Document 7rBVx849QRMobr1GJa9JNVq6

POSITION PAPER ON PCBS 1. Problem A) The EPA la uaing PCB aa a vehicle to expreaa the need Cor additional legislation to control induatrial effluent*. B) The EPA and aeveral states, e.g., Michigan, Minneaota, Wisconsin, and New York, are concerned about the high levela of PCB found in fiah. The market reatrictiona which we applied to Aroclor in 1972 have not reaulted in the expected fall-off in PCB levela in the environ ment. (He believe that the dielectric uaage of PCB ia not the cauae of the remaining high levela, but that they arise from residues of previous applications.) C) There is pressure, therefore, towards discontinuation of PCB uaage in electrical equipment. mons 2. Impact on Monsanto Salea See Appendix D 1. If PCB sales cease and we do not replace them with one of our non-PCB candidate* potential sales dollar loss is approximately $1BM per year of which $3M is production from Newport, U. K., plant. 2. Additional impact will be felt_in the following Biphenyl-related products ($15M in salest S5-6M in gross profit. Biphenyl HB-40/0S-84/Therminol WCM HQ-40 (Pydrauls) Therminol VP-1. 66/Santosol 340 3. Successful introduction of MCS 1238 (MIPB + Sulfone) protects these other product areas because of the divisor on the polyphenyl unit at Anniston. 4. Gross Profit - Dielectrics gross profit is running at 36.6% September, 1975j_ YTD. As a direct loss in GP, we would expect $6.0M minimum with additional loss in other biphenyl-related product areas. 5. Phase out costs and write offs (in 1976 or 1977) would be $2.6M. (H. S. Bergen memo to F. J. Fitzgerald July 26, 1975, Table II) Attached in Appendix D. 6. Customer relations will be strained only if we pre cipitously cease production before they have proper acceptable alternatives. At such time as major equipment producers have alternates, they would probably welcome Monsanto initiative in ceasing production since this would ease their new product acceptability and legal positions (caution - Monsanto legal position if we initiate move from PCB). 3. Impact on Major Customers Major alternativea opan to customers. Capacitors (See Appendix B - market data) Motet The capacitor producers have no alternatives to Aroclor ready for commercialization today to cover all markets. 1) Continue to use PCBs as long as a) Monsanto, b) Regulatory authorities, or c) Cost of controls permits. 2) Power Capacitors - will require a liquid in future deeigns. a) Monsanto MCS 1238/1588 b) Dow candidate Chlorinated Butyl Biphenyl Oxide c) Use Monsanto Dichlorobiphenyl MCS 1043. 3) Motor Run a) Monsanto MCS 1238/1588 - little design change. b) DRY metallized polypropylene attractive, but requires new investments in metallizing and winding equipment. c) Metallized paper-oil - requires change in paper technology. d) DOP/DINP - available, at 30-404/lb. In plant handling difficulties requires reduction in capacitor reliability. e) Use MCS 1043. 4) Ballast a) Monsanto MCS 1238/1588. b) Dry metallized film + new investment + considerable redesign of ballast itself. c) DOP/DINP d) Use MCS 1043. Motet G. E. admit that DOP use in sectors 2/3 will require major plant investment to modify their automated impregnation/treatment cycles. They do MOT know yet if MCS 1588/1475 will fit the existing plant cycles eliminating the investment. MONS 041977 Transformers (See Appendix C - market data) 1) industrial Load Centers a) Move to lower chlorinated PCB, e.g., Aroclor 1016. b) Derate or redesign for silicone use. c) Sell Dry I.e. Air cooled transformers. d) Uae Monsanto product X. e) Oil filled units plus additional installation costs. Hotel a)- Least change for industry if environmentally acceptable. b)- Could be achieved in 5-6 months. Uncertainties about silicone fire resistance. c)- Would result in major loss of business to G. E., Westinghouse Who are less set up for dry type .. . . unit production, e.g., Westinghouse, S. Boston, using 5M lbs. per year Aroclor makes no dry units. d)- Only becomes alternative when we define product. Current preference of customers in above order. 