regulations to comply with Executive Order 12866. See Section XX.A of
today's notice.

B. Description of Economic Activity

    The construction sector is a major component of the United States
economy as measured by the gross domestic product (GDP), a measure of
the output of goods and services produced domestically in one year by
the U.S. economy. Historically, the construction sector has directly
contributed about five percent to the GDP. Moreover, one indicator of
the economic performance in this industry, housing starts, is also a
``leading economic indicator,'' one of the indicators of overall
economic performance for the U.S. economy. Several other economic
indicators that originate in the construction industry include
construction spending, new home sales, and home ownership.
    During most of the 1990s, the construction sector experienced a
period of relative prosperity along with the overall economy. Although
cyclical, the number of housing starts increased from about 1.2 million
in 1990 to almost 1.6 million in 2000, with annual cycles during this
period. (U.S. Census Bureau, ``Current Construction Reports, Series
C20--Housing Starts,'' 2000, available at http://www.census.gov/const/
www). At the beginning of the 21st century, the

economy began to slow relative to previous highs in the 1990s. This
slower economic growth had a negative impact on construction starts for
new commercial and industrial projects. Driven in part by low mortgage
interest rates, consumer spending for new homes continued to remain
strong through 2005. However, in 2006 the U.S. residential construction
market began a rapid decline in activity that continued all the way
through 2008. (Global Insights, ``U.S. Economic Outlook; Executive
Summary,'' January 2009). In June of 2009, the single-family housing
market began to show signs of recovery, while multi-family construction
is still in decline. Government spending increased in the first half of
2009, and is expected to accelerate in the near future as the bulk of
the infrastructure projects, funded by the 2009 Stimulus bill, will
begin in 2010 and 2011. Conversely, the outlook for nonresidential
construction is poor as spending on new commercial and industrial
properties is decreasing due to the current recession. Overall
construction spending is expected to decline through the first quarter
of 2010, as declines in private nonresidential and multi-family housing
construction is predicted to outweigh the gains from infrastructure and
single-family home construction. (Global Insight, ``An Update on U.S.
Construction Spending,'' August 2009.) However, overall construction
spending is expected to return to positive growth by 2011 and continue
this positive trend through 2014, approximately when this rule will be
fully implemented in EPA and state NPDES permits. (Global Insight,
``U.S. Economic Service,'' July, 2009.)
1. Industry Profile
    The C&D point source category is comprised of sites engaged in
construction activity, including clearing, grading and excavation
operations. The projects that fall under this category are performed by
business establishments (the Census Bureau uses the term
``establishment'' to mean a place of business; ``Employer
establishment'' means an establishment with employees) that are
involved in building construction (NAICS 236) as well as heavy and
civil engineering construction (NAICS 237). As a starting point, Table
XII-1 shows the number of business establishments whose projects are in
the C&D point source category in 1992, 1997, and 2002. Only a portion
of these establishments would be covered by the final regulation,
because some of these establishments are house remodelers and others
who build on sites with less than one acre of disturbed land each year.
The NAICS classification system changed between the issuance of the
1997 and 2002 Economic Census.
    Table XII-1 shows a sharp decline in the number of developers
between 1992 and 1997. The decrease in the number of developers may
have been a response to changes in tax laws and the Financial
Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989
(Pub. L. 101-73, August 9, 1989) and the 1993 implementing regulations.
The objective of FIRREA and the implementing regulations was to correct
events and policies that led to a high rate of bankruptcies in the
thrift industry in the late 1980s. The regulations changed lending
practices by financial institutions, requiring a higher equity position
for most projects, with lower loan-to-value ratios, and more
documentation from developers and builders. (Kone, D. L. ``Land
Development 9th ed.,'' Home Builder Press of the National Association
of Home Builders, Washington, DC 2000).

         Table XII-1--Number of C&D Industry Establishments, 1992, 1997, and 2002, Economic Census Data
----------------------------------------------------------------------------------------------------------------
                                                              1992       1997       2002      Change     Change
              NAICS                     Description          (No.)      (No.)      (No.)     92-97(%)   97-02(%)
----------------------------------------------------------------------------------------------------------------
236.............................  Construction of            168,407    191,101    211,629      13.50      10.70
                                   Buildings, except all
                                   other Heavy
                                   Construction \a\.
237 except 2372.................  Heavy Construction,         37,180     42,554     49,433      14.50      16.20
                                   except Land
                                   Subdivision.
2372............................  Land Subdivision.......      8,848      8,185      8,403      -7.50       2.70
----------------------------------------------------------------------------------------------------------------
    Total.......................  .......................    214,435    241,840    269,465      12.80     11.30
----------------------------------------------------------------------------------------------------------------
\a\ In the 2002 NAICS classification framework, All Other Heavy Construction was assigned among NAICS 236, 237,
  and 238. To maintain relevant comparisons, 2002 All Other Heavy Construction data were reassigned back into
  NAICS 237 (Heavy Construction).
Figures do not necessarily add to totals due to rounding.
Source: U.S. Census Bureau (2005).

    Building upon Table XII-1, Table XII-2 shows the number of firms
that are expected to be covered under the C&D final regulation.
Construction establishments are relatively permanent places of business
where the usual business conducted is construction related.
Construction firms are an aggregation of construction establishments
owned by a parent company that share an annual payroll. EPA estimates
that for approximately 99 percent of construction firms there is only
one establishment, and those that do have more than one establishment
tend to be in the highest revenue categories.
    For Table XII-2, EPA subtracted out firms that are engaged in home
remodeling (NAICS 236118) from the total of about 269,000 firms in
2002, as they would not be subject to the final regulations. The
elimination of remodelers is based on the fact that remodeling and
renovation activities generally disturb less than one acre of land, if
at all. Thus, the total number of C&D firms would be 178,835.
    EPA used data from the Economic Census and other sources to define
an average housing density for the nation as a whole (average number of
housing units per acre), then used this figure to identify firms to be
excluded from regulation based on their likelihood of disturbing less
than one acre on a per project basis. EPA believes that these estimates
(of firms unaffected by the final options) are conservative, meaning
that they potentially overestimate the actual number of firms that will
be affected. First, while the regulatory threshold for NPDES regulation
applies to each site, EPA excluded firms only if the estimated number
of acres disturbed in a whole year falls below the regulatory threshold
for needing permit coverage under the NPDES regulations. In addition,
the analysis was not adjusted for the portion of a site that is
potentially left undisturbed, such as open space and buffers.
Furthermore, EPA assumes that all of the housing units built by a firm
during a year are covered by NPDES stormwater permits, while in reality
the firm could build houses on lots not covered by NPDES

permits. However, the Agency does not have information on the amount of
houses that are built within subdivisions, rather than on discrete
lots, by these firms.
    Based upon these adjustments of the total number of firms, EPA
believes there currently are about 81,655 firms that would be covered
under the rule. However, the Agency has insufficient data to make any
further adjustments to the population of developers and builders
covered by the rule.

           Table XII-2--Number of Firms Covered by the Construction and Development Final Regulations
----------------------------------------------------------------------------------------------------------------
                                                                                Firms
                                                                                -------------------------------
                   NAICS                               Industry sector                              Percent of
                                                                                Number           total
----------------------------------------------------------------------------------------------------------------
2361.......................................                   Residential Building Construction
----------------------------------------------------------------------------------------------------------------
236115.....................................  New Single-family Housing                    18,269              22
                                              Construction (except operative
                                              builder).
236116.....................................  New Multifamily Housing                       2,148               3
                                              Construction (except operative
                                              builder).
236117.....................................  New Housing Operative Builder......          16,040              20
----------------------------------------------------------------------------------------------------------------
2362.......................................                  Nonresidential Building Construction
----------------------------------------------------------------------------------------------------------------
236210.....................................  Industrial Building Construction...           1,752               2
236220.....................................  Commercial and Institutional                 33,399              41
                                              Building Construction.
----------------------------------------------------------------------------------------------------------------
237........................................                Heavy and Civil Engineering Construction
----------------------------------------------------------------------------------------------------------------
237310.....................................  Highway, Street, and Bridge                  10,047              12
                                              Construction.
----------------------------------------------------------------------------------------------------------------
    Total..................................  ...................................          81,655
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

2. Consideration of Current Economic Conditions
    EPA received numerous comments expressing concern regarding the
effect the rule may have on the construction industry during the
current economic downturn. Although, EPA considers the rule to be
affordable even under the current adverse circumstances, EPA recognizes
that full immediate implementation of the rule could be disruptive to
the industry, and potentially slow the pace of the industry's return to
normal levels of activity.
    The construction industry is distinguishable from other industries
in that it has a comparatively large number of firms, the majority of
which are small, that operate on many sites, which are temporary and
widely dispersed over a broad geographic area. EPA recognizes that
these characteristics could pose potentially greater obstacles to
mobilizing the necessary resources for compliance, than those normally
faced by industries dealing with a new regulation. By phasing in the
regulation starting with a smaller number of larger sites, EPA believes
that this will minimize the chance of bottlenecks of resources, and
reduce the start-up burden for firms as they plan for implementation
and learn new techniques. When new methods or techniques are introduced
into the production process and employees gain more experience with the
technique it is common for there to be a corresponding increase in the
efficiency of performing the new technique. This efficiency gain, often
referred to as an experience or learning curve, is likely to occur with
both the application of passive treatment systems and the monitoring of
performance. The gradual phase-in of the regulation, gives the firms
and groups such as industry trade associations time to disseminate
information on how to meet requirements in the more cost-effective
ways.
    Construction is a keystone industry of the economy, comprising 10
percent of U.S. businesses and 6.6 percent of total employment. The
steep decline in construction activity since 2006 is considered a major
factor in precipitating the recent economic recession. However, the
four-year phasing process is expected to give the industry sufficient
time to experience several years of growth, before all rule
requirements are in effect. In 2014, the year that all projects greater
than 10 acres will need to comply with the numeric limit, the economic
forecasting firm Global Insights predicts that the industry will
experience its fifth consecutive year of positive growth. Forecasts of
future activity are always uncertain and Global Insights has tried to
provide baseline, positive and pessimistic predictions for several
important economic indicators. Housing starts are a considered a key
measure of industry health and they are estimated to steadily increase
during the five years after promulgation. Table XII-3 shows that even
the pessimistic forecast predicts sustained growth albeit at a slower
pace.

                                            Table XII-3--Global Insight Five-Year Forecast of Housing Starts
                                                            [Seasonally adjusted annual rate]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Year                        2009         2010         2011         2012         2013         2014
-----------------------------------------------------------------------------------------------------------------------
Pessimistic Forecast (20% probability)...      556,000      701,000    1,044,000    1,296,000    1,472,000    1,566,000
Baseline Forecast........................      556,000      865,000    1,294,000    1,563,000    1,659,000    1,665,000
Optimistic Forecast (20% probability)....      556,000    1,096,000    1,542,000    1,785,000    1,882,000   1,886,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Global Insights, U.S. Economic Outlook, July 2009.

