Title: Sea Empress Cost-Benefit Project: Final Report
Author: Environment Agency
Document Type: Monograph
Annotation: Environment Agency Project ID:EAPRJOUT_430, Representation ID: 126, Object ID: 1769
KEYWORDS i i ... vm xi xx TERMS 1. INTRODUCTION 1.1 1.2 1.3 1.4 1.5 Background to the Study The Study Objectives and Approach .. The Cost-Benefit Analysis Approach The Risk:Assessment Approach Structure of the Report 2. 2.1 2.2 2.3 TEIE,OIL The Grounding of the Sea Empress and Subsequent Oil Spill a. Brief Summary of Response and Fate of Oil Overview of Impacts 3. 3.1 3.2 3.3 3.4 The Nature of Clean-up and Salvage Costs Compensation under the International-Oil Pollution Compensation Fund Other Costs Total Costs for Clean-up and Salvage 4. 4.1 4.2 4.3 4.4 4.5 5. 5.1 5.2 5.3 5.4 6. 6.1 6.2 6.3 6.4 6.5 6.6 SPILL ANI) AFFECTED CLEAN-UP ANDSALVAGE l-l l-l 1-2 l-6 l-6 AREA 2-l 2-l 2-2 COSTS 3-1 3-2 3-4 . 3-7 TOURISM Pembrokeshire and Tourism The Impacts of the Sea Empress Oil S$l Compensation under the 1971 Fund : Other Cost Estimates Summary of Costs to .Tourism 4 and l 4-6 4-9 4-12 4-13 RECREATION Recreational Activities in Pembrokeshire Impacts of the Sea Empress Incident on Recreational Activities Valuation of Impacts Summary of Costs to Recreational Activity-. COMMERCIAL 5-l 5-10 5-13 5-19 FISHEXIES The Nature of Commercial Fisheries Overview of Impacts Claims to the 1971 Fund: Data from the South Wales Sea Fisheries Committee The Valuation of Costs Arising.tiom the.Sea Empress Oil Spill : Summary of Costs to Commercial Fisheries R and D Technical Report .P119 : . .. Ill a 6-l 6-2. 6-4 6-6 6-10 .. 6-13 : CONTENTS (cont.) Page 7. 7.1 7.2 7.3 7.4 7.5 RECREATIONAL FISHERIES 7-l 7-l 7-7 7-11 7-15 Introduction Salmon and Sea Trout Bass Other Sea Fisheries Summary of Costs to Recreational Fishing 8. 8.1 8.2 8.3 8.4 8.5 IMPACTS Overview ON INDUSTRY 9. 9.1 9.2 9.3 9.4 CONSERVATION/NON-USE Overview of the Area Affected by the Oil Spill The Impact of the Oil Spill Payments under the 1971 Fund Valuation of Impacts 10. HUMAN 8-l 8-l 8-2 8-3 8-4 Port-Related Industries The Defence Industry Benefits to the Pembrokeshire Economy Total Costs to Industry HEALTH RELATED EFFECTS 9-l 9-l 9-6 9-7 EFFECTS 10.1 Introduction 10.2 Acute Physical Effects of Oil Vapour on the General Population 10.3 Psychological Effects on the General Population 10.4 Other Effects on the General Population 10.5 The Effects of the Sea Empress Oil Spill on the Health of Workers 10.6 Summary of Health Costs 11. SUMMARY 11.1 11.2 Overview of Costs Comparison with Damage Compensation Payments 10-l 10-l 10-5 10-8 10-8 10-11 OF COSTS 12. MARINE TRANSPORT RISKS 12.1 Overview 12.2 Analysis at an International Level 12.3 Analysis for UK Waters 12.4 Analysis of Incidents in Milford Haven 12-1 12-2 12-9 12-13 13. MITIGATION iMEASURES 13.1 Overview 13.2 Possible Mitigation Measures 13.3 Practicality and Effectiveness of Mitigation Measures 13.4 Cost-Effectiveness of Measures R and D Technical Report Pll9 11-1 11-2 iv 13-1 13-1 13-7 13-8 CONTENTS (cont.). Page 14. CONCLUSIONS 14.1 14.2 Conclusions Recommendations 15. REFERENCES ANNEX AND RECOMMENDATIONS 14-1 14-6 1: ai LIST OF CONSULTEES ANNEX 2: SITE SENSITIVITY ANNEx3: CLAIMS ANNEx4: DATA IN SUPPORT OF TOURISM ANNEX 5: DATA IN SUPPORT OF RECREATIONAL ANNEX 6: DATA ON COMMERCIAL ANNEX 7: DATA IN SUPPORT OF RECREATIONAL ANNEX 8:' DATA IN SUPPORT OF ANALYSIS OF IMPACTS ANNEX 9:. DATAaINSUPPORT OFaANALYSIS OF CONSERVATION MAPS. TO THE 1971 FUND ANNEX 10: DATA ON HUMAN ANNEX 11:. FLORIDAaS HEALTH ANALYSIS ACTlVlTY~ ANALYSIS a. FISHERIES FISHERIES TO INDUSTRY EFFECTS EFFECTS DAMAGE.COMPENSATION FORMULA ANNEX.12: INTERNATIONAL OIL SPILLS OVER 30,00Ot,. AND.INCIDENTS INVOLVING TANKERS IN MILFORD HAVEN SINCE JUNE 1993 : ANNEX ANNEX 13: REFERENCES List of Figures 2.1 2.2 Extent of Sea Emprexs Oil The Coast of Southwest Wales. 12.1 Milford Haven 12.2. Approaches to Milford Haven R and D Technical Report Pl19 2-4 2.4 12-13 12-14 List of. Tables Page 2.1 Estimated Times and Datesof Cargo Losses horn Sea Empress 2-2 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Organisations Involved in the Clean-up. Claims for Direct Costs under the 1971 Fund Costs to be Submitted to the 1971 Fund Estimates of Total Payments by the 1971 Fund for Direct Costs Costs to be Met from Sources other than the 1971 Fund Costs Rejected by the Fund Summary of Clean-up and-Salvage Costs 3-l 3-2 3-3 3-3 3-5 3-5 3-8 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Visits to Wales and Carmarthen and ire/Pembrokeshire l995 and 1996 MainPurpose for Visiting Welsh Coast in 1994 Summary Profile of Visitors to Pembrokeshire Claims to the 1971 Fund for Costs to Tourism Estimates of Total Payments Under the 1971 Fund to the Tourist Industry Summary of Financial Costs to Tourism Industry in Pembrokeshire Summary of Economic-Losses to Tourism from the Sea Empress Oil Spill.a 4-3 4-5. 4-6 4-10 .a 4-11a. 4-14. 4-16 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 : 5.11.. Water Contact Recreational Pursuits Undertaken at Affected Beaches Visitor Activities. Pembrokeshire-Coast Path Spend per User Figures for 1996 Estimated Number of Climbing Trips to South-Wales Coast Data on Welsh Beach Visits Effect on Leisure Activities Impacts of Sea Empress Oil Spill on Specific aCasuala Activities ! Specific Events Impact by Sea Empress Oil Spill :: Examples of Recreation Willingness to Pay Studies Costs of Lost Activity Days Summary of Recreation Costs from the Sea Empress Oil Spill 5-2 5t3 5-4. 5-5 5-6 5-11 5-15 5-16 5-18 5-20 5-21. 6.1 6.2 6.3 6.4 6.5 6.6 6.7. 