FRASER RIVER DREDGING GUIDELINES:

A BENEFIT-COST ANALYSIS

FINP..L REPORT

·f

FRASER RIVER DREDGING GUIDELINES:

A BENEFIT-COST ANALYSIS

FINP...L REPORT

Prepared for :

Department of Fisheries and Oceans Habitat Protection

Prepared by:

DPA Consulting Limited

Vancouver, BC

September, 1981.

Table of Contents

Executive Summary

1.0 Introduction

1.1 Historical Background

1.2 Benefit-Cost Analysis

2.0 Methodology

2.1 Benefits

2 .1.1 2 .1. 2

2.2 Costs

3.0 Results

Optirnistic Case Base Case

3.1 Operation of the Guidelines frorn 1975 through 1979

3.2 Projected Operation of the Guidelines frorn 1980 through 2010

Appendix: Derivation of the Estirnates of the Nurnbers of Salmon Fry Saved and to be Saved by the Enforcernent of the Fraser River Dredging Guidelines

i

1

1

3

6

6

9 10

12

15

15

17

List of Tables

Table S-1: Benefits and Costs of the Operation i11

of the Fraser River Dredging Guidelines from 1975 through 1979

Table S-2: Projected Benefits and Costs of the iv Operation of the Fraser River Dredging Guidelines from 1980 through 2010

Table 1: Numbers of Salmon Fry Saved and to be 8 Saved as a Result of "Fraser River Dredging Guidelines"

Table 2: Historical and Predicted Future Costs 13 of Application of "Fraser River Dredging Guidelines"

Table 3: Benefits and Costs of the Operation of 16 the Fraser River Dredging Guidelines from 1975 through 1979

Table 4: Projected Benefits and Costs of the 18 Operation of the Fraser River Dredging Guidelines from 1980 through 2010

Table A-1: Sceptre Dredging at North Arm A-2

Table A-2: Proportions of the Migrations Being A-4 Caught Just Prior to Requests for Shutdown or Relocation

Table A-3: Peak Migration Periods and Days A-5

Table A-4: Numbers of Salmon Fry Saved and to be A-7 Saved as a Result of "Fraser River Dredging Guidelines"

i

EXECUTIVE SUMMARY

Starting in 1975, the Federal Department of Fisheries and

Oceans (DFO) has enforced a set of guidelines affecting .

dredging operations in the Fraser River. This report gives

the results of a benefit-cost analysis of these guidelines

from the perspective of Canada that was carried out by DPA

Consulting Limited.

Although the "Fraser River Dredging Guidelines" contain a

number of provisions, this analysis deals with their impact

on the entrainment by suction dredges of salmon fry during

Spring migration. The benefits of the "Guidelines" were

measured by the value of the salmon saved, and their costs

included the administrative costs to DFO, the costs of

monitoring the numbers of fry being entrained, and the costs

of shutdowns or relocations of the dredges required under

the "Guidelines." Separate benefit-cost analyses were con­

ducted for the "historical" application of the "Guidelines"

(1975-1979) and for their "projected future" application

(1980-2010). The historical analysis, however, should be

regarded as incomplete, since it omits the benfits and costs

of the total shutdown of the private dredging industry in the

Fraser River for a period of four years (1975-1978).

The benfits of the "Guidelines" for bath the historical and

future periods were measured under two alternative sets of

assumptions. In the "base case", all relevant prices are

assumed to remain constant in real terms through time, landed

values and incremental harvesting costs are used to determine

the salmon's value, and the availability of greater numbers

of salmon is assumed to stimulate capital investment in the

fishing industry. In the "optimisii:.ic case" the real prices

of fish and related goods are assumed to rise slightly over

time, wholesale values and incremental processing plus

harvesting costs are used to determine the salrnon's value,

and no new capital investment in the fishing industry is

ii

assumed to take place. Costs are the same under bath the

base case and the optimistic case.

Tables S-1 and S-2 show the results of the: benefit-cost

analyses of the historical and projected future periods

respectively. As noted above, Table S-1 is incomplete since

it does not include any of the consequences, either positive

or negative, of the total prohibition of commercial dredging

operations in the Fraser River from 1975 through 1978.

