Academic journal article Contemporary Economic Policy

Dams, Dam Removal, and River Restoration: A Hedonic Property Value Analysis

Academic journal article Contemporary Economic Policy

Dams, Dam Removal, and River Restoration: A Hedonic Property Value Analysis

Article excerpt

I. INTRODUCTION

The removal of the Edwards Dam on the Kennebec River in 1999 set a national precedent for removing hydropower dams of marginal value. The removal represented the first time a functioning hydropower facility undergoing relicensing under the U.S. Federal Energy Regulatory Commission (FERC, which licenses hydropower facilities) was removed with the goal of restoring aquatic ecosystems. The Edwards Dam was also the first major dam to be removed in Maine. Since its removal, anadromous fish, including Atlantic salmon, have returned to the river above the dam site. Benthic aquatic insect populations--a key indicator of ecosystem health used in Maine to document compliance with water quality standards--appear to be growing dramatically. (1) Recreation on the river in the form of fly-fishing, canoeing, and kayaking has also grown. Upstream dams have faced the need to build fish passage in order to meet the terms of the Kennebec River Restoration agreement. However, little has been done in the way of postproject research or monitoring. The project has been deemed successful by most observers, but without formal evaluation, few objective measures of "success" are possible. This article presents the results of an ex post hedonic property value analysis of the area surrounding the former dam site and an upstream area with two hydropower dams. To the best of our knowledge, this is one of the first studies to undertake an ex post analysis of the economic impacts of a dam removal. (2)

The removal of the Edwards Dam signaled--or partially triggered--a change in thinking about management of Maine rivers. Nearly, half a dozen smaller dams have recently been removed or are currently being evaluated for removal, including the Ft. Halifax Dam, in Waterville. Efforts to establish fish passage at upstream sites have increased as anadromous fish are able to pass downstream dams that have blocked access for most of a century. The Penobscot River Restoration agreement, which has been negotiated but not yet fully funded, would allow for the removal of two major dams north of Bangor and for fish passage to be built at others. On rivers around the country, similar things are happening. Two small hydropower dams on the Sandy River in Oregon are scheduled to be removed this year. (3) All this activity signals a critical need for credible estimates of the socioeconomic benefits of often-expensive restoration efforts (an estimated $25 million in the case of the Penobscot River project). (4)

Additionally, since dam removal is controversial, it is important to fully understand its potential impacts. Impacts on recreation, property values, and community development are all of concern both to local communities and to property owners. Indeed, opposition to dam removal is often especially loud from property owners along impoundments, who may have purchased homes or invested in boats, docks, and other recreational facilities in expectation of the presence of an impoundment. Such losses to waterfront landowners, however, may not appear if potential buyers value homes near free-flowing rivers as much as properties near reservoirs. With river restoration efforts gaining national attention, studies that shed light on direct and indirect costs and benefits associated with dam removal should be valuable to the decision-making process.

The need for better postproject monitoring and socioeconomic evaluation of aquatic restoration projects is widely recognized. The Draft Maine River Restoration User Guide (2004) (5) emphasizes the need for a "comprehensive, accurate method for evaluating the beneficial and adverse impacts of a dam removal." This report includes a section highlighting the need for socioeconomic valuation. Johnson and Graber (2002) also emphasize the need for incorporating the social sciences in decision making about dam removal. In 2002, the Department of Interior commissioned the Water, Science and Technology Board (WSTB) to undertake an assessment of water resources research funded by federal dollars. …

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