IEAB Independent Economic

Analysis Board

Daniel D. Huppert, Chair 

Lon L. Peters, Vice-Chair 

Joel R. Hamilton

Kenneth L. Casavant 

Noelwah R. Netusil

Roger Mann

Susan S. Hanna

Hans Radtke

Recommendations and Guidance for Economic Analysis 

in Subbasin Planning

Independent Economic Analysis Board

January 2003, document IEAB 2003-2

Summary

Subbasin planning may need to consider two types of economic issues; 1) economic 

impacts, and 2) cost-effectiveness. This paper provides general guidance to help planners 

identify when economic analysis is required, what level of detail is appropriate, and how 

to conduct both types of analysis and present results.

As a practical matter, economic impact analysis may be required to address concerns of 

stakeholders that will be identified during the public involvement process. Subbasin 

strategies and projects should be designed to minimize or avoid adverse impacts. 

Unavoidable negative impacts may be addressed by direct payments or other program 

elements that compensate those adversely affected, while beneficial impacts may provide 

a basis for sharing program costs with those enjoying the benefits.

Cost-effectiveness analysis is required by the Pacific Northwest Electric Power Planning 

and Conservation Act (the Regional Act). Planners should consider cost-effectiveness for 

local strategies or projects that are alternative means to the same biological objective. 

Also, planners should provide information on the physical or biological benefits, and the 

economic costs, of all strategies or projects. This information is needed for costeffectiveness analysis at the regional level.

Introduction

The Pacific Northwest Electric Power Planning and Conservation Act (the Regional Act), 

created the Northwest Power Planning Council (the Council), and directed the Council to 

consider fish and wildlife mitigation and enhancement on a equal basis with hydroelectric 

power generation in the operation of the Federal Columbia River Power System. The Fish 

and Wildlife Program must be consistent with an adequate, efficient, economical, and 

reliable power supply for the region. In particular, fish and wildlife measures must 
Recommendations and Guidance for Economics in Subbasin Planning 2

“utilize, where equally effective alternative means of achieving the same sound biological 

objective exist, the alternative with the minimum economic cost.”1

Subbasin planning is intended to achieve a comprehensive, integrated and scientifically 

sound fish and wildlife program through locally-developed plans, broad participation, and

coordination with federal, State and local laws. A subbasin plan includes three parts: 1) 

an inventory of existing programs, activities and plans, 2) an assessment to determine the 

biological potential and opportunities for restoration, and 3) a management plan including 

a vision, biological objectives, and strategies. 

The Council has suggested that economic considerations have a role in the planning 

process. Subbasin Planning 101 states that "The management plan. . . . takes into 

account the economic, legal and environmental issues." The Technical Guide for 

Subbasin Planners states that "The strategies, taken as a package, will represent 

alternatives that stakeholders should use as a tool to evaluate as part of the planning 

process. Economic, political, social and cultural aspects should be taken into account 

when evaluating the alternatives. From this evaluation, projects designed to address the 

strategies and the limiting factors would be proposed for funding."

The Independent Economic Analysis Board (IEAB) was chartered to assist the Council 

with cost-effectiveness and other economic analysis related to the Fish and Wildlife 

Program. The IEAB has been monitoring the progress of the subbasin planning effort, has 

met with planners, and has reviewed planning documents. Based on this information, the 

IEAB is providing this guidance to help planners deal with two economic issues that 

should be addressed by the subbasin planning process. 

1. The identification, measurement, and planning for adverse and positive economic 

impacts. Public involvement will help the planners identify potential economic 

impacts. The planning process must be prepared to suggest strategies that will avoid 

or diminish adverse impacts. Adverse economic impacts may imply additional costs

in the form of offsetting payments, but beneficial impacts may allow cost sharing. 

These costs and cost-sharing may be considerations in a cost-effectiveness analysis.

2. The cost-effectiveness of fish and wildlife strategies and programs. Cost-effectiveness 

analysis ensures that ratepayers will obtain the most “bang for the buck.” Costeffectiveness analysis should be included in the subbasin planning process when 

alternative means of achieving the same objective are being considered. 

Also, cost-effectiveness analysis will be required at the regional level to prioritize 

projects across subbasins. This regional analysis will not be conducted by subbasin 

planners. However, if specific projects are proposed, information about biological and 

physical benefits and costs should be collected and displayed.

