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Case Study: Costs and Allocation Decisions
Table of Contents
The allocation modeling framework estimates compliance cost for each allocation scenario, including the minimum cost to meet criteria.Total compliance costs ($1.4 million) for allocations based on equal percent load reductions are substantially higher than the minimum cost allocations ($400,000). Higher costs under equal percent reductions are due to the additional abatement requirements imposed on wastewater treaters and hog and dairy operators (figure 1).
Figure 1: Total compliance costs under each allocation scenario. Total costs range from 1.4 million dollars for allocations based on equal percent reductions to 400 thousand dollars for minimum cost allocations.
Allocations based on the minimum cost objective are likely to be desirable based on cost-effectiveness but less desirable from the
perspective of beef cattle operators who sustain most of the cost burden under minimum cost allocations (figure 2).
Figure 2: Distribution of annual costs across allocation scenarios. Hog and dairy operations pay almost half the costs under equal percent reductions, but pay nothing under minimum cost allocations.
The distribution of compliance costs across stakeholders suggests that allocations based on equal loads may be the most acceptable objective, given the potential need to balance equity and cost-effectiveness. If cost-sharing programs can be implemented, or if hog and dairy operations are at risk of closure, then allocations based on minimum cost may be considered more acceptable from an economic impact perspective.
If concerns are raised about uncertainty, then improved margins of safety may justify allocations based on equal loads or equal load reductions. The concentration forecasts presented in the figure above indicate that concentrations will not exceed 1000 cfu/100ml when allocations are based on equal percent load reductions, while maximum concentrations range as high as 1800 cfu/100ml when costs are minimized.
Figure 3: Maximum concentrations are below 2000 cfu per 100 milliliters under all three allocation scenarios.
Allocations based on equal loads may be the most acceptable allocation option, if it can be argued that the gains in equity justify the additional annual cost of $10,000 per year, relative to minimum cost allocations. A phased strategy involving a combination of necessary abatement (i.e., cattle exclusion from streams and septic system repairs) and increased monitoring may be the most acceptable strategy if there are concerns about uncertainty and modeling results. Ultimately, variances or changes to water quality standards may be required to enable acceptable allocations.
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