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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
Recommended