[env-trinity] Delta water tunnel project needs $1.2 billion more for planning

[Tom Stokely]

Delta water tunnel project needs $1.2 billion more for planning

 
By Matt Weiser
mweiser at sacbee.com
Published: Saturday, Dec.
7, 2013 - 12:00 am
Last Modified: Saturday,
Dec. 7, 2013 - 9:21 am
The giant Delta water-diversion tunnels proposed
by Gov. Jerry Brown need $1.2 billion more spent on planning and design before
construction starts or is even assured.
The additional planning costs, which come on top
of $240 million already spent, first came to light at a board meeting of the Westlands Water
District late last month. The Sacramento Bee confirmed this
additional planning cost in recent interviews with the California
Department of Water Resources, which is leading the project, and several
of the water agencies that are responsible for the bills.
“It’s a lot of money on a project of this size
before you get to construction,” said Roger Patterson, assistant
general manager of the Metropolitan
Water District of Southern California, which has been paying about
25 percent of the bills for preliminary planning. “Sometime in the spring,
we’ll need to make the decision so at least the next piece of funding is
available, because you don’t want to stop if you’re going to have a project.”
The state expects to release the draft
environmental impact study – seven years in the making – for the project on
Monday. Known as the Bay Delta Conservation Plan, the proposal calls for two
huge tunnels, 40 feet in diameter and 35 miles long, that would divert
freshwater out of the Sacramento-San
Joaquin Delta and deliver it directly to existing state and federal
water export pumps near Tracy.
Existing canals would disperse the water to
agencies that deliver Delta water to 25 million Californians and 3 million
acres of farmland from San Jose to San Diego.
Three pumping plants are proposed on the Sacramento River between
Freeport and Courtland, together capable of diverting water at 9,000 cubic feet
per second. The plan also includes about 100,000 acres of habitat restoration
and other environmental projects.
Tunnel proponents say the project is key to
resolving decades of conflict over California’s water supply and repairing
the health of the Delta’s fragile ecosystem. Water agencies that depend on the
Delta are looking for more stability in that water supply, which in dry
years might be 25 percent or less of what they are allowed by contract.
The tunnels also would be designed to alleviate
the continuous slaughter of fish at the existing pumps near Tracy, which are
operated by DWR and the U.S. Bureau
of Reclamation. The pumps reverse natural water flows in the
estuary, trapping fish and making modern fish screens ineffective.
By moving diversions upstream on the Sacramento River, the
theory goes, reverse flows would be avoided and fish screens would prevent much
of the carnage.
Urban and farm water agencies have spent $240
million planning the project over the past seven years. State officials hope to
approve the project by the end of 2014. But actual design and planning is only
about 10 percent complete, and construction is not expected to begin until
2017, at the earliest.
The remaining planning work is estimated to cost
$1.2 billion, water officials told The Bee, or an estimated $300 million
annually for four years until construction begins. Among the planning work yet
to be done are construction-ready designs and extensive soil testing, which is
essential to refine the tunnel route and prepare the gigantic drilling machines
that will bore the tunnels.
There’s no formal funding agreement yet for the
tunnel project – DWR says that will happen if the project gets approval from
state and federal wildlife agencies. So far, water agencies that stand to
benefit have paid the planning costs out of their own budgets.
DWR intends to pay for construction of the
tunnels by selling bonds under its existing legal authority to finance the
State Water Project, and those bonds would be repaid by water contractors via
higher water rates. DWR has asserted that it needs no approval from the
Legislature or state voters.
Water contractors will have to come up with
funding for the remaining planning costs if they want to keep the project going
– and do so even though construction of the tunnels is far from assured.
That is because additional regulatory permits
must be secured in the interim, notably a complicated Clean Water Act permit
from the U.S. Army
Corps of Engineers. The project also is likely to be challenged in
the courts during the next four years of planning.
In addition, DWR will have to start acquiring
land for the project about one year after approval. The interim financing is
intended partly to purchase land, a costly process also likely to result in
litigation.
Water agencies will have to decide early next
year how to ensure a steady flow of cash for the planning process, said DWR
director Mark Cowin. Some water agencies may have to sell bonds to raise their
portion.
“It’s a tough decision,” Cowin acknowledged. “But
we expect them to ultimately decide the investment is worthwhile.”
Jeffrey Michael, an economist at University of
the Pacific in Stockton, called $1.2 billion a “staggering” sum that could
prompt some water agencies to pull out of the project. Michael has been a
persistent critic of the tunnel project and its financial assumptions.
“I think it would be crazy for them to go forward
with this,” said Michael, director of UOP’s Business Forecasting Center. “The
interim financing is incredibly risky. You don’t know whether you’re going to
get a project at the end of this.”
Patterson said Metropolitan
Water District likely can cover its share of the future planning
costs – about $300 million – without affecting ratepayers. He said he did not
know yet whether the money would come from existing revenue or new bond sales.
Westlands Water District in the San Joaquin Valley depends
almost entirely on water diversions from the Delta, which it buys from the U.S. Bureau
of Reclamation. Among the agencies that contract for water with the
bureau, Westlands has provided the majority of funding for planning so far, and
it has done so by selling bonds. If it contributes to the additional $1.2
billion in planning costs, it likely would sell more bonds, agency officials
said. Ultimately, these would be repaid by charging its ratepayers – farmers in
Fresno and Kings counties – more for water.
Westlands farmers use Delta water to grow cotton,
tomatoes, almonds, grapes, peaches, corn and other crops on more than 600,000
acres.
“Certainly the money’s got to come from the
revenue sources, which is sales of water,” said Jason Peltier, chief deputy
general manager at Westlands.
The Westlands district held a workshop on the financing
issues with board members on Nov. 20. During that meeting, a financial
consultant explained that building the tunnels will end up costing more than
initially projected because of inflation. Until now, officials have put the construction cost at $15
billion, with the rest of the $25 billion cost attributed mostly to habitat
restoration. The consultant said construction costs will
escalate to $18 billion when adjusted for inflation at the project’s estimated
completion date in 2027.
Despite the costs, Peltier hopes the tunnels will
be a better option than the alternative, which is a future in which Westlands
must rely on Delta water allocations that are 20 percent to 40 percent of its
contract amount.
“When you’re deciding whether to make an
investment, you’ve got to consider what’s the downside if we don’t invest,”
Peltier said. “The downside ... is continued water shortages and
economic dislocation. That’s something we’re trying to find a path away from.”
 
Call The Bee’s Matt Weiser at (916) 321-1264.
Follow him on Twitter @matt_weiser.
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