Use of Ecosystem Service Values Within Net Environmental Benefit Analysis

Prepared for:

The ACES Conference

Prepared by:Mark RockelCH2M HILL Natural Resource Economist

December 2008

2

Ecological Service ValuationEcological Service Valuation

Actions and decisions that affect habitats/land, etc., can substantially affect ecosystem service valuesChanges to these values can be quantified and evaluated

Natural resource economics approachesLitigation tested methodologiesHEA, REA, Benefits Transfer, etc.

Area A - Services Lost (Ecological Loss)

A

% o

f Ser

vice

s

Years

Area B - Services Provided (Ecological Benefit)

B

Comparing Environmental Values(Cost Benefit Analysis of Action)

BaselineB

4

Alternative Comparisons Using Ecosystem Services

Alternative Comparisons Using Ecosystem Services

Land Re-Use Designs (e.g., Brownfield, greenspace designs)Remedial ActionsNEPA AlternativesLand Management ActionsRestoration, Recreational Area Designs (e.g., eco-tourism)BioDiversity OffsetsAny actions that affect natural resource service values (ecological and human use)

5

Biodiversity OffsetsBiodiversity Offsets

Defined: Conservation actions intended to compensate for the residual, unavoidable harm to biodiversity caused by development projects, so as to ensure no net loss of biodiversity

Voluntary or Non-Voluntary

Governments and companies are increasingly using biodiversity offsets

6

Resource CompensationResource Compensation

United States (US) and in Europe, laws have been enacted to provide for compensation for damage to natural resources. Generally, two approaches have been used to calculate the amount of required compensation:

monetary value of the damages; and calculating the amount of natural resource restorationneeded to compensate for the harm.

service to service approach

Recent European Union (EU) Directives covering environmental compensation state a preference for resource equivalency approaches over monetary valuation.

7

European Commission Sponsored Project: REMEDEResource Equivalency Methods for Assessing Environmental Damage in the EU

2008 Draft Published

European Commission Sponsored Project: REMEDEResource Equivalency Methods for Assessing Environmental Damage in the EU

2008 Draft Published

The REMEDE project aims to develop methods and techniques known as “resource equivalency” (RE) to assist the implementation of Annex II of the Environmental Liability Directive (ELD).Annex II of the ELD identifies the requirements which must be met to ensure the public is adequately compensated for environmental damage.

Evaluating ecological service methods used in the USHEA, REA, human use values

Are equally applicable to 3 other relevant EU Directives relating to environmental damage:

Environmental Impact Assessment (EIA) Habitats and Wild Birds (H & WB) Directives.

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Laws Requiring Offsets: ExamplesLaws Requiring Offsets: Examples

Wetland Banking in the USConservation Banking in the USNRDA in the USHabitats and Birds Directives and implementing regulations in the EUOffsets in Brazil under the Forest Regulation and National System of Conservation UnitsFederal Law for the Protection of Nature and Landscape in SwitzerlandOffsets in AustraliaNo net loss of fisheries habitat in Canada under the Fisheries Act

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Ecosystem Service MetricsEcosystem Service Metrics

Biodiversity/Habitatecological service value (dSAYs, $): habitat equivalency analysis (HEA); resource equivalency analysis (REA); acres

Climate ChangeCarbon Sequestration ( tons sequestered per acre per yearpollutant removal (tons/yr, tons/acre/yr): value measured in removal costs ($/lb/yr)

Water/Groundwater (volume, acre-ft, $)

Equity/Socialhuman recreational use value (user-days, $)

Health and SafetyChange in HHRA value (e.g., 1 x 10-6)Change in ERA value (HQ percent reduction)

EconomicChange in property valueChange in tax revenue

10Potential to Rank Actions and Alternatives for Comparison

Potential to Rank Actions and Alternatives for Comparison

Economic

Climate ChangeWater/Ground

waterEquity/ Social H&S

Action / Alternative

Ecological Services (dSAYs)

Ecological Risk Profile

Net GHG Emissions (tons/yr) and Carbon

Sequestration (tons/yr)

Water Volume Affected and $

Value

Human Use Value

($)

Human Risk Profile

Property Value

Change

ALT 1ALT 2ALT 3ALT 4

Environment SocialNet Environmental Benefit Analysis Example Table (Measure Net Change in Metric)

Biodiversity/Habitat

Quantifying Ecosystem Service Changes

Case Studies

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City of Milwaukee, WisconsinCase Study

City of Milwaukee, WisconsinCase Study

Brownfield SiteComparison of alternative reuse designs to maximize ecological and human use valuesFinal design estimated to provide over $100 Million in human use benefits

Value:City will be able to demonstrate overall project value to regulatory agencies and the public; and Use natural resource service values to manage/limit site liabilitiesProvides economic justification as to the benefits of the final redevelopment design and demonstrates environmental stewardship. Demonstrates the potential increase in the number of visitors tothe area (i.e., assist in securing private tenants). Support justification to secure public funding and grants.

