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Economic Benefits of Nutrient Reduction in Utah Waters

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Economic Benefits of Nutrient Reductions in Utah’s Waters

Executive Summary  Protecting water quality is important impor tant to Utah’s economy and the quality of life of Utahns. Ut ahns. Excess nutrients (nitrogen and phosphorus) from treated wastewater, stormwater, and agricultural runoff can result in nuisance algae

waters that are threatened by increasing levels of nutrients. Households who visit lakes, rivers and streams in Utah stated, st ated, and showed through their trip choices choices,, a clear preference for recreating at cleaner waterbodies. The

growth which degrades aesthetics, recreation and aquatic life in waterbodies. This study stud y poses the question: What are the economic benefits to Utahns maintaining and improving the quality of the t he state’s lakes, lakes, rivers, and streams? Through surveys administered to Utah households, the study found that residents place importance on protecting waters from excess nutrients for quality of life and recreation; for instance, 97 percent of Utah households surveyed sur veyed indicated that

study found that annual economic economic benefits derived from enhancing recreational trips by improving water quality in Utah’s waters accounted for about $48 million of the total economic value. The remainder is due to other quality of life factors fac tors including sustaining water quality for future generations. gener ations. Finally, Finally, this study estimated that residents of Utah spend sp end about $1.4 to $2.4 billion a year on trips to the state’ s tate’ss waters for water-based recreation activities. In this t his way, way, they not only derive a

it was important to maintain water quality for future generations. Utah households report that they are willing to pay from $70 million to $271 million a year to protect and improve

great deal of enjoyment from the state’s water resources, but at the same time they make an important contribution to the state’s economy economy.

 

Utah’s lakes, reservoirs, rivers and streams If clear, clean water was free, play a significant role in the state’s economy. economy. it is easy to imagine that Annual expenditures for recreation trips most Utahns would prefer to Utah waters by state residents total not to see algal blooms between $1 $1.4 .4 billion and $2.4 billion. These or experience unpleasant expenditures to gasoline service stations and convenience stores, restaurants and odors. Indeed as shown fast food establishments, hotels and in Chapter 7, Utahns rated campgrounds, sporting good stores, and streams as undesirable other suppliers are to support outdoor once algae was as recreation activities on or near the water. high as it isgrowth in the bottom These direct expenditures represent about photograph. 1 to 2 percent of the total state economy economy.. Any spending by visitors from other for recreation and aesthetics based upon high states is in addition to these figures. For levels of algal growth in the river bottom. perspective, as described in the State of Utah Outdoor Recreation Vision, in 2011, 22 million Unfortunately, for as long as rivers and lakes domestic and international visitors traveled tr aveled to must serve multiple uses, clean water will not Utah, spending an estimated $6.87 billion. Many be free. As populations increase, so do the of these visitors are attracted to Utah for its pressures on lakes and rivers to accommodate beautiful natural amenities. increasing levels of nitrogen and phosphorous in the wastewater streams that result from people Anyone who swims or boats in rivers or lakes, or takes walks along a waterside in Utah, can appreciate the value of clean water. If clear, clean water was free, it is easy to imagine that most Utahns would prefer not to see algal blooms or experience unpleasant odors. Indeed as shown in Chapter 7, 7, Utahns rated streams as undesirable

going about their daily lives. It is costly to treat wastewater to remove these nutrients from homes and businesses before it is discharged to surface waters. In addition, managing stormwater from city streets and suburban yards as well as runoff from agricultural fields all come with a price tag.

What is the problem with excess nitrogen and phosphorus? Nitrogen and phosphorus are naturally occurring nutrients that ow into surface waters and are necessary to support

aquatic life. However However,, man-made sources of nitrogen and phosphorus, such as sewage, stormwater and agricultural runoff, result in excess concentrations of nutrients that can cause nuisance algal algal growth. The increased algal growth and decomposition can lead to low oxygen levels in surface waters that harm sh and other aquatic organisms, and can c an reduce ecosystem diversity. The nuisance algae can also cause problems with taste, odor, and overall aesthetics that impede recreation, reduce property values, and can lead to increased drinking water treatment costs.

