Bay Journal

Studies aim to put a figure on cost of cleanup, benefits of better Bay

EPA promised review after criticism from Congress

  • By Karl Blankenship on September 01, 2011
  • Comments are closed for this article.
The benefits study shouldn't estimate the current value of fishing in the Bay but should put a value on the improvement in fishing that might take place if nutrient pollution were reduced.  (Dave Harp)

People often use nebulous terms like "priceless" and "national treasure" to describe the Chesapeake, but a new effort is under way to put the cost of cleaning the Bay, and the benefits of doing so, in cold, hard cash.

The EPA has launched a pair of studies. One is aimed at establishing the cost of implementing the Bay's "pollution diet," or total maximum daily load. The other is aimed at establishing the benefits of restoring water quality in the nation's largest estuary.

The efforts stem from repeated criticism of the agency for not doing a cost-benefit study in conjunction with the TMDL - something it was not required to do under the Clean Water Act. Nonetheless, under hostile questioning from several members of Congress during a hearing earlier this year, EPA Deputy Administrator Bob Perciasepe promised to estimate the cost of the cleanup, as well as its benefits.

Both jobs will be tough, but economists say estimating cleanup costs will be the easier task.

The initial step is trying to establish the costs of various nutrient control actions - such as planting cover crops or planting a streamside buffer - and how those costs may vary from place to place.

When states complete new cleanup plans next spring, which will describe more precisely all the local-level actions needed to meet water quality goals, that type of information can help produce a cost estimate. But that's not necessarily the full picture.

One complicating factor is figuring out what should be counted as a Bay cleanup cost. For example, many of the most costly actions in state cleanup plans, including some stormwater improvements as well as upgrading antiquated sewer systems that combine sewage with stormwater runoff, are also required by other regulations or - in some cases - court orders.

Debates over such issues are going on now, said Kevin DeBell, who is leading the cost estimate study for the EPA. "I'm not certain there is a right answer," he said. "We want to make a decision that stakeholders can support, but we certainly understand that in research like this, there is a diversity of opinion."

Ultimately, DeBell hopes to include the full range of expenses, including such things as the cost to states and local governments for writing new regulations and ordinances - which can take a long time to develop. He also hopes to factor in cost reductions that might be achieved through new initiatives such as nutrient trading, and new nutrient reduction technologies that are not widely used but may have great potential.

"It is difficult, there's no question," DeBell said. "But we are reaping as much information and knowledge as possible to incorporate into this work."

Indeed, a number of previous studies have estimated the costs of individual nutrient reduction actions, and several have attempted to put a price on the entire cleanup effort. But so far, each has come up with a higher cost than the previous study.

In 2001, the Chesapeake Bay Foundation estimated that the cost of achieving all Bay goals, from nutrient reduction to oyster restoration to land preservation would cost $850 million a year, over 10 years. About three quarters of that cost was for meeting water quality goals.

The following year, a study by the Chesapeake Bay Commission put the cost of meeting all Bay objectives at $19 billion, with the nutrient reduction goals costing $11 billion to achieve.

Less than two years later, a special Chesapeake Bay Watershed Blue Ribbon Finance Panel estimated it would cost $28 billion in up-front costs to implement state plans to meet water quality goals, plus another $2.7 billion a year in annual operation and maintenance expenses.

Ann Swanson, executive director of the Bay Commission, an advisory panel that represents state legislatures, said any cost study has to be done with care, noting the dramatic cost difference between the commission's study and the blue ribbon panel study.

Part of the reason, she said, was that the commission tried to identify the least-costly methods to meet the goal. The blue ribbon panel was charged with finding ways to raise money for the cleanup effort, so states had an incentive to come up with higher cost estimates.

"I have the feeling that the truth lies somewhere in the middle," Swanson said.

Today, with many people complaining about cleanup costs, Swanson said she is worried that states have an incentive to inflate expenses. "There is such an inclination to show it is excessively expensive, it makes me nervous," Swanson said.

The commission is currently engaged in a new effort to assess how, and whether, nutrient trading might reduce cleanup costs.

The Bay Program's Scientific and Technical Advisory Committee said in a recent letter to the EPA that a cost study could likely be produced in a year or less, but warned it may take twice that long to complete a credible benefits study, which is to be done by the EPA's National Center for Environmental Economics.

