Shetland oil spill highlights water concerns in United Kingdom - includes related article

The recent oil spill in the Shetland Islands has brought renewed attention to the subject of water in the United Kingdom. Even before the recent Braer oil spill captured the world's attention, growing concerns had been raised about both the quality and quantity of inland water supplies. Significant export opportunities will continue to emerge for a range of U.S. products and services that can help solve potentially troublesome environmental problems.

In addition to the recent ecological tragedy in the Shetlands, other influences have impelled the United Kingdom to study its water problems. European Community regulations setting new water quality standards, fresh evidence of contaminants in drinking water supplies, and assessments of the economic and environmental consequences of declining supplies of clean water have stimulated planning and action by U.K. officials. Spending on technology and equipment to provide for clean water is expected to run close to $42 billion by the year 2000, according to U.K. industry sources. American companies possess the technology and competitiveness to increase their presence in this market.

The United Kingdom's concerns with water pollution problems have been prompted both by the obligation to meet new EC water quality standards and by public reaction to reports of contaminants in the drinking water. Both tap water and the industrial water used and discharged by British industry are under scrutiny. Today, the U.K. water industry is obliged to produce drinking water that meets minimum EC standards, while U.K. water users must address another concern--control of water pollution at the source. These elements, together with growing public and industrial awareness, are the catalysts for changes in the ways the United Kingdom treats its water resources.

Benefits should accrue to firms that specialize in a variety of water related technologies, including domestic and industrial water purification, reuse, cleaning, water pipe and storage tank restoration and rehabilitation, conservation, and desalinization. In addition, should recommendations that water metering replace the current practice of charging flat rates for water usage be adopted, firms with products and technology in this industry would also experience growing markets.

Meeting the Challenges Will Generate Opportunities

The obligation of U.K. water suppliers and industry to meet these challenges will help to generate marketing opportunities for U.S. firms that have expertise in a variety of product and service markets. The specific problems facing the United Kingdom and the opportunities for U.S. exporters appear to rise from several sources.

Privatization

The U.K. water industry was transferred from public to private ownership in 1990. Spinning off the ownership of the water utilities has had an immediate impact on the market for related equipment and services. Freed from government intervention in management and from public ownership constraints on financing, the private water companies have already begun to improve standards of services and prevention of pollution.

The industry has taken the first steps in a $45 billion capital investment program that will including spending on a range of related equipment and services, including water treatment systems, monitoring instrumentation, pumping stations, sewage treatment, flood prevention, and relaying of water mains.

Water Standards

Quality standards come from U.K. legislation as well as EC directives. The U.K. Water Act of 1989 obliges companies to supply "wholesome" water for domestic uses such as drinking, cooking, or washing. U.K. national standards and the EC Drinking Water Directive are used to define wholesomeness. The definition has numerical standards for 55 parameters, which include aesthetic considerations such as clarity and color, as well as the levels of bacteria, natural minerals, and manmade chemicals in the water.

The pollution of inland waters and discharge of raw sewage into the sea are areas of concern in U.K. standards as well. The U.K. Environmental White Paper, "This Common Inheritance," has set out certain commitments for cleaner water. Among these goals are the establishment of an urban waste water directive and the possible use of incentive charging for water polluting discharges, and fines. Already the National Rivers Authority has successfully secured a fine of $1.5 million against Shell for pollution of the Mersey River. A number of other prosecutions have taken place, including some against the former water authorities.

Lead Contamination

Recent tests have found high lead levels in houses supplied by old and decaying lead pipes. The problem is complicated in certain regions, such as northwest England, where high levels of naturally occurring lead are found. A recent sample of tap water in Lancashire contained 88,200 micrograms of lead. Other samples containing particulate lead have also exceeded 50,000 micrograms. According to one estimate, 20 percent of British houses exceed a World Health Organization recommended lead standard of 10 micrograms per liter of water. The EC limit is 50 micrograms.

A U.K. Department of the Environment official has indicated that the lead particulate problem is one unique to the region. Local water utility authorities, though, believe the problem is caused by disintegrating water pipes made of lead. That point of view seems to be confirmed by a report in the British magazine, "New Scientist," that indicates replacement of lead pipes has reduced high lead readings. The report also notes that there is general agreement by water industry scientists that a national program to remove lead plumbing is needed.

Geographic factors may actually compound the problem. Most of northwest England receives very acid water from reservoirs in the Lake District. The water pipes serving the region apparently are especially vulnerable to acid moorland water and this may cause the particulate lead problem. Further, water supplies from several sources often are mixed. This mixing, says the local water utility, may change the water chemistry and upset the stability of the inside surfaces of some lead pipes.

