Economist: EPA Economic Analysis On Water Rule Is Flawed

The Fertilizer Institute (TFI) notes with interest of the recent release of Dr. David Sunding’s report, Review of 2014 EPA Economic Analysis of Proposed Revised Definition of Waters of the United States. The report examines the U.S. EPA’s estimates of probable costs and benefits associated with the proposed rule on “Waters of the United States,” and finds that EPA significantly underestimates the economic impacts the rule will have on local communities and businesses. Dr. Sunding is an economist on the faculty of the University of California-Berkeley and a principal with The Brattle Group.

The proposed rule includes a significant expansion of the term “Waters of the United States” to include previously unregulated waters located in floodplains and riparian areas, ditches, and the all-inclusive “other waters.”

Dr. Sunding chronicles how EPA systematically excluded costs, underrepresented jurisdictional areas and used flawed methodologies to arrive at much lower economic impacts. He also examines how the lack of transparency in the report makes it difficult to understand or replicate the calculations, evaluate the underlying assumptions, or understand discrepancies in the results. Dr. Sunding explains how EPA’s analysis downplays non-404 impacts, resulting in an artificially small increase in jurisdictional waters. A full copy of his report is available online.

Dr. Sunding concluded that the errors in the study are so extensive as to render it unusable for determining the true cost of the proposed rule. His report underscores the need for EPA to withdraw the rule and complete a comprehensive and transparent economic review.

“This rule will have widespread impacts on communities across the country,” said a spokesman for the Waters Advocacy Coalition. “It is not just businesses trying to expand in this struggling economy that will suffer, but the proposed rule would impact everything from local governments trying to start or expand infrastructure projects to community gardens. It will dictate land use decisions across the United States. It is a far-reaching expansion of the EPA’s jurisdiction, and the EPA has not been forthright about the costs to our businesses and communities.”

TFI is concerned that the agencies have decided to move forward with such a substantial rulemaking before EPA’s Science Advisory Board (SAB) completes its review of EPA’s report on the connectivity of lakes and streams. Because the connectivity report forms the scientific basis for the rule, it is important that the deficiencies identified by the SAB panel in its December 2013 meeting are taken into account. TFI is also concerned that the rule fails to provide reasonable clarity and leaves many key concepts unclear, undefined or subject to agency discretion which will likely result in litigation over their proper meaning.

The report was commissioned by the Waters Advocacy Coalition (WAC), which represents the nation’s construction, real estate, mining, agriculture, wildlife conservation, forestry, manufacturing and energy sectors, and of which TFI is a member. As part of WAC, TFI will continue to push for EPA to withdraw this proposed rule, and work to develop a better rule that balances the needs of affected communities with protections for “Waters of the United States.”

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