cost/benefit study of the impacts of potential nutrient controls for ...

COST/BENEFIT STUDY OF THE IMPACTS OF
POTENTIAL NUTRIENT CONTROLS FOR COLORADO
POINT SOURCE DISCHARGES
August 10, 2011

Acknowledgements
• Michael Brod, Colorado Water Resources and Power
Development Authority (CWRPDA) (funding agency)
• David Akers, Dick Parachini, Colorado Department of Public
Health & Environment (CDPHE) – Water Quality Division
• David Holm, Consultant to CDPHE
• Project Team
– Becky Dunavant, Jacqui Wesley, Sarah Stewart, Susan Morea -
CDM
– Ed Harvey, Susan Walker, Melinda Ogle – Harvey Economics
– Tim Moore, Risk Sciences
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Presentation Outline
• Overview
• Colorado Approach to Nutrient Control
• Cost-Benefit Study Objectives
• Methodology Framework
• Wastewater Costs
• Water Supply Benefits
• Environmental Benefits
• Example Preliminary Results
• Next Steps
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Cost-Benefit Study Purpose
• Inform the Colorado Water Quality Control Commission and
State Agencies (CDPHE and CWRPDA) regarding implications
of proposed regulations for controlling the discharge of
nutrients that rely largely on a technology-based control
regulation that would establish effluent limits for most
municipal and some industrial wastewater treatment
facilities.
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Cost-Benefit Study Objectives
• Determine statewide aggregate POTW costs resulting from
the potential implementation of a range of statewide
regulations to address nutrients (based on evaluation of
three tiers of potential effluent quality for Total Phosphorus
[TP] and Total Inorganic Nitrogen [TIN]);
• Determine statewide costs associated with implementation
of stormwater monitoring requirements;
• Determine the environmental benefits of implementation of
proposed nutrient regulations (for three effluent tiers); and
• Determine the benefit to drinking water quality and reduced
treatment costs.
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COLORADO APPROACH TO
NUTRIENT CONTROL

Regulatory Approach
• CDPHE proposes to adopt two regulations to establish
nutrient controls
– Regulation 31 – Establishes interim instream TIN, TP, and
chlorophyll a (Chl a) values for streams, rivers, lakes and
reservoirs
• Interim values will not be used for adoption of water quality
standards except in specific circumstances (e.g., concerns
regarding water supply in specific lakes and reservoirs) prior to
May 2017 for TP and Chl a and May 2022 for TIN.
– Regulation 85 – Establishes nutrient control requirements for
POTWs that vary depending on facility size and type and
whether the facility is existing or new as of May 2012
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Proposed Regulation 31 – Total Phosphorus
Interim Total Phosphorus Values
Lakes and Reservoirs, cold, >25 acres 20 µg/L 1
Lakes and Reservoirs, warm > 25 acres 80 µg/L 1
Lakes and Reservoirs,

Proposed Regulation 31 – Total Nitrogen
Interim Total Nitrogen Values
Lakes and Reservoirs, cold, >25 acres 410 µg/L 1
Lakes and Reservoirs, warm, > 25 acres 850 µg/L 1
Lakes and Reservoirs,

Proposed Regulation 85 - Overview
• Existing Domestic Wastewater Treatment Facilities, as of
May 30, 2012
– Small or disadvantaged communities, following are exempt:
• Any facility with a design capacity of ≤ 1.0 MGD that uses waste
stabilization pond technology as its means of treating
wastewater
• Any facility owned by a disadvantaged community
• Any facility with a design capacity of ≤ 0.1 MGD
– Facilities subject to a Watershed Protection Control Regulation
are exempt until May 31, 2022
– All other existing facilities – required to comply with Tier 1
numeric effluent limits
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Proposed Regulation 85 - Overview
• New Facilities
– Comply with Tier 2 numeric effluent limits
• Non-Domestic Facilities
– If discharging prior to May 30, 2013, comply with Tier 1
numeric effluents, where the State has determined that the
effluent quality will exceed the Tier 1 limits
– If discharging after May 30, 2013, comply with Tier 2, where
the State has determined that the effluent quality will exceed
the Tier 2 limits
• Additional implementation requirements within regulation;
review at: www.cwqf.org/Workgroups/Workgroup.htm
(click on “nutrient workgroup”)
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Cost-Benefit Analysis of Effluent Tiers
• Regulation 85 includes Tiers 1 and 2; additional analysis for
Tier 3 is included in the cost-benefit study
Nutrient
Tier 1
Tier 2
Tier 1
Tier 2
Tier 3 –
Semi-
Semi-
Annual
Annual
Quarterly
Median 1 Annual
Median 2 Median 1 Annual
Median 2 Average
Total Inorganic
Nitrogen (TIN)
(mg/L)
Total
Phosphorus
(mg/L)
10.0 15.0 7.0 10.0
1.0 1.25 0.7 1.0
0.4 (Cold)
2.0 (Warm)
0.11 (Cold)
0.16 (Warm)
1
Rolling annual median, based on previous 12 months of data
2
Six-month median value
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COST-BENEFIT METHODOLOGY FRAMEWORK

