[Federal Register Volume 60, Number 103 (Tuesday, May 30, 1995)]
[Proposed Rules]
[Pages 28210-28278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8885]




[[Page 28209]]

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Part II





Environmental Protection Agency





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40 CFR Part 433, et al.



Effluent Limitations Guidelines, Pretreatment Standards, and New Source 
Performance Standards: Metal Products and Machinery; Proposed Rule

  Federal Register / Vol. 60, No. 103 / Tuesday, May 30, 1995 / 
Proposed Rules    
[[Page 28210]] 

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 433, 438 and 464

[FRL-5186-6]
RIN 2040-AB79


Effluent Limitations Guidelines, Pretreatment Standards, and New 
Source Performance Standards: Metal Products and Machinery

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed regulation establishes technology-based limits 
for the discharge of pollutants into waters of the United States and 
into publicly owned treatment works by existing and new facilities that 
manufacture, maintain or rebuild finished metal parts, products or 
machines.
    This proposed regulation will reduce the discharge of toxic 
pollutants from Metal Products and Machinery (MP&M) facilities by 
almost a million pounds per year, thereby reducing violations of water 
quality standards (which were established to protect aquatic life and/
or human health) in water bodies across the country. This proposed 
regulation will also reduce the metals content of municipal sludge, 
thereby allowing approximately 184 additional POTWs to land apply 
another 439,000 dry metric tons of sewage sludge rather than 
incinerating or landfilling the sludge.
    As a result of consultations with numerous stakeholders, the 
preamble solicits comments and data not only on issues raised by EPA, 
but also on those raised by environmental groups, by state and local 
governments who will be implementing these regulations, and by industry 
representatives who will be affected by them. As indicated elsewhere 
throughout this proposal, the Agency welcomes comment on all options, 
issues, and proposed decisions and encourages commentors to submit 
additional data during the comment period (See Section XIX of this 
preamble). The Agency plans to have additional discussions with 
interested parties during the comment period to help ensure that the 
Agency has the views of such parties and the best possible data upon 
which to base decisions for the final rule. EPA's final rule may be 
based upon any technologies, rationale or approaches that are a logical 
outgrowth of this proposal, including any options discussed in this or 
subsequent documents.

DATES: Comments on the proposal must be received by August 28, 1995. In 
addition, EPA will conduct a workshop covering this rulemaking, in 
conjunction with a public hearing on the pretreatment standards portion 
of the rule. The public hearing and the workshop will be held on June 
28, 1995. Persons wishing to present formal comments at the public 
hearing should have a written copy for submittal.

ADDRESSES: Submit comments in writing, and if possible on a 3.5 inch 
disk in Word Perfect 5.1 format to: Mr. Steven Geil, Engineering & 
Analysis Division (4303), U.S. EPA, 401 M Street, SW., Washington, DC 
20460.
    The public hearing and the workshop will be held starting at 9 a.m. 
at the Hall of States, room 333, 444 North Capital Street, Washington, 
DC 20001.
    The public record for this rulemaking is available for review at 
the EPA's Water Docket; 401 M Street, SW., Washington, DC 20460; call 
between 9 a.m. and 3:30 p.m. Eastern Standard Time for an appointment. 
The EPA public information regulation (40 CFR part 2) provides that a 
reasonable fee may be charged for copying. For access to Docket 
materials, call (202) 260-3027.

FOR FURTHER INFORMATION CONTACT: For additional technical information, 
contact Mr. Steven Geil at (202) 260-9817. Additional economic 
information may be obtained by contacting Dr. Lynne G. Tudor at (202) 
260-5834. Background documents supporting the proposed regulations are 
described in the ``Background Documents'' section below. Some of the 
documents are available from the Office of Water Resource Center, Mail 
Code RC-4100, US EPA, 401 M Street SW., Washington, DC 20460; telephone 
(202) 260-7786 for the voice mail publication request line.

SUPPLEMENTARY INFORMATION:

Overview

    This preamble describes the scope, purpose, legal authority and 
background of this rule, the technical and economic bases, and the 
methodology used by the Agency to develop these effluent limitations 
guidelines and standards.
    Abbreviations, acronyms, and other terms used in the Supplementary 
Information Section are defined in Appendix A to this notice.

Background Documents

    The regulation proposed today is supported by the major documents 
listed below. (1) EPA's technical conclusions concerning the 
regulations are detailed in the ``Development Document for Proposed 
Effluent Limitations Guidelines and Standards for the Metal Products 
and Machinery Phase I Point Source Category,'' hereafter referred to as 
the Technical Development Document (EPA 821-R-95-021). (2) The Agency's 
economic and regulatory flexibility analyses are found in the 
``Economic Impact of Proposed Effluent Limitations Guidelines and 
Standards For The Metal Products And Machinery Industry Phase I,'' 
hereafter referred to as the Economic Impact Analysis (EPA 821-5-95-
022). (3) The industry profile is described in the ``Industry Profile 
Of The Metal Products And Machinery Industry Phase I,'' (EPA 821-R-95-
024). (4) The regulatory impact analysis (including the Agency's 
assessment of environmental benefits) is detailed in the ``Regulatory 
Impact Assessment of Proposed Effluent Limitations Guidelines and 
Standards for the Metal Products and Machinery Industry Phase I,'' 
hereafter referred to as the Regulatory Impact Assessment (EPA 821-R-
95-023). (5) An analysis of the incremental costs and pollutant 
removals is presented in ``Cost Effectiveness Analysis of Proposed 
Effluent Limitations Guidelines and Standards for the Metal Products 
and Machinery Phase I Point Source Category,'' (EPA 821-R-95-025). (6) 
The statistical support for today's proposal is found in reports on the 
information screener survey (called the Mini Data Collection 
Portfolio), the detailed questionnaire (call the Data Collection 
Portfolio), and the calculation of limits.
    Outline: This preamble is organized according to the following 
outline:

I. Legal Authority

II. Background

A. Statutory Requirements of Regulation
    1. Best Practicable Control Technology Currently Available (BPT)
    2. Best Available Technology Economically Achievable (BAT)
    3. Best Conventional Pollutant Control Technology (BCT)
    4. New Source Performance Standards (NSPS)
    5. Pretreatment Standards for Existing Sources (PSES)
    6. Pretreatment Standards for New Sources (PSNS)
    7. Best Management Practices (BMP)
B. Litigation History
C. Pollution Prevention Act
D. Common Sense Initiative
E. Consultation (Executive Order 12875)
F. Prior Regulation for Metals Industries
G. Scope of Today's Proposed Rule

III. Summary of Proposed Regulations

A. BPT
B. BCT
C. BAT
D. NSPS
E. PSES
F. PSNS [[Page 28211]] 

IV. Overview of the Industry

A. Industry Description
B. Estimation of Number of Metal Products & Machinery Phase I Sites
C. Source Reduction Review Project

V. Data Gathering Efforts

A. Existing Databases
B. Survey Questionnaire
C. Waste water Sampling and Site Visits
D. EPA Bench Scale Treatability Studies (Terpene Study)

VI. Industry Subcategorization

VII. Water Use and Waste water Characteristics

A. Waste water Sources and Characteristics
B. Pollution Prevention, Recycle, Reuse and Water Conservation 
Practices

VIII. Approach for Estimating Costs and Pollution Reductions Achieved 
by Waste water Control Technology

IX. Best Practicable Control Technology Currently Available

A. Need for BPT Regulation
B. BPT Technology Options and Selection
C. Calculation of BPT Limitations
D. Applicability of BPT
E. BPT Pollutant Removals, Costs, and Economic Impacts

X. Best Conventional Pollutant Control Technology

A. July 9, 1986 BCT Methodology
B. BCT Options Identified

XI. Best Available Technology Economically Achievable

A. Need for BAT Regulation
B. BAT Technology Options and Selection
C. Calculation of BAT Limitations
D. Applicability of BAT
E. BAT Pollutant Removals, Costs, and Economic Impacts

XII. Pretreatment Standards for Existing Sources

A. Need for Pretreatment Standards
B. PSES Technology Options and Selection
C. Calculation of PSES
D. Applicability of PSES Limitations
E. Removal Credits
F. Compliance Date
G. PSES Pollutant Removals, Costs and Economic Impacts

XIII. New Source Performance Standards (NSPS) and Pretreatment 
Standards for New Sources (PSNS)

XIV. Economic Considerations

A. Introduction
B. Overview of the Facilities Subject to Regulation
C. Overview of Options Considered for Proposal and Selection of the 
Proposed Options
D. Economic Impact Methodology
E. Estimated Facility Economic Impacts
F. Labor Requirements and Possible Employment Benefits of Regulatory 
Compliance
G. Community Impacts
H. Impacts on Firms Owning Metal Products & Machinery Facilities
I. Foreign Trade Impacts
J. Impacts on NSPS and PSNS
K. Regulation Flexibility Analysis
L. Cost Effectiveness Analysis
XV. Executive Order 12866

A. Introduction
B. Benefits Associated with the Proposed Effluent Guidelines
C. Costs to Society
D. Benefit-Cost Comparison

XVI. Water Quality and Other Environmental Benefits of Proposed Rule 
for the Metal Products and Machinery (MP&M) Industry

XVII. Non-Water Quality Environmental Impacts

A. Air Pollution
B. Solid Waste
C. Energy Requirements

XVIII. Regulatory Implementation

A. Upset and Bypass Provisions
B. Variances and Modifications
    1. Fundamentally Different Factors Variances
    2. Economic Variances
    3. Water Quality Variances
    4. Permit Modifications
C. Relationship to NPDES Permits and Monitoring Requirements
D. Best Management Practice

XIX. Solicitation of Data and Comments

XX. Guidelines for Comment Submission of Analytical Data

A. Types of Data Requested
B. Analytes Requested
C. Quality Assurance/Quality Control (QA/QC) Requirements

XXI. Unfunded Mandates Reform Act

Appendix A Abbreviations, Acronyms, and Other Terms Used in This Notice

I. Legal Authority

    This regulation is being proposed under the authorities of sections 
301, 304, 306, 307, 308, and 501 of the Clean Water Act, 33 U.S.C. 
Sections 1311, 1314, 1316, 1317, 1318, and 1361; and under authority of 
the Pollution Prevention Act of 1990 (PPA), 42 U.S.C. 13101 et seq., 
Pub. L. 101-508, November 5, 1990.

II. Background

A. Statutory Requirements of Regulation

    The objective of the Clean Water Act (``Act'') is to ``restore and 
maintain the chemical, physical, and biological integrity of the 
Nation's waters,'' (section 101(a)). To assist in achieving this 
objective, EPA is to issue effluent limitations guidelines, 
pretreatment standards, and new source performance standards for 
industrial dischargers.
    These guidelines and standards are summarized briefly below:
1. Best Practicable Control Technology Currently Available (BPT) 
(Section 304(b)(1) of the Act)
    BPT effluent limitations guidelines are generally based on the 
average of the best existing performance by plants of various sizes, 
ages, and unit processes within the category or subcategory for control 
of pollutants.
    In establishing BPT effluent limitations guidelines, EPA considers 
the total cost of achieving effluent reductions in relation to the 
effluent reduction benefits, the age of equipment and facilities 
involved, the processes employed, process changes required, engineering 
aspects of the control technologies, non-water quality environmental 
impacts (including energy requirements) and other factors as the EPA 
Administrator deems appropriate (section 304(b)(1)(B) of the Act). The 
Agency considers the category or subcategory-wide cost of applying the 
technology in relation to the effluent reduction benefits. Where 
existing performance is uniformly inadequate, BPT may be transferred 
from a different subcategory or category.
2. Best Available Technology Economically Achievable (BAT) (Section 
304(b)(2) of the Act)
    In general, BAT effluent limitations represent the best existing 
economically achievable performance of plants in the industrial 
subcategory or category. The Act establishes BAT as the principal 
national means of controlling the direct discharge of toxic pollutants 
and nonconventional pollutants to navigable waters. The factors 
considered in assessing BAT include the age of equipment and facilities 
involved, the process employed, potential process changes, and non-
water quality environmental impacts (including energy requirements) 
(section 304(b)(2)(B)). The Agency retains considerable discretion in 
assigning the weight to be accorded these factors. As with BPT, where 
existing performance is uniformly inadequate, BAT may be transferred 
from a different subcategory or category. BAT may include process 
changes or internal controls, even when these technologies are not 
common industry practice.
3. Best Conventional Pollutant Control Technology (BCT) (Section 
304(b)(4) of the Act)
    The 1977 Amendments to the Act established BCT for discharges of 
conventional pollutants from existing industrial point sources. Section 
304(a)(4) designated the following as conventional pollutants: 
Biochemical oxygen demanding pollutants (BOD), total suspended solids 
(TSS), fecal coliform, pH, and any additional pollutants defined by the 
Administrator as conventional. The Administrator designated oil and 
grease as an [[Page 28212]] additional conventional pollutant on July 
30, 1979 (44 FR 44501).
    BCT replaces BAT for the control of conventional pollutants for 
certain facilities. In addition to other factors specified in section 
304(b)(4)(B), the Act requires that BCT limitations be established in 
light of a two part ``cost-reasonableness'' test. EPA's current 
methodology for the general development of BCT limitations was issued 
in 1986 (51 FR 24974; July 9, 1986).
4. New Source Performance Standards (NSPS) (Section 306 of the Act)
    NSPS are based on the best available demonstrated treatment 
technology. New plants have the opportunity to install the best and 
most efficient production processes and waste water treatment 
technologies. As a result, NSPS should represent the most stringent 
numerical values attainable through the application of the best 
available control technology for all pollutants (i.e., conventional, 
nonconventional, and toxic pollutants). In establishing NSPS, EPA is 
directed to take into consideration the cost of achieving the effluent 
reduction and any non-water quality environmental impacts and energy 
requirements.
5. Pretreatment Standards for Existing Sources (PSES) (Section 307(b) 
of the Act)
    PSES are designed to prevent the discharge of pollutants that pass 
through, interfere with, or are otherwise incompatible with the 
operation of publicly owned treatment works (POTWs). The Act requires 
pretreatment standards for pollutants that pass through POTWs or 
interfere with POTWs' treatment processes or sludge disposal methods. 
The Act requires industry to achieve PSES within three years of 
promulgation. Pretreatment standards are technology-based and analogous 
to the BAT effluent limitations guidelines. For the purpose of 
determining whether to promulgate national category-wide pretreatment 
standards, EPA generally determines that there is pass-through of a 
pollutant and thus a need for categorical standards if the nation-wide 
average percent removal of a pollutant removed by well-operated POTWs 
achieving secondary treatment is less than the percent removed by the 
BAT model treatment system.
    The General Pretreatment Regulations, which set forth the framework 
for the implementation of categorical pretreatment standards, are found 
at 40 CFR Part 403. Those regulations contain a definition of pass-
through that addresses localized rather than national instances of 
pass-through and does not use the percent removal comparison test 
described above. See 52 FR 1586 (January 14, 1987.)
6. Pretreatment Standards for New Sources (PSNS) (Section 307(b) of the 
Act)
    Like PSES, PSNS are designed to prevent the discharges of 
pollutants that pass through, interfere with, or are otherwise 
incompatible with the operation of POTWs. PSNS are to be issued at the 
same time as NSPS. New indirect dischargers, like the new direct 
dischargers, have the opportunity to incorporate into their plants the 
best available demonstrated technologies. The Agency considers the same 
factors in promulgating PSNS as it considers in promulgating NSPS.
7. Best Management Practices (BMP)
    The Agency is not proposing BMPs for MP&M. However, we are 
soliciting comment on whether BMPs could be promulgated in lieu of 
numeric limitations for low discharge volume sites. EPA has defined 
BMPs broadly (40 CFR 122.2) and is considering whether numeric 
limitations are infeasible for such sites because of the administrative 
burdens imposed on permitting authorities to develop, implement, and 
monitor necessary permits. BMP's could also cause pretreatment 
permitting to be more efficient and less costly for both control 
authorities and dischargers. The use of BMP's instead of flow 
monitoring associated with mass-based limits could result in greater 
efficiencies and cost savings for both control authorities and 
discharges. Properly implemented, BMP's could provide environmental 
protection equivalent to mass-based limits at a lower cost. Since some 
Control Authorities pass their costs along to industrial users in the 
form of service fees, cost savings to Control Authorities could be 
passed along to industrial users. BMPs could include any of the in-
process pollution prevention or flow reduction technologies discussed 
in the MP&M public record and pollution prevention bibliography section 
of the Technical Development Document.

B. Litigation History

    Section 304(m) of the Act (33 U.S.C. 1314(m)), added by the Water 
Quality Act of 1987, requires EPA to establish schedules for (i) 
reviewing and revising existing effluent limitations guidelines and 
standards (``effluent guidelines''), and (ii) promulgating new effluent 
guidelines. On January 2, 1990, EPA published an Effluent Guidelines 
Plan (55 FR 80), in which schedules were established for developing new 
and revised effluent guidelines for several industry categories. One of 
the industries for which the Agency established a schedule was the 
Machinery Manufacturing and Rebuilding Category (the name was changed 
to Metal Products and Machinery in 1992).
    Natural Resources Defense Council, Inc. (NRDC) and Public Citizen, 
Inc. challenged the Effluent Guidelines Plan in a suit filed in U.S. 
District Court for the District of Columbia (NRDC et al v. Reilly, Civ. 
No. 89-2980). The plaintiffs charged that EPA's plan did not meet the 
requirements of section 304(m). A Consent Decree in this litigation was 
entered by the Court on January 31, 1992. The terms of the Consent 
Decree are reflected in the Effluent Guidelines Plan published on 
September 8, 1992 (57 FR 41000). This plan requires, among other 
things, that EPA propose effluent guidelines for the Metal Products and 
Machinery (MP&M) category by November, 1994 and take final action on 
these effluent guidelines by May, 1996. The most recent Effluent 
Guidelines Plan was published on August 26, 1994 (59 FR 44235). EPA 
filed a motion with the court on September 28, 1994, requesting an 
extension of time until March 31, 1995, for the EPA Administrator to 
sign the proposed regulation and a subsequent four month extension for 
signature of the final regulation in September 1996.

C. Pollution Prevention Act

    The Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13101 et 
seq., Pub. L. 101-508, November 5, 1990) makes pollution prevention the 
national policy of the United States. The PPA identifies an 
environmental management hierarchy in which pollution ``should be 
prevented or reduced whenever feasible; pollution that cannot be 
prevented should be recycled in an environmentally safe manner, 
whenever feasible; pollution that cannot be prevented or recycled 
should be treated in an environmentally safe manner whenever feasible; 
and disposal or release into the environment should be employed only as 
a last resort * * *'' (42 U.S.C. 13103). In short, preventing pollution 
before it is created is preferable to trying to manage, treat or 
dispose of it after it is created. According to the PPA, source 
reduction reduces the generation and release of hazardous substances, 
pollutants, wastes, contaminants or residuals at the source, usually 
within a process. The term source reduction ``* * * includes equipment 
or technology modifications, [[Page 28213]] process or procedure 
modifications, reformulation or redesign of products, substitution of 
raw materials, and improvements in housekeeping, maintenance, training, 
or inventory control. The term `source reduction' does not include any 
practice which alters the physical, chemical, or biological 
characteristics or the volume of a hazardous substance, pollutant, or 
contaminant through a process or activity which itself is not integral 
to or necessary for the production of a product or the providing of a 
service.'' In effect, source reduction means reducing the amount of a 
pollutant that enters a waste stream or that is otherwise released into 
the environment prior to out-of-process recycling, treatment, or 
disposal.
    The PPA directs the Agency to, among other things, ``* * * review 
regulations of the Agency prior and subsequent to their proposal to 
determine their effect on source reduction'' (42 U.S.C. 13103). This 
directive led the Agency to implement a pilot project called the Source 
Reduction Review Project that would facilitate the integration of 
source reduction in the Agency's regulations, including the technology 
based effluent guidelines and standards.

(see Section IV. B. for a more complete discussion of the Source 
Reduction Review Project.) The MP&M Phase I category effluent guideline 
was included in the Source Reduction Review Project.

D. Common Sense Initiative

    On October 17, 1994, the Administrator established the Common Sense 
Initiative (CSI) Council in accordance with Federal Advisory Committee 
Act (U.S.C. App. 2, Section 9(c)) requirements. One of the goals of the 
CSI is to develop recommendations for optimal multi-media approaches to 
address environmental problems associated with six industrial sectors 
including Metal Plating and Finishing, Electronics and Computers, Auto 
Assembly, and Iron and Steel Manufacturing. The current Clean Water Act 
MP&M rulemaking studies, which were initiated in 1989, overlap to 
varying degrees these six CSI pilot industrial sectors.
    The following are the six elements of the CSI program, as stated in 
the ``Advisory Committee Charter.''


    1. Regulation. Review existing regulations for opportunities to 
get better environmental results at less cost. Improve new rules 
through increased coordination.
    2. Pollution Prevention. Actively promote pollution prevention 
as the standard business practice and a central ethic of 
environmental protection.
    3. Recordkeeping and Reporting. Make it easier to provide, use, 
and publicly disseminate relevant pollution and environmental 
information.
    4. Compliance and Enforcement. Find innovative ways to assist 
companies that seek to comply and exceed legal requirements while 
consistently enforcing the law for those that do not achieve 
compliance.
    5. Permitting. Improve permitting so that it works more 
efficiently, encourages innovation, and creates more opportunities 
for public participation.
    6. Environmental Technology. Give Industry the incentives and 
flexibility to develop innovative technologies that meet and exceed 
environmental standards while cutting costs.


    In addition, it is the intent of the Agency to work with the CSI's 
sector teams and further integrate their consensus recommendations 
applicable to the MP&M Phase I proposal as they are developed. Even 
though the MP&M Phase I data collection and analysis efforts were 
completed before the CSI program was announced, many aspects of the CSI 
objectives are reflected in the MP&M proposal. As part of the 
development of this proposal, EPA took advantage of several 
opportunities to gain the involvement of various stakeholders. For 
example, a public meeting was held in March of 1994 to present the 
technology options under consideration by the Agency. We have addressed 
industry trade associations, the Association of Metropolitan Sewerage 
Authorities, pretreatment coordinators from the Regions, States, and 
municipalities, and the Effluent Guidelines Task Force, and we have met 
with environmental interest group representatives. We have used 
comments and concerns raised at these meetings to frame solicitations 
for data and comment on aspects of this regulation ranging from 
pollution prevention to implementation issues. The MP&M Phase I 
proposal was based in part on pollution prevention for the largest 
dischargers, and the technical documents that support the proposal 
provide guidance on pollution prevention techniques applicable to this 
industry for use by all facilities. This proposal is performance-based 
and does not stipulate the use of specific control or treatment 
technologies. Industry retains the flexibility to develop or select 
innovative technologies that meet or exceed the performance-based 
standards proposed today. EPA considered cost effectiveness as part of 
the overall MP&M Phase I effluent guideline development process. The 
MP&M Phase II effluent guideline development process will further 
support the CSI.

E. Consultation (Executive Order 12875)

    Executive Order 12875, ``Enhancing the Intergovernmental 
Partnership'' requires Federal Agencies to consider the impacts of 
unfunded mandates on state, local, or tribal governments. Agencies, 
such as the EPA, that can impose unfunded mandates on state, local, or 
tribal governments are required by Executive Order 12875 to ensure that 
the Federal government either allocates the funds necessary for 
compliance or involves the affected agencies in the regulatory 
development process. The proposed MP&M Phase I regulation establishes 
effluent limitations guidelines and pretreatment standards that will 
directly impact the state and local waste water permitting process. The 
primary impact of the proposed MP&M Phase I regulation on state and 
local regulatory agencies will be that an increased number of permits 
will have to be issued. The cost associated with writing additional 
permits for direct dischargers based on national guidelines may be 
partially offset by a decrease in the expenses associated with writing 
individual permits based on local conditions or best professional 
judgment (BPJ). In general, EPA believes that the cost of individual 
permits for direct dischargers may be reduced by the MP&M Phase I rule, 
because fewer resources are required to issue effluent-guideline-based 
permits than to issue BPJ-based permits.
    The proposed MP&M Phase I effluent guidelines will be implemented 
as part of the National Pollutant Discharge Elimination System (NPDES) 
and pretreatment permitting processes. An estimated 1,895 direct and 
8,706 indirect discharging facilities will require permits under the 
proposed MP&M Phase I regulation. Although existing effluent guidelines 
such as metal finishing (40 CFR 433) and electroplating (40 CFR 413) 
cover some of these facilities (approximately 2,000), EPA expects a 
substantial net increase in the number of permits state and local 
regulatory agencies are required to write. The economic impact on 
industry associated with the additional permits is not expected to 
adversely affect industries that dominate local economies in a manner 
that would significantly alter state or local government revenues.
    The administrative burden created by the proposed MP&M Phase I 
effluent guidelines may be partially offset by anticipated savings in 
the costs associated with writing individual permits. Currently, many 
permits are written based on BPJ criteria. The development of such 
permits is often [[Page 28214]] contentious and can require a 
significant investment in resources. The proposed MP&M Phase I 
guidelines are expected to require fewer resources to develop permits 
than those based on BPJ, since MP&M Phase I includes specific effluent 
guidelines and pretreatment standards. EPA solicits comments on the 
administrative burden associated with permits based on BPJ, permits 
based on effluent guidelines, and the relationship between the two.
    The MP&M Phase I regulatory development process was closely 
coordinated with the public, industry groups, and other interested 
parties. MP&M regulation development summaries were presented at 
technical symposia and two public outreach meetings. In addition, 
comments regarding several implementation issues are included in 
today's notice (See Section XIX). Based on public comments, concerns 
will be addressed and, if applicable, incorporated into the final MP&M 
regulation.
    EPA plans to continue the data collection and public outreach 
programs for MP&M Phase I. Consultation with other governmental 
activities will also be initiated early in MP&M Phase II regulation 
development to allow continued, effective compliance with E.O. 12875 
requirements.

F. Prior Regulation for Metals Industries

    EPA has established effluent guidelines regulations for thirteen 
industries which may perform operations that are sometimes found in 
MP&M Phase I facilities. These effluent guidelines are:

 Electroplating (40 CFR Part 413);
 Iron & Steel Manufacturing (40 CFR Part 420);
 Nonferrous Metals Manufacturing (40 CFR Part 421);
 Ferroalloy Manufacturing (40 CFR Part 424);
 Metal Finishing (40 CFR Part 433);
 Battery Manufacturing (40 CFR Part 461);
 Metal Molding & Casting (40 CFR Part 464);
 Coil Coating (40 CFR Part 465);
 Porcelain Enameling (40 CFR Part 466);
 Aluminum Forming (40 CFR Part 467);
 Copper Forming (40 CFR Part 468);
 Electrical & Electronic Components (40 CFR Part 469); and
 Nonferrous Metals Forming & Metal Powders (40 CFR Part 471).

These existing effluent guidelines generally apply to the production of 
semi-finished products, while the MP&M Phase I category applies to 
finished metal parts, products, and machines. EPA recognizes that unit 
operations performed in industries covered by the existing effluent 
guidelines generate waste water similar to unit operations performed at 
MP&M Phase I sites. A discussion of how these guidelines are integrated 
with the regulations proposed today is continued in the following 
section.

G. Scope of Today's Proposed Rule

    The MP&M Phase I category applies to industrial sites engaged in 
the manufacturing, maintaining or rebuilding of finished metal parts, 
products or machines. Today's proposed effluent guideline (MP&M Phase 
I) applies to process waste water discharges from sites performing 
manufacturing, rebuilding or maintenance on a metal part, product or 
machine to be used in one of the following industrial sectors:

 Aerospace;
 Aircraft;
 Electronic Equipment;
 Hardware;
 Mobile Industrial Equipment;
 Ordnance; and
 Stationary Industrial Equipment.

    MP&M Phase II will be proposed and promulgated approximately three 
years after the MP&M Phase I schedule. EPA currently intends to cover 
the following eight industrial sectors in MP&M Phase II:

 Bus and Truck;
 Household Equipment;
 Instruments;
 Motor Vehicle;
 Office Machine;
 Precious and Nonprecious Metals;
 Railroad; and
 Ships and Boats.

    EPA has identified these fifteen industrial sectors in the MP&M 
category; these sectors manufacture, maintain and rebuild products 
under more than 200 different SIC codes. In order to make the 
regulation more manageable, EPA has divided it into the two phases 
discussed above; lists of typical products manufactured within the two 
MP&M phases are included as appendices to the proposed regulation. 
Although EPA believes that it has clearly defined what the fifteen 
sectors are and how they have been divided into two phases for the 
purposes of regulation, EPA expects that some products will clearly fit 
within certain industry sectors while others will be more difficult to 
define. Some examples of how the proposed MP&M Phase I regulation would 
apply are provided below for clarification.
    An example of a clear fit would be a site which manufactures 
aircraft engines. The site would be considered to be within the 
aircraft industrial sector of MP&M. Since aircraft is an MP&M Phase I 
industry, the aircraft engine manufacturer would be covered by MP&M 
Phase I.
    Another example of a clear fit would be a site which manufactures 
school buses. The site would be considered to be within the bus and 
truck industrial sector of MP&M. Since bus and truck is an MP&M Phase 
II industry, the school bus manufacturer would be covered by MP&M Phase 
II.
    An example of a site which produces products which would fall under 
more than one MP&M Phase I industry would be a site which manufacturers 
farm tractors and farm conveyors. The site would be considered to be 
within the mobile industrial equipment and the stationary industrial 
equipment sectors. Since both mobile industrial equipment and 
stationary industrial equipment are MP&M Phase I industries, the farm 
tractor and farm conveyor manufacturer would be covered by MP&M Phase 
I. Although MP&M Phase I covers seven industrial categories, the 
proposed rule is not subcategorized by industrial sector (See Section 
VI). Instead, all seven MP&M Phase I industries are grouped together 
under one MP&M Phase I category.
    An example of a site that produces products within an MP&M Phase I 
industry and an MP&M Phase II industry would be a site which 
manufactures hand tools and household cooking equipment. The site would 
be considered to be within the hardware and household equipment 
sectors. Since hardware is an MP&M Phase I industry and household 
equipment is an MP&M Phase II industry, the site has operations in both 
MP&M phases. As discussed further below, EPA proposes to apply the MP&M 
Phase I rule to sites with operations in both MP&M Phase I and MP&M 
Phase II. As a result, all of the site's operations (including those 
performed to manufacture the cooking equipment) would be covered under 
MP&M Phase I. The coverage of sites that might be assigned to either 
Phase I or II is discussed further below.
    An example of a site which manufactures products which could be 
difficult to assign to a specific MP&M industrial sector would be a car 
door handle manufacturing site. If a car door handle were considered a 
piece of hardware, then the site would fit under MP&M Phase I (hardware 
industrial sector). If, on the other hand, the door handle were 
considered a motor vehicle part, then the site would fit under MP&M 
Phase II (motor vehicle industrial sector). In cases where 
[[Page 28215]] products could be viewed under different industrial 
sectors, EPA proposes that the industrial sector(s) which most 
accurately matches the market into which the product is sold be 
assigned. In addition, if a metal part has a specific use in one of the 
fifteen MP&M industrial sectors, then the sector in which it is 
intended to be used is the industrial sector that should be assigned to 
that site. In this example, the car door handle has no other uses than 
operating the door of a car, and this site would be considered a motor 
vehicle site (MP&M Phase II).
    Another example of a site which produces products which could be 
difficult to assign to a specific MP&M industrial sector would be a 
site which manufactures pistons for use in internal combustion engines, 
stationary generators, automotive engines, aircraft engines, truck 
engines, etc. Since the pistons are used in a wide variety of 
industrial applications and are not produced for use in a specific MP&M 
industry, the piston manufacture should be considered to be making a 
fabricated metal product and be covered under MP&M Phase I (hardware).
    EPA is soliciting comment from any industrial site which has the 
potential to be covered by MP&M but is uncertain as to their 
appropriate industrial sector and phase (MP&M Phase I or MP&M Phase II) 
classification. These sites are requested to supply information about 
what operations they are performing, what products they are 
manufacturing, and to what industries they are selling their products.
    As discussed above, some MP&M sites will have operations in both 
MP&M Phase I and Phase II industries. EPA proposes to apply the MP&M 
Phase I regulation to combined waste water discharges when a site is 
manufacturing, rebuilding or maintaining finished metal products in 
both Phase I and Phase II sectors.
    For example, a site manufacturing aircraft components and 
discharging process waste water in the process is included in the 
aircraft sector and thus its waste water discharges would be regulated 
by MP&M Phase I effluent guidelines. Another site which manufactures 
components that are used in aircraft and ships and generates waste 
water in the process which is combined and discharged would also be 
regulated by the MP&M Phase I effluent guidelines for the combined 
discharge. This proposal should alleviate burdens on the permit writers 
and allow the site to achieve compliance more cost effectively, since 
they will have to comply with one set of limits.
    EPA's data collection and analysis of MP&M sites included MP&M 
Phase I and Phase II overlap sites and processing of both Phase I and 
II parts at these sites. Many of these sites use the same equipment to 
manufacture, maintain, and rebuild goods for both Phase I and Phase II 
sectors, making it impossible to separate the two phases, and in many 
cases impossible to distinguish among the sectors, for these sites.
    Typical MP&M unit operations include any one or more of the 
following: abrasive blasting, abrasive jet machining, acid treatment, 
adhesive bonding, alkaline treatment, anodizing, assembly, barrel 
finishing, brazing, burnishing, calibration, chemical conversion 
coating, chemical machining, corrosion preventive coating, disassembly, 
electrical discharge machining, electrochemical machining, electrolytic 
cleaning, electroplating, electron beam machining, electropolishing, 
floor cleaning, grinding, heat treating, hot-dip coating, impact 
deformation, laminating, laser beam machining, machining, metal 
spraying, painting, plating, plasma arc machining, polishing, pressure 
deformation, rinsing, salt bath descaling, soldering, solvent 
degreasing, sputtering, stripping, testing, thermal cutting, thermal 
infusion, ultrasonic machining, vacuum metalizing, welding and numerous 
sub-operations within those listed above. In addition to waste water 
that is generated from these operations, these operations also 
frequently have associated rinses and water-discharging air pollution 
control devices which are also included under the scope of today's 
proposed regulation.
    Waste water from noncontact, nondestructive testing is also 
included under the scope of today's proposed regulation. A common 
source of ``testing'' waste water is photographic waste from 
nondestructive X-ray examination of parts.
    Many MP&M sites will also have operations covered by one of the 
existing metal processing effluent guidelines listed above in Section 
II.D. In general, with the exception of the metal finishing 
regulations, the existing effluent guideline will continue to apply to 
those operations judged to be covered by it. MP&M will provide the 
basis for establishing permit limitations for the unit operations which 
at present are not covered, covered by the metal finishing effluent 
guidelines regulation, or covered by best professional judgment. EPA is 
proposing to require that the MP&M Phase I effluent guidelines 
regulation replace the metal finishing regulation for sites with 
operations in an MP&M Phase I industrial sector. Both MP&M and metal 
finishing apply to the same types of unit operations. EPA has included 
the metal finishing sites in its data collection and study of the MP&M 
industry and has estimated the costs and impacts on these sites to 
comply with the proposed MP&M regulation. EPA anticipates that today's 
proposed limitations will impose more stringent requirements on waste 
water discharges from MP&M/metal finishing sites without undue economic 
impacts (see Section XIV), and therefore is proposing that MP&M replace 
metal finishing regulations for sites satisfying the MP&M Phase I 
criteria. Today's proposal does not apply to surface finishing job 
shops and independent circuit board manufacturers as defined in this 
regulation; they will continue to be covered by 40 CFR Part 413 and 40 
CFR Part 433.
    ``Surface finishing job shops'' defined in the proposed MP&M 
regulation are identical to ``job shops'' defined in the metal 
finishing category (40 CFR 433). Indirectly discharging job shops which 
were considered existing for the metal finishing category (existing 
prior to August 31, 1982) and independent printed circuit board 
manufacturers will continue to be covered by the electroplating 
category (40 CFR 413). Indirectly discharging jobs shops which were 
considered new sources for the metal finishing category and directly 
discharging job shops will continue to be covered by the metal 
finishing category.

III. Summary of Proposed Regulations

A. BPT

    EPA is proposing to establish concentration-based BPT limitations 
which reflect the best practicable technology performance. EPA proposes 
to require permit writers to convert the concentration-based 
limitations into mass-based limitations based on MP&M flow guidance in 
the MP&M Phase I Technical Development Document. This document provides 
guidance to permit writers on identifying sites with pollution 
prevention and water conservation technologies equivalent to those 
listed above (e.g., electrodialysis, reverse osmosis). EPA recognizes 
that there are many different pollution prevention and water 
conservation technologies that may achieve the same performance as 
those listed above; therefore, the Agency has provided permit writers 
guidance on assessing these technologies.
    EPA recommends that, for sites with pollution prevention and water 
[[Page 28216]] conservation technologies in place that are equivalent 
to those included as the basis for BPT, permit writers use historical 
flow as a basis for converting the concentration-based limitations to 
mass-based. For sites without these types of technologies in place, EPA 
recommends that permit writers do not use historical flow, but use 
other tools listed in the development document (e.g., measuring 
production through unit operations, measuring the concentration of 
total dissolved solids (TDS) in rinse waters) to convert the 
concentration-based limitations to mass-based. This approach encourages 
sites to implement good water use practices and investigate and install 
pollution prevention and water conservation technologies. By 
recommending use of historical flow only when sites have pollution 
prevention and water conservation technologies in place, EPA expects 
that permits based on BPT will reflect pollution prevention and water 
conservation technologies. If mass-based limitations have not been 
developed as required, the source shall achieve discharges not 
exceeding the concentration limitations listed in the regulation.
    The technology basis for BPT is end-of-pipe treatment using 
chemical precipitation and sedimentation (commonly referred to as lime 
and settle technology), used in conjunction with flow reduction and 
pollution prevention technologies. EPA has also included the following 
as a basis for BPT limits: oil-water separation through chemical 
emulsion breaking and either skimming or coalescing; cyanide 
destruction through alkaline chlorination; chemical reduction of 
hexavalent chromium; chemical reduction of chelated metals; and 
contract hauling of organic solvent-bearing waste waters. The 
technology basis of BPT is to apply these preliminary treatment 
technologies when necessary based on waste water characteristics.
    The following in-process pollution prevention and water 
conservation technologies were included as a basis for BPT:

--Flow reduction using flow restrictors, conductivity meters, and/or 
timed rinses, for all flowing rinses, plus countercurrent cascade 
rinsing for all flowing rinses;
--Flow reduction using bath maintenance for all other process water-
discharging operations;
--Centrifugation and 100 percent recycling of painting water curtains;
--Centrifugation and pasteurization to extend the life of water-soluble 
machining coolants, reducing discharge volume by 80 percent; and
--In-process metals recovery with ion exchange followed by electrolytic 
recovery of the cation regenerants for selected electroplating rinses. 
This includes first stage drag-out rinsing with electrolytic metal 
recovery.

    The discharge limitations included in today's proposal are based on 
the technology discussed above. However, it is important to note that 
these technologies are not mandated under effluent guidelines and 
pretreatment standards. Sites which would be covered by this proposed 
rule would be required to meet the discharge limitations but would not 
be required to use the technology basis discussed above.

B. BCT

    EPA is proposing to establish BCT limitations equivalent to BPT 
limitations.

C. BAT

    EPA is proposing to establish BAT limitations equivalent to BPT 
limitations.

D. NSPS

    EPA is proposing to establish NSPS equivalent to BAT limitations.
E. PSES

    EPA is proposing to establish PSES equivalent to BAT limitations. 
Facilities with an annual discharge volume less than 1,000,000 gallons 
are proposed to be exempt from PSES. For a site operating 250 days per 
year, 1,000,000 gallons per year translates into an average discharge 
flow rate of 4,000 gallons per day.

F. PSNS

    EPA is proposing to establish PSNS equivalent to BAT.

IV. Overview of the Industry

A. Industry Description

    As discussed above, the MP&M Phase I Category covers sites that 
generate waste water while manufacturing, maintaining or rebuilding 
finished metal parts, metal products, and machinery EPA within 7 
industrial sectors. See the discussion under Section II.G. of this 
notice for the scope of today's proposed rule.
    MP&M sites perform a wide variety of process unit operations on 
metal parts. For a given MP&M site, the specific unit operations 
performed and the sequence of operations depend on many factors, 
including the activity (i.e., manufacturing, rebuilding, or 
maintenance), industrial sector, and type of product processed. MP&M 
sites that repair, rebuild, or maintain products often perform 
preliminary operations that may not be performed at manufacturing 
facilities (e.g., disassembly, cleaning, or degreasing to remove dirt 
and oil accumulated during use of the product). Sites that manufacture 
products required to meet very strict performance specifications (e.g., 
aerospace or electronic components) often perform unit operations such 
as gold electroplating or magnetic flux testing that may not be 
performed when manufacturing other products.
    EPA identified 47 unit operations as typical operations performed 
at MP&M Phase I sites. The following general types of unit operations 
are included in Phase I of the MP&M Category:

 Metal shaping operations;
 Surface preparation operations;
 Metal deposition operations;
 Organic deposition operations;
 Surface finishing operations; and
 Assembly operations.

    Metal shaping operations (e.g., machining, grinding, impact and 
pressure deformation) are mechanical operations that alter the form of 
raw materials into intermediate and final product forms. Surface 
preparation operations (e.g., alkaline treatment, barrel finishing and 
etching) are chemical and mechanical operations that remove unwanted 
materials from or alter the chemical or physical properties of the 
surface prior to subsequent MP&M operations. Metal deposition 
operations (e.g., electroplating, metal spraying) apply a metal coating 
to the part surface by chemical or physical means. Organic deposition 
operations (e.g., painting, corrosion preventive coating) apply an 
organic material to the part by chemical or physical means. Metal and 
organic deposition operations may be performed for reasons such as 
protecting the surface from wear or corrosion, altering the electrical 
properties of the surface, or altering the appearance of the surface. 
Surface finishing operations (e.g., chromate conversion coating, 
anodizing, sealing) protect and seal the surface of the treated part 
from wear or corrosion by chemical means. Assembly operations (e.g., 
welding, soldering, testing, assembly) are performed to complete the 
manufacturing, rebuilding, or maintenance process.
    Revenues at Phase I MP&M sites range from less than $10,000 to more 
than $50 million (in 1989 dollars) annually. Phase I MP&M sites range 
in size from less than 10 employees and waste water discharge flows of 
less than 100 gallons per year to sites with tens of thousands of 
employees and waste water discharge [[Page 28217]] flows exceeding 100 
million gallons per year. Table 1 presents information on the waste 
water discharge flow ranges for Phase I MP&M sites based on responses 
to EPA's survey (See Section V.B. below).

                       Table 1.--Estimated Distribution of Sites by Baseline Range of Flow                      
----------------------------------------------------------------------------------------------------------------
                                                  Estimated    Estimated                                        
                                                  total flow   total load                                       
                                     Estimated     in range     in range    Estimated    Estimated    Estimated 
     Flow range (gal/yr/site)        number of    (millions    (millions    percent of   percent of   percent of
                                       sites       of gal/      of lbs/    total sites   total flow   total load
                                                    year)        year)                                          
----------------------------------------------------------------------------------------------------------------
0-10,000..........................        3,216          4.6          3.5           30           <1            1
10,000-1,000,000..................        5,109          800          150           48            3            8
Greater than 1,000,000............        2,276       22,000        1,500           22           97           91
                                   -----------------------------------------------------------------------------
    Totals........................       10,601       23,000        1,600          100          100          100
----------------------------------------------------------------------------------------------------------------
Source: 1989 Data Collection Portfolio.                                                                         

    As shown in Table 1, sites discharging more than 1,000,000 gallons 
per year (approximately 22% of the total Phase I sites) account for 
approximately 97% of the total waste water discharge and 91% of the 
pollutant load from the industry. For a site operating 250 days per 
year, 1,000,000 gallons per year translates into an average discharge 
flow rate of 4,000 gallons per day. In contrast, sites discharging less 
than 10,000 gallons per year (approximately 30% of the total Phase I 
sites) account for less than one percent of the overall waste water 
discharge flow and approximately one percent of the pollutant load for 
the industry. For a site operating 250 days per year, 10,000 gallons 
per year translates into an average discharge flow rate of 40 gallons 
per day.
    This regulation applies to process wastewater discharges from 
plants or portions of plants within the MP&M Phase I industries that 
manufacture, maintain, or rebuild finished metal parts, products or 
machines from any basis metal. A ``plant or portion of a plant'' is 
defined to include all activities or facilities located in a single 
building or on a contiguous parcel of property that are engaged in 
performing an MP&M-related industrial function. For instance, if an 
entity operates a chrome plating operation and, on a non-adjoining 
parcel of property and within the same fence line, operates a runway or 
vehicle maintenance shop, discharges resulting from these different 
activities would not be considered discharges from a single plant.
    EPA seeks comments on how to define which parcels of property 
within the same fence line on a mixed use property are contiguous. For 
example, should properties be divided into a system of grids with all 
discharges from sites within a single sector considered contiguous? 
Should discharges from a single building be treated as a plant or 
portion of a plant for purposes of determining the volume of discharge 
subject to regulation? Another option would be for permit writers to 
make the determination case-by-case based on some degree of proximity 
between industrial operations and a practical application of the 
requirements for MP&M Phase I industries (with due consideration to the 
amount of MP&M Phase I wastestream and its concentration in the overall 
wastestream discharged to the treatment works), the degree to which 
functions are related, and such other factors as EPA considers relevant 
to the determination.
    This definition is relevant in the determination of the amount of 
wastewater generated by a plant and the applicability of the provisions 
for small volume indirect dischargers. It is particularly important in 
the case of federal, state, and local government agencies or entities 
that perform highly varied function, more than one of which may be an 
MP&M Phase I or II activity located in separate areas of the same 
facility. For instance, one of the military services may operate an 
airfield, a metal plating facility, and a motor pool. While each of 
these facilities would be considered a plant, it would be illogical to 
consider the entire mixed use facility to be a single plant and to 
calculate its discharges collectively.
    Unlike the typical industrial plant, such as an aircraft or 
electronic equipment manufacturing plant with one primary manufacturing 
activity, the majority of military installations are mixed use 
facilities and more like municipalities with several small industries 
as well as other operations within their boundaries; they support a 
unique and wide variety of functions and activities, including 
residential housing, schools, churches, recreational parks, shopping 
centers, industrial operations, training ranges, airports, gas 
stations, utility plants, police and fire departments, and hospitals. 
Installations also include a variety of tenant activities, including 
contractor and other Department of Defense federal agency activities. 
Finally, the geographic size of many military installations (for 
example, over 300 square miles at Fort Hood, TX and over 1.1 million 
acres at the China Lake Naval Air Warfare Center, CA) makes it 
difficult to treat them as a single plant. Treating military 
installations or other mixed use facilities as multiple plants or 
portions of plants allows them to take advantage of any less stringent 
requirements for small volume indirect dischargers without 
significantly increasing the threat to human health or the environment. 
EPA seeks information from other facilities that believe they would 
fall within this mixed use facility category.

B. Estimation of Number of MP&M Phase I Sites

    Between 1986 and 1989, EPA conducted a preliminary study of the 
MP&M industry. For this study, EPA identified over 200 SIC codes 
pertaining to sites that would be included in the MP&M category 
(including Phase I and Phase II). Using information from Dun & 
Bradstreet, EPA estimated that there were 970,000 sites within these 
SIC codes, including 278,000 with more than nine employees. This 
estimate did not quantify the number of water-discharging MP&M sites. 
The basis for these estimates and a discussion of how EPA identified 
the SIC codes included in the MP&M category are presented in the 
Preliminary Data Summary For The Machinery Manufacturing and Rebuilding 
Industry (EPA 440/1-89/106, October 1989).
    As discussed above, to make the regulatory process for such a large 
number of sites more manageable, EPA decided to divide the MP&M 
category into two segments and to develop effluent guidelines 
regulations in phases. This is also described in EPA's regulatory plan 
published on January 2, 1990 (55 FR 80). The industrial sectors 
[[Page 28218]] in each phase are listed in Section II.G. Based on the 
Dun & Bradstreet estimates, Phase I sectors included approximately 
195,000 sites. EPA used the information collected from Dun & Bradstreet 
to conduct a screener survey of Phase I manufacturing, rebuilding, and 
maintenance sites and Phase II manufacturing sites. This survey is 
described in Section V.B. The results of this survey indicated that 
there were approximately 80,000 MP&M Phase I sites. The difference 
between the two estimates (195,000 sites versus 80,000 sites) was 
caused primarily by sites misclassified by Dun & Bradstreet and sites 
that had gone out of business. Approximately 20,000 of the MP&M Phase I 
sites were identified by the screener survey as water-discharging 
sites.
    EPA used the data collected by the screener survey to conduct a 
detailed survey of water-discharging MP&M Phase I sites. This 
questionnaire is described in Section V.B. This survey requested 
detailed information on unit operations and water use practices. The 
results of this survey indicated that there were an estimated 10,601 
MP&M Phase I water-discharging sites. The difference between the two 
estimates of water-discharging sites was primarily caused by sites that 
had misinterpreted questions on the screener survey.

