A comparison of nourishment and retreat costs on Delaware's Ocean Beaches

Transcription

1 University of Delaware From the SelectedWorks of George R. Parsons January, 2003 A comparison of nourishment and retreat costs on Delaware's Ocean Beaches Jeffrey Wakefield George R Parsons Available at: 51/

2 .., J A Comparison of Nourishment and Retreat Costs on Delaware's Ocean Beaches By Jeffrey R. Wakefield ENTRX 10 Corporate Circle, Suite 100 Wilmington, DE George R. Parsons College of Marine Studies and Department of Economics University of Delaware, Newark, DE ABSTRACT Nourishment and retreat are competing policy options for managing Delaware's eroding ocean beaches. We compare the costs of these two options over the next 50 years and find that the cost of retreat exceeds the cost of nourishment by more than a factor of three. The analysis ignores envuonmental considerations and, as always, rests on a number of assumptions presented within. Although the methodology is transferable to other areas, the results are nol Additonal Keywords: Beach nourishment, benefit cost ratio, economics, and erosion NTRODUCTON t has been estimated that 70% of G.~ world's beaches and 90% of U.S. beaches are eroding (Bird 1985). One needs to look no further than the dramatic 1999 relocation of the Cape Hatteras lighthouse (National Parks Service 2000) to see evidence of the unrelenting and often costly march of the sea. The problem is particularly acute in the mid-atlantic region where erosion characterizes the majority of natural systems (Galgano 1998). There are at least four management responses to erosion: nourish, armor, retreat, and no action. Nourishment maintains beach width and position through direct placement of sand on the beach (Davison, Ulrich, and Nicholls 1993). Armor uses hard structures such as a sea wall or offshore breakwater to maintain both beach width and position. Retreat maintains width but not position by removing or relocating homes and businesses as the beach migrates inland. No action maintains neither beach width nor beach position on a developed coastline. As the coastline recedes, structures are enveloped by the ocean. Each response is costly. Which is least costly will vary from beach to beach. Common sense suggests that nourishment and armor are reasonable on densely developed beaches, nourishment and retreat on lightly developed beaches, and no action on undeveloped beaches. Ultimately, the least costly option is an empirical, site-specific question. The purpose of this paper is to present an analysis comparing the cost of nourishment to the cost of.r.etreat over the next 50 years along Delaware's ocean beaches. The analysis is based on Wakefield's (2001) dissertation at University of Delaware. The state presently has a policy of nourishment, yet it seems reasonable to consider retreat as an alternative. ndeed, a past governor of the state called for a serious look at retreat as a future policy Shore & Beach Vol.71, No.1, January 2003, pp option. Given the recreational value of Delaware's beaches, armoringand no action would appear to be extremelycostly and are not consideredin our analysis. THE COST OF NOURSHMENT AND RETREAT Nourishment The goals of most modem nourishment projects are to maintain beach position and width. This typically requires emplacement of sediment, sediment stabilization factors such as dune grass, and minimal rigid construction. The idea is not to hold sediment in place, but to increase sediment volume so that ongoing erosion has limited impact. A typical project removes sediment from a "borrow site" at sea and places it on the beach. The initial construction may include sediment stabilization factors such as beach grass, sand fence, and dune walkovers. Following initial construction, periodic renourishment is used to maintain the desired beach width and position. There are several costs associated with nourishment. Labor and capital are required to create and maintain a beach's width and position over time. These are productive inputs that are effectively removed from other potential uses. The foregone output from these other uses is the real economic cost (the opportunity cost) of a nourishment project. Second, there are environmental consequences. These consequences include any change in the flow of ecosystem services that are attributable to nourishment. These are real economic costs as well and may be negative (society experiences a net loss of environmental services) or positive (society experiences a net gain of environmental services). Retreat The goal of retreat is to maintain beach width while allowing the coast to migrate landward. To do this, residential and commercial structures as well as public infrastructure are removed as the beach migrates inland. Retreat relies on a rolling buffer zone. This zone would include all land within a predetermined distance of the shoreline. As the coastline migrates landward, the rolling buffer zone migrates landward. f, at any time, a structure infringes upon the rolling buffer zone, it is removed and the surrounding land is returned to a natural condition. This allows a beach area to be maintained while the beach position migrates. 23

