PAPER Understanding the Potential Economic Impacts of Sinking Ships for SCUBA Recreation AUTHOR ABSTRACT Linwood H. Pendleton Ships, planes, and other large structures are finding their way to the bottom of the Program in Environmental Science sea along coasts in North America, Europe, Australia, and elsewhere. More and more, and Engineering coastal communities and even not-for-profit organizations (e.g. the San Diego Oceans Department of Environmental Foundation and Artificial Reef Society of British Columbia) are actively promoting and Health Sciences financing “ships to reefs” projects as a means of providing new destinations for recre- University of California, Los Angeles ational SCUBA diving tourists. Creating a “ships to reef” site can be costly. The cost to prepare a ship for reefing can range from $46,000 to $2 million, depending on the size of the vessel (Hess et al., 2001). The benefits, however, can be equally large or larger. In order to get a better idea of the potential economic value of ships to reefs, I review the literature on the value of recreational diving to artificial reefs in the United States. Using data from the literature, I estimate that potential net present value of expenditures associated with the recently placed Yukon ship to reef site in Southern California could be on the order of $46 mil- lion and the potential net present non-market value of the sunken ship could be as high as $13 million. These estimates are within an order of magnitude of estimates based on a preliminary survey of divers at the Yukon. INTRODUCTION The scale and pace of sinking ships to that the Persian Kingdoms built reefs across hips, planes, and other large structures create artificial reefs, especially reefs designed the Tigris River (Hess et al., 2001). In the are finding their way to the bottom of for recreational diving, is increasing rapidly. United States, artificial reefs have been Sthe sea along coasts in North America, Eu- In Florida, over 380 vessels have been sunk around for over 150 years; as long ago as rope, Australia and elsewhere. While many to create artificial reefs. In 2004 the U.S.S. 1830 log huts were sunk off the coast of purists see the scuttling of ships and planes Spiegel, a 510-foot naval vessel, was sunk in South Carolina to improve fishing (Hess et in coastal waters as something akin to dump- the Florida Keys National Marine Sanctu- al., 2001). What differentiates modern arti- ing, more and more coastal communities are ary. To date, over 700 vessels serve as artifi- ficial reefs from past reef making is the scale turning to these structures as a means of pro- cial reefs in the waters off the continental and cost of artificial reefs and the potential tecting shoreline, creating habitat for fish and U.S. coastline. The majority of these ships economic benefits that could be produced sea life, and providing new destinations for are found off the coast of Florida (380), New by the strategic placement and marketing recreational fishing and SCUBA diving tour- Jersey (129), South Carolina (100), and New of artificial reefs. ists (Baine, 2001). In many cases (e.g. the York (65) (http://njscuba.net/reefs/ Creating a ship to reef site can be costly. sinking of the Yukon off the San Diego index.html accessed 9.18.2004). Other states The cost to prepare a ship for reefing can coast), the goal of “ships to reefs” is exclu- lag far behind in the creation of artificial reef range from $46,000 to $2 million, depend- sively to create new destinations for non- structures. For instance, while steps have ing on the size of the vessel (Hess et al., consumptive SCUBA diving; in some cases been made to increase the use of artificial 2001). These costs represent direct outlays ships to reefs are even designated as “no fish- reefs in California, the state has only ten ships by cities, counties, states or not-for-profit ing zones”. Despite the success of these re- currently in place as artificial reefs intended organizations and are considered an invest- gional organizations in raising funds to sup- for recreational diving. ment that is expected to produce economic port ships to reefs, it is never certain that While the attention paid to artificial reef returns. For governments, especially local any one ship to reef site represents a good development has increased dramatically in governments, ships to reefs are intended as economic investment—especially when the the past decade, artificial reefs are not a new recreational revenue sources that will intended goal of a “ship to reef” is limited modern development. Two thousand years stimulate tourism, increase local expendi- to SCUBA recreation alone. ago, the Greek geographer Strabo recorded tures, and support new tax revenues. For Summer 2005 Volume 39, Number 2 47 diving groups and not-for-profits, the returns and gray literature are