The
Honorable
Michael
O.
Leavitt
Administrator
U.
S.
Environmental
Protection
Agency
Ariel
Rios
Building
1200
Pennsylvania
Avenue,
NW
Washington,
DC
20460
date
stamped
APR
27
2004
Dear
Mr.
Leavitt:

Enclosed
for
your
consideration
is
the
Report
of
the
Small
Business
Advocacy
Review
Panel
(
SBAR
Panel
or
Panel)
convened
for
EPA's
planned
proposed
rulemaking
entitled
"
Proposed
Regulations
to
Establish
Requirements
for
Cooling
Water
Intake
Structures
at
Phase
III
Existing
and
New
Facilities."
These
regulations
are
under
development
by
the
U.
S.
Environmental
Protection
Agency
(
EPA)
under
the
Clean
Water
Act,
section
316(
b).
They
would
control
the
loss
of
fish
and
shellfish
to
impingement
and
entrainment
by
cooling
water
intake
structures.

Pursuant
to
a
consent
decree,
EPA's
rulemaking
under
section
316(
b)
was
divided
into
three
phases.
Phase
I
(
published
December
18,
2001)
applies
to
cooling
water
intake
structures
at
new
land­
based
facilities.
Phase
II
(
signed
February
16,
2004)
applies
to
existing
utility
and
nonutility
electric
power
producers
with
design
intake
flow
(
DIF)
of
50
MGD
or
greater.
Phase
III
could
apply
to
a
range
of
existing
facilities,
including
electric
power
producers
with
design
intake
flow
less
than
50
MGD
and
manufacturing
plants,
as
well
as
to
certain
new
offshore
facilities
not
included
in
the
Phase
I
rule.
The
consent
decree
requires
that
EPA
propose
regulations
for
Phase
III
facilities
by
November
1,
2004,
and
take
final
action
by
June
1,
2006.

On
February
27,
2004,
EPA's
Small
Business
Advocacy
Chairperson
(
Alexander
Cristofaro)
convened
this
Panel
under
section
609(
b)
of
the
Regulatory
Flexibility
Act
(
RFA)
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA).
In
addition
to
its
chairperson,
the
Panel
consists
of
the
Director
of
the
Engineering
and
Analysis
Division
of
the
Office
of
Science
and
Technology
within
EPA's
Office
of
Water,
the
Administrator
of
the
Office
of
Information
and
Regulatory
Affairs
within
the
Office
of
Management
and
Budget
(
OMB),
and
the
Chief
Counsel
for
Advocacy
of
the
Small
Business
Administration
(
SBA).

It
is
important
to
note
that
the
Panel's
findings
and
discussion
are
based
on
the
information
available
at
the
time
this
report
was
drafted.
EPA
is
continuing
to
conduct
analyses
relevant
to
the
proposed
rule,
and
additional
information
may
be
developed
or
obtained
during
this
process
as
well
as
from
public
comment
on
the
proposed
rule.
The
options
that
the
Panel
identified
for
reducing
the
rule's
regulatory
impact
on
small
entities
may
require
further
analysis
and/
or
data
collection
to
ensure
that
the
options
are
practicable,
enforceable,
protective
of
public
health,
environmentally
sound
and
consistent
with
the
Clean
Water
Act.
2
Summary
of
Small
Entity
Outreach
EPA
has
actively
involved
stakeholders
in
the
development
of
the
proposed
rule
in
order
to
ensure
the
quality
of
information,
identify
and
understand
potential
implementation
and
compliance
issues,
and
explore
regulatory
alternatives.
EPA
conducted
numerous
meetings
with
the
electric
power
industry
over
the
past
six
years
and
met
twice
with
manufacturing
industry
representatives
in
the
past
two
years,
and,
in
the
process,
received
direct
input
about
the
impacts
of
the
proposed
rule
on
the
industry.

In
the
past
three
years,
EPA
held
three
conference
calls
with
small
entity
representatives
from
the
manufacturing
and
electric
power
industries
to
improve
our
understanding
of
cooling
water
intakes
in
these
industries,
and
the
potential
impacts
of
new
requirements
from
an
economic
and
business
perspective.
Prior
to
convening
the
Panel,
EPA
held
a
conference
call/
meeting
on
October
1,
2002
and
another
on
January
22,
2004,
to
receive
information
from
prospective
small
entity
representatives
(
SERs)
about
plans
for
convening
the
Panel
and
their
early
concerns
about
the
planned
proposed
regulation.

