The economic model of costs vs. benefits is often used when analyzing a project. There is specific procedure used in this model and it is used to help make decisions. First you must identify all feasible alternatives. Next you must attempt to identify all impacts both positive and negative. Then you must place a value on these inputs. The next step is to calculate the net benefit (benefits minus the costs). Finally you choose the best project. Unfortunately this process is not as easy as it sounds. This difficult procedure would be a very useful study at Glen Canyon Dam. This section will not attempt to measure the cost and benefits but instead attempt to explain the methodology that should be used and address some of the very difficult issues involved in completing a cost benefit analysis on project similar to this one.

There are many costs that must be calculated in order to analyze if you should decommission Glen Canyon Dam. These costs include losing some of the benefits from tourism, power, water, and decommissioning. By putting all of these lost benefits together and adding them to the cost of decommissioning and cleaning up Glen Canyon we will have a model that explains how to evaluates the cost of decommissioning Glen Canyon Dam.

The amount of tourism that results from Glen Canyon Dam is a large benefit to the economy. There are around three million visitors each year to this National Recreation Area. By using a study done by the Army Corp of Engineers they give a figure which estimates the value of flat water recreation at about $50 per user day. Three million visitors multiplied by $50 per visitor we get a benefit of $150 million. This is a very low estimate because the figure that the study produced for flat-water recreation was composed in an area where there were many substitutes for flat-water recreation. In the case of Lake Powell there are no substitutes so the value is probably much higher than the $50 estimate. (Friends Of Lake Powell Web Site)

In order to understand the benefit of Lake Powell we must look at use value and non-use values. Use value is what people are willing to pay to enjoy the recreation opportunities at Lake Powell. Non-use values are extremely hard to measure because they attempt to put a value amount on something that is not tangible. There are three types of non-use values; they are option, bequest, and existence. An option value attempts to measure how important it is to keep a resource that you are not using in the event that at some other time you would like to have the option to use that resource. A bequest value attempts to measure how important it is to you that future generations are able to use this resource. An existence value attempts to measure how important the resource is to keep a species going.

Under the category of use values we have two sub categories, market and non-market values. In the case of Lake Powell we can find a market value by looking at the entry fees paid by individuals who use this National Recreation Area. We must then take into account non-market values that are much more difficult to measure. Non-market values are considered what people are willing to pay in order to use the resource. In order to come up with this value it is necessary to use a method called the contingent valuation method (CVM). A CVM is used to put a dollar value on some non-market value. This process is done by doing surveys that ask people what they would be willing to pay to use the resource. A good CVM that limits its biases is a necessary tool in order to put a more complete cost and benefit analysis together. Another technique that would help give a better understanding of the value of Lake Powell would be a Travel Cost Method. This study would calculate the amount of money people had to pay in order to get to Lake Powell if and only if it was their final destination.

Below Glen Canyon Dam is one of the best trout fisheries in the world. This stretch of river brings 19,000 fisherman to the river each year. "The direct and indirect value that these people bring to the economy is between 14-30 million dollars per year" (Terry Gun, Lee’s Ferry Anglers). The dam blocks all of the sediment from the river and drops the temperature of the water also. This cool clear water is a habitat that trout thrive in. If the dam were decommissioned the trout fishery would be destroyed.

Rafting has become a large industry below Glen Canyon Dam. There were 19,195 commercial users and 113,336 commercial user days on the river in 1998. By taking the figures from the Army Corp of Engineers for the value of whitewater recreation and multiplying it by the amount of user days we can get an estimate of the benefit of white water recreation. The Corp figure is $184 multiplied by 113,336 user days we get a figure for the benefit of whitewater recreation. This recreation is not a direct benefit of the Glen Canyon Dam but the dam’s ability to regulate the flow of the river does positively effect the industry. If the dam were decommissioned the whitewater industry would probably lose some user days because of the high fluctuations in the hydrology of the river. (LINK) PIC

Glen Canyon Dam is also a hydroelectric power plant. The energy produced and sold is another benefit of the dam. The dam has a capacity of 1,356,000 kilowatts of electricity and it is peak load electricity, which is the most valuable kind. The revenues generated from this power plant are approximately $100 million dollars per year. In order to get a benefit value of the electricity sold by the dam we must calculate the avoided cost of the least expensive alternative means of meeting the identical load. The power sold from Glen Canyon Dam is sold at a reduced rate so this $100 million does not give us an accurate picture of what the true value of this electricity. (PIC)

There is also an externality that might have to be added to the cost of losing the hydroelectric power plant because it would probably be replaced by a coal or nuclear power plant. Both of these have negative externalities associated with them so those costs would have to be added to the loss of revenue from electricity and the cost of producing another plant.

Glen Canyon power plant is not the only plant that depends on Lake Powell for its production of energy so does Navajo Generating Station (NGS). NGS takes water from the lake and uses it in its production of electricity from coal. "If the lake were decommissioned NGS would close and the estimated lost revenue is $125,520,000" (Navajo Power Project Web Page). NGS employed 675 people in 1997, most of which are Native Americans. An indirect benefit from NGS is the Kayenta coalmine that is the supplier of coal for the NGS. Kayenta coal mines employs 455 full-time employees and is a major source of revenue for the Native Americans in the region. If the dam were decommissioned and NGS and Kayenta coal mine were shut down there would be a significant negative effect on the Native Americans economy in this region.

