Ch. 7— The Effects of the 404 Program • 155 



MODIFICATION COSTS 



Project modifications made in response to Fed- 

 eral agency requirements or pressure as a condi- 

 tion for permit approval may entail additional out- 

 lays by applicants — i.e., to restore or create wet- 

 lands, transport material to more expensive upland 

 sites, or use more expensive technology or manage- 

 ment practices. In addition, such modifications may 

 reduce the profitability of a project, for example, 

 by making the project smaller. There also may be 

 modification costs not directly required by agen- 

 cies. Applicants may modify projects before an 

 agency objects to them in expectation of permit 

 denicds if modifications are not undertaken. 



Rough estimates indicate that one in three per- 

 mits is modified. The figure is probably lower for 

 small projects and higher for large projects. Many 

 projects undoubtedly were modified in anticipation 

 of comments by Federal agencies; many others were 

 modified as a result of preapplication consultations 

 (12). 



According to one supporter of the program, 90 

 percent of recommendations made by Federal re- 

 source agencies to permit applicants during per- 

 mit review are "accepted" by applicants,^' mean- 

 ing that few such suggestions result in the appli- 

 cant withdrawing a permit application or refusing 

 to make the change. However, the requirement of 

 modifications often has an element of coercion. 

 Apart from the threat of denial of a permit by the 

 Corps or the Environmental Protection Agency, 

 (EPA), Federal agencies without the power to deny 

 a permit could, before the regulatory changes pro- 

 posed by the administration in 1982, threaten to 

 elevate a decision on a permit to higher levels in 

 the Government, with the concomitant delay en- 

 tailed in processing. As stated by OMB, the threat 

 of elevation often has caused applicants to "accede 

 to unnecessary and unreasonable changes in their 

 plans" to avoid agency objections. ^^ 



The cumulative amount of outlays for modifica- 

 tions and the average cost per permit applicant are 



almost entirely unknown, given present data. IWR 

 estimated that the cost of modifications equals the 

 amount of savings to permit applicants through 

 "technology transfer."^' These savings were esti- 

 mated to be 15 percent of site development costs, 

 or an annual amount of $135.5 million to $271 mil- 

 lion. ^^ However, no basis was given for the assump- 

 tion that sums for modifications and technology 

 transfer are the same. Further, as previously dis- 

 cussed, the IWR estimate of technology transfer 

 savings is extremely uncertain. 



The OTA survey asked associations to estimate 

 the ranges of costs for modifications. Very few 

 quantitative estimates were made. The American 

 Mining Congress (AMC) and the American Petro- 

 leum Institute (API) said that modifications range 

 from minor, relatively inexpensive changes to major 

 modifications costing millions of dollars. AAPA said 

 that costs for riprapping increased by 10 to 20 

 percent. 



An example of increased costs was given by API, 

 which said that drilling a 12,000-ft oil or gas ex- 

 ploratory well may cost $2.5 million for a straight 

 hole and $7.5 million when directional drilling is 

 employed. Out of the API survey sample of 40 

 firms, representing a total of 794 permits from 

 August 1978 to October 1981, 53 cases of increased 

 costs from "the adoption of stipulations or special 

 conditions" were noted, totaling $17 million, an 

 average of about $320,000 per case. However, this 

 average is not representative, one permit alone ac- 

 counted for $10 million in costs. Secondly, not all 

 firms submitted all of their past permitting experi- 

 ences to API: some firms gave only exzimples where 

 problems were encountered, possibly biasing the 

 overall picture presented. API also gave an alter- 

 nate figure: averaging the $17 million figure across 

 all 794 permits, API determined the average cost 

 to be about $22,000. 



Among the nonquantitative estimates, API/ 

 NFPA said that "with respect to specific project 



^'National Wildlife Federation, op. cit. 

 ^^Office of- Management and Budget, op. cit. 



^'Institute for Water Resources, op. cit., p. 153. 

 2=Ibid., p. 135. 



