United States Genera Accounting Of&e Briefing Report to Congressional Requesters January 1986 WATER RESOURCES Issues Concerning Expanded Irrigation in the Columbia Basin Project . , UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 RESOURCES, COMMUNITY, AND ECONOMK OEVELOPMENT 0lVlSl0N E-221748 The Honorable James H. Weaver Chairman, Subcommittee on General Oversight, Northwest Power and Forest EAanagement Committee on Interior and Insular Affairs House of Representatives The Honorable George Filler Chairman, Subcommittee on Water and Power Resources Committee on Interior and Insular Affairs House of Representatives In an August 20, 1985, letter, you reuuested that we review the economic and environmental impacts of expanding the irrigated acreage in the Columbia Basin Project in Washington State from 556,000 acres to nearly 1.1 million acres. The Bureau of Reclamation of the Department of the Interior in a 1984 report on the project esti.mated that this expansion could cost $1.9 billion and that the projects benefits outweighed its costs. On the basis of this request and subseguent discussions with your offices, we obtained information on the Project's benefit/cost analysis, repayment of construction costs, and the anticipated environmental impacts. On January 24, 1986, we briefed your offices on the results of our review, and this report summarizes the information presented at that briefing. We reviewed studies and reports on possible expansion of the Project issued in 1984 and 1985 by the Bureau, faculty members of Washington State University and the university of Idaho, and a consulting firm for the Washington State Department of Ecology. We also interviewed officials from federal and state agencies, and organizations knowledgeable of the Project. In summary, we found that the Bureau's 1984 benefit/cost analysis did not conform to the Water Resources Council's Principles and Guidelines for preparing such analyses. As a result, the costs were understated and the benefits overstated. The Chief of the Economic Analysis Division in the Bureau's Pacific Northwest Region advised us that the Bureau recognized the limitations of its analysis and has contracted with a consulting B-221748 firm to perform a major study of the economic and environmental feasibility of expanding the Project which will follow the Principles and Guidelines. However, in the economic analysis of the Project, the Bureau's consultant will be evaluating the Project's impacts on income and employment only within the State of Washington, even though electricity users throughout the four-state Bonneville Power Administration's marketing area will be paying for the Project. An analysis that addresses the effects on income and employment in the entire marketing area may provide a more sound basis for judging the economics of the Project. The Bureau's 1984 analysis showed that the construction costs would be paid by irrigators (46 percent}, power users (34 percent), and the state of Washington (20 percent). The Bureau's estimate was in contrast to two other studies which concluded that U.S. taxpayers would pay about 80 percent of the project costs. The major difference between the studies resulted from the treatment of interest on federal funds used for construction. The Bureau did not include a cost for interest because, by law, the construction funds are provided interest free. The other two studies included the interest cost in their analysis indicating that these costs, although not repaid, are a project expense. We have taken the position in a prior report that measuring and reporting the interest subsidy would assist the Congress when it considers and compares such projects. The anticipated environmental impact of the expanded Project was studied in 1985 by the Fish and Wildlife Service and the Washington State consultants. These studies indicated that the proposed expansion would not adversely affect fish and wildlife or water quality. Our review was performed between September and December 1985 and was conducted in accordance with generally accepted government auditing standards. The views of directly responsible officials were sought during the course of our work and are incorporated where appropriate. In accordance with your wishes, we did not request the Department of the Interior to review and comment officially on a draft of this report. Unless you publicly announce its contents earlier, we do not plan to distribute this report further until 30 days from its issue date. At that time, copies will be sent to the Secretary of the Interior; the Director, Office of Management and Budget, and other interested parties. If you need more information on this report, please contact me on (202) 275-7756. Michael Grys Associate Di Enclosure 2 Contents Page SECTION I BACKGROUNDON THE COLUMBIA BASIN PROJECT 7 II OBJECTIVES, SCOPE, AND METHODOLOGYOF OUR REVIEW 13 III BENEFIT/COST ANALYSIS 15 Cost of replacing lost hydroelectric power not included 16 Cost placed on electricity used to pump water for irrigation