Economic, Environmental, and Benefits Analysis of the Final Metal Products & Machinery Rule 2 Printed on paper containing at least 30% postconsumer recovered fiber. U. S. Environmental Protection Agency Office of Water ( 4303T) 1200 Pennsylvania Avenue, NW Washington, DC 20460 EPA 821 B 03 002 Economic and Environmental Benefits Analysis Document For The Final Effluent Limitations Guidelines and Standards For The Metal Products & Machinery Point Source Category EPA 821 B 03 002 Christine Todd Whitman Administrator G. Tracy Mehan, III Assistant Administrator, Office of Water Geoffrey H. Grubbs Director, Office of Science and Technology Sheila E. Frace Director, Engineering and Analysis Division Nicolaas Bouwes Chief, Economic and Environmental Assessment Branch William Anderson Technical Coordinator Lynne Tudor Economist James C. Covington, III Economist February 2003 U. S. Environmental Protection Agency Office of Water Washington, DC 20460 ACKNOWLEDGMENTS AND DISCLAIMER The Agency would like to acknowledge the contributions of William Anderson, James C. Covington, III, Lynne Tudor, Lynn Zipf, and Nicolass Bouwes to development of this Economic and Environmental Benefits Analysis document. In addition, EPA acknowledges the contribution of Abt Associates, Westat, Eastern Research Group, and Science Application International Corporation.

