'43“, . . .... ..V. _ V. . E. ... _,..... .3??? THE IMPACT OF AIR POLLUTION ABATEMENT ACTIVITIES 0F COAL-BURNING ELECTRIC POWER GENERATING PLANTS ON THE FERTILIZER INDUSTRY Thesis for the Degree of Ph. D‘ MICHIGAN STATE UNIVERSITY DAVID M. BELL 1971 ~ an} . III‘ I. ‘ .‘u. ,..- II V v-I .4 ., .,., .. _ ‘.,,A .. - ‘_-_ _ .. H V . I.. . ‘ . 'u ~ w - ‘ . I ‘ 1- 51113: '139I{4"‘.'1§2£3 “"5: .u .13-.“- .<. : ‘v- ‘ ,4 .- l. 2 - “I“..-mi‘ LIRRARY ' Michigan State University .- .n' w This is to certify that the thesis entitled THE IMPACT OF AIR POLLUTION ABATEMENT ACTIVITIES OF COAL-BURNING ELECTRIC POWER GENERATING PLANTS ON THE FERTILIZER INDUSTRY presented by DaVid M. Bell has been accepted towards fulfillment of the requirements for _.Eh..ll.___ degrec in W Economics Major professor Date October 84 I971 0-7839 a; muomc av 15' "DAB 8 SUNS' BUUK BINDERY INC. LIBRARY BINDE RS I "aileron. Item I ABSTRACT THE IMPACI' OF AIR POLLUTION ABATENENT ACTIVITIES OF COAL-BURNING ELECTRIC POWER GENERATING PLANI's ON THE FERI‘EIZER INDUSTRY By David M . Bell Society is becoming increasingly sensitive to damages caused by air pollution. The sulfur oxides , a major couponent of flue emissions, are very damaging to many materials and to plant and animal life. A Although legislation designed to solicit control of sulfur oxide emissions has alream' been enacted, more persuasive controls in the form of direct regulation can be eXpected to originate from the Enviromnental Protection Agency in the near future . Numerous processes desin to recover sulfur oxides from the flue as of electric power generating plants , which account for over one-half of all sulfur oxide emissions, are in varying stages of development . Many of those processes produce by-product sulfuric acid while a few produce anmoniun sulfate and a few produce throwaway products . Both sulfuric acid and amnoniun sulfate have value to the fertilizer industry . A couprehensive linear programming model based on the prominent characteristics of the fertilizer industry as it relates to the Michigan market was deve10ped. This model was manipulated to examine the inpact production of by-product anmonium sulfate and sulfuric acid would have on the Optiml organization of the fertilizer industry. The model was designed so other problems of interest to participants in the fertilizer industry, and to those who consume its products could be studied as well. .N.‘ . “IN \u‘\ ...r\ David M . Bell The long-run optimal organization of the fertilizer industry is based on three mgr-analysis products: anhydrous ammonia, mono- armonimn phosphate and granular potassium chloride. Most of the latter two are used in dry blends while anhydrous ammonia is used for direct application. By producing and distributing these products Optimally, the cost of supplying the amomt of N, P205 and K20 con- sumed in Michigan in 1970 can be reduced by 32.14 percent from the amount farmers actually paid. Three uses for by-product ammonium sulfate were examined: direct application, granulation and bulk blending. Although the use of ammoniun sulfate for direct application was superior to the two alternative uses, it carpeted with N provided in the optimal product mix at very low prices only (1 $2.00 per ton). However, if some value were imputed for its sulfur content, and if it competed with products currently being used, it would sell at significantly higher prices. Both sulfuric acid, a primary input into the wet process, and electricity , a primary input into the elemental phosphorus-Wee acid processes , are currently used to produce phOSphoric acid. However, the analysis indicates that at the currently low price for sulfhric acid, approzdrnately $12.50 per ton, electricity cannot compete economically with sulfuric acid. Therefore, it can be emected that the sulfuric acid process will account for an increasing share of the production of phosphoric acid. Althougi this and other factors will cause the con- sumption of sulfur to increase annually in the United States, the po- tential supply of sulfur is so great that sulfur prices can be expected to be relatively low for some time to come. By-product sulfuric acid produced in Michigan cannot be used David M. Bell efficiently in the fertilizer industry. But the high concentration of manufacturing in the North combines with its remoteness from sulfur sources in the Gulf Coast area to provide a good market price for sulfuric acid for those power plants that may choose to produce it. Since Michigan power plants can generate considerably more revenue by producing sulfuric acid than by producing ammonium sulfate , they can be expected to invest in those abatement processes that produce the by-product sulmric acid. Consequently, firms in the fertilizer industry that improve their economic position by reorganizing consistent with the optimal organization of the fertilizer industry need not be unduly concerned about the possible effect of by-product ammonium sulfate . THE IMPACT OF AIR POLLUTION ABATEMENT ACTIVITIES OF OOALeBURNINGIELECTRIC POWER GENERATING PLANTS ON THE FERTILIZER INDUSTRY By . eL/ David Mk Bell A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of.Agricultural Economics 1971 ACMOWS This thesis originated with a team research effort , and the author wishes to express sincere appreciation to his teammates . Dr. Jim Shaffer and Dr. David Arnetrong, who served as co—chairmen of the thesis committee, provided invaluable assistance. Colleagues Dennis Henderson and George Perkins participated fully in the develOp- ment of the model and deserve much of its credit. They also assisted the author in the development of this thesis and made useful sugges- tions on early drafts. The author would also like to thank Dr. Shaffer for serving as his that or professor. His guidance , stimulation and friendship played an integral part in the author's graduate study. The author is grateful to the Econamic Research Service for their financial support and to Paul E. Nelson, Jr. for his contri- butions to the stuck]. A thank you is extended to the faculty and graduate students in the Department of Agricultural Economics who made the stay in East Lansing so rewarding and enjoyable. The work on this manuscript was admirably performed by my secretary, Barbara Gibson. Barb, your efforts are appreciated. The author wishes to express a very special thanks to his parents, Mr. and Mrs. Robert M. Bell. Without their encouragement and confidence throughout my undergraduate and gaduate program , ii iii this moment would not have been possible. I am also indebted to my grandfather , whose zeal for education was a continual inspiration, even in his absence. Last, but certainly not least, I wish to express my heartfelt appreciation to my wife, Diane, and son, Zane. They understand all too well the cost associated with graduate study, but they remained unselfish and cheerful throughout . LIST OF LIST OF LIST OF CHAPTER I. II. III . TABLE OFCON'I'ENI‘S TM 0 O O O O O O C O O I O O O O O O O O O 0 O O O 0 v1 FIGURES.... ....... ....... viii APPENDICES.............. ........ .11 INTIQDUCI‘IONW...” ...... ....l 0bJectives............. ..... .....2 Methodolog.............. ........ 3 AIR POLLUTION AND THE FERTILIZER INDUSTRY ....... 10 The Economics of Pollution . . . . ........ . . . 10 Measuring the Cost of Air Pollution W 8rd. Abamnt O O O O O O O O O O O O O O O O O 0 13 ThePollutants......................19 SourcesofSulfurOxides................20 Pollution Abatement: Market Versus Collective Action: Expectations . . . . . . . . . . . . 26 Control of Sulfur Oxide Emissions from Electric Power-Generating Plants . . . . . . . ..... ‘46 Technical Processes for Recovering Sulfur OxidesfromSmokestackFlueGas ...... 50 A Projection of Sulfur Oxide Control RMIOW O O O O O O O O O O O O O 0000000000 63 Sulmr, Sulfuric Acid, and Ammonium SulfateasFertilizers................. 69 The Fertilizer Industry—A Consumer of P onums O O O O O O O O O C O O O O O O 0 O O O O O O 71 ‘TIIE IONG-RUN OPTIMUM ORGANIZATION OF m mm mm 0 O O O O O O O O O O O O O O I 77 iv The Optimal Organization of the Fertilizer Industry . . . . . . . The Transition From 1970 Actual to Optimum ....... THE USE OF BY-PRODUCT AMNONIUM SULFATE IN 'IHEFERTIIIZERINDUSTRY........ Ammonitmm Sulfate for Direct Application . . . . ..... Ammonium Sulfate for Granulation . . . Granular Ammonium Sulfate for Bulk Blending . . . . . Chitimizing the Use of By-product Ammonium mate 0 O O O I O O O O O O O 0 O O O O 0 O O O O O 0 0 Exploration of Relevant Issues . . . . THE USE OF BY-PRODUCT SULFURIC ACID IN THEFERTILIZERDIDUSTRY........ Sulfur Consumption SulfurProduction.......... Conversion of Sulfur to Sulfuric Acid . Sulfuric Acid Versus Off-peak Electricity ..... . . . Emloration of Relevant Issues THEESSENCE... Summary...... Implications . . ResearchNeeds . . . 103 110 115 121 127 128 132 137 138 150 1514 1514 156 162 Table 11-1 0 III-2 . II-3 . III-1 c III-2 0 LIST OF TABLES Estimated potential sulfur dioxide pollution without abatement for the [Initw States 0 0 O O O O O O O O O 0000000000 Estimated coal consumption and sulfur content of seven major power plants mmcmmlg'ISooocoooocooooooooo Index of plant food consumption in the UnitedStatesandPuertoRico............. Product use summary for the transition yeam O O O O O O O O O O O O O O O O O O O O O 0 0 I 0 Estimated price elasticities of demand for fertilizer nutrients and total feminzem O O O I O O O I O O O O O O 0 O 0 O O O O 0 Summary of powdered ammonium sulfate used for direct application . . . ........... Summary of powdered ammonium sulfate usedforgranulation ..... Granular ammonium sulfate for bulk blew-IE O O O O O O O O O O O O I 0000000000 Level and price range of ammonium sulfateusedforthreepurposes. . . . . . . . . . . . United States sulfur commotion, 1970 . . . . . . . . Industries and products in which sulfur is ‘Jsed O O O O O O O O O O O O O O O O O O 0 O O 0 O 0 Distribution of domestic sulfur commptim ’ 1966 O 0 O O O O I O O O O O O O O O O O 0 United States sulmr production, all rm , 1970 o o o o o o o o o o o ...... o o c o 0 Estimated sulfur reserves in Canada, MeJdcoandtheUnitedStates vi 75 91 914 103 120 129 130 131 133 135 Table V-6 . V-7 . vii Page Cost of converting sulfur to sulfuricacid.......... ....... ....138 ‘Ihe substitution of white phosphoric acid for green phosphoric acid with sulmric acid priced at $12 per ton . . . . . ..... 1142 The substitution of white phosphoric acid for green phosphoric acid with sulmricacidpricedat $16perton . . . . . . . . . . 1A8 II-7 . 11-8. 11-9 . II-lO . II“ 11 0 11-12 0 11-13 0 11-1“ 0 11-15 . LIST OF FIGURES Product schematic: anhydrous ammonia . . . . . Airpollutiondamagecosts . . . . . . . . . . Air pollution abatement costs . . . . . . . . . Total and marginal costs of air pollution . . . Total cost of air pollution . . . . . ..... Potential sulfur dioxide emissions :LntheUnitedStateS ............. By-product sulfuric acid-ammonium sulfate production frontier from scrubbing seven major power plants inMichiganinl975 . . . . . The impact of pollution controls onafirm'scostcurves............ Limestone injection-dry process for recovering SO2 fromflue gas . . . . ..... Limestone injection—wet scrubbing process forrecoveringSOzfromfluegas . . . . . . Alkalized alumina process for recovering SOzfromfluegas............... Catalytic oxidation process for removing SOZfranfluegasWW Stripping process for removing sulfur oxidesfromfluegas............. Acidification process for removing sulfuroxidesfromfluegas......... Oxidation process for removing sulfur O O O O O 22 ..... 51 oxidesfrdnfluegs 61 Acidification process using mmonium bisulfate O O O O O O O O O O O O O O O O O O O O O O O O 7 0 viii ix II-16. Ammonium phosphate-sulfate process . . . . . . . . . . . 72 II-17. Plant food consumption in the United Statesandpossessions................. 7A III-1. Optimum organization of the fertilizer industry for supplying the amount of N, P205andK20 consumedinMichiganinl970 . . . . . . . 79 III-2 . Granular potassium chloride nutrient andbulkblendstoragerequirements . . . . . . . . . . 82 III-3. Marginal costs of blending versus direct application for granular potassiumchloride......... .......... 85 III-ll. Marginal costs of blending versus direct application for monoammonium phosphate . . ....... 85 IV-l. Seven major coal-fired, electric power- gererating stations in Michigan and con- sumption of fertilizer by county . . . . . . . . . . . . 98 IV-2. Marginal costs of ammonium sulfate andarmydrousatmoniapernutrient ton . . . . . . . . . 101 IV-3. Summary of the industry organization when ammonium sulfate is used for direct Wheatim O O O O O I O O O O O O I O O 0 O 0 O O O O 10“ IV-lI . Summary of powdered ammonium sulfate usedforgrarmrlation..................107 IV-S. Summary of the industry organization when ammonium sulfate is used in the production ofanammoniumphosphate-sulfate . . . . . . . . . . . . 111 IV-6. Granular ammonium sulfate price- consumptionmep 116 III-7. The impact of alternative uses of by- product ammonium sulfate on revenues of electric power-generating plants andfarmeXpendituresonfer-tilizer . . . . . . . . . . 119 V-l . Sulfur-sulfuric acid price indifference cuwe O O O O O O O O O O O O O O O 0 0 0 O O O O O O I 139 V-2. Summy of the industry organization with green phosphoric acid replaced by white mmcac1doococcooocoooooooooolu6 Figure Page V;3. The effect of alternative prices for sulfuric acid and electricity on the organization of the fertilizer industry . . . . . . . . . 149 LIST OF APPENDICES Appendix Page A. 1970 Actual, Constrained Optimum, an th: mta O O O O O O O O O O 0 O O O O 0 O O O 170 B . Powdered Ammonium Sulfate for Direct Application: Data . . . . . . . ........ 207 C . Powdered Ammonium Sulfate for Gramlation: Data...................2llI D. Granular Ammonium Sulfate for Bulk Blending: Data . . . . ........ . ..... 223 E. Substitution of White Phosphoric Acid for Green Phosphoric Acid: Data . . . . ..... 230 F. ‘Ihe Detrimental Effects of Sulfur 0x1®8 o o o o o o o o o o o o o o ooooooooo o o 253 G. Enviromental Protection Act of 1970 . . . . . . . . . . 259 CHAPTERI INTRODUCTION Estimates of damages resulting from air pollution in the United States range as high as 20 billion dollars annually (Kreese, 1966, p. 529) . Of all the pollutants, sulfur oxides, most of which are emitted from the electrical power generating industry, are quite pos- sibly the most costly. They attack both plant and animal life. Incidents have been recorded where vegetation 50 miles from the source of sulfur oxide emissions has been injured (The Effects of Air Pollution, 1966, p. 15). Humans have been victimized individually as well as en masse. Sulfur oxides attack materials as well; few metals, stones, or fabrics are exempt. Because of the high cost borne by society, pressure for abatement of sulfur oxide emissions is increasing. Several processes have been developed for recovering sulfur oxides from power plant smokestacks. One of these processes uses anhydrous ammonia as an irput and produces ammonium sulfate and/or sulfuric acid. Many of the other processes produce only sulmric acid. Both ammonium sulfate and sulfuric acid have value to the fertilizer industry. Ammonium sulfate is useful as a fertilizer material itself, and is also used in the manufacture of other fertilizer materials . Sulfuric acid is used primarily in tre acidification of phosphate rock, the initial step in the production of phosphate fertilizers . Since ammonium sulfate and/or sulmric acid could be obtained 2 as by—products in abatement of undesirable emissions from the power generating irriustry, their price could theoretically fall below zero since ttere may be a cost of disposing of the by-products. Consequently, their price could fluctuate over a wide range, almost insuring the movement of some of the products into the fertilizer industry . If a portion of the cost of producing amrmonium sulfate and/or sulfuric acid were borne by the fertilizer enterprise , power generating firms would maximize profits by equating the marginal cost of producing each by-product with its marginal revenue. If, on the other hand, the electricity generating component of the firm bore the production costs , and the two by-products were tram ferred to the fertilizer enterprise at zero cost, the firm would maximize revenues, and therefore profits, by pricing these by-products at those points where their respective price elasticities of demand are equal to one, since this is where marginal revenue equals marginal cost (both of which would be equal to zero). If these by-products produced through the abatement of power generating plant emissiore were priced at a level to allow their use as primary inputs in fertilizer production, the organization of the fertilizer industry would be expected to change. Objectives This study investigates both the environmental quality issue as it relates to power production and tre fertilizer industry, and identifies the potential relationship between the two. Such facets as the economics of abatement , the cost of pollution, the pollutants and their impact , the sources of pollutants , and potential remedies are discussed. Of particular concern, hovever, is the analysis of the 3 various impeti that may stimulate the flow of by-product ammonium sulfate and sulfuric acid into the fertilizer industry, the amount of these two by-products that could be used as primary inputs in fertilizer production, and their impact upon the organization of the fertilizer industry. Specifically, the objectives of this study are: 1 . Identify the potential situations that could provide the stimulus necessary to initiate production of by-product ammonium sulfate and/or sulfuric acid from air pollution abatement activities; 2 . Determine the amount of each of the two by-products that could be produced from abatement activities in the United States and in Michigan, and the amount of other fertilizer products that could be produced from these two by-products; 3 . Project the consequences on the organization of the fertilizer irriustry (product mix, facilities used, etc.) of these by-products entering the fertilizer market at selected input prices; and II. Examine same of the issues relevant to pollution abatement ac- tivities and the use of the resulting by-products in the fertilizer industry . Methodolgg Essential to the analysis of the problem is the determination of tre potential quantity of fertilizer precincts that could originate from pollution abatement efforts of power plants in the United States and in Michigan. Estimates of the potentially recoverable sulfur oxide emissions for the United States will be secured. For Michigan, power plants that are of sufficient size to warrant abatement procedures u will be identified and the amount of sulfur oxides emitted from each plant determined. The potential supply of ammonium sulfate and sulfuric acid will be based on existing technical processes and their efficiency in capturing the sulfur oxides . A systems model is used to determire the amounts of the recovered by-products from the abatement of power plant emissions that can be expected to flow into the fertilizer industry. The model is designed to represelt the realities of the industry and remain consistent with a set of relevant theories of economics, marketing, and systems science. The model is based on We theory of linear programming, a mathemtical technique that will give the optimal solution to problems defired by a linear objective function subject to a set of linear constraints. Mathematically, the problem of linear programming may be stated as one of Optimizing (minimizing, in this model) an objective functicm of the following form: n z- { cx wheren=l,2,...,N 3.1 J .1 subject to restraints of the form n f. all a wherei=1,2...M 321 1d J _>_ r a ame :0 for j - 1,2,...,N where XJ is the quantity of the j th variable of interest (activity) when there are N variables; C is the per unit contribution to the J objective function; a1.j is the coefficient of the jth variable in the ith restraint when there are M restraints; and b is the ith requirement 1 when there are M requirerents in all (Naylor, 1963, p. 21). The Michigan model contains 2,6514 activities (Na-2,6510, 757 restraints 5 's in the basic matrix.1 (#757), and 15,616 non-null 8.13 The model was designed to represent the fertilizer industry of the United States as it relates to the utilization of fertilizers in Michigan. Consequently, essentially all of the components of the Michigan sector of the industry are included, while only those com— ponents of the regional and national industry that are relevant to Michigan markets are included. Six basic functiom in the industry are included: production, storage, handling, transportation, sales, and application. These functions are those necessary to convert mixed materials to fertilizer products, and move them to the soil of Michigan. 0f the 31 products included in the model, 12 are strictly intermediate products.2 These include nitric acid, nitrogen manufacturing solution, elemental phos: phorous, green phosphoric acid (wet process), white phosphoric acid (fumace process), ammonium polyphOSphate liquids (10-31I-0) , super- phosphoric acid, run-of-mine potassium chloride , standard potassium chloride , run-of-pile triple super-phosphate , and sulmric acid. 3 Twelve products may serve as intermediate products , or may go directly to farms for application. They include anhydrous ammonia, ammonium nitrate , nonpressure nitrogen solution, low pressure nitrogen solution, urea, ammonium sulfate , rormal superphosphate , diammonium phosphate , 1When special problems are studied, the number of restraints , activities, and 61%‘8 may change because of the additiore or deletions needed to represen a certain relationship or phenomenon. 2Intermediate products are those that are used in the production of otter fertilizer products . 3Sulmric acid can be purchased, as well as produced, within the industry. 6 granular triple super-phosphate , monoammonium phosphate , rock phosphate , and granular potassium chloride . Seven products are used for direct application only: aqua ammonia, coarse potassium chloride, g'anulated mixed fertilizers , bulk blended fertilizers , hot mixed liquid fertil- izers, cold mixed liquid fertilizers , and suspensions. While most products have fixed levels of N, P205, and K20, the formulations and grades of the mixed products may vary. Bulk blends have lilo formulations representing 18 nutrient ratios . These ratios account for more than 80 percent of the fertilizer actually blended in Michigan in 1970. Granulation, hot and cold mixed fertilizers, and suspensions have 29, 15 , 22, and 16 formulations , respectively. Six production and processing locations that are possible sources of the fertilizers that can terminate in Michigan have been identified. The three primary production areas for N, P205, and K20 are Donaldson- ville, Louisiana; Tampa, Florida; and Saskatoon, Saskatchewan, respec- tively . Alternative production locations include a Midwest location (Peoria, Illinois), a central Michigan location (Lansing), and outstate Michigan locations . The locational alternatives make analysis of relative locational efficiencies possible . Sane products can be produced by more than one technical process. Only processes that were siglificantly different are included, however. For example, dry materials can be blended by several different processes ranging fran labor intensive processes to capital intensive ones . Tb represent this continuum of processes , a labor intensive, a capital intensive, and an intermediate process midway between the labor intensive am capital intensive processes were included within the model. Products may be stored at the mamlfacturing and processing 7 locatioro , at terminals , at the retailers or at farms , or they may not be stored at all. Usually, however, storage must be provided to recon- cile the seasonal use of fertilizer with nonseasonal production. Rail, barge, pipeline, and trucks are the primary means of trans- porting fertilizers interstate and intrastate. For local hauls from the retailer or mixer to the farm, applicators, trucks, wagons, nurse wagons or bobtails” may be used.5 ' when the product alternatives are incorporated with the alter— natives of process , location, modes and routes of transportation, storage and sales, a complex system results. Figure I-l, the product schematic for amydrous ammonia, shows some of the approximately 713,000 separate channels ammonia may take. Although the model is designed to reflect the important interrela- tionships that will govern those interactions that the flow of by— product ammonium sulfate and sulfuric acid may cause, it is also much broader in scope . A system of controls was incorporated so that numerous situations could be evaluated under a multitude of assumptions . Initially, three basic situations are examined. The first situation is the simulation of the actual conditions that occurred in the Michigan industry in 1970. The model was controlled to closely mlplicate the product mix, the product flow, facilities used, and so forth. This analysis identifies, within the framework of the model, the current organization of the Michigan fertilizer industry. The “A nurse wagon is a trailer with a tank used to transport liquid fertilizers from the retailer to the applicator in the field. A bob- tail is a tank truck (similar to those used to haul propane) used for thesanepurposeasthenursewagon. 5The model is thoroughly described in (Bell, 1971). The data used in the model is presented in (Henderson, 1971). GJLF COAST MANUFACTURING NWO Cyrogenic Storage IINTS h—HP Centrifugal Compressor —’ ton Compress Spherical Storage No Storage 7 t V v GULF COAST TRANSPORTATION TRANSPORTATION TRANSPORTATION MANUFACTURER OF: Ammonia Nitrate arge arge Barge Nitric Acid Pipeline Pipeline Pipeline rogen Manuf i Rail Rail Rail turing Solution lruck Truck lruck Non Pressure Nitrogen Solution ¢ ¢ Lou Pressure Nitrogen Solution [FLORIM Urea MANUFACTURER 0F: MIWEST MANUFACTURER OF: MIDHEST TERMINAL Ammonium Poly- Ammonium Nitrate Cyrogenic Storage Phosphate Nitric Acid Spherical Storage Liquids Nitrogen Manufacturing Solution lionoamanoniun Non Pressure Nitrogen Solution Phosphate sure Nitrogen Solution D ammonium rea Phosphate inanoniun Polyphosphate Liquids Phos hate p e ramulated Fertilizers a IiIDHEST MANUFACTURLR C rogenic Ste 3 e p y r 9 fig” Centrifugal Cumsor Piston Coqmsor Spherical Storage in Storage MICHIGAN MANUFACTURER MICHIGAN MANUFACTURER OF: TRANSPORTATION PURCHASED INPUTS Centrifuaai Compressor rim-Ion iun Nitrate Pipeline ran-Canons“ Nitric A id ‘1 Rail H Nitrogen Manufacturing Solution Truck Non Pressure Nitrogen Solution ure Nitrogen Solution * Ammonium Polyphosphate Liquids lion oamrnonium Pho osnap niun liosp e Cyrogenic Storage Granulated Fertilizers TRANSPORTAYION nia Spherical Storage I|ot Liquid rlixed Fertilizer Pipeline Rail in Storage Truck ‘ MICHIGAN TERMINAL Cyroqenic Storage Spherical Storage No Storage ‘7 v * TRANSPMTAT ION TRANSPORTATION ‘Pipeline Pipeline R il Rail “in“ musromnoa Truck Truck RETAILER ¢ FARM UTSTATE MICHIGAN UFACTURER Of: High Pressure Applicator High Pressure r l Storage No Storage Nurse Hagen Truck APPLICMM.’ No Storage Aqueous Ammonia Figure I-l. Product selmtic: antwckous ammonia 9 second analysis involved the determination of the short—run Optimum; that is, the least cost method of fulfilling the respective 1970 Michigan requirements for N, P and K20, utilizing only existing 205 facilities. The third analysis was the determination of the long- run optimum, a situation in which new facilities may be built. The data from these three analyses are presented in Appendix A, and are discussed very briefly in Chapter III. These data serve as a basis for comparisons in this study . Other situations can be investigated with the model as well. For example, the impact of shifts in the nutrient ratio of consumption, and the consequences of consumption of nonoptimal products can be determined. The impact of shifts in capital costs and wage rates can also be studied.6 In summary, this study will focus on the interrelationships between the fertilizer industry and one aspect of the environmental quality issue—sulfur oxide emissions from electrical power-generating plants. An analysis of the impact of the conversion of sulfur oxides to various fertilizer materials and their distribution will be con- ducted within the framework of the previously described systems model. It is hypothesized that large amounts of these by-product fertilizer products could enter the market , and that they would have a siglificant impact on the organization of the industry in doing so. 6T'hese two problem areas are tre subject matter of studies being made by Dennis R. Henderson and George R. Perkins, respectively. Their findings, and the findings of this study, will be included in the report that discusses the basic analysis. CHAPTER II AIR POILUI'ICN AND THE FERTILIZER INDUSTRY On February 10, 1970, President Nixon sent to Congress a 37- point program to rescue the nation's environment. Calling air "our most vital resource" and its pollution "our most serious environmental problem," he proposed amendments to the Clean Air Act to enlarge the scape of the national program to abate air pollution. With this stimulus, control of air pollution has become a national goal of high priority. The Economics of Pollution Decision makers are faced with the problem of determining the amount that should be Spent on pollution abatement . From an economic stantpoint, this problem fits neatly into a theoretical framework. One miglt expect , a priori , that the relationship between the level of pollution and the cost of damages caused by pollution can be emressed by a nonlinear mnction (Figure II-l represents such a relatiomhip) . At low levels of pollution, damage is at a minimum. But as the pollution level rises there is a very rapid rise in damage costs . As the saturation point is approached the function may become nearly vertical . One might also expect, a priori , that the relationship between the expenditures on pollution abatement and the resulting level of pollution can be represented by a nonlinear function (Figure II—2 plots 10 11 1’11?! Costs due to pollution damage Low Index of pollution level Figure II-l. Air pollution damage costs 12 A 8 Threshold level B = Saturation level Abatement expenditures § . A ' c B 0 LOW I r H1 Index of pollution level 8h Figure II—2 . Air pollution abatement costs 13 such a relationship). If one moved from Point C to Point A, the thresh- old level (in other words , the level at which air pollution would be at a low level and Just recognizable), eJ-penditures for increased levels of abatement would have to increase more rapidly to reach successive and more difficult to obtain levels of cleaner air, given a constant state of production technology . At lesser levels of expenditures for abatement activities , one would encounter an acceleration in pollution damages. If this abatement function were the actual function decision makers faced, we would eipect low returns for small expenditures , then a long Span of increasing returns (around the C area) and, finally, diminishing marginal returns to abatement activities as the air approached the threshold level. The total cost of air pollution is comprised of these two com- ponents: the losses that result from air pollution damages , and the cost of expenditures to control it. The total cost curve can be derived by simply vertically adding these two cost curves (Figure II-3) . The socially Optimal level at which to set the pollution standard is that which achieves the minimum on the total cost curve for air pollution (Point M, Figure 11-3) . while the theoretically optimal standard is easily identified on the total cost curve, the empirical problem is that of identifying the actual total cost curve, i.e. , the empirical derivation of its component curves , the costs due to damages, and the costs of abatement activities. Measuring the Cost of Air Pollution Damage and Abatement While it is normally assumed that the damages from air pollution are costly to society, the actual costs attributable to air pollution 114 “131— Cost of air pollution 5 4/ Total cost Cost due to damages Cost of abatement expendi- tures Low M High Index of pollution level Marginal benefits of abatement Marginal Low High Abatement activities Figure II-3. Tbtal and marginal costs of air pollution 15 are extremely difficult to determine . Several theoretical approaches are available to determine the cost of air pollution (Ridker, 1967). They correspond to the different levels or stages that can be distin- guished. First, the pollution has certain direct and immediate effects such as paint damage, throat irritation, and plant damage. Measurement of these direct effects would require description of the damage per unit of each object affected as a function of the intensity of air pol— lution. This relationship could be presented as: D i where Di is a measure of the ith type of damage per unit of object -- 13(3), 1 = 1,2,...,N affected by the pollution, and S is a measure of the pollution. Then a monetary weight appropriate to measure the importance of the particular effect, and an indication of the number of units of the objects affected must be obtained. On the assumption that tire monetary weights and the number of units affected stay constant as the level of pollution varies, the total cost of pollution can be obtained by multiplying the damage function by the appmpriate cost per unit damage, C1, and the number of units affected, Q1, and then summing over all types of damage, yielding n I CiQifi(S)’ the total cost of direct air pollution damage. The i=1 derivative of this function with respect to S is the marginal cost , the additional cost of achieving each succeeding unit reduction in the pollution level (Ridker, 1967. pp. 15-20) . The second theoretical approach to measure the cost of air pol- lution is based upon the assumption that the direct effects of the pollutants give rise to certain adjustments which individuals and firms 16 make to reduce the direct impact. For example, an asthmatic person may move to another climate or perhaps filter the air in his home. Such actions have the effect of transferring the direct loss from air pollution to other categories, where it appears in a different form. And although it may reduce the loss, it cannot eliminate it. Procedures for measuring the cost of adjusting to air pollution, although difficult to carry out , are theoretically straightforward. First, each logically possible category of adjustment that can be used to minimize tre effects of air pollution must be identified, and behavior falling into these categories measured. Then all important variables that could also explain this behavior must be identified and measured. Finally, for each category of behavior, statistical analysis must be applied to separate the effects of the pollution from the other factors that could also explain the behavior. The resulting damage function must then be combined with estimates of unit costs and quantities and aggregated over different categories of behavior to obtain a cost- of-pollution function (Ridker, 1967, pp. 20-23) . The third measurement scheme is based on the assumption that the only completely adequate way to measure the social losses of pollution is to take into account social interactions—the effect of one person' s actions on another. For the purpose of measurement , the most important interactions are probably tre effects that occur because people are linked together through a market system. 'Iheoretically, tre market effect represents transfers of berefits and costs between economic units. For example, an increase in pollution levels will depress the value of houses in that area and cause an increase in tre value of houses in unaffected areas . By measuring the changes in market value that result l7 fran changes in pollution, the cost of pollution can be obtained1 (Ridker, 1967. pp. 23-28). It is obvious that significant measurement problems are evident in these three procedures. Each has been tried on limited scale, and each encountered great difficulty . Although a comprehensive analysis has yet to come, estimates of the damage of air pollution have been abmdant. The estimates range from four to 20 billion dollars annually.‘2 However, tke value of any estimate of current pollution damages to decision makers can certainly be questioned. Recalling that the total cost of pollution is the sum of pol- lution cost plus abatement costs (Figure II-lt) , it is apparent that tre relevant portion of the total cost curve is in the portion close to the minimum (Point B, Figure II-ll) . If one assumes pollution levels are well above tre level that correSponds to Point B on Figure II—h , the total damages may well correspond to the area around Point A on Figure II-ll.3 Indeed, knowing precisely tre location of A is not too important. Rather efforts should be directed toward identifying the level and shape of the curve around Point B on Figure II-ll, since this LIhere are siglificant theoretical problems involved in this approach; for a discussion see (Ridker, 1967). 2Kneese points out discernable reasons for this wide range: (a) the figures given are guesses based on slender evidence; (b) they differ in inclusiveness (Kneese, 1966, p. 529). 3The staff of the Committee on Public Works certainly believes that tre 0.8. is in the area around Point A on Figure II-lt. They report, ". . .it is clearly evident that the cost of property damages alone from air pollution is great—far greater than tre amounts devoted to its abatement by irxiustry and all levels of govermen ;" in A Study of Pollution—Air, staff report of the Senate Committee on Public Works , 38th Congress, lst Session, September 1963, p. 20. Although it does not necessarily follow, the implication seems to be that there is little chance of tie costs of abatement activities exceeding tre benefits . 18 E) E Total cost C 8 :3 3. H a :4 m f... o 4.) 8 o B Low High Index of pollution level Figure II-lt. Total cost of air pollution 19 is the relevant portion of the curve in determining tie level of eXpen- ditures that are economically relevant in decisions concerning the abatement of air pollution . Just as determining the cost of pollution damages is a difficult task, so is the task of determining the cost of abatement. Reliable estimates of costs of abatement at tre macro level are scarce. Esti- mates of costs for specific processes have been made, but even they vary comiderably. Often the control system is tied into production changes, or is added to older plants. In other situations, the controls are an integral part of a new installation and their costs cannot independently be accurately estimated. Each situation will have its own peculiarities which result in a unique set of costs.“ Sampling desigl problems originate when aggregate supply response analyses are contemplated. The Pollutants ’l’ne pollutants of the atmosphere are primarily gases and solids . The solids, referred to as particulates, are minute particles that remain suspended in air. The particles may be lead, arsenic, asbestos, beryllium, cadmium, or flour-ides , for example. The primary gaseous pollutants include carbon monoxide, sulfur dioxide, sulfur trioxide, photochemical smog,5 nitric oxide, nitrogen dioxide, and hydrocarbons. The well-loom 1967 estimates by the U.S. Department of Health, Educa- tion, and Welfare give the following figures for total discharge of ”Estimates of the increased cost of electricity that will result from abating sulfur oxides vary greatly, ranging from six percent (Stites, 1970, p. 222) to 33 percent (Slack, 1971). I5Photochemical smog is a mixture of gases and particles manu- factured by the sun chiefly out of tie combustion products of such organic fuels as gasoline. 20 these pollutants in millions of tons per year: carbon monoxide, 72; sulfUr oxides, 26 ; nitrogen oxides, 13; hydrocarbons, l9; and particu- late matter, ll—a total of 141 million tons per year. However, trese figures mean little unless each pollutant can be assigned a weighting factor indicating its relative importance as a hazard and a source of annoyance. Based on expenditures appro- priated for federal research gents , one might conclude that sulfur oxides pose the geatest threat to tlre environment . Even thougl auto- mobiles contribute sure 60 percent of the total mass emissions of air pollutants, HEW has allocated several times as much funding for research gents directed toward sulfur oxide control as on gents directed toward the abatement of the pollution from auto exhausts (Sherwood, 1970, p. 183). Health authorities appear to consider sulfur dioxide, and the accompaming sulfur trioxide, as the most serious single air pollution threat. Somoes of Sulfur Oxides The combustion of fossil fuels accounts for 85 percent of the total sulfur oxides emitted to the atmosphere, with coal accounting for 60 percent of this amount ("Sulfur Oxides: Drawing a Bead on Air Pollution," 1968, p. 281) .6 Electric power plants account for over one-half of all sulfur oxide emissions ("Sulfur Oxide Control: A Grim Future," 1970, p. 187). The 271! million tons of coal armually burned by electric power plants produce 13 million tons of sulfur oxide, while the 156 million barrels of oil used annually account for one 6Other sources include refinery operations, smelting of ores, coke processing, sulfuric acid manufacturing, coal remse banks, and refuse incineration (Spaite, 1966, p. 162) . 21 million tore, and 2,739 billion cubic feet of gas burned annually account for 3,500 tons of sulfur oxides. To provide further perspective, the sulfur from electric power- generating plants are carpared to the sulfur industry. Electric power- generating plants in 1970 were estimated to have emitted ten million tons of sulfur in the form of oxides (Hangebrauck, 1970) . Sulfur con- smption for all purposes in the United States in 1970 was only 10 million tore. The sulfur emitted from electric power plants in 1970 was equivalent to 30.7 million tons of sulfuric acid, which slightly exceeds the 30.6 million tons of sulfuric acid produced by the United States sulfur industry in 1970. The United States fertilizer industry, the primary consumer of sulfuric acid, used only 18.5 million tons of sulmric acid in 1970 (Manderson, 1968). Sulfur oxide emissions are not likely to diminish either, even if effective controls are implemented] Estimates by the National Air Pollution Control Administration show rapidly increasing emissions (in tie absence of controls) reaching 126 million tons per year by the year 2000 (Table II-l) . Electric power-generating plants will account for an increasing share of these total emissions.8 The estimate of power plant emissions of 94.5 million tons in 75 percent of the estimated total emissions for the year 2000 (Table II-l). 7Bohrman, et a1., in stuchring future emissions of sulfur oxides, used estimated demands on the industries producing sulfur- oxide pol- lution to proJ ect the overall emission rates to be expected under varying degees of control of emissions. Figure II-5 shows an estimate of what can be expected at two levels of control as compared with present practices: (1) with good progess in development and appli- cation of control methods (Case I); and (2) with control methods developed and applied on a crash basis (Case II) (Rohrman, 1965). 8Tbis results from the phenomenon of a doubling of power needs every eight to ten years in the United States. u Q !~. I>u.\\ 1: nt v s 75...: II- inJ-i N15N-nm ‘ 22 70 60- 50» N0 30 802, millions of tons/year 20 10 . Potential emissions using present control practices Case I Assumes good progress in develOpment and application of control:methods Case II Assumes maximum ‘ possible rate of development and application of control‘methods l l l 1960 1970 1980 1990' 2000 Year JFieMre II-S. Potential sulfur dioxide emissions in the United States 23 Table II-l. Estimated potential sulfur dioxide pollution without abatement for the United States Annual emissions of sulfur dioxide, in million tons 71970 1980 1990 2000 Power plant operations (coalandoil) 20.0 111.1 62.0 91¢.5 Total emissions 36.6 60.9 86.14 125.8 Power plant emissions as percent of total 55.6 67.5 71.8 75.1 Source: February 1970 estimates by National Air Pollution Control Administration (Middleton, 1970, p. 172). In 1969, 21,432 million tons of the 35,679 million tons of bituminous coal shipped to Michigan went to power utilities (Gallagher, 1971, p. 357).9 Much of this went to seven major power plants. In 1975, these plants are expected to burn approximately 19 million tons of coal. This volume of coal would contain about 581! thousand tons of sulfur (Table II-2). If all of the sulfur burned to sulfur dioxide, there would result 1,076,200 tons of that air pollutant.10 If scrubbing devices are successful in removing 90 percent of tie sulfur oxides, 1,606,730 tons of sulfuric acid or 2,16li,7ll9 tons of ammonium sulfate (or some linear combination in between) would result from the scrubbing operations as by—products (Figure II—6) .11 The 2,16ll,7149 tons of ammonium sulfate contains approximately 9811all amounts of anthracite coal was also consumed by utilities in Michigan. 10Usually some of tie sulfur is emitted as sulfur trioxide and sulfuric acid. n‘Ihe conversion of sulmr oxides to sulfuric acid and ammonium sulfate will be presented later in this chapter. Eu‘ Ix.’ Ll 24 Table II-2. Estimated coal consumption and sulfur content of seven major power plants in Michigan in 1975a Consumption Sulfur Plant Location tons/year 1 sulfur tons B. C. Cobb' Muskegon 1,334,000 1.7 22,678 Board of Water Lansing 953,000 2.5 23,825 and Light Campbell West Olive 1,687,000 3.2 23,825 Karn Essexville 1,432,000 2.2 31,504 Monroe Monroe 8,000,000 3.5 280,000 St. Clair St. Clair 4,800,000 3.0 144,000 whiting Lima Pier 988,000 2.8 27,664 Total 19,185,000 583,655 aCompiled from: (Rector, 1970) and (Esch, 1971). 454,597 tons of nitrogen (N). If the ammonium sulfate were used to manufacture an ammonium phosphate—sulfate, with a 20-20-0 analysis, the 2,042,216 tons of fertilizer product would contain 408,443 tons of N and an equal amount of P205. The amount of N in the ammonium sulfate is 3.2 times the total amount of N consumed in Michigan in 1970. If the ammonium phosphate-sulfate product were produced, it would provide 2.9 and 2.6 times the 1970 Michigan consumption levels of N and P2 5, respectively. The amount of sulfuric acid needed to produce the wet process phosphoric acid, which is utilized in Michigan under the Optimal organi- zation of the industry, is 260,565 tons. Scrubbing the effluent from these seven Michigan power plants would provide 4 .2 times that amount. Sulfuric acid 25 2.0 - 1.75- 1.5 1 1025d 1.0 J in million tons 0.754 0.5 . 0025...; 0 a j [ f I l I I 1 fi 0.25 0.5 0.75 1.0 1.25 1.5 1.75 2.0 2.25 Ammonium sulfate in million tons Figure II-6 . By-product sulfuric acid-ammonium sulfate production frontier from scrubbing seven major power plants in Michigan in 1975 V 2.5 26 Pollution Abatement: Market Versus Collective Action: Expectations Smoke has often been used as a classic example of a negative external effect. Essentially all economists agee that tre discharge of pollutants into the atmosphere imposes on some members of society costs which are inadequately imputed to the sources of the pollution by free markets, resulting in more pollution than would be desired from the point of view of society as a whole. Since the cost of pollution to society is not reflected through tie market , it is not an important decision variable for the economic unit producing the pollutant . This creates a misallocation of resources since the full cost of pro— ducing the economic good (electricity in the case of the electric power- generating firm) is not reflected in the cost curves for the firm in question. Consequently, the firm draws into production more resources than is socially desirable; i.e., the marginal cost of electricity is understated. The problem of abating air pollution is determining the best manrer for reflecting the cost of air pollution in tie firm's decision- making framework. Essentially all legislation that has been enacted to date fails to internalize those costs. At best, it only solicits abatement activities by offering incentives such as tax exemption or subsidies on investments in abatement equipment. Firms must still bear the bulk of the cost of controlling emissions, and few have volunteered to do so. Consequently, a more persuasive approach must be taken; an approach that removes the voluntary aspect of former legislation. But there is real question as to whether or not the American people are legally, politically, technologically, economically, and socially 27 ready for the nonvoluntary approach. This is important because the rate of development of nonvoluntary controls , the form of those controls , and the resulting sulfur oxide abatement activities are a function of each of those areas. The remainder of this section examires the various corponents of this issue and determines their implications for various policy alternatives . Finally , it identifies likely develOpment in normarket controls for the abatement of sulfur oxide emissions . Citizens may protect their right to clean air by use of several different common laws currently in existence in every state, including private and public nuisance laws, trespass laws , tie Constitutionally protected right to live, and laws relevant to tie trust of the nation's natural resources. It is argued that in cases wrere natural resources are being unduly damaged as a result of some firm's emission of pollutants, courts may rule that the firm stOp polluting. Society holds the "comon property" natural resources in trust and courts can stop any activity that it feels involves unjustified use of those resources . The Constitution protects tie right to live . Yet firms that fill the atmosplere with matter that acts as poison are killing humans . A situation my be determined a nuisance if it causes inconvenience , discomfort, annoyance, damage or harm to a person or to the public (Van Doren, 1971, p. 16). A firm could be guilty of trespassing if it prevents a person from fully using his land or property (Speck, 1970, p. 85) . Sore states have enacted laws designed to protect personal rights from firm that might otherwise infringe on those rights by polluting the atmosphere. These laws are primarily adaptions of time-honored comon law and statutory concepts . The Environmental Protection Act 28 of 1970 passed in Michigan is such an act (Appendix C). It is An act to provide for actions for declaratory and equitable relief for protection of tie air, water and other natural resources and tie public trust therein; to prescribe the rights, duties and functions of tie attorney general, any political subdivision of tie state, any instrumentality or agency of tie state or of a political subdivision thereof, any person, partnership, corporation, association, organization or other legal entity; and to provide for judicial proceedings relative thereto. the can easily imagine situations where each one of these statutes may be used to protect personal rights. However, such procedures for controlling pollution leave much to be desired. First, it places the issues in courts—courts that are already so overloaded that it is questionable whether or not justice is being served. Secondly, it is difficult for plaintiffs to prove "beyond doubt" that a given firm is resporoible for a given loss. In some cases, clear scientific evidence must be shown, and even the high correlation between cigarette smoking and lung cancer would not be considered clear scientific evidence . Third, the outcome of am case may not be in the public interest. In a case involving private rights, the public interest cannot be given proper consideration. Consequently, a decision in favor of the plaintiff may not be in the social interest. For example, a plant that is the basis of the ecormy in an area may be required to stop polluting because a household is being showered with pollutants. Such an order may cause it to shut down, in which case the social loss may be geat. On the other hand, a firm that is causing geat social loss through its pollution emissions may be required by the court to pay damages to tie plaintiff, in which case it may continue to pollute. It cannot be expected that the courts would becore an economic decision maker in these situations. Finally, a law such as Michigan's Environmental Protection Act of 1970 29 would supersede regulations or directives established by the State Air Pollution Control Agency . Consequently , a firm which Operated under the approval of the agency could be taken to court under the Environ- mental Protection Act . The appropriate court may tien determine the reasonableness of the agency-issued standard and, if it found the stan- dard deficient, could direct tie defendant to ad0pt a more stringent device or procedure (Johnson, 1971, p. 6). The use of common laws and the courts may serve to control certain situations where it can be clearly deronstrated that a firm, or firms, are responsible for losses suffered by a citizen. However, such an approach camot be used effectively as a universal means of pollution control. Alleviation of air pollution is, among other things, a political problem (Hill, 1968) . Traditionally, politics is the art of corpronise. But air pollution , in the severity that it is develOping in many local- ities, is about as subject to compromise as is pregnancy. Public decision makers are faced with complex problems with nurerous facets , each with a sound arguzrent. And the public will be split on all sides, often with an individual taking opposite sides. For example, a goup may appear before a senate subcommittee testifying to the evils of air pollution and recommending a clamp-down of certain firms.12 The same goup will return hare to stoke their coal furnaces and burn their leaves , and argue their right to do so . Individuals will wage verbal war against a polluting firm, and yet will not be willing to sacrifice the jobs nor pay the higher prices that may result from tie firm's 12For a brief review of the effects of sulfur oxides, see Appendix F. 30 abatment activities . Generally, an issue as complicated as air pollution control poses simificant risks to political decision makers . Legislators would have to interpret the vibrations, and their political careers may rest on that interpretation. They would have to carefully weigh the political viability of each alternative . However, legislators appear to have successfully eliminated much of the risk involved in air pollution con- trol by establishing the Environmental Protection Agency at the federal level , and air pollution control agencies at the state level, and by charging the agencies with the responsibility of establishing the necessary rules and regulations , and empowering them with the tools necessary to carry out their objectives. Of course, the legislators did not sacrifice all control. They are still reaponsible for appro- priating mos , and this single responsibility gives them considerable control. In addition, Just as the legislature created the agency, it can alter it or even eliminate it. Although the establishment of the environmental protection agencies may have reduced the importance of personal political objectives as a variable in developing pollution con- trol, the basic issues remain. The influence of industrialists and environmentalists is an important factor determining the rapidity with which the agencies will establish regulations and the effectiveness of those regulations . One 11th emect the agencies to side with industry , for the interests of big industry seem to be highly intertwined with tre political system. ()1 the other hand, the cause of the environmentalists is real; the great cost and trend of current pollution activities can neither be denied nor igrored. 31 The environmentalist's position will continually strengthen as (l) pollution levels continue to increase, (2) better data on the cost of pollution becomes available , (3) as technological advances make abatement easier and less costly, and (ll) as industry increases its willingess to accept abatement regulation. This last factor is an important one. Big industry exerts considerable influence on legislators, and much of this influence will be felt by the agencies. Until industry determines the control of sulfur oxides is desirable, it will serve as an important barrier to the develOpment of effective controls. A primary problem in deve10ping effective regulation is that of establishing a pragmatic relationship between the various levels of government . The 1963 Clean Air Act specified that the prevention and control of air pollution at its source is the primary responsibility of state and local governments and the primary role of the federal govern- ment is to support the state and local goverments with technical and financial assistance. However, the problem of Jurisdiction is particularly acute in the case of air pollution since the geographic spread of pollutants recognizes no political boundaries . For example, it has been estimated that one-fourth of the maple in the United States live in approximately 23 standard metropolitan areas (as defined by the Census Bureau) that cross state lines and 28 others which extend up to a state line (Edelman, 1968, p. 5611). 'Ihe Air Quality Act of 1967 was designed to overcome this problem. It establishes procedures whereby states may Join together to form an air quality control region. lIhus, in situations where the pollution 32 crosses state boundaries, the respective states can Jointly attack the problem. Under the 1967 Act, the federal agency will establish minimum standards, as well as provide financial and technical assistance. The states, which maintain primary control, must set standards at least as strict as the federal standards. They may establish more restrictive controls . Although local governments may enact controls more restric- tive than either state or federal standards , it cannot exempt firms from those standards . Although essentially no one questions the basic precept that local and state governments are responsible for pollution control while the federal government functions in a supportive role , the trend is to the contrary. In the beginning, the federal Air Quality Act autho— rized only studies and grants. It now directs the Administrator of the Enviromental Protection Agency to promulgate criteria for the guidance of the states , to designate air quality control regions , and to set federal air quality standards in the event a state's efforts are insufficient. As Senator Muskie states it, The federal role is that of setting national goals, providing the necessary scientific, technical, and financial support to launch an effective air quality enhancement program, providing the framework for regional institutions to plan for and to implement such programs, and having available the necessary enforcement authority in those cases where Jurisdictional impasses or the breakdown of local authority make it impossible to protect health or welfare of communities and states (Muskie, 1968) . 