Economics of Proposed EPA Regulations of Concentrated Animal Feeding Operations Dr. Kelly Zering, NCSU Dr. Ray Massey, UMC

Cost and Economic Impact Models Comment Summary Cost Offsets Manure Value Cost Share Programs Frequency Factors

Cost Offsets: Manure Value Comment EPA is considering an approach that places a nutrient value on manure. EPA intends to consider the 1997 Commercial Fertilizer Institute values of nitrogen and phosphorus for purposes of estimating the nutrient value of manure.

Cost Offsets: Manure Value The National Center believes the EPA should not value manure when determining the economic consequence of its proposed rule.

Manure Valuation Problem 1  The economic model accounts for incremental changes.  There is nothing in the rule that incrementally increases the value of manure.  To value total value rather than incremental value as a cost offset is inconsistent.

Manure Valuation Problem 2  Value is a function of both nutrient content and the form of the fertilizer.  1997 US Nitrogen Fertilizer Prices (USDA)

Poultry Litter Illustration  EPA calculates litter at $8/ton (FR 58575)

Cost Offsets: Cost Sharing A potential cost offset is cost share and technical assistance available to farmers for on-farm improvements from various State and Federal programs, such as the Environmental Quality Incentives Program administered by USDA (FR 58585).

Cost Offsets: Cost Sharing Comment The National Center believes the EPA should not consider cost share as a cost offset when determining the economic consequence of its proposed rule. Most cost share programs are restricted to “non- permitted” AFO’s – the proposed regulations are looking at cost share for regulated CAFOs. Cost share is subject to budgetary constraints not yet worked out by various legislative and executive branches of the government.

Use of Frequency Factors EPA is considering breaking out its estimated average compliance costs across three different performance group scenarios: below average performers, average performers, and above average performers (FR 58573)

Frequency Factors Comments The EPA is commended for recognizing a serious shortcoming in its earlier economic modeling. The National Center would like clarification of exactly how the new economic modeling will be implemented.

Frequency Factor Comments The percentages assigned to “least needs,” “average needs” and “most needs” categories need to be related to frequency factors. Frequency factors should be used to determine the number of farms incurring a cost and never used to reduce a cost to an individual representative farm.