Table S-2 indicates that the "Guidelines" will have a positive

impact on Canada society as a whole under the optimistic

case, but a negative impact under the base case. The major

difference between the two cases is the difference in

assumptions about future capital investment. If present

policies continue, it is our opinion that the base case

presents the more accurate picture of the value of the

"Guidelines." If, however, the gov~rnment can and does

effectively restrict investment in additional capital equipment

by the fishing industry, then the full benefits shown in the

optimistic case may be realized.

iii

TABLE S-1: BENEFITSl AND COSTSl OF THE OPERATION OF THE FRASER RIVER DREDGING GUIDELINES FROM 1975 THROUGH 1979

(all values in thousands of 1979 dollars, discounted to "present value" as of 1980)

Base Case

Benefits

Costs

Net Benefits

Optimistic Case

Benefits

Costs

Net Benefits

5%

517

226

+291

1,306

226

+l,078

Discount Rate

10%

527

263

+264

1,276

263

+1,013

15%

538

306

+232

1,258

306

+952

1 See accompanying text for discussion of omitted benefits and costs.

iv

TABLE S-2: PROJECTED BENEFITS AND COSTS OF THE OPERATION OF THE FRASER RIVER DREDGING GUIDELINES FROM 1980 THROUGH 2010

(all values in thousands of 1979 dollars, discounted to "present value" as of 1980)

Base Case

Benefits

Costs

Net Benefits

Optimistic Case

Benefits

Costs

Net Benefits

5 %

762

1,489

-727

4,705

1;489

+3,216

Discount Rate

10%

455

940

-485

2,846

940

+l,906

15%

295

675

-380

1,866

675

+1,191

1

1.0 INTRODUCTION

1.1 Historical Background

In 1973 the Departrnent of Fisheries and Oceans (DFO) developed

a set of guidelines limiting dredging operations in the

Fraser River. 1 These guidelines were specifically intended to

reduce the detrimental impacts of dredging operations on the

Fraser River's salmon resource. Such impacts include the

destruction of salmon habitat and spawning grounds, the

loss of elements of the food chain vital to the survival of

salmon, the delay of upstream migration, and the capture

of salmon fry migrating downstream in the spring.

The last of these impacts has been the subject of particular

concern by DFO. The salmon fry migrating downstream every

year (every even-numbered year, in the case of Pink) can

easily be entrained by suction dredges. Passing through a

suction dredge is nearly always fatal to salmon fry. In

1974 through 1976 DFO conducted a series of experiments

designed to f ind out how many fry were killed by dredging

in the Fraser River. These experiments, together with the

process of monitoring dredging activity that DFO began

in 1972, resulted in the enforcement of the present

"Guidelines" beginning in 1975.

Before the enforcement of the "Fraser River Dredging Guide­

lines" began, two public and five commercial dredges operated

in the Fraser River area. The two public dredges, operated

by the Department of Public Works (DPW), were and are

primarily engaged in the dredging of navigational channels.

One of them, DPW 322, a stationary dredge, operates largely

in the Fraser-Surrey docks area. The other, DPW 312, a

mobile, happer dredge, operates wherever required, but

mostly in the Main Arm of the Fraser from Sanheads to Steveston

1 "Fraser River Dredging Guide", Technical Report Series No. PAC/T-75-2.

2

and in the Annacis Channel.

The five private dredges were owned and operated by Sceptre

Dredging Ltd., Centennial Dredging and Sands Ltd., Dillingham

Corporation of Canada Ltd., Island Sand Sales Ltd., and

Riparian Dredging Ltd. These commercial dredges are generally

hired by either private or public customers to provide landfill

for use in new facilities for transport, storage, docking,

and related activities.

From 1975 through 1978, the "Guidelines" prohibited the

operation of the commercial dredges. Beginning in 1979,

the private dredges were allowed to resume operations provided

they undertook adequate monitoring activities as set forth

in the "Guidelines." The dredges owned by Sceptre Dredging

Ltd., Centennial Dredging and Sand Ltd., and the Dillingham

Corporation of Canada Ltd. have resumed operations, and a

new small dredge was added in 1979 by Fort Langley Recreation.

At present, then, two publicly owned and four privately

owned dredges operate on the Fraser River.

Although the "Fraser River Dredging Guidelines" contain a

number of provisions, this report is concerned with the

provisions that permit dredging during the fry migration

period (generally March 15 to June 1) under specified

conditions. The "Guidelines" require that the dredging

equipment owner monitor the number of salmon fry being

entrained by the suction dredging process and cease operations

whenever the number being entrained is signif icant. As part

of an attempt to assess the value of the "Guidelines" as

applied over the past several years and to predict their

future value, DFO commissioned DPA Consulting Limited to

conduct a benefit-cost analysis of these "Guidelines" covering

bath of these periods.

