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Economic Implications, Viewpoints and Solutions for the Success of the Clean Water Rule

June 16, 2015
With any major governmental decision, there will be discontent amongst parties that are negatively impacted.  However, overall considerations of a law’s benefits must also be taken into account before declaring the decision either “good” or “bad.” In the case of the Clean Water Rule, there are many costs associated with attaining compliance for businesses not yet meeting the EPA’s standards. However, the overall health benefits of the people and other industries provides evidence that the Clean Water Rule may considerably assist with the growth of the economy and prevent the costs of healthcare associated with contaminated water.

By Sarah Burns, C’16

On May 27th, 2015, the U.S. Environmental Protection Agency (EPA), in conjunction with the U.S. Army, finalized the Clean Water Rule (CWR), which serves to more clearly protect the streams and wetlands leading to major bodies of water from pollution and deterioration (U.S. EPA, 2015). The Rule is a complement to the Clean Water Act (CWA) of 1972, which acts as the dominant initial federal law in the U.S. controlling water pollution. One of the main goals of the Clean Water Act and Clean Water Rule is to protect drinking water sources and ensure that the water supply continues to be clean and reliable in cases of rising temperatures, drought, storms increasing in severity, and sea level rise (U.S. EPA, 2015). Despite all of these anticipated positive outcomes, many skeptics, including the American Farm Bureau and Republican Senators from Oklahoma, West Virginia, and Utah, have made public their opinions of the rule, claiming that it increases the federal government’s jurisdiction over water on private and public land (Crowell, 2015).

According to the EPA, the Clean Water Rule will reduce costs and be more efficient for businesses due to its more straightforward guidelines. In addition, although old permitting requirements still stand, the exemptions to the permitting process for agriculture established before the Clean Water Rule also hold, and no new permitting requirements have been made. In their “Economic Analysis of the EPA-Army Clean Water Rule,” the U.S. EPA and Army have estimated that the annual costs occurring from the new CWR legislation will range from $153.4 million to $306.6 million, while the benefits will fall between $338.9 million to $349.5 million (U.S. EPA and Army, 2015). Not only do the economic benefits presented in the report outweigh the costs by a minimum of $32.3 million and a considerably large $191.1 million, but the report additionally shows that the benefits for the four sections of Compliance, Administration, Pesticide General Permit Implementation, and Mitigation—Streams, were not accounted for, even though their costs were included in the calculations (See Figures 1 and 2). This gives the appearance of that the benefits the CWR may have on the economy are underestimated.

Although the EPA’s calculations appear to be promising, there is always a possibility of an overestimate of the economic benefits and underestimate of the costs associated with the CWR. For example, the EPA’s economic analysis does not specify in detail the methods by which it obtained the numbers for the monetary benefits of the CWR, which further raises the question of whether the results are reliable.

Despite the encouraging numbers that have been published by the EPA, many opponents still see the Rule as an attempt by the federal government to gain more power. Specific groups most affected by the CWR include the agriculture, energy and home-building industries (Politico, 2015). Senator Thad Cochran, a Republican from Mississippi and established member of the Senate Agricultural Committee, stated, “Over the past five years the EPA has demonstrated a willingness to expand its regulatory reach, ignore common sense and, at times, exceed any rational reading of the law. Its actions have increased the regulatory burdens and costs on farmers, ranchers, businesses and other job creators” (Fatka, 2014). Through my research, I have been unable to find numbers detailing the estimated costs placed on any of these industries or overall costs that have been incurred in the past have not been published.

One of the main fears these industries have regarding the new regulations is that they will lose money from purchasing permits or as a result of paying fines for not abiding by the EPA’s standards. Additionally, they fear that the cost of implementing new technology or altering their farms to decrease pollution and environmental degradation. These costs can become very expensive if a business is unable to pay an initial permitting or renovation fee. As a result, many businesses fear that they may be forced to spend more money than they can afford as a result of changing the law. These highly voiced concerns amongst opposing groups, EPA states, may only affect those who pollute protected waters without applying for a permit. EPA stated that the cost of applying for a permit may be as little as $100 for commercial businesses and free for government and non-profit organizations.

Commercial fishing boat in Juneau, Alaska (Wikimedia Commons).

Although the EPA anticipates that there will be no damage done to businesses by the CWR, real estate industry leaders argue that their businesses will be uniquely impacted due to construction limitations. Barbara Anson, a real estate broker from Florida, claims that the Rule will make construction more difficult. She provided the example that with the implementation of the CWR, “[Builders] won’t be able to dig a pond to make a pad for a house” (O’Dea, 2015). This statement, although a true concern for some business owners, is false. The CWR states that waters must flow into a water of the United States in order to be protected under the CWA. Despite this major information gap, opponents warn that both old and new real estate transactions may be affected by the Rule and are concerned that construction or destruction within these properties may violate regulations without their knowledge.

The EPA is aware of the concerns many businesses have with its policies, and has enacted the CWA compliance assistance system, in which it provides a detailed method by which businesses can best pursue achieving compliance. In addition, the EPA provides time and assistance with the process of meeting the guidelines. In order to mitigate the financial burden placed on specific businesses as a result of clean water regulations. This system may not be perfect, but it has certainly helped many businesses attain compliance while still earning a profit.

