NOPP Regional Ocean Observing Systems Benefits Project:

Center for Economic Forecasting and Analysis (CEFA) Economic Impact Analysis of the Gulf of

Mexico Region

By

Dr. Tim Lynch, Director

Dr. Julie Harrington, Asst. Director

Presented to the NOPP Co-PI’s Meeting

National Oceanic Atmospheric Administration (NOAA)

April 28, 2003

Washington, D.C.

CEFA Background

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

Background of Primary Investigator(s)

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

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

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

Sample of CEFA Projects

Research and economic analysis of high tech (super conducting) materials and advanced power systems with FSU Center for Advanced Power Systems (CAPS) and the Office of Naval Research (ONR), and the future of the electricity industry through participation on the Governor’s Florida Vision 2020 Commission

Detailed study comparing Florida and US cities with the New Economy High Tech Index

Economic analysis of University Research Centers and Institutes

Study on the economic impact of Florida’s outdoor advertising industry

Non-profit work including annual economic analysis of the North Florida Birding Festival

Tax Impact Analysis for the Florida Legislature

Summary of Proposed Research

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

• Our primary modeling software to conduct economic impact analysis will be IMPLAN, using 2000 data.

• Results will be in terms of direct, indirect, induced and total impacts for GRP, employment, and income.

Maritime Transportation: Shipping Coststypical

charter ratetypical operating

costs

($/day) ($/day, 2002)

handysize 27,000 dwt 6,500 3,230

dry bulk handymax 43,000 dwt 8,000 3,645Panamax 59,000 dwt 9,500 3,701

Cape 150,000 dwt 14,000 4,280

product 45,000 dwt 12,000 3,847

liquid bulk Aframax 90,000 dwt 13,000 5,538Suezmax 140,000 dwt 16,500 5,538

VLCC 280,000 dwt 22,000 5,773

general cargo container 400 TEU 5,000 3,144container 1,000 TEU 9,000 3,470

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

cargo type ship type representative size

Maritime Transportation: Estimated Operating Costs, Assuming Average Total

Transit Time of Two Daystransits/year operating cost

estimateannual

operating cost

in 2001 ($/day) ($/year)foreign dry cargo and passenger

3,676 3,230 23,746,960

foreign flag tanker 1,422 5,538 15,750,072domestic dry cargo and passenger

60,856 3,230 393,129,760

domestic flag tanker 346 3,847 2,662,124Total 435,288,916

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

Commercial Fishing: Estimated Average Value Added Per Fishing Day

Source: NMFS Commercial Fishing Database, 2001

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

Estimated Average Value State/Region Pounds Added Per Fishing DayFinfish West Florida 3,540,540 59,009 Alabama 126,048 2,101 Mississippi 1,844,565 30,743 Louisiana 617,909 10,298 Texas 125,499 2,092Gulf of Mexico 6,254,561 104,243Shellfish West Florida 36,188,188 301,568 Alabama 19,327,950 161,066 Mississippi 19,003,512 158,363 Louisiana 190,160,062 1,584,667 Texas 92,261,270 768,844Gulf of Mexico 356,940,982 2,974,508Gulf of Mexico Total 363,195,543 3,078,751

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

the Gulf of Mexico RegionEstimated Total Value of 1%

Angler Trips* Willingness to Pay** Increase in2001 Coastal Non-Coastal Non-Residents Total ($$ Million) Trips ($)

West Florida 16,388,611 1,877,405 0 2,208,390 4,085,796 $2,168 $21,682,132Alabama 1,635,798 211,354 97,930 193,766 503,049 $216 $2,164,161Mississippi 1,250,045 196,865 44,380 69,944 311,189 $165 $1,653,810Louisiana 3,615,244 588,132 65,351 122,232 775,715 $478 $4,782,968Texas*** 497,128 695,283 $66 $657,700Gulf of Mexico 23,386,826 2,873,756 207,661 2,594,332 6,371,032 $3,094 $30,940,771

