Report shows inflation has boosted the delta tunnel cost to $20 billion – or more

May 17, 2024
Jesse Vad, SJV Water
by Jesse Vad, SJV Water
The approved Delta Conveyance project would take water 25 miles south from the Sacramento River. Source: Delta Conveyance Design and Contruction Authority
Jesse Vad, SJV Water
Jesse Vad, SJV Water

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The controversial Delta Conveyance Project will cost $20.1 billion according to a new cost-benefit analysis released by the state on Thursday. That’s up from the previous cost projection of $16 billion. 

Almost all of that increase is because of inflation, said David Sunding, emeritus professor at UC Berkeley, who led the benefit-cost analysis, in a media briefing. 

The benefits will likely far outweigh the costs, said Sunding. For every $1 spent, $2.20 will be generated by the project, according to the analysis. 

The Delta Tunnel would take Sacramento River water beneath the Sacramento-San Joaquin Delta to thirsty towns and farms further south and relies on the end users footing the bill. The Department of Water Resources (DWR) is the agency overseeing the project. 

The tunnel would also help to maintain water operations in the case of an earthquake, said Sunding. An earthquake along one of California’s major faults could significantly impact the State Water Project and the delta in which case the new tunnel would compensate for those losses. 

Climate change is also expected to severely impact the State Water Project over time. 

“It’s worth thinking about the cost of doing nothing,” said Sunding. “The status quo is not an option going forward. One way or another things are going to have to change.”

But opponents of the project say the analysis is nothing but clever marketing from the state. 

“It’s just an elaborate public relations stunt,” said Barbara Barrigan-Parrilla, executive director of the nonprofit Restore the Delta. 

Barrigan-Parrilla said the analysis was one-sided and did not fully account for all of Californians’ needs.

“DWR has a duty to California to include an analysis on the impacts to California tribes, Delta communities and economies, the commercial fishing industry, and environmental and public safety concerns. And so their cost benefit analysis is just flawed by what it has left out,” said Barrigan-Parrilla. 

The new cost estimate is also flawed, she added. Taking into account inflation over the coming years and interest on bond repayments, Barrigan-Parrilla said the real cost will likely be more than double the $20.1 billion estimate. 

Participating agencies have yet to formally commit to the project, another problem with the study, Barrigan-Parrilla said. 

“They don’t have a commitment from the water payers to pay so it’s not an accurate financial analysis,” said Barrigan-Parrilla. “There has to be a commitment to pay, and without a commitment to pay, it is also an incomplete financial analysis.”

Each participating agency is going to have to build off the state analysis and do their own studies, said Graham Bradner, executive director of the Delta Conveyance Design and Construction Authority, in the briefing. 

“This is a step but it’s certainly not the last step regarding evaluation of costs and benefits,” said Bradner. “And this will be key information for those local agencies, but they’ve got their own work to do.”

Water managers in the San Joaquin Valley, and especially at the Kern County Water Agency, are likely sharpening their pencils to calculate their own cost-benefit analysis with this new information.

The Kern County Water Agency is the 2nd largest contractor receiving water from the State Water Project. The largest contractor is the Metropolitan Water Agency of Southern California. Both have become a bit more cautious of the tunnel costs in recent years.

Metropolitan has only committed $160 million to this version. And several agricultural water districts within the Kern County Water Agency have already opted out of paying more for continued studies.

Water agencies that receive delta water through the State Water Project had already kicked in a combined $160 million between 2007 and 2019 for study and planning work on the California WaterFix, an earlier version of the tunnel plan.

Kern water districts, through the Kern County Water Agency, have paid about $71 million since 2007. That includes aout $36 million since 2021 on the more recent Delta Conveyance version of the tunnel.

Meanwhile, the agency and its member water districts are frustrated that in a year when reservoirs are full, they are only receiving 40% of their allocation, though they have to pay for 100% of their contracted amounts.

DWR has noted that because some endangered fish have been caught in pumps moving water south, they are obligated to throttle back pumping.

Agency Board President Ted Page said the restrictions are “based on outdated fish population estimating tools,” in a release last month. “There is no data to show that the actions imposed by the regulatory agency have helped fish in the Sacramanto-San Joaquin Delta.”

It’s unclear if similar endangered fish restrictions would curtail water deliveries if the tunnel were already built and in use.

Jesse Vad, SJV Water

SJV Water is an independent, nonprofit news site dedicated to covering water in the San Joaquin Valley. Get inside access to SJV Water by becoming a member.


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