Officials present the draft Statewide Economic Impact Study at BDCP Finance Working Group meeting

IMG_4185On August 5, the Brown Administration released a draft Statewide Economic Impact Study that estimated that implementation of the Bay Delta Conservation Plan (BDCP) would result in positive economic benefits to residents statewide of $4.8 to $5.4 billion.  Some of those benefits include the creation of 177,000 construction and habitat restoration jobs, the avoidance of shortages that could cost 1 million jobs and an increased in statewide economic activity of $84 billion over 50 years, as well as increased recreation opportunities and reduced greenhouse gas emissions, the report says.

The economic study released last week is different than the previous analysis given in Chapter 9 and related appendices of the BDCP which only evaluated benefits to the state and federal contractors as this study takes a wider of view of estimating the benefits to all residents statewide and includes analysis of the impacts of the BDCP on things such as agricultural salinity, recreation, transportation, air quality and carbon sequestration.

On August 8, the BDCP Finance Working Group held a public meeting where Administration officials and the state’s contractors explained the report’s findings.  At helm once again was Deputy Director Jerry Meral, flanked by Dr. David Sunding of the Brattle Group, Dr. Jonathan Hecht and Laura Yoon from ICF International.


Sunding 1I want to give you an overall frame of reference for what this study is and how the different pieces fit together,” began Dr. Sunding, emphasizing that the study is still a draft.  He said he was looking for what he called ‘actionable intelligence’:  “If you can give us information that we do not have right now that we can use in a future version of the report, that’s what this whole process is about.  The comments are great, but what really helps us as analysts is information, data, questions, things that we can actually use going forward.”

Dr. Sunding said that the draft Statewide Economic Impact Report compares the state of the world in California both with and without the implementation of the BDCP.  The scenario with BDCP evaluated outcomes using the high outflow, lower export values, and the no BDCP case evaluated outcomes using the existing conveyance, high outflow, lower export values described in Chapter 9 and Appendix 9-A of the Plan, he explained.  “The impacts are evaluated out over a 50-year permit term, and then they are pulled back into present values using a 3% real discount rate,” he said.

This report is different than the information in Chapter 9 and Appendix 9-A, Dr. Sunding said, as those studies were more of a financial feasibility analysis that looked at the implications of the BDCP for the state and federal contractors.  “State and federal contractor funding is over 2/3rds of all the money that is anticipated to come in the BDCP so that is an important test,” said Dr. Sunding.  “It’s not the whole picture but it’s an important part of the picture.”

This study is an attempt to look at the implications of BDCP for the whole state – for groups in the Delta and beyond the Delta, urban, agriculture, even groups that are not having activities that are part of the permit or are not expected to pay for a portion of it, but nonetheless are impacted by the BDCP,” said Dr. Sunding.  He explained that the statewide effects were viewed through two common economic perspectives: welfare impacts and changing business output, such as GDP and employment.  “The welfare impacts … are the way that one does a cost benefit analysis.  So the calls for a cost-benefit analysis for the BDCP, this is it,” said Dr. Sunding.  “There may be things that you want to comment on, but this is it.”

Slide 3 ImpactsA ‘welfare impact’ is a standard measure of economic well-being, and is defined as the difference between what something is worth and what it costs, explained Dr. Sunding.  Welfare impacts evaluated include the conveyance facilities, including construction, operations, maintenance, and capital replacement over the life of the permit; the habitat restoration that will take place over 40 years or so; seismic risks, changes in water supply reliability; and changes in water quality for both state and federal deliveries, as well as the changes in water quality in the Delta waterways, he said.

Welfare impacts can manifest in different ways depending on whose welfare it is you are measuring, he said.  “It is the difference between revenue and costs, but the revenue you get from selling goods and the costs to produce those goods so profit is a measure of welfare for businesses,” said Dr. Sunding.  “For consumers, economists use something called consumer surplus.  Consumer surplus is just the difference of what a consumer is willing to pay for a good, and what they actually have to pay for it.  So if you’re willing to spend $2.00 for a head of broccoli and you only have to pay 49 cents, you’re consumer surplus would be $1.51, and so we apply this in the case of water.”  Other welfare impacts include impacts to market-based Delta-dependent economic activities such as farming and non-market environmental amenities, such as views or improved air-quality – things that are important to people but aren’t sold in a marketplace, he explained.

Changes in economic activity is different than changes in welfare, noted Dr. Sunding.  “With respect to economic activity, we are looking primarily at business sales, state GDP, and employment.  One of the things I want to emphasize about employment is that we have measured the jobs in terms of job years which is one full time equivalent job that lasts a year; the reason we do that is that there are many aspects of the program that are temporary, like construction, that only lasts for a certain period of time, so the jobs created aren’t necessarily permanent.”

The third portion of the analysis is things that you have seen before,” said Dr. Sunding.  “The impacts to the state and federal contractors, their welfare gains and losses from changes in water supply reliability, water quality and seismic risk.”

Agricultural Salinity Impacts

Slide 7 Ag Salinity TableDr. Sunding and the Brattle Group analyzed the agricultural salinity impacts in the Delta, and although the impacts are real and measurable, they are ‘quite a bit smaller’ than what people were expecting, he said.