 

1 16 U.S.C. § 839b(h)(6)(C) 
Recommendations and Guidance for Economics in Subbasin Planning 3

Planning for Economic Impacts

A subbasin planning effort should be prepared to accommodate economic concerns that 

might derail the process. Stakeholders will be affected by the strategies proposed by 

subbasin plans, and the feasibility of implementing a subbasin plan will be affected by 

how people respond to it. Cooperation with stakeholders will be needed to develop, fund 

and implement a subbasin plan. Cooperation may require that strategies be implemented 

in a manner that will avoid stakeholder costs, and unavoidable impacts may require 

payments to persons who are harmed. On the other hand, economic benefits for some 

stakeholders might justify cost sharing, or these benefits might offset some other adverse 

economic effects.

Economic impacts should be scoped during the public involvement process

Stakeholders include residents of the subbasin and non-residents who are affected by 

subbasin strategies or projects. That is, “stakeholders” include affected business owners 

or workers, consumers, other resource users, or any other persons affected by the 

subbasin plan, regardless of where they live. Economic benefits or costs may extend far 

beyond the subbasin.

Adverse and beneficial economic impacts can be identified during the public involvement 

process. Subbasin planners should work with stakeholders to understand how fish and 

wildlife strategies affect their interests, and how objectives might be achieved with less 

adverse economic impact. At the same time, planners should recognize that stakeholder 

preferences will not necessarily yield cost-effective results. Alternative projects or 

strategies should not be rejected early in the process just because some stakeholders do 

not like them. Planners should evaluate a full range of alternatives for achieving fish and 

wildlife objectives. 

The IEAB recommends that the Assessment section of each subbasin plan briefly describe 

the relationships between stakeholders and the potentially affected natural resources, 

including the economic dimension of these relationships. 

A short qualitative description of economic, demographic, social and cultural conditions 

should be included in the assessment. This description should demonstrate concern for 

the human dimension of fish and wildlife planning, and should provide useful 

background information for consideration in the management plan. 

The description should include an identification of prominent economic activities in the 

subbasin, connections to natural resources, and levels of related income and employment 

For example, industries such as agriculture, forestry, mining, and tourism should be 

discussed if they might be affected. The amount of wages and salaries paid and net 

returns should be described if possible.2 Resource uses including outdoor recreation, 

fishing, hunting, and gathering, as well as aesthetics and quality of life considerations 

 

2

 Information might be provided by the affected industry, or data might be obtained from other sources. For 

example, detailed budgets for agricultural operations are produced by the Cooperative Extension Service.
Recommendations and Guidance for Economics in Subbasin Planning 4

should be revealed. Significant cultural relationships to natural resources should be 

described. 

Economic linkages between the subbasin and the Pacific Northwest region should be 

identified. These linkages may involve economic trade or physical linkages. Economic 

trade includes export of products from the subbasin, and tourism. Physical linkages may 

include anadromous fish production, hydrology, and/or water quality. This information 

will help the Council consider cost-effectiveness relationships at the Regional level.

The IEAB recommends that each management plan include a general description of the 

adverse and beneficial economic impacts. More detailed analysis, including quantitative 

analysis, may be justified if specific projects are proposed. 

This description should:

1) Identify relationships between stakeholders and the management plan. Describe how 

actions in the management plan will affect these interests;

2) Describe how actions can be implemented to minimize adverse impacts. 

3) Describe adverse economic effects that can not be avoided;

4) Describe strategies for offsetting payments and/or cost-sharing, including who would 

be paid and the impacts on their economic incentives;

5) Describe impacts of management plan actions on the larger, Pacific Northwest region. 

Often, adverse economic effects involve reduced productivity in agriculture or other 

natural resource industries. Reduced productivity means that the industry provides the 

same amount of output for higher cost, or less output for the same cost. 

Strategy development should consider and reduce adverse stakeholder impacts while 

achieving beneficial improvements for fish and wildlife. Subbasin plans should include 

proposals to compensate those who suffer adverse economic impacts either through 

direct payments or countervailing benefits from other program elements. Cost-sharing 

with stakeholders who benefit from the plan should be included where feasible.

