
            
           Public Comments on Federal Register Notices and Response
                                       
            A. First Round of Public Comments to 77 FR 43822
                        1) Utility Water Act Group
                        	Response
                        2) Coalition of 18 Interest Groups
                        Response
                        3)  Food and Water Watch
                        Response
            B. Second Round of Public Comments to 77 FR 43822
                        4) Coalition of 23 Interest Groups
                        Response
                        5) Utility Water Act Group
                        Response
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      C. References
      
            
            
            
            
            
            
            
            
            
            
            
            
            

            

            
            A.
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            First Round of Public Comments to 77 FR 43822
            Open May 24, 2012   
            Closed July 23, 2012
            Extended 
            Open July 26, 2012
            Closed Aug 27, 2012
                        
                        Commenters:
                        1) Utility Water Act Group
                        2) Coalition of 18 Interest Groups
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                        3)  Food and Water Watch





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RESPONSES TO COMMENT SET 1:  Utility Water Act Group 

0-1 Thank you for the detailed comments.  
0-2 EPA extended the comment period by 30 days in order to accommodate review of supporting materials.  
0-3 See Section 2a of Part A this ICR for a discussion of the purpose of the study.  
0-4 Again, see Section 2a of Part A of this ICR for a detailed discussion of the purpose of the study. `
0-5 EPA recognizes that hypothetical bias is a potential concern in stated preference (SP) surveys and takes this concern seriously.  In general, SP methods have "been tested and validated through years of research and are widely accepted by federal, state, and local government agencies and the U.S. courts as reliable techniques for estimating nonmarket values" (Bergstrom and Ready 2009, p. 26).  A recent meta-analyses of the stated preference literature also concludes that hypothetical bias may not always be a significant concern (Murphy, et al. 2005). 
      To reduce the potential for hypothetical bias in this survey EPA has consulted with experts and drawn from peer reviewed literature to address it in the survey design.  For example, the survey explicitly incorporates elements that allow mitigation of hypothetical bias, such as the use of reminders about budget constraints (akin to the cheap talk language in Cummings and Taylor 1999; List 2001).  These features of survey design are shown to minimize hypothetical bias in experimental settings.  The text used in this survey has undergone thorough testing with participants in focus group and one-on-one interviews.  EPA believes that the steps taken during survey development and testing have largely mitigated the potential for hypothetical bias.  See Section 2d of Part B of this ICR for more information on how we address hypothetical bias.   
      Similarly, EPA recognizes the potential for households to exhibit yea-saying and to overstate or understate their true WTP in order to influence decisions informed by survey data.  Survey and study design choices can mitigate yea-saying.  The use of mail survey rather than face-to-face interview has been shown to decrease the social pressure that may influence a respondent to provide a response deemed desirable (Dillman 2000).  This survey also employs a conjoint choice framework, where respondents must consider the trade-offs between a status quo and two policy options. Respondents are asked to make a discrete choice among three unranked options rather than a simple yes or no. These options vary in terms of the levels of five environmental attributes (plus cost). In this choice experiment framework it is has been shown that the likelihood for yea-saying and strategic responses is less prominent (Blamey and Bennett 2001, Collins and Vossler 2009). 
      In addition, in order to identify such respondents EPA includes debriefing questions at the end of the survey to identify respondents who might believe that protecting the environment is important no matter the cost.  Sensitivity analysis will be used to examine if and how responses to these debriefing questions influence responses.  Again, Section 5(b) of Part B of this ICR provides a detailed response.  
      