In order to minimize discussion over the choice of models and data, Dr. Sunding used the same framework and model as the Delta Protection Commission used in their Economic Sustainability Plan.  “They developed a statistical model that actually is quite sophisticated,” said Dr. Sunding.  “I give them a lot of credit and this is Jeff Michael who developed that.  The peer reviewers on the economic sustainability plan pointed out this portion of the analysis and said this is really cutting edge stuff, and it definitely passes standards for what’s an acceptable professional analysis. So this seemed like a good framework to build off of.”

The framework, roughly speaking, correlates agricultural land cover in the Delta with patterns of salinity in Delta waterways and it’s using actual farmer behavior as opposed to a theoretical or hypothetical model, he explained.  “There is quite a salinity gradient west to east and north to south; salinity changes from year to year so you have variation over time and variation over locations, and what the Delta Protection Commission did is they correlated those actual changes in salinity with actual changes in agricultural land cover and then they used that to forecast out if there were different changes in salinity, what would be the response of farmers, so they are working with a very detailed field level database on agricultural land cover,” he said.

Slide 9 Ag Revenue by AcreDr. Sunding displayed a slide that depicted patterns in terms of revenue per acre from farming in the Delta, with the red areas indicating lower revenues per acre and the green areas showing the higher value.  “You can see the red tends to show up primarily in the western Delta and up into the northern portions; the green is in the eastern margins and the southern Delta,” he said.  “The salinity gradient is not predicted to change in a uniform way across the Delta; the largest changes are actually in the western portion where revenues are already low to begin with.  So putting these factors together using the models put together by the Delta Protection Commission consultants, over the 50 year permit term if you take the predicted change in agricultural revenues that results from salinity changes in Delta waterways and bring that back to present value, it’s something right around $34 million.  It’s a measurable impact, it’s a net negative impact, but it’s a very modest impact in the context of the BDCP where you are talking about tens of billions of dollars swinging one direction or another.”


Hecht 2Dr. Jonathan Hecht from ICF International gave the presentation on the impacts of Delta-dependent activities, noting that his presentation would be just ‘broad brush’ through these sections, but there is significantly more detail in the report.

Recreation Impacts

As for impacts to recreation, “what we looked at here were impacts related to the construction operation of the water conveyance facility and also the various conservation measures,” said Dr. Hecht.  The negative impacts expected from the construction and operation of the water conveyance facility were challenging to quantify as there are a number of mitigation measures that will be put in place to mitigate those impacts where possible, and there isn’t much research that has been done about the impacts of infrastructure facilities on recreation sites, he explained.  “It’s very site and geographic specific in terms of how the infrastructure could influence the recreation.”  He also noted that some of the conservation measures are expected to enhance and expand Delta recreation while other measures may constrict it.

The three recreation opportunities that were evaluated were migratory bird hunting visits, freshwater angling visits, and non-consumptive recreational visits for activities such as hiking, picnicking, bird watching, or wildlife viewing – things where resources are not actually consumed, Dr. Hecht said, noting that his analysis drew on information from the EIR/EIS, Chapter 15.

The method for estimating these impacts is a common method used in environmental economics called ‘benefit transfer’ which involves using the results of previous studies and customizing or adapting them to fit into context, Dr. Hecht explained.   He used a tool called the Benefit Transfer Toolkit that was developed by Professor John Loomis at Colorado State University that’s been heavily used to evaluate impacts on outdoor recreation.  “What the benefit transfer toolkit does is that it looks at the characteristics of the recreation site and it also looks at the characteristics of the population assumed to use that site, and then estimates the functional relationship between those two to then show how the changes in a site can influence potential visits,” he said.

Slide 12 Monetizing Rec ImpactsThe toolkit contains a number of different models for different kinds of activities; Dr. Hecht used the models that applied to non-consumptive recreation, migratory bird hunting, and freshwater angling in his analysis.  “What we did was took the changes assumed to result from the BDCP and the various conservation measures and the specific measures are outlined in the report, and looked at the changes in acres available for recreation that those would result in, whether it’s an expansion of recreation or a contraction, and also looked at changes in public access, and what we get out of that … are the changes in visitor dates for each of these three activities,” Dr. Hect said.  “What we’re looking at here is the difference between the a scenario without the BDCP and with the BDCP over the 50 year permit term.”

Once we’ve quantified that impact, what we do then is we monetize it to get to a value for this change in recreation, using ‘unit day values’ for different recreation activities,” Dr. Hecht continued, noting that the unit day values have been estimated by the US Forest Service and used heavily in similar analyses of changes in recreation.  “What they represent is a consumer surplus for participant of a day spent recreating … it is really the value of something to someone over and above what they had to pay for it.”  Unit day values have been estimated in terms of a low value, medium value, and high value, but only the range between low and medium values were considered, in order to be conservative and also to account that actual changes in visitor are uncertain.  “Some of that arises from how people might use substitute recreation sites, or other things that we couldn’t model that could affect recreation choices,” he said.

Slide 13 Rec Impacts TableThe results of his analysis found that there was a net benefit for non-consumptive recreation that ranged from $223 million to $370 million, depending on whether low or medium unit day values were used.  Since there is a reduction in the number of acres that can be used for migratory bird hunting, there is a negative impact that ranges from $1.5 million to $3 million over the permit term, but there are small gains for freshwater angling from $200,000 to $3 million, again depending on the unit day value that is used.  “When those effects are totaled up, the net impact on recreation is estimated to be about $223 million to $370 million,” said Dr. Hecht.