'Ihis growth in federal activity does not originate from its zeal for power. Rather it originates from necessity 5 it originates from the iractivity of states . Although the inactivity of states probably originates from 33 several factors , the economic consequences of a state's aggressive pol— lution control measures alone would likely be a sufficient deterrent . Abatement controls , once established and enforced by a state , would require that a firm bear all costs of production. Whereas previously the firm was allowed to pass some of its production costs on to society simply by discharging waste, it now must either discharge that waste in a manrer that does not depreciate the welfare of others, or must stOp producing the waste . Either procedure will require investments by the firm and will involve some operating costs (assuming the firm will con- tinue Operating). This will increase the fixed and variable cost of producing each level of output and, consequently, the firm' 3 average fixed cost, average variable cost, average total cost, and marginal cost will have risen at each level of output (Figure II-7) . If the firm was marketing its product in a purely competitive interstate market, and if other states did not enact similar regulations , the consequences of the pollution control could be catastrophic. By equating its rew mar- giral cost with its marginal revenue (M01 - P in Figure II-7), the O firm's level of output would decrease and it would now be realizing a loss. Although a firm may be able to withstand a loss in the short run, it would have to cease production in the long run. If the firm marketed in an imperfectly competitive interstate market, its output would again fall, but it would not necessarily be operating at a loss . Consequently, aggressive air pollution control by any one state, without similar activities in all otter states, could have dire effects on firm, their owners and employees in that state, and could have considerable impact upon the economy of the state. To prevent such a 3'4 Figure II-7. The impact of pollution controls on a firm's cost curve 35 situation, the state need only wait for federal regulations to force a_._l_l_ states to initiate similar regulations in unison. Such a procedure would result in a general price increase for the product (to P in 1 Figure II-7) , but would not significantly affect the relative position of firms in any one state. This econamic pherxmenon, which prevents a state from being the leader in controlling air pollution, may also cause it to lag in enforcement of standards required under federal controls . Firms not required to internalize all costs of production would gain an economic advantage over the firms in other states where federal standards are enforced. Consequently, the firm and those associated with it (except possibly for those suffering from the pollution) would gain economically as would the state. For this reason, the federal agency will not only have to establish tte standards; it may also have to enforce them. Three approaches are gererally available for regulating firms in an effort to lower pollution levels: 1 . charge the polluter for his production of the undesirable product (pollution); 2 . pay him for his production of the desirable good (clean air); or 3. force him to stop polluting through direct regulation. These three approaches will be discussed along with a fourth alternative that is relevant in the case of power-generating plants . The most cannon method for dealing with air pollution to date has been the direct regulation of emissiora . Direct regulation includes a ccxmbination of licenses, permits, registration, zoning, and the enforce- ment of air quality and effluent standards. Propments of direct regula- tion emprasize its effectiveness . Not only are regulations easy to administer, policing is easy since noncompliance can easily be determined. 36 Another primary advantage of direct regulation is that it permits the government to take interim steps even though it has little information on relevant pollutants measurements . It is argued that government agencies have the right to force abatement (at least temporarily) of emission of pollutants from am given firm in situations where it is lopwn to contribute to overall pollution levels , even if the government does not know to what extent the firm is contributing. This argument is based on the contention that suspected negative health effects from air pollution is sufficient basis for abatement action.13 Economists are disturbed with such proposals, however, since the action could result in greater social cost than do the pollutants . They argue that only after the relevant data is secured can rational decisions be made. While this may well be true, Crocker points out: Given the uncertain quality of available physical, biological, and economic information, and the potentially high costs associated with the gathering of additioral information about atmospheric pollution problems , the control authority , in order to impress receptors and emitters with the neces- sity of regarding the air's two value dimensionsl as scarce economic resources, appears to be Justified in setting minimal standards (Crocker, 1966, p. 79). It can also be argued that by imposing standards, polluters are forced to reduce emissions, and in situations where the technolog is either lacking or nonexistent , this incentive would be sufficient to stimulate truly innovative research and develOpment of abatement technologies . As eXpected, direct regulation, a simplistic approach, is not 13A representative statement of this view is U.S. Senate, _;_Ai_r_' t Crigtre_riaLA Staff Remrt of the Subcommittee on Air and Water ution, Camdttee on Public Works, 90th Congress, 2nd Session, July I968. luCrocker identifies the two value dimensions as life and property supporting capacity, and waste disposal capacity (Crocker, 1966, p. 614). 37 without cost. While it is effective in dealing with the gossest forms of pollution, it would be difficult to use for equalizing incre- mental abatement costs among emitters in a relatively precise manner. Althougm it can be argued that direct regulation can be administered in a flexible manner, evidence shouts that it usually is not . 'Ihus , an obJection to direct regulation is that its alleged inflexibility results in higher costs tran would more selective measures . An alternative approach to direct regulation is payments , which not only includes direct payments of subsidies , but reduction in collec- tions as well. Examples include subsidization of certain control devices, exemption of pollution control devices from local property taxes , and tax credits for investment in control equipment . A possible payments system would involve gents to polluters to motivate them to restrict emissions to an Optimal level. The gent would vary with atmospheric conditions , effluent location, quantity of effluent, and quality of effluent. However, the more typical proposal mder the payments heading relates to tax relief or subsidies used in conjunction with direct control . There is a strong practical argment against most of the schemes under the payments heading. 'Ihey are simply payments for the wrong thing. The payment should depend on tre amount of pollution discharge, and not on an activity that is directly or indirectly related to tre disclarge of pollutants . For example, a payment to firms for decreasing the discharge of pollutants is better than a tax credit for investment in pollution control devices because the latter creates a bias against 38 alternative means of reducing emissions .15 More efficient control can normally be obtained by incentives that depend on the variable it is desired to influence rather than by incentives that depend on a related variable. Some 'charge' proposals suffer from tre same shortcomings. Charges are often based on related activities ratrer than on the amount of pollution discharge. For example, an excise tax on coal is less desirable than a tax on the discharge of pollutants resulting from burning coal because the former distorts resource use in favor of other fuels and against devices to remove pollutants from smokestack gases . If, however, this problem is avoided, tre charge approach ras strong theoretical basis . In an effort to reach minimum total cost for pollution, emissions should be reduced until the marginal cost of further reductions equals the marginal benefits derived. By using tl'e charge approach, this procedure can be followed . The control agency would evaluate the damage done by tre emission of incremental amounts of pollutant into 15A prime example of this problem is Michigan's Tax Exemption Act 250 (1965) administered by the State Tax Commission which provides for tre exemption from locally assessed real and personal property taxes for facilities installed primarily for the control of air pollution. Another problem ras deveIOped as a result of this act. This problem centers around the installation of process equipment which effects a reductim in air pollution, but which may not have been in- stalled primarily for the purpose of air pollution control. For example, firms have submitted applications for tax exemptions on equipment to convert from coal firing to gas firing, a sure way to reduce emissions. But in reviewing applications , the state health department denied exelption on those types of installations. or the $218,900,000 invest- ments submitted in “29 applications for exemption, only $119,100,000 worth of exerptions have been gented. Appeals to the state's tax commissioner, tre final authority, have resulted in the support of state health department '8 decision indicating that process changes are rot in tremaelves eligible for tax exemption (Second Annual Report , 1970, p. 1214). 39 the air at am given location and time and assess the emitters a corresponding amount. The economic unit can then decide on the best adjustment to make in ligit of tre costs and benefits they perceive. If the firm can reduce emissions at a cost that would be less than the charge, it would do so to avoid being assessed tie charge. If it cannot reduce emissions at a cost less than the charge, it would elect to pay the fee , but would nevertheless have a continuing incentive to reduce emissions . 'Ihus , tre optimum level of pollution abatement would be approached by the method that is least costly to society as a whole. The practical problems associated with this method, however, are prohibitive, at least for the rear future . These problems include fee collection, data collection and evaluation , measurement of damages , identification of the polluters and allocation of damages , particularly when syrergistic effects occur; that is , when the combination of two or more pollutants cause more damage than either pollutant could cause alone. 'D'e fourth alternative for controlling emissions is relevant in the case of electric power-generating plants and has its basis in the fact that they are regulated utilities . It is asserted that the regu- lating agency could create a situation in which electric power-gener- ating plants would find it advantageous to control their emissions . ‘Ihe regulating agency performs three roles when it regulates power-generating plants . It acts as a proxy for the legal mechanism, the price mechanism, and tre voting mechanism. As a substitute for the legl mechanism, the agency protects the legitimate claims of the utilities ' shareholders with respect to the level and rate of earnings that the firm enjoys. Earnings are allowed on the basis of 140 R = 0 + (V-D)r l where R - return, 0 - operating costs, and the return to capital is given by the product of the rate of return 'r' times the rate base, the original value of the plant and equipment 'V' less accumulated depreciation 'D' . As a substitute for the price mechanism, the agency must determine how the new capital that is presented for inclusion in the rate base will influence the output and distributim of goods and services through- out the econerw. 'Ihis problem is further complicated by the fact that the agency must also try to ascertain wretrer or not the adjustments that will take place as a consequence of their actions represent a move toward improving the community '3 welfare. Firelly, as a substitute for the voting mechanism, the regulating agency must treat the utility as an obj ect of the commity ' 8 social preferences. In the case of air pollution, the agency becemes the vehicle through which the community expresses its preferences to the meregement of the utility. If the regulators perceive that society is seriously concerned about the damages caused by the effluents from electric power generating, and that society is willing to pay for abatement measures in the form of higher electrical rates , they have the right to allow such expen- ditures for abatement devices as acceptable costs in providing electricity. The firm could then invest in the pollution abatement equipment and add it into its rate base. Likewise, the cost of Operating the equipment would also be allowed. The allowable earnings would then be R' - 0 + DEC 4» (v+vEC-D)r 141 where 0E0 is the operating cost of controlling emissions and VEC the value of the equipment needed to control emissions. Since R' is would be greater than R in equation 1, the utility would be allowed to raise its electrical rates so that it could realize revenues equiva- lent to R' . Furtl'er incentives for the power plant would depend on the value of tl'e by-products in the fertilizer industry and on the tolerance of the regulators. Asstmning the utility could sell or transfer the by-products at zero cost (or at a negative cost if a disposal cost is allowable) to another enterprise or to a subsidiary, that division could then mrket the by—products , thereby generating revenue to that enterprise. If time regulators considered this revenue external to the power-generatirg enterprise, the revenue generated by the sale of the by-product would not be included in R' above and the total revenues of the firm would be increased. ‘Ihus, if investments and operating costs are allowed in the regulated porticn of the busiress , and if the by-products can return sufficient revenue outside the regulated portion of the business , profits of the firm would be enhanced, emissions of sulfur oxides from the power plant would be reduced, and simificant amounts of ammonium sulfate and/or sulfuric acid could be routed into the fertilizer industry . Because of the complexity of the problem, all four approaches will be used to control sulfur oxide emissions . Sulfur oxides are emitted into tlre atmosphere from a great variety of facilities in- cluding power plants, refineries, smelters , coke processors, sulfuric acid plants , and even from refuse incineration. Directing attention 142 to power plants alone does not reduce the problem appreciably. Size of power plants varies greatly. For example, one power firm in Michigan operates a 7.500401 plant as well as a plant at least as great as l,l|90,000 KW. There are plants currently being built and plants 50 years old. Sane plants can burn only coal, while others may burn a variety of mel. And there is a great variety of firing technologies used in tl'ese plants . ‘Ihe importance of this characteristic of great variety lies in the implications it has for physical emission control techniques that may be applicable. No one process is applicable to all facilities. Indeed, am given control technique may be limited to very few types of facilities , and for those types of facilities where the process is applicable, the costs may vary considerably. Unfortunately, for nurerous plants, no economical control technique may be available. This variety will serve to complicate the problem of regulating sulfur control. Consequently, a simplified approach must be taken, and it is becoming increasingly apparent that the direct regulation and/or directivesl6 approach will make up the bulk of the regulations , and that emission requirements will be the primary criteria. The trend to this approach has been established in foreign countries as well as in the United States. Japan, which suffers frem critical levels of air pollution, uses emission controls to reduce sulfur oxide levels . Under their current regulations , sulmr oxide emissions must be less than 16A regulation applies to all firms that fall in the class defired within the regulation regardless of the type of firm, its products, locatim, resource base, etc. A directive is a rule or decision that applies to are firm, and is normally based on the unique characteristics of the situation with which it is concerned. “3 q . k x 10'3 He2 whereq-quantity ofSOZinCMM/hourat STP He - effective stack height in meters and k . a cmstant which varies by regions and currently ranges between 5.26 and 26.3 (Profile StudLof Air Pollution Control Activities in Foreigl Countries, 1970, p. 99). Essentially the only effective air pollution controls in use in the United States qualify as direct regulation, i.e. , licenses, permits, registration, and most use emission standards as the primary criteria. Control of particulate emissions from a variety of sources and control of motor vehicle emissions have led the way. The states of New York and California and the cities of Toledo, Newark, and Chicago have motor vehicle emission controls. Control of particulate emissions from Riel-burning plants, refuse-burning equipment and from manufacturing processes has been initiated in eight maJor cities , five counties or areas, and in four states. Control of sulfur oxide emissions appears to be following a similar pattern, with standards alream' established in the cities of New York and St. Louis, and in metropolitan Dade County, Florida; the county of Los Angeles; the San Freeisco Bay area; and the county of Sarasota, Florida. For example, Los Angeles County specifies that missions of sulfur dioxide shall not exceed 0 . 2 percent by volume at the point of discharge. The Missouri Air Conservation Commission adopted the Air Pollution Control Regulation for St . Louis Metropolitan Area which states that emissions of sulfur dioxide from plants that produce 2,000 million or more Btu's per hour shall be less than 2.3 pounds per million Btu's of heat. The San Francisco Bay Area limits an emissions in excess of 2,000 ppm. Some of these agencies also use otl'er criteria and otter ap- proaches . 'Ihe Pollution Control Ordinance of metropolitan Dade County , Florida, and the San Francisco Bay Area Air Pollution Control District Lees ground-level concentrations of sulfur dioxide as the criteria rather than smokestack emission concentrations . Although Los Angeles Comty has a smokestack emission limit, it also restricts the use of high-summ- fuels between April 15 and November 15 of the year (this is an indirect control, as the limitations are placed on the quality of tre input, ratrer than the effluent quality). New York City limits the sulfur content of coal to one percent by weight. Many states currently use tre payment approach for firms that invest in abatelent equipment . However, it usually takes the form of exerption from taxes. ‘I’rere are likely to be subsidies, however, in cases where the only alternative would be to cease Operations. For example, a small marginal firm may have high concentration of sulfur dioxide in its smokestack pltme. Became of the characteristics of its finances, and its financial situation, a regulation to curb emis- sions may force it to discontinue production. However, rather than allow this to happen, a state or federal grant or loan may be available to provide the firm with enough financial strength to continue operations . 'Ihe payments approach camot generally be used as a means of establishing emission controls. There is no natural source for gener- ating the funds necessary to carry out such a program. Any money that is granted will probably have to be collected from the public through usual taxing procedures. Another shortcoming to this approach is that often the technique of abatelent is specified and the firm in question '45 loses its option of determining tre process that could result in least cost. Althougl this need not be the case, it often is. Even though the payment approach cannot be used as a primary means of control, it can 'be expected to be used in situations where grave consequences that may otterwise result wish to be avoided . 'Ihe effluent fee approach will be used to some extent early in abatelent programs. However, it will without doubt take a less ef- ficient form, such as a tax on high-sulmr fuels, rather than the econorically optimal approach of taxing on the basis of the damage caused by erissions. This approach can be expected because, in the short run (i.e., in the rext couple of years, at least), consumption of low-sulfur fuel will be the only technically feasible method of controlling erissions . 'Ihe theoretically optimal approach will not be used because of measurement and administrative problems. aloe proven processes are available for removing sulfur from flue gases, one would hqe to see the tax on high-sulfur fuels removed. The removal of sulmr dioxide from the emissions of power plants should be easy to regulate. Public utility regulators have encouraged power plants to invest in pollution control equipment by allowing investments and operating expenses for pollution control as J latified expenses in producing electricity. 'Ihus , power firma are allowed to pass the cost of abating missions on to the consumers of electricity in tre form of higler electrical rates. ‘Ihe firm would not face the problems relevant to inter-regional competition since each firm' 3 market scene to be well-defired geographically. In conclusion, all four approaches will be used to improve elbient air qualities . Althoigh direct regulation will be used most 146 heavily for controlling emissions , payments and effluent charge schemes will also have an important role. Once reliable processes are developed for removing sulfur dioxide from flue gas , power utilities can be ex- pected to control treir emissions even in the absence of direct regula- tion, payments, or effluent fees. Control of Sulfur Oxide Emissions from Electric Power-Generating Plants Several alternatives are available for alleviating the problems of power plant emissions. 'Ihese alternatives fall into three basic approaches: (1) diminish the damages that result from the sulfur oxide emissions; (2) reduce the use of high-sulfur coal; and (3) ex- tract the sulfur that accompanies coal . Two proposals have been made for reducing the impact of the emissions from power plants. Basically, they both have the effect of removing the sulfur oxides from urban or heavily populated areas. One proposal, the relocation of power plants—preferably to the location of the source of coal—has interesting implications . While it serves the purpose of removing the source of sulfur oxides from the urban area, it would reduce the quality of air in the mining area, and would have significant consequences on related economic activity ("Sulfur Oxide Control: A Grim Future," 1970, p. 187): lbs second proposal is that of using tall smokestacks. Under amt meteorological condition, a tall stack located in open, uncom- plicated terrain will produce a dramatic reduction in tre local ground- level concentrations of sulfur oxides . This reduction is accomplished simply by giving natural atmospheric turbulence an Opportunity to dilute the pollutant before it reaches ground level. 'I're tall stacks are even more valuable during temperature inversions, when the mixing 147 process is extremely slow and ineffective, particularly with respect to vertical movement of plummes . A plume emitted at am; reasonable height above ground (500 feet or more) will remain aloft indefinitely, producing no ground-level concentrations (Smith, 1966, p. 151) .17 Both of these prOposals would siglificantly reduce the level of pollution in urban areas . Whereas the tall stacks allow the pol- lutants to disperse, moving power plants simply moves the pollution to another area. But both are strictly short-run solutions . They only reduce the local concentration of sulfur oxides in urban areas . They do nothing to eliminate the overall burden of pollution borne by the atmosphere . The second approach is that of simply reducing the use of coal. Proposals follow two lites: use low-sulfur coal, oil, or gas to power steam—generatirg electric plants; or substitute other types of plants for the conventional steam plants . Fuel oils contain much less sulfur than does coal, and gas contains very little sulfur at all. Unfor- tunately, the substitution of gas for coal and oil is limited. The supplies of gas are limited, and tie demand for gas in other uses has set a market price on gas which generally precludes its use as a primary input in generating electricity . Most power-generating plants would find alternative means of abatement more economically feasible than the comtinued use of this relatively high—priced input . Nuclear power plants are an alternative to coal and will likely increase their share of the electricity-gemmting market . However , pollutants other than sulfur oxides accompany this means of generating l7Tall stacks solve other problems that result in ground-level pollution as well. See (Smith, 1966, p. 1514). 118 electric power. Another potential advance in conversion technology which now appears feasible is the magetorydrodvnamic (MHD) conversion. The MHD generator makes use of high-velocity electrically conducting gses to produce electric power without the need for a turbogenerator (Seaborg, 1966, p. 136). The primary problem with identifying one, or a few, sources of fuel is that no one source of fuel will be able to satisfy, or is currently capable of satisfying, the electrical power demands of the United States (Sporn, 1966, p. 1115). The power demands of this country in 1980 are estimated at twice the present level; and by 2000, approx- imately six times the present level (Rohrman, 1965, p. it). Even under projected technolog, the United States will have to call on all of its principal sources of fuel for power generation in future time periods . At present, and in the future, no major source of fuel can be heavily restricted in use for the purpose of maintaining cleaner air without seriously handicapping the capability of society to achieve many other objectives at least as important as cleaner air. The third approach for reducing power plant emissions is the removal of the sulfur that accompanies coal. Three alternatives are available: (1) remove the sulfur from the coal before burning; (2) remove the sulfur during combustion; or (3) recover sulfur oxides from the flue gs. The sulfur in coal is present in varying amounts of pyritic and orgnic forms. Orgnic sulfur is not ammenable to removal by nondes- tructive methods. Pyritic sulfur can often be separated by use of con- ventional coal-cleaning equipment because of differences between its specific gravity and that of coal. Unfortunately, pyrite is sometimes 49 present in such firely divided particles that such separations are difficult, if not impossible. Further, the tonnages of coal which would reed to be processed to supply power plants are so great that routine Operations like crushing and washing would add substantially to the cost of power gereration (Zimmerman, 1966, p. 61). Numerals studies are under way to determine the feasibility of removing sulfur during combustion. In 1966, Detroit Edison was cOOperating with a steam gererator manufacturer on a pilot Operation at their largest power plant. An attempt was made to capture the sulfur oxides by injecting dolomite dust during the firing of pulverized coal. Although the process was chemically and technically feasible, practical problems plagued the operation . They did learn that the process in- creased the cost of generating electricity, however (Cisler, 1966 , p. 121) . At best , Operational techrologies for removal of sulfur during fuel comumption are three to eight years away from being operationally feasible according to the National Research Council, and may not be retrofitted to existing plants ("Sulfur Oxide Control: A Gr'im Future," 1970, p. 187). Hundreds of processes for removing sulfur oxides from flue gases have been proposed. These various processes can, in gereral, be classified into the fbllowing:18 . Scrubbing with aqueous salt solutions Sorption by metal oxides Catalytic oxidation of sulfur dioxide to sulfur trioxide J: LA.) N H O . Sorption by inorganic solids other than oxides lBSee ("Sulfur Oxide Removal from Power Plant Stack Gas—Ammonia Scrubbing," 1970, p. 15). 