easily available on the expenditures do not represent net benefits from these investments need not be so obvi- Web. The National Ocean Economics Pro- to the economy, gross expenditures do cap- ous. Acting on behalf of the diving public, gram provides a literature portal that includes ture the magnitude of importance that arti- these groups seek to create new recreational a searchable bibliographic database of ma- ficial reefs may have in the overall local resources that increase the quantity and qual- rine non-market valuation studies economy. Further, gross expenditures rep- ity of dive opportunities for their members. (www.oceaneconomics.org). Similarly, the resent the base upon which tax revenues can The benefits these users derive may not be National Oceanic and Atmospheric Admin- be generated. The promise of increased tax apparent in the market and include the value istration (NOAA) has a Web site that con- revenues may lead local, state, and even fed- of these ship-based dive experiences beyond tains many technical reports on the eco- eral agencies (e.g. National Marine Sanctu- what divers spend in the market. These latter nomic valuation of marine resources aries) to approve the sinking of ships and values, known as non-market values, can be (www.marineeconomics.noaa.gov). Econo- the creation of other artificial reef structures. significant, but often are difficult to measure. mists can use data from these studies and The lure of increased expenditures on dive To better understand the potential eco- on-site data regarding environmental and charters and hotel stays can encourage local nomic benefits of artificial reefs generally, a socio-economic conditions to estimate the businesses to support such endeavors. number of studies have been undertaken to economic value of marine resources that have The non-market value of recreational estimate both the market and non-market not yet been valued rigorously. Less formally, diving is more difficult to determine. Non- values of artificial reefs. In the late 1970s, these studies can be used by non-economists market values represent the value reef users studies began to quantify the economic ben- to better understand the potential range of place on a reef, beyond what they have to efit of recreational fishing and diving on ar- values that may be associated with a marine pay to use the reef. Non-market values are tificial reefs (Daniel, 1976). Over time, the resource or policy. often associated with outdoor recreational accuracy and comprehensiveness of these In this paper, I assess the state of the art resources, including dive sites, and have been studies have grown to provide a more com- in the quantification of the recreational val- shown to generate substantial economic plete picture of the potential economic ben- ues of artificial reefs that may provide recre- value beyond the expenditures generated by efit of artificial reefs. ational experiences that are similar to ships these resources (see Cesar, 2000 and Ships to reefs potentially could support to reefs. I provide an overview of the litera- Pendleton, 1995). These non-market values a number of diverse uses and values includ- ture, describe the kinds of estimated values represent a true net economic value of reefs ing shoreline protection and fishery enhance- in the literature, and provide a non-techni- to divers; these values capture the increase ment or concentration. Nevertheless, ships cal demonstration of how these values could in economic well-being that divers enjoy as to reefs projects are increasingly undertaken be used to gain a better knowledge of the a result of access to reefs. At a minimum, with the primary purpose of supporting rec- potential economic returns of sinking ships funds raised directly from divers to support reational, non-consumptive diving. I focus for SCUBA tourism. the creation of artificial reefs reflect a lower on this limited use of ships to reefs as a con- bound for these non-market values. These servative estimate of their value. (Further, I funds are only a lower bound, however, be- limit the scope of the research to diving in cause most artificial reefs, including ships to order to keep the demonstration of values II. The Economic Value of reefs, are open access public resources; many straightforward and clear.) Recreational div- Artificial Reefs for SCUBA reef users will be able to “free ride” on the ing is a rapidly growing industry and increas- Recreation creation of ships to reefs. ingly artificial reefs are being prepared, sunk, Artificial reefs yield economic benefits In the literature, two primary methods and maintained for the express use of recre- through the enhancement of shoreline pro- are used to estimate the non-market value ational diving. Leeworthy et al. (2005) esti- tection, fishery resources, and recreational of artificial reefs.