Methodology Framework - Overview
Wastewater Costs
• Categorize facility size/type
• “Typical “ upgrades to meet effluent tiers
• Capital and O&M costs
Subdivide the State
into Manageable
Units (MU)
MU-Specific Analyses
• Expected water quality
Improvements by Tier
• Pilot test methodology in 2 MUs
• Ramp up to all MUs
Cost-Benefit Analysis
• MU-specific benefitcost
ratios
• Aggregate data by
Basin and State
Potential Benefits
• Public Water Supply (avoided costs by Tier)
• Environmental (active, passive, intrinsic by Tier)
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27 Proposed Manageable Units
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DRAFT

Platte Basin MUs
DRAFT
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Platte Basin MUs – Close-up of Front Range
DRAFT
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Gunnison Basin MUs
DRAFT
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Pilot Test Methodology
• Two Manageable Units selected to pilot test methodology
– St. Vrain subwatershed of the Platte Basin (north of Denver,
includes Cities of Boulder and Longmont)
– Eagle River subwatershed (includes Cities of Vail and Eagle)
• Pilot test is key to overall project execution
– Opportunity to “test drive” methodology
– Allows stakeholders to provide input before statewide
application
– Methods refined based on stakeholder input
• Cost-benefit methodology applied to all MUs after
methodology affirmed
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Manageable Unit Analysis Based on Expected
Water Quality Improvement
• Streams & Rivers
– Calculated instream median TP and TIN based on existing data
– POTW discharges based on a 75% design capacity flow
– Assumed effluent concentrations of 4.5 mg/L for TP and 25
mg/L for TIN unless POTW-specific data available
– Background nutrient concentrations (other than POTWs) based
on land use type and associated event mean concentrations
• Lakes & Reservoirs
– Similar assumptions as provided above
– Water quality modeled using Continuously Stirred Tank
Reactor calculation, except where existing model available
– Incorporated reservoir-specific characteristics, as appropriate
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WASTEWATER COSTS
23

Approach to Wastewater Cost Estimates
Gather facility data
from state; conduct
surveys with
dischargers
Develop “Typical”
plants for MUs
Develop process unit
sizes and flow diagram
for each “typical” plant
Determine O & M
impacts and costs for
each MU
Calculate capital costs
for MUs from models,
reports, surveys,
contractors, vendors
Determine
improvements required
for each “typical” base
plant for each effluent
tier
Confirm costs with
existing reports, cost
estimates, studies
Calculate total present
worth for each MU
based on capital and
annual O & M costs
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Determine Improvements for Each Tier and
Category
Category/Description
1 Suspended Growth
Action
Upgrade for each Tier
Filters satisfy 75% of Tier 3 requirement
2 1 st Generation Fixed Film Replace with mechanical plant
3 2 nd Generation Fixed Film
Upgrade for each Tier
Portions of the plant can be used in upgrade
4 Lagoon Replace with mechanical plant
5 Sequencing Batch Reactor Replace with mechanical plant
6 Oxidation Ditch
Upgrade for each Tier
Portions of the plant can be used in upgrade
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Wastewater Costs - Overview
Cost Area
Capital
Operation &
Maintenance
Key Cost Elements*
• Categorize facilities by general treatment type (6 categories) and
permitted capacity
• Develop “typical” costs associated with meeting effluent quality tier and
upgrading existing facility types
• Incorporate allowances (percent of capital cost, varies by facility size and
treatment tier)
• Hydraulics (% of existing
average daily flow)
• Site Work (5-10%)
• Yard Piping (5-10%)
• Electrical (5-10%)
• Contingency (30%) and Engineering (25%)
• Instr. & Controls (5 – 15%)
• Misc. Repair (1%)
• Flow Maintenance (1 – 3%)
• Land Acquisition (2%)
• Labor (additional labor/tier at fully loaded rate and annual training costs)
• Chemical (tier dependent)
• Power costs/kwh
* Sources: EPA, unit costs, literature, CDM’s bid database, POTWs
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Facility Categorization – St. Vrain MU
Flow Bin
(MGD)
Existing Treatment Process
Facility
Category
No. of
Facilities
Upgrade
AS
Full
conversion
to AS
0.5 to 1 Aerated Lagoon 4 1 X
> 1 to 3
Activated Sludge 1 2 X
• MBBR or IFAS with Filters
• Activated Sludge with
Nitrifying Trickling Filters
3 2 X
> 3 to 5 Activated Sludge with Filters 1 1 X
> 10
Activated Sludge 1 1 X
Activated Sludge with Nitrifying
Trickling Filters
1 1 X
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Develop Capital Costs by Flow Bin, Treatment
Category – Example Tier 1 Summary
Estimated Cost/Gallon and Capital Costs ( based on permitted capacity, excluding land
acquisition and engineering costs)
Flow Bin
(MGD)
Cat. 1
Unit Cost
0 – 0.5 > 0.5 – 1.0 > 1.0 – 3.0 > 3.0 – 5.0 > 10.0
$ 2.72 $ 1.46 $ 1.65 $ 1.51
Subtotal $ $4.4M $13.3M $5.6M $81.8M
Cat. 3
Unit Cost
Subtotal $
Cat. 4
Unit Cost
$ 6.92 $ 5.58
Subtotal $ $1.6M $5.5M
Cat. 5
Unit Cost
Subtotal $
$ 6.92
$3.5M
$ 2.83
$11.3M
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Develop O & M Costs by Flow Bin, Treatment
Category – Example Tier 1 Summary
Estimated Cost/Gallon and O & M Costs (based on permitted capacity)
Flow Bin (MGD) 0 – 0.5 > 0.5 – 1.0 > 1.0 – 3.0 > 3.0 – 5.0 > 10.0
Cat. 1 - Unit Cost Labor $ 0.22 $ 0.07 $ 0.07 $ 0.04
Cat. 1 - Unit Cost Non-Labor $ 0.04 $ 0.04 $ 0.10 $ 0.10
Subtotal $ $0.4M $0.9M $0.5M $6.2M
Cat. 3 - Unit Cost Labor $ 0.07
Cat. 3 - Unit Cost Non-Labor $ 0.04
Subtotal $
Cat. 4 - Unit Cost Labor $ 0.37 $ 0.37
Cat. 4 - Unit Cost Non-Labor $ 0.07 $ 0.07
Subtotal $ $0.1M $0.4M
Cat. 5 - Unit Cost Labor $ 0.22
Cat. 5 - Unit Cost Non-Labor $ 0.04
Subtotal $ $0.1M
Colorado Nutrient Cost/Benefit Study
$0.4M
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WATER SUPPLY BENEFITS

