Kachess Drought Relief Pumping Plant and Keechelus Reservoir-to-Kachess Reservoir Conveyance
Draft Environmental Impact Statement
Bureau of Reclamation and Department of Ecology
BENEFIT-COST ANALYSIS OF THE YAKIMA
BASIN INTEGRATED PLAN PROJECTS
REPORT TO THE WASHINGTON STATE LEGISLATURE
December 15 2014
Jonathan Yoder, Project Lead and contact author
Director, State of Washington Water Research Center
Professor, School of Economic Sciences
Washington State University
Jennifer Adam, Washington State University
Michael Brady, Washington State University
Joseph Cook, University of Washington
Stephen Katz, Washington State University
Contributing authors and research support
Daniel Brent, Monash University
Shane Johnston, University of Washington
Keyvan Malek, Washington State University
John McMillan, McMillan Biological Consulting and Media
Qingqing Yang, Washington State University
B-C Analysis of YBIP Projects P a g e | 2 December 2014
The Yakima River Basin lies in semi-arid south central Washington and supports a growing population as well as $3 billion agricultural industry that is heavily dependent on irrigation for production. The river system historically supported large runs of salmon and steelhead, but a variety of stressors both internal and external to the basin have reduced those populations substantially since the early 20th century. A reservoir system supplies water through the operation of five reservoirs with a combined storage totaling just over a million acre-feet (af). Stream flow is primarily derived from the spring snowmelt runoff. Precipitation in this area is winter-dominant, and is stored in the snowpack as a natural but seasonally declining reservoir for spring and summer water use. Water rights in the basin are over-appropriated such that a number of droughts in the last few decades have led to curtailment of water to junior water rights holders. Historical drought impacts, concerns over the effects of climate change on snowpack, the potential for increasing anadromous fish abundance in the basin, and future municipal water demands have been the impetus for the development of the Yakima River Basin Integrated Water Resource Management Plan
(“IP”). The IP includes the following elements:
• Reservoir Fish Passage
• Fish Habitat Enhancement
• Modifying Existing Structures and
• Surface Storage
• Market-Based Reallocation
• Groundwater Storage
• Enhanced Water Conservation
Fish passage projects, habitat enhancements, and instream flow augmentation are designed to support increases in salmon, steelhead, and other fish populations in the basin. Proposed infrastructure and water market development are intended to mitigate instream and out-of-stream drought impacts through increased storage and improved water trading, respectively. In particular, the surface water and groundwater storage projects would increase cumulative water storage by 500,000 af for a total of 1.5 million af in the basin. Many analyses of the IP and its components have been published to date. One of them, the “Four Accounts analysis” (2012), compares the net benefits of the IP as a whole against a no-IP alternative, and reports benefits ranging from $6.2 billion to $8.6 billion, and costs ranging from $2.7 billion to $4.4 billion. The reported Benefit/Cost (B/C) ratios are 1.4 and above, suggesting that the benefits of the IP as a whole outweigh its costs in aggregate net present value. These B/C results are provided for the full proposed implementation of the IP, but with limited exceptions, existing studies do not provide estimates of the net benefits of the individual components of the IP.
Section 5057 of the State of Washington Capital Budget for 2013 charges the State of Washington Water Research Center “to prepare separate benefit-cost [B-C] analyses for each of the projects proposed in the 2012 Yakima River basin water resource management plan [IP]”. It further stipulates that “To the greatest extent possible, the center must use information from existing studies, supplemented by primary research, to measure and evaluate each project’s benefits and costs.” This report is in response to and framed by this charge.
