3 methodology

3.1 Background for Analysis

Economics is the study of how scarce resources are allocated among alternative uses. Markets allocate privately owned resources. Allocation of publicly owned resources, like the waters of the Columbia River system, is not based on markets and money alone, but reflect other social values through adherence to legal requirements and policies that are shaped by the political process. The Human Effects Analysis of the Framework Process considers many types of human effects to capture the diversity of human purposes and consequences of river allocation.

The primary approach to this analysis of human effects has been to compile and display information and data from existing sources. Major sources of information included previous studies of the effects of proposed fish and wildlife policies, and data on the costs of habitat practices as reported by implementing agencies. New information has been developed regarding hydrosystem operations, fish and wildlife effects, and habitat programs. Sources of information do not cover all of the proposed strategies in the framework. If no existing information is available and new information cannot be developed, effects are noted and described in qualitative terms.

In this section, the methods used in the Human Effects Analysis are described. Section 3.2 describes how the analysis is organized into "human effects categories" and the indicators or measures used to analyze each of the categories. It also describes current conditions for each category of human effect. Section 3.3 describes the sources of data and information used in the analysis. Section 3.4 documents the assumptions used in the analysis.

3.2 Measures of Human Effects

Human effects are effects on people through the economy, changes to social structure and important values, and effects on tribal culture and wellbeing. Economic, social and tribal analytical procedures can provide both quantitative and non-quantitative information useful to the Human Effects Analysis. These approaches depend upon theory and procedures found in economic, sociological, anthropological, physiological and psychological disciplines ? and upon direct description of historic and contemporary circumstances. This human effects analysis attempts to combine such multi-disciplinary procedures in a manner that provides fair and balanced consideration of economic, social and tribal perspectives in the Columbia Basin.

Given the timeframe for analysis, the nature of respective disciplinary theories, and presently available data, it was impossible to conduct this assessment using a single comprehensive cross-disciplinary model. Rather, the Human Effects Workgroup has elected to use "human effects indicators" to represent economic, social and tribal impacts and concerns. These indicators are grouped under the economic, social and tribal perspectives, with the economic perspective represented by two categories, economic efficiency and regional economics. The resulting four categories of human effects are defined below:

• Social Effects - Effects on the social structure and quality of life in the region.
• Tribal Effects - Effects on relatively unique and commonly held values for tribal societies.
• Economic Efficiency - Changes in the net benefit of producing the goods and services that society desires.
• Regional Economic Effects - Changes in output, income, and employment in specific geographic areas of the region.

A limited set of human effects indicators were selected by the Human Effects Workgroup based on their relations to the four categories and the availability of information. The indicators under each category are shown in Table 3-1.
 

Clearly, the four categories of human effects are all interrelated. There are several "human effects indicators," which, arguably, all perspectives would agree are important. Health and mortality, poverty, employment/unemployment, and quality of life are important issues that span the range of interests of Columbia Basin residents. Environmental quality and the continued "existence" of key salmon and wildlife species are similarly overarching issues for the region.

It is unlikely that these human effects indicators will be sensitive to relatively small changes in Columbia Basin fish and wildlife. For example, we would not be able to demonstrate quantitatively that a 10 percent improvement in fish and wildlife equals a 10 percent improvement in mortality rates for dependent persons, or that small abundance changes will resolve "extinction" concerns). However, it may be that these indicators will be responsive to large-scale restorative efforts, at least in qualitative terms. Finally, the ability to identify effects on these indicators is significantly dependent on receipt of requisite impact information from the Ecological Workgroup and other sources.

The baseline levels of some of the human effects indicators are expected to change even without changes in fish and wildlife policy. Human populations and economic activity will continue to grow and are likely to have some effect on fish and wildlife populations. On the other hand, existing policies will work to slow or arrest fish and wildlife declines. There also are a host of policy initiatives that are changing existing conditions almost daily. These include federal, state, and private efforts to improve the condition of the region?s ecosystem. Other trends include declining poverty and mortality. Assumptions about baseline conditions are discussed in Section 3.4.1, and some sensitivity analyses are provided in Section 5.5.

Many economists have noted the Pacific Northwest?s dynamic economy and strong economic performance in recent years. The "Consensus Report of Pacific Northwest Economists" (Pacific Northwest Economists, 1995) noted that employment, real income, and earnings had increased at unprecedented rates during the previous 7-year period. These increases occurred despite declines in traditional natural resource and aerospace industries that eliminated tens of thousands of jobs. Increases in non-traditional employment, primarily electronics and services, accounted for much of the increase. The report finds that quality of life is a major factor driving the regions? prosperity and is closely related to a healthy environment.

Even with the region?s dynamic change, a snapshot of current human conditions in the region provides a background for understanding the effects of the Multi-Species Framework alternatives. The Human Effects Workgroup has collected and reported many types of data about current economic and social conditions and the status of fish and wildlife programs in the Columbia Basin. This database includes data about most of the human effects indicators broken out by states, regions, and counties. Some of these data are presented in Appendix A.

Each of the categories of human effects indicators is described below. Each section discusses the specific indicators and how they are measured. Then current conditions and trends for the indicators are described where feasible. Some understanding of current and expected future conditions is needed to put the estimated human effects of alternatives into perspective. In some cases, it is also important to understand some of the history leading to the current situation. For most human effects indicators, an alternative?s effect on the indicator can be compared to current and expected levels of the indicator to obtain a sense of relative magnitude.

