EPA’s Proposed Rule on
Waters of the United States
Audio Dial in Number
855-581-6805
February 27, 2014
Don Parrish
• Senior Director,
Regulatory Relations,
American Farm
Bureau Federation
• Chair, Waters
Advocacy Coalition
Waters Advocacy Coalition Members
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Agricultural Retailers Association
American Farm Bureau Federation®
American Forest & Paper Association
American Iron and Steel Institute
American Petroleum Institute
American Road & Transportation Builders
Association
Associated General Contractors of America
CropLife America
Edison Electric Institute
The Fertilizer Institute
Florida Sugar Cane League
Foundation for Environmental and Economic
Progress
Independent Petroleum Association of America
Industrial Minerals Association - North America
International Council of Shopping Centers
Irrigation Association
NAIOP, the Commercial Real Estate
Development Association
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National Association of Home Builders
National Association of Manufacturers
National Association of REALTORS®
National Association of State Departments of
Agriculture
National Cattlemen’s Beef Association
National Corn Growers Association
National Council of Farmer Cooperatives
National Milk Producers Federation
National Mining Association
National Multi Housing Council
National Pork Producers Council
National Stone, Sand & Gravel Association
Public Lands Council
RISE - Responsible Industry for a Sound
Environment
Southern Crop Production Association
United Egg Producers
Western Business Roundtable
Deidre Duncan
• Partner, Hunton &
Williams LLP
• Counsel to Waters
Advocacy Coalition
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.
5 | brattle.com
EPA’s Proposed Rule on
Waters of the United States
February 27, 2014
Background
• CWA provides federal jurisdiction over
“navigable waters,” defined as “the waters of the
United States”
• In 1985, in Riverside Bayview Homes, the
Supreme Court upheld the regulation of
wetlands adjacent to or “inseparably bound up
with” navigable waters
• The agencies adopted the current regulations in
1986
7
Background
• In 2001, the Supreme Court in SWANCC
rejected regulation of “isolated waters” under the
Migratory Bird Rule because the waters lacked a
“significant nexus to navigable waters”
− Emphasized Congress’ use of the term
“navigable”
• After SWANCC, the agencies adopted a broad
interpretation that “waters of the U.S.” include
any water “connected” to navigable waters
8
Background
• In 2006, the Court in Rapanos rejected the
agencies’ “any hydrological connection” theory
of jurisdiction as overly broad
− Plurality opinion (Scalia):
• Rejected assertion of jurisdiction over ephemeral
streams, ditches, and drains
• Relatively permanent waters
− Kennedy concurrence:
• Joined plurality in rejecting the Government’s any
connection theory
• Significant nexus
9
2013 “Proposed” Rule
• The Proposed Rule replaces the definition of “navigable waters” and
“waters of the United States” in the regulations for all CWA
programs, and in particular sections 311, 401, 402, and 404:
−
−
−
−
−
−
−
−
−
−
−
−
33 C.F.R. § 328.3
40 C.F.R. § 110.1
40 C.F.R. § 112.2
40 C.F.R. § 116.3
40 C.F.R. § 117.1(i)
40 C.F.R. § 122.2
40 C.F.R. § 230.3(s) and (t)
40 C.F.R. § 232.2
40 C.F.R. § 300.5
40 C.F.R. § 300, Appendix E to Part 300, 1.5
40 C.F.R. § 302.3
40 C.F.R. § 401.11
10
WOTUS Under the “Proposed” Rule
1.
2.
3.
4.
5.
6.
7.
All waters currently, in the past, or may be susceptible to use
in interstate or foreign commerce, including tidal waters;
All interstate waters, including interstate wetlands;
The territorial seas;
All impoundments of waters otherwise defined as waters of
the U.S.;
All tributaries of waters identified in 1-3 above;
All waters, including wetlands, adjacent to water
identified in 1-5 of this section; and
On a case-specific basis, other waters, including wetlands,
that alone or in combination with other similarly situated
waters in the region have a significant nexus to a water
identified in paragraphs 1-3
11
New Definitions in “Proposed” Rule
• Tributary:
− Water body physically characterized by a bed and
bank and ordinary high water mark which contributes
flow directly or through other water bodies to waters
in 1-3.