      EPA also recognizes the potential for non-reponse bias and the impacts it could have on the data analysis.  First, EPA is taking steps to obtain the highest possible response rate, thereby mitigating non-response bias.  Specifically, EPA is also following the Dillman tailored design method (Dillman 2008) for mail surveys which includes an introduction letter preceding the survey, a reminder post card, and second mailing of the survey, and a reminder letter following the second survey.
      EPA will also administer a non-response bias study survey (Attachment 11) in both the pre-test and full survey in order to examine whether or not respondents are systematically different from non-respondents (see OMB 2006).  In the non-response bias survey, households that do not return the survey will be randomly sampled to receive a short questionnaire by mail.  The questionnaire will elicit basic demographic information as well as a few short questions regarding awareness and the reasons they did not complete the survey.  Responses to these questions will be used to examine whether respondents are systematically different from non-respondents.  See Section 2(c) of Part B of the ICR for a description of the non-response bias study.
0-6 It is impossible to know the magnitude of nonuse values prior to conducting this study.  While information is available in Bockstael, McConnell and Strand (1989) on the potential value of water quality improvements in the Watershed, the study is based on a small sample of Bay-area residents, and provides limited information on a broader set of benefits attributable to water quality improvements.  
0-7 Standard survey development protocols have been used to develop the survey.  See Section 3(c) of Part A for a discussion of background information.   
0-8 In response to peer review comments from academic experts in stated preference methods, EPA is now only modeling willingness to pay for improvements in bay water clarity, striped bass, blue crab, oyster populations, and the quality of lakes in the watershed. This was previously referred to as the "endpoint" version of the survey.  These attributes were chosen based on extensive focus groups and interviews as the environmental features that are most salient to the general public.  Furthermore, EPA and NOAA models predict that these features will be impacted by the TMDL. The stated preference survey outlined in the ICR does not estimate the benefits of the TMDL directly; rather this survey is designed to value generic status quo and policy options that result in changes in the environmental attributes.  As part of the experimental design, respondents are presented with hypothetical changes in these attributes and cost. In other words, the hypothetical levels associated with each of the attributes and costs in the survey vary across respondents (see Section 2(d) of Part B).  This allows us to identify the parameters and estimate a range of values associated with different scenarios.  The variation in costs across programs is not intended to reflect the costs of the TMDL, but rather the likely range of values respondents hold for the options, as found in extensive focus groups and interviews.  The parameters estimated from respondents' choices to these hypothetical scenarios will then be used to estimate the benefits of the TMDL incremental to the baseline.  
0-9 The survey does remind respondents to consider other things they may spend their money on, like food, clothing, etc., so that they fully consider their budget constraint before making choices.  However, respondents are also reminded several times that all other factors (including employment) are held constant across options.  In other words, the survey only assesses the value people hold for the attributes specified in the choice experiments. EPA believes that focusing on this subset of factors will lead to a conservative but more reliable estimate of total benefits.  EPA proposes to administer three versions of the survey - an increasing baseline, decreasing baseline and constant baseline - in order to estimate benefits of environmental improvements relative to a range of baseline scenarios.  
0-10 EPA conducted 10 focus groups and 59 one-on-one interviews with individuals within and outside the Watershed in order to test their level of understanding of the materials included in the survey (OMB Control Number 2090-0028). We used this standard survey design protocol to identify the most salient environmental endpoints that will be affected by the TMDL. 
0-11 See Sections 2(b) and 5(b) of Part B of the ICR for the survey implementation and econometric analysis approach to be used in the survey project.  
0-12 Again, the EPA disputes the idea that the stated preference method does not have the ability to collect information with, "quality, objectivity, utility, integrity" on the foundation that these methods are largely accepted as a valuable tool among those seeking to understand the benefits of changes to nonmarket goods.   The use and nonuse willingness-to-pay estimates generated from this research will provide a more well-rounded evaluation of future pollution reduction programs in the Chesapeake Bay, contributing to the quality, objectivity, and integrity of information the EPA will disseminate. 
0-13 We appreciate the attention to these details addressed by UWAG and can assure them that any errors within the experimental design have been rectified. 
0-14 EPA believes this study will allow public values and opinions to be included in the decision-making process for the Chesapeake Bay.  Using current econometric methods, this study will provide unique, policy relevant information about what, if any, further actions are called for in the Chesapeake Bay. 


 




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RESPONSES TO COMMENT SET 2:  Coalition of 18 Interest Groups (C18)

2-1	A complementary study of the costs of the TMDL is being conducted by EPA's Chesapeake Bay Program Office and will be issued by EPA after a peer-review is complete.  

2-2	No response required.

2-3	No response required.

