The Case of the Lower Snake River Dams Adam Domanski, Ph.D Senior - - PowerPoint PPT Presentation

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The Case of the Lower Snake River Dams Adam Domanski, Ph.D Senior - - PowerPoint PPT Presentation

Dec 05, 2023 358 likes •657 views

Econom nomic ic Tools ls for Envi vironmen onmental l Goods ds The Case of the Lower Snake River Dams Adam Domanski, Ph.D Senior Economist Background Four hydropower dams constructed from 1955 to 1975: Generate ~1,000 MW of

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SLIDE 1

Econom nomic ic Tools ls for Envi vironmen

  • nmental

l Goods ds The Case of the Lower Snake River Dams

Adam Domanski, Ph.D Senior Economist

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SLIDE 2

Background

2

Four hydropower dams constructed from 1955 to 1975:

  • Generate ~1,000 MW of electricity
  • Locks allow barge transportation upstream to Lewiston, Idaho
  • Irrigation withdrawals
  • Reservoir based recreation
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SLIDE 3

Research Questions

3

  • 1. Do the economic benefits of a world without

the LSRD exceed the cost of getting there?

  • 2. How would the regional economy respond to

removal of the LSRD? Topic Areas:

  • Grid Services
  • Irrigation
  • Transportation
  • Ecosystem Services
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SLIDE 4

Benefit Cost Analysis - Results

4

Benefits of dam removal exceed the costs

Net Benefits and Costs of LSRD Removal, by Category

  • $2.21
  • $1.08

$1.04 $2.32 $8.65

  • $4
  • $2

$0 $2 $4 $6 $8 $10 $12 Grid Services Dam Removal Irrigation Transportation Use Value Potential Non- Use Billion, PV 2.75% Break Even Non-Use Value → Surplus Non-Use Value

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SLIDE 5

Reaction

5

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SLIDE 6

Approach

6

Scenario

  • Dams removed in 2025
  • Benefits/costs evaluated through 2045

Methodology

  • Use best available quantitative information
  • Results reported as net present value
  • 2.75% discount rate (Bureau of Reclamation)
  • 7% discount rate (Office of Management and Budget)
  • Incorporated uncertainty into analysis
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SLIDE 7

Grid Services

7

  • 60,000

120,000 180,000 240,000 300,000 360,000 10 20 30 40 50 60 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 Output (MWh) Prices ($/MWh) Week Output (MWh) Price ($/MWh)

Price of power is low when output is high

LSRD Output and Real Prices, by Week, 2014-2018

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SLIDE 8

Grid Services

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  • Market values for

ancillary services & capacity inferred from CA

  • Carbon emissions for

replacement power in CA; EPA carbon values

  • High value assumes

clean energy replacement portfolio

Annual Values for LSRD ($millions) Medium High: "Balanced Plus" Energy $202.40 Ancillary Services $3.00 Capacity $17.40 T

  • tal

Value of Grid Services $222.70 $464.00

  • $4
  • $3
  • $2
  • $1

$0 $1 $2 Grid Services Value CO2 Cost BPA Overhead LSRD Fish Mitigation Annual O&M Capital Costs Billion, PV 2.75%

Value of grid services exceeds production costs

Grid Services Costs and Savings from LSRD Removal, by Category Annual LSRD Grid Services Value, by Component

*

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SLIDE 9

Irrigation

9

  • 41 surface water

withdrawals

  • 84 potentially affected

groundwater wells

  • LSR not a major region

for irrigated agriculture

  • Any additional water

moving downstream likely still used by WA agriculture

Limited water withdrawals from the LSR

Irrigated and Non-Irrigated Agricultural Land in the LSR Basin

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SLIDE 10
  • Cost to replace irrigation infrastructure due to

change in water level:

  • Surface diversions: $148 million
  • Groundwater wells: $12 million
  • Unlikely all would need to be replaced, adapted
  • Opportunities to change farming activities, relocate
  • perations

10

Irrigation

Water supply infrastructure can be replaced

*

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SLIDE 11

Transportation

11

  • Other transport alternatives
  • Rail connections to west coast ports
  • Truck transport to rail and barge

LSR barges primarily carry agricultural products

Average Downriver Barge Volumes, by Commodity and Year

0.5 1 1.5 2 2.5 3 3.5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Short Tons (millions) Total Crude Materials Food & Farm Other

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Transportation

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Barge volumes increase downstream

Average Downriver Barge Volumes, by River Reach

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Transportation

13

500 1000 1500 2000 2500 3000 3500 4000 4500 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Historical Forecast Actual

Barge volumes are below historical forecasts

Historical and Forecasted Barge Volumes on the LSR, by Year

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Transportation

14

If barging services no long available on the Lower Snake River:

  • Additional trucking of commodities to existing railroads

and remaining barging services near Tri-Cities

  • New infrastructure may be needed to support truck

access, loading and transport by rail

  • Drawdown of reservoirs may lead to compromises in

existing transport infrastructure (railroads, highways, bridges)