50 . Reduction of sulfur dioxide to sulfur Sorption by inorganic liquids Sorption by organic solids . Sorption by organic liquids \O (D N) Ch U1 0 . Separation of sulfur dioxide by physical methods Of these, the first three rave received major attention although a few of the other sorption processes have been develOped. There is not sufficient evidence to conclude that am are economically feasible . Some of those processes that have been developed to Operational stages are discussed in the following section. It is safe to conclude that few other processes will be dele to tre extent of being used in the rext decade. Technical Processes for Recovering Sulfur Oxides from Smokestack Flue Gas Farm of the recovery processes have some useful form of sulfur as the by-product of controlling sulfur dioxide erissions from electric power-gererating plants. However, the first two described result in a by—product that is not useable on an economic basis. A dry limestone-1m ection process to control sulfur dioxide from flue gas was initiated in 1964 by the Process Control Engineering Pro- gram of the National Air Pollution Control Administration (NAPCA) , and later studied by the Tennessee Valley Authority (TVA). In this process , limestone and/or dolomite is pulverized and fed into the high-temperature combustion zone of the furnace were it is calcined to the active oxide forms of Cao and MgO (Figure II-B). The reaction of the additive with $02 and oxygen at temperatures above 1200° F forms gypsum (CaSOu). sulfates, unreacted lime, and fly ash are removed by conventional Particulate collection equipment (Harrington, 1968, pp. 152-158). 51 now 3E E New €82 no.“ snooze $8333." £8qu.3 .mmHH magma \ I x w 4 e33 Eo§b\ someones populates/r mg ems: oboe obsess: ...... scoops—:3 m m Eon—ocean o5 massage swoon 52 The limestone-injection, wet-scrubbing process for recovering $02 is actually a combination of two individual processes, (1) dry limestone injection directly into tre furnace where it is calcined to line, and (2) scrubbing of the combustion flue gas by a lime slurry for removal of SO2 (Figure II-9). In the second step of this process, lime and fly ash are collected by tre scrubber, where the calcined limestone forms a slurry of reactive milk-of-lime, which reacts with the SO2 in tre flue gs to form sulfite and sulfate salts. The spent scrubber liquor and reaction products are allowed to settle. Ash and reacted lime are removed for disposal. Scrubber liquor is recycled to reduce water requirements and avoid water pollution (Control Tech- niques for Sulfur Oxide Air Pollutants, 1969, p. 53). The Beckwell Process, develOped by Wellman-Lord Company, is based on absorption of $02 in a potassiumm sulfite solution, crystal- lization of K28205 from tris solution, and conversion of K25205 to KHSO3 by dissolving tl'e crystals in water. 802 is then stripped from this solution (Watt, 1970, p. 235). The Westvaco $02 recovery process utilizes a specially tailored activated carbon in a small flue gas absorption unit. The sulfur dioxide in the cooled flue gs going to the stack is continuously absorbed on fluidized carbon and reacts with residual oxygen in the flue gs to form 803' This 303 reacts with water vapor in the carbon pores to form sulfuric acid which is retaired at high levels within the carbon. The carbon is completely regenerated in a progressive reaction between sulfuric acid on the carbon and hydrogen with sulfur oxide or sulmr being released (Ball, 1970, p. 211). The Stone and Webster-Ionics Process Utilizes a solution composed now 3.8 2 Now magnum: you 30093 39953 postsogoog 083954 .mmHH 9% income as l maroon eons! Savanna I he Jr. 1? 4 4+ is. +- Q .selmn ma... \ . L? \e/ , Ham 53 \ 3935 i. made w a u. rIIL_ xenon 514 of sodium sulfate electrolyte which is fed into an electrochemical cell wherein a caustic stream is produced at tre cathodes and an acidic streamn at the anodes. The caustic stream is fed into the top of an absorption tower where it is contacted counter-currently with flue gs . A chemical reactiom between the caustic and sulfur dioxide produces sodium acid sulfate which is fed to a heater tank where it is neutral- ized by the acidic stream from tre electrochemical cell. The neutral- ization reaction results in the reformation of tme sodium sulfate which is recycled to the electrochemical cells, and the evolution of pure sulfur dioxide ("Stone and Webster-Ionics Process for SO 1970, p. 215). The Alkalized Alumina Process is one of a number of flue gs- 2 Removal," desulfurization schemes that use a dry metal oxide to contact and ab- sorb the $02 . Tie raw sorbent solid in the form of l/l6-inch spheres of dawsonite, NaAl(CO3)(OH2), is activated at 1200° to form hig— porosity, big-surface—area sodium aluminate, which reacts with 802 in the flue gas at 300° to 650° F to form sodium sulfate (Figure II-lO) . Regeneration of the sodium sulfate in tre presence of a reducing gs at 1200° F produces a stream of SO2 (Control Techniques for Sulfur Oxide Air Pollutants, 1969, p. 50). The Air Pollution Control Department of Monsanto Enviro—Chem Systems, Inc. placed an emission control process on the market in 1968. Because of the proprietary nature of the process, details are not available. However, the process is a catalytic oxidation process , an adaption of the contact catalytic process used in the manufacture of sulfuric acid. A big-efficiency electrostatic precipitator is em- ployed to remove particulate matter before the gs enters tre catalyst 55 xenon new 8.8 89C mom 3388 no.“ cocoons g5? pong .oTHH snow—H new wceonoon pounce nous V ammnoun fungus” Insecure 9598.... cm as 3.38.8 defiill. - no.9“ ll.— a A; pounced.» commodon i r We... honours A .Houoofl” mow paso 3a 56 bed at elevated temperatures of 800° to 850° F (Figure II-ll). Sulfur trioxide formed in the catalyst bed reacts with water vapor in the flue gs to form sulfuric acid. Condensation occurs both in the acid condenser'and.mist eliminator sections (Stites, 1970, p. 222). Recovery of sulfur oxides by ammonia scrubbing involves new possibilities. Several products can be made, and there are various ways of arriving at each product. Only the primary processes will be discussed.19 hkemmammmmia.is introduced into the scrubber system, three products result: ammonium sulfate, ammonium sulfite , and ammonium bisulfite. The relative amounts of each of trese may vary, depending upon tre control of the scrubbing operation. The amount of bisulfite increases as the pH of the solution is reduced. But at low pH, the sulfur dioxide is not removed effectively. In.practice, the pH must be adjusted to give the best balance between sulfur dioxide leakage at low pH and.ammonia loss at high pH. Best results can be obtained by stepwise scrubbing with relatively high.pH in the early stages to capture most of the sulfur dioxide, and lower pH in the final stages to minimize ammonia.loss. The sulfite and bisulfite in the effluent solution are not useful products and.must be converted to a more desirable product. Numerous methods fbr conversion.and recovery have been prOposed and some have been tested. The Operational methods fbr treating the scrubber solution can be divided into three classes: stripping, acidification, and ouidation. 19This part was based heavily on (Sulfur Oxide Removal from Power Plant Stack Gag” 1970, pp. 16-22). 57 now 03C :68 Now 582 no.“ whooond savanna 393.38 .HHIHH g dough undo Alm undo _ _ 4 new I. J. eon caboose _ FIT. newscasts ] T a Buy sets on a new m3.“ 58 1. Stripping—Ammonium bisulfite is an unstable compound and will produce a relatively high vapor pressure if heated even to a level of only 50° F or so above the scrubbing temperature. Moreover, the sulfur dioxide partial pressure is much higher than for the ammonia, so that passing the gs through a condenser to condense the ammonia as ammonia sulfite will produce a stream of sulfur dioxide and water vapor essentially free of ammonia. The stripping solution and the condensate are recycled to the scrubber, and sulfur dioxide remains as a by-product (Figure II-12) . 2. Acidification—Since sulfurous acid is a weak acid, any strong acid added to the scrubber effluent will capture the ammonia and release sulfur dioxide from the sulfite and bisulfite. The sulfur oxide can be converted to either sulfuric acid or elemental sulfur as in the stripping process . The captured ammonia forms an ammonium salt of the added acid. Since sulfuric, nitric, and phosphoric acid are the most appropriate acids to use, tre resulting salts world be am- monium sulfate , ammonium nitrate , and ammonium phosphate, respectively (Figure II-13) . 3 . Oxidation—Ammonia can be added to the scrubber liquor to convert the bisulfite to sulfite. Then the sulfite is oxidized uxier pressure by adding oxygen (ordinarily supplied as air) to form ammonium sulfate, the only product (Figure II-lll). There are between 60 and 70 other 802 removal system that are in various stages of develOpment. In inorganic sorption systems, there are both dry and wet processes proposed. The Reinluft Process is typical of the dry processes. Flue gs containing SO2 is passed through a bed of activated char at temperatures of 200° to 300° F. Daring 59 a 3.8 89d moodfio Madam magnum,“ no.“ mmoogo gooflum . NTHH 933E L ml 3 fill ...a 33m I! A] 93953 5330a noooflum _ 339m 5.3953 b _ _\ V. 11W A — _ a noun: U—r gooell! nonsmosoo Fauna 38 _ a 053m .983 60 new 3.8 89C moodno 983m 5082 no.“ $30.3 souuooadouoiq .mHIHH g mongoose 5.385 goofing ,l , A new .8 3C 3.8»? 538.51...” “Minna .Ho pgaumhuo madam. 5285 Am coflmoufiflom uflnfiom 38 cucummofi Imew snow OH»? .13.. .3 - - _ .1 38 0533.11 - _ a a . v n P x owed . panda god a E _ 35a?» 053m _ , , xooum 61 wow 3.8 59C moodno madam 582 so.“ 380.5 833.20 . :HIHH 253m ngfi Al I. 93338 J .833 ml 2 i now 3.553 r? 62 adsorption, SO2 is oxidized to SO which reacts with flue gas mois- 3’ ture, yielding H230“. The char adsorbent is removed to a regenerator and heated to 750° F, liberating $02 and 00 A conventional acid 2 0 plant converts SO2 into concentrated acid (Control Techniques for Sulmr Oxide Air Pollutants, 1969, p. 56). The Lurgi Process is a wet-char system that first cools the boiler gas by contact with a weak solution of sulfuric acid. After adsorption of converted SO by the char, water is intermittently sprayed 3 into the gas stream to remove acid (Slack, 1967, pp. 188-196). Several metal-oxide sorption systems are also being investigated in addition to those alreamr discussed. The Grillo Process uses a slurry of manganese and magnesium oxide as an absorbent. The gas is cooled by evaporation of the absorbent slurry . After absorption, the regeneration of the absorbent is carried out by heating a mixture of MgSO,4 and coke in a Herreshoff—type furnace . Concentrated SO2 is evolved for sulfuric acid production. The ash and regenerated oxide are separated, the oxide suspended, and the slurry recycled (Control Technigues for Sulfur Oxide Air Pollutants, 1969, p. 57). In the Carl Still Process, a brown coal (ligrite) ash is reacted at 300° F after the SO -laden flue gas leaves the air preheater and 2 before it reaches the control precipitator. The lime content of the ligfite ash is ‘40 to 50 percent. After reaction with the flue gases, the spent absorbent can be discarded or the calcium sulfite can be heated to evolve a rich SO stream for sulfuric acid production (Slack, 2 Few alternatives are currently available for controlling sulfur oxide concentrations in the atmosphere . But it is apparent that many 63 alternatives are in the development stage and a few may soon be Opera- tional . The next section proJ ects development progress and identifies the pattern that can be expected as society attempts to improve the ambient air quality . A Projection of Sulfur Oxide Control Technolfl Were it not for three factors, society migmt enjoy air free of sulfur oxides: (l) the limited supply of natural gas; (2) the con- straints on the construction of hydroelectric and nuclear power plants; and (3) the state of the technolog for desulfurizing coal and oil, for new generating processes , and for reroving sulfur oxides from flue gas. Althougr eliminating any one of these constraints could make possible the achievement of high-quality ambient air, researchers are in general agreement that progress in eliminating the latter two will weigh most heavily. This section projects the developments that can be expected in sulfur oxide control technolog . Two approaches will be used to minimize the impact of sulfur oxide emissions in the next two or three years; use of available supplies of low-sulfur fuels and tall smokestacks . By emitting the pollutants at higher levels (500-1 ,000 feet), the atmosphere is capable of mixing and dispersing the pollutants before they settle to earth. The disper- sion prevents excessive concentration of sulfur oxides at ground level, and therefore improves the air quality. The use of low-sulfur fuels will also be used to reduce sulfur oxide emissions in the near future. Some sources yield natural gas essentially free of sulfur, and the sulfur found in natural gas from other sources can be successfully removed. Although essentially all 61: oil contains sulfur, some of the sulfur can be removed. In addition, a small portion of the coal produced in the United States contains low levels of sulfur (less than one percent by weight). However, the limited supply and higher prices associated with fuels with lower sulfur content will discourage their widespread use . Same air pollution control agencies are requiring the continual use of low-sulfur mels. Although this is feasible on a small scale, the supply of these low-sulfur fuels is not sufficient to allow all or even a mad or portion of the country to use this approach. Therefore, most control agencies are allowing the consmption of high-sulfur fuels as long as the ambient air quality does not fall below the tolerable level. If it does, firms will be required to shift to low-sulfur fuel. reserves for as long as the emergency exists . locating power plants away from major pOpulation and/or indus- trial centers when the Opportunity affords itself will also serve to improve air quality. However, this approach will be used in few situations. Atomic power will account for an increasing share of the energy source used for generating electricity. However, the rate at which its growth can proceed is physically limited. Although atomic power solves the problem of sulfur oxide emissions , some are concerned with emissions of radioactivity and heat. Although the heat problem must be reckoned with, the minute amwnt of radioactivity emitted "poses no health hazard whatsoever" (Seaborg, 1966, p. 131). Althougr hydroelectric power plants are pollution free , they often require extensive amounts of valuable resources. Some segments of society are disenchanted with the use of the nation's resources 65 in this manner, and may be successful in limiting the construction of mrtter hydroelectric power-generating capacity. Therefore , the con- struction of nuclear power plants and the location of the more conven- tional steam-generating plants in less populated areas will serve to reduce the levels of sulfur oxides in the atmosphere. Of these two approaches, the role of the atomic power plant will be by far the most important . Hydroelectric power facilities cannot be expected to play a major role. Techrological progress will be the key in attaining acceptable ambient air quality . Although novel power conversion schemes such as mgretol'wdromnamics will not be available in the near future, they may be important in 20 or 30 years. Of prime importance in the near future, however, is the removal of sulfur from either 011 and coal or from their combustion gases . Technological advances in removing sulfur from oil can be expected in the next couple of years, and should play an increasingly important role in five years . The problems of desulfurization of coal for comm- mercial purposes will not be so easily solved. If progress in the removal of sulfur from flue gas is good, desulfurization of coal will receive less attention and will not play a primary role . There is much optimism in the potential of the recovery of sulfur in flue gas . Numerous processes are being studied and several will be developed. The wet limestone process that produced a throw- away by-product will likely be one of the first processes put to use, probably within five years. The alkalized alumina process, and the ammonia scrubbing process could be on the market by that time or shortly thereafter. The Monsanto process, which is already supposed 14' I n P (X ;.J .’< 66 to be Operational could also share in the early smokestack scrubbing duties. Three of the four processes could produce sulfur or sulfuric acid, and one of those three could produce ammonium sulfate . The use of these processes in the next few years will be a function of the order of development and the reliability associated with each. Several factors lead to this conclusion. First, with the level of sulfur dioxide increasing in the ambient air as it is, it will be important to activate the technically feasible processes as they became available. In some population and industrial centers, where sulfur oxides are particularly concentrated, the returns to recovery of the pollutant may be so great that even relatively expensive processes can be used. Second, the amoumt of risk associated with each process will be a primary comideration. A process that may be relatively expensive but has low risk associated with it may well be preferable. Currently, the risk associated with each process is high. Engineers at the TVA Development Center believe that such basic problems as corrosion and plugging have not been sufficiently solved. No power firm can be expected to risk the production of its plant on an uproven process. Rather, they would prefer a somewhat more expensive process where risk is at a minimum. Third, in the early stages of use, the cost data associated with each process will not be sufficiently reliable to be a primary criteria for selection. For example, the traditional problem of cost allocation could result in an array of cost schedules for army facility . But equally important, the cost of operating a scrubbing plant varies with a number of different factors, such as size of the power plant, 67 age, level of Operation, stack gas temperatures, sulfur content of the coal, ash content of the coal, degree of sulfur oxide and dust removal, and so on. Consequently, the cost of a process in one situation could be considerably different from that process in another situation. Therefore, in the early stages of use, cost considerations will not be primary. After recovery processes have been in use for several years and the cost relationships are understood, cost information will become increasingly important in process selection. Firms will have several alternatives with low risk from which to choose, and the economics associated with each process will become an important consideration. Finally, it should be kept in mind that public utilities are allowed a fair return on their investmment . Therefore, by investing in high-cost equipment , they increase their rate base and are allowed a higher level of profit. Thus, there is an incentive to over-invest . There is little reason to believe that this will not happen. Although the Federal Power Commission is theoretically responsible for preventing such occurrences , their record is solething less than admirable. It is impossible to predict the cost that will be associated with each process. Engineers suspect that, on the basis of the physical process alone, the limestone process may be the cheapest. However, the situation could change when related factors are considered. For example, the purchase and transportation cost of limestme, and the problem of disposirg of the waste by-product could add significantly to the cost. On the other hand, tre alkalized alumina process uses a mgr-cost sorbent, but it can be regererated with little loss (0.1 percent). Since ammonia is being produced at a rate of approximately 68 two-thirds the capacity of the industry , the ammonia scrubbing process may also be attractive. Both the alkalized alumina and the ammonia process produce by-products that have noteworthy value . Revenue gener- ated from the sale of these products may more than offset their higher process cost. In conclusion, tall smokestacks and consumption of the limited supply of low-sulfur fuels will serve as the primary solution to high- sulfur oxide concentrations in the atmosphere in the next five years . Mass desulfurization of oil will be an important source of low-sulfur fuel, but unless great technological advances are made in the desul- furizatiom of coal, that process will not be commonly used. Use of smokestack scrubbers for removing sulfur oxides from flue gas will begin appearing within five years and will be widely used within ten years . Processes that produce throwaway products and that produce products useful to the fertilizer industry will be used. Continual construction of atomic power plants will allow for the production of electricity without producing sulfur oxides , and atomic energy will become a primary source of power. Finally, development of new con- version techniques will not be significant in terms of either generating electricity or controlling sulfur oxides in the next 20 or 30 years. There will be few power plants built in remote areas for the specific purpose of sulfur oxide control, and additions to hydroelectric gener- ation capacity will be limited. The sigmificance of these activities to the sulfur industry and the fertilizer industry is clear. Large amounts of ammonium sulfate, sulfur, and sulfuric acid could be available as by-products from efforts to control sulfur oxide emissions. The next section examines 69 the use of these by-products in the fertilizer industry. Sulfur, Sulfuric Acid, and Ammonium Sulfate as Fertilizers The acidification and oxidation processes discussed earlier produce ammonium sulfate as either the sole by-product or a co-by- product with sulfuric acid. The ammonium sulfate by-product mnay be used as a primary input in manufacturing other fertilizer products. First, it can be used to mnake a nitric phosphate fertilizer. A slurry of prosphate rock and nitric acid can be treated with the ammonium sulfate, which reacts with the calcium nitrate in the slurry to form soluble ammonium nitrate and insoluble calcium sulfate. The precipi- tated calcium sulfate can be discarded and the remaining solution of ammonium nitrate and phosphoric acid can be reacted to give an ammonium phosphate-nitrate fertilizer. The by-product, ammonium sulfate, can also be heated to about 700° F to convert it to ammonium bisulfate. Since ammonium bisulfate is acidic, it can replace sulfuric acid for dissolving phosphate rock. The resulting slurry would be filtered to remove calcium sulfate and then ammoniated to give an ammonium phosphate-sulfate fertilizer. Ammonia freed in the kiln can be recycled to tme scrubber, or used in the ammoniation process (Figure II-lS) . Ammonium sulfate can also be used to mnake sulfuric acid or sulmr. By reacting it with zinc oxide at high tenperatures, ammonia and zinc sulfate result . The zinc sulfate can be rurtrer heated to regenerate the zinc oxide and give a rich stream of surm- trioxide that can be absorbed directly to form sulfuric acid. Sulfuric acid can also be produced from ammonium sulfate via 70 Sagan 5885 when emooea commonsense ..flnn mama ocean goo _ Annulnl _ new ogugm , 03H“ , nooowmn modafio Had: e mpeafle 38a: canoe—em xenon 71 a scrubber process . Since ammonium bisulfate made by heating ammmonium sulfate is acidic, it can be used in the acidification method discussed earlier for processing the scrubber effluent solution. In that process , a strong acid was used to capture the ammonia and release sulfur dioxide, leaving an ammonium salt of the added acid. By substituting the bisulfate for the strong acid, the ammount of ammonium sulfate ending up as final product is minimized. Only the sulfate resulting from oxidation before and in the scrubber results as final product, whereas if sulfuric acid is the acidification agent as in the method described earlier, all the ammonium sulfite is converted to sulfate as well (Figure II-l6). While the acidification and oxidation processes can result in ammonium sulfate , all other processes produce sulfur dioxide , sulfur, or sulfuric acid. In addition, the ammonium sulfate can be converted to sulfuric acid. Likewise, sulfur dioxide can be converted to sul- mric acid. Both sulfuric acid and sulfur are used in the production of phosphate fertilizers . Be Fertilizer Industry—A Consumer of Pollutants In some respects, traditional waste disposal practices have real advantages. By-products that had no ecomic value were often discharged into the atmosphere or dnmped into rivers, lakes, or streams. The atmosphere and water are excellent medias for disposing of waste as long as it is discharged in moderation. Both medias disperse and Often chemically or biotically convert the waste to harmless material that does not disrupt the ecology. That is, it disposes of the waste at essentially zero cost. But as the discharge of waste increases, 72 ammonia to scrubber -4-—-fl—__-___l I 1 water —Ef disolver J ammonium bisulfate solution +1 l phosphate rock fl extractor ] calcium sulfate waste beqfilter ammonium sulfate from scrubber concentrati "fl‘ ammonium phosphate- sulfate product granulation Figure II-16. Ammonium phosphate-sulfate process 73 damages from the materials are incurred and, consequently, additional costs are incurred. While disposing of wastes by spreading them over soil requires distribution activities not needed with disposal via air or water, the soil has a great potential for absorbing wastes without ill effects. The chemical and biological activity in the soil is mam times that of either air or water. And when the waste can be utilized by plant life, nirther benefits are realized. When processes for removing sulmr oxides are installed in electric power-generating plants, and the effluents converted to products useable as fertilizer, the industry could become essentially a secondary industry utilizing by-product inputs . Indeed, the fer— tilizer industry miglt becmo a primary user of certain industrial waste. This would certainly require extensive readjustment within the fertilizer industry, an industry which has previously undergone considerable change. Since 191:0, the fertilizer industry has grown at a phenomenal rate. By 19148, consqutim of all three nutrients had doubled their respective 19% levels (Figure II-l7 and Table II-3) . This loo-percent increase in an eight-year period can be contrasted to the 20-year period before 19160 when N, P205 and K20 (the three basic fertilizer nutrients) increased 8“ percent, 38 percent, and 69 percent, respec- tively . '32 rate of increase then slackened for phosphates , without a tripling of the 19% level until 1962.20 In that same year, con- sumption of N was eight times the 19140 cmsurption level, and 20Note that the consumption of P205 in the base year was more than double that of either N or K20. 3.0m 2.01 Source: Figure II-l'l . /.