C. Source Reduction Review Project

    Section 6604 of the PPA directs the Administrator to set up an 
office for the purpose, among other things, of reviewing for the EPA 
Administrator the impact that Agency regulations would have on source 
reduction (See 42 U.S.C. 13103). This office is to ``consider'' the 
effect of Agency programs on source reduction efforts and to ``review'' 
EPA's regulations prior and subsequent to their proposal to determine 
their effect on source reduction.
    The Source Reduction Review Project (SRRP) is a pilot program of 
the EPA to promote a source reduction approach in designing 
environmental regulations. The project's goal is to ensure that source 
reduction measures and implications of rules to other regulatory 
programs are fully considered during development of regulations. To the 
extent practicable and consistent with existing law, and considering 
cost-effectiveness as appropriate, the Agency will emphasize source 
reduction as the basis of its rules. Where source reduction cannot be 
implemented, the Agency will consider recycling, then treatment and if 
necessary disposal technologies and practices as the basis of its 
rules. Even in cases where EPA cannot base its rule on source reduction 
practices, the Agency may encourage the regulated community to consider 
using source reduction measures to comply with rules by providing 
information and economic incentives. To investigate opportunities for 
source reduction, EPA will consider source reduction in every phase of 
rule development: data collection, site visits, bench-scale technology 
testing, economic and technical analysis, multi-media impacts and 
agency and public reporting.
    Since initial data collection for MP&M preceded the PPA, the Agency 
did not collect much information about source reduction in the industry 
survey. Since the survey, the Agency has considered and evaluated 
opportunities for source reduction. In addition, the Office of Water 
has coordinated this rule with efforts by the Office of Air and 
Radiation to develop regulations for halogenated solvents, chromium 
electroplating, and others.
    The primary sources of waste waters generated by this industry are 
water-based lubricants used in the metal working (machining or 
deformation operations) or process solutions and rinses associated with 
surface treatment operations (cleaning, chemical etching or surface 
finishing). These waste waters afford considerable opportunities for 
pollution prevention and water conservation. As described in Section 
VII of this preamble, EPA has studied and observed a number of 
pollution-preventing and/or waste water conserving practices at a wide 
range of metal products and machinery facilities. This information is 
included in the Technical Development Document for MP&M Phase I. 
Because of the pollution prevention opportunities demonstrated by this 
industry, the Agency has included this rule in the SRRP. Some of the 
research on waste water treatment described in the next section focuses 
on waste water treatment that also allows for product recovery.
    The SRRP designation for the MP&M effluent guidelines has prompted 
EPA to look more closely at what some of the likely outcomes would be 
of applying the identified candidate BAT technologies. The Agency has 
looked beyond the usual estimation of the cost expected to be incurred 
by the industry to comply with this rule and the pollutants expected to 
be removed from the waste water stream. EPA also has estimated the 
savings that might be realized due to the water conservation and 
product recovery practices that are part of the best available 
technology. For example, EPA estimated the savings in water cost 
through flow reduction, as well as the reduction in costs for end-of-
pipe treatment associated with flow reduction. EPA also estimated the 
cost savings from recovery of metals through electrolytic recovery, and 
savings in virgin coolant from reduction of coolant discharge through 
centrifugation and pasteurization.

V. Data Gathering Efforts
A. Databases

    In developing the MP&M effluent guidelines, EPA evaluated the 
following data sources:

 EPA/EAD databases from development of effluent guidelines for 
other metals industries;
 The Office of Research and Development (ORD) Risk Reduction 
Engineering Laboratory (RREL) treatability database;
 The Fate of Priority Pollutants in Publicly Owned Treatment 
Works (50 POTW Study) database;
 The Domestic Sewage Study; and
 The Toxics Release Inventory (TRI) database.

These data sources and their uses for the development of the MP&M Phase 
I effluent guidelines are discussed below.
    EPA has promulgated effluent guidelines for 13 metals industries 
(See Section II.F. above). In developing these effluent guidelines, EPA 
collected waste water samples to characterize the unit operations and 
treatment systems at sites in these industries. Many of the sampled 
unit operations and treatment systems are operated at MP&M sites; 
therefore, EPA evaluated these data for transfer to the MP&M effluent 
guidelines development effort.
    For the MP&M Phase I pollutant loading and waste water 
characterization efforts, EPA reviewed the data collected for unit 
operations performed at both MP&M sites and at sites in other metals 
industries. EPA reviewed the Technical Development Documents (TDDs), 
sampling episode reports (SERs), and supporting record materials for 
the other metals industries to identify available data. EPA transferred 
data for unit operations that met the following two criteria:

 The unit operation was performed at MP&M Phase I sites; and
 EPA had not collected data for the unit operation from MP&M 
sites.

EPA keypunched the data into a database, which was combined with the 
data collected from the MP&M sampling program.
    For the MP&M technology effectiveness assessment effort, EPA 
reviewed data collected to characterize treatment systems sampled for 
the development of effluent guidelines for [[Page 28219]] other metals 
industries. For several previous effluent guidelines, EPA used 
treatment data from metals industries to develop the Combined Metals 
Data Base (CMDB), which served as the basis for developing limits for 
these industries. EPA also developed a separate database used as the 
basis for limits for the Metal Finishing category. EPA used the CMDB 
and Metal Finishing data as a guide in identifying well-designed and 
well-operated MP&M treatment systems. EPA did not use these data in 
developing the MP&M technology effectiveness concentrations, since 
sufficient data were collected from MP&M Phase I sites to develop 
technology effectiveness concentrations.
    EPA's Office of Research and Development (ORD) developed the Risk 
Reduction Engineering Laboratory (RREL) treatability database to 
provide data on the removal and destruction of chemicals in various 
types of media, including water, soil, debris, sludge, and sediment. 
This database contains treatability data from publicly owned treatment 
works (POTWs) for various pollutants. This database includes physical 
and chemical data for each pollutant, the types of treatment used to 
treat the specific pollutants, the type of waste water treated, the 
size of the POTW, and the treatment concentrations achieved. EPA used 
this database to assess removal by POTWs of MP&M pollutants of concern.
    In September, 1982, EPA published the Fate of Priority Pollutants 
in Publicly Owned Treatment Works (EPA 440/1-82/303), referred to as 
the 50 POTW Study. The purpose of this study was to generate, compile, 
and report data on the occurrence and fate of the 129 priority 
pollutants in 50 POTWs. The report presents all of the data collected, 
the results of preliminary evaluations of these data, and the results 
of calculations to determine:

 The quantity of priority pollutants in the influent to POTWs;
 The quantity of priority pollutants discharged from the POTWs;
 The quantity of priority pollutants in the effluent from 
intermediate process streams; and
 The quantity of priority pollutants in the POTW sludge 
streams.

EPA used the data from this study to assess removal by POTWs of MP&M 
pollutants of concern.
    In February, 1986, EPA issued The Report to Congress on the 
Discharge of Hazardous Wastes to Publicly Owned Treatment Works (EPA 
530-SW-86-004), referred to as the Domestic Sewage Study (DSS). This 
report, which was based in part on the 50 POTW Study, revealed a 
significant number of sites discharging pollutants to POTWs which are a 
threat to the treatment capability of the POTW. These pollutants were 
not regulated by national effluent regulations. Some of the major areas 
identified were in the metals industries areas, particularly an area 
called ``equipment manufacturing and assembly.'' This category included 
sites which manufacture such products as office machines, household 
appliances, scientific equipment, and industrial machine tools and 
equipment. The DSS estimated that the ``equipment manufacturing and 
assembly'' category discharges 7,715 metric tons per year of priority 
hazardous organic pollutants which are presently unregulated. Data on 
priority hazardous metals discharges were unavailable for this 
category. Further review of the DSS revealed other categories which 
were related to metals industries, namely the motor vehicle category, 
which includes servicing of new and used cars and engine and parts 
rebuilding; and the transportation services category, which includes 
railroad operations, truck service and repair, and aircraft servicing 
and repair. EPA used the information in the DSS in development of the 
Preliminary Data Summary (PDS) for the MP&M category.
    The Toxics Release Inventory (TRI) database contains specific toxic 
chemical release and transfer information from manufacturing facilities 
throughout the United States. This database was established under the 
Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), 
which Congress passed to promote planning for chemical emergencies and 
to provide information to the public about the presence and release of 
toxic and hazardous chemicals. Each year, manufacturing facilities 
meeting certain activity thresholds must report the estimated releases 
and transfers of listed toxic chemicals to EPA and to the state or 
tribal entity in whose jurisdiction the facility is located. The TRI 
list includes more than 300 chemicals in 20 chemical categories.
    EPA considered use of the TRI database for development of the MP&M 
effluent guidelines. However, EPA did not use TRI data on waste water 
discharges from MP&M sites because sufficient data were not available 
for effluent guidelines development. For example, in development of the 
MP&M effluent guidelines, production data were used that could be 
linked directly to pollutant loadings. This information was used to 
normalize pollutant loadings to production. The linked production and 
pollutant loadings data are not available in the TRI database. EPA also 
did not use the data on waste water discharges because many MP&M Phase 
I sites do not meet the reporting thresholds for the TRI database.

B. Survey Questionnaires

    EPA surveyed the metal products and machinery industry through two 
survey instruments pursuant to Section 308 of the Act. The first survey 
was titled ``1989 Machinery Manufacturing and Rebuilding Mini Data 
Collection Portfolio'' (OMB No. 2040-0148) or MDCP. The MDCP was sent 
to a random sample of 8,342 MP&M facilities, stratified within sector 
by Standard Industrial Classification (SIC) code. Facilities were 
classified by SIC code strata based on Dun & Bradstreet data. The 
sample size determination for each strata was based on the use of a 
coefficient of variation (CV) minimization procedure. The basic goal of 
the CV procedure was to minimize the number of facilities needed for 
the survey, subject to the condition that the separate strata variances 
would not be too large. The CV minimization procedure is described in 
the ``Data Base Summary Report for the Metal Products and Machinery 
Mini Data Collection Portfolio.'' A name and address list of sites was 
purchased from Dun & Bradstreet. This list included more than twice the 
number of sites specified by the CV procedure (for a total of 
approximately 22,110 sites). Within each SIC code, Dun & Bradstreet 
randomly selected the requested number of sites from the Dun & 
Bradstreet data base.
    EPA reviewed the Sites listed for each SIC code and deleted sites 
from the mailing list for the following three reasons: (1) Sites had 
SIC codes which were inconsistent with company names, (2) sites were 
corporate headquarters, or (3) sites had insufficient mailing 
addresses. After this review, EPA randomly selected sites to receive 
the MDCP.
    The purpose of the MDCP was to characterize the industry, help in 
the selection of sites to receive a more detailed questionnaire, and to 
estimate the number of MP&M sites in the country. To characterize sites 
engaged in MP&M activities, the MDCP requested the following site-
specific information:

 Name and address;
 Contact person;
 Parent company;
 Industrial sectors in which the site manufactures, rebuilds or 
maintains machines or metal components;
 SIC codes corresponding to products at the 
site; [[Page 28220]] 
 Number of employees;
 Annual revenues;
 Unit operations performed at the site;
 Process water use and waste water discharge for each unit 
operation performed at the site; and
 Base metals on which each unit operation is preformed.

    EPA sent the MDCP to randomly selected MP&M Phase I sites engaged 
in manufacturing, rebuilding, or maintenance operations. The MDCP was 
also sent to selected MP&M Phase II manufacturing sites to characterize 
the interfaces between MP&M phases. The MDCP was not sent to sites with 
SIC codes indicating that the sites were engaged in MP&M Phase II 
rebuilding or maintenance operations.
    The MDCP survey estimated that approximately 80,000 sites were 
engaged in Phase I sector activities. The majority of these sites were 
engaged only in Phase I sectors, since the majority of the MDCPs were 
sent to sites within Phase I sectors. The remainder of the sites were 
phase overlapped sites (engaged in industrial sectors in both Phase I 
and II) or Phase II only sites. Some of the smaller sites could have 
been misclassified as to their industrial sector based on the results 
of the MDCP, because the sites did not know their SIC code. Uncertainty 
as to SIC code is one of the reasons that EPA is not proposing to 
define the MP&M Phase I applicability in terms of SIC codes. Less than 
half of all engaged sites were estimated to be water users, and less 
than one-fourth were estimated to be water dischargers. Sites with 
operations in both Phase I and II (``overlap sites'') were more likely 
to use water than sites engaged only in Phase I activities (50% vs. 
35%). This may be partly because overlap sites were on average larger 
with respect to number of employees and revenues than sites engaged in 
Phase I activities only. In general, larger sites were more likely to 
use water than smaller sites. Nonconfidential information from the 
MDCPs is included in the MP&M public record.
    The second questionnaire, entitled ``1989 Machinery Manufacturing 
and Rebuilding Data Collection Portfolio (DCP)'' (OMB No. 2040-0148), 
was designed to collect detailed technical and financial information 
from water-using MP&M sites. Eight hundred ninety-six questionnaires 
were mailed in January 1991. Because a number of questionnaires were 
returned undelivered, an additional 124 questionnaires were mailed in 
January and February 1991, for a total of 1,020. EPA assumed that the 
undelivered DCP questionnaires represented sites that had gone out of 
business since the MDCP survey.
    The DCP was divided into six parts:

 General information;
 Process information;
 Water supply;
 Waste water treatment and discharge;
 Process and hazardous wastes; and
 Financial and economic information.

    The general information was requested to identify the site, to 
characterize the site by certain parameters (including number of 
employees, age, and location), and to confirm that the site was engaged 
in MP&M activities.
    The process information requested included details on products, 
production levels, unit operations, activity, water use for unit 
operations, waste water discharge from unit operations, miscellaneous 
waste water sources, pollution prevention or water conservation 
practices, and air pollution control for unit operations.
    The water supply section requested the site to specify the source 
of water, average intake flow, average intake operating hours, and the 
percentage of water used for MP&M operations.
    EPA requested detailed information on the waste water treatment 
systems used and the discharge volumes (including residuals), including 
a block diagram of the waste water treatment system; self-sampling 
monitoring data; and capital and operating cost data (including 
treatment chemical usage).
    The fifth section of the questionnaire requested detailed 
information on the types, amounts and composition of solid/hazardous 
wastes generated during production to evaluate the types and amounts of 
pollutants currently discharged, the amount of pollutants that are 
contract-hauled off-site, and the cost of hauling pollutants.
    The sixth section requested information on the site's finances and 
corporate structure.
    EPA selected sites to receive the DCP based on the responses 
obtained by the MDCP and other factors. Three population groups formed 
the basis of the survey of this industry.
    1. Water-discharging Phase I and overlap MDCP sites;
    2. Water-using Phase I and overlap MDCP sites that do not discharge 
process water; and
    3. Key water-discharging MP&M Phase I and overlap sites that did 
not receive the MDCP (discussed further below).
    EPA sent DCP's to all 860 Phase I and overlap water-discharging 
MDCP sites to characterize the potential variations in unit operations 
performed and water use practices among sites in the MP&M industry.
    In addition, a random sample of 50 MDCP recipients that use but do 
not discharge process water was selected by EPA to receive the DCP in 
order to provide information on potential zero-discharge unit 
operations. EPA selected these sites to obtain information on water-use 
practices from sites that use but do not discharge process water, and 
to determine if ``zero-discharge'' practices employed at those sites 
may be used at other MP&M sites. An additional 24 MDCP recipients that 
use but do not discharge process water were selected by EPA. These 
sites were selected to provide information on specific unit operations 
expected at each site.
    Eighty-six sites that did not receive the MDCP were selected by EPA 
to receive the DCP. These sites represent key MP&M companies that were 
not selected as DCP recipients based on the MDCP responses. EPA's 
intent in selecting these sites was to characterize leading companies 
in the MP&M category. The key companies were identified from the Dun & 
Bradstreet company listings, the Thomas Register, and MP&M site visits. 
These key companies reported annual revenues of $50 million or more or 
were recognized by the EPA to be leading companies in their particular 
sector. Each company was contacted to identify sites within the company 
that were engaged in MP&M activities and used process water to perform 
MP&M unit operations. The one or two sites believed to perform the most 
water-using MP&M unit operations from each key company were selected to 
receive the DCP. Non-confidential information contained in the DCPs are 
included in the public record.

C. Waste Water Sampling and Site Visits

    EPA visited 98 MP&M sites between 1986 and 1993 to collect 
information about MP&M unit operations, water use practices, pollution 
prevention and treatment technologies and waste disposal methods, and 
to evaluate sites for potential inclusion in the MP&M sampling program. 
In general, EPA selected sites for visits to encompass the range of 
sectors, unit operations, in-process source reduction and recycling 
practices, and treatment operations within the MP&M industry. EPA's 
site visits encompassed sites in both Phase I and II but focused 
primarily on Phase I sites. EPA also performed site visits at military 
installations, government owned and operated sites, and government 
owned contractor operated sites. In addition, EPA visited four job shop 
electroplating sites that performed [[Page 28221]] in-process source 
reduction and recycling technologies.
    EPA selected sites from information contained in the MDCPs and 
DCPs, and also through contacts with EPA regional personnel, state 
environmental agency personnel, local pretreatment coordinators, and 
pollution prevention and technical assistance providers. These 
personnel helped EPA identify MP&M sites believed to be operating in-
process source reduction and recycling technologies or end-of-pipe 
waste water treatment technologies.
    To ensure that EPA selected sites that encompassed the range of 
sectors and unit operations within the MP&M industry, the Agency used 
the following general criteria as part of the basis for selecting sites 
for visits:

    1. The site performed MP&M unit operations in an industrial 
sector in which sites had not previously been visited.
    2. The site performed MP&M unit operations that had not been 
observed during previous site visits.
    3. The site had water use practices that were believed to be 
representative of the site's industrial sector.
    4. The site operated in-process source reduction, recycling, or 
end-of-pipe treatment technologies considered in the development of 
the MP&M technology options.

    EPA visited sites of various sizes, with waste water flows ranging 
from less than 200 gallons/day to more than 1,000,000 gallons/day.
    EPA collected detailed information from the sites visited such as 
unit operations performed and the types of metals processed through 
these operations, purpose of the unit operation and any waste water 
associated with it, and in-process source reduction and water 
conservation practices as well as whether these source reduction 
practices caused any cross-media impacts. Also collected during the 
site visits were information on the end-of-pipe treatment technologies 
and, if the facility was a candidate for sampling, the logistics of 
collecting samples. All nonconfidential information collected during 
site visits are included in the public record.
    The Agency conducted waste water sampling at 27 sites between 1986 
and 1993. EPA sampled at least two sites in each of the seven MP&M 
Phase I sectors, as well as several sites in Phase II sectors. EPA also 
sampled waste water at one job shop electroplating site to characterize 
surface treatment operations and end-of-pipe treatment systems that 
were comparable to MP&M unit operation and treatment systems. EPA 
selected sites for sampling for reasons such as the following:

 The site performed MP&M unit operations that had not been 
sampled at other sites;
 The site processed metals through MP&M unit operations for 
which the metal/unit operation combination had not been sampled at 
other sites;
 The site performed in-process source reduction recycling, 
or end-of-pipe treatment technologies that were considered for 
technology option development; or
 The site performed unit operations in a sector in which 
samples had not previously been collected.

    EPA sampled sites with waste water flows ranging from less than 200 
gallons/day to greater than 600,000 gallons/day.
    During sampling, EPA collected samples of both raw (untreated) 
waste water and treated waste water, frequently across individual unit 
treatment operations, to characterize the performance of the entire 
treatment system. In addition, EPA gathered flow data corresponding to 
each sample, and design and operating parameters for source reduction, 
recycling and treatment technologies. EPA also collected samples of 
unit operations to determine pollutant loadings at the unit operation 
level as well as flow and production data corresponding to each sample. 
All data collected during the sampling episodes are included in the 
sampling reports which are in the rulemaking record.

D. EPA Bench Scale Treatability Studies (Terpene Study)

    Terpenes are a broad classification of 10, 15, 20 or 30 carbon-atom 
compounds and derivatives produced from citrus fruits, wood turpentine, 
and wood pulp byproducts. Increasingly, these compounds are being used 
in industrial cleaning formulations designed for printed circuit board 
defluxing and metal degreasing operations. The popularity of these 
terpene-based cleaners is based primarily on their ability to replace 
the usage of suspected ozone-depleting chemicals such as 1,1,1-
trichloroethane and 1,1,2-trichloro-1,2,2-trifluoroethane (e.g., CFC-
113).
    In general, the use of terpene-based cleaners in these applications 
is considered environmentally preferable to chlorinated solvents. 
However, studies conducted by EPA's Office of Toxic Substances (OTS) 
indicate that substitution of chlorinated solvents with terpene-based 
cleaners will result in increased discharges of these chemicals to 
waste water from these industrial operations. The OTS studies also 
identified potential aquatic toxicity concerns associated with several 
specific terpene compounds. These concerns, combined with the fact that 
most industrial facilities engaged in printed circuit board defluxing 
and metal cleaning operations discharge their waste water into public 
sewers, created the need to better understand the fate of terpene 
compounds in a typical municipal waste water treatment system.
    EPA's Risk Reduction Engineering Laboratory (RREL) conducted a 
study to quantify the fate of specific terpene compounds in the 
activated sludge waste water treatment process. The study was conducted 
using pilot-scale equipment at EPA's Test and Evaluation (T&E) Facility 
in Cincinnati, Ohio. The specific goal of the research was to establish 
the percentage of the terpene mass entering a typical activated sludge 
process that is (1) biodegraded, (2) partitioned to waste sludge, (3) 
volatilized to air, and/or (4) passed through the treatment process 
unchanged.
    This study on the fate of specific terpene compounds in the 
activated sludge waste water treatment process produced the following 
conclusions:

 The primary fate of d-limonene and terpinolene in a typical 
municipal waste water treatment process (primary clarifier/activated 
sludge) is biodegradation followed by sorption onto primary 
clarifier solids and volatilization.
 The activated sludge process typically produces d-limonene 
and terpinolene effluent concentrations below 10 g/L, 
corresponding to influent concentrations as high as 10,000 
g/L.

    EPA's terpene study was conducted to determine the treatability of 
terpene in municipal waste water treatment systems. The results of the 
study indicate that the primary removal mechanism for the terpenes 
studied in the activated sludge process is biodegradation. EPA studied 
terpenes because they represent one broad class of compounds in use as 
replacements for ozone depleting chlorinated solvents. A wide variety 
of non-terpene compounds are also being used as solvent substitutes, 
but these compounds were not examined in this study.

VI. Industry Subcategorization

    EPA is not proposing to subcategorize the MP&M Phase I category. 
EPA considered a number of potential subcategorization schemes as 
described below, but concluded that no basis exists for creating 
subcategories and the only way to establish a categorical regulation 
that could be implemented to ensure the most effective treatment and 
removal of waste water pollutants was [[Page 28222]] to not 
subcategorize this industrial category.
    The subcategorization factors considered were based on 
subcategorization factors required by the Clean Water Act, as well as 
factors that have been used as a basis for subcategorization in other 
metals industry regulations. These factors include:

 unit operation;
 activity;
 raw materials;
 products;
 size of site;
 location;
 age;
 economic impacts;
 total energy requirements;
 air pollution control methods; and
 solid waste generation and disposal.

    EPA considered subcategorizing the MP&M Phase I category by unit 
operation. EPA identified 47 unit operations, subsets of which are 
typically performed at MP&M sites. These unit operations can use 
differing amounts of water, generate different pollutant loadings, and 
can be performed in different combinations; however, the resulting 
waste waters exhibit general characteristics that allow the waste 
waters to be treated by the technologies on which this proposed rule is 
based (See Section IX.). Subcategorization by unit operation is 
technically feasible, but would result in approximately 47 
subcategories with facilities operating under numerous subcategories. 
This would result in a very complex and unmanageable regulatory 
structure. The waste water characteristics for a given unit operation 
are expected to be similar across the other subcategorization factors 
listed above. As a result, EPA is not proposing to subcategorize by 
unit operation.
    EPA also considered subcategorizing this industry by activity; 
i.e., manufacturing, rebuilding, and maintenance. Manufacturing is 
defined as the series of unit operations necessary to produce metal 
products, generally performed in a production environment. Rebuilding 
is defined as the series of unit operations necessary to disassemble 
used metal products into components, replace one or more components or 
subassemblies or restore them to original function, and reassemble the 
metal product. Rebuilding is generally performed in a production 
environment. Maintenance is defined as the series of unit operations, 
on original or replacement components, required to keep metal products 
in operating condition. Maintenance is generally performed in a non-
production environment.
    Based on the results of the DCP survey, the estimated percentages 
of water discharging Phase I sites performing each activity are listed 
below:

                                                                        
                                                                 Percent
                                                                        
Manufacturing only............................................        71
Rebuilding only...............................................         1
Maintenance only..............................................         8
Manufacturing and rebuilding..................................        13
Manufacturing and maintenance.................................         2
Rebuilding and maintenance....................................         2
Manufacturing, rebuilding & maintenance.......................         3
                                                                        

    With the exception of the initial cleaning steps for rebuilding and 
maintenance (discussed below), waste water characteristics do not vary 
across activity. Results of analyses of the DCP database indicate that 
the production-normalized flow (volume of waste water discharged per 
unit of production) for each unit operation does not depend on the 
activity. Additionally, for sites performing multiple activities, the 
same unit operations are often used for multiple activities (e.g., a 
machining process may be used to both manufacture and rebuild parts). 
Information collected during site visits at MP&M Phase I sites supports 
these conclusions.
    The initial cleaning steps associated with rebuilding and 
maintenance may have unique waste water characteristics because of the 
presence of oil, grease, and grime not present in cleaning during 
manufacturing. These pollutants are present in waste waters generated 
by other operations at manufacturing, rebuilding, and maintenance sites 
(e.g., machining and grinding), and a technology used to remove these 
pollutants (oil-water separation) is included in the technology options 
considered for MP&M Phase I. Based on analytical data collected at 
rebuilding sites, the waste waters from initial cleaning require 
additional preliminary treatment capacity for oil-water separation, but 
do not impact the overall treatability of waste water from rebuilding 
sites. The impact of the oil and grime in the initial cleaning steps 
was accounted for in the development of compliance cost estimates and 
pollutant loading estimates. Because the initial cleaning steps do not 
impact waste water treatability, sites performing these cleaning steps 
can achieve the same effluent concentrations as sites that don't 
perform these steps.
    Subcategorization by raw material may be appropriate when sites 
process similar types of raw materials, and these raw materials dictate 
a site's overall waste water characteristics. Raw materials at MP&M 
sites consist of base metals processed (e.g., bar stock, sheet stock, 
ingots, formed parts) and applied materials (e.g., paint, corrosion 
preventive coatings, metal applied during electroplating, electroless 
plating, and metal spraying).
    Data from the DCP database and site visits indicate that the waste 
water discharge rates from unit operations are not dependent on the 
base metal processed or material applied. The base metal or material 
applied affects the site's waste water characteristics; however, EPA 
accounted for this in calculating technology effectiveness 
concentrations and pollutant loading estimates.
    Based on the DCP results it is estimated that more than half of the 
MP&M Phase I sites process more than one type of base metal or metal 
applied. The estimated percentages of sites by the number of metal 
types processed are as follows:

                                                                        
                                                                 Percent
                                                                        
Zero metal types..............................................        <1
One metal type................................................        43
Two metal types...............................................        32
Three metal types.............................................        15
Four metal types..............................................         4
Five or more metal types......................................         6
                                                                        

    The metal types processed at MP&M sites are diverse, and sites 
periodically change metal types. At sites processing multiple metal 
types, individual unit operations frequently process more than one 
metal type (e.g., a machining operation can process nickel, aluminum, 
and iron parts). Additionally, not all metal types processed at a site 
are processed through all unit operations. For example, a site may 
process aluminum and iron base metals. Anodizing is performed on the 
aluminum, and electroplating on the iron. Both metals share the same 
alkaline and acid treatments. Subcategorizing by base metal type would 
place the anodizing operation in the aluminum subcategory, the 
electroplating operation in the iron subcategory, and the alkaline and 
acid treatments in both subcategories. While this subcategorization 
scheme is possible, the Agency did not select this approach because the 
waste water discharge rates from unit operations are not dependent on 
metal type. Also, EPA considered the effect of metal type on waste 
water characteristics in calculating technology effectiveness 
concentrations and pollutant loadings.
    EPA considered subcategorizing the MP&M category by industrial 
sector (e.g., aerospace, aircraft, electronic [[Page 28223]] equipment, 
hardware, mobile industrial equipment, ordnance, and stationary 
industrial equipment). However, waste water characteristics, unit 
operations, and raw materials used to produce products within a given 
sector are not always the same from site to site, and they are not 
always different from sector to sector. Within each sector, sites can 
perform a variety of unit operations on a variety of raw materials. For 
example, a site in the aerospace sector may primarily machine aluminum 
missile components and not perform any surface treatment other than 
alkaline cleaning. Another site in that sector may electroplate iron 
parts for missiles and perform little or no machining. Waste water 
characteristics from these sites may differ because of the different 
unit operations performed and different raw materials used.
    Based on the analytical data collected for this rule, EPA has found 
no statistically significant difference in industrial waste water 
discharge among industrial sectors for cadmium, chromium, copper, 
cyanide, lead, nickel, oil & grease, silver, TSS and zinc. The 
analytical data are available in the public record for this rulemaking.
    Most MP&M unit operations are not unique to a particular sector and 
are performed across all sectors. Major waste water-generating unit 
operations (e.g., alkaline treatment, acid treatment, machining, 
electroplating) are performed in all sectors. The unit operations that 
are rarely performed (e.g., abrasive jet machining) are not performed 
in all sectors, but are also not limited to a single sector. Based on 
the information obtained from engineering site visits and sampling 
episodes, these unit operations do not affect the overall treatability 
of waste waters generated at sites performing these unit operations. 
Therefore, the raw waste waters are expected to have similar 
treatability across the MP&M Phase I sectors.
    EPA considered subcategorization of the MP&M Phase I category on 
the basis of site size. Three parameters were identified as relative 
measures of MP&M site size: number of employees, production, and waste 
water discharge flow rate.
    Raw materials, unit operations, and waste water characteristics are 
independent of the number of site employees. A review of the DCP 
database shows that production-normalized flows do not depend on the 
number of employees. A correlation between the number of employees and 
waste water generation can be difficult to develop due to variations in 
staff. Fluctuations can occur for many reasons, including shift 
differences, clerical and administrative support, maintenance workers, 
efficiency of site operations, degree of automation, and market 
fluctuations. For these reasons, EPA did not subcategorize by number of 
employees.
    EPA did not subcategorize by site production, since the production 
through an MP&M Phase I site does not reflect the production through 
process waste water-generating unit operations. For example, two sites 
may each process 100 tons of steel annually. One site may process all 
of the steel through an electroplating line, while the other may 
perform dry assembly for 95 tons, and process five tons through a 
machining operation. If production through the entire site were used 
for subcategorization, these two sites would be placed in the same 
subcategory while their waste water characteristics would be different.
    EPA did not subcategorize by site waste water discharge flow rate 
because the waste water characteristics for a site are independent of 
the overall waste water discharge flow rate from a site. Waste water 
characteristics are primarily a function of the raw materials and unit 
operations at a site, and not the site's waste water discharge flow. 
For example, a site performing one machining operation on steel and 
discharging 100 gallons per year (gpy) of waste water would have 
similar waste water characteristics as a site with 1,000 machining 
operations on steel discharging 100,000 gpy, provided the sites have 
similar water use practices. A review of the DCP database shows that 
water use practices, as measured by production-normalized flow rates, 
do not depend on the overall waste water discharge flow rate from a 
site. The raw materials and unit operations also do not vary by site 
discharge flow rate.
    For sites discharging to publicly owned treatment works (POTWs), 
EPA divided the MP&M Phase I population by waste water discharge rate 
to facilitate implementation (see Section III.E).
    EPA also considered subcategorizing MP&M facilities on the basis of 
economic characteristics of these facilities. If a group of facilities 
with common economic characteristics, such as revenue size, was in a 
much better or worse financial condition than others, then it might be 
appropriate to subcategorize based on economics. However, analyses of 
the financial conditions of facilities showed no significant pattern of 
variation across possible subcategories.
    While any group of facilities is likely to differ from any other 
group of facilities, the relevant issue is whether these differences 
were random differences due to the normal variation characteristic of 
all MP&M businesses, or whether these differences were systematically 
and predictably related to some shared economic characteristic. Linear 
regression and logistic regression were used to test for systematic 
variations in the financial condition and performance of subcategories 
of facilities grouped according to the following kinds of economic 
characteristics:
     Primary Line of Business: Facilities were assigned to MP&M 
sectors according to the sector in which they earned most of their 
revenues. The financial condition and performance of facilities across 
sectors did not vary in a statistically significant way.
     Customer Type: Responding facilities indicated the 
percentage of revenues they earned from three customer types, 
government, domestic non-government and foreign customers. When 
facilities were grouped according to their dependence on each of these 
customer types, statistical analyses found no significant differences 
in the financial condition or performance of the various groups.
     MP&M Activity: Responding facilities indicated the 
percentage of revenues they earned from each of three categories of 
activities (manufacturing, repairing and rebuilding). Facility 
financial performance and condition did not vary systematically with 
variations in dependence on the three categories of activities.
     Revenue Size: Facilities subcategorized by revenue size 
did not differ in financial condition or performance in a statistically 
significant way.
    Appendix D of the Industry Profile of the Metal Products and 
Machinery Industry Phase I documents the methodology and findings in 
detail. This document is in the MP&M public record. Based on these 
analyses, EPA found no reasonable economic basis for subcategorizing 
MP&M facilities.
    EPA is directed by the Clean Water Act to consider geographic 
location as a potential factor in subcategorizing an industrial 
category. The MP&M sites are generally located all over the country, 
however, almost two-thirds are located east of the Mississippi, with 
pockets of sites in Texas and California. EPA generally found that the 
sites located in California had installed more water conservation 
equipment and were generally more sensitive to water consumption 
concerns than the sites located in the rest of the country. EPA expects 
this is due to the nearly decade long drought suffered by California 
[[Page 28224]] during the 1980's, as well as local regulations that are 
often stricter than other areas of the country. However, EPA did not 
find this limited water conservation a sufficient basis for 
subcategorization.
    Other factors that EPA is directed to consider by the Clean Water 
Act include total energy requirements, non-water quality 
considerations, and age of facilities. Energy requirements vary widely 
throughout the MP&M Phase I category; however, EPA did not 
subcategorize by this factor because the energy requirements are not 
directly related to waste water characteristics. Energy costs resulting 
from this regulation were accounted for in the economic impact 
assessment for this regulation. Non-water quality considerations 
include solid waste and air pollution generation. EPA did not 
subcategorize by these factors because solid waste and air pollution 
characteristics and generation rates depend on the raw materials 
processed and unit operations performed at MP&M sites, and are not 
directly related to waste water characteristics. The non-water quality 
impacts and costs of solid waste and air pollution control associated 
with this regulation were considered in the economic analysis and 
regulatory impact analysis for this regulation.
    EPA did not subcategorize by age of facility because site age does 
not account for differences in raw waste water characteristics. The 
percentage of sites by the decade in which they were built is listed 
below. This information is based on the DCP respondents that reported 
the date in which their facility was built:

                                                                        
                                                                 Percent
                                                                        
Before 1920...................................................         4
1920 through 1929.............................................         3
1930 through 1939.............................................         2
1940 through 1949.............................................         8
1950 through 1959.............................................         8
1960 through 1969.............................................        13
1970 through 1979.............................................        40
1980 through 1989.............................................        21
1990*.........................................................         1
                                                                        
* The DCP was mailed on January 2, 1991.                                

    The majority of the sites have been built since 1960. The DCP 
respondents reported a wide range of ages; however, based on 
information in the DCPs and from site visits, MP&M Phase I sites 
continually modernize to remain competitive. For example, several sites 
visited that were built before 1960 had recently installed either new 
electroplating lines with in-process pollution control technologies or 
in-process pollution control technologies on existing electroplating 
lines. Another site which was initially built before 1940 had recently 
installed a new heat treating process. This type of modernization is 
typical in the MP&M Phase I industry. Modernization of production 
processes and pollution control equipment produces similar wastes among 
all sites of various ages that are performing similar types of 
operations; therefore, site age does not account for differences in the 
raw waste water characteristics and was not selected as a basis for 
subcategorization.

VII. Water Use and Waste Water Characteristics

A. Waste Water Sources and Characteristics

    The unit operations included in the MP&M category can be classified 
by water use practices into those that typically use process water and 
discharge process waste water, unit operations that typically either do 
not use process water or use process water but do not discharge waste 
water, and miscellaneous operations reported in DCP responses by fewer 
than five MP&M sites.
    Process waste water includes any water that, during manufacturing 
or processing, comes into direct contact with or results from the 
production or use of any raw materials, intermediate products, finished 
products, by-products, or waste products. Process waste water includes 
waste water from wet air pollution control devices. Non-contact cooling 
water is not considered a process waste water. Non-aqueous wastes used 
as processing liquids, such as spent solvents or quench oil, are also 
not considered process waste waters.
    As discussed below, waste waters from the operations that use 
process water have different characteristics depending on the unit 
operation from which they are derived. First, oil-bearing waste waters 
are typically metal shaping coolants and lubricants, surface 
preparation solutions used to remove oil and dirt from components, and 
associated rinses. Some examples of oil-bearing waste waters are: 
machining and grinding coolants and lubricants; pressure and impact 
deformation lubricants; dye penetrant and magnetic flux testing; and 
alkaline cleaning solutions and rinses used to remove oil and dirt. 
These waste waters typically require preliminary treatment to remove 
oil. Chemical emulsion breaking followed by oil skimming is typically 
used for this treatment. Membrane separation technologies are also used 
for oil removal.
    Second, hexavalent chromium-bearing waste water typically consists 
of concentrated surface preparation or metal deposition solutions, 
sealants, and associated rinses. Some examples of hexavalent chromium-
bearing waste waters are: chromic acid treatment solutions and rinses; 
chromate conversion coating solutions and rinses; and chromium 
electroplating solutions and rinses. These waste waters typically 
require preliminary treatment to reduce the hexavalent chromium to 
trivalent chromium for subsequent chemical precipitation and settling. 
Sodium metabisulfite is typically used for this reduction.
    Third, process waste waters that contain cyanide are typically 
generated by surface preparation or metal deposition solutions and 
their associated rinses. Two examples of cyanide-bearing waste waters 
are: cyanide-bearing alkaline treatment solutions and rinses (typically 
used as a surface treatment step prior to electroplating with cyanide 
solutions) and cyanide-bearing electroplating solutions and rinses. 
These waste waters typically require preliminary treatment to destroy 
cyanide and facilitate subsequent chemical precipitation and settling. 
Sodium hypochlorite is typically used for this treatment.
    Fourth, process waste waters that contain complexed metals are 
typically concentrated surface preparation or metal deposition 
solutions and their associated rinses. Complexed metal-bearing waste 
waters are usually generated at MP&M sites by electroless plating 
operations and their rinses. These waste waters require preliminary 
treatment to break the complexes for subsequent chemical precipitation 
and settling.
    Finally, virtually all of the MP&M process waste waters contain 
some metallic pollutants. The most concentrated metal bearing waste 
waters include metal shaping solutions, surface preparation solutions, 
metal deposition solutions, and surface finishing solutions. Chemical 
precipitation (usually with either lime or sodium hydroxide) and 
settling is typically used for metals removal. Coagulants and 
flocculants may be added to assist chemical precipitation and settling.

B. Pollution Prevention, Recycle, Reuse and Water Conservation 
Practices

    The data gathered to support this rule indicate that a number of 
pollution prevention and water conservation practices exist in the MP&M 
industries. Some of these pollution prevention, recycling, and water 
conservation practices were determined to be broadly applicable to the 
MP&M category, and [[Page 28225]] these were included in the technology 
options (see Section III.A.).
    A large number of additional pollution prevention practices were 
site specific and could not be used as the basis for a national 
standard. However, EPA considers it important to make this site 
specific pollution prevention information available for possible use by 
MP&M sites. Therefore, the Technical Development Document contains a 
bibliography of the pollution prevention practices identified during 
the development of this rule. EPA's proposed flow guidance also 
discusses the applicability of the more prevalent pollution practices 
identified in this category.

VIII. Approach for Estimating Costs and Pollution Reductions 
Achieved by Waste Water Control Technology

    EPA estimated industry-wide compliance costs and pollutant loadings 
using model sites based on DCP respondents and a computerized design 
and cost model for the MP&M technology options. Industry-wide costs and 
pollutant loadings were estimated for three technology options based on 
technologies designed for 396 model sites. Statistically calculated 
weights were used to scale those results to the estimated 10,601 MP&M 
Phase I sites nationwide which are expected to incur costs under the 
regulation.
    The 396 model sites were a subset of the 860 sites which indicated 
that they were water dischargers on their MDCP survey response. Six 
hundred seventy five of these sites returned the subsequent DCP and 
their responses were entered into the DCP database. Of these 675 sites 
in the DCP database, 396 were chosen to be model sites for the 
following reasons:
     The site generated revenue from a Phase I sector, as 
determined from the economic section of the DCP (for some sites, an 
economic sector was not identified; therefore, the sector identified in 
the technical section of the DCP was used); and
     The site supplied sufficient economic and technical data 
to estimate compliance costs and pollutant loadings of the MP&M 
technology options.
    Each of the 396 sites selected was assessed to determine the unit 
operations, waste water characteristics and treatment technologies 
currently in place at the sites.
    Based on the information provided by the sites in their DCP 
responses, follow-up letters, and phone calls, each waste water stream 
was classified by the type of unit operation (e.g., machining, 
electroplating, acid treatment, etc.) and base metal type (e.g., steel, 
aluminum, zinc, etc.). The following additional DCP data were used to 
characterize process waste water streams: waste water discharge flow 
rate, production rate, operating schedule, and discharge destination. 
Many of the 396 sites provided these data for all waste water streams 
generated on site. For sites that did not provide complete data, the 
missing data were either estimated based on technical considerations 
specific to the site, or were statistically imputed. The concentration 
of each pollutant in each waste water stream was modelled from field 
sampling of waste water discharges from the unit operation/metal type 
combinations at other MP&M sites. DCP responses were used to identify 
the following information about end-of-pipe technologies in place at 
MP&M sites: the types of treatment units in place; the unit operations 
discharging process waste water to each treatment unit; and the 
operating schedule of each treatment unit.
    A computerized design and cost model was developed to estimate 
compliance costs and pollutant loadings for the MP&M technology 
options, taking into account each site's level of treatment in place. 
The model was programmed with technology-specific modules which 
calculated the costs for various combinations of technologies as 
required by the technology options and the model site waste water 
stream characteristics. Design and cost data were based on MP&M site 
data, literature data, and vendor data.
    Technology-specific cost modules were developed for the in-process 
pollution prevention and water use reduction technologies and end-of-
pipe treatment technologies discussed in Section IX below. The model 
provided the following types of information for each technology 
designed for a model site:

 Capital costs;
 Operating and maintenance costs;
 Electricity used and associated cost;
 Sludge generation and associated disposal costs;
 Waste oil generation and associated disposal costs;
 Water use reduction and associated cost credit;
 Metal reclaimed and associated cost credit;
 Chemical usage reduction and associated cost credit;
 Effluent flow rate; and
 Effluent pollutant concentrations.

    If contract hauling of waste water for off-site treatment and 
disposal was less costly than on-site treatment, EPA estimated costs 
assuming the model site would contract haul the waste water. EPA made 
this assessment on a technology-specific basis.
    After estimation of capital and operating and maintenance costs, 
the total capital investment (TCI), total annualized cost (TAC), and 
monitoring costs were calculated. Sites that reported being regulated 
by categorical limitations and standards were assumed to currently 
incur some monitoring cost.

IX. Best Practicable Control Technology Currently Available

A. Need for BPT Regulation
    The MP&M Phase I regulation is estimated to potentially apply to 
10,601 facilities nationwide. Although there are a number of metal 
processing categorical effluent guidelines that also apply to some 
operations performed at MP&M sites, these other effluent guidelines 
only affect approximately 2,000 MP&M Phase I sites. Thus, a large 
number of MP&M Phase I facilities do not have any effluent limitations 
guidelines. EPA estimates that 1,895 MP&M sites that are direct 
dischargers currently discharge substantial quantities of pollutants 
into the surface waters of the United States, including 18 million 
pounds per year of oil and grease, 2.6 million pounds per year of total 
suspended solids, 0.56 million pounds per year of priority pollutants, 
and 0.6 million pounds per year of nonconventional metal pollutants. 
EPA estimates that the proposed BPT limitations will reduce these 
quantities to 150,000 pounds per year of oil and grease, 360,000 pounds 
per year of total suspended solids, 40,000 pounds per year of priority 
metal pollutants, and 130,000 pounds per year of nonconventional metal 
pollutants.

B. BPT Technology Options and Selection

    EPA considered three regulatory options on which to base BPT 
limitations.
    1. Option 1: Lime and Settle Treatment. Option 1 consists of 
preliminary treatment for specific pollutants and end-of-pipe treatment 
with chemical precipitation (usually accomplished by raising the pH 
with an alkaline chemical such as lime or caustic to produce insoluble 
metal hydroxides) followed by clarification. This treatment, which is 
also commonly referred to as lime and settle treatment, has been widely 
used throughout the metals industry and is well documented to be 
effective for removing metal pollutants. As with a number of previously 
promulgated regulations, EPA has established BPT on the basis 
[[Page 28226]] that all process waste waters, except solvent bearing 
waste waters, will be treated through lime and settle end-of-pipe 
treatment.
    All of the regulatory options considered for the MP&M category are 
based on a commingled treatment of process waste waters through lime 
and settle with preliminary treatment when needed for specific waste 
streams. Preliminary treatment is performed to remove oil and grease 
through emulsion breaking and oil skimming; to destroy cyanide using 
sodium hypochlorite; to reduce hexavalent chromium to the trivalent 
form of chromium which can subsequently be precipitated as chromium 
hydroxide; or to break metal complexes by chemical reduction. EPA has 
also included the contract hauling of any waste waters associated with 
organic solvent degreasing as part of the Option 1 technology.
    Through sampling episodes and site visits, EPA has determined that 
some waste waters, usually alkaline cleaning waste waters and water-
based metal working fluids (e.g., machining and grinding coolants, 
deformation lubricants), may contain significant amounts of oil and 
grease. These waste waters require preliminary treatment to remove oil 
and grease and organic pollutants. Chemical emulsion breaking followed 
by either skimming or coalescing is an effective technology for 
removing these pollutants.
    EPA has identified MP&M waste waters that may contain significant 
amounts of cyanide, such as plating and cleaning waste waters. These 
waste waters require preliminary treatment to destroy the cyanide. This 
is typically performed using alkaline chlorination with sodium 
hypochlorite or chlorine gas. EPA has also identified hexavalent 
chromium-bearing waste waters, usually generated by anodizing, 
conversion coating, acid treatment, and electroplating operations and 
rinses. These waste waters require chemical reduction of the hexavalent 
chromium to trivalent chromium. Sodium metabisulfite or gaseous sulphur 
dioxide are typically used as reducing agents. Several surface 
treatment waste waters typically contain significant amounts of 
chelated metals. These chelated metals require chemical reduction to 
break down the chelated metals prior to lime and settle. Sodium 
borohydride, hydrazine, and sodium hydrosulfite can be used as reducing 
agents. These preliminary treatment technologies are more effective and 
less costly on segregated waste waters, prior to adding waste waters 
that do not contain the pollutants being treated with the preliminary 
treatment technologies. Thus, EPA includes these preliminary treatment 
steps whenever it refers to lime and settle treatment.
    2. Option 2: In-process Flow Control, Pollution Prevention, and 
Lime and Settle Treatment. Option 2 builds on Option 1 by adding in-
process pollution prevention, recycling, and water conservation methods 
which allow for recovery and reuse of materials. Techniques or 
technologies, such as centrifugation or skimming for metal working 
fluids, or ion exchange for electroplating rinses, can save money for 
companies by allowing materials to be used over a longer period before 
they need to be disposed. These techniques and technologies also can be 
used to recover metal or metal treatment solutions. Using these 
techniques along with water conservation also leads to the generation 
of less pollution and results in more effective treatment of the waste 
water that is generated. As has been demonstrated by numerous 
industrial treatment systems, the treatment of metal bearing waste 
waters is relatively independent of influent concentration. For 
example, the well-operated lime and settle treatment system can achieve 
the same effluent concentration with an influent stream of 1,000 
gallons per minute (gpm) and 10 parts per million (ppm) as it can 
achieve with an influent stream which is 500 gpm and 20 ppm. In fact, 
within a broad range of influent concentrations, the more highly 
concentrated waste water influent, when treated down to the technology 
effectiveness concentrations of a lime and settle treatment system, 
results in better pollutant removals and less mass of pollutant in the 
discharge. In addition, the cost of a treatment system is largely 
dependent on the size, which in turn is largely dependent on flow. As a 
result, the lower the flow of water to the treatment system the less 
costly the system. Option 2 in-process technologies include:


     Flow reduction using flow restrictors, conductivity 
meters, and/or timed rinses, for all flowing rinses, plus 
countercurrent cascade rinsing for all flowing rinses;
     Flow reduction using bath maintenance for all other 
process water-discharging operations;
     Centrifugation and 100 percent recycling of painting 
water curtains;
     Centrifugation and pasteurization to extend the life of 
water-soluble machining coolants reducing discharge volume by 80%; 
and
     In-process metals recovery using ion exchange followed 
by electrolytic recovery of the cation regenerant for selected 
electroplating rinses. This includes first-stage drag-out rinsing 
with electrolytic metal recovery.


