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Public vs. private financing is a point of contention for a group of irrigators in the Odessa Subarea

June 2016
By Trista Crossley


Although the Columbia Basin Project was conceived as a public works program, a group of landowners is advocating the use of private funds in the latest project.

The Columbia-Snake River Irrigators Association (CSRIA) has had private financing in place since 2014 to begin building pumps and pipelines that will bring surface water from the East Low Canal (ELC) to current deep well irrigators in the Odessa Subarea. The entity responsible for the construction and maintenance of the project, the East Columbia Basin Irrigation District (ECBID), however, maintains that this is a public project and should be financed with public money. The irrigation district plans to use 30-year tax exempt municipal revenue bonds for financing.

“We’ll build our own pipelines, with our own capital,” said Darryll Olsen, a CSRIA board representative. “We believe you have to bring 21st century water resource management to bear on this problem just like you would anywhere else, and that means private sector financing.”

The Odessa Subarea groundwater replacement project is a joint effort between the U.S. Bureau of Reclamation (Reclamation) and the Washington State Department of Ecology to move as many irrigated acres as possible from deep wells that tap into the depleted Odessa Aquifer to surface water from the Columbia River. The project will ultimately bring water to about 87,700 acres across Lincoln, Adams and Franklin counties. Both the state and Reclamation have allocated funds to the project, mostly for improvements and expansion on the ELC, which is the backbone of the system.

CSRIA is a private, nonprofit corporation formed in 1991 in response to private water right holders’ concerns about the threat of federal control on the Columbia River and mounting regulatory concerns with the state of Washington on water rights. It is led by a board of directors and has approximately 120 members, mostly private water right holders, but also includes some municipal service irrigators, such as the Kennewick Irrigation District and the City of Brewster. Its members manage more than 300,000 acres of irrigated agriculture in Eastern Washington, stretching from Douglas County to the John Day pool on the Washington/Oregon border. CSRIA was instrumental in pushing for state legislation that created county water conservancy boards in the 1990s and consults in statewide legislation for water right changes and transfers and the issuance of new Columbia River system water rights. Approximately 10 percent of CSRIA acreage is located in the Odessa Subarea.

“We know we can build those pipelines cheaper (than the ECBID),” Olsen said. “And we’ll do it with 20-year financing using conventional loans that right now have pretty low interest rates. The total debt service will be at least one-third less if not 40 percent less because you are looking at debt service over 20 years instead of 30 years.”

CSRIA has lined up $42 million in private loans to finance System 1, which corresponds to ECBID’s EL 22.1 pipeline. That money would pay for the pumps and pipelines from the ELC out to the irrigated acreage, but then individual landowners would be responsible for retrofitting their systems to accept the surface water. CSRIA has also secured funding, up to $100 million, for two more pipelines.

Another point of contention between the two sides is ECBID’s plan to “normalize” costs by assessing all irrigators the same amount regardless of where they are on the system. The irrigation district capped those costs at $190 per acre plus operating and maintenance (O&M) fees. CSRIA filed a lawsuit in 2015 against the irrigation district contending its normalized assessment was not consistent with state irrigation law.

“Our lawsuit says the irrigation law is very, very clear. You can only assess costs for the direct benefits received by the land. It’s very specific. The only thing you can charge as a benefit are the common costs. Across all these systems, what’s the common cost? The East Low Canal,” Olsen explained.

In April of this year, CSRIA submitted a proposal to ECBID in hopes of reaching a settlement agreement on the lawsuit. Under that proposal, which Olsen said recognizes that the project hinges on the ELC, landowners would pay ECBID a total of $125 per acre per year, which includes operating and maintenance (O&M) fees. That amount includes a development fee of $29 per acre for modifications to the ELC, which amounts to $28 million over 20 years and would be financed through private loans, and a $23 per acre transfer fee for ECBID to use as it sees fit. Craig Simpson, manager of the ECBID, had no comment on the settlement proposal and would neither confirm nor deny that the ECBID board had taken any action on it.

“This whole normative costs thing is just a transfer payment of some kind. Nobody even knows who’s paying what to whom, but we’ll kick in a transfer payment, and they can do whatever they want with it,” Olsen explained. “There are no additional functions the district has to provide other than the canal.”

According to Olsen, unless the irrigation district drops the plan to normalize costs or accepts CSRIA’s settlement proposal, the lawsuit will go forward. A court date has been set for August.

CSRIA got involved in the project in 2006 when Reclamation began considering several proposals to bring groundwater to the Odessa Subarea. The organization was asked to submit input on the project by its members and by Adams County commissioners. They have done detailed engineering reports on Systems 1, 2 and 4, as well as a formal benefit cost analysis that was presented to the state legislature in 2012.

With the private financing already in place, construction on System 1 could begin as early as this fall if an agreement can be reached between CSRIA and ECBID. Olsen said System 1 is the most expensive of the planned pipelines because of its length and the elevation the water would need to be pumped up to. Systems 2 and 4 would be next (ECBID’s EL 40.2 and EL 54.0 pipelines, respectively).

The irrigation district is currently offering contracts to landowners along their EL 47.5 pipeline (CSRIA’s System 3). Originally, those contracts were set at approximately $210 per acre ($137 in capital replacement costs plus O&M fees) with the possibility that they can increase up to $263 if the capital repayment costs increase ($190 plus O&M fees). The remaining three systems aren’t included in CSRIA’s plan because they won’t have access to the surface water until the ELC modifications are finished.

Not all of the landowners along Systems 1-4 are CSRIA members, and Olsen said if they want to participate in the private financing, they’d need to join the organization. CSRIA’s pipelines will have no extra capacity built in, so it’s “now or never” for landowners who want to get involved.

Another issue for CSRIA is that they consider the water contracts offered by ECBID as open ended, meaning the irrigation district could increase the amount of the contracts as needed. According to ECBID, the capital repayment costs are capped at $190, so the only costs that might change are the O&M costs. “There’s a reason why their contracts are open ended. There is a clause in there that says for any reason, they can increase the assessment,” Olsen said. “When you look at their spreadsheets on some of their costs, we don’t think they’ve got all their costs in there. We think it is inevitable that they are going to come back and reopen the contracts.”

ECBID has indicated it is still looking for alternate sources of funding, including additional state and federal grants, and Olsen said he’s heard some landowners wonder why they should have to pay more for these water rights than those from earlier Columbia Basin projects, and why the state and federal government isn’t kicking in more money.

“We are putting in a completely different water system. It is a completely different water right,” he said. “They are under the secondary use permits, and there is no obligation by the irrigation district or the Bureau (Reclamation) or anyone to build this system. None. It’s just like a standard private water right where people put their own money and capital into it.”

CSRIA also filed a lawsuit against Reclamation, but that lawsuit was dismissed in February. Olsen said they have no plans to appeal.

“Our view is that the real problem is the irrigation district,” he said. “This would all go away and they’d actually get some money if the district would agree to give us a water service contract.”

For more background on this issue, see our story in the April issue of Wheat Life. Past issues can be downloaded at wheatlife.org/pastissues.html.