The Natural Resources Agency's $3 Billion Error in Estimating Delta Tunnel Costs

The Natural Resources Agency has posted an “update” to its September 11, 2013 letter rejecting calls to analyze the portfolio alternative offered by several water districts, environmental groups, business interests, and local governments in the Bay Delta Conservation Plan process. The “update” indicates that Resources made a $3 billion error in its original letter.

Oops.

The Agency’s goof is disconcerting as the citizens of California look to the State to capably analyze and select the best alternative for the State’s water future before embarking on a $25 billion project. Perhaps the most worrisome aspect is that, regardless of which cost estimate is correct, a $3 billion difference appeared to have no effect on the Agency’s conclusion about the feasibility of the portfolio alternative or the desirability of its own big, expensive twin tunnel proposal. The State insists that it has not yet settled on a preferred BDCP project. But its decision to not even study seriously a sensible alternative that is supported by a wide array of interests does not indicate an openness to different approaches.

The upcoming public draft EIS/EIR, expected in the next couple months, is intended to help the Agency and the public evaluate a reasonable range of alternatives, compare the costs, benefits, and impacts of those alternatives, and make an informed decision on the basis of that knowledge. By rejecting the portfolio alternative prior to even completing that review, and without regard to whether its tunnel component is $3 billion or $6 billion cheaper than the current BDCP proposal, the State feeds concerns that its upcoming analysis is simply designed to bolster a pre-ordained result. In addition, the Agency's reasons for rejecting the portfolio alternative are deeply flawed, as I discuss here.

It’s also concerning that the State’s cost estimates vary widely, and no supporting information is provided to justify the Agency’s estimates of the cost of a smaller, single tunnel. Here are just a few of the different cost estimates from BDCP:

  • In July, 2010, BDCP pegged the capital cost of two tunnels with a capacity of 3,000 cfs at $7.2 billion. Using a single tunnel would reduce that cost estimate significantly, as would calculating the present value capital cost, as Resources does in its latest estimates. 
  • In May, 2013, BDCP pegged the present value capital cost of a 3,000 cfs facility at $10 billion, and the present value capital cost of a 9,000 cfs facility at $13.3 billion (page 9.A-5).
  • In August, 2013, BDCP estimated the undiscounted capital cost of the 9,000 cfs, twin-tunnel facility at $14.5 billion (page ES-1).
  • On September 11, 2013, BDCP estimated the cost of a 3,000 cfs tunnel as $8.5 billion, and the cost of the 9,000 cfs tunnel as $14.5 billion.
  • On September 16, 2013, BDCP estimated the present value capital cost of a 3,000 cfs tunnel as $9.2 billion, and claims that would be “a savings of $3 billion as compared to a 9,000 cfs tunnel” (page 3),  even though $9.2 billion is over $4 billion less than the latest published estimate from BDCP of $13.3 billion present value capital cost of the 9,000 cfs facility.

To be fair, there could be good reasons for differing estimates. Some of these estimates have been discounted to reflect net present value costs and some have not. It’s also possible that the latest published discounted cost estimate of $13.3 billion for the big, twin-tunnel proposal (which is more than $4 billion more than the current estimate for the smaller tunnel) has been revised to reflect the changes in route and configuration announced by the State in mid-August. But, if that’s the case, why hasn’t the cost of the smaller tunnel also been reduced, instead of increased? Are we comparing apples to apples, or are there different assumptions and different configurations assumed in these estimates? Is the State’s estimate for a smaller facility based on one or two tunnels?  

Ultimately, the way to answer these questions and reassure a public with lots of questions is to analyze a range of alternatives, including the portfolio one, across a range of conveyance sizes in the draft EIS/EIR, as we requested. We at NRDC do not claim to know the right answer yet. We’re trying to keep an open mind and respond to the best available information. That’s why we believe the draft EIS/EIR should include a comprehensive analysis of a wide range of alternatives to help all interested stakeholders, including the rate-paying public, make an informed decision, just as the 2009 Delta Reform Act requires.

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