6.8. The Main Commercial Species Caught in the Area of the Sea Empress.Oil Spill Key Events for Fisheries Claims to the 1971 Fund for Impacts to Commercial Fisheries Landings Figures for the South-Wales SeaFisheries District Landings Figures for the Molluscan Factory _. Landings Figures for Whitefish Landings Figures for Crustaceans Summary of Costs to Commercial Fisheries 6-l 6-3 6-4 6-6 6-7 6-8 6-9 6-14 7.1 7.2 7.3 7.4 7.5 Claims for Compensation-for Impacts to Recreational Fisheries Reductions in Angling Visits -per Angler Estimates of Reductions in Consumer Surplus Impacts on Angling~Activity as a Percentage of Average Annual Activity Number of Trips AfXected by Fisheries Ban -a R and D Technical Report Pl19 vi 7-2 7-4 7-5 7-9 7-9 List of Tables (cont.) Page 7.6 7.7 7.8 7.9 7.10 7.11 Estimated Costs to Bass Angling Percentage of Anglers Fishing for each Sea Fish Species Number of Anglers for Each Species Comparison of Wholesale Prices for Most Popular Species Estimated Costs to Sea Angling OveraJl Costs to Recreational Fishing 8.1 Summary of Costs to Industry 9.1 9.2 9.3 Replacement Costs for Stranded Marine Species Key Non-Use Values for the Sea Empress Oil Spill Estimates of the Non-use Value of the Sea Empm.ss Oil Spill 10.1 10.2 10.3 10.4 Acute Physical Health Effects Experienced by the Exposed Population The Value of Acute Physical Health Effects Psychological Effects of Oil Spills and Floods Summary of Health Costs 11.1 11.2 11.3 summary of costs Summary of Costs (break-down) Estimates of Total Payments Under the 1971 Fund 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 12.14 12.15 12.16 12.17 12.18 12.19 International Oil Spill Frequencies (All Vessels) International Oil Spill Frequencies (Tankers) International Oil Spill Frequencies (Tankers) Serious Casualties (Tankers greater than 6 000 grt/lO 000 dwt) Escalation Probabilities for Spills resulting from Serious Casualties Tanker Fleet Composition (Tankers greater than 6 000 grt/lO 000 dwt) Characterisation of Incidents by Author/Organisation Nature of Incidents Location of Incidents Serious Casualties by Tanker Size (1968 - 91) Oil Spills ~34 t by Tanker Size (1960 - 95) Marine Transport at Global and National Levels Incidents in UK Waters (Tankers > 6000 grt) Nature of Incidents in UK Waters (all tankers) Relative Contributions of Incidents Most Likely to Results in a Large Spill Marine Transport of Oil and Oil Products (1995) Marine Transport of Oil and Oil Products (1995) Numbers of Incidents in Milford Haven and UK Waters (all tankers) Spills mMilford Haven (1961-96) 13.1 13.2 At Sea Response Options Proposed Mitigation Measures R and D Technical Report Pl19 7-l 1 7-12 7-13 7-14 7-14 7-15 8-4 9-8 9-10 9-l 1 1o-2 10-5 10-7 10-l 1 11-l 11-3 11-2 12-2 12-2 12-3 12-4 12-4 12-5 12-6 12-6 12-7 12-8 12-8 12-9 12-10 12-11 12-12 12-15 12-16 12-16 12-17 13-6 13-7 vii GLOSSARY OF ECONOMIC TERMS Capitalised value: the sum of the discounted values of a future stream of costs or receipts - a once off value (as for property) Catastrophic event: that which has a sudden, dramatic and, -widespread .impact upon the environment : Complementary goods: those which are purchased along with another good (for example petrol with a car) Consumer surplus: the difference between the -amount. paid for a good or service and the maximum amount that an individual would be willing to pay Contingent valuation method. (CVMJ: aa social survey technique used to derive values -for environmental change by estimating peopleas willingness to pay (or to accept compensation) .for.a specified effect Cost-benefit. analysis (CBA): a form of economic analysis in which zests and benefits are converted into money values :for comparison Demand function: an algebraic,expression of the demand schedulewith values expressed for all .. factors affecting demand Demand schedule:.atable showing the level of demand for a good at various.prices Discounting: converts future zests and benefits into comparable units (present value). ::The discount rate is set by the:Treasury at 6% Dose-response technique: determines the: economic. value ..of changes in, say, pollutant a. concentrations by estimating the market value of the resulting changesin output Economic analysis: aimed at evaluating all of the effects of a policy or project and valuing them. in national-resourceterms. Takes place in a with and without fi-amework Economic rent: a payment in excess of what is necessaryto keep to.its present employment Existence-:values: values- which result from an individualas- altruistic desire to .ensure that an environmental asset is preserved and continues to exist into the future (a non-use value) Externalities: goods which remain unpriced and-thus are external to theamarket (i.e. free goods such as those relating to-the environment, with an example being pollution) Financial analysis: aimed at determinin g the.cash flow implications of a policy or a project to the commissioning organisation and ensuring that these are sustainable in athat sufficient funds are generated to meet outflows R and D Technical Report Pll9 .. vlll,. Hedonic pricing method @PM): an implicit price for an environmental attribute is estimated from consideration of the real markets in which the attribute is effectively traded (e.g. water quality improvements and property values) Implicit price: the opportunity cost of the use of resources that a producer already owns lIntrinsic/inherent values: related to existence values and are those which are said to residein nonhuman biota and which are not related to any form of human satisfaction Irreversible effects: e.g. the loss of a unique natural feature, an ecosystem or species and very long-term changesto the natural environment Market price approach:in a perfectly competitive market the market pr$ceof a good provides an appropriate estimate of its economic value. In markets which are not perfectly competitive, economic value is calculated by removal of subsidies or other price distortions