This document discusses the economic case for a "no-tunnel" Bay Delta Conservation Plan (BDCP) alternative to the proposed tunnel plan. It notes that cost estimates for the tunnels have increased substantially while estimated water exports and seismic benefits have decreased. It analyzes differences in estimated benefits and costs between the tunnel plan and a no-tunnel alternative. It concludes that a no-tunnel plan could provide regulatory assurances at a lower cost if exports were maintained above 4 million acre-feet per year on average. Financial and regulatory issues with the tunnel plan are also noted.

1. THE ECONOMIC CASE FOR A NO-TUNNEL
BAY DELTA CONSERVATION PLAN
jmichael@pacific.edu
Dr. Jeffrey Michael
University of the Pacific
San Diego County Water Authority
September 12, 2013

2. Results of BDCP Economic Studies Support
Development of a No-Tunnels BDCP
 The Water Supply Benefits in BDCP report is from the
regulatory assurance of the habitat conservation
plan, not the physical characteristics of the tunnels.
 The tunnels are not required for a habitat
conservation plan (HCP) under the ESA.
 A No-Tunnels BDCP could provide regulatory
assurance benefits at a much lower cost.

3. Does BDCP Still Make Sense for Water
Agencies?
1. Conveyance construction cost estimates have increased
from $4 billion to $15 billion.
2. Anticipated Water Exports Have Decreased From
6.5maf to about 5maf. (No increase in water supply.)
3. Seismic Benefit Estimates Have Declined Substantially
 Seismic levee upgrades create more benefits at lower cost.
4. Present and future prospects for federal and state
funding have severely declined.
5. Urban water demand is declining, and future
population forecasts have dropped significantly.

4. Comparing Estimates of Benefits
and Costs of the Tunnels
Michael
(7/2012)
BDCP (5/2013) Difference
Export Water Supply 3,916 15,722 to 16,642 11,806 to 12,726
Export Water Quality 2,328 1,819 to 1,789 -509 to -539
Earthquake Risk
Reduction
866 470 to 364 -396 to -502
Environmental
Benefits/Costs
0 Not Estimated* NA (0)
Tunnel Costs (Capital,
O&M)
-12,310 -13,328 to -13,343 1,018 to 1,033
In-Delta and Upstream
Impacts
-1,173 Not Estimated* NA (-1,173)
Net Benefits ($
millions)
-6,374 4,684 to 5,452 11,058 to 11,826
Benefit-Cost Ratio 0.53 1.35 to 1.41

5. Why the huge difference in water
supply benefits?
 The studies assume dramatically different water
exports for the no-tunnel scenario.
 Michael: Extension of current restrictions as described in
BDCP Environmental Impact Report no-action
alternative (4.7 maf)
 BDCP/Sunding: Assumes BDCP restrictions to benefit fish
are placed on south Delta pumps even without
introducing the fish-harming north Delta intakes.
 Exports are 3.4 maf to 3.9 maf
 This no-tunnel alternative is likely better for fish than the
tunnels. BDCP study provides no environmental analysis.

6. Both Estimates Have Significant
Pro-Tunnel Biases
 Assume rapid future growth based on outdated, pre-
recession, pre 2010 census forecasts. 2050 MWD
area population overstated by 5 million, more than
current population of San Diego County.
 Assume tunnels open in 2025, no delays.
 Does not account for risk of cost escalation.
 Does not include many alternative water supply
developments already in water agency plans.
 Assumes current technology, ignores technological
improvements in alternative water supplies.

7. What is the “break-even” point?
The case for a no-tunnel BDCP
 How much more could water exports be reduced
and still be less costly for water agencies than the
$15 billion tunnels?
 Based on Dr. Sunding’s results, I estimate the break-
even or “tunnel indifference” level of exports
appears to be an average of 4 to 4.4 maf.
 This suggests that if a no-tunnel BDCP could be
developed with water exports above 4 maf, water
agencies would be better off than with the current
tunnel-based BDCP.

8. Two Other Key Issues
 Regulatory Assurances under an HCP are not
guarantees.
 Regulatory risk reduction benefits are overstated.
 Financial feasibility requires benefits exceed
allocated costs for all users. BDCP only shows total
benefits and costs.
 Financial feasibility will require a large reallocation of
costs from agricultural contractors to urban ratepayers
or general taxpayers.