3.2.1 Social Effects

Social effects include economic and non-economic measures related to health, quality of life, and communities. A wide array of indicators has been reviewed including measures of poverty, mortality, unemployment, life expectancy, infant mortality, accidental death rates, crime rates, family violence, educational levels, suicide rates, and many others. There is no one indicator that aggregates and summarizes social conditions. The Human Effects Workgroup selected five indicators to summarize social effects. Only two of these (poverty and mortality) are routinely measured.

Poverty and mortality comparisons are important for Tribes and for analysis of environmental justice impacts. Passive use values, other environmental quality indicators, and other quality of living concerns, such as the cost of living and quality of services, are important human effects. Passive use values are measured intermittently with respect to specific environmental attributes. For environmental quality, overall provision of ecological services provides a qualitative indicator. Quality of life concerns include potential for social, cultural, and community disruptions; noise; congestion; quality of services; and a variety of other qualitative assessments.

3.2.1.1 Current Social Conditions

Poverty is usually defined by an income threshold. In 1996, in Washington, Oregon, and Idaho, about 12 percent of families were below the poverty line. This rate was slightly better than the 13-plus percent poverty rate for the nation. Montana had a substantially higher poverty rate of 17 percent, and tribal poverty rates are even higher (Table 3-2).

Mortality measures by type of mortality include infant mortality, suicide, accidental death, and natural death. These types of mortality can be combined into one measure of deaths per thousand population, or may be reflected in life expectancy. Life expectancy in the four Northwest states (Idaho, Montana, Oregon, and Washington) in 1990 was about 1 to 1.5 years longer than in the United States as a whole. Tribal life expectancy is much less than the regional average (Table 3-3).

Some other indicators of quality of life in the region are less favorable compared to the rest of the country in spite of the reputation of the Northwest as a region with a high quality of life. Crime rates, suicide rates, accidental death rates, and divorce rates are, with some exceptions, higher in the Northwest states than the national average. Education levels, up to college, and high school dropout rates are slightly better than average, again with some exceptions.

Indicators for environmental quality are indicators of ecosystem diversity, quality, and abundance. Specific measures might include air and water pollution measures that are known to be related to environmental factors. The study team collected some data about air and water quality available for discrete points (monitoring stations) throughout the region. The EDT analysis should provide more useful measures in this category.

Table 3-2

Selected Human Effects Indicators of All Citizens and Tribal Citizens of the Columbia Basin
 

Table 3-3

Age Adjusted Death Rates For Tribal Peoples Compared To Other Citizens In the Columbia Basin
 

In general, the effects of fish and wildlife strategies on these measures of social conditions are expected to be subtle. However, they may be significant in specific heavily affected communities or ethnic groups. These effects are identified where possible.

3.2.2 Tribal Effects

Selection of indicators to appropriately represent potential impacts on tribal peoples from implementation of alternative framework initiatives is necessarily cross-cultural. For example, while economic issues are of keen interest to Tribes due to their critical needs for jobs and improved incomes, the Tribes consider spiritual, cultural and life-style values associated with fish and wildlife of paramount importance ? and these cannot be adequately or accurately represented by contemporary economic measures. Expert analysts have described such inappropriate application of non-tribal "text-book" measures to tribal effects as "cultural encapsulation," and point out that they are often inaccurate and misleading (Sue and Sue, 1990). At the same time, the Human Effects Workgroup?s objective in this Framework Process was to select indicators that are understandable to both tribal and non-tribal reviewers.

Selection of the "human effects indicators" discussed earlier is considered a useful starting point. Poverty, unemployment, health/life expectancy, environment, and quality of life resonate with both tribal and non-tribal peoples.

We have attempted to select additional indicators that, if monitored, would inform tribal peoples as to whether framework actions to restore fish and wildlife "were making things better" for the Tribes. We believe that the best way to do this is to directly consider expected improvements, if any, of the selected species salmon, bull trout, bear, beaver, and bald eagle as actions under each framework alternative progress.

Tribal spokespersons remind us that, in their culture, "tribal peoples live as one with the land, the waters, and the fish and wildlife of their home areas." It follows that it is culturally appropriate to consider alternative levels of these selected fish and wildlife species as both appropriate measures of relative abundance and of tribal value. Selection of water quality and habitat capability as tribal indicators of value follows similar reasoning.

This approach to measuring improvement in tribal values provides core indices for comparative measurement between regional citizens in general and tribal peoples. It also provides measures of change to abundance and quality of waters, habitat and selected species?the value of which can be articulated by tribal spokespersons in their own words and on their own terms. And these measures of water quality, habitat, and species improvement also can be tracked and understood by non-tribal citizens.

Finally, the tribal peoples of the Columbia Basin presently survive under circumstances that are extremely adverse, relative to citizens of the region in general. This issue of distribution of wealth, and "relative fairness" for tribal peoples has become more pronounced with publication of environmental justice guidelines by the EPA (EPA 1998). Consequently, the Human Effects Workgroup has incorporated an indicator of relative equity effects between tribal and non-tribal peoples in this analysis.

