Major water supply benefits realized by all Southern California water users not only project subscribers

January 29, 2014 – Today, Cadiz Inc. made available a new report prepared by Southern California economic consulting firm Stratecon Inc. that describes up to $6.1 Billion in benefits that can be realized by Southern California water users as a result of implementation of the Cadiz Valley Water Conservation, Recovery, and Supply Project (“Project”) over its 50-year term.  According to the report, the Project offers four significant ratepayer benefits: a new reliable water supply, new groundwater storage opportunities, improved water quality, and new storage opportunities in other area reservoirs.  These benefits would not only be realized by Project subscribers, but experienced by all water users throughout the entire Southern California region, an area which currently faces a severe drought, long-term imported supply uncertainty and a legacy of continuous rate increases over the last 10 years.

The report, authored by Dr. Rod Smith, PhD., summarized the benefits as follows:

1. Reliable water supply: The Project offers a 50-year water supply independent of hydrologic risks and regulatory restrictions that confront Southern California’s water supplies from the State Water Project and the Colorado River. The Project would reduce Cadiz customers’ dependence on imports and all Southern California water users would face less frequent and less severe water shortages. (up to $3 Billion Benefit) 
2. New Groundwater Storage:  The Project provides a 1 million acre-feet underground storage facility for imported State Water Project or Colorado River water. The storage of water in the Cadiz Project could help avoid future water shortages and related economic losses.(up to $631 Million Benefit) 
3. Improved Water Quality:  Groundwater at Cadiz has very low total dissolved solids (TDS), or salts. Introduction of this water into the Southern California water system will reduce economic damages currently experienced as a result of high salt content in local supplies.(up to $240 Million Benefit) 
4. New Intentionally Created Storage Credits:  Groundwater from the Cadiz Project would be eligible for the creation of storage credits in Lake Mead and would help Southern California avoid the economic cost of water shortages by making new water available in Lake Mead and reducing the need for other storage sources. (up to $2.2 Billion Benefit)

To quantify the benefits, Stratecon constructed a water resources economic model, which was peer- reviewed by a variety of industry experts and economists.  A similar model was recently used to evaluate water quality benefits associated with the twin tunnel solution now being pursued through the Bay-Delta Conservation Plan (“BDCP”) process.  In order to conservatively assess the findings of the report, Stratecon also ran an Alternative case scenario in the model, which assumes that the Project’s expected deliveries are not fully realized due to pumping restrictions resulting from terms of the Project’s groundwater management plan.  Even under the alternative case, Stratecon estimates the overall ratepayer benefit to be $5.3 Billion.

Total Ratepayer Benefit of Cadiz Project

BDCP Scenario

The Stratecon report also examines how implementation of the BDCP, a conservation strategy to increase reliability of water deliveries from Northern California, could modify the economic benefits of the Cadiz Project.  If implemented, the BDCP could provide sustainable long-term supplies into Southern California that would supplement those provided by Cadiz.  According to the report, implementation of the BDCP as currently proposed would reduce the economic benefits of the Cadiz Project to $5.0 Billion in the Project case or $4.4 Billion in the Alternative case.  However, even under successful implementation of the BDCP, the Cadiz Project provides a significant, multi-billion dollar benefit for Southern California.

Total Ratepayer Benefit of Cadiz Project (BDCP)

Construction Benefit

In addition to the significant water supply benefits attributable to implementation of the Project, Dr. Smith also confirms that Project construction will generate direct employment and related economic benefits for the Inland Empire.

Total Economic Benefit of Construction Activity

The report has been posted on the Cadiz Inc. website. To view a copy,  click here.

About the Cadiz Project

The Cadiz Water Project is designed to save groundwater that would otherwise evaporate or become undrinkable at the base of a 1,300 square mile watershed in California’s eastern Mojave Desert and provide a new, reliable water supply for approximately 100,000 Southern California families (across 6 counties) every year.   A second phase of the Project would provide underground storage for imported surplus water in wet years.  Stored water would be banked in the aquifer system and held in storage until needed in dry-years or in the event of restrictions that significantly reduce supplies available to Southern California.  The Project has been reviewed and approved in accordance with the California Environmental Quality Act (CEQA), one of the most rigorous environmental laws in the U.S. and is continuing to process additional planning requirements prior to construction.  To learn more, visit www.missionaguacadiz.com/waterproject

About Dr. Rod Smith

Founder of Stratecon Inc., a strategic planning and economics consulting firm specializing in water and other natural resources, Dr. Rodney T. Smith, Ph.D. is a renowned economist that has widely studied, written, consulted and lectured on Western water issues and participated in major water transfers and projects throughout the western United States and Mexico.  Dr. Smith has consulted extensively for public and private sector clients on business and public policy issues concerning water resources, including California’s Drought Water Bank, the IID/San Diego County Water Authority Agreement, the settlement of Colorado River disputes on behalf of the Imperial Irrigation District, and the acquisition of 42,000 acres from the United States Filter Corporation.  Dr. Smith has also served as an expert witness in the economic valuation of groundwater resources, disputes over the economic interpretation of water contracts, economics of water conservation and water use practices, and the socio-economic impacts of land fallowing.   In addition, Dr. Smith is known for his books Troubled Waters: Financing Water in the West and Trading Water: A Legal Framework for Water Marketing, sponsored by the Ford Foundation through grants to the Council of Governors’ Policy Advisors.

Earlier in his career, Dr. Smith served as a professor of economics at Claremont McKenna College for fifteen years and as an economist at the RAND Corporation.  Dr. Smith received his Ph.D. in Economics from the University of Chicago and a Bach­elor of Arts in Economics from the University of California at Los Angeles.

To learn more about Dr. Smith and Stratecon Inc., please visit www.waterstrategist.com.

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