at the North Carolina State University Sediment and Erosion Control
Research and Education Facility (SECREF). He evaluated standard trap
designs as contained in the North Carolina Erosion and Sediment Control
Manual utilizing a stone outlet structure as well as alternative designs
utilizing a skimmer outlet and various types of porous baffles. Baffle
materials tested included silt fence, jute/coconut and tree protection
fence tripled over. Tests were conducted using simulated storm events in
which sediment was added to stormwater at flows of 10 to 30 liters per
second. McLaughlin found that a standard gravel outlet did not
significantly reduce turbidity values. Average turbidity values in the
basin were 843 NTUs, while average turbidity in the effluent was 758
NTUs using the standard outlet. Use of a skimmer instead of a standard
gravel outlet reduced turbidity to an average of 353 NTUs. Additional
tests were conducted to evaluate the addition of polyacrylamide (PAM)
through the use of floc logs. Floc logs are a solid form of PAM which
are designed to be placed in flowing water. They are typically anchored
by a rope or by placing them in a mesh bag or cage either in open
channels or in pipes. As the water flows over the floc logs, the PAM
dissolves somewhat proportional to flow. The floc logs typically have
substantial amounts of non-PAM components, which are intended to improve
PAM release, maintain the physical integrity of the blocks and enhance
PAM performance (McLaughlin – Soil Facts; Chemical Treatments to
Control Turbidity on Construction Sites). McLaughlin found that addition
of PAM to sediment traps resulted in average effluent turbidities of 152
NTUs using a rock outlet and 162 NTUs using a skimmer outlet. For one
set of tests, use of a standard stone outlet along with PAM was able to
attain an average effluent turbidity of 51 NTUs, while tests with
jute/coconut mesh baffles with PAM were only slightly higher, at 71
NTUs.

	Warner (see DCN XXXXX) evaluated several innovative erosion and
sediment controls at a full-scale demonstration site in Georgia as part
of the Erosion and Sedimentation Control Technical Study Committee
(known as "DirtII"). The Dirt II project consisted, among other things,
of field monitoring as well as modeling of erosion and sediment control
effectiveness at construction sites. The demonstration site was a
50-acre lot in a suburban area near Atlanta where a school was being
constructed. In total, 22.5 acres of the site was disturbed. A
comprehensive system of erosion and sediment controls were designed and
implemented to mimic pre-developed peak flow and runoff volumes with
respect to both quantity and duration. The system included perimeter
controls that were designed to discharge through multiple outlets to a
riparian buffer, elongated sediment controls (called seep berms)
designed to contain runoff volume from 3 to 4 inch storms and slowly
discharge to down-gradient areas, multi-chambered sediment basins
designed with a siphon outlet that discharged to a sand filter, and
various other controls. Extensive monitoring was conducted at the site.
For one particularly intense storm event of 1.04 inches (0.7 inches of
which occurred during one 27 minute period), the peak sediment
concentration monitored prior to the basin was 160,000 mg/L while the
peak concentration discharged from the sand filter after the basin was
168 mg/L. Effluent turbidity values ranged from approximately 30 to 80
NTUs. Using computer modeling, it was shown that discharge from the sand
filter, which flowed to a riparian buffer, was completely infiltrated on
the site for this event. Thus, no sediment was discharged from the site
for this event. For another storm event, a 25-year rainfall event of 3.7
inches occurred over a 2 day period. Effluent from one sand filter
during this storm was 175 mg/L while discharge from a second sand filter
was 100 mg/L, except for the first-flush data point occurring at the
beginning of the storm event.

	There are other references in the literature describing the various
types of passive treatment systems and the efficacy of passive treatment
systems. One potential application of a passive system would be to add
liquid polymer, such as PAM, to the influent of a conventional sediment
basin. This can be accomplished by using a small metering pump to
introduce a pre-established dose of polymer in the influent pipe or
channel. If the polymer is added in a channel far enough above the
basin, then turbulent mixing in the channel can aid in the flocculation
process. Otherwise, some sort of provision may need to be made to
provide mixing in the basin to produce flocs. Polymers typically used in
this particular application include PAM, chitosan, polyaluminum chloride
(PAC), aluminum sulfate (alum) and gypsum. With any polymer, jar tests
should be performed beforehand with soils present on the site in order
to determine an appropriate polymer type and dosage.

	The Auckland (New Zealand) Regional Council conducted several trials to
evaluate the effectiveness of chemical flocculants and coagulants in
improving settling of suspended sediment contained in sediment laden
runoff from earthworks sites (Auckland Regional Council. The Use of
Flocculants and Coagulants to Aid the Settlement of Suspended Sediment
in Earthworks Runoff - Trials, Methodology and Design. Technical
Publication 227. June, 2004). Trials were conducted using both liquid
and solid forms of flocculants. Trials were initially conducted on two
projects: a highway project and residential development.

	The highway project (ALPURT) evaluated both a liquid polymer system and
solid polymers. Liquid polymers evaluated were alum and PAC and solid
polymers evaluated were all polyacrylamide products (Percol AN1, Percol
AN2 and Percol CN1). Bench tests indicated that AN2 performed best among
the solid polymers and that both PAC and alum were effective in
flocculating the soils present on the site.

	Following bench testing of the polymers, liquid and solid dosing
systems were developed. For the liquid dosing system, initial
consideration was given to a runoff proportional dosing system which
would include a weir or flume for flow measurement, an ultrasonic sensor
and signal generating unit, and a battery driven dosing pump. These
components, together with costs for necessary site preparatory work,
chemical storage tanks and a secure housing, was estimated to cost
approximately $12,000 (NZ $) per installation. An alternative system was
developed that provided a chemical dose proportional to rainfall. This
rainfall driven system, which did not require either a runoff flow
measurement system or a dosing pump, had a total cost of $2,400 (1999 NZ
$) per installation (we plan to translate the 1999 NZ $ to 2008 U.S. $
during OMB review).

	The rainfall driven system operated by collecting rainfall in a
rainfall catchment tray. Rainfall into this tray was used to displace
the liquid treatment chemical from a storage tank into the stormwater
diversion channel prior to entering the sediment basin. The size of the
catchment tray was determined based on the size of the catchment
draining to the basin, taking into consideration the desired chemical
dosage rate obtained from the bench tests. Accumulated rainfall from the
catchment tray fills a displacement tank that floats in the chemical
storage tank. As the displacement tank fills with rainfall and sinks,
liquid chemical is displaced from the chemical storage tank and flows
via gravity to the dosing point.

	Field trials of the liquid treatment system using alum were conducted
at the ALPURT site. The authors report that the system performed
“satisfactorily in terms of reduction of suspended solids under a
range of rainfall conditions varying from light rain to a very high
intensity, short duration storm, where 24mm of rainfall fell over a
period of 25 minutes.” Suspended solids removal for the intense storm
conditions was 92% with alum treatment. For a similar storm on the same
catchment with the same retention pond without alum treatment, suspended
solids removal was about 10%.

	Field trials at the ALPURT site were also conducted using PAC. In
total, 21 systems were used with contributing catchments ranging between
0.5 and 15 hectares (approximately 1 to 37 acres). The overall treatment
efficiency of the PAC treated basins in terms of suspended sediment
reduction were reported to be between 90% and 99% for ponds with good
physical designs. The authors noted that some systems did not perform as
well due to mechanical problems with the system or physical problems
such as high inflow energy (which likely caused erosion or sediment
resuspension) or poor separation of basin inlets and outlets. The
suspended solids removal for all ponds incorporating PAC ranged from 77%
to 99.9%, while the removal in a pond not incorporating PAC ranged from
4% to 12%. Influent suspended solids concentrations for the systems
incorporating PAC ranged from 128 to 28,845 mg/L while effluent
concentrations ranged from 3 to 966 mg/L. In comparison, influent
suspended solids concentrations for the untreated ponds were
approximately 1,500 mg/L while effluent concentrations were
approximately 1,400 mg/L. The authors also noted that dissolved aluminum
concentrations in the outflow from the basins treated with PAC, in most
cases, were actually less than the inflow concentrations, and were also
less than the outflow concentrations from the untreated ponds. Outflow
aluminum concentrations in the PAC treated ponds ranged from 0.01 to
0.072 mg/L. The ALPURT trials generally indicate that a relatively
simple, passive treatment system using liquid polymers can result in
significant reductions in suspended sediment concentrations, even with
influent concentrations in excess of 25,000 mg/L. Although some effluent
concentrations were as high as several hundred mg/L, the majority were
below 100 mg/L. This indicates that a passive liquid polymer system,
perhaps coupled with a gravity sand filter or distributed discharge to a
vegetated buffer (as described by Warner, 2001) could be used to meet a
numeric effluent limit for turbidity at a significantly lower cost than
ATS. EPA solicits comments on this issue.

	Field trials of polymer treatment using solid forms of PAM by the
Auckland Regional Council were conducted at the ALPURT site as well as a
residential project (Greenhithe). Trials at the ALPURT site were
conducted by placing the floc blocks in plastic mesh bags in plywood
flumes through which the runoff from the site was directed. Initial
trials encountered problems due to the high bedload of granular
material, which accumulated against and stuck to the floc logs
inhibiting solubility of the polymer. The system was reconfigured to
incorporate a forebay before the flumes in order to facilitate removal
of the bedload fraction. The authors noted that while this system was
generally effective at low flow rates, it was difficult to control
dosage rates and sediment accumulation in the flumes continued to be a
problem. The authors concluded that “Floc Block treatment has a high
potential for removal of suspended solids from stormwater with
consistent quality, particularly for small catchments; when flow
balancing can be achieved prior to treatment.”

	Field trials were also conducted at the Greenhithe site, which was a 4
hectare (approximately 10 acre) residential project. As with the ALPURT
trial, a flume was constructed and placed in the flow path immediately
before the sediment basin. Results of the trials were mixed. The authors
noted several problems with the floc logs, such as drying and breakdown
of the logs due to prolonged exposure to the air and softening and
breakdown during periods of prolonged submergence. Sediment accumulation
around the logs and breakdown continued to be a problem. Incorporating
an effective sediment forebay and limiting bedload are suggestions for
increasing performance. In addition, authors recommended soaking the
floc logs in water to allow hydration before use and periodic spraying
with water as ways to limit drying of the floc logs. EPA notes that
similar problems with floc logs have been noted by some construction
site field inspectors (see DCN XXX) and by McLaughlin (see DCN XXX). EPA
solicits comments on the effectiveness of floc logs as components of
passive treatment systems. EPA also solicits comments on any operational
or maintenance considerations that should accompany use of solid forms
of polymers.

	Results of the PAC studies at the ALPURT sites have led the Auckland
regional council to require chemical treatment for any site that
produces more than 1.5 metric tons of (net) sediment as determined by
the Universal Soil Loss Equation. Sites that exceed this threshold will
require chemical treatment in accordance with a site chemical treatment
plan. Exceptions include projects of less than one month duration and
sites with granular volcanic soils and sand areas. Chemical treatment
may also not be required if bench testing indicates that chemical
treatment will provide no improvement in sediment removal efficiency
(see DCN XXX). EPA solicits comments on the approach adopted by the
Auckland Regional Council and its applicability to construction and
development site discharges in the U.S.

	In addition to (or in place of) adding polymers to sediment basins,
polymers can be introduced on other areas of the site as a soil
stabilization measure or as components of other BMPs. For example,
McLaughlin (DCN XXXX) evaluated adding polymer to check dams on highway
projects. Various other researchers evaluated PAM as a soil
stabilization agent. There are a number of documents in the
administrative record for this rulemaking describing the use of PAM (see
DCNs XXX through XXX - this is a list of 7 papers).

	The data from these studies indicate that various types of passive
treatment systems that utilize both solid and liquid forms of polymers
have been reported to be effective in reducing turbidity levels in
discharges from construction and development sites. EPA is therefore
soliciting comments on whether a turbidity limitation of 50 NTUs (or
some other value) based on passive treatment systems should instead
serve as the basis for BAT limitations and NSPS. EPA solicits comments
on the costs, pollutant removal effectiveness and effluent quality
attainable by passive treatment systems and on the technical basis for
establishing a particular a numeric turbidity limit of 50 NTUs (or some
other value). EPA also solicits comment on the ability to reliably meet
a 50 NTU limit using passive systems on different types of construction
and development sites and in locations across the country and on the
appropriate monitoring requirements that should accompany passive
treatment systems. EPA also solicits comments on the applicability of a
50 NTU (or some other value) standard. Specifically, since passive
systems may be less costly and require less expertise and operator
supervision than active treatment systems, EPA solicits comments on
whether a standard based on passive systems should apply more broadly
and to more sites than are covered by EPA’s proposed option 2, or if
EPA should establish a tiered set of turbidity limitations, reflecting
variation of site parameters such as site size, rainfall patterns, soil
types, soil erodibility, or some other parameter and the specific
thresholds that should apply to such parameters.

