NOPP Regional Ocean Observing Systems Benefits Project: Center for Economic Forecasting and Analysis (CEFA) Economic Impact Analysis of the Gulf of Mexico Region By Dr. Tim Lynch, Director Dr. Julie Harrington, Asst. Director Presented to the NOPP Co-PI’s Meeting National Oceanic Atmospheric Administration (NOAA) April 28, 2003 Washington, D.C.

CEFA Background

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The Florida State University Center for Economic Forecasting and Analysis (CEFA) specializes in applying advanced, computer-based economic models and techniques to examine and help resolve pressing public policy issues across a spectrum of research areas. CEFA provides advanced research and training in the areas of high technology, commercialization of super conducting materials, health care, energy, and environmental economics, among others.

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Background of Primary Investigator(s)

Dr Lynch earned BS degrees in economics and political science, MS in Environmental/Transportation Planning and a Ph.D in Environmental Economics from FSU; Dr. Harrington earned a BS in Fish and Wildlife Management from Montana State University, MS in Fisheries, and Ph.D in Economics (Agricultural) from Auburn Univ.

Dr Lynch worked on developing regulatory preservation plans for the Florida Keys, Big Cypress, Everglades and Green Swamp Area of Critical State Concern. He also served as Florida’s Chief Environmental Economist at DER and worked on regulatory economic evaluations of above and underground water and wetland protection, energy production, use and distribution and air pollution socio-economic impact assessments.

Dr Lynch has led and cooperated on a number of extensive environmental economics research projects including El Nino economic assessments, air and water quality and impact assessment studies, Florida Everglades restoration studies, valuation of eco-tourism in Florida, energy economics evaluation and advanced transportation and emerging energy technologies environmental, energy and economic impacts.

Sample of CEFA Projects

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Research and economic analysis of high tech (super conducting) materials and advanced power systems with FSU Center for Advanced Power Systems (CAPS) and the Office of Naval Research (ONR), and the future of the electricity industry through participation on the Governor’s Florida Vision 2020 Commission Detailed study comparing Florida and US cities with the New Economy High Tech Index Economic analysis of University Research Centers and Institutes Study on the economic impact of Florida’s outdoor advertising industry Non-profit work including annual economic analysis of the North Florida Birding Festival Tax Impact Analysis for the Florida Legislature

Summary of Proposed Research

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To identify and quantify the expected economic benefits of COOS in the Gulf of Mexico region. The economic benefits will be separated into three categories: private sector, non-market and public sector activities.

Our primary modeling software to conduct economic impact analysis will be IMPLAN, using 2000 data. Results will be in terms of direct, indirect, induced and total impacts for GRP, employment, and income.

Maritime Transportation: Shipping Costs

cargo type

dry bulk liquid bulk general cargo

ship type

handysize handymax Panamax Cape product Aframax Suezmax VLCC container container

representative size

27,000 dwt 43,000 dwt 59,000 dwt 150,000 dwt 45,000 dwt 90,000 dwt 140,000 dwt 280,000 dwt 400 TEU 1,000 TEU

typical charter rate ($/day)

6,500 8,000 9,500 14,000 12,000 13,000 16,500 22,000 5,000 9,000

typical operating costs ($/day, 2002)

3,230 3,645 3,701 4,280 3,847 5,538 5,538 5,773 3,144 3,470

Sources: Moore Stephens OpCost 2002 Report and Kite-Powell (2000)

Maritime Transportation: Estimated Operating Costs, Assuming Average Total Transit Time of Two Days

transits/year in 2001

3,676

operating cost estimate ($/day)

3,230

annual operating cost ($/year)

23,746,960 foreign dry cargo and passenger foreign flag tanker domestic dry cargo and passenger domestic flag tanker

Total

1,422 60,856 346 5,538 3,230 3,847 15,750,072 393,129,760 2,662,124 435,288,916

Sources: US Army Corps of Engineers Waterborne Commerce of the United States 2001and Moore Stephens OpCost 2002 Report

Commercial Fishing: Estimated Average Value Added Per Fishing Day

State/Region Finfish West Florida Alabama Mississippi Louisiana Texas Gulf of Mexico Shellfish West Florida Alabama Mississippi Louisiana Texas Gulf of Mexico Gulf of Mexico Total Pounds

3,540,540 126,048 1,844,565 617,909 125,499 6,254,561

Estimated Average Value Added Per Fishing Day

59,009 2,101 30,743 10,298 2,092 104,243 36,188,188 19,327,950 19,003,512 190,160,062 92,261,270 356,940,982

363,195,543

301,568 161,066 158,363 1,584,667 768,844 2,974,508

3,078,751 Source: NMFS Commercial Fishing Database, 2001 *

Assumes a 60 day finfish season and 120 day shellfish season.