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Mr. James C. Covington, III. Economist Engineering and Analysis Division ( 4303T) U. S. Environmental Protection Agency 1200 Pennsylvania Avenue, N. W. Washington, DC 20460 ( 202) 566  1034 covington. james@ epa. gov MP& M EEBA Table of Contents Table of Contents EXECUTIVE SUMMARY ES. 1 Overview of Facilities Evaluated for Regulation under the MP& M Point Source Category and Its Effluent Discharges ................................................................................... ES 1 ES. 2 Description of the Final Rule .................................................................... ES 3 ES. 3 Economic Impacts and Social Costs of the Final Rule ................................................ ES 3 ES. 3.1 Economic Impacts ....................................................................... ES 4 ES. 3.2 Social Costs ............................................................................ ES 7 ES. 4 National Benefits of the Final Rule ............................................................... ES 8 ES. 4.1 Reduced Human Health Risk ............................................................. ES 10 ES. 4.2 Ecological, Recreational, and Nonuser Benefits ............................................... ES 14 ES. 4.3 POTW Impacts ........................................................................ ES 15 ES. 4.4 Total Estimated Benefits of the Final MP& M Rule ............................................ ES 16 ES. 5 NationalBenefits Costs Comparison............................................................. ES 16 ES. 6 Ohio Case Study ............................................................................ ES 18 ES. 6.1 Benefits .............................................................................. ES 18 ES. 6.2 Social Costs ........................................................................... ES 20 ES. 6.3 Comparing Monetized Benefits and Costs ................................................... ES 20 PART I: INTRODUCTION AND BACKGROUND INFORMATION Chapter 1: Introduction 1.1 Purpose ...................................................................................... 1 1 1.2 Introduction ................................................................................... 1 1 1.3 Readers  Aids.................................................................................. 1 3 Chapter 2: The MP& M Industry and the Need for Regulation 2.1 Overview of Facilities Evaluated for Regulation under the MP& M Point Source Category ............... . . ..... 2 1 2.2 MP& M Discharges and the Need for Regulation....................................................... 2 3 2.2.1 Baseline MP& M Discharges for Regulated Facilities .............................................. 2 4 2.2.2 Discharges under the MP& M Regulation ....................................................... 2 4 2.3 Addressing Market Imperfections .................................................................. 2 5 2.4 Overlap with Other Effluent Guidelines.............................................................. 2 6 2.5 Meeting Legislative and Litigation Based Requirements ................................................ 2 9 Glossary ........................................................................................ 2 11 Acronyms ....................................................................................... 2 13 Chapter 3: Profile of the MP& M Industries 3.1 Data Sources .................................................................................. 3 2 3.2 Overview of the MP& M Industry and Industry Trends ................................................. 3 3 3.2.1 Aerospace ............................................................................... 3 7 3.2.2 Aircraft ................................................................................. 3 7 3.2.3 Electronic Equipment ...................................................................... 3 7 3.2.4 Hardware................................................................................ 3 8 3.2.5 Household Equipment...................................................................... 3 8 3.2.6 Instruments .............................................................................. 3 9 3.2.7 Iron and Steel ............................................................................ 3 9 3.2.8 Job Shops ............................................................................... 3 9 3.2.9 Mobile Industrial Equipment ................................................................ 3 9 3.2.10 Motor Vehicle and Bus & Truck ........................................................... 3 10 3.2.11 Office Machine ......................................................................... 3 10 3.2.12 Ordnance .............................................................................. 3 10 3.2.13 Precious Metals and Jewelry............................................................... 3 11 Table of Contents 1 MP& M EEBA Table of Contents 3.2.14 Printed Wiring Boards ................................................................... 3 11 3.2.15 Railroad............................................................................... 3 11 3.2.16 Ships and Boats ......................................................................... 3 11 3.2.17 Stationary Industrial Equipment ............................................................ 3 12 3.3 Characteristics of MP& M Manufacturing Sectors .................................................... 3 12 3.3.1 Domestic Production...................................................................... 3 13 3.3.2 Industry/ Market Structure .................................................................. 3 18 3.3.3 Financial Condition and Performance......................................................... 3 24 3.4 Characteristics of MP& M Non ManufacturingSectors ................................................ 3 25 3.4.1 Domestic Production...................................................................... 3 25 3.4.2 Industry Structure and Competitiveness ....................................................... 3 28 3.5 Characteristics of All MP& M Sectors.............................................................. 3 30 3.5.1. Eight firm Concentration Ratio ............................................................. 3 30 3.5.2 Risk Normalized Return on Assets ........................................................... 3 31 3.6 Characteristics of MP& M Facilities ............................................................... 3 32 Glossary ........................................................................................ 3 38 Acronyms ....................................................................................... 3 40 References ...................................................................................... 3 41 Chapter 4: Regulatory Options 4.1 Subcategorization .............................................................................. 4 1 4.2 Technology Options ............................................................................ 4 3 4.3 BPT/ BAT Options for Direct Dischargers ........................................................... 4 3 4.4 PSES Options for Indirect Dischargers .............................................................. 4 3 4.5 NSPS and PSNS Options for New Sources........................................................... 4 4 4.6 Summary of the Final Rule and Regulatory Alternatives ................................................ 4 4 Glossary ......................................................................................... 4 5 Acronyms ........................................................................................ 4 6 PART II: COSTS AND ECONOMIC IMPACTS Chapter 5: Facility Impact Analysis 5.1 Data Sources .................................................................................. 5 2 5.2 Methodology .................................................................................. 5 2 5.2.1 Converting Engineering Compliance Costs and Survey Financial Data to Current Year Dollar Values ........ 5 3 5.2.2 Market level Impacts and Cost Pass through Analysis ............................................. 5 4 5.2.3 Impact Measures for Private Facilities ......................................................... 5 5 5.2.4 Impact Measures for Railroad Line Maintenance Facilities ........................................ 5 12 5.2.5 Impact Measures for Government owned Facilities .............................................. 5 12 5.3 Results ...................................................................................... 5 14 5.3.1 Baseline Closures ....................................................................... 5 14 5.3.2 Price Increases .......................................................................... 5 15 5.3.3 Overview of Impacts ...................................................................... 5 16 5.3.4 Results for Indirect Dischargers ............................................................. 5 18 5.3.5 Results for Direct Dischargers .............................................................. 5 19 5.3.6 Results for Private Facilities ............................................................... 5 20 5.3.7 Results for Government Owned Facilities ..................................................... 5 21 Glossary ........................................................................................ 5 25 Acronyms ....................................................................................... 5 26 References ...................................................................................... 5 27 Chapter 6: Employment Effects 6.1 Job Losses Due to Closures....................................................................... 6 2 6.2 Job Gains Due to Compliance Requirements ......................................................... 6 3 6.3 Net Effects on Employment ...................................................................... 6 5 Glossary ......................................................................................... 6 7 Table of Contents 2 MP& M EEBA Table of Contents Acronym ........................................................................................ 6 8 References ....................................................................................... 6 9 Chapter 7: Government and Community Impact Analysis 7.1 Impacts on Governments......................................................................... 7 1 7.1.1 Impacts on Governments that Operate MP& M Facilities ........................................... 7 1 7.1.2 POTW Administrative Costs ................................................................. 7 2 7.2 Community Impacts of Facility Closures ............................................................ 7 6 Glossary ......................................................................................... 7 7 Acronyms ........................................................................................ 7 8 Chapter 8: Foreign Trade Impacts 8.1 Data sources .................................................................................. 8 1 8.2 Methodology .................................................................................. 8 2 8.3 Results....................................................................................... 8 3 References ....................................................................................... 8 5 Chapter 9: Firm Level, New Source and Industry Impacts 9.1 Firm Level Impacts ............................................................................. 9 1 9.1.1 Sources ................................................................................. 9 1 9.1.2 Methodology ............................................................................. 9 2 9.1.3 Results.................................................................................. 9 2 9.2 New Source Impacts ............................................................................ 9 3 9.2.1 Methodology ............................................................................. 9 4 9.2.2 Results .................................................................................. 9 5 9.3 Industry Level Impacts .......................................................................... 9 7 Glossary ......................................................................................... 9 9 Acronyms ....................................................................................... 9 10 References ...................................................................................... 9 11 Chapter 10: Small Entity Impact Analysis 10.1 Defining Small Entities ........................................................................ 10 2 10.2 Methodology ................................................................................ 10 4 10.3 Results..................................................................................... 10 4 10.3.1 Number of Affected Small Entities.......................................................... 10 4 10.3.2 Impacts on Facilities Owned by Small Entities................................................. 10 5 10.3.3 Impacts on Small Firms .................................................................. 10 6 10.4 Consideration of Small Entity Impacts in Developing the Final Rule..................................... 10 7 Glossary ........................................................................................ 10 8 Acronyms ....................................................................................... 10 9 References ..................................................................................... 10 10 Chapter 11: Social Costs 11.1 Components of Social Costs .................................................................... 11 1 11.2 Resource Costs of Compliance .................................................................. 11 2 11.3 POTW Administration Costs ................................................................... 11 4 11.4 Social Costs of Unemployment .................................................................. 11 5 11.4.1 Social Cost of Worker Dislocation .......................................................... 11 5 11.4.2 Cost of Administering Unemployment Benefits Programs ........................................ 11 6 11.4.3 Total Cost of Unemployment .............................................................. 11 6 11.5 Total Social Costs ............................................................................ 11 7 Glossary ........................................................................................ 11 8 References ...................................................................................... 11 9 Table of Contents 3 MP& M EEBA Table of Contents PART III: BENEFITS Chapter 12: Benefit Overview 12.1 MP& M Pollutants ............................................................................ 12 2 12.1.1 Characteristics of MP& M Pollutants ........................................................ 12 2 12.1.2 Effects of MP& M Pollutants on Human Health ................................................ 12 3 12.1.3 Environmental Effects of MP& M Pollutants .................................................. 12 7 12.1.4 Effects of MP& M Pollutants on Economic Productivity ......................................... 12 8 12.2 Linking the Regulation to Beneficial Outcomes ..................................................... 12 9 12.3 Qualitative and Quantitative Benefits Assessment .................................................. 12 11 12.3.1 Overview of Benefit Categories ........................................................... 12 11 12.3.2 Human Health Benefits .................................................................. 12 13 12.3.3 Ecological Benefits .................................................................... 12 13 12.3.4 Economic Productivity Benefits ........................................................... 12 14 12.3.5 Methods for Valuing Benefit Events ........................................................ 12 14 Glossary ....................................................................................... 12 16 Acronyms ...................................................................................... 12 19 References ..................................................................................... 12 20 Chapter 13: Human Health Benefits 13.1 Methodology & Data Sources ................................................................... 13 2 13.1.1 Cancer from Fish Consumption............................................................. 13 3 13.1.2 Cancer from Drinking Water Consumption ................................................... 13 8 13.1.3 Exposures above Non cancer Health Thresholds .............................................. 13 10 13.1.4 Human Health AWQC .................................................................. 13 14 13.2 Results .................................................................................... 13 17 13.2.1 Fish Consumption Cancer Results.......................................................... 13 17 13.2.2 Drinking Water Consumption Cancer Results................................................. 13 19 13.2.3 Non cancer Health Threshold Results ....................................................... 13 19 13.2.4 Human Health AWQC Results ............................................................ 13 21 13.3 Limitations and Uncertainties .................................................................. 13 22 13.3.1 Sample Design & Analysis of Benefits by Location of Occurrence ................................ 13 22 13.3.2 In Waterway Concentrations of MP& M Pollutants ............................................ 13 23 13.3.3 Joint Effects of Pollutants ................................................................ 13 23 13.3.4 Background Concentrations of MP& M Pollutants ............................................. 13 23 13.3.5 Downstream Effects .................................................................... 13 24 13.3.6 Exposed Fishing Population .............................................................. 13 24 13.3.7 Treatment of Cancer Latency ............................................................. 13 25 13.3.8 Treatment of Cessation Lag .............................................................. 13 25 13.3.9 Use of Mean Individual Exposure Parameters ................................................ 13 26 13.3.10 Cancer Potency Factors................................................................. 13 26 Glossary ....................................................................................... 13 27 Acronyms ...................................................................................... 13 28 References ..................................................................................... 13 29 Chapter 14: Lead Related Benefits 14.1 Overview of Lead Related Health Effects.......................................................... 14 2 14.1.1 Children Under Age One.................................................................. 14 3 14.1.2 Children Between the Ages of One and Seven ................................................. 14 3 14.1.3 Adults ................................................................................ 14 4 14.2 Health Benefits to Children..................................................................... 14 4 14.2.1 PbB Distribution of Exposed Children ....................................................... 14 5 14.2.2 Relationship Between PbB Levels and IQ ................................................... 14 12 14.2.3 Value of Children's Intelligence ........................................................... 14 12 14.2.4 Value of Additional Educational Resources .................................................. 14 14 14.2.5 Changes in Neonatal Mortality ............................................................ 14 17 Table of Contents 4 MP& M EEBA Table of Contents 14.3 Adult Health Benefits ........................................................................ 14 17 14.3.1 Estimating Changes in Adult PbB Distribution Levels .......................................... 14 20 14.3.2 Male Health Benefits ................................................................... 14 22 14.3.3 Female Health Benefits.................................................................. 14 26 14.4 Lead Related Benefit Results .................................................................. 14 28 14.4.1 Preschool Age Children Lead Related Benefit Results.......................................... 14 28 14.4.2 Adult Lead Related Benefit Results ........................................................ 14 29 14.5 Limitations and Uncertainties .................................................................. 14 31 14.5.1 Excluding Older Children ................................................................ 14 31 14.5.2 Compensatory Education Costs ........................................................... 14 32 14.5.3 Dose Response Relationships ............................................................. 14 32 14.5.4 Absorption Function for Ingested Lead in Fish Tissue .......................................... 14 32 14.5.5 Economic Valuation .................................................................... 14 33 Glossary ....................................................................................... 14 35 Acronyms ...................................................................................... 14 38 References ..................................................................................... 14 39 Chapter 15: Recreational Benefits 15.1 Ecological Improvements from the MP& M Regulation ............................................... 15 3 15.1.1 Overview of Ecological Improvements....................................................... 15 3 15.1.2 Quantification of Ecological Improvements ................................................... 15 3 15.1.3 Benefiting Reaches ...................................................................... 15 4 15.1.4 Geographic Characteristics of MP& M Reaches ................................................ 15 6 15.2 Valuing Economic Recreational Benefits .......................................................... 15 6 15.2.1 Transferring Values from Surface Water ValuationStudies....................................... 15 6 15.2.2 Recreational Fishing ..................................................................... 15 9 15.2.3 Wildlife Viewing ...................................................................... 15 13 15.2.4 Recreational Boating.................................................................... 15 17 15.2.5 Nonuse Benefits ....................................................................... 15 20 15.3 Summary of Recreational Benefits .............................................................. 15 20 15.4 Limitations and Uncertainties Associated with Estimating Recreational Benefits ............... . . ......... 15 22 Glossary ....................................................................................... 15 26 Acronyms ...................................................................................... 15 28 References ..................................................................................... 15 29 Chapter 16: POTW Benefits 16.1 Reduced Interference with POTW Operations ...................................................... 16 2 16.2 Assessing Benefits from Reduced Sludge Contamination.............................................. 16 2 16.2.1 Data Sources........................................................................... 16 2 16.2.2 Sludge Generation, Treatment, and Disposal Practices .......................................... 16 4 16.2.3 Overview of Improved Sludge Quality Benefits ................................................ 16 7 16.2.4 Sludge Use/ Disposal Costs and Practices ..................................................... 16 8 16.2.5 Quantifying Sludge Benefits .............................................................. 16 10 16.3 Estimated Savings in Sludge Use/ Disposal Costs ................................................... 16 15 16.4 Methodology Limitations ..................................................................... 16 16 Glossary ....................................................................................... 16 18 Acronyms ...................................................................................... 16 19 References ..................................................................................... 16 20 Chapter 17: Environmental Justice & Protection of Children 17.1 Demographic Characteristics of Populations Living in the Counties Near MP& M Facilities ............... . . . 17 1 17.2 Protection of Children from Environmental Health and Safety Risks..................................... 17 3 Glossary ........................................................................................ 17 4 Reference ....................................................................................... 17 5 Table of Contents 5 MP& M EEBA Table of Contents PART IV: COMPARISON OF COSTS AND BENEFITS Chapter 18: MP& M Benefit/ Cost Comparison 18.1 Estimating National Level Benefits and Costs ...................................................... 18 1 18.2 Social Costs ................................................................................. 18 2 18.3 Benefits .................................................................................... 18 2 18.4 Comparing Monetized Benefits and Costs ......................................................... 18 2 Chapter 19: Social Costs and Benefits of Regulatory Alternatives 19.1 Estimated Social Costs ......................................................................... 19 1 19.1.1 Compliance Costs for MP& M Facilities ...................................................... 19 1 19.1.2 Government Administrative Costs ........................................................... 19 2 19.1.3 Cost of Unemployment ................................................................... 19 2 19.1.4 Total Social Costs ....................................................................... 19 3 19.2 Estimated Benefits ............................................................................ 19 4 19.2.1 Human Health Benefits ................................................................... 19 4 19.2.2 Recreational Benefits ..................................................................... 19 5 19.2.3 Avoided Sewage Sludge Disposal or Use Costs................................................. 19 6 19.2.4 Total Monetized Benefits.................................................................. 19 7 19.3 Comparison of Estimated Benefits and Costs........................................................ 19 7 Glossary ....................................................................................... 19 10 Acronym ....................................................................................... 19 11 PART V: OHIO CASE STUDY Chapter 20: Baseline Conditions in Ohio 20.1 Overview of Ohio s Geography, Population, and Economy ............................................ 20 2 20.2 Profile of MP& M Facilities in Ohio .............................................................. 20 3 20.3 Ohio s Water Resources ....................................................................... 20 6 20.3.1 Aquatic Life Use ........................................................................ 20 8 20.3.2 Water Recreation in Ohio ................................................................ 20 11 20.3.3 Commercial Fishing in Ohio .............................................................. 20 12 20.3.4 Surface Water Withdrawals .............................................................. 20 12 20.4 Surface Water Quality in Ohio ................................................................. 20 12 20.4.1 Use Attainment in Streams and Rivers in Ohio ................................................ 20 13 20.4.2 Lake Erie and Other Lakes Use Attainment .................................................. 20 13 20.4.3 Causes and Sources of Use Non Attainment in Ohio ........................................... 20 14 20.5 Effects of Water Quality Impairments on WaterResource Services..................................... 20 15 20.5.1 Effect of Water Quality Impairment on Life Support for Animals and Plants ............... . . ....... 20 15 20.5.2 Effect of Water Quality Impairment on RecreationalServices .................................... 20 17 20.6 Presence and Distribution of Endangered and Threatened Species in Ohio ............................... 20 18 20.6.1 E& T Fish............................................................................. 20 19 20.6.2 E& T Mollusks......................................................................... 20 19 20.6.3 Other Aquatic E& T Species .............................................................. 20 20 Glossary ....................................................................................... 20 24 Acronyms ...................................................................................... 20 27 References ..................................................................................... 20 28 Chapter 21: Modeling Recreational Benefits in Ohio with a RUM Model RUM Analysis 21.1 Methodology ............................................................................... 21 2 21.1.1 Overview .............................................................................. 21 2 21.1.2 Modeling the Site Choice Decision.......................................................... 21 3 21.1.3 Modeling Trip Participation ............................................................... 21 6 21.1.4 Calculating Welfare Changes from Water Quality Improvements.................................. 21 9 21.1.5 Extrapolating Results to the State Level ..................................................... 21 10 Table of Contents 6 MP& M EEBA Table of Contents 21.2 Data ...................................................................................... 21 10 21.2.1 The Ohio Data ........................................................................ 21 11 21.2.2 Estimating the Price of Visits to Sites....................................................... 21 14 21.2.3 Site Characteristics .................................................................... 21 14 21.3 Site Choice Model Estimates .................................................................. 21 17 21.3.1 Fishing Model ........................................................................ 21 18 21.3.2 Boating Model ........................................................................ 21 19 21.3.3 Swimming Model ...................................................................... 21 20 21.3.4 Viewing ( Near water Activity) Model ...................................................... 21 20 21.4 Trip Participation Model...................................................................... 21 20 21.5 Estimating Benefits from Reduced MP& M Discharges in Ohio ....................................... 21 23 21.5.1 Benefiting Reaches in Ohio .............................................................. 21 23 21.5.2 Estimating Recreational Benefits in Ohio ................................................... 21 24 21.6 Limitations and Uncertainty ................................................................... 21 25 21.6.1 One State Approach .................................................................... 21 25 21.6.2 Including One Day Trips Only ............................................................ 21 26 21.6.3 Nonuse Benefits ....................................................................... 21 26 21.6.4 PotentialSources of Survey Bias .......................................................... 21 26 Glossary ....................................................................................... 21 28 Acronyms ...................................................................................... 21 30 References ..................................................................................... 21 31 Chapter 22: MP& M Benefit Cost Analysis in Ohio 22.1 Benefits of the Final Regulation.................................................................. 22 1 22.1.1 Human Health Benefits( Other than Lead)..................................................... 22 2 22.1.2 Lead Related Benefits .................................................................... 22 3 22.1.3 Economic Productivity Benefits ............................................................ 22 4 22.1.4 Total Monetized Benefits.................................................................. 22 4 22.2 Social Costsof the FinalRegulation .............................................................. 22 5 22.2.1 Baseline and Post Compliance Closures ...................................................... 22 5 22.2.2 Compliance Costs for MP& M Facilities ...................................................... 22 6 22.2.3 Total Social Costs ....................................................................... 22 7 22.3 Comparison of Monetized Benefits and Costs in Ohio ................................................ 22 7 Glossary ........................................................................................ 22 8 Acronyms ....................................................................................... 22 9 APPENDICES Appendix A: Detailed Economic Impact Analysis Information A. 1 MP& M SIC and NAICS Codes ................................................................... A 1 A. 1.1SIC Codes by Sector ....................................................................... A 1 A. 1.2 Bridge Between NAICS and SIC codes ........................................................ A 7 A. 2 Annual Establishment   Births  and   Deaths  in MP& M Industries ...................................... A 26 A. 3 Description of MP& M Surveys .................................................................. A 28 A. 3.1 Screener Surveys ........................................................................ A 28 A. 3.2 Ohio Screener Surveys .................................................................... A 28 A. 3.3 Detailed MP& M Industry Surveys........................................................... A 28 A. 3.4 Iron and Steel Survey..................................................................... A 29 A. 3.5 Municipality Survey...................................................................... A 29 A. 3.6 Federal Facility Survey ................................................................... A 29 A. 3.7 POTW Survey .......................................................................... A 29 References ...................................................................................... A 31 Appendix B: Cost Pass Through Analysis B. 1 The Choice of Sector Specific CPT Coefficients...................................................... B 1 B. 2 Econometric Analysis........................................................................... B 2 Table of Contents 7 MP& M EEBA Table of Contents B. 2.1 Framework .............................................................................. B 3 B. 2.2 Data Used to Estimate the Regression Equation.................................................. B 4 B. 2.3 Regression Results ........................................................................ B 6 B. 3 Market Structure Analysis ....................................................................... B 9 B. 3.1 Measures Descriptions ..................................................................... B 9 B. 3.2 Results ................................................................................ B 13 B. 4 Validation of Econometrically Estimated CPT Coefficients ............................................ B 16 B. 4.1 Other Metal Products ..................................................................... B 17 B. 4.2 Job Shops .............................................................................. B 17 B.. 3 Motor Vehicle ........................................................................... B 18 B. 4.4 Aircraft ............................................................................... B 18 B. 4.5 Mobile Industrial Equipment .............................................................. B 18 B. 4.6 Aerospace .............................................................................. B 18 B. 5 Adjusting Estimates of Compliance CPT Potential ................................................... B 18 Attachment B. A: Selected Review of CPT Literature ..................................................... B 20 B. A. 1 Ashenfelter et al. ( 1998),   Identifying the Firm Specific Cost Pass Through Rate.  ................ . ... B 20 B. A. 2 Exchange Rate Pass Through .............................................................. B 20 B. A. 3 Tax Pass Through ....................................................................... B 20 B. A. 4 Studies Cited ........................................................................... B 20 Acronyms ....................................................................................... B 22 Appendix C: Summary of Moderate Impact Thresholds by Sector C. 1 Developing Threshold Values for Pre Tax Return on Assets ( PTRA) ...................................... C 1 C. 2 Developing Threshold Values for Interest CoverageRatio ( ICR) .......................................... C 2 C. 3 Summary of Results ............................................................................. C 4 References ....................................................................................... C 5 Appendix D: Estimating Capital Outlays for MP& M Discounted Cash Flow Analyses D. 1 Analytic Concepts Underlying Analysis of Capital Outlays ............................................. D 2 D. 2 Specifying Variables for the Analysis ............................................................. D 4 D. 3 Selecting the Regression Analysis Dataset .......................................................... D 7 D. 4 Specification of Models to be Tested .............................................................. D 8 D. 4.1 LinearModel Specification ................................................................ D 9 D. 4.2 Log LinearModel Specification ........................................................... D 10 D. 4.3 Sensitivity Analysis ..................................................................... D 12 D. 5 Model Validation ............................................................................ D 12 Attachment D. A: Bibliography of Literature Reviewed for this Analysis ..................................... D 17 Attachment D. B: Historical Variables Contained in the Value Line Investment Survey Dataset ............... . . .. D 18 Appendix E: Calculation of Capital Cost Components E. 1 Calculation of One Time Capital Cost Components .................................................... E 1 Appendix F: Administrative Costs F. 1 Effluent Guidelines Permitting Requirements ......................................................... F 1 F. 1.1 NPDES Basic IndustrialPermit Program ....................................................... F 1 F. 1.2 Pretreatment Program ...................................................................... F 2 F. 2 POTW Administrative Cost Methodology ........................................................... F 2 F. 2.1 Data Sources............................................................................. F 2 F. 2.2 Overview of Methodology .................................................................. F 3 F. 3 Unit Costs of Permitting Activities ................................................................. F 4 F. 3.1 Permit Application and Issuance.............................................................. F 4 F. 3.2 Inspection ............................................................................... F 7 F. 3.3 Monitoring .............................................................................. F 7 F. 3.4 Enforcement ............................................................................. F 9 F. 3.5 Repermitting ............................................................................ F 10 F. 4 POTW Administrative Costs by Option ............................................................ F 10 Appendix F Exhibits............................................................................... F 12 Table of Contents 8 MP& M EEBA Table of Contents References ...................................................................................... F 25 Appendix G: Extrapolation Methods G. 1 Using Raking to Adjust MP& M Facility Sample Weights............................................... G 2 G. 1.1 Data Sources ............................................................................ G 2 G. 1.2 Raking Adjustment........................................................................ G 3 G. 2 Methodology for Developing Sample Weighted Estimates for Sites with More Than One MP& M Facility ........ G 7 G. 3 Methodology for Extrapolation of Ohio Case Study Results to the National Level ................ . .......... G 13 G. 3.1 Change in Pollutant Loads ................................................................. G 14 G. 3.2 Level of Recreational Activities on Reaches Affected by MP& M Discharges ............... . . ........ G 14 G. 3.3 Differences in Household Income ........................................................... G 14 G. 4 Results ..................................................................................... G 15 Glossary ........................................................................................ G 17 Appendix H: Fate and Transport Model for DW and Ohio Analyses H. 1 Model Equations .............................................................................. H 1 H. 2 Model Assumptions ............................................................................ H 3 H. 2.1 Steady Flow Conditions Exist Within the Stream or River Reach ................................... H 3 H. 2.2 Longitudinal Dispersion of the Pollutant Is Negligible ............................................ H 3 H. 2.3 Flow Geometry, Suspension of Solids, and Reaction Rates Are Constant Within a River Reach ............ H 4 H. 3 Hydrologic Linkages ........................................................................... H 4 H. 4 Associating Risk with Exposed Populations ......................................................... H 4 H. 5 Data Sources ................................................................................. H 4 H. 5.1 Pollutant Loading Data Used in the Drinking Water Risk Analysis................................... H 4 H. 5.2 Pollutant Loading Data Used in the Ohio Case Study Analysis...................................... H 4 Glossary ......................................................................................... H 8 Acronyms ........................................................................................ H 9 References ...................................................................................... H 10 Appendix I: Environmental Assessment I. 1 MP& M PollutantCharacterization ................................................................. I 4 I. 1.1 Identifying MP& M Pollutants ................................................................ I 4 I. 1.2 Physical Chemical Characteristics and Toxicity Data of MP& M Pollutants ............... . . ............ I 9 I. 1.3 Grouping MP& M Pollutants Based on Risk to Aquatic Receptors ................................... I 21 I. 1.4 Assumptions and Limitations ............................................................... I 23 I. 2. Methodology ................................................................................. I 23 I. 2.1 Sample Set Data Analysis and National Extrapolation ............................................ I 23 I. 2.2 Water Quality Modeling ................................................................... I 23 I. 2.3 Impact of Indirect Discharging Facilities on POTW Operations..................................... I 25 I. 2.4 Assumptions and Limitations ............................................................... I 27 I. 3 Data Sources ................................................................................. I 28 I. 3.1 Facility Specific Data ..................................................................... I 28 I. 3.2 Water Body Specific Data.................................................................. I 28 I. 3.3 Information Used to Evaluate POTW Operations ................................................ I 29 I. 4 Results ...................................................................................... I 33 I. 4.1 Human Health Impacts .................................................................... I 34 I. 4.2 Aquatic Life Effects....................................................................... I 37 I. 4.3 POTW Effects ........................................................................... I 41 Glossary ........................................................................................ I 44 Acronyms ....................................................................................... I 48 References ...................................................................................... I 49 Appendix J: Spacial Distribution of MP& M Facilities and Recreational User Populations Table J. 1 Distribution of MP& M Facilities and Participants of Water Based Recreation by State ................ . .. J 2 Figure J. 1 Cumulative Distribution of Facilities and Participants................................................... J 4 Table of Contents 9 MP& M EEBA Table of Contents Appendix K: Selecting WPT Values for Benefits Transfer K. 1 Desvousges et al., 1987. Option Price Estimates for Water Quality Improvements: A Contingent Valuation Study for the Monongahela River .................................................................... K 2 K. 2 Farber and Griner, 2000. Valuing Watershed Quality Improvements Using Conjoint Analysis ................. K 3 K. 3 Jakus et al., 1997. Do Sportfish Consumption Advisories Affect Reservoir Anglers  Site Choice? .............. K 5 K. 4 Lant and Roberts, 1990. Greenbelts in the Cornbelt: Riparian Wetlands, Intrinsic Values, and Market Failure .... K 6 K. 5 Audrey Lyke, 1993. Discrete Choice Models to Value Changes in Environmental Quality: A Great Lakes Case Study ...................................................................................... K 7 K. 6 Montgomery and Needelman, 1997. The Welfare Effects of Toxic Contamination in Freshwater Fish ........... K 8 K. 7 Phaneuf et al., 1998. Valuing Water Quality Improvements Using Revealed Preference Methods When Corner Solutions are Present .......................................................................... K 8 Glossary ....................................................................................... K 10 Acronyms ...................................................................................... K 11 References ..................................................................................... K 12 Appendix L: Parameters Used in the IEUBK Model Table B 1: Description of Parameters Used in the IEUBK Lead Model ....................................... L 1 Appendix M: Sensitivity Analysis of Lead Related Benefits M. 1 Values for Quantified Lead Related Health Effects................................................... M 1 M. 2 Lead Related Benefit Results.................................................................... M 2 M. 2.1 Preschool Age Children Lead Related Benefits ................................................ M 2 M. 2.2 Adult Lead Related Benefits ............................................................... M 3 Appendix N: Analysis of the National Demand for Water Based Recreation Survey N. 1 Background Information........................................................................ N 1 N. 2 Data Analysis ................................................................................ N 2 N. 3 Participation in Water Based Recreation by Activity Type ............................................. N 2 N. 4 Allocation of Trips by Water Body Type.......................................................... N 11 N. 5 One Way Travel Distance ..................................................................... N 16 N. 6 Individual Expenditures per Trip ................................................................ N 19 N. 7 Distribution of Direct Costs for Single day Trips.................................................... N 22 N. 8 Profile of Boating Trips ....................................................................... N 27 N. 9 Profile of Fishing Trips ....................................................................... N 30 Table of Contents 10 MP& M EEBA Executive Summary Executive Summary INTRODUCTION EPA is promulgating effluent limitations guidelines and standards for the Metal Products and Machinery ( MP& M)

