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Memorandum

To: 316(b) Record

From: 316(b) Team, Engineering and Analysis Division, U.S. Environmental Protection Agency

Date: May 15, 2014

Re: Applicability Threshold of the Existing Facilities Rule

The cost information presented below is for the existing unit provision of the final rule, to 

facilitate comparison with the propose rule, where existing and new unit costs were not added 

together and reported as such. When costs of the new unit provision are added, the total cost of 

the final rule becomes $275 million. See the Technical Development Document (TDD) (DCN 

12-0005) and the Economic Analysis (EA) (DCN 12-0002) for detailed analyses.

1. There are substantial environmental benefits that result from having the rule apply to 

facilities below 50 mgd.

 Facilities with DIF below 50 mgd are twice as likely to have no controls in place for 

impingement or entrainment as are those facilities with DIF greater than 50 mgd. 

 A higher threshold ignores the site-specific impacts of these lower flow intakes and 

forgoes the site-specific benefits of reducing the impacts, including non-monetized 

benefits that are not accounted for in the benefits analysis because they are difficult to 

monetize (e.g., ecosystem benefits). 

 More than 63 percent of facilities with DIF below 50 mgd are co-located with other 

intakes on fresh water rivers; cumulative impacts are not accounted for in the quantified 

or monetized benefits analysis for this rule. (See TDD Chapter 5)

 At least 19 percent of all facilities below 50 mgd and located on rivers (38 known 

facilities with data) withdraw a significant volume of the source water (DIF is more than 

5 percent of the mean annual flow of the fresh water sources on which they are located).

(See TDD Chapter 5) Using the same analysis methods applied in TDD Chapter 5, EPA 

also determined that 14 percent of the 110 known facilities below 20 mgd with data 

located on rivers have an intake designed to withdraw more than 5 percent of the mean 

annual flow of the source water.

2. The rule is not costly to lower flow facilities and there is no appreciable difference in the 

cost effectiveness of the rule for facilities that are 2 mgd to less than 50 mgd and those

50 mgd and above.
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 The cost effectiveness of the rule with a threshold of 2 mgd is $0.418 per age-one 

equivalent loss (A1E)1and at a threshold of 50 mgd, the cost effectiveness is $0.410 per 

A1E for existing units. See Table 1.

 Of the total $272 million cost of the rule for existing units at 1,065 facilities, $20 million 

(7 percent) will be incurred by the 471 facilities below 50 mgd, and $252 million (93

percent) will be incurred by the 593 facilities at or above 50 mgd. In other words, the 44 

percent of facilities below 50 mgd are estimated to incur only 7 percent of the costs, 

while 56 percent of the facilities at or above 50 mgd are estimated to incur 93 percent of 

the costs (for existing units).

 The total cost of the rule with a threshold of 2 mgd is negligible for the electric power 

industry, accounting for less than 0.1 percent of annual electricity sector revenues, which 

exceed $126 billion.

 Costs for lower flow facilities are so small that the average annual household utility bill 

would not measurably decrease by changing the threshold from 2 to 50 mgd.

3. A higher threshold provides no significant small business advantage. 

 If the goal is to protect small manufacturing businesses, a low flow threshold of 50 mgd 

is far too blunt a tool. See Table 2.

o Small businesses account for only 17% of facilities between 2 and 50 mgd (79 of 

471). Small businesses account for 10% of facilities above 50 mgd (57 of 593); of 

these, just 6 are manufacturers. Thus, most of the small manufacturers (61 of 67) are 

below 50 mgd.

o The converse - that the 471 firms between 2 and 50 mgd are mostly small 

manufacturers (61) - is not true. The most prevalent type of firm under 50 mgd is a 

large manufacturer (313), the second most prevalent is a large electric generator (79), 

followed by small manufacturers (61) and small generators (18).

 Even the Small Business Panel from the Phase III rulemaking (manufacturers and low 

flow electric generators) did not select a 50 mgd threshold.

o The panel found that "an effective way to substantially reduce potential impacts on 

small businesses would be to set an applicability threshold of 20 mgd" and 

recommended analyzing thresholds between 20 and 50 mgd.

o At that time, EPA was considering requirements that covered entrainment as well as 

impingement, making for a more expensive rule.

 For the final rule, EPA finds that no small entities that own manufacturers facilities have 

a cost-to-revenue ratio of 3 percent, and only three to four small entities have a cost-torevenue ratio exceeding 1 percent; further, this analysis assumes zero cost pass-through 

to the consumer. The results of EPA's analysis of the impacts on small businesses lead 

 

1 Age-one equivalent losses represent the number of individual organisms of different ages impinged and entrained 

by facility intakes, standardized to equivalent numbers of one-year-old fish.
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the agency to certify no significant economic impacts on a substantial number of small 

entities (no SISNOSE).

4. Rule costs are already less than either of EPA’s preferred options at proposal; Proposal 

Option 1 and the least costly, Proposal Option 4.

 The final rule‘s total cost of $272 million (existing units) is $127 million less than EPA’s 

preferred option at proposal (Proposal Option 1) because of added flexibilities and 

elimination of a single numeric Impingement Mortality performance standard. The final 

rule also costs $55 million less than Proposal Option 4, which included a 50 mgd 

threshold at a total cost of $327 million, for existing units (see Table 13-4 of the 

Economic and Benefits Analysis for Proposed Section 316(b) Existing Facilities Rule

(DCN 10-0002)).

