1

Economic Costs & Adaptations for Alternative Delta Regulations: Appendix F

Stacy Tanaka, Watercourse Engineering

Christina Connell, UC DavisKaveh Madani, UC DavisJay Lund, UC DavisEllen Hanak, PPICJosue Medellin, UC Davis

with Richard Howitt, UC Davis

Supported with funding fromDavid and Lucile Packard

Foundation

Stephen D. Bechtel, Jr.

The Delta

2

Delta and California’s Water System

Economic effects of reducing water exportsEffects of increasing net Delta outflowsComparisons of Delta regulationsEmployment impactsConclusions

The Delta

3

CALVIN Model

Statewide intertied water systemIntegrated water management:– Reservoir reoperation– Groundwater & conjunctive use– Water conservation– Wastewater reuse– Seawater desalination– Water markets

Optimized for statewide economic benefitsHighly reviewed models and applications

4

CALVIN Model

Databases of Input & Meta- Data

HECPRM Solution Model

Surface and ground water hydrology

Environmental flow constraints

Urban values of water (elasticities)

Agricultural values of water (SWAP)

Physical facilities & capacities

Values of increased facility capacities

Conjunctive use & cooperative operations

Water operations & delivery reliabilities

Willingness-to-pay for additional water & reliability

Value of more flexible operations

Economic benefits of alternatives

Operating costs

CALVIN Economic Optimization Model:

5

Model Coverage

6

Applications of CALVIN

• Regional and statewide water markets & values of new facilities (2001)

• Conjunctive use in S. California (2002)• Restoring Hetch Hetchy (2003)• Climate warming & adaptation (2003, 2005, now)• Paleodrought (2005)• Groundwater overdraft (2006)• Baja California & Colorado R. Delta (2006 - now)• Delta water supply impacts (2002, 2007- now)• Sacramento Valley Conjunctive Use (2008)

7

Does it work? 2001 Predictions

1. Water market transfers– IID – San Diego transfers – Kern–Castaic transfers– Sacramento Valley to South transfers

2. CCWD-EBMUD inter-tie3. No major new surface storage4. More conjunctive use development5. CRA conjunctive use fails (2003)Only a model, “wrong, but sometimes useful.”

8

Delta Model Runs

What is the problem?Exports from the DeltaReductions in net Delta outflow

Runs reducing and ending water exportsRuns increasing net Delta outflows, but not necessarily reducing exportsModel results for 2050 conditions:

Water deliveries and shortagesWater scarcity costsOperating costsMix of water management decisions

9

Reducing Water Exports

Responds to problems with in-Delta intakesReduce physical export capacity, to zero

Agriculture

Urban

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0 1000 2000 3000 4000 5000 6000Average Delta Exports (taf/yr)

Avg

Ag

Sca

rcity

(taf

/yr)

0

50

100

150

200

250

300

350

400

Avg U

rb Scarcity (taf/yr)

NE 75%R 50%R BC

10

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

RT NE 75%R 50%R BC

Avg

Tot

al C

osts

($B/

yr)

Net Operating Costs

Scarcity Costs

Reducing Water Exports

Economic costs: $1.5 - $2.2+ billion/year (2050)RT = restricted transfers

11

Reducing Water Exports

Statewide costs of partial reductions in exports

CALVIN result

CALVIN result

n = 1

n = 2.5n = 2

n = 3

0

0.2

0.4

0.6

0.8

1

0 0.2 0.4 0.6 0.8 1% Export Reduction

% No

Exp

ort E

cono

mic L

oss

12

Ending Water Exports

Water management adaptation Unfettered water market

58.4%

30.2%

8.6%

2.1% 0.8%

Surface Water

Groundw aterPumping

Agr icu ltural Re-Use

ScarcityRecycling & Desalination

South of Delta –Base Case

44.5%

25.4%

24.8%

1.7% 3.7%

Surf ace Water

Groundw aterPumping

Agr icultural Re-Use

Recycling & Desalination

Scarcity

South Delta – No Exports

13

Ending Water Exports

Employment and regional income effects in southern Central Valley

Southern Central Valley Crop Losses with

No Delta Exports* Base No Exports Reduction

Water Delivery (maf) 15.0 10.1 4.9 (29%) Irrigated Crop Acres (million acres) 3.399 2.522 0.877 (26%) Agricultural Crop revenue ($billion) 19.0 15.7 3.3

Water Scarcity Costs# ($billion) - - 0.814 Valley Crop Income ($billion) 25.5 21.1 4.4 Valley Crop Agricultural Jobs 598,000 495,000 103,000

