Document k9LdppVY2rOqBJZQpZ5yM01vb

1 IBt I N U R T,CC TEHHECO CHEMICALS, me. ENV. SCIENCE APR 8 - 19T5 Tc> F P'J M ciU8 )EC T Distribution D. I. Smalley AT Ar Piscataway daff April 4, 1975 copy To SPI Critique of EPA Economic Impact Analysis - VCM A meeting was held in the New York offices of SPI to review and develop policy relative to the economic impact analysis con tained in EPA's recent draft standard for VCM, Those in attendance in addition to the writer were: Ray Abramowitz Cecil Loechelt Bill Madden Ray Manning Tom Linok Jack Zimmerman Bert Ingley Bob Hill John Lawrence Gary Baise Hooker Ethyl Firestone Union Carbide Goodrich Diamond Diamond Diamond SPI Ruckleshaus, et. al. Baise began the discussion with the explanation that under Section 112 EPA is required to judge only the hazard aspect of a situation. Economic and technological considerations are not re quired under 112. However, in this case, EPA introducing both economic and tcchnologica1 considerations. It is believed they are doing this at least inpart to justify a possible dual standard i.e.: one for suspension and one for dispersion. This may be an attempt to avoid a law suit from a public interest group demanding a single rigorous standard. Attached is a brief critique of section 10 of the draft standard prepared by Diamond. The feeling of the group was that this analysis was much closer to reality than the EPA analysis and raised numerous questions concerning EPA's data sources and financial methodology. Some debate insued concerning the best approach in dustry could take in view of a rather tight timetable. Baise re affirmed the opinion of counsel that if industry felt the EPA analysis was faulty, a response was appropriate and desirable. The outcome was that a meeting will be held in Durham on 4/10 between Don Goodwin, et. al. and Diamond, Carbide, Hooker, Firestone, and Ethyl representatives plus counsel. This will be a fact-finding meeting to determine how better economic data can be developed quickly for use in standard development. A report on this meeting will be made to the Steering Committee on 4/11. COLORITE 007973 2- - Other discussion concerned dispersion resin and the Section 114 letters sent to all dispersion resin producers. A letter to EPA from John Lawrence is also attached suggesting that 6000 ppm down stream from the stripper would be in line with industry thinking. There continues some discussion of an "averaging" VCM levels between suspension and dispersion reactor products where both types of plants are on common sites. This is not expected to gain favor by either EPA or industry. Many suppliers will ask for a 7 day extension of the 4/14 deadline for submittal of the 114 data. As an aside. Diamond claims to be installing stripping equip ment which will get them under 1000 ppm in the latex. DIS:rs attach, Distribution: F. X. Ritter J. Path H. B. Carr A. P. Lobo P. Anderson G. S. Flint G, X. Rozand D. I. Smalley COLORITE 007974 MEMORANDUM To: MR. LAWRENCE. SPI This will follow up on our March 27th telephone call regarding "economic rationale" in the EPA draft - "An Investigation of Health Effects and Emission Reductions of Vinyl Chloride in the Vinyl Chloride Monomer & Polyvinyl chloride industries". A primary point for reference is page 10-2. in the last paragraph on that page the "annualized capital charge" - covering depreciation, interest, administrative overhead, property taxes and insurance - is estimated at 12.5% per year of the installed capital cost. Dieimond feels this approach is completely inadequate. An annual cost of 2530% would be suitable; with 3-5% assigned to administrative overhead, property taxes and insurance; 7-10% for interest charges and 10-15% for depreciation of the facilities. The second main point, for reference is Table 10-15 - "Financial Impact of Alternative control Levels on New Suspension process PVC Plants". This table purports to demonstrate the Return on Investment (ROI) to be achieved in an Uncontrolled plant; in a plant meeting Effluent Regulations; and in a plant meeting Effluent Regulations plus Level A through D controls. Again, the difference between our'normal financial calculations and those of the presentation are astonishingly different. The attach ment to this letter indicates the comparative figures on the "Uncon trolled plant" wherein the EPA ROI is 28.7% and Diamond's 11.3% The comparison for the other 5 cases may be summarized as follows using the same basis: Plant Meeting Effluent EPA TABLE DIAMOND APPROACH Regulations 24.7% 9.10% Item 1 plus Level A Item 1 plus Level B Item 1 plus Level c Item 1 plus Level D 23.9% 24.1% 23.3% 18.8% 7.6% 8.2% 8.0% 5.3% COLORITE 007975 _^uued Pago 2 The comparison is even more startling when one considers these RQI positions are achieved only at a capacity operating level, combined with very optimistic price assumptions and would never justify new plant investments. It would seem the discrepancy is so great as to require a very detailed review - item by item - with EPA personnel to gain any under standing of "how" they did their computations. A final brief point - referring to Table 10-16. EPA considers the investment in an uncontrolled Dispersion plant as $5,835,000 for 30 MM pounds of annual capacity. Diamond would consider /Q - /j? dVJ, i/tm a more reasonable number excluding working capital. AJI:bit A. J. Ingley Diamond Shamrock Chemical Company COLORITE 007976 return on investment calculation j <, m Jk EPA Calculations SUSPENSION PROCESS PVC PLANT 12.00 0 12.00 Investment e/lb/yr plant Working Capital Total 24.00 /lb o 24.00 1 5.92 1.20 6.88 0 ____ 0 6.88 3.44 28.1% Gross Sales Freight to Customer Net Sales Cost of Sales (Ex Dep) Depreciation Gross profit Admin,Selling, R & D etc. Interest * , Net Profit Before Taxes " " After " ROI i.'C M /bj Diamond Calculations 14.0 5.0 19.0 24.0 e/lb. 2.0 22.0 13.97 1.43 6.60 1.50 .80 4.30 2.15 11.3% ~!7 A Interest is shown on 50% of total investment at current rater,, COLORITE 007977