<2I2.-J.OO 3.
Risk Ranking Project
Region 2
Economic/Welfare Ranking
and Problem Analysis
U.S. Environmental Protection Agency
Risk Ranking Work Group
Region 2
February 1991
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Foreword
What are our nation's worst environmental problems? Pesticides in our foods, dwindling
wetlands, toxic wastes, the hole in the ozone layer, radon lurking in the basement, acid rain,
closed beaches, and urban smog are among the many problems that pose threats to our health,
to the environment, and to our well being.
Over the last 20 years, the Environmental Protection Agency (EPA) has been given
responsibility to deal with many of these problems under a patchwork of legislative mandates.
Given the scarcity of resources available to confront the expanding list of threats to public
health and to the environment, we need to know what the worst environmental problems are in
terms of risks to people, natural systems, and our welfare. Then, we must assess whether our
priorities make sense in light of the relative risks posed by these problems.
On a national level, Unfinished Business: A Comparative Assessment of Environmental
Problems, a landmark study published by EPA in 1987, was designed to start answering these
questions. In January 1990, EPA's Office of Policy, Planning and Evaluation requested that the
seven EPA regions which had not yet completed comparative analyses of the risks posed by
environmental problems at the regional level undertake such studies.
In Region II, a work group composed of staff members with varied backgrounds,
representing each of the divisions was created, and asked by the Regional Administrator to
undertake the Risk Ranking Project. The work group proceeded to: 1) define the regional list
of environment problems; 2) develop the criteria and methodologies for evaluating the problem
areas; 3) collect data and analyze the risks; and, 4) complete a relative ranking of the problem
areas on the basis of their health, ecological and welfare risks.
On October 1, 1990, the work group presented its rankings and the rationale for its
findings to the Regional Administrator and the region's senior managers. The work group's
recommendations were unanimously adopted by the senior managers.
The Regional Risk Ranking project is composed of four documents. A summary report
contains an overview of the Region II's relative risk rankings for health, ecological and welfare
effects, and the rationale for those rankings. There are three additional reports which contain
the detailed health, ecological and welfare problem areas analyses on which the rankings are
based.
This is the Economic/Welfare Report; it includes both the background analyses and a
discussion of the work group deliberations that led to the relative ranking.
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Region II Risk Ranking Work Group
Chairwoman
Alice Jenik
Branch Chief
Office of Policy and Management
Members
Debra Curry
Hydrologist
Water Management Division
Ellen Parr-Doering
Hydrologist
Air and Waste Management Division
Kevin Doering
Program Analyst
Office of Policy and Management
Marcus Kantz
Section Chief
Environmental Services Division
Robert F. Kelly
Environmental Scientist
Air and Waste Management Division
Carlos O'Neffl
Section Chief
Caribbean Field Office
Marian Olsen1
Environmental Scientist
Office of Policy and Management
Timothy J. Ream
Program Analyst
Office of Policy and Management
Ernest Regna
Branch Chief
Environmental Services Division
Palma Risler2
Program Analyst
Office of Policy and Management
Dennis Santella
Section Chief
Emergency and Remedial Response
Division
Nancy Schlotter
Environmental Scientist
Water Management Division
Walter Schoepf
Environmental Scientist
Emergency and Remedial Response
Division
Berry Shore
Congressional Relations Specialist
Office of External Programs
Harvey Simon3
Environmental Scientist
Office of Policy and Management
Marina Stefanidis
Environmental Scientist
Emergency and Remedial Response
Division
Lawrence Tannenbaum
Environmental Scientist
Emergency and Remedial Response
Division
1. Lead analyst for health risks, and editor of health risk, document.
2. Analyst for economic/welfare ranking, and editor of economic/welfare document
3. Lead analyst for ecological risks, and editor of ecological risk document
III
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Acknowledgements
The contributions of the following people were essential to the completion of this
project:
Air and Waste Management
Larainne Koehler
Alan Fellman
Environmental Services
Diane Buxbaum
Policy and Management
Maeve Arthars
Steve Rubin
Robert Eckman
John Baglivi
Vicki Snitzler-Neeck
Mike Verhaar
Office of Policy. Plannine
and Evaluation
Catherine Tunis
Richard Worden
Water Management
Isaac Chen
Christopher Dere
Anthony Dore
Theresa Faber
Aristotle Harris
William Hoppes
Wayne Jackson
Edwin Khadaran
Bruce Kiselica
Maureen Krudner
Marit Larson
Alex Lechich
Elizabeth Lonoff
Robert Nyman
Douglas Pabst
Patrick Pergola
Eric Stern
Shari Stevens
The following firms, under contract to the Office of Policy, Planning and Evaluation
provided assistance by conducting research for and completing some of the problem area
analyses:
ICF, Inc.
RCG/Hagler, Bailly, Inc.
Temple, Barker, and Sloane, Inc.
Jay J. Wind, Inc.
v
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Contents
Page No.
Foreword i
Region II Risk Ranking Work Group iii
Acknowledgements v
Section I. Introduction 1
Section II. Measuring Economic/Welfare Effects 3
Section III. Damages to Ground Water Resources 7
Section IV. Health Care Costs 17
Section V. Problem Area Analyses 19
1. Industrial Point Discharges and Public Waste Water
Treatment Discharges to Water}
2. Combined Sewer Overflow Discharges to Water}
4. Nonpoint Sources of Water Pollution} 21
3. Operation and Maintenance of Drinking Water Systems:
Trihalomethanes, Lead and Microbiological Contaminants 28
5. Traditional Underground Injection Wells (Class I-III) 28
6. Other Underground Injection Wells (Class IV-V) 29
7. Land Use Changes/Physical Modifications of Aquatic Habitats 29
8. Land Use Changes/Physical Modifications of
Terrestrial Habitats 30
9. Dredging and Dredge Disposal}
10. Muncipal Sludge Disposal and Treatment}
11. Wastewood Disposal or Treatment} 30
12. Active Hazardous Waste Sites Currently Regulated
under RCRA Subtitle C 31
13. Abandoned Hazardous Waste Sites/Superfund Sites 31
14. Municipal Solid Waste - Storage and Landfills 37
15. Municipal Solid Waste - Incinerators 37
16. Material Storage Tanks, Sites and Pipelines Not Regulated
Under RCRA Subtitle C (Underground Storage Tanks) 37
17. Accidental Releases During Production or Transport 38
18. Pesticides Contamination Associated with Application 38
19. Pesticides Residues in Food 38
Vll
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20. Stationary and Point Sources of Air Pollution}
21. Mobile Sources of Air Pollution}
22. Area Sources/Nonpoint Sources of Air Pollution}
23. Sources of Air Pollution that Lead to Acid Deposition
24. Radon
25. Indoor Air Pollutants
26. Chemical Use that Depletes the Ozone Layer/Chlorofluorocarbons
27. Radiation other than Radon
39
43
46
46
46
47
Vlll
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/. Introduction
The primary objective of the Region II Risk Ranking Project is to compare the risks
posed by the different environmental problems facing the New York/New Jersey/Caribbean
Region. The intent of the project is not only to inform EPA staff and managers, but to inform
and to influence the public debate over environmental issues as well. Another objective is to
use the results as a critical component of a strategic planning process for the region. The level
of risk is only one factor that determines priorities. Strategic planning also takes into account a
variety of other factors: cost/effectiveness; public concern; the effects of disinvestment; statutory
and regulatory mandates; and, how well government effort leverages private investment in
environmental improvement. The strategic planning process for the Fiscal Year 1993 budget
began in the fall of 1990.
The Risk Ranking Project has two components: analysis and professional judgement.
An interdivisional work group, composed of Region II staff with diverse academic backgrounds
and encompassing all program areas, was named. On January 31, 1990 the Regional
Administrator convened the work group and charged it with responsibility for completing a
comparative risk analysis and ranking. In the ensuing months, the work group developed the list
of environmental problem areas that were ranked, and the methodologies and criteria for
ranking the problems on the basis of their health, ecological and welfare effects. Individual staff
members conducted research and analyzed the environmental problem areas.
After staff analyses were completed, initial meetings were held to determine the relative
risks posed by environmental problems for health, ecological and welfare effects. The work
group evaluated the data and analyses submitted as well as the professional judgement of the
work group, especially the persons who completed the analyses. The group also considered the
direction of the uncertainty, data gaps, consistency and the technical merit of the analysis.
After the initial rankings were developed, work group members had several weeks to
review the analyses more thoroughly and to consider the relative rankings. Proposals to adjust
the rankings were prepared during this period. At a subsequent meeting, the work group
reached a consensus on the rankings. They were presented to the region's senior staff during
September 1990. At a joint meeting on October 1, 1990, the Regional Administrator and his
senior staff concurred with and adopted the work group's rankings.
This document provides detailed background on the economic/welfare rankings, and the
supporting analyses for each problem area.
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I/. Measuring Economic/Welfare Effects
Along with EPA's mandate to protect human health and ecosystems is a concern about
reducing the negative effects of pollution on the welfare and economic well being of society.1
The effects of environmental problems on human welfare include a variety of damages to
property and resources that affect human use or enjoyment.
Economic damages were one of the components of the national comparative risk study.
The Region n work group decided that economic damages were an important aspect of decision
making. One driving factor in this judgment was that some environmental problems in the
region (e.g. beach closings, fisheries closings, and ground water losses) have large economic
effects but small health or ecological effects. The work group thought that including an
economic analysis in the project would better account for the full range of concerns about
environmental degradation because some important areas are captured only in the welfare
ranking.
If priorities were set on the basis of health and ecological criteria alone, EPA would not
be troubled by beach closings or closing of drinking water wells because health concerns have
been eliminated and the ecological impacts are negligible. But protecting society from the
economic damages of caused by pollution and environmental destruction is one of the EPA's
roles. This role can be especially important because environmental problems are often
characterized by an unequal distribution of benefits and costs. Often the individuals whose well
being is affected by a soiled beach or a closed shellfish bed are different from those who benefit
from the reduced costs that contributed to the pollution in the first place.
The economic/welfare damages analyzed include: damages to commercial and
recreational fishing; the need for treatment of surface water supplies; loss of commercially
valuable forests; loss of recreational opportunities in wetlands, forests or coastal areas; declines
in property value around toxic waste sites or other polluted areas; buildings and cultural
monuments damaged by air pollution; reduced visibility; destruction of watersheds; increased
health care costs; and, destruction of ground water resources. This list is not all inclusive but
serves to illustrate the major categories of economic damages from pollution considered.
Health care costs were included because the increased cost of health care adds to the concern
created by personal pain and suffering resulting from environmental health problems.
It is important to distinguish between the losses and damages caused by pollution that
are encompassed in the analysis and ranking, and the economic costs of controlling pollution.
The costs of control are not included. It is tempting but incorrect to try to compare the
estimates of damages to control costs.
