A supply and demand risk assessment of the Bay Delta Conservation Plan

On January 9, 2014, the San Diego County Water Authority’s Imported Water Committee held another workshop in a continuing series of workshops that are focusing on the Bay Delta Conservation Plan as the Authority prepares to submit formal comments on the BDCP before the April 15 deadline.

Yesterday’s post covered the the first half of the meeting with Water Authority Engineering Director Bill Rose and Engineering Manager Gary Bousquet giving a preliminary analysis of the BDCP’s proposed infrastructure.

Today’s post covers the second half of the meeting with Director of Water Resources Ken Weinberg and Principal Water Resource Specialist Dana Friehauf giving an assessment of the supply and demand risks of the BDCP.

Ken Weinberg’s presentation continued the discussion of risks, moving past the engineering and project risks and instead, focusing on supply and demand, water reliability and the environmental risks that surround the BDCP. He began by saying that they were evaluating the public draft released in December, and would have more to report at the February meeting. He noted that the projected export yields are consistent with what was in the administrative draft, so they won’t have to redo those analyses. The objective of staff’s review is to provide the Board with an assessment of which proposal is most consistent with the Board’s Bay-Delta principles as well as the reliability and diversification goals set in the 2010 Urban Water Management Plan, he said.

“Your board has not endorsed a preferred Delta fix solution, nor staff has not recommended any,” he said, noting that the options being the options would be that we are evaluating are the No-Action Alternative, the 9,000 cfs BDCP preferred alternative, the 6,000 cfs Delta Vision Foundation’s BDCP Plus, the 3,000 cfs NRDC’s portfolio alternative. He noted that the NRDC proposal and the Delta Vision Foundation proposal are differentiated from the proposed project in that they include south of Delta storage and increased local supplies instead of a larger conveyance.

Seven years and $250 million has been spent by the state and federal governments on this plan and we can’t duplicate that, he pointed out, so this is going to be a high level review based on the perspective of a recipient and purchaser of Delta exports. “There are a lot of issues that are attached to this project but we really are trying to look at from what is most important to the Water Authority,” he said.

The main deliverable will be the comment letter that is due in April, which the efforts of the committee will be focused on starting in February. Staff will provide an assessment of the reliability of the project, the financing of the project, the impacts on rates, and risk assessments to try and give you a sense of what is the risk and the costs that relate to that.

Mr. Weinberg turned the presentation over to Dana Friehauf, principal water resource specialist, who then summarized some of the analysis that has been done to date.

Ms. Friehauf began by emphasizing that it’s isn’t necessarily the size of the conveyance, but more importantly, it’s the operating scenario, which is comprised of the regulatory standards and rules that will govern operation of the projects. “I can’t stress enough how much the operating scenario that they ultimately choose to operate the facilities will have on the export yields,” she said.

Ms. Friehauf then presented a slide of a previous analysis of the four alternatives that showed the estimated average export yields under the high outflow scenario for the alternatives being studied. The colors represent the split between the existing diversion points with the south diversions in blue and the proposed north diversions in yellow.

She explained what is meant by the term “high outflow”. “When we talk about Delta outflow, we’re talking about amount of water flowing out of the Delta to San Francisco Bay. So in this situation, when we’re looking at a high outflow scenario, that is standards and regulations that are requiring more water to flow out to the San Francisco Bay which in turn results in low export yield. If you have a low outflow scenario, then you’ll have more export yield.”

Ms. Friehauf noted that there is an even split between the two diversion points on the proposed 9000 cfs project, but the 3000 cfs project would still rely on the existing south Delta conveyance about 72% of the time. These are based on modeling results that were contained in the BDCP, she said.

Based on staff analysis, the 9000 cfs proposal does provide the most SWP yield on average. “In addition, the greater amount of north Delta diversions, the greater improvement in State Water Project water quality in your average and wet years, but not necessarily in a dry year. In addition, when you have greater reliance on South Delta diversions, it creates more risk because of increasing restrictions to protect the fish species in the Delta that could cause uncertainty over the export yields and also uncertainty regarding the reliability during a levee failure and other catastrophic events.”

