THE NATIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS ENG MASSACHUSETTS INSTITUTE OF TECHNOLOGY By: M3 020 BENJAMIN R. MOSHER LIBRARIES Bachelor of Science in Civil and Environmental Engineering University of Rhode Island, 1999 Submitted to the Department of Civil and Environmental Engineering in Partial Fulfillment Of the Requirements for the Degree of MASTER OF ENGINEERING IN CIVIL AND ENVIRONMENTAL ENGINEERING at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY JUNE 2000 © 2000 Massachusetts Institute of Technology All Rights Reserved Signature of Author_ Benjamin R. Mosher Department of Civil and Environmental Engineering May 7, 2000 Certified by Dr. David H. Marks James Mason Crafts Professor of Civil and Environmental Engineering Director, MIT Center for Environmental Initiatives Thesis Supervisor Accepted by Daniele Veneziano Chairman, Department Committee on Graduate Studies THE NATIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS By: BENJAMIN R. MOSHER Submitted to the Department of Civil and Environmental Engineering on May 7, 2000 in Partial Fulfillment of the Requirements for the Degree of Master of Engineering in Civil and Environmental Engineering ABSTRACT The four Lower Snake River Dams have been providing irrigation, recreation, navigation, and electricity generation capabilities to residents of the Northwest since their completion in 1975. Meanwhile, salmon populations have gradually been declining to the point that five species of Snake River salmon are now listed as endangered. In 1995, the NMFS released a report citing the Snake River Dams as potential contributors to this decline, sparking a national debate. The diversity of existing studies and opinions surrounding the debate, combined with the complexity of the issues, has created a need for clarification of the estimated costs and benefits of breaching the dams. Recognition of the source and context of all data and conclusions is essential to the formulation of a well-informed analysis. It is in this context that this report attempts to analyze the costs and benefits of breaching the four Lower Snake River Dams through the use of existing in-depth studies, as well as through first-hand data collected during a visit to the region. It is the goal of this report to summarize and clarify the major economic issues and to produce a non-biased analysis, which will aid in improvement of public understanding. In strictly considering the NED models of direct uses of the Lower Snake River Dams with no regards to the net worth of preserving salmon, dam breaching would cost the national economy and its taxpayers an estimated $236 million annually for the next 100 years. Taking into account the existence values of the five species of endangered salmon, the net economic benefit to the nations taxpayers would be $86 million annually. It is important to note that the uncertainties surrounding this controversy are substantial. With few exceptions, this analysis has shown that the USACE/DREW initiative has surpassed any other existing study of the issue to date in both breadth and insight. Numerous groups have attempted to discredit the regional data obtained