Neo-classical economics: an economic theory which uses the general approach methods and techniques of the original nineteenth century economists Net present value (NET): the present value (i.e. in year 0) of the difference between the discounted stream of benefits and the discounted stream of costs Non-use value: values which are not related to direct or indirect use of the environment (option, existence and bequest values) a Opportunity cost: the value of a resource in its next best alternative use Option value: value to a consumer of retaining the option to consume a good Protest votes: the responsesofthose who refuse to take part in a contingent valuation survey (e.g. those who refuse to value the environment becauseit is priceless) Replacement costs approach: impacts on environmental assetsare measured in terms of the cost of replacing or recreating that asset Residual value: the remaining value of an asset at the end of the analysis Resource costs/values: cost of marketed goods or services (adjusted to economic prices) used as inputs to, or consumed as a consequenceof an action Scarce resources: resources available are insufficient to satisfy wants Sensitivity analysis: key assumptions and values are varied so asto determine their effect on the choice of best option Social benefit: the sum of the gains or benefits from an activity R and D Technical Report P119 ix Social cost: the sum:of money:which is just.enough when:paid,as compensationto restore all losses to their utility level Sustainable development: some acceptable measure of national well being (e.g. gross national product or some other agreed measure of welfare) which is.at least-constant and preferably rising over time. Total economic value (TIN): the sum of use values (direct and indirect) plus non-use values (option, bequest and.existence) Transfer payment: a payment .for .which no good -or service is obtained.in return; .e.g.-a tax or subsidy. Travel cost method (TCM): the benefits arising form the recreational use of a site are estimated interms of the costs incurred in travel to the site Uncertainty: stems. from a lack of information, scientific knowledge or ignorance. and is characteristic of all predictive assessments Use vahie:,a value related to the actual direct or indirect use of the environment (e.g. recreational values) Utility: the satisfaction an individual receives fromthe use, accessto or existence of a good. Willingness to accept (WTA): (also willingness to sell) the amount an individual will take in lieu of being able to partake in an activity for.a given length of time (usually. a year, or season) B Willingness to pay (WTP): the valuation placed by an individual on a good or service interms of money With and without framework: economic analysis considers the costs and benefits both with and. without a proposed option The without option is sometimes known as the donothing option R and D Technical Report Pll9 X EXECUTIVE SUMMARY INTRODUCTION On 15 February 1996; the Sea Empressran aground on its approachto the Port ofMilford Haven, resulting in the loss of72 000 tonnes (t) of crude oil which subsequentlyimpacted 200 kilometres of the South.Wales coastline. The area affected was of considerable conservation importance, being associatedwitha large number of designated sites including two NationalNature Reserves and a Marine Nature Reserve. Much of the affected coastline lies within the Pembrokeshire Coast National Park which was designated largely for its coastal Iandscape. The majority of the oiled areawas clean by May 1996, the operation involving at its peak over 1000 workers. The bulk of the o and for example that,at high priority sites, was removed by the end .. of February and early March. However;.partly as a result of storms, some cleaned.areas.were subsequentlyre-oiled. Some oiled areashave been left to clean themselves naturally, while other cleaned areascontinued to contain patches of deep sub-surfaceoil residuesover one year after the incident. Some local industries were particularly affected by the spill. For example, the areahas a thriving tourist industry which is closely linked to the coastal environment and its excellentwatersports opportunities. The number of tourists visiting the area was lower than predicted from recent .. trends and limited accessto beaches owing to the oil and clean-up operations affected both local and visitor recreational activities. The local economy also has an historical reliance on harvests from commercial fisheries. Following the spill, Fisheries Exclusion Orders causedtheacessation : of all commercial and recreational fishing activity in a designatedareaa and in all associated rivers and. streams. Having been removed in nine stages, parts of the ban were stillin place until September 1997. In addition to these costs, health effects were reported by the clean-upworkers as well as the generalPopulation;.. In early 1997; the Environment Agency (EA) commissioned Risk and Policy Analysts Limited to develop monetary estimates of the economic impacts of the Sea Empress oil spill and clean-up, andto quantify the risks associated with the movement of oil in UK waters.: The,results of this work are to be used in identifying cost-effective risk mitigation measuresto prevent future spills. Key sources of data were the International Oil Pollution-Compensation (IOPC) Fund,:the! Sea Empress Environmental -Evaluation Committee (SEEEC) Final. Report and -the reports., of a individual SEEEC projects. These were augmented-bywider literature review and consultation. Whilst severalfactors acted as major barriers to rapid and efficient data gathering; it has still been possible to place a monetary value on many of the impacts arising corn the Sea Empress incident : and to quantify risks associated