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Jul 22 2013

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Maven’s Minutes from the July 17 BDCP Public Meeting: Project costs, financing, and economic benefits

IMG_3728On July 17, a public meeting was held to discuss the remaining chapters of the Bay Delta Conservation Plan that were released at the end of May.  Led by Jerry Meral, Deputy Director of the Natural Resources Agency, the meeting was well attended and included a large ‘visually-vocal' contingent of Discovery Bay residents.

On the agenda is how much the project will cost and how it would be funded, as well as a discussion by Dr. David Sunding on how the benefits of the project for water contractors were calculated.

Notes to readers:

  1. The presentations discussed the economic analysis using a few terms that may or may not be familiar to some readers.  Fortunately, the newest feature to Maven's Notebook is a pop-up glossary, so if you encounter a word you are unfamiliar with, and if it is underlined with a dashed line (such as this: coequal goals) simply move your cursor over to the word and a definition will pop-up.
  2. The meeting was very lengthy, going well over the four hours allotted to it.  This post is not meant to be a complete transcription; in some cases, comments were shortened or sometimes eliminated in the interest of brevity.  Also, David Zippin's presentation of the first part of Chapter 9, analyzing the take alternatives, is abbreviated.  For the complete record of the event, please refer to the video.
  3. For this post, in the interest of readability, only the words from BDCP representatives are in italics.  Comments from the public are not in italics.

PRESENTATION: CHAPTER 8 – IMPLEMENTATION COSTS AND FUNDING SOURCES

After introductions and procedural announcements, the presentation on Chapter 8, Implementation and Funding Sources, began.  ICF International’s David Zippin led off with a rundown of the schedule, announcing that  a Finance Working Group meeting to discuss the draft Statewide Economic Impact Report on August 8.

IMG_3731David Zippin then began his discussion with what Chapter 8 is and what it is not.  “The purpose of the chapter is to provide planning estimates of plan costs over the 50 year permit term,” he said.  “We’re trying as well to identify all likely funding sources and to quantify those; these are not guarantees of funding in some cases, but these are likely funding sources.”  The chapter also describes the likelihood of funding based on commitments that have been made within the limits of federal and state law as well as describing contingencies in the event things are different, he said.  “The bottom line for this chapter is to demonstrate that the sum of all of those reasonably likely funding sources equal or exceed our expected costs.”

What is the chapter not?  The chapter is not an annual operating budget,” he said, noting that a budget would be prepared on an annual basis during plan implementation.  “It’s also not a financing plan.  In the past, people have asked very specific questions about how the bonds would be issued, how they’d be financed; those are great questions, this chapter necessarily does not answer those questions because we don’t know the answers to some of them yet,” he said, noting that additional financing plans will be developed in the future, but they won’t be in Chapter 8.  “It’s also not a funding agreement; the chapter does not guarantee some funding sources; and there may be additional funding commitments made in other ways later in the process.”

IMG_3756Dr. Zippin noted that additional federal funding authority may be needed.  “We are assuming a substantial amount of funding from Washington, some of which is under existing authorities, some of which may be necessary for additional federal authorities,” he said.

The chapter is divided into two major sections: costs and funding, he said.  The cost section includes a summary of costs reported in both undiscounted dollars (2012) and net present value.

Some common cost assumptions that we’ve used throughout the document is a 5-year increment of time periods over which we estimate the costs, so we have 10 time periods that we’ve used,” Mr. Zippin said.  “We do use cost ranges –  in some cases, we’re not able to develop a precise estimate so in some cases we use ranges and then take a mid-point.  There are contingencies built into a lot of the costs, mostly 20 to 30% but depending upon the uncertainty of the costs, we go as high as 50%.”

Land values are an important component of the program and are based on 2009 data updated to 2012 dollars, he said.  “We have five different categories of land use and have developed estimates of that value of each of those categories as well as by county because we know the land values vary by county as well as land use.”

These cost assumptions are important because a substantial amount of the plan acquisition would be in the form of a conservation easement as opposed to fee title; that applies particularly to cultivated land which we need to offset our impacts and contribute to recovery and conservation of species that depend on cultivated land,” said Mr. Zippin, noting that the Swainsons Hawk, sandhill cranes, tri-colored blackbirds, and others depend on the crops grown on these lands.

BDCP Slide 13All land acquired by fee title does include the costs of offsetting any revenue lost from property taxes or local assessments, so this is a cost that is part of the program that will be paid to counties, cities if it applies, and other local districts and special districts to offset that change.”

The total capital costs for the project are estimated at $16.3 billion dollars in undiscounted dollars (2012).  The majority of the capital costs, a little over 75%, are for facility construction, he said, noting that restoration at 20% is also substantial.  The majority of the capital costs will be incurred within the first 10 years of the program, he noted.  “Water facility operation accounts for about 33% of the operational costs, monitoring and research about 25%, and about 35 to 40% are for the other stressors conservation measures, and those are focused primarily at the aquatic natural communities and the covered fish,” he said, noting that the costs increase up to year 15 or year 20 or so, and are fairly steady over the life of the program for the remainder of the program term of 50 years.

The goal of the BDCP is to obtain what we called incidental take permits from the two federal fish agencies and the state fish and wildlife agency,” explained Mr. Zippin.  “Their regulations require that we describe our funding sources in a way that explains that our funding is ‘assured’.  … The way we’ve done it is very consistent with other approved Habitat Conservation Plans, which is the federal side of this conservation plan, and National Communities Conservation Plan, which is the state component,” he said, noting that their approach is consistent with other approved plans.

BDCP Slide 20The chapter does describe the fact that state and federal funding is anticipated, he said. “Some people might claim that is a deficiency, but we cannot guarantee those public funds.  There are state and federal laws that prevent us from doing that,” he said. “We’re limited in how far we can go, but we can certainly demonstrate a history of similar kinds of federal funding, and we can describe the federal authorities that the funding can come from to demonstrate the likelihood of that funding.”

There are three primary sources for the BDCP, he said, noting that those funding sources are the state and federal water contractors, two future state water bonds, and federal appropriations primarily for restoration, many of which are already in place for Bay Delta restoration and monitoring.

To be clear, the state and federal funding will not be contributing to mitigation.  It will not be paying for mitigation of the water facility,” said Mr. Zippin.   “It funds and is often only required to fund the actions associated with contribution to recovery and to conservation of the species that are essentially beyond the mitigation requirement of the plan.”

Two-thirds of the funding will be coming from the state and federal water contractors for the construction and operation of the water facility and the mitigation associated with it,” he said, noting that the other large sources are the two state water bonds and federal appropriations.  There are other federal sources such as grants, and other state funding, he added.

IMG_3732There are still components of the costs to be determined that won’t likely be ready even by the public draft as it still is being worked out, Mr. Zippin said.  “There are some components of this yet to be determined;   the split between the state and federal contractors is still undetermined, and then within each of those groups, the allocations between the state contractors themselves or between the federal contractors themselves, that is still to be determined.”

The state water bond that is expected to be on the ballot next year has two categories that could provide funds for the BDCP, and those are Delta sustainability and watershed protection, he said. “The chapter goes into some details how we estimated what would be contributed to BDCP.  We do assume a second water bond, but of course we know much less details about that water bond because it hasn’t been proposed, but that would come in the future.”

The chapter provides a history of water bonds in California, he noted, adding that the history shows that there has been some success in the past passing water bonds with fairly substantial margins by the voters.  “I think this history is helpful in demonstrating the likelihood of passage of future water bonds,” he said.