The flow reduction practices included in Option 2 are widely used by 
MP&M sites and are also included as part of the regulatory basis for a 
number of effluent guidelines regulations in the metals industry.
    3. Option 3: Advanced End-of-Pipe Treatment. Option 3 includes all 
of the Option 2 technologies plus advanced end-of-pipe treatment. 
Advanced end-of-pipe treatment could be either reverse osmosis or ion 
exchange to remove suspended and dissolved solids yielding a treated 
waste water that can be partially recycled as process water. This 
technology is not widely used but has been demonstrated by some MP&M 
sites, particularly in instances where the water supply is contaminated 
and requires clean-up before it can be used. For the purposes of 
modelling the cost of compliance and resulting pollutant removals, 
Option 3 technology is expected to achieve a sufficiently clean treated 
waste water such that 90 percent of the treated waste water can be 
recycled back to the facility to be reused in the processing area.
    Selected Option. EPA proposes to establish BPT effluent limitations 
guidelines based on Option 2 technologies. Lime and settle treatment 
used in conjunction with flow reduction and pollution prevention 
technologies represents the best technology widely practiced by MP&M 
sites. EPA proposes to require permit writers to convert the 
concentration-based effluent limitations guidelines into mass-based 
permit limitations based on MP&M flow guidance from the Technical 
Development Document. This document provides guidance to permit writers 
on identifying sites with pollution prevention and water conservation 
technologies equivalent to those included in Option 2 (e.g., 
electrodialysis, reverse osmosis). EPA recognizes that there are many 
different pollution prevention and water conservation technologies that 
may achieve the same performance as those included in Option 2; 
therefore, the Agency has provided permit writers guidance on assessing 
these technologies.
    EPA recommends that, for sites with pollution prevention and water 
conservation technologies in place that are equivalent to those 
included as the basis for BPT, permit writers use historical flow as a 
basis for converting the concentration-based limitations to mass-based. 
For sites without these types of technologies in place, EPA recommends 
that permit writers do not use historical flow, but use other tools 
listed in the Technical Development Document (e.g., measuring 
production [[Page 28227]] through unit operations, measuring the 
concentration of total dissolved solids (TDS) in rinse waters) to 
convert the concentration-based limitations to mass-based. This 
approach encourages sites to implement good water use practices and 
investigate and install pollution prevention and water conservation 
technologies. By recommending use of historical flow only when sites 
have pollution prevention and water conservation technologies in place, 
EPA expects that permits based on BPT will reflect pollution prevention 
and water conservation technologies. If mass-based limitations have not 
been developed as required, the source shall achieve discharges not 
exceeding the concentration limitations listed in the regulation.
    EPA did not select Option 1 as it does not reflect the average of 
the best technology performance in the industry. EPA did not select 
Option 3 technology as the basis for BPT because the costs do not 
justify the removals achieved.

C. Calculation of BPT Limitations

    EPA visited 98 sites and sampled waste waters from 27 MP&M Phase I 
sites. In addition to sampling to characterize the process waste 
waters, EPA sampled 23 lime and settle treatment systems. EPA reviewed 
the treatment data gathered and identified data considered appropriate 
for calculating BPT limitations for the MP&M Phase I industry. EPA 
identified data from well-designed and well-operated treatment systems 
and focused on data for specific pollutants processed and treated on 
site. The data editing procedures used for this assessment consisted of 
four major steps:
    1. Assessment of the performance of the entire treatment system;
    2. Identification of process upsets during sampling that impacted 
the treatment effectiveness of the system;
    3. Identification of pollutants not present in the raw waste water 
at sufficient concentrations to evaluate treatment effectiveness; and
    4. Identification of treatment chemicals used in the treatment 
system.

The evaluation criteria used for each of these steps are described 
below. Data that failed one or more of the evaluation criteria were 
excluded from calculation of the BPT limitations.
    1. Assessment of Treatment System Performance. EPA assessed the 
performance of the entire treatment system during sampling. Data for 
systems identified as not being well-designed or well-operated were 
excluded from use in calculating BPT limitations. EPA first identified 
the metals processed on site, as well as if the site performed unit 
operations likely to generate oil and grease and cyanide. EPA focused 
on these pollutants because the treatment trains used as a basis for 
the limitations are designed to treat and remove these pollutants. EPA 
then performed the following technical analyses of the treatment 
systems:


--Based on the pollutants processed or treated on site, EPA excluded 
data from systems that were not operated at the proper pH for 
removal of the pollutants.
--EPA excluded data from lime and settle systems that did not have 
solids removal indicative of effective treatment. In general, EPA 
identified as having poor solids removal systems that did not 
achieve 90% removal of total suspended solids (TSS) and had effluent 
TSS concentrations greater than 50 milligrams per liter. Site-
specific exceptions were made to this rule depending on influent 
concentrations of TSS.
--EPA excluded data from lime and settle systems at which the 
concentration of most of the metals present in the influent stream 
did not decrease, indicating poor treatment.


    2. Identification of Process Upsets Occurring During Sampling. EPA 
reviewed the sampling episode reports for each of the sampled sites, 
and identified any process upsets that resulted in poor treatment 
during one or more days of the sampling episode. EPA excluded the data 
affected by the process upsets.
    3. Identification of Pollutants Not Present in the Raw Waste water 
at Sufficient Concentrations to Evaluate Removal. EPA excluded data for 
pollutants that were not detected in the treatment influent streams at 
a site, or were detected at concentrations less than 0.1 milligram per 
liter. EPA also excluded data for pollutants that were not processed on 
site. EPA reviewed the water use practices for the sampled sites and 
excluded data from sites that may have been diluting the raw waste 
water and reducing the concentration of pollutants processed on site. 
Because the MP&M Phase I effluent guidelines include water conservation 
practices and pollution prevention technologies, EPA reviewed the data 
to ensure that the BPT limitations were based on sites that had these 
practices and technologies in place.
    4. Identification of Waste water Treatment Chemicals. EPA 
identified treatment chemicals used in each of the sampled treatment 
systems to determine if the removal of the metals used as treatment 
chemicals were consistent with removal of other metals on site, 
indicating a well-designed and well-operated system. If a metal was 
used as a treatment chemical, and the site treated the metal to a 
concentration consistent with other metals removed on site, the metal 
was included in calculation of the BPT limitations. If the metal was 
used as a treatment chemical and was not removed to a concentration 
consistent with other metals removed on site, the treatment chemical 
was excluded from calculation of the limitations. The data remaining 
after these data editing procedures were used to calculate the BPT 
limitations.
    A detailed description of the statistical methodology used for the 
calculation of limitations is described in the Technical Development 
Document. A summary of the methodology follows.
    The calculation of the BPT daily maximum limitations for pollutants 
was performed by the following steps. The arithmetic long-term mean 
concentration was calculated for each facility representing BPT 
treatment technology, and the median of the means was determined. A 
modified delta-lognormal distribution was fit to daily concentration 
data from each facility that had enough detected concentration values 
for parameter estimation. This is the same distributional model used by 
EPA in the final rulemakings for the Organic Chemicals, Plastics and 
Synthetic Fibers (OCPSF) and Pesticides Manufacturing categories and 
the proposed rulemaking for the Pulp and Paper category. Variability 
factors were then computed for each facility distribution, and the 
average variability factor was determined. Finally, the daily maximum 
limitation was calculated by multiplying the median long-term mean by 
the average variability factor. The monthly maximum limitation was 
calculated similarly except that the variability factor corresponding 
to the 95th percentile of the distribution of monthly averages was used 
instead of the 99th percentile of daily concentration measurements.
    The daily variability factor is a statistical entity defined as the 
ratio of the estimated 99th percentile of the distribution of daily 
values divided by the expected value, or mean, of the distribution. 
Similarly, the monthly variability factor is defined as the estimated 
95th percentile of the distribution of four-day averages divided by the 
expected value of the monthly averages.
    The modified delta-lognormal distribution models the data as a 
mixture of non-detect observations and measured values. This 
distribution was selected because the data for most analytes consisted 
of a mixture of measured values and non-detects. The modified delta-
lognormal distribution assumes that all non-detects have a 
[[Page 28228]] value equal to the detection limit and that the detected 
values follow a lognormal distribution.
    Table 2 presents the proposed daily and monthly limitations. In 
Table 2, the term ``T'', as in ``cyanide(T)'', shall mean total. The 
values calculated by the above procedures were rounded off to the next 
highest tenths place for metals, to the next highest hundredths place 
for cyanide, and to the next highest unit place for TSS and oil and 
grease.
    EPA identified 24 metal types processed at MP&M Phase I sites. 
Because EPA did not have sufficient data to set limits for all of these 
metal types, EPA is regulating aluminum and iron as indicator metals 
for removal of non-regulated metals that may be processed at MP&M 
sites. Aluminum is most effectively removed in lime and settle systems 
at a pH between 7.5 and 8 standard units, while iron is most 
effectively removed at a pH of approximately 10.5 standard units. Most 
metals that may be present in MP&M waste waters are effectively removed 
in this pH range. Therefore, removal of aluminum and iron will indicate 
effective removal of other metal types. Although iron and aluminum can 
be used as water treatment chemicals, EPA believes that regulation of 
these pollutants will control discharges of non-regulated metals that 
are processed at MP&M sites.
    EPA is proposing a pH range limit in order to assure that the pH of 
the waste water is within the neutral range.
    EPA is also proposing to use oil and grease as an indicator for 
monitoring for organic pollutants that have the potential to be present 
in MP&M waste waters. EPA is using oil and grease as an indicator since 
most of the organic pollutants detected in MP&M waste waters during the 
MP&M sampling program are more soluble in oil than in water, and as 
such would partition to the oil layer. Thus, removal of oil and grease 
will result in significant removal of these pollutants. Data for oil-
water separation systems collected during the MP&M sampling program 
show removals between 63 and 90 percent for organic pollutants across 
the oil-water separation systems. These data support the conclusion 
that the organic pollutants will partition to the oil layer. In 
addition, most of the organic pollutants detected in MP&M waste waters 
are insoluble in water, further supporting that these pollutants will 
partition to the oil layer.
    EPA considered establishing limitations for Total Toxic Organics 
(TTO), which would reflect the sum of concentrations achieved for 
several specific organic pollutants identified during the MP&M sampling 
program. However, because of the diversity in the types of cleaners, 
coolants, paints, etc., used in the MP&M industry, as well as the 
current industry trends in identifying substitutes for organic solvent 
degreasing, EPA did not have sufficient analytical data to identify and 
regulate all organic pollutants in use at MP&M sites. Therefore, EPA 
rejected TTO as an approach to controlling organic pollutant 
discharges. EPA believes that use of oil and grease as an indicator 
will provide regulatory control of organic pollutants while allowing 
the flexibility to control organic pollutants that are used by MP&M 
sites but not identified during the MP&M sampling program.
    EPA also considered establishing limitations for lead, since lead 
is known to have several adverse human health effects. Although lead 
was analyzed for in nearly all samples collected during the development 
of the MP&M Phase I rule, lead was rarely found at treatable 
concentrations in the influent to the treatment systems sampled. As 
discussed above, treatable concentration was defined as 0.1 milligram 
per liter in the raw waste water prior to treatment. The majority of 
lead data were non-detects or detects at very low concentrations. Since 
lead was rarely found at treatable concentrations in the raw waste 
water, prior to treatment, EPA decided not to propose a limit for lead. 
EPA is soliciting additional data and comments on the possibility of 
setting a limit for lead in the final rule (see Section XIX).

          Table 2.--Proposed Effluent Concentration Limitations         
                      [Milligrams per liter (mg/l)]                     
------------------------------------------------------------------------
                                                                Monthly 
                                                    Maximum     average 
        Pollutant or pollutant parameter           for any 1   shall not
                                                      day       exceed  
------------------------------------------------------------------------
Aluminum (T)....................................        1.4         1.0 
Cadmium(T)......................................        0.7         0.3 
Chromium(T).....................................        0.3         0.2 
Copper(T).......................................        1.3         0.6 
Iron(T).........................................        2.4         1.3 
Nickel(T).......................................        1.1         0.5 
Zinc(T).........................................        0.8         0.4 
Cyanide(T)......................................        0.03        0.02
Oil & Grease....................................       35          17   
TSS.............................................       73          36   
pH..............................................    (\1\)       (\1\)   
------------------------------------------------------------------------
\1\ Within 6.0 to 9.0.                                                  

D. Applicability of BPT

    The Agency is proposing BPT limitations guidelines for the MP&M 
Phase I category to apply to all MP&M process waste waters that are 
generated by sites performing manufacturing, rebuilding or maintenance 
of metal parts, products, or machinery in one of the seven industrial 
sectors (i.e., aerospace, aircraft, electronic equipment, hardware, 
mobile industrial equipment, ordnance and stationary industrial 
equipment).

E. BPT Pollutant Removals, Costs, and Economic Impacts

    EPA estimates that the proposed BPT limitations will remove 
annually an estimated 20 million pounds of conventional pollutants (TSS 
and oil and grease), 1 million pounds of metals and cyanide, and 67,000 
pounds of organic pollutants. BPT is estimated to require a capital 
expenditure of $63 million (in 1994$), which will require an annualized 
cost of $18 million. In addition, as a result of this regulation, EPA 
estimates that 18 sites may close with an accompanying job loss of 158 
full time employees (FTEs). EPA estimates that compliance activities 
may generate annual labor requirements which could more than offset 
these job losses. EPA believes that the effluent reduction benefits 
achieved by this proposed BPT justify the costs and that all statutory 
factors have been satisfied. (See further discussion of costs and 
benefits below).

X. Best Conventional Pollutant Control Technology

A. July 9, 1986 BCT Methodology

    The BCT methodology, promulgated in 1986 (51 FR 24974), discusses 
the Agency's consideration of costs in establishing BCT effluent 
limitations guidelines. EPA evaluates the reasonableness of BCT 
candidate technologies (those that are technologically feasible) by 
applying a two-part cost test:
    (1) The POTW test; and
    (2) The industry cost-effectiveness test.
    In the POTW test, EPA calculates the cost per pound of conventional 
pollutant removed by industrial dischargers in upgrading from BPT to a 
BCT candidate technology and then compares this cost to the cost per 
pound of conventional pollutant removed in upgrading POTWs from 
secondary treatment. The upgrade cost to industry must be less than the 
POTW benchmark of $0.25 per pound (in 1976 dollars).
    In the industry cost-effectiveness test, the ratio of the 
incremental BPT to BCT cost divided by the BPT cost for the industry 
must be less than 1.29 (i.e., the cost increase must be less than 29 
percent). [[Page 28229]] 

B. BCT Options Identified

    For today's proposed rule, EPA considered whether or not to 
establish BCT effluent limitation guidelines for MP&M sites that would 
attain incremental levels of effluent reduction beyond BPT for TSS. The 
only technology option identified to attain further TSS reduction is 
the addition of multimedia filtration to existing BPT systems.
    EPA applied the BCT cost test to use of multimedia filtration 
technology as a means to reduce TSS loadings. The MP&M sites were split 
into three flow categories: low flow (generally less than 10,000 
gallons per year (gpy)); medium flow (between 10,000 gpy and 1,000,000 
gpy); and high flow (greater than 1,000,000 gpy). For each of these 
three flow categories, a representative site was chosen for which EPA 
had estimated the costs of installing the Option 2 technologies 
discussed under BPT (See Section IX.B. above). The Agency evaluated the 
costs of installing a polishing multimedia filter to remove an 
estimated additional 45 percent of the TSS discharged after lime and 
settle treatment. This estimated removal reflects the reduced TSS 
concentrations seen when filters are used in the MP&M industry. The 
cost per pound of the high flow case was $28/lb of TSS (in 1976 
dollars), the cost per pound removed of the medium flow case was $131/
lb and the cost of the low flow case was $813/lb of TSS (in 1976 
dollars). All of these cases individually as well as combined exceed 
the $0.25/lb (in 1976 dollars) POTW cost test value. Because these 
costs exceed the POTW benchmark, the first part of the cost test fails; 
therefore, the second part of the test was unnecessary. It was 
therefore determined that multi-media filtration does not pass the cost 
test for BCT regulations development. In light of the above, BCT 
limitations for MP&M are proposed to be set equal to BPT limitations.
    Therefore, EPA is proposing to establish BCT limitations on the 
basis of Option 2 technology, equivalent to BPT.

XI. Best Available Technology Economically Achievable

A. Need for BAT Regulation

    The need for BAT regulation is the same as the need for BPT 
regulation (see Section IX.A.).

B. BAT Technology Options and Selection

    The factors considered in establishing the best available 
technology economically achievable (BAT) level of control include: the 
age of process equipment and facilities, the processes employed, 
process changes, the engineering aspects of applying various types of 
control techniques, the costs of applying the control technology, 
economic impacts imposed by the regulation, non-water quality 
environmental impacts such as energy requirements, air pollution and 
solid waste generation, and other such factors as the Administrator 
deems appropriate (sec

tion 304(b)(2)(B) of the Act). In general, the BAT technology level 
represents the best existing economically achievable performance among 
plants with shared characteristics. In making the determination about 
economic achievability, the Agency takes into consideration factors 
such as plant closures and product line closures. Where existing waste 
water treatment performance is uniformly inadequate, BAT technology may 
be transferred from a different subcategory or industrial category. BAT 
may also include process changes or internal plant controls which are 
not common industry practice.
    EPA is today proposing BAT effluent limitations guidelines for all 
parameters listed in Table 2 except TSS and pH. Oil and grease is an 
indicator for 2-methylnaphthalene, 2-propanone, N-octadecane, and N-
tetradecane.
    The three regulatory options which EPA considered for BAT are 
identical to the three options discussed under BPT. Like BPT, EPA is 
proposing BAT on the basis of Option 2. This technology represents the 
best available technology economically achievable. Option 1 was 
rejected because it does not include the pollution prevention and water 
conservation technologies which are widely demonstrated at MP&M sites. 
Option 3 was rejected because the costs do not justify the removals 
achieved.
    EPA did not include the application of filters, discussed under 
BCT, as a BAT option. Data collected during sampling at MP&M facilities 
demonstrated no additional removals of many metal pollutants resulting 
from the use of filters as compared to concentrations of the same 
metals after the lime and settle treatment included in Option 2. Thus, 
although filtration is demonstrated to be effective in achieving 
additional removals of suspended solids, and as such was considered for 
the basis of BCT, multimedia or sand filtration does not reflect the 
best available technology performance for priority and nonconventional 
pollutants.
C. Calculation of BAT Limitations

    The calculation of the BAT limitations were performed by using the 
same methodology used for calculating BPT limitations (see Section 
IX.C.)

D. Applicability of BAT

    The applicability of BAT is the same as that for BPT.

E. BAT Pollutant Removals, Costs, and Economic Impacts

    The pollutant removals for BAT are the same as those for BPT except 
that BAT does not cover TSS (see Section IX.E.). The estimated cost of 
BAT is the same as BPT (see Section IX.E.). The economic impacts of BAT 
are the same as BPT (see Section IX.E.). EPA believes that the effluent 
reduction benefits achieved by this proposed BAT justify the costs and 
that all statutory factors have been satisfied. (See further discussion 
of costs and benefits below.)

XII. Pretreatment Standards for Existing Sources

A. Need for Pretreatment Standards

    Indirect dischargers in the MP&M Phase I category, like the direct 
dischargers, use raw materials that contain many priority pollutant and 
nonconventional metal pollutants. As in the case of direct dischargers, 
they may be expected to discharge many of these pollutants to POTWs at 
significant mass or concentration levels, or both. EPA estimates that 
indirect dischargers annually discharge approximately 12 million pounds 
of priority and nonconventional metals, and 2.4 million pounds of 
priority and nonconventional organic pollutants.
    EPA determines which pollutants to regulate in PSES on the basis of 
whether or not they pass through, interfere with, or are incompatible 
with the operation of POTWs (including interference with sludge 
practices). The Agency evaluates pollutant pass through by comparing 
the pollutant percentage removed by well operated POTWs achieving 
secondary treatment with the percentage removed by BAT technology 
applied by direct dischargers. A pollutant is deemed to pass through 
POTWs when the average percentage removed nationwide by well-operated 
POTWs (those meeting secondary treatment requirement) is less than the 
percentage removed by directly discharging MP&M sites applying BAT for 
that pollutant.
    To evaluate the need for PSES, EPA followed the procedures 
established by the Organic Chemicals, Plastics and Synthetic Fibers 
(OCPSF) regulation to determine the degree to which well-operated POTWs 
are capable of removing pollutants. Prior to promulgation of the OCPSF 
effluent guidelines, EPA conducted a study of [[Page 28230]] well-
operated POTWs that use secondary (biological) treatment (the ``50-POTW 
Study''). The 50-POTW study determined the extent to which priority 
pollutants are removed by POTWs. The principal means by which the 
Agency evaluated pollutant pass-through was to compare the pollutant 
percentage removed by POTWs with the percentage removed to comply with 
BAT limitations.
    Because some of the data collected for evaluating POTW removals 
included influent levels of priority pollutants that were close to the 
detection limit, the POTW data were edited to eliminate influent values 
less than 10 times the nominal method detection limit (MDL) and the 
corresponding effluent values, except in cases where none of the 
influent concentrations exceeded 10 times the MDL. In the latter case, 
where there were no influent data exceeding 10 times the MDL, the data 
were edited to eliminate influent values less than twice the MDL and 
the corresponding effluent values. These editing rules were used to 
allow for the possibility that low POTW removals simply reflected the 
low influent levels.
    EPA then averaged the remaining influent data and also averaged the 
remaining effluent data for the POTWs. The percent removal achieved for 
each priority pollutant was determined from these averaged influent and 
effluent levels. This percent removal was then compared to the percent 
removal achieved by BAT treatment technology. Based on this analysis, 
EPA determined that four nonconventional organic pollutants, seven 
priority metal pollutants, five nonconventional metal pollutants, 
cyanide, and chemical oxygen demand pass through POTWs. POTW removals 
for ten of the nonconventional organic pollutants were calculated using 
a data base developed by EPA's Risk Reduction Engineering Laboratory 
(RREL) and data transferred from other pollutants based on physical 
similarities (e.g., straight-chained hydrocarbons, ketones, etc.).

B. PSES Technology Options and Selection

    Indirect discharging MP&M sites generate waste waters with similar 
pollutant characteristics to direct discharging facilities. Hence, the 
same treatment technologies discussed previously for BPT and BAT are 
considered applicable to PSES. However, as described below, the 
application of the technology options has resulted in the addition of a 
new option that applies to indirect dischargers.
    EPA is today proposing PSES for all parameters listed in Table 2 
except TSS and pH. EPA is proposing PSES for oil and grease as an 
indicator for monitoring for organic pollutants which have the 
potential to be present.
    The Agency considered the following five options in developing PSES 
for MP&M Phase I.
    1. Option 1: Lime and Settle Treatment. This option is equivalent 
to BPT Option 1.
    2. Option 1a: Tiered PSES for ``Low'' Flow and ``Large'' Flow 
Sites. This option would establish a tiered PSES requirement depending 
on the annual discharge volume at a given MP&M site. For ``low'' flow 
sites, sites with a discharge volume of less than 1,000,000 gallons per 
year (gpy), PSES would require that sites comply with concentration 
standards based on Option 1. For a site operating 250 days per year, 
1,000,000 gallons per year translates into an average discharge flow 
rate of 4,000 gallons per day. For ``large'' flow sites, sites with a 
discharge volume of 1,000,000 gpy or greater, PSES would require that 
mass-based standards be imposed based on Option 2 (i.e. the conversion 
of Option 1 concentration-based standards using an appropriate flow 
which reflects good pollution prevention and water conservation 
practices such as those included in BPT Option 2). The flow basis would 
be determined by the Control Authority using site-specific factors and 
flow guidance (see the Technical Development Document for a detailed 
presentation of flow guidance aimed at water conservation and good 
housekeeping practices). If mass-based limitations have not been 
developed as required, the source would have to achieve discharges not 
exceeding the concentration limitations listed in the regulation. The 
technology basis for PSES for large flow sites is the same as BPT 
Option 2.
    3. Option 2a: In-process Flow Reduction and Pollution Prevention 
and Lime and Settle Treatment for ``Large'' Flow sites. This option 
would require that mass-based standards be imposed based on Option 2 
for sites with a discharge volume of 1,000,000 gpy or greater. Sites 
with a discharge volume of less than 1,000,000 gpy would not be subject 
to PSES requirements. For a site operating 250 days per year, 1,000,000 
gallons per year translates into an average discharge flow rate of 
4,000 gallons per day.
    In order to fully implement the mass-based permits, it is important 
for Control Authorities to issue permits in a timely manner. 
Dischargers are reminded of their responsibilities under the General 
Pretreatment Regulations (40 CFR 403) to provide, among other things, 
Baseline Monitoring Reports. The Agency expects Control Authorities to 
place a priority on issuing needed mass-based permits, and those 
permits should be issued within a year after the Baseline Monitoring 
Report deadline. Control Authorities that do not meet these permitting 
timelines may not be in compliance with their pretreatment programs 
under 40 CFR 123.45.
    4. Option 2: In-Process Flow Reduction & Pollution Prevention and 
Lime and Settle Treatment. This option is equivalent to BPT Option 2.
    5. Option 3: Advanced End-of-Pipe Treatment. This option is 
equivalent to BPT Option 3.
    Selected Option: EPA is proposing Option 2a technologies as the 
basis for the proposed PSES for MP&M Phase I. Option 2a is economically 
achievable (see Section XIV) and greatly reduces pollutants discharged 
into the environment. Compared to Option 2, which would require that 
all MP&M indirect dischargers be controlled by mass standards, Option 
2a achieves significant pollutant reduction without imposing undue 
administrative burden on the Control Authorities. Whereas Option 2 
would require an estimated 8,706 facilities to have permits or similar 
control mechanisms written incorporating the proposed standards into a 
mass-based permit, Option 2a reduces this burden, requiring only an 
estimated 1,998 facilities to have mass-based permits, the rest of the 
facilities would not be subject to PSES requirements. EPA believes this 
approach would allow Control Authorities to focus their efforts on the 
facilities discharging the vast majority of the pollutants, rather than 
dissipating their limited resources on sites contributing much less to 
the overall problem. An indication of relative pollutant loadings by 
size of facility is provided in Table 26 below. The low flow sites 
could also be expected to reduce their discharges of pollutants, but 
they would do so by meeting local limits. EPA has consulted with 
representatives from EPA Regions, States and Municipalities, the 
majority of whom favor this approach to regulating the MP&M industry.

C. Calculation of PSES

    The proposed pretreatment standards for existing sources in the 
MP&M Phase I category are presented in today's proposed rule. The 
pretreatment standards are shown for cyanide and priority and 
nonconventional metal pollutants. [[Page 28231]] 
    An oil and grease standard is proposed as an indicator for specific 
organic pollutants. The specific organic pollutants for which oil and 
grease is an indicator are 2-methylnaphthalene, 2-propanone, N-
octadecane, and N-tetradecane. EPA identified these pollutants in MP&M 
waste water and determined that these pollutants will pass through a 
POTW. These pollutants are more likely to partition to the oily phase 
than the water phase, thus EPA believes that the treatment and removal 
of oil and grease in waste water will also result in significant 
removals of these pollutants. EPA's sampling results show higher 
percent removals are achieved through oil and grease treatment (BAT 
technology) than at a well-operated secondary POTW. EPA considered and 
rejected establishing a pretreatment standard for Total Toxic Organics 
(TTO) which would reflect the sum of concentrations achieved for 
several organic pollutants. The reason EPA rejected TTO as an approach 
to controlling organic pollutant discharges is that EPA knows that the 
industry is in the midst of a significant shift in the solvents it is 
using. Accordingly, EPA has no reason to believe that regulation of the 
specific list of organics identified as of today would reflect the 
organics that will be present in waste water when this regulation is 
promulgated. EPA is planning to continue to study the sources and 
concentrations of organic pollutants in MP&M waste water, particularly 
as sites switch from ozone-depleting solvents to aqueous-based 
cleaners. Accordingly, EPA may propose a different approach to 
controlling organic pollutant discharges for both Phase I and Phase II 
in conjunction with the MP&M Phase II rulemaking.
    As with BAT proposed standards, the pretreatment standards are 
expressed in terms of concentration-based standards. As described 
above, EPA is proposing that MP&M sites be required to comply with a 
mass-based permit if their annual discharge volume equals or exceeds 
1,000,000 gallons. The proposed PSES would require dischargers to meet 
``maximum for any one day'' and ``maximum monthly average'' standards. 
The proposed PSES limitations for cyanide, priority and nonconventional 
metal pollutants, and oil and grease are identical to those limits 
established for these pollutants under proposed BAT Option 2.
    Considering the large number of indirect dischargers which have the 
potential to be covered by this proposed regulation, an important issue 
to the affected industry and to permit writers is the potentially 
enormous administrative burden. Therefore, in developing this proposal, 
EPA has looked for means of reducing the administrative burden, 
reducing monitoring requirements, and reducing reporting requirements. 
The proposed exemption of existing indirect discharges discharging less 
than one million gallons per year is one means by which EPA is 
proposing to reduce the administrative burden.

D. Applicability of PSES Limitations

    The Agency is proposing PSES under the MP&M Phase I category to 
apply to all MP&M process waste waters that are generated by sites 
performing manufacturing, rebuilding, or maintenance of metal parts, 
products, or machinery in one of the seven industrial sectors (i.e., 
aerospace, aircraft, electronic equipment, hardware, mobile industrial 
equipment, ordnance and stationary industrial equipment). The Combined 
Wastestream Formula will apply to sites which have operations covered 
by MP&M Phase I, existing effluent guidelines, or not covered by 
existing regulations.

E. Removal Credits

    As described previously, many industrial facilities discharge large 
quantities of pollutants to POTWs where their wastes mix with waste 
water from other sources, domestic wastes from private residences and 
run-off from various sources prior to treatment and discharge by the 
POTW. Industrial discharges frequently contain pollutants that are 
generally not removed as effectively by waste water treatment at the 
POTWs as by the industries themselves.
    The introduction of pollutants to a POTW from industrial discharges 
poses several problems. These include potential interference with the 
POTW's operation or pass-through of pollutants if inadequately treated. 
As discussed, Congress, in section 307(b) of the Act, directed EPA to 
establish pretreatment standards to prevent these potential problems. 
Congress also recognized that, in certain instances, POTWs could 
provide some or all of the treatment of an industrial user's 
wastestream that would be required pursuant to the pretreatment 
standard. Consequently, Congress established a discretionary program 
for POTWs to grant ``removal credits'' to their indirect dischargers. 
The credit, in the form of a less stringent pretreatment standard, 
allows an increased amount of pollutants to flow from the indirect 
discharger's facility to the POTW.
    Section 307(b) of the CWA establishes a three-part test for 
obtaining removal credit authority for a given pollutant. Removal 
credits may be authorized only if (1) The POTW ``removes all or any 
part of such toxic pollutant,'' (2) the POTW's ultimate discharge would 
``not violate that effluent limitation, or standard which would be 
applicable to that toxic pollutant if it were discharged'' directly 
rather than through a POTW and (3) the POTW's discharge would ``not 
prevent sludge use and disposal by such [POTW] in accordance with 
section [405]. * * *'' Section 307(b).
    EPA has promulgated removal credit regulations in 40 CFR part 
403.7. The United States Court of Appeals for the Third Circuit has 
interpreted the statute to require EPA to promulgate comprehensive 
sewage sludge regulations before any removal credits could be 
authorized. NRDC v. EPA, 790 F.2d 289, 292 (3rd Cir. 1986) cert. 
denied. 479 U.S. 1084 (1987). Congress made this explicit in the Water 
Quality Act of 1987 which provided that EPA could not authorize any 
removal credits until it issued the sewage sludge use and disposal 
regulations required by section 405(d)(2)(a)(ii).
    Section 405 of the CWA requires EPA to promulgate regulations which 
establish standards for sewage sludge when used or disposed for various 
purposes. These standards must include sewage sludge management 
standards as well as numerical limits for pollutants which may be 
present in sewage sludge in concentrations which may adversely affect 
public health and the environment. Section 405 requires EPA to develop 
these standards in two phases. On February 19, 1993, EPA promulgated 
the Round One sewage sludge regulations establishing standards, 
including numerical pollutant limits, for the use and disposal of 
sewage sludge. 58 FR 9248. EPA established pollutant limits for ten 
metals when sewage sludge is applied to land, for three metals when it 
is disposed of at surface disposal sites and for seven metals and total 
hydrocarbons, a surrogate for organic pollutant emissions, when sewage 
sludge is incinerated. These requirements are codified at 40 CFR part 
503.
    The Phase One regulations partially fulfilled the Agency's 
commitment under the terms of a consent decree that settled a citizens 
suit to compel issuance of the sludge regulations. Gearhart, et al. v. 
Reilly, Civil No. 89-6266-JO (D.Ore). Under the terms of that decree, 
EPA must propose and take final action on Round Two sewage sludge 
regulations by December 15, 2001. [[Page 28232]] 
    At the same time EPA promulgated the Round One regulations, EPA 
also amended its pretreatment regulations to provide that removal 
credits would be available for certain pollutants regulated in the 
sewage sludge regulations. See 58 FR at 9386. The amendments to part 
403 provide that removal credits may be made potentially available for 
the following pollutants:
    (1) If a POTW applies its sewage sludge to the land for beneficial 
uses, disposes of it on surface disposal sites or incinerates it, 
removal credits may be available, depending on which use or disposal 
method is selected (so long as the POTW complies with the requirements 
in part 503). When sewage sludge is applied to land, removal credits 
may be available for ten metals. When sewage sludge is disposed of on a 
surface disposal site, removal credits may be available for three 
metals. When the sewage sludge is incinerated, removal credits may be 
available for seven metals and for 57 organic pollutants. See 40 CFR 
403.7(a)(3)(iv)(A).
    (2) In addition, when sewage sludge is used on land or disposed of 
on a surface disposal site or incinerated, removal credits may also be 
available for additional pollutants so long as the concentration of the 
pollutant in sludge does not exceed a concentration level established 
in part 403. When sewage sludge is applied to land, removal credits may 
be available for two additional metals and 14 organic pollutants. When 
the sewage sludge is disposed of on a surface disposal site, removal 
credits may be available for seven additional metals and 13 organic 
pollutants. When the sewage sludge is incinerated, removal credits may 
be available for three other metals. See 40 CFR 403.7(a)(3)(iv)(B).
    (3) When a POTW disposes of its sewage sludge in a municipal solid 
waste landfill that meets the criteria of 40 CFR part 258 (MSWLF), 
removal credits may be available for any pollutant in sewage sludge. 
See 40 CFR 403.7(a)(3)(iv)(C).
    Thus, given compliance with the requirements of EPA's removal 
credit regulations,1 following promulgation of the pretreatment 
standards being proposed here, removal credits may be authorized for 
any pollutant subject to pretreatment standards if the applying POTW 
disposes of its sewage sludge in a MSWLF that meets the requirements of 
40 CFR part 258. If the POTW uses or disposes of its sewage sludge by 
land application, surface disposal or incineration, removal credits may 
be available for the following metal pollutants (depending on the 
method of use or disposal): arsenic, cadmium, chromium, copper, iron, 
lead, mercury, molybdenum, nickel and zinc. Given compliance with 
section 403.7, removal credits may be available for the following 
organic pollutants (depending on the method of use or disposal) if the 
POTW uses or disposes of its sewage sludge: benzene, 1,1-
dichloroethane, 1,2-dibromoethane, ethylbenzene, methylene chloride, 
toluene, tetrachloroethene, 1,1,1-trichloroethane, 1,1,2-
trichloroethane and trans-1,2-dichloroethene.

    \1\ Under Section 403.7, a POTW is authorized to give removal 
credits only under certain conditions. These include applying for, 
and obtaining, approval from the Regional Administrator (or Director 
of a State NPDES program with an approved pretreatment program), a 
showing of consistent pollutant removal and an approved pretreatment 
program. See 40 CFR 403.7(a)(3) (i), (ii), and (iii).
    Some facilities may be interested in obtaining removal credit 
authorization for other pollutants being considered for regulation in 
this rulemaking for which removal credit authorization would not 
otherwise be available under part 403. As discussed in the sewage 
sludge regulations (58 FR 9382-83), EPA has concluded that removal 
credits should  not be authorized for pollutants other than the 
pollutants specifically regulated by the final part 503 regulation. The 
Agency has determined that the CWA, as amended, removal credit 
eligibility is limited to those pollutants regulated specifically in 
Part 503 and to pollutants that the Agency determines do not threaten 
human health and the environment when used or disposed of in sewage 
sludge. When read together, sections 307(b) and 405 permit removal 
credits only when it can be determined that the increased 
concentrations or amounts allowed by the removal credit will not affect 
sewage sludge use or disposal adversely. EPA determined that a 
categorical pretreatment standard pollutant is eligible for removal 
credits only when EPA has either established a specific numerical limit 
for that pollutant or has evaluated it and concluded that it does not 
threaten public health or the environment. 58 FR 9382-83.
    Consequently, in the case of a pollutant for which EPA did not 
perform a risk analysis in developing the Phase One sewage sludge 
regulations, removal credit for pollutants will only be available when 
the Agency determines either a safe level for the pollutant in sewage 
sludge or that regulation of the pollutant is unnecessary to protect 
public health and the environment from the reasonably anticipated 
adverse effects of such a pollutant.2 Therefore, any person 
seeking to add additional categorical pollutants to the list for which 
removal credits are now available would need to submit information to 
the Agency to support such a determination. The basis for such a 
determination may include information showing the absence of risks for 
the pollutant (generally established through an environmental pathway 
risk assessment such as EPA used for Phase One) or data establishing 
the pollutant's presence in sewage sludge at low levels relative to 
risk levels or both. Parties, however, may submit whatever information 
they conclude is sufficient to establish either the absence of any 
potential for harm from the presence of the pollutant in sewage sludge 
or data demonstrating a ``safe'' level for the pollutant in sludge. 
Following submission of such a demonstration, EPA will review the data 
and determine whether or not it should propose to amend the list of 
pollutants for which removal credits would be available.

    \2\ In the Round One sewage sludge regulation, EPA concluded, on 
the basis of risk assessments, that certain pollutants (see Appendix 
G to Part 403) did not pose an unreasonable risk to human health and 
the environment and did not require the establishment of sewage 
sludge pollutant limits. As discussed above, so long as the 
concentration of these pollutant in sewage sludge are lower than a 
prescribed level, removal credits are authorized for such 
pollutants.
---------------------------------------------------------------------------

    EPA has already begun the process of evaluating a number of 
pollutants for adverse potential to human health and the environment 
when present in sewage sludge. In May, 1993, pursuant to the terms of 
the consent decree in the Gearhart case, the Agency notified the United 
States District Court for the District of Oregon that, based on the 
information then available at that time, it intended to propose 31 
pollutants for regulation in Round Two sewage sludge regulations. These 
are acetic acid (2, 4, -dichlorophenoxy), aluminum, antimony, asbestos, 
barium, beryllium, boron, butanone (2-), carbon disulfide, cresol (p-), 
cyanides (soluble salts and complexes), dioxins/dibenzofurans (all 
monochloro to octochloro congeners), endsulfan-II, fluoride, manganese, 
methylene chloride, nitrate, nitrite, pentachloronitrobenzene, phenol, 
phthalate (bis-2-ethylhexyl), polychlorinated biphenyls (co-planar), 
propanone (2-), silver, thallium, tin, titanium, toluene, 
trichlorophenoxyacetic acid (2, 4, 5-), trichlorphenoxypropionic acid 
([2- (2, 4, 5-)], and vanadium.
    The Round Two regulations are not scheduled for proposal until 
December, 1999 and promulgation in December 2001. However, given the 
necessary [[Page 28233]] factual showing, as detailed above, EPA could 
conclude before the contemplated proposal and promulgation dates that 
regulation of some of these pollutants is not necessary. In those 
circumstances, EPA could propose that removal credits should be 
authorized for such pollutants before promulgation of the Round Two 
sewage sludge regulations. However, because of the Agency's commitment 
to promulgation of effluent limitations and guidelines under the 
consent decree with NRDC, it may not be possible to complete review of 
removal credit authorization requests by the time EPA must promulgate 
these guidelines and standards.
    EPA's proposal to establish pretreatment standards for oil and 
grease as an indicator for organic pollutants means that oil and grease 
is not subject to removal credits.

F. Compliance Date

    EPA is proposing to establish a three-year deadline for compliance 
with PSES. Design and construction of systems adequate for compliance 
with PSES will be a substantial undertaking for many MP&M sites. In 
addition, Control Authorities will need the time to develop the mass-
permits for their industrial users with annual discharge volumes 
greater than 1,000,000 gallons.

G. PSES Pollutant Removals, Costs and Economic Impacts

    EPA estimates that the proposed PSES regulation will result in the 
removal of 14 million pounds per year of pollutants including 9.1 
million pounds of priority and nonconventional metal pollutants and 2.1 
million pounds of priority and nonconventional organic pollutants and 
cyanide. PSES is estimated to result in capital costs of approximately 
$ 351 million and annualized costs of $ 142 million (in 1994 dollars). 
EPA projects that 7 sites may be closed as a result of PSES, and job 
losses will affect 540 full-time employees (FTEs). However, EPA 
estimates that compliance activities may generate annual labor 
requirements which could more than offset these job losses.

XIII. New Source Performance Standards (NSPS) and Pretreatment 
Standards for New Sources (PSNS)

    Section 307(c) of the Act calls for EPA to promulgate pretreatment 
standards for new sources (PSNS) at the same time that it promulgates 
new source performance standards (NSPS). New facilities have the 
opportunity to incorporate the best available demonstrated technologies 
including process changes, in-plant controls, and end-of-pipe treatment 
technologies.
    The same technologies discussed previously for BAT and PSES are 
available as the basis for NSPS and PSNS. Option 2 was the selected 
option for BAT and for large flow PSES, and the only higher technology 
option identified by EPA was Option 3. Option 3 includes advanced end-
of-pipe treatment with significant reuse of process water. Since new 
sites have the potential to install pollution prevention and pollution 
control technologies more cost effectively then existing sources, 
Option 3 was considered for NSPS and PSNS. However, EPA did not select 
Option 3 technology as the basis for NSPS and PSNS because the costs do 
not justify the removals achieved. Therefore, EPA is proposing NSPS and 
PSNS for MP&M Phase I are based on the proposed Option 2 BAT 
technologies identified above. All NSPS and PSNS limits are expected to 
be mass-based. If mass-based limitations have not been developed as 
required, the source shall achieve discharges not exceeding the 
concentration limitations listed in the regulation.
XIV. Economic Considerations

A. Introduction

    EPA's economic impact assessment is set forth in the report titled 
``Economic Impact Analysis Of Proposed Effluent Limitations Guidelines 
And Standards For The Metal Products And Machinery Industry, Phase I'' 
(hereinafter ``EIA''). This report estimates the expected economic 
effect of compliance with the proposed regulatory options in terms of 
facility closures and associated losses in employment. Firm-level 
impacts, local community impacts, international trade effects, labor 
requirements of compliance, and effects on new Metal Products and 
Machinery Industry (MP&M) facilities are also presented in this report. 
A Regulatory Flexibility Analysis detailing the small business impacts 
for this industry is also included in the EIA. In addition, EPA 
conducted an analysis of the cost-effectiveness of the regulatory 
options. The report, ``Cost-Effectiveness Analysis of Proposed Effluent 
Limitations Guidelines and Standards of Performance for the Metal 
Products and Machinery Industry, Phase I'' is included in the record of 
this rule-making. EPA also prepared a background analysis of the 
economic conditions in the MP&M industry, ``Industry Profile Of the 
Metal Products and Machinery Industry, Phase I.'' The following 
discussion summarizes material from the Economic Impact Analysis, Cost-
Effectiveness Analysis, and Industry Profile reports. The reader is 
referred to these reports for the full details of these analyses.
    Analysis of the economic impacts of effluent guidelines for the 
MP&M industry relies heavily on the responses to the questionnaire 
distributed to MP&M facilities by EPA under the authority of Section 
308 of the Clean Water Act (the DCP). As discussed above, EPA sent the 
questionnaire, requesting both technical and economic information, to 
1,020 MP&M industry facilities (See Section V.A.2 for details). After 
detailed data cleaning and validation activities, the responses for 396 
facilities, representing 10,601 water-discharging facilities in the 
MP&M industry population, were used in the industry impact analysis. 
EPA analyzed the economic impacts of the regulatory options applicable 
to MP&M Phase I facilities on the basis of data for the 396 sample 
facilities. The impacts assessed for these sample facilities were 
extrapolated to the level of the MP&M industry population using 
facility sample weights that are based on the sample design for the 
Section 308 survey. Unless otherwise indicated, the remainder of this 
discussion reports the estimated economic impacts for the MP&M industry 
population.

B. Overview of the Facilities Potentially Subject to Regulation

    From secondary source data (Department of Commerce), EPA estimates 
that approximately 90,000 establishments or facilities participated in 
the MP&M Phase I business sectors as of 1987. Thus, the estimated 
10,601 water-discharging facilities (from Section 308 Survey data) that 
would potentially be affected by this regulation represent about 11 
percent of the total facilities in the MP&M Phase I business sectors. 
Of the 10,601 water-discharging facilities, EPA estimates that 8,706 
facilities are indirect dischargers (i.e., they discharge effluent to a 
POTW) and would thus be subject to Pretreatment Standards for Existing 
Sources (PSES). The remaining 1,895 facilities are estimated to be 
direct dischargers (i.e., they discharge effluent directly to a 
waterway under a NPDES permit) and will thus be subject to Best 
Available Technology Economically Achievable (BAT) and Best Practicable 
Control Technology Currently Available (BPT) requirements as herein 
proposed.
    The MP&M facilities that are expected to be subject to this 
regulation contribute significantly to the U.S. economy. Table 3, 
below, summarizes important economic data for the estimated 10,601 
water-discharging facilities that are potentially subject to regulation 
and on which the economic [[Page 28234]] impact analysis for this 
regulation is based.

 Table 3.--Summary Data for 1989 for Facilities Subject to Regulation in MP&M Phase I Sectors Estimated Revenue,
                               Value Added and Payroll in Millions of 1989 Dollars                              
----------------------------------------------------------------------------------------------------------------
             Sector                 Facilities      Employment        Revenue       Value added       Payroll   
----------------------------------------------------------------------------------------------------------------
Hardware........................           4,197         379,000          44,327           9,463           5,845
Aircraft........................             856         552,000          96,715          24,858          15,148
Electronic Equipment............           1,280         700,000         155,101          80,502          12,503
Stationary Industrial Equipment.           2,769         419,000          52,918          12,815           6,306
Ordnance........................             190         131,000          21,666           7,059           4,006
Aerospace.......................             545         580,000          54,430          19,454           9,660
Mobile Industrial Equipment.....             764         275,000          65,914          14,101           8,151
                                 -------------------------------------------------------------------------------
    All Phase I Sectors.........          10,601       3,036,000         491,071         168,252          61,620
                                 -------------------------------------------------------------------------------
    Total U.S. Manufacturing....  ..............      19,492,000       2,793,000       1,308,000         533,000
Phase I Facilities as a Percent                                                                                 
 of Total U.S. Manufacturing....  ..............          15.58%          17.58%          12.86%          11.56%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency, Section 308 Survey Data, 1989, and Statistical Abstract of the    
  United States, 1992, Department of Commerce.                                                                  

    These data show that the 10,601 facilities potentially subject to 
regulation employed over 3,000,000 persons in 1989 or approximately 16 
percent of the total U.S. manufacturing employment of 19.5 million in 
1989.3 Total revenues for the 10,601 facilities are estimated at 
$491 billion or about 18 percent of the total shipments for U.S. 
manufacturing in 1989 of $2,793 billion. A more meaningful measure of 
the value of production activity in these facilities is provided by 
value added,4 which is estimated to amount to about $168 billion 
or approximately 13 percent of the total value added of $1,308 billion 
for U.S. manufacturing in 1989. The estimated payroll for the 10,601 
facilities is about $62 billion or approximately 12 percent of the 
total of $533 billion for U.S. manufacturing in 1989.

    \3\ Although the MP&M Phase I sectors include non-manufacturing 
activities and employment, nearly 95 percent of the revenue received 
by facilities affected by the regulation is estimated to be derived 
from manufacturing activities. Thus, the comparison of employment 
and other economic values with totals for the U.S. manufacturing 
sector provides a relevant basis for understanding the economic 
significance of the industries and facilities expected to incur 
costs under the regulation.
    \4\ Value Added is the difference between the output price of a 
good or service and the price of all material inputs used in 
producing the good or service, and is generally considered a better 
measure than revenue of the value of production that occurs in a 
given economic activity.
    Table 3 also shows these economic activity data for the seven MP&M 
Phase I business sectors. On the basis of number of facilities, the 
Hardware, Stationary Industrial Equipment, and Electronic Equipment 
sectors are the largest sectors subject to regulation. These three 
sectors account for over 75 percent of the total of 10,601 facilities 
expected to be subject to regulation. However, on the basis of 
employment and dollar measures of economic activity, the Hardware 
sector is less dominant. A ranking on both employment and value added 
shows that Electronic Equipment is the largest sector in terms of 
economic contribution followed by Aircraft, Aerospace, Stationary 
Industrial Equipment, Mobile Industrial Equipment, Hardware, and 
Ordnance.

