Review of Comments Regarding the Economics of Lower Dredging

Executive Summary

I have been retained by the Center for Economic Development, , and Research (CEDER), to provide an economic analysis of August 14, 2014, comments submitted to the Inland Waterways Users Board.

Last year, I submitted comments to the U.S. Army Corps of Engineers in a letter dated August 9, 2013, regarding comments on the economics of dredging the Lower Snake River, in which I concluded that Lower Snake River freight traffic is growing toward pre-recession levels; competition from Lower Snake River disciplines rail prices; the region’s rail network was at risk of congestion; expenditures on Lower Snake River dredging cannot be characterized as a “subsidy” to companies; and the benefits in a single year of dredging the Lower Snake River would exceed the costs by at least $5.5 million.

These conclusions remain unchanged. In fact, rail congestion and capacity constraints indicate that the net benefits of maintaining the river for commercial navigation have increased. For example:

• As of 2012, the most recent year for which information is available, Snake River traffic volume is approaching pre-recession levels; • Snake River traffic is expected to continue to increase as the economy improves, overseas demand for soft white wheat increases, and the energy boom diverts rail shipments to the river system; • Rail capacity constraints and rail demand from energy shippers is increasing the importance of river transportation as both a complement and a substitute for rail; • Expansion of the Panama will likely have no impact on the supply or demand for Lower Snake River transportation.

Opponents of maintaining the Lower Snake River for commercial navigation have distributed comments they characterize as a Reality Check. These comments present a flawed economic approach that is based on speculation and produces incorrect and inflated impacts. Many of the comments are unsupported assertions, rather than conclusions based on analysis of facts and data. Because of the methodological and analytical errors, these comments cannot be relied upon in any way to suggest that the costs of dredging the Lower Snake River outweigh the benefits.

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Review of Comments Regarding the Economics of Lower Snake River Dredging

Eric Fruits, Ph.D. Economics International Corp.

October 10, 2014

I have been retained by the Pacific Northwest Waterways Association to provide an economic analysis of August 14, 2014, comments submitted by dredging opponents in a report by Linwood Laughy with the title “Waterborne Commerce on the Lower Snake River: A 2014 Reality Check” (hereafter Reality Check).

I am a president and chief economist at Economics International Corp., an Oregon that specializes in providing economics services to private and public sector clients. I earned both my masters and Ph.D. in economics from Claremont , and a B.S. with Distinction in Business Economics and Public Policy from Indiana University. In addition to my Pacific Northwest economics consulting practice, I am an adjunct economics professor at Portland State University, and am an expert on economics, finance and statistics. A copy of my curriculum vitae is attached as Exhibit 1. My comments are based on my general expertise and knowledge regarding economics, finance, and statistics as well as publicly available information regarding river transportation and associated benefits and costs.

I have submitted comments to the U.S. Army Corps of Engineers in letter dated August 9, 2013. Based on my analysis, in that letter I concluded the following:

• The benefits in a single year of dredging the Lower Snake River would exceed the costs by at least $5.5 million;

• Lower Snake River freight traffic is growing toward pre-recession levels;

• The benefits to grain shippers alone is sufficient to justify the costs of dredging;

• The benefits to container shippers and the cruise and tourists provide additional justification for dredging;

• Competition from Lower Snake River barges disciplines prices;

2 Review of Comments Regarding Economics of Lower Snake River Dredging 3

• The region’s rail network is at risk of congestion and rail costs would increase with the elimination of barging on the Lower Snake River as a transportation option; and

• Expenditures on Lower Snake River dredging cannot be characterized as a “subsidy” to barge companies.

As described more fully below, Reality Check presents a flawed economic approach that is based on speculation and produces inflated impacts. Many of the comments are unsupported assertions, rather than conclusions based on analysis of facts and data. Because of the methodological and analytical errors, these comments cannot be relied upon in any way to suggest that the costs of dredging the Lower Snake River outweigh the benefits.

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Review of Comments Regarding Economics of Lower Snake River Dredging 4

1 Snake River freight traffic is growing toward pre-recession levels

Figure 1 provides the amount of freight traffic on the Snake River from 1983 through 2012. The figure shows that average freight traffic is 5.1 million tons a year, but varies widely from year to year. Total Snake River freight traffic slowly increased through the 1980s and early 1990s, peaking in the mid-1990s. Since then, total Snake River freight traffic slowly declined, then dropped sharply with the most recent recession.1

Much of the decline in container volume at the of Lewiston coincided with the onset of the most recent recession. The recession began in December 2007 and continued through the middle of 2009. In the first year of the recession, container volume at the Port of Lewiston dropped by 39 percent as it did elsewhere throughout the country. For example, Mississippi River food and farm product shipments declined by more than 30 percent and all other product shipments declined by almost 25 percent in the first year of the recession; total U.S. grain shipments by barge declined by almost 20 percent.2 As the economy began to recover, labor and problems at the Port of Portland created logistical uncertainties for upriver shippers who sought more stable alternatives.

