Environmental Economics

BP enters the window repair business

“Much of the region’s [nonfishing boat] businesses — particularly the hotels — have been prospering because so many people have come here from BP and other oil emergency response teams,” another report says. Indeed, one tourist official in a local town makes it clear that “BP has always been a very great partner of ours here…We have always valued the business that BP sent us.”

via blogs.wsj.com

How much compensation should Gulf Coast restaurants get from BP?

Famed New Orleans chef Susan Spicer is suing BP on behalf of at least seven restaurant owners and seafood suppliers, claiming that the Gulf oil spill has damaged their businesses.

“I’m proud to be part of a resilient community,” she said. “I also feel strongly that [BP] needs to be held accountable for its negligence.”

via eatocracy.cnn.com

How much should restaurants get in damages from BP? Look below the jump for my simple analysis...

Is it time to sink the sunk cost?

Former President Bill Clinton said during a panel discussion in South Africa that it may become necessary to blow up the Deepwater Horizon well that continues to spew oil into the Gulf of Mexico.

...

"Unless we send the Navy down deep to blow up the well and cover the leak with piles and piles and piles of rock and debris, which may become necessary - you don't have to use a nuclear weapon by the way, I've seen all that stuff, just blow it up - unless we're going to do that, we are dependent on the technical expertise of these people from BP," Clinton said. 

There has been some pressure for BP to simply blow up the well, with critics suggesting the company is forgoing that option out of a desire to get as much oil as possible from the rig.

"If we demolish the well using explosives, the investment's gone," former nuclear submarine officer and a visiting scholar on nuclear policy at Columbia University Christopher Brownfield said in a Fox News interview in May. "They lose hundreds of millions of dollars from the drilling of the well, plus no lawmaker in his right mind would allow BP to drill again in that same spot. So basically, it's an all-or-nothing thing with BP: They either keep the well alive, or they lose their whole investment and all the oil that they could potentially get from that well."

via www.cbsnews.

Are your ideas worth $3 million?

The X Prize Foundation announced today that it is developing a multimillion-dollar “oil spill cleanup X challenge” to come up with solutions to cleaning up shorelines and open water fouled by oil leaking from the BP Deepwater Horizon rig in the Gulf of Mexico.

Speaking at the TEDxOilSpill conference in Washington, Frances Beland of the X Prize Foundation asked the audience of 300, and many more watching the conference’s videostream, “What do you prize?” Beland told CNN after his appearance that the oil-related challenge will probably offer about $3 million in prize money for a cleanup solution.

The X Prize Foundation gained public attention for its X Prize of $10 million awarded for the development of private spacecraft, and the nonprofit foundation has created other prize challenges.

via news.blogs.cnn.com

66.8% of the Gulf of Mexico is still open for fishing

From the inbox:

NOAA has expanded the closed fishing area in the Gulf of Mexico to include portions of the oil slick moving beyond the area’s current northern boundary, off the Florida panhandle’s federal-state waterline. This boundary was moved eastward to Cape San Blas.

This federal closure does not apply to any state waters. Closing fishing in these areas is a precautionary measure to ensure that seafood from the Gulf will remain safe for consumers.

The closed area now represents 80,228 square miles, which is approximately 33.2 percent of Gulf of Mexico federal waters. This leaves more than 66 percent of Gulf federal waters available for fishing. The closure will be effective at 6:00 p.m. EDT [June 28]. Details can be found at http://sero.nmfs.noaa.gov/. The last closed area modification was June 23, when 78,597 square miles were closed to fishing, or roughly 32.5 percent of federal waters of the Gulf.

Here is a link to the map: 

http://sero.nmfs.noaa.gov/sf/deepwater_horizon/BP_OilSpill_FisheryClosureMap_062810.pdf

PhD Comics: Call for Papers!

via www.phdcomics.com

Recycling in Char-latte

From the city of my glorious birth (Charlotte's new ...):

Beginning next week, Charlotte's recycling program gets an overhaul, with new bins and a biweekly collection schedule.

Under the initiative, known as "Recycle It!", residents have received 96-gallon green recycling carts to replace the older 16-gallon red bins. And with a new waste collection company, the city will reduce its pickup from weekly to biweekly. ...

