State of New Mexico Before the Water Quality Control Commission TECHNICAL TESTIMONY BY DR. JOHN TALBERTH IN SUPPORT OF WILDEARTH GUARDIANS

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1 State of New Mexico Before the Water Quality Control Commission In the Matter of: WQCC 10-01(R) AMENDED PETITION TO NOMINATE SURFACE WATERS IN FOREST SERVICE WILDERNESS AS OUTSTANDING NATIONAL RESOURCE WATERS, In the Matter of: PETITION TO AMEND ANTIDEGRADATION POLICY, A(3) NMAC, In the Matter of: REQUEST TO AMEND ANTIDEGRADATION POLICY IMPLEMENTATION PROCEDURES and TO ISSUE GUIDANCE FOR NONPOINT SOURCE DISCHARGES IN AREAS DESIGNATED AS ONRWS, TECHNICAL TESTIMONY BY DR. JOHN TALBERTH IN SUPPORT OF WILDEARTH GUARDIANS August 13 th, 2010

2 I. INTRODUCTION My name is John Talberth. I currently serve as President and Senior Economist for the Center for Sustainable Economy (CSE) in Santa Fe, New Mexico. CSE is a nonprofit consulting firm that provides expertise in economic analysis, conservation planning, and environmental law for non-profit, business, and governmental clients. Concurrently, I also serve as Senior Economist for the People and Ecosystems Program at World Resources Institute in Washington D.C. I hold a Ph.D. in Economics from the University of New Mexico and a Masters of Urban and Regional Planning from the University of Oregon. My areas of expertise include environmental economics, sustainability metrics, international economics, land use planning, and regulatory compliance. My professional experience includes analyzing the economic costs and benefits of federal policies, programs and projects that affect environmental quality. I ve attached, hereto as Exhibit A, a copy of my current vita. I have significant research experience in matters related to management of federal forestlands in New Mexico. For example, my dissertation addressed the economic benefits of reducing wildfire risk in areas in and adjacent to urban wildland interface zones in the East Mountains of the Cibola National Forest. The dissertation was published in the peer-reviewed journal Contemporary Economic Policy in In 2006, in collaboration with Forest Guardians, the organizational predecessor of WildEarth Guardians, I led a team of researchers investigating the economic benefits of inventoried roadless areas in New Mexico. In 2009, for Restoration Technologies Group, I led a team Talberth Testimony 2

3 of researchers investigating the potential economic benefits of forest restoration activities in the Signal Peak analysis area of the Gila National Forest. I also have extensive personal experience with New Mexico s wilderness areas, roadless lands, and other wildlands. As part of my work with Forest Guardians, Forest Conservation Council, and National Forest Protection Alliance in the 1990s I traveled extensively throughout the state gathering data on resource conditions and trends in virtually every corner of the State s national forests, parks, wilderness areas and wildlife refuges. My resume is included as Exhibit 1. II. ECONOMIC BENEFITS OF WILDERNESS AND ROADLESS WATERSHEDS IN NEW MEXICO. As relatively undisturbed ecosystems, wilderness and roadless lands in New Mexico generate a host of economic benefits to nearby communities and residents throughout the State. These benefits are both market and non-market in nature, and include both use and non-use values. Examples of market benefits include the economic benefits associated with extractive uses including minerals and cattle ranching, which produce commodities that are sold in formal markets. Examples of non-market benefits include the value of wilderness and roadless lands for regional water supplies, hunting and fishing, non-consumptive recreation, and endangered fish and wildlife species. Examples of values associated with active uses of these lands are the benefits derived from recreation, hunting, and fishing. Examples of non-use values are the increases in property values associated with homes and properties nearby or the passive use values people hold for conserving intact ecosystems. As noted in the State s petition, the overwhelming majority of New Mexico residents find it moderately to extremely Talberth Testimony 3

