Analysis of Snake River Dam Removal Has Deficiencies, Economists Report

June 28, 2013


BOISE – An economic analysis that claims to demonstrate cost savings for taxpayers and electricity ratepayers from removing four federal dams on the lower Snake River has a number of deficiencies that diminish its credibility, according to a panel of independent economists that reviewed the report for the Council.
The Chairman of the Independent Economic Analysis Board (IEAB) reported today at a Council meeting in Boise on the panel's review of Revenue Stream (1mb PDF), a report prepared by the staff of several fishing associations and environmental groups.

The independent economists wrote, based on our review of the Corps of Engineers' cost estimate, the Revenue Stream report underestimates hydropower replacement costs by enough to invalidate their main result that the region could save money by removing the dams.”

The independent panel also found that, “the reported benefits from salmon recovery in the Snake River appear unreliable, leading them to the conclusion, “that the Revenue Stream report prepared by Save Our Wild Salmon has a number of deficiencies that raise serious questions about its acceptability as an alternative to the Corps of Engineers Lower Snake EIS.”

“With all the highly charged debate swirling around dam breaching we are fortunate to have the perspective of an independent panel of economists, said Dr. Tom Karier, Chair of the Council.

According to the IEAB, an environmental impact statement (EIS) by the U.S. Army Corps of Engineers in 2000, “has been widely accepted as a credible analysis of the impacts of removing the four lower Snake dams. More specifically, the IEAB reports that “the Corps EIS set a high standard as an open, public, and peer reviewed analysis that has not been matched by any other study of dam removal, and is certainly not matched by the Revenue Stream report.”

The IEAB suggests in its Revenue Stream review that it may be time to do a “follow-on study” of dam removal that would address “changes in the regional economy, regional transportation systems, power generation and transmission, the successes and failures of current recovery efforts, and the improved models of fish biology, dam passage and ocean survival now available.”

Toward this end the Council has recently supported funding for a comprehensive research project that will compare survival of Columbia River salmon to salmon in other rivers without hydropower dams. That research, to be conducted by Kintama Research Corporation, is expected to report its initial results in September, 2007.

Here are the IEAB's five conclusions regarding the Revenue Stream report:

  1. The Revenue Stream report so underestimates the cost of replacing the lost hydropower that the report's main conclusion that the region would save money is invalidated. The report estimates replacement power costs as $79-$170 million per year. The U.S. Army Corps of Engineers, which operates the dams, estimated the cost $267 million per year in its Lower Snake River Environmental Impact Statement in 2000. Recently, the Bonneville Power Administration estimated the cost at $400 million to $550 million per year. The IEAB reviewed the Corps' EIS in 2001 (see review) and found weaknesses in it, as well. In its review of the Revenue Stream report, the IEAB suggests:

    Perhaps it is time for the region to consider doing a follow-on study of the four lower Snake dams that would address some of the weaknesses of the Corps study, and that would update the study to reflect the many changes in the regional economy, regional transportation systems, power generation and transmission, the successes and failures of current recovery efforts, and the improved models of fish biology, dam passage and ocean survival now available.

  2. The Revenue Stream report is not a peer reviewed analysis, the work was not conducted by an open public process, and many of the sources that the report relied on came from reports that were also not products of an open, public, peer reviewed process. Consequently, the IEAB does not have a solid basis to either accept or reject many of the cost and benefit estimates in the Revenue Stream report.
  3. The Revenue Stream report does not discount future benefits and costs of dam removal. Discounting recognizes that people give greatest weight to immediate costs and benefits. Because some large costs of dam removal occur immediately, while other costs and benefits occur slowly over many years, lack of discounting could have a significant impact on the conclusions of the report.
  4. The Revenue Stream Report estimates the cost of maintaining the salmon program in the Columbia basin with and without the four lower Snake River dams, and then poses the difference between these two costs as a cost saving. The cost estimates reflect a diverse mix of federal agency budgets and estimated additional salmon recovery costs. It is not clear that the agency budgets reflect full or accurate cost estimates, or that they rely on a common definition of costs.
  5. The Revenue Stream report argues that dam removal will have substantial additional benefits due to the recovered fishery. The reported recreational fishery benefits rely heavily on a study by Don Reading (2004), which the IEAB reviewed in December 2005. We concluded that Reading had made a number of methodological errors which seriously biased his benefit estimates upward. The non-fishery recreational benefits are derived from a study by John Loomis (1999) which the IEAB reviewed during our overall review of the Corps' EIS in 2001. We had significant concerns about some of Loomis' results as well, and the numbers actually used in the final Corps EIS differed substantially from those presented in the original Loomis study. Hence, the Revenue Stream's reported benefits from salmon recovery in the Snake River appear unreliable.

Contacts:

Tom Karier, Chair, 509-623-4386
John Harrison, Information Officer, 503-222-5161