C. Overview of Options Considered for Proposal and Selection of the 
Proposed Options

    In developing the regulatory proposals presented herein, EPA 
defined and evaluated a number of PSES regulatory options for indirect 
dischargers and BAT/BPT options for direct dischargers. The following 
discussion defines the options that were considered for proposal and 
outlines the rationale for the regulatory proposals.
1. PSES Options for Indirect Dischargers
    As discussed previously in Sections IX, XI, and XII, EPA initially 
evaluated three PSES regulatory options for indirect dischargers:
    Option 1: Lime and Settle Treatment. Under this option, 
Pretreatment Standards for Existing Sources (PSES) would be established 
on the basis of the application of lime and settle treatment without 
any pollution prevention and flow controls imposed. The implementation 
of this option would likely result in concentration-based standards 
imposed on facilities by Control Authorities.
    Option 2: In-Process Flow Reduction and Pollution Prevention and 
Lime and Settle Treatment. This option would establish PSES on the 
basis that all facilities should comply with mass-based standards that 
are the based on the Lime and Settle technology and associated 
concentration limits as specified for Option 1. However, the mass-based 
standards would be calculated from a flow volume that reflects good 
pollution prevention and water conservation practices. Thus, this 
option embodies a requirement for pollution prevention and water 
conservation in conjunction with the Lime and Settle Treatment process. 
The flow basis would be determined by the relevant Control Authority 
using site-specific factors and flow guidance.
    Option 3: Advanced End-of-Pipe Treatment. This option would 
establish PSES based on the same technology and mass-based limit 
specifications as set forth for in Option 2 plus additional end-of-pipe 
treatment through reverse osmosis or ion exchange to achieve additional 
removals and produce a treated wastewater that can be recycled back to 
the facility for reuse as process waters.
    From its preliminary analysis of these options, EPA initially 
selected Option 2, In-Process Flow Reduction and Pollution Prevention 
and Lime and Settle Treatment, as the preferred PSES regulatory option 
for indirect dischargers. Stated simply, EPA preferred Option 2 because 
it would apply to all indirect discharging facilities, mass-based 
standards that embody best available technology based on a combination 
of treatment systems and pollution prevention measures. Moreover, EPA 
found that Option 2 would impose relatively modest economic impacts in 
terms of expected facility closures and employment losses in the MP&M 
industry and thus concluded that Option 2 would be 
[[Page 28235]] economically achievable. However, upon further analysis 
and consideration, EPA reached additional findings that weighed against 
the proposal of Option 2 and caused the Agency to define and evaluate 
modifications to Option 2 as the basis for a PSES proposal. These 
findings involved three issues as follows:
    Impact on small business. In its Regulatory Flexibility Analysis, 
EPA found that Option 2 would be expected to disproportionately burden 
small business-owned facilities in terms of facility closures and 
financial requirements. In particular, by embodying technology 
requirements for pollution prevention as well as treatment systems, 
Option 2 was found to impose greater financial burden on MP&M small 
business-owned, indirect discharging facilities than would result from 
the treatment system-only basis of Option 1. As discussed in Section 
K., Regulatory Flexibility Analysis, below, EPA considered 
modifications to Option 2 in an effort to mitigate financial and 
economic burdens on small business-owned facilities. These 
modifications differentiated among facilities based on the annual 
volume of facility discharge; however, EPA anticipated that reducing 
regulatory requirements for small discharge volume facilities would 
also mitigate the regulatory burden among small business entities.
    Cost effectiveness. For indirect discharging facilities with 
smaller discharge volumes, EPA found that Option 2 would not be cost 
effective (see Section L, below). That is, for facilities with smaller 
discharge volumes, Option 2 would not achieve sufficient additional 
reductions in pollutant discharges beyond those achieved by Option 1 to 
support its higher cost relative to Option 1. In view of this finding, 
EPA considered modifications to Option 2 that would be more cost 
effective for indirect discharging facilities with smaller discharge 
volumes.
    Impact on permitting authorities. EPA was concerned that Option 2, 
by requiring mass-based permits for all indirect discharging 
facilities, regardless of discharge volume, would substantially burden 
the authorities that administer the permit requirements. In particular, 
as part of the public participation in the regulation development 
process, the Association of Metropolitan Sewerage Agencies (AMSA) 
commented that the permit administration requirements of covering small 
discharge facilities under mass-based limitations would unduly burden 
permitting authorities. In its analysis of the MP&M Phase I industry, 
EPA estimated that a large percentage of indirect discharging 
facilities had relatively small annual discharge: over 75 percent of 
the estimated 6,700 indirect discharging facilities discharge less than 
1 million gallons annually. Thus, EPA acknowledged that Option 2 would 
require a large number of permits to be written for these smaller 
discharge volume facilities and could therefore impose a substantial 
burden on permitting authorities. In response to this concern, EPA 
undertook a limited analysis of the likely costs to permitting 
authorities of issuing mass-based and concentration-based permits. This 
analysis indicated that the cost to permitting authorities of covering 
smaller discharge volume facilities (less than 1 million gallons per 
year) could vary considerably among permitting authorities but, in 
aggregate, might not be excessive: EPA estimated a total annual cost of 
$1.9 to $3.2 million ($1994) for writing and administering permits for 
indirect discharging facilities with effluent discharge of less than 1 
million gallons per year. Still, in view of the limited nature of EPA's 
analysis of permitting costs and, moreover, in view of the findings 
with regard to small business impact and cost effectiveness (which also 
argued for moderating requirements among smaller facilities), EPA 
decided to define and evaluate modifications to Option 2 that would 
reduce the number of mass-based permits needed for implementing the 
regulation. Because of the conflicting information and findings 
regarding the burden of permit administration, EPA requests that 
permitting authorities comment on this issue.
    On the basis of these findings, EPA defined and evaluated two 
additional PSES regulatory options for indirect discharging facilities: 
Option 1a and Option 2a. EPA found that both options addressed the 
issues described above and presented superior alternatives to Options 
1, 2, or 3, alone, for regulatory proposal. However, with respect to 
each of the issues noted above--impact on small business, cost 
effectiveness, and burden on permit writing authorities--EPA found that 
Option 2a provided a better solution than Option 1a. Accordingly, EPA 
is proposing Option 2a as the preferred PSES option for indirect 
discharging facilities. Option 1a and Option 2a, together with the 
basis of their selection for regulatory proposal, are discussed below:
    Option 1a: Tiered PSES for ``Low'' Flow and ``Large'' Flow Sites. 
This option would establish a tiered PSES requirement and blends 
elements of Option 1 and Option 2 depending on a site's annual 
discharge volume. Sites with a discharge volume of less than 1,000,000 
gallons per year (``low'' flow sites) would meet the concentration-
based standard set forth in Option 1. Sites with a discharge volume of 
at least 1,000,000 gallons per year (``large'' flow sites) would meet 
the mass-based standards that embody pollution prevention as well as 
the Lime and Settle Treatment process as set forth in Option 2.
    By adopting the concentration-based requirements of Option 1 for 
``low'' flow sites, Option 1a reduces the number of facilities for 
which mass-based permits would need to be written. In addition, Option 
1a reduces the expected compliance costs and financial burdens for the 
smaller discharge volume facilities, many of which are small 
businesses. Finally, because of the reduced requirements on smaller 
discharge volume facilities, Option 1a achieves better cost 
effectiveness than Option 2.
    Option 2a: In-Process Flow Reduction and Pollution Prevention and 
Lime and Settle Treatment for ``Large'' Flow Sites. This option would 
establish the same PSES requirements as specified for Option 2. 
However, these requirements would apply to only ``large'' flow sites--
that is, indirect discharge sites with a discharge volume of at least 
1,000,000 gallons per year. All such sites would comply with mass-based 
standards based on the Lime and Settle Treatment process coupled with a 
requirement for pollution prevention and water conservation as 
specified for Option 2. ``Low'' flow indirect discharge sites--that is, 
with a discharge volume of less than 1,000,000 gallons per year--would 
not be subject to PSES requirements. EPA estimates that, of the 8,706 
indirect discharge facilities in the MP&M Phase I industry, 6,708 would 
qualify as low flow discharge sites and thus would not be subject to 
the Option 2a PSES requirement.
    By exempting low flow discharge sites from PSES regulatory 
requirements, Option 2a, even more than Option 1a, mitigates the 
difficulties of Option 2. Specifically, because of the regulation's 
reduced coverage in terms of number of facilities, Option 2a would 
substantially reduce the burden on permit-writing authorities. In 
addition, low flow indirect discharging facilities would bear no costs 
as a result of regulation, substantially reducing financial burdens and 
closure impacts among small business-owned facilities. Finally, as 
discussed below at Section L, EPA found that Option 2a would be 
expected to achieve substantially better cost effectiveness than the 
other regulatory [[Page 28236]] options considered for indirect 
discharging facilities.
    Thus, EPA found that Option 2a addresses the limitations of Option 
2 while imposing even fewer economic impacts than Option 2 or Option 1a 
in terms of facility closures and financial burdens. Moreover, Option 
2a embodies best available technology for reducing the industry's 
effluent discharges. Accordingly, EPA judges that Option 2a presents a 
balanced regulatory approach for reducing effluent discharges from the 
MP&M Phase I indirect discharging facilities while not imposing undue 
burdens on industry or on the permit-writing authorities that will be 
directly responsible for administering the regulation.
2. BAT/BPT Options for Direct Dischargers
    As discussed previously in Sections IX, XI, and XII, EPA evaluated 
three BAT/BPT regulatory options for direct discharging facilities:
    Option 1: Lime and Settle Treatment. Under this option, BAT/BPT 
would be established on the basis of the application of lime and settle 
treatment without any pollution prevention and flow controls imposed.
    Option 2: In-Process Flow Reduction and Pollution Prevention and 
Lime and Settle Treatment. Option 2 includes the same technology basis 
as Option 1, lime and settle treatment, but adds in-process pollution 
prevention and flow controls.
    Option 3: Advanced End-of-Pipe Treatment. Option 3 includes the 
same treatment technology and in-process pollution prevention and flow 
controls as set forth in Option 2 plus additional end-of-pipe treatment 
through reverse osmosis or ion exchange to achieve additional removals 
and produce a treated wastewater that can be recycled back to the 
facility for reuse as process waters.
    Of these options, EPA selected Option 2 as the proposed BPT/BAT 
regulation for direct existing discharging facilities. Like Option 2a 
for indirect discharging facilities, Option 2 embodies best available 
technology for reducing effluent discharges. Moreover, EPA found that 
Option 2 would impose modest economic impacts in terms of facility 
closures, employment losses, and financial requirements. As discussed 
in Section L, below, EPA also found that Option 2 is cost effective. 
Finally, EPA concluded that Option 2 (in combination with Option 2a for 
indirect dischargers) would impose a modest and manageable burden among 
small business-owned, direct discharging facilities.
    The following sections summarize the specific analyses and findings 
leading to EPA's selection of Option 2a for indirect dischargers and 
Option 2 for direct dischargers as the proposed regulatory alternatives 
for existing facilities in the MP&M Phase I industries.

D. Economic Impact Methodology

    The promulgation of a BAT effluent guideline rests on a finding of 
economic achievability. As described earlier in Section III of this 
Preamble, EPA is proposing to establish BAT equal to BPT. BPT effluent 
limitations do not face the same economic achievability test as BAT. 
Therefore, the following discussion of economic achievability describes 
the regulatory approach in terms of BAT economic achievability. The 
analyses supporting the determination of economic achievability for 
this proposed regulation include a facility impact analysis, which 
assesses how facilities are expected to be affected financially by the 
proposed regulation. Key outputs of the facility impact analysis 
include expected facility closures in the MP&M industry and the 
associated losses in employment and value of economic activity in those 
facilities. The findings from the facility impact analysis provide the 
basis for the other analyses regarding the economic achievability of 
the regulation. These include:

     A firm-level analysis, which assesses the impact of 
effluent guidelines on the financial performance and condition of firms 
owning MP&M facilities subject to regulation;
     A labor requirements analysis, which assesses the likely 
demands for labor that will accompany the activities of facilities to 
comply with effluent guidelines.
     A community impact analysis, which assesses the local 
employment impact of possible facility closures;
     A foreign trade analysis, which assesses the effect of 
effluent guidelines on the international competitiveness and balance of 
trade of the MP&M industries.
     A new source impact analysis, which assesses the effect of 
effluent guidelines on the costs and financial viability of new 
facilities in the MP&M industries; and
     The Regulatory Flexibility Analysis, which assesses the 
economic and financial impacts of effluent guidelines for the MP&M 
industries on small businesses.
    The following section of the preamble addresses the facility impact 
analysis. This discussion is followed by the other analyses of the 
economic impact of effluent guidelines for the MP&M industries.
1. Structure of the Facility Impact Analysis
    The facility-level impact analysis involves a series of financial 
analyses to assess the expected occurrence of significant financial 
impacts as the result of an MP&M effluent guideline. Several 
considerations define the structure of the facility impact analysis, 
including: the impact categories analyzed; baseline and post-compliance 
analyses; assumptions regarding the ability of facilities to pass 
compliance costs on to customers; and whether facilities were expected 
to discharge effluent to a publicly owned treatment works (POTW) (i.e., 
indirect dischargers) or directly to a waterway (i.e., direct 
dischargers). Each of these considerations is discussed briefly below.
a. Impact Categories Analyzed
    Two categories of significant impact are assessed: (1) facility 
closure, which is judged as a severe economic impact, in that all 
employment and production at the facility are assumed to be terminated; 
and (2) financial stress short of closure, which is judged to be a 
moderate economic impact. The estimates of facility closures and 
associated employment and production losses underlie the other analyses 
required for the assessment of economic achievability. The second 
impact category, financial stress short of closure, signifies that 
facilities may experience difficulty in financing the pollution 
prevention and treatment systems needed for compliance or that, because 
of compliance, may subsequently experience difficulty in financing 
other capital needs.
b. Baseline and Post-Compliance Analyses
    The facility closure analyses were undertaken on both a pre-
compliance, or baseline, basis, and a post-compliance basis. The 
purpose of the Baseline Analysis is to identify facilities that are 
currently experiencing or are projected to experience significant 
financial stress following the period for which the Survey was 
completed. These facilities are having or are expected to have serious 
financial difficulties regardless of the promulgation of effluent 
guidelines. Attribution of these financial difficulties to the effluent 
guidelines rather than to facilities' current financial problems would 
inaccurately represent the burden of the effluent guidelines. 
Accordingly, facilities that failed the baseline analysis 
[[Page 28237]] were excluded from the subsequent, post-compliance 
analyses that measure the impact of compliance on financial performance 
and condition.
    The Post-Compliance Analyses differ from the Baseline Analysis by 
accounting for the capital and operating costs of pollution prevention 
and discharge treatment systems needed to comply with regulatory 
options. The post-compliance analyses thus indicate how facility 
financial performance and condition are likely to be affected by the 
proposed regulation and provide the basis for identifying whether 
facilities may be expected to incur a significant financial impact.
c. Pass Through of Compliance Costs to Customers
    The analyses of Post-Compliance Closure and Financial Stress Short 
Of Closure were performed under assumptions of both zero-cost-pass-
through and partial-cost-pass-through of compliance costs to customers. 
The zero-cost-pass-through case provides a conservative assessment of 
regulatory impacts in that facilities are assumed to pass none of the 
costs of compliance through to customers. That is, both quantities and 
prices--and therefore revenues--for each facility's production were 
assumed to remain constant after compliance even though costs were 
increased on the basis of the estimated equipment and operating 
requirements for effluent guidelines compliance. Because it is likely 
that companies would both attempt and be able to recover some of the 
compliance costs by increasing prices, the no-cost-pass-through case 
represents an extremely conservative, worst case assessment of the 
effects of the regulation.
    For a more realistic assessment of impacts, EPA also analyzed the 
impact of regulatory options under an assumption of partial-cost-pass-
through. For the partial-cost-pass-through analysis, EPA estimated the 
ability of firms in each of the MP&M sectors to recover compliance 
costs from customers. The assessment of cost pass-through potential was 
based on an econometric analysis of historical pricing and cost trends 
in the MP&M industries over a fifteen-year period coupled with an 
analysis of market structure factors that provide additional insight 
into the likely ability of firms to pass on higher costs to customers. 
Market structure factors considered in the analysis include: market 
power based on horizontal and vertical integration; extent of 
competition from foreign suppliers (both in domestic and export 
markets); barriers to competition as indicated by higher than normal 
profitability; and the long term growth trend in the industry. The 
analysis of pass-through potential yielded a pass-through parameter 
applicable to each MP&M industry sector indicating the fraction of 
compliance costs that firms subject to regulation are expected to 
recover from customers through increased revenues. The partial-cost-
pass-through analysis yielded modestly lower impacts in terms of 
expected facility closures and losses in employment and production.
d. Facility Discharge Status
    Whether facilities discharge effluent streams to a publicly owned 
treatment works (POTW) (i.e., indirect dischargers) or directly to a 
waterway (i.e., direct dischargers) is relevant to the structure of the 
economic impact analysis because these facilities and their effluent 
streams are regulated under different technology standards. Indirect 
dischargers are subject to Pretreatment Standards for Existing Sources 
(PSES) while direct dischargers are subject to Best Available 
Technology Economically Achievable (BAT), Best Practicable Control 
Technology Currently Available (BPT), and Best Conventional Pollutant 
Control Technology (BCT) requirements. For this regulation, different 
sets of regulatory options were considered for indirect and direct 
dischargers. As discussed above, five PSES regulatory options were 
considered for indirect dischargers and three BAT/BPT options were 
considered for direct dischargers. EPA performed the facility impact 
analyses separately for these two classes of facilities and the 
regulatory options that were considered for them. In the following 
discussion, economic impact analysis results are presented separately 
for the two classes of facilities and are also summed for the proposed 
options for both facility classes.
2. Data Supporting the Facility Impact Analysis
    The most important source of data for the facility impact analysis 
is the facility-level financial data obtained by the DCP. These data 
include: three years (1987-89) of income statements and balance sheets 
at the level of the facility; the composition of revenues by customer 
type and MP&M business sector; estimated value of facility assets and 
liabilities in liquidation; borrowing costs; and ownership of the 
facility business and total revenues of the owning entity (if separate 
from the facility).
    In addition to the DCP data, several secondary sources provided 
data for the analysis. In most cases, secondary source data were used 
to characterize a background economic or financial condition, in the 
economy as a whole or in the particular industries subject to the MP&M 
effluent guideline. For example, secondary source data were used to 
define capital market conditions underlying the cost-of-capital 
analysis. Secondary source data also figured prominently in the 
analysis of cost pass-through potential for the MP&M sectors. Secondary 
sources used in the analysis include:5

    \5\ See the Public Record for a detailed listing of the 
secondary information sources used in the economic impact analysis.
---------------------------------------------------------------------------

     Department of Commerce economic census and survey data 
including the Censuses of Manufacturers, Annual Surveys of 
Manufacturers, and international trade data;
     The Benchmark Input-Output Tables of the United States, 
published by the Bureau of Economic Analysis in the Department of 
Commerce;
     Price index series from the Bureau of Labor Statistics, 
Department of Labor;
     U.S. Industrial Outlook, published by the Department of 
Commerce;
     Industry trade publications; and
     Financial publications, including the Value Line 
Investment Survey and Robert Morris Associates annual data summaries.
    Other vital data for the analysis of facility impacts include the 
estimates of capital and operating costs for complying with regulatory 
options. These cost estimates were developed by EPA from engineering 
studies of sample MP&M industry facilities. These studies took into 
account the characteristics of effluent discharges and existing 
treatment systems at the facilities and estimated the additional 
pollution prevention and treatment system needs for complying with the 
alternative regulatory options. The estimated capital costs and annual 
operating and maintenance costs for pollution prevention and treatment 
systems provided the basis for assessing how an effluent guideline 
would be likely to affect the financial performance and condition of 
MP&M facilities and whether those facilities might be expected to incur 
significant economic impacts.
3. Methodology for Calculating Facility Impacts
    The estimation of facility impacts is based on the following 
analyses: the Baseline Closure Analysis, the Post-Compliance Closure 
Analysis, and the Financial Stress Short of Closure Analysis. Each 
analysis is described briefly in the following section. Table 4, 
[[Page 28238]] below, summarizes the methodology for each impact 
category.
a. Baseline Closure Analysis
    The Baseline Facility Closure Analysis is based on two financial 
tests, both of which must be failed for the facility to be deemed a 
closure:
    1. After-Tax Cash Flow Test. This test examines whether a facility 
has lost money on a cash basis for the three years covered by the DCP. 
If the facility's cash flow is negative when averaged over the period 
of analysis, then the facility's management and ownership is presumed 
to be under pressure to change operations or business practices to 
eliminate future losses. One possible change is to terminate operations 
at the facility. Whether it may be financially advantageous to the 
facility's ownership to terminate facility operations is the subject of 
the second financial test.
    2. Liquidation Value and Going-Concern Value Comparison Test. This 
test examines whether the liquidation value of facility assets exceeds 
the going concern value of the facility based on a discounted value 
analysis of the facility's after-tax cash flow. The liquidation value 
of facility assets was calculated from information provided by 
facilities in the DCP and reflects the market value of facility assets 
less expenses associated with closure and liquidation. The financial 
question underlying this comparison is whether the facility is worth 
more in liquidation or in its current operation (i.e., as a going 
concern). If the liquidation value exceeded the going-concern value, 
then facility ownership is presumed to see a reward for terminating the 
facility's business and liquidating its assets.
    If a facility failed both tests, then the facility was presumed to 
be in jeopardy of financial failure independent of the application of 
the MP&M effluent guideline and was excluded from further consideration 
in the analysis of effluent guideline impacts. Failure of the after-tax 
cash flow tests means that the facility is incurring a cash loss and is 
thus under financial pressure to alter its business to prevent future 
losses. Failure of the liquidation value/going-concern value test means 
that facility ownership would benefit financially by terminating 
operations and liquidating facility assets. The combination of these 
two circumstances leads to the expectation that facility management and 
ownership may decide to cease business at the facility independent of 
the application of an MP&M effluent guideline. Facilities failing only 
one test were carried forward to the post-compliance analysis; because 
of their more fragile condition, these facilities were more likely to 
fail that analysis.
b. Post-Compliance Closure Analysis
    The Post-Compliance Closure analysis is identical in structure to 
the Baseline Closure Analysis with the exception that the after-tax 
cash flow amounts used in the After-Tax Cash Flow test and in the 
Liquidation Value and Going-Concern Value Comparison test are adjusted 
to reflect the annual cash outlays for financing and operating the 
pollution prevention and treatment systems needed to comply with an 
MP&M effluent guideline. The adjustments to cash flow reflect the 
annualized costs of purchasing and financing equipment for compliance 
with the alternative regulatory options and include allowances for the 
cost of debt and equity financing. In addition, the cash flow 
adjustments reflect the annual costs incurred by facilities for 
operating and maintaining the pollution prevention and treatment 
systems needed for compliance. The capital cost and operating and 
maintenance costs that underlie these cash flow adjustments were 
estimated by EPA on the basis of engineering studies of pollution 
prevention and treatment system needs at sample MP&M facilities for 
complying with alternative regulatory options.
    In the same way as for the Baseline Closure Analysis, a facility 
was judged likely to close as a result of regulation only if the 
facility fails both the After-Tax Cash Flow Test and the Liquidation 
Value and Going-Concern Value Comparison Test. The requirement to fail 
both tests again rests on the logic that negative cash flow provides 
the impetus for considering facility closure to avoid future losses and 
the excess of liquidation value over going concern value provides the 
reward for doing so.
    The analysis of post-compliance facility closures was undertaken 
for the sample facilities that were not assessed as baseline closures. 
These results were then extrapolated to the facility population using 
sample weights. As discussed above, facility closure is considered a 
severe economic impact as all employment and production from the 
facility is assumed to be lost as a result of closure. Moreover, for 
this analysis, none of the production or employment losses were assumed 
to be offset by possible increases in MP&M production activity at other 
facilities that remain in production. Thus, the assumption of full loss 
of employment and production in closing facilities is conservative and 
overstates possible employment and production impacts.
c. Analysis of Financial Stress Short of Closure
    The analysis of Financial Stress Short of Closure identifies 
facilities whose financial condition is so weak as to imply difficulty 
in financing the treatment system investments for compliance with an 
MP&M effluent guideline. This analysis was undertaken only for those 
facilities that passed the preceding Facility Closure analysis. 
Facilities that fail the Financial Stress analysis were judged as 
likely to experience a financial impact that is less severe than 
closure as the result of efforts to comply with an MP&M effluent 
guideline. However, they would be expected to incur significant 
financial stress from undertaking compliance-related investments and/or 
incurring the operating cost burdens of compliance. Financing 
assistance might be required from the parent firm or through an equity 
infusion or other financial restructuring. These facilities or firms 
are projected to become among the poorer, but still viable, financial 
performers in an industry. Although they are not projected to fail or 
otherwise terminate operations directly because of compliance 
requirements, the deterioration in their financial performance would 
presumably leave them at greater risk of failure from other factors in 
their business environment.
    The analysis of Financial Stress Short of Closure was based on two 
tests of financial performance and condition calculated at the facility 
level. The measures of financial performance and condition--pre-tax 
return on assets and interest coverage ratio--are among the more 
important criteria reviewed by creditors and equity investors in 
determining whether and under what terms to provide financing to a 
firm. These measures also provide insight into the ability of firms to 
generate funds for compliance investments from internally generated 
equity--that is, from after-tax cash flow. The basis for evaluating 
these measures was by comparison of the facility values with industry 
norms obtained from secondary sources.
    The analyses of pre-tax return on assets (ROA) and interest 
coverage ratio (ICR) were performed by first calculating ROA and ICR 
values for facilities independent of the financial effects of complying 
with an effluent guideline. The ROA and ICR values were then adjusted 
to reflect the expected changes in facility finances resulting from 
installing and operating the pollution prevention and treatment systems 
needed for effluent guidelines compliance. As a result of the 
compliance-related outlays, if a facility's ROA or ICR fell below 
industry norms, the facility was judged likely to incur a moderate 
impact (i.e., financial stress short of closure) as a result of 
regulatory compliance. The industry norms for evaluating ROA and ICR 
were developed from data reported in Robert Morris Associates Annual 
Statement Summaries (RMA).6 Specifically, facility ROA and ICR 
values were compared with the lowest quartile (i.e., 25th percentile) 
value for the respective financial measures as calculated from RMA data 
for the relevant industries over the period 1985-1992. [[Page 28239]] 

    \6\ RMA provides financial statistics based on bank credit 
reports from public-reporting and non-public-reporting firms in a 
variety of industries.

            Table 4.--Summary of Facility Impact Methodology            
------------------------------------------------------------------------
                                                         Significance of
 Impact category      Description         Analysis      negative finding
------------------------------------------------------------------------
1. Baseline        Identifies        Two tests: 1.      Facilities      
 Closure.           facilities that   After-tax cash     failing both   
                    are in jeopardy   flow negative?     tests are      
                    of financial      and 2.             considered a   
                    failure           Liquidation        baseline       
                    regardless of     value exceed       closure and    
                    the               going concern      excluded from  
                    promulgation of   value?             subsequent     
                    effluent                             analyses.      
                    guidelines.                                         
2. Post-           Identifies        Two tests: 1.      Facilities      
 Compliance         facilities that   Post-compliance    failing both   
 Closure.           are likely to     after-tax cash     tests are      
                    close instead     flow negative?     projected to   
                    of implementing   and 2.             close as the   
                    the pollution     Liquidation        result of      
                    prevention and    value exceed       regulation, a  
                    treatment         post-compliance    severe economic
                    systems needed    going concern      impact.        
                    for effluent      value?                            
                    guidelines                                          
                    compliance.                                         
3. Financial       Identifies        Two tests: 1.      Facilities      
 Stress Short of    facilities with   Decline in pre-    failing either 
 Closure.           limited ability   tax ROA to a       test are likely
                    to finance the    level that         to experience  
                    pollution         jeopardizes        financial      
                    prevention and    access to          weakness as the
                    treatment         financing? or 2.   result of      
                    systems needed    Decline in ICR     regulation, a  
                    for effluent      to a level that    moderate       
                    guidelines        jeopardizes        economic       
                    compliance.       access to          impact.        
                                      financing?                        
------------------------------------------------------------------------

 E. Estimated Facility Economic Impacts

    The findings from the facility impact analysis are summarized 
below.
1. Baseline Closure Analysis
    The estimated baseline closures for both indirect and direct 
discharge facilities are summarized in Table 5. Of the estimated 10,601 
discharging facilities, 13.9 percent or 1,471 facilities were assessed 
as baseline closures from the financial analyses outlined above. The 
1,471 baseline closures include 1,413 indirect dischargers, or 16.2 
percent of indirect dischargers, and 58 direct dischargers, or 3.1 
percent of direct dischargers. The facilities estimated to close in the 
baseline analysis are in jeopardy of financial failure independent of 
the promulgation of the MP&M regulation. The estimated baseline 
closures are removed from the subsequent post-compliance analysis of 
regulatory impacts.

             Table 5.--Summary of Baseline Closure Analysis             
------------------------------------------------------------------------
                                                  Indirect      Direct  
                                        Total   dischargers  dischargers
------------------------------------------------------------------------
Facilities in Analysis (dischargers                                     
 only)..............................    10,601                          
                                        100.0%       8,706              
                                                     82.1%        1,895 
                                                                  17.9% 
Baseline Failures (percent failing                                      
 in class)..........................     1,471                          
                                         13.9%       1,413              
                                                     16.2%           58 
                                                                   3.1% 
Facilities in Analysis (percent in                                      
 class).............................     9,130                          
                                         86.1%       7,293              
                                                     83.8%        1,837 
                                                                  96.9% 
------------------------------------------------------------------------

2. Post-Compliance Impact Analysis
    The findings from the Post-Compliance Impact Analyses are 
summarized below. Findings are presented first for the PSES options 
considered for indirect discharging facilities, and then for the BAT/
BPT options considered for direct discharging facilities. A third 
section presents aggregate findings for the proposed PSES and BAT/BPT 
options for both discharger classes. In each discussion, findings in 
terms of estimated facility closure and lost employment and production 
are presented for both the highly unlikely zero-cost-pass-through case 
and the more realistic partial-cost-pass-through case. The expected 
impacts of compliance in terms of estimated total capital cost and 
total annual costs are also summarized. In addition, the numbers of 
facilities expected to incur moderate impacts are discussed.
a. Indirect Dischargers
    For indirect discharging facilities, EPA analyzed the impacts of 
five possible PSES regulatory options--Options 1, 2, 3, 1a, and 2a--as 
discussed in Section XIV.C., above, and as described in Section XII of 
the technical discussion. Of the options considered, EPA is proposing 
Option 2a as the preferred PSES regulatory option. As discussed in 
Section XII, Option 2a embodies best available technology for reducing 
the industry's effluent discharges. In addition, EPA estimates that 
Option 2a will impose very modest economic impacts and is thus 
economically achievable. The estimated facility-level impacts 
associated with each of the regulatory options are discussed below and 
presented in Table 6. The discussion first reviews the impact findings 
for the three PSES options that EPA initially evaluated for proposal: 
Options 1, 2, and 3. The discussion then reviews the impact findings 
for the two PSES options that were subsequently developed: Option 1a 
and the PSES proposal, Option 2a. As described previously, Option 1a 
applies the requirements of Option 1 or Option 2 to facilities based on 
whether facilities are ``low'' flow (i.e., discharge volume of less 
than 1,000,000 gallons per year) or ``large'' flow (i.e., discharge 
volume of at least 1,000,000 gallons per year), while 
[[Page 28240]] Option 2a applies the requirements of Option 2 to only 
``large'' flow facilities.
i. Impacts of Option 1: Lime and Settle Treatment

Zero-Cost-Pass-Through Analysis
    Of the 7,293 indirect discharging facilities subject to regulation, 
EPA estimates that 161 facilities or 2.2 percent could be expected to 
close as the result of the Option 1 regulation. The employment and 
shipments losses associated with these facility closures are estimated 
at 3,001 full-time equivalent (FTE) positions and $370 million, 
respectively (all amounts in 1994 dollars). The estimated employment 
and shipments losses amount to 0.14 percent and 0.08 percent, 
respectively, of the total values for indirect discharging facilities 
that pass the baseline closure analysis and are thus the basis for the 
post-compliance analysis. The estimates of possible facility closures 
and associated losses in employment and shipments are probably 
substantial overestimates because of the assumption of zero-cost-pass-
through and because the analysis does not account for the likelihood 
that non-closing facilities will absorb some of the lost production and 
employment from closing facilities. In addition to the facility closure 
impacts, another 42 facilities would be expected to incur financial 
stress short of closure, a moderate economic impact, under Option 1. 
EPA estimates that industry would incur capital costs of $276 million 
for complying with Option 1. The estimated total annualized, after-tax 
cash cost to industry, which reflects private costs of capital and 
expected tax treatment of capital outlays and annual expenses, amounts 
to $202 million.

                   Table 6.--Estimated Impacts of Regulatory Compliance, Indirect Dischargers                   
                                          [Dollar values in $000, 1994]                                         
----------------------------------------------------------------------------------------------------------------
                                                    Options initially considered for       Subsequent options   
                                                                proposal               -------------------------
                                                ---------------------------------------                         
                                                   Option 1     Option 2     Option 3    Option 1a    Option 2a 
----------------------------------------------------------------------------------------------------------------
Facilities in Analysis.........................        7,293        7,293        7,293        7,293        1,792
----------------------------------------------------------------------------------------------------------------
                          Severe Impacts (closing facilities)                                                   
                            Zero-Cost-Pass-Through Analysis (unrealistic worst case)                            
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Number of Facilities...........................          161          151          227          151            7
Percent of Class...............................        2.20%        2.07%        3.11%        2.07%        0.39%
Employment (FTEs)..............................        3,001        2,354       18,215        2,354          540
Value of Shipments.............................     $369,997     $235,852   $2,350,346     $235,852     $133,678
----------------------------------------------------------------------------------------------------------------
                 Moderate Impacts (financial stress short of closure)                                           
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Number of Facilities...........................           42          124          184           54           12
Financial Impacts on Complying Facilities:                                                                      
    Capital Cost...............................     $275,798     $436,293   $1,174,721     $437,209     $350,853
Total Annual Compliance Cost:                                                                                   
    Tax-adjusted *.............................     $202,115     $213,530     $615,530     $208,639     $142,467
    No adjustments ....................     $271,020     $267,544     $783,691     $259,994     $171,134
----------------------------------------------------------------------------------------------------------------
                          Severe Impacts (closing facilities)                                                   
                                       Partial-Cost-Pass-Through Analysis                                       
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Number of Facilities...........................           91           52          160           82            7
Percent of Class...............................        1.25%        0.72%        2.20%        1.12%        0.39%
Employment (FTEs)..............................        1,714          892        7,710        1,068          540
Value of Shipments.............................     $325,896     $177,109     $858,207     $191,751     $133,678
                 Moderate Impacts (financial stress short of closure)                                           
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Number of Facilities...........................            0           41           66           12           12
Financial Impacts on Complying Facilities:                                                                      
    Capital Cost...............................     $279,029     $439,840   $1,195,482     $440,441     $350,853
Total Annual Compliance Cost:                                                                                   
    Tax-adjusted *.............................     $203,647     $215,274     $629,618     $210,171     $142,467
    No adjustments ....................     $272,914     $269,717     $802,156     $261,888     $171,134
----------------------------------------------------------------------------------------------------------------
* ``Tax-adjusted'' compliance costs are an estimate of the annual cash compliance cost to industry and reflect  
  private costs of capital and expected tax treatment of capital outlays and annual expenses.                   
 Compliance costs with ``No adjustments'' are an estimate of the total annual cost of compliance without
  tax adjustments and with capital costs annualized on the basis of a real social discount rate.                

Partial-Cost-Pass-Through Analysis
    The more realistic, partial-cost-pass-through analysis shows fewer 
impacts under Option 1. Among indirect dischargers, 91 facilities or 
1.3 percent would be expected to close as a result of such regulation 
and no additional facilities are expected to incur moderate economic 
impacts. Employment and shipments losses associated with closing 
facilities are estimated at 1,714 FTEs (0.08 percent of total for 
indirect discharging facilities in the post-compliance analysis) and 
$326 million (0.07 percent of total) respectively. Because additional 
facilities are expected to come into compliance (instead of closing) 
under the partial-cost-pass-through analysis, the costs of compliance 
are estimated to be modestly higher. Total capital costs of compliance 
are estimated at $279 million and total annualized 
[[Page 28241]] compliance costs are estimated at $204 million, tax-
adjusted.

ii. Impacts of Option 2: In-Process Flow Reduction and Pollution 
Prevention and Lime and Settle Treatment

Zero-Cost-Pass-Through Analysis
    Under Option 2, EPA estimates that 151 facilities or 2.1 percent 
could be expected to close as the result of regulation. The employment 
and shipments losses associated with these facility closures are 
conservatively estimated at 2,354 FTEs (0.11 percent of total) and $236 
million (0.05 percent of total), respectively. In addition to the 
facility closure impacts, another 124 facilities are expected to incur 
financial stress short of closure because of regulation. EPA estimates 
that industry will incur capital costs of $436 million for complying 
with Option 2. The estimated total annualized, after-tax cash cost to 
industry, which reflects private costs of capital and expected tax 
treatment of capital outlays and annual expenses, amounts to $214 
million.
Partial-Cost-Pass-Through Analysis
    Under the more realistic, partial-cost-pass-through analysis, 52 
facilities or 0.7 percent of indirect dischargers passing the baseline 
analysis are expected to close as a result of regulation and another 41 
facilities are expected to incur moderate economic impacts. Employment 
and shipments losses associated with closing facilities are estimated 
at 892 FTEs (0.04 percent of total) and $177 million (0.04 percent of 
total) respectively. Total capital costs of compliance are estimated at 
$440 million and total annualized compliance costs are estimated at 
$215 million, tax-adjusted.

iii. Impacts of Option 3: Advanced End-of-Pipe Treatment

Zero-Cost-Pass-Through Analysis
    Impacts under Option 3 are estimated to be markedly higher than 
those for Options 1 or 2. Under Option 3, EPA estimates that 227 
facilities or 3.1 percent could be expected to close as the result of 
regulation. The employment and shipments losses associated with these 
facility closures are conservatively estimated at 18,215 FTEs (0.87 
percent of total) and $2,350 million (0.52 percent of total), 
respectively. In addition to the facility closure impacts, another 184 
facilities are expected to incur financial stress short of closure 
because of regulation, again considerably higher than for the other 
options considered. Compliance costs are also considerably higher for 
Option 3. EPA estimates that industry will incur capital costs of 
$1,175 million for complying with Option 3. The estimated total 
annualized, after-tax cash cost to industry, which reflects private 
costs of capital and expected tax treatment of capital outlays and 
annual expenses, amounts to $616 million.
Partial-Cost-Pass-Through Analysis
    Although impacts are moderated under the more realistic partial-
cost-pass-through analysis (in relation to the zero-cost-pass-through 
analysis), they still remain considerably higher than the impacts 
estimated for the other options. Among indirect dischargers, 160 
facilities or 2.2 percent of facilities passing the baseline analysis 
are expected to close as a result of regulation and another 66 
facilities are expected to incur moderate economic impacts. Employment 
and shipments losses associated with closing facilities are estimated 
at 7,710 FTEs and $858 million respectively. Total capital costs of 
compliance are estimated at $1,195 million and total annualized 
compliance costs are estimated at $630 million, tax-adjusted.

iv. Impacts of Option 1a: Tiered PSES for ``Low'' Flow and ``Large'' 
Flow Sites

Zero-Cost-Pass-Through Analysis
    Under Option 1a, which applies the limitations of Option 1 or 
Option 2 based on facility discharge volume, EPA estimates that 151 
facilities or 2.1 percent could be expected to close as the result of 
regulation. The employment and shipments losses associated with these 
facility closures are conservatively estimated at 2,354 FTEs (0.11 
percent of total) and $236 million (0.05 percent of total), 
respectively. All these values are the same as estimated for Option 2. 
Under Option 1a, 54 facilities are expected to incur financial stress 
short of closure, a moderate economic impact. EPA estimates that 
industry will incur capital costs of $437 million for complying with 
Option 1a, or very slightly greater than for Option 2. However, the 
estimated total annualized, after-tax cash cost to industry, which 
reflects private costs of capital and expected tax treatment of capital 
outlays and annual expenses, amounts to $209 million, which is about $5 
million less than estimated for Option 2.
Partial-Cost-Pass-Through Analysis
    The more realistic, partial-cost-pass-through analysis again shows 
fewer impacts than the zero-cost-pass-through analysis. Among indirect 
dischargers, 82 facilities or 1.1 percent are expected to close as a 
result of regulation and only 12 facilities are expected to incur 
moderate economic impacts. Employment and shipments losses associated 
with closing facilities are estimated at 1,068 FTEs (0.05 percent of 
total) and $192 million (0.04 percent of total), respectively. Total 
capital costs of compliance are estimated at $440 million and total 
annualized compliance costs are estimated at $210 million, tax-
adjusted.

v. Impacts of Option 2a: In-Process Flow Reduction and Pollution 
Prevention and Lime and Settle Treatment for ``Large'' Flow Sites

Zero-Cost-Pass-Through Analysis
    Among the five PSES options that EPA analyzed, the proposed Option 
2a, which applies the limitations of Option 2 to large flow facilities 
and exempts low flow facilities from regulation, achieves the lowest 
impacts in terms of facility closures, employment losses, and financial 
burdens. Under Option 2a, EPA estimates that a minimal number of 
facilities--7--would be expected to close as the result of regulation. 
These 7 facilities represent 0.1 percent of the 7,293 indirect 
discharge facilities found to pass the baseline closure analysis and 
0.4 percent of the 1,792 indirect discharge facilities that both have a 
discharge volume of at least 1,000,000 gallons per year and pass the 
baseline closure analysis. The employment and shipments losses 
associated with these facility closures are conservatively estimated at 
540 FTEs (0.03 percent of total) and $134 million (0.03 percent of 
total), respectively. In addition to the facility closure impacts, 12 
facilities are expected to incur financial stress short of closure 
because of regulation. EPA estimates that industry will incur capital 
costs of $351 million to comply with Option 2a. The estimated total 
annualized, after-tax cash cost to industry, which reflects private 
costs of capital and expected tax treatment of capital outlays and 
annual expenses, amounts to $142 million.
Partial-Cost-Pass-Through Analysis
    The estimated impacts of Option 2a under the partial-cost-pass-
through case are the same as the already modest values estimated for 
the zero-cost-pass-through case. The estimated closure and financial 
impact values remain the lowest among the five PSES options analyzed 
for indirect discharging facilities.
b. Direct Dischargers
    For direct discharging facilities, EPA analyzed the impacts of 
three possible [[Page 28242]] BAT/BPT regulatory options--Options 1, 2, 
and 3--as previously described. Of these options, EPA is proposing 
Option 2 because, as discussed above, it represents the performance 
achievable with the best available technology and, in view of its 
comparatively modest economic impacts, is economically achievable. The 
estimated facility-level impacts associated with each of the regulatory 
options are discussed below and presented in Table 7. For direct 
dischargers, EPA estimated the same level of facility closure and 
compliance cost impacts under both the zero-cost-pass-through and 
partial-cost-pass-through analyses. Thus, these results for these two 
cases are not presented separately. The estimated moderate impacts--
that is, financial stress short of closure--did vary between the two 
cost pass-through cases and these differences are noted in the summary 
table and accompanying discussion.
i. Impacts of Option 1: Lime and Settle Treatment

    Of the 1,837 direct discharging facilities subject to regulation, 
EPA estimates that 18 facilities or 1.0 percent could be expected to 
close as the result of regulation. The employment and shipments losses 
associated with these facility closures are estimated at 158 FTEs (0.03 
percent of total employment for direct discharging facilities passing 
the baseline closure analysis) and $6 million (0.01 percent of total 
shipments for direct discharging facilities passing the baseline 
closure analysis), respectively. As noted above, the estimates of 
possible facility closures and associated losses in employment and 
shipments overstate likely impacts because the analysis does not 
account for the likelihood that non-closing facilities will absorb some 
of the lost production and employment from closing facilities. Under 
the zero-cost-pass-through analysis, an additional 6 facilities are 
expected to incur financial stress short of closure because of 
regulation, a moderate economic impact; no facilities are estimated to 
incur moderate economic impacts under the partial-cost-pass-through 
case. EPA estimates that industry will incur capital costs of $47 
million for complying with Option 1. The estimated total annualized, 
after-tax cash cost to industry, which reflects private costs of 
capital and expected treatment of capital outlays and annual expenses, 
amounts to $16 million.

Table 7.--Estimated Impacts of Regulatory Compliance, Direct Dischargers
                      [Dollar values in $000, 1994]                     
------------------------------------------------------------------------
                                     Option 1     Option 2     Option 3 
------------------------------------------------------------------------
Facilities in Analysis...........        1,837        1,837        1,837
------------------------------------------------------------------------
                   Severe Impacts (closing facilities)                  
   Zero-Cost-Pass-Through and Partial-Cost-Pass-Through Analyses (same  
                                results)                                
                                                                        
------------------------------------------------------------------------
Number of Facilities.............           18           18           90
Percent of Class.................        0.96%        0.96%        4.92%
Employment (FTEs)................          158          158        7,339
Value of Shipments...............       $6,161       $6,161     $883,577
------------------------------------------------------------------------
          Moderate Impacts (financial stress short of closure)          
                                                                        
------------------------------------------------------------------------
Zero-Cost-Pass-Through                                                  
    Number of Facilities.........            6            0            0
Partial-Cost-Pass-Through                                               
    Number of Facilities.........            0            0            0
------------------------------------------------------------------------
                Financial Impacts on Complying Facilities               
   Zero-Cost-Pass-Through and Partial-Cost-Pass-Through Analyses (same  
                                results)                                
                                                                        
------------------------------------------------------------------------
Capital Cost.....................      $47,363      $63,269     $127,369
Total Annual Compliance Cost:                                           
    Tax-adjusted*................      $16,297      $18,136      $63,979
    No adjustments.......      $18,181      $19,137      $80,523
------------------------------------------------------------------------
* ``Tax-adjusted'' compliance costs are an estimate of the annual cash  
  compliance cost to industry and reflect private costs of capital and  
  expected tax treatment of capital outlays and annual expenses.        
 Compliance costs with ``No adjustments'' are an estimate of the
  total annual cost of compliance without tax adjustments and with      
  capital costs annualized on the basis of a real social discount rate. 

ii. Impacts of Option 2: In-Process Flow Reduction and Pollution 
Prevention and Lime and Settle Treatment

    Under the proposed Option 2, EPA estimated the same level of 
facility closures and associated impacts as for Option 1; however, 
moderate facility impacts are modestly lower and compliance costs are 
modestly higher. Closing facilities are estimated at 18 facilities or 
1.0 percent of direct dischargers passing the baseline analysis. 
Associated employment and shipments losses are again estimated at 158 
FTEs (0.03 percent of total) and $6 million (0.01 percent of total), 
respectively. In both the zero-cost-pass-through and partial-cost-pass-
through analyses, no additional facilities were assessed as likely to 
incur financial stress short of closure. EPA estimates that industry 
will incur capital costs of $63 million for complying with Option 2. 
The estimated total annualized, after-tax cash cost to industry, which 
reflects private costs of capital and expected tax treatment of capital 
outlays and annual expenses, amounts to $18 million.

iii. Impacts of Option 3: Advanced End-of-Pipe Treatment

    In a similar way as for indirect dischargers, impacts under Option 
3 for direct dischargers are estimated to be markedly higher than those 
for Options 1 and 2. Under Option 3, EPA estimates that 90 facilities 
or 4.9 percent of direct dischargers passing the baseline analysis 
could be expected to close as the result of regulation. The employment 
and shipments losses associated with these facility closures are 
conservatively estimated at 7,339 FTEs (1.24 percent of total) and $884 
million (1.26 percent of total), respectively. In both the zero-cost-
pass-through and partial-cost-pass-through analyses, no additional 
facilities were assessed as likely to incur financial stress short of 
closure, the same result as estimated for Option 2. Compliance costs 
are estimated to be considerably higher for Option 3 than for Options 1 
and 2. EPA estimates that industry will incur capital costs of $127 
million for complying with Option 3. The estimated total annualized, 
after-tax cash cost to industry, which reflects private costs of 
capital and expected tax treatment of capital outlays and annual 
expenses, amounts to $64 million.
c. Aggregate Impacts for the Combined Regulatory Proposal for Existing 
Facilities: Option 2a for Indirect Discharging Facilities and Option 2 
for Direct Discharging Facilities
    Aggregate impacts for both indirect and direct discharging 
facilities are summarized in Table 8, below, for the proposed 
regulatory options applicable to existing facilities: Option 2a for 
indirect dischargers (PSES) and Option 2 for direct dischargers (BAT/
BPT).
    Overall, 3,629 facilities passed the Baseline Closure analysis 
(1,837 direct discharging facilities and 1,792--large flow--indirect 
discharging facilities) and thus are expected to be subject to 
regulation. Of this population, 25 facilities or 0.7 percent are 
expected to close as a result of regulation in both the zero-cost-pass 
through and partial-cost-pass-through analyses.7 The total 
associated employment impact amounts to 698 FTEs (0.03 percent of the 
total employment in facilities passing the baseline analysis and thus 
potentially subject to regulation) and the associated value of lost 
shipments amounts to $140 million (0.03 percent of the total shipments 
in facilities passing the baseline analysis and thus potentially 
subject to regulation).8 In addition to the estimated closure 
impacts, a modest 12 facilities are expected to encounter financial 
stress short of closure as a result of the proposed regulation. Summed 
over both indirect and direct discharging facilities, the total capital 
costs of compliance amount to $414 million. Total annualized costs of 
compliance are estimated at $161 million, when calculated on an after-
tax basis using private costs of capital. [[Page 28243]] 

    \7\ The impact analysis results for Option 2a/2 are the same 
throughout for both the zero-cost-pass-through and partial-cost-
pass-through cases.
    \8\ An analysis of possible employment increases that may 
partially offset these losses is presented in the next section.

 Table 8.--Estimated Aggregate Impacts of Regulatory Compliance-Proposed
     Regulatory Options 2a and 2 for Indirect and Direct Dischargers    
                      [Dollar values in $000, 1994]                     
------------------------------------------------------------------------
                             Option 2a       Option 2      Sum for both 
                             (indirect        (direct       classes of  
                           dischargers)    dischargers)     facilities  
------------------------------------------------------------------------
Facilities in Analysis..           1,792           1,837           3,629
------------------------------------------------------------------------
                   Severe Impacts (closing facilities)                  
      Zero-Cost-Pass-Through and Partial-Cost-Pass-Through Analysis     
                                                                        
------------------------------------------------------------------------
Number of Facilities....               7              18              25
Percent of Class........           0.39%           0.96%           0.69%
Employment (FTEs).......             540             158             698
Value of Shipments......        $133,678          $6,161        $139,839
------------------------------------------------------------------------
          Moderate Impacts (financial stress short of closure)          
                                                                        
------------------------------------------------------------------------
Number of Facilities....              12               0              12
Financial Impacts in                                                    
 Complying Facilities:                                                  
    Capital Cost........        $350,853         $63,269        $414,122
Total Annual Compliance                                                 
 Cost:                                                                  
    Tax-adjusted........        $142,467         $18,136        $160,602
    No adjustments                                                      
      ..........        $171,134         $19,137        $190,270
------------------------------------------------------------------------
*``Tax-adjusted'' compliance costs are an estimate of the annual cash   
  compliance cost to industry and reflect private costs of capital and  
  expected tax treatment of capital outlays and annual expenses.        
 Compliance costs with ``No adjustments'' are an estimate of the
  total annual cost of compliance without tax adjustments and with      
  capital costs annualized on the basis of a real social discount rate. 

