Response to "Comments of American Chemistry Council, American Forest &
Paper Association, American Iron and Steel Institute, American Petroleum
Institute, American Public Power Association, and Utility Water Act
Group on EPA's Proposed Information Collection Request on Willingness to
Pay Survey for § 316(b) Phase III Cooling Water Intake Structures"

DOCKET ID OW-2005-0006-0007

EPA's responses to the "Comments of American Chemistry Council, American
Forest & Paper Association, American Iron and Steel Institute, American
Petroleum Institute, American Public Power Association, and Utility
Water Act Group on EPA's Proposed Information Collection Request on
Willingness to Pay Survey for § 316(b) Phase III Cooling Water Intake
Structures," the attached comment "Comments on EPA 316(b) 'Willingness
to Pay' Survey Materials" from Lawrence Barnthouse, and the attached
comment "Evaluation of the EPA's 316(b) Phase III Rule Willingness to
Pay Survey: Final Report" from Triangle Economic Research (TER) are
organized to correspond to the individual ordered sections of the
comments. These comments are henceforth referred to as the "ACC et al.
Comment," "Barnthouse Comment," and "TER Comment," respectively.

Responses to the ACC et al. Comment

Introduction and Overview

The ACC et al. Comment is summary in nature and draws heavily on the
Barnthouse Comment and the TER Comment. In this spirit, EPA offers the
following general responses that address the main issues presented in
the list of points beginning on page 2 of the comment. Detailed
responses to all comments can be found in the Agency's response to the
Barnthouse Comment and TER Comment.

The commenter argues that there are several reasons why EPA will not be
able to develop reliable estimates of the non-use benefits of the 316(b)
regulation for Phase III facilities:

-   "EPA's view of non-use values as presented in the November 23, 2004
    ICR is conceptually flawed." EPA disagrees with this statement,
    which does not reflect the wide conceptual acceptance of non-use
    values in the academic literature. As stated by Freeman, "Non-use
    values, like use values, have their basis in the theory of
    individual preferences and the measurement of welfare changes.
    According to theory, use and non-use values are additive" (Freeman,
    2003).

-   "The proposed ICR contains numerous flaws that will result in
    unreliable benefit estimates." Again, EPA disagrees with the
    commenter. As discussed in the Agency's detailed responses, below,
    EPA has extensively tested the survey using focus groups and
    cognitive interviews. Results indicate that the survey is effective
    at eliciting respondents' opinions about reducing fish losses, and
    that the survey will produce valid, unbiased, and reliable
    willingness-to-pay estimates.

-   "EPA based its survey on unreliable empirical estimates of the
    effect of cooling water intake structure regulations on fish
    populations and fisheries production." In response, EPA first notes
    that the survey materials are based on the best biological and
    engineering data available. Second, the stated preference survey
    will still produce results that are meaningful in the context of the
    scenarios that are presented to respondents.

The commenter argues that the benefits of regulating cooling water
intake structures for recreationally and commercially significant
species are already reflected in the EPA's RIA for the proposed rule for
Phase III facilities. EPA disagrees with the commenter's statement. As
stated by Freeman, "Non-use values, like use values, have their basis in
the theory of individual preferences and the measurement of welfare
changes. According to theory, use and non-use values are additive"
(Freeman, 2003). Moreover, as stated by Freeman (2003, p. 137), "\[t\]he
hypothesis of nonuse values has gained wide acceptance among economists
working in the field of environmental and resource economics..." and the
suppression of such values "in natural resource policymaking could lead
to serious errors and resource misallocations" (p. 138). The potential
significance of nonuse values as a distinct component of total
value---and the requirement that stated preference methodologies are
used to measure these values---are also emphasized by the NOAA Blue
Ribbon Panel on Contingent Valuation (Arrow et al. 1993) and EPA's
guidelines for benefit cost analysis (US EPA 2000). The Agency notes
that the non-use benefits of the proposed regulation are a completely
separate category of value from the commercial and recreational welfare
effects of the proposed rule. Furthermore, results from the focus groups
and cognitive interviews indicated that some individuals hold
substantial non-use values for protecting fish species with direct uses,
in addition to any use values that they have for those species.

The commenter argues that the presentation materials prepared by EPA
contain inaccurate statements and invalid comparisons that will lead
respondents to believe that the benefits of increased regulation of
cooling water intakes would be substantially greater than is actually
the case. EPA agrees that certain details of the survey and presentation
materials provided in the supporting documentation for the June 9
Federal Register notice required revision. Since issuing the June 9
Federal Register notice, EPA has conducted five focus groups and two
cognitive interview sessions to improve the Agency's understanding of
the public\'s perceptions and attitudes concerning fishery resources, to
pretest draft survey questions and presentation materials, to test for
and reduce potential biases that may be associated with stated
preference methodology, and to ensure that both researchers and
respondents have similar interpretations of survey language and
scenarios. As a result of this extensive pre-testing, a number of
revisions have been made to the survey that have significantly improved
its reliability and reduced its potential for bias. Results from
pretests indicate that the presentation materials prepared by EPA do not
lead respondents to believe that the benefits of increased regulation of
cooling water intakes would be substantially greater than is actually
the case.

The commenter argues that because the survey materials are based on
unreliable population and fish losses data, the survey results will also
be unreliable. In response, EPA first notes that the survey materials
are based on the best biological and engineering data available. Second,
the stated preference survey will still produce results that are
meaningful in the context of the scenarios that are presented to
respondents. Different versions of the survey will show a range of
different baseline and resource improvement levels, where these levels
are chosen to (almost certainly) bound actual levels. Different
respondents will be asked to make choices over all possible policy
scenarios where impingement and entrainment reductions range from 0% (no
policy) to 98%. Given that there will almost certainly be some
biological uncertainty regarding the specifics of the actual baselines
and improvements, the resulting valuation estimates will allow
flexibility in estimating WTP for a wide range of different
circumstances.

The commenter also argues that the survey is unnecessary because in
independently conducted verbal protocol interviews with 15 individuals,
respondents did not demonstrate meaningful values for marginal changes
in forage fish populations. EPA notes that this finding contradicts the
results of the EPA focus groups and cognitive interviews conducted under
ICR #2155.01. These focus groups and interviews provided strong evidence
that many individuals value forage fish and are willing to pay to
prevent losses of all fish species including forage fish. Participants
in the EPA focus groups and interviews cited a variety of motivations
for preventing fish losses, including the satisfaction of knowing that
the fish exist, the desire to bequeath healthy fish populations to
future generations, and the desire to protect the functioning of aquatic
ecosystems. Furthermore, EPA notes that the economic literature advises
against the use of ad hoc, expert assumptions regarding the magnitude of
non-use values---particularly assumptions that non-use values are
trivial. Because values are inherently subjective, Bateman et al. (2002,
p. 75) emphasize that "it would be wrong for experts to assume that one
resource is a perfectly good substitute for another" \[and hence that
non-use values are trivial or small\]. As further noted by Bateman et
al. (2002, p. 75), "there are, therefore, no easy rules for determining
at the outset" whether non-use values are likely to be significant or
non-significant. Based on this clear guidance, EPA believes that
empirical analysis should be used to determine the magnitude of non-use
values in the 316(b) regulation for Phase III facilities. Finally, the
Agency notes that TER did not provide complete transcripts for the 15
verbal protocol interviews described in their comments, preventing the
Agency from obtaining a complete perspective on the result of this
effort.

The commenter argues that the survey does not sufficiently emphasize the
uncertainty in the estimates of the fish losses that would be prevented
by the proposed policies. EPA points out that debriefing sessions during
focus groups and cognitive interviews showed that respondents clearly
understood that the ecological changes described in the survey were
uncertain. Furthermore, respondents were comfortable making decisions in
the presence of this uncertainty. Additionally, EPA has modified the
survey and slide show to emphasize the uncertainty of the expected
environmental changes. For example, the following statement has been
added to the survey: "You will be shown different policy options---with
different effects on fish. This is because scientists are still working
to determine what the exact effect on fish will be, so it is important
to know how you would react to a wide range of possible outcomes. Common
sense indicates that preventing the loss of fish eggs and young fish
will mean more adult fish in future years, but at this point there is
still significant uncertainty regarding the exact size of these future
effects." EPA also added debriefing questions to the survey instrument
that are designed to identify respondents whose responses are based on
incorrect interpretation of the environmental changes described in the
survey, including the uncertainty of the expected changes. [^1] EPA also
notes that tests of survey question formats suggested by
TER---incorporating ranges of impacts in survey questions---performed
poorly in both TER's own focus group and in EPA's pretests.

Finally, the commenter expresses the opinion that the survey should be
peer reviewed by an independent panel of experts. EPA agrees with the
commenter's opinion, and the Agency plans to convene two peer-review
panels. The first panel will review the results of the focus groups, the
instrument and the planned survey sampling design, and the proposed
willingness to pay estimation methodology, before the survey is fielded.
The second peer review panel will review the entire survey process,
including EPA's final estimated results for the 316(b) Phase III
rulemaking, after the survey is completed.

