Review of 2013 EPA Economic
Analysis of Proposed Revised
Definition of Waters of the
United States
David Sunding, Ph.D.
February 20, 2014
Copyright © 2014 The Brattle Group, Inc.
Presenter Information
DAVID SUNDING
Principal │ San Francisco
David.Sunding@brattle.com
+1.415.217.1000
Prof. Sunding holds the Thomas J. Graff Chair of Natural Resource Economics at
the University of California, Berkeley. He is the founding director of the
Berkeley Water Center and currently serves as the chair of his department. He
has won numerous awards for his research, including grants from the National
Science Foundation, the U.S. Environmental Protection Agency, and private
foundations.
1 | brattle.com
About Brattle
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Agenda
Incremental Jurisdictional Determinations
Incremental Acreage Calculations
Incremental Cost Calculations
Incremental Benefit Calculations
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Incremental Jurisdictional Determinations
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Calculation of Incremental JDs
Streams
Wetlands
Other Waters
Total
No. ORM
Records
95,476
38,280
8,209
141,965
No. Positive
Juris.
93,538
37,709
0
131,247
Proj. Positive
Juris.
95,476
38,280
1,396
135,152
% Total ORM2
Records
% Positive Juris.
67%
98.0%
27%
98.5%
6%
0.0%
100%
92.5%
Proj. Positive
Juris.
100.0%
100.0%
17.0%
95.2%
USACE review of 262 project files from FY 2009/10
▀
▀
67% streams, 27% wetlands, 6% other waters
− Old JD:
 98% of streams, 98.5% of wetlands, 0% of other waters
− USACE Review:
 100% of streams, 100% of wetlands, 17% of other waters
2.7% incremental JDs
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Calculation of Incremental JDs
Key Limitations
▀
▀
▀
No discussion of impacts of new jurisdictional terminology
(“neighboring”) and revised definitions (“adjacent”, “tributary”,
“riparian areas”, “floodplain”) on number of permit applications
ORM2 database (USACE) categories of jurisdictional waters not
compatible with EPA draft rule categories
Universe of jurisdictional waters underrepresented in ORM2
database
− Preliminary JDs not included
− Majority of individuals not seeking permits likely for isolated
waters category
− Only impacted areas currently included (omitting non-impacted
portion of site)
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Section 404 Permitting Process
Jurisdiction
Seeks JD
No
Proposed
Project
Jurisdiction
No Action
Omitted from
EPA Analysis
• Statistically invalid procedure that likely underrepresents impacts
• PJDs are improperly aggregated with JDs
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Incremental Acreage
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Calculation of Incremental Acreage
Permits
Permit Type issued
FY2010
Added
Permits
(2.7%
increase)
Average
Impact Per
Added Permit
(Acres)
Total
Added
Impacts
(Acres)
Individual
2,766
75
12.81
960
General
49,151
1,327
0.28
372
Total
51,917
1,402
Calculations
A
B = A*0.027
1,332
C
D = B*C
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Calculation of Incremental Acreage
Underestimation of impacted acreage
▀
▀
▀
▀
FY 2009/10 baseline not representative
− Period of reduced development and economic contraction
(impacting both number of projects and average size of
projects)
USACE review does not address potential new permit seekers
− Only concerns applicants already in system
Section 404 impacts unreasonably extended to all CWA programs
Heterogeneity in project files ignored
− State-level and project size differences not addressed
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FY 2009/10 Baseline Not Representative
Source: US Census Bureau
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Incremental Costs
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Calculation of Incremental Costs
Section 404
▀
▀
▀
▀
Permit Application Costs
Compensatory Mitigation Costs
Permitting Time Costs (omitted from EPA analysis)
Impact Avoidance and Minimization Costs (omitted from EPA
analysis)
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Section 404 Permit Application Costs
Permits
Permit Type issued
FY2010
Added
Permits
(2.7%
increase)
Average
Impact Per
Added Permit
(Acres)
Total
Added
Impacts
(Acres)
Costs from
Costs from
Additional Annual
Sunding and
Corps’ Analysis
Cost (2010$
Zilberman Study
(2010$)
millions)
(2010$)
Individual
2,766
75
12.81
960
$31,400 /
permit
General
49,151
1,327
0.28
372
$13,100 /
permit
Total
51,917
1,402
Calculations
A
B = A*0.027
C
$57,180 /
permit +
$15,441 / acre
$2.4 - $19.1
$22,079 /
permit +
$12,153 / acre
$17.4 - $33.8
1,332
$19.8 - $52.9
D = B*C
Lower:
E*B
Upper:
(F 1 *B)+(F 2 *D)
E
F 1,2
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Section 404 Permit Application Costs
Key Limitations
▀
▀
▀
▀
Changes in distribution of individual/general permits not
addressed
Average project sizes ignore heterogeneity across projects
Values from Sunding & Zilberman study nearly 20 years old and
unadjusted for programmatic changes and inflation
Permitting time costs and impact avoidance/minimization costs
not addressed
