139MacDougalStreet,ThirdFloor,NewYork,NewYork10012•(212)992-8932•www.policyintegrity.org

April15,2019

VIAELECTRONICSUBMISSIONAttn: Mr.MichaelMcDavit,Oceans,Wetlands,andCommunitiesDivision,Officeof

Water(4504–T),EnvironmentalProtectionAgency; Ms.JenniferA.Moyer,RegulatoryCommunityofPractice(CECW-CO-R),U.S.

ArmyCorpsofEngineersRe: RevisedDefinitionof“WatersoftheUnitedStates,”84Fed.Reg.4,154

(proposedFeb.14,2019)DocketID: EPA–HQ–OW–2018–0149;FRL–9988–15–OWTheInstituteforPolicyIntegrityatNewYorkUniversitySchoolofLaw1(“PolicyIntegrity”)respectfullysubmitsthefollowingcommentstotheEnvironmentalProtectionAgency(the“EPA”)andtheArmyCorpsofEngineers(the“Corps”)(together,the“agencies”)regardingproposedchangestothedefinitionof“watersoftheUnitedStates,”whichdelineatesthescopeoffederalregulatoryauthorityundertheCleanWaterAct(the“CWA”)(the“ProposedReplacementRule”).2PolicyIntegrityisanon-partisanthinktankdedicatedtoimprovingthequalityofgovernmentdecision-makingthroughscholarshipinthefieldsofadministrativelaw,economics,andpublicpolicy.

Wewritetomakethefollowingspecificcomments,asdescribedmorefullybelow:

• Theagencieshavenotprovidedareasonedexplanationforimposingthecosts,intheformofforgonebenefits,oftheProposedReplacementRule.

• Theagencies’assumptionthatstateswillstepintofilltheregulatorygapleftbytheProposedReplacementRuleisunreasonable.

• Theagencies’revaluationofwetlandbenefitsisfundamentallyflawed.• Theagencies’decisiontoignoreregionalwetlandbenefitsisarbitraryand

capricious.

1ThisdocumentdoesnotpurporttopresentNewYorkUniversitySchoolofLaw’sviews,ifany.2ArmyCorpsofEngineersandEPA,RevisedDefinitionof“WatersoftheUnitedStates,”84Fed.Reg.4,154(proposedFeb.14,2019)[hereinafterProposedReplacementRule].

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• Theagencies’bifurcatedanalysisandapproachtounquantifiedforgonebenefitsunreasonablyobscuresthetrueimpactoftheProposedReplacementRule.

• Theagencieshaveinadequatelyexplainedtheirestimatesofavoidedcosts,andhaveinadequatelyexplainedwhytheProposedReplacementRule’sallegedavoidedcostsjustifyallofthequantifiedandunquantifiedforgonebenefits.

TABLEOFCONTENTS

I. ProceduralHistory.............................................................................................................................................4

II. TheAgenciesHaveNotProvidedAReasonedExplanationfortheDecisiontoCauseCostsintheFormofForgoneBenefits.....................................................................................................6

TheAgenciesAreRequiredtoProvideaReasonedExplanationforImposingtheCostsoftheProposedReplacementRule......................................................................................6

TheAgencieshaveNotProvidedaReasonedExplanationforImposingtheCostsoftheProposedReplacementRule........................................................................................................7

III. TheAgencies’DecisiontoReducetheForgoneBenefitsBasedonAssumptionsaboutStateResponseScenariosIsFundamentallyFlawed.........................................................................9

TheStateResponseAnalysisIsNotanAcceptedMeansofAccountingforRegulatoryImpactsinaCost-BenefitAnalysis...........................................................................9

EvenIftheStateResponseAnalysisWereaValidApproach,theAgencies’AssumptionthatStateswillRespondtoFilltheGapIgnoresImportantFactors....10

1. Cross-borderexternalities...........................................................................................................10

2. Resourceconstraints......................................................................................................................12

3. State-levelpoliticalfactors..........................................................................................................13

4. Stateantipathy..................................................................................................................................14

5. LegislationandRulemakings.....................................................................................................14

6. Inconsistencies..................................................................................................................................15

FederalismDoesNotJustifytheAgencies’Approach............................................................15

TheAgenciesHaveIgnoredCoststotheStates........................................................................16

IV. TheAgencies’RevaluationoftheWetlandBenefitsinStage1IsFundamentallyFlawed....................................................................................................................................................................................18

TheAgencies’NewUnitBenefitsTransferAnalysisIsRiddledwithErrors..............18

1. TheAgenciesArbitrarilyExcludeStudiesWhenTheyRevaluethe2015EconomicAnalysis’sUnitTransferAnalysis.......................................................................18

2. NoJustificationforAssigningZeroForgoneBenefitsto31States..........................19

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3. TypographicalandMethodologicalErrorsRevealthattheAgenciesHaveGrosslyUnderestimatedForgoneBenefits..........................................................................20

TheAgenciesHaveConductedaFlawedMeta-Analysis......................................................22

TheAgencies’DecisiontoIgnoretheRegionalBenefitsofWetlandsIsArbitraryandCapricious..........................................................................................................................................23

V. BifurcatingtheAnalysisandProvidingPrimarilyQualitativeEstimatesforStage2ObscurestheTrueImpactoftheProposedReplacementRule..................................................24

TheAgenciesAreRequiredtoProvideInformationAbouttheTrueImpactoftheProposal.......................................................................................................................................................24

TheLackofQuantificationintheStage2AnalysisObfuscatestheTrueImpactoftheProposedReplacementRule......................................................................................................24

TheStage2CaseStudiesAreMisleadingandPresentanAdHocApproachThatIsMethodologicallyInconsistentandBasedonSpeciousAssumptions...........................26

TheAgencies’OwnEconomicAnalysisShowsthattheyShouldNotMoveForwardwiththeProposedReplacementRule...........................................................................................29

VI. TheAgenciesDoNotAdequatelyExplainHowTheyEvaluateAvoidedCostsinStage1orWhytheAllegedAvoidedCostsJustifytheProposedRule.....................................................30

VII. TheAgenciesFailtoGiveConsiderImportantUnquantifiedForgoneBenefits.................32

VIII. Conclusion............................................................................................................................................................34

REFERENCES................................................................................................................................................................36

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I. ProceduralHistory

OnJune29,2015,theagenciesissuedafinalrulesettingforthanewdefinitionfor“watersoftheUnitedStates”undertheCWA(the“2015CleanWaterRule”).3The2015CleanWaterRulesoughtto“ensureprotectionforthenation’spublichealthandaquaticresources,andincreaseprogrampredictabilityandconsistencybyclarifyingthescopeof‘watersoftheUnitedStates’protectedundertheAct.”4Asaresultofchallengesinvariouscourts,the2015CleanWaterRuleiscurrentlyenjoinedin28states,5butitremainsineffectin22states,theDistrictofColumbia,andU.S.Territories.6

OnFebruary28,2017,thePresidentissuedExecutiveOrder13,778,directingtheagenciestoreviewandrescindorrevisethe2015CleanWaterRule.7InMarch2017,theagenciesannouncedtheirintentiontoreviewandrescindorrevisethe2015CleanWaterRuleinorderto“providegreaterclarityandregulatorycertaintyconcerningthedefinitionof‘watersoftheUnitedStates,’consistentwiththeprinciplesoutlinedintheExecutiveOrderandtheagencies’legalauthority.”8

OnJuly27,2017,theagenciespublishedanoticeofproposedrulemakingtorepealthe2015CleanWaterRuleandrecodifytheregulatorytextthatgovernedpriortothepromulgationofthe2015CleanWaterRule(the“ProposedRepeal”).9PolicyIntegrity,submittedacommentletterregardingtheProposedRepealonSeptember27,2017.10OnJuly12,2018,theagenciespublishedasupplementalnoticeofproposedrulemakingtoclarify,supplement,andseekadditionalcommentonthenoticeofproposedrulemakingtorepealthe2015CleanWaterRule.11PolicyIntegritysubmittedanadditionalcommentletterregardingthesupplementalproposalonAugust10,2018.12Totheextentapplicable,

3SeeArmyCorpsofEngineersandEPA,CleanWaterRule:Definitionof“WatersoftheUnitedStates,”80Fed.Reg.37,054(June29,2015)(“2015CleanWaterRule”).4Id.5SeeNorthDakotav.EPA,127F.Supp.3d1047,1051(D.N.D.2015);Georgiav.Pruitt,326F.Supp.3d1356(S.D.Ga.,2018);Texasv.EPA,No.3:15-cv-162,2018U.S.Dist.LEXIS160443,at*4(S.D.Tex.,Sept.12,2018).6SeeProposedReplacementRuleat4,162.7SeeExec.OrderNo.13,778,RestoringtheRuleofLaw,Federalism,andEconomicGrowthbyReviewingthe“WatersoftheUnitedStates”Rule,82Fed.Reg.12,497(Mar.3,2017).8CorpsandEPA,IntentiontoReviewandRescindorRevisetheCleanWaterRule,82Fed.Reg.12,532(Mar.6,2017).9SeeArmyCorpsofEngineersandEPA,Definitionof“WatersoftheUnitedStates”—RecodificationofPre-ExistingRules,82Fed.Reg.34,899(proposedJuly27,2017)(“ProposedRepeal”).10SeeInstituteforPolicyIntegrity,CommentLetter:CommentsontheProposedDefinitionof“watersoftheUnitedStates”—Recodification&ontheUnderlyingEconomicAnalysis,Dkt.No.EPA-HQ-OW-2017-0203,82Fed.Reg.34,899(proposedJuly27,2017)(September27,2017),availableathttps://policyintegrity.org/documents/IPI_WOTUS_comments.pdf.11SeeArmyCorpsofEngineersandEPA,Definitionof“WatersoftheUnitedStates”—RecodificationofPreexistingRule,83Fed.Reg.32,227(proposedJuly12,2018).12SeeInstituteforPolicyIntegrity,CommentLetter:CommentsontheSupplementalNoticeofProposedReplacementRulemaking,Definitionof“watersoftheUnitedStates”—RecodificationofthePreexistingRule,

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PolicyIntegrity’spriorcommentsontheProposedRepealareincorporatedbyreferenceherein.

OnFebruary6,2018,theagenciesissuedafinalruleaddingan“applicabilitydate”ofFebruary6,2020tothe2015CleanWaterRule(the“SuspensionRule”).13IntheSuspensionRule,theagenciesclarifiedthattheywill“continuetoimplementnationwidethepreviousregulatorydefinitionof[WOTUS],consistentwiththepracticeandprocedurestheagenciesimplementedlongbeforeandimmediatelyfollowingthe2015CleanWaterRulepursuanttothe[courtinjunctions].”14OnAugust16,2018,theU.S.DistrictCourtfortheDistrictofSouthCarolinaenjoinedtheSuspensionRulenationwide.15OnNovember26,2018,theU.S.DistrictCourtfortheWesternDistrictofWashingtonvacatedtheSuspensionRulenationwide.16

OnFebruary14,2019,theagenciesissuedtheProposedReplacementRule,whichpurportsto“increaseCWAprogrampredictabilityandconsistencybyincreasingclarityastothescopeof[jurisdictionalwaters]...whilerespectingStateandtribalauthorityovertheirownlandandwaterresources.”17Mostnotably,theProposedReplacementRule:excludesephemeralstreamsfromCWAjurisdiction;18altersthe2015CleanWaterRule’sdefinitionof“adjacent”wetlands;19removesandaddsvariousindependentcategorieswithinthedefinitionof“watersoftheUnitedStates;”20andeschewsaninquiryintowhethercertainwatersmaybedeemedjurisdictionalasaresultofhavinga“significantnexus”withjurisdictionalwaters.21

Dkt.No.EPA-HQ-OW-2017-0203,83Fed.Reg.32,227(proposedJuly12,2018)(August10,2018),availableathttps://policyintegrity.org/documents/Clean_Water_Rule_Supplemental_NPR_Comments_081018.pdf.13SeeArmyCorpsofEngineersandEPA,Definitionof“WatersoftheUnitedStates”–AdditionofanApplicabilityDateto2015CleanWaterRule,83Fed.Reg.5,200(proposedFebruary6,2018)(“SuspensionRule”).14Id.at5,201.15SeeSouthCarolinaCoastalConservationLeaguev.Pruitt,No.2-18-cv-330-DCN,2018U.S.Dist.LEXIS138595(D.S.C.,Aug.16,2018).16SeePugetSoundkeeperAlliance.v.AndrewWheeler,No.C15-1342-JCC,2018U.S.Dist.LEXIS1999358(W.D.Wash.,Nov.26,2018).17ProposedReplacementRuleat4,154.18Seeid.at4,204.19Compare80Fed.Reg.at37,105with84Fed.Reg.at4,204.20Seegenerally84Fed.Reg.at4,169-4,195.21See84Fed.Reg.at4,170.

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II. TheAgenciesHaveNotProvidedAReasonedExplanationfortheDecisiontoCauseCostsintheFormofForgoneBenefits

TheAgenciesAreRequiredtoProvideaReasonedExplanationforImposingtheCostsoftheProposedReplacementRule

UnderthearbitraryandcapriciousstandardoftheAdministrativeProcedureAct,22anagencymust“examinetherelevantdata”and“articulateasatisfactoryexplanationforitsactionincludingarationalconnectionbetweenthefactsfoundandthechoicemade.”23Courtswillreversewhereanexaminationoftheagency’sexplanationmakesclearthattheagencyfailedtoconsider“animportantaspectoftheproblem.”24

Inissuingthe2015CleanWaterRule,theagenciesfoundthatthebenefitsoftheruleexceededthecostsbyaratioofgreaterthan1:1.Incalculatingtherule’scostsandbenefits,theagenciesassessedtwodifferentscenariosshowingasmallerandlargerincreaseinprotectedwaters.Forthemoreconservativescenariowhereasmalleramountofwatersreceiveprotection,theagenciesestimatedannualcostsinarangeof$158M-$307Mandannualbenefitsintherangeof$339M-$350M.25Assuch,the2015CleanWaterRulepromisednetbenefits.