2. Definition of “New Source” for the Construction and Development
Category

EPA interprets the definition of “new source” at CWA section
306(a)(2) as not including discharges associated with construction
activity. Section 306(a)(2) of the CWA defines “new source” as
“any source, the construction of which is commenced after publication
of proposed regulations…” The plain language of section 306 excludes
C&D sites because a construction site cannot itself be constructed.
Further, the term “source” is defined in 306(a)(3) of the CWA to
mean “any building, structure, facility, or installation…” or
in-other-words sources that are the product of the construction, not the
construction activity itself. Additionally, there is an independent
definition of “construction” in section 306(a)(5). If construction
sites were intended to be “new sources,” the Agency finds it
illogical that there would be a separate definition for
“construction” or that there would be a requirement in section 306
of the CWA that “sources” be “constructed” prior to becoming
“new sources.”

Though EPA interprets the CWA not to apply NSPS under section 306 of the
CWA to the C&D point source category, the District Court order enjoins
EPA to propose and promulgate NSPS. Therefore, EPA proposes to define
“new source” for purposes of part 450 as any source of stormwater
discharge associated with construction activity that itself will result
in an industrial source from which there will be a discharge of
pollutants regulated by a new source performance standard in subchapter
N other than today’s rulemaking. (All new source performance standards
promulgated by EPA for categories of point sources are codified in
subchapter N). The definition of new source proposed today for purposes
of part 450 would mean that the land-disturbing activity associated with
constructing a particular facility would itself constitute a “new
source” when the facility being constructed would be a “new
source” regulated by new source performance standards under section
306 of the CWA. For example, construction activity that builds a new
pharmaceutical plant covered by 40 CFR 439.15 would be subject to new
source performance standards under 40 CFR 450.24.

F. Option Selection Rationale for BCT

	EPA has selected Option 2 as the basis for the proposed BCT. As
discussed in IX.C.5 above, the requirements of Option 2 have been
demonstrated to be technologically available and EPA’s analyses show
that the requirements are economically achievable. Additionally, Option
2 passes EPA’s two-part BCT cost test. See 51 FR 24974.

	Establishing BCT effluent limitations for a point source category
begins by identifying technology options that provide additional
conventional pollutant control beyond that provided by application of
BPT effluent limitations. Conventional pollutants under the CWA are
biochemical oxygen demand (BOD5), total suspended solids (TSS), fecal
coliform, pH, and oil and grease. CWA section 304(a); 40 CFR 401.16.
Stormwater discharges, if not adequately controlled, can contain very
high levels of TSS. In addition, many of the construction materials used
at the site can contribute BOD or oil and grease. Fecal coliform can
also be present at elevated levels, due to natural sources (contributed
by animal wastes) or if stormwater is not segregated from sanitary waste
facilities. See Section VII for additional discussion of pollutant
sources.

	EPA evaluates the candidate technologies by applying the two-part BCT
cost test. The first part of the BCT cost test is the POTW test. To
“pass” the POTW test, the cost per pound of conventional pollutant
discharges removed in upgrading from BPT to the candidate BCT must be
less than the cost per pound of conventional pollutant removed in
upgrading POTWs from secondary treatment to advanced secondary
treatment. Using the RS Means Historical Cost Indices, the
inflation-adjusted POTW benchmark (originally calculated to be $0.25 in
1976 dollars) is $0.92 (2008 $). EPA calculated the incremental cost per
pound of conventional pollutants removed ($/lb TSS) for Option 2 to be
$0.07. Since this result is less than the POTW benchmark, Option 2
passes the first part of the two-part BCT cost test.

	To pass the second part of the BCT cost test, the industry cost
effectiveness test, EPA computes a ratio of two incremental costs. The
numerator is the cost per pound of conventional pollutants removed by
the BCT candidate technology relative to BPT. The denominator is the
cost per pound of conventional pollutants removed by BPT relative to no
treatment (i.e., raw wasteload). As in the POTW test, the ratio of the
numerator divided by the denominator is compared to an industry cost
benchmark. The industry cost benchmark is the ratio of two incremental
costs: the cost per pound to upgrade a POTW from secondary treatment to
advanced secondary treatment, divided by the cost per pound to initially
achieve secondary treatment from raw wasteload. If the calculated ratio
is lower than the industry cost benchmark of 1.29 (i.e., the normalized
cost increase must be less than 29 percent), then the candidate
technology passes the industry cost test. The ICR calculated ration for
Option 2 is 0.28; therefore, it passes the second part of the BCT cost
test. EPA requests comments on the Agency’s loading analysis and on
the BCT cost test calculations.

	EPA estimated loading reductions, which are used as the basis of the
BCT cost test, by using a model site approach and modeling soil erosion
using the Revised Universal Soil Loss Equation (RUSLE). An alternative
approach would be to estimate removals on a concentration basis by
comparing average effluent TSS concentrations in construction site
discharges under baseline conditions to concentrations following EPA’s
candidate BCT technology options. EPA could then estimate total
stormwater treatment volumes and, based on the change in concentrations
following treatment, determine the total load of conventional pollutants
removed. EPA requests comment on this approach and on the proper data
sources and concentration values to use in such a calculation.

	EPA also evaluated BCT for Option 3. In establishing BCT limitations,
any “candidate” technologies are evaluated to determine if they are
technically available and economically achievable. [See EPA’s BCT
Final Rule, 51 FR 24974, 24976 (col.1) (July 9, 1986)]. As discussed
above in the BAT options section, this option is not economically
achievable in light of the total industry cost and the appropriateness
of ELG turbidity limits in arid areas and at construction sites where
soils contain little clay. Therefore, EPA determined that Option 3 does
not represent BCT for the C&D point source category.

X. Methodology for Estimating Costs to the Construction and Development
Industry  TC \l1 "XI. Methodology for Estimating Costs

	In developing today's proposed rule, EPA has used numeric models to
estimate the costs of compliance with potential regulatory approaches.
This approach was used to estimate the incremental costs associated with
the regulatory options at the state and national level.

	In order to estimate costs to different segments of the industry, EPA
developed nine model project types. These nine model project types are:
small, medium and large transportation; small, medium and large
residential; and small, medium and large non-residential. Small projects
are those less than 10 acres, medium project are 10 or more but less
than 30 acres, and large projects are 30 or more acres. Using the NOI
data discussed in Section VI.D, EPA developed a national distribution of
construction projects and determined the median project size (in acres)
of each of the nine model project types. Using estimates of the annual
quantity of acres of new developed land determined from the NLCD data
(discussed in Section VI.B.), EPA determined the number of model
projects in each of the nine categories in each state (excluding Alaska,
Hawaii and U.S. territories). Detailed results of this analysis are
discussed in the Development Document.

	For estimating baseline conditions, EPA evaluated each state’s
erosion and sediment control requirements to determine the size of
sediment basins currently required in each state. For each of the model
projects within each state, EPA calculated the size of the sediment
basin that would be required. When a state’s sediment basin
requirements were based on containing runoff from a specific size of
storm (such as runoff from the 2-year, 24-hour storm), EPA used one
indicator city in each state and obtained rainfall data from various
NOAA sources (see discussion on rainfall data in Section VI.F). EPA used
the rainfall data for each indicator city for all model projects within
a given state. To determine runoff quantities, EPA calculated a runoff
coefficient for each state (see discussion in the Development Document
for detailed information on these calculations). While EPA acknowledges
that using one indicator city to represent rainfall conditions in an
entire state is a somewhat simplified approach, it does capture the
range of precipitation that occurs across the country and serves as a
reasonable estimate for estimating the costs of the regulatory options.

	For each of the regulatory approaches considered, EPA determined the
sediment basin volume (in cubic feet) that would be required for each of
the model projects in each state. Using data on sediment basin costs,
EPA estimated the increase in costs over baseline requirements for each
model project in each state. Using the number of model projects in each
state, EPA estimated the total costs due to larger sediment basins in
each state.

	For determining costs for options that include numeric effluent limits,
EPA obtained data from vendors of stormwater treatment systems. The
technology EPA used as a basis for estimating costs is chitosan-enhanced
sand filtration, one type of active treatment system. Information in the
record indicates other active treatment technologies have comparable
costs. Using data submitted by the vendors, EPA determined a cost for
treating stormwater for each of the five model projects that would be
expected to be subject to the turbidity limit. These costs include
treatment chemical costs, labor costs and equipment rental costs, as
well as sediment disposal and monitoring costs. Using NOAA data on
average annual rainfall for one indicator city within each state, and
using state-specific runoff coefficients, EPA determined, for each
state, the volume of stormwater that would require treatment for each of
the five model projects. EPA then estimated the costs for treating
stormwater from each model construction site within each state. Using
the number of model construction projects within each state, EPA then
determined the total costs for treatment at the state and national
level. EPA notes that this approach likely resulted in an overestimation
of actual treatment costs, since EPA expects that many construction
sites would not need to rely on active treatment systems in order to
reliably meet the effluent limit, and could instead meet the effluent
limit by relying on passive treatment systems or conventional stormwater
BMPs. In addition, there are other treatment technologies available that
may be cheaper than chitosan-enhanced sand filtration that permittees
could use to meet an effluent limit.

	Chapter 7 of the Development Document contains a more detailed
discussion of the EPA’s costing approach.

XI. Economic Impact and Social Cost Analysis  TC \l1 "XII. Economic
Impact and Social Cost Analysis

A. Introduction  TC \l2 "A. Introduction

	EPA's Economic Analysis (see "Supporting Documentation") describes the
impacts of today's proposed rule in terms of firm financial performance,
firm closures, employment losses, and market changes. In addition, the
report provides information on the impacts of the proposal on sales and
prices for residential construction. The results from the small business
impact screening analysis support EPA's implementation of the Regulatory
Flexibility Act (RFA), as amended by the Small Business Regulatory
Enforcement Fairness Act (SBREFA). The report also presents identified,
quantified, and monetized benefits of the proposal as described in
Executive Order 12866.

	This notice includes related sections such as the cost-effectiveness
analysis in Section XII, benefits analysis in Section XV, and
benefit-cost analysis in Section XVI. In their entirety, these sections
comprise the economic analysis (referred to collectively as the "C&D
economic analysis") for the proposed rule. EPA's Environmental
Assessment provides the framework for the monetized benefits analysis.
See the complete set of supporting documents for additional information
on the environmental impacts, social costs, economic impact analysis,
and benefit analyses.

	The C&D economic analysis, covering subsectors that disturb land (NAICS
236 and 237), uses information from, and builds upon, the 2002 proposed
rule (67 FR 42644; June 24, 2002) and the 2004 withdrawal of the
proposed rule (69 FR 22472; April 26, 2004). In addition to CWA
requirements, EPA has followed OMB guidance on the preparation of the
economic analyses for federal regulations to comply with Executive Order
12866. See section XIX of today's notice.

B. Description of Economic Activity  TC \l2 "B. Description of Economic
Activity

	The construction sector is a major component of the United States
economy as measured by the gross domestic product (GDP), a measure of
the output of goods and services produced domestically in one year by
the U.S. economy. Historically, the construction sector has directly
contributed about five percent to the GDP. Moreover, one indicator of
the economic performance in this industry, housing starts, is also a
"leading economic indicator," one of the indicators of overall economic
performance for the U.S. economy. Several other economic indicators that
originate in the C&D industry include construction spending, new home
sales, and home ownership.

	During most of the 1990s, the construction sector experienced a period
of relative prosperity along with the overall economy. Although
cyclical, the number of housing starts increased from about 1.2 million
in 1990 to almost 1.6 million in 2000, with annual cycles during this
period. (U.S. Census Bureau, "Current Construction Reports, Series C20 -
Housing Starts," 2000. http://www.census.gov/const/www). At the
beginning of the 21st century, the economy began to slow relative to
previous highs in the 1990s. This slower economic growth had a negative
impact on construction starts for new commercial and industrial
projects. Driven in part by low mortgage interest rates, consumer
spending for new homes continued to remain strong through 2005. However,
speculative buying and relaxed lending standards helped create a market
bubble that burst in 2006. Currently the housing market is in an
economic downturn, yet near term future projections are for renewed
growth in housing starts as soon as the third quarter of 2009.
Nonresidential construction, which was weak during the first five years
of the decade, recovered to 2000 levels by 2007. (Global Insight, “The
Nonresidential Picture: Will the Rescuer Need To Be Rescued?” 2007.
Global Insight, “U.S. Economic Service, Executive Summary” 2008.)
However, the construction industry is expected to experience declines
for the residential, non-residential, and non-building sectors for the
near future. The weakness in the construction industry will likely
continue until residential markets work through the current inventory of
unsold homes and credit markets and the general economy return to a
better condition (Global Insight, “U.S. Economic Service, Executive
Summary” 2008.)

