Natural Resource Damage Assessment: Methods and Cases

have been provided in the absence of the injury cannot be observed, they must be estimated. One
approach is to use services provided in an uncontaminated reference area to predict the services
in an injured area. The other approach is to predict such services using historical information on
the services in the injured area prior to the injury. It is important, however, to recognize that a
‘with-and-without analysis’ is different from a ‘before-and-after’ analysis. Comparing the
services provided by an aquifer before and after an injury may not be a valid method for valuing
the damages due to an injury. This method does not account for changes that may have taken
place to affect the quantity and quality of the resource.
Once the losses of economic and ecosystem services have been quantified, the next step
is to assess the value of those changes. Potential changes in services that may occur with
groundwater contamination are availability of drinking water, human health risks measured by
changes in mortality, morbidity, cancerous and non-cancerous health effects, costs of medical
treatment, increased fear and anxiety within a community, averting or defensive expenditures to
protect oneself from groundwater contamination, property value loss, ecological injury and loss
of recreational use and loss in nonuse values (Abdalla, 1994). Dose-response models that link
contaminant sources to changes in contaminants in groundwater and then to changes in economic
and ecosystem services may be needed to estimate the damages due to groundwater
contamination.
The final step in the groundwater benefit estimation process is to assign monetary values
to the changes in groundwater services. A number of techniques are available depending on the
groundwater services that are being valued. After the economic value of groundwater to an
individual is determined, the aggregate economic value is estimated by summing individual
economic values over the total number of people who benefit from groundwater services. This
requires determining the spatial distribution of consumers and producers who benefit from the
groundwater resource. There is no consensus in the literature on how to determine market size,
particularly when nonuse values are involved. Since contamination can affect groundwater
services over a long time horizon, its total economic value to the current generation is the
discounted sum of values in each time period over the entire time horizon required to restore
groundwater quantity or quality to baseline levels. Both the length of the time horizon and the
choice of discount rate can affect the estimates of groundwater values. Data regarding the
quantity and quality of groundwater are imperfect and there is uncertainty about the actual
changes in the current level of services projected into the future and the alternative level of
services. Thus the change in service flows is an expected change and is not known with certainty.
Expected changes in groundwater service flows are a function of possible alternative changes in
current and future groundwater conditions and the probabilities of each of those alternatives
occurring (Bergstrom et al., 1996).
IV. Economic Valuation Methods
Many economic methods may be used to value natural resources, although some methods
may be more applicable to certain resources than others. Although there may be other methods
that can be applied to the task of valuing groundwater, the following list provides an introduction
to some of the economic methods that can be used and the complexity involved in applying
them. The following methods were chosen because most are authorized for use by the
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