industry. This document presents EPA s economic and environmental analyses supporting the final rule. The Executive Summary provides an overview of the costs and benefits of the regulation.

Overall, EPA finds that the final rule has modest economic impacts and benefits. The estimated social cost of the final rule is $ 13.8 million annually ( 2001$). The total benefits that can be valued in dollar terms in the categories traditionally analyzed for effluent guidelines range from around $ 1.0 to $ 1.5 million annually ( 2001$), based on alternative extrapolation methods.

EPA recognizes that estimates of both costs and benefits are uncertain. To supplement the national level analysis performed for the final MP& M regulation, EPA conducted a more detailed case study of the expected State level costs and benefits of the MP & M rule in Ohio. In contrast to the national level analysis, the more detailed case study analysis finds that the final regulation would achieve benefits substantially exceeding estimated social costs. Comparing the midpoint estimate of social costs ($ 62,232) with the midpoint EXECUTIVE SUMMARY CONTENTS ES. 1 Overview of Facilities Evaluated for Regulation under the MP& M Point Source Category and Its Effluent Discharges ...... ES 1 ES. 2 Description of the Final Rule ............... ES 3 ES. 3 Economic Impacts and Social Costs of the Final Rule ................. .......... ES 3 ES. 3.1 Economic Impacts ................. ES 4 ES. 3.2 Social Costs ................. ..... ES 7 ES. 4 National Benefits of the Final Rule .......... ES 8 ES. 4.1 Reduced Human Health Risk ........ ES 10 ES. 4.2 Ecological, Recreational, and Nonuser Benefits ................. ... ES 14 ES. 4.3 Reduced POTW Impacts ........... ES 15 ES. 4.4 Total Estimated Benefits of the Final MP& M Rule ................. .. ES 16 ES. 5 National Benefit Costs Comparison ......... ES 16 ES. 6 Ohio Case Study ................. ....... ES 18 ES. 6.1 Benefits ................. ........ ES 18 ES. 6.2 Social Costs ................. .... ES 20 ES. 6.3 Comparing Monetized Benefits and Costs ................. ......... ES 20 estimate of monetizable benefits ($ 930,408) for Ohio, EPA estimates a net benefit of the final MP& M rule for Ohio is $ 868,178 ( 2001$).