2-4	EPA recognizes that hypothetical bias is a potential concern in stated preference (SP) surveys and takes this concern seriously.  In general, SP methods have "been tested and validated through years of research and are widely accepted by federal, state, and local government agencies and the U.S. courts as reliable techniques for estimating nonmarket values" (Bergstrom and Ready 2009, p. 26).  A recent meta-analyses of the stated preference literature also concludes that hypothetical bias may not always be a significant concern (Murphy, et al. 2005). 
      To reduce the potential for hypothetical bias in this survey EPA has consulted with experts and drawn from peer reviewed literature to address it in the survey design.  For example, the survey explicitly incorporates elements that allow mitigation of hypothetical bias, such as the use of reminders about budget constraints (akin to the cheap talk language in Cummings and Taylor 1999; List 2001).  These features of survey design are shown to minimize hypothetical bias in experimental settings.  The text used in this survey has undergone thorough testing with participants in focus group and one-on-one interviews.  EPA believes that the steps taken during survey development and testing have largely mitigated the potential for hypothetical bias.  See Section 3(b) of Part A of this ICR for more information on how we address hypothetical bias.   
      EPA also recognizes the potential for non-reponse bias and the impacts it could have on the data analysis.  First, EPA is taking steps to obtain the highest possible response rate, thereby mitigating non-response bias.  Specifically, EPA is also following the Dillman tailored design method (Dillman 2008) for mail surveys which includes an introduction letter preceding the survey, a reminder post card, and second mailing of the survey, and a reminder letter following the second survey.
      EPA will also administer a non-response bias study survey (Attachment 11) in both the pre-test and full survey in order to examine whether or not respondents are systematically different from non-respondents (see OMB 2006).  In the non-response bias survey, households that do not return the survey will be randomly sampled to receive a short questionnaire by mail.  The questionnaire will elicit basic demographic information as well as a few short questions regarding awareness and the reasons they did not complete the survey.  Responses to these questions will be used to examine whether respondents are systematically different from non-respondents.  See Section 2(c) of Part B of the ICR for a description of the non-response bias study.
      EPA agrees that it challenging to measure complex environmental commodities.  Standard survey design protocols were followed in developing the survey.  As such, EPA conducted 10 focus groups and 72 one-on-one interviews with individuals within and outside the Chesapeake Bay Watershed in order to test their level of understanding of the materials included in the survey (OMB Control Number 2090-0028).  We used this standard protocol to identify the most salient environmental commodities that will be affected by the TMDL.  Limiting the survey to those policy outcomes (i.e., water clarity, striped bass, oysters, blue crabs, and lake water quality) is conservative but we can be confident in the benefits we do capture from the survey.  
      
2-5	EPA believes the survey has practical utility, as required by the Paperwork Reduction Act.  The results of the study will be made available to state and local governments which they may use to better understand the preferences of households in their jurisdictions and the benefits they can expect as a result of meeting the TMDL.  Finally, stakeholders and the general public will be able to use this information to understand the social benefits of improving water quality in the Chesapeake Bay Watershed to accompany the cost information also being developed by EPA.  EPA also believes that the survey meets OMB's information quality guidelines.  We agree that a number based on a poor quality survey is inferior to no number at all.  Therefore, EPA is using standard survey design protocols in the design and implementation of the survey, including extensive focus group and interview testing, a pre-test, and a non-response bias follow-up analysis.  

2-6	The attributes on the survey (i.e., water clarity, striped bass, oysters, blue crabs, and watershed lake conditions) were chosen because water quality and ecological modeling show that they will be affected by the nutrient and sediment reduction targets in the TMDL.  EPA's National Center for Environmental Economics has been working closely with water quality modelers in the EPA Chesapeake Bay Program Office and the Office of Research and Development to quantify the impact of the TMDL on the chosen attributes. 

      EPA has also been working closely with ecosystem modelers in NOAA's Chesapeake Bay Office and National Marine Fisheries Service's Office of Habitat Conservation.  Specifically, NOAA's modelers have provided assistance with the eco-system based fishery models "Ecopath with Ecosim" and "Atlantis."  These consultations have been instrumental in examining the ecological impacts of reducing nutrient and sediment loads to the Bay of the ecosystem-based fishery models and will allow EPA to more accurately translate the values people place on the various attributes of the Chesapeake Bay highlighted in the survey to benefits estimates associated with the TMDLs.	

2-7	The survey is indeed framed in a way to elicit "willingness to pay for generic improvements in water quality."  This allows EPA to estimate the parameters for a range of policy outcomes, which will then be used to estimate a "benefits curve." To allow for a range in outcomes, EPA describes conditions in 2025 with the current programs in place and have developed three survey versions with different hypothetical future baseline conditions (i.e., with no additional programs), where environmental quality is increasing, decreasing, or constant, as described in Section 5(b) of Part B of this ICR.  The benefits curve will be used to estimate the incremental benefits of the TMDL relative to the most accurate baseline as predicted by the water quality and ecological models developed by EPA and NOAA. Sensitivity analyses will be conducted on the results of the survey to examine the effect of uncertainty in future levels of the environmental conditions, under both the baseline (i.e., without the TMDL) and TMDL scenarios.
  