IntheProposedReplacementRule,theagencieshaveproposedtoreversecourseontheprotectionsimplementedinthe2015CleanWaterRuleandtoprotectevenfewerwatersthanwereprotectedbeforethe2015CleanWaterRule.Thatdecisionwillcausecosts,intheformofforgoneenvironmentalprotections.Thus,animportantaspectoftheproblemthattheagenciesmustconsiderandaddresshereisthecostoftheProposedReplacementRule,intheformoftheforgonebenefits.26

Moreover,theCleanWaterAct’soverarchinggoalisthe“[r]estorationandmaintenanceofchemical,physicalandbiologicalintegrityofNation’swaters.”27AndtheagenciesmustexplainwhetherimposingthecostsoftheProposedReplacementRuleisconsistentwiththeagencies’statutorymandate.28

225U.S.C.§706(2)(A).23MotorVehicleMfrs.Ass’nv.StateFarmMut.Auto.Ins.Co.,463U.S.29,43(1983).24Id.SeealsoF.C.C.v.FoxTelevisionStations,Inc.,556U.S.502,515(2009).2580Fed.Reg.at37,101.26StateFarm,463U.S.at43;AirAllianceHoustonv.EPA,906F.3d1049(D.C.Cir.2018)(holdingthattheagency’sfailuretoaddresstheforgonebenefitsoftherulewasarbitraryandcapricious);cf.Nat’lAss’nofHomeBuildersv.EPA,682F.3d1032,1039(D.C.Cir.2012)(findingthattheagencyproperlycalculatedthecostsofamendingaregulation);MingoLoganCoalCo.v.EPA,829F.3d710,730(D.C.Cir.2016)(Kavanaugh,J.,dissenting)(consideringthecostsofarepealis“commonsenseandsettledlaw”).27FederalWaterPollutionControlAct,33U.S.C.§1251.28SeeMichiganv.EPA,135S.Ct.2699,2707(2015)(“reasonableregulationordinarilyrequirespayingattentiontotheadvantagesanddisadvantagesofagencyaction”);NewYorkv.Reilly,969F.2d1147,1153

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Andlastly,totheextentthattheagenciesarenowrelyingontheireconomicanalysistojustifytheProposedReplacementRule,29“aseriousflawunderminingthatanalysiscanrendertheruleunreasonable.”30Moreover,whenissuinganeconomicallysignificantregulatoryaction,suchasthisone,ExecutiveOrder12,866requiresagenciestoassessthecostsandbenefits,including,butnotlimitedto,“anyadverseeffectson...health,safety,andthenaturalenvironment.”31Thisassessmentshouldbebased“onthebestreasonableobtainablescientific,technical,economic,andotherinformation.”32

TheAgencieshaveNotProvidedaReasonedExplanationforImposingtheCostsoftheProposedReplacementRule

Theagencieshavenotsatisfiedthesestandards.Thoughtheagencieshaveproducedaneconomicanalysispurportingtoshowtheforgonebenefitsoftheproposedrule,thatanalysisundercountstheforgonebenefitsateachstageinwaysthatcontravenetheliteratureanddisregardimportantfactors.Inthisway,theagencieshaveproducedabiasedandlopsidedeconomicanalysisthatfailsatitsmaintask—toprovideapictureoftheproposal’scostsandbenefits.

Infact,withthosemistakesfixed,itisverylikelythattheproposalwouldbenetcostly.Theagencieshaveprovidedtheeconomicanalysisintwostages(wecritiquethetwo-stageapproachbelow).Stage1showstheagencies’calculationofforgonebenefitsandcostsavingsofrepealingthe2015CleanWaterRule.33Stage2addressestheforgonebenefitsandcostsavingsofwithdrawingevenmoreprotectionsfromwetlandsthanwereprotectedbeforethe2015CleanWaterRule.34Lookingatthemonetizedcostsandbenefitsofthosetwostagestogether,theagenciesmakeitappearthattheProposedReplacementRuleisnetbeneficialinamajorityoftheprojectedoutcomes.Butevenaccordingtotheagencies’owncalculations,thereisascenarioinwhichthisisnotthecase.Usingtheagencies’lowestimateofavoidedcostsandtheirhighestimateofforgonebenefitsinStage1forallstates(scenario0),therepealofthe2015CleanWaterRuleisonlynetbeneficialby$60.5

(D.C.Cir.1992)(remandingrulewhereagencyfailedtoexplainhoweconomicbenefitswouldjustifyforgoingpromisedairbenefits). 29See,e.g.,84Fed.Reg.at4,168(explainingthattheagenciesareproposingtheruleinorderto“improveregulatorypredictabilityandcertaintyandeaseadministrativeburdenwhilestilleffectuatingthepurposesofthe[CleanWater]Act”).30Nat’lAss’nofHomeBuildersv.EPA,682F.3d1032,1040(D.C.Cir.2012);seealsoMotorVehicleMfrs.Ass’nv.StateFarmMut.Auto.Ins.Co.,463U.S.29,43(1983)(arbitraryandcapriciousstandardrequiresagencyto“examinetherelevantdata”and“articulateasatisfactoryexplanationforitsactionincludingarationalconnectionbetweenthefactsfoundandthechoicemade”(internalquotationmarksomitted)).31Exec.OrderNo.12,866§6(a)(3)(C),RegulatoryPlanningandReview,58Fed.Reg.51,735(Oct.4,1993).32Id.§§1(b)(7).33EPAandArmyCorpsofEngineers,EconomicAnalysisfortheProposedRevisedDefinitionof“WatersoftheUnitedStates”at1(2018)(“2018EconomicAnalysis”),https://www.epa.gov/wotus-rule/proposed-revised-definition-wotus-supporting-documents.34Id.

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million.35Inthenationalanalysisofsection404permitsintheStage2analysis,whenthelowestimateofavoidedcostsforallstatesexceptHawaiiiscombinedwiththehighestimateofforgonebenefitsforallstatesexceptHawaii,Stage2isnetcostlyby$63.8million.36PuttingthosetwostagesandscenariostogethershowsthattheProposedReplacementRuleisnotcost-benefitjustifiedagainstthelegalstatusquoofthe2015CleanWaterRule.Inotherwords,inScenario0,apossiblescenarioidentifiedbytheagencies,theruleisnetcostly—evenleavingalloftheagencies’otheranalyticalmistakesinplace.

Aswediscussbelow,Scenario0,wherestatesdonotfilltheregulatorygapleftbytheProposedReplacementRule,isthemostlikelyscenario.37Andtheagencies’analysiscontainsseveralotherseriousflaws,whichifcorrectedwouldincreasetheforgonebenefitsacrossthevariousscenariosandstages.Forexample,theagencieshaveleftoutanyestimateofthevalueofwetlandsacrossregions.Butasweexplainbelow,thatvalueisincontrovertibleandleavingitoutwasunjustified.38Similarly,correctingtheagencies’errorsintheunitbenefittransferanalysisorthemeta-analysiscouldsignificantlyincreasetheestimatesofforgonebenefits.39Moreover,theagencieshaverefusedtoquantityasignificantamountoftheStage2forgonebenefits.40Theagencieshavealsoinadequatelyexplainedtheirestimatesofcostsavingsandmayhavefailedtoconsiderhowtheavailabilityofcomplianceflexibilitiesreducethosecostsavings.Giventhatthecost-benefitanalysisisalreadysoclosetotheline,especiallyinthemostlikelyscenarios,correctinganyoneoftheseerrorswouldlikelytipthescalesandshowthattheforgonebenefitsoftheProposedReplacementRuleoutweighthecosts.

Seenfromthisperspective,itappearsasthoughtheagencieshavetakenmultipleunjustifiedstepsandmadeunjustifiedassumptions,allwiththegoalofensuringthattheeconomicanalysisshowsnetbenefitsfortheProposedReplacementRule.ButtosatisfytheirdutyundertheAdministrativeProcedureAct,theagenciesmustgiveanaccurateandreasonableassessmentofthecostsandbenefitsoftheproposal.This“requirementofreasoneddecisionmaking...preventsofficialsfromcoweringbehindbureaucraticmumbo-jumbo.”41Andalopsided,inaccurate,andresults-drivenanalysisdoesnotsatisfythatrequirement.42

35Id.at222,TableB-1.36Id.at207-08,TablesIV-60andIV-61.37SeeSectionIII.38SeeSectionIV.39SeeSectionIV.40SeeSectionV.41CompetitiveEnter.Inst.v.Nat’lHighwayTrafficSafetyAdmin.,956F.2d321,326-27(D.C.Cir.1992).42SeeAirAllianceHoustonv.EPA,906F.3d1049,1067(D.C.Cir.2018)(vacatingdelayruleforfailuretoprovideareasonedexplanationforforgoingbenefitsofChemicalDisasterRule);Californiav.U.S.BureauofLandManagement,277F.Supp.3d1106,1122(N.D.Cal.2017)(vacatingdelayrulebecausetheagencyhadagencyhadarbitrarilyfailedtoconsidertheforgonebenefitscausedbythedelay);NewYorkv.Reilly,969F.2d1147,1153(D.C.Cir.1992)(remandingrulewhereagencyfailedtoexplainhoweconomicbenefitswouldjustifyforgoingpromisedairbenefits);SierraClubv.Sigler,695F.2d957,979(5thCir.1983)(holding,

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Evenmorefundamentally,theagenciesclaimthattheyhavechosenareasonableinterpretationofthestatute.43ButgiventhatareasonableanalysisofthecostsandbenefitsoftheProposedReplacementRuledemonstratesthattherulewouldremoveprotectionsandcompromisetheintegrityofthenation’swaters,inawaythatislikelynetcostly,theproposedapproachcannotbewithintherangeofreasonableoptionsavailabletotheagencies.

III. TheAgencies’DecisiontoReducetheForgoneBenefitsBasedonAssumptionsaboutStateResponseScenariosIsFundamentallyFlawed

Inthe2018EconomicAnalysis,theagenciesreducedtheirestimateoftheforgonebenefitsofrepealingtheCleanWaterRulerelativetotheoriginal2015estimateoftheRule’sbenefitsbyassumingthatsomestateswouldmakeregulatorydecisionstofillthegapleftaftertheProposedReplacementRuleremovesprotectionsfromthewatersatissue.44Theagenciesassertthattheresultofstatesadopting“regulationsequivalenttoexistingfederalregulation”willbe“noimpact”onforgonebenefits,andthatstatesadopting“alternative...regulatorycoverage”willactuallyleadtoa“netbenefitincrease.”45Butloweringtheoverallestimateofforgonebenefitsbasedontheassumptionthatcontingentanduncertainstateresponseswillfillthegapaftertheagenciescauseharmtowetlandsandotherbodiesofwaterisnotanacceptedmethodforcalculatingtheforgonebenefits.Andevenifthemethodwereappropriate,thestatesarerequiredtoprovidemorethanjust“conclusoryorunsupportedsuppositions”thatstateswillfillthegap.46Theagencies’assumptionshereareunsupportedandwhollyspeculativeanddonotmeetthisstandard.Assuch,theagenciesshouldincreasetheestimateofforgonebenefitstoaccountforthefullforgonebenefitsinallstates.

TheStateResponseAnalysisIsNotanAcceptedMeansofAccountingforRegulatoryImpactsinaCost-BenefitAnalysis

Federalagencies’economicanalysesgenerallyshouldnotreduceforgonebenefitsbasedonassumptionsaboutspeculativestateaction,whichmayormaynotbetakeninresponsetothefederalagencies’owndecisionstorollbackarule;rather,onlythosestateregulationsthatwereinplaceexanteorarereasonablycertaintobeimplementedshouldbeconsidered.Forexample,EPAGuidelinescontemplateincorporatingthe“impactofother

withrespecttoanenvironmentalimpactstatement,thatwhenanagency“trumpet[s]”theeconomicbenefitsofaproject,itmustalsodisclosecosts,andthat“logic,fairness,andthepremisesofcost-benefitanalysis,letaloneNEPA,demandthatacost-benefitanalysisbecarriedoutobjectively”);Johnstonv.Davis,698F.2d1088,1094-95(10thCir.1983)(remandinganenvironmentalstudybecauseitmade“nomention”ofacrucialfactorthatwouldmaketheactionnetcostly).4384Fed.Reg.at41,69.442018EconomicAnalysisat56-59.452018EconomicAnalysisat28.46NetCoalitionv.SEC,615F.3d525,539(D.C.Cir.2013).

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rulescurrentlyunderconsideration”ifthey“fundamentallyaffect[]theeconomicanalysis.”47Asanotherexample,“ifanindustryiscertaintoberegulated(e.g.,bycourtorderorcongressionalmandate)butthatregulationhasnotyetbeenimplemented”anagencyshouldincludethebenefitsofthoseregulationsinthebaseline.48Inthosecases,“multiplescenarios,withandwithouttheserulesinthebaseline,maybenecessary.”49

Buthere,theagencieshavenotexaminedtheimpactofregulationsthatarecurrentlyunderconsiderationorcertaintobeimplemented.Instead,theagencieshavereducedtheforgonebenefitsduetoassumptionsaboutstaterulemakingsthatarenotcurrentlypending.Indeed,thoserulemakingsarenotcurrentlynecessaryandonlybecomenecessaryiftheagenciesrollbackprotectionsthatcurrentlyprotectthosewaters.Itisafundamentalflawtoassumethatstateswilltakestepstoprotectthenewlydamagedwaters,whenthosestepsarenecessaryonlybecausetheagencieshavedecidedtocausetheharm.