Sources for federal funding come from several existing authorities, such as the CVPIA, restoration fund and appropriations for Bay Delta restoration.  “These authorities will provide certainly some funding in the future, but we expect the authorities to be modified or perhaps new authorities created to provide funding for BDCP, so this is the $2.8 billion,” Mr. Zippin said.  There are other state funding sources that are fairly small compared to the others such as some money left in ballot propositions or funds to acquire land for conservation purposes, but he noted it’s a modest amount.

BDCP Slide 27Mr. Zippin presented a table that compares the BDCP’s funding program to other similarly HCPs and NCCPs in California that are similar in terms of both acreage and size.  The plans are all long-term duration permit term plans and they cover different kinds of activities, he said, noting that most of the other plans are more development focused and cover large transportation projects and residential and commercial development in those areas.

The table compares the BDCPs proposal with those of the other plans and shows the proportion of public funding – state and federal funding – versus local public funding.  “Four of the plans actually have substantial amounts of private funding which are often local development fees charged on commercial developments or sometimes on public infrastructure that is privately funded.”

The BDCP is probably most comparable to the Lower Colorado River Habitat Conservation Plan in terms of the types of activities covered,” he said.  “The Lower Colorado River HCP was 75% funded by state and federal government, and 25% local and public funding, and that is due in large part to the nature of the water system on the Colorado River, but in other areas, the proportions are actually quite similar with the proportion of state and federal funding for BDCP lining up in the middle with other plans.”

QUESTIONS AND ANSWERS (PART 1)

BOND CARRYING COSTS

Julia McGeever, Environmental Water Caucus:  “In Chapter 8, there is a lot of discussion about the reliance on bond funding … but there’s no discussion at all of any of the carrying costs of that bond funding, or very minimal.  Yet those are very real costs and should be included in any future BDCP discussion.  … This omission implies that beneficiaries expect the state’s general fund to shoulder these costs, but fails to tell the general public what they are.  And these extra costs will show up every year in the budget, and the public will have to allocate precious general funds to pay for them. … These costs are very real, and should be included in any future financial discussion of BDCP.”

Jerry Meral:I will say that you’re right, the general fund does bear those costs; however, traditionally, those who are applying for bond funding were not charged the interest on that, the general fund bore those costs.  It could be readily done and it is a valid cost, it’s always in the Voter’s Handbook, but it’s a good point and maybe we should make a note of it in the chapter.”

COST ESTIMATES, FINANCIAL FEASIBILITY, COST ALLOCATIONS

Jeffrey Michael (University of the Pacific, Valley Economy Blog): “I have three points to make.  I have no reason to doubt the cost estimates but I recognize their importance.  If the cost of any of these building projects were to be significantly higher or lower than estimated, that would be very important and .. of great interest to everyone.  Is there any review of the cost estimates being done?  Or independent second-opinions?”

IMG_3742Jerry Meral:  “The answer is yes.  We have both internal and external cost estimators.  We’ve actually hired a firm to help us with cost estimating, but that’s going to change as we go forward.  We’ve got less than 10% of the design of the project, so obviously the costs … that’s one of the reasons as David pointed out that we have high contingencies. 20 to 50% contingencies because we really don’t have a firm estimate … we’re using the best numbers that we have, and we have a outside firm that reviews our work.

Jeffrey Michael: My second point, in the chapter, there are statements about the financial feasibility being demonstrated by some calculations in Chapter 9 that I won’t talk about now, but let’s assume that they are correct.  It says that the total benefits to the contractors exceeds the total costs.  My training in financial feasibility and the clear reading of the Department of Water Resources guidelines says that the financial feasibility criteria is a little different than that; it requires every participant to have greater benefits that their allocated costs.  So, my question is, without a cost allocation, how can you evaluate financial feasibility? The lack of formal cost allocation hasn’t stopped some of the contractors from telling their constituents what’s going to happen to their water bills and what they are going to have to pay … is a proportional financing plan financially feasible for all the participants?  Statements made about financial feasibility are premature until you have a cost allocation, and I think you need to move that to a higher level of design, if you will, before making the statements like that.”

IMG_3758Jerry Meral:Let me offer my own thought on that.  You’re absolutely right.  We have a theory in Chapter 8 carried through to Chapter 9 that says here’s how we think this project could at least be financed through division of the costs between the contractors.  I have every confidence that will change.  There will be some agreement between the contractors that will change the division between ag and urban, between the State Water Project and the Central Valley Project, and then we’ll have to go back, undoubtedly … we think that under the current theory of the split between the two, it’s financeable, but they will have to make the determination themselves.”

Dr. David Sunding:You’re right, of course.  Ultimately there will have to be a cost allocation specified for each contractor that will have to deal with the benefits relative to costs.  That’s the way one would do feasibility, but the analysis isn’t really to that point yet.  But at the same time, it is saying something significant to say that in aggregate, the benefits are greater than the aggregate costs, and that’s the point to which we’re at now.  The next step in the analysis is to divide up the costs and divide up the benefits for each entity. … “

Jeffrey Michael: “I think it would be useful for you to assume some cost allocation alternatives, just like you assume BDCP alternatives.  My third question is that in the chapter, one of the most interesting passages …. It was in italics and was labeled ‘A note to readers’ and it said that because of the decision tree and the uncertainty to the contractors that additional state and federal investments were being considered and proposed, but didn’t give any specifics about that, and so my question is can you offer any more specifics as to what has been proposed or discussed in terms of additional state and federal funding?”

Jerry Meral:I think the answer is that we don’t have any yet.  It’s not inconceivable that there might be public benefits that the public might want to invest in; for example, in the water bond, a lot of money is allocated to storage that would pay for the public benefits.  We don’t have a specific example, but we didn’t want to deceive anyone into thinking we’re never going to think about that again, but I can’t give you a specific example today.”

COST OF WATER AT THE PUMPING PLANTS

Rogene Reynolds, south Delta:  “It was mentioned that $24 billion approximately financial encumbrance to the CVP and SWP users, and I know that Jeff was just talking about allocations and you don’t have them worked out yet, but I am very interesting in this figure that could be presented to the public regarding the costs of this water per acre-foot at the Jones and Banks pumping plant.”

IMG_3749Jerry Meral:To most of the urban users, they are looking at the water as delivered to themselves either in the Bay Area or in Southern California.  We have estimated that when you build in the costs of conveyance – the additional costs, not just the capital costs, we would estimate the costs per household is in the neighborhood of $5 per household.  Some people say $3, others say $6, I’ve seen a variety of analyses but it’s somewhere around that.

Rogene Reynolds:  “I am talking about the cost of water at the pumping plant, because from there, most of it will go to farming.  A much smaller portion will go for urban use.  Then I think those buyers of that water need to have an idea of what is the basic cost.  Now then, if Central Valley Project and State Water Project are not going to charge their users per acre foot for ag use, then the public needs to know that too.”

Jerry Meral:The cost at the Jones and Banks pumping plant will be in the neighborhood of $150 an acre-foot. “

Rogene: “Are you sure?  For a facility you’ve just built for $24 billion?”

Jerry Meral:We’re exporting a lot of water from the Delta, so it can be spread out over a fair amount of water.  That is our current estimate; we’re not done yet. … For someone who is an irrigator, $150 an acre-foot on top of what they are paying now is a lot of money.  But we don’t want to lowball the figure.  That would be enough to pay for the project.”