First, the analysis could not be conducted with sufficient detail to lead to any conclusions
about cost versus benefits. Second, neither time frame nor equity concerns have been
1 Although the term "welfare" connotes a broader range of impacts than economics effects alone, both terms
can be used for this analysis. The type of economic effects considered include monetization of damages to an
individual's welfare such as loss of recreational opportunities and other public goods. Although individuals are not
currently paying for enjoyment, there is definite evidence that individuals value these goods and would be witling to
pay for continued use.
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addressed, and these are very important components of cost/benefit analysis. For many
environmental issues, the control costs are large but they are incurred in the present, while
benefits characteristically continue infinitely into the future. Comparing the level of costs and
benefits hinges upon the time frame and discount rate considered appropriate. An example
may help to illustrate the nuances involved.
In the analysis, acid rain was found to result in approximately $400 million in losses to
society yearly. While the present day control costs are probably higher than this, the benefits
resulting from healthy forests and fisheries will continue for generations. In addition, the people
who benefit from the lower cost of electricity that results in acid rain are different from those
who are hurt by the effects of the pollution. Equity concerns, even intergenerational equity,
need to be considered in a cost benefit analysis, along with the level of dollars estimated.
Structure of the Report
This report is a summary of both the analyses prepared for the Region II Risk Ranking
Project, and the work group discussions and decisions on the relative magnitude of the
economic problem posed by each environmental problem. The analyses prepared for the
regional ranking project were completed both by regional staff and by contractors. The review
of the literature and the staff analyses were constrained by the time and resources available.
While there is confidence in the order of magnitude of the damages and their legitimacy for
ranking purposes, the actual dollar figures are not exact. Dollar estimates were not included for
two very important damages, the loss of a life and the existence of ecosystems. The methods
for putting dollar values on these types of damages are controversial and unreliable. It is noted
here because damages that are not quantified are often minimized in value, and this is not
intended.
The work group reviewed the results of the analyses, and determined the relative
ranking of each problem area. This was a difficult task because some evaluations contained only
part of the total economic impact since certain factors could not be quantified; some
environmental problems had no dollar estimates at all. The group did not want to restrict the
ranking to quantitative problem areas, so they used best professional judgement to rank the
more qualitative problem areas. The differences between problems ranked within the same
categories are often minimal. The categories are more reliable and are in general order of
magnitude. They are:
o Very high = over a half billion dollars annually
o High = $ 500 - 50 million
o Medium = $ 50 - 1 million
o Low = minimal damages
The limits and uncertainties of the data and methods used are discussed fully in the
report. The uncertainties are in the following areas:
1) Does the economic damage exist, or is it theoretical?
2) Does data exist on the size or extent of the damage?
3) Is the method for estimating the dollar value of the damage sound?
4) Does the data accurately reflect what is being estimated?
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The welfare ranking of the problem areas is contained in Table 1. The background
analyses on which the work group deliberations were based, along with a summary of the actual
work group deliberations (which relied heavily on expert judgment in some cases) follows. Each
environmental problem area is discussed separately for the most part. However, because the
Region II ranking was by sources of pollution and the economic analysis was often structured by
the impact or receptor of the pollution, several environmental problem areas were analyzed
together.
For example, both point and nonpoint sources of water pollution can affect fisheries, and
both Superfund sites and underground storage tanks can damage the ground water resource.
The analysis of damages to the ground water resource covered five environmental problem
areas, and the analysis is fully described in Part HI and referenced throughout the report.
A separate analysis of Health Care Costs based on the estimated annual cancer incidence
included in the Health Risk Analysis was completed. It is described in Part IV, and referenced
throughout the report.
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TABLE!
WELFARE/ECONOMTC JUNONG
VERY HIGH
Nonpoint Sources of Water Pollution
Industrial Point Discharges and Municipal/Public Wastewater Treatment Discharges
to Water
Combined Sewer Overflow Discharges to Water
Land Use C&anges/Physical Modifications of Terrestrial Habitats
Land Use, Changes/Physical Modifications of A
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///. Damages to Ground Water Resources
Many environmental problem areas - superfund sites, underground storage tanks,
municipal solid waste landfills, nonpoint sources and pesticides - contribute to the contamination
of ground water. This section discusses the monetary estimates of damages to the ground water
resource for any problem area that affects ground water.
Ground water has economic value in Region II primarily as a source of drinking water.
Contamination by toxics damages the ground water resource by reducing the available volume of
good quality water. The following review discusses the types of economic damage society suffers
when ground water is contaminated, and the information needed to estimate these damages for
Region II. Currently available information has been used in an effort to quantify these
economic damages. However, information linking the source of contamination to various
ground water contamination incidents should be considered speculative.
In earlier comparative risk projects, many programs that contaminate ground water supplies
have not ranked highly based on either health or ecological criteria. For example, the health
risk from drinking contaminated ground water is often minimal because wells can be closed, and
the risk eliminated. In addition, ground water is not an ecosystem, and therefore ground water
is not a high priority ecological problem. However, when ground water is contaminated, a loss
of society's resources has taken place, and that loss should be reflected in the evaluation of
economic damages. Many states demonstrate concern for this resource by enacting ground
water protection policies. Rather than using health risk as a primary criterion for cleanup of
contaminated ground water, these policies generally call for the restoration of damaged natural
resources whenever possible, regardless of current health exposure.
Economic Damages from the Contamination of Ground Water
Economic damages to society from the contamination of current drinking water wells can
be divided into three components. First, and most obvious, is the need for replacement water
supplies when wells are closed. These supplies must be replaced by digging new wells, hooking
up to other water supplies, or treating the water. Data is available on the actual number of
wells that have been replaced and possible costs.
The second category of economic damages involves costs incurred when potable ground
water not currently used for drinking water is contaminated. Although the contamination does
not cause current harm, it results in a decrease in the stock of ground water available for future
use. For example, restrictions against new wells in areas surrounding toxic waste sites are often
instituted, thus increasing the cost of finding a new supply of water. The following analysis
could only provide speculative estimates because data on the extent of ground water
contamination are lacking, and no practical economic method has been devised for the valuation
of losses to future supplies of water.
The third and least obvious economic damage to society occurs when contamination of
drinking water wells occurs, but the wells continue to be used because the health effects are
considered negligible. It is unclear what value to place on this decreased quality. Yet many
citizens consider their water quality to be reduced and often drink bottled water, at very high
costs, partly because of the perception that water from the tap is contaminated. Despite
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evidence that such damage exists, the data for quantifying any losses are not available.
Another issue that will not be addressed is the value of non-potable ground water that is
contaminated. Whether people value the existence of clean ground water in the abstract -
removed from any consideration of potential current or future use - is debatable. Calculation of
such intrinsic value is more readily applicable to wetlands and endangered species than to
ground water.
Damages to Current Drinking Water Supplies
The following method can be used to determine the monetary losses due to ground water
contamination of drinking-water supplies that must be replaced:
Volume of water to be replaced x the cost of replacement = Monetary Damages
To estimate the water supplies needing replacement, data are needed on the number of
wells in Region n that have been closed or treated because of contamination. For regulatory
purposes and for this report, data on drinking water wells are categorized by private wells or
public wells.
Public wells, sometimes called municipal wells or community wells, are regulated units.
Both federal and state regulations impose testing requirements. Under those regulations, 163
municipal wells in New York have been closed as a result of contamination (draft 1990 305b
report.) In the State of New Jersey, 88 public wells were found to have unacceptable levels of
volatile organic compounds (VOCs), and an additional 32 wells were treated. Overall, 283
public wells need treatment or replacement.
No central source provides data on the number of private wells that need replacement.
Private wells are regulated by counties, and no mandatory testing and monitoring is conducted
nor is there a central database indicating the numbers or percentages of contaminated private
wells. However, several statewide sampling studies of public wells provide a rough idea of the
extent of private well contamination. For example, the New Jersey monitoring program found
18 percent of public water sources with detectable levels of organic contaminants. Of these
systems in New Jersey, 9.4 to 12 percent were contaminated at levels where actions were
recommended but not mandatory; mandatory action was necessary for 6 percent of systems. A
federal survey showed a similar percentage (21 percent) as did a New York program (14
percent).
Private well contamination is calculated at comparable percentages to the contamination
reported for public wells. In some cases, where private wells are shallower than public systems,
the private well may be more vulnerable to contamination. However, private wells also are
usually found in areas with less industrial development, and the possibility of pollutants in those
areas is lower. An example of the lower potential for pollution comes from Suffolk County
where the Bureau of Drinking Water found that approximately 3 percent of private wells
exceeded limits on Maximum Contaminant Levels (MCLs), and required closure. (This
contrasts with the 10 to 21 percent contamination rate in public wells.) An estimate of 10% of
private wells contaminated was obtained from the New Jersey Department of Health
professionals. Because of the range of estimates, the Region II analysis uses two separate
sensitivity cases: 3 percent of private wells contaminated, and 10 percent of private wells
contaminated. «
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Cost of Replacement
To determine the cost of replacing water supplies, several measures can be used:
o Cost of drilling a new well
o Cost of hook-up to an uncontaminated water supply
o Cost of wellhead treatment
Capital costs for well replacement vary widely, depending primarily on well size and
design. For the purposes of this analysis, the well costs are estimated for both public wells and
private wells.
Estimates of well replacement costs were obtained from the State of New Jersey's
wellfield tracking system. These data are compiled only for wells that apply for state funds.
The main method of replacing municipal wells, as reported by water purveyors and the wellfield
tracking systems, is some type of treatment (aeration or granular activated carbon). The
average cost of such systems was $315,000. This figure is comparable to costs from the Region I
comparative risk project, where a cost of $300,000 was reported. Other estimates, from a
California water district, indicate that capital costs for a municipal well can range from $450,000
to $250,000, excluding land acquisition costs. Thus, a capital cost of $300,000 was used for
public well replacement cost.
Operation and maintenance costs for wells are primarily the energy costs for pumping,
and the cost varies with the flow rate. However, operation and maintenance costs were
excluded from the analysis because these costs are not additional costs, but would be incurred
with the untreated or uncontaminated wells.
Private wells are replaced mainly by connecting households into a municipal water
system (personal communication, water purveyors, NYDOH, NJDOH). Two different capital
cost figures are used in the analysis - $3,500 and $17,500. Region I used a $3,500 value in its
comparative risk analysis. When a large number of private wells are connected, capital costs per
household are often in this range. However, New Jersey's well tracking data system shows an
average well connection cost of $17,500, a figure that may be more representative of conditions
throughout Region II where economies of scale are not always experienced, especially in upstate
New York.
For private wells, the analysis also considers an additional annual water bill of $250.
Although the average water bill in New Jersey is $132 yearly, most small municipal water
companies have higher yearly bills because they do not benefit from the economies of scale
enjoyed by larger cities and towns (NJDEP Municipal sector study).