2) Precipitator Transformers - Notet Air cooled transformers can Mot be used in this application. a) Move to lower chlorinated biphenyl. b) Redesign for silicone. c) Uae mineral oil and engineer precipitator around fire hazard. a) Least change for industry if environmentally acceptable. b) Could not derate, would need new design. c) Happening to some extent today because of 0 PCB effluent rules in force for power generation stations. ' HONS 041978 3) Railroad/Bapid Transit Today no acceptable alternative. Could involve redeaign transformers and rapid transit cars. Silicone is not acceptable at precent. 4) Urban Power Substations at high voltages used. Dry-type not acceptable a) Lower chlorinated biphenyl b) Oil plus additional fire protection investment. c) Possibly silicone - not yet tested. d) Monsanto product X. 0*1^ MONS 4. Alternatives Open To Monsanto 1) Cease production immediately. 2) Phase out over 9 months. 3) Phase out over 24 months. 4) Continue sales of present PCB range until either legis lation prohibits further sale or customers abandon product. 5) Support continued use of PCBs and move to lower chlorinated homologs e.g., MCS 1043 from Aroclor 1016 in capacitors, 1016 from Aroclor 1242/54 in transformers. Rejected 1) - Alienation of major customers if we want on-going business. - In absence of government ban, European imports would fill gap and any fault in their handling would almost inevitably still involve Monsanto in litigation. - Precipitous withdrawal could in itself add to litigation burden because of added belief that product must be genuinely harmful. 2) Cannot get transformer fluid development completed in 9 months. Would force transformer industry to non-PCB, non-Monsanto alternative. - Note one advantage of this alternate in capacitor area is to pre-empt dry metallized film capacitors in motor run/ballast area. 4) This alternate results in total loss of sales over 2-3 years with low probability of replacement. 5) Qualified Rejection - This alternate has little merit unless environmental authorities make a very positive statement accepting continued long-term use of lower chlorinated homologs before end of 1975. Without such support, additional capital to switch production to 1043/ 1016 would be unjustified. Such support is, I believe, unlikely to be given. If support were given, this solution is the best one for both Monsanto and electrical industry. 041980 HONS I recommend elternete (3) as the most positive course of action and best suited to achieving minimum loss in short term and maximum on-going business. HONS 0<*198 3. SCP Plan (24-Month Phase Out) Capacitors 1. Focus effort on MCS 1238 (MIPB t Sulfone) with lassar effort suspended on MCS 1588 (Santosol 100 + Sulfone) as hack up. 2. Obtain performance approvals from: a) G. E./Westinghouse _ Power b) G. E./Aerovox/EUC - Motor Run c) G. E./Aerovox/Universal - Ballast. 3. Accelerate and document environmental test program 1238/1588. 4. Open up fire resistance question and clear use of flammable fluid. 5. Phased increase of PCB pricing to support development price for MCS 1238/1588. 6. Establish interim production 1238 by mid-1976 to support transition volumes. 7. Selectively introduce 1238 in Europe, Canada, Latin America, Japan. t. Use PR to draw attention to progress towards a PCB replacement. Transformers 1. Introduce alkylated biphenyl/TCB blend to G. E./Westinghouse . 2. Obtain their decision as to this being genuine replacement candidate. 3. If yea, initiate joint teat programs with G. E./ Meetinghouse, start environmental test program, link into manufacturing plan as additional potential volume. MONS 041982 4. If not acceptable, accelerate research program on other possible candidates. 5. Work with 0. E./Westinchouse/Bureau of Standards on fire test standards to further define acceptable limits. MQNS 041983 6. Currant Status SCD Actions Capacitor* 1. All key capacitor producers aware that MCS 1238 Is our primary candidate. Samples are in hands of all accounts using more than 100,000 lbs. per year. 2. Key approval programsi a) 0. E. - testing in power motor run, ballast with results expected March/April, 1976. Simula tion test to check HCS 1238 fit into automated plant timed for January, 1976. (Success in this test is very important.) b) Westinghouse have funded 6-month power capecitor teats with HCS 1238 as lead candidates. c) Aerovox are impregnating motor and ballast units November for 3-4 month accelerated life tests of MCS 1238 in 2 major selling designs. d) EUC are selling MCS 1588 units and carrying out MCS 1238 program to transition to the preferred grade. e) Universal program in ballast is behind schedule. 