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Natural Resource Damage Assessment: Methods and Cases

Natural Resource Damage Assessment: Methods and Cases

C. An Application of the

C. An Application of the Benefits Transfer Method for Valuing Groundwater We briefly describe the case study conducted by Crutchfield et al. (1995) to show how estimates of groundwater quality benefits can be transferred to areas beyond the original study sites. They selected three studies from those listed in Table 3.2 because of the small amount of information needed to compute willingness to pay estimates and because these studies had been published in peer-reviewed literature. These three studies are Jordan and Elnagheeb (1993), Shultz and Lindsay (1990) and Sun et al. (1992). Each of these studies estimated a willingness to pay function for groundwater protection given by WTP = f(b,x,z), where WTP is willingness to pay for preventing contamination or cleaning groundwater to safe levels for drinking, and the other notation is defined as follows: f(.) is a valuation function b= hypothetical bid value x = variables proxying for price of access to the resource, quantity and quality of resource z =demand determinants such as income, education, age etc. The three original studies had included variables such as income, gender, race, age, education, status of current water quality, land value, future demand for clean water and bid value. Crutchfield et al. (1995) used USDA data from surveys of farmers in four Area Studies regions in 1991 to obtain comparable data about socio-economic characteristics of farmers in their study region. A proxy variable for income was constructed using data from the USDA Farm Costs and Returns Survey. County level data on sex and racial composition was obtained from the latest Census of Agriculture. Since the researchers did not have information on farmers’ attitudes about pollution probabilities for sites for which benefits were being estimated, they used mean values from the original studies. They used these data to estimate willingness to pay for groundwater quality in four areas on a county-by-county basis. County averages were then used to estimate willingness to pay per household. The per-household values were multiplied by the number of rural households in each county to obtain an estimate of aggregate willingness to pay at the county level. These estimates were further improved by correcting for differences in the distribution of risks across households based on the whether the region was classified as hazardous, risky, slightly risky or safe, and by assuming that households whose water supplies are not at risk will not be willing to pay. D. Legislation Applying to Groundwater As already established, groundwater is an important natural resource with many uses. In a majority of situations, it is more expensive to clean up contaminated groundwater than it is to prevent its contamination. Therefore, legislation to prevent or reduce contamination of groundwater, as well as clean up the contamination when it does occur, has been instituted. Unfortunately, the effectiveness of these laws in protecting groundwater may be limited, as many of these laws focus on surface water rather than groundwater. Additionally, water protection programs are split between federal, state, and local levels, making the enforcement of these laws 75

and overall protection of the resource more difficult (NRC, 1997). At the federal level, there are several laws that relate to maintaining groundwater quality. The Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or Superfund, requires that groundwater contaminated with waste be cleaned up and holds responsible the polluters for the costs of the cleanup. The Resource Conservation and Recovery Act regulates waste disposal and underground storage tanks that may pollute groundwater. The Clean Water Act aims at pollution control, although regulation of polluting sources applies mainly to surface water (NRC, 1997). The Safe Drinking Water Act provides for clean public drinking water supplies specifying maximum contaminant levels for pollutants that are found in public water supplies. These maximum contaminant levels are also used in determining the amount of cleanup of groundwater supplies necessary at Superfund sites. Additionally, the 1996 amendments to the Safe Drinking Water Act allow funding for greater protection of groundwater supplies in areas where groundwater is the primary source of the public water supply (NRC, 1997). In Illinois, the Illinois Groundwater Protection Act serves as the main piece of legislation that aims to maintain a high level of quality of our groundwater supplies. Enacted in 1987, the Illinois Groundwater Protection Act focuses on maintaining the quality of groundwater supplies through prevention of groundwater contamination. It calls for cooperation between local and state authorities and places emphasis on the protection of wells (IDNR, 2000). It is difficult to determine the effect that these policies have had on reducing groundwater contamination or on cleaning up the contamination that does occur. Few case studies make reference to these laws, and the ones that do are cleanup sites based on CERCLA. The groundwater protection program under the Illinois Groundwater Protection Act sets a good foundation for the prevention of groundwater contamination in Illinois, yet it is also difficult to quantify how much groundwater pollution has been prevented by this program. VII. Conclusions As can be seen from the results of various studies and cases reported above, the estimates of groundwater values vary widely, and there are no single values that can be attached either to groundwater quality or to the damages caused to water quality by human activities. The valuation of these damages will depend on the impact of those activities on concentrations of contaminants in groundwater as well as the monetary value of damages caused by those contaminants and is a site-specific problem. The physical impact of activities such as spills, agricultural production and landfills on groundwater is site-specific because of differences in factors such as the physical impact of soils, topography, depth of water table, and recharge rate of water into the aquifer, which will influence the amount of leaching and its effect on the concentration of contaminants in groundwater. The monetary value of damage caused by contaminants will vary with factors such as the uses of the groundwater, ecological services provided by the groundwater, the type of contaminant, and the preferences and socio-economic characteristics of heterogeneous individuals affected by the contamination. Several methods for determining the value of groundwater are available. A National 76

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