Existing hydrologic and water management models of the Yakima River basin are used to examine the impact of proposed IP water storage projects, conservation, and proposed instream flows on drought impacts under a limited set of climate scenarios. A crop production model is used to assess the potential economic impact of IP projects and water market development on the economic risk of water curtailment. Municipalities in the basin are slated to receive water rights for future population growth under the IP, and these benefits to municipalities are estimated. The net benefits of fish passage for the five reservoirs in the basin, proposed IP instream flows, and habitat restoration in the basin for salmon and trout are assessed. Because each of the proposed IP projects would operate within the Yakima Basin hydrologic system, there are extensive interdependencies among projects, so that the benefits of one project are often dependent on the implementation status of other projects. We show that the value of any given water storage projects is highest when no other water storage project is implemented, and that water market development also affects the value of water storage projects. The economic tradeoffs between instream flows for fish and out-ofstream water uses are also dependent on these factors. Selected results include the following:
• A snapshot of IP benefit estimates for moderate climate, water market, and baseline fish scenarios.
o Agricultural irrigation benefits: $117 million.
o Municipal and domestic benefits: $32 million.
o Fish benefits: $1 to $2 billion.
• When implemented together as part of the IP, the major water storage projects as a group do not pass a B-C test. Net present value for out-of-stream benefits (NB) from the IP range from -$2.2 to -$2.7 billion (B/C ratios from 0.02 to 0.20) depending on market and climate assumptions. Estimated benefits of proposed instream flow increases cannot make up for this shortfall.
• No individual water storage project provides positive net benefits for out-of-stream uses when implemented as part of the full IP, even under the most adverse climate and restrictive market conditions.
• Net benefits for out-of-stream use of individual water storage projects implemented with no other projects implemented are negative, with some exceptions under the most adverse climate and water market conditions. Based on moderate climate and market outcomes, storage infrastructure projects implemented alone and without proposed IP instream flow augmentation result in the following estimated out-of-stream net present value and B/C ratios, none of which passes a B-C test:
o Bumping Lake Expansion: NB=-$371 million; B/C ratio of 0.18.
o Cle Elum Pool raise: NB= -$6 million; B/C ratio of 0.62. Under the most adverse climate scenario and moderate market conditions, NB=$5 million with a B/C ratio is 1.35. It is also the most likely of the storage projects to satisfy a B-C test under moderate climate based on the sum of out-of stream and instream use value.
o Keechelus to Kachess Conveyance: NB= -$110 million; B/C ratio of 0.20.
o Kachess Drought Relief Pumping Plant: NB= -$107 million; B/C ratio of 0.46. Under the most adverse climate considered, Keechelus to Kachess Conveyance and Kachess Drought Relief Pumping Plant together provide net benefits of $6 million and a B/C ratio of 1.02.
o Passive Aquifer Storage and Recovery: NB=-$82 million; B/C ratio of 0.35.
o Wymer Dam and Reservoir: NB= -$1,217 million; B/C ratio of 0.09.
o Due to diminishing economic returns to water in the basin, increasing the number of IP storage projects reduces the value of each water storage project implemented.
• Instream flow benefits are insufficient to support the full suite of IP water storage projects given the net benefit shortfall in out-of-stream benefits, but proposed instream flows may be supportable through market purchases.
o Purchases of senior water rights to implement proposed IP instream flows would be less expensive than providing instream flows via IP storage infrastructure, with estimated costs ranging from $85 million to $500 million depending on water market and climate conditions.
o Because of its low cost, Cle Elum pool raise is most likely to satisfy a B-C test under moderate climate based on the sum of estimated out-of-stream and instream benefits.
• Reservoir fish passage projects are likely to provide positive net benefits through their pivotal role in supporting wild sockeye reintroduction into the basin. Fish passage is estimated to provide benefits ranging from about $0.95 to $1.7 billion and cost a total of $0.35 billion for all fish passage projects, which provide B/C ratios ranging from 2.7 to 4.9 for the individual fish Passage projects.
• Fish habitat restoration is unlikely to satisfy a B-C test. Results for the net benefits of instream flow purchases and restoration investment together range from about $48 million to $294 million, which fall below their estimated combined costs of $450 million. IP restoration costs are estimated at $338 million, so our results suggest that restoration does not satisfy a B-C test. However, insufficient evidence exists to estimate the contribution of habitat restoration to fish passage productivity, which may affect the value of restoration.
• Water markets show potential for reducing the impacts of basin-wide curtailment. We estimate that potential net gains from trade net of estimated transaction costs range between $216 million and $1.4 billion depending on climate, the extent of market development, and the extent of IP development. We show that markets act as a substitute for IP water storage infrastructure in that more active markets reduce the value of IP water storage infrastructure.