* 2050 crop projections (in 2008 dollars). #Estimated from SWAP post-processing

14

Ending Water Exports

Reduced agricultural water deliveries

Region Base Case

(% target delivery) No Export

(% target delivery)No Export % of Base Case

CVPM 1 95.8 95.8 -0.1 CVPM 2 92.6 97.5 5.3 CVPM 3 100 100 0 CVPM 4 98.7 100 1.3 CVPM 5 94.7 99.5 5.1 CVPM 6 100 100 0 CVPM 7 94.6 95.7 1.1 CVPM 8 98.4 97.9 -0.5 CVPM 9 93.1 95.8 2.9 CVPM 10 91.9 45.4 -50.6 CVPM 11 97.9 97.4 -0.5 CVPM 12 85.5 84.9 -0.7 CVPM 13 87.7 76.2 -13.2 CVPM 14 90 39.2 -56.5 CVPM 15 90.9 75 -17.5 CVPM 16 95.2 85.3 -10.4 CVPM 17 81.8 72.2 -11.7 CVPM 18 90.1 45 -50.1 CVPM 19 91.9 52.9 -42.4 CVPM 20 90.4 63 -30.3 CVPM 21 91.3 21.4 -76.6

Total 92.5 74.3 -19.7

Sacr

amen

to

Valle

y &

Del

ta

E. San Joaquin Valley

E. Tulare Basin

W. & S. Tulare Basin

Westlands

Exchange contractors

15

Ending Water Exports

Reduced agricultural acreages (SWAP results) San Joaquin Valley Statewide

Crop Base Case No Export No Export (% of

Base Case) No Export (% of

Base Case) Alfalfa 380,413 262,442 -31.0 -18.4 Citrus 222,135 215,610 -2.9 -2.6 Cotton 589,463 373,434 -36.7 -36.7

Field Crops 294,990 128,843 -56.3 -25.8 Grains 144,921 34,271 -76.4 -39.8

Orchards 766,653 713,414 -6.9 -3.8 Pasture 179,452 133,541 -25.6 -12.8 Raisins 26,287 25,293 -3.8 -3.8

Rice 6,278 5,184 -17.4 0.3 Sugar Beet 36,485 28,919 -20.7 -15.6

Table Grapes 17,184 17,021 -1.0 -1.0 Tomato 245,225 144,664 -41.0 -23.6

Truck Crops 398,661 356,093 -10.7 -8.3 Wine Grapes 91,451 83,671 -8.5 -4.4

Total 3,399,598 2,522,400 -25.8 -15.3

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0

500

1000

1500

2000

2500

3000

Avg

Del

ta O

utflo

w (ta

f/mon

)

SurplusRequired

Nov DecOct Jan Feb Mar Apr May Jun Jul Aug Sep

Increasing Net Delta Outflows

Allows exports to continue with water purchased upstreamIncrease minimum monthly Delta outflow

Monthly required flows increase with each run

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Increasing Net Delta Outflows

Water Scarcity and scarcity costs

Agriculture

Urban

02,0004,000

6,0008,000

10,00012,000

14,00016,00018,000

20,000

5,000 10,000 15,000 20,000 25,000Average Required Delta Outflows (taf/yr)

Avg

Ag S

carc

ity (t

af/y

r)

0

50

100

150

200

250

300

Avg Urban Scarcity (taf/yr)

BC 1000MNDO 2218MNDO1600MNDO

Agriculture

Ur ban

Statewide

0

500

1,000

1,500

2,000

2,500

3,000

5,000 10,000 15,000 20,000 25,000Ave rage Re quired Delta Outflows (taf/yr)

Avg

Scar

city

Cos

t ($M

/yr)

BC 1000MNDO 2218MNDO1600MNDO

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Increasing Net Delta Outflows

Total economic costs

0

1,000

2,000

3,000

4,000

5,000

6,000

BaseCase

250 500 700 1000 1200 1400 1500 1600 1909 2064 2218

Avg

Cost

s ($

M/y

r)

Net Operating Costs

Scarcity Costs

Minimum monthly outflow (taf)

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Increasing Net Delta Outflows

58.1%

31.9%

0.1%7.1%

2.9%

Surface WaterGroundw ater

Pumping

Agricultural Re-Use

ScarcityRecycling & Desalination

North of Delta – Base Case

16.3%

23.3%

0.5%2.5%

57.5%Surface Water

Agricultural Re-Use

Scarcity

Recycling & Desalination

Groundw aterPumping

North of Delta – 1909 taf per month MNDO

58.5%

30.1%

0.8%2.1%

8.5%

Surface Water

Agricultural Re-Use

ScarcityRecycling & Desalination

Groundw aterPumping

South of Delta – Base Case

40.8%

25.5%

31.7%1.0% 1.0%

Surface Water

Agricultural Re-Use

Scarcity

Recycling & Desalination

Groundw aterPumping

South of Delta – 1909 taf per month MNDO

Water management adaptation

20

Comparing Delta Regulation Strategies

Regulation strategies have different costs & effects

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

0 1 2 3 4 5 6Ave rage De lta Exports (maf/yr)