EPA notes that effluent limitations guidelines for the MP& M industry are technology based. EPA is neither required to demonstrate environmental benefits of its technology based rules, nor is it required to consider receiving water quality in setting technology based effluent limitations guidelines and standards. EPA considers benefits as one of the factors that the Agency evaluates.

Detailed descriptions of the analytic methodologies and results are presented in the Economic, Environmental, and Benefits Assessment for the Final Metal Products and Machinery Rule ( EEBA). In addition, the EEBA presents costs, benefits, and economic impacts for alternatives to the final rule that were considered by EPA.

ES. 1 OVERVIEW OF FACILITIES EVALUATED FOR REGULATION UNDER THE MP& M POINT SOURCE CATEGORY AND ITS EFFLUENT DISCHARGES The MP& M Point Source Category regulates oily operations process wastewater discharges to surface waters from existing or new industrial facilities ( including facilities owned and operated by federal, state, or local governments) engaged in manufacturing, rebuilding, or maintenance of metal parts, products, or machines for use in the sixteen Metal Product &

Machinery ( MP& M) industrial sectors. Please note the underlined language in the previous sentence as a facility may be subject to the MP& M effluent guidelines even if it is not in one of the MP& M industrial sectors. For example, EPA considers a facility performing machining part of the   Bus & Truck  MP& M industrial sector if it manufactures metal parts for truck trailers. Process wastewater means wastewater as defined at 40 CFR parts 122 and 401, and includes wastewater from air pollution control devices ( see 40 CFR 438.2( g)). Oily operations are listed at 40 CFR 438.2( g) and defined in Appendix B to Part 438 ( see also Section 4 of the TDD ).

ES 1 MP& M EEBA Executive Summary According to Statistics of U. S. Business, 1996, approximately 638,696 establishments operate in the MP& M industry sectors.

Based on information in the MP& M survey database, approximately 44,000 facilities meet the definition of an MP& M facility. These 44,000 facilities include approximately 41,000 indirect dischargers ( i. e., facilities discharging effluent to a publicly owned sewage treatment works or POTWs) and 3,000 direct dischargers ( i. e., facilities discharging effluent directly to a waterway under a NPDES permit).

Table ES. 1 reports the estimated number of MP& M facilities and total discharge flow ( before final rule implementation) by type of facility. The largest number of sites, approximately 22,000, perform   rebuilding/ maintenance only  and account for approximately 6 percent of the total estimated discharge flow for the industry.   Manufacturing only  contains the next largest number of facilities ( 15,400) and accounts, by far, for the largest percentage of the total estimated discharge flow for the industry ( 82 percent).

Table ES. 1: Number of MP& M Facilities and Total Discharge Flow by Type of Facility Type of Facility Number of Facilities Total Estimated Discharge Flow ( million gal/ yr) Percent of Facilities Percent of Total Discharge Flow Manufacturing &

Rebuilding/ Maintenance 6,600 9,400 15.0% 12.0%

Manufacturing only 15,400 64,100 35.0% 82.0%

Rebuilding/ Maintenance only 22,000 4,700 50.0% 6.0%

Total 44,000 78,200 100.0% 100.0%

Source: U. S. EPA analysis. See Section 4 of the Technical Development Document for the final rule.

Of the 43,858 water discharging facilities, 3,593 are predicted to close in the baseline, leaving 40,265 existing MP& M facilities that EPA estimates could be regulated. 1 After accounting for subcategory and discharger class exclusions, EPA estimates that the final rule will regulate 2,382 of these facilities, all of which are direct dischargers. These regulated facilities represent 5.9 percent of the 40,265 facilities that could be potentially regulated.

Table ES. 2 summarizes information on the total number of MP& M facilities that were evaluated for the final rule, the number operating in the baseline, and the number and percent of facilities that will be regulated under the final rule. As reported in Table ES. 2, no indirect dischargers are subject to the final regulation. The rule will regulate 2,382 direct dischargers in the Oily Wastes subcategory.

Table ES. 2: Number of MP& M Facilities Evaluated for the Final Rule and Regulated under the Final Rule Discharge Status MP& M Facilities Operating in the Baseline Regulated under the Final Rule Percent of Facilities Operating in the Baseline that are Regulated Direct dischargers 2,739 2,641 2,382 90%

Indirect dischargers 41,162 37,652 0 0%

All dischargers 43,858 40,265 2,382 6%

Source: U. S. EPA analysis.

1 These are facilities that are predicted to close due to weak financial performance under baseline conditions, i. e., in the absence of the final rule. EPA does not attribute the costs or the reduced discharges resulting from these baseline closures to the final rule, and therefore excludes these facilities from its analyses of the rule s impacts. Baseline closures account for differences between the universe of facilities discussed in this report and the universe discussed in the Technical Development Document.

ES 2 MP& M EEBA Executive Summary Several aspects of the MP& M industries as a whole and part of those industries evaluated for regulation under the final rule are important in understanding the need for the regulation, the likely distribution and occurrence of benefits, and the framework of the economic analysis for the regulation.

Facilities in the relevant MP& M industries are located in every state, with a particular concentration in the heavy industrial regions along the Gulf Coast, both East and West Coasts and the Great Lakes Region. Moreover, MP& M facilities are frequently located in highly populated regions. Based on an analysis of in scope sample facilities, around 35% of these facilities discharge to reaches located adjacent to counties with populations of at least 500 thousand people. 2 Discharges of these pollutants to surface waters and POTW s have a number of adverse effects, including degradation of aquatic habitats, reduced survivability and diversity of native aquatic life, and increased human health risk through the consumption of contaminated fish and water.

Many MP& M facilities evaluated for the final regulation produce goods and services that serve multiple market sectors. It is not possible to associate regulatory costs and benefits to particular sectors, because EPA is not able to link regulated processes to specific sectors for facilities operating in multiple sectors. As a result, EPA s cost and economic impact analyses are disaggregated by type of facility but not by sector.

ES. 2 DESCRIPTION OF THE FINAL RULE In order to address variations between products, raw materials processed, and other factors that result in distinctly different effluent characteristics, EPA proposed eight groupings called   subcategories  for the January 2001 proposal and June 2002 Notice of Data Availability ( NODA). EPA retained this subcategory structure for evaluating options for the final rule.

Regulation of a category using subcategories allows each subcategory to have a uniform set of effluent limitations that take into account technological achievability and economic impacts unique to that subcategory ( see Section 6 of the TDD). For the final rule, EPA is establishing limitations and standards only for direct dischargers in the Oily Wastes subcategory. The other seven subcategories ( General Metals, Metal Finishing Job Shops, Non Chromium Anodizing, Printed Wiring Board,

Railroad Line Maintenance, Shipbuilding Dry Docks, and Steel Forming & Finishing) were considered for regulation at proposal and for some of the alternative regulatory options, but are not further regulated under the final rule.

EPA is establishing BPT pH limitations and daily maximum limitations for two pollutants, oil and grease as hexane extractable material ( O& G ( as HEM)) and total suspended solids ( TSS), for direct dischargers in the Oily Wastes subcategory based on the proposed technology option ( Option 6). The technology requirements include the following treatment measures:

( 1) in process flow control and pollution prevention; and ( 2) oil water separation by chemical emulsion breaking and skimming ( see Section 9 of the TDD). This technology is available technology readily applicable to all facilities in the Oily Wastes subcategory. Approximately 42% of the direct discharging facilities in the Oily Wastes subcategory currently employ this technology already.

EPA is promulgating BCT equivalent to BPT for facilities in the Oily Wastes subcategory and has decided not to establish BAT limitations. EPA is promulgating NSPS for new direct dischargers in the Oily Wastes subcategory at the BPT and BCT levels.

ES. 3 ECONOMIC IMPACTS AND SOCIAL COSTS OF THE FINAL RULE EPA assessed the economic impacts and social costs of the final rule using detailed financial and technical data from the MP & M surveys ( see Section 3 of the TDD ). Engineering analyses of these facilities identified the pollution prevention and treatment systems needed to comply with the final rule and other regulatory alternatives. The estimated capital and annual operating and maintenance costs of these systems, incremental to the costs of systems already in place, represent the 2 EPA is not able to characterize the location characteristics of all potentially regulated MP& M facilities at the national level precisely, because the MP& M survey design was not intended to provide national results by location characteristics.

ES 3 MP& M EEBA Executive Summary compliance costs of the rule. 3 EPA analyzed the financial performance of the facilities evaluated for regulation under pre

regulation conditions ( the baseline) and as subject to regulatory requirements. The Agency used a variety of measures to assess the economic impacts resulting from the final rule, both for the regulated MP& M facilities and for the firms and governments that own the facilities. The economic impact analysis also considered impacts for small entities in particular,

and impacts on employment, foreign trade and communities. The results of the analyses for sample facilities were extrapolated using survey sample weights for each facility, to provide national level results.

ES. 3.1 Economic Impacts Overall, EPA found the econom ic impact of the final rule to be modest. The following are EPA s findings for different categories of impacts.

a. Facility impacts The facility impact analysis assesses how facilities will be affected financially by the final rule. Key outputs of the facility impact analysis include expected facility closures in the MP& M industries, associated losses in employment, and the number of facilities experiencing financial stress short of closure (  moderate impacts ). EPA performed economic impact analyses for three categories of facilities, using different methodologies to evaluate each of the groups. The three groups are:

  Private MP& M Facilities. This group includes privately owned facilities that do not perform railroad line maintenance and are not owned by governments. This major category includes private businesses in a wide range of sectors or industries, including facilities that manufacture and rebuild railroad equipment. Only facilities that repair railroad track and equipment along the railroad line are not included.

  Railroad line maintenance facilities maintain and repair railroad track, equipment and vehicles.

  Government owned facilities include MP& M facilities operated by municipalities, State agencies and other public sector entities such as State universities. Many of these facilities repair, rebuild, and maintain buses, trucks, cars,

utility vehicles ( e. g., snow plows and street cleaners), and light machinery.

The specific methodology used to assess impacts differed for each of the three types of MP& M facilities. For private MP& M facilities, EPA established thresholds for measures of financial performance and compared the facilities  performance before and after compliance with each regulatory option with these thresholds. Impacts were measured at the operating company level for railroad line maintenance facilities, since firms are unlikely to keep track of financial performance at the facility level for these sites. For governments, EPA compared compliance costs with facilities  baseline costs of service, and assessed the impact of the compliance costs on the government s taxpayers and on its ability to finance compliance costs by issuing debt.

EPA identified facilities that are financially weak and might be expected to close under baseline conditions. Of the estimated 43,858 discharging facilities, 8.2 percent or 3,593 facilities were assessed as baseline closures. The 3,593 baseline closures include 3,511 indirect dischargers, or 8.5 percent of indirect dischargers, and 98 direct dischargers, or 3.6 percent of direct dischargers. These facilities were excluded from the post compliance analysis of regulatory impacts.

Table ES. 3 summarizes the facility level economic impact of the final rule. EPA estimates that the final rule will cause no facilities to close or to incur moderate financial stress short of closure. The final rule excludes all indirect discharging facilities and two percent of the direct discharging facilities from requirements.

