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THE ECONOMICS OF CO-PERMITTING

Published by the American Society of Agricultural and Biological Engineers, St. Joseph, Michigan www.asabe.org

Citation:  Pp. 529-546 in Animal Agriculture and the Environment: National Center for Manure and Animal Waste Management White Papers. J. M. Rice, D. F. Caldwell, F. J. Humenik, eds. 2006. St. Joseph, Michigan: ASABE.  .(doi:10.13031/2013.20265)
Authors:   Erik Lichtenberg

Traditionally, livestock growers have been responsible for managing manure and other waste products, appropriating any benefits (e.g., from use as fertilizer) and bearing any costs. The spread of contracting in livestock industries has raised questions about the appropriateness of this situation. It has been argued, for example, that integrators exert substantial operational control of contract livestock operations and should thus bear some responsibility for managing waste. It has also been argued that integrators have deep pockets allowing them to finance needed investments in waste management structures and equipment that individual growers cannot afford.

These arguments have led the U.S. Environmental Protection Agency (EPA) and several states to propose regulations that would make integrators and growers jointly responsible for disposing of wastes from contract livestock operations. The most notable are EPAs proposal to issue joint NPDES permits for confined animal feeding operations (CAFOs) operated under contract, the State of Marylands proposal to require joint NPDES permits for contract livestock operations under its Clean Water Act authority, and Kentuckys law requiring joint management of waste in contract livestock operations. However, neither these nor other potential rationales have been subjected to rigorous analysis of their economic efficiency or of their potential impacts on the distribution of income (including profits from livestock production as well as disposal costs) between growers and integrators.

This report examines the efficiency and distributional implications of alternative forms of copermitting (and, more generally, of apportioning liability for waste management between integrators and growers). We begin with a brief review of the proposed co-permitting regulations mentioned above and arguments made both pro and con. We then discuss findings from the existing economic literature that bear on these arguments, in particular, on the economic efficiency of making integrators partially responsible for waste management and on the implications of joint responsibility for the distribution of income between growers and integrators.

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