Alternatives for development of unreclaimed land in the kootenay river floodplain, creston, British Columbia : a benefit-cost analysis

This thesis is an investigation of the economic potential for use of 15,000 acres of land in the Kootenay River floodplain at Creston, British Columbia. The Kootenay River flows north into Canada through this floodplain and enters Kootenay Lake 20 miles north of the International Border. The total area of the floodplain between Kootenay Lake and the Border is approximately 36,000 acres, of which 20,000 acres have been reclaimed for agriculture. This study is concerned with 15,000 acres which remain undeveloped, 10,000 acres being provincial Crown land, and 5,000 being Indian Reserve. At present this land is inundated annually by the freshet of the Kootenay River. It provides an important link in the habitat requirements of migratory waterfowl, is used lightly by hunters and fishermen, and provides limited grazing for beef cattle before and after the freshet. The impending completion of Libby Dam, upstream on the Kootenay River at Libby, Montana, will reduce the extent of annual flooding and the costs associated with more intensive use of the land. Consequently, there is considerable interest in intensive development of this land, either for agriculture as with the rest of the floodplain, or as a wildlife management area for the production of wildlife and use in outdoor recreation. Resource managers face the problem of determining which of these alternatives represents the optimum land use. This is a difficult problem, and its solution requires that the benefits and costs associated with each alternative be reduced to a common basis for comparison. This study attempts to make such comparisons on a rigorous basis through the use of benefit-cost analysis. The feasibility of each land use alternative is assessed, and comparisons made on the basis of the net present worth of benefits minus costs. The principles of benefit-cost analysis are well developed, and its application is not difficult when project costs and benefits are adequately reflected in factor prices. Difficulties are encountered in the present study, however, where the output from development for wildlife and outdoor recreation is not marketed and there are no prices to reflect the values created. In analysing the wildlife-recreation alternative, values are imputed to the recreational opportunities using recently developed concepts in evaluating non-priced resource uses. While values are established for direct recreational use, other important aspects of the output under this development are not valued (the production of wildlife independent of recreational use, the preservation of rare species, the fulfillment of international obligations regarding migratory birds). The analysis of this alternative is thus restricted to a comparison between the full costs and only those benefits which are expressed in monetary terms. A further important issue is that the relevant measure of benefits and costs may differ, depending on the 'referent group' from whose point of view the analysis is conducted. To demonstrate the importance of this matter the analysis in this study is conducted from the point of view of three referent groups, the local Creston economy, the province of British Columbia, and Canada as a whole. The outcome of a benefit-cost analysis may also be sensitive to the discount rate adopted, and the sensitivity is tested in this study using rates of six, eight and 10 per cent. Despite the difficulties of expressing all costs and benefits in monetary terms, a rigorous analysis is undertaken and provides the basis for a clear choice of the optimum form of land use. Analysis of agricultural reclamation reveals it to be feasible, with net present values of primary and secondary benefits ranging from $2.4 million from the local perspective to $2.2 million from the provincial and national points of view. Offset against these tangible net benefits are the intangible costs associated with the destruction of existing wildlife habitat and wildlife species. Analysis of the wildlife-recreation development produces widely varying results, depending on the referent group adopted. The net present value of primary and secondary benefits is estimated at $2.1 million from the local viewpoint, $4.6 million provincially, and $7.3 million from the point of view of Canada as a whole. In addition to these quantified values, this development will produce important unmeasurable benefits. In comparing the two, the net benefits estimated for agricultural development can be interpreted as maximum values, ignoring as they do some of the costs associated with wildlife losses. The net benefits estimated from the wildlife-recreation development are regarded as minimum values, since important additional values associated with wildlife production are not quantified.. Viewed in this light the choice between alternatives favors the wildlife-recreation development from both provincial and national perspectives, but is less clear at the local level. Since a basic premise of the study is that the provincial viewpoint is appropriate for decision making, it is concluded that the wildlife-recreation development represents the optimum land use.

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