Transportation impacts

The nine year construction process of the BDCP will result in significant transportation disruptions which is something that can be accounted for and analyzed, said Dr. Hecht, explaining that this analysis was done looking at the construction impacts detailed in the EIR/EIS’s chapter on transportation.  The EIR/EIS looked at 114 road segments projected to be impacted with a focus on the construction transportation impacts, and not so much the conservation measures.  Dr. Hecht explained why:  “While there is construction involved with those too, those impacts are expected to be minimal for a couple reasons.  One, those are much more site specific than the water conveyance facility, and two, most of those construction impacts happen in more rural and remote areas so there is less disruption to transportation.”

To quantify impacts to transportation, he first looked at the projected traffic on affected roadways, both with and without the BDCP.  “In both scenarios, the projected traffic accounts for population growth in the region, because that is something that will happen regardless of BDCP,” he explained.  Next, the average speed was estimated for the roadways at the projected volumes using a model that projects the congested speed on the roadways given the capacity of the roadway and given what the projected volume of traffic is on that roadway.  “By looking at this and projecting the estimated average speed for the BDCP scenario and the difference without the BDCP scenario, it gives us the incremental change in traffic expected due to BDCP.  Then once we have that incremental change, we can convert that to an estimated increased time factor … and this increased time is expressed as increases in total car hours of delay.

Slide 18 Transportation ImpactsOnce quantified, those car hours were ascribed a monetary value following guidance by the U.S. Department of Transportation that monetizes travel delays by a measure called the ‘opportunity cost of the traveler’s time,’ Dr. Hecht said, explaining that opportunity cost represents the value of the time foregone that someone has to spend traveling that they could have spent on other activities. Drawing on values used heavily by the U.S. Department of Transportation in regulatory analysis, “what we have then is a weighted value that represents a mix of foregone work and foregone leisure time, because obviously the BDCP construction will affect both types of travel,” he said, noting that the ranges used in the analysis were from $16 to $24.40.

Mitigation strategies such as notifying the public of possible disruptions, providing alternative access routes, limiting or prohibiting the construction activity would be implemented for roadways where there is a projected impact.  “Mitigation would be implemented are on 23 road segments that would exceed what are called level service thresholds; this is the threshold for what is a congested roadway, and those 23 segments would be congested even without BDCP construction,” said Dr. Hecht.  “There are 10 additional ones that are projected to be congested because of BDCP construction.”

The analysis determined that the net construction impact, which is traffic delay minus the projected avoided cost due to mitigation, gives a total of 3.6 million car hours over the course of the construction period, the impacts would be from $53 million to $79 million, depending on whether a low or high opportunity cost is used, he said.

Urban water treatment

There are impacts to urban water treatment that would result permanently from the construction and operation of the water conveyance facility as well as the set of conservation measures that impact or alter the physical use of land, explained Dr. Hecht.  “We looked at two key contaminants: bromide and nitrate, and the reason why we focused on those contaminants is that other contaminants have been focused on elsewhere such as salinity and also bromide and nitrate are two contaminants that have been linked to adverse health impacts.  They also have defined thresholds in Delta waterways so those facilitated an impact of BDCP on those contaminants,” he said, noting that the data came from the EIR/EIS chapter on water quality.

Hecht 1What our findings showed is that we looked at the four major pumping stations in the Delta – Baker Slough, Contra Costa, Banks, and the Jones pumping stations – and we analyzed water quality in terms of the concentrations of these two contaminants both without the BDCP … the result was that the net impact of BDCP is an overall decrease in the concentration of those contaminants,” he said, noting that it isn’t a uniform decrease, because there is a decrease at some pumping stations, but the net effect is a decrease.  Dr. Hecht said that although the impacts were quantified, they were not monetized because there is not increased treatment costs expected and that treatment for these contaminants is projected to happen with or without BDCP.

Another thing that BDCP will do in terms of urban water quality is to increase water security benefits, meaning provide additional cushion or buffer if water quality were to degrade for some other reason, but this is an effect that we talk about but do not quantify,” he said.

Commercial fishery impacts

Impacts to commercial fisheries were considered, with the Chinook salmon fishery being the major commercial fishery that would be affected by the BDCP.  “We primarily focused on that fishery for that reason, although we do consider effects on other commercial fisheries including threadfin shad, crayfish, and California bait shrimp, and we also note that there are other prevalent fish species found in the Delta, such as sturgeon and bass, but those are not commercial fisheries; they are an attraction for sports fishermen,” said Dr. Hecht, noting that the data for this analysis was taken from Chapter 11 of the EIR/EIS.

Slide 23 Fishery ImpactsThe construction of the water conveyance facility is projected to affect Chinook salmon in a few different ways,” explained Dr. Hecht.  “There is actually supposed to be a positive effect from the increased screening of the intakes, particularly in the north Delta, and an increase in water being pumped from the North Delta in wetter years, which is supposed to have a positive effect on entrainment.  There is expected to be no effect on spawning habitat, largely because of the construction of the water conveyance facility, which is seasonal, does not generally interfere with critical spawning habitats, and there is also projected to be a small positive effect on rearing habitat.”