3.2.2.1 Current Tribal Conditions

Before the coming of white explorers and settlers, the tribes of the Columbia Basin used the lands and the rivers to live?fishing for salmon; hunting game; and gathering roots, berries, and medicinal plants. Analysts report that with a few exceptions, natural resources of the time were abundant?and tribal life was rich and satisfying.

During the ensuing 200 years, uses of Columbia Basin lands and waters have changed, together with the distribution of wealth from these resources. Ancestors of the settlers and later immigrants to the region comprise an overwhelming share of the region?s present day population. Production from the lands and waters of the Columbia Basin also has changed. Today, the Columbia and Snake river systems provide substantial quantities of inexpensive electricity for the region, waters to irrigate crops, a navigable waterway inland to Lewiston, Idaho, and opportunities for disposal of waste products.

While most citizens have prospered, some have fallen behind. Transformation of the rivers and lands of the Columbia Basin has come at a price?significant deterioration of salmon populations and salmon habitat. Between 1900 and 1973, Smith (1979) estimated that commercial catches of Columbia Basin salmon?estimated at 26 million pounds in 1900 - had fallen by 67 percent. By 1997, non-tribal commercial catches had fallen again, and stood at a remnant catch of 0.3 million pounds (Oregon Department of Fish and Wildlife and Washington Department of Fisheries, 1998). This is only 1 percent of Smith?s 1900 estimate. Commercial fishing closures, and recently, stock listings under the ESA, have attended these declines, and the adverse impacts from these events can be observed in fishing communities on the Columbia River and along the coast.

Similarly, the thirteen Tribes dependent upon Columbia Basin salmon and lands have suffered greatly, while citizens of the region as a whole have prospered. In the mid-to-late-1800s the Tribes gave up most of the lands of the basin and moved to reservations. They did so with assurances from the United States, in many cases stipulated in treaties, that they would have sufficient resources to live peacefully and to prosper. At the heart of these assurances was the right of continued access to salmon at usual and accustomed places, and of undisturbed use of their reservation lands.

Transformation of Columbia Basin?s rivers has largely destroyed the salmon, and turned the treaties and assurances into empty promises. With construction of Grand Coulee and Chief Joseph dams, salmon harvests by the roughly 18,000 persons of the Colville, Spokane, Kalispel, Coeur d?Alene, Salish, and Kootenai tribes were effectively lost. The Shoshone-Bannock and the Shoshone Paiute?high up in the Snake River system?harvest only a few salmon. The Nez Perce fishing above the Lower Snake River dams take about 1 percent of traditional harvests?while they, and the Yakama, Umatilla, and Warm Springs, fishing in Zone 6 of the mid-Columbia River, take less than 10 percent of their traditional totals.

These adverse effects on the tribes have been exacerbated by substantial preemption of tribal treaty lands, particularly rich bottom lands suitable for agriculture and grazing. Sanctity of reservation lands was the other core guarantee given the Tribes at the time their reservations were defined?but this promise also was not kept (Meyer, 1999). These losses are summarized in Table 3-4.

Table 3-4

Losses of Reservation Lands By Tribes of the Columbia Basin
 

Source: Meyer Resources, 1999

Taken together, destruction of the salmon and wholesale taking of tribal lands have had predictable effects on the well-being of tribal peoples. The greatest of these have been cultural and religious.

Data about tribal poverty, unemployment, and per capita income, as of the 1990 census, are provided in Table 3-2. Comparative state data are provided for ease of reference?with data for all residents of each state provided first, then data for each tribe "home based" in that state.

Finally, numerous writers identify that levels of material well-being and self-sufficiency powerfully affect physical and psychological health (for example, Maslow). Table 3-3 provides contemporary baseline information concerning the relative age adjusted death rates of tribal peoples, compared to other citizens, in the Columbia Basin. Similar data for Montana were not readily available.

In sum, present circumstances in the Columbia Basin show substantial wealth distributions flowing to citizens in general from the activities that now dominate the Columbia Basin. The salmon resources, together with the people who depend on them, have been decimated. These are the present circumstances that help define the re-balancing needs of the framework process.

3.2.3 Economic Welfare Effects

Economic welfare effects focus on benefits and costs. These effects are most readily identified and measured at the industry level. Eight industry indicators were identified?fisheries, hydropower, recreation, transportation, agriculture and other water users, forestry, mining, and implementation costs. Implementation costs are the direct cost of implementing a strategy as opposed to its direct effects on economic activity in one of the related economic sectors.

Most of the welfare analysis is concerned with economic costs and benefits of changes in economic activity. In theory, economists use economic demand and supply functions (relationships between prices and quantities bought or sold) to measure economic benefits (areas under demand functions) and economic costs (areas under supply functions). "Net" benefit, the difference between benefits and costs, is the measure of change in economic welfare. Net benefits are also equal to consumer and producer surplus.

Consumer surplus, willingness to pay above actual price, cannot be directly measured because it is not included in money transactions. Rather, economic demand functions must be estimated, and consumer surplus is the area above price but below the demand function. Producer surplus is revenue of producers minus all costs. In economic supply relationships, producer surplus is the area below price and above the supply function. Producer surplus is included in monetary transactions, but it is still difficult to measure because of complex relationships between markets, supplies, and opportunity costs. To simplify, and consistent with standard practice, producer surplus is measured as change in value of production net of incremental costs.

