<br />24158
<br />
<br />'lntermedl8lte produced goods are pre-
<br />sented below.
<br />Il. Final consumer goods. Provision of
<br />additional recreation opportunities and
<br />fish and wildlife enhancement for the
<br />direct enjoyment of individuals may en-
<br />able merchants of sporling goods and.
<br />other suppliers of recreation equipment
<br />and services to increase their sales and
<br />net income. However, to the extent that
<br />the increased expendltrnes for outdoor
<br />spo~ting equipment and other outdoor
<br />recreation services substitute for some
<br />other consumer expenditures. there is no
<br />real gain in the Nation's output.
<br />The provisIon of either water supply
<br />or electric power for community and res~
<br />1dent1al use will not generally stimulate
<br />external economies to enhance natrlonal
<br />economic development. It is usually as-
<br />BUmed that the necessary Qwmt1:t1es of
<br />these outputs will be provided by some
<br />a.lternative means In the absence of the
<br />plan. As a oonsequence, firms that are
<br />economically related to consumers
<br />through the consumption of these prod-
<br />uots will experience the same economic
<br />conditions and have the same net in-
<br />come without the plan as compared with
<br />the plan.
<br />b. Intermediate producer Doods. The
<br />utllization of intermedIate goods and
<br />services from the plan by direct users
<br />may enable 1Jh.em to exp-and their output.
<br />Increased levels of output by direct users
<br />of the output of a plan may, in ttim., en-
<br />able economically related ftnns to im-
<br />prove the efficiency of their operation
<br />and/or expand their output and, as a
<br />result, increase their net income. Meas-
<br />urement of 'the change in the net income
<br />position of related firms should be made,
<br />if it can be deflnitely established that a
<br />change in output by the direct users will
<br />generate 'B corresponding income change
<br />for the rel8Jted firms,
<br />An evaluation should be made of the
<br />output levels that will be achieved by the
<br />direct users with the. plan and without
<br />the plan. If the direct users would obtain
<br />tlie same good or service from some other
<br />source 10 the absence of the plan, no
<br />external economies occur and the net In-
<br />come position of the related flrms would
<br />be unatreoted by the plan. Some examples
<br />of types of plan outputs to whlch this
<br />standa.rd may be applied are presented
<br />below,
<br />In situations where water supply is an
<br />intermed1Bite good, its utlliz9ltion by di-
<br />rect users may stimulate more inputs to
<br />be acquired from supplying flnns, aIlld if
<br />there Is an increased output from the
<br />enterprise of the. direct user additional
<br />output w11l be processed by related proc-
<br />essing firms. Except for irrigation water
<br />supplies a.n.d a few industries with high
<br />water requirements, warter represents a
<br />relatively small consideration in the
<br />management decision of firms. If firms
<br />or industries with relatively sma.ll water
<br />requirements would obtain their neces-
<br />sary water from some other source In the
<br />absence of the plan. no extemal econ-
<br />omies should be Inoluded In the oaloula-
<br />t10n a! water supply benefits,
<br />The provision a! fiood control land
<br />sbablUzatlon, drainage, and related pro-
<br />
<br />NOTICES
<br />
<br />grams may affect the productivity ot land
<br />resources resulting in Increased levels of
<br />output by llrlIl5 directly affected by the,
<br />plan. Net Income changes may also
<br />occur in economicallY related firms.
<br />Measurement of the net income ch.ange
<br />of the related finn.s should be made If It
<br />can be definitely established ,that a
<br />change in output by the dIrect users will
<br />generate a corresponding ineome change
<br />for the related firDl.5. However, if the
<br />plan merely enables economic activit1es
<br />to shift to new locations resulting in more
<br />efficient productJ.on but no change In
<br />total output, then no external economies
<br />occur and no attempt should be made to
<br />measure net income changes of related.
<br />input supply or output processing finns.
<br />Electric power provided for Industrial.
<br />commerclaJ., and agricultural uses will
<br />frequently result in higher levels of out-
<br />put from these economic sectors. How-
<br />ever, if alternative electric power or
<br />alternative energy sources would be
<br />utillzed in the absence of the plan, the
<br />level of output would be unaffected and
<br />no external economies would accrue as
<br />a benefit to the plan.
<br />To the extent that navigational facili-
<br />ties provide alternative transportation
<br />services that would otherwise be pr0-
<br />vided In the absence of the project. no
<br />external economies occur. In situations
<br />where the navigatJonal facilitY provides a
<br />unique service, such as providing move-
<br />ment of bulky raw mater1als that would
<br />not otherwise. be ma.d.e available, external
<br />economies may occur to the :tlrms eco-
<br />nomicaJly rela:ted to the shippers. .