3. Environmental test program is lsid out, but dates for test results are slipping. Need closer co-ordina tion. 4. Fire test program - Not started yet. 5. Increased PCB pricing October 1, 1975, - review again 1st quarter, 1976. 6. Schedule established to achieve interim production MCS 1238 by mid-1976. Need approval of approximately $350 M expenditure. 7. MCS 1238 introduced in Canada, Europe, Mexico, Brasil. 8. PR program currently being developed. 041984 Tranaformers We will present preliminary data on: a) Alkyl Biphenyl/TCB b) Alkyl Naphthalene/TCB c) Trichlorobiphenyl methane to G. E./Weatinghouee on November 12 and week of November 23 reapectively. 7. Recommendations 1. We should not precipitously and unilaterally cease PCB production. 2. He should put in place interim production facilities for non-PCB capacitor fluids (e.g. MCS 1238). 3. We should staff our marketing department to effect a transition from PCS to non-PCB dielectric fluids with minimum loss of H/I by 12/31/77. 4. Research activity should be focused on dielectrics market served by PCB today, and on process and appli cation research on a limited number of non-PCB can didates . 5. Research activity on lower PCB homologs or other PCB developments should be discontinued 12/31/75 unless "lower chlorinated homolog" concept receives active support of EPA. 6. An environmental test program on the primary nonPCB candidates should be more closely defined and accelerated. All work on PCB or non-PCBa with low potential for commercial success should be restricted or discontinued. HONS 041986 APPENDIX A Problem Additional contributing factors in the problem aret 1) Hew York State has taken legal action against 8. E. capacitor business and seeks zero discharge by September 30, 1976, into the Hudson River. G. E., while able to make significant reduction in PCS, do not believe that they can achieve zero discharge. 2) 0. E. Transformer Division has just lost a $250 H law suit as a result of a spillage of transformer liquid in Tennessee. Additionally, clean-up of this spill cost in excess of $300 M. Since part of the damages assessed against 6. E. related to physical injury to a passing motorist who claimed bronchial problems resulting from the PCB exposure, G. E. are concerned that loss of this suit could lead to further costly litigation and worker compensation suits. 3) The EPA use of PCB as an example to support the Toxic Substancee Act hae resulted in wide spread publicity concerning chlorinated biphenyls reflecting on the public-mindednesa of a number of large corporations including ourselves, G. E., and Westinghouse. 041.987 MQNS APPENDIX B Capacitor Market 1) Of our total PCB dialactric aalea of 40M lbs., $1SM capacitor fluids represents approximately 2/3 in both lbs. and dollars. . 2) There are three major applicational areas for Aroclor in capacitors: - Power Capacitors, used by utilities to improve efficiency of electrical distribution-approximately 1/4 of lbs. used. - Motor Sun, e.g. air conditioners, industrial motors, fans, microwave ovens, etc.- 1/2 of lbs. used. - Ballast Capacitors - used in the starting and efficient operating of fluorescent lights and sodium and mercury street lighting - approximately 1/4 of lbs. used. 3) There are three influential companies supplying capacitors a) General Electric - active in all three markets - have close to 50% market share in each market - technical leader in all three markets - Aroclor used at two locations. Fort Edwards/Hudson Falls, both on Hudson River, New York. - Aroclor capacitors represents approximately 80% of the value of production at these locations - two plants employ approximately 1200 workers - within G. E. Electronic Components Division, capacitor business group represents approxi mately 20% of sales and a lower percentage of profit. Business viewed by divisional management