framework in which after-tax cash flow is discounted at an estimated
cost of capital to calculate the going concern value of the
facility.\135\ In conjunction with the discounted cash flow analysis,
EPA tested whether annualized costs exceeded 0.1 percent of revenue by
dividing the after-tax, annualized total compliance cost by facility-
level revenue. If this analysis found that the facility's business
value would become negative as a result of estimated compliance costs
and the annualized cost of compliance exceeded 0.1 percent of revenue,
EPA classified the facility as a regulatory closure.
---------------------------------------------------------------------------

    \135\ This after-tax cash flow analysis conducted for
manufacturers is similar in concept to the cash flow analysis
conducted for electric generators through the IPM analysis.
---------------------------------------------------------------------------

    For facilities estimated not to close under the severe-impact test,
EPA conducted a moderate-impact test to assess whether any would
experience financial stress short of closure as the result of
regulatory requirements (e.g., higher costs of capital borrowing). EPA
used two financial performance measures to test for occurrence of
financial stress: (1) Interest coverage ratio and (2) pre-tax return on
assets. The Agency compared these measures before and after compliance
with regulatory requirements against industry-specific performance
thresholds for the two financial measures. If both measures for a
facility exceeded the threshold in the baseline, and at least one
measure fell below the threshold in the post-compliance case, EPA
counted this as a moderate impact based on the rule.
    Exhibit IX-16 presents the results from the severe-impact and
moderate-impact analyses. EPA estimated that no facilities would be at
risk of closure as a result of the final rule and that 12 facilities
could experience financial stress short of closure. For Proposal Option
4, EPA also estimated no closures, while moderate impacts are
significantly lower, estimated at two facilities. Under Proposal Option
2, EPA estimated that one facility would be at risk of closure, while
the moderate impact finding is the same as for the final rule: 12
facilities. Again, this analysis is conducted assuming that all the
costs are borne by the facility and cannot be passed along, an
assumption that is highly unlikely to be true, as many of these
facilities are in industries where there is some market power and
barriers to entry. Thus, these tests present worst case scenario
results.

                   Exhibit IX-16--Facility Impacts and Compliance Costs for Manufacturers \d\
----------------------------------------------------------------------------------------------------------------
                                                                     Proposed                        Proposed
                                                                     option 4       Final rule     option 2 \c\
----------------------------------------------------------------------------------------------------------------
                                      Primary manufacturing industries \a\
----------------------------------------------------------------------------------------------------------------
Number of Facilities Operating in Baseline......................             500             500             500
Number of Closures (Severe Impacts).............................               0               0               1
Percentage of Facilities Closing................................              0%              0%              0%
Number of Facilities with Moderate Impacts......................               2              12              12
Percentage of Facilities with Moderate Impacts..................              1%              3%              3%
----------------------------------------------------------------------------------------------------------------
                                              Other industries \b\
----------------------------------------------------------------------------------------------------------------
Number of Facilities Operating in Baseline......................               9               9               9
Number of Closures (Severe Impacts).............................               0               0               0

Percentage of Facilities Closing................................              0%              0%              0%
Number of Facilities with Moderate Impacts......................               0               0               0
Percentage of Facilities with Moderate Impacts..................              0%              0%              0%
----------------------------------------------------------------------------------------------------------------
\a\ Primary Manufacturing Industries include facilities in the Aluminum, Chemicals and Allied Products, Food and
  Kindred Products, Paper and Allied Products, Petroleum Refining, and Steel industries.
\b\ Other Industries include cooling water-dependent facilities in industries whose principal operations lie in
  businesses other than the electric power industry or the Primary Manufacturing Industries.
\c\ Under Proposal Option 2, the percentage of facilities closing is 0.3 percent.
\d\ The analysis assumes no cost pass through.

b. Entity-Level Impact Analysis
    EPA also examined the impact of regulatory requirements on entities
that own regulated manufacturers facilities. An entity that owns
multiple facilities could be adversely affected because of the
cumulative burden of regulatory requirements the facilities face. For
this analysis, a parent entity is the domestic parent entity with the
largest ownership share in a regulated facility. For each identified
parent entity, EPA aggregated facility-level, annualized, after-tax
compliance costs to the level of the parent entity and compared these
entity-level costs to entity-level revenue. Similarly to electric
generators, EPA used cost-to-revenue thresholds of 1 and 3 percent as
thresholds for categorizing levels of impacts.
    EPA considered two cases, based on two sets of entity-level. These
cases, which are described in the EA, Appendix H, provide a range of
estimates for the number of entities incurring compliance costs and the
costs incurred by any entity owning a regulated facility. EPA conducted
this analysis for 509 facilities in the primary manufacturing
industries and 12 facilities in other industries.\136\ For information
on the methodology used for the entity-level cost-to-revenue analysis,
see the EA, Chapter 5.
---------------------------------------------------------------------------

    \136\ This is a sample-weighted estimate of the number of
manufacturer facilities, calculated using technical weights. This
number excludes 67 facilities estimated to be at substantial risk of
closure regardless of any additional financial burden that might
result from the regulatory options under consideration.
---------------------------------------------------------------------------

    Exhibit IX-17 presents the results from the entity-level analysis
for these two cases. EPA estimated that between 120 and 337 entities
own 521 regulated facilities. Under the final rule, between 90 and 95
percent of all entities are estimated to incur compliance costs of less
than 1 percent of revenue. This is true also for Proposal Option 2.
Under Proposal Option 4, more entities are expected to incur compliance
costs of less than 1 percent of revenue (between 94 and 96 percent of
all entities).

                                              Exhibit IX-17--Entity-Level Cost-To-Revenue Analysis Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Not analyzed due to lack               Number of entities with a cost-to-revenue ratio of
                                                   of revenue information  -----------------------------------------------------------------------------
                     Option                      --------------------------           < 1%                 >= 1% and < 3%                 >= 3%
                                                                           -----------------------------------------------------------------------------
                                                           %                %                %                %
--------------------------------------------------------------------------------------------------------------------------------------------------------
Case 1: Lower bound estimate of number of entities that own regulated facilities; upper bound estimate of total compliance costs that an entity may
 incur \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposal Option 4...............................            5            4          113           94            2            2            0            0
Final Rule......................................            5            4          108           90            6            5            1            1
Proposal Option 2...............................            5            4          108           90            6            5            1            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Case 2: Upper bound estimate of number of entities that own regulated facilities; lower bound estimate of total compliance costs that an entity may
 incur \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposal Option 4...............................           12            4          324           96            1        \a\ 0            0            0
Final Rule......................................           12            4          319           95            6            2            0            0
Proposal Option 2...............................           12            4          319           95            6            2            0            0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ The percentage of entities with impacts greater than or equal to 1 percent and less than 3 percent is less than 0.5 percent.
\b\ The total number of entities under Case 1 is 120.
\c\ The total number of entities under Case 2 is 337.

E. Employment Effects

    To study employment effects of this rule, EPA considered the
potential effects of the final rule, focusing on the impacts of meeting
compliance requirements in the directly regulated industry sectors: The
Electric Power Industry, and selected Primary Manufacturing Industries,
including Aluminum, Chemicals and Allied Products, Food and Kindred
Products, Paper and Allied Products, Petroleum Refining, and Steel
Manufacturing.
    When the economy is at full employment, an environmental regulation
is unlikely to have much impact on net overall U.S. employment;
instead, labor would primarily be shifted from one sector to another.
These shifts in employment impose an opportunity cost on society,
approximated by the wages of the employees, as regulation diverts
workers from other activities in the economy. In this situation, any
effects on net employment are likely to be transitory as workers change
jobs (e.g., some workers may need to be retrained or require time to
search for new jobs,

while shortages in some sectors or regions could bid up wages to
attract workers).
    On the other hand, if a regulation comes into effect during a
period of high unemployment, a change in labor demand due to regulation
may affect net overall U.S. employment because the labor market is not
in equilibrium. Schmalansee and Stavins \137\ point out that net
positive employment effects are possible in the near term when the
economy is at less than full employment due to the potential hiring of
idle labor resources by the regulated sector to meet new requirements
(e.g., to install new equipment) and new economic activity in sectors
related to the regulated sector. In the longer run, the net effect on
employment is more difficult to predict and will depend on the way in
which the related industries respond to the regulatory requirements. As
Schmalansee and Stavins note, the magnitude of the effect on employment
could vary over time, region, and sector, and positive effects on
employment in some regions or sectors could be offset by negative
effects in other regions or sectors. For this reason, they urge caution
in reporting partial employment effects because it can ``paint an
inaccurate picture of net employment impacts if not placed in the
broader economic context.''
---------------------------------------------------------------------------

    \137\ Schmalansee, Richard, and Robert N. Stavins. ``A Guide to
Economic and Policy Analysis of EPA's Transport Rule.'' White paper
commissioned by Exelon Corporation, March 2011 (Docket EPA-HQ-OAR-
2011-0135-0054).
---------------------------------------------------------------------------

    In that spirit, unlike the analysis for the proposed rule, for the
final rule EPA is not estimating quantitative employment impacts and
instead, including only a qualitative discussion. The methods used at
proposal were not sufficiently robust, largely because they relied on
an input-output analysis that assumed fixed production relationships
and used historical data to estimate the labor and other inputs
required for compliance with the rule. Since publication of the
proposed rule, EPA has concluded that input-output analysis is
inappropriate for assessing employment impacts of national-level
regulations. Input-output models are static, do not include prices, and
assume the supply of all inputs is inexhaustible. They do not model a
wide variety of adjustments that are expected to occur over time, such
as changes in production processes, technology or trade patterns.\138\
After reviewing the public comments EPA received on the proposed rule,
the Agency concludes that the commenters have not identified any
specific improvements to the employment analysis of the proposed rule.
Thus, today's final rule EA includes a qualitative discussion
highlighting the variety of potential adjustments in the labor market
that may follow the rulemaking.
---------------------------------------------------------------------------

    \138\ For a discussion of input-output models see Chapter 8 of
the EPA Handbook on the Benefits, Costs, and Impacts of Land Cleanup
and Reuse (2011).
---------------------------------------------------------------------------