      Flexibility in the baseline and policy outcomes are important in this case because the Chesapeake Bay TMDL allows for adaptive management and additional offsets if the required nutrient reductions are not being met.  So as population in the watershed grows over the future and land use patterns change, these survey data will still be useful in estimating the benefits of nutrient and sediment reductions in the Chesapeake Bay.  

2-8	The EPA recognizes that there are other programs and activities that will affect water quality in the Watershed.  For this reason we have included an increasing baseline version of the survey to reflect the fact that absent new programs it is plausible that conditions will improve in the Watershed under these existing programs.  

2-9	Again, the improving baseline version of the survey captures this scenario.  

2-10	See 2-9.

2-11	EPA agrees that improvements to lakes that are not in the Watershed should not be included in the survey.  We have made several modifications to the survey instrument to make it clear that only lakes in the Watershed should be considered.  First, we have enhanced the map at the beginning of the survey to identify major cities within and outside the Watershed and added the Finger Lakes to the map (which are clearly marked as being outside the watershed).  This helps orient respondents who are considering whether or not they "use" (i.e., engage in recreation activities) the Watershed.  Second, we clearly describe the Watershed as including lakes and state that water bodies outside of the Watershed will not be affected by the programs.  Finally, we include a follow-up question designed to test their level of understanding that conditions in lakes outside the watershed will not be affected by the programs described by the survey.

2-12	In addition to providing an enhanced map of the Watershed we identify which sampled households are in the Watershed and which are not.  Respondents will be told in the cover letter of the survey if their home address is inside or outside the watershed.  See Attachments 5 and 6 for examples of the cover letters.   

2-13	The survey scenarios were designed based on the goal of illustrating hypothetical but realistic policy scenarios that "span the range over which we expect respondents to have preferences, and/or are practically achievable" (Bateman et al. 2002, p. 259). In the survey these scenarios are framed as generic policies in order to estimate the range of benefits for water quality improvements. These benefit estimates will then be used to estimate the incremental benefits of the TMDL relative to the baseline (see response 2-7).

      The survey provides examples of sources of nutrients, including fertilizers, livestock manure, and household wastewater.  The list is not intended to be comprehensive.  As stated above, different versions of the survey have different baseline assumptions, which will be used in the statistical analysis to reflect the fact that future conditions in the Bay, absent new programs, are uncertain.  EPA agrees that this baseline uncertainty stems, at least partially, from the fact that the TMDL does not impact other sources of nutrients and sediments, including air disposition from outside the watershed, sediments, and hurricanes and ocean currents.

2-14	While the sequence of implementation is unknown the experimental design allows EPA to estimate benefits for a range of outcomes.  

2-15	We have added information on page 11 of the survey to inform respondents that programs will be implemented over time, with full implementation occurring in 2025.  

2-16	A separate analysis of the costs of implementing the TMDLs is being developed by EPA's Chesapeake Bay Program Office and will be available upon the completion of peer review.  

2-17	EPA agrees and a version of the survey with an increasing baseline is now included in the Information Collection Request.  

2-18	EPA agrees and does not intend to add the total monetized benefit results from this study with results from other studies, such as those that use revealed preference methods.  The results from this study can be used to isolate nonuse values or used alone as a measure of total monetized benefits.  

2-19	EPA carefully reviewed the survey instrument and has corrected typos.  

2-20	Please see Section 2(b) of Part B of the ICR for the sampling methodology.  

2-21	EPA is using state-of-the-science methods to assess the benefits of the TMDL for the Chesapeake Bay.  As such EPA believes that the results will provide useful information to the public and decision makers on how society values improvements in environmental conditions in the Chesapeake Bay.  



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RESPONSES TO COMMENT SET 3:  Food and Water Watch

3-1	Thank you very much for the detailed comments.  Stated preference surveys (or surveys to measure WTP) have been used by a variety of federal agencies to assess the benefits of regulations and federal activities (see, for example, NOAA 2002; USEPA 2008, 2009; U.S. Bureau of Reclamation 2012).  The use of stated preferences studies (i.e., WTP studies) is consistent with EPA's peer-reviewed Guidelines for Preparing Economic Analyses (USEPA 2010) and OMB Guidelines, Circular A-4 (OMB 2003).  The use of a choice experiment design is consistent with standard practice in the peer-reviewed literature for valuing environmental resources (see Freeman 2003; Bennett and Blamey 2001; Louviere et al. 2000).  The individual choices reflected in each household survey response are aggregated with other household responses to estimate a total value for the resource.  The stated preference survey is not part of a water quality trading plan, nor will the results of the survey be used to develop a trading plan.  The survey is designed to estimate the welfare impacts of water quality improvements and will have no bearing on how those improvements are achieved.