Water Supply Nitrate/Nitrite Benefits
• A negligible O&M cost savings may results from decreased
ammonia loading
• For pilot MUs, we have concluded that there is no need to
include public water supply costs for removal of nitrogen
since existing water quality is well below primary drinking
water MCLs; this will be evaluated for each MU
• Potential for chloramine formation and resulting nitrogenbased
Disinfection By-Products (DBPs) being evaluated
qualitatively
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Water Supply Benefits – Total Phosphorus
• There are no Primary Drinking Water MCLs; concerns linked
to the formation of DBPs and taste and odor concerns
• Difficult to directly relate TP to DBP formation potential;
instead relying on compliance with Stage 1 and Stage 2
D/DBP Rule
• Stage 1 compliance has not been identified as a concern
with any water treatment facilities
• Potential Stage 2 compliance concerns identified for a
number of facilities – will be looking at potential avoided
costs (quantitative or qualitative) associated with improved
instream TP concentrations
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ENVIRONMENTAL BENEFITS
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Primary Elements of the Cost-Benefit Analysis
POTW COSTS
BENEFITS (AVOIDED COSTS)
Upgrades, Operating
Cost of Affected Point
Source Dischargers
Improved
Domestic Water
Supply Quality
ACTIVE
i.e., Recreation
PASSIVE
i.e., Aquatic Life
INTRINSIC
i.e., Existence
Values
Estimate and Project
Estimate and Project
Determine Quantitative vs. Qualitative Benefits
Discount to Present
Value
Discount to Present
Value
Estimate and Project
Quantitative Benefits
Discount to Present
Value
Characterize and
Determine
Magnitude of
Qualitative Benefits
Compare Present Value Benefits and Costs
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Benefit Definitions
• Active Benefits: Based on direct use of a resource
(i.e., fishing) or services provided by an ecosystem (i.e.,
water for recreational opportunities, such as boating or
swimming)
• Passive Benefits: Derived from ecological functions that
support active uses (i.e., habitat functions that support
fishing)
• Intrinsic Values: Knowledge that the resource or ecosystem
exists in the world whether we use it or not
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Quantification of Active Benefits
USE ACTIVITY QUANTIFICATION
Recreation
Aquatic Life
Recreation
Stream, Lake Angling =
Rafting, Kayaking,
Boating
Recreation Swimming =
Recreation
Other
Picnicking and Site-
Seeing
Agriculture Livestock =
Other Property Values =
=
=
Increased angler days x expenditure value of
angler day
Increased boating days x expenditure value
of boating day
Increased number of swimmers x
expenditure value of swimmer day
Increased site seers x expenditures per siteseer
Increased weight gain of livestock x sales
price per count
Increased property value around reservoirs
because of water clarity, etc.
Where quantification is not possible, qualitative analyses are
being considered
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Quantification of Passive Benefits
Colorado
Elsewhere
Willingness to Pay Studies
(as closely applicable as possible)
• Examples:
• Habitat Protection
• Endangered Species
• Species Diversity
• Factors:
• Time period
• Geography
• Weighted average
household income
Adjusted for Revealed Payments
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Environmental Benefits
• Environmental benefit calculations depend on an estimate of
expected water quality improvement
• Active Benefits
– Percent change in water quality equated to percent change in
visitor days
– Change in visitor days for various recreational activities used as
primary means to quantify active benefits
• Passive/Intrinsic Benefits
– Based on “Willingness-to-Pay” (WTP) calculation methods and
factors such hypothetical WTP vs. actual WTP
– Consideration of how to “re-distribute” benefits to account for
people realizing benefits outside of their immediate area
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Environmental Benefits
• Not all benefits may be quantified; incorporating qualitative
methods to account for such benefits, e.g., using state nonconsumptive
values assessment data
– All major basins have completed a non-consumptive water
needs assessment for environmental and recreational values
– Stakeholder-led process; outcomes vary by basin
– Willingness to pay adjusted to recognize the most highly
valued stream reaches for recreational and environmental
benefits
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PILOT STUDY RESULTS

