Using its regulatory review authority, the White House Office of Management and Budget completely gutted an EPA proposal to limit runoff from construction and development sites -- the largest source of pollution in coastal waters and estuaries in the United States. As originally prepared, the proposed rule sought to require an 80 percent reduction in storm water discharges both during and after construction through commonly used measures, such as various drains, barriers, and buffer zones. Yet citing costs, OMB’s Office of Information and Regulatory Affairs (OIRA) -- which by executive order must give its consent to major rules -- cut out any reference to permanent controls put in place after construction, and blocked the performance standard for discharges during construction, a move strongly urged by developers, including the National Association of Home Builders. In its place, according to agency sources, OIRA forced the agency to present three weak options, which it published for public comment on June 24. These options, on which EPA states no preference, include:

• setting “design criteria” for active construction only, specifying certain control measures for certain conditions;
• setting requirements for inspection and certification for permits under the Clean Water Act; and
• doing nothing, which given the scope of the problem is truly breathtaking.

In gutting EPA’s proposal, OIRA gave heavy emphasis to monetized cost-benefit analysis, according to agency sources, and insisted on a showing of “net benefits” -- monetized benefits minus costs. EPA’s original submission carried estimated costs of $2.6 billion. Although this sounds expensive, it would be spread out over 150,000 construction sites, increasing the price of new homes by $1,000, which amortized over 30 years would amount to $5 to $10 a month. Nonetheless, OIRA refused to even look at EPA’s proposal until it showed costs less than $1 billion, according to agency sources. OIRA also objected that EPA’s estimate of monetized benefits, $1.13 billion, did not exceed estimated costs. Yet in its original submission to OIRA, EPA pointed out that it was unable to monetize what it considered substantial benefits, including effects on natural habitat, benefits to human health, and impacts of many storm water pollutants, such as lead, zinc, herbicides and pesticides, as well as oils and grease. OIRA acted as if these benefits didn’t exist since they weren’t monetized, according to EPA sources. EPA’s estimate is based mostly on the amount communities are paying to repair stream banks as a result of storm water runoff, relying on various studies estimating restoration costs between $107 to $185 per linear foot. EPA multiplied this amount by the number of miles (converted to linear feet) of streams protected by its proposal, including 791 miles of perennial streams (out of a total of 1,123 miles) and 3,616 miles of intermittent streams (out of a total of 5,037). With the changes forced by OIRA, EPA’s proposed rule falls far short of the promise reached in a 1992 consent decree with the Natural Resources Defense Council (NRDC) and Public Citizen, which sued for a standard, as well as a further settlement between the parties signed in 2000. Under these agreements, EPA was to set specific pollution reduction goals and take action on post-construction activities, including requirements to maintain pre-development runoff levels. Further details are available below under the following categories:

• The Problem
• EPA’s Original Proposal
• OMB Changes
• Cost Considerations Preeminent
• Undervaluing Benefits
• Background

