[Federal Register Volume 69, Number 80 (Monday, April 26, 2004)]
[Proposed Rules]
[Pages 22472-22483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7865]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 450

[FRL-7644-2]
RIN 2040-AD42


Effluent Limitations Guidelines and New Source Performance 
Standards for the Construction and Development Category

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule; Withdrawal.

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SUMMARY: On June 24, 2002, EPA published a proposal that contained 
several options for the control of storm water discharges from 
construction sites, including effluent limitations guidelines and new 
source performance standards. We have selected the option in that 
proposal that continues to rely on the range of existing programs, 
regulations, and initiatives at the Federal, State, and local level for 
the control of storm water discharges from construction sites rather 
than a new national effluent guideline or other new rule. EPA 
determined that uniform national technology-based standards are not the 
most effective way to address storm water discharges from construction 
sites at this time. Instead, EPA believes that it is better at this 
time to rely on the existing National Pollutant Discharge Elimination 
System (NPDES) storm water program, which requires permit coverage for 
discharges associated with construction activity disturbing at least 
one acre of land, and also requires municipalities to reduce their 
stormwater discharges of pollutants to the maximum extent practicable, 
which can include implementation of tailored local programs to reduce 
pollutant discharges from construction sites.

DATES: For judicial review purposes, this action is considered issued 
as of 1 p.m. eastern daylight time (e.d.t.) on May 10, 2004, as 
provided in 40 CFR 23.2. Under section 509(b)(1) of the Clean Water 
Act, judicial review of the Administrator's action regarding effluent 
limitations guidelines and standards can only be had by filing a 
petition for review in the United States Court of Appeals within 120 
days after the decision is considered issued for purposes of judicial 
review.

ADDRESSES: The docket for today's action is available for public 
inspection at the Water Docket in the EPA Docket Center, (EPA/DC) EPA 
West, Room B102, 1301 Constitution Ave., NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: For technical information regarding 
today's action, please contact Mr. Jesse W. Pritts at (202) 566-1038 or 
send e-mail to: [email protected]. For economic information, please 
contact Mr. George Denning at (202) 566-1067 or send e-mail to: 
[email protected].

SUPPLEMENTARY INFORMATION:

General Information

A. What Entities Are Potentially Interested in This Action?

    Entities potentially interested in this action include businesses 
that conduct construction and development activities.

----------------------------------------------------------------------------------------------------------------
                                                                             Examples of common North American
                Category                   Examples of regulated entities      Industry Classification System
                                                                                       (NAICS) codes
----------------------------------------------------------------------------------------------------------------
Industry................................  Builders, Developers, General    233, 234
                                           Contractors and Heavy
                                           Construction operators that
                                           perform construction
                                           activities.
----------------------------------------------------------------------------------------------------------------

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be interested in today's 
action. If you have questions this action, consult the person listed in 
the preceding FOR FURTHER INFORMATION CONTACT section.

B. How Can I Get Copies of This Document and Other Related Information?

1. Docket
    We have established an official public docket for this action under 
Docket ID No. OW-2002-0030. The official public docket consists of the 
documents specifically referenced in this action, any public comments 
received, and other information related to this action. The official 
public docket is the collection of materials that is available for 
public viewing at the Water Docket in the EPA Docket Center, (EPA/DC) 
EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The 
EPA Docket Center Public Reading Room is open from 8:30 a.m. to 4:30 
p.m., Monday through Friday, excluding legal holidays. The telephone 
number for the Public Reading Room is (202) 566-1744, and the telephone 
number for the Water Docket is (202) 566-2426. To view docket 
materials, please call ahead to schedule an appointment. Every user is 
entitled to copy 266 pages per day before incurring a charge. The 
Docket may charge 15 cents for each page over the 266-page limit plus 
an administrative fee of $25.00.
2. Electronic Access
    You may access this Federal Register document electronically 
through the

[[Page 22473]]

EPA Internet under the ``Federal Register'' listings at http://www.epa.gov/fedrgstr/.
    An electronic version of the public docket is available through 
EPA's electronic public docket and comment system, EPA Dockets. You may 
use EPA Dockets at http://www.epa.gov/edocket/ to view public comments, 
access the index listing of the contents of the official public docket, 
and to access those documents in the public docket that are available 
electronically. Once in the system, select ``search,'' then key in the 
appropriate docket identification number. Although not all docket 
materials may be available electronically, you may still access any of 
the publicly available docket materials through the docket facility 
identified in section B.1.

C. What Other Information Is Available To Support This Action?

    You can obtain electronic copies of this action as well as copies 
of the two major supporting documents at EPA Dockets at http://www.epa.gov/edocket/ and http://www.epa.gov/waterscience/guide/construction.
     ``Development Document for Final Action for 
Effluent Guidelines and Standards for the Construction and Development 
Category'' (EPA-821-B-04-001) referred to in the preamble as the 
Technical Development Document (TDD). This document presents the 
technical information that formed the basis for our decisions in 
today's action, including information on the costs and performance of 
the pollutant reduction technologies we considered.
     ``Economic Analysis for Final Action for 
Effluent Guidelines and Standards for the Construction and Development 
Category'' (EPA-821-B-04-002) referred to in the preamble as the 
Economic Analysis (EA). This document presents the methodology employed 
to assess economic impacts and environmental benefits of the options we 
considered for today's action and the results of the analysis.

Table of Contents

I. Legal Authority
II. Background
    A. Clean Water Act
    B. NPDES Storm Water Permit Program
    C. Effluent Guidelines Program
III. Summary of Proposed Rule
IV. Summary of Comments Received and Significant Changes Since 
Proposal
V. Decision Not To Establish Effluent Limitations Guidelines
    A. Existing Programs
    B. Cost
    C. The Importance of Flexibility
    D. Additional Information
    E. Other Options
VI. Compliance Cost Estimates of Options We Considered
VII. Economic Impact Analysis of Options We Considered
    A. Description of Economic Activity
    B. Methodologies for Estimating Economic Impacts
VIII. Pollutant Reductions and Environmental Benefits of Options We 
Considered
    A. Pollutant Reduction Estimation
    B. Environmental Benefits Estimation
IX. Non-Water Quality Environmental Impacts
X. Statutory and Executive Order Reviews

I. Legal Authority

    This action withdraws the proposed effluent limitations guidelines 
and new source performance standards that EPA proposed for the 
construction and development industry at 40 CFR part 450 and the 
revisions to 40 CFR part 122 (67 FR 42644, June 24, 2002). We take this 
action pursuant to sections 301, 304, 306, 308, 402 and 501 of the 
Clean Water Act, 33 U.S.C. 1311, 1314, 1316, 1318, 1342 and 1361.

II. Background

A. Clean Water Act

    Congress adopted the Clean Water Act (CWA) to ``restore and 
maintain the chemical, physical, and biological integrity of the 
nation's waters'' (section 101(a), 33 U.S.C. 1251(a)). To achieve this 
goal, the CWA prohibits the discharge of pollutants into navigable 
waters except in compliance with the statute. CWA section 402 requires 
most ``point source'' discharges to obtain NPDES permits issued by EPA 
or authorized State or tribal agencies.
    Following enactment of the Federal Water Pollution Control 
Amendments of 1972 (Pub. L. 92-500, October 18, 1972), EPA and the 
States issued NPDES permits to thousands of dischargers, both 
industrial (e.g., manufacturing, energy and mining facilities) and 
municipal (sewage treatment plants). EPA promulgated effluent 
limitations guidelines and standards for many industrial categories. 
NPDES permits incorporate these requirements when permit authorities 
issue them.
    The Water Quality Act of 1987 (Pub. L. 100-4, February 4, 1987) 
amended the CWA. The CWA was clarified by defining municipal and 
industrial storm water discharges as point sources. Industrial storm 
water dischargers, municipal separate storm sewer systems and other 
storm water dischargers designated by EPA must obtain NPDES permits 
pursuant to section 402(p) (33 U.S.C. 1342(p)).

