Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
CHAPTER
ONE
INTRODUCTION
The
U.
S.
Environmental
Protection
Agency
(
EPA)
is
proposing
some
options
to
address
storm
water
discharges
from
construction
sites.
As
one
option,
EPA
is
proposing
technology­
based
effluent
limitation
guidelines
and
standards
(
ELGs)
for
storm
water
discharges
from
construction
sites
required
to
obtain
National
Pollutant
Discharge
Elimination
System
(
NPDES)
permits.
As
another
option,
EPA
is
proposing
not
to
establish
ELGs
for
storm
water
discharges
from
those
sites,
but
to
allow
technology­

based
permit
requirements
to
continue
to
be
established
based
upon
the
best
professional
judgment
of
the
permit
authority
A
third
option
would
establish
inspection
and
certification
requirements
that
would
be
incorporated
into
the
discharge
permits
issued
by
EPA
and
States,
with
other
permit
requirements
based
on
the
best
professional
judgement
of
the
permit
authority.
The
regulatory
proposals,
if
implemented,
are
expected
to
significantly
reduce
the
amount
of
sediment
discharged
from
construction
sites.
The
deposition
of
sediment
originating
from
construction
sites
has
contributed
to
the
loss
of
capacity
in
small
streams,
lakes,
and
reservoirs,
leading
to
the
necessity
for
mitigation
efforts
such
as
dredging
or
replacement.

This
Economic
Analysis
(
EA)
summarizes
EPA
 
s
analysis
of
the
incremental
compliance
costs
and
the
economic
impacts
that
may
be
incurred
by
regulated
entities
within
the
C&
D
industry.
The
EA
details
EPA
 
s
proposed
regulation
and
the
alternative
regulatory
options
considered
by
EPA.
The
report
covers
financial
impacts
to
establishments
in
the
C&
D
industry,
potential
impacts
on
consumers
of
C&
D
industry
output,
and
market
and
other
secondary
impacts
on
the
national
economy,
such
as
employment
and
output.
The
EA
also
undertakes
small
business
analyses
under
the
Regulatory
Flexibility
Act
(
RFA)

as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA)
,
cost­
benefit
analyses
under
Executive
Order
12866
and
the
Unfunded
Mandates
Reform
Act
(
UMRA)
.
EPA
also
addresses
the
issues
of
environmental
justice
and
children
 
s
health.

This
chapter
begins
with
a
discussion
of
the
current
regulatory
environment
in
the
C&
D
industry.

Section
1.2
presents
EPA
 
s
reasons
for
proposing
this
rule
while
Section
1.3
identifies
the
potentially
1­
1
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
affected
sectors
of
the
C&
D
industry.
Section
1.4
provides
an
overview
of
key
data
sources
used
in
the
development
of
this
EA,
and
Section
1.5
provides
an
outline
for
the
remainder
of
this
report.

1.1
EXISTING
REGULATORY
FRAMEWORK
The
Federal
Water
Pollution
Control
Act,
also
known
as
the
Clean
Water
Act
(
CWA)
,
was
passed
by
Congress
in
1972
to
 
restore
and
maintain
the
chemical,
physical,
and
biological
integrity
of
the
nation
 
s
waters
 
(
(
33
U.
S.
C.
§
1251
(
(
a)
)
,
sometimes
referred
to
as
 
fishable,
swimmable
 
criteria.
.
The
CWA
establishes
a
comprehensive
program
for
protecting
our
nation
 
s
waters.
Among
its
core
provisions,
the
CWA
prohibits
the
discharge
of
pollutants
from
a
point
source
to
waters
of
the
U.
S.
,

except
those
authorized
by
a
NPDES
permit.
Under
Title
III,
the
CWA
also
provides
for
the
development
of
technology­
based
effluent
limitations
that
are
imposed
through
the
NPDES
permit
framework
to
control
direct
discharges
of
pollutants.

