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.~nncttc Quill <br />1)aVC (~lC2 rS <br />June 12, 2000 <br />Page 1] <br />18. hcoaanic 13ene(it <br />'there arc three very intporLutt [laws in the economic bcnefi::alculalion. These invali- <br />date the conclusion tha[ the Rol is enjoying no economic bzr.c5t as a result of its failure <br />to comply for a lengthy period of time. <br />Pit:,t, it is falsd to assume that the 400 gallon trcannent facilit.; is Irzalino all of tae <br />conlaminuctl water which is being discharged to llu waters of the slate and Uttired <br />States. As is demonstrated by the fact that tltcrc has been onroing discharge from the <br />seeps, the trcannent facility is not treating all of the contaminated groundwater. Thcn- <br />forc, -MRI c:onlintres to cojoy the economic bcttetit of failin~ to comprehensively <br />address the violation. 'fhc same applies to the mtgoing discha ,c of groundwater to the <br />Rito Scco alluvium, which was not stopped by bringing the :rcatment facility on line, <br />because the gmundwatcr flow still linds expressiun in the st:rfacc seeps. <br />Second, thz economic benefit analysis makes an assumption that there is ~ linem <br />relationship between capital costs and the size of the two cotitparative facilities (110 gltrn <br />and 400 gpm). This is fundantcntally untntc as regards capi~:l costs. Por cxarnlrlc, the <br />cost of design is not reduced on a linear basis far a smaller fcctliry. A capital cost such <br />as design is relatively equal no ntattcr what size facility. is being designed. 1'ltcr~:forc, the <br />t~ttio used to make the comparison between the costs of the two facilities, based ~n a <br />linear relationship (i. e., 2.75, or 110 divided by 400) dots not tttake settle and uttdcr- <br />ntincs tltc conclusion reached, <br />Third, and most significantly, the ccouomic 6ene(il justification assumes that the cost of <br />money to BMltl wtts 6%.' 'Chis is fundamentally incorrect as a matter of economics. To <br />obtain an acctrcate estimate, the economic Ircitcfit calculation should consider tlta internal <br />rate of return, i. e., what the company makes froth its altctnative investment of the money <br />which should ltavc been spent oft a treatment fttcilily. An economist would peg this <br />inldrnal rate of rdntrn conservatively at 10"/o to 15"/0. At Itcarings on anotftcr DM matter, <br />BM recently ;trgucd that its internal rate of rclum exceeds I S%, 7'hc failure to tut the <br />internal rate of return as the true cost of money makes a significant difference in the <br />'Wz note that even the 6% assumption, based on a simple interest rate, is wrong. <br />'Cltc prime interest fate was 3.5"/o in April 1997, and DM, as a commercial bonowcr, <br />would have paid morn than prime to obtain a loan. <br />~mm mr.....•J.. e1+...+J1.a..+. M <br />