3-2	No response required.  

3-3	We agree that the Bay is a complex resource and estimating a total value is challenging.  EPA conducted 10 focus groups and 72 one-on-one interviews with individuals within and outside the Watershed.  These standard protocols allowed for testing of individual's understanding of the materials included in the survey instrument.  This approach was used to identify the most salient environmental resources that will be affected by the TMDL.  Limiting the survey to those outcomes (i.e., water clarity, striped bass, oysters, blue crabs, and water quality of lakes in the watershed) is conservative, but means that we are more confident in the benefits we do capture from the survey.

3-4	The study that is referenced (i.e., a citation in Diamond and Hausman 1994 to Desvousges 1993) is almost 20 years old and uses methods that are no longer considered standard (e.g., use of convenience samples).  It is standard to include debriefing questions to capture various biases that may appear in survey responses, such as "warm glow."  As such we have included questions to capture respondents who may be responding in such a way.  

3-5	The study that is referenced (i.e., Loomis and White 1996) is a meta-analysis based on older studies, many of which were unpublished or not peer-reviewed.   While examples of implausible survey results exist, including appropriate debriefing questions, use of focus groups, and pre-testing reduces such occurrences.  This project is based on current survey design methods reflecting careful design choices.  In addition, the survey instrument will be pre-tested with a small sample to determine whether or not responses are plausible and consistent with economic theory.  

3-6  	Stated preference surveys capture individual preferences for public goods, that is environmental resources that are shared by all.  The choices individuals make in the experimental setting reflect the trade-offs, or preferences, for that individual between environmental improvements and costs.  By examining and aggregating individual preferences or choices using the analytical methods described in Section 5 of Part B of this ICR, the researcher (i.e., EPA) is able to discern a value from the sample of individual choices for the various environmental improvements (also called "attributes") in the survey.  The survey clearly states that many households are being asked about their preferences and choices, and therefore does not imply that any one person would be solely responsible for the program choices.  

3-7 and 3-8
  	The stated preference survey is not part of a water quality trading plan, nor will the results of the survey be used to develop a trading plan.  The survey is designed to estimate the welfare impacts of water quality improvements and will have no bearing on how those improvements are achieved.
 
3-9	Stated preference surveys are routinely used in federal agencies to estimate the value of non-market goods (see, for example, U.S. EPA 2008, 2009; U.S. Bureau of Reclamation 2012).  It is not a method to determine a "price" for a good to be sold, but rather a method to reflect society's value of the resource.  There are no plans to "sell" the Chesapeake Bay.

3-10	Enforcement remains an important and relevant goal of the EPA.  

	






            B.
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            Second Round of Public Comments to 78 FR 9045
            Open Feb 7, 2013
            Closed March 11, 2013
                        
                        Commenters:
                        4) Coalition of 23 Interest Groups 
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                        5) Utility Water Act Group


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RESPONSES TO COMMENTS SET 4: Coalition of 23 Interest Groups (C23)

4-1a.	 The purpose of the survey is to value water quality improvements of the type that are expected to result from the Chesapeake Bay TMDL.  While the survey does not refer to Executive Order 13508 or the Chesapeake Bay TMDLs by name, the range of improvements on the survey cover the improvements predicted by the Chesapeake Bay Watershed models under the TMDLs.  Describing the policy behind the water quality improvements introduces unnecessary "policy jargon" and would require several more pages of text in the information section of the survey.  In order to maximize response rates we are keeping the burden placed on the respondent as low as possible by limiting the information sections of the survey to what respondents need to know to answer the choice questions.   So, while the survey does not discuss the Chesapeake Bay TMDLs by name it is well suited to estimate benefits from the resulting water quality improvements.

4-1b. 	The Northeast Lakes model was designed specifically to model changes in the eutrophication of freshwater lakes as the result of management practices aimed at improving the water quality of coastal estuaries.  Combining data from the National Lakes Assessment and results from the Spatially Referenced Regressions On Watershed Attributes (SPARROW) nutrient models, the Northeast Lakes model uses nutrient loads to watershed streams and rivers to forecast eutrophication of lakes in the watershed.  The Northeast Lakes Model places every lake in the Chesapeake Bay watershed into one of four eutrophication categories.  The "low algae growth" lakes on the survey refer to the lower three categories.    The Northeast lakes model is described in more detail in Moore et al. (2011) and Booth et al. (2011).  

