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Press Release

    Comments on Aviation Noise Abatement Policy 2000

    10/24/2000

    Submitted to:
    Office of the Chief Counsel
    Federal Aviation Administration
    Attention: Rules Docket (AGC-200)
    Docket Number [30109]
    800 Independence Avenue, S.W.
    Washington, D.C. 20591

    Comments on:
    Aviation Noise Abatement Policy 2000
    July 14, 2000 (65 FR 43802)

    Submitted by:
    Wayne T. Brough, Ph.D and Jason M. Thomas

    On behalf of:
    Citizens for a Sound Economy Foundation
    1250 H Street, NW Suite 700
    Washington, D.C. 20005

    Comments on:
    Aviation Noise Abatement Policy 2000
    July 14, 2000 (65 FR 43802)

    Citizens for a Sound Economy Foundation (CSE Foundation) is a non-profit, 501 (c)(3), non-partisan research and education foundation. For more than fifteen years, CSE Foundation has been educating consumers and the policy community about market-based solutions to public policy problems. CSE Foundation respectfully submits the following comments to the Federal Aviation Administration’s (FAA’s) docket, “Noise Abatement Policy 2000.”

    It is clear that aircraft noise is a source of grief to Americans who reside near airports. Although CSE Foundation recognizes that some individuals may have seen their property values diminish as a result of airport development, on the whole we believe that air travel provides significant benefits to all consumers. Attempts to implement new noise abatement policies must be judged on both the costs and benefits that such policies may provide. Not only must the benefits of any new policies outweigh their costs, but also the FAA should identify those policies that can achieve their goals at the least cost. According to FAA estimates, only 500,000 Americans are exposed to significant levels of aircraft noise. This number equates to less than 0.2 percent of the nation’s total population. Thus, it is imperative that any policy change designed to benefit such a small minority not come at the expense of all consumers.

    Policy Element 1: Aircraft Source Noise Reduction

    Docket 30109 proposes that the FAA develop and prescribe a new generation of “source noise standards and regulations.” Presumably, these regulations will take the form of mandatory carrier upgrades to the latest in noise reduction technology. According to the docket, this “Stage 4” standard will be set “early in the next century” and be phased in over an undetermined timeframe.

    Notably, the cost of such regulation is not mentioned anywhere in the docket. In addition to the traditional cost on the business, in this case airlines and air cargo providers, and their consumers, this regulation has the potential to dramatically affect the economy as a whole. Few industries are as important to consumers in a globalized economy as passenger air travel and air cargo transport. Evaluating noise reduction standards such as the new Stage 4 requirements must include the potential costs borne by consumers of both passenger and cargo services.

    The increased average cost of a Stage 4 mandate would have many harmful effects on air passenger service. Beyond the simple increase in price, the cost increase would undo the trend of democratization in air travel. Due to falling airfares, more people are able to fly than ever before. Before deregulation, only half of the American population had flown on an airplane; by 1988, this increased by 25 percent. The increase in airfares caused by Stage 4 regulation would likely cause this number to trend downward.

    According to a common airline fare measure known as the “yield,” airfare has fallen by 37-percent since deregulation.1 This has increased output as measured in number of flights, number of nonstop flights, and number of possible connections. A 1995 study placed the value of this output increase at $10.3 billion dollars annually.2 The value of increased output would be greatly compromised by excessive new Stage 4 standards that increase the costs of air travel.

    New Stage 4 standards also would dramatically increase the average cost of cargo transport service, which tends to rely on older aircraft than the passenger fleet. One study finds that if Stage 4 regulation were instituted today, 77 percent of jet transports would be grounded.3 While no one suggests that the FAA would demand instant compliance, the costs of implementation, even through a timed transition, must be assessed. The costs of new noise standards would likely translate into an increase in shipping costs, which would cause a commensurate decrease in cargo transport. The effect of such a reduction would be an increase in the inventory costs of American business.

    Due to the growth in air cargo transport, U.S. businesses have been able to reduce inventory costs by establishing “just in time” inventory systems. When added to the many other logistical improvements facilitated by air cargo, American businesses have saved $107.2 billion since 1986.4

    Inventories are needed to protect business from running out of items. When emergency transport, such as air cargo, is not available, or unaffordable, the business must have a larger inventory. Similarly, the longer a business must wait for a shipment from a supplier, the more inventory it must hold to ensure that its orders are filled in the interim. Increased expenses due to larger inventories will include the cost of increased storage space, interest costs for the duration the product is stored, insurance costs, and the cost of additional labor for inventory maintenance. These are costs that must be considered when evaluating the economic impact of any new standards.

