is 2.24 towboats and 9.76 barges.
Assuming 345 working days per year, the average operating costs
per barge operator is estimated at around $2 million per year.
Assuming an operating ratio of 0.85 this translates to an
average operating revenue of $2,325 thousand per year, leaving
an estimated operating income of $325,000.
3 ’rransportation Statistics in the United States, Carriers by
Water , Interstate Commerce Commission, December 1971.
IV—202
-------
REFERENCES
1. Jacobson, I. B. “Systems Analysis of Abstructive Bridges,”
U. S. Coast Guard Academy.
2. U. S. Department of Transportation, D.O.T. Superport Study,
Interum Report, Appendix G.
3. Transportation Statistics in the United States, Carriers by
Water , Interstate Commerce Commission, December 1971. —
U.S. GOVERNMENT PRINTING OFFICE: 191S— 582-423:28
I V — 203
------- |