C. Method for Estimating Economic Impacts

    EPA has conducted economic impact analyses to examine the economic
achievability of each of the four ELG and NSPS options presented in
this rule. The analyses used to assess economic achievability are based
on conditions of both full implementation of the rule requirements and
an estimate of normal business conditions. These normal business
conditions reflect the long-term trend based on construction activity
data from 1990 through 2008. For more information see the Chapter 4:
Analysis Baseline of the Economic Analysis.
    An important aspect of the economic impact analysis is an
assessment of how incremental costs would be shared by developers and
home builders, home buyers, and society. This method is called ``cost
pass-through'' analysis or CPT analysis. Details of this method may be
found in Chapter 6 of the Economic Analysis.
    The economic analysis conducted for this rule also uses another
method called partial equilibrium analysis that builds upon analytical
models of the marketplace. These models are used to estimate the
changes in market equilibrium that could occur as a result of the final
regulation. In theory, incremental compliance costs would shift the
market supply curve, lowering the supply of construction projects in
the market place. This would increase the market price and lower the
quantity of output, i.e., construction projects. If the demand schedule
remains unchanged, the new market equilibrium would result in higher
costs for finished construction and lower quantity of output. The
market analysis is an important methodology for estimating the impacts
of the options presented in today's notice.
    The economic analysis also reflects comments in the October 2001
final report from the Small Business Advocacy Review (SBAR) Panel
submitted to the EPA Administrator as part of the requirements under
SBREFA. The SBAR Panel was convened as part of the 2002 rulemaking
effort and EPA considers the information in the 2001 report to still be
relevant to today's C&D final rule. EPA also voluntarily convened a
SBAR Panel on September 10, 2008 in order to gather more information on
the potential impacts of the rule on small businesses and held an
outreach meeting with Small Entity Representative (SERs) on September
17, 2008. The current economic analysis contains changes to the initial
economic analysis done for the proposed rule, which are based on SER
comments and comments received during the proposed rule public comment
period. A summary of the changes can be found in section VII.D.
    EPA estimated the incremental compliance costs for the regulatory
options using an engineering cost model that accounts for cost factors
such as treatment costs, labor, materials, and operation and
maintenance costs. Because some of the erosion and sediment controls
considered have design requirements that take into account
meteorological and soil conditions, EPA developed compliance costs that
take into account regional differences. EPA also took into
consideration the additional monitoring and reporting costs that would
be incurred by construction permit holders.
    EPA estimated both the incremental compliance costs and the
economic impacts of each regulatory option at the project, firm, and
industry (national) level. The economic impact analysis considered
impacts on both the firms in the construction industry, and on
consumers who purchase the homes, and buy or rent industrial buildings
and commercial and office space. In the case of public works projects,
such as roads, schools, and libraries, the economic impacts would
accrue to the final consumers, who, in most circumstances, are the
taxpaying residents of the community. The sections below summarize each
modeling effort. Detailed information on the data, models, methods, and
results of the economic impact analyses are available in the Economic
Analysis.
1. Model Project Analysis
    EPA estimated project-level costs and impacts for a series of model
projects. The models vary by size (disturbed acres), duration,
geography, and type of construction to establish the baseline
conditions for factors that can directly influence compliance costs and
firm impacts. Numerous comments by small business representatives and
public comments received by the agency suggested that the approach to
modeling projects used for the proposal did not sufficiently account
for many of the project characteristics that could affect the
feasibility and cost of compliance. Characteristics most often sighted
were project size, duration, and geographic conditions. As a result,
EPA refined the analysis to use a more refined set of model projects
that includes 12 different size categories and 12 different duration
categories. To account for how project type can affect control costs,
EPA partitioned these categories between building and transportation
projects to create 288 model project categories. These 288 different
model projects were then combined with a set of geographic conditions
unique to each state, based on a representative metropolitan area
within the state. This resulted in 7,344 model projects (144 x 51) with
distinct size, duration, type and geographic characteristics. EPA used
these characteristics to determine what the likely compliance costs
would be for each model project under each option considered.
    Next EPA determined the frequency of occurrence for each of these
144 model projects within each state. This requires state level
information on the distribution of construction projects by size,
duration, and type. A comprehensive national data set with this
information does not exist. However, this information can be derived
for some states based on Notice of Intent (NOI) data. An NOI is
submitted to a state permitting authority, by each owner or operator of
the C&D site seeking coverage for their project under the state's
construction general permit. The information required under an NOI
varies from state to state, and state permitting authorities are not
required to submit their NOI information to EPA. However, some states
have voluntarily submitted their NOI data to the Agency. The Agency
identified data sets from four states (California, New York, South
Carolina, and South Dakota) containing detailed information on the type
of project, the size of the disturbed area, and the period of active
construction, which could be used to develop distributions of project
size and duration for the residential, commercial & industrial
building, and transportation sectors. The Agency used the distribution
from each of these states to represent the typical distribution for the
region of the country they are in. These four regions were delineated
based on similar geography and demographic trends. Table XII-4 shows
which representative distribution was assigned to each state. These
distributions are then combined with state value of construction data,
for each of the three sectors, and revenue per acre estimates to
predict how many actual projects are represented by each of the 288
size/duration/type categories. Given the fact there is no comprehensive
national data set with this information EPA believes this is a
reasonable approach. For more information on this approach see the
Technical Development Document.

      Table XII-4--Assignment of Regionally Representative Project
            Distributions Based on NOI Data From Four States
------------------------------------------------------------------------
    States with regionally     States assigned regionally representative
   representative NOI data                project distribution
------------------------------------------------------------------------
California...................  Arizona, Colorado, Nevada, New Mexico,
                                Oregon, Texas, Utah, Washington.
New York.....................  Connecticut, Delaware, Dist. of Columbia,
                                Hawaii, Illinois, Indiana, Maine,
                                Maryland, Massachusetts, Michigan,
                                Minnesota, New Hampshire, New Jersey,
                                Ohio, Pennsylvania, Rhode Island,
                                Vermont, Wisconsin.
South Carolina...............  Arkansas, Florida, Georgia, Kentucky,
                                Louisiana, Mississippi, Missouri, North
                                Carolina, Oklahoma, Tennessee, Virginia,
                                West Virginia.
South Dakota.................  Alaska, Idaho, Iowa, Kansas, Montana,
                                Nebraska, North Dakota, Wyoming.
------------------------------------------------------------------------

2. Model Firm Analysis
    EPA analyzed the impacts of the regulations at the level of the
firm by building financial models of representative construction firms.
Model firms are broken out by seven revenue ranges for each of the six
NAICS sectors aligning with the principal construction business
segments expected to be affected by the regulation (See Table XII-2).
These revenue ranges and sector breakouts are based on data reported by
the Statistics of U.S. Business (SUSB) and the Economic Census. Within
each business sector and revenue range model firms are further
differentiated based on median, lower quartile, and upper quartile
measures of baseline financial performance and condition (i.e., capital
returns, profit margins, levels of debt and equity to capital, etc.).
Firms in the upper quartile have better than normal financial metrics,
while the metrics for firms in the lower quartile are worse than
normal. Baseline financing costs (cost of debt and equity) was varied
over revenue ranges, with firms in higher revenue ranges having access
to more favorable terms. However, the financial data was not
sufficiently disaggregated to allow financing terms to vary over the
three quartiles. These model firms are used in combination with
compliance cost estimates to examine the potential for financial
stress, firm closures, employment effects, and increased barriers to
the entrance of new firms to the industry. EPA did not base its
analysis, as it has for many past ELGs, on actual firm-specific data
because the Agency was not provided the time necessary by the district
court order to survey the industry through an Information Collection
Request and gather such data.
    The financial statements for the model firms are constructed to
capture two business condition cases for the firm-level analysis:
General Business Conditions case that reflects the financial
performance and condition of construction industry businesses during
normal economic conditions; and Adverse Business Conditions case that
is meant to reflect financial performance during weak economic
conditions. The two business condition cases are differentiated by the
baseline operating financial circumstances of the model firms as well
as other important factors in firm financial performance, including
cost of debt and equity capital.
a. Assigning Projects and Costs to Model Firms
    For a given sector of construction activity, model projects are
assigned to model firms based on the each model firm's capacity to
perform projects. This capacity is measured in terms of annual acreage
of construction and is determined by multiplying the firm's estimated
revenue by an average acreage per million dollars of construction. For
residential construction activity, the acreage per million dollars was
derived from the Census Bureau's Census of Housing. For nonresidential
construction activity, information on project acreage and estimated
project value from Reed Construction Data is used to derive an average
number of acres developed per million dollars of value (Reed
Construction, March 2008; see DCN 51017). So for each construction
sector within each state, model projects were systematically assigned
to the firms with the most capacity for performing the work, until all
projects and their associated costs had been assigned. For more
information on the methodology for assigning projects to firms see
Section 6.1 of the Economic Analysis.
    EPA was then able to assess the impact of the annual compliance
costs on key business ratios and other financial indicators.
Specifically, EPA examined impacts on the following measures: (1) Costs
to Revenue Ratio, (2) Pre-Tax Income to Total Assets Ratio, (3)
Earnings before Interest and Taxes (EBIT) to Interest Ratio, and (4)
change in business value. The first is a simple screening level measure
which is used for measuring the impact on small entities. The second
and third are financial measures reported by Risk Management Associates
(RMA) for median, lower and upper quartiles by sector and business size
that were used in constructing the baseline financial statements for
the model firms. The change in business value measure is based on
application of compliance costs to the model firm financial statements,
both as the estimated absolute dollar change in value and the fraction
of firms whose net business value becomes negative because of
compliance outlays. The impacts of the compliance costs were examined
by calculating the values of each ratio with and without the compliance
costs.
b. Project-Level Cost Multiplier
    EPA accounted for the additional costs incurred by firms for
financing the compliance costs via debt and equity over the duration of
the project. For the firm-level impact analysis, these financing costs
are explicitly accounted for by each model firm's estimated cost of
debt and cost of equity, and then by the duration of the individual
projects that are assigned to it. However, for the housing
affordability analysis, and the estimation of social costs, EPA does
not go through the process of assigning projects to firms, so a
project-level cost multiplier was developed. This multiplier represents
how direct compliance costs translate into the change in the cost of
the final product being constructed. To develop this multiplier, EPA
created a baseline scenario that incorporated assumptions concerning
the costs incurred and revenue earned at each stage of land development
and construction. EPA has included the following three principal
development stages in developing the project-level multiplier.
    (1) Land acquisition. The starting point is usually acquisition of
a parcel of land deemed suitable for the nature and scale of
development envisioned. The developer-builder puts together the
necessary financing to purchase the parcel.
    (2) Land development. The developer-builder obtains all necessary
site approvals and prepares the site for the construction phase of the
project. Costs

