Estimating the Costs of the 2013 Raetihi Diesel Spill
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Report prepared for the Ministry of Health Estimating the costs of the 2013 Raetihi Diesel Spill Preston Davies, David Moore About Sapere Research Group Limited Sapere Research Group is one of the largest expert consulting firms in Australasia and a leader in provision of independent economic, forensic accounting and public policy services. Sapere provides independent expert testimony, strategic advisory services, data analytics and other advice to Australasia’s private sector corporate clients, major law firms, government agencies, and regulatory bodies. Wellington Auckland Sydney Level 9, 1 Willeston St Level 8, 203 Queen St Level 14, 68 Pitt St PO Box 587 PO Box 2475 GPO Box 220 Wellington 6140 Auckland 1140 NSW 2001 Ph: +64 4 915 7590 Ph: +64 9 909 5810 Ph: +61 2 9234 0200 Fax: +64 4 915 7596 Fax: +61 2 9234 0201 Canberra Melbourne Unit 3, 97 Northbourne Level 2, 65 Southbank Boulevard Ave GPO Box 3179 Turner ACT 2612 Melbourne, VIC 3001 GPO Box 252 Ph: +61 3 9626 4333 Canberra City, ACT 2601 Fax: +61 3 9626 4231 Ph: +61 2 6267 2700 Fax: +61 2 6267 2710 For information on this report please contact: Name: David Moore Telephone: +64 4 915 7593 Mobile: +64 21 518 002 Email: [email protected] Costing the Raetihi Diesel Spill Page i Contents Executive summary ....................................................................................................... v Introduction ................................................................................................................... 1 Understanding the event ............................................................................................... 2 Scoping the population and area ............................................................................................. 2 Timeline ....................................................................................................................................... 5 Categories of impact .................................................................................................................. 8 Approach ..................................................................................................................... 10 Analysis components .............................................................................................................. 10 Impacts on households ............................................................................................... 11 Impacts on businesses ................................................................................................. 12 Impacts on officials/authorities ................................................................................ 12 Impacts on service providers ..................................................................................... 13 Cost calculations ...................................................................................................................... 14 Caveats and assumptions ............................................................................................ 15 Costs to households ($700,000) ................................................................................. 16 Costs to businesses ($55,000) ..................................................................................... 17 Costs to officials/authorities ($1,000,000) ............................................................... 18 Costs to service providers ($60,000) ......................................................................... 19 Ongoing costs ($97,000) ............................................................................................. 21 Intangible effects .......................................................................................................... 22 Appendices Appendix 1 Literature overview ................................................................................... 25 Appendix 2 Interview outline ...................................................................................... 29 Tables Table 1 Household income distribution 3 Table 2 Industry make-up 3 Table 3 Tanks installed 6 Table 4 Costs considered in our assessment 9 Table 5 Interview summary 11 Figures Figure 1 Location overview 4 Figure 2 Order of release of water use types 7 Figure 3 Response function 8 Costing the Raetihi Diesel Spill Page iii Figure 4 Breakdown of cost impacts by broad stakeholder grouping 15 Page iv Costing the Raetihi Diesel Spill Executive summary In late 2013, the town of Raetihi experienced a unique event with wide-ranging and deeply- felt impacts. The town water supply was contaminated with diesel that spilled from a storage tank on nearby Mt Ruapehu. The town water supply was shut down for around four weeks. We were asked to estimate, and where possible, quantify the costs of such a spill using an economic approach. Our findings can be summarised as follows: • It is extremely difficult to quantify and monetise impacts; no firm guidance is provided in the literature, many of the impacts are intangible and/or absorbed into “everyday life”. • Estimates presented relied on judgment and assumptions as much as “hard data”. • The quantifiable impacts total around $2 million (conceptually equivalent to over half the households in Raetihi being without income for the two month duration), the majority of which is time-specific (i.e. while the event was underway), but some impacts endure. • The major element of cost relates to the restoration of secure water supply as well as the provision of alternative water supply, while that restoration work was underway. • The costs to households were the most difficult to calculate with precision. The midpoint of estimated costs being sought in a potential representative action was used as a proxy for household costs. Such costs are the second largest cost element, responsible for over a third of total costs. • Business impacts were relatively minor and direct health impacts negligible. • Not all impacts were negative; some interviewees reported positive impacts in the form of better cohesion and cooperation of Raetihi residents as a result of the sense of shared experience. • The response to the incident involved a large number of agencies and people. The intensive efforts (and consequent toll taken on them) are not easily captured in full. There are some idiosyncratic features that are noteworthy. In our view, these features reduced the estimated impact. In addition, such unique features make extrapolation to other water contamination events tricky. These features are: • Significant “resilience” in the town. The residents of Raetihi are a hardy bunch and while the diesel contamination had a major psychological effect (i.e. the event is still very much alive in people’s memories and consciousness) there was no sense of panic and people appeared to adjust in a very practical manner. • A replacement water supply was geographically proximate. The availability of such a supply eased the pressure somewhat in terms of needing to rapidly bring back on-line the existing supply, meaning that the risk of haste resulting in re- contamination was reduced. Costing the Raetihi Diesel Spill Page v • A significant storm event that occurred while the water supply was shut off assisted in the flushing of the stream that supplied the town water. • A pro-active and intensive effort by the major local authority responsible for Raetihi water supply provided leadership and comfort, helping residents and agencies alike cope with the event. Page vi Costing the Raetihi Diesel Spill Introduction 1. Sapere Research Group Ltd (Sapere) was commissioned by the Ministry of Health to assess the costs of a water contamination incident (via a diesel spill) that affected Raetihi in September/October 2013. The focus of the study was on the wider impacts felt by key stakeholders (i.e. residents, businesses, government agencies, non-profit service providers, suppliers) as a result of the spill, as opposed to public health concerns. 2. The motivation for the study was a desire to better understand the full range of costs associated with water contamination (and by analogy the benefits that society gains from water quality initiatives). In addition to bringing to light localised and event- specific impacts, the study is also intended to provide lessons in terms of management of any similar events that might occur again in Raetihi or in other communities. 3. In essence, the study is a contribution to the stock of knowledge on the value of safe, high quality potable water. It is not intended to be a “how to” guide. Nor is it intended to play any role in determining the quantum, or bringing about the resolution of claims against parties perceived as being responsible for the spill. To the extent that such claims are relevant to the study, treatment of them will be impartial and as “matter of fact” as possible. Furthermore, the study is silent on issues such as efficient levels of water infrastructure investment, engineering solutions, ownership and governance of freshwater. Costing the Raetihi Diesel Spill Page 1 Understanding the event 4. This section provides contextual and factual information on the spill event and the setting within which the event took place. It starts by describing, in general terms, the characteristics of the Raetihi population and the nature of the water supply for the town. It then details chronologically the relevant activities that took place in September and October 2013. Scoping the population and area 5. According to the 2013 Census, Raetihi has a total resident