Water from many of California's coastal rivers has been used for a wide variety of development ventures, including major agricultural diversions, hydropower generation, and contaminant assimilation from industry, agriculture and logging. Anthropogenic impacts often degrade water quality and decrease the quantity and quality of aquatic habitat. Reallocating streamflow away from uses that degrade water quality to uses that foster higher water quality is a critical step in restoring riverine habitat and the anadromous fish that rely on that habitat for a portion of their life cycle. Reallocation always brings with it the need to examine the economic efficiency of the proposed changes. If the dollar benefits of improving water quality are greater than the costs, the criterion of improving economic efficiency is satisfied, a fact that can be highly persuasive to decision makers contemplating reallocation.

Previous related studies have examined nonmarket benefits of the Trinity River in northern California (Douglas and Taylor, 1998; Douglas and Taylor, 1999abc) but nothing of this kind had been done on the Klamath River, another system with numerous uses for and competition over water in times of drought. An economic survey is nearing completion for the mid- to lower Klamath River, including the Scott, Shasta, and Salmon Rivers, but excluding the Trinity River. This survey provides valuable insights about the magnitude of the benefits and nature of the costs of reallocating water from market uses to instream flows that improve water quality and assist in the recovery of Klamath River fish stocks.

Preliminary survey results (Douglas and Johnson, 2002; Douglas and Sleeper, In Prep.) indicate that about 234,000 California, Oregon, and Nevada households made recreation trips to the Klamath River Basin 1997-1998 and that these users spent about $372 million on trip related expenditures. Clearly the prosperity of the region is closely linked to the demand for mid- and lower Klamath River Basin recreation trips. Further, respondents indicated that they would make roughly 36% more recreational trips per annum to the Klamath if the water quality and the fishery were restored to an unspoiled condition. Using two distinct types of survey data, these additional trips would yield benefits with a present value of approximately $9.6 billion (at a discount rate of 7.5%).

Calculating costs to restore the fishery and raise water quality involved five major hypothetical restoration activities: (1) purchasing Klamath project farmland and environmentally sensitive forest lands, (2) allocating more water down the Trinity River to enhance the quantity and quality of Klamath flows below the confluence, (3) removing four mainstem dams along the Klamath River and losing their associated hydropower production, (4) eliminating all harvest of Klamath-Trinity fish stocks for a 12-year period including the acquisition of fishing rights from both tribal and commercial marine fishermen, and (5) operating all Klamath-Trinity fish hatcheries to restore self-reproducing stocks. In total, restoration costs were estimated to be about $1.7 to $2.3 billion. If the assumptions used in this study are valid, it is clear that the benefits ($9.6B) outweigh the costs of restoring water quality and the fishery. 

The apparent disparity between restoration benefits and costs for the Klamath River may suggest to some that water resources on the Klamath be reallocated to environmentally friendly nonmarket uses. The economic analysis rests in part on the information made available to the survey designers by the biological, hydrologic, and water quality data incorporated in The System Impact Assessment Model (SIAM). It is our hope that SIAM can be used to improve the river's water quality and fishery, and strengthen the important regional economy.