-\l, o “W I 1950 ' l9'lt0 7H ‘ T 1970 I 1960 l q 1950 (Harre, 1969, p. 12) and (Fbrtilizer Situation, 1952, p. 8). Plant food consumption in the United States and possessions 75 Table II-3. Index of’plant food consumption in the united States and Puerto Rico Year N P205 K20 19110a 100 100 100 19u1 109 109 107 19u2 98 12h 126 19u3 121 136 1u8 19uu 153 15a 1H9 1945 150 1N8 168 19u6 167 170 186 19u7 187 190 197 19u8 205 203 212 19u9 220 213 2H7 1950 2u0 21h 25a 1951 295 231 317 1952 339 291 363 1953 391 2H9 “00 195R “"1 2H5 N17 1955 “68 250 R31 1956 u61 2M6 u3l 1957 510 252 uu5 1958 595 251 has 1959 637 280 50“ 1960 653 282 u95 1961 723 290 M98 1962 80a 308 522 1963 938 337 575 196h 1039 370 627 1965 1107 385 651 1966 1271 927 7&0 1967 1&38 R72 837 1968 1597 h88 872 Sdurce: (Harre, 1969, p. 12) and (Fertilizer Situation, 1952, p. 8). Base year: 19H0. aProduction.in the base year‘was: N - 919,000 tons; P o _ 912,000 tons; and.K20 - u35.000 tons. 2 5 76 cmsutption of K20 was 5.2 times the 19110 consumption level (Fertilizer Situation, 1952) and (m, 1969). More drastic increases occurred during the 60's. Consulption of N increased from 2,738,014? tons in 1960 to 6,693,790 tons in 1968, while consurption of P205 increased from 2,572,398 tons in 1960 to a 1968 level of 11,451,980 tons. Consumption of K 0 increased from 2 2,153,319 tons in 1960 to 3,792,013 tons in 1966. The dramatic increase in the level of consumption of N, P205 and K20 was not unique, it was paralleled by an increase in the number of firms supplying the nutrients. In 19140, only seven firms manufac- tured synthetic ammonia, the basic nitrogen product. The largest firm had 51 percent oftthe industry capacity and the two largest 87 percent. In 1966, there were 65 firms, with the largest having eight percent of industry capacity and the four largest 26 percent (Gale, 1968, p. 28). Phosphate was produced by four firms in 19140. This number in- creased to 16 by 1966. In that year, the largest firm had 19 percent of industry capacity and the top four had 51 percent . Potash was produced by five firms in 19110 and, in spite of a 323-percent increase in industry capacity, by only ten firms in 1965 (Gale, 1968, p. 31). It is apparent that the fertilizer industry can be characterized as an industry of great change. But what lies ahead? Chapter III examines the industry as it would appear if it were Optimally organized in the long run and discusses the route it should take to obtain that organizatim. Chapter IV discusses the impact of large amounts of by-product ammonium sulfate on the long-run Optimal organization, while Chapter V examines the sulfur industry and its relationship to the fertilizer industry. CHAPTER III THE LONG-RUN OPTIMAL ORGANIZATION OF THE FERTILIZER INDUSTRY As noted in Chapter 1, three basic situations were examined with tie fertilizer model. First, the actual conditions that prevailed in the Michigan industry in 1970 were duplicated, as closely as possible, with the model. Such items as product mix, product flow, facilities used and so forth, were programmed into the model. This provides a benchmark from which analysis of special situations may be compared. This benchmark, the simulation of the industry as it was in 1970, is referred to as "1970 Actual" and its details are provided in Appendix A. The second analysis involves the determination of the short-run optimal organization of the industry. This analysis determined the Least-cost method of supplying the amount of N, P205 and K20 Michigan farmers consumed in 1970. Being consistent with the economic concept of "short-run," the model was allowed to make am adjustment that low- ered the total cost of fertilizer except to make investment in new facilities . Existing facilities only could be used. Although the short-run Optimal organizaticm of the fertilizer industry, called "Constrained Optimum," is not discussed here, 'its details are provided in Appendix A. The third analysis involves the determination of the long-run optimal organization of the fertilizer industry . In this analysis, the 77 78 model was allowed to make any adjustment, within the constraints of the model, that lowered the total cost Of fertilizer, including investment in new facilities. This organization, called "Optimum," will be dis- cussed in this chapter. ‘Ihe details of Optimum are provided in Appendix A and can be carpared with both Constrained Optimum and 1970 Actual. The analysis of the impact of by-product ammonium sulfate and sulfuric acid, which is presented in Chapters IV and V, is based on the long-run Optimal organization of the fertilizer industry and, there- fore, frequent comparisons with Optimum will be made. Since Optimum is considerably different than the current organization Of the industry, 1970 Actual, the most efficient manner of reaching Optimum starting at the organization Of 1970 Actual is also explored in this chapter. The Optimal Orgnization Of the Fertilizer Industly The Optimal organizatim of the industry is quite simple, centering around three high-analysis products: anhydrous ammonia, monoammonium phosphate and ganular potassium chloride (Figure III-l) . Approximately 130,000 tons Of anhydrous ammonia would be produced in a centrifugal plant in Michigan and trucked to farms for direct application. The Gulf Coast facilities would also manufacture l62,8714 tons and barge it tO monoammoniun phosphate producers in Florida . Ammonia used for direct application would be produced in Michigan because it is cheaper to pro— duce it in Michigan, near the market, than to produce it in the Gulf Coast area where natural gas is much cheaper,l and transport it to Michigan. Of course, when ammonia is needed in Florida, the Gulf Coast lNatural gas is the primary input in the production of anhydrous ammonia. 79 green phosphoric anhydrous 1a acid production p 3 ct ion (mama) (Gulf Coast) monoammoni um phosphate +—-< barge )————J production (Florida) granular f potassium L rail 3... ch10 rt 28 . produc on terminal — lam...) J mama? 1 production (Michigan) application to soil Figure III~1. Optimal organization of the fertilizer industry for supplying the amount Of N, P205 and K20 consumed in Michigan in 1970 is the logical source. The ammonia received in Florida would be combined with green phosphoric acid in the production Of 270 ,576 tons Of monoammoniun phosphate (13-52-0) . Although the alternative Of producing elemental phosphorus and converting it to phosphoric acid was available , acidu- lation Of phosphate ore with sulfuric acid, the process for producing green phosphoric acid, was selected by tl'e model as more economical.2 All Of the monoammoniun phospahte would then be transported by rail to outstate blenders where it would be mixed with 172,713 tons of granular potassium chloride in two formulations: 7—28—28, a l-A-JI ratio; and custom blend 10.6-142.55-10.85, approximately a 1-14-1 ratio. Because 75 percent Of all materials going to blenders must be stored somewhere to reconcile nonseasonal production of those inputs with seasonal blending operations,3 202,932 tons of the monoammonium phosphate would be stored at the manufacturers in Florida, while 129,535 tons Of the granular potassium chloride would be stored at tre manufacturers in Saskatoon. The remaining 86,319 tons of granular potassium chloride would 2Sulfuric acid used tO produce green phosphoric acid is a com- petitor Of electricity which is used to produce elemental phosphorus in the electric arc furnace which, in turn, is used to produce white phosphoric acid. Consequently, their prices are critical. In this situation, the price Of electricity was ‘4 mills per kilowatt hour, while the price Of sulfuric acid was $12.32 per ton at the Florida production location (the elemental phosphorus route is discussed in greater detail on p. 138). 3The blending season is short, with most of the materials being blended in a two-month period in tre spring, although a little is blended in each spring month, and some in the fall. Since the intermediate products (products that serve as inputs to blending) are produced year- round, 75 percent Of each of them must be stored until the blending seasm. Seasonal production Of the intermediate products is not economi- cally feasible under current economic relationships and, in mam situa— tions , is not technically feasible. 81 be shipped to the Michigan terminal where it would be transferred to the truck and hauled to fame for direct application. It may seem unusual that some of the granular potassium chloride travels direct while the remainder is used in bulk blending. However, this is easily explained. The bulk blend storage requirement combines with a nutrient storage requirement to cause this phenomenon. The nutrient storage requirement specifies that 50 percent of each nutrient supplied to Michigan farms must be stored}I For example, since 155,1322 tons of K20 are supplied, 77,721 tons must be stored. If granular potassium chloride is tie only product being produced, as is the case in Optimum, this storage requirement can be satisfied by storing 129,535 tons Of it. If several products are providing a nutrient , any amount Of any product may be stored to satisn/ the storage requirement. Of course, since the objective is to minimize cost , tre product that can be stored the cheapest per nutrient content will be stored. Returning to the granular potassium chloride phenomenon, line 0D (Figure III-2) corresponds to the 75—percent blending storage require- ment (the line is a locus Of points where the amount being stored is 75 percent Of the amount being blended). OE is the minimal amoult of granular potassium chloride that can be stored in satisfying the 50- percent nutrient storage requirement , and is independent of the amoult being blended. Point B (the point Of intersection of lires 0D and EB) “Fertilizer consurption is seasonal while production Of fer- tilizers is rot . Since seasonal production Of fertilizer products (except for mixed products) is not economically feasible under current economic relationships and, in many situations, is not technically feasible, it was concluded that 50 percent of all production in each nutrient group must be stored. 82 E Nutrient storage requirement B m ~ Tons Of product stored .------------ .------------ Ob’-‘-—-—-—-—-——m—p—--- A 0 Tons Of product blended Figure III-2 . Granular potassium chloride nutrient and bulk blend storage requirements 83 is the point where 75 percent Of the amount being blended OG corres— ponds tO the mflnimal nutrient storage requirement OE. Its significance lies in the fact that at levels Of blending below 00 (for example, 0A), additimal levels of product can be blended without affecting the minimal amount of product that must be stored since , at that amount , the minimal storage level, as specified by the 50-percent nutrient requirement, is well above Aa. But at levels Of blending above 00 (for example, DC), the minimal amount Of product that must be stored is equal to 75 percent of the amoult being blended, and is well above tie 50—percent nutrient storage control . Therefore , the minimal storage requirement is line EBD in Figure III—2. If no more than 0G is blended, the minimal storage requirement is OE. The BD portion Of line 0D is relevant 3111 if blending exceeds OG. For example, if 0C is being bleroed, the minimal storage requirement is on. In terms Of the marginal cost Of blending, no storage costs result from tre blending activities up to level OG, which corresponds to 172,713 tons of granular potassium chloride. But at levels above 00, the additional storage requirements result entirely from increased levels Of blending and consequently raise the marginal cost of blending. Therefore, it can be concluded that it is cheaper to blend the grarmlsr potassium chloride with the monoammonium phosphate as long as there are no storage costs that result specifically from the blending operation. ‘Iie 129,535 tons Of potassium chloride had to be stored, whether it was being blended or not , to satisfy the 50-percent nutrient storage requirement. But if more than 172,713 tons Of granular potassium chloride is being blended, the blending Operation must bear the marginal cost of storage in additim to its own marginal cost. Since the marginal 8A cost of the direct application channel was less then the marginal cost Of the blending channel above 172,713 tons, the remainder Of the granular potassium chloride went direct. Figure III-3 illustrates this relationship. Line ABCD is the marginal cost of blending.5 It is dis- continuous at Point B since it incurs the additional marginal cost of storage. Up to 172 ,713 tons of product the marginal cost of blending is less than the marginal cost of direct application. But at trat point, the marginal cost of blending raises above the marginal cost Of the direct application channel. Therefore, all Of the granular potassium chloride above 172,713 tons travels to the farm via the direct applica- tion channel. One mglt now pose the question, "Why did not the same phenomeron occur with monoamrmonium phosphate?" The fact that all Of the mono- ammonium phosphate went into the blending Operation reflects the fact that the marginal cost Of blending, even with the marginal cost Of storage added in, is less than the marginal cost Of direct application (Figure III-ll). Therefore, at am level, the bulk blend channel is preferred to the direct application channel. The contrasting patterns followed by monoammoniun phosphate and granular potassium chloride in Optimum give rise to an interesting situation. Adding $2.33 (the marginal cost Of storing .75 tons of gremlar potassium chloride) to the marginal cost of blending one ton Of potassium chloride causes it to follow the direct application channel. But addirg a larger amount, $2.142 (tre marginal cost of storing .75 tom Of mommnium phosphate to tie marginal cost Of blending one ton 5Only the relevant portion Of the margiral cost curves are flat, or rearly flat, as represented in Figure III-3. 85 Marginal cost of direct application 45 Cr D ' / l I I A J B Marginal cost of blending 0 Tons of granular potassium chloride blended Figure III-3. Marginal costs of blending versus direct application for granular potassium chloride Marginal cost Of direct application Marginal cost . of blending Tons of monoammonium phosphate blended Figure III-N. Marginal costs of blending versus direct application for moroammonium phosphate ‘ Q .t W ‘1' thaw 51?. a...» 80.0 kW 8%.. has I\‘ ...w 86 of monoammonium phosphate), does not cause it to use the direct applica- tion channel. The explanation is straightforward. TO make comparisons across products, nutrient content must be taken into consideration. If the marginal costs discussed above are placed on a common denominator (nutrient content), we find that the additions were $3.88 per nutrient ton for potassium chloride and $3.72 per nutrient ton for monoammonium phosphate . It becomes apparent that , as long as the differential be- tween the bulk blend route and the direct application channel lies between $3.72 and $3.88 per nutrient ton, only potassium chloride would utilize the direct application channel. Although the product mix is the most. striking characteristic of Optimum, a few otter Observations are Of interest . Both anhydrous ammonia and granular potassium chloride bypass the retailers; the centrally located firm would perform the retailing functions. The two products would be transported directly from the central location to the farm. In terms Of their functions, retailers appear to be relatively high in cost and low in benefits. This results primarily from tl'eir high investments and low thruput . Thruput is an important factor in blending as well. Nire- thousand-ton blenders are identified as more economical than 2,500— or 1000—ton blenders. 'Ihe ecoromies Of scale more than Offset the dis- economies of increased distribution cost from the blender. However, a satellite distribution outlet would be utilized to assist in moving the fertilizer to the farm. Applicators would be used to move the product to the farm. By using applicators, the additional investment of trucks or terriers is avoided, as are handling costs that would be incurred in transferring the fertilizer to the applicator at the farm. 87 The effect Of this organization on the total cost Of supplying fertilizer tO Michigan farmers is phenomenal. Whereas the cost Of fertilizer under 1970 Actual is $71,445,667, the same amount of N, P205 and K20 can be provided under Optimum at “8,297,963, a saving of 32.11 percent. In view Of tre substantial cost reduction, it behooves farmers and firms in the fertilizer industry to take the necessary measures to improve performance within the industry. 'lhe best approach for going from the organization Of 1970 Actual to Optimum is examined in the next section . The Transition from 1970 Actual to Optimln6 The Optimal approach for reorganizing the fertilizer industry in an attempt to go from tre organization Of 1970 Actual to the organi- zation of Optimum is highly dependent upon tie assurptions made . The transition discussed here is based on several assumptions. 1. Tie model was not allowed to invest in new facilities that do not appear in the organization Of Optimum. ‘Ihe objective here was to Optimize year by year, $292 the goal of attaining Optimum as rapidly as possible. Without this restriction, the model may have selected facilities that would have lowered cost in the specific year, but would have detained or prevented the achievement of Optimum. This latter approach would have been consistent with the objective of Optimizing year by year without heading for am specific point. Obviously, there is a trade Off between the two Objectives . With the Objective of Optimizing year by year without heading for a specific 6For a thorougl discussion Of this transition, see (Perkins, 1972). 88 point, annual total cost may be lower in the first few years, but higher thereafter. With the Objective selected, annual total cost may be higmer in the first few years, but lower thereafter. Certainly, one Of these approaches would result in a cost lower than the other over a span Of a nurber Of years. If the model had been recursive, the best route Of transition in conjunction with an efficient long-run organization would have achieved lowest total cost for that time span. The outcome of that analysis could well have been different from the outccme ulder either Of the two approaches that could have been taken with the current model . However, given the model available, the objective of Optimizing year by year, given the goal of attaining Optimum as rapidly as possible was selected. 2. It is assumed that the capacity Of existing facilities in the industry declines at a rate of 20 percent amually. This decline in capacity results from two factors. First, some plants became totally depreciated every year and cease to Operate . Second those plants that continue to produce lose some Of their productive capability due to usual deterioration and loss of efficiency . 3. The salvage value on all facilities is assumed to be zero. This seems to be very consistent with actual conditions. Fertilizer facilities have essentially no other use, and the cost of scrapping them is approximately matched by the revenue generated by the sale of the recoverable carporents and scrap. A. Return on investment of existing facilities and those at least one year old is assumed to be zero. Only two factors will cause a plant to cease Operating. The first is its total depreciation (pmsical rather than accounting). The second is learned from the 89 classical economists and is based on fixed asset theory . Interpreting this situation, a new facility will not replace an existing facility unless its total cost of production is less than the variable cost Of production in the Old facility. If an existing plant is just covering its variable cost of production, it is earning a return on the investment Of zero. 'lherefore, by setting the return on investment at zero, while having a return on investment equal to that level required to induce firms to build the facility, a new plant will not replace the old plant unless its total cost is less than the variable cost of existing plants. 5. It is also assured that farmers will purchase the products that are produced in each phase of the transition. 'Ihis would involve some ratler extensive and abrupt shifts in the consumption Of fertilizers , and past observations tend to indicate that farmers do not change that rapidly. (But never before have the incentives been so great, i.e., a 32." percent reduction in the cost of fertilizer.) In any case, it is assured that they will be willing to accept the products produced in each phase. 6. Finally, it is assured that the level Of consurption Of N, P205 and K20 does not change. Althougl a 32.1! percent reduction in the cost Of fertilizer world certainly cause an increase in the quantity demanded, cotparisons between the organizations and costs associated with 1970 Actual, Optimum and the transition periods are much more appropriate if the levels Of the three nutrients are not allowed to change. The issue Of the change in quantity demanded is discussed at tie and of this chapter. It is important to keep these assumptions in mind because the tramition about to be discussed is optimum mly for those assurptiora. 90 If the assuxptiora were cranged, the transition route would probably change also. In making the transition from 1970 Actual to Optimum, the short- run Optimum can be achieved instantaneously; no additional investment is needed. Therefore, the achievement Of the short-run Optimum takes place in year zero. In year one, the mechanics of tie transition are initiated. The capacity of existing facilities decreases by 20 percent and investment is alloved. The short-run Optimum (year zero) used in the transition is different than Constrained Optimum, however. This variation originates from the differences in the return on investment; as you recall, return on investment for the transition analysis is set at zero for existing facilities, while in Constrained Optimum a 7.5 percent return was allowed on facilities . As emected, components that make up the organization Of Optimum, trose products that have high nutrient content—cost ratios , would begin placing inefficient products immediately . By year five, tie Optimal organization, for the most part, would be achieved (Table III-l). Since anhydrous ammonia is the only source Of nitrogen for all other fertilizer products, its level in year zero, year five, and each intermediate year is essentially the same. A slight variation results from tre differing amounts of product loss in the various uses of axmonia. Although its gereral level would remain stable, there would be important changes in its production and distribution. Production and storage of ammonia in tre Gulf Coast would decline siglificantly. Whereas ammmia storage would drop to zero, production would fall no lower than 112,873 tons. This amount woild be barged to Florida for use in the production of moroammoniun phosphate . Both A I: hKle Pfin. V fikufiu~r1v> FHAIVHIJ F ENHFHJ Ami-N19 Lawffi Ea7vlnleew.n.u otnhfla Ha Pv~ah va,¥,h.~ I .NIIIH N N. 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This loss Of product and storage capacity in the Gulf Coast and Midwest world be made up by investments in those facilities in Michigan. By the end of tie five years, ammonia production in Michigan world climb to 129,890 tons while storage would rise to 62,1429 tons. Allofthe ammoniaproducedinMichiganinyear five wouldbeused for direct application. One Of the major changes that would occur in the tramition would be tre decline in granulation Of mixed fertilizers . Whereas in year zero the granulator would produce 286 ,099 tons Of mixed fertilizers , production world drOp to 1118,308 tons in year one, 98,887 tons in year two and 149,181 tons in year three. NO mixed products would be gran- ulated after year three. Associated with this decline in granulation is a corresponding decline in all those products that serve as inputs into granulation, eitter directly or indirectly . Trey include nitrogen manufacturing solution, ammonium nitrate , nitric acid, run-of-pile triple superptos- phate , diammonium phosphate , white phosphoric acid , elemental phosphorus and nm-Of-mine potassium chloride . Although bulk blending would decline somewhat in year one, it would climb steadily thereafter, reaching 3711,2143 tons in year five. Only two intermediate products would be used in blending in year we, and thereafter: mmoammonium phosphate and granular potassium chloride . By year five, 201,530 tons Of monoammonium phosphate and 172,713 tons of granular potassium chloride would be blended, and another 68,965 tons and 86,293 tons of those products respectively world pass through the Central Michigan terminal enrorte to the farm for direct application. 93 Finally, production Of wet process-green phosphoric acid would increase somewhat, from 240,133 tons to 260,487 tons. This increase would substitute for an equal decrease in the production of white phosphoric acid. Altl'ougl the cost Of supplying the fertilizer would continually decrease, the shift from 1970 Actual to the short—run optimal organi- zation would accomt for most Of the savings . In each Of the succeeding years, additional savings would be realized as the efficient products replace the less efficient sources Of N, P205 and K20. Interestingly, the savings generated in any one year would be more than sufficient to cover tre new investment needed to continue improving the organization Of the industry in tre succeeding year, even if these savings were shared with famers (Perldns, 1972, p. 116). This should be an impor- tant encouragement for an industry which is very likely exceedingly cautious abort mrther investments . Although holding the level of N, P205 and K20 constant throrghort the analysis was useful for coiparative purposes, it is not consistent with ecoromic concepts to expect their levels to remain uncharged in the presence Of such remarkable price drops. Several studies have been undertaken to determine the price elasticity Of demand for fertilizer (Table III-2) . In these studies, the elasticities varied widely, from positive, to irelastic, to quite elastic. It would be difficult to base am change in consurption o1 tiese elasticity estimates. Railing estimated consumption Of N, P205 and K20 to be 187,000 tors, 172,000 tons and 167,000 tons respectively in Michigan in 1980 (Reilirg, 1966, p. 139). Using this projection, or some other projections , colsuzption could be steadily increased 94 Table III-2. Estimated price elasticities of demand for fertilizer nutrients and total fertilizers (short run) Fertilizer nutrients Study N P K Total Grilicl'es (1958) -.50 Griliches (1959) -.43 (East North Central) Yeh and Heary (1959) (U.S.) -.499 -.u88 ~.uo3 -.49 (Corn Belt) Heady and Tweeten (U.S.) -l.24 to -l.34 to -l.43 to -l.40 to .2011 -1090 ‘Zolu '1052 Heady and Tweeten (Corn Belt) -2.99 -3.90 -4.07 -3.67 Brake (1960) (East North Central) -1.79 to “5037 Daniel (1970) -.66 and -.47 Railing (1966) (Michigan) -2.17 .783 .112 Source: (Daniel, 1970, p. V-29). (Railing, 1966, p. 104). throughout the transition. In summary, tre fertilizer industry could improve efficiency co'aiderably without investing in additional facilities . By improving the use of existing facilities, tie cost of supplying the amouit Of tie three nutrients consuxed in Michigan in 1970 can be reduced by more than 25 percent. However, by making modest investments, a reduc- tion in the cost of fertilizer Of 32.4 percent can be achieved. A primary characteristic of Optimum is the use of only three basic and intermediate products; one product to supply each of the 95 nutrients . Granular potassium chloride provides all of the required K20 , while monoammonium phosphate provides all of the P Altrough 205 . the moroamonium phosphate also provides some nitrogen, 75 percent of the nitrogen is provided by anhydrous ammonia. The phosphoric acid used to produce the moroammonium phosphate world be produced as green phosphoric acid; i.e., it would be produced by the wet process. Since the wet process uses sulfuric acid as a primary input , the potential for by-product sulfur or sulfuric acid recovered from the smokestacks of electric gererating plants is clear. On the other hand, all nitrogen world be provided by anhydrous ammonia. Ammonium sulfate is rot Optimal. However, he by-product ammonium sulfate has a distinctive difference from synthetic ammonium sulfate, a difference that may well establish it a role in the fertil- izer product mix. This difference will be discussed in tre rext chapter which examines "me use of by-product ammonium sulfate in the fertilizer irmstry . " CHAPTER IV. THE LEE OF BY-PRODUC‘I' AWDNIUM SULFATE IN THE FERTILIZER INDUSTRY More ammonium sulfate was consumed in the world than any other solid nitrogen fertilizer until 1959, when it was surpassed by ammonium nitrate. In 1966 , consulption Of ammonium sulfate and ammonium nitrate represented 18 and 28 percent of the world fertilizer consumption, respectively . Consurption of ammonium sulfate is equivalent tO three million metric tons Of nitrogen per year. Ammonium sulfate is of lesser importance in the United States than it is m the world level. Althougr it was the major nitrogen fertilizer from 1923 to 1947, anhydrous ammonia, ammonium nitrate and urea have moved ahead. In 1970, 771,655 tons of omonium sulfate were applied directly. Ammonia and ammonium nitrate supplied 3,491,603 and 2,847,334 tors of material for direct application, respectively (Hargett, 1971, p. 6). Only 2,366 tons Of ammonium sulfate were consumed in Michigan in 1970, which accounts for only .26 percent of the total material sold (Tomage of Femilizer Sold in Michigan From January; _‘11_ir_ou_gg DecemberQELl,L 1970) . The decline in ammonium sulfate is not without reason. Because Of its low nitrogen content (about 21%), the cost of handling, storing, transportation and application relative to its nutrient content is high. Fur example, if urea (45% N) and ammonium sulfate are transported at equal cost per ton of material , the cost per nutrient content would be 2.14 times as great for ammonium sulfate as it would be for urea 96 97 simply because urea can spread the transportation cost over more nitrogen coltent. However, if the cost Of manufacturing ammonium sulfate were sufficiently low, the premium that would be needed to handle, store, transport and apply ammonium sulfate might be Offset, particularly if these Operations were minimal . Indeed, tie transportation differ- ential should rot be geat since the potential source Of by-product ammonium sulfate, tre electric poweregererating plants , are in proximity to the fertilizer consular (Figure IV-l). How law must the manufacturing cost go to make ammonium sulfate conpetitive with the source of nitrogen in the long-run Optimal organization? Ammonium Sulfate for Direct Application The Option of utilizing by-product ammonium sulfate for direct application was introduced into the model . Although the technology relating to the use Of the by-product powdered ammonium sulfate is not van-@veloped, it is assumed that it can be handled, stored, transported and applied at the same cost as can granular ammonium sulfate. To initiate the analysis, the price at which powdered ammonium sulfate was transferred from the smokestack scrubbing operatioi to tre fertilizer enterprise was lowered until it became corpetitive with established sorrces Of nitrogen. An analysis indicates that at prices above two dollars per material ton, ammonium sulfate is not competitive with the products in (kitimmm. But at two dollars, 296,321 tons would enter the solution by replacing 75,703 tons Of anhydrous ammonia being used for direct application in mtimrm. By lovering the price tO that level, tre Premium paid for handling, transportation and application is Offset . 