BILL ANALYSIS Ó
AB 2421
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Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Jared Huffman, Chair
AB 2421 (Bill Berryhill) - As Amended: April 12, 2012
SUBJECT : Bay Delta Conservation Plan costs and benefits
analysis
SUMMARY : Requires that an independent third party costs and
benefits analysis of the Bay Delta Conservation Plan (BDCP) be
submitted to the Legislature prior to the BDCP's inclusion in
the Delta Plan, or by June 30, 2013, whichever comes first.
Specifically, this bill :
1)Requires that an independent third-party use the 2008
Department of Water Resources (DWR) Economic Analysis
Guidebook to conduct a costs and benefits analysis of the
BDCP, a DWR project.
2)Requires the BDCP costs and benefits analysis include:
a) The total costs of the project including planning,
construction and mitigation and how those costs are to be
paid;
b) The expected impacts of the project on taxpayers, water
ratepayers, and the General Fund; and,
c) A conclusion as to whether the project is economically
justified when weighing its direct societal benefits
against its social costs over the analysis period.
3)Specifies that the third party conducting the analysis shall
be chosen by one representative from each of the following:
a) The Legislative Analyst's Office;
b) The Delta Protection Commission; and
c) The State Water Contractors.
4)Limits the maximum analysis cost to $1 million.
EXISTING LAW:
1)Creates the Delta Stewardship Council (DSC), an independent
seven-member body that is tasked with developing a long-term
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plan for the Delta (Delta) that meets the coequal goals of
providing a more reliable water supply for California while
preserving, enhancing and protecting the Delta ecosystem and
respecting the unique cultural, recreational, natural
resource, and agricultural values of the Delta as an evolving
place.
2)Sets forth mandatory elements for the BDCP environmental
review process and requires the BDCP comply with the state
Natural Community Conservation Planning Act (NCCPA) in order
to be eligible for state funding and inclusion in the Delta
Plan.
FISCAL EFFECT : Unknown
COMMENTS : The San Francisco Bay/Sacramento-San Joaquin Delta
Estuary (Bay-Delta) is the West Coast's largest estuary - the
transition zone where fresh water from rivers mixes with ocean
water. The environmental collapse of the Bay-Delta,
particularly its fisheries, is well-documented and has led to
listing under the California Endangered Species Act (CESA),
federal Endangered Species Act (FESA), or both, of many native
fish species such as winter-run and spring-run Chinook salmon,
green sturgeon, steelhead, Delta smelt and longfin smelt. In
addition, poor Delta conditions have affected fall-run Chinook
salmon, the backbone of California's commercial salmon industry.
The Bay-Delta is also the hub of California's water export
infrastructure. Water stored in federal Central Valley Project
(CVP) and State Water Project (SWP) reservoirs located in
northern California is released into tributaries to the
Sacramento River, or the Sacramento River itself until it meets
the Delta and is exported via two large SWP and CVP pumping
plants located in the south of the Delta near Tracy. In nature,
both the Sacramento River and the San Joaquin River flow west
out of the Bay-Delta until they meet with the ocean. However,
the SWP/CVP pumping plants change the hydrodynamics of the
Bay-Delta and pull water that would flow west to the south
instead, causing Old and Middle Rivers in the Delta to run
backwards. At times sensitive to native fish, this causes
entrainment (drawing into the pumps), impingement (crushing
against fish screens and other structures), and predation
(pulling fish into areas where they are vulnerable to being
eaten by larger fish and other species). Insufficient flows and
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alterations of hydrodynamic patterns can also change water
temperatures, increase straying of fish from migratory paths,
contribute to the growth of invasive species, and adversely
affect the food sources fish rely upon.
There have been many attempts to address the conflict inherent
in requiring an ecosystem that is home to more than 750 animal
and plant species to also provide part of the export water
supply for 25 million citizens in southern Californian and 3
million acres of agricultural land, principally in the San
Joaquin Valley. The CALFED Bay-Delta Program was one such
attempt. The CALFED Program adopted a record decision (ROD) in
August 28, 2000 that was signed by eighteen state and federal
agencies and called "an unprecedented effort to build a
framework for managing California's most precious natural
resource: water." Although the CALFED effort adopted a
"beneficiary pays" principal, it was fatally flawed in that it
lacked a sustainable financing plan. When bond money ran low six
years after the adoption of the ROD, the primary state and
federal agencies implementing the program entered into a
"Memorandum of Agreement for Supplemental Funding of Certain
Ecosystem Actions and Support for Implementation of Near-Term
Water Supply, Water Quality, Ecosystem and Levee Actions" (MOA),
which provided "voluntary" funding from certain export water
agencies. In exchange, the MOA, among other requirements,
called for the "development of a conservation plan for the Delta
and its upstream basins, hereinafter referred to as the Bay
Delta Conservation Plan (BDCP)" in order "to obtain the permits
necessary to comply with ÝCESA] and ÝFESA]." The MOA stated
that it would "terminate if the State of California imposes fees
or an involuntary financial obligation on any water agency or
utility signatory to the MOA for implementation of any CALFED
Programs?"
