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Natural Resource Damage Assessment: Methods and Cases

Natural Resource Damage Assessment: Methods and Cases

I. Introduction Chapter

I. Introduction Chapter 3 Groundwater Damage Assessment: Methods and Values Groundwater is an important natural resource which can be pumped through wells and used in homes, agriculture, and in industry. In rural areas it may be the only source of drinking water. Groundwater can also be a source for surface water discharges and wetlands, and can support ecosystems and recreational activities. Precipitation percolates through the subsurface, becoming part of the groundwater supply. Contamination of groundwater develops slowly. Some contaminants occur naturally in the rock below the surface and enter the groundwater. Other contaminants found in groundwater, such as pesticides, fertilizers, road salt, and oil, are the result of human activities. Furthermore, underground tanks, septic systems, and landfills pose a threat to the quality of groundwater. As groundwater flows through permeable rock and sand beneath the earth’s surface, some harmful substances may be naturally filtered and broken down by microbes. However, because of slow flow rates and dilution, it takes long periods of time for aquifers to recover naturally from harmful pollution (IEPA, 1985). A National Research Council study (NRC, 1994) assessing the feasibility of restoring groundwater quality at hazardous waste contamination sites found that it could be resource intensive and technically difficult. Natural resource damage assessment (NRDA) provides a mechanism to impose liabilities on potentially responsible parties (PRPs) after contamination has occurred and also create incentives for PRPs to take actions to protect groundwater quality. The purpose of NRDA is to compensate the public for the direct loss of use of the resource as well as for the interim lost use and services that the resource provided. This compensation takes the form of either monetary damages paid by the responsible parties or a commitment from the PRPs to restore the injured resources to their former state. This compensation could include the cost of assessing the injuries to the resource, the cost of restoration and the value of the interim lost use. Assessment of groundwater damages caused by contamination requires that monetary values be assigned to groundwater and that these values recognize the many unique services provided by groundwater. The economic value of groundwater should be determined prior to deliberating regulatory guidelines designed to prevent contamination and implement remedial actions. Groundwater valuation should quantify its total economic value which consists of use values and nonuse values. Use values arise from consumptive uses, such as drinking water or irrigation supply and nonconsumptive uses such as water supply for wetlands. Nonuse values include option, existence and bequest values (Freeman, 2003). These values may arise because people might wish to preserve the environment to have the option for future use, to bequeath to their heirs or simply to preserve the resource in its current state even if they may never demand in situ the services it provides. Groundwater is a non-market good. This means that unlike goods that are traded in an open market for a pre-determined price, groundwater does not have an attached price that reflects its total economic value. Estimation of the total value of groundwater may therefore require either analytic techniques that elicit the values that people place on groundwater or indirect approaches that reveal the value they place on groundwater through choices they make regarding market goods that are closely related to groundwater. 55

This chapter will examine the extent to which available direct and indirect valuation methods are able to estimate the total value of groundwater and the range of estimates for the value of groundwater obtained by existing studies using these methods. Available studies and estimates are examined to determine how they might be used in obtaining values for groundwater. Finally, the difficulties in mechanically transferring non-market values from the literature to assess damages in a different context are discussed. II. Classification of Groundwater Services Groundwater in an aquifer provides a reserve with given quantity and quality dimensions for consumptive and non-consumptive uses. In addition, groundwater discharges to surface water contribute indirectly to the services provided by surface water and wetland ecosystems. These two functions provide a variety of services that can be classified into human-use and ecological (those provided to the ecosystem as a whole). Classifying groundwater in this manner is helpful in determining an appropriate valuation method and its use values. Human-use services can be further categorized into consumptive use services and non-consumptive use services. Examples of consumptive use services include drinking water irrigation and for manufacturing. Examples of non-consumptive uses include subsidence protection due to low groundwater levels, as a resource stock, and as a barrier against saltwater intrusion. Groundwater may protect water quality by maintaining the capacity to dilute and assimilate groundwater contaminants, support surface water supplies, provide ecological services to wetlands and riparian habitat, and prevent erosion and flood control through absorption of surface water runoff. It can facilitate habitat and ecological diversity and provide discharge to support recreational activities. Groundwater recharge provides nonuse services to surface water bodies or wetlands and other ecosystems (Bergstrom et al., 1996). III. A Conceptual Framework for Valuing Groundwater Valuation of groundwater damages requires a determination of injury, quantification of injury and damage assessment. Determination of injury requires technical data on current or baseline conditions of the aquifer in terms of quantity and quality, delineation and size of the contaminated plume, effect on water quality caused by the contamination, and changes in groundwater services as a result of quantity and quality changes. Quantity dimension includes the location of the plume relative to public water supply or private drinking water wells, amount of groundwater available within a specific geographic region in a given period of time, and the change in this quantity over time from recharge and extraction. Changes in groundwater quality could impact human health, plant density, and habitat of species depending on those plants. Quantifying the share of surface water services that can be credited to groundwater is a challenge and may involve modeling the interaction between groundwater and surface water services so that incremental contributions of groundwater can be identified. In doing this double counting of service flows should be avoided. The extent of loss of services due to groundwater contamination is quantified using a with-and-without analysis, by comparing the services provided following the injury to the services that would have been provided in the absence of the injury. Since services that would 56

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