incurred during this stage are divided among ``soft'' costs for
architectural and engineering services, legal work, permits, fees, and
testing, and ``hard'' costs such as land clearing, installing utilities
and roads, and preparing foundations or pads. The result of this phase
is a parcel with one or more finished lots ready for construction.
    (3) Construction. The developer-builder undertakes the actual
construction activity. A substantial portion of this work may be
subcontracted out to specialty subcontractors (foundation, framing,
roofing, plumbing, electrical, painting, etc.). In the case of a
housing subdivision, marketing often begins prior to the start of this
phase, hence, the developer-builder may also incur some marketing costs
at this time.
    The general approach used in establishing the baseline scenario is
to assume normal returns on invested capital and normal operating
profit margins to arrive at the sales price for the final product (for
example, completed new single-family homes in a residential housing
complex, or office space in a new office park). This multiplier was
then used to adjust the compliance cost estimates used for the housing
affordability analysis and the social cost analysis.
c. Cost Pass-Through
    EPA analyzed the impact of today's final rule by adding in the
regulatory costs at the appropriate stage of the project life cycle. An
important consideration for assessing who ultimately bears the
financial burden of a new regulation is the ability of the regulated
entity to pass the incremental costs of the rule on to its customers.
If the developer-builder can pass all of its costs through to the
buyer, the impact of the rule on developer-builders is negligible and
the buyer bears all the impact. Conversely, if they are unable to pass
any of the cost to buyers through higher prices, then they must assume
the entire cost. For the economic impact analysis EPA uses three pass-
through cases: zero cost pass-through; full cost pass-through; and
partial cost pass-through (85% for residential and 71% for non-
residential).
    Under the first case, the zero (0%) cost pass-through assumption,
the incremental regulatory costs are assumed to accrue entirely to the
builder-developer, and appear as a reduction in per-project profits.
The sale price of the constructed unit and surrounding lot remains the
same as the asking price in the baseline. Using the full (100%) cost
pass-through assumption, all incremental regulatory costs are passed
through to end consumers. Under this approach, the compliance costs are
also adjusted to reflect the developer's cost of debt, equity, and
overhead. Consumers experience the impact of the final regulatory
options in the form of a higher price for each new building or housing
unit. For the partial cost pass-through case, firms are assumed to pass
on part of the compliance outlay to other parties. For the partial cost
pass-through case, EPA assumes a cost pass-through rate of 85% for
residential sectors and 71% for non-residential and non-building
sectors. This is the expected average long-term level of cost pass-
through based on observed response of market supply and demand to
changes in prices for new construction. For more on the method used for
determining the level of cost pass-through see Section 8.2 of the
Economic Analysis, Analysis of Social Cost of the Economic Analysis.
When a sector is stressed, cost pass-through will tend to be below this
long-term average (i.e., more costs being borne by builders).
Conversely, when a sector is booming, most costs are likely to be
passed through.
    Information in the record indicates that builders do pass through
much of the regulatory costs to customers. This is supported by the
academic literature and industry publications. However, the financial
impact analysis also calculates results under the two bounding cases,
no cost pass-through for firms and full cost pass-through for
customers, to assess the ability of these groups to absorb the impact
of the regulation under a worst case scenario. The two bounding cases
also provide an approximation of the sensitivity of impact estimates to
the partial cost pass-through assumptions used for the primary case.
    EPA notes that under certain conditions developers might also
attempt to pass regulatory costs back to land sellers. For example, in
a depressed market, builders may argue successfully that a regulatory
cost increase would make a particular project unprofitable unless the
land costs can be reduced. If the land seller is convinced that a
residential subdivision project would not proceed, they may be willing
to accept a lower price for undeveloped land. The ability of developers
to pass such costs back would likely depend on the sophistication of
the land owner, their experience in land development projects,
knowledge of the local real estate market, and, in particular, their
understanding of the regulations and their likely cost. While evidence
of cost pass-back to land owners exists for fixed and readily
identifiable regulatory costs such as development impact fees, it is
unclear whether a builder's claim that costs would be higher due to
construction site control regulations would induce land owners to make
concessions.
3. Housing Market Impacts
    EPA developed models to assess the potential impacts of the
regulations on the national housing market. Buyers of new
nonresidential properties will also be impacted as costs are passed
through to them. However, they account for a minority of the
construction projects considered and EPA assumes that this group of
customers is not as vulnerable to changes in prices as are households
in the market for new homes. Therefore, impacts to purchasers of new
nonresidential construction sites were not highlighted as part of the
financial impact assessment and are accounted for on a more general
basis as part of the analysis of impacts on the national economy.
    To analyze the impacts of compliance costs on housing
affordability, EPA estimated the level of income that would be
necessary to purchase both the median and lower quartile priced new
home without the final regulation, and the change in income needed to
purchase the median and lower quartile priced new home under each of
the regulatory options. To assess how low-income home purchasers might
be affected, EPA also looked at the change in income needed for a
$100,000 priced home. The Agency then used income distribution data to
estimate the change in the number of households that would qualify to
purchase the median, lower quartile, and $100,000 priced new home under
each of the regulatory options. In this way, EPA attempted to estimate
the number of households that may not be able to afford the exact same
new home they could under baseline conditions. The housing market
analysis was performed at the level of the metropolitan statistical
area (MSA) to account for regional differences in housing prices and
income. The housing market analysis uses the full cost pass-through
assumption, to estimate the worst-case impacts on new single-family
home buyers.
    When assessing the impact of the rule on housing affordability, EPA
acknowledges that even those buyers who are able to afford the same
newly built home at the new price may still experience an impact. Many
households would continue to qualify to purchase (or rent) a housing
unit of approximately the same price (or rent)

as before the C&D regulation, but might instead experience a reduction
in some desirable housing attributes.
4. Impacts on the National Economy
    The market model generates an estimate of the change in the total
value of construction produced by the industry, i.e., industry output.
Two effects of the regulation are acting on the market value of
construction output. First, the cost of construction activity
increases, leading to a price rise and an increase in market value of
final projects. Second, the quantity of houses sold is reduced because
of the higher price due to compliance costs. The net effect on market
value may be either positive or negative, depending on whether the
elasticity of demand for housing is less than or greater than 1. There
are also secondary impacts in other markets, caused by the shift in
consumer spending, necessitated by the increased housing costs, from
other goods to housing.
    Construction markets vary in the level of activity, structure of
the industry, and ultimately cost pass-through potential, from state-
to-state and region-to-region. The modeling approach used for the
national impact analysis captures such regional variation in the
impacts of the final regulatory options by estimating partial
equilibrium models at the state level for four major building
construction sectors (single-family, multi-family, commercial, and
industrial). EPA assumes that all costs for transportation projects are
passed through to governmental entities, and therefore there is no
reduction in overall construction activity in the transportation
sector. The analysis of state- and national-level economic impacts is
based on estimating changes to economic output, employment, and welfare
measures that result from the estimated baseline market equilibrium to
the estimated post-compliance market equilibrium for each construction
sector in each state.
    A partial equilibrium analysis assumes that the final regulation
will only directly affect a single industry; in this case, the four
major construction sectors that were considered. Holding other
industries ``constant'' in this way is generally appropriate since the
compliance costs of the final regulatory options are expected to result
in only marginal changes in prices and quantities and the rule does not
directly affect the other industries (HUD, 2006; see DCN 52105).
    For the partial equilibrium analysis, EPA uses estimated
elasticities of market supply and demand to calculate the impact of
incremental costs on the supply curve and, thus, on prices and
quantities of construction products under post-compliance conditions.
    Economic impacts in the directly affected construction industry can
trigger further shifts in output and employment losses in the set of
broader U.S. industrial sectors as these changes pass through the
economy. The U.S. Department of Commerce uses input-output techniques
to derive ``multipliers'' which indicate, for a given change in one
industry's output, how output and employment in the whole U.S. economy
will respond. EPA has applied the multipliers from the Regional Input-
Output Modeling System, version 2 (RIMS II) to the change in output
estimated from the market model to estimate some of the anticipated
impacts on national output and employment.

D. Results

1. Project-Level Impacts
    For most industries the closure of existing facilities and
impediments to the opening of new facilities are a good indication of
the impact of a regulation on overall industry activity. However, for
the construction industry, the permitted activity is a temporary
project rather than ongoing operations at a permanent facility. This is
an important distinction, in that it provides construction firms with
greater flexibility in how they respond to the rule. Not only can they
elect to use one or more technologies to ensure compliance with the
rule they can also choose to modify the dimensions and timing of the
project to further minimize the effects of the rule on project
profitability. Potential projects that are not profitable after
considering compliance costs will either be modified to avoid or lessen
compliance costs, or they will not be performed. Although EPA cannot
predict the number or characteristics of future projects that may not
occur due to today's rule, the agency has estimated the percent
reduction in total construction activity resulting from the rule,
expressed in terms of acreage. Under Option 4 the reduced level of
construction activity is 231 acres or 0.03% of the total estimated
level of activity. EPA does expect the rule to have an effect on
overall project characteristics by providing an incentive to minimize
disturbed areas, disturb them for shorter durations, and possibly
separating the activity into more phases so that fewer acres are
disturbed at any one time.
2. Firm-Level Impacts
    EPA has estimated the economic impacts of the final rule at the
firm level by estimating the traditional factors considered by EPA
under the CWA in determining economic achievability: the number of firm
closures, and the number of lost jobs. Since in-scope firms are
predominantly small businesses EPA also thought it informative to
consider the effects on firm profitability, which is typically
considered as part of the RFA analysis. EPA also considered it
informative to assess the impact of the rule on the financial health of
firms. The construction industry is highly reliant on raising capital
to fund projects. A firm's ability to raise capital is based in large
part on its credit worthiness and the productivity of its assets. Both
of these factors can be affected by an increase in compliance costs.
Difficulty raising capital resulting from increased costs may not cause
a firm to close but it may cause its business to grow more slowly or
actually contract.
    The economic impact analysis at the firm level looks at two cases.
The first, which is the worst-case scenario, assumes that none of the
incremental costs would be passed through to the final consumer, i.e.,
zero cost pass-through. The second, which is the primary analysis case,
considered pass-through. The Agency examined the economic achievability
of options assuming zero-pass through, because it presents the worst-
case scenario (i.e., the largest impacts to the firm). The second case
(partial cost pass-through) is the primary analysis case because EPA
believes this is more reflective of typical circumstances based on
EPA's review of the academic literature and its discussions with
industry officials who indicate that under normal business conditions
most costs are passed through to the final consumer and are not
absorbed by firms in the industry.
    EPA analyzed economic impacts at the firm level. The firm is the
entity responsible for managing financial and economic information.
Moreover, the firm is responsible for maintaining and monitoring
financial accounts. For the C&D category, most of the business
establishments, as defined by the Census Bureau, are firms. Likewise, a
small number of establishments are entities within a larger firm. A
small percentage of firms have multiple establishments and some firms
are regional or national in scope.
    Table XII-5 presents two economic indicators that measure impacts
to firms. These indicators are presented using the partial cost pass-
through case,

which represents the firms' expected ability to pass costs through to
buyers, and the no cost pass-through case.

