Download Economic Impacts of Critical Habitat Designation

AREC 551
Economic Impacts of Critical Habitat
Designation for Oregon Chub
(oregonichthys crameri)
Chris Cusack
Judith Dempsey
Biao Huang
Taeyoung Kim
Caiwen Wu
June 4th, 2009
Objective
• This project will investigate the potential
economic impacts of designating critical
habitat for the Oregon Chub on the
commercial, agricultural, industrial, and
recreational sectors, over and above those
impacts already made by its classification as
an endangered species.
Overview
• Oregon Chub – description and background
• Endangered Species Designation vs.
Critical Habitat Designation
• Economic Analysis
• Conclusion
Introduction
• The Oregon Chub is a small, minnow-like fish
which favors backwaters with little or no
current, silty and organic substrate, and ample
vegetation for hiding.
Historic habitat
• The Oregon Chub is endemic to the
Willamette valley of Western Oregon.
• They were formerly distributed throughout
the Willamette River Valley in a dynamic
network of off-channel habitats.
Changes in Habitat Conditions
• Alterations in natural flow conditions:
– Dams (for flood control and hydropower generation)
– Fill and removal activities
• Decline in Water Quality
– Siltation from logging
– Pesticide runoff
• Introduction of non-indigenous species
Invasive Species
• Consume resources essential to existence of
Oregon Chub
• Directly prey on Oregon Chub
• Difficult to monitor or remedy
Historic Distribution of Oregon Chub in the Willamette River Basin
Source: Markle 1991/Oregon Chub Recovery Plan
1998 Distribution of Oregon Chub in the Willamette River Basin
Source: Oregon Chub Recovery Plan
Oregon chub potentially occurs in these Oregon counties:
Benton, Lane, Linn, Marion, and Polk county.
(Map may reflect historical as well as recent sightings)
Source: http://www.fws.gov/oregonfwo/Species/Data/OregonChub/
Endangered Species Act (ESA)
• Purpose:
– protect and recover imperiled species and the
ecosystems upon which they depend.
• Endangered species:
– any species which is in danger of extinction
throughout all or a significant portion of its range.
• Threatened species:
– any species which is likely to become an endangered
species within the foreseeable future throughout all
or a significant portion of its range.
(http://www.fws.gov/endangered/pdfs/esaall.pdf)
Criteria Used to Evaluate
the Listing of A Species
1) Damage to, or destruction of, a species’ habitat;
2) Overutilization of the species for commercial,
recreational, scientific, or educational purposes;
3) Disease or predation;
4) Inadequacy of existing protection; and
5) Other natural or manmade factors that affect
the continued existence of the species.
Critical Habitat
• Critical Habitat can include areas occupied by the
species, or those that are outside the geographical area
occupied by the species at the time it is listed, but
determined to be essential for the conservation of the
species.
• Critical habitat may be established for species now
listed as threatened or endangered and for which no
critical habitat has previously been established .
• Critical habitat generally does not include the entire
geographical area which can be occupied by the
threatened or endangered species.
ESA and the Oregon Chub
• The Oregon chub was listed as endangered in
1993.
• A recovery plan was published in 1998.
• A 5-year review was published in 2008.
• Currently, there is a proposal to designate Critical
Habitat for this species.
• On May 15th , 2009, the Oregon Chub was down
listed from “endangered” to “threatened”.
Consultation Costs
• Every analysis or project includes consultation
costs.
• Consultation costs are a significant portion of
overall costs (total percent will vary).
• Assumption: all calculations include
consultation costs.
Impacted Activities
• Dams and Reservoir operations:
– Hydropower
– Recreation
• Logging
• Agriculture
• Property development
– commercial/ residential/ industrial
• In-stream activities
– dredging
Dams and Reservoirs
• Economic Impacts
– Hydropower
– Recreation
• Calculations
– Opportunity costs of power generation
– Opportunity costs of recreation
Hydropower Dams in Willamette Basin
Dams
# of
Power Generated
Generator Power
s
Total
Storag
e
Mwatt hrs.
