MWD fills funding shortfall for two-tunnel WaterFix 12 Apr 2018

Critical decisions on the sharing of fresh water resources was voted on this week. In an historic vote, funds were committed in California to secure supply and delivery of potable water from the bountiful north to the needy south. At its April Board meeting Directors of the Metropolitan Water District of Southern California (MWD) voted with a 60.8% majority to provide an extra US$6.5 billion in funding to finance full scope construction of the California WaterFix project.

The shortfall in funding presented a choice between one tunnel or two:

• one tunnel of 40ft diameter and 35 miles long (12m x 56km) and two intakes for a 6,000cfs (cubic feet/second) capacity with the second built at a second construction stage, or
• two parallel tunnels of 40ft diameter x 35 miles long and three new intakes to complete the full 9,000cfs capacity project in one, fully-funded US$16.7 billion single construction programme (Fig 1).

The capacity of the system as a whole, with intakes, retention basis and pumping installations governing capacity rather than the flow capacity of the tunnels in isolation.

The full capacity project has been studied for many years and in late 2017, the project beneficiaries – the water supply wholesalers and delivery authorities – were asked to confirm commitment of their share of the funding for the projected near US$17 billion project. The project is designed to upgrade the State’s water delivery system and aqueducts that deliver water from Northern California to farms and agricultural businesses in the Central Valley cities and to the residential and commercial users in the mega-conurbations of Southern California, including Los Angeles and San Diego.

About 30% of the water that flows to taps in Southern California comes from Northern California via the Sacramento-San Joaquin Delta system, which is now outdated, its ecosystem is in decline and its 1,100-mile levee system is increasingly vulnerable to earthquakes, flooding, saltwater intrusion, sea level rise and environmental degradation. Attempts to protect the Delta have led to regulatory restrictions that have reduced water exports from the region. The California WaterFix will address these issues and secure water supply from the Delta by building three new water intakes on the Sacramento River, three feeder tunnels to the systems forebay, and two long tunnels to carry the water under the Delta to pumping stations in the south Delta where it will be lifted into the existing water canals for conveyance to the south (Fig 1).

When asked in late 2017, all 28 California State beneficiary authorities agreed to their funding allocation with MDW of Southern California, as the largest single beneficiary of the project, agreeing its 26% share or about $5 billion. The majority of the Federally-funded agencies of the Central Valley Project (CVP) service area, who also import supplies via the Delta, reported there were still a number of internal institutional issues that needed resolution before they could commit to participating in the full 9,000cfs project, leaving a shortfall in the funding needed for construction of the full project. In February 2018, the State authorities proposed building the project in two stages while at the same time, continuing to work with the CVP agencies to explore alternative financing mechanisms and leave the door for them to join the full scope or staged approach projects should they decide to do so. A window of about 18-24 months was estimated as available to change to the full project before commitment to a staged project had passed a point of no return.

The Federally-funded CVP agencies supply water mainly to farming and agricultural businesses in the Central Valley of California and these users felt that the supply of water from the project would increase costs from what is already considered a high rate. For MWD end users, and as part of the ‘beneficiaries pay’ concept, household water rates are expected to rise on average by up to $4.80 a month to cover its funding commitment. That would reduce with negotiations by MWD to sell or lease capacity in the tunnels to allow water deliveries or exchanges for other parties, and in the eventuality of recoup some of its investments from the agricultural sector.

As the principal beneficiary, MWD, the State-established cooperative of 26 cities and water agencies serving nearly 19 million people in six counties of Southern California, realized the risks to the full capacity of the project of a staged approach. If not committed to in full at the start, there was risk that the second phase would ever be built. There were also negatives associated with splitting the project in two.

Under the staged approach, the cost of building two intakes and one tunnel at about $11.1 billion would delay investment of about $6 billion for the $17 billion full scheme of three intakes and two tunnels. The reduced scope could save a possible year or two on the 18 year program of the full project, but would also result in potential permitting delays associated with changing the current project into a staged approach, as well as resulting in the permitting processes needing to be repeated for the second phase of a staged approach. Cost of completing the elements of stage two at a later date would also be significantly more expensive in real terms.

In promoting the option to fund the shortfall and support construction of the full project all at once, MWD Board Chair Randy Record said: “For decades, we have sought a solution to the problems of the Bay Delta, problems that put Southern California’s water supply at risk. We simply cannot jeopardize the opportunity to move this long-sought and much-needed project forward.”

At its Board Meeting on Tuesday 10 April 2018, the 38 members of the MWD Board voted 28 to 10 to increase its funding commitment of the estimated $16.7 billion project to $10.8 billion (Fig 2). This more than doubles the agency’s initially planned investment (in today’s dollars), making MWD the primary investor in the project and to ensure it is completed as originally proposed and studied.

“Two tunnels better accomplishes the co-equal goals of the project of improving the environment and securing supply reliability,” said MWD General Manager Jeffrey Kightlinger. “With them, we are better able to capture the high flows of big storms that climate change is expected to bring and we will have more flexibility to operate the water delivery system.” Kightlinger added that investing in WaterFix does not change the commitment by MWD to local supply development and conservation efforts. MWD imports water also from the Colorado River and assists its members in conservation, recycling, storage and other resource-management programs. “We need a diverse portfolio of water resources,” said Kightlinger, “including water recycling, storm-water capture, and increased conservation. We will continue to work hard and invest in those projects.”

The vote on Tuesday was, however, far from clinical or a foregone conclusion. MWD Board meetings are open to the public and there was a three-hour period at the start of the meeting of impassioned and well considered pleas from members of the public and of interested groups for both for and against the agency’s investment. Several of those presenting against the proposal were speaking on behalf of the many households in Southern California that will find the increase in water rates a financial burden in reality.

The Board members who found they could not support the proposal also presented considered concerns about the management of MWD to control the program and cost of a construction project of this size and the financial commitment to the project now and into the future. Those in support of the project cited the devastation of Hurricane Katrina in New Orleans when authorities knew that ageing levees needed major overhaul and investment but waited too long to commit and suffered the dreadful consequences.

The vote by MWD Board is a commitment to the future, to the welfare of its customers for years to come, and to one of the largest tunneling and construction projects currently in the world. Knowing now that it is the full, three-intake two-tunnel system to be built, the engineering and construction industry is able to prepare for its commitment to realize the full scope project. The current 18-year realisation for the project has construction starting at the end of 2020, once all required permits are in place, and the full project in service at the start of 2035, after 13 years in construction (Fig 3).

In December 2017, RFPs for engineering design manager services were called for a submittal date in February 2018 and an announcement of award is expected during April (Fig 4). At the same time MWD staff are working with other agencies to establish a Design/Construction Joint Powers Authority to manage the implementation of the project and another Joint Powers Authority to manage the project's funding and financing.

The vote by MWD clears an important hurdle for the project with funding now in place to see the full project through to optimum operation as planned.