EvenIftheStateResponseAnalysisWereaValidApproach,theAgencies’AssumptionthatStateswillRespondtoFilltheGapIgnoresImportantFactors

Theagencies’assumptionsthatstateswillfillthegaparebasedonthreevariables:(1)whetherthestateisauthorizedtoadministertheNPDESprogram,orthepresenceofananalogousstate-leveldredge-and-fillpermittingprogram(“stateleveldredgedandfillprogram”);(2)thebreadthofthestate’scoverageofwaterssubjecttoregulation(“regulatewatersmorebroadlythanCWA”);and(3)thestate’sself-imposedlegalrestrictionsonregulatingwaters(“legallimitations”).50Accordingtotheagencies,analyzingthelegallandscapeinthiswaycanshowwhetherastateislikelytorespondbyregulatingthewatersthatwillnolongerbeprotectedunderthefederalCleanWaterAct.51

Butevenifreducingtheforgonebenefitsbasedonassumptionsaboutstateresponseswereappropriateasatheoreticalmatter,theagencies’analysisignoresseveralsignificantfactorsthatmakeitunlikelythatstateswillactinwaysinlinewiththeagencies’assumptions.Giventhepresenceofthesefactors,thelegallandscapeisnotasufficientbasisfortheagencies’decisionthatstateswillfillthegap.

1. Cross-borderexternalities

Becauseofinterstateenvironmentalexternalities,astatecansendpollutionacrossstatelines,therebyobtainingthelaborandfiscalbenefitsoftheeconomicactivitythatgeneratesthepollution,butnotsufferingthefullcostsofthatactivity.Theresultisanundesirably

47EPA’sGuidelinesforPreparingEconomicAnalysesat5-2(emphasisadded),https://www.epa.gov/environmental-economics/guidelines-preparing-economic-analyses.48Id.at5-3.49Id.(emphasisadded).50See2018EconomicAnalysisat39-40,42-43.51Id.at39-40.

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largeamountofpollutioncrossingstatelines.52Becausestateshavelittleincentivetointernalizeout-of-stateexternalities,itisirrationaltoexpectthatstate-levelcoverageinthewakeoftheproposedrollbackwouldbeidenticaltothebaselinewithrespecttointerstatewatersandotherout-of-stateeffects.

Waterisaprimeexampleofaresourcethatcanandoftendowncrossstatesboundariesandwherepollutioncanbesentdownstream.Forthatreason,federalregulationundertheCleanWaterActprovidesaclearadvantageoverstateactioninregulatingwaterscarryingpollutionacrossstatelines.53Indeed,inthe2015CleanWaterRule,theagenciesspecificallyincludedinterstatewatersasacoveredcategoryof“waters”tofulfillthecongressionalintenttocover“watersthatflowacross,orformapartof,stateboundaries,”54havingconcludedthat“theFederalGovernmentisinthebestpositiontoaddressissueswhichmayarisewhenwaterscrossstateboundaries.”55

Butnow,notonlydoestheProposedReplacementRuleeliminateinterstatewatersasaspecificallycoveredcategoryofwaters,buttheagenciesalsoirrationallyexpectstatestofillthegapandcoverinterstatewatersontheirown.Yettheassumptionthatstateswilladopt“equivalent”regulationsthatwillmimiccurrentfederalcoverageandsoresultin$0inforgonebenefitsisdirectlyundercutbytheagencies’admissionthatstatesare“lesslikelytoconsiderbenefitsthataccrueoutsideoftheirborders.”56Perhapsnotsurprisingly,

52SeeRichardL.Revesz,FederalismandInterstateEnvironmentalExternalities,144U.Pa.L.Rev.2341,2343(1996).53See,e.g.,DavidA.Dana,OneGreenAmerica:ContinuitiesandDiscontinuitiesinEnvironmentalFederalismintheUnitedStates,24FordhamEnvtl.LawRev.103,105(2013)(“Theemissionsofpollutantscrossingstateboundariesorpollutedwatertravellingdownstreamistheparadigmaticcaseonwhichthereisthebroadestnormativeagreementforaleadingroleforfederalenvironmentallawandgovernance.Indeed,obvious,readilyidentifiablecross-boundarytransportofindisputablyharmfulpollutantsviawaterandairisanareawhereeventhosetheoristsandcommentatorswhoarehighlycriticalofthefederalizationofenvironmentalgovernanceseeanappropriateroleforthefederalgovernment.”).542015CleanWaterRule,80Fed.Reg.37,054,37,074(June29,2015)(citingPub.L.80-845,sec.10,62Stat.1155,at1161(1948));seealsoid.at208-11(notingtheCourt’sacknowledgementoftheneedforfederallawtoresolveinterstatewaterpollutiondisputes),211-15(distinguishingRapanosandSWANCCasnotlimitingCWAjurisdictionovernon-navigableinterstatewaters),216-23(citinglegislativehistoryindicatingsupportfortheagencies’inclusionof“interstatewaters”asanindividualcategory)(citationsomitted);seealso(“ItwouldcontraveneCongress’clearlystatedintentforacourttoimposeanadditionaljurisdictionalrequirementonall...watersthatflowacross...stateboundaries....Norwouldalltheexistingwaterqualitystandardsbe‘carry[ing]outthepurposeofthisAct,’iftheonlywaterqualitystandardsthatcouldbeimplementedthroughtheAct...werethose...establishedforinterstatewatersthat...connecttowatersthatarenavigable...”)(citationsomitted).55EPAandCorps,Definitionof“WatersoftheUnitedStates”UndertheCleanWaterAct,79Fed.Reg.22,188,22,259(proposedApr.21,2014).562018EconomicAnalysisat45.

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theProposedReplacementRuleconcedesthatitwillprotectfewerinterstatewatersthanthe2015CleanWaterRule.57

Inshort,becauseinterstateexternalitiesprovideaparticularlycompellingcaseforfederalversuslocalregulation,theagencies’assumptionthatstateswillseamlesslyfillthegapwithrespecttointerstatewatersisnotjustified,andtheiranalysisofforgonebenefitsisbiased.

2. Resourceconstraints

Stateshavesignificantresourceconstraintsthatlimittheirabilitytotakeonnewenforcementresponsibilities,whichmakestheagencies’assumptionsaboutstateresponsesinappropriate.Statesalreadyaccountforthebulkofenforcementactivity,58andtheyfrequentlyfailtomeetnationalenforcementgoalsfortheirexistingresponsibilities.59Despitepleasfromstateregulatorsforincreasedfederalaidtohelpmeetthegoals,EPAgrantstostateshaveactuallydeclinedinrecentyears,sometimesexacerbatedbystatelegislaturesreducingfundingtostateenvironmentalagenciesaswell.60

Theagenciesconcedethat“stateenforcementcapabilitywouldalsopossiblybeimportantindeterminingstateresponses,”butclaimthat“nomeasureofenforcementcapabilitywasavailableforuseinthisanalysis.”61Assuch,theyassumefullcompliancewiththeimaginedstateprovisions.62

Butthereisinformationthattheagenciescouldlookattodeterminewhetherastateiscapableoffillingthegap—forinstance,states’currentbudgetallocationsandstaffingresourcesdirectedtowardswaterregulation.Andthatdatawilllikelyshowthatstatesdo

57SeeProposedReplacementRule,84Fed.Reg.at4,172.TheagenciesfurtherimplicitlyconcedethattheProposedReplacementRulewillprotectfewerinterstatewatersthanwereprotectedunderpre-2015practice:specifically,theagenciesclaimthat“mostwaters”thatweredeemedjurisdictionalasinterstatewatersunderpre-2015practicewould“likely”remainjurisdictionalundertheProposedReplacementRule,astheywouldfallwithinoneoftheotherproposedcategories.Nevertheless,thepreamble’sdiscussionofnearlyallothercategoriesconcludesthatfewerwaterswouldbedeemedjurisdictionalundertheProposedReplacementRuleascomparedtopre-2015practice.Id.;seealsoRPAat37(impoundments),38-39(tributaries),41(ditches),42-43(lakesandponds),44-45(wetlands).58SeeStatesDefendEnvironmentalRecord,Pew,https://www.pewtrusts.org/research-and-analysis/blogs/stateline/2001/05/14/states-defend-environmental-record(quotingareportbytheEnvironmentalCounciloftheStatesasestimatingthatstatesbring“about90percentofenvironmentalenforcementactionseachyear.”).59SeeU.S.EPAOfficeoftheInspectorGeneral,12-P-0113,EPAMustImproveOversightofStateEnforcement8(2011),availableathttps://www.epa.gov/sites/production/files/2015-10/documents/20111209-12-p-0113.pdf)(concludingthatstateenforcementeffortswerebothinadequateandinconsistent).60See,e.g.,MarieCusick,EPAcutswouldleavestateswithmorework,lessmoney,NPR(Apr.7,2017),availableathttps://stateimpact.npr.org/pennsylvania/2017/04/07/epa-cuts-would-leave-states-with-more-work-less-money.612018EconomicAnalysisat39n.47.Seealsoid.at42n.49.62Id.at39n.47.

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nothavethestafforresourcestofillthegap.NebraskaandNevada,forexample,areclassifiedaspotentiallyincreasingprotections,despiteeachhavingfewerthanonefull-timeemployeedevotedtosection401certification,63anddespitethefactthatNebraskahasnosystemofstatepermittingfordredgeandfillactivitiesatall.64

3. State-levelpoliticalfactors

Localpoliticalfactorswillalsocausestatestobeunabletofillthegap.Astate“maybereluctanttoadequatelypenalizeitsjurisdiction’slargestandmostpoliticallypowerfulindustrialfacilities.”65Localenforcerscanbemore“vulnerabletopressuresfromelectedofficialsorinterestgroups,pleasofeconomichardshipfromviolators,enforcementbudgetconstraints,andtoo-closerelationshipsbetweenregulatorsandregulatedentities.”66Astheagenciesnoticedintheirfederalismreview,thereis“evidencethatlocalspecialinterestsinfluenceenforcementeffortwhennationalpolicyisdelegatedtothestatelevel.”67

Moreover,asaformerheadofEPA’sOfficeofEnforcementandComplianceAssurancehasexplained,manysignificantviolatorsarenationalcompanieswithoperationsinmultiplestatesandindividualstatesfilingcasesoneatatimeisinefficientandmayleadtoinconsistentresults.68Incontrast,EPAhasacomparativeadvantageinenforcingenvironmentalregulationsagainstsuchcompanies.69

HavingEPAinvolvedatthenationallevelisalsonecessarytoensurethatanyexistinglocalenforcementachievesitsends.Federalenforcementcanactasa“backstop”preventingprivatecompaniesfromresistingstateregulators,sincetheymayfearthat“iftheydon’tresolvetheirenforcementproblemsatthestatelevel,theymayhavetofacetheEPAinstead.”70Butintheabsenceoffederalregulations,companieswillbeemboldenedtofight

63AssociationofStateWetlandManagers.StatusandTrendsReportonStateWetlandProgramsintheUnitedStates(2015)at69-70(lastupdatedMar.6,2016).64Id.at106,127.65PolicyIntegrity.Irreplaceable:WhyStatesCan’tandWon’tMakeUpforInadequateFederalEnforcementofEnvironmentalLaws(2017)at3,https://policyintegrity.org/files/media/EPA_Enforcement_June2017.pdf.66MarkAtlas,EnforcementPrinciples&Environmentalagencies:Principal-AgentRelationshipsinaDelegatedEnvironmentalProgram,41Law&Soc’yRev.939,942(2007);seealsoEricHelland,TheRevealedPreferencesofStateEPAs:Stringency,Enforcement,andSubstitutes,35Envtl.Econ.&Mgmt.242,243(1998)(“Thestringencyofthe[CWA’s]enforcementbystateagenciesisnotafunctionmerelyofbudgets,butalsoofinterestsgrouppolitics.”);CynthiaGiles,Whywecan’tjustleaveenvironmentalprotectiontothestates,Grist(Apr.26,2017),availableathttp://grist.org/opinion/why-we-cant-just-leave-environmental-protection-to-the-states(“TheEPAisfarlesslikely[thansomestateenvironmentalagencies]tobeheldhostagetocompanieswithlocalpoliticalclout.”).672018EconomicAnalysisat36(citingHelland(1998)).68SeeCynthiaGiles,Whywecan’tjustleaveenvironmentalprotectiontothestates,Grist(Apr.26,2017),availableathttp://grist.org/opinion/why-we-cant-just-leave-environmental-protection-to-the-states.69Id.70Id.

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stateregulators,“resultinginfewerandsmallersettlements,andlessdeterrenceoffutureviolations.”71This“backstop”enablescompaniestoreportcompetitors’allegedviolationstothefederalgovernmentwhenstateslacktheresourcesorwilltoensurecompliance.72Withoutthatbackstop,thereisnoguaranteethatstateswillbeabletofilltheregulatorygapleftbytheProposedReplacementRule.

4. Stateantipathy

SeveralstateshaveshownasignificantamountofantipathytotheCleanWaterRuleandthuscannotbeassumedtobewillingtofilltheregulatorygaponcetheruleisrevised.Multiplestatesclassifiedassection402category373andassection404category474(i.e.,thosestatesdeemedmostlikelytoregulatenon-jurisdictionalwatersasstatewaters)areamongthestatesthathavechallengedthe2015CleanWaterRuleincourt.Thefactthatthosestateschallengedthe2015CleanWaterRuleshouldprovidestrongproofthattheyareunlikelytopassregulationstofillthegapleftoncetheCleanWaterRuleisrepealed.

