(Prepared by Wendy Leger)
In December 2003 the Economics Advisory Committee met with PFEG and representatives of the TWGs and came up with a structure for the Contextual Narratives. These narratives were to address two main purposes:
- To provide the socioeconomic context for each interest
- To identify key trends and developments for the interest that may influence the decision regarding a regulation plan.
The key elements of the contextual narratives identified at the December 2003 meeting included the general socio-economic context, key baseline conditions, key trends and expected consequences of changes, risk assessment and sources.
The first official call for the contextual narratives was sent by the PFEG to the TWGs in May 2004. It included an outline and example. Most of the TWGs had draft contextual narratives completed before the end of the summer 2004.
During that same time period, the Economics Advisory Committee was asked to address a number of outstanding economic issues and provide guidance for the study. In their report (Nov. 2004), the Economics Advisory Committee has identified some key findings regarding the contextual narratives. They are as follows…
Finding 1.3: The TWGs shall develop brief Contextual Narratives for their area of study.
The Contextual Narratives shall explain baseline conditions, key trends in an area of interest,
how an interest adapts to changing water levels, and how an interest is affected by a
management plan. TWGs should use their best professional judgment in identifying the
most likely trends, outcomes, and ways of adapting to changing water levels.
Finding 1.5: Each non-environmental Contextual Narrative shall include a discussion of the
conceptual and data limitations that limit the degree of fungibility. TWGs should indicate
in the Contextual Narrative whether the measured performance indicators are likely to
overstate or understate net economic benefits relative to ideal, fully fungible measures.
Finding 3.4: (Revised) The contextual narratives should explain potentially significant benefit categories not addressed by the current performance indicators such as the effects of changes in hydropower production on air quality and global warming. The narratives should also identify any potentially significant changes in local income and expenditures that could result from, for example, changes in shipping at the Port of Montreal or to the tourist sector as a result of changes in recreational boating. In both cases, the narrative should be based on professional expertise rather than new studies; should explain the geographic extent of the impacts to the extent they are known, and should offer advice to the Board as to how they might use this information in making their decision.
Finding 5.1: The adaptive behaviors underlying a performance indicator should be
described in the Contextual Narrative. The description of adaptive behaviors should provide
insight as to why a particular adaptive behavior was chosen from among alternative possible
Finding 7.1: Beach accretion should not enter into the calculation of the economic
performance indicators. As an alternative, it may be useful to describe sediment transport
and beach accretion processes in the Contextual Narrative.
Each TWG has completed a draft contextual narrative according to the outline provided. However, the original notice to the TWGs covered the first EAC finding only and therefore the other findings have not yet been addressed by the TWGs in their contextual narratives.
All current drafts are posted on the ftp site under PFEG/Reports/Contextual Narratives. The Economics Advisory Committee has been asked to review these drafts. Most are in decent shape, although Hydro still needs some work as does the Lower St. Lawrence River Coastal. Environment still has some gaps. PFEG will be following-up with each TWG with specific comments including any comments provided by the Economics Advisory Committee. One issue that we will ask the EAC to consider is whether the contextual narratives appear unbiased and factual.
How will the Board Use the Contextual Narratives in the Decision?
The contextual narratives will not be used directly in the ranking of plans based on performance, but could be used as part of a "robustness" test to determine if the best plans would still rank highly under changed conditions.
For those TWGs that have identified a future condition that could affect a decision, PFEG may conduct sensitivity analyses to determine the impact of these possible changes on the ranking of plans and the decision process.
The Study Board recognizes that there could be some inherent biases incorporated into the contextual narratives. To help eliminate this, the Study Board will request each TWG to identify the author of the contextual narrative, the level of support from the TWG, and to identify the critical review process applied to each of the contextual narratives.
The Study Board will have at least one or more contextual narratives from each technical work group. While these are prepared in a similar format, it is not always easy to quickly pull-out the desired information. The Board needs a synthesis of the key messages such as that outlined in the Key Messages section. In addition, it is recommended that PFEG prepare tables which pull out key features of the contextual narratives for use by the Study Board as a kind of look-up table, as shown in the example for Recreational Boating.
Recommendation 1: The Study Board reviews all contextual narratives, but uses the key messages and look-up tables during the decision process. These are incorporated into the Board Room.
Recommendation 2: The Study Board requests the TWGs and PFEG to conduct sensitivity analyses for those interests where an identified future condition could influence the decision. The sensitivity analysis results are incorporated into the Board Room.
Recommendation 3: The Study Board adopts all five findings of the Economics Advisory Committee and asks the TWGs to complete the Contextual Narratives by the January workshop, with the sensitivity analysis completed for the March 2005 workshop.
Recommendation 4: The Study Board request the TWGs to identify the author, level of support from the TWG, and the critical review process applied to the contextual narratives.
The TWGs shall develop brief Contextual Narratives for their area of study (e.g.3-4 pages). The Contextual Narratives shall explain baseline conditions, key trends in an area of interest, how an interest adapts to changing water levels, and how an interest is affected by a management plan. TWGs should use their best professional judgment in identifying the most likely trends, outcomes, and ways of adapting to changing water levels.
The contextual narratives are to contain data and information that is critical to "informing" decision-making by the Study Board and IJC. They are to be fact-based, objective appraisals. They are to present logical, concise and effective arguments and they should be written in plain language with the use of tables to present key statistics. They will be used by the Study Board and IJC in communicating with the public, or for use in products made directly available to the public.
The following is an updated outline of what should be included in the contextual narrative.
