Loss-of-Damages From U.S. Nuclear Testing in the Marshall Islands: Technical Analysis of the Nuclear Claims Tribunal's Methodology and Alternative Estimates

CRS Report for Congress
Loss-of-Use Damages From U.S. Nuclear Testing
in the Marshall Islands: Technical Analysis of the
Nuclear Claims Tribunal’s Methodology and
Alternative Estimates
August 12, 2005
Salvatore Lazzari
Specialist in Public Finance
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Loss-of-Use Damages from U.S. Nuclear Testing in the
Marshall Islands: Analysis of the Nuclear Claims
Tribunal’s Methodology and Alternative Estimates
Summary
Key oversight committees in the 109^th Congress have held joint hearings on the
Republic of the Marshall Islands (RMI) Changed Circumstances Petition, which
requests $522 million in additional compensation for loss-of-use of Enewetak and
Bikini atolls due to U.S. nuclear testing. The $522 million appears to be significantly
overstated because the methodology — sample rent data, assumptions, and statistical
procedures (i.e., the sampling technique and the use of the exponential regression
model) — overestimates the per-acre rental rate for land on Enewetak and Bikini, the
key variable in the loss-of-use calculation.
Rents on Enewetak and Bikini are overestimated because an exponential
regression model was applied to rents established not in a competitive, free market
for agricultural land on Enewetak and Bikini, but rather to government-established,
and predominantly commercial, rents on the more urbanized and densely populated,
Majuro and Kwajalein atolls. Most land in the RMI is leased at “the official
government rate” established by the RMI cabinet. This rate, which was set by the
RMI at $2,500/acre on January 1, 1979 and increased to $3,000/acre on October 1,
1989, serves as the benchmark for all lease transactions. The RMI government is not
only the tenant in over 40% of the leases — a major source of the demand for RMI
land — but RMI government officials were also effectively the landlords during the
estimation period when rents were government-controlled. Applying this
methodology to unrepresentative sample rent data leads to projected rent/acre of
$112,995/acre for the year 2027, which is equivalent to land asset value of nearly
$1,774,024/acre. The Nuclear Claims Tribunal’s (NCT) methodology also assumes
that vaporized islands were not vaporized, undervalues the rentals on alternative atoll
habitation, and assumes that 100% of the rental proceeds would have been saved.
The NCT’s estimated average rent/acre — e.g., $4,105/acre in 1996 — also
appears overstated when compared to average agricultural rents in the United States
for similar periods: $17.50/acre in Montana, $115/acre in Oregon, $210/acre in
California, $88/acre in New Mexico (1995 figures), and $66.50/acre for the United
States generally (1998 figures). Using an alternative economic methodology, and
applying it to RMI’s national income and product accounts data, the Congressional
Research Service (CRS) has developed alternative estimates of agricultural land rents
for Enewetak and Bikini for the period 1982-1990, which are more consistent with
the underlying real rental value of the two atolls (and the RMI economy), as well as
with agricultural rents observed in the United States and in regions in the Pacific.
CRS estimated rent/acre at $115/acre for the year1982 rising to $258/acre for 1990,
as compared with the NCT’s estimates of $1,902 for 1982 rising to $2,939 for 1990.
Based on these rental rates, CRS estimates gross loss-of-use rentals for 1982-1990
(before adjustments and interest) of $6.4 million, about 10% of the $64 million
estimated by the NCT. According to the NCT, the amount of loss-of-use
compensation already paid by the United States over this period is $36 million.
This report will not be updated.

Contents
Introduction and Background ........................................1
Damage from U.S. Nuclear Testing................................1
U.S. Government Compensation..................................2
Class Action Lawsuits and the Nuclear Claims Fund..................3
Purpose of the Report...........................................5
Description of the Methodology Used in the NCT Reports..................6
Description of Past Loss-of-Use Methodology...................6
Step 1: Estimate Annual Rentals per Acre.......................7
Step 2: Determine the Quantity of Land and the Period of Denied Use8
Step 3: Compute Total Rental Value for Each Year...............9
Step 4: Subtract the Value of Alternative Habitation (Land) Used....9
Step 5: Adjust Annual Rentals for Prior Rentals Paid.............10
Step 6. Multiply Each Year’s Rentals by a Compound Interest Factor11
Step 7: Add the Investment Income on the Proceeds of
Foregone Rental Income...............................11
Step 8: Sum Each Year’s Rental Over the Period of Denied Use....11
Step 9: Determine the Cumulative Sum.......................13
Pre-Judgment Interest Methodology..........................13
Description of Future-Loss-of-Use Methodology ....................13
Assessment of the Methodology .....................................14
The Loss-of-use Concept.......................................14
Explicit and Implicit Rentals....................................15
The Methodology in General....................................16
Overestimation of Past Loss-of-Use..............................17
Overestimation of Average Rents Per Acre.....................17
The Exponential Model of Rent Growth.......................20
The Quantity of Land Affected..............................20
The Value of Alternative Habitation..........................21
Reinvestment of Rental Proceeds............................22
Overestimates of Future Loss-of-Use .............................22
Empirical Evidence...............................................23
Alternative Methodology...........................................25
The RMI Economy............................................25
Theoretical Framework of Rent Determination......................29
Adjusting for the Economic Effects of Nuclear Testing ...............31
Estimation Results............................................34
The Value of Environmental Amenities...........................34
Conclusions .....................................................35
Technical Appendix A: The NCT’s Formulas for Estimating Past
Los s -of-Us e .................................................36

Los s -of-Us e .................................................38
List of Figures
Figure 1. U.S. Average Farm Real Estate Value
Dollar Per Acre, 1982-2004.....................................27
Figure 2. The Supply of and Demand for Land After Nuclear Testing.......33
List of Tables
Table 1. The NCT’s Estimated Damages for Loss-of-Use, by Component......7
Table 2. Quantity of Land and Duration of Denied Use, by Type of Loss ....10
Table 3. Prior Compensation for Loss-of-Use: Figures Used by the NCT.....12
Table 4. Descriptive Statistics on the RMI Economy, 1981-2001...........28
Table 5. Data Used to Estimate Unadjusted Rents per Acre from Equation (3).32
Table 6. Comparison of CRS-Estimated Rents With NCT Estimated Rents,

1982-1990 ..................................................34

Loss-of-Use Damages from U.S. Nuclear
Testing in the Marshall Islands : Analysis of
the Nuclear Claims Tribunal’s Methodology
and Alternative Estimates
Introduction and Background
The Republic of the Marshall Islands (RMI) is an archipelago of approximately
1,200 islets in 28 atolls and 5 separate islands (all coral) located in the Southwestern
Pacific about 2,100 miles southwest of Hawaii and 1,700 miles Northeast of New^o^o^o^o
Guinea (between 160- 175E longitude and 4-12N latitude). After evacuating the
inhabitants, between June 30, 1946 and August 18, 1958 (i.e., over a period
consisting of 4,432 days), the U.S. Government conducted an intensive program of
nuclear testing on Bikini and Enewetak, two remote Northwesterly atolls in the RMI.
Sixty-six underwater, surface, and atmospheric nuclear tests (atomic and
thermonuclear) were conducted on these two atolls, which were considered to be
“ideal” locations for such testing. The total yield of these weapons was 108,000
kilotons, the equivalent of more than 7,200 Hiroshima bombs — an average of over

1.6 Hiroshima-equivalent bombs daily during the testing period.

Damage from U.S. Nuclear Testing
U.S. nuclear testing on the Marshall Islands inflicted significant damage to
property — lands, vegetation, lagoons, and surrounding ecosystems — as well as to
people’s health. Twenty-three nuclear devices were detonated on Bikini atoll.¹ The
hydrogen bomb dropped on February 28, 1954 as part of the “Bravo Test,” which had
the explosive power of 15,000 kilotons — the force equivalent of 1,000 Hiroshima-
type bombs — was the most powerful nuclear weapon ever tested by the United
States.² It completely vaporized five of the atoll’s northern islands (a total of about
68 acres of land, or 4% of the pre-test lands). The underwater “Baker Test” of July
24, 1946, left 500,000 tons of radioactive mud in the atoll’s lagoon. Bikini’s southern
islands were mostly covered by concrete and asphalt for the nuclear testing facilities.
Bikini atoll was so devastated, nearly all of the atoll’s vegetation was destroyed, and
the islands sufficiently contaminated as to render them all uninhabitable through at
least the year 2027.³

¹ An additional test was conducted (i.e., a bomb was detonated) 70 miles west of Bikini.
² For perspective, one might note that the bomb dropped on Hiroshima killed about 140,000
people; the bomb dropped on Nagasaki killed an additional 70,000.
³ At this writing, 10 people were reported living on Bikini. However, according to the
(continued...)

On the Enewetak atoll, 43 above-ground nuclear devices, ranging in size from

18 kilotons to 10,400 kilotons, were exploded from April 14, 1948, to October 18,

1958. The tests on Enewetak atoll pulverized four islands — about 10% of the land
(nearly 200 acres) — and rendered about 60% of the remainder (about 1,120 acres)
uninhabitable at least through the year 2026. The “Mike Test”of 1952 vaporized the
islet of Elugelap, and left a crater in the atoll’s reef 200 feet deep and 1 mile in
diameter. The northern half of the Enewetak atoll remains seriously contaminated by
plutonium radiation, limiting habitation to the southern half of the atoll. The island
of Runit contains 110,000 cubic yards of radioactive contaminants (e.g., plutonium
239) and remains a radioactive waste site. The atoll’s southern islands were mostly
covered by concrete to support the weapons infrastructure so that nearly all of the
vegetation there was destroyed also.⁴
In addition to rendering all of Bikini and most of Enewetak atolls dangerously
irradiated and uninhabitable, radioactive fallout from nuclear testing on Bikini and
Enewetak accidentally spread to other populated areas of the RMI. Fallout from the
1954 “Bravo Test” on Bikini, for example, unexpectedly fell on a total of 253
residents of the Rongelap (86 people) and Utrik atolls (167 people), 95 miles and 255
miles east of Bikini, respectively.⁵ Some experts argue that the nuclear tests on Bikini
and Enewetak caused high incidences of birth defects, miscarriage, and weakened
immune systems, and caused high rates of thyroid, cervical, and breast cancer
throughout the Marshall Islands: They contend that more than a dozen Marshall
Islands atolls, rather than only four, were seriously affected.⁶ Other analysts counter
that the extent of radioactive fallout was limited to the four northern atolls, and that
RMI experts overestimate the link between radiogenic illnesses in the Marshall
Islands and the nuclear tests.
U.S. Government Compensation
The U.S. government has accepted responsibility for the injuries to the people
of Bikini and Enewetak (and to other affected Marshall Island atolls), as well as the
damage to their land, lagoons, and surrounding ecosystem. It has provided financial
and program assistance, services, access to benefits in the United States, and trade
and other economic incentives; and every recent budget has included money for the

³ (...continued)
NCT’s memorandum of decisions and order for Bikini, the date of safe return is estimated
to be November 19, 2027.
⁴ Woodard, Colin. “Marshall Islands: Payback Time” Bulletin of the Atomic Scientists.
March/April 2000. Pp.11-13.
⁵ As with other figures pertaining to RMI nuclear testing, the number of people on Rongelap
and Utrik affected by the Bravo Test (the “down winders”) has been variously reported. For
example, Weisgall reports that 236 inhabitants were irradiated by the Bravo Test. See
Statement of Jonathan M. Weisgall on Behalf of the Peoples of Bikini, Enewetak, Rongelap,
and Utrok Before the House Resources Committee. May 25, 2005.
⁶ Gary Lee, “Postwar Pacific Fallout Wider than Thought,” Washington Post, February 24,

1994.

RMI as compensation for the harm done by U.S. nuclear testing.⁷ According to the
U.S. Department of State, over $531 million (nearly $840 million in 2003 dollars)
has been spent since 1958 on nuclear-test related health care, medical surveillance,
environmental monitoring and soil remediation, loss-of-use and resettlement, and
surplus food assistance.⁸ About one-half of this assistance has been provided through
congressional ex-gratia payments — payments not compelled by legal right or formal
agreement. Including humanitarian causes, economic development, and other non-
nuclear aid, the United States will spend, according to the U.S. Department of the
Interior, nearly $1 billion over the 15-year-period from 1987-2003.⁹
Class Action Lawsuits and the Nuclear Claims Fund
In the early 1980s, fourteen different groups of litigants representing
approximately 5,000 inhabitants of the Marshall Islands (inhabitants of Enewetak,
Bikini, Rongelap and Utrik) brought class-action cases in the United States Court of
Claims against the United States to recover damages said to result from nuclear
weapons testing.¹⁰ These lawsuits were dismissed because in 1986 an agreement,
called the Compact of Free Association (the Compact of Free Association Act of

1985, P.L. 99-239), was reached between the Marshall Islands and the United States.