3 Retreat also has associated costs. We classify retreat costs into five categories: capital loss, transition loss, land loss, proximity loss, and environmental impact. Capital loss exists if a structure is demolished earlier than it would be in the absence of retreat. The costs are the forgone housing and commercial service flows that these structures would have otherwise provided. Transition loss exists because labor and machinery are required to remove structures from the rolling buffer zone. Again, these are productive inputs removed from other possible uses. Land loss occurs because the area of dry land is reduced and land is a productive input as well. The actual cost will depends on society's ability to adjust land use patterns in response to erosion. The fourth cost, proximity loss, occurs if future construction is located further from the coast than it would have been if the beach were not migrating inland. A reduction in the proximity of future construction is also a real economic cost. Finally, as with nourishment, there is environmental impact. mplicit in our definition of economic costs is a baseline or counterfactual against which the options are compared. We use a stable beach as the counterfactual. As such, the baseline against which we estimate costs is a beach identical to the Delaware coast in all respects except that it experiences no net erosion or accretion. The cost estimates can therefore be interpreted as the cost of maintaining Delaware's current beach width with erosion versus without erosion. Also, note that there is no recreation loss under nourishment or retreat. n both cases, we assume that beaches are managed to maintain the same recreation uses realized under the counterfactual. COST ESTMATES Background Delaware's Atlantic coast is approximately 38.5 an long and consists of a high-energy berm and dune system. Approximately 50% of the coastline is natural open beach (parks) with no adjacent development. The balance is mostly residential and light commercial development. Route 1, a major traffic artery in Delaware, is located 200 to 700 m to the west of the shoreline. Nourishment We estimate the cost of nourishment in three steps (see Wakefield (2001) for details in estimation). First, the volume of sand needed for nourishment is predicted. This is based on past projects and historic survey data. Second, the unit cost of nourishment is predicted using the cost of past nourishment efforts in Delaware. We accept these unit costs as reasonable estimates of the real labor and capital costs. Third, the total cost of sand needed over the next 50 years is discounted back to present value using a real rate of 3%. We consider two different estimates of the volume of sand required: Corps (U.S. Army Corps of Engineers 1996, 1998, 2000) and University of Delaware's Ocean Engineering Laboratory (Garriga 1999). Both the Corps and University of Delaware (UD) employ coastal simulation models to predict the volume of sand required to stabilize the coast via beach nourishment and assume somewhat different erosion rates. The average recession rate is about 0.3 myear. The Corps rates vary from 0 to 1.22 m year over seven different zones used in the analysis. The UD rates vary from 0 to 0.98 rri/year. The final Corps estimates for volume requirements is 2.69 million cy of initial fill followed by re-nourishment on 3 to 4 year intervals totaling 15.5 million cy over the next 50 years. The UD estimates are lower. The initial requirement is 2.45 million cy and the re-nourishment is on 5 to 7 year intervals totaling million cy. We assume no decline in cost due to technological advance and no increase due to diminished availability of borrow sediment or accelerated sea-level rise. We use a constant real cost of sand of $5.21 per cy over the next 50 years. The discounted present value of costs is in the range of $48 to $60 million. The high estimate is based on the Corps' recession rates and volume requirements, and the low estimate is based on the UD rates. We have made no attempt at estimating the environmental impacts associated with nourishment. The issues usually cited (U.S. Army Corps of Engineers 2000,1998,1996) are effects on shellfish, finfish, and other marine wildlife due to increased turbidity, the effects, both positive and negative, on beach nesting or mating, and entrainment at borrow sites. There are Table 1. Fifty-Year Cost Estimate Nourishment and Retreat on the Atlantic Coast of Delaware M\of\' 11iL_..d of Year 2000 Dollars Using a 3%Real Discount Rate 50-Year '. 50-Year Estimate Estimate (Corps (UDErosion Erosion Total Policy Goal Method Cost CategOfJ Rates) Rates) Cost Nourishment Maintain Sediment Project Cost Beach Profile Emplacement Environmental and Position $48 $60 Stabilization Factors mpact NA1 NA1 Some Rigid Construction Retreat Maintain R$move Structures Capital Loss.$19 $34 Beach Profile nfringingon Transition Loss $17 $34 and Position RollingBufferZone Land Loss $120-$231 $190-$251 but allow ProximityLoss Migration Environmental NA1 NA1 mpact NA1 NA1 1Values listed as NAwere not analyzed and assumed to be zero for computational purposes. $48-$60 $156 -$319,." 24 Shore & Beach Vol. 71, No.1, January 2003, pp

