Disasters as a Necessary Part of Benefit-Cost Analyses

Benefit-cost analyses for water projects generally have not included the expected costs (residual risk) of low-probability disasters such as dam failures, impoundment-induced earthquakes, and landslides. Analysis of the history of these types of events demonstrates that dam failures are not uncommon and that the probability of a reservoir-triggered earth-quake increases with increasing reservoir depth. Because the expected costs from such events can be significant and risk is project-specific, estimates should be made for each project. The cost of expected damage from a "high-risk" project in an urban area could be comparable to project benefits.