Enterprise Budgets for EPA Confined Animal Feeding Operations Effluent Limitation Guidelines

The United States Environmental Protection Agency (EPA) issued court-ordered, proposed regulations governing effluent from Confined Animal Feeding Operations (CAFO) on January 12, 2001.

Accompanying the proposed regulations was an analysis package that included engineering studies related to the size and cost of various fixed and re-occurring factors such as berms, settling ponds, groundwater monitoring and nutrient management plans. Also included in the assessment was an economic analysis of the regulation’s effects from the farm to consumers.

The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri received Farm Foundation support to bring together panels of university-based economic experts in livestock sectors to formulate enterprise budgets. These budgets were used as samples to suggest how the additional costs of environmental compliance might be evaluated in future regulatory assessment. Through this work, an alternative methodology of calculating the expected impacts of the EPA’s proposed CAFO regulations was developed.

The FAPRI analysis of EPA’s proposed CAFO regulations may be found here.

A number of questions exist concerning the EPA regulations.  For example, the work relied heavily on USDA’s Agricultural Resource Management Survey (ARMS).  How that data was applied is one area of debate. For example, revenues tended to be calculated on a firm rather than an enterprise basis. EPA used these revenues to determine the financial achievability of the proposed regulations at the farm level. Questions have also been raised concerning the tests applied to projected revenue streams, the pass-through effects on consumers and suggested revenue from manure sales.

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