ABILITY OF CENTRAL VALLEY PROJECT CONTRACTORS TO PAY

Jane Wagner-Tyack, Restore the Delta: “We need to be sure that the beneficiaries are willing and able to pay their allocated costs for a project over the life of the project, and in that respect I want to mention specifically a report that was issued by the Office of the Inspector General of the Department of the Interior in March.  This report found that the US Bureau of Reclamation is not on track to meet the Congressional mandate for recovering the federal investment in the Central Valley Project by 2030 …  Given the fact that you’re looking at creating additional expenses for CVP contractors on top of costs that they are already not able to repay, I’m curious to hear why we think that CVP contractors are going to be able to come up with the money you say they will to pay for this project?”

IMG_3750Jerry Meral:The Bureau does have a very different way of cost recovery than the State Water Project which is more of a take or pay situation, and I don’t think anything in this particular contract would change their fundamental underlying contractual relationship with their contractors.  But maybe I could turn this to Jason to comment on the ability of the federal contractors to at least pay for their costs ... “

Jason Peltier, Westlands Water District:It is our intent to cover costs and yet as it’s been discussed here, it’s uncertain what those costs are and how they will be allocated.  A final decision is not only for our policy people to make, but our bond counsel.  I would say relative to our past repayment ability, the fact that we have 20 years of 40, 60, 90 percent cut in our water supplies over the last 20 years … Over the last 20 years we’ve had 2.25 million acre-feet of project water reallocated or reserved to the environment.  Over the past 20 years, water and power users have put a billion dollars into ecosystem restoration.  All of those things have put downward pressure on our ability to cover our water costs.  … you could say anything you want, it would not change my view about the way the project has been manipulated in the last couple years.

Jane Wagner-Tyack, countering: “Assuming that the levels of deliveries can be guaranteed over the course of this project, you anticipate that the contractors would be able to be able to pay this off at the rates we’re talking about here?  Assuming that these levels of deliveries can be guaranteed?”

IMG_3768Jason Pelteir:No.  We would assume no guarantee in deliveries.  We have a model of anticipated deliveries; frankly if we come up on the low end of the range, and that’s all the project can produce, I don’t see a sane farmer in the world saying I’m going to pay a whole lot money for less water than I am getting today.  So there are some realities here.  It’s not ‘we’re just going to do it no matter what it costs.’  There are fiscal realities that we face.  And what the regulators have to come to grips with is that there are costs associated with what they do to the public infrastructure.  Costs not only for us, the citizens that provide that infrastructure, but ultimately costs to the ecosystem, because if we don’t get water, we don’t pay into the restoration fund, the restoration fund doesn’t get money, we don’t build more streams, we don’t build more habitat.  We don’t things for salmon, so there’s a lot of interconnection between the health of the project and the health of not only customers but the ecosystem.”

FINANCING FROM THE VARIOUS SOURCES

IMG_3754Dennis O’Connor: In laying out the financing from the different sources, was there an attempt to follow some sort of beneficiary pays concept, or was it more of an opportunistic ‘there’s money in that pocket, let’s use that’?

Jerry Meral:  “It’s really based on a formula.  We assumed a traditional division between the state and federal governments.  …   That issue could come up in the discussions between the state and federal contractors or the ag and urban contractors, and they may decide internally to allocate costs based on benefits but we did not.  We just assumed it was the number of acre-feet coming out of the Delta and the same charges applied to each acre-foot.  The only costs allocated to the water bond are the costs that are not allocated, or those that are specifically unallocated to the water users, such as habitat development projects, more wardens in the Delta, removal of boats, what have you.  Those costs are the only costs allocated to the bond.”

BDCP AND AGRICULTURE

Jerry Meral with a question from CJ Johar, watching the webcast: “He says, the PPIC has reported that agriculture and related manufacturing use about 4/5ths of the water in CA and make up 2% of the state GDP and 4% of the jobs, and he asks how much will the BDCP help increase farming activity south of the Delta and at what cost?  It’s very hard for me to imagine, given the levels of delivery that Jason described in the past that we’re going to do anything to increase farming.  The state, I think, will be lucky to be able to maintain the farming we have today.  Perhaps as farming becomes more efficient as it has in the past, that may be one way to increase farming, but as for this project, it’s very hard for me to imagine any increase in farming as a result.  …

He also asked, does the BDCP consider the effects of the tunnel on premium agricultural land in the Delta, and the answer to that is definitely yes.  We do have habitat development in the Delta as part of the project to achieve the second of the coequal goals of ecosystem restoration in the Delta, but we expect to be able to avoid … prime ag land and especially high productivity land in the Delta; there is a lot of land that is in lower value crops, and to the extent that we do acquire any farmland, we would hope it would be that.  With regard specifically to the tunnels, the amount of impact of tunnel construction, if that takes place, on agricultural land will be minimal – it will be in the hundreds of acres I should say, but not extensive, and quite frankly, the habitat impacts are more likely to be much larger.”

PROSPECT OF FEDERAL FUNDING

IMG_3762Brandon Mitchell with Congressman John Garamendi’s office: “I did want to offer a little bit of perspective on the assumed federal funding component of previous chapter we just went through.  I am concerned about some of those assumptions and I feel that it doesn’t necessarily consider the current political dynamic …  We are dealing with sequestration in the federal government. … In particular, with the recent development of the farm bill, we see that there is an unwillingness, particularly amongst the House of Representatives to fund a lot of different programs that have been traditionally have been funded in our country. … Congressman Garamendi does serve on the water and power subcommittee in the house, and recently they did their appropriation markup, and the Army  Corps of Engineers saw a significant reduction in their budget. … the Department of Interior markup will be happening in the near future and we can assume it will be consistent with how the house has been operating and there will be across the board reductions.  So amidst that I would caution you not to assume traditional funding levels.  I would further caution you, especially, about any consideration of new authorities, in particular considering that the members of congress whom represent the five Delta counties are all passionately opposed to this plan.”

SALMON, THE CVPIA AND THE BDCP

Dick Poole, Golden Gate Salmon Association: “We continue to look at the conservation actions in the Delta, and from our standpoint, we do not see that they will recover the salmon.  I’ve said this before.  For the last two years, we have been working to put some short range plans together with consultants and the assistance of the fishery agencies, and we have settled on 26 projects that we think can be done within the next 5 years or so and will substantially improve the salmon situation … out of those 26 projects, 23 of them are in the upper river.  And some of them are fairly simple, but we don’t think the salmon can be recovered without doing things in the upper river.  Three of the projects are in the Delta and none of those three projects are on your list.  That also tells you something.  …  We don’t see that digging up the Delta necessarily helps the salmon the way that we and our consultants feel is necessary, so that’s a problem. …   We finally convinced the Bureau, FWS, and others that some of these on the ground projects are better than where they were spending some of that $50 million CVPIA fund.  So my question is, how much money are you counting on from the CVPIA because we might be competing for those funds?

IMG_3738Jerry Meral:We have had those discussions with the federal government and they have told us that CVPIA is not only oversubscribed but in the danger of having less money in the future, so we are counting it very little, because we understand the CVPIA is heavily subscribed, so we don’t expect that to be available source of funding.”

Dick Poole:  The $50 million comes from Jason and his colleagues and they are as frustrated as we are that we haven’t made progress in the past.

Jason Peltier:We are, and I would add that of all the billions of dollars that has been spent out of the CVPIA fund so far, less than $5 million has been spent in the Delta.  That would be my guess. Virtually nothing.  At the same time, a lot of our money and power customer’s money has gone to Buena Vista shrew, brush rabbits in Stanislaus County, some endangered plant up in the El Dorado hills, a lot of … things that are maybe good investments …  We would like to see some of the money directed at projects like those on your list that are real, because what we’ve seen over the 20 years is that it is oversubscribed – the money’s not getting on to the ground anymore.  Empires have been built, a lot of money has been wasted, and we’re frankly at the end of our rope in terms of trying to push some common sense in there, and we’re happy to work with you, Dick, because real projects are something they have seemed to lost track of.

