This document analyzes the costs of reducing nitrogen loadings through wetland restoration. It finds that restoring wetlands could remove large amounts of nitrogen at relatively low costs. Specifically, restoring 842,000 acres of wetlands could remove 424 tons of nitrogen per year at a cost of less than $0.15 per pound of nitrogen removed. The cost of nitrogen removal through wetland restoration is competitive with the costs of on-field nitrogen reduction practices. Therefore, wetland restoration appears to be an effective and cost-competitive policy tool for reducing nitrogen loadings.

1. Costs of reducing nitrogen loadings
through wetland restoration
LeRoy Hansen
Economic Research Service
Presented to the Soil and Water Conservation Society
Louisville, Kentucky
July 24th‐27th, 2016
The views expressed are those of the authors and should not be attributed to the Economic Research Service or USDA

2. 2
Introduction: Impacts of excess
reactive nitrogen (N) loadings
• Hypoxia in the Gulf of Mexico
• Water treatment costs
– The water utility in Des Moines, Iowa, is suing
three counties, alleging that the farmers’ N runoff
increases the city’s water‐treatment costs
• Sometimes affects freshwater ecosystems

3. 3
Sources of N loadings
• Roughly 65 percent of the N that reaches the
GoM is from agriculture
– Primarily from surface and subsurface water
movement from fields
– Non‐point sources → Difficult/costly to regulate
• Other sources include municipalities,
industries, and atmospheric deposition

4. 4
USDA conservation program incentives
reduce N loadings
• EQIP encourages the adoption of on‐field N‐
reducing conservation practices
• CRP retires cropland—N no longer leaves
fields; can be located to capture N runoff
• WRP has restored and protects wetland
ecosystems—some wetlands are effective at
N‐removal

5. 5
Objective: Assess whether restoring
wetlands to reduce N loadings would
be a cost‐effective policy tool
To be a cost‐effective tool, wetlands must
remove N at a ‘competitive price’ (e.g., be as
cost‐effective as on‐field practices)

6. 6
Wetland costs depend on:
1. The cost of the land
2. The construction needed to restore wetlands
3. The value of the land with a wetland

7. 7
The quantity of N removed depends on:
1. The size of the wetland and its watershed
2. The quantity of water reaching the wetland
3. N concentration in incoming waters
4. The dynamics of N movement through the
wetland
5. The wetland ecosystem/temperature

8. 8
This analysis:
1. Uses GIS data to identify where wetlands might be
restored
2. Uses historical data to estimate a cost function that
generates county‐level estimates of the cost of
restoring and preserving wetlands
3. Derives spatial estimates of N removal rates
4. Overlay spatial estimates of costs and N removal rates
to generate expected N removal costs ($/lb) across
suitable locations
5. Aggregates the GIS data to derive the total quantity of
N removed at various levels of costs ($/lb)
6. Compares the estimates of N removal costs of
wetlands to costs of on‐field practices

9. 9
Locations where effective wetlands
might be restored
• Two primary geological characteristics of
locations where wetlands are likely to be
effective
1. Impermeable subsoils
2. Hydric soils suitable to wetland
creation/restoration

10. 10
Study area has geologic and climatic
conditions to support denitrification

11. 11
County‐level wetland cost estimates
are generated for the study area
1) Total wetland cost = f(land cost, wetland size
(proxy‐determinant of restoration cost),
wetland region, urban proximity)
2) Primary data: 3,321 WRP contract records
– The model’s predictive capability: adj R‐square
=0.78
3) We generated cost estimates for average‐
sized (10‐acre) wetlands

12. 12
Annualized costs ($14 to $219/ac) are
driven primarily by land values

13. 13
GIS biophysical model predicts N
removed by hypothetical wetlands
• Model built on variables that affect wetlands’
effectiveness (e.g., land use, temperature,
soils, hydrology)
• 26‐year simulations capture effects of annual,
daily variations in temperature, precip, etc.
• There are 923,000 GIS grid points; each is 1
square km (247 acres)

14. 14
N removal rates (11 to 1,817 lbs/ac/yr)
tend to be highest in IN, IA, IL, OH

15. 15
Laying N removal on cost reveals a cost‐
effectiveness range of $0.03 to $8.65/lb N

16. 16
Suitable lands? Feasible to restore?
Landowners willing to participate?
1. Suitable acreage proxy: ratio of total converted
wetland acreage relative to total acres in study
area = 0.13
2. Assumed that 75% of the converted wetland
acreage can be restored (restoration limited by
roads, development, reservoirs, etc.)
3. Assumed that 50% of eligible landowners will
participate
Assumptions suggest that 37.5% (0.75*0.5) of the
prior‐existing wetland acres within the region could
be restored

17. 17
Expected quantity and cost of N
removed depends on the probability
of restoring a wetland
1. The probable acreage at grid points is 5.4 acres
(=0.13*0.75*0.5*247)
2. To calculate totals, GIS estimates are weighted
by the probability that a 10‐acre wetland can be
restored = 0.54 (e.g., wetlands restored at ~1/2
of the GIS points)
Expected quantity of N removed and the cost are
derived by 1) sorting the probable values at the grid
points by cost‐effectiveness and 2) summing N‐
removed based on cost

18. 18
842,000 wetland acres remove 424
tons of N at less than $0.15/lb
Removal
cost/price
($/lb)
Total N
removed
(1,000
tons)
Wetland
acres
restored
(1,000)
Total cost
(million $)
Average
total cost
($/lb)
0.15 424 842 82.9 0.098
0.50 722 2,330 225 0.16
1.00 774 3,390 297 0.19
3.00 793 3,990 347 0.22

19. 19
Conclusions: Results suggest that
restoring wetlands to reduce N
loadings is an effective policy tool
The cost is competitive: Petrolia and Gowda (2006)
reported on‐field N conservation costs to be
$0.78/lb for a 20% reduction in N losses (versus the
upper‐bound average‐cost estimate of $0.22/lb
reported here. Also results suggest that:
1. At $0.78/lb, about 3 million acres would be
restored and N loadings reduced by 759 tons/yr
2. Scale: The WRP has 2.4 million acres

20. 20
Thank you.