A variety of factors discussed below suggests that consumer surplus effects in most industries should not be important, especially at the regional level. Prices of agricultural commodities and natural resources are set by international markets so producers cannot change the price they charge consumers in response to changes in costs. Recreation and hydropower are the exceptions. For recreation, consumer surplus is estimated as willingness to pay minus cost. For hydropower, increased costs are passed to ratepayers.

In social benefit-cost analysis, costs and benefits are counted without regard for the location or residence of the affected humans. Conceptually, estimates of net benefits can be obtained for different groups of people such as residents of the United States, or alternatively, residents of the Columbia Basin. To the extent possible, the Human Effects Analysis specifies which specific group is affected when presenting results. Measurement of economic surplus is complicated at the regional level because some producers, such as shareholders of a public company, and some consumers of regional products, such as buyers of agricultural exports, do not live in the region. Also, information about the supply and demand characteristics for various local products and industries often is lacking. In general, this analysis reports benefits and costs received and paid by U.S. citizens.

Economic efficiency indicators lend themselves better to quantification of discrete changes than do many of the non-economic estimators. However, even here, analytical accuracy will depend on the accuracy of direct impact estimates, both biophysical and economic, associated with each framework alternative identified.

3.2.3.1 Current Economic Efficiency Conditions

There are no measures readily available that can be used to gauge the current level of economic costs and benefits. Thus, while changes in economic welfare can be estimated, there is no commonly measured baseline that can be used for comparison. Limited comparative information is available for some industries. A measure of net benefit provided by Columbia River commercial fisheries is provided as Table 4-16 (see Section 4).

3.2.4 Regional Economic Effects

Regional economic effects are economic measures commonly used to describe economic impacts to regions. The main purpose of this category in the framework analysis is to identify and describe impacts to humans living in specified geographic areas where implementation of the alternatives is likely to have the most pronounced effects. Regional economic measures are meant to provide some of the information required for regional economic development accounts.

Regional economic effects are related to economic efficiency effects in that both stem from direct effects on industries. Efficiency and regional effects differ, however, in important ways. Efficiency analysis is concerned with net economic value; regional analysis is typically concerned with the total value of sales, income, or employment. Efficiency analysis normally takes a national perspective, while regional economic development analysis normally is concerned with regional residents. In regional economics, the distribution of expenditures among an industry?s owners, workers, consumers, and suppliers, and the location of these affected persons is important. The locations of affected businesses and people, and where they spend and earn their income, determine regional effects.

The regional analysis uses value of output, personal income, and employment as human effects indicators. Each of these has some useful features and drawbacks as indicators of regional economic activity.

Total value of output at the national level is most commonly measured as gross domestic product. At the state level, it is called gross state product. To avoid double counting, gross state product is measured net of the value of those intermediate goods used in their production. Therefore, the annual value of sales in a state far exceeds the annual gross state product. The value of sales, by definition, is exhausted in payments for intermediate goods, labor, economic rents, profits, and indirect taxes. Value of output, being net of intermediate goods, includes employee compensation income, property-type income, and indirect business taxes (primarily excise and sales taxes paid by individuals to businesses) paid by industries in the state.

Value of output is paid by industries in the region, but not necessarily to regional citizens. Therefore, value of output should not be used to suggest payment to regional residents. Similarly, the output may be bought by regional residents or it may be exported. Therefore, no inference about consumer values can be made from value of output alone.

Personal income is measured by place of residence rather than place of work. It includes wage and salary earnings, proprietor?s income, dividends and interest, and transfer payments, among other sources. Some of these payments, transfer payments for example, are largely net benefits from the perspective of regional residents. Other payments represent factor sales that were provided at some cost, so they are greater than net benefits. Incomes are not themselves net benefits because employees and other factor owners incur costs, especially opportunity costs, to provide them. Also, new incomes generated in a region may not be paid to regional residents. Current residents, for example, may be unqualified for the new work, so non-residents must be hired to meet qualifications.

Employment, like output, is normally measured by place of employment rather than place of residence. New employment in a small region often results in immigration, and loss of jobs can result in out-migration from a region. Relationships between regional employment and income also are complicated by social unemployment and retraining programs, and the level of skill and desirability of alternative types of employment. Thus, no one of these indicators is the perfect measure of the level of net economic welfare. However, when it comes to measuring change, these indicators are often closely correlated, moving in the same direction at the same time

3.2.4.1 Current Regional Economic Conditions

The value of output depends on the size of a state or region in terms of its people and resources. Washington, Oregon, Idaho, and Montana combined reached a regional gross state product of about $320 billion in 1997, with a population of 11 million people. Alaska would add another $25 billion of production and 600,000 people. Washington and Oregon accounted for about 85 percent of the four-state production, with a large share of that occurring west of the Cascades. Some regional economic data for the regional states in recent years are provided in Appendix A.

Industries that rely directly on natural resources for their production, including agriculture, forestry, fisheries, lumber, paper, mining, and electric and gas utilities, are most likely to be affected directly by changes in fish and wildlife policies. These industries accounted for $29 billion, or about 9 percent, of the four-state regional production. Idaho, Montana, and Alaska are relatively more reliant on natural resource based industries; at 14, 17, and 25 percent, respectively.