DISCOUNT RATE

IMG_3772David Abelson: “I did a rough calculation based on your assumed discount rate of 2.275% and found that roughly the nondiscounted dollar costs for this project would be closer to $50 billion in undiscounted dollars.  My question to my concerns is that the discount rate of 2.275 seems unreasonably low to me.”

David Mitchell, M. Cubed (economist): The discount rate was based on federal guidelines for the Bureau of Reclamation and the US Army Corps of Engineers for federal water project investigations.  That’s set each year and adjusted based on current capital markets and other factors. …

AGRICULTURAL LAND VALUES

Rogene Reynolds, south Delta:  “Jerry, you mentioned that the agricultural land that would be acquired will be by willing seller with the implication that it was marginal.  I want to point you to your own EIR which shows over 16,000 acres in the south Delta, including all of Fabian tract, parts of eastern Union Island and middle Roberts Island, designated for habitat restoration – terrestrial – it’s not swampland.  Somewhere in your report, it talks about that land being about $7000 an acre; the ranch just sold next to me at $12,000 an acre 5 years ago.  Your values are incorrect and the implication that the lands you are looking at is not highly productive land is incorrect, also.”

FOLLOW-UP:  ASSUMPTIONS

Jeffrey Michael:  “In a question that followed the one that I asked, you gave an answer that contradicted the one you gave me.  You said it was premature to assume a cost allocation but when someone asked how much it would cost, you used a figure of $5 per household for urban households … that calculation assumes a cost allocation … I don’t think this project is feasible at $5 a household.”

FUNDING AND BENEFIT ASSUMPTIONS

Melinda Terry, North Delta Water Agency: “I lost track of the number of times I read the words assumed, expected, anticipated or potential funding sources, which seems counter to what I understand or my definition of assured adequate funding to carry out conservation actions.  But in particular, relying on 14% to come from two water bonds thinking that they’ll pass is like me saying I’m going to retire early because I’m going to win the Powerball this week.  It’s a nice little dream but I can’t take that to the bank and I can’t quit my job today, so I’m not sure why a permit should be granted on a similar kind of pipe dream of having that windfall come your way.  It’s very risky, especially when it’s 14% …. “

IMG_3776“One of the benefits to contractors is water supply, and I just would point out that that may not exist because water tables that are in the EIR/EIS are based upon the modeling assumption of the State Water Board moving the salinity compliance point from Emmaton to Three Mile Slough, and that allows you to account for a lot more water if that were to happen.  The problem is that particular action is not contained in the permits … unless the water board has done that [changed the permits], the water may not even be what is identified in the EIR/EIS.

Improving the water quality for the contractors, interestingly, or if you are in the south or western Delta, it gets worse for salinity, and its called a unavoidable significant impact.  We would disagree with that.  … it doesn’t seem appropriate that the water contractors get better water quality but somehow two portions of the Delta, it’s ‘sorry Charlie, it’s unavoidable,’ but it is avoidable – you can modify or mitigate by changing the project.”

“The seismic risk reduction talks about resilience of the new infrastructure to levee failures … If we have lower subventions (money for Delta levees) going in to the next 10 years, even before you start construction, I’m just not sure what shape they will be in.  There’s no funding for levees in BDCP, and yet 51% of the time under water ops, the south Delta pumps will be used, so you will still need all of these levees that are claimed to fail that are not going to be improved under BDCP, so by having north Delta intakes does not necessarily reduce your risk … “

Jerry Meral:In the current bond that’s on the ballot for next November, a billion and a half dollars is allocated for Delta projects.  There’s also $750 million for direct community projects, and the subventions money could come out of that fund … clearly, when you read that language, subventions would be eligible.  If the Legislature wanted to use some of those funds, they could.”

IMG_3782David Zippin:To get to one of your earlier questions about the uncertainty of the water bonds and relying on 14% or so of our funding from those two water bonds, I would point out that the our audience is the federal fish and wildlife agencies and the state agency of assured funding, it’s not guaranteed funding, it’s not setting aside money.  It’s actually very consistent with other HCPs around the country that have been approved and have relied on some portion of their funding coming from voter approved measures … Our permits require that we implement the conservation plan and that we pay for the conservation plan and all of the measures that we committed to, so if the bond measures do not pass or if they pass short of the funding that we expect, we’ll need to find that funding elsewhere.  So our commitment and our permits require us to implement the conservation measures; the funding is just a demonstration that it is feasible to actually implement those conservation measures. …

Erik Ringelberg:  “To use that as an illustration, in year 10, if you fail to meet your x thousand acres and have no funding in place to mitigate your activity, does the permit get withdrawn and the operation cease? Or does that get deferred out to the next 5 to 7 years?”

Michael Hoover, US Fish and Wildlife Service:Intuitively, the answer would be if you’re not going to get what the agreement, do you have an agreement, does that mean you go back and re-evaluate what you did because situations have changed. It’s all un-treaded ground, I would argue.  So we’re going into this that we’re going to get an agreement on what the funding will be before we issue a permit and work to make sure that whatever we can do our roles – it looks like as we head towards operation, if there is some sort of issue, we will work to resolve those issues and move forward.  Once the permit is issued, we’re in this process with everyone to try and make it work.  If that happens, we’ll have to work to try and solve it.

MITIGATIONS

IMG_3788Ann Spaulding, City of Antioch:  “I couldn’t find any reference to mitigation funding that would apply to impacts to not buying agricultural land.  I refer back to the water quality chapter, and those mitigations are not mitigations.  What they are, are studies of actions to be taken, so there is no specific mitigation and no cost associated with them.  … “

Jerry Meral:To some extent, we are undertaking discussions with those who are impacted by those changes in water quality to find out what mitigations exactly would be needed so we can define the costs.  So in the case of Antioch, we have well defined costs because the contract calls on us to pay for the problems that we cause; in the case of Contra Costa Water District, the exact form of mitigation, we’re still in discussions with them.  They have some different ideas on how we could mitigate. …  As soon as we have a good idea, we’ll have to include those in the present costs.”

PRESENTATION: CHAPTER 9 – ALTERNATIVES TO TAKE

David Zippin then began the presentation of Chapter 9, Alternatives to Take.  He began by noting that the appendices in this chapter describe in detail the economic benefits of the BDCP, so those who are interested in the details should take a look at those.

This chapter has a fairly narrow purpose which is defined by the Federal Endangered Species Act, which requires applicants for an incidental take permit (which we are) in their HCP to look at what alternative actions to the taking of those federally listed species were considered and why those alternatives were not selected,” he explained.  “This chapter is not a look at all possible alternatives, it’s not a look at all of the effects of those alternatives, it’s simply looking at alternatives to the take of federally-listed species.”  He also explained that the chapter is limited to just fish and wildlife species and that the NCCPA, the state equivalent does not have a similar provision, so the narrow purpose of Chapter 9 is just to satisfy the federal act.

The purpose of this chapter is to try and demonstrate that the impacts of the proposed project have minimized and mitigated to the maximum extent practicable and that is the key finding that the two federal agencies will need to make in order to issue their permits, he said.  “What we’ve done is describe take alternatives that we considered that may result in less incidental take, more conservation benefit, or both; we’ve evaluated the feasibility of reducing that take to the covered species, and that explains why those take alternatives were not adopted as the proposed action.”

What is take? It is a very specific term defined in federal regulation as ‘to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct,'” said Mr. Zippin.  “'Harm' includes significant habitat modification through impairment of essential behavior that might result in death or injury; its, for example, habitat for a listed species that may be unoccupied currently, but in the future could be occupied and might impair essential behaviors like reproduction.”

