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Water authority: New report of $7.3 billion pipeline cost is worst-case analysis
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LAS VEGAS REVIEW-JOURNAL
Updated: Aug. 23, 2011 | 7:44 a.m.
Opponents of a plan to tap groundwater across eastern Nevada said a new financial analysis prepared for the Southern Nevada Water Authority reveals that the project could cost billions more than previously thought and might lead to massive water rate hikes.
But authority officials dismissed the claim Monday as a wild exaggeration based on a worst-case analysis of the project that the agency had done in preparation for a key state hearing this year.
The "Ability to Finance" report, prepared by Las Vegas-based financial analysts Hobbs, Ong & Associates, suggests the proposed network of wells, pipelines and power lines could cost as much as $7.3 billion and might in 10 years help push the average monthly residential water bill from about $36 to more than $90.
For the ranchers, rural residents and conservationists who make up the Great Basin Water Network, the report is written proof of something they've been warning of for years: The pipeline project will cost a great deal more than even the authority's current estimate of $3.2 billion.
"We have long suspected that the numbers provided by the water authority are highly suspect," said Launce Rake, a Las Vegas conservation advocate and member of the Great Basin Water Network. "Our concern here, beyond the unsustainability and environmental damage that would accompany the wells and pipelines, is that working families who already are having a very tough time making ends meet would be hit hard by massive increases in their water bills."
And that pain could go on for generations, because financing the $7.3 billion project would require an additional $8\u2007million in interest payments.
But water authority spokesman J.C. Davis accused Rake and company of taking the figures in the report completely out of context.
The purpose of the document was to demonstrate to state water regulators that the authority could finance the project even under dire circumstance.
Davis said the near-tripling of water bills would occur only if the authority found itself having to pay for the pipeline and all other pending capital projects under current revenue conditions, namely sluggish sales tax money, almost nonexistent connection charge proceeds and "no additional customers to divide this among."
Davis called the worst-case scenario "very unlikely because what it would mean is that for the next several decades, the population of Southern Nevada doesn't increase at all."
But in that event, the average customer a decade or more from now could wind up paying $31.25 more each month just to help pay for the in-state water project, he said.
As for the overall price tag, Davis said the $7.3 billion figure is based on the assumption that construction would start in 2017 and last until about 2050, with an estimate for the escalation of construction costs over that period.
Davis said the authority's official estimate of $3.2 billion represents what the project would cost if built today. Officials prefer to use that number because it's grounded in verifiable information, not speculation about the future, he said.
The authority is seeking state permission to pipe almost 220,000 acre-feet of groundwater a year from rural valleys in Clark, Lincoln and White Pine counties. The project is being touted as drought security for a community that gets 90 percent of its water from a single source, the Colorado River.
One acre-foot of water is enough to supply two average Las Vegas homes for a year, so the proposed project could deliver water for roughly 440,000 households.
Opponents and some experts warn that such large-scale groundwater pumping will destroy wildlife and rangeland.
The cost controversy comes as federal officials wrap up a six-year environmental review that will be used to determine whether the authority should be allowed to build more than 300 miles of pipelines and power lines across public land.
The U.S. Bureau of Land Management just finished a series of public hearings in Nevada and Utah to gather input on its draft environmental impact statement on the project. Based on feedback from those hearings, bureau officials plan to include a financial analysis of the project in the final draft, due for release in mid-2012.
"People have been so vocal about wanting to see that, so we thought we'd include it," said Penny Woods, project manager for BLM's review of the water development project.
Specifically, bureau officials plan to examine the report by Hobbs, Ong & Associates and other information about the project's financial feasibility. They also will look at the potential economic impact of a water supply shortage in Southern Nevada, though Woods acknowledged that such an analysis would be "fairly speculative and very subjective" because it assumes the pipeline project is the best way to bring more water to the community.
Woods said the addition of a financial analysis should not delay the release of the environmental impact statement's final draft.
A decision on whether to grant the water authority a federal right of way for the pipeline project could come within 30 days after the final draft is released.
So how much can ratepayers really expect to pay should the authority decide to forge ahead with the project?
Because of all the variables involved, officials insist they won't know until the time comes.
Davis said there is sure to be some increase, but it will almost certainly be less than the worst-case scenario laid out by Hobbs, Ong & Associates.
"I think it's fair to say that by 2025, people's water bills will go up," he said.
A state hearing on the project is set to start Sept. 26 and last into November.
The public has until Oct. 11 to submit comments on the BLM's environmental impact statement. The roughly 4,000-page document and details about how to comment on it are available on the bureau's website, www.blm.gov/5w5c.
Contact reporter Henry Brean at hbrean@reviewjournal. com or 702-383-0350.
Authority files new applications for White Pine water
The Southern Nevada Water Authority has set its sights on even more water in a White Pine County valley already central to the agency's pipeline plans.
The authority filed 20 new applications for water rights in Spring Valley on Aug. 11 immediately after the release of a new state inventory that showed more available water in the basin than previously thought.
The authority already holds roughly 6,000 acre-feet in groundwater rights and 34,000 acre-feet in surface rights in the valley, 250 miles north of Las Vegas.
An additional 91,225 acre-feet of groundwater applications will be the subject of a hearing before state water regulators late next month. The authority wants to send that water to the Las Vegas Valley through a multibillion-dollar pipeline network that could branch across much of eastern Nevada.
One acre-foot of water is enough to supply two average valley homes for one year.
