Technical Capability, Financial Commitments, Implementation Prepared For: Policy and Litigation...

Technical Capability, Financial Commitments, Implementation

Prepared For:

Policy and Litigation Briefing

May 2015Washington, D,C.

CSRIA-5-2015

Darryll Olsen, Ph.D.Regional Planner/Resource Economist

CSRIA Board Representative

Columbia-Snake River Irrigators AssociationOdessa Subarea Systems 1, 2, and 4 Review

Private Sector Financing-Development for Surface Water Delivery

How Much Water Is There in the Columbia River?

Columbia-Snake River Irrigators Association Water Resources Management, Economics, Policy

CSRIA-3-2015

Effective Standard for Effective Water Resources Management:

“The CSRIA has relentlessly told water managers, legislators, and agency heads that the fundamental standard for effective water resources management is competence and honesty. Competence depends on sound technical and economic information; honesty means not deceiving others or worse, deceiving yourself.”

-- CSRIA Correspondence to

USBR Comm. Lopez

CSRIA-5-2015



CSRIA Litigation Against USBR (ECBID-State):

USBR Denial of New Water Service Contract:

•USBR Acting with Competence and Honesty?

•Or Arbitrary and Capricious Behavior Under Administrative Law?

•Why? Perspective?

CSRIA-5-2015



State-USBR Project: Modified

Partial ReplacementAlternative 70,000

acresN/S-I-90

CSRIA Objective:1)Protect Economic Benefits of Irrigated Ag. 2)Optimize Water Use.3)Provide a Private Sector Financing Structure for Off-Canal Development.



Moses Lake

East Low Canal SystemUSBR EIS

Phase II Analysis:Systems 1 and 2

Detailed PreconstructionAnalysis and

Economic Costs(CSRIA.org)

System 4 AnalysisDetailed Preconstruction

Analysis and Economic Costs

(CSRIA.org)



CSRIA-5-2015

N-I-90 Systems 1 (2 and 4) Private Sector Package Development:

• Participants’ Water System Agreement (WSA).Financial and Development “Instrument” for System Participants.

Legal Construction Contract and Development Management.

Legally Binds Land Owners-Lease Holders to System Financial Obligation.

Structures Post Development OM&R Obligations.



CSRIA-5-2015

It’s the Water—New State Conditional Water Use Permit Issued to USBR:

• New State Secondary Water Use Permit Issued to USBR.

• Office of Columbia River (OCR) and Eastern Region Office, Ecology,

Working with CSRIA to Verify System 1 Groundwater Rights with

System 1 Lands—On the Ground Water Determination.

• Water Right Verification and Application to New Lands.

Use of Nameplate Acres without Relinquishment.

RCW 90.03.380 Water Spreading to Include Extension-Seasonal Transfer Lands.

Economic-Financial Viability of ALL System Projects.



CSRIA-5-2015



Draft Water Service Contract Submittal:

Bringing 21st Century Irrigation Development to Subarea.

• Engineering for On-the-Ground Irrigation Efficiency and Water Use.

• Optimize the Environmental Regulations (EIS), State Water Code.

• Private Sector Economics-Financial Model—There Are No State$-Federal$.

Respecting the “Invisible Hand” of Private Sector Economics.

• For System(s) development, Allow the Irrigators to Make the Decision for Willingness-to-Pay; “Let Them Do as They Will...”

• Let the Irrigators Determine Payment Structure—Multiple Zones

with Marginal Costs.• Optimized Private Sector Financial Capability with Water Spreading.

CSRIA-5-2015



Private Sector Irrigators vs. ECBID Public Sector Financial Models:

DevelopmentFactors

Private SectorEcon/Financing

ECBID Nov.Public Model

EngineeringStatus

Pre-ConstructionCompleted

On-Going Design?

System CostAllocation

By System/Zone, (Marginal Costs)

“Normalized” ZoneOne Ave. Cost/Acre

Financing Direct Ag. Lending LID-Rev. Bonds

Cost of Capital-Time Period-

Total Debt Serv.-

4-4.5%20-Years

5.2-6.0%(?)30-Years

>20% of Private

Total Capital &OM&R/Acre

$250-500(Annual $/Acre)

$400-450*(Annual $/Acre)

Acres SecuredParticipants

Syst.1: 14,500Syst. 2&4: 17,000

Unknown(Costs)?

Timing 2017-2018 2018>?

CSRIA-5-2015 *CSRIA Estimate.

Water System Contract Review Issues? Impeding Action?

• Water Spreading. State Water Code Prevails. Required for Financial Viability.

• EIS Configuration: All Systems Must Be Within 87,000 Acres. Within Allocated Water Supply. Real Issue Is Actually Getting All the Acres.

• USBR NED-B/C Analysis. Direct Net Value Must Be Positive Per Acre. Yes, It Is…Market Value Exceeds USBR Production

Budget Estimates.

• Direct Service Contract with Private Irrigators. Turn Key Operations Conveyed to ECBID. Wait for Master Water Service Contract? Time and Money Indifference?



CSRIA-5-2015

Further Perspectives—Development Picture:• Move Now to Get Water on the Ground—Success Breeds

Success.

• Get System 1 Operational by 2017; Systems 2, 3, and 4 by 2017-2018.

• Further State/Federal Dollars for Canal? Show Some Results First!

• Financial Reality—Take Advantage of the POWER of Private Sector

Financing and Construction.

• The “Normalized” Model Does Not Add Acres, It Further Disperses Acres and Can Increase Costs—Discouraging Irrigator/Lender Participation.

• ECBID: Focus on Canal Expansion to Lind Coulee and South.

• The ECBID Rejected $20 Capital from the State, with Public Sector Budget Proviso Requiring USBR to Issue WSC—Money That Could Have Been Used to Finish Canal Modifications and Complete Water Delivery Access South of Lind Coulee.

CSRIA-5-2015



Why No Action on Water Service Contract?

• ECBID Is Moving Slowly to Complete Canal Modifications.

• Cultural Problem—The “Second Coming” of the USBR; 20th Century Mindset; Agency Objective Is Unclear Internally.

• No Experience with the Private Sector.

• Human Factor—Greed, Pride, Envy.

• Poor Leadership; It Takes More Than Just Giving People Money.

• They (Agencies) Have Lost Their Way—No Primary Concern for Irrigators or Communities.

CSRIA-5-2015



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