by Joel Hamilton

Joel Hamilton, UI agricultural economist, is chair of the eight-member Independent Economic Analysis Board appointed by the Northwest Power Planning Council to advise it on the economics of fish and wildlife recovery issues in the Columbia River Basin. The board recently reviewed the economics portion of a preliminary U.S. Army Corps of Engineers analysis of salmon recovery alternatives for the lower Snake River.

Eight years ago the first stocks of Columbia/Snake River salmon were declared endangered under the Endangered Species Act. Ever since, the region has struggled to formulate recovery plans. The decision process is now reaching a critical point, with the U.S. Army Corps of Engineers (the major dam-operating agency on the river) struggling to complete a study of recovery options by spring 2000, when the National Marine Fisheries Service is supposed to complete a fish recovery plan.

The corps' study addresses one of the prerequisites for salmon recovery: more juvenile salmon must survive their downstream migration over, through, or around eight dams on their ways to the ocean. The study's particular focus is the four lower Snake River dams, Lower Granite, Little Goose, Lower Monumental, and Ice Harbor.

The study poses three main alternatives: (1) flow augmentation to flush the juveniles more quickly through the slack-water pools behind the dams, (2) improved fish collection facilities and maximum use of barges to transport young fish around the dams, and (3) dam breaching to return the river to a more natural and, hopefully, more fish-friendly state. The corps' study is a massive attempt to address all important impacts of the alternatives. This article highlights a few of the more important economic issues.

Hydropower

Lost hydropower would be among the main impacts if the dams were breached, and one of the most straightforward parts of the analysis. The models that describe how the hydropower system works are believable, and the federal agencies are getting quite good at using these models to estimate electric system impacts of alternative fish recovery plans. The four lower Snake dams account for about 5 percent of hydropower generation in the region. In addition to the value of the energy itself, the dams have value for their contribution to system capacity, system stability and reliability, and transmission capability. The corps' analysis estimates the total of these breaching scenario costs at between $250 and $300 million per year. Most is the estimated cost of replacing lost hydropower with combined cycle natural gas turbines.

It is, however, very difficult to predict how this would translate into costs felt by Northwest electricity users. That depends on how these and other salmon recovery costs are allocatedÑand whether the costs can be passed back to consumers in our increasingly privatized energy market. Indications are that the electricity costs of salmon recovery through dam breaching would be a few dollars per month on household electricity bills. To put that in perspective, the cost of Northwest electric system deregulation could be much larger.

Water Supply

Dam breaching would disrupt a number of water supply systems that pump from the four lower Snake reservoirs, including a backup municipal water pump at Lewiston, a Potlatch Corporation water pump, and several irrigation supply pumps at golf courses and wildlife sites along the river. The corps' study estimates the costs of modifying these pumps to draw from the natural river rather than from the reservoir surfaces.

Dam breaching would also affect pumps that supply irrigation water from Ice Harbor pool to 13 Oregon farms irrigating about 35,000 acres of vineyards, orchards, hybrid poplars, and ordinary crops. Corps engineers have concluded that shifting banks and silt load would prevent relocating these pumps adjacent to a new, natural river for several years.

One alternative is a single pumping plant located at a secure point upriver at a cost of $290 million, or $8,300 per irrigated acre. Concluding that this would be economically infeasible, however, the corps is looking instead at the cost of buying out the farms, at a cost of about $143 million.

The corps' $10 million to $17 million annualized cost estimate under dam breaching includes both the municipal and industrial pump modification costs and the cost to buy the 13 farms. While this item is very important to the affected individuals, it is not one of the big ticket items that will determine whether or not the corps decides to recommend breaching the dams.

Another water supply issue arises from the alternative where the dams stay in place, but 1 million acre-feet of water is secured from southern Idaho to augment the 427,000 acre-feet included under present practices. Increasing Snake River flows means decreasing existing consumptive water uses by the same amount, in other words, irrigation use.

The Bureau of Reclamation estimated it might cost $13 million to $102 million per year to secure this water from willing seller farmers. While farmers, as willing sellers, would presumably consider themselves better off, the bureau concluded the cost of the reduced farming activity to the rest of the southern Idaho economy would be $46 million to $210 million per year.