98 ‘ ""iOHII' 0"; i imam I \__l WW" ' M‘our- ' misfi— wam I 01300 ."°“"‘°' ,l -— —-—-—.—._-— 'uxl l'oscsou [cunt |oubwm3 5 ’7‘" l . u u I I I 2 I 1 I 1 TL. ‘ Human ‘ -——-'——-_-' ._,_:____. uv mm o wecosn WW IMMUNE-I 35 I . L__-_-___ 5 I 9 | 6 I" (j, ruscou Imam - Ema—'iméa-Tmim L! 33 | 29 "gif'fiir -i la i 25 i 31 !_ ”.711 and I I__-' __._.-—-—-!?EIM M“ L—-—-- orva IIOIIA [mutton I‘""“"" I \smum 9I11i13|15i13i 7 LEE,“ W0 rumouq C 15!6i11i12!7i3 !7 VFW—Fm? man? "imam; j‘fififiiffifii "" L13” in in !12 L2 16 i” WMWFMKJ Taoism ima— ' Tim) '5".'_"‘J..._9_L.1.1_l._n_ll 11i 32 i220 Source: 1962 Census of Agriculture. Figure IV-l. Seven maJ or coal-fired electric power-generating stations in Michigan and consumtion of fertilizer by county (in 1,000 tons) 99 This relationship can be presented algebraicly: P +Has+Tas+Aas_<_M +Ha-i-Ta4-Aa % ———v— Nas Na where P - price, M =- manufacturing cost, H = handling cost, 'I' = transpor- tation cost, A = application cost, N a nutrient content (i.e. , 21 percent for ammonium sulfate) and the subscript "as" means "of ammonium sulfate" while "a" means "of ammonia." As noted previously, ammonium sulfate's share of the market diminished because the handling, transportation and application costs per nutrient were high relative to other products . That is , H +Tas+Aas>Hx+Tx+Ax 88 N88 NI where "x" represents another product . But as ammonium sulfate '3 price per nutrient ton falls below the manufacturing cost per nutrient ton for other products, i.e., Pas < ”Sr “2; “I it diminishes the diaparity in the total of the four Operations until equation 1 holds true . ‘Ihe ammonium sulfate would not replace all of the anhydrous ammonia going direct, however; 5H,239 tons would remain. 'I’nat amount of ammonia would be stored in order to meet the previously discussed storage requirements of the model. Since ammonia has a favorable storage cost per nutrient content relationship , and ammonium sulfate an ur- favorable one, adding those two components into equaltion l swings the advantage back to ammonia. That is, +Has+sas+Tas+Aas1Ma+Ha+Sa+Ta+Aa Nas IQ Pas 100 where "S" is the cost of storage. With ammonium sulfate priced at $2.00 per ton, its low price per nutrient content would be able to counterbalance the my: nutrient cost of handling, transporting and applying, but would not be able to counterbalance storage in addition to those three. Consequently, ammonium sulfate would be able to replace only that amount of ammonia not being stored.1 This relationship can be illustrated in terms of marginal costs (Figure IV-2a). Line BCD‘S is the marginal cost per nutrient ton for providing ammonium sulfate . Portion BD corresponds to its marginal cost when it is rot being stored. Portion DE. is its marginal cost when it is being stored. The marginal cost of anhydrous ammonia, FGHI, is similar. When the marginal cost of ammonium sulfate fell to OB, which is below the marginal cost of ammonia (OF), it became desirable to supply N in the form of ammonium sulfate, rather than anhydrous ammonia, up to level 0A. At that level, ammonium sulfate would need to be stored to satisfy the nitrogen nutrient storage requirement . But the marginal cost of storing ammonium sulfate was much greater than the marginal cost of storing anhydrous ammmia. So wren the marginal costs of storage are coraidered in addition to the marginal cost of production (or purchase) and distribution, anhydrous ammonia is clearly preferable. However, when tre price of ammonium sulfate falls to one dollar per ton, the storage cost disparity is offset, the inequality in lActually , the disparity between the per-nutrient storage costs of ammonium sulfate and ammonia does not specifically have to be neu- tralized if there are alternative products that can satisfy the storage requirement. For example, if urea were also going direct in the solu- tion, it would have been stored rather than ammonium sulfate because its storage cost per nutrient content is less . In that case, the price per nutrient content of ammonium sulfate would need to offset the dis- parity between nutrient storage costs of ammonia and urea only . Marginal cost of ammonium sulfate U -‘P Marginal cost of anhydrous ammonia mu: y-(I :1': 3’ ""'"rm ' Nutrient tons of product (a) Price of ammonium sulfate at $2.00/ton Marginal cost of anhydrous ...”...7. I Marginal cost of ammonium sulfate t----4L .. Nutrient tons of product (b) Price of ammonium sulfate at $1.00/ton Figure IV—2. Narginal costs of ammonium sulfate and anhydrous ammonia per nutrient ton 102 equation 3 reverses , and ammonium sulfate becomes the preferred product . At that point, all the 129,942 tons of ammonia going direct would be replaced by 508,629 tons of ammonium sulfate. In terms of marginal costs , tre purchase price of ammonium sulfate would be low enough that when the marginal cost of storage is added, it is preferred to anhydrous ammonia (Figure IV—2b) . Althougm there would still be some ammonia in the solution, the ammonium sulfate would not be able to replace it-even when its price dropped to zero. The remaining ammonia would be manufactured at the Gulf Coast and barged to Florida to be used in the production of mono— ammonium phosphate . The monoammonium phosphate would, in turn , be shipped to Michigan for use in blending. If the ammonium sulfate were to replace that ammonia, it would also have to offset the additional nutrient cost of producing and distributing phosphate products that are less efficient than monoammonium phosphate . The ammonium sulfate is not able to do that at positive price levels. The entry of tre by-product ammonium sulfate would reduce the total cost of fertilizer to Michigan farmers somewhat . When it replaces the nonstored ammonia, the cost would fall from $148,297,763 to $118,278,751. a meager savings of $19,012. When tre cost fell to $1 and ammonium sulfate replaces all direct application ammonia, the total fertilizer bill would. drop to $147,963,336, a savings of $315,165 or a .65 percent reduction in the cost of fertilizer. If the price of ammonium sulfate continued to drop, the cost of supplying fertilizer would go down proportionately . As the price falls from $1 to zero, the total cost for fertilizer would be $u7,u5u,707, an additional savings of $508,629, resulting in a 1.7 percent reduction in 103 the cost of supplying fertilizer to Michigan farmers. All other production and distribution facilities would be u'raffected by the substitution of ammonium sulfate for anhydrous ammonia used for direct application. Appendix B provides the detail of the organization of the industry at the three levels of ammonium sulfate usage (0, 296,321 and 508,629 tons). Table IV-l summarizes the changes that would occur, while Figure IV-3 illustrates the organization when the price of ammonium sulfate is at one dollar per ton. Table IV—l. Summary of powdered ammonium sulfate used for direct application (in tons) Price of ammonium sulfate >200 2.00 1.00 0.00 Antwdrous ammonia: Production 172,828 97,125 142,886 112,886 Direct application 129,9LI2 514,239 -0- -0- Stomae 514.239 511.239 -0- ~0— Ammonium sulfate: Production —0- 296,321 508,629 508,629 Direct application -0- 296,321 508,629 508,629 Storage -0- -0- 212,309 212,309 Ammonium Sulfate for Granulation Powdered ammonium sulfate can also be used as an input in the granulation of an ammonium phosphate-sulfate (20—20-0) product by carbining the by-product powdered ammonium sulfate with phosphoric acid. This results in a product with considerably higher nutrient content than has ammonium sulfate and, trerefore, might be more competitive than the direct application of ammonium sulfate . However, the cost of 1014 green phosphoric arm}! WES acid production rodu p ction (Wide) (Gulf Coast) I monoammonium phosphate production ' ( barge (Florida) granular f potassium 0 ”11 F an: p no on C rail )— (Saskatoon) Michign terminal ammonium ‘ sulfate I production satellite retailer C applicator D C applicator D A application fl to soil Figure IV-3. Summary of the industry organization when ammonium sulfate is used for direct application (with amronium sulfate priced at $1.00/ton) 105 granulation must be covered, whereas there were no such costs for the ammonium sulfate applied directly, and granulation operations are not as efficient as many other processes . In addition, phOSphoric acid will have to be shipped to granulation facilities in Michigan. From the discussion of Optimum, it was discovered that it is cheaper to ship phosphate in the form of monoammonium phosphate than it is to ship phosphoric acid. There are obviously factors that will facilitate , and others that will hinder, the potential of the ammonium phosphate- sulfate product . Not until the price of ammonium sulfate drops to $l.l60 per ton would the ammonium phosphate-sulfate product become competitive . At that price , the cost per nutrient content would be low enough to replace certain products in Optimum. 'Ire granulation of 179,309 tons of ammonium phosphate-sulfate would enter the solution replacing 113,600 tons of a custam—blended product with an analysis of 10.6-42.55-10.85. The amount of the other blended product, 7-28-28, would increase form 329,689 tons to 3715218. In addition, the amount of direct application of anhydrous ammonia would drop from 129,942 tons to 97,169, while the direct appli- cation of yamlar potassium chloride would decline slightly (Table IV-2 and Figure IV-ll) . 'Iwo changes in the combination of intermediate products would occur as well. They would be primarily a result of the changes in the mixing operations . In the long-run optimal product mix , phosphoric acid would be produced in Florida and used as an input in producing Wm ptosphate——all of which would be used in the bulk blending operation . But when grermrlation entered the solution , it would replace sale of the phosphate that was provided in the blends . Consequently, 106 .om.o n m» we .26 .. a» we .oe.a a a» me $348.? hogan? omamémmaz meadow? 3.838 :3 $8 38. .o- Samoa .0. -o. 0.2.3.5736 Bog 530 -o. ..o- -o- 89m: mm.oa.mm.me-a.2 ocean 5390 gamma eases minim mmm.m~m mméml. Bog can magma mmmoom Damien 08.93 Bean #5 mmmomm www.mem moma: -o. 8.8-03 sonata dog oooogefio 833.293 0:33 :33 mag Show 323 8235 gamete ago «magma Simmm 8an mmo.mmm 830893 onions asaaaoood gage mam: Enema 03.8..“ Shea eoaooeooao Sflaaoeo 5295593: Sofia Gamma $0.9: 8.068 Baggage 38 oEBaoofi some 89:3 dome: Amado -o. 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Rather than produce green phosphoric acid in Florida, ship it to Michigan, and convert it to white phosphoric acid. Although the processes for producing elemental phosphorus and converting it to phosphoric acid are more emensive than the process of acidulating phosphate rock with sulfuric acid, the savings of shipping the highly concentrated elemental phosphorus (229% P205) over phosphoric acid (59% P205) more than offset the difference. Consequently, 16,1190 tons of elemental phosphorus would be produced in Florida and shipped to Michigan where they would be converted to 69,931 tons of phosphoric acid. The production of green phosphoric acid in Florida would drop to 1911 ,073 tons, which is the amount needed to manufacture the monoammonium phosphate. As the price of ammonium sulfate continues to decrease, no organizational shifts would occur ultil it reached $0.70 per ton. At that price, 373,868 tons of ammonium phosphate-sulfate would be granu- lated. 'llmis product would replace approximately I40,000 tons of ammonia used for direct application, and would cause a shift in the products being blended. Bulk blend 7-28-28 would drop from 371.,203 tons to 107,246 tons while 6.15-17.95-37.0, a 1—3—6 ratio blend, would come into the solution at a level of 199,707 tons. No other siglificant changes would occur in direct application products. The 1-3-6 blend requires 75 pounds of urea per ton of product. Therefore, the 199,707 tons of that product would cause 7,989 tons of urea to be produced at the central Michigan location. Less monoammonium phosphate would be used in blends, and its production would fall to 126,751 tons . The increased need for phosphoric acid at the granulator 109 would prurpt the production of more elemental phosphorus , which in turn would be shipped to tre white phOSphoric acid plant in Michigan. The production of green phosphoric acid would fall further to 122,601 tons. The total cost would drop $116,075 to $18,151,800. As the price continued to decrease, the solution would again change at $0.30 per ton. The changes for most of the products would be merely a continuation of the established trend. The formulation of blends would reverse, however; whereas the 1-3—6 ratio would come in at the price of $0.70 for ammonium sulfate, it would go back out at $0.30 so that all of the 219,189 tons of blended material would be of the formulation 7-28-28. The direct application of potassium chloride would Jump from 86,1401: to 175,876 tons. Tre total. cost would ease lower to $7,991,378. If the price of ammonium sulfate drops to zero, no further organizational changes would occur. The only effect would be a reduction in total cost to $117 ,978,773, a meager reduction of .66 percent from Optimum. Although the causes of each of these shifts cannot be positively identified, the grade of tie granulated product and the grades of the blended products appear to be important . When granulated ammonium phosphate-sulfate enters tre solution at 179 ,309 tons , the product 5, but no K20. Consequently, the shift in blending counters by providing a product high in potash would supply large amounts of N and P20 relative to N and P205. Since 7-28-28 is the only product that uses monoammonium phosphate and granular potassium chloride and is relatively high in potash, it would be utilized. A custam blend product provides a 1-3-6 nutrient ratio 5 but it uses urea, a relatively expensive source of nitrogen. However, as the price of ammonium sulfate falls, the savings realized by using ammonium sulfate as a cheap source of N would llO offset the increased cost of using urea in the 1—3-6 ratio custom blend, and the 20-20-0 product would combine with the custom blend (6.15-17.95- 37.0) to provide the proper balance of nutrients. If additional amounts of the 20—20-0 product were to be produced, the potash would have to be provided by direct application, since no blend product is that concen— trated with K20. This would happen only when the price of armonium sulfate falls to $0.30 per ton. The primary effects of routing the powdered ammonium sulfate into the production of ammonium phosphate-sulfate would be a reduction of production and application of anhydrous ammonia and bulk blends, a reduc- tion in the use of monoammonium phosphate and green phosphoric acid, an increase (from zero) in the production of elemental phOSphorus and furnace phosphoric acid, and an increase in the direct application of granular potassium chloride (Figure IV-S shows the organization, with tre price of ammonium sulfate at $0.70 per ton). Granular Ammonium Sulfate for Bulk Blendirg The optimal organization of the industry demonstrates the relative efficiency of bulk blending. Unfortunately, the powdered ammonium sulfate cannot be blended with other fertilizer products because of its pmsical characteristics . To blend two or more products , the particles of each product must be similar in size. Otherwise, they are difficult to blend evenly and, when they are loaded into applicators or into bins and make a conical pile, segregation occurs. In addition, they segregate when trey are trareported. Since the by-product ammonium sulfate is a very fine powder, it is not feasible to blend it with other popular blending materials. The technolog for recovering the ammonium sulfate in granular 111 anhydrous elemental grade d5 I lpflfiifilc ammonia phosphorous (Florida) production production (Gulf Coast) (Florida) monoammonium Wm «Cb 3 - production arse mi; rail L production C rail D C rail )——‘ (Saskatoon) urea production ammonia (Michigan) production , Michi FC “8‘ )— white - phorous aci production (Michifl. _ um , sulfate 1 purchase ( truck ) 1 C applicator) t C 3 M .. truck farm ,_,,_.r , I granulator satellite mobigan [retailer C ”pl-Tat” ) W ‘ ' I application 1 f C applicator f '1 to soil , ( truck D Figure IV-S. Sumary of the industry organization when ammonium sulfate is used in the production of an ammonium phosphate- sulfate (with ammonium sulfate priced at $0.70/ton) 112 form, or for converting it from the powdered to the granular form, does not currently exist. However, it is relevant to query whether or not ef- forts should be directed toward developing such a technology. If indeed tre product can be produced in granular form, new Opportunities would result. It could become important in blending operations since a large number of fertilizer grades can be blended with ammonium sulfate as a source of nitrogen. By assuming that the ammonium sulfate is in a form that can be blended, its value as an input into blending Operations can be determined within the framework of the model. This information would be useful to decision makers in determining whether or not funds should be allocated toward the develOpment of such a technique.2 This assmption was made, and the price of granular ammonium sulfate lowered, to initiate analysis. Granular ammonium sulfate would enter into tre product mix when its price lowers to $12.50 per ton. At this price, 13,0514 tons of it would feed into the blending Operations to be combined with monoammonium phosphate and granular potassium chloride. The only other change in tke system would be a reduction in the direct application of anhydrous amronia from 129,912 tons to 1211,2112 tons, and a very slight rise in direct application of granular potassium chloride . W0 formulations would be used to mix the 270,823 tons of monoammonium phosphate, 172,713 tons of granular potassium chloride, and the ammonium sulfate: custom blends 6.65-17.9-35.7 and lO.6-fl2.55-—10.85 (Table IV-3). When the price falls another dollar, to $11.50, the use of 2This application of the model can be used to determine the value of new products, or potential products as well. By identifying some basic characteristics Of the product, it can be compared with established product or with the optimal products within tre model, and its value can be determined. 113 mm:.oom.ez msm.:oo.m: mmo.m~m.ms oso.omm.ms mms.emm.mz 080 .3009 93.6.: -o- ..o- ..o- no- mm.m.mo.mum.2 BOB 5895 3348 80.5.0. .0. no- .0. oumémuofi 203 835 .0: ..o- 0862.. mmoém 08$: mdemdeodH 8mg 823 £0.83 gimme 20.3mm mafizm no- hmmumfiumod 203 Sumac -o- no- .0. .0. «08.30. mmummi. @203 go smm.mom wso.mms mmo.mmm omm.mms omm.m:s magmas saga .0. -o- -o- mamas mamas coastlines 883 82020 Eammapoa gage Siam wmoamm mmoamm modamm mmo.mmm 8338mm oceans newsman .8353 H865 $35 08.0% mmwafi 2.06%. 83833 32%08 528.580: 08.08 05.8w $5.08 N868 $908 8308211 38 02938.3 880 9:35. 21%.: «scam $0.? .0. 83335 Swan... 5285 engage 312m 9&5 mama: Swim... gamma 838318 38% mg 95.35 318 £53 9:..me $3.3 mean: 8306qu mucosa 998.25. 8.?“ oméum 8.3.4.1 E .5530 389E §\§Hoo 5” mammgm sad—.655 .3 00E ' '1’... I ...." i'vl.' ‘0'"-A’l‘0' .y‘l'it-".:|‘ ’-“'I.I.II"I A88 :3 553 ads moo 8mm?» 5% Amigo .mufi mafia 1114 atmonium sulfate would increase to 23,0112 tons. The direct application of anrwdrous ammonia would fall a little more to 119,805 tons, but direct application of ganular potassium chloride would fall to zero. The same two formulations would be used again, but custom blend 6.65- l7.9-35.7 would increase from 217,562 to 3814,0149 tons while custom blend 10.6-92.55-10.85 would fall from 239,028 to 168,990 tons. This amount of the two custom blends balance so that all of the ammonium sulfate , monoammonium phosphate and granular potassium chloride would be used in blending. Other changes would not occur until the price of ammonium sulfate reached $1.50 per ton. The changes that would occur at that price, and the changes that would occur at $1.00 per ton, would be essentially a continuation of the trend already established. Anhydrous ammonia used for direct application would continue to drop , although much more than before, and ammonium sulfate would increase. Consurption of anhydrous ammonia would fall to 75,899 tons at the $1.50 level, and to 511,19“ tons at the $1.00 level. The loss of N from ammonia would be replaced by the use of 193,116 tons and 279,998 tons of ammonium sulfate, respec- tively. Again, all of the ammonium sulfate, monoammonium phosphate and granular potassium chloride would be used in blending. However, there would be a shift in formulations. At the $1.50 level, custom blend 6.65-17.95-35.7 would increase from 389,099 tons to 1435,909 tons. But custom blend 10.6-42.55-10.85 would drop out in favor of custom blend 17.6-21.8-0, of which 287,669 tons would be blended. At the $1.00 level, 6.65—17.9-35.7 would increase further to 901,011! tons, 17.6-21.8-0 would drop a little to 261,65u, and 1146,799 tons of 16.8-8.05-8.35 would also be blended. 115 The total cost of supplying fertilizer would change little. If the price of ammonium sulfate falls to zero, the total cost would be $117,621,090, compared to $48,297,763, the cost of Optimum. Although granular ammonium sulfate would come in at a much higher price than would powdered ammonium sulfate, $12.50 versus $2.00 for direct appli- cation and $1.110 for use in granulation, a very small amount would be involved. Consurption would increase little until the price drops to $1.50, which is in the range of activity for powdered ammonium sulfate (Figure IV—6) . gptimizing the Use of Byiroduct Ammonium Sulfate Sumorizing, the analysis indicates the by—product powdered ammonium sulfate used for direct application had to be priced very low before it was competitive with alternative sources of nitrogen. However, it must be remembered that it is carpeting with products in Optimum; products that are highly efficient at supplying N, P205 and K20. This is considerably different from carpeting with products that constitute the current product mix. At the price of two dollars per ton, ammonium sulfate replaced 58 percent of the anhydrous ammonia that was going direct, and at one dollar per ton, ammonium sulfate replaced all of the anhydrous ammonia going direct. When ammonium sulfate was priced at one dollar per ton, 508,629 tons were consumed. While this lowered the cost of fertilizer to the farmers in Michigan by $315,1415, it returned $508,629 to the power plants. However, when ammonium sulfate was priced at $2.00 per ton and 296,321 tons were consumed, farmers realized a savings of only $19,012, whereas the returns to the power plant were higher at $592,6u2. Nor did the use of ammonium sulfate in the granulation of an 116 ...a .b: _._l ...: U.) 1 ...: [Y 1 J l ...: ’E‘ H O L 9‘ 7'1 6‘ 5d I41 Price of granulated ammonium sulfate in dollars/ton 1. l ............ 100 200 Granular ammonium sulfate in thousands tons Figure IV-6. Granular ammonium sulfate price—consumtion map 117 ammonium phosphate-sulfate (20-20-0) compete well with the products in Optimum. Although a large amount of the product was produced, it was not produced until the price of ammonium sulfate had dropped very low (i $1.140 per ton). With ammonium sulfate priced at $0.30 per ton, the 396,385 tons of 20-20-0 caused a number of changes. The application of anrwdrous ammonia fell 56 percent, while bulk blending dropped off 51 percent . Since bulk blending dropped off, the monoammonium phosphate which was used as an input in blending dropped off also, as did the green phosphoric acid used in the production of the monoammonium phos— phate. The production of the 20-20—0 required phosphoric acid as an input. The acid was provided by producing highly concentrated (229 percent P205) elemental phosphorus in Florida, railing it to Michigan and converting it to white phosphoric acid. Finally, the amouit of granular potassium chloride applied directly increased by 103 percent. In spite of these organizational shifts, the revenues and savings were small. With ammonium sulfate priced at $0.30 per ton, farmers' fertilizer bills fell by only $301,385, which is less than was realized when ammonium sulfate was priced at one dollar per ton and used for direct application. Power companies would generate the most revenue by pricing ammonium sulfate at $0.70 per ton. But even then the revenue would be only $287,1410, which compares unfavorably with the $592,692 generated when the ammonium sulfate used for direct application was priced at $2.00. The use of ammonium sulfate in bulk blending was also considered. Althougi it was first used at a much higher price ($12.50) than when used as a direct application product or as an input into the 20-20—0 granulated product, it entered in small amounts (13,051: tons). Before 118 large amounts were utilized, the price had to fall quite low ($1.50 per ton). There were few organizational shifts associated with the use of ammonium sulfate in blending Operations. As the amount of N supplied by ammonium sulfate increased, the amount of anhydrous ammonia used as a direct application source of N decreased. The increased amount of blending also pulled all of granular potassium chloride, that previously was going direct, into the blending Operation. With ammonium sulfate priced at $1.00 per ton, farmers realize a savings of $397,275 on the cost of Obtaining fertilizer under the long-run optimal organization. This is a larger amount than was realized under either of the two previously discussed uses of ammonium sulfate, but still reduces their cost of fertilizer by only .82 percent. However, by pricing ammonium sulfate to generate the greatest return, power plants could still earn only $289,679, which is about half of what they could earn by using the ammonium sulfate for direct application. In the previous discussion, the effect of lowering the price of ammonium sulfate to $0.00 was not considered since the power plant would rot generate returns at that price . Needless to say , farmers would realize greatest saving if ammonium sulfate was priced at zero. Figure IV-7 shows the relationship between the revenues generated by the power plants marketing the by-product ammonium sulfate and the reduction in farmers ' expenditures on fertilizer for each of the three uses of ammonium sulfate . Each linear portion in Figure IV-7 corresponds to a level of ammonium sulfate used for the purpose represented by the line. The letters correspond to the letters. in Table IV-lt which identifies that level and the corresponding price range . 119 panache.“ 5 3.5930 58 new use gags-Bu 188 0283» ac 83.265 8 3% .5285 3889.? go mom: 03853? .«o 939: flu. 433 85E 88.3 a: .8338." 8 ”358080 and 5 8326mm 8m o.8 2.: pee 8m 8.: omm 8w 2.: o § § .3. Powerth revermes (in $1,000) 3 120 Table IV-ll. Level and price range of ammonium sulfate used for three purposes Ammonium sulfate Code Use used (in tons) Price range A Direct application 296,321 $2.00-l.00 B Direct application 508,629 1.00-0.00 C Granulation 190 ,068 l . l{O-O . 70 D Granulation 396 , 300 0 . 70-0 . 30 E Granulation l420 , 168 0 . 30-0 . 00 F Bulk blending 13,05u 12.50-11.50 G 311k blending 23,0'42 11.50-1.50 H Bulk blending 193,116 1.50-1.00 I Bulk blending 279,11148 1.00—0.00 It can be seen that using ammonium sulfate in bulk blending is, for the most part, preferable to using it in granulating tl'e 20-20-0 product, and that using it for direct application is preferable to using it in bulk blending. For example, section B on Figure IV-7 indicates the savings that can be generated by applying 508,629 tons of ammonium sulfate directly. The distribution of savings depends on the price placed on the by-product. If it is priced at $1.00 per ton, power plants would realize a savings of over $500,000 and farmers would realize a savings of over $300,000. As the price is lowered, increasing amounts of revenue are transferred from the power firm to the farmers. At a price of $0.00, the farmers enjoy all the benefits. If the utility regulators assume the responsibility of distributing the revenues , they need only pick a point on B, or A in Figure IV-7. This point would 121 specify the price of the by—product ammonium sulfate , the quantity that would be utilized at that price, and the correSponding fertilizer industry organization. Exploration of Relevant Issues As pointed out earlier, public utility regulators have encouraged power plants to invest in pollution control equipment by allowing in- vestments and Operating eXpenses for pollution control as Justified expense in producing electricity. Thus, power firms are allowed to pass the cost of abating emissions on to the customers of electricity in the form of higher electrical rates . However, power firms have been reluctant to make those investments. Two factors probably cause this: the impact that increased prices for electricity may have on the quantity demanded from the power firm, and risk. Although power firm would not face the problems relevant to interregional competition for their product (their geographic markets seem to be well-defined), it would face competition from alternative sources of power, and would realize some secondary effects from interregional competition. If electrical rates increased, consumers would tend to substitute alternative sources of power for electricity . Depending on the pollution control regulations, this may or may not be serious. If there were no sulfur oxide emission restrictions on firms that consure electricity, they could switch to high-sulfur coal or Oil and avoid the cost associated with sulfur oxide control. This would result in a significant decrease in the quantity of electricity demanded and an increase in the quantity of coal and oil demanded. (If this occurred, air pollution control commissions would soon have a problem on their hands, for the sulfur content of ambient air would return to high levels .) 