[Federal Register: January 12, 2001 (Volume 66, Number 9)]
[Proposed Rules]
[Page 3059-3108]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja01-39]
[[pp. 3059-3108]] National Pollutant Discharge Elimination System Permit Regulation
and Effluent Limitations Guidelines and Standards for Concentrated
Animal Feeding Operations
[[Continued from page 3058]]
[[Page 3059]]
reduce BOD loads. There are therefore no candidate technologies for
more stringent BCT limits. If EPA had identified technologies that
achieve greater TSS reductions than the proposed BPT, EPA would have
performed the two part BCT cost test. (See 51 FR 24974 for a
description of the methodology EPA employs when setting BCT standards.)
EPA solicits comment on the assumptions it used in considering BCT.
EPA is proposing to establish BCT limits for conventional
pollutants equivalent to the proposed BPT limits.
5. Best Available Technology Economically Achievable (BAT)
EPA is considering six technology options to control discharges
from CAFOs in the beef, veal and poultry subcategories, and seven
technology options for the dairy and hog subcategories. All of the
technology options include restrictions on land application of manure,
best management practices (BMPs), inspections and record keeping for
the animal confinement areas, and wastewater storage or treatment
structures. The following table summarizes the requirements for each of
the seven technology options. Note that a given technology option may
include a combination of technologies.
Table 8-1.--Requirements Considered in the Technology Options
----------------------------------------------------------------------------------------------------------------
Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7
----------------------------------------------------------------------------------------------------------------
Zero Discharge w/overflow X X X X Cat.......... ..........
when a 25-24 Design Dairy
Standard is met............
Depth markers for lagoons... X X X X Cattle & X X
Dairy
Annual Manure Testing....... X X X X X X X
N-based PNP................. X .......... .......... .......... .......... .......... ..........
100' LA setback............. X X X X X X X
P-based PNP (where .......... X X X X X X
necessary).................
Soil Test--every 3yrs....... .......... X X X X X X
Zero discharge without any .......... .......... .......... .......... Swine & .......... ..........
allowance for overflow..... Poultry
Hydrologic Link Assessment & .......... .......... X X .......... .......... ..........
Zero Discharge to
Groundwater beneath
Production Area............
Ambient Surface Water .......... .......... .......... X .......... .......... ..........
Sampling (N,P,TSS).........
Anaerobic Digestion w/power .......... .......... .......... .......... Swine Swine & ..........
generation................. Dairy
Frozen/snow covered/ .......... .......... .......... .......... .......... .......... X
saturated application
prohibitions...............
----------------------------------------------------------------------------------------------------------------
X = All Subcategories.
Option 1. This option is equivalent to Option 1 described under BPT
Section VIII.3. Option 1 would require zero discharge from the
production area and that liquid storage be designed, constructed and
maintained to handle all process wastewater and storm water runoff from
the 25-year, 24-hour storm event. In addition, Option 1 requires
management practices to ensure that the production area (which includes
manure and wastewater storage) is being adequately maintained.
Option 1 also would establish a requirement to develop a PNP which
establishes the proper land application rate for manure and wastewater
to meet the nitrogen requirements for the crops being grown by the CAFO
and require a 100 foot setback from surface water, sinkholes, tile
drain inlets and agricultural drainage wells.
Option 2. This option is equivalent to Option 2 described under BPT
(section VII.3). Option 2 includes all of the requirements established
under Option 1. However, Option 2 would further restrict the amount of
manure that can be applied to crop land owned or controlled by the
CAFO. The CAFO would be required to apply manure and wastewater at the
appropriate rate taking into account the nutrient requirements of the
crop and soil conditions. Specifically, Option 2 would require that
manure be applied at crop removal rate for phosphorus if soil
conditions warrant and, if soils have a very high level phosphorus
build-up, no manure or wastewater could be applied to the crop land
owned or controlled by the CAFO.
Option 3. Option 3 includes all the requirements for Option 2 and
would require that all operations perform an assessment to determine
whether the ground water beneath the feedlot and manure storage area
has a direct hydrological connection to surface water. As described in
Section VII, EPA has authority to control discharges to surface water
through ground water that has a direct hydrological connection to
surface water. A hydrological connection refers to the interflow and
exchange between surface impoundments and surface water through an
underground corridor or ground water. EPA is relying on the permitting
authority to establish the region-specific determination of what
constitutes a direct hydrological link. Option 3 would require all
CAFOs to determine whether they have a direct hydrological connection
between the ground water beneath the production area and surface
waters. If a link is established, the facility would have to monitor
ground water up gradient and down gradient of the production area to
ensure that they are achieving zero discharge to ground water. EPA has
assumed that CAFOs would comply with the zero discharge requirement by
installing liners of synthetic material beneath lagoons and ponds, and
impervious pads below storage of dry manure stockpiles. EPA's costs for
liners reflect both a synthetic liner and compacted clay to protect the
liner and prolong its useful life.
CAFOs with a direct hydrologic link would be required to sample the
groundwater from the monitoring wells (located up gradient and down
gradient of the production area) at a minimum frequency of twice per
year. These samples are necessary to ensure that pollutants are not
being discharged through groundwater to surface water from the
production area. The samples shall be monitored for nitrate, ammonia,
total coliform, fecal coliform, Total Dissolved Solids (TDS) and total
chloride. Differences in concentration of these pollutants between the
monitoring
[[Page 3060]]
well(s) located up gradient and down gradient of the production area
are assumed to represent a discharge of pollutants and must be
prevented. As noted below, coliforms are not necessarily good
indicators of livestock discharges. Also, it is difficult to determine
``concentrations'' of coliforms as they are not necessarily evenly
distributed in the way chemical contaminants generally are. EPA
requests comment on technical concerns associated with including total
and fecal coliforms in the groundwater monitoring and protection
requirements and on ways to address such concerns.
Option 4. Option 4 includes all the requirements for Option 3 and
would require sampling of surface waters adjacent to feedlots and/or
land under control of the feedlot to which manure is applied. This
option would require CAFOs to sample surface water both upstream and
downstream from the feedlot and land application areas following a one
half inch rain fall (not to exceed 12 sample events per year). The
samples would be analyzed for concentrations of nitrogen, phosphorus
and total suspended solids (TSS). EPA selected these pollutants because
it believes these pollutants provide an adequate indication of whether
a discharge is occurring from the operation. All sampling results would
be reported to the permit authority. Any difference in concentration
between the upstream and downstream samples would be noted. This
monitoring requirement could provide some indication of discharges from
the land application or feedlot areas.
EPA also considered requiring that pathogens and BOD5 be
analyzed in samples collected. EPA decided that this would not be
practical, because sampling under Option 4 is linked to storm events
which limits the ability to plan in advance for analysis of the samples
and making arrangements for shipping samples to laboratories. Fecal
coliform and BOD samples all have very short holding times before they
need to be analyzed. Most CAFOs are located in rural areas with limited
access to overnight shipping services and are probably not near
laboratories that can analyze for these pollutants. Further, fecal
coliform and similar analytes that are typically used as indicators in
municipal wastewater are not necessarily good indicators of livestock
discharges. If CAFOs were required to monitor for pathogens which could
indicate discharges of manure or CAFO wastewater, it would be better to
require monitoring for fecal enterococci, or even specific pathogens
such as salmonella, Giardia, and Cryptosporidium. However, the cost for
analyzing these parameters is very high and the holding times for these
parameters are also very short.
Furthermore, EPA determined pathogen analyses are also
inappropriate because the pathogens in manure are found in areas
without animal agriculture. For example Enterobacter, Klebsiella,
Bacillus cereus, Clostridium, and Listeria are all naturally occurring
soil and plant microorganisms and are found in soils that have never
received manure. Pathogens may also be deposited onto land from
wildlife. Thus, EPA concluded that requiring analysis for these
pollutants was impractical at best and potentially very expensive.
Option 5. Option 5 includes the requirements established by Option
2 and would establish a zero discharge requirement from the production
area that does not allow for an overflow under any circumstances. By
keeping precipitation from contacting with the animals, raw materials,
waste handling and storage areas, CAFOs could operate the confinement
areas and meet zero discharge regardless of rainfall events. Option 5
includes the same land application requirements as Option 2, which
would restrict the rate of manure and wastewater application to a crop
removal rate for phosphorus where necessary depending on the specific
soil conditions at the CAFO. Additionally, as in Option 2, application
of manure and wastewater would be prohibited within 100 feet of surface
water.
EPA considered Option 5 for the poultry, veal and hog
subcategories, where it is common to keep the animals in total
confinement, feed is generally maintained in enclosed hoppers and the
manure and wastewater storage can be handled so as to prevent it from
contacting storm water. EPA considered a number of ways a facility
might meet the requirements of no discharge and no overflow. In
estimating the costs associated with Option 5, EPA compared the total
costs and selected the least expensive technology for a given farm
size, geographic region, and manure management system. Costs also
depend on whether the facility's PNP indicates land application must be
based on nitrogen or phosphorus, and how many acres the facility
controls. The technologies described below were used singularly or in
combination to meet the requirements of Option 5.
Many facilities can achieve Option 5 by covering open manure and
storage areas, and by constructing or modifying berms and diversions to
control the flow of precipitation. EPA costed broiler and turkey
operations for storage sheds sufficient to contain six months of
storage. Some poultry facilities, particularly turkey facilities,
compost used litter in the storage sheds, allowing recycle and reuse of
the litter. EPA costed swine, veal, and poultry facilities which use
lagoons or liquid impoundments for impoundment covers.
EPA believes that operations which have excess manure nutrients and
use flush systems to move manure out of the confinement buildings will
have an incentive to construct a second lagoon cell. A second storage
or treatment cell should accomplish more decomposition of the waste and
will allow flush water to be recycled out of the second cell or lagoon,
thus reducing the addition of fresh water to the system. Reducing the
total volume of stored waste reduces the risk of a catastrophic failure
of the storage structure. In the absence of large volumes of water,
facilities with an excess of manure nutrients will be able to transfer
the excess manure off-site more economically due to a lower volume of
waste needing to be hauled. Water reduction also results in a more
concentrated product which would have a higher value as a fertilizer.
Covered systems substantially reduce air emissions, and help
maintain the nutrient value of the manure. Covered systems also may
benefit facilities by reducing odors emanating from open storage. This
option also creates a strong incentive for facilities to utilize
covered lagoon digesters or multistage covered systems for treatment.
The use of covers will allow smaller and more stable liquid
impoundments to be constructed. Finally, the use of covered
impoundments encourages treatment and minimal holding times, resulting
in pathogen die-off and reduction of BOD and volatile solids.
Other technologies can be effectively used at some facilities, such
as conversion of flush systems to scrape systems, or by retrofit of
slatted floor housing to V-shaped under house pits that facilitate
solid liquid separation. Solids can be stored or composted in covered
sheds, while the urine can be stored in small liquid impoundments.
In the event the facility has insufficient land to handle all
nutrients generated, EPA evaluated additional nutrient management
strategies. First, the manure could pass through solid separation,
resulting in a smaller volume of more concentrated nutrients that is
more effectively transported offsite. Second, land application could be
based on the uppermost portion of a covered lagoon containing a more
dilute concentration of nutrients. Data indicates much of the
phosphorus
[[Page 3061]]
accumulates in the bottom sludge, which is periodically removed and
could be transported offsite for proper land application. Though many
facilities report sludge removal of a properly operating lagoon may
occur as infrequently as every 20 years, EPA assumed facilities would
pump out the phosphorus and metals enriched sludge every three years.
This is consistent with the ANSI/ASAE standards for anaerobic treatment
lagoons (EP403.3 JUL99) that indicates periodic sludge removal and
liquid drawdown is necessary to maintain the treatment volume of the
lagoon. Third, swine and poultry farms can implement a variety of
feeding strategies, as discussed under Option 2 (see Section VII.C.3).
Feed management including phytase, multistage diets, split sex feeding,
and precision feeding have been shown to reduce phosphorus content in
the manure by up to 50%. This results in less excess nutrients to be
transported offsite, and allows for more manure to be land applied at
the CAFO.
EPA is aware of a small number of swine facilities that are
potentially CAFOs and use either open lots or some type of building
with outside access to confine the animals. EPA data indicate these
types of operations are generally smaller operations that would need to
implement different technologies than those described above. CAFOs that
provide outdoor access for the animals need to capture contaminated
storm water that falls on these open areas. Open hog lots would find it
difficult to comply with a requirement that does not allow for
overflows in the event of a large storm. EPA costed these facilities to
replace the open lots with hoop houses to confine the animals and
storage sheds to contain the manure. Hoop structures are naturally
ventilated structures with short wooden or concrete sidewalls and a
canvas, synthetic, or reflective roof supported by tubes or trusses.
The floor of the house is covered with straw or similar bedding
materials. The manure and bedding is periodically removed and stored.
The drier nature of the manure lends to treatment such as composting as
well as demonstrating reduced hauling costs as compared to liquid
manure handling systems.
EPA considered a variation to Option 5 that would require CAFOs to
use dry or drier manure handling practices. This variation assumed
conversion to a completely dry manure handling system for hogs and
laying hens using liquid manure handling systems. In addition to the
advantages of reduced water use described above, a completely dry
system is more likely to minimize leaching to ground water and, where
directly connected hydrologically to surface water, will also reduce
loads to surface waters. For the beef and dairy subcategories EPA
assumes that the liquid stream would be treated to remove the solids
and the solids would be composted. It is not practical to assume beef
and dairy operations can avoid the generation of liquid waste because
operations in both subcategories tend to have animals in open areas
exposed to precipitation resulting in a contaminated storm water that
must be captured. Also dairies generate a liquid waste stream from the
washing of the milking parlor.
Option 6. Option 6 includes the requirements of Option 2 and
requires that large hog and dairy operations (hog operations and
dairies with 2,000 AUs) would install and implement enclosed anaerobic
digestion to treat their manure and use the captured methane gas for
energy or heat generation. With proper management, such a system can be
used to generate additional on-farm revenue. The enclosed system will
reduce air emissions, especially odor and hydrogen sulfide, and
potentially reduces nitrogen losses from ammonia volatilization. The
treated effluent will also have less odor and should be more
transportable relative to undigested manure, making offsite transfer of
manure more economical. Anaerobic digestion under thermophilic or
heated conditions would achieve additional pathogen reductions.
Option 7. Option 7 includes the requirements of Option 2 and would
prohibit manure application to frozen, snow covered or saturated
ground. This prohibition requires that CAFOs have adequate storage to
hold manure for the period of time during which the ground is frozen or
saturated. The necessary period of storage ranges from 45 to 270 days
depending on the region. In practice, this may result in some
facilities needing storage to hold manure and wastes for 12 months. EPA
requests comment on whether there are specific conditions which warrant
a national standard that prohibits application when the ground is
frozen, snow covered or saturated.
6. Proposed Basis for BAT
BAT Requirements for the Beef and Dairy Subcategories. EPA is
proposing to establish BAT requirements for the beef and dairy
subcategories based on the same technology option. The beef subcategory
includes stand-alone heifer operations and applies to all confined
cattle operations except for operations that confine mature dairy
cattle or veal. Under the two-tier structure, the BAT requirements
would apply to any beef operation with 500 head of cattle or more.
Under the three-tier structure, the BAT requirements for beef would
apply to any operation with more than 1,000 head of cattle and any
operation with 300 to 1,000 head which meets the conditions identified
in section VII.B.2 and 3 of this preamble.
EPA proposes to establish BAT requirements for dairy operations
which meet the following definitions: under the two-tier structure, all
dairy with 350 head of mature dairy cows or more would be subject to
today's proposed BAT requirements. Under the three-tier approach any
dairy with more than 700 head of mature dairy cows or 250 to 700 head
of mature dairy cows which meets the conditions identified in section
VII of this preamble would be subject to today's proposed BAT
requirements.
EPA proposes to establish BAT requirements for the beef and dairy
subcategories based on Option 3. BAT would require all beef and dairy
CAFOs to monitor the ground water beneath the production area by
drilling wells up gradient and down gradient to measure for a plume of
pollutants discharged to ground water at the production area. A beef or
dairy CAFO can avoid this ground water monitoring by demonstrating, to
the permit writer's satisfaction, that it does not have a direct
hydrological connection between the ground water beneath the production
area and surface waters.
EPA proposes to require CAFOs in the beef and dairy subcategories
to monitor their ground water unless they determine that the production
area is located above ground water which has a direct hydrological
connection to surface water. CAFOs would have to monitor for ammonia,
nitrate, fecal coliform, total coliform, total chlorides and TDS. EPA
selected these pollutants because they may be indicators of livestock
waste and are pollutants of concern to ground water sources. If the
down gradient concentrations are higher than the up gradient
concentration this indicates a discharge which must be controlled. As
discussed above, EPA requests comment on the inclusion of total and
fecal coliforms among the required analytes. For operations that do not
demonstrate that they do not have a direct hydrologic connection, EPA
based the BAT zero discharge requirement on the installation of liners
in liquid storage structures such as lagoons and storm water retention
ponds and concrete pads for the storage of dry manure stockpiles.
Beef and dairy CAFOs must also develop and implement a PNP that is
based on application of manure and
[[Page 3062]]
wastewater to crop land either at a crop removal rate for phosphorus
where soil conditions require it, or on the nitrogen requirements of
the crop. EPA believes the land application rates established in
accordance with one of the three methods described in today's proposed
regulation, along with the prohibition of manure application within 100
feet of that surface water will ensure manure and wastewater are
applied in a manner consistent with proper agricultural use. See EPA's
document entitled ``Managing Manure Nutrients at Concentrated Animal
Feeding Operations'' for the detailed discussion of how a PNP is
developed.
EPA believes that technology option 3 is economically achievable
and represents the best available technology for the beef and dairy
subcategories, and is therefore proposing this option as BAT for these
subcategories. The incremental annual cost of Option 3 relative to
Option 2 for these subcategories is $170 million pre-tax under the two-
tier structure, and $1205 million pre-tax under the three tier
structure. EPA estimated annual ground water protection benefits from
the proposed requirements of $70-80 million. EPA estimates Option 3 for
the beef and dairy subcategories will reduce loadings to surface waters
from hydrologically connected ground water by 3 million pounds of
nitrogen. To determine economic achievability, EPA analyzed how many
facilities would experience financial stress severe enough to make them
vulnerable to closure under each regulatory option. As explained in
more detail in the Economic Analysis, the number of facilities
experiencing stress may indicate that an option might not be
economically achievable, subject to additional considerations. Under
Option 2, no facilities in either the beef or dairy sectors were found
to experience stress, while under Option 3, the analysis projects 10
beef and 329 dairy CAFOs would experience stress under the two-tier
structure, and 40 beef and 610 dairy CAFOs would experience stress
under the three-tier structure. Of these, EPA has determined that 40
beef operations are considered small businesses based on size standards
established by the Small Business Administration. This analysis assumes
that 76% of affected operations would be able to demonstrate that their
ground water does not have a hydrological connection to surface water
and would therefore not be subject to the proposed requirements. EPA
projects the cost of making this demonstration to the average CAFO
would be $3,000. EPA is aware that concerns have been raised about
these cost estimates, and about its estimates of how many facilities
would be able to avoid the groundwater monitoring and protection
requirements on this basis. EPA requests comment on this analysis and
on its proposed determination that Option 3 is economically achievable
for the beef and dairy sectors.
EPA is not proposing to base BAT requirements for the beef and
dairy subcategories on Option 2 because it does not as comprehensively
control discharges of pollutants through ground water which has a
direct hydrological connection with surface water. However, EPA is
requesting comment on Option 2 as a possible basis for BAT in the beef
and dairy subcategories. EPA notes that even under Option 2, permit
writers would be required to consider whether a facility is located in
an area where its hydrogeology makes it likely that the ground water
underlying the facility is hydrologically connected to surface water
and whether a discharge to surface water from the facility through such
hydrologically connected ground water may cause or contribute to a
violation of State water quality standards. In cases where such a
determination was made by the permit writer, he or she would impose
appropriate conditions to prevent discharge via a hydrologic connection
would be included in the permit. The main difference between Option 2
and Option 3 is thus that under Option 3, the burden of proof would be
on the facility to demonstrate that it does not discharge to ground
water that is hydrologically connected to surface water, while under
Option 2, ground water protection and monitoring requirements would
only be included in the permit if there were an affirmative
determination by the permitting authority that such requirements were
necessary to prevent a discharge of pollutants to surface waters via
hydrologically connected ground water that may be sufficient to cause a
violation of State water quality standards. Under today's proposal, the
Option 2 approach to preventing discharges via hydrologically connected
ground water would be used for the veal, swine and poultry
subcategories. EPA requests comment on applying this approach to the
beef and dairy subcategories as well.
EPA is not proposing to establish BAT requirements for the beef and
dairy subcategories on the basis of Option 4 due to the additional cost
associated with ambient stream monitoring and because the addition of
in-stream monitoring does not by itself achieve any better controls on
the discharges from CAFOs as compared to the other options. In-stream
monitoring could be an indicator of discharges occurring from the CAFO;
however, it is equally likely that in-stream monitoring will measure
discharges that may be occurring from adjacent non-CAFO agricultural
sources. Through the use of commercial fertilizers these non-CAFO
sources would likely be contributing the same pollutants being analyzed
under Option 4. EPA has not identified a better indicator parameter
which would isolate constituents from CAFO manure and wastewater from
other possible sources contributing pollutants to a stream. Pathogen
analysis could be an indicator if adjacent operations do not also have
livestock or are not using manure or biosolids as fertilizer sources.
However, as described earlier, EPA has concerns about the ability of
CAFOs to collect and analyze samples for these pollutants because of
the holding time constraints associated with the analytical methods for
these parameters. Accordingly, EPA does not believe that specifying
these additional in-stream monitoring BMP requirements would be
appropriate; and would not be useful in ensuring compliance with the
Clean Water Act. Moreover, in-stream monitoring would be a very costly
requirement for CAFOs to comply with.
EPA is not proposing to establish BAT requirements for the beef and
dairy subcategories on the basis of Option 5. Option 5 would require
zero discharge with no overflow from the production area. Most beef
feedlots are open lots which have large areas from which storm water
must be collected; thus, it is not possible to assume that the
operation can design a storm water impoundment that will never
experience an overflow even under the most extreme storm. Stand alone
heifer operations (other than those that are pasture-based) are
configured and operated in a manner very similar to beef feedlots.
Unlike the hog, veal and poultry subcategories, EPA is not aware of any
beef operations that keep all cattle confined under roof at all times.
Dairies also frequently keep animals in open areas for some period
of time, whether it is simply the pathway from the barn to the milk
house or an open exercise lot. Storm water from these open areas must
be collected in addition to any storm water that contacts food or
silage. As is the case for beef feedlots, the runoff volume from the
exposed areas is a function of the size of the area where the cattle
are maintained, and the amount of precipation. Since the CAFO operator
cannot control the amount of precipation, there always remains the
possibility that an extreme storm event
[[Page 3063]]
can produce enough rainfall that the resulting runoff would exceed the
capacity of the lagoon.
EPA did consider a new source option for new dairies that would
enforce total confinement of all cattle at the dairy. This new source
option poses a barrier to entry for new sources, therefore, EPA assumes
that this option if applied to existing sources would be economically
unachievable. Furthermore, EPA did evaluate a variation of Option 5
that would apply to existing beef and dairy operations and would
require the use of technologies which achieve a less wet manure. These
technologies include solid-liquid separation and composting the solids.
EPA is not proposing to establish BAT on the use of these technologies,
but does believe these technologies may result in cost savings at some
operations. Additionally, composting will achieve pathogen reductions.
As described in section VIII.C.9., EPA is continuing to examine
pathogen controls and may promulgate requirements on the discharge of
pathogens. If EPA set limitations on pathogens, composting technology
would likely become a basis for achieving BAT limits. EPA invites
comment on composting and its application to dry beef and dairy manure.
For any operation that has inadequate crop land on which to apply
its manure and wastewater, solid-liquid separation and composting could
benefit the CAFO, as these technologies will make the manure more
transportable. Drier manure is easier to transport; and therefore, EPA
believes solid liquid separation and composting will be used in some
situations to reduce the transportation cost of excess manure. In
addition, composting is a value-added process that improves the
physical characteristics (e.g., reduces odor and creates a more
homogenous product) of the manure. It can also make the manure a more
marketable product. As a result, a CAFO with excess manure may find it
easier to give away, or even sell, its excess manure. EPA encourages
all CAFOs to consider technologies that will reduce the volume of
manure requiring storage and make the manure easier to transport.
Option 6, which requires anaerobic digestion treatment with methane
capture, was not considered for the beef subcategory, but was
considered for the dairy subcategory for treatment of liquid manure.
Anaerobic digestion can only be applied to liquid waste. As described
previously in Section VI, beef feedlots maintain a dry manure, yet they
capture storm water runoff from the dry lot and manure stockpile. The
storm water runoff is generally too dilute to apply digestion
technology.
Most dairies, however, handle manure as a liquid or slurry which is
suited to treatment through anaerobic digestion. EPA concluded that
application of anaerobic digesters at dairies will not necessarily lead
to significant reductions in the pollutants discharges to surface
waters from CAFOs. An anaerobic digester does not eliminate the need
for liquid impoundments to store dairy parlor water and barn flush
water and to capture storm water runoff from the open areas at the
dairy. Neither do digesters reduce the nutrients, nitrogen or
phosphorus. Thus, basing BAT on digester technology would not change
the performance standard that a production area at a CAFO would achieve
and would not reduce or eliminate the need for proper land application
of manure. Digesters were considered because they achieve some degree
of waste stabilization and more importantly they capture air emissions
generated during manure storage. The emission of ammonia from manure
storage structures is a potentially significant contributor of nitrogen
to surface waters. Covered anaerobic digesters will prevent these
emissions while the waste is in the digester, but the digester does not
convert the ammonia into another form of nitrogen, such as nitrate,
which is not as volatile. Thus as soon as the manure is exposed to air
the ammonia will be lost. Operations may consider additional management
strategies for land application such as incorporation in order to
maintain the nitrogen value as fertilizer and to reduce emissions.
As mentioned above, the application of ambient temperature or
mesophilic anaerobic digesters would not change the performance
standard that a CAFO would achieve. EPA considered anaerobic digestion
as a means to control pathogens. Thermophilic digestion which applies
heat to the waste will reduce pathogens. As described in Section
VIII.C.9. EPA is still evaluating effective controls for pathogens.
EPA is not proposing to base BAT requirements on Option 7 for the
beef and dairy subcategories. Option 7 would prohibit manure
application on saturated, snow covered or frozen ground. Pollutant
runoff associated with application of manure or wastewater to
saturated, snow covered or frozen ground is a site specific
consideration, and depends on a number of site specific variables,
including distance to surface water and slope of the land. EPA believes
that establishing a national standard that prohibits manure or
wastewater application is inappropriate because of the site specific
nature of these requirements and the regional variability across the
nation. This is described in Section VII.E.5.b, above. However, Section
VII also explains that EPA is proposing to revise 40 CFR Part 122 to
require the permit authority to include, on a case-by-case basis,
restrictions on the application of CAFO waste to frozen, snow covered
or saturated ground in CAFO permits. This permit condition should
account for topographic and climatic conditions found in the state.
Requirements for the beef and dairy subcategories would still allow
for an overflow in the event of a chronic or catastrophic storm that
exceeds the 25-year, 24-hour storm. EPA believes this standard reflects
the best available technology. Under the proposed revisions to Part
122, permits will require that any discharge from the feedlot or
confinement area be reported to the permitting authority within 24
hours of the discharge event. The CAFO operator must also report the
amount of rainfall and the approximate duration of the storm event.
BAT Requirements for the Swine, Veal and Poultry Subcategories. EPA
is proposing to establish BAT requirements for the swine, veal and
poultry subcategories based on Option 5. For the purpose of simplifying
this discussion, the term poultry is used to include chickens and
turkeys. Option 5 requires zero discharge of manure and process
wastewater and provides no overflow allowance for manure and wastewater
storage. Land application requirements for these operations would be
the same as the requirements under Option 2.
EPA is proposing Option 5 because swine, veal and poultry
operations can house the animals under roof and feed is also not
exposed to the weather. Thus, there is no opportunity for storm water
contamination. Broiler and turkey operations generate a dry manure
which can be kept covered either under a shed or with tarps. Laying
hens with dry manure handling usually store manure below the birds'
cages and inside the confinement building. Veal and poultry operations
confine the animals under roof, thus there are no open animal
confinement areas to generate contaminated storm water. Those
operations with liquid manure storage can comply with the restrictions
proposed under this option by diverting uncontaminated storm water away
from the structure, and covering the lagoons or impoundments.
The technology basis for the poultry BAT requirements at the
production
[[Page 3064]]
area are litter sheds for broiler and turkey CAFOs, and underhouse
storage for laying hens with dry manure handling systems. For laying
hen CAFOs with liquid manure handling systems, EPA's technology basis
is solid separation and covered storage for the solids and covered
lagoons.
Laying hen farms may also have egg wash water from in-line or off-
line processing areas. Only 10% of laying hen operations with fewer
than 100,000 birds have on farm egg processing, while 35% of laying hen
operations with more than 100,000 birds have on farm egg processing.
The wash water is often passed through a settling system to remove
calcium, then stored in above ground tanks, below ground tanks, or
lagoons. Today's proposal is based on covered storage of the egg wash
water from on-farm processing, to prevent contact with precipitation.
The ultimate disposal of egg wash water is through land application
which must be done in accordance with the land application rates
established in the PNP. EPA believes the low nutrient value of egg
washwater is unlikely to cause additional incremental costs to laying
hen facilities to comply with the proposed land application
requirements.