3 The annual equivalent of capital and other one time costs is calculated by annualizing costs at a seven percent discount rate over an estimated 15 year equipment life. Annual compliance costs are annualized capital costs plus annual operating and maintenance ( O& M)

costs.

ES 4 MP& M EEBA Executive Summary Table ES. 3: Regulatory Impacts for All Facilities, Final Rule, National Estimates Totala Direct Indirect Number of facilities operating in the baseline: total 40,265 2,641 37,652 private MP& M and railroad line maintenance 36,480 2,183 34,325 government owned 3,785 458 3,327 Number of facilities with subcategory exclusions 37,883 259 37,652 Percent of facilities operating in the baseline excluded or below cutoffs 94.1% 9.8% 100.0%

Number of facilities operating subject to regulatory requirements 2,382 2,382 0 Number of regulatory closures 0 0 0 Percent of facilities operating in the baseline that are regulatory closures 0.0% 0.0% 0.0%

Number of facilities experiencing moderate impacts 0 0 0 Percent of facilities operating in the baseline that experience moderate impacts 0.0% 0.0% 0.0%

a The total number of facilities does not sum to the number of facilities by subcategory because some facilities have an indirect and direct discharging operation within the same facility.

Source: U. S. EPA analysis.

Table ES. 4 summarizes impacts for government owned facilities in particular. Under the final rule, 88 percent of the government owned facilities are excluded from requirements by subcategory exclusions. The compliance costs of the final rule do not result in significant budgetary impacts for any of the governments that operate MP& M facilities.

Table ES. 4: Regulatory Impacts for Government Owned Facilities, Final Rule, National Estimates Number of government owned facilities operating in the baseline 3,785 Number of facilities with subcategory exclusions 3,327 Percent of facilities operating in the baseline excluded 88%

Number of facilities operating subject to regulatory requirements 458 Number of facilities experiencing significant budgetary impactsa 0 Percent of facilities operating in the baseline that experience significant budgetary impacts 0%

a A government is judged to experience major budgetary impacts if ( 1) any of its MP& M facilities incur compliance costs exceeding 1% of baseline cost of service and ( 2) the government fails both the taxpayer impact and debt impact tests.

Source: U. S. EPA analysis.

b. Firm level impacts EPA examined the impacts of the final rule on firms that own MP& M facilities, as well as on the financial condition of the facilities themselves. A firm that owns multiple MP& M facilities could experience adverse financial impacts at the firm level if its facilities are among those that incur significant impacts at the facility level. The firm level analysis is also used to assess impacts on small firms, as required by the Regulatory Flexibility Act.

EPA compared compliance costs with revenue at the firm level as a measure of the relative burden of compliance costs. EPA applied this analysis only to MP& M facilities owned by private entities. EPA estimated firm level compliance costs by summing costs for all facilities owned by the same firm that responded to the survey plus estimated compliance costs for ES 5 MP& M EEBA Executive Summary additional facilities for which respondents submitted voluntary information. The Agency was not able to estimate the national numbers of firms that own MP & M facilities precisely, because the sample weights based on the survey design represent numbers of facilities rather than firms. Most MP& M facilities ( 26,472 of 36,480, or 73 percent) are single facility firms,

however. These firms can be analyzed using the survey weights. In addition, from survey responses, EPA identified 389 sample facilities that are owned by 276 multi facility firms. It is not known how many multi facility firms exist at the national level, so EPA included these 276 firms in the firm level analysis without extrapolation to the national level.

Table ES. 5 shows the results of the firm level analysis. The results represent a total of 26,748 MP& M firms ( 26,472 + 276),

owning 26,861 facilities ( 26,472 owned by single facility firms + 389 owned by multi facility firms).

Table ES. 5: Firm Level Before Tax Annual Compliance Costs as a Percent of Annual Revenues Number of Firms in the Analysis a Number and Percent with Before Tax Annual Compliance Costs/ Annual Revenues Equal to:

0% > 0% and < 1% Over 1%

Number % Number % Number %

26,748 25,722 96.2% 1,027 3.8% 0 0%

a Firms whose only MP& M facilities close in the baseline are excluded.

Source: U. S. EPA analysis.

None of the firms in the analysis incur after tax costs of greater than 1 percent of their annual revenues. Of the 1,027 firms that incur any costs at all, none own facilities that close or experience moderate impacts as a results of the final rule.

This analysis is likely to overstate costs at the firm level because it does not consider the actions a multi facility firm might take to reduce its compliance costs under the final rule, such as transferring functions among facilities to consolidate wet processes and to take advantage of scale economies in wastewater treatment.

c. Employment effects Potential changes in employment from the rule include: ( 1) job losses that occur when facilities close and ( 2) job gains resulting from facilities  compliance activities. EPA estimates that the final rule will cause no facilities to close and therefore the final rule will cause no job losses. EPA estimates that the regulation will increase employment, with the manufacture and installation of compliance equipment causing a short term gain in direct employment of 20 FTEs. In addition, EPA estimates that operation and maintenance of compliance equipment will cause a continuing direct requirement for 2 FTEs per year. The net effect on direct employment of the regulation is an estimated increase in 47 FTE years, a measure that reflects both the number and duration of jobs gained. Over the 15 year analysis period, the employment gain averages 3 FTEs per year.

d. Community impacts EPA also considered the potential impacts of changes in employment due to the regulation on the communities where MP& M facilities are located. Given that no closures are predicted due to the final rule, EPA does not expect the rule to have significant impacts at the community level.

e. Foreign trade impacts The foreign trade impacts analysis allocates the value of changes in output for each facility that is projected to close to exports, imports, or domestic sales, based on the dominant source of competition in each market as reported in the surveys.

EPA does not expect any foreign trade impacts as a result of the final rule because no facility closures are expected.

f. Impacts on new facilities The new facility analysis assessed whether revised or new discharge limits for newly constructed sources would create a barrier to entry by new businesses and new facilities. To assess the potential for barrier to entry, EPA compared, by subcategory and discharger status, the estimated annual incremental costs of meeting revised new source limits with the estimated annual revenue of new facilities. EPA based the estimates of annual revenue and incremental costs of meeting revised new source limits on information from the existing facility database. EPA used the findings from this analysis, in ES 6 MP& M EEBA Executive Summary terms of the estimated percentages of new facilities that would incur costs exceeding specified revenue thresholds, to decide whether to issue revised new source limits for the various industry subcategories and discharger classes. From this analysis,

EPA concluded that the promulgation of revised new source limits for the Oily Wastes direct discharger subcategory would not create a barrier to entry and this information, in part, underlies EPA s decision to promulgate new source limits for this subcategory as part of the final regulation.

g. Impacts on small entities Table ES. 6 shows the total number of facilities operating in the baseline and the number owned by small entities. Overall,

approximately 73 percent of all MP& M facilities are owned by small entities. However, subcategory exclusions in the final rule will exclude approximately 95 percent of the facilities owned by small entities.

Table ES. 6: Number and Percent of MP& M Facilities Owned by Small Entities Type of Facility Number of Facilities of all Sizes Operating in the Baseline Number of Facilities Owned by Small Entities Percent of Facilities Owned by Small Entities Private MP& Ma 36,480 27,418 75%

Government owned 3,785 1,962 52%

Totala 40,265 29,380 73%

a Excludes baseline closures Source: U. S. EPA analysis.

EPA assessed impacts on small entities by comparing compliance costs to revenues for the small entities at the firm level and by analyzing the facility impact analysis results for facilities owned by small firms. These analyses indicate that no facilities will incur costs exceeding 1% of revenues, and only 1,019 facilities owned by small firms will incur any costs at all. None of these facilities incur moderate impacts or close as a result of the final rule.

EPA estimates that 1,962 facilities are owned by small governments ( those with populations less than 50,000). The subcategory exclusions in the final rule exclude 1,682 of these small government owned MP& M facilities. Thus, the final rule covers 280 small government owned facilities. Of these facilities, only 140 incur costs, and the average annual cost per facility is less than $ 30,000. All of the 140 facilities have costs less than 3 percent of baseline cost of service. EPA estimated no significant impacts for any of these facilities or the governments that own them, based on the analysis of change in site cost of service, impact on taxpayers, and impact on government debt levels. The total compliance cost for all the small government owned facilities incurring costs under the final rule is $ 3.5 million.

ES. 3.2 Social Costs The social costs of the final rule represent the value of society s resources used to comply with and administer the rule. EPA estimated three categories of social cost for the final regulation:

  the cost of society s economic resources used to comply with the final regulation,

  the cost to governments of administering the final regulation, and   the social costs of unemployment resulting from the regulation.

Resource costs of compliance are the value of society s productive resources including labor, equipment, and materials expended to achieve the reductions in effluent discharges required by the final rule. The social costs of these resources are generally higher than the cost burden to facilities because facilities are able to deduct the costs from their taxable income and may offset some of the costs through increased prices to customers. The costs to society, however, are the full value of the resources used, whether they are paid for by the regulated facilities, by all taxpayers in the form of lost tax revenues, or passed on to customers through increased prices.

ES 7 MP& M EEBA Executive Summary The main cost to government from administering the regulation is the cost to POTWs for writing permits, and for compliance monitoring and enforcement activities. POTWs could incur costs in writing new permits for previously unpermitted facilities,

and writing revised permits for some facilities earlier than would otherwise be required. Because the final regulation excludes all indirect dischargers from coverage, EPA expects that the final rule will not increase POTW administrative costs.

The loss of jobs from facility closures would represent a social cost of the regulation. From its facility impact analysis, EPA estimates that no facilities will close as a result of the regulation. Accordingly, EPA estimates a zero cost of unemployment for the final rule. EPA did not recognize possible savings in unemployment related costs from jobs created by the rule as a negative cost ( benefit) of the regulation.

From this analysis EPA estimated a total annual social cost of $ 13.8 million annually ( 2001$) for the final rule ( see Table ES. 7). All of this cost results from the estimated resource cost of compliance.

Table ES. 7: Total Social Cost: Final Rule ( millions, 2001$)

Social Cost Categories Final Rule Resource cost of compliance expenditures $ 13.8 Costs to POTWs of administering the rule $ 0.0 Social costs of unemployment $ 0.0 Total Social Cost $ 13.8 Source: U. S. EPA analysis.

ES. 4 NATIONAL BENEFITS OF THE FINAL RULE The final regulation will reduce MP& M industry pollutant discharges to the nation s surface waters with a number of consequent benefits to society, including:

  improved quality of freshwater, estuarine, and marine ecosystems;

  increased survivability and diversity of aquatic and terrestrial wildlife; and   reduced risks to human health through consumption of fish or water taken from affected waterways.

Table ES. 8 shows EPA estimates for reduction in pollutant discharges to U. S. waters under the final rule. Loadings are shown both in pounds of pollutant and in toxic weighted pound equivalents. The latter measure reflects the relative toxicity of the various toxic pollutants. The regulation would result in a 80 percent reduction in total toxic weighted pollutant lbs.

equivalent per year. The estimated toxic weighted pollutant reductions range from 87 percent for priority metal pollutants to 1 percent for arsenic. Reductions in pounds of pollutants ( not toxic weighted) range from 93 percent for oil and grease ( O& G)

to 5 percent for arsenic. As shown in Table ES. 8, the final rule achieves modest reductions for arsenic, organics, biological oxygen demand ( BOD), and chemical oxygen demand ( COD), and significant reductions for toxic metals, other inorganics,

bulk pollutants, and oil and grease.

ES 8 MP& M EEBA Executive Summary Table ES. 8: Summary of Discharges by Pollutant Type for Regulated MP& M Facilitiesa Pollutant Category Current Releases Releases under the Final Rule Percent Reduction Due to the Final Rule Pounds Pounds Eq. Pounds Pounds Eq. Pounds Pounds Eq.