Dam removal will lead to mode substitution

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SLIDE 15

Transportation

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Infrastructure

  • Mitigation and repair of existing rail, highway, and bridge

infrastructure associated with geotechnical risk

  • New infrastructure to support changing freight modal

demands

  • Damage costs from increased truck traffic

Shippers/Growers

  • Changes in shipping costs due to model shifting

Societal

  • Changes in accident costs
  • Changes in vehicle emissions

Multiple increased costs with dam removal

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SLIDE 16

Transportation

16

  • $200
  • $150
  • $100
  • $50

$0 $50 $100 $150 $200 $250 $300 Transportation Costs Crash Costs CO2 Costs Road Wear and Tear Emissions Costs Reduced Federal Appropriations Million, PV 2.75%

Increased costs do not offset Federal appropriations

Transportation Costs and Savings from LSRD Removal, by Category

*

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SLIDE 17

Ecosystem Services

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Description Status 10 Year Average Adult Returns 2017 Adult Returns Historical Population Sockeye Endangered 1,133 228 150,000 Spring/Summer Chinook Threatened 79,704 36,309 140,000 Fall Chinook Threatened 35,510 26,430 500,000 Steelhead Threatened 158,913 76,798 114,800 Coho Not Listed 4,975 8,178 3,000 Pacific Lamprey Not Listed 79 346 10,000

Wild salmonid populations are at historic lows

Sockeye Chinook Steelhead

Anadromous Fish Populations in the LSR

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SLIDE 18

Ecosystem Services

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  • Increased juvenile downstream survival (reduced predation, reduced

transit time, improved water quality)

  • Increased in-stream spawning habitat for Fall Chinook (currently

inundated)

Dam removal reduces extinction risk

Benefits to Anadromous Fish Populations from LSRD Removal

Effect Result Direct Effect

  • Improved fish passage
  • Decreased migration time for juvenile salmonids
  • New main-stem spawning habitat for fall Chinook
  • Return of LSR to natural river system

Ecological Implication

  • Increased population and reduced extinction risk for

endangered LSR fish stocks Potential Downstream Ecological Effects

  • Increased food supply for endangered Orcas
  • Reduced culling of sea lions, seals, and birds
  • Potential delisting of endangered LSR fish stocks
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Ecosystem Services

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  • A measure of the economic tradeoff that an individual is willing to

make to assure the protection of a natural resource even if they will not visit or use the resource (Carson 2012)

  • Not revealed by choices in the marketplace (unlike many local

public goods) (Krutilla 1967)

  • Must be measured using stated-preference survey-based

approaches (Bowen 1943; Ciriacy-Wantrup 1947)

  • Stated preference surveys as questions that help to reveal the

monetary tradeoff an individual would make concerning the value

  • f goods or services

Non-use values represent social value for salmonids

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SLIDE 20

Ecosystem Services

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  • 60% of of the estimates in the Environmental

Values Reference Inventory (maintained by Environment Canada and the U.S. EPA) come from contingent valuation surveys

  • U.S. EPA estimates of the benefits of the Clean Water Act (1994) are derived from

contingent valuation surveys

  • Pennsylvania used contingent valuation in a benefit-cost analysis of additional incarceration

versus rehabilitation programs for serious juvenile offenders (Nagin et al, 2006)

  • Used to measure the value of developing vaccine policies in Africa (Jeuland et al, 2009)
  • Measured willingness to pay higher water tariffs for less river pollution in Fuzhou, China

(Jiang et al, 2011)

  • Measured willingness of the U.S. public to pay for climate change measures (Aldy et al,

2012)

  • Used to estimate natural resource damages in the Exxon

Valdez oil spill (1989), Montrose Chemical contamination (2000), Oklahoma v Tyson (2010), Deepwater Horizon (2010)

  • Used to evaluate the benefits of dam removal on the Elwha River (USBOR & NPS, 1996;

NOAA 2012) and the Klamath River (USBOR 2012).

Non-use values are regularly used in policymaking

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SLIDE 21
  • DC Circuit Court of Appeals: “option and existence values may represent

'passive' use, but they nonetheless reflect utility derived by humans from a resource, and thus, prima facie, ought to be included in a damage assessment." (Ohio v DOI,1989 )

  • CERCLA: Compensable value includes “all of the public economic values associated

with an injured resource, including use values and nonuse values such as option, existence, and bequest values.” (56 FR 19760, 1991)

  • NOAA: “well conducted CVM studies can produce estimates reliable enough to be the

starting point of a judicial process of damage assessment, including lost passive values” (Arrow et al, 1993)

  • USBOR: “The state of the natural environment affects people both in how they use the

environment and how they would prefer the environment to be. Thus, both use and non- use values need to be considered when assessing impacts to the human environment.” (Glen Canyon Dam EIS, 1996)