The new waste management equipment also will be able to process all recyclables together, said Solid Waste Management Director Bruce Gledhill. Before, collectors had to separate recyclables into two different compartments - containers or fibrous paper products - to be processed on different machines.

The new equipment was installed in December and cost around $7 million, he added. ...

The cutback in recycling collection is expected to save the city $15 million over the next five years and $43 million over the next decade, Curtis said.

This seems to pass the benefit-cost test unless the discount rate is r=0.35 over five years or r=0.61 over 10 years.

But, this sounds big brother scary!

The recycling bins for Charlotte also include new technology: Every bin comes with a radio frequency identification chip that tracks the serial number of the recycling bin and the residential address to which it is assigned. The city says the chips will allow the city to manage cart information more efficiently and to better focus environmental education to certain neighborhoods.

Next thing you know, they'll want to embed a radio frequency identification chip in my neck. Lookout for the libertarian outrage in the comments section.

Grrrrr; more salt in the wound

From the inbox (Et tu, Brute?):

I am in Montreal for the World Congress this week ...

That was my original plan too (Salt in the wound)! Gathering with the best environmental and resource economists in the world, seeing old friends, catching up on gossip, etc. All I asked the organizers was to present a friggin' poster! My flight would have left Charlotte today.

My backup plan is to be a sport economist and fly to Portland tomorrow for the WEAI meetings where I'm chairing an environmental session, discussing a sports paper and co-authoring a sports paper (presented by Bruce Johnson). The sports economists have some great sessions arranged and there are plenty of friends there to hang with. Should be fun.

The $20 billion fund doesn't cover damages?

Wow (States weigh big claims against BP):

Gulf Coast states are gearing up to follow shrimpers and hotel owners in seeking payouts from BP PLC for lost revenue and other damages stemming from the Gulf of Mexico oil spill.

The demands could far exceed the $305 million BP has already given the states of Louisiana, Mississippi, Alabama and Florida to help pay cleanup costs, promote tourism and begin building sand berms off the coast of Louisiana, state officials say. Lawyers advising the states said they would eventually seek multi-billion dollar payouts, but it was still too early to give a tally.

BP declined to comment on the states' legal strategies. The British oil company agreed nearly two weeks ago to honor claims for damages and lost business revenue from individuals and businesses through a $20 billion, independent compensation fund administered by Kenneth Feinberg, the Washington, D.C.,-based lawyer and arbitration expert.

The fund is also meant to cover payments for states and localities to defray cleanup costs, but not necessarily claims for the larger economic damages that Florida and the other states plan to present directly to BP, the state's representatives said.

My initial impression was that the $20 billion would cover economic damages over and above cleanup costs. If the $20 billion is for cleanup costs and the states are going after more over and above that (no surprise, I guess), the final bill could be mind-blowing.

... Mississippi Attorney General Jim Hood has sought advice from state university researchers, economists and lawyers to assess the environmental and economic damage the spill has caused to the state.

I bet it is a real feeding frenzy at the Gulf coast land grant schools.

Quote of the day

Good enough for government work? aka, best available science? Yep. From the WSJ Numbers Guy:

Determining the size of the BP spill will be crucial because under a federal law passed in the wake of the Valdez disaster, oil companies pay penalties that are directly proportional to the amount of oil released into the water.*

Yet the size of the current disaster is far more difficult to calculate than previous spills, because no one knows for sure how much crude was contained in the reservoir thousands of feet below the water's surface, nor whether the oil has been spewing at a constant rate.

"Based on the history of past large spills, I am sure there will be differences of opinion on the exact amount that was spilled," says William J. Lehr, senior scientist in the National Oceanic and Atmospheric Administration's Office of Response and Restoration, and a member of the federal group estimating the amount of oil spilled in the Gulf. "We give the best scientific estimate we can, under tight time constraints and with the data available at the time."

via online.wsj.com

That can be said for most policy analyses and it is quite reasonable. Yet it won't stop the criticism on both sides.

*Later in the column:

The spillage total is critical because BP can be charged $1,100 to $4,300 a barrel spilled, under the Clean Water Act.

The amount spilled also informs the Natural Resource Damage Assessment, which will be used to determine how much BP will have to pay for environmental damage. A BP spokesman referred questions about potential fines to the government, saying the company is focused on recovery efforts.