4 other concerns as well, including pollution from sedimententrained toxins or heavy equipment used to pump sand (air, noise, and visual pollution), and changes in bathymetry that. could affect,positivelyor negatively,the dynamicsof the natural environment. Whether these effects are large enough to alter the final outcome of the analysis is an open issue. Retreat We have estimated capital loss, transition loss, and land loss assuming the same erosion rates used in the nourishment analysis. We make no attempt at estimating proximity loss or environmental impact. Over 95% of residential and commercial parcels located within 500 m of Delaware's Atlantic coast are developed. For this reason, proximity loss is likely to be a small fraction of the total. For more on the methodology used to estimate retreat loss see Parsons and Powell (2001) or Wakefield (2001). The first step in estimating retreat cost is to identify structures that will infringe upon the rolling buffer zone during the next 50 years. We constructed a data set on coastal housing and commercial structures where structures are the unit of observation. The data include detailed characteristic information for each unit including distance to the high tide line. Combining this with community specific erosion rates, we predicted structures that will be removed and their year of removal. Although structures may be lost in discrete jumps, the erosion rate is a reasonable approximation of the rate of loss over an extended period of time. Structures are removed in one of two ways in our analysis: demolition or relocation. f relocation is selected, society incurs relatively high transition losses. However, because services continue to flow from the structure, relocation results in little or no capital loss. Conversely,the transition loss associated with. demolition is relatively small but capital losses can be quite large. n our application we use the least costly option in each instance. Transition and capital losses are based on historic market data. Transition loss is based on recent cost estimates of relocating structures to inland sites. These'costs include removal, transport, and new site preparation. Capital loss uses recent housing sales. For example, consider a structure with a life expectancy of 50 years. Assume that that life expectancy declines to 25 years with retreat due to early removal. Let Vstablebe the present value of the structure if services flow for 50 years, and V be the present value of services from year 0 to year 25. The loss due to retreat is the present value of structural services from year 25 onward or V stable - V... Because the estimated structural value reflects services attributable to coastal proximity, and, in our formulation, proximity value is costlessly transferred to adjacent inland properties, "proximity values" are purged from all estimates. For example, suppose an oceanfront structure is worth $200,000 more than a similar structure located immediately landward. f the oceanfront structure is removed, the $200,000 oceanfront premium is not lost; it is transferred to the landward structure. Under these assumptions, the capital loss associated with any structure is Vstable -V - p, where p is coastal proximity value. Vstable' V ' and p are estimated using recent property transactions data and a hedonic price analysis (see Wakefield 2001 for details). Again, we consider two different estimates for retreat costs. One based on the Corps erosion rates and the other based on the UD rates. n our simulations, between 670 and 747 structures require removal. Of these, 14 to 22 percent are demolished. We estimate total capital losses to be between $19 and $34 million and transition losses to, be between $17 and $34 million. See Table 1. n all cases, values are purged of their proximity value and are discounted to present values in Year 2000 dollars. Wakefield (2001) breaks these and other cost estimates down by coastal community. Using zone specific erosion rates, shoreline lengths, and shoreline types Wakefield estimates the area of land eroded annually under the Corps and the UD scenarios. Keep in mind; erosion does not reduce oceanfront acreage. As long as the length of the coast remains constant, the area of oceanfront acreage remains