EPA
invited
six
municipal
power
plant
representatives
and
six
representatives
from
manufacturing
industries
to
serve
as
potential
SERs
during
the
pre­
panel
outreach
process.
Ultimately,
three
municipal
power
plant
representatives
and
four
representatives
from
manufacturing
industries
provided
comments
to
the
Panel.
The
full
Panel
report
lists
the
materials
provided
to
them
and
summarizes
their
comments.
Their
full
written
comments
are
also
attached.
In
light
of
these
comments,
the
Panel
considered
the
regulatory
flexibility
issues
specified
by
RFA/
SBREFA
and
developed
the
findings
and
discussion
summarized
below.

Panel
Findings
and
Discussion
Under
the
RFA,
the
Panel
is
to
consider
four
regulatory
flexibility
issues
related
to
the
potential
impact
of
the
rule
on
small
entities
(
i.
e.,
small
businesses
and
municipalities):

1.
The
type
and
number
of
small
entities
to
which
the
rule
will
apply.

2.
Record
keeping,
reporting
and
other
compliance
requirements
applicable
to
small
entities.

3.
The
rule's
interaction
with
other
Federal
rules.

4.
Regulatory
alternatives
that
would
minimize
the
impact
on
small
entities
consistent
with
the
stated
objectives
of
the
statute
authorizing
the
rule.

The
Panel's
most
significant
findings
and
discussion
with
respect
to
each
of
these
issues
are
summarized
below.
To
read
the
full
discussion
of
the
Panel
findings
and
recommendations,
see
Section
9
of
the
Report.
3
Number
and
Types
of
Entities
Affected
EPA
believes
that
around
121
electric
generating
facilities
owned
by
about
73
entities,
and
about
630
manufacturing
facilities
owned
by
nearly
630
entities,
may
potentially
be
covered
by
the
forthcoming
proposed
rule.
Of
these,
an
estimated
95
are
small
entities,
as
defined
by
the
Small
Business
Administration.
These
estimates
are
based
upon
an
initial,
screening
survey
of
2600
facilities
and
a
subsequent
detailed
survey
of
1412
facilities.

Potential
Reporting,
Record
keeping,
and
Compliance
Requirements
The
small
entity
representatives
commented
that
the
costs
projected
by
EPA
could
impose
a
significant
financial
burden
on
some
small
businesses,
especially
in
certain
industries,
like
steel
and
paper,
that
have
experienced
recent
downturns.
There
was
general
agreement
among
SERs
that
the
projected
costs
of
conducting
demonstration
studies
and
verification
monitoring
were
substantial
and
would
likely
impose
a
significant
burden,
particularly
as
most
small
entities
would
need
to
hire
outside
consultants
The
Panel
shares
these
concerns
and
recommends
that
EPA
develop
regulatory
alternatives
that
minimize
these
types
of
costs.
For
example,
the
Phase
II
rule
included
a
preapproved
technology
option
that
allowed
facilities
to
avoid
the
demonstration
study
requirement
while
still
requiring
them
to
conduct
verification
monitoring
and
to
demonstrate
attainment
of
performance
standards.
The
Panel
recommends
that
EPA
include
a
similar
provision
in
the
proposed
Phase
III
rule
and
explore
ways
to
expand
the
availability
of
a
pre­
approved
technology
option
to
low­
flow
facilities
and/
or
identify
other
ways
to
reduce
the
associated
monitoring
and
study
costs.
One
promising
approach,
suggested
by
one
SER,
would
be
to
eliminate
the
verification
monitoring
requirement
for
low­
flow
facilities
that
install
and
properly
operate
an
approved
technology.

Related
Federal
Rules
The
Panel
did
not
identify
any
federal
rules
that
duplicate,
overlap,
or
conflict
with
the
proposed
Phase
III
rule.

Regulatory
Flexibility
Alternatives
The
small
entity
representatives
suggested
a
number
of
regulatory
alternatives
for
reducing
the
impacts
of
the
rule
on
small
entities
that
the
Panel
believes
warrant
further
consideration.
These
included
delayed
implementation
or
flexible
timing
of
implementation,
and
thresholds
for
applicability
of
requirements
based
upon
the
design
flow
of
an
intake.

