Delta News

Delta tunnels project needs water agencies to pay for it. Why some are hesitating

If you live in Los Angeles, the cost of building the Delta tunnels might raise your water bill by as little as $2 a month or less – no more than a latte, to quote one of the project’s main cheerleaders in Southern California.

But if you’re a farmer on the west side of the San Joaquin Valley, the increase could be hundreds of dollars per acre-foot of water. And you could be looking at hundreds of thousands of dollars in additional expenses every year, for decades, for a resource that’s as indispensable to farming as soil itself.

As California water agencies prepare to vote next month on paying for the tunnels, which are supposed to improve water deliveries to the southern half of the state, the stark difference between urban and rural water users’ expected costs illustrates one of the project’s main stumbling blocks.

While the controversial project is moving through the permit process, it can’t break ground unless a solid bloc of south-of-Delta water agencies, urban and rural alike, commits to paying the $17 billion tab.

It’s far from certain that all the major water agencies will sign on.

The Westlands Water District, an influential agency serving farmers in western Fresno and Kings counties, is among the agricultural districts expressing serious concerns about cost. Westlands farmers’ water bills, which currently run to around $200 an acre-foot, could jump by as much as $495 an acre-foot to pay for the tunnels, according to estimates provided to the district last month by Goldman Sachs & Co.

“The number’s just too high,” said farmer Sarah Clark Woolf, who serves on Westlands’ board of directors. “It doesn’t work for farming.” The Westlands board is tentatively scheduled to vote on the project Sept. 19.

If a significant player such as Westlands were to withhold financial support, the entire project could falter. Gov. Jerry Brown’s administration, which has been pushing the tunnels for years, would have to persuade other south-of-Delta agencies to pay more.

State officials acknowledge the importance of winning over all the big contractors. “If at the end of the water contractors’ processes it becomes clear there is not a critical mass of local agencies participating, then we would have to assess whether there is a project that can move ahead,” said Erin Mellon, spokeswoman for DWR.” She added that “inaction would be irresponsible.”

California WaterFix, as the project is formally known, is Brown’s audacious plan for remaking the plumbing of the Sacramento-San Joaquin Delta by building two tunnels beneath the estuary.

Decades of pumping water from the Delta has degraded its ecosystem and left some fish species at the brink of extinction. Located near Tracy in the south Delta, the pumps are so powerful they can literally reverse the flow of segments of the San Joaquin River, pulling fish into harm’s way. The pumps sometimes have to be shut off to protect the fish, leaving water to flow out to sea.

Environmentalists and Delta landowners say the tunnels would make things worse. Brown disagrees.

The tunnels would divert a portion of the Sacramento River’s flow, from a point near Courtland, to the existing Tracy pumps about 40 miles south. Brown’s aides say this would eliminate much of the “reverse flow” problem. The pumps could operate with fewer interruptions, firming up water deliveries to valley farmers and 19 million Southern Californians.

Outside of the governor’s office, WaterFix’s biggest fan is probably the Metropolitan Water District of Southern California, which relies heavily on Delta water. Metropolitan appears ready to formally commit to WaterFix at a Sept. 26 board of directors meeting.

How much each of the several dozen agencies would pay for the tunnels depends on how much water they currently take out of the Delta. With the ability to spread its estimated $4 billion share of the cost among 6 million households, Metropolitan staff said last week that average monthly bills for its customers likely will increase $1.90 to $3.10 a month.

“About a tall latte. 1x a month,” general manager Jeff Kightlinger wrote in a Twitter post.

The math is more forbidding for an agricultural agency like Westlands. It can spread its costs among just 600 customers, not millions. Although the price hikes would vary widely, depending on which borrowing structure is employed, the numbers released by Goldman Sachs have left some growers reeling. A farmer such as Woolf could see his or her annual water bill increase by as much as $700,000.