4 important to conserve New Mexico s biological diversity, and to protect and improve lands and waters used by fish and wildlife. Passive use values reflect their willingness to pay for such conservation, which can be measured by peer-reviewed methods such as contingent valuation. As previously noted, in 2006, I led a team of researchers investigating the economic and community benefits of inventoried roadless areas in New Mexico. We considered both market and non-market benefits and both use and non-use values. Our results provide evidence that New Mexico s inventoried roadless areas generate tens of millions of dollars each year in both economic and community benefits. Annual economic benefits range up to $42 million for maintenance of water quality, $24 million for carbon sequestration, $26 million for outdoor recreation, $14 million for passive uses, and $1.4 million in enhanced property values. Annual community effects range up to 938 jobs and $23 million in personal income. Since wilderness lands share the intact natural characteristics of inventoried roadless lands and are in general immediately adjacent, it is reasonable to assume that these values are just as significant if not more so in watersheds that contain river and stream segments being considered for Outstanding National Resource Waters (ONRW) designation. As such, the economic benefits reported in our 2006 study can be extrapolated to wilderness lands. For example, our 2006 study found that on average, inventoried roadless areas across the State yield.33 acre feet of clean water per acre each year. This value was based on Forest Service research and real time flow data maintained by the U.S. Geological Service (USGS). I am unaware of any research suggesting that wilderness lands do not have similar yields. Multiplying the.33 annual acre-feet per acre flow Talberth Testimony 4

5 estimate by 1.65 million acres of designated wilderness in New Mexico yields 544,500 acre-feet as an estimate of annual surface water flow from New Mexico s wilderness lands. Following the methods presented in our 2006 report, this flow can be expected to generate at least $51.26 per acre foot in economic benefits associated with consumptive water uses downstream (withdrawals for irrigation, domestic use, etc.) and $21.78 per acre-foot for instream flow (primarily recreation) in 2010 dollars. Multiplying these figures by the estimate of water yield suggests that the value of water flowing from wilderness including watersheds nominated for ONRW status in New Mexico for both offstream and instream uses is at least $39.77 million per year. The benefits associated with non-motorized recreation in inventoried roadless areas can also be extended to wilderness areas. In our 2006 study we presented an estimate from a variety of USDA Forest Service publications from the National Visitor Use Monitoring Program of current wilderness area recreation use in New Mexico of 714,500 recreation visitor days (RVDs) annually. Although the Forest Service no longer uses RVDs as a unit of measure, the way in which economic contributions from wilderness recreation are counted remains the same. The estimated RVDs of 714,500 can be multiplied by a per RVD value to calculate the annual consumer surplus (benefits minus costs of traveling, etc.) to non-motorized outdoor recreationists from wilderness areas in New Mexico (714,500 RVD *$48.69 per RVD=$34,789,005). The RVD value of $48.69 is a benefit transfer estimate taken from a 2005 Forest Service review of more than 30 wilderness area studies for the intermountain census region of the U.S., and updated into current dollars. Thus, the predicted annual consumer surplus value is approximately $34.79 million for non-motorized recreation in New Mexico s wilderness Talberth Testimony 5

6 areas including watersheds nominated for ONRW status. In addition to consumer surplus benefits, this recreation use generates jobs and incomes in communities that receive recreation related expenditures, such as small rural communities nearby where wilderness recreationists purchase equipment, food, fuel, maps, and other supplies. These are known as community benefits and were reported in our 2006 study on a per acre, county by county, and statewide basis. The per acre figures reported in that study were $13.84 for personal income and for jobs. Updating the personal income figure to 2010 and assuming the same job multiplier yields $29.14 million in personal income and 937 jobs each year in New Mexico s wilderness areas including watersheds nominated for ONRW status. Passive use values are another category of economic benefit that is likely to be just as great if not more so in New Mexico s wilderness watersheds. Passive use values reflect people s willingness to pay to protect environmental quality even if they do not actively use the resources in question. Passive use values flow into the State s economy in a number of ways, for example, by people s willingness to accept lower wages in exchange for living in a State with an abundance of protected natural landscapes the so called second paycheck effect. In our 2006 analysis, we estimated that New Mexico s inventoried roadless lands provide at least $7.53 to $8.17 per acre per year in passive use benefits. If we update these figures to 2010 dollars and apply them to 1.65 million acres of designated wilderness it suggests that New Mexico s wilderness areas, including watersheds nominated for ONRW status, generate $13.55 to $14.69 million in passive use benefits each year. An increase in nearby property values is another benefit of inventoried roadless Talberth Testimony 6