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Section 404 Compensatory Mitigation Costs
Water Body
Type
Streams
Wetlands
Units of
Annual Cost (2010$
Unit Costs ($2010)
Mitigation
millions)
49,075 feet
$177 - $265
$8.7 - $13.0
2,042 acres
$24,989 - $49,207
Total
Calculations
$51.0 - $100.5
$59.7 - $113.5
A
B
C = A*B
Key Limitations
▀
Discrepancy between EPA 2011 and 2013 analyses
− Unit costs and amount of mitigation lower in 2013 analysis
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Calculation of Incremental Costs
Other (Non-404) Sections
▀
▀
▀
Adopt old estimates
Adjust for 2.7% incremental increase in jurisdictional waters
Adjust for changes in program size
Key Limitations
▀
▀
▀
Impacts to some programs omitted due to lack of data
Other programs assumed to be cost neutral without explanation
− Example: Section 303 (state water quality standards and
implementation plans) and Section 402 (NPDES permits)
Estimates of Section 404 impacts (+2.7%) not applicable to non404 programs
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Incremental Benefits
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Calculation of Incremental Benefits
Section 404
▀
▀
Increased clarity in CWA jurisdictional determination (omitted
from EPA analysis)
Ecosystem benefits from increased compensatory mitigation
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Section 404 Mitigation Benefits
Region
Incremental Impact
Estimate (Acres)
Number of
Households
Present Value of Benefits
per Year- 7% Discount
(2010$ millions)
Present Value of Benefits
per Year- 3% Discount
(2010$ millions)
Central Plains
Delta and Gulf
Mountain
Midwest
Northeast
Pacific
Prairie Potholes
Southeast
Other
National
Calculations
30
85
145
322
240
79
241
187
3
1,332
A
3,201,336
14,521,178
7,390,812
23,909,088
23,839,690
16,163,714
2,176,626
20,485,107
234,779
111,922,330
B
$1.20
$14.80
$12.90
$92.30
$68.70
$15.30
$6.30
$46.10
$0.00
$257.60
C = A*B*0.012
$1.50
$19.80
$17.30
$123.70
$92.10
$20.50
$8.40
$61.70
$0.00
$345.10
D = A*B*0.016
Benefit Transfer Analysis
▀
▀
Synthesized 10 contingent valuation studies providing willingness
to pay (WTP) estimates of wetland preservation
WTP estimates multiplied by acres and households for each
wetland region
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Section 404 Mitigation Benefits
Key Limitations
▀
▀
Selection of WTP studies arbitrary and not representative
− 9 of 10 studies more than a decade old (oldest ~30 years old)
− Several studies not published in peer-reviewed journals
Unreasonable presumption of transferability of results
− Localized benefits assumed to accrue to all members of wetland
region
− No adjustment for changes in economic trends, recreational
patterns, stated preferences over time
21 | brattle.com
Calculation of Incremental Benefits
Other (Non-404) Sections
▀
▀
▀
Adopt old estimates
Adjust for 2.7% incremental increase in jurisdictional waters
Adjust for changes in program size
Key Limitations
▀
Assumption that negative impacts would occur without increase
in federal jurisdiction is unreasonable
− State programs well-suited to protect local resources
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Summary of Incremental Costs/Benefits
Program
§404 Mitigation- Streams 2
§404 Mitigation- Wetlands
§404 Permit Application 3
§404 Administration
§401 Administration 4
§402 Construction Stormwater
§402 Stormwater Administration
§402 CAFO Implementation 5
§402 CAFO Administration
§402 Pesticide General Permit 6
§311 Implementation
Total
Costs ($millions)
low
high
$8.7
$51.0
$13.0
$100.5
$19.7
$7.4
$52.9
$11.2
Benefits ($millions)
low
high
$257.6
$345.1
$25.4
$32.3
$3.4
$5.9
$0.7
$25.6
$31.9
$0.2
$5.5
$0.2
$2.9
$3.2
$11.7
$133.7
$231.0
$14.3
$300.7
$397.6
Notes (from EPA documents):
1
§303 impacts are assumed to be cost-neutral; §402 impacts are components of costs and benefits previously
identified for past actions, not new costs and benefits associated with this proposed rule
2
Benefits of stream mitigation are not quantified
3
4
Costs of potential delayed permit issuance and costs and benefits of avoidance/minimization are not quantified, nor
are any benefits from reduced uncertainty
Costs to permittees and benefits of any additional requirements as a result of §401 certification are reflected in the
mitigation estimates to the extent additional mitigation is the result, yet not calculated to the extent
avoidance/minimization is the result.
5
Benefits apply to large CAFOs only, which account for 85% of implementation costs and 66% of administrative costs
6
PGP benefits and government administrative costs are not available
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Conclusion
Underestimation of Incremental Acreage
Flawed calculation of Incremental Costs
▀
▀
Focus on Section 404 costs, other sections ignored
No consideration of permitting time costs and impact
avoidance/minimization costs
Flawed calculation of Incremental Benefits
▀
Benefit transfer analysis not consistent with best practices in
environmental economics
Analysis poorly documented and contains multiple
inconsistencies with previous analyses
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