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24154 NOTICES to the users is measured by the enUre exIst for the final ILDd Intermedlte goods, shaded area. on the chart. Th1B !s a respectively. to include the :increased larger amount than would be reflected by output as & contributlon to natlon'8l the market value. It is the sum of ma.rket economic development. price times increased quantity (repre- Cer1B1n consumer goods and services sented by the rectangle CBQ,Q,) plus the may resul~ directlY from water projects consumer surplus for that increase (rep- and be used With no additional produc- resented by the triangle ABC) . tion resulting therefrom. Recree.tlon. Since. in most instances. it is not pos- mun1cipaJ water, and electr1c power .for sible for the planner to mea.sure the ac- residential use are examples of this type tual demand s1tuation. three 'alternative or gC>Od or service. Most goods and serV- techniques can be used to obtain aD. esti-. ices produced by water proJec-t;s are not mate of the total value of the output of di.i-ecUy conswned, however. but are in- the plan-willingness to pay, change in termediate products that serve as inPuts net income. and the most likely alterna- far producers of final goods or producers tive. ot other tntermediate goods. The devel- It the additional output from a plan o"pment of irrigation water tor use in 15 not expected to have a sigW.tlcant ef- producing food and fiber or supplying fect on price, actual or simula.ted market. electric power and water for industry prices will c:1oselY approximate the toW are examples.. value of the output. This is true becB.lLSe The value of increased output result- there would be no consumer's surplus. U lng directly lrt'.'lIn plans that produce.final the additional output 15 exPected to sig- conswner goods or services is properly ntficantly influence market price (as measured as the w1l1ingness to f1&Y by in figure 1) , a price midway between that final users for such output. When a com- . expected with and w1thout the plan may petitive market price is not directly be used to est1mate the total vaJue. This available, and the increased output will would approximate the willingness to not be large enough to a:fIect PJ:"ices, total pay, including consumer surpluses, in value of output may be estimated by most cases. I simulated market Prices or the use of the . When outputs of a plan are intenne~ cost or the most likely aJteI]l8tive means diate goods or services the net income of of prodUCing such final output. Examples the (producer) uses may be increased. or types of outputs to wh1ch this stJand- Where changes in net income of each tn- ard may be applIed include: dlvidual user can be estimated, a close &. Community and residential water approximation of the total value of the supply; · output of the plan (including conswner b. Electric power provided for com- surpluses) will be obtained. .mnnity and residential use; and The COSt of the most likely alternative c. Recreation enhancement. mea.ns of obtaining the desired .output The value of increased output of in- can be used to approximate total value tennedia;\:;e goods and services is meas- when the willingness to pay or change in uroo by their total value as inputs to net income methods cannot be used. The producers of final consumer products. cost of the most likely alternative means The intermediate product from the plan will generally mistate the total value of may enable the prodUcers to incr~e the output of a plan. This 1s because it production of final conswner goods, or merely 4J,dicates what society must pay - reduce costs of production which In e!- by the next most likely alternative to feet releases re5Ol.U"CeS lar use elsewhere secure the output, rather than estimat- in~the economy. In either case, the total ing the real value of the output of a plan value of the intermediate goods or serv- to the users. This assumes, of course ices to the producer 18 properly measured that society would in fact nndertake th~ as the increase In net income received by alternative means. Because the planner the producers with a plan as compared may not be able to detennlne whether with the .net income received in the ab- alternative means would be undertaken sence of a plan. Net income'is defined as in the 'absence of the project, th!s pro- the market value of -prod}lCers' outputs cedure for benefit estimation must be less the ma.rket value of. producers' m- used ca.uUousljr. puts exclusive of the cost at' the inter- Application of these general measure- mediate goods or services resulting from ment stAndards will necessarily vary, de- a. plan. Ex~ple:;> of types of plan out- pending upon the source by which out- p~t.s ~ which this standard may be ap- put is increased (that is, via 'direct In- plied mclude: . creases in production. or through 8. Agricultural water supply; ~,Ild SUbsequent employment of released b. Agricultural flood damage aJIevia.- resources), upon the type of good or serv- tion, land. stabiliZation, drainage. and ice produced (whether the output is an related activities. intermediate or final good), and upon Where net income changes cannot be the type and nature of avaUable aJterna.- directly determined. however, the value tlves. General mc:asurement standards of the intermediate goods and services to for .eac~ type of SItuation as well as an producers will be measured either in indica.rtlOn of the wa~er and land resource terms of competitive market values, when plan outputs to which .these Standards competitive conditions exist, or approx- are applIcable are presented below. imated by the cost of the likely alterna- a. Direct output increases. Direct out- tive that the producers would utilize in puts of water and land resource plans the absence of a plan to achieve the same may be in the form of e1ther final 000- level of output. Examples of types of plan swner goods or intermediate goods. An outputs to which th1s standard may be effective direct or derived demand must applied include: &. Industrial and commercial water' supply; b, Urban 1I00d damage alleVIation; c. Electric power proVided for 1ndus- trlal, commercial, and agricultural uses; d. Transportation; and e. Commercia.! fiShery enhancement. b. Increases in output resulting from ezternal economies, Increased o,,~ of Indlvidualllrms or industries directlY 0.(- fecte<l by the plan may create situations in w,fIich related: finns or tndustries a.re able to take advantage of more emclent production techniques; or consumers may be indirectly aff'ected by a project (such as ilhrough favorable envirOnmen- tal Ch&nges), Such productlvity oru.nges or technologicaJ e,.,,1;emal economies can be attributed as a benefit to a plan. For example, higiher levels of outpul; by di- rectly aUected lIrms Il1BY enable subse- quent processing :flnns. 1:0 use more effi- cient processing techniques and thereby release resources for use in producing other gOOds and services or permit the higher level of output to be processed. with no additional resources. Present techniques are not well devel- oped tor measuring the beneficial effects a'CcrUing from external economies. How- ever, in situations. where it is thought that the increased output of final con- sumer goods or intermediate goods used by direct users can be expected to in- crease the prooucti vity or output of re- lated f1.r1l1S, an attempt should be made to measure the net income change re- sulting from such externalities. When this is done the methodology should be carefully documented in the reDort. 2. Measurement 0/ the value to users 01 increased outputs-a. Water suWly. P.la.ns for the provision of water supply are genernJly designed to satisfy reQuire- menta far water as a final good to domes- tic and municipal users and as an inter- mediate good to agricultural and lndus- t.r1al users. Provision of wa.ter supply to satlsfy requirements in these uses gen- erally requ1res, either sepa.mtely or. in combinatJon. an increase in water quan- tity, an Improvement in water quality, and an inlprovement in the re]ja.bil1ty of both quantity and quality, Where It is necessary to use alternative 095ts for a,pproxim.ation of total value for water supply, as provided herein, t.hEl aJ.- t.ernative Bf'lected must be a likely and realistic alternative directly ~lXIDSive to achievement of this particular category, namely the addit.ional output of water as an input to industrlal, agriou1tural, a.nd municipal uses or 80S 8 final. good for oonummity and individual uses. More- over. the oJ:ternative must be a viable one In terms of engineering and fin3.n.c- Ing and must be institutlanally accept- able. It must be more than a. hypothel;ical project, It must be a real alternative that could and would likely be undert:a.ken in the absence of the proposed program, for instance. the reuse or recycling ot exJst- ing water supplies or the use of available groundwater, including the improvement of tts quality,it neceSBan', Alllhough water supply can often be considered as a final good, there usually d0e5 not exjst a. market value in terms of FEDERAL REGISTER, VOL. 36, NO. 245-TUESDAY, DECEMBER 21, 1971