Cost-Benefit Analysis Summary: Thompson & Chilcotin River Steelhead

Policy Branch, Economic Analysis
Fisheries and Oceans Canada
Pacific Region
July 2019

Steelhead Trout (Thompson River DU)
Region: British Columbia
Populations: Thompson River Steelhead & Chilcotin River Steelhead
Scientific name: Oncorhynchus mykiss
COSEWIC Status: Endangered
SARA Status: Under consideration

Context

The Chilcotin River (CR) and Thompson River (TR) Designatable Units (DUs) of Steelhead Trout were both assessed as Endangered by the Committee on the Status of Endangered Wildlife in Canada (COSEWIC)^{Footnote 1} in an Emergency Assessment in January 2018. The COSEWIC assessment was based on population declines of 79% and 81% respectively over the last three generations. This was followed by Fisheries and Oceans Canada (DFO) and the province of British Columbia (BC) implementing additional management measures in 2018.

A cost-benefit analysis (CBA) has been completed to inform the decision by Governor in Council to list or not list the Thompson and Chilcotin Steelhead on Schedule 1 of SARA. The analysis considers incremental costs and benefits relative to a baseline of activity that accounts for management measures in place, such as those implemented in 2018, or known to be coming into force, in the absence of the proposed regulation (i.e. without vs. with listing).

2018 Management and Economic Profiles

Management of the freshwater recreational fishery for wild Thompson and Chilcotin Steelhead has been delegated to the province of BC. The recreational fishery for wild Thompson and Chilcotin Steelhead is exclusively catch and release.

Salmon fisheries (commercial and recreational) are managed by DFO under the Fisheries Act, and retention of Steelhead bycatch is not permitted. In addition, a number of recreational salmon closures exist in the Fraser, Chilcotin and Thompson Rivers. In 2018, DFO implemented additional closures with a series of rolling 27-day closures for commercial gillnet salmon fisheries (including Indigenous communal commercial, Economic Opportunity (EO), Excess Salmon to Spawning Requirement (ESSR) and demonstration (demo) fisheries) in marine and inland waters, as well as for tidal and freshwater water recreational salmon fisheries.

To create the baseline or “status quo” scenario for this analysis, an average of the data from 2013-2016 was used and adjusted to account for lost opportunities from the 2018 measures. Overall, the impact of the 2018 measures were estimated to be relatively small:

• Revenues for the commercial salmon fishery and recreational service businesses (lodges/ charters) were estimated to decline by 1%;
• Indigenous alternative sale fisheries (EO/Demo/ESSR) were estimated to decline by 4%;
• Recreational angling activity (days) were estimated to decline by about 1%; and
• Food, Social and Ceremonial (FSC) salmon harvest in the Fraser was estimated to decline in volume by about 4%. ^{Footnote 2}

Management Scenarios

Management Scenarios were developed by Fisheries Management, DFO Pacific Region for both populations combined, as the identified measures would apply to both DUs. Two scenarios were provided, a Do Not List (Scenario 1) and List (Scenario 2).^{Footnote 3}

Under the Do Not List scenario:

• individuals and their habitat would continue to be managed and protected under existing federal legislation, including the management measures implemented in 2018; and,
• management measures currently in place would continue, with movement towards the implementation of management plans consistent with a recovery approach.

This scenario is essentially the baseline; as such, there are no incremental costs and benefits. However, if additional management measures are implemented as part of the Do Not List scenario, there may be additional costs and benefits as a result of those measures. As information on the potential new measures that may be implemented are currently not known, a detailed cost-benefit analysis of these measures could not be undertaken.

Under the List scenario, the general prohibitions of SARA would come into effect. The resulting management measures for listing either one or both DUs on Schedule 1 of SARA are as follows:

• permits for incidental catch and exemptions for directed catch in fisheries would not be provided. As a result, commercial, communal, recreational and Indigenous FSC salmon fisheries that incidentally intercept CR or TR Steelhead would be restricted; and,
• all directed recreational and FSC fisheries for the listed species would be closed. To achieve this, the 2018 closures would be expanded to longer times (from 27 to 60 days), and more areas and fisheries (adding FSC salmon and salmon troll).