with the seabome transport of oil in UK-waters. For economic impacts, the.valuation approach was that of social cost-benefit analysis (CBA) which and describedbelow. For the risks associatedwith the movement of oil, data on the number and-nature of vessels,their cargoes, operational characteristics of the port, etc. were combinedwith the numbers of past incidents and accidents to derive aexpecteda incident and accident rates. Thus it was possibleto establish whether actual accident rates for UK waters differ. signiiidantly ,j from the expected; R and D Technical Report Pll9 a::I xi COST-BENEFIT ANALYSIS CBA is based on the principles of neo-classical welfare economics which is concerned with the allocation of scarceresources. It provides a rational and systematic framework for evaluating actions by expressing all potential impacts in a directly comparable unit of measurement, that of money. Thus, all costs and benefits are treated in the samemanner, ensuring that environmental and social effects aregiven equal consideration to private sector gains and losses. CBA therefore extends beyond financial analysis, by analysing the implications of an action from a social perspective. As an economic analysis of costs and benefits, CBA differs f?omthe tinancial analysis in three main respects: (1) it places a monetary value on impacts which normally fall outside the marketplace such as environmental costs and benefits - for example, conservation effects; (2) it is concernedwith changesin profit and not changesin income - for example, commercial fisheries; and (3) it estimates net national losses by taking into account the potential shift of activities elsewhere - for example, tourism Of relevance to this study is the concept of atotal economic valuea (TEV) of an environmental asset. This is the sum of ausea values and anon-usea values. The former are benefits gained from actual use of the environment (for example, angling) and comprise two components: the cost of undertaking an activity; and the additional willingness to pay for that activity (deemed aconsumer surplusa). Non-use values comprise option values, bequest values and existence values. The fist of these relates to the ability to use an environmental assetin the future, the second to the ability to bequeath an assetto future generations, and the third to an altruistic desire to preserve an asset and ensure its continued existence. A range of valuation techniques has been developed for valuing environmental effects (although it may not always be possible or appropriate to convert all effects into money values): Many of these derive an individualas willingness to pay for an environmental benefit as revealed in the marketplace, through individualsa actions, or as directly expressed through surveys. For some affected sectors, a benefit transfer approach has been adopted in valuing non-market goods. Benefit transfer involves taking a value or benefit estimate developed for a previous project or policy decision and transferring it to another. Thus, some impacts of the Sea Empress oil spill have beenvalued using estimatesderived through previous surveysof awillingness to paya to avoid similar impacts. (All valuations are given in 1996 prices). CLEAN-UP AND SALVAGE COSTS The Sea Empress incident imposed costs on those involved in the clean-up and salvage operations. For example, clean-up costs were incurred by the Marine Pollution Control Unit (MPCU) which was responsible for marine clean-up and Pembrokeshire Country Council (PCC) who undertook land-based clean-up. Under the 1969 Convention on Civil Liability for Oil Pollution Damage and the 1971 Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, the costs incurred as a result of spills of persistent oils can be recovered 4%om Ship Insurers (Skuld the Club) and the IOPC Fund (although specific criteria must be met in order for payment to be agreed). Data available at the time of the analysis indicated that claims totalling nearly and9 million had been made for costs associated with clean-up and property damage, with and3.6 million R and D Technical Report Pll9 xii approved for payment.. (Data gathering for the study ceasedat the.end of November 1997. The most recent IOPCFund data provided at this.time were dated l:* October 1997). These data do not include the costs incurred by some organisations which had not claimed at thistimej for example MPCUincurred costs of just under and12 million. : In addition, the then Department of Transport may have incurred costs associatedwith monitoring salvage operations. Estimates of total-payments under the Fund range from and22 million to $30 million. ..a It would be.inappropriate to take paymentsunder.the 1971 Fund as a measure of the financial costs of the incident because: (1) TFundcriteria only address.some of the costs arising.fi-om oil spills; (2) some organisations may be unable to substantiate claims .(and thus-will not receive compensation); .and (3) not all those eligible will claimtiom the Fund.. For the first of these,,the fact.that loss or damage would not have occurred had the oil spillnot happened is not sufficient. to claim compensation Ya reasonabledegree ofproximity must also to demonstrated. In addition, the 1971 Fund is not responsible-for compensating for the repair of the Sea Empress (circa-g21 million) nor for loss of cargo (circa and5 million) which are covered byseparate insurance. Overall, direct costs are estimated at between g49 million and and58 million, taking account of other costs such as those related to research commissioned as a result :of the oil spill. TOURISM Pembrokeshire is a popular destination for Welsh, other UK and overseasvisitors. Its tourism industry employs between 15 000 and 20 000 people and has a revenue of around and200 million