constant. nstead, erosion reduces the area of inland acreage. The value of the lost inland acreage depends on the type of land lost, headland or barrier island, and a society's ability to alter land use patterns when erosion occurs (Yohe 1990). n our analysis between 125 (UD) and (Corps) acres of barrier island is lost and between 66.5 (Corps) and (UD) acres of headland is lost over 50 years. Erosion along barrier islands is always assumed to result in loss of acreage from the interior portion of the barrier island. The average observed sale price for a barrier island acre is $1.81 million. We investigate two hypotheses pertaining to headland erosion. The first assumes headland erosion results in the loss of land located well inland where the land has less value. The alternative hypothesis is that headland erosion reduces the area of land between Route 1 and the coast. The value for the more distant headland is assumed to be $0.0 per acre. The nearby headland is valued at $1.63 million per acre. Assuming zero value for the inland acres implies a complete, costless ability to adjust land use patterns and insures that the lower end of our retreat estimates is indeed a lower bound. f erosion reduces the area of low value inland acreage, the discounted present value of the land loss is estimated to be between $120 million and $190 million (Table 1). f erosion reduces the area of land located between Route 1 and the coast, land loss estimates are between $231 and $251 million. The 50-year social cost of retreating from Delaware's Atlantic coast then is estimated to be between $156 million and $319 million' in current dollars (Table 1). These estimates vary depending upon assumed erosion rates and land loss assumptions. We have made no attempt to estimate the environmental impacts associated with retreat. These impacts would include disturbance to beach nesting or mating during removal or demolition, introductionof toxinsduring removal or demolition, pollution from heavy equipment(air,noise, and visual pollution), and disposal or recyclingof demolishedmaterials. CONCLUSON For more than 3 decades, Delaware has been nourishing its coast. The 50-year cost of continuing this policy in Year 2000 dollars is estimated to be between $48 and $60 million. The 50- year cost of retreat in Year 2000 dollars is estimated to be between $156 and $319 million. Although our analysis would appear to support continuation of beach nourishment, several caveats are worth noting. The analysis ignores the environmental cost of both nourishment and retreat. t accounts only indirectly for the loss of public infrastructure due to retreat. t assumes no change in the technologies used to nourish and retreat from beaches; costless and complete transfer of proximity Shore & Beach Vol.71, No.1, January 2003, pp

5 value, no behavioral adjustments to mitigate retreat losses or e~acerbate stabilization costs, and no change in the rate of sealevel rise. To the extent that any of these assumptions are unreasonable, caution is warranted in using the results. t also worth noting that, while the study methodology is transferable, the results are not. f erosion rates, housing stock, structural proximity, or nourishment costs vary, different outcomes may be expected. ACKNOWLEDGEMENTS This study was funded by the National Oceanic and Atmospheric Administration's Sea Grant Program. We thank Courtney Garriga, Tony Pratt, Wendy Carey, and Tony Dalrymple for input and assistance. REFERENCES Bird, E.C.F Coastline Changes: A Global Review. Chichester, England: Wiley nterscience. Davison, A.T., Ulrich, c.p., and Nicholls, R Accreditation of Beach Nourishment Projects: An ssues Discussion. Shore and Beach 61(4),9-15. Galgano, F.A Geomorphic Analysis of United States East Coast Shoreline Behavior and the nfluence of Tidal nlets on Coastal Configuration, Ph.D Dissertation, Department of Geology, University of Maryland, College Park, MD. Garriga, C Personal communication, Newark DE. National Parks Service Parsons, G.R., and Powell, M Measuring the Cost of Beach Retreat. Coastal Management 29, U.S. Anny Corps of Engineers Delaware Coast from Cape Henlopen to Fenwick sland: Fenwick sland, Philadelphia, PA, nterim Feasibility Report. U.S. Anny Corps of Engineers Delaware Coast from Cape. Henlopen to Fenwick sland: Bethany Beach/South Bethany, Philadelphia, PA, nterim Feasibility Report. U.S. Anny Corps of Engineers Delaware Coast from Cape Henlopen to Fenwick sland: Rehoboth BeachlDewey Beach, Philadelphia, PA, nterim Feasibility Report. Wakefield, J.R An Efficient Response to Beach Erosion: A Cost Effectiveness Analysis Employing Hedonic Price Analysis, Ph.D. Dissertation, DE. Department of Economics, University of Delaware, Newark, Yohe, G The Cost of Not Holding Back the Sea: Toward a National Sample of Economic Vulnerability, Coastal Management 18, Shore &. Beach Vol. 71, No.1, January 2003, pp