B. NPDES Storm Water Permit Program

    EPA's initial 1990 storm water regulations identified construction 
as one of several types of industrial activity requiring an NPDES 
permit. These ``Phase I'' storm water regulations require operators of 
large construction sites to apply for permits (40 CFR 
122.26(b)(14)(x)). A large-site construction activity is one that will 
discharge storm water runoff from the construction site through a 
municipal separate storm sewer system (MS4) or otherwise to waters of 
the United States and meets one or more of the following conditions:
     Will disturb five acres or greater;
     Will disturb less than five acres but is part of 
a larger common plan of development or sale if the larger common plan 
of development will ultimately disturb five acres or more;
     Is designated by the NPDES permitting authority.
    The 1999 ``Phase II'' storm water regulations generally extend 
permit coverage to sites one acre or greater (40 CFR 122.26(b)(15)). 
Collectively, the Phase I and II storm water rules address 
approximately 97.5% of the annual construction acreage in the U.S. (64 
FR 68731) and require permits of over 5,000 municipalities. Additional 
information on the NPDES storm water program can be found at http://cfpub.epa.gov/npdes/home.cfm?program_id=6.
1. Storm Water Permits for Construction: General and Individual
    Pursuant to the NPDES Phase I storm water regulations at 40 CFR 
122.26, EPA and the States started issuing permits for storm water 
discharges from large construction sites in 1992. The Phase II 
regulations require smaller sites to obtain permits starting in March 
2003. Construction sites can be regulated through either general or 
individual permits.
a. General Permits
    General permits cover the vast majority of construction sites 
governed by the NPDES regulations. EPA and States use general permits 
to cover a group of similar dischargers under one permit (see 40 CFR 
122.28). General permits simplify the application process for the 
industry, provide uniform requirements across covered sites, and reduce 
administrative workload for the permit authorities. EPA and the States 
published documents containing the construction general permits, along 
with forms and related procedures. To be covered under a general 
permit, the permittee (either the developer, builder or contractor for 
a construction project)

[[Page 22474]]

typically submits a Notice of Intent (NOI) to the permit authority. The 
NOI replaces the lengthier application package that is used for an 
individual NPDES permit. By submitting the NOI, the permittee generally 
agrees to the conditions in the published permit. While the specific 
provisions of State general permits vary, all generally require the 
permittee to prepare a storm water pollution prevention plan (SWPPP), 
install and maintain best management practices (BMPs) to prevent soil 
erosion and control construction site runoff, and conduct periodic 
inspections of their construction sites. Permittees generally may begin 
land disturbance activities after a specified period following NOI 
submission unless the permit authority notifies them otherwise.
    To discontinue permit coverage, an operator must generally complete 
final stabilization of the site and transfer responsibility to another 
party (e.g., a developer transferring land to a home builder) or, for a 
residential property, complete temporary stabilization and transfer the 
property to the homeowner. The permittee generally submits a Notice of 
Termination (NOT) form to the permit authority when the appropriate 
permit conditions are satisfied.
    EPA's Construction General Permit (CGP) covers discharges from 
construction activities in five States, the District of Columbia, 
Puerto Rico, U.S. territories, and specifically designated portions of 
other States (e.g., most land in Indian Country and Federal 
facilities). The current CGP became effective on July 1, 2003, and is 
available on EPA's Web site at http://cfpub.epa.gov/npdes/stormwater/cgp.cfm. The CGP covers any site with one or more acres of disturbed 
land, including smaller sites that are part of a larger common plan of 
development or sale, and replaces and updates previous EPA permits. 
Construction activities on Indian Country land in EPA Region 4 are 
covered by a separate construction permit.
b. Individual Permits
    A permit authority can require any site to apply for an individual 
permit rather than a general permit. The individual permit is most 
often used for complex projects and/or projects in sensitive 
watersheds. Additionally, a construction site owner or operator may 
request an individual permit.
2. Municipal Storm Water Permits and Local Government Regulation of 
Construction Activity
    Local governments have a role in the co-regulation of construction 
industries along with States and EPA. In general, the Phase I rule 
requires that local governments (or MS4s) serving populations of 
100,000 or more obtain permits. The Phase II rule extends coverage to 
most other MS4s in urbanized areas. NPDES permitting agencies may 
designate additional MS4s outside of urbanized areas for permit 
coverage based on State-specific criteria. Permitted MS4s are 
responsible for overseeing long-term maintenance of storm water 
management facilities and implementation of appropriate erosion and 
sediment controls at construction sites within their jurisdiction. A 
variety of State and municipal regulations addressing erosion and 
sediment control and storm water runoff from construction activities 
have been in place for some time, but under the NPDES storm water 
regulations all permitted MS4s are required to develop such programs.
    EPA's storm water regulations require that each municipality 
develop a local storm water management program in order to properly 
control discharges into, and out of, its MS4. MS4s also have the option 
to accept end-of-pipe treatment limitations in connection with their 
stormwater discharges, but MS4s rarely, if ever, pursue this option. 
The Phase II MS4 regulations contain explicit requirements for a local 
program to control storm water discharges from construction activities 
and to manage ``post-construction'' (long-term) runoff. Phase I MS4s 
are required to develop programs to control discharges resulting from 
construction activities and submit them with their permit application. 
The permit authority uses this application to develop permit 
requirements to reduce pollutants in discharges to the maximum extent 
practicable. See 40 CFR 122.26(d) for descriptions of the Phase I MS4 
program and 40 CFR 122.34 for a description of the Phase II MS4 
program. EPA has provided guidance to permit authorities and MS4s that 
recommends appropriate components and activities for a well-operated 
local storm water management program, including appropriate erosion and 
sediment controls for active construction sites and post-construction 
storm water management measures. Guidance materials can be found on 
EPA's Web site at http://www.epa.gov/npdes/stormwater.

C. Effluent Guidelines Program

    Effluent limitations guidelines and standards (called ``effluent 
guidelines'' or ``ELGs'') are technology-based requirements for 
categories of point source dischargers. These limitations are 
incorporated into NPDES permits. The effluent guidelines are based on 
the degree of control that can be achieved using different levels of 
pollution control technology, as defined in Title III of the CWA and 
outlined below.
1. Best Practicable Control Technology Currently Available (BPT)
    In guidelines for a point source category, we may define BPT 
effluent limits for conventional, toxic, and non-conventional 
pollutants. In evaluating BPT, we generally look at a number of 
factors. We consider the age of the equipment and facilities, the 
processes employed and any required process changes, engineering 
aspects of the control technologies, non-water quality environmental 
impacts (including energy requirements), and such other factors as the 
Administrator deems appropriate (CWA section 304(b)(1)(B)). 
Traditionally, we establish BPT effluent limitations based on the 
average of the best performance of facilities within the category of 
similar ages, sizes, processes or other common characteristics. Where 
existing performance is uniformly inadequate, we may require higher 
levels of control than currently in place in a category if we determine 
that the technology can be practically applied (see ``A Legislative 
History of the Federal Water Pollution Control Act Amendments of 
1972,'' U.S. Senate Committee of Public Works, No. 93-1, January 1973, 
p. 1468).
    In addition, we consider the total cost of treatment technologies 
in relation to the effluent reduction benefits achieved. This inquiry 
is generally designed to determine, among other things, whether the 
additional reductions from adopting a potential BPT technology are 
``wholly out of proportion to the costs of achieving such marginal 
level of reduction'' (see ``A Legislative History of the Federal Water 
Pollution Control Act Amendments of 1972,'' 1973, p. 170). The inquiry 
does not require us to quantify benefits in monetary terms, although we 
generally attempt to do so where feasible. See, for example, American 
Iron and Steel Institute v. EPA, 526 F. 2d 1027 (3rd Cir., 1975).
    In balancing costs against the benefits of effluent reduction, we 
generally consider the volume and nature of expected discharges after 
application of BPT, the general environmental effects of pollutants, 
and the cost and economic impacts of the required level of pollution 
control. The Act does not require EPA to consider water quality 
problems attributable to particular point sources, or water quality 
improvements in particular bodies of water when selecting BPT. Rather, 
the Act provides