Navigation

Ever since dam breaching first surfaced as a possibility, the impact of curtailed barge navigation has provoked controversy. A significant portion of grain from this region travels by truck to a river port, then by barge to Portland. The waterway also carries wood chips, logs, and paper products downriver, and petroleum and fertilizer upriver. The corps estimates that with the dams breached, shipping these products by alternative means would cost the transportation system $30 million to $40 million more per year.

These kinds of figures always cause navigation interests to shake their heads in disbelief. Farmers worry that if barges disappear, railroads and truckers will use that as an excuse to raise rates. Under the rules for these kinds of studies, however, these increased rates are "transfers" from farmers to shippers, not increased costs to the system. Such transfers are included elsewhere in the corps' analysis, but they carry less weight in the decision making process of federal agencies. Given the intense local concern over navigation issues, it will be interesting to see how the corps handles this in the final report.

Recreation

Recreation impacts involve the difficult question of whether the recovery measures will actually help the fish. Early on, the federal agencies brought together scientists expert in modeling fish river passage and survival. This PATH group was asked to reconcile their models and predict the impacts of alternative river operations on the fish.

This task proved more difficult than expected, and the resulting uncertainty affects all parts of the corps' study that depend on fish numbers. After a great struggle, PATH concluded that several endangered/threatened fish stocks were more likely to achieve recovery if the dams were breached than under any of the other alternatives.

Recreation will occur with or without the dams, but breaching would force an adjustment from reservoir recreation to natural river recreation. The nature of this recreation depends on whether there will be fish to catch, and how many. The corps concludes that if salmon recovery does result in catchable numbers of fish in our rivers, the world will beat a path to our door to catch them, enriching the regional economy. However, PATH's tepid conclusion makes it very difficult to estimate numbers of catchable fish under each alternative.

The corps seems to be concluding that dam breaching would produce more catchable fish than the other alternatives. This suggests breaching could increase both sport fishing and other natural river recreation benefits compared to present slack water conditions. It is not clear how big the difference will be.

Many economists argue that rare things, Rembrandts, spotted owls, pandas, have value just because they exist even if they are not "useful." Would the increased length of natural river created by dam breaching have existence value? Do Snake River salmon have value if we can keep them from extinction, even if we can't achieve catchable numbers? The corps will include some existence values in their report, and they may be very large.

Commercial and Tribal Harvest

Today the commercial salmon fishing industry is in trouble from all sides. There are few fish to catch, and the catch is not worth much at prices depressed by fish farming. The differences in commercial salmon value associated with the recovery alternatives should not be large, and are unlikely to be a big factor in decisions about salmon recovery.

Other Costs of Implementation

Several other costs should be mentioned. For example, collecting as many juvenile fish as possible at the upper dams and transporting them in barges or tanker trucks to below Bonneville Dam on the Columbia River will require collection and transport facilities with an annualized cost of $5 million to $7 million. Dam breaching would incur annualized costs of $34 million to $64 million to decommission the dams, remove their earthen sections, and shore up bridge piers and other structures.

Conclusions

The important factors to watch for when the Army Corps of Engineers releases its study are the cost estimates for hydropower, the cost of Snake River flow augmentation, the benefit estimates for recreation, and the existence value estimates for salmon and a natural river. These will be the big ticket items, big enough to swamp the effects of most other factors.

Results available so far suggest the study will conclude that breaching is most likely to achieve fish recovery, may result in very large recreation and existence values, but will have high costs due to lost hydropower and politically sensitive navigation impacts. The study may also conclude that flow augmentation and fish barging are less likely to achieve recovery, but are still very costly.

Any decision must ultimately be a political one. Economics will be just one set of information affecting the decision, along with legal factors, tribal treaty responsibilities, and fundamental feelings about the role of man in nature.

Learn more on the Internet

Northwest Power Planning Council http://www.nwppc.org/

U.S. Army Corps of Engineers Lower Snake Study http://www.npw.usace.army.mil/