Pilot Study Example – Preliminary Estimate of
Expected Water Quality Improvements (mg/L)
Site 1
Existing
TP
Tier 1
TP
Tier 2
TP
Tier 3
TP
Existing
TIN
Tier 1
TIN
Tier 2
TIN
Tier 3
TIN
PLT-01 0.60 0.32 0.30 0.25 3.50 1.92 1.49 0.54
PLT -02 0.80 0.32 0.28 0.20 3.50 1.89 1.44 0.45
PLT-03 2 0.50 0.26 0.24 0.20 3.20 1.76 1.35 0.46
PLT-06 0.03 0.03 0.03 0.03 NA NA NA NA
PLT-07 0.02 0.02 0.02 0.02 0.32 0.26 0.24 0.21
PLT-08 0.02 0.02 0.02 0.02 0.33 0.20 0.17 0.12
1
– highest numbers are upstream locations
2
– below Boulder Creek subwatershed confluence; Boulder Creek data not shown
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Pilot Study Examples – Preliminary Estimate of
Wastewater Costs in Two Manageable Units
• Costs include land acquisition and engineering costs
Cost Type
Effluent Tier
Platte River Basin
St. Vrain MU
Colorado River Basin,
Eagle River MU
1 $157,574,000 $25,116,000
Capital
2 $403,127,000 $48,116,000
3 $893,879,000 $172,347,000
1 $4,683,000 $1,011,000
O & M
2 $9,125,000 $1,529,000
3 $20,671,000 $4,855,000
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Pilot Study Example – Preliminary Present Value
Costs and Benefits ($ millions)
Pilot MU
Effluent
Tier
Total
Costs
Active
Benefits
Passive
Benefits
Total
Benefits
Benefit –
Cost
Ratio
1 $214.6 $253.8 $69.4 $323.2 1 : 1.51
Platte Basin
(St. Vrain)
2 $504.8 $299.6 $82.0 $381.6 1 : 0.76
3 $1,126.1 $397.5 $108.8 $506.3 1 : 0.45
Colorado
Basin
(Eagle River)
1 $38.3 $26.6 $5.2 $31.8 1: 0.81
2 $67.1 $30.9 $6.1 $37.0 1 : 0.55
3 $230.6 $40.5 $8.0 $48.5 1 : 0.21
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Pilot Study Example – Additional Refinements
• Passive benefits do not yet include factor that takes into
account benefits accrued from people who live outside
the MU
– Adjustment requires data for all MUs; impact will be higher
benefit value
• Potential further refinement in wastewater costs
• Inclusion of avoided costs for water treatment, if any
• Qualitative findings, which will affect interpretation of
final benefit-cost ratios
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NEXT STEPS

Next Step
• Refine results in Pilot Study Manageable Units
• Complete analyses in all Manageable Units
• Develop Region-specific and Statewide Cost-Benefit Results
• Prepare Study Report
– Draft Report, September 2
– Stakeholder Workshop, September 26
– Final Report, October 19
• Study Report to inform rule-making process with public
hearing on proposed regulations planned for March 2012
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QUESTIONS