Appendix A, Staff Report

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Economic impacts

This section is intended to summarize the consideration of potential impacts that were considered when formulating this policy. The consideration of economics is required by CEQA. However, since this policy change does not include water quality objectives the water code requirements for a more detailed economic analysis that considers specific factors is not required and is not included.

The economics of dredging are currently controlled by the process of obtaining a cost sharing agreement with the primary federal agency responsible for maintaining navigation channels in the Bay, USACE. This agreement allows USACE, as the federal partner in a project to provide funding for a specified portion of a project, with the local sponsor responsible for the remaining cost. This agreement, the manner in which the federal interest, and percentage of the cost borne by the USACE in a project is determined, is a complex process beyond the scope of this report. However, any potential evaluation of economic impacts on dredging cannot ignore the overriding control that the federal interest and cost share basis has on local projects. This introduces an element of economics that is beyond this policy, however the policy is intended to be reviewed every 3 years and the economics of dredging and the status of federal cost sharing for the planned reuse projects will be evaluated in each revision cycle.

The program, as currently proposed does not have direct economic impacts to baseline dredge operations. This conclusion is based on two parts of the current proposal, first the voluntary nature of the initial program, which relies upon the largest dredger, the USACE, to voluntarily place material for wetland restoration or enhancement, or ocean disposal, rather than at in-bay disposal sites. The increased cost is borne by the USACE. This will affect the budget of the USACE but will, presumably, not affect the maintenance of navigation channels and harbors. This presumption is based on the current baseline, which provides additional funding for projects that achieve an environmental benefit, that is the project baseline is changed by increasing the project value by including the value of habitat restoration and projections by USACE that their budget with augmentation for this environmental benefit will allow them to achieve this goal. The federal budget process and existing programs and funding, none of which provide certainty of funding, govern this.

The second portion of the area that has been evaluated is the impact on small dredgers. These projects are allotted a separate disposal volume (250,000 yds3/year), and this volume is essentially a control or planning volume that will not be restricted. This should provide continued access to in-Bay disposal sites for small dredging projects with economic conditions similar to the current baseline. The impact on the current baseline of changing business conditions, unrelated to this policy, for dredge contractors and the differences in equipment availability is difficult to project. The cost for small dredging projects varies by year and is affected by equipment availability, competition from other projects, and the overall size of the market for service. Some of these factors may be influenced by this proposed policy and result in an indirect effect on the cost of small dredging projects, however these are market driven forces, and cannot be quantified at this time.

One area that may have economic impact is on new work projects, loosely defined as projects that are not included in the historic database, typically resulting from expansion of existing facilities or creation of new facilities at ports or marinas. The most advanced new project in the Bay area at this time is the Port of Oakland expansion. This project has been planned to be consistent with the proposed policy and includes a mix of innovative disposal for habitat creation, disposal for wetland construction and restoration and diversion of some material to landfill or other approved disposal locations. The current estimated cost (all costs are approximate) for the Port of Oakland deepening project for all disposal options are listed below.

Middle Harbor $5.00/cy

Alcatraz: $8.00/cy

Ocean $14.00/cy

Hamilton $18.00/cy

Montezuma $20.00/cy

Berth 10/Landfill $50.00/cy

Through careful planning and a long pre-planning phase the average disposal cost, with a mix of volumes going to Middle Harbor, Montezuma, Hamilton, onsite reuse, and Landfill, is projected to be similar to disposal at the in-Bay dispersive sites. That is, by combining innovative lower cost alternatives, with the more expensive restoration projects and the high cost of removing material that is unacceptable for reuse or dispersive disposal, the project plan has provided a disposal cost similar to disposal at Alcatraz. This model shows the presumption that the policy is based on regarding new work projects, which is that through careful planning and with the long project lead times related to these new projects, at least one new project has minimized or avoided economic impacts as a result of the proposed policy.

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