Responses to the Barnthouse Comment

Introduction

The introduction to the Barnthouse Comment states that the presentation
materials for the 316(b) survey (1) overstate both current impacts of
impingement and entrainment (I&E) losses and the biological benefits of
reducing those losses, and (2) understate the uncertainty inherent in
EPA's estimates of the magnitude of those losses. EPA disagrees with
these claims. In response to the first point, EPA emphasizes that the
estimates of impingement and entrainment losses used in the survey are
scientific estimates specific to the policy options valued in this
study. The policies considered by EPA in the context of the 316(b)
regulations would prevent the loss of a potentially large number of
age-one equivalent fish, both regionally and nationwide. This change in
impingement and entrainment could lead to wide range of biological
improvements (e.g., effects on stock size). In response to the second
point, EPA notes that the presentation materials and the survey clearly
state that the expected ecological changes associated with impingement
and entrainment reductions from the 316(b) regulations are subject to
uncertainty. Specifically, EPA added the following statement to the
slide show and the matching script: "You will be shown different policy
options---with different effects on fish. This is because scientists are
still working to determine what the exact effect on fish will be, so it
is important to know how you would react to a wide range of possible
outcomes. Common sense indicates that preventing the loss of fish eggs
and young fish will mean more adult fish in future years, but at this
point there is still significant uncertainty regarding the exact size of
these future effects." Furthermore, given that there will be some
biological uncertainty regarding the specifics of the "actual" baseline
conditions and policy impacts, EPA designed the survey as a choice
experiment, in which levels of attributes will vary across respondents.
The resulting valuation estimates will allow flexibility in estimating
WTP for a wide range of different circumstances.

The introduction to the Barnthouse Comment also notes that cooling water
intake structures were not listed as major concerns in two recent
reports on threats to U.S. marine resources for which new regulatory
policies are needed. The commenter then argues that this implies that
statements in the survey materials "that entrainment and impingement
losses are known to be causing measurable reductions in the abundance of
important fish populations, and that reductions in those losses are
needed to prevent continuing long-term declines," are false. EPA
disagrees with this statement. The Preamble to the 316(b) Phase II Rule
discusses a number of specific examples of evidence that I&E at CWIS
causes significant losses of fish (69 FR 41588). For example, at the at
the San Onofre Nuclear Generating Station, an estimated 57 tons of fish
were killed per year when all units were in operation, and local fish
densities decreased significantly. Thus, based on empirical evidence
that I&E at CWIS causes significant losses of fish, it is entirely
reasonable to list "the use of cooling water in commercial facilities"
as a factor that affects fish populations. Moreover, the lack of
emphasis in a two reports does not in any way imply that entrainment and
impingement losses do not cause measurable reductions in the abundance
of important fish populations.

Finally, the introduction points out that the survey materials imply
that impingement and entrainment impacts on freshwater species are
equally severe as I&E impacts on marine species. EPA disagrees that the
presentation materials imply equally severe I&E impacts on marine and
freshwater species. The presentation materials clearly emphasize that
the effect of impingement and entrainment losses on fish population will
vary depending on facility location and that the estimates presented in
the slide show discuss average effects across all affected water bodies.
(For more detail see EPA's response to TER Comments on Slide 13).

Specific Comments on the Slide Show

The commenter provides a number of comments, organized by slide. EPA's
responses follow the same convention:

-   Slide 8: The commenter asserts that commercial and recreational
    fishing, pollution, and development of waterfront areas are "among
    the factors evaluated by the Pew Oceans Commission and the U.S.
    Commission on Ocean Policy. The reports from these commissions
    provide ample documentation of their harmful effects. No similar
    documentation exists for effects of cooling water withdrawals." EPA
    disagrees with this statement. In the Preamble of the 316(b) Phase
    II Rule (69 FR 41588), under "Examples of Environmental Impacts
    Caused by Cooling Water Intakes," this passage was included: "At the
    San Onofre Nuclear Generating Station (SONGS), in a normal (non-El
    Nino) year, an estimated 57 tons of fish were killed per year when
    all units were in operation. The amount lost per year included
    approximately 350,000 juveniles of white croaker, a popular sport
    fish; this number represents 33,000 adult equivalents or 3.5 tons of
    adult fish. In shallow water, densities of queenfish and white
    croaker decreased 60 percent within one kilometer of SONGS and 35
    percent within three kilometers from SONGS as compared to densities
    prior to facility operations. Densities of local midwater fish
    decreased 50 to 70 percent within three kilometers of the facility."
    Thus, based on empirical evidence that I&E at CWIS causes
    significant losses of fish, it is entirely reasonable to list "the
    use of cooling water in commercial facilities" as a factor that
    affects fish populations.

-   Slide 9: The commenter notes that this slide does not point out that
    I&E at CWIS is not a primary cause of the general decline most fish
    stocks. First, EPA notes that the relative importance of various
    causes of fish loss varies by species. Accordingly, it is misleading
    to make "general" statements about the relative importance of
    different causes. For example, while overfishing may be the most
    important cause of decline for certain highly-prized commercial
    species, it is a negligible cause of decline for most forage fish.
    Second, EPA's focus groups showed that participants had a basic
    level of understanding about the importance of various factors that
    affect fish populations. Most participants ranked pollution and
    coastal zone development as the main factor affecting fish
    population, followed by commercial and recreational fishing (for
    details, refer to Section 2.2.1 of the focus group report \[Besedin
    et al., 2005\]). EPA also included a debriefing question in the
    survey that asks survey respondents to rank the effect of various
    human and natural factors in terms of their importance to the
    decline in fish populations (question 2, Attachment 3, U.S. EPA,
    2005). The question was intended as a screening tool that would
    identify those survey respondents who misunderstood the slide show
    and ranked I&E as a major factor in the decline of fish populations.
    The commenter also points out that although striped bass are
    featured prominently on a number of slides, the population of this
    species has increased significantly in the northeast over the last
    twenty years. EPA points out that pictures of striped bass are
    included in the slides show because 1.8 million of age-1 equivalents
    of striped bass are lost to impingement and entrainment in the
    Northeast region. Whether eliminating impingement and entrainment
    losses has any effect on the stock size of this species will be
    determined by project biologists. The revised version of this slide
    will include the estimated change (if any) of the striped bass stock
    size from reducing impingement and entrainment mortality (slide 19,
    Attachment 1, U.S. EPA, 2005). Finally, EPA has added material to
    the survey and slide show to emphasize that CWIS losses may not be
    the most significant cause of fish losses in many cases. For
    example, the slide show script now explicitly states, "It is
    important to recognize that the effects of fish losses from cooling
    water use are usually smaller than the effects of commercial
    fishing. Even though cooling water use is not the largest cause of
    fish losses in many areas, it has contributed to a measurable
    decline in some fish stocks, in some locations." This statement is
    both justified based on scientific evidence, and provides an
    appropriate understanding that CWIS losses are not, in some cases,
    the most significant cause of fish decline.

-   Slide 13: EPA agrees that the effect of impingement and entrainment
    losses on fish population will vary depending on the baseline
    condition of the stock size, magnitude of impingement and
    entrainment losses, and other factors. Therefore, EPA revised slide
    13 as follows: the slide shows a map identifying locations of major
    facilities in the Northeast that withdraw cooling water. The script
    for Slide 13 states: "Facilities that use cooling water are located
    in all Northeastern States. This map shows the locations of major
    facilities in the Northeast that withdraw cooling water in ways that
    harm fish. Common sense indicates that effects on fish will be
    greater in areas closer to these facilities, and smaller in areas
    that are further away. For the sake of simplicity, this presentation
    discusses average effects across all affected water bodies"
    (Attachment 1, U.S. EPA, 2005).

-   Slide 15: The commenter's point that very few trout are affected by
    impingement and entrainment is well taken. EPA has removed the photo
    of the trout from this slide (slide 15, Attachment 1, U.S. EPA,
    2005).

-   Slide 17: EPA disagrees that the slide show fails to inform survey
    respondents regarding the proportion of impingement and entrainment
    losses attributable to forage fish. Slide 16 specifically states
    that two thirds of impingement and entrainment losses are fish that
    are not directly used by humans (slide 16, Attachment 1, U.S. EPA,
    2005)

-   Slide 18: This slide has been removed from the slide show.

-   Slide 19: EPA has revised this slide to compare impingement and
    entrainment losses for selected species used by humans with the
    stock size and commercial and recreational harvest for these
    species. EPA also added the following statement to the slide show:
    "There are many billions of fish that are not directly used by
    humans in Northeast waters. However, the exact size of total fish
    stocks for these species is not known" (slides 17-19, Attachment 1,
    U.S. EPA, 2005)

-   Slide 21: EPA disagrees with the commenter that no decline in fish
    population attributable to cooling water withdrawals was documented.
    In the Preamble of the 316(b) Phase II Rule, under "Examples of
    Environmental Impacts Caused by Cooling Water Intakes," this passage
    was included: "At the San Onofre Nuclear Generating Station (SONGS),
    in a normal (non-El Nino) year, an estimated 57 tons of fish were
    killed per year when all units were in operation. The amount lost
    per year included approximately 350,000 juveniles of white croaker,
    a popular sport fish; this number represents 33,000 adult
    equivalents or 3.5 tons of adult fish. In shallow water, densities
    of queenfish and white croaker decreased 60 percent within one
    kilometer of SONGS and 35 percent within three kilometers from SONGS
    as compared to densities prior to facility operations. Densities of
    local midwater fish decreased 50 to 70 percent within three
    kilometers of the facility."