3

1.2 Benefit-Cost Analysis

Benefit-cost analysis is a technique frequently used in the

evaluation of public projects. It organizes information so

that the benefits and costs of one or more projects can be

compared. This comparison takes place from the perspective of

a given society. In this case, the project to be evaluated is

the application of the "Fraser River Dredging Guidelines", and

the adopted perspective is that of Canada.

Benefit-cost analysis requires that the economic impacts of

a given project on the subject society be measured by comparing

two scenarios of future events: the "with-the-project"

scenario and the "without-the-project'' scenario. One measures

both the positive impacts of the project (the benefits) and

its negative impacts (the costs) by comparing the predicted

future si tua'tion "wi th-the' proj ect" versus the predicted future

situation "without-the-project."

In general, benefit-cost analysis involves an attempt to express

as many impacts as possible in monetary terms. A project's

benefits are measured by the dollar value gained by the project's

beneficiaries, and its costs are measured by the dollar value

lost by those who bear the project's costs. The gains and

losses thus expressed in terms of dollars are then compared;

if gains exceed losses, the project is said to have positive

net benefits for the society, whereas the opposite conclusion

obtains if losses exceed gains.

Two important limitations on the effectiveness of benefit-cost

analysis as a technique for project evaluation follow from

the above discussion. The necessity of assigning dollar

values to the impacts to be measured in a benefit-cost analysis

excludes impacts that are difficult to quantify or to translate

into monetary terms. Project impacts that may be very

important might be totally ignored in a benefit-cost analysis.

4

The "net-value-to-society-as-a-whole'' approach used in benefit­

cost analysis also ignores project consequences on the

distribution of incarne within the society. The rationale for

this is that those who benefit from the project could fully

compensate those who sustain lasses and still retain some

positive value. In fact, such compensation is rarely, if ever,

carried out. Almost every project that produces a net gain

to society as a whole will result in some individuals sustaining

lasses.

DFO recognized these limitations on benefit-cost analysis in

adopting a multiple-account framework for the evaluation of

its Salmonid Enhancement Program. The following elements are

included in this evaluation tool: national incarne, regional

development, impact on Native people, employment, and resources

. and environmental protection. Benefit-cost analysis is used

to determine the impacts on national incarne, and the other

accounts capture the values considered important to decision­

makers that would be missed by a benefit-cost analysis.

Budgetary constraints have necessitated the elimination from

this study of all considerations outside the scope of a benefit­

cost analysis. Any benefits or costs excluded from our

analysis because of the difficulty of translating them into

monetary terms are stated, as are the broad outlines of the

distributional consequences of the ''Guidelines." Nevertheless,

our focus is on determining whether the "Guidelines'' are cost­

effective, from the point-of-view of the people of Canada.

In the course of admitting the weaknesses of benefit-cost

analysis as an evaluation technique, we should net forget its

strengths. It is a tool that can bring together vast amounts

of information about a project and answer the question of

whether society will be richer or poorer as a result of the

project. The application of this technique in this study is

something of a pioneering effort for Habitat Protection; the

5

sarne type of analysis rnight be used by Habitat Protection to

assist in the evaluation of many actual or potential prograrns

that use public funds.

6

2.0 METHODOLOGY

2.1 Benefits

As mentioned earlier, the "Fraser River Dredging Guidelines"

were intended to reduce the detrimental impacts of dredging

operations on the Fraser River's salmon resource. In other

words, the "Guidelines" are a salmonid enhancement program,

and their ultimate goal is to increase the number of salmon

available to Canadians. The intended project benefit, an

increase in the salmon population, is obviously quantifiable

and can be translated into monetary terms if the value of a

salmon can be ascertained. Project benefits thus lend them­

selves easily to a benefit-cost analysis.

Although the concept of benefits is quite straightforward,

their measurement is a different story. The "Guidelines" are

aimed at reducing a whole series of negative impacts of

dredging on the salmon resource. For most of these impacts no

data are available concerning the number of salmon saved. For

example, the "Guidelines" may help prevent the loss of elements

of the food chain vital to the survival of salmon, but we have

no way of measuring the number of salmon saved thereby. The

only impact for which such data are available is the capture

by the dredges of salrron fry migrating downstream. Since our

measure of benefits excludes all impacts except this one, our

benefits may be substantially understated.

Two separate time periods were used for the evaluation. The

first period, 1975-1979, measures the historical value of the

"Guidelines" for their first five years of operation. The

second period, 1980-2010, measures the predicted future value

of the "Guidelines" in operation. The calculations used in

estimating the number of fry saved by the Guidelines are

explained in an Appendix. Table l shows the results of these

calculations for every year from 1975 through 2010.