    To elaborate on the difficulty of deriving high quality estimates
of how environmental regulations will impact net employment, the task
requires consideration of labor demand in both the regulated and
environmental protection sectors, as well as labor supply more
generally. Economic theory predicts that the net effect of an
environmental regulation on labor demand in regulated sectors could be
positive or negative; the direction of the outcome depends on the
magnitude of output and substitution effects, explained further in the
EA. Peer-reviewed econometric studies that use a structural approach,
applicable to overall net effects in the regulated sectors, indicate
that such effects, whether positive or negative, have been small and
have not affected employment in the national economy in a significant
way (Berman and Bui 2001, Morgenstern, Pizer and Shih 2002). Effects on
labor demand in the environmental protection sector seem likely to be
positive.
    In aggregate, the environmental protection sector is likely to
experience a temporary increase in jobs created as more compliance
technology systems are designed, manufactured, and installed
attributable to the final rule. In addition, because of regional
variation in consumption patterns and the presence of regulated
facilities and supporting industries, short- and long-run employment
effects likely will vary across the United States. It is possible that
positive net employment effects will occur in the near term due to the
hiring of idle labor resources by the regulated sectors to plan for and
meet new technology control requirements rather than diverting workers
from other productive employment. However, it is also possible that in
the long run, as the economy returns to full employment, any changes in
employment in the regulated sectors due to the final rule will be
offset by employment changes in other sectors. These dynamics compound
the uncertainty in estimating employment effects for a substantial
number of years into the future.
    Even if regulated facilities are able to reduce the impact of
regulatory requirements by changing their production processes in the
post-rule environment, production costs may still be higher compared to
those before the rule. As a result, regulated facilities may seek to
increase their product prices in response to the higher production
costs. For example, attempts by electric generators to recover
increases in electricity generation costs, however small, are likely to
result in higher electricity rates. The impact of this increase will
vary by region, customer group (e.g., industrial, commercial,
transportation, and residential), and by industry, depending on the
electricity-use intensity.\139\ Further, the extent to which electric
generators are able to pass their costs to consumers through higher
electricity rates, will vary by region. Specifically, electric
generators operating in regions where electricity prices remain
regulated under the traditional cost-of-service rate regulation
framework may be able to recover compliance cost-based increases in
increased rates.\140\ However, cost recovery is less certain for
electric generators operating in States where electric power generation
has been deregulated, and will depend on the competitive circumstances
of specifically affected facilities.
---------------------------------------------------------------------------

    \139\ See the EA Chapter 6: Electricity Market Analysis for
assessment of the impacts of increased production costs on wholesale
electricity prices and Chapter 4: Economic Impact Analysis--Electric
Generators for analyses of the impacts on retail rates by customer
group.
    \140\ However, even for electric generators operating under
traditional rate regulation, the recovery of cost increases through
increased rates is not certain, and will depend on additional
factors such as the facility ownership structure and operating
model, approval of public utility commissions, and the importance
and role of market mechanisms in dispatching production of
electricity across generating units. See Chapter 2A of the EA for
additional discussion.
---------------------------------------------------------------------------

    Overall, the long-run changes in employment will likely depend on
how the electric power industry, primary manufacturing industries, and
other industries adjust in response to the new regulatory requirements,
and on the upstream and downstream effects of those adjustments on the
rest of the economy, as well as the overall state of the economy and
labor markets. The long-run employment effects in the directly affected
sectors will depend on a number of economic factors. These factors
include changes in labor requirements to operate the infrastructure in
general and compliance technology in particular at regulated
facilities, the potential to change production processes to become less
dependent on cooling water, availability of alternative technologies to
meet compliance requirements, and changes in demand for the outputs of
the directly affected sectors. Because

these and many other interrelated factors include data and methodology
limitations, it is difficult to fully assess the employment impacts of
the final rule. However, based on the available evidence from several
peer-reviewed econometric studies mentioned above that are applicable
to net effects in the regulated sectors and that closed-cycle
recirculating systems was rejected as national BTA for entrainment, EPA
expects that employment impacts of today's rule are not likely to be
substantial.

X. Benefits Analysis

A. Introduction

    This section presents EPA's estimates of the national environmental
benefits of the final existing facilities rule and other options
considered by EPA. This section describes how EPA calculated values for
those benefits it could monetize. EPA did not rely on the results of
its stated preference survey in estimating the benefits of today's
rule. It also presents descriptive information for those benefits for
which EPA could not develop a monetary value. The benefits EPA assessed
occur because of reductions in impingement and entrainment at cooling
water intake structures affected by the rulemaking and changes in
greenhouse gas emissions at regulated facilities. Impingement occurs
where fish and other aquatic life are trapped on equipment as they
enter the cooling water intake structure. Entrainment occurs where
aquatic organisms, including eggs and larvae, are drawn into the
cooling system, passed through the heat exchanger, and discharged back
into the source waterbody. Impingement and entrainment kill or injure
large numbers of aquatic organisms across all life stages. On the basis
of entrainment data presented in facility studies, EPA assumes a
mortality rate of 100 percent for entrained individuals. Mortality is
then reduced on the basis of the efficiency of technology in place in
reducing mortality rates, or by reducing levels of impingement and
entrainment.\141\ By reducing impingement mortality and entrainment,
the final existing facilities rule is likely to increase the number of
fish, shellfish, and other aquatic organisms in affected water bodies
resulting in healthier aquatic environments. In turn, this healthier
aquatic environment directly improves welfare for individuals using the
affected aquatic resources, generating use benefits such as increases
in the value of recreational and commercial fisheries or increases in
property values. Reductions in impingement mortality and entrainment
also improve welfare for individuals without use of the affected
resources, generating nonuse benefits, such as improved ecosystem
function and resource bequest values. Section D provides an overview of
the types and sources of benefits EPA anticipated, how EPA estimated
these benefits, and the level of benefits that the final rule and other
options EPA considered for the rule would achieve.
---------------------------------------------------------------------------

    \141\ See the discussion in Section III on entrainment mortality
data and assumptions.
---------------------------------------------------------------------------

    EPA derived national benefit estimates for the final rule and other
options considered from a series of regional studies representing a
range of waterbody types and aquatic resources. Section B provides
detail on the regional study design. Section C describes the
impingement and entrainment effects and Section D presents the national
benefits estimates.
    The methodologies used to estimate benefits are largely built on
those used to estimate benefits for the remanded Phase II and Phase III
and the proposed existing facilities rules. In addition to updating
these analyses, EPA more fully investigated the effects of impingement
mortality and entrainment on T&E species, incorporated benefits from
greenhouse gas reductions, and improved its estimation of nonuse
benefits. The Benefits Analysis document for the final existing
facilities rule (referred to as the BA) provides detailed descriptions
of the new methodologies EPA used to analyze the benefits of regulatory
options, and provides references to (i) Part A of the 2004 Regional
Benefits Analysis for the Final Section 316(b) Phase II Rule, and (ii)
Part A of the 2006 Regional Benefits Analysis Document for the Final
Section 316(b) Phase III Existing Facilities Rule for analyses using
similar methodologies.
    The BA provides EPA's benefit estimates for the final rule and
considered options. EPA relied on information collected in the 2000
section 316(b) industry surveys (the Industry Screener Questionnaire
(SQ) and the Detailed Industry Questionnaire (DQ)) on cooling water
systems and intake structures already in place to estimate the number
of regulated facilities under regulatory options considered for the
final existing facilities rule. For the analysis of regulated electric
generators, EPA used information from 656 regulated electric generating
facilities that responded to the section 316(b) industry surveys on
cooling water systems and intake structures already in place. Because
the DQs were sent to a sample of the manufacturing industries that use
cooling water, the respondents were assigned sample weights designed to
represent other facilities in other manufacturing industries that were
not covered in the survey. All regulated facilities have a DIF of at
least 2 mgd. EPA estimated regional benefits from the sample of
facilities for which EPA has sufficient DQ information to estimate the
environmental impacts of regulatory options. The environmental impacts
from the set of explicitly analyzed facilities were then extrapolated
to the universe of facilities in a region using statistical weights
developed for this analysis. National benefits are estimated as the sum
of the regional benefits.
    As described above at Section IX, the findings presented in this
section assume that all facilities with impoundments will qualify as
having closed-cycle recirculating systems in the baseline. For purposes
of this analysis, EPA did not estimate IM&E reductions for these
facilities under the final rule and other options considered; however,
these facilities remain subject to today's rule and are assigned
administrative costs. To the extent that some of these facilities do
not qualify as having closed-cycle cycle recirculating systems in the
baseline, the monetized benefits reported in this section may be
underestimated. EPA notes that the vast majority of these facilities
occur in the Inland benefits region. Any underestimation in monetized
benefits due to the treatment of facilities with impoundments is likely
to be minor because commercial fishing benefits and nonuse benefits are
not estimated for the Inland region.

B. Regional Study Design

    EPA evaluated the benefits of today's rule in seven study
regions.\142\ Regions were defined on the basis of ecological
similarities within regions (e.g., freshwater versus marine, similar
communities of aquatic species), and on characteristics of commercial
and recreational fishing activities. The seven study regions are:
California,\143\ North Atlantic, Mid Atlantic, South Atlantic, Gulf of
Mexico, Great Lakes, and Inland. The five coastal regions EPA
identified (California, North Atlantic, Mid-Atlantic, South Atlantic,
and Gulf of Mexico) correspond to those of the

National Oceanic and Atmospheric Administration's National Marine
Fisheries Service. The Great Lakes region includes Lake Ontario, Lake
Erie, Lake Huron (including Lake St. Clair), Lake Michigan, Lake
Superior, and the connecting channels (Saint Mary's River, Saint Clair
River, Detroit River, Niagara River, and Saint Lawrence River to the
Canadian border) as defined in 33 U.S.C. 1268, Sec. 118(a)(3)(b). The
Inland region includes all remaining facilities that withdraw water
from freshwater lakes, rivers, and reservoirs, including inland
facilities in coastal states. Notably, of the 435 facilities that are
on freshwater streams or rivers, 30 percent (132) have average actual
intake flow that is greater than 5 percent of the mean annual flow of
the source waters, which is a significant amount of the source water
flow. During periods of low river flow, or during periods of higher
than average withdrawals of cooling water, the proportionate withdrawal
of source waters could be much higher. Thus, the potential for adverse
environmental impacts could increase dramatically during these periods.
The number and total operational intake flow of all 316(b) facilities
by study region are presented in Exhibit X-1.
---------------------------------------------------------------------------

    \142\ Benefits associated with changes in greenhouse gas
emissions were estimated for the nation as whole.
    \143\ The California region includes facilities in State of
California and four facilities in Hawaii. No coastal facilities are
in Oregon, and one facility in Washington is classified as a
baseline closure.

              Exhibit X-1--Number of Surveyed Facilities and Total Mean Operational Flow, by Region
----------------------------------------------------------------------------------------------------------------
                                                                    Flow (billions of gallons per day)
                                          Number of     --------------------------------------------------------
               Region                      surveyed      Non-recirculating    Recirculating
                                        facilities \a\     facilities \b\       facilities         Total flow
----------------------------------------------------------------------------------------------------------------
California \c\......................                 21              10.65               0.00              10.65
Great Lakes.........................                 50              16.24               0.24              16.47
Inland \d\..........................                566             107.56              18.06             125.62
Mid-Atlantic........................                 46              24.69               0.07              24.76
Gulf of Mexico......................                 22              10.14               0.05              10.18
North Atlantic......................                 21               5.93               0.00               5.93
South Atlantic......................                 12               5.91               0.05               5.96
                                     ---------------------------------------------------------------------------
All Regions.........................                738             181.12              18.46             199.58
----------------------------------------------------------------------------------------------------------------
\a\ This table presents unweighted facility counts and flow for surveyed facilities (excluding baseline
  closures). The regional study design for the benefits analysis uses weights based on flow rather than facility
  counts. EPA did not develop weighted facility counts by benefits region. The ``All Regions'' total of 738
  surveyed facilities includes 532 electric generating facilities and 206 manufacturing facilities, excluding
  baseline closures. The total (weighted) estimated universe of facilities, excluding baseline closures, is
  1,065 facilities.
\b\ Recirculating facilities are facilities with closed-cycle cooling or impoundments that qualify as closed-
  cycle cooling. Non-recirculating facilities include facilities with CWIS classified as once-through.
\c\ The California region includes four facilities in Hawaii. There are no coastal facilities in Oregon and the
  one coastal facility in Washington is classified as a baseline closure.
\d\ A facility in Texas has intakes in both the Inland and Gulf of Mexico regions. It is included in the Inland
  region in the table to prevent the double counting of facilities.