There is a small negative effect estimated from the water conveyance facility but then some positive impacts projected from the different conservation measures and that effect on rearing habitat is projected to be positive,” he said.  “Looking at the other conservation measures, the effect on restoration activities on Chinook salmon is expected to be beneficial due to increases in habitat and protection of habitat.”

The findings then on this analysis is that BDCP is expected to increase the survival rates of fall run Chinook salmon and it’s also expected to positively impact other Delta commercial fisheries,” said Dr. Hecht, noting that those effects were considered qualitatively and not monetized largely because they are affected by factors outside of BDCP’s influence.

Non-market environmental impacts

Air quality impacts resulting from construction of conveyance facilities as well as some of the conservation measures were one of the non-market environmental activities that were considered.  “The impact expected related to BDCP is that the construction of the water conveyance facilities is expected to increase emissions of key criteria of air pollutants, and the conservation measures are expected to result in some positive impacts on air quality due to the filtration mechanism of vegetation in natural areas, but that being a highly uncertain impact, it was not quantified in this analysis,” said Dr. Hecht, noting that the data we used for this analysis came from the EIR/EIS chapter on air quality and greenhouse gases.

Slide 29 Air QualitySix pollutants were considered in quantifying the impacts on air quality: reactive organic gases, nitrogen oxides, carbon monoxides, two different sizes of particulate matter, and sulphur oxides, explained Dr. Hecht, noting that the California emissions estimator model was used to quantify the incremental changes both with and without BDCP.  The impacts were quantified and estimated for three air basins that would be affected by the Delta, and a per ton cost ascribed to the emission of each pollutant which represents the costs due to increased mortality and morbidity that can be linked to air pollution, he said.

In certain air quality basins, air basins, there are mitigation strategies required if air pollutants exceed a threshold level, and these are required if thresholds are exceeded on an annual basis or on a daily basis, and those are considered in this analysis,” said Dr. Hecht.  “The impact of these mitigation strategies is that if an air quality emissions are mitigated, there is a cost savings due to avoided health impacts, but then there will be an increased cost due to the cost to purchase these offsets,” noting those impacts range from greater than $10.8 million to $15.6 million.


Yoon 2Laura Yoon from ICF International presented the analysis on greenhouse gas emissions, noting that most of the greenhouse gases generated by BDCP are the result of construction and operation of the water conveyance facility.  The analysis considered the incremental difference in emissions between the BDCP and the no BDCP scenarios, and evaluated both direct and indirect greenhouse gases generated by the BDCP, she said.  “Economic impacts from the direct emissions are related to the regulatory costs required to purchase offsets to offset greenhouse gases to net zero, which is required by several mitigation measures inside the EIR/EIS.  These measures result in a variety of economic, environmental and public health co-benefits for the local community, which are also analyzed in the economic study,” she said.  “Indirect emissions can result in lower regulatory costs, particularly if there is a regulatory mechanism like AB32 in place, as well as economic savings in long-term reductions in greenhouse gas emissions which can help avoid some of the future climate change impacts,” and she noted that the analysis relied heavily on data in chapter 22 of the EIR/EIS.

So in general, there are two methods for monetizing greenhouse gas emissions, regulatory costs and social costs.  Regulatory costs are tied to specific local, state or federal regulations; for example, costs to purchase carbon allowances under the California cap and trade system, or planning and capital expenditures require to implement mitigation pursuant to CEQA and NEPA, she explained, and social costs are really related to economic burdens that may be experienced by the community as a result of future climate change impacts – for example, property damage from sea level rise or increased storm surges.  Both of these types of costs are evaluated in the economic study.

SLide 34 GHG Land ConversionThe EIR/EIS states that the greenhouse gas emissions from construction and operation of the conveyance facility as well as implementation of conservation measures will be offset to net zero by mitigation measures.  “Economic impacts associated with these mitigation measures are quantified in the economic study and are really related to planning and capital expenditures; for example, costs to purchase or install a particular emissions reduction technology,” said Ms. Yoon.  “Many of these measures may also yield a variety of local community co-benefits and these benefits are evaluated qualitatively in the economic study and could include cost savings from energy efficiency retrofit program or public health improvements from engine electrification in the Plan area.”

Three  sources of indirect greenhouse gas emissions were considered in the study: increased electricity demand, materials manufacturing, and land conversion, she said.  “Depending on the location at which activities occur, materials manufacturing and electricity demand may result in increased regulatory costs which could be reflected in future materials and energy prices.  The economic study considered these effects qualitatively and also includes a high level quantitative analysis of implementation of the conservation measures based on changes in carbon sequestration rates associated with the various land use types that are affected by the BDCP,” she said, noting that changes in carbon sequestration are really variable and location dependent.

Vegetation both sequesters carbon dioxide from the atmosphere but can also release a variety of other greenhouse gases.  The balance of these emissions is what’s called the greenhouse gas flux, and whether or not a particular land use type is source or sink of emissions is really variable and influenced by several site specific factors like temperature, precipitation, prevailing climate and several other factors,” she said, noting that the analysis relied heavily on the measurements taken at Twitchell Island to represent conditions in the plan area.  Indirect land conversion emissions were monetized using a social cost of carbon developed by an interagency working group.

ThSlide 36 GHG Summarye mitigation measures will result in a net cost but may also yield a variety of local community co-benefits, said Ms. Yoon, and implementation of the conservation measures may reduce long term greenhouse gas emissions could result in economic savings from climate change moderation.