Priority Pollutants Metals 794 2,756 153 351 80.7% 87.3%

Organics 336 58 268 45 20.2% 22.4%

Arse nic 22 75 21 74 4.5% 1.3%

Cyanide ( CN) 0 0

Nonconventional Pollutants Metals 25,863 417 16,428 158 36.5% 62.1%

Organics 2,159 45 1,038 39 51.9% 13.3%

Other inorganics 2,334 0.2 1,301 0.1 44.3% 50.0%

Bulk pollutants 335,679 167,295 50.2%

Conventional Pollutants BOD 263,419 165,567 37.1%

COD 523,440 488,697 6.6%

O& G 428,137 28,955 93.2%

TSS 160,695 73,769 54.1%

Total 3,351 667 80.1% 0 0 a Includes only direct discharging facilities in the Oily Wastes subcategory that continue to operate in the baseline and that are subject to the final rule.

Source: U. S. EPA analysis.

EPA assessed the benefits from the expected pollutant reductions in three broad classes: human health, ecological, and productivity benefits. 4 EPA was able to assess benefits within these three classes with varying degrees of completeness and rigor. Where possible, EPA quantified the expected effects and estimated monetary values. Some benefit categories could not be monetized because of data limitations and a limited understanding of how society values certain water quality changes.

EPA used sample facility data to estimate national benefits from the regulation. The Agency extrapolated findings from the sample facility analyses to the national level using two extrapolation methods: ( 1) traditional extrapolation and ( 2)

post stratification extrapolation. EPA traditionally uses a standard linear weighting technique ( i. e., traditional extrapolation)

to estimate national compliance costs, changes in pollutant removals, and national level benefits of environmental regulations.

However, using sample weights that are based only on facility specific ( e. g., engineering) characteristics without including non facility factors can lead to a conditional bias in the estimation of national level benefits. In particular, this approach omits consideration of important non facility factors that influence the occurrence and size of benefits. Non facility factors that are likely to affect the occurrence and size of benefits from reduced sample facility discharges and that are not reflected in the standard stratification and sample weighting approach include the receiving water body type and size and the size of population residing in the vicinity of a sample facility. To address omission of these important non facility factors ( i. e., water body type and size, affected population, and co occurrence MP& M discharges) in designing the MP& M facilities sample,

EPA adjusted sampling weights through post stratification using two variables: ( 1) receiving water body type and size and ( 2) the size of the population residing in the vicinity of the sample facility. The Agency used a commonly used post

4 EPA evaluated two productivity measures: ( 1) the reduction in pollutant interference at POTWs, and ( 2) pass through of pollutants into the sludge, which limits options for POTW disposal of sewage sludge. Because the final rule only regulates direct discharges and thus does not affect POTW operations, productivity benefits were evaluated for alternative options only.

ES 9 MP& M EEBA Executive Summary stratification method called   raking  to adjust original sample weights to reflect these benefits characteristics. Appendix G of this report provides detail on extrapolation methods used in this analysis.

To supplement the national level analysis performed for the final MP& M regulation, EPA also conducted a detailed case study of the expected state level costs and benefits of the MP& M rule in Ohio. For several reasons, EPA judges that the Ohio case study is more robust than the national benefit analyses that EPA undertakes in support of effluent guideline development.

These reasons include: ( 1) use of more detailed data on MP& M facilities than is possible at the national level; ( 2) use of more detailed and accurate water quality data than are usually available; ( 3) more accurate accounting for the presence and effect of multiple discharges to the same reach; ( 4) inclusion of data on non MP& M discharges in the baseline and post compliance;

( 5) use of a first order decay model to estimate in stream concentrations in downstream water bodies; and ( 6) inclusion of an additional recreational benefit category ( swimming) in the analysis. The Ohio case study analysis is presented in Chapters 20,

21, and 22 of this report.

ES. 4.1 Reduced Human Health Risk EPA estimates that the final rule will prevent discharge of 18 pounds per year of carcinogens and 119 pounds per year of lead.

Also, the final rule will prevent discharge of an additional 6,900 pounds of 76 pollutants of concern that are known to cause adverse human health effects. These reduced pollutant discharges from MP& M facilities are expected to result in reduced risk of illness from consumption of contaminated fish, shellfish, and water.

EPA analyzed the following measures of health related benefits: reduced cancer risk from fish and water consumption;

reduced risk of non cancer toxic effects from fish and water consumption; lead related health effects to children and adults;

and reduced occurrence of in waterway pollutant concentrations in excess of levels of concern. The levels of concern include human health based ambient water quality criteria ( AWQC) or documented toxic effect levels for those chemicals not covered by water quality criteria. Although some health effects are relatively well understood and can be quantified and monetized in a benefits analysis ( e. g., cancer), others are less well understood, and may not be assessed with the same rigor or at all ( e. g.,

systemic health effects). The Agency therefore monetized only two of these health benefits: ( 1) changes in the incidence of cancer from fish and water consumption, and ( 2) changes in adverse health effects in children and adults from reduced lead exposure.

The national level analysis of human health benefits finds negligible monetized benefits from the final rule. However, because of significant simplifications in the national level analysis, this finding should be recognized as potentially having substantial error and should therefore be interpreted with caution. In particular, the national level analysis: ( 1) is based only on limited information on MP& M facilities at the national level; ( 2) accounts in only a very limited way for the presence and effect of joint discharges on the same reach; ( 3) omits data on non MP& M discharges in the baseline and post compliance; and ( 4)

omits consideration of the downstream effects of pollutant discharges.

In contrast to the national level analysis, the methods and data used for the Ohio case study address a number of these analytic weaknesses. This more rigorous analysis finds that the final regulation would achieve $ 0.5 million ( 2001$) in health related benefits in the state of Ohio alone. EPA estimates that this analysis provides a more accurate, albeit lower bound, estimate of health related benefits than indicated by the simpler national level analysis. Moreover, given ( 1) that Ohio represents only about 6 percent of the total MP& M facility population and ( 2) that a substantial share of the total MP& M facility population is located in other states with similar water body and population characteristics ( e. g., the states of Illinois, Indiana, Michigan,

Pennsylvania), it is reasonable to expect that additional human health benefits would be estimated for the remainder of the country if EPA were able to apply this more rigorous approach at the national level. Accordingly, EPA judges that the final rule's human health benefits are higher than its social costs.

a. Benefits from reduced incidence of cancer cases EPA assessed changes in the incidence of cancer cases from consumption of M P& M pollutants in fish tissue and drinking water. The methodology for assessing human health benefits from reduced cancer incidence is presented in Chapter 13 of this report. The Agency valued changes in incidence of cancer cases using a willingness to pay ( WTP) of $ 6.5 million ( 2001$)

for avoiding premature mortality. This estimate of the value of a statistical life saved is recommended in EPA's Guidelines for Preparing Economic Analysis. This estimate does not include estimates of WTP to avoid morbidity prior to death.

EPA estimated aggregate cancer risk from contaminated drinking water for populations served by drinking water intakes on water bodies to which MP& M facilities discharge. EPA based this analysis on six carcinogenic pollutants for which drinking ES 10 MP& M EEBA Executive Summary water criteria have not been published. 5 This analysis excludes seven carcinogens for which drinking water criteria have been published. EPA assumed that public drinking water treatment systems will remove these pollutants from the public water supply. To the extent that treatment for these seven pollutants may cause incidental removals of the chemicals without criteria,

the analysis may overstate cancer related benefits.

Calculated in stream concentrations provide the basis for estimating changes in cancer risk for populations served by affected drinking water intakes. EPA estimates that baseline MP& M discharges from in scope facilities are associated with virtually zero annual cancer cases. The national level analysis finds that the final regulation would lead to a marginal reduction in these cancer cases resulting from consumption of contaminated drinking water; correspondingly, monetary benefits estimated from reduced consumption of contaminated drinking water are essentially zero.

EPA also estimated cancer risk from the consumption of contaminated fish for recreational and subsistence anglers and their families. EPA based this analysis on thirteen carcinogenic pollutants found in MP& M effluent discharges. Estimated contaminant concentrations in fish tissue are a function of predicted in stream pollutant concentrations and pollutant bioconcentration factors. EPA used data on numbers of licensed fishermen by state and county, presence of fish consumption advisories, number of fishing trips per person per year, and average household size to estimate the affected population of recreational and subsistence anglers and their families. The analysis uses different fish consumption rates for recreational and subsistence anglers to estimate the change in cancer risk among these populations.

EPA estimated that baseline MP& M discharges from in scope facilities are associated with 0.03 annual cancer cases. The national level analysis shows that the final option would lead to a marginal reduction in cancer cases among recreational and subsistence angler populations. The monetary benefits estimated from consumption of less contaminated fish by these populations are essentially negligible.

The findings from the national analysis of changes in cancer risk for the final rule differ from the Ohio case study results.

Based on the Ohio case study, the final option is expected to eliminate 0.01 cancer cases annually in the State of Ohio alone.

This reduction translates into $ 14,500 ( 2001$) in annual benefits due to reduced cancer risk from consumption of contaminated fish tissue and drinking water ( see Chapter 22 of this report for detail).

The difference in the findings of the national and Ohio analyses results primarily from more comprehensive information on MP& M and non MP& M facility discharges used in the Ohio case study analysis. The national level analysis accounts only for the pollutant exposures from MP& M sample facilities. In contrast, the Ohio case study approach accounts for a broader baseline of pollutant exposure, including more thorough and detailed coverage of discharges from MP& M facilities and also estimated exposures from non MP& M sources. As a result, the Ohio case study analysis more accurately reflects baseline health risk conditions.

b. Reductions in systemic health effects The final rule can potentially achieve a wide range of non cancer human health benefits ( e. g., systemic effects, reproductive toxicity, and developmental toxicity) from reduced contamination of fish tissue and drinking water sources. The common approach for assessing the risk of non cancer health effects from the ingestion of a pollutant is to calculate a hazard quotient by dividing an individual's oral exposure to the pollutant, expressed as a pollutant dose in milligrams per kilogram body weight per day ( mg/ kg day), by the pollutant's oral reference dose ( RfD). An RfD is defined as an estimate ( with uncertainty spanning perhaps an order of magnitude) of a daily oral exposure that likely would not result in the occurrence of adverse health effects in humans, including sensitive individuals, during a lifetime. A hazard quotient less than one means that the pollutant dose to which an individual is exposed is less than the RfD, and, therefore, presumed to be without appreciable risk of adverse human health effects. EPA guidance for assessing exposures to mixtures of pollutants recommends calculating a hazard index ( HI) by summing the individual hazard quotients for those pollutants in the mixture that affect the same target organ or system ( e. g., the kidneys, the respiratory system). HI values are interpreted similarly to hazard quotients; values below one are generally considered to suggest that exposures are not likely to result in appreciable risk of adverse health effects during a lifetime, and values above one are generally cause for concern, although an HI greater than one does not necessarily suggest a likelihood of adverse effects. Chapter 13 of this report provides a detailed discussion of the methodology for assessing changes in systemic health effects associated with this rule.

5 EPA included n nitrosodimethylamine ( NDMA) in its assessment of the baseline incidence of cancer cases. However, the Agency did not consider NDMA pollutant reductions in its benefits analysis due to limited wastewater sampling for that pollutant.

ES 11 MP& M EEBA Executive Summary To evaluate the potential benefits of reducing the in stream concentrations of 76 pollutants that cause non cancer health effects, EPA estimated target organ specific HIs for drinking water and fish ingestion exposures in both the baseline and post compliance scenarios. Specifically, EPA calculated target organ specific HIs for pollutants predicted in each MP& M discharge reach; as a result, a separate HI was calculated for each target organ/ exposure pathway ( fish consumption and drinking water)/ reach combination. EPA then combined estimates of the numbers of individuals in the exposed populations with the HIs for the populations to determine how many individuals might be expected to realize reduced risk of non cancer health effects in the post compliance scenario.