    EPA obtained estimates of regional impingement mortality and
entrainment by extrapolating impingement mortality and entrainment
observed at 98 facilities with impingement and entrainment studies
(model facilities) to all regulated facilities in the same region. EPA
used regional estimates to more accurately estimate impacts by
accounting for differences in ecosystems, aquatic species, and
characteristics of commercial and recreational fishing activities
across regions. Extrapolation was conducted on the basis of AIF
reported for the period 1996-1998 by facilities in response to EPA's
Section 316(b) Detailed Questionnaire and Short Technical
Questionnaire. Chapter 3 of the BA provides details of the
extrapolation procedure. Because the goal of the analysis was to
provide estimates of impingement mortality and entrainment at regional
and national scales, EPA recognizes that these averages may not reflect
the substantial variability at individual facilities. In spite of this
variability, EPA determined that this extrapolation is a reasonable
basis for developing estimates of regional- and national-level benefits
for the purposes of the final existing facilities rule.

C. Physical Impacts of Impingement Mortality and Entrainment

    EPA based the benefits analysis on facility-provided impingement
mortality and entrainment monitoring data. Facility data consist of
records of impinged and entrained organisms sampled at intake
structures and include organisms of all ages and life stages. Sampling
protocols were not standardized across facilities. Facility protocols
differed in sampling methods and equipment used, the number of samples
taken, sampling duration, and the unit of time and volume of intake
flow used to express impingement mortality and entrainment. To
standardize estimates across facilities, EPA converted sampling counts
into annual impingement mortality and entrainment. Using standard
fishery modeling techniques,\144\ EPA constructed models that combined
facility-derived impingement mortality and entrainment counts with life
history data from the scientific literature to derive annual estimates
of the following:
---------------------------------------------------------------------------

    \144\ Ricker, W.E. 1975. Computation and interpretation of
biological statistics of fish populations. Fisheries Research Board
of Canada, Bulletin 191; Hilborn, R. and C.J. Walters. 1992.
Quantitative Fisheries Stock Assessment, Choice, Dynamics and
Uncertainty. Chapman and Hall, London and New York; Quinn, T.J., II.
and R.B. Deriso. 1999. Quantitative Fish Dynamics. Oxford University
Press, Oxford and New York; Dixon, D.A. 1999. Catalog of Assessment
Methods for Evaluating the Effects of Power Plant Operations on
Aquatic Communities. Electric Power Research Institute (EPRI) Final
Report. Report number TR-112013.
---------------------------------------------------------------------------

     Individuals--the number of individual organisms impinged
and entrained by facility intakes. Under this metric, eggs, larvae,
juvenile, and adult organisms are counted as equivalent individuals.

     A1Es (age-one equivalent losses)--the number of individual
organisms of different ages impinged and entrained by facility intakes,
standardized to equivalent numbers of 1-year-old fish. A conversion
rate between all life history stages and age 1 is calculated using
species-specific survival tables based on life history schedule and
age-specific mortality rates. An individual younger than age 1 is a
fraction of an age-one equivalent; an individual older than age 1
represents more than one age-one equivalent. EPA finds it appropriate
to use the A1E measure because information in the record indicates that
an overwhelming majority of eggs, larvae and juveniles do not survive
into adulthood and the A1E calculations adjust for differences in
survivorship based on species and age-specific mortality rates. EPA
recognizes that using A1Es simplifies a complex ecological situation,
because some of the smaller fish would provide an ecological benefit to
other species as food even if they would not survive to adulthood.
Recognizing this as one nonmonetized benefit in the analysis, using an
A1E approach is the most reasonable approach available because to date,
there is insufficient data to account for the extent to which organisms
that do not survive to adulthood provide a benefit to other organisms
which can be reliably monetized.
     Forgone fishery yield--pounds of commercial fish harvest
and numbers of recreational fish and shellfish that are not harvested
because of impingement mortality and entrainment. EPA used the
Thompson-Bell equilibrium yield model \145\ to convert impingement
mortality and entrainment to forgone fishery yield, assuming that (1)
impingement mortality and entrainment reduces the future yield of
harvested adults, and (2) reductions in impingement mortality and
entrainment rates will lead to an increase in harvested biomass. The
general procedure involves multiplying age-specific harvest rates by
age-specific weights to calculate an age-specific expected yield.
---------------------------------------------------------------------------

    \145\ Ricker, W.E. 1975. Computation and interpretation of
biological statistics of fish populations. Fisheries Research Board
of Canada, Bulletin 191.
---------------------------------------------------------------------------

     Biomass production forgone--biomass that would have been
produced had individuals not been impinged or entrained,\146\
calculated for all species from species- and age-specific growth rates
and survival probabilities. It refers to the mass of impinged and
entrained organisms that would have served as valuable components of
aquatic food webs, particularly as an important food supply to other
aquatic species.
---------------------------------------------------------------------------

    \146\ Rago, P.J. 1984. Production forgone: An alternative method
for assessing the consequences of fish entrainment and impingement
losses at power plants and other water intakes. Ecological Modeling,
24(1-2): 79-111.
---------------------------------------------------------------------------

    Estimates of forgone fishery yield include direct and indirect
losses of impinged and entrained species that are harvested. Indirect
losses represent the yield of harvested species lost because of
reductions in prey availability according to a simple trophic transfer
model (i.e., forage species).\147\ Chapter 3 of the BA contains
detailed methodology for these analyses.
---------------------------------------------------------------------------

    \147\ Indirect losses account for about 10 percent of commercial
and recreational harvest reductions at baseline.
---------------------------------------------------------------------------

    Studies from individual facilities may underestimate or
overestimate impingement mortality and entrainment rates at those
facilities. For example, facility studies typically focus on a subset
of fish species affected by impingement mortality and entrainment,
resulting in other species being ignored. The number of individuals
lost to impingement mortality and entrainment is then underestimated.
Estimating the magnitude of this underestimate is not possible because
of the low number of replicate studies. Moreover, studies often do not
count early life stages of organisms that are more difficult to
identify. In addition, many of the impingement mortality and
entrainment studies used by the Agency were conducted more than 30
years ago, prior to the improvement of aquatic conditions that have
resulted from implementation of the CWA as well as State and local laws
and efforts. In locations where water quality was degraded at the time
of impingement mortality and entrainment sampling relative to current
conditions, the abundance and diversity of fish populations might have
been depressed, resulting in low impingement mortality and entrainment
estimates. Therefore, use of these data may underestimate the magnitude
of current impingement mortality and entrainment. Alternatively,
studies could have been conducted in locations where local fish
populations are now lower than they were when the study occurred. Such
a shift in fish populations might have occurred because of natural
variability in populations, because of other anthropogenic effects
(i.e., over-harvesting), or because of competition from invasive
species. In such cases, the use of these data may overestimate the
magnitude of current impingement mortality and entrainment.
    EPA's use of linear methods for projecting losses to fish and
shellfish in the waterbody may also overstate or understate impacts.
Nevertheless, the data from facility studies are the best means to
estimate the relative magnitude of impingement mortality and
entrainment nationwide. Exhibit X-2 presents EPA's estimates of
baseline annual impingement mortality and entrainment, and reductions
in annual impingement mortality and entrainment estimated to occur
under the final rule and other options considered. Impingement
mortality and entrainment reductions under the final rule are less than
the reductions under Proposal Option 2 and greater than reductions
under Proposal Option 4. Unlike the analysis of Proposal Option 2, EPA
did not model the entrainment reductions from cooling tower
installation under the final rule and Proposal Option 4 because these
would be based on site-specific determinations of BTA, which are not
possible to predict with information EPA has today. EPA estimated a
small amount of entrainment losses under the final rule and Proposal
Option 4 due to the assumed installation of variable speed pumps at
some facilities to achieve compliance via the low velocity compliance
alternative.

 Exhibit X-2--Baseline Annual IM&E and Annual Reductions in IM&E for Existing Units at All Facilities Subject to
                                                 the Final Rule
----------------------------------------------------------------------------------------------------------------
                                                   Reduction in annual IM&E by regulatory option
                                                                      \b\ \c\
                  Loss mode \a\                  ------------------------------------------------    Baseline
                                                     Proposal      Final rule--      Proposal       annual IM&E
                                                     option 4     existing units     option 2
----------------------------------------------------------------------------------------------------------------
                                             Individuals (millions)
----------------------------------------------------------------------------------------------------------------
IM..............................................           419.9           441.3           511.9           568.6
E...............................................           399.8         1,693.9       335,447.6       497,316.3
IM&E............................................           819.7         2,135.2       335,959.4       497,884.8
----------------------------------------------------------------------------------------------------------------
                                         Age-One Equivalents (millions)
----------------------------------------------------------------------------------------------------------------
IM..............................................           612.8           647.5           748.2           824.2
E...............................................             1.4             4.5           889.3         1,106.7
IM&E............................................           614.2           652.0         1,637.5         1,931.0
----------------------------------------------------------------------------------------------------------------
                                       Forgone Fishery Yield (million lbs)
----------------------------------------------------------------------------------------------------------------
IM..............................................            12.6            13.3            15.4            16.9
E...............................................             0.0             0.1            35.7            52.9
IM&E............................................            12.6            13.4            51.1            69.8
----------------------------------------------------------------------------------------------------------------
                                        Production Forgone (million lbs)
----------------------------------------------------------------------------------------------------------------
IM..............................................           129.7           136.5           157.2           174.8
E...............................................             0.5             2.4           337.0           451.8
IM&E............................................           130.3           138.9           494.2           626.6
----------------------------------------------------------------------------------------------------------------
\a\ IM = impingement mortality; E = entrainment; IM&E = impingement mortality and entrainment.
\b\ IM&E Effects by Option: Proposal Option 4 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.
\c\ The totals presented here do not include IM&E reductions associated with new units. Estimated IM&E
  reductions associated with the new unit provision of the final rule are presented in Exhibit X-4.

    Exhibit X-3 presents EPA's estimates of annual impingement
mortality and entrainment for final rule and other considered options
by category of fish species. Estimates of annual forgone fishery yield
include both direct losses of harvested species and indirect losses
from reductions in prey fish species. Organisms convert (on average)
only about 10 percent of the mass of food they consume into additional
tissue mass. Thus, although essential to maintain ecosystem function,
the vast majority of biomass moving through food webs does not reach
higher trophic levels associated with commercial and recreational
species and harvest. Instead, the biomass of prey species is
metabolized and used for predator locomotion, reproduction, and tissue
repair. Accordingly, the portion of impingement mortality and
entrainment that are counted within the forgone harvest metric
represent only a small percentage of all organisms experiencing
impingement mortality and entrainment at cooling water intake
structures. Neither forage species nor the unlanded portion of
recreational and commercial species were assigned direct use values in
this analysis, although losses in forage species did contribute to the
overall losses in recreational and commercial species as noted above.
Because the majority of annual impingement mortality and entrainment
include unharvested recreational and commercial fish and forage fish,
considering nonuse values in the final rule benefits analysis is
particularly important. If nonuse values were not considered at all,
only two to three percent of fish losses would be represented in
monetized benefits.