per annum. To estimate the costs to tourism fi-oynthe Sea Empress oil spill,.payments under the. 1971 Fund were used as a first source of data. .However, consultation indicated that 70% of tourism businessesthat experienced a financial impact may not have claimed due to: (1) thea complexity of the claims procedure; (2) the requirement to provide records of peflormance and income,over time; or (3) the requirement to.provide written evidence of lost bookings owing directly to.the spill.a Owing to thelnature of the tourism industry, many,smaller, less organised operators would not collate this information Several studies have attempted to value.the tourism impacts from the 5aea~Empres.s oil-spill and clean-up. The Wales Tourist Board (WTB) analysedthese studiesto establishthe level andnature of identified impacts. They. concluded -that ano consistent or. measurable trends. in tourism performance emerge for Pembrokeshireoverall in 1996a. Despite the yearas overall performance remaining relatively..unchanged, there- were specific, -significant impacts toa some individual operators including- one company specialising in water-based activities.which lost half of.itsturnover for a1996 and one quarter of that for 1997: A number of actions was also taken to minimise impacts to the region including a reassurancecampaign co-ordinated by Tourism South and West Wales. Four estimates of costs to the tourism industry were provided f?om.various sources: (1) estimates of total payments under the 1971 Fund indicate costs of between and4 million and and18 million, assumingthat payments are onlyhalfof costs incurred; (2) WTB estimate that.lost bookings may be equivalent to between and1;3million and and5 million;(3) a 7% decreasein hotel bed-nights sold during 1996 compared with- 1995 may be-equivalentto between and20 million and g27 million; and .. (4) the Pembrokeshire Tourism Federation has suggested that lost revenue across tourism. in R and D Technical Report P119 . .. .: xul, Pembrokeshire between 1995 and 1996 may be between and12 million and and46 million. The mid point of this range (i.e. and18/ and 20 million) is taken as the value of financial impacts. Financial costs cannot be assumed to represent economic costs because of a potential shift in activities to elsewhere (e.g. ifa holidaymaker chosenot to visit Pembrokeshire but somewhere else in Wales, there may be no net impacts to the Welsh economy). Based on the assumptions concerning the percentage of financial costs which represent profit and the alternative holiday destinations chosenby those visitors lost from Pembrokeshire and Wales, it is estimated that for and an and l losses of and20 million economic costs would be El.3 million for Wales and SO.13million for the UK. RECREATION There is a relationship between impacts on tourism and recreation; however, the costs associated with each are quite different. Costs to tourism relate mainly to the impact of the oil spill on the overall performance of tourism in 1996. Recreational costs, on the other hand, relate to lost activity days owing to the spill, or changesin the quality of activity undertaken. For example, less bathing occurred during the summer of 1996 in response to the oil spill Other activities which appear to have been affected by the spill and clean-up include canoeing, sand/landyachting and paracarting, surfing and windsurfing. Access to popular coastal sites was affected immediately following the spill and during the clean-up. Impacts to other activities were minimised due to the timing of the spill. Longer-term impacts were experienced, however, by more formal events, such as the Celtic Watersports Festival. This did not take place until August and yet stiered reduced attendance as a result of perceived impacts. Estimating lost accessto the 64 beachesaffected by the oil spill and clean-up involved scoring and ranking beachesaccordingto key features (i.e. access,facilities and quality of bathing waters) and then attributing visit numbers to them (using some visitor data combined with information on the spreadof beachvisits throughout the year). Using this approach, it appearsthat 450 000 general beach visits may have been lost directly following the spill (based on an assumption that access was not possible fromFebruary 15 until March 10, with visit rates then at halftheir normal number until the end of March). The economics literature suggeststhat lost visits to UK beacheshave a value of between andl .OO and5.20 per visitor day, leading to costs of between CO.45million and and 52.3 million. Overall, recreational impacts are estimated at between around andl million and 52.8 million, with go.5 million associatedwith reduced participation in swimming (for 100 000 lost visits valued at a consumer surplus of and5 per visit); however, data did not permit the valuation of impacts to surfing and windsurfing. COMMERCIAL FISHERIES The fishing industry in South West Wales employs approximately 1000 fishermen and there are over 300 licensed fishing vessels. It is estimated that for everyjob at sea,there are between 3 and 5 shore-basedjobs. The main markets are for commercial fish, lobster, brown crab and spider R and D Technical Report Pl19 xiv crab, whelks and cockles, which are supplied to Spain, Brittany, Portugal, Japan, Korea and local markets. Immediately following the oil spill,local fishermen agreed a voluntary fishing ban and the fishery was later closed by the Ministry of Agriculture, Fisheries and -Food (MAFF). GIahe fisheries exclusion zone (FEZ) impacted both:.commercial inshore and -offshore fisheries,. as well as recreational-angling. Once the FEZ was lifted for a given speciesand area,there was the potential for residual impacts associatedwith reductions-in harvesting rates arising from reductions