Virginia Coastal Program: 2007 Coastal Grant Project Description and Final Summary

Project Task:

92.02

Grantee:

Virginia Polytechnic Institute & State University

Project Title:

Economic Implications of Promoting the Aquaculture Industry in Virginia: Alternative Management Strategies

Project Description as Proposed:

The proposed project objective is to evaluate the economic implications of potential management strategies for clam and oyster grounds in Virginia. The state requests information and analysis on the costs and benefits of shellfish management alternatives.
The project will articulate economic benefits of clam and oyster management alternatives. To the extent refinement allows, alternatives for publicly managed grounds will include allocating access to public grounds and managing timing and location of harvest areas. Private lease options include policy alternatives for managing land use and water use conflict. An ongoing review of existing aquaculture management programs will identify the most viable option(s) for Virginia. As an adaptive process, modifications to specific management tools are likely to reflect the outcome of the economic analysis.

The study will review and summarize private and public benefits and costs of selected management alternatives. Private benefits include industry net returns. Private costs may include property value impacts and other adverse use impacts. Potential public benefits from oysters’ capacity for nutrient removal include improved water quality and clarity. There may also be public benefit from oyster reefs providing habitat for other finfish and shellfish. Qualitative evaluations will be provided for non-quantifiable benefits.

The decline in oyster production in the Chesapeake Bay is documented in Hargis and Haven (1999), Rothschild et al. (1994) and Santopietro (1986). The adverse effects of harvest technologies on oyster populations are described in Rothschild et al. (1994) and Shabman and Thunberg (1988). Management strategies for private producers are assessed in Bosch and Shabman (1990; 1989). The economic and ecological values of the construction of the oyster reefs are discussed in Coen and Luckenbach (2000), Hargis and Haven (1999), Henderson and O’Neil (2003), Hicks (2004), and Mann and Harding (1998). The economic costs of harvesting oysters are discussed and estimated in Wieland (2006).
Important datasets include the Chesapeake Bay oyster habitat valuation survey (NOAA Fisheries, 2001) and oyster habitat suitability studies (VIMS).

References

Bosch, Darrell J. and Leonard A. Shabman. 'Simulation Modeling to Set Priorities for Research on Oyster Production.' American Journal of Agricultural Economics 72:2(May 1990):371-381.

Bosch, Darrell J. and Leonard A. Shabman. 'The Decline of Private Sector Oyster Culture in Virginia: Causes and Remedial Policies.' Marine Resource Economics 6:3(1989):227-243.

Coen, L. and M. Luckenbach. 2000. “Developing success criteria and goals for evaluating oyster reef restoration: Ecological function or resource exploitation?” Ecological Engineering 15:323-343.

Cerco, Carl F. and Mark R. Noel. “Ecosystem Effects of Oyster Restoration in Virginia Habitat and Lease Areas” June 2006 Final Report. US Army Engineer Research and Development Center, Vicksburg MS.

Hargis Jr., W. and D. Haven. 1999. “Chesapeake Oyster Reefs, Their Importance, Destruction and Guidelines for Restoring Them.”
Chapter 23 In Luckenbach. M.W., R. Mann and J.A. Wesson eds. Oyster Reef Habitat Restoration: A Synopsis and Synthesis of Approaches Virginia Institute of Marine Science Press: Gloucester Point, VA.

Henderson, J. and J. O’Neil. 2003. “Economic Values Associated with Construction of Oyster Reefs by the Corps of Engineers.” EMRRP Technical Notes Collection (ERDC TN-EMRRP-ER-01), U.S. Army Engineer Research and Development Center, Vicksburg, MS.

Hicks, R. 2004. “Recreational Fishing and the Benefits of Oyster Reef Restoration in the Chesapeake Bay.” Mimeo. Dept. of Economics, College of William and Mary, Williamsburg, VA.

Mann, R. and J. Harding. 1998. “Continuing trophic studies on constructed ‘restored’ oyster reefs.” Annual research report to the U.S. Environmental Protection Agency. Chesapeake Bay Program, Living Resources Committee, Virginia Institute of Marine Science, Gloucester Point, Virginia.

Rothschild, B.J. J.S. Ault, P. Goulletquer and M. Heral. 1994. “Decline of the Chesapeake Bay oyster population: a century of habitat destruction and overfishing.” Marine Ecology Progress Series Vol. 111:29-39.

Santopietro, George. 1986. “The Evolution of Property Rights to the Oyster Grounds of the Chesapeake Bay.” Ph.D. Dissertation. Virginia Tech.