  Exhibit X-3--Distribution of Annual Baseline IM&E and Reductions in IM&E by Species Category, for Individual
          Organisms and Age-1 Equivalents, at Existing Units for the Final Rule and Options Considered
----------------------------------------------------------------------------------------------------------------
                                                  Reduction in IM&E by regulatory option \b\ \c\
                                                 ------------------------------------------------
                 IM&E Metric \a\                     Proposal      Final rule--      Proposal      Baseline IM&E
                                                     option 4     existing units     option 2
----------------------------------------------------------------------------------------------------------------
                                             Individuals (millions)
----------------------------------------------------------------------------------------------------------------
All Species.....................................           819.7         2,135.2       335,959.4       497,884.8
Forage Species..................................           607.9         1,423.6       224,323.1       325,069.1
Commercial & Recreational Species...............           211.8           711.5       111,636.3       172,815.8
Commercial & Recreational Harvest (millions of              16.1            17.1            44.7            54.0
 fish)..........................................
Lost Individuals with Direct Use Value (%)......           1.97%           0.80%           0.01%           0.01%
----------------------------------------------------------------------------------------------------------------
                                         Age-One Equivalents (millions)
----------------------------------------------------------------------------------------------------------------
All Species.....................................           614.2           652.0         1,637.5         1,931.0

Forage Species..................................           528.2           560.8         1,258.7         1,459.7
Commercial & Recreational Species...............            85.9            91.2           378.8           471.3
Commercial & Recreational Harvest (millions of              16.1            17.1            44.7            54.0
 fish)..........................................
A1E Losses with Direct Use Value (%)............           2.63%           2.62%           2.73%           2.80%
----------------------------------------------------------------------------------------------------------------
\a\ IM&E = impingement and entrainment; A1E= age-one equivalent;
\b\ IM&E Effects by Option: Proposal Option 2 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.
\c\ The totals presented here do not include IM&E reductions associated with new units. Estimated IM&E
  reductions associated with the new unit provision of the final rule are presented in Exhibit X-4.

    In addition to the final rule and other options analyzed for
existing units (Proposal Option 4 and Proposal Option 2), EPA analyzed
requirements for new units at existing facilities. EPA's new unit
provision in the final rule establishes entrainment requirements for
all new stand-alone units at existing facilities. EPA could not
directly apply the extrapolation methodology used for existing units
because facility-specific information was not available for new units.
Instead, EPA estimated impingement mortality and entrainment reductions
on the basis of impingement mortality and entrainment reductions per
million gallons per day from the analysis of existing units. The
estimated reduction in impingement mortality and entrainment for the
new unit requirement is summarized in Exhibit X-4.

Exhibit X-4--Annual Reductions in IM&E by Species Category for the Final
                           Rule for New Units
------------------------------------------------------------------------
                                                           Reduction in
                     IM&E metric \a\                         IM&E \b\
------------------------------------------------------------------------
                         Individuals (millions)
------------------------------------------------------------------------
All Species.............................................           867.2
Forage Species..........................................           566.1
Commercial and Recreational Species.....................           301.1
Commercial and Recreational Harvest (millions of fish)..             0.1
Lost Individuals with Direct Use Value (%)..............           0.01%
------------------------------------------------------------------------
                     Age-One Equivalents (millions)
------------------------------------------------------------------------
All Species.............................................             2.3
Forage Species..........................................             1.7
Commercial and Recreational Species.....................             0.7
Commercial and Recreational Harvest (millions of fish)..             0.1
A1E Losses with Direct Use Value (%)....................           2.87%
------------------------------------------------------------------------
\a\ A1E = age-one equivalent; IM&E = impingement mortality and
  entrainment.
\b\ Impingement mortality and entrainment reductions increase throughout
  the compliance period. The values presented here reflect the peak
  reductions achieved in 2059, the final year of the compliance period.
IM&E Effects: Entrainment requirements for all stand-alone or units.

D. National Benefits of the Final Rule and Options Considered

1. Overview
    Economic benefits of the final rule and other options considered
for regulated facilities can be categorized broadly into use and nonuse
benefits of goods and services. Use values include benefits that
pertain to the human use (direct or indirect) of affected fishery
resources. Use values reflect the value of all current direct and
indirect uses of a good or service. Direct use benefits can be further
categorized according to whether affected goods and services are traded
in the market (i.e. commercially captured fish are traded, recreational
catch is not). Likewise, indirect use benefits can be linked to direct
goods and services. For example, reductions in impingement mortality
and entrainment of forage fish will enhance the biomass of species
targeted for commercial (market) and recreational (nonmarket) uses. It
could also affect property values.
    Nonuse benefits are those benefits that are independent of any
current or anticipated human use of a resource. Nonuse benefits reflect
human values associated with existence and bequest motives. In other
words, these values reflect the value the public places on something
simply as a result of its existence or natural functioning. EPA
estimated the economic benefits from national regulatory options using
a range of valuation methods. Commercial fishery benefits were valued
using market data. Recreational angling benefits were valued using a
benefits transfer approach based on revealed and stated preference
data. To estimate indirect use benefits from reduced impingement
mortality and entrainment of forage species, EPA used a simple

trophic transfer model. This model translated changes in impingement
mortality and entrainment of forage fish into changes in the harvest of
commercial and recreational species. All benefits for fish saved under
today's final rule are estimates on the basis of projected numbers of
age-one equivalent fish, converted to harvestable age equivalents on a
species-by-species basis for those commercial species analyzed.
    EPA calculated the monetary value of use benefits of the final rule
and other options considered for existing facilities using two discount
rate values: 3 and 7 percent. All dollar values presented are in 2011
dollars. Because avoided fish deaths occur mainly in fish that are
younger than harvestable age (eggs, larvae, and juveniles), the main
benefits from avoided impingement mortality and entrainment would be
realized typically 3 to 4 years after their avoided death. A detailed
description of the approaches used to address this is in Appendix C of
the BA.
    Neither forage species nor the unlanded portion of recreational and
commercial species were assigned direct use values in this analysis.
Their potential value to the public is derived from several alternative
sources: Their indirect use as both food and breeding population for
those fish that are harvested; and nonuse value. The nonuse value
includes individuals' WTP (willingness to pay) for the protection of
fish based on a sense of altruism, stewardship, bequest, or vicarious
consumption; and their support of ecosystem stability and function. To
estimate a subset of nonuse benefits from reducing impingement
mortality and entrainment of forage species and unlanded commercial and
recreational species, EPA conducted a benefits transfer using a
nonmarket valuation study of aquatic ecosystem improvements. This
effort generated partial estimates of nonuse values for resource
changes for a species that represents less than one percent of adverse
environmental impacts.
    EPA developed and fielded an original stated preference survey to
estimate total WTP for improvements to fishery resources affected by
impingement mortality and entrainment from regulated 316(b) facilities
(75 FR 42438, July 21, 2010). Preliminary results of the stated
preference survey were described in a Notice of Data Availability (77
FR 34927, June 12, 2012). EPA presents preliminary benefits estimates
based on the stated preference survey in the BA to demonstrate progress
on this effort. In the absence of final survey results, EPA estimated
partial nonuse benefits for the final rule using the benefits transfer
approach from proposal. EPA updated the proposal results to incorporate
additional stock assessment data for winter flounder, the species used
as the basis for the analysis. Due to the challenges associated with
estimating nonuse benefits, some nonuse benefits are described only
qualitatively.
2. Timing of Benefits
    Discounting refers to the economic conversion of future benefits
and costs to their present values, accounting for the fact that
individuals value future outcomes less than comparable near-term
outcomes. Discounting enables a valid comparison of benefits and costs
that occur across different periods. EPA used discounting to account
for differences in the timing across benefits and costs under the final
rule and options considered. EPA estimated the expected benefits of the
final rule once the rule takes full effect, then used discounting to
account for delays in the realization of benefits. Two different delays
affect the timing of benefits under the final rule and options
considered.
    First, facilities will begin to incur costs prior to technology
installation. Facilities will face regulatory requirements once the
rule is effective, but it will take time for requirements to be
developed and for the required technology to be installed. Analyzed
facilities are assigned a technology installation year which considers
facility characteristics and technology being installed. EPA assumed
that facilities installing impingement technology tend to complete
technology installation sooner than facilities installing closed-cycle
cooling (for other options considered). The assignment of technology
installation years is speculative on EPA's part, because EPA does not
have sufficient data on hand to project the schedules that Directors
will set for facilities. See Chapter 3 of the EA document for the final
existing facilities rule for details on EPA's development of technology
installation years. EPA effectively discounts benefits to a greater
extent than costs to account for the lag between the incurrence of
costs and the realization of benefits.
    Second, an additional time lag will result between technology
implementation and use values via increased fishery yields. This lag
occurs because several years could pass between the time an organism is
spared from impingement mortality or entrainment and the time of its
potential harvest. For example, a larval fish spared from entrainment
(in effect, at age 0) could be caught by a recreational angler at age
3, meaning that a 3-year time lag arises between the incurred
technology cost and the realization of the estimated recreational
benefit. Likewise, if a 1-year-old fish is spared from impingement and
is then harvested by a commercial waterman at age 2, there is a 1-year
lag between the incurred cost and the subsequent commercial fishery
benefit. To account for this growth period, EPA applied discounting by
species groups in each regional study. Note that nonuse values
(depending on how they are measured) do not necessarily need to be
discounted similarly.
3. Recreational Fishing Valuation
a. Recreational Fishery Methods
    To estimate recreational benefits of the final options, EPA
developed a benefits transfer approach on the basis of a meta-analysis
of recreational fishing valuation studies designed to measure the
various factors that determine WTP for catching an additional fish per
trip. Regional benefits are summarized as follows (for details, see
Chapter 7 of the BA):
    1. Estimate the annual forgone catch of recreational fish (number
of fish) attributable to impingement mortality and entrainment under
current conditions.
    2. Estimate the marginal value per fish using a benefit transfer
function based on a meta-analysis of recreational fishing studies.
    3. Multiply the forgone catch by the marginal value per fish to
estimate the total annual value of the forgone catch.
    4. Estimate the annual value of reductions in the forgone catch
attributable to the regulatory analysis options.
    5. Discount the time path of benefits at 3 and 7 percent to reflect
the time lag between impingement mortality and entrainment reductions
and increased harvests.
b. Estimated Benefits to Recreational Anglers
    Decreasing impingement mortality and entrainment increases the
number of fish available to be caught by recreational anglers, thereby
increasing angler welfare. Exhibit X-5 shows the estimated benefits
resulting from reduced impingement mortality and entrainment under
today's final existing facilities rule and other options that EPA
considered. The total annualized recreational fishing benefits for all
regions at existing units of existing facilities for the final rule
(impingement mortality and entrainment combined)

are $18 million using a 3 percent discount rate and $14 million using a
7 percent discount rate. Annual recreational fishing benefits for other
options considered range from $17 to $43 million using a 3 percent
discount rate and $13 million to $30 million using a 7 percent discount
rate.