                              Table XII-5--Firms Expected To Incur Financial Stress
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
               Firms Incurring Deterioration in Financial Performance (Partial Cost Pass-through)
----------------------------------------------------------------------------------------------------------------
Number Incurring Effect.....................................           31        1,181        5,398          169
% of All In-scope Firms.....................................         0.0%         1.4%         6.6%         0.2%
% of Firms Incurring Cost...................................         0.1%         3.9%        17.7%         0.6%
----------------------------------------------------------------------------------------------------------------
                  Firms Incurring Deterioration in Financial Performance (No Cost Pass-through)
----------------------------------------------------------------------------------------------------------------
Number Incurring Effect.....................................          123        2,448       18,461          534
% of All In-scope Firms.....................................         0.2%         3.0%        22.6%         0.7%
% of Firms Incurring Cost...................................         0.4%         8.0%        60.5%         1.8%
----------------------------------------------------------------------------------------------------------------
                Potential Closures Due to Negative Net Business Value (Partial Cost Pass-through)
----------------------------------------------------------------------------------------------------------------
Number Incurring Effect.....................................           30          430        1,254          147
% of All In-scope Firms.....................................         0.0%         0.5%         1.5%         0.2%
% of Firms Incurring Cost...................................         0.1%         1.4%         4.1%         0.5%
Number of Jobs..............................................        1,464       33,044       67,443        7,257
% of In-scope Firm Employees................................         0.1%         1.8%         3.6%         0.4%
----------------------------------------------------------------------------------------------------------------
                  Potential Closures Due to Negative Net Business Value (No Cost Pass-through)
----------------------------------------------------------------------------------------------------------------
Number Incurring Effect.....................................          172        2,251        7,449          840
% of All In-scope Firms.....................................         0.2%         2.8%         9.1%         1.0%
% of Firms Incurring Cost...................................         0.6%         7.4%        24.4%         2.8%
Number of Jobs..............................................        7,010      155,364      319,030       35,450
% of In-scope Firm Employees................................         0.4%         8.4%        17.2%         1.9%
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

    The first measure estimates the potential decrease in the number of
firms considered financially fit. Deterioration of firm financial
performance is based on assessing the impact of costs on two financial
measures (Pre-Tax Income/Total Assets and Earnings before Interest and
Taxes/Interest). EPA estimated the fraction of firms in the various
sector and revenue ranges whose financial indicators decline below the
lower quartile for these two measures, as reported by Risk Management
Associates (RMA). For each sector and revenue category, whichever of
the two measures have the greatest decline is used to represent the
impact on financial performance. For additional information on EPA's
analysis of the change in financial position, see Section 6.2,
Estimating the Change in Model Firm Financial Performance and
Condition, from the Economic Analysis.
    The second measure indicates the number of firms who are no longer
profitable as a result of the rule. This is an indicator of the number
of likely firm closures and is a commonly used measure of economic
impacts under the CWA. These numbers represent the impact on firms with
thin profit margins who are most vulnerable to impacts from cost
increases, and they do not represent the effects of a reduction in the
overall quantity of construction activity as a result of the C&D rule.
Both phenomena can result in reduced activity and job losses, but they
are two separate measures of impact that are not necessarily wholly
additive or overlapping.
    Construction is a highly competitive industry that is characterized
by many small firms with a relatively high turnover and low barriers to
entry. Firms routinely expand and contract their workforce in response
to work load and as a result many workers laid off when a firm closes
are rehired by new and other existing more financially healthy firms.
Therefore, job losses due to firm closures are in many cases a
temporary displacement of the workforce. By contrast, job losses due to
market contraction result from an overall reduction in the volume of
construction and not necessarily from the closure of a firm. Table XII-
6 shows the estimated number of job losses within the construction
industry resulting from a reduction in overall construction activity
due to each of the options considered. These job losses can be
considered a more lasting effect until market conditions change again.

 Table XII-6--Change in Employment Levels Due to Decreased Industry Activity, Assuming Partial Cost Pass-Through
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
                               Employment Effect from Reduced C&D Industry Output
----------------------------------------------------------------------------------------------------------------
Estimated Permanent Reduction in Construction Jobs..........           83        3,370        5,802          560
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

For more information on job losses due to market contraction, see
Chapter 9 Economy-wide Analysis in the Economic Analysis.
    Table XII-7 presents one economic indicator, the relationship of
compliance cost to firms' annual revenue. A comparison between costs
and revenues is typically done prior to any consideration of the pass-
through of costs to buyers. This comparison provides a simple measure
of possible impacts on firm profitability and it is used under the RFA
to determine if a rule has the potential to have a significant impact
on a substantial number of small entities. Even under the more severe
No Cost Pass-through case, firms whose costs exceed 1% of revenue are
only 0.3 percent of the approximately 82 thousand in-scope firms for
the selected Option 4. Furthermore, there are no firms whose costs
exceed 3% of revenue for the selected Option 4.

                                                              Table XII-7--Cost to Revenue
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Costs exceeding 1% revenue                      Costs exceeding 3% revenue
                                                         -----------------------------------------------------------------------------------------------
                                                                                Percent of                                      Percent of
                         Option                              Number of      Percent of         firms         Number of      Percent of         firms
                                                               firms      firms in-scope     incurring         firms      firms in-scope     incurring
                                                                                costs                                           costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Partial Cost Pass-through Case
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1................................................               0             0.0             0.0               0             0.0             0.0
Option 2................................................             873             1.1             2.9              81             0.1             0.3
Option 3................................................           3,573             4.4            11.7             225             0.3             0.7
Option 4................................................               0             0.0             0.0               0             0.0             0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                No Cost Pass-through Case
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1................................................               0             0.0             0.0               0             0.0             0.0
Option 2................................................           4,717             5.8            15.5           2,399             2.9             7.9
Option 3................................................          14,021            17.2            46.0           9,126            11.2            29.9
Option 4................................................             276             0.3             0.9               0             0.0            0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

    The construction industry has historically been a relatively
volatile sector, and is subject to wider swings of economic performance
than the economy as a whole. EPA has used historical financial and
census data for the construction industry to discern long-term trends
within the market fluctuations. EPA based its primary economic analysis
on data that reflects average long-term performance rather than a
temporary high or low. The industry is currently experiencing a period
of weakness that is likely to persist until residential markets work
through the current inventory of unsold homes, credit markets improve,
and the general economy returns to a better condition. As such, there
will continue to be considerable uncertainty regarding the likely
length and severity of the current slump in the construction industry.
EPA realizes that the rule will be promulgated during this low period
for the industry, and there may be concerns that additional compliance
costs, associated with the rule, could have a greater than normal
impact on construction firms and potentially slow the industry
recovery. To some degree, this will be offset, by the four year phase
in of the numeric limitation and monitoring requirements, which is part
of today's rule. Additionally, the rule will not be fully implemented,
with the associated costs to the industry, until 5 years after the
effective date of this rule, sometime in 2015, when all EPA and state
construction general permits have gone through their five year permit
cycle and new permits are issued incorporating the requirements of this
rule. See CWA section 402(b)(1)(B). The time period could be longer if
it takes permitting authorities more time to issue revised permits.
However, using historical census and financial data for the industry
EPA identified periods of weakness for various industry sectors and
used them to develop a secondary analysis that represents potential
impacts of additional compliance costs during a period of adverse
economic circumstances. Three key assumptions EPA used to represent
adverse conditions for the industry were that there would be a
contraction in overall market activity, firms would finance projects
under less favorable terms and no costs incurred by the firm as a
result of compliance would be passed through to the buyer. Table XII-8
below shows the results of the adverse analysis case. The number of
firms experiencing impacts reflects the market contraction, so they are
not directly comparable to the primary analysis case, since they
represent differing levels of regulated activity. However, the adverse
case analysis shows that the percentage of in-scope firms incurring
financial stress is 0.5% of in-scope firms and the percentage of in-
scope firms at risk of closure in the adverse case is 0.9%. However,
even with the greater impacts seen under the adverse analysis case, the
percentage of total firms experiencing financial hardship is very small
under any of the metrics considered, with respect to the final option.
Another important consideration for the adverse analysis case is that
under the no-cost pass through assumption, there are no secondary
impacts on small builders or affordability effects for buyers.

                                  Table XII-8--Adverse Impact Analysis Results
----------------------------------------------------------------------------------------------------------------
          Impact analysis concept                      Option 1              Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
Costs Exceeding 1 Percent of Revenue:
    Number of Firms.......................  0............................        2,037        6,960          105
    % of Firms In-Scope...................  0.0%.........................         3.5%        11.8%         0.2%

    % of Firms Incurring Cost.............  0.0%.........................        11.6%        39.8%         0.6%
Costs Exceeding 3 Percent of Revenue:
    Number of Firms.......................  0............................          751        3,401            0
    % of Firms In-Scope...................  0.0%.........................         1.3%         5.8%         0.0%
    % of Firms Incurring Cost.............  0.0%.........................         4.3%        19.4%         0.0%
Firms Incurring Financial Stress:
    Number of Firms.......................  71...........................        3,163        8,168          315
    % of Firms In-Scope...................  0.1%.........................         5.4%        13.9%         0.5%
    % of Firms Incurring Cost.............  0.4%.........................        18.1%        46.7%         1.8%
Firms With Negative Business Value
 (Potential Closures):
    Number of Firms.......................  180..........................        1,041        2,966          547
    % of Firms In-Scope...................  0.3%.........................         1.8%         5.0%         0.9%
    % of Firms Incurring Cost.............  1.0%.........................         6.0%        17.0%        3.1%
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

    Since EPA expects that the effluent guidelines requirements will be
implemented over time as states revise their general permits (EPA
expects full implementation within five years of the effective date of
the final rule, in 2015), EPA has used macroeconomic forecasts of
construction activity to assess when the industry is likely to return
to its long-term trend. (Global Insight, ``U.S. Economic Service,''
July, 2009) Based on these forecasts, EPA anticipates that the industry
activity will have recovered to the long-term trend during the period
when the rule is being fully implemented.
3. Impacts on Governments
    EPA has analyzed the impacts of today's final rule on government
entities. This analysis includes the cost to governments for compliance
at government-owned construction project sites (construction-related).
For construction-related costs, EPA assumed that 100 percent of the
incremental compliance costs that contractors incur at government-owned
construction sites are passed through to the government. EPA also
estimated the additional administrative costs that government entities
would incur for reviewing the additional monitoring reports associated
with the turbidity monitoring requirements of Options 2, 3, and 4.
Table XII-9 shows the costs that government entities are expected to
incur at federal, state, and local levels.