[[Page 22475]]

for water-quality based effluent limitations (WQBELs) over and above 
the technology-based limitations established through ELGs to address 
any water quality issues that may remain after technology-based 
limitations have been applied (CWA section 301(b)(1)(C)). Accordingly, 
we did not consider water quality in particular receiving waters in 
developing today's action. See Weyerhaeuser Company v. Costle, 590 F. 
2d 1011 (D.C. Cir. 1978).
2. Best Available Technology Economically Achievable (BAT)
    In general, BAT effluent guidelines (CWA section 304(b)(2)) 
represent the best available technology economically achievable for 
reducing discharges of toxic and non-conventional pollutants of direct 
discharging facilities in the subcategory or category. The factors we 
consider in assessing BAT include the cost of achieving BAT effluent 
reductions, the age of equipment and facilities involved, the processes 
employed, engineering aspects of the control technology, potential 
process changes, non-water quality environmental impacts (including 
energy requirements), and such factors as the Administrator deems 
appropriate. We retain considerable discretion in assigning the weight 
to be accorded to these factors. An additional statutory factor we 
consider in setting BAT is ``economic achievability.'' Generally, we 
determine the economic achievability on the basis of the total cost to 
the subcategory and the overall effect of the rule on the industry's 
financial health. As with BPT, where existing performance is uniformly 
inadequate, we may base BAT upon technology transferred from a 
different subcategory or from another category. In addition, we may 
base BAT upon manufacturing process changes or internal controls, even 
when these technologies are not common industry practice.
3. Best Conventional Pollutant Control Technology (BCT)
    The 1977 amendments to the CWA required EPA to identify effluent 
reduction levels for conventional pollutants associated with BCT 
technology for discharges from existing point sources. EPA generally 
follows a methodology for evaluating potential BCT limitations using a 
two-part ``cost reasonableness'' test. We explained the methodology for 
the development of BCT limitations in July 1986 (51 FR 24974).
    Section 304(a)(4) designates the following as conventional 
pollutants: biochemical oxygen demand (BOD5), total 
suspended solids (TSS), fecal coliform, pH, and any additional 
pollutants defined by the Administrator as conventional. The 
Administrator designated oil and grease as an additional conventional 
pollutant on July 30, 1979 (44 FR 44501). Sediment, which is a primary 
pollutant of concern at construction sites, is commonly measured as 
TSS.
4. New Source Performance Standards (NSPS)
    NSPS reflect effluent reductions that are achievable based on the 
best available demonstrated control technology. New facilities have the 
opportunity to install the best and most efficient production processes 
and wastewater treatment technologies. As a result, NSPS should 
represent the greatest degree of effluent reduction attainable through 
the application of the best available demonstrated control technology 
for all pollutants (i.e., conventional, non-conventional, and priority 
pollutants). In establishing NSPS, CWA section 306 directs us to take 
into consideration the cost of achieving the effluent reduction and any 
non-water quality environmental impacts and energy requirements.
5. Pretreatment Standards
    The CWA also defines standards for indirect discharges, i.e., 
discharges into publicly owned treatment works (POTWs). These are 
Pretreatment Standards for Existing Sources (PSES) and Pretreatment 
Standards for New Sources (PSNS) under section 307(b) and (c). Because 
we did not identify any specific discharges directly to POTWs, we did 
not consider PSES or PSNS for the Construction and Development 
Category. The information that we reviewed indicates that the vast 
majority of construction sites discharge either directly to waters of 
the U.S. or through MS4s. In some urban areas, construction sites 
discharge to combined sewer systems (i.e., sewers carrying both storm 
water and domestic sewage through a single pipe) which lead to POTWs. 
Sediment is susceptible to treatment in POTWs using technologies 
commonly employed such as primary clarification. As a result, we do not 
expect pollutants in construction site runoff that are discharged to 
POTWs to pass-through without treatment. In addition, we have no 
evidence of sediment from construction sites causing interference with 
or sludge contamination at POTWs.
6. Effluent Guidelines Plan and Consent Decree
    Clean Water Act section 304(m) requires us to publish a plan every 
two years that consists of three elements. First, under section 
304(m)(1)(A), we are required to establish a schedule for the annual 
review and revision of existing effluent guidelines in accordance with 
section 304(b). Section 304(b) applies to ELGs for direct dischargers 
and requires us to revise such regulations as appropriate. Second, 
under section 304(m)(1)(B), we must identify categories of sources 
discharging toxic or nonconventional pollutants for which we have not 
published BAT ELGs under section 304(b)(2) or new source performance 
standards under section 306. Finally, under section 304(m)(1)(C), we 
must establish a schedule for promulgating BAT and NSPS for the 
categories identified under subparagraph (B) not later than three years 
after they are identified in the 304(m) plan. Section 304(m) does not 
apply to pretreatment standards for indirect dischargers, which we 
promulgate pursuant to section 307(b) and 307(c) of the Act.
    On October 30, 1989, Natural Resources Defense Council, Inc. 
(NRDC), and Public Citizen, Inc., filed an action against EPA in which 
they alleged, among other things, that we had failed to comply with 
section 304(m). Plaintiffs and EPA agreed to a settlement of that 
action in a consent decree entered on January 31, 1992. (Natural 
Resources Defense Council, et al. v. Whitman, D.D.C. Civil Action No. 
89-2980). The consent decree, which has been modified several times, 
established a schedule by which we are to propose and take final action 
for eleven point source categories identified by name in the decree and 
for eight other point source categories identified only as new or 
revised rules, numbered 5 through 12. We selected the Construction and 
Development (C&D) category as the subject for New or Revised Rule 
10. The decree, as modified, calls for the Administrator to 
sign a proposed ELG for the C&D category no later than May 15, 2002, 
and to take final action on that proposal no later than March 31, 2004. 
A settlement agreement between the parties, signed on June 28, 2000, 
provided for EPA to develop regulatory options applicable to discharges 
from construction, development and redevelopment, covering site sizes 
included in the Phase I and Phase II NPDES storm water rules (i.e., one 
acre or greater). We also agreed to develop options including numeric 
effluent limitations for sedimentation and turbidity; control of 
construction site pollutants other than sedimentation and turbidity 
(e.g., discarded building materials, concrete truck washout,

[[Page 22476]]

trash); BMPs for controlling post-construction runoff; BMPs for 
construction sites; and requirements to design storm water controls to 
maintain pre-development runoff conditions where practicable. The 
settlement agreement also provided for us to issue guidance to MS4s and 
other permittees on maintenance of post-construction BMPs identified in 
the proposed ELGs. We developed options and considered all of these 
provisions, as discussed in the June 24, 2002, proposal. We did not 
issue guidance for MS4s and other permittees on maintenance of post-
construction BMPs at the time of the June 24, 2002, proposal because 
the proposal did not contain proposed requirements for post-
construction BMPs. However, EPA continues to develop and issue a range 
of guidance materials to support continued implementation of the 
program.

III. Summary of Proposed Rule

    On June 24, 2002, we published a proposal (67 FR 42644) that 
contained three options to control storm water runoff from construction 
sites. Option 1 proposed to modify the existing NPDES regulations to 
incorporate a series of inspection and certification provisions for 
site owners and operators. Option 1 would have applied to all 
construction sites that disturb one or more acres of land and that are 
required to obtain an NPDES permit under the provisions of 40 CFR 
122.26(b)(14)(x) and 122.26(b)(15). Option 2 proposed to create a new 
part 450 that would codify certain provisions of the EPA construction 
general permit and establish inspection and certification provisions 
for site owners and operators as BPT, BAT, BCT and NSPS limitations. 
These requirements would have applied to all construction sites that 
disturb five or more acres of land and that are required to obtain an 
NPDES permit under the provisions of 40 CFR 122.26(b)(14)(x). Option 3 
did not establish new regulatory requirements, but instead explained 
how we would rely on continued implementation of the existing program. 
In addition to these three options, we solicited comment on 
implementing Option 1 with applicability to sites with five or more 
acres of disturbed land (as opposed to one acre as in Option 1). The 
June 24, 2002, Federal Register notice (67 FR 42644) contains detailed 
descriptions of the regulatory options.

