On May 25, 2023, the Supreme Court handed down a ruling on Sackett vs. Environmental Protection Agency (EPA), a case concerning which wetlands are regulated under the Clean Water Act. The justices unanimously agreed that the EPA overreached when they attempted to regulate wetlands on the Sackett’s Idaho property, but the justices differed considerably in their assessment of what rule or test would be appropriate for determining if a specific parcel of land can be regulated by the EPA.
The Supreme Court's ruling reversed the U.S. Court of Appeals for the 9th Circuit's decision, and a 5-4 majority supported requiring a more stringent test for the application of the Clean Water Act to a wetland. The majority opinion, authored by Justice Samuel Alito, emphasized that the Clean Water Act should only apply to wetlands that are directly adjacent to neighboring waters connected to interstate commerce channels. The EPA is now tasked with rewriting the regulation to comply with the ruling.
What effects will this ruling have on Michiganders? Providing a definitive answer is impossible, but we can start by considering three related questions: First, what are the economic benefits of wetlands in Michigan? Second, what role has agriculture played in protecting Michigan wetlands? Finally, what effect do environmental regulations have on land values and agricultural profitability?
Economic benefits of wetlands
Wetlands provide an array of economic and ecological benefits. A recent paper by economists Charles Taylor and Hannah Druckenmiller estimates the value of U.S. wetlands for one specific type of benefit: flood protection. Using data from this paper, Figure 1 shows the area of converted wetland across Michigan between 2001 and 2016. Pairing this data on wetland loss with data on flood damage claims from the National Flood Insurance Program, Taylor and Druckenmiller estimate that an acre of lost wetland results in an increase of $740 in flood damages for an average U.S. wetland. For wetlands in developed areas, this figure rises to $3,240. Interestingly, the conversion of wetlands into cropland or pasture did not seem to increase flood damages much nationally, likely because farmland still has a great deal of water-holding capacity relative to paved surfaces.
However, not all wetlands and floodzones are created equal. It seems unlikely that wetland loss in Michigan would have an identical effect on flood damages as wetland loss in New Jersey or Florida. Thanks to authors making their data and code publicly available, I am able to use their empirical approach to generate estimates using only data for Michigan and Michigan’s neighbors. Table 1 shows the estimated effect of an acre of wetland loss on flood damages within the same zip code (standard errors clustered at the county level shown in parentheses) using three different samples: the full United States, Michigan and its neighbors (Wisconsin, Indiana and Ohio), and only Michigan. I present estimates for the effect of all wetland loss, in addition to estimates of the effect of converting wetlands into cropland or pasture.
Comparing Michigan to the entire U.S., I find much smaller effects of overall wetland loss in Michigan relative to the full U.S. sample– $33/acre in damages versus $201/acre. For wetland to cropland/pasture conversion, I find similar estimates of $20/acre for the Michigan-only sample and $22/acre for the Michigan and neighbor’s sample.
How large are these effects? These estimates imply that wetland to cropland conversion between 2001 and 2016 led to a $490,000 increase in annual Michigan flood damages, a small fraction of overall annual flood damages, which were $3.3 million in 2016. Framed differently, these estimates imply that current Michigan wetlands provide hundreds of millions of dollars in annual flood protection benefits.
Source: msu.edu
Photo Credit: istock-blackjack3d
Categories: Michigan, Crops, Sustainable Agriculture