Staff did a second reliability analysis of the big gulp, little sip concept of diverting more water in wet years (big gulp) while taking less water in dry years (little sip). The big gulp, little sip concept addresses one of the Board’s policy principles that the Delta solution should improve the ability of water users to divert water from the Delta in wet periods when impacts on fish and ecosystems are lower and water quality is higher, she said. “In this analysis, we looked at it from the perspective of best managing the shortage risk,” said Ms. Friehauf. “Now because we do not have the ability to model Metropolitan’s system, their puts and takes to storage, we evaluated this from the perspective of looking at the volume and frequency of wet year State Water Project deliveries for puts to storage; we focused on the SWP and what kind of deliveries we would expect in a wet year.”

She then presented a slide with the results of the analysis, noting that they considered 1.5 MAF of State Water Project deliveries to be a ‘big gulp’ of water. “It’s clear from the analysis that all the conveyance options provide a more reliable wet year yield compared to the existing conveyance, and that the 9000 cfs does provide the ability to more frequently take the water and place it into storage,” she said.

“This big gulp, this large slug of water in a wet year, is critical to replenishing storage reserves,” continued Ms. Friehauf. “This would allow Water Authority and Metropolitan to put supplies into storage, and basically the Delta conveyance facility improves the ability to provide these wet year deliveries into storage compared with the existing conveyance.”

Adequate dry year supplies are really the key to State Water Project reliability, and dry year reliability of SWP supplies needs to be seen not only as the yield from the SWP but also the availability of stored water, she said, noting that the frequency and volume of the wet year SWP deliveries is critical to replenishing the storage and having that stored water available in a dry year.

“We found that a north Delta conveyance facility provides the best opportunity to ensure a big gulp,” said Ms. Friehauf. “It addresses the Water Authority’s policy principle and that a larger conveyance size does provide more opportunities to put SWP supplies into storage.”

Next, staff evaluated the potential for additional local projects as well as south of Delta storage to improve the overall reliability of a smaller conveyance. “This is consistent with the approach of the NRDC and the Delta Vision Foundation proposals,” she said. “We also want to look at the risks associated with these options, compared with the BDCP proposed action.” She emphasized that this is a reliability assessment only that doesn’t take into account the costs or financial impacts.

Both the NRDC and the Delta Vision Foundation proposals are both ‘portfolio’ concepts, with in-Delta components, such as habitat restoration, levee improvements, and out-of-Delta components, which are local and south of Delta storage projects, and other programs. The premise is to integrate these components as a comprehensive Delta solution, she said. She noted that the Governor’s water action plan also recognizes the importance of an integrated approach to addressing the state’s water issues, but in that case, it is envisioned that the components would be developed individually by the state, federal, regional and local agencies. She added that there are other statewide planning efforts that also focus on integrations throughout the state, such as the California Water Plan and the Delta Plan, as well as the CalFed surface storage investigations.

It was proposed that these options with both the in-Delta and out of Delta components be evaluated as alternatives in the BDCP process, including the EIR/EIS. “From staff perspective, that’s probably inconsistent with the current BDCP project objectives and plan area where they are just looking at the in-Delta,” she said. “To us, it’s really unclear at this point if all those components could be under a single environmental document and permit, so something that would need to be assessed is how best to complete the environmental process for those various components.”

The NRDC and Delta Vision Foundation proposals did not identify specific local projects, so from a risk assessment point of view, it’s more risky relying on other water agencies statewide to develop these additional projects, especially because they haven’t been identified, she said. While agencies have identified supply projects in their urban water management plans, there are no commitments to develop these supplies. So from a risk assessment approach, we assessed the potential of additional local project development in the San Diego region to offset the risk of the SWP deliveries from MWD, rather than statewide. “We felt this was a less risky approach, provides more local control, and again these would be the projects that would offset a decrease in dry-year supplies from MWD due to less storage reserves which resulted from the smaller conveyance.”

She then presented a slide that listed potential projects within the San Diego County region. “These would be additional plan projects beyond what is existing and what is now considered verifiable in our urban water management plan,” she said. “These projects are more at a feasibility level rather than what we consider verifiable in our UWMP, and these would be the projects that could help offset a decrease in yield from MWD in a dry year,” she said.

