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Commercial Fishing and Outdoor Recreation Benefits of Water Quality Improvements in the Chesapeake Bay

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Commercial Fishing and Outdoor Recreation Benefits of Water Quality Improvements in the Chesapeake Bay Commercial fishing and outdoor recreation benefits of water quality improvements in the Chesapeake Bay David M. Massey, Chris Moore, Stephen C. Newbold U.S. EPA, National Center for Environmental Economics Tom Ihde, Howard Townsend National Oceanographic and Atmospheric Administration March 24, 2017 The findings, conclusions, and views expressed in this paper are those of the authors and do not necessarily represent those of the U.S. EPA. No Agency endorsement should be inferred. 1 Commercial fishing and outdoor recreation benefits of water quality improvements in the Chesapeake Bay ABSTRACT: We estimated the economic benefits of the Chesapeake Bay TMDL to commercial fish harvesters and consumers, recreational anglers, and other outdoor recreators. To forecast the impacts of the TMDL on harvested fish and shellfish stocks in the bay and connected At- lantic coast waters, we used a summary of judgments from an expert panel and a multi-spe- cies model of Chesapeake Bay fisheries. We estimated benefits to consumers in commercial fish markets using a multi-stage inverse demand system, which models price as a function of exogenous supply and accounts for substitution possibilities between 13 different species and as many as five regions. Models were estimated using monthly harvest data from the years 1991 to 2011. The estimated parameters of the inverse demand systems were then used to calculate compensating and equivalent variation from the changes in harvests be- tween the baseline and TMDL scenarios. To estimate producer surplus changes, we assumed that fishing effort will remain fixed at recent levels in each fishery, so harvesting costs do not increase due to the TMDL. The resulting estimates of commercial fishing benefits range be- tween $3 and $26 million per year. We also examined the implications of alternative assump- tions about the management regime in each fishery, including fixed effort, open access, and maximum sustainable surplus. We calculated benefits to recreational anglers using a linked participation and site- choice recreation demand model. The model was estimated using angler intercept survey data from the Marine Recreational Fisheries Statistics Survey (MRFSS). Catch rates were cal- culated using historic reported catch from the MRFSS. We accounted for the sample selection bias caused by the non-random intercept survey sampling design using weights based on historic visitation frequencies at each intercept site. The intercept data were used to estimate a random utility site-choice model, and counts of trips from respondent zip codes were used to estimate a negative binomial participation model conditional on the inclusive value of all sites as estimated by the site-choice model. The resulting estimates of recreational fishing benefits range between $5 and $59 million per year. We used a separate recreation demand model to estimate the benefits associated with other outdoor recreation activities. The model was estimated using aggregate data on the total number of visitors to national and state parks in Maryland, Virginia, and Delaware. The aggregate visitation data alone are insufficient to estimate all parameters of the model, so these data were supplemented with survey data on the number of recreation trips taken to the Chesapeake Bay collected from a random sample of individuals in the study area. The marginal effects of water quality on recreators’ site choices were estimated in a second-stage regression, using estimates of site-specific constants from the first-stage site-choice model as the dependent variable and measures of average water quality conditions and other fixed site attributes as explanatory variables. The central estimates of the outdoor recreation ben- efits (exclusive of recreational fishing) are between $105 to $280 million per year. 2 1 Introduction The ecological impacts of the Chesapeake Bay TMDL and subsequent effects on fish- ery harvests will stem from changed water quality and aquatic habitat conditions for a vari- ety of finfish and shellfish species in the bay and connected waters. By reducing the loads of nitrogen, phosphorus, and sediment to the Chesapeake Bay, the extent and frequency of hy- poxia—defined as dissolved oxygen (DO) levels less than 2 mg/l—which creates “dead zones” where fish and shellfish cannot survive, are expected to diminish. Also, water clarity is expected to increase, thereby allowing sunlight to penetrate deeper into the water column supporting the growth of submerged aquatic vegetation. These water quality and habitat im- provements may in turn lead to increased abundances of aquatic species that support