Knowledge of the adverse and positive effects of project alternatives on stakeholders 

should help the subbasin planners and decision makers craft an overall plan that includes 

actions to reduce the adverse economic effects. The management plan should identify 

groups of persons who will incur economic losses or costs, and identify groups who 

benefit. Where economic costs are substantial, despite efforts to mitigate for them, the 

management plan should include proposals to compensate those who are harmed. This 

could be accomplished through direct payments for land, water rights, or conservation 

easements, for example. 
Recommendations and Guidance for Economics in Subbasin Planning 5

The IEAB recognizes that this guidance does not provide the detail needed to conduct 

quantitative analysis to support a subbasin budget. This level of detail is not required for 

a subbasin plan. Rather, management plan strategies should provide the level of detail 

needed to accommodate the economic concerns of stakeholders in a general way. If 

additional detail is needed, the IEAB can assist local planners with economic methods 

that might be applied.

Table 1 provides a table that can be used to describe adverse or beneficial economic 

impacts and related plans. This table and table 2 are offered as illustrations. Table formats 

might be modified or not used at all if the information is presented in a different, succinct 

format.

Cost-Effectiveness Analysis

The IEAB recommends that the management plan include a short section on costeffectiveness analysis. This section should identify alternative projects or strategies that 

could achieve the same result. Cost-effectiveness analysis may be justified for these 

projects if the results and costs can be measured, and if the costs are large enough to 

justify the additional analysis. 

Cost-effectiveness analysis is appropriate for alternative actions that 1) produce the same 

or similar type of output3, 2) have costs and output that can be measured or reasonably 

estimated, and 3) have costs large enough to justify the additional analysis. When specific 

actions or projects that meet these criteria are being considered, a reasonable attempt 

should be made to collect information for cost-effectiveness analysis. Some subbasin 

analysis and results may need to be qualitative.

Cost-effectiveness analysis can be used to compare two or more alternative projects when 

the projects have the same type of output. Quantitative cost-effectiveness analysis 

typically requires two measures: cost, and the result in terms of output. The result is 

usually measured in quantitative terms; fish or habitat units, for example, but the result 

need not be quantitative. For example, the result could be a simple affirmative (a yes or 

no) for meeting a goal, e.g., recovery.

There are two general types of cost-effectiveness analysis. In Type 1, the problem is to 

select a cost-effective set of actions or projects from many. In Type 2, the problem is to 

select one cost-effective action from many.

In Type 1, a number of actions that achieve progress towards an objective are available, 

but not all actions need be or can be implemented. The objectives may be reached with a 

subset of the actions, or a limited budget may preclude taking all feasible actions. In this 

case, the unit costs of actions should be calculated and those that achieve the objective for 

the least cost are, by definition, the most cost-effective. 

 

3

 “Similar” is added here because it is up to the Council, not the subbasin planners, to decide what actions 

might contribute to the “same purpose”. Thus, the subbasin plans should provide information about 

“similar” purposes to the Council to help them make such decisions.
Recommendations and Guidance for Economics in Subbasin Planning 6

For example, suppose a number of habitat projects have the same objective of wild 

steelhead recovery. If there are estimates for numbers of steelhead for each project, then 

the cost-effectiveness analysis should use this measure. If not, then a surrogate such as 

habitat units might be used. 

First, the costs of each project per fish or per habitat unit should be calculated for each 

project being considered. These are called unit costs. Next, the projects should be arrayed 

in ascending order of unit costs. The cumulative cost of projects and the cumulative 

amount of output should calculated as each project is added to the cost-effective set. 

Finally, if there is a quantified dollar budget or a quantified objective, a costeffectiveness decision can be made. If there is a fixed budget, projects are selected in 

order of increasing unit cost until the budget is exhausted. The cumulative amount of 

output is the most that can possibly be achieved within the limited budget. If there is a 

fixed objective, projects are selected until the objective is met, and the cumulative cost is 

the least possible cost for achieving the objective.

This description of a Type 1 analysis has presumed that the actions (projects) are 

independent in that the total amount of output can be calculated as the sum of all. This 

may not be the case if projects are interactive. If they are interactive, the amount of 

output or the cost for each project depends on which others are included in the mix. If this 

is the case, a Type 1 analysis is still possible, but the unit costs of each project taken 

alone are meaningless. The cost-effectiveness analysis must compare and select from a 

number of sets of actions. The total cost and output are calculated for each set, and the 

cost-effective set can be selected.

