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The experiments described in this report are among the first fundamental tests of CV’s measurement capabilities for nonuse losses. The first experiment tests whether people give higher CV responses for protecting larger numbers of migratory waterfowl. According to the U.S. Fish and Wildlife Service (USFWS) more than 100,000 migratory waterfowl die each year in the southwestern United States in uncovered ponds containing wastewater, oil, and other byproducts from oil and gas drilling operations. More than 250,000 of these ponds, which range from 10 to 100 feet in diameter and 14 to 100 feet in depth, are found in the Playa Lakes Region of eastern New Mexico, northwest Texas, western Oklahoma, and parts of Kansas and Colorado. Migratory waterfowl are attracted to these waste-oil holding ponds in the Central Flyway because there are few wetlands and freshwater ponds in the region. Affected migratory waterfowl include mallard ducks, pintail ducks, white-fronted geese, snow geese, and greater sandhill cranes (Hubert, 1990).

While the USFWS does not regulate or control oil and gas operations, it has authority under the Migratory Bird Treaty Act of 1918 to prosecute “wrongful” deaths of migratory waterfowl. Accordingly, in 1988 USFWS began encouraging states in the Southwest (mainly New Mexico, Oklahoma, and Texas) to require companies to cover their ponds. Since that time, New Mexico has been the most

aggressive in requiring companies to cover their waste-oil holding ponds with a screen or netting (Kelly, 1990). Texas recently adopted a statewide rule requiring a screen, net, or cover on most waste-oil holding ponds (Conservation, 1991).

The survey questionnaire describes a regulation that would require wire- net covers on waste-oil holding ponds to protect migratory waterfowl. The

questionnaires, which are identical in all other respects, indicate one of three levels of migratory waterfowl protection: 2,000, 20,000, and 200,000 bird deaths prevented annually. These three levels of waterfowl deaths reflect the range of bird deaths associated with many oil spills. For example, the Arthur Kill pipeline spill in January 1990 is said to have killed an estimated 1,200 to 2,000 birds, numbers very close to our 2,000-bird scenario.7 The Nestucca spill in December 1988 is claimed to have killed an estimated 40,000 birds (see Rowe et al., 1991). For the Exxon Valdez spill, the Trustees estimate that 260,000 to 580,000 birds were killed (Oil Spill Intelligence Report, 1991b).

This test uses a commodity that is simple and concrete, which should provide a relatively easy situation for people to assess their preferences. It also involves a situation where respondents may have relatively few preconceived notions, which otherwise could complicate CV’s ability to measure the value of specific natural resource services. Therefore, we expect that CV would work better in this experiment than in typical NRDAs, which often involve more emotional situations.

The second experiment tests whether WTP responses increase for an increased level of oil-spill response capability. Although the media coverage has focused on very large oil spills, most spills are relatively small in size. According to data collected by the Coast Guard for the years 1984 through 1986, well over 95 percent of all oil spills in U.S. waters were under 50,000 gallons in size. In fact, the majority of spills reported to the Coast Guard were under 500 gallons. During that 3-year period, the average size of a spill was 1,789 gallons (USDOT, 1989). The General Accounting Office, in a report to Congress, notes that about half of the oil spilled in 1988 was spilled near waterfront facilities, with a majority of that oil spilling during the transfer of oil between the facility and a vessel (GAO, 1991).

7 _{This range is estimated using the number of dead birds found and a multiplier of three to five to} account for unrecovered dead birds (Oil Spill Intelligence Report, 1991a).