The
CWA
was
amended
in
1987
to
require
implementation
of
a
comprehensive
national
program
for
addressing
municipal
and
industrial
storm
water
discharges
(
Water
Quality
Act
of
1987,
Pub.
L.
100­
4,

February
4,
1987)
.
CWA
Section
402(
p)
requires
that
industrial,
municipal
and
other
storm
water
dischargers
designated
by
EPA
obtain
NPDES
permits.
In
response
to
these
amendments
EPA
has
promulgated
two
rules
that
contain
provisions
affecting
the
C&
D
industry.
These
regulations,
commonly
referred
to
as
the
Phase
I
and
Phase
II
storm
water
rules,
require
NPDES
permits
for
construction
activities
disturbing
more
than
one
acre
and
discharging
storm
water.
Phase
I
was
promulgated
on
November
16,
1990
(
55
FR
47990)
,
with
permit
requirements
taking
effect
in
1992.
Phase
II
was
promulgated
on
December
22,
1999
(
64
FR
68722)
.

1.1.1
NPDES
Permit
Regulation
of
the
C&
D
Industry
The
C&
D
industry
is
currently
regulated
under
NPDES
permit
requirements
for
construction
activities
disturbing
more
than
one
acre.
Construction
activities
disturbing
five
acres
or
more
are
covered
under
the
Phase
I
requirements
while
construction
activities
disturbing
between
one
acre
and
five
acres
1­
2
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
are
covered
under
the
Phase
II
requirements.
(
Applications
for
permits
for
storm
water
discharges
associated
with
small
construction
activity
under
the
Phase
II
rule,
however,
are
not
due
until
March
10,

2003.
)
The
NPDES
regulations
affecting
the
construction
and
development
industry
are
implemented
through
EPA
 
s
Construction
General
Permit
(
CGP)
in
states
without
their
own
authorized
NPDES
program.

The
CGP
requires
permittees
to
prepare
a
storm
water
pollution
prevention
plan
(
SWPPP)
for
C&
D
activities.
The
permit
lists
options
and
goals
for
other
erosion
and
sediment
controls
(
ESCs)
,
and
the
SWPP
must
contain
a
description
of
any
ESCs
used,
but
there
are
no
required
elements.
1
Options
and
goals
for
post­
construction
best
management
practices
(
BMPs)
are
also
contained
in
the
CGP,
but
none
are
specifically
required.
As
with
ESCs,
those
BMPs
selected
for
use
must
be
described
in
the
SWPPP.

The
Phase
II
regulations
also
provide
waivers
for
construction
activities
disturbing
between
one
and
five
acres
of
land
in
instances
where:

 
Activity
occurs
during
a
negligible
rainfall
period
(
rainfall
erosivity
factor
of
less
than
five)
,
or
 
A
Total
Maximum
Daily
Load
(
TMDL)
or
equivalent
analysis
addresses
the
pollutants
of
concern
leading
to
a
determination
that
storm
water
controls
are
not
necessary
for
construction
activity.
(
64
FR
68735)
.

These
waivers
acknowledge
that
variance
in
regional
factors
such
as
climate,
annual
rainfall
patterns,
and
existing
hydrology
affect
the
incidence
and
magnitude
of
storm
water
runoff.

The
CGP
is
the
vehicle
through
which
the
NPDES
storm
water
regulations
are
implemented
for
construction
activities.
There
is
a
national
CGP
issued
by
EPA
which
applies
in
those
areas
where
EPA
Regions
1,
2,
3,
5,
7,
8,
9
and
10
are
the
NPDES
permitting
authorities.
In
addition,
EPA
Regions
4
and
6
have
their
own
version
of
the
CGP
which
applies
only
in
those
areas
where
the
respective
Region
is
the
1
For
sites
with
10
acres
or
more
of
disturbed
area,
the
CGP
does
require
installation
of
temporary
sediment
basins.