122 If, on the other hand, all firms were restricted by emission controls, there would be little reason for consurers of electricity to shift to other sources of fuel since the cost of abatement must be borne one way or arother.3 However, the higher price for electricity would increase the cost of producing those products that use electricity as an irput, and those firms would be at a disadvantage in interregional markets if other regions did not also have pollution controls . Therefore, the derived effect of interregional competition could have important implications for the power firm and cannot be igored. There is also considerable risk associated with investments in scrubbing equipment. No process has yet been proven on full scale, and some engineers believe significant problems remain in those processes currently available. To risk tie production of a plant on a process as yet unproven is not practical. Althougi one can only speculate on the amount of return that is necessary to induce power plants to produce and market by—product powdered ammonium sulfate, or the savings necessary to convert farm consumption to a new product, it is not likely that the $592,612 return tor the $315 ,‘415 savings associated with using ammonium sulfate for direct application is sufficient. The return to the power plant would represent approximately a 2 .19 percent increase in ret income, or a .11 percent return on investment. The savings of $315.A15 farmers could realize would represent a .65 percent reduction in their fertilizer bill. 3Tlme establishment of pollution controls may serve to shift the demand curve for electricity from power utilities to the rigmt if, by virtue of their size, power plants can control their emissions at a lower unit cost than can firms that have their own power units. 123 A review of recent develOpments in the ammonium sulfate market also casts doubts. In 1970, 1,889,000 tons of synthetic ammonium sulfate were produced for fertilizer while 595,000 tons were produced as by-product from the metal industry. Consurption was somewhat less, and significant portions were reported to have been dumped at sea or burned. From the analysis in this chapter, it is krown that ammonium sulfate can compete with the Optimal organization of the industry (although at low prices), and it can be inferred that ammonium sulfate would be able to compete with the products currently being used in the industry at considerably higher prices (tie cost of the current product mix is ’48 percent higher than the cost of the product mix in Optimum). But this conclusion does not appear consistent with the observation that by-product ammonium sulfate was destroyed last year. TWO factors may explain the deliberate destruction of the product. First, some metal producers also produce synthetic anhydrous ammonia and other nitrogen products . They may have determired that marketing by-product ammonium sulfate at low prices would reduce the market for their other nitrogen products to the extent that they would realize in total a net loss from marketing ammonium sulfate. On the other hand, the metal producers may have determired that the cost of marketing ammonium sul- fate was great erough that attempts to market the product could rot be Justified. In the first four months of 1971, synthetic ammonium sulfate production was down 16 percent from one year ago while by-product am- mn'dm sulfate production was up five percent from a year ago. Through much of 1971 the price of ammonium sulfate vacillated around the lower 12" side of $12 per ton, going as low as $7. It was even reported that one firm was offering tre product free if the consumer would take delivery of the product at the plant (Her-re, 1971) . The implication that ammonium sulfate does not sell even at low prices raises an interesting possibility. For years researchers, extension specialists and industry personnel have been informing the farmer that high-analysis fertilizers have the potential for lowest cost per nutrient content . If their efforts have been moderately successful, biases against low-analysis fertilizers may have resulted. Consequently, in those situations where low-analysis fertilizers such as ammonium sulfate are a cheap source of nitrogen, marketing efforts will have to include an effective information system. Such a bias could prove to be an important barrier to power plants that plan to market their by-product ammonium sulfate . On the other hand , in analyzing the competitive position of ammonium sulfate, it was assumed that the sulfur had no fertilizer value. However, agronomists are rapidly becoming convinced that it is an important nutrient , and reaponses to sulfur-containing fertilizers have been recorded in Michigan (Beaton, 1971). If sulfur is an important nutrient , the fertilizer component of ammonium sulfate would rise to #5 percent from the 21 percent (21 percent N plus 21! percent S), and its value in the analysis would have been significantly understated. The alternative uses for by-product ammonium sulfate from power plants are few. Because of its low analysis, it cannot be shipped far before it loses its competitive advantage. 0n the other hand, because of consumption constraints , it will have to travel moderate distances so that a market area large erough to consume all of tie by-product 125 from a power plant can be obtained. For example, assure (l) the Board of Water and Light in Lansing recovers 90 percent of the sulfur it normally emits to the atmosphere and produces ammonium sulfate , (2) the consunption of nitrogen per square mile in the area around Lansing is equivalent to the average consumption in the lower two-thirds of the Lower Peninsula, and (3) the Board of Water and Light can capture 15 percent of the nitrogen market in its geographic market area. The market area required to absorb the amount of ammonium sulfate recovered would have a radius of 90 miles. The Board of Water and Light could rot expect to transport the ammonium sulfate farther and receive a positive price for the product . On the otter hand, if it could increase its share of the market, it may be able to increase its product price. For example, if it had 50 percent of the nitrogen market, it would need a market area with a radius of only 50 miles to absorb the product. In this situation, the Board could eXpect to receive a little more for its product, possibly as much as $4 or $5 per ton. If power firms market by-product ammonium sulfate , the effects on the various canponents of the fertilizer industry would be surprisingly few. Although the ammonium sulfate would replace ankwdrous ammonia for direct application, he ammonia producers may benefit . The production of by-product ammonium sulfate requires tre use of anhydrous ammonia as the scrubbing agent in the abatement process . Since some mmonia escapes in the process, more ammonia would be needed to produce enough ammonium sulfate to equal the amount of N that was being used for direct application. Consequently , the ammonia producers would realize a small increase in demand. wrereas previously the ammonia was going directly 126 to the farm for application, now it moves to the power plant, and from there to the farm in the form of ammonium sulfate. A shift in investment from ammonia applicators to dry spreaders would be required by this change. NO other component of the industry would be affected. Bulk blending of monoammonium phosphate and granular potassium chloride would be unaffected as would the remainder of the phosphate and potash industries. It is doubtful that many power firms will produce ammonium sulfate as a by-product if they must compete against the long-run Optimum organization of the fertilizer industry . If, however, the fertilizer industry does not improve its performance , ammonium sulfate may be very competitive, and could be a profitable enterprise for the power firm. The ability of ammonium sulfate to compete effectively with the various products currently being used by Michigan farmers should be examined. Until then, the potential revenue that could be generated by a power firm's marketing ammonium sulfate can only be conjectured. CHAPTER V THE USE OF BY-PRODUCI‘ SULFURIC ACID IN THE FERTILIZER INDUSTRY While only those abatement processes that utilize ammonia as an input product ammonium sulfate as a by-product, nearly all processes, including those that use ammonia, can produce sulfur or sulfuric acid as shy-product.l Therefbre, it is considerably more probable that electric powerbgenerating,plants will produce sulfur, or sulfuric acid, thanrammoniumnsulfate. Electric power firms need not be concerned, as was the case in by-product ammonium sulfate, whether or rot its by-product sulfur has a market. Sulfur plays a major role in the economy of the United States, being one of the most important industrial raw materials (Hazleton, 1970, p. l). The fertilizer industry accounts for nearly half‘of the annual sulfUr consumption in.the United States. Sulfur is converted to sulfuric acid and is used to acidulate phosphate rock in the production of'phosphoric acid. Although other acids may substi- tute fOr sulfuric acid in the acidulation.process, sulfur's primary competitor in the production of‘phosphoric acid is, ironically, electricity. Electricity is used to produce elemental phosphorus, which can easily be converted to phosphoric acid. The sulfur industry is examined in this chapter. Attention is ddrected to demand, supply and prospective develOpments. Its role 1A few of the processes produce nonuseable materials such as calcium sulfate . 127 128 in the fertilizer industry is examired as are other relevant issues. Sulfur Consurption United States sulfur consurption in 1970 was 9,132,000 long tons (Table V-l). Of this amount, over 85 percent was burned to form sulfur dioxide for conversion to sulfuric acid. Since all of the sulfuric acid is used in processing and manufacturing industries (Tables V—2 and V-3) , the demand for sulfur is largely a derived demand dependent upon the demand for the end products of the industries that use sulfur either directly or indirectly as sulfuric acid. A simple method of projecting aggregate sulfur demand is to assure that the demand for sulfur will continue to grow at about the same rate as industrial production. A long-run annual growth rate of 6 . 5 percent in industrial production-mthe rate actually experienced over the period from 1960 to l969-would imply a rise in annual sulfur consumption in the United States from 9,132,000 long tons in 1970 to 12,100,000 long tons in 1975 and 15,100,000 long tons in 1980. How- ever, such projections assure that the pattern of sulfur consumption will rot change. There exists clear evidence that the demand for sulfur could shift. For example, sulfuric acid can successfully be replaced by hydrochloric acid in iron and steel pickling; currently, six percent of donestic sulfur consumption is used in tie manufacture of inorganic pigments; and Want has introduced a process whereby chlorine can be substituted for sulfuric acid in pigrent manufacture. The use of sulfuric acid in the chemical industry is so widespread that the sub- stitution of another input for sulfuric acid in the manufacture of Table V-l. United States sulfur consumption, 1970 Sulfur content Source (in 1,000 long tons) Total Frasch sales: Native 6,419 Import ...222. 6,956 6,958 Recovered sulfur sales: Native 1,963 Import __2_9§_ 2,961 2,961 Other sulfUr: Pyrites 130 By-product sulfuric acid 535 Other byeproduct sulfides A81 1,1u6 1,1u6 10,565 Exports of Frasch: Crude 1,u29 Refined A 1,933 —l,u33 Total sulfur consumption 9,132 Source: (Merwin, 1971). 130 Table VL2. Industries and.products in which sulfur is used Acids Inorganic or’organic acids Alcohols Insecticides Ahum Leather Ammonium sulfate Livestock fOOd Aniline Lubricants Efleaching agent Magnesium Bromine Matches Carbon dioxide Medicine Carbon disulphide Metallurgy Carbon tetrachloride Paints and pigments Casein Paper pulp Cellophane Petroleum products Celluloid Pharmaceuticals Cellulose esters Phenol cements Photography Chlorine Plastics Coke Plate glass Capper Rayon Dehydrating agent Refrigerants Detergents Resins Dyes Roadssurfacing materials Ebonite Rubber goods ElectrOplating Soap Explosives Soda Fertilizers Solvents Fire extinguishers Fireproofing agents Steel pickling and galvanizing Storage batteries Fireworks Sugar Fbod preservatives Sulfbnated oils FUmigants Synthetic fibers FUngicides Synthetic rubber Glue Textiles Glycerin Tires, rubber Impregnant Water purification Source: (Mineral Facts and Problems, 1965, p. 908). 131 Distribution of donestic sulfur consurption, 1966 Consuming sector Percent of total sulfur consurption Acid uses: Fertilizers 118 Chemicals l8 T102 and other inorganic pigrents 6 Iron and steel 3 Rayon and film 3 Petroleum 2 Others _'_7__ Total acid uses 87 Nonacid uses: Pulp and paper 5 Carbon bisulfide 3 Ground and refined 2 Other __3__ Total nonacid uses 13 Source: (Hazleton, 1970, p. 53). 132 am one product would likely go unroticed, but the accumulative effect of each substitution would lower the demand. Ch the otter hand, a decision to use sulfur or sulfuric acid usually coincides with a decision to use a particular production process. Changing from elemental sulfur to a technical substitute generally will involve a change of processes, requiring both changes in irput proportions of other variable inputs and changes in plant and equipment. Since price stability reduces the element of risk in purchase and investment decisions, industrial decision makers may prefer the reliable source of sulfur to the uncertainty associated with sub- stitute variable inputs . Even if they do shift to alternative irputs, they will likely delay such a change until their current sulfur- oriented fixed productive assets become technically obsolete and/or until tre capital outlays have been recaptured through depreciation. The use of sulfur in the fertilizer industry has increased sharply. Since sulfuric acid is used in the production Of high- analysis fertilizers , the continuing trend to these products should further increase the demand for sulfur. In addition, the increasing attention being directed toward the use of sulfur as a fertilizer nutrient itself may further strengthen the role of sulfur in the fertilizer industry. Sulfur Production In 1970, 9,549,000 long tons of sulfur were produced in the United States (Table V-H). Of this amount, 7,082,000 long tons were produced as Frasch sulfur. Frasch sulfur is simply elemental sulfur mired via the Frasch process and is not different from elerental sulfur obtained in other ways. Althougn sulfur is abundant in the 133 Table V-N . United States sulfur production, all forms, 1970 Sulfur content Source (in 1,000 long tons) Elemental sulfur: Frasch 7 ,082 Recovered l , lM9 Nonelemental sulfur: By-product sulfuric acid 535 Other by-product “83 Total 9 ,5“9 Source: (Merwin, 1971) . earth's crust , only highly concentrated deposits , or domes, located along the Gulf Coast are mired camercially in the United States. Significant quantities of sulfur are also recovered from sour natural or refinery gases. The gases contain hydrogen sulfide which is separated from the other gases and converted to sulfur dioxide which can readily be converted to elerental sulfur (Estep, 1962, p. 329) . In addition to these two sources, lesser amounts of sulfur are produced as by-product sulfuric acid and other sulfur compounds from numerous industries in the United States. Production of Frasch sulfur in the United States is concen- trated in only four firms, with the Texas Gulf Sulfur Company and the V Freeport Sulfur Company producing 90 percent of the output . The average total cost of producing Frasch sulfur varies considerably with the scale of plant and the quality of the mine. 139 Investment outlays per unit of capacity decline significantly with increases in the scale of plant . However, variable costs account for 75 percent of total production costs and tie critical variable cost is water. The water ratio, i.e. , the nurber of gallons of hot water required to produce a ton of sulfur, varies with the quality of tre sulfur deposits and may range from 1,000 gallons to 12,000 gallons. Plants having identical water ratios experience decreasing average total costs with increases in plant scale over the range of plant sizes cur- rently found in the industry. Similarly, average total costs of plants of identical size vary directly with the water ratio. The water ratio is more important than plant size in determining the level of average total costs, and the water ratio varies directly with the quality of the deposit (Hazleton, 1970, p. 1146). Consequently, ownership of the higher quality deposits by those established in the industry serves as an effective barrier to entry . Although entry into tre production of Frasch sulfur is effec- tively barred in the United States, those four firms currently in the irriustry do not enjoy an oligopolistic market. The producers of recovered sulfur and by-product sulfuric acid have comnbined with im- porters to increase considerably the number of suppliers and supply of sulfur. By-product sulfuric acid is certain to increase considerably when smelters are required to recover tre sulfur they currently emit as sulfur dioxide. Metal sulfides, such as iron-bearing pyrites and various nonferrous ore that are smelted or refined for their cOpper, lead and zinc content could be an important source of sulfur (Table V-5) . Reserves of sulfur in these ores in tre United States are estimated at 100 to 150 million tons (Ambrose, 1965, p. 909). 135 Table Ve5. Estimated sulfur reserved in Canada, Mexico, and the united States Type and sources Million long tons EnementalpFrasch: United States 200 Mexico 50 Recovered: Uhited States-gas and petroleum 55 Canadar-gas 350 Oil shale, tar sands, etc.: united States 50 Canada 780 Metal sulfides: United States 125 Coal: united States 15,000 Total reserves: 16,610 Source: (Hazleton, 1970, p. 137). 136 Large amounts of sulfur can also be extracted from natural gas arnd crude petroleum. The sulfur content of United States natural gas averages about 0.05 percent by weight. The sulfur occurs as hydrogen sulfide in concentrations from zero to 70 percent. Crude oils in the United States contain an average sulfur content of 0.6 percent, and oil shale 0.75 percent. Reserves of sulfur in these three sources are estimated to be 105 million tons (Mireral Trade Notes, 1965, pp. 29-30). In addition to this recoverable sulfur, huge amounts may also exist in the natural gas and petroleum located on the north slope of Alaska. However, the greatest source of sulfur in the United States lies in coal deposits. Sulfur accounts for 2.6 percent of the weight of coal. Tie sulfur content of recoverable United States coal reserves alone, taken at a conservative 220 billion tons, would come to five billion tons or more (Ambrose, 1965, p. 909). The domestic market for sulfur is sensitive to international trade. Large amounts of sulfur are produced in Canada and Mexico, and this sulfur can flow freely to the United States market (the cur- rent surcharge on imports has no effect since there is no tariff on sulfur). Whereas Mexico has several high-quality deposits, up to 95 percent sulfur, most of Canada's sulfur is currently being recovered from natural gas. Alberta's natural gas contains from ore to 38 per- cent hydrogen sulfide and reserves of sulfur in this source are es- timated at, 350 mnillion tons. Further amounts of sulfur are being recovered from tar sands in Alberta, and the potential reserves of sulfur in this source have been calculated at 780 million tons (Mineral Trade Notes, 1965, pp. 29-30). The increases in domestic production of sulfur and the shift 137 fkemna.net exporter to a net importernresulted.in severe declines in the price of sulfur. In the past two years, the price of sulfur has fallen to nearly 20 percent of its high. The current price of $7 per long ton.compares with the 1969 high of $35 per long ton. The future holds little promise for higher prices in competitive markets. The potential supply Of sulfur will continue to exceed con- sumption by considerable margins, particularly when production of recovered and by-product sulfur increases rapidly with the establish, ment of sulfur oxide emission controls. Whether or'not recovery of sulfur oxides fromnfTue gas proves economical, the potential supply of by-product sulfur will continue to increase because reroval of the sulfur from.fuels is essential, and if it cannot be accomplished by scrubbing flue gas, it will be achieved by fuel desulfurization or some other process. The relevant question is whether or not the sulfur will be recovered in a useful form. This question is not so easily answered but, as explored earlier, there is sound reason to believe that much of it will. Conversion of Sulfur to Sulfuric Acid Altl'ough some sulfuric acid is produced and marketed, most fertilizer producers usually purchase sulfur and convert it to sulfuric acid. However, decisions to purchase sulfur rather than sulfuric acid must be based on their prices and the cost of conversion. Table V-6 shows typical cost of converting sulfur to sulfuric acid. Tie total cost, excluding tre cost of sulfur, is $6.01 per ton of sulfuric acid . Figure V—l shows the price indifference curve for sulfuric acid and sulfur. Simply stated, if the price of sulfuric 138 Table V—6. Cost of converting sulfur to sulfuric acid Dollar cost/production Labor (0.10 man hours/ton @ $4.00) 0.40 Miscellaneous 356 Depreciation 0.79 Interest on nvesterent ($11.90/ton 6 0.075) 0.89 Interest on working capital ($.33/ton @ 0.085) __Q_._3_'_7_ 6.01 Plus 0.35 tons of sulfur Source: (Henderson, 1971, p. 34). acid is more than $6.01 per ton over the cost of .35 tons of sulfur at the proSphate plant, the sulfur will be purchased. If the sulfuric acid is less than $6.01 per ton over the price of .35 tons of sulfur, it will be purchased. Sulfuric Acid Versus Off-peak Electricity Although sulfur is one of the most plentiful of the elements, twice within the postwar era it has been in short supply within the United States and abroad (Hazleton, 1970, p. 1). In these periods when prices of sulfur are high, phosphate producers are highly affec- ted. Production Of each ton of phosphoric acid requires 1.47 tons of sulfuric acid (Henderson, 1971, p. 32) . Consequently, they have been hignly motivated to develop substitutes for sulfuric acid. Although there has been emerimental use of such acids as nitric and phosphoric , the primary develOpment was the electric arc Sulfur’price/ton 139 30 q 25‘ Sulfuric acid purchase area 20+ 5, , £3 5 54 Sulfur 10 ‘ purchase area 5 . ° ' t} 6 I 1'2 ' 16 T 2'0 Sulfuric acid price/ton in dollars Figure Vel. Sulfur-sulfuric acid price indifference curve 140 furnace for producing elerental phosphorous . The process consists of two phases. In tre first phase, rock phosphate and coke are mnixed together and fed into an electric reduction furnace. The electric current enters through carbon electrodes and fuses the rock and silica, while the carbon in the coke reduces the phosphate . Phosphorus vapors are withdrawn from the furnace and condensed to form elemental phos- phorus , an active material that contains 229 percent P In tre 205. second phase , tre elemental phosphorus is then converted to white phosphoric acid by burning it and absorbing the resulting oxide in water (Bell, 1971, p. 39). Trerendous amounts of electricity are required to fuse the rock phOSphate-coke mixture . Each ton of elemental phosphorus requires 12,223 KWH. In addition, the electric reduction plant is a high- investment plant. A facility that can produce 131,000 tons per year requires an original investment of $45 million (Henderson, 1971, p. 31). However, one primary advantage of the elerental phosphorus route is that the second phase reed rot be carried out at the same location as the first phase. Therefore, the first phase can be located near the source of the rock phosphate while the second phase can be located near tl'e fertilizer market area, making it possible to reduce trans- portation costs by shipping the highly concentrated (229 percent P205) elemental phosphorus . Identifying the impact of by-product sulfuric acid on the fer- tilizer incmstry will involve some variations from tre procedure used for by-product armonium sulfate . Unlike the case of ammonium sulfate , the value of sulfuric acid to tie fertilizer industry is known. At current prices, it is the established input for producing phosphoric 141 acid. Therefore, the problem is not to find a price at which it will becore competitive, as was the case with ammonium sulfate. Rather, the approach will be to determine at what price electricity will become carpetitive with sulfuric acid. To initiate the analysis, the price of sulfuric acid was set at $12 per ton at the phosphate-producing area, and the price of electricity was lowered from 4 mills. Not until the price reaches 1.2545 mnills will tre elemental phosphorus process become carpetitive. At that price , 15 ,660 tons of elemental phosphorus would be produced , shipped to tie furnace acid plant in Michigan, and converted to 66,413 tons of phosphoric acid, the pattern that was expected. The phosphoric acid would then be used to produce 69,000 tons of monoammonium phos- phate, which would be trucked to farms for direct application (Table V—7) . The production of phosphoric acid in Florida would fall by an amount equivalent to the amount produced in Michigan. It would be used to produce monoammonium phosphate , which would be railed to the bulk. blenders and caroired with 173,000 tons of granular potassium chloride to produce 374,000 tons of 7-28-28. The storage controls on bulk blending and the K20 nutrient storage control appear to combire to determine tie levels of production of phosphoric acid and moroammonium phosphate in Michigan. As discussed earlier when 172,713 tons of granular potassium chloride are flowing to the bulk blender, 75 percent of that amount (the bulk blender storage requirenent) is equivalent to 50 percent of total K20 (that amount re— quired for storage). Up to this level, blending is preferred to direct application; while above this level, direct application is preferred. This relationship would cause 172,713 tons of granular potassium 142 85.0.3 madam 335m omm.omm 8.33 no- SE 83 .5 3338on -o- 33.8 83.33 .338 www.mwm 303mm 38 3.33% no- .0. no- .0. .0. 082m: 3.3-3.283 833258 no- $98 $0.3 $0.8 no- no- gamummfinfld 83358 $8.8m 30me 3.0.3.0. madam maxim www.mmm 3.3; 2383an Swim amimmm 833mm 333mm memim 0833 339 33 53.3335 82.3 3mg imam 3mg ~83 3mg 23835 2:38qu 838.5 coauosoono 30.3w emoamm Roam.“ Roamm 80.9mm mmo.mmm 833% 53838 833a 23.8 $3.8 $3.8 $3.8 35.8 ..o.. 838388 328er e538; 33.03 03.08 momém 03.23 3.1.28 2:005 8326er mpfidmfid §E§ .o. 98.3 08.03 elem: Q33 momamm sausage 38 "0388er 58a $3.8m 38.3.0. :36? 38.8 33.8 ..o. 83038d 38 0388er 33: ~93 «8.3. 358 02.8 08.3 no: 8383a 889383 38853 no. swim swim amim no... to: advanced «95 08.83 .1363 £1.33 31.63 03.83 $3.83 838388 3558 8965 gum: Nam: $8.33 3323 $5.33 83.83 8326er 8388 89625 83.5.0.2 0333.2 333%? 8308.? 80:36: 33.33.? 380 338. m . um Hm m m . am 0 . cog gang 5 ufiofinpooam 90 8E A88 :3 :8 8d «3 8 803.3 38 0383.... a»? 38 032803 59% no.