From the end of 2010 through the first quarter of 2011, the Columbia-Snake River System underwent a long-term, planned closure for maintenance. The coordinated closure eliminated barge transportation on much of the and all of the Snake River for about 16 weeks. The result was a steep drop in reported Snake River freight traffic for 2010 and 2011.

Figure 2 provides the amount of freight traffic associated with food and farm products on the Snake River from 1983 through 2012. The figure shows that average freight traffic is 3.2 million tons a year, accounting for approximately two-thirds of total traffic volume over that period. In 2012, the most recent year for which information is available, food and farm product volume was only 10 percent below the long-run average.

1 The National Bureau of Economic Research concludes that the most recent recession began in December 2007 and ended in June 2009. The recovery since the end of the recession has been widely described by economists as “sluggish” and “lackluster.” 2 U.S. Department of and U.S. Department of Transportation. Study of rural transportation issues, Chapter 12: Barge transportation. 2010.

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Review of Comments Regarding Economics of Lower Snake River Dredging 5

For many years, petroleum and petroleum products accounted for the second largest share of Snake River traffic. Figure 3 shows that from 2000 to 2009, average freight traffic was 1.7 million tons, accounting for one-third of river traffic during that period. During the 2010–11 coordinated closure of the Columbia-Snake River System, petroleum and petroleum products dropped to zero. The Port of Wilma oil and terminal shut down in the year leading up to coordinated lock closure. Several factors accounted for the shut down including low activity at the terminal, consolidation of oil majors, and more aggressive pricing at Spokane and Pasco terminals.

Thus, a series of idiosyncratic events leading to and during the coordinated closure of the river system have accounted for nearly all of the decline in Snake River traffic.

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Review of Comments Regarding Economics of Lower Snake River Dredging 6

Figure 1 shows that if petroleum products were at the same levels as the decade before the coordinated closure of the Columbia-Snake River System, total river traffic would be almost the same as the long-run average.

Looking toward the future, a surge in oil trains hauling North Dakota oil is interfering with grain shipments to Pacific Northwest . Indeed some shippers who typically rely on railroads are increasingly paying truckers to move their wheat to a barge port.3 The continuing energy boom will likely lead to increased demand for river transport. Also, looking toward the future, the Lower Snake River anticipates increased activity at two fertilizer projects, one of which has been completed and has been associated with a recent delivery of liquid fertilizer to the Port of Whitman County, Wilma site. Another project is anticipated to be completed in late 2015 or early 2016.

In summary, there is no evidence that commercial navigation on the Lower Snake River is undergoing a long-run systematic decline. Rather, much of the decline in traffic over

3 González, Á. Oil trains crowd out grain shipments to NW ports. Seattle Times. July 26, 2014.

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Review of Comments Regarding Economics of Lower Snake River Dredging 7 the past few years can be attributed to a series of idiosyncratic events such as the recession, the coordinated closure of the river system, and labor/management issues at the Port of Portland.

In fact, despite the idiosyncratic issues, recent shipping volumes show that river traffic is returning to pre-recession levels. As a result, it is likely that Lower Snake River traffic volumes will continue their upward trend into the foreseeable future.

In contrast, Reality Check concludes that the Lower Snake River is a “ in decline” (p. 1). This conclusion is based on erroneous data and cannot be relied upon. The comments state that freight volume at Ice locks declined from 9.1 million tons in 1998 to 3.2 million tons in 2012, representing a drop of 64 percent (p. 1). Data published by the U.S. Army Corp of Engineers, however indicates that in 1998, 4.6 million tons passed through Ice Harbor locks (Exhibit 2).4 In this way, Reality Check overstates the decline in traffic by a factor of two. Because of this error the comments also erroneously conclude that the “majority of the decline” in river traffic occurred before the recent recession. Thus, the comments’ conclusions are erroneous and cannot be relied upon.

2 Alternative modes as complements and substitutes

Opponents of maintaining the Lower Snake River for commercial navigation suggest that capital projects at the will cause container traffic to be diverted from west coast ports to ports in the Gulf of Mexico and the east coast.

The Chief Commercial Officer at the Port of Portland has concluded that changes at the Panama Canal will have virtually no impact on the Port of Portland.5 The Pacific Northwest is an export hub for farm products, especially grains. The Port of Portland executive indicated that large grain handling companies, such as Cargill and Mitsui, are directing their investments toward the Pacific Northwest rather than the Mississippi River valley. He said, such large investments mean that handlers are “betting on geography, betting on the river system, and betting on railroads.” In other words, investors recognize the Pacific Northwest as a coordinated transportation system in which rail transport and the river system are important complements.

4 U.S. Army Corps of Engineers. Lower Snake River Programmatic Management Plan. Draft Environmental Impact Statement. December 2012. Table 3-13. 5 Ruda, S. Will the new Panama Canal impact the Port of Portland? Lecture conducted from Columbia Corridor Association and Portland City Club, Portland, OR. September 24, 2014.

