Column: Blocked by old contracts and modern-day infighting, California’s big water project staggers to its deathbed

No one should have been surprised when the giant Westlands Water District voted Sept. 19 against joining the state’s equally imposing $17-billion water infrastructure project.

After all, the Central Valley district — at 600,000 acres the largest agricultural water district in the nation — had been signaling its uneasiness about the California WaterFix for months. The district accepted that the reliability and volume of the water supply for Southern and Central California could be enhanced by the plan to build two 30-mile, four-story-high tunnels to carry water under the Sacramento-San Joaquin River Delta. But questions were mounting about how much more reliable and how much larger the supply would be, and whether the gain was worth the price.

A staff report prepared in advance of the vote cast a shadow. The report warned that “a business case … cannot be made� for a project that could increase Westlands’ cost of irrigation water by nearly $1,000 per acre-foot. The economics of the project deteriorated sharply for the district in July, when federal officials made clear that the government wouldn’t pick up the tab for environmental refuges or districts whose historic water rights were so senior to all others that they’d get almost all the water they needed even without the tunnels.

The U.S. Bureau of Reclamation said that, while districts that wished to obtain water through the WaterFix were welcome to opt in, the federal government would contribute nothing to the project’s cost. The opt-in users, therefore, would effectively be subsidizing the refuges and the so-called exchange districts by shouldering an estimated additional $4 billion.

Yet Westlands had expressed support for the WaterFix in principle. Many observers expected the board to signal that it was open to negotiation over its financial share, or to a less ambitious and cheaper tunnel project. Instead, the board’s 7-1 vote not to participate delivered what could be a mortal blow to the whole project.

The California WaterFix is about to enter a make-or-break phase. The board of the Metropolitan Water District, which serves 19 million residents of Southern California, is scheduled to vote Tuesday on participating in the project. But that vote is based on the expectation that the MWD would pay only 26% of the total project cost, or about $4.4 billion, a figure that has been thrown into doubt by the federal government’s position and the Westlands vote. Additional Central and Southern California users of delta water will be voting over the coming weeks.

Things weren’t helped by the release Thursday of a negative report by state auditor Elaine Howle, who found that the project’s “unexpected complexity� already has led to “significant cost increases and schedule delays.�

The state’s options if the tunnels can’t secure adequate funding are few.

“There are a couple of possible paths forward, and then there’s just giving up and not building the project,� MWD General Manager Jeffrey Kightlinger told me. One option is to “push aggressively to see exactly what Westlands and others would be willing to fund,� he says. Another option is to try to jawbone the federal government into funding at least some of the tunnels’ cost. Barring that, the state could decide to build a smaller, cheaper project now and phase in additions over the decades to come.

None of these options is especially palatable for the project’s supporters. The two-tunnel option, which would carry as much as 5 million acre-feet per year (one acre-foot can supply the annual needs of up to two average California households) captures economies of scale that would be diminished in a slimmed-down version. The project’s claimed virtues, which include protecting the state’s water supply from climate change or earthquake damage while reducing environmental stress and strain on the delta, would be reduced commensurately, supporters say. The consequences, they say, would be the continuing shrinkage of the water supply from Northern California, higher local bills and more urban purchases of water from growers and a decline in agricultural output.

Critics maintain that these virtues and drawbacks have consistently been overstated, or can be addressed more cheaply for less via smaller local projects. “You can have a lot of bottom-up innovation in water supply by local water districts that you might not get from a top-down system,� says Doug Obegi of the Natural Resources Defense Council. Adds Jeff Michael, an environmental economist at the University of the Pacific, “If they don’t go ahead with this project, there’s $17 billion in capital expenses that could be deployed by water agencies in other ways.�

The California WaterFix is in trouble because the fragmentation of water interests in the state renders agreement on major statewide water projects difficult, perhaps impossible. Through much of the 20th century, regional and economic conflicts over statewide public works could be papered over by the impetus of rapid economic growth. The projects also required the drive of visionary leaders such as Gov. Pat Brown, who in the 1960s oversaw some of the initial construction of the State Water Project, which aimed to secure exports of water through the delta to Central and Southern California.

But regional conflicts never lay far below the surface. In 1982, voters rejected the Peripheral Canal, a proposed upgrade to the State Water Project championed by Gov. Jerry Brown, Pat Brown’s son. The outcome reflected a sharp north-south divide, depicted by The Times’ Pulitzer-winning editorial cartoonist, Paul Conrad, in graphic fashion. The delta tunnels, of which Gov. Brown is a leading supporter, are the latest iteration of that project.

Supporters of the delta tunnels try to be philosophical about the blow by Westlands. “It’s understandable,� Kightlinger says. “Just as my board’s been saying they don’t expect to be subsidizing agriculture, Westlands is saying they don’t expect to be subsidizing exchange contractors or the refuges.�

It’s hard to see how anything on the scale of the California WaterFix can be built without some cross-subsidy, however. In a 2015 analysis for state officials, agricultural economist David Sunding of UC Berkeley calculated that the project would pass a cost-benefit test for California in the aggregate. But when the calculations were broken down, it was an economic winner for residential, or “urban,� users but a close call or a loser for agriculture. Sunding based his conclusions on the assumption that the federal government would chip in $3.9 billion for the refuges and exchange contractors; if it did not, “the net benefits of the project are even more negative for agricultural contractors.�

Depicting the conflict as one pitting residential users vs. farmers, or Northern California vs. Southern, is too simplistic. Some farmers, such as those growing almond and pistachio trees, need year-round reliability more than truck farmers, who can temporarily fallow acreage in times of shortage. Some urban water districts with large storage reservoirs (including the MWD) will benefit from the delta tunnels more than those without, because they can bank the ample flow in wet years for use during droughts rather than letting it go to waste.

Sunding asserted that the benefits of the project weren’t all tied to direct recipients of the water. A more stable delta water supply would increase yields from California farms, for instance, leading to reduced food prices that would benefit consumers everywhere, even those outside the state. He reckoned that the project would create 118,700 construction jobs and 5,800 long-term jobs directly and indirectly, another economic plus. Those broad benefits, he suggested, warranted examining whether financing should be expanded beyond a strict user-pays model.

Securing that funding would be a challenge, given today’s tight state budgets and skinflint U.S. Congress. “The only way to make this project work would be with a massive taxpayer subsidy, on the order of $7 billion,� says Michael.

Despite the mounting uncertainties, Kightlinger still sees Tuesday’s vote by the MWD board as “still a pretty big historic vote.� The question on the table, he says, is “Can California do big things anymore, or are we so gridlocked in competing interests that we can’t solve problems? Here’s a problem right in front of us that we’ve known about for decades. The status quo is a disaster, and yet we’re on the verge of just saying it’s too hard.�

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