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<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 />