7

According to Table 1, more than 84 million salrnon fry will

have been saved frorn death by dredging under the Guidelines

in the thirty six year period frorn 1975-2010. This cornes to

an average of about two and one-third million fry per year .

Salmon fry are not valued in thernselves as a comrnodity.

Instead, they are valued as a rneans to an end: by saving the

lives of fry, the "Guidelines" create the potential for a

larger population of adult salrnon. The benefit-cost rnodel

used in the evaluation of the Salmonid Enhancement Program

can be used to translate nurnbers of f ry saved into the increase

in the adult population and to translate the latter into a

value figure, in dollars and cents. We used this benefit-cost

rnodel as the starting point for the evaluation of benefits

resulting from saving salrnon fry. f

The SEP benefit-cost rnodel begins by applying survival rates

to the fry population in order to get numbers of adult salmon.

It then predicts the pattern of ultirnate fates of the adult

salmon based on historical data. Sorne adults are caught by

Americans, others are caught by the Canadian commercial fishery,

the Canadian sport fishery, or the Canadian Native food fishery,

and still others get back to the spawning grounds and reproduce.

The model also assigns monetary values to these various cate­

gories.

One change we made in applying the SEP rnodel was to elirninate

the possibility that any of the incrernental fish saved by the

"Guidelines" would reach the spawning grounds. This was done

because the salrnon saved by the "Guidelines" are marginal rather

than average fish. The prirnary mandate of DFO is to preserve

the fishery resource. No one should be perrnitted to catch

fish in violation of that mandate. Since fishing is in fact

permitted, marginal increases in the fish population should

not be required to rnaintain the resource but should be avail­

able for catching. Our assumption, then, is that all the

adult salrnon saved were caught, either by Americans or Canadians.

8

TABLE 1: NUMBERS OF SALMON FRY SAVED AND TO BE SAVED AS A RESULT OF "FRASER RIVER DREDGING GUIDELINES"

(al l entries in thousands of fry saved)

Year Chinook Chum Pink Total

1975 387 369 756

1976 134 275 842 1,251

1977 202 1,636 1,838

1978 175 398 2,202 2,775

1979 252 735 987

1980 252 735 1, 670 2 , 657

1981 358 993 1,351

1982 358 993 2,260 3 , 611

1983 358 993 1,351

1984 358 993 2,260 3,611

1985 358 993 1,351

1986 358 993 2,260 3,611

subsequent, odd-numbered years through 2009 358 993 1,351

subsequent, even-numbered years through 2010 358 993 2 , 260 3,611

Total 12, 142 33,938 38 , 614 84,694

9

A second adjustment to the SEP model was made to eliminate

the higher values per fish used for the sport and Indian food

fisheries relative to the corrunercial fishery. Instead, all

the values used came out of the corrunercial fishery. Presumably,

DFO would already have allocated as many fish to both the Indian

food and sport fisheries as are justified by the differences

in value. Since the salmon saved from the dredges are marginal

fish, they should be valued at the lowest (commercial) value.

Having made these two adjustments to the SEP benefit-cost model,

we used the model for the calculation of benefits under two

alternative sets of assumptions, which we have named the

"optimistic case" and the "base case." The assumptions involved

in each of these cases will be examined in turn.

2.1.1 Optimistic Case

Under the optimistic case, all of the assumptions of the SEP

model except those just discussed have been applied. Fish

values are determined by wholesale prices less marginal costs

of getting the fish to wholesale. The real wholesale price of

the various species of salmon are assumed to increase modestly

through time. A complete statement of the assumptions used in

this model can be found in a DFO paper titled "Estimation of

Commercial Fishery Benefits and Associated Costs for the National

Incarne Account."

One reason for labelling this case "optimistic'' is its use of

wholesale prices and costs, rather than landed prices and costs,

to measure the value of incremental salmon. The usual rule

in benefit-cost analysis is to value a product by looking at the

first market it passes through. In the case of salmon, this

is the sale by fishennen to processors (landed value) , not the

sale by processors to retailers (wholesale value) .

The SEP benefit-cost model does not follow this rule because the

10

oligopolistic structure of the fish processing industry

(especially canning) has created an alleged tendency toward

monopsony in relation to the fishermen. In other words, the

market power enjoyed by the fish processors allows thern to

pay less than the competitive price for salmon. To use the

price paid by the processors (minus the incremental harvesting

costs) as the measure of the value of salmon would, according

to this argument, understate the value. To correct for this

tendency, it is then necessary to use prices and costs at the

point of the next market on the vertical chain, the wholesale

market.