-   Slide 24-25: EPA disagrees with the commenter's interpretation of
    information presented in Slide 24. This slide simply provides an
    example of technologies that may be implemented to reduce
    impingement and entrainment losses. EPA agrees that many facilities
    already have technologies in place and the proposed policies will
    not result in further impingement and entrainment reductions at
    these facilities. To avoid any misunderstanding of the baseline
    conditions, EPA added the following statement to Slide 25:
    "Technologies such as these are already in use at 52% of facilities
    that use cooling water in the US. The proposed policies would
    require similar technologies at all facilities that use cooling
    water" (Attachments 1 and 2, U.S. EPA, 2005). EPA further notes that
    the survey is to be implemented as a choice experiment survey. The
    goal of choice experiment methodology is to obtain choice responses
    covering a wide range of outcomes that bound (on the upper and lower
    end) actual possible policy outcomes. Different respondents will be
    asked to make choices over policy scenarios whose CWIS reductions
    range from 0% (no policy) to 98%. This will provide EPA with an
    opportunity for estimating values for a wide range of potential
    outcomes.

-   Slide 31: This slide has been removed from the show.

-   Slide 42: EPA emphasizes that the proposed survey versions will
    allow respondents to choose among a wide variety of hypothetical
    policy options, some with larger and other with very small changes
    in fish populations and harvest. More generally, the survey is to be
    implemented as a choice experiment survey, in which levels of
    attributes will vary across respondents. The experimental design
    will explicitly allow for variation in baselines and improvements.
    As long as the range of baseline and improvement levels present in
    the experimental design bounds the actual levels, the choice
    experiment survey will be able to estimate appropriate values---even
    though some respondents will see numbers that are "not right." This
    is a fundamental property of the choice experiment method. Our goal
    is to construct survey versions showing a range of different
    baseline and resource improvement levels, where these levels are
    chosen to (almost certainly) bound the "actual" levels. Given that
    there will almost certainly be some biological uncertainty regarding
    the specifics of the "actual" baselines and improvements, the
    resulting valuation estimates will allow flexibility in estimating
    WTP for a wide range of different circumstances. EPA refers the
    commenter to the numerous sources in the literature that address the
    uses and methods of the choice experiment method, including Louviere
    et al. (2000), Bateman et al. (2002), and Bennett and Blamey (2001).

-   Slide 44: See EPA's response to TER Comments on Slide 42.

Comments on the Fact Sheet

The commenter first states that the fact sheet provided with the survey
questionnaire overstates the potential benefits of reducing entrainment
and impingement losses. The commenter then lists specific issues
associated with the information presented in the fact sheet. EPA notes
that the fact sheet was dropped from the final version of the survey.
Findings from the focus groups conducted in August-September 2005 showed
that the slide show and the introductory materials in the survey
provided sufficient information to answer survey questions and that the
fact sheet was unnecessary. For example, one participant stated: "I
found it unnecessary. \[...\] I thought I picked out enough from the
slide show in order to answer the questions that were being asked"
\[#9/3-2\]. Another stated:

M: You were also handed a fact sheet. Did you use the fact sheet?

R: No, I didn\'t. No.

M: So basically, what you are telling me, that the only information you
used was the slide show.

R: Right, exactly. I was listening to him giving us, you know, what he
was reading from, and then looking at the show. It was okay.

M: And you felt that you had enough information to respond to the
survey.

R: Right, exactly. \[#9/2-11\]

Therefore, EPA decided not to include the fact sheet as additional
reference material.

Conclusion

The commenter states that the informational slide show and fact sheet
prepared by EPA contain numerous inaccurate statements and invalid
comparisons and that the survey respondents are likely to be misled to
believe that the benefits of requiring closed-cycle cooling or other
advanced intake technologies are substantially greater than is actually
the case.

EPA disagrees with this conclusion. First, EPA emphasizes that the
estimates of impingement and entrainment losses used in the survey are
scientific estimates specific to the policy options valued in this
study. The policies considered by EPA in the context of the 316(b)
regulations would prevent the loss of a potentially large number of
age-one equivalent fish, both regionally and nationwide. EPA, however,
notes that the estimated reductions in impingement and entrainment could
lead to wide range of biological improvements (e.g., effects on stock
size).

In addition, the presentation materials and the survey clearly state
that the expected ecological changes associated with impingement and
entrainment reductions from the 316(b) regulations are subject to
uncertainty. Specifically, EPA added the following statement to the
slide show and the matching script: "You will be shown different policy
options---with different effects on fish. This is because scientists are
still working to determine what the exact effect on fish will be, so it
is important to know how you would react to a wide range of possible
outcomes. Common sense indicates that preventing the loss of fish eggs
and young fish will mean more adult fish in future years, but at this
point there is still significant uncertainty regarding the exact size of
these future effects."

Given that there will be some biological uncertainty regarding the
specifics of the "actual" baselines conditions and policy impacts, EPA
designed the survey as a choice experiment, in which levels of
attributes will vary across respondents. The proposed survey versions
will allow respondents to choose among a wide variety of hypothetical
policy options, some with larger and other with very small changes in
fish populations and harvest. As long as the range of baseline and
improvement levels present in the experimental design bounds the actual
levels, the choice experiment survey will be able to estimate
appropriate values corresponding to the policy outcomes. The resulting
valuation estimates will allow flexibility in estimating WTP for a wide
range of different circumstances.

Focus groups conducted in August-September 2005 showed that focus group
participants clearly understood that the 316(b) regulations will have
only a small impact on long-term fish populations, and that the
estimates provided in the survey were uncertain (Besedin et al., 2005).
For example, participants made statements such as: "I don\'t think a
three percent population thing with the fish is a big deal" \[#9/8-4\],
and "It didn\'t show much either way, to me. From 65 percent to 68
percent, maybe in the big scheme of things three percent is a lot, that
I don\'t know" \[#9/10-2\].

Responses to the TER Comment

1 Introduction and Overview

The introduction to the TER Comment describes EPA's proposed survey, and
then provides a summary of later comments. In the spirit of these
summary comments, EPA offers the following summarized responses. Details
and rationale underlying these responses are provided in later sections
of this commentary, corresponding to the appropriate numbered sections
of the TER Comment. The primary elements highlighted in this section of
the TER Comment, and EPA's summary comments, are found below.

-   **Comment:** "Respondents are not valuing marginal changes in forage
    fish populations. \[...\] The pattern of such responses is
    consistent with other well-documented biases (such as embedding or
    payment vehicle). \[...\] The fact that EPA's survey elicits, in
    many instances, values other than the nonuse value of forage fish is
    a fatal flaw." **EPA Response:** This statement reveals a clear
    misunderstanding of the purpose of the survey, which is to measure
    total willingness to pay to prevent losses of both forage and
    commercial and recreational species. Furthermore, despite the
    commenter's claims, EPA's pretesting suggests that symbolic biases
    such as the warm glow effect will not be a major concern.
    Additionally, the survey instrument provides a means to test for and
    eliminate responses based on such motives. More detailed responses
    to this comment are provided in Section 2.1, below.

-   **Comment:** "The survey responses reveal a consistent pattern of
    hypothetical bias." **EPA Response:** EPA agrees with the commenter
    that addressing hypothetical bias is an important survey design
    issue, and the Agency has taken several steps to minimize
    hypothetical bias. The survey has been explicitly designed to
    maximize the consequentiality of choice experiment questions,
    thereby maximizing incentive compatibility, and it includes numerous
    debriefing questions to assess the rationale underlying the choices
    made by respondents, and to assess whether hypothetical bias is an
    issue. EPA also emphasizes that the proposed survey follows the
    guidelines of the NOAA Blue Ribbon Panel on Contingent Valuation
    (Arrow et al. 1993) with regard to mechanisms for reduction of
    hypothetical bias. Based on the results of EPA's focus groups, EPA
    believes that these measures have been effective at limiting
    hypothetical bias in the survey. More detailed responses to this
    comment are provided in Section 2.2, below.

-   **Comment:** "The study results offer little or no evidence that the
    stated preference format used in this survey...is any less subject
    to the pervasive biases." **EPA Response:** EPA's focus groups have
    shown that the survey respondents are aware of their budget
    constraints, evaluate the policy choices realistically, and
    understand the environmental changes they are being asked to value.
    Furthermore, the referendum survey format allows EPA to evaluate
    willingness to pay for a range of policy scenarios. More detailed
    responses to this comment are provided in Section 2.3, below.

-   **Comment:** "The survey responses deviate from standard economic
    principles for measuring benefits and interpreting survey data.
    \[...\] Respondents are answering the questions conditional on the
    responses given to previous questions, which violates the
    independence assumption used in the standard statistical analysis."
    **EPA Response:** EPA believes that the survey will generate
    economically consistent responses. Although the resource changes
    associated with the policies presented in the survey will affect
    respondents in different ways, the three-way factorial survey
    format---in which each policy is represented as having separate
    effects on fish losses, long term populations, and commercial and
    recreational catch rates---is explicitly designed to allow separate
    calculation of the values that respondents assign to each aspect of
    resource change, both independently, and though interaction terms.
    Furthermore, the results of EPA's focus groups revealed that most
    respondents answered the choice questions separately. More detailed
    responses to this comment are provided in Section 2.3, below.