Total costs range from $47 million to a net savings of $478 million, and this range is really driven by the greenhouse gas flux values used in the conversion analysis,” said Ms. Yoon.  “Estimated changes in carbon sequestration are extremely variable and really require site-specific monitoring in order to obtain a precise value, and so far this reason, we did use a range of flux values to account for this inherent variability.”


Dr. Jonathan Hecht then provided a summary of the impacts on non-market environmental amenities, beginning with impacts related to flood risk that result from the water conveyance facility operation and the various conservation measures.  “These impacts are not quantified or monetized in the report for a few different reasons,” he explained.  “One is that both positive and negative impacts are expected and thus the total impact is expected to be small,” noting that there is also a great deal of uncertainty in quantifing those impacts so they are considered qualitatively.

Hecht 3Impacts on property values were also considered, he said, noting that these are impacts that were not considered elsewhere in the report, such as potential changes in viewscapes from properties located close to the water conveyance facility or the conservation measures, or changes in noise levels.  “The effect on the water conveyance facility on these properties is expected to be negative due to potential changes in viewscapes and noise,” he said, “although several mitigation measures will be implemented to try and lessen those impacts and mitigate them where possible.  It’s also worth noting that much of the area is rural and also includes a number of public properties so the impact on the number of private properties is relatively small.”

They also looked at the impact of being located close to wetlands or natural areas or conservation lands that will be included in the of the conservation measures to try to provide some context around how both the water conveyance facility and the conservation measures are expected to influence properties, he said.  “The property impacts are considered only qualitatively due to the difficulty in obtaining data and then monetizing those impacts, and also because the changes are expected to be both positive and negative, resulting in what might be a small change in total.”

The last category is the impacts related to erosion and sedimentation.  “The water conveyance facility operation and also conservation measures are expected to affect sedimentation rates in the Bay Delta and again these effects are expected to be both positive and negative,” said Dr. Hecht, noting that these impacts were considered only qualitatively due to the uncertainty about how to monetize these impacts and because there are also positive and negative effects.  One the positive effects is the stability of building up and the maintenance of tidal marshes which is something that is particularly important when sea level rise and climate change is considered, he said.


Slide 41 Welfare Impacts totalDr. Sunding then summarized the welfare benefits, including salinity impacts, recreation benefits, transportation impacts, air quality impacts and other non-market amenities and said, “Looking at all Californians together from very strict cost benefit perspective, the BDCP would increase economic welfare by 4.8 to $5.4 billion.

The part of this that really changes the conversation about impacts in the Delta are the greenhouse gas emissions,” said Dr. Sunding.  “The BDCP and particularly the restoration component of the BDCP could result in a very significant change in carbon fluxes in the Delta so the net benefits resulting from changes in greenhouse gas emissions could be from a very small negative number of $47 million present value to almost a half a billion dollars in net benefits.”  He noted that not all of the impacts are in the table because there are others that are described qualitatively in the analysis because they either lacked the data or there was so much uncertainty about net effects that it was impossible to monetize.

Dr. Sunding then discussed the economic output impacts, defined as the value of business sales or the state GDP.  Impacts that were considered include the impacts on business sales and employment of construction of the water conveyance facility, the net impact of other relevant conservation measures, the impacts to economic output from improved water supply reliability, and also the negative impact of higher rates on spending.  “Somebody’s got to pay for all of this and it’s going to come from a combination of ratepayers and taxpayers, and money spent on BDCP is money that can’t be spent on other stuff in the economy, so that is a negative effect,” he said.

Building a new conveyance facility is a very large capital project, said Dr. Sunding, noting that they divided the impacts up by decade to show not just the total impact over the life of the permit but how things play out over time.  The analysis determined that California businesses will sell over $22.5 billion more output as a result of the BDCP.

Sunding 3On the flip side of that,” he said, “the increased water rates and taxes that result from expenditures on BDCP – remember money spent on BDCP is money that can’t be spent going out to eat or buying clothes or going other things that people do in their everyday lives – so that redirected spending has a negative effect that has to be taken account of, and so looking at the same multiplier effects used for construction spending,  the negative impact on state business output resulting from higher taxes and higher water bills is about $19 billion, brought back into present value terms.”

Now that’s interesting because that cancels out a big part of the positive stimulus from the construction and habitat restoration.  There is a net positive of several billion dollars, but what’s interesting and this is why you do things from a welfare analysis point of view and also from a statewide economic activity point of view … when we pull back and do an analysis from a macro perspective where we’re looking at impacts to all Californians, if someone in LA has a higher water bill and spends $100 more on their water bill and that money goes to hire a construction worker in Sacramento County, that’s income to them, so it’s a loss to one Californian and a gain to another Californian, but the money stays within the state.  And that’s largely what’s happening here, so it’s important to remember that the BDCP redirects expenditures but within the state so the net statewide costs are much less than the costs to just the contractors.”

Slide 43 Output ImpactsThe construction of the conveyance facilities and the other conservation measures are added together in terms of business activity, less the negative effects and the multipliers that result from taking farmland out of production, and the stimulus effect of that is $22.5 billion plus $6.5 billion, so $29 billion in stimulus resulting from this big public works project, Dr. Sunding explained.  “Then you have to net out of that the negative impact of the higher water bill.  And the reason you’re left with a positive number here is that basically spending money on instate construction generates more economic activity than normal household spending … construction spending that’s occurring in the state has a very high multiplier associated with it … and so this kind of activity generates more business output than it costs, because it’s redirecting spending to something that has a strong multiplier effect.”