4-2.    	No response needed.  
4-3a.  	The discrepancy between the 764 million number quoted in the comment and the 250 million number used on the survey is due to the inclusion of juvenile crabs in the larger number.  EPA chose to use the adult spawning population for three reasons.  (1) It is more stable from year to year than the total population because of the vulnerability of juvenile crabs to a variety of environmental factors including temperature.  (2) The adult population is considered to be the harvestable stock and will support the recreational fishery.  (3) The adult population, particularly the females, is related to the number of young crabs that can be produced each year and is an important indicator of the health of the stock.  (Maryland DNR, http://dnr.maryland.gov/fisheries/crab/dredge.asp)  Page 3 of the survey been revised to clarify that the population refers to adult crabs.  
4-3b.  	Describing the relevant context for the current conditions and providing respondents references to target levels set by fishery managers is very important.  This language was tested in focus groups and commented on by the external peer reviewers.  The survey was revised in response to feedback from respondents about the levels and targets, what they mean, and how they were determined.  External peer reviewers reinforced the idea that policy benchmarks do not necessarily help respondents better understand attribute levels. Conditions in the recent past, which respondents can understand and relate to recent experiences, provide a more objective and grounded reference point for respondents to decide what choices are best for them and their household.  Therefore on page 3 of the survey, information is provided on conditions in the early 1990s, with current conditions provided in relation to this marker.  In addition, the early 1990s is the time at which data started being collected at regular intervals on all the choice question attributes.  
4-3c.  	The current number of lakes with low algae levels is based on the results of the Northeast Lakes Model (see response 1b) which uses EPA's National Lakes Assessment (http://water.epa.gov/type/lakes/lakessurvey_index.cfm) to characterize eutrophication levels and algae growth in freshwater lakes.   
4-3d.  	Focus group testing of the survey showed that documenting the source of the predictions for policy and baseline scenarios improved the credibility and consequentiality of the choice questions.  Focus group participants wanted to know the source of the information on the survey.  Removing the documentation for these predictions and replacing it with a description of those predictions as "hypothetical" would undermine the credibility of the survey instrument, the consequentiality of the choice questions and produce less reliable results.  However, to reinforce the point that the estimates are not certain we have revised the survey to refer to these estimates as "predictions," a term more commonly used for modeled outcomes than "forecast." 
4-3e.  	We have added Attachment 14 to the docket that describes how attributes in the choice questions were modeled and includes documentation for all models used to predict attribute levels under baseline and policy conditions.    
4-4     	EPA is aware that some management practices specified in the Watershed Implementation Plans will not reach their full effectiveness for many years after implementation and EPA will be explicit about those time lags in the benefit analysis.  How to address such time lags is an important and often-encountered challenge in stated preference study design and an active area of research.
 
      It is generally accepted practice in the stated preference literature to provide stylized information on the timing of the benefits, estimate WTP for a certain outcome, and then perform ex-post discounting and sensitivity analysis to account for longer time lags and uncertainty in the environmental outcomes (e.g., Alberini et al. 2004, Banzhaf et al. 2006, Cameron and DeShazo 2013).  In part, this reflects a choice to reduce outcome uncertainty that will be implicit, but not separately observable, in survey responses.  Uncertainty in outcomes and differences in timing can then be reflected explicitly in the application of the results.  
    
      Such adjustments are, for example, the standard approach to valuing reduced mortality risks at EPA and elsewhere.  Estimates of the value of statistical life (VSL) from the economics literature whether from stated preference or revealed preference studies typically focus on immediate risk reductions, but for many policies there is a lag between changes in exposure and changes in risk.  Consistent with guidance from OMB and EPA, these existing VSL estimates are discounted appropriately to account for the differences in timing between the study and the policy scenarios.
 
      Still, there are reasons to favor describing a longer time frame for the realization of benefits associated with policy actions in the survey instrument for this case.   First, using a shorter time frame requires strong assumptions regarding respondents' discount rates and their perception of the transition of the survey attributes to long term levels.  In addition, using a shorter timeframe for environmental improvements would be changing aspects of the policy that may be welfare relevant and could therefore affect willingness to pay.
 