-   **Comment:** "Respondents' answers are entirely dependent upon the
    information provided. \[...\] Barnthouse (2005) shows that the
    information contained in the EPA survey materials is inaccurate.
    \[...\] Consequently, any responses based on such data are biased
    and not suitable for inclusion in a RIA." **EPA Response:** The data
    presented in the survey represents the best scientific estimates of
    fish losses and population changes available. The fact that
    respondents' answers are influenced by this information provided is
    expected, and is consistent with the academic literature. As the
    commenter points out, the "NOAA panel identified the inclusion of
    accurate and complete information in the CV questionnaire as a
    critical characteristic of a CV survey." More detailed responses to
    this comment are provided in Section 2.4, below.

-   **Comment:** "EPA also has failed to include information concerning
    the inherent uncertainty of the effects of CWIS on the environment,
    which further limits the usefulness of the survey responses. The
    respondents in the verbal protocol survey found it very difficult to
    answer questions that include uncertain outcomes. Such a finding is
    supported by the recent Resources for the Future (RFF) study
    (Banzhaf et al. 2004), which found that respondents could not
    provide answers to questions when uncertainty was present. The RFF
    solution to this problem was to misrepresent the factual
    information, which is akin to no solution at all." **EPA Response:**
    EPA disagrees with this comment. The survey materials clearly
    indicate the uncertainty involved in forecasting the impacts of
    CWIS. EPA's focus groups demonstrated that survey respondents
    clearly understood that the ecological changes described in the
    survey were uncertain. Furthermore, most respondents were
    comfortable making decisions in the presence of this uncertainty.
    More detailed responses to this comment are provided in Section 2.4,
    below.

-   **Comment:** "Many respondents indicated that they found the survey
    process to be long, difficult and confusing. Such a finding
    increases the chances of significant nonresponse bias in the survey.
    The evident confusion in respondents' answers is yet another source
    of statistical noise that further lowers the likelihood that this
    survey would yield useful information for a RIA." **EPA Response:**
    EPA has made a number of efforts to simplify the presentation of
    information and the format of the survey. Results from EPA's focus
    groups confirm that respondents understood the questions and were
    able to complete the survey without difficulty. More detailed
    responses to this comment are provided in Section 2.5, below.

-   **Comment:** "...the EPA survey design does not try to determine
    whether people value protecting all fish from all forms of predation
    and whether the value of reducing the impacts of CWIS on forage fish
    is a subset of that broader valuation. At a minimum, this survey
    presents a classic illustration of the conundrum as to whether
    respondents have preferences for reducing the effects of CWIS on
    forage fish or whether such preferences are merely an artifact of
    the survey process." **EPA Response:** Results from EPA's focus
    groups indicate that respondents feel differently about fish losses
    they perceive as "natural", and fish losses that are caused by
    humans. Furthermore, the focus groups revealed that many respondents
    have large values for preventing fish losses; these values are not
    likely to be an artifact of the survey process.

2 Results of Verbal Protocol

Many of the claims presented in the TER Comment are based on the results
of a series of verbal protocol interviews conducted by TER. In these
interviews, which were held in July 2005, fifteen subjects were asked to
"think aloud" while they completed a modified version of EPA's choice
experiment survey. A moderator then asked a series of questions intended
to determine how subjects processed and reacted to the information and
survey questions. The commenter notes that the results of such
interviews are qualitative, and appropriately, the TER Comment "does not
attempt to provide any statistical analysis of the responses because of
the small sample size." EPA emphasizes that the TER Comments are based
on interviews with only fifteen participants. Given such a small sample,
it is difficult to generalize these findings into the broad claims made
by TER. Moreover, the demographic characteristics of the TER sample may
not be representative of the general population (e.g., 2/3 of focus
group participants are females). This stands in contrast to the
extensive testing and improvement of the survey instrument conducted by
EPA, which involved twelve focus groups with 120 participants. While EPA
nonetheless takes these comments seriously, it believes that comments of
greater validity and applicability are generated by the 12 focus groups
conducted by the agency.

At various points throughout the TER Comment, the commenter provides
"paraphrases of respondents' answers" that support specific claims made
by the commenter. Many of these excerpted comments from the TER verbal
protocol interviews are of great interest to EPA. However, it is
difficult for EPA to evaluate these excerpted comments properly, given
that most are provided without relevant contextual information, such as
the moderator questions to which respondents were replying, or previous
statements made by the same respondents. EPA would greatly appreciate
the opportunity to examine the full transcripts from each interview,
including moderator questions. In the absence of this complete
information, it is difficult to assess the validity of the claims that
TER draws from these transcripts---even within the small-sample caveats
offered by TER.

At the end of the introduction to Section 2, the TER Comment states that
"the results from TER's verbal protocol study show that the respondents
took the survey seriously. They spent considerable effort to both
process the information provided in the slide show and use that
information in their attempt to answer the paired comparisons as well as
the other survey questions." This result is consistent with the findings
from EPA's focus groups. However, the comment continues: "...despite
their efforts, a number of fundamental concerns arose which seriously
undermine EPA's ability to draw any meaningful or reliable conclusions
regarding the nonuse benefits of the Phase III 316(b) Rule based on this
survey questionnaire." EPA disputes the accuracy of this statement. As
discussed in EPA's detailed responses, below, a number of issues raised
in the TER Comment reflect a misunderstanding of the purpose of the
survey, which is to evaluate *total* willingness to pay (WTP) to reduce
losses of all species affected by impingement and
entrainment---including forage species *as well as commercial and
recreational species*. Furthermore, the results from the focus groups
and cognitive interviews carried out under EPA ICR #2155.01 contradict
many of the findings from the TER verbal protocol interviews. Without
access to the full transcripts of the TER interviews, EPA is unable to
determine whether this discrepancy is due to differences in the verbal
protocol used by TER, the specific form of questioning used by the TER
moderator, random variation in attitudes of the small number of
participants in the TER interviews, or selective presentation of results
by the commenter. Given that EPA conducted twelve focus groups with 120
participants, the Agency prefers to rely on the overall weight of
evidence, which suggests that (1) respondents understand the information
presented, and respond to the survey as they would a real vote, (2) the
survey is not subject to serious methodological or informational biases,
and (3) the survey effectively measures respondents' total willingness
to pay for reductions in fish losses. Finally, EPA emphasizes that a
review of the leading scholarly journals in the environmental economics
field (e.g., *Journal of Environmental Economics and Management, Land
Economics, American Journal of Agricultural Economics*, etc.) clearly
reveals that the extent of testing, development and revision given to
the survey in question far exceeds that reported for the vast majority
of surveys reflected in the peer reviewed literature. Moreover, the
information provided to respondents is more extensive than that in most
surveys reflected in the literature, and focus groups indicate that
respondents are able to process this information appropriately when
answering choice experiment questions.

Despite these concerns of EPA with the verbal protocol analysis results
selectively reported by TER, the Agency nonetheless takes very seriously
the possibility of the reported biases. As a result, the suggestions of
the TER Comment were explicitly explored and tested in seven focus
groups conducted after the TER Comment was received by the Agency. As
noted below, these tests showed that the TER claims, in the opinion of
the Agency, are largely unsupported by the weight of the evidence.

2.1 Respondents are not valuing marginal changes in forage fish
populations.

This section of the TER Comment begins with the statement: "EPA has
developed measures of recreational and commercial fishing values in the
regulatory impact analysis for the proposed Phase III rule, so any
respondent who is valuing sport or commercial fish and not forage fish
would be valuing the wrong commodity." This statement shows the
commenter's confusion about the multiple ways in which commercially and
recreationally valuable fish may influence the utility of individuals.
Specifically, it fails to recognize that there are two legitimate
sources of economic value related to these fish: use benefits and
non-use benefits. As noted in the TER Comment, commercial and
recreational anglers benefit from catching these species. However, only
a small percentage of the recreationally and commercially valuable fish
whose losses would be prevented by the 316(b) regulation will be caught
by anglers. The remaining fish would enter individuals' utility
functions by providing *non-use* benefits---through their
existence---that have little or no relationship to the role of these
species in recreational and commercial fisheries. EPA emphasizes the
well-known tenet of economic theory which states that benefits or costs
from multiple *direct* (primary) effects on markets should be counted
within a benefit-cost analysis; this is not double counting, and is
indeed appropriate (Just et al. 1982). Comprehensive estimates of total
resource value should include both use and non-use values, such that the
resulting total value estimates may be compared to total social cost .
"Non-use values, like use values, have their basis in the theory of
individual preferences and the measurement of welfare changes. According
to theory, use values and non-use values are additive" (Freeman, 2003,
p. 154).

Both the market valuation and revealed preference methods used to
estimate benefits of improved commercial and recreational harvest allow
EPA to estimate direct use values only. These methods are not suitable
for estimating total values (use and nonuse) of harvested species and
therefore would underestimate total value (Freeman 2003). Both
recreational and commercial and forage fish attributes may enter
individuals' utility functions directly, providing non-use benefits that
bear little or no relationship to (and are not subsumed by) use benefits
generated by recreational and commercial fish. EPA refers to Freeman
(2003), who provides a clear distinction between use benefits (indirect
and direct) and true non-use benefits. Finally, EPA notes that nearly
all (96 percent) of impingement and entrainment losses at CWIS consist
of either forage species, or non-landed recreational and commercial
species that do not have direct uses or, as a result, direct use values.
Therefore, EPA believes that (1) only a small fraction of potential
benefits associated with the 316(b) regulation is quantified in EPA's
benefit cost analysis of the proposed 316(b) regulation for the Phase
III facilities and (2) developing comprehensive quantified benefit
estimates for the section 316(b) regulation requires consideration of
non-use values.