5. LegislationandRulemakings

Theagenciesrelyinpartonstatelegislationcurrentlyinplace,whichwouldpermitthosestatestostrengthentheirregulationsoverwater,inordertopredictwhethercertainstateswilldoso.However,suchlegislationisnotakintothestatehavingregulationsinplacethatcanseamlesslyfillthegapleftwhentheagenciesremoveprotectionsfromtheregulatedwaters;nordoesitequatetoastate’spreparationorwillingnesstodoso.Ifadditionalrulemakingsarerequired,thosecantakeconsiderabletime,andduringtheinterveningdelay,agapincoveragewillcauseenvironmentalharms.Moreover,givenstates’difficultieswithcost-benefitanalysis,thereisnoparticularreasontobelievethateverystatewilladoptefficientregulatoryreplacements;75somestates,inattemptingtofillthegapleftbytheproposedrepeal,mayendupwithnetcostlyreplacements.76

Further,legislationmayhavelittletonobearingonthestate’sfutureaction.Itmayhavebeenenacteddecadesagobyalegislaturecontrolledbyadifferentparty,itmayhavebeenenactedasaresponsetojudicialdecisions(andhasbeenrolledbackinsubsequentyears).77Assuch,thisfactorisinsufficienttosupportafindingthatstateswillfillthegap.

71Id.72Id.73Kansas,Louisiana,Nebraska,Nevada,NorthCarolina,WestVirginia,andWisconsin.74Forexample,FloridaandIndiana;Ohiohadalsojoinedlitigationagainstthe2015rule.75SeegenerallyJasonSchwartz,52ExperimentswithRegulatoryReview:ThePoliticalandEconomicInputsintoStateRulemakings,InstituteforPolicyintegrity,ReportNo.6(2010).76Bycomparison,theagenciesassume,withoutjustification,thatall“alternative”stateregulationswillnecessarilybenetbeneficial,see2018EconomicAnalysisat28.77SeeArielWittenberg,“CriticsslamWOTUSeconomics:‘Intheory,pigscouldfly,’”E&ENews(Jan.21,2019),availableathttps://www.eenews.net/stories/1060117957.

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6. Inconsistencies

Theagenciesdonottreatthethreevariablesconsistently.Forexample,theagenciesignorethepresenceoflegallimitationsonregulatingaquaticresourcesfortwostates—NorthCarolinaandWisconsin—andconcludethatthosestatesarelikelytolikelytoregulatenon-jurisdictionalwatersasstatewaters.78Theagenciesexplainthisdisparatetreatmentbynotingthatdespitebroadlimitationsinthesestates,“inpractice...[they]stillregulatewatersbeyondthescopeof‘watersoftheUnitedStates’...”79Butifthatlevelofvariabilityexists,thenthatthrowstheagencies’entireapproachofusingthethreevariablestomakeassumptionsaboutstateresponsesintodoubt.

Similarly,theagenciesalsonoteadditionaluncertaintiescreatedbytheinconsistencyofstatetreatmentoflawsrequiring“extrasteps”orfindingsofbenefitsinordertoimposestateregulationsbeyondfederalrequirements;80buttheagenciesdonotattempttoaccountforthisstate-by-statevariationintheiranalysis.

FederalismDoesNotJustifytheAgencies’Approach

TheagenciesreliedonfederalismliteraturetoclaimthatnetbenefitsmightincreaseifstatesfilltheregulatorygapcreatedbytheProposedReplacementRule.81Accordingtotheagencies,the“federalismliteratureillustratesthatstatesmayactuallybeinabetterpositionthanthefederalgovernmenttoregulatelocalenvironmentalpublicgoods(e.g.,waterquality).”82But,asexplainedabove,therearenumerousfactorsthatundermineanyassumptionthatstateswilleventakestepstofilltheregulatorygap.

Inanyevent,theliteraturereviewthattheagenciesreliedon,conductedbyPerG.Fredriksson,doesnotsupporttheargument.83Astheagenciesconceded,potentialbenefitsfromdecentralizationarelikelyonlyifthefollowingfactorsarepresent:“notransboundarypollution,manyjurisdictions,perfectlymobilecapitalandimmobilelabor,ahomogenouspopulation,perfectinformation,productioncostsandbenefitsthatarelocallyinternalized,andwelfaremaximizinglocalgovernments.”84Withoutthoseassumptions,themain

78See2018EconomicAnalysisat45n.1.79EPA&ArmyCorpsofEngineers,ResourceandProgrammaticAssessmentfortheProposedRevisedDefinitionof“WatersoftheUnitedStates”at57(2018).Theagenciesgoontonote:“ItisbeyondthescopeofthisResourceandProgrammaticAssessmenttoanalyzehowstateswithbroadlegallimitations(e.g.,NorthCarolinaandWisconsin)may,infact,regulatebeyondthescopeofCWAjurisdiction.However,theagencies’researchindicatesthattheirbroaderregulationdoesoccur,eitherbecauseofspecificexceptionsintheoriginalrequirementsorthroughactionofthestatelegislature.”Id.at57n.73.80Id.at57.812018EconomicAnalysisat56-57.82Id.atxiii.83PerG.Fredriksson,EnvironmentalFederalism:LessonsLearnedfromtheLiterature(Feb.28,2018),https://www.regulations.gov/document?D=EPA-HQ-OW-2018-0149-0011842018EconomicAnalysisat36(citingOatesandSchwab(1988),JournalofPublicEconomics,Volume35,Issue3,April1988,Pages333-354).

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resultschange.Asitishighlyunlikelythatallthoseassumptionsholdintherealworld,anyconclusionthatdecentralizationwillleadtobenefitsisunsupported.Particularlyinthecaseofcross-borderexternalities,theagenciesacknowledgethatstatesareunlikelytotakeintoaccountbenefitsthataccrueoutsidetheirborder.85Likewiseintheliteraturereview,Fredrikssonexplainedthattherearemanystatesthatmaynotregulateincaseswherepollutioncrossesstateborders.Forexample,Fredrikssonfoundthat“manystatesdonotappeartotakenon-residentsintoaccount”andthatstatesmayfree-rideonotherstatesinthecaseofnegativepollutionspillovers.86

Theagenciesalsoacknowledgethatlocalpoliticalinfluencesthatmaylimittheabilityofalocalgovernmenttoexpandastate’sprogramsandfillthegapleftaftertheagenciesremoveprotections.87

Inaddition,theFredrikssonreviewfindsthatstatesthatareaffectedby“investmentcompetition”maydecreasetheirprotections,eveniftheypreferstrongerprotections88andthatthereisalreadyevidenceinWisconsinthatstatesaremovingtoprotectlessthanthefederalfloor.89Insum,astheagenciesnote,“thetheoreticalliteraturearguesthatdecentralizationcanyieldinefficientlyweakregulations.”90

Despitealloftheseconcessions,theagenciesstillmaintainthatsomestatesmightcountertheimpactofthosefactorsbydecidingtoremovelegalrestrictionssothattheycanregulatemorethantheycurrentlyregulateandthatthecombinedimpactofallthesefactorsonthebenefits“isambiguous.”91

Buttheagenciespointtonothingtosupporttheassumptionthatsomestateswhichcurrentlyhavelegallimitationsonregulatingbeyondthefederaldefinitionwouldconsiderremovingthoselimits.Thatiscompletespeculation.Ontheotherhand,theliteraturesupportsthefindingthatstateslikelywillnotacttoprotecttrans-boundarybenefitsandthatstateshavelimitedresourcesandarehamperedbypoliticalinfluences.Puttingallthisevidencetogetherdemonstratesthatthereisnosupportfortheassumptionthatstateswillfillthegap.

TheAgenciesHaveIgnoredCoststotheStates

EvenifthestatescouldbeexpectedtoregulateatalevelabovetheProposedReplacementRule’srequirements—andasdetailedsupra,thereisnoevidencetosupportsuchanassumption—thoseeffortswouldcomewithcostsbornebystates.Theagencieshave

85Id.at45.86Id.at14-15.87Id.at45.88Id.89Id.at15.902018EconomicAnalysisat36.91Id.at46.

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ignoredthosecostsinthecalculationoftheeconomicimpactoftheProposedReplacementRuleandthushavearbitrarilyignoredanimportantfactoroftheproposal.92

Forexample,theagencieshaveignoredthecoststhatwillarisefromstaterulemakingprocesses.Evenifstateshavestatutesenablingthemtomaintainthebaselinelevelofcoverage,theymaynothaverulesinplace,andthuswillincurthecostsofstateregulatorsformulatingnewrules.93Stateswithoutrulesinplacewouldneedtoanalyzethecostsandbenefitstoformulatetheiralternativerules.94Forcingstatestogothroughthenecessarylegislativeandregulatoryprocessesalsoinvolvescostsintheforgonebenefitsduringtheperiodofdelay,whichtheagenciescannotignore.95

Beyondcostsassociatedwithrulemakingprocesses,theagenciesgiveshortshrifttoissuesregardingstateenforcement.Theagenciesadmitthattheadministrativecostsofstatesrunningtheirownprogramsmaybehigherthanthecostsofrunningafederalprogramduetoeconomiesofscaleandresourceconstraints.96Andtheyconcedethat“stateenforcementcapabilitywouldalsopossiblybeimportantindeterminingstateresponses.”Buttheagenciesignorethedutytoassessandquantifythesecosts,claimingthatbecause“nomeasureofenforcementcapabilitywasavailableforuseinthisanalysis.”97

Butthereisawaytoassessenforcementcapability.Thereareagenciesandregulatorsineachstatewithacertainamountofstaffaswellasabudget,allofwhichisascertainable.Theagencieshavealreadygatheredextensivedataonthestate-levelprograms98andtheylookedatstateprogrambudgetsaspartoftheirfederalismreview.99Theyneedonlytolookatthatinformationtoobtainabetterpictureofthecostsofexpandingregulationatthestateleveltomakeamoreaccurateassessmentofthecosts.

Inanyevent,totheextenttheagenciesdeterminethisimpactisnotquantifiableormonetizable—andagain,thatislikelynottrue—theagencieshaveanobligationto,attheveryleast,incorporatethisdiscussionqualitativelybyincludingitinthetables

92StateFarm,463U.S.at43.93Theagenciesbrushthesecostsoff,withoutexplainingwhytheydonotincorporatethemintotheirassumptionofzeroimpactingap-fillingsituations,statingmerelythat“...stateswilllikelyincursometransitioncostsintheshort-run...”2018EconomicAnalysisat56.94SeeJasonA.Schwartz,52ExperimentswithRegulatoryReview:ThePoliticalandEconomicInputsintoStateRulemakings,InstituteforPolicyintegrity,ReportNo.6(2010)atiii-iv.95California,277F.Supp.3dat1123(“Defendants'failuretoconsiderthebenefitsofcompliancewiththeprovisionsthatwerepostponed,asevidencedbythefaceofthePostponementNotice,renderedtheiractionarbitraryandcapriciousandinviolationoftheAPA.”).96See2018EconomicAnalysisat36,56.97Id.at39n.47.Seealsoid.at42n.49.98AppendicestotheResourceandProgrammaticAssessmentfortheProposedRevisedDefinitionof“WatersoftheUnitedStates”U.S.EnvironmentalProtectionAgencyandDepartmentoftheArmyRevised(Dec.18,2018),https://www.epa.gov/sites/production/files/2018-12/documents/wotus_proposed_step_2_rpa_appendices_for_clearance_12-18-18_508c.pdf.99Fredriksson(2018),at16.

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summarizingthestateresponseanalysis;CircularA-4advisesassuch,100andtheEPAGuidelinesprovidespecificguidanceondoingso.101

IgnoringthecostsofthestateresponseshasledtoalopsidedeconomicpictureofthecostsandbenefitsoftheProposedReplacementRule.

IV. TheAgencies’RevaluationoftheWetlandBenefitsinStage1IsFundamentallyFlawed.

Theagencies’Stage1analysistakestheeconomicanalysisusedinthe2015CleanWaterRuleasastartingpoint,butitmakesseveraladjustmentswhichreducethe2015CleanWaterRule’svaluationofwetlandsbenefitsfrom$306.1million(lowestimate)to$59million.102Buttogettothatlownumber,theagencieshavetakenseveralstepsthatareunsupportable.

TheAgencies’NewUnitBenefitsTransferAnalysisIsRiddledwithErrors.

Thefirststeptheagenciestakeistorevisethe2015unittransferanalysistoarbitrarilycutoutevidenceandthenremovestate-levelbenefitsfrom30states.Butexcludingevidenceinthiswayisunjustified.Moreover,thenewunittransferanalysisisriddledwithtypographicalandmethodologicalerrors.Whenthoseerrorsarecorrected,evenundertheagencies’arbitrarilycrabbedunittransferanalysisitbecomesapparentthattheagencieshavegrosslyunderestimatedforgonewetlandbenefits.

1. TheAgenciesArbitrarilyExcludeStudiesWhenTheyRevaluethe2015EconomicAnalysis’sUnitTransferAnalysis

Arationalanalysisofthebenefitsofwetlandsshouldlookatallthevaluationstudieswithpotentiallyusefulinformation.103Ifastudycontainsdetailsorevidencethatislessuseful,thebestwayofhandlingthatproblemistoweightthestudyaccordingtoitsevidentiaryvalue.Excludingstudiesinsteadcanleadtobiasedandinaccurateresults.104

100CircularA-4at27(“...pleaseincludeasummarytablethatlistsalltheunquantifiedbenefitsandcosts,anduseyourprofessionaljudgmenttohighlight(e.g.,withcategoriesorrankordering)thosethatyoubelievearemostimportant(e.g.,byconsideringfactorssuchasthedegreeofcertainty,expectedmagnitude,andreversibilityofeffects).”)101See,e.g.,EPA’sGuidelinesforPreparingEconomicAnalysesat11-3(“Allmeaningfulbenefitandcostsareincludedinallofthetableseveniftheycannotbequantifiedormonetized.Notonlydoesthisprovideconsistencyforthereader,butitalsomaintainsimportantinformationonthecontextofthequantifiedandmonetizedbenefits.”)(emphasisinoriginal).1022015EconomicAnalysisat53;2018EconomicAnalysisat76103Howard&Shrader(2019),at2.104JasonSchwartz&JeffreyShrader,MuddyingtheWatersat2-3,https://policyintegrity.org/files/publications/Muddying_the_Waters.pdf.