IV. Summary of Comments Received and Significant Changes Since Proposal

    One hundred five organizations and individuals submitted comments 
on a range of issues in the proposal. You can find detailed responses 
to all comments, including the ones summarized here, in our comment 
response document in the official public docket. Among the most 
prevalent comments were those questioning the need for new regulations 
in light of existing programs at the Federal, State, and local level as 
well as specific comments on our costing, economics and environmental 
benefits analyses. A number of comments were submitted specifically 
opposing our proposal of New Source Performance Standards (NSPS). Other 
comments requested that we re-propose the guideline to incorporate 
requirements for post-construction storm water management BMPs, and to 
include more stringent requirements for erosion and sediment controls.
    Many commenters were concerned that we were proposing options 
(Options 1 and 2) that had a low benefit-cost ratio and felt we should 
not promulgate a rule where the costs outweighed the benefits to such 
an extent. In a similar vein, several commenters indicated that we did 
not account for some substantial benefits. We did make changes to our 
benefits estimation methodologies since the time of proposal, but there 
are still a range of benefits that cannot be quantified and/or 
monetized. However, the costs continue to be substantially greater than 
the monetized benefits of Option 1 and 2.
    The National Association of Home Builders (NAHB), the National 
Multi Housing Council and the National Apartment Association commented 
on certain issues with our methodology. They also provided data to 
replace assumptions EPA had made on the duration of projects, timing of 
expenditures, and financial independence of a firm's individual 
projects from other projects. We reviewed the information and found 
that it contained valid assumptions for the modeling. Thus, we now 
consider single- and multi-family projects to be independent (not 
cross-subsidized by other projects) and have set the duration of 
single-family projects to four years and multi-family projects to nine 
years. However, we still assume that all costs related to erosion and 
sediment controls are incurred in the first year of a project. This 
assumption would result in a slight overestimation of the annual costs 
of the options, since costs incurred in future years would not be 
discounted back to present values.
    We also made changes to the costing analyses since the proposal. 
For the proposal, we only examined a subset of existing State erosion 
and sediment control programs in order to establish the baseline of 
existing requirements. Since then, we conducted a more detailed 
evaluation of the programs of all 50 States. This allowed us to 
construct a more accurate baseline and to calculate compliance costs 
for the regulatory options on a State-by-State basis. The evaluation 
for this action still does not fully capture the requirements in place 
at the county, municipal and conservation district level. As a result, 
we may have overestimated both the incremental costs and the sediment 
removals.
    We also updated the best management practice (BMP) assumptions in 
the costing model. Based on a review of existing State programs, we 
found that all 50 States require basic sediment controls such as silt 
fencing, inlet protection and check dams as part of their existing 
programs. In addition, all States require permittees to prepare a SWPPP 
or equivalent document, such as an erosion and sediment control plan, 
clearing and grading plan or storm water management plan. The 
requirements of these plans are essentially equivalent to the 
requirements for a SWPPP contained in the EPA CGP. The only notable 
differences between existing programs and the requirements contained in 
the EPA CGP are variations in the size of sediment basins required, the 
requirement for installing sediment traps for smaller sites, the time 
allowed for providing stabilization of exposed soil areas, and the 
frequency of site inspections. As a result, the cost model we developed 
for this action only calculates costs of the options we considered for 
these four elements.
    We also updated the unit cost values. For sediment basins and 
sediment traps, we used at proposal a cost curve for dry extended 
detention basins. See Thomas R. Schueler and Heather K. Holland, eds., 
``The Economics of Stormwater Treatment: An Update,'' The Practice of 
Watershed Protection, Ellicott City, MD, Center for Watershed 
Protection, 2000, p. 402. However, the costs of dry extended detention 
basins (which are permanent storm water management facilities) can 
differ significantly from the costs of temporary sediment basins and 
sediment traps due to differences in their intended functions and 
design parameters. Therefore, for the analysis supporting today's 
action, we instead used values for sediment basins contained in a 
report issued by EPA in 1993 (see U.S. Environmental Protection Agency, 
Guidance Specifying Management Measures for Sources of Nonpoint 
Pollution in Coastal Waters, EPA 840-B-92-002, Washington, U.S. 
Environmental Protection Agency, 1993, p. 4-78). We also examined 
several

[[Page 22477]]

more up-to-date references in order to determine if current unit costs 
vary significantly from the values reported in this document. We 
examined a number of individual unit cost entries for sediment basins 
and sediment traps contained in 32 references, including county bonding 
estimates and State department of transportation contract bids, and 
found that the values reported in the 1993 document are still valid for 
sediment basins and sediment traps. Therefore, we used these values for 
the analysis in support of today's action. As a result of these 
changes, we believe that the costing analysis presents a much more 
accurate estimate of the costs of compliance for the regulatory options 
we considered.
    We also revised the pollutant loading estimates for this action. 
For the proposal, we estimated reductions in pollutant loadings by 
using the per-site loads from the economic analysis for the Phase II 
NPDES Storm Water rule and estimates of BMP removals based on our best 
professional judgment (BPJ). We received several comments that this 
approach was not clear and that the basis for our BPJ estimates was not 
fully described. For today's action, we estimated soil erosion on an 
ecoregion basis using the Revised Universal Soil Loss Equation (see 
K.G. Renard, et al., Predicting Soil Erosion by Water: A Guide to 
Conservation Planning with the Revised Universal Soil Loss Equation 
(RUSLE), Agriculture Handbook No. 703, Washington, U.S. Govt. Print. 
Off., 1997) and county-level soil data. We estimated loadings 
reductions using the SEDCAD model (see Richard C. Warner and Pam 
Schwab, SEDCAD 4 for Windows 95/98 & NT. Design Manual and User's 
Guide, Ames, IA, Civil Software Design, 1998). We believe that this 
resulted in a much more accurate estimate of the removals attributable 
to the various regulatory options we considered.
    We also made changes in our benefits assessment methodologies. For 
the proposal, we estimated the total reduction in discharge of 
turbidity and suspended solids nationally and then calculated avoided 
costs associated with reduced water storage capacity in reservoirs, 
reduced need for navigational dredging, and reduced drinking water 
treatment costs. We received several comments that indicated there were 
potentially other benefits that we did not quantify (such as 
improvements in water quality and associated changes in designated 
uses, ecological benefits, and human health impacts). For the analysis 
in support of this action, we calculated monetized benefits of the 
regulatory options using the National Water Pollution Control 
Assessment Model (NWPCAM) developed by Research Triangle Institute for 
EPA (see Research Triangle Institute, National Water Pollution Control 
Assessment Model (NWPCAM) v. 2.0, Research Triangle Park, NC, Research 
Triangle Institute, 2000). We believe that the NWPCAM model is a 
significant improvement over the methodology we used for the proposed 
rule analysis. We have used NWPCAM to value benefits in other recent 
effluent guidelines rulemakings, such as Concentrated Animal Feeding 
Operations and Meat and Poultry Products. You can find additional 
information on our loadings analysis and benefits assessment in section 
VIII, in the development document, and the public docket.

V. Decision Not To Establish Effluent Limitations Guidelines

    We have decided not to promulgate effluent limitations guidelines 
and standards for the construction and development industry and instead 
have selected the option that relies on the range of existing programs, 
regulations, and initiatives at the Federal, State, and local level for 
the control of storm water runoff from construction sites. This option 
was identified in the June 2002 proposal as Option 3. We made this 
decision for numerous reasons.
    The existing NPDES storm water regulations already require permits 
for the vast majority of construction sites and municipalities 
nationwide. The Phase I regulations first required permits for 
construction sites disturbing 5 or more acres in 1992. The Phase II 
regulations added permitting requirements for small construction sites 
disturbing between 1 and 5 acres in early 2003. EPA estimates that the 
Phase I and II construction site storm water regulations combined 
require permits for approximately 400,000 construction sites annually. 
In addition, the Phase I regulations require permits for MS4s that 
include requirements that they address construction site runoff within 
their municipal boundaries. Currently, there are nearly 1,000 medium 
and large MS4 operators permitted, or in the final stages of being 
permitted, under the NPDES storm water program. The Phase II 
regulations required permits of small municipalities beginning in 2003. 
Small municipalities must also develop a program to address 
construction site runoff within their municipal boundaries. The Phase 
II permitting requirements add over 5,000 municipalities to the 
program. The Phase I and II municipal permitting requirements combined 
require permits for nearly all of the urbanized area in the United 
States. Since the NPDES regulations already contain permitting 
requirements for most construction sites disturbing at least 1 acre, 
and the municipal permitting requirements also address construction 
site runoff that occurs within municipal boundaries, EPA believes that 
construction site storm water discharges are already being adequately 
addressed through the existing program.
    The total annual costs of the proposed ELGs (Option 2) would be 
more than half a billion dollars. EPA believes that these costs are 
simply too high and are disproportionately large when compared to the 
incremental loading reductions over the existing program that would be 
attributable to the proposed ELG. Our modeling indicates that the 
existing Phase I and Phase II permit programs as of the year 2003 were 
already capable of controlling approximately 80-90% of sediment runoff 
from construction sites, and the proposed rule would remove only 1% 
more. Furthermore, continued implementation of the Phase II municipal 
programs and revisions to State construction general permits will 
likely result in continued improvements in the level of control for 
construction site storm water discharges nationwide. This will reduce 
the sediment loading reductions estimated to result from the proposed 
Option 2 to an even smaller incremental amount. Moreover, EPA estimates 
that under Option 2 between 673 and 5,178 jobs would be displaced each 
year--an impact that would fall predominantly on small businesses. The 
high economic impacts for this industry, coupled with the finding that 
a national rule would remove only about 1% of the overall loads, 
persuades EPA that we should not promulgate an ELG based on the June 
2002 proposal. EPA concludes that employing the flexibility inherent in 
the existing programs is a better approach to addressing remaining 
sediment loadings at this time.