	The C&D point source category is comprised of activities that disturb
land. The category contains business establishments (the Census Bureau
uses the term "establishment" to mean a place of business; "Employer
establishment" means an establishment with employees) that are involved
in building construction (NAICS 236) as well as heavy and civil
engineering construction (NAICS 237). As a starting point, Table XI-1
shows the number of business establishments in the C&D category in 1992,
1997, and 2002. Only a portion of these establishments would be covered
by the proposed regulation, because some of these establishments are
house remodelers and others build on sites with less than one acre of
disturbed land each year. The NAICS classification system changed
between the issuance of the 1997 and 2002 Economic Census

	Table XI-1 shows a sharp decline in the number of developers between
1992 and 1997. The decrease in the number of developers may have been a
response to changes in tax laws and the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA) of 1989 (Public Law 101-73,
August 9, 1989) and the 1993 implementing regulations. The objective of
FIRREA and the implementing regulations was to correct events and
policies that led to a high rate of bankruptcies in the thrift industry
in the late 1980s. The regulations changed lending practices by
financial institutions, requiring a higher equity position for most
projects, with lower loan-to-value ratios, and more documentation from
developers and builders. (Kone, D. L. “Land Development 9th ed.”,
Home Builder Press of the National Association of Home Builders,
Washington, DC., 2000).

Table XI-1 Number of C&D Industry Establishments, 1992, 1997, and 2002,
Economic Census Data

NAICS	Description	1992 (No.)	1997 (No.)	2002 (No.)	Change 92-97(%)
Change 97-02 (%)

236	Construction of Buildings, except all other Heavy Constructiona
168,407	191,101	211,629	13.50%	10.70%

237 except 2372	Heavy Construction, except Land Subdivision	37,180
42,554	49,433	14.50%	16.20%

2372	Land Subdivision	8,848	8,185	8,403	-7.50%	2.70%

Total

214,435	241,840	269,465	14.10%	11.30%

a In the 2002 NAICS classification framework, All Other Heavy
Construction was assigned among NAICS 236, 237, and 238. To maintain
relevant comparisons, 2002 All Other Heavy Construction data were
reassigned back into NAICS 237 (Heavy Construction).

Figures do not necessarily add to totals due to rounding.

Source: U.S. Census Bureau (2005)

Building upon Table XI-1, Table XI-2 shows the number of firms that are
expected to be covered under the C&D proposed regulation. Construction
establishments are relatively permanent places of business where the
usual business conducted is construction related. Construction firms are
an aggregation of construction establishments owned by a parent company
that share an annual payroll. EPA estimates that for approximately 99
percent of construction firms there is only one establishment, and those
that do have more than one establishment tend to be in the highest
revenue categories.

	For Table XI-2, EPA subtracted out firms that are engaged in home
remodeling (NAICS 236118) from the total of about 269,000 firms in 2002,
as they would not be subject to the proposed regulations. The
elimination of remodelers is based on the fact that remodeling and
renovation activities generally disturb less than one acre of land, if
at all. EPA requests comment on its methodology for removing remodelers
from the analysis. Thus, the total number of C&D firms would be 178,835.

	EPA used data from the Economic Census and other sources to define an
average housing density for the nation as a whole (average number of
housing units per acre), then used this figure to identify firms to be
excluded from regulation based on their likelihood of disturbing less
than one acre on a per project basis. EPA believes that these estimates
(of firms unaffected by the proposed options) are conservative, meaning
that they potentially overestimate the actual number of firms that will
be affected. First, while the regulatory threshold applies to each site,
EPA excluded firms if the estimated number of acres disturbed in a year
falls below the regulatory threshold. In addition, the analysis was not
adjusted for the portion of a site that is potentially left undisturbed,
such as open space and buffers. Furthermore, EPA assumes that all of the
housing units built by a firm during a year are in a project covered by
a single NPDES storm water permit, while in reality the firm could build
on several separate sites. However, the Agency does not have information
on the amount of houses that are built within subdivisions, rather than
on discrete lots, by these firms. EPA requests comment on its
methodology for excluding firms that do not disturb more than one acre
of land from the analysis.

	Based upon these adjustments of the total number of firms, EPA believes
there currently are about 81,628 firms that would be covered under the
rule. However, the Agency has insufficient data to make any further
adjustments to the population of developers and builders covered by the
proposal. For example, no adjustments have been made to account for
firms in the non-residential construction or heavy construction
industries that may disturb less than one acre of land. EPA solicits
comment on the Agency's estimate of the number of firms that would be
covered under the proposal.

Table XI-2. Number of Firms Covered by the Construction and Development
Proposed Regulations

NAICS	Industry Sector	Firms

Number	Percent of Total

2361 	 Residential Building Construction

236115	New Single-family Housing Construction (except operative builder)
33,609	41%

236116	New Multifamily Housing Construction (except operative builder)
2,620	3%

236117	New Housing Operative Builder	17,295	21%

2362 	Nonresidential Building Construction

236210 	Industrial Building Construction	1,610	2%

236220	Commercial and Institutional Building Construction	20,797	26%

237	Heavy and Civil Engineering Construction

237310	Highway, Street, and Bridge Construction	5,696	7%

Total	81,628

	Source: Economic Analysis

C. Method for Estimating Economic Impacts  TC \l2 "C. Method for
Estimating Economic Impacts

	EPA has conducted economic impact analyses to determine the economic
achievability of each of the three ELG options presented in this notice.
An important aspect of the economic impact analysis is an assessment of
how incremental costs would be shared by developers and home builders,
home buyers, and society. This method is called "cost pass-through"
analysis or CPT analysis. Details of this method may be found in Chapter
4 of the Economic Analysis.

	The economic analysis for the C&D proposal also uses another method
called partial equilibrium analysis that builds upon analytical models
of the marketplace. These models are used to estimate the changes in
market equilibrium that could occur as result of the proposed
regulations. In theory, incremental compliance costs would shift the
market supply curve, lowering the supply of construction projects in the
market place. This would increase the market price and lower the
quantity of output, i.e., construction projects. If the demand schedule
remains unchanged, the new market equilibrium would result in higher
costs for housing and lower quantity of output. The market analysis is
an important methodology for estimating the impacts of the provision
proposed in today's notice. The economic analysis also reflects comments
in the October 2001 final report from the Small Business Advocacy Review
(SBAR) Panel submitted to the EPA Administrator as part of the
requirements under SBREFA. The SBAR Panel was convened as part of the
2002 rulemaking effort and EPA considers the information in the 2001
report to still be relevant to today’s C&D proposal. In addition, EPA
convened a SBAR panel in 2008 for this proposal, but did not obtain any
information during the SBREFA process that resulted in changes in
EPA’s economic analysis.

		EPA estimated the incremental compliance costs for the regulatory
options using an engineering cost model that accounts for cost factors
such as treatment costs, labor and operation and maintenance costs.
Because some of the erosion and sediment controls considered have design
requirements that take into account meteorological and soil conditions,
EPA developed compliance costs that take into account regional
differences.

	EPA estimated both the incremental compliance costs and the economic
impacts of each regulatory option at the project, firm, and industry
(national) level. The economic impact analysis considered impacts on
both the firms in the C&D industry, and on consumers who purchase the
homes, and buy or rent industrial buildings and commercial and office
space. In the case of public works projects, such as roads, schools, and
libraries, the economic impacts would accrue to the final consumers,
who, in most circumstances, are the taxpaying residents of the
community. The sections below summarize each modeling effort. Detailed
information on the data, models, methods, and results of the economic
impact analyses are available in the Economic Analysis.

1. Model Project Analysis  TC \l3 "1. Model Project Analysis

	EPA estimated project-level costs and impacts for a series of model
projects. The models establish the baseline economic and financial
conditions for model projects and assess the significance of the change
in cash flow that results from the incremental compliance costs. EPA
used the model project analysis to indicate whether typical projects
affected by the proposed regulations would be vulnerable to abandonment
or closure. The Agency developed nine model projects based on
consideration of size and construction categories. The construction
categories were: residential; commercial & industrial building; and
transportation. These three categories were broken out further into
small (one acre or more, but less than ten acres), medium (ten acres or
more, but less than thirty acres) and large (thirty acres or more)
projects.

	Based on a review of NOI data, each model of the nine project types was
assigned an average number of acres. Implicit in the model project
analysis is the assumption that each project is undertaken in its
entirety by a single entity acting as both developer and builder. EPA
recognizes that in practice there may be several parties with financial
investment, planning, and construction roles in a particular land
development and construction project. For example, on some projects a
developer may acquire the land, conduct the initial engineering and site
assessments, and obtain the necessary approvals. The land may then be
sold to another developer or builder who will undertake the actual
construction work. Projects are also frequently undertaken by a
consortium of firms or individuals, through various types of limited
liability partnerships (LLP). While it is important to acknowledge this
variation, for modeling purposes EPA has simplified this aspect and
assumed only a single entity is involved from beginning to end, referred
to below as a "developer-builder." EPA requests comment about this
economic modeling approach.

	Land development and construction typically occurs in a series of
stages or phases. The model projects developed by EPA incorporate
assumptions concerning the costs incurred and revenue earned at each
stage. EPA has modeled all of the projects to reflect three principal
development stages:

(1) Land acquisition. The starting point is usually acquisition of a
parcel of land deemed suitable for the nature and scale of development
envisioned. The developer-builder puts together the necessary financing
to purchase the parcel. When lenders are involved, they may require
certain documentation, such as financial statements, tax returns,
appraisals, proof of the developer's ability to obtain necessary zoning,
evaluations of project location, assessments of the capacity of existing
infrastructure, letters of intent from city/town to install
infrastructure, environmental approvals, etc. To satisfy these needs,
the developer may incur costs associated with compiling these data.

(2) Land development. The developer-builder obtains all necessary site
approvals and prepares the site for the construction phase of the
project. Costs incurred during this stage are divided among "soft" costs
for architectural and engineering services, legal work, permits, fees,
and testing, and "hard" costs such as land clearing, installing
utilities and roads, and preparing foundations or pads. The result of
this phase is a parcel with one or more finished lots ready for
construction.

(3) Construction. The developer-builder undertakes the actual
construction of the buildings. A substantial portion of this work may be
subcontracted out to specialty subcontractors (foundation, framing,
roofing, plumbing, electrical, painting, etc.). In the case of a housing
subdivision, marketing often begins prior to the start of this phase,
hence the developer-builder may also incur some marketing costs at this
time. Housing units may come under agreement at any time prior to,
during, or after completion of construction. Marketing costs are part of
the baseline costs. EPA determined that no incremental marketing costs
would be imposed by today's proposed rule.

	EPA developed estimates of the project-specific costs and revenue at
each stage of project development in the baseline scenario. The result
is a cash flow analysis of the costs and revenue associated with the
project. The general approach used in establishing the baseline scenario
is to assume normal returns on invested capital and normal operating
profit margins to arrive at the sales price for the final product (for
example, completed new single-family homes in a residential development,
or office space in a new office park).

	EPA analyzed the impact of today's proposed rule by adding in the
regulatory costs at the appropriate stage of the project life cycle. An
important consideration for assessing who ultimately bears the financial
burden of a new regulation is the ability of the regulated entity to
pass the incremental costs of the rule on to their customers. If the
developer-builder can pass all of their costs through to the buyer, the
impact of the rule on developer-builders is negligible and the buyer
bears all the impact. Conversely, if they are unable to pass any of the
cost to buyers through higher prices, then they must assume the entire
cost. For the economic impact analysis EPA uses three pass-through
cases: zero cost pass-through; full cost pass-through; and partial cost
pass-through.

	Under the first case, the zero (0%) cost pass-through assumption, the
incremental regulatory costs are assumed to accrue entirely to the
builder-developer, and appear as a reduction in per-project profits. The
sale price of the constructed unit and surrounding lot remains the same
as the asking price in the baseline. Using the full (100 %) cost
pass-through assumption, all incremental regulatory costs are passed
through to end consumers. Under this approach, the compliance costs are
also adjusted to reflect the developer’s cost of debt, equity, and
overhead. Consumers experience the impact of the proposed regulatory
options in the form of a higher price for each new building or housing
unit. For the partial cost pass-through case, firms are assumed to pass
on part of the compliance outlay to other parties. For the partial cost
pass-through case, EPA assumes cost pass-through rate of 85% for
residential sectors and 71% for non-residential and non-building
sectors. This is the expected level of cost pass-through based on
observed response of market supply and demand to changes in prices for
new construction. For more on the method used for determining the level
of cost pass-through see Section 3.5 of the Economic Analysis, Analysis
of Social Cost of the Economic Analysis.

	Information in the record indicates that builders do pass through much
of the regulatory costs to customers. This is supported by the academic
literature and industry publications. However, the financial impact
analysis also calculates results under the two extreme cases, no cost
pass-through for firms and full cost pass-through for customers, to
assess the ability of these groups to absorb the impact of the
regulation under a worst case scenario. The two extreme cases also
provide an approximation of the sensitivity of impact estimates to the
partial cost pass-through assumptions used for the expected case. EPA
requests comment on the partial cost pass-through assumptions used for
the expected case.