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Review of Comments Regarding Economics of Lower Snake River Dredging 8

While rail and barge transportation are complements, the existence of competition from barging disciplines rail pricing and provides an alternative when railroads become capacity constrained. For example, research has found that competition supplied by truck-barge transportation results in a 20 percent reduction in rail rates for grain shipments.6 This is consistent with earlier research demonstrating that wheat shipments originating 200 miles from water transport are subject to transportation rates that are 18.1 percent higher than those shipments originating 50 miles from water transport.7 All of this demonstrates that barge transportation on the Columbia and Snake Rivers competes with rail transportation and disciplines the rates that can be charged for rail transportation.8

My comments last year noted that increasing demand for from China and increasing production of oil in North Dakota’s Bakken oil field would likely to increase rail traffic and add congestion to the Pacific Northwest’s rail network. This prediction has come true. This year, grain shippers report weeks-late trains and rising rail rates while railroads report a backlog of grain cars. River transportation has provided a critical alternative in the face of a rail transportation shortage, as noted in the Seattle Times: “Washington wheat farmers have been luckier than their Upper Midwest cousins because most can ship their wheat by barge down the Columbia River.” In addition, one of the largest wheat shipping facilities in Ritzville, Washington, saw its rail shipping drop by more than half.9 The continuing intermountain energy boom will continue to strain rail resources until rail firms complete their investments to expand capacity, further adding value to the Snake River as an alternative for grain shippers.

3 Costs of dredging

The Corps has historically used dredging as its primary method of removing accumulated sediment that interferes with use of the Lower Snake River. In December

6 Winston, C., Maheshri, V., and Dennis, S. M. (2011). Long-run effects of mergers: The case of U.S. western railroads. Journal of Law and Economics, 54(2):275–304. 7 Wu, F. L. (2010). An assessment of the impact of competition on rail rates for agricultural shipments: An empirical study of Minnesota rail rates on soybean, corn and wheat shipments. Minnesota Department of Agriculture, Agricultural Services, http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5084325. 8 Casavant, K. and Jessup, E. (2006). Palouse River and Coulee City Railroad: Market assessment. Washington State Department of Transportation Office of Freight Strategy and Policy. 9 González, Á. Oil trains crowd out grain shipments to NW ports. Seattle Times. July 26, 2014. Gillie, J. Port of Tacoma executive asking railroad for better . News Tribune. July 30, 2014.

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Review of Comments Regarding Economics of Lower Snake River Dredging 9

2012, the Corps produced a draft Programmatic Sediment Management Plan (PSMP) and Environmental Impact Statement (EIS) for managing sediment. My 2013 letter to the Corps provided an analysis of comments regarding the costs and benefits of dredging the Lower Snake River.

I understand that the Corps has budgeted a total of $6.5 million for the project. The Lower Snake River last was dredged at the end of 2005 and early 2006. By the time the anticipated dredging begins, there will have been a nearly 10 year interval between dredging activities. Before the 2005–06 activity, the last dredging occurred in 1999.

Rather than focusing on the costs and benefits of dredging, Reality Check attempts to enumerate “all costs related to commercial navigation on the lower Snake” (p. 3). The comments provide a list of expenditures on the Lower Snake River, including appropriations under the stimulus package known as the American Recovery and Reinvestment Act, capital costs associated with repairs and maintenance, an allocation of fish mitigation costs, and costs to the Bonneville Power Administration. It is not clear in what way any of these expenditures and projects are relevant to the costs and benefits of dredging the Lower Snake River.

Dredging opponents cite expenditures under the American Recovery and Reinvestment Act to conclude that “costs are rising.”. However, the comments provide no baseline to measure whether or to what extent “costs are rising.” Without such context, the conclusions are meaningless. In addition, the comments do not indicate how such stimulus spending is relevant to the ongoing costs and benefits of dredging the Lower Snake River.

Similarly, opponents of maintaining the Lower Snake River for commercial navigation identify past capital costs—some as long ago as 1996—associated with repair and maintenance, but provide no demonstration that these costs are relevant to the ongoing costs and benefits of dredging the Lower Snake River.

Reality Check relies on a 15 year old position paper to provide a speculative allocation of fish mitigation costs associated with Lower Snake River (p. 4). The costs presented in the comments are merely a hypothetical allocation of costs. Such speculative estimates cannot be relied upon. In addition, the comments do not indicate how such a cost allocation is relevant to the costs and benefits of dredging the Lower Snake River.

Dredging opponents have identified costs associated with “saving threatened and endangered fish.” The comments do not indicate how these capital costs

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Review of Comments Regarding Economics of Lower Snake River Dredging 10 are relevant to the costs and benefits of dredging the Lower Snake River. The comments assert, but do not demonstrate, that annual maintenance costs on these projects will increase. In contrast, the capital projects cited in Reality Check include the installation of spillway weirs, which have no moving parts and require virtually no ongoing maintenance once installed. In this way, Reality Check is erroneous and cannot be relied upon.