This report is not intended as a review of prior benefit-cost assessments of the IP, but it does utilize and extend existing IP analyses, and sheds some light on the sources and accuracy of previous B-C estimates. The Four Accounts analysis estimates agricultural benefits of 0.8 billion, municipal benefits of 0.4 billion, fish benefits ranging from $5 to $7.4 billion, and costs ranging from $2.7 billion to $4.4 billion, which together provide positive net benefits and B/C ratios of 1.4 and higher. Our estimated benefits are lower for each category for a host of reasons. Notably, the assumed climate regime has substantial consequences for agricultural benefits, and the baseline salmonid abundance in the Columbia River Basin has important consequences for fish benefits.
Despite differences in results, there are important similarities in our findings. Fish passage projects alone comprise a small percentage of median IP costs but provide about 75% to 80% of the estimated benefits of the IP. In contrast, IP investments for instream and out-of-stream uses account for about 66% of median costs but provide a small fraction of benefits, although this breakdown is not explicit in the Four Accounts analysis. This distribution of costs and benefits drives the strong results for fish passage.
In accordance to the legislative charge, this report focuses sharply on Benefit-Cost analysis to assess the economic efficacy of individual projects. It does not include an economic impact analysis to assess the indirect economic impact of IP investments on the local economy or the statewide impacts of the potential use of state funds to support the IP. Nor does this report cover costs and benefits from ongoing, non-IP programs within the basin whose outcomes may impact IP benefit metrics, such as fish translocation or hatchery operations. Due to data limitations, the majority of the results are based on simulation methods rather than statistical analysis, though statistical analysis is provided when feasible and useful. The consequence is that the majority of our results do not lend themselves to statistical confidence assessment, although robustness analyses are performed. Many necessary tradeoffs were made with respect to modeling approaches due to the dimensionality and scope of this research mandate. As is always true of modelling exercises, refinements are certainly possible and may provide more precision and accuracy for various aspects of this analysis.
Click Here for full WSU Washington State Water Research Center Benefit/Cost Analysis of the Draft Report on the Yakima River Basin Integrated Plan.
The following are the complete comments YBSA sent to the WSU Water Resource Center on the benefit/cost analysis of the Draft Report on the Yakima River Basin Integrated Plan.
Click Here for the complete YBSA Comments
WSU study challenges economics of Yakima Basin water plan
Posted on December 4, 2014
YAKIMA, Wash. — The most expensive projects in the Yakima Basin Integrated Plan for water management don’t pass a cost-benefit analysis, according to a new study by Washington State University economists.
But supporters of the 30-year, $4 billion plan to improve drought security and salmon recovery in the Yakima River Basin call the findings misleading because each part of the plan is designed to work with the others for a net benefit, not to stand alone for economic scrutiny.
They call it a difficult case to grasp, but one in which the whole is greater than the sum of the parts.
“It’s a false premise that what we have before us is a group of disparate projects,” said Derek Sandison, the Department of Ecology’s lead on the Integrated Plan. “The elements move together as a package or they don’t move at all; it’s like a three-legged stool, you can’t remove one of the legs and still expect it to stand.”
The plan, approved by the Legislature in 2013, is a groundbreaking deal led by the Bureau of Reclamation and the Ecology Department that gained the support of groups whose competing interests had kept them at odds for decades — farmers, environmentalists and the Yakama Nation.
The Legislature also separately requested a cost-benefit analysis on each major component of the plan: new dams, expanded reservoirs, new fish ladders, habitat restoration, water conservation and water markets.
The recently released report is a first draft of that analysis and a final draft is due to lawmakers later this month, said Jonathan Yoder, a WSU economist and lead author of the report.
Yoder and his team found that none of the water storage projects called for in the plan provide economic benefits that outweigh their costs, even under scenarios in which droughts become more common in the future. However, researchers found that investment in fish ladders for the basin’s five reservoirs will really pay off.