In converting capital costs to annual yearly costs, four different calculations were used:
o A 0.04 rate over 10 or 20 years
o A 0.08 rate over 10 or 20 years
The first method reflects a depreciation of capital approach which could be correct if private
water companies were the water purveyors. The latter method may be more representative of
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conditions in Region n. This method uses an 8 percent interest rate to reflect the annual cost
of payments by municipalities who borrow money to finance infrastructure improvement.
Results - Current Use of Ground water
The yearly household costs for well replacement are lowest - approximately $500.- when
using a low capital cost estimate and the 0.04 rate over 20 years. The highest yearly cost -
$2,858 - occurs when the average capital cost ($17,500) is combined with an 8 percent interest
rate over 10 years. The higher estimate is probably closer to the actual costs because it assumes
average capital costs rather than lowest cost values, and it accounts for the need of
municipalities to borrow capital to finance most of these water connections. The municipal
sector study indicates that many municipalities are in fact financing environmental
improvements thorough a combination of increased user fees and increased debt.
TABLE 2
ECONOMIC LOSSES FROM CONTAMINATED GROUND WATER
(Annual Impact)
CAPITAL COSTS TOTAL PRIVATE WELLS PRIVATE 4 PUBLIC WELLS
TEN PERCENT OF PRIVATE WELLS CONTAMINATED
$3,500
$ 54-
82 million
$17,500
$17,500
304 million
$ 60.4 - 67 million
$ 88.4 - 9$ million
$ 222 - 229 million
$ 310 - 317 million
THREE PERCENT OF PRIVATE WELLS CONTAMINATED
$3,500
$3^00
$17,500
$17,500
$ 1.6 »
2.4 million
$4.9-
9.1 million
$ 8.0 - 14.6 million
$ 8.4 - 15.4 million
$11,3 -17.9 million
$15.5 - 22.1 million
These damages do not account for increased costs of obtaining water in the future
due to cutr^nt contamination, incidents that have not dosed wells but have reduced
the available stock for future use*
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Sources of Well Contamination
Little information is available on the sources of contamination at public or private wells.
The databases and monitoring surveys indicate that well owners and operators often cannot
trace the source of contamination. Therefore, allocating the economic losses among
environmental problem areas is difficult.
In New Jersey, the percentage distribution of ground water contamination is reported as
follows (NJ 305b report, draft 1990):
o Unknown sources - 40 percent
o Underground storage tanks - 20 percent
o Landfills - 13 percent
o Surface spills - 11 percent
o Septic tanks - 6 percent
o Lagoon disposal - 6 percent
In addition, the New Jersey 305b report ranks contamination sources in the following
order, with the most serious problem first in the list:
1. Underground storage tanks
2. Industrial/commercial septic/Class V injection wells
3. Surface spills
4. Landfills (municipal/industrial)
5. Unidentified
The 305b report for New York also ranks underground storage tanks as the primary
source of ground water contamination, with 65 percent of private well contamination related to
the underground storage tanks. However, New York's ranking of other sources differs
somewhat from the list for New Jersey:
1. Underground storage tanks
2. Hazardous materials, leaks, and spills
3. Abandoned hazardous waste sites
4. Wastewater treatment and small leaks and spills
5. Municipal landfills
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Because this data does not define sources in a consistent manner with the ranking, and
because it does not provide numerical estimates, rough approximations of the percentage
contributed by the sources in the various ranking categories were made by Region II staff.
From these percentages, which should be considered speculative, an annual distribution of
economic costs was constructed.
TABLES
SOURCES AND COSTS OE OROUND WATER CONTAMINATION
Percent of Ground Water
Contamination Incidents
Share of Estimated
Damages
UIC WELLS- GLASSY 7 percent
annually
MUNICIPAL LANDFILLS 7 percent
RCRA SITES 7 percent
UNDERGROUND STOKACE TANKS 65 percent
SUJPERFUND SITES 7 percent
PESTICIDES , 7 percent
$21 million
$22 million
$207 million
$22 million
$22 million
Future Use Damages
An additional loss not included in the estimates in the previous section, is the value of
ground water that has been contaminated but is not currently used as a drinking water source.
This ground water has lost economic value because the stock of clean ground water available for
future use is limited, and this contamination reduces the available supply. In both New York
and New Jersey, localized supply problems already exist. Ground water contamination is
making the supply situation worse and is thus increasing the cost of the water.
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Part of the potential economic damage attributable to future use stems from the heavy
reliance on ground water in New York and New Jersey. In some areas, ground water is the only
source of drinking water. For example, 3 million people on Long Island depend upon ground
water as the sole source of drinking water, and 80 percent of the State of New Jersey has been
designated as a sole-source aquifer. That reliance shows no signs of abating. To demonstrate
the potential magnitude of these difficult to quantify costs, the Region II analysis includes an
assessment of the monetary value of lost future use of ground water.
The need for additional water supplies in those states is evident from the effort
expended to develop new wells. In New Jersey, more than 20,000 well-drilling permits are
approved each year, and one-half of the water systems are expecting to expand their systems in
the next five years. Anecdotal evidence shows that drilling deeper wells underneath the
contaminated zones of aquifers has been used as the source of a new supply. New Jersey also
has local areas of concern, called critical areas, where water level declines and increased
development have resulted in limits on water withdrawal. In these areas, one can assume that
the contamination of aquifers increases the costs of supplying water of good quality to residents.
In New York State, Long Island's reliance on ground water and the contamination of this
ground water has led to increasing use of deeper aquifers with resultant increases in costs.
Some measure of the value of good quality ground water can be obtained by comparing
the cost of using good quality ground water to the cost of treating the ground water or obtaining
surface water supplies. Currently, ground water is inexpensive in comparison to surface water
supplies. For example, it costs about $100 per million gallons to obtain untreated ground water.
In ground water overdraft areas in New Jersey, some communities switching to surface water
supplies will be paying ten times more. This equals a $340 increase per household per year. On
a statewide level, the public and private water systems are expected to spend $1.4 billion dollars
in the next five years to comply with drinking water and supply requirements. Some portion of
this cost is incurred because of ground water contamination. For example, the water supply
master plan update for New Jersey indicates that $25 million has been earmarked to treat
polluted wellfields.
To obtain a rough value estimate for the potentially lost future supplies of ground water,
it was assumed that every household using ground water increased its yearly cost by the $340
experienced by some communities in New Jersey (see above). On the basis of that estimate,
$1.2 billion in annual costs could be incurred in New York and New Jersey as a result of ground
water contamination. These estimates are highly speculative and are not meant to serve as
projected costs. However, they do serve to indicate the potential magnitude of pollution effects.
In summary, for areas that rely heavily on ground water for drinking water, there are
significant future economic costs as a result of increased water supply costs as water demand
increases and toxic contamination reduces the supply of ground water of good quality.
Ground Water Problems in the Caribbean
Virgin Islands
Ground water in the U.S. Virgin Islands has been relatively free of contaminants. An
exception is the Tutu area of St. Thomas, which has had a nitrate problem since the 1970's
because of malfunctioning sewage treatment plants in the area. Recently, other areas have been
identified as suffering damage from sewage pollution as well. One study indicated the existence
13
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of contamination by chlorinated solvents and petroleum products, but the extent and severity of
the contamination is unknown.
Puerto Rico
Ground water provides approximately 24 percent of the total water used on the island,
but dependence upon ground water varies by locality. Ground water contamination has been
assessed in the northeast region of Puerto Rico where wells have been contaminated. The three
suspected sources of contamination are hazardous waste sites, municipal landfills, and
underground storage tanks. Numbers of wells or percentage of wells contaminated were not
provided in the 305b report.
In addition, nitrate contamination in Puerto Rico has affected approximately 25 percent
(5 wells) of the wells studied, and at least three other wells have been permanently closed. The
source of the contamination is under investigation. Industrial wastewater, illegal landfills, septic
tanks, and agricultural runoffs are suspected.
Sources
State of New Jersey, Wellfield Tracking Data as of 5/27/1990
New Jersey Department of Environmental Protection, Municipal Sector Study: Impacts of
Environmental Regulations on New Jersey's Municipalities, draft December 1989.
State of New Jersey, Department of Environmental Protection, Division of Water Resources,
"Public Wells Found to have Unacceptable Concentration of VOCs May 1985 - May 1989"
State of New Jersey, Department of Environmental Protection, Draft New Jersey 1990 State
Water Quality Inventory Report 305(b). March 1990.
State of New Jersey, Department of Environmental Protection, Results of Testing for Hazardous
Contaminants in Public Water Supplies Under Assembly Bill A-28Q. Final Report March 1987.
New York State Department of Environmental Conservation, Division of Water, New York
State Water Quality 1990. Submitted Pursuant to Section 305(b^ of the Federal Clean Water
Act". Draft April 1990.
New York State Department of Environmental Conservation, Nonpoint Source Assessment
Report. February 1989.
New York State Department of Health, Bureau of Public Water Protection, Report of Statewide
Surveillance of Organic Compounds in Selected Community Water Systems. 1981, 1984 - 1985,
1986 - 1987.
New York State Department of Health, Bureau of Public Water Protection, "Community Water
System Sources Affected by Organic Chemical Contamination", February 1990 & June 1990.
U.S. EPA Region 1, Draft. A Comparison of Welfare Impacts of Environmental Problems in
New England: Replacement or Remediation Costs. September 1989.
14
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Personal Communication
Lacey Township MUA
Manchester MUA
Toms River Water Company
Suffolk County Water Authority
U.S. EPA Region 2, Debra Curry
U.S. EPA Region 2, Fred Luckey
U.S. EPA Region 2, Dennis Santella
New York Department of Health
15
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IV. Health Care Costs
The range of health care costs for cancer used throughout this analysis are the same as
those used in the Region I analysis, originally developed by Hartunian (1981). The increased
health care costs are:
Annual direct medical costs (in 1988 dollars)
Annual indirect costs (days lost from work)
Total annual costs per case
$28,000- $57,000
$52,000 - $80,000
$80,000 - $137,000
These costs were used as annual costs and then multiplied by the estimated increased
cancer cases per year (generated in the health analysis) to obtain annual increased health care
costs from cancer. This method is a simplification from true health care cost for cancer.
The first simplification is the use of an average cost for cancer, cancer differs in cost
from locality to locality and by types of cancer. The second simplification is that cancer
incidence, which is a yearly estimate, was used with these yearly health care cost estimates even
though there was no accounting for years of survival for cancer (i.e. these estimates implicitly
assume that the cancer was treatable indefinitely).
It was explicitly decided by the work group that no monetary estimates would be
calculated for the non-monetary costs of cancer such as pain and suffering and, of course, death.
