ECONOMIC ANALYSIS OF CRITICAL HABITAT DESIGNATION FOR THE HAWAIIAN MONK SEAL Final Report | November 12, 2014 prepared for: National Marine Fisheries Service prepared by: Industrial Economics, Incorporated 2067 Massachusetts Avenue Cambridge, MA 02140 617/354-0074 Final Economic Analysis – November 12, 2014 TABLE OF CONTENTS EXECUTIVE SUMMARY CHAPTER 1 | INTRODUCTION AND BACKGROUND 1.1 Introduction 1-1 1.2 Background 1-2 1.3 Overview of Species and Habitat 1-3 1.3.1 Hawaiian Monk Seal Biology and Habitat Requirements 1-3 1.3.2 Threats and Human Activities 1-4 1.3.3 Description of Study Area 1-5 1.4 Organization of Report 1-7 CHAPTER 2 | FRAMEWORK FOR THE ANALYSIS 2.1 Introduction 2-1 2.2 General Analytic Framework for the 4(b)(2) Process 2-1 2.2.1 Benefit-Cost Analysis and Cost-Effectiveness Analysis 2-1 2.2.2 Process for 4(B)(2) Exclusion Decisions 2-3 2.3 Framework for the Economic Analysis 2-4 2.3.1 Baseline for the Economic Analysis 2-5 2.3.2 Identifying Incremental Impacts of Critical Habitat Designation 2-6 2.4 Presentation of Results 2-9 2.4.1 Geographic Scope 2-9 2.4.2 Analytic Time Frame 2-10 2.4.3 Discounting Impacts Over Time 2-10 2.5 Summary 2-10 CHAPTER 3 | IN-WATER AND COASTAL CONSTRUCTION ACTIVITIES 3.1 Introduction 3-1 3.2 Profile of Transportation and other Coastal Construction Activities 3-4 3.2.1 Transportation Infrastructure 3-4 3.2.2 In-water and Coastal Infrastructure 3-5 3.3 Regulation of In-water and Coastal Construction Activities 3-6 3.3.1 Department of Land and Natural Resources Permitting 3-6 3.3.2 General Permit for Small Scale Beach Nourishment 3-7 3.3.3 Standard Local Operating Procedures for Endangered Species in the Central and Western Pacific Region (Pac-SLOPES) 3-8 3.4 Methodology for Evaluating Impacts to In-water and Coastal Construction Activities 3-9 3.4.1 Projected Level of Future In-Water and Coastal Construction Activity 3-9 i Final Economic Analysis – November 12, 2014 3.4.2 Impacts of Additional Conservation Efforts 3-14 3.4.3 Administrative Costs 3-15 3.5 Results of In-water and Coastal Construction Analysis 3-16 3.5.1 Impacts Specific to Northwest Hawaiian Islands 3-18 CHAPTER 4 | FISHERIES 4.1 Introduction 4-1 4.2 Profile of Regional Fishing Industry 4-3 4.2.1 Bottomfish and Seamount Groundfish Fisheries 4-4 4.2.2 Coral Reef Ecosystem Fisheries 4-7 4.2.3 Crustacean Fisheries 4-8 4.2.4 Precious Coral Fisheries 4-9 4.2.5 Recreational Fishing 4-9 4.3 Regulation of Fishing Activities in the Study Area 4-11 4.3.1 Recreational Fishing Management 4-17 4.3.2 NWHI 4-18 4.4 Methodology for Evaluating Impacts to Fishing Activities 4-18 4.4.1 Quantifying the Impacts of Additional Conservation Efforts 4-18 4.4.2 Quantifying the Administrative Costs 4-21 4.5 Results of Analysis 4-23 CHAPTER 5 | DREDGING AND DISPOSAL OF DREDGED MATERIALS 5.1 Introduction 5-1 5.2 Extent of Dredging and Disposal of Dredged Materials 5-2 5.2.1 Dredging 5-2 5.2.2 Disposal 5-3 5.3 Regulation of