Review of the EPA's Economic Analysis of Final Water Quality Standards for Nutrients for Lakes and Flowing Waters in Florida (2012) / Chapter Skim
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3 A Framework for Incremental Cost Analysis of a Rule Change
3 A Framework for Incremental Cost Analysis of a Rule Change
Pages 88-116
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From page 88... ...
The corresponding watersheds for these incrementally affected waters were then delineated, and their land uses were determined in order to predict the additional nutrient control actions various source sectors in that watershed would need to take for the numeric nutrient criteria to be met. In addition, EPA estimated how many National Pollutant Discharge Elimination System (NPDES)
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From page 89... ...
. To develop such a baseline for this chapter, the water quality management process is divided into five broad stages, and a description is provided of how the narrative rule, the NNC rule, and the proposed Florida rule would affect each stage over time.
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From page 90... ...
Define Level of Nutrient Reduction/ Model water quality conditions to relate Write TMDL desired biological condition to N and/or P loads; determine N and or P targets 4. Develop TMDL/BMAP BMAP process seeks WLA/LA load reduction Implementation balance across sources 5.
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From page 91... ...
list Springs: No stressor analysis if nitrate threshold is exceeded Model water quality to determine loads Streams and Lakes: Model water quality of N and P that result in ambient N and P conditions to relate desired biological numeric criteria concentrations condition to N and/or P levels; determine N and or P targets Springs: Load reductions based on meeting nitrate threshold WLA set by NPDES permitting process/LA BMAP process seeks WLA/LA load reduction the remainder for nonpoint sources balance across sources N and/or P ambient concentration equal to Biological condition attained; N and P targets NNC or SSAC must be met; biology may revised to be consistent with meeting required or may not remain impaired biological condition Stage 1: List Waters as Impaired Stage 1 establishes whether a waterbody is going to be listed as impaired. The narrative rule uses various biological condition indices (depending on the type of water body)
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From page 92... ...
The proposed Florida rule is essentially the same as the narrative rule for this stage. Stage 2 under the NNC Rule is less explicit because during Stage 1 the NNC Rule has already listed a water as impaired based on the presence and level of nutrients.
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From page 93... ...
As currently written, the proposed Florida rule affirms that a numeric TMDL target approved by EPA under the current narrative rule would be the numeric nutrient target for that waterbody. This is not a change from the narrative rule, but under the NNC rule the waters that already had a TMDL and a nutrient target would have still been required to define that target as a concentration (if it was only a load limit in the TMDL)
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From page 94... ...
However, monitoring does not stop and loads limits must continue to be maintained in the face of population and economic growth to assure that the water does not become impaired at a future date. The narrative rule and the proposed Florida rule focus their determination of attainment on ongoing bioassessment along with measurement of all stressors.
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From page 95... ...
The cost of type II error is the water quality benefits that are lost when a waterbody is not listed as impaired when it is impaired and so load controls are inadequate -- called the cost of undercontrol. While it is not possible to clearly conclude which rule is more prone to which type of error, there are some general observations that can be made.
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From page 96... ...
It is reasonable to conclude from the draft guidelines that the analytical approaches that might be used to support a request for an SSAC are similar to those analyses already in use in the narrative rule. For example, a placebased stressor response analysis might be prepared for the SSAC application to demonstrate that a concentration of nutrients different from the numeric nutrient criteria would support the designated use.
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From page 97... ...
than numeric criteria • Narrative TMDL targets for river phosphorus are lower than numeric criteria • arrative TMDL targets for lake nitrogen are generally lower than numeric N criteria • arrative TMDL targets for lake phosphorus are generally higher than numeric N criteria In general, additional load reductions will be required for lakes determined to be impaired for phosphorus under the NNC rule compared to the narrative rule. However, in the case of impairments for river nitrogen or phosphorus, or for lake nitrogen, lesser load reductions would be required by the NNC rule than with the narrative target.
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From page 98... ...
A COST ANALYSIS FRAMEWORK The various cost estimations of EPA and other stakeholders differed according to the assumptions made about how the different rules are implemented. Conceptually, the incremental costs of adopting the NNC rule or the proposed Florida rule is the change in costs over what would have occurred under the existing narrative rule during all five stages of water quality management.
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From page 99... ...
. Timing and Cost Uncertainty As discussed in the first section of this chapter, the three rules differentially affect the timing of the five stages of water quality management, and as a result, also the realization of administrative and load control costs and water quality outcomes.
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From page 100... ...
In general, predictions of administrative and load control costs over time, and the resulting water quality outcomes, depend on many assumptions including (1) regulatory agency behavior, (2)
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From page 101... ...