1­
3
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
NPDES
permitting
authority.
Other
NPDES
programs
also
require
permits,
and
as
with
most
of
these
other
programs,
the
NPDES
storm
water
permits
may
be
issued
through
one
of
EPA
 
s
ten
regions
(
as
described
above)
or
through
an
authorized
state/
territory
NPDES
permitting
authority.
At
this
time
44
states
have
NPDES
permitting
authority.
2
EPA
itself
issues
storm
water
permits
in
nondelegated
states,

on
tribal
lands,
and
in
most
territories.

EPA
 
s
CGP
currently
covers
large
(
5
acres
or
larger)
construction
activities;
NPDES
permitting
authorities
are
expected
to
develop
and
issue
storm
water
permits
for
small
(
between
1
and
5
acres)

construction
activities
by
December
8,
2002.
EPA
expects
that
the
national
CGP
and
the
general
permits
currently
in
use
by
NPDES
permitting
authorities
will
be
used
as
templates
for
the
small
construction
permits.
EPA
 
s
CGP
is
valid
for
a
five
year
period,
after
which
time
the
permit
will
be
reviewed
and
renewed
for
another
5­
year
period.
The
CGP
was
originally
issued
in
1992
and
revised
in
1998
and
thus
is
due
for
renewal
in
2003.
EPA
plans
to
incorporate
the
small
construction
activity
permitting
requirements
into
its
national
CGP
at
the
time
of
the
permit
 
s
renewal.

1.
2
PURPOSE
OF
THE
PROPOSED
RULE
The
existing
NPDES
storm
water
regulations
require
construction
site
operators
to
manage
construction
site
runoff,
but
do
not
require
any
specific
level
of
control.
One
of
the
proposed
regulatory
options
(
Option
2)
would
establish
effluent
limitation
guidelines
in
the
form
of
minimum
standards
for
design
and
implementation
of
erosion
and
sediment
controls
used
during
the
active
phase
of
construction.

Existing
compliance
determination
practices
for
construction
site
storm
water
controls
rely
principally
on
site
inspections
by
local
governments,
however
enforcement
efforts
are
reported
to
be
uneven
nationwide,
largely
due
to
limited
enforcement
resources
a
the
Federal,
State
and
local
levels.

Option
2
would
also
establish
minimum
requirements
for
conducting
site
inspections
and
providing
2
All
states
with
the
exception
of
Alaska,
Arizona,
District
of
Columbia,
Idaho,
Massachusetts,
New
Hampshire
and
New
Mexico
have
some
level
of
NPDES
permitting
authority.
Even
in
those
states
with
NPDES
permitting
authority,
EPA
may
be
responsible
for
issuing
permits
for
activities
conducted
at
federal
facilities
and/
or
on
tribal
lands.

1­
4
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
certification
as
to
the
design
and
completion
of
various
aspects
of
those
controls.
These
requirements
could
strengthen
the
current
permit
program.
Another
regulatory
option
(
Option
1)
would
establish
the
same
site
inspection
and
certification
requirements,
but
without
the
ESC
standards.

1.
3
INDUSTRIES
AFFECTED
BY
THE
PROPOSED
C&
D
EFFLUENT
GUIDELINES
This
report
focuses
on
the
major
C&
D
industries
potentially
affected
by
the
proposed
ELG
requirements.
Table
1­
1
identifies
these
industries
according
to
both
their
North
American
Industry
Classification
System
(
NAICS)
and
Standard
Industrial
Classification
(
SIC)
codes.
3
A
detailed
description
of
these
C&
D
industries
may
be
found
in
Chapter
Two
of
this
report.