Other economic sectors rely indirectly on natural resources. These include tourism, many recreational activities, and, to some extent, industries that rely on a quality environment to attract and retain quality employees. Industries that thrive in high quality environments are the locus of many of the beneficial economic effects from fish and wildlife programs. However, categories of gross state product are not organized in a way that facilitates direct identification of these types of activities.

Total personal income in the Northwest (four states) for 1997 was $270 billion, or about 85 percent of gross regional product. The two numbers are similar because most personal income received in the region is paid by industries operating in the region, and most payments by regional industries go to regional residents.

Personal income is available for county and metropolitan areas, so it is a useful indicator for the distribution of producer surplus plus transfers received within the region. In 1997 about 73 percent of that $270 billion of personal income was received west of the Cascades in Oregon and Washington. About 57 percent of the region?s personal income was received in the major metropolitan areas of Seattle, Tacoma, Portland, Spokane, and Boise.

Personal income per person averaged about $25,000 in 1997 in the four-state region. However, for Idaho and Montana, it was closer to $20,000. Per capita income varies substantially among parts of the region and social/cultural groups. Among the counties located in the regions evaluated in this report, per capita income varied from a low of $12,000 to a high value of $24,000. Across the four states, per capita income for blacks was 25 to 40 percent below that of whites, and per capita income for American Indians and Eskimos was 35 to 53 percent below that of whites.

Total employment in the four-state region was 5.5 million persons. The same resource-related industries listed above accounted for less than 10 percent of this employment. Services, trade, and government activities accounted for most regional employment and have been growing in share for the last few decades.

3.3 Sources of information

The Human Effects Analysis is based on three types of information (1) economic and social theory, (2) results of existing studies, and (3) new analysis. It has pulled together many different analytical results and information from existing sources, and some new analysis has been completed by building on existing information and using existing models.

3.3.1 Economic and Social TheoryEconomic and social theory provides useful non-quantitative information for the Human Effects Analysis. A combination of theory and general information can suggest the kinds of effects that might be expected, whether the effects on identified groups are important, the direction of effects, and the factors that may be important in determining the size and distribution of effects.

Economic linkages are one important set of ties that bind people together in a society?the trade of goods and services, prices and values, and the roles of people in the economy. People have economic roles as workers, owners of businesses or of factors of production, taxpayers, consumers of goods and services, and as residents and homeowners. The economic effects to people in these different roles are conditioned by demand and supply conditions in the markets they participate in as well as by regulatory, social, and historical factors that shape the economy. Economic theory provides guidance about likely market conditions and subsequent economic effects.

Demand and supply are important economic concepts for several types of effects. Demand elasticity, for example, is the percent reduction in quantity demanded caused by a percent increase in price. If demand is elastic, a percent increase in price causes more than a percent reduction in quantity purchased. Demand for Northwest agricultural products is generally elastic because the Northwest provides a small share of the world market for agricultural goods. Cost increases cannot easily be passed to customers and, therefore, costs must be absorbed by the agricultural industry. If demand is inelastic, on the other hand, increased costs can be passed to customers to a greater degree. Retail electricity demand is generally inelastic, but market trends may be changing how much increased power cost can be passed to customers.

Social and cultural linkages involve non-economic relationships among individuals, groups, and the environment. Important social linkages include relationships between law, policy, and communities, between economic effects and social-well-being, and linkages with community and family cohesion. Important cultural linkages include commonly held values, human values for preservation of natural systems and features, and tribal values regarding traditional ways of life.

The concepts described above are necessary to determine the economic and social effects of an alternative across various regions and groups of people. For example, social concepts affect how an alternative may be implemented. Law and public policy determine if regulation, acquisition, or subsidy will be used, and how costs are allocated to the BPA, state governments, federal government, or to private interests. For costs paid privately or passed to private interests, economic concepts determine how a change in cost will be allocated throughout the economy. Elasticity of demand and other economic factors allocate costs among consumers, producers, workers, and others.

3.3.2 Existing Studies and Information

Existing studies and information are available from many sources. These sources are cited below as they are referenced, and a list is provided in the References section (Section 6). In almost all cases, the available economic or social effects analysis was developed for past or proposed actions that were not identical to those proposed for the Multi-Species Framework Process. The ability to extrapolate from the available studies to the Multi-Species Framework alternatives was a major analytical challenge for the Human Effects Analysis. Readers should refer to these studies for a full understanding of their scope and limitations.

The most important sources of quantitative information are:

• Numerous studies produced by and for the Drawdown Regional Economic Workgroup (DREW) of the COE Lower Snake River Juvenile Migration Feasibility Study (the Feasibility Study) or by the COE itself. These studies include analysis of benefits, tribal impacts and values, and economic costs associated with alternative actions on the Lower Snake River.

DREW investigated the economic benefits associated with drawdown of the Lower Snake reservoirs. B. The main alternatives investigated for DREW were:

A1: Present condition baseline
A2a: A2 with maximum transport,
A2b: A2 with system improvements,
A3a: Lower Snake to natural river, 0.427 MAF flow augmentation.

The John Day Drawdown Study, due for public release in early 2000, is used for most cost forecasts associated with breaching or drawdown of that facility. The exception is that, for water supply costs, data from PACAM Engineering and IRZ Consulting (1991, 1991a) are used.

It should be noted that members of the Human Effects Workgroup did not all agree on the validity or accuracy of these COE studies.