This agreement, inter alia, provided for an alternative compensation system: a $150
million Nuclear Claims Fund (NCF) funded by the United States. The agreement also
established a Nuclear Claims Tribunal (NCT) to disburse money for nuclear test-
related compensation from the fund. The NCF was to be the final and full settlement
of all claims, past and future, arising out of the nuclear testing program; the RMI also
agreed to espouse and dismiss any and all private damage claims that had been filed
against the U.S. government in the Claims Court.¹¹

⁷ For instance, in 1988, P.L. 99-239 and P.L. 100-446 appropriated $90 million to resettle
Bikini claims and supplement the trust fund. In 2005, P.L. 108-188 appropriated $5.3
million to rehabilitate and resettle Rongelap atoll. The proposed FY2006 budget proposes
$62 million in grants for the RMI. See Executive Office of the President. Office of
Management and Budget. Appendix, Budget Document of the United States, FY 2006.
P.648.
⁸ U. S. Department of State. Report Evaluating the Request of the Government of the RMI
Presented to the Congress of the United States of America. November 2004.
⁹ U.S. Department of the Interior. Office of Insular Affairs. The State of the Islands, 1999.
P.82
¹⁰ In 1981 and 1982 several suits were filed against the U.S. government by the residents of
Enewetak, Bikini, and other RMI atolls that allegedly suffered damages by the nuclear
testing. See Peter v. United States 6 Cl.Ct. 768 (1984), Juda v. United States, 6 Cl.Ct. 441
(1984), and Nitol v. United States, 7 Cl.Ct. 405 (1985).
¹¹ The Compact (99 Stat. 1770 as amended by P.L.108-188) was negotiated and agreed to
by the governments of the United States and the Marshall Islands and approved by plebiscite
in the Marshall Islands and by the U.S. Congress in 1985. It recognized the RMI as a
sovereign nation with economic and security ties to the United States. From 1946-1986, the
United States had administrative responsibility (i.e., full powers of administration,
legislation, and jurisdiction) over the Marshall Islands in its role as Trustee for the United
Nations Trust Territory of the Pacific Islands.

Despite the compensation and financial aid provided by the United States,
including funds disbursed under the 1986 Compact agreement, the inhabitants of
Enewetak and Bikini filed, in the early 1990s, another class action lawsuit. This suit
was filed with the NCT, and claimed $3,300 million in personal and property
damages. The NCT awarded the judgments in 2000 and 2001, but with insufficient
funds from which to pay the claim, the RMI filed a Changed Circumstances Petition
in September 2000 with the U. S. Congress requesting $3,300 million in additional
nuclear testing compensation.¹² The $3,300 million judgment includes unpaid
property damages awards for Enewetak and Bikini totaling $949 million, of which
$522 million is for the lost use of property ($278,000,000 for Bikini and
$244,000,000 for Enewetak) from the date of evacuation in the 1940s to the date of
return which is projected to be in 2026 (for Enewetak) and 2027 (for Bikini). This is
above and beyond amounts already paid for loss-of-use, which, through the year
2000, the NCT has estimated to be about $129 million. The remaining $427 million
($949 million less $522 million) is for the remaining property damages: hardships,
soil remediation, and land restoration.
The methodology used to estimate the $522 million damages for loss-of-use of
property, which is the same for both the Enewetak and Bikini claims, was developed
by a consulting firm — a real estate appraisal firm — under contract for the NCT (as
well as for counsel for claimants).¹³ No alternative methodologies were explored or
used, and the NCT provided many of the estimation parameters and assumptions.¹⁴
The resulting estimates of the dollar value of loss-of-use were adjusted and awarded
by the NCT as damages (or reparations) to the Enewetak and Bikini people, who are
claimants in a class action suit against the U.S. government.¹⁵ The adjusted estimates
are also the amounts requested in the Changed Circumstances Petition (CCP)
submitted to the U.S. Congress by the government of the Republic of Marshall

¹² Additional claims are pending for Rongelap and Utrik, the other 2 Northwesterly atolls
indirectly affected by nuclear testing on Enewetak and Bikini. These damages include
personal injury, remediation, and hardship, but not loss-of-use, since the inhabitants of the
two atolls were not evacuated except for very brief periods.
¹³ Appraisal Report of the Loss in Value in Enewetak Atoll, Republic of Marshall Islands for
the Nuclear Claims Tribunal. The Hallstrom Group, Inc., and Raymond A. Lesher & Co.,
Ltd., May 17, 1996; Appraisal Report of the Aggregate Loss in Use Value in the Bikini Atoll
in the Republic of Marshall Islands. Report written for Mr. Jonathan Weisgall, Chartered.
The Hallstrom Group, Inc. November 19, 1997. Both the Hallstrom Group, Inc. and
Raymond Lesher & Co. Ltd. are real estate appraisal firms.
¹⁴ For the Bikini claim, the NCT had access to a second set of independent estimates of loss-
of-use from a report written by the New Zealand real estate consulting firm of Darroch
Limited for the Defender of the Fund. That report used the same methodology as in the NCT
report, but made fewer unrealistic assumptions. The Hallstrom estimates of past lost use are
60% greater than the Darroch report estimates; for future lost use, the Hallstrom report
estimates are nearly 200% greater than the Darroch report estimates. Since the NCT did not
use these estimates, but used the estimates of the Hallstrom Group to award damages
instead, this second report is not discussed.
¹⁵ Nuclear testing occurred on Enewetak and Bikini, but claims are pending in the case of
Rongelap, Utrik, Ailuk, and Likiep, which, though not directly bombed, experienced
radioactive fallout.

Islands (RMI), which requests further compensation for damages resulting from U.S.
nuclear testing on Marshall Islands atolls during the 1940s and 1950s.
Key oversight committees in the 109^th Congress are the Senate Energy and
Natural Resources Committee, the House Resources Committee, and the House
International Relations Committee. On May 25, 2005, the House Committee on
Resources and the Subcommittee on Asia and the Pacific of the House Committee
on International Relations held a joint hearing on the Changed Circumstances
Petition. The Senate Committee on Energy and Natural Resources held a hearing on
July 19, 2005.
Purpose of the Report
This report examines the NCT loss-of-use methodology. It is a more detailed
version of the loss-of-use discussion incorporated into CRS Report RL32811
Republic of the Marshall Islands Changed Circumstances Petition to Congress.¹⁶ It
supplements that discussion by 1) comparing the NCT estimates of land rents for
Enewetak and Bikini, with land rents in selected areas in the United States (e.g.,
California, Oregon, Montana, and New Mexico) and around the world, and 2)
developing an economic model of agricultural land rents, which is then used to
generate alternative estimates of land rents, which are also compared with the NCT
estimates.
The next section describes the NCT’s methodology in detail, including each of
the steps that the appraisers took in estimating loss-of-use. The mathematical
formulas used in the calculations, which are CRS derivations based on the appraisers’
reports, appear in Technical Appendices A and B. The third section analyzes the
methodology and explains why the NCT’s methodology leads to significantly inflated
rents, and consequently an overstatement of loss-of- use estimates. The fourth section
presents empirical evidence — facts, comparisons, and additional arguments — that
support the main conclusion that the NCT’s loss-of-use estimates are significantly
overstated. The fifth section applies standard neoclassical economic theory to
develop a model of agricultural rents, which is applied to available data from RMI’s
national income and product accounts to generate alternative estimates of average
rents/acre for the total loss-of-use rentals for the Enewetak and Bikini atolls.
This report discusses only the methodology as it relates to estimating damages
for loss-of-use of property; the methodology applied to estimate land reclamation (or
remediation) costs, and hardship costs — the other two components of property
damages — or personal injury damages are not addressed here. Finally, the report is
not a legal analysis of whether or not the loss-of-use claims are valid.

¹⁶ U.S. Library of Congress. Congressional Research Service. Republic of the Marshall
Islands Changed Circumstances Petition to Congress. CRS Report RL32811, by David
Bearden, Mark Holt, Salvatore Lazzari, Thomas Lum, and Kenneth Thomas. Updated June

24, 2005.

Description of the Methodology Used in the NCT
Reports
On April 13, 2000, the NCT awarded the people of Enewetak loss-of-use
damages — including past lost use, future lost use, and pre-judgment interest — of
$244,000,000. On March 5, 2001, the NCT awarded the people of Bikini loss-of-use
damages — including past lost use, future lost use, and pre-judgement interest — of
$278,000,000. The total awards to both peoples sum to $522,000,000 as shown in
Table 1.
Loss-of-use includes not only the period when the United States tested the
nuclear bombs (roughly the period from 1946 to 1958), but the period during which
the islands have been, and will continue to be, unsafe due to dangerous levels of¹⁷
radiation contamination (roughly the period from 1958 to 2027).
More specifically, the estimated loss-of-use is the sum of two components: past
or retrospective loss-of-use, which is the present value of rents that should have been
paid from the time of evacuation of the 312 residents (145 residents of Enewetak, and
167 residents of Bikini) to the date of the NCT reports’ publication; and future or
prospective loss-of-use, which is the present value of estimated rents from the
reports’ publication dates to that estimated date in the future (as described below)
when the lands are sufficiently decontaminated and usable as to permit the return of
RMI citizens. In addition, as part of the past loss-of-use estimates the NCT also
awarded what it called a “pre-judgment interest,” which is the interest income earned
on the original judgments from the time they were determined to the time they were
awarded.
Description of Past Loss-of-Use Methodology. For Enewetak, past
loss-of-use consists of the estimated rents on the entire atoll (1,952.6 acres) from the
time the entire Enewetak population of 145 people was evacuated (December 21,
1947) to their date of return on October 1, 1980. However, when the Enewetak
people were allowed to return on October 1, 1980, they were allowed to safely use
only 646.82 acres of the atoll — 1,305.78 acres continued to be off limits due to
dangerous levels of radioactive contamination. Thus, past loss-of-use includes the
estimated rents on this 1,305.78 acres from October 1, 1980, to May 16, 1996, which
is the date of the Hallstrom Group’s appraisal report. For Bikini, past loss-of-use is
the estimated rental value of all the atoll (1,889.36 acres) from March 7, 1946, which
is when the entire Bikinian population of 167 people was evacuated, to November
18, 1997, when the Bikini appraisal report is dated. The methodology assumes that
the loss-of-use was continuous and uninterrupted — that the islanders never returned
to the atoll.¹⁸

¹⁷ Memoranda of Decisions and Order for Enewetak and Bikini attached to the Changed
Circumstances Petition.
¹⁸ Some of the Bikinians returned to the atoll in June 1969, but had to be re-evacuated in
August 1978 due to continued high and dangerous levels of radioactivity from nuclear
contamination. The islands of Enyu and Bikini were returned to, and inhabited by, the
(continued...)

