1.
This
document
represents
the
best
judgment
of
the
EPA
staff
conducting
analyses
to
support
the
Phase
II
Section
316(
b)
rule
at
this
time.
It
does
not
represent
the
final
position
of
the
Administrator
or
EPA
on
this
rulemaking.
EPA
reserves
the
right
to
change
or
amend
any
of
the
statements
within
this
document
up
until
the
time
that
the
EPA
Administrator
takes
final
action
on
this
rule.

1
Estimating
Commercial
Fishing
Losses
for
the
Phase
II
Proposal
July
2,
20021
Introduction
To
estimate
the
economic
value
of
losses
due
to
impingement
and
entrainment
(
I&
E)
impacts
on
commercial
fishery
landings
for
the
Section
316(
b)
Phase
II
proposal,
EPA
applied
a
benefits
transfer
approach
that
entails
three
steps.
The
change
in
economic
surplus
is
the
suitable
measure
of
change
in
economic
value
(
loss
or
benefit).
This
paper
presents
an
overview
of
the
approach
used
by
EPA,
and
then
provides
detail
on
the
sources
and
interpretation
of
empirical
values
drawn
from
prior
research
in
order
to
implement
the
approach.

Overview
of
Approach
The
EPA
approach
starts
with
an
estimate
of
reductions
in
dockside
gross
revenues
(
step
one),
and
this
estimate
is
then
used
in
subsequent
steps
to
infer
the
loss
in
total
economic
surplus
(
the
sum
of
producer
and
consumer
surplus
through
the
multitiered
market
for
commercial
fisheries).
Previous
empirical
research
is
used
(
in
steps
two
and
three)
to
develop
a
simple
proportional
relationship
between
changes
in
dockside
gross
revenues
and
the
resulting
changes
in
total
economic
surplus.
The
approach
is
described
in
Chapter
A9
of
EPA's
Case
Study
Analysis
for
the
Proposed
Section
316(
b)
Phase
II
Existing
Facilities
Rule
(
February
2002),
referred
to
hereafter
as
the
case
study
document
(
and
found
in
the
docket
as
DCN
#
4­
0003).

In
brief,
the
three
steps
used
in
the
EPA
benefits
transfer
are
as
follows:

1.
Estimating
the
loss
in
the
gross
value
of
dockside
landings.
This
step
takes
estimated
I&
E­
related
reductions
in
commercial
landings
(
species­
specific
reductions
in
pounds
per
year
for
each
case
study
area),
and
monetizes
these
pounds
foregone
based
on
applicable
dockside
prices.
Methods
and
data
underlying
this
step
are
presented
in
Chapter
A9
of
the
case
study
document,
and
in
each
case
study­
specific
Chapter
4
(
e.
g.,
B4
for
Salem).

2.
Estimating
the
producer
surplus
to
the
commercial
anglers
from
the
change
in
gross
dockside
revenues.
Producer
surplus
is
estimated
by
EPA
to
range
from
40%
to
70%
of
gross
revenues
from
dockside
landings
(
producer
surplus
in
this
context
is
taken
to
include
returns
to
capital
and
the
vessel
owner's
labor
if
the
owner
is
a
commercial
fisherman
on
the
craft).
This
range
is
derived
from
various
studies,
as
described
and
cited
in
Chapter
A9
of
the
case
study
document.
2.
These
results
are
based
on
data
collected
for
the
value
of
gross
landings
and
estimated
costs
for
commercial
anglers
(
and
returns
to
commercial
anglers
are
the
difference
between
revenues
and
costs).
The
data
are
from
Table
2
of
Bishop
(
2000),
and
indicate
an
average
return
to
commercial
fishermen
(
tribal
vessel
owners)
of
42.2%
of
gross
revenues.
Earlier
work
by
Bishop
indicates
returns
on
capital
and
own
labor
for
nontribal
commercial
fishermen
was
approximately
30.5%
(
p.
25).

3.
Omitted
from
this
estimate
is
the
surplus
realized
by
those
who
supply
services
to
the
owners
of
the
commercial
fishing
vessels,
including
suppliers
of
labor
(
e.
g.,
crew
members),
boats,
boat
repairs,
fuel,
and
so
forth.

2
3.
Estimating
total
economic
surplus
based
on
empirically
based
relationships
between
producer
and
total
surplus,
as
estimated
by
past
research.
Empirical
observations
from
Norton
et
al.
(
1983)
and
from
Bishop
(
and
various
coauthors)
both
reveal
that
total
estimated
economic
surplus
was
roughly
approximately
22%
of
total
economic
surplus
(
an
equivalent
statement
is
that
total
surplus
was
found
to
be
roughly
4.5
times
the
producer
surplus
estimated
for
watermen
alone,
because
1/
0.22
=
4.5).
This
is
described
in
Chapter
A9
of
the
case
study
document
(
and
in
cases
study­
specific
Chapters
B4,
etc.).

Taking
the
three
steps
together,
this
implies
that
total
economic
surplus
lost
because
of
I&
E
can
be
approximated
as
between
1.8
and
3.2
times
the
gross
value
of
foregone
landings
(
i.
e.,
1.8
=
40%
*
[
1/.
22];
and
3.2
=
70%
*
[
1/.
22]).

Sources
and
Interpretation
of
Empirical
Relationships
This
section
provides
empirical
detail
on
the
benefits
transfer
relationships
described
above,
focusing
on
step
three.