    Exhibit X-5--Annual Recreational Fishing Benefits From Eliminating or Reducing IM&E at Existing Units at
                       Existing Facilities for the Final Rule and Other Options Considered
----------------------------------------------------------------------------------------------------------------
                                                         Increased harvest   3% discount rate   7% discount rate
                 Regulatory option \a\                     (million fish)    (million 2011$)    (million 2011$)
----------------------------------------------------------------------------------------------------------------
Proposal Option 4......................................                6.1               17.1               12.6
Final Rule--Existing Units.............................                6.5               18.2               13.5
Proposal Option 2......................................               20.5               43.0               29.5
Baseline...............................................               25.3               78.8               72.0
----------------------------------------------------------------------------------------------------------------
\a\ IM&E Effects by Option: Proposal Option 4 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.

4. Commercial Fishing Valuation
    Reductions in impingement mortality and entrainment at cooling
water intake structures are expected to benefit the commercial fishing
industry. By reducing the number of fish killed, the number of fish
available for harvest is expected to increase. The next section
summarizes the methods EPA used to estimate benefits to the commercial
fishing sector. The section after that presents the estimated value of
commercial fishing benefits.
a. Commercial Fishing Valuation Methods
    The total loss to the economy from impingement mortality and
entrainment impacts on commercially harvested fish species is
determined by the sum of changes in both producer and consumer surplus.
EPA assumed a linear relationship between stock and harvest, such that
if 10 percent of the current commercially targeted stock were
harvested, 10 percent of the commercially targeted fish lost to
impingement mortality and entrainment would have been harvested absent
impingement mortality and entrainment. The percentage of fish harvested
is based on data of historical fishing mortality rates.
    Producer surplus provides an estimate of the economic damages to
commercial fishers, but welfare changes can also be expected to accrue
to final consumers of fish and to commercial consumers (including
processors, wholesalers, retailers, and middlemen) if the projected
increase in harvest is accompanied by a change in price. The analysis
of market impacts involves the following steps (for details, see
Chapter 6 of the BA):
    1. Assessing the net welfare changes for fish consumers due to
changes in fish harvest and the corresponding change in fish price.
    2. Assessing net welfare changes for fish harvesters due to the
change in total revenue, which could be positive or negative.
    3. Calculating the increase in net social benefits when the fish
harvest changes by combining the welfare changes for consumers and
harvesters.
    For a more detailed description of the methodology for commercial
fishing, see Chapter 6 of the BA.
b. Commercial Fishing Valuation Results
    Exhibit X-6 presents the estimated annual commercial fishing
benefits attributable to the proposed options. The results reported
include the total reduction in losses in pounds of fish, and the value
of this reduction discounted at 3 and 7 percent. Total estimated
annualized commercial fishing benefits for the United States for the
final rule are $0.9 million using a 3 percent discount rate and $0.7
million using a 7 percent discount rate. Annual commercial fishing
benefits for other options considered range from $0.9 million to $3.9
million using a 3 percent discount rate and $0.7 million to $2.7
million using a 7 percent discount rate. EPA estimated the expected
price changes from eliminating baseline levels of impingement mortality
and entrainment and found them to be small, ranging from 0.2 to 2.5
percent.

 Exhibit X-6--Annual Commercial Fishing Benefits From Eliminating or Reducing IM&E at Existing Units at Existing
                           Facilities for the Final Rule and Other Options Considered
----------------------------------------------------------------------------------------------------------------
                                                         Increased harvest   3% discount rate   7% discount rate
                 Regulatory option \a\                     (million lbs)     (million 2011$)    (million 2011$)
----------------------------------------------------------------------------------------------------------------
Proposal Option 4......................................                5.3                0.9                0.7
Final Rule--Existing Units.............................                5.7                0.9                0.7
Proposal Option 2......................................               14.0                3.9                2.7
Baseline...............................................               17.3                8.0                7.2
----------------------------------------------------------------------------------------------------------------
\a\ IM&E Effects by Option: Proposal Option 4 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.

5. Nonuse Benefits
    Aquatic organisms with no direct use benefits account for the
majority of cooling water intake structure losses (Exhibit X-3).
Although many individuals may not use a particular waterbody for
recreation or fishing, individuals nevertheless may value improvements
in that waterbody. To quantitatively assess the ecological gains from
the final rule and other options considered, EPA took both of the only
two approaches available for quantifying nonuse benefits--a benefits
transfer approach and a stated

preference survey. It is not necessary to use a stated preference
survey approach to calculate benefits; however, important nonuse
benefits can be missed by not using a stated preference survey
approach. So EPA took both approaches, but relied on only the benefits
transfer approach for the benefits analysis supporting the final rule.
The benefits transfer approach relies on the existence of previously
published studies with values that can be transferred; in instances
where nonuse is potentially significant, as is the case here,
previously published studies would only include nonuse value if they
adopted a stated preference approach.
    EPA used a benefit transfer approach to partially monetize nonuse
benefits associated with reductions in impingement mortality and
entrainment of fish, shellfish, and other aquatic organisms under the
regulatory options for the North Atlantic and Mid-Atlantic benefits
regions. EPA applied estimated values from a study conducted in Rhode
Island; these estimates are likely to be more representative of nonuse
values held by individuals residing in the Northeast United States and
less accurate in other regions. EPA was unable to identify comparable
studies conducted in other regions that could be used to estimate
nonuse values. Chapter 8 of the BA provides further detail on this
analysis.
    The preferred techniques used to estimate total values (including
both use and nonuse values), in general, are benefits transfer or to
conduct a stated preference survey. There are many studies in the
environmental economics literature that quantify benefits or WTP
associated with various types of water quality and aquatic habitat
changes. However, none of these studies allows the isolation of non-
market WTP associated with quantified reductions in impingement
mortality and entrainment for forage fish or unlanded portion of
commercial and recreational species.
a. Nonuse Benefits Transfer
    EPA identified a recent stated preference survey of Rhode Island
residents that is closely related to the 316(b) policy context. The
study results have been published in multiple scientific journals and
books including Johnston et al.\148\ and Zhao et al.\149\ Both the
Rhode Island study and the present context address policy changes that
increase the number of forage fish in aquatic habitat with unknown
effects on overall fish populations. The Rhode Island study was
developed originally as a case study addressing Rhode Island residents'
preferences for the restoration of migratory fish passage over dams in
Rhode Island's Pawtuxet and Wood-Pawcatuck watersheds. It estimates
nonuse values by asking respondents to consider changes in ecological
indicators reflecting quantity of habitat, abundance of wildlife,
ecological condition, and abundance of migratory fish species. Within
this study, estimated values were based on the relative change in
abundance of fish species most affected by restoration.
---------------------------------------------------------------------------

    \148\ Johnston, R.J., E.T. Schultz, E.T., K. Segerson, E.Y.
Besedin, and M. Ramachandran. 2012. Enhancing the content validity
of stated preference valuation: The structure and function of
ecological indicators. Land Economics, 1: 102-120.
    \149\ Zhao, M., Johnson, R.J. and Schultz, E.T. 2013. What to
Value and How? Ecological Indicator Choices in Stated Preference
Valuation. Environmental Resource Economics. Published online,
February 8, 2013.
---------------------------------------------------------------------------

    Estimating benefit functions from the Rhode Island choice
experiment survey \150\ allows one to distinguish benefits associated
with resource uses from those associated primarily with nonuse motives.
Within the benefit transfer application, WTP is quantified for
increases in non-harvested fish alone on the basis of the implicit
price for migratory fish changes. This transfer holds constant all
effects related to identifiable human uses (e.g., effects on catchable
fish, public access, and observable wildlife). The remaining welfare
effect--derived purely from effects on forage fish with little or no
direct human use--may therefore be most accurately characterized as a
nonuse benefit realized by households.
---------------------------------------------------------------------------

    \150\ Johnston, R.J., E.T. Schultz, E.T., K. Segerson, E.Y.
Besedin, and M. Ramachandran. 2012. Enhancing the content validity
of stated preference valuation: The structure and function of
ecological indicators. Land Economics, 1: 102-120; Zhao, M.,
Johnson, R.J. and Schultz, E.T. 2013. What to Value and How?
Ecological Indicator Choices in Stated Preference Valuation.
Environmental Resource Economics. Published online, February 8,
2013.
---------------------------------------------------------------------------

    The estimation of nonuse values involved the following steps:
    1. Use a model published by Zhao et al.\151\ to estimate household
WTP per percent increase in the number of fish in a given watershed.
The household WTP values reflect a survey version that characterizes
effects on the number of migratory fish passing upstream.
---------------------------------------------------------------------------

    \151\ Op cit.
---------------------------------------------------------------------------

    2. Calculate the relative change in abundance for the fish species
most affected by the regulation. The structure of the transfer study
dictates that WTP should be evaluated based on the single species that
would experience the greatest relative increase in abundance from
restoration and that WTP estimates from multiple species impacted by
IM&E should not be treated as strictly additive. After reviewing
available stock assessment data, current stock size, and the magnitude
of IM&E, EPA determined winter flounder to be the species likely to
experience the greatest percent increase in abundance among those
species with sufficient stock information to conduct the analysis
within the boundaries of the North Atlantic and Mid-Atlantic benefits
regions. This species is harvested; however, early life stages of
recreational and commercial species may be eaten by other organisms and
therefore have nonuse values.
    3. Estimate total household WTP by applying model results for WTP
per percentage of estimated winter flounder impingement mortality and
entrainment. Total regional WTP is the product of household WTP and the
number of households in the affected region (for details, see Chapter 8
of the BA).
b. Estimated Nonuse Benefits for the North Atlantic and Mid-Atlantic
Regions
    EPA expects that a decrease in impingement mortality and
entrainment will lead to increased fish abundance in affected water
bodies, thus increasing nonuse benefits. Exhibit X-7 shows the benefits
that would result from reducing impingement mortality and entrainment
through today's final rule and other options considered. Application of
the transfer study requires that the increases be expressed as a
percent improvement relative to a maximum number of fish that could be
supported. EPA calculated estimates of WTP on the basis of the increase
in age-1 equivalent winter flounder relative to the estimated number of
age-1 fish when the stock is at maximum sustainable yield, thus
assuming that the population structure of the current stock is similar
to the larger stock. The total annualized nonuse benefits for the North
Atlantic and Mid-Atlantic regions for the existing unit provision of
the final rule are $1 million using a 3 percent discount rate and $0.8
million using a 7 percent discount rate. For other options considered,
annualized nonuse benefits range from $0.3 to $51 million using a 3
percent discount rate and $0.3 to $37 million using a 7 percent
discount rate.