IMG_3746The alternatives used in Chapter 9 were in part derived from the fourteen alternatives analyzed in the EIR/EIS.  Through a screening process, eight were eliminated and six were retained.  They are identified by letter codes to make them distinct from the EIR/EIS alternatives.  Mr. Zippin explained that for comparison purposes, the alternatives were varied as little as possible; they varied by the amount of restoration, water operations and the location, type and scale of the water conveyance facility.   “The purpose of this chapter is to compare alternatives as they relate to that key finding of minimizing and mitigating to the maximum extent practicable.  So it doesn’t help us to have alternatives that vary in 10 or 15 different ways, because you can’t really tease apart in what ways matter for those changes in take,” said Mr. Zippin.

Three alternatives were added in addition to the six alternatives for the EIR/EIS.  One way that the take alternatives vary from their parallel alternatives in the EIR/EIS is that the water operations were modified to be the same as proposed for the BDCP.  “Water operations vary a lot, so … it makes it hard to separate out the effects of those water operations from other components of the project when they vary so much.  So for these take alternatives, we added elements to water operations so that they were the same as what’s proposed under BDCP,” he said, noting that they made these changes to meet the narrow regulatory purpose of Chapter 9.

The EIR/EIS alternatives have a much broader purpose.  They must avoid or substantially lessen impacts to the human environment on a wide variety of issues, everything from agriculture to water quality to transportation to cultural resources.  There are 35 chapters in the environmental documents devoted to all those topics.  We don’t need to …  we’re not required to look at that variety of issues in the take alternatives chapter.”  Mr. Zippin also noted that there isn’t any discussion of costs or economic benefits in the EIR/EIS, and that is deliberate.  “There is certainly some discussion in the socio-economic chapter but not to the level that you would describe as a cost-benefit analysis.”

The take alternatives were evaluated against four criteria: the level of incidental take and likely conservation benefits to each of those covered fish and wildlife species, consistency with our overall goal, practicability, and the level of non biological impacts, he said.  The effects were based on the impacts or stressors during construction, operations, and maintenance during operations, and a three stage ranking system was assigned to each stressor and take alternative,  relative to the proposed action:  measurably less then, not different than, or greater than the BDCP proposed action.

Slide 55Practicability is a really important component of the analysis, said Mr. Zippin.  “It’s made up of economic feasibility, logistical considerations and technology considerations.  Cost practicability –the question was, are the economic benefits to the funding entities, do those benefits exceed the costs to those funding entities?  So we’re comparing incremental benefits to incremental costs and looking at economic benefits to the water agencies in those three categories: water supply, water reliability, and seismic risk reduction.  We then compare those costs to reasonable scenarios without BDCP.”

For the purposes of Chapter 9, the scenario without BDCP was defined as the existing conveyance high outflow scenario and the existing conveyance low outflow scenario as well.  These are benchmarks for the cost practicability analysis assuming that we have the same water system in the Delta, the north Delta the intakes are not built, and the south Delta continuing to operate … so what the scenario without BDCP contemplates is those components of BDCP operations being superimposed on the current or existing water facilities,” he said, noting that this is only used for the purposes of cost practicability in Chapter 9.

Alternatives were also evaluated on the basis of whether they were technologically practicable or not, using a standard for large infrastructure projects of ‘all known, available and reasonable technology.’

IMG_3802Dr. David Sunding then began explaining the economic benefits portion of the chapter.  “This is a very complicated chapter; there is a lot of analysis that goes into it but it’s very important.  It’s essentially a description or an explanation of why the proposed action looks the way it does,” he said.  “And one of the criteria for ruling in or ruling out an alternative project is whether or not its financially feasible.”

This is about the economic analysis that’s in chapter 9,” he added.  “We’re just looking at benefits and costs to the contractors.  It’s not saying that other impacts aren’t relevant and won’t be studied – they will be … this is a description of what’s in Chapter 9.”

What we’re looking at here is an incremental analysis.  On one side of the ledger, you pay for something, so that’s payments relative to doing nothing, but then benefits are also measured on an incremental basis; you get some benefit as opposed to doing nothing.  So, to measure the benefits and the costs of BDCP and all of the take alternatives, we need to make assumptions about what the world would look like if BDCP weren’t implemented.”

The levels of benefits depend on future regulation which is inherently hard to figure with any precision so we looked at a range, he said.  “The bookends of the range are the existing conveyance high outflow scenario and then the existing conveyance low outflow scenario.  …  All of the impacts for all of the take alternatives have to be and are evaluated relative to an assumption about what would be the operation of facilities in other aspects in the event BDCP is not implemented.  That is integral to the analysis.”

BDCP Slide categoriesThe benefits of BDCP and levels of benefits under the assumption of no BDCP are evaluated along four dimensions: urban water supply reliability, agricultural water supply reliability, water quality impacts, and reductions in seismic risks, he said.

The perspective of Chapter 9 is narrow, Dr. Sunding pointed out.  “It’s looking at the world just from the perspective of state and federal contractors who will pay for the majority of the program, however, BDCP obviously impacts more than just the state and federal contractors.  There is an analysis that is coming out in early August that does take a more comprehensive look from an economic perspective of many other groups in the state who are potentially impacted by BDCP.  The Statewide Economic Impact Report looks at a number of potential types of impacts of the BDCP, such as impacts to the labor market, jobs created and jobs lost, Delta agriculture and the effects of changes in salinity of irrigation water supplies there, impacts on urban water treatment, outdoor recreation, and even some impacts associated with construction of the conveyance facilities and restoration of habitat such as things like traffic congestion or local air quality impacts from construction equipment.  This statewide economic impact analysis is also looking at changes in carbon fluxes and greenhouse gas emissions that would result from both the construction aspects of BDCP but also the habitat restoration, in particular the conversion of agricultural lands to habitat.  There are some parts of this analysis that are done in a precise, quantitative, monetized way; other parts of the analysis we’re just not able to make that degree of precision so they are done more on a qualitative basis.”

The benefit analysis that we undertook [for Chapter 9] absolutely takes account of investments in urban water supply alternatives: recycling, desalination, stormwater capture, conservation opportunities, so the analysis is rooted in the reality that BDCP or State Water Project deliveries are just a part of an overall urban water supply portfolio,” he said.  “No matter whether BDCP is implemented or not, there will absolutely be a very large degree of investment in urban water supplies.  The level may be affected by whether or not BDCP is implemented, but even with BDCP, there will be significant investment in new water supplies.”

There are two components to water supply benefits for urban agencies: avoiding future shortages and avoiding some investments in urban water supplies, said Dr. Sunding.  “So if there is more water coming from these foundational supplies, then that lessens somewhat the need to invest in urban water supplies and it may also somewhat lessen the magnitude and frequency of future water shortages.”

The urban water benefit model works on the basis of 36 urban water agencies across the state that receive State Water Project supplies; it includes all 26 Metropolitan water district member agencies, plus ten other water districts in California, three of which are in the Bay Area, with the others in between the Bay Area and Southern California, explained Dr. Sunding.  The impact model considered a range of factors, such as demand growth, water supply alternatives, and the operation of existing storage facilities.

What  we’re asking here what would urban ratepayers be willing to pay to get a different pattern of deliveries from the State Water Project.  That’s really what this analysis is about.  What amount of money would they pay to get post BDCP water supplies as opposed to water supplies that would exist without BDCP?”