• Numerous studies from the BPA and the Northwest Power Planning Council (NWPPC) regarding hydropower costs and values, market conditions, and costs of ongoing and proposed habitat and hatchery modifications.
• Studies produced by the Interior Columbia Basin Ecosystem Management Project (ICBEMP) regarding the effects of changes in forestry, recreation, and grazing on federal lands.
• Numerous publications from other federal and state sources, especially the U.S. Department of Agriculture (USDA), U.S. Bureau of Reclamation (USBR), EPA, USGS, and National Marine Fisheries Service (NMFS).

3.3.2.1 Geographic Scope

The Human Effects Workgroup developed a preferred set of regions for display of certain types of economic information. However, the Human Effects Analysis displays information organized around several different spatial units because many important types of information were available on a watershed, ecological province, or geopolitical basis. Figures 3-1a and 3-1b show ecological provinces, states, and the preferred economic regions chosen by the Human Effects Workgroup.

3.3.3 New Analysis

Several new analyses have been developed and completed for the Framework analysis. Hydrosim model runs have been used to estimate the amount and value of hydropower production under the alternatives. These results also have been used to estimate change in flows and reservoir storage in mainstem reservoirs. Hydrologic results currently are not used directly in the Human Effects Analysis.

Facility modifications are an important part of the costs of some Framework alternatives, and these modifications should improve water quality, and fish passage and survival. Cost data were provided by the COE and EPA, and packages of modifications were developed for each alternative.

A preliminary habitat cost analysis is included in this draft. The analysis uses information about amounts of acreage by land use, cost data from a variety of sources, and assumptions about amount of land affected to estimate habitat costs. The method, while based on assumptions, does provide a large package of potential habitat practices that can be applied when information about changes in land use is available from the EDT.

The EDT has provided preliminary estimates of chinook salmon run sizes under current conditions and under each Framework alternative. The estimates include natural and hatchery fish, and run sizes are provided for each ecological province. Preterminal harvest levels are based on harvest assumptions specified for each alternative, and additional harvest potential is estimated for each alternative.

3.4 Key Assumptions

This section describes several assumptions that were made in the Human Effects Analysis. These assumptions fall into three categories. The first is a set of assumptions about conditions that are common to all of the alternatives. These could be considered base case, or without-project assumptions. In many cases, these are not so much specific assumptions as a characterization of what would exist in the absence of the actions specified in the alternatives.

The second category of assumptions includes specific analytical assumptions, such as discount rates, economic growth, and the base year. Generally, these have been adapted from the DREW analysis for the Feasibility Study to be able to directly use results from that analysis.

Finally, the third category of assumptions specifies the allocation of the costs of strategy implementation. These allocations are ultimately a political decision. These assumptions are in no way a prediction of actual allocations in the future or a recommendation for future allocations. It has been necessary, however, to make some assumptions about these allocations to analyze human effects, especially regional effects. Positive regional effects will occur where expenditures increase, but the location of offsetting adverse effects is determined by who pays.

[Figures  3-1a and Figure 3-1b not included in online version]  

3.4.1 Common Assumptions

Common assumptions are the assumed conditions that apply to any future, including all Framework alternatives. Selection of common assumptions is important to the Human Effects Analysis because economic and social effects are strongly influenced by underlying physical, economic, social, and cultural conditions. The important common assumptions are that (1) programs and policies generally continue in their current form, and (2) human population increases, but current programs are, at a minimum, able to stabilize fish and wildlife populations at current size and risk of extinction.

No specific analysis of these assumptions was conducted for the Human Effects Analysis, but some of the assumptions are implicit in the models and data used in the analysis. The general assumptions selected for the analysis, some specific examples, and the implications of this selection, are discussed below.

3.4.1.1 Existing Facilities, Programs and Policies

Existing facilities, programs, and policies are assumed to continue in the future unless specified otherwise. Examples include water storage, navigation, and fish passage facilities; reservoir operating rules and criteria; federal treaties and laws such as the Clean Water Act (CWA), ESA, Federal Power Act, Northwest Power Act, National Forest Management Act, and the Federal Agriculture Improvement and Reform Act. Relevant state laws include water rights and environmental laws and initiatives. Federal and state laws also are defined by their related court decisions, rules, and enforcement. All federal, state, and local laws and policies are assumed to remain at their current status unless specifically changed by an alternative. For example,

• No new reservoir or related facilities would be built or removed.
• No new water rights would be granted unless they would not adversely affect ecosystem conditions or fish and wildlife populations. Diversions could increase within the limits of existing rights.
• Mainstem reservoir operating rules and criteria would be as defined by the 1998 Bi-Op.
• Harvest regulations would continue as they are today. Common assumptions include the 1999 U.S. v. Oregon settlement and the 1999 Pacific Salmon Treaty (PST) with Canada. Fish populations also would remain about as they are now, so harvest levels would be as they are under late 1990s conditions. The PST may affect harvest in ways that are not yet well understood and that have not been considered here.
• BPA would continue funding of projects defined as ongoing. "New" projects, as defined by the FY2000 funding process (BPA, 1999), are not included. Proposed projects are shown in Appendix B. State programs to fund habitat and other improvements also would continue at existing funding levels (in real dollars) in their current form. Federal investments also would continue through the USDA?s ongoing conservation programs and cost-sharing provided by other existing federal programs.
• Management of forest and rangeland resources managed by the USDA Forest Service and the USDI Bureau of Land Management would be guided by the interim PACFISH and INFISH strategies (USDA Forest Service/USDI BLM, 1995; USDA Forest Service, 1995); or by revised management direction that may result from the Interior Columbia Basin Ecosystem Management Project process, which would be at least as resource protective as PACFISH/INFISH direction (USDA Forest Service/USDI BLM, in press).
• Hatcheries in place include those existing or approved for construction now. Other hatcheries in planning but not approved for construction, such as those included in the "Fed1" list, are not included.
• The CWA would continue in its current form (that is, including the on-going development and implementation of total maximum daily limits (TMDLs) for water-quality limited streams), and current levels of enforcement and non-compliance would continue. (Section 5.5 includes a sensitivity analysis of this issue.)