On that point, the WSU study largely agrees with an earlier 2012 economic analysis of the plan by the Bureau of Reclamation. The bureau found that economic benefits for the plan as a whole ranged from $6.2 billion to $8.6 billion, but primarily from the value of salmon recovery.
“It’s no surprise, this study comes up with what we already came up with,” said Urban Eberhart, a Kittitas County grower and member of the Integrated Plan’s executive committee.
Last year, Sen. Jim Honeyford, R-Sunnyside, who sponsored the plan, told the Herald-Republic that this study was added to the capital budget by opponents of the plan who hoped to discredit it. Eberhart agreed.
“This is politics,” Eberhart said. “You can’t break it up into individual pieces and look at each part in isolation, it doesn’t work that way. They do work as an integrated plan.”
But Yoder said his study offers a new way of looking at the various parts of the plan and how each aspect affects the others.
Sometimes, the benefits of one project are enhanced by others, such as how fish passage and habitat restoration both encourage salmon recovery. And fish ladders require sufficient water supplies to function. But in the case of water storage projects designed to provide more supply during times of drought, each project actually reduces the value of the others in Yoder’s analysis.
“There are diminishing marginal returns to additional water storage,” Yoder said. “The value of just one project is larger than the value of the same project if all the other water storage projects are also implemented.”
It all comes back to the basics of supply and demand: During a water shortage, each gallon of water becomes more valuable. But if there’s more water, that additional water has less value.
The plan also calls for developing water markets that would allow farmers to buy and sell water during droughts so that the available water is used in the most valuable way, such as keeping an apple orchard alive, rather than raising a crop of hay. But if those markets are working well, Yoder said, it reduces the economic pain of droughts, which then reduces the value of additional water storage.
But that’s exactly why this type of economical analysis is problematic, Sandison said.
It’s not about maximizing the value of water, he said, but ensuring that the region has enough supply to weather droughts, for both farmers and fish. Estimates show that the basin needs 450,000 more acre-feet of water storage and that’s what the plan aims to do, he added.
“This is clearly a case where the whole is greater than the sum of the parts, but we’re always going to have the challenge to explain that to people,” Sandison said.
While seemingly counterintuitive, adding that expanded water supply for drought years only provides a small economic benefit relative to the cost of the projects, under the analysis used by the report.
Sandison said that’s because droughts don’t happen every year, and although they are expected to happen more often with climate changes, no one really knows exactly how common they will become.
Also, the analysis only looked at the direct economic gains from reducing the impact of drought, not how the agricultural economy then affects the rest of the region’s finances.
“We’re trying to keep the agricultural economy intact, not grow it, so it’s hard to come up with accurate valuation,” Sandison said. “What did the 2005 drought really cost us? No one can answer that.”
Michael Garrity, Washington conservation director for the conservation group American Rivers, said that the economic analysis also lacks a way to measure the benefits from restored habitat, healthier ecosystems and the recovery of threatened species, such as steelhead and bull trout.
Putting an economic value on salmon recovery is difficult as well, since fish swimming in rivers lack a conventional price tag.
The WSU team used the same method to calculate the value of the plan’s fish benefits as the Bureau of Reclamation did: predicted population gains from implementing the plan combined with a survey about how much people would be willing to pay for varying levels of salmon recovery.
Under that formula, the value of each salmon can end up at thousands of dollars. But, no one is actually purchasing the salmon. Instead, everyone who values salmon recovery benefits, allowing the value of each fish to build up, Yoder said.
It may sound fishy, but Yoder said it’s the best method they had to value salmon recovery, in addition to the smaller value of new fisheries.
But the fact that most of the economic benefits for the whole plan come from a subjective survey about the value of salmon concerns Miles McPhee, a climate scientist from Naches.
McPhee said that the more he learned about the survey, given in the late 1990s to people around the Columbia Basin, the more doubts he had about the Integrated Plan’s actual benefits.
“It just seems like a phony justification for the dams,” McPhee said. “Why spend all that money if the actual benefits are really quite small?”