Because CALFED was "programmatic," it did not provide CESA and
FESA coverage for take of listed fish species by the SWP,
operated by the State Department of Water Resources (DWR) and
the CVP operated by the U.S. Department of Interior, Bureau of
Reclamation. Those projects received their FESA coverage
through federal biological opinions and incidental take
authorizations issued by the U.S. Fish and Wildlife Service for
Delta smelt and by the National Marine Fisheries Service for
marine species, such as anadromous or "ocean going" fishes like
salmon and steelhead. With regard to CESA, a state law
administered by the California Department of Fish and Game
(DFG), the federal government maintained that it was sovereign
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and the CVP needn't comply (a legally untested theory) and, as
was revealed in subsequent litigation against DWR, the SWP had
no CESA permit.
Financial costs and benefits are at the heart of the BDCP
The desire for permit certainty is at the core of the BDCP which
is being drafted as a federal Habitat Conservation Plan (HCP)
and state Natural Community Conservation Plan (NCCP). Both the
HCP and the NCCP require a higher conservation standard for
species than federal biological opinions. In fact, the current
federal biological opinions for the SWP and CVP are "jeopardy"
biological opinions that contain measures which were determined
to be necessary to prevent the extinction of listed species from
SWP/CVP operations in the Bay-Delta, which are the authorized
activity. If those biological opinions were superseded by
permits issued under the BDCP, it assumed the BDCP permits would
have a 50-year duration and include some type of "regulatory
assurances." Regulatory assurances mean that once a final plan
is approved, as long as the permittee is implementing it
consistent with the permit, no further water, money, or land can
be required of the permittee to protect and conserve species
unless one or more species being harmed by the activities
covered under the permit are determined to be in jeopardy of
extinction. In the case of BDCP, DWR would be the clear
permittee. But, by statute, DWR passes on SWP costs for the
preservation of fish and wildlife to its subcontractors for
water and power. It is because those export water subcontractors
are looking for certainty regarding both water supply and
financial investment in the Bay-Delta that they are funding the
BDCP planning process.
The BDCP could create a large potential financial exposure for
the public
Currently, the principal feature of BDCP is proposed new
conveyance either around or under the Delta combined with tidal
and subtidal habitat restoration and "other stressors" measures.
Under existing law, as explained above, costs of new SWP
facilities are repayed by contractors for water and power.
Current estimates for constructing new conveyance are $12
billion or higher. That does not include maintenance and
operation costs. As with any new water conveyance facility, it
is assumed those costs would be passed on to the ratepayers who
receive water supplies from that new facility. What is less
clear is who would pay for the costs of ecosystem restoration
and other stressors measures. Right now the BDCP assumes that
the general public would pay for a large share of those costs.
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However, achieving the "conservation standard" under BDCP would
be largely based on the restoration measures - not new
conveyance. That means that the public would have two potential
exposures under BDCP: the costs of planning and implementing
the measures that would provide the basis for the "regulatory
assurances," and then, if those measures did not yield the
anticipated benefits, the public could be responsible for paying
for any additional measures that are needed to achieve the
conservation standard. Put another way, in exchange for a plan
that is supposed to provide a level of conservation that is
greater than would be received under an ordinary permit,
"assurances" shift the financial burden for any additional
unforeseen preservation and enhancement actions that may be
needed from the permittee to the public.
BDCP does not currently have a financing plan but has contracted
for an "Economics Benefit" analysis." The scope of work for
that analysis states that "water supply reliability benefits are
the main driver of the economics of the ÝBDCP]." The scope of
work specifies that estimating the benefits that will be derived
from new conveyance should be achieved by comparing "the status
quo and isolated facility cases." The scope of work states that
the analysis should reflect that an "isolated facility may
improve water supply reliability in the event of an earthquake
in or near the Delta" by "giving a range of outage durations in
different types of water years" with instructions to reflect
that "a given earthquake can cause much more economic damage in
a dry period than a wet one." Because Sacramento River water is
inherently of a higher quality than San Joaquin River water or
water that has mixed in the Delta, the scope of work also
instructs the analyzer to reflect the benefits of "changes in
treatment costs" that could result from new across-Delta
conveyance. With respect to habitat restoration, the contractor
is instructed that there "are numerous prominent examples in the
United States where the public has expressed a willingness to
pay for environmental restoration and it is likely the same
would be true of the Delta. Environmental economists have
developed a set of tools to value changes in environmental
quality. Under this task, Contractor will apply the tools of
this field to gauge the economic benefits to the public as a
result of BDCP."
What about the costs?