from a process that they were, themselves, invited to partake in. In interpreting and skewing economic data as a means toward their ends, these groups have slighted the true argument surrounding the controversy, which could be more appropriately argued in a social context. Despite this seemingly unavoidable opposition, the FR/EIS process has proven itself to be revolutionary. As society gains insight into the environmental consequences of its actions, controversies of the form of that surrounding the Lower Snake River Dams are sure to become more prevalent. Though the final result of this controversy has yet to be determined, it is evident from investigation of the existing studies that a unified effort is essential to a well-rounded non-biased analysis. Thesis Supervisor: David H. Marks, Ph.D. Title: James Mason Crafts Professor of Civil and Environmental Engineering ACKNOWLEDGMENTS I would like to take this opportunity to thank everyone who has provided me with guidance, advice and support, both academically and personally. In particular, I would like to thank: Dr. David Marks,for his guidance and helpful advice. His in-depth insight into the relationshipbetween engineeringand the environment has provided me with direction and inspiration. Dr. Peter Shanahan,for introducing me to andfocusing me on this intriguing controversy. His dedication to this project and to all of the MEng. students is extremely appreciated. Dr. Eric Adams for his devotion to teaching and to the students at MIT. The numerous economists and otherprofessionals that took the time to speak with me during my visit to Portland,OR. I would specifically like to acknowledge Dennis Wagner, Gina Trafton, Jim Fredricks, Tim Kuhn, Ed Woodruff, Phil Benge, and Dr. Charles Paulsen. My parents, Angelique and Stephen, and my brother,James, for their love and support. They have been an inspiration to me and without them, I would have never made it thisfar. Most importantly, my wife, Jennifer. It is her love, support, inspiration and encouragement that have allowed me realize my full potential.I will never be able to express in words my appreciationfor all that she does for me. THE NATIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS CONTENTS 1.0 LOWER SNAKE RIVER DAM CONTROVERSY 11 1.1 LOWER SNAKE RIVER FACILITIES 13 1.2 STUDY MOTIVATION 14 2.0 ECONOMIC INTRODUCTION 15 2.1 EXISTING ANALYSES 16 2.1.1 UNITED STATES ARMY CORP OF ENGINEERS 16 2.1.2 OREGON NATURAL RESOURCE COUNCIL STUDY 19 2.1.3 ECONORTHWEST 20 2.1.4 AMERICAN RIVERS 20 2.2 METHODOLOGY 21 2.2.1 MOTIVATION 21 2.2.2 NATIONAL ECONOMIC DEVELOPMENT 21 2.2.3 STUDY ASSUMPTIONS 22 3.0 HYDROPOWER 24 3.1 REGIONAL OVERVIEW 24 3.2 LOWER SNAKE RIVER HYDROPOWER FACILITIES 26 3.3 DREW HYDROPOWER IMPACT TEAM ANALYSIS 29 3.3.1 HYDROREGULATION MODELS 29 3.3.2 POWER SYSTEM MODELS 30 3.3.3 MODEL RESULTS 30 3.3.4 OTHER CONSIDERATIONS 32 3.3.4.1 Transmission System 32 3.3.4.2 Ancillary Services 33 3.3.5 USACE / DREW / HIT CONCLUSIONS 34 3.4 ALTERNATIVE ANALYSES 35 3.4.1 OREGON NATURAL RESOURCE COUNCIL 35 3.4.2 ECONORTHWEST & AMERICAN RIVERS 36 4 RENJAMIN MOSHER THE NATIONAL ECONOMIC EFFECTS OFBREACHING THE LOWER SNAKE RIVER DAMS 4.0 