                                   Table XII-9--Total Costs by Government Unit
                                                [Millions 2008 $]
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
Compliance Costs
    Federal.................................................         $3.8        $87.1       $166.9        $17.7
    State...................................................          8.1        178.1        323.0         35.3
    Local...................................................         46.2      1,022.3      1,854.0        202.4
Administrative Costs
    Federal.................................................          0.0          0.0          0.0          0.0
    State...................................................          0.0          2.2          6.2          6.2
    Local...................................................          0.0          0.0          0.0          0.0
Total Costs
    Federal.................................................          3.8         87.1        166.9         17.7
    State...................................................          8.1        180.3        329.2         41.5
    Local...................................................         46.2      1,022.3      1,854.0        202.4
    State Government Total Revenues.........................    1,097,829    1,097,829    1,097,829    1,097,829
    Total Costs as % of Total Revenues......................         0.00         0.02         0.03         0.00
    Local Government Total Revenues.........................    1,083,129    1,083,129    1,083,129    1,083,129
    Total Costs as % of Total Revenues......................         0.00         0.09         0.17         0.02
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

     The additional government costs associated with today's rule are
not expected to have a significant impact on state and local
governments as they account for less than a tenth of a percent of state
government revenues and less than a tenth of a percent of estimated
local government revenues. For additional information on the effect of
the rule on government entities see the UMRA analysis in Chapter 14 of
the Economic Analysis.
4. Community-Level Impacts
    EPA has estimated community-level impacts based upon the
incremental costs of the final rule at the household level. The
household impacts are those that would affect local communities in
terms of the costs of housing. EPA's analysis considers the impacts on
the price of housing based on the increase/decrease in the price of
three representative houses (median, lower quartile, and $100,000).
Table XII-10 shows the change by selected option in the price per
house. It is important to note that these costs would not apply to all
new houses built in the U.S., but rather only to those houses that are
part of construction projects that are subject to the given regulatory
option. Each of the options are assumed to affect all new homes sales,
which are approximately 12.6 percent of total annual home sales. This
is a slight over estimate because it includes those new

houses built in projects less than 1 acre and those that are built in
localities where erosion and sediment controls are more stringent than
the ones being promulgated today.
    The table also provides estimates of the expected change in monthly
payments under each option for the median and lower quartile priced
home. The monthly mortgage payments were calculated using the median
and lower quartile priced house for each Metropolitan Statistical Area
(MSA) in the country. For the MSA's, the weighted average median price
for a home is $356,000, the 5th percentile is $117,000, and the 95th
percentile is $498,000. For the lower quartile priced home, the
weighted average is $251,000, the 5th percentile is $70,000, and the
95th percentile is $371,000. The U.S. Census does not report lot sizes
for the upper or lower quartile. Instead the Census reports the median
for all new single-family homes and the median for new single-family
homes that are attached (townhomes). Housing census data indicates that
lower-priced homes have a greater likelihood of having a smaller lot
size (U.S. Census Characteristics of New Housing, 2006). To account for
this factor, EPA performed the affordability analysis for the lower-
quartile price home twice, using both the median lot size for all
single family homes and the median lot size for attached single family
homes. To assess the impacts on those households that were just able to
afford a house at the low end of the housing market, EPA also included
an analysis of the expected change in monthly payments for a new house
valued at $100,000.

      Table XII-10--Change in Monthly Mortgage Payment for New Single-Family Home (Full Cost Pass-Through)
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
                            New Single-Family Median Priced Home on Median Sized Lot
----------------------------------------------------------------------------------------------------------------
Price Change New Single-Family Home on Median Sized Lot.....          $59       $2,231       $4,093         $415
Baseline Mortgage Payment ($/month).........................       $1,953       $1,953       $1,953       $1,953
New Mortgage Payment ($/month)..............................       $1,954       $1,969       $1,982       $1,956
% Change....................................................        0.02%        0.80%        1.45%        0.14%
----------------------------------------------------------------------------------------------------------------
                        New Single-Family Lower Quartile Priced Home on Median Sized Lot
----------------------------------------------------------------------------------------------------------------
Price Change New Single-Family Home on Median Sized Lot.....          $59       $2,231       $4,093         $415
Baseline Mortgage Payment ($/month).........................       $1,352       $1,352       $1,352       $1,352
New Mortgage Payment ($/month)..............................       $1,352       $1,367       $1,380       $1,355
% Change....................................................        0.03%        1.15%        2.10%        0.21%
----------------------------------------------------------------------------------------------------------------
                    New Single-Family Lower Quartile Priced Home on Median Sized Attached Lot
----------------------------------------------------------------------------------------------------------------
Price Change New Single-Family Home on Median Sized Attached          $20         $745       $1,367         $139
 Lot........................................................
Baseline Mortgage Payment ($/month).........................       $1,352       $1,352       $1,352       $1,352
New Mortgage Payment ($/month)..............................       $1,352       $1,357       $1,361       $1,353
% Change....................................................        0.01%        0.38%        0.70%        0.07%
----------------------------------------------------------------------------------------------------------------
           New Single-Family $100,000 Priced Home on Median Sized Lot for Attached Single-Family Home
----------------------------------------------------------------------------------------------------------------
Price Change New Single-Family Home on Median Sized Attached          $20         $745       $1,367         $139
 Lot........................................................
Baseline Mortgage Payment ($/month).........................         $681         $681         $681         $681
New Mortgage Payment ($/month)..............................         $681         $686         $691         $682
% Change....................................................        0.02%        0.76%        1.39%        0.14%
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

    The increase in mortgage payments attributable to the final options
compared to the estimated mortgage payment for the median price of a
new house in the U.S., currently about $1,953, is a small percentage of
the overall payment. For these costs, the average monthly mortgage
payment would increase by $1, $16, $29, and $3 per month for Options 1,
2, 3, and 4, respectively. For the analysis, EPA assumes that buyers
finance approximately 80% of the home purchase price using a 30-year
conventional fixed rate mortgage with an interest rate of 7.39%.
    EPA also estimated how the change in home prices would affect
mortgage availability. EPA estimated that 1,249 prospective home
purchasers seeking to buy a new median priced single-family home would
be affected by the final rule, of which 354 would no longer qualify
using a 29% housing payment-to-income ratio. At the lower end of the
housing market, 518 prospective home purchasers seeking to buy a new
$100,000 priced single-family attached home would be affected by the
final rule, of which 246 would no longer qualify using a 29% housing
payment-to-income ratio. However, these are only specific points along
the spectrum of housing prices and therefore do not represent the total
number of households that would have to make a different homebuying
decision as a result of the rule. For more information on the
affordability analysis see Section 7, Analysis of Single-Family Housing
Affordability Impacts, of the Economic Analysis.
5. Foreign Trade Impacts
    As part of its economic analysis, EPA has evaluated the potential
for changes in U.S. trade (imports, exports) of construction-related
goods and services. A significant component of the U.S. C&D category
operates internationally, and, in addition, numerous foreign firms that
participate in this category also operate in the U.S. EPA judged that
the potential for U.S. construction firms to be differentially affected
by the final rule is negligible. The final rule will be implemented at
the project level, not the firm level, and will affect projects within
the U.S. only. All firms undertaking such projects, domestic or

foreign, will be subject to the final rule. U.S. firms doing business
outside the U.S. will not be differentially affected compared to
foreign firms, nor will foreign firms doing business in the U.S.
    This final rule could theoretically stimulate or depress demand for
some construction-related goods. To the extent that the final rule acts
to depress the overall construction market, demand for conventional
construction-related products may decline. This decline may be offset
by purchase of goods and services related to erosion and sediment
control. Overall, EPA does not anticipate that any shifts in demand for
such goods and services resulting from the rule would have a
significant implication for U.S. and foreign trade.
6. Impacts on New Firms
    The construction sector is a relatively fluid industry, as
documented in the industry profile, with low barriers to entry and
considerable entry and exit activity from year to year. As a result,
the potential employment losses or capital idling effects of weakness
in a specific firm are likely to be offset by changing levels of
activity in other existing firms or entry of new firms into the local
market. In addition, existing firms would need to meet the same
requirement, and therefore would not obtain a competitive advantage
over new entrants.
    EPA conducted an analysis to assess the impacts on new firms that
choose to enter the C&D point source category. This analysis uses a
method called ``barrier to entry'' and is relevant to determining BADT
for NSPS. EPA examined the ratio of compliance costs to current and
total assets to determine if new market entrants could find it more
difficult to assemble the capital requirements to start a project than
would existing firms. The methodology is conservative, because it
doesn't account for the fact that a firm would typically be expected to
finance 20 percent of the incremental compliance costs from their own
financial resource to obtain the loan, not the full amount as assumed
here.
    For the selected regulatory option (Option 4), the increase in
financing requirement varies from approximately 0.0 percent to 4.1
percent of baseline assets depending on the firms size and business
sectors. This comparison assumes that the new firm's compliance outlay
would be financed and recorded on its balance sheet. To the extent that
the compliance outlay is financed and recorded not on the firm's
baseline sheet but as part of a separate project-based financing for
each individual project, this comparison is likely to be overstated,
perhaps substantially. EPA does not consider the increase in financing
requirements to pose a significant barrier to entry for potential
businesses and projects.
    This analysis likely overstates the costs that will need to be
financed by new entrants to the industry. For the economic analysis,
industry firms were grouped into one of seven revenue ranges. Firms
with higher revenues are considered to be more capable of performing
larger projects. This assumption formed the basis for assigning model
projects and their associated compliance costs to model firms. Under
Option 4, compliance costs for projects under 10 acres are considerably
less than they are for projects 10 acres and above. EPA believes that
most new entrants will likely be small firms starting in one of the
lower revenue ranges considered for the economic analysis, and so they
will likely be performing projects less than 10 acres.
7. Social Costs
    EPA's analysis of social costs for each option contains three cost
components: (1) Firm compliance costs; (2) incremental increase in
government administrative costs; and (3) deadweight loss (loss of
economic efficiency in the construction market). When summed, these
three cost categories comprise the total social costs for each option.
    EPA has conducted a social cost analysis for each option. The
Economic Analysis provides the complete social cost analysis for the
final regulation. The firm-level estimate compliance cost, however,
does not account for the potential affect of the final options on the
quantity of construction activity/units performed in the various
construction markets. Compliance costs for each final option have the
effect of increasing builder/developer costs, which can cause a
leftward shift in the market's supply curve. Part of the increased
costs may raise the price of new housing, with the balance of increased
costs being absorbed by the builder, depending on the relative
elasticities of supply and demand. The resulting shift in market
equilibrium may also reduce the quantity of construction units produced
in a given market.
    EPA has estimated a state-by-state linear partial equilibrium
market model for each construction building sector to estimate this
potential market effect on the quantity of output. The estimated change
in the quantity of output produced in each construction market segment
is then used to not only adjust the firm-level resource cost of
compliance, but also to compute the economic value of the reduction in
construction output, and estimate the total loss of consumer and
producer surplus, referred to as the deadweight loss. Table XII-11
shows the change in cost due to the quantity effect (i.e. reduction in
market activity), the dead weight loss, and their combined effect on
total costs.

                         Table XII-11--Total Social Cost of Options [Millions of $2008]
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
Total Costs, Unadjusted for Quantity Effect.................         $176       $4,866       $9,090         $953
Change in Costs Due to Quantity Effect......................         0.01           10           31         0.29
Total Costs, Adjusted for Quantity Effect...................          176        4,856        9,059          952
Total Dead Weight Loss......................................          0.0          5.0         15.5         0.15
Additional Government Administrative Costs..................          0.0          2.2          6.2          6.2
Total Social Cost of the Regulation.........................        175.7      4,863.1      9,081.1        958.7
----------------------------------------------------------------------------------------------------------------

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

    Table XII-12 shows the impacts of the final rule using the one
percent and three percent revenue tests, a method used by EPA to
estimate the impacts on small businesses for the regulatory options.