The CBA assesses the economic impacts of these measures relative to the baseline (status quo).

Costs of Listing (TR Only, CR Only or Both DUs)

Listing is assumed to occur in 2019, with impacts assessed over a 20-year period (i.e. to 2038). This is consistent with the timeframe considered in the Recovery Potential Assessment and is representative of approximately three generations for the CR and TR DUs. All monetary values are expressed in real 2016 Canadian dollars, and annualized and present values are calculated using a 7% discount rate, in accordance with Treasury Board guidelines.

The direct cost estimates are the same for all three listing alternatives (list CR DU, list TR DU or list both). Total monetized costs were estimated to range from $190.3-$254.0 million (present value) over the 20 year period, or $17.9-$24.0 million per year. In the commercial salmon fishery, which represents a majority of the cost impacts, listing would result in a reduction in landings and revenues of almost 25% from the 2018 baseline landed value of $60 million (i.e. gross value). The breakdown of the annual incremental costs to interested parties are as follows:

• Loss in profits to the commercial salmon fisheries, Indigenous commercial fisheries and seafood processing are estimated to be $8.1m. For commercial fishery this would affect approximately 1150 crew (jobs lost or reduced). For the processing sector, about 120 direct jobs would be affected.
• Loss in profits to the recreational fishing sector (lodges, charters and guides) are estimated to be $1.5m. Losses in consumer surplus ^{Footnote 4} to freshwater and tidal anglers are estimated to be $6.2m-$11.2m.
• Food replacement costs of lost Indigenous salmon food fisheries are estimated to range from $1.6m to $2.3m. This represents a conservative estimate of the impacts to First Nations, as losses in social and ceremonial uses have not been quantified. Between 51 and 93 First Nations groups who harvest salmon for food would be affected.

Additional groups could be affected as a result of their share in potentially affected commercial salmon fisheries.

Table 1 below provides a detailed breakdown of the costs to businesses and Canadians (including Indigenous groups).

Benefits of Listing by DU

Simulations of growth and recovery probabilities for each of CR and TR Steelhead under three different levels of productivity show different potentials for benefits. However, according to the Recovery Potential Assessment model, simulations suggest increases in future abundances of both DUs are conditional on improvements in natural productivity. Exploitation rate (fishing mortality) reduction, whether or not undertaken under SARA, has the potential to lessen rates of decline if the most recent productivities observed continue in the future. However, eliminating exploitation alone will not result in population recovery.

As a result, in the absence of specific information on recovery potential, incremental benefits cannot be estimated. Instead, a breakeven analysis was conducted to establish a range of benefits, or willingness to pay (WTP) values, that would be needed to offset the monetized costs and demonstrate a net benefit. The WTP is estimated by dividing the total incremental cost of the listing scenario by the number of Canadian households^{Footnote 5}. For the listing scenario, the benefits value would need to be $1.8 to $2.4/year, per Canadian household, to equal the monetized costs.

To validate these breakeven values, they were compared to a valuation study for steelhead protection and recovery in the US (Wallmo and Lew, 2010)^{Footnote 6}. This study is considered representative of the management measures proposed for listing these salmon DUs under SARA, and is the most current research in this area. This study estimated the WTP value of steelhead recovery to range from CAD $69.4 to $79.6 per household (2016 dollars), after adjusting for inflation and exchange rate^{Footnote 7}.

This analysis suggests that the breakeven values of $1.8 to $2.4/year are well below the range estimated in the Wallmo and Lew study, demonstrating that benefits of recovery, if achieved, could potentially be greater than costs.

Summary

Overall, the incremental costs under the three List combinations (i.e. List CR, List TR or List both DUs) are between $190.4 million to $254.0 million present value, with an annualized value of $17.9m to $24.0m. This is within the range of “high impact”, as defined by TBS. Benefits of recovery could exceed the monetized costs, provided the recovery objective is achieved.

In the event of a Do Not List decision, there would be no incremental costs or benefits under the status quo (i.e. 2018 management measures) scenario. However, if additional management measures are implemented as part of the Do Not List scenario, there may be additional costs and benefits as a result of those measures. As information on the potential measures that may be implemented are currently not known, a cost-benefit analysis of these measures could not be undertaken.

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