Review of the SOS Revenue Stream Report

read full document >

The IEAB reviewed the "Revenue Stream: An Economic Analysis of the Costs and Benefits of Removing the Four Dams on the Lower Snake River" (1mb PDF) prepared by the Save Our Wild Salmon (SOS) organization. We prepared a short summary of the content of that report and provide the following five main comments on the report.

  • The Revenue Stream estimate of the cost of hydropower replacement if the dams were removed is substantially below the cost estimates reported in the Corps of Engineers Lower Snake EIS in 2000. This is crucial, because the cost of replacement power is potentially a large continuing cost if the four lower Snake River dams were removed. Based upon our review of the Corps of Engineers’ cost estimate, the Revenue Stream report underestimates hydropower replacement costs by enough to invalidate their main result that the region could save money by removing the dams.
  • The Revenue Stream report is not a peer reviewed analysis, the work was not conducted by an open public process, and many of the sources that the report relied on came from reports that were also not products of an open, public, peer reviewed process. Consequently, the IEAB does not have a solid basis to either accept or reject many of the cost and benefit estimates in the Revenue Stream report.
  • The Revenue Stream report does not discount future benefits and costs of dam removal. Discounting recognizes that people give greatest weight to immediate costs and benefits. Because some large costs of dam removal occur immediately, while other costs and benefits occur slowly over many years, lack of discounting could have a significant impact on the conclusions of the report.
  • The Revenue Stream Report estimates the cost of maintaining the salmon program in the Columbia basin with and without the four lower Snake River dams, and then poses the difference between these two costs as a cost saving. The cost estimates reflect a diverse mix of Federal agency budgets and estimated additional salmon recovery costs. It is not clear that the agency budgets reflect full or accurate cost estimates, or that they rely on a common definition of costs.
  • The Revenue Stream report argues that dam removal will have substantial additional benefits due to the recovered fishery. The reported recreational fishery benefits rely heavily on a study by Don Reading (2004), which the IEAB reviewed in December 2005. We concluded that Reading had made a number of methodological errors which seriously biased his benefit estimates upward. The non-fishery recreational benefits are derived from a study by John Loomis (1999) which the IEAB reviewed during our overall review of the Corps’ EIS in 2001. We had significant concerns about some of Loomis’ results as well, and the numbers actually used in the final Corps EIS differed substantially from those presented in the original Loomis study. Hence, the Revenue Stream’s reported benefits from salmon recovery in the Snake River appear unreliable.

The IEAB concludes that the Revenue Stream report prepared by Save Our Wild Salmon has a number of deficiencies that raise serious questions about its acceptability as an alternative to the Corps of Engineers Lower Snake EIS. Although it may now be out of date and was not perfect, the Corps EIS has been widely accepted as a credible analysis of the impacts of removing the four lower Snake dams.

The Corps EIS set a high standard as an open, public and peer reviewed analysis that has not been matched by any other study of dam removal, and is certainly not matched by the Revenue Stream report. Because Revenue Stream uses numbers from reports that do not result from an open peer reviewed process, it is difficult to assess the validity of these studies, whether they use appropriate methodology, rely on good data, or use compatible assumptions.

The Revenue Stream report itself reflects some inappropriate methodology choices. SOS’s choice to not address the likely distribution of costs and benefits over time or to discount future costs and benefits is a major failing of the report. In other cases, the Revenue Stream report does not clearly document the methodology they used to derive their estimates, making it impossible for us to replicate or critique their numbers.

While the IEAB concludes that there are enough problems with the Revenue Stream report that it cannot be viewed as a credible alternative to the Corps Lower Snake EIS analysis of the impacts of removing the four lower Snake dams, we want to emphasize that the EIS is not necessarily the last word on the topic. When the IEAB served as formal reviewer of the Corps EIS, one of our conclusions was the region should "… invest in improved estimates of economic benefits from dam breaching to reduce the range of uncertainty and to improve confidence in them …" At the time the IEAB had a number of criticisms and suggestions for how the analysis could and should be improved. Because there are a number of weaknesses to the Corps study, because some of the assumptions and methodologies used by the Corps are controversial, and because the world, especially the power cost world, is a much different place than it was in the late 1990s when much of the Corps analysis was done, it is easy to see why people continue to question whether the Corps EIS is the final word on the topic.

Perhaps it is time for the region to consider doing a follow-on study of the four lower Snake dams that would address some of the weaknesses of the Corps study, and that would update the study to reflect the many changes in the regional economy, regional transportation systems, power generation and transmission, the successes and failures of current recovery efforts, and the improved models of fish biology, dam passage and ocean survival now available.

comments powered by Disqus