Tuesday, June 21, 2011

Impacts of Isolated Conveyance on Delta Agriculture: Update

I have been too busy to follow much of anything for a few days, but a concern has been raised to me that the $200 million agriculture loss from isolated conveyance reported in the post below and a newspaper article is an exagerration because it reflects a heavy pumping scenario, not what is actually proposed in the current BDCP.  This is a good point, and I agree that a "would" should have been a "could" or presented as a range and I take responsibility for that slip.  It will be corrected in presentations later this week, similar to what is written below. 

If forced to use a single number, I am using an estimated impact of agricultural revenue losses of $50 million.  How is it supported?  The models that have been developed for the report estimate annual losses ranging from $27m under current south Delta salinity standards (0.7 EC) to $64m under proposed  (1.0 EC) salinity standards currently under consideration by the SWRCB (I note that these numbers are revised modeling results with lower numbers than I was provided to include in the 1st draft).  In addition, the footprint of the tunnel conveyance is 8,000 acres which will be primarily farmland in a zone that currently averages $2,075 per acre.  Assuming some of it takes out non-farmland, a reasonable estimate is another $8m to $16m from the footprint.  That gives you a reasonable estimate of revenue losses of isolated conveyance to Delta agriculture (assuming it is operated as proposed in the draft BDCP) of $35m to $80m.  Thus, I am comfortable using $50m as a discussion number, and have rewritten the summary of this results as:

"If operated as proposed in the draft BDCP, isolated conveyance would decrease Delta agricultural production by about $50 million, and would have a negative impact on tourism development and the rural quality of life.  If a large isolated conveyance were operated to maximize water supplies, south Delta salinity could triple and agricultural production losses could increase to $200 million.  The higher scenario illustrates the risk of a large capacity conveyance to the Delta since there will be financial and political pressure to increase exports to high levels."

I also emphasize that it is a draft, results continue to be refined, but that the impacts are in fact very consistent with those Prof. Howitt estimated in 2007; $70m loss, up to $200m in high scenarios. Not much difference in this number, but the adjectives we use and our overall view of the situation is very different.

I don't intend to post every little update and revision to this report as it progresses through drafts, but felt this clarification was needed now given a concern that has been raised.

Update:  There was a typo in the original post, the upper level of salinity loss is $64m but was originally reported as $54m. 

Thursday, June 16, 2011

First Administrative Draft of the Economic Sustainability Plan for the Delta

[Update Note: This is a description of preliminary results from a first, incomplete draft.  For up to date information on the most recent complete drafts of the plan, visit the Delta Protection Commission website.  I also deleted a paragraph that listed key contributors, because several of the sub-contractors have been bothered by people associated with the BDCP for their names appearing on this blog that makes critical comments about the BDCP.  In hindsight, I shouldn't have deleted the paragraph, but I can't recover it now.]

As some ValleyEcon readers know, I am the PI on the Delta Protection Commission's Economic Sustainability Plan (phase 2).  The first administrative draft of the ESP report was posted this afternoon in preparation for a DPC workshop at the Port of Stockton on June 23.  This contract was only awarded in March, and a stellar research team has been working hard to get us to this point in under 3 months.  It is work in progress, and some portions are incomplete.

The initial list of key findings is below:

·         Delta agriculture supports 13,700 jobs, $1.1 billion in value-added, and nearly $2.8 billion in economic output in the five Delta counties.  In addition, Delta agriculture supports nearly 23,000 jobs, over $1.9 billion in value-added, and over $4.6 billion in economic output in the state of California. (chapter 7)

·         Delta recreation and tourism supports 2,700 jobs, $152 million in value-added, and nearly $284 million in economic output in the five Delta counties.  In addition, Delta recreation and tourism generates over 4,900 jobs, $324 million in value-added, and $600 million in economic output in the state of California.  (chapter 8) 

·         Delta agriculture supports 5 times more jobs, and 7 times more value-added (income) than Delta recreation and tourism.  While recreation is an important supporting economic sector and adds to the Delta’s unique quality of life, it is unrealistic to expect that recreation and tourism could replace agriculture as the Delta’s economic driver.  (chapters 7 and 8)

·         All available indicators for Delta recreation suggest Delta tourism has been flat for one to two decades before the onset of the recession.  Regional population growth is an opportunity, but does not by itself guarantee growth in Delta recreation and tourism.  Delta boating and fishing increased rapidly in the 1980s and previous decades, but has slowed since.  Improved water quality and new investment in recreation facilities and hospitality enterprises are frequently cited as being essential to growing recreation and tourism in the Delta. (chapter 8)

·         Improving the visibility and recognition of the Delta as a place will benefit Delta tourism and agriculture.  The Delta Protection Commission should complete its feasibility assessment of National Heritage Area designation. (chapter 8)

·         Delta levees are critical to economic sustainability.  The Delta levee system protects critical water, energy, and transportation infrastructure for the state and regional economy, and supports all aspects of the Delta economy.   (chapter 4)