Even though the legal and insurance systems and some economists often make such calculations,
the work group decided that the methods for calculating a monetary value for loss of life were
too unreliable and controversial to be included in the analysis.
Table 4 shows the various cancer incidence values from the health analysis and the
corresponding health care costs. The average of the cancer incidence values was used
throughout the analysis. The health care costs are shown only for environmental problem areas
where cancer incidence was estimated, all other problem areas were assessed qualitatively. For
a full discussion of the uncertainties and assumptions involved, please see the health analysis
report.
17
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,-j > ^ ; TABU) 4
,,-v
Estimated Annual
Problem Area - Cancer Incidence
\* V
26. Chlorofluorocarbons 6400
25* Indoor Air Pollutants 3700
24, Radon , " 200
13. SuperfUnd Sites 390
19. Pesticides in Food * 154
21 Mobile Sources of Air Pollution 95
22. Area Sources of Air Pollution 46
12. RCRA Sites 40
20. Stait Sources of Air Pollution 28
6. Underground Injection Wells 27
16. Underground Storage Tanks 8
3. Trihalomethanes, Lead, Micro-
biological Contamination 7
Annual Health Care
Cost * front Cancer
(000,000)
$500 -877
300 -501?
16 27
31 53
12 21
,rt AM
O1 1*5"
4, 6
3 6
2 4
2 4
0.6 1
0,6- 1
Sources
Cannon, James S. The Health Costs of Air Pollution. A survey of studies published 1984 - 1989.
American Lung Association. 1990.
N. Hartunian et al, The Incidence and Economic Costs of Major Health Impairments,
(Lexington Books), 1981.
18
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V. Problem Area Analyses
Analyses of the 27 environmental problem areas for economic/welfare effects in Region
II are presented in the following section. The analyses are arranged in the order in which they
appeared in the master list for the project. The order of the list is not related to the priority
ranking.
In many cases no information was available on the extent of economic damages. The
work group ranked all problem areas, regardless of data availability, because they concluded that
environmental problems that were not ranked would not be given priority. Therefore, in some
cases, the explanation of the work group deliberation is the only assessment of the magnitude of
the problem available.
The background analysis on which the work group deliberations were based, along with a
summary of the actual work group deliberations (which relied heavily on expert judgement in
some cases) follows. Each environmental problem area is discussed separately for the most
part. However, because the Region II ranking was by sources of pollution and the economic
analysis was often structured by the impact or receptor of the pollution, several environmental
problem areas were analyzed together.
For example, both point and nonpoint sources of water pollution can affect fisheries, and
both Superfund sites and underground storage tanks can damage the ground water resource.
The analysis of damages to the ground water resource covered five environmental problem
areas, and the analysis is fully described in Part HI and referenced throughout the report.
A separate analysis of Health Care Costs based on the estimated annual cancer
incidence included in the Health Risk Analysis report was completed. It is described in Part IV,
and referenced throughout the report.
19
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1. Industrial Point Discharges and Municipal/Public
Waste Water Discharges to Surface Water
2. Combined Sewer Overflows (CSOs) Discharges to
Water
4. Nonpoint Sources of Water Pollution
Introduction
Because the same types of economic damages to surface water are caused by three
problem areas (industrial point source discharges and POTW (publicly owned treatment works)
discharges, combined sewer overflows, and nonpoint source discharges, the economic damages
were researched and analyzed together. The major categories of economic damages from
surface water pollution are:
o Damages to recreational fisheries
o Damages to commercial fisheries
o Reduction in recreational opportunities, tourism and other businesses that
depend upon recreational activities
o Increased treatment costs of drinking water supplies from surface water
Estimates were obtained from studies on recreational fishing, commercial fishing and
recreation and tourism. Estimates of the increased treatment costs of drinking water supplies
are omitted, however, because data was not readily available. It was more difficult to obtain
information on the proportional contributions of different sources to overall damages to water
quality and related uses. As a result, the allocation of damage estimates contained in the report
must be regarded as suitable for ranking purposes only. A summary of the studies used to
estimate damages and the allocation of the damages between pollutant sources follows.
Numerous methodological and empirical studies, including studies for Region II, have
been conducted to ascertain fisheries damages and recreation losses resulting from surface water
pollution. Because of time constraints, the analysis focused on significant pieces of existing
research on the largest fisheries and recreation areas in Region II.
Most of the studies used for this report cover specific geographic areas (i.e., the Hudson
River, the New York Bight, and Long Island Sound), and relatively in-depth research was
conducted on these three areas. Unpublished reports and analyses were obtained through
contacts in government agencies and universities. Many of the articles and papers were
originally prepared by local universities.
Data gaps remain even for damages to fisheries and recreation. Some waterways in
Region II were not covered in the studies analyzed. These include the Great Lakes, the Finger
Lakes, the Delaware River, and smaller rivers and streams throughout the region. However,
only damages to the Great Lakes fishery are assumed to be large. Given the lack of data on
these areas, however, it is assumed that the estimates are a lower bound. Nonetheless, because
21
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the population centers in Region IE are located near the coastal areas, the studies focusing on
the coastal regions probably capture the largest categories of damages.
Coastal Regions: New York/New Jersey Bight
Several studies have calculated the economic damages caused by pollution in coastal
areas. The most complete evaluation is one by Swanson and Kahn for the State University of
New York, Marine Science Research Center. Their report covers the economic impacts of beach
closures, fisheries damages, and navigation impairments. According to the study, the largest
annual economic losses, both direct and indirect, are:
o Beach closures - $1.4 billion to $5.8 billion
o Unsafe seafood - $1.4 billion
o
o
Commercial navigation - $525 million
A negative impact on fisheries abundance - not measured but assumed to be
large (i.e. a change in species from those that are more desirable commercially to
those that are less desirable or a decline in numbers of fish)
The most significant impact reported by Swanson/Kahn was for beach closures. Their
report tabulates beach closings in the summer of 1988 for the entire coastal area of New Jersey
and the south shore of Long Island. Calculation of the economic impact from the closings is
based on an assessment of beach attendance. The study found no comprehensive tune series
data on total beach attendance, with the exception of data on New York State Park beaches.
Thus, it was extremely difficult to determine the impacts of the scattered beach closings on
attendance in general. To overcome this data gap, Swanson/Kahn assumed that attendance at
the New York State Park beaches is a constant percentage of total attendance. The reduction
in attendance was based on the percentage declines reported for particular beaches. The dollar
estimates for economic impacts then were generated by calculating the amount of days lost at
the beach and assuming an average expenditure per person. In addition, an economic multiplier
effect was added.
Two additional estimates corroborate the level of damages found in the Swanson/Kahn
study. The two billion dollar economic loss due to beach closings often used by Region II and
the media in Region II was derived from a report by Thomas Conoscenti (1989) and an
estimate by the New Jersey Department of Tourism. The figures are comparable to the Kahn
study although different methods were used. Conoscenti used a 1983 Long Island Tourism and
Convention Commission study as a basis for his estimates. He assumed that tourism would
grow at the historical annual average of 5.6 percent per year; then he compared the potential
expenditures from tourism with actual revenue figures for hotels, food, and transportation in
1988. The result is an estimated $1.3 billion difference that was attributed to the lowered
tourism demand resulting from the widely reported beach pollution.
The New Jersey Tourism Department estimated that $0.7 billion per year has been lost
due to beach closings and the resulting drop in tourism. Combining both the Conoscenti and
tourism bureau estimates, Region II staff concluded that $2 billion per year is a reasonable
estimate for losses from beach closures. The estimate is within the range calculated in the
Swanson/Kahn study, but it assumes that 100 percent of the tourism industry and 100 percent of
the downturn that year were beach-related. This is not likely. As Conoscenti notes, "Since the
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public has many optional activities with which to replace a visit to the beach, it is reasonable to
assume that some portion of the people who would normally patronize the beaches participated
in other activities on the Island. Thus, the absolute net effect was considerably less than $1.3
billion."
The economic losses reported by both the Swanson/Kahn and Conoscenti studies are
quite large. Some examples from the raw data illustrate how such large economic losses are
possible. For example, the Long Island State Park Commission reports that Jones
Beach/Captree and Robert Moses experienced an attendance decline of more than 3.7 million
persons in 1988 (Conoscenti, 1989). The New York State Office of Parks, Recreation, and
Historic Preservation reported that annual attendance on Long Island beaches fell from 17.5
million in 1987 to 12.1 million in 1988. This was the lowest turnout in 20 years.
Another direct indication of the magnitude of economic damages is the response to a
survey by DiLernia and Malchoff (1989) of charter and open boat owners, who were asked in a
mail questionnaire to document alleged business declines since mid-summer 1988. The returned
surveys indicated a 23 percent decline in passengers and a 30 percent decline in trips. Sixty
percent of the boat owners identified floatables as the most important reason for the declines;
fish abundance and seafood safety were also noted as important.
The contribution of different pollution sources to the economic impacts was reported in
the Swanson/Kahn report. The study claims that New Jersey beaches tended to be closed
because of pathogens, and Long Island beaches because of floatables. "Eighty to 90 percent of
New Jersey's coastal beach closings are attributable to localized sources of storm-water runoff
containing elevated bacterial pollution," they report. (The higher level of beach closures in New
Jersey due to pathogens may be due to New Jersey's monitoring practices and not because of a
greater contribution of this type of pollutant) In addition, the authors note that the floatable
incidents leading to the 1988 beach closings on Long Island were not predominantly sewage-
related. That is, they was not primarily caused by a CSO (combined sewer overflow) or sewage
treatment plant bypasses. Instead, the floatables source apparently was associated with
improper solid waste disposal.
Coasted Regions: Striped Bass Fishery
The economic value of the Atlantic Coast commercial and recreational striped bass
fishery was the focus of an in-depth study by Norton, Smith, and Strand (1984). The study
looked at the value of the fishery in the early 1970's and compared it to the 1980 landings.
After considering the multiplier effect, the authors conclude that the net economic loss to the
mid-Atlantic region was $105 million dollars and 3000 jobs lost annually. While the study
defined the mid-Atlantic region as the States of New York, New Jersey and Delaware, Delaware
accounts for an extremely small portion (less than 1 percent) of the recreational fishing value,
and less than 2 percent of the commercial value. Thus, for practical purposes, the totals for the
mid-Atlantic are representative for the States of New York and New Jersey.
Long Island Sound: Fisheries
Estimates of the value of Long Island Sound fisheries are available from a variety of
sources, but no overall analysis of the Sound's economic value has been published. (The
University of Connecticut Sea Grant Office is currently conducting an analysis of the Sound's
economic value.) Preliminary estimates of the value of Long Island Sound's commercial fisheries
23
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have been compiled by Hasbrouck (1990). He reported an estimated value of $30 million for
the 1989 commercial fishery landings. Using a multiplier of 3.5 to account for both direct and
indirect expenditures, the total economic value is approximately $100 million. No estimation of
the damage to the fishery from pollution was attempted in this analysis.