* Includes all modes (charter, private and shore) and all areas (state, federal, etc. waters)Source: NMFS data 2001 http://www.st.nmfs.gov/st1/recreational/queries/participation/par_time_series.html **Detailed willingness to pay measures have not been summarized with a standardized methodology for the Gulf of Mexico states by NMFS, so other studies were used. For Florida: Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Analysis 2002. Used McConnell and Strandt study using RUM (random utility method for both residents and non-residents) Note: adjusted from 1994 dollars to 2003 dollars.*** Data was obtained from Mark Fisher, Dir. Of Research, Coastal Fisheries Division, Texas Parks and Wildlife

Number of Marine Recreational Anglers

Examples of Use Value Per Unit of Time for Recreational/Other Natural Resources in

Florida (in 1998 Dollars)

Author/Date WTP/Day Method Site/Kind User(Dollars) R=Res, V=visitor

Leeworthy, 1997 $69 TCM Florida Keys R/VMilon&Apogee,1996 $1.76 TCM Indian River/Redfish RMcConnell&Strand,1994 $107 RUM All Florida/All Species R/VGreen,1984 $70 CVM All Florida/All Species VBell &Leeworthy, 1981 $69 CVM All Florida/All Species VBell &Leeworthy, 1981 $52 CVM All Florida/All Species RGeen et al., 1992 $810 TCM Gulf of Mexico/Reef Fish R/V

Search and Rescue: Mission and Lives Saved

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

• There were 609 lives saved during 2001. This represents about 13.7% of the Coast Guard’s total SAR activity.

• There were 107 lives lost. Of those lost, 73 were lost prior to Coast Guard notification, and 34 were lost after Coast Guard notification.

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

Sources: U.S. Coast Guard, 2001

Pollution Management and Prevention: Gulf of Mexico Number of Spills and

Spill Volume (1973-2000)Spill Volume Spill Volume

Year Number of Spills (in gallons) (in barrels)1973 38 8,553 359,2261974 218 157,926 6,632,8921975 727 1,418,791 59,589,2221976 936 850,660 35,727,7201977 731 933,106 39,190,4521978 656 402,392 16,900,4641979 867 386,281 16,223,8021980 473 437,069 18,356,8981981 857 99,120 4,163,0401982 1061 121,889 5,119,3381983 1290 295,736 12,420,9121984 1583 2,897,179 121,681,5181985 951 116,969 4,912,6981986 431 97,221 4,083,2821987 218 91,524 3,844,0081988 372 1,076,986 45,233,4121989 1063 108,519 4,557,7981990 1834 4,115,264 172,841,0881991 1977 100,702 4,229,4841992 1974 363,279 15,257,7181993 1763 53,265 2,237,1301994 1350 205,151 8,616,3421995 1485 253,040 10,627,6801996 2403 45,145 1,896,0901997 2341 105,462 4,429,4041998 2190 181,372 7,617,6241999 1756 45,786 1,923,0122000 1838 112,069 4,706,898

Source: U.S. Coast Guard.

Pollution Management and Prevention: Gulf of Mexico Number of Spills and

Spill Volume (1973-2000)

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

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

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

Data Problems Encountered To Date

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

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

Conclusions to Date

Application Nature of Benefit

Annual Potential Benefits

($ million)

Search and Rescue Lives Saved* (from 94.95% to 95.95%) 24

Pollution Mitigation Oil Spills** ?

Commercial

Fisheries

Improved Management***

3.1

Recreational Fisheries Additional recreational fishing days****

31

Maritime Transportation

Lower vessel operating costs*****

4.4

Total 62.5+

* based on improved SAR effectiveness from 95%-96% success.** based on 10 year average annual oil spill costs.*** based on 1 additional fishing day per year for finfish and shellfish.**** based on 1% increase in recreational fishing trips.*****based on 1% savings in annual operating costs.