Policy Research

Oil Spill Economics: Estimates of the Economic Damages of an Oil Spill in the Straits of Mackinac in Michigan

Robert B. Richardson, Nathan Brugnone

Summary

In the Straits of Mackinac, the Line 5 oil pipeline proves to be at potential risk of spilling into the Great Lakes, which would prove to be damaging for the state economically. This report is an estimation of these economic damages in the cost of natural resource damages and the cost associated with restoring it as well as the impact on the private sector and the municipalities in the surrounding area. The economic impact would be in areas like tourism, commercial fishing, municipal drinking water and sewer systems, and real estate. The total estimated economic damages from a spill from Line 5 in this report is $5.6 billion dollars.

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Policy Implications

The economic impact of a Line 5 oil spill will be felt in many ways in the area surrounding the Straits of Mackinac. Tourism will take a major hit, as perceived environmental issues will decrease the number of visitors to places like Mackinac Island and Bois Blanc Island. It also will cost millions in industries that rely on the Great Lakes, including commercial fishing, costal real estate, and municipal water treatment. The unmaintained Line 5 could potentially lead to these economic damages.