Goldman Sachs gives low-ball estimate of Delta Tunnels costs

  • Published on July 21st, 2017

Westlands Water District, dubbed the “Darth Vader” of California water politics by Tribes, fishermen,  conservationists and environmentalists, has been in the news a lot lately. On Monday, Goldman Sachs gave the water district a presentation on financing for Jerry Brown’s water-stealing Delta Tunnels/WaterFix project, and, unsurprisingly, told them what they wanted to hear.

By Dan Bacher westlands water district is one of the delta tunnels waterfix funders

Westlands Water District is the nation’s largest water district, and has a record of backing big agriculture at the expense of Sacramento-San Joaquin River and Klamath-Trinity River salmon and steelhead restoration. They’ve been big proponents of the Delta Tunnels scheme that would shunt water from the Northern side of the Sacramento Delta to their clients in the south. One of the big questions has been: How much would this boondoggle cost the taxpayer and ratepayers of California?

Background: California’s water-stealing Delta Tunnels could be approved in September

The Goldman Sachs Group, Inc. is a controversial American multinational finance company that engages in global investment banking, investment management, securities, and other financial services including asset management, mergers and acquisitions advice, prime brokerage, and securities underwriting services. It also sponsors private equity funds, is a market maker, and is a primary dealer in the United States Treasury security market. Goldman Sachs also owns GS Bank USA, a direct bank.

After the meeting, Natural Resources Defense Council (NRDC) Senior Attorney Doug Obegi crunched the numbers and discovered that San Joaquin Valley growers would likely pay more than Goldman Sachs’s cost estimates, according to a Restore the Delta news release.

Barbara Barrigan-Parrilla, executive director of Restore the Delta (RTD), said Obegi “hits the nail on the head in his latest blog post, Goldman Sachs Underestimates WaterFix Costs for Westlands.”

Obegi revealed:

“First, they include an analysis based on the incremental water supply gained from Waterfix, but that cost analysis assumes that the incremental water supply from WaterFix is 1 million acre feet of water (slide 3). The farmers at Westlands know that’s not true; indeed, one of them was quoted saying, ‘It’s a lot of money for not a lot of water.’

“The incremental water supply is calculated using a fake baseline that is completely different from the analysis used in the CEQA/NEPA documents for WaterFix, as I’ve written about before. In contrast, as Dr. Jeff Michael of the University of the Pacific pointed out last year, the final EIS/EIR for WaterFix estimates that the State Water Project would increase exports by 186,000 acre feet, and the Central Valley Project would reduce exports by 14,000 acre feet.

“If one uses the real estimate of the incremental water supply yield from WaterFix, the per acre/foot costs skyrocket (particularly for CVP contractors, who lose water supply compared to today according to the final NEPA/CEQA documents).

“It’s no surprise that WaterFix is a bad deal for the environment and for water users. But these unreasonable assumptions indicate WaterFix is likely to cost Westlands and other contractors far more than Goldman Sachs’ analysis shows.”

“We couldn’t have said it better ourselves,” Barrigan-Parrilla concluded.

Presentation suggests goal of Delta Tunnels is to privatize public water

The next day, Dale Kasler of the Sacramento Bee summed up the joint-meeting of Westlands Water District and California's $15+ billion waterstealing "WaterFix" boondoggleGoldman Sachs: “These farmers say they may not pay for Delta tunnels pushed by Gov. Brown.”

Barrigan-Parrilla noted that the joint presentation suggested that the Delta Tunnels project’s end goal is to privatize public water. Since the project, formerly called the peripheral canal, was resurrected like a zombie from its electoral grave by Governor Arnold Schwarzenegger in 2007, critics have frequently accused the project of being a thinly-veiled effort to privatize public trust water to benefit corporate agribusiness interests and water privateers like Stewart and Lynda Resnick, millionaire owners of the big ag Wonderful Company.

Barrigan-Parrilla stated:

“The joint Goldman Sachs, DWR, Bureau of Reclamation presentation at Westlands Water District suggests that the end goal of CA WaterFix is to transform California water into a capital commodity, which will be controlled by the private sector under the smoke screen of public interest. While Goldman Sachs officials maintained that they were not making a recommendation, but were rather giving a presentation regarding loan possibilities, they, like a mortgage lender of a decade ago, laid out loan options that on the surface seem to make the project more affordable for Westlands farmers. 

“For what project proponents believe would be an additional million acre feet of water for the four major water districts, the incremental gain in water would cost farmers roughly $1200 per acre-foot. We clearly heard farmers say they could not farm with water costs that high. In addition, the Goldman Sachs representatives believed that design was much further along, and did not know that project proponents have only finished 10 percent of the design. Consequently, their analysis did not cover any of the construction risks or potential for cost overruns.

“Perhaps the most disturbing moment was Goldman Sachs redefining intergenerational equity, which is the idea that humans hold the natural and cultural environment with past, present, and future generations. They redefined intergenerational equity as spreading tunnel costs over 50-75 years so that future generations could pay their fair share for use of the project.”  

David Bernhardt is still advising Westlands

Meanwhile, David Bernhardt, Trump’s nominee for the Deputy Secretary of Interior, has kept advising California’s Westlands Water District “even after he withdrew his formal registration as a lobbyist last year,” according to Michael Doyle at E&E News:

Bernhardt has for many years served as a lobbyist and litigator for the Westlands Water District, the largest federal water contractor in the nation and a strong advocate of the construction of the Delta Tunnels and the weakening of environmental laws protecting Sacramento River salmon, Central Valley steelhead, Trinity River salmon and steelhead and other imperiled fish populations.

From 2001 and 2009, he held several positions within the Department of the Interior, including serving as Solicitor, Interior’s third ranking official and chief legal officer, according to the White House.

Bernhardt has been one of the primary lobbyists for H.R. 23, the “Gaining Responsibility on Water (GROW) Act of 2017,” water legislation authored by Congressman David Valadao that is supported by San Joaquin Valley agribusiness interests. The House of Representatives recently approved the newest version of the bill, but faces major hurdles in the Senate, since both California Senators Harris and Feinstein oppose it.

This bill is strongly opposed by The Hoopa Valley Tribe, fishing groups and conservation organizations, since it guts key provisions of the Central Valley Project Improvement Act of 1992 and the San Joaquin River Restoration Settlement Act,  two landmark federal laws that aim to restore salmon, steelhead and other anadromous fisheries on the Sacramento and San Joaquin rivers.

Background: Feinstein, Harris, even Jerry Brown hate big agriculture’s awful GROW water bill

About the Author

Dan Bacher is an environmental journalist in Sacramento who focuses on California's water issues, a healthy environment for the salmon fishery of the Northwest, and the attempts by big agriculture and big oil to hog all the water.