Millerton Lake State Park California
Millerton Lake state park, California. Photo: ggcarrle /

By Scott Hamilton, President, Hamilton Resource Economics

Scott Hamilton
Scott Hamilton, PH.D., President, Hamilton Resource Economics

Farmers have been seeking more water storage in California. In 2014, Proposition 1 dedicated $2.7 billion for investments in water storage projects – a water storage investment program (WSIP). The California Water Commission (CWC), which administers WSIP chose eight projects in 2018 based on the public benefits they would provide. Those public benefits include flood protection, ecosystem improvements and water quality improvements. The costs for private benefits, such as water for irrigation, are not covered by Proposition 1 funds. The funds for those costs must come from other sources. The eight projects selected cover the length of the state and are listed in Table 1. Four of them are conjunctive use projects, meaning surface water and groundwater resources are managed jointly to achieve the project benefits. Three projects involve the construction or enlargement of reservoirs. One reservoir, Temperance Flat Reservoir, a 1.26-million-acre-foot reservoir proposed on the San Joaquin River just upstream of Millerton Lake, was awarded WSIP funding, but proponents withdrew the application for a variety of reasons, including the inability to prove evidence of 75% of non-public benefit cost share. 

In December of 2021, four of these projects (Pacheco Reservoir Expansion, Willow Springs Water Bank, Sites Reservoir, and the Kern Fan Project) were deemed feasible by the CWC, a key hurdle. 

Table 1. Summary of water storage projects selected by the California Water Commission for funding. Numbers are estimates or projections based on available information from publicly available sources. The cost information only relates to capital costs. That does not include operational and maintenance costs (O&M costs) such as the costs to buy the water and convey it to the project site, nor conveyance losses, such as the losses incurred if water has to be conveyed through the Delta which can reduce the quantity by 20% to 30%. Therefore, the actual costs for the water projects will be higher than the numbers provided in Table 1. The last line of the table is a calculation of the capital costs on an annual basis assuming a 30-year repayment at a 4% interest rate. Those are not the costs the projects will actually pay, but they are provided as a means of comparing capital costs between projects. These figures do not account for funds contributed by the CWC. If the public benefits are obtained without reducing project yield, these costs will be overstated.

There is both good and bad news here. The good news is that the CWC has identified more than 2.5 million acre feet of new water storage projects in California with an increase in average yield of more than 400,000 acre feet per year. The first bad news comes in the cost of the projects. The capital costs of the surface reservoir projects are not quite double the costs of the conjunctive use projects. At around $1,000 per acre-foot just for the capital costs, the surface reservoir projects appear unaffordable for most farmers. Even for the conjunctive use projects, the costs are high, exceeding $500/af. 

The other bad news is that these projects are unlikely to provide much water to Kern County farmers. The Harvest Water, Chino Basin and Pacheco Reservoir projects are not designed to provide water to the San Joaquin Valley. The cost of water from Sites Reservoir, in which Wheeler Ridge-Maricopa Water Storage District and two other districts in Kern County are still weighing options, is likely to exceed $1,200/af by the time it gets to Wheeler Ridge. The remaining three projects (the Kern Fan Project, Los Vaqueros and Willow Creek) depend heavily on high flow water from the Delta which has been scarce since the biological opinions in 2008 restricted water project operations to protect endangered fish. 

Figure 1. Current schedules for water storage projects seeking funding under Proposition 1.

The take-away messages?  Since the inception of the SWP, there has been an unwillingness by governments to subsidize water infrastructure to meet irrigation needs, despite such benefits as increased jobs and increased tax revenues. With that precedent in mind, it does not appear the surface reservoirs are an economically feasible answer to the water shortages in the San Joaquin Valley. It is anticipated that water districts will continue to expand recharge capacity to maximize use of high flow water from east side rivers. Those activities might reduce water shortages by 250,000-acre-feet per year or so, but that is only about one tenth of what is needed to achieve sustainability without fallowing land. It is appearing that sizable investments in new water storage are not necessary until the water is available to fill them. Either the supply of water from the Delta needs to increase without harming fish or large acreages need to come out of production. These are both difficult options. 

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