		EPA notes that under certain conditions developers might also attempt
to pass regulatory costs back to land sellers. For example, in a
depressed market, builders may argue successfully that a regulatory cost
increase would make a particular project unprofitable unless the land
costs can be reduced. If the land seller is convinced that a residential
subdivision project would not proceed, they may be willing to accept a
lower price for undeveloped land. The ability of developers to pass such
costs back would likely depend on the sophistication of the land owner,
their experience in land development projects, knowledge of the local
real estate market, and, in particular, their understanding of the
regulations and their likely cost. While evidence of cost pass-back to
land owners exists for fixed and readily identifiable regulatory costs
such as development impact fees, it is unclear whether a builder's claim
that costs would be higher due to construction site control regulations
would induce land owners to make concessions. EPA requests comment on
the likely success of developers attempting to pass regulatory costs for
incremental storm water controls back to land owners.

2. Model Firm Analysis  TC \l3 "2. Model Firm Analysis

	EPA analyzed the impacts of the regulations at the level of the firm by
building financial models of representative construction firms. Model
firms are developed for NAICS sectors aligning with each of the
principal C&D business segments expected to be affected by the
regulation (See Table XI-2). Each model firm represents the baseline
(i.e., pre-regulation) financial performance and condition of typical
businesses in these industry segments. These model firms are used in
combination with compliance cost estimates to examine the potential for
financial stress, employment effects, and increased barriers to the
entrance of new firms to the industry. Model firms are broken out
further by revenue size ranges for each of the NAICS categories for
which data are reported by the Statistics of U.S. Business (SUSB) and
the Economic Census. The financial statements for the model firms are
constructed to capture two business condition cases for the firm-level
analysis: General Business Conditions case that reflects the financial
performance and condition of C&D industry businesses during normal
economic conditions; and Adverse Business Conditions that is meant to
reflect financial performance during weak economic conditions. The two
business condition cases are differentiated by the baseline operating
financial circumstances of the model firms as well as other important
factors in firm financial performance, including cost of debt and equity
capital.

	Compliance costs for a given regulatory option are assigned to the
model firms, by sector and revenue size category, based on an estimate
of “annual in-scope acreage per dollar of revenue” for the various
model firms. The compliance costs for a given regulatory option were
converted to a per-acre basis based on project size, type of
construction and other compliance cost-related characteristics such as
state and/or climatic region, depending on the option being considered.
Since affected acreage is the principal driver of compliance costs, the
number of projects and in-scope project acreage associated with a given
level of firm revenue will be the primary basis on which compliance
costs are assigned to the model firms. The basis for estimating number
of projects and in-scope project acreage for model firms will vary by
sector and principal construction activity.

	EPA assigns the per acre compliance costs to each model firm based on
an estimate of the acreage developed per million dollars of construction
value for the model firm. For residential construction, the acreage per
million dollars was derived from the Census Bureau’s Census of
Housing. For nonresidential construction, information on project acreage
and estimated project value from Reed Construction Data is used to
derive an average number of acres developed per million dollars of value
(Reed Construction, March 2008; see DCN XXXXX). Using each model
firm’s acreage to revenue relationship, costs are then assigned to
firms based on the number of in-scope firms in each revenue range
category. EPA requests comment on its approach for assigning compliance
costs to model firms.

	EPA was then able to assess the impact of the annual compliance costs
on key business ratios and other financial indicators. Specifically, EPA
examined impacts on the following measures: (1) Costs to Revenue Ratio,
(2) Pre-Tax Income to Total Assets Ratio, (3) Earnings before Interest
and Taxes (EBIT) to Interest Ratio, and (4) change in business value.
The first is a simple screening level measure which is important for
measuring the impact on small entities. The second and third are
financial measures reported by Risk Management Associates (RMA) for
median, lower and upper quartiles by sector and business size that were
used in constructing the baseline financial statements for the model
firms. The change in business value measure is based on application of
compliance costs to the model firm financial statements, both as the
estimated absolute dollar change in value and the fraction of firms
whose net business value becomes negative because of compliance outlays.
The impacts of the compliance costs were examined by calculating the
values of each ratio with and without the compliance costs. For this
analysis, EPA used both the partial and no cost pass-through, to assess
potential economic impacts on the industry under the expected and
worst-case scenarios. Full cost pass-through would have no impact at the
firm level.

3. Housing Market Impacts  TC \l3 "3. Housing Market Impacts

	EPA developed models to assess the potential impacts of the regulations
on the national housing market. Buyers of new nonresidential properties
will also be impacted as costs are passed through to them. However, they
account for a minority of the construction projects considered and EPA
assumes that this group of customers is not as vulnerable to changes in
prices as are households in the market for new homes. Therefore, impacts
to purchasers of new nonresidential construction sites were not
highlighted as part of the financial impact assessment and are accounted
for on a more general basis as part of the analysis of impacts on the
national economy.

	To analyze the impacts of compliance costs on housing affordability,
EPA estimated the level of income that would be necessary to purchase
both the median and lower quartile priced new home without the proposed
regulation, and the change in income needed to purchase the median and
lower quartile priced new home under each of the regulatory options. The
Agency then used income distribution data to estimate the change in the
number of households that would qualify to purchase the median and lower
quartile priced new home under each of the regulatory options. In this
way, EPA was able to estimate the number of households that may not be
able to afford the exact same new home they could under baseline
conditions. The housing market analysis was performed at the level of
the metropolitan statistical area (MSA) to account for regional
differences in housing prices and income. The housing market analysis
uses both the partial and full cost pass-through assumptions, to
estimate both the expected and the worst-case impacts on new
single-family home buyers.

	When assessing the impact of the rule on housing affordability, EPA
acknowledges that even those buyers who are able to afford the median
valued single-family home at the new price may still experience an
impact. Many households would continue to qualify to purchase (or rent)
a housing unit of approximately the same price (or rent) as before the
C&D regulation, but would instead experience a reduction in some
desirable housing attributes instead. This analysis looks not only at
the affordability effect at the median-priced housing unit but also
considers the impact on housing affordability at lower housing prices,
specifically the impact on households that can afford the lower quartile
priced home. Focusing on housing prices below the median provides
important insight into the regulation’s impact on housing
affordability accounting for the likely greater number of households at
the income levels that just qualify to purchase/rent lower price units.
EPA requests comment on its approach to assessing impacts of the rule on
housing affordability.

4. Impacts on the National Economy  TC \l3 "4. Impacts on the National
Economy

	The market model generates an estimate of the change in the total value
of construction produced by the industry, i.e., industry output. Two
effects of the regulation are acting on the market value of construction
output. First, the cost of construction increases, leading to a price
rise and an increase in market value of final projects. Second, the
quantity of houses sold is reduced because of the higher price due to
compliance costs. The net effect on market value may be either positive
or negative, depending on whether the elasticity of demand for housing
is less than or greater than 1. There are also secondary impacts in
other markets, caused by the shift in consumer spending, necessitated by
the increased housing costs, from other goods to housing.

	Markets vary in the level of activity, structure of the industry, and
ultimately cost pass-through potential, from state-to-state and
region-to-region. The modeling approach used for the national impact
analysis captures such regional variation in the impacts of the proposed
regulatory options by estimating partial equilibrium models at the state
level for four major building construction sectors (single-family,
multi-family, commercial, and industrial). The analysis of state- and
national-level economic impacts is based on estimating changes to
economic output, employment, and welfare measures that result from the
estimated baseline market equilibrium to the estimated post-compliance
market equilibrium for each construction sector in each state.

	A partial equilibrium analysis assumes that the proposed regulation
will only directly affect a single industry; in this case, the four
major construction sectors considered. Holding other industries
“constant” in this way is generally appropriate since the compliance
costs of the proposed regulatory options are expected to result in only
marginal changes in prices and quantities and the rule does not directly
affect the other industries (HUD, 2006; see DCN XXXXX).

	For the partial equilibrium analysis, EPA uses estimated elasticities
of market supply and demand to calculate the impact of incremental costs
on the supply curve and, thus, on prices and quantities of construction
products under post-compliance conditions.

	Economic impacts in the directly affected construction industry can
trigger further shifts in output and employment losses in the set of
broader U.S. industrial sectors as these changes pass through the
economy. The U.S. Department of Commerce uses input-output techniques to
derive "multipliers" which indicate, for a given change in one
industry's output, how output and employment in the whole U.S. economy
will respond. EPA has applied the multipliers from the Regional
Input-Output Modeling System, version 2 (RIMS II) to the change in
output estimated from the market model to estimate some of the
anticipated impacts on national output and employment. EPA is also using
the Regional Economic Models, Inc. (REMI) Economic Geography Forecasting
and Policy Analysis Model to derive a more comprehensive estimate of the
potential long-term effects on the national economy. The REMI model uses
a similar set of industry sector multipliers, but also incorporates
econometric and general equilibrium models to derive a more refined
estimate of the impacts on national output and employment.

D. Results  TC \l2 "D. Results

1. Firm-Level Impacts  TC \l3 "1. Firm-Level Impacts

	EPA has estimated the economic impacts of the proposed rule at the firm
level by estimating the number of firm closures, the number of lost
jobs, and the decrease in firms' profits. The economic impact analysis
at the firm level looks at two cases. The first assumes that none of the
incremental costs would be passed through to the final consumer, i.e.,
zero cost pass-through. The Agency used this assumption for the economic
impact analysis, because it presents the worst-case scenario (i.e., the
largest impacts to the firm). The second case assumes partial cost
pass-through, and EPA believes this is more reflective of actual
conditions based on EPA's review of the academic literature and its
discussions with industry officials who indicate that most, if not all
costs, are passed through to the final consumer and are not absorbed by
firms in the industry.	EPA analyzed economic impacts at the firm level.
The firm is the entity responsible for managing financial and economic
information. Moreover, the firm is responsible for maintaining and
monitoring financial accounts. For the C&D category, most of the
business establishments, as defined by the Census Bureau, are firms.
Likewise, a small number of establishments are entities within a larger
firm. A small percentage of firms have multiple establishments and some
firms are regional or national in scope.

	Table XI-3 presents one economic indicator, the relationship of
compliance cost to firms’ annual revenue. A comparison between costs
and revenues is typically done prior to any consideration of the
pass-through of costs to buyers. Firms whose costs exceed 1% of revenue
are only 4.5 percent of the approximately 82 thousand in-scope firms for
the most costly option. Furthermore, firms whose costs exceed 3% of
revenue are significantly less than 1% for all options considered for
proposal.

Table XI-3. Cost to Revenue, Assuming No Cost Pass-Through

Option	Costs Exceeding 1% Revenue	Costs Exceeding 3% Revenue

	Number of Firms	Percent of Firms	Number of Firms	Percent of Firms

Option 1	0	0.0%	0	0.0%

Option 2	1,032	1.3%	76	0.1%

Option 3	3,638	4.5%	220	0.3%

Source: Economic Analysis

	Table XI-4 presents two additional economic indicators that measure the
potential decrease in firms' financial fitness. These indicators are
presented using the partial cost pass-through case, which represents the
firms’ expected ability to pass costs through to buyers.

Table XI-4. Firms Expected to Incur Financial Stress, Assuming Partial
Cost Pass-through

	Option 1	Option 2	Option 3

Firms Estimated to Incur Deterioration in Measures of Financial
Performance

Number Incurring Effect	19	179	561

% of All In-scope Firms	0.0%	0.2%	0.7%

Firms whose Net Business Value Becomes Negative as a Result of
Compliance (Potential Closures)

Number Incurring Effect	21	132	795

% of All In-scope Firms	0.0%	0.2%	1%

Number of Jobs	1,100	11,900	29,400

% of In-scope Firm Employees	0.4%	1.7%	2.7%

Source: Economic Analysis

	Both the financial performance and net business value measures show
that a very small percentage of the approximately 86 thousand in-scope
firms will experience any financial stress as a result of the proposed
options. Deterioration of firm financial performance is based on
assessing the impact of costs on two financial measures (Pre-Tax
Income/Total Assets and Earnings before Interest and Taxes/Interest).
EPA estimated the fraction of firms in the various sector and revenue
ranges whose financial indicators decline below the lower quartile for
these two measures, as reported by Risk Management Associates (RMA). For
each sector and revenue category, whichever of the two measures decline
that is the greatest is used to represent the impact on financial
performance. For additional information on EPA's analysis of the change
in financial position, see Section 3.3.4, Estimating the Change in Model
Firm Financial Performance and Condition, from the Economic Analysis.