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Thereareanumberofstudiesshowingpeople’svaluationofprotectingwetlands,whichcouldbeusedbytheagenciestoinformawetlandsdecision.105Butratherthanfollowrationalprinciplesandincludealltherelevantstudies,theagencieschosetoexcludeasignificantnumberofthesewetlandvaluationstudies,citingissuesthateitherwerenotvalidreasonsforexcludingthestudyorissuesthatcouldhavebeenaddressedbyweightingthestudies.106TheseissuesaremorefullyaddressedinthereportsubmittedbyDr.PeterHowardandDr.JeffreyShrader.107Asthatanalysisshows,excludingstudiesinthiswayisafundamentalflawintheagencies’analysis.

2. NoJustificationforAssigningZeroForgoneBenefitsto31States

Theagenciesclaimthattheunitvaluesderivedfromthehandfulofstudiestheyhavenotexcludedcanbeappliedonlytostates“inwhichthestudy[s][were]conductedandappropriatesurroundingstates.”108Consequently,theagencies’newunittransferanalysiscalculatesforgonebenefitsforonly19states;theagenciesconcedethattheirunittransferanalysis“omitsvaluesfrom30states,”109thoughintruthitalsoomitsvaluesforHawaii,theDistrictofColumbia,PuertoRico,andotherterritoriesaswell.110Thefactthattheunittransferanalysisexcludesthesestatesandsois“morerestrictive”seemstobetheagencies’principalreasonforfocusingmoreontheresultsofthemeta-analysisthanontheresultsoftheunittransferanalysis.111Yettheseemingrestrictivenessoftheunittransferanalysisisaproblemoftheagencies’owncreation.Tobegin,theagencieshavearbitrarilyexcludedstudiesandsobiasedtheunittransferanalysis.Buteveniftheagencieswerecorrecttorelyononlytheirlimitedpoolofstudies,theagenciesfailtoexplainwhytheywerecorrecttofailtoestimate—andsoeffectivelytoignoreentirely—theforgonewetlandbenefitsof31states.Mostbroadly,theagenciescouldhaveusedthestudiestheyleftintheunittransferanalysistoderiveestimatesofforgonebenefitsforallstates.Takinganaverageofallthestudieswouldhavebeenamuchmoreaccurateestimateforthosestatesthanfailingtoassignanyvalue,whicheffectivelyassignsa$0value.Inparticular,becausetheagencies’meta-analysisregressionshowsthattheregionalsvariablesarenotsignificant,112anaverageofthestudieswouldhavebeenamoreappropriateestimate.Thoughtheremaybesome

105See2015EconomicAnalysis,at44-47.106SeeHoward&Shrader(2019)at3-6.107Id.1082018EconomicAnalysisat69.1092018EconomicAnalysisat70.1102018EconomicAnalysisat59n.59.1112018EconomicAnalysisat76.1122018EconomicAnalysisat73.

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uncertaintyabouttheestimate—asthereisuncertaintywithallestimates—thevalueofforgonebenefitsinthosestateswascertainlynotzero.113Additionally,theagenciesfailedtoprovideanyreasonedexplanationforwhytheunittransfervaluescouldbeappliedonlyto“surroundingstates,”andfurtherfailedtoprovideanydescriptionofwhatcriteriamakeforan“appropriate”surroundingstate.Why,forexample,isthenarrowriverbordersharedbyKentuckyandMissourisufficienttomaketransferringthevaluefromtheKentuckystudytoMissouri“appropriate,”whileapparentlythegreatlakesharedbyWisconsinandIndianaorthegreatMississippiRiversharedbyWisconsinandMissouriareinsufficientconnectionstoallowavaluetransfer?114Whyarestrictcartographicalboundariesamoreappropriatebasisforvaluetransferthanothercommonalitiesandfactorsthatmaytiestatestogether,andwhichcouldhave,forexample,allowedvaluetransfersfromRhodeIslandtoMaineorfromWisconsintoNorthDakotabasedonregionalsimilaritiesinpopulation?Theagenciesprovidenoexplanation.ApplyingtheWisconsinstudytoNorthDakota,forexample,wouldhaverevealedforgonebenefitsof$72,031,982—asignificantomissionforaso-called“category2”state,andanomissionthattheagenciesneverexplain.

Asdescribedmorebelow,thecompleteexclusionof31statesfromtheunittransferanalysisisinadditiontothearbitraryexclusionofestimatesofsignificantregionalbenefits.Inotherwords,forexample,notonlycouldtheRhodeIslandstudyhavebeenusedtocalculatesomenon-zeroestimateforhowtheresidentsofMainevaluewetlandsinMaine,buttheresidentsofMainealmostcertainlyalsohaveanon-zerovalueforthewetlandsinRhodeIsland,andyettheagencieshavearbitrarilycountedallthosesignificantvaluesaszero.

3. TypographicalandMethodologicalErrorsRevealthattheAgenciesHaveGrosslyUnderestimatedForgoneBenefits

TableIII-4intheagencies’2018EconomicAnalysisisriddledwitherrors:

• Ohio’svalueofforgonebenefitsisgivenas“$7,331,34,”withthefinaldigitmissing.• Thetotalfiguregivenfortheunittransferanalysis($20,374,834)doesnotmatch

thetotalfiguregivenfortheunitvalueanalysisinTableIII-9($26,150,660).

113SeeCtr.forBiologicalDiversityvNHTSA,538F.3d1172,1200(9thCir.2008)(“[W]hiletherecordshowsthatthereisarangeofvalues,thevalueofcarbonemissionsreductioniscertainlynotzero….[Theagency]insistedatargumentthatitplacednovalueoncarbonemissionsreductionratherthanzerovalue.Wefailtoseethedifference.”).114Instead,bothIndianaandMissouriaregivenvaluesderivedfromaKentuckystudy.TheagenciesdonotexplainwhythelowervaluesfromKentuckyaremoreappropriatetotransfertothesestatesthanthehighervaluesfromWisconsin.And,ofcourse,otherstatesexcludedfromtheunittransferstudy—ArkansasandLouisiana—alsosharetheMississippiRiver.

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• Perhapsmostsignificantly,TableIII-4lists“MS”asa“surroundingstate”forWisconsin,butpresumablytheagenciesintendedtocountMinnesota(MN)asaneighboringstateofWisconsin,notMississippi(MS).115

• Notonlyisthestateabbreviationwrong,butTableIII-4listsMississippi’saffectedacresofwetlands(0.9)andhouseholdpopulation(1,115,768)insteadofMinnesota’s(which,basedonTableIII-9,shouldhavebeen2,087,227householdsand10.7impactedacres).Thoughtheagenciesneverstatetheirformulaforcalculatingforgonebenefits,presumablytheyaremultiplyingacres*households*annualWTPperhouseholdperacre.116Applyingthisformula,theagencies’unittransferanalysisshouldhavecalculatedforgonebenefitsinMinnesotaof$12,993,531—afigureover$12milliongreaterthanthevaluelisted($576,286forMississippi).

AnotherstrangeandunexplainedfeatureofTableIII-4isthatIllinoisisgroupedwiththestatessurroundingKentuckyandassignedatransfervalueaccordingly.However,IllinoisobviouslysharesalargerlandborderandasignificantlakeborderwithWisconsin.TheagenciesneverexplainwhyitismoreappropriatetogroupIllinoiswithKentuckythanwithWisconsin,especiallygivenotherregionalcommonalitiesIllinoisandWisconsinshare.HadtheagenciesusedtheWisconsinstudytoestimateforgonebenefitsinIllinoisratherthantheKentuckystudy,theestimatewouldhavebeenover$140milliongreaterthanwhatislistedinTableIII-4.117EveniftheagencieshadtakentheaveragevaluesfromboththeKentuckyandWisconsinstudies,theforgonebenefitsinIllinoiswouldbeabout$70milliongreaterthanwhatisreportedinTableIII-4.SimilarcasesforatleastblendedvaluescouldalsobemadeforIndianaandOhio,whichalsosharegeographicproximity,regionalsimilarities,andevenmajorwaterfeatureswithWisconsinaswellasKentucky.UsingthatapproachforIndianaandOhioaswellwouldhaveincreasedtheestimatesbyaboutanother$120millionperyearinforgonebenefits.Thesesignificantandunexplainedmethodologicalerrorsresultingrossunderestimatesoftotalforgonebenefits,enoughtoflipthenetbenefitcalculationofatleastScenario0andwouldlikelyalsoflipthecalculationfortheotherScenarioswheretheagencieshavemadetheunreasonable

115WisconsinandMississippiareconnectedbytheMississippiRiver,andasarguedabove,suchaconnectionshouldindeedwarrantsomeunittransferfromtheWisconsinstudytoMississippi.However,becausetheagencieshaveexcludedotherstatesalsoconnectedbytheMississippiRiver,suchasArkansasandLouisiana,presumablytheagencieswerecontemplatingthemoredirectlandconnectionbetweenWisconsinandMinnesota.116Note,however,thatapplyingthisformula,someofthevaluesinTableIII-4areimpossibletoreproduce.ThisproblemwithreproducingvaluesinTableIII-4seemstoberelatedtothemismatchedtotalsbetweenTableIII-4andTableIII-9.117Thatis,$146,054,401ratherthanthe$4,521,460listed.Note,however,that51.9acres*4,836,972households*$0.0109perhouseholdperacreactuallyequals$2,736,323.ThisisoneofseveralmathematicalinconsistenciesinTableIII-4thattheagenciesneverexplain.Eitheritscalculationsarewrongoritsdataiswrongortheagenciesareusingsomenon-obviousformula.

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assumptionthatstateswillfillthegapandprotectwatersharmedbythisProposedReplacementRule.

TheAgenciesHaveConductedaFlawedMeta-Analysis

Theagencies’secondstepistoconductanewbenefittransferanalysiswithnumbersderivedfromameta-analysisofnationalforgonewetlandbenefits.Themeta-analysisisbasedona2018workingpaperbyKlausMoeltnerandco-authors.118Butboththemeta-analysisandtheagencies’useofthemeta-analysisforanewbenefittransferanalysishaveseriouserrors.Themeta-analysisisseriouslyflawedbecauseitdoesnotincludemanyoftherelevantstudiesanditlacksjustificationforfailingtoincludethosestudies.119Excludingthestudiesisparticularlyproblematicbecausethemeta-analysisshowssignsofseriouseconometricflaws,whicharelikelycausedbythesmallsamplesize.120Tocorrecttheseerrors,theagenciesshouldincreasethesamplesizebyincludingalloftherelevantstudiesandconductingnecessarysensitivityanalyses,asdescribedinanexpertreportsubmittedbyDr.PeterHowardandDr.JeffreyShrader(2019).121

Theagencieshavealsomadeseveralarbitrarymethodologicalchoicesthathaveloweredthevalueofwetlandsbenefits.Forexample,theagenciesuseanarbitrarilylowestimateforbaselineacreageineachstate.Astheworkingpaperfinds,peoplevaluewetlandsmoreasthesizeofthewetlandbeingvaluedincreases(i.e.,“convexity”inthevaluation).122Andtherearemanystateswithahugeamountofwetlands.Thereare100millionacresinthecoterminousstates123andcloseto175millionacresinAlaskaalone.124Becauseoftheconvexityinvaluationandthevastvariationinthebaselineamountofwetlands,anaccurateestimatewouldlookattheactualbaselineacreageineachstate.Butratherthantakeintoaccountdatashowingthebaselineamountofwetlandacreageineachstate,theagencieschosetouseanunreasonablylowamountofbaselineacres(10,000),themedianvaluefoundinthestudies.125Giventheconvexityofwetlandsvaluationthischoicelikelyledtoavastundercountingofwetlandsbenefits.Similarly,thoughtheagencieshavenotdisclosedtheirmethodology,itislikelythatinapplyingthemeta-analysistheyalsovastlyundercountedbenefitsassociatedwithlocal

118https://www.regulations.gov/document?D=EPA-HQ-OW-2018-0149-0031.119SeeHoward&Shrader(2019),at6-7.120Id.at8.121Theexpertreportwassubmittedtothedocketandisavailablehere:https://policyintegrity.org/documents/Shrader_Howard_Expert_Report_FINAL.pdf.122Moeltner(2018),at23.SeeHoward&Shraderat10.123U.S.Fish&WildlifeService,ReporttoCongress,StatusandTrendsofWetlandsintheConterminousUnitedStates2004to2009,https://www.fws.gov/wetlands/documents/Status-and-Trends-of-Wetlands-in-the-Conterminous-United-States-2004-to-2009.pdf.124AlaskaDep’tofFishandGame,Wetlands,https://www.adfg.alaska.gov/index.cfm?adfg=wetlands.main1252018EconomicAnalysisat73.

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andotherusevalues.Forexample,asthemeta-analysisshows,localvaluesarethemostsignificantvariableinmagnitudeandsignificance.126Inthatcontext,todoaproperbenefittransferanalysis,theagenciesneedtousestatedata,showingthenumberofpeoplethatlivenearwetlandsandusewetlands.If,asappearslikely,theagenciesdidnotuseactualstateleveldata,theywouldbemakingamistakebecause,astheagencies’ownanalysisshows,theimpactofthosevalueslikelychangesdramaticallyfromplacetoplace.Theagenciesshouldprovideinformationabouthowtheysetthevaluesandseekpubliccommentonthosechoicesbeforeproceedingwiththisproposal.