Avg

Net C

ost (

$B/y

r) Minimum Delta Outflow Requirement

Reduced Export Requirement

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

13 15 17 19 21 23 25 27Average Delta Outflow (maf/yr)

Avg

Net C

ost (

$B/y

r)

Minimum Delta Outflow Requirement

Reduced Export Requirement

21

Comparing Delta Regulation Strategies

Regulate exports based on objectives

0

1

2

3

4

5

6

7

13 15 17 19 21 23 25 27Ave rage De lta Outflow (ma f/yr)

Avg

Delta

Exp

orts

(maf

/yr) Minimum Delta Outflow Requirement

Reduced Export Requirement

22

ConclusionsEnding exports is possible, but costly $1.5 - 2.3+B/yr

Ending exports not catastrophic statewide, but is for parts of southern Central Valley agricultural economy

Shortages are felt more by agriculture, as cities buy all they can. Larger shortages get cities too

Water conservation, wastewater reuse, and seawater desalination help some

Reducing exports is an economically costly way to increase net Delta outflows

Reduces economic surplus for other purposes

23

Questions?

Research Brief, main report, technical appendices, animations, and spreadsheets available at: www.ppic.org

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N. or S.of Delta Name

No Exports

Base Case

Conveyance Facilities North Freeport Project 7 0 North Mokelumne River Aqueduct 274 0 South New Don Pedro Intertie 863 252 South Hetch Hetchy Aqueduct 1365 480 South EBMUD-CCWD Intertie 21 0 South Hayward Intertie 766 161 South Jones Pumping Plant 1880 0 South Banks Pumping Plant 1885 3 South Cross Valley Canal 224 1 South Friant-Kern Canal 7 0 South Coastal Aqueduct 0 1371 South Colorado River Aqueduct 1011 362

Surface Reservoirs North Shasta Lake 8 8 North Clair Engle Lake 3 3 North Lake Oroville 12 15 North Thermalito Afterbay 4 9 North New Bullards Bar Res 17 18 North Englebright Lake 44 44 North Folsom Lake 10 13 South New Melones Reservoir 9 9 South New Don Pedro Reservoir 17 18 South Hetch-Hetchy Reservoir 5 5 South Millerton Lake 29 6 South Lake Kaweah 166 51 South Lake Success 148 46 South Lake Skinner 27 522

Artificial Recharge Facilities South Santa Clara Valley 1873 31 South Mojave 357 392 South Antelope Valley 1715 1051

Value of Infrastructure Expansions

Marginal value of infrastructure expansion ($/AF-yr – conveyance, $/AF – storage)Selected conveyance becomes much more valuableSome recharge become much more valuable

Additional storage seems much less valuable

25

Economic Costs of Environmental Flows

Marginal value of environmental flows ($/AF)Northern environmental flows become easier

Southern environmental flows become much harder

N. or S. of Delta Location

No Exports

Base Case

Minimum Instream Flow North Trinity River 47.0 51.5 North Sacramento River 2.4 3.1 North Clear Creek 24.1 24.6 North Feather River 0.8 0.5 North Yuba River 0.5 0.6 North American River 1.2 0.9 North Mokelumne River 8.2 5.7 North Calaveras River 0 0 South San Joaquin River 277.5 54.2 South Stanislaus River 4.0 3.3 South Tuolumne River 3.9 3.5 South Merced River 60.5 29.7

Refuges North Sacramento East 1.3 4.3 North Sacramento West 0.6 4.0 South Pixley Nat’l Wildlife 168.8 50.6 South Kern National Wildlife 756.5 56.7 South San Joaquin Wildlife 601.3 35.6

Other

North Req. Net Delta

Outflow 0.4 3.8

South Delta Mendota Pool 131.2 31.7 South Owens Lake 1741.4 1101.7 South Mono Lake 2104.7 1423.7

26

Uncertainty about No Export Cost Estimates

“All models are wrong, but some are useful.”Why might costs be too high?

Desalination costs

Water scarcity/conservation costs (mostly urban)

Lower population growth

Agricultural land retirements

Why might costs be too low?

Optimization models tend to be optimistic:

– Easy water marketing – No fights over water– Perfect foresight

More agricultural land use

Higher population growth

Additional water quality costs

27

Could Ending Exports Cost Less than a Peripheral Canal?Seems unlikely, at this time.

Modeled costs of ending exports seem more likely to be low than high, on balance.

Market values of exports at $150/AF for 6 MAF/year, ending exports would cost California $900 M/yr - already exceeds estimated p.c. cost. What is Westlands paying this year?

Why would exporters pursue a p.c. if ending exports were cheaper?