Recreational Fishing and Boating: Daily Recreation Values for Marine Fishing in

West Florida Alabama Mississippi Louisiana Texas*** Gulf of Mexico

the Gulf of Mexico Region

Angler Trips* 2001 16,388,611 1,635,798 1,250,045 3,615,244 497,128 23,386,826 Number of Marine Recreational Anglers Coastal 1,877,405 Non-Coastal Non-Residents 0 2,208,390 Total 4,085,796 211,354 196,865 588,132 2,873,756 97,930 44,380 65,351 207,661 193,766 69,944 122,232 2,594,332 503,049 311,189 775,715 695,283 6,371,032 Estimated Total Willingness to Pay** ($$ Million) $2,168 $216 $165 $478 $66 $3,094 Value of 1% Increase in Trips ($) $21,682,132 $2,164,161 $1,653,810 $4,782,968 $657,700 $30,940,771 * Includes all modes (charter, private and shore) and all areas (state, federal, etc. waters) Source: NMFS data 2001 http://www.st.nmfs.gov/st1/recreational/queries/participation/par_time_series.html **Detailed willingness to pay measures have not been summarized with a standardized methodology for the Gulf of Mexico states by NMFS, so other studies were used.

For Florida: Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Analysis 2002.

Used McConnell and Strandt study using RUM (random utility method for both residents and non-residents) Note: adjusted from 1994 dollars to 2003 dollars.

*** Data was obtained from Mark Fisher, Dir. Of Research, Coastal Fisheries Division, Texas Parks and Wildlife

Examples of Use Value Per Unit of Time for Recreational/Other Natural Resources in Florida (in 1998 Dollars)

Author/Date Leeworthy, 1997 Milon&Apogee,1996 McConnell&Strand,1994 Green,1984 Bell &Leeworthy, 1981 Bell &Leeworthy, 1981 Geen et al., 1992 WTP/Day Method (Dollars) $69 $1.76

$107 TCM TCM RUM $70 $69 $52 $810 CVM CVM CVM TCM Site/Kind Florida Keys Indian River/Redfish All Florida/All Species All Florida/All Species All Florida/All Species All Florida/All Species Gulf of Mexico/Reef Fish User R=Res, V=visitor R/V R R/V V V R R/V

Search and Rescue: Mission and Lives Saved

• • • • There were 5,239 SAR missions conducted in District 8 (the Gulf of Mexico Region).

There were 609 lives saved during 2001. SAR activity . This represents about 13.7% of the Coast Guard’s total There were 107 lives lost. Of those lost, 73 were lost prior to Coast Guard notification, and 34 were lost after Coast Guard notification.

A 1% improvement in SAR effectiveness would result in an additional 6 lives saved per year, with an economic value of some $24 million.

Sources: U.S. Coast Guard, 2001

Pollution Management and Prevention: Gulf of Mexico Number of Spills and Spill Volume (1973-2000)

Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: U.S. Coast Guard.

Number of Spills 38 218 727 936 731 656 867 473 857 1061 1290 1583 951 431 218 372 1063 1834 1977 1974 1763 1350 1485 2403 2341 2190 1756 1838 Spill Volume (in gallons) 8,553 157,926 1,418,791 850,660 933,106 402,392 386,281 437,069 99,120 121,889 295,736 2,897,179 116,969 97,221 91,524 1,076,986 108,519 4,115,264 100,702 363,279 53,265 205,151 253,040 45,145 105,462 181,372 45,786 112,069 Spill Volume (in barrels) 359,226 6,632,892 59,589,222 35,727,720 39,190,452 16,900,464 16,223,802 18,356,898 4,163,040 5,119,338 12,420,912 121,681,518 4,912,698 4,083,282 3,844,008 45,233,412 4,557,798 172,841,088 4,229,484 15,257,718 2,237,130 8,616,342 10,627,680 1,896,090 4,429,404 7,617,624 1,923,012 4,706,898

Pollution Management and Prevention: Gulf of Mexico Number of Spills and Spill Volume (1973-2000)

• • • The volume of oil spilled has dropped significantly in the Gulf of Mexico over time.

For Florida, Alabama, and Texas the number of spill incidents has dropped for the last decade.

Although the frequency of oil spills has increased in Mississippi and Louisiana since 1973, the volume of oil spilled has dropped.

Data Problems Encountered To Date

• • For Search and Rescue Data (SAR), the Coast Guard has data by District 7 (which includes west coast of Florida) and District 8 (which includes all the other Gulf coast states plus states up the Mississippi river). Coast Guard staff will provide us with “oceanic” data and hopefully state data in the upcoming weeks.

For discussion at this meeting: what sources to use for oil spill cost data.

Application

Conclusions to Date

Nature of Benefit Annual Potential Benefits ($ million) Search and Rescue Lives Saved* (from 94.95% to 95.95%) Pollution Mitigation Oil Spills** 24 ?

Commercial Fisheries Recreational Fisheries Maritime Transportation Total Improved Management*** Additional recreational fishing days**** Lower vessel operating costs***** * based on improved SAR effectiveness from 95%-96% success.

** based on 10 year average annual oil spill costs.

*** based on 1 additional fishing day per year for finfish and shellfish.

**** based on 1% increase in recreational fishing trips.

*****based on 1% savings in annual operating costs.

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