There’s a bit of room for partial participation by CVP contractors; Metropolitan directors float idea of financing construction of entire project
At Monday’s meeting of Metropolitan’s Water Stewardship and Planning Committee, Steve Arakawa, Manager of Bay Delta Initiatives, updated the committee members on the Cal Water Fix project, given the state’s long-anticipated announcement of a phased approach to construction of the project. His presentation covered Metropolitan staff’s preliminary review of how project implementation might move forward, and what that would mean in terms of water supply and costs to Metropolitan Water District.
In the February 7 announcement, Mr. Arakawa said the state is really communicating that it would be pursuing Cal Water Fix as planned, which is the 9,000 cfs capacity at the intakes; the state also said that in addition, they want to be prepared to take actions that are responsive to the stated needs of the contracting water agencies, so they are looking at aligning how the funding commitments may fall into place along with project implementation. They are preparing themselves to look at staging of the project, and if all funding commitments fall into line to support 9,000 cfs, they would move forward with that; if not, they would have a plan with how they would move forward with stage one, he said.
Stage one would be a 6,000 cfs facility that have one tunnel instead of two; the intermediate forebay in the north Delta; two intakes instead of three, and one pumping plant at the bottom at the south end of the Delta. For the full 9,000 cfs implementation, it would be adding the second tunnel, a third intake, and the second pumping plant. Construction of stage one would be funded by south of the Delta State Water Project contractors; other potential contractors could commit at some point as the staging occurs. The Cal Water Fix project would still provide benefits to species in the Delta, to improve water quality, improve the reverse flow conditions, and help with the native fish, Mr. Arakawa said.
In moving forward, the state has an approved environmental impact report and the permits. The state will be producing a supplemental environmental impact report in the coming months to make sure that any of the project aspects that they’ve been refining are covered by the environmental report with a draft of supplemental environmental report by June and the final in October.
“There would be supplemental endangered species permitting, but they are expecting that based on the analysis that’s been done with looking at the potential for staging, that there would be no new impacts related to water quality or aquatic species that haven’t been analyzed fully in the environmental impact report, so they don’t expect to see any changes to mitigation requirements as a result of any of that,” said Mr. Arakawa.
He presented a map of the project, with the facilities for stage one labeled in blue and stage two labeled in red. The full Cal Water Fix would have three intakes; (he explained that they are labeled intake 2, 3, and 5 because at one point, there were 5 intakes, and as the project was refined over time to go from 15,000 cfs to 9,000 cfs, two of the intakes were eliminated.) Then there is the system that brings the water into the main tunnels, an intermediate forebay at the head of the main tunnels, the two tunnels from the north Delta to the south Delta. There would be pumping units for each of those tunnels, and integration with the State Water Project and the Central Valley Project into operations.
With the staged approach, the facilities that would be constructed are intakes 2 and 3, the intermediate forebay, the east tunnel, and the east pumping plant. Stage two facilities that would be constructed would be intake 5, the other tunnel, and the other pumping plant in the south end of the Delta.
Mr. Arakawa next presented a slide showing their analysis of the full Cal Water Fix project. Currently, the State Water Project and the Central Valley Project provide 4.7 MAF of water supply on average. The analysis of what the SWP and the CVP would provide if anticipated regulations were implemented without the new intakes had a range of 3.5 to 3.9 MAF, which would be a reduction.
“The benefit of Cal Water Fix is really protecting this reliability of the supply we have today,” he said. “The future with Cal Water Fix had a range as well with both the low outflow and high outflow scenario, but it also had the new intakes, so the project provides better protection for fish because of the new intakes, but it also has some additional operating criteria in the south Delta to protect fish. The north intakes actually help to offset that limitation in the south by providing the ability to divert water on the Sacramento River when conditions are right, when conditions don’t negatively impact fish, so those north intakes allow for the added water supply reliability that make up the future with Cal Water Fix.”
The analysis last summer leading up to the October board decision described a 1.3 MAF reliability benefit for both of the projects, Mr. Arakawa said. Staff described Metropolitan’s benefit as roughly 26% of that share because benefits would be apportioned from the State Water Project, and the State Water Project was assumed to be 55% of the full project.