It has been pointed out that an increase in wildfires in the Lower Snake River basin have led, and will lead, to increased and, in turn, an increased demand for dredging. To a large extent, forest policy and wildfire risk is managed by the U.S. Bureau of Land Management and outside the scope of the Corps’ dredging decision making process.

Opponents of maintaining the Lower Snake River for commercial navigation have identified the costs of developing the Lower Snake River Programmatic Sediment Management Plan (PSMP) and associated environmental impact statement. These costs stem from the settlement of a lawsuit filed by Save Our Wild and other environmental groups. In agreeing to the settlement, the parties implicitly understand that benefits of the PSMP and associated EIS process would exceed the costs. In this way, the PSMP and EIS process could be could counted as a net benefit, rather than a cost.

In summary, Reality Check and similar comments from dredging opponents provide no demonstration that “costs are rising” with respect to Lower Snake River commerce. The comments rely on irrelevant, outdated, and meaningless dollar amounts that cannot be relied upon to evaluate the benefits and costs of dredging the Lower Snake River.

4 The dredging-as-subsidy myth

Reality Check (p. 5) asserts that barge shippers receive a “subsidy” of “at least” $10 million a year. It also asserts (p. 4) that the “subsidy per ton of freight shipped” on the Lower Snake River has “risen dramatically.” These comments single out the barge industry and do not identify any other river user as a recipient of the so-called “subsidy.”

Under the definition of “subsidy” as used by dredging opponents, public education would be a subsidy to parents, national parks would be a subsidy to hikers, and highway maintenance would be a subsidy to trucking companies. In other words, under the spending-as-subsidy approach adopted by commercial navigation opponents, every dollar the government spends is a subsidy to someone.

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Review of Comments Regarding Economics of Lower Snake River Dredging 11

The notion of a “subsidy” described by opponents of maintaining the Lower Snake River for commercial navigation yields implausible implications that are not supported by fundamental principles of economics. For example, its per-ton-of-freight-shipped “subsidy” decreases with increased barge volume, which suggests the easiest way for dredging to pay for itself would be to encourage more barge traffic. Under this flawed thinking, the “subsidy” would be halved if barge volumes doubled.

A short ton of crude oil is approximately 6.65 barrels and is priced at roughly $90 a barrel, or just under $600 a short ton. On the other hand, a short ton of wheat is approximately 33.3 bushels and is priced at roughly $6 a bushel, or just about $200 a short ton. This raises a question for dredging opponents: If the weights are the same, but the values are different, is the subsidy the same? Similarly, should the “subsidy” to cruise be measured by number of passengers, or their weight? These are nonsense questions because the concept of a per-vessel, per-ton, per-dollar, or per-person “subsidy” makes no economic sense.

It is a well known and widely accepted principle of economics that one cannot allocate common costs (e.g., dredging costs) across multiple products (e.g., barges full of grain, barges loaded with containers, cruise ships, and kayaks).10 Nobel laureate George Stigler notes: “Such an allocation must be arbitrary, for there is no one basis of allocation that is more persuasive than others.”11

In reality, navigable waterways are a benefit enjoyed by many. Barges, cruise ships, and recreational users all share a common benefit from dredging, as well as infrastructure maintenance and improvements. These benefits are transmitted throughout the economy in the form of lower transportation costs for shippers, increased revenues to growers, lower prices for consumers, increased employment opportunities at ports, improved recreational opportunities, and through many other ways.

5 Conclusion

Based on my research and general experience and education as a professional and academic economist, I am confident that a comprehensive cost-benefit analysis would conclude that the benefits of dredging demonstrably outweigh the costs. The comments

10 In economics this is known and the “beef and hides” problem in that it is impossible to allocate the cost of raising a cow across beef that is sold as food and the hides that are sold as . It was first articulated in Marshall, A. (1890). Principles of economics, available at http://www.econlib.org/library/Marshall/marP.html. 11 Stigler, G. J. (1966) The theory of price, 3rd ed. Macmillan.

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Review of Comments Regarding Economics of Lower Snake River Dredging 12 in Reality Check cannot be relied upon. Many of its conclusions are merely unsupported assertions. Other conclusions are based on erroneous, irrelevant, and/or meaningless information.

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Eric Fruits, Ph.D.

Tel: 503-928-6635 www.econinternational.com [email protected]