·         Delta levees are in better condition than often portrayed, but still need investment.  As opposed to frequent reports that cite over a thousand miles of “fragile” levees in need of billions in repairs, there are actually about 370 miles of Delta levees that need roughly $500 million in investment to reach appropriate standards.  This goal could be reached with strategic use of existing bond funds. (chapter 4)
·         Population trends in the primary zone are relatively flat, but uneven across regions.  North Delta population increased over the past decade, whereas South and East areas of the primary zone declined in population.  In contrast, the secondary zone population increased 25% between 2000 and 2010.  (chapter 2)

·         The current capacity of Delta tourism infrastructure and enterprises is insufficient to capture significant income from increased visitation.  If the goal of the Delta Plan is to increase Delta tourism, there needs to be greater incentives for investment in tourism businesses, not increased regulation of “covered actions” in the Delta that discourage these investments. (chapter 8)

·         Implementing the November/December 2010 draft of the Bay Delta Conservation Plan would be devastating to the Delta economy.  It would cause a 30-50% decline in Delta agriculture, and could decrease Delta recreation and tourism.  (chapters 7 and 8)

·         Large, isolated conveyance would decrease Delta agricultural production by nearly $200 million, and negatively impact Delta tourism.  Increased South Delta salinity would cause large decreases in the production of high-value truck crops, and also negatively impact high-value vineyards.  Increased salinity would also negatively impact boating, and the large scale industrialization of the Sacramento River with five large new pumping plants and intakes near historic Legacy Communities would have negative impacts on tourism development and the rural quality of life.  (chapters 7 and 8)

·         The BDCP proposal to create 65,000 acres of tidal marsh habitat would reduce annual agricultural production by a minimum of $84 million, and generate little if any compensating tourist spending.  The $84 million annual loss in agricultural production assumes targeted land acquisition to minimize impacts, and annual losses could exceed $100 million if agricultural encroachment is not minimized.  (chapter 7)

·         Several influential studies of Delta issues have significant errors in economic analysis.  The most notable problems are various PPIC reports that have misled decision makers about the Delta economy and inaccurately portray the economics of the peripheral canal and investment decisions in Delta levees.  (chapter 5)

Wednesday, June 15, 2011

DRMS Phase 2 report released

Interestingly, I just discovered the Department of Water Resources released the Delta Risk Management Strategy (DRMS) Phase 2 report on Monday when searching for a tidbit of information from DRMS Phase 1.

June 13, 2011 - The Department of Water Resources has released the Delta Risk Management Strategy Phase 2 Report and Executive Summary. The Delta Risk Management Strategy (DRMS) Phase 2 report builds on the knowledge gained from the DRMS Phase 1 assessment to evaluate scenarios which could reduce the risks to our State economy. The methods include a selection of improvement strategies considered at the time of the study in 2009; however, today, there are more options in play. The information in the report provides insight to methods that may be used by the Department and others to manage risk.
Among the obvious signs that the study is from 2009 are that it uses a $4.9 billion cost estimate for a peripheral canal that is dated from 2007.  The results, and I have not reviewed to see how reliable the calculations are, show that improved levee strategies and isolated conveyance rank very close, and anyone who would interpret the results as saying isolated conveyance is best should realize that any net benefit advantage from isolated conveyance completely disapears if one uses more current cost estimates.

There are many other curious aspects of the report, such as its combining conveyance scenarios with putting highways on piers and armored infrastructure corridors that confuse the issues.  At this point, the phase 2 report will probably have little impact on the debate.  However, it is hard to use the DRMS Phase 2 results to justify a peripheral canal over upgrading levees in the way that many spun Phase 1.

The timing and low profile of this release is probably the most interesting aspect of it.  Very odd.  I would be interested in hearing more about that if anyone knows and is willing to share.

Tuesday, June 7, 2011

Water and Jobs in the San Joaquin Valley, again...

Since Devin Nunes introduced H.R. 1837, I don't think a day has gone by when someone hasn't asked me to write a letter, op-ed, blog, press release, t.v. show, speak at a meeting/hearing, etc.  I've even had people try to make it easy for me by sending ghost-written letters and op-eds for me to approve complete with folksy quotes and flattering self-references (sorry, but I write my own stuff). 

I did have an intern call his office a few times to get a source on the 25,000 to 30,000 jobs created claim in the bills press release and promotional materials, but we never got a call back.  I think I saw the fisherman respond by pulling their own billion dollar propaganda back out, and it makes me feel as if the debate has taken a few steps backwards to a place I thought we left behind.

I typed up a FAQ style handout for a meeting earlier today, and posted it to our website here.  Not much new information, but hopefully this format is useful to the folks asking for something new.

So, what do I think of the bill anyway?  I have been interested in all the comments about how Nunes is undermining the BDCP, suggesting that his bill is bad for his own constituents.  Yes, he is undermining BDCP, but BDCP isn't shaping up to be a great deal for South Valley agriculture anyway.  The costs are much higher and the additional water is much lower than they thought it would be when the originally signed on to look at it.  I think South Valley ag. is better off under the current biops (less water than they want, but at least most of it is cheap) than under an unsubsidized BDCP (a little more water, but all the water is a lot more expensive).  If that's the case, then the best strategy for them is to try to change the pump operations through legal and political channels.