 Exhibit X-7--Annual Nonuse Benefits From Eliminating or Reducing IM&E at Existing Units at Existing Facilities
          in the North Atlantic and Mid-Atlantic Regions for the Final Rule and Options Considered \a\
----------------------------------------------------------------------------------------------------------------
                                       Winter flounder    Increased winter
        Regulatory option \b\           IM&E (million       flounder A1E     3% discount rate   7% discount rate
                                             A1E)          abundance (%)     (millions 2011$)   (millions 2011$)
----------------------------------------------------------------------------------------------------------------
Proposal Option 4...................               0.03               0.02                0.3                0.3
Final Rule--Existing Units..........               0.08               0.07                1.0                0.8
Proposal Option 2...................               4.78               4.18               51.1               37.3
Baseline............................               6.23               5.44               99.1               96.9
----------------------------------------------------------------------------------------------------------------
\a\ IM&E = impingement and entrainment; A1E = age-one equivalent.
\b\ IM&E Effects by Option: Proposal Option 4 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.

c. Stated Preference Survey
    EPA conducted a stated preference survey to calculate benefits
associated with minimizing adverse impacts to aquatic ecosystems from
cooling water intakes. Refer to Sections VI.F.1 and X.D.1 for
additional discussion of the stated preference survey. EPA did not rely
on the results of its stated preference survey in estimating the
benefits of today's rule.
6. Threatened and Endangered Species
    This section summarizes methods and results of EPA's analysis of
benefits from improved protection of T&E species from today's final
rule and options considered. Chapter 5 of the BA provides further
detail on this analysis.
    Even if levels of mortality due to impingement and entrainment from
cooling water intake structures of T&E species are low in absolute
numbers, they may represent a substantial portion of annual
reproduction because of the reduced population levels that cause a
species to be protected. Consequently, impingement mortality and
entrainment may either lengthen recovery time, or hasten the demise of
these species. Adverse effects of cooling water intake structures on
T&E species can occur in several ways:
     Populations of T&E species may suffer direct harm as a
consequence of impingement mortality and entrainment.
     T&E species may suffer indirect harm if a cooling water
intake structure alters food webs.
     Cooling water intake structures can alter habitat
designated as critical to the long-term survival of T&E species.
    Consequently, the 316(b) regulation will help preserve threatened
and endangered species.
a. Qualitative Assessment of Impingement Mortality and Entrainment
Impacts on T&E Species
    By definition, T&E species are characterized by low population
levels. As such, it is unlikely that these species are recorded in
significant number, if recorded at all, in impingement mortality and
entrainment monitoring studies. Thus, losses are difficult to identify
and quantify in a framework developed for non-listed species.
Consequently, EPA developed a qualitative methodology to estimate the
number of T&E species affected by impingement mortality and
entrainment.
    To qualitatively assess the potential for cooling water intake
structure impacts on aquatic T&E species, EPA constructed a database
that assessed the geographical overlap of cooling water intake
structure and habitat used by aquatic T&E species. This database
identified the number of T&E species potentially affected by each
regulated 316(b) facility, and the number of facilities potentially
affecting each T&E species. Additional details are in Chapter 5 of the
BA.
    Using this database, EPA found 99 Federally-listed aquatic T&E
species that overlap with at least one covered cooling water intake
structure (an interaction in Exhibit X-8). T&E species included
freshwater, marine, and anadromous fish, freshwater mussels, and sea
turtles. On average, the habitat of each T&E species overlapped with 22
covered facilities (Exhibit X-8), suggesting that the 316(b) rule may
have substantial positive benefits of ensuring the long-term
sustainability and recovery of T&E species.

Exhibit X-8--Number of Regulated 316(b) Cooling Water Intake Structures in Aquatic T&E Species Habitat on a Per-
                                                  Species Basis
----------------------------------------------------------------------------------------------------------------
                                                                               Facilities per T&E species \c\
 Subset of affected species \a\ \b\        Species        Interactions \b\ -------------------------------------
                                                                                Avg                Max
----------------------------------------------------------------------------------------------------------------
All T&E Species.....................                 99              2,158               21.8                103
T&E Freshwater Mussels..............                 53              1,176               21.8                103
T&E Anadromous Fish.................                 12                235               19.6                101
T&E Freshwater Fish.................                 21                 65                3.1                  7
T&E Snails..........................                  7                199               28.4                 49
Sea Turtles.........................                  6                483               80.5                102
----------------------------------------------------------------------------------------------------------------
\a\ Aquatic T&E species includes species listed as threatened or endangered by the U.S. Fish and Wildlife
  Service (freshwater) or National Oceanic and Atmospheric Administration National Marine Fisheries Service
  (marine). Only aquatic species overlapping with a minimum of one cooling water intake structure are included.
\b\ Each interaction represents an overlap between the range of a T&E species and cooling water intake
  structure.
\c\ Avg = average, Max = maximum.

b. Quantitative Assessment of Impingement Mortality and Entrainment
Impacts on T&E Species
    Although difficult to observe and quantify, EPA identified 14 T&E
species with confirmed impingement mortality and entrainment based on
facility impingement mortality and entrainment studies. EPA notes that
some impingement mortality and entrainment studies identifying T&E
losses were conducted prior to the listing of the species under the
ESA. In addition to documented species-level instances of T&E
mortality, EPA identified impingement mortality and entrainment at the
level of genera \152\ when these genera contain a T&E species whose
habitat range overlapped the reporting facility's cooling water intake
structure. Although these are not confirmed impingement mortality and
entrainment of T&E species, they provide evidence that additional T&E
species are likely to be directly affected by impingement mortality and
entrainment. EPA found seven genus-level matches, suggesting that the
14 T&E species suffering impingement mortality and entrainment may be
inaccurate.
---------------------------------------------------------------------------

    \152\ Genera is the plural of genus. Genus is the rank superior
to species in taxonomic biological classification. For example, the
genus of Atlantic salmon (Salmo falar) is Salmo.
---------------------------------------------------------------------------

    Of the 14 Federally-listed T&E species for which EPA was able to
document losses in impingement mortality and entrainment studies, EPA
was able to quantify impingement mortality and entrainment for two
species (pallid sturgeon and Topeka shiner). The documented impingement
mortality and entrainment occurred before these species were Federally-
listed. Data were either qualitative or of insufficient quality to
quantify local or regional impingement mortality and entrainment for
the remaining 12 Federally-listed T&E species. EPA also quantified
impingement mortality and entrainment for the American paddlefish
(Polyodon spathula), listed by several states as threatened or
endangered under State law, using facility impingement mortality and
entrainment studies. Exhibit X-9 presents EPA's estimates of baseline
annual impingement mortality and entrainment, and reductions in
impingement mortality and entrainment which EPA estimates will occur
under the final rule and other options considered.

   Exhibit X-9--Baseline Annual IM&E for T&E Species and Reductions for Existing Units at Existing Facilities
                                                 (A1Es) \a\ \b\
----------------------------------------------------------------------------------------------------------------
                                                            Final rule--
               Species                Proposal option 4    existing units   Proposal option 2       Baseline
----------------------------------------------------------------------------------------------------------------
Paddlefish \c\......................            7,930.1            8,245.4           15,659.7           18,841.4
Pallid Sturgeon.....................               65.4               67.6               78.0               89.5
Topeka Shiner.......................            2,910.9            3,009.8            3,471.9            3,984.9
                                     ---------------------------------------------------------------------------
    Total...........................           10,906.4           11,322.8           19,209.5           22,915.7
----------------------------------------------------------------------------------------------------------------
\a\ IM&E = impingement and entrainment; A1E = age-one equivalent.
\b\ IM&E Effects by Option: Proposal Option 2 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.
\c\ The American paddlefish is not a Federally-listed T&E species but is listed as threatened or endangered on
  several state lists.
\d\ This analysis is based solely on IM controls.

    Impingement mortality and entrainment is only one of many factors
that adversely affect T&E species. Estimating total population impacts
from changes in impingement mortality and entrainment requires
estimates of current populations of these fish and estimates of other
anthropogenic effects which were not readily available for all T&E
species with quantified impingement mortality and entrainment at the
time of this analysis. Therefore, EPA was unable to quantify effects on
T&E populations from the 316(b) regulation.
c. Valuation Methods of T&E Fish Species
    EPA had sufficient data from impingement mortality and entrainment
studies to quantify impingement mortality and entrainment estimates for
three T&E species, Topeka shiner, pallid sturgeon, and paddlefish
(Exhibit X-9). Two of these species (pallid sturgeon and paddlefish)
have potential use values. A limited recreational fishery (mostly catch
and release) exists for paddlefish in several states; although
harvesting pallid sturgeon is illegal, the species is sometimes caught
by recreational anglers. EPA estimated recreational use values for
pallid sturgeon and paddlefish by applying transfer values from a
Random Utility Model analysis it conducted to evaluate recreational
fishing benefits of the 316(b) Phase II regulation to quantified
impingement mortality and entrainment (for details, see Chapter 5 of
the BA).
    EPA was unable to generate estimates of nonuse values for T&E fish
species because reliable population estimates needed to transfer the
values were unavailable. However, EPA emphasizes that nonuse values for
T&E fish species are likely to be significantly greater than any use
values. Harvest of these species is prohibited, reflecting a societal
judgment that protection and preservation of these species is of
greater value than harvest.
d. Estimated Monetary Benefits From Reduced Mortality of T&E Fish
Species
    Exhibit X-10 presents the estimated annualized benefits for a
subset of T&E species. For existing units under the final rule, EPA
estimates total annualized use benefits for T&E species with quantified
impingement mortality and entrainment of $0.4 million using a 3 percent
discount rate and $0.3 million using a 7 percent discount rate. For
other options considered, annualized benefits range from $0.4 to $0.7
million using a 3 percent discount rate and $0.3 to $0.5 million using
a 7 percent discount rate.

Exhibit X-10--Annual Use Benefits From Eliminating or Reducing IM&E of T&E Species at Existing Units of Existing
                     Facilities for The Final Rule and Other Options Considered \a\ \b\ \c\
----------------------------------------------------------------------------------------------------------------
                                                         Increased harvest   3% discount rate   7% discount rate
                   Regulatory option                      (number of fish)   (million 2011$)    (million 2011$)
----------------------------------------------------------------------------------------------------------------
Proposal Option 4......................................            7,995.5                0.4                0.3
Final Rule--Existing Units.............................            8,313.0                0.4                0.3
Proposal Option 2......................................           15,737.7                0.7                0.5
Baseline...............................................           18,930.9                1.2                1.3
----------------------------------------------------------------------------------------------------------------
\a\ IM&E = impingement and entrainment; T&E = threatened and endangered. Values are included for pallid sturgeon
  and paddlefish in the Inland region.
\b\ IM&E Effects by Option: Proposal Option 4 = impingement mortality limitations based on modified traveling
  screens for all facilities with flow greater than 50 mgd; Final Rule = impingement mortality standards based
  on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 = intake flow
  commensurate with closed-cycle cooling for facilities that have a DIF of greater than 125 mgd and impingement
  mortality limitations based on modified traveling screens for all facilities with flow greater than 2 mgd.
\c\ This analysis is based solely on impingement mortality controls.