Dr. Sunding then presented a graph of an exceedance curve for the proposed action, and the alternatives.  “What this exceedance curve is telling you is that if you look over the historic hydrologies at the patterns of wet years and dry years, what is the level of deliveries on the state project across all of those historic hydrologic conditions,” he explained.

Slide 63

Exceedance curve for the proposed action

On the horizontal access across the bottom we have percentages, so this is the percent of years under the historic hydrologies that deliveries exceed the amount that’s on the vertical axis.  So this tells you not just average deliveries but what’s the distribution of deliveries across wet and dry years.”  He pointed out that there’s a lot of information in these curves; it’s really the core of the economic analysis, and he encouraged those interested to study these curves specifically.

We’re looking at the effects of BDCP under some bookend assumptions of high outflow and low outflow,” he said, noting that the high outflow case actually has the lowest level of deliveries, and the low outflow case has the high level of deliveries.

The black line at the bottom is the distribution of State Water Project deliveries under the high outflow scenario no BDCP.  The red line corresponds to post BDCP, what would be the level of deliveries in the high outflow bookend, so we’re comparing the black line to the red line,” explained Dr. Sunding.  “The red line is obviously above the black line, so above means more water, so post BDCP there’s more water delivered from the State Water Project than without BDCP.”

Dr. Sunding pointed out that on the left side of the graph, the red line and the black line are pretty close; the big difference is on the right side.  “The right side are the wet years, so what this is saying is two things:  BDCP increases state water project deliveries, which makes sense, and also that the incremental water that results from BDCP occurs mostly if not entirely in average to wet years.  That’s also extremely important for the economic analysis,” he said.  “This is why we took such pains to include storage, because that water coming in the wet years, you have to be able to store it to use it.”

In the analysis, we took account of all aspects of the urban water supply portfolio because if you look at an area like Southern California that’s quite dependent on deliveries from the Delta, Delta exports account for only roughly a quarter of the water that is consumed in Southern California.  About half is locally sourced from local groundwater, local surface supplies, and about half is imported,” said Dr. Sunding.  “Half of that from the Colorado and half of that from the Delta, so clearly you have to take account of other changes in water supplies to figure out what additional water from the Delta is worth.”

The analysis includes changes that are assumed are going to occur no matter what happens with the BDCP, such as new projects that are under construction or have been permitted and financed, an increase in groundwater extraction, brackish groundwater desalination, seawater desalination, recycled water and expected changes in imported water supplies.

With respect to demand, the current 2012 level of demand is just a little over 5 million acre-feet. The assumption that we’re making in the model is that by 2050 that grows by not even one million acre-feet, not even 20%, so that’s an implicit growth rate of less than a half percent per year, which is low.  There were years in the 1960s where urban water demand was increasing at over 10% per year,” said Dr. Sunding.  “What’s happening here now is that when rates go up and conservation programs continue as urban densities go up – land’s expensive now and transportation’s expensive now – so the projected growth patterns are much more the mixed use variety, where people will be in multi-family units with less outdoor irrigation.”

Slide 67Roughly what’s happening with urban water demand forecasts is that all of those factors are driving down per capita consumption, but population is still expected to grow, and roughly speaking those factors are about canceling out.  There’s a little bit of growth, less than a half percent per year,” said Dr. Sunding.

Water demand is half of what determines the amount of shortage.  Shortage is just demand minus what’s available, the supply that is available.  So the urban water demand forecasts are very important numbers, and what this is showing is the urban water shortages that are avoided as a result of BDCP,” he explained.  “This is what creates the economic value.  Less shortage is something the ratepayers are willing to pay for.”

BDCP Slide 68Dr. Sunding displayed a simpler version of the graph.  “The horizontal axis goes from 2012 to 2050, and there are two lines on there, a solid line and a dashed line.  The solid line is showing what is the expected amount of shortage, considering the entire historic hydrology, wet years, dry years, and what is the expected amount of shortage that is alleviated by implementation of the BDCP.  The dashed line shows you that over the historic hydrology in the driest year, what was the reduction in shortage that resulted from implementing BDCP.”

If the project is implemented in 2025, which is where you start to see some difference, the amount of urban water shortage that is avoided because of BDCP is somewhere in the range of 250,000 acre-feet per year, looking across wet and dry years,” he said.   “In dry years, the avoided shortage as a result of BDCP is closer to a million acre-feet.  Now, the level of baseline urban water demand was 5 million, starting in 2012, and growing to right around 6 million by 2050, so this is a reduction in shortage on the order of 15 to 18%.  Now a 15% urban water shortage is huge. We rarely have those, and that’s just the avoided shortage.  This is what creates the economic benefit from BDCP,” noting that so far, we’re only dealing in terms of acre-feet and not dollars.

Dr. Sunding reminded that the analysis is cognizant that urban water supply alternatives will have to be invested in, even with the BDCP, “because the BDCP just keeps deliveries from the Delta at roughly the level they’ve been over the last 20 years,” he said.  “The analogy I like to use is this.  It’s similar to repairing the foundation on your house.  It doesn’t make your bathroom any fancier, it doesn’t add another bedroom, it just keeps your house the way it is, but it prevents something catastrophic from happening, so it prevents a big loss.”

BDCP Slide 69Because of urban demand growth, there is still a shortage that remains after implementation of BDCP, he said.  “In an average year, there would be about 300,000 acre-feet of shortage remaining, even after BDCP is implemented.  And in a very dry year, the amount of shortage goes to over 1.6 million acre-feet, which is about 30% and this after BDCP.  This is the problem that has to be addressed by investment in water supply alternatives.”

Desalination, recycling, stormwater capture, brackish water desal, conservation – we’re going to need it all to make ends meet with respect to urban water in California.  So I would not want you to come out of here with the idea that BDCP is going to solve everybody’s problems because on the urban side, it won’t,” he said.  “It keeps things where they are, but growth, as well as existing shortages, that has to be dealt with entirely by investments in alternatives.”

There are a lot of different ways to think about costs – the way economists prefer to think about costs is incremental costs,” said Dr. Sunding.  “The proposed action high outflow increases State Water Project deliveries by 1.2 million acre-feet relative to the existing conveyance high outflow.  … Under the low outflow case, it increases deliveries by mean deliveries 1.7 million acre-feet, so we ask the question, what is the extra amount of water that results from the BDCP?  It’s between 1.2 million acre-feet and 1.7 million acre-feet, again that’s state and federal supply combined, so that’s the supply you’re getting, but it’s really a loss we’re avoiding,” he said.  “With a cost of 13.3 billion that gives you an implicit water supply cost of $300 to $400 per acre-foot.  That’s incremental dollars compared to incremental water supplies.”

Comparing that cost to other water supplies, Dr. Sunding noted that many past recycling projects were heavily subsidized, with no guarantee that those subsidies will continue into the future, so the cost of recycled water is in the range of $1000 to $1700, with some projects costing more.  Desalination is still expensive, he said, with the Carlsbad project in San Diego likely to be in the range of $2000 to $2300 per acre-foot.  Brackish desalination is less expensive at around $1200 to $1300 per acre-foot.

Conservation is another way to close the supply—demand gap.  Under the high outflow scenario, it’s about $1400 per acre-foot; in a low-outflow scenario, it’s about $1200 per acre-foot, so the cost of conservation is somewhere in that range and that we can measure it pretty precisely.”

Agricultural water supply benefits are estimated using the Statewide Agricultural Production Model, very common framework, which accounts for Central Valley Project deliveries, State Water Project deliveries and other local supplies as well as groundwater, he said.