The dam controls the erratic flow of the Colorado River and delivers it down stream where it can be used for irrigation and water for cities. Over 22 million people and 3.5 million acres of agricultural land in the southwest use the water from the river. This represents 15% of the nation’s crops. These irrigated lands produce $1.5 billion dollars worth of crops and employ countless thousands of people each year (Friends of Lake Powell web site). Farming would be very adversely effected if the dam was decommissioned because of the unpredictability of the wet and dry years. If these areas were no longer suitable for farming we would incur an increase in the cost of these crops because of the reduced supply.

The dam also acts as a buffer for floods. This is another value that is very difficult to measure. Implicit value is a way of determining the value of human life by taking the cost of the risk reducing investment and dividing it by the change in probability of death. In the case of the dam and its ability to help control floods we would have to calculate how much people would be willing to pay to have the dam and divide it by the change in probability of dying in a flood. This would give us a value of the dam for flood control.

Another social cost that would occur if the dam were decommissioned would be an increase in law suites. Whenever the upper basin did not deliver its 7.5maf or the US did not deliver its 1.5maf to Mexico there would be some type of litigation. This could end up being very costly to the taxpayers because every time a state sues another state it must go to the Supreme Court. By looking at previous inter-state law suites we can get some type of idea how much this type of litigation costs.

In order to decommission the dam properly many people believe that the structure of the dam would have to be removed. If this is true it adds on another significant cost to the decommissioning the dam. Some estimates of the cost of removing these millions of tons of concrete are around $2.6 billion without using any economic multipliers.

Another cost that will be incurred if the dam is decommissioned is the cost of cleaning up everything that is presently at the bottom of the lake. Toxic sediment, garbage, and everything else you could think of could be at the bottom of Glen Canyon. The cost of managing and cleaning up 186 miles of waste will probably be significant. The only way to estimate how much a project like this would cost would be to compare it to other clean up projects that have already been completed (Exxon oil spill, nuclear waste sites, etc…). (PIC)

The benefits of decommissioning the Glen Canyon Dam are harder to evaluate than the costs. The main reason is that what we are dealing with for benefits are all events in the future and there is an element of uncertainty. The proponents of decommissioning the dam hope that by draining Lake Powell we will be able to restore the ecosystem that was in the canyon before the dam. Another benefit that they hope for is new opportunities for recreation. The final benefit of decommissioning the dam is it would be an enormous laboratory that could be used for large amounts of scientific research.

The benefit of restoring the ecosystem that was there before the dam is very hard to measure. For those people who really care about the environment restoring Glen Canyon, the natural river, and its ecosystem has very high non-use values. The option, bequest, and existent value of seeing Glen Canyon restored could be determined by using a contingent valuation method. This would be a very difficult study because of the difficulty of avoiding biases in the study. If you interviewed a Sierra Club member and a house boat owner each might answer in such a way that would attempt to influence the survey, this would be an example of strategic bias. Another type of bias that might occur would be a vehicle bias. This bias results from the mode of payment when respondents are asked willingness to pay type of questions, because the huge cost of decommissioning the dam people might not want to pay for the project with increased taxes.

If the ecosystem can be restored the aquatic endangered species in the Colorado River may also be restored. The Humpback chub, the Colorado Squawfish, Razorback sucker, and the Boneytail chub are all native fish that are on the endangered species list. The value of saving endangered species can not be measured. The reason that it is so difficult is because it is an existence value. In the non-use study found in the Environmental Impact Statement participants indicated that they care most about the impacts associated to vegetation and associated wildlife such as the Native Fish. These types of studies would be essential in giving a value to endangered species.

Another benefit that would occur if the river was able to transport sediment is the covering and preservation of Native American cultural resources. The changing flow and distribution of sediment keeps erosion at a minimum and continually covers up these Native American cultural sites so they can be naturally preserved. This is another benefit that is very difficult to measure. This is another non-use value and could be considered a bequest value. A bequest value attempts to quantify how important it is that the resource be their for future generations. To the Native people and to American history sites have a very important intrinsic value. (EIS)

If the dam is decommissioned and Glen Canyon restored there will be an increase in whitewater recreation. For the analysis of this benefit we will assume that there will be less users than the Grand Canyon just to be safe on our estimation and we will use the whitewater use values from the Corp of Engineers study. If we assume that there are 100,000 use days on the river and that the use value is $184 (Saving the Tuolumne. Kincaid, Linda) then the use value is 18,400,000.

There is also a possibility that the Canyon could become the Mecca of environmental tourism. People from all across the world might come to see what happens after the decommissioning of a dam. Travel cost valuation could be a useful tool in assessing value to this type of destination. The study would have to be a survey that asked, "would you go to Glen Canyon during its restoration to see what happens after decommissioning of a dam"?

If the dam were decommissioned the effects on the environment would be enormous. This would be the first time a major dam has been decommissioned and the impacts on the environment would merit a large amount of study. The studies that would be completed would also have a non-use value. This type of study could have major impacts on the future of resource management. This entire canyon could be used for environmental studies.

A true cost benefit analysis would be a very valuable asset in accessing the issue of decommissioning of the dam. As you can see above that there are many difficulties in completing a study of this nature. Solving the problem of non-use values and non-market values is a very difficult exercise. The uncertainty of what will happen if the dam is decommissioned adds another variable to this analysis. The inability to correctly access the costs and benefits of this project is the major disagreeing point in the debate of this issue. The end result is more studies are needed before an academically sound cost benefit analysis could be completed.