EPA assumes large swine operations (e.g., operations with more than
1,250 hogs weighing 55 pounds or greater) operate using total
confinement practices. EPA based BAT Option 5 on the same approach
described above of covering liquid manure storage. CAFOs can operate
covered lagoons as anaerobic digesters which is an effective technology
for achieving zero discharge and will provide the added benefits of
waste stabilization, odor reduction and control of air emissions from
manure storage structures. Anaerobic digesters also can be operated to
generate electricity which can be used by the CAFO to offset operating
costs.
Although Option 5 is the most expensive option for the hog
subcategory, as shown on Table X.E.2(a), EPA believes this option
reflects best available technology economically achievable because it
prevents discharges resulting from liquid manure overflows that occur
in open lagoons and pond. Similarly, the technology basis of covered
treatment lagoons and drier manure storage is believed to reduce the
likelihood of those catastrophic lagoon failures associated with heavy
rainfalls. Option 5 also achieves the greatest level of pollutant
reductions from runoff reaching the edge of the field. Non-water
quality environmental impacts include reduced emissions and odor, with
a concurrent increase in nitrogen value of the manure, however as
mentioned previously, the ammonia concentration is not reduced and once
the manure is exposed to air the ammonia will volatilize. Water
conservation and recycling practices associated with Option 5 will
promote increased nutrient value of the manure, reduced hauling costs
via reduced water content, and less fresh water use.
The technology basis of Option 5, solid-liquid separation and
storage of the solids, has the advantage of creating a solid fraction
which is more transportable, thus hog CAFOs that have excess manure can
use this technology to reduce the transportation costs.
EPA is aware of three open lot hog operations that have more than
1,250 hogs and there may be a small number of others, but the
predominant practice is to house the animals in roofed buildings with
total confinement. For open lot hog CAFOs, EPA is proposing to base BAT
the application of hoop structures as described above.
Veal operations use liquid manure management and store manure in
lagoons. EPA has based BAT on covered manure and feed storage. The
animals are housed in buildings with no outside access. Thus, by
covering feed and waste storage the need to capture contaminated storm
water is avoided.
In evaluating the economic achievability of Option 5 for the swine,
veal and poultry subcategories, EPA evaluated the costs and impacts of
this option relative to Option 2. For these subcategories, the
incremental annual cost of Option 5 over Option 2 would be $110 million
pre-tax under the two-tier structure, and $140 million pre-tax under
the three-tier structure. Almost all of these incremental costs are
projected to be in the swine sector. Since the majority of the costs
are borne by the swine subcategory, EPA solicits comment on
establishing BAT on the basis Option 5 for the only the veal and
poultry subcategories, and establishing BAT on the basis of Option 2
that the swine subcategory. EPA projects that there would be no
additional costs under the two-tier structure, and only very small
additional costs under the three-tier structure for the veal and
poultry subcategories to move from Option 2 to Option 5. Under Option
2, EPA estimates 300 swine operations and 150 broiler operations would
experience stress under the two-tier structure, and 300 swine
operations and 330 broiler operations would experience stress under the
three-tier structure. Under Option 5 an additional 1,120 swine
operations would experience stress under both the two-tier and three-
tier structures. All affected hog operations have more than 1000 AU.
None of these affected hog operations are small businesses based on the
Small Business Administration's size standards. There would be no
additional broiler operations experiencing stress under Option 5, and
no veal, layer, or turkey operations are projected to experience stress
under either Option 2 or Option 5. EPA did not analyze the benefits of
Option 5 relative to Option 2. Under Option 2 operations are required
to be designed, constructed and operated to contain all process
generated waste waters, plus the runoff from a 25-year, 24-hour
rainfall event for the location of the point source. Thus, the benefit
of Option 5 over Option 2 would be the value of eliminating discharges
during chronic or catastrophic rainfall events of a magnitude of the
25-year, 24-hour rainfall event or greater. Further benefit would be
realized as a result of increased flexibility on the timing of manure
application to land. By preventing the rainfall and run-off from mixing
with wastewater, CAFOs would not need to operate such that land
application during storm events was necessary.
EPA is not proposing Option 2 for these sectors. However, EPA notes
that at the time of the SBREFA outreach process, removing the 25-year,
24-hour design standard for any sector was not considered largely due
to concern that a different design standard would lead to larger
lagoons or impoundments. EPA staff explicitly stated this to the SERs
and other member of the Panel. Although not extensively discussed,
since it did not appear at that time to be an issue, retention of this
standard was supported by both the SERs and the Panel. At that time,
EPA was not planning to evaluate such an option because of the concern
that this would encourage larger lagoons. Since the Panel concluded it
outreach, EPA decided to evaluate, and ultimately propose removing this
design standard for the veal, swine and poultry subcategories because
of reports of lagoon failures resulting from rainfall and poor
management. As mentioned previously, all of these sectors maintain
their animals under roof eliminating the need to capture contaminated
storm water from the animal confinement area. In addition, most poultry
operations generate a dry manure, which when properly stored, under
some type of cover, eliminates any possibility of an overflow in the
event of a large storm. Therefore EPA believes that Option 5 technology
which prevents the introduction of storm water into manure
[[Page 3065]]
storage is achievable and represents Best Available Technology, without
redesigning the capacity of existing manure storage units. However, EPA
requests comment on retaining te 25-year, 24-hour storm design standard
(and thus basing BAT on Option 2) for these sectors, consistent with
its intention at the time of the SBREFA outreach process.
EPA is not proposing to base BAT for the swine, poultry and veal
subcategories on Option 3, because EPA believes Option 5 is more
protective of the environment. If operators move towards dry manure
handling technologies and practices to comply with Option 5, there
should be less opportunity for ground water contamination and surface
water contamination through a direct hydrological connection. EPA
strongly encourages any newly constructed lagoons or anaerobic
digesters to be done in such a manner as to minimize pollutant losses
to ground water. A treatment lagoon should be lined with clay or
synthetic liner or both and solid storage should be on a concrete pad
or preferably a glass-lined steel tank as EPA has included in its
estimates of BAT costs. Additionally, Option 5 provides the additional
non-water quality benefit of achieving reductions in air emissions from
liquid storage systems. EPA estimates that the cost of complying with
both Option 3 and 5 at existing facilities would be economically
unachievable.
EPA believes the proposed technology basis for broilers, turkeys
and laying hens with dry manure management will avoid discharges to
ground water since the manure is dry and stored in such a way as to
prevent storm water from reaching it. Without some liquid to provide a
transport mechanism, pollutants cannot move through the soil profile
and reach the ground water and surface water through a direct
hydrological connection.
EPA is not proposing to base BAT on Option 4 for the same reasons
described above for the beef and dairy subcategories.
EPA is not proposing to base BAT on Option 6, because EPA believes
that the zero discharge aspect of the selected option will encourage
operations to consider and install anaerobic digestion in situations
where it will be cost effective.
As with beef and dairy, EPA is not proposing to base BAT for swine,
veal and poultry on Option 7, but believes that permit authorities
should establish restrictions as necessary in permits issued to CAFOs.
Swine, veal and poultry operations should take the timing of manure
application into account when developing the PNP. Any areas that could
result in pollutant discharge from application of manure to frozen,
snow covered or saturated ground should be identified in the plan and
manure or wastewater should not be applied to those areas when there is
a risk of discharge.
EPA solicits comment on the use of remote liquid level monitoring
at livestock operations. As described above in Section VIII.C.3, this
technology could provide advanced notification that levels are reaching
a critical point, and corrective actions could then be taken. This
technology does not prevent precipitation from entering the lagoon and
does not prevent overflows, therefore EPA chose not to propose this
technology as BAT for swine or veal operations. However, EPA solicits
comments on applicability of this technology to livestock operations,
especially at swine and veal as an alternative to covers on lagoons.
PNP Requirements
There are a number of elements that are addressed by both USDA's
``Guidance for Comprehensive Nutrient Management Plans (CNMPs)'' and
EPA's PNP which would be required by the effluent guidelines and NPDES
proposed rules and is detailed in the guidance document ``Managing
Manure Nutrients at Concentrated Animal Feeding Operations.'' EPA's
proposed PNP would establish requirements for CAFOs that are consistent
with the technical guidance published by USDA experts, but go beyond
that guidance by identifying specific management practices that must be
implemented. What follows is a brief description of what must be
included in a PNP.
General Information. The PNP must have a Cover Sheet which contains
the name and location of the operation, the name and title of the owner
or operator and the name and title of the person who prepared the plan.
The date (month, day, year) the plan was developed and amended must be
clearly indicated on the Cover Sheet. The Executive Summary would
briefly describe the operation in terms of herd or flock size, total
animal waste produced annually, crop identity for the full 5 year
period including a description of the expected crop rotation and,
realistic yield goal. The Executive Summary must include indication of
the field conditions for each field unit resulting from the phosphorus
method used (e.g., phosphorus index), animal waste application rates,
the total number of acres that will receive manure, nutrient content of
manure and amount of manure that will be shipped off-site. It should
also identify the manure collection, handling, storage, and treatment
practices, for example animals kept on bedding which is stored in a
shed after removal from confinement house, or animals on slatted floors
over a shallow pull plug pit that is drained to an outdoor in-ground
slurry storage inpoundment. Finally, the Executive Summary would have
to identify the watershed(s) in which the fields receiving manure are
located or the nearest surface water body. While the General
Information section of a PNP would give a general overview of the CAFO
and its nutrient management plan, subsequent sections would provide
further detail.
Animal Waste Production. This subsection details types and
quantities of animal waste produced along with manure nutrient sampling
techniques and results. Information would be included on the maximum
number of livestock ever confined and the maximum livestock capacity of
the CAFO, in addition to the annual livestock production. This section
would provide an estimate of the amount of animal waste collected each
year. Each different animal waste source should be sampled annually and
tested by an accredited laboratory for nitrogen, phosphorous,
potassium, and pH.
Animal Waste Handling, Collection, Storage, and Treatment. This
subsection details best management practices to protect surface and
groundwater from contamination during the handling, collection,
storage, and treatment of animal waste. A review would have to be
conducted of potential water contamination sources from existing animal
waste handling, collection, storage, and treatment practices. The
capacity needed for storage would be calculated.
Feedlot runoff would have to be contained and adequately managed.
Runoff diversion structures and animal waste storage structures would
have to be visually inspected for: seepage, erosion, vegetation, animal
access, reduced freeboard, and functioning rain gauges and irrigation
equipment, on a weekly basis. Deficiencies based on visual inspections
would have to be identified and corrected within a reasonable time
frame. Depth markers would have to be permanently installed in all
lagoons, ponds, and tanks. Lagoons, ponds, and tanks would have to be
maintained to retain capacity for the 25-year, 24-hour storm event.
Dead animals, required to be kept out of lagoons, would have to be
properly handled and disposed of in a timely
[[Page 3066]]
manner. Finally, an emergency response plan for animal waste spills and
releases would have to be developed.
Land Application Sites. This subsection details field
identification and soil sampling. County(ies) and watershed code(s)
where feedlot and land receiving animal waste applications are located
would be identified. Total acres of operation under the control of the
CAFO (owned and rented) and total acres where animal waste will be
applied would be included. A detailed farm map or aerial photo, to be
included, would have to indicate: location and boundaries of the
operation, individual field boundaries, field identification and
acreage, soil types and slopes, and the location of nearby surface
waters and other environmentally sensitive areas (e.g., wetlands,
sinkholes, agricultural drainage wells, and aboveground tile drain
intakes) where animal waste application is restricted.
Separate soil sampling, using an approved method, would have to be
conducted every 3 years on each field receiving animal waste. The
samples shall be analyzed at an accredited laboratory for total
phosphorous. Finally, the phosphorous site rating for each field would
have to be recorded according to the selected assessment tool.
Land Application. This subsection details crop production and
animal waste application to crop production areas. Details of crop
production would have to include: Identification of all planned crops,
expected crop yields and the basis for yield estimates, crop planting
and harvesting dates, crop residue management practices, and nutrient
requirements of the crops to be grown. Calculations used to develop the
application rate, including nitrogen credits from legume crops,
available nutrients from past animal waste applications, and nutrient
credits from other fertilizer and/or biosolids applications would have
to be included.
Animal waste application rates cannot exceed nitrogen requirements
of the crops. However, animal waste application rates would be limited
to the agronomic requirements for phosphorous if the soil phosphorous
tests are rated ``high'', the soil phosphorous tests are equal to \3/
4\, but not greater than twice the soil phosphorous threshold value, or
the Phosphorous Index rating is ``high.'' Finally, animal waste could
not be applied to land if the soil phosphorous tests are rated ``very
high'', the soil phosphorous tests are greater than twice the soil
phosphorous threshold value, or the Phosphorous Index rating is ``very
high.'' In some cases, operators may choose to further restrict
application rates to account for other limiting factors such as
salinity or pH.
Animal wastes cannot be applied to wetlands or surface waters,
within 100 feet of a sinkhole, or within 100 feet of water sources such
as rivers, streams, lakes, ponds, and intakes to agricultural drainage
systems (e.g., aboveground tile drain intakes, agricultural drainage
wells, pipe outlet terraces). EPA requests comment on how serious would
be the limitations imposed by these requirements. Manure spreader and
irrigation equipment would have to be calibrated at a minimum once each
year, but preferably before each application period. Finally, the date
of animal waste application and calibration application equipment, and
rainfall amounts 24-hours before and after application would be
recorded.
Other Uses/Off-Site Transfer. The final required subsection for a
PNP details any alternative uses and off-site transport of animal
wastes. If used, a complete description of alternative uses of animal
waste would have to be included. If animal wastes are transported off-
site the following would have to be recorded: date (day, month, year),
quantity, and name and location of the recipient of the animal waste.
Voluntary Measures. Many voluntary best management practices can be
included within various subsections of a PNP. These voluntary best
management plans are referenced in EPA's guidance document for PNP
``Managing Manure Nutrients at Concentrated Animal Feeding
Operations.''
Annual Review and Revision. While a PNP is required to be renewed
every 5 years (coinciding with NPDES permitting), an annual review of
the PNP would have to occur and the PNP would be revised or amended as
necessary.
The most likely factor which would necessitate an amendment or
revision to a PNP is a change in the number of animals at the CAFO. A
substantial increase in animal numbers (for example an increase of
greater than 20%) would significantly increase the volume of manure and
total nitrogen and phosphorous produced on the CAFO. Because of this,
the CAFO will need to re-evaluate animal waste storage facilities to
ensure adequate capacity, and may need to re-examine the land
application sites and rates.
A second reason which would require an amendment or revision to a
PNP is a change in the cropping program which would significantly alter
land application of animal waste. Changes in crop rotation or crop
acreage could significantly alter land application rates for fields
receiving animal waste. Also the elimination or addition of fields
receiving animal waste application would require a change in the PNP.
Changes in animal waste collection, storage facilities, treatment,
or land application method would require an amendment or revision to a
PNP. For example, the addition of a solid-liquid separator would change
the nutrient content of the various animal waste fractions and the
method of land application thereby necessitating a revision in a PNP.
Changing from surface application to soil injection would alter ammonia
volatilization subsequently altering animal waste nutrient composition
requiring a revision of land application rates.
When CAFOs Must Have PNPs. EPA proposes to allow two groups of
CAFOs up to 90 days to obtain a PNP:
3. Existing CAFOs which are being covered by a NPDES permit for the
first time; or
4. Existing CAFOs that are already covered under an existing permit
which is reissued within 3 years from the date of promulgation of these
regulations.
EPA proposes that all other existing CAFOs must have a PNP at the
time permits are issued or renewed.
7. New Source Performance Standards
For purposes of applying the new source performance standards
(NSPS) being proposed today, a source would be a new source if it
commences construction after the effective date of the forthcoming
final rule. (EPA expects to take final action on this proposal in
December 2002, which is more than 120 days after the date of proposal--
see 40 CFR 122.2). Each source that meets this definition would be
required to achieve any newly promulgated NSPS upon commencing
discharge.
In addition, EPA is proposing additional criteria to define ``new
source'' that would apply specifically to CAFOs under Part 412. EPA
intends that permit writers will consult the specific ``new source''
criteria in Part 412 rather than the more general criteria set forth in
40 CFR 122.29(b)(1). The other provisions of 40 CFR 122.29 continue to
apply. EPA proposes to consider an operation as a new source if any of
the following three criteria apply.
The definition of new source being proposed for Part 412 states
three criteria that determine whether a source is a ``new source.''
First, a facility would be a new source if it is constructed at a
site at which no other source is located. These new sources have the
advantage of not
[[Page 3067]]
having to retrofit the operation to comply with BAT requirements, and
thus can design to comply with more stringent and protective
requirements.
The second criterion for defining a new source would be where new
construction at the facility ``replaces the housing, waste handling
system, production process, or production equipment that causes the
discharge or potential to discharge pollutants at an existing source.''
Confinement housing and barns are periodically replaced, allowing the
opportunity to install improved systems that provide increased
environmental protection. The modern confinement housing used at many
swine, dairy, veal, and poultry farms allows for waste handling and
storage in a fashion that generates little or no process water. Such
systems negate the need for traditional flush systems and storage
lagoons, reduce the risks of uncontrollable spills, and decrease the
costs of transporting manure.
Third, a source would be a new source if construction is begun
after the date this rule is promulgated and its production area and
processes are substantially independent of an existing source at the
same site. Facilities may construct additional production areas that
are located on one contiguous property, without sharing waste
management systems or commingling waste streams. Separate production
areas may also be constructed to help control biosecurity. New
production areas may also be constructed for entirely different animal
types, in which case the more stringent NSPS requirements for that
subcategory would apply to the separate and newly constructed
production area. In determining whether production and processes are
substantially independent, the permit authority is directed to consider
such factors as the extent to which the new production areas are
integrated with the existing production areas, and the extent to which
the new operation is engaging in the same general type of activity as
the existing source.
EPA also considered whether a certain level of facility expansion,
measured as an increase in animal production, should cause an operation
to be subject to new source performance standards. If so, upon facility
expansion, the CAFO would need to go beyond compliance with BAT
requirements to meet the more stringent standards represented by NSPS.
In today's proposal, that increment of additional control, for the
swine, poultry and veal subcategories, would amount to the need to
monitor ground water and install liners in lagoons and impoundments to
prevent discharges to ground water that has a direct hydrological
connection to surface water; unless the CAFO could demonstrate that no
such direct hydrological link existed. In the beef and dairy
subcategories, the NSPS proposed today are the same as the BAT
standards.
The Agency, however, decided against proposing to identify facility
expansion as a trigger for the application of NSPS. Many CAFOs oversize
or over-engineer their waste handling systems to accommodate future
increases in production. Thus, in many cases, the actual increases in
production may not present a new opportunity for the CAFO to install
the additional NSPS technologies--e.g. liners. To install liners, these
operations would need to retrofit their facilities the same as existing
sources would. EPA has explained above that such retrofitting would not
be economically achievable in these animal sectors. Similarly, the
costs associated with these requirements would represent a barrier to
the expansion. Therefore, it would not be appropriate to require these
operations, upon facility expansion, to meet the additional ground
water-related requirements that are a part of today's proposed NSPS.
EPA considered the same seven options for new source performance
standards (NSPS) as it considered for BAT. EPA also considered an
additional option for new dairies, which if selected, would prohibit
dairies from discharging any manure or process wastewater from animal
confinement and manure storage areas (i.e., eliminating the allowance
for discharging overflows associated with a storm event). New sources
have the advantage of not having to retrofit the operation to comply
with the requirements and thus can design the operation to comply with
more stringent requirements. In selecting new source performance
standards, EPA evaluates whether the requirements under consideration
would impose a barrier to entry to new operations.
EPA is proposing to select Option 3 as the basis for NSPS for the
beef and dairy subcategories. Option 3 includes all the requirements
proposed for existing sources including complying with zero discharge
from the production area except in the event of a 25-year, 24-hour
storm and the requirement to develop a PNP which establishes the rate
at which manure and wastewater can be applied to crop or pasture land
owned or controlled by the CAFO. The application of manure and
wastewater would be restricted to a phosphorus based rate where
necessary depending on the specific soil conditions at the CAFO.
Additionally, other best management practice requirements would apply,
including the prohibition of manure and wastewater application within
100 feet of surface water. The proposed new source standard for the
beef and dairy subcategories includes a requirement for assessing
whether the ground water beneath the production area has a direct
hydrological connection to surface water. If a direct hydrological
connection exists, the operation must conduct additional monitoring of
ground water up gradient and down gradient from the production area,
and implement any necessary controls based on the monitoring results to
ensure that zero discharge to surface water via the ground water route
is achieved for manure stockpiles and liquid impoundments or lagoons.
For the purpose of estimating compliance costs, EPA has assumed that
operations located in areas with a direct hydrological connection will
install synthetic material or compacted clay liners beneath any liquid
manure storage and construct impervious pads for any dry manure storage
areas. The operator would be required to collect and analyze ground
water samples twice per year for total dissolved solids, chlorides,
nitrate, ammonia, total coliforms and fecal coliform. EPA believes that
Option 3 is economically achievable for existing sources. Since new
sources are able to install impermeable liners at the time the lagoon
or impoundment is being constructed, rather than retrofitting
impoundments at existing source, costs associated with this requirement
should be less for new sources in comparison to existing sources. EPA
has concluded that Option 3 requirements will not pose a barrier to
entry for new sources.
EPA is proposing to establish NSPS for all swine and poultry
operations based on Option 5 and Option 3 combined. In addition the BAT
requirements described in Section VIII.C.6, the proposed new source
standards would require no discharge via any ground water that has a
direct hydrological link to surface water. As described above, Option 3
requires all CAFOs to monitor the ground water and impose appropriate
controls to ensure compliance with the zero discharge standard, unless
the CAFO has demonstrated that there is no direct hydrological link
between the ground water and any surface waters. The proposed new
source standard also restricts land application of manure and
[[Page 3068]]
wastewater to a phosphorus based rate where necessary depending on the
specific soil conditions at the CAFO. Additionally, other best
management practice requirements would apply, including that
application of manure and wastewater would be prohibited within 100
feet of surface water.
EPA encourages new swine and poultry facilities to be constructed
to use dry manure handling. Dry manure handling is currently the
standard practice at broiler and turkey operations. As described
previously, some existing laying hen operations and most hog operations
use liquid manure handling systems. The proposed new source performance
standard would not require the use of dry manure handling technologies,
but EPA believes this is the most efficient technology to comply with
its requirements.
EPA has analyzed costs of installing dry manure handling at new
laying hen and swine operations. Both sectors have operations which
demonstrate dry manure handling can be used as an effective manure
management system. The dry manure handling systems considered for both
sectors require that the housing for the animals be constructed in a
certain fashion, thus making this practice less practical for existing
sources. Both sectors have developed a high rise housing system, which
houses the animals on the second floor of the building allowing the
manure to drop to the first floor or pit. In the laying hen sector this
is currently a common practice and with aggressive ventilation, the
manure can be maintained as a dry product. Hog manure has a lower
solids content, thus the manure must be mixed with a bedding material
(e.g., wood chips, rice or peanut hulls and other types of bedding)
which will absorb the liquid. To further aid in drying the hog manure,
air is forced up through pipes installed in the concrete floor of the
pit. With some management on the part of the CAFO operator, involving
mixing and turning the hog manure in the pit periodically, the manure
can be composted while it is being stored. The advantages of the high
rise system for hogs and laying hens include a more transportable
manure, which, in the case of the hog high rise system, has also
achieved a fairly thorough decomposition. The air quality inside the
high rise house is greatly improved, and the potential for leaching
pollutants into the groundwater is greatly reduced. The design standard
of these high rise houses include concrete floors and also assume that
the manure would be retained in the building until it will be land
applied, thus there is no opportunity for storm water to reach the
manure storage and virtually no opportunity for pollutants to leach to
groundwater beneath the confinement house. EPA believes that the cost
savings associated with ease of manure transportation, as well as
improved animal health and performance, with the dry manure handling
system for hogs will off-set the increased cost of operation and
maintenance associated with the high rise hog system. Thus, EPA
concludes the high-rise house does not pose a barrier to entry and is
the basis for NSPS in both the laying hen and hog sectors. Although the
high rise house is the basis of the new source standards for the swine
and laying hen sectors, operations are not prevented from constructing
a liquid manure handling system. If new sources in these sectors choose
to construct a liquid manure handling system, they would be required to
line the lagoons if the operation is located in an area that has a
direct hydrologic connection, but the cost associated with lining a
lagoon at the time it is being constructed is much less than the cost
to retrofit lagoon liners.
EPA proposes to establish new source requirements for the veal
subcategory on the basis of Option 5 which requires zero discharge with
no overflow from the production area and Option 3 which requires zero
discharge of pollutants to groundwater which has a direct hydrological
connection to surface water, with the ground water monitoring or
hydrological assessment requirements described above. EPA believes that
a zero discharge standard without any overflow will promote the use of
covered lagoons, anaerobic digesters or other types of manure treatment
systems. Additionally, this will minimize the use of open air manure
storage systems, thus reducing emission of pollutants from CAFOs.
New veal CAFOs would not be expected to modify existing housing
conditions since EPA is not aware of any existing veal operations that
use dry manure handling systems. New veal CAFOs would be expected to
also use covered lagoons, or anaerobic digesters to comply with the
zero discharge standard. New veal CAFOs would be required to line their
liquid manure treatment or storage structures with either synthetic
material or compacted clay to prevent the discharge of pollutants to
ground water which has a direct hydrological connection to surface
water. In addition, the CAFO would have to monitor the groundwater
beneath the production area to ensure compliance with the zero
discharge requirement. The CAFO would not need to install liners or
monitor ground water if it demonstrates that there is no direct
hydrologic link between the ground water and any surface waters.
In addition to the seven options considered for both existing and
new sources, EPA also investigated a new source option for dairies that
would prohibit all discharges of manure and process wastewater to
surface waters, eliminating the current allowance for the discharge of
the overflow of runoff from the production area. To comply with a zero
discharge requirement, dairies would need to transform the operation so
they could have full control over the amount of manure and wastewater,
including any runoff, entering impoundments. Many dairies have drylot
areas where calves, heifers, and bulls are confined, as well as similar
drylot areas where the mature cows are allowed access. EPA estimated
compliance costs for a zero discharge requirements assuming that the
following changes would occur at new dairies:
(1) Freestall barns for mature cows would be constructed with six
months underpit manure storage, rather than typical flush systems with
lagoon storage;
(2) Freestall barns with six months underpit manure storage would
be constructed to house heifers;
(3) Calf barns with a scrape system would be constructed with a
scrape system and six months of adjacent manure storage; and
(4) New dairies would include covered walkways, exercise areas,
parlor holding, and handling areas.
Drylot areas are continually exposed to precipitation. The amount
of contaminated runoff from such areas that must be captured is
directly related to the size of the exposed area and the amount of
precipitation. Under the current regulations, dairies use the 25-year,
24-hour rainfall event (in addition to other considerations) when
determining the necessary storage capacity for a facility. Imposing a
zero discharge requirement that prevents any discharge from
impoundments would force dairies to reconfigure in a way that provides
complete control over all sources of wastewater. EPA considered the
structural changes in dairy design described here to create a facility
that eliminates the potential for contaminated runoff.
While EPA believes that confining all mature and immature dairy
cattle is technically feasible, the costs of zero discharge relative to
the costs for Option 3 are very high. Capital costs to comply with zero
discharge increase by two orders of magnitude. EPA estimates
[[Page 3069]]
annual operating and maintenance costs would rise between one to two
orders of magnitude above the costs for Option 3. These costs may
create a barrier to entry for new sources. In addition, EPA believes
selecting this option could have the unintended consequence of
encouraging dairies to shift calves and heifers offsite to standalone
heifer raising operations (either on land owned by the dairy or at
contract operations) to avoid building calf and heifer barns. If these
offsite calf/heifer operations are of a size that they avoid being
defined as a CAFO, the manure from the immature animals would not be
subject to the effluent guidelines.
EPA is not basing requirements for new dairies on the zero
discharge option for the reasons discussed above. EPA solicits comment
on the approach used to estimate the costs for new dairies to comply
with a zero discharge requirement. Comments are particularly solicited
on aspects such as: converting from flush systems to underpit manure
storage; types of housing for calves and heifers; and whether the
potential for uncontrollable amounts of precipitation runoff have been
sufficiently eliminated (including from silage). EPA also solicits
comment on a regulatory scenario that would establish a zero discharge
requirement for manure and process wastewater from barns (housing
either mature or immature dairy cattle) and the milking parlor, but
would maintain the current allowance for overflow of runoff from drylot
areas.
As an alternative to underpit manure storage, dairies could achieve
zero discharge for parlor wastes and barn flush water by constructing
systems such as anaerobic digesters and covered lagoons. These covered
systems, if properly operated, can facilitate treatment of the manure
and offer opportunities to reduce air emissions. The resulting liquid
and solid wastes would be more stable than untreated manure. EPA
solicits comment on the usefulness of applying stabilization or
treatment standards to liquid and slurry manures prior to land
application. Commenters encouraging the use of such standards should
recommend appropriate measurement parameters such as volatile solids,
BOD, COD, and indicator organism reduction(s) to establish stability or
treatment levels.
EPA has not identified any basis for rejecting the zero discharge
option for dairies solely due to animal health reasons. EPA solicits
comment on the technical feasibility of confining mature and/or
immature dairy cattle in barns at all times.
Ten-year protection period. The NSPS that are currently codified in
part 412 will continue to have force and effect for a limited universe
of CAFOs. For this reason, EPA is proposing to retain the NSPS
promulgated in 1974 for part 412. Specifically, following promulgation
of the final rule that revises part 412, the 1974 NSPS would continue
to apply for a limited period of time to certain new sources and new
dischargers. See CWA section 306(d) and 40 CFR 122.29(d). Thus, if EPA
promulgates revised NSPS for part 412 in December 2002, and those
regulations take effect in January 2003, qualified new sources and new
dischargers that commenced discharge after January 1993 but before
January 2003 would be subject to the currently codified NSPS for ten
years from the date they commenced discharge or until the end of the
period of depreciation or amortization of their facility, whichever
comes first. See CWA section 306(d) and 40 CFR 122.29(d). After that
ten year period expires, any new or revised BAT limitations would apply
with respect to toxic and nonconventional pollutants. Limitations on
conventional pollutants would be based on the1974 NSPS unless EPA
promulgates revisions to BPT/BCT for conventional pollutants that are
more stringent than the 1974 NSPS.