      In light of these factors and to ensure the most rigorous analysis possible, EPA will employ a split sample design.  Consistent with TMDL requirements, all surveys will make clear that practices are put in place by 2025, but the year for which improvements are characterized, the "reference year," will vary.  Half of the sample will receive the original version of the survey in which 2025 is the reference year for the attribute levels.  The other half of the sample will receive a survey that uses 2040 as the reference year.  EPA will discount WTP estimates from the 2025 version of the survey to make them comparable to 2040 estimates and provide a range generated by two valid but different approaches to stated preference study design.
 
      We will include debriefing questions on all surveys to test for scenario rejection of the type we encountered in focus groups.  If the pretest results show that a disproportionate number of respondents reacted negatively to either reference year we will reconsider the split sample design for the full survey. 


4-5.    	The complementary cost analysis that EPA is conducting is taking into account all management practices that are incremental to the Chesapeake Bay TMDL, including those in the greater watershed.  



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RESPONSES TO COMMENTS SET 5: Utility Water Act Group (UWAG)

5-1	In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), EPA published a notice in the Federal Register on May 24, 2012, announcing EPA's intent to submit this application for a new Information Collection Request (ICR) to the Office of Management and Budget (OMB), and soliciting comments on aspects of the information collection request (See Attachment 7 for a copy of the Federal Register notice, 77 FR 31006).  Because certain supporting documents were not available in the docket for public review during the first 30 days of the comment period, EPA re-opened the comment period for an additional 30 days beginning on July 26 (77 FR 43822; Attachment 7). Also see docket # EPA-HQ-OA-2012-0033.  

      The commenter notes that Attachment 13, the response to comments from the first public comment period, was not posted to the docket when the second public comment period began.  However, the supporting statement includes a lengthy summary of the comments and EPA's responses to those comments received.  Attachment 13 was made available within 3 days of the submission of the request to docket customer service.
      
      The commenter notes that EPA did not make transcripts or other documentation of the focus groups and protocol interviews available during the public comment period.  While transcripts are not available, EPA is posting a detailed report of the focus groups and protocol interviews to docket EPA-HQ-OA-2012-0033-0018.  The commenter also notes that the reports of the peer reviewers of the survey instrument were not made available during the public comment period.  EPA is posting the materials provided to peer reviewers and their reports to docket EPA-HQ-OA-2012-0033-0018.  EPA is also reopening the public comment period for an additional 30 days to provide the public an opportunity to provide additional comments while these materials are available.

5-2	EPA again refers the commenters to section 2(a) and 2(b) in Part A of the ICR for a discussion of the purpose of the ICR.  In particular as stated in this section, states and their congressional representatives have expressed a desire to know how practices that reduce nutrients and sediment will benefit their constituents (see, for example, page 55 of US Congress 2011).  

5-3	EPA would like to reiterate that the estimates from this stated preference study will be used in conjunction with a broader benefit-cost analysis that utilizes several of the other non-market valuation approaches referred to by UWAG, including recreational demand and hedonic property value methods. However, as stated in the ICR Part A Section 2(a) and in the literature, only stated preference methods can capture non-use values.   
      
      It is impossible to know the magnitude of nonuse values prior to conducting this study, hence the need for the stated preference study proposed in this ICR.  While information is available in Bockstael, McConnell and Strand (1989) on the potential value of water quality improvements in the Watershed, the study is based on a small sample of Bay-area residents, and provides limited information on a broader set of benefits attributable to water quality improvements. 
      
      EPA believes that a stated preference study to measure non-use benefits is particularly appropriate in the context of the Chesapeake Bay.  Similar to the Grand Canyon (as referenced in UWAG's attached "Comments on EPA's Notice of Data Availability of 316(b) Stated Preference Survey), the Chesapeake Bay is an extremely unique resource. For example, it is the largest estuary in North America.  Although water clarity and blue crab in general are not necessarily unique resources, water clarity in the Chesapeake Bay, and blue crab populations in the Chesapeake Bay, are unique. 
      
      Finally, UWAG's claim that "EPA has specifically acknowledged a lack of direct connection between the ICR's environmental attributes and actual TMDL benefits," is misplaced and stems from a fundamental misunderstanding of the referred to response 1-8, and to conjoint choice methods more generally. EPA again refers the commenters to the previous response 1-8. To reiterate, the basic purpose of the stated preference survey is to estimate a range of values associated with different scenarios.  Using respondents' choices in the stated preference survey, EPA can then use the estimated parameters to estimate the benefits of the TMDL incremental to the baseline. This conjoint choice experimental design allows flexibility, compared to a more conventional contingent valuation approach, for example, because the benefit estimates can be adjusted to fit a range of assumptions about the policy and baseline scenarios. These scenarios will be well documented in the final Cost-Benefit Analysis report, to which the stated preference study proposed in this ICR is one of several inputs.    

