Environmental Economics

Friday Beer Post

"Sometimes when I reflect back on all the beer I drink I feel ashamed - Then I look into the glass and think about the workers in the brewery and all of their hopes and dreams. If I didn't drink this beer, they might be out of work and their dreams would be shattered. Then I say to myself, 'It is better that I drink this beer and let their dreams come true than be selfish and worry about my liver.'"

-Deep Thought, Jack Handy

It's a jobs post!

A fatally flawed, grossly premature, estimate of the lost recreational fishing value of the BP Deepwater Horizon oil spill

In 2000, John and I submitted a report to the National Oceanic and Atmospheric Administration (NOAA, get it?) entitled: The Economic Value of Marine Recreational Fishing in the Southeast United States.  In the report, we used the fatally flawed Marine Recreational Fisheries Statistics Survey (1997 data) to estimate the value of lost recreational angling trips in the Southeast U.S. by state for both the Atlantic and Gulf Coasts. 

In the report, we estimated that:

• the value of a lost recreational fishing trip due to loss of access to marine fishing from closure of access points in Louisiana in May or June is $8.77.   
• the value of a lost recreational fishing trip due to loss of access to marine fishing from closure of access points along the entire Gulf Coast in May or June is $86.82.   

In 2009, NOAA estimated there were 1,058,162 recreational fishing trips initiated in Louisiana in May and June and 5,698,922 recreational fishing trips initiated in May and June along the entire Gulf Coast. 

Prematurely and irresponsibly assuming the BP Deepwater Horizon oil spill shuts down access to recreational fishing in Louisiana for the next two months, the estimated value of lost recreational fishing access is $9,280,080 (1997 dollars).

If the recreational fishing access to the entire Gulf Coast is lost for two months, that estimate balloons to $494,780,408 (1997 dollars).

The Louisiana-only estimate is a fraction of the Gulf Coast estimate because the model we used allows for substitution to other access points if a single state is closed (Louisiana anglers can drive their boats to Mississippi with relatively little lost value).  If the entire Gulf Coast is closed to recreational fishing access, the value is 54 times higher because 5 times more trips are lost and close substitutes are unavailable.  

DISCLAIMER: I have no idea if access will be lost, for how long it will be lost, or where it will be lost.  The only point of this post is to demonstrate numbers are out there, and they can be used to begin to estimate damages once more information is available.  Once more information is available, I'm sure I could talk John into helping me estimate damages.  For the right price, of course.

Oil spill projection for April 30

 

An economist a tad bit obsessed with politics

"The Oil Spill is Obama's Fault"

No, I haven’t lost my mind — that’s not what I believe. But you know that’s what the talk-show hosts will be saying soon, if they haven’t already started. The only question is what the story will be.

Will it be claims that liberals and/or scientific conspirators sabotaged the rig, to undermine good Americans who want to drillheredrillnow? (Michael Crichton already wrote that novel).

Will it be that oil workers, demoralized by the march of socialism, fell into despair and let the accident happen?

Will it be claims that since this didn’t happen under Bush, it obviously shows that Obamanomics is responsible?

I don’t know. But you know something along these lines is coming.

via krugman.blogs.nytimes.com

But what about damages?

Under the 1990 Oil Pollution Act, passed a year after the Exxon Valdez oil spill in Alaska, the company [BP] is required to foot the bill for the cleanup.

via www.cnn.com

But BP's obligations will go well beyond cleanup: The Oil Pollution Act (OPA) of 1990 was passed in the wake of the Exxon Valdez oil spill. The statute addresses oil pollution and establishes liability for the discharge and substantial threat of a discharge of oil to navigable U.S. waters and shorelines. A major goal of OPA is to restore natural resources that are injured and services that are lost as a result of oil spills. Responsibility for acting on behalf of the public lies with designated Federal, state, tribal, and foreign natural resource trustees. OPA directs trustees to (1) return injured natural resources and services to the condition they would have been in if the incident had not occurred, and (2) recover compensation for interim losses of such natural resources and services through the restoration, rehabilitation, replacement, or acquisition of equivalent natural resources or services.

Where I'll be today

Yesterday? I attended the BAC meeting for 2 hours. I met with my Senior Seminar students for the last time (sniff): 2.5 hours of presentations during the final exam period, with a 10 minute pizza break. I closely monitored the installation of office furniture.

Today?

I'm "working at home." I'm "grading senior seminar papers." I'm "writing a referee report." I'm "working on the blog paper for Tim and Aaron." I'm "making that book deadline." I'm "monitoring gulf oil spill economics for my blog readers."

I'm "going to Merlefest."

Field research

One footnote to the trip to North Charleston, the market price of black grouper (8 oz., grilled) at a downtown seafood restaurant is $20.95.

Oil spills blow

Oil spill's blow to BP's image may eclipse cost:

BP says that the offshore drilling accident that is spewing thousands of barrels of oil a day into the Gulf of Mexico could cost the company several hundred million dollars.

Nobody really knows whether the London-based oil giant is being too conservative about the cost for the April 20 accident, which some experts say could end up as the biggest oil spill in history. The 1989 grounding of the Exxon Valdez off Alaska, for example, cost Exxon Mobil more than $4.3 billion, including compensatory payments, cleanup costs, settlements and fines.

...

The cost of an environmental cleanup will depend largely on how much oil reaches shore. The government could assess fines or other penalties. And lawyers have already filed a flurry of suits on behalf of commercial fisherman, shrimpers and injured oil workers against BP; Transocean; Cameron, the company that manufactured the blowout preventer; and other companies involved in the drilling process. 

As Tim suggested yesterday, this sounds like Exxon Valdez redux.

If anyone on the Gulf Coast happens to be looking for a pair of highly skilled, objective, experts well-versed in the techniques of natural resource damage assessment...

...our contact information is to the left.

Just saying.

I predict that pictures of oil on-shore will be a bad thing

In a hastily called news conference, Rear Adm. Mary E. Landry of the Coast Guard said a scientist from the National Oceanic and Atmospheric Administration had concluded that oil is leaking at the rate of 5,000 barrels a day, not 1,000 as had been estimated. While emphasizing that the estimates are rough given that the leak is at 5,000 feet below the surface, Admiral Landry said the new estimate came from observations made in flights over the slick, studying the trajectory of the spill and other variables.

via www.nytimes.com