Shabman, L. and E. Thunberg. 1988. “An Evaluation of Alternative Strategies for Virginia Oyster Grounds Management: Economic Considerations in Policy Design.” Bulletin 88-4. Virginia Agricultural Experiment Station. Virginia Tech, Blacksburg, VA.

Wieland, R. 2006. “Operating Costs in the Chesapeake Bay Oyster Fishery.” Main Street Economics. http://mainstreeteconomics.com/documents/HarvestCostReport.pdf

Necessary study data will be derived from existing databases and past research on biology and management of the shellfish industry in the Chesapeake Bay and on bio-economic benefits of oysters (see section VII). Shellfish market price data will also be used in valuing processed and fresh market products. Shellfish production and response relationships will be based on previous studies (ex. biological information on the suitability of shellfish grounds). Ecosystem service benefits of oyster production will be derived from on-going research in the Bay. To the extent that data allow, the distributional consequences of economic benefits and costs of different management alternatives will be discussed.

Federal Funding:

$66,000.00

Project Contact:

Darrell Bosch, (540) 231-5265; bosch@vt.edu

Project Status:

10/01/07 - 9/30/08 - Project Completed

Final Product Received:

Economic Implications of Alternative Management Strategies for Virginia Oysters and Clams.  Bosch, Darrell, Nicolai V. Kuminoff, Anna Harris, Jaren C. Pope, Kurt Stephenson, and Pam Mason.  2008. 116 pp. (pdf)

Project Summary Provided by Grantee:

The Virginia shellfish industry has historically been an important element of the state’s economy.  After long-term downward trends in the harvest of wild stocks, clam and oyster production from shellfish aquaculture has been growing.  Three general classes of policy alternatives were considered for supporting and enhancing aquaculture expansion: 1) state policy to increase private grounds available for shellfish production, 2) state research and development programs, and 3) various financial incentives to increase production.  A survey of Virginia oyster and clam producers, existing economic models, and information obtained in interviews with industry, government, and academic experts and literature review were used in assessing policy options. 

In general, the availability of suitable lease ground is not a large barrier for expansion to oyster aquaculture.  Thus, reforms to the state’s current leasing policy are unlikely to stimulate significant new production.  Existing clam producers, however, identified ground availability as one of the most significant barriers to increasing production.  Unlike existing larger producers, smaller clam growers were more likely to see ground availability as a barrier, providing supporting evidence that clam production would expand if more grounds were made available.  In general a slight majority of active shellfish producers surveyed supported opening some of the current (unproductive) Baylor grounds to leased shellfish production. 

Shellfish aquaculture producers in general identified seed availability and poor water quality as major challenges to the industry.  Both oyster and clam producers indicated that state policies to facilitate seed production and improve water quality would do the most to assist their operations. Some conflicts between shellfish growers and surrounding landowners have been widely publicized in the local media, but such conflicts do not appear to be a systematic or widespread obstacle for the industry.  Less than 10 percent of oyster growers identified conflicts with surrounding property owners as the most important barrier limiting expansion of their operations.  Clam growers expressed even less concern with land owner conflicts.

State sponsored shellfish research has the potential to significantly benefit the oyster industry.  Over half of all oyster growers indicated that development of triploid oysters and field trials verifying and testing new genetic strands of oysters would be the most useful lines of research. A firm level simulation analysis of oyster aquaculture operations provides additional support for these conclusions.  Simulation results suggest that even small increases in oyster growth rates or reductions in oyster mortality can produce relatively large increases in rates of return on investment. 

Financial (price) incentives can be provided or facilitated by the state in a number of ways including direct and indirect subsidy programs, state supported efforts to enhance market margins (value-added through branding or ecolabeling), or payments for the water quality services provided by oysters. Each activity can potentially increase the effective price growers receive for their product.  Based on survey results and economic modeling analysis, if these types of programs could provide relatively small increases in oyster prices then production could increase substantially.  For instance a 5 cent increase in price (per oyster) may increase production between 50 and 60 percent.  Clam producers may face a more significant offsetting price effect (downward pressure on clam prices) if production were to increase substantially.

Project publication: 

Disclaimer: This project summary provides the federal dollars initially awarded to the grantee. Due to underexpenditure or reprogramming of grant funds, this figure may change. For more information on the allocation of coastal grant funds, please contact Laura McKay, Virginia Coastal Program Manager, at 804.698.4323 or email: Laura.McKay@deq.virginia.gov

A more detailed Scope of Work for this project is available. Please direct your request for a copy to Virginia.Witmer@deq.virginia.gov

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Virginia Department of
Environmental Quality
P.O. Box 1105
Richmond, VA 23218
(804) 698-4000


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