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Delta tunnels don’t pencil out, UOP economist says

Delta tunnels battle heats up

One Delta farmer talks about his family history and why he opposes Gov. Jerry Brown's tunnels plan.
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One Delta farmer talks about his family history and why he opposes Gov. Jerry Brown's tunnels plan.

A prominent Sacramento-area economist says Gov. Jerry Brown’s $15.5 billion plan to overhaul the troubled Sacramento-San Joaquin Delta doesn’t make financial sense, with costs far outweighing the benefits.

Jeff Michael of the University of the Pacific, who has been a persistent critic of Brown’s plan to build a pair of massive tunnels beneath the Delta, said the project would likely deliver just 23 cents worth of economic benefit for every $1 spent.

Even under the most optimistic scenario, the tunnels, known as California WaterFix, would generate just 39 cents worth of benefit, Michael wrote in a 24-page report released early Wednesday.

“The results clearly show that the WaterFix is not economically justified,” wrote Michael, director of UOP’s Center for Business and Policy Research.

Michael’s analysis comes at a crucial time for the project, which is widely opposed among Delta farmers and other residents. His research was funded by a $10,000 grant from the Delta Counties Coalition, a group of five Northern California counties trying to block the tunnels.

The State Water Resources Control Board has launched a grueling hearing on the details of the plan, which is expected to last well into 2017. Meanwhile, Brown’s administration is scrambling to secure environmental approvals from two federal agencies that supervise endangered fish species found in the Delta. State officials believe it’s crucial to get those approvals before President Barack Obama leaves office next January, or risk losing momentum on the entire project.

A preliminary cost-benefit analysis, conducted in 2013 for the state, concluded that the project makes financial sense. Michael’s report said the 2013 study was flawed because it overestimated the benefits of the proposed project. State officials say the 2013 study will be updated.

The UOP report focuses on a critical element in the tunnels proposal: the amount of water California WaterFix will be capable of delivering to areas south of the Delta. Water agencies in the San Joaquin Valley are reluctant to pay for the project because they’re concerned the tunnels won’t improve the volumes of water they receive from the Delta.

Those concerns are justified, Michael wrote.

“The primary economic problem for the WaterFix is its low water yield,” he wrote.

While state officials haven’t yet seen Michael’s analysis, they said it appeared he had overlooked the economic value of shoring up the existing system and keeping water flowing south at more or less current volumes.

“Opponents often make the assumption that today’s (water) exports will stay consistent, but that’s a fallacy,” said spokeswoman Erin Mellon of the Natural Resources Agency in an email. “Recent history shows that if we do nothing, we’ll likely face a decline in supplies due to increased restrictions to protect declining fish populations.”

Even with the tunnels built, officials with the Brown administration have said water deliveries could diminish somewhat because of increasingly strict environmental regulations. But they say the fish problems would become considerably worse, and water deliveries would plummet, if the tunnels don’t materialize.

As things stand now, the giant pumping stations near Tracy have degraded fish populations to the point that water deliveries frequently have to be halted to comply with the Endangered Species Act. That means millions of gallons of water pours into the Pacific instead of getting pumped south, to the rising irritation of south-of-Delta cities and agricultural water agencies.

The tunnels, by diverting a portion of the Sacramento River’s flow 30 miles upstream, are expected to improve fish populations by altering water currents in the Delta. That would mean pumping operations would be interrupted less frequently.

Gov. Jerry Brown, renewed his pitch for the Delta tunnels project in January 2016, saying opponents "are not right" about their objections.

Dale Kasler: 916-321-1066, @dakasler

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