	The second economic indicator is firm closures and resulting job loss,
by regulatory options. These numbers represent the impact on firms with
thin profit margins who are most vulnerable to impacts from costs
increases, and they do not represent the effects of a reduction in the
overall quantity of construction activity as a result of the C&D rule.
Both phenomena can result in job losses, but they are two separate
measures of job losses and are not necessarily wholly additive or
overlapping. Construction is a highly competitive industry that is
characterized by many small firms with a relatively high turnover and
low barriers to entry. Firms routinely expand and contract their
workforce in response to work load and as a result many workers laid off
when a firm closes are rehired by new and other existing more
financially healthy firms. Therefore, job losses due to firm closures
are in many cases a temporary displacement of the workforce. By
contrast, job losses due to market contraction result from an overall
reduction in the volume of construction and can be considered a more
lasting effect until market conditions change again. For more
information on job losses due to market contraction, see Section 3.5
Analysis of Social Cost in the Economic Analysis.

	The C&D industry has historically been a relatively volatile sector,
and is subject to wider swings of economic performance than the economy
as a whole. EPA has used historical financial and census data for the
C&D industry to discern long-term trends within the market fluctuations.
EPA based its primary economic analysis on data that reflects average
long-term performance rather than a temporary high or low. The industry
is currently experiencing a period of weakness, which will persist until
residential markets work through the current inventory of unsold homes,
and credit markets and the general economy return to a better condition.
There continues to be considerable uncertainty regarding how much the
market for new construction will contract or how far real estate values
will decline, before the construction industry begins to recover. EPA
realizes that the rule will be promulgated during a low period for the
industry, and there may be concerns that additional compliance costs,
associated with the rule, could have a greater than normal impact on C&D
firms and potentially slow the industry recovery. Again using historical
census and financial data for the industry EPA identified periods of
weakness for various industry sectors and used them to develop a
secondary analysis that represents potential impacts of additional
compliance costs during a period of adverse economic circumstances. With
regard to Option 2, comparing the results of the primary economic
analysis, to those of the adverse case analysis shows a four fold
increase in the number of firms incurring financial stress; and a 550
percent increase in firms at risk of closure. However, even with the
greater impacts seen under the adverse analysis case, the percentage of
total firms experiencing financial hardship, under any of the metrics
considered, never exceeds two percent of total in-scope firms.

	Since EPA expects that the effluent guidelines requirements will be
implemented over time as states revise their general permits (EPA
expects full implementation within five years of the effective date of
the final rule, currently required to be promulgated in December 2009,
which would be 2014), EPA has used macroeconomic forecasts of
construction activity to assess when the industry is likely to return to
its long-term trend (Global Insight, “Housing and Construction”,
2008) (Global Insight, “U.S. Economic Service, Executive Summary”
2008).  Based on these forecasts, EPA anticipates that the industry
activity will have recovered to the long-term trend during the period
when the rule is being implemented by states and will be able to absorb
the rule’s requirements without undue adverse effect.

2. Impacts on Governments  TC \l3 "2. Impacts on Governments

	EPA has analyzed the impacts of today's proposed rule on government
entities. This analysis includes the cost to governments for compliance
at government-owned construction project sites (construction-related).
For construction-related costs, EPA assumed that 100 percent of the
incremental compliance costs that contractors incur at government-owned
construction sites are passed through to the government. EPA also
estimated the additional administrative costs that government entities
would incur for reviewing the additional monitoring reports associated
with the turbidity monitoring requirements of Options 2 and 3. Table
XI-5 shows the costs that government entities are expected to incur at
federal, state, and local levels.

Table XI-5 Total Costs by Government Unit (millions 2008 $)

 	Option 1	Option 2	Option 3

Compliance Costs

Federal	$2.3	$34.0	$66.5

State 	$4.4	$68.1	$128.2

Local	$25.1	$390.7	$735.8

Administrative Costs

Federal	$0.0	$0.0	$0.0

State 	$0.0	$0.1	$0.2

Local	$0.0	$0.6	$1.0

Total Costs

Federal	$2.3	$34.0	$66.5

State 	$4.4	$68.2	$128.4

Local	$25.1	$391.3	$736.8

Total	$31.8 	$593.5 	$931.7

Source: Economic Analysis

	These additional government costs are not expected to have a
significant impact on state and local governments as they account for
less than a tenth of a percent of state government revenues and less
than a tenth of a percent of estimated local government revenues. For
additional information on the effect of the rule on government entities
see the UMRA analysis in Chapter 9 of the Economic Analysis.

3. Community-Level Impacts  TC \l3 "3. Community-Level Impacts

	EPA has estimated community-level impacts based upon the incremental
costs of the proposed rule at the household level. The household impacts
are those that would affect local communities in terms of the costs of
housing. EPA's analysis considers the impacts on the price of housing
based on the increase/decrease in the median price per house. Table XI-6
shows the change by selected option in the price per house. It is
important to note that these costs would not apply to all new houses
built in the U.S., but rather only to those houses that are part of
construction projects that are subject to the given regulatory option.
Approximately 3 percent of new houses are expected to be in projects
subject to Option 1, 8 percent to Option 2 and 13 percent to Option 3.
The table also provides estimates of the expected change in monthly
payments under each option for the median and lower quartile priced
home.

Table XI-6. Change in Monthly Mortgage Payment for New Single-Family
Home (Full Cost Pass-Through)

	Option 1	Option 2	Option 3

Price Change New Single-Family Home 	$330	$2,100	$2,242

New Single-Family Median Priced Home

Baseline Mortgage Payment ($/month)	$1,971	$1,971	$1,971

New Mortgage Payment ($/month)	$1,972	$1,985	$1,986

% Change	0.05%	0.70%	0.75%

New Single-Family Lower Quartile Priced Home

Baseline Mortgage Payment ($/month)	$1,358	$1,358	$1,358

New Mortgage Payment ($/month)	$1,359	$1,363	$1,364

% Change	0.07%	0.36%	0.39%

Source: Economic Analysis

	The increase in mortgage payments attributable to the proposed options
compared to the estimated mortgage payment for the median price of a new
house in the U.S., currently about $1,971, is a small percentage of the
overall payment. For these costs, the average monthly mortgage payment
would increase by $1, $14, and $15 per month for Options 1, 2, and 3,
respectively. For the analysis, EPA assumes that buyers finance
approximately 80% of the home purchase price using a 30-year
conventional fixed rate mortgage with an interest rate of 7.39%. For
more information on the affordability analysis see Section 3.4, Analysis
of Regional-Level Housing Affordability Impacts, of the Economic
Analysis.

4. Foreign Trade Impacts  TC \l3 "4. Foreign Trade Impacts

	As part of its economic analysis, EPA has evaluated the potential for
changes in U.S. trade (imports, exports) of C&D related goods and
services. A significant component of the U.S. C&D category operates
internationally, and, in addition, numerous foreign firms that
participate in this category also operate in the U.S. EPA judged that
the potential for U.S. C&D firms to be differentially affected by the
proposed rule is negligible. The proposed rule will be implemented at
the project level, not the firm level, and will affect projects within
the U.S. only. All firms undertaking such projects, domestic or foreign,
will be subject to the proposed rule. U.S. firms doing business outside
the U.S. will not be differentially affected compared to foreign firms,
nor will foreign firms doing business in the U.S.

	This proposed rule could theoretically stimulate or depress demand for
some construction-related goods. To the extent that the proposed rule
acts to depress the overall construction market, demand for conventional
construction-related products may decline. This decline may be offset by
purchase of goods and services related to erosion and sediment control.
Overall, EPA does not anticipate that any shifts in demand for such
goods and services resulting from the proposal would have a significant
implication for U.S. and foreign trade.

5. Impacts on New Firms  TC \l3 "5. Impacts on New Facilities

	The construction sector is a relatively fluid industry, as documented
in the industry profile, with low barriers to entry and considerable
entry and exit activity from year to year. As a result, the potential
employment losses or capital idling effects of weakness in a specific
firm are likely to be offset by changing levels of activity in other
existing firms or entry of new firms into the local market. EPA
conducted an analysis to assess the impacts on new firms that choose to
enter the C&D point source category. This analysis uses a method called
"barrier to entry". EPA examined the ratio of compliance costs to
current and total assets to determine if new market entrants could find
it more difficult to assemble the capital requirements to start a
project than would existing firms. The methodology is conservative,
because it doesn't account for the fact that a firm would typically be
expected to finance 20 percent of the incremental compliance costs from
their own financial resource to obtain the loan, not the full amount as
assumed here. In addition, existing firms would need to meet the same
requirement, and therefore would not obtain a competitive advantage over
new entrants. For more information on the analysis see Section 3.3.6
Assessing Potential Barriers to Entry of New Businesses to the C&D
Industry from the Economic Analysis.

	For the proposed regulatory option (Option 2), the increase in
financing requirement varies from approximately 2.7 percent to 7.7
percent of baseline assets depending on the firms size and business
sectors. This comparison assumes that the new firm’s compliance outlay
would be financed and recorded on its balance sheet. To the extent that
the compliance outlay is financed and recorded not on the firm’s
baseline sheet but as part of a separate project-based financing for
each individual project, this comparison is likely to be overstated,
perhaps substantially. Still, EPA does not consider the increase in
financing requirements to pose a significant barrier to entry for
potential businesses and projects.

6. Social Costs  TC \l3 "6. Social Costs

	EPA's analysis of social costs for each option contains four costs
components: (1) firm compliance costs; (2) incremental increase in
government administrative costs; and (3) deadweight loss (loss of
economic efficiency in the construction market). When summed, these
three cost categories comprise the total social costs for each option.

	EPA has conducted a social cost analysis for each option. The Economic
Analysis provides the complete social cost analysis for the proposed
regulation. The firm-level estimate compliance cost, however, does not
account for the potential affect of the proposed options on the quantity
of construction activity/units performed in the various C&D markets.
Compliance costs for each proposed option have the effect of increasing
builder/developer costs, which can cause a leftward shift in the
market’s supply curve. Part of the increased costs may raise the price
of new housing, with the balance of increased costs being absorbed by
the builder, depending on the relative elasticities of supply and
demand. The resulting shift in market equilibrium may also reduce the
quantity of construction units produced in a given market.

	EPA has estimated a state-by-state linear partial equilibrium market
model for each C&D building sector to estimate this potential market
effect on the quantity of output. The estimated change in the quantity
of output produced in each C&D market segment is then used to not only
adjust the firm-level resource cost of compliance, but also to compute
the economic value of the reduction in C&D output, and estimate the
total loss of consumer and producer surplus, referred to as the
deadweight loss. Table XI-7 shows the change in cost due to the quantity
effect (i.e. reduction in market activity), the dead weight loss, and
their combined effect on total costs.

Table XI-7: Total Social Cost of Options (millions of $2008)

	Option 1	Option 2	Option 3

Total Costs, Unadjusted for Quantity Effect	$132	$1,891	$3,797

Change in Costs Due to Quantity Effect	$0.1	$7	$17

Total Costs, Adjusted for Quantity Effect	$132	$1,884	$3,780

Total Dead Weight Loss	$0.0	$3.5	$8.4

Additional Government Administrative Costs	$0.0	$0.7	$1.2

Total Social Cost of the Regulation	$132	$1,888	$3,789

Source: Economic Analysis

7. Small Business Impacts  TC \l3 "7. Small Business Impacts

	Section XIX.C of today's document provides EPA's Regulatory Flexibility
Analysis (RFA) analyzing the effects of the rule on small entities. For
purposes of assessing the economic impacts of today's proposed rule on
small entities, small entity is defined by the US Small Business
Administration (SBA) size standards for small businesses and RFA default
definitions for small governmental jurisdictions. The small entities
regulated by this proposed rule are small land developers, small
residential construction firms, small commercial, institutional,
industrial and manufacturing building firms, and small heavy
construction firms.

 	Table XI-8 shows the impacts of the proposal using the one percent and
three percent revenue tests, a method used by EPA to estimate the
impacts on small businesses. The table presents the results for the
regulatory options.

Table XI-8. Small Business Analysis for Options, 1% and 3% Revenue
Tests, Assuming No Cost Pass-Through

Option	1% Revenue Test	3% Revenue Test

	Number of Small Firms	Percent of Small Firms	Number of Small Firms
Percent of Small Firms

Option 1	0	0.0%	0	0.0%

Option 2	618	0.8%	51	0.1%

Option 3	3,049	3.9%	185	0.2%

Source: Economic Analysis

	Table XI-8 shows that for the preferred option (Option 2), less than a
thousand small firms would be likely to incur costs exceeding one
percent of revenue, which accounts for less than one percent of the
approximately 78 thousand small in-scope firms. Therefore, EPA does not
consider the preferred option to have the potential to cause a
significant economic impact on a substantial number of small entities.