City of Milwaukee, Wisconsin: Case Study Recreational Valuation Results

$16 – $2059,680-69,160Total

$0.84 – $2.645,280 – 8,760Biking

$9.343,200Soccer

$2.21,200Fishing

$0.41,000Canoeing/kayaking

$3.2 – $5.49,000 – 15,000General recreation

NPV (millions)Users per YearActivity

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Ecological Valuation ResultsEcological Valuation ResultsE

colo

gica

l Val

ue G

ener

ated

(dis

coun

ted

serv

ice

acre

yea

rs (

dSA

Ys)

125

100

75

50

25

0WetlandCreation

StreambankRestoration

Figure 1. Estimate of the ecological value generated by the proposed design.

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Minnesota: Land Transfer/DonationMinnesota: Land Transfer/Donation

Site (43 acres) Adjacent to Mississippi R.Marginal Contamination, Limited RisksClient wanted to donate to City, but wanted to capture full valueFair market value was $214,000Ecological value minimalHuman use recreational value ≈ 30 Million dollarsDonated to City

Expedited site closureReceived covenant-not-to-sue for NRDGreat public goodwill

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Plans Announced for Plans Announced for Riverfront Park:Riverfront Park:

City to Complete Bike Trail, Develop Park with Group's Gift of Land

From April 20, 2000 5:46 PM EDT HASTINGS, MN. PR Newswire

“… The appraised market value of the land is $215,000; its potential recreation value to the public is estimated at $30 million based on a

recent study by nationally recognized environmental consultants CH2M HILL. The city's plans for the park include construction in 2001 of a

community bandshell and an environmental interpretive center at the park's south end. Native plantings, nature boardwalks, a picnic shelter

and a sculpture garden also are planned, with funding from a wide variety of sources. … This gift of land, which will serve to complete Hastings 15

miles of bike trails, …”

Area A - Services Lost (Ecological Loss)

A

% o

f Ser

vice

s

Years

Area B - Services Provided (Ecological Benefit)

B

Demonstrating Environmental Sustainability and Stewardship

Baseline

Action affecting the environment

Offsets: How much is enough?

Net Environmental Benefit Analysis

Use of Ecosystem Service Values in Risk Management Decision-Making and Site Remediation

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What is a Net Environmental Benefit Analysis (NEBA)?

(In the Context of Remediation and Land Development Actions)

What is a Net Environmental Benefit Analysis (NEBA)?

(In the Context of Remediation and Land Development Actions)

A Risk-Benefit Analysis Applied to Environmental Management Options

Analytical framework to quantify and compare the ecosystem service benefits and/or losses associated with an environmental management option (e.g., remedial action, site re-development)

Uses formally quantified values Can be Used as a Method to Demonstrate Environmental SustainabilityPotential uses under site cleanup/land development programs…

Use NEBA to help identify preferred alternatives: the break-point between remedial/development alternatives

Demonstrate and maximize benefits Support feasibility studies and decision-making

Marginal Risks/Uncertainty

Using Offsets to Manage Risk, Site Remediation

Effort/Cost ($)

Con

cent

ratio

n/R

isk Criterion Level

High Risk Areas

Larger Reduction in Risk

Smaller Reduction in Risk

Lower % Higher %NEBA: Compares projected loss of ecological and/or human use service values associated with allowing residual risks to remain in place (MNA) in marginal areas to gains in ecological and human use services from alternative implementation.

Allows for offsetting mitigation(providing certain gains for uncertain losses): Maximizing benefits.

Risk Management Objectives

• EPA Superfund ERA Guidance (Step 8)– “The risk manager must balance (1) residual risks posed

by site contaminants before and after implementation of the selected remedy with (2) the potential impacts of the selected remedy on the environment independent of contaminant effects.”

– “In instances where substantial ecological impact will result from the remedy (e.g., dredging a wetland), the risk manager will need to consider ways to mitigate the impact of the remedy and compare mitigated impacts to the threats posed by the site contamination.”

