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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
Costs
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.
Benefits
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:
- 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.
- 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.
- 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.
- 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.
- 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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