# Presentation: 173139

## Estimating the Economic Benefits of Oyster Reef Restoration and Marine Preserve Establishment in the Lower Chesapeake Bay

***Robert L. Hicks***
***Department of Economics***
***College of William & Mary***
***Timothy C. Haab***
***Department of Agricultural, Environmental and Development Economics***
***The Ohio State University***
***Douglas Lipton***
***Department of Agricultural & Resource Economics***
***Sea Grant Extension Program***
***University of Maryland College Park***
***October 22, 2002***
***Silver Spring, MD***

## The Problem

## Problem in MD

## VA Problem

## A Proposed Solution?

## Slide 6

## It’s An Investment

- The restoration of Chesapeake Bay oyster reefs and habitat either with native oysters or the intentional introduction of C. ariakensis is an investment and should be analyzed to determine whether the return on the investment is sufficient to justify making it.

## Public Benefits (Positive Externalities)

- Will oyster habitat restoration lead to improved water quality and/or habitat in Chesapeake Bay?
- Beneficiaries
- Watermen
- Recreational Fishermen
- Boaters, Swimmers
- Bay Users
- Reduced Costs to Achieve WQ standards
- General Public (users and non-users)

## The Approach

- Random Utility Model of Recreational Fishing Benefits Over Oyster Bottom
- Contingent Valuation Survey of General Public for WTP for Oyster Bottom Restoration

## Random Utility Model – Indirect Utility Function

- TCOST = travel and time cost
- ECR = expected catch rate
- LNM = Log of number of intercept sites
- VAC = dummy (=1) if in a vacation destination

## Expected Catch Rate

- ECR = expected catch rate
- CR = Historic catch rate
- BOTTOM = area amount of hard bottom
- Oyster = angler indicated fishing on oyster reef
- YRSF = years of fishing experience
- HRSF = time spent fishing on trip

## Slide 12

## Spatial Variability – 16 Zones

| Site | Zone | Base Square Kilometers |
| --- | --- | --- |
| Eastern Shore | 1 | 98.94 |
| Upper Peninsula | 2 | 256.32 |
| Isle of Wight | 3 | 56.48 |
| James City County | 4 | 0 |
| Richmond County | 5 | 43.89 |
| Surry County | 6 | 21.61 |
| Westmoreland | 7 | 8.29 |
| York County | 8 | 7.89 |
| Chesapeake City | 9 | 0 |
| Hampton | 10 | 63.35 |
| Newport News City | 11 | 50.3 |
| Norfolk | 12 | 0 |
| Poquoson | 13 | 687.91 |
| Portsmouth | 14 | 12.18 |
| Suffolk | 15 | 24.4 |
| Virginia Beach | 16 | 0 |

## Results

- All coefficient estimates in expected catch rate and RUM were significant at the 95% confidence level

| 
Scenario | CV per Recreation Trip | Total CV |  | Acreage | Cost | Net Benefits |
| --- | --- | --- | --- | --- | --- | --- |
| 5% increase | $0.27  | $1,855,122 |  | 16451 | $243,485,013 | -$241,629,891 |
| 10% increase | $0.62  | $4,259,910 |  | 32903 | $486,970,027 | -$482,710,116 |
| 25% increase | $2.32  | $15,940,311 |  | 82258 | $1,217,425,068 | -$1,201,484,756 |
| 50% increase | $9.12  |  | $62,661,914 | 164516 | $2,434,850,136 | -$2,372,188,221 |

## Implications

- While there are positive benefits to anglers from oyster reef restoration, justification of the costs must come from other benefits such as water quality improvements, non-use benefits, etc.

## Contingent Valuation Experiment

## Contingent Value Approach

- Use random digit dial of MRFSS as sample frame for mail survey.
- Survey responses used to bootstrap simulation model parameters
- Conservative estimates:
- Do not know = $0 WTP
- Unwilling to participate = $0 WTP

## CV Results

- Willingness to pay ranges from $0.26-$0.38 per acre per person
- Aggregate willingness to pay
- $115,605 to $168,962 per acre
- >>> than $14,800 per acre reef creation cost

## Conclusions

- Spatial model shows anglers would have positive benefits from increased oyster reef creation
- General public (which would include anglers) have a much higher aggregate willingness to pay for reef creation that exceeds the costs
- In reality, Virginia has had limited success in reef creation and many now support the introduction of a non-native species which may or may not form reefs and improve water quality conditions.
- Future research – willingness to pay for a habitat creation program with varying probabilities of success.