Coastal Fisheries (General)
The Cornell Cooperative Extension Service analyzed the economic effect of floatables
and marine pollution on the dockside prices of key species harvested and landed by New York
fishermen. Although the press reported prices 35 percent lower than the previous year because
of consumer reaction to the floatables incidents, Cornell's subsequent research did not indicate
such a decline. The study did indicate a leveling off of prices paid to local fisherman, however,
in an era of generally increasing prices due to an increased demand for seafood.
Finally, Kahn has reported that the value of the saltwater recreational fisheries on Long
Island is "on the order of a billion dollars a year (before multiplier effects)." He did not
estimate the sensitivity of this value to changes in the quality of the fishery. However, for both
the Hudson and Long Island fisheries, recreational fishery benefits outweigh commercial fishery
benefits. The survey Kahn used for recreational fishing on Long Island provides some
information on the damages pollution has caused to recreational fishing. For example, 40
percent of respondents indicated that they did not fish because there was too much pollution.
This study also reports that an estimated 0.5 million households engage in recreational fishing
on Long Island.
Hudson Riven Striped Bass Fishery
PCB contamination forced the closing of the commercial striped bass fishery in the
Hudson River in 1975. A 1988 study (McLaren, Klauda et at) included an assessment of that
fishery's value. Unfortunately, both the landings and the market prices varied considerably over
the years. For example, the reported commercial landings of striped bass in the Hudson River
varied irregularly by a factor of 35 between 1931 and 1980, with no discernable increasing or
decreasing trends. The dockside value of striped bass catch also varied considerably, making it
difficult to project economic losses.
Great Lakes: Recreational Swimming
Recreational swimming is affected by beach closings as well as by perceptions that water
quality is poor. To assess the impacts of pollution on swimming in the Great Lakes region,
Region n staff considered reports both of beach closings and of poor water quality. Data on
beach closings included a 1988 survey of the Great Lakes bathing beaches. Responses were
collected from 100 percent of the relevant agencies, thus covering almost 100 percent of the
beaches regularly monitored for pollution. The State of New York reported four beaches closed
or restricted, and one beach permanently closed. These numbers have been steady since 1980 in
New York State, but beach closings in other Great Lakes states have shown no discernable
trends. Unfortunately, because beach attendance figures were not reported in the survey,
economic value of the beach closings cannot be estimated.
Beach closings are not the only indication of reduced recreation swimming; consumer
perception of poor water quality will have an effect even if beaches are not officially closed.
24
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Data indicate that water quality violations exist at Great Lakes beaches, reaffirming possible
consumer reaction. For example, water quality criteria were violated in Chautauqua County 116
times in 1988, and the water quality in Lake Erie can be very poor at times although beaches
were not closed in 1988.
Caribbean
No separate analysis of damages to waterways was conducted for the Caribbean.
However, surface water quality is strongly related to the tourist economy in this region.
Therefore, surface water pollution could have a large deleterious impact on the islands.
Trend
It is difficult to determine the trend of losses in recreational swimming and fishing, and
commercial fisheries. Although water quality in general has been improving, the recent
floatable incidents and oil spills can effectively wipe out increased demand for recreational
swimming. While some may argue that the level of recent damages might never happen again,
other large floatable incidents happened as recently as 1976, a year that saw a pronounced
decline in attendance at beaches.
Economic losses in fisheries are expected to increase as information on the levels of
toxics in fish increase and the public health standards tighten.
Direction of Uncertainty
Because the pollution of surface waters in Region II is longstanding (floatables were
noted problems as early as 1895), current evaluations of the damages to recreation and fisheries
underestimate the overall problem. By necessity, the studies measure only recent incremental
changes. Historical pollution levels make it impossible to account for the full value of coastal
surface waters if they were returned to a pristine level in the New York/New Jersey region.
For example, the true losses to the residents of these states should theoretically include the
difference between the present condition, both perceived and real, and the freedom to swim
without hesitation in the Hudson or to eat shellfish straight from the Raritan.
Given the information readily available and the types of economic damage measured in
existing studies, two major areas of uncertainty are apparent: the omission of the recreational
values of entire water bodies that have not been studied closely, and the omission of estimates
of the increased costs of treating of drinking supplies obtained from surface water bodies.
Results
The total value of economic damages calculated from surface water pollution is $3.4 billion to
$7.8 billion per year. Again, this estimate should be considered lower than actual damages
because it does not include estimates of all known damages.
Apportioning Damage from Various Sources
It is widely assumed that beach closures from floatables and bacteria are primarily due to
CSOs. Thus, 100 percent of the economic damages of beach closures are allocated to CSOs.
25
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No consensus exists on the proportion of impairment from point versus nonpoint sources.
Therefore, a 50/50 split was chosen after consultation with staff from Region IPs Water
Management Division.
o CSOs are assumed to cause 100 percent of the beach closures, at an annual cost of $1.4
billion to $5.8 billion.
o Industrial point sources and POTW discharges cause 50 percent of the damages to
surface waters, a cost estimated at $1 billion per year.
o Nonpoint sources of pollution lead to the other 50 percent of damages to surface waters,
again at an estimated cost of $1 billion per year.
Work Group Deliberations
The Region II work group decided that point and nonpoint sources of surface water
pollution cause the largest economic damages. The overriding reason was that the value of the
resources they affect - primarily fisheries, recreation and surface water supplies - is high, and
the impacts are well-established. Apportioning the damages between nonpoint sources and
point sources is inexact, however, the work group agreed with Water Management Division staff
that nonpoint sources generally cause more damage.
These estimates have a very low uncertainty and are not all-inclusive, further confirming
their place at the top of the economic damages ranking.
In addition, CSO's were ranked as having very high economic damages. The main
economic impact of CSO's is their potential to reduce beach recreation. The economic damages
due to beach closings have been studied by several authors who estimate losses between $1.4 -
5.8 billion dollars for the worst years. Since the monetary estimates were based on the worst
years, the group felt that these estimates should not be considered yearly estimates, and should
be ranked lower than the yearly fishery losses. Despite this concern, the economic damages of
beach closings are substantial and well documented.
Sources
Conoscenti, T. Floatable Waste in 1988 and Its Impact on the Long Island Tourist Industry.
Conference on Floatable Wastes in the Ocean. (Stony Brook: SUNY, March 1989).
Cornell Cooperative Extension. "Information about the economic impact on Long Island
Seafood industry as a result of ocean floatables and marine pollution". 1989.
DiLernia, A. D. and Malchoff, M. Effect of Floatable Waste on the 1988 Charter and Open Boat
Business oh New York City and Long Island.
Floatable Wastes and the Region's Beaches: Answers to Some Common Questions (Stony Brook:
SUNY, June 1989).
Hasbrouck, E. March 1990. Long Island Sound Commercial Fisheries. July Issue, Long Island
Sound Study Update. (Riverhead, NY: Cornell Cooperative Extension).
26
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O'Hara, K. Trash on America's Beaches: A National Assessment. (Center for Marine
Conservation, June 1989).
"Survey of Great Lakes Bathing Beaches, 1988." USEPA Great Lakes National Program Office,
July 12, 1989.
"Use Impairments and Ecosystem Impacts of the New York Bight," SUNY (Stony Brook, NJ:
Marine Science Consortium.
Walsh, R. et al. A comparison of Long-Run Forecasts of Demand for Fishing, Hunting and
Non-consumptive Wildlife Recreation Based on the 1980 and 1985 National Surveys. Colorado
Water Resources Research Institute, Fort Collins, CO, December 1988.
R. Walsh, D. Johnson, J. McKean. December 1988. Review of Outdoor Recreation Economic
Demand Studies with Nonmarket Benefit Estimates 1978 to 1988 Colorado Water Resources
Research/Institute, Fort Collins, CO.
"Estimating the Economic Benefits of Improved Water Quality, National Estuary Program
Guidance" USEPA.
"Marine and Sport Fisheries: Economic Valuation and Management" Association of
Environmental and Resource Economists, June 1988.
Personal Communication
Joel O'Connor, U.S. Environmental Protection Agency Region II
Mark Tedesco, U.S. Environmental Protection Agency Region II
Debra Curry, U.S. Environmental Protection Agency Region II
Melissa Bariston, New York Sea Grant Office
Emerson Hasbrook, Cornell Cooperative Extension Service
Chester Arnold, University of Connecticut Cooperative Extension Service
John Waldman, Hudson River Foundation
27
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3. Operation and Maintenance of Drinking Water
Systems - Trihalomethanes (THMs), Lead,
Microbiological Contamination
The primary economic damage from THM's, lead and microbiological contaminants
cause is increased health care costs and lost productivity. The costs are estimated for cancer at
approximately $1 million per year. (See Health Care Costs analysis, Section IV.) Health care
costs from microbiological contamination must be added to these figures. In addition, the
benefits from reducing lead in air and in water are large and well-documented. For example,
reducing lead levels in the drinking water in Boston would result in approximately $8 million
dollars annually in decreased health care costs for hypertension and cardiovascular disease in
adults, reduced materials damage due to corrosion, and avoided neurological damage in
children. Therefore, it is likely that the economic damages from lead in New York and New
Jersey are at least as great and most likely much greater.
Work Group Deliberations
This problem area ranked medium in the overall ranking.
Sources
Cannon, James S. The Health Costs of Air Pollution. A survey of studies published 1984 - 1989.
American Lung Association. 1990.
N. Hartunian et al, The Incidence and Economic Costs of Major Health Impairments,
(Lexington Books), 1981.
U.S. Environmental Protection Agency, Office of Policy, Planning and Evaluation. "Reducing
Lead in Drinking Water: A Benefits Analysis", December 1986
5. Traditional Underground Injection Wells
(Classes I - III)
IJue to lack of data, no quantitative estimates of economic damages were attempted.
Work Group Deliberations
Because the health impacts of Class I - HI Underground Injection Wells are minimal and
the contamination of usable ground water is unknown, this problem area was ranked as "low".
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6. Other Underground Injection Wells
(Classes IV and V)
See the Damages to Ground Water Resources analysis, Section III, and Health Care
Costs analysis, Section IV.
Work Group Deliberations
Class IV-V wells were ranked in the "medium" category of economic damages. Class IV-
V wells have both health care costs and are a ground water contamination problem. Class IV-
V wells contribution to ground water contamination problems in Region II is estimated at $22
million plus future use.
7. Land Use Changes/Physical Modifications of
Aquatic Habitats (Wetland Destruction)
Wetlands have important ecological value that translates into economic value. Wetlands
provide fishery habitat, flood protection, water purification and recreational resources that
translate into direct economic benefits to industries and individuals. For example, 60 to 90
percent of commercially valuable marine fish in the Atlantic depend on coastal wetlands for part
of their life cycle. However, economic methods to trace these values back to particular wetlands
are not reliable theoretically or empirically.