5. Even if lower flow facilities were exempted from the rule’s impingement requirements, 

they would still be subject to BPJ permitting for 316(b) requirements.

 In a recent review of permits (DCN 12-2932), EPA found more frequent use of BPJ 

permitting than in an earlier review (DCN 10-6623). Permits in 8 of the 18 States EPA 

reviewed more recently contain no 316(b) requirements. However, permits in the 

remaining 10 States do include 316(b) requirements with varying levels of information 

submission requirements and associated administrative burden and cost.

 EPA did not account for the costs that permitting authorities and facilities otherwise incur 

for BPJ-based permit activity, as currently occurs in the absence of a national 316(b) 

regulation. To the extent that permitting authorities and facilities are incurring these 

costs, those costs should be analyzed as an avoided cost of the final rule. Any baseline 

BPJ costs imply that the costs reported in the Economic Analysis (EA) of the regulation 

are overstated.

o EPA’s cost estimates do not account for BPJ costs, following EPA’s 2010 Guidelines 

for Preparing Economic Analyses. The guidance there is to estimate the costs of the 

rule (or options analyzed) as the difference between costs in the world with the rule 

(or option) and the world without the rule (or option). When analyzing an option that 

is BPJ for facilities below 50 mgd, both the world with the option and the world 

without the option include BPJ permitting. Therefore, the difference in costs is zero.

 Exempting lower-flow facilities would not mean zero permitting or compliance costs 

because these facilities would be issued permits with BPJ-based 316(b) requirements. For 

example, based on the Phase II ICR ($395k to $679k per facility initial application, $7k 

annual reporting and monitoring), submission of basic characterization studies and permit 

application materials upon which site-specific impingement requirements would be 

based, cost the 531 facilities with a DIF less than 50 mgd from $59.8 million to $99.3 

million per year in aggregate ($2012).

 Raising the threshold would increase the number of individual BPJ permits, which can 

increase uncertainty, complexity and the amount of time required for permitting. The 
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burden on State permitting authorities would also be higher for BPJ-based permits 

compared to permits developed under national requirements.

 Realizing the $23 million cost "savings" associated with a 50 mgd threshold is predicated 

on the outcome of BPJ permitting being "no additional controls" at all these facilities, 

even though the rule contains specific requirements for facilities above 50 mgd that could 

be easily applied.

6. A 2 mgd threshold was adopted in Phase I.

 The Phase I 316(b) New Facilities rule states, “All cooling water intake flow results in 

the potential for impingement and Entrainment,” and, “The 2 MGD threshold was chosen 

because this threshold addresses 99.7 percent of the total flow and 62 percent of all inscope facilities. EPA estimates that 58 percent of the manufacturers, 70 percent of the 

non-utilities, and 100 percent of the utilities will be regulated at the 2 MGD threshold.”

7. Small flow facilities already have closed-cycle.

 Most facilities are in the below 50 mgd category because they already have closed-cycle 

cooling. The permit application process is highly streamlined for closed-cycle.

 51 percent of facilities with DIF below 50 mgd have closed-cycle cooling.

 30 percent of manufacturers with DIF below 50 mgd have closed-cycle cooling.

Table 1 – Comparison of 2 versus 50 mgd Thresholds1

Greater than 2 mgd Greater than or equal to 50 mgd

Number of facilities 1,065 593

Number of facilities owned by

small entities5136 57

DIF as percent of total DIF2100% (408,286 mgd) 97%

AIF as percent of total AIF3100% (237,832 mgd) 98%

Total Option Costs (existing units) $272 million $252 million

Quantified benefits4652 million A1E 614 million A1E

Cost effectiveness (existing units) $0.418A1E $0.410/A1E

1The numbers presented in this table are aggregate national numbers and do not indicate the extent of site-specific 

impacts.

2DIF (design intake flow)—the maximum instantaneous rate of flow of water the cooling water intake system is 

capable of withdrawing from a source waterbody.

3 AIF (actual intake flow)—the average volume of water withdrawn on an annual basis by the cooling water intake 

structures over the past three years.

4A1E (age-one equivalent losses)—the number of individual organisms of different ages impinged and entrained by 

facility intakes, standardized to equivalent numbers of one-year-old fish.

5 Small entity as defined under the Small Business Administration size standards. See Chapter 10 of the EA for more 

details.
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Table 2 – Counts of All Facilities by DIF Flow and Parent Entity Size1,2,3

Size of Parent Entity Electric Generators Manufacturers Total

DIF Greater than Two MGD but Less than 50 MGD 

Small 18 61 79 

Large 79 313 392 

Total 97 374 471 

DIF of 50 MGD or Greater

Small 51 6 57 

Large 396 141 537 

Total 447 146 593 

DIF Greater than Two MGD

Small 69 67 136 

Large 475 454 929 

Total 544 521 1,065 

1 This table reports counts of facilities owned by entities that EPA classified either small or large based on Small 

Business Administration (SBA) entity size criteria.

2 DIF (design intake flow)—the maximum instantaneous rate of flow of water the cooling water intake system is 

capable of withdrawing from a source waterbody.

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Individual values may not sum to totals due to independent rounding.