The OPA of 1990 addresses some prevention issues, such as double-hulled tankers and improved navigational equipment. However, an increase in response capacity would help minimize the environmental damage from oil spills that still occur. After providing respondents with information on the OPA of 1990, oil spills, and the damages resulting from oil spills, the second experiment describes two types of response centers: (1) local response centers that would only prevent environmental damage from oil spills of less than 50,000 gallons and (2) regional response centers that would prevent environmental damages from large, offshore oil spills. The local response centers would be located at each port that handles oil. They would be equipped with inventories of response equipment (e.g., booms, skimmers) and local emergency response personnel would be trained in oil-spill response. Additionally, local volunteers would be trained in wildlife rescue. The regional centers would add to the capabilities of the local centers by preparing for larger spills. These regional centers would be located on the East Coast, Gulf Coast, West Coast, and in Alaska. They would employ full-time professional response staff and maintain larger

inventories of response equipment. Also, they would provide facilities for large-scale wildlife rehabilitation. This experiment enables us to examine issues directly related to the context of oil spills, which is likely to be more emotional than the migratory- waterfowl experiment.

The oil-spill experiment also includes a test of whether the format of the WTP question (i.e., dichotomous-choice vs. open-ended) affects the magnitude of the WTP responses. Bishop and Heberlein (1979 and 1986) first used the dichotomous- choice, or referendum, format in their experimental work comparing CV with other valuation methods. The dichotomous-choice format has become the preferred question format for many CV practitioners. They argue that the “take it or leave it” style question, which only requires people to give a Yes or No response, more closely resembles a market choice than the open-ended alternatives. Hanemann (1984) also contributed to the adoption of the dichotomous-choice method by establishing a link between theoretical welfare concepts and empirical estimates of welfare gains and losses derived from the method. However, very little attention has been given to actually comparing question formats using independent samples. Most tests have compared responses for people who were given both formats (see Loomis, 1990;

Boyle and Bishop, 1988; Stevens et al., 1991; and Kealy, Dovidio, and Rockel, 1988).8 These comparisons are of limited value because people’s responses to one format are likely to condition their responses to the other. Our study employs independent samples for the comparison of question formats.

The choice of this overall design reflects several considerations:

• The migratory waterfowl scenario tests a commodity that is relatively simple and concrete.

• The commodity may have some use-value component, but nonuse values dominate the total value for most respondents. (The survey deals with the Central Flyway, and the interviews were conducted in Atlanta, Georgia.). • The migratory waterfowl scenario has relatively little emotional content,

which Freeman (1990) suggests should improve the ability of CV to accurately measure WTP.

These characteristics of the migratory waterfowl scenario are intended to minimize the likelihood that WTP values are proxies for general environmental attitudes. The design also measures total value, which Mitchell and Carson (1989) argue is the preferred way to structure the valuation task.

The oil-spill scenario addresses a broader set of issues that are relevant to many policy questions. It elicits an ex ante value for reducing the environmental effects of oil spills. The national policy context allows for a substantial nonuse component because it would protect all beaches, not just those the respondent might use. However, the oil-spills scenario lacks the simplicity of the migratory waterfowl scenario because oil spills sometimes are national, or even global, in significance. The wide media coverage received by large oil spills undoubtedly influences public perceptions. Preoccupation with culpability and punishment may make it more difficult to elicit respondents’ WTP for resource services. The strong influence of 8 _{Johnson, Bregenzer, and Shelby (1990) and Seller, Stoll, and Chavas (1985) use independent samples}

to compare question formats, but they do not conduct any formal hypothesis tests. Kriström (1988) is another exception, but this study remains unpublished and largely unavailable. He found that dichotomous-choice WTP estimates were substantially higher than open-ended WTP estimates for preserving virgin forests in Sweden.

information from outside the scenario also makes it more difficult to restrict the elicitation to the facts presented in the scenario. The migratory waterfowl scenario alone could be questioned regarding its relevance to policy decisions about oil spills. However, the oil-spill scenario allows us to check whether our results are replicable for another commodity. By performing two separate studies, we are able to test the consistency of our results. If independent studies produce similar results, the credibility of both studies is reinforced.

In summary, we perform two independent, yet related, CV surveys for our study. The test of question formats also uses independent samples. As discussed in Chapter 3, we used focus groups, one-on-one interviews, and large pretests to refine the survey instruments for both experiments. We have large sample sizes to strengthen the statistical analysis. We also employ some of the latest analysis techniques, such as bootstrapping, to test various hypotheses.