TheAgencies’DecisiontoIgnoretheRegionalBenefitsofWetlandsIsArbitraryandCapricious

Forboththenewunittransferanalysisandthenewbenefittransferanalysisbasedonthemeta-analysis,theagencieshavedecidedtoexcludeanyregionalvaluationforwetlands.127Butregionalvaluationisasignificantsourceofvalueforwetlands.128Theagenciesclaimthatincludingregionalbenefitsis“inappropriate”becauseusingtheUSDA’sEconomicResearchService’swetlandregiondeterminationswouldapplywillingnesstopayvaluestowetlandchangesthatare“thousandsofmilesaway.”129Butthatdoesnotmeanthatcalculatingregionalvaluationisimpossible.Infact,inthe2018EconomicAnalysisitself,theagencieshavecalculatedbenefitsacrossdistances130andhavecalculatedbenefitsacrossregions.131Forexample,intheStage2analysis,theagenciescalculatedforgonebenefitsfortheLowerMissouriwatershed,whichcrossesintothreedifferentstates:Colorado,Nebraska,andKansas.132Ignoringtheregionalvaluesrenderstheagencies’analysisincomplete133andarbitraryandcapricious.134

126See2018EconomicAnalysisat73.127Id.at71.128Howard&Shrader(2019),at11.1292018EconomicAnalysisat62.130SeeHoward&Shrader(2019),at12.131See2018EconomicAnalysisat173.132See,e.g.,id.at173-74.133Id.at11-12.134StateFarm,463U.S.at43.

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V. BifurcatingtheAnalysisandProvidingPrimarilyQualitativeEstimatesforStage2ObscurestheTrueImpactoftheProposedReplacementRule

TheAgenciesAreRequiredtoProvideInformationAbouttheTrueImpactoftheProposal

Theagenciesarerequiredtoexplaintheimpactofthisrulebyaddressingtheforgonebenefitsoftherule.135Inordertodothat,theagenciesmustassesstheproposedruleagainsttheexistingstatusquo.Thebaselineforthatanalysisisaworldwherethe2015CleanWaterRuleisfinalandpartiesareimplementingtherule.136EPA’sGuidelinesforPreparingEconomicAnalyses(the“EPAGuidelines”)explainthatabaselineshouldreflect“theworldabsenttheproposedregulationorpolicyaction”andthat“allfinalrules”shouldbeincludedinthebaselineregardlessofwhethertheyhavetakeneffect.137Inthisway,thepublicandagencycanhaveanaccurateunderstandingoftheincrementalimpactsoftheproposedrule.

TheLackofQuantificationintheStage2AnalysisObfuscatestheTrueImpactoftheProposedReplacementRule

RatherthanprovideananalysisoftheimpactoftheproposedReplacementRule,theagencieshavedividedtheanalysisintotwostagesanduseddataconcernstoobfuscatethedetrimentalaspectsoftheproposal.InStage1,theagenciesdescribethecostsandbenefitsofrepealingthe2015CleanWaterRule’sprotectionsandreturningtothepre-2015practice.138InStage2,theagenciesanalyzethecostsandbenefitsofremovingevenmoreprotectionsfromwetlandsandotherwatersthanunderthatpre-2015regime.139Stage1isalargelyquantitativeanalysisthathighlightsthecostsavingsofrepealingthe2015CleanWaterRule.Stage2usesamixofqualitativeandquantitativeanalyses,whichalsodisproportionatelyhighlightsthecostsavingsandfailstoquantifymanyimportantimpacts.Accordingtotheagencies,moving

135StateFarm,463U.S.at43;AirAllianceHoustonv.EPA,906F.3d1049(D.C.Cir.2018)(holdingthattheagency’sfailuretoaddresstheforgonebenefitsoftherulewasarbitraryandcapricious);cf.Nat’lAss’nofHomeBuildersv.EPA,682F.3d1032,1039(D.C.Cir.2012)(findingthattheagencyproperlycalculatedthecostsofamendingaregulation);MingoLoganCoalCo.v.EPA,829F.3d710,730(D.C.Cir.2016)(Kavanaugh,J.,dissenting)(consideringthecostsofarepealis“commonsenseandsettledlaw”).136AirAllianceHoustonv.EnvironmentalProtectionAgency,906F.3d1049,1068(D.C.Cir.2018).SeealsoPolicyIntegrity,CommentsontheDefinitionof“WatersoftheUnitedStates”—AdditionofApplicabilityDateto2015CleanWaterRule,at3-4(submittedDec.13,2017),availableathttps://policyintegrity.org/documents/12.13.17_WOTUS_stay_final.pdf,formoredetailsonwhyitispropertofactorthe2015Ruleintothebaseline.Thosecommentsareherebyincorporated.137EPA’sGuidelinesforPreparingEconomicAnalysesat5-1,5-14(2010);Seealsoid.at5-10(“analystsshoulddevelopbaselineandpolicyscenariosthatassumefullcompliancewithexistingandnewlyenacted(butnotyetimplemented)regulationsforanalysisofregulations”)(emphasisinoriginal).1382018EconomicAnalysisat1.139Id.at1.

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throughtheanalysesinStages1and2allowsthepublictoweighthecostsandbenefitsofrepealandreplacementofthe2015CleanWaterRule.140Butsplittingtheforgonebenefitsintotwosmallerportionsmakesiteasierfordecisionmakersandthepublictodiscountthesignificanceofthosebenefits.Thisisallthemoretruefornon-monetizedeffects.Thetendencytoignorenon-monetizedeffectsistheresultofcommonbutirrationalmentalheuristicslikeprobabilityneglect.Forexample,thephenomenonofprobabilityneglectcausespeopletoreducesmallprobabilitiesentirelydowntozero,resultingintheseprobabilitiesplayingnoroleinthedecision-makingprocess.69Thesameistruewhenunmonetizedeffectsaresplitintosmallerportions:eachindividualsmallportionisirrationallytreatedasbeingclosertozero,wheninfacttheaggregatecouldbequitesignificant.Here,thelackofquantificationformuchoftheStage2analysismakesitextremelydifficulttoaddthosestagestogetherandtrulyassesstheimpactoftheproposedruleagainstthebaseline.Inaddition,providingaprimarilyqualitativediscussionoftheforgonebenefitsatStage2,theagencieshavebeenabletoclaimthattheeffectsofStage2are“modest”141andthatthecostssavingsoutweightheestimatedforgonebenefitsforallbutScenario0.142

Theagencies’failuretoquantifymuchoftheimpactsofStage2isunjustified.ExecutiveOrder12,866advisesthatacost-benefitanalysisbebased“onthebestreasonablyobtainablescientific,technical,economic,andotherinformation,”andeffectsshouldbequantified“totheextentfeasible.”143Long-standingguidanceonregulatoryanalysisfromtheOfficeofManagementandBudgetsimilarlyadvisesthat“[s]oundquantitativeestimatesofbenefitsandcosts,wherefeasible,arepreferabletoqualitativedescriptions.”144Becausesomeeffectsare“toodifficulttoquantifyormonetizegivencurrentdataandmethods,”however,agenciesmustalso“carryoutacarefulevaluationofnon-quantifiedbenefitsandcosts.”145Butagenciesshouldquantifyeffectswhereverpossible.146Andinweighingapossibleaction,anagency“cannottipthescales”bytrumpetinganaction’sbenefitswhileignoringthecosts.147Theagenciesassertthattheywereunabletodeterminethejurisdictionalscopeofeitherthe2015CleanWaterRuleortheProposedReplacementRulewithenoughprecisionto

14084Fed.Reg.at4,200.1412018EconomicAnalysisatxvii.142Id.;seealsoid.at205(explainingthattheforgonebenefitsoutweighthecostsavingsforScenario0).14358Fed.Reg.51,735at§§1(b)(7),6(a)(3)(C).144CircularA-4at26.145Id.at26-27.146Exec.OrderNo.12,866,§1(“Costsandbenefitsshallbeunderstoodtoincludebothquantifiablemeasures(tothefullestextentthatthesecanbeusefullyestimated)andqualitativemeasuresofcostsandbenefitsthataredifficulttoquantify,butneverthelessessentialtoconsider.”).147SierraClubv.Sigler,695F.2d957,979(5thCir.1983);seealsoCaliforniav.U.S.BureauofLandMgmt.,277F.Supp.3d1106,1123(N.D.Cal.2017)(vacatingadelaywhereagencyrelied“onpreciselythesameRegulatoryImpactAnalysisthatithadpreviouslyreliedon”tosupportitsfindingsregardingthesuspendedrule’scosts,butignoredthatanalysis’sfindingsregardingtherule’sbenefits).

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directlyassessthecostsandbenefitsofadoptingtheProposedReplacementRule.148Butitappearsthattherelevantdatalikelydoesexist.Forexample,oneofthekeydefinitionalchangesintheProposedReplacementRuleremovesjurisdictionalstatusforephemeralstreams.Meanwhile,intermittentstreamsretaintheirjurisdictionalstatus.WhiletheNationalHydrographyDatasetmaynotdistinguishbetweenephemeralandintermittentstreamsonanationalscale,theagenciesconcedethattheNationalHydrographyDatasetdoesdistinguishbetweenephemeralandintermittentstreamsinthearidWestwherethesestreamsareanimportantpartofthehydrologicallandscape.149JustbecausethereissomeuncertaintyabouttheeffectofStage2,doesnotjustifyassigningtheeffectnovalueinacost-benefitanalysis.150Theagenciescouldusethatdatatocalculatetheforgonebenefitsforthoseregionsandtoextrapolateforotherregions.Moreover,asanEPAslidedeckobtainedthroughaFOIArequestclearlyindicates,theagencieswereabletousedataavailableintheNationalHydrographyDatasetandNationalWetlandsInventorytoestimateboth(a)thenumberandlengthofephemeralstreamsintheUnitedStatesand(b)thenationalacreageofwetlandswhichareintersectedbyephemeralstreams.151ThisallowedthemtoestimatethestreamsandwetlandsnationwidewhichwouldnotbeprotectedundertheProposedReplacement.Thisslidedeckdirectlycontradictstheagencies’claimthatavailabledatawereinsufficienttoassessthechangeinjurisdictionaldeterminationswhichwouldflowfromredefiningwatersoftheUnitedStates.

TheStage2CaseStudiesAreMisleadingandPresentanAdHocApproachThatIsMethodologicallyInconsistentandBasedonSpeciousAssumptions

TheStage2casestudiesareintendedtobeanillustrativequantitativesupplementtotheotherwiselargelyqualitativenationalanalysisofthecostsandbenefitsofimposingtheagencies’ProposedReplacementRule.Inadditiontotheproblemofbeingunabletoevaluatethecasestudies’resultsrelativetothe2015-RuleBaseline,thecasestudiesarealsomisleadingontheirowntermsbecausetheyfailtoadoptacoherentmethodologyandrelyonunjustifiedassumptions.

Inbothofthecasestudieswheretheagenciesmonetizeforgonebenefits,theagenciesrelyonthe1998BlomquistandWhiteheadstudytomakethosevaluations.152TheagenciesjustifyuseofthissinglestudybycitingthesimilaritiesbetweenthewetlandsintheOhio

1482018EconomicAnalysisat8-9.149Seeid.at9,195.150Ctr.forBiologicalDiversityv.Nat’lHighwayTrafficSafetyAdmin.,538F.3d1172,1200(2008).151ArielWittenberg&KevinBogardus,“EPAFalselyClaims‘NoData’onWatersinWOTUSRule,”E&ENews(Dec.11,2018),availableathttps://www.eenews.net/stories/1060109323;BreakdownofFlowRegimesinNHDStreamsNationwideSlideshowat1,8,https://www.eenews.net/assets/2018/12/11/document_gw_05.pdf(estimatingthat18%ofstreamsand51%ofwetlandsnationwidewouldnotbeprotectedunderthenewproposeddefinition).152BlomquistandWhitehead,supranote128,at179.

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andLowerMissouriRiverBasinsandthosevaluedintheBlomquist&Whitehead(1998)study.153TheagenciesadoptamethodsimilartothatinBlomquist&Whitehead(1998),accordingtowhichallhouseholdsinthewatershed’sprimarystateareassumedtobewillingtopayforwetlandpreservation,whilehouseholdsoutsideofthatstateareincludedinthevaluationonlyiftheyliveinacountywithinthewatershed.154Thereareatleasttwoproblemswithhowtheagencieschosetoconductbenefittransferinthecasestudies.ThefirstrelatestotheselectionofcontingentvaluationstudiesintheLowerMissouriRiverBasincasestudy.ThesecondrelatestohowtheagenciesdefinethegeographicparametersthatdeterminethenumberofhouseholdsconsideredincalculatingforgonebenefitsintheOhioRiverandLowerMissouriRiverBasincasestudies.

First,becauseasignificantportionoftheareawithintheLowerMissouriRiverBasinwatershedsstudiedbytheagenciesfallswithintheRainwaterBasinstudiedinPoor(1999),155theagenciesshouldhaveincludedthatstudyinthevaluationofthosewetlands.Asa1989surveybytheCorpsindicates,manyoftheNebraskacountiesincludedinthewetlandvaluationintheLowerMissouriRiverBasincasestudyintersectwithNebraska’sRainwaterBasin.156WhileEPAhassomelatitudeinreasonablyselectingstudiesforbenefittransfer,onekeyelementthatshouldbeconsideredisthe“definitionoftheenvironmentalgoodbeingvalued.”157ThisalonewouldsuggesttheappropriatenessofincorporatingthePoor(1999)studyintothevaluationfortheLowerMissouriRiverBasinCaseStudy,becausethatstudyisvaluingasegmentoftheverywetlandstheagenciesaretryingtovalue.Additionally,theagencies’characterizationoftheRainwaterBasinwetlandsas“unique”asareasonforexcludingthePoor(1999)studyfromthenationalbenefittransferanalysesfurthersuggeststheappropriatenessofitsusewithinthiscasestudy.158Therefore,theagenciesmustfurtherexplainwhythevaluationfromPoor(1999)wasnotusedintheLowerMissouriRiverBasincasestudy.