Dredging and Disposal Activities 5-4 5.4 Methodology for Evaluating Impacts on Dredging and Disposal Activities 5-6 5.4.1 Impacts of Additional Conservation Efforts 5-6 5.4.2 Administrative Costs 5-7 5.5 Results of Dredging and Disposal Analysis 5-9 5.5.1 Administrative Costs 5-9 5.5.2 Impacts Specific to Northwest Hawaiian Islands 5-10 5.6 Assumptions and Limitations 5-10 ii Final Economic Analysis – November 12, 2014 CHAPTER 6 | ENERGY PROJECTS 6.1 Introduction 6-1 6.2 Extent of Energy Projects 6-3 6.3 Regulation and Management of Energy Projects 6-7 6.3.1 National Environmental Policy Act: Hawaii Interisland Renewable Energy Program and Hawaii Clean Energy Programmatic Environmental Impact Statement 6-7 6.3.2 Federal Regulation of Energy Developments 6-9 6.3.3 Other Relevant Laws and Regulations 6-11 6.4 Methodology for Evaluating Impacts on Energy Projects 6-12 6.4.1 Impacts of Additional Conservation Efforts 6-12 6.4.2 Administrative Costs 6-13 6.5 Results of Energy Analysis 6-14 6.5.1 Impacts Specific to Northwest Hawaiian Islands 6-14 6.6 Assumptions and Limitations 6-15 CHAPTER 7 | RESIDENTIAL, RESORT AND COMMERCIAL DEVELOPMENT 7.1 Introduction 7-1 7.2 Extent of Development Activity 7-2 7.2.1 Developable Urban Land Within the MHI 7-2 7.2.2 Potential Development Projects Within Critical Habitat 7-6 7.3 Regulation of Coastal Development in Hawaii 7-11 7.3.1 Federal Oversight of Coastal Development 7-12 7.3.2 State and County Oversight of Coastal Development 7-13 7.3.3 Existing Conservation Measures Required 7-16 7.4 Evaluation of Potential Impacts on Coastal Development Activities 7-17 7.5 Results of the Analysis 7-20 7.6 Assumptions and Limitations 7-21 CHAPTER 8 AQUACULTURE 8.1 Introduction 8-1 8.2 Extent of Regional Aquaculture Industry 8-3 8.3 Regulation of Aquaculture in the Study Area 8-5 8.4 Methodology for Evaluating Impacts on Aquaculture Activities 8-6 8.4.1 Impacts of Additional Conservation Efforts 8-6 8.4.2 Administrative Costs 8-7 8.5 Results of Aquaculture Analysis 8-9 8.5.1 Administrative Costs 8-9 8.5.2 Impacts Specific to Northwest Hawaiian Islands 8-10 8.6 Assumptions and Limitations 8-10 iii Final Economic Analysis – November 12, 2014 CHAPTER 9 | ACTIVITIES THAT GENERATE WATER POLLUTION 9.1 Introduction 9-1 9.2 Extent of Activities that Generate Water Pollution in the Study Area 9-2 9.3 Existing Regulation of Water Quality in Hawaii 9-3 9.4 Qualitative Assessment of Impacts to Activities that Generate Water Pollution 9-5 9.4.1 Impacts Specific to Northwest Hawaiian Islands 9-6 9.5 Assumptions and Limitations 9-6 CHAPTER 10 | OIL SPILLS, SPILLS OF OTHER SUBSTANCES, VESSEL GROUNDING, AND MARINE DEBRIS RESPONSE ACTIVITIES 10.1 Introduction 10-1 10.2 Extent of Oil Spills, Spills of Other Substances, Vessel Groundings, and Marine Debris in the Study Area 10-1 10.3 Existing Regulation and Response Protocols Relating to Oil Spills, Spills of Other Substances, Vessel Groundings, and