3
The
NAICS
system
recently
replaced
the
SIC
system.

1­
5
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
1­
1.
Industries
Potentially
Affected
by
Proposed
Rulemaking
Regulated
Entities
North
American
Industry
Classification
System
Code
(
NAICS)
Standard
Industrial
Classification
Codes
(
SIC)
a
Land
subdivision
and
development
23311
6552
Single­
family
housing
construction
23321
1521,
1531,
8741
Multifamily
housing
construction
23322
1522,
1531,
8741
Manufacturing
and
industrial
building
construction
23331
1531,
1541,
8741
Commercial
and
institutional
building
construction
23332
1522,
1531,
1541,
1542,
8741
Highway
and
street
construction
23411
1611,
8741
Bridge
and
tunnel
construction
23412
1622,
8741
Water,
sewer,
and
pipeline
construction
23491
1623,
8741
Power
and
communication
transmission
line
construction
23492
1623,
8741
Industrial
nonbuilding
structure
construction
23493
1629,
8741
All
other
heavy
construction
23499
1629,
7353,
8741
Excavation
contractors
23593
1794
Wrecking
and
demolition
contractors
23594
1795
Source:
U.
S.
Census
Bureau
1997
Census
of
Construction
a
Some
parts
of
the
Standard
Industrial
Classification
Codes
are
included
in
other
North
American
Industry
Classification
Codes.

1.
4
OVERVIEW
OF
KEY
DATA
SOURCES
A
common
data
source
used
to
support
the
development
of
many
past
ELGs
is
the
CWA
Section
308
industry
survey.
For
this
proposed
rule,
however,
EPA
determined
that
such
a
survey
should
not
be
undertaken.
This
determination
necessitated
the
use
of
existing
data
sources,
including
academic
literature,
industry
trade
associations,
and
government
data
such
as
that
provided
by
the
U.
S.
Census
Bureau.
Major
data
sources
are
discussed
in
more
detail
where
they
are
used
to
support
sections
of
this
analysis.
This
section
provides
an
overview
of
several
key
sources
and
their
importance
to
the
economic
analysis
of
the
proposed
C&
D
ELG.

1­
6
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Of
primary
importance
in
the
development
of
this
EA
were
the
1992
and
1997
Censuses
of
Construction,
conducted
by
the
U.
S.
Census
Bureau.
The
Census
provided
information
on
the
industry
sectors
potentially
affected
by
the
proposed
rule,
as
well
as
characteristics
of
each
sector
such
as
employment
and
revenue
levels.
Also
used
were
several
other
reports
from
the
Census
Bureau,

including:
4
 
Report
C20
 
Housing
Starts
 
Report
C25
 
Characteristics
of
New
Housing,
,

 
Report
C30
 
Value
Put
in
Place,
,

 
Report
C40
 
Building
Permits
All
of
these
reports
contributed
to
the
various
economic
models
developed
for
this
EA.

The
U.
S.
Department
of
Agriculture
 
s
(
USDA
 
s)
Natural
Resources
Inventory
(
NRI)
was
used
to
determine
the
amount
of
disturbed
acreage
caused
by
urbanization
and
new
development.
This
information
was
important
to
the
environmental
assessment,
the
benefits
assessment,
and
as
a
way
to
determine
the
rate
of
new
development.

EPA
also
used
data
collected
from
permits
issued
by
existing
NPDES
permitting
authorities.

Currently,
regulation
of
C&
D
activity
is
triggered
when
a
builder/
developer
files
a
notice
of
intent
(
NOI)

with
the
permitting
authority.
Permitting
authorities
record
these
NOIs
in
order
to
track
development
within
their
jurisdiction.
EPA
obtained
copies
of
NOI
databases
for
NPDES­
approved
states
and
for
those
non­
authorized
states
where
EPA
acts
as
the
NPDES
permitting
authority.
5
The
databases
contained
a
wide
variety
of
information,
such
as
total
site
size,
disturbed
acreage,
project
type
(
e.
g.
,

residential,
nonresidential)
,
and
project
ownership
status
(
public
or
private)
.
EPA
planned
to
use
this
information
to
estimate
the
number
of
storm
water
starts.
The
databases,
however,
lacked
the
level
of
detail
EPA
needed
to
use
the
data
to
its
full
advantage.
In
addition,
inconsistencies
in
the
type
of
data
4
These
reports
are
available
at
the
following
web
address:
http:
/
/
www.
census.
gov/
const/
www/
.