− A water does not lose its tributary status if there
are man-made breaks (such as bridges, culverts,
pipes, dams) so long as bed and bank can be
identified up and downstream of the break.
− A wetland can be a tributary.
− A tributary can be natural, man-altered, or manmade and includes rivers, streams, lakes,
impoundments, canals, and ditches (unless
12
excluded).
Tributary Definition
• The rule, for the first time ever, specifically defines
ditches as jurisdictional tributaries under all CWA
programs
− Roadside ditches
− Irrigation ditches
− Stormwater ditches
• Other man-made conveyances that drain or connect
would also likely qualify as tributaries
• Huge practical consequences that have yet to be
evaluated
13
Farm Ditch
14
Potomac, Maryland
15
• Roadside ditch
constructed and
maintained by
Wicomico County,
Maryland roads
department
16
Other New Definitions
in “Proposed” Rule
• Adjacent: Bordering, contiguous, or neighboring
waters separated from other WOTUS by dikes, or
barriers are adjacent waters
• Neighboring: Waters located within a riparian area or
floodplain or waters with a surface or shallow
subsurface connection
− Riparian area: Transitional areas between water and
land where surface or subsurface hydrology
influences the ecological process and plant
community of the area …
− Floodplain: An area bordering inland or coastal
areas that … is inundated during periods of moderate
to high water flows
17
Industrial Ponds Along
the Colorado River
18
Washington,
DC
Floodplain
19
Significant Nexus Definition in
“Proposed” Rule
• Significant Nexus:
− Means a more than speculative or
insubstantial effect that a water or wetland
has either or alone or in combination with
other waters in the region on waters 1-3.
− Other waters, including wetlands, are similarly
situated when they perform similar functions
and are located sufficiently close together so
that they can be evaluated as a single
landscape unit.
20
Exclusions in “Proposed” Rule
• Waste treatment systems designed to meet the
requirements of the Clean Water Act;
• Prior converted cropland;
• Ditches excavated in uplands and that drain only
uplands and have no more than ephemeral flow;
and
• Ditches that do not contribute flow either directly
or through other water bodies to a water in 1-3
above
21
Exclusions in “Proposed” Rule
• Artificially irrigated areas that would revert to uplands
should irrigation cease
• Artificial lakes or ponds created in dry land and used
exclusively for stock watering, irrigation, settling basins,
or rice growing
• Artificial reflecting pools or swimming pools created by
excavating and/or diking dry land
• Small ornamental waters created by excavating and/or
diking dry land for primarily aesthetic reasons
• Water-filled depressions from construction
• Groundwater drained through subsurface drainage
systems
• Gullies, rills, non-wetland swales, and puddles
22
Why Does CWA Jurisdiction Matter?
• The amount of jurisdictional waters influences:
− Enforcement/likelihood for potential illegal
discharges
− Permitting/reporting requirements
• Type of permit: Nationwide or individual
− “Federal action” triggers: NEPA, ESA,
NHPA, 401 water quality certification, etc.
− Mitigation
− Third-party challenge
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Enforcement
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Enforcement
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Spill Prevention and
Countermeasure Plan
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Industrial Facility Implications
• Industrial ponds
− Refineries
− Process waters
• Industrial storm water systems
− Closing or modifying facilities
• Ditches and other conveyances
27
Deidre G. Duncan
Hunton & Williams LLP
2200 Pennsylvania Avenue, NW
Washington, DC 20037
(202) 955-1919
dduncan@hunton.com
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.