While a certain amount of nitrogen and phosphorous is necessary for the health of aquatic ecosystems, excess quantities from human activities can be harmful to fish and biodiversity and cause nuisance algal blooms, changes in water clarity, and undesirable odors. These detriments to people and aquatic life detract from the value of the state’s waters and thus the quality of life of Utahns, which raises the question: What is the cost of failing to address current and future degradation from excess nutrients? Stating the question a different way: What are the benefits to Utahns maintaining and improving the quality of the state’s lakes, rivers, and streams?

NUTRIENT UTRIENT REDUCTIONS IN UTAH’S WATERS WATERS ECONOMIC BENEFITS OF N

 

The primary objective of this investigation is to answer this question by providing information on the value of clean water to the citizens of Utah. This objective is best accomplished by surveying and random sample of Utah households. Surveys were conducted and interpreted by a research team that included academic and consultant experts in survey research and economic e conomic analysis in coordination with state water quality professionals. The state determined current water quality conditions and developed predictions for future scenarios for water quality with and without additional interventions to limit nutrients. This information was mailed to a representative sample of Utah households as paper surveys. These surveys are described in Chapter 3.

Undeniably, water-based recreation is popular Undeniably, among Utah’s 893,717 893,717 households. Based on survey results it is estimated that three-forths (73.2 percent) of Utah households indicated that they visited a lake and/or river to swim, fish, boat, hunt or engage in near-shore activities ac tivities at least once in the previous 12 12 months (see Table ES-1). ES-1). These households are defined as “users” “users ” of Utah’s waters. This means that only about 27 percent are “nonusers” because they did not take a trip to a waterbody in the last 12 months.

Public Benefits

TABLE ES-1

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stewardship of the state’s waters and a full 97 percent rated this objective as of moderate importance importa nce or higher.

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In addition, 63 percent also highly rated the importance of improving water quality for fish and wildlife. Most households indicated that it was also important to maintain water quality for recreational purposes.

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The survey results indicated that regardless of whether or not households recreated at rivers and lakes, they at least wanted to prevent the state’s waters from getting any worse (Chapter 5). Indeed, as shown in Figure ESES -1, for the citizens of Utah as represented by the survey, the most important reason for protecting lakes and rivers from excess nutrients is to maintain water quality for future generations. Specifically, 84 percent of all respondents placed a high importance on the

Distribution of Utah Households by Water-based Recreation Total Households 893,717 Nonuser

239,516 (26.8%)

User

654,201 (73.2%)

Both River and Lake

475,457 (53.2%)

River only

67,029 (7.5%)

Lake Only

111.715 (12.5%)

FIGURE ES-1

Public Opinion on the Importance Of Water Quality-Related Issues In Utah

NU TRIENT REDUCTIONS IN UTAH’S WATERS ECONOMIC BENEFITS OF NUTRIENT WATERS

 

The households who visited rivers or lakes averaged more than 20 trips in the last year whether these trips were just day outings or longer. That translates to more than 13 million millio n waterbody visits visit s by Utah households! Table ES-2 shows the t he estimated number of day and overnight trips to the most popular lake and river destinations as reported in the survey. Households may engage in more than one activity on their outing to a river or lake. As shown in Table Table ES-3, respondents respondent s were asked to report on their households’ activities on their water-based recreation trips. Near shore activities, such as taking a walk along a riverside

(73.8 percent) or enjoying a picnic by the lake (59.6 (59 .6 percent) were taken by most households. h ouseholds. Boating proved a more popular activity on lakes (64 percent) than rivers (1 (13.7 3.7 percent). Swimming was also a more frequent activity at lakes (64.6 percent) than rivers (31.5 percent). Coldwater fishing was more popular than warmwater fishing whether in lakes or in rivers. river s. Finally, Finally, a relatively small number of households also include hunting activities on their trips to the waterside. Thus, most Utah households have direct and varied experience with the state’s waters as a recreational resource.