    EPA notes that the benefit values presented in Exhibit X-10
represent only a fraction of values for T&E species potentially
affected by the final existing facilities rule. The Agency was able to
obtain only use values and for only a small subset of all affected T&E
species. Moreover, because of the nature of T&E species, even a small
increase in population could yield economic and ecological benefits
(e.g., Richardson and Loomis; \153\ Bell et al.; \154\ Berrens et
al.\155\)
---------------------------------------------------------------------------

    \153\ Richardson, L., and J. Loomis. 2009. The total economic
value of threatened, endangered and rare species: An updated meta-
analysis. Ecological Economics, 68(5): 1535-1548.
    \154\ Bell, K.P., D. Huppert, and R.L. Johnson. 2003.
Willingness to pay for local coho salmon enhancement in coastal
communities. Marine Resource Economics, 18: 15-31.
    \155\ Berrens, R.P., P. Ganderton, and C.L. Silva. 1996. Valuing
the protection of minimum instream flow in New Mexico. Journal of
Agricultural and Resource Economics 21(2): 294-309.
---------------------------------------------------------------------------

e. Valuation Methods for T&E Sea Turtles
    In addition to estimating values of T&E fish with quantitative
estimates of impingement mortality and entrainment, EPA estimated the
WTP for sea turtle conservation. In this analysis, EPA applied
estimates from a study using a stated preference valuation approach to
estimate total economic value of a management program that reduces the
risk of extinction of loggerhead sea turtles.\156\
---------------------------------------------------------------------------

    \156\ Whitehead, J.C. 1993. Total economic values for coastal
and marine wildlife: specification, validity, and valuation issues.
Marine Resource Economics, 8(2): 119-132.
---------------------------------------------------------------------------

    Although impingement mortality and entrainment of turtles is
relatively low compared to mortality from shrimp trawling and other
fisheries,\157\ it is known that reducing turtle mortality during
juvenile and subadult life stages can have a substantial positive
effect on population growth.\158\ The marginal change in extinction
probability of sea turtles due to 316(b) regulatory options is likely
to be at least 0.01, or a 1 percent decrease in the probability of
extinction over 25 years. This assessment is based on reports that
impingement mortality and entrainment may result in the loss of more
than 100 turtles per year and because turtle population growth rates
are known to be sensitive to changes in juvenile and subadult life
stages.\159\
---------------------------------------------------------------------------

    \157\ Plotkin, P.T., (Ed). 1995. National Marine Fisheries
Service and U. S. Fish and Wildlife Service Status Reviews for Sea
Turtles Listed under the Endangered Species Act of 1973. National
Marine Fisheries Service. Silver Spring, MD.
    \158\ Crouse, D.T., L.B. Crowder, and H. Caswell. 1987. A
stated-based population model for loggerhead sea turtles and
implications for conservation. Ecology, 68(5): 1412-1423.
    \159\ Ibid.
---------------------------------------------------------------------------

f. Benefits From Reduced Mortality of T&E Sea Turtles
    The U.S. range of loggerhead sea turtles includes the Gulf of
Mexico, South Atlantic, Mid-Atlantic, and North Atlantic 316(b)
regions.\160\ To calculate national WTP for an increased 25-year
survival probability of loggerhead sea turtles, EPA assumed the
affected population to include households in States with 316(b)
facilities that are in loggerhead sea turtle habitat. EPA determined
that 54.8 million households would be willing to pay for improved
protection of loggerhead sea turtles. Although incidences of mortality
have been reported at facilities in California, Texas, Florida, South
Carolina, North Carolina, and New Jersey, EPA does not have sufficient
information to quantify total sea turtle losses due to intakes or the
reductions in such losses that might occur from the final rule or
options considered. But as an illustrative example, assuming that the
survival probability of loggerhead sea turtles over 25 years were
increased by 1 percent, and applying a mean household value of $0.37
(2011 dollars), the monetized value would be $19.3 million and $18.8
million using discount rates of 3 percent and 7 percent, respectively.
EPA is presenting these estimates only to demonstrate the potential
range of benefits, and is not including them in national benefits
totals for the final rule and options considered. Actual household
values and total benefits may be higher or lower than these estimates,
with Proposal Option 2 likely to provide substantially greater benefits
than the final rule and Proposal Option 4.
---------------------------------------------------------------------------

    \160\ U.S. Fish and Wildlife Service (USFWS) (2010c). ``North
Florida Ecological Services Office: Loggerhead Sea Turtle
(Caretta).'' Available at http://www.fws.gov/northflorida/seaturtles/turtle%20factsheets/loggerhead-sea-turtle.htm.
---------------------------------------------------------------------------

    Because EPA does not currently have accurate national estimates of
impingement mortality and entrainment for turtle species, nor are
population models available that estimate the effect of 316(b)
regulation on population size and extinction risk, these estimates are
presented only as an illustrative example and are not included in
national totals.
g. Other Indications of Society's WTP for Protection of T&E Species
    Many sources provide information that indicates that society places
significant value on protecting T&E species. These include, but are not
limited to:
     The Endangered Species Act of 1973, which provides for the
conservation of T&E species of fish and wildlife. Federal and State
expenditures on T&E species were $593 million during fiscal year 2011
just on protection of those Federally-listed T&E species that have
habitat overlapping cooling water intake structures. This accounted for
68 percent of the $869 million spent on fish, marine reptiles,
crustaceans, corals, clams, aquatic snails and marine mammals listed
under the Endangered Species Act.\161\
---------------------------------------------------------------------------

    \161\ U.S. Fish and Wildlife Service. 2012. Federal and State
Endangered and Threatened Species Expenditures. Fiscal Year 2011.

---------------------------------------------------------------------------

     Restrictions on activities in the habitat occupied by T&E
species. For example, water diversions on the San Joaquin-Sacramento
River delta, in place to protect the Delta Smelt (Hypomesus
transpacificus), limit the extraction of water for drinking and
agriculture.
     The willingness of individuals to volunteer their time to
conserve T&E species. For example, dozens of organizations recruit
thousands of volunteers every year to participate in sea turtle
conservation and research projects. Volunteers are often required to
undergo substantial training and commit to long hours.
    While costs to replace, protect, or enhance stocks, and costs to
users affected by efforts to conserve stocks are not direct measures of
economic benefits, they indicate that society is willing to pay
significant sums to protect and restore populations of T&E species.
Although impingement mortality and entrainment is only one of many
stressors on these species, reducing the amount of impingement
mortality and entrainment could contribute to the recovery of
populations over time, thereby eliminating some costs associated with
conserving T&E species.
7. Assessment of Thermal Discharge Impacts
    In addition to reducing total impingement mortality and
entrainment, closed-cycle cooling reduces thermal pollution. Most
retrofit installations of cooling towers at electric generating
facilities have been required by NPDES permits to reduce thermal
discharges. Since thermal discharges are a product of cooling water
intake structures, the impacts of thermal discharges are a relevant
benefit to consider when assessing appropriate technologies to reduce
the effects of cooling water intakes. The installation of technologies,
such as closed-cycle cooling systems, can reduce thermal pollution
significantly. Thermal pollution has long been recognized to cause harm
to the structure and function of aquatic ecosystems. Concerns about the
impacts of thermal discharges are addressed by State water quality
standards that, when implemented through NPDES permits, limit the
amount of heat that can be discharged to a receiving water and result,
in some cases, in technology-based permit conditions. Section 316(a) of
the CWA applies to point sources with thermal discharges. It authorizes
the NPDES permitting authority to impose alternative effluent
limitations for the control of the thermal component of a discharge in
lieu of the effluent limitations that would otherwise be required under
sections 301 or 306 of the CWA. Before such a ``thermal variance'' can
be granted, the permittee must demonstrate that the alternative limit
will assure the protection and propagation of a balanced, indigenous
population of shellfish, fish and wildlife in and on the body of water
into which the discharge is to be made. 40 CFR 125.73(a).
    EPA did not quantify nationally the impacts of thermal discharges.
However, numerous studies have shown that thermal discharges may
substantially alter the structure of aquatic communities by modifying
photosynthetic, metabolic, and growth rates. Thermal discharges also
harm aquatic life by reducing levels of dissolved oxygen, altering the
location and timing of fish behavior such as spawning, aggregation, and
migration, and may cause thermal shock-induced mortality for some
species. Adverse temperature effects may also be more pronounced in
aquatic ecosystems that are already subject to other environmental
stressors such as high levels of biochemical oxygen demand, nutrient
and sediment contamination, or pathogens. Within mixing zones, which
often extend several miles downstream from outfalls, thermal discharges
may impair efforts to restore and protect the waterbody. For example,
permit requirements to limit nitrogen discharges in a watershed, and
thereby reduce harmful algal blooms, may be counteracted by thermal
discharges which promote growth of harmful algae. Thermal discharges
may have indirect effects on fish and other vertebrate populations
through increasing pathogen growth and infection rates.
    Thermal discharges may thus alter the ecological services, and
reduce the benefits, of aquatic ecosystems that receive heated
effluent. The magnitude of thermal effects on ecosystem services is
related to facility-specific factors, including the volume of the
waterbody from which cooling water is withdrawn and returned, other
heat loads, the rate of water exchange, the presence of nearby refugia,
and the assemblage of nearby fish species.
8. Assessment of Social Cost of Carbon
    The social cost of carbon reflects the estimated increase in the
burden of global warming to society in future years due to higher
greenhouse gas (GHG) emissions, measured as CO2 equivalents,
associated with additional energy requirements--energy penalty,
auxiliary energy requirements, and compliance technology installation--
of regulatory options. EPA estimated positive or negative benefits
associated with the social cost of carbon for decreases or increases,
respectively for Proposal Option 4 and Final Rule or Proposal Option 2,
in energy requirements at regulated facilities under the final rule and
other options considered.
    EPA's estimates of changes in CO2 emissions were based
on results from the electricity market analysis using IPM.\162\ For
electric generators, EPA estimated the change in CO2
resulting from the energy penalty associated with close-cycle
recirculating technology, auxiliary energy requirement for operating
compliance technology, and technology installation downtime. For
manufacturers, EPA estimated the change in carbon emissions resulting
from the energy penalty and auxiliary energy requirement. For
compliance technology installation downtime at manufacturers, EPA
assumed no change in carbon emissions as the short-term replacement of
energy by electric power generating facilities that would otherwise be
produced at manufacturers could either increase or decrease emissions.
---------------------------------------------------------------------------

    \162\ For this analysis, EPA used the Integrated Planning Model
(IPM[supreg]), a comprehensive electricity market optimization model
that assesses such impacts within the context of regional and
national electricity markets.
---------------------------------------------------------------------------

    To estimate benefits associated with the reductions in carbon
emissions, EPA used social cost of carbon values calculated from the
2013 document titled, Technical Support Document: Technical Update of
the Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866, developed by the U.S. Government Interagency
Working Group on Social Cost of Carbon. The Agency used the Working+
Group's annual social cost of carbon values for 2010 through 2050 based
on the 3 percent average discount rate, which EPA has concluded is the
most appropriate discount rate for intergenerational benefits such as
the social cost of carbon. See Chapter 9 of the BA for annual social
cost of carbon values based on discount rates of 2.5, 3 (high) and 5
percent. Benefits for each year of the analysis period were calculated
by multiplying the change CO2 emissions by the SCC value for
that year. Similar to the treatment of other benefits, EPA discounted
all year-specific social cost of carbon values to the beginning of 2013
and calculated an annualized value over 51 years using a 3-percent
discount rate. EPA acknowledges that it is mixing estimates of benefits
categories analyzed at different discount rates, but finds in this

case that using different discount rates is justified by the
intergenerational nature of the social cost of carbon, for purposes of
the sensitivity analysis based on a 7 percent discount rate to discount
other benefit categories.
    Exhibit X-11 presents annualized benefits for existing units for
the final rule and options considered. Included in the monetized
benefits is EPA's estimate that the final rule will reduce greenhouse
gas emissions by 9.3 million tons of CO2-equivalent
emissions over the 40-year compliance period for this analysis. Both
the final rule and Proposal Option 4 result in a net reduction in
CO2 emissions for existing units during the analysis period.
Proposal Option 2 would result in a net increase in emissions and
negative benefits for existing units. Using a 3 percent discount rate,
annualized benefits under the final rule for existing units are $12
million. Using a 7 percent discount rate, annualized benefits under
final rule for existing units are $13 million.

