Economics of Dam Removal

"Dam removal is not unambiguously good."  There are certainly situations where dams are providing benefits, such hydroelectric power or storage capacity for irrigation, especially when it is an updated facility and there are effective opportunities for fish passage.  When considering the tradeoffs, economics is one good method to evaluate the positive and negative effects to society of dam removal.

Frequently, dams in the Northwest have been removed because of economic considerations: when operators weighed the costs of maintaining old dams and renovating them to allow for fish passage against the benefits of continued operation, they  found that it was more cost effective to remove the dams.

Benefits of Dam Removal

Steelhead above the removed Condit Dam
on the White Salmon River.
Courtesy of the Oregonian.

There are many benefits associated with dam removal.  There are the environmental benefits of a restored salmon and steelhead fishery, especially when the dams removed open up the entire watershed to spawning fish, as is the case on the Elwha River.  While there is absolutely intrinsic and value-less value to restoring fisheries, there is also an economic benefit in terms of opportunities for fishing, recreation, and tourism and the benefits these industries bring to local communities.

In Idaho, a study found that the economic benefit of restoring the salmon and steelhead fishery with the removal of the four Lower Snake River dams could be as high as $544 million annually.  This estimate includes $196 million of direct expenditures, what anglers spend out of pocket during fishing trips, and $348 million of indirect expenditures (an estimate of the total economic impact of angler spending in a community).  Furthermore, river communities, which are often more rural and have less economic opportunities, would receive $330 million in economic benefit, while the rest of the state would gain $214 million annually.

Increased sediment from the Elwha River will be carried
by tides to replenish Ediz Hook.
Courtesy of washingtonlandscape.blogspot.com

In determining whether or not to remove the dams on the Elwha River, the Department of Interior looked a variety of economic benefits.  Market values were estimated for the benefits commercial harvesting of restored salmon runs, increased sediment downstream to help prevent erosion (Ediz Hook), and increased income to local businesses from an increase in tourism in the area due to the improved quality of the watershed and improved recreational opportunities, such as boating and fishing.  The table below quantifies the market-value of these benefits in millions over 100 years following dam removal:  

Type of Benefit	Benefit
Commercial Fishing (tribal and non-tribal)	36.7
Sportfishing Business	10.3
Ediz Hook	1.0
Recreation / Tourism	317.6
Total*	355.3

Courtesy of Elwha Watershed Information Resource.

Lower Elwha Klallam tribe's creation site,
recently uncovered by release of water
 behind the Elwha River dams.
Courtesy of the Peninsula Daily News.

In addition, they looked at non-market values, including restoring access to important cultural, historical, and religious sites of the Lower Elwha Klallam Tribe, preserving genetic diversity within the salmon population which allows them to better fight disease and adjust to changes in the environment, and the non-market value of sport and subsistence fishing.  Through a survey of people willing to pay for dam removal and restoring the fishery, a 1996 study indicated that the non-market value of removing the Elwha River dams was between $3 billion and $6 billion in 1994 dollars.

Dam removal has also been shown to have other economic benefits, such as improving water quality, removing dam safety risks and associated liability costs, saving taxpayer dollars in maintenance costs, improving public access to the river, creating "new" land that reservoirs previous covered for parks or private property, and increased recreation and tourism.

Costs of Dam Removal
On the other hand, there are significant, real costs associated with dam removal.  Many dams in the Northwest are used primarily to produce hydroelectric power, which is often an inexpensive and fairly clean source of energy.  In removing dams, we must replace the this lost power production, ideally through conservation, efficient energy use, and renewables.  Other costs include the cost of dam deconstruction, mitigating floods, and monitoring water quality. 
     

Elwha River flooding in a National Park campground.
Courtesy of Olympic National Park.

In the case of the Elwha River, the Department of Interior found a variety of costs.  In addition to the actual costs of deconstructing the dam ($96.5 million), the Department looked at costs associated with flood mitigation and water quality.  The project requires modifications to the existing flood control infrastructure to protect the downstream Lower Elwha Klallam reservation from the increased possibility of flooding when the dam was removed.  Additionally, the project requires modifications to existing water quality infrastructure (including sewage treatment facilities) and monitoring the quality of the groundwater.  The table below summarizes the cost in millions of removing both dams on the Elwha River:

Dam Removal Feature	Cost
Flood Protection and Cultural Resources Mitigation	17.0
Modify Water Quality, Water Supply, and Flood Mitigation	69.0
Direct Dam Removal Costs and Other	96.5
Total	182.5

Courtesy of Elwha Watershed Information Resource.

JC Boyle Dam (hydroelectric) on the Klamath River,
proposed for removal.
Courtesy of Klamath Riverkeeper.

In an assessment of the economic costs and benefits of removing four dams on the Klamath River, Ecotrust found three main categories of costs: dam removal, lost services (including finding an alternative source of power), and external costs (including changes in local economy, jobs, and the environment).  Negative changes in the environment include the possibility for loss of wildlife habitat in and on the shores of reservoirs and the loss of a lake view for property owners on the reservoirs.  Additionally, the dams currently support 19 seasonal and full-time jobs with an annual payroll of approximately $820,000.  The report estimates that all of these jobs would be lost if the dams are removed.  Finally, Pacificorp, the operator of the Klamath dams, pays 3.8% (~$1.1 million) of the property taxes in the county.  The report also details a large array of benefits, economic and non-market, from dam removal.

Before and after removal of the Elwha Dam.
Courtesy of the Seattle Times.

Ultimately, each dam is unique, and the costs and benefits of removal are dependent on the quality of the dam, the benefits of a restored fishery, and the potential economic gains to surrounding communities, among other considerations.  The situation in the Northwest, with the huge potential benefits from restored fisheries and costs of aging dams, has largely bent toward benefits outweighing costs, especially for aging, smaller (i.e. non-Columbia River) dams that produce less hydroelectricity.  Economic analysis can be an effective method to look at the tradeoffs in dam removal; however, there are limitations in that it cannot consider the many non-market values of dam removal, including access to cultural resources and the intrinsic value of watershed, fishery restoration, and recreation in the restored ecosystem.