June 24, 2024
Board of Directors
Santa Clara Valley Water District
5750 Almaden Expressway
San Jose, CA 95118
Via email to:
Clerk of the Board <clerkoftheboard@valleywater.org>
Board of Directors <Board@valleywater.org>
Nai Hsueh <nhsueh@valleywater.org>
John Varela <jvarela@valleywater.org>
Tony Estremera <testremera@valleywater.org>
Barbara Keegan <bkeegan@valleywater.org>
Richard Santos <rsantos@valleywater.org>
Jim Beall <jbeall@valleywater.org>
Rebecca Eisenberg <reisenberg@valleywater.org>
Re: Agenda Item 3.5. Receive an update on the Delta Conveyance Project.
Dear Valley Water Board of Directors,
The Sierra Club appreciates the opportunity to provide input on the Delta Conveyance Project (DCP) update. We would like to bring to your attention an analysis of the Benefit-Cost Analysis (BCA) conducted by Dr. Jeffrey Michael from the McGeorge School of Law at the University of the Pacific as well as a comment letter Dr. Michael submitted to the Metropolitan Water District (MWD) ahead of the DCP update at their board meeting on June 10, 2024. The report and comment letter are attached for reference, and a brief summary of the analysis is outlined below:
- The Benefit Cost Analysis is based on inflated population and demand projections by Metropolitan Water District, the main proponent of the Delta tunnel project.
The valuation of urban water supply benefits, which make up nearly 90% of the estimated benefits, is driven by an assumption of very aggressive growth in the MWD service area, including an unbelievable 2.8 million new households residing on an average 5,000 square foot lot by the time the DCP begins operating in 2045. This rapid growth in water demand is an unlikely reversal of current trends, and the valuation of urban water supplies would be much lower if more realistic demand projections were used. Under several future demand scenarios, much of MWD’s DCP water would be surplus to its needs and thus its value would be a small fraction of the extreme shortage values used in DWR’s new benefit-cost report. The report includes no sensitivity analysis around its assumption of extreme demand growth. In addition, the report includes no sensitivity analysis for cost overruns, discount rates, project lifespan, and endangered species risk – all major project risks for which the report takes an optimistic view.
- Even when exaggerating the benefits, the costs exceed the benefits for agricultural districts.
The BCA estimates that agricultural users make up only 6.2% of water supply and quality benefits of the DCP while receiving 36.4% of the projected water yield, which is the basis for DCP cost shares. The benefit-cost ratio specific to agricultural users is only 0.39, even when accepting the assumptions of the report that inflate the benefits. When an optimistic perspective finds only 39 cents in benefits for every dollar of costs, the economically rational choice for most if not all agricultural users will be to opt-out of the DCP.
- The BCA estimates that the seismic reliability benefits are worth less than $1 billion to water users.
There is a calculation error in this part of the analysis, so the benefits are actually much lower, but whether $100 million or $1 billion, the report finds seismic reliability is not a compelling economic reason to build the DCP. There are far less expensive and cooperative ways to address this risk.
- Omitted Environmental Costs.
The BCA ignores the environmental impacts from both construction and operation in the tunnel’s EIR for the dozens of impacts where the EIR found the impact to be less than significant after mitigation. Less than significant under CEQA does not mean no impact. While it may be infeasible to monetize every environmental impact, there will be high-value, and thus high-cost, impacts to endangered fish and wildlife species, which are certainly not equal to zero impact. Large-scale habitat restoration and mitigation are extremely unlikely to fully offset negative impacts of the tunnel, and this was rejected in previous iterations of the project, which the consultants are likely aware of.
- The BCA doesn’t consider any alternatives.
A benefit-cost ratio of 2.2, even if correct, does not mean the tunnel is the best alternative. If evaluated with similar assumptions, alternative investments would have very high BCA ratios, too.
Thank you for the opportunity to provide feedback and comments on the Delta Conveyance Project update. We hope the Valley Water board will take Dr. Michael’s analysis of the BCA into serious consideration.
Sincerely,
Katja Irvin, AICP
Guadalupe Group Conservation Chair
Sierra Club Loma Prieta Chapter
Molly Culton
Chapter Organizing Manager
Sierra Club California