The TER Comment also argues that "in order to empirically measure these
nonuse values, survey respondents must be able to conceive of a value of
forage fish for its own sake and to be able to separate such values from
recreation or commercial use values." This statement reveals a clear
misunderstanding of the purpose of the survey, which is to measure
*total* willingness to pay to prevent losses of both forage and
commercial and recreational species. The referendum format of the survey
allows respondents who do not hold non-use values for fish to choose
policy options that reflect their preferences; respondents need not
value the existence of fish, nor do they need to be able to separate
their use and non-use values. In fact, the peer-reviewed literature is
highly skeptical of stated preference surveys that attempt to decompose
use and nonuse values, or to measure only nonuse values (for example,
see Cummings and Harrison 1995). This is the rationale behind the
estimation of nonuse values as the total willingness to pay (WTP) of
nonusers (Cummings and Harrison 1995; Johnston et al. 2003). A primary
advantage of this approach is the general conceptual acceptance of
nonuser values, even among those highly critical of surveys that attempt
to isolate nonuse values among the general population (Cummings and
Harrison 1995). In early survey versions tested in focus groups, EPA
attempted to assess values for only one subset of fish (e.g., only
forage fish). Such surveys were protested by respondents, and were often
received with confusion. For example, respondents had difficulty
understanding how regulations designed to prevent fish losses in CWIS
could only "target" species with no human uses. As a result of both the
above arguments, EPA feels that the current conceptual
approach---assessing values for the full range of fish affected by the
316b rule---is both the most appropriate and most practical approach
towards stated preference value estimation in this case.

Finally, the Agency notes that these comments are nearly identical to
those already addressed by EPA in prior responses to TER. In these prior
responses, EPA noted that the TER assertion, "EPA should focus only on
the nonuse value of fish," contradicts both the economic literature and
its own statement on page 7, "telling respondents to think only about
the nonuse part will not work." As noted above, "what matters for policy
purposes is total value, regardless of how it is divided between use and
non-use values" (Freeman 2003, p. 154). It is generally recognized in
the economic literature is preferable to estimate total value of a given
resource rather that to estimate components of the total value (e.g.,
indirect use vs. non-use values) and then aggregate them. EPA further
notes that both estimates of use values associated with improved
commercial and recreational harvest and the total value of reduced fish
losses due to the 316(b) regulation provide valuable information to
decision makers.

2.1.1 Respondents are valuing recreationally or commercially-caught
fish, not forage fish.

The commenter argues that that because participants in TER's verbal
protocol study frequently mentioned recreational and commercial species,
individuals do not hold significant nonuse values for forage fish. EPA
disagrees with this statement. First, EPA points out that the
commenter's agument is based on a logical fallacy. *Absence* of evidence
that participants value forage fish is not equivalent to the *presence*
of evidence that participants do not value forage fish. This is
particularly relevant here, given that TER has not provided a complete
transcript of their focus group results---a full transcript which might
well provide evidence of values for forage fish. Second, many
participants in the focus groups conducted by EPA stated clearly that
they held significant non-use values for forage species. For example,
when asked what types of fish they were imagining as they filled out the
questionnaire, participants gave responses such as: "All of them: little
minnows to big whales," "I am more worried about the types of fish that
are not directly used by us," and "I think about them as being living
creatures." When directly questioned in both written debriefing
questions and verbal focus group questions, the majority of respondents
indicated that their survey responses reflected values for all fish,
including forage fish. EPA notes that one possible explanation for the
discrepancy between the results of the TER's verbal protocol interviews
and EPA's focus groups is that seven of the fifteen individuals in the
TER study stated that they participate in recreational angling.
Inclusion of such a disproportionately high percentage of anglers---who
presumably hold large use values for species affected by the proposed
policies---would naturally result in a higher percentage of responses
mentioning recreational species. However, the fundamental fallacy of
TERs argument is grounded on the fact that frequent mention of
recreational and commercial fish among their respondents in no way
implies that values for forage fish are negligible.

2.1.2 Respondents are giving a value for improving the environment, not
forage fish.

In this section, the commenter expresses a concern that the survey may
measure "the feeling of satisfaction of helping to improve the
environment, and not the value of the enhanced fish populations per se.
Based on the results of verbal protocols, respondents did report what
amounts to warm glow as a reason why they chose particular programs in
the paired comparisons." As evidence, the commenter provides several
statements made by respondents about their motivations for answering the
survey. EPA notes that not all of the statements support the hypothesis
of a warm glow effect. For example, the participant who stated that "I
have a conscience. Don't want to see anything wiped out," was clearly
thinking about fish mortality, not about a general desire to benefit the
environment. EPA also notes that the lack of full transcripts from TER's
focus group is important here, as the critical issue when assessing
symbolic effects is whether these effects contribute to *specific*
answers to stated preference responses, not whether such issues are
mentioned casually by respondents in focus group discussions.

More importantly, the evidence from EPA's focus groups and cognitive
interviews shows that the warm glow effect is not a significant source
of bias in the survey. Many participants specifically stated that their
responses to the choice questions were based on the value of preserving
fish, not on a general desire to help the environment or to send an
environmental message. Some participants felt that fish were worth
saving for their own sake. Others felt that preserving fish was
important because changes in fish populations can affect aquatic
ecosystems, anglers, and fish markets. For example, one participant
stated, "You know, if you were telling me you were saving spiders, who
cares? You know what I mean? So, it is not just to do the right thing. I
think that fish are important."

The commenter continues by quoting one participant who expressed
hesitation over paying money to reduce fish losses when there are other
important issues that she felt strongly about. The commenter argues that
her statements demonstrate how respondents' answers "do not conform to
the basic economic assumptions that are required to measure benefits."
EPA disagrees with this point. As provided in the TER Comment, the
participant's answers do not reveal any inconsistencies. Instead, her
responses show a strong awareness of her own budget constraint---a
critical point for any stated preference survey. The commenter also
cites the following statement about the programs for which the
respondent stated that she was willing to pay: "Air pollution, something
having to do with forests---not cutting down forests, what else? I would
be for polices like this or anything having to do with preserving
wildlife or animals or fish and plant life. Education would definitely
be a top issue." This comment shows that the respondent is aware of a
variety of environmental and social programs that the government may
support and that she has well defined preferences for these programs.
EPA notes that survey respondents are expected to answer survey
questions based on the specific information provided and their own
preferences. Thus, the provided excerpts shows that respondents are
likely to vote differently for different programs and that their
responses do conform to the basic economic assumptions required to
measure benefits (i.e., responses are based on well defined preferences
and take the budget constraint into account).

On page 9, the TER Comment states that "respondents are likely to
consider that their valuation responses would affect either other fish
populations besides those that would be described in the contingent
valuation (CV) survey or other environmental factors such as habitat
quality that limit fish populations." The commenter then provides
excerpts from statements made by respondents. EPA notes that three of
the four statements do not support the commenter's argument:

-   One participant in the TER verbal protocol interviews stated that:
    "It's important to protect the ecosystem. Fish are a part of that
    \[ecosystem\]. If you kill all the fish in a lake, the lake is going
    to change a lot. And other plants or animals in the lake might not
    be able to survive." This statement clearly demonstrates the
    participant's understanding that fish are part of a larger aquatic
    ecosystem, and that fish losses may harm that ecosystem. While the
    phrase "...kill all the fish in a lake..." is inconsistent with the
    survey scenario, it is not clear from the excerpt whether the
    respondent actually believed that the proposed policies would have
    this effect, or whether the respondent was simply using an extreme
    example to illustrate a point to the moderator.

-   Another participant stated: "I think it's to determine what we
    should do as far as saving the fish. We did lose a lot with that oil
    spill. That one in Alaska, and we had one somewhere else not long
    ago." This statement provides no evidence that the respondent was
    imagining that the policies would affect anything except fish
    populations. Instead, it shows that the respondent is aware of
    previous situations in which fish have been killed.

-   The fourth participant stated: "Coastal development in my lifetime
    has hurt fishing a whole lot. You can't catch fish beside a high
    rise condominium. Part of fishing is environment (the fisherman's
    surroundings). I have a better experience on an island fishing than
    at Virginia Beach or Myrtle Beach. Now it is row after row of box
    buildings. You don't want to fish beside the storm water sewer
    outlet. It degrades the whole experience." This statement reflects
    the participant's opinion about the negative effects of coastal
    development, but at no point does the participant indicate that
    cooling water intake structures are the cause of this problem, or
    that the proposed survey policies would address coastal development.