While the groundwork for a cost study has been laid by several previous studies, little recent work has been done on the benefits side. The most cited work was a 1989 study by the Maryland Department of Economic and Employment Development that put the economic value of the Bay - from tourism to shipping - at $678 billion. Using that report as a baseline, Bay advocates have put the value of the Bay at $1 trillion.

But the STAC letter said that study was "never peer-reviewed and contains significant errors…No valid conclusions, actions or recommendations can be based on the figures from this report."

Among its problems, economists say, is that it fundamentally asks the wrong question by trying to place a value on the Bay, rather than establish the benefits of cleanup actions.

Saying the Bay is priceless, or worth unrealistically high figures "is a way of arguing without engaging," said Ted McConnell, an economist with the University of Maryland who did economic studies of the Bay for the EPA in the 1980s.

"The issue is not whether you want a clean Bay," McConnell said. "We know to a certain degree we don't want to let it go to rot. But how far do you push it, and how much is it worth? And what is the right trade-off? A well-designed study would get at that."

Determining the benefit of implementing the TMDL requires estimating the incremental economic improvements between the current conditions and the conditions it seeks to restore.

For instance, the benefits study shouldn't estimate the current value of fishing in the Bay - it should put a value on the improvement in fishing that might take place if nutrient pollution were reduced. And that might not be a huge figure, economists warn, as other factors, such as fisheries management, are generally more important in determining fish abundance than water quality improvements - as seen with striped bass and blue crabs, both of which recovered while Bay water quality was considered poor.

"Based on studies of the North Carolina blue crab fishery, it makes a lot more of a difference how you manage the fishery and how you manage the harvest rate than it does to improve water quality," said Maureen Cropper, a University of Maryland economist who recently completed a scoping study for the think tank Resources for the Future about what work might be needed to estimate benefits of the TMDL.

The answer, according to her and others, is quite a bit.

Although some studies have been done that are useful, they are often outdated or small scale. The STAC letter cited a "weak foundation" on which to build a solid study of the benefits of Bay restoration. And, economists warn, it may not produce a figure as high as many imagine.

A recent study of the benefits of cleaning up the Great Lakes by the Brookings Institution found the quantifiable annual values somewhere between $2 billion and $3 billion. Those included such things as increased fish abundance, reduced sedimentation, fewer beach closures, improved water clarity, improved habitats that resulted in more birds and birding, and increased property values. Increased property values from cleaning up "Areas of Concern" accounted for more than half of the benefits.

Economists say the benefits of improving the Bay could still be substantial when all recreational activities and property values are combined, along with things like benefits from cleaning up local streams. If states reduce air pollution to benefit the Bay beyond what is required in the Clean Air Act, that may also produce potentially large human health benefits.

Larger values, economists say, are likely to come from what they call "nonuse" benefits - something not part of the Great Lakes studies. Those are values people place on having a clean Chesapeake Bay even though they may not personally use it - just as people who may never visit Yellowstone National Park may value that it's protected. That's often measured by determining the willingness of people to pay for such perceived benefits of improvements in Bay water quality.

"Those are legitimate values, and tend to be fairly high in total, even if they are small per person," said Doug Lipton, a University of Maryland economist who has a long history of working on Bay issues. "If everyone in the watershed has a small value for the restoration of the Bay, it ends up being a big number."

Such studies are legally defensible, they say, and formed the basis for much of the settlement in the Exxon Valdez oil spill in Alaska in 1989.

"It stands up in court cases," McConnell said. But those studies have to be carefully designed. Past work in this region suggest the values may vary widely by income, race and distance from the Bay. People have to understand trade-offs - money that goes to Chesapeake restoration comes from someplace else.

"It is possible to do a really bad job with nonuse values," McConnell said. "Real good work is needed to keep it credible."

Whatever the costs and benefits turn out to be, Lipton said, it probably won't impact cleanup efforts as the Clean Water Act requires states to meet water quality standards - which is what the TMDL is intended to accomplish.

"It shouldn't change the decision for anything you would do for the TMDL," he said, "but it does provide information for policy discussions about how the Clean Water Act is written and what it requires, which I think is healthy, whatever the results may be from these studies."

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About Karl Blankenship

Karl Blankenship is editor of the Bay Journal and Executive Director of Chesapeake Media Service. He has served as editor of the Bay Journal since its inception in 1991. .(JavaScript must be enabled to view this email address).

Read more articles by Karl Blankenship

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