Rather than reproduce the 1974 NSPS in the proposed rule, EPA
proposes to refer permitting authorities to the NSPS codified in the
2000 edition of the Code of Federal Regulations for use during the
applicable ten-year period.
8. Pretreatment Standards for New or Existing Sources (PSES AND PSNS)
EPA is not proposing to establish Pretreatment Standards for either
new or existing sources. Further, EPA is withdrawing the existing
provisions entitled ``Pretreatment standards for existing sources'' at
Secs. 412.14, 412.16, 412.24, 412.26. Those existing provisions
establish no limitations. The vast majority of CAFOs are located in
rural areas that do not have access to municipal treatment systems. EPA
is not aware of any existing CAFOs that discharge wastewater to POTWs
at present and does not expect new sources to be constructed in areas
where POTW access will be available. For those reasons, EPA is not
establishing national pretreatment standards. However, EPA also wants
to make it clear that if a CAFO discharged wastewater to a POTW, local
pretreatment limitations could be established by the Control Authority.
These local limits are similar to BPJ requirements in an NPDES permit.
9. Effluent Guidelines Controls for Pathogens
The third most common reason for waterbodies being listed on State
Sec. 303(d) lists as an impaired watershed is pathogens. Degradation of
surface waters by excessive levels of pathogens has been attributed to
several sources, including natural wildlife, faulty septic systems, and
animal agriculture. As described in Section 5, stream water quality may
be impacted by animal feeding operations due to feedlot surface runoff,
spills from liquid impoundments, tile drain effluent, leaching and
runoff from land receiving manure, and seepage from waste storage.
Degradation of aquatic and riparian habitat also occurs when animal
grazing operations are poorly managed.
In today's notice, EPA is not setting specific requirements for the
control of pathogens. The proposed BAT is expected to reduce pathogens
to surface waters through the implementation of the zero discharge
requirements at the production area, and through the implementation of
the PNP at the land application area. Even without explicit
requirements or limits for pathogen controls, EPA expects considerable
reduction in the discharge of pathogens for reasons described below.
Runoff simulations and loadings analysis predict a 50% reduction in
fecal coliforms and a 60% reduction in fecal streptococci under the
regulatory scenario proposed today. Following this proposal, EPA
intends to further analyze technologies for the treatment or reduction
of pathogens in manure, and solicits comment on other approaches to
control pathogens.
One mechanism for pathogen discharge to surface waters is
catastrophic spills, whether caused by intentional discharges or
through overflow following major storms. EPA expects the requirements
for no discharge from the production area, as well as routine
inspection and mandatory management practices for the control of liquid
impoundment levels, will reduce catastrophic spills. For the swine and
poultry sectors EPA believes the elimination of the storm event at
which an overflow is allowed will also reduce discharge of pathogens.
At the production area, operators would be required to handle animal
mortalities in a manner so as to prevent contamination of surface
water. The proper use of manure as a fertilizer, as specified in the
proposed regulations, may result in increased storage capacity and
longer retention times of both liquid and solid manure storage,
allowing
[[Page 3070]]
increased opportunity for natural die-off of pathogens. For example,
runoff from fields receiving poultry litter that had been stored prior
to application showed no significant difference in pathogen content in
runoff from control fields (GEIS, 1999), supporting the conclusion that
pathogen reductions will occur from increased storage times.
Application rate has been identified as the single most important
manure management practice affecting pollution of surface waters from
fields receiving manure. Other practices affecting pathogen content in
the runoff include amount of application, incorporation methods,
tillage, saturation of the receiving field, and elapsed time following
application before a rainfall. In one case study, swine lagoon effluent
applied to tile drained fields at 1.1 inches showed no difference in
runoff quality than the control fields, but application at three times
the rate showed high levels of fecal coliform in the surface water.
Fecal bacteria in runoff from land receiving fresh manure may often be
a significant proportion of the fecal contamination measured in the
surface waters. Vegetated filter strips are useful in removing
pollutants from runoff on manured fields, particularly nutrients and
sediment, but have not been identified as generally effective in
reducing bacterial concentrations in the runoff. Surface applications
of manure are more likely to result in fecal coliform transport when
the soil is saturated, particularly in fine sandy loam soils.
EPA believes nutrient management practices and rates established in
the PNP would limit the quantity of nutrients that may be applied to
fields and will reduce the occurrence of manure application to
saturated soils, or when a heavy storm event is predicted. Nutrient
loss to surface water under these conditions would result in reduced
crop yields and would be reflected in revisions made to the PNP in
subsequent years translating to a lower manure application rate.
EPA has collected data on technologies useful in treating manure
and wastes for pathogens. Anaerobic digesters and even simple manure
storage for an extended period of time promote pathogen reductions
through selective growth conditions and natural die-off over time. The
addition of heat, such as is used in thermophilic digesters, further
reduces pathogens. Proper composting processes also involve high
temperatures--achieving temperatures approaching 140 degrees F in the
pile. Heat treatment over several days is likely to kill protozoans
such as Giardia and Cryptosporidium. The addition of lime to achieve
high alkaline conditions, e.g., achieving a pH 12, also is
effective at killing many pathogens by disrupting the cell membrane or
disrupting virus viability.
EPA will continue to analyze the performance and applicability of
treatments to reduce pathogens in CAFO waste, and will analyze the
costs of these processes. The processes described above and others used
to significantly reduce pathogens in biosolids or sewage sludge such as
heat treatment, drying, thermophilic aerobic digestion, pasteurization,
disinfection, and extended storage will be analyzed for their
applicability to animal manures. EPA will give consideration to
establishing the same performance standards as required for Class A
sludge in Part 503. If supported by appropriate data, the final rule
could establish these or other appropriate standards as performance
standards that the wastes would be required to meet prior to land
application. The CAFO would need to demonstrate achievement of these
standards prior to land application because of the impracticability of
measuring the pollutant loadings in any eventual runoff from the land
application areas to the waters. EPA solicits comment on this possible
approach and specifically requests data relating to pathogen treatment
and reductions that are demonstrated to be effective on CAFO waste. EPA
also solicits data on management practices that can be applied to the
land application of manure, which may reduce pathogens in runoff.
10. Antibiotics
Related to concerns over pathogens in animal manures are concerns
over antibiotics and other pharmaceuticals that may be present in the
manure. As discussed in Section V, an estimated 60-80% of all livestock
receive antibiotics. Some antibiotics are metabolized, and some are
excreted with the manure. In cases where antimicrobials are
administered to animals through the feed, spilt feed and wastelage may
contribute to antibiotic content of the waste storage. The presence of
antibiotics in manure and the environment has been shown to result in
antibiotic resistant pathogens. EPA solicits comments on the direct
effects of antibiotic residues and antimicrobial resistance,
specifically on how manure management may contribute to the problem of
antibiotics reaching the environment and contributing to pathogen
resistance. EPA also solicits data and information on effective
treatment or practices that may be implemented by CAFOs to reduce these
releases.
IX. Implementation of Revised Regulations
A. How Do the Proposed Changes Affect State CAFO Programs?
EPA is proposing a number of changes to the effluent guidelines and
the NPDES permit regulations for CAFOs in today's proposed rule. Under
40 CFR 123.25, authorized NPDES State programs must administer their
permit programs in conformance with NPDES requirements, including the
requirements that address concentrated animal feeding operations
(Sec. 122.23) and the incorporation of technology-based effluent
limitation guidelines and standards in permits (Sec. 122.44). Thus,
today's proposed rule would require the 43 States [note that State is
defined in Sec. 122.2] with authorized NPDES permit programs for CAFOs
to revise their programs as necessary to be consistent with the revised
federal requirements. Current NPDES regulations note that authorized
NPDES State permit programs are not required to be identical to the
federal requirements; however, they must be at least as stringent as
the federal program. States are not precluded from imposing
requirements that are more stringent than those required under federal
regulations.
Any State with an existing approved NPDES permitting program under
section 402 must be revised to be consistent with changes to federal
requirements within one year of the date of promulgation of final
changes to the federal CAFO regulations [40 CFR 123.62(e)]. In cases
where a State must amend or enact a statute to conform with the revised
CAFO requirements, such revisions must take place within two years of
final changes to the federal CAFO regulations. States that do not have
an existing approved NPDES permitting program but who seek NPDES
authorization after these CAFO regulatory provisions are promulgated
must have authorities that meet or exceed the revised federal CAFO
regulations at the time authorization is requested.
In States not authorized to administer the NPDES program, EPA will
implement the revised requirements. Such States may still participate
in water quality protection through participation in the CWA section
401 certification process (for any permits) as well as through other
means (e.g., development of water quality standards, development of
TMDLs, and coordination with EPA).
[[Page 3071]]
EPA is aware that the majority of States authorized to implement
the NPDES program supplement the NPDES CAFO requirements with
additional State requirements, and some States currently regulate or
manage CAFOs predominantly under State non-NPDES programs. It has been
suggested that EPA provide a mechanism through which State non-NPDES
CAFO programs can be recognized alternatives that would be authorized
under the CWA.
No permit issued by a non-NPDES program will satisfy the NPDES
permit requirement. Facilities required to be covered by a NPDES permit
must obtain a permit from an agency authorized to issue a NPDES permit.
However, EPA believes that the current NPDES program provides a
reasonable degree of flexibility consistent with CWA requirements, and
that the proposed CAFO regulation provides opportunities to incorporate
State programs in several ways.
It is possible for non-NPDES State programs that currently regulate
AFOs to gain EPA's approval as NPDES-authorized programs. Such a change
would require a formal modification of the State's approved NPDES
program, and the State would have to demonstrate that its program meets
all of the minimum criteria specified in 40 CFR Part 123, Subpart B for
substantive and procedural regulations. Among other things, these
criteria include the restriction that permit terms may not exceed 5
years, and include provisions on public participation in permit
development and enforcement, and EPA enforcement authority.
In addition, today's proposal provides specific flexibility on
particular issues. First, with regard to the off-site transfer of
manure, EPA is requiring under one co-proposed option that the CAFO
operator obtain a certification from recipients that, if they intend to
land apply the manure, it will be done according to appropriate
agricultural practices. EPA is proposing to waive this requirement in a
State that is implementing an effective program for addressing excess
manure generated by CAFOs. Second, EPA is proposing to require that
processors be permitted, or co-permitted, along with their contract
producers. EPA is requesting comment on an option that would waive this
requirement in certain instances in States with effective programs for
managing excess manure. EPA is also soliciting comment on one
particular type of program, an Environmental Management System
developed by the processor, as sufficient to waive co-permitting
requirements. EPA is interested in comments on other specific
requirements of today's proposal that might be satisfied in whole or in
part by State program requirements. This could include ways to ensure
that states with unique programs that meet or exceed the provisions of
the revised regulations and the CWA requirements could utilize their
own programs that include similar objectives such as enhanced water
quality protection, public participation and accountability.
A third possible means of providing flexibility for States would be
available if the three-tier regulatory structure is adopted in the
final regulation. In the three-tier structure, all facilities over
1,000 AU would be considered CAFOs by definition, and those between 300
AU and 1,000 AU would be CAFOs only if they meet one of several
conditions, described in detail in Section VII.B.3, or if designated by
the permit authority as a significant contributor of pollution to
waters of the U.S. Those with fewer that 300 AU would become CAFOs only
if designated by the permit authority. A State with an effective non-
NPDES program could succeed in helping many operations avoid permits by
ensuring they do not meet any of the conditions that would define them
as CAFOs.
EPA is also soliciting comment on whether or not to adopt both the
two-tier and the three-tier structures, and to provide a mechanism to
allow States to select which of the two alternative proposed structures
to adopt in their State NPDES program. Under this option, a State could
adopt the structure that best fits with the administrative structure of
their program, and that best serves the character of the industries
located in their State and the associated environmental problems. This
option is viable only if the Agency is able to determine that the two
structures provide substantially similar environmental benefits by
regulating equivalent numbers of facilities and amounts of manure.
Otherwise, States would be in a position to choose a less stringent
regulation, contrary to the requirements of the Clean Water Act. A
discussion of this option can be found in Section VII.B.4.
The requirements for State NPDES program authorization are
specified under Sec. 402(b) of the CWA and within the broad NPDES
regulations (40 CFR Part 123). These provisions set out specific
requirements for State authorization applicable to the entire NPDES
program and the Agency does not believe that broad changes to these
requirements are appropriate in this proposed rulemaking.
B. How Would EPA's Proposal to Designate CAFOs Affect NPDES Authorized
States?
Today's proposal would provide explicit authority, even in States
with approved NPDES programs, for the EPA Regional Administrator to
designate an AFO as a CAFO if it meets the designation criteria in the
regulations. EPA's authority to designate AFOs as CAFOs would be
subject to the same criteria and limitations to which State designation
authority is subject. However, EPA does not propose to assume authority
or jurisdiction to issue permits to the CAFOs that the Agency
designates in approved NPDES States. That authority would remain with
the approved State. EPA requests comment on this prosed new designation
authority.
C. How and When Will the Revised Regulations be Implemented?
EPA anticipates that this these proposed regulations will be
promulgated as final regulations in December, 2002, and published in
the Federal Register shortly thereafter (approximately January, 2003).
As mentioned, authorized States programs will need up to two years
after that date to revise their programs to reflect the new
regulations. Following a State's revision of its program and approval
of the revisions by EPA, we expect many States to want additional time
to develop new or revised CAFO general permits. EPA believes it is
reasonable to allow States one additional year to develop these new or
revised general permits. To summarize, some States will need until
approximately January 2006--i.e., three years after the final rule is
published--before they can make CAFO general permits available that
reflect the new regulations in the State.
At the same time, once these regulations are finalized, we estimate
that there will be a large number of operations that will need to apply
for a permit, described in Section VII.B.4. It is important to take
into account that some States will not be making CAFO general permits
available to these facilities until three years after the final rule.
If EPA were to make the new Part 122 regulations effective shortly
after we issue the final rule (January 2003), there would be large
numbers of facilities that would be newly defined as CAFOs at that
time. They would be required to apply for a permit right away, but
States would not be able to issue general permits at that time or a
large number of individual permits all at once. This would leave the
facilities potentially in
[[Page 3072]]
the detrimental position of being unpermitted dischargers.
To avoid this situation, EPA proposes that the revisions to the
CAFO definition in part 122 (including, for example, changes to the
threshold number of animals to qualify as a CAFO and other changes such
as the elimination of the 25-year, 24-hour storm exemption) would not
take effect until three years after publication of the final rules. See
proposed section 122.23(f). We expect, therefore, that these changes
would not take effect until approximately January, 2006. Operations
that are brought within the regulatory definition of a CAFO for the
first time under these regulatory revisions would not be defined as
CAFOs under final and effective regulations until that date.
EPA also considered an alternate approach in which the effective
date for the part 122 revisions would be different in each State,
depending on when the State actually adopted and got approval for the
changes and issued general permits. An advantage of this approach would
be that the new regulations would potentially be effective at an
earlier date, i.e., before January 2006, in some States. EPA is not
proposing this approach, however. We decided that it would be
preferable to provide one uniform effective date for these particular
revisions, which would provide necessary clarity and consistency to the
national NPDES program for CAFOs. EPA does seek comment, however, on
which approach would be preferable to adopt in the final regulations.
States, however, are free to implement more stringent requirements, and
may choose to implement the revised CAFO definition at an earlier date.
It should be noted that EPA is proposing this delayed effective
date only for the proposed regulatory changes that affect which
operations would be defined as CAFOs. There is no need to delay the
effective date of any of the other revisions EPA is proposing to the
CAFO regulations at 40 CFR part 122, such as those that specify land
application requirements and other requirements. These other revisions
to the part 122 regulations would become effective 60 days after
publication of the final regulations (January 2003). For any operation
that is a CAFO according to the current definition and that is being
permitted after that date, or having its permit renewed, the permit
would be developed under these new part 122 provisions.
EPA is proposing that the revised effluent guidelines, once
promulgated as final regulations, would be effective 60 days after
promulgation. The 1989 statutory deadline for meeting BAT has long
passed, and we do not believe there is any reason why permit writers
could not begin incorporating the revised effluent guidelines into
permits beginning 60 days after promulgation.
If a CAFO submits a timely application for a permit renewal, but
has not received a decision on that application prior to the expiration
date of the original permit, then the original permit would be
administratively ``continued'' until there is a decision from the
permit authority on the new application (in EPA-administered States and
States with comparable administrative procedure laws). If that
continuance lasts beyond the date that is the effective date of the
revised NPDES regulations and effluent guidelines, then the CAFO's new
permit would reflect both sets of new regulations.
EPA also proposes to adopt specific timing requirements in the
permit with respect to the CAFO's development of PNPs. As described in
Section VIII, EPA proposes to establish BAT as encompassing the
following timing requirements: (1) for all new permittees and for
applicants who hold existing individual permits, compliance with the
PNP would be an immediate requirement of the permit. Therefore, the
draft PNP must be submitted to the permit authority along with the
permit application or NOI; the final PNP must be adopted by the
permittee within 90 days of being permitted; (2) for applicants who are
authorized under an existing general permit, the permittee must develop
a Permit Nutrient Plan within 90 days of submittal of the NOI; and (3)
the PNP for all CAFOs would need to include milestones for
implementation. This time is necessary because, while operators can
begin preparing necessary data, it would be difficult to develop a PNP
before the permit authority issues a final permit that specifies the
terms and conditions of the permit. (Operators of existing CAFOs with
individual NPDES permits, who must submit their draft PNP with the
permit application, are expected to reapply for coverage under the
revised regulation early enough to provide time to develop its PNP
without causing a lapse in coverage.) For facilities that have been
designated as CAFOs, the permit writer will develop the implementation
schedule in order to provide reasonable time to prepare the PNP.
Prior to the effective date of the revised regulations, State and
EPA permit authorities will be issuing permits to facilities that
currently meet the definition of a CAFO under the existing regulations
or that have been designated as CAFOs. Consistent with the AFO
Strategy, discussed in section III.B., during 2000 to 2005 States with
authorized NPDES programs are to focus on issuing permits to the
largest CAFOs, those with 1,000 AU or greater. In States where EPA is
the permit authority, EPA will issue permits to operations defined as
CAFOs that are over 300 AU. The permits are valid for a maximum of five
years, at which time these facilities would obtain new permits under
the revised regulation.
One of the significant changes to the NPDES and ELG regulation for
CAFOs will be the requirement to develop and implement Permit Nutrient
Plans that are developed, or reviewed and approved, by certified
planners. Concern has been raised about the availability of the
necessary expertise to develop and certify the plans. EPA believes that
there will be sufficient lead time before this regulation is
implemented to expect the market to have developed the CNMP and PNP
planning expertise and infrastructure because, during this period,
CNMPs will be developed under both the USDA voluntary program and EPA's
Round I permitting.
For facilities subject to the requirements of the revised
regulation, EPA anticipates that during the period between the time
this regulation is promulgated and the time it is effective, operators
will be able to anticipate the status of their facilities, and
therefore can begin gathering data that will be needed for the Permit
Nutrient Plan and other requirements, such as soil type, manure
sampling, cropping information, and other data needed to calculate the
allowable manure application rate. (Note: States are supposed to have
adopted their NRCS 590 standard by May 2001.)
EPA also proposes that CAFOs that are new sources may not receive
permit coverage until the PNP is developed. In this case, a complete
application must include the PNP. The owner or operator of a new
facility is expected to design and construct the new facility in a
manner that anticipates the ELG and NPDES requirements for manure
management, rather than incurring the costs of retrofitting an already
constructed facility.
EPA recognizes that some practices such as liners and groundwater
wells for beef and dairy operations may take time to implement. The PNP
will include a schedule for implementing the provisions of the PNP,
including milestones with dates.
[[Page 3073]]
Facilities Constructed After the Proposed Regulation is Published.
EPA is soliciting comment on whether the revised regulations should
apply 60 days after publication of the final rule to facilities that
commence operation after that date, even if they would not be defined
as a CAFO under the existing rules. Although EPA is proposing to delay
for three years the effective date of the proposed regulations for
existing facilities that are not currently defined as CAFOs, it is
considering whether to require all facilities defined as CAFOs under
the final rule that commence operation after the final rule is
published to obtain an NPDES permit and comply with the other
requirements of the final rule. For example, a dry poultry operation or
an animal feeding operation of 501 cattle that is constructed during
the three year period after publication of the final rule might be
required to comply immediately with the revised regulations rather than
remaining outside the scope of the NPDES program until three years
after publication of the final rule.
Requiring newly constructed facilities to obtain permits does not
pose the same problem as requiring all existing AFOs which are not
defined as CAFOs under the current rule to obtain permits immediately
after promulgation of the final rule. Once a new definition of a CAFO
becomes effective, a large number of existing facilities would need a
permit on the same date. EPA expects that most existing facilities will
seek coverage under a general permit. However, EPA and authorized
States will need some time after the final rule is promulgated to
develop those general permits. An existing facility would face the
dilemma of either ceasing operations or discharging without a permit if
it was required to obtain a permit but none was available. By contrast,
new facilities would commence operation over a period of time and
present less of a burden on permit authorities. If a general permit was
not available, issuing individual permits to the smaller number of
newly constructed facilities would present less of a burden. If all
else fails, a newly constructed facility could not commence operation
until it had a permit. This approach would be consistent with EPA's
general approach for regulation of new sources and new dischargers, who
are required to obtain an NPDES permit (and comply with any applicable
NSPS) prior to commencing operation. See 40 CFR 122.29, 124.60(a).
Finally, unlike an existing facility, a newly constructed facility is
in a better position to plan its facility to comply with the revised
regulations.
If EPA did not delay the effective date for facilities that are
constructed after the final rule is published, the rule would address
additional sources sooner. On the other hand it would further
complicate the regulatory structure because it would temporarily create
another category of facilities. EPA solicits comments on whether all
provisions of the rule should be effective 60 days after the final rule
is published for facilities that are constructed after that date.
D. How Many CAFOs are Likely to be Permitted in Each State and EPA
Region?
Tables 9-1 and 9-2 delineate the number of facilities, in each
State and EPA Region, that are expected to be affected by either of
today's proposed two-tier and three-tier structures, respectively. In
both proposed structures, all CAFOs with more than 1,000 AU would be
required to apply for a NPDES permit. The differences lie primarily in
how the middle-sized operations are affected.
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As described in today's preamble, the three-tier structure would
affect more facilities because all AFOs with 300 AU or more would be
required to do something. However, not all would be required to apply
for a permit, and, depending on the vigor with which States and AFOs
seek to avoid the conditions defining these facilities as CAFOs, the
actual number of permittees could be smaller. EPA projects that a
minimum of 4,000 middle-sized facilities and a maximum of 19,000 would
apply for a permit under the three-tier structure. By contrast, the
proposed two-tier structure would require all 13,000 facilities between
500 AU and 1,000 AU to apply for a permit.
Further, the number of small facilities likely to be designated
differs between the two proposed structures. Under the three-tier
structure, EPA expects very few AFOs to be designated, potentially 10
per year nationally. Under the two-tier structure, however, this number
is likely to rise to 50 per year, given that AFOs from 300 AU to 499 AU
have the potential to generate significant quantities of manure that,
if not properly managed, may lead the facility to be a significant
contributor of pollution to the waters.
E. Funding Issues
While most CAFO owners and operators are interested in taking
appropriate measures to protect and preserve the environment, there are
legitimate concerns over the costs of doing so. While EPA's cost
analysis indicates that this rule is affordable, some businesses in
some locales may experience economic stress. (See Section X). Further,
concern has been expressed as to whether facilities below 1,000 AU that
become CAFOs due to the changes in this proposed rulemaking may
potentially cause operations to lose cost-share money available under
EPA's Section 319 Nonpoint Source Program and USDA's Environmental
Quality Incentive Program (EQIP). Once a facility is considered a point
source under NPDES, the operation is not eligible for cost sharing
under the Section 319 nonpoint source program. However, the USDA EQIP
program is in fact available to most facilities, and being a permitted
CAFO is not a reason for exclusion from the EQIP program. EQIP funds
may not be used to pay for construction of storage facilities at
operations with greater than 1,000 USDA animal units; however, EQIP is
available to these facilities for technical assistance and financial
assistance for other practices. One USDA animal unit equals 1,000
pounds of live weight of any given livestock species or any combination
of livestock species. (The approximate number of animal equivalents
would be: 1,000 head of beef; 741 dairy cows; 5,000 swine, 250,000
layers; and 500,000 broilers).
To this end, EPA anticipates that State and Federal Agencies will
facilitate compliance with this rule by providing technical assistance
and funding for smaller CAFOs, as available.
F. What Provisions are Made for Upset and Bypass?
A recurring issue of concern has been whether industry guidelines
should include provisions authorizing noncompliance with effluent
limitations during periods of ``upsets'' or ``bypasses''. An upset,
sometimes called an ``excursion,'' is an unintentional noncompliance
occurring for reasons beyond the reasonable control of the permittee.
It has been argued that an upset provision is necessary in EPA's
effluent limitations because such upsets will inevitably occur even in
properly operated control equipment. Because technology based
limitations require only what the technology can achieve, it is claimed
that liability for such situations is improper. When confronted with
this issue, courts have disagreed on whether an explicit upset
exemption is necessary, or whether upset incidents may be handled
through EPA's exercise of enforcement discretion. Compare Marathon Oil
Co. v. EPA, 564 F.2d 1253 (9th Cir.1977), with Weyerhaeuser v. Costle,
594 F.2d 1223 (8th Cir. 1979). See also Sierra Club v. Union Oil Co.,
813 F.2d 1480 (9th Cir. 1987), American Petroleum Institute v. EPA, 540
F.2d 1023 (10th Cir. 1976), CPC International, Inc. v. Train, 540 F.2d
1320 (8th Cir. 1976), and FMC Corp. v. Train, 539 F.2d 973 (4th Cir.
1976).
A bypass, on the other hand, is an act of intentional noncompliance
during which waste treatment facilities are circumvented because of an
emergency situation. EPA has in the past included bypass provisions in
NPDES permits. EPA has determined that both upset and bypass provisions
should be included in NPDES permits and has promulgated permit
regulations that include upset and bypass permit provisions. See 40 CFR
122.41. The upset provision establishes an upset as an affirmative
defense to prosecution for violation of, among other requirements,
technology-based effluent limitations. The bypass provision authorizes
bypassing to prevent loss of life, personal injury, or severe property
damage. Consequently, although permittees in the offshore oil and gas
industry will be entitled to upset and bypass provisions in NPDES
permits, this regulation does not address these issues.
G. How Would an Applicant Apply for Variances and Modifications to
Today's Proposed Regulation?
Once this regulation is in effect, the effluent limitations must be
applied in all NPDES permits thereafter issued to discharges covered
under this effluent limitations guideline subcategory. The CWA,
however, provides certain variances from BAT and BCT limitations. Under
301(l), the only variance available for discharges from the production
area is an FDF variance under 301(m). For the land application area,
301(g) variances don't apply because EPA is not setting BAT effluent
limitations for the five pollutants to which that provision applies.
301(c) and FDF variances are available for effluent limitations
covering the land application area.
The Fundamentally Different Factors (FDF) variance considers those
facility specific factors which a permittee may consider to be uniquely
different from those considered in the formulation of an effluent
guideline as to make the limitations inapplicable. An FDF variance must
be based only on information submitted to EPA during the rulemaking
establishing the effluent limitations from which the variance is being
requested, or on information the applicant did not have a reasonable
opportunity to submit during the rulemaking process for these effluent
limitations guidelines. If fundamentally different factors are
determined, by the permitting authority (or EPA), to exist, the
alternative effluent limitations for the petitioner must be no less
stringent than those justified by the fundamental difference from those
facilities considered in the formulation of the specific effluent
limitations guideline of concern. The alternative effluent limitation,
if deemed appropriate, must not result in non-water quality
environmental impacts significantly greater than those accepted by EPA
in the promulgation of the effluent limitations guideline. FDF variance
requests with all supporting information and data must be received by
the permitting authority within 180 days of publication of the final
effluent limitations guideline (Publication date here). The specific
regulations covering the requirements for and the administration of FDF
variances are found at 40 CFR 122.21(m)(1), and 40 CFR part 125,
subpart D.
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X. What Are the Costs and Economic Impacts of the Proposed
Revisions?
A. Introduction and Overview
This section presents EPA's estimates of the costs and economic
impacts that would occur as a result of today's proposed regulations.
Costs and economic impacts are evaluated for each commodity sector,
including the beef, veal, heifer, dairy, swine, broiler, turkey and egg
laying sectors. A description of each of the ELG technology options and
the NPDES scenarios considered by EPA, and the rationale for selecting
the proposed BAT Option and NPDES Scenario, are provided in Sections
VII and VIII of this document. Detailed information on estimated
compliance costs are provided in the Development Document for the
Proposed Revisions to the National Pollutant Discharge Elimination
System Regulation and the Effluent Guidelines for Concentrated Animal
Feeding Operations (referred to as the ``Development Document''). EPA's
detailed economic assessment can be found in Economic Analysis of the
Proposed Revisions to the National Pollutant Discharge Elimination
System Regulation and the Effluent Guidelines for Concentrated Animal
Feeding Operations (referred to as ``Economic Analysis''). EPA also
prepared the Environmental and Economic Benefit Analysis of the
Proposed Revisions to the National Pollutant Discharge Elimination
System Regulation and the Effluent Guidelines for Concentrated Animal
Feeding Operations (``Benefits Analysis'') in support of today's
proposal. These documents are available at EPA's website at http://
www.epa.gov/owm/afo.htm.