• EPA Sediment Guidance, 2005: – Important risk management function: compare and

contrast the costs and benefits of various remedies

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“A Framework for Net Environmental Benefit Analysis For Remediation or Restoration of

Contaminated Sites”

“A Framework for Net Environmental Benefit Analysis For Remediation or Restoration of

Contaminated Sites”

Rebecca A. EfroymsonOak Ridge National Laboratory

Joseph P. NicoletteCH2M HILL

Glenn W. Suter IIUSEPA National Center for Environmental Assessment

Published, Environmental Management, August 2004

23When to Consider a NEBA for Site Remedy Comparison?

Remediation:Alternatives being evaluated provide no unacceptable human health risksBalance of risks and benefits of remediation are ambiguous

Site retains significant ecological valueRemediation will cause environmental damage

Creating NRD Liability?Ecological risks are small, uncertain, or limitedRemediation or restoration may fail or not truly change risk scenarioCosts appear disproportionate to changes in the risk scenario

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Table 1. Case Study: The general effect of a remedial alternative can be evaluated.

Table 1. Case Study: The general effect of a remedial alternative can be evaluated.

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6

Remedial ActionsEcological Services (dSAYs)

Human Use Value ($)

Human Risk Profile

Ecological Risk Profile

Cost ($)

ALT 1ALT 2ALT 3ALT 4

Scenario #1

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CERCLA Case Study, NJ

Groundwater Beneath 262 Acres of Forested Wetland Is Contaminated With Volatile SolventsNo Human Health Risks (No Exposure) Metric: SAYsIndicator: GW Service to Provide Surface Water (Quantity and Quality) to Freshwater Wetlands

A Framework For Measuring The Economic Benefits of Ground Water” EPA Report 230-B-95-003

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Action 2: Pump and Treat

10 Yrs. 20 Yrs. 30 Yrs.InitiationPoint

100

60

20

Pump and Treat

Physical Destruction

Ground Water Debit Water QualityEffect

Water QuantityEffect

Forested Wetland

NetP&T

% S

ervi

ces

Baseline Services

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“

“

28Interstate Technology and Regulatory

Council (ITRC)Interstate Technology and Regulatory

Council (ITRC)

44 states represented and countingDeveloped guidance (2006) for the ecological reuse of contaminated sites

We provided NEBA section for this guidance

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2008 EPA Guidance

Value of the NEBA Approach• Provides information for management decisions using

technical, scientific, and credible tools– Uses quantifiable metrics providing a basis for

decisions• e.g., layer of protection from third party-suits

• Shows benefits to the public and demonstrates environmental sustainability

• Framework may result in :• better environmental management and greater environmental

improvement at lower costs

• Methodologies are consistent with policy and direction of natural resource agencies

NEBA Consistent With Regulatory Guidance

Examples:– Risk Management Objectives– EPA’s Ecological Benefits Assessment

Strategic Plan – OSWER Directive 9285.7-28 P 1999– Interstate Technology and Regulatory Council

(ITRC)– 1999 DOI-EPA Guidance – State rules (e.g., Texas risk reduction rules,

ESA provision; Louisiana similar provision) • Port Arthur, Texas, Chevron RCRA Site

Superfund Process

Preliminary Assessment/Site Investigation (PA/SI)/

Designation of OU’s

Remedial Investigation (RI)

Feasibility Study (FS)(NEBA Evaluation)

Proposed Plan (PP)

Public Comment

OU Record of Decision (ROD)

OU Remedial Design/Remedial Action (RD/RA)

CERCLA Site-Wide Consent DecreeIncluding Global settlement and

Covenant Not to Sue (CNTS)

NRI/NRDA Process

BTAG Coordination/ TrusteeNotification/Biological Opinion

Investigation Strategy

Proposed NRI Restoration

Public Outreach and Technical Support From NR Trustees

Implement NRI Restoration

Settlement With Natural Resource Trustees

•Nature and Extent•HHRA/ERA

•Evaluate NRI Based on HHRA, ERA, and Nature and Extent

•Evaluate Cost/Benefit and NRI Potential Associated With Remedial Alternatives

•Evaluate Potential Offset Projects

•Preferred Alternative Based Upon NEBA (Environmental Value and Cost/Benefit Associated

With Risk Reduction)

•Public Review of Proposed Remedy and NRI Restoration

Using same metrics on both

sides

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A “Win-Win” SolutionA “Win-Win” Solution

Responsible PartyProvides defendable basis for decisions gains complete closure, reduces liability (cost) improves agency and public relations

Agency StakeholdersProvides basis for decisions: has technical and scientific basis, is not arbitraryDemonstrates benefits, timely closure and success to the public

Public compensated with a long-term tangible asset

Environmentis restored/maintained (no net loss -

sustainability)