Price tag for California’s controversial Delta tunnel project increases by $4 billion

The estimated cost for California’s controversial Delta Conveyance tunnel just went up by more than $4 billion.

The state Department of Water Resources on Thursday released an analysis that estimates the price tag of the project at $20.1 billion, up from a 2020 assessment of $16 billion.

The project, in the works for decades, would create a 45-mile tunnel to divert water from the Sacramento River beneath the Sacramento-San Joaquin River Delta and through a pumping station in Tracy. It was approved in December.

Proponents including Gov. Gavin Newsom and Department of Water Resources Director Karla Nemeth argue that the project is necessary in the face of water supply crises that are becoming more frequent and dire due to climate change. Once diverted, the water would flow through the State Water Project to Southern California.

“Twenty-seven million people rely on these surface water supplies that support a $2.3 trillion economy in California,” Nemeth said Thursday in a prepared statement. “There is a very real cost to do nothing. It is vastly more efficient and economical to avoid declining supplies.”

Environmental leaders, Native American tribes and other stakeholders vehemently oppose the project on the grounds that construction and the drawing of water would decimate native fish populations and ruin vast tracts of farmland. The final environmental impact report in December said the project would also disturb tribal cultural resources including human remains.

The Department of Water Resources must “analyze and include the impacts to California tribes, Delta communities and economies, the fishing community, and environmental and public safety concerns,” Barbara Barrigan-Parrilla, executive director for nonprofit Restore the Delta, said in a statement Thursday.

A coalition including Restore the Delta, tribes and other organizations filed a formal protest petition Tuesday with the State Water Resources Control Board, arguing the project is “unlawful and not in the public interest.”

Environmentalists and others, including water agencies not affiliated with the State Water Project, have also filed a number of lawsuits.

‘Similar in cost’?

The Department of Water Resources in a Thursday news release called the 2020 and 2023 estimates “similar in cost” when accounting for inflation. The value of the dollar rose about 16% between the previous report and the end of 2023, according to a U.S. Bureau of Labor Statistics inflation calculator.

The cost in “undiscounted” 2023 dollars, went up by 26%, according to the new report, prepared by a joint powers authority called the Delta Conveyance Design and Construction Authority. But the report said that factoring in federal guidance on the time value of money “discounts” the $20.1 billion figure down to about $17.3 billion.

The report estimated the project benefit at $38 billion, leading state water officials to claim: “For every $1 spent, $2.20 in benefits would be generated.”

DWR also said Thursday that the project could be trimmed by another $1.2 billion through design and engineering improvements currently under consideration.

The state project’s new figures include a “Community Benefits Program,” which DWR says is $200 million in grant funding it will set aside for local projects associated with the Delta Conveyance.

State Water Contractors, a nonprofit that represents 27 public water agencies that participate in California’s State Water Project and deliver water to more than 27 million residents and about 750,000 acres of farmland, is another vocal supporter of the Delta Conveyance tunnel. Those water agencies, led by the Metropolitan Water District of Southern California, had scuttled earlier iterations of the project during Gov. Jerry Brown’s tenure because of the price tag and would pay the bulk of the project’s cost.

“If we do nothing to shore up the State Water Project’s aging infrastructure, California’s primary and most affordable water supply faces continued reliability risk and remains vulnerable to increasing weather extremes that could lead to supply disruptions,” Jennifer Pierre, general manager of the State Water Contractors, said Thursday in a statement.

“DWR’s analysis demonstrates that the Delta Conveyance Project’s benefits far outweigh the costs and that investing in the project is more efficient and economical than allowing our current infrastructure and supplies to decline,” Pierre’s statement continued.

Opponents expressed skepticism regarding the state’s latest financial analysis.

“The benefit-costs analysis is one-sided and incomplete since it only looks at benefits and costs for State Water Project customers,” Restore the Delta executive director Barrigan-Parrilla’s statement continued. “Instead of foisting the costs of this boondoggle project onto Californians, the state should invest in sustainable water solutions that promise to restore the Delta ecosystem, not destroy it.”