A. Existing Programs

    When we began developing effluent guidelines for the construction 
and development industry, we expected to find that the existing State 
and local erosion and sediment control programs were not well 
developed. At the time of proposal, we had evaluated a subset of 
existing State programs to compare their requirements to those of the 
EPA Construction General Permit (CGP). Since proposal, we have 
evaluated the programs of all 50 States and have determined that these 
requirements generally are comparable to and in some cases exceed those 
of the EPA CGP. All

[[Page 22478]]

50 States require basic sediment controls such as silt fencing, inlet 
protection and check dams as part of their existing programs. In 
addition, all States require permittees to prepare a storm water 
pollution prevention plan (SWPPP) or equivalent document, such as an 
erosion and sediment control plan, clearing and grading plan or storm 
water management plan. The requirements of these plans are essentially 
equivalent to the requirements for a SWPPP contained in the EPA CGP. 
The only notable differences between existing programs and the 
requirements contained in the EPA CGP are variations in the size of 
sediment basins required, the requirement for installing sediment traps 
for smaller sites, the time allowed for providing stabilization of 
exposed soil areas, and the frequency of site inspections. We thus 
compared the existing State requirements with those of the EPA CGP for 
each of these components. The results of this evaluation are as 
follows:
     All 50 States require preparation of a SWPPP, 
erosion and sediment control plan, or equivalent document;
     41 States require inspections of the site at 
least once every 14 days;
     30 States require sediment basins with at least 
3,600 cubic feet of storage per acre disturbed for areas draining ten 
acres or more;
     27 States require stabilization of soils within 
14 days after construction activities have temporarily or permanently 
ceased on any portion of the site; and
     22 States require sediment traps for smaller 
sites.
    In many cases where the State-level requirements are not equivalent 
to those contained in the EPA CGP, we expect that local requirements 
will be equivalent to or even more stringent than those contained in 
the EPA CGP. We received comments from both NAHB and NRDC citing 
examples of this. Due to the information burden of collecting this sort 
of data and the significant analytical complexity of calculating costs 
and loadings reductions at a level finer than at the State-level, we 
did not comprehensively collect information on programs currently in 
place for counties, municipalities, or conservation districts. However, 
as noted before, municipalities permitted under the Phase I and Phase 
II storm water regulations are required to develop programs that 
control discharges of runoff from active construction sites within 
their jurisdiction to the maximum extent practicable.
    Moreover, we have determined that some of the States that do not 
have equivalent requirements to those contained in the EPA CGP are 
located in arid or semi-arid areas of the country. In these States, the 
additional pollutant load reduction that would result from implementing 
more stringent requirements is likely minimal, since these areas do not 
experience a significant amount of rainfall. For example, four of the 
States (Colorado, Montana, North Dakota and Wyoming) that do not have 
sediment basin requirements equivalent to the EPA CGP have urbanized 
areas that are located predominately in arid or semi-arid areas.
    Using modeling data, we have determined that existing State and 
Federal requirements, once fully implemented,\1\ will likely result in 
removal of approximately 80-90% of sediment loads that would otherwise 
be discharged from active construction sites. This suggests that 
existing programs are already quite good. Our modeling data indicate 
that imposing the requirements in the EPA CGP as a uniform technology 
floor nationwide as proposed, however, would result in an additional 
capture of relatively little additional sediment--approximately 1% 
more.
---------------------------------------------------------------------------

    \1\ Under Phase II, small municipalities and small construction 
sites were required to obtain permit coverage by March 10, 2003. As 
most Phase II municipalities are still early in their first permit 
terms, and storm water programs by nature require a certain amount 
of local optimization, we believe it likely that many such programs 
have yet to reach their full potential.
---------------------------------------------------------------------------

    EPA's decision not to go forward with an ELG at this time was also 
influenced by the Agency's estimate of the relatively small portion of 
the overall sediment problem the options EPA considered would have 
addressed. EPA estimates that Option 2 would have resulted in 
reductions of approximately 1,000,000 tons per year of sediment 
loadings. While the total amount of sediment reduction may appear quite 
large, it is small in comparison to the sediment reduction attributable 
to the existing program and the sediment currently discharged from 
other sources. As an example, the United States Department of 
Agriculture (USDA) estimated in the 2001 Natural Resources Inventory 
(http://www.nrcs.usda.gov/technical/land/nri01/) that sediment eroded 
by water from cropland is approximately 1 billion tons per year. The 
small amount of expected sediment reductions in comparison to the 
reductions due to the existing program and the sediment loadings 
originating from sources outside the scope of this program reinforces 
our decision not to promulgate effluent limitations guidelines and 
standards at this time.
    The remainder of the sediment being discharged from construction 
sites nationwide would be extremely difficult to capture using the 
technologies contained in our proposal for a number of reasons. 
Principal among these reasons is the varying soil types and topography 
found at construction sites. Certain soil types (e.g., clay) do not 
settle readily even in sediment ponds that hold stormwater runoff for 
many days. Even where the runoff itself is amenable to treatment using 
sediment controls, the topography does not always allow for large 
sediment basins. We believe that these kinds of site-specific 
considerations are best addressed by local permit authorities and 
municipal storm water programs at this time.

B. Cost

    We also considered the high incremental cost of imposing technology 
requirements equivalent to the CGP nationwide and determined that the 
overall cost in absolute dollars spent annually and the resulting 
annual job displacement was disproportionate to the incremental 
pollutant reductions that would be achieved. At proposal, EPA estimated 
the cost of the proposed ELG (Option 2) at $505 million annually. As a 
result of further analysis conducted since proposal in response to 
comments received, EPA now estimates that the cost of the proposed ELG 
would be $585 million annually. Even using the smaller $505 million 
figure, the ELG would have imposed considerable annual costs on the 
national economy, with little corresponding pollutant reduction when 
compared to the existing program.
    We are also concerned that, in addition to substantial costs, the 
ELG considered by EPA would result in significant job displacement. Our 
estimates for job displacement range from 461 (with a market-based cost 
pass-through assumption) to 3,847 (with a 0% cost pass-through 
assumption) annually. Moreover, the cost and job displacement impacts 
caused by imposing these requirements nationwide would be felt 
primarily by small businesses. Because of the importance of this sector 
to the national economy, we determined these economic impacts to be 
substantial. These impacts also support our decision not to establish 
effluent limitations guidelines at this time.
    Some commenters suggested that the cost of the proposed ELGs per 
pound of pollutant removed was low by EPA's traditional standards. At 
proposal, we

[[Page 22479]]

estimated a cost of approximately $0.01 per pound of TSS removed. For 
this action, we have revised this estimate considerably, based 
primarily on a significant reduction in estimated removals. We now 
estimate a cost of approximately $0.29 per pound of TSS removed. While 
this is still within the range that EPA has considered acceptable in 
past cost-reasonableness analyses, we believe the small relative 
magnitude of these reductions (approximately 1% of total loads 
generated at construction sites and approximately 0.1% of estimated 
discharges from cropland), the nature of the pollutants (primarily 
sediment), the fact that discharges occur only through storm water, and 
the existence of increasingly effective local erosion and sediment 
control programs in all urbanized areas, support our conclusion that 
the cost of the ELGs does not justify a national rule at this time. 
While no one of these factors in isolation would necessarily lead us to 
this conclusion, we believe that collectively they support it.

C. The Importance of Flexibility

    The purpose of an effluent limitations guideline is generally to 
set a technology-based minimum standard of pollution control on 
dischargers within a given industrial sector. EPA has determined, due 
largely to the wide variability of conditions under which the 
construction industry operates, that imposing such national, uniform 
standards is not the most effective means of controlling sediment 
discharges from construction sites at this time.
    As described above, there is currently variability among the State 
programs addressing sediment discharges from construction sites, 
although all require permits that contain provisions to address 
construction site storm water runoff, such as development of a SWPPP or 
similar instrument. Moreover, imposing uniform requirements 
commensurate with the CGP would be very costly, with little incremental 
pollutant reduction over the existing program. We considered the 
possibility of crafting a national ELG that incorporated flexibility to 
allow permit writers to impose different measures in areas where some 
types of controls would be less effective than in other locations 
(e.g., different requirements based on varying soil types). The goal of 
such a flexible approach would be to retain controls on sediment 
discharge where such controls would yield the best results, while 
minimizing the considerable costs of such controls where they would do 
little good. We ultimately concluded that, at this time, the complexity 
that would result from such national standards threatened to make the 
ELG too unwieldy. The existing permit programs already have the 
necessary flexibility and, in the Agency's opinion, constitute the 
better tool to address sediment discharges at construction sites at 
this time. EPA has provided, and will continue to provide, guidance to 
local authorities on how best to reduce construction site discharges to 
the maximum extent practicable on a site-specific basis.
    Moreover, NPDES permits issued by States are generally submitted to 
EPA in draft form before issuance, are subject to public notice and 
comment, and are judicially reviewable. This applies to both permits 
for construction site operators, and to permits for municipalities that 
must develop effective programs to control construction site storm 
water discharges. Hence, EPA may exercise oversight authority to object 
to inadequate State permits, and the public may comment on, and 
ultimately challenge in court, permits that they deem inadequate.