In the Type 2 cost-effectiveness problem, planners must select just one action, because 

selecting one action precludes any other from being selected. This type of problem occurs 

when a unique resource can only be used for one purpose. If it is dedicated to one use, it 

cannot be used for any other. 

For example, a number of alternative hatchery plans for one site are being contemplated, 

and all would produce about the same number of fall chinook. In this case, costeffectiveness is used to determine which hatchery plan for the site will provide the most 

fall chinook per dollar. The cost and output are calculated for each hatchery plan, and the 

cost-effectiveness decision selects that plan with the lowest unit cost.

Note that, for the Type 2 analysis, there is no issue about how multiple actions may 

interact, because no two actions can be taken together. However, if there is a fixed budget 

or production objective, there can be ambiguities about which action is the best. For 

example, a hatchery plan with a higher unit cost might produce more fish to meet a more 

important production goal, or the plan with the lowest unit cost might not meet a budget 

constraint. Still, the costs and production for each alternative plan should be compared 

where possible.
Recommendations and Guidance for Economics in Subbasin Planning 7

For the management plan, the cost-effectiveness section should:

• Provide measures of costs and output.

• Identify sets of actions for which cost-effectiveness analysis might apply (e.g. 

alternative ways of obtaining the same goal or output). For each set, describe outputs 

and costs in qualitative and quantitative terms, to the extent possible. 

• Conduct cost-effectiveness analysis if output and cost measures are available and 

reasonably accurate, and if the cost of the analysis is justified by potential costsavings.4

• If no accurate measures are available, describe the reasons for the lack of information. 

Provide a qualitative description of cost-effectiveness relationships. Describe how 

cost and output forecasts might be improved.

Table 2 provides a format that can be used to describe subbasin cost-effectiveness 

considerations. 

The Council may need to prioritize projects according to their cost effectiveness for 

meeting regional goals and objectives, and subbasin projects may be compared to 

mainstem actions. Therefore, subbasin planners should provide information on biological 

and physical benefits and economic costs of all subbasin strategies and projects for use 

in cost-effectiveness analysis at the regional level.

The subbasin management plan should provide information on costs and physical or 

biological benefits of all proposed strategies and any specific projects. If such 

information can not be provided, the management plan should state why. Any additional 

work needed to develop cost and effectiveness data should be described.

 

4

 Cost data from budgets for the proposed action should be used when available. If these data are not 

available, cost data might be obtained for the same or similar practices from secondary sources. For 

example, the Natural Resources Conservation Service keeps information on the costs of many actions that 

might be used for habitat restoration. 
Table 1. 

Table for Summarizing Economic Impact Information for Subbasin Planning

For each strategy likely to have a beneficial or adverse impact 

Strategy 

Number

Strategy 

Name

Name of 

Affected 

Stakeholder

Describe How These 

Persons are Affected

If an Adverse 

Impact, Describe 

Actions that Would 

Reduce or Avoid the 

Impact

Describe 

Economic 

Cost after 

Mitigation 

(Dollars if 

possible)

Describe 

Economic 

Benefit, 

(Dollars if 

possible)

Source 

of Economic 

Cost or 

Benefit 

Data

Describe 

Mechanism 

For 

Payment or 

Cost 

Sharing 

Cost of 

Compensation 

Mechanism 

(Dollars if 

possible)

Amount of 

Cost 

Sharing 

(Dollars if 

possible)
Table 2. 

Table for Summarizing Cost-Effectiveness Information for Subbasin Planning.

One table for each group of actions that are alternative means to accomplish the same purpose. 

The purpose of these actions is:_____________________________________________________

______________________________________________________________________________

Action 

Number 

(at least 

two) Action Name

Measure 

of 

Accomplishment 

(Units)

Amount 

of Units 

Produced

If Accomplishment 

Cannot be Measured, 

Give Qualitative 

Description 

Total 

Cost of 

the 

Action 

(Dollars)

Cost per 

Unit 

Produced 

(Dollars)

Selected 

as Part of 

Subbasin 

Plan? 

(Y/N)

Briefly explain rationale 

for selection of options 

whether cost-effective or 

not

________________________________________

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