These different assumptions about both the ways the rules will work in practice, as well as about the cost estimates for certain load control practices, are the source of the very different cost estimates found in the EPA report compared to the competing analyses. In addition, these same differences of view lead the environmental NGO community to assert that the narrative rule and the proposed Florida rule will result in significant loss of water quality benefits.
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From page 102... ...
and relate this to the incremental differences in water quality outcomes at each time period. The costs for the existing narrative rule would serve as the baseline for any comparisons.
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From page 103... ...
Once complete, the costs of the narrative process could be subtracted from the numeric process to get a total cost difference, which could be compared to the incremental differences in water quality outcomes and interpreted in light of the uncertainty of the total cost estimates of each process. This can be done for each time period and would provide information on the implication for annual public budgets and when water quality results might be realized.
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From page 104... ...
Absent the implementation of the NNC rule, additional waters would also have been listed as biologically impaired under the narrative rule (in Stage 1) , deemed to be stressed by nutrients (in Stage 2)
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From page 105... ...
. A more complete analysis also would recognize that the narrative rule may list different waterbodies than the NNC rule and ultimately the narrative may require different nutrient targets than the numeric nutrient criteria.
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From page 106... ...
The cost of making that determination is limited to the cost of chemical water quality monitoring and determined through a predefined sampling procedure. While the magnitude and direction of these listing costs under the NNC rule is uncertain, the relevant point is that it is reasonable to conclude that the NNC rule would produce a net incremental cost savings in the administrative costs associated with the listing (difference between two cost time paths)
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From page 107... ...
This analysis builds on the previous chapter by highlighting the substantial cost differences between the narrative and NNC rule related to the timing of point source control costs. The general pattern of the timing of permit modification and future compliance costs under the NNC and narrative rules is shown in Figure 3-4.
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From page 108... ...
Thus, the point source control costs would also be incurred soon after the NNC rule is adopted, with a WQBEL being set possibly at the level of the numeric nutrient criteria. Under the narrative rule, some point source permits would also be incrementally tightened, but this would occur gradually as TMDL plans are developed and implemented in watersheds with these point sources.
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From page 109... ...
. The time path of plan development is shown as slightly lower under the narrative process because TMDLs Annual BMAP Implementation Costs # BMAP Plans Developed NNC # $ Narrative NNC Narrative Time in yrs Time in yrs A B FIGURE 3-5 Illustration of the TMDL and NPS control costs time paths.
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From page 110... ...
Under both rules, nonpoint source control costs will be incurred and these costs will likely increase over time as more expensive efforts are pursued to achieve the water quality criteria. Yet, the difference between the NNC and narrative nonpoint source control curves, which is the incremental cost of the proposed rule, is small, assuming the funding and staffing constraints will be similar across processes.
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From page 111... ...
. On the other hand, the discussion above indicates that because the NNC rule does not alter the regulatory and budgetary constraints on nonpoint source controls, the acceleration of water quality improvements that occurs over time could be modest.
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From page 112... ...
If this was the result there would have been unnecessary load control costs placed on limited public budgets and on the financial viability of businesses. On the other hand, the argument offered by the environmental NGOs and supported by the EPA is that the narrative rule, in minimizing the possible error of overcontrol of nutrients, makes water quality management too slow and inadequate in protecting designated uses.
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From page 113... ...
Greater clarity and understanding about the SSAC process, which is central to the NNC rule, might lead to less divergence in assumptions about the cost of applying for SSAC and the likelihood of SSAC approval. • There were different assumptions made regarding whether the numeric nutrient criteria would become WQBELs for NPDES permitted sources, with the EPA cost analysis assuming less stringent levels of control and being silent on when they would be imposed on NPDES regulated sources.
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From page 114... ...
In future analyses, reporting the difference in the time paths for implementation of water quality management rules, and as sociated uncertainties, would provide a more transparent and realistic way to compare costs of the different rules and provide more useful information about where, when, and how costs diverge. FINDING: Some stakeholders viewed the EPA cost analysis as being superficial or of limited scope, leading to reduced credibility.
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From page 115... ...
• Over time, there is significant uncertainty in nonpoint source load control costs under either rule because of uncertainty about the incremental increase in the number of listed waters, about the nutrient target levels for N or P, and about cost and effectiveness of nonpoint source load control actions. FINDING: Conducting the cost analysis as outlined in this chapter, with increased attention to careful assessment of rule differences, stake holder engagement, and uncertainty analysis, might not have been possible with the budget and time EPA spent on its cost analysis.
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From page 116... ...
2001. Assessing the TMDL Approach to Water Quality Management.
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