Work Group Deliberations
Using the replacement cost of a wetland as a starting point despite the fact that no
dollar estimates were considered reliable, the work group felt that wetlands deserved to be
ranked in the "very high" priority category. Another area of uncertainty is that the amount of
wetlands lost historically is not known, and estimates of the current loss rates are unreliable.
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8. Land Use Changes/Physical Modifications of
Terrestrial Habitats (except dredging)
Increased pollution can result from land development with commensurate damages from
pollution. Many types of economic damages result such as damages and loss of recreation
areas; increased dredging costs and surface water quality degradation due to soil erosion; and
increased air pollution. None of these damages, however, could be realistically measured for
this project. However, large and very real economic costs will be incurred in the region due to
overdevelopment of important watersheds. The principal cause of the pollution of the
watershed surrounding the reservoirs that supply water to New York City is the destructive
development of surrounding lands. Estimated capital costs of filtering the city's water range
from $1.5 billion - $5 billion; these estimates do not include operation and maintenance costs.
The sole source aquifer in Long Island is another example of a valuable natural resource where
costs of supplying water are increasing due to overdevelopment in the watershed.
Work Group Deliberations
Land Use Changes/Physical Modifications of Terrestrial Habitat were given a "very
high" priority ranking by the Region n work group. The work group determined that this
problem area deserved a 'Very high" priority because of the estimated costs of watershed
destruction along with the costs not estimated.
Sources
New York State Senate, "The Impending Pollution of New York City's Water Supply", June 4,
1990.
9. Dredging and Dredge Disposal
10. Municipal Sludge Disposal and Treatment
11. Wastewood Disposal and Treatment
No economic damages have been estimated for dredging and the disposal of dredging).
wastes, municipal sludge disposal and treatment, or waste wood disposal and treatment. The
economic damages from these problem areas are assumed to be small, because the ecological
impacts are assumed to be small.
The economic damages associated with sludge disposal are estimated to be minimal or
non-existent. After ocean dumping ceases, alternative methods of disposal may have increased
economic damages associated with them. It is possible that some of the reduced beach use is
associated with consumer perception that ocean dumping of sludge reduces the quality of the
water, however, it was not possible to prove or quantify the effect.
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12. Active Hazardous Waste Sites; Sites currently
regulated under RCRA's Subtitle C
Three types of economic or welfare damages were considered for RCRA sites: property
value declines, ground water resource damages and increased health care costs. (See Section III
for Damages to Ground Water Resources analysis, and Section IV for Health Care Costs
analysis.) Although professional judgment and anecdotal information indicate that the public is
concerned about buying homes surrounding RCRA sites, no studies document this impact.
Generally, public knowledge of and concern about Superfund sites far exceeds concern about
RCRA sites. Thus, no empirical studies support estimating the existence or level of declining
property values at the RCRA sites.
Work Group Deliberations
RCRA sites were judged by the Region II Work Group as ranking "high" in the
economic damages ranking. Ground water contamination due to RCRA sources is estimated at
7 percent of total ground water damages, or $22 million annually not including future use (see
Damages to Ground Water Resources analysis, Section III). Although there are no statistical
studies on property value decline near RCRA sites, the work group assumed that losses in
property value would be about half that of Superfund sites. Therefore, the total economic
damages due to RCRA sites was estimated at $120 million.
13. Abandoned Hazardous Sites/Superfund Sites
Three types of economic concerns - increased health care costs, damages to the ground
water resource, and property value declines - are caused by Superfund sites. The largest
economic damage is the decline in property values for homes located near Superfund sites. This
section contains Region ITs analysis of potential property value declines. The analyses of
Damages to Ground Water Resources is contained in Section HI; and Health Care Costs, in
Section IV.
Property Value Declines and Toxic Waste Sites
The impact of toxic waste dumps on the property value of surrounding homes has
generated considerable community concern as well as academic study. Although no studies of
property value declines in Region II have been published, an estimate of possible property value
declines in Region II, based on studies completed in Massachusetts and California, was
completed for purposes of the ranking project. Although the estimates must be considered
speculative, much anecdotal information exists in Region II. For example, concern expressed by
community members at public meetings, phone calls from individual home buyers on the
location of toxic sites, and requests by lending/home financing institutions lead to the conclusion
that there is some decreased demand for housing surrounding toxic waste sites.
Because the study of declines in property value near toxic sites is relatively new, there is
no general consensus on the conditions that must exist (for example, risk beliefs, media
31
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attention, public knowledge) for the property values to decline. In addition, the size of the
property value declines has not been established. As a result, any dollar estimates of the losses
should be considered speculative; the uncertainty in those figures is relatively high. Because of
this uncertainty, a range of assumptions were used in the analysis. The uncertainty differs
considerably from uncertainties in most of the economic analysis. More often, the estimates of
economic damages from pollution are uncertain because damages are known but cannot be
calculated. A good example is the loss of wetlands, where economic damages to fisheries,
recreation, scientific study, and surface water quality exist but cannot be fully calculated.
However, when dollar estimates do exist (i.e., dollar losses due to beach closures), they are
generally concrete. In contrast, the property value estimates presented here are far from
precise because the existence of the property value loss is uncertain.
The analysis of Region II property value declines estimates losses in residential property
value only. Declines in commercial property value will occur as well. However, because there
are no studies estimating the extent and existence of these economic losses, they were excluded
from the analysis.
Methodology
Estimation of property value declines consisted of multiplying the value of the decline
per home by the number of homes per site, and then by the number of sites. The resulting
dollar total is the measure of property value declines resulting from pollution. Each factor is
described in the following pages.
Damage Per Home
Estimates of the dollar decline per home were obtained from various studies, primarily
econometric analyses, that estimated the difference between the value of homes near a site and
the value of comparable homes elsewhere. Other studies surveyed the public for "willingness to
pay": that is, how much more would the buyer pay for a home if it were farther from the waste
site. Michaels (1990) notes that many methodological issues remain, and identifying price
effects has been an elusive goal with results of different studies varying considerably.
In a 1986 publication, Smith and Descvousges reported on a survey of property values
conducted in suburban Boston. Residents were asked about their attitudes and the prices of
housing units that lay at varying distances from toxic waste sites. (The neighborhood involved
currently has several Superfund sites.) For the homeowners in the sample, "willingness to pay"
estimates ranged from $330 to $495 per mile from a toxic waste site. That is, the farther a
property lay from the waste site, the more a resident was willing to pay for that property.
In another study, Schultz, McClelland, and Hurd (1989) used a statistical estimation of
property value declines. Their work for the Office of Policy, Planning, and Evaluation (OPPE)
analyzed sales data from 173 homes surrounding the Operating Industries, Inc., landfill in the
Los Angeles area. The site had received both municipal and hazardous waste, and odor from
the landfill was a significant problem.
The study showed a statistically significant decline in property values despite the fact
that 62 percent of recent purchasers were not aware of the landfill when they bought their
homes. The difference in sales price between homes in that neighborhood and similar homes
elsewhere was an average of $2,084, with a reasonable upper bound limit of $4,793. Unlike
other studies, the values were not reported on a yearly basis.
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A similar approach also has been used in a study by Michaels, Smith, and Harrison of
Resources for the Future (the study is currently undergoing peer review). The research is based
on a sample of sales prices for 2,182 single-family homes in suburban Boston. The study shows
a "uniform, statistically significant effect" for price/distance relationships but notes that this
relationship varied in different housing markets and localities. For example, the willingness to
pay for distance from a waste site was $1,799 per year in a premier housing market but $38 in
an "average" housing market. In 1977 dollars, the average value per household per year was
$124. Using 1988 dollars, the average each household was willing to pay was $241, with a range
of $3,500 to $74.
The variability in public willingness to pay for distance from waste sites also was
discussed by Pettit and Johnson in a 1987 Waste Age article. "The impact of a solid waste
faculty on nearby development and property values can vary according to the circumstances of
each particular case," they concluded. They cited a number of cases and studies in which
different results had been reported: Some found a positive increase in property values; others
reported no impacts; and others found negative impacts on property values. However, the
reported increase in property value was a case where government purchases of property to buy
land for a landfill had increased the land values. This case is therefore not applicable to
Superfund sites, although it may apply to new RCRA facilities or incinerators. Two studies
showed no property value decline; one analyzed the property values around Three Miles Island
after the shutdown, and other has been criticized on methodological grounds. Thus , these
studies are not convincing for purposes of the Region II assessment. In addition, although
Pettit and Johnson report that "property value characteristics other than distance to the landfill
appear much more important in explaining prices," their study does not disprove the hypothesis
that when everything else is equal, a landfill or toxic waste site will decrease property values.
EPA Risk Analysis Results
Two other regional comparative risk projects supported by EPA have examined property
value declines. Region X did not directly estimate the property value losses, but cited local
examples. Region I estimated the extent of property value losses. Region IPs analysis follows
the same general approach as the Region I assessment. However, Region I used different
population density information and a similar range of estimates for the size of property value
declines, specifically, a lower bound limit of $69, and upper bound limit of $500 per site within
one mile, and an absolute worst case of $4,800 per home. In contrast, because of the range of
losses reported in the literature, the Region n analysis uses the values $70, $500, and $1,000.
The values were rounded from the study values (i.e., $69 was rounded to $70 and so on) so that
no false sense of precision will be conveyed. In addition, the analysis avoided using $4,800 as an
absolute worst case because it appears to be a one-time loss rather than a yearly loss ( the value
was lost at the time the house was sold).
Number of Homes Per Site
Initially, Region II staff planned to extract information on population and homes from
actual site data, and then to extrapolate those data to the region. Initially population data was
extracted from the same 20 ATSDR reports that were used to generate estimates of health risk.
These sites selected were considered to be representative of sites with high human health risk.
After the information was collected, however, it was determined to be less reliable than an
alternative method described below.
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As an alternative, Region II staff developed an "assumed distribution" of sites based on a
CERCLIS characterization study. The 1989 CERCLIS study indicates that 37.6 percent of the
sites in Region n are in urban areas, 27.4 percent are in suburban areas, 27.9 percent in rural
areas, and 7.1 percent "unknown." The percentage listed as unknown was allocated evenly to the
other three categories, and the proportions were then rounded slightly. Thus, the study treats
40 percent of the sites as urban, 30 percent as suburban, and 30 percent as rural.
Housing density figures were developed to determine the number of homes - rural,
suburban, and urban - found within one mile of a toxic waste site. For the rural areas, the
computation yielded an estimate of 60 homes in the region lying within one mile of waste sites.
