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Re: EH&S in Capital Projects

Joann -- There is a variety of guidance out there and the selection of a
particular approach depends largely on the needs of the firm (and what is
credible in a given firm), but here are two sets of recommendations on ways to
go about it...

In his book Corporate Environmental Accounting (Wiley and Sons, 1996), Stefan
Schaltegger says this:

...Because of this integration of environmental protection into the
manufacturing device, the following question arises:  What part of the device
costs (assets) and maintenance expenditures are environmentally induced?
     The main criterion for answering this question is the cost difference in
relation to the environmentally next (less) favorable solution.  For example,
20% of the capital costs may be traced as environmental if the integrated
technology has caused 20% extra costs relative to a comparable device.  Or the
costs of depreciation of the old technology over two years may be considered as
environmentally induced -- if the integrated technology was installed two years
earlier than would have been economically justified, simply to comply with
environmental regulations.
     However, the costs should not be considered as environmentally related if
the integrated technology only represents present technological knowledge, and
if it has been installed for no other reason than the regular replacement of an
old device.

In EPA's An Introduction to Environmental Accounting as a Business Management
Tool:  Key Concepts and Terms, it says:

To handle costs in the gray zone, some firms use the following approaches:

-- allowing a cost item to be treated as "environmental" for one purpose but not
for another
-- treating part of the cost of an item or activity as "environmental", or
-- treating costs as "environmental" for accounting purposes when a firm decides
that a cost is more than 50% environmental.

Susan McLaughlin
US EPA's Environmental Accounting Project

CORTESE@sartomer.com on 12/15/99 02:52:02 PM

Please respond to CORTESE@sartomer.com

To:   p2tech@great-lakes.net

Subject:  EH&S in Capital Projects

I work in the chemical manufacturing industry. I am trying to track money
spent on environmental and safety upgrades. It is straight forward when
installing a pollution control device or safety equipment (100%). Does
anyone know a rule of thumb when allocating the cost of a new piece of
process equipment or other auxiliary equipment that also may have process
safeguards and environmental benefits?

Joann Cortese, CHMM
*: (610) 344-2133