Ecosystem Services

21

Corps of Engineers has a minority opinion

  • USACE: “Contingent value procedures (survey techniques) for estimating existence,

“option”, bequest, or other such non-use values will not be approved, and shall not be used, due to several factors including the conjectural nature of estimated values and the high difficulty in controlling bias." (USACE 2000)

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SLIDE 22

Ecosystem Services

22

Study Scenario Population PV 2.75% Mean Annualized HH WTP PV 7% Mean Annualized HH WTP Mansfield et al. 2012 Reduce the extinction risk for Klamath River Coho from “high” to “moderate” Klamath Basin $40.72 $30.66 Rest of Oregon and California $45.14 $34.00 Rest of U.S. $34.71 $26.13 Wallmo and Lew, 2012 Recover Puget Sound Chinook salmon within 50 years U.S. $21.53 $18.94 Down-list Southern Resident Killer Whales within 50 years U.S. $27.06 $23.81 Recover Southern Resident Killer Whales within 50 years U.S. $39.60 $34.83 Save Our Wild Salmon, 2018 Remove LSRD and protect wild salmon - willing Washington State $46.44 $34.98 Remove LSRD and protect wild salmon – very willing Washington State $33.94 $25.56

Multiple studies measured non-use values for salmon

Relevant Studies for Measuring Non-Use Value Gains from LSRD Removal

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SLIDE 23

Ecosystem Services

23

Non-use value estimate derived from 2018 survey

Distribution of WTP from 2018 Survey

0% 10% 20% 30% 40% 50% 60% 70% 80% $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 Percent Voting Yes Dollars Per Month "Somewhat Willing" "Very Willing"

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SLIDE 24

Ecosystem Services

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Should non-use values extend to households beyond the five-state region to the nationwide population (as identified in the Mansfield et al. (2012) and Wallmo and Lew (2012) studies), these net present values would be approximately 6.5 times larger.

Source Range Households PV 2.75% PV 7% Save Our Wild Salmon, 2018 Low 18,058,492 $11,169,351,000 $4,931,266,000 Save Our Wild Salmon, 2018 High 18,058,492 $15,284,376,000 $6,748,048,000

Mean household WTP per month: $3.42 to $4.68

Estimated Non-Use Value for LSRD Removal from 2018 Survey

*

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SLIDE 25

Benefit Cost Analysis

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Net Costs:

  • Lost Grid Services Value
  • Dam Removal Costs
  • New Irrigation Infrastructure

Net Benefits:

  • Transportation Cost Savings
  • Recreational Use Value
  • Non-Use Values

Grid Services Dam Removal Irrigation Trans. Recreation Potential Non-Use T

  • tal

New Costs $ (2.95) $ (1.08) $ (0.17) $ (0.10) $ (4.30) Reduced Costs $ 2.20 $ 0.26 $ 2.46 Public Benefits $ (1.45) $ (0.07) $ 1.04 $ 10.97 $ 10.49 T

  • tal

$ (2.21) $ (1.08) $ (0.17) $ 0.09 $ 1.04 $ 10.97 $ 8.65

Benefits of dam removal exceed the costs

Net Benefits and Costs of LSRD Removal, by Category

Net Benefits and Costs of LSRD Removal, by Category

  • $2.21
  • $1.08

$1.04 $2.32 $8.65

  • $4
  • $2

$0 $2 $4 $6 $8 $10 $12

Grid Services Dam Removal Irrigation Transportation Use Value Potential Non- Use

Billion, PV 2.75% Break Even Non-Use Value → Surplus Non-Use Value

*

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SLIDE 26

Economic Impacts

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Employment Gains:

  • Environmental/technical

consulting

  • Construction of power

structures

  • Nonresidential construction
  • Truck transportation
  • Restaurants

Employment Losses:

  • Nonresidential

maintenance/repair

  • Federal Electric Utilities
  • Local Electric Utilities
  • Support Activities for

Agriculture

  • Grain Farming

Impact Type Average Annual Job-Years Labor Income Value Added Output Direct 202 $289,880,000 $324,544,000 $227,968,000 Indirect 16 $6,265,000 ($41,536,000) ($83,439,000) Induced 99 $112,207,000 $208,620,000 $360,632,000 T

  • tal

317 $408,352,000 $491,629,000 $505,160,000

Dam removal is a net positive regional impact

Summary of Economic Impacts

*

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SLIDE 27

Bottom Line

27

Economic Evaluation Supports Dam Removal

  • Conversations about removal should focus on household

willingness to pay higher utility prices for ecological benefits

  • Transportation and Irrigation are minor components

Distributional Effects Matter

  • Portions of the population may be worse off
  • Efficient economic outcome requires mitigation of losses

E.I.S. is likely to recommend keeping the dams

  • Corps of Engineers does not include non-use values in BCA
  • Non-use values reflect the true benefits of dam removal
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