How Big are the Damages from Algal Blooms for Beaches and Fishing in Lake Erie?
By Brent Sohngen (sohngen.1@osu.edu)
A consulting company, Key-Log Economics has just released a report estimating the economic benefits from phosphorus reductions in Lake Erie (http://www.keylogeconomics.com/lakeerievalue.html). This report adds up estimates from a variety of studies and attempts to calculate a summary estimate. They calculate that eliminating harmful algal blooms would bring up to $437 million in annual benefits to beach users and anglers in Lake Erie.
This is a big number that should raise some eyebrows. The question is, is it realistic? Since many of the underlying studies used by Key-Log Economics for the Ohio analysis were actually done by my colleagues and myself in AED Economics at Ohio State, we seem well suited to ask this question. As explained below, based on my own research, their estimates are an over-estimate of the recreational benefits to beach users and anglers in Lake Erie of reducing P pollution by 40%. I calculate more modest benefits in the range of $5-$7 million per year.
That said, the real problem for Lake Erie beach users remains bacterial contamination, with annual damages of up to $38 million per year. The solution for bacterial contamination is different than the solution for P pollution, and may be a more pressing problem for much of the lakeshore.
Lake Erie Beaches
Let’s start with Lake Erie beaches. Key-Log Economics estimates that there are 865,018 beach visitors. They assume 15 trips per year for each visitor, an estimated based on our 2001 study (Murray et al., 2001). They assumed more visits per year per person for Presque Isle based on data from a study there. They conclude that there are 14.8 million Lake Erie beach trips per year in Ohio, Pennsylvania, New York, Michigan and Ontario. They then use a study that is in press by colleagues in AEDE, Wolf et al. (2019), to value the gain per trip with a 40% reduction in P pollution. They use a damage estimate of $0.07 per trip from this study to calculate that closing the western basin beaches would have an impact of about $1 million (14.8 million trips times $0.07).
Let’s look closer at this estimate. Are there 14.8 million trips that potentially could be lost due to beach closures? It’s hard to tell because there is not a lot of data at hand. We estimated around 122,000 single day trips per year to the State Park beaches in 1998 and an additional 50,000 or so multiple day trips (Murray et al., 2001). Palm-Forster et al. (2016) suggest around 86,000 single day visits per beach to all beaches. If there are 33 western basin beaches in Ohio and Michigan, this is 2.8 million visits.
This lower number for visitation is only the western basin, but it makes sense to use this number because those are the beaches that seem to be most affected by HABs. We’ve been surveying and counting visitors for two years now on Lake Erie beaches and will release our results this fall. This lower number of 2.8 million or so trips that could be affected by HABs is a lot closer to what we’ll find than 14.8 million.
Then there is the question of how to value the damages. The Key-Log Economics folks assumed the damage was $0.07 per trip. Our 2001 paper found that a single beach warning due to bacteria caused damages of $1.85/trip. Updating this to the present, the damage would be $2.64 per trip, so $2.64*2.8=$7.4 million for a single warning at a single beach in the western basin of Lake Erie.
This estimate assumes that when a warning happens at a given beach, individuals can shift to a beach that doesn’t have a warning. Key-Log Economics was after the damages from closing the beaches and not providing alternatives because all the alternatives were also closed. So the damages would be much higher because there are no substitutes, or at least there would be fewer.
The earlier study by Sohngen et al. (1999) found that the value of day trips to Maumee and Headlands State Park beaches was valued at $25.60 and $15.50 per trip respectively, updated to $22 to $36 per trip in 2018. Palm-Forster et al. (2016) use more conservative numbers based on trips in Michigan, and suggest potential losses of $18 – $24 per lost trip. Given these studies, if all 2.8 million lost trips, then the damages are obviously significantly higher, at $50-$65 million per year.
So, what to make of all this for beaches. There are 3 main conclusions. First, if one is trying to estimate the damages from a complete closure for the entire year of the western basin beaches due to HABs, the damages are $50-$65 million per year. This is the current value of beach visitation in the western basin for the entire year, which could get completely wiped out if no one visits beaches for an entire summer. This represents an extreme upper bound of the potential damages. There is no evidence that HABs have had, or will have, that much of an impact on visitation.