So what are the benefits of enhanced water supply reliability that result from BDCP? “In the high outflow case, after implementation of BDCP, mean deliveries in the early long term are about 4.7 million acre-feet per year.  In the low-outflow case, which is the high supply scenario, it’s about 5.6 million acre-feet,” explained Dr. Sunding.  “So what this is saying is that post implementation of BDCP deliveries from the Delta would be in the range of 4.7 to 5.6.  Over the last 20 years, what’s been the level of deliveries?  It’s been about 5.2 to 5.3, which is right in the middle of the range.  So when statements are made to the effect that BDCP does not greatly increase water supplies, that’s the basis for it.

Conversely, under the existing conveyance, high and low outflow cases which is what we’re comparing to, combined state and federal deliveries are 3.5 to 3.9, so a very simple way of thinking about what BDCP is accomplishing from an economic point of view is that it is avoiding a regulation induced 40% reduction in state and federal deliveries,” said Dr. Sunding.  “It’s kind of a blunt way to say it, but that’s what’s happening, and that’s one reason these benefits are as high as they are.”

With respect to water quality, we’re able to monetize benefits with respect to salinity; however, there are expected to be other changes in bromides and other constituents but we were not able to monetize those,” he said.  “We looked at value of changes in the salinity of water deliveries both to ag and urban agencies, and the water quality benefits are actually significant.  Again, we’re just monetizing changes in salinity, but for the BDCP proposed action high and low outflow scenarios, salinity reduction benefits are in the range of $1.8 billion dollars, and that is primarily urban.”

Seismic risk reduction, the last category of benefits, was calculated using a 1 year outage, called the reference case.  “We’re assuming such an outage has a 2% probability of occurring each year. … We’re only considering direct benefits to ratepayers in the affected agencies. … The benefits of seismic risk reduction as a result of new conveyance facilities for the BDCP proposed action high and low outflow scenarios are in the neighborhood of $360 million.”

We’re looking at the proposed action under the high and low outflow assumptions, but then we’re also looking at a whole bunch of ways that BDCP could have been put together.  Different conveyance, different operations, different restoration, and for each one we’re evaluating whether that take alternative would be practicable – is it a project that somebody would be willing to pay for because if not, it’s not going to work,” he said.

Slide 84The proposed action itself … has total costs of 13.3 billion,” he said, noting that the number was different than the $16.3 billion figure given earlier because it was in present value.  Referencing the chart, Dr. Sunding noted “The final column is the net benefits, or benefits minus costs, so you can see for both high and low outflows, both ends of the bookends, BDCP produces net positive benefits.”

A couple of take alternatives didn’t pass the cost practicability test with one of those being alternative D which used a 3000 cfs tunnel, he said.  “The other alternative that I would argue doesn’t pass is alternative I, which is the proposed action but with 44,500 cfs of spring outflow.  That generates a number that is very close to 0 – only $326 million in benefits, and no one in their right mind is going to invest $13 billion to get a net return of $300 million, so that one would also not pass from a cost practicability point of view,” he said.

QUESTION AND ANSWERS, PART 2

EQUAL TIME FOR DELTA IMPACTS

Melinda Terry, North Delta Water Agency: “First of all I would like to request equal time given to what some of these impacts are from an economic standpoint to the Delta, because frankly all we’ve heard for the last 45 minutes are the impacts to those who are paying for the project, and that’s great.  That’s important to them and to whether they want to do it or not, but we haven’t talked at all about the impacts on the Delta folks, and again, there are more than 750 impacts identified.  It’s interesting to note that the changes in the water supply and water deliveries during construction for the SWP and the CVP contractors, there are no impacts.  The change in the SWP/CVP deliveries long term is actually beneficial.  Then when you read  through the document and you go through the impacts, there are several for the in-Delta folks that are significant, adverse, and unavoidable, so while one side talks about benefits for 45 minutes, there’s a lot to be talked about in terms of the impacts from an economic standpoint to the Delta.  These unavoidable impacts that will occur are to degrade the water quality, and that’s significant because in the Delta, particularly the area where the conveyance facilities are going in, those homes are on well water.  Normally that’s not a big deal, but now they don’t have water to their homes, or at least something they might be able to use.”

IMG_3805“Another unavoidable significant effect: deplete groundwater supplies and reduce the well production.  That occurs because of the dewatering activities for 10 years of construction.  Again, you’re talking impacts to people’s homes that that will occur.  Also the access will be limited to portions of the communities and individual parcels for ten years of construction.  That means you won’t be able to farm, even if you aren’t in the actual footprint.  I’d like to hear about the economic impacts of that.”

“There’s going to be permanent loss of prime and important farmland, and that was brought up by one of the south Delta landowners earlier.  That’s going to continue … the Delta is the largest area of the contiguous amount of what’s considered prime and important farmland, thousands of acres of that will be gone.  What’s the economic impact of that?  I’d like to hear about that for 45 minutes.”

“And then, from a water supply standpoint, … I’m not sure the number you’re being told is correct, because again, if it’s based on a compliance point for D1641 being moved, which is not in the permit, and that water board letter that they recently did made it clear that when they look at things like that, that they must find that the change you want to happen will not injure any user of water.  Well I just named several people in the Delta that would be harmed. …”

IMG_3785“Even from the earthquake standpoint, one of these documents talks about all the importance of having this isolated facility … maybe you would get some earthquake reduction if there was an isolated facility, but 51% of the time, during alternative 4 operations, south Delta is being used and there’s no money in BDCP to improve or even maintain levees in the short term  … I just don’t see that you really get that earthquake benefit.  …

“David talked about the willingness of the people to pay for the BDCP.  And I’ll just pose to you that there’s another way to ask people how much they are willing to pay, those in the export areas, for the BDCP, and that’s to put it to a vote of the people.  Are you willing to pay for this, because it is significant.  And again, if you partly just look at if those benefits are real, I’m not convinced. …

“I think you’ve underestimated the costs, because as we’ve gone through some of our cooperative agency meetings, there are a lot of these impacts that are only analyzed at a programmatic level and not a project level, so it will take a great deal of money and time to get it to a project level analysis, and then the other things that are significant and costly and haven’t been analyzed at all, such as the degradation of the levees as part transportation for all the trucks that will go over them; they aren’t built for that weight.  …

“I would request at some point that we have equal time.  I would like to hear David talk for 45 minutes about the fact that people will have their land values reduced; I forgot to mention the lost property taxes of $11 to $18 million during the 10 year construction period, and 2 million annually and that’s just property taxes, and that doesn’t count for the lost ag revenues.  I would like to hear the presentation on all of those; the lost land, the property values, people abandoning their homes, I’d like to hear about that.”

Jerry Meral:You’ll be here for that because that is the presentation that was referred to earlier of the more statewide benefits and costs of the project.  I’m sure the presentation will last at least 45 minutes; you’ll probably have more than that.   I should add one thing though.  The legislature mandated in the Delta Reform Act that any construction associated with this project, any land acquisition by the state cannot take away the property tax or reclamation district costs, or any of those other costs.  In the bill, there’s not way the state is going to violate that …

Melinda Terry: “ … the lost ag revenues, the businesses that are closing … “

THROUGH-DELTA ALTERNATIVE, POPULATION GROWTH ESTIMATES

IMG_3817Jeffrey Michael, (University of the Pacific, Valley Economy Blog) : “I do want to compliment you for doing these studies and hiring Dave; this is without doubt the most useful economic work that has been done since BDCP was begun … this is useful but when I read this and interpret it, I think that this is the analysis that should have been presented 4 or 5 years ago when you were developing alternatives, because when you look at this analysis objectively and not from the standpoint of trying to justify the preferred project, it has real implications for some things we should take a look at.  … The earthquake analysis and benefits were 2% of the total project when usually it’s touting as the number reason we need to do it. … One of the things about BDCP is the failure to look at levee investment alternatives that would make a more seismic resilient Delta. …

The second point is that the one and only through Delta alternative considered performs very well in the alternatives to take analysis.  The net economic benefits were comparable to the BDCP, but the benefit-cost ratio was much, much higher because it was so much cheaper.  I would argue that the feasibility of it from both a financial and a political and a lawsuit standpoint is much higher than the BDCP that is being discussed. Also the through-Delta alternative performed better for all the fish species, which is what this is supposed to be about. Will BDCP be looking at the through-Delta alternative, and maybe trying to refine and look at other alternatives moving forward?”