TABLE ES-2

TABLE ES-3

Top Five Lakes and Rivers, by Total Trips (Weighted)

Household Activities While Visiting Lakes and Rivers (All Activities)

NUMBER OF TRIPS

LAKE

ACTIVITY

Day Trips Utah Lake Strawberry Reservoir

492,000 271,000

Deer Creek Reservoir

240,000

Pineview Reservoir

206,000

Bear Lake

199,000

Overnight Trips Flaming Gorge Reservoir

274,000

Strawberry Reservoir

263,000

Bear Lake

222,000

Jordanelle Reservoir

52,000

Rockport Reservoir

47,000

RIVER

LAKES

RIVERS

Boating

64.0%

13.7%

Fishing—warm-water fis fishery

35.3%

18.4%

Fishing—cold-water fis fishery

57.1%

47.8%

Swimming

64.6%

31.5%

Near-shore activities

59.6%

73.8%

Hunting—waterfowl

8.9%

7.5%

Hunting/Trapping—other

4.5%

6.4%

LOCATION DESCRIPTION

NUMBER OF TRIPS

Day Trips Logan River-1

Logan River from Cutler Reservoir to Third Dam

203,000

Provo River-1

Provo River from Utah Lake to Murdock Diversion

132,000

Provo River-3

Provo River from Olmsted Diversion to Deer Creek Reservoir

119,000

Jordan River-8

Jordan River from Narrows to Utah Lake

117,000

Chal Ch alkk Cre Creek ek-1 -1

Chalkk Cr Chal Cree eekk fro from m con conflu fluen ence ce wi with th We Webe berr Riv River er to co confl nflue uenc nce e wit with h Sou South th For Chalk Creek

111,000

Overnight Trips Green River-4

Green River from San Rafael confluence to Price River confluence

34,000

Provo Deer Creek

Provo Deer Creek from confluence with Provo River to headwaters

29,000

Hunt Hu ntin ingt gton on Cr Cree eekk-1 1

Hunt Hu ntin ingt gton on Cr Cree eekk fr from om co confl nflue uenc nce e wit with h Cot Cotto tonw nwoo ood d Cr Cree eekk to to Hig Highw hway ay 10

22,0 22 ,000 00

S. Fork Ogden River

From Pineview Reservoir to Causey Reservoir

21,000

Ogden River

From confluence with Weber River to Pineview Reservoir

19,000

NUTRIENT UTRIENT REDUCTIONS IN UTAH’S WATERS WATERS ECONOMIC BENEFITS OF N

 

Total Economic Benefits

The expressed opinions by the public provide valuable feedback about their attitudes toward managing water quality. However, However, these attitude attitudess alone do not provide a direct measure of the economic value to the public. To To this end, the surveys presented choice situations to respondents, similar to a vote in a referendum. Specifically, households could choose to pay nothing additional for their water and sewer services and allow some rivers and lakes to degrade or opt to pay higher monthly wastewater rates to prevent that degradation and in some cases, to improve waters that are already impaired by excess nutrients.

Utah has over 130 priority lakes and reservoirs and hundreds of river destinations. The most popular day trips by Utahn households included Utah Lake, Strawberry Reservoir, Deer Creek Reservoir, Pineview Reservoir, Bear Lake and sections of the Logan, Provo, and Jordan rivers as well as Chalk Creek. For overnight overnight trips Flaming Gorge Reservoir topped the list followed by Strawberry Reservoir and Bear Lake.

By making these choices, households indicated what economic value they place on protecting and improving the state’s s tate’s waters

FIGURE ES-2

Nutrient Reduction Program Maintain Scenario

(shown in Figures ES-2 and ES-3). ES -3). They chose what they would give up in terms of dollars that they could spend on other goods and services in the economy in return for cleaner water for their own use and enjoyment and for the quality of life of future generations living in Utah. A look at the raw responses is instructive. The dollar amounts of the monthly payment or “bid” that was offered to respondents ranged from $2 to $50. About half the households were given the option to maintain water quality and the other half had the choice to go beyond simply preventing further degradation and improve existing water quality. As shown in to Table ES-4, the percentage of respondents who opted to make the extra monthly payments tended to be higher at the lower price levels, just as with other goods and services purchased in the market place. That is, the better the deal, the larger the number of buyers. More than 75 percent of households would pay $2 to $5 a month in return for maintaining water quality, but the percentage fell to about 40 percent at the $20 per month price level. Finally, Finally, when the monthly cost reached $50, about 25 percent of households indicated that maintaining water quality was worth that much to them.