The Problem During construction and development, the natural landscape is disturbed and soil is left exposed for a period of time. When rainwater runs over these sites, massive amounts of sediment are swept into streams, lakes, rivers, and oceans. Forest stripped for construction produces 500 to 1,000 times the amount of sediment of undeveloped land, as pointed out by the Natural Resources Defense Council (NRDC), which has led the way for tougher standards. After construction, much of the previously natural area is paved over and covered with impervious surfaces that prevent water from soaking into the ground. Runoff continues, carrying pollution from human activity in addition to sediment. This includes metals, pesticides, fertilizers, oil, grease, bacteria, viruses, and trash. This storm water pollution, as it’s commonly known, is the largest source of pollution of coastal waters (55 percent) and estuaries (46 percent) in the United States, and the leading cause of beach closures and advisories. EPA estimates that construction sites annually discharge 80 million tons of solids into U.S. waterways, which is only increasing with the rapid pace of development. EPA estimates that 2.2 million acres of rural land are developed each year, which has also led to increased flooding. Urbanized land increased 47 percent between 1982 and 1997 while population increased only 17 percent, according to NRDC. EPA’s Original Submission to OMB Prior to construction, developers need to submit storm water plans for limiting runoff and obtain a permit under the Clean Water Act (a process generally handled by the states), but there is no specific required level of control. EPA’s original submission to OMB sought to set standards for these permits, establishing both temporary controls for active construction and permanent controls for after construction. For developers disturbing more than one acre of land, EPA sought to require an 80 percent reduction in discharges (from a baseline of no controls) both during and after construction, and required that post-construction peak runoff levels (i.e., volume of water) remain at pre-construction levels in order to limit flooding and erosion. To achieve these goals, EPA did not direct specific technologies. Instead, builders could choose from a combination of storm water controls and practices appropriate for their particular site. For active construction, temporary controls might involve sediment barriers, sediment ponds, or even such simple things as phasing construction to limit the amount of surface disturbed at one time and re-seeding as soon as construction is complete. For post construction, permanent controls involve using soil and vegetation or man-made ponds to trap, treat, and reduce runoff. To receive a permit, builders would have to certify that its design for runoff controls meets EPA standards, and arrange for inspection of the temporary and permanent controls by a qualified professional, which could be a private inspection firm or an employee of the construction firm certified or licensed in erosion control and/or engineering. There are numerous techniques that communities across the country have been using to reduce the adverse effects of storm water runoff, as chronicled in NRDC's "Stormwater Strategies: Community Responses to Runoff Pollution." More techniques are outlined in fact sheets on this EPA web site. OMB Changes On March 1 of this year, OMB’s Office of Information and Regulatory Affairs (OIRA) received EPA’s proposed rule for review. Citing costs, OIRA forced EPA to remove any reference to permanent, post-construction controls and to substantially weaken temporary controls during construction, according to publicly available documents from EPA’s docket library. Instead, OIRA embraced a hands-off approach favored by developers, including the National Association of Home Builders, Associated Builders & Contractors, and the National Association of Realtors, among others, which met with OIRA on Feb. 4 to press their case. EPA’s proposed rule, as altered by OIRA, asks for comment on three possible options for reducing runoff, on which EPA states no preference, as it moves to a final rule. Two of these options “would not set national standards for control of storm water discharges from construction sites…” One sets minimum requirements for site inspections and certification by the permit authority, which EPA estimates would cost about $130 million and reduce discharges by about 5 million tons a year. The other proposes to do nothing: “Both the control requirements and the certification requirements would be left to the best professional judgment of the permitting authority…” The remaining option would set minimum criteria for design and implementation of erosion and sediment controls during active construction, but “does not contain numerical discharge standards or discharge monitoring requirements.” For instance, for drainage areas between five and 10 acres, EPA directs that “sediment basins or sediment traps shall be used where attainable.” EPA estimates this option would cost $505 million and reduce discharges by 11 million tons per year. For NRDC, EPA’s proposal is “primarily a restatement of existing requirements. The proposed regulations would not set new minimum standards for best management practices, discharge limits, performance levels, pollution prevention, or discharge monitoring.” According to EPA sources, the agency allotted about three-fourths of the money and time budgeted for the project to go toward developing post-construction standards for permanent pollution controls. As mentioned above, the active controls are temporary and are only in place during construction. Clearly, EPA believed the post-construction controls were the most important, and spent its time and money accordingly, only to be undermined by OIRA. Cost Considerations Preeminent EPA estimated its original submission to OIRA would result in costs of $2.6 billion, which was too high for OIRA. In fact, according to EPA sources, OIRA refused to review the agency’s proposal until it showed compliance costs less than $1 billion, regardless of the benefits, suggesting that some sort of informal regulatory budget may be at play. This forced EPA to overhaul its original submission. To be sure, $2.6 billion sounds expensive. Yet according to EPA, this amount would be spread out over 150,000 construction sites, increasing the price of new homes by about $1,000, which amortized over 30 years would amount to $5 to $10 a month. EPA further determined that reducing solid discharges by 80 percent would be “very cost reasonable,” costing about 5 cents per pound of waste removed. This makes the actual costs to individual homeowners and builders appear relatively small compared to the overall benefits. Moreover, EPA saw these cost estimates as conservative, and believed industry would ultimately find less expensive ways to comply, as is often the case. OIRA, however, claimed that EPA was actually underestimating costs, that really the agency’s submission would increase the cost of each new house by $3,500, as it explained in a memo documenting changes to EPA’s submission. Unfortunately, OIRA presented no supporting evidence for this finding, whereas EPA presented scores of technical and development documents. Undervaluing Benefits EPA found that its original submission to OIRA would protect 791 miles of perennial streams (out of a total of 1,123 miles) and 3,616 miles of intermittent streams (out of a total of 5,037 miles) that are affected by the annual development of 2.2 million acres. EPA estimated the monetized benefits of this protection at $1.13 billion, which is significantly less than the $2.6 billion in estimated costs. Yet as EPA notes, this estimate incorporates only a part of the expected benefits. Among those benefits excluded from EPA’s estimate are:

• Impacts on habitats and ecosystems;
• Impacts of priority pollutants, such as lead, zinc, herbicides, and pesticides, on water quality;
• Impacts of conventional pollutants, such as oils and grease, on water quality;
• Impacts of non-conventional pollutants (nutrients) on water quality;
• Groundwater impacts;
• Effects on stream temperatures, as well as flow and velocity;
• Aesthetic value of avoided stream degredation; and
• Benefits to human health.

For these benefits, EPA determined it was not feasible at this time to separate the impact of construction and development from other sources, such as industrial pollution, though “EPA believes that these benefit categories may have substantial benefits.” Unfortunately, in pressing EPA to revise its submission, OIRA acted as if these benefits didn’t exist, insisting on a showing of “net benefits” (monetized benefits minus monetized costs). EPA sources also explained that in calculating benefits, it legally must assume that all construction sites are already using erosion and sediment controls required to obtain a permit under the existing National Pollutant Discharge Elimination System (NPDES) -- explained further below -- even though it doesn’t believe this to be the case. Therefore, the prospect of enhanced compliance cannot be taken into account. In arriving at its monetized figure, EPA based its estimate on the amount communities are paying to repair stream banks and recover habitat as a result of storm water runoff, relying on “various studies of stream bank restoration that showed costs ranging from $107 to $185 per linear foot.” EPA multiplied this amount by the number of miles (converted to linear feet) of protected streams, producing the majority of monetized benefits at $1.08 billion. EPA similarly estimated monetized benefits of reduced flooding at $14 million, but noted, “Flood control benefits may be more significant than presented here and other estimates show flood control benefits in the area of $100 million to $200 million on an annual basis.” Other monetized estimates included reduced sediment in lakes and estuaries, as well as improved thermal conditions, which reduces the loss of cold-water fisheries. Background Under section 402 of the Clean Water Act, EPA is supposed to require dischargers of any "point sources" of pollution -- or pollution from a specific and identifiable location -- to obtain an operating permit. EPA issued initial storm water regulations in 1990, which identified construction as one of several types of activities that would require permits through the National Pollutant Discharge Elimination System (NPDES). Phase I of the rule generally required operators of large construction sites -- five acres or larger -- to obtain an NPDES permit by submitting storm water plans for limiting runoff. Phase II of the rule extended permit coverage to sites that are between one and five acres. However, under this rule, construction sites were not subject to any effluent limitation guidelines (ELGs), setting specific pollution reduction goals based on available technologies. A lawsuit by NRDC and Public Citizen demanding that a technology standard be set for a number of industries that pollute, including construction and development, resulted in a 1992 consent decree with EPA that, among other requirements, called for EPA to sign a proposed ELG for the construction and development category no later than May 15, 2002, and to take final action on that proposal no later than March 31, 2004. However, in the proposed rule, as altered by OIRA, only one of the potential options would set an effluent guideline. And even then, the ELG would differ from most ELGs because it would not specify a discharge limit; instead it would establish minimum standards for design and implementation of erosion and sediment controls, which EPA would approve of as meeting the technology standard for an ELG. A further settlement between the parties, signed on June 28, 2000, requires that EPA take action on post-construction activities, including setting “best management practices” (BMPs) and requirements to maintain pre-development runoff levels, and set numeric effluent limitations. Thanks to OIRA, EPA appears ready to completely flout these agreements.