The publicity over the disintegrating lead pipes coincides with growing criticism of the British water industry for not dealing effectively with lead contamination. In 1989, under threat of action in the European Court, the British government promised that all British water supplies would meet the EC 50 milligram lead limit by the end of 1992, seven years after the 1985 Directive target date. The water industry admits its efforts to meet the limit by dosing acid waters have failed.

Nitrates

The question of nitrate levels in U.K. water supplies is similarly debated. The use of nitrate-based fertilizers has increased significantly since the methods to produce them have been perfected. Approximately 1.6 million tons of nitrate fertilizer are applied to U.K. farm crops each year. However, between 10 and 60 percent of this fertilizer may not be taken up by the crops on which it is spread. As a result, there is wastage and, more seriously, leakage of nitrate through the soil into water supplies.

A decade ago, the United Kingdom committed to an EC directive requiring it to ensure that all water supplies would contain less than 50 parts per million (ppm) of nitrates by 1985, compared to the previous standard of 100 ppm. In 1991, EC inspectors discovered levels between 50 and 100 ppm in some water supplies in eastern England. A new EC directive requires all member states to identify, by December 1993, "vulnerable zones," areas where there is a possibility that farming may contribute to a deterioration of water quality. In those zones, limits will be imposed on farming over the next six years.

The U.K Ministry of Agriculture has identified areas where nitrate leaching from farmland appears most significant. The Ministry has designated 10 small "nitrate sensitive areas" for testing agronomic systems that may reduce leaching. Meeting the requirements of the EC directive, though, may place some of the most productive U.K. farming land under the EC ban. The land involved could total five million acres. Farmers in the affected areas--mostly in East Anglia--would have to meet yield-inhibiting nitrate levels similar to those in the experimental nitrates sensitive zones.

Water Conservation and Shortages

The threat posed by growing water consumption and reduced supply, both to Britain's industry and wildlife, has been the subject of recent reports. The European Commission has reported that the lack of fresh water will constrain or increase the cost of economic growth in the EC. Although the shortages will be most pronounced in Mediterranean countries, industrial and agricultural contamination of ground water could lead to economic constraints in the United Kingdom and other northern EC countries, if current patterns of water use are maintained, says the report. The report indicates that, even before assessing the costs of meeting water quality standards, EC members will have to make heavy investments simply to keep water supplies available and flowing.

The report cites several regions at risk, including southeast England, where high population density and industrial development could cause water shortages, despite considerable rainfall and plentiful rivers. The report calls for investment in technology to reduce leakages, and the reuse of industrial water and waste water.

A central element in the conservation problem is simply water loss. Between 15 and 30 percent of the water in delivery pipes for household use leaks away or evaporates before it reaches the tap. In some areas of the United Kingdom the loss rates are higher. For example, in the northwest the loss rate reaches one-third. Water used for agricultural purposes suffers from much higher loss rates. Approximately 50 percent of water used for irrigation purposes is lost before it reaches the intended site, according to industry sources.

In a related context, the Prince of Wales has issued a report highlighting the threats to Britain's wildlife posed by increasing consumption and declining supply of water. Findings in the report indicate that "overzealous" drainage and increasing demand for water has brought some wetland species to near extinction. Between 1971 and 1980, more than 754,000 hectares of land were drained in England and Wales, according to estimates in the report.

While drainage practices have lowered the water table and destroyed various wetland habitats, a serious drought has caused the lowest river levels in 200 years. Calling for a two-year campaign to enhance water quality and improve habitat management, the report also recommends changing current land-drainage and farming practices and provides advice on water conservation.

The expected beneficiaries of increased spending on water conservation and clean-up will include companies in a wide range of water-related industries. These would include waste water treatment services and equipment, water pipe replacement and repair services, and industrial and domestic water pollution control equipment. The market for monitoring systems is expected to show rapid growth to meet the demand for these systems from the privatized water companies.

Firms that provide assistance to the actual polluting industries will also experience rising demand. U.K. policy to "make the polluter pay" will force companies that pollute waters both to clean up their discharges and to more accurately monitor the effects of those discharges. Last year, it is estimated that U.K. industrial firms spent $677 million for equipment to control their own pollution. The growth rate for water pollution control equipment is calculated to be close to 10 percent per year in real terms over the near term.

As noted, increasingly stringent European legislation has sped the pace of U.K. improvement of the water supply. Consequently, major opportunities for U.S. companies are likely to be in water pollution prevention and treatment, areas where the United States has led world development. It is estimated that the market created by the water companies alone for pollution control equipment reached $706 million in 1992.

The total U.K. market for water pollution control equipment was approximately $990 million in 1990. Last year, purchases of water pollution control equipment were believed to have exceeded $1.4 billion. The two largest end-users were the water supply companies and regulators, and U.K. industry. Each accounted for nearly half of all expenditures, with residential, agricultural, and leisure end-users responsible for only 4 percent of all purchases. The market is expected to grow 9 percent per year over the near term. U.S. suppliers of most products for the water industry face no major barriers to the market.