“It’s definitely more affordable for an urban district compared to a farmer,” said Jeff Michael, a University of the Pacific economist who has consulted for anti-tunnels advocates. “The capacity to pay, and the willingness to pay, are on a different level.”

Without the tunnels, Brown’s aides say environmental conditions in the Delta will continue to deteriorate and pumping operations will become less reliable. That’s a compelling argument, even for some agricultural districts.

“I won’t lie to you, it’s going to be expensive,” said Ted Page, president of the Kern County Water Agency, a major agricultural district at the south end of the valley. “What’s the alternative? It takes water to run your business.” He added that the Kern County agency is still formulating its cost estimates; its board is expected to vote in late September or early October.

A big sticking point for many water users, particularly farmers, is that considerable uncertainty remains over how much water would get delivered from the Delta if the tunnels are built. Project opponents say the tunnels’ leading advocates are basing their financial projections on overly optimistic expectations about water deliveries.

Metropolitan’s analysis “is significantly flawed and understates the costs and risks,” attorney Doug Obegi, of the environmental advocacy group the Natural Resources Defense Council, told the Southern California agency’s board of directors this week.

In addition, Wall Street analysts said this week that Metropolitan’s prices might rise even more if some of the other water agencies won’t commit their dollars to the project. “The cost to (Metropolitan) and its ratepayers could be higher if some contractors decline to participate,” Fitch Ratings said in a report analyzing the project’s finances.

The water agencies’ deliberations have been complicated by the way California’s delivery system is structured. The federal and state governments operate two different water systems in California, side by side. They both pump water out of the south Delta, but when it comes to paying for WaterFix, they’re playing by different rules.

The State Water Project’s south-of-Delta agencies have informally decided they will all participate in the funding, in amounts that correspond to how much water they currently pull out of the Delta. If an agency bails out, it is expected to find a substitute. The more an individual agency pays, the more water it can expect to receive out of the tunnels.

With everyone expected to participate, the costs become more palatable, even for agricultural users like those in Kern County.

It’s different for customers of the federal government’s Central Valley Project. The CVP’s contractors take about 45 percent of the water pumped from the Delta.

In a memo in late July, the U.S. Bureau of Reclamation said two significant CVP customers don’t have to contribute to WaterFix’s costs. Those customers are a group of state and federal wildlife refuges, which are guaranteed water by federal law, and the Exchange Contractors, a large cluster of farmers along the San Joaquin River who have special historical water rights. Those two groups combined take about 20 percent of all the water that’s pumped out of the Delta.

The bureau’s memo said it doesn’t believe it needs the tunnels to continue meeting its legal obligations to supply water to those two groups. As a result, the bureau said, they don’t have to pay for the tunnels.

As for every other CVP customer, the bureau has said spending money on tunnels construction project is purely voluntary.

“We’re having our CVP contractors make their business decision on whether they will choose to participate and therefore pay capital costs for California WaterFix,” said Brooke White, the bureau’s program manager for the tunnels project, in an interview this week.

The bureau’s decision has many of the other CVP contractors squirming. Those that don’t sign up risk losing some water; they wouldn’t be eligible for water that’s routed through the tunnels. On the other hand, if they do participate, their costs will be higher because of the two groups that have been let off the hook financially.

“The capital costs ... will be spread only among those who participate,” said Tom Birmingham, the general manager at Westlands, one of the largest CVP contractors.

If the costs were allocated among every CVP contractor, Birmingham said, it would be easier for Westlands to commit to the project.

“It becomes affordable,” he said.

Another major CVP contractor, the Friant Water Authority, which serves farmers on the east side of the valley, considers itself undecided on the tunnels issue. Jason Phillips, the authority’s chief executive, said Friant’s board hasn’t yet scheduled a vote on the tunnels but is weighing the potential costs and benefits.

“How do you make a multibillion-dollar decision? Is it a risk worth taking? That’s what we’re looking at,” Phillips said. “It depends on how much skin you’re going to have to put into the game.”

Dale Kasler: 916-321-1066, @dakasler

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