SOS Forests

Wildfire Cost-Plus-Loss

What are the actual costs of a wildfire?

A new research paper posted at the W.I.S.E. Colloquium: Forest and Fire Sciences [here] addresses that question. The title is U.S. Wildfire Cost-Plus-Loss Economics Project: The “One-Pager” Checklist, and the authors are Bob Zybach, Michael Dubrasich, Gregory Brenner, and John Marker.

Official Forest Service tallies usually include suppression expenses only. Media reports sometimes include estimates of damage to homes and infrastructure. But the economic impacts of wildfires are far-reaching and new (and old) research shows the need for improved cost estimates of wildfire.

Large wildfires consume more than just suppression expenses (costs) –- they also do measurable short- and long-term damages (loss) to public and private equity and resources. Traditional fire appraisal uses the term cost-plus-loss to account for all the economic impacts of wildfire. This econometric analysis method is sometimes expressed as C+NVC (costs plus net value change). The goal (economic utility) of fire suppression is to minimize cost-plus-loss, sometimes expressed as LCD (least cost plus damage).

The paper describes a method for accounting for all the costs and losses associated with wildfires. A one page checklist is appended that serves as a mini-ledger for performing that accounting.

We have discussed the cost-plus loss issue many times at SOS Forests [here, here, and here, for instance]. One post worth highlighting:

* The Western Forestry Leadership Coalition recently released a report [here] entitled “The True Cost of Wildfire in the Western U.S.” (Dale et al 2009). The authors examined six major US wildfires, and compared suppression costs and tactics with “total costs.”

A full accounting considers long-term and complex costs, including impacts to watersheds, ecosystems, infrastructure, businesses, individuals, and the local and national economy. Specifically, these costs include property losses (insured and uninsured), post-fire impacts (such as flooding, erosion, and water quality), air quality damages, healthcare costs, injuries and fatalities, lost revenues (to residents evacuated by the fire, and to local businesses), infrastructure shutdowns (such as highways, airports, railroads), and a host of ecosystem service costs that may extend into the distant future.

Day-lighting the true costs of fire highlights opportunities to use active management to curb escalating costs. Unhealthy forests can increase the risk of fire. Investing in active forest management is therefore valuable in the same way as investing in one’s own preventative health care. Upfront costs can be imposing, and while the benefits may seem uncertain, good health results in cost savings that benefit the individual, family, and society. This analogy helps to highlight the importance of fostering resilient ecosystems before fires occur, as a tool for reducing the costs associated with suppression and recovery as well as extending benefits to a far wider circle of individuals than might be initially expected.

Other examples of cost-plus-loss accounting include:

* The 2003 fires in San Diego and Southern California were a disaster by any measure –- 24 fatalities, over 3,700 homes destroyed. At the time, the costs of the suppression efforts were staggering, $43 million. However, Matt Rahn, a researcher from San Diego State University, recently presented findings that put this figure at less than 2% of the total long-term cost-plus-loss of the fire.

* The Hayman Fire (2002) burned 138,000 acres and cost $42,279,000 ($307/acre) to suppress. But Professor Dennis Lynch of Colorado State University estimated that an additional $187,500,000 ($1,358/acre) in losses had accrued within a year. Suppression costs were only 18% of the total, and Dr. Lynch stated, “I recognized the need to follow costs into subsequent years to more completely identify a fire’s true impact”.

* The National Association of Forest Service Retirees issued Forest Health and Fire: An Overview and Evaluation (Pfilf et al., 2002) [here] that documented and analyzed the recent historic increases in US wildfire occurrences and severity. The report called for a detailed accounting of “total losses associated with fire and other forest health situations,” specifically mentioning homes, evacuations, insurance claims, natural resources, recreation, water, forest health, timber, habitat, wildlife, management costs, subsequent increases of insects and disease.

* In June of 2008 Union Pacific Railroad settled a civil lawsuit brought by the US Forest Service to recover damages connected with the 2000 Storrie forest fire in the Plumas and Lassen National Forests in Northern California [here]. Fire suppression costs were $22 million, but the settlement was for $102 million, roughly 5 times more. The U.S. District Court of Eastern California ruled that government was entitled to compensation for the unique aspects of the damaged forests, above and beyond the fair market value of the timber destroyed. The area burned included old-growth forests that Congress expressly set aside for preservation by protecting them from logging. The remaining $80 million of the settlement compensates the United States for:

… the loss of public scenery and recreation and habitat and wildlife, rather than merely the costs of the lost timber and fire-fighting resources used to douse the blaze. … US district judge Frank C. Damrell Jr. ruled that ‘this court must consider, as many courts have, the unique character of the land at issue.’ Over the railroad’s objections, the judge found the government could seek damages for injuries other than to timber, including harm to the soil, destruction of trees too young for harvest, destruction of wildlife and habitat, and to the area’s grandeur, as well as denial of its use for recreation. He also ruled the government could seek its reforestation costs, noting ‘much of the devastated areas involved old growth forests, designated wilderness and trees that were hundreds of years old.’

In every case cited, the true damages from the fires exceeded the suppression costs by 10 to 50 times or more.

Appraisal of resources damaged by wildfire is not always straightforward. Human lives and adverse health effects are usually not considered in terms of dollar losses at all, and damages to watersheds, soils, habitat, scenery, ecosystem services, and other non-commodities are difficult to value (although there has been considerable study and published efforts in that regard). Rarely has there been any attempt to quantify the long-term consequences of a damaged renewable resource base to provide for the needs of an ever increasing present and future human society. Consideration of an inclusive and comprehensive cost-plus-loss evaluation could be a helpful exercise when evaluating suppression/readiness need and effectiveness appropriation as well.

The authors of U.S. Wildfire Cost-Plus-Loss Economics Project: The “One-Pager” Checklist offer an operational methodology to better characterize the broader true costs to society of large-scale wildfires. The “first step” tool we have developed – a one-page checklist – can be employed by local citizens, media, fire managers, and elected officials to begin the process of better accounting for short-term and long-term effects of wildfires on local and regional economies. We use comprehensive cost-plus-loss accounting methods and consider direct, indirect, and post-fire costs and losses. We have also set up a new website that provides resource appraisal tools and literature citations [here].

We are now seeking funding to apply (to specific fires) the more formal fire cost-plus-loss appraisal methods that we have outlined. Such appraisals would be of benefit to communities, insurance companies, public health groups such as the American Lung Association, water users and companies, wildlife interest groups, and forest and fire managers, to list a few affected parties. Evaluating the true costs of wildfires will inform all those affected and responsible, so that we may more effectively pursue cost-plus-loss savings through restoration forestry and wildfire suppression.

If we can gain a better understanding of the true costs, and of methods to reduce those costs through pro-active management of forests and wildfires, then we all will benefit.