Thus, only one of the responses provided in the TER Comment provides
evidence that a participant misunderstood the effects of the proposed
policies. This is consistent with the results from EPA's focus groups,
in which the majority of respondents indicated that they completed the
survey questions based solely on the impingement and entrainment changes
described in the survey. Although a few respondents indicated that they
thought that the proposed policies might also reduce pollution or have
other environmental effects, most respondents considered only changes
related to fish losses, fish populations, and commercial/recreational
catch rates. For example, when asked what kind of environmental changes
would occur as the result of the policies, respondents answered, "Just
fish. And the fishing industry; it\'s not just the fish. But that\'s
about it" (#8-7), and "I understood it as, this would only, the only
effect of this would be to increase the catch for local fisheries"
(#9/5-4). Furthermore, EPA has added the following statement to the
survey: "Sometimes people taking this survey imagine that the policies
being discussed would affect such things as water quality, pollution, or
other environmental issues. They will not. [The only environmental
effect of these regulations is on the quantity of fish in the
water]{.underline}." Testing of this statement in later focus groups
indicated that it was effective at eliminating any confusion about the
results of the proposed policies.

However, while finding that the preponderance of evidence does not point
to the substantial "warm glow" biases suggested by TER, EPA does take
the possibility seriously. As a result, the revised survey contains
numerous debriefing questions to identify explicitly those answering
based on symbolic or warm glow considerations. For example, there are
four questions in the revised survey (questions 9, 11, 12 and 13) that
are designed, among other things, to identify respondents answering
based on symbolic considerations rather than based on a personal value
for fish.[^2] In addition, the survey slide show materials provide
extensive text to focus respondents on specific changes to fish
attributes, and to eliminate considerations of broader environmental
issues. For example, the slide show script states: "Now, before you
answer the survey questions, there are a few very important things that
need to be emphasized. First, sometimes people taking this survey
imagine that the policies being discussed affect such things as water
quality, pollution, or other environmental problems. They will not. The
only significant environmental effect of these regulations is on the
quantity of fish in the water. There are no other significant effects on
the environment." Focus groups and cognitive interviews clearly indicate
that this text was effective at minimizing symbolic responses. Hence,
although EPA's pretesting suggests that symbolic biases will not be a
major concern, the survey instrument provides a means to test for and
eliminate responses based on such motives.

2.2 Respondents' answers show substantial hypothetical bias.

This section of the TER Comment begins with a description of the
well-known problem of hypothetical bias. The comment then states,
"Respondents in the verbal protocol survey explicitly recognized this
difference between what they said they would do in the survey and what
they currently do or would actually do in the future." The comment
follows with several statements from participants whose answers seem to
indicate potential for hypothetical bias. EPA agrees with the commenter
that addressing hypothetical bias is an important survey design issue.
Thus, EPA has taken several steps to minimize hypothetical bias:

1\. The survey has been explicitly designed to maximize the
consequentiality of choice experiment questions, thereby maximizing
incentive compatibility (i.e., reducing strategic and hypothetical
biases) (Carson et al. 1999; Johnston and Joglekar 2005). Elements
specifically designed to maximize consequentiality include a\] explicit
mention of the agency involved, b\] explicit mention that this survey is
associated with considerations of actual policies that are being
considered, c\] numerous details provided in the slide show and survey
concerning the proposed policies, d\] emphasis that some sort of policy
WILL be enacted---and that the type of policy enacted will depend in
part on survey results. The consequentiality and policy implications of
the survey are highlighted in both the survey script and the slide show.
In sum, respondents are presented with a situation in which they are
very much aware that their survey responses will influence impending
policy decisions---which has been shown to ameliorate problems with
hypothetical bias in past work. Evidence from focus groups suggests that
most respondents feel that the survey is consequential, and that they
are responding as if voting in a binding referendum. EPA believes that
the emphasis on the budget constraint, the consequentiality of the
survey, and realism of the payment mechanism is as extensive as
virtually any survey reflected in the peer-reviewed literature to date.
Moreover, the survey as currently specified clearly meets the guidelines
of the NOAA Blue Ribbon Panel on Contingent Valuation (Arrow et al.
1993) with regards to the emphasis given to the budget constraint.

2\. The survey includes numerous debriefing questions to assess whether
hypothetical bias is an issue. For example, the survey includes the
question: "If Questions 3-5 were asked in a real referendum, how certain
would you feel about the answers you provided? (circle one)". Focus
groups indicate that this question is quite successful at identifying
respondents for whom hypothetical bias is an issue. Previous research
has shown that such "certainty" questions can be used to mitigate
hypothetical bias (Champ et al. 2004). Pretests regarding this question
reveal that the majority of respondents feel very certain of their
stated preference responses, and indicate that they would answer the
same way in a binding referendum---a key means of addressing the
criterion validity of stated preference responses (Vossler and Kerkvliet
2003).

3\. The survey also includes debriefing questions that assess the
rationale underlying the choices made by respondents (why they answered
the way that they did), and to assess whether symbolic or hypothetical
bias issue are present. These questions are detailed in the draft survey
instrument.

Because of these measures, EPA does not believe that hypothetical bias
will be a significant issue for this survey. This conclusion is
supported by the results of EPA's focus groups and cognitive interviews.
Participants took the survey questions seriously, as illustrated by the
following excerpt from one of the focus groups:

M: Well, when you answered this survey, did you consider that these
results might actually be used by the government?

\[voices of assent\]

M: Did that affect how you answered the survey?

R: No, I think I\'d answer it the same. If this is just an exercise to
see how I would react, I\'d still answer the same as if the government
really used it to create policy. The reason I used it, I would use no
matter what, no matter who\'s going to use the information, yes.

M: But do you feel that the survey will have an impact on actual
policies?

R: We hope so.

\[others repeat\]

R: It would be a waste of our time if it doesn\'t. \[#8-8\]

Although some participants had mixed opinions about whether their
responses would actually affect government policy, most indicated that
they would have chosen the same answers if the survey had been part of a
real vote. For example, one participant stated, "I take it seriously but
I have my doubts whether it will affect government policy" (#6-16). Even
those participants who did not believe that their answers would have any
effect said that they expressed their opinion honestly. For example:

M: And I guess the last thing before I let you go is, did you think
that---when you were, you know---obviously we\'re testing the survey
today. But were you to get this and take it, would you think that your
answers would actually affect anything? Or would this just be a survey,
okay, it\'s another survey? Do you think that your answers would make a
difference? Were you thinking that someone would actually make use of
the answers?

R: No.

R: Not mine, anyway. Maybe, "Okay, his is not what we\'re looking for."
But like you say, there\'s no wrong or right answers. I was just giving
honest answers.

R: I think that it gave you the impression that they will take this
seriously the way they said, regarded as a real vote. So it gives you
that impression that they are going to use it. \[#10-18\]

The TER Comment also argues that "the verbal protocol results revealed
that many respondents either did not realize that they could choose
neither option (opt out) or felt some social/moral responsibility not to
do so." This argument is not supported by EPA's observations during the
focus groups conducted under ICR #2155.01. In these focus groups, many
respondents indicated that they would not vote for the proposed
policies. For example:

R: If I had to make the choice between the three options, that\'s
unfortunately, if I was going to go into a voting booth---

M: That\'s how you\'d vote.

R: I would not vote for any of them. \[#9/8-8\]

The section of the TER Comment concludes with a summary of results from
previous studies of hypothetical bias, and a discussion of the magnitude
of such bias in the current survey. EPA notes that such discussion is
highly speculative. EPA emphasizes that these arguments in the TER
Comment represent largely unsupported empirical claims that were clearly
and repeatedly addressed within EPA's focus group and survey design
process. EPA emphasizes that the peer reviewed literature provides very
few examples of surveys provided with survey design and testing as
extensive as the survey proposed by EPA for the Phase III 316(b)
analysis. Given that the results of EPA's focus groups indicated that
most survey respondents answered the questions as honestly as they
could---as if they were really voting in a binding referendum---the
Agency does not believe that hypothetical bias will significantly affect
the results of the current survey. As one participant stated: "I think
I\'d answer it the same. If this is just an exercise to see how I would
react, I\'d still answer the same as if the government really used it to
create policy. The reason I used it, I would use no matter what, no
matter who\'s going to use the information" \[#8-8\].

2.3 Respondents' answers violate key economic assumptions.

In this section of the TER Comment, the commenter argues that "the
manner in which the respondents answer the questions must be
conceptually consistent with the way EPA intends them to be answered.
Any substantial divergence between the respondents' answers and the key
economic assumptions used in the statistical analysis of the data will
either bias the estimated benefits or create such a large amount of
statistical noise that the results are not economically meaningful."
While EPA agrees that there should be general correspondence between the
survey scenario and the actual 316(b) scenario, exact correspondence is
not necessary, and in fact, may not be desirable. As is common in
surveys, scenarios must be presented in simplified form to facilitate
respondent comprehension, and to encourage respondents to focus on the
most important policy characteristics, balancing the desire to provide
detailed policy information with respondents' cognitive abilities to
simultaneously consider a large number of attributes (Louviere et al.
2000). Policy attributes that are suppressed include the specific
technology used to prevent fish losses and the exact location of cooling
water intake structures. As an additional note, EPA emphasizes that the
level of "statistical noise" suggested by TER will be reflected in the
variance of model parameter estimates. This will influence the
statistical significance of WTP measures, but will not, as suggested by
TER, render results "not economically meaningful." The confusion between
theoretical appropriateness and statistical variance is an additional
flaw in TER's reasoning.