XII. Cost-Effectiveness Analysis  TC \l1 "XIII. Cost-Effectiveness
Analysis

	For many effluent guidelines, EPA performs a cost-effectiveness (C-E)
analysis using toxic-weighted pound equivalents. The C-E analysis is
useful for describing the relative efficiency of different technologies.
The pollutant removals estimated for today's proposed rule are all based
on sediment, a conventional pollutant. While EPA expects that today’s
rule would also result in a significant reduction of other pollutants
associated with sediment at construction sites, such as nutrients and
metals, and other pollutants found in urban stormwater runoff, such as
organics, oil and grease, pesticides and herbicides, the Agency has not
quantified these reductions. The Agency does not have a methodology for
converting sediment, measured as TSS or turbidity, into toxic-weighted
pound equivalents for a C-E analysis. Instead, EPA compared the cost of
each regulatory option to the pounds of sediment removed. This
unweighted pollutant removal analysis is meaningful because it allows
EPA to compare the cost effectiveness of one option against another, and
to other sediment reduction efforts. Table XII-1 shows a comparison of
the cost-effectiveness of C&D proposed options for controlling sediment
discharges. EPA notes that the total pollutant reductions for Options 2
and 3 are likely upper-bound estimates, because it is very difficult to
estimate baseline sediment discharges from this industry given the
variation in stormwater discharge rates, sediment concentrations and the
range of conditions present on construction sites across the country.

Table XII-1. Cost-Effectiveness of Options

	Option 1	Option 2	Option 3

Compliance Cost (millions 2008$)	$132.2	$1,891.0	$3,796.5

Sediment Removed (million lbs/yr)	670	26,426	50,413

Cost per Pound Removed ($/lb)	$0.20 	$0.07	$0.08

Source: Economic Analysis

XIII. Non-Water Quality Environmental Impacts  TC \l1 "XIV. Non-Water
Quality Environmental Impacts

	Under sections 304(b) and 306(b) of the CWA, EPA is to consider the
"non-water quality environmental impacts” (NWQEI) when setting ELGs
and NSPS. EPA used various methods to estimate the NWQEI for each of the
options considered for today's proposed rule.

A. Air Pollution  TC \l2 "A. Air Pollution

	EPA estimates that today's proposed rule would have no significant
effect on air pollution because none of the approaches considered would
significantly alter the use of heavy equipment at construction sites,
nor the manner in which construction sites are prepared. Accordingly,
the levels of exhaust emissions from diesel-powered heavy construction
equipment and fugitive dust emissions generated by construction
activities would not change substantially from current conditions under
the proposed rule. Use of active treatments systems that utilize
diesel-powered pumps and generators would produce additional emissions,
however these emissions are expected to be small compared to current
emissions for this industry.

B. Solid Waste Generation  TC \l2 "B. Solid Waste

	Generation of solid waste would not be substantially affected
regardless of the option selected because the majority of solid waste
generated at construction activities derives from wastage of materials
brought onto and used at construction sites. Likewise, for redevelopment
projects, the amount of solid waste generated, while possibly greater
than the amounts generated at new developments, would not vary
regardless of the option selected. In many states, sediment accumulated
in sediment basins can typically be removed and applied on-site as fill
material, so long as the material is not contaminated with litter or
chemicals. Where permittees are using polymers or other chemicals to
treat stormwater, then sediment accumulated in sediment basins or filter
backwash waters may need to be handled as solid waste, depending on the
nature of the chemical used. Most dischargers using chemical additives
are expected to select polymers that would enable the operator to apply
solids (i.e., sediment) on-site to avoid the transportation and disposal
costs associated with hauling off-site. If ATS systems utilize bag or
cartridge particulate filters, then disposal of these filters would
produce additional solid waste. EPA expects that these filters can be
managed as nonhazardous solid waste.

	The Administration recently created an initiative to strengthen control
of marine debris, which includes any man-made, solid material that
enters the nation’s waterways either directly or indirectly via land-
and ocean-based sources. Materials from construction sites may become
marine debris if they are improperly disposed of or maintained
(California Coastal Commission, June 2006). However, many actions can be
taken at construction sites to prevent materials used on-site from
becoming marine debris. For example, permittees can schedule regular
collection and disposal of trash before dumpsters become full, or ensure
that adequate waste and recycling receptacles are available and properly
covered. Today’s guideline includes control measures that should
address these issues and preventative actions. (Source: Eliminating
Land-based Discharges Of Marine Debris In California: A Plan of Action
from The Plastic Debris Project, California Coastal Commission, June
2006, available on the Internet at:
http://www.plasticdebris.org/CA_Action_Plan_2006.pdf).

C. Energy Usage  TC \l2 "C. Energy Usage

	The consumption of energy as a result of today's proposed rule is not
expected to be significantly affected regardless of the option selected
because the operations that currently consume energy (both direct fossil
fuel use and electricity) will not be changing to any substantial degree
during land disturbance. Use of active treatments systems that utilize
diesel-powered pumps and generators would result in increased fuel
consumption. Likewise, the installation of larger sediment basins would
require additional run-time for construction equipment. However the
additional fuel consumption for these activities is expected to be small
compared to current consumption for this industry. In addition, polymers
such as polyacrylamide are produced from petroleum, so additional
polyacrylamide usage to treat construction site stormwater runoff would
result in increased petroleum consumption. However, usage on
construction sites is not expected to significantly increase demand for
acrylamide (U.S. acrylamide usage in 2001 was estimated to be
approximately 200 million pounds, and additional usage on construction
sites would be minimal; see DCN XXXX). Chitosan, another polymer
commonly used on construction sites, and the basis for EPA’s BAT
option, is manufactured from crustacean shells. Therefore, additional
energy consumption due to chitosan production and usage is expected to
be minimal.

XIV. Environmental Assessment  TC \l1 "XV. Environmental Assessment

A. Introduction

	In its Environmental Assessment (see “Supporting Documentation”),
EPA evaluated environmental impacts associated with the discharge of
stormwater from construction activities.

As discussed in Section VII, construction stormwater discharges have
been documented to increase the loadings of several pollutants to
receiving surface waters. The most prominent and widespread pollutant
from construction sites is sediment. Discharges of metals, nutrients,
and polycyclic aromatic hydrocarbons (PAHs) have also been documented.
Other possible construction site pollutants include materials that exert
biochemical oxygen demand (BOD), pesticides and other toxic organic
compounds.

Pollutants other than sediment derive from construction equipment and
materials, contaminants naturally present in a site’s soils, or
contamination by some other source prior to the start of construction
activity at a site. Construction activities mobilize sediments and other
pollutants by disturbing soil and altering stormwater runoff quantity
and patterns. Construction equipment washes and irrigation of
revegetation areas, if not properly managed, can mobilize pollutants
during dry weather.

Surface water effects from construction site discharges include physical
and biological changes. Physical changes include increased turbidity
levels, increased total suspended solids concentrations, increased
sedimentation rates, increased levels of pollutants other than sediment,
and modified stream flow. Biological changes include decreased organism
abundance, modified species composition, and decreased species
diversity.

Sediment is the predominant pollutant from construction activity and is
also one of the most common pollutants affecting waters listed as
impaired under Clean Water Act Section 303(d). According to the National
Water Quality Inventory Report to Congress: 2002 Reporting Cycle (USEPA,
2007), sediment is the top source of impairment for streams and rivers
in the United States. Sediment and siltation impairs 100,446 stream and
river miles and turbidity or suspended solids impair 695,133 miles. In
addition, 1,317,938 acres of lakes and reservoirs have been documented
as impaired by sediment or siltation and 376,832 acres are impaired by
turbidity or suspended solids. The report states that sediment also has
significant impacts on wetlands. Because only a subset of all surface
waters were assessed for water quality impairment during the 2002
Reporting Cycle, it is likely that the quantity of surface water
impaired by sediment is greater than the numbers above indicate.

Construction site discharges impair or place additional stress on
already impaired waterbodies. Twenty-four states have been able to
identify construction activity as a cause of impairment for some
waterbodies under their jurisdiction. Identifying the causes of a
waterbody’s impairment is often a challenging task, however, so it is
likely that construction activity is a cause of impairment for more
waterbodies than states have been able to identify at this time.

	Ecological impacts from sediment discharges to surface waters can be
acute or chronic and vary in severity depending on the quantity of
sediment discharged, the nature of the receiving waterbody and aquatic
community, and the length of time over which discharges take place.
Sediment can depress aquatic organism growth, reproduction, and
survival, leading to declines in organism abundance and changes in
community species composition and distribution. Threatened and
Endangered (T&E) and other special status species are particularly
susceptible to adverse habitat impacts. According to the United States
Fish and Wildlife Service, increased sedimentation is one of the main
contributors to the demise of some fish, plants, and invertebrates (see
Drennen, Daniel J. United States Fish and Wildlife Service. 2003. The
urban life of darters (excessive sedimentation endangers darter fishes).
Endangered Species Bulletin. Also see “Endangered Species Program:
Species Information” at http://www.fws.gov/endangered/wildlife.html).

	There are numerous processes by which sediment affects aquatic
communities. Sediment deposition on waterbody beds can bury benthic
communities, smothering fish eggs and other immobile benthic organisms
and severing connections to organisms in the water column. Sedimentation
also modifies certain types of benthic habitats by filling crevices and
burying hard substrates, making recolonization by previously existing
organisms difficult unless the sediment is removed.

In the water column, increased turbidity levels block light needed for
photosynthesis by submerged aquatic vegetation (SAV), resulting in its
reduced growth or death. Because SAV is a primary producer depended upon
by other many other aquatic organisms in ecosystems, its loss or
reduction can create an impact cascade throughout an entire community,
lowering the community’s total health and productivity. Increased
turbidity also impairs the ability of visual predators (e.g., many fish
species) to forage successfully. Increased TSS concentrations in the
water column can also impair fish gill function, reducing the ability of
fish to breathe. These and additional processes by which sediment
discharges impact aquatic ecosystems are discussed in more detail in the
Environmental Assessment.

Increased sediment and turbidity levels in surface waters can also
adversely affect direct human uses of water resources such as navigable
channels, reservoirs, drinking water supplies, industrial process water,
agricultural uses, and recreational uses, as well as property values.

Sediment deposition on riverbeds can fill and impede use of navigable
channels. Between 1995 and 2006, the U.S. Army Corps of Engineers
(USACE) funded approximately 3,700 dredging projects at a cost of more
than $6.3 million (2007 dollars) to remove more than 2.3 billion cubic
yards of sediment from U.S. navigable waters (United States Army Corps
of Engineers Dredging Database. 2007).

Reservoirs and lakes serve a variety of functions, including drinking
water storage, hydropower supply, flood control, and recreation.
Sediment deposition on reservoir and lake beds reduces their capacity to
serve these functions. An increase in sedimentation rate reduces the
useful life of these waterbodies unless measures are taken to reclaim
their capacity. In waters serving as a drinking water source, increased
turbidity levels and TSS concentrations degrade water quality unless
treatment levels are increased to remove the additional sediment.

Sediment can also have negative effects on industrial activities.
Suspended sediment increases the rate at which hydraulic equipment,
pumps, and other equipment wear out, causing accelerated depreciation of
capital equipment. Sediment can clog cooling water systems at power
plants and other large industrial facilities.

Irrigation water used for agriculture that contains sediment or other
pollutants from construction site discharges can harm crops and reduce
agricultural productivity. Suspended sediment can form a crust over a
field, reducing water absorption, inhibiting soil aeration, and
preventing emergence of seedlings. Sediment can also coat plant leaves,
inhibiting plant growth and reducing crop value and marketability. Other
pollutants can damage soil quality (Clark, Edwin, Jennifer A. Haverkamp,
and William Chapman. 1985. “Eroding Soils: The Off-Farm Impacts.”
Washington, DC: The Conservation Foundation).

Sediment deposition in river channels, ditches, and culverts reduces
their capacity and can increase flood levels and frequency, increasing
the level of adjoining property damage from flooding. Sediment can also
lower values of property near impacted surface waters by degrading
surface water appearance (ibid). Degraded aesthetics can also lower the
value of surface waters for recreational activities such as boating,
fishing, and swimming.

	Sediment is the primary pollutant known to be associated with
construction activity, but as stated earlier in this section, other
pollutants such as nutrients, PAHs, and metals are also discharged from
construction sites. Environmental impacts associated with these other
pollutants are qualitatively discussed in the Environmental Assessment.
The remaining discussion in this section describes EPA’s quantitative
analysis of the water quality impacts associated with sediment
discharges from construction activity. Additional qualitative
information on sediment impacts is also provided in the Environmental
Assessment. EPA solicits submission of additional information on
discharges from construction activity and environmental impacts
associated with those discharges.

B. Methodology for Estimating Environmental Impacts and Pollutant
Reductions

	This section describes the methodology EPA used to quantitatively
assess water quality impacts from construction activity sediment
discharges and the water quality benefits expected from today’s
proposed options. Other pollutants from construction activity, such as
nutrients, PAHs, and metals, create water quality impacts, but the
information available to EPA on discharges other than sediment from
construction sites is insufficient for EPA to quantitatively analyze
their impacts. These discharges are instead discussed qualitatively in
the Environmental Assessment.

