DS10 Small Pennsylvania Town Considers Waste Water Treatment Options

Because of a rapid growth in population, a small town in Pennsylvania is considering several options to establish a waste water treatment facility that can handle a waste water flow of 2 MGD (million gallons per day). The town has five treatment options available:

Option 1 No action: This option will lead to continued deterioration of the environment. If growth continues and pollution results, fines imposed (as high as $10,000 per day) would soon exceed construction costs.

Option 2 Land treatment facility: Provide a system for land treatment of wastewater to be generated over the next 20 years. This option will require the utilization of the most land for treatment of the wastewater. In addition to finding a suitable site, pumping of the wastewater for a considerable distance out of town will be required. The land cost in the area is $3,000 per acre. The system will use spray irrigation to distribute waste-water over the site. NO more than one inch of wastewater can be applied in one week per acre.

Option 3 Activated sludge-treatment facility: Provide an activated sludge-treatment facility at a site near the planning area. No pumping will be required for this alternative. Only 7 acres of land will be needed for construction of the plant at a cost of $7,000 per acre.

Option 4 Trickling filter-treatment facility: Provide a trickling filter-treatment facility at the same site selected for the activated sludge plant of option 3. The land required will be the same as used for option 3. Both facilities will provide similar levels of treatment using different units.

Option 5 Lagoon treatment system: Utilize a three-cell lagoon system for treatment. The lagoon system requires substantially more land than options 3 and 4, but less than option 2. Due to the larger land requirement, this treatment system ill have to be located some distance outside of the planning area and will require pumping of the wastewater to reach the site.

The following summarizes the capital expenditures and O&M costs associated with each option:

Land Cost for Each Option
Option Number	Land Required (acres)	Land Cost ($)	Land Value (in 20 years)
2	800	$2,400,000	$4,334,600
3	7	49,000	88,500
4	7	49,000	88,500
5	80	400,000	722,400

The price of land is assumed to be appreciating at an annual rate of 3%.

Option Number	Capital Expenditures			Total
	Equipment	Structure	Pumping
2	$500,000	$700,000	$100,000	$1,300,000
3	500,000	2,100,000	0	2,600,000
4	400,000	2,463,000	0	2,863,000
5	175,000	1,750,000	100,000	2,025,000

The equipment installed will require a replacement cycle of 15 years. Its replacement cost will increase at an annual rate of 5% (over the initial cost), and its salvage value at the end of the planning horizon will be 50% of the replacement cost. The structure requires replacement after 40 years and will have a salvage value of 60% of the original cost.

Option Number	Annual O&M Costs			Total
	Energy	Labor	Repair
2	$200,000	$95,000	$30,000	$325,000
3	125,000	65,000	20,000	210,000
4	100,000	53,000	15,000	168,000
5	50,000	37,000	5,000	92,000

The cost of energy and repair will increase at an annual rate of 5% and 2% respectively. The labor cost will increase at an annual rate of 4%.

With the following sets of assumptions, answer (a) and (b).

(a) If the interest rate (including inflation) is 10%, which option is the most cost-effective?

(b) Suppose a household discharges about 400 gallons of waste water per day thorough the facility selected in (a). What should be the monthly assessed bill for this household?

• Assume analysis period of 120 years.
• Replacement costs for the equipment as well as pumping facilities will increase at an annual rate of 5%.
• Replacement cost for the structure will remain constant over the planning period. However, its salvage value will be 60% of the original cost. (Because it has a 40-year replacement cycle, any increase in the future replacement cost will have little impact on the solution).
• The equipments salvage value at the end of its useful life will be 50% of the original replacement cost. For example, the equipment installed for option 1 will cost $500,000. Its salvage value at the end of 15 years will be $250,000.
• All O&M cost figures are given in todays dollars. For example, the annual energy cost of $20,000 for option 2 means that the actual energy cost during the first operating year will be $200,000(1.05)=$210,000
• Option 1 is not considered a viable alternative as its annual operating cost exceeds $36,500,000.