in fish numbers or impacts on spawning for example. In addition, there -was the possibility that the incident may have reduced-the market for fish from -the oiled area; Despite-theapotential for effects, SEEEC studies have not identified any long termnegative impacts resulting from the spill. Indeed, there are reports that the Sea Empress spill has indirectly improvedsome aspects of the fishery, for example the ban on fishing has allowed populationsof some speciesto recover. At the time of the study, data.indicated.approval for payments of and6.8 million by the .1971Fund;with and5.5 million of this associated with normal fishing activity within the FEZ. Data from the South Wales SeaFisheries Committee (SWSFC) indicates that the landed.value of the catch from its District in 1996 was and5:6 million, which is similar to previous years. The fact that payments under the 1971 Fund equal the value of the catch from the SWSFC District (which.encompasses the FEZ) indicates that; unlike other sectors; payments under the Fund provide a fair.estimate of financial costs to fishermen. Indeed, payments under the Fund are surprisingly~high;r Despitethe above, the factthat compensation claims are rigorously audited by the Fund indicates that payments-do reflect the lower bou.nd.of losses incurred by fishermen. As such, payments under the-1971 Fund of and6.8 million are taken as-thelower bound estimate ofthe financial costs to commercial fisheries arising from the Sea Empress oil spill. Upper. bound costs are estimated ..: at andlo million which includesMAFFas costs in operating the FEZ. Most-of these costs are financial, with economic costsvalued at between SO.67million and andl million (assuming that 10% of lost income is profit). RECREATIONAL FISHERIES In addition to the above restriction, a ban was also placed on fishing for migratory salmon and sea trout in all rivers and streams discharging into the affected area due to risks associatedwith the consumption of fish which may have passedthrough contaminated water during migration This affected thestart of the fishing seasonuntil 21 May 1996 (i.e. for about 22% of the,season). .:. Claims-to the 1971 Fund have been made by those owning or leasing fishing rights in the rivers affected by the fishing ban. Known direct costs to angling.clubs and riparian owners amount to:; EO.13million,.although a further nine clubs may also be putting in claimsfor loss of income, a Migratory salmon and seatrout anglers were also impacted, incurring consumer surplus losses associated with reductions in angling visits.. Information provided by five of the 21 aangling.clubs affected by the ban indicates that between 1995 and 1996; club membership reduced by around 7%. If these five clubs are representative of all those. affected, total club membership -will also have reduced to the same degree. It also appears.that there was a 21% reduction in visit rate across all types of anglers,with the largest reduction experienced by occasional anglers.. Thereduction in the number of angling visits is estimated to lie between 2 1.700 and-36900 and, using R and D Technical Report I?119 xv a benefit transfer approach with a value per visit of and26, there may be a corresponding change in consumer surplus of between SO.56million and go.95 million. There was also a reduction in the numbers of sea- and coastal-basedangling visits for species such as bass, cod, whiting and mackerel. The number of lost visits was estimated fiomnational data on participation rates combined with an estimate of the percentage of trips lost as a result of the ban, taking into account the availability of alternative sites. The associated costs were valued using consumer surplus estimates for bass, which were adjusted for other speciesusing wholesale fish prices (i.e. it was assumed consumer surplus varies in direct proportion to the wholesale that price of fish). Surveys ofbass anglersindicate a wide variationinthe consumer surplus associated with a years angling ($88 to and2140 per annum), valuing the impacts of the Sea Empress incident to this group at between go.07 million and El.7 million. The overall costs to all recreational anglers appearsto be between about and0.76 million and E2.7 million. INDUSTRY Traditionally, the key componentsof the Pembrokeshire economy have been agriculture, tourism the oil industry (and related businesses), the defence industry and, to some extent, fisheries. However, the importance of agriculture is in decline, following a general decline in this sector coupled with other factors such as the BSE crisis. In addition, the military has scaled down its activities in the area considerably. As a result, other industries, particularly tourism and the oil industry, are increasing in importance. With respect to the latter, of the original four refineries based at Milford Haven, one closed in the 1980s and one other announcedits closure last year. It is understood that the refineries suffered some disruption to oil deliveries and the export of oil products as a result of the spill. Imports of fuel to Pembroke Power Station may also have been similarly impacted, and asthe power stationwas on-line during some ofthe incident, cooling water flows were interrupted. It has been suggestedthat the Sea Empress incident was a key factor in National Poweras decision to drop its plans for burning orimulsion at the power station, and that this impact should be valued in monetary terms. This has not been possible due to a number of factors including: (1) the difliculties in obtaining a true estimate ofthe importance of the incident; (2) an inability to quantify the likelihood that the schemewould have been given the go-aheadhad the oil spill not occurred; and (3) the need to estimate the change in risks arising fi-om