CHAPTER

Introduction
Randall J.F. Bruins and Matthew T. Heberling

CONTENTS The Importance of Integrated, Watershed-Level Analysis Goal and Genesis of This Book Organization Unique Contributions References

THE IMPORTANCE OF INTEGRATED, WATERSHED-LEVEL ANALYSIS Aquatic ecosystems such as coasts, estuaries, wetlands, lakes, rivers, and streams provide many services to human society. They supply water and food, they assimilate wastes, they offer means of transportation and energy generation, they provide habitat for many species that humans value, and they offer recreation, aesthetics, and inspiration. In taking advantage of these services, humans have stressed these ecosystems. Alteration of stream corridors, changes in patterns of ow, introduction of nonindigenous species, and pollution by toxicants, nutrients, sediments, heat, and oxygen-demanding substances have diminished aquatic ecosystems ability to continue providing the services that society values. As social awareness has increased, efforts have been made to better manage these ecosystems and reduce human impacts upon them. In the United States, these efforts have included increased regulation and mitigation of pollution; increased attention to the ecological impacts of water resource projects; modication of agricultural practices and subsidies; and efforts by urban, suburban and rural communities to better steward their aquatic ecological resources through monitoring,

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planning and collective action. Most of these efforts have been accompanied by a recognition that aquatic ecosystems have complex interactions with their surrounding landscapes. As a result, the watershed increasingly is seen as a basic unit for aquatic ecosystem analysis and management. This book is concerned with two types of analysis that are both important for aquatic ecosystem management: ecological risk assessment (ERA) and economic analysis. Both have been recognized as necessary, and their use is provided for in law and regulation, yet because they arise from very different philosophical traditions, they have tended to remain separate in both theory and practice.1,2 This separation hampers environmental management. Analysts from these respective traditions often fail to coordinate their efforts, frequently misunderstand one anothers terminology and approaches, or disagree as to what is important, thus providing decision-makers with incomplete or confusing information. Decision-makers may also assume that these analyses ought to be separate and thus fail to recognize the wealth of insight that their effective integration could produce. ERA has been dened as a process for collecting, organizing and analyzing information to estimate the likelihood of undesired effects on nonhuman organisms, populations or ecosystems.3 Recommended procedures for carrying out ERA have been published by the U.S. Environmental Protection Agency (USEPA),4 and the practice has been employed for a wide variety of ecological problems and settings. For example, a 1999 report by the Committee on Environment and Natural Resources (CENR) documented the use of ERA by ve U.S. federal agencies to regulate the uses of toxic substances and pesticides, for the control of nonindigenous species, and to remediate and determine compensation for damage caused by chemical releases.5 The general principles of ERA also underlie many important regulatory protections for aquatic ecosystems in the United States, such as state-issued water quality standards (WQS), but watersheds themselves are not usually the subject of ERA. Routine management approaches, however, including the monitoring and enforcement of WQS, cannot address certain kinds of aquatic ecosystem impairment. Some undesired effects are caused by human-caused insults (hereafter termed stressors) for which there are no standards; these include, for example, introduced organisms and altered habitat. Some are a complex result of multiple kinds of stressors, and in some cases the causes remain unclear without further study. Moreover, some aquatic ecosystems host unique resources (such as rare species or habitats) having special requirements that are not adequately understood. In addition, it is often unclear, without focused analysis, whether a given set of proposed actions to correct these problems will be effective. In these cases, ERA that is carried out at the spatial scale of the watershed, here termed watershed ERA (W-ERA), may be useful. As is further described in Chapter 3, W-ERA focuses on the key ecological resources and management goals for the watershed, rather than on regulatory standards alone. The approach directly engages stakeholders in the determination of assessment goals and scope, identies all relevant threats, and applies scientic methods to the identication of causes, risks, and uncertainties of adverse effects. The resulting information is intended to be useful for the design of approaches for ecosystem protection or restoration, whether these measures are physical or institutional, regulatory or driven by incentives, or governmental or community-based or some combination of these.

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Mid-Snake River, ID Middle Platte River, NE

Big Darby Creek, OH Clinch Valley, VA/TN

Waquoit Bay, MA

Location of watershed ecological risk assessment (W-ERA) Location of W-ERA and related economic analysis

Figure 1.1

Locations in the USA of ve watershed ecological risk assessment studies undertaken by USEPA and other partners. Comparison economic analyses were undertaken at three of the ve locations as indicated.