TRANSPORTATION 37 4.1 EXISTING FACILITIES 37 4.2 DREW TRANSPORTATION WORK TEAM MODELING 40 4.2.1 MODAL COST ESTIMATING 41 4.2.2 TRANSPORTATION SYSTEM COST ESTIMATING 41 4.2.3 DREW / TRANSPORTATION WORKGROUP CONCLUSIONS 44 4.3 ALTERNATIVE ANALYSES 45 4.3.1 OREGON NATURAL RESOURCE COUNCIL 45 4.3.2 ECONORTHWEST 46 4.3.3 AMERICAN RIVERS 47 5.0 WATER SUPPLY / IRRIGATION 48 5.1 SNAKE RIVER FACILITIES 48 5.1.1 IRRIGATED AGRICULTURE 49 5.1.2 MUNICIPAL AND INDUSTRIAL PUMP STATIONS 50 5.1.3 PRIVATE WELLS 51 5.2 DREW WATER SUPPLY WORK TEAM ANALYSIS 52 5.2.1 IRRIGATED AGRICULTURE 52 5.2.1.1 Pump Cost Modification Approach 52 5.2.1.2 Farmland Value Approach 54 5.2.1.3 Net Farm Income Approach 55 5.2.1.4 Irrigated Farmland Method Comparison 55 5.2.2 MUNICIPAL AND INDUSTRIAL PUMP STATIONS 56 5.2.3 PRIVATE WELLS 56 5.2.4 SUMMARY OF DREW WATER SUPPLY WORK TEAM 57 5.3 ALTERNATIVE ANALYSES 58 5.3.1 OREGON NATURAL RESOURCE COUNCIL 58 5.3.2 ECONORTHWEST 59 5.3.3 AMERICAN RIVERS 59 5 BENJAMINMOSHER THE NA TIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS 6.0 RECREATION 60 6.1 RECREATION ON THE LOWER SNAKE RIVER 60 6.1.1 RESERVOIR RECREATION 61 6.1.2 FREE-FLOWING RIVER RECREATION 61 6.2 MEASURING RECREATIONAL BENEFITS 62 6.3 DREW RECREATION WORKGROUP 63 6.3.1 SURVEY OF USERS 63 6.3.2 INTERPRETATION OF SURVEY RESULTS 65 6.3.3 RECREATION WORKGROUP RESULTS 66 6.4 ALTERNATIVE ANALYSES 67 7.0 ANADROMOUS FISH 68 7.1 BACKGROUND 68 7.2 SALMON AND THE PACIFIC NORTHWEST 69 7.2.1 PATH ANALYSIS 70 7.3 DREW ANADROMOUS FISH WORKGROUP ANALYSIS 72 7.3.1 COMMERCIAL HARVESTS 72 7.3.2 OCEAN RECREATIONAL HARVESTS 73 7.3.3 AVERAGE ANNUAL BENEFITS 74 7.4 ALTERNATIVE ANALYSES 76 8.0 IMPLEMENTATION / AVOIDED COSTS 77 8.1 IMPLEMENTATION INTRODUCTION 77 8.1.1 USACE, WALLA WALLA, WA DISTRICT 78 8.1.2 ASSUMPTIONS 78 8.2 EXISTING CONDITIONS IMPLEMENTATION COSTS 78 8.3 BREACHED CONDITIONS IMPLEMENTATION COSTS 80 8.4 AMORTIZATION OF COSTS 80 8.5 AVOIDED COSTS 83 BENJAMIN MaSHER 6 BENJAMIN MOSHER THE NATIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS 9.0 NATURAL RESOURCE EXISTENCE VALUATION 84 9.1 PASSIVE USE 84 9.2 DREW PASSIVE USE ANALYSIS 85 9.2.1 SALMON VALUATION 86 9.2.2 FREE-FLOWING RIVER VALUATION 87 9.3 SUMMARY 88 10.0 SUMMARY OF FINDINGS 89 10.1 NET EFFECT ON NATIONAL ECONOMIC DEVELOPMENT 89 10.2 EXISTENCE VALUES 94 11.0 CONCLUSIONS 96 11.1 ECONOMIC FINDINGS 96 11.2 STUDY PROCESS 97 12.0 REFERENCES 99 BENJAMIN MOSI'IER 7 BENJAmMMOSHER THE NATIONAL ECONOMIC EFFECTS OF BREACHING THE LOWER SNAKE RIVER DAMS TABLES TABLE 2.1: USACE ANNUAL COST INCREASE TO BREACH SNAKE RIVER DAMS 18 TABLE 2.2: ORNC ESTIMATED RESULTANT SAVINGS WITH DAM BREACHING 19 TABLE 3.1: PACIFIC NORTHWEST POWER RESOURCES 25 TABLE 3.2: PACIFIC NORTHWEST FEDERAL DAMS 27 TABLE 3.3: SNAKE RIVER DAM DATA 28 TABLE 3.4: ANNUAL AVERAGE HYDROPOWER PRODUCTION OVER SIMULATION PERIOD 29 TABLE 3.5: HIT MODEL RESULTS 32 TABLE 3.6: TRANSMISSION COSTS 33 TABLE 3.7: HYDROPOWER SYSTEM COST SUMMARY ($ MILLION ANNUALLY) 34 TABLE 3.8: TOTAL SYSTEM COST SUMMARY ($ MILLION ANNUALLY) 34 TABLE 3.9: ORNC HYDROPOWER ANALYSIS - SAVINGS WITH RESTORED RIVER 36 TABLE 4.1: TOTAL ANNUAL TONNAGE THROUGH ICE HARBOR LOCK (THOUSAND TONS)