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Early Findings of the Pollution Prevention Program - June 1995

Part I: On-Site Reviews of Pollution Prevention Plans

I. Pollution Prevention Planning Process
The New Jersey Pollution Prevention Act requires approximately 700 industrial facilities in the manufacturing sector to prepare three documents: Pollution Prevention Plans, Pollution Prevention Plan Summaries, and Pollution Prevention Plan Progress Reports. Pollution Prevention Plans contain detailed facility and process-specific inventory data for covered hazardous substances. The Plans are kept on-site due to the potentially sensitive nature of the information. The Plans also contain five-year goals for the reduction in the use of hazardous substances and the generation of nonproduct output (those materials which are unwanted and are not part of a saleable product). The five-year reduction goals and the reduction methods used to achieve them are annotated in a Pollution Prevention Plan Summary which is submitted to the Department and is publicly available.

A Pollution Prevention Plan is a detailed analysis of a facility's production processes. The goal of the planning process is to reduce the use of hazardous substances and the generation of hazardous substances as nonproduct output. Both of these measurements are made on a per unit of product basis, so that fluctuations in production do not appear to increase or decrease pollution outputs. Simply put, the goal of pollution prevention is to make products with fewer losses.

II. Facility Selection
As part of the implementation of the Pollution Prevention Program, the Department of Environmental Protection randomly ranked approximately 400 facilities that submitted Plan Summaries in July 1994. The Department is conducting on-site reviews of Pollution Prevention Plans following the random list. This document summarizes findings, to date, of the Department's on-site reviews of Pollution Prevention Plans covered under the Pollution Prevention Act. These preliminary findings are based on a review of 42 facilities' Pollution Prevention Plans. The 42 facilities visited are representative of small, medium, and large facilities (13 had less than 50 employees, 14 had 50-100 employees and 15 had more than 100 employees). The majority of covered industrial facilities, approximately 64%, are considered small businesses pursuant to the Regulatory Flexibility Act, N.J.S.A. 52:14B-16. Final results of the Department's on-site Plan reviews are expected to be available in fall 1995 from approximately 100 Plan Reviews. The Department's on-site Plan Review typically includes a "walk through" of the facility's operations, an administrative check of the Pollution Prevention Plan, a quality review of the Plan and a survey questionnaire to get feedback on the effectiveness of the planning process. The survey questionnaire is intended to gain feedback from facilities on their experience with the planning process that can be used in a later program evaluation. This document is based on information provided by facilities in response to the survey questionnaire. A copy of the questionnaire is attached.

III. Methods For Developing Key Information
A facility's Pollution Prevention Plan includes an estimated inventory of where hazardous substances are used and generated in a production process. This inventory, called a "materials accounting" is the core of a Pollution Prevention Plan and, by tracking the flow of chemicals through a production process, offers an estimate of how efficiently the production process uses the chemical in making a product. By estimating the amount of chemical at key points in a production process (e.g., chemicals brought into the process, produced in the process, chemically altered in the process, leaving the process as a product, and leaving the process as unwanted material), a materials accounting is intended to identify points in a production process where there are inefficiencies and losses of hazardous substances. These inefficiencies and losses have the potential to eventually become environmental pollution. The Pollution Prevention Plan tracks the quantity of chemicals used and wasted in production processes. In doing so, the Plan is designed to identify where chemicals are inefficiently used in production processes so that the production processes can be made more efficient.

Some facilities use methods other than materials accounting to track the efficiency of their operations. For example, historically, facilities have kept track of inventory data such as how much raw material was purchased for their entire facility on an annual basis. Some methods other than materials accounting, however, are more general because they are at a facility-level and do not necessarily locate the losses of hazardous substances within a production process. In order to measure chemical use efficiency, it is necessary to relate the quantity of chemical use (and chemical wastes) to the quantity of the product produced. Without such a comparison, it is impossible to gauge whether increases or reductions in chemical use and wastes are related to changes in efficiency or to changes in production. By being more specific and by directly measuring the sources of production process inefficiency, a materials accounting is intended to track chemical use efficiency.

As part of the visits conducted for this evaluation, several questions were asked about methods the industrial facility used to measure efficiency, in particular, facilities were asked about their previous use of materials accounting methods. Of the 42 Plans reviewed, 55% of the facilities reported having some type of efficiency measurement prior to preparation of their

Pollution Prevention Plan. However, only 24% of the facilities reported that they previously tracked their use of raw materials per unit of product (i.e., measured chemical use efficiency) prior to Pollution Prevention Planning. Only 14% of the facilities reported that, prior to Pollution Prevention Planning, they tracked quantities of production process losses (nonproduct output) on a per unit of product basis.

IV. Costs and Benefits of Pollution Prevention Planning

The 42 facilities visited were asked to estimate the time and cost of preparing their Pollution Prevention Plans. The majority (74%) of facilities chose to prepare the Plans themselves while 26% used consultants. Facilities who hired outside consultants were generally better able to estimate a direct cost for the preparation of the Plan. Of the 42 facilities visited, 20 were able to provide an estimate of their direct costs for preparing a Plan. Estimates provided by 4 of the 20 facilities were significantly higher than the other facilities. The total cost estimates for all 20 facilities ranged from $1,000 to $50,000, with one at $100,000 and one at $200,000 ($539,000 in total). If the 4 outlying facilities are excluded from the $539,000 total, the total cost of the remaining 16 facilities would be $114,000.

