Technical Capability, Financial Commitments, Implementation Prepared For: Policy and Litigation Briefing May 2015 Washington, D,C. CSRIA Darryll Olsen, Ph.D. Regional Planner/Resource Economist CSRIA Board Representative Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery

How Much Water Is There in the Columbia River? Columbia-Snake River Irrigators Association Water Resources Management, Economics, Policy CSRIA

Effective Standard for Effective Water Resources Management: “The CSRIA has relentlessly told water managers, legislators, and agency heads that the fundamental standard for effective water resources management is competence and honesty. Competence depends on sound technical and economic information; honesty means not deceiving others or worse, deceiving yourself.” -- CSRIA Correspondence to USBR Comm. Lopez CSRIA Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery

CSRIA Litigation Against USBR (ECBID-State): USBR Denial of New Water Service Contract: USBR Acting with Competence and Honesty? Or Arbitrary and Capricious Behavior Under Administrative Law? Why? Perspective? CSRIA Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery

State-USBR Project: Modified Partial Replacement Alternative 70,000 acres N/S-I-90 CSRIA Objective: 1)Protect Economic Benefits of Irrigated Ag. 2)Optimize Water Use. 3)Provide a Private Sector Financing Structure for Off-Canal Development. Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery Moses Lake East Low Canal System USBR EIS

Phase II Analysis: Systems 1 and 2 Detailed Preconstruction Analysis and Economic Costs (CSRIA.org ) System 4 Analysis Detailed Preconstruction Analysis and Economic Costs (CSRIA.org) Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery CSRIA

N-I-90 Systems 1 (2 and 4) Private Sector Package Development: Participants’ Water System Agreement (WSA). Financial and Development “Instrument” for System Participants. Legal Construction Contract and Development Management. Legally Binds Land Owners-Lease Holders to System Financial Obligation. Structures Post Development OM&R Obligations. Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery CSRIA

It’s the Water—New State Conditional Water Use Permit Issued to USBR: New State Secondary Water Use Permit Issued to USBR. Office of Columbia River (OCR) and Eastern Region Office, Ecology, Working with CSRIA to Verify System 1 Groundwater Rights with System 1 Lands—On the Ground Water Determination. Water Right Verification and Application to New Lands. Use of Nameplate Acres without Relinquishment. RCW Water Spreading to Include Extension-Seasonal Transfer Lands. Economic-Financial Viability of ALL System Projects. Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery CSRIA

Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery Draft Water Service Contract Submittal: Bringing 21 st Century Irrigation Development to Subarea. Engineering for On-the-Ground Irrigation Efficiency and Water Use. Optimize the Environmental Regulations (EIS), State Water Code. Private Sector Economics-Financial Model—There Are No State$-Federal$. Respecting the “Invisible Hand” of Private Sector Economics. For System(s) development, Allow the Irrigators to Make the Decision for Willingness-to-Pay; “Let Them Do as They Will...” Let the Irrigators Determine Payment Structure—Multiple Zones with Marginal Costs. Optimized Private Sector Financial Capability with Water Spreading. CSRIA

Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery Private Sector Irrigators vs. ECBID Public Sector Financial Models: Development Factors Private Sector Econ/Financing ECBID Nov. Public Model Engineering Status Pre-Construction Completed On-Going Design? System Cost Allocation By System/Zone, (Marginal Costs) “Normalized” Zone One Ave. Cost/Acre FinancingDirect Ag. LendingLID-Rev. Bonds Cost of Capital- Time Period- Total Debt Serv % 20-Years %(?) 30-Years >20% of Private Total Capital & OM&R/Acre $ (Annual $/Acre) $ * (Annual $/Acre) Acres Secured Participants Syst.1: 14,500 Syst. 2&4: 17,000 Unknown (Costs)? Timing >? CSRIA *CSRIA Estimate.

Water System Contract Review Issues? Impeding Action? Water Spreading. State Water Code Prevails. Required for Financial Viability. EIS Configuration: All Systems Must Be Within 87,000 Acres. Within Allocated Water Supply. Real Issue Is Actually Getting All the Acres. USBR NED-B/C Analysis. Direct Net Value Must Be Positive Per Acre. Yes, It Is…Market Value Exceeds USBR Production Budget Estimates. Direct Service Contract with Private Irrigators. Turn Key Operations Conveyed to ECBID. Wait for Master Water Service Contract? Time and Money Indifference? Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery CSRIA

Further Perspectives—Development Picture: Move Now to Get Water on the Ground—Success Breeds Success. Get System 1 Operational by 2017; Systems 2, 3, and 4 by Further State/Federal Dollars for Canal? Show Some Results First! Financial Reality—Take Advantage of the POWER of Private Sector Financing and Construction. The “Normalized” Model Does Not Add Acres, It Further Disperses Acres and Can Increase Costs—Discouraging Irrigator/Lender Participation. ECBID: Focus on Canal Expansion to Lind Coulee and South. The ECBID Rejected $20 Capital from the State, with Public Sector Budget Proviso Requiring USBR to Issue WSC—Money That Could Have Been Used to Finish Canal Modifications and Complete Water Delivery Access South of Lind Coulee. CSRIA Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery

Why No Action on Water Service Contract? ECBID Is Moving Slowly to Complete Canal Modifications. Cultural Problem—The “Second Coming” of the USBR; 20 th Century Mindset; Agency Objective Is Unclear Internally. No Experience with the Private Sector. Human Factor—Greed, Pride, Envy. Poor Leadership; It Takes More Than Just Giving People Money. They (Agencies) Have Lost Their Way—No Primary Concern for Irrigators or Communities. CSRIA Columbia-Snake River Irrigators Association Odessa Subarea Systems 1, 2, and 4 Review Private Sector Financing-Development for Surface Water Delivery