Table 1. The NCT’s Estimated Damages for Loss-of-Use, by
Component
($ thousands)
EnewetakBikini
Type ofTime PeriodAmountTime PeriodAmount
Loss ($ thousands) ($ thousands)
Past Lost12/21/47 to$149,0003/3/46 to$163,731
Use 5/16/9611/18/97
Future5/17/96 to50,15411/19/97 to68,420
Lost Use 5/17/202611/18/2027
Sub- Tot a l 199,155 232,150
Pr e-^a
judgment1/97 to 4/200044,8455/98 to 3/200145,849
Interest
Grand
Tot a l 8/3/2000 $244,000 3/5/2001 $278,000
(rounded)
^So^ur^c^e^:^M^e^m^o^r^aⁿ^d^{a of}^Decisⁱ^on^s^an^{d Order f}^o^{r En}^ew^etak^an^{d B}ⁱ^kⁱⁿⁱ^attach^{ed to th}^e^C^hanged
^Circu^m^staⁿ^{ces Petitio}ⁿ^{; an}^d^B^ill^Gr^ah^am^,^Ou^tlin^e^o^f^th^e^P^r^ep^ar^ed^Rem^a^r^k^{s f}^o^r^Coⁿ^g^r^essioⁿ^{al Staf}^f
^B^rⁱ^e^fi^ng,^O^p^er^atⁱ^ons^of^t^h^{e M}^a^r^s^hal^l^Is^l^ands^N^u^cl^ear^C^l^ai^m^s^T^rⁱ^bunal^Es^t^ablⁱ^s^{hed Pur}^s^uant^t^o^U^.^S.
^Publⁱ^c^L^a^w^99-239,^A^p^{r. 23, 2004.}
^No^tes^{: a/ P}^r^e-^j^u^d^g^m^eⁿ^tⁱⁿ^ter^e^{st o}ⁿ^lo^ss-^o^f^-^u^{se f}^o^r^Bⁱ^kⁱⁿⁱ^isⁿ^o^t^r^e^p^o^r^ted^sep^a^r^a^tely^{, an}^d^th^u^s^{, w}^a^s
^es^tim^{ated by}^th^{e au}^th^{or bas}^e^{d on}^th^{e oth}^e^{r av}^{ailable data. Note}^th^at^th^es^e^aw^ards^are^on^ly^f^o^r^los^s^-^of^-
^u^s^{e of}^propert^y^;^aw^ards^f^o^{r ot}^h^e^{r propert}^y^dam^a^g^e^s^(rem^edi^a^tⁱ^oⁿ^cos^t^s^an^d^h^a^rds^hⁱ^p⁾^an^d^f^o^{r pers}^on^al
ⁱⁿ^j^u^ry^brin^g^th^{e total dam}^a^g^e^s^{to $3,300 m}^illion^.
More specifically, the methodology used in the two appraisal reports for
estimating the value of past lost use involves each of the following eight steps.
Step 1: Estimate Annual Rentals per Acre. The first step was to estimate
the imputed annual rentals per acre of land that the islanders were unable to use. This
is imputed because it represents what the land would hypothetically have rented for
if the residents had been able to lease that land — there were no actual or explicit
rentals or land sales during the estimation period. The estimate is based on public
records of 174 transactions of actual leases primarily from the Majuro and Kwajalein
atolls.¹⁹

¹⁸ (...continued)
Bikinians in 1985 and 1989, respectively. The appraisal reports assume, based on
instructions from the NCT, that there was no return and that the loss-of-use was continuous
and uninterrupted.
¹⁹ Majuro, RMI’s capital, contains 72% of RMI’s population and is 595 miles from
Enewetak; Kwajelein, the next most populated atoll, contains 9% of RMI’s population and
(continued...)

The records spanned a period of 50 years from 1944 to 1996, but there was only
one lease transaction in 1947, none from 1948 to 1964, and one in 1965.²⁰ Between
1965 and 1996 the number of lease transactions in the Majuro and Kwajalein atolls
increases but there are still missing observations for some years. This problem is
addressed by first taking a five-year moving average to fill in the missing years (in
effect, fabricating rents for those missing years) and estimating two regression
models on the resulting data. The average of the fitted (or predicted) values
calculated from each of these two regression equations was used as the estimated
rents on the affected atolls.²¹ The first model (model A) used the fitted or predicted
values of the regression throughout the forecast period, 1947-1996; the second model
(model B) used the fitted values from the regression for the period 1947-1978, and
the official rents set by the government for the period 1979-1996. The official
government rental rates per acre were $2,500/acre for the years 1979-1989, and
$3,000/acre for the years 1990-1997.
Step 2: Determine the Quantity of Land and the Period of Denied
Use. Having estimated average rents per acre for each of the loss-of-use years, the
next step was to determine how much of their atolls the owners/inhabitants were
prevented from using, i.e., the quantity of acreage lost to use, and the corresponding
period of lost use. The latter included both temporary loss (temporary because of the
return of the inhabitants and their descendants) and permanent loss due to complete
destruction of the some parts of the atolls. As discussed, the period of lost use has²²
two components: past loss and future loss. The assumed values for these variables
are in Table 2.
Note that the vaporized (or pulverized) portions of the atoll’s islands — 201.62
acres in the case of Enewetak, and 69.67 acres in the case of Bikini — were included
in the acreage of denied use, which means the estimates assume that the acreage was
not vaporized. The vaporized portions continue to generate rents for the loss-of-use
estimates both in the past and into the future even though no return to these portions

¹⁹ (...continued)
is 354 miles from Enewetak. Bikini is approximately 440 miles from Majuro and 217 miles
from Kwajalein.
²⁰ The public records were documents from the Majuro Court House and the RMI’s Attorney
General’s Office.
²¹ Regression analysis is a statistical technique that links cause and effect between variables
that are functionally related, as determined by a theoretical analysis, and whose covariations
are related in some significant way (either negatively or positively); it is used to test theories
about the importance of variables suggested by theories, in making predictions, as well as
in policy analysis. In this application, the regression model hypothesizes that rents per acre
increase over time (are a function only of time) at an exponential rate, with the rate of
increase per year determined by the results of the model estimation. The available raw rent
data are first converted to a 5-year moving average and the regression of this average is
estimated as a function of the time variable.
²² In the case of Enewetak, there are some differences in the acreage of lost use assumed in
the appraisal report and those that appear in the NCT’s memorandum of decision and order.
CRS reports only the former as they are the values assumed in the estimation procedures.

is possible.²³ A more appropriate approach, as discussed later, would compensate
landowners for the value of the vaporized portions at the time of vaporization, plus
interest.
Step 3: Compute Total Rental Value for Each Year. The total annual
rental for all the lost land is the product of the estimated average rents/acre for each
year (from step 1) and the affected acreage for that year (from step 2). For Enewetak
this begins in 1947 and runs through the 50-year period through 1996; for Bikini this
begins in 1946 and runs for 52 years through 1997. Each of these annual rentals is
the estimated amount that the U.S. government should have paid the landowners for
the use of their land in that year that the land was appropriated and actually used by
the U.S. Government, and, therefore, lost to the use of the islanders as a result of the
U.S. Government’s nuclear testing.
Step 4: Subtract the Value of Alternative Habitation (Land) Used.
Next the appraisers subtracted the estimated annual rental value of the land to which
the islanders were relocated, which in the case of Enewetak was to Ujelang (429
acres) and in the case of Bikini, was four different locations: Majuro’s Ejit island,
Kili atoll (230 acres), Rongerik atoll (416 acres), and Kwajalein atoll (4,051.2
acres).²⁴ The average rentals/acre of these alternative atolls were not estimated
separately but were assumed to be a fraction of the base values. In the case of
Enewetak, Ujelang was valued at 58% of Enewetak’s rentals. In the case of Bikini,
alternative atolls were valued as follows: Kili’s at either 58% or 75% depending on
the time period of alternative use, and Rongerik and Ejit, at 100%.²⁵ Note that except
for Kwajalein, the replacement atolls are each significantly smaller than Bikini.

²³ Bikini’s land area differs in the two appraisal reports. The Hallstrom report assumed the
total acreage is 1,889.63; the Darroch report assumed it is 1,848.34. One survey reported

1,438 acres. The NCT used the highest figures and assumes that there was no vaporization.

See Hallstrom Group, Inc., and Darroch, Lmt., op. cit.
²⁴ CRS was unable to determine Ejit island’s land area.
²⁵ This adjustment is more difficult for Bikini because of the relocation to four different
atolls, Rongerik, Kili, Kwajalein, and Ejit for different time periods. On a per acre basis, the
stay on Rongerik and Ejit is valued at 100% of the Enewetak rents, but this was for slightly
more than 2 years from Mar. 7, 1946, to Mar. 14, 1948, for Rongerik and from Sept. 1, 1978
to Nov. 2027.

Table 2. Quantity of Land and Duration of Denied Use, by Type
of Loss
Type ofAcreage ofPeriod of Denied UseNotes
LossDenied Use
Enewetak
Past Loss-1,952.6012/21/47 to 9/30/80On 12/21/47, 145
of-UseEnewetak residents were
evacuated.
Past Loss-1,305.7810/1/80 to 5/16/96646.82 acres returned to
of-Useuse on 10/1/80.
Future1,104.16^a5/17/96 to 5/16/2026On 5/16/2026, 1,104.16
Loss-of-acres are to be
Usesufficiently
decontaminated for use.
Bikini
Past Loss-1,889.363/7/46 to 11/18/97 On 3/7/46, 167 residents
of-Usewere evacuated. They
returned on June 1969
and inhabited the atoll
through July 1978, but
due to dangerous
contamination, NCT
estimates assume no
return.
Future1,889.3611/19/97 to11/18/2027The entire (unvaporized)
Loss-of-atoll will likely be
Usecontaminated until

11/19/2027.

^So^urce^{: Mem}^o^ran^d^{a of}^Decisⁱ^on^s^an^{d Order f}^o^{r En}^ew^etak^an^{d B}ⁱ^kⁱⁿⁱ^attach^{ed to}^t^h^e^C^hange^d
^Circu^m^staⁿ^{ces Petitio}ⁿ^.
^No^tes^:^a/^{Per ag}^reem^en^t^bet^w^een^t^h^{e part}ⁱ^e^s^,^t^h^{e ori}^gⁱⁿ^al^acreag^e^of^{1,305.78 i}ⁿ^t^h^{e f}^u^t^u^{re l}^o^s^s^-^of^-^u^s^e
^cal^cu^l^a^tⁱ^oⁿ^w^a^s^redu^{ced t}^o^{1,104.16, bu}^tⁿ^o^ex^pl^an^atⁱ^oⁿ^w^a^s^gⁱ^v^eⁿ^.
Step 5: Adjust Annual Rentals for Prior Rentals Paid. Then the
appraisers subtracted any amount paid by the U.S. government in that year as
compensation for loss-of-use. While it is difficult to determine precisely how much
of the total nuclear compensation was for loss-of-use, Table 3 shows the totals
assumed by the NCT: from 1956-1997, about $38.5 million for the lost use of
Enewetak, and about $65.7 million for the lost use of Bikini has already been paid.
Through 2000, a total of $128.9 million has already been paid for loss-of-use,
according to the NCT. Beginning in 1987, these amounts represent allocations for
loss-of-use from the $150 million Nuclear Claims Fund, which was established as

part of the Compact of Free Association.²⁶ Note that the NCT’s past loss-of-use
estimates ended in 1996 for Enewetak and 1997 for Bikini. Through these years, the
total compensation for lost use assumed by the NCT as paid by the U.S. Government
was $100.9 million.²⁷
Step 6. Multiply Each Year’s Rentals by a Compound Interest
Factor. Each year’s estimated (adjusted) total rental value (the values determined
at step 5) was compounded (multiplied) by an interest factor to adjust for the time
value of money — reflecting the foregone interest that could have been earned had
the rents been paid in the year the atolls’ use was actually lost. The interest rate used
in this calculation, which varies by year, was the effective yield on 30-year U.S.
Treasury bonds.
Step 7: Add the Investment Income on the Proceeds of Foregone
Rental Income. The appraisers calculated the foregone investment income the
islanders could have earned had the rental proceeds from 1946 to 1967 been invested
in 30-year U.S. Treasury bonds. This step, which is different from, and in addition
to the interest calculation in step 6, assumes that the residents/proprietors would have
saved 100% of the rental proceeds, and invested them in long-term U.S. Treasury
securities.²⁸
Step 8: Sum Each Year’s Rental Over the Period of Denied Use. The
eighth step was to sum, for each year, the terms from steps 6 and steps 7.

²⁶ Note that loss-of-use compensation has been provided after 1997. The “Compact of Free
Association” law, P.L. 99-239, authorized annual payments from 1987 through 2003, when
the original economic assistance package expired. The Compact of Free Association
Amendments Act of 2003, P.L. 108-188, continues financial assistance to the RMI through
FY2023. However, for purposes of Table 3, since the rentals are only calculated through

2000, the loss-of-use compensation in later years is excluded.

²⁷ The Hallstrom Group’s initial loss-of-use estimates generated for the NCT did not take
these amounts under consideration. Subsequent estimates by the Hallstrom Group did
account for this compensation.
²⁸ In other words, the interest adjustment in step 6 reimburses residents for delayed nature
of the compensation “owed” by the U.S. government; the interest adjustment in step 7
assumes that if the rentals had been paid when due, the residents/proprietors could have
invested the money in interest-bearing assets.