The remaining 22 facilities did not estimate their direct costs and, instead, estimated the amount of time spent by all personnel involved in pollution prevention planning, which DEP used to estimate a dollar cost. Estimates provided by one of the 22 facilities to complete its Pollution Prevention Plan was significantly higher than the other facilities, 150 days. If one includes this outlying facility in an analysis, the average number of days to complete a Pollution Prevention Plan would be 60.7. However, if one removes this outlying facility from the analysis, the average number of days to complete a Pollution Prevention Plan would be 13.5. These estimates include time spent by engineering, environmental, management, production, and, in some cases, research and development staff at industrial facilities. Assuming an average salary range for these personne1 from $25,000 to $75,000, the average cost of preparing a Plan for these 22 facilities would range from $5,000 to $15,000. Again, if the outlying facility is removed from the analysis, the average cost of preparing a Plan would range from $1,600 to $5,000.

The 42 facilities were asked to estimate any savings that they predicted from implementing pollution prevention measures. The savings that they were asked to predict were net savings after deducting costs associated with pollution prevention planning and implementation of pollution prevention techniques, including any capital expenses. Of the 42 facilities, 29 (69%) predicted net cost savings as a result of pollution prevention techniques identified through the planning process. The remaining 13 facilities did not anticipate any cost savings. Sixteen of the 29 facilities that predicted net cost savings were able to provide dollar estimates of their predicted net cost savings which, for the 16 facilities, totaled $6.34 million. The remaining 13 facilities did not anticipate any savings. Sixteen of the 29 that predicted cost savings were unable to identify a predicted dollar amount for their cost savings. For the purposes of this analysis, the Department assumed zero cost savings for these 13 remaining facilities that predicted cost savings. Some facilities reported that they could not quantify the cost savings due to limitations with their existing cost accounting systems.

To develop a projection of the total costs to all 700 covered facilities, it was necessary to develop a cost estimate for the 42 facilities interviewed. This involves adding the direct costs provided by 20 of the facilities ($539,000) to the costs provided by the 22 facilities who estimated their time spent on planning (which ranged from $109,000 to $325,000). Extrapolating the sum of the direct costs and the estimated costs across to 700 facilities results in an estimated "worst case" cost projection for facilities to comply with the Pollution Prevention Program. This estimated "worst case" cost projection would range from $10.8 to $14.4 million. If one adds to this estimate the total cost for developing the DEP program, approximately $6 million over 4 years, the total cost for the 700 facilities to comply with the pollution prevention program would be between $16.8 and $20.4 million.

As outlined previously, the total net benefits to facilities themselves projected as a result of the 42 facility estimates is $6.34 million per year. Assuming that these savings are representative, extrapolating this figure to all 700 facilities results in a projected total savings of approximately $105 million per year. A very simple and preliminary cost/benefit analysis using the estimated costs and potential benefits from the Pollution Prevention Planning Process shows that for every dollar spent on the entire process (including government costs, facility costs for compliance and capital costs for implementation of pollution prevention techniques), facilities project net savings of $5 to $8.

This figure also ignores indirect benefits that would result from the pollution prevention opportunities, inc1uding: reduced environmental and worker health impacts, benefits to the facilities such as increased market share, etc. Estimates of these benefits will be made in the future and included in the final results of the Department's on-site plan review process.

V. Net Effect of Planning: Was it Worthwhile?
There has been concern that the Planning Process is overly complicated and burdensome. The Pollution Prevention Planning process does, in fact, involve detailed engineering analyses. The Department's on-site reviews strove to determine the extent to which such analyses led to greater understanding of production processes that would result in improvements in production process efficiencies. The underlying assumption of the state Pollution Prevention Act is that mandatory planning coupled with voluntary implementation is a far less burdensome, and far more effective, approach to pollution prevention planning than traditional command and control regulatory methods, such as mandatory reductions.

During its on-site visits, facility operators were asked for their opinion on whether they felt that "the time spent on pollution prevention planning was worthwhile?" The majority of facilities (74%) thought that the time spent on the Planning Process was worthwhile. Facilities noted the following reasons for why the planning process proved to be worthwhile:

  1. Cost Savings: Clearly the most obvious reason that facilities found the Planning Process to be worthwhile is the money they are saving. While some savings are large ($100,000 or more), even savings of $20,000 are significant to a small business trying to compete in the international marketplace.

  2. Less Regulation: There are several illustrations of facilities making process changes that result in less regulatory requirements. Some facilities were able to substitute a non-hazardous substance for a hazardous substance or to use less raw materials per unit of product, thereby exempting the facilities from being subject to Right to Know and Pollution Prevention reporting. Some facilities are striving to reduce the use of volatile organic compounds so that they would not need to operate costly afterburners.

  3. Better Business Decisions: By relating hazardous substance use and nonproduct output to units of product (e.g., pounds of chemical produced, square feet of paper coated, batches of product made), some facilities were able to re-think decisions they had made about how to set prices and which of their products were the most profitable. These decisions have profound impacts on their bottom lines and their competitiveness.

  4. More Accurate Reporting: The detailed analysis involved in the Planning Process and the emphasis on material balances led some facilities to realize that they had been "double-counting" outputs, reporting materials as being "treated" rather than chemically consumed, or to amend a whole variety of data elements.

  5. Shared Mission Between Environmental and Production Staff: While difficult to quantify, many facilities' staff said that they "really learned a lot about their production processes". The Planning Process provided an opportunity for people with different roles in a facility to get together and brainstorm.

VI. Obstacles to Pollution Prevention
As part of the Plan Review Process, facilities were asked whether they had found any regulatory obstacles to implementing pollution prevention at their facilities. A few thought that they might need permit revisions. Several identified their desire to be able to reduce VOC emissions so that they could shut off afterburners and were unsure of the emission level at which they could get DEP approval to do so Many facilities identified practices or people within their own firms that represented greater obstacles to implementing pollution prevention then the regulatory ones. Finally, a large majority of prevention opportunities required very little capital expense, so at this early stage of planning, a lack of capital did not appear to be a significant obstacle.


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Department of Environmental Protection
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Last Updated: November 22, 2005