D. Additional Information

    EPA is authorized to promulgate BPT/BAT limitations only where we 
determine that the technologies identified satisfy each element of the 
statutory test. For BPT, for example, the technology in question must 
be ``best,'' ``practicable'' and ``currently available.'' For BAT, the 
technology basis for the limitations must be ``best,'' ``available'' 
and ``economically achievable.'' Hence, EPA need not make a 
determination that a given technology is economically achievable if 
that technology is not ``best'' or otherwise fails another statutory 
requirement. See, BP Exploration & Oil, Inc. v. EPA, 66 F.3d 784, 796-
97 (6th Cir. 1995). Rather, EPA is authorized to decline to promulgate 
a nationally applicable effluent limitations guideline where we 
determine that a national categorical rulemaking is not the best tool 
to address the problem at hand. Such is the case with today's decision. 
For the various reasons cited in this action, and further discussed in 
our responses to comments (e.g., high cost, low rate of pollutant 
reduction compared to the existing program, adequate existing programs, 
preference for site-specific flexibility), we have determined that none 
of the technologies considered for this category is ``best'' at this 
time, and therefore we decline to promulgate an ELG for this category.
    The NPDES construction site storm water management regulations have 
been in place for large sites since 1990 (permits were first required 
in 1992) and small sites since 1999 (permits were first required in 
2003). We expect that implementation of the NPDES permitting program is 
continuing to raise awareness of erosion and sediment control issues 
across the industry and leading to improvements in runoff control. This 
is especially true for operators of smaller sites, which only recently 
were required to obtain permits. We received many comments questioning 
the need for additional regulations at this time, given that a large 
portion of the NPDES program is just being implemented. We agree that 
since the permitting requirement for discharges from ``small'' sites 
(disturbing at least one, but less than five, acres) is now in force, 
it makes sense to allow additional time for the existing program to be 
more fully implemented before deciding the need for additional 
regulation through effluent limitations guidelines.
    In the meantime, there are a number of other maturing EPA programs 
and initiatives that are expected to lead to significant reductions in 
discharges from construction sites, including:
     Total Maximum Daily Loads (TMDLs) are now being 
developed at an accelerating pace, which will lead to increased water-
quality based management of construction site runoff where sediment and 
nutrients from such sites contribute to impairments;
     EPA's National Management Measures to Control 
Nonpoint Source Pollution from Urban Areas, which is a draft technical 
guidance and reference document for use by State, local, and tribal 
managers in the implementation of nonpoint source pollution management 
programs. It contains information on measures for reducing pollution of 
surface and ground water from urban areas and controlling construction 
site storm water runoff;
     EPA's Office of Enforcement and Compliance 
Assurance (OECA) Construction Workgroup has worked with the Associated 
General Contractors of America (AGC), NAHB and other trade groups to 
prepare ``Federal Environmental Requirements for Construction''. This 
workgroup will also soon release a guide to managing storm water and 
other environmental requirements for contractors and others who work 
together in construction and development;
     EPA's Office of Policy, Economics and Innovation 
through the Sector Strategies Program is partnered with AGC to promote 
industry-wide

[[Page 22480]]

performance improvements in managing storm water using Environmental 
Management Systems, regulatory burden reduction, and performance 
measurement; and
     The Construction Industry Compliance Assistance 
Center, which steers contractors to EPA and State storm water 
requirements and assistance resources (see http://www.cicacenter.org/).
    As a result of these and other initiatives at the Federal, State, 
and local level, the sediment reductions we estimated under an ELG for 
this industry may well be achieved anyway. We expect that the 
combination of these EPA programs and continued implementation of 
State, county, and local programs will eventually control the majority 
of these discharges.
    We received comments indicating that there are technologies that 
would provide incremental pollutant reductions that were not included 
in our BCT analysis (such as phasing, limiting amount of land exposed 
at one time, improving sediment basin designs, etc.). For the purposes 
of today's action, we did not apply the BCT cost test because BPT 
effluent limitations guidelines themselves were determined not to be 
feasible or appropriate. While these technologies would provide 
incremental reductions, they do not change the overall decision process 
because all of the factors discussed above (high costs, low sediment 
reduction, effective local programs, need for flexibility) still apply. 
As a result, we are not promulgating effluent limitations guidelines 
based on BCT.
    We considered the same options for BAT as BPT. We are not aware of 
any additional technically feasible and economically achievable 
technologies for the removal of toxics (i.e., priority metals and 
organic chemicals) and non-conventional pollutants beyond those we 
considered for BPT. In fact, we do not have data indicating that these 
pollutants are found in construction site runoff nationwide. As a 
result, we are not promulgating effluent limitations guidelines based 
on BAT.
    We also did not consider additional options for NSPS. At the time 
of the proposal, we sought comment on various ways EPA might approach 
NSPS for the construction industry. We have decided not to promulgate 
NSPS because we have determined that discharges associated with 
construction activity generally are not appropriately characterized as 
``new sources.'' The CWA defines ``new source'' as ``any source, the 
construction of which is commenced after the publication of proposed 
regulations * * *'' EPA believes that this definition is best read to 
generally exclude construction sites. To include construction activity 
itself within the definition of a ``new source'' would be to view 
construction sites as things that are themselves constructed. EPA 
sought comment on this interpretation of the statute in the June 24, 
2002, proposal. This is not, in EPA's view, the best way to read this 
provision of the CWA. EPA's interpretation of the statute does not, 
however, foreclose the possibility that the Agency might at a future 
point promulgate an effluent limitations guideline set in accordance 
with BPT, BCT and/or BAT. Because construction sites themselves are not 
``new sources,'' NSPS is not applicable and the Agency has decided to 
withdraw the NSPS proposed on June 24, 2002.
    For these reasons, we have determined that at this time the 
existing permit requirements along with existing programs and 
initiatives at the Federal, State, and local level are adequate to 
control discharges from active construction sites. Not promulgating 
effluent limitations guidelines allows for continued implementation of 
the existing storm water program through appropriately tailored State 
and local control programs within the existing general and individual 
permitting systems. This approach allows maximum flexibility for 
permitting authorities to continue to regulate construction sites 
reflecting site-specific conditions such as soil types and rainfall 
patterns, and to develop alternative control strategies or other BMP 
requirements to respond to local water quality concerns.

E. Other Options

    We eliminated Option 1 from consideration because site inspection 
and certification requirements by themselves are not technology-based 
standards (though they may be an important operational component of 
other technology-based standards) and thus do not constitute an 
effluent limitations guideline. We eliminated this option from 
consideration after receiving many comments indicating that these 
provisions would be too burdensome, especially for small businesses. In 
addition, many commenters questioned the environmental benefits of such 
requirements. We agree that these provisions would have been 
burdensome. Indeed, our analysis indicates that these provisions would 
have had an aggregate cost of approximately $278 million annually. 
Furthermore, we lack the tools to evaluate the pollutant loading 
reductions that would likely result from such provisions; we also lack 
any data that indicates that such provisions would result in notable 
improvements in implementation of the existing program. At present, 
site inspections are required under the existing stormwater programs 
regulating construction activity. We believe at this time that the 
timing of inspections, as well as any certification requirements, are 
best determined by permitting authorities in accordance with existing 
Federal, State and local requirements reflecting local conditions 
(e.g., rainfall patterns).
    As noted above, under the June 28, 2000, Settlement Agreement, EPA 
agreed to develop options that included BMPs for controlling post-
construction runoff and requirements to design storm water controls to 
maintain pre-development runoff conditions where practicable. Prior to 
publishing the proposed rule, EPA developed such options, including an 
option that would require developers to implement post-construction 
stormwater controls to reduce pollutant discharges by 80% from 
uncontrolled levels and maintain peak post-development flows at pre-
development levels. EPA ultimately decided, however, not to propose 
controls on post-construction flows for several reasons. (67 FR 42644, 
42660 (June 24, 2002))
    First of all, EPA noted that the choice of such controls has 
traditionally been left to State and local governments, who use a 
variety of regulatory and non-regulatory programs (such as land use 
planning) to address post-construction runoff to protect infrastructure 
and achieve local resource goals. The Clean Water Act recognizes the 
primary responsibility of States in the planning and use of land and 
water resources (section 101(b), 33 U.S.C. 1251(b)). Furthermore, many 
of the approaches used by State and local governments to address post-
construction flows, such as low impact development, do not lend 
themselves to uniform standards, but require integration with land use 
decisions and site design. EPA supports these approaches and does not 
want to limit local flexibility. In addition, EPA determined that 
adopting uniform national standards for post construction flows would 
be very expensive. For the particular option that would have required 
maintaining peak post-construction flows at pre-development level, EPA 
estimated national costs of about $3.3 billion per year. This includes 
only monetized costs, and does not include costs such as safety and 
communities preferences for sewer design, road width, sidewalk 
placement, and other amenities that might be