                   Table XII-12--Small Business Analysis for Options, 1% and 3% Revenue Tests
----------------------------------------------------------------------------------------------------------------
                                                          1% revenue test                 3% revenue test
                                                 ---------------------------------------------------------------
                     Option                          Number of      Percent of       Number of      Percent of
                                                    small firms     small firms     small firms     small firms
----------------------------------------------------------------------------------------------------------------
                                         Partial Cost Pass-through Case
----------------------------------------------------------------------------------------------------------------
;Option 1.......................................               0             0.0               0             0.0
Option 2........................................             593             0.8              60             0.1
Option 3........................................           3,008             3.9             187             0.2
Option 4........................................               0             0.0               0             0.0
----------------------------------------------------------------------------------------------------------------
                                            No Cost Pass-through Case
----------------------------------------------------------------------------------------------------------------
Option 1........................................               0             0.0               0             0.0
Option 2........................................           3,454             4.5           1,843             2.4
Option 3........................................          11,889            15.4           8,106            10.5
Option 4........................................             230             0.3               0             0.0
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

    Under the No Cost Pass-through case, Table XII-12 shows that for
the selected option (Option 4), less than a thousand small firms would
be likely to incur direct costs exceeding one percent of revenue, which
accounts for less than one percent of the approximately 78 thousand
small in-scope firms. Therefore, EPA does not consider the selected
option to have the potential to cause a significant economic impact on
a substantial number of small entities. EPA acknowledges that
additional small builders may experience secondary impacts in the form
of higher lot prices as larger developers attempt to pass some of their
compliance costs through to them. The ability of large developers to
pass-through costs to builders will vary based on market conditions in
the same manner that the pass-through rate to the purchaser of the
finished construction can vary. Additionally, as noted above, some of
these small builders may also be copermittees who are required to be in
compliance with these standards. To the extent they are copermittees,
they are not accounted for in the firms incurring costs. However, all
costs have been attributed to firms. Allocating costs over a broader
number of firms may or may not increase the estimated impacts, but
spreads the costs over a larger number of firms.

XIII. Cost-Effectiveness Analysis

    For many effluent limitations guidelines, EPA performs a cost-
effectiveness (C-E) analysis using toxic-weighted pound equivalents.
The C-E analysis is useful for describing the relative efficiency of
different technologies. The pollutant removals estimated for today's
final rule are all based on sediment and sediment bound nutrients.
While EPA expects that today's rule would also result in a significant
reduction of other pollutants associated with sediment at construction
sites, such as turbidity, metals, organics, oil and grease, pesticides
and herbicides, the Agency has not quantified these reductions. The
Agency does not have a methodology for converting sediment, measured as
TSS or turbidity, into toxic-weighted pound equivalents for a C-E
analysis. Instead, EPA compared the cost of each regulatory option to
the pounds of sediment removed. This unweighted pollutant removal
analysis is meaningful because it allows EPA to compare the cost
effectiveness of one option against another, and to other sediment
reduction efforts. Table XIII-1 shows a comparison of the cost-
effectiveness of the options for controlling sediment discharges.
Details on the estimates of sediment reductions can be found in Section
XV.B.

                                   Table XIII-1--Cost-Effectiveness of Options
----------------------------------------------------------------------------------------------------------------
                                                                Option 1     Option 2     Option 3     Option 4
----------------------------------------------------------------------------------------------------------------
Compliance Cost (millions 2008$)............................         $176       $4,866       $9,090         $953
Sediment Removed (million lbs/yr)...........................        1,743        3,616        4,507        3,971
Cost per Pound Removed ($/lb)...............................         0.10         1.35         2.02         0.24
----------------------------------------------------------------------------------------------------------------
Source: Economic Analysis.

XIV. Non-Water Quality Environmental Impacts

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

A. Air Pollution

    EPA estimates that today's final rule would have no significant
effect on air pollution because the final rule would not significantly
alter the use of heavy equipment at construction sites. Accordingly,
the levels of exhaust emissions from diesel-powered heavy construction
equipment and fugitive dust emissions generated by construction
activities would not change substantially from current conditions as a
result of the final rule. The final rule, which relies on the use of
passive treatment, typically does not utilize large diesel-powered or
gasoline pumps. The only anticipated use of pumps would be due to the
use of small metering pumps to introduce polymer in certain situations.
These pumps

would only use a trivial amount of energy and would produce only a
trivial amount of air emissions. On certain sites, it may be necessary
to remove accumulated sediment from basins and traps. In these cases,
construction equipment may need to periodically remove accumulated
sediment. In these cases, additional emissions due to construction
equipment may occur. EPA estimates that the final rule will result in
the removal of approximately 1,986,000 tons of sediment annually. EPA
estimates that increased emissions from construction equipment to
remove this quantity of sediment would be approximately 0.0009 percent
of current industry emissions. Table XIV-1 shows the expected emissions
due to the final rule.

              Table XIV-1--Air Emissions Due to Final Rule
------------------------------------------------------------------------
                                                             Emissions
                        Parameter                          (pounds/year)
------------------------------------------------------------------------
Reactive organic gases..................................           4,707
Carbon monoxide.........................................          15,335
Nitrogen oxides.........................................          43,970
Sulfuric oxides.........................................              45
Particulate matter......................................           1,809
Carbon dioxide..........................................       4,167,800
Methane.................................................             424
------------------------------------------------------------------------

B. Solid Waste Generation

    Generation of solid waste could be affected under today's final
rule because of the large volumes of sediment containing polymers or
other chemicals that may accumulate in sediment basins and traps and
behind check dams and other sediment control structures. Where
permittees are using polymers or other chemicals to treat stormwater,
then sediment accumulated in sediment basins, traps or in drainage
channels may need to be handled as solid waste, depending on the nature
of the chemical used. However, most permittees using chemical additives
are expected to select polymers that would enable the operator to apply
solids (i.e., sediment) on-site as fill material to avoid the
transportation and disposal costs associated with hauling off-site.

C. Energy Usage

    The consumption of energy as a result of today's final rule is not
expected to be significant because the operations that currently
consume energy (both direct fossil fuel use and electricity) will not
be changing to any substantial degree during land disturbance. PTS
utilize little or no energy, hence no significant increase in fuel
consumption by the industry is anticipated. However, removal of
accumulated sediment would require use of construction equipment, which
would increase diesel fuel and gasoline consumption by the industry.
However the additional fuel consumption for these activities is
expected to be small compared to current consumption for this industry.
EPA estimates that gasoline and diesel fuel consumption due sediment
removal would be approximately 76,000 gallons per year as a result of
the final rule. This represents an increase in fuel usage by the
industry of approximately 0.0009 percent over current usage, which was
estimated at approximately 8.3 billion gallons per year in 2002 (2002
Economic Census, U.S. Census Bureau). In addition, polymers such as
polyacrylamide are produced from petroleum, so additional
polyacrylamide usage to treat construction site stormwater discharges
would result in increased petroleum consumption. However, usage on
construction sites is not expected to significantly increase demand for
acrylamide. U.S. acrylamide demand in 2001 was estimated to be
approximately 253 million pounds, and additional usage on construction
sites would be approximately 4.56 million pounds per year if all
discharges from all regulated sites were to use PAM at a dosage of 2
mg/L. Therefore, additional petroleum and energy consumption due to PAM
production and usage is expected to be small. See section 11 of the TDD
for additional discussion.

XV. Environmental Assessment

A. Surface Water Impacts From Discharges Associated With Construction
Activity

    In its Environmental Assessment (see ``Supporting Documentation''),
EPA evaluated environmental impacts from stormwater discharges
associated with construction activity.
    As discussed in Section VIII, stormwater discharges associated with
construction activity have been documented to increase the loadings of
several pollutants to receiving surface waters. The most prominent and
widespread pollutant discharges from construction sites are turbidity
and sediment. Discharges of metals, nutrients, and petroleum
hydrocarbons have also been documented. Other pollutants discharged
from construction sites include polycyclic aromatic hydrocarbons (PAHs)
and other toxic organic compounds.
    Pollutants other than sediment and turbidity derive from
construction equipment and materials, natural soil constituents, and
contamination existing prior to the start of construction activity at a
site. Construction activities mobilize sediments and other pollutants
by disturbing soil and altering stormwater discharge quantity and
patterns during precipitation events and from exposure of rainfall and
runoff to construction materials. Excavation dewatering and irrigation
of revegetation areas, if not properly managed, can mobilize pollutants
during dry weather.
    Surface water effects from construction site discharges include
physical, chemical and biological changes. Physical and chemical
changes include modified stream flow and elevated levels of turbidity,
suspended solids and other pollutants. Biological changes include
reduced organism abundance, modified species composition, and reduced
species diversity.
    Sediment and turbidity are the primary pollutants in discharges
associated with construction activity and are also significant sources
of water quality impairment. Nitrogen and phosphorus, also present in
construction site discharges, contribute significantly to water quality
impairment as well. EPA's Wadeable Streams Assessment (2006) is a
statistical survey of the smaller perennial streams and rivers that
comprise 90 percent of all perennial stream miles in the coterminous
United States. Excess nitrogen, phosphorus, and streambed sedimentation
are among the most widespread stressors examined in the survey.
According to the survey, 25 percent of streams have ``poor'' streambed
sediment condition, 31 percent have ``poor'' phosphorus condition, and
32 percent have ``poor'' nitrogen condition relative to reference
streams. The risk of having poor biological condition was two times
greater for streams scoring ``poor'' for nutrient or streambed sediment
condition than for streams that scored ``good.''
    In addition, EPA's Assessment TMDL Tracking and Implementation
System (ATTAINS) provides information on water quality conditions
reported by the states to EPA under Sections 305(b) and 303(d) of the
Clean Water Act. According to ATTAINS (as of September 17, 2009),
turbidity contributes to impairment of 26,278 miles of assessed rivers
and streams, 1,008,276 acres of assessed lakes, and reservoirs, and 240
square miles of assessed bays and estuaries. The total area of impaired
surface waters due to turbidity is probably underestimated due to the
low percentage of surface waters that have been assessed. See the
Environmental Assessment for