7 areas that can also be expected to be generated by wilderness lands. Without more detailed geographic information systems research, however, the results of our 2006 study cannot be extended. However, since that time, a recent study by University of New Mexico researchers suggests that wilderness areas do generate economic benefits to homes located in census tracts near New Mexico s wilderness areas in the form of a 1.2 to 1.6% increase in median home values relative to census tracts that are not located near wilderness for every one unit increase in the amount of wilderness land. Thus, in their present state, New Mexico s wilderness areas, including watersheds nominated for ONRW status, generate numerous market, non-market, use and non-use benefits to New Mexico. Conservative estimates of just three of these benefits (water quality, non-motorized recreation, and passive use) total $88.11 million each year assuming the general methods and sources of information included in our 2006 analysis of inventoried roadless areas can be extended to wilderness areas. I believe that the extension of my work on roadless areas to wilderness areas is entirely reasonable. In addition, community benefits associated with wilderness recreation generate at least $29.14 in personal income and 937 jobs each year. Including other benefits such increases in local property values would drive these estimates much higher. III. POTENTIAL BENEFITS OF ONRW DESIGNATION. In my opinion, designation of waters within New Mexico s wilderness areas as Outstanding National Resource Waters could generate economic benefits for the State in two key ways. First, the annual stream of market, non-market, use and non-use benefits described above would have a higher likelihood of being maintained since the ONRW designation would help protect the quality of surface waters and watershed conditions at Talberth Testimony 7

8 levels as least as great as they are now. While not all of the economic benefits discussed above are attributable to surface waters within wilderness areas, clearly, a substantial portion are (i.e. water quality benefits) and so if ONRW status helped maintain these benefits over time relative to their magnitude without ONRW status this is a demonstrable benefit clearly related to the ONRW designation. Second, avoiding degradation of surface waters could save costs for downstream users. These costs are known in the economics literature as negative externalities, because they are externalized onto entities who have no control over the management decisions that affect the quality of the water and aquatic ecosystems they depend on. In their 1999 seminal work, Ernest Niemi and Dr. Ed Whitelaw identified the following downstream entities who may incur externalized costs from watershed degradation in upland forested watersheds: (1) recreational and commercial fishers, who face a decrease in the number of fish caught; (2) taxpayers, who foot the bill for removing sediment from streams, rivers, and reservoirs and restoring fish and wildlife habitat; (3) property owners who incur losses associated with an increase in the incidence and severity of floods; (4) domestic and commercial water providers, who face increased costs for maintaining water quality, and (5) the tourism industry, who suffers from the loss of visitors to areas degraded by unsustainable land management practices. The benefit of ONRW designation is a potential reduction in the likelihood of these negative externalities being passed on to downstream users in New Mexico. For example, in New Mexico, state and federal agencies and non-profit organizations spend substantial funds each year to restore rivers, streams, and wetlands damaged by unsustainable land uses. These expenditures are made in the context of Talberth Testimony 8

9 programs such as New Mexico Game and Fish Department s habitat improvement program managed under the authority of the Federal Sikes Act or the State s River Ecosystem Restoration Initiative. ONRW designation could reduce the number of acres needing treatment under these programs relative to what would exist without designation. Similarly, throughout New Mexico, reservoir managers expend funds each year for dredging and sediment removal. Sedimentation of reservoirs reduces reservoir life, power generation capacity, flood control efficacy and increases sediment removal and dredging costs. Conversely, reducing sedimentation to reservoirs generates benefits in the form of increased reservoir life, increased power generation capacity, increased flood control efficacy and decreased sediment removal and dredging costs. A recent study found that for New Mexico reservoirs, these benefits range as high as $2.29 per ton of sediment reduced in 2010 dollars. If ONRW designation leads to a reduction in sedimentation rates to New Mexico reservoirs or prevents an increase in future sedimentation it is likely to avoid costs and (conversely) generate benefits of this magnitude. IV. HYPOTHETICAL COSTS TO CATTLE PRODUCERS ARE NOT SUBSTANTIATED. Clearly, ONRW designation could generate benefits as described above as well as costs to those who derive income from land uses that could be restricted. In their comments filed in this matter, the New Mexico Department of Agriculture (NMDA) suggested that potential negative economic impacts of the proposed designation is the value of livestock production from the allotments affected. NMDA goes on to compute the value of livestock production for affected allotments by multiplying the assumed number of cows on these allotments (35,282) by the value of production per cow per year ($468.51) to arrive at a figure of $16,529,853 per year. It is unclear whether NMDA is Talberth Testimony 9