In 1993, USEPA initiated W-ERA in ve watersheds to evaluate the feasibility and usefulness of this approach (Figure 1.1).5,6 The outcomes from some of these assessments, and their usefulness for management, have been described in the literature,712 and W-ERA guidance has been made available as a web-based training unit.13 Prior to this book, however, little information has been available on approaches for integrating economic analysis with ERA in a watershed management context (see CENR5 and Appendix 9-A). Economists study choices made by individuals or other entities relating to the allocation of scarce resources across competing uses (see Chapter 5). Watershed management choices involve complex and uncertain trade-offs of current and future nancial and ecological resources. Economics offers an analytic framework for determining whether a given choice appears to provide a net benet to society. Depending on the approach used, economic analysis can also address impacts on affected parties, illuminate negotiation processes, and help evaluate the long-term sustainability of various outcomes. However, the integration of W-ERA and economic analysis that is needed to realize these insights entails theoretical, technical, and procedural challenges.

GOAL AND GENESIS OF THIS BOOK The goal of this book is to enhance the management of aquatic ecosystems by improving the integration of ERA and economic analysis. This book is intended for technically educated readers with an interest in improving environmental management, including researchers, analysts, advocates, and decision-makers working at

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Table 1.1 Case studies of the integration of watershed ecological risk assessment and economic analysis, funded by USEPA in 1999 Study Area Big Darby Creek watershed, Ohio Upper Clinch Valley, Virginia and Tennessee Project Title Determining biodiversity values in a place-based ecological risk assessment A trade-off weighted index approach to integrating economics and ecological risk assessment A strategic decision modeling approach to management of the middle Platte ecosystem Principal Investigators and Grantee Institution O. Homer Ereksona and Orie L. Loucks Miami University, Oxford, Ohio James Kahna and Steven Stewarta University of TennesseeKnoxville Raymond Supalla University of Nebraska-Lincoln

Central Platte River oodplain, Nebraska

a

No longer at grantee institution; see list of contributors.

local, state, regional, or national levels. It is based on experience in the United States, but many of the principles discussed are broadly applicable. This book originated with a program of USEPA-funded research to investigate the integration of ERA and economics, with an emphasis on the watershed as the scale for analysis. In 1998, the National Center for Environmental Assessment of USEPAs Ofce of Research and Development solicited applications for assistance to conduct case studies of the integration of ERA and economic analysis. Research was required to include original economic analysis conducted in collaboration with an ongoing ERA, to reect the state of the science of ERA and economics, and to be relevant to decision-making with respect to the problem being assessed. In 1999, following peer review of proposals, economic case studies were funded in conjunction with three of the ve aforementioned W-ERAs (Figure 1.1, Table 1.1). The ecological settings and resources of concern differed among the three locations. The degree of progress made by each W-ERA team prior to initiation of the economic study varied as well, and diverse methodological lenses were brought to these problems by the respective economic teams. But the commonalities between these three studies were also considerable in that each involved the watershed scale, each introduced economists to the ERA process, and each confronted the challenging task of interpreting ecological risks in economic terms and in a manner that would be meaningful to decision-makers. Building on those commonalities, a workshop was held at USEPA in Cincinnati, Ohio in 2001 to review progress on the studies, to discuss environmental problems involving other watershed settings, and to discuss the ideal characteristics of a generalized approach for conducting studies of this type. Based on the workshop results, a conceptual approach for the integration of ERA and economic analysis in watersheds was developed. Reports of the three case studies and a description of the conceptual approach for integration were described in a USEPA report (Integrating Ecological Risk Assessment And Economic Analysis In Watersheds: A Conceptual Approach And Three Case Studies14) and also form the nucleus for the present

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volume (Chapters 912). To this nucleus, chapters on other methods and perspectives and three additional case studies have been added, broadening this exploration beyond the USEPA research context.

