Distinguished Economist Finds EPA Economic Analysis Flawed

EPA’s report severely underestimates the effects on local communities and the national economy

NSSGA notes with interest today’s release of Dr. David Sunding’s report, Review of 2014 EPA Economic Analysis of Proposed Revised Definition of Waters of the Unites States. The report examines the U.S. Environmental Protection Agency’s estimates of probable costs and benefits for the proposed rule on “Waters of the United States,” and finds that EPA significantly underestimates the economic impacts the rule will have on local communities and businesses. Sunding is an economist on the faculty of the University of California-Berkeley and a principal of The Brattle Group.

The rule proposes a significant expansion of the term “Waters of the United States” to include previously unregulated waters located in floodplains and riparian areas, ditches and the all-inclusive “other waters.”

Sunding chronicles how EPA systematically excluded costs, underrepresented jurisdictional areas and used flawed methodologies to arrive at much lower economic impacts. He also examines how the significant lack of transparency in the report makes it difficult to understand or replicate the calculations, evaluate the underlying assumptions or understand discrepancies in the results. Sunding explains how EPA’s analysis downplays non-404 impacts, resulting in an artificially small jurisdictional increase. A full copy of his report is available here online.

Sunding has concluded that the errors in the study are so extensive as to render it unusable for determining the true cost of the proposed rule. His report underscores the need for EPA to withdraw the rule and complete a comprehensive and transparent economic review.

According to the Waters Advocacy Coalition, which represents the nation’s construction, real estate, mining, agriculture, wildlife conservation, forestry, manufacturing and energy sectors, the rule will have widespread impacts on communities across the country. It would not only affect businesses trying to expand in this struggling economy that will suffer, but will impact everything from local governments trying to start or further develop infrastructure projects to community gardens. It will dictate land-use decisions across the United States. It is a far-reaching expansion of the EPA’s jurisdiction, and the EPA has not been forthright about the costs to businesses and communities.

The determination of jurisdiction is critical for the aggregates industry, and as Sunding’s report indicates, the proposed rule will drastically expand jurisdiction and lead to increased costs to an industry barely recovering from the recession. NSSGA members need jurisdictional certainty and a reasonable estimation of costs to plan and operate aggregates facilities, which provide the material integral to the nation’s infrastructure. NSSGA supports Sunding’s conclusions that the rule does not adequately reflect the true cost to businesses and the U.S. economy.

The report was commissioned by WAC, of which NSSGA is a member. As part of WAC, NSSGA will continue to push for EPA to withdraw this proposed rule, and work to develop a better rule that balances the needs of affected communities with protections for “Waters of the United States.”