The
Panel
notes
that
significant
implementation
flexibility
was
included
in
the
Phase
II
rule
and
recommends
that
at
least
the
same
level
of
flexibility
be
provided
for
Phase
III
requirements.
The
Panel
also
recommends
that
EPA
consider
the
availability
of
contractor
resources
as
it
develops
the
implementation
schedule
for
Phase
III.
4
Most
SERs
recommended
an
applicability
threshold
in
the
range
of
20
to
50
million
gallons
per
day
(
MGD).
Under
this
approach,
facilities
that
fell
below
the
threshold
would
continue
to
be
regulated
on
an
individual
best
professional
judgement
(
BPJ)
basis
by
State
and
local
permitting
authorities,
but
would
not
be
subject
to
uniform
national
requirements.
These
SERs
noted
the
relatively
small
quantity
of
water
used
(
nationwide)
below
various
capacity
thresholds,
the
comparatively
high
cost
per
gallon
of
water
of
controlling
impingement
and
entrainment
(
I&
E)
at
small­
capacity
intakes,
and
either
the
absence
of
evidence
for
adverse
impacts
or
the
small
numbers
of
fish
impinged
at
small­
capacity
intakes.
The
Panel
notes
that
in
some
cases,
even
small
intake
flows
could
cause
significant
adverse
environmental
impacts.
BPJbased
permitting
decisions
would
be
able
to
address
such
situations
on
a
site­
specific
basis.

In
response
to
these
comments,
EPA
developed
additional
information
on
Phase
III
facilities
within
various
design
intake
flow
ranges,
under
the
assumption
that
they
were
required
to
comply
with
Phase
II
requirements.

Based
on
that
information,
the
Panel
believes
that
an
effective
way
to
substantially
reduce
potential
economic
impacts
on
small
businesses
would
be
to
set
an
applicability
threshold
of
20
MGD.
Facilities
below
20
MGD
represent
a
small
proportion
of
the
total
flow
associated
with
the
Phase
III
rulemaking.
Setting
an
applicability
threshold
at
20
MGD
would
exclude
43%
of
potentially
in­
scope
facilities,
including
53%
of
small
entities,
that
collectively
account
for
11%
of
the
national
costs
but
only
5­
6%
of
flow,
which
the
Panel
used
as
a
proxy
for
expected
benefits.
To
the
extent
flow
is
a
good
proxy
for
environmental
impacts,
setting
a
threshold
at
this
level
would
not
substantially
reduce
the
environmental
benefits
of
the
rule.
Thus,
the
Panel
recommends
that
EPA
analyze
a
range
of
potential
thresholds,
particularly
those
between
20
MGD
and
50
MGD.
Setting
a
threshold
at
any
of
these
levels
would
remove
a
majority
of
potentially
impacted
small
entities
from
the
scope
of
the
rule.

Methodological
Issues
One
municipal
electric
generator
provided
comments
from
its
industry
trade
association,
American
Public
Power
Association
(
APPA),
that
raised
several
issues
regarding
EPA's
methodology
in
analyses
prepared
for
the
Panel
report.
These
concerned
the
number
of
potentially­
affected
entities
and
the
down­
time
required
to
retrofit
an
intake.
The
Panel
anticipates
that
the
Phase
III
rule
will
incorporate
flexible
implementation
provisions
adopted
in
Phase
II,
which
should
be
sufficient
to
address
APPA's
concerns.
Nonetheless,
the
Panel
recommends
that
EPA
seek
further
information
from
APPA
to
identify
any
necessary
modifications
to
the
assumptions
used
for
its
cost
and
economic
impact
analyses
prepared
for
this
report.

The
same
SER
also
provided
comments
and
examples
to
suggest
that
EPA
might
have
underestimated
compliance
costs
for
facilities
with
a
small
budget
and
staff.
The
Panel
recommends
that
EPA
review
its
assumptions
used
to
develop
costs
and
economic
impacts
to
ensure
that
these
assumptions
are
appropriate
for
facilities
with
smaller
budgets
and
staffs.

(
see
next
page
for
signature
blocks)
5
Sincerely,

/
s/
/
s/
_____________________________
_______________________________
Alexander
Cristofaro
John
D.
Graham
Small
Business
Advocacy
Chair
Administrator
Office
of
Policy,
Economics
and
Innovation
Office
of
Information
and
Regulatory
Affairs
U.
S.
Environmental
Protection
Agency
U.
S.
Office
of
Management
and
Budget
/
s/
/
s/
_____________________________
________________________________
Thomas
M.
Sullivan
Mary
T.
Smith
Chief
Counsel
for
Advocacy
Director,
Engineering
and
Analysis
Division
Office
of
Advocacy
Office
of
Water
U.
S.
Small
Business
Administration
U.
S.
Environmental
Protection
Agency