2.1.2 Base Case

The base case differs from the Optimistic case in three respects:

(1) the real prices of salmon and salmon products and the real

costs associated with the salmon industry are assumed to remain

constant through time,

( 2) prices paid by wholesalers to fishennen (landed value) and

incremental harvesting costs are used as the bases for deter­

mining value instead of wholesale prices and incremental processing

plus harvesting costs, and

(3) new investment in capital equipment by fishennen in response

to increases in the size of catches is predicted to take place.

The first two of these assumptions were made out of a desire to

avoid the possibility of overstating project benefits. While

it is certainly possible that the real price of salmon will

increase over time or that the prices paid by processors for

salmon are less than the competitive prices or both, it is better,

for the purposes of this study, to make conservative assumptions

on these issues.

11

The third of these assurnptions probably carries the most

serious consequences. Both the SEP benefit-cost model and the

"optimistic case" discussed above assurned that, for any year,

the value of the salmon saved was the difference between a

market price for salmon and the incremental costs of getting

the salmon to the market. Capital investment was assumed to

remain constant, since present "excess capacity'' could handle

the increase in numbers of salmon.

Historically speaking, however, this assurnption has not held

true. Whenever the catch increases and profits go up, more

investment takes place, as each person tries for a larger share

of the catch, and profits go back down. The SEP model assumption

about no new investment requires government action to limit such

investment, either directly or indirectly.

The present licensing program can be seen as a step in this

direction. Although not a direct limitation on investment, it

has probably hindered investment somewhat, thereby resulting in

the potential retention of some of the gains in salmon population.

Based on conversations with officials at DFO, we have set the

potential long-term gains from the licensing program at 15 percent

of the landed value of the incremental salmon.

It takes time for the fishing industry to respond to gains in

the salmon population by new capital investment. In the f irst

year of salmon population increase, no investment will have

taken place, so that the benefits can be measured by subtracting

incremental harvesting costs from landed value. We assume that

new capital investment will be phased in over a three year

period in equal annual increments, so that, by the fourth year,

and for all years beyond that, benefits will equal 15 percent

of landed value . 2

2Thus, benefits in the second year will equal 72 percent of landed value minus 67 percent of incremental harvesting costs, and benefits in the third year will equal 43 percent of landed value minus 33 percent of harvesting costs.

12

In surnmary, the base case uses realistic assumptions about the

impact of present government policy upon the value of increasing

the Fraser River salmon population together with conservative

assumptions about the structure of the industry and future

relative prices.

2.2 Costs

While the benefits from the application of the ''Fraser River

Dredging Guidelines" have accrued and will accrue to fishermen

(in the base case) or to fishennen and processors (in the optirnistic

case), the costs have been and will be borne by DFO, DPW, and

the private dredging companies. DFO's costs have included costs

of monitoring, fry burial tests, report writing, and other costs

related to the development and implernentation of the "Guidelines . "

Costs to DPW and to the dredging companies include monitoring

costs and the costs of shutdowns. Table 2 provides a year-by­

year statement of the costs, by source.

The numbers shown in Table 2 were used in the computations of

net benefits for both the base case and the optirnistic case.

The dividing line between the benefit-cost evaluation of the

history of the "Guidelines" and the benefit-cost analysis of

their future application is between 1979 and 1980. The earlier

period, frorn 1971 through 1979, includes DFO's expenditures in

establishing and irnplementing the "Guidelines" (1971-1975),

DFO's supervisory expenditures and DPW's expenditures in complying

with the "Guidelines" during the period when private dredges

did not operate (1976-1978), and the first year of private

operation under the "Guidelines" (1979) .

The later period, from 1980 through 2010, encompasses subsequent

years of private, as well as public, dredging under the "Guide­

lines." Two dredging companies, Centennial and Fort Langley

Recreation, purchased capital equipment for monitoring purposes

13

TABLE 2: HISTORICAL AND PREDICTED FUTURE COSTS OF APPLICATION OF "FRASER RIVER DREDGING GU IDELINES"

(values expressed in 1979 dollars)

Costs to:

Priva te Dredging Year DFO DPW Companies Total

1971 382 382

1972 2 , 359 2,359

1973 1,016 1,016

1974 1 6 ,503 16 , 503

1975 25' 119 25' 119

1976 6 , 217 25,000 31 , 217

1977 3,597 25 , 000 28,597

1978 3,339 25,000 28,339

1979 3,600 25 , 000 32,311 60,911

1980 3 , 600 25,000 23 , 651 52,251

1981 3,600 25,000 83,651 112,251

1982 3,600 25 , 000 63 ,651 92,251

1983-2010 , per year 3,600 25,000 63,651 92,251

Total 173,732 875,000 1,985,492 3,034,224

14

in 1979, and it is assumed that two others, Sceptre and

Dillingham, will do the same in 1981. These purchases account

for the pattern of values through time shown in Table 2.

