Document ID: EPA-HQ-OW-2004-0020-0011
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2005-03-18T05:00Z

1
Response
to
Comments
from
the
American
Petroleum
Institute
Docket
ID:
OW­
2004­
0020
­
0008
EPA
would
like
to
emphasize
that
the
ICR
in
question
concerns
focus
groups
that
are
to
be
used
in
the
development
of
a
stated
preference
survey.
The
brief
letter
from
the
American
Petroleum
Institute
(
API)
does
not
address
focus
groups
explicitly,
but
rather
the
more
general
topic
of
resource
valuation
and
stated
preference
surveys.
The
API
comment
refers
to
API
Publication
Number
316,
"
Identifying
and
Measuring
Nonuse
Values
for
Natural
and
Environmental
Resources:
A
Critical
Review
of
the
State
of
the
Art."
EPA
emphasizes
that
this
publication
provides
a
general
critical
assessment
of
stated
preference
methods
(
as
a
means
for
non­
use
value
assessment)
in
general,
and
does
not
provide
comments
on
the
focus
group
ICR
issued
by
EPA.

Regarding
API
publication
316,
EPA
emphasizes
that
this
manuscript
offers
material
that
largely
reflects
standard
positions
taken
by
more
extreme
critics
of
stated
preference
methods
and
non­
use
value
estimation.
It
is
the
opinion
of
EPA
that
these
comments
reflect
the
perspective
of
a
relatively
narrow
portion
of
the
literature,
and
one
that
is
out
of
step
with
accepted
practices
in
benefit­
cost
analysis.
While
EPA
recognizes
that
some
researchers
consider
stated
preference
methods
to
be
controversial,
it
is
also
emphasized
that
standard
benefit­
cost
practice
considers
these
methods
to
provide
useful
information
concerning
resource
values
(
e.
g.,
Freeman
2003;
Carson
et
al.
1999).
The
comments
offered
in
this
text
 
while
reflecting
the
legitimate
opinions
of
some
researchers
 
do
not
reflect
general
standards
or
practice
in
the
larger
benefit­
cost
analysis
literature.

As
stated
by
the
NOAA
Blue
Ribbon
Panel
on
Contingent
Valuation
(
Arrow
et
al.
1993,
p.
4610),
" 
some
antagonists
of
the
CV
approach
go
so
far
as
to
suggest
that
there
can
be
no
useful
information
content
to
CV
results.
The
Panel
is
unpersuaded
by
these
extreme
arguments."
The
panel
later
follows
with
the
conclusion
"[
t]
he
Panel
concludes
that
under
[
conditions
described
in
the
report],
CV
studies
convey
useful
information.
We
think
it
is
fair
to
describe
such
information
as
reliable
by
the
standards
that
seem
to
be
implicit
in
similar
contexts,
like
market
analysis
for
new
and
innovative
products ."
Many
of
the
arguments
in
the
API
publication
reflect
the
type
of
"
extreme"
opinions
that
the
NOAA
panel
found
unconvincing.

In
the
opinion
of
EPA,
the
API
publication
in
question
represents
a
relatively
extreme
criticism
of
stated
preference
methods.
This
critical
assessment
is
at
odds
with
current
practice
as
reflected
by
the
NOAA
panel
(
p.
4610),
which
states
that
"
CV
studies
can
produce
results
reliable
enough
to
be
the
starting
point
of
a
judicial
process
of
damage
assessment,
including
lost
passive­
use
values."
Moreover,
as
stated
by
Freemen
(
2003,
p.
154),
"
stated
preference
valuation
methods 
are
likely
to
offer
the
only
feasible
approaches
to
estimating
nonuse
values."

We
also
refer
API
to
EPA's
reply
to
comments
by
the
Mercatus
Center
(
George
Mason
University),
whose
comments
are
analogous
to
many
of
those
found
within
API
Publication
316.
Specifically,
these
arguments
represent
empirical
questions
that
are
appropriately
addressed
within
the
survey
design
process.
For
2
example,
with
regard
to
the
incentive
structure
of
stated
preference
questions
 
that
are
often
cited
as
a
key
distinction
between
stated
and
real­
market
choices
 
Carson
et
al.
(
1999,
p.
124)
state
that
"
one
must
endeavor
to
provide
questions
with
a
proper
incentive
structure."
As
emphasized
by
the
NOAA
Panel
(
Arrow
et
al.
1993),
Schkade
and
Payne
(
1994)
and
many
others,
appropriate
survey
design
can
identify
the
mechanisms
through
which
people
respond
to
CVM
questions
and
assess
whether
responses
reflect
the
types
of
tradeoffs
required
by
neoclassical
theory
for
appropriate
expressions
of
stated
values.