The other major category considered is water supply reliability, he said.  “The construction of the conveyance facilities and habitat restoration, that’s all creating jobs that don’t exist now.  The water supply reliability improvements – because BDCP doesn’t cause a large increase in water supplies relative to where they’ve been recently – it more prevents a loss, it’s fair to say the economic output and employment benefits of the BDCP are economic output preserved or jobs preserved.  Those are jobs that could potentially be lost in the event that there were large decreases in the water supplies that would occur if BDCP is not implemented … because of the large size of the potential reductions in water supplies.”

In the existing conveyance high outflow case, the economic activity in agriculture and urban areas that’s preserved as a result of BDCP is just over $73 billion, and that’s the number over the 50 years brought back into a present value,” he said.  “That’s a large impact but it’s because the water supply hit that we’re modeling is large.”

Employment impacts are considered in job years, said Dr. Sunding, noting that the conveyance facility creates 110,000 job years over the first 10 years of the project, so that would be an average annual increment of 11,000 jobs.  There is also the employment impact of other conservation measures, largely habitat restoration: “Factoring in the jobs that are lost as a result of agricultural land retirement, essentially, the habitat restoration creates more jobs than are lost by taking farmland out of production,” he said.  “People forget how labor intensive habitat restoration is.  This is a 40 year program, so it’s going over the next four decades, creating a fair number of jobs every year, so the net impact on employment from the other relevant conservation measures is actually positive to the tune of just over 55,000 job years over the 50 year life of the program.

Slide 44 Employment ImpactsHowever, the increased water rates and taxes that go to finance the project has a negative effect on employment, because it’s redirected spending – money that could have been spent at local restaurants or retail establishments that is now spent in the Delta on a big construction project, so there are negatives and positives to that redirected spending, explained Dr. Sunding.  “The negative impact is about a loss of 102 to 103 thousand job years over the 50 year life of the program, so that’s a negative.  But if you look at all the public works aspects together, the CM1, other relevant conservation measures, those together create about 177,000 job years, and you have 103,000 job years that are lost as a result of the higher water expenditures, that’s still nets out to over 70,000 net positive job creation over the 50 year permit term.”

There are significant employment gains that result from water supply reliability, explained Dr. Sunding, “because without BDCP you have obviously very significant water shortages in agriculture, but shortages in urban areas that are too large to be absorbed in just the single family residential sector.  There is just not enough room there to accommodate these large shortages, so they have to spill over into commercial and industrial uses.

The number that we calculated is just over a million job years preserved in urban and agricultural areas as a result of the improved water supply that you get with BDCP,” Dr. Sunding continued, “so adding all of these factors together, the net impact to jobs in California is 1.1 million positive.  So over 50 years, 1.1 million job years or about 20,000 jobs every year for 50 years.  You can look at it either way.”

Slide 45 Emp CompWe also calculated what the extra money in workers pockets is as a result of implementation of the BDCP less the impact of agricultural land retirement, he said.  “The BDCP would put an extra $11 billion in workers pockets.  This is not looking at water supply reliability and not looking at the negative impacts of higher water bills, because we lacked some of the inputs to do that, so I want to be fair about what this is, but the two major construction components of the BDCP would result in increases in employee compensation of just over $11 billion, the majority of that, somewhere just over half, would be in the three Delta counties where most of the construction would take place.”


Bill Jennings, Bill Jennings, California Sportfishing Protection Alliance, California Water Impact Network, AquAlliance:

““ … We don’t believe the assessment meets the test of a full benefit/cost analysis …  The analysis improperly discounts risk and uncertainty, understates adverse impacts and lacks a defensible alternatives comparison.  Dr. Sunding’s claim that BDCP will result in a positive economic benefit rests on a series of hypothetical and highly speculative assumptions.  Three of the most significant of these unsupported assumptions are that water exports will substantially decrease in the future if the tunnels aren’t constructed, proposed habitat improvements will be successful, and BDCP will ensure that exports will continue at present levels. …

Jennings 1… The analysis ignores other possible futures, with and without BDCP.  Given the history of the last 30 years of regulatory proceedings, there is no certainty that exports would be reduced in the absence of BDCP.  Recent export restrictions have simply rolled back the abrupt increase in exports that occurred between 2000 and 2005, to the 20 year export average.  Nor is there any certainty that export restrictions would not become more stringent, even if BDCP were approved.  Over decades of administrative proceedings, environmental and fishery agency scientists have consistently testified that a substantial reduction of exports is necessary to restore the Delta.  …

… There are many other plausible alternatives that should have been analyzed.  For example, exports may significantly decrease even if BDCP is approved.  The State Water Board presented this premise as Scenario 8 in comments to the BDCP EIR/EIS.  …

… Comments by independent scientists, the fishery agencies, EPA, State Water Board, Corps of Engineers, Stewardship Council, Independent Science Board and the National Research Council variously note that the proposed habitat improvements are speculative, ill‐defined, overly optimistic and, in some cases, counter productive. …