One major omission from the benefit-cost analysis for the

historical period (pre-1980) should be noted. It was not

possible to estimate the lasses sustained by Canadian society

as a result of the total closing down of private dredging

operations from 1975 through 1978. Nor was any attempt made

to include the benefits from these shutdowns. Yet no impact

of the "Guidelines" during this period was more important than

these shutdowns. As a consequence, the results of the historical

benefit-cost analysis, given in section three of this report,

do not necessarily indicate the true benefits and costs of

the application of the "Guidelines" during this period.

Determination of the cost figures that make up Table 2 was

largely straightforward. Out-of-pocket expenditures were used

to measure the costs to DFO and the costs of monitoring equip­

ment and personnel. The costs of temporary shutdowns

(necessitated by fry capture exceeding permitted levels) were

based on the average "historical" temporary shutdown. We

assumed each shutdown would be eight hours long, and that the

only extra cost resulting from it would be eight hours worth

of "variable" costs (mostly salaries). A downward adjustment

was made to this figure to reflect the use of part of the

shutdown time for maintenance work. Based on historical data,

three shutdowns per future year were predicted for each dredge

in operation.

15

3.0 RESULTS

3.1 Operation of the Guidelines from 1975 through 1979

Table 3 presents the benefits, costs, and net benefits to

Canada from the historical operation of the "Fraser River

Dredging Guidelines" in the years 1975 through 1979. Three

different discount rates (5, 10, and 15 percent) were used

to show the results under a variety of assumptions about the

relationship between the present and future values of

money (apart from inflation) .

The benefits stated in Table 3 were derived from the increase

in salmon population caused by the enforcement of the "Guide­

lines" from 1975 through 1979. The costs shown in that table

are those incurred by Canadian society from 1971 through

1979 in connection with the development and enforcement of

the "Guidelines."

Table 3 shows substantial positive net benefits under all

three discount rates for both the base case and the optimistic

case. For example, at a 10% rate of discount, Canada's

benefits exceeded her costs by $1,013,000 under the optimistic

case and by $264,000 under the base case. These benefits

are understated to some degree, since no attempt was made to

capture either the benefits to the salmon habitat and spawning

grounds or the benefits to the food chain that resulted from

the operation of the "Guidelines."

On the other hand, we must keep in mind that a potentially

major cost item, the cost of the shutdown of the private,

commercial dredges for a four year period, was ignored in the

calculation of the entries in Table 3. This omission prevents

us from concluding that the "Guidelines" were economically

efficient in their historical operation. We shall instead

have to rely on the benefit-cost analysis of their predicted

future operation.

l6

TABLE 3: BENEFITS1

AND COSTSl OF THE OPERATION OF THE FRASER RIVER DREDGING GUIDELINES FROM 1975 THROUGH 1979

(all values in thousands of 1979 dollars, discounted ta "present value" as of 1980)

Discount Rate

5% 10% 15%

Base Case

Benefits 517 527 538

Costs 226 263 306

Net Benefits +291 +264 +232

Optimistic Case

Benefits 1,304 1,276 1,258

Costs 226 263 306

Net Benefits +1,078 +1,013 + 952

1 See accompanying text for discussion of omitted benefits and costs.

17

3.2 Projected Operation of the Guidelines from 1980 through 2010

Table 4 presents the predicted benefits, costs, and net

benefits to Canada from the future operation of the "Fraser

River Dredging Guidelines" spanning the years 1980 through

2010. The same discount rates are used here as for Table 3.

The benefits shown in Table 4 were dervied from the increase

in salmon population to be caused by the enforcement of the

"Guidelines" from 1980 through 2010, except that no benefits

after 2010 were counted. Just as for Table 3, no attempt was

made to quantify benefits other than those arising from the

saving of salmon fry from entrainment by the dredges.

The costs shown in Table 4 are those to be incurred by Canadian

society from 1980 through 2010 in connection with the con­

tinuing enforcement of the "Guidelines." These costs include

administrative costs, the costs of monitoring equipment and

personnel, and the costs of temporary shutdowns.

The results shown in Table 4 indicate that under the "base

case" assumptions, the "Guidelines" will result in a substantial

net loss to Canadian socièty, while under the "optimistic

case" assumptions, the "Guidelines" will result in an even

more substantial net gain to Canadian society.