The commenter states that "information obtained through the verbal
protocol indicates that many of the respondents are valuing vastly
different commodities both from what the EPA survey intends and from one
another." The commenter then provides several examples of different
environmental changes for which respondents in the interviews expressed
values, including improvements in commercial and recreational fishing,
reductions in losses of fish, and increases in overall fish populations.
EPA agrees that it likely that the resource changes associated with the
policies presented in the survey will affect respondents in different
ways. However, the three-way factorial survey format---in which each
policy is represented as having separate effects on fish losses, long
term populations, and commercial and recreational catch rates---is
explicitly designed to allow separate calculation of the values that
respondents assign to each aspect of resource change, both
independently, and though interaction terms. Thus, EPA believes that
opinions expressed by participants in the TER verbal protocol interviews
are consistent with the purpose and format of the survey.

TER's comments suggest a lack of understanding of the capacity of choice
experiments to isolate the marginal effects of different attributes on
stated choices and hence on WTP---a methodology clearly described by
numerous sources (e.g., Louviere et al. 2000). For example, TER states
that "some respondents are valuing improvements in recreational and
commercial fishing...while others are simply valuing reductions in the
number of fish killed." EPA is not at all surprised by these
findings---indeed this is the specific reason that the choice experiment
survey distinguishes attributes for recreational and commercial fishing
and total quantity of fish losses. The survey is specifically designed
to address the patterns observed by TER. The fact that TER finds such
patterns in conflict with appropriate stated preference value estimation
belies a lack of understanding of current methods for choice
experiments, reflected in Louviere et al. (2000) and Bennett and Blamey
(2001), among others.

The commenter also argues that the results of the survey should not be
used to estimate national WTP to prevent fish losses because (1)
respondents are thinking about local water resources, and (2)
respondents to the survey may not actually live near a Phase III
facility. This comment reflects a misunderstanding of the survey
statistical sampling design. In response to the first point, EPA notes
that the survey will allow calculation of different WTP values for
respondents in different regions of the country. Such geographic
differentiation will allow EPA to control for regional differences in
water resources, fish species, and CWIS impacts. In response to the
second point, the Agency notes that the survey will be implemented using
a national probability sample. Regardless of whether respondents
actually live near a Phase III facility, their answers will reveal
information about their preferences for saving fish. However, when EPA
estimates non-use benefits in the context of the 316(b) regulation for
Phase III facilities, EPA will estimate non-use benefits only for the
relevant population of households that are likely to hold non-use values
for losses attributable to Phase III facilities.

On page 14, the commenter again demonstrates a clear misunderstanding of
the purpose of the survey by stating: "Moreover, to the extent that
users are expressing a use value, the relevance of such a value to the
nonuse value of marginal changes in forage fish populations is
questionable, at best." EPA points out that the purpose of the survey is
to measure total WTP for the changes discussed in the survey---including
both use and non-use values. When the results of the survey are used to
estimate benefits in the context of the 316(b) regulation, EPA will
approximate non-use values associated with the policy changes based on
total WTP of non-users---a method characterized as "...one of the more
defensible means of distinguishing use and nonuse values in a stated
preference context" (Johnston et al. 2005). A primary advantage of this
approach is the general conceptual acceptance of nonuser values, even
among those highly critical of surveys that attempt to isolate nonuse
values among the general population (Cummings and Harrison 1995). In
early survey versions tested in focus groups, EPA attempted to assess
values for only one subset of fish (e.g., only forage fish). Such
surveys were protested by respondents, and were often received with
confusion. For example, respondents had difficulty understanding how
regulations designed to prevent fish losses in CWIS could only "target"
species with no human uses. As a result of both the above arguments, EPA
feels that the current conceptual approach---assessing values for the
full range of fish affected by the 316b rule---is both the most
appropriate and most practical approach towards stated preference value
estimation in this case.

Additional comments by TER in this area suggest additional confusion
among the commenter with regard to the appropriate measurement of values
in the 316(b) policy case. For example, TER states "even respondents who
are not users of the resource may still be valuing recreational and
commercial species," as an argument that the valuation proposed by EPA
is conceptually flawed. As noted above, however, it is perfectly valid
for nonusers to maintain nonuse values for recreational and commercial
fish that are in addition to the use values that might be realized by
users. That is fact is not noted by the commenter suggests, again, a
fundamental flaw in reasoning and understanding of accepted conceptual
models for benefit cost analysis (Boardman et al. 2001).

Finally, the commenter stated that the TER verbal protocol interviews
showed that respondents were not answering the questions independently.
EPA takes this concern seriously, and has hence explicitly assessed the
potential for non-independence in focus group. Based on the results of
these tests, EPA finds little evidence that this is a serious problem in
the current survey. As shown in the following excerpt from the Agency's
focus groups and cognitive interviews, most respondents considered the
choice questions independently.

M: When you answered these questions three, four, and five, were you
answering them separately or did you compare them across --

R: No, separately. \[#11/2-9\]

Moreover, EPA notes that there are numerous well-known statistical
methods to test for---and if present, account for---the potential for
non-independence of responses among individual respondents (e.g.,
McFadden and Train 2000). Hence, while focus groups provide little
evidence of concern in this area, statistical options exist even if
unanticipated independence is discovered ex-post.

2.4 Respondents' answers are conditioned by inaccurate and misleading
information.

The commenter states that the TER verbal protocol interviews show that
respondents' answers were informed by, and conditional on, the
information provided in the slide show. EPA believes this result is
entirely expected, and is consistent with the academic literature. It is
well known that information can influence economic values (Bergstrom and
Stoll 1989; Bergstrom et al. 1989; Hoehn and Randall 2002). As the
commenter points out, the "NOAA panel identified the inclusion of
accurate and complete information in the CV questionnaire as a critical
characteristic of a CV survey."

The commenter also states that some verbal protocol respondents felt
that the survey was a "marketing

effort and sales pitch" designed to convince them to vote for the
survey. This finding contradicts the results from EPA's focus groups and
cognitive interviews, which demonstrated that most participants felt
that the slide show presented objective, unbiased information.
Participants felt that the slide "didn\'t push you either way" (#10-4)
and that the information presented "seemed objective" (#11/7-1).
Furthermore, the participants who felt that the slide show did not
provide objective information had mixed opinions about which way it was
biased. For example, one individual explained that "I think by saying
that the cost will be passed on to the consumer, without discussing the
benefit other than just more fish, \[it\] leaves out the portion that
crab prices could go down, cod prices could go down, there would be more
abundance of fish" (#12-16). Another individual gave an opposite
opinion: "I can\'t remember what it said at the end there, that seemed a
little bit like, you know, 'We\'re trying to protect everything'"
(#6-5). Additionally, many of the individuals who felt that the factual
information in the slide show was biased revealed through their
responses that the factual information presented was startling (i.e.,
the number of fish killed was very high), but that the presentation of
the materials was not itself slanted. For example, one participant
stated, "They push you out there, 1.8 billion or 12.8---they make it
sound like it\'s so much. Like you\'re killing this amount of fish, you
know. And almost anything that you\'re killing, you know, you don\'t
want to do that" (#10-4). Finally, some individuals who indicated that
the slide show was biased also indicated that this perceived bias did
not influence their decisions. For example:

R: I thought they were trying to tell me to vote so they don\'t use
their cooling systems.

M: Okay. Did it actually get you to vote a different way than what you
would have?

R: No. (#11/8-1)

On page 16, the TER Comment claims that presenting costs on a monthly
basis is deceptive. EPA does not believe that this is true. First, the
Agency notes that most consumers have ample experience with monthly
payments for items such as rent, mortgages, loans, utility bills,
big-ticket items, and insurance. Furthermore, to ensure that respondents
carefully evaluate the cost of the policies relative to their budget
constraints, the survey also shows costs on a yearly basis.

On page 17, the commenter questions EPA's rationale for identifying EPA
as the sponsor of the survey, and argues that doing so may affect
participants' responses. EPA notes that this choice improves the
consequentiality of the survey, as clearly recommended by Carson et al.
(1999). Respondents are presented with a scenario in which they are told
that the results of the survey "will influence real policy changes," and
as evidence, EPA is cited as the sponsor of the survey. Results of EPA's
focus groups show that this treatment is effective, and that
participants took the survey questions seriously. For example, one
respondent stated, "If this is just an exercise to see how I would
react, I\'d still answer the same as if the government really used it to
create policy. The reason I used it, I would use no matter what, no
matter who\'s going to use the information, yes." Although the commenter
cites a few respondents who felt that identifying the Agency as the
survey sponsor biased their responses, the majority of participants in
EPA's much more extensive focus groups did not think that the survey was
biased.

In the following paragraph, the commenter refers to arguments made in
the Barnthouse Comment about the validity of EPA's estimates of fish
losses and long-term fish population impacts. EPA's responses to these
comments are discussed in the Agency's response to the Barnthouse
Comment, above.