[[Page 22481]]

adversely impacted by the need to minimize impervious surface in order 
to maintain pre-development flows. The primary benefit of this option 
would have been the reduction in adverse impacts to small streams from 
increased peak flows during storm events. Based on preliminary effort 
to quantify these benefits, EPA believes that the high costs of this 
option are likely disproportionate to the benefits.
    A number of other issues were raised, both by other Federal 
agencies during interagency review of the proposed rule, and 
subsequently by commenters, which EPA considered in its decision not to 
propose and promulgate post-construction stormwater controls (see e.g., 
March 30, 2004, letter from Thomas M. Sullivan, Chief Counsel for 
Advocacy, Small Business Administration, to Benjamin Grumbles, Acting 
Asst Administrator for Water, USEPA, and accompanying March 30, 2004, 
Memorandum from Kevin Bromberg, Assistant Chief Counsel for Advocacy, 
to Marvin Rubin, Chief Environmental Engineering Branch, Engineering 
and Analysis Division, USEPA Office of Water; March 30, 2004, letter 
from Mary E. Peters, Administrator, Federal Highway Administration, to 
Benjamin H. Grumbles, Acting Asst Administrator for Water, USEPA; and 
March 31, 2004, letter from A. Bryant Applegate, Director, America's 
Affordable Communities Initiative, U.S. Department of Housing and Urban 
Development, to Jesse Pritts, P.E., USEPA). Concerns were raised about 
a number of human health and safety risks potentially associated with 
structural and non-structural BMPs to address stormwater runoff. EPA 
has included materials in the record describing these risks.
    EPA's analysis indicated that the average incremental cost of 
construction and post-construction controls for a single family house 
would have ranged from about $1,000 to $2,200, depending on the degree 
of implementation of the Phase II stormwater program. These cost 
increases were projected to make new homes unaffordable for between 
135,000 and 325,000 families. These estimates accounted only for up-
front capital costs. They did not include the costs that homeowners 
would ultimately bear through fees and local property taxes for long-
term maintenance of the control structures.
    Concerns were also raised about impacts of post-construction 
stormwater requirements on small businesses and employment. EPA 
estimated that up to 800 construction firms, almost all of which are 
small, might close as a result of these requirements. About 1,300 firms 
would experience impacts in excess of 3% of gross revenues, and about 
8,000 firms would experience impacts in excess of 1% of gross revenues. 
EPA has traditionally used these threshold to evaluate impacts on small 
businesses. Net job losses in the economy were estimated at between 
9,000 and 18,000 jobs, depending on whether infrastructure cost savings 
were assumed or not.
    Finally, concerns were raised about the impacts of post-
construction controls on road and highway construction. Roadways are 
generally limited to fairly narrow, linear rights-of-way that may lack 
sufficient land to construct structural BMPs (detention basins). LID 
controls are also not practical because roadways are by definition 
impervious, and need to be able drain water quickly from road surfaces 
for safety reasons. If land for infiltration beside the roadway is 
limited, it will likely not be possible to maintain pre-construction 
runoff patterns.
    For all of these reasons, EPA is reaffirming its decision not to 
propose and promulgate post-construction stormwater controls.

VI. Compliance Cost Estimates of Options We Considered

    Since we are not promulgating effluent guidelines for the 
construction and development industry, there are no compliance costs 
associated with today's action. However, we did estimate costs for the 
regulatory options we considered. You can find more information on the 
costing analysis in the Development Document and in the public record 
for this action.
    We estimate that the national annual compliance costs of the 
options we considered, in 2002 dollars, are $278 million annually for 
Option 1 and $585 million annually for Option 2.
    We evaluated per-site costs individually for a series of model 
construction sites. We based per-site costs on model construction sites 
that reasonably represent common construction site features and factors 
related to State regulations, topography, and hydrology. Using 
estimates of the amount of new construction acreage developed annually 
in the U.S. obtained from the 1997 USDA National Resources Inventory 
(http://www.nrcs.usda.gov/technical/NRI/1997/national_results.html) 
and the U.S. Census Bureau, we computed State total costs by 
multiplying modeled per-site costs by the number of construction sites 
in each land use/site-size combination for 48 States. Costs for Alaska 
and Hawaii, as well as the U.S. territories were not estimated because 
we lacked sufficient data for these areas. However, since there is 
little construction in these areas compared to national development 
rates, we expect that excluding these costs has little impact on the 
results we obtained. We calculated national-level costs by summing 
State costs.
    We used a three-step process to compute the total national 
compliance costs of the options we considered:
    (1) Estimated model site costs using national average unit costs;
    (2) Calculated model site costs using State-specific cost 
adjustment factors; and
    (3) Summed State totals to produce the national compliance cost 
estimates.
    We collected and compiled data on State construction general 
permits, erosion and sediment control regulations, and storm water 
management regulations to determine if existing State programs were at 
least equivalent to requirements contained in the July 2003 EPA CGP. To 
determine whether a State program was equivalent to the EPA CGP, we 
focused on six main areas:
    (1) Requirements for preparing a storm water pollution prevention 
plan (SWPPP) or equivalent document and for installing general erosion 
and sediment controls (such as silt fencing, inlet protection and soil 
stabilization);
    (2) The amount of time allowed for stabilization of exposed soil 
when construction activities have temporarily or permanently ceased;
    (3) Requirements for installing sediment traps for drainage areas 
of less than 10 acres;
    (4) Requirements for installing sediment basins for drainage areas 
of 10 or more acres;
    (5) Requirements for removing accumulated sediment from sediment 
controls when sediment storage capacity has been reduced by at least 
50%; and
    (6) Requirements to conduct inspections at least every 7 days OR 
every 14 days and following rainfall of 0.5 inches or more.
    We found that many States have requirements similar to those 
contained in the EPA construction general permit, which is the basis 
for the requirements contained in Option 2. No States currently have 
requirements equivalent to the inspection and certification provisions 
of Options 1 and 2. For each State, we determined if certain key BMPs 
are required and for what construction site size a particular BMP is 
required. We used this information to determine the baseline BMP sizes 
and quantities for each of the 24 model

[[Page 22482]]

construction sites in each State across the U.S. We then calculated the 
incremental BMP quantities and size increases by comparing these sizes 
and quantities with those required under each regulatory option. For 
sediment basins and sediment traps, we also noted the size of the BMP 
required by the State program. Where a State program did not note a 
sediment basin size, we assumed based on BPJ that the baseline size was 
1,800 cubic feet per acre.

VII. Economic Impact Analysis of Options We Considered

    Since we are not promulgating effluent guidelines for the 
construction and development industry, there are no economic impacts 
associated with today's action. However, we did conduct an analysis of 
the economic impacts of the options we considered for today's action. 
Our economic analysis describes the impacts of the options in terms of 
firm financial stress, employment effects, and market changes, such as 
housing prices. In addition, the Economic Analysis contains information 
on the impacts on sales and prices for residential construction. This 
section presents selected information from the economic analysis that 
supports this action. For more complete information on the economic 
analysis, you may review the economic analysis and the official public 
docket for this action.

A. Description of Economic Activity

    For the purposes of these analyses, the Construction and 
Development Category is comprised of industries that are involved in 
building, developing and general contracting (NAICS 233) as well as 
heavy construction (NAICS 234). We estimated that in 1997 there were 
approximately 262,000 employer establishments in construction and 
development industries. By subtracting establishments that are engaged 
in remodeling and establishments that are unlikely to disturb more than 
5 acres of land, we estimated that under Option 2 about 82,883 
establishments (of which about 84% are small businesses) would 
potentially be affected. Census data for 2002 were not available for 
today's action.