… The study is blatant advocacy, divorced from impartial scientific integrity.  It does, however, reveal how desperate BDCP has become in having to resort to gimmickry in an effort to show economic benefit.  …

Melinda Terry, North Delta Water Agency

Terry 3” … I’ve read the report … I’m just dumbfounded.  I’m confused.  I have no idea what report you analyzed but it was not the BDCP EIR/EIS.  It was not the 48 significant unavoidable adverse impacts that are purposefully and knowingly imposed on the Delta.  Those all have economic impacts and you didn’t analyze those, so I have no idea what rosy report you read but you certainly read the one that I have. …

… I’m talking about things like during construction, 9 to 10 years, the operations of the projects will deplete groundwater supplies or interfere with groundwater recharge, alter local groundwater levels, or reduce production capacity of preexisting wells nearby.  All of the homes in the North Delta rely on well water; they’re not on County water, so that means toilets aren’t flushing, faucets aren’t coming on, and yet it’s really not analyzed.  … You could have analyzed it but you didn’t.  It’s not even in there. …

… The lowering of water levels such as they are not able to support existing land uses.  There’s an economic impact to that.  Lower groundwater levels by 10 to 20 feet.  Replacement supplies may not meet existing demand or planned land use … significant and unavoidable.  These are prime farmland, important farmland, that means these are the most productive.  You didn’t analyze that. …

… So to add insult to injury, you spent time quantifying a speculative benefit of greenhouse gas carbon credits, which you’re very proud of, but for which there is no protocol currently developed.  It takes 10 to 15 years to develop that … Then on top of that, it decades to grow the amount of biomass that you could count as a benefit or sell.  You quantified them.  You picked dollar amounts; you’re trying to say there are benefits to the Delta. …

..IMG_4184. Unavoidable is unacceptable.  There’s 48 unavoidable, ‘sorry Charlie, Delta,’ you absorb having worse water quality, and worse water availability so we can provide the benefits to other parts of the state so that they get better water quality and availability.  Again, unavoidable is unacceptable.  But you could at least analyze that and be honest with people. …

… I spent time on behalf of my agency, because we represent 300,000 acres in the Delta.  So I spent time.  I wrote 18 pages.  You ignored all of it.  You didn’t do anything or look at anything I said in that … so I’m not going to write anymore.  Because at this point I’ve gone from being insulted, which the original reports were, to frankly just offended and disgusted, because each economic report is worse than the last. …

… After the July 17 public meeting, I asked, I brought some of these things up.  Can we have a discussion about this, disclose these.  Put an economic value to them.  …  These are things that need to be not only disclosed to the Delta but frankly they need to be disclosed to the water exporters, because they need to know the truth about what the real costs are, because you haven’t told them what the real costs are in your economic report, and they deserve to know as much as the folks that I represent. …

IMG_4209… At this point, this report, in my opinion, and this process is not legitimate.  And it’s just becoming more frustrating.  It’s pure fantasy.  If you want to keep exaggerating the benefits to the contractors which I think you have in this report … but stop lying and hiding from the Delta residents what the real impacts are to them.  If it’s such a statewide benefit, that’s politics, but be honest about it. Quantify it.  How dare you say there’s Delta benefits? That’s outrageous. I just can’t swallow that …”

… I vacillated over words to call it … is it a sham, is it deceitful, and I finally came up with the definition of fraud, because when I looked it up, it said ‘a deception deliberately practiced in order to secure unfair or unlawful gains.  The legal definition, by the way, is the false representation of a matter of fact whether by words or conduct.  That’s what we have here.  This is not real.  This is not factual. …

Jerry Meral:All I can suggest is that we can only improve this report by getting comments on it … and so we issued the report as a draft so there’s a chance for the public to comment on it, to send us specific changes, to quantify things we didn’t quantify because we didn’t feel that we had the data and we’re open to that, and that’s the only way we are going to make it better, so if people want to participate, we welcome their participation.”

Burt Wilson, Public Water News Service

Burt ” …I was very disappointed that you released what I feel is a bogus report.  And what you say is unfinished and not complete is released to the public.  DWR and all the water agencies around the state are publicizing the fact that the twin tunnels are going to have a $4.7 billion payoff to the people of California; the media rounds it up to 5, and this is false.  This is absolutely false.  What’s a little one-week blogger like me going to do against the facilities of ACWA and all the other water agencies to do this.  If anybody believes that the fix is in on the state for the tunnels, it’s stuff like that that convinces us that the fix really is in.  You should not have released that report to the public before it was finished. … ”

Jane Wagner Tyack, Restore the Delta

Tyack 1… You estimate that tunnels will facilitate deliveries of 4.71 to 5.59 million acre-feet per year. However, only 49% of that will come from the actual tunnel diversion in the north Delta.  The other 51% will come from the existing facilities in the south Delta.  But BDCP has no plans for strengthening the Delta levees that protect south Delta diversions.  Even with the most robust levees, there is a residual risk of flooding.  A commitment to building peripheral tunnels does not relieve the DWR or the federal government of the obligation to consider risks to water supply and human safety under both levee failure and sea level rise.  … The BDCP and the Delta Plan have refused to commit to upgrading Delta levees to the PL 84-99 standard recommended in earlier studies.  Failure to make these upgrades will increase flood risk both for Delta communities and the agencies that rely on water pumped from the south Delta.  Given the fact that even with peripheral tunnels, 51% of exports will come from the existing south Delta facilities, it is wildly irresponsible for the BDCP to claim economic benefits based on increased reliability while refusing to commit to strengthening and maintaining Delta levees.  …

Jerry Meral responds: I agree with your point that we need to strengthen Delta levees and the state’s invested several hundred million dollars that we work very cooperatively with the reclamation districts to spend over the last five to six years.  We need additional funding for that.  There’s nothing incompatible with that funding this project and in fact your point is correct that we do intend to continue to divert from the Delta channels so we need to have the levees maintained so there’s no reason why that can’t be done in addition to this project.

