Monday, January 14, 2019

"$7 an acre foot? No way, it's worth more than $200 to you." If California is going to adopt voluntary agreements over the regulation of Delta water, the fish need a real negotiator.

Recently, the California Department of Fish and Wildlife (CA DFW) and the CA Department of Water Resources announced a voluntary agreement, negotiated in secret, as a proposed substitute to new regulations in the Bay-Delta Water Quality Control Plan that would limit water diversions from the environmentally troubled Delta.

While the negotiations were secret, I recently obtained a training video that CA DFW leaders used to prepare for the high-stakes negotiations with delta water diverters.  (The yellow convertible represents the revised Bay-Delta plan that has been under development for nearly a decade.)       

O.K., that's a joke - but it isn't far off from the giveaway of the water quality control plan in this proposed deal, especially when it comes to the projects diverting from the south Delta (the CVP and SWP).  It does not appear that the CVP/SWP have offered any water or habitat projects that are not already required by existing regulations or plans, and it proposes an $800 million subsidy from state taxpayers to the deal by redirecting water bond funds.  As far as I can tell, the only new requirement on the CVP/SWP is some modest funding in the form of a $5 per acre foot fee to compensate upstream water diverters who may lose water supply in other components of the deal, and an additional $2 per AF for a science program they would control.

There has been confusion about whether the CVP/SWP contractors are actually giving up any water in this deal. For example, this Fresno Bee op-ed by two CVP executives, describes the CVP/SWP contractors as voluntarily giving up 300,000 AF for fish.  However, many environmentalists dispute this characterization and argue that they could actually get more water under this deal than under the current, decade-old biological opinions that are supposed to regulate delta pumping.  In comments to the Metropolitan Water District (MWD) board earlier this week, MWD staff seemed to confirm the environmental argument that the 300,000 AF is nothing more than compliance with existing regulations according to this account in Maven's Notebook.
In the settlement that was produced for the December 12 briefing, [the parties] put forth a proposal that had ... a commitment on the CVP and SWP of 300,000 acre-feet, largely met by incidental flows that are met through export constraints that are in the current biological opinions, so basically committing to those dedicated flows that are in the biological opinions, said Mr. Arakawa.
Considering that this agreement is proposed to substitute for a new Bay Delta water quality control plan that would likely require the CVP/SWP give up 1.3 million acre feet of current average annual diversions to allow more Delta outflows for environmental benefits, this is an enormous amount of regulatory relief for the bargain price of $7 per acre foot (about $30-35 million in a typical year).

Thankfully, the State Water Resource Control Board (SWRCB) did not accept the proposed agreement, but it did encourage further negotiation to complete the deal.  The environment and the fishing community deserve a stronger negotiator in the future.  How would a better negotiator respond?

"$7 an acre foot, are you kidding me?  You have told others that protecting this water supply from the new water quality control plan was worth $200/AF to you."

Why do I say that the water agencies value this protected water supply at 30+ times what they have offered?  Because they have been pushing the $20 billion Delta tunnels (aka WaterFix) that would provide a very similar benefit after this 15-year agreement would expire.  Water agencies have argued that the point of WaterFix is to protect 1.3 million acre feet of water supply from future regulatory actions like the water quality control plan.  And they* say they are willing to pay $1+ billion in annual debt service to protect this water supply.  Averaged across the roughly 5 million acre feet of water they hope to divert from the Delta in the future, this would be a $200 per acre foot charge on their diverted water.  WaterFix would provide a few additional benefits to these water agencies, but this voluntary agreement would generate about 80% of the benefits that WaterFix would, according to the water agencies' previous economic analysis of WaterFix.  Thus, the proposed voluntary agreement would provide about 80% of the annual benefits of WaterFix to SWP/CVP contractors for only 3-4% of the annual cost of the WaterFix.  What a deal!

I am not opposed to a negotiated agreement, and have actually recommended a settlement with these elements in the past.  In an October 2013 op-ed in the Sacramento Bee, I argued that the State's economic analysis of the tunnels-oriented Bay Delta Conservation Plan supported the value of a negotiated habitat conservation plan, but not the Delta tunnels themselves.  I argued that the State's own analysis showed that a habitat conservation plan with Delta exports in the low 4 million AF range with water agencies paying for the habitat measures was a better deal for all parties than the BDCP tunnels (now renamed the WaterFix).

Governor Newsom supported the concept of a negotiated agreement as Governor-elect.  If he continues this approach as Governor, he needs to install a much tougher negotiating team on behalf of the environment.  Based on the WaterFix proposal, my suggested counter-offer is something like a 20-40% reduction from the proposed water quality control plan regulations, and a charge of $50-75 per acre foot of diverted water to pay for all of the costs of the non-flow habitat measures (no taxpayer bond funding would be required).  Any funds collected in excess of the requirements to pay for the habitat restoration would be given to an independent third party to make grants for alternative water supply projects that would reduce demand for Delta water in the areas served by Delta exports.

If the SWP/CVP water agencies want better terms, such as a lower fees, then the environmental negotiators should ask them to drop the twin tunnels/WaterFix plan.  If they are unwilling to do this, then that is very revealing about their expectations for the tunnels.  It shows the water agencies aren't actually willing to pay costs on the order of the WaterFix project just to "protect" their existing levels of Delta water diversions.  If they will only pay at these levels to "protect" the water supply with tunnels, it suggests these agencies do not expect they will have to follow the constrained operations of the tunnels described in their voluminous EIR.  Thus, it confirms the fears of environmentalists that the tunnels' large capacity would be used to increase diversions after they are built - regardless of any current promises not to do so.

Not all environmentalists would be on board with a negotiation like this, as it does represent a concession on the environmental side relative to the Water Board's proposed regulations.  In fact, some of my environmental friends criticized me back when I wrote that 2013 op-ed proposing a no-tunnel BDCP since it included some substitution of non-flow measures for flow measures.  That is a scientific matter on which I have no expertise, but if there are no substitutes for flow at any level - then there probably is no point in negotiating at all.

The bottom line is that if we are going to have negotiated agreements, the fish need a much stronger negotiator.  If Governor Newsom wants to continue supporting an attempt at a negotiated deal, he must install better negotiators for the environment. 

* Yes, I know the CVP contractors have not said they are not willing to spend that much on WaterFix at this time.  But MWD approved financing the CVP share with expectation of being reimbursed by CVP in the future.  Thus, they have collectively approved spending at this level to protect delta exports from this regulatory cut.

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