<br />
<br />c. ADVERSE EFFECTS ON NATIONAL ECONOMIC
<br />DEVELOPMEN"r
<br />
<br />AChievement- of beneficial effects of
<br />national economic development, environ-
<br />mental. quali ty, or regional development
<br />requires resources to be cUverted from
<br />alternative uses. The adverse effects on
<br />national economic development are the
<br />economic value that these resources
<br />would have in their alternative uses.
<br />Generally, market prices provide a "wid
<br />measure of the values of goOds and serv-
<br />ices foregone In alternative uses. Both
<br />public and private costs associated with
<br />the plan will be measured to indicate the
<br />total adverse etrect on national economic
<br />development incurred to realire the de-
<br />sired objectives.
<br />1. Sources 01 adverse effects. Water
<br />and land resource plans result in adverse
<br />effects to national economic development
<br />in two ways.
<br />a. Resource requirements to produce
<br />final 01" intermediate goods and services.
<br />In situa.tions where a. physical structure
<br />is necessary to obtaJ.n the desired obJec-
<br />tive, the adverse effecbs on national eco-
<br />nomic development include a.ll explicit
<br />cash expenditures for goods and services
<br />necessary to con.stnJ.ct and operate a.
<br />project throughout a given period of
<br />analysis. They consist of actual expendi-
<br />tures for constructJ.on; transfers from
<br />other projects, such B6 costs for reservoir
<br />storage; development costs; and interest
<br />during construction, If the output of the
<br />plan Is an intermediate good or service,
<br />the assoclated costs Incurred by the
<br />
<br />intennediate product user in converting
<br />It Into a marketable form will be meas-
<br />ured. These associated costAs are borne
<br />by the user of the plan output but, never-
<br />theless, represent resource requirements
<br />necessary to convert the project ootput
<br />into a. product demanded by society. Ex-
<br />amples are produC'Uon costs incurred by
<br />users of plan outputs, and CQ6ts to other
<br />producers or 1;0 processors that arIse in
<br />conjW1ction with the physical:now of the
<br />output of the plan. Associated costs
<br />should be deducted from the value ot
<br />gross outputs to obtain net beneficial
<br />effects to be compared' with the national
<br />economic development adverse effects of
<br />a plan.
<br />In sltuat,ons where nonstructural
<br />measures are used to obtain the desired
<br />objective, the adverse effects on national
<br />economic development wlll Include pay--
<br />ments to purchase easements or rtgh ts-
<br />of-way and costs Incurred for manage-
<br />ment arrangements or to implement and
<br />enfor.ce necessary zoning. In some cases,
<br />actual cash expenditures wlll not be in-
<br />volved as when local communIties are
<br />required to furnish lands, easements
<br />and rights-of-way. ~
<br />b. Decreases in output resulting Irom
<br />external diseconomie&. External disecon-
<br />omies are adverse economic .effects of a
<br />plan that are not reflected in market
<br />prices of project inputs. They result
<br />when prOVision of goods and services for
<br />'one group necessarl.ly results in an un-
<br />desirable etfect or disservice for another
<br />group. For example, the return flow from
<br />an irrigation project may create a salin-
<br />ity condition for downstream water
<br />users, forcing them to adopt higher cost
<br />water treatment practices. These adverse
<br />effects (external diseconomies) are not
<br />compensated, yet they should be taken
<br />into account when deciding on the de-
<br />sirability of a. plan.
<br />Another type of external diseconomy
<br />may occur if the plan has the direct effect
<br />of reducing the output ot some flrms in
<br />the project area, and this reduction
<br />causes flrms that are linked to the di-
<br />rectly affected :firms to become less em-
<br />dent in their operatIon. For example,
<br />the reduction in output by a group of
<br />firms which have their output processed
<br />by another flrm may result in an Inem-
<br />c1ent operation by the processing flrm.
<br />A third type ot external diseconomy
<br />may occur 11 the plan has an adverse
<br />direct effect on the consumption by In-
<br />dividual consumers. For example, if a
<br />plan is instrumental in increasing con-
<br />gestion or pollut.ion which results in in-
<br />creased costs to the consumers, this effect
<br />should be taken into accouht in plan
<br />evaluation.
<br />2. Measurement 01 adverse efJects-a.
<br />Resource requirements 01 the plan. Re-
<br />source requirements of the plan are the
<br />sum of the- market values of the goods
<br />and services used for installations; in-
<br />terest during construction; operatlon,
<br />maintenance, and replacement; and in-
<br />duced costs as defined below.
<br />Installation costs are the market values
<br />of goods and services necessary to imple-
<br />ment a plan and pI""" It In operatlon,ln-
<br />cluding management and organizational
<br />
<br />;,.
<br />
<br />FEDERAL REGISTER, VOL. 36, NO. 245_TUESDAY, DECEMBER 21, 1971
<br />
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