additional information on the Wadeable Streams Assessment and ATTAINS.
    Discharges from construction sites impair or place additional
stress on already impaired surface waters. Multiple states have
identified construction activity as a source of impairment for surface
waters within their jurisdiction.
    Ecological impacts from sediment and turbidity discharges to
surface waters can be acute or chronic and vary in severity depending
on the quantity of sediment and turbidity discharged, the nature of the
receiving waterbody and aquatic community, and the length of time over
which discharges take place. Sediment and turbidity can depress aquatic
organism growth, reproduction, and survival, leading to declines in
organism abundance and changes in community species composition.
Threatened and Endangered (T&E) and other special status species are
particularly susceptible to adverse habitat impacts. According to the
United States Fish and Wildlife Service, increased sedimentation is one
of the main contributors to the demise of some fish, plants, and
invertebrates.
    There are numerous ways in which sediment and turbidity affect
aquatic communities. Sediment deposition on waterbody beds can bury
benthic communities, smothering fish eggs and other benthic organisms
and severing connections to organisms in the water column.
Sedimentation also modifies some benthic habitats by filling crevices
and burying hard substrates, making recolonization by the previously
existing community difficult unless the sediment is removed.
    In the water column, elevated turbidity levels block light needed
for photosynthesis by submerged aquatic vegetation (SAV), resulting in
its reduced growth or death. Because SAV is a primary producer depended
upon by many other organisms in aquatic ecosystems, its loss or
reduction can create a cascade of impacts through aquatic communities,
lowering community health and productivity. Increased turbidity also
impairs the ability of visual predators (e.g., many fish species) to
forage successfully. Increased sediment concentrations in the water
column can impair fish gill function, reducing the ability of fish to
breathe. These and other processes by which sediment and turbidity
discharges impair aquatic ecosystems are discussed in more detail in
the Environmental Assessment.
    Increased sediment and turbidity levels in surface waters also
adversely affect direct human uses of water resources. These uses
include navigation channels, reservoirs, drinking water supply,
industrial process water supply, agricultural water supply, and
recreational use. Property values also depend in part on the quality of
nearby surface waters, though these may reflect the values already
discussed and not necessarily represent a separate benefit.
    Sediment deposition on riverbeds and in harbors can fill and impede
use of navigable channels. Between 1995 and 2008, the U.S. Army Corps
of Engineers (USACE) funded nearly 3,400 dredging projects at a cost of
more than $9 billion (2008 dollars) to remove more than 2.6 billion
cubic yards of sediment from U.S. navigable waters (United States Army
Corps of Engineers Dredging Database 2009). Reservoirs and lakes serve
a variety of functions, including drinking water storage, hydropower
supply, flood control, and recreation. Sediment deposition on reservoir
and lake beds reduces their capacity to serve these functions. An
increase in sedimentation rate reduces the useful life of these waters
unless measures are taken to reclaim their capacity. In waters serving
as a drinking water source, elevated turbidity, suspended sediment, and
other pollutants degrade water quality, and may require increased
treatment levels.
    Sediment can also have negative effects on industrial activities.
Suspended sediment increases the rate at which hydraulic equipment,
pumps, and other equipment wear out, causing accelerated depreciation
of capital equipment. Sediment can also clog water intakes at power
plants and other industrial facilities and drinking water intakes.
    Elevated levels of sediment and other pollutants in irrigation
water used for agriculture can harm crops and reduce agricultural
productivity. Suspended sediment can form a crust over a field,
reducing water absorption, inhibiting soil aeration, and preventing
emergence of seedlings. Sediment can also coat plant leaves, inhibiting
plant growth and reducing crop value and marketability. Other
pollutants can damage soil quality.
    Sediment deposition in river channels, ditches, stormwater basins
and culverts reduces their capacity and can increase flood levels and
frequency, increasing the level of adjoining property damage from
flooding. Sediment and turbidity can degrade surface water appearance,
lowering property values near impacted surface waters and the
desirability of surface waters for recreational activities such as
boating, fishing, and swimming.
    Sediment and turbidity are the primary pollutants known to be
associated with construction activity, but as stated earlier in this
section, other pollutants such as nitrogen, phosphorus and metals are
also discharged from construction sites. These pollutants can also harm
aquatic ecosystems. Additional qualitative information on the
environmental impacts associated with all pollutants from construction
sites is provided in the Environmental Assessment. The remaining
discussion in this section describes EPA's quantitative analysis of
discharge levels and water quality impacts associated with sediment,
nitrogen, and phosphorus from construction sites.

B. Quantification of Sediment Discharges Associated With Construction
Activity

    EPA used a model project approach to estimate baseline sediment
loads and to estimate loading reductions for the C&D industry under the
regulatory options evaluated. EPA used RUSLE to estimate loads and load
reductions at the RF1 scale. This approach consisted of the following
steps:
     Developing a series of model projects of differing sizes,
durations and types based on an analysis of NOI data;
     Determining RF1-level estimates for RUSLE and hydrologic
parameters using national GIS data layers, supplemented with BPJ
estimates of parameters for which data were not available;
     Estimating baseline and option-specific estimates of
sediment loads for each RF1. For Option 1, estimates were developed
based on changes in the RUSLE practice factors and cover factors from
baseline. For Options 2, 3 and 4, estimates were developed using a
concentration approach for acres subject to turbidity limitations, and
the Option 1 approach for acres not subject to turbidity limitations;
and
     Summing RF1 loads to the national level.
    For Options 2 and 3, EPA used a TSS value of 25 mg/L as an
approximation of the level of sediment contained in discharges
following ATS. For Option 4, EPA used a TSS value of 250 mg/L as an
approximation of the level of sediment contained in discharges
following the application of passive treatment. EPA calculated removals
based on the change in concentration between baseline conditions and
the respective level under the regulatory options. Under baseline
conditions, modeled TSS concentrations for RF1s ranged from
approximately 8 to 8,200 mg/L, with a median value of approximately
1,550 mg/L. Estimated

sediment loading reductions for the options can be found in Table XIII-
1.

C. Quantification of Surface Water Quality Improvement From Reducing
Discharges Associated With Construction and Development Activity

    This section describes the methodology EPA used to quantitatively
assess national water quality impacts from construction activity
sediment, nitrogen, and phosphorus discharges and the water quality
benefits expected from today's rule. This analysis has been revised
since the proposed rule in that it expands the quantitative analysis of
the water quality benefits beyond sediment reductions to include
reductions in nitrogen and phosphorus discharges from construction
sites. Other pollutant discharges associated with construction activity
(e.g., toxic organic compounds and metals) also create water quality
impacts, but the information available to EPA on their discharge is
insufficient to quantitatively analyze their impacts. These pollutants
are instead discussed qualitatively in the Environmental Assessment
document.
    The water quality impact analysis utilized estimates of sediment
discharges from construction sites throughout the coterminous United
States. EPA estimated discharges under current conditions as well as
under the requirements set forth in today's rule.
    To estimate improvements to water quality from reducing
construction site discharges, EPA used SPARROW models. SPARROW is a
statistically-based modeling approach developed by the United States
Geological Survey that relates surface water quality component levels
to attributes of contributing watersheds. EPA used national versions of
the models that allow quantification of water quality in the RF1
surface water network which encompasses approximately 700,000 miles of
the largest, perennial rivers and streams and associated lakes,
reservoirs, and estuarine waters in the coterminous United States. The
sediment, nitrogen, and phosphorus versions of SPARROW allowed EPA to
estimate baseline concentrations of suspended sediment, nitrogen, and
phosphorus, respectively, in these surface waters, as well as levels of
sediment accumulation in reservoirs.
    Following estimation of baseline water quality conditions, EPA used
the SPARROW sediment model to quantify the reductions in surface water
suspended sediment concentrations and sediment accumulation in
reservoirs associated with reducing sediment discharges from
construction sites under today's rule. To quantify water quality
improvements from reducing nitrogen and phosphorus discharges, EPA used
results from the SPARROW sediment, nitrogen, and phosphorus models'
estimation of baseline water quality conditions to estimate watershed-
level relationships between suspended sediment and nitrogen and
phosphorus loading from land-related sources. EPA used these
relationships to estimate the surface water reductions in nitrogen and
phosphorus associated with surface water sediment reductions as
estimated by the SPARROW sediment model for conditions under today's
rule. Additional description of this analysis is provided in the
Environmental Assessment.
    For certain estuarine waters, EPA also used the Dissolved
Concentration Potential (DCP) approach developed by the National
Oceanic and Atmospheric Administration (NOAA) to estimate suspended
sediment concentrations. This model estimates ambient concentrations of
conserved contaminants that are subject to mixing and dilution when
introduced to estuaries. EPA used the DCP approach for those estuarine
waters for which available data on flow was insufficient to estimate
suspended sediment concentrations. NOAA has provided DCP factors for
most major estuaries in the coterminous United States. These factors
allow estimation of estuarine TSS concentrations without detailed
numerical simulation modeling. Additional description of this analysis
is provided in the Environmental Assessment.
    Construction activity in the United States is unevenly distributed
among watersheds. It is highly concentrated in some areas and is sparse
or absent in others. For this reason, EPA presents in this discussion
the results of its water quality analysis for two different sets of
watersheds. The first set includes all RF1 watersheds containing more
than 1 acre of annual construction activity, or 93% of all construction
acres. This set contains all RF1 watersheds for which EPA estimated
reductions in construction site sediment discharges and encompasses
approximately 412,000 RF1 surface water miles (``All''). The second set
contains the 10 percent of RF1 watersheds in ``All'' with the highest
number of construction acres (``Top 10%''). This set encompasses 58
percent of all construction activity and therefore reflects conditions
associated with the majority of construction activity in the
coterminous United States. This set encompasses approximately 64,000
RF1 surface water network miles.
    EPA estimates that construction sites in ``All'' RF1 watersheds
discharge approximately 5.2 billion pounds of sediment per year under
current conditions. Construction discharges elevate suspended sediment,
nitrogen, and phosphorus levels, on average, 2.4 mg/L, 0.02 mg/L, and
0.0060 mg/L, respectively, beyond what they would otherwise be in
412,000 RFI surface water miles. They also cause deposition of 1.7
million cubic yards of sediment in reservoirs each year.
    The rule will reduce construction site sediment discharges from
``All'' RF1 watersheds by approximately 4 billion pounds per year. TSS,
nitrogen, and phosphorus concentrations in affected surface waters are
expected to decrease approximately 2 mg/L, 0.015 mg/L, and 0.0058 mg/L
respectively, on average. Sediment deposition in reservoirs is expected
to fall by more than 1.3 million cubic yards annually. In the ``Top
10%'' set of watersheds, TSS, nitrogen, and phosphorus levels are
expected to decrease approximately 4 mg/L, 0.049 mg/L, and 0.024 mg/L
respectively, on average. Average TSS, nitrogen, and phosphorus
concentration reductions are greater for ``Top 10%'' watersheds because
construction sites exert a stronger influence on water quality in these
areas. Current median concentrations of TSS, nitrogen, and phosphorus
in RF1 reaches receiving construction site discharges are 289 mg/L,
1.65 mg/L, and 0.25 mg/L, respectively.
    Because surface waters transport pollutants downstream, water
quality will also improve in additional reaches downstream of those
reaches directly receiving construction site pollutants. EPA's analysis
indicates that today's rule will improve water quality in more than
431,000 miles of surface waters, or approximately 69% of the more than
627,000 miles in the RF1 surface water network for the coterminous
United States assessed in EPA's analysis.
    The numbers above reflect average surface water conditions over
very large geographic areas and long time scales. They do not convey
the spatial and temporal variability in pollutant concentrations seen
in actual surface waters. Construction sites are dispersed throughout
the United States, but they comprise only approximately 0.04% of total
land area in the coterminous United States on an annual basis. In
addition, as described earlier in this section, construction acreage
concentrates in a relatively small number of watersheds. It is notable
that, despite their small land area, construction sites impact a large
proportion of the nation's surface

waters. Temporally, most construction site discharges are driven by
precipitation events and are therefore highly episodic. In-stream
turbidity, TSS, nitrogen, phosphorus and other pollutant concentrations
in surface waters deriving from construction site discharges are
typically higher during and shortly after precipitation events and
lower during periods in between precipitation events. For these
reasons, the most highly visible impacts from construction sites are
observed in surface waters immediately downstream of construction sites
during and immediately following precipitation events. During these
periods, suspended sediment levels can rise from several to hundreds of
milligrams per liter above those observed immediately upstream of
construction sites. Likewise, turbidity levels can rise from tens to
hundreds of NTUs. With the cessation of precipitation and movement and
dilution of pollutants as water flows downstream, suspended pollutant
concentrations decline (deposited sediment and associated pollutants,
however, can persist). EPA's quantification of water quality impacts
from construction site discharges reflects an averaging of these
discharge events both over time and over the 412,000 miles of surface
waters directly impacted by construction site discharges in today's
rule.
    EPA did not attempt to quantify pollutant discharges from other
construction site sources, such as discharges from dewatering
activities, vehicle and equipment washing, and erosion and deposition
by wind. Since these discharges may occur at any time during the
construction project and are not necessarily tied to storm events, EPA
expects that these discharges would influence receiving water quality
during inter-event periods and that benefits would accrue if these
discharges were reduced from baseline levels. EPA, however, lacked data
and an appropriate methodology for quantifying the nature and extent of
these potential discharges.
    Estimates from EPA's national quantitative analysis of water
quality impacts were used for a quantitative analysis of the economic
benefits of today's rule. This analysis is discussed in Section XVI.