Ken Weinberg, Water Resources Director, then resumed with the presentation with a preliminary supply and demand risk assessment. From a supply standpoint, he explained that the least riskiest approach is for the Water Authority to develop storage projects within the region, rather than hope other agencies develop their local projects thereby easing pressure on Metropolitan’s supplies. He presented his analysis and said that in order to hedge the risk of shortages in Metropolitan supplies, the Water Authority would need to develop 100,000 acre-feet of new local supplies. “And when I say new, I mean beyond what we are already planning on doing,” he clarified. “If we develop that in the County, we basically have hedged the risk that they [Metropolitan] are not going to have enough water in storage and they are only going to be dependent on their core supply.”

“In my experience of three decades in the water industry, there’s nothing risk free about it,” said Mr. Weinberg. “There’s risk in anything that we do, but there are ways to minimize and mitigate that risk. Some things have more risk than others.”

He explained that there are five general categories of risk to be evaluated:

Permitting risk – Can the project alternatives obtain the major permits to construct and operate all the components to provide that water supply.
Schedule risk – What’s the likelihood of these project alternatives actually providing what they say they’ll provide by in the needed time period.
Implementation risk – how complex and difficult is it to implement the supply and environmental components of those alternatives.
Supply risk- what is the likelihood that if implemented, the project alternative will achieve the desired yield of water supply.
Demand risk – the likelihood that there’s insufficient demand to take the yield identified in the proposal.

Mr. Weinberg noted that they were taking a general approach to evaluating the risks. “The more uncertainty and lack of definition in the alternative, there’s more risk,” he said. “The less we know, it’s just more risky. And the more components of an alternative and the more parties you have to depend on to fully implement, the more risk. It’s just kind of the way it is.”

“And the more reliant we, the Water Authority, are on external parties for implementation, the more risk to San Diego County supply reliability, which gets to the issue on local projects. And the larger the project, the greater the implementation risk, just because it’s big and usually big stuff is harder to do,” he said.

The NRDC and the Delta Vision Foundation contain two components: In-Delta components, such as conveyance and habitat protection, and out-of-Delta components, such as south of Delta storage, and using storage to increase the yield of the smaller capacity conveyance, which means regional and local supply projects, he explained. Since there were no specific storage projects proposed by either of those alternatives, it is difficult to analyze permitting, schedule, and implementation risks, but we were able to have enough information to analyze the risk of getting the supply needed out of south of Delta storage, he said.

“The existing conveyance option wasn’t evaluated because after the last couple of reports, our conclusion was that it just doesn’t meet the Board’s supply reliability policy principles: it doesn’t improve State Water Project reliability, it doesn’t increase wet year deliveries, it doesn’t stabilize the regulatory environment, and it doesn’t achieve the coequal goals,” said Mr. Weinberg. “So we didn’t feel that it was necessary to bring it any further, at least for the purposes of the risk analysis, because it is the most risky alternative.”

In terms of permitting risk, simply because the resource agencies, the ones who issue the permits are at the table, they’ve been structuring their permit conditions and the operating criteria and all the other things that go with those permits around the proposed action, the proposed action is less risky in obtaining permits, he said. “In the staff memo, we said that if you can bring this to conclusion, you can prove that it’s financeable, then given the process that they’ve undertaken, it’s likely that they can get permits. This is really the reason that the NCCP and HCP process was chosen by the state and federal agencies because it is the most likely path to permitting.”

The major permitting risk with the NRDC option is that they have a proposed a much lower habitat restoration acreage – 40,000 acres compared with 153,000 acres that the BDCP proposes, he said. “Now there is some reduction and mitigation under what’s called direct mitigation because the conveyance is smaller and there’s only one tunnel, but direct impacts, even on the proposed, are very small compared to the restoration acreage,” he said. “The restoration acreage is designed to contribute to the recovery of these species, and so it really is independent of how big you build the conveyance options.” The biggest risk for this option is since the NRDC has taken a much different approach to habitat restoration, it’s unclear whether their proposal would satisfy the permitting requirements, he said.

He noted that the Delta Vision Foundation did not provide a specific acreage amount, but the BDCP analyzed the 6000 cfs tunnel and identified a restoration amount that was pretty close to the 153,000 acres specified in the proposed project.

In terms of schedule and implementation risk, opposition and litigation is the biggest risk to schedule risk of the in-Delta components of any alternative, he said. “It’s clear that the in-Delta users, environmental groups and other stakeholders will oppose the 9000 cfs alternative, but it’s likely that the exporters who have the cost responsibility are not going to support the smaller 3000 cfs conveyance, so either way, you’re going to have very unhappy people and that’s going to contribute to delays,” he said.