    Exhibit X-11--Benefits Associated With Social Cost of Carbon for
     Existing Units for the Final Rule and Other Options Considered
                    [In millions of 2011 dollars] \a\
------------------------------------------------------------------------
                                                3% Discount  7% Discount
             Regulatory option \b\                  rate         rate
------------------------------------------------------------------------
Proposal Option 4.............................         12.4         13.4
Final Rule--Existing Units....................         12.4         13.4
Proposal Option 2.............................     -1,643.1     -1,218.2
------------------------------------------------------------------------
\a\ Benefits are based on the workgroup's average social cost of carbon
  values using 3 percent rate.

9. Benefits for New Units
    In addition to the final rule and other options considered for
existing units, EPA analyzed the benefits of the requirements for new
units at existing facilities. EPA could not directly apply the benefits
methodology used for IM&E (impingement mortality and entrainment)
reductions at existing units to new units because it lacks facility-
specific information to estimate regional impingement mortality and
entrainment reductions for new units. Instead, EPA estimated benefits
associated with IM&E reductions for the new unit requirements on the
basis of the monetary benefits per million gallons per day from the
analysis of existing units. EPA also estimated benefits associated with
changes in GHG emissions as the result of the energy penalty associated
with operating cooling towers using the social cost of carbon. Exhibit
X-12 below presents the estimates of monetized benefits for the new
unit requirements. Monetized benefits are -$0.2 million discounted at 3
percent and -$0.1 million discounted at 7 percent.

                                Exhibit X-12--National Benefits Under the Final Rule for New Units at Existing Facilities
                                                                    [In 2011 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Monetized benefit categories
                                                         -----------------------------------------------------------------------------------------------
                  Regulatory option \a\                    Recreational     Commercial                      T&E species   Social cost of
                                                              fishing         fishing         Nonuse            \b\         carbon \c\         Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% discount rate (millions 2011$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule--New Units...................................             0.0             0.0             0.1             0.0            -0.3            -0.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            7% discount rate (millions 2011$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule--New Units...................................             0.0             0.0             0.0             0.0            -0.2            -0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ IM&E Effects: Final Rule--New Units--entrainment requirements for all stand-alone facilities.
\b\ Benefits estimates for T&E species are restricted to recreational fishing benefits from increased catch of T&E species. They do not include benefits
  for reduced mortality of T&E sea turtles and other nonuse values associated with T&E species.
\c\ Benefits are based on the Work Group's average social cost of carbon values using the 3 percent rate.

10. National Monetized Benefits
    Quantifying and monetizing reductions in impingement mortality and
entrainment attributable to the final rule and other options considered
is challenging. National benefit estimates are subject to uncertainties
inherent in valuation approaches used to assess the benefits categories
(see Chapters 5, 6, 7, 8, 9, and 12 of the BA). While EPA has no data
to indicate that the results for each benefit category are atypical or
unreasonable, some potentially significant benefit categories have not
been fully monetized, and thus the national monetized benefits
presented below likely underestimate total benefits.
    Exhibit X-13 presents EPA's estimates of the partial monetized
benefits from impingement mortality and entrainment reduction and the
social cost of carbon for the final rule and other options considered.
These monetized values represent use values from increased commercial
and recreational catch, benefits transfer of recreational fishing
benefits of threatened and endangered species, nonuse values associated
with an increase in fish abundance (those fish that are not caught) in
the Northeast and Mid-Atlantic benefit regions, and national benefits
estimates associated with the social cost of carbon. For the final rule
for existing and new units, partial estimated benefits from reducing
impingement mortality and entrainment at existing units are $33 million
using a 3 percent discount rate and $29 million using a 7 percent
discount rate. EPA was not able to fully monetize the benefits for the
final rule. Thus, the estimates represent a conservative (i.e., low)
estimate of total regulatory benefits of the final rule.

                               Exhibit X-13--Summary of National Benefits for All Regulated Facilities for the Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Monetized benefit categories
                                                         -----------------------------------------------------------------------------------------------
                  Regulatory option \a\                    Recreational     Commercial                      T&E species   Social cost of
                                                              fishing         fishing         Nonuse            \b\         carbon \c\         Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% discount rate (millions 2011$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule--Existing Units..............................            18.2             0.9             1.0             0.4            12.4            33.0
Final Rule--New Units...................................             0.0             0.0             0.1             0.0            -0.3            -0.2
Final Rule (Existing Units + New Units).................            18.3             0.9             1.1             0.4            12.1            32.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            7% discount rate (millions 2011$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule--Existing Units..............................            13.5             0.7             0.8             0.3            13.4            28.7
Final Rule--New Units...................................             0.0             0.0             0.1             0.0            -0.2            -0.1
Final Rule (Existing Units + New Units).................            13.5             0.7             0.9             0.3            13.2            28.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ IM&E Effects: Final Rule-Existing Units = impingement mortality standards based on modified traveling screens for all facilities with flow greater
  than 2 mgd; Final Rule-New Units: Entrainment requirements for all stand-alone facilities where the turbine and condenser are newly built or replaced.
\b\ Benefits estimates for T&E species are restricted to benefit transfer of recreational fishing benefits from T&E species. They do not include
  benefits for reduced mortality of T&E sea turtles and other nonuse values associated with T&E species.
\c\ Baseline does not include potential benefits associated with the social cost of carbon.

    Exhibit X-14 presents total monetized benefits for the final rule
and other options EPA considered for existing units by benefit category
using a 3 percent discount rate. Annual monetized benefits are slightly
higher for the final rule than Proposal Option 4, and are negative for
Proposal Option 2. Including both existing and new units, annual
monetized benefits are $32.8 million for the final rule, $30.8 million
for Proposal Option 4 and -$1,542.8 million for Proposal Option 2.

Exhibit X-14--Summary of National Benefits for All Regulated Facilities for the Final Rule and Other Options EPA
                                                   Considered
                                               [3% Discount rate]
----------------------------------------------------------------------------------------------------------------
                                                             Annual benefits by regulatory option \a\  (millions
                                                                                2011$)
               Monetized benefit categories                -----------------------------------------------------
                                                             Proposal option    Final rule--     Proposal option
                                                                    4          existing units           2
----------------------------------------------------------------------------------------------------------------
                                                 Existing Units
----------------------------------------------------------------------------------------------------------------
Recreational Fishing......................................              17.1              18.2              43.0
Commercial Fishing........................................               0.9               0.9               3.9
Nonuse....................................................               0.3               1.0              51.1
T&E Species \b\...........................................               0.4               0.4               0.7
Social Cost of Carbon.....................................              12.4              12.4          -1,641.3
                                                           -----------------------------------------------------
    Total.................................................              31.0              33.0          -1,542.6
----------------------------------------------------------------------------------------------------------------
                                              Final Rule--New Units
----------------------------------------------------------------------------------------------------------------
    Total.................................................              -0.2              -0.2              -0.2
----------------------------------------------------------------------------------------------------------------
                                             Existing and New Units
----------------------------------------------------------------------------------------------------------------
    Total.................................................              30.8              32.8          -1,542.8
----------------------------------------------------------------------------------------------------------------
\a\ IM&E Effects: Proposal Option 4 = impingement mortality limitations based on modified traveling screens for
  all facilities with flow greater than 50 mgd; Final Rule--Existing Units = impingement mortality limitations
  based on modified traveling screens for all facilities with flow greater than 2 mgd; Proposal Option 2 =
  impingement mortality limitations based on modified traveling screens for all facilities with flow greater
  than 2 mgd and entrainment mortality limitations commensurate with closed-cycle recirculating systems for all
  facilities with flow greater than 125 DIF; Final Rule--New Units: entrainment requirements for all stand-alone
  facilities.
\b\ Benefits estimates for T&E species are restricted to benefit transfer of recreational fishing benefits from
  T&E species. They do not include benefits for reduced mortality of T&E sea turtles and other nonuse values
  associated with T&E species.

EPA recognizes that its estimates of ecological and economic benefits
projected to occur under regulation are affected by uncertainty at many
levels.
     Not all ecological goods and services affected by cooling
water intake structures at regulated 316(b) facilities are modeled or
monetized, suggesting that the total benefits of regulation may be
underestimated. For example, potential increases in ecosystem stability
that might occur as a result of regulation is not explicitly estimated
nor monetized.
     When particular ecological goods and services are
monetized, data is not always available at the national level. For
example, EPA was only able to estimate the nonuse benefits transfer for
a species that represents less than one

percent of adverse environmental impacts.
     For the proposed rule, EPA used a habitat-based method to
assess potential WTP for reducing fish mortality at CWIS based on the
approximate area of habitat required to produce and support the number
of organisms lost to impingement mortality and entrainment.\163\ EPA
did not consider the habitat-based approach appropriate for primary
analysis of benefits for the proposed rule, and did not include it in
its analysis for the final rule. However, the results for the proposed
rule illustrate that total benefits may be substantially greater than
benefits estimated using the methodologies described in Section D.
---------------------------------------------------------------------------

    \163\ U.S. EPA. 2011. Environmental and Economic Benefits
Analysis for the Proposed Section 316(b) Existing Facilities Rule.
---------------------------------------------------------------------------

    Because EPA was able to only partially monetize nonuse benefits
using the benefits transfer approach, EPA expects that the actual
benefits will be greater than those presented here.

XI. Related Acts of Congress, Executive Orders, and Agency Initiatives

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    Under section 3(f)(1) of E.O. 12866 (58 FR 51735, October 4, 1993),
this action is an economically significant regulatory action because it
is likely to have an annual effect of $100 million or more on the
economy. Accordingly, EPA submitted this action to the Office of
Management and Budget for review under E.O. 12866 and 13563 (76 FR
3821, January 21, 2011), and any changes made in response to Office of
Management and Budget recommendations have been documented in the
docket for this action.
    In addition, EPA prepared an analysis of the costs and benefits
associated with this action; this analysis is discussed in detail in
the Chapter 8 of the EA. A copy of the EA is available in the docket
for this action, and the analysis is briefly summarized here.
    Exhibit XI-1 (drawn from Chapter 8 of the EA) provides the results
of the benefit-cost analysis.\164\ Placeholders for option-specific
non-monetized benefits are represented by BP4 for Proposal
Option 4, BFR for the final rule and BP2 for
Proposal Option 2. While preliminary, and not yet reviewed by EPA's
Science Advisory Board, the preliminary results of EPA's stated
preference survey (see BA, Chapter 11) suggest that BP4,