Posted by: Jan | July 25, 2015

Revised Delta Tunnels EIR Further Worsens The Project’s Already Lousy Economics


Dr. Jeff Michaels weighs in on the revised BDCP Plan’s economics.

  1. The new plan drops the 50-year permit, and any notion of regulatory assurances about future water deliveries. This change has already been revealed and discussed, but its importance to the economics can not be understated. According to the State’s BDCP consultants, the regulatory assurance was the basis for over half of the economic value of the Tunnels to the water exporters’ who would finance them. As I have discussed repeatedly (see here, here, and here for examples), the already flimsy economic case for the Tunnels completely falls apart without the regulatory assurance. It drops the estimated benefits by nearly $10 billion.

  2. The average annual incremental water yield with the tunnels compared to “No Action” has dropped by 135,000 acre feet(af).

  3. The new plan shows the estimated construction period has grown from 10 to 14 years. It’s buried in the Appendices. An extra 4 years of waiting to receive any economic benefits (while accumulating financing costs) will further reduce the benefit-cost ratio.

In 2012, Dr. Michaels estimated an economic loss of $5 billion. He now revises his estimate to a loss of $8 billion.

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