Agenda
Incremental Jurisdictional Determinations
Incremental Acreage Calculations
Incremental Cost Calculations
Incremental Benefit Calculations
30 | brattle.com
Incremental Jurisdictional Determinations
31 | brattle.com
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
32 | brattle.com
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)
33 | brattle.com
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
34 | brattle.com
Incremental Acreage
35 | brattle.com
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
36 | brattle.com
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
37 | brattle.com
FY 2009/10 Baseline Not Representative
Source: US Census Bureau
38 | brattle.com
Incremental Costs
39 | brattle.com
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)
40 | brattle.com
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 - $52.9
D = B*C
Lower:
E*B
Upper:
(F 1 *B)+(F 2 *D)
E
F 1,2
41 | brattle.com
Section 404 Permit Application Costs
Key Limitations
▀
▀
▀
▀
Changes in distribution of individual/general permits not
addressed
Average project sizes ignore heterogeneity across projects
Values from Sunding & Zilberman study nearly 20 years old and
unadjusted for programmatic changes and inflation
Permitting time costs and impact avoidance/minimization costs
not addressed
42 | brattle.com
Section 404 Compensatory Mitigation Costs
Water Body
Type
Streams
Wetlands
Units of
Annual Cost (2010$
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 - $113.5
A
B
C = A*B
Key Limitations
▀
Discrepancy between EPA 2011 and 2013 analyses
− Unit costs and amount of mitigation lower in 2013 analysis
43 | brattle.com
Calculation of Incremental Costs
Other (Non-404) Sections
▀
▀
▀
Adopt old estimates
Adjust for 2.7% incremental increase in jurisdictional waters
Adjust for changes in program size
Key Limitations
▀
▀
▀
Impacts to some programs omitted due to lack of data
Other programs assumed to be cost neutral without explanation
− Example: Section 303 (state water quality standards and
implementation plans) and Section 402 (NPDES permits)
Estimates of Section 404 impacts (+2.7%) not applicable to non404 programs
44 | brattle.com
Incremental Benefits
45 | brattle.com
Calculation of Incremental Benefits
Section 404
▀
▀
Increased clarity in CWA jurisdictional determination (omitted
from EPA analysis)
Ecosystem benefits from increased compensatory mitigation
46 | brattle.com
Section 404 Mitigation Benefits
Region
Incremental Impact
Estimate (Acres)
Number of
Households
Present Value of Benefits
per Year- 7% Discount
(2010$ 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
$345.10
D = A*B*0.016
Benefit Transfer Analysis
▀
▀
Synthesized 10 contingent valuation studies providing willingness
to pay (WTP) estimates of wetland preservation
WTP estimates multiplied by acres and households for each
wetland region
47 | brattle.com
Section 404 Mitigation Benefits
Key Limitations
▀
▀
Selection of WTP studies arbitrary and not representative
− 9 of 10 studies more than a decade old (oldest ~30 years old)
− Several studies not published in peer-reviewed journals
Unreasonable presumption of transferability of results
− Localized benefits assumed to accrue to all members of wetland
region
− No adjustment for changes in economic trends, recreational
patterns, stated preferences over time
48 | brattle.com
Calculation of Incremental Benefits
Other (Non-404) Sections
▀
▀
▀
Adopt old estimates
Adjust for 2.7% incremental increase in jurisdictional waters
Adjust for changes in program size
Key Limitations
▀
Assumption that negative impacts would occur without increase
in federal jurisdiction is unreasonable
− State programs well-suited to protect local resources
49 | brattle.com
Summary of Incremental Costs/Benefits
Program
§404 Mitigation- Streams 2
§404 Mitigation- Wetlands
§404 Permit Application 3
§404 Administration
§401 Administration 4
§402 Construction Stormwater
§402 Stormwater Administration
§402 CAFO Implementation 5
§402 CAFO Administration
§402 Pesticide General Permit 6
§311 Implementation
Total
Costs ($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
50 | brattle.com
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
51 | brattle.com
Questions?