XVI. Benefit Analysis

    EPA has assessed the potential benefits associated with the final
rule by identifying various types of benefits that can result from
reducing the level of turbidity, sediment and other pollutants being
discharged from construction sites. Where possible, EPA has attempted
to quantify and monetize benefits attributable to the regulatory
options. Section III of the Environmental Impact and Benefits
Assessment, describes in more detail the analytical framework for the
benefits analysis.

A. Benefits Categories Estimated

    Discharges of turbidity, sediment, nutrients, and other pollutants
from construction activity can have a wide range of effects on down
stream water resources. As discussed in Section XV, there are numerous
potential impacts to local aquatic environments, but there are also
consequences for human welfare, which are discussed here. Human
activities and uses affected by construction discharge-related
environmental changes include recreation, commercial fishing, public
and private property values, navigation, and water supply and use.
Sediments, nutrients, and other pollutants in discharges from C&D sites
can also cause environmental changes that affect the non-use values
(values that do not depend on use of the resource) that individuals
have from knowing that environmental resources are in good condition.
These existence services, sometimes described as ``ecological
benefits,'' are reflected under the Clean Water Act as aquatic life,
wildlife, and habitat designated uses.
    Stormwater control measures reduce the amount of sediment that
reaches waterways from C&D sites. As sediment loads are reduced, TSS,
nutrient, and turbidity levels in adjacent waters decline, which in
turn increases the production of environmental services that people and
industry value. These environmental services valued by industry and the
public include: Recreation, public and private property ownership,
navigation, water supply and use, and existence services. Table XVI-1
provides a summary of various water related activities and their
associated environmental services potentially impacted by discharges of
sediment from C&D sites.

             Table XVI-1--Summary of Benefits From Reducing Sediment Runoff From Construction Sites
----------------------------------------------------------------------------------------------------------------
                                          Environmental service
                                         potentially affected by
              Activity                  runoff from construction                  Benefits category
                                                  sites
----------------------------------------------------------------------------------------------------------------
Recreation:                           Aesthetics, water clarity,    Non-market direct use.
--Outings                              water safety, degree of
--Boating                              sedimentation, weed growth,
--Swimming                             fish and shellfish
--Fishing                              populations.
Commercial Fishing and Shellfishing.  Fish and shellfish            Markets.
                                       populations.
Property Ownership..................  Aesthetics, safety of         Markets.
                                       property from flooding,
                                       property value.
Water Conveyance and Supply:          Turbidity, degree of          Avoided Costs.
--Water conveyance                     sedimentation.
--Water storage
--Water treatment
Transportation......................  Degree of sedimentation.....  Avoided Costs.
Water Use:                            Turbidity...................  Avoided Costs.
--Industrial
--Municipal
--Agricultural
Knowledge (No Direct Uses)..........  Environmental health and      Non-market non-use value.
                                       ecosystem function.
----------------------------------------------------------------------------------------------------------------

    However, not all of the changes in these services can be readily
quantified as it requires a thorough understanding of the relationship
between changes in water pollutant loads and production of
environmental services. This problem is exacerbated by the fact that
both the pollutant source and load reductions are relatively small,
sporadic, numerous,

and dispersed over a wide area when compared to more traditional
sources of pollutants, such as a wastewater treatment plant. As a
result of the difficulty in assessing changes in each environmental
service associated with an activity listed in Table XVI-1, EPA chose to
focus on two main categories of benefits: Avoided costs and non-market
benefits. The specific categories of avoided costs considered were:
reservoir dredging, navigable waterway dredging, and drinking water
treatment and sludge disposal. Non-market benefits considered were
improvements in recreational activities and existence value from
improvements in the health of aquatic environments.

B. Quantification of Benefits

    Reduced costs for water treatment, water storage, and navigational
dredging are three benefit categories that EPA is using to estimate the
benefits of the final rule. EPA used estimates of changes in sediment
deposition and in-stream TSS concentrations from the SPARROW model runs
to quantify the reduction in the amount of sediment that would need to
be dredged from reservoirs and the reduction in the amount of TSS that
must be removed from the source water used for the production of
potable water. The SPARROW results provided these changes for each
waterbody in the RF1 network (approximately 60,000 stream segments).
This allowed EPA to associate these changes with data from the US Army
Corps of Engineers on navigable waterways that are routinely dredged;
EPA data on source water for drinking water treatment plants; and USGS
data on the location of reservoirs used for hydroelectric power, flood
control, a source for drinking water, and recreation.
    SPARROW results also allowed for the estimated change in TSS and
nutrient concentrations in the RF1 network to be mapped to a Water
Quality Index (WQI). The index is used to map changes in pollutant
parameters, such as TSS and nutrients, to effects on human uses and
support for aquatic and terrestrial species habitat. Implementation of
the WQI involves the transformation of parameter measurements into
subindex values that express water quality conditions on a common scale
of 0 to 100. For the pollutant TSS, a unique subindex curve was
developed for each of the 85 Level III ecoregions using baseline TSS
concentrations calculated in SPARROW at the RF1 reach-level. The
SPARROW generated concentration change estimates for sediment and
sediment-bound nutrients were used to measure improvement along the WQI
for each RF1 watershed. Section 10.1.1 of the Environmental Assessment
Document provides detail on the WQI index and its application to the
benefits analysis for the C&D regulation. The WQI presents water
quality by linking to suitability for various human uses, but does not
in itself identify associated changes in human behavior. Behavioral
changes and associated welfare effects are implied in the benefit
transfer approach for measuring economic values. The use of benefit
transfer allows the results from economic valuation studies in the
published literature to be used to generate WTP estimates associated
with changes in the WQI. For more on the benefit transfer approach see
Appendix G Meta-Analysis Results from the Environmental Impact and
Benefits Assessment.
    The benefits analysis results are shown in Table XVI-2. The
NMBi terms are included to demonstrate that the monetized
benefits represent an unknown portion of total benefits of the rule,
and are likely to vary with the options.

                            Table XVI-2--Annual Benefits (Million 2008 $) For Options
----------------------------------------------------------------------------------------------------------------
                                                                        Regulatory Options
                                                 ---------------------------------------------------------------
                                                     Option 1        Option 2        Option 3        Option 4
----------------------------------------------------------------------------------------------------------------
Avoided Costs:
    Reservoir Dredging..........................            $1.4            $2.9            $3.6            $3.2
    Navigable Waterway Dredging.................             1.3             2.6             3.3             2.9
    Drinking Water Treatment....................             1.2             1.8             2.1             1.8
Total Avoided Costs \a\.........................             3.8             7.2             8.9             7.9
Welfare Improvements............................           210.3           352.9           413.4           361.0
Total Annual Benefits \a\ \b\...................      214.1+NMB1      360.1+NMB2      422.3+NMB3      368.9+NMB4
----------------------------------------------------------------------------------------------------------------
\a\ Totals may not add due to rounding.
\b\ NMBi are the non-monetized benefits of the ith Option.
Source: Economic Analysis; Environmental Assessment.

XVII. Benefit-Cost Comparison

    EPA has conducted a comparison of monetized benefits to costs of
the C&D effluent guidelines detailed in today's notice. The benefit-
cost analysis may be found in the complete set of support documents.
Sections XII, XV, and XVI of this notice provide additional details of
the benefit-cost analysis. Table XVII-1 provides the results of the
benefit-cost analysis. A discount rate of 3% was used to annualize
costs and benefits.

 Table XVII-1--Total Annualized Benefits and Costs of Options (Year 2008
                                   $)
------------------------------------------------------------------------
                                  Social costs
                                    (2008  $      Benefits \a\ (2008  $
             Option               millions  per    millions  per year)
                                      year)
------------------------------------------------------------------------
Option 1.......................          $175.8  $214.1 + NMB1
Option 2.......................         4,863.1  $360.1 + NMB2
Option 3.......................         9,081.1  $422.3 + NMB3
Option 4.......................           958.7  $368.9 + NMB4
------------------------------------------------------------------------
\a\ NMBi are the non-monetized benefits of the ith Option.
Source: Economic Analysis; Environmental Assessment.

XVIII. Approach To Determining Effluent Limitations and Standards

    The same basic procedures apply to the calculation of all effluent
limitations guidelines and standards for this industry, regardless of
whether the technology basis is BAT or NSPS. For simplicity, the
following discussion refers only to effluent limitations guidelines;
however, the discussion also applies to new source performance
standards. The numeric limitation is 280 NTU, expressed as a maximum
daily discharge limitation. Chapter 6 of the TDD provides a detailed
description of the data and methodology used to develop the long-term
average,

variability factor, and limitation and standard for today's final rule.

A. Definitions

    The limitation for turbidity, as presented in today's notice, is
expressed as a maximum daily discharge limitation. Definitions provided
in 40 CFR 122.2 state that the ``maximum daily discharge limitation''
is the ``highest allowable `daily discharge.' '' Daily discharge is
defined as the `` `discharge of a pollutant' measured during a calendar
day or any 24-hour period that reasonably represents the calendar day
for purposes of sampling.''

B. Percentile Basis for Limitations, Not Compliance

    EPA promulgates limitations that sites are capable of complying
with at all times by properly operating and maintaining their processes
and treatment technologies. EPA established these limitations on the
basis of percentiles estimated using data from sites with well-operated
and controlled processes and treatment systems. However, because EPA
uses a percentile basis, the issue of exceedances (i.e., values that
exceed the limitations) or excursions is often raised in public
comments on limitations. For example, comments often suggest that EPA
include a provision that allows a facility to be considered in
compliance with permit limitations if its discharge exceeds the
specified daily average limitation one day out of 100. As explained in
Section 6 of the TDD, the limitation was never intended to have the
rigid probabilistic interpretation implied by such comments. The
following discussion provides a brief overview of EPA's position on
this issue.
    EPA expects that all sites subject to the limitation will design
and operate their treatment systems to achieve the long-term average