An economic evaluation of livestock odor regulation distances

Setback regulations-legislated distances that livestock production facilities must be removed from surrounding properties-are meant to mitigate odor impacts. If the setback length is too short, then there is evidence that surrounding properties and people suffer uncompensated damages. If, on the other hand, setback lengths are too long, then livestock producers may be paying more than that required to compensate for odor-related environmental damages. The purpose of this study is to assess the impact of Kentucky's livestock production facility setbacks on the value of surrounding properties and farm financial management decisions. This paper develops a model of the benefits of livestock odor reduction and the livestock odor abatement cost associated with setback lengths paid by producers. The results of this investigation indicate that the mandated setback lengths for Kentucky are too short. Livestock production firms are worse off under longer setback lengths, but the losses to surrounding home owners far exceed the firm gains at the mandated setbacks. A finding of this study is that the firm has no incentive to completely protect the legislated setback length. Livestock producers in compliance with the relevant setback length may feel protected from odor lawsuits despite damage being done to surrounding property. This suggests that the perceived threat of lawsuit is currently low in the state of Kentucky. Both industry and public goals could be met from further research including location and economic impact of livestock production.