Best Sales Prospects--Products expected to have the best prospects for increased sales over the near term include: water quality instrumentation, water quality upgrade systems, pumps, water softeners, flash mixers, screening systems, rapid gravity filtration plants, sludge digesters, sewage clarifiers, micro-straining systems for algae removal, telemetry equipment, hazardous waste treatment and disposal plants, ozonation equipment, ion exchange systems, sludge and waste incineration plants, and marine oil-slick clean-up equipment.

Competitive Situation--There are new dynamics in the competitive situation. Under the U.K. government's privatization policy, the ten water companies with potentially wide-ranging activities were made private concerns in 1990, and took over the previously legally-restricted water related operations of local authorities. The new water companies are involved in pollution control activities for which they are expected to purchase needed expertise. Given the advanced technology and expertise already operational in American pollution control systems, American firms have considerable scope to work with U.K. water companies. This is substantially a new market.

Imported products accounted for approximately 39 percent of the total market in 1992, and the total market share held by each of the main supplying countries was as follows: U.S. manufacturers, with 11 percent of the market, have strengthened their position in the past decade in monitors, analyzers, and other computerized instrumentation. West Germany had a 13 percent market share, with its strengths in process plant, instrumentation, softeners and supplies, and pumps. The Netherlands had a 5 percent share, and was strong in process instrumentation, ion exchangers, filters, pumps, and geotextiles. France, with a share of 4 percent, has made strides in monitors and recycling systems. Sources of other imports last year included Taiwan (pipes, couplings, and purification equipment), Italy, Japan, Switzerland, Denmark, Belgium, Israel, Austria, and Canada.

Additional information on this growing market, and advice on the best methods to penetrate it, can be obtained from the U.K. Desk Officer, Office of Western Europe, Room 3043, U.S. Department of Commerce, Washington, D.C. 20230; tel. (202) 482-3748.

Shetland Salmon Upset By Spill

In addition to the ecological damage done by the Braer oil spill, the most serious economic consequences appear to be on the farming of the prized Shetlands' salmon. Commercial harvesting of salmon has been banned in 16 farms in a 400,000-square-mile zone in the Shetland Islands near the Braer oil spill. About 30 percent of the Shetlands' farmed salmon, which has a total commercial value of nearly $95 million, is found in the fishing exclusion zone that was imposed by U.K. officials after the spill. The local product, raised in the pure offshore waters and carefully farmed, is widely acclaimed as a superior salmon.

Shetlands' salmon are farmed on a three-year growth cycle. Although salmon that are ready for the current harvesting cycle show some signs of tainting, most remain fit for consumption. The commercial value of the catch, though, could be degraded from the high end to the low end of the market. The long-term impact on Shetlands' salmon appears to be slight. Salmon do not accumulate hydrocarbons, and those affected generally should return to normal approximately six weeks after their exposure. Consequently, there could be ample scientific justification to roll back rapidly the boundaries of the exclusion zone.

The impact on the salmon supply follows notice that, despite strides in aquaculture, fish and shellfish consumption in the European Community has been outstripping supply since 1988. In 1990, demand exceeded landings of fish and shellfish for human consumption by almost one million tons. Supplies of a number of common varieties, including cod, herring, and mackerel, cannot meet demand in the EC. As a consequence, there has been increased consumption of varieties that normally would have been processed into fish meal and other industrial products.

Recent reports indicate that one major food chain store in the United Kingdom has stopped buying Shetland salmon as "a temporary precautionary measure," while two other large chains are "monitoring" the situation. A fourth chain has indicated that its suppliers are nowhere near the polluted area, and that it will continue to buy Shetland salmon. All salmon, and other fish, harvested from the island will be accompanied by a certificate stating its suitability for consumption.

There are 58 sea-based salmon farms in the Shetlands. Last year, they accounted for 10,000 of the 40,000 tons of farmed salmon produced in the United Kingdom. Most of the inlets where the salmon are released are located on the west coast of Shetland, with the nearest just 13 miles from the site of the shipwreck. The Shetlands, though, produce only a small amount of the salmon consumed in the United Kingdom. Scotland produces about 30,000 tons per year, while Norway produces another 150,000 tons each year.

U.S. suppliers of fish and shellfish interested in developing markets in the United Kingdom and elsewhere in the European Community face no major import barriers, and should be able to penetrate the growing markets. The Department of Commerce's National Marine Fisheries Office of Trade and Industries Services can provide assistance and guidance to exporters. Interested parties should contact that office on tel. (301) 713-2379.

COPYRIGHT 1993 U.S. Government Printing Office
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