5-4 	EPA recognizes the potential for bias in stated preference surveys and has undertaken efforts to minimize these biases, as documented in our previous response to comments (Please see comment 1-5) and as described in of Part A Section 3(b) the ICR.  We believe that these measures are sufficient to identify and overcome significant biases.  In general, SP methods have "been tested and validated through years of research and are widely accepted by federal, state, and local government agencies and the U.S. courts as reliable techniques for estimating nonmarket values" (Bergstrom and Ready 2009, p. 26).  

5-5	EPA has revised the Supporting Statement to provide documentation of all models being used to generate attribute levels used in the choice questions of the stated preference survey.  In particular, Attachment 17 summarizes the hydrological, biochemical, and ecological models that EPA has used to forecast attribute levels under various water quality scenarios.  As stated earlier, EPA is reopening the public comment period for an additional 30 days to provide the public with another opportunity to comment on the ICR.   

5-6	As described above in 5-3, and in prior responses to comments (Please see comment 1-8), the stated preference study described in the ICR does not estimate the benefits of the TMDL directly, but estimates a range of values associated with different scenarios.  The parameters estimated from respondents' choices to these hypothetical scenarios will then be used to estimate the benefits of the TMDL incremental to the baseline.  The accuracy of the final benefits analysis does depend upon the accuracy of modeled outcomes.  The applicability of the survey for a specific set of modeled changes is determined by this range of outcomes, but its validity is not.  The EPA survey uses a range of plausible outcomes to estimate WTP.

5-7 	See 5-3

5-8	Econometric analysis of data for choice experiments is well-developed and EPA will use established econometric techniques, as described in the ICR Part B Section 5(b).  The statistical methods, including econometric methods for data analysis and the application of the results to the TMDL will be subject to peer review.

5-9 	This project is not designated as a highly influential scientific assessment (HISA).  EPA has designated this project as being "influential scientific information" (ISI) and it is included in the Agency's Science Inventory.  Although the survey is not designated HISA, to ensure that the survey was of high quality EPA did conduct "periodic consultations with experts in the field throughout the survey development process," as stated in ICR (2205.01).  EPA also obtained peer review of the survey instrument.  Additional peer review of the statistical methods, including econometric methods will be conducted. The peer review plan is included in EPA's Science Inventory database.

5-10 	As stated in the prior response to this comment (Please see comment 1-12), EPA disputes the idea that the stated preference method does not have the ability to collect information with, "quality, objectivity, utility, integrity" on the foundation that these methods are largely accepted as a valuable tool among those seeking to understand the benefits of changes to nonmarket goods. The use and nonuse willingness-to-pay estimates generated from this research will provide a more well-rounded evaluation of future pollution reduction programs in the Chesapeake Bay, contributing to the quality, objectivity, and integrity of information the EPA will disseminate. 





































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C. References

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Bergstrom, J.C. and R.C. Ready (2009). What Have We Learned from Over 20 Years of Farmland Amenity Valuation Research in North America?  Review of Agricultural Economics 31(1), 21 - 49.

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Moore, R. B., C. M. Johnston, R. A. Smith and B. Milstead (2011). "Source and Delivery of Nutrients to Receiving Waters in the Northeastern and Mid-Atlantic Regions of the United States." Journal of the American Water Resources Association 47(5): 965-990. 

NOAA.  2002.  Stated Preference Methods for Environmental Management:  Recreational Summer Flounder Angling in the Northeastern United States.  https://www.st.nmfs.noaa.gov/st5/RecEcon/Publications/NE_2000_Final_Report.pdf.  (Accessed November 7, 2012.)  
      
OMB. 2003. Circular A-4, Regulatory Analysis, September 17, 2003. Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/. (Accessed February 22, 2011.)
            
U.S. Bureau of Reclamation. 2012.  Klamath River Basin Restoration Nonuse Value Survey.  Final Report.  Prepared by RTI International.  RTI Project Number 0212485.001.010.  
      
      U.S. Congress. House. (2011)  Conservation, Energy, and Forestry Subcommittee of the Committee on Agrictulture.  Hearing to review the Chesapeake Bay TMDL, agricultural conservation practices, and their implications on national watersheds. 112th Cong., 1[st] sess. Washington: GPO, 2011. Print.
      
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