Dr. Eric Fruits is an economics expert, finance expert, and statistics expert. He has produced numerous research studies involving economic analysis, financial modeling, and statistical analysis. As an expert witness, he has provided expert testimony in state courts, federal courts, and an international court. Dr. Fruits is an antitrust expert who has written articles on price fixing and for the top-tier Journal of Law and Economics. He has assisted in the review of several mergers including Exxon-Mobil, BP-Arco, and Nestle-´ Ralston. He has worked on many antitrust lawsuits, including Ross-Simmons v. Weyerhaeuser, a predatory bidding case that was ultimately decided by the Supreme Court. As an economic damages expert, Dr. Fruits has provided expert testimony regarding business valuation, lost profits, and foregone income. He has been a testifying expert in cases involving real estate valuation, health care services, and transportation and shipping services. He has provided expert testimony to state courts and federal courts. As a finance expert, Dr. Fruits has been a testifying expert and provided expert consulting services in cases alleging insider trading. He is a securities expert who has conducted numerous research studies on financial issues, including initial public offerings and municipal bonds. As a statistical expert, Dr. Fruits has provided expert testimony regarding real estate trans- actions, profit projections, agricultural , and war crimes allegations. His expert testimony has been submitted to state courts, federal courts, and an international court. Dr. Fruits is a Daubert expert who has testified in federal court on the methods and procedures of science and described the Daubert standard to an international tribunal. He has written peer-reviewed articles on initial public offerings (IPOs), the municipal bond market, and the formation and operation of cartels. Dr. Fruits has been affiliated with Portland State University, Pacific Northwest College of Art, University of Southern California, Indiana University, and the Claremont Colleges. He has been an economic consultant with Nathan Associates, LECG, ECONorthwest, and Econ One Research.

Present Positions & Affiliations

Economics International Corp. 2006–present President and Chief Economist

Nathan Associates Inc., Principal Consultant 2012–present

Portland State University 2002–present Department of Economics, Adjunct Professor School of Business Administration, Adjunct Professor School of Urban Studies and Planning, Adjunct Professor Center for Real Estate Quarterly Report, Editor

EXHIBIT 1 Eric Fruits, Ph.D. 2

Previous Professional Experience

Pacific Northwest College of Art 2009–2010 Adjunct Professor

ECONorthwest 2002–2008 Senior Economist

LECG, LLC 1999–2002 Senior Economist

Claremont Graduate University 1996–2002 Adjunct Professor of Economics and Visiting Scholar

Econ One Research, Inc. 1998–1999 Economist

University of Southern California, Marshall School of Business 1997–1998 Visiting Assistant Professor of Finance & Business Economics

Indiana University, Kelley School of Business 1997 Visiting Assistant Professor of Business Economics & Public Policy

Scripps College 1996 Adjunct Professor of Economics

Pomona College 1994 Lecturer in Economics

Andersen Consulting 1990–1991 Staff Consultant

Education

Ph.D., Economics, Claremont Graduate University 1997

M.A., Economics, Claremont Graduate University 1993

B.S. with Distinction, Business Economics & Public Policy, Indiana University 1990

Publications, Reports, and Other Papers

Proposal for Management of the Elliott State Forest to Provide Adequate Returns for Oregon Schools. Cascade Policy Institute. 2014.

Tax Myths Debunked. American Legislative Exchange Council, with R. J. Pozdena. 2013.

Forecast of Oregon’s economy in 2013: Disappointing but not disastrous. Center for Real Estate Quarterly Journal, 6(4):4–10. Fall 2012.

Right-to- and Economic Growth: A Comprehensive Analysis of the Economic Benefits to New Mexico of Enacting a Right-to-Work Law. . 2012.

EXHIBIT 1 Eric Fruits, Ph.D. 3

Right-to-Work is Right for Oregon: A Comprehensive Analysis of the Economics Benefits From Enacting a Right-to-Work Law. Cascade Policy Institute, with R. J. Pozdena. 2012.

Compact development and greenhouse gas emissions: A review of recent research. Center for Real Estate Quarterly Journal, 5(1):2–7. Winter 2011.

Tax Policy and the Colorado Economy: The Effects on Employment and Migration. Common Sense Policy Roundtable, with R. J. Pozdena. 2011.

Fiscal Impacts of an Oregon Tax Scholarship Program. Cascade Policy Institute. 2011.

The Oregon Health Plan: A “Bold Experiment” that Failed. Cascade Policy Institute. 2010.

Test for W. B. Brueggeman and J. D. Fisher. Real Estate Finance and Investments, 14th ed. McGraw-Hill/Irwin. 2010.

Tax Policy and the Oregon Economy: The Effects of Measures 66 and 67. Cascade Policy Institute, with R. J. Pozdena. 2009.

Future Management of the Elliott State Forest: Providing Adequate Returns for Oregons Schools. Cascade Policy Institute. 2009.

Fiscal Impacts of Proposed Educational Tax . Cascade Policy Institute. 2009.

Impact of Minimum Wage Indexing on Employment and Wages: Evidence from Oregon and Washington. Employment Policies Institute. 2009.

The Relationship Between Residential Development and Greenhouse Gas Emissions. National Associa- tion of Homebuilders. 2008.

Oregon Greenhouse Gas Reduction Policies: The Economic and Fiscal Impact Challenges. Cascade Policy Institute, with R. J. Pozdena. 2008.

The Ranking of Oregon State and Local Spending. Cascade Policy Institute, with R. J. Pozdena. 2008.

A comprehensive evaluation of the comparative cost of negotiated and competitive methods of municipal bond issuance. Municipal Finance Journal, with R. J. Pozdena, J. Booth, and R. Smith. 28(4):15–41. Winter 2008.

Damages: Experts, liability, and calculations. In The Employment Case: From Discovery to Decision. Oregon State Bar CLE Seminars. 2004.