the sea transport of the orimulsion fuel. The military facility at Pendine supports a rocket test track and a firing range and the former is operated asa business.It is reported that some businesswas lost as a result of the clean-up. Total costs are estimated to be between SO.01 million and SO.021million and were not reclaimed from 3 the 1971 Fund. Costs to the order of go.004 million were also incurred by the Castlemartin Range. These costs were limited as the spill occurred during that part of the year when the Range training facility is not in operation. At any other time ofthe year costs associatedwith lost training may have been up to go.001 million per day. R and D Technical Report P119 xvi While there were some costs to industry in Pembrokeshire, the economy:of the county also: benefited from the oil clean-up... For example,, the clean-up operations provided temporary employment for some individuals. CONSERVATION EFFECTS The affected coastline is of outstanding~beauty and scientific. interest, and most lies within Pembrokeshire Coast National Park; the only nationalpark in Britain primarily designated for its. coastal and estuarinelandscapes. The main areaimpacted by the spill contains 35 Sites of Special Scientific Interest and two National Nature Reserves. In addition, part of the.area forms one of the UKas three Marine Nature Reserves and.much of the coastline has been defined as Heritage Coast. Parts ofthe areaare further designatedbythe-European Commission asSpecial Protection Areas under the EC Birds Directive. and there are also plans for three Special Areas -of Conservation under the Habitats and Species Directive (1992). In the weeks following-the spill, large numbers of dead or moribund marine animals were washedup on beaches. Longer-term impacts on the offshore marine community appearsto be minimal, apart for a reduction in small crustacean species, such as amphipods, in some locations. One heavily affected rocky shoreline species was the limpet and it is .expected that-in the worst affectedareaspopulations could take between ten and 15 years to recover. There were also some large scale mortalities of barnacles, but these effects were short-lived and ,by October 1996 .a barnacle densities were similar to-those before the spill.. In addition, l37 of the rare population of 150 cushion starfish (Asterinaphylactica) were lost and recovery has been slow and uncertain. These impacts aside,there does not appearto be any serious or long-term damageto lower shore or rockpool communities. The oil spill also resulted in some impacts to sediment shoreswhich are particularly important as fish nurseries and are feeding areas for migrant birds. The greatest decrease was .of small crustaceansY. especially amphipods, with molluscs also being impacted to some extent. With respect to maritime vegetation,:while somewas impacted by the oil, most effects have been shortlived. The saltmarsh in MiKord Haven waterway was directly impacted by the oil spill and studies have been initiated to map long-term effects. There was no impact on mammals as a result of the SeaEmpress incident, however large numbers of birds were oiled. The worst hit specieswas the common scoter which made .up two thirds of the birds recorded. Most of the rest were auks, mainly guillemots, which together,with common scoters and razorbills madeaup over 90% of recorded casualties,. These birds are vulnerable to oiling as they spend much-time on the.surface of the water and dive to feed. In contrast, many gulls and herring gulls survived oiling and a number.of important speciesappearto have avoided any significant impact.: In particular, puffins, Manx shear-waters stormpetrels were away from _. and the region at the time of the spill, andthe oil did not reach the important .gannetpopulation at Grassholm Island. Applying the replacementcosts approach.to observed strandings of marine animals generates a value of the order of go.05 million. This involved quantifying the numbers of individuals stranded for each affected species (from mainly qualitative reports) and combining this with a price per R and D Technical Report P119 xvii a-, individual -fkom a biological supply company. If estimates of amphipod losses are taken into account, then costs would be of the order of millions of pounds. For this value to be considered sound in theoretical terms there has to be an indication that society would be willing to pay such replacementcosts. In the caseof amphipods, evidence suggeststhat losseswill be relatively shortlived, with somepopulations already at pre-spill levels. Whether a valuation ofmillions ofpounds would be accepted for the temporary loss of these crustaceansis debatable. Non-use values were applied to give a monetary valuation of the environmental impacts of the oil spill. Three values were considered appropriate for application to the Sea Empress: (1) willingness to pay (WTP) values of andO. per household per beach for protecting 23 EC 14 designated beachesfrom pollution giving a valuation of 230 million per event for all households in the Welsh Water region; (2) WTP values of and166 per household per spill for avoiding a moderate oil spill giving a valuation of and23 million per event for all households in Dyfed; and (3) WTP values of and32 per household for avoiding an Exxon Valdez type oil spill giving a valuation of and35 million per event for all households in the Welsh Water region. HUMAN HEALTH The vapour cloud resulting from the Sea Empress oil spill had the potential to impact the health of workers involved in the clean-up and the health of the general population. A study by Dyfed Powys Health Authority (DPHA) examined the impacts of the oil spill on the health of the general population and found increasedprevalence of some symptoms