As
emphasized
by
Johnston
et
al.
(
1995),
Mitchell
and
Carson
(
1989),
Bateman
et
al.
(
2002),
Desvousges
et
al.
(
1984),
Desvousges
and
Smith
(
1988)
and
many
others,
the
use
of
focus
groups
to
assist
in
the
design
of
stated
preference
surveys
is
well
established,
as
is
the
capacity
of
focus
groups
to
provide
insight
into
motivations
underlying
respondents'
stated
willingness
to
pay
values.
Indeed,
EPA
emphasizes
that
focus
groups
will
be
used,
following
the
advice
of
Mitchell
and
Carson
(
1989),
Desvousges
et
al.
(
1984)
and
Johnston
et
al.
(
1995),
to
test
for
and
eliminate
or
ameliorate
potential
biases,
which
may
be
associated
with
the
stated
preference
methodology.

Within
this
context,
EPA
believes
that
the
potential
concerns
reflected
by
API
provide
an
even
stronger
rationale
to
conduct
focus
groups
 
as
these
comments
reflect
exactly
the
type
of
issues
that
focus
groups
are
meant
to
address
in
stated
preference
survey
design.
Accordingly,
EPA
will
take
special
care
within
the
proposed
focus
groups
to
address
the
concerns
and
issues
raised
by
this
section.

References
Arrow,
K.
,
R.
Solow,
E.
Leamer,
P.
Portney,
R.
Rander,
and
H.
Schuman.
1993.
Report
of
the
NOAA
Panel
on
Contingent
Valuation,
Federal
Register
58
(
10):
4602­
4614.

Bateman,
I.
J.,
R.
T.
Carson,
B.
Day,
M.
Hanemann,
N.
Hanley,
T.
Hett,
M.
Jones­
Leee,
G.
Loomes,
S.
Mourato,
E.
Ozdemiroglu,
D.
W.
Pierce,
R.
Sugden,
and
J.
Swanson.
2002.
Economic
Valuation
with
Stated
Preference
Surveys:
A
Manual.
Northampton,
MA:
Edward
Elgar.

Carson,
R.
T.,
N.
E.
Flores,
and
R.
C.
Mitchell.
1999.
The
Theory
and
Measurement
of
Passive­
Use
Value,
in
Valuing
Environmental
Preferences:
Theory
and
Practice
of
the
Contingent
Valuation
Method
in
the
US,
EU,
and
Developing
Countries,
edited
by
I.
J.
Bateman
and
K.
G.
Willis,
Oxford
University
Press,
Oxford,
UK.

Desvousges,
W.
H.,
V.
K.
Smith,
D.
H.
Brown,
and
D.
K.
Pate.
1984.
The
Role
of
Focus
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in
Designing
a
contingent
Valuation
Survey
to
Measure
the
Benefits
of
Hazardous
Waste
Management
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Triangle
Institute:
Research
Triangle
Park,
NC.

Desvousges,
W.
H.
and
V.
K
Smith.
1988.
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Groups
and
Risk
Communication:
the
Science
of
Listening
to
Data.
Risk
Analysis
8:
479­
484.

Freeman,
A.
M.
III.
2003.
The
Measurement
of
Environmental
and
Resource
Values:
Theory
and
Methods.
Washington,
DC:
Resources
for
the
Future.
3
Johnston,
R.
J.,
T.
F.
Weaver,
L.
A.
Smith
and
S.
K.
Swallow.
1995.
Contingent
Valuation
Focus
Groups:
Insights
From
Ethnographic
Interview
Techniques.
Agricultural
and
Resource
Economics
Review
24(
1):
56­
69.

Mitchell,
R.
C.
and
R.
T.
Carson.
1989.
Using
Surveys
to
Value
Public
Goods:
The
Contingent
Valuation
Method.
Resources
for
the
Future,
Washington,
D.
C.

Schkade,
D.
A.
and
J.
W.
Payne.
1994.
How
People
Respond
to
Contingent
Valuation
Questions:
A
Verbal
Protocol
Analysis
of
Willingness
to
Pay
for
an
Environmental
Regulation.
Journal
of
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Economics
and
Management
26:
88­
109.