What accounts for the wide gap between the results for the

base case and those for the optimistic case? In Section 2

we identified the three differences in assumptions between

the two cases. The Base Case uses constant real prices and

landed values and incremental harvesting costs, and it assumes

that additional capital investment will dissipate most of the

resource rent. The Optimistic Case uses slightly increasing

real prices of salmon and wholesale values and incremental

costs through wholesaling, and it assumes that no new capital

investment will take place so that the full resource rent

can be captured.

18

TABLE 4: PROJECTED BENEFITS AND COSTS OF THE OPERATION OF THE FRASER RIVER DREDGING GUIDELINES FROM 1980 THROUGH 2010

(all values in thousands of 1979 dollars, discounted to "present value" as of 1980)

Discount Rate

5% 10% 15%

Base Case

Benefits 762 455 295

Costs 1,489 940 675

Net Benefits -727 -485 -380

Optimistic Case

Benefits 4,705 2,846 1,866

Costs 1,489 940 675 ---Net Benefits +3,216 +l,906 +1,191

19

The most important of these differences between the two

cases is the issue of whether additional capital investrnent

will take place. We conclude that without an effective

cornrnitrnent by governrnent to prevent capital investrnent in

response to an increase in the salmon catch, the enforcement

of the Fraser River Dredging Guidelines is not economically

efficient from the Canadian perspective. With such a cornrnit­

ment, however, the enforcernent of the guidelines would be

highly efficient. The continuing absence of effective restric­

tions on this sort of investrnent lowers the benefits not only

of these guidelines, but also of all salmonid enhancement

programs.

The above analysis is limited to the guidelines as presently

structured. Subjects for further research include the con-

sequences of changing the guidelines in one way or another.

For example, what would be the benefits and costs of changing

the present monitoring system to one in which dredging is pro­

hibited during the downstream migration season? This and

other similar questions woùld arise if the focus of inquiry

shifted from whether the present "Guidelines" are efficient

to the development of the most efficient set of guidelines

possible.

APPENDIX

DERIVATION OF THE ESTIMATES OF THE NUMBERS

OF SALMON FRY SAVED AND TO BE SAVED

BY THE ENFORCEMENT OF THE

FRASER RIVER DREDGING GUIDELINES

1 1

A-1

This appendix describes the manner in which the estimated

numbers of fry saved by shutting down the dredges operating

in the Fraser River were derived and the sources of informa­

tion used. Data on salmon fry migration (for Chum, Chinook,

and Pink) were obtained from Paul Star of DFO. The nurnbers

of fry caught by the dredges were obtained frorn two technical

reports published by DFO:

"A Review of Suction Dredge Monitoring in the Lower Fraser River 1971-75", Technical Report Series No. PAC/T-75-27. Pp. vii, 19-90.

"Dredge Monitoring Capture Data and Entra.inrnent Estimates During the 1976 Juvenile Salmonid Migration in the Lower Fraser River", Technical Report Series No. PAC/T-76-21. Especially pp. 3-37.

The data on the average number of shutdowns for DPW 312 and

DPW 322 were obtained frorn Paul Sookachoff of DFO.

The first step was to correlate, for each day between 1972

and 1978 for which data were available, the nurnber of salmon

fry caught by the dredges prior to shutdown with the number

of fry migrating in that area on that day. Table A-1 shows

an example of this calculation process. The monitored

dredges were requested to shutdown operations by DFO when fry

capture became excessive. From 1972 through 1974, the moni­

toring technician's judgement defined "excessive''; starting

with 1975, eut-off numbers were established.

The first entry in Table A-1 is the estimated number of fry

captured on that day by that dredge. This number was obtained

from one of the two technical reports cited earlier. The

second entry presents total fry migration on that day based

on information supplied by DFO. The third entry, the propor­

tion of the total migration passing through the given area

on that day, was calculated under the assumption that the local

proportion of the total migration was the same as the local

A-2

TABLE A-1: SCEPTRE DREDGING AT NORTH ARM: MAY 10, 1972

Estirnated Pink Fry Capture, all day:

Total Pink Fry Migration, all day:

Pink Fry Migration through North Arm, all day:

Percentage of Available Migration Caught by Dredge:

16,800

2,944,679

382,808

4.4%

A-3

proportion of the total river flow. The final entry, the

percentage of the migration caught by the dredge was calculated

by dividing the first entry by the third.