- General Socioeconomic Context
- An order of magnitude estimate and summary of the overall production value of the interest (i.e. what is the interest/industry worth in both dollar and/or social values)
- An order of magnitude estimate of the number of people who are stakeholders for this interest.
- Any organizational characteristics of these stakeholders (communities, geographic distribution, demographics)
- Specific values and perceptions of the interest in both Canada and US and perhaps upstream/downstream if pertinent. (For environment identify societal values and perceptions)
- The most significant statutory, regulatory and policy restrictions - things that might influence water management decisions ten years from now (e.g. FEMA, electricity deregulation, Endangered Species Act, NAFTA price controls, etc.)
- History of the interest in the Lake Ontario - St. Lawrence River setting.
- Trade flows and current market conditions
- How did the interest fair during the last high (1970s) or low (1960s) water conditions.
- Performance Indicators:
- List the key performance indicators chosen for the analysis and
any important assumptions that could affect the benefits analysis.
- Include a discussion of the conceptual and data limitations that
limit the degree of fungibility of the performance indicators.
TWGs should indicate whether the measured performance indicators
are likely to overstate or understate net economic benefits relative
to ideal, fully fungible measures.
- Potentially Significant Benefit Categories Not Addressed by the
Current Performance Indicators (secondary impacts)
Explain potentially significant benefit categories not addressed by the current performance indicators such as the effects of changes in hydropower production on air quality and global warming. The narratives should also identify any potentially significant changes in local income and expenditures that could result from, for example, changes in shipping at the Port of Montreal or to the tourist sector as a result of changes in recreational boating. In both cases, the narrative should be based on professional expertise rather than new studies; should explain the geographic extent of the impacts to the extent they are known, and should offer advice to the Board as to how they might use this information in making their decision.
- Key Baseline Conditions:
Identify any socio-economic conditions of the interest that if altered, could impact our analysis of regulation plans. For example, our analysis is based on the current Seaway structure, a widening and deepening of the Seaway could completely modify our results for the Commercial Navigation sector.
- Key Trends:
Looking back 10-15 year and using a 10-5 year horizon, identify possible trends in the baseline conditions of the interest. For example, based on the past data and expert judgment, is it expected that the Recreational Boating sector will likely move to larger draft boats, or do we expect about the same distribution of boat sizes over the next decade or so?
- Expected Consequences of Changes:
Based on the key baseline conditions and trends, summarize the expected consequences of these changes in terms of:
- Adoption of substitute goods and services and averting behavior change
- Winners/losers from changes, including regional distribution
- The sensitivity of the interest to changes and ability to adapt to changes through mitigation.
- Adaptive Behaviors
The adaptive behaviors underlying a performance indicator should be described. The description of adaptive behaviors should provide insight as to why a particular adaptive behavior was chosen from among alternative possible behaviors. What is the likely adaptive behavior of the recreational boating sector to and extended low water period? How likely is it that the sector will adapt?
- Risk Assessment/Sensitivity Analysis:
Identify the likelihood of a major shift in the sector any thresholds that if crossed could result in a major dislocation of the interest. Characterize the confidence associated with the baseline conditions, trends, adaptive behavior and risk assessment. Identify if there are specific sensitivity analysis that should be carried out to address these risks.
- Sources: Identify your references.
- Review Process
Received TWG Support:
Boating will continue to increase (predictions of 21% from 1995 to 2006)
The relationship between damage and water levels will stay about the same (stage damage curves will not change). We should conduct a sensitivity analysis in the SVM to see if a 50% increase in boating would change the ranking of plans.
Vessel size has increased over the past 40 years making the industry more sensitive to lows. The performance indicator function derived for the Seaway is unlikely to change in the future provided the Seaway stays the same. There could be change in Montreal as there is a continued trend toward containerization and fewer seaway-sized ocean vessels. However, given that there are other reasons for getting water down to Montreal, this will not likely influence the evaluation.
A widening or deepening of the Seaway would change the conclusions of the analysis.
Municipal and Industrial Water Uses:
Future is not expected to change much in the future. Any new facilities that were built should design their infrastructure to account for more variability in water levels. Not likely that any changes to this sector would affect the decision, except perhaps is the Seaway itself were changed.
Performance indicator functions will probably underestimate demand and prices will be higher. Value of energy will vary from year to year, but we're modeling it as a fixed pattern. The plan has to address hydro prices like water supplies, not fixed but varying randomly within known bounds.
Much of the existing coastal community along the shores of Lake Ontario and the St. Lawrence River are located within the coastal hazard zone. Development pressures are anticipated to increase the number of properties located in the hazard area in the future. Securing a state/provincial and federal permit for shoreline protection is an extremely complicated, costly and lengthy process. If the frequency or duration of higher lake levels increase in the future there will be an increased demand for shoreline protection. If the regulatory process is altered such that a riparian land owner can no longer protect their property with engineered structured, the predicted economic damages will increase dramatically.
It will be important to do some sensitivity analysis with increase development and without adaptation (house is destroyed rather than building shore protection).
Issues such as invasive species, changes in fisheries management, pollution, and population changes or changes in use of the resource are all additional stressors on the environment besides just water levels. There are no guarantees that improving the conditions for levels and flows will provide the expected results although it may help the environment be more robust to the other stressors.
Recognizing that uncertainty about outcomes is a constant feature of the management of complex and dynamic ecosystems and also that the mathematical relationships used by the IERM and SVM are hypotheses based on a limited period of research, it is very important that a new regulation plan include an adaptive management strategy.
Contextual Narrative Summary Table