The results of EPA's analysis suggest that hazard indices for individuals in the exposed populations may decrease after facilities comply with today's rule. Increases in the percentage of exposed populations that would be exposed to no risk of non cancer adverse human health effects due to the MP& M discharges occur in both the fish and drinking water analyses. The shift to lower hazard indices should be considered in conjunction with the finding that the hazard indices for incremental exposures to pollutants discharged by MP& M facilities ( for which reference doses are available) are less than one in the baseline analysis for the entire population associated with sample facilities. Whether the incremental shifts in hazard indices are significant in reducing absolute risks of non cancer adverse human health effects is uncertain and will depend on the magnitude of contaminant exposures for a given population from risk sources not accounted for in this analysis.

c. Benefits from reduced exposure to lead EPA performed a separate analysis of benefits from reduced exposure to lead. This analysis differs from the analysis of non cancer adverse human health effects from exposure to other MP& M pollutants because it is based on dose response functions tied to specific health endpoints to which monetary values can be applied. Chapter 14 of this report presents the methodology for assessing benefits from reduced exposure to lead.

Many lead related adverse health effects are relatively common and are chronic in nature. These effects include, but are not limited to, hypertension, coronary heart disease, and impaired cognitive function. Lead is harmful to individuals of all ages,

but the effects of lead on children are of particular concern. Children's rapid rate of development makes them more susceptible to neurobehavioral effects from lead exposure. The neurobehavioral effects on children from lead exposure include hyperactivity, behavioral and attention difficulties, delayed mental development, and motor and perceptual skill deficits.

This analysis assessed benefits of reduced lead exposure from consumption of contaminated fish tissue to three sensitive populations: ( 1) preschool age children; ( 2) pregnant women; and ( 3) adult men and women. This analysis uses blood lead levels as a biomarker of lead exposure. EPA estimated baseline and post compliance blood lead levels in the exposed populations and then used changes in these levels to estimate benefits in the form of avoided health damages.

EPA assessed neurobehavioral effects on children based on a dose response relationship for IQ decrements. Avoided neurological and cognitive damages are expressed as changes in overall IQ levels, including reduced incidence of extremely low IQ scores (< 70, or two standard deviations below the mean) and reduced incidence of blood lead levels above 20 mg/ dL.

The analysis uses the value of compensatory education that an individual would otherwise need and the impact of an additional IQ point on individuals' future earnings to value the avoided neurological and cognitive damages. The national level analyses shows that implementation of the final option would not result in any changes in IQ loss across all exposed children. The final option does not reduce occurrences of extremely low IQ scores (< 70) or incidences of blood lead levels above 20 mg/ dL.

Prenatal exposure to lead is an important route of exposure. Fetal exposure to lead in utero due to maternal blood lead levels may result in several adverse health effects, including decreased gestational age, reduced birth weight, late fetal death,

neurobehavioral deficits in infants, and increased infant mortality. To assess benefits to pregnant women, EPA estimated changes in the risk of infant mortality due to changes in maternal blood lead levels during pregnancy. The national level analysis shows that the final option does not result in changes in maternal blood lead levels during pregnancy and as a result does not reduce neonatal mortality.

The national level analysis finds no benefits to children from reduced exposure to lead. However, as for the cancer risk analysis previously discussed, these findings differ from the more comprehensive analysis used in the Ohio case study. Using the more rigorous case study approach, EPA estimates that the final regulation will yield annual lead related benefits for children in Ohio of $ 422,113 ( 2001$). This benefit value includes three components. First, reduced lead exposure is estimated to reduce neonatal mortality by 0.024 cases annually with an annual value of $ 162,094 ( 2001$). Second, reduced lead exposure will avoid the loss of an estimated 26.96 IQ points among preschool children in Ohio, which translates into ES 12 MP& M EEBA Executive Summary $ 253,934 ( 2001$) per year in benefits. Third, the annually avoided costs of compensatory education from incidence of IQ below 70 and blood lead levels above 20 g/ dL among children amounts to approximately $ 5,345 ( 2001$).

Lead exposure has been shown to have adverse effects on the health of adults as well as children. The health effects in adults that EPA quantified all derive from lead's effects on blood pressure. Quantified health effects include increased incidence of hypertension ( estimated for males only), initial coronary heart disease ( CHD), strokes ( initial cerebrovascular accidents and atherothrombotic brain infarctions), and premature mortality. This analysis does not include other health effects associated with elevated blood pressure and other adult health effects of lead, including nervous system disorders, anemia, and possible cancer effects. EPA used cost of illness estimates ( i. e., medical costs and lost work time) to estimate monetary value of reduced incidence of hypertension, initial CHD , and strokes. EPA then used the value of a statistical life saved to value changes in risk of premature mortality. The national level analysis finds that the final rule will achieve no lead related health benefits among adults.

Again, the national analysis results differ from the Ohio case study results. Using the case study approach, EPA estimates that the final regulation will achieve total lead related benefits among Ohio adults of $ 117,393 ( 2001$). This value includes benefits from reduced hypertension among adult males: a reduction of an estimated 9.4 cases annually, with benefits of approximately $ 10,670 ( 2001$). In addition, reducing the incidence of initial CHD, strokes, and premature mortality among adult males and females in Ohio would result in estimated benefits of $ 963, $ 2,115, and $ 103,645, respectively ( see Chapter 22 of this report for detail).

Based on the national level benefits analysis, EPA found that total benefits from reduced exposure to lead, for both children and adults, are negligible under the final rule. However, based on the Ohio case study findings, benefits for children and adults from reduced lead related health effects of the final rule are estimated to total approximately $ 0.5 million ( 2001$)

annually in the state of Ohio alone ( see Section H of today's final rule for detail). As in the cancer risk analysis, the difference in the national and Ohio based findings stems primarily from more comprehensive information on MP& M and non MP& M facility discharges used in Ohio.

d. Exceedances of human health based AWQC EPA also estimated the effect of MP& M facility discharges on the occurrence of pollutant concentrations in affected waterways that exceed human health based AWQCs. In a conceptual sense, this analysis and its findings are not additive to the preceding analyses of change in cancer or lead related health risks but are another way of quantitatively characterizing the same possible benefit categories. This analysis compares the estimated baseline and post compliance in stream pollutant concentrations in affected waterways to ambient water criteria for protection of human health. The comparison included AW QC for protection of human health through consumption of organisms and consumption of water and organisms. Pollutant concentrations in excess of these values indicate potential risks to human health.

EPA estimates that in stream concentrations of 4 pollutants ( i. e., arsenic, iron, manganese, and n nitrosodimethylamine) will exceed human health criteria for consumption of water and organisms in 78 receiving reaches nationwide as the result of baseline MP& M pollutant discharges. EPA estimates that 23% of human health AWQC exceedances are caused by n nitrosodimethylamine ( NDMA). EPA did not consider NDMA pollutant reductions in its benefits analyses due to limited wastewater sampling data for that pollutant. EPA estimates that the final rule will not eliminate the occurrence of concentrations in excess of human health criteria for consumption of water and organisms and for consumption of organisms on any of the reaches on which baseline discharges are estimated to cause concentrations in excess of AWQC values.

ES 13 MP& M EEBA Executive Summary ES. 4.2 Ecological, Recreational, and Nonuser Benefits EPA expects the MP& M rule to improve aquatic species habitats by reducing concentrations of toxic contaminants such as aluminum, cadmium, copper, lead, mercury, silver, and zinc in water. These improvements should enhance the quality and value of water based recreation, such as fishing, swimming, wildlife viewing, camping, waterfowl hunting, and boating. The benefits from improved water based recreation would be seen as increases in the increased value participants derive from a day of recreation and the increased number of days that consumers of water based recreation choose to visit the cleaner waterways. This analysis measures the economic benefit to society from water quality improvements based on the increased monetary value of recreational opportunities resulting from those improvements a. Reduced aquatic life impacts EPA quantified the ecological improvements of the final regulation by comparing estimates of in waterway concentrations of pollutants discharged by MP& M facilites with AWQC values for protection of aquatic species. Pollutant concentrations in excess of acute and/ or chronic AWQC limits for protection of aquatic life indicate potential adverse impacts to aquatic species. EPA estimates that baseline in stream concentrations of 9 pollutants ( i. e., aluminum, cadmium, copper, lead,

manganese, mercury, nickel, silver, and zinc) will exceed the acute and chronic criterion for aquatic life in 353 reaches nationwide. The final rule eliminates concentrations in excess of aquatic life AWQCs on nine of these reaches. EPA s analysis shows that none of the receiving reaches exceeding chronic or acute aquatic life AW QC at the baseline discharge level will experience partial water quality improvements from reduced occurrence of AWQC exceedances for some pollutants.

b. Recreational benefits EPA assessed the recreational benefits from reduced occurrence of pollutant concentrations exceeding aquatic life and/ or human health AWQC values. Combining its findings from both the aquatic life and human health AWQC exceedance analyses, EPA found that 394 stream reaches exceed chronic or acute aquatic life AWQC and/ or human health AWQC values at baseline discharge levels. The Agency estimates that the final rule will eliminate exceedances on nine of these discharge reaches, leaving 384 reaches with concentrations of one or more pollutants exceeding AWQ C limits. None of these 384 reaches will experience partial water quality improvements from reduced occurrence of some pollutant concentrations in excess of AW QC limits.

EPA attached a monetary value to reduced exceedances based on increased values for three water based recreation activities ( fishing, wildlife viewing, and boating) and on nonuser values. EPA applied a benefits transfer approach to estimate the total WTP, including both use and nonuse values, for improvements in surface water quality. This approach builds upon a review and analysis of the surface water valuation literature.

EPA first estimated the baseline value of water based recreation for benefiting reaches, based on per reach estimates of:

  annual person days of water based recreation, and   per day values of water based recreation.

The baseline per day values of water based recreation are based on studies by Walsh et. al ( 1992) and Bergstrom and Cordell ( 1991). The studies provide values per recreation day for a wide range of water based activities, including fishing, boating,

wildlife viewing, waterfowl hunting, camping, and picnicking. The mean values per recreational fishing, boating, and wildlife viewing day used in this analysis are $ 42.12, $ 48.30 and $ 26.28 ( 2001$), respectively. Applying facility weights and summing over all benefiting reaches provides a total baseline value for a given recreational activity for MP& M reaches expected to benefit from the elimination of pollutant concentrations in excess of AWQC limits.

EPA then applied the percentage change in the recreational value of water resources implied by surface water valuation studies to estimate changes in values for all MP& M reaches in which the regulation eliminates AWQC exceedances by one or more MP& M pollutants. The Agency selected eight of the most comparable studies and calculated the changes in recreation values from water quality improvements ( as percentage of the baseline) implied by those studies. Sources of estimates included Lyke ( 1993), Jakus et al. ( 1997), Montgomery and Needleman ( 1997), Paneuf et al. ( 1998), Desvousges et al.

( 1987), Lant and Roberts ( 1990), Farber and Griner ( 2000), and Tudor et al. ( 2002). EPA's reasoning for selecting each study is discussed in detail in Chapter 15 of this report. EPA took a simple mean of point estimates from all applicable studies to derive a central tendency value for percentage change in the water resource values due to water quality improvements. These studies yielded estimates of increased recreational value from water quality improvements expected from reduced MP& M ES 14 MP& M EEBA Executive Summary discharges of 12, 9, and 18 percent for fishing, boating, and wildlife viewing respectively. Using all possible applicable valuation studies in developing a benefits transfer approach to valuing changes in the recreational value of water resources from reduced MP& M discharges, makes unit values more likely to be nationally representative, and avoids the potential bias inherent in using a single study to make estimates at the national level.

Table ES. 9 presents the estimated national recreational benefits of the final rule ( 2001$). The estimated increased value of recreational activities to users of water based recreation is $ 537,197, $ 202,691, and $ 259,949 annually for fishing, boating,

and wildlife viewing, respectively. The recreational activities considered in this analysis are stochastically independent; EPA calculated the total user value of enhanced water based recreation opportunities by summing over the three recreation categories. The estimated increase in the total user value is $ 999,838 annually.

