Estimate of Economic Impact
I. Summary of Economic Impact. Currently nitrogen-removal technology must be included
with any new or replacement OSDS installed in either the Chesapeake Bay critical area or the
Coastal Bays critical area, basically within 1,000 feet of tidal water. To be certified as a nitrogenremoval technology in Maryland, 5 years of operation and maintenance must be included in the
up-front cost system. This proposed action will expand the requirement for nitrogen-removal
technology to include all OSDS serving new construction in the Chesapeake Bay watershed, in
the Atlantic Coastal Bays watershed, and in the watershed of any nitrogen-impaired water body.
The proposed action also requires operation and maintenance of the nitrogen-removal technology
for the life of the system.
The proposed action will have economic impacts on State revenue, State agencies, local
approving authorities, small businesses, the regulated industry, and the regulated community.
The Tax-General Article 10-208 Q would allow a deduction for homeowner out of pocket
expenses for installing the required nitrogen removal technologies. This tax reduction would
apply only to homeowners building new homes and not to developers. The Department is unable
to predict what percentage of new homes would be constructed by homeowners and thus cannot
predict the loss of revenue through tax deductions. This loss in revenue may be offset by an
increase in revenue from sales tax.
Impacts to the issuing agency and the local approving authorities will be minimal as no
additional staffing is needed to implement the proposal. MDE currently administers the State
OSDS program primarily through delegation agreements with local approving authorities. MDE
would establish a web-based reporting program for operation and maintenance of nitrogenremoval technologies for OSDS. This would require some manpower and up-front costs related
to information technology but have minimal continuing expenses. Local approving authorities
will be required to inspect the installation of nitrogen reducing technologies; however, these
approving authorities already inspect the installation of all OSDS. Nutrient removal technology
will be an additional component usually installed in place of a traditional septic tank. This should
be possible without additional staff. Staff would be expected to receive the training necessary to
understand how nitrogen-removal systems should be installed and maintained. There will be
some cost associated with this training. The proposal will have a positive economic benefit for
the business community and regulated industry and a negative economic impact on the regulated
community.
Revenue (R+/R-)
Expenditure (E+/E-)
Magnitude
II. Types of Economic Impact.
A. On issuing agency:
B. On other State agencies:
C. On local governments:
(E+)
(E+)
(E+)
Benefit (+)
Cost (-)
Minimal
Minimal
Minimal
Magnitude
D. On regulated industries or trade groups:
Selling, installing, and maintaining new systems
(+)
Significant
E. On other industries or trade groups:
Sales and installation of electrical and plumbing
(+)
Moderate
F. Direct and indirect effects on public:
Purchasing, installing, and maintaining new systems (+)
Significant
III. Assumptions. (Identified by Impact Letter and Number from Section II.)
A. Under existing regulations, MDE’s Water Management Administration’s OSDS
responsibilities include oversight of programs delegated to local approving authorities, technical
assistance, and education. In addition, MDE evaluates best available technologies to determine
their suitability for use in Maryland. This proposal would expand MDE’s responsibility to
include maintaining a system to ensure that nitrogen-removal systems are maintained for the life
of the system. MDE would oversee the development of a web-based reporting system to track
nitrogen-removal systems and develop a system to maximize compliance of operation and
maintenance requirements. Emphasis will be developing a system with a relatively small upfront cost that would use little resources to maintain and operate. This can be accomplished with
existing staff after the up-front development effort.
B. To the extent that State agencies may have facilities impacted by the requirements, see F
below.
C. Local approving authorities issue permits for and inspect the installation of OSDS. Expanding
the requirement for including nitrogen-removal technologies increases the complexity of these
activities. While approving authorities already inspect all OSDS installations, the inspections
would now have to include the nitrogen-removal technology. Staff would need additional
training in order to complete this activity. To the extent that local agencies may have facilities
impacted by the requirement, see Note F below.
D. The regulated industry includes vendors who sell nitrogen-removal technologies, installers of
nitrogen-removal technology, and service providers who operate and maintain nitrogen-removal
technologies. Under existing regulations we estimate approximately 900 nitrogen-reducing
systems will be installed per year. The Department estimates a range from 2,000 to 8,000 new
and replacement OSDS are installed each year that will need nitrogen-removal technology.
E. Installation of nitrogen-removal technology requires providing electricity and sometimes
additional plumbing. Trades people and small businesses would benefit from the requirements of
this proposal.
F. This proposal may result in an additional 5,000 nitrogen-removal systems installed per year.
The average installation of nitrogen-removal technology costs approximately $12,000, with
electrical use running from $31 to $240 per year, and operation and maintenance after the first 5
years costs $150 to $300 per year. These costs will have to be borne by property owners.