
On September 20, the California Department of Water Resources (DWR) released a Benefit-Cost Analysis for the Delta Tunnels written by Dr. David Sunding of the Brattle Group claiming that the California WaterFix could bring billions of dollars in benefits to those who receive their water from participating State Water Project (SWP) contractors.
The benefits include improved water quality, more reliable water supplies, enhanced disaster preparedness, and climate change resilience, according to Sunding, a professor of natural resource economics at UC Berkeley.
In his initial response, Dr. Jeffrey Michael, the Executive Director of the Center for Business and Policy Research at the University of the Pacific, pointed out four major flaws in the analysis, including the assumption of a massive new subsidy for agricultural users cost share from urban water users and the dependence of the positive benefit-cost on a dubious new benefit: the value of sea-level rise protection benefits.
In Sunding’s report prepared for DWR, Sunding said, the analysis described in this report demonstrates that investment in the California WaterFix results in positive net benefits for the SWP urban and agricultural contractors.
He claims that the economic analysis summarized in the report goes beyond what is legally required for WaterFix and is consistent with methods described in the department’s Economic Analysis Guidebook.
The analysis concludes that the WaterFix benefits to SWP water agencies are substantial. Urban agencies could see about $3.1 billion in net benefits, while WP agricultural agencies could see about $400 million in net benefits, Sunding claims.
The report compared the benefits and costs of WaterFix in relation to what would likely occur if WaterFix were not built, including further restrictions on existing SWP and CVP operations designed to minimize harmful reverse flows and protect species, according to Sunding.
Without WaterFix, State Water Project contractors will see the continued deterioration of their water supply reliability, Sunding said. This analysis shows there is substantial benefit for both.