com- mercial and recreational fisheries, and enhance the aesthetic character of the water and con- nected habitats that support other non-consumptive recreational activities including boat- ing, swimming, hiking, and wildlife viewing. At the same time, reductions in nutrient loads to the Chesapeake Bay could lead to diminished productivity of primary producers at the base of the aquatic food web, thereby reducing the biomass of fish species at higher trophic levels that the ecosystem can support. The net effects of the TMDL on aquatic living resources and associated ecosystem services in the Chesapeake Bay will depend in part on the strength of these potentially countervailing influences. We estimated the market and non-market benefits of the TMDL for commercial fish- eries and outdoor recreational activities using: a summary of expert judgments regarding the potential impacts of the TMDL on fish stocks in the Bay; predictions of changes in dis- solved oxygen levels and associated habitat volumes for 14 aquatic species using outputs from a mechanistic water quality model of the bay; a multi-species fishery simulation model; and three economic valuation models. To estimate the commercial fishery benefits of the TMDL, we combined predictions of fishery harvest changes due to the TMDL with an inverse consumer demand system model to project changes in market prices of fish and associated changes in consumer surplus and harvester revenues. We estimated the benefits of the TMDL to recreational anglers using a linked participation and site-choice recreation demand model. We calculated the benefits of the TMDL associated with improvements in other out- 3 door recreation activities using a separate recreation demand model. The model was esti- mated using data on the total number of visitors to federal and state parks in Maryland, Vir- ginia, and Delaware, plus supplemental data from two independent stated preference sur- veys that asked respondents how many outdoor recreation trips they took to the Chesapeake Bay in the previous 12 months. This paper is organized as follows. Section 2 describes the potential impacts of the Chesapeake Bay TMDL on aquatic living resources using three sources of information: 1) a summary of judgments by a panel of experts that was convened to provide guidance at an early stage of this study, 2) estimates of changes in habitat volumes due to the TMDL for a set of 14 key aquatic species in the bay, and 3) an ecological simulation model that relates habitat volumes to steady-state harvest levels for 14 key fish and shellfish species that reside in the bay. Section 3 describes how we estimated the commercial fishing benefits of the TMDL, and Section 4 describes how we estimated the potential benefits of the TMDL to out- door recreators. 2 Ecological impacts of nutrient loads to the Chesapeake Bay The most important effects of nutrient loads in estuaries might be classified into two broad categories: the “enrichment” effects of enhanced primary productivity at the base of the food web as more nutrients are added to the system (Nixon and Buckley 2002), and var- ious “over-enrichment” effects that can occur when the rate of nutrient inflows exceed the capacity of the ecosystem to assimilate those nutrients in living biomass (e.g., Caddy 2000, Cloern 2001, Baird et al. 2004). Specifically, if increased nutrient inputs lead to phytoplank- ton growth that outstrip the capacity of grazers to consume them, then the surplus blooms of phytoplankton will subsequently die and be decomposed by microbes in the water col- umn. This decomposition process consumes dissolved oxygen from the water column, thereby depleting the oxygen available for respiration by other aquatic organisms such as fish and shellfish. The resulting hypoxic conditions lead to physiological stress for many aquatic species, and so diminish the available habitat for mobile species that can avoid hy- poxic areas and may reduce the growth rates or increase the mortality rates of sessile species that are not able to avoid hypoxic waters. 4 Water quality problems related to nutrient over-enrichment—including depressed dissolved oxygen levels, increased frequency of algal blooms, reduced water clarity, and loss of submerged aquatic vegetation—have been observed in over 60% of estuaries in the United States (Bricker et al. 1999). A wide range of studies have documented various ecolog- ical impacts of elevated nutrient loads to the Chesapeake Bay (e.g., Breitburg 1992, Boesch et al. 2001, Kemp et al. 2005, Seitz et al. 2009). However, a comprehensive ecological simu- lation model relating nutrient loads to water quality conditions and ultimately to aquatic species’ population dynamics and fishery outcomes for the Chesapeake Bay was not availa- ble at the time of this study.1 To examine the effects of nutrient loads on aquatic living resources in the Chesapeake Bay, we began by
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