FIGURE ES-3

Nutrient Reduction Program Improve Scenario

NU TRIENT REDUCTIONS IN UTAH’S WATERS ECONOMIC BENEFITS OF NUTRIENT WATERS

 

TABLE ES-4

Percent Responding “Yes” to Offered Bid by Survey Version

BID

MAINTAIN % ‘YES’

IMPROVE % ‘YES’

$2

76%

75%

$5

77%

68%

$7

42%

62%

$10

44%

54%

$12

63%

50%

$15

41%

47%

$20

40%

62%

$30

31%

51%

$40

29%

32%

$50

26%

31%

Overall, more households were willing to pay the monthly increase in their utility bills when given the opportunity to improve rather than simply maintain water quality. This is reasonable because these households were getting more for their money. For example, at the $20 $2 0 bid amount, the percentage percentag e who said “Yes” to the offer increased from 40 to more than 60 percent. In addition, half of the households were willing to pay pay as much as $30 $ 30 more each month in order to improve and protect water quality from too many nutrients entering the waterways.

The analysis of these data in Chapter 5 revealed different results depending upon whether the household was a recreational user or nonuser of the state’s waters. As shown in Table ES-5, on average, nonuser households stated that they would be willing to pay from $2 to $7 more each month to maintain current conditions. Households who actively recreate in or near waterways would pay $3 to $14 $14 per month to prevent any further degradation in Utah’s waters and from $ 8 to $32 month if the nutrient reductions also improved waters that have already been impaired by excess nutrients. As shown in Table ES-6, on an annual basis and adding up the payments across all Utah households, this gives a range $31 million to $127 $127 million to maintain water quality qualit y and between $70 $ 70 million million and $271 million per year to improve water quality. quality. The upper bound of of the range is based upon survey responses exactly as they were reported in the survey. The lower bound of the range shows the results after conservatively adjusting the responses for how certain survey respondents felt about their answers. A respondent had to be at least 70 percent certain cert ain that they would be willing to pay the increase in their water bill for the response to count as a vote for the nutrient reduction program.

TABLE ES-5

Monthly and Annual Benets per Utah Household

MONTHLY WTP*

ANNUAL WTP

FUTURE WATER

LOWER

UPPER

LOWER

UPPER

GROUP

QUALITY SCENARIO

BOUND

BOUND

BOUND

BOUND

User

Improve

$8

$32

$97

$384

Maintain

$3

$14

$38

$163

Improve/Maintain

$2

$7

$26

$85

Nonuser

* WTP = Willingness To Pay TABLE ES-6

Total Utah Households Annual Benets (2011 dollars)

ANNUAL WTP USERS

NONUSERS

NUMBER OF USERS

Lower Bound

$37.56

$26.28

642,470

235,221

$31 million

Upper Bound

$163.32

$84.60

642,470

235,221

$127 million

Lower Bound

$97.32

$26.28

642470

235,221

$70 million

Upper Bound

$383.64

$84.60

642,470

235,221

$271 million

SCENARIO Maintain

Improve

NUMBER OF NONUSERS

UTAH ANNUAL WTP

NUTRIENT UTRIENT REDUCTIONS IN UTAH’S WATERS WATERS ECONOMIC BENEFITS OF N

 

Even the lower bound estimates are significant and suggest that Utah households value clean water.. According to the survey water sur vey,, Utah households house holds would be willing to continue these payments for at least 20 years. Using the lower bound estimates, and the 20-year time frame, means that maintaining water quality is worth about $500 $50 0 million, while improving improving water quality is worth more than t han $1 billion. billion. Not accounting for population growth, the upper bound for maintaining water quality is about abou t $2 billion and for improving water quality is more than $4 billion. This is also a measure of the cost of not taking further action to address water quality problems due to too many nutrients. A number of factors contribute to the validity of the results: »

»

»

»

The results have internal validity based of the fact that responses showed an economically sensible inverse relationship between the amount households were asked to pay and their likelihood of paying the increase in their water bill. Given the information in the survey booklet, the familiarity Utah households have with paying a water bill, and the fact that nearly three-fourths of Utah households visit Utah lakes and/or rivers, the survey results should be considered well-informed economic values. The statistical tests found no evidence of sample selection bias, and weights were applied so that the values represent Utah households as a whole. A range of benefits have been provided with an upper bound based on responses by households to the survey and a conservative lower bound to bracket the value that the economic literature indicates will correspond to what households would pay when it comes time to part with real money.