“So overall 26%, about 340,000 acre-feet of that 1.3 MAF of reliability of benefit is what we showed you when we were talking about the benefit to Metropolitan,” he said. “The project benefit or supply reliability benefit with the 6,000 cfs would be 900,000 acre-feet. Stage one, for now, is defined as the State Water Project contractors who find the means to commit to funding the project being the main funder, and being the beneficiary of the benefits. When looking at what those supply figures mean to the State Water Project, it results in about the same amount of supply benefit because the State Water Project would be investing in a larger portion of a 9,000 cfs facility.”
Mr. Arakawa then presented a slide with cost estimates for the capital for the conveyance facility and the mitigation, noting that these are all in 2017 numbers. The cost estimate includes a 36% contingency, program management, construction management, and land acquisition. For stage one, a 6,000 cfs facility, the cost estimate is $11.1 billion. In looking at the staged approach, if the State Water Project is fully funding the 6,000 cfs, with Metropolitan’s share being at about 47%, costs to Met would be $5.2 billion.
DWR has also analyzed in their modeling what the water supply benefit would be if there were 5,000 cfs for the State Water Project and 1,000 cfs for other partners, possibly CVP contractors. This would put the State Water Project share would be back at about the same percentage, with Met’s share would be about the same at $4.3 billion, he said.
Mr. Arakawa presented a slide showing the difference in costs between the 6,000 and the 9,000 cfs facilities. “We wanted to estimate the costs based on looking at the proportionate costs of 9000 vs 6000 and the proportionate benefit of 1.3 MAF of reliability versus 900,000 AF of reliability,” he said. “So looking at the total cost, if the State Water Project was to invest in the full 9000 cfs, that’s $526 million per year. If there were other partners for 1000 of 6000, then the costs for the State Water Project would be about what we were saying last fall, $438 million, which is the far right column. These are both under the 4% interest rate which we are calling the base case. We still felt that that’s still a pretty good estimate. This is capital and O&M per year costs.”
“Metropolitan’s share for both capital and O&M is $207 million with the full project implementation, or $249 million if the State Water Project was investing in 6000 cfs,” he said. “The $207 million is if the State Water Project portion was 5000 cfs rather than 6000 cfs.”
With respect to the impact on Metropolitan’s budget, last fall staff estimated that the overall cost increase over about 15 years of construction would be about 13%. “That would certainly be the same if the SWP invested in 5000 cfs; if the SWP invested in 6000 cfs, it would be 16%, but those costs would not incur right away, it would be as the project was constructed out over time,” Mr. Arakawa said. “On a per year basis over the 15 years, we had estimated .9% for implementing Cal Water Fix, and the middle column shows the range, depending upon the SWP’s share of the 6000 stage one.”
“The average increase per acre foot when you consider the sales of Metropolitan water, assuming 1.7 MAF of sales based on the 2017-18 sales budget, is $122 per acre-foot if you melded the costs into all of the water that Metropolitan sells. Similarly for stage one, it would be the range, depending on the share the State Water Project takes in the 6000 cfs stage one.”
“If you were to look at the marginal costs when considering the benefit, we looked at the 1.3 MAF of benefit last fall and we apportioned that about 340,000 AF of that benefit would be Metropolitan’s,” he said. “We had $613 per acre-foot for marginal costs of that benefit and so under the stage one approach, if the State Water Project is investing in the full 6000, the marginal costs would be $588 per acre-foot. We also show what that was treated and delivered to the service area, so that’s the $840 for the full project and $815 for the stage one.”
In terms of costs per household, staff estimates $1.90 to $2.40 per month per household, with the larger amount if the SWP invests in the full 6000 cfs, Mr. Arakawa said.
At the next Bay Delta Committee meeting, staff will go over the recently released economic analysis for Cal Water Fix from the state, as well as any other additional analyses and refinement that they feel is informative as they continue to look at the staging approach.