A
key
source
of
the
information
used
by
EPA
derives
from
empirical
work
by
Bishop
(
2000),
and
by
Holt
and
Bishop
(
2002),
in
the
Great
Lakes.
Some
of
this
empirical
work
is
in
a
draft
report
prepared
by
Dr.
Bishop
(
Bishop,
2000)
that
he
has
not
made
available
for
public
distribution.
If
Dr.
Bishop
makes
his
results
and
associated
documentation
available,
EPA
will
include
this
information
in
the
docket.
In
the
interim,
the
empirical
results
of
relevance
to
the
EPA
approach
are
presented
here
as
follows
(
and
are
derived
from
Table
6
of
Bishop,
2000):


Surplus
earned
by
commercial
fishermen
(
including
both
tribal
and
state­
licensed
watermen)
amounts
to
$
4.4
million.
2

"
Post­
fisherman
commercial
fishing
benefits"
consist
of
surplus
to
businesses
(
rents
to
wholesalers,
retailers,
restaurants,
fish
processors,
etc.)
and
consumers
(
consumer
surplus
to
those
who
ultimately
consume
the
fish).
The
post­
fisherman
commercial
benefits
estimated
by
Bishop
(
2000)
as
attributable
to
catches
of
tribal
and
state­
licensed
commercial
fishermen
amount
to
$
15.3
million.
3

Based
on
the
above,
total
surplus
is
$
19.7
million
(
19.7
=
15.3
+
4.4),
of
which
producer
4.
Norton
et
al.
provide
their
method
and
results
for
commercial
fishery
benefits
in
pp.
38
through
45
of
their
book.
Results
are
based
primarily
on
data
from
1976
through
1979.

5.
Note
that
earlier
citations
to
this
paper
as
Holt
and
Bishop
(
forthcoming)
may
have
mistakenly
assigned
it
to
the
journal
Applied
Economics.
The
manuscript
appears
in
Empirical
Economics.

3
surplus
to
commercial
fishermen
amounts
to
approximately
22%
(
4.4/
19.7
=
22.3%).
"
Post­
fisherman
commercial
fishing
benefits"
amount
to
the
remaining
78%.

In
the
above
work,
the
post­
fisherman
commercial
fishing
benefits
are
estimated
based
on
a
model
of
the
Great
Lakes
fish
markets
developed
by
Holt
and
Bishop.
Holt
and
Bishop
develop
a
general
equilibrium
model
of
the
commercial
fishery,
in
which
dockside
demand
is
derived
from
demands
expressed
"
downstream"
in
the
wholesale,
retail,
and
consumer
markets.
The
general
equilibrium
approach
is
based
on
principles
found
in
Just
et
al.
(
1982),
and
typically
accounts
for
a
more
complete
measure
of
surplus
than
obtained
using
Marshallian
demand
curves
in
a
partial
equilibrium
framework.
This
model
is
represented
in
Holt
and
Bishop
(
2002).

Similar
findings
with
respect
to
total
versus
producer
surplus
can
be
observed
from
Norton
et
al.
(
1983),
who
present
empirical
results
for
the
striped
bass
commercial
fishery
in
the
Fulton
and
Baltimore
markets.
4
As
with
Holt
and
Bishop,
Norton
et
al.'
s
approach
is
based
on
an
application
of
multimarket
welfare
as
described
by
Just
et
al.
(
1982).
Norton
et
al.
report
the
following
results
(
presumably
reported
in
1980$):


Surplus
to
retailers
and
consumers
amounts
to
$
1.522
million
in
the
Fulton
and
Baltimore
markets,
and
an
additional
$
1.191
million
in
surplus
is
estimated
for
other
central
markets
such
as
Newport
News
and
Philadelphia
(
pp.
42
and
43).
The
combined
results
indicate
total
estimated
post­
fisherman
surplus
of
$
2.713
million.


Producer
surplus
to
commercial
fishermen
themselves
is
estimated
at
$
0.772
million
(
p.
44).


Combining
surplus
estimates
results
for
watermen
and
post­
fishermen,
the
total
surplus
estimate
amounts
to
$
3.485
million
($
2.713
+
$
0.772).
The
proportion
of
that
total
allocated
to
producer­
surplus
for
commercial
fishermen
is
22.2%
(
0.772/
3.485).

References
Bishop,
R.
C.
2000.
Economic
Implications
of
Treaty
Fishing
Rights
in
Michigan:
Income
Earning
Potential
and
Allocation
of
Social
Benefits.
July
19.

Holt,
M.
T.
and
R.
C.
Bishop.
2002.
A
semiflexible
normalized
quadratic
inverse
demand
system:
An
application
to
the
price
formation
of
fish.
Empirical
Economics
27:
23­
47.5
4
Just,
R.
E.,
D.
L.
Hueth,
and
A.
Schmitz.
1982.
Applied
Welfare
Economics
and
Public
Policy.
Prentice
Hall,
Englewood
Cliffs,
NJ.

Norton,
V.,
T.
Smith,
and
I.
Strand.
1983.
Stripers:
The
Economic
Value
of
the
Atlantic
Coast
Commercial
and
Recreational
Striped
Bass
Fisheries.
Maryland
Sea
Grant
Publication
UM­
SG­
TS­
83­
12.
University
of
Maryland,
College
Park.