Acrefeet
Unit
Big Cliff
1
Detroit
46,352
Proj.
Cost
Millio
n
$
N.A
62.7
2
393,539 455,100
62.7
Hills
creek
2
164,791 355,500
46
Foster
2
104,956
60,700
82.3
Green
Peter
2
235,961
28,100
82.3
Lookout
Point
3
297,325 455,800
88.2
Dexter
1
Cougar
2
87,797
N.A
88.2
172,171 219,000
54.2
Opportunity Cost of Reduction of
Hydropower Generation
• Suppose hydropower generation is the function
of water storage volume:
gl  gl (Vl ),
l
• Then it will be reduced by:
HG  gl (Vl )  gl ((1   )Vl ) , where α is % reduction.
• The total loss in hydropower generation per
year willL be:
C ( AH )   p[ gl (Vl ) gl ((1   )Vl )]
l 1
–p: electricity price ($/mwh);
–r : discount rate.
Recreational Reservoirs in Willamette Basin
# of
Recreation
Areas
Avg. yearly visits
Total Storage
Proj.
Cost
Fern Ridge
5
768,000
116,800
6
Cottage Grove
5
417,000
32,900
3.3
Detroit
7
735,000
455,100
62.7
Dorena
5
343,000
77,600
14
Dexter
2
321,000
N.A
88.2
Blue river
3
66,000
89,500
32
Cougar
6
64,000
219,000
54.2
Fall Creek
5
269,000
125,000
22
Hills Creek
5
109,000
355,500
46
Foster
6
590,000
60,700
82.3
Green Peter
3
230,000
28,100
82.3
Lookout Point
6
97,000
455,800
88.2
Opportunity Cost of Recreation
• User expenditures (UE) for reservoir i:
UEi  MSi Vi  Ei
– MSi : No. of people visiting
– Vi : Average annual household visitation frequency
– Ei : Individual daily user expenditure for reservoir i.
• Linear regression model:
FV  a  bWL
– FV : frequency of visitation;
– WL : water level in mean feet;
– b : change in visitation for each one-foot change in WL.
Opportunity Cost of Recreation (Cont.)
• Total user expenditure per year due to a
decrease in reservoir water level of Willamette
river basin:
13
C ( AR )  UEi 
i 1
b
Vi
where (b/V) is a percentage reduction in visitation.
Logging
• Oregon Chub thrive in small tributaries.
• Activities such as logging lead to siltation,
filling in these habitats.
• Under Critical Habitat, logging practices must
be altered:
– reduction in total area;
– more stringent controls leading to reduced yield.
Opportunity Cost of Logging
• Logging profit function:
i
–
–
–
–
–
 ( p  hc)qi Ai  RCi i
qi : total timber harvest per acre;
P : timber price;
hc : harvest cost;
Ai : area;
RCi : replanting cost.
• If logging is required to be reduced by a (0<a<1) , then
the associated profit loss for unit i would be:
 i  a( p  hc)qi Ai
i
I
• Total profit loss per year is: C ( AL )   a( p  hc)qi Ai
i 1
Opportunity Costs of Agriculture
• Production reduction by changing farming
practice.
• Runoff control cost from:
– applying alternative materials;
– changing irrigation method;
– leaving alternate uncultivated;
– Conservation tillage.
• So, the total profit loss per year C ( AA ) is from:
– production reduction;
– additional runoff control cost.
Other Costs
• Property Development:
– Future development may be reduced;
– Existing structures not impacted;
– Federal Permits/Safe Harbor Agreements.
• In-stream activities:
– Must maintain habitat;
– Impacts uncertain;
– Changes from the natural state may make the
habitat more sensitive to invasive species.
Aggregate Costs
• The expected present value of aggregate costs
of the Oregon chub critical habitat designation
for the future 20 years:
 N

Pr(Ci )C (Ci )  Pr(Ci ) Pr( Ai )C ( Ai )  
20   
i 1



t
(1  r )

t 0 




– Ci : consultation for activity i,
– Ai : the i th activity.
Oregon Chub vs. Salmon
• Salmon is a high-profile case:
– Listed earlier than chub;
– More recreation and economic activities
associated with salmon.
• Difficult to split costs.
• Due to existing protection, many impacts of
Critical Habitat designation for the Oregon
Chub will come from land use in isolated,
specific areas.
Benefits
• Benefits are difficult to determine:
– Contingent valuation;
– Impacts on other species;
– Other environmental benefits.
• Assumption:
– While the costs of Critical Habitat Designation are
potentially high, the expected benefits outweigh
the costs.
Conclusion
•
•
•
•
Costs have the potential to be high.
Costs spread through many sectors of economy.
Local impacts relatively high.
Additional overall impact may not be significant
due to existing protections afforded to Salmon.
Willamette River – Past and Present
Source: Sedell and Froggatt 1984/Oregon Chub Recovery Plan.