ORGANIZATION Because ERA and economic analysis stem from different intellectual traditions, most readers will not be familiar with the methods and terminology of both. Therefore, an effort is made to limit jargon and to carefully dene and crossreference terms and concepts. Since an abundance of acronyms in such a work is practically unavoidable, each acronym is dened at its rst use in every chapter, and a list of acronyms is compiled in the front matter for the convenience of the bewildered reader. Part I of this book, Background, Concepts, and Methods, introduces some basic concepts and terminology of ERA and economics, especially as applied to watershed management. Chapter 2 provides an historical overview of the federal role in watershed planning and management in the United States, which traces the changes in governmental approach that have resulted from changes in both the understanding of environmental problems and popular notions of governance. The chapter attributes many past and present shortcomings of federal management to an inadequate appreciation of the ecological connectedness of land and water, as well as to the difculty inherent in valuing ecological resources in a manner consistent with the Constitutional objective to promote the general welfare. Chapter 3 summarizes the USEPAs Guidelines for Ecological Risk Assessment.4 These Guidelines, which were published in 1998 following a 10-year period of consensus-building involving scientists both within and outside the USEPA, describe the principles underlying ERA and provide a procedural approach for conducting assessments that is designed to be broadly applicable. The chapter also presents some critiques of these methods, and it discusses their application by the USEPA to the watershed scale. As is discussed in Chapter 2, the USEPA has important programmatic authority under the Clean Water Act (CWA), but it lacks the project authority, often critical to watershed management efforts, that is vested in the land and water resource management agencies. Therefore, Chapter 4 illustrates how ERA can be applied within the six-step water resources planning process established for federal agencies.15 It describes the use of ERA in U.S. Army Corps of Engineers ecological restoration projects, and in Appendix 4-A it presents an example of the use of ERA to evaluate project alternatives for a hypothetical salt marsh rehabilitation effort. Chapter 5 then introduces basic concepts and methods for the economic analysis of environmental problems the discipline commonly referred to as environmental economics. It explains what is meant by the term economic value, how economists measure the value of environmental changes, and how those measurements are incorporated in analytic approaches such as costbenet analysis. It discusses game

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theory, a eld of economics that is concerned with the study of interacting decisionmakers and has applications to environmental management, and it introduces the emerging body of practice and critique loosely referred to as ecological economics. Appendix 5-A introduces two techniques used to elicit, by means of questionnaires, the economic value that individuals would place on hypothetical environmental changes; these stated preference techniques are the contingent valuation method and conjoint analysis (or choice modeling). Chapters 6 and 7 each comment, from differing perspectives, on the limited degree of interaction between ERA and economics that is currently seen within the CWA-mandated water quality standards (WQS) program, a program with important inuence on watershed management practices. Chapter 6 explains current uses of ERA and economic concepts in WQS development; it presents conceptual arguments for improved integration, yet stops short of procedural recommendations. Chapter 7, on the other hand, presents a vision for integration accomplished through an adaptive implementation process, whereby stakeholders and regulators periodically reexamine the risks, benets, and uncertainties associated with standard setting in a degraded aquatic system and revise restoration goals based on public preferences. Since both of these chapters, and later chapters as well, make frequent reference to the CWA concept of biological (or biotic) integrity, and to the ecological indices sometimes used to measure it, Appendix 6-A describes four such indices of biotic integrity used by the State of Ohio. Economic value, as Chapter 5 explains, is determined based on trade-offs that individuals would be willing to make. Environmental law sometimes requires that ecological damages be compensated by proportionate restoration. While a legally required exchange does not have the same economic characteristics as one that is freely chosen, it nonetheless requires the establishment of a currency as a basis for equivalence. Chapter 8 introduces the reader to various restoration currencies, derived from ecological and economic concepts, that are used in the determination of natural resource damage compensation. It focuses especially on habitat equivalency analysis, the most commonly used approach. Chapter 9 culminates Part I by proposing a conceptual approach for the integration of ERA, economics, and other disciplinary methodologies in the context of watershed management. The chapter begins by referring to several procedural approaches, which are compiled in Appendix 9-A, and criteria that have been applied to environmental management. It then outlines a new approach that draws from their common elements but is more explicit as to how ecological and economic analyses should interact. (A second Appendix, 9-B, briey introduces sociocultural assessment methods that may serve to complement ecological and economic analyses.a) This new conceptual approach for integration serves as a point of reference for critical discussion of the case studies presented next. Part II, Applications, presents six case studies, each demonstrating the use of a different economic method. The rst three (described in Chapters 1012) were part of a USEPA-sponsored program of research and demonstration, as described in the previous section. They sought to apply the USEPAs Guidelines for Ecological
a

Health risk assessments may also be required, but these methods are familiar to many readers and are not discussed in this text.