Table 3. Prior Compensation for Loss-of-Use: Figures Used by
the NCT
($ thousands)
EnewetakBikini
Date/Time PeriodAmountDate/Time PeriodAmount
11/19/56 $175 11/22/56 $325
8/19/69 $1,020 1957-1976 None
9/30/76$750
1977 None 2/14/77 $3,000
12/18/78 $750 11/15/78 $3,000
2/1/80$1,400
1979-1986 None 9/10/82 $3,000
1982-1986None
1987 $3,250 1987 $5,000
1988 $3,250 1988 $5,000
1989 $3,250 1989 $5,000
1990 $3,250 1990 $5,000
1991 $3,250 1991 $5,000
1992 $3,250 1992 $5,000
1993 $3,250 1993 $5,000
1994 $3,250 1994 $5,000
1995 $3,250 1995 $5,000
1996 $3,250 1996 $5,000
1997 $3,250 1997 $5,000
1998 $3,250 1998 $5,000
1999 $3,250 1999 $5,000
2000 $3,250 2000 $5,000
Tot a l s $48,195 $80,725
^So^urce^{: Mem}^o^ran^d^{a of}^Decⁱ^sⁱ^oⁿ^s^a^{nd Order f}^o^{r En}^ew^etak^an^{d B}ⁱ^kⁱⁿⁱ^attach^{ed to th}^e^C^hanged
^Circu^m^staⁿ^{ces Petitio}ⁿ^{; an}^d^A^d^mⁱⁿⁱ^str^a^tioⁿ^ev^alu^a^tioⁿ^o^f^RMI^C^hang^e^d^Circ^u^m^staⁿ^c^e^s^P^e^titioⁿ^{, Nov}^.
^{2004. C}^R^S^R^e^port^R^L^32811,^{Republic of the Mar}^s^{hall Is}^lands^C^hanged^Cⁱ^r^c^ums^t^ances^{Petition to}
^C^ongr^es^s^.

Step 9: Determine the Cumulative Sum. Then, for each year, from the
time of evacuation to the valuation date, the appraisers took the cumulative sum of
the annual terms determined in step 8. This is the total of estimated past loss-of-use,
as reported in Table 1. (The formulas for the computations in each of these steps
appear in Technical Appendix A.)
Pre-Judgment Interest Methodology. The grand total past loss-of-use
estimate includes pre-judgment interest, which is the interest that accumulates on the
original award ($199,154,811 for Enewetak; $232,150,821 for Bikini) compounded
(at 7%) from the original date of estimation to the time the awards were granted. For
Enewetak this is the 40-month period from January 1997 to April 2000; for Bikini
this is the 33-month period from May 1998 to March 2001.²⁹ In effect, this pre-
judgment interest assumes that the loss-of-use awards should have been paid when
the claims were heard as compared to when either the estimates were generated and
reported to the NCT, when the claims were actually awarded, or when the claims will
be paid, if ever.
Description of Future-Loss-of-Use Methodology
Future loss-of-use begins on the day after the damage estimates were reported
(May 17, 1996, for Enewetak; November 19, 1997, for Bikini) and continues until
such time as the claimants are allowed to return to a safe homeland (May 16, 2026,
for Enewetak; November 18, 2027, for Bikini). The value of future loss-of-use was
calculated as the present discounted value of the estimated annual rents over this time
period.
More specifically, for Enewetak future loss-of-use is the value of projected
foregone rental income on the 1,104.16 acres from the period from May 17, 1996, to
May 16, 2026, (which is the date that the 1,104.16 acres of the Enewetak atoll are to
be sufficiently decontaminated to permit its safe use); for Bikini future loss-of-use
is from November 19, 1997 to November 18, 2027 (which is the estimated date that
the Bikini islanders are to have full use of their atoll once again). These dates of
return were determined by the NCT. Each year’s projected rentals — again the
product of estimated average rents per acre and the projected (or assumed) lost
acreage — was discounted at the assumed uniform nominal interest rate of 8%.
Average rents per acre were assumed to start at $4,105 for Enewetak, and $4,167 for
Bikini, and to remain constant for each year throughout the forecast period. (These
rates are the fitted values for the final years determined from the past loss-of-use
estimation procedure.)
The formulas for this computation appear in Technical Appendix B.

²⁹ The relevant dates are as follows: for Enewetak the Hallstrom loss-of-use estimates report
is dated May 16, 1996; the report was transmitted to counsel and the NCT in October 1996;
the claims hearings were conducted in January 1997; and the award was granted on April
13, 2000. For Bikini, the Hallstrom loss-of-use estimates report is dated Nov. 19, 1997; the
report was transmitted to the NCT and filed in Apr. 1998; the claims hearings were
conducted in May 1998; and the award was granted on Mar. 5, 2001.

Assessment of the Methodology
The Loss-of-use Concept
The NCT’s loss-of-use methodology is based on sound economic concepts: 1)
that the uncompensated loss-of-use of an asset that has economic value should be
compensated, and 2) that compensation should be based on the rental value of that
asset, as established by the marketplace.³⁰
Individuals receive a stream or flow of benefits or income from an asset over
time. In a market economy, the value of those streams of income are measured by the
asset’s rental. Further, since individuals may also purchase (rather than simply use
or rent) an asset, the rental value of an asset is, at least in theory, also equal to the
present discounted value of the projected stream of future net rental payments — the
value of the streams of net income or benefits earned — over the expected life of the
asset.³¹ In the case of land (or other real estate) the market-determined price of land
would be computed as (and in fact would tend to equal) the present discounted rental
values of that land — the fair market value of the annual rents that a willing tenant
would pay a willing landlord in an arms-length transaction over the life of the asset
(in perpetuity in the case of land).
Thus, in theory, had the Enewetak and Bikini economies operated on a market-
based system, with private property rights, and a competitive real estate market with
many potential landowners and lessees, these competitively determined explicit rents
would have been what the U.S. government would have paid and what the islanders
would have charged. With a competitive rental market, the people of Enewetak and
Bikini, as landlords, could have leased the land to tenant-operators who would have
paid rents to the landlord over an agreed upon period of time.³² If the U.S.

³⁰ Obviously, the whole question of compensation, from a legal perspective, hinges on
whether the lost use of the atolls was coerced or whether it was part of a voluntary, and
legally binding written contract or agreement. It is CRS’s understanding that there was only
an oral agreement between the U.S. military governor of the Marshall islands and the
resident/proprietors to evacuate for a “brief” (though unspecified) period due to nuclear
testing, and to provide alternative habitation. The military governor gave the impression
(based on this oral agreement) that the resident/proprietors would be able to return soon
after the “brief” testing period ended. As noted in the text, however, the
residents/proprietors of the Bikini atoll have been forbidden to return (except for a brief
period) due to continued nuclear contamination, and the residents of Enewetak were allowed
to return to only a portion (33%) of the land. Whether the oral agreement constitutes a
legally binding and enforceable contract is a legal issue beyond the scope of this report. See
Guyer, Ruth Levy. “Radioactivity and Rights: Clashes at Bikini Atoll” The American
Journal of Public Health. Sept. 2001, vol. 91, pp. 1371-1377.
³¹ In this context, the economic concept of rent is similar to the popular notion of rent — the
price one pays for the right to use an asset such as a house, or car, for a specified period of
time.
³² A third type of arrangement common in more sophisticated (developed) capitalistic
economies is the sale lease-back arrangement. Under this type of exchange, the original
(continued...)

government had permanently taken Enewetak and Bikini atolls without adequate
compensation, any restitution would be based on the value of those assets at the time
of the taking. But the assumption is that, rather than a permanent taking, there was
only a temporary use by the U.S. Government (and equivalently, temporary loss-of-
use to the resident/proprietors of the atolls). Therefore, any restitution would be
based on the value of this use to the U.S. government, (or equivalently, the value of
the lost use to the rightful owners of the two atolls). This value would be the fair
market average rents per acre times the relevant acreage — the lands consisting of
the two atolls (and including the environmental assets or habitat and any residences)
— for the length of time that it was rendered unuseable as a result of U.S.
government activities. Note that as long as the market is competitive, the U.S.
government would not pay more than the fair market rental, based on the land’s
return as agricultural and residential property.³³
Explicit and Implicit Rentals
There has never been a competitive real estate market, nor even a market
economy generally, in either Enewetak or Bikini atoll. Indeed, until recently there has
never been any type of real estate market nor a market economy in the RMI generally.
The islanders did not employ a concept of market value; land was held communally
rather than privately, and was not exchanged for money as in a capitalistic real estate
market. The Enewetak and Bikini landowners did not lease their land — there were
no tenants paying rent to the landlords — but used it themselves. Thus, there are no
actual real estate transactions, competitive or otherwise, in either Enewetak or Bikini,
from which to obtain explicit rentals for agricultural land.
With no real estate market (competitive or otherwise) from which to obtain
explicit rents, the equivalent implicit (accrued) rents must be estimated before loss-
of-use damages may be estimated. Implicit rents would have accrued to the people
of Enewetak and Bikini, as property owners and operators of the lands, if they had
continued to live and produce on their lands even if an explicit real estate market did
not exist. In other words, when the people of Enewetak and Bikini lost the use of
their assets, they lost the implicit rentals that would have accrued to them.
Regardless of the type of leasing and the tenure system, there is, at least in theory and
assuming a competitive market with private property and no transactions costs, an
equivalency between the implicit rentals that would accrue to a landlord and any
explicit rentals paid by tenants.³⁴ These foregone implicit rentals are what the NCT

³² (...continued)
owner of an asset (typically a non-taxable entity) sells the asset to a taxable entity who then
leases it back to the original owner. This type of deal is frequently a tax-motivated one —
it is undertaken to take advantage of tax breaks that would otherwise be lost to the non-
taxable entitity.
³³ In theory there is an equivalency between the rentals (either explicit or implicit) and the
asset value: Value is equal to the present discounted value of the future, projected stream
of returns (or rents) over the income producing life of the asset.
³⁴ With transactions costs, the implicit and explicit rents would diverge. Explicit rentals
would be larger than implicit rentals by the amount of such costs. Also, the assumption of
(continued...)

methodology attempted to determine. According to this line of reasoning, these rents
are the amounts that the U.S. government should have paid the owners of the land for
their use of it at the time of the use.
The Methodology in General
In general, the methodology used by the NCT’s estimators to estimate these
implicit (accrued) rentals is rooted in sound economic and financial theory; it is (at
least when the competitive rent data are available ) standard methodology used by
economists, as well as by the courts, in solving similar problems.³⁵ This is because,
in general, if the assumptions and conditions of the theory were met, the real estate
market rents obtained from comparable (i.e., agricultural and residential) properties
— to the extent they existed — would represent the implicit rentals on agricultural
and residential properties on the islands of Enewetak and Bikini.
Further, the NCT’s methodology attempted to adjust each year’s estimated
rentals owed — the gross rentals — for 1) any rentals previously paid by the U.S.
government for loss-of-use, and 2) the value of alternative land provided as domiciles
by the U.S. government. The NCT’s appraisers adjusted the annual net rentals for
interest on unpaid prior rents. This is also viewed as appropriate because rents should
have been paid at the time of the U.S. government’s use, and at the time of the
consequential loss-of-use to the islanders. Since such rents, if any, should be paid
retroactively, they would have to be compounded, on a year-by-year basis, for the
interest income the islanders would have earned had they been paid on time. In
estimating past loss-of-use, hundreds of actual lease transactions from RMI atolls
were sampled to estimate average rents per acre for each year — a critical variable
upon which both past and future loss-of-use estimates depend. In estimating future
loss-of-use, the methodology appropriately attempted to estimate the value of such
loss-of-use as the present discounted value of projected rentals up to the date of
return.
Although, in general, the methodology could be appropriate, the conditions
under which it should be applied to generate reliable estimates of past implicit rentals
for loss-of-use were not present in either Enewetak and Bikini. Moreover, the NCT’s
specific application of the methodology — much of the critical data used, some of
the assumptions, and certain statistical procedures applied (i.e., the sampling
technique and, specifically, the exponential regression model) — produced estimated
rentals that appear to be overstated, particularly in comparison with rents in the
United States and elsewhere around the world, and in comparison to rents calculated
based on RMI’s national income and product accounts. If the rental value of

³⁴ (...continued)
private property rights is crucial. If private property has value, then a share of a resource that
is privately held has more value that a proportionate share of a communally owned resource.
³⁵ In Yuba Natural Resources, Inc. v. United States 904 F.2d 1577, 1581 (Fed. Cir. 1990)
the Federal Circuit court argued that the usual measure of just compensation for a temporary
taking of property is its fair rental value for the period of the taking, based on the
“minimum” amount of rents under a lease agreement. This is the value for the use of the
property during the taking — the amount which the owner lost as a result of the taking.