including nausea,headaches,sore eyes and skin irritation. Modelling of the vapour cloud emanating from the pool of oil released from the Sea Empress indicates that asmany as 37 500 people could have been exposed to oil vapour at a concentration above the odour threshold - the level at which some symptoms could result. In addition, around 25 500 people are estimated to have been exposed to oil vapour via oiled beaches. Using data from DPHA, it is estimated that a total of around 19 000 people experienced symptoms as a result of the Sea Empress oil spill. The cost of symptoms has been estimated from data on their prevalence and willingness to pay for their avoidance. For example, it is estimated that around 8 875 people experiencedheadachesas a result of the oil spill Studies indicate a willingness to pay of and12 per day to avoid a headache valuing this symptom at SO. million (assuming headaches 1 lasted one day). Total acute health effects have been valued at between go.23 million and andl .l million, with the variation aris.mg from different assumptions concerning the frequency of symptoms and their value. The SeaEmpress oil spill is alsoreported to have resulted in psychological impacts to those living in the area affected by the incident. In particular, the psychological health of the exposed population was found to be 4.8% lower than a control group. It has beenpossibleto value these impacts using a stressmodel which compares the stress associatedwith oil spills with that arising from other disasters. Using this approach it is estimated that the value of psychological effects ranges between go.95 million and El.9 million, with the analysis being particularly sensitive to assumptions concerning the size of the affected population. R and D Technical Report P119 SUMMARY OF COSTS The summarisedcosts of the Sea Empress oil spill and clean-up are presented in Table 1. As this shows, the total financial costs arein the range of 260 million to $114 million, and economic costs, are in the range, and 75 million to 2106 million. .Either ends of these ranges represent lower and upper bound costs with the actual costs of the incident most likely falling somewhere between. Table 1: Summary of Costs (E miMion) ..: Financial Costs Economic Costs Category Lower Bound Upper Bound 49.1 58;l 49.1 58.1 46.0 0.0 2.9 1.0.. .. 2.8 Direct Costs Tour and n a 4.0 Recreation. Lower Bound Upper Bound Commercial Fisheries .a 6.8 10.0 0.8 1.2 Recreational Fisheries 0.1 0.1 0.8 2.7 Local Industry 0.0 0.0 0.0 .. 0.0 22.5 35.4 1.2. 3.0 75.3 106.1. Conservation/Non-Use Human Health 1 Total 60.0 Note: Costs are to the nearest andO.1 million. 114.3 MARINE TRANSPORT RISKS Data on tanker incidents and oil spills were analysedto derive incident rates at international and national levels. Internationally, the serious casualtyrate (as defined bythe InternationalMaritime Organization - lM0) for large vessels is 0.02 per vessel per year (for vesselsin excessof 10 000 deadweighttonnes - dwt). In other words, there is 1 chancein 50 per year that a particular tanker will be involved in an event,which leads to, a total loss, serious structural damage, loss of life,. pollution or a breakdown necessitating towage. Not ,aIl serious-casualtiesresult in oil spills.. The.probability that an incident will escalate to a major spill (where a major spill is 30 OOOt or more) is 0.014,aor 1 chance in 70, based on historical data since.1986: Historically, on average, there has been a major spill (~30 OOOt)every year somewhere,in the world, with most (28%) resulting from groundings. Each year, 1 830 million tonnes of oil/oil products are transported globally compared with 217 million tonnes in UK waters. It might, therefore, be expected that 12% of international serious casualties; or 7.5 per annum (pa), would occur in UK waters., Incident data suggests that the actual number of serious casualties in and around UK waters is-in the range 4 to 8 pa. Thus, the R and D Technical Report P119 xix general level of tanker safety in UK waters is not significantly better or worse than that experienced internationally. With a best estimate of six serious casualties per year and the escalation probability given above, a major spill (>30 OOOt) would be expected in UK waters once every 12 years. This is entirely consistent with the incidents involving the Torrey Canyon (1967), the Braer (1993) and the Sea Empress (1996). CONCLUSIONS Based onhistorical data relating to oil tanker incidents and disasters,the SeaEmpress oil spill was to be expected. Another major oil spill (>30 OOOt) would be expected in UK waters within the next 12 years.The economic impact of the incident was minimised owing to the time of year when it occurred, for example tourist, fishing and defence training activities were not at peak levels. Even so, the oil spill and clean-up resulted in financial costs of between and60 million to and114 million, and economic costs of between and75 million to $106 million. RECOMMENDATIONS Given that there is a significant risk of another major oil spill in Milford Haven, it is recommended that priority be given to implementing a range of risk reduction measures. The numbers of future shipping incidents and oil spills should continue to be monitored (and analysed)to determine the effectiveness of the adopted risk reduction strategy. At a national level, it is recommended that much greater emphasis is placed on using the information on shipping incidents in UK waters (routinely gathered by MAD3 and others) to reduce marine transport risks.
Publisher: Environment Agency
Subject Keywords: Fisheries; Marine pollution; Cost benefit analysis; Recreation; Human health; Clean-up; Industrial; Oil spillage; Risk analysis; Tourism
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