Sometimes water can cost way too much
by Chuck Howe
The multibillion dollar proposal by the aptly named Aaron Million to pump water from the Green River in Wyoming, and then pipe it to the Front Range of Colorado by way of a privately funded project he calls the Regional Watershed Supply Project, may never overcome the many objections to it. But if it does, one thing is certain: The water it would provide for Denver-area consumers won't be cheap.
Now the U.S. Army Corps of Engineers is poised to begin an environmental impact study to examine whether Million's still-incomplete project design has any major flaws. One issue the Corps must take into account is whether anyone can pay for this water at the prices the project would have to charge to cover its costs and produce a profit. I think it's clear that the answer is no.
The project is a huge and costly undertaking. It foresees pumping 81 billion gallons of water a year -- the equivalent of 250,000 acre-feet -- a volume slightly less than Denver's annual use. (An acre-foot of water is enough to cover a football field with nearly one foot of water).
The water would have to travel a distance of nearly 600 miles, requiring at least three new reservoirs, plus 16 pumping stations to lift the water 3,000 feet. The Colorado Water Conservation Board estimates the project's construction cost to be in excess of $7 billion. To cover construction and operating costs, the price of project water would have to be at least $2,200 for each acre-foot provided each year, a price few cities can afford.
In late 2009, the Corps of Engineers required Million to demonstrate the need for his project's water by providing information on interested customers. In response, a series of non-binding form letters from a few cities and agricultural districts in Colorado and Wyoming were presented, all stating that the respondents could use the extra water. Notably absent from the project's list of interested customers were the three biggest water providers on the Front Range: the Denver, Aurora and Colorado Springs utilities, which have the greatest ability to pay for new water supplies.
With the state's largest population centers apparently not on board, it is suggested that agricultural users could make the most use of the new supplies. But while irrigated farms currently consume the largest share of the state's water, they lack the ability to pay for expensive new supplies. According to researchers at Colorado State University, the average irrigated acre in the South Platte Basin generates about $345 of net income per acre, or around $260 per acre-foot of water consumed. This is considerably less than the price required to make the project financially viable.
Million claims that his project could subsidize the large volume of farm water to reduce the price to one-tenth to one-twentieth of what would be charged to municipal users. But covering these subsidies would require an uncompetitive increase in the price of water charged to cities, which could develop their own less-expensive alternatives. For example, Denver's estimated cost of expanding Gross Reservoir is about $400 per acre-foot. Colorado Springs' estimated cost of its Southern Delivery Pipeline from Pueblo Reservoir is around $1,300 per acre-foot, while transfers from agriculture may cost cities as little as $750 per acre-foot. That's a long way from Million's likely $2,200 per acre-foot. And water saved through urban conservation would cost even less in many settings.
Perhaps the greatest cost of Million's water proposal would be borne by all Colorado water users, since the project would lock up most of the state's remaining Colorado River allocation and preclude other alternatives. Removing water from the Colorado River system also increases the likelihood that in the foreseeable future, the Upper Basin States would fail to meet their obligation to the Lower Basin under the Colorado River Compact of 1922, an event that would jeopardize existing Western Slope exports to the Front Range.
I urge the Corps of Engineers, water providers and the state of Colorado to focus on economic and environmentally friendly solutions to our state's water challenges. These solutions should include greater water conservation in our cities, increased agricultural efficiencies, and a more innovative approach to the operation of our water markets so that the water we have can be reallocated as economic conditions and population change over time.
As for Aaron's Million's water scheme, it is pie in the sky, and expensive pie at that.
Charles (Chuck) Howe is a contributor to Writers on the Range, a service of High Country News (hcn.org). He is professor emeritus of economics and a member of the professional staff at the Institute of Behavioral Science, University of Colorado-Boulder.© High Country News