This section presents EPA's estimate of the total annual
incremental costs and the economic impacts that would be incurred by
the livestock and poultry industry as a result of today's proposed
rule. This section also discusses EPA's estimated effects to small
entities and presents the results of EPA's cost-effectiveness and cost-
benefit analysis. All costs presented in this document are reported in
1999 pre-tax dollars (unless otherwise indicated).
B. Data Collection Activities
1. Sources of Data To Estimate Compliance Costs
As part of the expedited approach to this rulemaking, EPA has
chosen not to conduct an industry-wide survey of all CAFOs using a
Clean Water Act Section 308 questionnaire. Rather, EPA is relying on
existing data sources and expertise provided by the U.S. Department of
Agriculture (USDA), industry, State agriculture extension agencies, and
several land grant universities. More detailed information on the data
used for this analysis can be found in the Development Document and
also the Economic Analysis.
EPA collected and evaluated data from a variety of sources. These
sources include information compiled through EPA site visits to over
100 animal confinement operations and information from industry trade
associations, government agencies, and other published literature. EPA
also received information from environmental groups such as the Natural
Resources Defense Council and the Clean Water Network. The Agency
contacted university experts, state cooperatives and extension
services, and state and EPA regional representatives to identify
facilities for site visits. EPA also attended USDA-sponsored farm tours
and site visits arranged by other groups, as well as industry,
academic, and government conferences.
EPA obtained data and information from several agencies in USDA,
including the National Agricultural Statistics Service (NASS), Natural
Resources Conservation Service (NRCS), the Animal and Plant Health
Inspection Service (APHIS), and the Economic Research Service (ERS).
The collected data include statistical survey information and published
reports.
EPA gathered information from a wide range of published NASS
reports, including annual data summaries for each commodity group.
USDA's NASS is responsible for objectively providing important, usable,
and accurate statistical information and data support services on the
structure and activities of agricultural production in the United
States. Each year NASS conducts surveys and prepares reports covering
virtually every facet of U.S. agricultural production. The primary
sources of data are animal production facilities in the United States.
NASS collects voluntary information using mail surveys, telephone and
in-person interviews, and field observations. NASS is also responsible
for conducting a Census of Agriculture.
EPA's main source of primary USDA data containing farm level
descriptive information is USDA's Census of Agriculture (Census).
USDA's Census is a complete accounting of United States agricultural
production and is the only source of uniform, comprehensive
agricultural data for every county in the nation. The Census is
conducted every 5 years by NASS. The Census includes all farm
operations from which $1,000 or more of agricultural products are
produced and sold. The most recent Census reflects calendar year 1997
conditions. This database is maintained by USDA. Data used for this
analysis were compiled with the assistance of staff at USDA's NASS.
(USDA periodically publishes aggregated data from these databases and
also compiles customized analyses of the data to members of the public
and other government agencies. In providing such analyses, USDA
maintains a sufficient level of aggregation to ensure the
confidentiality of any individual operation's activities or holdings.)
USDA's NRCS publishes the Agricultural Waste Management Field
Handbook, which is an agricultural engineering guidance manual that
explains general waste management principles and provides detailed
design information for particular waste management systems. USDA's
Handbook reports specific design information on a variety of farm
production and waste management practices at different types of
feedlots. The Handbook also reports runoff calculations under normal
and peak precipitation as well as information on manure and bedding
characteristics. EPA used this information to develop its cost and
environmental analyses. NRCS personnel also contributed technical
expertise in the development of EPA's estimates of compliance costs and
environmental assessment framework by providing EPA with estimates of
manure generation in excess of expected crop uptake. This information
is provided in the record that supports this rulemaking.
NRCS also compiled and performed analyses on Census data that EPA
used for its analyses. These data identify the number of feedlots,
their geographical distributions, and the amount of cropland available
to land apply animal manure generated from their confined feeding
operations (based on nitrogen and phosphorus availability relative to
crop need).
EPA gathered information from several reports on the livestock and
poultry industries from the National Animal Health Monitoring System
(NAHMS). USDA's APHIS provides leadership in ensuring the health and
care of animals and plants, improving agricultural productivity and
competitiveness, and contributing to the national economy and public
health. One of its main responsibilities is to enhance the care of
animals. In 1983, APHIS initiated the NAHMS as an information-gathering
program to collect, analyze, and disseminate data on animal health,
management, and productivity. NAHMS conducts national studies to gather
data and generate
[[Page 3080]]
descriptive statistics and information from data collected by other
industry sources.
USDA's ERS provides economic analyses on efficiency, efficacy, and
equity issues related to agriculture, food, the environment, and rural
development to improve public and private decision-making. EPA's
analysis of economic impacts at a model CAFO references a wide range of
published ERS reports and available farm level statistical models. ERS
also maintains farm level profiles of cost and returns compiled from
NASS financial data.
Databases and reports containing the information and data used by
EPA in support of this proposed rule are available in the rulemaking
record.
2. Sources of Data To Estimate Economic Impacts
To estimate economic impacts, EPA used farm level data from USDA,
industry, and land grant universities. The major source of primary USDA
data on farm financial conditions is from the Agricultural Resources
Management Study (ARMS). ARMS is USDA's primary vehicle for data
collection on a broad range of issues about agricultural production
practices and costs. These data provide a national perspective on the
annual changes in the financial conditions of production agriculture.
USDA's ARMS data provide aggregate farm financial data, which EPA
used for its cost impact analysis. The ARMS data provide complete
income statement and balance sheet information for U.S. farms in each
of the major commodity sectors, including those affected by the
proposed regulations. The ARMS financial data span all types of farming
operations within each sector, including full-time and part-time
producers, independent owner operations and contract grower operations,
and confinement and non-confinement production facilities.
ERS provided aggregated data for select representative farms
through special tabulations of the ARMS data that differentiate the
financial conditions among operations by commodity sector, facility
size (based on number of animals on-site) and by major producing region
for each sector. The 1997 ARMS data also provide corresponding farm
level summary information that matches the reported average financial
data to both the total number of farms and the total number of animals
for each aggregated data category. As with the Census data, ERS
aggregated the data provided to EPA to preserve both the statistical
representativeness and confidentiality of the ARMS survey data. ARMS
data used for this analysis are presented in the Economic Analysis and
are available in the rulemaking record.
EPA obtained additional market data on the U.S. livestock and
poultry industries as a whole from a wide variety of USDA publications
and special reports. These include: Financial Performance of U.S.
Commercial Farms, 1991-1994; USDA Baseline Projections 2000, Food
Consumption, Prices and Expenditures, 1970-1997; Agricultural Prices
Annual Summary; annual NASS statistical bulletins for these sectors;
and data and information reported in Agricultural Outlook and ERS's
Livestock, Dairy, and Poultry Situation and Outlook reports. Other
source material is from ERS's cost of production series reports for
some sectors and trade reports compiled by USDA's Foreign Agricultural
Service (FAS). Information on the food processing segments of these
industries is from the U.S. Department of Commerce's Census of
Manufacturers data series. Industry information is also from USDA's
Grain Inspection Packers and Stockyards Administration (GIPSA).
Industry and the associated trade groups also provided information
for EPA's cost and market analyses. In particular, the National
Cattlemen's Beef Association (NCBA) conducted a survey of its
membership to obtain financial statistics specific to cattle feeding
operations. EPA used these and other data to evaluate how well the ARMS
data for beef operations represent conditions at cattle feedyards. EPA
also obtained industry data from the National Milk Producers Federation
(NMPF) and the National Pork Producers Council (NPPC).
EPA also used published research by various land grant universities
and their affiliated research organizations, as well as information
provided by environmental groups.
Databases and reports containing the information and data provided
to and used by EPA in support of this proposed rule are available in
the rulemaking record.
C. Method for Estimating Compliance Costs
1.Baseline Compliance
For the purpose of this analysis, EPA assumes that all CAFOs that
would be subject to the proposed regulations are currently in
compliance with the existing regulatory program (including the NPDES
regulations and the effluent limitations guidelines and standards for
feedlots) and existing state laws and regulations. As a practical
matter, EPA recognizes that this is not true, since only 2,500
operations out of an estimated 12,700 CAFOs with more than 1,000 AU
have actually obtained coverage under an NPDES permit and the remainder
may in fact experience additional costs to comply with the existing
requirements. EPA has not estimated these additional costs in the
analysis that is presented in today's preamble because the Agency did
not consider these costs part of the incremental costs of complying
with today's proposed rule.
To assess the incremental costs attributable to the proposed rules,
EPA evaluated current federal and state requirements for animal feeding
operations and calculated compliance costs of the proposed requirements
that exceed the current requirements. Operations located in states that
currently have requirements that meet or exceed the proposed regulatory
changes would already be in compliance with the proposed regulations
and would not incur any additional cost. These operations are not
included as part of the cost analysis. A review of current state waste
management requirements for determining baseline conditions is included
in the Development Document and also in other sections of the record
(See State Compendium: Programs and Regulatory Activities Related to
Animal Feeding Operations compiled by EPA and available at http://
www.epa.gov/owm/afo.htm#Compendium).
EPA also accounted for current structures and practices that are
assumed to be already in place at operations that may contribute to
compliance with the proposed regulations. Additional information is
also provided in the following section (X.C.2(a)). This information is
also provided in the Development Document.
2. Method for Estimating Incremental CAFO Compliance Costs
a. Compliance Costs to CAFO Operators. For the purpose of
estimating total costs and economic impacts, EPA calculated the costs
of compliance for CAFOs to implement each of the regulatory options
being considered (described in Section VIII of this preamble). EPA
estimated costs associated with four broad cost components: nutrient
management planning, facility upgrades, land application, and
technologies for balancing on-farm nutrients. Nutrient management
planning costs include manure and soil testing, record keeping,
monitoring of surface water and groundwater, and plan development.
Facility upgrades reflect costs for
[[Page 3081]]
manure storage, mortality handling, storm water and field runoff
controls, reduction of fresh water use, and additional farm management
practices. Land application costs address agricultural application of
nutrients and reflect differences among operations based on cropland
availability for manure application. Specific information on the
capital costs, annual operating and maintenance costs, start-up or
first year costs, and also recurring costs assumed by EPA to estimate
costs and impacts of the proposed regulations is provided in the
Development Document.
EPA evaluated compliance costs using a representative facility
approach based on more than 170 farm level models that were developed
to depict conditions and to evaluate compliance costs for select
representative CAFOs. The major factors used to differentiate
individual model CAFOs include the commodity sector, the farm
production region, and the facility size (based on herd or flock size
or the number of animals on-site). EPA's model CAFOs primarily reflect
the major animal sector groups, including beef cattle, dairy, hog,
broiler, turkey, and egg laying operations. Practices at other
subsector operations are also reflected in the cost models, such as
replacement heifer operations, veal operations, flushed caged layers,
and hog grow- and farrow-finish facilities. EPA used model facilities
with similar waste management and production practices to depict
operations in regions that were not separately modeled.
Another key distinguishing factor incorporated into EPA's model
CAFOs includes information on the availability of crop and pasture land
for land application of manure nutrients. For this analysis, nitrogen
and phosphorus rates of land application are evaluated for three
categories of cropland availability: Category 1 CAFOs are assumed to
have sufficient cropland for all on-farm nutrients generated, Category
2 CAFOs are assumed to have insufficient cropland, and Category 3 CAFOs
are assumed to have no cropland. EPA used 1997 information from USDA to
determine the number of CAFOs within each category. This information
takes into account which nutrient (nitrogen or phosphorus) is used as
the basis to assess land application and nutrient management costs.
For Category 2 and Category 3 CAFOs, EPA evaluated additional
technologies that may be necessary to balance nutrients. EPA evaluated
additional technologies that reduce off-site hauling costs associated
with excess on-farm nutrients, as well as to address ammonia
volatization, pathogens, trace metals, and antibiotic residuals. These
technologies may include Best Management Practices (BMPs) and various
farm production technologies, such as feed management strategies,
solid-liquid separation, composting, anaerobic digestion, and other
retrofits to existing technologies. EPA considered all these
technologies for identification of ``best available technologies''
under the various options for BAT described in Section VIII.
EPA used soil sample information compiled by researchers at various
land grant universities to determine areas of phosphorus and nitrogen
saturation, as described in the Development Document. This information
provides the basis for EPA's assumptions of which facilities would need
to apply manure nutrients on a phosphorus- or nitrogen-based standard.
EPA's cost models also take into account other production factors,
including climate and farmland geography, land application and waste
management practices and other major production practices typically
found in the key producing regions of the country. Model facilities
reflect major production practices used by larger confined animal
farms, generally those with more than 300 AU. Therefore, the models do
not reflect pasture and grazing type farms, nor do they reflect typical
costs to small farms. EPA's cost models also take into account
practices required under existing state regulations and reflect cost
differences within sectors depending on manure composition, bedding
use, and process water volumes. More information on the development of
EPA's cost models is provided in the Development Document.
To estimate aggregate incremental costs to the CAFO industry from
implementing a particular technology option, EPA first estimated the
total cost to a model facility to employ a given technology, including
the full range of necessary capital, annual, start-up, and recurring
costs. Additional detailed information on the baseline and compliance
costs attributed to model CAFOs across all sectors and across all the
technology options considered by EPA is provided in the Development
Document.
After estimating the total cost to an individual facility to employ
a given technology, EPA then weighted the average facility level cost
to account for current use of the technology or management practice
nationwide. This is done by multiplying the total cost of a particular
technology or practice by the percent of operations that are believed
to use this particular technology or practice in order to derive the
average expected cost that could be incurred by a model CAFO. EPA
refers to this adjustment factor as the ``frequency factor'' and has
developed such a factor for each individual cost (i.e. each technology)
and cost component (i.e. capital and annual costs) in each of its CAFO
models. The frequency factor reflects the percentage of facilities that
are, technically, already in compliance with a given regulatory option
since they already employ technologies or practices that are protective
of the environment. The frequency factor also accounts for compliance
with existing federal and state regulatory requirements as well as the
extent to which an animal sector has already adopted or established
management practices to control discharges.
EPA developed its frequency factors based on data and information
from USDA's NRCS and NAHMS, state agricultural extension agencies,
industry trade groups and industry-sponsored surveys, academic
literature, and EPA's farm site visits. More detailed information on
how EPA developed and applied these weighting factors is provided in
the Development Document. To identify where farm level costs may be
masked by this weighting approach, EPA evaluated costs with and without
frequency factors. The results of this sensitivity analysis indicate
that the model CAFO costs used to estimate aggregate costs and impacts,
as presented in this preamble, are stable across a range of possible
frequency factor assumptions.
The data and information used to develop EPA's model CAFOs were
compiled with the assistance of USDA, in combination with other
information collected by EPA from extensive literature searches, more
than 100 farm site visits, and numerous consultations with industry,
universities, and agricultural extension agencies. Additional detailed
information on the data and assumptions used to develop EPA's model
CAFOs that were used to estimate aggregate incremental costs to the
CAFO industry is provided in the Development Document.
b. Compliance Costs to Recipients of CAFO Manure. To calculate the
cost to offsite recipients of CAFO manure under the proposed
regulations, EPA builds upon the cropland availability information in
the CAFO models, focusing on the two categories of farms that have
excess manure nutrients and that need to haul manure offsite for
alternative use or to be spread as
[[Page 3082]]
fertilizer (i.e., Category 2 and Category 3 CAFOs, where facilities are
assumed to have insufficient or no available cropland to land apply
nutrients, respectively). EPA also uses this information to determine
the number of offsite recipients affected under select regulatory
alternatives, shown in Tables 10-3 and 10-4.
USDA defines farm level ``excess'' of manure nutrients on a
confined livestock farm as manure nutrient production less crop
assimilative capacity. USDA has estimated manure nutrient production
using the number of animals by species, standard manure production per
animal unit, and nutrient composition of each type of manure.
Recoverable manure is the amount that can be collected and disposed by
spreading on fields or transporting off the producing farm.
Depending on the nutrient used to determine the rate of manure
application (nitrogen or phosphorus), EPA estimates that approximately
7,500 to 10,000 CAFOs with more than 300 AU are expected to generate
excess manure. This includes about 2,600 animal feeding operations that
have no major crop or pasture land. These estimates were derived from a
USDA analysis of manure nutrients relative to the capacity of cropland
and pastureland to assimilate nutrients. EPA's estimate does not
account for excess manure that is already disposed of via alternative
uses such as pelletizing or incineration.
For the purpose of this analysis, EPA assumes that affected offsite
facilities are field crop producers who use CAFO manure as a fertilizer
substitute. Information on crop producers that currently receive animal
manure for use as a fertilizer substitute is not available. Instead,
EPA approximates the number of operations that receive CAFO manure and
may be subject to the proposed regulations based on the number of acres
that would be required to land apply manure nutrients generated by
Category 2 and Category 3 CAFOs. EPA assumes that offsite recipients
will only accept manure when soil conditions allow for application on a
nitrogen basis. Therefore, the manure application rate at offsite acres
in a given region is the nitrogen-based application rate for the
typical crop rotation and yields obtained in that region. EPA then
estimates the number of farms that receive CAFO manure by dividing the
acres needed to assimilate excess manure nitrogen by the national
average farm size of 487 acres, based on USDA data. The results of this
analysis indicate that 18,000 to 21,000 offsite recipients would
receive excess CAFO manure.
The costs assessed to manure recipients include the costs of soil
testing and incremental recordkeeping. EPA evaluated these costs using
the approach described in Section X.C.2(a). Excess manure hauling costs
are already included in costs assessed to CAFOs with excess manure. For
the purpose of this analysis, EPA has assumed that crop farmers already
maintain records documenting crop yields, crop rotations, and
fertilizer application, and that crop farmers already have some form of
nutrient management plan for determining crop nutrient requirements.
EPA estimates, on average, per-farm incremental costs of approximately
$540 to non-CAFOs for complying with the offsite certification
requirements. This analysis is provided in the Development Document.
3. Cost Annualization Methodology
As part of EPA's costing analysis, EPA converts the capital costs
that are estimated to be incurred by a CAFO to comply with the proposed
requirements, described in Section X.C.2, to incremental annualized
costs. Annualized costs better describe the actual compliance costs
that a model CAFO would incur, allowing for the effects of interest,
depreciation, and taxes. EPA uses these annualized costs to estimate
the total annual compliance costs and to assess the economic impacts of
the proposed requirements to regulated CAFOs that are presented in
Sections X.E and X.F.
Additional information on the approach used to annualize the
incremental compliance costs developed by EPA is provided in Appendix A
of the Economic Analysis. EPA uses a 10-year recovery period of
depreciable property based on the Internal Revenue Code's guidance for
single purpose agricultural or horticultural structures. The Internal
Revenue Service defines a single purpose agricultural structure as any
enclosure or structure specifically designed, constructed and used for
housing, raising, and feeding a particular kind of livestock, including
structures to contain produce or equipment necessary for housing,
raising, and feeding of livestock. The method EPA uses to depreciate
capital investments is the Modified Accelerated Cost Recovery System
(MACRS).
EPA assumes a real private discount/interest rate of 7 percent, as
recommended by the Office of Management and Budget. EPA also assumes
standard federal and average state tax rates across the broad facility
size categories to determine an operation's tax benefit or tax shield,
which is assumed as an allowance to offset taxable income.
D. Method for Estimating Economic Impacts
To estimate economic impacts under the proposed regulations, EPA
examined the impacts across three industry segments: regulated CAFOs,
processors, and national markets.
1. CAFO Analysis
EPA estimates the economic impacts of today's proposed regulations
using a representative farm approach. A representative farm approach is
consistent with past research that USDA and many land grant
universities have conducted to assess a wide range of policy issues,
including environmental legislation pertaining to animal agriculture. A
representative farm approach provides a means to assess average impacts
across numerous facilities by grouping facilities into broader
categories to account for the multitude of differences among animal
confinement operations. Information on how EPA developed its model
CAFOs is available in the Economic Analysis. Additional information on
EPA's cost models is provided in the Development Document. At various
stages in the proposed rulemaking, EPA presented its proposed
methodological approach to USDA personnel and to researchers at various
land grant universities for informal review and feedback.
Using a representative farm approach, EPA constructed a series of
model facilities that reflect the EPA's estimated compliance costs and
available financial data. EPA uses these model CAFOs to develop an
average characterization for a group of operations. EPA's cost models
were described earlier in Section X.C.2(a). From these models, EPA
estimates total annualized compliance costs by aggregating the average
facility costs across all operations that are identified for a
representative group. EPA's cost models are compared to corresponding
model CAFOs that characterize financial conditions across differently
sized, differently managed, and geographically distinct operations. As
with EPA's cost models, EPA's financial models are grouped according to
certain distinguishing characteristics for each sector, such as
facility size and production region, that may be shared across a broad
range of facilities. Economic impacts under a post-regulatory scenario
are approximated by extrapolating the average impacts for a given model
CAFO across the larger
[[Page 3083]]
number of operations that share similar production characteristics and
are identified by that CAFO model.
EPA compares its estimated compliance costs at select model CAFOs
to corresponding financial conditions at these model facilities. For
this analysis, EPA focuses on three financial measures that are used to
assess the affordability of the proposed CAFO regulations. These
include total gross revenue, net cash income, and debt-to-asset ratio.
Financial data used by EPA to develop its financial models are from the
1997 ARMS data summaries prepared by ERS and form the basis for the
financial characterization of the model CAFOs. To account for changes
in an operation's income under post-compliance conditions, EPA
estimated the present value of projected facility earnings, measured as
a future cash flow stream. The present value of cash flow represents
the value in terms of today's dollars of a series of future receipts.
EPA calculated baseline cash flow as the present value of a 10-year
stream of an operation's cash flow. EPA projected future earnings from
the 1997 baseline using USDA's Agricultural Baseline Projections data.
Section 4 of the Economic Analysis provides additional information on
the baseline financial conditions attributed to EPA's model CAFO across
all sectors as well as information on the data and assumptions used to
develop these models.
EPA evaluates the economic achievability of the proposed
requirements based on changes in representative financial conditions
for select criteria, as described in Section X.F.1. For some sectors,
EPA evaluates economic impacts at model CAFOs under varying scenarios
of cost passthrough between the CAFO and the latter stages in the food
marketing chain, such as the processing and retail sectors. These three
scenarios include: zero cost passthrough, full (100 percent) cost
passthrough, and partial cost passthrough (greater than zero). Partial
cost passthrough values used for this analysis vary by sector and are
based on estimates of price elasticity of supply and demand reported in
the academic literature. This information is available in the docket.
Table 10-1 lists the range of annualized compliance costs developed
for EPA's analysis. Annualized costs for each sector are summarized
across the estimated range of minimum and maximum costs across all
facility sizes and production regions and are broken out by land use
category (described in Section X.C.2). In some cases, ``maximum'' costs
reflect average costs for a representative facility that has a large
number of animals on-site; EPA's cost models for very large CAFOs are
intended to approximate the average unit costs at the very largest
animal feeding operations. More detailed annualized costs broken out by
production region, land use category, and broad facility size groupings
are provided in the Economic Analysis.
Estimated annualized costs shown in Table 10-1 are presented in
1999 dollars (post-tax). All costs presented in today's preamble have
been converted using the Construction Cost Index to 1999 dollars from
the 1997 dollar estimates that are presented throughout the Development
Document and the Economic Analysis. As shown in the table, costs for
Category 3 CAFOs may be lower than those for Category 1 CAFOs since
facilities without any land do not incur any additional incremental
costs related to hauling. EPA has assumed that these operations are
already hauling off-site in order to comply with existing requirements.
More detailed cost estimates for individual technologies are provided
in the Development Document.
To assess the impact of the regulations on offsite recipients of
CAFO manure, EPA compares the estimated cost of this requirement to
both aggregate and average per farm production costs and revenues (a
sales test). This analysis uses EPA's estimated compliance costs and
1997 aggregate farm revenues and production costs reported by USDA. For
the purpose of this analysis, EPA assumes that these costs will be
incurred by non-CAFO farming operations (i.e., crop producers) that use
animal manures as a fertilizer substitute and will not be borne by
CAFOs.
Table 10-1.--Range of Annualized Model CAFO Compliance Costs ($1999, post-tax)
----------------------------------------------------------------------------------------------------------------
Category 1 \1\ Category 2 \1\ Category 3 \1\
Sector -----------------------------------------------------------------
Minimum Maximum Minimum Maximum Minimum Maximum
----------------------------------------------------------------------------------------------------------------
(1999 dollars per model CAFO across all size groups)
----------------------------------------------------------------------------------------------------------------
Beef.......................................... 2,100 986,000 8,500 1,219,800 1,000 896,700
Veal.......................................... 1,500 8,100 1,100 6,100 1,000 6,000
Heifers....................................... 1,700 16,900 2,000 17,900 1,200 11,700
Dairy......................................... 5,200 44,600 14,700 67,700 4,200 40,300
Hogs: GF \2\.................................. 300 52,300 5,500 63,500 11,400 81,500
Hogs: FF \2\.................................. 300 82,900 8,800 100,600 10,000 115,500
Broilers...................................... 4,800 36,300 4,400 25,800 3,900 21,400
Layers: wet \3\............................... 300 24,800 2,100 29,300 1,500 18,100
Layers: dry \3\............................... 1,500 59,000 1,400 31,700 1,200 27,600
Turkeys....................................... 4,900 111,900 4,800 29,500 3,800 20,800
----------------------------------------------------------------------------------------------------------------
Source: EPA.
\1\ Category 1 CAFOs have sufficient cropland for all on-farm nutrients generated; Category 2 CAFOs have
insufficient cropland; and Category 3 CAFOs have no cropland.
\2\ ``Hogs: FF'' are farrow-finish (includes breeder and nursery pigs); ``Hogs: GF'' are grower-finish only.
\3\ ``Layers: wet'' are operations with liquid manure systems; ``Layers: dry'' are operations with dry systems.
2. Processor Analysis
As discussed in Section VI, EPA estimates that 94 meat packing
plants that slaughter hogs and 270 poultry processing facilities may be
subject to the proposed co-permitting requirements (Section VI). Given
the structure of the beef and dairy sectors and the nature of their
contract relationships, EPA expects that no meat packing or processing
facilities in these sectors will be subject to the proposed co-
permitting requirements. EPA bases these assumptions on data from the
Department of Commerce on the number of slaughtering and meat packing
facilities in these sectors and information from USDA on the degree of
[[Page 3084]]
animal ownership at U.S. farms, as described in Section VI of this
document. Additional information is provided in Section 2 of the
Economic Analysis. EPA is seeking comment on this assumption as part of
today's notice.
EPA did not conduct a detailed estimate of the costs and impacts
that would accrue to individual co-permittees. Information on
contractual relationships between contract growers and processing firms
is proprietary and EPA does not have the necessary market information
and data to conduct such an analysis. Market information is not
available on the number and location of firms that contract out the
raising of animals to CAFOs or on the number and location of contract
growers, and the share of production, that raise animals under a
production contract. In addition, EPA does not have data on the exact
terms of the contractual agreements between processors and CAFOs to
assess when a processor would be subject to the proposed co-permitting
requirements, and EPA does not have financial data for processing firms
or contract growers that utilize production contracts.
EPA, however, believes that the framework used to estimate costs to
CAFOs does provide a means to evaluate the possible upper bound of
costs that could accrue to processing facilities in those industries
where production contracts are more widely utilized and where EPA
believes the proposed co-permitting requirements may affect processors.
EPA's CAFO level analysis examines the potential share of (pre-tax)
costs that may be passed on from the CAFO, based on market information
for each sector. Assuming that a share of the costs that accrue to the
CAFO are eventually borne by processors, EPA is proposing that this
amount approximates the magnitude of the costs that may be incurred by
processing firms in those industries that may be affected by the
proposed co-permitting requirements. EPA solicits comment on this
approach.
To assess the impact of the regulations on processors, EPA compares
the passed through compliance costs to both aggregate processor costs
of production and to revenues (a sales test). These analyses use
estimated compliance costs, cost passthrough estimates, and aggregate
revenues and production costs by processing sector. National processor
cost and revenue data are from the U.S. Department of Commerce's Census
of Manufacturers data series. For some sectors, EPA evaluates the
impact of the proposed regulations on processors under two scenarios of
cost passthrough from the animal production sectors (described in
Section X.D.1), including full cost and partial cost passthrough. More
detail on this approach is provided in Section 4 of the Economic
Analysis.
This suggested approach does not assume any addition to the total
costs of the rule as a result of co-permitting. This approach also does
not assume that there will be a cost savings to contract growers as a
result of a contractual arrangement with a processing firm. This
approach merely attempts to quantify the potential magnitude of costs
that could accrue to processors that may be affected by the co-
permitting requirements. Due to lack of information and data, EPA has
not analyzed the effect of relative market power between the contract
grower and the integrator on the distribution of costs, nor the
potential for additional costs to be imposed by the integrator's need
to take steps to protect itself against liability and perhaps to
indemnify itself against such liability through its production
contracts. EPA has also not specifically analyzed the environmental
effects of co-permitting. EPA has conducted an extensive review of the
agricultural literature on market power in each of the livestock and
poultry sectors and concluded that there is little evidence to suggest
that increased production costs would be prevented from being passed on
through the market levels. This information is provided in the
rulemaking record. However, as discussed in Section VII.C.5, EPA
recognizes that some industry representatives do not support these
assumptions of cost passthrough from contract producers to integrators
and requests comments on its cost passthrough assumptions, both in
general and as they relate to the analysis of processor level impacts
under the proposed co-permitting requirements.
EPA's processor analysis does not explicitly account for the few
large corporate operations that are vertically integrated, to the
extent that the corporation owns and operates all aspects of the
operation, from animal production to final consumer product. These
operations are covered by EPA's CAFO analysis to the extent that they
are captured by USDA's farm survey and are included among EPA's model
CAFOs. While the ARMS data may include information on CAFOs that are
owned by corporate operations, these data cannot be broken out to
create a model specifically designed to represent these operations.