Enewetak and Bikini land (average rents/acre) is overestimated, this leads to
overstated past and future loss-of-use estimates, and excessive total loss-of-use
damages claimed and awarded by the NCT. The main shortcoming is with the past
loss-of-use estimates, but since future loss-of-use calculations rely on past loss-of-use
rent estimates, these estimates appear to be inflated as well.
Overestimation of Past Loss-of-Use
This section of the report demonstrates that past loss-of-use damages appear to
be overstated. First, the methodology overestimated or inflated average rents per acre
for land on Enewetak and Bikini. Second, the quantities of land that were denied use
were overstated by, for example, including the use of vaporized portions of islands
(although these would, alternatively, be compensated as assets at the time of their
vaporization, as already explained). Third, the value of alternative atolls provided by
the U.S. government as domiciles may be understated.
Overestimation of Average Rents Per Acre. The NCT’s methodology —
sample rent data, assumptions, and statistical procedures (i.e., the sampling technique
and the use of the exponential regression model) — overestimated the per-acre rental
rate for land on Enewetak and Bikini, the key variable in the loss-of-use calculation.
The NCT’s methodology examined all lease transactions in the RMI from 1944
through November 1997 (the valuation date) — nearly 500 of them in total — and
used 196 transactions as the basic statistical sample from which to estimate average
rents/acre for each year from 1946-1996. The lease transactions were primarily
commercial leases from the urbanized, and densely populated, atolls of Majuro, the
capital of RMI, and Kwajalein, where the U.S. missile test site is located. These
transactions do not reflect the value of the more isolated, rural, and agricultural lands
of Enewetak and Bikini.³⁶ In the NCT’s statistical rent sample, 176 of the 196 leases
are for land on Majuro, which is 595 miles from Enewetak and 439 miles from Bikini
(Kwajalein is 354 miles from Enewetak and 217 miles from Bikini). There are no
surveys of leases on any of the affected atolls because property was (and is)
communally owned and little land or property was bought and sold or rented until
the late 1970s, when the RMI real estate market became more developed.
These problems raise the question of the validity of the sample to determine
land rents in the affected islands. It is true that there have not been actual lease
transactions on either Enewetak or Bikini, even at this writing. However, because the
land on Majuro and other Southeastern atolls, from which sample data are obtained,
are not representative or comparable to land on Enewetak and Bikini, the NCT
arguably should have explored use of an alternative methodology.

³⁶ The 29 RMI atolls and five islands are spread over about 750,000 square miles of ocean.
About 70% of the population live on two atolls: Majuro (50%), and Kwajalein (20%). The
population densities on Majuro and Kwajalein are 5,244 persons/sq.mile and 1,471
persons/sq.mile, respectively. On Enewetak and Bikini, population densities are 316 and 4,
respectively.

Economic theory suggests, and the evidence supports, that rents decline the
further the land is from the central business district; and that the more distant land
will be used for agricultural purposes, and generally at the lowest rents.³⁷ Although
one would expect to find higher rentals in these two atolls than in either Enewetak
or Bikini, the applicability of these rentals to distant, more agrarian, less populated,
and less productive atolls is questionable. In theory, sample rents would be taken as
a random sample from a population of comparable properties sold or rented in a
competitive real estate market, the same market to which a rental value is being
estimated. In the event that such data are unavailable, then an attempt would be made
to estimate the implicit rentals by an alternative method. (The fifth section of this
report develops such an alternative methodology.)
A more serious methodological problem is that the rents/acre obtained from the
sample data are not competitive, free-market rents — they are not the equilibrium
result of the interplay of supply and demand, and, therefore, do not represent the real
underlying productivity of land as a factor of production. There are essentially three
reasons for this: First, most lease transactions in the RMI place take place at what is
called “the official government rate,” which is established by law by the RMI cabinet,
which, under the parliamentary system of government is appointed by the President,
who is also the Prime Minister. The RMI cabinet established the official rental at
$2,500/acre on October 1, 1979, and increased it to $3,000/acre on October 1, 1989.
This rate has been the price at which land and other property is rented throughout the
RMI; it is also the benchmark for most other lease transactions in the RMI including
land leased by the United States government — virtually all land transactions since
1979 have been conducted at this rate. For example, the United States rents the
Kwajalein missile test range at the official rate of $3,000/acre.³⁸ This makes the
United States (which values the RMI lands as a strategic asset) the single biggest
lessee (tenant) for RMI land.
Not only does the RMI government determine the land (and other property)
rental rate, but it is also the source of much of the demand for land, at least during
the period from 1979-1997 (the loss-of-use valuation period). The lessors (tenants)
in many of the nearly 500 lease transactions are either the RMI Government,
Government of the Trust Territory of the Pacific Islands, the Ministry of Interior &
Outer Island Affairs, or other RMI government agencies (such as the National
Telecommunications Authority). According to the Hallstrom appraisal report:
The federal and national governments have been active participants in the market
with over 180 transactions or 40% of the data involving them primarily as
lessees. The national government of the Marshall Islands continues to lease land
for a variety of purposes, but has actually played an important role in establishing

³⁷ Randall, Alan and Emery N. Castle. Land Resources and Land Markets. Handbook of
Natural Resource and Energy Economics, vol II, edited by A.V. Kneese and J.L. Sweeney.
Elsevier Publishers, 1985. pp 571-620.
³⁸ According to the Bank of Hawaii, the United States spent about $180 million for land rent
on Kwajalein over the 15-year-period from 1986 to 2001, $12 million per year. There are

4,051.2 acres of dry land in Kwajalein. Assuming the entire island was rented by the U.S.

government, the exact rental per acre is $2,962. See Republic of the Marshall Islands
Economic Report. Bank of Hawaii. April 2001

a more active market. Prior to the establishment of the “government rate,”
relatively little activity is observed in the Marshall Islands. However, upon
providing businesses and private individuals a basis of land value, a marked
increase in transactions ensues — over 70 percent of the database involves
transactions from 1980 to current. Further discussed below, the market has
tracked the government rate with each adjustment.... This is further supported in
many cases by leases that adopt the then government rate as a standard or basis
for ground rent renegotiation. Since the 1980s, most leases have been written
with a provision for a five-year review and comparison with the official³⁹
government rental rate.
Finally, top RMI government officials were also effectively landowners of much
of the land rented to the RMI government agencies — they were a source of the
supply of land — which raises the possibility of a conflict of interest. Under the
system of landownership in the RMI, the King or paramount chief (called the
“Iroijlaplap” in the RMI’s native language) effectively owns one-third of all the land,
which means that he receives one third of the rent or any other income from the land,
whether in-kind or in currency (dollars). Many of the leases in the sample of 500
lease transactions, and many of the leases in the sample of 196 lease transactions
used in the NCT’s estimation methodology, list the paramount chief (or King) Amata
Kabua as one of the landowners.⁴⁰
The practical effect of this system of land ownership, land pricing, and rent
determination is that the RMI government (the primary lessee or tenant) rents much
of the land from itself (as the landlord) at above market prices also determined by the
RMI government. To illustrate, on May 1,1979, the citizens of the Marshall Islands
approved a constitution and elected its King, Amata Kabua, as its first President. On
October 1, 1979, the RMI cabinet, which was appointed by President Kabua,
established by law the official government rental rate. The RMI government has
leased substantial quantities of land at the official government rate, and has
influenced the leasing of other non-government land. And since by tradition the King
owns a one-third share of all rents, President Kabua received one-third of the
government established rental rate. Rents obtained from these types of non-arms-
length and non-market transactions, do not yield rent estimates that would
realistically reflect implicit agricultural and residential rentals (i.e., the real
agricultural productivity of the land) on either Enewetak and Bikini.
Finally, the NCT’s methodology also assumed that all of the islands of the two
atolls were equally valuable; that the land in these islands was potentially rentable at
the same average rate as for the RMI as a whole, based, again on lease transactions
on Kwajalein and Majuro atolls. However, at the time of their relocation on March
7, 1946, the Bikinians all resided on Bikini island. Three other islands — of the
atoll’s original 29 islands — could have supported permanent populations: Enyu,

³⁹ Appraisal Report of the Loss in Value in Enewetak Atoll, Republic of Marshall Islands for
the Nuclear Claims Tribunal. The Hallstrom Group, Inc., and Raymond A. Lesher & Co.,
Ltd., May 17, 1996, pp. 19,21.
⁴⁰ Appraisal Report of the Loss in Value in Enewetak Atoll, Republic of Marshall Islands for
the Nuclear Claims Tribunal, Hallstrom Group, Inc. and Raymond A. Lesher & Co., Ltd.,
May 17, 1996, Exhibit VI.

Namu, and Eniirikku. This may suggest that the other 25 islands had little use value,
even to the Bikinians, and to value them equally with the usable islands is
questionable.
The Exponential Model of Rent Growth. CRS research demonstrates that
the NCT also overestimated average rents per acre on Enewetak and Bikini due to the
use of an exponential regression model to extrapolate rental rates for years in which
observations are not available. The model estimated by the NCT is: R^t = e ^{2.8967 +}^{.0993 t}
— that the trend of average rentals in the RMI grows every year at an
exponential rate as determined by this equation. Applied to overstated non-market
sample rents, this model predicts implausibly high average rents/acre of $5,745 for
1997, and $112,995/acre for the year 2027, which is equivalent to land value of
nearly $2,000,000/acre (compounded at 8% for 30 years the precise figure is
$1,774,024/acre).⁴¹ When this model is fitted to data calculated using the more recent
observations from inflated government-controlled rental rates, it produces very high
slope estimates — an estimate of implied changes in rentals each year. This method
further compounds the upward bias in the estimated average rents/acre and
overestimates past loss-of-use. In theory, and according to much empirical evidence,
real estate rents reflect real estate values, which, when they fluctuate — as they
invariably do — do so depending primarily on economic conditions, and generally
do not increase at exponential rates.
The Quantity of Land Affected. Another source of overstated loss-of-use
estimates is the assumption that more land on Enewetak and Bikini was lost to use
than is actually the case.⁴² For example, though some portions of the affected atolls
were completely destroyed or pulverized by the nuclear testing — 182.46 acres of
Enewetak (9.34% of the atoll’s land acreage) and 69.67 acres of Bikini (3.69% of the
land acreage) — the NCT’s methodology assumed that they were not. The result is
that the U.S. government owes rentals for loss-of-use on land that no longer exists,
and which continues to earn inflated rents at compound interest through 2026 for
Enewetak and 2027 for Bikini.
The NCT’s justification for making this assumption was twofold. First, it argued
that Enewetak and Bikini are “part of the environmental whole” and should not be
separated into islets. However, this assumption results in an inconsistency: Enewetak
and Bikini atolls are treated as individual land masses for purposes of 1) calculating
the annual rental values on unvaporized portions of the atolls, 2) adjusting for
alternative habitation, and 3) adjusting for prior loss-of-use compensation already
paid by the U.S. government. But, Enewetak and Bikini atolls are treated as

⁴¹ However, the NCT’s methodology for future loss-of-use does not use these estimates,
probably because they are so inflated as to be not plausible. Rather, the appraisers take
averages of the predicted rents for 1996 (Enewetak) and 1997 (Bikini) from two different
models (one of which is the exponential model) and holds the future rents/acre through 2026
(Enewetak) and 2027 (Bikini) constant at these levels.
⁴² Note that for both Enewetak and Bikini, the two appraisers use different quantities of land
lost-to-use, and different quantities of vaporized acreage. For example, for Bikini, the
Hallstrom report assumes the total acreage is 1,889.63; the Darroch report assumes it is

1,848.34. The NCT employs the highest of the various acreage estimates.

collective land masses for the purposes of excluding the vaporized portions of the
atolls.
The second reason given for including the vaporized land portions in the loss-of-
use calculation was that there are problems in determining the value of the vaporized
and otherwise unusable portions of Enewetak and Bikini. But, there are no more
problems in valuing vaporized land as there are problems in valuing unvaporized
land. Given the equivalency between the value of land and the rentals earned on that
land, an appropriate methodology would consider the vaporized land areas as being
tantamount to a permanent taking of property, and estimate the capitalized land value
based on the projected streams of rentals, using the estimated rentals at the time of
pulverization. In this way, past loss-of-use estimates would include the rental value
of the vaporized portions up to the time of pulverization, and thereafter based on the
capitalized value of these portions of the land as assets, with interest. This is the same
as calculating future rents foregone, but it does so at the time of the destruction of the
land, whether from vaporization or any other cause.⁴³
Finally, the NCT methodology also made some assumptions regarding the
timing of denied use, in the case of Bikini atoll, that raise the loss-of-use damage
estimates. In particular, it assumed that the Bikinians’ loss-of-use was continuous and
there was no return. On March 7, 1946, 167 Bikini islanders (the inhabitant
proprietors) were evacuated, but the Bikinians returned to two islands of the atoll
(Bikini and Eneu islands) from June 1, 1969, to July 31, 1978. While it is true that
they returned to a contaminated island, the time they spent on the atoll after their
return should not be counted as a loss-of-use. The implication for the loss-of-use
estimation is that the rentals on these two occupied islands of the atoll would be
lower owing to this contamination and that the corresponding value of their stay on
alternative atolls should not be deducted from the overall rental.
The Value of Alternative Habitation. The estimating assumption that the
rents/acre of alternative homeland provided by the U.S. government is only a fraction
of the rental value of the original homeland also resulted in overstated loss-of-use
damages. The NCT’s methodology valued Ujelang generally at only 58% of the
average rents on Enewetak; Rongerik, Kili, and others were valued at either 75% or⁴⁴
58% of the value, per acre, of Bikini. The assumption is based on an assertion that
the economic value of copra (dried coconut meat) production and other agricultural
commodities (cassava, sweet potatoes, etc.), which were produced on the
contaminated and vaporized islands before U.S. testing and population evacuation,
was less on these alternative residences than on either Enewetak and Bikini.