Recreation Benefits

Another way to validate the results and to learn more about how water quality affects the value of the recreation experience exper ience is to observe and analyze the recreation decisions made by households. Specifically Specific ally,, if people show by their behavior that they tend to bypass eutrophic waters to visit cleaner water bodies to enjoy their favorite recreation activities, this further corroborates their statements about the importance importan ce of maintaining and improving water quality. Table Table ES-7 shows the changes in water quality relative to current conditions for the water bodies most utilized for water-based recreation in Utah. Under the status quo 46 lakes and 73 rivers would degrade. degr ade. However, However, if the state adopts measures to maintain water quality, that degradation would not occur. Under the improve policy, the state would go beyond maintaining water quality and improve waters that have already degraded. TABLE ES-7

Summary of the Effect of Future Water Quality Policies on 131 Lakes and 153 Rivers

NUMBER THAT DEGRADE

NUMBER HELD CONSTANT

NUMBER THAT IMPROVE

Status Quo Lakes

46

62

23

Rivers

73

64

16

Maintain Lakes

0

108

23

Rivers

0

137

16

Improve Lakes

0

85

46

Rivers

0

80

73

Status Quo: Comparison of water quality in twenty years under

Current Policy, Policy, relative to current 2011 conditions. Maintain: Comparison of water quality in twenty years under a

Maintain Water Quality Policy, relative to current 2011 conditions. Improve: Comparison of water quality in twenty years under an

Improve Water Quality Policy, relative to current 2011 conditions.

NU TRIENT REDUCTIONS IN UTAH’S WATERS ECONOMIC BENEFITS OF NUTRIENT WATERS

 

The survey of outdoor recreation is described in Chapter 3 and the analysis of the survey data is explained in Chapter 6 (Table ES-8). The annual value of maintaining water quality in terms of enhancing the recreation experience is more than $18 million; whereas improving water quality is valued at more than $48 million per year. This recreation value is not in addition to the amount that households are willing to pay each year to maintain and improve water quality. Rather it shows that the recreation value is just one component of total value. These results also show that a decision about which water body to visit is only partly based on water quality. quality. Other important factors, such as distance from home, are described in greater detail in Chapter 6. Besides their own use and enjoyment, Utah households are willing to pay a sizable amount each year to sustain water quality and protect the quality of life of future generations of Utahns. Indeed, 97 percent of Utahns reported that protecting water

TABLE ES-8

quality for future generations was somewhat or extremely important when directly asked (Chapter 5).

Those results are presented in a separate report. However, the effects of water clarity on lakefront property values are described in Chapter 8. Compared to other states, Utah has very little private lakefront property. Most of the state’s waterfront is owned by the public. pu blic. Of Utah’s 130+ priority lakes, only a fraction have shorelines in private ownership subject to property tax payments, and only 17 of those waterbodies showed changing water clarity conditions from the nutrient control scenarios. The water clarity in these lakes could improve by almost 1 meter by reducing excess nutrients; nutrient s; whereas, continuation of the status quo could cause water clarity to decline by about 0.27 meter (about 1 foot). In property value terms, reducing nutrients would produce a gain in propertyy values of $20.2 million. No new action propert would lead to a loss of around $7.4 million. These benefits to lakefront property owners are small in relation to the total benefits to the Utah residents as a whole.

Using the lower bound estimates, and the 20-year time frame, means that maintaining water quality is worth about half a billion dollars while improving water quality is worth over a billion dollars.

Annual Net Economic Benets of Future Water Quality Policies ($ millions)

STATUS QUO

MAINTAIN

IMPROVE

Specification 2  Day trips

-$3.91

$6.01

$10.96

 Overnight trips

-$2.02

$12.34

$37.49

 Total

-$5.93

$18.35

$48.45

Other Benefits

As a final note, there are other ways that clean water can benefit Utahns. One is through higher values of lakefront properties that are affected by the aesthetics of clean water views and a second is lower drinking water treatment costs due to higher quality water at the drinking water intake. The state is currently investigating the relationship between excess nutrients and drinking water treatment costs.

ECONOMIC BENEFITS OF N NUTRIENT UTRIENT REDUCTIONS IN UTAH’S WATERS WATERS

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