F. Labor Requirements and Possible Employment Benefits of Regulatory 
Compliance

    Firms will need to install and operate compliance systems to comply 
with an effluent limitations guideline for the MP&M industry. The 
manufacture, installation, and operation of these systems will require 
use of labor resources. To the extent that these labor needs translate 
into employment increases in affected firms, a MP&M rule has the 
potential to generate employment benefits. If realized, these 
employment benefits may partially offset the employment losses that are 
expected to occur in facilities impacted by the rule. The employment 
effects that would occur in the manufacture, installation, and 
operation of treatment systems are termed the ``direct'' employment 
benefits of the rule. Because these employment effects are directly 
attributable to the MP&M rule, they are conceptually parallel to the 
employment losses that were estimated for the facilities that are 
expected to incur significant impacts as a result of the MP&M rule.
    In addition to direct employment benefits, the MP&M rule may 
generate other employment benefits through two mechanisms. First, 
employment effects [[Page 28244]] may occur in the industries that are 
linked to the industries that manufacture and install compliance 
equipment; these effects are termed ``indirect'' employment benefits. 
For example, a firm that manufactures the pumps, piping and other 
hardware that comprise a treatment system will purchase intermediate 
goods and services from other firms and sectors of the economy. Thus, 
increased economic activity in the firm that manufacturers the 
treatment system components has the potential to increase activity and 
employment in these linked firms and sectors. Second, the increased 
payments to labor in the directly and indirectly affected industries 
will lead to increased purchases from consumer-oriented service and 
retail businesses, which in turn lead to additional labor demand and 
employment benefits in those businesses. These effects are termed 
``induced'' employment benefits.
    In view of these possible employment benefits, EPA estimated the 
labor requirements associated with compliance with the proposed MP&M 
Phase I regulatory option: Option 2a for indirect dischargers and 
Option 2 for direct dischargers. Labor requirements--and thus the 
possible employment benefits-- were estimated in two steps. EPA first 
estimated the direct employment effects associated with the 
manufacture, installation, and operation of compliance equipment. 
Second, EPA considered the additional employment effects that might 
occur through the indirect and induced effect mechanisms outlined 
above.
1. Direct Labor Requirements of Complying With the Proposed Regulation
    EPA separately analyzed each component of the direct labor 
requirements: manufacturing, installing, and operating compliance 
equipment. The analysis is based on the compliance cost estimates 
developed for the economic impact analysis of the MP&M regulation. 
Compliance requirements and associated costs were estimated for each 
facility in the Survey that was assessed as incurring costs. For the 
labor requirements analysis, compliance costs and their associated 
labor requirements were considered only for those facilities that were 
not assessed as a baseline or compliance related closure. That is, the 
analysis considered the labor requirement effects associated only with 
those facilities that, upon compliance with the rule, would be likely 
to continue MP&M production activities.
    EPA estimated the direct labor requirements for manufacturing and 
installing compliance equipment based on the cost of the equipment and 
its installation, and labor's expected share of cost in manufacturing 
and installing the equipment. The labor input was estimated in dollars 
based on information contained in the National Input-Output Tables 
assembled by the Bureau of Economic Analysis in the Department of 
Commerce. In particular, the direct requirements matrix identifies the 
value of each input, including labor, that is required to produce a one 
dollar value of output for a subject industry. The industries in the 
input-output tables that were used as the basis for this analysis are: 
the Heating, Plumbing, and Fabricated Structural Metal Products 
Industry (Bureau of Economic Analysis industry classification 40) for 
compliance equipment manufacturing; and the Repair and Maintenance 
Construction Industry (Bureau of Economic Analysis industry 
classification 12) for compliance equipment installation. The dollar 
value of labor's contribution was converted to a full-time employment 
equivalent based on a yearly labor cost of $56,244 in 1994 dollars 
(including benefits and payroll taxes). Because compliance equipment 
purchase and installation are considered one-time outlays, the labor 
requirements for these activities were annualized over a 15-year period 
at the seven percent social discount rate.
    For the analysis of the labor required to operate compliance 
equipment, EPA used the estimates of annual labor hours that were 
developed as the basis for assessing the annual operating and 
maintenance costs of the MP&M regulatory options.
    From these analyses, EPA estimated an annual direct labor 
requirement of 1,594 full-time equivalent positions (FTEs) for 
complying with the combined regulatory proposal for existing 
facilities: Option 2a for indirect dischargers and Option 2 for direct 
dischargers (Option 2a/2). Of this total, the annualized labor 
requirements for manufacturing and installing compliance equipment are 
187 and 85 FTEs, respectively. Compliance equipment operation is 
estimated to require 1,322 FTEs annually. The corresponding annual 
estimated payments to labor is $89,664,000 (1994 dollars) (see Table 
9).

                    Table 9.--Analysis of Possible Employment Generation Effects of Proposed Regulatory Options for the MP&M Industry                   
                                                    [All dollar amounts in thousands of 1994 dollars]                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Labor cost         Labor cost component        Direct labor requirements \3\
                                                          Total weighted     share of    ---------------------------------------------------------------
                                                           expenditures     production                     Annual basis                                 
                                                                             value \1\    One-time basis        \2\       One-time basis   Annual basis 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Option 2a for Indirect Dischargers and Option 2 for Direct Dischargers                                         
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Labor Effects From Compliance Equipment:                                                                                                         
    Manufacturing.......................................        $308,981          31.02%         $95,833         $10,522           1,704             187
    Installation........................................        $102,994          42.23%         $43,497          $4,776             773              85
    Operation...........................................  ..............  ..............  ..............         $74,367  ..............           1,322
                                                                                                         ----------------                ---------------
      Total Direct Labor Effects........................  ..............  ..............  ..............         $89,664  ..............           1,594
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Source: U.S. Department of Commerce, The 1982 Benchmark Input-Output Accounts of the United States, December 1991. The labor cost share of          
  production value for compliance equipment manufacturing is based on the input-output composition of the Heating, Plumbing, and Fabricated Structural  
  Metal Products Industry (Bureau of Economic Analysis industry classification 40). The labor share of production value for compliance equipment        
  installation is based on information for the Repair and Maintenance Construction Industry (Bureau of Economic Analysis industry classification 12).   
\2\ Annualized over 15 years at the social discount rate of 7 percent.                                                                                  
\3\ Number of jobs calculated on the basis of an average hourly labor cost of $24.00 ($1989) and 2,000 hours per labor-year. The annual labor cost of   
  $48,000 ($1989) was brought forward as $56,244 for 1994.                                                                                              

[[Page 28245]] 2. Indirect and Induced Labor Requirements of Complying 
With the MP&M Rule
    In addition to its direct labor effects, an MP&M effluent guideline 
may also generate labor requirements through the indirect and induced 
effect mechanisms described above. EPA assessed the indirect and 
induced employment effects of the proposed regulatory options by use of 
multipliers that relate aggregate economic effects, including indirect 
and induced effects, to direct economic effects. Using a range of 
multipliers from previous studies of the aggregate employment effects 
of general water treatment and pollution control expenditures, EPA 
estimated that the total labor requirement effect would range from 
3,900 to 6,400 FTEs for the proposed Option 2a/2 . The lower end of 
this range reflects the use of lower multiplier values and conservative 
assumptions regarding effects on economic activity in industries linked 
to the MP&M industry. The higher end of the range reflects the higher 
multiplier values and assumes full incurrence of indirect economic 
effects in industries linked to the MP&M industry.
G. Community Impacts

    EPA expects that the employment losses resulting from MP&M facility 
closures will not have a significant impact on the national economy. 
However, employment losses may be significant at the local level if 
facility closures are concentrated regionally or if they occur in 
smaller communities. Therefore, EPA examined the community level 
employment impacts that may result from the proposed regulatory options 
for the MP&M industry. Community impacts were assessed by estimating 
the expected change in employment in communities with MP&M facilities 
that are affected by regulation. Possible community employment effects 
include the lost employment in facilities that are expected to close 
because of regulation, and related employment losses in other 
businesses in the affected community. These employment losses are 
considered significant if they are expected to exceed one percent of 
the pre-regulation level of employment in the affected communities. For 
such comparisons, a community is generally defined as the area in which 
employees may reasonably commute to work--typically a Metropolitan 
Statistical Area (MSA), or county if the affected community is not 
contained within a MSA.
    To understand the significance of community employment impacts from 
the proposed regulation, Option 2a/2, EPA performed two analyses of 
expected community employment impacts. First, EPA examined the 
community employment impacts based on the known location of the sample 
facility closures estimated to result from each of the proposed 
regulatory options. Because the location of these sample facilities is 
known, it is possible to compare the expected employment loss from 
closure, including losses in related businesses, with the pre-
regulation employment in the affected community, defined as either the 
MSA or the county in which the sample facility closure is located. This 
analysis directly tests the significance of employment losses in the 
communities in which the estimated closing sample facilities are 
located.
    Second, EPA examined the significance of expected facility closures 
taking into account the employment losses from the closing facilities 
in the underlying facility population that are represented by the 
sample facility closures. Because the locations of these non-sample 
closing facilities are not known, it was not possible to measure the 
significance of the associated employment losses in specific 
communities. Instead, EPA distributed these employment losses among 
states and assessed their significance at the state level, taking into 
account the estimated job losses in both MP&M facilities and in related 
businesses.
    In addition to these analyses of the impact of employment losses, 
EPA also considered the effect of possible employment gains as 
discussed in the preceding section at the state level. Specifically, 
EPA distributed the possible employment gains among states and 
calculated a net potential employment impact by state taking into 
account the expected effect of both facility closures and labor demands 
from compliance-related outlays.
1. Assessment of Community Impacts for Estimated Sample Facility 
Closures
    To assess the significance of facility closures and associated 
employment losses in specific communities, EPA compared the employment 
loss from estimated sample facility closures, including losses in 
related businesses, to the pre-regulation level of employment in the 
communities in which the sample facilities are located.
    For the proposed Option 2a/2 (Option 2a for indirect dischargers 
and Option 2 for direct dischargers), the facility closure analysis 
indicated that three sample facilities would be expected to close as a 
result of regulation. Two of the three sample facilities are located in 
California: 1 in Merced County, 1 in the Los Angeles-Long Beach MSA. 
The third facility is located in Virginia, in the Norfolk-Virginia 
Beach-Newport News MSA. The total of employment losses in these sample 
facilities amounts to 168 FTEs, or an average of 56 FTEs per closing 
sample facility (see Table 10).

                 Table 10.--Community Employment Impacts in Estimated Sample Closing Facilities                 
----------------------------------------------------------------------------------------------------------------
                                                        Facilities                      Total employment loss in
                                                         affected                                  MSA          
                                    Pre-regulation --------------------   MP&M state   -------------------------
           MSA or county              employment                          multiplier               As % of pre- 
                                                     Number     Empl.                     FTEs      regulation  
                                                               (FTEs)                               employment  
----------------------------------------------------------------------------------------------------------------
Los Angeles-Long Beach............       4,173,000         1        97            2.72       264           0.01%
Merced County.....................          64,617         1        62            2.72       169           0.26%
Norfolk-Virginia Beach-Newport                                                                                  
 News.............................         594,463         1         9            2.27        20           0.00%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                                                                   

    In addition to the primary employment losses (i.e., those that 
occur in the estimated MP&M facility closures), employment losses may 
also occur through the secondary impact mechanism. Such secondary 
employment losses may occur in: (1) Industries that are economically 
linked to MP&M industries and (2) consumer businesses whose employment 
is affected by changes in the earnings and expenditures of the 
employees in the directly and indirectly affected industries. To assess 
these secondary employment losses, EPA calculated [[Page 28246]] state-
specific, composite MP&M employment multipliers that are based on the 
estimated relationship of employment in MP&M industry sectors to total 
state employment, and the composition of employment within a state 
among the seven MP&M Phase I sectors. These state-specific composite 
employment multipliers were calculated from Regional Input-Output 
Modeling System (RIMS) multipliers developed by the Bureau of Economic 
Analysis (BEA) within the Department of Commerce.
    To calculate the expected total employment loss (i.e., considering 
both primary and secondary employment impacts) in the communities in 
which estimated sample facility closures are located, EPA multiplied 
the employment loss in the estimated sample facility closures by the 
composite multiplier for the particular state. The total losses by MSA 
ranged from 20 to 264 FTEs. To assess the significance of these losses, 
EPA compared the estimated total employment loss with the pre-
regulation employment in the community, based on 1990 Census data. For 
the two facilities that are located in an MSA, the pre-regulation 
employment is the 1990 employment for the MSA. For the facility that is 
not located within a MSA, the pre-regulation employment is the 1990 
civilian employment for the county in which the facility is located. 
This comparison indicated that none of the estimated sample facility 
closures would be expected to have a significant impact on total 
community employment. The largest of the percentage impacts is 
estimated for Merced County, California and amounts to 0.26 percent. 
The estimated impact in the Los Angeles-Long Beach MSA amounts to only 
0.01 percent, while the impact in the Norfolk-Virginia Beach-Newport 
News MSA rounds to zero when calculated to the nearest hundredth of a 
percent (see Table 10).
2. Assessment of State-Level Employment Impacts
    To capture the effect of employment losses in the non-sample 
facilities that are represented by the estimated sample facility 
closures, EPA performed a second analysis in which the employment loss 
in these non-sample facilities was distributed among states in 
proportion to pre-regulation levels of MP&M industry employment. 
Because the community locations of these non-sample, represented 
facilities is not known, it is not possible to analyze the impact of 
these employment losses in specific communities as defined by MSAs or 
counties.
    In addition to the 168 FTE losses in the 3 sample facility 
closures, EPA estimated that another 530 FTE employment losses and 22 
facility closures would occur in the underlying population that is 
represented by the sample facilities. EPA distributed these losses 
among states in proportion to each state's estimated MP&M Phase I 
sector employment as calculated from Department of Commerce employment 
data. To estimate the total employment loss by state (i.e., both 
primary and secondary losses), EPA multiplied the primary losses for 
each state by the state's composite employment impact multiplier as 
developed from BEA state- and industry-specific multipliers. The 
estimated loss by state averaged 36 FTEs and ranged from a low of zero 
to a high of 621; 32 states and the District of Columbia had a total 
estimated loss of less than 25 FTEs. Table 11 summarizes the estimated 
facility closures and associated primary and total employment losses 
for the 9 states in which the total employment loss is estimated to 
exceed 50 FTEs. To evaluate the significance of the estimated total 
employment loss by state, EPA compared the employment loss values with 
estimated total civilian employment for each state, as reported by the 
Department of Commerce for 1991.
    From these calculations, the estimated total employment loss as a 
percent of total state employment rounds to zero when calculated to the 
nearest hundredth of a percent for all 50 states and the District of 
Columbia. The maximum estimated employment loss as a percentage of 
total state employment amounts to less than one-half of one-hundredth 
of one percent of total state employment (Table 12 lists the estimated 
employment loss results for the 10 states with the highest percentage 
impacts). Thus, on the basis of the findings from this and the 
preceding analysis, EPA expects that the proposed regulation for the 
MP&M industry will not cause significant employment impacts at the 
local level.

 Table 11.--Estimated Facility Closures and Total Employment Losses for 
                     States With Largest Total Loss                     
------------------------------------------------------------------------
                                            Employment                  
                             Estimated       losses in         Total    
          State           total facility    facilities      employment  
                             closures         (FTEs)        loss (FTEs) 
------------------------------------------------------------------------
California..............             4.9             228             621
Ohio....................             1.6              38             116
Illinois................             1.6              38             116
Pennsylvania............             1.3              31              89
Texas...................             1.3              32              89
Michigan................             1.1              27              74
New York................             1.2              30              64
Wisconsin...............             0.8              20              53
Indiana.................             0.7              17              52
------------------------------------------------------------------------
Loss in all other states is less than 50 FTEs.                          
Source: U.S. Environmental Protection Agency.                           


                Table 12.--Total Employment Loss by State, 10 States With Highest Percentage Loss               
----------------------------------------------------------------------------------------------------------------
                                                    Employment                                                  
                                     Estimated        loss in          Total        Total state      Loss as a  
              State               total facility    facilities      employment      employment      percent of  
                                     closures         (FTEs)        loss (FTEs)       (1990)           total    
----------------------------------------------------------------------------------------------------------------
California......................             4.9             228             621      13,714,000          0.005%
Ohio............................             1.6              38             116       5,094,000          0.002%
Wisconsin.......................             0.8              20              53       2,453,000          0.002%
Connecticut.....................             0.6              15              35       1,679,000          0.002%
Illinois........................             1.6              38             116       5,598,000          0.002%
[[Page 28247]]
                                                                                                                
Indiana.........................             0.7              17              52       2,632,000          0.002%
Michigan........................             1.1              27              74       4,125,000          0.002%
Pennsylvania....................             1.3              31              89       5,524,000          0.002%
Massachusetts...................             0.7              17              45       2,847,000          0.002%
New Hampshire...................             0.1               3               9         589,000          0.001%
----------------------------------------------------------------------------------------------------------------
Total percentage employment loss for all states rounds to zero at the nearest hundredth of a percent.           
Source: U.S. Environmental Protection Agency.                                                                   

3. Assessment of State-Level Employment Impacts Including Possible 
Employment Gains
    As a final part of the analysis of community level employment 
impacts, EPA considered total state-level employment effects taking 
into account possible employment gains. Possible labor gains, as 
discussed in the previous section, were distributed by state in 
proportion to MP&M employment by state, and state-level employment 
multipliers were applied to these gains to estimate the total potential 
state-level employment gain. The multipliers used for this analysis 
were selected to correspond to the industries in which primary labor 
effects are expected to occur. These values were subtracted from the 
total employment loss values calculated in the preceding section to 
calculate a net employment loss by state, taking into account the 
possible employment gains from compliance-related activities.
    The estimated employment gain values range from a low of zero for 
the District of Columbia, which has a very low estimated employment in 
MP&M industry activity, to a high of 552 for California, the state with 
the largest estimated MP&M industry employment. The average possible 
gain by state amounted to 81 FTEs. These values were subtracted from 
the estimated total loss values calculated in the preceding section to 
yield an estimated net employment loss by state for the proposed 
regulation. For all states but California, which has an estimated net 
employment loss of 69 FTEs, the estimated potential gain exceeds the 
estimated loss from facility closures (Table 13 summarizes these values 
for the 10 states with the highest estimated loss from facility 
closures). Thus, the potential employment gains associated with 
compliance activities could substantially offset the local employment 
losses expected to result from facility closures.

   Table 13.--Employment Loss and Possible Gain by State, 10 States With Highest Estimated Loss From Facility   
                                                    Closures                                                    
----------------------------------------------------------------------------------------------------------------
                                                    Total loss      Employment      Total gain                  
                      State                        from facility   gain, primary       with       Net employment
                                                     closures       impact only     multiplier         loss     
----------------------------------------------------------------------------------------------------------------
California......................................             621             209             552              69
Ohio............................................             116             115             345           (229)
Illinois........................................             116             113             344           (228)
Pennsylvania....................................              89              93             265           (176)
Texas...........................................              89              97             261           (171)
Michigan........................................              74              82             222           (148)
New York........................................              64              90             187           (124)
Wisconsin.......................................              53              59             155           (102)
Indiana.........................................              52              51             153           (101)
Massachusetts...................................              45              52             130            (86)
----------------------------------------------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                                                                   

H. Impacts on Firms Owning MP&M Facilities

    The assessment of economic achievability of the MP&M regulation is 
based primarily on the facility-level impact analysis. However, because 
the impacts at the level of the firm may exceed those assessed at the 
level of the facility, particularly when a firm owns more than one 
facility that will be subject to regulation, EPA also conducted a firm-
level impact analysis for the MP&M regulation. The firm-level analysis 
estimates the impact of regulatory compliance on firms owning 
facilities subject to MP&M effluent guidelines.
    Secondary financial sources and DCP responses provided income 
statement and balance sheet data for 255 firms that own 290 of the 396 
sampled facilities. Sufficient data were not available to analyze 
compliance impacts on the parent firms of the remaining 106 facilities.
    EPA conducted the firm-level impact analysis under the zero-cost-
pass-through scenario. Because the DCP sample was not designed as a 
random sample of firms, but was instead directed toward estimating 
national characteristics of facilities, the DCP sample data used in 
this analysis is not sample weighted. The findings apply only to the 
firms that own sample facilities and do not represent national 
estimates of firm-level impacts.
    EPA assessed firm-level impacts on the basis of changes in measures 
of profitability and interest coverage, as calculated from firm 
financial statements. These measures, Pre-Tax Return on Assets (ROA) 
and Interest Coverage Ratio (ICR), are the same as those used in the 
facility-level Analysis of Financial Stress Short of Closure. When 
applied at the level of the firm, these measures indicate the firm's 
ability to attract the capital needed for expansion in the normal 
course of business or for pollution control [[Page 28248]] investments 
associated with effluent guidelines compliance. EPA used the same 
thresholds of minimum financial performance for these two measures in 
the facility-level Financial Stress Short of Closure analysis. These 
thresholds are based on a weighted average of the first quartile values 
for ROA and ICR for the relevant MP&M industries as reported in the 
Robert Morris Associates publication Annual Statement Studies.
    In the same way as for the facility closure analysis, EPA performed 
the firm-level analysis in two steps: (1) a baseline analysis, which 
evaluates the firm's financial condition independent of the costs of 
regulatory compliance; and (2) a post-compliance analysis, which 
accounts for the effects of compliance costs on the firm-level 
financial measures. In the baseline analysis, firms whose ROA or ICR 
were below the industry standards were considered financially weak 
independent of regulation and were eliminated from further analysis. 
Firms that pass both of the thresholds were subjected to a post-
compliance test, in which their financial measures were changed to 
reflect the impact of the MP&M effluent guideline. Firms that failed 
either threshold post-compliance but pass both pre-compliance are 
expected to incur significant financial stress as a result of 
compliance with the regulation.
    The firms consist of both single and multiple facility firms. In 
the case of single facility firms, the impact on each firm's ROA and 
ICR is identical to the impact calculated on the basis of the 
responding facility's financial statements and estimated compliance 
costs, alone. The impacts for single facility firms correspond to those 
calculated in the facility level analysis.
    Analysis of firm impacts for multiple facility firms, however, 
involves aggregating and extrapolating financial and compliance cost 
data for sample facilities to the level of the firm. If all of a firm's 
revenues come from activities subject to the MP&M regulation, the 
impact of regulation on that firm will clearly be greater than the 
impact on a firm that participates minimally in activities subject to 
the MP&M regulation, all other things being equal. Similarly, a firm 
whose production is heavily concentrated in foreign facilities would 
also experience less significant impacts than firms primarily producing 
in the U.S. (i.e., with more facilities subject to the MP&M effluent 
guideline).
    The analysis of firm-level impacts for multiple facility firms is 
made difficult because compliance-related information is available only 
for the sample facilities owned by these firms. That is, information is 
not available for the non-sample facilities owned by a firm in terms of 
whether or not those facilities would be subject to the MP&M regulation 
and, if so, the costs that they would incur to achieve compliance with 
the proposed regulation. Lacking this information, the firm-level 
analysis estimated impacts based on two scenarios that cover the full 
range of possible regulatory applicability to the non-sample facilities 
owned by a firm. The first scenario is based on the minimum 
applicability of the regulation and assumes that the sampled facilities 
are the only facilities that engage in activities subject to regulation 
in a firm. In this scenario, the firm level impact of the regulation is 
calculated by adjusting the firm-level financial measures for the 
compliance costs incurred by the firm's sampled facility(ies).
    The second scenario is based on the maximum applicability of the 
regulation and assumes that all of a firm's activities are subject to 
regulation, whether associated with a sampled facility or not. In this 
scenario, EPA calculated a firm-level impact by extrapolating the 
estimated costs of compliance for the firm's sample facility(ies) to 
the level of the firm assuming that all of the firm's revenues are 
subject to regulation. Specifically, the compliance costs for the 
sample facility (or the sum of costs over facilities, for those firms 
owning more than one sample facility) were scaled upward by the ratio 
of firm revenue to the sum of sampled facility revenues. This method 
presumes a uniform relationship between compliance costs and revenue 
over all the facilities owned by a firm. EPA then used these estimated 
firm-level compliance costs under the scenario in which all revenue is 
subject to regulation to adjust the pre-compliance measures of 
financial performance.
    Of the 255 firms analyzed, 73 firms, or slightly less than 29 
percent, failed one or both of the firm financial tests pre-compliance 
and therefore failed the baseline firm-level impact analysis. These 
firms are assessed as being financially weak based on current 
circumstances and independent of the effects of the MP&M regulation. Of 
these 73 firms, 39 own facilities that were projected to close under 
the facility-level baseline closure test.
    Of the 182 firms that pass the baseline firm financial test, only 
one failed either test under Option 2a/2, even under the conservative 
zero-cost-pass-through assumption (see Table 14). The single adversely 
affected firm is a single facility firm and accounts for less than 
0.0001 percent of revenues earned by all 255 sampled firms in the firm-
level impact analysis. These results are independent of the assumptions 
about the share of firm revenue subject to regulation. The minimum and 
maximum impact scenarios yielded identical results, in terms of 
financial test failures. From this analysis, EPA finds that firm-level 
impacts are not likely to be significant.

           Table 14.--Summary of Firm Impact Analysis Results           
                                                                        
                                                                        
Number of Firms in Analysis......................................    255
Baseline Failures................................................     73
Incremental Post-Compliance Failures.............................     1 
Source: U.S. Environmental Protection Agency.                           

I. Foreign Trade Impacts

    Products of the MP&M industry are traded internationally. 
Therefore, changes in domestic production resulting from effluent 
regulations may affect the balance of trade. In particular, some of the 
production from facilities estimated to close because of regulation may 
be replaced by foreign producers, thus changing the U.S. foreign trade 
balance. The foreign trade analysis examines the trade balance effects 
of Option 2a/2 under the zero-cost-pass-through assumption. This 
assumption is conservative in the sense that it projects the most post-
compliance closures. Even under this assumption, EPA estimates that the 
MP&M industry will experience less than a 0.01 percent loss in its 
trade balance. Therefore, EPA finds that the proposed effluent 
guidelines will not have a significant adverse impact on the 
international trade status of the MP&M Phase I industry.
    The foreign trade impact analysis identifies three scenarios that 
span the likely range of foreign trade responses to post-compliance 
closures. Each scenario describes a possible outcome of the competition 
between domestic and foreign producers to replace the production loss 
from closure of domestic facilities. The three scenarios are as 
follows:
    1. Worst case. In the worst case scenario, all production for 
domestic consumption and for export by domestic facilities subject to 
post-compliance closure is replaced by foreign sources. Therefore, the 
net trade balance deteriorates by the total amount of production lost 
by post-compliance incremental closures.
    2. Best case. In the best case scenario, all production for 
domestic consumption and for export by facilities subject to closure 
are replaced in full by production and exports from other 
[[Page 28249]] domestic facilities. The net trade balance is unaffected 
by regulation.
    3. Proportional case. Domestic production of facilities subject to 
closure is replaced both by remaining domestic facilities and by 
foreign imports in the same proportions as the baseline ratio of 
imports and exports to the total domestic market. In this scenario, if, 
in the baseline case, imports accounted for half of the domestic 
market, then a closing facility's production for domestic sales would 
be replaced half by imports and half by other domestic producers. This 
scenario is meant to reflect the historical performance of the MP&M 
Phase I industries in competing with foreign producers for import and 
domestic markets.
    In the foreign trade impact analysis, EPA assigned each sample 
facility that is expected to close--and its associated revenue--to one 
of the three scenarios, depending on the findings from two assessments 
of the facility's exposure to competition from foreign producers. The 
first assessment is based on sample facilities' responses to DCP 
questions concerning the magnitude and source of competition in various 
markets, including export and domestic markets. The second assessment 
is based on secondary source data provided by the Department of 
Commerce and used in the industry profile. This assessment considers 
the overall competitiveness of the MP&M industries in import and export 
markets, with respect to foreign competitors.
    On the basis of the two assessments, facilities with significant 
exposure to foreign competition were assigned to the worst case trade 
impact scenario while facilities with little expected exposure to 
foreign competition were assigned to the best case trade impact 
scenario. Facilities with moderate exposure to foreign competition were 
assigned to the proportional case trade impact scenario.
    After assigning each sample facility closure to a trade impact 
scenario, EPA allocated the export and import market revenues from 
estimated facility closures between foreign and domestic producers 
according to the rules for the three trade scenarios. The changes in 
exports and imports accruing from all incrementally closing facilities 
were multiplied by their sample weights and summed to yield an estimate 
of the aggregate impact on imports, exports and the trade balance 
resulting from promulgation of the effluent guideline.
    Table 15 presents the results from the foreign trade impact 
analysis. As shown in the table, even under the conservative zero-cost-
pass-through assumption, the proposed effluent guideline will have a 
negligible impact on U.S. imports, exports and the trade balance.
    On the basis of sample-weighted national estimates, EPA estimates 
that exports will not be measurably affected by compliance with the 
proposed regulation, while imports are estimated to increase by 
approximately $5.3 million, or 0.01 percent of the 1991 imports of the 
MP&M Phase I industry commodities, according to Department of Commerce 
data. The net effect on the trade balance is therefore a decline of 
$5.3 million, or approximately 0.01 percent of the current trade 
balance in MP&M Phase I industry commodities.

   Table 15.--MP&M Phase I Effluent Guideline Impacts on Foreign Trade  
    [Sample Weighted National Estimates for Option 2a/2 ($ millions)]   
------------------------------------------------------------------------
                              Exports         Imports      Trade balance
------------------------------------------------------------------------
Baseline................       112,565.1        72,157.1        40,408.0
Post-Compliance Change..             0.0             5.3            -5.3
Percent Change From                                                     
 Baseline...............           0.00%           0.01%         -0.01% 
------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency and Department of Commerce.

J. Impacts of New Source Performance Standards and Pre-Treatment 
Standards for New Sources

    The proposed regulation includes limitations that will apply to new 
direct and indirect discharging sources within the MP&M Phase I 
category. EPA examined the impact of these regulations for new 
dischargers to determine if they would impose an undue economic and 
financial burden on new sources seeking to enter the MP&M Phase I 
industry.
    As documented in Part 438.16-17 and Section XIII, EPA proposes to 
set New Source Performance Standards (NSPS), which apply to new 
facilities that discharge directly to receiving waters, on the basis of 
the Best Achievable Technology (BAT) limitations as specified by the 
proposed Option 2 for existing direct dischargers. Thus, the new source 
limitations for direct dischargers are the same as those proposed for 
existing direct discharge facilities.
    In addition, EPA proposes to set Pretreatment Standards for New 
Sources (PSNS), which apply to new indirect discharging facilities 
(i.e., that will discharge to POTWs), on the basis of the discharge 
limitations in PSES Option 2, as analyzed for existing indirect 
discharging facilities. Thus, the new source limitations for indirect 
discharging facilities will differ from the PSES limitations proposed 
for existing indirect discharge facilities. Specifically, the proposed 
PSES option for existing indirect discharge facilities, Option 2a, 
applies the mass-based limitations of Option 2 to large flow indirect 
discharge facilities (i.e., facilities discharging at least 1,000,000 
gallons per year) but applies no limitations to low flow indirect 
discharge facilities (i.e., facilities discharging less than 1,000,000 
gallons per year). However, for new indirect dischargers, the proposed 
PSNS limitations will apply the mass-based limitations of Option 2 
regardless of the new facility's discharge volume.
    In general, EPA estimates that, when new and existing sources face 
the same discharge limitations, new sources will be able to comply with 
those limitations at the same or lower costs than those incurred by 
existing sources. Engineering analysis indicates that the cost of 
installing pollution control systems during new construction is 
generally less than the cost of retrofitting existing facilities. Thus, 
a finding that discharge limitations are economically achievable by 
existing facilities will also mean that those same discharge 
limitations will be economically achievable to new facilities.
    On the basis of this argument alone, EPA concludes that those 
elements of the effluent limitations that are the same for both new and 
existing facilities will be economically achievable. In fact, the new 
source and existing source limitations are identical except for the 
limitations applicable to new indirect discharging sources with a 
discharge volume of less than 1,000,000 gallons per year. As stated 
above, these new [[Page 28250]] sources must meet the mass-based 
limitations of PSES Option 2, while existing, low flow indirect 
discharging facilities would not be subject to effluent limitations 
under the proposed guideline. Therefore, the only issue concerning 
economic achievability of the new source limitations involves the 
application of the PSES Option 2 limitation to new indirect discharging 
sources with a discharge volume of less than 1,000,000 gallons per 
year.
    However, in its analysis of regulatory impacts on existing 
facilities, EPA found that the mass-based limitations of PSES Option 2 
would be economically achievable by indirect discharging facilities 
regardless of discharge volume. For this reason, EPA additionally 
concludes that the new source limitations applicable to new indirect 
discharging facilities will also be economically achievable by indirect 
discharging facilities with flow of less than 1,000,000 gallons per 
year. Therefore, EPA finds that the proposed NSPS and PSNS limitations 
will be economically achievable.
    EPA notes that an important reason for exempting the low flow class 
of existing indirect dischargers (less than 1,000,000 gallons per year) 
from regulatory requirements is to reduce the administrative burden to 
permit writers that would result from writing mass-based permits for 
the large number of existing low flow indirect dischargers. EPA 
estimates that approximately 63 percent of the existing facilities to 
which the regulation could have applied are low flow indirect 
dischargers. However, applying the mass-based concentration 
requirements of Option 2 to new facilities will not impose so great an 
administrative burden, because new facilities enter gradually over 
time.
K. Regulatory Flexibility Analysis

    In accordance with the requirements of the Regulatory Flexibility 
Act (Public Law 96-354), the Agency performed a Regulatory Flexibility 
Analysis of the proposed regulation. The purpose of the Regulatory 
Flexibility Act is to ensure that, while achieving statutory goals, 
government regulations do not impose disproportionate impacts on small 
entities. The Regulatory Flexibility Analysis for the proposed 
regulation is contained in Chapter 10 of the Economic Impact Analysis 
report referenced above, ``Economic Impact Analysis Of Proposed 
Effluent Limitations Guidelines And Standards For The Metal Products 
And Machinery Industry, Phase I.'' On the basis of the Regulatory 
Flexibility Analysis and as summarized herein, the Administrator 
certifies, pursuant to Section 605(b) of the Regulatory Flexibility 
Act, 5 U.S.C. 605(b), that the proposed regulation will not have a 
significant economic impact on a substantial number of small entities.
    In developing the proposed regulation, EPA sought from the outset 
to define a regulation that would not unreasonably burden small 
entities. In particular, EPA considered a number of regulatory 
alternatives for indirect and direct dischargers, each of which was 
assessed to have varying degrees of impact on small entities. In 
selecting the proposed regulation from among these alternatives, EPA 
balanced several factors, including: the need for additional reduction 
in effluent discharges from the MP&M industry; the fact that the MP&M 
industry is largely comprised of small business entities; and the need 
to achieve additional reduction in effluent discharges without imposing 
unreasonable burdens on small entities. As a result of these 
considerations, EPA expressly framed the proposed regulation to reduce 
impacts on small entities.
    Specifically, as discussed in Section XIV. C., above, EPA settled 
on the proposed regulation for indirect dischargers, Option 2a, after 
considering and rejecting the initial Option 2. On the basis of the 
facility impact analyses presented above, EPA determined that Option 2 
would be economically achievable by indirect discharging facilities. In 
accordance with this finding, EPA initially considered adopting the 
mass-based requirements of Option 2 for all indirect discharging 
facilities. However, further analysis indicated that Option 2 would 
place substantial financial burdens on smaller facilities and, 
moreover, would substantially burden permitting authorities by 
requiring that mass-based standards be written for all indirect 
discharging facilities, regardless of size and amount of discharge 
reduction to be achieved. For these reasons, EPA defined and evaluated 
two additional options: Option 1a, which applies the Option 2 
requirements to large flow facilities and the modestly less stringent 
Option 1 requirements to low flow facilities; and Option 2a, which 
applies the requirements of Option 2 to large flow facilities while 
exempting low flow indirect discharging facilities from regulation. EPA 
found that both of these additional options would mitigate the burden 
of regulation on small businesses and permitting authorities. However, 
EPA found that the latter option, Option 2a, much more substantially 
reduced the closure impacts and financial burdens among MP&M facilities 
owned by small business and, as well, the regulatory implementation 
burden on permitting authorities. After considering other factors that 
also favored Option 2a--namely, cost effectiveness--EPA decided to 
propose Option 2a as the PSES option for indirect discharging 
facilities.
    The following sections summarize the analyses underlying the 
Agency's conclusion that the proposed regulation will not have a 
significant economic impact on a substantial number of small entities
1. Small Business in the MP&M Industry
    EPA analyzed the role of small entities in the MP&M industry and 
the associated impacts that would be caused by the proposed regulation. 
These analyses showed that the MP&M industry is largely comprised of 
small business entities and, accordingly, the regulation is expected to 
apply to a substantial number of small entities. Specifically, on the 
basis of Small Business Administration (SBA) firm-employment size 
criteria, EPA estimates that over 75 percent of the estimated 10,601 
water discharging facilities in the MP&M Phase I industries are owned 
by a small business. With over 75 percent of the facilities to which 
the regulation is expected to apply defined as small businesses, EPA 
also examined the employment size distribution of the MP&M facilities 
to gain provide additional insight into how smaller facilities are 
likely to be affected by the proposed regulation. From the analysis of 
the facility employment distribution, EPA estimated that 25 percent of 
water-discharging facilities have 9 or fewer employees and that 50 
percent of water-discharging facilities have 79 or fewer employees.
    EPA also found that small facilities play a substantial role in the 
economic performance and contributions of the MP&M industry. From 
Department of Commerce data for 1989, EPA estimates that over 97 
percent of facilities in the MP&M Phase I industries (including both 
water-discharging and non-discharging facilities) have fewer than 250 
employees. These relatively small facilities account for about 49 
percent of total MP&M industry employment, 40 percent of total 
shipments, and 40 percent of the MP&M industry's tribution to gross 
domestic product.
2. Impacts of the Proposed Regulation on Small Business
    To gauge whether the proposed regulation would have a significant 
impact on a substantial number of small entities, EPA considered the 
level of impacts and compliance costs expected [[Page 28251]] to be 
imposed on small entities. From these analyses, EPA found that the 
proposed regulation will impose significant economic impacts (i.e., 
facility closures) more frequently among small business entities than 
among MP&M facilities generally. In addition, these analyses indicated 
that the compliance cost burden (as measured by total annual compliance 
costs as a percent of facility revenue) is expected to be greater among 
small business entities than among MP&M facilities generally. However, 
for both of these measures of small business impact--frequency of 
facility closures and compliance cost burden--EPA found that the 
absolute levels of impacts were so slight as to not constitute a 
significant economic impact on small entities. Moreover, the impact 
levels under the proposed regulation are much lower than those that 
would be expected under any of the other options that EPA considered 
for proposal.
a. Facility Closure Impacts by Business Size
    Table 16 summarizes the findings from the facility closure analysis 
according to business size classification. The first three columns--
Option 1, Option 2, and Option 3--combine the results for indirect and 
direct dischargers for each of those options. The latter two columns 
reflect the additional options that were developed for indirect 
dischargers--Option 1a and Option 2a--combined with Option 2 for direct 
dischargers. Specifically, the rightmost column, which is labeled 
Option 2a/2, combines results for Option 2a for indirect dischargers 
and Option 2 for direct dischargers and thus represents the proposed 
regulatory option. The next column to the left, which is labeled Option 
1a/2, combines results for Option 1a for indirect dischargers and 
Option 2 for direct dischargers and represents the other option that 
EPA defined as an alternative to the initially selected Option 2 for 
indirect and direct dischargers.
    As shown in the table, all estimated facility closures for Options 
1, 2, 1a/2, and 2a/2 occur among small business-owned facilities, as 
defined on the basis of SBA criteria. Only under Option 3 are closures 
estimated to occur among facilities not owned by small businesses. The 
analysis according to facility employment size gives similar results 
with estimated facility closures occurring more frequently in the 1-9 
and 10-79 employee size classes.

                              Table 16.--Facility Closure Impacts by Business Size                              
----------------------------------------------------------------------------------------------------------------
                                                                     Regulatory option                          
                                          ----------------------------------------------------------------------
         Facility classifications                     Initial options                   Subsequent options      
                                          ----------------------------------------------------------------------
                                             Option 1     Option 2     Option 3     Option 1a/2     Option 2a/2 
----------------------------------------------------------------------------------------------------------------
Total Estimated Facility Closures........          178          169          317             169              25
  (as percent of facilities in impact                                                                           
   analysis).............................         2.0%         1.8%         3.5%            1.8%            0.3%
Closures By SBA Firm-Size Criteria:                                                                             
    Small Business-Owned.................          178          169          248             169              25
      (as percent of class)......         2.6%         2.5%         3.6%            2.5%            0.4%
    Other (not Small Business-Owned).....            0            0           69               0               0
      (as percent of class)..............         0.0%         0.0%         3.1%            0.0%            0.0%
Closures By Facility Employment Class:                                                                          
    1-9 Employees........................           83           83           83              83              18
      (as percent of class)..............         4.1%         4.1%         4.1%            4.1%            0.9%
    10-79 Employees......................           95           84          132              84               5
      (as percent of class)..............         4.0%         3.5%         5.5%            3.5%            0.2%
    80 or more Employees.................            0            2          102               2               2
      (as percent of class)..............         0.0%         0.1%         2.2%            0.1%           0.1% 
----------------------------------------------------------------------------------------------------------------
``Class'' refers to the indicated sub-group of facilities (e.g., Small Business-Owned Facilities) and   
  ``percent of class'' means the percentage of that group expected to incur facility closure impacts.           
                                                                                                                
Source: Environmental Protection Agency.                                                                        

    Although closure impacts are concentrated among small entities, the 
expected level of closures under the proposed option is extremely low 
for the small entity categorizations analyzed: 0.4 percent of small 
business-owned facilities; 0.9 percent of facilities with 9 or fewer 
employees; and 0.2 percent of facilities with 10 to 79 employees. 
Notably, closures among the small entity categorizations are 
substantially higher for all the other options analyzed. To illustrate, 
for small business-owned facilities, the closure rate ranges from 2.5 
percent to 3.6 percent for the other four composite options presented 
in the table. Overall, EPA finds that the rate of expected facility 
closures among small business entities is well within acceptable 
bounds.
b. Compliance Cost Impacts by Business Size
    EPA also considered the compliance costs likely to be incurred by 
facilities in complying with the proposed regulation. EPA assessed 
compliance costs in terms of (1) the total annual compliance costs 
expected to be imposed on facilities according to business size and (2) 
total annual compliance cost as a percentage of facility revenue as a 
measure of the relative burden of compliance costs.

i. Analysis of Total Annual Compliance Costs

    Table 17 summarizes total annual compliance costs by business size 
classification of facility for the alternative regulatory options. 
Total annual compliance costs are calculated as the annual after-tax 
cash flow impact on facilities and reflect private costs of capital and 
the expected tax treatment of capital outlays and operating costs of 
compliance. This analysis shows that the aggregate compliance costs to 
small entities are substantially lower under the proposed Option 2a/2 
than under all the other options analyzed. At $63.9 million ($1994), 
the estimated annual compliance cost for small business-owned 
facilities under the proposed Option 2a/2 is approximately 40 percent 
less than the cost estimated for either the initially selected Option 2 
or the other secondarily defined option, Option 1a/2. The analysis 
based on facility employment size class further confirms the reduced 
impact of the proposed Option 2a/2 on small entities: 
[[Page 28252]] the total costs of Option 2a/2 among facilities with 9 
or fewer employees are only about 9 percent of the costs for Option 2 
or Option 1a/2; and the costs for Option 2a/2 among facilities with 10 
to 79 employees are about half of the costs for Option 2 or Option 1a/
2. That the cost burden of Option 2a/2 on small business entities is so 
much lower than that estimated for the other options supports EPA's 
choice of Option 2a/2 as the proposed regulatory option and the finding 
that Option 2a/2 will not impose a significant economic impact on small 
entities.

             Table 17.--Total Annual Compliance Costs by Business Size, All Dischargers ($000, 1994)            
----------------------------------------------------------------------------------------------------------------
                                                                     Regulatory option                          
                                          ----------------------------------------------------------------------
         Facility classification                      Initial options                   Subsequent options      
                                          ----------------------------------------------------------------------
                                             Option 1     Option 2     Option 3     Option 1a/2     Option 2a/2 
----------------------------------------------------------------------------------------------------------------
All Facilities...........................      218,412      231,666      679,509         226,781         160,607
By SBA Firm-Size Criteria:                                                                                      
    Small Business-Owned.................       91,414      107,062      330,215         105,431          63,906
    Other (not Small Business-Owned).....      126,998      124,602      349,293         121,349          96,702
By Facility Employment Class:                                                                                   
    1-9 Employees........................       10,996       11,264       11,781          10,935             974
    10-79 Employees......................       34,449       37,907       87,482          37,294          18,642
    80 or more Employees.................      172,967      182,494      580,245         178,550        140,991 
----------------------------------------------------------------------------------------------------------------
Source: Environmental Protection Agency.                                                                        

ii. Analysis of Compliance Costs Relative to Facility Revenue

    Table 18 summarizes the relative compliance cost burden among 
facilities by business size classification. For this analysis, the 
compliance cost burden was assessed as the ratio of total annual 
compliance cost to facility revenue. Table 18 indicates for each option 
the average value of compliance costs as a percentage of revenue for 
facilities by size class, and lists the percentage of facilities in 
each size class expected to incur compliance costs exceeding 5 percent 
of revenue. For several previous regulations, EPA judged annual 
compliance costs that are less than five percent of facility revenue as 
not likely to impose a significant financial burden on the complying 
entity.
    As shown in Table 18, EPA estimates that compliance costs as a 
percentage of facility revenue will be higher for small entities than 
for MP&M facilities generally both for the proposed Option 2a/2 and, as 
well, for the other options considered. However, among small business-
owned facilities, total annual compliance costs are estimated to 
average only 0.11 percent of revenue for the proposed Option 2a/2. 
Moreover, in comparing compliance costs with the 5 percent of revenue 
threshold, EPA found that a very small percentage of small business-
owned facilities, only 0.26 percent, are expected to incur total annual 
compliance costs exceeding 5 percent of revenue under the proposed 
regulatory option. Accordingly, EPA judges that the proposed 
regulation's cost burden on small entities would be manageable based on 
accepted standards of cost severity.

                  Table 18.--Total Annual Compliance Costs as a Percentage of Facility Revenue                  
                                  [All Dischargers, by Business Size Criteria]                                  
----------------------------------------------------------------------------------------------------------------
                                                                        Regulatory option                       
                                                ----------------------------------------------------------------
             Facility size classes                          Initial options                Subsequent options   
                                                ----------------------------------------------------------------
                                                   Option 1     Option 2     Option 3   Option 1a/2  Option 2a/2
----------------------------------------------------------------------------------------------------------------
             Compliance Costs as a Percentage of Facility Revenue, Average Values by Facility Class             
                                                                                                                
----------------------------------------------------------------------------------------------------------------
All Facilities.................................         0.41         0.42         0.65         0.41         0.10
By SBA Firm-Size Criteria:                                                                                      
    Small Business-Owned Facilities............         0.51         0.53         0.78         0.51         0.11
    Other (not Small Business-Owned)...........         0.11         0.11         0.26         0.11         0.06
By Facility Employment Class:                                                                                   
    1-9 Employees..............................         1.09         1.12         1.20         1.08         0.10
    10-79 Employees............................         0.41         0.42         0.79         0.42         0.12
    80 or more Employees.......................         0.12         0.13         0.36         0.13         0.09
                                                                                                                
----------------------------------------------------------------------------------------------------------------
            Percentage of Facilities by Class with Compliance Costs Exceeding Five Percent of Revenue           
                                                                                                                
----------------------------------------------------------------------------------------------------------------
All Facilities.................................         0.52         0.47         1.35         0.52         0.19
By SBA Firm-Size Criteria:                                                                                      
    Small Business-Owned Facilities............         0.69         0.63         1.79         0.69         0.26
    Other (not Small Business-Owned)...........         0.00         0.00         0.00         0.00         0.00
By Facility Employment Class:                                                                                   
    1-9 Employees..............................         1.27         1.27         2.78         1.27         0.00
    10-79 Employees............................         0.94         0.76         2.49         0.93         0.73
    80 or more Employees.......................         0.00         0.00         0.17         0.00        0.00 
----------------------------------------------------------------------------------------------------------------
Source: Environmental Protection Agency.                                                                        

[[Page 28253]] 3. Small Business Impact Finding
    In view of this analysis and in recognition of the Agency's 
efforts, as summarized above, to define the proposed option in a way 
that would reduce impacts to small entities, EPA concluded that the 
facility closure impacts and compliance cost burdens of the proposed 
option will not constitute an undue impact on small business entities. 
Pursuant to Section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Administrator certifies that the proposed regulation will 
not have a significant economic impact on a substantial number of small 
entities.