Opponents of the project have labeled it a "water grab" that threatens the environment and the livelihoods of residents across rural Clark, Lincoln and White Pine counties.
But spokesman J.C. Davis said the authority is simply applying for unused water in accordance with state law. "Southern Nevada should not have to apologize for requesting to use a resource the state has declared available," he said.
The new filings seek an additional 11,879 acre-feet of surface water from several springs and streams in Spring Valley.
According to the applications, the authority plans to use the water to support the farms and ranches it has acquired in Spring Valley in recent years. The water also could be diverted around the valley to mitigate the impacts from groundwater pumping, though state regulators would have to approve such a change of use.
None of the water from the new filings would be piped to Las Vegas, Davis said. The authority has pledged not to divert any surface water out of Spring Valley.
LAS VEGAS REVIEW-JOURNAL
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the Water Authority has become a rip off. i use the same amt
of water as i did ten years ago, but my payments have
tripled
Jigs-n-figures: i have been here for a long long time. I give the article as much credibility as I do the LVRJ. None. Take for example the new "straw" LVVWA is putting into Lake Mead. How much over and how far behind?
It is time for you to come clean Jigs-n-fixtures, Mulroy is that you?
Or, you are new to Las Vegas. in which case God Bless you, ya got a lot to learn.
To Jerry Dickinson: Where exactly do yo come up with, "a min. of $7.3 billion just to construct"? That most certainly isn't what the article says. Do you misquote things all the time?
To Alcohol: The Nevada Revised Statutes, require contracts be awarded to the "Best Bidder", not the lowest. The agency is required to consider the Contractor's experience and past performance in making the recommendation to award to the controling elected board. Admitedly, many politicinas still insist on awarding to the low bidder. But that is not the legal requirement.
The LVVWD and SNWA are very experienced at planning, designing, and constructing major water system components such as: pumping stations; wells; pipelines; and, reservoirs. Their plans and specs have very few holes that contractors can jump thorugh for change orders. I'm guessing that the actual contracted cost will be within five percent of the accepted bid price.
To Rodman: The LVVWD, and the SNWA deliver the lowest priced water, of any pumped system in the nation. There are some that are gravity fed that cost less. But, the LVVWD rates are lower than most gravity fed systems. Doesn't sound liike an inefficient organization to me.
In closing, the actuall cost will be higher than the SNWA's estimate, but quite a bit lower than the worst case scenario.
Y'all see that area where the pipeline runs along highway 93 at the Clark co. Lincoln co. line? That is the true reason for this entire fiasco. That is where "Coyote Springs" is being developed.
We Nevadans that understand the concept of "it's a desert out there" know there will never be enough water in Coyote Springs to do all they want to do. This severely limits the growth and threatens the existing population. What better way to bring water to them than letting Las Vegas pay to build a water pipeline thru their property. Not only will they get water delivered, they will get paid for leasing land to the pipeline.
Who is smart enough and influential enough to devise this plan..oh ya, and crooked enough? Dirty Harry Reid and his trusty sidekick Harvey.
To elaborate you think? Impossible, I am a conspiracy nut? What do you suppose they were saying in California back when they did their water grab? Ruining the Owens valley and Mono Lake.
Impossible, too elaborate?
Sit back and watch. I will say I told you so.
To Russ (below) Let me get this straight. You, obviously a Democrat, feel it is a good idea to take water that is only in existence on paper. Ship it 250 miles via a pipeline that will cost a min. of $7.3 billion just to construct. Bring that ghost water to Las Vegas that has suffered arguably the worst of any city.
Lets check your record for accurracy. You voted for(collectivly) the architiect of the housing bubble Barney Frank and Chris Dodd.
You pray to O'Drama every waking hour and you re-elected Dirty Harry Reid.
And you call conservatives morons. We morons hope you are happy with your choices. Because we are LOAF.
I used to deal with contractors for a local government. What contractors do to ensure they get the project in question is to bid low to ensure they win. Regulations at the Federal, State and local level say the lowest bid has to get the job. But, what actually happens is that later on is the contractors puts in "add-ons" and the government has to pay or the contractor walks off the job. This could double or triple a project. It's legal stealing of the taxpayers and they don't care.
Talk about a bunch of uneducated people. Yes I'm referring to those below with one exception. Damn is it just republicans that read the RJ? Anyway, for all of you that throw your minus 2 cents into this, when the valley runs out of water what would your solution be? My solution would be those of you bitching about this die of thirst. LMAO I mean how fun would that be. Morons, nothing but morons.
IN this article, "Davis called the worst case scenario very unlikly". I wonder what he would call the 50 million plus, third intake for water flow to LV, mistake, the second worst scenario??? The idiots at the water district, led by Mulroy (who spends much of her time lobbying to be the Secretary of the Interior) are nothing more than under worked, over paid individuals who have very little clue on how to do anything other than draw their high priced salaries. As far as the question of how much our water bills will increase officials offered yet another intelligent gem in answering the question; "because of all the variables involved officials insist they won't know until the time comes" but you can dam well believe there will be an increase and a big one at that. It is time that the county cleans up the water district, gets rid of the high priced employees, and gives the district some direction. OOPS, that will never happend with the current group of county commissioners as they are as confused and lost as the water authority.
govt authority doesnt think it will cost more? ALARM ALARM ALARM it will cost even more.
When it comes to government it always ends up "worst-case " and twice the cost of their "worst-case " costs by the time they are done. We won't even talk about the time overruns. The costs are enough to brake most taxpayers.