too low 14 Costs for existing facilities incorrectly included 17 Benefits calculated with outdated guidelines 17 Upcoming benefit/cost analysis takes these problems into account 17 IV IRRIGATION FACILITIES REPAYMENT COSTS 19 Analysis of the Bureau of Reclamation's estimate 20 Consulting firm's analysis shows U.S. taxpayers would pay most of the Project's costs 21 Faculty members' analysis shows results similar to those of consultants' study 21 V ENVIRONMENTAL IMPACTS 23 Past studies indicate environmental quality generally enhanced 23 Additional studies now under way 24 Water quality problems like those at Kesterson refuge not expected 25 VI ADDITIONAL MATTERS 27 Economic analysis does not include consideration of Bonneville marketing area 27 Pacific Northwest power planning council initially left out of environmental impact statement process 28 FIGURE I.1 Columbia Basin Project 9 ABBREVIATIONS cfs cubic feet per second RED Regional Economic Development GAO BRIEFING ON ISSUES CONCERNING EXPANDED IRRIGATION IN THE COLLTMBIF BASIN PROJECT PREPARED FOR THF CHAIRMEN, SUECOPMITTFES ON GENERAL OVERSIGHT, NOFTHWFST POWER, AND FOREST MANAGEMENT, AND ON WATER AND POWER RFSOURCES, HOUSE!COMMITTEE ON INTERIOR AND INSULAR AFFAIPS _ _-__-------------.---I- - 1 SEC!I!ION I: BACKGROUND ON THE COLUMBIA BASIN PROJECT The Columbia Basin Project is a multi-purpose Bureau of Reclamation project in south-central Washington State. The primary purposes of the Project are irrigation and hydroelectric power. Principal features of the Project are the Grand Coulee Dam, which produces hydropower and stores water in Roosevelt Lake for irrigation of Columbia Basin land, a pumping plant that diverts water from Roosevelt Lake to Banks Lake, and two siphons and tunnels that transport water diverted from Banks Lake into irrigation canals for delivery to farms. The Columbia Basin Project contains 1.095 million acres that have been authorized for irrigation. Development of irrigation proceeded rapidly from 1952, when the first acres were irrigated, until the mid-1960's. By 1965, about 490,000 acres had been irrigated. Development then slowed considerably. By 1984 about 556,000 acres, or about half of the authorized Project area, were under irrigation. ---------. -----------I---II------------ --.-- To facilitate orderly development of the Columbia Basin Project, construction of irrigation facilities has taken place in stages. Storage and most of the carriage system have been built to serve the entire 1.095 million acres. Some of the major canals were built to meet full Project needs, while others were built to meet immediate needs with the expectation they would be enlarged when the Project was developed to full capacity. The latest major Project component, the Second Bacon Siphon and Tunnel was completed and added to the system in 1980. Its completion and the future enlargement of 5 miles of canal downstream will permit the main canal to convey enough water to irrigate the entire authorized acreage. The second half of the Columbia Basin Project consists of about 539,000 acres. This land is higher in elevation than the land developed in the first half of the Project and supports profitable dryland wheat farms. To irrigate this land, existing canals will have to be enlarged and extended, and new canals will have to be constructed. Figure 1.1 shows the existing 556,000 acres that are being irrigated and the remaining 539,000 acres that are proposed for 7 irrigation in a two-phase expansion process. The first phase would serve about 173,000 acres and require about 14 years to complete. The remaining 366,000 acres would be served through construction of additional facilities in subsequent stages. In September 1984, the Bureau reported that construction of facilities for the first phase would cost about $802 million and that total construction costs to irrigate the 539,000 acres would be about $1.9 billion. At the point at which water is diverted from Roosevelt Lake to Project lands, the Columbia River's annual average flow is about 110,000 cubic feet per second (cfs). The river's minimum flow on record at the diversion point is about 70,125 cfs. In January 1934, the Secretary of the Interior authorized withdrawals of 25,000 cfs for irrigating project lands, or about 23 percent of annual average flow and about 36 percent of minimum flow. The currently irrigated portion of the Project holds a diversion permit of 13,450 cfs. The Bureau of Reclamation considers that the remaining 11,550 cfs are sufficient to develop the remaining portion of the Project, Recently, there has been renewed interest in irrigating the remaining acreage authorized under the Project. During the 1985 legislative session, the Washington State Senate introduced a bill authorizing $40 million in general obligation bonds for water supply projects. Although the Columbia Basin Project was not specifically mentioned in the bill, it would have been eligible for funding. Under the legislation, the bonds would be used to fund a portion of a federal project.