Tuesday, April 23, 2013

BDCP Appears to Have Canceled Their Statewide Benefit-Cost Analysis (Updated 4/24 3:30 PM)

In Fall 2012, BDCP announced it was finally going to do a statewide benefit-cost analysis after refusing for years.  The framework and preliminary results from some components were described by Dr. David Sunding in BDCP Finance Working Group Meetings in November and January that I attended, and a scope of work was released.  While I was initially encouraged, it became clear in these meetings that BDCP was not going to allow Dr. Sunding the freedom to do a correct and comprehensive benefit-cost analysis.  I submitted comments at the requested deadline that said BDCP should stop saying they are doing a benefit-cost analysis since they are not following the guidelines established by their own agencies.

I had not heard anything else about it until yesterday when the new BDCP glossy sheet describing economic studies was released.  It describes six "studies" and none of them are the statewide benefit-cost analysis they said they were doing.  The six studies include:
  • BDCP Chapter 8:  Costs and funding sources.  Notably, they say this will still not be a complete financing plan.
  • Alternatives to Take:  This sounds like it could include some interesting new analysis but details are murky.  It is described as an economic feasibility analysis to undefined alternatives to take which are said to be different than the alternatives in the EIR.
  • Economic benefits of the proposed project to participating water agencies.  This will be an update and detailed technical report of the informative, but narrow one-sided analysis Dr. Sunding has already presented at several meetings. 
  • Statewide Economic Impact Study:  This sounds more useful than it is.  It will look at economic impacts on some stakeholder groups who oppose BDCP, like Delta farmers, but is not nearly as balanced as it sounds.  It will likely generate some useful information, but like most economic impact reports, it will lend itself to distorted interpretations and generate lots of talking points for PR flaks.  Notably, it does not seem to include any estimate of the economic impacts of higher water rates on consumer spending and industrial activity or the economic impact of diverting dollars from the state general fund to pay the water bond.
  • Employment Impacts of BDCP:  This was already released and is being used for pro-BDCP talking points.  What the pro-BDCP PR flaks who write these memos aren't pointing out is that the 137,000 job years over 50 years for over $20 billion in public spending over that period is actually pathetically weak job creation.  It is roughly 6 jobs per $1 million in public spending which is about the worst job bang for the buck I have ever seen.  Most public works programs create 10-20 jobs per $1 million.  BDCP alternatives will undoubtedly create more jobs.
  • Socioeconomic Impact from the Environmental Impact Report (EIR):  Nothing new here, a required part of the EIR.
The new economics glossy says they are going to let the public interpret this hodge podge of narrow reports, rather than have their consultants put this and other information together into a comprehensive benefit-cost analysis.  While there is some additional analysis, this is a complete regression to the position BDCP was taking a year ago when they were dodging the benefit-cost analysis question.  The summary of the glossy sheet says:    
By examining the costs of BDCP in Chapter 8, the benefits of BDCP to the participating agencies in the contractor benefits study, and the economic impacts of BDCP on other affected parties in the statewide economic impact study, the public can determine whether the BDCP is a good investment for California.

While that may sound democratic and inclusive, and is more accurate than mislabeling their reports as benefit-cost analysis, I am sure the public and the legislature would appreciate it if they would let their esteemed professor interpret his own studies in a comprehensive benefit-cost analysis, and defend it in independent peer review.  I haven't talked with Dr. Sunding in quite a while, but think I know him well enough to guess that he would prefer that too.

Instead, we will have Jerry Meral and the pro-BDCP flaks helping the public interpret his work.  As an antidote to the spin, I recommend the public read my preliminary benefit-cost white paper from last summer.  Using BDCP's own numbers, I concluded the benefits fell $7 billion short of the costs.  I will update it if these new and revised studies yield new information, but preliminary results revealed to date do not show a huge difference.

There still are some problems with the definition of BDCP alternatives in these studies.  Although it sounds like they have made some improvements and are going to look at something resembling the small-tunnel "portfolio" plan, they also appear to be continuing to ignore the seismic levee upgrade alternatives.  And thus the BDCP that makes a big deal about natural disasters in the Delta will continue to ignore a lower-cost alternative that addresses the co-equal goals while creating the additional benefits of saving hundreds of lives in the event of an earthquake, in addition to protection of the billions of dollars in private property, transportation and energy infrastructure damage that will receive no protection from the BDCP.   The results of the BDCP studies will depend a lot on what they assume as the "no action" or no-tunnel alternative in terms of water supply and flood protection.

One can't help but wonder what prompted the cancellation of the benefit-cost analysis just a few weeks before it was supposed to be released in final form.  I went back to the scope of work of the purported benefit-cost analysis and made note of the descriptions of Task 3, due in late March or early April, and Task 4 due in mid-May.

Task 3. Prepare Draft Technical Report
Once the analysis is complete, a draft technical report will be prepared that describes the
methods used, the results, and draws overall conclusions about the cost and economic benefit of BDCP. This final section will offer an opinion about whether benefits exceed costs from a statewide perspective, and over what time frame. The concluding section will also summarize the impacts in various regions of California, and to various interest groups.
The draft technical report will be submitted for review by the California Department of Water Resources (DWR), Reclamation, and the water contractors involved in the BDCP.
Task 4. Prepare Final Technical Report Based on comments received on the draft, the Contractor and Brattle Group will revise the technical report and prepare a final report suitable for public distribution and web posting.
Perhaps cancelling the benefit-cost analysis report in favor of this release of a hodge podge of mini-studies was the revision ordered for Task 4.

Update 4/24:  I added a bullet list of the 6 studies with brief comments, and deleted a reference to the $23 billion BDCP that caused some confusion.  The $23 billion came from a 2012 estimate of $14b tunnel construction, $4b habitat construction, $5b operation and maintenance costs over 50 years.  Some had misinterpreted that I was saying that building the tunnels would cost $23 billion.  A few other minor edits too.

1 comment:

  1. Melinda Terry, Manager NDWAApril 25, 2013 at 8:28 PM

    Task 3 required Dr. Sunding to submit his Draft Technical Report to DWR/USBR/water contractors involved in BDCP for "editing." Makes one wonder if maybe Dr. Sunding exerted some professional integrity and backbone by refusing to make the "editing" changes requested by BDCP proponents. Maybe BDCP changed its mind on releasing an economic study supposed to analyze impacts to various groups whose welfare may be impacted by the Plan, because it showed the BDCP to be a boondoggle that delivers very little economic benefits compared with the costs, despite its grandiose promises? So much for public transparency. Two words come to mind for the ratepayers who receive water from the Delta -- Buyer Beware.