as low growth area (e.g., dropped in 1973 as a separate strategic centerl- separate from transformer division up to mainboard level. Capacitor salves total approximtely $70M. Aroclor purchases $2-3M per year. MONS 041988 b) Westinghouse-factor only in power capacitor market - do not manufacture in the other two sectora - within aame division as transformers, capacitor sales $10-15M per year (versus aakarel transformer sales $18-20M per year) - sales of Aroclor capacitor represent a small proportion of Corporate sales - capacitor sales have additional significance in filling out Westinghouse's line of equipment supplied to utilities - All pro duction centered in Bloomington, Indiana, where little environmental pressure has been felt up to the present time. c) Aerovox - factor only in motor run and ballast market sectors - Do not manufacture power capacitors- Smaller dynamic company - actively pursuing increased market share. Currently, Aroclor units represent approximately 50% of annual sales - Actively seeking design innovation as means to increase market share - Support Aroclor until they can find a satisfactory non-PCB design which would permit increased market share. - The rest of the industry will follow the lead of these three companies if Aroclor usage is discontinued. Some of the smaller producers may wall go out of the capacitor business^ however, the total demand for capacitors will remain much the same. A wild card is McGraw-Edison (operated only at the power capacitor sector) who are seeking to establish a reputation for technical leadership by introduction of improved designs and who are actively working with Dow. 0419a' HONS APPENDIX C Transformer Market 1) G. E. and Westinghouse represent 75% of Aroclor usage. 2) Total usage 14-15 M lba. per year. 3) Transformers fall Into 3 major categories and one minor but highly profitable 0. B. specialty. a) Industrial Load Centers i.e., secondary power distribution in large manufacturing plants, hospitals, schools, etc. The total installed cost is the key to Aroclor use in this sector. The higher cost of an Aroclor unit is more than offset by the additional engineering in fire walls, sumps, sprinklers and extra low voltage cable expense if ah oil unit is used. Represents approximately 50% of our sales. b) Precipitator Transformers - Electrostatic precipitator use is becoming mandatory in many plants emitting par ticulate matter in stack gases, e.g. power utilities, steel mills, cement plants. To provide high voltage, DC transformer rectifiers must be placed CLOSE to the precipitator, normally in a penthouse above the unit. Fire hazard is high. Represents 20% of business and growing. c) Urban Substations - Utilities in urban areas have many high voltage underground substation vaults. Space re quirements make askarel preferable to oil units with cumbersome fire walls etc. Represents 15-20% of lbs. sold. d) Special Railroad Transformers (G.E.) Special designs under railroad cars, 3-4 inch clearance from track. Very rugged treatment creates leakage risk. In event of fire, passenger risk high. Price of fluid almost insignificant in these units. Safety all important. 10-15% of business. MOWS 041990 Domestic U. S. Export Sub-Total Ex-O.S.A. Total W. W. APPENDIX D ABOCLOR SALES FOR PIELBCTBICS (M lbs./or $) ------------------------------1974__________ Transformer Capacitor ike _L- ike -S_ 13.9 4.1 18.0 4.52 1,34 5.86 22.1 2.48 24.58 6.7 0.75 7.45 3.42 7.86 2.38 21.42 6.86 32.44 9.83 1975 September_________________ 1976 B Transformer Capacitor Transformer Capacitor lb. _s_ lb. _S_ lb. $ lb- _L_ 11.2 3.7 14.9 4.6 1.5 6.1 9.5 1.65 11.15 3.5 6 4.1 10.8 4.1 14.9 4.5 1.6 6.1 16.0 2.8 18.8 6.3 1.2 7.5 1.7 .66 4.4 1.8 2-2 1.0 5.9 2.6 16.6 6.76 15.55 5.9 17.1 7.1 24.7 10.1 xoz to TABLE II SPECIALTY PRODUCTS Phase-out costs t writeoffs - take ih 1977 1 Flqcd Investment Write-off and Dismantling Krwmrlch Plant Newport Plant II. Decontamination and Phase-out Pom. Tank Cars 1450 360 III. Deqontamlnatlon - Newport Total |50 I960 IV. Pl^nt FIE Redistributed to Rest of Plant Kruemrlch Newport 330 125 ' A55 V. Teak Force to Phnse-out PCB Dielectrics Domestic and Export Ex. USA 150 75 225 /tl 7/28/75 v HONS 041992