Economic Benefits of Nutrient Reductions in Utah's Waters
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Economic Benefits of Nutrient Reductions in Utah’s Waters State of Utah Prepared by in association with April 2013 FINAL REPORT Economic Benefits of Nutrient Reductions in Utah’s Waters April 2013 Prepared for: State of Utah Utah Division of Water Quality 195 North 1950 West DEQ Third Floor PO Box 144870 Salt Lake City, UT 84114-4870 Prepared by: Paul Jakus, Utah State University Mary Jo Kealy, CH2M HILL John Loomis, Colorado State University Nanette Nelson, University of Wyoming Survey and Analysis Center Jeff Ostermiller, Utah Division of Water Quality Cody Stanger, CH2M HILL Nicholas von Stackelberg, Utah Division of Water Quality Executive Summary (Under Separate Cover) Contents Section Page Abbreviations and Acronyms .............................................................................................................................. vii 1.0 Introduction ............................................................................................................................................... 1‐1 1.1 The Contribution of Water‐Based Recreation to the Utah Economy ............................................. 1‐1 1.2 The Environmental Problem—Excess Nutrients in Surface Waters ................................................ 1‐1 1.3 Costs of Nutrient Criteria Implementation ...................................................................................... 1‐2 1.4 The Benefit Study ............................................................................................................................ 1‐2 2.0 Types of Benefits Arising from Improved Water Quality ............................................................................. 2‐1 2.1 Use Values ....................................................................................................................................... 2‐1 2.2 Passive Use Values ........................................................................................................................... 2‐1 2.3 Total Economic Value ...................................................................................................................... 2‐1 2.4 Definition of Economic Value .......................................................................................................... 2‐2 2.5 Techniques to Estimate WTP for Water Quality .............................................................................. 2‐2 2.5.1 Stated Preference Methods Including Contingent Valuation Method ............................... 2‐2 2.5.2 Hypothetical Bias in CVM ................................................................................................... 2‐3 2.6 Review of the Economic Benefits of Water Quality Literature ....................................................... 2‐4 2.6.1 Local WTP for Improving Water Quality of Specific Water Resources ............................... 2‐4 2.6.2 Statewide WTP for Improving Water Quality of Specific Water Resources ....................... 2‐5 2.6.3 Statewide WTP for Improving Water Quality of State Water Resources ........................... 2‐6 2.6.4 Nationwide WTP to Avoid a Regional Reduction in Water Quality .................................... 2‐6 2.6.5 Nationwide WTP for Nationwide Improvement in Water Quality ..................................... 2‐6 3.0 Designing the Questionnaires ..................................................................................................................... 3‐1 3.1 The Total Economic Value Questionnaire ....................................................................................... 3‐1 3.1.1 Structure of the TEV Questionnaire ................................................................................... 3‐1 3.1.2 The Science Used to Develop the Valuation Scenario ........................................................ 3‐3 3.1.3 Specifying How the Respondent Will Pay and the Willingness to Pay Question ................ 3‐5 3.1.4 Focus Groups and Pretests ................................................................................................. 3‐5 3.2 The Recreation Questionnaire ......................................................................................................... 3‐6 3.2.1 Structure of the Recreation Questionnaire ........................................................................ 3‐6 3.2.2 The Science Behind the Water Quality Attributes in the Recreation Survey ..................... 3‐7 3.2.3 Focus Group and Pretesting ............................................................................................... 3‐8 4.0 Administering the Surveys .......................................................................................................................... 4‐1 4.1 Sampling, Field Period, and Participation Rates for the TEV Survey ............................................... 4‐1 4.2 Sampling, Field Period, and Participation Rates for the Recreation Survey .................................... 4‐2 4.3 Weighting ......................................................................................................................................... 4‐3 4.4 Summary .......................................................................................................................................... 4‐4 5.0 Analysis of Total Economic Value ................................................................................................................ 5‐1 5.1 Demographic Comparison of Users versus Non‐Users of Utah’s Surface Water Resources ........... 5‐1 5.2 Statistical Model of WTP ................................................................................................................. 5‐3 5.3 Statistical Results ............................................................................................................................. 5‐6 5.4 Economic Benefit Estimates ............................................................................................................ 5‐8 5.5 Generalizing the Sample WTP to the Utah Population ................................................................... 5‐9 5.6 Present Value of Benefits ................................................................................................................ 5‐9 ES062712232531SLC\UTAHDWQ_STATEWIDEBENEFITS_RPT_V2_KM _MJK EO.DOCX iii CONTENTS (CONTINUED) 5.7 Interpretation of Results in Relation to the Study Objectives ....................................................... 5‐10 5.8 Conclusions .................................................................................................................................... 5‐11 6.0 Analysis of Water‐Based Recreation Demand ............................................................................................. 6‐1 6.1 Lake and River Recreation in Utah .................................................................................................. 6‐1 6.2 A Brief Introduction to the Travel Cost Model ................................................................................ 6‐7 6.3 Review of the Relevant Literature ................................................................................................... 6‐9 6.4 Recreational Site Characteristics ................................................................................................... 6‐13 6.5 Implementing the Travel Cost Model: Econometric Issues ........................................................... 6‐16 6.5.1 The Conditional Logit “Site Choice” Model ...................................................................... 6‐16 6.5.2 A Nested Logit Model ....................................................................................................... 6‐17 6.5.3 A Poisson “Total Trips” Model .......................................................................................... 6‐18 6.5.4 Summary of the Econometric Model ............................................................................... 6‐19 6.6 Empirical Results ............................................................................................................................ 6‐19 6.6.1 Preliminary Issues ............................................................................................................. 6‐19 6.6.2 Balancing the Tradeoffs: An Initial Model Specification ................................................... 6‐20 6.6.3 Model Results: Day Trips .................................................................................................. 6‐23 6.6.4 Overnight Trips ................................................................................................................. 6‐27 6.6.5 Model Selection ................................................................................................................ 6‐30 6.7 Benefits Estimation ........................................................................................................................ 6‐32 6.8 Summary ........................................................................................................................................ 6‐36 7.0 Nuisance Algae Threshold for Recreation and Aesthetics ............................................................................ 7‐1 7.1 Background ...................................................................................................................................... 7‐1 7.2 Methods ........................................................................................................................................... 7‐2 7.3 Results .............................................................................................................................................