⁴³ Another illustration is the case of Runit Island of Enewetak atoll. This island has been
indefinitely quarantined because it is used to store nuclear waste, and should thus be
compensated based on its value at the time it was rendered unusable (plus interest).
⁴⁴ This adjustment is more involved for Bikini because of the relocation to four different
atolls, Rongerik, Kili, Ejit, and Majuro, for different time periods. On a per-acre basis, the
stay on Rongerik and Ejit is valued at 100% of the Enewetak rents, but this was for slightly
more than 2 years from Mar. 7, 1946, to Mar. 14, 1948, for Rongerik. For more detail see
the Memoranda of Decisions and Order for Enewetak and Bikini attached to the Changed
Circumstances Petition.

While deducting the value of alternative habitation provided by the U.S.
Government is viewed as fair and appropriate, the assumption that rent/acre on these
alternative habitats are lower than on either Enewetak and Bikini because the value
of the economic output on these alternatives is less than on either Enewetak and
Bikini is inconsistent with the rest of the methodology. The methodology developed
for the NCT — based on instructions given to the appraisal firm by claimant’s
counsel and the NCT — assumed that rents on Enewetak and Bikini, should not be
based on economic value of land in agricultural production, such as production of
copra, or potential for nuclear storage.⁴⁵ Thus, for purposes of adjusting for
alternative habitation (i.e., calculating variables for a term in the formula that is
subtracted from gross rentals), the NCT did take into account differences in economic
value. But, for purposes of calculating gross rentals on Enewetak and Bikini,
differences in average rents/acre due to differences in economic output were not
taken into account by the NCT. The value of the produce from the land, its output
potential or productivity of the islands in producing copra or fish, was not considered.
The assumption is also inconsistent with the capitalization model that the value of
an asset is equal to the present discounted flow of income streams (returns).
Reinvestment of Rental Proceeds. Finally, the NCT methodology
assumed that all of the rental proceeds earned during the first 20 years of payments
— the estimated amounts of past loss-of-use rental owed by the U.S. government for
the period 1946-1966 — would have been invested in 30-year U.S. Treasury bonds.
This step in the procedure, which seems like double counting, effectively assumes
that none of the proceeds would have been distributed to the residents of the affected
atolls and consumed. This is equivalent to assuming that savings rates would have
been 100%. A more appropriate way to adjust for this would be based on the
assumption that a large portion of the proceeds would have been expended on
consumer goods and the remainder saved in a savings account at some interest rate.⁴⁶
The amount saved should be based on a realistic savings rate.
Overestimates of Future Loss-of-Use
With respect to future loss-of-use, the present discounted value methodology is
generally appropriate, but the estimated dollar amounts also appear to be inflated or
overstated. The primary reason that future loss-of-use is overstated is that the
procedure carries over into the calculation of projected future rents the inflated
estimates of average rents per acre from the past loss-of-use. Thus, for Enewetak,
rents for 1997-2026 are projected to be the same as for 1996 ($4,105/acre); for
Bikini, rents for 1998-2027 are the same as for 1997 ($4,167/acre). The assumption
that the Enewetakians and Bikinians could return to use the vaporized islands also
contributes to this overestimate.

⁴⁵ Memorandum from Jonathan M. Weisgall to Philip A. Okney, Defender of the Fund, Feb.

23, 1998.

⁴⁶ Another possible source of overstatement is in the adjustment for prior loss-of-use
compensation. The George W. Bush Administration argues that the extent of such prior
compensation used in the methodology is greater than is shown in the NCT reports. CRS
was unable to independently verify this, but if so, this also would contribute to inflated past
lost use values.

Empirical Evidence
The main conclusion of the discussion so far — that loss-of-use estimates
appear overstated or inflated — is based on an examination and economic analysis
of the strengths and weaknesses of the NCT’s methodology. This section of the
report presents empirical evidence — facts, comparisons, and additional arguments
— that support this conclusion.
^!From 1970-1978, before the establishment of the RMI’s “official
government rental rate” of $2,500/acre on January 1, 1979, annual
rents on all RMI lease transactions (which were primarily
commercial leases on business properties and residential leases,
rather than agricultural land) averaged $511/acre according to the
Hallstrom report and $597/acre according to the Darroch report. In
contrast, average rents in 1979 — after the official government
rental rate was enacted in October 1, 1979 — averaged $2,575/acre,
404% above the Hallstrom average, and 331% above the Darroch
average. The economic conditions for rent increases of this
magnitude — essentially the demand for land would have had to
increase by that same percentage, given that the supply is essentially
fixed — while not inconceivable, do not appear to have existed in
the RMI generally, and the Enewetak and Bikini atolls particularly.
^!Estimated average rents per acre in the NCT report for Enewetak and
Bikini (and the rest of the RMI) — $4,105/acre in 1996 and $4,167
in 1997 — appear high in comparison with agricultural rents in the
continental United States, Hawaii, and various other parts of the⁴⁷
world. For example, rents for continental U.S. cropland in 1996
ranged from $17.50/acre in Montana, $115/acre in Oregon, to
$210/acre in California, which has the highest agricultural rents
anywhere in the continental United States primarily because it
produces a greater quantity of more valuable specialty crops than
anywhere else (reflecting primarily the marginal productivity of
California agricultural land). For New Mexico crop-land rents in

1995 averaged $88/acre. Average rents for continental U.S. crop-

land in 1998 (the first year average figures for the U.S. became
available) were $66.50/acre.
^!The NCT-estimated rents also appear high when they are converted
to farmland (or asset) prices and compared to average land prices for
comparable properties in selected areas around the world. The
NCT’s estimated 1997 rental of $4,167/acre, discounted at 8% for
30 years, is equivalent to land valued at $46,911/acre, which is
nearly 2,000% greater than the $2,405/acre average price for
Hawaiian land, and 5,000% more than the $926/acre average price

⁴⁷ See U.S. Department of Agriculture, Agricultural Land Values and Cash Rents: Final
Estimates 1999-2003, National Agricultural Statistics Service, Statistical Bulletin # 993.

of farmland in the continental United States generally.⁴⁸ Figure 1
shows average land prices for the continental United States from

1982-2004.

^!Although official rent and land value data from places around the
world are unavailable, anecdotal evidence also suggests that the
NCT’s estimates of rents are significantly overstated. For example,
in 1997 the U.S. Fish and Wildlife Service purchased 5,300 acres of
land in the South Kona district of the Hawaiian Islands at a total cost
of $7.78 million, or $1,468/acre, which translates into an estimated⁴⁹
annual rent per acre of $130. In June 2002, the average price of
cropland in Brazil was reported at $355/acre.⁵⁰ In April 2005,
100,725 acres of New Zealand forest land went on sale for $42/acre
in New Zealand dollars (which, at the April exchange rate, converts⁵¹
to about $30/acre in U.S. dollars). On February 2005, a 1,300 acre
New Zealand commercial farm, with residential structures, was on⁵²
the market for $3,846/acre. Again, when compared to these prices,
the $46,911 price for RMI land estimated by the NCT in 1997 seems
substantially overstated.
^!Finally, a comparison based on national income and product
accounts and the relative income shares of various factors of
production — shares earned by labor, capital, land, and profits —
also suggests that the NCT’s methodology significantly overstated
rents. For example, the NCT’s loss-of-use calculations for 1990
resulted in a total rental value of $9,155,949 ($3,837,687 for
Enewetak and $5,318,262 for Bikini), which is 13% of RMI’s
aggregate GDP (gross domestic product) of $68,691,000.⁵³ For 1995

⁴⁸ Based on the average asset value (price) of agricultural land in Hawaii, the estimated rent
per acre would be $213.63, as compared with an average estimated rent of $4,167 in the
NCT reports. For the value of Hawaiian agricultural land see U.S. Department of
Agriculture. 2002 Census of Agriculture: State Data. p.31.
⁴⁹ “Ranchers Press Federal Government to Pay To Move Junk, Wild Cattle off Refuge
Land.” Environment Hawaii, vol.14, Nov. 2003. Available at [http://www.environment-
hawaii.org/ 1103ranchers.htm] .
⁵⁰ Kenneth. M. Chomitz and Timothy Thomas, “Determinants of Land Use in Amazonia:
A Fine Scale Spatial Analysis.” American Journal of Agricultural Economics, Nov, 2003,
vol. 85, pp. 1016-1029.
⁵¹ Available at [http://www.nzforestland.co.nz ].
⁵² Wall Street Journal, Feb. 18, 2005, p. W11.
⁵³ GDP is the value of all final goods and services produced by the productive factors inside
a country during a given year. It equals GNP (gross national product) less overseas
remittances. GDP may be measured either as the sum of expenditures by consumers and
governments, gross investment spending, and total merchandise exports less imports or as
the sum of all factor incomes earned by all of the economic agents in the economy. In terms
of national income and product accounts, , where W are wagesGDPWIR=+++π
(continued...)

the total estimate of $11,890,496 ($5,039,009 for Enewetak and
$6,851,487 for Bikini), is 11.3% of RMI’s 1995 GDP.⁵⁴ Such
implicit rentals for just two atolls, whose combined land area
comprises 8.7% of RMI’s total land area, are high in and of
themselves, but they also do not account for the implicit and explicit
rents on RMI’s other 27 remaining atolls and 5 islands. Applying
the estimated 1995 per-acre rental rates of $3,859/acre to the entire
area of the RMI would yield a total implicit rental of $170.5 million,

62% more than the 1995 RMI’s GDP of $105.2 million.⁵⁵

Alternative Methodology
This section of the report develops a model of agricultural rents, which is
applied to available data from RMI’s national income and product accounts to
generate alternative estimates of average rents/acre for the total loss-of-use rentals
for the Enewetak and Bikini atolls. The model is founded on the same neoclassical
microeconomic theory underlying the NCT loss-of-use methodology. However, in
addition to making the model explicit, it avoids shortcomings of the NCT
methodology, by using available data from RMI’s national income and product
accounts that is consistent with the underlying theory. The model is deterministic —
there is no uncertainty — and assumes that land values, and therefore land rents,
derive primarily from agricultural productivity, but also from proximity to the major⁵⁶
urban areas (Majuro). The value of agricultural land, and equivalently, the rental
price of that land, reflects the value of the crops produced.
The RMI Economy
Table 4 is a brief statistical profile of the RMI economy. The RMI is a small,
developing island country, and, like other Western Pacific island nations, its
economy is based primarily on services. These are largely government services

⁵³ (...continued)
or labor’s income, I s the return to capital or interest income, R is rental income (the return
to land), and are profits (the return to entrepreneurial ability and managementπ
efficiency).
⁵⁴ For every country, the relative income shares, e.g., R/GDP vary, but only within certain
parameters which follow the laws of economics. For example, rental income in the United
States over the last 75 years has declined from about 7.5% of GDP in the early 1930s to
under 2% in 2002. See David Barker and Jay Wa-Aadu, “Is Real Estate Becoming Important
Again? A Neo Ricardian Model of Land Rent.” Real Estate Economics, Spring, 2004, pp.

33-54.

⁵⁵ Using 640 acres/sq. mile x 69 sq. miles gives 44,185 acres x $3,859 = $170,512,230. Note
that there are some minor differences in the reported land area of the RMI. Darroch reports

70.05 sq. miles; Hallstrom reports 69.04 sq. miles.

⁵⁶ Uncertainty would make many of the determining variables in the model random, which,
although it would add realism, it would also add an unnecessary level of complication and,
in any event, is beyond the scope of this memorandum.

mostly funded, either directly or indirectly, by U. S. Government assistance under the
Compact of Free Association. Much, if not most, of RMI’s growth has depended on
these external resources (grants) provided by the U.S. government. According to
column (7) of Table 4, U.S. grants to the RMI from 1992-1997 have averaged 44%⁵⁷
of GDP. However, with grant flows declining in real terms in the 1990s, economic
growth in the RMI has weakened, and real per-capita income fell below the
pre-independence level.
Production capabilities of the RMI, such as manufacturing, are quite limited as
the country is geographically isolated and dispersed, has limited access to world
markets, and is susceptible to natural disasters. The RMI, in general, possesses few
natural resources other than the Pacific Ocean, which is exploited for fishing. The
labor force is very small and unskilled; there is also relatively little capital and
infrastructure, although investment in capital and infrastructure has been growing of
late. Much of the population has historically been involved in subsistence agriculture
and fishing, including livestock farming.