Jerry Meral:The answer would be yes, but remember this is a Habitat Conservation Plan, and while the economics are important, we also have to show that biologically whatever alternative we propose to go forward will in fact meet the federal standards, which is strong, and the state standards, which are stronger.

IMG_3803Jeffrey Michael, about population growth assumptions: “I noticed the analysis is using the analysis from 2006-2007 regional transportation plans from southern California planning agencies, and those have been updated twice since then. … those growth assumptions were considered aggressive when they were released and agencies started backing away from them almost immediately.  …  The California DOF released projections in 2012 based on the 2010 census.  They were revised again last week, and they are the basis for housing and regional transportation planning in these states.  … I compared the estimates, and in 2035 it’s about 3 million fewer people in the water demand area, about 5 million in 2050, about 15% less.  With a different assumption, the water demand looks different. … “

Dr. David Sunding:I do want to be very transparent about the fact that the water demand growth assumptions that go into the analysis are important … what we presented was based on somewhat outdated land use forecast.  We did do a separate analysis with using more recent 2010 forecasts … we also developed our own econometric model of long run water demand.  I didn’t report that in the chapter because it came out pretty close to what I did present.  I’d be very happy to talk about that with you.  … There are a number of things that change when you use the more recent analysis than we’re using when we do our own modeling.  We’re using different econometric results about the influence of income and water rate growth on consumption per capita, so there are a number of things that change in the analysis but we came out to roughly the same.”

MISCELLANEOUS COMMENT EXCERPTS

Bob Wright, Friends of the River, addressed his comments specifically to the federal fish agencies, FWS and NMFS:  “What you have here is a tradeoff.  The consultants have concluded that there would be economic benefits to the contractors from having this project as opposed to not having it, and the trade-off there is the extirpation, among other things, of two species of salmon and clearly and undeniably adverse modification of their critical habitat by taking away so much of the freshwater flow.  That is a … violation of Section 7 of the ESA … This is simply not a permittable project to extinguish several species of fish to achieve some costs benefits as a result of consultant’s work for the contractors …”

IMG_3813Michael Hoover, US Fish and Wildlife Service:Our comments that you are referring to about the potential extinction of winter run is just a bit complicated because that is a cumulative analysis, including the impacts of climate change, over the next 50 years.  Our current biological opinion already states that there is jeopardy for winter run endangered species that has faced a lot of challenges for quite some time … We will be writing a biological opinion on the BDCP, and it’s very possible in that cumulative analysis that we will find jeopardy for winter run … it’s very possible there will be additional RPAs …. We’re certainly not giving up on that species by any means.”

David Swank, National Marine Fisheries Service:  “We wouldn’t move forward with a permitting process if we felt the action that was being pursued would cause the species to go extinct … We have been working since the red flag comments to address those red flags; we’ve modified some things working with the state and the contractors.  We’re still working to make sure we fully understand the ramifications of the actions that are being proposed … We fully realize … we can’t move forward with permitting efforts with the issues that were mentioned.”

Bob Wright, Friends of the River part 2:  “ … In addition to Section 7 prohibiting jeopardy of endangered species, it also prohibits the destruction or adverse modification of critical habitat for the endangered species … This is simply not a permittable project under the endangered species act.  To say that taking those kinds of quantities of fresh water away from those fish, including the winter and spring run Chinook salmon, would not adversely modify their critical habitat does not pass the laugh out loud test. … “

IMG_3770Patrick Porgans:  “ … so taking all of that into account and recognizing this is all déjà vu, and we’re sitting here, we don’t have accurate information, recognizing the enormity of the project and recognizing that we don’t fully understand the costs and benefits associated with it, and putting the Delta at greater risk at this particular point in time is by no means justified.  … “

Jim Jones: “ … There should be imperatives, there should be requirements of meeting the needs of the fisheries of the Delta, the farmers of the Delta, the people who live in the Delta, depend on the Delta, their livelihoods depend on the Delta, there should be no project begun until those coequal requirements are met, and that’s not the case now. …

David Abelson:  “ … today, there is only one state that doesn’t have comprehensive groundwater management, and that is the state of California. We’re continuing to overdraft, we’re continuing to deplete, most of that water is going to agriculture, that’s a fact, I ask you in the name of environmental sustainability and in the name of economic efficiency, why in the world are we using a hard water path in the form of concrete, as opposed to a soft water path in the form of intelligent long-term planning and implementation?  If we don’t do that, this canal, this tunnel is going to be looked at in years gone by as a waste of $50 to $100 billion. … “

DELTA IMPACTS TO BE PRESENTED

Melinda Terry, North Delta Water Agency: In regards to her earlier request for a presentation on the impacts to the Delta: “My request would be for that information to be done at one of these public meetings, not the August 8 Finance Committee … that is not as broad as this is, so I am specifically asking that it be done, just as this was, at one of these public meetings.“

MEETING MATERIALS:

Webcast of meeting

July Public Meeting Power Point Presentation

Outreach Materials:

BDCP Draft Chapters:

 

 

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    1. John Bass

      Hi Maven,

      A very informative piece of work. And I do mean work. That was a big job to put together. Fantastic job!

    2. Jane Wagner-Tyack

      Chris, I’m in awe of you. EVERYTHING is here.

    3. Terry Spragg

      Hi Chris,

      I don’t know how you have the time to do what you do so well, and still have time to breathe. I note that desalination is mentioned several times as being a part of the solution. Transporting water from Humboldt Bay and from as far north as Washington State using waterbag technology is another economic and technical alternative that should be included in the discussion of alternatives. This technology could add several 100,000 acre feet per year to California’s water supply. It is simply a matter of adding more waterbags to the trains and more trains to the system in order to increase the quantities of water delivered. This is a simple and inexpensive technology to demonstrate in California just as it has been demonstrated in Washington State (see:http://www.youtube.com/watch?v=4TEJp6UZaDI to watch a YouTube video of television coverage of this test). More information can be found in a Wikipedia article at: http://www.en.wikipedia.org/wiki/Flexible_barge and on the website: http://www.waterbag.com. At the request of DWR we have also submitted a proposal to test an Emergency Fabric Pipeline that could be quickly and economically installed to deliver 100,000’s of acre feet per year through the Delta following a major levee collapse. Other than the $29 million plan to stockpile rocks on a few Delta islands to be installed in time to divert the river there is no emergency plan in place to deliver water through the Delta following a major disruption of the Delta water supply. All these plans can be demonstrated with zero cost to the California tax payers by implementing a marketing plan that has been submitted to DWR, MWD and other State and local agencies. Restore The Delta has written a letter of support for testing this Delta plan in one of its news letters.

    4. Rodney T. Smith

      Chris:

      Astounding work. This is invaluable reporting. Your style of “just the facts” about what was said and presented is valuable. You saved time for everyone who reads your posts. Further, anyone interested in and thinking about BDCP can take your reporting as a reliable basis for their own analysis and commentary.

      Rodney T. Smith

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