Although from the arguments of critics it may seem as though the water regulations imposed by the CWR are detrimental to businesses, they may also have the opposite effect. For example, even though the agriculture industry may need to spend money on modifications to ensure compliance with EPA’s water standards for years to come, it also depends on potable and reliable water to raise animals, grow crops, and have proper irrigation. Meanwhile, the CWR positively impacts a multitude of industries including the manufacturing, fishing, beverage, aquatic recreation, and hunting industries (U.S. EPA, 2015).

Commercial fishing boat in Juneau, Alaska (Wikimedia Commons).

The Bottom Line

With any major governmental decision, there will be discontent amongst parties that are impacted. However, overall considerations of a law’s benefits must also be taken into account before declaring the decision either “good” or “bad.” In the case of the Clean Water Rule, there are potential costs associated with attaining compliance for businesses that pollute or destroy protected waterways. However, the overall health benefits of the people and other industries provides evidence that the Clean Water Rule may considerably assist with the growth of the economy and prevent the costs of healthcare associated with contaminated water. Examining both sides of the argument, it appears that some businesses may be impacted financially by the CWR if they fail to obtain a permit as a result of fines and implementing new methods of controlling water pollution. Although the cost of a permit may not be expensive for some groups affected, limitations to the number of permits given may prevent a candidate from obtaining one. Meanwhile, those who obtain permits may experience little to no economic impacts.

Despite the EPA’s sincere intentions, it is evident that there is much distrust in the EPA’s motives. In order to establish a more honest relationship with the industries the CWR impacts, the EPA may need to be clearer about the financial burdens its policies may place on businesses if they do not apply for a permit and pollute regulated waters. Rather than dismissing the CWR’s costs for polluters, the EPA needs to be upfront about the exact costs associated with the CWR, including permitting and the costs of polluting without a permit. By making these costs transparent, it will be easier for the public to realize how minimal the economic impact can be. As revealed by the claims of businesses, there is much confusion about the modifications the CWR has made to the CWA. Greater favorability from, and discussion with, businesses and other involved groups will make enforcement easier, and in turn, will have a much better outcome for the environment.

Figure 1: Estimated Annual Indirect Costs to CWA Programs (U.S. EPA and Army, 2015).

 

Records. Annual Costs (FY14$ millions) - Low

Annual Costs (FY14$ millions) - High

CWA 402 CAFO Administration

$0.2

$0.2

CWA 402 CAFO Implementation

$6.1

$6.1

CWA 402 Stormwater Administration

$0.3

$0.3

CWA 402 Stormwater Implementation

$29.2

$36.4

CWA 404 Permit Application

$28.7

$49.1

CWA 404 Mitigation – Wetlands

$54.4

$152.3

SUBTOTAL

$118.8

$244.3

CWA 311 Compliance

$12.7

$12.7

CWA 401 Administration

$0.8

$0.8

CWA 402 Pesticide General Permit Implementation

$3.3

$3.6

CWA 404 Mitigation – Streams

$22.8

$45.2

TOTAL

$158.4

$306.6

 

Figure 2: Estimated Annual Indirect Benefits to CWA Programs (U.S. EPA and Army, 2015).

 

Annual Benefits (FY14$ millions) - Low

Annual Benefits (FY14$ millions) - High

CWA 402 CAFO Administration & Implementation

$3.8

$6.6

CWA 402 Stormwater Administration & Implementation

$29.0

$36.8

CWA 404 Permit Application & Mitigation – Wetlands

$306.1

$306.1

SUBTOTAL

$338.9

$349.5

CWA 311 Compliance

not quantified

not quantified

CWA 401 Administration

not quantified

not quantified

CWA 402 Pesticide General Permit Implementation

not quantified

not quantified

CWA 404 Mitigation – Streams

not quantified

not quantified

TOTAL

$338.9

$349.5

 

Works Cited

Crowell, Susan. “EPA finalizes Clean Water Rule; defines ‘waters of the United States’.” Farm and Dairy. N.p., 5 June 2015. Web. 14 June 2015. <http://www.farmanddairy.com/news/eoa-finalizes-clean-water-rule-defines-waters-of-the-united-states/ 264126.html>.

Fatka, Jacqui. “Tell EPA Impact of Water Rule Changes.” Farm Futures. N.p., 28 Mar. 2014. Web. 15 June 2015. <http://farmfutures.com/blogs-tell-epa-impact-water-rule-changes-8324>.

Politico. “Critics of EPA’s Clean Water Rule Muster Opposition.” Texas Tribune. N.p., May 2015. Web. 15 June 2015. <http://www.texastribune.org/plus/water/vol-3/no-11/critics-epas-clean-water-rule-muster-opposition/>.

U.S. EPA. “The Clean Water Rule for: Business.” File last modified on 29 May 2015. PDF file.

“Clean Water Rule Protects Streams and Wetlands Critical to Public Health, Communities, and Economy.” United States Environmental Protection Agency. N.p., 27 May 2015. Web. 14 June 2015.<http://yosemite.epa.gov/opa/admpress.nsf/0/62295CDDD6C6B45685257E52004FAC97>.

U.S. EPA and U.S. Army. “Economic Analysis of the EPA-Army Clean Water Rule.” May 2015. PDF file.

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