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Stakeholder Meeting
Summary - Economics
EXECUTIVE SUMMARY
September 23-24, 1997
Reauthorization of the Safe Drinking Water Act (SDWA), passage of
the Small Business Regulatory Enforcement Fairness Act and the Unfunded
Mandates Reform Act, and a variety of stakeholder concerns have created
a need for EPA to substantially restructure its program for conducting
Regulatory Impact Assessments (RIAs) and Economic Impact Analyses within
the Office of Ground Water and Drinking Water (OGWDW). Numerous efforts
are underway to characterize future requirements to expand and upgrade
existing methods and models, to design and develop new approaches, to
collect essential data, and also to ensure that new documentation will
effectively explain the decision making process behind the rules. Understanding
the effort is further complicated by the different stages of development
of various aspects of the program. For example, although the Agency fully
appreciates the importance of having balanced cost and benefit analyses
and is striving to provide them, benefits programs are at a much more
formative stage. Because there are timing differences and given the extreme
complexity of this undertaking, EPA is seeking broad stakeholder input
on policy and direction related issues to supplement the many scientific
reviews that will be conducted on its analytical products.
On September 23 and 24, OGWDW convened a public meeting in Washington,
DC to discuss with the public and representatives of interested groups
EPA's RIA and cost/ benefit evaluation approaches. The meeting objectives
were these:
- Provide an overview of the proposed programs and identify information
EPA intends to provide in support of future water regulations;
- Solicit input on the types of additional studies or information that
should be included, and the priority among potential activities and
upgrades; and
- Develop a plan for more effective stakeholder involvement in program
development.
The first day of the meeting considered how EPA is changing its
cost analyses, while the second focussed on improving assessments of benefits.
EPA provided participants with a detailed list of citations documenting
the regulatory requirements the agency is now addressing. Participants
at the sessions had a number of suggestions for EPA about how they would
like to be involved. They urged the cost and benefit teams to make every
effort to communicate and ensure that the two programs produced a balanced
analysis.
Discussions were also held relating to a number of key components
of the programs under development. A synopsis of the areas discussed and
principal comments follows.
Summary
Defining the Baselines for Costs and Benefits. Drinking
water regulations must consider what is the status quo for water utilities,
the public and governmental units responsible for implementation of regulations.
Defining these "baselines"is the starting point for what costs and benefits
will result from a particular regulation. So far EPA has conducted the
needed reviews of the literature and available data sources, and defined
the technical, management, and financial characteristics that may be affected.
Over the next two years the team will gradually be incorporating these
new model systems and baselines into the regulatory proposals under development.
Meeting participants urged the team to include sensitive sub-populations
in the models and give careful attention to research by other organizations,
voluntary efforts by the regulated community, and the realities of funding.
They were also concerned that the analyses reflect the costs and benefits
directly attributable to regulatory changes and not those that would have
occurred even in the absence of new regulations.
Technology Costing. In this area, the team is trying
to bridge past differences between EPA and the water industry on national-level
cost estimates. Meeting participants asked that EPA make clear the details
of the criteria and assumptions embedded in the estimates and that modeling
be done to maximize the use of input ranges rather than single point estimates.
Data Quality Objectives (DQOs). EPA is attempting in
this effort to develop standardized methods for quantifying uncertainty
and sensitivity in relation to the regulatory options it considers, and
to develop a "blue-print" for new data collection efforts to improve estimates.
During the meeting there was a lengthy and detailed discussion of the
approaches EPA is taking to these problems. Participants applauded the
team for developing DQOs, since they are seen as a crucial to providing
meaningful RIA and cost/benefit analyses. They urged EPA to apply the
DQO approach to the benefits side of the work, since the range of uncertainty
for some benefits can be so large, thereby making the DQO work on the
cost side much less relevant. Some also encouraged EPA to make the process
iterative, but without incurring excessive delay.
Regulatory Support Documentation. EPA is attempting
to develop more standardized documentation for the background information
supporting regulations. The formats of individual standard support documents
were discussed. The documents are being organized to facilitate subject
area peer reviews and increase decision-making transparency. Meeting participants
suggested that these documents have executive summaries and be focussed
on the target audiences. They should also describe the criteria EPA uses
to make decisions.
Benefits Program. As indicated in the first day's session,
benefits analysis is in a much more formative stage and its incremental
inclusion in the regulatory analyses will of necessity lag the cost analytical
efforts. On the second day, EPA presented an overview of ongoing literature
reviews, internal survey efforts, and other groundwork being undertaken
to respond to SDWA requirements for a fuller consideration of all classes
of benefits. Key potential benefits categories were discussed (e.g., human
health improvements, enhanced aesthetic qualities, nonuse and information
benefits, and the avoided costs of averting behaviors, materials damages
and market production). Participants were asked to review the draft Valuing
Drinking Water Quality: Theory, Methods, and Research Needs (available
on request).
Several participants commenting on these efforts expressed reservations
about inclusion of non-health benefits, arguing that health benefits are
by far the most important and should therefore be emphasized. Others expressed
the opinion that undervaluing these factors is a major perceived deficiency
in past rulemakings. Participants also disagreed on whether costs and
risk tradeoffs can be separated. Most participants agreed that maintaining
a balanced analysis was important.
Methods for Valuing Benefits. The debate begun in the
previous session, continued as the EPA team discussed methodologies, including
techniques to determine damage functions, revealed preferences, stated
preferences, and benefits transfers. Some participants were concerned
that EPA adequately consider including non-out of pocket expenses (such
as pain and suffering), stratifying contingent valuation studies by socio-economic
classes, and including sensitive subgroups. Participants argued that EPA
must be careful to omit benefits that would occur in the absence of regulation.
Health Effects Profiling. This part of the project is
concerned with identifying sensitive populations, exposure factors, and
other elements of a health effects profile, and then constructing a risk
assessment paradigm. Participants in the meeting asked detailed questions
concerning the definition of the immunity and sensitivity categories being
used, how EPA was using previous outbreak studies, and whether new information
is being collected. Many participants viewed data uncertainty a critical
issue for EPA to evaluate and address in the future. Another key factor
of concern was the distinction between groups with higher exposure (potential
high risk groups) and those with greater vulnerability (sensitive populations,
including children).
The sessions concluded with considerable discussion about future
involvement. Many participants saw this area as enormously complex and
felt EPA would need to expend some effort further educating stakeholders
about methodologies and associated problems. For them this meant getting
EPA decision-makers to meetings, identifying appropriate forums for interested
group participation, and making the process transparent and understandable
to the public. As important as meetings are, participants asked that they
be tied to products that need review. Ongoing communications should make
greater use of mail, telephone, E-mail, and the Internet, as appropriate
for each participant. Comments on the full meeting summary (now being
prepared by RESOLVE, Inc. and available on request) and ideas on future
public participation efforts may be submitted by October 24, 1997, to
Corry Westbrook, US EPA, 401 M Street, NW (4607), Washington, DC 20460,
or westbrook.corry@epamail.epa.gov.
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