L. Cost Effectiveness Analysis of MP&M Regulatory Options

    In addition to the foregoing analyses, EPA performed a cost-
effectiveness analysis of the alternative regulatory options for 
indirect dischargers (PSES) and direct dischargers (BPT/BAT). This 
analysis is detailed in ``Cost-Effectiveness Analysis of Proposed 
Effluent Limitations Guidelines and Standards for the Metal Products 
and Machinery Industry, Phase I'' (hereinafter ``Cost Effectiveness 
Report''). Cost-effectiveness analysis is used in the development of 
effluent limitations guidelines to evaluate the relative efficiency of 
alternative regulatory options in removing pollutants from the effluent 
discharges to the nation's waters, and to compare the efficiency of a 
proposed regulation with that estimated for previous regulations.
    The cost effectiveness of a regulatory option is defined as the 
incremental annual cost (in 1981 constant dollars) per incremental 
toxic-weighted pollutant removal for that option. This definition 
embodies the following concepts:
    Toxic-weighted removals. Because pollutants differ in their 
toxicity, the reductions in pollution discharges, or pollutant 
removals, are adjusted for toxicity by multiplying the estimated 
removal quantity for each pollutant by a normalizing toxic weight 
(Toxic Weighting Factors). The toxic weight for each pollutant measures 
its toxicity relative to copper, with more toxic pollutants having 
higher toxic weights. The use of toxic weights allow the removals of 
different pollutants to be expressed on a constant toxicity basis in 
toxic pounds-equivalent (lb-eq). The removal quantities for the 
different pollutants may then be summed to yield an aggregate measure 
of the reduction in toxicity normalized pollutant discharges that is 
achieved by a given regulatory option. Note that cost-effectiveness 
analysis does not address the removal of conventional pollutants (oil 
and grease, biological oxygen demand, and total suspended solids).
    Annual costs. The costs used in the cost-effectiveness analysis are 
the estimated annual costs to industry for complying with the 
alternative regulatory options. The annual costs include the annual 
expenses for operating and maintaining compliance equipment and for 
meeting monitoring requirements, and an annual allowance for the 
capital outlays for pollution prevention and treatment systems needed 
for compliance. However, unlike the costs used in the facility impact 
analysis, the costs used in the cost-effectiveness analysis are 
calculated on a pre-tax basis and capital costs are annualized using an 
estimated real opportunity cost of capital to society of 7 percent. 
Thus, these costs represent the costs incurred by industry on behalf of 
society for compliance with the proposed regulation. In the facility 
impact analysis, costs were considered on an after-tax basis and 
reflected the estimated private after-tax cost of capital to MP&M 
firms. In addition, the costs used in the cost-effectiveness analysis 
are calculated in 1981 dollars so that the cost-effectiveness values 
for regulations applying to different industries and that were 
developed at different times may be consistently compared.
    Incremental calculations. The incremental values that are 
calculated for a given option are the change in total annual compliance 
costs and change in removals from the next less stringent option, or 
the baseline if there is no less stringent option, where regulatory 
options are ranked by increasing levels of toxic-weighted removals. 
Thus, the cost-effectiveness values for a given option are relative to 
another option or, for the least stringent option considered, the 
baseline.
    The question posed in a cost-effectiveness analysis is: what is the 
cost to industry of the additional toxic-weighted pollutant removals 
achieved by a given option relative to the next less stringent option 
or the baseline? The result of the cost-effectiveness calculation 
represents the unit cost of removing the next pound-equivalent of 
pollutants and is expressed in constant 1981 dollars per toxic pound-
equivalent removed ($/lb-eq). The cost-effectiveness values for a given 
option may be compared with those of other options being considered for 
a given regulation and also with those calculated for other industries 
or regulatory settings. Although not required by the Clean Water Act, 
cost-effectiveness analysis is a useful tool for evaluating regulatory 
options for the removal of toxic pollutants.
    EPA performed the cost-effectiveness analysis for the MP&M 
regulation separately for indirect dischargers (subject to PSES) and 
direct dischargers (subject to BAT/BPT). For each of the regulatory 
options, the pounds-equivalent removed were calculated by multiplying 
the estimated pounds removed of each pollutant by its toxic weighting 
factor and summing the toxic-weighted removals over all toxic (i.e., 
excluding conventional) pollutants. The estimated annual compliance 
costs for each option (as reported in Section XIV.D., above) were 
deflated to 1981 dollars. As discussed above, the cost-effectiveness 
values were then calculated as the change in compliance cost, in moving 
to a given option from the next less stringent option, divided by the 
change in toxic-weighted removals. The following sections summarize the 
results for the two classes of facilities.
1. Cost-Effectiveness Analysis for Indirect Dischargers
    Table 19 summarizes the cost-effectiveness analysis for the PSES 
regulatory options applicable to indirect dischargers. Annual 
compliance costs are shown in 1994 dollars and also in 1981 dollars. In 
addition, pollutant removals are reported on both an unweighted and 
toxic-weighted basis. The regulatory options are listed in order of 
increasing stringency on the basis of the estimated toxic-weighted 
pollutant removals.
    As shown in Table 19, Option 2a/2 achieves approximately 12.8 
million pounds of toxic pollutant removals, on an unweighted basis and 
881,300 pounds-equivalent on a toxic-weighted basis. Because Option 2a/
2 is the least stringent option in terms of pollutant removals, the 
cost-effectiveness of this option is the same as its average cost per 
pounds-equivalent removed, $127. EPA considers this value to be 
acceptable when compared to values calculated for previous regulations.
    The next more stringent option, Option 1, is estimated to achieve 
approximately 14.6 million pounds of toxic pollutant removals on an 
unweighted basis and 988,900 pounds-equivalent on a toxic-weighted 
basis, which is a 107,100 pounds-equivalent increment over Option 2a/2. 
With an estimated annual compliance cost of $137 million ($1981), or 
$65 million more than Option 2a/2, the calculated cost effectiveness 
for Option 1's removals is $607 per pound-equivalent of pollutant 
removed. This cost-effectiveness value is higher than the 
[[Page 28254]] values calculated for other industrial discharge 
limitations previously promulgated by EPA.
    In moving from Option 1 to Option 1a, toxic-weighted pollutant 
removals increase by 22,100 pounds-equivalent while costs decrease by 
$7.2 million. Thus, the cost effectiveness of Option 1a relative to 
Option 1 is a negative $327 per pound-equivalent of additional 
pollutant removed. Because Option 1a is estimated to impose lower cost 
on industry and society than Option 1 while, at the same time, 
achieving greater toxic-weighted removals, Option 1a may be said to 
dominate Option 1 from an economic efficiency perspective. That is, 
within the context of the cost-effectiveness analysis, society would 
always be better off by choosing the more stringent Option 1a over 
Option 1 because greater toxic-weighted pollutant removals would be 
achieved by Option 1a but at a lower total pre-tax cost of compliance.

                            Table 19.--Cost Effectiveness of Regulatory Options for the Metal Products and Machinery Industry                           
                                                              [Indirect Dischargers (PSES)]                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Annual compliance costs       Unweighted      Weighted pollutant removals     Incremental        Cost     
                                         --------------------------------    pollutant   --------------------------------      cost        effectiveness
            Regulatory option               ($000,000,      ($000,000,    removals (000,                    Incremental     ($000,000,       ($/lb-eq,  
                                               1994)           1981)           lbs)        (000, lbs-eq)   (000, lbs-eq)       1981)          $1981)    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 2a...............................           171.1           111.9        12,769.7           881.3           881.3           111.9             127
Option 1................................           271.0           177.2        14,611.7           988.9           107.6            65.3             607
Option 1a...............................           260.0           170.0        14,872.8         1,011.0            22.1           (7.2)           (327)
Option 2................................           267.5           174.9        14,878.8         1,011.6             0.6             4.9           8,537
Option 3................................           783.7           512.3        15,612.1         1,105.4            93.8           337.4          3,596 
--------------------------------------------------------------------------------------------------------------------------------------------------------
The cost effectiveness for a regulatory option is defined as the incremental cost per incremental removal in toxic pounds equivalent ($/lb-eq) for that 
  option. The ``increment'' for a given option is the change in costs or removals from the next less stringent option, or the baseline if there is no   
  less stringent option (i.e., Baseline to Option 2a, Option 2a to Option 1, . . .). Regulatory options are ranked by increasing levels of toxic-       
  weighted removals. Cost effectiveness-values are calculated in 1981 dollars to permit consistent comparison of cost-effectiveness values among        
  regulations promulgated at different times.                                                                                                           
                                                                                                                                                        
 Source: U.S. Environmental Protection Agency.                                                                                                          

    Stepping beyond Option 1a to Option 2 is clearly not cost effective 
for existing indirect dischargers in comparison to values calculated 
for previous regulations. Stepping from Option 1a to Option 2 yields 
very little additional toxic-weighted pollutant removals, 600 pounds-
equivalent, at an additional estimated cost of $4.9 million. Because 
the increase in removals is so small, the cost-effectiveness value for 
moving from Option 1a to Option 2 is extremely high at $8,537 per 
pound-equivalent of additional pollutant removed. The only difference 
between Option 1a and Option 2 is that Option 2 applies the mass-based 
limitations of Option 2 to low-flow indirect dischargers while Option 
1a applies the somewhat less stringent, concentration-based limitations 
of Option 1 to these facilities. Thus, the high cost-effectiveness 
value of $8,537 stems entirely from the increased stringency of 
regulatory requirements for these low-flow indirect discharging 
facilities and demonstrates the poor cost effectiveness of applying the 
Option 2 requirements to this class of facilities. As noted in Section 
XIV.C, above, the finding of such a high cost-effectiveness value for 
Option 2 for low-flow indirect discharging facilities was an important 
factor in EPA's decision to define and evaluate alternatives to Option 
2 for these facilities in developing the PSES regulatory proposal.
    Moving from Option 2 to Option 3 was also found to yield a high 
cost-effectiveness value. Although the incremental removals for this 
step are relatively substantial at 93,800 pounds-equivalent, the large 
increase in cost of $337.4 million yields a cost-effectiveness value of 
$3,596 per pound-equivalent of additional pollutant removed, thus 
rendering this option unacceptable from the standpoint of cost 
effectiveness.
    On the basis of this analysis, EPA determined that the proposed 
option, Option 2a, is cost effective. The cost-effectiveness analysis 
supports the choice of Option 2a as the proposed PSES regulatory option 
for indirect dischargers.
2. Cost-Effectiveness Analysis for Direct Dischargers
    Table 20 summarizes the cost-effectiveness analysis for the BPT/BAT 
regulatory options applicable to direct dischargers. As before, annual 
compliance costs are shown in 1994 dollars and also in 1981 dollars; 
and pollutant removals are reported on both an unweighted and toxic-
weighted basis. The regulatory options are listed in order of 
increasing stringency on the basis of estimated toxic-weighted 
pollutant removals. The ranking of annual compliance costs matches the 
ranking of option stringency.
    As shown in Table 20, Option 1 is estimated to achieve 
approximately 1.2 million pounds of toxic pollutant removals on an 
unweighted basis and 58,200 pounds-equivalent on a toxic-weighted 
basis. With an estimated annual compliance cost of $11.9 million 
($1981), the calculated cost effectiveness for Option 1s removals is 
$204 per pound-equivalent of pollutant removed. In moving from Option 1 
to Option 2, toxic-weighted pollutant removals increase by 12,500 
pounds-equivalent at a cost increase of $0.6 million. Thus, the cost 
effectiveness of stepping to Option 2 is a comparatively low $50 per 
pound-equivalent of additional pollutant removed. EPA considers both of 
these cost-effectiveness values to be acceptable in relation to the 
values calculated for previous regulations.

                                                                                                                                                        
[[Page 28255]]
                            Table 20.--Cost Effectiveness of Regulatory Options for the Metal Products and Machinery Industry                           
                                                             [Direct Dischargers (BPT/BAT)]                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Annual compliance costs       Unweighted      Weighted pollutant removals     Incremental        Cost     
                                         --------------------------------    pollutant   --------------------------------      cost        effectiveness
            Regulatory option               ($000,000,      ($000,000,    removals (000,                    Incremental     ($000,000,       ($/lb-eq,  
                                               1994)           1981)           lbs)        (000, lbs-eq)   (000, lbs-eq)       1981)          $1981)    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1................................            18.2            11.9         1,152.5            58.2            58.2            11.9             204
Option 2................................            19.1            12.5         1,232.2            70.7            12.5             0.6              50
Option 3................................            80.5            52.6         1,446.7           133.6            62.9            40.1            638 
--------------------------------------------------------------------------------------------------------------------------------------------------------
The cost effectiveness for a regulatory option is defined as the incremental cost per incremental removal in toxic pounds equivalent ($/lb-eq) for that 
  option. The ``increment'' for a given option is the change in costs or removals from the next less stringent option, or the baseline if there is no   
  less stringent option (i.e., Baseline to Option 1, Option 1 to Option 2, . . .). Regulatory options are ranked by increasing levels of toxic-weighted 
  removals. Cost effectiveness-values are calculated in 1981 dollars to permit consistent comparison of cost-effectiveness values among regulations     
  promulgated at different times.                                                                                                                       
                                                                                                                                                        
 Source: U.S. Environmental Protection Agency.                                                                                                          

  Option 3's cost effectiveness of $638 per pound-equivalent of 
additional pollutant removed is substantially poorer than the cost 
effectiveness of Options 1 and 2. Stepping from Option 2 to Option 3 
nearly doubles the total toxic-weighted removals with a substantial 
increase of 62,900 pounds-equivalent. However, Option 3's annual 
compliance costs are more than four times those estimated for Option 2 
and the resulting additional cost of $40.1 million yields the 
relatively high cost-effectiveness value of $638 per pound-equivalent.
    From this analysis, EPA determined that Option 2 is cost effective, 
and the cost-effectiveness analysis supports the choice of Option 2 as 
the proposed BPT/BAT regulatory option for direct dischargers.
    EPA also performed the cost-effectiveness analysis with an 
additional set of weighting factors called Pollutant Weighting Factors, 
which are a modification of the Toxic Weighting Factors on which the 
preceding analyses are based. Pollutant Weighting Factors are not 
related to a benchmark pollutant (i.e., copper) and normalize toxicity 
on a different scale. This additional analysis can be found in Appendix 
A of the Cost Effectiveness Report.

XV. Executive Order 12866

A. Introduction

    Under Executive Order 12866 [58 Federal Register 51, 735 (October 
4, 1993)], the Agency must determine whether the regulatory action is 
``significant'' and therefore subject to OMB review and the 
requirements of the Executive Order. The Order defines ``significant 
regulatory action'' as one that is likely to result in a rule that may:
    (1) have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations or recipients 
thereof; or
    (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, EPA has determined 
that this rule is a ``significant regulatory action'' because it is 
expected to impose an annual cost on the economy exceeding $100 
million. As such, this action was submitted to OMB for review. Changes 
made in response to OMB suggestions or recommendations will be 
documented in the public record.
    Because of the finding that the MP&M regulation is a ``significant 
regulatory action'' within the meaning of Executive Order 12866, the 
Agency has prepared a Regulatory Impact Assessment (RIA) for the 
proposed regulatory alternative. The RIA responds to the requirements 
in Executive Order 12866 to assess both the benefits and costs to 
society of significant regulatory actions. The RIA is detailed in, 
``Regulatory Impact Assessment of Proposed Effluent Guidelines for the 
Metal Products and Machinery Industry, Phase I,'' (see Section II. for 
availability of this and other supporting documents).
1. Overview of Benefits Analyzed
    The RIA assesses the benefits of proposed regulations to reduce 
effluent discharges in the MP&M industry. Three broad classes of 
benefits are considered: human health, ecological, and economic 
productivity benefits. Each class is comprised of a number of more 
narrowly defined benefits categories. EPA expects that benefits will 
accrue to society in all of these categories. Because of data 
limitations and imperfect understanding of how society values some of 
these benefit categories, however, EPA was not able to analyze all of 
these categories with the same level of rigor. At the highest level of 
analysis, EPA was able to quantify the expected effects for some 
benefit categories and attach monetary values to them. Benefit 
categories for which EPA developed dollar estimates include reduction 
in cancer risk from fish consumption, increased value of recreational 
fishing opportunities, and reduced costs of managing and disposing of 
POTW sewage sludges. For other benefit categories, EPA was able to 
quantify expected effects but not able to estimate monetary values for 
them. Examples of these benefit categories include change in the 
frequency with which certain aquatic species are exposed to lethal 
concentrations of certain pollutants, and change in certain human 
health risk indicators. Finally, EPA was able to identify and 
qualitatively describe certain benefit effects but was not able to 
assess them on either a quantitative or an economic value basis. These 
benefit categories include but are not limited to: enhanced 
diversionary uses, improved aesthetic quality of waters near discharge 
outfalls, enhanced water-dependent recreation other than fishing, and 
benefits to wildlife and to threatened or endangered species, option 
and existence values, cultural values, tourism benefits, and 
biodiversity benefits. Table 21 summarizes the benefit categories 
discussed above and identifies those that were monetized, those that 
were quantitatively assessed (but not monetized), and those that are 
expected to result from the regulation but were neither quantitatively 
assessed nor monetized.

                                                                                                                                                        
[[Page 28256]]
 Table 21.--Benefit Categories Associated With Water Quality Improvements Resulting From the Metal Products and 
                                          Machinery Effluent Guideline                                          
----------------------------------------------------------------------------------------------------------------
                                                        Quantified and      Quantified and     Nonquantified and
                  Benefit category                         monetized         nonmonetized        nonmonetized   
----------------------------------------------------------------------------------------------------------------
Human Health Benefits:                                                                                          
    Reduced cancer risk due to consumption of         X                                                         
     chemically-contaminated fish.                                                                              
    Reduced cancer risk due to ingestion of           ..................  X                                     
     chemically-contaminated drinking water.                                                                    
    Reduced systemic health hazards (e.g.             ..................  X                                     
     reproductive, immunological, neurological,                                                                 
     circulatory, or respiratory toxicity) from                                                                 
     consumption of chemically-contaminated fish.                                                               
    Reduced systemic health hazards (e.g.             ..................  X                                     
     reproductive, immunological, neurological,                                                                 
     circulatory, or respiratory toxicity) due to                                                               
     ingestion of chemically-contaminated drinking                                                              
     water.                                                                                                     
    Reduced cancer risk from exposure to unregulated  ..................  ..................  X                 
     contaminants in chemically-contaminated sewage                                                             
     sludge.                                                                                                    
    Reduced systemic health hazards from exposure to  ..................  ..................   X                
     unregulated contaminants in chemically-                                                                    
     contaminated sewage sludge.                                                                                
    Reduced health hazards from exposure to                                                                     
     contaminants in waters used recreationally                                                                 
     (e.g., swimming and boating).                                                                              
Ecological Benefits:                                                                                            
    Enhanced recreational fishing...................  X                                                         
    Reduced risk to aquatic life....................  ..................  X                                     
    Enhanced in-stream recreation such as swimming,   ..................  ..................  X                 
     boating, hunting, rafting, subsistence fishing.                                                            
    Improved water enhanced recreation such as        ..................  ..................  X                 
     hiking, picnicking, birdwatching, photography.                                                             
    Increased aesthetic benefits such as enhancement  ..................  ..................  X                 
     of adjoining site amenities (e.g. residing,                                                                
     working, traveling, and owning property near                                                               
     the water).                                                                                                
    Existence value.................................  ..................  ..................  X                 
    Option value....................................  ..................  ..................  X                 
    Reduced risk to terrestrial wildlife including    ..................  ..................  X                 
     endangered species.                                                                                        
    Protection of biodiversity......................  ..................  ..................  X                 
    Protection of cultural valuation................  ..................  ..................  X                 
    Reduced non-point source nitrogen contamination   ..................  ..................  X                 
     of water if sewage sludge is used as a                                                                     
     substitute for chemical fertilizer on                                                                      
     agricultural land.                                                                                         
    Satisfaction of a public preference for           ..................  ..................  X                 
     beneficial use of sewage sludge*.                                                                          
 Economic Productivity Benefits:                                                                                
    Reduced sewage sludge disposal costs............  X                                                         
    Enhanced tourism................................  ..................  ..................  X                 
    Improved commercial fisheries yields............  ..................  ..................  X                 
    Addition of fertilizer to crops (nitrogen         ..................  ..................  X                 
     content of sewage sludge is available as a                                                                 
     fertilizer when sludge is land applied)*.                                                                  
    Improved crop yield (the organic matter in land-  ..................  ..................  X                 
     applied sewage sludge increases soil's water                                                               
     retention)*.                                                                                               
    Reduced management practice and recordkeeping     ..................  ..................  X                 
     costs for appliers of sewage sludge meeting                                                                
     exceptional quality criteria.                                                                              
    Reduced management and disposal costs for         ..................  ..................  X                 
     ``cleaner'' sewage sludge that does not meet                                                               
     land application criteria.                                                                                 
    Avoidance of costly siting processes for more     ..................  ..................  X                 
     controversial sewage sludge disposal methods                                                               
     (e.g., incinerators) because of greater use of                                                             
     land application.                                                                                          
    Reduced water treatment costs for municipal       ..................  ..................  X                 
     drinking water, irrigation water, and                                                                      
     industrial process and cooling water.                                                                      
----------------------------------------------------------------------------------------------------------------
* Some double counting between this benefit category and ``reduced sewage sludge disposal costs'' is present.   

  The monetary assessment of benefits is inevitably incomplete. As 
mentioned above, monetary values were estimated for only a few of the 
likely benefit categories. In addition, because of data and measurement 
limitations, some of the available valuation measures do not fully 
account for all of the mechanisms by which society is likely to value a 
given benefit event. As a result, the estimated dollar values that are 
attached to certain of the estimated benefit events may understate 
society's willingness-to-pay to achieve those benefit events. For 
example, reduced sewage sludge disposal costs may understate society's 
willingness-to-pay for less polluted sewage sludge because public 
preferences as revealed through political decision-making processes 
indicate that some communities would be willing to pay for beneficial 
sewage sludge use (land application) even when it is more costly than 
other disposal options. As a result, the estimate of the dollar value 
of benefits to society is a partial, noncomprehensive estimate and, in 
all likelihood, understates the economic benefits that will accrue from 
the proposed regulation.
2. Overview of Costs Analyzed
    The RIA compares EPA's best estimate of the monetized benefits of 
the proposed MP&M regulation to the estimated costs to society for 
achieving those benefits. To assess the economic costs to society of 
the MP&M regulation, EPA relied foremost on the estimated costs to MP&M 
facilities for the labor, equipment, material, and other economic 
resources needed to meet the discharge limitations specified by the 
proposed regulation. These cost estimates are the same as those used 
for the zero-cost-pass-through analysis of [[Page 28257]] facility 
impacts described in Section XIV of this document (i.e., in which firms 
must absorb all of the regulatory compliance costs). In the societal 
cost-benefit analysis, however, accounting for these costs differs from 
that in the facility impact analysis. In the facility impact analysis, 
costs and their impacts are considered in terms of their effects on the 
financial performance of the firms and facilities affected by 
regulation. To understand the significance of those costs to affected 
firms and facilities and their likely responses to the proposed 
regulation, the analyses explicitly considered the expected tax 
treatment of the annual expenses and capital outlays for compliance. In 
addition, the annual charges for the capital outlays were calculated 
using private costs of capital. Thus, the total annual compliance costs 
reported earlier in this document are the costs to industry and are 
presented on an after-tax basis reflecting private costs of capital. In 
the analysis of the costs to society, however, these compliance costs 
are considered on a before-tax basis and the annualization of capital 
outlays is based on an opportunity cost of capital to society. In 
general, because of the elimination of tax considerations, the 
estimated compliance costs are greater from the perspective of society 
than from the perspective of private industry.
    In addition to the estimated resource costs to society of 
regulatory compliance, the estimate of social cost used in this 
analysis includes two other cost elements: the cost to governments 
(federal, state, and local) of administering the permitting and 
compliance monitoring activities under the proposed regulation (as 
discussed above at Section XIV.C.1); and the costs associated with 
unemployment that may result from the proposed regulation. The 
unemployment-related costs include: the cost of administering 
unemployment programs for workers who are estimated to lose employment 
(but not the cost of unemployment benefits, which are a transfer 
payment within society); and an estimate of the amount that workers 
would be willing to pay to avoid involuntary unemployment. In much the 
same way that society may value the benefits of avoided adverse health 
effects stemming from the regulation on the basis of willingness-to-
pay, society may also value the incurrence of unemployment as a cost of 
the regulation using the same willingness-to-pay principle of 
valuation.
3. Organization of Following Discussion
    The following sections of this preamble discuss the estimated 
benefits and costs to society of the proposed MP&M regulation. The next 
section, Section B, describes the broad categories of benefits 
associated with the MP&M rule as well as the estimation of these 
benefits while Section C summarizes the estimated costs. Section D 
summarizes the comparison of estimated national benefits and costs for 
the proposed regulation.

B. Benefits Associated With the Proposed Effluent Guidelines

    MP&M industry effluents contain priority and non-conventional 
metals, organics and conventional pollutants. Discharge of these 
pollutants into freshwater, estuarine, and marine ecosystems may alter 
aquatic habitats, affect aquatic life and terrestrial wildlife, and 
adversely affect human health. Many of these pollutants are human 
carcinogens, human systemic toxicants, aquatic life toxicants, or all 
of the above. In addition, many of these pollutants persist in the 
environment, resist biodegradation, and bioaccumulate in aquatic 
organisms.
    The Agency's analysis of these environmental and human health risk 
concerns and of the water-related benefits resulting from the proposed 
effluent guidelines is contained in the ``Environmental Assessment of 
the Metal Products and Machinery Industry (Phase I)'', hereafter called 
the Environmental Assessment (see Section II. for availability of this 
document). This assessment qualitatively and quantitatively evaluates 
the potential human health benefits and water quality benefits of 
controlling the discharges of 66 pollutants from the MP&M industry 
group. (see the Environmental Assessment and the RIA for a discussion 
of the pollutants).
    In this analysis, benefits were assessed by identifying the various 
ways in which the reduction in discharges from the MP&M industry would 
be expected to provide benefits. Regulations that improve water quality 
will generally provide benefits in several broad categories, which are 
summarized below. Please refer to Table 21 for a list of the different 
types of benefits that fall under each category.
    Human health benefits. Reduced pollutant discharges to the nation's 
waterways will generate human health benefits by a number of 
mechanisms. The most important and readily analyzed of the human health 
benefits stem from reduced risk of illness associated with the 
consumption of water, fish or other food that is taken from waterways 
affected by effluent discharges. Human health benefits are typically 
analyzed by estimating the change in the expected number of adverse 
human health events in the exposed population resulting from a 
reduction in effluent discharges. While some health effect mechanisms 
such as cancer are relatively well understood and thus may be 
quantified in a benefits analysis, others are less well understood and 
may not be assessed with the same rigor or at all. For example, this 
analysis quantitatively examines only two health effect categories: 
incidence of cancer and a composite indicator of systemic, non-cancer 
health risk. However, in this analysis, only incidence of cancer is 
translated into an expected number of avoided adverse health events 
(i.e., avoided cancer cases) and, on that basis, monetized. Dose-
response relationships are not available for other health events that 
might also be avoided by reduced pollutant exposures. The economic 
valuation of these health effect events is generally based on estimates 
of the monetary value that society is willing to pay for their 
avoidance. Such ``willingness-to-pay'' valuations are generally 
considered to provide a fairly comprehensive measure of society's 
valuation of the health-related benefit in that they account for such 
factors as the costs of health care,9 loss in income, and pain and 
suffering (both among affected individuals and family and friends). In 
some cases, less comprehensive valuations are used that are based only 
on the estimated costs of health care, remedial treatments, or forgone 
income.

    \9\ Individuals with health insurance, however, would not 
include the part of medical care cost covered by insurance in their 
willingness-to-pay to avoid adverse health effects.
---------------------------------------------------------------------------

    Ecological benefits. Ecological benefits stem from improvements in 
habitats or ecosystems that are affected by effluent discharges. For 
example, spawning grounds for important recreationally or commercially 
caught fish species may be restored in response to a reduction in MP&M 
effluent discharges. It is frequently quite difficult, however, to 
quantify and attach economic values to benefit categories that are 
referred to as ecological benefits. The difficulty in quantifying 
benefit categories results from imperfect understanding of the 
relationship between changes in effluent discharges and the benefit 
events. In addition, it is often difficult to attach monetary values to 
these benefit categories because the benefit events do not occur in 
markets in which prices or costs are readily observed. Ecological 
benefits may be loosely classified as non-market, use benefits, and 
non-market, non-use benefits. [[Page 28258]] 
    Non-market, use benefits stem from improvements in ecosystems and 
habitats that, in turn, lead to enhanced human use and enjoyment of the 
affected areas. For example, reduced discharges may lead to increased 
recreational use and enjoyment of affected waterways in such activities 
as fishing, swimming, boating, hunting or birdwatching. Such uses can 
be classified as either consumptive or non-consumptive. Consumptive 
uses can be distinguished from non-consumptive uses in that the former 
excludes other uses of the same resource. For example, if recreational 
anglers consume their fish catch, the stock of the natural resource is 
at least temporarily depleted. With non-consumptive uses, however, the 
resource base generally remains in the same state before and after use 
(e.g., birdwatching).\10\

    \10\ Even some so-called non-consumptive uses may temporarily 
deplete the natural resource or reduce the potential value to other 
users. For example, over-use of the habitat or crowding in such 
pursuits as bird-watching may diminish the value of the natural 
resource to other users.
---------------------------------------------------------------------------

    In some cases, it may be possible to quantify and attach partial 
economic values to such benefit events on the basis of market values 
(e.g., an increase in tourism activity associated with improved 
recreational fishing opportunities); in this case, these benefit events 
might better be classified as economic productivity related events as 
explained in the next section. These events, however, are often not 
able to be fully valued using information from economic markets. In 
this case, they are more appropriately classified as non-market use 
ecological benefits since economic markets will only capture related 
expenditures made by recreational users such as food and lodging and 
will not capture the value placed on the experience itself.
    The second broad class of ecological benefits, non-market, non-use 
benefits, includes benefit events that are not associated with current 
use of the affected ecosystem or habitat but arise from the realization 
of the improvement in the affected ecosystem or habitat resulting from 
reduced effluent discharges. This class of benefits also includes the 
value that individuals place on the potential for use sometime in the 
future either by themselves or future generations. As an example of the 
former, people may attach a value to protecting habitats and species 
that are otherwise detrimentally affected by effluent discharges even 
when they do not use or anticipate future use of the affected waterways 
for recreational or other purposes. The latter can be described as a 
combination of insurance and speculative value which reflects 
individuals' wish to protect the option to use and enjoy a resource at 
some later date. From an ecosystem standpoint, pristine habitats and 
wildlife refuges are often preserved under the assumption that plant or 
animal species that may yield pharmaceutical, genetic, or ecosystem 
benefits yet to be discovered. These benefits may also manifest by 
other valuation mechanisms, such as: cultural valuation, philanthropy, 
and bequest valuation. It is often extremely difficult or even 
impossible to quantify the relationship between changes in discharges 
and the improvements in societal well-being associated with such 
valuation mechanisms. That these valuation mechanisms exist, however, 
is indisputable as evidenced, for example, by society's willingness to 
contribute to organizations whose mission is to purchase and preserve 
lands or habitats for the sole purpose of averting development.
    Economic productivity benefits. Reduced pollutant discharges may 
also generate benefits through improvements in economic productivity. 
For example, economic productivity gains may occur through reduced 
costs to public sewage systems (publicly owned treatment works or 
POTWs) for managing and disposing of the sewage sludge that results 
from treatment of effluent discharges. With less pollutant 
contamination of industry's discharges to POTWs, the POTWs in turn 
incur lower costs in managing and disposing of their treatment 
residuals. Similarly, economic productivity may be enhanced due to 
reduced treatment costs associated with irrigation water, industrial 
cooling water and municipal drinking water supplies. Other economic 
productivity gains may result from improved tourism opportunities in 
areas that are affected by effluent discharges. In addition, ecological 
benefits such as improved species survival will be translated into 
economic productivity benefits such as increases in commercially caught 
fish populations and yield. When such economic productivity effects can 
be identified and quantified, they are generally straightforward to 
value because they often involve market-place events for which prices 
or unit costs are readily available.
    As indicated above, some of these improvements reduce societal 
costs. As such, these improvements (i.e. reduced treatment and disposal 
costs) could be described as a reduced cost and be included in the 
economic cost analysis rather than in the benefits analysis. For this 
analysis, they are treated as a benefit of the effluent guideline.
1. Qualitative Description of the Benefits
    Benefits to human health associated with the proposed rule include 
reductions in cancer risk and systemic health problems (e.g. 
reproductive, immunological, neurological, circulatory, or respiratory 
toxicity) that are caused by consuming chemically-contaminated fish and 
ingesting chemically-contaminated drinking water. With respect to fish 
consumption, benefits will accrue to recreational and subsistence 
fishermen and to their families. In addition, populations served by 
drinking water intakes located on river reaches to which MP&M 
facilities discharge will benefit from reduced pollutant concentrations 
in MP&M wastewater discharges.
    Benefits to aquatic life include reduction of priority and non-
conventional metals, organics, and conventional pollutants to levels 
below those considered to negatively affect receiving water's biota. 
Such impacts include acute and chronic toxicity, sublethal effects on 
metabolic and reproductive functions, physical destruction of spawning 
and feeding habitats, and loss of prey organisms. Chemical 
contamination of aquatic biota may also directly or indirectly impact 
local terrestrial wildlife. Reductions in such impacts will enhance 
recreational fishing opportunities in terms of both the quality and 
abundance of species caught. As a result, more persons may fish a given 
area and the value of their fishing experience may increase on a per 
fishing event basis.
    Benefits from changes in sewage sludge disposal practices will be 
realized as publicly owned treatment works (POTWs) are able to dispose 
of cleaner (i.e. less toxic) sewage sludge by less expensive and more 
environmentally beneficial methods. For example, cleaner sewage sludge 
may be applied to agricultural land rather than being incinerated or 
disposed of in landfills and other land sites. In addition to the 
direct cost savings that may accrue to POTWS, when sewage sludge is 
beneficially applied to land, its nitrogen content is available as a 
valuable fertilizer. In addition, the organic matter in sludge will 
generally improve the soil structure for plant growth and increase the 
ability of soil to retain water. As a result, land application of 
sewage sludge may yield benefits in terms of overall improvements in 
soil quality and crop yields. Benefits may also accrue through greater 
flexibility in managing and disposing of POTW sewage sludges and 
[[Page 28259]] shifts into beneficial reuse of sewage sludge even when 
the reduction in sludge contamination levels does not yield direct cost 
savings to POTWs. These latter components of economic benefits from 
less contamination of POTW sewage sludges are not addressed in this 
analysis.
2. Quantitative Estimate of Benefits
    EPA quantified and monetized human health, aquatic life, 
recreational fishing, and sewage sludge disposal benefits using a site-
specific analysis for baseline conditions and for the conditions that 
are expected to be achieved by BAT/PSES process changes. Quantified but 
not monetized benefits include reductions in excursions of health-based 
water quality toxic effects levels and aquatic life criteria as well as 
reductions in the frequency with which certain aquatic species are 
exposed to lethal concentrations of MP&M pollutants. It should be noted 
that the benefit categories that were able to be quantified and 
monetized in this analysis represent only a few of the benefits that 
are likely to be achieved by the proposed regulation (see Table 21).Q
    Quantified human health benefits are estimated by:
     Estimating the potential reduction of carcinogenic risk 
and systemic hazards from fish consumption;
     Estimating the potential reduction of carcinogenic risk 
and systemic hazards from ingestion of drinking water; and
     Comparing estimated in-stream concentrations to health-
based water quality toxic effect levels.

    Quantified aquatic life benefits are estimated by:
     Comparing modeled in-stream concentrations to aquatic life 
water quality criteria or toxic effect values (AWQCs); and
     Comparing in-stream concentrations to estimated lethal 
threshold concentrations for selected aquatic species.

     Quantified recreational fishing benefits are calculated on the 
basis of the estimated increase in the value per person-day of fishing 
in a waterbody from which all MP&M AWQC excursions are eliminated. 
Sewage sludge disposal benefits are calculated on the basis of the 
incremental quantity of sludge that, as a result of reduced pollutant 
discharges to POTWs, meets criteria for the generally less expensive 
disposal methods, namely land application and surface disposal. The 
methodologies used in these analyses, including all assumptions and 
limitations, are explained in the Regulatory Impact Analysis.
a. Cancer Risk and Systemic Hazards and Benefits
    Aggregate cancer risk, and systemic hazards from drinking 
contaminated water were estimated for populations served by drinking 
water intakes on waterbodies to which MP&M facilities discharge. In-
stream concentrations of 4 carcinogenic and 33 systemic toxicants were 
estimated for 396 facilities discharging directly or indirectly to 326 
receiving waterways using a model of the instream pollutant mixing and 
dilution process. In-stream concentrations were estimated for the 
initial discharge reach and for downstream reaches taking into account 
the various mechanisms by which pollution concentrations diminish below 
the initial point of discharge (e.g., dilution, adsorption, 
volatilization, and hydrolysis). The calculated in-stream 
concentrations were used to estimate the change in cancer risk and 
systemic hazards resulting from the proposed and alternative MP&M 
regulatory options for populations served by drinking water intakes.
    In addition, aggregate cancer risk and systemic hazards from 
consuming contaminated fish were estimated for recreational and 
subsistence anglers and their families. This analysis relied on the 
same estimates of instream pollutant concentrations as used for the 
drinking water health effects analysis. Pollutant contamination of fish 
flesh was estimated using biological uptake factors. Data on licensed 
fishing population by state and county, presence of fish advisories, 
fishing activity rates, and average household size were used to 
estimate the population of recreational and subsistence anglers and 
their families that would benefit from reduced contamination of fish. 
Fish consumption rates for recreational and subsistence anglers were 
used to estimate the change in cancer risk and systemic hazards among 
these populations.
    For combined recreational and subsistence angler populations, the 
proposed BAT and PSES options are projected to eliminate approximately 
2.7 cancer cases per year from a baseline of about 11.1 cases estimated 
at the current discharge level, representing a reduction of about 25 
percent. For the drinking water population, EPA estimated that reduced 
pollutant discharges under the proposed BAT and PSES options would 
reduce cancer risk by approximately 3.0 cancer cases per year. However, 
EPA has published drinking water criteria for all of the chemicals for 
which these avoided cancer cases were estimated. As a result, these 
avoided cancer cases were excluded from the benefits evaluation because 
it is assumed that public drinking water treatment systems will remove 
these pollutants from the public water supply.
    In addition to the estimated changes in cancer risk in exposed 
populations, EPA also estimated the change in an indicator of systemic, 
non-cancer risk of illness. This composite risk indicator, or systemic 
hazard score, which is based on the change in exposure to pollutants 
through fish and water consumption relative to pollutant-specific 
health effects thresholds, yields an additional measure of the human 
health benefits that are likely to result from the proposed regulation. 
Specifically, the systemic hazard score is calculated as the sum of the 
ratios of quantities of pollutants ingested into the human body 
relative to the daily reference dose for each pollutant. Values above 
or near one are highly suggestive of a risk of systemic health hazard. 
The hazard score assumes that the combined effect of ingesting multiple 
pollutants is proportional to the sum of their effects individually.
    The distribution of hazard scores was calculated for drinking water 
and fish consumption populations on the basis of baseline and post-
compliance exposures. For each exposed population category, the change 
in the distribution from baseline to the post-compliance case provides 
a measure of the reduced risk of systemic health hazard from reduced 
MP&M industry discharges. Analytic tractability issues prevented this 
analysis from being able to be done on a sample-weighted basis. The 
results are for sample discharge locations only. The results for both 
the fish and drinking water analysis show movement in populations from 
higher risk values to lower risk values. In addition, both analyses 
show substantial increments in the percentage of exposed population 
that would be exposed to no risk of systemic health hazard associated 
with discharges by MP&M facilities.
b. Excursions of Health-Based Water Quality Toxic Effect Levels
    In addition to the estimated changes in cancer and systemic risk in 
exposed populations, EPA also estimated the effect of facility 
discharges of regulated pollutants on pollutant concentrations in 
affected waterways relative to ambient water criteria for protection of 
human health. The estimated concentrations were compared, on both a 
baseline and post-compliance basis, with EPA ambient water quality 
criteria (AWQCs) for protection of human health through consumption of 
[[Page 28260]] organisms and consumption of organisms and water. 
Pollutant concentrations in excess of these values indicate potential 
risks to human health. EPA modeling results show that 137 reaches 
exceed AWQC values at baseline discharge levels. Proposed BAT and PSES 
options are projected to eliminate concentrations in excess of the 
criteria on 40 of these reaches, leaving an estimated 97 reaches with 
concentrations in excess of AWQC values for protection of human health.
    The analyses pertaining to change in human health risk described in 
this and the preceding section ignore the potential for joint effects 
of more than one pollutant. Each pollutant is dealt with in isolation 
and the individually estimated effects are added together. The analyses 
do not account for the possibility that several pollutants may combine 
in a synergistic fashion to yield more adverse effects to human health 
than indicated by the simple sum of the individual effects.
c. Aquatic Life Benefits
    To assess aquatic life benefits, EPA estimated the effect of 
facility discharges of regulated pollutants on pollutant concentrations 
in affected waterways. The estimated concentrations were compared, on 
both a baseline and post-compliance basis, with EPA ambient water 
quality criteria (AWQCs) for acute and chronic exposure impacts to 
aquatic life. Pollutant concentrations in excess of these values 
indicate potential impacts to aquatic life. EPA modeling results show 
that 130 reaches exceed AWQC values at baseline discharge levels. 
Proposed BAT and PSES options are projected to eliminate concentrations 
in excess of the criteria on 88 of these reaches, leaving an estimated 
41 reaches with concentrations in excess of AWQC values for aquatic 
life.
    EPA also analyzed aquatic life benefits on the basis of the change 
in frequency with which certain aquatic species may be expected to be 
exposed to lethal concentrations of pollutants discharged by MP&M 
facilities. As such, this analysis focuses solely on acute (short-term) 
toxicity and does not consider chronic (long-term) toxicity. This 
analysis examined the effects of specific pollutants on selected 
aquatic species with a relatively wide range of sensitivity to MP&M 
pollutants. Specifically, thirteen MP&M pollutants thought to be among 
those having the greatest potential to cause risks to aquatic life were 
analyzed. Species with socioeconomic importance such as trout, bass, 
and catfish were highlighted, but all species for which data were 
available, including those of less socioeconomic importance, were 
evaluated. This analysis uses a species sensitivity distribution rather 
than a single toxicity threshold concentration in comparison to in-
stream pollutant concentrations for the following three reasons:
    1. Species sensitivity distributions, which are used by EPA to set 
water quality criteria, can be used to relate exposure concentrations 
to the proportion of species whose toxicological effect concentrations 
(e.g., LC50 , the lethal concentration for fifty percent of a species, 
or some lower lethal threshold such as an LC10 or LC1) are exceeded. 
This proportion provides an indication of the percentage of aquatic 
species that would be directly affected \11\ at the exposure 
concentration. Unlike comparisons to water quality criteria, which 
usually yield ratios of the exposure concentration to the criterion 
concentration, the proportion of species that are likely to be directly 
affected provides a more intuitive indicator of ecological risk. It 
should be noted, however, that both indicators of ecological risk 
(water quality criteria and proportion of species impacted) suffer from 
the inability to account for indirect impacts on aquatic ecosystems, 
such as those that result from interruption of predator-prey 
relationships. Therefore, neither approach should be considered to 
provide absolute measures of ecological risk.

    \11\ The term ``directly affected'' is used here to reflect 
impacts from direct exposure to a pollutant, rather than 
``indirect'' effects such as those that occur due to the loss of 
important predator or prey species.
---------------------------------------------------------------------------

    2. The variation in chemical sensitivity over a group of species is 
known to vary among chemicals (Erickson and Stephan, 1988). For 
example, consider two chemicals both of which are at lethal effect 
concentrations for five percent of a habitat's species. A given 
percentage increase (e.g., doubling) of both pollutants' concentrations 
will not necessarily lead to the same increase in the proportion of the 
species that are exposed to lethal effect concentrations. That is, 
doubling one chemical's concentration might increase the proportion of 
species affected from five percent to 25 percent while doubling the 
other chemical's concentration might increase the proportion of species 
affected from five percent to 50 percent. This diversity of species' 
response to changes in concentrations of different pollutants is better 
captured by use of distributions of response over the group of species 
in the habitat.
    3. Because the identities of the tested species comprising the 
species sensitivity distributions are known, the use of species 
sensitivity distributions allowed EPA to identify which of the tested 
species are at risk from exposure to regulated pollutants and which are 
likely to benefit from reduced discharges.
    Using species sensitivity distributions, EPA estimated the 
proportion of tested species whose lethal threshold concentrations 
would be exceeded at various exposure concentrations. In interpreting 
these results, EPA assumed that a greater proportion of species 
affected signifies a greater risk of lethal effects in the population 
of species present in a habitat. This analysis found that the proposed 
regulation will yield significant reductions in the expected frequency 
with which certain aquatic species may be exposed to lethal 
concentrations of pollutants. The reduced exposure translates into 
benefits such as increased species diversity and abundance which would, 
in turn, enhance recreational and commercial fishing opportunities (see 
the RIA for additional discussion of this analysis and its findings in 
terms of benefits to specific species).
d. Recreational Fishing Benefits
    As described above, the proposed BAT and PSES options will reduce 
the number of excursions of aquatic life criteria or toxic effect 
values. EPA assumes that elimination of criteria excursions for all 
regulated pollutants in a waterbody will achieve water quality that is 
protective of aquatic life. This improvement in water quality, in turn, 
generates benefits to recreational anglers by increasing the value of 
their experience or the number of days they subsequently choose to fish 
the waterbody. These benefits, however, do not include all of the 
benefits that are associated with improvements in aquatic life. For 
example, recreational benefits do not capture the benefit of increased 
assimilative capacity of a receiving waterbody, improvements in the 
taste and odor of the instream flow, or improvements to other 
recreational activities such as swimming and wildlife observation that 
may be enhanced by improved water quality. Modeling results show that, 
under the proposed regulatory option, criteria excursions for all 
pollutants whose discharges are affected by the MP&M regulation are 
eliminated in 123 discharge locations. [[Page 28261]] 
e. Avoided Sewage Sludge Disposal Costs
     To estimate the quantity of sewage sludge that will be disposed of 
using a less expensive method due to the proposed regulatory 
requirements, EPA calculated baseline and post-compliance sewage sludge 
quality and compared sewage sludge pollutant concentrations to criteria 
for land application and surface disposal.12 POTWs are assumed to 
choose the least expensive sewage sludge use or disposal option for 
which the sludge meets pollutant criteria. For many POTWs, the least 
expensive or ``preferred'' option is generally agricultural application 
(a type of land application) or surface disposal of sewage sludge. As a 
result of the proposed regulation, many POTWs are expected to achieve 
substantial cost savings by disposing of sewage sludge through 
agricultural application or surface disposal. For POTWs with limited 
access to agricultural land and surface disposal sites, the cost 
savings resulting from sewage sludge with lower pollutant 
concentrations are expected to be less substantial. However, disposal 
of sewage sludge that meets agricultural application limits through 
distributing and marketing methods may achieve some cost savings for 
these facilities. In the baseline, an estimated 5,559 of 6,950 POTWs 
meet criteria for surface disposal or land application. Of the 5,559 
POTWs meeting surface disposal or land application criteria, 5,309 meet 
the more stringent criteria for beneficial land application while 250 
meet only the more lenient surface disposal criteria. Under the 
proposed regulation, the total of POTWs that are expected to meet 
criteria for surface disposal or land application increases to 5,743. 
Of this total that meet criteria for surface disposal or land 
application, 5,493 POTWs (or an increase of 184 POTWs) are expected to 
meet criteria for beneficial land application, while 250 POTWs continue 
to meet criteria for surface disposal.