Finally, the commenter provides a number of excerpts from the TER verbal
protocol interviews that demonstrate, in the commenter's opinion, that
the survey provides in inadequate treatment of uncertainty. EPA
disagrees with this comment. EPA's focus groups demonstrated that survey
respondents clearly understood that the ecological changes described in
the survey were uncertain. Most respondents were comfortable making
decisions in the presence of this uncertainty (although they were less
comfortable about political uncertainties, such as whether their money
would be used effectively). As one respondent explained, "It sounds like
they\'re talking from a certain degree of certainty, and they\'re not
putting any figures out there that they can actually prove, but based on
theory we know that fish populations are declining and so these are all
estimates. And I accept them as estimates" (#7-7). Another stated, "If
they had stated figures as though these figures are it---that I would
question" (#7-7). However, EPA acknowledged that a few participants did
express protest when told that biologists were uncertain as to the
long-term effects of programs on fish populations. For example, one
participant stated, "I instantly thought, oh, here we go again! We are
going to spend the money and they are going to tell us later on that
they were wrong, but we are not going to say that we were wrong. We are
just going to do another study." (#3-17). EPA emphasizes that the slide
show clearly states that results of the proposed policies are uncertain:
"You will be shown different policy options---with different effects on
fish. This is because scientists are still working to determine what the
exact effect on fish will be, so it is important to know how you would
react to a wide range of possible outcomes. Common sense indicates that
preventing the loss of fish eggs and young fish will mean more adult
fish in future years, but at this point there is still significant
uncertainty regarding the exact size of these future effects."

Beyond these comments, EPA also highlights that many of TER's comments
regarding respondents' reactions to uncertainty are based on a version
of the survey invented by TER itself---and not the version of the survey
developed by EPA. EPA emphasizes the clear and significant differences
between the two survey versions, as highlighted in the TER Comment and
the Appendices. EPA as a result, finds these results questionable, as
they are not based on the survey instrument proposed by EPA, but rather
a "straw man" survey designed explicitly by TER. EPA believes that these
comments also show the relative success of the EPA survey at addressing
issues of uncertainty. Unlike the version of the survey developed by
TER, which was met with skepticism and protests by their respondents,
the survey versions developed by EPA were found to appropriately capture
uncertainty by the vast majority of focus group and cognitive interview
respondents. For example, participants made statements such as: "This is
what the scientists project. It\'s not for certain. I knew that anyway
from the presentation" \[#11/1-4\], "It was said in the slide show, that
they really don\'t know. \[...\] Scientific speculation, see, so
there\'s a scientific aspect of it" \[#11/2-7\], and "Even in the slide
show, when we heard it and watched it, a lot of these things are
estimates. They\'re not exact sciences. So, basically taking these
questions with a grain of salt in that respect as far as the averages
and the figures and all that" \[#11/7-4\].

To address the problem of uncertainty, the comment suggests modifying
the survey to present a range of possible effects. EPA agrees this is a
valid suggestion, and in fact, in one of the groups of cognitive
interviews, EPA tested a version of the survey that did show a range of
effects. The respondents were explicitly asked whether the ranges were
helpful in understanding the uncertainty of estimates presented in the
choice question or whether they were a source of confusion. Seven out of
the eight respondents interviewed indicated that that ranges were more
confusing, that the original presentation of resource changes was more
clear, and that they clearly understood that the ecological changes
described in the survey were uncertain. Furthermore, respondents were
comfortable making decisions in the presence of this uncertainty.

Moreover, and more importantly, the respondents in cognitive interviews
showed that different people anchor their responses to different values
within the provided range. This indicates that the model suggested by
the commenter does not match respondents' behavior, as few of the
cognitive interviews showed that respondents were using expected values
to determine their responses. For example, some respondents anchored
their responses to either upper or lower bound of the presented ranges,
while others used a mid-point estimate. Still others had no clear
understanding of the meaning of the presented ranges. Therefore, the use
of range midpoints for estimation (or any other point for that matter)
will result in errors-in-variables bias (Greene 2003).

2.5 Respondents have difficulty completing the survey, which could lead
to nonresponse bias.

In this section, the commenter makes that argument that the information
presented in the survey is complex, which may lead to respondent fatigue
and non-response bias. This argument is contradicted by observations
from EPA's focus groups. Participants made statements about the slide
show such as: "I thought it was good. I liked it," "Just about right,"
and "It seems interesting. Informative." No participants in EPA's focus
groups indicated that they would not have completed the survey because
it was long or difficult. Furthermore, EPA has made a number of efforts
to simplify the presentation of information and the format of the
survey. Participants responded positively to these changes. For example,
one participant stated: "On option B, looking at it, I saw that the blue
was where we were presently, and the purple would be how much more we
would increase the population of fish. So that was pretty
straightforward. It wasn\'t very difficult to understand." \[#11/7-7\].
Another participant stated, "The pie graphs, I could understand them."
\[#11/4-1\].

The commenter also argues that participants failed to understand some of
the information presented in the slide show and survey. EPA notes that
in any survey, some participants will fail to understand or remember
certain pieces of information. However, in EPA's own focus groups, most
participants seemed to comprehend and remember information presented in
the slide show and survey. Participants displayed a high degree of
understanding with regard to fish, fish ecosystem services, and aquatic
habitat. Furthermore, no participants indicated that they had trouble
completing the survey because they didn't remember or understand
information from the slide show. Finally, EPA has included specific
questions in the survey to test respondents' recollection and
understanding of specific elements of information from the slide
show.[^3] These questions will assist in the identification of
respondents for whom recall of critical information is a concern.

On pages 21 and 22, the commenter discusses reasons why participants in
the TER protocol interviews were uncertain about their answers, such as
insufficient information or misunderstanding the choice sets. In EPA's
focus groups, participants generally felt comfortable with their
answers, although some expressed uncertainty. For example, participants
made statements such as: "I was pretty certain" (#7-17), and "I would be
very certain that I would answer in a real referendum the way I did it
here, if this was the same exact survey that went out to the people, and
it was presented this way with the presentation" (#9/7-6). Some
participants expressed hesitation: "I wasn\'t real sure. I don\'t know
that much about it. If I was going to be voting on it I\'d do some
research on it before I would vote on it" \[#8-6\]). Most participants
who were unsure of their answers cited a lack of information as the
primary reason. These participants often stated that they wanted more
details about how the policies would be implemented, particularly what
technology would be used ("You would need to go into a whole lot more
specifics with the technology you\'re going to use" \[#10-17\]). As
discussed previously, EPA has included several debriefing questions in
the survey to identify respondents who are very uncertain about their
answers.

2.6 Summary

The commenter summarizes the major points of the comment as follows:

"The verbal protocol study demonstrates that the stated preference
survey proposed by EPA to measure the nonuse value of certain marginal
changes in forage fish populations will not produce reliable results."
As discussed in the previous sections of this response, most issues
identified by the commenter reflect a misunderstanding about the purpose
of the survey, or have been addressed in more recent versions of the
survey.

"The verbal protocol analysis demonstrates that the study is
unnecessary. Respondents do not have a separate meaningful value for
marginal changes in forage fish populations. To the extent that
respondents care about fish, and perhaps would actually pay to protect
fish, they are thinking of recreationally and commercially significant
species. The benefits of CWIS on those species are already reflected in
EPA's RIA for the Phase III proposed rule." As discussed in EPA's
responses above, this conclusion reflects a misunderstanding of the
purpose of the survey, which is to measure total use values for
reduction in impingement and entrainment of all species---including both
forage species and commercial and recreational species.

Appendix A: Description of Verbal Protocols and Respondents

First, EPA notes that the TER sample is very small (15 participants) to
use to draw general conclusions based on the focus group findings. EPA
notes that the demographic information provided in Appendix A shows that
the TER sample may not be representative of general population. Some
demographic groups are overrepresented in the TER sample. For example,
2/3 of the participants are females, and half of the participants are
recreational anglers.

EPA also emphasizes that the pretest conducted by TER is not necessarily
a "clean" pretest of the survey instrument, in that additional materials
and questions are presented to respondents prior to viewing the slide
show and taking the stated preference survey. This is distinct from the
approach used in actual survey implementation, in which respondents are
only shown the slide show and then given the survey. For example, as
noted by TER, "Respondents completed a set of questions at the start of
the interview inquiring about their knowledge of the effects of cooling
water intake structures on fish populations. They were also asked to
indicate whether or not enough money is spent on other problems in this
country and then rated the importance of specific issues, ranging from
preserving aquatic life to reducing taxes. A slide show was presented to
the respondents that gave background information on the effects of
cooling water intakes on fish populations. The slide show also explained
the decision that the EPA is trying to make regarding regulations for
cooling water intake structures and how the technological advancements
might affect the respondent financially. The respondents were then given
the SP survey." This divergence between TER's pretest methods and actual
survey implementation methods invalidates much of the pretest results
with regard to the specific survey developed by EPA.

EPA also emphasizes that TER apparently did not test the specific
version of the survey proposed by EPA, but rather a "similar" survey.
Again, any differences between the survey proposed by EPA and the survey
tested by TER will reduce the validity of focus group results with
regard to the specific survey instrument proposed by EPA.

[]{.mark}

Appendix B: Verbal Protocol Material

No response is required.

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[^1]: For detail, see Questions 2, 3, 8, 9, 10, and 11 in the survey
    instrument provided in Attachment 3, U.S. EPA (2005).

[^2]: For detail, see Questions 9, 10, 11, and 12 in the survey
    instrument provided in Attachment 3, U.S. EPA (2005).

[^3]: For detail, see Questions 2 and 3 of the survey instrument
    provided in Attachment 3, U.S. EPA (2005).