To calculate suburban density figures, measures of 1,000 persons per square mile were used,
from New Jersey data and 2 and 2.7 persons per household from census data. Thus, an
estimated 370 housing units per square mile is the density factor for the suburban areas. For
urban areas, the 1983 Census County and City Data Book provided population densities for 28
urban areas in the states of New York and New Jersey. The average population density for
these areas (10,603) was divided by 2.7 persons per housing unit, for a density factor of 3,927,
approximately 4,000 homes per square mile.
Total Number of Homes
The final step in estimating the number of homes vulnerable to potential property-value
declines involved multiplying the number of waste sites in each area by the housing density for
the area:
o Rural: 60 sites x 60 homes = 3,600
o Suburban: 60 sites x 370 homes = 22,000 homes
o Urban: 80 sites x 4,000 homes = 320,000 homes
Number of Sites
Several choices are available for factoring in the number of waste sites that might affect
property values in the region. For example, sites on the National Priority List (NPL) are
generally well known and receive frequent media attention. Since public knowledge is an
essential ingredient in declines in property values, one might simply use the NPL sites as those
affecting property value. But Region n has, in addition, many potential NPL sites that
although not currently listed, have generated a great deal of local concern or have been placed
on the larger state cleanup lists. Region II staff concluded that approximately 3,200 sites are
under investigation, and two-thirds of these will require some further action. Approximately
1,000 sites are considered NPL candidates. Given these options, the current analysis uses the
same values applied in the health analysis: 200 sites, 600 sites, and 1,000 sites. As a result,
housing deemed at risk for property value declines are as follows:
o Assuming 200 sites: 345,600 homes within one mile
o Assuming 600 sites: 1,036,800 homes within one mile
o Assuming 1,000 sites: 1,728,000 homes within one mile
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Results
The lowest estimate obtained for property value declines resulting from pollution
damage was $24.2 million dollars per year. It was obtained by multiplying the lowest reported
damage per home ($70) by the number of homes around the 201 NPL sites experiencing
property value declines.
TABLES
POSSIBLE PROPERTY VALX3E DECLINES
AT SUPERMINI) SITES
Yearly Loss
per home
Number of Homes Total Yearly Losses
Within 1 mile
2QO NPL SITES
$ 70 345,000
, $ 500 345,000
1000 POSSIBLE NPL SITES
$ 70 1,728,000
$ 500 1,728,000
$ 242 million
$172.8 million
$121.0 million
$864.0 million
The largest estimate obtained for property damage is $1.728 billion per year. This estimate
used a value of $1,000 for loss per home and included all 1,000 potential NPL sites. However,
even this estimate is not considered to be an upper-bound one. Some reported property value
declines are as high as $5,000. These may be just one-time losses rather than annual losses.
But, if the $5,000 value proves to be a reasonable factor for yearly losses, the upper-bound
estimate could be as high as $8.6 billion annually.
Work Group Deliberations
The analysis encompassed a wide range of assumptions regarding amount of loss per
home and number of sites. The estimates range from $173 million to $1 billion. The work
group agreed that the most reasonable estimates were on the low end of the range. In its
assessment, the work group chose to consider only current NPL sites for the economic
assessment, while the Superfund analysis for health and ecological considered all the potential
NPL sites. In addition, Superfund also contributed approximately 5 percent or $22 million to
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ground water contamination not including future use losses, plus approximately $31 million - $52
million in health care costs.
Sources
Michaels, Gregory R, "Hazardous Waste Sites and Hedonic Housing Analysis: Improvements yet
questions Linger", AERE Newsletter.
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14. Municipal Solid Waste Sites - Storage and Landfills
Work Group Deliberations
Economic damages resulting from pollution at municipal solid waste sites include
property value losses and ground water resource damages. The work group used the same
assumptions for municipal solid waste sites as for RCRA sites (contribution to ground water
contamination and loss of property value) to come up with an estimated $120 million in
economic damages. Therefore, the work group ranked this problem area in the "high" category.
Some of the property value studies are based on Superfund sites that are also municipal solid
waste sites.
15. Municipal Solid Waste - Incinerators
Work Group Deliberations
The work group ranked municipal solid waste incinerators in the "medium" economic
damage category. Health care cost increases were estimated at $10 million. In the future, as
more incinerators are sited, this problem area is expected to have greater economic damages
associated with it. One issue of concern is whether or not property value declines should be
considered for incinerators.
16. Underground Storage Tanks Materials Storage Tanks,
Sites and Pipelines Not Regulated under RCRA
Subtitle C
Work Group Deliberations
Leaking underground storage tanks were judged as "high" in the economics ranking by
the work group, largely because of their impact on the ground water resource. The New York
State 305(b) report indicates that 65 percent of private well contamination is related to UST's.
Therefore, 65 percent of ground water contamination was attributed to UST's for the purpose of
this analysis (See Damages to Ground Water Resources analysis, Section HI.) UST's were
estimated to be causing $200 million dollars worth of damage. This estimate does not include
future use (i.e., contamination which has not closed wells, but is reducing the available stock of
ground water).
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17. Accidental Releases During Transport or Production
Economic damages from accidental releases include damages from oil spills, evacuation
costs, materials damages, and health-care costs. Although various databases exist (especially the
ERNS database), the data was not considered reliable as to the size or number of spills. Data
on the damages caused by spills was largely absent. In addition, because the economic damages
from oil spills are considered to be large and important, EPA has developed an economic
damages model to be used for litigation purposes. Further investigation on the use of the
model revealed that previous analysis done with the model on actual spills cannot be used
because it is litigation sensitive. Therefore data were not available to conduct any type of
economic damage assessment.
Work Group Deliberations
Even without data, because of evacuation costs, property damage and oil spills the work
group determined that this was a "high" priority with the potential to be even greater, e.g. in the
case of a Valdez-like spill.
18. Pesticides Contamination Associated with Application
Work Group Deliberations
The work group ranked this problem in the "medium" economic damage category.
Pesticides contribution to ground water contamination is estimated at $22 million plus future
use. See Damages to Ground Water Resources analysis, Section III.
19. Pesticide Residues in Food
Work Group Deliberations
The work group ranked pesticides residues on food as a "medium" priority for the
economic damage category. Increased health care costs from cancer were the only area of
concern. See Health Care Costs analysis, Section IV.
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20. Stationary Sources of Air Pollution
21. Mobile Sources of Air Pollution
22. Area Sources of Air Pollution
In order to determine the economic/welfare damages from criteria air pollution in
Region II, estimates were first calculated for the damages from air pollution, and then the
proportion of the damage from each of the three sources was determined. Estimates were
made of the following types of damages:
o Health care costs
o Materials damages
o Aesthetic/Visibility losses
o Agriculture and Forestry losses
o Global warming damages
Estimates of the first four damages (health care costs, damages to man-made materials,
agriculture, forestry and visibility) were provided by a consultants to Region II (RCG, 1990).
The global warming estimates were extracted from a national study. Summaries of both these
analyses follow.
Health Care Costs
Increased health costs from criteria air pollution are based on the human health
problems discussed in the human health volume. The types of human health problems analyzed
include: asthma attacks from ozone, respiratory restricted activity days from ozone, restricted
activity days from particulates, and increased cancer incidence from air toxics. A range of
estimates was provided by the consultant, however, Region II staff determined that the county
population should be used for ranking purposes. Annual average estimates in 1988 dollars
based on county population are:
Ozone
Ozone
PM
Air Toxics
- Asthma attacks
- Restricted activity
- Restricted activity
- Costs from cancer
$ 63,000
$ 1,200,000
$ 143,000,000
$ 20,000,000
Materials Damages
Estimates were made for materials damages from three criteria air pollutants -
participate matter, ozone and nitrogen dioxide. The uncertainty associated with these estimates
is high because the estimates were based on national studies, and then gross assumptions were
made to proportion the estimates to Region II. However, because the existence of materials
damages from criteria air pollution has been well established, the estimates were included.
Particulate matter causes soiling and discoloration effects on an wide variety of materials
including paint, structural metals and other building materials. Based on county population
data, increased household costs from soiling was estimated to be $286 million annually. In
addition to these increased household costs, the increased costs on two metal industries was
estimated in a national study. Scaling down the national estimates using Region IPs proportion
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of the U.S. population, the increased costs for Region II were estimated to be $401 million
annually.
Using estimates from two national studies and scaling the damages based on population,
estimates of the materials damage from nitrogen dioxide and ozone were made. For nitrogen
dioxide the primary deleterious effect on materials is dye fading. Damages were estimated at
$34 million annually. The primary effect from ozone is on elastomers, specifically for auto and
truck tires. Damages for Region n were estimated to be $24 million annually.
Decreased Crop Yields
Based on the national crop loss assessment network's analyses, the consultant estimated
potential decreased crop yields from ozone. The results range between $34 - $62 million lost
annually in reduced yields for the crops of alfalfa, corn, forage and wheat.
Damages to Forests from Air Pollution
The potential for damages to forests from air pollution, especially ozone, is well known
(RCG, 1990). Rural ozone concentrations have been widely associated with changes in forest
growth, yield and composition. However, given the magnitude of the uncertainties regarding the
magnitude of the decline and its economic impact on widely harvested species in Region II, it
was not possible to estimate the damages credibly.
Decreased Visibility
There is little uncertainty that people put a value on improved visibility. In numerous
surveys over many years, the public reports consistently that they would be wiiling to pay for
increased visibility in either urban areas or scenic areas. Given that there is no real market for
visibility, or even good proxies, all dollar values have been obtained by surveys, mostly in
national parks. Despite this uncertainty, estimates were made of the dollar value of visibility
impairments for Region II that ranged from $300 - 2620 million annually. Given the high
uncertainty the lower-bound estimate was used for ranking purposes.
Global Warming
Global warming may cause sea levels to rise and lead to losses of crops, forests, and
fisheries. Thus, the property value damages caused by global warming should be considered
when ranking the economic damages from criteria air pollution. In developing such estimates
for this analysis, Region n staff extracted data from a recent EPA report to Congress. The
report described the potential effects of global warming on the entire United States. The
estimates developed on this basis are tentative at best and are included only as an attempt to
place parameters on the potential magnitude of any problems. This caveat applies especially to
any dollar values reported. For example, the upper-bound estimate for a sea-level rise resulting
from global warming is two meters. A rise that large would drown most of New York City
unless a massive and costly engineering feat were accomplished. Any predictions of the actual
responses, economic or otherwise, to a global change this drastic is pure guesswork.
Nonetheless, given the magnitude of the impacts if global warming occurs, it is important to
include some estimate of the impact, even given the uncertainty. The various effects estimated
for Region II in the Report to Congress are:
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o Cost of replacing sand on recreational beaches
o Infrastructure and property protection
o Infrastructure costs for New York City
o Increased electricity demand
o Costs to elevate beaches and prevent coastal barrier island loss; rebuilding roads
and elevating structures; constructing levees and bulkheads to protect developed
lowlands
On the basis of the EPA estimates and speculation about global warming effects, the
following estimates have been made for Region II. Although it was impossible, given time
constraints, to gather and analyze the original studies to determine the various discount rates
and time frames used. If one assumed that the total damages would take place equally in the
next 100 years, damages could amount to $340 - 880 million per year.