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Risk Assessment4 in stepwise fashion; economic analysis was not a part of that process but was begun as a separate initiative several years later. The other three (described in Chapters 1315) are more varied in purpose and approach. The case studies presented in Chapters 10 and 11 both address the protection of streams that have unusually high diversity of sh and mussels, including many rare species. Big Darby Creek in central Ohio is located in the broad plains of the eastern corn belt, where agriculture predominates but suburban development is expanding. In contrast, the Clinch and Powell Rivers (Clinch Valley) are located in the mountainous terrain of southwest Virginia and northeast Tennessee, where agriculture is conned to narrow oodplains and coal mining, though declining, remains an important inuence. In these studies, economists applied stated preference techniques the contingent valuation method in the case of Big Darby Creek and conjoint analysis in the Clinch Valley to put the value of protecting these unique species, and the high quality environments that support them, into an economic context. Chapter 12 focuses not on estimating value but on resolving conict. The Platte River watershed encompasses portions of Wyoming, Colorado, and Nebraska; to date these states have been unable to reach agreement on the provision of sufcient water and restored habitat to meet the needs of threatened and endangered species, including several migratory bird species, in a critical reach of river located in central Nebraska. In the case study, economists used game theory to search for solutions most likely to satisfy the preferences of the interested factions. Chapter 13 describes an effort to predict the likely impacts of economic development on stream ecology in two Dutchess County, New York watersheds within the Hudson River catchment. This ongoing study seeks to combine economic simulation (inputoutput modeling), spatiotemporal analysis of land use changes, and spatial analysis of stream biological integrity to help Dutchess County residents better understand the potential long-term consequences of their immediate choices. Chapters 14 and 15 demonstrate the application of methods for scaling restoration to balance losses. In Chapter 14, the economic value of a proposed set of remedial actions (i.e., clean-up) and other ecological enhancements in a polluted watershed is calibrated to equal the value of natural resource damage using a method termed total value equivalency. The method is applied in the assessment of damages resulting from polychlorinated biphenyl (PCB) discharges into the Lower Fox River and Green Bay in Wisconsin and Michigan. Chapter 15 presents a determination of habitat replacement cost, a method that balances an amount of harm inicted on populations of particular species with the amount of habitat restoration that would restore those populations. The method is used to determine the monetary amount needed to restore habitat sufcient to compensate for damages to sh and shellsh populations caused by the intake of power-plant cooling water from Plymouth Bay in Massachusetts. Part III, Conclusions, consists of one nal chapter, Chapter 16, which examines the commonalities of these studies and draws general conclusions. The chapter describes the barriers to ecologicaleconomic integration that still remain, and it makes recommendations for further research.

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UNIQUE CONTRIBUTIONS This book makes several unique contributions to environmental management. First, it places economic analysis into a context that is familiar to risk assessors. Because it uses the specic procedures and terminology of ERA, it will help ERA practitioners better understand how those procedures can be integrated with economic analysis. The conceptual approach presented in Chapter 9 borrows heavily from the USEPAs ERA Framework. The case studies demonstrate how risk assessment outcomes that is, probabilities of adverse changes in ecological assessment endpoints gure into economic analysis, and they sensitize the reader to the difculties that economists face in using those results. They also illustrate for risk assessors the importance of the withwithout context that is familiar to economists. Whereas risk assessors sometimes focus mainly on identifying risks associated with current situations and trends, or on identifying exposure targets for reducing those risks, economists most often focus on choices between alternative actions. Therefore, economists demand a comparison of current and future risks with and without a given action. The economists perspective, evident both in the conceptual approach and the case studies, prods the risk assessor to use ERA in a way that maximizes its value to decisionmakers. The case studies allow comparison of six different economic approaches. Second, the risk assessment perspective employed in this book poses interesting challenges for the economist. Economists sometimes use relatively vague statements about the ecological improvements expected under a given policy to elicit the monetary amounts individuals would pay to obtain the policy, either because they lack more specic information on ecological changes or as a way to match the individuals understanding of the ecosystems. ERA, on the other hand, uses the bestavailable data and methods to quantify the linkages between human activities, the stressors they produce, and the ensuing effects on particular ecological endpoints. The resulting statements about risk are as specic as possible about the nature and magnitude of effects expected, but they may also include descriptions of uncertainties. Translating these statements into terms amenable to economic analysis is difcult, as these case studies illustrate, but the challenge must be accepted if these sciences are to be integrated.15 Finally, this book introduces a conceptual approach for integrating ERA and economic analysis in the context of watershed management (see Chapter 9, especially Figure 9.1). The approach draws its elements from existing USEPA guidance, as well as from other environmental management frameworks developed by various agencies and advisory bodies. By synthesizing these elements in a way that emulates yet expands the ERA Framework, which is a familiar tool in the eld of environmental management, it communicates the essential principles of integration to an important audience.