The uncertainty regarding financing and payment commitments is the greatest implementation risk, he said, pointing out that it exists for all options. “You can’t obtain the permits without demonstrating that you have the financing,” he said. “That is one of the hurdles that they face, and that can lead to schedule risk and implementation risk.”

“There is some reduced scheduling risk with the single bore tunnel because there’s just less to do, but I’m not going to say it’s entirely risk-free or significantly less risky, but there’s just less to do,” he added.

There are key permitting and schedule implementation risks for out-of-Delta components as well. He then presented a graph which plotted various supply projections from recent years. He pointed out that in the year 2000, there were a lot more projects under consideration than the ‘verifiable’ water supply targets estimated in the 2005 and 2010 Urban Water Management Plans. “Things came down mostly because of the growth in water legislation, SB221 and 610, that really addressed having evidence and documentation that you were pursuing this project in the context of cities and counties relying on that information in making land use decisions,” he said.

“So local projects haven’t always developed as planned, and in the portfolio approach, you need additional projects beyond what’s verifiable in the 2010 UWMP,” he said, noting that there are risks associated with implementing anything. “You’ve got to get past political, financial, institutional, and regulatory issues, but we feel the risks are lower if you develop it locally within the region as opposed to relying on others because you can manage those risks better with local control,” he said.

In terms of supply yield and supply risk, the 9000 cfs option, because of it’s size, produces the most State Water Project average yield with better export water quality because more would be diverted from the north Delta, and it has better operational redundancy, he said. “We’re not saying it’s worth the cost, but you’ve got two tunnels, two pipes instead of one, and that just means by definition you have redundancy and less risk.” He added that the 9000 cfs option has the greatest reliability from a risk perspective if the Delta levees fail. “Again, as a function of getaway capacity in a wet year, you are able to replenish storage in bigger volumes more frequently, and that really is a function of the getaway capacity or the size of the diversion.”

The supply risks of the project are associated with the biological aspects. The decision tree process will be used to determine the initial criteria with the high-outflow criteria, the most restrictive, being the starting point, he said. “They may stay there if things don’t work out in the restoration or if the species aren’t recovering,” he said. “They may stay there, they may get worse, or it may get better, we don’t know. The future yield is really dependent on the success of the restoration efforts.”

He noted that the state is trying to mitigate some of those risks. “They’ve identified recently in the draft documents some strategies to make sure that there is enough water in the system to meet the outflow criteria, but some of those strategies may wind up costing the exporters money, and we don’t know,” Mr. Weinberg said.

Reducing San Diego County Water Authority’s dependence on Metropolitan for dry year deliveries beyond what was anticipated in the 2010 Urban Water Management Plan addresses the risk of not getting enough State Water Project water, he said. “You’ve got to achieve it through the development of additional plan projects,” he said. “Member agencies are working on projects that haven’t come to fruition yet; those have to happen and we would have to do additional projects above and beyond that amount. We’ve got projects that can be between 124,000 and 223,000 AF, and again, these projects are at a feasibility level stage and there’s uncertainties with them. Those are risks that we have faced in every local project we’ve developed here and those risks are for anything we do in the future.”

Regarding south of Delta storage, we made what we feel is a key finding, he said. First, to understand the relationship of new storage, keep in mind that we have salmon at the north end, Delta smelt at the south end, and longfin smelt to the west, he explained. “The way these species are protected is by keeping water within the Delta system and specifically with the longfin smelt, having that water pulse through into San Francisco Bay, especially in wet years. They are using that natural cycle to get food supply for the longfin smelt, to deal with water quality issues, and that is what restricts the ability to pump whatever you want to pump.”

In terms of supply yield, think of the size of the conveyance as valves or spigots that control how much water is in or leaves the Delta, he explained. The high outflow criteria is the starting point; if things improve, that criteria might be relaxed, but we’ve been analyzing supply yield based on high outflow, he said. “You have the outflow criteria, you have the existing conveyance on the bottom, and then you have the north Delta conveyance, and these all really work to constrain how much water you can get out of the system in an average and wet year. You can see that the only thing you really have some choice here in terms of how it performs is the size of the capacity of the conveyance. These things really limit how much water you can get out.”