1. National Analysis

EPA conducted a national quantitative analysis of water quality impacts
associated with construction activity sediment discharges. To conduct
this analysis, EPA used a Spatially Referenced Regressions on Watershed
Attributes (SPARROW) model. SPARROW is a statistically-based modeling
approach developed by United States Geological Survey that relates
measured levels of water quality components to the attributes of
contributing watersheds. SPARROW has been used previously to estimate
deliveries of nitrogen and phosphorus to surface waters from point,
nonpoint, and atmospheric sources at both national and regional scales.
The sediment version of SPARROW allows EPA to estimate levels of total
suspended solids (TSS) in the larger freshwater surface waters (Reach
File 1 level) in the contiguous 48 states (see description of Enhanced
Reach File 1.2 (RF1) in Section VI). EPA used this analysis to examine
expected water quality impact improvements under various options
relative to current levels of water quality impact. A full description
of EPA’s analysis is provided in the Environmental Assessment.

SPARROW estimates total sediment loadings to estuaries but is unable to
estimate sediment concentrations in estuaries. EPA instead used the
Dissolved Concentration Potential (DCP) approach developed by the
National Oceanic and Atmospheric Administration (NOAA) to estimate
ambient concentrations of conserved contaminants introduced to estuaries
that are subject to mixing and dilution. NOAA has provided DCP factors
for most major estuaries in the contiguous 48 states. These factors
allow estimation of estuarine TSS concentrations without detailed
numerical simulation modeling. A full description of this analysis is
provided in the Environmental Assessment.

The compliance options vary in the number of RF1 river and stream miles
they improve. Option 1 improves water quality in 175,775 RF1 reach
miles. Option 2 improves water quality in 522,120 RF1 reach miles.
Option 3 improves water quality in 542,408 RF1 reach miles. In addition
to improving water quality in rivers and streams, each option also
improves water quality in other types of surface waters such as lakes
and estuaries.

Construction activity in the United States is unevenly distributed among
watersheds. It is highly concentrated in some areas and very sparse in
others. For this reason, EPA presents information on water quality
improvements associated with the compliance options for two different
groups of watersheds. The first group contains the 10 percent of RF1
watersheds in the conterminous United States with the highest number of
construction acres during the 1992-2001 time period (“Top 10%”).
This group represents 75 percent of all construction activity during
this time period and therefore reflects conditions associated with the
majority of construction site activity. The second group encompasses all
RF1 watersheds containing construction activity during the 1992-2001
time period (“All”). Median TSS concentration reductions under the
compliance options are greater for the “Top 10%” group because
construction sites exert a greater influence on water quality in these
reaches. This is because more construction activities are occurring in
these watersheds.

For the group of watersheds representing 75 percent of construction
activity during the 1992-2001 time period, Option 1 reduces sediment
discharges by approximately 0.5 billion pounds per year. It reduces
median TSS concentration from 248.34 mg/L to 248.05 mg/L, or 0.29 mg/L.
Option 2 reduces sediment discharges more than 19 billion pounds per
year. It reduces median TSS concentration from 248.34 mg/L to 239.16
mg/L, or 9.18 mg/L. Option 3 reduces sediment discharges by more than 37
billion pounds per year. It reduces median TSS concentration from 248.34
mg/L to 231.65 mg/L, or 16.69 mg/L.

The median concentrations in Table XIV-1 reflect average conditions over
multi-year time periods and across a large geographic area. Most
construction site discharges are driven by precipitation events and are
therefore highly episodic. In-stream TSS concentrations deriving from
construction site discharges tend to be higher during and shortly after
precipitation events and lower during periods in between precipitation
events. In addition, the average median concentrations in Table XIV-1 do
not describe the high level of variability seen among different
locations affected by construction site discharges. For more information
on these sources of variability, see the Environmental Assessment.

Table XIV-1: RF1 River and Stream Median TSS Concentration Improvements
under Three Compliance Options

	“Top 10%” RF1 Watersheds - Median TSS Concentration (mg/L)
Reduction in Median TSS Concentration (mg/L)	“All” RF1 Watersheds -
Median TSS Concentration (mg/L)	Reduction in Median TSS Concentration

(mg/L)

Baseline	266.86	---	287.22	---

Option 1	266.85	0.01	287.03	0.19

Option 2	257.10	9.76	282.23	4.99

Option 3	250.13	16.73	279.71	7.51

Estimates from EPA’s national quantitative analysis of water quality
impacts were used for an analysis of the potential economic benefits of
each of today’s proposed options. See Section XV for additional
information on the economic benefits analysis.

2. Case Study Analysis

	In addition to a national analysis of water quality, EPA is conducting
a case study analysis. SPARROW allows national examination of water
quality at the scale Reach File 1 surface waters, which is a relatively
coarse scale. Reach File 1 surface waters do not include many smaller
rivers and streams in the national surface water network. In order to
quantitatively examine the nature of water quality impacts from
construction activity on smaller rivers and streams, EPA is using the
Soil and Water Assessment Tool (SWAT) in combination with the
Agricultural Policy – Environmental Extender (APEX) model. SWAT is a
watershed-scale simulation model and APEX is a site-scale simulation
model. SWAT-APEX was developed by the United States Department of
Agriculture’s Agricultural Research Service (USDA-ARS). Because of
higher computational requirements for the SWAT-APEX model relative to
the SPARROW model, EPA has chosen to use the SWAT-APEX model for a
single watershed in the Dallas metropolitan region that has experienced
significant levels of construction. A description of the case study is
provided in the Environmental Assessment. The case study has not been
completed, so EPA intends to include the case study analysis in the
documentation in support of the final rule. EPA requests comments on
this approach.

XV. Benefit Analysis  TC \l1 "XVI. Benefit Analysis

	EPA has assessed the potential benefits associated with the proposed
rule by identifying various types of benefits that can result from
reducing the level of sediment and turbidity being discharged from
construction sites. Where possible, EPA has attempted to quantify and
monetize benefits attributable to the regulatory options. Section XIV,
Environmental Assessment, established the analytical framework for the
benefits analysis.

A. Benefits Categories Estimated  TC \l2 "A. Benefits Categories
Estimated

	Discharges of sediment and other pollutants from construction activity
can have a wide range of effects on down stream water resources. As
discussed in the Section XIV, there are numerous potential impacts to
local aquatic environments, and there are also consequences for human
welfare. Human activities and uses affected by construction
discharge-related environmental changes include recreation, commercial
fishing, public and private property ownership, navigation, and water
supply and use. Sediments and other pollutants in discharges from C&D
sites can also cause environmental changes that affect the non-use
values that individuals have for the assurance that environmental
resources are in good condition. These existence services, sometimes
described as “ecological benefits,” are reflected under the Clean
Water Act as aquatic life, wildlife, and habitat designated uses.

	Stormwater control measures reduce the amount of sediment that reaches
waterways from C&D sites. As sediment loads are reduced, TSS and
turbidity levels in adjacent waters decline, which in turn increases the
production of environmental services that people and industry value.
These environmental services valued by industry and the public include:
recreation, public and private property ownership, navigation, water
supply and use, and existence services. Table XV-1 provides a summary of
various water related activities and their associated environmental
services potentially impacted by discharges of sediment from C&D sites.

Table XV-1. Summary of Benefits from Reducing Sediment Runoff from
Construction Sites

  SEQ CHAPTER \h \r 1 Activity	Environmental Service Potentially
Affected by Runoff from Construction Sites	 Benefits Category

Recreation

 - Outings

 - Boating

 - Swimming

 - Fishing 	Aesthetics, water clarity, water safety, degree of
sedimentation, weed growth, fish and shellfish populations	Non-market
direct use

Commercial Fishing and Shellfishing	Fish and shellfish populations
Markets

Property Ownership	Aesthetics, safety of property from flooding,
property value	Markets

Water Conveyance and Supply

 - Water conveyance

 - Water storage

 - Water treatment	Turbidity, degree of sedimentation	Avoided Costs

Transportation	Degree of sedimentation	Avoided Costs

Water Use

 - Industrial

 - Municipal

 - Agricultural 	Turbidity	Avoided Costs

Knowledge (No Direct Uses)	Environmental health	Non-market existence
value

	However, not all of the changes in these services can be readily
quantified as it requires a thorough understanding of the relationship
between changes in water pollutant loads and production of environmental
services. This problem is exacerbated by the fact that both the
pollutant source and load reductions are relatively small, sporadic,
numerous, and dispersed over a wide area when compared to more
traditional sources of pollutants, such as a wastewater treatment plant.
As a result of the difficulty in assessing changes in each environmental
service associated with an activity listed in Table XV-1, EPA chose to
focus on two main categories of benefits: avoided costs and non-market
benefits. The specific categories of avoided costs considered were:
reservoir dredging, navigable waterway dredging, and drinking water
treatment and sludge disposal. Non-market benefits considered were
improvements in recreational activities and existence value from
improvements in the health of aquatic environments.

B. Quantification of Benefits  TC \l2 "B. Quantification of Benefits

	Reduced costs for water treatment, water storage, and navigational
dredging are three benefit categories that EPA is using to estimate the
benefits of the proposed rule. EPA used estimates of changes in sediment
deposition and in-stream TSS concentrations from the SPARROW model runs
to quantify the reduction in the amount of sediment that would need to
be dredged from reservoirs and the reduction in the amount of TSS that
must be removed from the source water used for the production of potable
water. The SPARROW results provided these changes for each waterbody in
the RF1 network (approximately 60,000 stream segments). This allowed EPA
to associate these changes with: data from the US Army Corps of
Engineers on navigable waterways that are routinely dredged; EPA data on
source water for drinking water treatment plants; and USGS data on the
location of reservoirs used for hydroelectric power, flood control, a
source for drinking water, and recreation. SPARROW results also allowed
for the estimated change in TSS concentrations in the RF1 network which
were mapped to a Water Quality Index (WQI). The index is used to map
changes in pollutant parameters, such as TSS, to effects on human uses
and support for aquatic and terrestrial species habitat. Section 10.1.1
of the Environmental Assessment Document provides detail on the WQI
index and its application to the benefits analysis for the C&D
regulation. The WQI presents water quality by linking to suitability for
various human uses, but does not in itself identify associated changes
in human behavior. Behavioral changes and associated welfare effects are
implied in the proposed benefit transfer approach for measuring economic
values. For more on the benefit transfer approach see Appendix 7-1
Meta-Analysis Results from the Economic Analysis.

	The benefits analysis results are shown in Table XV-2.

Table XV-2. Annual Benefits (million 2008 $) for Options

Benefit Categories	Regulatory Options

	Option 1	Option 2	Option 3

Avoided Costs

Reservoir Dredging	$0.6	$17.6	$30.6

Navigable Waterway Dredging	$1.0	$12.9	$27.2

Drinking Water Treatment	$0.2	$7.4	$13.1

Total Avoided Costsa	$1.8	$37.9	$70.9

Welfare Improvements	$16.6	$295.0	$398.5

Total Monetized Benefits 	$18.4	$332.9	$469.5

a Totals do not add due to rounding

Source: Economic Analysis; Environmental Assessment

XVI. Monetized Benefit-Cost Comparison  TC \l1 "XVII. Benefit-Cost
Comparison

	EPA has conducted a benefit-cost analysis of the C&D effluent
guidelines proposed in today's notice. The benefit-cost analysis may be
found in the complete set of support documents. Sections XI, XIV, and XV
of this notice provide additional details of the benefit-cost analysis.

	Table XVI-1 provides the results of the benefit-cost analysis.

Table XVI-1. Total Annualized Benefits and Costs of Options (year 2008
$)

Option	Social Costs

(2008 $ millions per year)	Monetized Benefits

(2008 $ millions per year)

Option 1	$132	$18

Option 2	$1,891	$333

Option 3	$3,797	$470

XVII. Approach to Determining Long-Term Averages, Variability Factors,
and Effluent Limitations and Standards

This section describes the statistical methodology used to develop
long-term averages, variability factors, and limitations for BAT and
NSPS. For simplicity, the following discussion refers only to effluent
limitations guidelines; however, the discussion also applies to new
source performance standards. EPA also is soliciting comments on a
limitation on pH as described in Section XX. Such a limitation would not
be developed using the statistical methodology described below. Instead,
EPA typically establishes a range of acceptable values from 6 to 9 to
protect against extreme acidity or alkalinity.

A. Definitions

The proposed limitations for turbidity, as presented in today's notice,
are provided as the maximum daily discharge limitation. Definitions
provided in 40 CFR 122.2 state that the “maximum daily discharge
limitation” is the “highest allowable ‘daily discharge.’”
“Daily discharge” is defined as the “‘discharge of a
pollutant’ measured during a calendar day or any 24-hour period that
reasonably represents the calendar day for purposes of sampling.” To
be consistent with the daily discharge definition, EPA averaged all
measurements recorded each day from each treatment system before
calculating the proposed limitations. In complying with the final rule,
the number of measurements required each day would be determined by the
permit authority. EPA would, however, discourage the practice of
allowing the number of monitoring samples to vary arbitrarily merely to
allow a site to achieve a desired average concentration, i.e., a value
below the limitation that day. EPA expects that enforcement authorities
would prefer, or even require, monitoring samples at some regular,
pre-determined frequency. As explained below, if a site has difficulty
complying with the limitation on an ongoing basis, then the site should
improve its equipment, operations, and/or maintenance.