⁵⁷ In addition to U.S. grants (which are both mostly “Compact grants,” but also include other
types of grants) the RMI receives assistance grants and loans from other foreign
governments. See International Monetary Fund. IMF Concludes 2003 Article IV
Consultation with the Republic of the Marshall Islands, Feb. 13, 2004; and International
Monetary Fund, IMF Staff Report, Marshall Islands: Recent Economic Developments.

Figure 1. U.S. Average Farm Real Estate Value
Dollar Per Acre, 1982-2004

^1,⁴⁰⁰
^1,³⁶⁰
^1,²⁷⁰^1,³⁰⁰
^1,²¹⁰^1,²⁰⁰
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^1,0⁹⁰^1,¹⁰⁰
^1,0³⁰
⁹⁷⁴^1,⁰⁰⁰
⁹²⁶
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⁷⁸⁸⁸⁰⁰
⁷⁴⁰
⁷¹³⁷⁰³⁷¹³⁷⁰⁰
⁶⁶⁸⁶⁸³
⁶⁴⁰⁶³²
⁵⁹⁹⁶⁰⁰
⁵⁰⁰
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^So^urce^:^U^S^D^A^-^N^A^S^S^,^A^u^g^.^2004.

Table 4. Descriptive Statistics on the RMI Economy, 1981-2001
($ thousands)
^Agriculture,^{U.S. G}^r^aⁿ^ts
^r^T^o^ta^{l G}^D^P^G^D^{P in Agriculture, Fores}^try,^a^{nd F}ⁱ^shing^Fores^{try, an}^d^Fi^s^hⁱⁿ^{g, as}^%^of^Pop^u^l^ati^oⁿ^T^otal^E^m^p^l^oym^en^t^G^D^{P Per-}^Ca^pita^{Under the}
^GD^P^Co^m^p^a^c^t
⁽¹⁾⁽²⁾⁽³⁾⁽⁴⁾⁽⁵⁾⁽⁶⁾⁽⁷⁾
^$27,152^$3,469^12.75%^32,942^—^$824^N^.^A^.
^$30,584^$3,900^12.75%^34,299^4,980^$892^N^.^A^.
^$36,543^$4,659^12.75%^35,711^—^$1,023^N^.^A^.
^$39,513^$5,038^12.75%^37,182^—^$1,063^N^.^A^.
^$38,406^$4,897^12.75%^36,702^5,487^$1,046^N^.^A^.
^$49,907^$6,363^12.75%^38,044^6,971^$1,312^N^.^A^.
^$55,130^$7,029^12.75%^39,449^7,139^$1,398^N^.^A^.
ⁱ^{ki/CRS-RL33029}^$61,874^$7,889^12.75%^42,692^6,761^$1,449^N^.^A^.
^g/w^$63,721^$8,124^12.75%^43,332^6,224^$1,471^N^.^A^.
^s^.or
^le^ak^$68,691^$8,758^12.75%^43,982^6,839^$1,562^N^.^A^.
^$72,219^$10,015^13.86%^44,642^7,277^$1,618^N^.^A^.
^://wiki^$79,709^$10,739^13.47%^45,312^7,896^$1,876^$50,400
^h^ttp
^$87,059^$11,476^13.18%^45,991^7,625^$1,893^$49,300
^$94,596^$15,068^15.92%^46,681^8,727^$2,026^$50,600
^$105,239^$15,874^15.08%^47,381^8,810^$2,221^$50,200
^$97,036^$13,589^14.00%^48,092^9,181^$2,018^$46,200
^$92,184^$12,963^14.06%^48,814^7,293^$1,888^N^.^A^.
^$95,223^$11,403^11.97%^49,546^6,889^$1,931^N^.^A^.
^$97,352^$8,274^8.49%^50,840^6,681^$1,914^$40,100
^$98,961^$9,715^9.81%^52,671^—^$1,821^$50,400
^$99,174^$10,296^10.38%^54,584^—^$1,817^$58,700
^:^C^o^l^u^mn^s⁽¹⁾^aⁿ^d⁽⁶⁾^:^[^h^t^t^p^:^/^/^www.^s^p^c^.ⁱⁿ^t^/^p^rⁱ^s^m^/^c^o^uⁿ^t^r^y^/^m^h^/^s^t^a^t^s^]^aⁿ^d^Republⁱ^c^of^t^h^{e M}^a^r^s^hal^l^Is^l^ands^Economⁱ^c^Repor^t^{. Ban}^k^of^H^a^w^aⁱⁱ^.^A^p^ri^l^{2001. C}^o^l^u^mⁿ^s^{(2), (4) an}^d
^Republⁱ^c^of^t^h^{e M}^a^r^s^hal^l^Is^l^ands^Economⁱ^c^Repor^t^.^Ban^k^of^H^a^w^aⁱⁱ^.^A^p^{r. 2001. C}^o^l^u^mⁿ^(7):^In^t^e^rn^atⁱ^oⁿ^a^l^Mon^e^t^a^ry^F^uⁿ^d^.^IMF^S^t^af^f^R^e^port^.^M^a^r^s^{hall Is}^lands^{: Recent Economic}
^Appr^ais^a^{l Repor}^{t of}^{the Los}^s^{in Valu}^{e in Enew}^etak^C^o^lu^mⁿ^{(3): A}^u^th^or’^s^calcu^lation^,^asⁱⁿ^dicated.

Life on both Enewetak and Bikini was traditionally agrarian with generally
adequate food — at least, before the nuclear testing — and an abundance of fish. This
lifestyle included the growing and gathering of food crops, fishing on the adjoining
lagoon, and gathering seafood from the reefs. The soil on Enewetak and Bikini is
basically coral rock and coralline sands with limited water and fertility retention.
Annual rainfall averages 50-60 inches. Few products are convertible into cash crops
other than copra, products from the processing of coconut oil, pearl farming, and
fishing. In addition to copra some of the islands produce pandanus, breadfruit,
bananas, limes, taro, and arrowroot, but in relatively small quantities. Handicrafts
are made for export, but this is also a very small industry. Tourism is insignificant
primarily due to RMI’s remoteness from major population areas, which makes travel
costs high. Thus, the economic potential of the RMI economy in general, and the
agricultural sector in particular, is extremely limited, which implies that rents would
not be expected to be very high. Based on the theory that rentals of agricultural land
in capitalistic or mixed economies reflect primarily the net earnings capacity of the
land (the value of the land’s marginal productivity), the rents for agricultural land
values estimated by the NCT appear to be overstated.⁵⁸
Theoretical Framework of Rent Determination
As discussed above, land is a marketable capital asset, a productive factor, that
produces a flow of goods and services over time.⁵⁹ The exchange value of land is its
fair market price: what a willing buyer would pay a willing seller in an arms-length
transaction in a free, competitive marketplace. The exchange value of the goods and
services produced by the land are its rents — what a willing lessee would be willing
to pay a willing lessor for the use of the land over an agreed-upon period of time in
an arm’s-length transaction. Economic theory suggests that the exchange value of the
land itself, the price of the land, is equal to the present discounted value, discounted
at the opportunity cost of capital, of the streams of annual returns (or income)
generated by employing the asset in its best and highest use and over its economic
life plus any salvage value of the asset at the end of its economic life.⁶⁰
In the case of agricultural land, that stream of returns — the annual ground rents
per acre — would reflect the fertility (or productivity) of that land as a productive
factor as well as its location, topography, the value of any natural resources (and
environmental amenities), any speculative potential value, and cultural value.
Agricultural land prices would then be closely related to the present and expected

⁵⁸ As the German colonists developed the Marshall Islands’ copra production and trade, later
continued by Japanese traders, land became commercially important and its rental value
increased. This point is noted in the Darroch Ltd. appraisal report p.15.
⁵⁹ Land has many uses such as a store of minerals, wildlife habitat, park land, urban land
(residential, industrial, etc.), and as a speculative asset. We adopt the NCT assumption that
the Enewetak and Bikini lands were valued primarily as agricultural land and, to a lesser
extent, as residential land.
⁶⁰ This general rule applies to all capital asset stocks, real estate, business machines, and
other income earning assets.

earnings of that land — as in fact they have been historically — and those earnings
would be the price for which the land would rent: they would be its cash-rent.⁶¹
Assume households have an endowment of labor L, capital K, and the effective
quantity of land A(S), which are used in combinations to produce marketable
commodities, Q, satisfying the following agricultural production function F [( K, L,
A(S)], where
(1) Q F K L A S= [ , , ( )]
Q = output of copra and other agricultural commodities, and fish caught in the lagoons
and surrounding waters,
K = capital, including residential structures and farm buildings
L = labor
A = land
S = soil fertility or quality
In this formulation the effective quantity of land reflects not just the acreage of land
but soil fertility and nutrients, which are assumed to be a function of environmental
amenities or the ecosystem. For example, one possible specification of isAS()
where is some quality index, which is itself a function ofASqItA()(,)=⋅qI()
soil improvement investments and time, with (the greater the level ofδδqI/>0
investment, the more fertile is the soil, and (soil fertility improves withδδqt/>0
time). Soil fertility is then a choice variable — the agricultural firm/household can
choose the level of investment to increase soil fertility, which would increase the
return to land. To illustrate, 2 different parcels of land A¹and A² could differ in
effective land if one is more fertile and productive than the other. Thus and q¹1=q²105=.
would make parcel 2 five-percent more productive than parcel 1 — this would be
equivalent to having 5% more land area.
Assume that is homogeneous of degree one (constant returns toFKLAS[,,()]
scale) satisfying , , , and .δδFK/>0δδFL/>0δδ²²0FK/<δδ²²0FL/<
Assume also that land is a factor of production allocated to its highest and best use,
which is primarily for agricultural uses (as the NCT assumes) and that the household-
farmer, who owns his land, chooses combinations of L, K, together with a fixed
quantity of land A so as to maximize profit B defined as
(2) π δ=⋅ − −+ −PFKLAS wL i K rAS[,,()] ( ) ()

⁶¹ Agricultural land can also rent for a crop rent, which means that the rental is paid as a
share of the crop produced.

where
P = the competitively determined output price
w = wage rate
i = the interest rate
r = the land rental
building depreciation rateδ=
Output price P is exogenous, as are w, and i.
Economic theory suggests rents are the intra-marginal residual returns — the
surplus income — accruing to each acre of land after paying the variable factors of
production the value of their marginal products. They are the difference between
revenues and the opportunity costs of inputs. In equilibrium, pure economic profits
(net of the return to capital) will be zero and the implicit rental r per acre accruing to
land in any given point in time is
(3) rK L AS P F K L AS wL i K AS[ , * , * ( ) } [ [ *, *, ( )] * ( ) *] / ( )=⋅ − −+δ
where the asterisks indicate equilibrium, profit maximizing levels of inputs and
supply.
That is, after the household-farmer pays all the costs of production, including
implicit labor costs equal to the opportunity cost of employing his labor services in
the next best alternative, and capital, rents per acre are equal to the net revenue minus
labor and capital costs at the zero profit equilibrium point. K* and L* are the
solutions to the first order conditions. At this profit maximizing point, the marginal
return to land, i.e., the value of land’s marginal productivity, will also be equal to its
rental price.
Equation (3) is used to estimate rents per acre and total rents which is then
compared with the NCT’s estimates. is the total land rental which isrKLAA(,*,*)
estimated and compared with the NCT’s estimates. The data used to calculate rents
per acre as defined by equation (3) are in Table 5. These data, in particular the data
in column (2) for 1982-1990, are the starting point for the calculation of
in equation (3) above. Column (1) replicates column (2) in Table 4.rKLA[,*,*()]
Column (2) estimates labor costs for the agricultural, fishing, and forestry sector. The
estimates are based on available data on employment in that sector and average
wages for private sector employment. Column (3) estimates capital costs for that
same sector, based on depreciation deductions data from the NIPA. The discount rate
is assumed to be 6%, and the capital depreciation rate is straight line with a recovery
period of 20 years (a weighted average of residential and non-residential business
capital). Column (4) shows the estimates of “gross” rents per acre before any
adjustments, such as for the economic effects of nuclear testing, which is addressed
next.
Adjusting for the Economic Effects of Nuclear Testing
Before equation (3) can be applied to measure rents, an adjustment has to be
made to account for the adverse effects of nuclear testing on the RMI economy. It can