Since EPA's analysis uses farm financial data and not corporate data,
this analysis does not reflect the ability of corporations to absorb
compliance costs that may be incurred at CAFOs that are owned by that
entity. EPA expects that its analysis overestimates the impact to
corporate entities since revenues of corporate entities are, in most
cases, no less than and are likely to exceed those at a privately-owned
and operated CAFOs.
3. Market Analysis
EPA's market analysis evaluates the effects of the proposed
regulations on national markets. This analysis uses a linear partial
equilibrium model adapted from the COSTBEN model developed by USDA's
Economic Research Service. The modified EPA model provides a means to
conduct a long-run static analysis to measure the market effects of the
proposed regulations in terms of predicted changes in farm and retail
prices and product quantities. Market data used as inputs to this model
are from a wide range of USDA data and land grant university research.
EPA consulted researchers from USDA and the land grant universities in
the development of this modeling framework. The details of this model
are described in Appendix B of the Economic Analysis.
Once price and quantity changes are predicted by the model, EPA
uses national multipliers that relate changes in sales to changes in
total direct and indirect employment and also to national economic
output. These estimated relationships are based on the Regional Input-
Output Modeling System (RIMS II) from the U.S. Department of Commerce.
This approach is described in Section 4 of the Economic Analysis.
E. Estimated Annual Costs of the Proposed Regulatory Options/Scenarios
As discussed in Section VII and VIII, EPA considered various
technology options and also different scope scenarios as part of the
development of today's proposed regulations. A summary overview of the
ELG options and NPDES scenarios is provided in Table 10-2. More detail
is available in Sections VII and VIII of today's preamble.
[[Page 3085]]
Table 10-2.--Summary Description of Options/Scenarios Considered by EPA
------------------------------------------------------------------------
------------------------------------------------------------------------
Technology Options (ELG)
------------------------------------------------------------------------
Option 1.......................... N-based land application controls
and inspection and recordkeeping
requirements for the production
area (described in Section
VIII.C.3).
Option 2.......................... Same as Option 1, but restricts the
rate of manure application to a P-
based rate where necessary
(depending on specific soil
conditions at the CAFO).
Option 3 BAT (Beef/Heifers/Dairy). Adds to Option 2 by requiring all
operations to determine whether the
groundwater beneath the production
area has a direct hydrologic
connection to surface water; if so,
requires groundwater monitoring and
controls.
Option 4.......................... Adds to Option 3 by requiring
sampling of surface waters adjacent
to production area and/or land
under control of the CAFO to which
manure is applied.
Option 5 BAT (Swine/Poultry/Veal). Adds to Option 2 by establishing a
zero discharge requirement from the
production area that does not allow
for an overflow under any
circumstances.
Option 6.......................... Adds to Option 2 by requiring that
large hog and dairy operations
install and implement anaerobic
digestion and gas combustion to
treat their manure.
Option 7.......................... Adds to Option 2 by prohibiting
manure application to frozen, snow
covered or saturated ground.
------------------------------------------------------------------------
Regulatory Scope Options (NPDES)
------------------------------------------------------------------------
Scenario 1........................ Retains existing 3-tier framework
and establishes additional
requirements (described in Section
VII.C.2).
Scenario 2........................ Same as Scenario 1; operations with
300-1,000 AU would be subject to
the regulations based on certain
``risk-based'' conditions
(described in VII.C.3.b).
Scenario 3 ``Three-Tier''......... Same as Scenario 2, but allows
operations with 300-1,000 AU to
either apply for a NPDES permit or
to certify to the permit authority
that they do not meet any of the
conditions and thus are not
required to obtain a permit.
Scenario 4a ``Two-Tier'' (500 AU). Establishes 2-tier framework and
applies ELG standard to all
operations with more than 500 AU.
Scenario 4b....................... Establishes 2-tier framework and
applies ELG standard to all
operations with more than 300 AU.
Scenario 5 ``Two-Tier'' (750 AU).. Establishes 2-tier framework and
applies ELG standard to all
operations with more than 750 AU.
Scenario 6........................ Retains existing 3-tier framework
and establishes a simplified
certification process (described in
Section VII.C.2).
------------------------------------------------------------------------
The ``BAT Option'' refers to EPA's proposal to require nitrogen-
based and, where necessary, phosphorus-based land application controls
of all livestock and poultry CAFOs (Option 2), with the additional
requirement that all cattle and dairy operations must conduct
groundwater monitoring and implement controls, if the groundwater
beneath the production area has a direct hydrologic connection to
surface water (Option 3 BAT), and with the additional requirement that
all hog, veal, and poultry CAFOs must also achieve zero discharge from
the animal production area with no exception for storm events (Option 5
BAT). For reasons outlined in Section VIII, EPA is not proposing that
beef and dairy CAFOs meet the additional requirements under Option 5 or
that hog and poultry CAFOs meet the additional requirements under
Option 3. Section VIII discusses EPA's basis for the selection of these
technology bases for the affected subcateogries.
EPA is jointly proposing two NPDES Scenarios that differ in terms
of the manner in which operations are defined as a CAFO. Scenario 4a is
to the two-tier alternative that defines as CAFOs all animal feeding
operations with more than 500 AU (alternatively, Scenario 5 is the two-
tier alternative that defines all animal feeding operations with more
than 750 AU as CAFOs). Scenario 3 is three-tier structure that defines
as CAFOs all animal feeding operations with more than 1,000 AU and any
operation with more than 300 AU, if they meet certain ``risk-based''
conditions, as defined in Section VII. Under Scenario 3, EPA would
require all confinement operations with between 300 and 1,000 AU to
either apply for a NPDES permit or to certify to the permit authority
that they do not meet certain conditions and thus are not required to
obtain a permit.
For the purpose of this discussion, the ``two-tier structure''
refers to the combination of BAT Option 3 (beef and dairy
subcategories) and BAT Option 5 (swine and poultry subcategories), and
NPDES Scenario 4a that covers all operations with more than 500 AU.
Where indicated, the two-tier structure may refer to the alternative
threshold at 750 AU. The ``three-tier structure'' refers to the
combination of ELG Option 3 (beef and dairy subcategories) and Option 5
(swine and poultry subcategories), and NPDES Scenario 3 that covers
operations down to 300 AU based on certain conditions. More detail of
the technology options considered by EPA is provided in Section VIII.
Section VII of this preamble provides additional information on the
alternative scope scenarios considered by EPA. EPA did not evaluate
costs and economic impacts under the alternative three-tier structure
that combines the BAT Option with Scenario 6, as described in Table 10-
2.
Under the two-tier structure, EPA estimate that 25,540 CAFOs with
more than 500 AU may be defined as CAFOs and subject to the proposed
regulations. EPA estimates that 19,100 CAFOs may be defined as CAFOs
under the alternative two-tier threshold of 750 AU. Under the three-
tier structure, an estimated 31,930 CAFOs would be defined as CAFOs
(Table 6-2) and an additional 7,400 operations in the 300 to 1,000 AU
size range would need to certify that they do not need to apply for a
permit. This total estimate counts operations with more than a single
animal type only once. EPA's analysis computes total compliance costs
based on the total number of CAFOs in each sector, including mixed
operations that have more than 300 or 500 AU of at least one animal
type. This approach avoids understating costs at operations with more
than one animal type that may incur costs to comply with the proposed
requirements for each type of animal that is raised on-site that meets
the size threshold for a CAFO or is designated as a CAFO by the
permitting authority. Therefore, EPA's compliance costs estimates
likely represent the upper bound since costs at facilities with more
than a single animal type may, in some cases, be lower due to shared
production technologies and practices across all animal types that are
produced on-site.
[[Page 3086]]
1. Costs to CAFOs Under the Proposed Regulations
Tables 10-3 and 10-4 summarize the total annualized compliance
costs to CAFOs attributed to the proposed two-tier structure and three-
tier structure. The table shows these costs broken out by sector and by
broad facility size group. EPA calculated all estimated costs using the
data, methodology and assumptions described in Sections X.B and X.C.
Under the two-tier structure, EPA estimates that the incremental
annualized compliance cost to CAFO operators would be approximately
$831 million annually (Table 10-3). Table 10-5 shows estimated costs
for the two-tier structure at the 750 AU threshold, estimated by EPA to
total $721 million annually. Most of this cost (roughly 70 percent) is
incurred by CAFOs with more than 1,000 AU. Overall, about one-third of
all estimated compliance costs are incurred within the hog sectors.
Under the three-tier structure, EPA estimates that the total cost
to CAFO operators would be $925 million annually (Table 10-4). These
costs are expressed in terms of pre-tax 1999 dollars. (Post-tax costs
are estimated at $573 million and $635 million annually, respectively,
and include tax savings to CAFOs. EPA uses estimated post-tax costs to
evaluate impacts to regulated facilities, discussed in Section X.F.).
Estimated total annualized costs for the three-tier structure include
the cost to permitted CAFOs as well as the estimated cost to operations
to certify to the permit authority that they do not meet any of the
conditions and are thus are not required to obtain a permit. EPA
estimates certification costs at about $80 million annually, which
covers phosphorus-based PNP costs, facility upgrades, and letters of
certification from manure recipient. More information on these costs
and how they are calculated is provided in Section 5 of the Economic
Analysis.
Estimated total annualized costs shown in Table 10-3 and 10-4
include costs to animal confinement operations that may be designated
as CAFOs. Total annualized costs to designated facilities is estimated
at less than one million dollars annually (Tables 10-3 and 10-4). As
discussed in Section VI, EPA assumes that designation may bring an
additional 50 operations each year under the two-tier structure; under
the three-tier structure, EPA expects that an additional 10 operations
may be designated each year. In this analysis, estimated costs to
designated facilities are expressed on an average annual basis over a
projected 10-year period. For the purpose of this analysis, EPA assumes
that operations that may be designated as CAFOs and subject to the
proposed regulations will consist of beef, dairy, farrow-finish hog,
broiler and egg laying operations under the two-tier structure. Under
the three-tier structure, EPA estimates that fewer operations would be
designated as CAFOs, with 10 dairy and hog operations being designated
each year, or 100 operations over a 10-year period. Additional
information is provided in the Economic Analysis.
Table 10-3.--Annual Pre-tax Cost of Two-Tier Structure (BAT Option/Scenario 4a), $1999
----------------------------------------------------------------------------------------------------------------
Number of 500-1000
Sector operations Total >1000 AU AU 500 AU \1\
----------------------------------------------------------------------------------------------------------------
(number) \
2\ ($1999, millions, pre-tax)
----------------------------------------------------------------------------------------------------------------
Regulated CAFOs
----------------------------------------------------------------------------------------------------------------
Beef................................................ 3,080 216.4 191.5 24.7 0.1
Veal................................................ 90 0.3 0.03 0.3 NA
Heifer.............................................. 800 11.6 3.7 7.9 NA
Dairy............................................... 3,760 177.6 108.6 65.4 3.6
Hog................................................. 8,550 294.0 225.5 67.0 1.5
Broiler............................................. 9,780 97.1 55.4 41.6 0.1
Layer............................................... 1,640 14.2 9.9 4.3 NA
Turkey.............................................. 1,280 19.6 10.4 9.2 NA
-----------------------------------------------------------
Subtotal........................................ 25,540 830.7 605.0 220.2 5.4
----------------------------------------------------------------------------------------------------------------
Other Farming Operations
----------------------------------------------------------------------------------------------------------------
Offsite Recipients.................................. 17,923 9.6 NA NA NA
Total........................................... NA 840.3 NA NA NA
----------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Table 6-2 provides information on affected operations.
Numbers may not add due to rounding. NA = Not Applicable. Option/Scenario definitions provided in Table 10-2.
\1\ Cost estimates shown are for designated CAFOs (see Section VI).
\2\ ``Total'' adjusts for operations with more than a single animal type. The number of CAFOs shown includes
expected defined CAFOs only and excludes designated facilities.
Table 10-4.--Annual Pre-tax Cost of Three-Tier Structure (BAT Option/Scenario 3), $1999
----------------------------------------------------------------------------------------------------------------
Number of 300-1000
Sector operations Total >1000 AU AU 300 AU \1\
----------------------------------------------------------------------------------------------------------------
(number) \
2\ ($1999, million, pre-tax)
----------------------------------------------------------------------------------------------------------------
Regulated CAFOs
----------------------------------------------------------------------------------------------------------------
Beef................................................ 3,210 227.7 191.5 36.2 0.0
Veal................................................ 140 0.8 0.03 0.8 0.0
Heifer.............................................. 980 14.4 3.7 10.7 0.0
Dairy............................................... 6,480 224.6 108.6 115.3 0.7
Hog................................................. 8,350 306.1 225.5 80.4 0.2
[[Page 3087]]
Broiler............................................. 13,740 116.6 55.4 61.2 0.0
Layer............................................... 2,010 15.3 9.9 5.4 0.0
Turkey.............................................. 2,060 24.9 10.4 14.5 0.0
-----------------------------------------------------------
Subtotal........................................ 31,930 930.4 605.0 324.5 0.8
----------------------------------------------------------------------------------------------------------------
Other Farming Operations
----------------------------------------------------------------------------------------------------------------
Offsite Recipients.................................. 21,155 11.3 NA NA NA
-----------------------------------------------------------
Total........................................... NA 936.7 NA NA NA
----------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Table 6-2 provides information on affected operations.
Numbers may not add due to rounding. NA = Not Applicable. Option/Scenario definitions provided in Table 10-2.
\1\ Cost estimates shown are for designated CAFOs (see Section VI).
\2\ ``Total'' adjusts for operations with more than a single animal type. The number of CAFOs shown includes
expected defined CAFOs only and excludes designated facilities.
2. Costs to CAFOs of Alternative Regulatory Options and Scenarios
Alternative regulatory options considered by EPA during the
development of today's proposed regulations include various technology
options and also different regulatory scope scenarios. Sections VII and
VIII present the Agency's rationale for each regulatory decision.
Table 10-5 summarizes the total annualized (pre-tax) costs of
alternative technology options for each NPDES scenario and ELG
technology basis considered by EPA. As shown in the table, the total
estimated costs across these options range from $355 million (Option 1/
Scenario 1) to $1.7 billion annually (Option 5, applicable to all the
animal sectors, and Scenario 4b). By scenario, this reflects the fact
that fewer CAFOs would be affected under Scenario 1 (a total of about
16,400 operations) as compared to Scenario 4b (about 39,300 operations
affected). As noted in Section X.E, EPA's estimate of the number of
CAFOs and corresponding compliance costs does not adjust for operations
with mixed animal types and may be overstated. By technology option,
with the exception of Options 1 and 4, costs are evaluated incremental
to Option 2 (see Table 10-2). Compared to Option 2, Option 5 costs are
greatest. Additional breakout of these costs by sector are provided in
the Economic Analysis.
Table 10-5.--Annualized Pre-tax Costs for the Alternative NPDES Scenarios ($1999, million)
----------------------------------------------------------------------------------------------------------------
Scenario 4a Scenaro 2/3 Scenario 5 Scenario 4b
Option/Scenario ``Two-Tier'' ``Three-Tier'' Scenario 1 >750 AU >300 AU
----------------------------------------------------------------------------------------------------------------
Number of CAFOs \1\............. 25,540 28,860 16,420 25,770 39,320
Option 1........................ $432.1 $462.8 $354.6 $384.3 $493.6
Option 2........................ $548.8 $582.8 $444.4 $484.0 $633.3
Option 3........................ $746.7 $854.1 $587.0 $649.5 $883.6
Option 4........................ $903.9 $1,088.2 $707.0 $768.0 $1,121.2
Option 5........................ $1,515.9 $1,632.9 $1,340.9 $1,390.4 $1,671.3
Option 6........................ $621.6 $736.9 $501.5 $541.3 $706.6
Option 7........................ $671.3 $781.9 $542.4 $585.1 $756.6
BAT Option...................... $830.7 $925.1 $680.3 $720.8 $979.6
----------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Cost estimates shown include costs to designated operations.
Numbers may not add due to rounding. NA = Not Applicable. Option/Scenario definitions provided in Table 10-2.
\1\ ``Total'' adjusts for operations with more than a single animal type. The number of CAFOs shown includes
expected defined CAFOs only and excludes designated facilities.
3. Costs to Offsite Recipients of CAFO Manure Under the Proposed
Regulations
As described in Section VII, EPA is proposing that offsite
recipients of CAFO manure certify to the CAFO that manure will be land
applied in accordance with proper agriculture practices. As shown in
Table 10-3, EPA estimates that 18,000 non-CAFO farming operations will
receive manure and therefore be required to certify proper manure
utilization under the proposed two-tier structure. Under the
alternative three-tier structure, up to 3,000 additional farming
operations may be affected. EPA's analysis assumes that affected CAFO
manure recipients are mostly field crop producers who use CAFO manure
as a fertilizer substitute. EPA's analysis does not reflect manure
hauled offsite for alternative uses such as incineration or
pelletizing. EPA estimates the annualized cost of this requirement to
offsite recipients to be $9.6 to $11.3 million across the co-proposed
alternatives (Tables 10-3 and 10-4). This analysis is provided in the
Development Document.
Estimated costs to recipients of CAFO manure include incremental
recordkeeping and soil tests every 3 years. Conservation Technology
Information Center (CTIC) Core 4 survey data suggest an average of 46
percent crop farmers regularly sample their soil. EPA believes crop
farmers already maintain records pertaining to crop yields, nutrient
requirements, and fertilizer applications. EPA also assumed that crop
farmers have a nutrient management plan, though the plan is not
necessarily a PNP (Permit Nutrient Plan) or CNMP (Comprehensive
Nutrient Management Plan). EPA has evaluated alternative
[[Page 3088]]
approaches to ensuring that manure is handled properly, but is not
proposing to establish specific requirements for offsite recipients.
The costs to offsite recipients do not include the costs of spreading
manure at the offsite location or any additional payments made to
brokers or manure recipients in counties with excess manure. These
costs are likely to be offset by the fertilizer savings and organic
value associated with manure. EPA's analysis accounts for the costs
incurred by the CAFO for offsite transfer of excess manure in the
estimated industry compliance costs, described in Section X.E.1. These
costs include the cost of soil and manure sampling at the CAFO site,
training for manure applicators, application equipment calibration, and
the hauling cost of excess manure generated by the CAFO.
Under the proposed regulations, CAFOs would be required to apply
manure on a phosphorus basis where necessary, based on soil conditions,
and on a nitrogen basis elsewhere. EPA anticipates that offsite
recipients of CAFO manure will only accept manure when soil conditions
allow for application on a nitrogen basis. EPA believes this is a
reasonable assumption because crop farms are less likely to have a
phosphorus buildup associated with long term application of manure.
EPA's analysis assumes a nitrogen-based application rate for offsite
locations that is identical to the rate used by CAFOs in the same
geographic region. A summary of the data and methodology used by EPA to
calculate the number of affected offsite recipients and to estimate
costs is presented in Section X.C.2(b). EPA solicits comment on the
costs and assumptions pertaining to offsite recipients.
F. Estimated Economic Impacts of the Proposed Regulatory Options/
Scenarios
This section provides an overview of EPA's estimated economic
impacts across four industry segments that are included for this
analysis: CAFOs (both existing and new sources), non-CAFO recipients of
manure, processors, and consumer markets. More detailed information on
each of these analyses is available in the Economic Analysis.
1. CAFO Level Analysis
This section presents EPA's analysis of financial impacts to both
existing and new CAFOs that will be affected by the proposed
regulations, as well as impacts to offsite recipients of CAFO manure
who will also be required to comply with the proposed PNP requirements.
a. Economic Impacts to Existing CAFOs under the Proposed
Regulations. As discussed in Section X.C.1, EPA's CAFO level analysis
examines compliance cost impacts for a representative ``model CAFO.''
EPA evaluates the economic achievability of the proposed regulatory
options at existing animal feeding operations based on changes in
representative financial conditions across three criteria. These
criteria are: a comparison of incremental costs to total revenue (sales
test), projected post-compliance cash flow over a 10-year period, and
an assessment of an operation's debt-to-asset ratio under a post-
compliance scenario. To evaluate economic impacts to CAFOs in some
sectors, impacts are evaluated two ways'assuming that a portion of the
costs may be passed on from the CAFO to the consumer and assuming that
no costs passthrough so that all costs are absorbed by the CAFO.
EPA used the financial criteria to divide the impacts of the
proposed regulations into three impact categories. The first category
is the affordable category, which means that the regulations have
little or no financial impact on CAFO operations. The second category
is the moderate impact category, which means that the regulations will
have some financial impact on operations at the affected CAFOs, but EPA
does not consider these operations to be vulnerable to closure as a
result of compliance. The third category is the financial stress
category, which means that EPA considers these operations to be
vulnerable to closure post-compliance. More information on these
criteria is provided in Section 4 of the Economic Analysis.
The basis for EPA's economic achievability criteria for this
rulemaking is as follows. USDA's financial classification of U.S. farms
identifies an operation with negative income and a debt-asset ratio in
excess of 40 percent as ``vulnerable.'' An operation with positive
income and a debt-asset ratio of less than 40 percent is considered
``favorable.'' EPA adopted this classification scheme as part of its
economic achievability criteria, using net cash flow to represent
income. This threshold and cash flow criterion is established by USDA
and other land grant universities, as further described in Section 4 of
the Economic Analysis. The threshold values used for the cost-to-sales
test (3 percent, 5 percent and 10 percent) are those determined by EPA
to be appropriate for this rulemaking and are consistent with threshold
levels used by EPA to measure impacts of regulations for other point
source dischargers (as also documented in the Economic Analysis).
For this analysis, EPA's determination of economic achievability
used all three criteria. EPA considered the proposed regulations to be
economically achievable for a representative model CAFO if the average
operation has a post-compliance sales test estimate within an
acceptable range, positive post-compliance cash flow over a 10-year
period, and a post-compliance debt-to-asset ratio not exceeding 40
percent. If the sales test shows that compliance costs are less than 3
percent of sales, or if post-compliance cash flow is positive and the
post-compliance debt-to-asset ratio does not exceed 40 percent and
compliance costs are less than 5 percent of sales, EPA considers the
options to be ``Affordable'' for the representative CAFO group. A sales
test of greater than 5 percent but less than 10 percent of sales with
positive cash flow and a debt-to-asset ratio of less than 40 percent is
considered indicative of some impact at the CAFO level, but at levels
not as severe as those indicative of financial distress or
vulnerability to closure. These impacts are labeled ``Moderate'' for
the representative CAFO group. EPA considers both the ``Affordable''
and ``Moderate'' impact categories to be economically achievable by the
CAFO.
If (with a sales test of greater than 3 percent) post-compliance
cash flow is negative or the post-compliance debt-to-asset ratio
exceeds 40 percent, or if the sales test shows costs equal to or
exceeding 10 percent of sales, the proposed regulations are estimated
to be associated with potential financial stress for the entire
representative CAFO group. In such cases, each of the operations
represented by that group may be vulnerable to closure. These impacts
are labeled as ``Stress.'' EPA considers the ``Stress'' impact category
to indicate that the proposed requirements may not be economically
achievable by the CAFO, subject to other considerations.
Tables 10-6 and 10-7 present the estimated CAFO level impacts in
terms of the number of operations that fall within the affordable,
moderate, or stress impact categories for each of the co-proposed
alternatives by sector and facility size group. For some sectors,
impacts are shown for both the zero and the partial cost passthrough
assumptions (discussed more fully below). Partial cost passthrough
values vary by sector, as described in Section X.D.1.
EPA's costs model analyzes impacts under two sets of conditions for
ELG Option 3. Option 3A assumes that there is a hydrologic connection
from groundwater to surface waters at the
[[Page 3089]]
CAFO; Option 3 assumes average costs conditions across all operations--
both operations with and without a hydrologic link. Based on available
data and information, EPA's analysis assumes 24 percent of the affected
operations have a hydrologic connection to surface waters. More detail
on this assumption may be found in the rulemaking record. EPA solicits
comment on this assumption as part of today's proposed rulemaking.
Based on results shown in Tables 10-6 and 10-7, EPA proposes that
the regulatory alternatives are economically achievable for all
representative model CAFOs in the veal, turkey and egg laying sectors.
The proposed requirements under the two-tier structure are also
expected to be economically achievable by all affected heifer
operations. Furthermore, although operations across most sectors may
experience moderate impacts, EPA does not expect moderate financial
impacts to result in closure and considers this level of impact to be
economically achievable.
In the beef cattle, heifer, dairy, hog and broiler sectors,
however, EPA's analysis indicates that the proposed regulations will
cause some operations to experience financial stress, assuming no cost
passthrough. These operations may be vulnerable to closure by complying
with the proposed regulations. Across all sectors, an estimated 1,890
operations would experience financial stress under the two-tier
structure and an estimated 2,410 operations would experience stress
under the three-tier structure. For both tier structures, EPA estimates
that the percentage of operations that would experience impacts under
the stress category represent 7 percent of all affected CAFOs or 8
percent of all affected operations in the sectors where impacts are
estimated to cause financial stress (cattle, dairy, hog, and broiler
sectors).
Tables 10-6 shows results for the two-tier structure at the 500 AU
threshold. By sector, EPA estimates that 1,420 hog operations (17
percent of affected hog CAFOs), 320 dairies (9 percent of operations),
150 broiler operations (2 percent), and 10 beef operations (less than 1
percent) would experience financial stress. The broiler and hog
operations with these impacts have more than 1,000 AU on-site (i.e., no
operations with between 500 and 1,000 AU fall in the stress category).
The dairy and cattle operations with stress impacts are those that have
a ground water link to surface water. Although not presented here, the
results of the two-tier structure at the 750 AU threshold are very
similar in terms of number of operations affected. The results of this
analysis are presented in the Economic Analysis.
Table 10-7 presents results for the three-tier structure, and show
that 1,420 hog operations (17 percent of affected hog CAFOs under that
alternative), 610 dairies (9 percent of operations), 330 broiler
operations (2 percent), and 50 beef and heifer operations (1 percent)
will be adversely impacted. Hog operations with stress impacts all have
more than 1,000 AU. Affected broiler facilities include operations with
more than 1,000 AU, as well as operations with less than 1,000 AU.
Dairy and cattle operations in the stress category are operations that
have a hydrologic link from ground water to surface water. Based on
these results, EPA is proposing that the proposed regulations are
economically achievable.
In the hog and broiler sectors, EPA also evaluated financial
impacts with an assumption of cost passthrough. For the purpose of this
analysis, EPA assumes that the hog sector could passthrough 46 percent
of compliance costs and the broiler sector could passthrough 35 percent
of compliance costs. EPA derived these estimates from price
elasticities of supply and demand for each sector reported in the
academic literature. More detailed information is provided in Section 4
and Appendix C of the Economic Analysis. Assuming these levels of cost
passthrough in these sectors, the magnitude of the estimated impacts
decreases to the affordable or moderate impact category. Even in light
of the uncertainty of cost passthrough (both in terms of whether the
operations are able to pass cost increases up the marketing chain and
the amount of any cost passthrough), EPA proposes that the proposed
regulations will be economically achievable to all hog and broiler
operations.
Although EPA's analysis does not consider cost passthrough among
cattle or dairy operations, EPA does expect that long-run market and
structural adjustment by producers in this sector will diminish the
estimated impacts. However, EPA did determine that an evaluation of
economic impacts to dairy producers would require that EPA assume cost
passthrough levels in excess of 50 percent before operations in the
financial stress category would, instead, fall into the affordable or
moderate impact category. EPA did not conduct a similar evaluation of
estimated impacts to beef cattle and heifer operations.
EPA believes that the assumptions of cost passthrough are
appropriate for the pork and poultry sectors. As discussed in Section
VI, EPA expects that meat packing plants and slaughtering facilities in
the pork and poultry industries may be affected by the proposed co-
permitting requirements in today's proposed regulations. Given the
efficiency of integration and closer producer-processor linkages, the
processor has an incentive to ensure a continued production by contract
growers. EPA expects that these operations will be able to pass on a
portion of all incurred compliance costs and will, thus, more easily
absorb the costs associated with today's proposed rule. This
passthrough may be achieved either through higher contract prices or
through processor-subsidized centralized off-site or on-site waste
treatment and/or development of marketable uses for manure.
EPA recognizes, however, that some industry representatives do not
support assumptions of cost passthrough from contract producers to
integrators, as also noted by many small entity representatives during
the SBREFA outreach process as well as by members of the SBAR Panel.
These commenters have noted that integrators have a bargaining
advantage in negotiating contracts, which may ultimately allow them to
force producers to incur all compliance costs as well as allow them to
pass any additional costs down to growers that may be incurred by the
processing firm. To examine this issue, EPA conducted an extensive
review of the agricultural literature on market power in each of the
livestock and poultry sectors and concluded that there is little
evidence to suggest that increased production costs would be prevented
from being passed on through the market levels. This information is
provided in the rulemaking record. Given the uncertainty of whether
costs will be passed on, EPA's results are presented assuming some
degree of cost passthrough and also no cost passthrough (i.e., the
highest level of impacts projected). EPA requests comment on its cost
passthrough assumptions. Although EPA does consider the results of both
of these analyses in making its determination of economic
achievability, EPA's overall conclusions do not rely on assumptions of
cost passthrough.
Finally, EPA believes its estimated impacts may be overstated since
the analysis does not quantify various cost offsets that are available
to most operations. One source of potential cost offset is cost share
and technical assistance available to operators for on-site
improvements that are available from various state and federal
programs, such as the Environmental Quality
[[Page 3090]]
Incentives Program (EQIP) administered by USDA. Another source of cost
offset is revenue from manure sales, particularly of relatively higher
value dry poultry litter. EPA's analysis does not account for these
possible sources of cost offsets because the amount of cost offset is
likely variable among facilities, depending on certain site-specific
conditions. If EPA were to quantify the potential cost offsets as part
of its analysis, this would further support EPA's proposed
determination that the proposed requirements are economically
achievable to affected operations. This analysis and additional
supporting documentation is provided in Section 6 of the Economic
Analysis.