Apportioning Damages to Sources of Air Pollution
In order to rank the problem areas, apportionment of damages to sources was necessary.
Staff with expertise in criteria air pollution in Region n used their professional judgment and
apportioned the damages into sources. The result of the apportionment is as follows:
TABLES
ANNUAL DAMAGES IN MILLIONS
Source Visibility Ozone NQX TSP
TOTAL
Global
Warming
STATIONARY 15
MOBI1B - 90
.AREA <50
ACID RAIN 135
44
35
10 m
17 275
7 310
172
426
412
1QO?
100?
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Based upon the order of magnitude, and including increased health care costs from air
toxics of approximately $20 million, mobile and area sources could result in economic damages
of a half billion dollars annually. Stationary sources result in lower damages of between 50 and
500 million dollars annually. The uncertainty associated with these percentages is high, and
should be used for ranking purposes only.
Work Group Deliberations
The work group ranked the economic/welfare damages from mobile sources of air
pollution in the very high category. Both mobile and area sources of air pollution contribute to
health care costs, materials damages, agricultural and forestry damages from ozone, increased
soiling of buildings and materials, reduced visibility and to possible damages from global
warming such as sea level rise, crop losses and increased electricity demand. While each of
these damages was estimated with varying degrees of confidence, estimates of economic
damages from mobile and area sources, excluding possible global warming damages, were
approximately $400 million yearly. The work group determined that mobile and area sources
should be ranked in the very high category.
The work group ranked stationary sources as "high" on the economic ranking. Stationary
sources of air pollution create the same damages to society as mobile and area sources. (See
discussion above.) Stationary sources are ranked lower because in Region II, stationary sources
are responsible for a much smaller contribution.
Sources
RCG/Hagler, Bailly Inc. EPA Region II Comparative Risk Project, Criteria Air Pollutants.
August 17, 1990.
U.S. Environmental Protection Agency. December 1989. The Potential Effects of Global
Climate Change on the United States. EPA-230-05-89-050.
Personal Communication
Kevin Doering, U.S. Environmental Protection Agency Region II
Robert Kelly, U.S. Environmental Protection Agency Region II
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23. Acid Rain
(Sources of Air Pollution that lead to Acid Deposition,
Primarily from Large Stacks)
Introduction
Ecological damages from acid rain generate economic impacts on society. The damages
of concern are those to materials, fisheries, the forest ecosystem, agricultural productivity, and,
possibly, water-supply systems. It is difficult to determine exact dollar figures for these impacts,
primarily because the extent and existence of the impacts are not well established scientifically.
In addition, economic analysis is not well suited to the ambiguities posed by the acid rain issue.
For example, issues such as long term, possibly significant, depletion of ecosystem nutrients are
potential ecological and economic concerns, however, the extent and actual occurrence of those
damages is very uncertain. In addition, despite the significance of these potential ecological and
economic damages, the negative effects from acid rain are currently small but may be increasing
rapidly in the future. Economic analysis is best equipped to estimate current and incremental
damages. Studies estimating the economic damages from acid deposition have thus
concentrated on damages to current use. These estimates, not surprisingly, have been fairly
small.
Researchers have emphasized the problems in using economics in analyzing the acid rain
problem. The authors of both studies used to generate monetary estimates caution,
"benefit/cost measurements of acid deposition may well involve major errors of commission and
omission" (Crocker, 1985) and that the models developed are only intended to estimate use
values. "Reviews of the possible magnitude of non-use values indicates that non-use values may
be larger than the use values" (Violette, 1985).
A complete literature review was not conducted because so many studies are
unpublished, and thus not easily accessible in the time frame for this project. However, two
studies were located that are useful in characterizing the acid rain problem for Region II. Both
studies were conducted by well-known researchers and have undergone peer review.
Impacts on Fisheries in the Adirondacks
The most detailed of the studies used in assessing economic damages from acid rain is a
1985 study by Violette for EPA's Office of Policy, Planning, and Evaluation. The analysis
calculates current-use impairments to recreational fisheries in the Adirondacks. Violette
concludes that $1 million to $12 million (1984 dollars) in annual losses occur. To develop that
estimate, Violette combined a 1976-1977 New York Anglers Survey (3 percent of Licensees, with
12,000 replies) with Adirondack Lake and Pond data as primary sources. He then compared
results from a modified travel-cost model and a participation model. In this way, estimates for
the value of each fishing site were obtained (i.e., the willingness to pay) based on out-of-pocket
travel costs (gas and expenses) and opportunity of time (hourly wage). These estimates of the
"value" of tfie fishing sites were combined with estimates of the number of fishing opportunities
lost as a result of acidification. (The fishing opportunities lost were obtained using catch rate
and acreage information from the NAPAP study. The analysis has been reviewed by OPPE
economists.)
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The Violette study does have some limitations, because of its underlying assumptions.
For example, the small dollar amount calculated for "lost" fishing results primarily from the
assumption that a large number of substitute lakes are available for fishing to replace the fishing
in lakes currently acidified. This assumption is open to question, because currently acidified
ponds are often high-elevation lakes that combine a "wilderness" experience with fishery
recreation. Thus, the acidified ponds may constitute a unique recreation experience. Other
fishing sites are not a perfect substitute.
Aggregate Estimates
The second study (Crocker, 1985) provides a much broader, albeit rougher, estimate of
damages. Of greatest interest is the estimation of an entire set of economic losses (materials
damages, forest ecosystems, agricultural losses, aquatic ecosystems, and water-supply systems)
except for non-user values. In this larger scheme, damages to aquatic ecosystems are
approximately 5 percent of total damages.
Unfortunately, Crocker's estimates are for the eastern one-third of the United States,
and the results must be scaled back to apply for Region II. Still, the overall proportion of the
damages is informative.
TABLE 7
Maximum Losses from Add Deposition
Eastern One-Third of the United States
Effects Category
Materials
Forest ecosystems
Direct agricultural
Aquatic ecosystems
Others (health, water supply)
Source: Crockery 1985
Maximum Losses (billions^
2.00
1,75
1,00
0.25
oao
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Visibility
Sulfate particles contribute to reduced visibility. In the Region I comparative risk
analysis, this loss of visibility was included as an economic damage resulting from acid
deposition. Depending upon definitions, the visibility estimates developed under the criteria air
analysis can be categorized in either the acid deposition or the criteria air pollution problem
area.
Conclusions
The range of estimates ($1 million to $36 million annually, in 1988 dollars) provided in
the Violette study provides a lower-bound estimated cost for fisheries losses in the Adirondacks.
These damages only account for a small proportion of total damages; however, using Crocker's
estimate that fisheries losses are only 5 percent of total losses to scale up to total losses, Region
II staff approximated that $20 million to $272 million annually for a rough estimate of total user
damages. Again, this estimate is highly speculative and was generated only to determine the
relative magnitude of the acid rain problem in economic terms. Non-user values are not
included, but may be larger than use values. In addition, acid deposition also causes visibility
impairments. (See discussion for Problem Areas 20 to 22). Region II staff estimated that acid
rain caused a large proportion of visibility damages. Adding visibility damages of approximately
$135 million annually to the rough estimate for materials, fisheries and forestry totals $400
million annual losses. This figure is a very rough approximation with a high uncertainty.
Work Group Deliberations
The work group ranked acid deposition as a 'Very high" priority for economic/welfare
damages. Acid rain damages to materials, fisheries and forests, losses in agricultural
productivity and visibility problems create economic impacts upon society. It is difficult to
determine any exact dollar figures primarily because the extent of damages from acid rain are
not well established scientifically. Using available studies of current damages only, estimates of
approximately $270 million annually are possible. (Note that the Adirondack fishery is but a
small proportion of the total, 5 percent.) Adding the value of visibility decreases could increase
acid rain damages to nearly $500 million annually. The uncertainty associated with these figures
is extremely high. Researchers indicate that"... benefit/cost measurements of acid deposition
may well involve major errors of commission and omission."
Sources
Crocker, T.D. and J.L. Regens, "Acid Deposition Control: A Benefit-Cost Analysis, Its Prospects
and Limits." Environmental Science Technology (Vol. 19, No. 2) 1985.
Violette, D.M. A Model Estimating the Economic Impact of Current Levels of Aquification on
Recreational Fishing in the Adirondack Mountains. (Washington, D.C., U.S. Environmental
Protection Agency, Office of Policy, Planning and Evaluation EPA
230-12-86-021) 1985.
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24. Radon
Work Group Deliberations
The work group ranked radon in as a "high" priority for economic damages. For radon
the only relevant area of concern is increased health care costs from increased cancer. Health
care estimates range from $60 to 274 million annually. See Health Care Costs analysis, Section
25. Indoor Air Pollutants
Work Group Deliberations
The work group ranked the economic/welfare damages from Indoor Air Pollutants other
than Radon as a 'Very high" priority. The only economic damages estimated for indoor air are
the health care costs from cancer. The very large cancer incidence numbers estimated result in
this problem area rating a very high ranking. Health care costs include direct medical
expenditures as well as lost productivity. Using the wide range of estimates from the cancer
ranking and a smaller range of estimates on health care costs resulted in annual losses of $56 to
904 million annually. Given this wide range and the fact that this estimate is all inclusive,
indoor air was ranked very high but below damage estimates of fisheries, beach closing and
wetlands where dollar estimated may not be as high as the high end of the range of values. By
comparison, fisheries, beach closings and wetlands estimates do not include all damages.
See Health Care Costs analysis, Section IV.
26. Chemical Use that Depletes the Ozone Layer -
Chlorofluorocarbons
Work Group Deliberations
The work group ranked Chlorofluorocarbons in the category of "high" economic
damages. Ozone depletion can cause both health and non-health economic damages. The
estimates used in the ranking were for the cost of health problems from skin cancer and
cataracts. Research is underway to determine how the cost of skin cancer compares to the
health care costs of other cancers; however, preliminary figures indicate that it could be one
quarter lower, leading to estimates of health care costs of approximately $100 - 200 million.
The non-health problems associated with CFC's include crop loss and habitat change, in
addition, CFC's are predicted to add to global warming problems. The uncertainty associated
with both the cancer estimates and the health care estimates are high. See Health Care Costs
analysis, Section IV.
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27. Radiation other than Radon
Work Group Deliberations
The Work Group ranked non-radon radiation in the "medium" category of economic
damages. The only damages estimated were increased health care costs from cancer,
approximately $10 million. See Health Care Costs analysis, Section IV.
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