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Economic Values of River Restoration by John Loomis Professor, Dept. of Agricultural and Resource Economics, Colorado State University estoration of rivers and related riparian areas is ow a billion dollar a year business, with at least $15 billion spent since 1990 (Bernhardt, et al., 2005). This restoration is taking place coast to coast, from the Everglades to the Elwha River in Washington. Resto- ration brings hope and optimism that we can begin to achieve some balance in our use of water resources. With restoration we can optimize the many values that rivers and lakes provide rather than solely maximizing the water supply that we can wring from them. Restoration may not always be perceived as a "win - win" for each party involved. This perception may be due to changes in the hydrograph often needed to re- establish channel structure or native species. However, restoration can also be viewed as the mitigation for past and proposed water developments. In this sense, river restoration may remove hurdles for expanding existing water projects and allow new water projects to proceed conditional on river restoration. As such, river restoration should be viewed as an integral component of moving from a fractious water competition (e.g., urban vs agriculture or environment vs development) to a more cooperative view of water resources. In the long run this broader view of water resources is likely to result in "win -win" situations for the "water haves" and "water have nots ". However, as river restoration grows into a billion dollar a year effort, some will no doubt ask whether the benefits of these efforts are worth the costs. This paper will present examples of the types of economic benefits that river restoration provides society. The paper will show that besides recreation opportunities and increased residential property values that non -use or passive use values of river restoration are critical to include when dealing with restoration of riverine habi- tat for threatened and endangered (T &E) species. Total Economic Values The Total Economic Value associated with restora- tion is made up of the obvious use value as well as the not so obvious passive use values. The use values of river restoration include a wide variety of ecosystem services such as recreation, fish habitat, water qual- ity, stormwater management and aesthetics. However, restoration also provides widespread benefits to peopl who obtain satisfaction or utility from knowing that native species exist in their natural habitat (i.e., exis- tence value) or from knowing that restoration today provides native species and their natural habitats to future generations (i.e. a bequest value). These existence and bequest values have been termed passive use values since they were upheld by the U.S. Court of Appeals for use in natural resource damage assessment. The U.S. Court of Appeals noted "Option and existence values may represent "passive" use, but they nonetheless reflect utility derived by humans fron a resource and thus, prima facie, ought to be included in a damage assessment." (US Court of Appeals, 1989; 67). In response to this court ruling, Dept. of Interior agencies include use and passive use values in their natural resource damage assessment (Ward and Duff- ield, 1992; USDOI, 1994). It seems that if passive use values are appropriate for the government to collect on behalf of the public when damages occur to natural resources then passive use values are appropriate to include when estimating the benefits of river restora- tion as well. Technique: Use Values To estimate use values of river restoration economists often rely upon actual market behavior to detect how visitors or homeowners value restoration of lakes and rivers. Visitors reveal their greater demand and ben- efits for improved water resources by the increased number of trips they take to restored lakes and riv- ers as compared to degraded ones. The Travel Cost Method (Loomis and Walsh, 1997) can be used to estimate the demand curve for restored rivers and allow calculation of the visitor's additional net willing ness to pay to visit these restored rivers as compared b degraded ones. For rivers running through residential areas, house price differentials reflect what homeown- ers will pay for living by a restored or natural stream as compared to a degraded one. This statistical analy- sis of house price differentials is called the Hedonic Property Method.