Appendix D of the Economic Analysis provides results of sensitivity
analyses, conducted by EPA, to examine the impact under differing model
assumptions. This analysis examines the change in the modeling results
from varying the baseline assumptions on gross and net cash income,
debt-to-asset ratios as well as other variability factors for model
CAFOs. These sensitivity analyses conclude that the results presented
here are stable across a range of possible modeling assumptions. EPA
also conducted sensitivity analysis of the compliance costs developed
for the purpose of estimating CAFO level impacts, as documented in the
Development Document.
Table 10-6.--Impacted Operations Under the Two-Tier Structure (BAT Option/Scenario 4a)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Number of affected operations)
-----------------------------------------------------------------------------
Sector Number of CAFOs Zero cost passthrough Partial cost passthrough
-----------------------------------------------------------------------------
Affordable Moderate Stress Affordable Moderate Stress
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fed Cattle............................................... 3,080 2,830 240 10 ND ND ND
Veal..................................................... 90 90 0 0 ND ND ND
Heifer................................................... 800 680 120 0 ND ND ND
Dairy.................................................... 3,760 3,240 200 320 ND ND ND
Hogs: GF \1\............................................. 2,690 1,710 180 810 2,690 0 0
Hogs: FF \1\............................................. 5,860 5,210 30 610 5,860 0 0
Broilers \4\............................................. 9,780 1,960 7,670 150 8,610 1,170 0
Layers--Wet \2\.......................................... 360 360 0 0 ND ND ND
Layers--Dry \2\.......................................... 1,280 1,280 0 0 ND ND ND
Turkeys.................................................. 1,280 1,230 50 0 ND ND ND
----------------------------------------------------------------------------------------------
Total \3\............................................ 28,970 18, 580 8,490 1,890 26,840 1,800 330
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Impact estimates shown include impacts to designated operations.
Numbers may not add due to rounding. ND=Not Determined. Option/Scenario definitions provided in Table 10-2.
Category definitions (``Affordable,'' ``Moderate'' and ``Stress'') are provided in Section X.F.1.
\1\ ``Hogs: FF'' are farrow-finish (includes breeder and nursery pigs); ``Hogs: GF'' are grower-finish only.
\2\ ``Layers: wet'' are operations with liquid manure systems; ``Layers: dry'' are operations with dry systems.
\3\ ``Total'' does not adjust for operations with mixed animal types, for comparison purposes, to avoid understating costs at operations with more than
one animal type that may incur costs to comply with the proposed requirements for each type of animal that is raised on-site.
Table 10-7.--Impacted Operations Under the Three-Tier Structure (BAT Option/Scenario 3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Number of affected operations)
-----------------------------------------------------------------------------
Sector Number of Zero cost passthrough Partial cost passthrough
CAFOs -----------------------------------------------------------------------------
Affordable Moderate Stress Affordable Moderate Stress
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fed Cattle................................................ 3,210 2,540 650 20 ND ND ND
Veal...................................................... 140 140 0 0 ND ND ND
Heifer.................................................... 980 800 150 30 ND ND ND
Dairy..................................................... 6,480 5,300 560 610 ND ND ND
Hogs: GF \2\.............................................. 2,650 1,660 190 810 2,650 0 0
Hogs: FF \1\.............................................. 5,710 5,070 30 610 5,710 0 0
Broilers.................................................. 13,740 1,850 11,560 330 12,320 1,440 0
Layers--Wet \2\........................................... 360 360 0 0 ND ND ND
Layers--Dry \2\........................................... 1,660 1,660 0 0 ND ND ND
Turkeys................................................... 2,060 1,950 110 0 ND ND ND
---------------------------------------------------------------------------------------------
Total \3\............................................. 37,000 21,300 13,250 2,410 33,410 2,930 660
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Impact estimates shown include impacts to designated operations.
Numbers may not add due to rounding. ND=Not Determined. Option/Scenario definitions provided in Table 10-2.
Category definitions (``Affordable,'' ``Moderate'' and ``Stress'') are provided in Section X.F.1.
\1\ ``Hogs: FF'' are farrow-finish (includes breeder and nursery pigs); ``Hogs: GF'' are grower-finish only.
\2\ ``Layers: wet'' are operations with liquid manure systems; ``Layers: dry'' are operations with dry systems.
\3\ ``Total'' does not adjust for operations with mixed animal types, for comparison purposes, to avoid understating costs at operations with more than
one animal type that may incur costs to comply with the proposed requirements for each type of animal that is raised on-site.
b. Economic Impacts to Existing CAFOs under Alternative Regulatory
Options and Scenarios. Table 10-8 presents estimated financial stress
impacts to model CAFOs under alternative option and scenario
combinations, assuming that no costs passthrough. The results shown are
aggregated and combine impacts in the cattle sector (including all
beef, veal and heifer operations), hog sector (including all phases of
production), and poultry
[[Page 3091]]
sector (including all broiler, egg laying and turkey operations).
Results are shown for Scenario 4a (two-tier), Scenario 3 (three-tier),
and Scenario 4b. Results are shown for technology Options 1 through 5.
Additional information is available in the Economic Analysis that
supports today's rulemaking.
As shown in Table 10-8, the number of potential closures range from
610 operations (Option 1 in combination with all Scenarios) to more
than 14,000 potential closures (Option 4/Scenario 4b). Among options,
the number of possible closures are highest under the more stringent
options, including Options 3A (i.e., requires groundwater controls at
operations where there is a determined groundwater hydrologic
connection to surface waters), Option 4 (groundwater controls and
surface water sampling), and Option 5 (i.e., zero discharge from the
animal production area with no exception for storm events). Differences
across scenarios reflects differences in the number of affected
operations; accordingly, the number of closures is greatest under
Scenario 4b that would define as CAFOs all confinement operations with
more than 300 AU.
Table 10-8.--``Stress'' Impacts at CAFOs Under Alternative Options/Scenarios
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Number of operations)
Number of ------------------------------------------------------------------------------------
Sector CAFOs Option 3A
Option 1 Option 2 Option 3 \1\ Option 4 Option 5 BAT option
--------------------------------------------------------------------------------------------------------------------------------------------------------
BAT Option/NPDES Scenario 4a (>500 AU)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle................................................. 3,960 0 0 0 10 0 30 10
Dairy.................................................. 3,760 0 0 0 320 0 0 320
Hogs................................................... 8,550 610 300 230 310 570 1,420 1,420
Poultry................................................ 12,700 0 150 260 100 6,660 150 150
------------------------------------------------------------------------------------------------
Total \2\............................................ 28,970 610 450 490 730 7,230 1,590 1,890
--------------------------------------------------------------------------------------------------------------------------------------------------------
BAT Option/NPDES Scenario 4b (>300 AU)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle................................................. 5,330 0 0 0 90 30 180 90
Dairy.................................................. 7,140 0 0 0 700 0 0 700
Hogs................................................... 14,370 610 300 230 330 570 1,420 1,420
Poultry................................................ 18,300 0 320 470 380 11,030 320 320
------------------------------------------------------------------------------------------------
Total \2\............................................ 45,140 610 620 700 1,500 11,630 1,910 2,530
--------------------------------------------------------------------------------------------------------------------------------------------------------
BAT Option/NPDES Scenario 3 (>300 AU with certification)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle................................................. 4,330 0 0 0 50 0 100 50
Dairy.................................................. 6,480 0 0 0 610 0 0 610
Hogs................................................... 8,360 610 300 230 320 570 1,420 1,420
Poultry................................................ 17,830 0 330 470 370 10,740 330 330
Total \2\............................................ 37,000 610 630 700 1,350 11,310 1,850 2,410
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Impact estimates shown include impacts to designated operations.
Numbers may not add due to rounding. ND = Not Determined. Option/Scenario definitions provided in Table 10-2.
\1\ Option 3A impacts reflect operations where there is a determined groundwater hydrologic connection to surface waters (assumed at 24 percent of the
affected operations).
\2\ ``Total'' does not adjust for operations with mixed animal types, for comparison purposes, to avoid understating costs at operations with more than
one animal type that may incur costs to comply with the proposed requirements for each type of animal that is raised on-site. The number of CAFOs
shown includes expected defined CAFOs only and excludes designated facilities.
c. Economic Analysis of New CAFOs from NSPS under the Proposed
Regulations. For new sources, EPA is proposing that operations meet
performance standards, as specified by the BAT requirements (Option 3
NSPS, beef and dairy subcategories, and Option 5 NSPS, swine and
poultry subcategories), with the additional requirement that all new
hog and poultry operations also implement groundwater controls where
there is a hydrologic link to surface water (Option 3 NSPS, swine and
poultry subcategories). Additional information on new source
requirements is provided in Section VIII of this document.
In general, EPA believes that new CAFOs will be able to comply at
costs that are similar to, or less than, the costs for existing
sources, because new sources can apply control technologies more
efficiently than sources that need to retrofit for those technologies.
New sources will be able to avoid these costs that will be incurred by
existing sources. Furthermore, EPA believes that new sources can avoid
the costs associated with ground water protection through careful site
selection. There is nothing about today's proposal that would give
existing operators a cost advantage over new feedlot operators;
therefore, new source standards are not expected to present a barrier
to entry for new facilities.
EPA's analysis of the NSPS costs indicate that requiring Option 3
for new sources in the beef and dairy subcategories and both Option 3
NSPS and Option 5 NSPS for the swine and poultry subcategories
(``Option 5+3 NSPS'') would be affordable and would not create any
barriers to entry into those sectors. The basis for this determination
is as follows. Option 5+3 NSPS is considered equivalent to Option 5 for
new sources in terms of cost. EPA is proposing that Option 3 NSPS for
beef and dairy subcategories and Option 5 NSPS for swine and poultry
subcategories is economically achievable for existing sources. Since
the estimated costs for these options are the same as or less expensive
than costs for these same options for existing sources, no barriers to
entry are created.
Under Option 5+3 NSPS, costs for new sources in the swine and
poultry subcategories would be the same as or
[[Page 3092]]
less than those for equivalent existing sources (BAT under Option 5),
as long as new sources are not sited in areas where there is a
hydrologic link to surface water. New operations are not expected to
incur costs estimated under Option 3A, which includes groundwater
controls, since they are not likely to establish a new operation where
there is a hydrologic link to surface waters (and where operating
expenses would be more costly). Thus EPA assumes that the costs for
Option 5+3 NSPS are the same as those for Option 5 NSPS, which in turn
are the same as those for Option 5 BAT. EPA is proposing that Option 5
BAT is economically achievable for existing sources in the swine and
poultry subcategories and therefore this same option should be
affordable to new sources. Furthermore, because costs to new sources
for meeting Option 5 NSPS are no more expensive than the costs for
existing sources to meet Option 5 BAT, there should be no barriers to
entry.
The estimated costs of Option 3 NSPS for the beef and dairy
subcategories are the same as or less than the costs for Option 3 BAT,
which includes retrofitting costs. EPA is proposing that Option 3 BAT
is economically achievable for existing sources in these sectors. Since
Option 3 NSPS is no more expensive than Option 3 BAT, this option
should also be economically achievable for new sources and should not
create any barriers to entry. In fact, new sources may be able to avoid
the cost of implementing groundwater controls through careful site
selection, thus their costs may be substantially lower than similar
existing sources.
EPA did not consider an option similar to Option 5+3 NSPS for the
beef and dairy subcategories (Option 8 NSPS), but found this option to
be substantially more expensive than Option 3 BAT for the dairy sector
and could create barriers to entry for this sector. Therefore, EPA
rejected this option. See Section 5 of the Economic Analysis for more
details on these analyses.
d. Economic Impacts to Offsite Recipients of CAFO Manure of the
Proposed Regulations. As discussed in Section X.D.1, EPA assesses the
economic impact to offsite recipients of CAFO manure by comparing the
estimated cost of this requirement to both aggregate and average per-
farm production costs and revenues. For the purpose of this analysis,
EPA assumes that these regulatory costs will be borne by a non-CAFO
farming operation that uses animal manures as a fertilizer substitute.
EPA estimates that 17,900 to 21,200 farming operations will incur
$9.6 million to $11.3 million in costs associated with requirements for
the offsite transfer of CAFO manure (Tables 10-3 and Table 10-4). This
translates to an average cost of roughly $540 per recipient. As
reported by USDA, farm production expenses in 1997 totaled $150.6
billion nationwide. Revenue from farm sales totaled $196.9 billion.
Averaged across the total number of farms, average per-farm costs and
revenues were $78,800 and $113,000 in 1997, respectively. Using these
data, the ratio of incremental costs to offsite recipients as a share
of average operating expenses and average farm revenue is well under
one percent. Total estimated compliance costs ($9.6 million to $11.3
million annually) as a share of aggregate farm expenses and sales is
also under one percent. This analysis is provided in Section 5 of the
Economic Analysis.
2. Processor Level Analysis
As discussed in Section X.D.2, EPA did not conduct a detailed
estimate of the costs and impacts that would accrue to individual co-
permittees due to lack of data and market information. However, EPA
believes that the framework used to estimate costs to CAFO provides a
means to evaluate the possible upper bound of costs that could accrue
to potential co-permittees, based on the potential share of (pre-tax)
costs that may be passed on from the CAFO (described in Section X.D.2).
EPA is proposing that this amount approximates the magnitude of the
costs that may be incurred by processing firms in those industries that
may be affected by the proposed co-permitting requirements.
Table 10-9 presents the results of EPA's analysis. This analysis
focuses on the potential magnitude of costs to co-permittees in the
pork and poultry sectors only since these are the sectors where the
proposed co-permitting requirements could affect processing facilities.
However, EPA did not evaluate the potential magnitude of costs to egg
and turkey processors because the compliance costs to CAFOs in these
industries is projected to be easily absorbed by CAFOs (see Section
X.F.1). The results presented in Table 10-9 are for the pork and
broiler industries only. EPA also did not evaluate the potential costs
to cattle and dairy processors because EPA does not expect that the
proposed co-permitting requirements to affect meat packing and
processing facilities in these industries, for reasons outlined in
Section VI.
The potential magnitude of costs to co-permittees is derived from
the amount of cost passthrough assumed in the CAFO level analysis,
described in Section X.F.1. For this analysis, two scenarios of cost
passthrough to processors are evaluated: partial cost passthrough
(greater than zero) and also 100 percent cost passthrough. EPA's
partial cost passthrough scenario assumes that 46 percent of all hog
compliance costs and that 35 percent of all broiler compliance costs
are passed on to the food processing sectors. Based on the results of
this analysis, EPA estimates that the range of potential annual costs
to hog processors is $135 million (partial cost passthrough) to $306
million (full cost passthrough). EPA estimates that the range of
potential annual costs to broiler processors as $34 million (partial
cost passthrough) to $117 million (full cost passthrough). These
results are shown in Table 10-9 and are expressed in 1999 pre-tax
dollars.
To assess the magnitude of impacts that could accrue to processors
using this approach, EPA compares the passed through compliance costs
to both aggregate processor costs of production and to revenues (a
sales test). The results of this analysis are shown in Table 10-9 and
are presented in terms of the equivalent 1997 compliance cost as
compared to 1997 data from the Department of Commerce on the revenue
and costs among processors in the hog and broiler industries. As shown,
EPA estimates that, even under full cost passthrough, incremental cost
changes are less than two percent and passed through compliance costs
as a share of revenue are estimated at less than one percent. EPA
solicits comment on this approach. Additional information is provided
in the Economic Analysis.
[[Page 3093]]
Table 10-9.--Impact of Passed Through Compliance Costs Under Co-proposed Alternatives
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passed through 1997 Passed through cost- Passed through cost-to-
compliance cost 1997 1997 to-revenues delivered cost
Sector -------------------------- revenues delivered ---------------------------------------------------
Partial CPT 100% CPT cost Partial CPT 100% CPT Partial CPT 100% CPT
--------------------------------------------------------------------------------------------------------------------------------------------------------
($1999, million)
($1997, million)
(percent, comparing costs in $1997)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hog Processors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Two-Tier........................................ 135 294 38,500 15,700 0.3% 0.7% 0.8% 1.8%
Three-Tier...................................... 141 306 ........... ........... 0.4% 0.8% 0.9% 1.9%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Broiler Meat Processors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Two-Tier........................................ 34 97 17,700 9,100 0.2% 0.5% 0.4% 1.0%
Three-Tier...................................... 41 117 ........... ........... 0.2% 0.6% 0.4% 1.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. 1997 processor revenues and costs are from the Department of Commerce. Option/Scenario definitions provided in Table 10-2. Estimated
compliance costs are pre-tax. CPT = Cost passthrough. Partial CPT assumes 46% CPT for the hog sector and 35% CPT for the broiler sector.
3. Market Level Analysis
As discussed in Section X.D.3, EPA's market analysis evaluates the
effects of the proposed regulations on commodity prices and quantities
at the national level. EPA's market model predicts that the proposed
regulations will not result in significant industry-level changes in
production and prices for most sectors. Tables 10-10 and 10-11 show
predicted farm and retail price changes across the two-tier (500 AU
threshold) and three-tier structures. For comparison purposes, the
average annual percentage change in price from 1990 to 1998 is shown.
Analyses of other technology options and scenarios considered by EPA
are provided in the record.
EPA expects that predicted changes in animal production may raise
producer prices, as the market adjusts to the proposed regulatory
requirements. For most sectors, EPA estimates that producer price
changes will rise by less than one percent of the pre-regulation
baseline price (Table 10-10). The exception is in the hog sector, where
estimated compliance costs slightly exceed one percent of the baseline
price. At the retail level, EPA expects that the proposed regulations
will not have a substantial impact on overall production or consumer
prices for value-added meat, eggs, and fluid milk and dairy products.
EPA estimates that retail price increases resulting from the proposed
regulations will be under one percent of baseline prices in all
sectors, averaging below the rate of general price inflation for all
foods (Table 10-11). In terms of retail level price changes, EPA
estimates that poultry and red meat prices will rise about one cent per
pound. EPA also estimates that egg prices will rise by about one cent
per dozen and that milk prices will rise by about one cent per gallon.
Appendix D of the Economic Analysis provides results of sensitivity
analyses, conducted by EPA, to examine the impact under differing model
assumptions. EPA examined variations in the price elasticities and
prices assumed for these industries, based on information reported in
the agricultural literature and statistical compendiums. These
sensitivity analyses demonstrate that the results presented here are
stable across a range of possible modeling assumptions.
Table 10-10.--Estimated Increases in Farm Prices Under the Co-proposed Alternatives
--------------------------------------------------------------------------------------------------------------------------------------------------------
Broilers Layers (cents/ Turkeys (cents/
Option/Scenario Beef ($/cwt) Dairy ($/cwt) Hogs ($/cwt) (cents/lb) doz.) lb)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pre-reg. Avg Price...................................... $68.65 $13.90 $56.41 38.43 72.51 41.66
Avg. Chg 90-98.......................................... 4.6% 8.0% 15.2% 5.7% 11.5% 4.4%
Two-Tier................................................ 0.22 0.06 0.61 0.19 0.14 0.13
Three-Tier.............................................. 0.24 0.08 0.66 0.23 0.15 0.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA, except historical data that are from USDA. Option/Scenario definitions provided in Table 10-2.
Table 10-11.--Estimated Increases in Retail Prices Under the Co-proposed Alternatives
--------------------------------------------------------------------------------------------------------------------------------------------------------
Broilers Layers (cents/ Turkeys
Option/Scenario Beef ($/lb) Dairy (Index) Hogs ($/lb) (cents/lb) doz.) (cents/lb)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pre-reg. Avg Price...................................... $2.91 145.50 $2.55 156.86 110.11 109.18
Avg. Chg 90-98 (%)...................................... 2.3% 2.4% 5.1% 3.0% 7.2% 2.4%
Two-Tier................................................ 0.00 0.61 0.01 0.19 0.14 0.13
Three-Tier.............................................. 0.00 0.78 0.01 0.23 0.15 0.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA, except historical data that are from USDA. Option/Scenario definitions provided in Table 10-2.
EPA does not expect that the proposed regulations will result in
significant changes in aggregate employment or national economic
output, measured in terms of Gross Domestic Product (GDP). EPA expects,
however, that there will be losses in employment and economic output
associated with decreases in animal production due to rising compliance
costs. These losses are estimated throughout the entire economy, using
[[Page 3094]]
available modeling approaches, and are not attributable to the
regulated community only. This analysis also does not adjust for
offsetting increases in other parts of the economy and other sector
employment that may be stimulated as a result of the proposed
regulations, such as the construction and farm services sectors.
Table 10-12 show these predicted changes. Employment losses are
measured in full-time equivalents (FTEs) per year, including both
direct and indirect employment. Under the two-tier structure (500 AU
threshold), EPA estimates that the reduction in aggregate national
level of employment is 16,600 FTEs. Under the three-tier structure, EPA
estimates total aggregate job losses at 18,900 FTEs. This projected
change is modest when compared to total national employment, estimated
at about 129.6 million jobs in 1997. EPA's estimate of the aggregate
reductions in national economic output is $1.7 billion under the two-
tier structure. Under the three-tier structure, EPA estimates the loss
to GDP at $1.9 billion. This projected change is also modest when
compared to total GDP, estimated at $8.3 trillion in 1997. Additional
information is available in the Economic Analysis.
Table 10-12.--Estimated Decreases in Employment and Economic Output
----------------------------------------------------------------------------------------------------------------
Option/ Scenario Beef Dairy Hogs Poultry Total
----------------------------------------------------------------------------------------------------------------
Estimated Decreases in Employment (Number of FTEs)
----------------------------------------------------------------------------------------------------------------
Two-Tier....................................... 4,600 3,200 6,400 2,400 16,600
Three-Tier..................................... 4,900 4,100 6,900 3,000 18,900
----------------------------------------------------------------------------------------------------------------
Estimated Decreases in Economic Output ($GDP)
----------------------------------------------------------------------------------------------------------------
Two-Tier....................................... $476 $307 $681 $251 $1,715
Three-Tier..................................... $510 $396 $734 $306 $1,946
----------------------------------------------------------------------------------------------------------------
Source: USEPA. Option/Scenario definitions provided in Table 10-2. FTE = Full-time equivalent.
G. Additional Impacts
1. Costs to the NPDES Permitting Authority
Additional costs will be incurred by the NPDES permitting authority
to alter existing state programs and obtain EPA approval to develop new
permits, review new permit applications and issue revised permits that
meet the proposed regulatory requirements. Under the proposed rule,
NPDES permitting authorities will incur administration costs related to
the development, issuance, and tracking of general or individual
permits.
State and federal administrative costs to issue a general permit
include costs for permit development, public notice and response to
comments, and public hearings. States and EPA may also incur costs each
time a facility operator applies for coverage under a general permit
due to the expenses associated with a Notice of Intent (NOI). These
per-facility administrative costs include initial facility inspections
and annual record keeping expenses associated with tracking NOIs.
Administrative costs for an individual permit include application
review by a permit writer, public notice, and response to comments. An
initial facility inspection may also be necessary. EPA developed its
unit permit costs assumed for this analysis based on information
obtained from a state permitting personnel. The cost assumptions used
to estimate develop, review, and approve permits and inspect facilities
are presented in the Development Document.
EPA assumes that, under the two-tier structure, an estimated 25,590
CAFOs would be permitted. This estimate consists of 24,760 State
permits (17,340 General and 7,420 Individual permits) and 1,030 Federal
permits (720 General and 310 Individual permits). Under the three-tier
structure, an estimated 31,930 CAFOs would be permitted, consisting of
30,650 State permits (21,460 General and 9,190 Individual permits) and
1,280 Federal permits (900 General and 380 Individual permits).
Information on the estimated number of permits required under other
regulatory alternatives is provided in the Economic Analysis. The basis
for these estimates is described in the Development Document that
supports this rulemaking.
As shown in Table 10-13, under the two-tier structure, EPA
estimates State and Federal administrative costs to implement the
permit program to be $6.2 million per year: $5.9 million for states and
$350,000 for EPA. Under the three-tier structure, EPA estimates State
and Federal administrative costs to implement the permit program to be
$7.7 million per year: $7.3 million for states and $416,000 for EPA.
EPA expects that the bulk (95 percent) of estimated administrative
costs will be incurred by the state permitting authority. EPA has
expressed these costs in 1999 dollars, annualized over the 5-year
permit life using a seven percent discount rate. The range of costs
across each of the regulatory options is $4.2 million to $9.1 million
annually (alternatives Scenario 1 and Scenario 4b, respectively). See
Table 10-13. (EPA did not estimate permit authority costs under
alternative NPDES Scenarios 5 and 6, described in Table 10-2.) This
analysis is available in the record and is summarized in Section 10 of
the Economic Analysis.
This analysis was conducted to evaluate the costs of the proposed
rule to governments, as required under the Unfunded Mandates Reform Act
(UMRA), as discussed in Section XIII.C of this preamble.
Table 10-13.--Annual State and Federal Administrative Costs, $1999
----------------------------------------------------------------------------------------------------------------
Regulatory scenario State Federal Total
----------------------------------------------------------------------------------------------------------------
Scenario 1...................................................... 3,922,990 268,630 4,191,620
Scenario 2...................................................... 7,233,470 413,060 7,646,530
Scenario 3 (``Three-tier'')..................................... 7,279,560 415,600 7,695,160
Scenario 4a (``Two-tier'')...................................... 5,910,750 351,090 6,224,040
[[Page 3095]]
Scenario 4b..................................................... 8,645,520 483,010 9,128,530
----------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Other supporting documentation is in the Development Document.
2. Community Impacts
As discussed in Section X.F.3, EPA does not expect that the
proposed regulations will result in significant increases in retail
food prices or reductions in national level employment.
EPA also considered other community level impacts associated with
this rulemaking. In particular, EPA considered whether the proposed
rule could have community level and/or regional impacts if it
substantially altered the competitive position of livestock and poultry
production across the nation, or led to growth or reductions in farm
production (in- or out-migration) in different regions and communities.
Ongoing structural and technological change in these industries has
influenced where farmers operate and has contributed to locational
shifts between the more traditional production regions and the more
emergent, nontraditional regions. Production is growing rapidly in
these regions due to competitive pressures from more specialized
producers who face lower per-unit costs of production. This is
especially true in hog and dairy production.
To evaluate the potential for differential impacts among farm
production regions, EPA examined employment impacts by region. EPA
concluded from this analysis that more traditional agricultural regions
would not be disproportionately affected by the proposed regulations.
This analysis is provided in the Economic Analysis.
EPA does not expect that today's proposed requirements will have a
significant impact on where animals are raised. On one hand, on-site
improvements in waste management and disposal, as required by the
proposed regulations, could accelerate recent shifts in production to
more nontraditional regions as higher cost producers in some regions
exit the market to avoid relatively higher retrofitting associated with
bringing existing facilities into compliance. On the other hand, the
proposed regulations may favor more traditional production systems
where operators grow both livestock and crops, since these operations
tend to have available cropland for land application of manure
nutrients. These types of operations tend to be more diverse and not as
specialized and, generally, tend to be smaller in size. Long-standing
farm services and input supply industries in these areas could likewise
benefit from the proposed rule, given the need to support on-site
improvements in manure management and disposal. Local and regional
governments, as well as other non-agricultural enterprises, would also
benefit.
3. Foreign Trade Impacts
Foreign trade impacts are difficult to predict, since agricultural
exports are determined by economic conditions in foreign markets and
changes in the international exchange rate for the U.S. dollar.
However, EPA predicts that foreign trade impacts as a result of the
proposed regulations will be minor given the relatively small projected
changes in overall supply and demand for these products and the slight
increase in market prices, as described in Section X.F.3.
Despite its position as one of the largest agricultural producers
in the world, historically the U.S. has not been a major player in
world markets for red meat (beef and pork) or dairy products. In fact,
until recently, the U.S. was a net importer of these products. The
presence of a large domestic market for value-added meat and dairy
products has limited U.S. reliance on developing export markets for its
products. As the U.S. has taken steps to expand export markets for red
meat and dairy products, one major obstacle has been that it remains a
relatively high cost producer of these products compared to other net
exporters, such as New Zealand, Australia, and Latin America, as well
as other more established and government-subsidized exporting
countries, including the European Union and Canada. Increasingly,
however, continued efficiency gains and low-cost feed is making the
U.S. more competitive in world markets for these products, particularly
for red meat. While today's proposed regulations may raise production
costs and potentially reduce production quantities that would otherwise
be available for export, EPA believes that any quantity and price
changes resulting from the proposed requirements will not significantly
alter the competitiveness of U.S. export markets for red meat or dairy
foods.
In contrast, U.S. poultry products account for a controlling share
of world trade and exports account for a sizable and growing share of
annual U.S. production. Given the established presence of the U.S. in
world poultry markets and the relative strength in export demand for
these products, EPA does not expect that the predicted quantity and
price changes resulting from today's proposed regulations will have a
significant impact on the competitiveness of U.S. poultry exports.
As part of its market analysis, EPA evaluated the potential for
changes in traded volumes, such as increases in imports and decreases
in exports, and concluded that volume trade will not be significantly
impacts by today's proposed regulations. EPA estimates that imports
(exports) will increase (decrease) by less than 1 percent compared to
baseline (pre-regulation) levels in each of the commodity sectors. By
sector, the potential change in imports compared to baseline trade
levels ranges from a 0.02 percent increase in broiler imports to a 0.34
percent increase in dairy product imports. The predicted drop in U.S.
exports ranges from a 0.01 percent reduction in turkey exports to a
0.25 percent reduction in hog exports.