In fact, according to Yoder’s analysis, the largest of the economic benefit comes from just one salmon species: sockeye. Sockeye need lake habitat, and so the population is expected to boom if fish ladders are added to all five of the region’s reservoirs, starting with the plans underway at Lake Cle Elum.
Yoder’s analysis shows the most valuable project is fish ladders, but supporters of the plan say the success of fish ladders depends on having adequate water supply in drought years.
Yoder said that his analysis attempted to capture those types of connections, and he thinks it was successful.
“It has been said that you cannot disaggregate the Integrated Plan in a meaningful way, economically or politically, but I think that’s not entirely true and our results show that,” Yoder said.
Sandison disagreed, saying that the integrated approach was necessary, both in terms of water management and political support.
“The social contract between the stakeholders in the Yakima Basin is real, it’s not lip service. All the elements of the plan have to move together or this doesn’t move,” Sandison said. “We’re always going to be fighting the notion that this can be disaggregated, when it just can’t.”
Below are important documents concerning the Yakima Basin Integrated Plan.
The overview document below was prepared to identify the important information in the Normandeau Associates Technical Review of the Yakima Basin Integrated Plan. Click Here for the overview.
For the complete Normandeau Report Click Here.
For the Infograph, “Enough Water in the Yakima Basin? No!” Click Here. The graph (with Citations) describes the possible shortfall that will occur in the storage components in the Integrated Plan.
from National Climate Assessment Report
With craggy shorelines, volcanic mountains, and high sage deserts, the Northwest’s complex and varied topography contributes to the region’s rich climatic, geographic, social, and ecologic diversity. Abundant natural resources – timber, fisheries, productive soils, and plentiful water – remain important to the region’s economy.
Snow accumulates in mountains, melting in spring to power both the region’s rivers and economy, creating enough hydropower (40% of national total) (NWPCC 2010) to export 2 to 6 million megawatt hours/month (EIA 2011). Snowmelt waters crops in the dry interior, helping the region produce tree fruit (#1 in the world) and almost $17 billion worth of agricultural commodities including 55%, 15%, and 11% of U.S. potato, wheat, and milk production respectively (USDA 2012a, 2012b).
Seasonal water patterns shape the region’s flora and fauna, including iconic salmon and steelhead, and forested ecosystems, which cover 47% of the landscape (Smith et al. 2009).
Changes in the timing of streamflow related to changing snowmelt have been observed andwill continue, reducing the supply of water for many competing demands and causing far-reaching ecological and socioeconomic consequences.
Description of observed and projected changes
Observed regional warming has been linked to hydrologic changes in basins with significant snowmelt contributions to streamflow. Since around 1950, area-averaged spring snowpack decreased 0% to 30% (depending on method and period of analysis) (Mote 2006; Pierce et al. 8 2008), spring snowmelt occurred 0 to 30 days earlier (Stewart et al. 2005), late winter/early spring streamflow increased (Hidalgo et al. 2009) and summer flow decreased 0% to 15% as a fraction of annual total flow (Luce and Holden 2009; Stewart et al. 2005), and winter flow increased, (U.S. Bureau of Reclamation 2011a) with exceptions in smaller areas and shorter time periods (Mote et al. 2008a).
Yakima wants to bank Naches River water in aquifer
By Kate Prengaman / Yakima Herald-Republic, April 13, 2014
Yakima’s four municipal wells normally pull water from a deep aquifer, but with a few adjustments, two of the wells can be reversed to send water back into the ground. These dual-action wells are about to become very handy. If temporary permits are approved, as expected, Yakima plans a test project in May to determine if the aquifer can be used to store water from the Naches River. “We want to take water out of the river when it’s available and put it in (the aquifer) when our customers don’t need it,” said David Brown, the city’s water and irrigation manager. “If we store it, then we can use it during drought years.”
Yakima relies primarily on the Naches River for its domestic water. But some of that supply falls under junior water rights, which can be cut during a drought. The city also has rights to the aquifer, which accounts for about 20 percent of the city’s supply during a normal year, Brown said. But during the 2005 drought, the city relied on that groundwater for about half its supply, he said. Brown envisions a system where the city takes advantage of its current water rights, existing wells and distribution system, and the natural groundwater reservoir to improve its ability to meet demands during times of drought. But the technology is relatively new in Washington and the path to getting the necessary permits is complicated. However, because this project is part of the Yakima Basin’s Integrated Plan for water management, the state funding of $150,000 is supporting it.