The first obligation of the SWP and the CVP is to deliver water to the contractors, which means any new storage last in line to get water if there is excess water, he said. The BDCP did conduct an initial analysis of adding 1 MAF in new storage (Appendix 1B of the EIR/EIS) and determined that a 9000 cfs conveyance increased the average total SWP and CVP Delta water exports by approximately 150,000 acre-feet per year, with virtually all of that increase occurring in very-wet years. The analysis with a 3,000 cfs conveyance was found to increase the average yield by approximately 50,000 acre-feet per year.

“These increases are an average, but they only occur in wet years and the problem with the smaller conveyance is that it’s already full in most of the wet years and there’s no additional room to fill the pipe with wet year water,” he said. “The only place you get some room is with the higher capacity conveyance alternatives.”

“The high Delta outflow criteria and the limited wet year take capacity limit the ability to store water and a million AF divided among state and federal contractors is not a lot of water to supplement in a dry year when you have close to 5 MAF under contract,” he pointed out. “It seemed to us that one million acre-feet of storage isn’t significant enough, but you can’t do anything more until you are able to do something to ease up on the operating criteria and allow for more exports, and maybe that would add value to south Delta storage.”

In terms of demand risk, there are growing water demands statewide, he said. “The State Water Project is a core supply; the BDCP is not providing significant new supply, it’s improving the reliability of the current deliveries,” said Mr. Weinberg. “And increased local projects and use efficiency are satisfying growing demands.”

He noted that the projected BDCP SWP deliveries are less than what MWD identified as their SWP target in their 2010 UWMP by about 400,000 AF. The 2010 UWMP for Met identified a lot more total supplies to meet the demand, including local supplies by member agencies, and again more than the projected demand, he said. “If the target for SWP decreases in the new regional UWMP, you’d see an overall drop in demand and an increase in projected local supply development causing them to drop their target. A greater drop in Met demand equals a higher risk of price increases, so the NRDC proposal, because it’s limiting exports and limiting how much water they’d be able to put in storage, more than the 9000 cfs, you’d have less risk of demand not matching supply.”

Putting it all together …

“So what does it all mean. From the beginning, this risk assessment was conducted solely from a water resources perspective. We’re going to come back with the cost elements at a later date. We focused on reliability for California and specifically the San Diego region, said Mr. Weinberg.

“The involvement of the regulatory agencies in the whole BDCP process which includes the environmental documents and the planning documents – that just improves the likelihood of obtaining an Endangered Species Act permit for the proposed action because that is what they were working on. They have other permits to get from the State Water Board and others, but they really dealt with the major environmental issues in the EIR/EIS,” he said. “The NRDC approach to restoration is significantly different than reflected in BDCP documents, which involves the participation of the regulatory agencies. And that really makes it unclear whether their proposal can meet biological objectives and could they obtain species coverage that you need under the NCCP/HCP process. That’s the biggest risk we saw in their in-Delta facilities.”

“There is a risk under the proposed option, and all of the options that have North Delta conveyance, of reduced yield if you don’t meet the species recovery goals during operation,” Mr. Weinberg continued. “The other side of that is that if you do meet the goals or if you do better, you can get more, but there is a risk, and it’s hard for us to quantify it. The state’s proposing ways to mitigate that risk, but some of those actions could impose a cost on Metropolitan Water District as an exporter, and it’s basically to buy water and keep it in the system.”

“Under the high outflow criteria and limited conveyance capacity, new south of the Delta storage provides limited benefit to increasing SWP yield. You can’t make up the entire difference from the smaller capacities, and filling Metropolitan’s and the Water Authority’s storage is more important to imported water reliability than new south of Delta storage. We need to fill those storage reservoirs first,” he said. “If you can get a relaxation on the regulatory standards, than it may be worth looking at south Delta storage because you can get more yield benefits and it’d be more beneficial, but that rests on successful restoration and species recovery.

“Finally, for me, the risk of SWP supply reliability is best managed through local supply development in San Diego County,” he said. “Water agencies and the Water Authority have a proven track record in developing local supplies, and relying on the state or other agencies statewide is inherently more risky. There’s still risk, but local control gives you a better ability to manage those risks. The key questions are costs and reliability improvements and really the balance between them.”