B. Methodologies for Estimating Economic Impacts

    We assessed how incremental costs of the options considered would 
be shared by developers and home builders, home buyers, and society 
using a cost pass-through (CPT) analysis and a partial equilibrium 
analysis. We analyzed these impacts on projects, firms and markets. We 
analyzed impacts on consumers and on the national housing market, 
regional markets and the U.S. economy. Moreover, we analyzed economic 
impacts to small businesses.
    We estimated project-level costs and impacts for a series of model 
projects to evaluate the options we considered. The models establish 
baseline economic and financial conditions for C&D projects and assess 
the significance of the change in cash flow that results from the 
incremental compliance costs.
    We conducted the economic impact analyses using three CPT 
scenarios. We analyzed the regulatory cost impacts on the model 
projects using zero and 100% CPT. In the first scenario (100% CPT), we 
assumed that the developer-builder can pass through all of the 
incremental compliance costs to the final customer (e.g., the new home 
buyer, office lessee, or taxpayer). Under this scenario, we assume all 
costs are borne by the customer in the form of higher prices for 
completed construction. In the second scenario (zero CPT), we assumed 
that the builder-developer cannot pass any of the cost increases 
through, and therefore must absorb all of the costs. For the market 
analysis, we used a partial equilibrium model with a market-based CPT 
and reflecting price elasticities observed in the marketplace.
    The outputs of the project and firm models include the cost 
increases that might fall on consumers under the 100 percent CPT 
scenario and the reductions in profits that industry might incur under 
the zero percent CPT scenario. In the market models, we analyzed the 
likely changes in market variables such as prices and quantities that 
could occur with each option.
    To estimate firm-level impacts, we developed the costs per housing 
start and then assessed the effect of the annual compliance costs of 
the options at the firm level on key business ratios and other 
financial indicators. We examined impacts on the gross profit, current 
ratio, debt-to-equity ratio and return on net worth. Industry 
publications cite these financial ratios as particularly relevant to 
the construction industry (see D. Linda Kone, Land Development, 
Washington, Home Builders Press, 2000, and M. Benshoof, ``An Inside 
Look at Builders'' Books,'' Housing Economics, Washington, National 
Association of Home Builders, 2001). Two of the ratios are based on 
operating income (gross profit, return on net worth), and two are based 
on the balance sheet statement (current ratio, debt to equity). We 
examined the compliance cost impacts by calculating the values of each 
ratio with and without the compliance costs, using a zero CPT 
assumption and a market-based CPT assumption.
    We used the changes in financial ratios to develop probability 
distributions of changes in financial status. We used these 
distributions to estimate the number of firms that might experience 
financial stress based on the likelihood that their financial ratios 
might fall below benchmark criteria we assume are indicators of 
financial stress. We define financial stress as a situation where the 
firm may have to change their way of doing business to adjust to the 
changing business climate. The most extreme adjustments are associated 
with downsizing or closure, but financial stress does not necessarily 
imply either of these. We then combined the number of firms estimated 
to experience financial stress with employment figures for the relevant 
size firms to estimate the numbers of employees that could potentially 
be affected by the options we considered. These effects might not occur 
if the firms experiencing financial stress are able to respond to the 
changing conditions without downsizing or closing. Our analyses project 
that 31 firms would experience financial stress and 673 employees would 
be displaced under Option 2, with the market-based cost pass-through 
assumption. Using the zero cost pass-through assumption, we estimate 
that 258 firms would experience financial stress and 5,178 employees 
would be displaced under Option 2.
    We used the Small Business Administration's definitions of ``small 
entity'', which includes firms ranging from $5.0 million in gross 
revenue for NAICS 23311 (Land subdivision and development) to $27.5 
million in gross revenue for the majority of industries within NAICS 
233 and 234. The small entities potentially impacted by the options we 
considered are small land developers, small residential construction 
firms, small commercial, institutional, industrial and manufacturing 
building firms, and small heavy construction firms. We estimated that 
under Option 2 the number of small firms that would have compliance 
costs exceeding 1% of revenue to be 1,376-1,811 and the number with 
compliance costs exceeding 3% of revenue to be 42-571, under the zero 
cost pass-through assumption. Under the market-based CPT assumption, we 
estimated that 0-213 firms would have compliance costs exceeding 1% of 
revenue and 0-71 firms would have compliance costs exceeding 3% of 
revenue. The ranges are a result of two different distributions we used 
to model impacts across firms of varying revenue.

[[Page 22483]]

VIII. Pollutant Reductions and Environmental Benefits of Options We 
Considered

    Since we are not promulgating effluent guidelines for the 
construction and development industry, there are no pollutant 
reductions or environmental benefits associated with today's action. 
However, we did estimate reductions in discharge of pollutants and the 
associated water quality improvements and environmental benefits of the 
options we considered.

A. Pollutant Reduction Estimation

    We estimated that Option 2 would result in approximately 1,000,000 
tons per year of sediment load reduction. There are no reductions 
attributable to Option 1. Under Option 2, additional reductions would 
also likely occur in the discharge of other pollutants that may be 
associated with sediment, such as phosphorus and certain metals. Due to 
data limitations regarding the amounts of pollutants attached to 
sediment from construction sites, we did not estimate national 
reductions for any pollutants other than sediment. To the extent there 
are additional discharges, local programs are best to address them at 
this time.
    Our estimate of 1,000,000 tons of annual sediment reduction differs 
significantly from the estimate at the time of proposal. For the 
proposal, we made a BPJ estimation of the incremental sediment 
reductions of the options. This estimation assumed a degree of non-
compliance with the existing NPDES storm water regulations. For the 
analysis in support of today's action, we assumed full compliance with 
existing regulations. This is consistent with EPA's analysis for other 
ELGs. Furthermore, we conducted modeling that considered regional soil 
types and regional-specific pollutant removal estimates of various 
technologies used on model construction sites. As a result of these 
changes and the use of modeling, the estimates of pollutant reductions 
attributable to the options in support of today's action are much lower 
than EPA had estimated at proposal.

B. Environmental Benefits Estimation

    For this action analysis, we calculated benefits using the National 
Water Pollution Control Assessment Model (NWPCAM). NWPCAM is a 
national-scale water quality model that simulates water quality and 
economic benefits resulting from water pollution control policies. 
NWPCAM characterizes water quality of the Nation's network of rivers 
and streams and, to a limited extent, its lakes. The model can 
translate spatially varying water quality changes resulting from 
different pollution control policies to reflect the value individuals 
place on water quality improvements. In this way, NWPCAM can estimate 
economic benefits of the regulatory options that we considered.
    We calculated economic benefits using a four-parameter continuous 
Water Quality Index (WQI4), representing a composite measure of water 
quality. We calculated benefits for each State at the local and non-
local scales. Local benefits represent the value that a State 
population is willing to pay for improvements to waters within the 
State, while non-local benefits represent the value that a State 
population is willing to pay for improvements to waters in all other 
States in the conterminous 48 States. Using this approach, the sum of 
local and non-local benefits represented a total WTP of approximately 
$19.5 million annually (2002 dollars) for Option 2. We could not 
attribute any benefits to Option 1.
    Some categories of economic benefits, such as reduced need for 
navigational dredging, reduced loss of water storage capacity in 
reservoirs, and reduced drinking water and industrial water treatment 
costs, were not included in this estimate. For the proposal, these 
benefits were estimated to have annual value of $22 million for Option 
2. Since proposal, we have substantially reduced our estimate of the 
reduction in sediment loading that would result from the proposed ELG. 
We expect the monetized benefits of these categories estimated at 
proposal would be correspondingly reduced.

IX. Non-Water Quality Environmental Impacts

    Sections 304(b) and 306 of the CWA require us to consider the ``non 
water quality'' environmental impacts when setting effluent limitations 
guidelines and standards. As described in the June 2002 proposal, we 
did consider the non-water quality environmental impacts of the options 
we developed. We estimated, however, that these impacts would be 
negligible. We are not promulgating effluent guidelines for the 
construction and development industry. Therefore, there are no non-
water quality environmental impacts associated with today's action.

X. Statutory and Executive Order Reviews

    Today's action does not constitute a rule under section 551 of the 
Administrative Procedure Act. 5 U.S.C. 551. Hence, requirements of 
other regulatory statutes and Executive Orders that generally apply to 
rulemakings (e.g., the Unfunded Mandate Reform Act) do not apply to 
this action.

    Dated: March 31, 2004.
Michael O. Leavitt,
Administrator.
[FR Doc. 04-7865 Filed 4-23-04; 8:45 am]
BILLING CODE 6560-50-P