Nowhere does the contemplated analysis appear to acknowledge the
potential costs of the BDCP project or the high levels of
uncertainty attached to certain actions. This is a similar
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strategy to the one BDCP utilized when it hired a group to put
out a report on September 19, 2011 entitled "Employment Impacts
for Proposed Bay Delta Water Conveyance Tunnel Options." There
the task order was to "estimate the number of direct, indirect,
and induced jobs that would be created by the construction and
operation of two water conveyance system options" - a 15,000
cubic foot per second (cfs) facility and a 3,000 cfs facility.
The consultants then attended a BDCP public meeting and
announced that the largest possible facility would create
"129,193" jobs over a projected "7.5 year construction period."
The analysis did not include or acknowledge the potential loss
of agricultural or recreational jobs in the Delta over the life
of the project or balance the potential "job creation" against
any other societal costs.
Supporting Arguments : The author states that in "2009 the
Legislature enacted a series of reforms in the way California
approaches water. These reforms, meant to accomplish the
coequal goals of restoring the Delta and securing a reliable
source of water for areas south of the Delta, will have wide
spread effects throughout California. From the farmers in the
Delta to the ratepayers in Los Angeles, all will experience some
effect." The author adds that questions of BDCP costs and
benefits have been continually raised by stakeholders but that
the Natural Resources Agency has said that no comprehensive
cost/benefit analysis will be done.
Opposing Arguments : Opponents state that they view this bill as
"a threat to achieving the co-equal goals of ecosystem
restoration and reliable water supplies." They state that this
bill would "repeal the process delineated in the 2009
Delta/water management legislation that created a path towards
new Delta conveyance and ecosystem improvements. The historic
Delta package wisely chose to set an achievable and balanced set
of state policies to restore this vital estuary and improve the
reliability of water supplies if they are given a chance to
succeed." They advise that they, the "undersigned are committed
to meeting California's water management challenges in a manner
consistent with achieving the coequal goals established by
legislative policy."
How would a costs and benefits analysis be the end of BDCP?
Opponents of this bill seem to infer that a costs and benefits
analysis of BDCP would be the end of the project. It is unclear
how a costs and benefits analysis of what is potentially the
largest public works project in the history of California
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"repeals the process delineated in the 2009 Delta legislation"
or threatens the coequal goals. This bill requires the costs
and benefits analysis to be completed by June 30, 2013. The
current BDCP time line assumes that all environmental review and
permitting will be completed by February 2013. Even if that
were accurate, which is unlikely, a project of this magnitude
and controversy is likely to be delayed for at least six months
pending litigation. Therefore, the costs and benefits analysis,
in and of itself, should not delay BDCP implementation.
It is also ironic to note that more than one of the signatories
to the coalition letter decrying the violence this bill would
purportedly do to the coequal goals and the 2009 legislation are
themselves on record supporting U.S. House of Representative
Resolution 1837 (Nunes). H.R. 1837 would have, in the words of
California Attorney General Kamala Harris, abrogated
"long-standing provisions of California law designed to protect
the State's natural resources and would violate settled
constitutional principles of state sovereignty." Importantly,
H.R. 1837 would have guaranteed exports out of the Delta for
certain parties and prohibited the State Water Resources Control
Board and the Department of Fish and Game from taking actions to
protect fishery and public trust values other than those that
were in place back in 1994. In other words, it would have
completely and directly eviscerated the 2009 Delta legislation.
REGISTERED SUPPORT / OPPOSITION :
Support
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A.G. Spanos Companies
City of Escalon
City of Ripon
City of Stockton
Ducks Unlimited
Food and Water Watch
Greater Stockton Chamber of Commerce
Lower Sherman Island Duck Hunters Assoc.
Pacific Coast Federation of Fishermen's Assoc.
Restore the Delta
San Joaquin Council of Governments
San Joaquin County Board of Supervisors
Sierra Club California
Stockton East Water District
The Grupe Company
Numerous individuals
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Opposition
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Alameda Co. Flood Control and Water
Conservation Dist. Zone 7
Association of California Water Agencies
Calleguas Municipal Water District
California Chamber of Commerce
Castaic Lake Water Agency
Coachella Valley Water District
Desert Water Agency
East Valley Water District
Eastern Municipal Water District
Friant Water Authority
Inland Empire Utilities Agency
Irvine Ranch Water District
Kern County Water Agency
Kings River Conservation District
Las Virgenes Municipal Water District
Metropolitan Water District of So. California
Newhall County Water District
Orchard Dale Water District
Rowland Water District
San Bernardino Valley Municipal Water Dist.
Southern California Water Committee
Three Valleys Municipal Water District
Upper San Gabriel Basin Municipal Water Dist.
Valley Ag Water Coalition
Westlands Water District
Western Growers Association
Western Municipal Water District
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Analysis Prepared by : Tina Cannon Leahy / W., P. & W. / (916)
319-2096