Course:ECON371/UBCO2011WT1/GROUP4/Article7

Article Link

http://www.ens-newswire.com/ens/nov2011/2011-11-17-091.html

Summary

The Caltrans which was responsible for Highway 1 construction has been blamed for contaminating the Presidio Lake. It agreed to pay $13.5 million to the federal government to resolve the problem. The United States claimed that runoff from the contruction polluted Mountain Lake sediment contained lead, copper, zinc and other substances, and that highway drainage facilities are in need of repair or replacement. Under the agreement, Caltrans will pay $5.5 million for remediation of Mountain Lake, $4 million for re-configuring the Mountain Lake overflow pipeline and $5 thousand for the Presidio’ legal costs. In addtion it will fund and operate a project to prevent the run-off to the Mountain Lake. This would cost $3.5 million. The amount that Caltrans will pay will not only for cleaning up the contamination but also for protecting the precious lakes in the long term.

Analysis

The Mountain Lakes can be considered as public goods. Because the lack of ownership rights, Caltrans which contructed the Highway 1 did not care much about the environmental consequences of its action. In this case, it seemed there was not any emission standard set by the federal government during the Highway construction time or any strictly monitoring. Caltrans saved its abatement cost by letting the runoff go to the lake. However, now it has to pay for the demage cost. There is not clear marginal abatement cost function or damage fuction so we cannot be sure whether this payment is better or worse for Caltrans. According to the agreement, the demage cost is $5.5 million and the transaction cost for legal action is $5 thousands. Caltrans could avoide this transaction cost if at the beginning it was willing to pay for reducing runoff. Another amount that Caltrans has to pay is $3.5 million of funding for environmental protection project. This payment can be considered as abatement cost to prevent runoff to the lakes in the long run and helps Caltrans avoid damage cost.

Another problem we should focus in this article is the biodiversity. The Presidio lies within the Golden Gate National Recreation Area and features natural, historic, scenic, cultural and recreational resources.The Mountain Lakes is the only one natural lake within Presidio and very precious to San Francisco. It attracts many migratory birds, becomes wildlife habitat and a place of interest for tourists. But it has been polluted for decade. Once the lake is damaged by runoff from construction, natural habitat for wildlife would be destroyed, declining biodiversity. As we all know, biodiversity plays an very important role in human life. In addition, human health can be badly affected due to pollution in the lakes and tourism can be slowed down. In fact, the amount that Caltrans agreed to pay may not capture all the social value of the loss caused by contamination. Fortunately, it was willing to pay for project to protect the lake from runoff that can help people prevent loss in the future . However, the government should be stricter on monitoring and controlling pollution from construction from now on. The longer the polltion happens, the more we loose.

Prof. Comments

An important issue here is liability. Caltrans is liable for the damages, or at least for the cost of doing the abatement, and this has been enforced. I would have liked to see liability discussed.

6.5/10