Implications: All currently planned and funded habitat and hatchery improvements are assumed to be part of all alternatives and their costs or benefits will be the same for all alternatives. Therefore, they are not counted as a part of the costs of alternatives unless they are specifically excluded by the alternatives, in which case they are benefits. Any impacts on ecosystems or populations from common assumption programs and policies are not attributed to the Framework alternatives.

Modifications at major dams and other hydrosystem facilities vary by alternative, so compliance with CWA standards below these facilities may vary among alternatives. Habitat improvements in the alternatives would affect these activities in ways that should improve CWA compliance. Therefore, benefits of CWA compliance vary among the alternatives. Reduced CWA compliance costs under the Framework alternatives is a potential benefit discussed in Section 4, but these benefits are not quantified.

3.4.1.2 Status of Ecosystem and Biological Resources

Specific examples include fish and wildlife population levels, ecosystem degradation or succession, amount and quality of habitat, pollution levels, and genetic integrity of species of concern.

There is no generally accepted information about trends in biological resources given the programs in effect today. Therefore, two alternative perspectives are adopted. In one perspective, the condition of biological resources in the future is assumed to remain the same as today unless specifically changed by an alternative. That is, given the programs and policies in place as described above, there would be no net degradation or improvement in ecosystem conditions or biological resources. Specifically,

• No new species of fish and wildlife would be listed pursuant to the ESA. It is recognized that this may not be true, but at this point, there is no information about which species might be listed and how resource management might be affected.
• The programs and policies in place now would not be expected to recover endangered species. The current status of endangered species would not improve or decline. Stated differently, their chances of recovery or extinction would not change.
• Harvest would continue at rates defined by current populations and policies.

Results of the preliminary EDT analysis of chinook salmon populations levels for Alternative 4 predict that natural salmon populations will not increase much (14 percent) relative to current levels. This finding is generally supportive of the common assumptions. The Alternative 4 analysis suggests increased numbers of hatchery fish, but harvest rates are assumed to be the same as under current conditions.

Implications: Alternative assumptions are that ecosystem and endangered species conditions would either improve or decline given the programs and policies in place. If the assumption of improving conditions were adopted, then improvements caused by the alternatives might be less valuable. If the assumption of continued degradation were adopted, then the alternatives might be more valuable.

Section 5.5 describes the implications for the Human Effects Analysis if, absent the alternatives, the condition of biological resources is assumed to decline relative to today. Even with all the restoration and mitigation measures in place now, populations might decline, ecosystems might degrade, pollution levels might increase, and the amount and quality of habitat might decrease. In general, this scenario increases both the benefits and costs of the alternatives. Additional costs are required to attain the ecosystem visions of the alternatives, but additional benefits are obtained because ecosystem benefits in a without-alternatives future are reduced. Alternatively, if current programs and policies would improve the status of fish and wildlife populations, then less cost would be required to attain the visions, but less benefits would be obtained because the value of incremental improvements would be less.

3.4.1.3 Population and Economic Growth

The Human Effects Analysis adopts the conventions used by DREW (USACE, 1999a). Human population and the size of the economy will continue to increase.

Implications: Demands for recreation, power, and food will increase. With the other assumptions, additional electricity demand caused by population growth would be met by thermal generation, conservation, or imports.

3.4.1.4 Technological Development

Technology is assumed to be unchanging unless expressly stated otherwise. One known exception is that DREW assumed that improving combustion turbine technology will result in more efficient thermal power generation in the future.

Implications: Implications of a constant technology are unclear because new technologies and their effects cannot be predicted. New computer technologies, for example, are a near certainty, but their implications are unknown. Some may be used to improve information for selective harvest, for example, while others may be used to increase harvest.

3.4.2 Analytical Assumptions

Analytical conventions involve the selection of discount rates and price levels, the base year for displaying results, and the period of analysis. The Human Effects Analysis uses and modifies analytical conventions from DREW as summarized below.

3.4.2.1 Discount Rate and Price Level

Three discount rates were used in DREW, including the federal rate of 7<ombumedia data-ombumedia="{"fid":"16211","link":"","link_options":0,"position":"default","view_mode":"full","title":"1_8th.gif","type":"image"}"></ombumedia> percent, the BPA rate of 4 ? percent, and 0.0 percent for the Tribes (USACE, 1999a). The Human Effects Analysis adopts the 4 ? percent rate where appropriate. Human effects occurring far in the future are displayed in physical units or real dollars at that time. That is, some future benefits are shown in the year they occur without discounting in 1998 dollars. All other economic costs and benefits are presented in 1998 price levels. If the higher rate were used, annualized economic costs of the alternatives would be larger. If the lower rate were used annualized economic costs would be less. Recreation benefits would be less if the higher rate were used, and more if the lower rate were adopted. Fisheries benefits would be unaffected in any case because no discounting of future benefits is used.