Importantly, other environmental factors, like the high-water levels Lake Erie is currently experiencing, could have important effects on beach value. We have seen reductions in visitor counts at most western basin beaches this year compared to last, largely due to high water levels that have affected the size and quality of the beach front in many places. Some beaches have been closed due to water levels and other factors (e.g., Nickel Plate beach was closed for a time due drownings). Given that we have counted and interviewed beach goers last year and this year, we will be able to document the effect of these closures, but it will not amount to damages worth the entire value of the beach (i.e., $50-$65 million).
Second, a 40% reduction in P emissions will presumably increase beach visits and beach value, but the size of this increase is hard to know at this time. Ohio Beach Guard (https://odh.ohio.gov/wps/portal/gov/odh/know-our-programs/bathing-beach-monitoring/BeachGuard/) provides publicly collected data on beach advisories, classifying them as bacterial or algal bloom. Over the last five years, beaches in the western basin in Ohio have experienced over 5.1 bacterial contamination warnings per beach per year, amounting to 18 days with warnings. In contrast, over the same five-year period, Ohio Beach Guard only records algal bloom warnings for 2017 and 2018. In 2017, warnings were posted at Maumee 4 times for 70 days. In 2018, warnings were posted at three different state park beaches 3 times for 28 days, none in the western basin. This year, so far, only Maumee Bay State Park has recorded a warning for algal blooms. On average, there are 0.07 HAB warnings per western basin beach per year, for 0.8 days per beach per year.
The main factor affecting Ohio beaches is bacteria, not algal blooms, and despite an average of nearly 5 closures per year for 18 days, beaches still seem to be providing $50-$65 million in value per year. If we assume the losses are $2.64 per visit per warning, then the current losses due to the two types of warnings are:
Bacteria: $2.64*5.1*2,800,000 = $37,700,000 per year (or $13.64 per visit)
Algal Blooms: $2.64*.07*2,800,000= $517,444 per year (or $0.18 per visit)
This suggests that there is large potential scope to improve beach value in Ohio by improving water quality, but much of the increased value will be derived from fixing the factors that cause bacterial contamination not so much HABs.
The third conclusion is that on the issue of beaches, Key-Log Economics seems to have gotten the aggregate estimate of damages from HABs, which they find to be very small, correct. They got there in a different way by assuming a far larger number of visits affected (14.8 million versus 2.8 million) and the damages would be smaller per person ($0.07 per visit versus $0.18 per visit), but currently, we do not have evidence that algal blooms are causing significant damages on Lake Erie beaches.
Note that these numbers focus nearly entirely on single day visitors, those coming from fairly close to visit the beaches. Multiple day visits are also important at State Parks. For instance, Edgewater State Park is the one of the most visited state parks for camping, and in normal water level years, it has plenty of beach. These trips are really valuable, but the extent to which they would be affected by beach warnings is not clear, especially if the recreation campers do involves multiple activities, like camping, general boating, fishing, beach visiting, and amusement parks. Our research at in AED Economics at Ohio State University will continue to look into this so stay tuned for further results.
Lake Erie Fishing
Next up we’ll examine the effects estimated by Key-Log Economics for fishing. They estimate that there are 3.6 – 8.1 million angling trips in Lake Erie in Canada and the US, based on US Fish and Wildlife data and data from the Province of Ontario. They then multiply the estimates of per trip benefits from a 40% reduction in P from Zhang and Sohngen (2018) to calculate total damages. They use the range of $31 to $52 per trip from that study. This provides a range of $117 to $437 million.
This is where things get interesting. Let’s look at the visitation numbers first. So, Key-Log Economics uses data from the US Fish and Wildlife Service, which suggests there are 458,000 anglers on Lake Erie and they take 8-17.6 trips per year. They use an earlier report (Sohngen et al., 2014) based on our 2014 survey to calculate total trips. This approach unfortunately leads to a vast overestimate of trips because of the way the sample was collected. First, we sampled anglers who purchased licenses in all three years 2011, 2012 and 2013. Second, we oversampled people living close to the lake. These two factors need to be considered when assessing the number of trips.
To assess this more carefully, I’m going to focus just on Ohio and calculate damages just for Ohio using the data used in Zhang and Sohngen (2018). This should capture the bulk of the damages from HABs since that’s where they mostly occur. It will miss some in Ontario and Michigan, but presumably not Pennsylvania and New York.