General Manager Jeff Kightlinger added that the economic analysis won’t likely change the analysis that has been presented already. “The real swing is that there’s 1000 cfs potentially extra in the project,” he said. “There is conversation taking place with several Central Valley Project contractors. To the extent they pick that up, nothing is changed for Metropolitan – same benefits, same costs. To the extent that is not picked up and the State Water Project contractors are asked to pick it up, added costs for Metropolitan are relatively minor and there’s added benefits as well, and so we will crunch that and be able to provide more detail on that in two weeks time frame. I know there’s a series of meetings scheduled with the administration and state and federal water contractors in the next couple of weeks, and we should have some more information on that as well.”
Mr. Kightlinger said they were hopeful to have enough information for the March board meeting, but it’s more likely to be April. “As staff, the goal that we’re setting ourselves to have this fully analyzed and brought to you with appropriate written documentation so that you can act on it and provide us with direction,” he said. “We’ll provide you with updates as we go through it between now and that April board meeting.”
DISCUSSION PERIOD
Environmental review
A director asks about the environmental review. Mr. Kightlinger answered, “The good news is in the roughly couple hundred thousand pages of environmental review that’s been conducted to date, basically every permutation known to mankind has been studied on this project, so it’s not like we’re entirely reinventing the wheel. We can pull out the single tunnel 6000 cfs analysis and the idea is to update the modeling on it and then make sure it is reflected as the preferred alternative and brought forward, so it should be a relatively straightforward process. That’s why that timeframe is not the eight years it took to get us to this point.”
Participation by Central Valley Project contractors
Director Russell Lefevre asks what the mechanism is for Central Valley Project contractors to be involved. Mr. Kightlinger noted that all the details aren’t yet known at this time and said, “The broad strokes would be individual CVP contractors (presumably with the blessing of the Bureau of Reclamation) would in turn directly contract with DWR for the ability to move a portion of their CVP water through the facility, as would be scheduled by both the CVP and DWR operators, and so they would not necessarily be the Bureau of Reclamation, but they have to acquiesce and bless it because they are the ones that would control the release of CVP water.”
Director Lefevre asked about Reclamation’s involvement. “They are a lead on the overall project and presumably they would remain a lead project proponent of this through the environmental review process as well as before the State Water Board for those permits. I should also clarify … what the Bureau would need is change in the delivery point for their place of use, so they would need to work through the State Water Board process for those contractors to participate.”
Director Keith Lewinger asked what are the rules then that govern the take of water out of the Delta vis a vis CVP versus SWP? Jeff Kightlinger says the rules are dictated by the fishery agencies, and that would not change.
“There are rules about when you can pump,” said Mr. Lewinger. “So in the future, let’s say we build one tunnel. And the CVP contractors have not participated in the tunnel, don’t we need some sort of prior agreement between SWP and CVP that that Delta of the future without the fix and the future with the fix is in fact what we all agreed to?”
“No, what we probably really need is the biological opinions, the draft biological opinions that would govern the future operations of the project to reflect the benefits associated with it,” said Mr. Kightlinger.
“But you still have to divvy it up,” said Mr. Lewinger. “Twenty years from now when the project has been operating for five years or so, how do you know what would have happened had you not built the tunnels? It’s pure conjecture, because the tunnels would be in existence, the environmental agencies will change the rules based upon what’s actually happening in the Delta, so there’s no way of knowing what would have happened had you not built the project, so how do we reach some agreement ahead of time that this is the benefit that the tunnels actually created and that’s what the folks who have put up the money to build that project are guaranteed of getting?”
“I think it’s helpful to look at it this way,” replied Mr. Kightlinger. “There are clearly direct benefits associated with the project. A direct benefit would be that you would move the water without the same restrictions on the Old and Middle River reverse flow and be able then to presumably pump and get more water out of the north Delta than you would if you operated out of the south Delta. That is a direct benefit that would accrue to the people who invested in the project.”
“There are indirect benefits that would accrue to everybody,” Mr. Kightlinger continued. “An indirect benefit would be water quality; once it reaches the pumps, there will be a water quality benefit, and there’s no way to really separate that. It just gets blended in. There was also an indirect benefit that by improving conditions for native fish, the restrictions in the south Delta, presumably become less restrictive. That bad scenario where it goes from 3.5 to 3.9 somewhere in the future; some portion of it occurs perhaps because we didn’t build the whole project, but some portion does not occur. Those people would also get an indirect benefit of that because as you point out, you would not segregate it. But the direct benefit of knowing how much water you can move from the north Delta, that would only accrue to project participants.”
