Quick Reaction to Delta Conveyance Benefit-Cost Analysis

Received the B-C analysis about 2 hours ago, and I am getting requests for instant reaction.  Posting here rather than respond to individual messages.  Three quick observations.    

1.  Seismic risk reduction benefits are low.  They are about 2.5% of the project's benefits according to Sunding and quite small relative to costs.  

Sunding's analysis confirms that earthquake risk is not a compelling reason to build the tunnel, a consistent finding over time.  

Can tunnel advocates stop hyping this point.  Even DWR's own analysis shows the tunnel is a lousy way to address earthquakes and flood risk.

2.  The project is all about urban water supply.  It accounts for virtually all the benefits, and urban water agencies (mostly Metropolitan Water District) will be pay the vast majority of costs. 

Urban water agencies, their decision makers and stakeholders need to take a critical eye at these estimates.  The value placed on this urban water seems extremely high.

3. Comparison to 2018 single-tunnel analysis raises questions about whether the benefits are overestimated.  

In 2018, he estimated 850,000 af of annual water yield from a tunnel, and in this analysis is it is 400,000 af.  

In 2018 analysis, urban users valued a larger water supply at $9.9 billion (2018$).

Now, a much smaller amount of water is valued at $33.3 billion to urban users (2023$)

It's a massive increase for less water.

A good chunk of the difference is due to inflation (2023$) and a lower discount rate (2% vs 3%) based on revised federal guidance.  If that 2018 analysis was redone with 2% discount rate and 2023$, that $9.9 billion would nearly double by my back of envelope math, let's call it $20 billion.  So consistency on inflation and discounting covers about half the gap.

But how do we get from $20billion to $33 billion urban water supply value, especially when the new project has a lower increase in water deliveries?  In other words, this report shows 50% more value from 50% less water.  

I will note that the urban water values are based on future urban water demand as estimated in agencies 2020 urban water management plans.  Experience shows those plans consistently overestimate demand growth, and I suspect that piece requires a lot of scrutiny.  He estimates the tunnel will reduce future water shortages in urban areas from 9% to 5%.  However, future urban water shortages are likely to be much lower with an updated or alternative estimate of demand growth.

Please note that this is instant reaction. I have not had time to review carefully.