Second,theagenciestakeaninconsistentapproachtocountingthenon-usevaluesofhouseholds.Specifically,asshowninFiguresIV-12andIV-13intheEconomicAnalysis,residentslivingadefined“primarystate”(i.e.,Ohio)havetheirnon-usevaluesofthewetlandscountedeveniftheyhappentoliverelativelyfarfromthewatershed;yetforresidentsofneighboringstates(i.e.,Indiana),onlythoselivinginspecificcountiesdeemedtobean“adjacent”partofthewatershedhavetheirnon-usevaluescounted.Otherresidentsoftheseneighboringstatesmayactuallyliverelativelyclosetothewatershedand,liketheresidentsoftheprimarystate,mayhavenon-usevaluesforthewetlandsthatdonotdependonimmediateproximity.Yetwhiletheagenciescountedalltheresidentsof

1532018EconomicAnalysisat146-47,173-74.154Id.at147,174.155SeeHoward&Shrader(2019)at3-4,foranexplanationofwhy,contrarytotheagencies’claims,Poorisamethodologicallysoundstudy.156CompareMICHAELC.GILBERT,ORDINATIONANDMAPPINGOFWETLANDCOMMUNITIESINNEBRASKA’SRAINWATERBASINREGION2,Figure1(1989)andEconomicAnalysis174-75FiguresIV-16andIV-17.157EPAGuidelinesat7-53.1582018EconomicAnalysisat61;cf.“[a]nalystsshouldavoidusingbenefittransferincaseswherethepolicyorcasestudyarefocusedona‘good’withuniqueattributes.”EPAguidelinesforeconomicanalysisat7-53.

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theprimarystate,theyexcludethenon-usevaluesofhouseholdsinneighboringstatesbasedonarbitrarilydrawncountyandstatelines.Theagenciesfailuretoexplaintheirrelianceonthisinconsistentmethodologyisarbitrary.AproblematicassumptionaboutstateresponsesalsoinfectstheentireLowerMissouriRiverBasincasestudy,leadingtheagenciestoerasemanyoftheforgonebenefits.Thisproblematicassumptionrendersthecasestudyapoorexampleofwhatwillactuallyoccurundertherule.TheagenciesclaimtoincludecasestudiesinStage2inordertodisplaya“rangeofscenariosthatillustratethepotentialoutcomes”oftheagencies’proposedrules.159Tothatend,theagenciesselecttheOhioRiverBasin,theLowerMissouriRiverBasin,andtheRioGrandeRiverBasinbecausethey“reflectarangeofecosystems,hydrographiccharacteristics,andregulatorycontexts.”160However,theLowerMissouriRiverBasincasestudyisnotrepresentativeoftheProposedReplacementRule’slikelyeffectsbecausetheagenciesrelyonanunfoundedassumptiontominimizeestimatedforgonebenefitsforthearea.Specifically,thecasestudyascribeszeroforgonebenefitstohalfofitsstateresponsescenariosbasedontheassumptionthatthereisa50%chancethatKansasandNebraskawillvoluntarilyregulatetheirwetlandsincompliancewithpre-2015Corpspractice.WhilethisresultfollowsfromtheassumptionthatbothKansasandNebraskaarecategory3stateswithintheagencies’state-responsetypology,factsnotcapturedbytheagencies’state-responsetypologyillustratetheimplausibilityofthisassumption.First,bothKansasandNebraskahavesuedinseparateproceedingstoenjointhe2015CleanWaterRule.161Second,neitherKansasnorNebraskahaveassumedthesection404permittingprogram.162Finally,whileKansashasastatepermittingprogramfordredgeandfillactivities,thisprogramonlycoversdredgeandfillactivitiesinfloodplains;Nebraskahasnosystemofstatepermittingfordredgeandfillactivitiesatall.163Therefore,theassumptionsunderlyingthecasestudy’sresultsaremisleadingandpresentasubstantialpossibilityofmisleadingdecisionmakersandthepublic.AstheFourthCircuitheldinHughesRiverWatershedConservancy,“[m]isleadingeconomicassumptions”canunderminetheagency’sobjectiveconsiderationoftheadverseenvironmentaleffectsassociatedwithagivencourseofaction.164TheassumptionthatKansasandNebraskaare50%likelytoregulatetheirstatewatersabovetheCWAfloorissuchanassumption,andthishighlyproblematicassumptioninfectsthecasestudyandpaintsamisleadingpictureaboutlikelyforgonebenefitsunderStage2.

1592018EconomicAnalysisat122.160Id.161SeeNorthDakotav.EPA,127F.Supp.3d1047(D.N.D.2015);Georgiav.Pruitt,326F.Supp.3d1356(S.D.Ga.2018).1622018ResourceandProgrammaticAssessmentat106,127.163Id.at106,127.164HughesRiverWatershedConservancyv.Glickman,81F.3d437,446(4thCir.1996).

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TheAgencies’OwnEconomicAnalysisShowsthattheyShouldNotMoveForwardwiththeProposedReplacementRule

ThoughtheagencieshavenotprovidedafullquantifiedestimateoftheforgonebenefitsofStage2,itisclearfromthequalitativediscussionsthattheharmsofrollingbackthe2015CleanWaterRuleasproposedinStage2aresignificant.Astheagenciesacknowledgeinthe2018EconomicAnalysis,ephemeralstreamsareavitalpartofthehydrologicallandscapeinthearidWest.165YettheProposedReplacementRuleremovesephemeralstreamsfromprotectionandstatesinthearidWestareexpectedtobearsignificantenvironmentalharmsduetothis.TheProposedReplacementRulewillalsolimitthosestates’abilitytosettotaldailymaximumloadstandardsforthosenon-jurisdictionalwaters.166Second,stateswithlargemitigationrequirementsforsection404permitsareexpectedtobeharmedbyremovingcertainwetlandsandstreamsfromthedefinitionofwatersoftheUnitedStatesunlesstheyindependentlyregulatethosewaters.167Theagenciesalsonotethatfacilitiesnolongerexpectedtodischargeintojurisdictionalwaterswillberemovedfromthesection311SpillPrevention,ControlandCountermeasure(SPCC)planrequirements;becauseofthesereducedmonitoringrequirements,thelikelihoodofspillsfromsuchfacilitiesmayincrease.168

Giventhattheharmsoftherulearesosignificant,onlyverystrongevidenceofnetbenefitswouldsupportanyrollback(assumingitwaslegalinotherrespects).Butthatisnotevidencethattheagencieshave.Instead,theagencies’ownanalysisshowsthatatleastoneofthestudiedscenarioshasnetcosts.169Notonlydoesthismakeitincumbentontheagenciestoshowthattheassumptionssupportingaconclusionthattheruleiscost-benefitjustifiedaremoreappropriatethanthosethatdonot,170thefactthattheProposedReplacementRulemaybecost-benefitjustifiedbysuchathinmarginsuggeststhatthereistoomuchuncertaintytoproceed.Insum,theagencieslopsidedanalysisofStage2isnotsufficientforanaccurateassessmentoftherule’scostsandbenefits.

1652018EconomicAnalysisat195;seealsoAlishaSteward,etal.,Whentheriverrunsdry:humanandecologicalvaluesofdryriverbeds(March2012),FrontEcol.Environ.2012;10(4):202–209,http://www.esa.org/pdfs/Steward.pdf;CommentbyGeneLikens(Mar.13,2019),https://www.regulations.gov/document?D=EPA-HQ-OW-2018-0149-0801.1662018EconomicAnalysisat87,120.167Id.at98.168Id.at107.169Compareid.at222,TableB-1(listingnetbenefitsof$60.5millionforStage1andScenario0oftheProposedReplacementRule)withid.at207-08,TablesIV-60,IV-61,IV-62(showingthatStage2atScenario0oftheProposedReplacementRuleisnetcostlyby$63.8million).170SeeCircularA-4at42(“Ifbenefitorcostestimatesdependheavilyoncertainassumptions,youshouldmakethoseassumptionsexplicitandcarryoutsensitivityanalysisusingplausiblealternativeassumptions.Ifthevalueofnetbenefitschangesfrompositivetonegative(orviceversa)...youshouldconductfurtheranalysistodeterminewhichofthealternativeassumptionsismoreappropriate.”)

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VI. TheAgenciesDoNotAdequatelyExplainHowTheyEvaluateAvoidedCostsinStage1orWhytheAllegedAvoidedCostsJustifytheProposedRule

Theagencies’cost-benefitjustificationfortheproposedrulehingesontheallegedcostsavingsunderSection404.TableIII-10showsthatinStage1-Scenario1,thehighestimateofforgonebenefitsforSection402-CAFO&StormwaterAdministrationandImplementation($21million+unquantifiedbenefits)exceedsthehighestimateofavoidedcosts($20.8million);thesameistrueofScenarios2and3and,accordingtoAppendixB,ofScenarios0and1aaswell.OnlybyvirtueofthelargeallegedcostsavingsfromwetlandandstreammitigationunderSection404doesStage1oftheproposedruleappeartobeatallcost-benefitjustified.Thereareatleasttwoproblemswiththis.First,theagencieshavefailedtoexploreotheralternativestotheproposedrulethatmight,accordingtotheirowncalculations,bettermaximizenetpublicwelfarebypreservingmoreoftheSection402forgonebenefits.FailuretoconsiderreasonablealternativesviolatestheguidelinesofExecutiveOrder12,866andCircularA-4andstronglysuggestsanarbitraryrulemakingprocessthathadapredeterminedoutcomeinmind.

Second,theagenciesdonotadequatelyexplainhowtheyhavederivedtheircalculationsoftheallegedSection404costsavingsonwhichtheproposedrulehinges.Inevaluatingtheavoidedcostsoftherepeal,theagenciesexplainonlyafewadjustmentstotheestimatedcostsofthe2015CleanWaterRule(whicharenowtheavoidedcostsintherepealscenario).171TheagenciesdiscusstwoupwardadjustmentsthataremadetotheavoidedcostcalculationinStage1.172First,theresultsofthe2015EconomicAnalysisareadjustedforinflation;second,mitigationcostsassociatedwithsection404permitsareadjustedtocorrectanallegederrorinthe2015EconomicAnalysis.173Thesechangesseemtoonlyslightlyincreasethetotalcostestimatesfromarangeof$158.4-$306.6millionincostsofthe2015ruletoarangeof$164.9-$343.1millioninavoidedcostsinScenario0oftheproposedrepeal;forSection404wetlandmitigationspecifically,costsincreaseslightlyfromarangeof$54.4-$152.3millionunderthe2015ruletoarangeof$57.4millionto$159.7millioninavoidedcostsinScenario0oftheproposedrepeal.174However,notonlydotheseslightincreasesconcealdramaticunderlyingincreasesinstate-specificperacre

171TheagenciesalsouseanarticlebySundingandZilberman.172Theagencies’statescenariosalsogreatlyaffecttheircostestimates.173Accordingtotheagencies“[t]heper-acrevariablecosttermfromtheSundingandZilberman(2002)studywasnotmultipliedbythenumberofpermits,whichresultedinasignificantdecreaseinthehigh-endcostestimatefor404permittinginthe2015and2017economicanalyses.”2018EconomicAnalysisat81.174The2015EconomicAnalysis,53-54,includedtwocostrangeestimates.Theagenciesnowdonotspecifywhichrangefrom2015theyuseasabaseline,butitappearsthattheyarerelyingonthesmallercostestimates.Theagenciesdonotexplainwhytheylookonlytothisestimateandnotbothrangescalculatedinthe2015EconomicAnalysis.Compare2018EconomicAnalysisat222,AppendixBTableB-1and2015EconomicAnalysisat53-54Figure74a.

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costestimates,butgiventheavailabilityofmitigationbankcredits,thecostslikelyshouldhavedecreasedsincethe2015estimates.Tobegin,despiteseemingtoonlyslightlychangetheestimates,itisdifficulttosquarethenewestimatesofavoidedcostsunderStage1withtheunderlyingdatabehindtheoriginal2015estimatesofwetlandmitigationcosts.In2015,theagenciesestimatedarangeof$54.4-$152.3millionintotalmitigationcosts,tomitigate2309acresofwetlands,175foranaverageperacrecostofbetween$23,550and$65,972.Now,theproposedruleestimatesarangeof$57.4-$159.7millioninavoidedcostsunderStage1-Scenario0,176butonlyestimatesforgonemitigationofhalfasmanyacres,1154,177foranaverageperacreavoidedcostofbetween$49,740and$138,388.Theagenciesdonotexplainthesignificantperacrecostincrease.Thecostestimatesbyindividualstateshavealsodramaticallyincreased,oftenwithoutanyexplanation,andalwayswithoutadequatedocumentationoftheunderlyingdata.Forexample,in2015,theagenciesestimatedthemitigationcostsinArkansaswouldbebetween$2,105and$5,262peracre,basedon“district”datafrom2011andinflatedto2014$.178Now,however,theagencieshaveresortedtoan“averageofneighboringstateestimates”tocalculateperacrecostsinArkansasbetween$30,040and$54,396179—anincreaseofmorethantentimes,andwithoutanyexplanationofwhytheArkansasdistrictdatausedinthe2015rulewasabandonedinfavorofaregionalproxy.Missouri’speracrecostswentfrom$15,787-$26,311inthe2015rule,basedondistrictdatafrom2011,uptotheproposedrepeal’sestimateofasmuchas$81,000peracre;theonlypost-2015dataupdatescitedforthislargeincreaseare“pers[onal]comm[unications]”witha“banker”andafoundationin2017.180Similarstoriesoflargeandunexplainedincreasescanbetoldfornearlyeverystate.Moreover,forArkansas,Missouri,andmanyotherstates,noestimateforwetlandmitigationcostsbasedoncreditpricesisgiven.Indeed,theincreasingavailabilityofmitigationcreditsshouldhavedecreasedcostssincetheywereestimatedin2015,notincreasedthem.Theagenciesseemtohaveignoredthedocumentedgrowthofmitigationbanksandtheireffectonwetlandandstreammitigationcosts.Whileboththe2015EconomicAnalysisandtheStage2analysisinthe2018EconomicAnalysisdiscussindependentfieldworkdonebytheagenciestoaccountfordevelopmentssuchasmitigationbanksandpay-in-lieuprogramswhicheffectsection404permitmitigationcosts,181thereisnoindicationthatsimilareffortsweremadetoadjustcostsin

175SupportingDocumentation(AnalysisofJurisdictionalDeterminationsforEconomicAnalysisandRule)at13,https://www.regulations.gov/document?D=EPA-HQ-OW-2011-0880-20877.1762018EconomicAnalysisat222.177Seeid.at77-78.178SupportingDocumentation(AnalysisofJurisdictionalDeterminationsforEconomicAnalysisandRule)at13,15,16,https://www.regulations.gov/document?D=EPA-HQ-OW-2011-0880-20877.179MitigationCostEstimatesbyState(UsedforProposedRuleEconomicAnalysis),https://www.regulations.gov/document?D=EPA-HQ-OW-2018-0149-0057.180Compare205SupportingDocumentation,supra,with2018MitigationCostEstimates,supra.1812015EconomicAnalysisat39-40;2018EconomicAnalysisat144-145.