Table A-2 presents the average proportions of the migrations

caught by the dredges in the time just prior to shutdown or

relocation. These averages were used in the calculation of

the numbers of fry saved. DPW 312 is treated separately

from the other dredges because it is a hopper dredge while the

others are stationary dredges. An hopper dredge can be

relocated in about one hour's time, so that unlike the

stationary dredges, it need not be shut down for 8 hours each

time that a signif icantly high number of salmon fry are

being entrained.

Next, the pattern of salmon fry migration for the years 1975

through 1978 was examined to determine peak migration days

and periods. 1975 was chosen as the first year because it

was the first year of strict enforcement of the "Guidelines."

1978 was chosen as the last year because it was the most

recent year for which migration data were available. As can

be seen from Table A-3, the pattern of fry migration varies

considerably from year to year.

In most cases, the requested shutdowns of the dredges occurred

in approximately the middle of a peak period. Thus the

information provided in Table A-3 is directly useful in

estimating the number of salmon fry saved by a shutdown or by

a relocation.

According to information supplied by DFO, DPW 322 was re­

quested to shutdown for an 8 hour shift about three times

per year, on average, while DPW 312 was relocated two to

three times per year. The number of fry saved was calculated

by combining the informatim~ontained in Tables A-2 and

A-3 with that just given. Table A-2 provides information on

A-4

TABLE A-2: PROPORTIONS OF THE MIGRATIONS BEING CAUGHT JUST PRIOR TO REQUESTS FOR SHUTDOWN OR RELOCATION

A. Each Dredge except for DPW 312 (average)

B. DPW 312 (average)

1 a weighted average.

Chum

. 0060

. 0471

Pink

. 0517

.0003

1 Total

.0351

.0263

TABLE A-3: PEAK MIGRATION PERIODS AND DAYS

A. Total Migration during Peak Periods (thousands of fry)

1975 1976 1977 1978

Chum

62,514 34,234

206,337 46,675

Pink

124,078

205,427

B. Average Migration per Peak Period (thousands of fry)

1975 1976 1977 1978

Annual Average

Chum

10,419 8, 558

51,584 11,669

20,558

Pink

24,816

68,476

46,6461

C. Average Migration per Peak Day (thousands of fry)

1975 1976 1977 1978

Annual Average

Churn

2, 718 1,426 7,936 2,593

3,668

Pink

5,395

11,413

8' 4041

1 Average for pinks based only on even-nurnbered years.

A-5

Chinook

46, 962 19,832 28' 080 19,250

Chinook

11,740 3,966 5,616 4,812

6,534

Chinook

2,236 862

1,560 1,375

1, 508

A-6

the percentage of the migration to be saved by a shutdown or

a relocation, the information just given tells us how long

the shutdowns last per year (e.g., 3 X an 8 hour shift = 24 hours = 1 day), and Table A-3 gives us peak day migrations ,

showing the number of potential candidates for rescue.

For the years from 1975 through 1978, only the fry saved by

the shutdowns of DPW 322 and by the relocations of DPW 312 are

included. The average migration per peak day for each year is

used in that year's calculations.

Starting with 1979, the annual average peak day migration

figures are used (only in even-numbered years in the case of

Pinks) in the calculations. For 1979 and 1980, the results for

DPW 322 are multiplied by 1.5 to account for the fry saved by

shutting down the private dredges owned by Centennial Dredging

and Sand and by Fort Langley Recreation. Starting in 1981

and continuing for every year thereafter, the results for

DPW 322 are multiplied by 3.5 to account for the fry saved by

shutting down all the privately owned dredges. We are assuming,

then, that the dredges owned by Centennial Dredging and Sand

and by Fort Langley Recreation were the only ones to re-initiate

operations before 1981, but that all the other companies will

have resumed in that year.

Table A-4 shows the results of the calculations of the number

of fry saved.

as Table 1.

It is duplicated in the main body of the report

A-7

TABLE A-4: NUMBERS OF SALMON FRY SAVED AND TO BE SAVED AS A RESULT OF "FRASER RIVER · DREDGING GUIDELINES"

(All entries in thousands of fry saved)

Year Chinook Chum Pink Total

1975 387 369 756

1976 134 275 842 1,251

1977 202 1,636 1,838

1978 175 398 2,202 2,775

1979 252 735 987

1980 252 735 1,670 2,657

1981 358 993 1,351

1982 358 993 2,260 3,611

1983 358 993 1,351

1984 358 993 2,260 3,611

1985 358 993 1,351

subsequent, odd-numbered years through 2009 358 993 1,351

subsequent, even-numbered years through 2010 358 993 2,260 3,611

Total 12,142 33,938 38,614 84,694