be reasonably assumed that RMI’s total economic output (the production function
would have been higher had there been no nuclear testing.⁶²FKLAS[*,*,()]
Table 5. Data Used to Estimate Unadjusted Rents per Acre from
Equation (3)
Year pF K L A S[*,*, ()] wL * ()*iK+ δ rK L AS[,*,*()]
(1)(2)(3)(4)
1982 $3,900,000 $589,140 $428,890 $77/acre
1983 $4,659,000$648,576$512,490$102/acre
1984 $5,038,000$658,822$554,180$103/acre
1985 $4,897,000$802,332$538,670$96/acre
1986 $6,363,000$1,165,605$699,930$121/acre
1987 $7,029,000$1,475,711$773,190$128/acre
1988 $7,889,000$1,856,166$867,790$139/acre
1989 $8,124,000$1,836,126$893,640$145/acre
1990 $8,758,000$1,607,808$963,380$166/acre
^Source:^C^R^{S es}^tim^ates^bas^e^d^on^R^M^I’^s^Nation^a^{l In}^com^e^an^{d P}^r^odu^{ct A}^ccouⁿ^t^s^{data av}^{ailable f}^r^om
^v^a^rⁱ^o^u^{s r}^e^p^o^r^{ts cited}^elsew^h^er^{e in}^th^{is r}^e^p^o^r^t.
As discussed, nuclear testing reduced the total quantity of land, vaporizing about
13% of Enewetak’s and Bikini’s land area. But such testing also reduced soil fertility
— the quality of the land on Enewetak and Bikini as a factor of production.⁶³ In
addition, nuclear testing led to the contamination of the remainder of the two atolls
for many years. According to Table 2, the entire atoll land areas (3,842 acres) are
sufficiently contaminated to prevent their full use until at least 2026 (Enewetak) and
2027 (Bikini). Indeed, some parts of the two atolls may never be usable at all because
they can never be completely sufficiently decontaminated as to be safe for human

⁶² This is merely an assumption to facilitate computation of equation (3). One could also
argue that had nuclear testing not occurred, there would have been less U.S. assistance, and
RMI’s level of economic development, would have been much less, and therefore rents
would have been smaller.
⁶³ In addition, nuclear testing has reduced rents from what they would otherwise be due to
its adverse effects on the productivity of the labor force (the L in equation (3)). Labor
productivity would be lower than had there been no testing because of radiation exposure
to the residents of Enewetak, Bikini, and other atolls, primarily Rongelop and Utrik. Such
exposure results in a variety of adverse biological effects and diseases. Some experts believe
that nuclear testing caused high birth defects and weakened immune systems, as well as high
thyroid, cervical, and breast cancers in the RMI population. Many other diseases may also
be linked to exposure to ionizing radiation, which would have reduced labor productivity,
output supply, and land rents.

habitation. Also, two other atolls, Rongelap and Utrik, were contaminated by fallout
from the tests on Enewetak and Bikini.⁶⁴ This contamination of the lands of the four
atolls reduced the fertility of the soil — the marginal productivity of the land — and
therefore the rents. These effects are shown in Figure 2.
Figure 2. The Supply of and Demand for Land After
Nuclear Testing

r^b[K,* L,* A(S)] is the demand for land before nuclear testing. The supply of land^s
is fixed at A (S). The effects of nuclear testing are shown by an leftward shift of the
demand curve to r^a[K,* L,* A(S)], and a leftward shift of land supply curve to A¹ ^s
(S¹). In order to adjust for these effects, CRS determined the average output per acre
for RMI lands other than Enewetak and Bikini. These lands and surrounding
ecosystems are assumed not to be affected adversely by nuclear testing during the
1940s and 1950s. That figure is then multiplied by the unusable acreage (the
vaporized and contaminated land area) on Enewetak and Bikini. This figure is then
added back in to the total agricultural output of the RMI generally to which equation
(3) is applied to determine rents per acre. The net result is a procedure which brings
the demand for land, hence land rents, back to the pre-nuclear testing position r^b[K,*
L,* A(S)].
⁶⁴ There is much disagreement on the extent of contamination of the rest of the RMI. Some
experts contend that 8 additional atolls were contaminated in addition to the four mentioned
in the text.

Estimation Results
The results of calculating adjusted equation (3) appear in Table 6 column (1),
which is essentially the figures from column (4), Table 5 with the aforementioned
adjustments for the economic effects of nuclear testing. The corresponding total
“gross” annual rental — gross because it represents the value of the loss-of-use
before adjustments for interest, alternative habitation, and prior compensation — is
shown in column (3). Note that, due to lack of data, estimates could be generated
only for years 1982-1990.
The results support the conclusions in the first section of the report, as well as
the empirical evidence presented in the second section, that the rents and loss-of-use
damages estimated by the NCT are apparently significantly overstated. More
specifically, summing up the values for the nine-year period 1982-1990 shows an
apparent overstatement of rents by a factor of 10. Note that this does not include the
cultural or environmental value of the land to the Enewetak and Bikini peoples as
discussed in the next section.
The Value of Environmental Amenities
The final adjustment in estimated rents/acre is for the value of environmental
amenities. Equation (3) does not fully reflect the value of the services provided by
the Enewetak and Bikini ecosystem as natural capital. Environmental amenities
generate utility, and thus, have value to the community of the RMI in addition to their
value as factors of production to landowners. Environmental amenities are part of the
ecosystem; they are public goods that are not traded in the marketplace and thus their⁶⁵
value cannot be easily measured in dollars as for most tradeable commodities.
These lands, and the environmental amenities (the shores, lagoons, reefs, vegetation
and the entire ecosystem) support the culture and sustain the lives of the inhabitants
and thus have a value in use beyond market or exchange (tradeable) value.
Table 6. Comparison of CRS-Estimated Rents With NCT
Estimated Rents, 1982-1990
Rents/AcreTotal “Gross” Annual Rentalfor Enewetak and Bikini
CRSNCTCRSNCT
YearEstimatesEstimatesEstimates Estimates
(1)(2)(3)(4)
1982 $115 $1,902 $441,830 $5,991,541

1983 $137 $1,970 $526,354 $6,198,558

⁶⁵ Public goods such as national defense and other common property resources are
commodities whose consumption and use is non-rival, equally available to all, who cannot
be excluded from their enjoyment and use, and which are non-divisible (the commodity
cannot be parceled out or divided).

Rents/AcreTotal “Gross” Annual Rentalfor Enewetak and Bikini
1984 $148 $2,045 $568,616 $6,425,800
1985 $144 $2,128 $553,248 $6,678,266
1986 $187 $2,219 $718,854 $6,954,109
1987 $207 $2,320 $795,294 $7,257,788
1988 $232 $2,431 $891,344 $7,592,997
1989 $239 $2,553 $918,238 $7,961,042
1990 $258 $2,939 $991,236 $9,155,949
Totals — - — -$6,405,011$64,216,046
^So^urce^{: CRS estim}^{ates b}^a^sed^oⁿ^d^a^{ta p}^r^o^vⁱ^d^ed^b^y^th^{e NCT}ⁱⁿ^th^{e tw}^o^ap^p^r^{aisal r}^e^p^o^r^{ts. NCT}
^es^tim^ates^{are obtain}^e^{d f}^r^om^th^{e tw}^{o apprais}^a^{l reports}^.
The people of Enewetak and Bikini have always maintained deep emotional ties
to their land, which traditionally could not be sold, is “owned or used” as a matter of
birthright, and bequeathed to one’s progenitors only. Because there are no markets
for such goods, alternative estimation procedures must be used to assess value. In
terms of Figure 2, the value of environmental amenities would raise rents from r^b
[K,* L,* A(S)] to r^c[K,* L,* A(S)].
While economists have developed methodologies for estimating such non-
market values, the data for the RMI are not available to permit estimation. Such
estimates as are available suggest values ranging from $23-61/acre for the amenity
value of South Carolina farmland, to $1,205-$1,597/acre for the value of wetlands
in different locations (all values are in 2000 dollars).⁶⁶
Conclusions
In conclusion, based on 1) an analysis of the NCT’s loss-of-use methodology,

2) empirical evidence of agricultural land rents in the continental United States,

Hawaii, and selected areas of the Pacific, and 3) alternative estimates based on a
neoclassical economic model of land rents in the RMI — estimates that are
consistent with the real underlying productivity of agricultural lands on Enewetak
and Bikini — the $522 million figure for loss-of-use of Enewetak and Bikini atolls
appears to be significantly overstated.

⁶⁶ See McConnell, Virginia and Margaret Walls. The Value of Open-Space: Evidence from
Studies of Nonmarket Benefits. Resources for the Future, Jan. 2005, Table 2, pp. 56-57.

Technical Appendix A: The NCT’s Formulas for
Estimating Past Loss-of-Use
The formula used by the NCT for estimating retrospective (past) loss-of-use is
ⁿ^c^c^nt^c^c^nt^nm⁻⁻⁻
(1)^t^tt^t^t^tt^tt^t^t^tt^m^tRA R A C r RA R A C r⁼⁺⁻⁼∑∑−−++ − −+¹¹¹ 1()()( )()
where
R^t = average rents per acre on Enewetak and Bikini in year t
A^t = acreage of Enewetak and Bikini lost to use in year t^c
R ^t = average rents per acre on alternative habitation^c
A^t = acreage of alternative habitation
C^t = loss-of-use compensation previously provided by the U.S.
n = 50 (52 for Bikini), m= 30,
t = 1 represents 1947 for Enewetak, 1946 for Bikini
r^t = discount rate in year t (the rate on 30-year U.S. Treasury bonds)
But,
(2)R^t = (R^t^Ma + R^t^Mb)/ 2)
And, for Enewetak
(3)R ^t^c = .58 [ (R^t^Ma + R^t^Mb)/ 2) ]
Thus, for Enewetak
(4)ⁿ
[.42 (R^t^Ma + R^t^Mb)/ 2) ( A^t - A^t^c) - ( C^t )] (1+ r^t )^n-^t ∑
^t⁼¹
^Ma^Mb^c^n-^t^nm⁻
+ [.42 ( (R^t + R^t)/ 2) ( A^t - A^t )- ( C^t ) ] (1 + r^t+m-¹ )∑
^t⁼¹
where
(5) Re^t^Ma^t=⁺^('^'⁾^αβ

are the fitted values of the regression for years 1940-1996, where R^t^MRe^t^Mt^u=⁺⁺⁽⁾^αβ
is the 5-year moving average of rents/acre in time t, and u is a log-normally
distributed random disturbance term, and

e^b^ab^t=−⎧⎪⁺⁽⁾foryears t19401978
(6)R^t==−⎨$2,500/acre for years t19791989
=−⎩⎪$3,000/acre foryearst19901996

and e .2.718281828.⁶⁷
⁶⁷ The $2,500 and $3,000 figures are the official government rental rate, as explained in the
text. See Appraisal Report of the Aggregate Loss in Use Value in the Bikini Atoll in the
Republic of Marshall Islands. Report written for Mr. Jonathan Weisgall, Chartered,
Hallstrom Group, Inc., Nov. 19, 1997. pp. 32-33.

Technical Appendix B: The NCT’s Formulas for
Estimating Future Loss-of-Use
The future loss-of-use value is estimated as the present value, at the time of the
valuation (1996 for Enewetak; 1997 for Bikini) of the projected future stream of
annual rents over thirty years, discounted at 8%, assuming that rents begin at those
estimated in the past loss-of-use model, and adjusting for alternative habitation
provided,
ⁿ
(1)PV= (R^t A^t - R ^t^c A^t^c ) (1 + r^t )ⁿ∑
^t⁼¹
which, for Enewetak would be
ⁿ
(2)PV= .42(R¹⁹⁹⁶^a + R¹⁹⁹⁶^b)/ 2) (A¹⁹⁹⁶⁾- A¹⁹⁹⁶^c ) (1 + r^t )ⁿ ∑
^t⁼¹
With the assumed constant annual rentals over the thirty year period through 2026,
the formula reduces to
(3) PV = .42 (R¹⁹⁹⁶^a + R¹⁹⁹⁶^b)/ 2) (A¹⁹⁹⁶- A¹⁹⁹⁶^c) [ (1/r^t) - (1/r^t (1+ r^t)ⁿ ]
where
(4)(R¹⁹⁹⁶^a + R¹⁹⁹⁶^b)/ 2) = $4,105 for Enewetak
(5)(R¹⁹⁹⁷^a + R¹⁹⁹⁷^b)/ 2) = $4,167 for Bikini
r^t = .08
n = 30