Marine Debris Removal 10-3 10.4 Methodology for Evaluating Impacts on Oil Spills, Spills of Other Substances, Vessel Grounding, and Marine Debris Response Activities 10-5 10.4.1 Impacts of Additional Conservation Efforts 10-5 10.4.2 Administrative Costs 10-6 10.5 Results of Oil Spills, Spills of Other Substances, Vessel Grounding, and Marine Debris Response Analysis 10-8 10.5.1 Administrative Costs 10-8 10.5.2 Impacts Specific to Northwest Hawaiian Islands 10-8 10.6 Assumptions and Limitations 10-9 CHAPTER 11 | MILITARY ACTIVITIES 11.1 Introduction 11-1 11.2 Extent of Military Activities 11-2 11.3 Existing Management of Military Activities within the Study Area with Respect to Monk Seal Conservation 11-3 11.3.1 Marine Corps Base Hawaii INRMP 11-4 11.3.2 Joint Base Pearl Harbor INRMP 11-5 11.3.3 PMRF INRMP 11-5 11.3.4 Other Military Areas Requested for Exclusion Based on Impacts on National Security 11-7 11.3.5 Military Activities on Niihau (Specific Area 12) 11-8 11.3.6 Monk Seal Conservation on Niihau (Specific Area 12) 11-10 11.3.7 HRC Environmental Impact Statement 11-11 11.4 Methodology for Evaluating Impacts on Military Activities 11-12 iv Final Economic Analysis – November 12, 2014 11.4.1 Impacts of Additional Conservation Efforts 11-12 11.4.2 Administrative Costs 11-13 11.4.3 Unquantified Potential Impacts Associated with the Designation of Niihau (Specific Area 12) 11-15 11.5 Results of Analysis of Impacts to Military Activities 11-16 11.5.1 Impacts Specific to Northwest Hawaiian Islands 11-16 11.6 Assumptions and Limitations 11-16 CHAPTER 12 | OTHER IMPACTS OF CRITICAL HABITAT DESIGNATION, INCLUDING: IMPACTS ON NATIVE HAWAIIAN ACTIVITIES; ACTIVITIES IN THE NWHI; BEACH RECREATION AND TOURISM; SCIENTI FIC RESEARCH; AND MISCELLANEOUS ACTIVITIES 12.1 Introduction 12-1 12.2 Impacts to Native Hawaiians 12-3 12.2.1 Background and Demographics 12-3 12.2.2 Potential Impacts on Native Hawaiian Economic Activities 12-4 12.3 Activities in the Northwest Hawaiian Islands 12-5 12.3.1 Future Section 7 Consultations 12-7 12.3.2 Midway Atoll 12-8 12.4 Impacts to Beach Recreation and Tourism 12-9 12.5 Impacts to Scientific Research Activities 12-10 12.6 Impacts to Other Activities 12-12 12.7 Summary of Assumptions and Limitations 12-14 CHAPTER 13 | POTENTIAL ECONOMIC BENEFITS 13.1 Estimating Conservation Benefits 13-2 13.1.1 Economic Methods Used to Value Use and Non-Use Values of Species and Habitat Conservation 13-3 13.1.2 Use and Non-Use Valuation Studies 13-4 13.1.3 Available Literature Valuing Hawaiian Monk Seal Populations 13-5 13.2 Qualitative Discussion of the Ancillary Benefits of Critical Habitat Designation for the Hawaiian Monk Seal 13-8 REFERENCES APPENDIX A: PRESENTATION OF UNDISCOUNTED IMPACTS APPENDIX B: SENSITIVITY OF RESULTS TO DISCOUNT RATE APPENDIX C: INITIAL REGULATORY FLEXIBILITY ANALYSIS AND ENERGY IMPACTS ANALYSIS v Final Economic Analysis – November 12, 2014 EXECUTIVE SUMMARY INTRODUCTION 1.