How Does Oregon Spending Rank? Ideas for Budget Stability. Cascade Policy Institute, with R. J. Pozdena. 2004.

Market power and formation: Theory and an empirical test. Journal of Law and Economics, with D. Filson, E. Keen, and T. Borcherding. 44:465–480. 2001.

The Determinants of Managerial : Theory and Evidence From Initial Public Offerings. Clare- mont Graduate University. 1997.

Managerial ownership, compensation, and initial public offerings. In Marr, M. and Hirschey, M., editors, Advances in Financial Economics, volume 2. JAI Press. 1996.

EXHIBIT 1 Eric Fruits, Ph.D. 4

Letters, Op-Eds, and Oregon Business Columns City’s noble goal meets an outlawed tax. Portland Tribune. August 8, 2012.

Rethinking public schools: It’s time Portland elects a real education mayor. Oregonian. August 9, 2011.

PPS bonds: Save the schools but lose the house? Oregonian. January 12, 2011.

Water and sewer charges: Basic services before pet projects. Oregonian. May 21, 2010.

PERS disaster will cost taxpayers. Statesman Journal. November 8, 2009.

Health care: Congress can learn from the costly mistakes of the states. Oregonian. September 1, 2009.

Behind Oregon’s jobless rate. Oregon Business. February 2009.

The high costs of climate change policies. Oregonian. January 24, 2009.

Facing the challenge of a revenue shortfall. Oregonian. November 19, 2008.

The youngest boomers trail behind. Oregon Business. September 2008.

Slow the growth to cut the carbon. Oregon Business. April 2008.

Do we really have a health-care crisis? Oregon Business. January 2008.

Economic forecast: Will 2008 bring economic salvation? Oregon Business Powerbook 2008. 2007.

The pixie dust of streetcars. Oregon Business. October 2007.

Pay me what I’m worth, or else. Oregon Business. July 2007.

Easy money. The Economist, p. 6. 1994.

Committee and Other Service

Peer reviewer and academic adviser for textbooks and academic journals:

A. O’Sullivan. Urban Economics, 9th ed. McGraw-Hill/Irwin. 2013. Taking Sides: Clashing Views in Urban Studies. M. A. Levine, editor. McGraw Hill. 2012. W. B. Brueggeman and J. D. Fisher. Real Estate Finance and Investments, 14th ed. McGraw- Hill/Irwin. 2011. Municipal Finance Journal Land Economics

Taxpayer Association of Oregon. Board Member, 2014–present.

Laurelhurst Neighborhood Association. City of Portland, Oregon. Past President and Board Member, 2014–present. President, 2009–2014.

City of Portland. Mayor’s Economic Cabinet. 2008–2012.

EXHIBIT 1 Eric Fruits, Ph.D. 5

State of Oregon Department of Environmental Quality. Fiscal Advisory Committee for the Proposed Adoption of Air Quality Improvements at the PGE Boardman Power Plant. 2008.

State of Oregon Department of Environmental Quality. Fiscal Advisory Committee for the Proposed Adoption of the Utility Mercury Rule and Other Federal Air Quality Regulations. 2006.

City of Portland. Mayor’s Ad Hoc Work Group on Regulatory Reform. 2002.

Testimony in Legal Proceedings

Kivin Varghese v. Amazon.com, Inc. and Amazon , Inc. Superior Court for the State of Washington in and for the County of King. No. 12-2-39303-6 SEA. Deposition testimony September 22, 2014. Evaluated Plaintiff’s claims of damages in the form of lost wages and other compensation. Plaintiff alleges wrongful termination of positions as principal product manager. Dr. Fruits provided present value calculations associated with foregone wages and other compensation, including bonuses in the form of shares of employer’s stock.

LMG Concerts, LLC v. Salem Communications Corporation, Salem Media of Oregon, Inc., Caron Broad- casting, Inc., Does 1 through 5. U.S. District Court for the District of Oregon. Case No. 3:12-CV-1117. Deposition testimony September 18, 2013. Antitrust dispute alleging monopolization and attempted monopolization of concert promo- tion business via ownership of commercial radio station. Evaluated relevant product and geographic markets; whether a exists in the relevant markets; and whether Defen- dants monopolized or attempted to monopolize the relevant markets. Evaluated Plaintiffs claim of lost profit damages.

Claude Hadley v. Extreme Technologies, Inc. Circuit Court for the State of Oregon for Lane County. Case No. 16-11-03225. Trial testimony March 14, 2012. Contract dispute involving alleged misappropriation of intellectual property regarding hunt- ing/archery bow . Performed reasonable royalty calculation. Calculations included statistical analysis of actual bow and forecast of future sales.

David Hill Development, LLC, v. City of Forest Grove, Steve A. Wood, and Robert A. Foster. U.S. District Court for the District of Oregon. Civ. No. 08-266-AC. Deposition testimony December 10, 2010. Trial testimony September 20, 2011. Evaluated Plaintiffs’ claims of damages. Plaintiff alleged that delays and exactions imposed by city diminished the market value of real estate, increased Plaintiff’s carrying costs, and imposed additional costs on Plaintiff. Evaluated “rough proportionality” related to inverse condemnation claim.

