Decision Making Case Studies Incorporating Ecosystem Services: Land Development Examples. Mark Rockel

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1 Decision Making Case Studies Incorporating Ecosystem Services: Land Development Examples Mark Rockel 1

2 Private Interest vs. Public Interest Value Typically real estate appraisers estimate lower wetland values than do environmentalists, academicians, and certain government agencies. Who is right? Keating, The Valuation of Wetlands: An Appraisal Institute Handbook,

3 Private Interest vs. Public Interest Value The two parties are often solving different valuation problems Real estate appraisers typically appraise the market value of a specified private interest in a natural area Environmentalists typically consider the total economic value of a natural area, irrespective of interest While wetland acreage purchases and sales are relatively common, these prices will understate the social value of wetlands because private owners are unable to capture many of the benefits. Thus, market transactions for wetlands do not provide a good guide to [total economic] wetlands values 3

4 Private Interest vs. Public Interest Value Market value is the most probable value of a private property owner's interest in a property subject to certain restrictions such as well-informed or well-advised parties, a reasonable time for exposure in the open market, a fair sale without undue duress, cash or equivalent financing, etc. Property rights are also subject to restrictions, i.e., the fee simple estate is subject to the government powers of taxation, eminent domain, police power, and escheat 4

5 5 Private Interest vs. Public Interest Value continued In contrast, the only factor restricting total economic value is society s ability to recognize the benefits of a property and translate those benefits into an indication of value. The public interest value is derived by summing the willingness to pay for the parcel across the individual members of the public

6 Private Interest vs. Public Interest Value Private interest value + Public interest value = Total economic value 6

7 Land Valuation: Case 1 Table 1. Restoration and Enhancement Mitigation Factors and Credits Calculator - Wetlands Factors (Charleston District Wetlands and Open Water Storm Water Management Compensatory Mitigation) Area ASB Polishing Area 6 Area 1 Net Improvement Credit Schedule Hydrology Kind Location Maintenance M and C Plan Soils Vegetation Sum (total lift) Acreage Credits/site Total Wetland Credits Credits x Cost / Credit (min) $840,600 $2,500 $5,000 $7,500 Credits x Cost / Credit (max) $874,224 $2,600 $1,681,200 $2,521,800 1 Maximum credit allowance for enhancement and restoration. 2 Based on Mitigation Bank credit schedule 3: No more than 20% of the credits may be withdrawn prior to final determination of success. 3 Hydrology in the SMA and ASB is considered created (0.1 credit factor); Others are natural hydrology (0.3 credit factor) 4 Kind assumesin-kind credits will be offered. 5 Location assumes outside impacted watershed (actual credit factor may be greater). 6 Low maintenance was assigned to East Pond and Chip Fill (0.1 credit factor), and no maintenance to SMA, ASB, and Borrow Pit (0.3 credit factor). 7 Monitoring and Contingencies Plan for 5 year period. 8 Existing Suitable Soil (E.S.S.) exist on all restoration sites. 9 Nursery stock vegetation will be planted on all restoration sites. East Pond Chip Fill Borrow Pit 7

8 8 Land Valuation Case Study

9 Tennessee Case Study: Confidential Client Comparative land reuse designs Over 300 parcels Comparing designs as part of the EIS alternative comparison process Economic Conservation Balanced: economic and conservation Provide defendable basis for final site reuse design 9

10 10 Tennessee Case Study

11 % Difference From Alt A Tennessee Case Study: Confidential Client: Results Ecological, Recreational, and Real Estate Values Per Acre Per Alternative (32 parcels, using Alternative A as a baseline for comparison) Ecological Recreational Real Estate 100% 80% 60% 40% 20% 0% A B C D -2 0% -4 0% Baseline Mgmt Plan Economic Maximized Alternative (balanced) -6 0% -8 0% -1 00% AlternativeConservation 11

12 12 Case Study 10: Soil Remediation Camp Bonneville, WA 2,000+ acres, old growth forest Stands Lead and MEC Issues Engineering Evaluation/Cost Analysis (EE/CA) Needed an approach to compare the cost, benefit and risk associated with remedial alternatives

13 NESA Results: Remedial costs and risk profile changes for each remedial alternative evaluated. Net Ecological Service Loss (SAYs) Relative Risk (Increasing) Remedial Cost ($ millions) ALTERNATIVE No MNA Action Surface Spot Removal Sweep Surface Clearance Clearance to 2 Feet 2 ft Clearance to 4 Feet 4 ft 0-5,000-10,000-15,000-20,000 Is There a Break-Point? Where: Remediation action causes more harm than the risk driving the action proposed actions do not provide a sustainable solution. or High cost for marginal change in risk Net Human Use Value Loss ($ millions) 13

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15 Case Study: NESA Used to Compare Natural Attenuation and Sediment Dredging Estuarine system Lead contamination AO stipulated dredging Hot Spot Removal Conducted Evidence of limited risk Evidence of attenuation Used NEBA to compare remedial alternatives 15

16 % Services Natural Attenuation: No Action The red area represents marginal risks ( potential injury) associated with the noaction alternative 0% Baseline 25% 50% 75% 100% 30 Acres Affected - 50 Net dsays Marginal Risk Year 16

17 % Services Dredging Impacts 0% Baseline 25% 50% 75% 100% 30 Acres Affected - 40 Net dsays Year 17

18 % Services Natural Attenuation With Restoration (Balance Risks) 0% 25% 50% 75% 100% A Certain Gain Debit = - 50 dsays Credit = +166 dsays NET = +116 dsays An Uncertain Loss Year Baseline 18

19 Example NEBA Table Remedial Action Cost ($) Net Envir. Benefit Dredging 16 M $ -50 dsays +10 dsays Net -40 dsays Natural Attenuation 0.5 M $ -50 dsays Natural Attenuation With Restoration 1.0 M $ -50 dsays +166 dsays Net +116 dsays 19

20 Groundwater Case Study, NJ Groundwater Beneath 262 Acres of Forested Wetland Is Contaminated With Volatile Solvents No Human Health Risks (No Exposure) Metric: SAYs Indicator: GW Service to Provide Surface Water (Quantity and Quality) to Freshwater Wetlands A Framework For Measuring The Economic Benefits of Ground Water EPA Report 230- B

21 % Services Action 2: Pump and Treat Ground Water Debit Water Quality Effect Baseline Services 100 Pump and Treat 60 Forested Wetland 20 Physical Destruction Water Quantity Effect Net P&T Initiation Point 10 Yrs. 20 Yrs. 30 Yrs. 21

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23 Perspective Not everything that can be counted counts, and not everything that counts can be counted. Albert Einstein Courts have warned against making a fetish [of market value] since that may not be the best measure of value in some cases Ohio v. U.S. Department of the Interior 1989