“ 38 oEofimoed SE: .3 8333888 «E. .3, 38m. 143 chloride to go to the blender. However, since it would be economical to produce elemental phosphorus , it would also be cheaper to produce monoammonium phosphate in Michigan, although not cheap erough to truck monoammonium phosphate to the blenders from tre Michigan plant . Conse- quently , enough monoammonium phosphate would be produced in Florida to supply the Michigan blender. The trade off between direct application and blending would be such that 7-28—-28 is the Optimal mtix. Since 172,713 tons of granular potassium chloride would move to the blenders, enough monoammonium phosphate, 201,530 tons, must also flow to formulate 7—28—28. The remainder of the granular potassium chloride, and the monoammonium phosphate produced in Michigan would be applied directly. Production of the elemental phosphorous requires 191 million KWH of electricity. The sulfuric acid consumption drops by nearly 100,000 tons, however, since the elemental phosphorus would be used in the production of phosphoric acid. The total cost would fall by $20,000 because of this shift. When the price of electricity falls to 0.6130 mills, the organ- ization would again change. And again storage controls prove to be the critical determinant of the organization. However, this time the P205 storage control would combine with the 75-percent blending storage control on monoammonium phosphate to determine the organization in conj motion with the two storage controls on potassium chloride . To satisfy the P205 nutrient storage requirement, 135,240 tons of mono- ammonium phosphate would have to be stored (assuming it is the only carrier of P20 Since 135,240 is 75 percent of 180,321, this latter 5" amount could be blended without additional storage costs. Consequently, 180,321 tons of monoammonium phosphate would be produced in Florida and, 144 although it all will eventually be transported to the blenders, 135,240 tons would be stored first. All of this monoammonium phosphate would be blended with 172,713 tons of granular potassium chloride, the same amount of the potash product that was in the previous product mix. The ammnt of 7-28-28 blended would decrease to 298,515 tons while 56,643 tons of custom blend 6.15-17.95-37.0, nearly a 1-3-6 ratio, would enter the product mix. The remainder of the changes would center around this basis. Since less monoammonium phosphate would be used in bulk blending, less would be produced in Florida. And , correspondingly , less phos- phoric acid would be produced there as well. The decrease in monoam- monium phosphate production in Florida would be equalled by an increase in production in Michigan. And, likewise , phosphoric acid production would increase by the same amount that Florida production decreases . Again, all Michigan-produced phosphoric acid would utilize elemental phosphorus as the intermediate product . All of Michigan-produced monoammonium phosphate would be trucked to the farm for direct application. Since the 6.15-17.95-37.0 formu- lation requires small amounts of urea, 2,124 tons of it would be pro- duced in the Michigan plant and shipped to the outstate blenders. Electricity use would increase further to 250,330,000 KWH while sulfuric acid consumtion would decrease to 255,264 tons. The total cost de- creases to $48,056,229, a savings of approximately $250,000 over Optimum. As the price of electricity falls to 0.370 mills, only a slight shift in the organization would occur. Whereas in the previous organ- ization, 180,321 tons of monoammonium phosphate were produced in 145 Florida, of which 135,240 tons were stored, only 135,240 tons would be produced and stored at Florida in this organization. The remaining 45,080 tons would be produced in Michigan and blended at the central Michigan blender. Outside of this change, and the corresponding changes in the production of phosphoric acid and elemental phosphorus , and the tramportation of granular potassium chloride to tre central Michigan blender, no other changes would occur. However, the total cost would drop another $60,000. As the price of electricity continues to fall, two more shifts would occur: at 0.268 mills and 0.225 mills. In both shifts, the trend of blending more at the central blender and less at the outstate blender would continue, as would the shifts necessary to accomodate this change. All phosphoric acid would be produced in Michigan from ele— mental phosphorus . The production of this elemental phosphorus in Florida would consume 751 million KWH, while the consumption of sulfuric acid would fall to zero (these changes are summarized in Table V-7 and are provided in detail in Appendix E). A total cost savings of $226,936 could be realized by making these changes . 0f more importance, however, are the implications on the organization of the industry, which changes radically from Optimum. The more important changes are the shift of bulk blending from outstate locations to a central Michigan location, the production of elemental phosphorus in Michigan, the substitution of mrnace phosphoric acid produced in Michigan for phosphoric acid produced in Florida with sulmric acid, and the production of monoammonium phos- phate in Michigan rather than Florida (Figure V-2 illustrates the resulting industry organization). 146 elemental phosphorus production anrwdrous (Florida) ammonia L production L rail 3 (Michigan) 1 white phos- monoammonium granular phoric acid phosphate potassium production production chloride (Michigan) , (Michigan) production I (Saskatoon) 1 l \__C rail )—-—- bulk _ 1 blender (Central [fimi] Mich .) application to soil Figure V-2. Summary of the industry organization with green phosphoric acid replaced by white phosphoric acid 1147 Although the analysis is revealing, it is not relevant for current price relationships because the price of electricity is not likely to fall to levels as low as are needed to induce the change. Consequently, the problem was reanalyzed using $16 per ton as the price of sulmric acid rather than $12 . With sulfuric acid priced at $16, electricity would first start replacing it when priced at 3.2970 mills per KWH, and completely replace it when the price had lowered to 2.2677 mills. The transition would be identical, in terms of the intermediate organizations , to the transition with sulfuric acid at $12 per ton. For example, in the first transition organization, 15,660 tons of elemental phosphorus world be produced, Just as was produced in the first organization when sulfuric acid was priced at $12 per ton. Table V—8 provides summary data for the transition from sulfuric acid to electricity in the production of phosphoric acid. Data are provided in greater detail in Appendix E. Since the solutions are identical, there is no reason to duplicate the discussion. These two sets of data provide insight into what could be ex- pected to occur if sulfuric acid were priced somewhere between $12 and $16 per ton, and the price of electricity lowered. By referring to Figure V-3, the situation could easily be analyzed. Each line refers to the loci where the industry organization would shift. Therefore, by selecting any price for sulfuric acid in that range, and a price for electricity, the resulting organization can be identified. The letters representing the organizational mix correspond to the organ- izational code which appears in Table V—8. 148 .m.> 283 83 832528 3 888 m m a o m e 888 8383880 82.6.3. 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Q5. .3852 yang Amiga use» no? sod 838a gflafia @853 common .mm..< «Baa 2014 530E no- .0. mom.m 1. ul 538m 3338 20380.3 $0.3m 08.84 335 20% E88303 :oflwfioag 3338 303:0 whommmoona mzmémm 8062 .0. 8239?, x25. cofimfioag 3338 gamut“: no- 08.8 .o. 85m x029 Sflmfioag €080 E3300.“ 5ng ..o. -o- mom.m 8838 due coflpmfioamqfia 33:8 A3883 5.0202 no- no- www.mm I- Hpfiuflom 838% 3338 $9888 533: ..o. .0. mad: ...I 3:320: 830? 8338 $0888 :meoE 8m. 93 -o- no- ul $395, 8303 3338 90883 gaming no: 000 . mmm no: In Evasion 83260.5 33330 :58 50.“ :meog no- 80.8 mom.m I. \3 3282.5 8302 H.828 5:000 H.030.» 203003” £03000.” 2258 gumso ES wfifififia men. 3052 wfiuafimflo .30» 00% 0:0» no? god 08020 Efifldfia 3803 0:5 .om..< mafia 205 80.93 8030 £03: I- ..I 838203 2:00 3038 mzmfimm 08de to: 030m 000300309 co30fioa§ 003003 00:05: 3038 ma0.Hmm ooo.0ma no- ..- --- 0030000 ouaaamamm 8232 .0. ..o- mom. 0 9:00 0.800020% 8300080500 33350 5539 H0300 003003 :03003 5500 00:20.88 2.2 05030509 05. 3333 05005020 A00» 00m 0:03 003095 3588 .80 030. 206 -o- .o. 30.2 ...... I. 8382090 050 0.8000093 -o- -o- 80.3 9000 003003000 83300035 .3838 5.883 000.202 ..o- .0. m8. 0 .l 083 38 838080 3338 90.80% v 00030.2 :0. no- 0.9x: II 00880 000 838020 3338 055000 30300 :3 0003 83003 5500 005.0588 3% gang 95. .3932 05005005 00% 0030.8» 0028.5 30.8 90:60.3 hoaflnHPHUH 6.56.: 6998 .3030 .HMI< 0.308 APPENDIX B Powdered Anmnium Sulfate for Direct Application: Data 207 Table B-1. Powdered anmonium sulfate for direct application: product use summary (in tons) Product Optimum PAS=$2.OO PAS=$1.OO rDotal cost (in dollars) 148,297,763 118,278,751 187,963,336 Anhydrous anmonia 172,828 97,125 112,886 Aqueous amnonia -O- -O- —0- Nitric acid -0- -0- -0- Amnonium nitrate -O- -0- -O- Nonpressure nitrogen solution -0— -O- -0- Low pressure nitrogen solution -0- -O- -0- Nitrogen manufacturing solution -0- -0- -0- Urea -0- -0- -0- Powdered anmonium sulfate -0- 296,321 508,629 Granular amuonium sulfate -0- -0- --0-- Elemental phosphorous -O- -O- -0- White phosphoric acid -0- -0- —0- Green phosphoric acid 260,565 260,565 260,565 Superphosphoric acid -0- -O- -0- Amnonimn polyphosphate liquid (lO—3fl-O) -0- -0- -O- Amnonium polyphosphate liquid (11-37-0) -o— -o- -0- Normal superphosphate -O- -0- -0- Run-of-pile triple superphosphate -O- -O- -O- Granular triple superphosphate -0- -O- -0- Dianmonium phosphate -0- -O- -0- Mmoamwnimn phosphate 270,576 270,576 270,576 Rock prhate -0- -0- -0- Run-of—mine potassium chloride -0- -0- ~0- Standard potassium chloride -0- ~0— ~0- Granular potassium chloride 259,032 259 .032 259,032 Coarse potassium chloride -0- -0- -0- Granulated mixed fertilizers -O- -0- -0- Bulk blended fertilizers 329,689 329,689 329,689 Custom blended fertilizers 113,600 113,600 113,600 Hot process clear mixed liquids -0- -O- -0— Cold process clear mixed liquids -0- -0- -0- Suspension liquids -0- -0- -0- N supplied 1141.932 141,932 1141,932 P205 supplied lho,650 1u0,650 1u0,6so . 00003000 3020030 05300300.000...H ..0. 000.00 000.000 .I.. ..I 838380 080.0 00323: .0. 000.00 000.000 050 088. 83088053 00.380 309008900 00.00 000.0: 000.0: 00303 00.30 83088803 0008 030 8082 -0- 000.00 000.00 I.. 8808.6 «0808 .98: 00.380 80300.. .0- 000.00 000.000 ..I 883080 83802.0 08008 000.0: 000.0: 000.0: I. 00083080 838020 0080 030 m< 9 3.3003 33003 00 . an um 00 . m... 0 3300 33050989 0000. 3333 3300.330 H003 00% 0:3 30:30 33.“ 3006000 03850 05963.00 "003003000 00056 you 0300.30 0338.50 00.006300 .00 3009 209 000.000 000.000 .0. li In 800800090 050.0 0.0000000.» 000.000 .0. no- ...... 0000 00830 3388 0.0000002 000.000 000.000 .0- I. 000.0 0500300 3338 0.0000002 000.000 000.000 .0. l.. In 00295.0 3338 0.0 00 800800 800080 8.0. .0 8.0n .0 330E 0500:0300. 0.00.0. 0005002 050000008 000070000 0:3 00060.00 30C 00:00.09 30.0030 05.080000 “00030000900 000.000 .08 000.0030 05.00.00.500 0900003050 . mum 0.30.0. 210 . 0000009000 00000000900 0050095000:an 0000000900 000900.00 000.000 000.000 000.000 00080.0 0000.8 00:02.0 000.0000 000.000 000.000 000.000 I. 008900 003 80000020 000.800 00 00 800080 800080 00.0.. .0 00.0... .0 500000 000005.050 00.00. 0090000 0000000005 .0000 .0000 000... 0030900 300.0 0000900 0.000 000900000000 :03 20030000900 000.000 00.0 000.0000 0505.500 00.000300 .00 0.30.0. 211 .000030000_0000000000 m0000000 0000 H0000000900 000.000 000.000 000.000 3000000 0000 80000800500. 000.800 000.000 000.000 000.000 I. 0000 000.800 0.0.02 000.800 00000009050 000.000 000.000 000.00 I: 0.0.800 080000.080 000.800 00 00 800080 0800080 00.0.. .0 00.0.. 0 0500300 050050000. 000,0 0000080 050000005 0000w000,0000 0030000 3000 0000000 0002000201550005500005 "0.00.00.00.39? 00930 new 30%..”30 0050009500 00.000300 .mlm 0.3.09 212 . 000000000 0000000000 00000000 0000 00m.00 00m.00 00m.00 ..l I. 800800000 900.0 0000008 00m.00 00mg 000400 90.00 003.0. 80000000880 500000: 00000000000 20.000 000.000 0.00.000 3838 0000 800000008000. 80000000 0.8003 00m.00 00m.00 00m00 50000: 00.00 8003000§ 8800000 000.000 000.000 000.000 I. 0000 000030 .020: 8390000 000.000 mm0.0mm 08.30 I- 8003000 80000020 8390000 3 m< 00000000 00000000 00.0» 10 00.0." 5.0008 05005500. 0000. 000,002 000080020 000% 001010000 0000000 300.0 0000000 00000000 050000000 0000099 ”0300000000 08000 00.0 000.0000 00008.5 0283.0 0.0 0000.0. 213 mwdd 89m: 08$: coma: l.. -mm.~:um.3 833 3mg 835 mafimmm $0.8m www.mmm In mmummé 83mg»? n83 £3 08.93 0363 83:3 I... I... 838392 E 3330 .03on 91.38 mzmémm 98% 8383aa< Sfiumfioamg 353mm 3293: 3398 mszmm mamgmm $0.3m ..l .I 389$ 333$ 98363.3 $0.8m méémm mzmémm 5 23839:. 83%an 3338 339:0 gmgn 393m mszmm 904mm SflHmfim x25. :oflafioag 3338 99888 53:22 0853 omm.m§ 08.93 ...i gfifig 8302 3838 m< m< 20383” 8.3.33 8.. T m 8 . mu m 3530 wfipmfinoa 25. $232 93...; .30» Ava mac» 9260.5 3a p883 floflfififl Bangs an ”cofipmonaqm 90% non «panda 55.3958 60.8033 . Tm magma APPENDIX C Powdered Amnonium Sulfate for Granulation: Data 211% to: no: no: no: 000200023090 03?» 50:95 ..o- .0. -o- no: Sfiagfimfim 3&0» 020.0% lo- no: no- no: flfiaggm 85.82 .0. no- no- no- GATE 0330 8332038 5285 no- .9. no- .0: Suzmnoc 333 $28238 €285 ..o.. ..o.. no- no: 38 022%Bfimgm 082m: 32%: $0.33 $308 38 0289.80 0080 8.3.3 25.9: H850 no. 33 oflfiamofi SE: mmzdm mmmi 2.3.3 no: $220820 3:058 318: oomdmm $0.03 ..o. 303% .5035 08830 no: no- no- no: «0.5 ..o. .o. no- no- 8338 3508033 8pr2 ..o... no: no: no: 003300 5mg»? 05600.5 33 ..o.. no: no: no: 83300 5&ng 0.3000352 no: :0: to: no: 0...ng 8:55 ..o. no- no- .0. 38 3.32 no... lo... no: no: 0.3850 000033 mmmé 89mm «3&2 mam: 38:5 £5.65 mafia; 08.31? 30.0%.? 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I. 838309.. 0.000 50032 SQ? 0.00.3 $0.3 03.30 2.0.0 025. 833300280. 08080 0000:0000 00.0 0:000 5&0:on .0. gm... .0. no- a 5.0202 003.8 02680 35:00 0.0003095 mg}: 08.8 9.me 0%.? H 03.83 00.80 833.080sz 0080 .35 50002 -o- ..o. 80.3 $0.30 ..I 350200 000.08.... .020: 00.550 50050: Rmém 03.3 $13 03.000 ul. 0.0082080 838020 33:00 08.2 08.8 9.me 80.0: ..I. 000302008 83038.00 0008 .35 md 04 2 0000000..” 0000003” 9...? 0 2.0» 0. 9:... #558 0500558. 0.5 30.32 0.00338 9005.000 0:00 0052 30.8 00:00.00 03820 0309035 ":0H00gcfiuw .00.“ 000.330 050.5500 09000300 . mic 0.30m. m< .000 000 000300 5 000.330 050.800 .00 00000. 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Public Opinion surveys indicate that dirty air is second only to poor public schools as a factor which drives young middle-income people from urban centers (Konheim, 1966, p. 552). Of all the pollutants, sulfur oxides are quite possibly the most costly. This appendix identifies may of the effects of the sulfur oxides. Sulfur Oxides and Plants Perhaps the most widespread effect of sulfur oxide pollution is the damage and destruction to vegetation. The most dranatic des- truction of vegetation has taken place in the vicinity of smelters discharging large amounts of sulfur pollution. More than half a century ago, all of the mJor tree species were dead or dying in a five— to eight-mile radius from a smelter at Anaconda, Montana. In the vicinity of the Trail, British Columbia smelter, plant injury was observed as far as 52 miles from the smelter (The Effects of Air Pollution, 1966, p. 15) . Because most of the sulfur oxides are emitted in or near cities, the urban areas suffermore than do rural areas. More and more urban park superintendents are reporting that they are becoming increasingly limited in what they can grow. For example, in Central Park in New York, only one of the original 150 varieties of evergreens remains. Likewise, plant lovers and gardeners are realizing that they must limit 253 2514 the types of plants they wish to cultivate (Konheim, 1966) . Generally, the plants most sensitive to sulfur pollution are those with succulent leaves having highly physiological activity , such as the grains, cotton, grapes, white pine, and apple. Plants with a heavy waxy leaf such as citrus and privet are more resistent to the sulfur oxides. High light intensity, high relative hwnidity, adequate moisture supply, and moderate temperature—ironically, all those things which cause a plant to thrive—predispose the plant to injury from the sulfur oxides. The visible mrkings of sulfur pollution on vegetation frequently serve notice of damage. Acute exposure of broad-leafed plants to sulfur dioxide causes areas of the leaves to die, dry out , and usually bleach to a ligut tan or ivory color. Danege to grasses is similar except that the pattern is nnre a streaking along the blade, and frequently the tip is killed. In addition, a chronic type of injury may occur. The synptan of this injury, a yellowing of older leaves, is often described as early aging (The Effects of Air Pollution, 1966) . Sulfur Oxides and Materials Sulfur oxides attack and destroy even the most durable materials. Steel corrodes two to four times faster in urban and industrial areas than in rural areas. When particulate matter is also present in the air, the corrosion rates multiply. For exanple, in the city of Pittsburgh during the period of 1926 to 1960, the corrosion of zinc went down by a factor of four as a direct result of a threefold reduction in sulfur pollution and a twofold reduction in dust . It has been estimated that one-third of the replacement cost of steel rails in England is attrib- utable to sulfur pollution (The Effects of Air Pollution, 1966, p. 13). 255 Electrical equipment manufacturers are forced in some cases to use gold for electrical contacts because other materials corrode in sulfur atmospheres. At low levels, sulfur oxides can destroy paint pigxents, and at slightly higier levels can attack fresh paint films to delay drying and to produce water sensitivity. In New York, marble ornamen- tation "crumbles between the fingers like a cube of sugar." Cleopatra' s needle behind the Metropolitan Museum of Art has deteriorated more since its arrival in 1881 than it did during the more than three thousand years it spent in Egypt. In order to protect the ancient stone struc- tures at The Cloisters, the Medieval Branch of the Metropolitan, wax coatings and other inpregrations have been used for years. Sulfur Oxides and Health Sulfur oxides are equally destructive to human life. The Host dramatic evidence lies in tte disasters that have overtaken both large and small comnunities. In December, 1930, a thick and stagIant smog enve10ped a heavily industrialized section of the Neuse Valley, Belgium. By the third day mam persons developed throat irritations, hoarseness, cough, and breathlessness. Sone were nauseated; some died. The elderly and those already ill with reSpiratory disease or heart disease were most vulnerable. In October, 1948, a similar fog blanketed the small industrial town of Donora, Pennsylvania (Schrenk, 1968). Before an afternoon rain cleared the smog away four days later, 6,000 persons of the town's 14,000 cane down with one or more of an assortment of ills—cough, sore throat, chest constriction, headache, a burning sensation of the eyes, nasal discharge, and vomiting. Twenty persons died during a period 256 of the year when Donora could expect only two to die. Those present remarked on the heaviness of the fog and on the intensity of the familiar odor of sulmr dioxide whose source was largely in the irriustrial Operations of tre town. At the beginning of December, 1952, the city of London went through a four-day period of still air during which pollution accurmi- lated in a pea soup fog (The London Fog of 1952, 19514). Mmths later, a review of mortality statistics revealed that ll ,000 excess deaths had occurred in the city during a seven-day period that began with the first day of fog. The illness rate during the period, especially the cardio-respiratory illness rate, increased to more than twice the normal rate for that time of year, and did not return to normal until two to three weeks later. In December, 1962, another episode of markedly increased levels of pollution in London accounted for 600 lives. Nat York suffered from an episode in 1953 and again in 1966. On Thanksgiving Day, 1966, New Yorkers awoke finding their city shrouded in dirty yellow acrid smog, of such intensity to irritate eyes, nose, and throat. The city health department warned citizens with heart, lung , and upper respiratory ailnents to stay indoors . That evening the air pollution index climbed to 60. Health officials believed that at 50, health is endangered if the level persists for 214 hours ("Pollution Alert," 1966, p. 66). The death rate rose to over 250 per day during a seven-day period, the first time that had happened in six years ("Air Pollution Can Kill," 1967, p. 85).1 1The total umber of deaths that were a direct result of the pol- lution is debated. While some argue that none were , others believe 150 is wch more accurate . 257 The long-term effects of breathing sulfur oxides are even more alarming than the disasters. The most serious ills are the diseases that occur in the bronchial tree—fran the cannon cold to lung cancer. Ehphysema, the fastest growing cause of death in this country, is a progressive breakdown of air sacs in the lungs. Brought on by chronic infection or imitation of tie bronchial tubes, it diminishes the ability of the lungs to transfer oxygen to the bloodstream and carbon dioxide from it. Chronic brmchitis is defined as a chronic productive cough.2 In Great Britain, nearly 10 percent of all deaths and more than 10 percent of all industrial absences because of illness are attributed to this disease. Using the British criteria, an investigation in this country found chronic bronchitis in 21 percent of nen NO to 59 years old. Sulfur dioxide may not be the only cause of this disease, however. Mortality varies with the pollution neasures of papulation density , amount of fuel burned, settled dust, airborne dust and decreased visibility, as well as sulfur dioxide. Deatl'e from lung cancer have been increasing rapidly in recent years. Although there are many causes of lung cancer, the disparity between rural and urban mortality rates points to air pollution. Even after mil allowances for smoking habits, the death rate in large netropolitan areas is twice the rural rate. In addition to these diseases, polluted air often mvates bronchial astrma , increases tre incidence of cannon colds , and in general weakens the respiratory system, making it vulnerable to other z'Ihe United States has not standardized the criteria for diag- nosing chronic bronchitis. The above criteria is used in Great Britain. 258 diseases or viruses. The danger of sulfur oxides is compounded if’particulate matter accompanies it. Sulfur dioxide alone usually irritates only the upper respiratory tract. But if it is absorbed on particulates, it can be carried deep into the lung where it can easily injure delicate tissue. Sulfuric acid in.the right particle size can also penetrate deep into the lung and damage tissue. APPENDIX G Environmental Protection Act of 1970 Enviromental Protection Act of 1970 Public Act No. 127 House Bill No. 3055 ha An act to provide for actions for declaratory and equitable relief for protection of the air, water and other natural resources and the public trust therein 3 to prescribe the rights, duties and functions of the attorney general, any political subdivision of the state, am! iretmnentality or agency of the state or of a political subdivision thereof, am person, partnership, corporation, association, organization or other legal entity; and to provide for judicial pro- ceedings relative thereto. The Maple 06 the. State 05 Mtciu'gan enact: Sec. 1. This act, shall be known and may be cited as the "Thomas J. Anderson, Gordon Rockwell enviromental protection act of 1970" . Sec. 2. (l) The attorney general, any political subdivision of the state, any instrunentality or agency of the state of a political subdivision thereof, any person, partnership, corporation, association, organization or other legal entity may maintain an action in the circuit court having jurisdiction where the alleged violation occurred or is likely to occur for declaratory and equitable relief agairst the state, 259 260 am political subdivision thereof, any instrtmentality or agency of the state or of a political subdivision thereof, any person, partnership, corporation, association, organization or other legal entity for the protection of the air, water and other natural resources and the public trust therein from pollution, inpairnent or destruction. (2) In granting relief provided by subsection (1) where there is involved 'a standard for pollution or for an anti-pollution device | or procedure , fixed by rule or otherwise , by an instrunentality or agency of the state or a political subdivision thereof, the court may: I (a) Determine tre validity , applicability and reasonableness I of the standard. I (b) When a court finds a standard to be deficient, direct the adoption of a standard approved and specified by the court . Sec. 2a. If the court has reasonable ground to doubt the solvency of the plaintiff or the plaintiff's ability to pay any cost or judgrent which might be rendered against him in an action brought under this act the court nay order the plaintiff to post a surety bond or cash not to exceed $500.00 Sec. 3. (1) When the plaintiff in the action has node a prima facie showing that the conduct of the defendant has , or is likely to pollute , inpair or destroy the air, water or other natural resources or the public trust trerein, the defendant may rebut the prim facie showing by the submission of evidence to the contrary. The defendant may also show, by way of an affirmative deferee, that there is no feasible and prudent alternative to defendant '8 conduct and that such conduct is consistent with the promotion of the public 261 health, safety and welfare in light of the state's paramount concern for the protection of its natural resources from pollution, inpairment or destruction. Except as to the affirmative defense, the principles of burden of proof and weight of the evidence generally applicable in civil actions in the circuit courts shall apply to actions brought under this act. (2) The court may appoint a master or referee, who shall be a disinterested person and technically qualified, to take testimom andmakearecordandareportofhis findingstothe cour'tinthe action. (3) Costs nay be apportioned to the parties if the interests of justice require. Sec. 1t. (l) The court may grant tenporary and permanent equitable relief, or may impose conditions on the defendant that are required to protect tre air, water and otter natural resources or the public trust therein from pollution, impairment or destruction. (2) If administrative, licensirg or other proceedings are required or available to determine the legality of the defendant's conduct, the court may remit the parties to such proceeding, which proceedings shall be conducted in accordance with and subject to the provisions of Act No. 306 of the Public Acts of 1969, being sections 213.201 to 213.313 of the Conpiled Laws of 19138. In so remitting the court may grant tenporary equitable relief where necessary for the pro- tection of the air, water and other natural resources or the public trust therein from pollution, inpairment or destruction. In so remitting the court shall retain jurisdiction of the action pending conpletion 262 thereof for the purpose of determining whether adequate protection fran pollution, impairnent or destruction has been afforded. (3) Upon cmpletion of such proceeding, the court shall ad- judicate the impact of the defendant's conduct on the air, water or other natural resources and on the public trust therein in accordance with this act. In such adjudication the court may order that additional evidence be taken to the extent necessary to protect the rights recog— nized in this act. (ll) Where, as to any administrative, licensing or other pro- ceeding, judicial review thereof is available, notwithstanding the provisions to the contrary of Act No. 306 of the Public Acts of 1969, pertaining to judicial review, the court originally taking jurisdiction shall naintain jurisdiction for purposes of judicial review. Sec. 5. (1) Whenever administrative, licensing or other proceedings, and judicial review thereof are available by law, the agency or the court may permit the attorney general, any political subdivision of the state , any instrmrentality or agency of the state or of a political subdivision thereof, am; person, partrership, cor- poration, association, organization or other legal entity to intervene as a party on the filing of a pleading asserting that the proceeding or action for judicial review involves conduct which has , or which is likely to have, the effect of polluting, impairing or destroying the air, water or other natural resources or the public trust therein. (2) In any such administrative, licensing or other proceedings, any in any judicial review thereof, any alleged pollution, impairment or destruction of the air, water or other natural resources or the public 1‘..- 263 trust therein, shall be determined, and no conduct shall be authorized or'approved which does, or is likely to have such effect so long as there is a feasible and prudent alternative consistent with the reasonable requirements of'the public health, safety and.welfare. (3) The doctrines of collateral estOppel and res judicata may be applied by the court to prevent multiplicity of suits. Sec. 6. This act shall be supplementary to existing administrative and.regulatory procedures provided by law. Sec. 7. This act shall take effect October 1, 1970. Ordered to take immediate effect. Approved July 27, 1970. "H. ..l MITITI'ITIWHTITIWIW “WW IIIIWWIWES 3 1193 03057 6692