H. Cost-Effectiveness Analysis
As part of the process of developing effluent limitations
guidelines and standards, EPA typically conducts a cost-effectiveness
analysis to compare the efficiencies of regulatory options for removing
pollutants and to compare the proposed BAT option to other regulatory
alternatives that were considered by EPA. For the purpose of this
regulatory analysis, EPA defines cost-effectiveness as the incremental
annualized cost of a technology option per incremental pound of
pollutant removed annually by that option. The analyses presented in
this section include a standard cost-effectiveness (C-E) analysis for
toxic pollutants, but also expand upon EPA's more traditional approach
to include an analysis of the cost-effectiveness of removing nutrients
and sediments. This expanded approach is more appropriate for
evaluating the broad range of pollutants in animal manure and
wastewater.
[[Page 3096]]
The American Society of Agricultural Engineers (ASAE) reports that
the constituents present in livestock and poultry manure include:
boron, cadmium, calcium, chlorine, copper, iron, lead, magnesium,
manganese, molybdenum, nickel, potassium, sodium, sulfur, zinc,
nitrogen and phosphorus species, total suspended solids, and pathogens.
Of these pollutants, EPA's standard C-E analysis is suitable to analyze
only the removal of metals and metallic compounds. EPA's standard C-E
analysis does not adequately address removals of nutrients, total
suspended solids, and pathogens. To account for the estimated removals
of nutrients and sediments under the proposed regulations in the
analysis, the Agency has developed an alternative approach to evaluate
the pollutant removal effectiveness relative to cost. At this time, EPA
has not developed an approach that would allow a similar assessment of
pathogen removals. Section 10 of the Economic Analysis describes the
methodology, data, and results of this analysis. (EPA did not estimate
cost-effectiveness for the alternative NPDES Scenarios 5 and 6,
described in Table 10-2.)
For this analysis, EPA has estimated the expected reduction of
select pollutants for each of the regulatory options considered. These
estimates measure the amount of nutrients, sediments, metals and
metallic compounds that originate from animal production areas that
would be removed under a post-regulation scenario (as compared to a
baseline scenario) and not reach U.S. waters. Additional information on
EPA's estimated loadings and removals under post-compliance conditions
is provided in the Development Document and the Benefits Analysis that
support today's rulemaking.
1. Cost-Effectiveness: Priority Pollutants
For this rulemaking, EPA identified a subset of metallic compounds
for use in the C-E
For this rulemaking, EPA identified a subset of metallic compounds
for use in the C-E analysis: zinc, copper cadmium, nickel, arsenic, and
lead. These six compounds are a subset of all the toxic compounds
reported to be present in farm animal manure (varies by animal
species). Therefore, if loading reductions of all priority pollutants
in manure were evaluated, the proposed regulations would likely be even
more cost-effective (i.e., lower cost per pound-equivalent removal).
EPA calculates cost-effectiveness as the incremental annual cost of
a pollution control option per incremental pollutant removal. In C-E
analyses, EPA measures pollutant removals in toxicity normalized units
called ``pounds-equivalent,'' where the pounds-equivalent removed for a
particular pollutant is determined by multiplying the number of pounds
of a pollutant removed by each option by a toxicity weighting factor.
The toxic weighting factors account for the differences in toxicity
among pollutants and are derived using ambient water quality criteria.
The cost-effectiveness value, therefore, represents the unit cost of
removing an additional pound-equivalent of pollutants. EPA calculates
the cost-effectiveness of a regulatory option as the ratio of pre-tax
annualized costs of an option to the annual pounds-equivalent removed
by that option, expressed as the average or incremental cost-
effectiveness for that option. EPA typically presents C-E results in
1981 dollars for comparison purposes with other regulations. EPA uses
these estimated compliance costs to calculate the cost-effectiveness of
the proposed regulations, which include total estimated costs to CAFOs
and offsite recipients of CAFO manure (Section X.E) and costs to the
permitting authority (Section X.G.1). Additional detail on this
approach is provided in Appendix E of the Economic Analysis.
Cost-effectiveness results for select regulatory alternatives are
presented in Table 10-14. Results shown in Table 10-14 include the BAT
Option (Option 3 for beef and dairy subcategories and Option 5 for the
swine and poultry subcategories) and Option 3+5 (both Option 3 and 5
for all subcategories). Options are shown for four CAFO coverage
scenarios, including CAFOs with more than 1,000 AU and CAFOs with more
than 500 AU (two-tier structure), and operations with more than 300 AU,
both under Scenario 4b and as defined under Scenario 3 (three-tier
structure). The differences in CAFO coverage provide an upper and lower
bound of the analysis to roughly depict the alternative NPDES
scenarios. Both incremental and average C-E values are shown.
Incremental cost-effectiveness is the appropriate measure for
comparing one regulatory alternative to another for the same
subcategory. In general, the lower the incremental C-E value, the more
cost-efficient the regulatory option is in removing pollutants, taking
into account their toxicity. For this rulemaking, EPA compares the
cost-effectiveness across alternative NPDES Scenarios to assess the
Agency's decision to define as CAFO operations with more than 500 AU
(two-tier structure) and, alternatively, some operations with more than
300 AU (two-tier structure).
As shown in Table 10-14, the BAT Option is the most cost-efficient
under each of the co-proposed alternatives. Under both the two-tier
(500 AU) and three-tier structures, EPA estimates an incremental cost-
effectiveness value of about $30 per pounds-equivalent (lbs.-eq.)
removed. This compares to the alternative Scenario 4b that have a
higher estimated incremental cost-effectiveness ($76/lbs.-eq., if all
CAFOs with more than 1,000 AU are regulated). (Since the change in
removals between Scenario 3 and Scenario 4b is zero, the incremental C-
E value is ``undefined.'') The BAT Option is also more efficient than
requiring Option 3+5 for all subcategories, which has higher costs but
results in no additional pollutant removals compared to the BAT Option.
This is because the ELG options differ mostly in terms of their
monitoring and sampling requirements but establish no additional
pollutant controls. (Since the change in removals between the BAT
Option and Option 3+5 is zero, the incremental C-E value is undefined.)
The average cost-effectiveness reflects the ``increment'' between
no regulation and regulatory options shown. For the BAT Option, EPA
estimates an average value at $55 per lbs.-eq. to $58 per lbs.-eq.,
depending on the proposed tier structure (Table 10-14). These estimated
average values are low compared to the alternative NPDES scenarios
since the average cost-effectiveness value is higher ($76/lbs.-eq., if
all CAFOs with more than 1,000 AU are regulated; $62/lbs.-eq. for all
CAFOs with more than 300 AU). This average cost is also low compared to
previous ELG rulemakings, where estimated costs have, in some cases,
exceeded $100/lbs.-eq. removed. This information is provided in the
Economic Analysis. In addition, as shown in Table 10-14, average cost-
effectiveness is nearly twice as high under the more stringent Option
3+5 for all subcategories (estimated at more than $100 per lbs.-eq.
removed). Costs, but also removals, are lower under the less stringent
Option 1 (also referred to as the ``nitrogen-based'' option) compared
to other technology options. As described in Section VIII, EPA
determined that this option would not represent the best available
technology and so chose not to propose it. This analysis, along with
additional results for each subcategory and other regulatory
alternatives, is provided in Appendix E on the Economic Analysis.
[[Page 3097]]
Table 10-14.--Cost-Effectiveness Results by Select Option/Scenario ($1981)
----------------------------------------------------------------------------------------------------------------
Total annual
------------------------------------
Option Pound- Average cost- Incremental cost-
equivalents Total cost \2\ effectiveness effectiveness
removed \1\
----------------------------------------------------------------------------------------------------------------
(million pounds) ($ millions) ($/lbs.-eq.)
----------------------------------------------------------------------------------------------------------------
``BAT Option'' ELG Option 3 (Beef/Dairy) and 5 (Swine/Poultry)
----------------------------------------------------------------------------------------------------------------
>1000 AU................................ 5.3 402 76 76
>500 AU ``Two-tier''.................... 8.4 491 58 29
Scenario 3 ``Three-tier''............... 9.4 518 55 28
>300 AU................................. 9.4 579 62 ND
----------------------------------------------------------------------------------------------------------------
ELG Option 3+5 (All Subcategories)
----------------------------------------------------------------------------------------------------------------
>1000 AU................................ 5.3 1,047 197 197
>500 AU ``Two-tier''.................... 8.4 1,212 144 53
Scenario 3 ``Three-tier''............... 9.4 1,251 133 40
>300 AU................................. 9.4 1,353 144 ND
----------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Option/Scenario definitions provided in Table 10-2. ND=Not Determined.
\1\ Pound-equivalent removals are calculated from removals estimated by EPA's loadings analysis, described in
the Benefits Analysis and the Development Document, adjusting for each pollutants toxic weighting factor (as
described in the Economic Analysis).
\1\ Costs are pre-tax and indexed to 1981 dollars using the Construction Cost Index.
2. Cost-Effectiveness: Nutrients and Sediments
In addition to conducting a standard C-E analysis for select toxic
pollutants (Section X.H.1), EPA also evaluated the cost-effectiveness
of removing select non-conventional and conventional pollutants,
including nitrogen, phosphorus, and sediments. For this analysis,
sediments are used as a proxy for total suspended solids (TSS). This
analysis does not follow the methodological approach of a standard C-E
analysis. Instead, this analysis compares the estimated compliance cost
per pound of pollutant removed to a recognized benchmark, such as EPA's
benchmark for conventional pollutants or other criteria for existing
treatment, as reported in available cost-effectiveness studies.
The research in this area has mostly been conducted at municipal
facilities, including publicly owned treatment works (POTWs) and
wastewater treatment plants (WWTPs). Additional information is
available based on the effectiveness of various nonpoint source
controls and BMPs (Best Management Practices) and other pollutant
control technologies that are commonly used to control runoff from
agricultural lands. A summary of this literature is provided in the
Economic Analysis. Benchmark estimates are used to evaluate the
efficiency of regulatory options in removing a range of pollutants and
to compare the results for each of the co-proposed tier structures to
other regulatory alternatives. This approach also allows for an
assessment of the types of management practices that will be
implemented to comply with the proposed regulations.
Cost-effectiveness results for select regulatory alternatives are
presented in Table 10-15. Results shown in Table 10-15 include the BAT
Option (Option 3 for beef and dairy subcategories and Option 5 for the
swine and poultry subcategories) and Option 3+5 (both Option 3 and 5
for all subcategories). Options are shown for four CAFO coverage
scenarios, including CAFOs with more than 1,000 AU and CAFOs with more
than 500 AU (two-tier structure), and operations with more than 300 AU,
both under Scenario 4b and as defined under Scenario 3 (three-tier
structure). The differences in CAFO coverage provide an upper and lower
bound of the analysis to roughly depict the alternative NPDES
scenarios.
The values in Table 10-15 are average cost-effectiveness values
that reflect the increment between no regulation and the considered
regulatory options. All costs are expressed in pre-tax 1999 dollars.
Estimated compliance costs used to calculate the cost-effectiveness of
the proposed regulations include total estimated costs to CAFOs and
offsite recipients of CAFO manure (Section X.E) and costs to the
permitting authority (Section X.G.1).
Under the co-proposed tier structures, EPA estimates an average
cost-effectiveness of nutrient removal at $4.60 per pound (two-tier) to
$4.30 per pound (three-tier) of nitrogen removed. For phosphorus
removal, removal costs are estimated at $2.10 to $2.20 per pound of
phosphorus removed (Table 10-15). For nitrogen, EPA uses a cost-
effectiveness benchmark established by EPA's Chesapeake Bay Program to
assess the costs to WWTPs to implement BNR (biological nutrient
removal) retrofits. EPA's average benchmark estimate is about $4 per
pound of nitrogen removed at WWTPs in four states (MD, VA, PA, and NY),
based on a range of costs of $0.80 to $5.90 per pound of nitrogen
removed. Using this benchmark, EPA's estimated cost-effectiveness to
remove nitrogen under the proposed regulations exceed EPA's average
benchmark value, but falls within the estimated range of removal costs.
However, EPA's estimated cost-effectiveness to remove phosphorus is
lower than benchmark used for phosphorus of roughly $10 per pound,
reported in the agricultural research as the costs to remove phosphorus
using various nonpoint source controls and management practices.
Available data on phosphorus removal costs for industrial point source
dischargers are much higher (exceed $100 per pound of phosphorus
removed). Based on these results, EPA concludes that these values are
cost-effective.
Costs and removals are nearly twice as high under the more
stringent Option 3+5 for all subcategories (Table 10-15). Costs and
removals are lower under the less stringent Option 1, but EPA chose not
to propose Option 1 because it does not represent the best available
technology (also described in Section VIII of the preamble).
EPA estimates that the co-proposed thresholds (two-tier and three-
tier structures) are more cost-effective compared to alternative AU
thresholds, given slightly lower average cost-effectiveness values
(Table 10-15). EPA
[[Page 3098]]
estimates that the average cost-effectiveness to remove nitrogen is
$5.10 per pound of nitrogen removed at a threshold that would regulate
as CAFOs all operations with more than 1,000 AU; the average cost-
effectiveness is $4.80 per pound of nitrogen removed at the alternative
300 AU threshold (Table 10-15). EPA estimates that the average cost-
effectiveness to remove phosphorus is $2.50 per pound and $2.30 per
pound of phosphorus removed at the 1,000 AU and 300 AU threshold. EPA
also estimates that the co-proposed tier structures are also the most
cost-efficient, compared to other alternatives considered by EPA. These
results, based on incremental cost-effectiveness values, are provided
in the Economic Analysis.
Table 10-15 also shows that the cost to remove sediments under the
BAT Option/Scenario is estimated at $0.003 per pound of sediment
removal (1999 dollars). This estimated per-pound removal cost is low
compared to EPA's POTW benchmark for conventional pollutants. This
benchmark measures the potential costs per pound of TSS and BOD
(biological nutrient demand) removed for an ``average'' POTW (see 51 FR
24982). Indexed to 1999 dollars, EPA's benchmark costs are about $0.70
per pound of TSS and BOD removed. The average cost-effectiveness of
sediment removal under the BAT Option/Scenario is lower than under the
alternative options. Option 1 results across the range of NPDES
Scenarios are estimated at about $0.05 per-pound removal of sediments.
This analysis, along with additional results for each subcategory and
other regulatory alternatives, is provided in Appendix E on the
Economic Analysis.
Table 10-5.--Cost-Effectiveness Results by Select Option/Scenario ($1999)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total cost
Option/Scenario \1\ Sediments Nitrogen Phosphorus Sediments Nitrogen Phosphorus
--------------------------------------------------------------------------------------------------------------------------------------------------------
($m 1999) (million pounds of removals)
(average $ per pound removed
--------------------------------------------------------------------------------------------------------------------------------------------------------
``BAT Option'' ELG Option 3 (Beef/Dairy) and 5 (Swine/Poultry)
--------------------------------------------------------------------------------------------------------------------------------------------------------
>1000 AU..................................................... $688 209050 136 280 $0.003 $5.1 $2.5
>500 AU ``Two-tier''......................................... 840 299708 182 377 0.003 4.6 2.2
>300 AU ``Three-tier''....................................... 887 335456 206 425 0.003 4.3 2.1
>300 AU...................................................... 991 335456 206 425 0.003 4.8 2.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
ELG Option 3+5 (All subcategories
--------------------------------------------------------------------------------------------------------------------------------------------------------
>1000 AU..................................................... 1,791 209050 136 280 0.009 13.2 6.4
>500 AU ``Two-tier''......................................... 2,074 299708 182 377 0.007 11.4 5.5
>300 AU ``Three-tier''....................................... 2,141 335456 206 425 0.006 10.4 5.0
>300 AU...................................................... 2,316 335456 206 425 0.007 11.2 5.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. See Economic Analysis. Option/Scenario definitions provided in Table 10-2. ND=Not Determined.
\1\ Costs are pre-tax.
I. Cost-Benefit Analysis
EPA estimated and compared the costs and benefits attributed to the
proposed regulations. The cost and benefit categories that the Agency
was able to quantify and monetize for the proposed regulations are
shown in Table 10-16.
Total social costs of the proposed regulations range from $847
million to $949 million annually, depending on the co-proposed approach
(Table 10-16). These costs include compliance costs to industry, costs
to recipients of CAFO manure, and administrative costs to States and
Federal governments.
Under the two-tier structure, EPA projects that total compliance
cost to industry is $831 million per year (pre-tax)/$572 million (post-
tax). By comparison, under the three-tier structure, EPA estimates that
the cost to industry is $930 million per year (pre-tax)/$658 million
(post-tax). Costs to industry include annualized capital costs,
operating and maintenance costs, start-up and recurring costs, and also
recordkeeping costs. Estimated costs cover four broad categories:
nutrient management planning, facility upgrades, land application, and
technologies for balancing on-farm nutrients. In addition, under the
two-tier structure, EPA estimates that the cost to off-site recipients
of CAFO manure is $10 million per year. The administrative cost to
State and Federal governments to implement the permit program is $6
million per year. Under the three-tier structure, the annual cost to
off-site recipients of manure is $11 million and State and Federal
administrative costs are $8 million per year.
EPA estimates that the monetized benefits of the proposed
regulations range from $146 million to $182 million annually, depending
on the co-proposed approach (Table 10-16). Annual benefits are
estimated to range from $146 million to $165 million under the two-tier
structure; under the three-tier structure, estimated benefits range
from $163 million to $182 million annually. EPA was only able to
monetize (i.e., place a dollar value on) a small subset of the range of
potential benefits that may accrue under the proposed regulations. Data
and methodological limitations restricted the number of benefits
categories that EPA was able to reasonably quantify and monetize. The
proposed regulations benefits are primarily in the areas of reduced
health risks and improved water quality, as shown in Table 10-16. In
addition to these monetized benefits, EPA expects that additional
benefits will accrue under the regulations, including reduced drinking
water treatment costs, reduced odor and air emissions, improved water
quality in estuaries, and avoided loss in property value near CAFOs,
among other benefits. These benefits are described in more detail in
the Benefits Analysis and other supporting documentation provided in
the record.
[[Page 3099]]
Table 10-16.--Total Annual Social Costs and Monetized Benefits, $1999
[In millions of dollars]
------------------------------------------------------------------------
``Two-Tier''
structure Three-Tier
Total social costs (500 AU structure
threshold) (Scenario 3)
------------------------------------------------------------------------
Industry Compliance Costs (pre-tax)..... 830.7 930.4
NPDES Permitting Costs.................. 6.2 7.7
Offsite Recipients of CAFO Manure....... 9.6 11.3
Total Social Costs.................. 846.5 949.4
------------------------------------------------------------------------
Monetized Benefits
------------------------------------------------------------------------
Improved surface water quality.......... 108.5 127.1
Reduced shellfish bed closures.......... 0.2-2.4 0.2-2.7
Reduced fish kills...................... 0.2-0.4 0.2-0.4
Improved water quality in private wells. 36.6-53.9 35.4-52.1
-------------------------------
Total Monetized Benefits.............. 145.5-165.1 163.0-182.3
------------------------------------------------------------------------
J. Initial Regulatory Flexibility Analysis
Pursuant to Section 603 of the Regulatory Flexibility Act (RFA) as
amended by the Small Business Regulatory Enforcement Fairness Act of
1996 (SBREFA), the Agency prepared an Initial Regulatory Flexibility
Analysis (IRFA) to assess the impacts on small livestock and poultry
feeding operations. EPA's IRFA and other supplemental economic
analyses, as required under Section 607 of the RFA, are provided in
Section 9 of the Economic Analysis. This section summarizes the
estimated number of small entities to which the rule will apply and
quantitatively describes the effects of the proposed regulations. Other
information on EPA's approach for estimating the number of small
businesses in these sectors is provided in the Final Report of the
Small Business Advocacy Review Panel on EPA's Planned Proposed Rule on
National Pollutant Discharge Elimination System (NPDES) and Effluent
Limitations Guideline (ELG) Regulations for Concentrated Animal Feeding
Operations (referred to as the ``Panel Report''). The Panel Report is
available in the rulemaking record, as well as online at http://
www.epa.gov/sbrefa. A summary of the Small Business Advocacy Review
(SBAR) Panel proceedings and recommendations is provided in Section
XII.G of this preamble. Section XIII.B of this preamble summarizes
other requirements to comply with the RFA.
1. Definition of Small Business
The Small Business Administration (SBA) defines a ``small
business'' in the livestock and poultry sectors in terms of average
annual receipts (or gross revenue). SBA size standards for these
industries define a ``small business'' as one with average annual
revenues over a 3-year period of less than $0.5 million annually for
dairy, hog, broiler, and turkey operations; $1.5 million for beef
feedlots; and $9.0 million for egg operations. In today's rule, EPA is
proposing to define a ``small'' egg laying operation for purposes of
its regulatory flexibility assessments as an operation that generates
less than $1.5 million in annual revenue. Because this definition of
small business is not the definition established under the Regulatory
Flexibility Act (RFA), EPA is specifically seeking comment on the use
of this alternative definition as part of today's notice of the
proposed rulemaking (see Section XIII.B and Section XIV). EPA also has
consulted with the SBA Chief Counsel for Advocacy on the use of this
alternative definition. EPA believes this definition better reflects
the agricultural community's sense of what constitutes a small business
and more closely aligns with the small business definitions codified by
SBA for other animal operations. A summary of EPA's rationale and
supporting analyses pertaining to this alternative definition is
provided in the record and in the Economic Analysis.
2. Number of Small Businesses Affected under the Proposed Regulations
Table 10-17 shows EPA's estimates of the number of small businesses
in the livestock and poultry sectors and the number of small businesses
that are expected to be affected by the proposed regulations. The
approach used to derive these estimates is described in more detail in
Section 9 of the Economic Analysis and also in Sections 4 and 5 of the
Panel Report. EPA presented this and other alternative approaches
during the SBAR Panel proceedings, as discussed in Section XII.G.2.a of
this document. EPA is requesting public comment on this approach.
EPA uses three steps to determine the number of small businesses
that may be affected by the proposed regulations. First, EPA identifies
small businesses in these sectors by equating SBA's annual revenue
definition with the number of animals at an operation. Second, EPA
estimates the total number of small businesses in these sectors using
farm size distribution data from USDA. Third, based on the regulatory
thresholds being proposed, EPA estimates the number of small businesses
that would be subject to the proposed requirements. These steps are
summarized below.
In the absence of farm or firm level revenue data, EPA identifies
small businesses in these sectors by equating SBA's annual revenue
definitions of ``small business'' to the number of animals at these
operations (step 1). This step produces a threshold based on the number
of animals that EPA uses to define small livestock and poultry
operations and reflects the average farm inventory (number of animals)
that would be expected at an operation with annual revenues that define
a small business. This initial conversion is necessary because USDA
collects data by farm size, not by business revenue. With the exception
of egg laying operations, EPA uses SBA's small business definition to
equate the revenue threshold with the number of animals raised on-site
at an equivalent small business in each sector. For egg laying
operations, EPA uses its alternative revenue definition of small
business.
EPA estimates the number of animals at an operation to match SBA's
[[Page 3100]]
definitions using SBA's annual revenue size standard (expressed as
annual revenue per entity) and USDA-reported farm revenue data that are
scaled on a per-animal basis (expressed as annual revenue per inventory
animal for an average facility). Financial data used for this
calculation are from USDA's 1997 ARMS database. This approach and the
data used for this calculation are outlined in Section 9 of the
Economic Analysis. The resultant size threshold represents an average
animal inventory for a small business. For the purpose of conducting
its IRFA for this rulemaking, EPA is evaluating ``small business'' for
these sectors as an operation that houses or confines less than: 1,400
fed beef cattle; 200 mature dairy cattle; 1,400 market hogs; 25,000
turkeys; 61,000 layers; or 260,000 broilers (Table 10-17).
EPA then estimates the total number of small businesses in these
sectors using facility size distribution data from USDA (step 2). Using
the threshold sizes identified for small businesses, identified above,
EPA matches these thresholds with the number of operations associated
with those size thresholds to estimate the total number of small animal
confinement operations in these sectors. Finally, based on the
regulatory thresholds being proposed--e.g., operations with more than
500 AU are CAFOs--EPA estimates the number of small businesses that
will be subject to the proposed requirements (step 3). The 1997 Census
constitutes the primary data source that EPA uses to match the small
business thresholds (e.g., a small dairy operation has less than 200
milk cows) to the number of facilities that match that size group
(e.g., the number of dairies with less than 200 cows, as reported by
USDA). EPA also used other supplemental data, including other published
USDA data and information from industry and the state extension
agencies.
Table 10-17.--Number of Small CAFOs That May Be Affected by the Proposed Regulations
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total annual
($million) Revenue per No. of animals Estimated Two-Tier Three-Tier
Sector revenue \1\ head \2\ (b) (Avg. U.S.) number of ``Small'' ``Small''
(a) (c=a/b) small AFOs CAFOs CAFOs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cattle \3\.............................................. 1.5 1,060 1,400 106,450 2,280 2,600
Dairy................................................... 0.5 2,573 200 109,740 50 50
Hogs.................................................... 0.5 363 1,400 107,880 300 300
Broilers................................................ 0.5 2 260,000 34,530 9,470 13,410
Egg Layers.............................................. 9.0 25 365,000 ND ND ND
1.5 .............. 61,000 73,710 200 590
Turkeys................................................. 0.5 20 25,000 12,320 0 500
All AFOs \4\............................................ NA NA NA 355,650 10,550 14,630
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA=Not Applicable. ND = Not Determined. ``AFOs'' have confined animals on-site. ``CAFOs'' are assumed to have more than 500 AU.
\1\ SBA Size Standards by SIC industry (13 CFR Part 121). EPA assumes an alternative definition of $1.5 million in annual revenues for egg layers.
\2\ Average revenue per head across all operations for each sector derived from data obtained from USDA's 1997 ARMS data.
\3\ Includes fed cattle, veal and heifers.
\4\ Total adjusts for operations with mixed animal types and includes designated CAFOs (expressed over a 10-year period). See Section VI.1 of this
document for estimates of the total number of AFOs (including operations that are not defined as small businesses by SBA).
EPA estimates that there were approximately 376,000 animal
confinement facilities in 1997 (Table 6-1). Most of these (95 percent)
are small businesses, as defined by this approach (Table 10-17).
However, not all of these operations will be affected by the proposed
regulations.
For this analysis, EPA has identified the number of CAFOs that are
also small businesses that would be subject to today's proposal. Under
the two-tier structure, EPA estimates that 10,550 operations that will
be subject to the proposed requirements that are small businesses.
Under the three-tier structure, an estimated 14,630 affected operations
are small businesses. See Table 10-17. The difference in the number of
affected small businesses is among poultry producers, particularly
broiler operations.
Under the two-tier structure, EPA estimates that there are 10,050
operations with more than 500 AU that may be defined as CAFOs that also
meet the ``small business'' definition. Under the three-tier structure,
there are 14,530 operations with more than 300 AU that may be defined
as CAFOs that are small businesses that meet the proposed risk-based
conditions (described in Section VII). These totals adjusts for the
number of operations with more than a single animal type. Under both
co-proposed alternatives, most operations are in the broiler and cattle
sectors. By broad facility size group, an estimated 4,060 operations
have more than 1,000 AU, most of which are broiler operations (about 77
percent) and cattle operations (18 percent), including fed cattle,
veal, and heifer operations. An estimated 6,490 operations have between
500 and 1,000 AU. The number of operations that would be regulated with
between 300 and 1,000 AU is estimated at 10,570 operations (accounting
for mixed operations).
Due to continued consolidation and facility closure since 1997,
EPA's estimates may overstate the actual number of small businesses in
these sectors. In addition, ongoing trends are causing some existing
small and medium size operations to expand their inventories to achieve
scale economies. Some of the CAFOs considered here as small businesses
may no longer be counted as small businesses because they now have
higher revenues. Furthermore, some CAFOs may be owned by a larger,
vertically integrated firm, and may not be a small business. EPA
expects that there are few such operations, but does not have data or
information to reliably estimate the number of CAFOs that meet this
description.
Under the two-tier structure, EPA estimates also include an
additional 500 operations with fewer than 500 AU that may be designated
as CAFOs under the proposed regulations over a 10-year period. See
Section VI. Of these, 330 operations meet the small business
definition: 50 dairies, 200 hog, 40 beef, 20 broiler, and 20 egg laying
operations. Under the three-tier structure, EPA estimates that 100
operations with fewer than 300 AU may be designated over ten years,
including 50 dairies and 50 hog operations, all of which are small
businesses. As these facilities are designated, EPA did not adjust this
total to reflect possible mixed animal
[[Page 3101]]
operations. Each of these operations are small businesses.
3. Estimated Economic Impacts to Small CAFOs under the Proposed
Regulations
EPA conducted a preliminary assessment of the potential impacts to
small CAFO businesses based on the results of a costs-to-sales test.
This screen test indicated the need for additional analysis to
characterize the nature and extent of impacts on small entities. The
results of this screening test indicate that about 80 percent (about
9,600) of the estimated number of small businesses directly subject to
the rule as CAFOs may incur costs in excess of three percent of sales
(evaluated for all operations with more than 500 AU). Compared to the
total number of all small animal confinement facilities estimated by
EPA (356,000 facilities), operations that are estimated to incur costs
in excess of three percent of sales comprise less than two percent of
all small businesses in these sectors. The results of this analysis are
provided in Section 9 of the Economic Analysis.
Based on the results of this initial assessment, EPA projected that
it would likely not certify that the proposal, if promulgated, would
not impose a significant economic impact on a substantial number of
entities. Therefore, EPA convened a Small Business Advocacy Review
Panel and prepared an Initial Regulatory Flexibility Analysis (IRFA)
pursuant to Sections 609(b) and 603 of the RFA, respectively. Section
XII.G provides more information on EPA's small business outreach and
the Panel activities during the development of this rulemaking.
The results of EPA's assessment of the financial impacts of the
proposed rule on small entities are as follows. To further examine
small businesses effects, EPA used the same approach as that used to
evaluate the impact to CAFOs under the proposed regulations described
in Section X.D.1. Economic achievability is determined by applying the
proposed criteria described in Section X.F.1. These criteria include a
sales test and also analysis of post-compliance cash flow and debt-to-
asset ratio for an average model CAFO.