Gordon Ogawa v. Malheur Home dba Malheur Bell and Qwest Corporation. U.S. District Court for the District of Oregon. No. CV 08-694-MO. Trial testimony September 9, 2010. Calculated foregone income resulting from alleged wrongful discharge. Calculations in- cluded evaluation of foregone income and retirement contributions as well as increased costs of medical coverage.

EXHIBIT 1 Eric Fruits, Ph.D. 6

Dave Molony and Leaf Investments, Inc. v. Crook County. U.S. District Court for the District of Oregon. No. 3:05-CV-1467-MO. Trial testimony May 27, 2009. Evaluated Plaintiffs’ claims of damages. Plaintiffs alleged that county planning commission decision deprived Plaintiffs of all economically viable uses for their property for approxi- mately four years. Dr. Fruits performed a statistical analysis of the reasonable rate of return on the value of real estate during that period of time through the date of trial. The rate of re- turn analysis formed the basis for a damages calculation associated with foregone investment opportunities.

Starr-Wood Cardiac Group of Portland, P.C., Dr. H. Storm Floten, and Dr. Anthony Furnary v. Dr. Jeffrey S. Swanson, Dr. Hugh L. Gately, and Cardiothoracic Surgeons LLC. Circuit Court for the State of Oregon for the County of Multnomah, No. 0706-06308. Trial testimony September 5, 2008. Evaluated Plaintiffs’ claims of foregone income. Plaintiffs alleged that Defendants violated their fiduciary duty by seeking seeking exclusive referrals from a cardiology group to the detriment of the corporation. Dr. Fruits performed a statistical analysis of the relationship between referrals and Plaintiffs’ revenues. He also analyzed impacts of changes in compen- sation formula on principals’ income.

Milutinovic et al. International Criminal Tribunal for the former Yugoslavia, No. IT-05-87 PT. Trial testimony April 23–24, 2008. Provided testimony to the ICTY regarding the statistical reliability of estimated relationships between the deaths and migration of Kosovo Albanians and the activities of NATO and the Kosovo Liberation Army (KLA). Evaluated statistical reliability of conclusions that Serb and Yugoslav forces were involved in a systematic campaign of murder and deportation of Kosovo Albanians.

In re: The Marriage of Virginia Salvadori and Gabriel Salvadori. State of Washington Clark County Superior Court, No. 06-3-00692-2. Trial testimony April 14, 2008. Evaluated the cost of living in the Portland-Vancouver (Oregon-Washington) area relative to the costs of living in Meriden, Connecticut.

Pamela L. Bond, Individually and as Personal Representative of the Estate of Craig R. Bond, Deceased v. United State of America. U.S. District Court for the District of Oregon. No. 06-1652-JO. Trial testimony February 6, 2008. Calculated the lump-sum payment associated with Plaintiff’s claim of lost household income resulting from alleged medical malpractice resulting in spouse’s death.

Erik E. Tolleshaug v. Shaver Transportation Co. Circuit Court for the State of Oregon for the County of Multnomah, No. 060809122. Trial testimony December 14, 2007. Conducted a study of the labor market for operators. Evaluated data from U.S. and state departments of labor. Interviewed representatives from west coast towing companies.

In re: The Marriage of Denise M. Kunze and Gust F. Kunze. State of Washington Clark County Superior Court, No. 05-3-00801-3. Trial testimony October 29, 2007. Evaluated the cost of living in the Portland-Vancouver (Oregon-Washington) area relative to the costs of living in a variety of area cities.

EXHIBIT 1 Eric Fruits, Ph.D. 7

Securities and Exchange Commission v. Philip Evans and Paul Evans. U.S. District Court for the District of Oregon. No. CV 05-1162-PK. Deposition testimony February 27, 2007. Trial testimony March 8, 2007. Evaluated allegations of insider trading by a tippee. Performed a statistical analysis of De- fendant’s trades in question and compared them to the Defendant’s earlier trading activities. Calculated profits from trades in question.

Randall D. Lam v. Kaiser Foundation ; Northwest Permanente, P.C.; Kaiser Foundation Health Plan of the Northwest; Robert James Shneidman, M.D.; and David Lee Brown, Jr., P.A. Circuit Court for the State of Oregon for the County of Multnomah. No. 020706633. Trial testimony November 9, 2006. Evaluated Plaintiff’s claim of diminished earning capacity resulting from alleged medical malpractice. Conducted a business valuation analysis that included a statistical analysis of the relationship between Plaintiff’s property appraisal business income and an real estate market activity.

Vitascan Partners I and Vitascan Partners II v. G.E. Healthcare and GE/Imatron. Superior Court for the State of California. No. 01129909. Trial testimony July 24, 2006. Evaluated Plaintiffs’ claims of foregone income. Plaintiffs alleged that Defendants provided malfunctioning mobile body imaging devices (sometimes known as full body scanners). Plaintiffs allege that malfunctions resulted in diminished revenues and business income. Dr. Fruits performed a statistical analysis of the relationship between scanner “down time” and Plaintiffs’ business revenues and income.