    \12\ Industrial sludge'' which results from the operation of 
treatment systems at MP&M facilities, will increase both in quantity 
and in level of contamination as a result of the proposed 
regulation. The cost of managing and disposing of this industrial 
sludge is included in the estimated costs of regulatory compliance 
used in the economic and regulatory impact analyses.
3. Monetization of Benefits
    For this regulation, EPA estimated the monetary value of benefits 
for three benefit categories: human health benefits from reduced 
exposure to carcinogens in fish taken from waterways affected by MP&M 
discharges; enhanced recreational fishing opportunities in waterways 
affected by MP&M discharges; and reduced costs to POTWs in managing and 
disposing of sewage sludge that is affected by MP&M discharges.
a. Valuation of Human Health Benefits
    EPA estimated the value of a limited set of possible human health 
benefits from the human health risk assessment discussed above. These 
benefits are attributed to reductions in cancer risks associated with 
consuming chemically-contaminated fish. The valuation of benefits is 
based on estimates of society's willingness-to-pay to avoid the risk of 
cancer associated with consuming chemically-contaminated fish. Little 
data, however, is available regarding both dose-response relationships 
for non-cancer systemic health outcomes and the monetary value of 
avoiding such health outcomes. As a result, it was not possible to 
monetize the systemic health effects that might be associated with 
exposures to pollutants emanating from the MP&M industry such as 
reproductive, immunological, neurological, or circulatory problems.
    To value mortality, EPA used a range of values recommended by EPA's 
Office of Policy Analysis from a review of studies quantifying 
individuals' willingness to pay to avoid increased risks to life 
(Fisher, Chestnut, and Violette, 1989; and Violette and Chestnut, 
1986). The reviewed studies used hedonic wage or contingent valuation 
analyses in labor markets to estimate the amounts that individuals 
would be willing to pay to avoid slight increases in risk of mortality 
(i.e., the question analyzed in these studies is: how much more must a 
worker be paid to accept an occupation with a slightly higher risk of 
mortality?). The willingness-to-pay values estimated in these studies 
are associated with small changes in the probability of mortality; to 
estimate a willingness-to-pay value for avoiding certain or high 
probability mortality events, they are extrapolated to the value for a 
100 percent probability event. The resulting estimates of the value of 
a ``statistical life saved'' are used in analyses such as this 
regulatory analysis to value regulatory effects that are expected to 
reduce the incidence of mortality. From this review, the Office of 
Policy Analysis recommended a range of $1.6 to $8.5 million (1986 
dollars) for valuing an avoided event of premature mortality or a 
statistical life saved. For this analysis, EPA adjusted the recommended 
figures to 1994 using the relative change in nominal Gross Domestic 
Product from 1986 to 1994 (57.2 percent) to account for increases in 
society's willingness to pay to avoid risk of mortality as national 
income increases. Updating to 1994 yields a range of $2.5 to $13.4 
million. For this analysis, the low-point of the range is used as a 
``low'' estimate while the top of the range is used as a ``high'' 
estimate. For the proposed Option 2a/2, the benefits associated with 
reduced incidence of cancer from fish consumption are estimated to 
range from $6.8 million to $36.2 million per year ($1994), depending on 
the choice of willingness-to-pay value that is used to value the 
avoided cancer events. Although EPA estimated the change in cancer risk 
resulting from reduced exposure to MP&M pollutants via the drinking 
water pathway, these effects were not included in the monetary estimate 
of benefits because EPA has published drinking water criteria for the 
four pollutants for which the cancer analysis was completed. Thus, the 
total estimated value for human health benefits ranges from $6.8 
million to $36.2 million per year ($1994).
b. Valuation of Enhanced Recreational Fishing Opportunities
     EPA also estimated the value of enhanced recreational fishing 
opportunities. This valuation provides a limited measure of the value 
to society of improvements in aquatic habitats that are used for 
recreational purposes. The estimate of benefits is limited because it 
focuses on only one mechanism, enhanced recreational fishing, by which 
society may value improved aquatic habitats; it ignores other 
recreational effects as well as valuation mechanisms that are separate 
from recreation.
    EPA calculated the value of enhanced recreational fishing 
opportunities by first estimating the baseline value of those fisheries 
in which all instances in which AWQCs are exceeded would be eliminated. 
Second, EPA estimated the value of improving the water quality in these 
fisheries based on the incremental value to anglers of eliminating all 
contaminants from a fishery (Lyke, 1992). Estimates of the increase in 
value of recreational fishing to anglers range from $23.6 million to 
$84.3 million annually ($1994).
c. Reduced Costs to POTWs in Managing and Disposing of Sewage Sludge
    On the basis of the estimated reduced contamination of sewage 
sludge, EPA estimated that 184 POTWs will be able to select the lower-
cost land application methods for sewage sludge disposal. The cost 
savings associated with the selection of lower cost sewage sludge 
management and disposal methods are [[Page 28262]] estimated to range 
from $39.1 to $86.0 million annually ($1994).
d. Total Estimated Value of Benefits
     For the proposed regulatory option, total benefits for the three 
categories for which monetary estimates were possible range from $69.6 
to $206.5 million annually. As noted above, this benefit estimate is 
necessarily incomplete because it omits numerous mechanisms by which 
society is likely to benefit from reduced effluent discharges from the 
MP&M industry. Examples of benefit categories not reflected in this 
estimate include: non-cancer related health benefits, other water 
dependent recreational benefits, existence and option values, and 
benefits to wildlife and endangered species.
4. Limitations and Uncertainties Associated With Estimating Benefits
    The estimation of benefits is inevitably incomplete in that only a 
small set of the categories by which the proposed regulation is 
expected to generate benefits are able to be quantified and monetized. 
Beyond this broad and overriding limitation to the assessment of 
benefits, the methodologies used to assess the benefit categories that 
were quantitatively analyzed and for which monetary values were 
estimated also involve significant simplifications and uncertainties. 
Whether these simplifications and uncertainties are likely to lead to 
an understatement or overstatement of the estimated economic values for 
the benefit categories that were analyzed is uncertain. Several of 
these simplifications and uncertainties are noted below.
    The methodology used to estimate water quality criteria excursions 
assumes that MP&M facilities are the only source of each of the 
regulated pollutants in the waterbody; the methodology does not 
incorporate background contributions either from other upstream sources 
or, in the case of water quality criteria, contaminated sediments due 
to previous discharge practices. Furthermore, although the discharge of 
these contaminants may cease or be minimized, sediment contamination 
and subsequent accumulation of the regulated pollutants in aquatic 
organisms may continue for years. Actual water quality improvements, in 
terms of eliminating excursions above criteria may, therefore, be over- 
or under-estimated depending on the relative magnitude of background 
contributions of regulated pollutants.
    In this analysis, the estimates of human health and ecological 
benefits are based on the estimated changes in in-stream concentrations 
of regulated pollutants. In-stream concentrations under baseline 
conditions and under the proposed option are modeled for all 
waterbodies to which MP&M facilities discharge. Certain data underlying 
these analyses are site specific, including: flow rates under average 
and low flow conditions, and flow depth. However, other basic 
assumptions in the model are not site specific, including: chemistry of 
the water body, mixing processes, longitudinal dispersion, flow 
geometry, suspension of solids and reaction rates. Where these 
assumptions differ from actual conditions, modeled results will 
approximate in-stream concentrations with varying degree of accuracy. 
The effect of these assumptions on benefit estimates, however, is 
indeterminate.
    In the analysis of benefits associated with consumption of fish 
taken from affected waterways, EPA estimated the exposed population--
that is, the population expected to fish an affected waterway--from 
county fishing license and fishing activity data. Some data are 
specific to the counties in which MP&M sample facilities are located; 
however, for some counties in which MP&M facilities are located, it was 
necessary to estimate fishing population and activity rates from state-
level data or from data for nearby counties or states (see Chapter 9 of 
the RIA for a detailed description of this methodology). These 
approaches are necessarily approximations and may lead to an over- or 
underestimates of the exposed population. The effect of these 
estimation procedures on the benefits estimate, however, is not known.
    A related issue involves the assumption made regarding the number 
of subsistence fishermen in the exposed population. In this analysis, 
subsistence fishermen are assumed to account for an additional 5 
percent of the fishing population. The magnitude of subsistence fishing 
in the United States or in individual states, however, is not known. As 
a result, this estimate may understate or overstate the actual number 
of subsistence fishermen.
    Finally, recreational fishing benefits are based on the assumption 
that anglers place the same value on reducing concentrations of MP&M 
pollutants to levels considered protective of aquatic life as they do 
on eliminating all contaminants from a fishery. While the former level 
of pollutant reduction is assumed to be protective of aquatic life, 
some level of contamination would still exist in a fishery. As such, 
benefits of recreational fishing may be overstated.
    EPA acknowledges the unavoidable uncertainty associated with 
estimating benefits. EPA believes that it has used the best methodology 
available for estimating benefits. EPA is soliciting comments on the 
reliability and accuracy of the methods used and suggestions on 
alternative methods which could be used for the final rule (see Section 
XIX).

C. Costs To Society

    The social costs of regulatory actions are the opportunity costs to 
society of employing scarce resources in pollution control activity. 
The social costs of regulation include both monetary and non-monetary 
outlays made by society. Monetary outlays include private-sector 
compliance costs, government administrative costs, and other adjustment 
costs, such as the cost of relocating displaced workers. Non-monetary 
outlays, some of which can be assigned monetary values, include losses 
in consumers' and producers' surpluses in affected product markets, 
discomfort or inconvenience, loss of time, and a slowdown in the rate 
of innovation.
    For this analysis, EPA based its estimate of the cost to society on 
the following components of social cost: the cost of society's economic 
resources for achieving compliance with the proposed regulatory option; 
the cost to governments of administering the proposed regulation; the 
cost of administering unemployment programs for job losses resulting 
from regulation; and worker dislocation costs.
1. Resource Cost of Compliance
    The chief component of the estimated annual social cost is the cost 
of complying with the proposed regulation. The portion of this cost 
that is expected to be borne directly by the MP&M Phase I industries 
amounts to $160.6 million ($1994). This amount is the same as that used 
for the facility impact analysis and reflects the cost of pollution 
prevention and treatment systems needed to achieve compliance with the 
proposed discharge limitations (see Section XIV. D. and E.). In 
addition, this amount reflects the expected tax treatment of capital 
outlays and annual expenses and is also based on private costs of 
capital. However, as discussed in the introduction to this section, the 
appropriate measure of cost of compliance to society will omit these 
tax effects and will also reflect the opportunity cost of capital to 
society or social discount rate. The combined effect of these 
adjustments is to add an estimated $29.7 million to the estimated 
private industry cost of the regulation, bringing the cost of 
compliance to society to $190.3 million ($1994). This 
[[Page 28263]] amount may be interpreted as the value of society's 
productive resources--including labor, equipment, and other material--
that is needed annually to achieve the reductions in effluent 
discharges specified by the proposed regulatory option.
2. Cost of Administering the Proposed Regulation
    In addition to the resource costs for achieving effluent discharge 
reductions, EPA also estimated the cost to all levels of governments 
for administering the proposed regulation. The main component of this 
administrative cost category is the cost of labor and material 
resources for writing permits under the regulation and for compliance 
monitoring and enforcement activities. EPA estimates that these costs 
will range from $2.1 to $3.4 million ($1994) annually.
3. Cost of Unemployment
    To account for the total social cost of unemployment, EPA estimated 
the cost of worker dislocation (exclusive of cash benefits) to the 
individual as well as the additional cost to governments to administer 
unemployment benefits. The cost of worker dislocation is estimated 
based on incremental willingness-to-pay to avoid job dislocation in a 
hedonic wage framework. This framework has been used in the past to 
impute a trade-off between wages and job security (Topel, 1984, Adams, 
1985). Specifically, this estimate approximates a one-time willingness-
to-pay to avoid an involuntary episode of unemployment and reflects all 
monetary and non-monetary impacts of involuntary unemployment incurred 
by the worker. It does not include any offsets to the cost of 
unemployment such as unemployment compensation or the value of 
increased leisure time.
    For the MP&M industry, the implied one time statistical cost of an 
involuntary layoff is estimated at $83,000 to $110,000 ($1994). To 
calculate the annual cost of employment displacement for the proposed 
regulatory option, EPA annualized this value over the 15-year analysis 
period at a social opportunity cost of deferred consumption of three 
percent and multiplied the resulting annual value by the total number 
of displaced workers (698 FTEs) estimated in the facility impact 
analysis. In the labor requirements analysis (see Section XIV.E, 
above), EPA estimated that the demand for labor for compliance with the 
proposed regulation would exceed the estimated loss in employment from 
facility closures. As a result, when the total number of displaced 
workers is adjusted to account for compliance-related labor demand, the 
net loss in employment is negative. For this analysis, EPA considered a 
range of cost for displaced workers with the high end of the range 
based on the cost of worker displacement considering only the job 
losses in estimated facility closures and with the low end of the range 
set at zero. Setting the low end of the range at zero recognizes that 
labor demands for compliance may equal or exceed job losses but, to be 
conservative, does not enter a negative cost based on the possible net 
reduction in unemployment resulting from the regulation. On this basis, 
EPA estimated that annualized worker displacement costs for the 
proposed regulation would range from zero to $6.6 million.
    Unemployment as the result of regulation may also impose costs to 
society through the additional administrative burdens placed on the 
unemployment system (the cost of unemployment benefits per se is not a 
social cost but instead a transfer payment within society). 
Administrative costs include the cost of processing unemployment 
claims, retraining workers, and placing workers in new jobs. Using data 
from the Interstate Conference of Employment Security Agencies, EPA 
estimated that the per unemployed worker cost of administering 
unemployment programs for job losses amounts to approximately $100 per 
job loss. Multiplying this figure by the 698 job losses and annualizing 
the result over the 15-year analysis period yields an annual 
unemployment administration cost of less than $10,000 per year. Again, 
considering that the net employment loss from the regulation may be 
negative, EPA used a range of from zero to $10,000 for the additional 
annual cost of unemployment administration.
    Summing across all social costs results in a total social cost 
estimate of $192.4 to $200.3 million annually ($1994). These social 
cost estimates do not include losses in consumers' and producers' 
surpluses resulting from the change in quantity of goods and services 
sold in affected product markets. However, under the zero-cost-pass-
through framework in which compliance costs have been tallied, MP&M 
industry product prices are assumed not to increase as a result of the 
proposed regulation. In this case, the estimated resource costs of 
compliance will approximate the loss in producers' surplus and, with no 
increase in prices, consumers' surplus will not change.

D. Benefit-Cost Comparison

    Because not all of the benefits resulting from the proposed 
regulatory alternative can be valued in dollar terms, a complete cost-
benefit comparison cannot be performed. The social cost of the proposed 
rule is estimated at $192.4 to $200.3 million annually ($1994). The sum 
total of benefits that can be valued in dollar terms ranges from $69.6 
million to $206.5 million annually ($1994).
    As shown in Table 22, combining the estimates of social benefits 
and social costs yields a net monetizable benefit ranging from negative 
$130.7 million to positive $14.1 million annually. This assessment of 
the relationship between costs and benefits is subject to severe 
limitations on the ability to estimate comprehensively the expected 
benefits of the proposed regulation. If all of the benefits of 
regulation could be quantified and monetized, EPA estimates that in all 
likelihood the benefits of regulation would exceed the social costs.

 Table 22.--Comparison of National Annual Monetizable Benefits to Costs 
 for Effluent Limitation Guidelines and Standards for the Metal Products
                     and Machinery Industry, Phase I                    
                       [Millions of 1994 dollars]                       
------------------------------------------------------------------------
             Benefit and cost categories                 Dollar value   
------------------------------------------------------------------------
Benefit Categories:                                                     
    Human Health Benefits: Fish Consumption.........          $6.8-$36.2
    Human Health Benefits: Water Consumption........             0.0-0.0
    Recreational Fishing Benefits...................           23.6-84.3
    Avoided Sewage Sludge Disposal Costs............           39.1-86.0
                                                     -------------------
        Total Estimated Benefits....................          86.4-208.9
Cost Categories:                                                        
[[Page 28264]]
                                                                        
    Cost to Industry for the Proposed Regulatory                        
     Option.........................................               160.6
    Adjustments for Tax Code and Use of Social                          
     Discount Rate..................................                29.7
    Costs of Administering the Proposed Regulation..             2.1-3.4
    Unemployment Administration and Worker                              
     Displacement Costs.............................             0.0-6.6
                                                     -------------------
        Total Social Cost...........................         192.4-200.3
        Net Benefits (Benefits less Costs)..........    * ($130.7)-$14.1
------------------------------------------------------------------------
* For calculating the range of net benefits, the low net benefit value  
  is calculated by subtracting the high value of costs from the low     
  value of benefits. The high net benefit value is calculated by        
  subtracting the low value of costs from the high value of benefits.   
Source: U.S. Environmental Protection Agency.                           

XVI. Water Quality and Other Environmental Benefits of Proposed 
Rule for the Metal Products and Machinery (MP&M) Industry

    The U.S. Environmental Protection Agency (EPA, Agency) evaluated 
the environmental benefits of controlling the discharges of toxic and 
nonconventional pollutants from metal products and machinery (MP&M) 
facilities (Phase 1) to surface waters and publicly-owned treatment 
works (POTWs) in national analyses of direct and indirect discharges. 
Discharges of these pollutants into freshwater and estuarine ecosystems 
may alter aquatic habitats, adversely affect aquatic biota, and 
adversely impact human health through the consumption of contaminated 
fish and water. Furthermore, these pollutants may also interfere with 
POTW operations in terms of inhibition of activated sludge or 
biological treatment and contamination of sludges, thereby limiting the 
method of disposal. Many of these pollutants have at least one toxic 
effect (human health carcinogen and/or systemic toxicant or aquatic 
toxicant). In addition, many of these pollutants bioaccumulate in 
aquatic organisms and persist in the environment. Various studies 
demonstrate the environmental impact of discharges from MP&M facilities 
on aquatic life, human health, and the quality of receiving waters and 
sediments. The National Sediment Contaminant Point Source Inventory 
ranks MP&M as one of the largest ongoing sources of potentially toxic 
pollutants to sediment (nearly 10 percent of the total load of 
potential sediment contaminants from point sources). Forty-six (46) 
direct MP&M facilities are identified by States as being point sources 
causing water quality problems and are included on their 304(l) Short 
List. Cases of human health impacts (production worker exposure); 
aquatic life impacts (lethal and sublethal); a State fish consumption 
advisory; and contamination of surface waters, ground water, and 
sediments are also documented.
    EPA evaluated the effects of direct wastewater discharges on 
receiving stream water quality at current levels of treatment and at 
proposed BAT treatment levels. EPA predicted steady-state in-stream 
pollutant concentrations after complete immediate mixing with no loss 
from the system, and compared these levels to EPA-published water 
quality criteria or to documented toxic effect levels for those 
chemicals for which EPA has not published water quality criteria. EPA 
performed this analysis for a representative sample set of 55 direct 
facilities discharging 61 pollutants to 55 receiving streams. This set 
of 55 facilities includes 12 facilities that currently are both direct 
and indirect dischargers, but are projected to become solely indirect 
dischargers at the proposed option. However, the set of 55 facilities 
excludes four facilities that EPA's cost model predicts to close based 
on current economic conditions. EPA then extrapolated the results of 
this analysis to the entire population of direct MP&M facilities 
nationwide (approximately 2,035 facilities discharging to 2,035 
receiving streams) with each sample facility representing a varying 
number of additional facilities of the same approximate size engaged in 
similar activities under similar economic conditions.
    In-stream concentrations for two pollutants are projected to exceed 
human health criteria (developed for consumption of water and 
organisms) in 6 percent of the receiving streams nationwide at current 
discharge levels. The proposed BAT regulated discharge levels will 
reduce the excursions of human health criteria to 2 percent of the 
receiving streams. The percentage of receiving streams nationwide with 
in-stream pollutant concentrations projected to exceed chronic aquatic 
life criteria or toxic effect levels will be reduced from 9 percent at 
current discharge levels to 4 percent at proposed BAT discharge levels. 
Thirty-nine (39) pollutants at current and six pollutants at BAT 
discharge levels are projected to exceed in-stream chronic aquatic life 
criteria or toxic effect levels. These projected water quality benefits 
are achieved through a 17 percent reduction in current direct loadings 
for the 61 evaluated pollutants by the proposed BAT regulatory option. 
Including loadings of oil and grease and total suspended solids (TSS), 
current pollutant loadings are reduced 36 percent by the proposed BAT 
regulatory option. Current pollutant loadings (including all 
conventional pollutants) are also reduced 36 percent by the proposed 
BAT regulatory option.
    EPA also evaluated the effects of POTW wastewater discharges of 61 
pollutants on receiving stream water quality at current and proposed 
pretreatment levels for a representative sample of 307 indirect 
discharging MP&M facilities. This set of 307 facilities includes 10 
facilities that currently are both direct and indirect dischargers, but 
are projected to become solely direct dischargers at the proposed 
option. As with the direct dischargers, the set of 307 facilities 
excludes 52 facilities that EPA's cost model predicts to close based on 
current economic conditions. These 307 facilities discharge to 264 
POTWs with outfalls located on 249 receiving streams. EPA extrapolated 
the results to a nationwide population of approximately 7,387 
facilities which discharge to 7,016 POTWs on 6,864 receiving streams 
using the same facility weighting approach described above for the 
direct dischargers. EPA predicted steady-state in-stream pollutant 
concentrations after complete immediate mixing with no loss from the 
system, and compared these levels to EPA-published water quality 
criteria or to documented toxic [[Page 28265]] effect levels for those 
chemicals for which EPA has not published water quality criteria.
    EPA projects that in-stream concentrations of five pollutants will 
exceed human health criteria (developed for consumption of water and 
organisms) in 7 percent of the receiving streams nationwide at current 
discharge levels. The proposed pretreatment regulatory option reduces 
excursions of human health criteria to three pollutants at 5 percent of 
the receiving streams nationwide. The percentage of receiving streams 
with in-stream pollutant concentrations projected to exceed chronic 
aquatic life criteria or toxic effect levels are reduced from 8 percent 
at current discharge levels to 3 percent at the proposed pretreatment. 
A total of 19 pollutants at current and ten pollutants at proposed 
pretreatment levels are projected to exceed in-stream aquatic life 
criteria or toxic effect levels. Current loadings of the 61 pollutants 
evaluated for water quality impacts are reduced 32 percent by the 
proposed pretreatment regulatory options. Including oil and grease and 
TSS, current pollutant loadings are reduced 50 percent by the proposed 
pretreatment regulatory options. Including all conventional pollutants, 
current pollutant loadings are also reduced 50 percent by the proposed 
pretreatment regulatory options.
    EPA also evaluated the potential adverse impacts on POTW operations 
(inhibition of microbial activity during biological treatment) and 
contamination of sludge at the 7,016 POTWs that receive wastewater from 
the national projected population of 7,387 indirect discharging MP&M 
facilities. Inhibition of POTW operations is estimated by comparing 
predicted POTW influent concentrations to available inhibition levels. 
Potential contamination of sludge is estimated by comparing projected 
pollutant concentrations in POTW sludge to available EPA sludge 
criteria. EPA evaluated 37 pollutants for potential POTW operation 
inhibition and nine pollutants for potential sludge contamination. At 
current discharge levels, EPA projects inhibition problems at 16 
percent of the POTWs nationwide caused by 11 different pollutants. At 
the proposed pretreatment, EPA projects inhibition problems at 15 
percent of the POTWs nationwide caused by six pollutants. The Agency 
projects sludge contamination at 13 percent and 9 percent of the POTWs 
nationwide at current and proposed pretreatment regulatory option 
levels, respectively. EPA projects that all nine evaluated pollutants 
at current and proposed pretreatment levels exceed sludge criteria 
levels.
    For the analysis of contamination of sewage sludge EPA included 
other industrial discharges in the sewage sludge model. EPA evaluated 
the benefits of reducing contamination of sludge in its analysis of 
projected POTW sludge disposal practices at current and proposed 
pretreatment levels. EPA performed analyses for a representative sample 
set of 80 POTWs with projected sludge contamination limiting its use 
for land application, and extrapolated to a nationwide population of 
1920 POTWs. Under the proposed pretreatment regulatory option, 184 of 
the facilities will shift into qualifying for land application of 
sewage sludge. Land application quality sludge meets ceiling pollutant 
concentration limits, class B pathogen requirements, and vector 
attraction reduction requirements. Because costs for land application 
tend to be lower than those for other disposal methods, this shift away 
from incineration, co-disposal, and surface disposal results in a cost 
savings.
    The POTW inhibition and sludge values used in this analysis are 
not, in general, regulatory values. EPA based these values upon 
engineering and health estimates contained in guidance or guidelines 
published by EPA and other sources. Therefore, EPA does not intend to 
base its regulatory approach for proposed pretreatment discharge levels 
upon the finding that some pollutants interfere with POTWs by impairing 
their treatment effectiveness or causing them to violate applicable 
limits for their chosen disposal methods. However, the values used in 
this analysis help indicate the potential benefits for POTW operations 
and sludge disposal that may result from the compliance with proposed 
pretreatment discharge levels.

XVII. Non-Water Quality Environmental Impacts

    Sections 304(b) and 306 of the Act require EPA to consider non-
water quality environmental impacts (including energy requirements) 
associated with effluent limitations guidelines and standards. In 
accordance with these requirements, EPA has considered the potential 
impact of the proposed regulation on energy consumption, air emissions, 
and solid waste generation. The Agency has also considered the impacts 
of other ongoing EPA rulemaking efforts on MP&M Phase I sites.
    This regulation was reviewed by EPA personnel responsible for non-
water quality environmental programs. While it is difficult to balance 
environmental impacts across all media and energy use, the Agency has 
determined that the impacts identified below are justified by the 
benefits associated with compliance with the limitations and standards.

A. Air Pollution

    The Agency believes that the in-process and end-of-pipe 
technologies included in the technology options for this regulation do 
not generate air emissions.
    The Agency is developing National Emission Standards for Hazardous 
Air Pollutants (NESHAPs) under section 112 of the Clean Air Act (CAA) 
to address air emissions of the hazardous air pollutants (HAPs) listed 
in Title III of the CAA Amendments of 1990. Current and upcoming 
NESHAPs that may potentially affect MP&M sites are listed below.
     Chromium Emissions from Hard and Decorative Chromium 
Electroplating and Chromium Anodizing Tanks;
     Halogenated Solvent Cleaning;
     Aerospace Manufacturing; and
     Miscellaneous Metal Parts and Products (Surface Coating).
    These NESHAPs will define maximum achievable control technology 
(MACT). Like effluent guidelines, MACT standards are technology based. 
The CAA set maximum control requirements on which MACT can be based for 
new and existing sources.
    The use of chlorinated solvents in the MP&M industry can create a 
source of hazardous emissions. The Agency believes this regulation will 
not affect the use of chlorinated solvents in the MP&M industry. This 
regulation neither requires nor discourages the use of aqueous cleaners 
in lieu of chlorinated solvents.
    EPA is addressing emissions of volatile organic compounds (VOCs) 
from industrial waste water through a Control Techniques Guideline 
(CTG) for industrial waste water under section 110 of the CAA (Title I 
of the 1990 CAA Amendments). The MP&M industry is one of several 
industries that would be covered by the industrial waste water CTG. The 
industrial waste water CTG will provide guidance to states in 
recommending reasonably available control technologies (RACT) for VOC 
emissions from industrial waste water at sites located in areas failing 
to attain the National Ambient Air Quality Standard for ozone.

B. Solid Waste

    Solid waste generation includes hazardous and nonhazardous waste 
water treatment sludge as well as waste [[Page 28266]] oil removed in 
waste water treatment. EPA estimates that compliance with this 
regulation will result in a decrease in waste water treatment sludge 
and an increase in waste oil generated at MP&M Phase I sites.
    EPA estimates that MP&M Phase I sites generated 33 million gallons 
of waste water treatment sludge and 8.1 million gallons of waste oil in 
1989 from the treatment of waste water. The amount of waste water 
treatment sludge and waste oil expected to be generated at each of the 
technology options is presented in Table 23.

     Table 23.--Waste Treatment Sludge and Oil Generation by Option     
------------------------------------------------------------------------
                                                Waste water             
                                                 treatment    Waste oil 
                                                   sludge     generated 
                    Option                       generated     (million 
                                                  (million     gallons/ 
                                                  gallons/      year)   
                                                   year)                
------------------------------------------------------------------------
Baseline (1989)...............................           33          8.1
Option 1......................................           31           38
Option 2......................................           21           36
Option 3......................................           21           36
------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                           

    As shown in Table 23, waste water treatment sludge generation 
decreased from baseline to Option 1 (which consists of end-of-pipe 
treatment without in-process flow control). The net decrease is 
attributed to the fact that Option 1 includes sludge dewatering, which 
may result in a significant decrease in sludge generation for sites 
that have chemical precipitation and settling technologies without 
sludge dewatering in place at baseline. Sludge reduction is not 
expected at sites which already have sludge dewatering in the baseline. 
An increase of sludge is expected to occur at sites which do not have 
treatment in place but are expected to install treatment under the MP&M 
options.
    The sludge reduction from Option 1 to Option 2 is attributed to the 
water conservation and pollution prevention technologies included in 
Option 2. EPA expects these technologies to result in sludge reduction 
for the following reasons:

--In-process metals recovery for electroplating rinses, recycling of 
coolants, and recycling of paint curtains reduce the mass of metal 
pollutants in treatment system influent streams, which in turn 
reduces the amount of sludge generated during metals removal;
--Bath maintenance practices included in Option 2 reduce the mass of 
metal pollutants discharged to treatment, which in turn reduces the 
amount of sludge generated during metals removal; and
--Water conservation technologies included in Option 2 reduces the 
discharge mass of metals present in the source water to a site 
(e.g., calcium, sodium), which in turn reduces the amount of sludge 
generated during removal of these metals.

    EPA does not expect Option 3 to result in additional sludge 
generation or reduction over Option 2.
    Sludges generated at MP&M sites are often determined to be 
hazardous under the Resource Conservation and Recovery Act (RCRA) as 
either a listed or characteristic waste based on the following 
information:

 If the site performs electroplating operations, and this 
waste water is mixed with the other waste water treated on site, the 
resulting sludge is a listed hazardous waste F006 (40 CFR 261.31), 
or
 If the sludge or waste oil from waste water treatment 
exceeds the standards for the Toxicity Characteristic Leaching 
Procedure (i.e. is hazardous), or exhibits other RCRA-defined 
hazardous characteristics (i.e., reactive, corrosive, or flammable) 
it is considered a characteristic hazardous waste. (40 CFR 261.24).

    Additional federal, state, and local regulations may result in MP&M 
sludges being classified as hazardous wastes. Determinations on whether 
a waste is hazardous are made by permitting authorities on a case-by-
case basis.
    Based on information collected during site visits and sampling 
episodes, the Agency believes that some of the solid waste generated 
would not be classified as hazardous. However, for purposes of 
compliance cost estimation, the Agency assumed that all solid waste 
generated as a result of the technology options would be hazardous.
    The increase in waste oil generation from baseline to Option 1 is 
attributed to removal of oil from MP&M waste waters prior to discharge 
to POTWs or surface waters. Option 1 includes oil-water separation for 
oil-bearing waste waters. This technology removes oil from the waste 
water. The waste oil is usually either recycled on site or off site, or 
contract hauled for disposal as either a hazardous or nonhazardous 
waste. The increase of waste oil generation reflects a transfer of oil 
from the waste water to a more concentrated waste oil, and does not 
reflect an increase in overall oil generation at MP&M Phase I sites. 
For the purpose of compliance cost estimation, EPA assumed that all 
waste oil was contract hauled for disposal; however, EPA expects that 
some of the waste oil can be recycled either on site or off site.
    The decrease in waste oil generation from Option 1 to Option 2 is 
attributed to the 80% reduction of coolant discharge using the 
recycling technology included in the Option 2 technology train. This 
system recovers and recycles oil-bearing machining coolants at the 
source, reducing the generation of spent coolant.
     EPA does not expect Option 3 to result in additional waste oil 
generation or reduction over Option 2.
     The in-process technologies of ion-exchange/and electrolytic 
recovery included in both Options 2 and 3 provide the pollution 
prevention benefits of reclaiming 1.7 million pounds of metal annually. 
This reuse reduces the solid waste generation at the end-of-pipe for 
the treatment of waste water from operations using these technologies. 
In addition, as stated above, the rule is expected to reduce metal 
contaminants in the sludges generated by POTWs. This is expected to 
allow POTWs to dispense of the lower metal content sludge by more 
environmentally beneficial methods (See Section XV).

C. Energy Requirements

    EPA estimates that compliance with this regulation will result in a 
net increase in energy consumption at MP&M Phase I sites. Estimates of 
increased energy usage by option are presented in Table 24. Option 1 
requires the greatest energy usage. The in-process flow control and 
recycling technologies included in Option 2 reduce the amount of water 
use. While these technologies require some energy, net energy 
consumption is reduced under Option 2 since the reduced hydraulic 
loading reduces the end-of-pipe treatment energy required. This results 
in an overall decrease in energy requirements from Option 1 to Option 
2. The additional end-of-pipe technology included in Option 3 (ion-
exchange) increases energy consumption from Option 2 to Option 3.

                Table 24.--Energy Requirements by Option                
------------------------------------------------------------------------
                                                                Energy  
                                                               required 
                           Option                              (million 
                                                               kilowatt 
                                                               hrs/yr)  
------------------------------------------------------------------------
Baseline (1989)............................................          610
Option 1...................................................          810
Option 2...................................................          740
Option 3...................................................          760
------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                           

    By comparison, 2,805 billion kilowatt hours of electric power were 
generated in the United States in 1990. Additional energy requirements 
for Option 1 (which has the greatest energy 
[[Page 28267]] requirements) correspond to approximately 0.007 percent 
of national requirements. The increase in energy requirements due to 
the implementation of MP&M technologies will in turn cause an air 
emissions impact from the electric power generation facilities. The 
increase in air emissions is expected to be proportional to the 
increase in energy requirements or approximately 0.007 percent.

XVIII. Regulatory Implementation

A. Upset and Bypass Provisions

     A ``bypass'' is an intentional diversion of the streams from any 
portion of a treatment facility. An ``upset'' is an exceptional 
incident in which there is unintentional and temporary noncompliance 
with technology-based permit effluent limitations because of factors 
beyond the reasonable control of the permittee. EPA's regulations 
concerning bypasses and upsets are set forth at 40 CFR Secs. 122.41(m) 
and (n).

B. Variances and Modifications
    The CWA requires application of effluent limitations established 
pursuant to section 301 or pretreatment standards of section 307 to all 
direct and indirect dischargers. However, the statute provides for the 
modification of these national requirements in a limited number of 
circumstances. Moreover, the Agency has established administrative 
mechanisms to provide an opportunity for relief from the application of 
the national effluent limitations guidelines and pretreatment standards 
for categories of existing sources for toxic, conventional, and 
nonconventional pollutants.
    1. Fundamentally Different Factor Variances. EPA will develop 
effluent limitations or standards different from the otherwise 
applicable requirements if an individual discharging facility is 
fundamentally different with respect to factors considered in 
establishing the limitation of standards applicable to the individual 
facility. Such a modification is known as a ``fundamentally different 
factors'' (FDF) variance.
     Early on, EPA, by regulation provided for the FDF modifications 
from the BPT effluent limitations, BAT limitations for toxic and non-
conventional pollutants and BCT limitations for conventional pollutant 
for direct dischargers. For indirect dischargers, EPA provided for 
modifications from pretreatment standards. FDF variances for toxic 
pollutants were challenged judicially and ultimately sustained by the 
Supreme Court. Chemical Manufacturers Assn v. NRDC, 479 U.S. 116 
(1985).
    Subsequently, in the Water Quality Act of 1987, Congress added new 
section 301(n) of the Act explicitly to authorize modifications of the 
otherwise applicable BAT effluent limitations or categorical 
pretreatment standards for existing sources if a facility is 
fundamentally different with respect to the factors specified in 
section 304 (other than costs) from those considered by EPA in 
establishing the effluent limitations or pretreatment standard. Section 
301(n) also defined the conditions under which EPA may establish 
alternative requirements. Under Section 301(n), an application for 
approval of FDF variance must be based solely on 1) information 
submitted during rulemaking raising the factors that are fundamentally 
different or 2) information the applicant did not have an opportunity 
to submit. The alternate limitation or standard must be no less 
stringent than justified by the difference and must not result in 
markedly more adverse non-water quality environmental impacts than the 
national limitation or standard.
    EPA regulations at 40 CFR part 125 subpart D, authorizing the 
Regional Administrators to establish alternative limitations and 
standards, further detail the substantive criteria used to evaluate FDF 
variance requests for direct dischargers. Thus, 40 CFR Sec. 125.31(d) 
identifies six factors (e.g., volume of process waste water, age and 
size of a discharger's facility) that may be considered in determining 
if a facility is fundamentally different. The Agency must determine 
whether, on the basis of one or more of these factors, the facility in 
question is fundamentally different from the facilities and factors 
considered by the EPA in developing the nationally applicable effluent 
guidelines. The regulation also lists four other factors (e.g., 
infeasibility of installation within the time allowed or a discharger's 
ability to pay) that may not provide a basis for an FDF variance. In 
addition, under 40 CFR 125.31(b) (3), a request for limitations less 
stringent than the national limitation may be approved only if 
compliance with the national limitations would result in either (a) a 
removal cost wholly out of proportion to the removal cost considered 
during development of the national limitations, or (b) a non-water 
quality environmental impact (including energy requirements) 
fundamentally more adverse than the impact considered during 
development of the national limits. EPA regulations provide for an FDF 
variance for indirect dischargers at 40 CFR 403.13. The conditions for 
approval of a request to modify applicable pretreatment standards and 
factors considered are the same as those for direct dischargers.
    The legislative history of Section 301(n) underscores the necessity 
for the FDF variance applicant to establish eligibility for the 
variance. EPA's regulations at 40 CFR 125.32(b) (1) are explicit in 
imposing this burden upon the applicant. The applicant must show that 
the factors relating to the discharge controlled by the applicant's 
permit which are claimed to be fundamentally different are, in fact, 
fundamentally different from those factors considered by the EPA in 
establishing the applicable guidelines. The pretreatment regulation 
incorporate a similar requirement at 40 CFR 403.13(h) (9).
    2. Economic Variances. Section 301(c) of the CWA authorizes a 
variance from the otherwise applicable BAT effluent guidelines for 
nonconventional pollutants due to economic factors. The request for a 
variance from effluent limitations developed from BAT guidelines must 
normally be filed by the discharger during the public notice period for 
the draft permit. Other filing time periods may apply, as specified in 
40 CFR 122.21(1) (2). Specific guidance for this type of variance is 
available from EPA's Office of Waste Water Management.
    3. Water Quality Variances. Section 301(g) of the CWA authorizes a 
variance from BAT effluent guidelines for certain nonconventional 
pollutants due to localized environment factors. These pollutants 
include ammonia, chlorine, color, iron, and total phenols.
    4. Permit Modifications. Even after EPA (or an authorized State) 
has issued a final permit to a direct discharger, the permit may still 
be modified under certain conditions. (When a permit modification is 
under consideration, however, all other permit conditions remain in 
effect.) A permit modification may be triggered in several 
circumstances. These could include a regulatory inspection or 
information submitted by the permittee that reveals the need for 
modification. Any interested person may request that a permit 
modification be made. There are two classifications of modifications; 
major and minor. From a procedural standpoint, they differ primarily 
with respect to the public notice requirements. Major modifications 
require public notice while minor modifications do not. Virtually any 
modification that results in less stringent conditions is treated as a 
major modifications, with provisions for public notice and comment. 
Conditions that would necessitate a major modification of a permit are 
described [[Page 28268]] in 40 CFR 122.62. Minor modifications are 
generally non-substantive changes. The conditions for minor 
modification are described in 40 CFR 122.63.
C. Relationship to NPDES Permits and Monitoring Requirements

    The BPT, BAT and NSPS limitations in today's proposed rule would be 
applied to individual MP&M Phase I plants through NPDES permits issued 
by EPA or approved State agencies under section 402 of the Act. The 
preceding section of this preamble discussed the binding effect of this 
regulation on NPDES permits, except when variances and modifications 
are expressly authorized. This section adds more detail on the 
relationship between this regulation and NPDES permits.
    One issue is how this regulation will affect the powers of NPDES 
permit-issuing authorities. EPA has developed the limitations and 
standards in the proposed rule to cover the typical facility for this 
point source category. This regulation does not restrict the power of 
any permitting authority to act in any manner consistent with law or 
these or any other EPA regulations, guideline, or policy.
    Even if a facility is totally without waste water discharge, an 
NPDES permit may be requested by the facility to provide upset 
provisions which would not apply to discharge in the absence of a 
permit.
    Another concern is the operation of EPA's NPDES enforcement 
program, which was an important consideration in developing today's 
proposal. The Agency emphasizes that although the Clean Water Act is a 
strict liability statute, EPA can initiate enforcement proceedings at 
its discretion. EPA has exercised and intends to exercise that 
discretion in a manner that recognizes and promotes good faith 
compliance.

D. Best Management Practices

    Section 304(e) of the Act authorizes the Administrator to prescribe 
``best management practices'' (BMPs). EPA may develop BMPs that apply 
to all industrial sites or to a designated industrial category and may 
offer guidance to permit authorities in establishing management 
practices required by unique circumstances at a given plant. Dikes, 
curbs, and other control measures are being used at some MP&M sites to 
contain leaks and spills as part of good ``housekeeping'' practices. 
However, on a facility-by-facility basis a permit writer may choose to 
incorporate BMPs into the permit.

XIX. Solicitation of Data and Comments

    EPA invites and encourages public participation in this rulemaking. 
The Agency asks that comments address any perceived deficiencies in the 
record of this proposal and that suggested revisions or corrections be 
supported by data where possible.
    EPA particularly requests comments and information on the following 
issues:
    1. Oil & Grease as Indicator for Organics. EPA believes that 
today's proposal of an oil and grease pretreatment standard as a 
indicator for specific organic pollutants will ensure that there is 
adequate treatment and removal of the organic pollutants found in MP&M 
waste water. The organic constituents originate in waste waters such as 
metal working fluids, corrosion prevention coating solutions, paints 
and solutions developed to clean the oils from the metal surface. EPA 
believes that treatment and removal of oil and grease will effectively 
remove the organics. Nonetheless, EPA's data are incomplete for all 
organics, and EPA can not predict what products may serve as 
substitutes for solvents that EPA is in the process of regulating under 
EPA's ozone depletion policy.
    Further, in recognition of the present state of changeover 
occurring in the industry, it may be premature to set limits based on 
today's practices. Therefore, EPA at promulgation may defer control of 
organic waste water pollutants until the MP&M Phase II rule is 
proposed. EPA requests comments on the establishment of oil and grease 
as an indicator parameter for specific organics and on the current 
practices and where industry is moving with respect to solvent cleaners 
and their substitution in industrial processes. EPA is interested in 
available information about current substitutions and their 
effectiveness.
    2. Flow Cut-offs and Administrative Burden. EPA divided the 
population of existing indirect dischargers into two flow categories 
for the purpose of data analysis and implementation. The existing 
indirect discharger flow cut-off of 1,000,000 gallons per year was 
based on a careful review of the data. For a site operating 250 days 
per year, 1,000,000 gallons per year translates into an average 
discharge flow rate of 4,000 gallons per day.
    This approach is in response to concerns raised by Control 
Authorities and Regional and state Pretreatment Coordinators regarding 
the burden that would be imposed on them, if they were required to 
establish mass-based discharge permits for all MP&M Phase I sites 
within a three-year period.
    EPA requests comments on the proposed indirect discharger flow cut-
off which was used to define the two flow categories established for 
PSES. EPA requests comments on the possibility of a different cut-off 
at 25,000 gallons per day to define large flow existing indirect 
discharger sites (25,000 gallons per day equals approximately 6,250,000 
gallons per year). The 25,000 gallons per day figure is currently used 
by the Agency as one definition for a significant industrial user 
(SIU). EPA requests comments on revising the flow cut-off and requiring 
mass-based permits for existing sites indirectly discharging more than 
25,000 gallons per day. Existing indirect sites discharging less than 
25,000 gallons per day could be exempt or covered by concentration 
based limits. Tables 25 and 26 compare the distribution of total annual 
flow and pollutant loadings discharged from MP&M Phase I indirect 
discharging sites using the 25,000 gallons per day (6,250,000 gallons 
per year) cut off to the distribution using the 1,000,000 gallons per 
year cut off.

          Table 25.--Estimated Distribution of Indirectly Discharging Sites by Baseline Flow and Load a         
----------------------------------------------------------------------------------------------------------------
                                                  Estimated                                                     
                                                    total      Estimated                                        
                                     Estimated      flowin     total load   Estimated    Estimated    Estimated 
     Flow Range (gal/yr/site)          No. of       range       in range    percent of   percent of   percent of
                                       sites      (millions    (millions   total sites   total flow   total load
                                                   of gal/      of lbs/                                         
                                                    year)        year)                                          
----------------------------------------------------------------------------------------------------------------
0-6,250,000.......................        8,065        4,600          550           93           23           38
Greater than 6,250,000............          641       15,000          900            7           77           62
                                   -----------------------------------------------------------------------------
    Totals........................        8,706       19,000        1,400          100          100          100
----------------------------------------------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                                                                   
[[Page 28269]]
                                                                                                                
a An estimated 364 MP&M sites discharged both directly and indirectly in the baseline. In order to evaluate     
  indirect and direct discharges separately, the expected post compliance discharge status was used to assign   
  these sites to either direct or indirect for the purpose of this table. The assignment was based on technical 
  factors which are included in the public record.                                                              


          Table 26.--Estimated Distribution of Indirectly Discharging Sites by Baseline Flow and Load a         
----------------------------------------------------------------------------------------------------------------
                                                  Estimated    Estimated                                        
                                                  total flow   total load                                       
                                     Estimated     in range     in range    Estimated    Estimated    Estimated 
     Flow range (gal/yr/site)          No. of     (millions    (millions    percent of   percent of   percent of
                                       sites       of gal/      of lbs/    total sites   total flow   total load
                                                    year)        year)                                          
----------------------------------------------------------------------------------------------------------------
Less than 1,000,000...............        6,708          744          138           78            4           10
Greater than 1,000,000............        1,998       18,000        1,300           22           96           90
                                   -----------------------------------------------------------------------------
    Totals........................        8,706       19,000        1,400          100          100          100
----------------------------------------------------------------------------------------------------------------
Source: U.S. Environmental Protection Agency.                                                                   
a An estimated 364 MP&M sites discharged both directly and indirectly in the baseline. In order to evaluate     
  indirect and direct discharges separately, the expected post compliance discharge status was used to assign   
  these sites to either direct or indirect for the purpose of this table. The assignment was based on technical 
  factors which are included in the public record.                                                              

  EPA also requests comments from Control Authorities and 
Pretreatment Coordinators regarding the burden alleviated by this 
proposal. Specifically, how many labor hours are estimated to be saved 
by the proposed exemption, and how much money would be saved by 
municipalities.
    EPA understands that accurate flow measurement can be difficult and 
costly, especially at sites with widely varying flow rates and at sites 
with very low flow rates. Therefore, EPA also solicits comments on the 
accuracy and cost of available flow monitoring devices.
    EPA also solicits comments, particularly from Control Authorities 
or Pretreatment Coordinators, on whether the proposed approach would be 
harmful to the environment. Specifically, is there evidence that some 
of the sites that would be exempt are currently causing problems at 
POTWs? Secondly, would mass-based requirements alleviate the problem?
    3. Exemption of Low Discharge Volume Indirect Sources. EPA is 
soliciting comments on proposed exemption of existing low discharge 
volume indirect sources from the MP&M Phase I categorical pretreatment 
standards.
    EPA considered a number of different flow cutoffs that could be 
used for the proposed exemption The number of sites which discharge 
less than 1,000,000 gallons per year and their contribution to the 
waste water discharge flow rate from the MP&M category (only 4%of the 
total) are provided in Table 26. Instead of the 1,000,000 gallons per 
year flow cutoff, other flow cutoffs could be used. For a site 
operating 250 days per year, 1,000,000 gallons per year would translate 
into 4,000 gallons per day.
    As an alternative to exempting existing low discharge volume 
indirect discharges, EPA could reduce the 40 CFR part 403 requirements 
on frequency of monitoring and reporting by industrial users and 
frequency of inspections and testing by the Control Authorities for 
these sites. If the requirements of 40 CFR part 403 were reduced 
instead of exempting low volume dischargers, this change could be tied 
to certain objective criteria (e.g. demonstrated compliance over time). 
EPA solicits comments on whether monitoring and inspections should be 
required more frequently in situations of continued non-compliance, 
planned expansion, etc.
    EPA solicits comments and data on the environmental impact the 
proposed exemption would cause. EPA also solicits comments and data on 
the burden imposed on Control Authorities by the possible inclusion of 
these low discharge volume sites under this rule.
    Finally, EPA solicits comments on the proposed exemption of low 
discharge volume indirect dischargers in relation to possible changes 
to the Clean Water Act that may reflect on the Domestic Sewage 
Exclusion provided for under RCRA section 1007 [27] (40 CFR 261.4 
(a)(1)). In the bill before the last Congress to amend the Clean Water 
Act, the Agency took the position that the Domestic Sewage Exclusion 
provisions should be limited and apply only under the following 
conditions:

    1. the source and wastestream are subject to or are scheduled to 
be subject to a categorical pretreatment standard;
    2. the pollutant and source are subject to a technically based 
local limit developed by a POTW, or a technology based local limit 
developed by EPA or a State;
    3. the waste is generated in de minimis amounts by a household 
or similar non-commercial entity; or
    4. the source and wastestream are covered by a Toxicity 
Reduction Action Plan (TRAP), as defined by the statute.

Considering these conditions could be included in future amendments to 
the Clean Water Act, EPA solicits comments on the impact these 
amendments could have on proposed exemption of low discharge volume 
indirect dischargers.
    4. Alternative to Mass-Based Compliance. EPA requests comments on 
an alternate compliance approach for large volume existing indirect 
dischargers under PSES. EPA is considering an alternate compliance 
approach for the existing indirect discharging large volume sites 
(sites defined in this proposal as having an annual discharge volume 
greater than 1,000,000 gallons). For a site operating 250 days per 
year, 1,000,000 gallons per year translates into an average discharge 
flow rate of 4,000 gallons per day. These sites would have to comply 
with a mass-based permit or choose the alternative of establishing 
compliance with the pretreatment standards by certifying in writing to 
the Control Authority that they have installed in-process technologies 
equivalent to those costed as the basis of the BPT Option 2 technology. 
The in-process control technologies of Option 2 include:

     Flow reduction using flow restrictors, conductivity 
meters, and/or timed rinses for all flowing rinses, plus 
countercurrent cascade rinsing for all flowing rinses;
     Flow reduction using bath maintenance for all other 
process water-discharging operations;
     Centrifugation and 100 percent recycling of painting 
water curtains;
     Centrifugation and pasteurization to extend the life of 
water-soluble machining coolants reducing discharge volume by 80%; 
and
     In-process metals recovery using ion exchange followed 
by electrolytic recovery of cation regenerants for selected 
electroplating rinses. This includes first-stage drag-out rinsing 
with electrolytic metal recovery.