5
NPDES
permits
are
fully
administered
by
EPA
in
six
States
plus
Washington,
DC.
In
other
States
EPA
acts
as
the
permitting
authority
for
activities
on
Indian
and/
or
Federal
lands
only.

1­
7
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
collected
and
coverage
made
it
difficult
to
compare
the
databases
with
one
another.
Although
EPA
could
not
use
these
databases
in
the
manner
hoped,
they
were
useful
for
generating
rough
estimates
of
the
number
of
permits
issued
nationwide,
as
a
check
on
the
permit
estimates
reported
by
the
Census
Bureau.

EPA
did
not
conduct
further
analysis
on
these
databases
prior
to
the
proposal
of
this
rule.

An
additional
source
of
information
for
the
development
of
the
economic
analysis
(
described
in
Section
4.2)
was
a
series
of
focus
groups
held
with
representatives
of
the
National
Association
of
Home
Builders
(
NAHB)
.
These
focus
groups
helped
EPA
understand
the
process
of
construction
project
development
and
provided
estimates
of
data
elements
most
helpful
in
building
economic
models.
These
estimates
were
particularly
useful
when
national­
level
data
from
other
sources
(
such
as
the
Census
Bureau)
were
not
available.

Some
of
the
data
and
methodologies
used
in
the
Phase
II
EA
were
also
used
in
this
rulemaking
effort.
These
sources
and
methods
were
described
in
detail
in
Chapters
Four,
Five,
and
Six.

1.
5
REPORT
ORGANIZATION
This
EA
report
is
organized
as
follows:

!
Chapter
2
contains
the
Industry
Profile,
which
provides
background
information
on
the
establishments
and
industry
sectors
potentially
affected
by
the
proposed
rule.

!
Chapter
3
summarizes
the
Proposed
Effluent
Guidelines
Regulations
and
discusses
the
regulatory
options
considered
by
EPA.

!
Chapter
4
,
Economic
Impact
Analysis
Methodology,
explores
the
data,
methodology,
and
analyses
used
in
the
determination
of
project,
establishment,
and
market
level
impacts
due
to
incremental
storm
water
control
costs
incurred
under
the
proposed
regulation.

!
Chapter
5
presents
the
impacts
of
the
proposed
rule
for
the
model
project,
model
establishment,
and
national
market.
This
chapter
also
includes
a
discussion
of
other
potential
impacts
of
the
proposed
rule
according
to
Executive
Order
12866
including
regional
and
social
impacts.

1­
8
!
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
!
Chapter
6
contains
information
on
the
Initial
Regulatory
Flexibility
Analysis
(
IRFA)
and
the
small
business
analysis
under
the
Regulatory
Flexibility
Act
(
RFA)
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA)
.

!
Chapter
7
presents
the
Benefits
Methodology
by
which
EPA
identifies,
qualifies,
quantifies,
and
where
possible
monetizes
the
benefits
associated
with
reduced
storm
water
runoff.

!
Chapter
8
presents
the
Environmental
Assessment
and
Benefits
Analysis,
which
assesses
the
nationwide
benefits
of
the
proposed
regulation
following
the
methodology
outlined
in
the
previous
chapter.

!
Chapter
9
looks
at
the
Costs
and
Benefits
of
the
Proposed
C&
D
ELG
using
the
benefits
assessment
described
in
Chapter
8.
Here,
EPA
presents
an
assessment
of
the
nationwide
costs
and
benefits
of
the
proposed
regulation
pursuant
to
Executive
Order
12866
and
the
Unfunded
Mandates
Reform
Act
(
UMRA)
.

!
Chapter
10
presents
a
discussion
of
UMRA.

1­
9
