Westlands Officials Ponder Big Buy-In on Bay Delta Conservation Plan

http://www.lloydgcarter.com/content/131122642_westlands-officials-ponder-big-buy-bay-delta-conservation-plan Nov 21, 2013

By Lloyd G. Carter

Westlands Water District directors Wednesday (Nov. 21) hosted a workshop on the controversial Bay Delta Conservation Plan (BDCP) and were told by California Department of Water Resources (DWR) officials the big federal water district in western Fresno and Kings counties may have to pony up $162 million over the next three years for pre-construction planning.

DWR Director Mark Cowin told Westlands directors DWR will need $500 million over the next three years to finance pre-construction engineering and other studies while the BDCP undergoes expected court challenges by environmentalists and Northern California/Delta farming interests. The BDCP document now runs over 30,000 pages. Westlands directors should decide by January 2014 if they wish to opt in, Cowin said.

Cowin said much progress has been made in answering the concerns of the various interest groups and he believes the project will survive any court challenges. The final BDCP plan is expected to be unveiled next month. Cowin said the draft BDCP "probably" drew a record number of comments.

The plan calls for construction of two 40-foot diameter tunnels to tap into the Sacramento River upstream from the problem-plagued Delta, which has a dwindling fishery due to a variety of causes, including lack of fresh water, pollution from farming, industrial and municipal sources, and invasive non-native plants and fish. The two tunnels will funnel water 35 miles to the export pumps at Tracy in the south Delta and then sent down the State Aqueduct to western San Joaquin Valley growers and Southern California urban water districts.

DWR officials have pegged the price of the massive project at $14.925 billion but David Houston, a Citibank/Citigroup bond underwriter, said construction inflation costs put the probable project cost at closer to $18 billion. Environmental critics of the project say interest on any bonds issued to finance construction, plus rising construction costs, and unforeseen delays, could put the price tag as high as $40-50 billion.

Houston was the regional director of the U.S. Bureau of Reclamation in the early 1980s during the Kesterson era, when it was discovered that drainage water from the Westlands ponded up at Kesterson Reservoir in Merced County was causing deformities in birds nesting at Kesterson. Excessive levels of selenium, leached from the Westlands soils by irrigation, was determined to be the cause of the bird deformities and deaths.

Ironically, the Kesterson Reservoir, a holding pond for selenium-tainted subsurface drainage, also doubled as a national wildlife refuge. The Department of Interior, parent agency of Reclamation, closed the Kesterson ponds in 1986 following issuance of a cleanup order from the State Water Resources Control Board.

DWR's Cowin said construction could start in 2017 and conclude around 2025. DWR official Jim Watson said the construction project is enormously complicated. Watson said an estimated $500 million is needed during the next three years of pre-construction planning and engineering and the state is proposing the State Water Project contractors pay $250 million and the federal Central Valley Project contractors will pay the other $250 million to cover costs. He estimated only 10 percent of the engineering work for the project is done.

Cowin told Westlands directors they have to decide if the project "is worth it" but he believed it was.

Westlands is by far the largest federal contractor involved in the project. Other federal water districts include the Santa Clara Water District, and the much smaller San Luis and Panoche irrigation districts.

Cowin noted that his agency has just announced the initial allocation of state water project water for 2014, following last year's drought conditions, is only five percent. Westlands, already carrying a large bond debt load, has poured millions of dollars into BDCP research on the Delta ecosystem the last few years.

Westlands Deputy General Manager Jason Peltier said the current problems in the Delta are the result of a "failed regulatory process." Westlands General Manager Tom Birmingham said the export pumps at Tracy used to run all year but court battles over the fishery, including the Delta Smelt and salmon, have resulted in the pumps being shut off six months out of the year to protect fish.

In explaining how the project will work, DWR's Watson said three intakes on the upper Sacramento River will be built and that the 35-mile-long tunnels could be up to 44-feet in diameter. He said the giant tunnel borers the state plans to buy have been used successfully in Southeast Asia.

Watson said current plans call for the "muck" - or soil removed in order to build the tunnels - will be "stored locally." He said one of the concerns of DWR engineers is that tunneling 100 feet under aging and crumbling levees in the Delta could cause them to collapse. Tunneling under the San Joaquin River, he said, will also be a challenge.

Houston and Watson said Westlands' share of the $250 million sought from federal water contractors depends on whether other federal water contractors decide to opt in on the next three years of financing. Westlands directors were told their water district's share for the next three years' planning costs could be as high as $162 million. Houston, who was peppered with questions by Westlands directors, said financing for the next three years could cost Westlands growers about $22 an acre-foot increase on their water bills. An acre-foot is 325,851 gallons. Growers are hopeful some 5.9 million acre-feet of water will be drawn from the upper Sacramento River each year, the amount which used to be drawn from the Delta prior to the fishery collapse and the court battles.

The massive Metropolitan Water District of Southern California (Met) is expected to pick up the lion's share of financing the $250 million sought from state water contractors over the next three years. Kern County irrigation districts are still weighing whether they want to participate. Water experts say Met could easily pick up all the state contractors' share of the next three years pre-project planning costs by raising urban household rates a few dollars a month. Met is a wholesaler of water to two dozen Southern California cities and urban water districts.

Following the 90-minute workshop, Westlands directors went into executive session to discuss, among other things, whether they want to participate further in BDCP financing. It is unknown if Westlands is comparison shopping by talking with bond underwriters other than Houston, who has done bond work for Westlands in the past.

As of 2012, Westlands had total liabilities of $337.3 million, including $288.5 million in debt borrowing. The total liabilities do not include the nearly $450 million the water districts in the San Luis Unit of the Central Valley Project still owed the federal government as of 2008 for repayment of the cost of building the water delivery project for Westlands and four small adjacent water districts, according to a GAO report.