Taking stored water from the aquifer during a drought, rather than from the river, benefits all the basin’s water users, from farmers to fish, Brown said. Advocates of the technology, known as Aquifer Storage and Recovery, or ASR, point out that using aquifers as reservoirs costs less and has fewer environmental consequences than building surface storage. Dan Haller, an environmental engineer who works on ASR projects, said that while the technology is still new here, several Eastern Washington communities, including Walla Walla, Kennewick and White Salmon, are developing such projects. None, however, has received final permits.
Yakima has been researching ASR since 1998, when a consultant noted that the geology below the city would be well suited to storing water. The aquifer beneath Yakima is basically shaped like a bowl, explained Chris Pitre, a hydrogeologist for Golder Associates who has worked with the city for years. But the bowl leaks a little bit. Water in the aquifer slowly moves through a layer of sandstone to eventually feed into the Yakima River. “What we have to figure out is if we store some water in the ground, how long can we retain it?” Brown said. The pilot project planned for May will help answer that question: the city will pump water into the aquifer for five days and then use monitoring wells to track it as it moves for several months.
This will be the city’s second such test. The first was done in 2000 at a different well, Pitre said. Running a model with data from that experiment, they found that about 40 percent of the water would probably “leak” out over 10 years. Since the city’s goal is to use this technology as drought insurance, Brown said they don’t expect to get all their water back. Instead, he said, having additional supply available when they really need it will be worth some slow loss over time.
Droughts are predicted to become more frequent in the region, Brown said, and he believes this storage, along with conservation measures, will help the city prepare for that future. Moreover, the “lost” water eventually adds to the flow of the Yakima River, which has environmental benefits. So the pilot project will help the city learn how much of the added water it can expect will remain in the aquifer over time. But, Pitre said state policy is not clear on how Ecology will determine how much water cities will be allowed to recover from these systems.
State law allows ASR projects to only withdraw the water that remains from what was put in, but it’s complicated to regulate because each aquifer loses water at a different rate. Because of that, Ecology has decided to set the recovery limits on a case by case basis during the permitting process, said Guy Gregory, a hydrogeologist with Ecology. Another challenge for permitting these projects is ensuring that they meet groundwater quality standards. “The state is trying to encourage ASR as a responsible water resource management tool, but they are bumping into this (water quality) regulation we also have to deal with,” Pitre said.
Yakima plans to treat the water, just like the drinking water, before it puts it into the ground. But Haller explained that water quality regulations for groundwater can actually be stricter than drinking water standards, because they are designed to prevent pollution. Yakima treats its water with chlorine to kill pathogens to prevent disease, but that process creates chemicals known as disinfection byproducts, Haller said. The chemicals are considered safe to drink. But since they don’t naturally occur in the groundwater, they can be treated like pollution by regulators. “You have to go through an evaluation of whether it is reasonable to treat and remove (the byproducts) or whether it is OK to degrade groundwater slightly to do this project,” Haller said.
Once the water quality data has been analyzed, the director of the Department of Ecology can determine whether the project’s benefits outweigh the risks and allow it to move forward. That’s what Ecology staff has recommended for the Kennewick project and that’s what Pitre believes will happen for Yakima. During the experiment in 2000, Pitre said the water quality analysis showed that after six weeks the byproducts broke down into water, chloride and carbon dioxide. The pilot project operating under a temporary permit this summer will also study the water quality, Pitre added, and help the city get a permanent permit.
Once it has that permit, the city can start storing water right away, without needing any construction. It’s one piece of the Integrated Plan that could be up and running quickly. Eventually, Brown said, the city could work with other water users, like the county or irrigation districts, to store water for them as well. “This has lots of long-term potential,” Brown said. “There is hundreds of millions of gallons of free space in this reservoir.”