“I’m a pessimist on that,” added Assistant General Manager Roger Patterson. “That even with the facility in place, I think you can see the south Delta restrictions continuing to get tighter over time just because of species population and climate change and others. The way it will work, whether it gets better or whether it gets worse, is the CVP folks that don’t invest in the project only get their share of what comes out of the south Delta, so as that goes down, they get their share and that’s it under COA, so we do have an arrangement and federal law to guide that. Only those that invest in the facility get the benefit of 900,000 acre-feet of reliability, so if you look at this, it’s the same concept here. Without the project, you’re going to see continued tighter regulations in the south Delta. You build the project, and you’re still holding on to what you have in a little bit, so those that don’t invest, they are going to lose a portion of a good water supply … “
Director sees benefit
Director Larry McKenney said that if Metropolitan is getting 47% of the whole revised project, that would be more water than 26% of the original project. “If the water supply benefit of the revised 6000 cfs project is 900,000 acre-feet, and we’re 47% of that, that’s 80,000 acre-feet a year more … is that fair?”
Jeff Kightlinger indicates agreement.
“There’s a lot of unknowns still to be resolved in this, but considering the way it looks like it’s resolving, even with all the unknowns, this is really positive and I think we all come out of this, not with a lot of consternation but that we talk about how this is developing really well,” said Director McKenney. “Remember that we voted to participate in the project with some assumptions about cost and yield, and we found at that time, even with that project, we needed another 400,000 acre-feet of water that we are going to have to develop locally. 80,000 AF, if we got that much more, is a fifth of that and we could use it. We found previously that the unit costs for this water supply were less than a lot of, maybe all of our local supply alternatives … If our share is 80,000 acre-feet more, that’s a 24% increase in water supply benefit projected for 21% increase in cost. I think things are looking pretty good. I look forward to getting all the details worked out.”
Metropolitan to build the full project … ?
Director Richard Atwater reminds that the project was sized and scaled at 9000 cfs to maximize the environmental benefits and to meet statewide needs. “What I’d like to do is ask the staff if over the next month, they can fully consider doing both tunnels at the same time now, just because this is an investment. In the San Joaquin Valley, they have an incredible need … I think for Metropolitan, if you want to show leadership, you really do want to build the project that maximizes the benefits because one of the unfortunate [consequences] of doing it in phases, as a lot of the experts at PPIC and UC Davis have pointed out, is that the 9000 cfs has more environmental benefits. … that’s an investment you know will have a significant return on investment because over time, the rest of the state is going to need that reliability, so you’re going to have the federal and the state agencies willing to subsidize the environmental benefits … “
“We have analyzed the costs of doing the whole project, but what we haven’t analyzed, and I believe that’s what you’re asking, is what if Met were to finance the rest of it and wait for others, and then presumably have control of that extra capacity and be able to sell that, lease that, etc.,” said Mr. Kightlinger. “Is that what you’re asking us to analyze?”
“Absolutely,” said Director Atwater. “That’s the legacy of Metropolitan. In the 1950s and 60s, we had huge excess capacity in the Colorado Aqueduct, and we used that to solve other people’s problems, like groundwater overdraft, a whole variety of issues or shortages across the region … those multiple benefits are something we ought to be proud of.”
“We can get that,” said Mr. Kightlinger. “We can prepare that information for the committee.”
Director Brett Barbre and Director Steve Blois endorsed Director Atwater’s suggestion. “I would point out why would we not study and figure out what we could do to buy more water, quite frankly as much water as we can from the cheapest source that’s available now and into the future, so this makes a lot of sense for a lot of different reasons,” said Director Blois.
OTHER COVERAGE OF THIS MEETING
- Southern California water agency eyeing whether to take control of Delta tunnels project, from the Sacramento Bee
- CA WaterFix Players Need a Serious Fact-Check: As MWD’s tunnels tab continues to increase, water deliveries could decrease, from Restore the Delta
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