10 suggesting that this entire amount should be considered a negative economic impact or merely a fraction of this figure. If the former, NMDA is clearly overstating the potential costs of ONRW designation. Regardless, causation does not flow from the plain language of the State s petition. In order to demonstrate a cost associated with a protective land designation, a chain of causation must exist linking the designation with changes in resource use or changes in the value of those resources. In their petition, the State makes it clear that [p]etitioners do not propose to alter the protection given to existing uses under the current regulations, but propose to maintain this protection. This includes livestock grazing at currently permitted levels. Thus, $16,529,853 in damages implied by the NMDA letter is not substantiated by the plain language of the State s petition. To substantiate costs to ranches affected by ONRW designation, one would have to relate changes to existing operations as a result of ONRW designation to a change in the number of cattle and from there to a reduction in the value of production. I have not reviewed the calculations behind the NMDA figure of $ in the value of production per cow per year, but if this figure is accurate it could serve as a reasonable basis for actual costs to ranchers associated with changes necessitated by ONRW designation. V. CONCLUSIONS In their present state, New Mexico s wilderness areas, including watersheds nominated for ONRW status, generate numerous market, non-market, use and non-use benefits to New Mexico. In this statement I presented conservative estimates of just three of these benefits (water quality, non-motorized recreation, and passive use) which total $88.11 million each year. In addition, community benefits associated with wilderness Talberth Testimony 10

11 recreation generate at least $29.14 in personal income and 937 jobs each year. A substantial portion of these benefits are related to the provision of high quality water and intact riparian zones. ONRW designation could benefit the State economically in two key ways. First, the future stream of market and non-market benefits associated with wilderness and roadless watersheds is more likely to be maintained at or above existing levels with ONRW designation simply because it is the goal of ONRW designation to prevent any degradation of water quality or watershed condition. Second, ONRW designation would help reduce future costs associated with loss of water quality such as an increase in stream restoration or reservoir maintenance costs. Since the range of benefits associated with protection of waters identified in the State s petition is similar to the benefits associated with protection of other outstanding waters, it makes sense that the economic benefits cited above would be proportionally greater if ONRW designation were extended to all other waters that qualify. ONRW designation generates benefits, as well as costs. Costs to livestock production are the most conspicuous, however the evidence I have reviewed does not suggest such costs would be significant because ONRW designation would not significantly change current uses and because the economic benefits I have calculated are substantially greater than the value of ONRW nominated lands for livestock production. As such, ONRW designation is likely to yield benefits to the state well in excess of costs and thereby represent sound public policy. Talberth Testimony 11

12 LIST OF EXHIBITS EXHIBIT 1 EXHIBIT 2 Resume of John Talberth Talberth, John, Robert P. Berrens, and Michael McKee Averting and Insurance Decisions in the Wildland Urban Interface: Implications of Survey and Experimental Data For Wildfire Risk Reduction Policy. Contemporary Economic Policy 24(2): EXHIBIT 3 Berrens, Robert, John Talberth, Jennifer Thacher and Michael Hand Economic and Community Benefits of New Mexico s Inventoried Roadless Areas. Santa Fe, New Mexico: Center for Sustainable Economy. EXHIBIT 4 Talberth, John Economic Benefits of Forest Restoration in the Signal Peak Assessment Area: Gila National Forest. Phase 1: Framework for Analysis. Santa Fe, New Mexico: Center for Sustainable Economy and Restoration Technologies Group. EXHIBIT 5 Germán M. Izón, Michael S. Hand, Matías Fontenla, and Robert P. Berrens The Economic Value of Protecting Inventoried Roadless Areas: A Spatial Hedonic Price Study in New Mexico. Albuquerque, New Mexico: University of New Mexico, Department of Economics (in review). EXHIBIT 6 EXHIBIT 7 EXHIBIT 8 EXHIBIT 9 Ernie Niemi and Ed Whitelaw Assessing Economic Tradeoffs in Forest Management. Gen. Tech Rpt PNW-GTR-403. Portland, Oregon: USDA Forest Service Pacific Northwest Research Station. September 26 th, 2008 letter from I. Miley Gonzalez, Ph.D.Director/Secretary, New Mexico Department of Agriculture to Ron Curry, Director, New Mexico Environment Department regarding ONRW designation, Page 2. Hansen, LeRoy and Daniel Hellerstein Increased Reservoir Benefits: The Contribution of Soil Conservation Programs. Washington, D.C.: USDA Economic Research Service. Figures from Wilderness Net, viewed at: Wilderness acres reflect acreage as of 3/31/10. John Talberth Economist For WildEarth Guardians Anticipated duration of direct testimony: 40 minutes Talberth Testimony 12