Accordingly, if an average model facility is determined to incur
economic impacts under regulation that are regarded as ``Affordable''
or ``Moderate,'' then the proposed regulations are considered
economically achievable. (``Moderate'' impacts are not expected to
result in closure and are considered to be economically achievable by
EPA.) If an average operation is determined to incur ``Stress,'' then
the proposed regulations are not considered to be economically
achievable. ``Affordable'' and ``Moderate'' impacts are associated with
positive post-compliance cash flow over a 10-year period and a debt-to-
asset ratio not exceeding 40 percent, in conjunction with a sales test
result that shows that compliance costs are less than 5 percent of
sales (``Affordable'') or between 5 and 10 percent (``Moderate'').
``Stress'' impacts are associated with negative cash flow or if the
post-compliance debt-to-asset ratio exceeds 40 percent, or sales test
results that show costs equal to or exceeding 10 percent of sales. More
detail on this classification scheme is provided in Section X.F.1.
EPA is proposing that the proposed regulations are economically
achievable by small businesses in the livestock and poultry sectors.
The results of this analysis are presented in Tables 10-18 and 10-19.
As defined for this analysis, EPA's analysis indicates that the
proposed requirements are economically achievable to all affected small
businesses in the beef, veal, heifer, dairy, hog, and egg laying
sectors (``Affordable'' and also ``Moderate''). Moderate impacts may be
incurred by small businesses in some sectors, but these impacts are not
associated with operational change at the CAFO. Under the two-tier
structure, EPA expects that there are no small businesses in the turkey
sector, as defined for this analysis. Under the three-tier structure,
EPA expects that there are an estimated 500 small businesses in the
turkey sector (operations with 16,500 to 25,000 birds) (Table 10-17).
EPA's IRFA analysis indicates that the proposed requirements will
not result in financial stress to any affected small businesses in the
veal, heifer (two-tier only), hog, dairy, egg laying, and turkey
sectors. In the beef, heifer (three-tier only), and broiler sectors,
however, EPA's analysis indicates that proposed regulations could
result in financial stress to some small businesses, making these
businesses vulnerable to closure. Overall, these operations comprise
about 2 percent of all affected small CAFO businesses. For the two-tier
structure, EPA estimates that 10 small beef operations and 150 small
broiler operations will experience financial stress. For the three-tier
structure, EPA estimates that 40 small beef and heifer operations and
280 small broiler operations will experience financial stress. Small
broiler facilities with stress impacts are larger operations with more
than 1,000 AU under both tier structures. Small cattle and heifer
operations with stress impacts are those that have a ground water link
to surface water. This analysis is conducted assuming that no costs are
passed through between the CAFO and processor segments of these
industries. Based on the results of this analysis, EPA is proposing
that the proposed regulations are economically achievable to small
businesses in these sectors.
EPA believes that the small business impacts presented are
overstated for reasons summarized below. As noted in the Panel Report,
EPA believes that the number of small broiler operations is
overestimated. In the absence of business level revenue data, EPA
estimated the number of ``small businesses'' using the approach
described in Sections X.J.1 and X.J.2. Using this approach, virtually
all (>99.9 percent) broiler operations are considered ``small''
businesses. This categorization may not accurately portray actual small
operations in this sector since it classifies a 10-house broiler
operation with 260,000 birds as a small business. Information from
industry sources suggests that a two-house broiler operation with
roughly 50,000 birds is more appropriately characterized as a small
business in this sector. This information is available in the
rulemaking record. Therefore, it is likely that the number of small
broiler operations may reflect a number of medium and large size
broiler operations being considered as small entities. (During the
development of the rulemaking, EPA did consult with SBA on the use of
an alternative definition for small businesses in all affected sectors
based on animal inventory at an operation. Following discussions with
SBA, EPA decided not to use this alternative definition. This
information is provided in the record.)
EPA believes that the use of a costs-to-sales comparison is a crude
measure of impacts on small business in sectors where production
contracting is commonly used, such as in the broiler sector (but also
in the turkey, egg, and hog sectors, though to a lesser extent). As
documented in the Economic Analysis, lower reported operating revenues
in the broiler sector reflect the predominance of contract growers in
this sector. Contract growers receive a pre-negotiated contract price
that is lower than the USDA-reported producer price, thus contributing
to lower gross revenues at these operations. Lower producer prices
among contract growers is often offset by lower overall production
costs at these operations since the affiliated processor firm pays for
a substantial portion of the grower's annual variable cash expenses.
Inputs supplied by the integrator may include
[[Page 3102]]
feeder pigs or chicks, feed, veterinary services and medicines,
technical support, and transportation of animals. These variable cash
costs comprise a large component of annual operating costs, averaging
more than 70 percent of total variable and fixed costs at livestock and
poultry operations. The contract grower also faces reduced risk because
the integrator guarantees the grower a fixed output price. Because
production costs at a contract grower operation are lower than at an
independently owned operation, a profit test (costs-to-profit
comparison) is a more accurate measure of impacts at grower operations.
However, financial data are not available that differentiate between
contract grower and independent operations.
EPA's analysis also does not consider a range of potential cost
offsets available to most operations. One source of potential cost
offset is cost share and technical assistance available to operators
for on-site improvements that are available from various state and
federal programs, such as the Environmental Quality Incentives Program
(EQIP) administered by USDA. These programs specifically target smaller
farming operations. Another potential source of cost offset is manure
sales, particularly of relatively higher value dry poultry litter. More
information on how these potential sources of cost offset would reduce
the economic impacts to small operations is described in Section X.F.1
in this document and also in the Economic Analysis. EPA's analysis also
does not account for eventual cost passthrough of estimated compliance
costs through the marketing chain under longer run market adjustment.
Finally, this analysis does not take into account certain non-economic
factors that may influence a CAFO's decision to weather the boom and
bust cycles that are commonplace in agricultural markets. These other
industry-specific factors are discussed in more detail throughout the
Economic Analysis.
EPA expects that the proposed regulations will benefit the smallest
businesses in these sectors since it may create a comparative advantage
for smaller operations (less than 500 AU), especially those operations
which are not subject to the regulations. Except for the few AFOs which
are designated as CAFOs, these operations will not incur costs
associated with the proposed requirements but could benefit from
eventual higher producer prices as these markets adjust to higher
production costs in the longer term.
As detailed in Sections XII.G and XIII.B of this document, EPA
convened a Small Business Advocacy Review Panel during the development
of this rule. As described in the Panel Report, EPA considered certain
regulatory alternatives to provide relief for small businesses. Some of
these alternatives are discussed in other sections of this document,
including Section VII and Section VIII. These alternative options are
summarized in the following section and are described in more detail in
Section 9 of the Economic Analysis.
Table 10-18.--Results of EPA's Small Business Analysis Under the BAT Option/Scenario 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Zero cost passthrough
-----------------------------------------------------------------------------
Sector Number of (Number of operations (% Affected operations)
small CAFOs -----------------------------------------------------------------------------
Affordable Moderate Stress Affordable Moderate Stress
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fed Cattle................................................... 1,390 1,130 250 10 81 18 1
Veal......................................................... 90 90 0 0 100 0 0
Heifer....................................................... 800 680 120 0 85 15 0
Dairy........................................................ 50 40 10 0 80 20 0
Hogs......................................................... 300 300 0 0 100 0 0
Broilers..................................................... 9,470 1,860 7,460 150 20 79 2
Layers....................................................... 200 200 0 0 100 0 0
Turkeys...................................................... 0 0 0 0 NA NA NA
------------------------------------------------------------------------------------------
Total.................................................... 10,550 4,300 7,840 160 41 74 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. Impact estimates shown include impacts to designated operations. Option/Scenario definitions provided in Table 10-2. Category definitions
(``Affordable,'' ``Moderate'' and ``Stress'') are provided in Section X.F.1. Numbers may not add due to rounding. NA = Not Applicable.
\1\ ``Total'' does not adjust for operations with mixed animal types, for comparison purposes, to avoid understating costs at operations with more than
one animal type that may incur costs to comply with the proposed requirements for each type of animal that is raised on-site. The number of CAFOs
shown includes expected defined CAFOs only and excludes designated facilities.
Table 10-19.--Results of EPA's Small Business Analysis Under the BAT Option/Scenario 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Zero cost passthrough
-----------------------------------------------------------------------------
Sector Number of (Number of operations (% Affected operations)
small CAFOs -----------------------------------------------------------------------------
Affordable Moderate Stress Affordable Moderate Stress
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fed Cattle................................................... 1,490 1,100 380 10 74 26 1
Veal......................................................... 140 140 0 0 100 0 0
Heifer....................................................... 980 800 150 30 82 15 3
Dairy........................................................ 50 40 10 0 80 20 0
Hogs......................................................... 300 300 0 0 100 0 0
Broilers..................................................... 13,410 1,910 11,220 280 14 84 2
Layers....................................................... 590 590 0 0 100 0 0
Turkeys...................................................... 500 460 40 0 92 8 0
------------------------------------------------------------------------------------------
[[Page 3103]]
Total.................................................... 14,630 5,340 11,800 320 37 81 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USEPA. Impact estimates shown include impacts to designated operations. Option/Scenario definitions provided in Table 10-2. Category definitions
(``Affordable,'' ``Moderate'' and ``Stress'') are provided in Section X.F.1. Numbers may not add due to rounding. NA = Not Applicable.
\1\ ``Total'' does not adjust for operations with mixed animal types, for comparison purposes, to avoid understating costs at operations with more than
one animal type that may incur costs to comply with the proposed requirements for each type of animal that is raised on-site. The number of CAFOs
shown includes expected defined CAFOs only and excludes designated facilities.
4. Regulatory Relief to Small Livestock and Poultry Businesses
EPA proposes to focus the regulatory revisions in this proposal on
the largest operations, which present the greatest risk of causing
environmental harm, and in so doing, has minimized the effects of the
proposed regulations on small livestock and poultry operations. First,
EPA is proposing to establish a two-tier structure with a 500 AU
threshold. Unlike the current regulations, under which some operations
with 300 to 500 AU are defined as CAFOs, operations of this size under
the revised regulations would be CAFOs only by designation. Second, EPA
is proposing to eliminate the ``mixed'' animal calculation for
operations with more than a single animal type for determining which
AFOs are CAFOs. Third, EPA is proposing to raise the size standard for
defining egg laying operations as CAFOs.
EPA estimates that under the co-proposed alternatives, between 64
percent (two-tier) and 72 percent (three-tier) of all CAFO manure would
be covered by the regulation. (See Section IV.A of this preamble.)
Under the two-tier structure, the inclusion of all operations with more
than 300 AU instead of operations with more than 500 AU, the CAFO
definition would result in 13,800 additional operations being
regulated, along with an additional 8 percent of all manure. An
estimated 80 percent of these additional 13,800 CAFOs are small
businesses (about 10,870 CAFOs). EPA estimates that by not extending
the regulatory definition to operations with between 300 and 500 AU,
these 10,870 small businesses will not be defined as CAFOs and will
therefore not be subject to the proposed regulations. The additional
costs of extending the regulations to these small CAFO businesses is
estimated at almost $150 million across all sectors. The difference in
costs between the two-tier and the three-tier structures may be
approximated by comparing the estimated costs for these regulatory
options, which are shown in Table 10-5. Also, under the two-tier
structure, EPA is proposing to raise the size standard for defining egg
laying operations as CAFOs. This alternative would remove from the CAFO
definition egg operations with between 30,000 and 50,000 laying hens
(or 75,000 hens) that under the current rules are defined as CAFOs, if
they utilize a liquid manure management system.
In addition, under both co-proposed alternatives, EPA is proposing
to exclude mixed operations with more than a single animal type. The
Agency determined that the inclusion of these operations would
disproportionately burden small businesses while resulting in little
additional environmental benefit. Since most mixed operations tend to
be smaller in size, this exclusion represents important accommodations
for small businesses. If certain of these smaller operations are
determined to be discharging to waters of the U.S., States can later
designate them as CAFOs and subject them to the regulations.
XI. What are the Environmental Benefits of the Proposed Revisions?
A. Non-Water Quality Environmental Impacts
The regulatory options developed for this proposed rule are
intended to ensure the protection of surface water in and around animal
feeding operations. However, one or more of the requirements included
in these options may also have an impact on the amount and form of
compounds released to air, as well as the energy that is required to
operate the feedlot. Under sections 304(b) and 306 of the CWA, EPA is
to consider the non-water quality environmental impacts (NWQI) when
setting effluent limitations guidelines and standards. This section
describes the methodology EPA used to estimate the NWQI for each of the
options considered for this proposed rule. These non-water quality
environmental impacts include:
Air emissions from the feedlot operation, including animal
housing and animal waste storage and treatment areas;
Air emissions from land application activities;
Air emissions from vehicles, including the off-site
transport of waste and on-site composting operations; and
Energy impacts from land application activities and the
use of digesters.
For each regulatory option, EPA estimated the potential for new
water pollution control requirements to cause cross-media pollutant
transfers. Consistent with the approach used to estimate compliance
costs, EPA used a model-facility approach to estimate NWQIs and to
define baseline conditions. Industry-level non-water quality impacts
for each animal sector (i.e., beef, dairy, swine, and poultry) were
then estimated by multiplying the model farm impacts by the number of
facilities represented by that model farm. These results are presented
in Tables 11-1 through 11-4 for the population of operations defined as
CAFOs under the two-tier structure (operations with more than 500 AU)
and Tables 11-5 through 11-8 for the population defined as CAFOs under
the three tier structure. For details on the derivation of the model
farms, including definitions of geographic location, method of
determining model farm populations, and data on waste generation, see
the Technical Development Document.
1. Sources of Air Emissions
Animal feeding operations generate various types of animal wastes,
including manure (feces and urine), waste feed, water, bedding, dust,
and wastewater. Air emissions are generated from the decomposition of
these wastes from the point of generation through the management and
treatment of these wastes on site. The rate of generation of these
emissions varies based on a number of operational variables (e.g.,
animal species, type of housing, waste
[[Page 3104]]
management system), as well as weather conditions (temperature,
humidity, wind, time of release). A fraction of the air emissions from
AFOs are subsequently redeposited on land or in surface waters. This
atmospheric redeposition in turn can be a source for water quality
impacts.
a. Air Emissions from the Feedlot Operation. Animal housing and
manure management systems can be a significant source of air emissions.
Little data exist on these releases to allow a complete analysis of all
possible compounds. For this proposed rule, EPA has focused on the
release of greenhouse gases (methane, carbon dioxide, and nitrous
oxide), ammonia, and certain criteria air pollutants (carbon monoxide,
nitrogen oxides, volatile organic compounds, and particulate matter).
i. Greenhouse Gas Emissions from Manure Management Systems. Manure
management systems, including animal housing, produce methane
(CH4), carbon dioxide (CO2), and nitrous oxide
(N2O) emissions. Methane and carbon dioxide are produced by
the anaerobic decomposition of manure. Nitrous oxide is produced as
part of the agricultural nitrogen cycle through the denitrification of
the organic nitrogen in livestock manure and urine. Greenhouse gas
emissions for methane and nitrous oxide were estimated for this
proposed rule based on methodologies previously used by EPA's Office of
Air and Radiation. Emission estimates for carbon dioxide are based on
the relationship of carbon dioxide generation compared to methane
generation.
Methane. Methane production is directly related to the quantity of
waste, the type of waste management system used, and the temperature
and moisture of the waste. Some of the regulatory options evaluated for
animal feeding operations are based on the use of different waste
management systems which may increase or decrease methane emissions
from animal operations. In general, manure that is handled as a liquid
or in anaerobic management systems tends to produce more methane, while
manure that is handled as a solid or in aerobic management systems
produces little methane. The methane producing capacity of animal waste
is related to the maximum quantity of methane that can be produced per
kilogram of volatile solids. Values for the methane producing capacity
are available from literature and are based on animal diet. EPA
estimated methane emissions for each type of waste management system
included in the cost models. These values vary by animal type,
geographic region (the methane conversion factor is a function of the
mean ambient temperature), and type of waste management system (e.g.,
anaerobic lagoon, composting, drylot, stacked solids, or runoff storage
pond).
Methane is also produced from the digestive processes of ruminant
livestock due to enteric fermentation. Certain animal populations, such
as beef cattle on feedlots, tend to produce more methane because of
higher energy diets that produce manure with a high methane-producing
capacity. However, since the proposed regulatory options do not impose
requirements forcing CAFOs to use specific feeding strategies,
potential impacts on enteric fermentation methane emissions are
speculative and were not estimated.
Carbon Dioxide. Carbon dioxide is a naturally occurring greenhouse
gas and is continually emitted to and removed from the atmosphere.
Certain human activities, such as fossil fuel burning, cause additional
quantities of carbon dioxide to be emitted to the atmosphere. In the
case of feedlot operations, the anaerobic degradation of manure results
not only in methane emissions, but also carbon dioxide emissions. These
carbon dioxide emissions due to anaerobic degradation were estimated
for each regulatory option. In addition, under Option 6, large dairies
and swine operations would install and operate anaerobic digestion
systems with energy recovery units. The biogas produced in the digester
is burned in an engine to recover energy. EPA's emission estimates for
Option 6 include the carbon dioxide produced during this combustion
process.
Nitrous Oxide. The emission of nitrous oxide from manure management
systems is based on the nitrogen content of the manure, as well as the
length of time the manure is stored and the specific type of system
used. In general, manure that is handled as a liquid tends to produce
less nitrous oxide than manure that is handled as a solid. Some of the
regulatory options evaluated for animal feeding operations are based on
the use of waste management systems which may increase nitrous oxide
emissions from animal operations. Values for total Kjeldahl nitrogen
(TKN), a measure of organic nitrogen plus ammonia nitrogen, vary by
animal type and are typically available in the literature for animal
waste. EPA estimated nitrous oxide emissions by adjusting these
literature values with an emission factor that accounts for the varying
degree of nitrous oxide production, based on the type of manure
management system.
ii. Ammonia Emissions and Other Nitrogen Losses from Housing and
Manure Management Systems. Much of the nitrogen emitted from animal
feeding operations is in the form of ammonia. Ammonia is an important
component responsible for acidification and overnutrification of the
environment. The loss of ammonia occurs at both the point of generation
of manure, typically from urine, as well as during the storage and
treatment of animal waste. As the pH of a system rises above 7,
nitrogen in the form of ammonium is transformed into ammonia. A number
of variables affect the volatilization of ammonia from animal waste,
including the method in which the waste is stored, transported, and
treated on site and the environmental conditions present (e.g.,
temperature, pH, wind).
Animals at the feedlot operation may be housed in a number of
different ways that have an impact on the type and amount of nitrogen
emissions that will occur. Some animals are housed in traditional
confined housing (e.g., tie stall barns, freestall barns), while others
are housed in outdoor areas (e.g., drylots, paddocks). Studies have
shown that the type of housing used has a great effect on the emission
of ammonia. Management of waste within the housing area also affects
emissions (e.g., litter system, deep pit, freestall).
Anaerobic lagoons and waste storage ponds are a major component of
the waste management systems. EPA has estimated volatilization of total
nitrogen and ammonia from lagoons and ponds based on emission factors
published in the scientific literature.
iii. Criteria Air Emissions from Energy Recovery Systems. Option 6
requires the implementation of anaerobic digestion systems with energy
recovery for large dairy and swine operations. The operation of the
digestion system greatly reduces the emission of methane through the
capture of the biogas. However, the use of the biogas in an energy
recovery system does generate certain criteria air pollutants when
burned for fuel. Literature values for emission factors for carbon
monoxide (CO), oxides of nitrogen ( NOX), and volatile
organic compounds (VOCs) were used to estimate releases of criteria air
pollutants.
b. Air Emissions from Land Application Activities. Animal feeding
operations generate air emissions from the land application of animal
waste on cropland. Air emissions are primarily generated from the
volatilization of ammonia at the point the material is applied to land.
Additional emissions of nitrous oxide are liberated from
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agricultural soils when nitrogen applied to the soil undergoes
nitrification and denitrification. Loss through denitrification is
dependent on the oxygen levels of the soil to which manure is applied.
Low oxygen levels, resulting from wet, compacted, or warm soil,
increase the amount of nitrate-nitrogen released to the air as nitrogen
gas or nitrous oxide. The analysis of air emissions from land
application activities for this proposed rule focused on the
volatilization of nitrogen as ammonia because the emission of other
constituents is expected to be less significant.
The amount of nitrogen released to the environment from the
application of animal waste is affected by the rate and method in which
it is applied, the quantity of material applied, and site-specific
factors such as air temperature, wind speed, and soil pH. There is
insufficient data to quantify the effect of site-specific factors.
Since regulatory options in this proposed rule do not dictate
particular application methods, EPA assumed that the application
methods used by animal feeding operations will not significantly change
from baseline.
Because EPA expects application methods to remain stable, EPA
assumed that only the quantity of waste applied to cropland will
change. On-site nitrogen volatilization will decrease as the quantity
of waste applied to cropland decreases. The reductions of nitrogen
volatilization will be the result of reductions in the total amount of
manure applied on site. However, when both on-site and off-site
nitrogen volatilization are considered, total nitrogen volatilization
from manure is expected to remain constant. The movement of waste off-
site changes the location of the nitrogen releases but not the quantity
released. On-site, however, the volatilization rate will decrease,
reflecting the decrease in the quantity of applied waste.
EPA used the same assumptions that were used to estimate compliance
costs for land application of animal waste in order to estimate the
change in air emissions from the application of nitrogen under baseline
conditions and for each regulatory option. The cost methodology defines
three types of animal feeding operations: Category 1 facilities
currently have sufficient land to apply all manure on site; Category 2
facilities currently do not have enough land to apply all manure on
site; and Category 3 facilities currently apply no manure on site (this
manure is already being spread offsite). Neither Category 1 nor
Category 3 facilities will show a change in nitrogen emission rates
from the land application of animal manure under the proposed
regulatory options. However, Category 2 facilities will be required to
apply their waste at the agricultural rate under the regulatory
options, thus reducing the amount of manure applied on site and
subsequently reducing air emissions from on-site land application.
Under a phosphorus-based application scenario, facilities will have
to apply supplemental nitrogen fertilizer to meet crop nutrient needs.
The cost model assumes facilities will apply commercial ammonium
nitrate or urea. The application of commercial fertilizer represents an
increase in applied nutrients on site. While losses from applied
commercial nitrogen are expected to be less than those from applied
manure, data from Ohio State Extension states that both of these
fertilizers can experience losses through denitrification if placed on
wet or compacted soils. There is also a possibility that urea will
volatilize if it is dry for several days after soil application.
Ammonium nitrate fertilizer (when injected) is less likely to
volatilize because it quickly converts to nitrate nitrogen which will
not volatilize.
EPA estimated a ``worst-case scenario'' for ammonia emissions due
to commercial fertilizer application based on a 35% loss of applied
nitrogen.
c. Air Emissions from Vehicles. i. Off-Site Transportation. All
options are expected to result in increasing the amount of manure
hauled off-site, at least for some operations. Consistent with the cost
model, EPA has grouped operations into three possible transportation
categories. Category 1 facilities currently land apply all manure on
site and Category 3 facilities currently transport all manure off site.
Neither Category 1 nor Category 3 facilities require additional
transportation of manure and will not have an increase in criteria air
emissions. Category 2 facilities do not have enough land to apply all
waste on site and do not currently transport waste. These facilities
are expected to transport manure off site and therefore will have an
increase in the amount of criteria air pollutants generated by the
facility.
Hauling emissions estimates are based on calculations of the annual
amount of waste generated, the annual number of miles traveled, and
truck sizes. The number of trucks, number of trips per truck, the
amount of waste and transportation distance are all calculated within
the cost model. Vehicle emissions are calculated based on emission
factors for diesel-fueled vehicles presented in ``Compilation of Air
Pollution Emission Factors'' (AP-42). Estimates were calculated for
volatile organic compounds, nitrogen oxides, particulate matter, and
carbon monoxide.
ii. On-Site Composting Activities. Farm equipment used for on-site
composting activities also affect the generation of air emissions,
although composting of waste may also result in a reduction in
transportation air emissions. While composting waste prior to hauling
offsite can increase the marketability of the manure and may decrease
hauling costs per ton of waste for some operations, not all operations
can be expected to realize such benefits. Under Option 5, beef and
dairy operations would be required to compost their solid manure. The
criteria air emissions from on-site composting of manure were estimated
for beef and dairy operations under Option 5. The source of criteria
air emissions from composting are tractors and associated windrow-
turning equipment.
2. Summary of Air Emission Impacts
Option 1: Emissions of methane and carbon dioxide from beef and
dairy operations decrease under Option 1 due to the addition of solids
separation in the waste management system. The separated solids are
stockpiled rather than held in waste storage ponds or anaerobic
lagoons. Anaerobic conditions, and the potential of the volatile solids
to convert to methane, decrease using this drier method of handling the
waste. However, this method also results in greater conversion of
nitrogen to nitrous oxide. An increase in nitrous oxide emissions from
dairies occurs for this reason. Greenhouse gas emissions from dry
poultry operations (broilers, turkeys, and dry layers) do not change
under Option 1 since no change to the waste handling practices are
expected. These operations are already handling the waste as a dry
material. Although indoor storage of poultry litter is included in the
options, it is not expected to significantly alter the air emissions
from the litter. Emissions of greenhouse gases from swine and wet
poultry operations also do not change since no change to the waste
handling practices are expected.
Ammonia emissions occur primarily from liquid waste storage areas,
including ponds and lagoons. Under Option 1, all facilities are
required to contain surface runoff from the feedlot, thereby increasing
ammonia emissions from smaller beef and dairy CAFOs that do not
currently have runoff control ponds or lagoons. Ammonia emissions
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for the poultry and swine sectors are not expected to change under
Option 1.
Option 1 requires the application of animal waste to cropland at
agronomic rates for nitrogen. Animal feeding operations that have
excess nitrogen for their crops will need to transport their waste to
another location. The generation of criteria pollutants for all animal
sectors are expected to increase from baseline to Option 1 due to the
additional transportation of waste off-site.
Options 2-4 and 7: No change in emissions of methane, carbon
dioxide, or nitrous oxide occurs for all sectors relative to Option 1
because no significant changes in waste management are anticipated.
Likewise, no large changes are expected for ammonia emissions.
These options require the application of animal waste to cropland
at agronomic rates for phosphorus. Animal feeding operations that have
excess phosphorus for their crops will need to transport their waste to
another location. The generation of criteria pollutants are expected to
increase from Option 1 to these options because more waste will need to
be transported off site to meet agronomic rates for phosphorus.
Option 5A: Option 5A does not apply to the beef and dairy sectors.
Emissions of greenhouse gases at swine operations significantly
decrease under Option 5A, due to covering lagoons. The swine operations
are expected to flare the gas that is generated in the lagoon. The
methane will be converted, although carbon dioxide emissions will
increase. In addition, the emissions of NOX and
SOX increase because of the flaring of biogas collected from
the covered lagoon.
On-site ammonia emissions at swine operations will decrease because
the lagoon cover prevents the ammonia from leaving solution. Ammonia in
the effluent from the covered lagoon will volatilize, however, soon
after it is exposed to air.
Option 5B: Emissions of greenhouse gases from beef and dairy
operations increase under Option 5B (i.e., mandated technology of
composting), relative to Options 1 and 2. Compost operations include
the addition of organic material to the waste pile to aid in the
decomposition of the waste. This additional material also decomposes
and contributes to increased methane emissions compared to other
options. In addition, compost operations liberate more methane than
stockpiles because the windrows are turned regularly. Stockpiles tend
to form outer crusts that reduce the potential for air emissions to
occur.
Emissions of greenhouse gases for swine operations under Option 5B
are less than Option 2 due to the conversion of liquid manure handling
systems (e.g., flush lagoons) to dry manure handling systems. Dry
manure generates less methane than liquid systems. However, the
emissions are higher than either Options 5A or 6, which allow liquid
manure systems, but include destruction of the biogas generated from
those systems.
Ammonia emissions at beef and dairy operations are expected to
increase. During composting operations, the aeration of the compost
pile liberates nitrogen in the form of ammonia. Ammonia emissions at
swine operations are expected to decrease compared to Option 2, because
of liquid manure systems converting to dry operations.
Option 5B generates the least criteria air pollutants compared to
any other option for beef operations. Although composting operations
include the operation of turning equipment which uses fuel and
generates additional tractor air emissions, the process reduces the
overall volume of waste to be transported. However, for dairy,
additional organic material is added to the compost pile, which results
in slightly higher transportation emissions than Option 2. Option 5B
emissions of criteria pollutants for poultry operations are equal to
the emissions for Options 2-4 and 7, since there is no difference in
the amount of waste transported off site. The emissions from swine
operations are significantly lower than Option 2 because the conversion
of flush operations to dry housing significantly decreases the volume
of waste to be transported off site.
Option 6: Relative to Option 2, only the dairy and swine sectors
see any changes in air emissions. Emissions of methane from swine and
dairy waste under Option 6 significantly decrease due to the addition
of the anaerobic digester. A significant portion of the methane
generated is collected as biogas and converted to energy. Drylot areas
at dairies, however, will continue to generate methane that is
uncollected. Carbon dioxide emissions significantly increase as methane
is converted during the combustion process.
Although waste at large swine and dairy CAFOs will be digested, no
significant changes to ammonia emissions are expected. The ammonia
nitrogen, which is highly soluble, remains in solution in the digester.
When the digester effluent is stored in an open lagoon, the ammonia
will then be released.
Emissions of criteria pollutants from swine and dairy operations
increase due to the addition of anaerobic digestion for large dairy
operations. The digester collects biogas, which is subsequently
combusted and converted into VOCs, NOX, and CO. Hydrogen
sulfide contained in swine waste will be converted to Sox.
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