To get a handle on the number of trips per year by the typical angler to Lake Erie, we checked with the Ohio Department of Natural Resources, who did a creel study in Lake Erie in 2012. They estimated 700,000 angler days on Lake Erie from Ohio access points in 2013. This is significantly lower than the numbers in the Key-Log Economics study and the question is why. I looked back into our 2014 survey data and calculated total estimated trips to Lake Erie based on that sample and came up with 739,369 trips per year. This means that the with 781,654 residential licenses sold in 2013, the average Ohio angler took 0.94 trips per year to Lake Erie. We can derive a reasonable estimate of out-of-state trips based on the ODNR creel survey data for 2012, where they found 18.5% of intercepted anglers were form out of state. Thus with our data from 2013, and the ODNR creel survey, a reasonable estimate of total angling trips on Lake Erie in Ohio waters is 907,201. This is bigger than what ODNR calculated, but far less than Key-Log Economics calculated.
It’s useful to first calculate the potential total value of the fishery. In Zhang and Sohngen (2018) we used our estimate of daily recreational value, which was $39 per trip, and multiplied by 700,000 to get $27.3 million per year in recreational value. In retrospect, I would increase that by about 19% to add value for out-state-angling trips, so I would estimate it now as $35.4 million per year ($39*907201).
To get a handle on the effect of algal blooms, we used the estimates of the impact from Zhang and Sohngen (2018) which found that a 40% reduction in P pollution would lead to a $40-$60 per trip benefit for anglers. This estimate only applies to the trips that are actually affected by algal blooms, not all trips. The problem we faced in estimating aggregate benefits of a reduction in P pollution was to figure out how many trips would be affected.
We ended up assuming that 10% of the trips would be affected by HABs. This was admittedly a guess, but 86% of the Walleye fishing effort occurs before August and Algal blooms are worse after August 1, and Walleye are half the trips. Perch fishing concentrates in months affected most by algal blooms, but algal blooms don’t affect all the trips. More work needs to be done to figure out which trips are affected by algal blooms, but 10% doesn’t seem so far off.
Based on a range of per trip damage of $40-60 from our study, if 10% of the trips are affected, that’s 90,000 trips, so the benefits of reducing P pollution by 10% are about $40*90,000 = $3.6 million to $60*90,000 or $5.4 million per year. Given the size of the fishery, which is $35.4 million per year, this is an impact of 10-15%. This is not insubstantial, but it’s not even close to the $117-$437 million predicted by Key-Log Economics.
So, in conclusion our numbers for the size of the damage to the recreational angling fishery are far lower than Key-Log Economics has predicted for two reasons. First, we use a much lower number of trips, which we believe is substantially more consistent with actual trip taking behavior in the Lake. Second, we only apply the damages to the trips that are affected. Although we don’t know this number, we believe a good case can be made that only about 10% of fishing trips are affected by algal blooms in any given year.
References
Murray, C., B. Sohngen, and L. Pendleton. 2001. “Valuing Water Quality Advisories and Beach Amenities in the Great Lakes.” Water Resources Research. 37(10) 2583 – 2590.
Wolf, D, W Chen, S. Gopalakrishnan, T Haab and A Klaiber. 2019. The Impacts of Harmful Algal Blooms and E coli on Recreational Behavior in Lake Erie. Forthcoming in Land Economics.
Ohio Department of Natural Resources. 2013. Ohio’s Lake Erie fisheries 2012. Prepared by Lake Erie Fisheries Units, ODNR Division of Wildlife, Columbus, OH.
Ohio Department of Natural Resources, 2014. Ohio’s Lake Erie fisheries 2013. Prepared by Lake Erie Fisheries Units, ODNR Division of Wildlife, Columbus, OH.
Palm-Forster, L.H., Lupi, F. and Chen, M., 2016. Valuing Lake Erie beaches using value and function transfers. Agricultural and Resource Economics Review, 45(2), pp.270-292.
Sohngen, B., Lichtkoppler, F., and Bielen, M. 1999. “The Value of Lake Erie Beaches.” Ohio Sea Grant Extension Fact Sheet FS-078.
Sohngen, B., W. Zhang, J Bruskotter, B. Sheldon. 2015. Results from a 2014 survey of Lake Erie anglers: Final Report Submitted to the Lake Erie Protection Fund
Zhang, W and B Sohngen. 2018. Do US Anglers Care about Harmful Algal Blooms? A Discrete Choice Experiment of Lake Erie Recreational Anglers. American Journal of Agricultural Economics. 100(3): 868-888