REFERENCES
1. Norgaard, R., The case for methodological pluralism, Ecol. Econ., 1, 37, 1989. 2. Shogren, J.F. and Nowell, C., Economics and ecology: A comparison of experimental methodologies and philosophies, Ecol. Econ., 5, 101, 1992.

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3. Suter, G.W., Efroymson, R.A., Sample, B.E., and Jones, D.S., Ecological Risk Assessment for Contaminated Sites, Lewis Publishers, Boca Raton, FL, 2000. 4. USEPA, Guidelines for ecological risk assessment, EPA/630/R-95/002F, Risk Assessment Forum, U.S. Environmental Protection Agency, Washington, D.C., 1998. 5. CENR, Ecological risk assessment in the federal government, CENR/5-99/001, Committee on Environment and Natural Resources of the National Science and Technology Council, Washington, D.C., 1999. 6. Butcher, J.B., Creager, C.S., Clements, J.T., et al. Watershed level aquatic ecosystem protection: Value added of ecological risk assessment approach, Project No. 93-IRM4(a), Water Environment Research Foundation, Alexandria, VA., 1997, 342 pp. 7. Diamond, J.M. and Serveiss, V.B., Identifying sources of stress to native aquatic fauna using a watershed ecological risk assessment framework, Environ. Sci. Technol., 35, 4711, 2001. 8. USEPA, Waquoit Bay Watershed ecological risk assessment: The effect of land derived nitrogen loads on estuarine eutrophication, EPA/600/R-02/079, U.S. Environmental Protection Agency, Ofce of Research and Development, National Center for Environmental Assessment, Washington, D.C., 2002. 9. USEPA, Clinch and Powell Valley Watershed ecological risk assessment, EPA/600/R01/050, U.S. Environmental Protection Agency, Ofce of Research and Development, National Center for Environmental Assessment, Washington, D.C., 2002. 10. Serveiss, V.B., Applying ecological risk principles to watershed assessment and management, Environ. Manage., 29, 145, 2002. 11. USEPA, Ecological risk assessment for the Middle Snake River, Idaho, EPA/600/R-01/017, U.S. Environmental Protection Agency, Ofce of Research and Development, National Center for Environmental Assessment, Washington, D.C., 2002. 12. Valiela, I., Tomasky, G., Hauxwell, J., et al. Producing sustainability: Management and risk assessment of land-derived nitrogen loads to shallow estuaries, Ecol. Appl., 10, 1006, 2000. 13. Serveiss, V., Norton, S., and Norton, D., Watershed ecological risk assessment, The Watershed Academy, U.S. Environmental Protection Agency, 2002, on-line training module at http://www.epa.gov/owow/watershed/wacademy/ acad2000/ecorisk. Accessed Sept. 29, 2004. 14. USEPA, Integrating ecological risk assessment and economic analysis in watersheds: A conceptual approach and three case studies, EPA/600/R-03/140R; NTIS PB2004-101634, National Center for Environmental Assessment, U.S. Environmental Protection Agency, Cincinnati, OH, 2003. 15. Suter, G.W., Adapting ecological risk assessment for ecosystem valuation, Ecol. Econ., 14, 137, 1995.

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