This paper recommends methods of economic analysis for evaluating and comparing fish and wildlife recovery programs. Developed by the staff of the Northwest Power Planning Council, the paper is intended in part to help the Council evaluate the economic dimensions of fish and wildlife recovery actions.
The Council draws guidance on the role of economics in its fish and wildlife decisions from the Northwest Power Act. Under the Northwest Power Act, the Council develops a Columbia River Basin Fish and Wildlife Program to "protect, mitigate and enhance fish and wildlife affected by the development, operation, and management of the [the basin's hydroelectric] facilities while assuring the Pacific Northwest an adequate, efficient, economical, and reliable power supply." The Act contains procedures and standards to further guide the Council's development of the program, most of them biological (e.g., use the "best available scientific knowledge") or legal (e.g., consistency with legal rights of tribes). Economics and cost effectiveness enter directly into the Council's program amendment decisions in only two ways: First, as evident from the primary standard quoted above, the Council must be able to assure that the program assures the region an "economical" power supply. Second, if "equally effective alternative means of achieving the same sound biological objective exist," the Council is to include in the program "the alternative with the minimum economic cost."
In 1994, the Direct Service Industries, Inc. argued in a court challenge to the Council's adoption of program amendments that the Power Act required the Council to subject proposed program amendments to a cost-benefit analysis. The U.S. Court of the Appeals for the Ninth Circuit rejected this claim, noting that the Power Act does not require cost-benefit analysis, explicitly or implicitly.
A 1996 amendment to the Northwest Power Act provides that when making project funding recommendations to the Bonneville Power Administration to implement the Council's Columbia River Basin Fish and Wildlife Program, the Council "shall determine whether the projects employ cost effective measures to achieve program objectives." This paper attempts to describe an approach or methodology that the Council will apply in making the cost-effectiveness determination called for in the legislation. The scope of this cost-effectiveness determination is limited to what is called the "direct program" portion of the Bonneville fish and wildlife budget. The direct program budget totals approximately $100 million out of an average annual budget for Bonneville fish and wildlife activities of $252 million. This direct program portion of the budget funds, among other things, a number of habitat, production, coordination and research projects that correspond to measures in the Council's program. It is these projects for which the Council must make the cost-effectiveness determination. The cost effectiveness determination required by the amendment to the Northwest Power Act excludes the remainder of the $252 million Bonneville budget and foregone power revenues as a result of changes in the operation of the river system. It is also important to remember that there are fish and wildlife activities in the basin not funded by Bonneville. These include Mitchell Act funding for hatcheries and diversion screens, land management activities to improve fish and wildlife conditions funded by the Forest Service, the Bureau of Land Management and others, and state investments in watersheds and harvest management, and more. One of the needs in the basin is to better understand and coordinate fish and wildlife activities of federal, state, and tribal entities.
The Council needs to develop a systematic approach to economic analysis of fish and wildlife measures to meet its obligations under the Northwest Power Act. Moreover, in order to make systematic judgments, the Council must consider a broad range of economic information. At a minimum, this broader economic perspective provides a context within which the more narrow cost-effectiveness determination called for in the Power Act amendment takes place. The broader context would include all areas of recovery actions and their implications including direct program funding, changes in operation of the Columbia River system, funding of production facilities outside the direct program, and capital investment appropriations for mainstem hydrosystem modifications undertaken consistent with the National Marine Fisheries Service's Biological Opinion on hydrosystem operations and the Council's Program. Thus, this paper has been developed in part to allow the Council's cost-effectiveness review to range broader than the direct program, even if these observations have less of a specific legal meaning for year-to-year funding decisions.
A broader economic perspective will help prepare the Council and other entities to understand and make the comprehensive programmatic decisions that will be called for in the next few years. Under consideration in a number of forums and processes, are proposals for major reconfigurations of the Columbia River hydroelectric facilities for the benefit of salmon and other fish and wildlife, including the possibility of removing or breaching a number of dams in the lower Columbia and Snake rivers or making other substantial and expensive, if less dramatic, modifications to the dams. Decisionmakers need to know how to develop the appropriate information on the economic implications of these proposals. This paper is intended as a guide to methods of economic analysis for this purpose.