 Data Selection

	The proposed limitations are based upon data from sites located in
three western states: California, Oregon and Washington. EPA is
soliciting data (see Section XX for a detailed request for data), in
part, to evaluate whether the limitations are appropriate for other
locations. Typically, EPA qualitatively reviews all the data before
making its data selection used to calculate the limitations in final
rules. EPA generally selects only from facilities that have the model
technologies for the option and meet several other criteria. One
criterion generally requires that the influents and effluents from the
treatment components represent typical wastewater from the industry,
with no incompatible wastewater from other sources (e.g., sanitary
wastes). A second criterion typically ensures that the pollutants were
present in the influent at sufficient concentrations to evaluate
treatment effectiveness. A third criterion generally requires that the
facility demonstrate good operation of the treatment component (e.g.,
data sets for episodes with generally high pollutant concentrations are
often excluded). A fourth criterion typically requires that the data can
not represent periods of treatment upsets or shut-down periods. EPA
solicits comment on its data selection and criteria.

	In its calculations of the proposed limitations, EPA applied its
criteria and excluded data that do not appear to demonstrate typical
performance (e.g., extremely large values for a measurement, daily
value, and/or site) and typographical errors. For the final rule, EPA
intends to reevaluate its exclusions and inclusions of data, and seek
additional information about the sites used as a basis for the proposed
limitations. EPA also intends to evaluate, and incorporate as
appropriate, any additional data provided by commenters and other
sources.

C. Statistical Percentile Basis for Limitations

The daily maximum limitation is an estimate of the 99th percentile of
the distribution of the daily measurements. EPA calculates the daily
maximum limitation based upon a percentile chosen with the intention, on
one hand, to accommodate reasonably anticipated variability within the
control of the site and, on the other hand, to reflect a level of
performance consistent with the Clean Water Act requirement that these
effluent limitations be based on well operated and maintained
facilities. The percentile for the daily maximum limitation is estimated
using the product of the long-term average and the variability factor.
For the proposed rule, EPA estimated the long-term average and
variability factor using a statistical model based upon the lognormal
distribution. The Development Document describes this model and others
that EPA will consider in developing the final regulations.

D. Daily Maximum Limitation

In establishing the daily maximum limitation, EPA’s objective is to
restrict the discharges on a daily basis at a level that is achievable
for a site that targets its treatment at the long-term average. EPA
acknowledges that variability around the long-term average results from
normal operations. This variability means that occasionally sites may
discharge at a level that is greater than the long-term average. This
variability also means that sites may occasionally discharge at a level
that is considerably lower than the long-term average. To allow for
these possibly higher daily discharges, EPA has established the daily
maximum limitation that is based upon a long-term average and a
variability factor.

1. Long-Term Average

	In the first of two steps in estimating the different types of
limitations, EPA determines an average performance level (the
“long-term average”) that a site with well-designed and operated
model technologies (which reflect the appropriate level of control) is
capable of achieving. This long-term average is calculated from the data
from the sites using the model technologies for the option. EPA expects
that all sites subject to the limitations will design and operate their
treatment systems to achieve the long-term average performance level on
a consistent basis because sites with well-designed and operated model
technologies have demonstrated that this can be done. The proposed
long-term average of 2.77 NTU is the median value of 19 long-term
averages collected from 17 construction sites (two sites each had two
treatment systems). The long-term averages ranged from a minimum of 0.43
NTU to a maximum of 21.86 NTU. The median is the midpoint of the 19
values, and thus, nine of the system averages are above the proposed
long-term average and nine are below.

	A site that discharges consistently at a level near the proposed daily
maximum limitation of 13 NTU would not be operating its treatment to
achieve the long-term average of 2.77 NTU, which is part of EPA’s
objective in establishing the daily maximum limitations. That is,
targeting treatment to achieve the limitation may result in frequent
values exceeding the limitation due to routine variability in treated
effluent, and thus, EPA also has incorporated an allowance for
variability into the limitation.

2. Variability Factor

	In the second step of developing a limitation, EPA determines an
allowance for the variation in pollutant concentrations when processed
through well designed and operated treatment systems. This allowance for
variance incorporates all components of variability including process
and wastewater generation, sample collection, shipping, storage, and
analytical variability. This allowance is incorporated into the
limitations through the use of the variability factors, which are
calculated from the data from the sites using the model technologies. If
a site operates its treatment system to meet the relevant long-term
average, EPA expects the site to be able to meet the limitations. The
variability factor assures that normal fluctuations in a site’s
treatment are accounted for in the limitation. By accounting for these
reasonable excursions above the long-term average, EPA’s use of
variability factors results in limitations that are generally well above
the actual long-term averages. The proposed variability factor of 4.58
is the arithmetic average of 19 variability factors collected from the
17 construction sites also used to calculate the proposed long-term
average. The variability factors ranged from a minimum of 1.96 to a
maximum of 10.85.

	In its evaluation of the proposed daily variability factor, EPA
examined TSS limitations promulgated during the last 10 years.
Engineering references (e.g., American Society of Civil Engineers
(ASCE)/American Water Works Association (AWWA), Water Treatment Plant
Design, 4th Edition, McGraw-Hill, NYC, NY, 2005) cite conversion factors
for turbidity to TSS values. Because of the generally accepted
relationship between turbidity and TSS, EPA assumes that the variability
also would be similar for turbidity and TSS. Furthermore, although the
regulations were based upon different treatment technologies, wastewater
professionals generally agree that TSS and turbidity can be adequately
controlled by many different types of treatment systems. Furthermore,
each regulation used data from well operated and controlled treatment
processes in determining the variability of TSS. As shown in the TDD,
the values are relatively close in value, ranging from 2.9 to 5.4, with
an arithmetic average of 4.1. Because the C&D technology is a relatively
simple one, EPA concluded that the relatively large value of 4.58 for
the proposed variability factor still ensures a level of control that
EPA considers possible for a simple technology.

E. Engineering Review of Limitations

	In conjunction with the statistical methods, EPA performs an
engineering review to verify that the limitations are reasonable based
upon the design and expected operation of the control technologies and
the facility conditions. EPA compared the value of the proposed
limitation to the data values used to calculate the limitation. Most
monitoring results were substantially lower than the proposed turbidity
limit. In most instances where the effluent turbidity was higher than
the proposed turbidity limit, the data indicated sudden jumps in
turbidity levels which suggested that the treatment system was not being
operated properly.

	For the final rule, EPA will perform a more in-depth examination of the
range of performance by the treatment systems used as the basis of the
limitation. Data from some treatment systems demonstrate the best
available technology. Data from other systems may demonstrate the same
technology, but not the best demonstrated design and operating
conditions for that technology. For these sites, EPA will evaluate the
degree to which the site can upgrade its design, operating, and
maintenance conditions to meet the limitations. If such upgrades are not
possible, then EPA will modify the limitations to reflect the lowest
levels that the technologies can reasonably be expected to achieve. EPA
recognizes that, as a result of the proposed limitation, some
dischargers may need to improve treatment systems, erosion and sediment
controls, and/or treatment system operations in order to consistently
meet the effluent limitation. EPA determined that this consequence is
consistent with the Clean Water Act statutory framework, which requires
that discharge limitations reflect the best available technology.

F. Monthly Average Limitations

	Because this industry generally does not have continuous discharges,
EPA is proposing only a daily maximum limitation that would apply only
on days when the site discharges. While the actual monitoring
requirements will be determined by the permitting authority, the Agency
has assumed that sites will monitor every day that the discharge occurs.
In similar situations when it has assumed daily monitoring for other
industries, EPA typically has also promulgated monthly average
limitations with the daily maximum limitations. In establishing monthly
average limitations, EPA’s objective is to provide an additional
restriction to help ensure that sites target their average discharges to
achieve the long-term average. The monthly average limitation requires
continuous dischargers to provide on-going control, on a monthly basis,
that complements controls imposed by the daily maximum limitation. EPA
solicits comment on whether monthly average limitations or some other
approach would be appropriate to further ensure that sites target
treatment at the long-term average.

XVIII. Regulatory Implementation  TC \l1 "XVIII. Regulatory
Implementation

A. Relationship of Effluent Guidelines to NPDES Permits and ELG
Compliance Dates  TC \l2 "B. Relationship of Effluent Guidelines to
NPDES Permits

	Effluent guidelines act as a primary mechanism to control the discharge
of pollutants to waters of the U.S. Once finalized, the proposed C&D
regulations would be applied to C&D sites through incorporation in
individual NPDES permits or a general permit issued by EPA or authorized
states or tribes under section 402 of the Act.

	The Agency has developed the limitations for this proposed rule to
cover the discharge of pollutants for this point source category. In
specific cases, the NPDES permitting authority may elect to establish
effluent limitations for pollutants not covered by this regulation. In
addition, if state water quality standards or other provisions of state
or federal law authorize or require limits on pollutants not covered by
this regulation or authorize or require more stringent limits or
standards on pollutants to achieve compliance, the permitting authority
has authority to apply those effluent limitations or standards in their
NPDES permits. EPA does not intend for this rule to preclude states from
including controls in their stormwater programs that are found to be
effective at controlling discharges of pollutants.  TC \l2 "A.
Compliance Dates

B. Upset and Bypass Provisions  TC \l2 "C. Upset and Bypass Provisions

	A "bypass" is an intentional diversion of the streams from any portion
of a treatment facility. An "upset" is an exceptional incident in which
there is unintentional and temporary noncompliance with technology-based
permit effluent limitations because of factors beyond the reasonable
control of the permittee. EPA's regulations concerning bypasses and
upsets for direct dischargers are set forth at 40 CFR 122.41(m) and (n).

	Because much of today's proposed rule includes requirements for the
design, installation, and maintenance of erosion and sediment controls,
EPA considered the need for a bypass-type provision in regard to large
storm events. However, EPA did not specifically include such a provision
in the text of the proposed regulation because the proposed ELGs only
require dischargers to meet a numeric turbidity limit for discharges
from storm events smaller than the 2-year, 24-hour storm. Because EPA is
not establishing requirements for control of larger storm events,
specific bypass provisions were not necessary.

C. Variances and Waivers  TC \l2 "D. Variances and Waivers

	The CWA requires application of effluent limitation guidelines
established pursuant to section 301 to all direct dischargers. However,
the statute provides for the modification of these national requirements
in a limited number of circumstances. Moreover, the Agency has
established administrative mechanisms to provide an opportunity for
relief from the application of ELGs for categories of existing sources
for toxic, conventional, and nonconventional pollutants. "Ability to
Pay" and "water quality" waivers do not apply to conventional or toxic
pollutants (e.g., TSS, PCBs) and, therefore, do not apply to today's
proposed rule. However, the variance for Fundamentally Different Factors
(FDFs) may apply in some circumstances.

	 EPA will develop effluent limitations or standards different from the
otherwise applicable requirements if an individual discharging facility
is fundamentally different with respect to factors considered in
establishing the limitation of standards applicable to the individual
facility. Such a modification is known as a "fundamentally different
factors" (FDF) variance.

	Early on, EPA, by regulation provided for the FDF modifications from
the BPT and BAT limitations for toxic and nonconventional pollutants and
BPT limitations for conventional pollutants for direct dischargers. For
indirect dischargers, EPA provided for modifications for PSES. FDF
variances for toxic pollutants were challenged judicially and ultimately
sustained by the Supreme Court. Chemical Manufacturers Assn v. NRDC, 479
U.S. 116 (1985).

	Subsequently, in the Water Quality Act of 1987, Congress added new
section 301(n) of the Act explicitly to authorize modifications of the
otherwise applicable BAT effluent limitations or categorical
pretreatment standards for existing sources if a facility is
fundamentally different with respect to the factors specified in section
304 (other than costs) from those considered by EPA in establishing the
effluent limitations or pretreatment standard. Section 301(n) also
defined the conditions under which EPA may establish alternative
requirements. Under section 301(n), an application for approval of a FDF
variance must be based solely on (1) information submitted during
rulemaking raising the factors that are fundamentally different or (2)
information the applicant did not have an opportunity to submit. The
alternate limitation or standard must be no less stringent than
justified by the difference and must not result in markedly more adverse
non-water quality environmental impacts than the national limitation or
standard.

	EPA regulations at 40 CFR part 125, subpart D, authorizing the Regional
Administrators to establish alternative limitations and standards,
further detail the substantive criteria used to evaluate FDF variance
requests for direct dischargers. Thus, 40 CFR 125.31(d) identifies six
factors (e.g., volume of process wastewater, age and size of a
discharger's facility) that may be considered in determining if a