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theStage1analysis.182Thefailuretodosoignoresthewell-documentedeffectsoftheexpansionofsuchprogramsandthewaythisexpansionisexpectedtodecreasemitigationcosts.Inarecentarticleassessingthegrowthofmitigationbanks,twoEPAscientists,PalmerHoughandRachelHarrington,discusshowmitigationbanksexpandedbothintermsofabsolutenumbersandgeographicdistributionbetween2008and2018.183Inadditiontoa120%increaseinapprovedmitigationbanksforsection404creditsgenerally,thestudyalsonotesa260%increaseinapprovedmitigationbanksofferingstreammitigationcredits.184HoughandHarringtonalsomeasureda55%increaseinthewithdrawalofmitigationcreditsoverthistimeperiod.185Theexpansionofthemitigationbanksandothermarket-drivenapproachestosection404mitigationrequirementsareexpectedtoreducemitigationcostsgenerally;186thesecostreductionsareexpectedtobeespeciallyprominentinthestateswithfewadditionalprotectionsforwetlands,i.e.thosestatesthattheagenciesdonotexpecttoregulatewetlandsabovethefloorsetbytheCWA.187Therefore,thelikelihoodthatcostsavingsareoverstatedinStage1generallyandinstateresponsescenarios2and3inparticularraisesthepossibilitythattherepealofthe2015CleanWaterRuleisnotcost-benefitjustified.

Theagenciesmustindicatewhetherthesewell-documentedeffectsoftheexpansionofmitigationbanksweretakenintoaccountintheStage1analysisand,ifnot,theagenciesmusttakethemintoaccountintheirestimatesofavoidedcosts.Theagenciesmustmorethoroughlydocumentthedatafortheircostestimates,explainanysignificantdifferencesbetweentheirnewestimatesandthe2015costestimates,andultimatelyshouldselecttheregulatoryalternativethatactuallymaximizesnetbenefits.

VII. TheAgenciesFailtoGiveConsiderImportantUnquantifiedForgoneBenefits

TheagenciesdonotquantifyormonetizemanyoftheforgonebenefitsresultingfromimplementationoftheProposedReplacementRule.Forinstance,theagenciesexcludeforgonebenefitsfromHawaiiandWashington,D.C.“duetoalackofdata.”188Likewise,AlaskaisomittedfromScenario0ofthesensitivityanalysesforthesamereason.189Meanwhile,theagenciesmakenomentionoftheforgonebenefitsinPuertoRicoorother

182Akeywordsearchfor“credit”inthe2018EconomicAnalysisturnsupnohituntilpage95—wellintotheStage2analysis,andcompletelybypassingtheStage1analysis.183PalmerHoughandRachelHarrington,TenYearsoftheCompensatoryMitigationRule:ReflectionsonProgressandOpportunities,49ENVIRONMENTALLAWREPORTER10018,10022-23(2018).184Id.at10022-23.185Id.at10024.186INSTITUTEFORPOLICYINTEGRITY,MUDDYINGTHEWATERS:HOWTHETRUMPADMINISTRATIONISOBSCURINGTHEVALUEOFWETLANDSPROTECTIONFROMTHECLEANWATERRULEat4(2017).187Id.at9(2017).1882018EconomicAnalysisat59,n.59.Thesewereclassifiedascategory2and1,respectively.Seeid.at44.Thestates189Seegenerally2018EconomicAnalysis,AppendixE.

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territories,despiteanalyzingPuertoRicoinAppendixBtotheResourceandProgrammaticAssessmentandshowingthatPuertoRicoshouldbeclassifiedasacategory2state.190Theagenciesalsoentirelyfailtoquantifyormonetizeforgonestreammitigationbenefits,“duetoalackofavailablestudies.”191Infact,duetotheNHDdataset’slimitations,theagenciesassumeallstreamsintheNHDdatasettobenotephemeral,therebyomittingforgonebenefitsassociatedwiththesewaters.Theagenciesconcedethat“[t]hismayhaveomittedrelevantactivitiesorpermitsfromtheanalysis,whichwouldunderstatetheimpactsoftheproposedrule.”192

Evenwithinthecategoryofforgonewetlandbenefits,notallimportanteffectshavebeenquantifiedormonetized.Whichcategoriesofbenefitshavebeenmonetizedbythestudiesthattheagenciesincludedintheirunittransferanalysisandmeta-analysisdependonhowthosestudiesweredesigned.Totheextentthedesignofsomestudieswouldindicatethattheirmeasuresofwillingnesstopayarefocusedononlycertainuseornon-usevalues,thestudiesmaynotfullymonetizeotherimportantuseornon-usevalues.193Theagenciesadmit,forexample,thattheirbenefittransferanalysesexcludedanystudiesthatestimated“themarketvalueofextractedproducts,”194andyettheagenciesdonototherwiseassesswhetherthewillingness-to-paystudiestheychoosetofocusonadequatelycapturethefullrangeofuseandnon-usevaluesofwetlands,suchasmarketvalues,recreationalvalues,directandindirectecosystemservicevalues(suchasfloodcontrolandbiodiversity),andscientificandeducationalvalues.195Theagenciesalsoconcedethattheiranalysisofthesection404permittingprogramdoesnotaccountforthereductionofincentivesfordeveloperstopreventorlimitimpacts,resultinginfurtherunderestimationofforgonebenefits.196Andasthesecommentsalreadyexplained,theagencieshavefailedtovalueanyregionalwillingnesstopayforwetlandbenefits.Altogether,theagenciesfailtomentionorglossoverseveralkeycategoriesofpotentiallyimportantbutcurrentlyunquantifiedforgonebenefits.ExecutiveOrder12,866instructsagenciestogivedueconsiderationtoallimportantunquantifiedcostsandbenefits.197CircularA-4likewisecautionsagenciesagainstignoringthepotentialmagnitudeof

190ResourceandProgrammaticAssessmentat150-51.1912018EconomicAnalysisatxv.192Id.at196.193See2018EconomicAnalysisat72(notingthatwhichspecificecosystemservicesthestudiesdescribetorespondentsisanimportantvariableinthestudies).1942018EconomicAnalysisat60.195See2018EconomicAnalysisat50(indicatingthattheirbenefittransferanalysisvalues“ecosystemservices,”withoutmentioningothertypesofforgonewetlandbenefits);seeid.at64(suggestingthattheagencies’focuswasonnonusevalueslikeecosystemservices,andthatstatedpreferencestudiesmeasuringwillingnesstopaylikewisefocusonnonusevalues,butnotmentioninganyvaluationofuses).196Id.at197.19758Fed.Reg.51,735at§1(a)(“Costsandbenefitsshallbeunderstoodtoincludebothquantifiablemeasures(tothefullestextentthatthesecanbeusefullyestimated)andqualitativemeasuresofcostsandbenefitsthataredifficulttoquantify,butneverthelessessentialtoconsider.”).

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unquantifiedbenefits,becausethemostefficientrulemaynothavethe“largestquantifiedandmonetized...estimate.”198Specifically,CircularA-4instructsagenciesto“exerciseprofessionaljudgmentinidentifyingtheimportanceofnon-quantifiedfactors...[and]recommendwhichof[them]areofsufficientimportancetojustifyconsiderationintheregulatorydecision.”199Themerefactthatabenefitcannotcurrentlybequantifiedsayslittleaboutitsmagnitude;infact,someofthemostsubstantialcategoriesofmonetizedbenefitsthatappearincurrenteconomicanalyseswereonceconsideredunquantifiable.200Thisguidanceisofparticularimportancegiventherelativeclosenessofestimatedtotalnationalcostsavingsandforgonebenefitsinvariousscenarios.201Ultimately,theagenciesneverexplainwhytheproposedrule’sallegedcostsavingsjustifyalltheforgonebenefits,includingalltheunquantifiedforgonebenefits.Eveniftheproposedruleseemscost-benefitjustifiedaccordingtotheagencies’calculationsofquantifiedcostsandbenefits,theagenciesneedtoexplainwhy,intheirbestjudgment,afterconsideringalltheunquantifiedforgonebenefitsaswell,theproposedruleiswarranted.Giventhemyriadoferrorsandomissionsinassessingtherulesquantifiedandunquantifiedcostsandbenefits,asdetailedabovethroughoutthesecomments,theproposedruleisnotcost-benefitjustified.

VIII. Conclusion

TheagenciesshouldnotfinalizetheProposedReplacementRule.Iftheyintendtoproceed,theyshouldprovidethepublicwiththeinformationabouttheircalculations,whichiscurrentlymissing,ashighlightedinthesecomments.Then,theagenciesprovidethepublicwithachancetocommentonthatinformation,beforefinalizinganyrepealorreplacementofthe2015CleanWaterRule.

198CircularA-4at2.199Id.at10.200SeeRichardL.Revesz,QuantifyingRegulatoryBenefits,102CAL.L.REV.1423,1436(2014)(explaining,forexample,howthevalueofstatisticallifehad“initiallyevadedquantification.”).201Theagenciesconcedethatinoneofthescenarios,forgonebenefitsoftheProposedReplacementRuleoutweighcostsavings.See2018EconomicAnalysisat205,207-08(inScenario0,the95thpercentileofWTPforwetlandsexceedsthelowerboundofestimatedcostsavings).Thereareseveralinstancesoftheagencies’mainanalysiswherethedifferencebetweenestimatedannualizedcostsavingsandforgonebenefitsislessthan$20million.See,e.g.,id.at207-08($19.8million–Scenario2using95thpercentileofWTPandlowerboundofcostsavings;$13.4million–Scenario3using95thpercentileofWTPandlowerboundofcostsavings).Incasessuchasthese,CircularA-4requiresathoroughlyexplainedrationaleregardingunquantifiedbenefits.SeeCircularA-4at(“Forcasesinwhichtheunquantifiedbenefitsorcostsaffectapolicychoice,youshouldprovideaclearexplanationoftherationalebehindthechoice.Suchanexplanationcouldincludedetailedinformationonthenature,timing,likelihood,location,anddistributionoftheunquantifiedbenefitsandcosts.”)(emphasisadded).

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Respectfully,IanDavidBethanyDavisNollPeterHowardJamesMeresmanJasonSchwartz

InstituteforPolicyIntegrityNewYorkUniversitySchoolofLawATTACHMENTS—SUBMITTEDTOTHERECORD

INSTITUTEFORPOLICYINTEGRITY,COMMENTLETTER:COMMENTSONTHEPROPOSEDDEFINITIONOF“WATERSOFTHEUNITEDSTATES”—RECODIFICATION&ONTHEUNDERLYINGECONOMICANALYSIS,DKT.NO.EPA-HQ-OW-2017-0203,82Fed.Reg.34,899(proposedJuly27,2017)(September27,2017),availableathttps://policyintegrity.org/documents/IPI_WOTUS_comments.pdf.INSTITUTEFORPOLICYINTEGRITY,COMMENTLETTER:COMMENTSONTHESUPPLEMENTALNOTICEOFPROPOSEDREPLACEMENTRULEMAKING,DEFINITIONOF“WATERSOFTHEUNITEDSTATES”—RECODIFICATIONOFTHEPREEXISTINGRULE,DKT.NO.EPA-HQ-OW-2017-0203,83FED.REG.32,227(proposedJuly12,2018)(August10,2018),availableathttps://policyintegrity.org/documents/Clean_Water_Rule_Supplemental_NPR_Comments_081018.pdf.INSTITUTEFORPOLICYINTEGRITY,COMMENTLETTER:COMMENTSONTHEDEFINITIONOF“WATERSOFTHEUNITEDSTATES”—ADDITIONOFAPPLICABILITYDATETO2015CLEANWATERRULE(submittedDec.13,2017),availableathttps://policyintegrity.org/documents/12.13.17_WOTUS_stay_final.pdfJasonSchwartz&JeffreyShrader,MuddyingtheWaters(2017)https://policyintegrity.org/files/publications/Muddying_the_Waters.pdf.

PeterHoward&JeffreyShrader,ExpertReport:AnEvaluationoftheRevisedDefinitionof“WatersoftheUnitedStates”(2019)https://policyintegrity.org/documents/Shrader_Howard_Expert_Report_FINAL.pdf

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