    As the economy shifts toward more remote sales, these inventory savings will be of even more importance. According to one estimate, business-to-business commerce over the Internet will account for over 1.2 trillion dollars.5 Dramatic cost increases as a result of Stage 4 regulations could strangle this growing sector of the economy.

    Policy Element 5: Land Use Planning and Zoning

    The Community and Environmental Needs Division (CEND), APP-600 Part 150 unambiguously states that zoning and land use issues are the province of local government, airport operators, and quasi-government entities such as planning boards. Docket 30109 states that the FAA will “assist State and local governments in establishing polices and practices to minimize noise sensitive land uses.”

    Such “assistance” may prove troubling. Too often assistance leads to “best practices,” which lead to some sort of standard, which, invariably, leads to an administrative law. Under Part 150, the FAA was to provide local authorities with enough scientific and technical information, “to prepare and execute appropriate noise compatibility planning and implementation programs.”(emphasis added) According to Part 150.5 of the CEND, local authorities are entrusted to determine what is appropriate:

    Responsibility for interpretation of the effects of noise contours upon subjacent land uses, including the relationship between noise contours and specific properties, rests with the sponsor or with other state or local government.6
    The docket seems intent to change this understanding. Beginning with the third paragraph of Policy Element 5’s “Discussion” section, the docket attempts to spell out one “best practice” after another: “It is important for (local authorities) to undertake” this, “The FAA encourages” and “the FAA further encourages” that. This is not local control and decision-making, but rather federal fiat carried out by local institutions. Such potential changes may raise concerns that the federal government may be imposing unfunded mandates on state and local governments. Such issues must be reviewed to ensure compliance with Title II of the Unfunded Mandates Reform Act of 1995.

    Policy Element 6: Areas with Unique Noise Sensitivities

    However well intentioned, any policy that aims to give special consideration to lands and peoples based on the ambiguous notion of “unique sensitivities” will lead to unequal application of the law.

    According to the docket, “the Secretaries of Transportation and the Interior are jointly reviewing the environmental and safety concerns resulting from park overflights.” This “joint review” is unfortunate because of the premium it places on the protection of public land. The Secretary of the Interior can leverage for special consideration, whereas owners of private parks, refuges, and preserves—who use their land for the same purposes—will incur the increased traffic that Policy Element 6’s re-routing will likely cause.

    Conclusion

    The FAA’s “Noise Abatement Policy 2000” has the potential of imposing significant costs on consumers throughout the country. Directly, new Stage 4 noise reduction standards can increase the cost of air travel for all consumers. Indirectly, the costs of moving goods and services may also increase due to the new standards. Accordingly, CSE Foundation recommends that no new standards should be proposed prior to conducting a through Regulatory Impact Analysis that will identify the costs of any new standards. The analysis must include not only the losses to air passengers, but also the losses to businesses and consumers due to changes in the costs of carrying and transporting inventory.

    Given the broad scope of the proposed policy on noise abatement, it is also important to consider other impacts of the regulation as well. Some of the policies may expand the FAA’s role in activities traditionally left to state and local governments. All proposals must be evaluated in terms of compliance with Title II of the Unfunded Mandates Reform Act of 1995.

    Respectfully submitted,

    Wayne T. Brough, Ph.D.
    Chief Economist

    Jason M. Thomas
    Policy Analyst

    1 Crandall, Robert and Ellig, Jerry, “Economic Deregulation and Customer Choice: Lessons for the Electric Industry.”
    2 Morrison, Steven and Winston, Clifford. The Economic Effects of Airline Deregulation. Washington: Brookings Institution, 1985.
    3 Beyer, Morten S. Comment to Rules Docket 30109. Morten Beyer & Agnew, August 14, 2000.
    4 McFarland, Henry B. “The Economic Importance of the All-Cargo Air Carriers.” Economists Incorporated. July 2, 1998
    5 Bruce, Donald and Fox, William F. “E-Commerce in the Context of Declining State Sales Tax Bases.” February 2000
    6 Part 150- Airport Noise Compatibility Planning (http://www.faa.gov/avr/AFS/FARS/far-150.txt)