A Cost-Benefit Analysis of AMD Recovery and its Implications

for Potential Business Opportunities

Ryan McCampbellAMR Conference 2015

Background

• Accounting student at Bloomsburg University• Started as a paper for the Honors Program in

my undergrad at Bloomsburg University – worked with Dr. Ed Pitingolo• Pursued the idea of “entering into the

‘business’ of Sustainability”• Worked closely with the SCRA for cost

information-how the process works• Applied accounting knowledge to what I

understood of AMD to develop a business plan

Business and Sustainability

• Brundtland Report – 1987• Called for better resource management and environmental protection• Coined the phrase “Sustainability” (or sustainable development)

• Industries have shifted to Sustainable Development• “green” projects• Limit waste/hazards on environment• Customer bases concerned with environmental impact

• Triple Bottom Line – Profit, People, Planet• Companies began looking for ways being “green” could save money

‘Scarlift’ Site 15

• Vertical Flow

• Series of Settlement and treatment cells

• Utilizes compost, limestone, and wetland plants

• Inflow: pH of 4.3, 28.6 mg/l Iron

Feasibility/Assumptions

• Best Case Scenario within reasonable expectations

• Most of the iron oxides removed from the water are accessible/recoverable• Useful life of limestone/compost is 10 years

• Organizing as Not-for-Profit

• No taxes on income

• Primary source of funding from support of State

• No “service revenue”

Start-Up Costs• Every system is different;

unique discharges have unique needs

• Active vs Passive

• Treatment cells vs settlement ponds

• Wetland Plants

• Fence

Figure 2-1 Estimated Material Costs

Amount Unit Per unit TotalMoving Equipment in/out 1 EA 35,000$ 35,000$ Clearing out Land of Plant Life and Debris 2 ACRE 1,500 3,000 Moving Powerlines, Telephone lines, ect. N/A N/A - 25,000 Diversion of Water 1 EA 2,500 2,500 Storm Water Channel Excavation 600 LF 4 2,100 Treatment System Grading 10,700 CY 10 101,650 misc. rock material 70 TON 24 1,680 Limestone 3,500 TON 28 98,000 Mushroom Compost 3,150 CY 25 78,750 .25" Geonet 5,000 SY 4 21,250 Sch. 80 Underdrain Piping 1 EA 30,000 30,000 LLDPE Liner (Geobase) 6,500 SY 10 65,000 Wetland Planting 5,000 SY 1 5,000 Seeding and Mulching 1.5 ACRE 820 1,230 Erosion and Sedimentation Measures 1 EA 8,000 8,000 Fencing 35,000 Equipment on site/ foreman/ wages/ rent 50,000 Cost of AMD Restoration Site 563,160 Chemical Composition Test Funds 5,000 Money to be Applied to Owner's Salary 40,000 Subtotal 608,160 Plus 10% Contingency 60,817 Total 668,977$

Continuing Costs, Depreciation

• “Passive” treatment is not really passive, requires upkeep, regular monitoring, and periodic field tests

• Active treatments often incur material electricity costs as well as costs for chemicals/materials and wages.

• Depreciation• Depletion varies by discharge flow rates• Generally need to be replenished every 10 years• Depreciation Expense offsets revenue generated

Revenue Sources

• Goods (Iron Oxide)• Paint• Pottery• Paper• Mulch• Cement/concrete• Building Materials• Clothing?

• Possibility for Service Revenue

Income Statement

• Depreciation• Accounting for future expenditures to

replace key revenue generators (limestone)

• ~ $9,500 in this example

• Salary (wages)

• Sales (optimistically)• Based on market rates for Iron Oxide• Assuming full recoverability (accrual for

later collection)• Important to consider freight/

transportation expenses to buyers

Figure 7-3

Sales (Figure 5-4) 104,000

Operating Expenses:Selling Expenses

Water Test Expense 1,500 Depreciation - Compost 7,875 Depreciation - Limestone 9,800 Depreciation - Treatment Site 11,181

Total Selling Expenses 30,356

Administrative ExpensesOwner's Salary 40,000 70,356

Net Income 33,644

Non-profit CompanyIncome Statement

For First Year of Operations

Cash vs. Accrual, Revenues vs. Assets• Revenues and Expenses do not immediately correlate to cash in hand• Depreciation does not cause an outflow of cash• Revenues do not always indicate cash received• Cash flow problems are likely to occur as accumulated assets remain in

treatment cells

• For simplification (and best case scenario), iron oxides are shown as revenues, even though a good portion of them would not be recovered/sold until the treatment cells are replenished.

Service/Sales Contracts

• Good way to guarantee demand, get a good rate on iron oxide• Potential for Service Revenue• Pay to hire workers/crews to extract iron oxide• Arrange there own extraction, use of company equipment, ect.

• Viable industries for contracts• Painting/Pottery• Bricklaying/Construction• Clothing, fabrics, ect.• Fish habitats and harvesting

Closing

• Sustainable Development is slow, but is not going away• The Iron Oxide is there, but in many cases it is difficult/costly to

extract• There isn’t a guaranteed source of revenue; need to find demand• Expenses, while not all out-of-pocket, are continuous year-to-year• While AMD recovery may not make break-even, recovering costs

reduces the amount of funding needed, and makes ventures that recover their costs more competitive for grant money.

Thank You

SCRA

EPCAMR

Bloomsburg University and the Honors Program

Dr. Edward Pitingolo, Advisor