EPA solicits comments on the list of in-process technologies above: 
should [[Page 28270]] additional in-process technologies be added, 
should any of the in-process technologies listed above not be included, 
would problems arise with how these technologies are defined, etc. If 
the alternative compliance approach is included in the final rule, the 
list of in-process technologies may differ somewhat from the list above 
based on public comment. EPA may include this approach of an alternate 
PSES requirement in the final rule and thus requests comments on this 
approach. EPA's purpose for offering this as an alternate compliance 
approach is to provide relief to Control Authorities from the burden 
associated with the development of mass-based permits. EPA is not 
proposing this alternative compliance approach, since a decision as to 
whether or not to offer this alternative will rely on comments and 
additional data as to the utility of such an approach.
    Specifically, EPA encourages MP&M sites to offer comments regarding 
the technical feasibility of the in-process control measures that would 
be required to be eligible for the alternate compliance approach, as 
well as an estimate of the burden (in labor hours) associated with 
submitting a certification.
    EPA also solicits comments from Control Authorities and 
Pretreatment Coordinators on the benefits and savings in time and 
manpower expected to be achieved whenever a site takes advantage of 
this alternate compliance approach. Comments should account for any 
burden associated with maintaining certifications and conducting 
inspections.
    EPA has considered another option of requiring all indirect 
dischargers to comply with concentration-based permits and mandatory 
pollution prevention practices. Some Control Authorities have indicated 
a preference for this type of approach for ease of enforcement and 
implementation, therefore, EPA seeks comments on this option as well.
    5. Cyanide Monitoring Waiver. Although cyanide is essential in many 
electroplating operations, the Agency is aware that some metal products 
and machinery plants do not use cyanide. In some existing regulations, 
this issue has been addressed by allowing plants to only monitor 
annually for cyanide if the annual waste water sample is below the 
regulatory long term average and if the plant owner or operator 
certifies in writing to the POTW authority or permit issuing authority 
that cyanide is not and will not be used on site. For example, see 40 
CFR 467.03. For MP&M, the regulatory long term average for cyanide is 
0.02 mg/l.
    The Agency is soliciting comments on the possibility of including 
such a provision to allow plants to not monitor for cyanide. The 
comments should address the utility of this provision, the amount of 
unnecessary monitoring avoided, the economic impacts, the environmental 
impacts, and any other information relevant to the decision. EPA also 
solicits comments as to what form the certification should take and at 
what frequency it should be required.
    6. Other Pollutant Monitoring Waivers. Similar to the alternate 
approach for cyanide discussed above, the Agency is also considering 
allowing sites to opt out from monitoring specific metals if the site 
can certify that the metal is not used in any way at their site. This 
may be restricted to metals such as cadmium, chromium and nickel, which 
are frequently plated onto a base metal or used in the surface 
treatment of metals. EPA solicits comments on this approach, 
specifically whether it should be limited to certain metals such as 
those mentioned, or whether it could apply to all regulated metal 
pollutants. EPA also solicits comments as to what form the 
certification should take and at what frequency it should be required.
    7. Additional Unit Operations. EPA has identified 47 unit 
operations which are typically performed at MP&M sites. EPA requests 
comments on additional operations which may be performed at MP&M sites 
and which have not been listed in today's notice. Please specify 
whether these operations have a waste water stream associated with 
them, what is the estimated volume of the waste water, what is the 
frequency of the operation, and whether it is similar to any of the 47 
operations already identified.
    8. Assignment of Industrial Sectors. EPA has discussed the 
assignment of industrial sector to MP&M plants in today's notice and 
has provided several examples of how to assign sites to industrial 
sectors based on the products produced. EPA is soliciting comment from 
any industrial site which has the potential to be covered by MP&M but 
is uncertain as to their appropriate industrial sector and phase (MP&M 
Phase I or MP&M Phase II) classification. Sites are requested to supply 
information about what operations they are performing, what products 
they are manufacturing, rebuilding or maintaining, and to what 
industries they are selling their products or providing their services.
    9. Possible Addition of Lead as Regulated Parameter. Lead is a 
regulated parameter under several existing metals regulations (e.g. 
metal finishing 40 CFR part 433), but lead was rarely found at 
treatable concentrations in the raw waste water, prior to treatment, at 
the sites sampled for MP&M Phase I. As a result, EPA is not proposing a 
lead limitation. EPA is considering collecting additional data or 
transferring data from the metal finishing category in order to 
regulate lead in the final MP&M Phase I regulation. If lead were 
regulated based on data transferred from the metal finishing rule, then 
the limits would be similar to those listed in metal finishing. The 
metal finishing daily maximum limit for lead is 0.69 milligrams per 
liter, and the monthly average limit for lead is 0.43 milligrams per 
liter. If lead were regulated based on the collection of additional 
data, then the MP&M Phase I lead limits could be lower than the lead 
limits in the metal finishing regulation. EPA is soliciting comments 
and data on the possibility of adding lead to the list of regulated 
parameters for MP&M Phase I. EPA is soliciting comments on the use of 
lead in the MP&M Phase I category (e.g. in what operations is lead 
used, how much is used, do these operations discharge process waste 
water, how prevalent are these operations, etc.).
    10. Possible Addition of Other Regulated Parameters. The list of 
parameters which EPA proposes to regulate under MP&M Phase I are shown 
in Table 2 of this document. EPA is soliciting comments and data on 
additional parameters that should be considered for regulation. EPA is 
proposing a total cyanide limit for MP&M Phase I. In other rules such 
as metal finishing (40 CFR part 433), EPA has set a total cyanide limit 
and included an alternative amenable cyanide limit. EPA is soliciting 
comments on whether or not an amenable cyanide limit should be offered 
as an alternative to the proposed total cyanide limit.
    11. Possible Deletion of Regulated Parameters. The list of 
parameters which EPA proposes to regulate under MP&M Phase I are shown 
in Table 2 of this document. EPA is soliciting comments and data on 
parameters that should be deleted from consideration for regulation.
    12. Additional Technology Data. In this document, the Agency 
proposes a new source standard equivalent to BAT, in part because, 
given the available data, the Agency concludes there is no add-on 
technology that is cost-effective for the entire Metal Products and 
Machinery category suitable for a more stringent new source standard. 
However, the Agency solicits comments [[Page 28271]] on other 
technologies and pollution prevention techniques that may be 
appropriate and cost-effective for new sources in subcategories of the 
Metal Products and Machinery category.
    For each technology or pollution prevention technique, the Agency 
is particularly interested in receiving data on: (1) Technology 
performance, including pollutant reduction/elimination and flow 
reduction/elimination; (2) economics, including initial capital 
investment, operation and maintenance costs, payback period, waste 
disposal savings, material input savings, and other savings; (3) 
overall energy use; (4) sludge generation, including metals 
recoverability and the ability of sludge to be recycled on or off-site; 
(5) applicability of a given technique across the whole MP&M Phase I 
population or across a particular MP&M sector, SIC code, or other 
industrial sector breakdown; and (6) air quality impacts and emissions. 
In addition, as some technologies and pollution prevention techniques 
eliminate or reduce discharges to water, but not to other media, the 
Agency solicits comments on the environmental impacts and regulatory 
costs associated with each technology's impact on other environmental 
media.
    Specifically, the Agency solicits information and comments 
concerning the pollution prevention performance, cross-media 
environmental impacts, and economic effects associated with the 
following technologies and pollution prevention techniques, even if the 
technology can only be applied to a subcategory of the MP&M category:
    (1) Ion Exchange;
    (2) Electrodialysis / Electrowinning;
    (3) Reverse Osmosis;
    (4) Evaporation (low pressure, conventional);
    (5) Diffusion dialysis;
    (6) Conductive polymer films;
    (7) Alternatives to electroplating (e.g. powder coating, aqueous 
soaks, ultrasonics);
    (8) Flow-through barrel plating; and
    (9) Micro-filtration.
    The Agency particularly welcomes comments on technology performance 
and cost from technology vendors and developers, in addition to 
comments from industrial users.
    13. Technical Assistance. The Agency is soliciting comments on the 
degree to which technical assistance would help MP&M facilities 
identify and choose compliance strategies which include pollution 
prevention technologies and practices that are most cost-effective and 
protective of the environment.
    If commenters believe technical assistance would be valuable, EPA 
invites comments and data to address the following questions. What 
would be the most productive source (e.g. EPA, state, or local 
environmental agencies; departments of commerce or development; 
universities; non-profit organizations; private trade associations) of 
technical assistance? What would be the most productive form (e.g. 
printed material, electronic bulletin boards, telephone hotlines, on-
site visits) of technical assistance? Commenters who currently use the 
technical assistance services provided in most states are requested to 
respond as to the utility of the services which they use. Would 
commenters be willing to pay a reasonable fee for such services?
    14. Consolidated Reporting and Permitting. EPA understands that 
MP&M facilities often must comply with several different reporting and 
permitting requirements for different media (i.e. air, water, and solid 
waste). These separate requirements could inhibit the development of 
comprehensive site-wide environmental compliance strategies. For 
example, some pollution prevention strategies which reduce overall 
environmental impact can be complicated by having to comply with 
separate media requirements. The Agency is soliciting comments on the 
degree to which separate reporting and permitting programs for 
different media hinder comprehensive site-wide environmental compliance 
strategies or pollution prevention approaches at MP&M facilities. EPA 
is soliciting data related to specific examples.
    15. Impact of Procurement Practices. EPA is soliciting comments on 
the degree to which certain government and private procurement 
practices (product specifications) inhibit MP&M facilities from using 
pollution prevention technologies and practices, especially in cases 
where such technologies and practices could yield a cost effective, 
quality product with less risk to the environment. EPA is soliciting 
data related to specific examples.
    16. Pollution Prevention Planning. Several states require MP&M 
facilities to develop various types of pollution prevention plans. EPA 
is soliciting comments from MP&M facilities which are currently 
required to develop pollution prevention plans as to whether or not the 
planning requirements were productive in identifying cost-effective 
pollution prevention practices, whether the permit process inhibited 
the use of such pollution prevention practices developed in the plans, 
and how the permit process could be changed to encourage the use of 
such pollution prevention practices.
    17. Financing Pollution Prevention. EPA is soliciting comments as 
to the degree to which MP&M facilities have encountered difficulty in 
acquiring capital for pollution prevention projects. EPA is soliciting 
data related to specific examples.
    18. Contiguous Site Definition. EPA seeks comments on how to define 
which parcels of property within the same fence line on a mixed use 
property are contiguous. For example, should properties be divided into 
a system of grids with all discharges from sites within a single sector 
considered contiguous? Should discharges from a single building be 
treated as a plant or portion of a plant for purposes of determining 
the volume of discharge subject to regulation? Another option would be 
for permit writers to make the determination case-by-case based on some 
degree of proximity between industrial operations and a practical 
application of the requirements for MP&M Phase I industries (with due 
consideration to the amount of MP&M Phase I wastestream and its 
concentration in the overall wastestream discharged to the treatment 
works), the degree to which functions are related, and such other 
factors as EPA considers relevant to the determination.
    19. Flow Definition. In this proposal, EPA has defined existing 
small volume indirect dischargers as existing indirect sites which 
discharge less than one million gallons per year. EPA is soliciting 
comments on whether the flow cut off for this exemption should be 
provided as a daily flow rate. For example, for a site operating 250 
days per year, one million gallons discharge per year is equivalent to 
an average discharge of 4,000 gallons per day.
    20. Municipalities. EPA has not examined the potential cost of 
compliance or environmental benefit from regulating municipal 
facilities which manufacture, maintains or rebuilds finished metal 
parts, products or machines within one of the seven industrial sectors 
in MP&M Phase I. EPA believes most municipal MP&M facilities would be 
existing indirect dischargers discharging less than one million gallons 
per year and would therefore be exempt from this regulation. However, 
EPA is seeking comment from municipalities which would qualify as MP&M 
Phase I sites and which would not qualify for the low flow exemption. 
Depending on the comments and data received, EPA could perform 
additional analyses to specifically cover municipal MP&M facilities, or 
EPA could specifically [[Page 28272]] exempt municipal MP&M facilities, 
especially if regulating such facilities is determined to be an 
unfunded mandate.
    21. Subcategorization. In today's notice, the Agency proposes to 
treat the Metal Products and Machinery industry as one category with a 
uniform BAT and new source standard. A single standard provides 
simplicity and clarity in compliance, permitting, and enforcement and, 
thus, may reduce compliance and implementation costs.
    However, the Agency recognizes that subcategorization may provide 
additional environmental benefits. Certain treatment technologies, for 
example, may reduce effluent loadings but may only be economically 
feasible for a subset of the regulated community. Since, according to 
available data, such technologies are not applicable to the entire 
industry category, the Agency has not selected such a technology for 
either the BAT or new source standards. The Agency solicits comments on 
how to balance the potential regulatory impacts of subcategorization 
against the potential environmental benefits of a more stringent BAT or 
new source standard for a subset of the Metal Products and Machinery 
category.
    22. Innovative Approaches to Reduce Regulatory Burden. The Agency 
solicits comments on innovative regulatory approaches that offer 
incentives for users to employ more effective pollution prevention or 
treatment technologies by reducing their regulatory burden. For 
example, a more stringent new source standard for a subcategory of the 
industry could include reduced monitoring or reporting requirements 
that could offset potentially higher compliance costs. In addition, the 
Agency could include a program that would offer similar regulatory 
flexibility to existing users who opt into permit conditions equal to a 
more stringent new sources standard. Similarly, a voluntary program 
that allows users to opt to meet more stringent technology standards in 
return for reduced monitoring and other requirements could be offered 
to both new and existing users even in the absence of either a more 
stringent new source standard or BAT standard. The Agency welcomes 
comments on these and other innovative approaches that could 
simultaneously improve water quality and ease regulatory burdens.
    23. Data Collection. With today's notice, the Agency wishes to 
communicate to the regulated community its strong interest in providing 
incentives for incorporating the best technologies into the final rule 
using approaches that reduce regulatory burdens. The Agency hopes that 
its consideration of these possible innovative approaches reduces any 
potential disincentives for collecting and submitting technology cost 
and performance data. While the Agency retains its authority under 
section 308(q) of the Act, the Agency hopes that its consideration of 
innovative and voluntary approaches will maximize voluntary data 
submissions during the comment period following today's proposal.
    24. Benefits Methodology. EPA acknowledges the unavoidable 
uncertainty associated with estimating benefits. EPA believes that it 
has used the best methodology available for estimating benefits. EPA is 
soliciting comments on the reliability and accuracy of the methods used 
and suggestions on alternative methods which could be used for the 
final rule.
    25. Unfunded Mandates. EPA believes that the proposed regulation 
represents the most cost effective approach. EPA acknowledges that the 
proposed regulation may not be the least burdensome, but EPA believes 
that the additional costs are justified due to the additional pollutant 
removals achieved. With respect to the Unfunded Mandates Act, EPA is 
soliciting comments and data on cost effective alternatives which are 
less burdensome. In addition, EPA solicits comment on how to interpret 
``most cost effective'' in the context of the effluent guideline 
program.

XX. Guidelines for Comment Submission of Analytical Data

    EPA requests that commentors to today's proposed rule submit 
analytical, flow, and production data to supplement data collected by 
the Agency during the regulatory development process. To ensure that 
commentor data may be effectively evaluated by the Agency, EPA has 
developed the following guidelines for submission of data.

A. Types of Data Requested

    1. EPA requests paired influent and effluent treatment data for 
each of the technologies identified in the technology options, as well 
as any additional technologies applicable to the treatment of MP&M 
waste waters. This includes end-of-pipe treatment technologies and in 
process treatment, recycling, water reuse, or metal recovery 
technologies. Submission of effluent data only is not sufficient for 
full analysis; the corresponding influent data must be provided.
    For submissions of paired influent and effluent treatment data, a 
minimum of four days of data are required for EPA to assess 
variability. Submissions of paired influent and effluent treatment data 
should include: a process diagram of the treatment system; treatment 
chemical addition rates; sampling point locations; sample collection 
dates; influent and effluent flow rates for each treatment unit during 
the sampling period; sludge or waste oil generation rates; a brief 
discussion of the treatment technology sampled; and a list of unit 
operations contributing to the sampled wastestream. EPA requests data 
for systems that are treating only process waste water. Systems 
treating non-process waste water (e.g., sanitary waste water or non-
contact cooling water) will not be evaluated by EPA. In addition to 
data for the analytes discussed below, data for total suspended solids 
(TSS) and pH must be included with submissions of treatment data. If 
available, information on capital cost, annual (operation and 
maintenance) cost, and treatment capacity should be included for each 
treatment unit within the system.
    2. EPA also requests flow, production, and analytical data from 
MP&M unit operations, rinses, and wet air pollution control devices. 
Submissions of analytical data for MP&M unit operations and rinses 
should include a process diagram of the unit operation; a description 
of the purpose and performance of the operation; production data 
associated with the sampling period; flow rates associated with the 
sampling period (i.e., continuous discharge flow rates, intermittent 
discharge rates and frequencies, or volume of bath and time of last 
discharge for stagnant baths); sample type (grab or composite); 
temperature and pH of each sample; sample collection dates; known 
process bath constituents; sampling point locations; and, the volume, 
discharge frequency, and destination of all process waste water, waste 
oil, or sludge generated by the unit operation.
    Associated production data should be provided in the following 
units: mass of metal removed (for abrasive jet machining, electrical 
discharge machining, grinding, machining, and plasma arc machining 
operations), in standard cubic feet of air flow (for wet air pollution 
control operations), or surface area of parts processed (for all other 
unit operations). Flow, production, and analytical data should all 
correspond to the same period of time. When applicable, a description 
of any pollution prevention technologies used at the site for the unit 
operations, including cost savings and pollution reduction estimates 
should be provided.

[[Page 28273]]

B. Analytes Requested

    EPA considered 342 metal, organic, conventional, and other 
nonconventional pollutant parameters for regulation under the MP&M 
Category. Based on analytical data collected by the Agency, 69 
pollutant parameters were identified as MP&M ``pollutants of concern''. 
Complete lists of pollutant parameters considered for regulation and 
pollutants of concern (as well as the criteria used to identify each of 
these pollutant parameters) are available in the Technical Development 
Document for this proposal. The Agency requests analytical data for any 
of the 69 pollutants of concern and for any other pollutant parameters 
which commentors believe are of concern in the MP&M industry. TSS and 
pH data are requested for all samples. For submissions of data 
including organic pollutants, data for oil and grease (O&G) is 
requested. Table 27 presents the EPA analytical methods for these 
pollutants. Commentors should use these methods or equivalent methods 
for analyses, and should document the method used for all data 
submissions.

C. Quality Assurance/Quality Control (QA/QC) Requirements

    Today's proposed regulations were based on analytical data 
collected by EPA using rigorous QA/QC checks. These QA/QC checks 
include procedures specified in each of the analytical methods, as well 
as procedures used for the MP&M sampling program in accordance with EPA 
sampling and analysis protocols. The Agency requests that submissions 
of analytical data include documentation that QA/QC procedures similar 
to those listed below were observed.
    EPA followed the QA/QC procedures specified in the analytical 
methods listed in Table 27. These QA/QC procedures include sample 
preservation and the use of method blanks, matrix spikes, matrix spike 
duplicates, laboratory duplicate samples, and Q standard checks (e.g., 
continuing calibration blanks). EPA requests that sites provide 
detection limits for all non-detected pollutants. EPA also requests 
that composite samples be collected for all flowing waste water streams 
(except for analyses requiring grab samples, such as oil and grease), 
sites collect and analyze 10% field duplicate samples to assess 
sampling variability, and sites provide data for equipment blanks for 
volatile organic pollutants when automatic compositors are used to 
collect samples.

           Table 27.--EPA Analytical Methods for Use With MP&M          
------------------------------------------------------------------------
          Parameter               EPA method            Sample type     
------------------------------------------------------------------------
Metals....................  1620.................  Composite/Grab.      
Volatile Organics.........  1624.................  Composite/Grab.      
Semivolatile Organics.....  1625.................  Grab.                
pH........................  150.1................  Composite/Grab.      
Total Dissolved Solids      160.1................  Composite/Grab.      
 (TDS).                                                                 
Total Suspended Solids      160.2................  Composite/Grab.      
 (TSS).                                                                 
Chloride, Fluoride, and     300.0 or 325.2,        Composite/Grab.      
 Sulfate.                    340.2, and 375.4.                          
Acidity...................  305.1................  Composite/Grab.      
Alkalinity................  310.2................  Composite/Grab.      
Cyanide, Total............  335.2................  Grab.                
Nitrogen, Ammonia.........  350.1................  Composite/Grab.      
Nitrogen, Total Kjeldahl..  351.2................  Composite/Grab.      
Phosphorus, Total.........  365.4................  Composite/Grab.      
Chemical Oxygen Demand....  410.1 or 410.2.......  Composite/Grab.      
Oil and Grease, Total       413.2................  Grab.                
 Recoverable.                                                           
Phenolics, Total            420.2................  Composite/Grab.      
 Recoverable.                                                           
------------------------------------------------------------------------

XXI. Unfunded Mandates Reform Act

    Section 201 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), signed into law on March 22, 1995, requires each 
agency, unless prohibited by law, to assess the effects of federal 
regulations on State, local, and tribal governments and the private 
sector. Under Section 202 of the Unfunded Mandates Act, EPA must 
prepare an unfunded mandate statement to accompany any proposed rule 
where the estimated costs to State, local, or tribal governments, or to 
the private sector, will be $100 million or more in any one year. Under 
Section 205, EPA must select the most cost-effective or least 
burdensome alternative that achieves the requirements, or explain why 
this was not possible. Section 203 requires EPA to establish a plan for 
informing and advising any small governments that may be significantly 
impacted by the rule.
    The unfunded mandate statement under Section 202 must include: (1) 
a citation of the statutory authority under which the rule is proposed, 
(2) an assessment of the costs and benefits of the rule and the federal 
resources available to defray the costs, (3) where feasible, estimates 
of future compliance costs and disproportionate impacts upon particular 
geographic or social segments of the nation or industry, (4) where 
relevant, an estimate of the effect on the national economy, and (5) a 
description of EPA's prior consultation with State, local, and tribal 
officials.
    Since this proposed rule is estimated to impose costs to the 
private sector in excess of $100 million, EPA has prepared the 
following statement with respect to budgetary impacts. EPA does not 
expect that this rule will impose significant costs on State, local, or 
tribal governments; although EPA has taken several steps to reduce the 
administrative burden of this proposed rule.
1. Statutory Authority
    The statutory authority for this rulemaking is identified and 
described in Sections I and II of the preamble. As required by Section 
205 of the Unfunded Mandates Act and as discussed in Section IX of the 
preamble, EPA has chosen to propose a rule that is the most cost-
effective alternative for regulation of these sources that meets the 
statutory requirements under the Clean Water Act. EPA acknowledges that 
the proposed regulation may not be the least burdensome, but EPA 
believes that the additional costs are justified due to the additional 
pollutant removals achieved. [[Page 28274]] 
2. Costs and Benefits
    The assessment of costs and benefits for this rule, including the 
assessment of costs and benefits to State, local, and tribal 
governments, is discussed in the Regulatory Impact Assessment for this 
proposal and in Section XV of the preamble.
3. Future and Disproportionate Costs
    The Unfunded Mandates Act requires that EPA estimate, where 
accurate estimation is reasonably feasible, future compliance costs 
imposed by the rule and any disproportionate budgetary effects. EPA's 
estimates of the future compliance costs of this rule are discussed in 
the Regulatory Impact Assessment for this proposal and in Section XIV 
of the preamble.
    EPA does not expect that there will be any disproportionate 
budgetary effects of the proposed rule on any particular areas of the 
country, particular governments or types of communities. This is 
because the affected population of MP&M facilities is distributed 
throughout the country in settings from urban to rural. The estimated 
annual impact of this proposed rule on the affected industry is $161 
million ($1994) as discussed in Section XIV of this preamble. A 
discussion of community impacts is also included in Section XIV. The 
annual administrative burden on State and local governments is 
estimated to be $1.9 to 3.2 million ($1994) as discussed in Section 
XIV.C. of the preamble and in the Regulatory Impact Assessment. The 
administrative burden was estimated for State and local governments 
combined due to the way in which direct and indirect discharge permits 
are administered. The impact on tribal governments is expected to be 
zero.
4. Effects on National Economy
    The Unfunded Mandates Act requires that the EPA estimate the effect 
of this rule on the national economy where (1) accurate estimates are 
feasible and (2) the rule will have a ``material'' effect on the 
economy. EPA's estimates of the impact of this proposal on the national 
economy are described in Section XIV of this preamble. The Federal 
resources which are generally available for financial assistance to 
States are included in Section 106 of the Clean Water Act.
5. Consultation With Government Officials
    The Unfunded Mandates Act requires that EPA describe the extent of 
the Agency's prior consultation with affected State, local, and tribal 
officials, summarize the officials' comments or concerns, and summarize 
EPA's response to those comments or concerns. In addition, Section 203 
of the Act requires that EPA develop a plan for informing and advising 
small governments that may be significantly or uniquely impacted by a 
proposal.
    In the development of this rule, EPA has conducted over a dozen 
technical presentations to explain the content of the MP&M proposal. 
Included among these presentations was a public meeting held on 
February 23, 1994. Also included among these presentations were several 
meetings with State and local governments. In summary, the comments and 
concerns raised by government officials had to do with the potential 
administrative burden of this proposed rule. EPA has addressed these 
concerns by evaluating the characteristics of the industry in order to 
determine if the potential administrative burden could be reduced 
without significantly changing the environmental benefits of the 
proposed rule. After carefully evaluating the number and size of MP&M 
facilities, the estimated cost of compliance and the estimated 
pollutant loadings, EPA decided to exempt existing indirect dischargers 
which discharge less than one million gallons per year. This addresses 
the concerns of State and local governments by significantly reducing 
the administrative burden while continuing to cover the majority of the 
pollutant loadings from this industry. Small governments are not 
significantly impacted by this rule as discussed in Sections XIV and XV 
if this preamble, and therefore no plan is required.

Appendix A To The Preamble--Abbreviation, Acronyms, and Other Terms 
Used in This Notice

Act--The Clean Water Act
Agency--U.S. Environmental Protection Agency
BAT--Best available technology economically achievable, as defined by 
section 304(b)(2)(B) of the Act.
BCT--Best conventional pollutant control technology, as defined by 
section 304(b)(4) of the Act.
BMP--Best management practices, as defined by section 304(e) of the 
Act.
BPT--Best practicable control technology currently available, as 
defined by section 304(b)(1) of the Act.
CAA--Clean Air Act (42 U.S.C. 7401 et. seq., as amended inter alia by 
the
Clean Air Act Amendments of 1990 (Pub. L. 101-549, 104 stat. 2394).
Clean Water Act--The Federal Water Pollution Control Act Amendments of 
1972 (33 U.S.C. 1251 et seq.), as amended by the Clean Water Act of 
1977 (Pub. L. 95-217), and the Water Quality Act of 1987 (Pub. L. 100-
4).
Conventional Pollutants--Constituents of waste water as determined by 
section 304(a)(4) of the Act and the regulations thereunder 40 CFR 
401.16, including, but not limited to, pollutants classified as 
biochemical oxygen demand, suspended solids, oil and grease, fecal 
coliform, and pH.
CTG--Control Techniques Guideline (applicable to NESHAPs)
DCP--Data Collection Portfolio (detailed questionnaire for MP&M)
Direct Discharger--An industrial discharger that introduces waste water 
to a water of the United States with or without treatment by the 
discharger.
Effluent Limitation--A maximum amount, per unit of time, production, 
volume or other unit, of each specific constituent of the effluent from 
an existing point source that is subject to limitation. Effluent 
limitations may be expressed as a mass loading or as a concentration in 
milligrams of pollutant per liter discharged.
End-of-Pipe Treatment (EOP)--Refers to those processes that treat a 
plant waste stream for pollutant removal prior to discharge.
HAP--Hazardous Air Pollutant
Indirect Discharger--An industrial discharger that introduces waste 
water into a publicly owned treatment works.
In-Plant Control or Treatment Technologies--Controls or measures 
applied within the manufacturing process to reduce or eliminate 
pollutant and hydraulic loadings of raw waste water. Typical in-plant 
control measures include process modification, instrumentation, 
recovery of raw materials, solvents, products or by-products, and water 
recycle.
MDCP--Mini Data Collection Portfolio (screener survey for MP&M)
MP&M--Metal Products and Machinery point source category
NESHAP--National Emission Standards for Hazardous Air Pollutants
MACT--Maximum Achievable Control Technology (applicable to NESHAPs)
Nonconventional Pollutants--Pollutants that have not been designated as 
either conventional pollutants or priority pollutants.
NPDES--National Pollutant Discharge Elimination system, a Federal 
Program requiring industry dischargers, including municipalities, to 
obtain permits to discharge pollutants to the nation's water, under 
section 402 of the Act.
OCPSF--Organic chemicals, plastics, and synthetic fibers manufacturing 
[[Page 28275]] point source category (40 CFR part 414).
POTW--Publicly owned treatment works.
Priority Pollutants--The 126 pollutants listed in 40 CFR part 423, 
appendix A.
PSES--Pretreatment Standards for existing sources of indirect 
discharges, under section 307(b) of the Act.
PSNS--Pretreatment standards for new sources of indirect discharges, 
under sections 307 (b) and (c) of the Act.
RACT--Reasonably Available Control Technology (applicable to NESHAPs)
SIC--Standards Industrial Classification, a numerical categorization 
scheme used by the U.S. Department of Commerce to denote segments of 
industry.
Technical Development Document--Development Document for Effluent 
Limitations Guidelines and Standards for the Metal Products and 
Machinery Phase I Point Source Category.
VOC--Volatile Organic Compound

List of Subjects

40 CFR Part 433

    Environmental protection, Metals, Waste treatment and disposal, 
Water pollution control.

40 CFR Part 438

    Environmental protection, Metals, Water pollution control, Water 
treatment and disposal.

40 CFR Part 464

    Environmental protection, Metals, Waste treatment and disposal, 
Water pollution control.

    Dated: March 31, 1995.
Carol M. Browner,
Administrator.
    For the reasons set out in the preamble, title 40, chapter I is 
proposed to be amended as follows:

PART 433--[AMENDED]

    1. The authority citation for part 433 continues to read as 
follows:

    Authority: Secs. 301, 304(b), (c), (e), and (g), 306(b) and (c), 
307(b) and (c), 308 and 501 of the Clean Water Act (the Federal 
Water Pollution Control Act Amendments of 1971, as amended by the 
Clean Water Act of 1977) (the ``Act''); 33 U.S.C. 1311, 1314(b) (c), 
(e), and (g), 1316(b) and (c), 1317(b) and (c), 1318, and 1361; 86 
Stat. 816, Pub. L. 92-500; 91 Stat. 1567, Pub. L. 95-217.

    2. Section 433.10 is amended by adding ``Metal Products and 
Machinery (40 CFR Part 438)'' to the list in paragraph (b) to read as 
follows:


Sec. 433.10  Applicability; description of the metal finishing point 
source category.

 * * * * *
     (b) * * *
     Metal Products and Machinery (40 CFR Part 438)
 * * * * *
    3. A new part 438 is proposed to be added as follows:

PART 438--METAL PRODUCTS AND MACHINERY POINT SOURCE CATEGORY

Subpart A--Metal Products and Machinery Phase I Category

Sec.
438.10  Applicability; description of the Metal Products and 
Machinery Phase I point source category.
438.11  Specialized definitions.
438.12  Monitoring Requirements
438.13  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best practicable control 
technology currently available (BPT).
438.14  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best conventional pollutant 
control technology (BCT).
438.15  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best available technology 
economically achievable (BAT).
438.16  Pretreatment standards for existing sources (PSES).
438.17  New source performance standards (NSPS).
438.18  Pretreatment standards for new sources (PSNS).

Subpart B--Metal Products and Machinery Phase II Category

438.20  [Reserved]

    Authority: Secs. 301, 304, 306, 307, 308, and 501 of the Clean 
Water Act (33 U.S.C. 1311, 1314, 1316, 1317, 1318, and 1361) and 42 
U.S.C. 13101 et seq.

Subpart A--Metal Products and Machinery Category


Sec. 438.10  Applicability; description of the Metal Products and 
Machinery Phase I point source category.

    (a) Except as provided in paragraphs (b), (c), and (d) of this 
section, the provisions of this subpart apply to process wastewater 
discharges from plants or portions of plants within the Metal Products 
and Machinery (hereafter referred to as MP&M) Phase I industries which 
manufacture, maintain or rebuild finished metal parts, products or 
machines from any basis metal.
    (b) The following existing effluent limitations and standards 
generally apply to the production of semi-finished products, although 
wastewater from similar operations is generated within MP&M Phase I. 
These part 438 limits shall not apply in cases in which one or more of 
the following regulations specifically applies, nor in cases in which 
either MP&M Phase I or one of the following regulations could apply to 
the wastewater discharge from the same operations; in these cases, the 
following regulations shall apply:

Iron and steel manufacturing (40 CFR Part 420)
Nonferrous metals manufacturing (40 CFR Part 421)
Ferroalloy manufacturing (40 CFR Part 424)
Battery manufacturing (40 CFR Part 461)
Plastic molding and forming (40 CFR Part 463)
Metal molding and casting (40 CFR Part 464)
Coil coating (40 CFR Part 465)
Porcelain enameling (40 CFR Part 466)
Aluminum forming (40 CFR Part 467)
Copper forming (40 CFR Part 468)
Electrical and electronic components (40 CFR Part 469)
Nonferrous metals forming and metal powders (40 CFR Part 471)

    (c) This subpart does not apply to plants which manufacture, 
maintain or rebuild finished metal parts, products or machines only 
within MP&M Phase II industries.
    (d) This subpart does not apply to existing indirect discharging 
surface finishing job shops and independent printed wiring board 
manufacturers (which are covered by 40 CFR parts 413 and 433).


Sec. 438.11  Specialized definitions.

    (a) The term semi-finished shall mean mill products and other metal 
products specifically covered by one of the existing regulations listed 
in Sec. 438.10 (b).
    (b) The term finished shall mean metal parts, products or machines 
which are not specifically covered by one of the existing regulations 
listed in Sec. 438.10 (b).
    (c) The term T, as in Cyanide, T, shall mean total.
    (d) The term surface finishing job shop shall mean a facility which 
owns not more than 50% (annual area basis) of the materials undergoing 
surface finishing operations.
    (e) The term TSS shall mean total suspended solids.
    (f) The term MP&M Phase I industries shall mean any one or more of 
the following seven industries: aircraft, aerospace, electronic 
equipment, hardware, mobile industrial equipment, ordnance, and 
stationary industrial equipment. A list of typical products within 
these seven industries is included in Appendix A of this part. If a 
plant generates wastewater from operations performed in both MP&M Phase 
I and MP&M Phase II industries and the wastewater from both phases is 
discharged to a combined outfall, then the plant is considered MP&M 
Phase I and the combined outfall is covered by this subpart. If the 
plant segregates Phase I wastewater from Phase II 
[[Page 28276]] wastewater, and discharges these wastewaters to separate 
outfalls, then only the Phase I wastewater is covered by this subpart.
    (g) The term MP&M Phase II industries shall mean any one or more of 
the following eight industries: bus and truck, household equipment, 
instruments, motor vehicles, office machines, railroad, ships and 
boats, and precious and non-precious metals. A list of typical products 
within these eight industries is included in Appendix B of this part.
    (h) The term independent printed wiring board manufacturer shall 
mean a facility which manufactures printed wiring boards (also referred 
to as printed circuit boards) principally for sale to other companies.
    (i) The term plant or portion of a plant is defined to include an 
activity, facility, or mixed use facility that is engaged in performing 
an MP&M-related industrial function and either located in a single 
building or located on a contiguous parcel of property. For purposes of 
this definition, mixed use facilities are those that have a mixture of 
non-related industrial, residential, or office types of activities. 
Sources or point sources located within the same fence line or property 
boundary are not necessarily considered contiguous.
    (j) the terms source and point source are defined as process 
wastewater discharges from plants or portions of plants.


Sec. 438.12  Monitoring requirements.

    Self monitoring for cyanide must be conducted after cyanide 
treatment and before combining with other streams. Alternatively, 
samples may be taken of the final effluent, if the plant limitations 
are adjusted based on the dilution ratio of the cyanide waste stream 
flow to the effluent flow.
Sec. 438.13  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best practicable control 
technology currently available (BPT).

    (a) Except as provided in 40 CFR 125.30 through 125.32, any 
existing point source subject to this subpart must achieve discharges 
not exceeding the quantity (mass) of pollutant determined by 
multiplying the process wastewater discharge flow subject to this 
subpart times the concentration listed in Table 1 of this part.
    (b) No user subject to the provisions of this subpart shall augment 
the use of process wastewater or otherwise dilute the wastewater as a 
partial or total substitute for adequate treatment to achieve 
compliance with this limitation.


Sec. 438.14  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best conventional pollutant 
control technology (BCT).

    (a) Except as provided in 40 CFR 125.30 through 125.32, any 
existing point source subject to this subpart must achieve discharges 
not exceeding the quantity (mass) of pollutant determined by 
multiplying the process wastewater discharge flow subject to this 
subpart times the concentration listed in Table 1 for oil & grease, TSS 
and pH.
    (b) No user subject to the provisions of this subpart shall augment 
the use of process wastewater or otherwise dilute the wastewater as a 
partial or total substitute for adequate treatment to achieve 
compliance with this limitation.


Sec. 438.15  Effluent limitations representing the degree of effluent 
reduction attainable by applying the best available technology 
economically achievable (BAT).

    (a) Except as provided in 40 CFR 125.30 through 125.32, any 
existing point source subject to this subpart must achieve discharges 
not exceeding the quantity (mass) of pollutant determined by 
multiplying the process wastewater discharge flow subject to this 
subpart times the concentration listed in Table 1 for all parameters 
except TSS and pH.
    (b) No user subject to the provisions of this subpart shall augment 
the use of process wastewater or otherwise dilute the wastewater as a 
partial or total substitute for adequate treatment to achieve 
compliance with this limitation.
    (c) An existing source subject to this subpart shall comply with 
the oil & grease standard which serves as an indicator for the organic 
pollutants which have the potential to be present in the wastewater.


Sec. 438.16  Pretreatment standards for existing sources (PSES).

    Except as provided in 40 CFR 403.7 through 403.13, any existing 
source subject to this subpart that introduces pollutants into a 
publicly owned treatment works must comply with 40 CFR part 403 and by 
[3 years from date the final rule is promulgated] and achieve the 
following pretreatment standards for existing sources (PSES):
    (a) Any source discharging 1,000,000 gallons or more per calendar 
year of MP&M process wastewater must achieve discharges not exceeding 
the quantity (mass) of pollutant determined by multiplying the process 
wastewater discharge flow subject to this subpart times the 
concentration listed in Table 1 of this part for all parameters except 
TSS and pH. If mass limitations have not been developed as required, 
the source shall achieve discharges not exceeding the concentration 
limitations listed in Table 1 for all parameters except TSS and pH.
    (b) Any source discharging less than 1,000,000 gallons per calendar 
year of MP&M process wastewater is exempt from this subpart.
    (c) No user introducing wastewater pollutants into a publicly owned 
treatment works under the provisions of this subpart shall augment the 
use of process wastewater or otherwise dilute the wastewater as a 
partial or total substitute for adequate treatment to achieve 
compliance with this section.
    (d) An existing source subject to this subpart shall comply with 
the oil & grease standard which serves as an indicator for the organic 
pollutants which have the potential to be present in the wastewater and 
which would pass through the publicly owned treatment works. Since oil 
and grease serves as an indicator for organic pollutants, POTW removal 
credits under 40 CFR 403.7 are not available for oil and grease.
Sec. 438.17  New source performance standards (NSPS).

    (a) Any new source subject to this subpart must achieve discharges 
not exceeding the quantity (mass) of pollutant determined by 
multiplying the process wastewater discharge flow subject to this 
subpart times the concentration listed in Table 1 of this part.
    (b) No user subject to the provisions of this subpart shall augment 
the use of process wastewater or otherwise dilute the wastewater as a 
partial or total substitute for adequate treatment to achieve 
compliance with this limitation.


Sec. 438.18  Pretreatment standards for new sources (PSNS).

    (a) Except as provided in 40 CFR 403.7, any new source subject to 
this subpart that introduces pollutants into a publicly owned treatment 
works must comply with 40 CFR part 403 and achieve discharges not 
exceeding the quantity (mass) of pollutant determined by multiplying 
the process wastewater discharge flow subject to this subpart times the 
concentration listed in Table 1 of this part for all parameters except 
TSS and pH. If mass limitations have not been developed as required, 
the source shall achieve discharges not exceeding the concentration 
limitations listed in Table 1 of this part for all parameters except 
TSS and pH.
    (b) No user introducing wastewater pollutants into a publicly owned 
treatment works under the provisions of this subpart shall augment the 
use of process wastewater or otherwise dilute the wastewater as a 
partial or total [[Page 28277]] substitute for adequate treatment to 
achieve compliance with this section.
    (c) A new source subject to this subpart shall comply with the oil 
& grease standard which serves as an indicator for the organic 
pollutants which have the potential to be present in the wastewater and 
which would pass through the publicly owned treatment works. Since oil 
and grease serves as an indicator for organic pollutants, POTW removal 
credits under 40 CFR 403.7 are not available for oil and grease.

Subpart B--Metal Products and Machinery Phase II Category


Sec. 438.20  [Reserved]

          Table 1 to Part 438.--MP&M Concentration Limitations          
                      [Milligrams per liter (mg/l)]                     
------------------------------------------------------------------------
                                                                 Monthly
                                                        Maximum  average
            Pollutant or pollutant property              for 1    shall 
                                                          day      not  
                                                                  exceed
------------------------------------------------------------------------
Aluminum (T)..........................................      1.4      1.0
Cadmium (T)...........................................      0.7      0.3
Chromium (T)..........................................      0.3      0.2
Copper (T)............................................      1.3      0.6
Iron (T)..............................................      2.4      1.3
Nickel (T)............................................      1.1      0.5
Zinc (T)..............................................      0.8      0.4
Cyanide (T)...........................................     0.03     0.02
Oil & Grease..........................................       35       17
TSS...................................................       73       36
pH....................................................    (\1\)    (\1\)
------------------------------------------------------------------------
\1\ Within 6.0 to 9.0.                                                  

Appendix A to Part 438--Typical Products Within MP&M Phase I 
Industries

Aerospace

Guided Missiles & Space Vehicle
Guided Missile & Space Vehicle Prop.
Other Space Vehicle & Missile Parts

Aircraft

Aircraft Frames Manufacturing
Aircraft Engines & Engine Parts
Aircraft Parts & Equipment
Airports, Flying Fields, & Services

Electronic Equipment

Telephone & Telegraph Apparatus
Radio & TV Communications Equipment
Communications Equipment
Electron Tubes
Electronic Capacitors
Electronic Coils & Transformers
Connectors for Electronic Applications
Electronic Components
Electric Lamps

Hardware

Cutlery
Hand & Edge Tools
Hand Saws & Saw Blades
Hardware
Screw Machine Products
Bolts, Nuts, Screws, Rivets & Washers
Metal Shipping Barrels, Drums Kegs, Pails
Iron & Steel Forgings
Crowns & Closures
Metal Stampings
Steel Springs
Wire Springs
Miscellaneous Fabricated Wire Products
Fasteners, Buttons, Needles & Pins
Fluid Power Valves & Hose Fittings
Valves & Pipe Fittings
Fabricated Pipe & Fabricated Pipe Fittings
Fabricated Metal Products
Machine Tools, Metal Cutting Types
Machine Tools, Metal Forming Types
Special Dies & Tools, Die Sets, Jigs, Etc.
Machine Tool Accessories & Measuring Devices
Power Driven Hand Tools
Heating Equipment, Except Electric
Industrial Furnaces & Ovens
Fabricated Structural Metal
Fabricated Plate Work (Boiler Shops)
Sheet Metal Work
Architectural & Ornamental Metal Work
Prefabricated Metal Buildings & Components
Miscellaneous Metal Work

Mobile Industrial Equipment

Farm Machinery & Equipment
Garden Tractors & Lawn & Garden Equipment
Construction Machinery & Equipment
Mining Machinery & Equipment, Except Oil Field
Hoist, Industrial Cranes & Monorails
Industrial Trucks, Tractors, Trailers
Tanks & Tank Components

Ordnance

Small Arms Ammunition
Ammunition
Small Arms
Ordnance & Accessories
Stationary Industrial Equipment

Steam, Gas, Hydraulic Turbines, Generator Units
Internal Combustion Engines
Oil Field Machinery & Equipment
Elevators & Moving Stairways
Conveyors & Conveying Equipment
Industrial Patterns
Rolling Mill Machinery & Equipment
Metal Working Machinery
Textile Machinery
Woodworking Machinery
Paper Industries Machinery
Printing Trades Machinery & Equipment
Food Product Machinery
Special Industry Machinery
Pumps & Pumping Equipment
Ball & Roller Bearings
Air & Gas Compressors
Blowers & Exhaust & Ventilation Fans
Packaging Machinery
Speed Changers, High Speed Drivers & Gears
Industrial Process Furnaces & Ovens
Mechanical Power Transmission Equipment
General Industrial Machinery
Automatic Vending Machines
Commercial Laundry Equipment
Refrigeration & Air & Heating Equipment
Measuring & Dispensing Pumps
Service Industry Machines
Fluid Power Cylinders & Actuators
Fluid Power Pumps & Motors
Scales & Balances, Except Laboratory
Industrial Machinery
Welding Apparatus
Transformers
Switchgear & Switchboard Apparatus
Motors & Generators
Relays & Industrial Controls
Electric Industrial Apparatus
Heavy Construction Equipment Rental
Equipment Rental & Leasing
Appendix B to Part 438--Typical Products Within MP&M Phase II 
Industries

Bus & Truck

Truck & Bus Bodies
Motor Vehicle Parts & Accessories
Truck Trailers
Local & Suburban Transit (Bus & subway)
Local Passenger. Trans. (Lim., Amb., Sight See)
Intercity & Rural Highways (Buslines)
School Buses
Bus Terminal & Service Facilities
Local Trucking Without Storage
Trucking
Local Trucking With Storage
Courier Services, Except by Air
Freight Truck Terminals, W/ or W/O Maintenance.
Truck Rental & Leasing, Without Drivers

Household Equipment

Household Cooking Equipment
Household Refrig. & Home & Farm Freezers
Household Laundry Equipment
Electric Housewares & Fans
Household Vacuum Cleaners
Household Appliances
Electric Lamps
Current-Carrying Wiring Devices
Noncurrent-Carrying Wiring Devices
Residential Electrical Lighting Fixtures
Commercial, Ind. & Inst. Elec. Lighting Fixtures
Lighting Equipment
Radio & Television Sets Except Commn. Types
Radio & Television Repair Shops
Refrig. & Air Cond. Serv. & Repair Shops

Instruments

Coating, Engraving, & Allied Services
Search & Navigation Equipment
Laboratory Apparatus & Furniture
Automatic Environmental Controls
Process Control Instruments
Fluid Meters & Counting Devices
Instruments to Measure Electricity
Analytical Instruments
Measuring & Controlling Devices
Optical Instruments & Lenses
Surgical & Medical Instruments & Apparatus
Orthopedic, Prosthetic, & Surgical Supplies
Dental Equipment & Supplies
Ophthalmic Goods
Watches, Clocks, Associated Devices & Parts
Pens, Mechanical Pencils, & Parts
Manufacturing Industries
Miscellaneous repair Shops & Related Services

Motor Vehicle

Carburetors, Pistons Rings, Valves [[Page 28278]] 
Vehicular Lighting Equipment
Electrical Equipment for Motor Vehicles
Motor Vehicle Parts & Accessories
Motorcycles
Miscellaneous Transportation Equipment
Automotive Stampings
Motor Vehicle & Automotive Bodies
Mobile Homes
Travel Trailers & Campers
Taxicabs
Automotive Equipment
Automobile Dealers (new & used)
Gasoline Service Stations
Recreational & Utility Trailer Dealers
Motorcycle Dealers
Auto. Dealers (Dunebuggy, Go-cart, Snowmobile)
Passenger Car Rental
Passenger Car Leasing
Utility Trailer & Recreational Vehicle Rental
Top & Body Repair & Paint Shops
Auto Exhaust System Repair Shops
Automotive Glass Replacement Shops
Automotive Transmission Repair Shops
General Automotive Repair Shops
Automotive Repairs Shops
Automobile Service (includes Diag. & Insp. Cntrs.)
Welding Shops (includes Automotive)

Office Machine

Electronic Computers
Computer Storage Devices
Computer Terminals
Computer Peripheral Equipment
Calculating & Accounting Equipment
Office Machines
Photographic Equipment & Supplies
Compute Rental & Leasing
Compute Maintenance & Repair
Computer Related Services
Electrical & Electronic Repair
Precious & Nonprecious Metals
Jewelry, Precious Metal
Silverware, Plated Ware, & Stainless
Jewelers' Materials & Lapidary Work
Musical Instruments
Costume Jewelry

Railroad

Railcars, Railway Systems
Line-Haul Railroads
Switching & Terminal Stations

Ships and Boats

Ship Building & Repairing
Boat Building & Repairing
Marines
Deep Sea Domestic Transportation of Freight
Freight Transportation on the Great Lakes
Water Transportation of Freight
Deep Sea Passenger Transportation, Except by Ferry
Water Passenger Transportation
Ferries
Towing & Tugboat Service
Water Transportation Services
PART 464--[AMENDED]

    4. The authority citation for part 464 continues to read as 
follows:

    Authority: Secs. 301, 304(b), (c), (e), and (g), 306(b) and (c), 
307, 308, and 501 of the Clean Water Act (Federal Water Pollution 
Control Act Amendments of 1972, as amended by the Clean Water Act of 
1977) (the ``Act''); 33 U.S.C. 1311, 1314(b), (c), (e) and (g), 
1316(b) and (c), 1317 (b) and (c), 1318, and 1361; 86 Stat. 816, 
Pub. L. 92-500; 91 Stat. 1567, Pub. L. 95-217.

    5. Section 464.02 is amended by revising the last sentence of 
paragraphs (a), (b), (c), and (d) to read as follows:


Sec. 464.02  General definitions.

* * * * *
    (a) * * * Processing operations following the cooling of castings 
not covered under aluminum forming, except for grinding scrubber 
operations which are covered in this section, are covered under the 
electroplating, metal finishing, and metal products and machinery point 
source categories (40 CFR parts 413, 433 and 438).
    (b) * * * Except for grinding scrubber operations which are covered 
in this section, processing operations following the cooling of 
castings are covered under the electroplating, metal finishing, and 
metal products and machinery point source categories (40 CFR parts 413, 
433 and 438).
    (c) * * * Except for grinding scrubber operations which are covered 
in this section processing operations following the cooling of castings 
are covered under the electroplating, metal finishing, and metal 
products and machinery point source categories (40 CFR parts 413, 433 
and 438).
    (d) * * * Processing operations following the cooling of castings 
not covered under nonferrous metals forming are covered under the 
electroplating, metal finishing, and metal products and machinery point 
source categories (40 CFR parts 413, 433 and 438).
* * * * *
[FR Doc. 95-8885 Filed 5-26-95; 8:45 am]
BILLING CODE 6560-50-P