Squaxin Island Tribe, Island Enterprises, Inc., Swinomish Indian Tribal , and Swinomish Development Authority v. Fred Stephens, Director, Washington State Department of Licensing. U.S. District Court for Western District of Washington. No. C033951Z. Deposition testimony June 15, 2005. Evaluated the relationship between the activities of Indian tribes and the tribes’ motor fuel stations (“gas stations”). Conducted a survey of gas station customers to evalute the extent to which tribal membership or tribal activities attracted customers to the gas stations. Analyzed of the costs of highway improvements and how improvements could be funded from tribal motor fuel revenues.

Androutsakos v. M/V PSARA, PSARA Shipping Corporation, and Chevron U.S.A., Inc. United States District Court for the District of Oregon. No. 02CV1173KI. Trial testimony May 21, 2004. Calculated the lump-sum payment necessary to cover the costs of care in Europe for an engineer injured at a U.S. port. Provided financial analysis and accounted for differences in tax policies between the U.S. and EU countries.

In re: Consolidated PERS Litigation. Supreme Court for the State of Oregon. Nos. S50593, S50532, S50656, S50657, S50645, S50685, S50687, and S50686. Trial testimony February 27, 2004. Evaluated and calculated the economic impacts associated with reforms to the state’s public employee retirement system. Analysis was conducted using the Oregon Tax Incidence Model (OTIM) and IMPLAN.

CollegeNET, Inc., v. ApplyYourself, Inc. United States District Court for the District of Oregon. Nos. 02CV484HU and 02CV1359HU. Daubert hearing May 9, 2003.

EXHIBIT 1 Eric Fruits, Ph.D. 8

Provided testimony in a Daubert hearing to determine whether an expert’s testimony was grounded in the methods and procedures of science.

Grants and Awards

City of Portland Spirit of Portland Award, nominee 2010

City of Portland Livability Volunteer Award 2010

Institute for Humane Studies Research Grant 1996

John Randolph Haynes and Dora Haynes Foundation Grant 1995

Lynde and Harry Bradley Foundation Grant 1992–1995

Lionel Edie Award 1990

Courses Taught

Microeconomics

Industrial

Economics of Regulation and Antitrust

Urban Economics

Managerial Economics

Econometrics

Real Estate Finance and Investment

State and Local Public Finance

Economics and the

War Crimes

September 22, 2014

EXHIBIT 1 EXHIBIT 2 Section 3.0, Affected Environment 3.5, Socioeconomics

The total tonnage moved on the lower Snake River fluctuates from year to year, depending on crop production, the state of the U.S. economy, and trends in world trade. The U.S. and world economies suffered a deep recession in 2007, 2008, and 2009 (the most recent years for which data was available), and the volumes barged on the lower Snake River dropped as a result. In contrast, the Pacific Northwest wheat forecast for 2011 is strong and world demand is growing, which is likely to result in substantial volume growth. Table 3-13 presents the total tonnages of cargo moved through the lower Snake River, and includes McNary since cargo statistics do not differentiate between the Snake and Columbia River portions of McNary Reservoir.

Table 3-13. Lower Snake River Navigation Lock Detail (million tons)

Lower Lower Year Little Goose Monumental Ice Harbor McNary* 1994 2,314 3,542 3,678 4,278 7,976 1995 2,414 3,776 3,924 4,581 8,670 1996 1,771 2,912 3,098 3,564 7,886 1997 1,952 3,180 3,675 4,205 8,294 1998 2,221 3,554 4,018 4,571 8,591 1999 1,987 3,128 3,496 4,067 7,604 2000 2,264 3,103 4,110 4,560 8,461 2001 1,820 2,811 3,408 3,952 8,102 2002 1,349 2,427 2,687 3,086 6,372 2003 1,527 2,579 2,866 3,210 6,998 2004 1,749 2,951 3,267 4,119 7,508 2005 1,661 2,724 2,991 3,519 6,652 2006 1,570 2,717 2,915 3,371 6,950 2007 1,763 2,933 3,268 3,611 7,351 2008 1,164 1,840 2,119 2,161 5,301 2009 1,226 2,503 2,536 2,867 6,125 *Note: McNary Pool includes facilities on both the Snake and Columbia Rivers. Source: Corps of Engineers

Cargo volumes at the Lower Granite lock were reduced between 2007 and 2008, dropping from 1.76 million short tons1 to 1.16 million short tons. In 2009, the last year for which data was available, Lower Granite volume increased somewhat over 2008, growing to 1.23 million short tons.

1 Short ton is 2,000 pounds. It is specified here to distinguish from metric ton (1,000 kilograms, or 2,205 pounds), which is frequently used for world grain production statistics.

Lower Snake River Programmatic Sediment Management Plan – Draft EIS 3-47