Ms. Wagner-Tyack suggests including the costs of upgrading the levees in the economic analysis.

Barbara Barrigan-Parilla, Restore the Delta

Barbara… One of the inconvenient truths is that if you look at these adverse impacts, the Delta is being asked to accept a less reliable water supply and worse water quality in order to provide export areas better supplies and quality.  Some of the footprints that have not really shown up in the economic analysis and haven’t been taken into account.  From the BDCP Chapter 5, farmland not in the footprint may be out of production for a ten year conveyance construction period.  Permanent crops destroyed.  …  Construction activities requiring excavation or use of land where irrigation canals are currently located could disrupt the delivery of water to crops which compromise key conditions for the productive use of the land for agriculture.  No farmer can withstand 10 years of interruption of production for the staging of a construction project.  I am curious – these 48 adverse, significant and unavoidable impacts, Dr. Sunding, you had said that you couldn’t analyze everything because you couldn’t assign a dollar value.  Can’t dollar values be assigned to something like this? … ”

Nick de Croce, Environmental Water Caucus

deCroce“… We obviously see some problems with the statewide economic impact report … the report underestimates the costs to the Delta, it fails to analyze impacts of reduced water quality in the Delta, it fails to adequately consider the costs of reduced recreation in the Delta, it overestimates water supply benefits, it fails to consider land use changes in the export areas, it fails to consider the increased water needs of the community in the rural Sacramento Valley, it underestimates the costs to the Sacramento Valley, it fails to consider the costs of virtually draining Shasta, Trinity and Folsom reservoirs in multiple dry years, it fails to consider the costs of harming the Trinity River and the severe impacts on local tribes.  It fails to consider the costs and impacts on the salmon fishing industry, … the  BDCP  modeling for the impacts on the Sacramento River and the Delta is severely flawed, the no action alternative is incorrectly specified, the fish life cycle models, they are bogus, there is “magical thinking” about the effects of habitat restoration without increased flows, it fails to adequately consider the increased needs of the Sacramento Valley and it’s cherry picked the impacts on climate change and avoided looking at the inconvenient truths about climate change.  And perhaps most harmful of all to your project is that there is to this date absolutely no assurance that there is a single dollar available to pay for BDCP.  … ”

Doug Obegi, Natural Resources Defense Council

Obegi” … You don’t really breakdown the benefits within the state and federal water contractors to ag vs urban, or CVP vs SWP, and obviously that’s a big issue down the road, but I was wondering if you envisioned the benefits running in the same sort of proportion as they do on the changes in economic activity where it’s  dramatically higher for the urban sector than it is for the ag sector even though the ag sector gets 60 to 70% of the water out of the Delta. … ”

Dr. Sunding responds: It’s not in proportion to that.  We have a couple of things in play here.  If you look at the very next table, ES-4, if you compare the agricultural and then the commercial and industrial impacts, it’s a very different proportion.  You have a couple of things in play here economically.  Agriculture is, in terms of the total job base, it’s about 2 – 3 % of all the employment in California, but it’s also an industry that is much more dependent on water diversions and other water supplies than other industries are, and both factors have to be taken into account when calculating benefits for economic output changes or employment.

Doug Obegi: I would hope that in the next version of this, you breakdown those benefits within the cost category of the state and federal contractrors so you get a better sense of how much the benefits run to urban versus ag, CVP versus SWP, it gives the contractors as well as all of us what the benefits and costs are.

Dan Bacher, editor of Fish Sniffer Magazine.

Bacher” … The study touting the alleged economic benefits of the peripheral tunnels under the Delta is not an actual cost benefit analysis.  It is a whitewash intended to justify sending massive amounts of northern California water south to corporate agribusiness and oil companies.  A comprehensive cost benefit study would fully analyze all alternatives to the tunnels.  On page 208, the study claims that the construction of the tunnels will increase water supply 1.3 million acre-feet per year for ag and urban agricultural use, but it bases this delusion on a false assumption that only 3 million acre-feet of water would be exported under the status quo, when in reality the state and federal projects under the current biological opinions, are exporting an average of 4.8 to 5.0 million acre-feet of water per year, so this assumption has no basis in reality.  … ”


The public comment period was then concluded, actually ending ahead of schedule.  “We are going to keep the door open for comments, both written and anyone else who has any comments they want to transmit and then take them all into account … and we will try as quickly as we can to finalize this version of the report.  It’s again not part of the official BDCP documents but it’s something a lot of people wanted to see and so we’re happy to try and provide it,” said Jerry Meral.


  • Click here to read the draft Statewide Economic Impact Report.
  • Click here for a fact sheet on the Statewide Economic Impact Report.


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