3.4.2.2 Base Year

All benefits and costs for each alternative analyzed by DREW were brought forward, or discounted, as appropriate, to FY 2005, and were subsequently annualized at the appropriate discount rate. The Human Effects Analysis adopts this convention where feasible.

3.4.2.3 Period of Analysis and Forecasting

A 100-year period of analysis was adopted by DREW. The Human Effects Analysis adopts this convention where feasible. Population and economic projections were carried out to 20 years only. Projections of salmon survival are extended beyond the 20-year limit to account for the necessary salmon recovery period.

3.4.3 Cost Allocation Assumptions

The question of who pays how much for the additional costs of the alternatives is an important issue for the Human Effects Analysis. Assumptions about future policies and market conditions are required in order to estimate economic and social effects on different regions and groups. Federal and state laws define who is assigned to pay the costs, but market conditions affect how the costs are distributed among groups such as consumers, producers, and workers.

The following cost allocation assumptions were adopted for this analysis.

• For the implementation of strategies affecting private property, it is generally assumed that no impairment to private property rights would occur. Positive incentives would be used. For acquisition of private land, water, or commercial fisheries, lease, purchase, subsidy, and similar economic incentives would be used to accomplish management objectives. One exception is that the current analysis includes a fish screening program that would require a 35 percent cost contribution by water diverters.
• For habitat actions, costs are assumed to be paid one-third by regional retail electricity ratepayers, one-third by regional (state and local) governments, and one-third by federal taxpayers. These costs shares are based on recent patterns of expenditure. The states of Washington and Oregon, and federal programs will continue to pay for an important share of ongoing habitat programs in the region.

• Water-based transportation and recreation users have no property interest in the water they enjoy. Therefore, it is assumed that any adverse economic effects would not be compensated. Recreational users include sport fishers and all forms of flatwater and riverine recreation.
• On public lands, it is assumed that objectives would be accomplished by changes in the mandates and/or regulations of public agencies. These mandates could result in costs and adverse effects for private forestry, grazing, and recreation interests without compensation.
• Power users are assumed to pay the costs of replacement power supplies, costs of facility modifications, hatcheries, harvest buy-outs, and one-third of habitat costs. No new institutional arrangements with respect to the region?s power industry/supply are assumed to occur.

It is recognized that some losses to private land owners may not actually be compensated. Regulation without compensation may be used. For example, "take limitations" under the ESA impose some responsibility on water diverters, and the CWA may require private costs that are not compensated.

The following market characteristics are assumed.

• Demand for BPA power is inelastic. Not only are power users assigned the costs described above, but wholesale and retail customers are willing to pay higher power costs without much reduction in their use of power. Power price increases caused by replacement costs or recovery costs passed to electricity consumers will be absorbed without reduced electricity use.
• Product demand for regional natural resources industries; agriculture, forestry, and fisheries, is elastic. Therefore, these industries cannot pass costs to consumers, so increased costs are reflected in reduced net returns to owners in the natural resource industries.

Implications: The assumptions described above are believed to be generally consistent with current law, policies, common practices and market conditions. The study team recognizes that policies may change as a result of national and regional decisions, and several variations are possible. First, tribal interests have expressed concerns about the assumption that impacts to private lands would be compensated on the basis that tribal properties and resources were taken without compensation. Therefore, compensation for private property owners may not be justified on the basis of equity.

Second, a policy is infeasible if cost allocation is assumed that actually could not occur because of market conditions. For example, our assumption that power demand is inelastic may not be true under some market conditions. Implicitly, it is assumed that electricity net revenues (sales minus all other costs) will be large enough to cover the new costs. An Analysis of the Bonneville Power Administration?s Potential Future Costs and Revenues (NWPPC, 1997a) shows why this may not be feasible. A range of possible future fish and wildlife mitigation scenarios was considered under high, medium, and low electricity prices. Some results are shown in Table 3-5.
 
 
 

The results of the NWPPC study shows that, with higher market prices, BPA could support even the most expensive fish and wildlife scenarios. BPA could show positive long-run net returns in most fish and wildlife scenarios under the medium electricity price scenario, continuing operations with positive net revenues. Under the 1995 Bi-Op, for example, BPA customers were expected to save a present value benefit of $8.5 billion during the next 20 years compared to market priced power. If electricity prices decline in real terms (the low electricity price scenario), BPA would be unable to meet its financial obligations in most of the fish and wildlife scenarios considered.

Short-term financial difficulties could occur in most fish and wildlife scenarios that include drawdown (Short-term results are not shown in Table 3-5). Short-term difficulties might be met with financial reserves, but the negative long-run net revenues in Table 3-5 suggest that, with increased costs and lower revenues, BPA might require outside funding, probably federal, to continue operating. Implicitly, the Human Effects Analysis assumes that electricity market prices will be sufficient to support the cost share assigned by assumption above. Sensitivity analysis in Section 5.5 is used to consider the potential for less ability to pay in the power sector.