EPA's proposed rule would affect approximately 1,260 existing power generating and manufacturing and industrial facilities. In 2011, EPA conducted its original cost-benefit analysis using well-established methods that determined the benefits for fishing. EPA then determined that its first analysis was "incomplete" and recalculated the benefits by conducting a national "stated preference survey" that heavily focused on hypothetical questions.
"The results of this survey cannot be taken as credible estimates of potential benefits of the proposed rule and certainly cannot be used to justify spending hundreds of millions or potentially billions of dollars each year," wrote the Senators in the letter. "If EPA were to substitute the survey results for the original benefits calculation, it would interject arbitrariness and unpredictability in the regulatory process and allow regulators to justify actions based on public opinion surveys rather than sound science."
Signing today's letter are Sens. Vitter, James Inhofe (R-Okla.), Mike Crapo (R-Idaho), and John Boozman (R-Ark.).
Text of today's letter is below. Click here to see the PDF version.
July 22, 2013
Ms. Nancy K. Stoner
Acting Assistant Administrator for the Office of Water
U.S. Environmental Protection Agency
1200 Pennsylvania Ave, NW
Washington, D.C. 20460
Dear Acting Assistant Administrator Stoner:
We write to express our concern regarding the Environmental Protection Agency's (EPA) apparent attempt to deliberately inflate benefits calculations in order to justify the high cost of a rule. EPA is seeking to exaggerate benefits through the use of a "stated preference survey" to calculate the alleged "non-use" benefits of the proposed rule for cooling water intake structures under Section 316(b) of the Clean Water Act (CWA). Use of a stated preference survey is inappropriate. Furthermore, reliance on non-use benefits, as opposed to traditional "use" benefits, to justify a significant regulation is without precedent and should not be permitted. Accordingly, we request that EPA refrain from using this survey as a basis for the final rule and stick to well-established methods to determine the costs and benefits of the regulation.
In April 2011, EPA issued a proposed rule under Section 316(b) of the CWA, which requires that standards governing cooling water intake structures reflect the best technology available (BTA) for minimizing adverse environmental impact. EPA's proposed rule would set new standards for cooling water intake structures at approximately 1,260 existing power generating and manufacturing and industrial facilities. EPA is required by a modified court settlement agreement to publish the final rule by November 4, 2013.
As part of its required regulatory analysis, EPA conducted an original cost-benefit analysis. In this analysis, EPA used conventional methods to determine the use benefits for commercial and recreational fishing. EPA then decided that its first cost-benefit analysis was "incomplete" and attempted to recalculate not only the use benefits, but the non-use benefits as well. In order to do so, EPA conducted a national "stated preference survey" in which individuals, who would gain no direct benefit, were asked how much they were hypothetically willing to pay to prevent distant fish from being harmed. Attempting to monetize non-use benefits in this way, and on this scale, is highly questionable.
As you may know, stated preference surveys are one of the most controversial methods for estimating non-use benefits because they are based on what individuals say they would do as opposed to what they are actually observed doing. There are very few instances in which such a complicated and subjective tool can be used with any degree of reliability. According to leading economists, stated preference surveys should only be used in situations where the resources are unique or limited and the impacts are substantial or irreversible. This is not the case here. The results of this survey cannot be taken as credible estimates of potential benefits of the proposed rule and certainly cannot be used to justify spending hundreds of millions or potentially billions of dollars each year. Accordingly, EPA should not use the results of the stated preference survey as a basis for the final rule.
Additionally, EPA conducted two separate benefits analyses in little more than a year that resulted in dramatically different conclusions. EPA's original cost-benefit analysis, using conventional methods, determined that the $466 million annual costs of the preferred option outweighed the $16.3 million annual benefits by a ratio of 29 to 1. Conversely, the annual benefits from the stated preference survey were $2.275 billion for the preferred option, with a cost to benefit ratio of 1 to 5. This is a substantial and questionable increase in benefits, all due to EPA's decision to rely on a controversial method to recalculate benefits. If EPA were to substitute the survey results for the original benefits calculation, the majority of all benefits would be non-use benefits as opposed to the traditionally calculated use benefits associated with commercial and recreational fishing. This would be highly unusual. EPA has never attempted to justify an entire regulation primarily on non-use benefits. Doing so now would set a dangerous precedent that would interject arbitrariness and unpredictability in the regulatory process and allow regulators to justify actions based on public opinion surveys rather than sound science.
EPA's previous estimate of use benefits associated with commercial and recreational fishing provides a far more accurate gauge of the potential benefits of the proposed rule than the results of the controversial stated preference survey. Accordingly, EPA should withdraw the survey and not attempt to use the results as a basis for the final rule.
If you have any questions regarding this letter, please feel free to have your staff contact the Senate Committee on Environment and Public Works at (202) 224-6176.
cc: Ken Kopocis
Senior Advisor for the Office of Water