EPA also estimated non market nonuser benefits. These non market nonuser benefits are not associated with current use of the affected ecosystem or habitat; instead, they arise from the value society places on improved water quality independent of planned uses or based on expected future use. Past studies have shown that nonuser values are a sizable component of the total economic value of water resources. EPA estimated average changes in nonuser value to equal one half of the recreational use benefits based on study by A. Fisher and R. Raucher ( 1984). The estimated increase in nonuse value is $ 499,919 ( 2001$).

A recent literature review finds that nonuse benefits are, on average, 1.9 to 2.5 times all use values, rather than 0.5 times recreational benefits alone as EPA has traditionally assumed for its nonuse benefit estimates ( T. Brown, 1993). EPA's method for estimating nonuse benefits from water quality improvements resulting from reduced MP& M discharges is therefore likely to understate the true value of nonuse benefits.

Table ES. 9: Estimated Recreational Benefits from Reduced MP& M Discharges ( thousands, 2001$)

Recreational Activity Traditional Extrapolation Post Stratification Extrapolation Recreational fishing $ 537 $ 350 Recreational boating $ 203 $ 132 Wildlife viewing and near water recreation $ 260 $ 169 Total recreational use benefits ( fishing + boating + wildlife viewing) $ 1,000 $ 651 Nonuser benefits ( ½ of total recreational use) $ 500 $ 326 Total Recreational Benefits ( 2001$) $ 1,500 $ 977 Source: U. S. EPA analysis.

The recreational trips corresponding to the three activities considered in this analysis are stochastically independent; EPA calculated the total value of enhanced water based recreation opportunities by summing the three recreation categories and nonuser value. The resulting increase in the value of water resources to consumers of water based recreation and nonusers is $ 1,500 thousand ( 2001$) annually under the traditional extrapolation method and $ 977 thousand ( 2001$) annually under the post stratification extrapolation method.

ES. 4.3 POTW Impacts The final rule only regulates direct dischargers. Therefore, the selected option does not affect POTW operation. For the alternative policy options that consider both direct and indirect dischargers, EPA evaluated two productivity measures associated with MP& M pollutants. The first measure is the reduction in pollutant interference at publicly owned treatment works ( POTW s). The second measure is pass through of pollutants into the sludge, which limits options for POTW disposal of sewage sludge. These analyses are presented in Chapter 16 of this report.

ES 15 MP& M EEBA Executive Summary ES. 4.4 Total Estimated Benefits of the Final MP& M Rule Using the traditional extrapolation method, EPA estimates total benefits for the five monetized categories of approximately $ 1,500,000 ( 2001$) annually. This value understates the total benefits of the rule because the benefits analysis omits significant sources of benefits to society. Examples of benefit categories not reflected in this estimate include non cancer health benefits other than benefits from reduced exposure to lead; other water dependent recreational benefits, such as swimming and waterskiing benefits to recreational users from reduced concentration of conventional pollutants and nonconventional pollutants such as TKN; and reduced cost of drinking water treatment for the pollutants with drinking water criteria. In addition, as noted in the prior discussion, although the national level benefits analysis finds negligible benefits from reduced health risk, the more rigorous analytic approach used for the Ohio case study found material health related benefits approximately $ 0.5 million in the state of Ohio alone.

ES. 5 NATIONAL BENEFITS COSTS COMPARISON The comparison of benefits and for the final rule is inevitably incomplete because EPA cannot value all of the benefits resulting from the final rule in dollar terms. A comparison of benefits and costs is thus limited by the lack of a comprehensive benefits valuation and also by uncertainties in the estimates. Bearing these limitations in mind, EPA presents a summary comparison of benefits and costs for the final rule in Table ES. 10. The estimated social cost of the final rule is $ 13.8 million annually ( 2001$). The total benefits that can be valued in dollar terms in the categories traditionally analyzed for effluent guidelines range from $ 977,000 to $ 1,500,000 annually ( 2001$), based on the alternative extrapolation methods.

As previously noted, EPA used more detailed information and a more comprehensive analytic method to estimate expected benefits of the final rule for the state of Ohio. This more rigorous analysis was undertaken to address certain issues in the national level analysis and to supplement the national level analysis performed for the final rule. The following section presents this analysis. The Ohio case study showed that the more rigorous analytic approach leads to a different conclusion from that found in the simpler, national level analysis approach in particular, that the estimated state level benefits exceed the estimated state level cost. As previously discussed, given ( 1) that Ohio accounts for only about 6 percent of total MP& M facilities, and ( 2) that other states with substantial numbers of MP& M facilities have similar population and water body characteristics to Ohio, EPA estimates that use of the more rigorous approach nationally would yield a higher estimate of national benefits. On this basis, the Agency estimates that national benefits from the final rule may be comparable to its social costs.

ES 16 MP& M EEBA Executive Summary Table ES. 10: Comparison of National Annual Monetizable Benefits to Social Costs ( thousands, 2001$)

Benefit and Cost Categories Traditional Extrapolation Post Stratification Extrapolation Benefit Categories Reduced Cancer Risk from Fish Consumption $ 0 $ 0 Reduced Cancer Risk from Water Consumption $ 0 $ 0 Reduced Risk from Exposure to Lead $ 0 $ 0 Enhanced Water Based Recreation $ 1,000 $ 651 Nonuse Benefits $ 500 $ 326 Total Monetized Benefits $ 1,500 $ 977 Cost Categories Resource Costs of Compliance $ 13,825 $ 13,825 Costs of Administering the Final Regulation $ 0 $ 0 Social Costs of Unemployment $ 0 $ 0 Total Monetized Costs $ 13,825 $ 13,825 Net Monetized Benefits ( Benefits Minus Costs) ($ 12,325) ($ 12,847)

Source: U. S. EPA analysis.

ES 17 MP& M EEBA Executive Summary ES. 6 OHIO CASE STUDY Part V of this report presents a detailed case study of the expected state level costs and benefits of the MP& M rule in Ohio.

The case study assesses the costs and benefits of the final rule for facilities and water bodies located in Ohio. Ohio is among the ten states with the largest numbers of MP & M facilities. The state has a diverse water resource base and a more extensive water quality ecological database than many other states. EPA gathered data on MP& M facilities and on Ohio's baseline water quality conditions and water based recreation activities to support the case study analysis. These data characterize current water quality conditions, water quality changes expected from the regulation, and the expected welfare changes from water quality improvements at water bodies affected by MP& M discharges. The case study also estimates the social costs of the final rule for facilities in Ohio and compares estimated social costs and benefits for the state.

The case study analysis supplements the national level analysis performed for the final MP& M regulation in two important ways. First, the analysis used improved data and methods to determine MP& M pollutant discharges from both MP& M facilities and other sources. In particular, EPA administered 1,600 screener questionnaires to augment information on the Ohio's MP& M facilities. The Agency also used information from the sampled M P& M facilities to estimate discharge characteristics of non sampled MP& M facilities, as described in Appendix H of the EEBA report. The Agency assigned discharge characteristics to all non MP& M industrial direct discharges based on the information provided in the EPA s Permit Compliance System ( PCS) database. Second, the analysis used an original travel cost study to value four recreational uses of water resources affected by the regulation: swimming, fishing, boating, and near water activities. The added detail provides a more complete and reliable analysis of water quality changes from reduced MP& M discharges. The study provides more complete estimates of changes in human welfare resulting from reduced health risk, enhanced recreational opportunities,

and improved economic productivity.

EPA estimated human health benefits from reduced MP& M dischargers in Ohio using similar methodologies to those used for the national level analysis. These methodologies are presented in Chapter 13 and 14 of the EEBA report.

The case study analysis of recreational benefits combines water quality modeling with a random utility model ( RUM) to assess how changes in water quality from the regulation will affect consumers' valuation of water resources. The RUM analysis addresses a wide range of pollutant types and effects, including water quality measures not often addressed in past recreational benefits studies. In particular, the model supports a more complete analysis of recreational benefits from reductions in nutrients and toxic pollutants ( i. e., priority pollutants and nonconventional pollutants with toxic effects).

EPA subjected this study to a formal peer review by experts in the natural resource valuation field. The peer review concluded that EPA had done a competent job, especially given the available data. As requested by the Agency, peer reviewers provided suggestions for further improvements in the analysis. Since the proposed rule analysis, the Agency made changes to the Ohio model and conducted additional sensitivity analyses suggested by the reviewers. The peer review report and EPA's response to peer reviewers' comments, along with the revised model, are in the docket for the rule.

ES. 6.1 Benefits The use of an original RUM in this case study allows the Agency to address limitations inherent in benefits transfer used in the analysis of recreational benefits at the national level. The use of benefits transfer often requires additional assumptions because water quality changes evaluated in the available recreation demand studies are only roughly comparable with the water quality measures evaluated for a particular rule. The RUM model estimates the effects of the specific water quality characteristics analyzed for the final MP& M regulation, such as presence of AWQC exceedances and concentrations of the nonconventional pollutant Total Kjeldahl Nitrogen ( TKN). EPA estimates that this direct link between the water quality characteristics analyzed for the rule and the characteristics valued in the RUM analysis reduces uncertainty in benefit estimates and makes the analysis of recreational benefits more robust.

The final MP& M regulation affects a broad range of pollutants, some of which are toxic to human and aquatic life but are not directly observable ( i. e., priority and nonconventional pollutants). These unobservable toxic pollutants degrade aquatic habitats, decrease the size and abundance of fish and other aquatic species, increase fish deformities, and change watershed species composition. Changes in toxic pollutant concentrations may therefore affect recreationists' valuation of water resources, even if consumers are unaware of changes in ambient pollutant concentrations.

The study used data from the National Demand Survey for Water Based Recreation ( NDS), conducted by U. S. EPA and the ES 18 MP& M EEBA Executive Summary National Forest Service, to examine the effects of in stream pollutant concentrations on consumers' decisions to visit a particular water body. The analysis estimated baseline and post compliance water quality at recreation sites actually visited by the surveyed consumers and at all other sites within the consumers' choice set, visited or not. The RUM analysis of consumer behavior then estimated the effect of ambient water quality and other site characteristics on the total number of trips taken for different water based recreation activities and the allocation of these trips among particular recreational sites. The RUM analysis is a travel cost model, in which the cost to travel to a particular recreational site represents the " price" of a visit.

EPA modeled two consumer decisions: ( 1) how many water based recreational trips to take during the recreational season ( the trip participation model); and ( 2) which recreation site to choose ( the site choice model). Combining the trip participation model's prediction of trips under the baseline and post compliance scenarios and the site choice model's per trip welfare measure provides a measure of total welfare. EPA calculated each individual's seasonal welfare gain for each recreation activity from post compliance water quality changes, and then used Census data to aggregate the estimated welfare change to the State level. The sum of estimated welfare changes over the four recreation activities yielded estimates of total welfare gain.

EPA estimated other components of benefits in Ohio using similar methodologies to those used for the national level analysis.

In addition to the RUM study of recreational benefits, other analytical improvements included the following: ( 1) use of more detailed data on MP& M facilities, obtained from the 1,600 additional surveys; ( 2) use of data on non MP& M discharges to estimate current baseline conditions in the state, and ( 3) use of a first order decay model to estimate in stream concentrations in the Ohio water bodies in the baseline and post compliance.

Appendix H of this report describes the water quality model used in this analysis and the approach and data sources used to estimate total pollutant loadings from all industrial and municipal sources to Ohio's water bodies. The Agency has concluded that the added level of detail results in more robust benefit estimates.

Summing the monetary values over all benefit categories yields total monetized benefits of $ 930,408 ( 2001$) annually for the final rule, as shown in Table ES. 11. Although more comprehensive than the national benefits analysis, the case study benefit estimates still omit important mechanisms by which society is likely to benefit from the final rule. Examples of benefit categories not reflected in the monetized benefits include non cancer health benefits ( other than lead related benefits) and reduced costs of drinking water treatment.

Table ES. 11: Annual Benefits from Reduced MP& M Discharges in Ohio ( thousands, 2001$)

Benefit Category Mean Annual Benefits 1. d cancer risk:

Fish consumption Water consumption $ 15 $ 0 2. isk from exposure to lead: