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Lunch break at JBS Farms in Waterville. From left are Chad Clements, Wyatt Mires, Landon Flaget, Mitch Clements and Dick Osborne.
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FARMER'S TOOLBOX

Sticker shock?

Odessa Subarea groundwater replacement project moves forward, but some growers worry that the cost of water is too high

April 2016
By Trista Crossley


As progress on the Odessa Subarea groundwater replacement project flows forward and water contracts are being made available, some growers have expressed concern over high assessment fees. But figuring out how high is too high, like beauty, might be based on the eye of the beholder.

The Odessa Subarea straddles portions of Lincoln, Adams and Franklin counties in central Washington. The area’s main economic activity is agriculture—both irrigated and dryland—and food processing with an annual economic value estimated at close to a billion dollars. The problem is much of that irrigated agriculture relies on deep wells that tap into the Odessa Aquifer. Many communities within the area also rely on the aquifer for drinking water, but the aquifer has been drained to the point where wells are failing and what water is left has high sodium concentrations. Some studies estimate that at the current rate of decline, if no action is taken, 35 percent of the wells in the subarea could cease production by 2020. The state and federally approved solution is to expand the Columbia Basin Project’s (CBP) network of canals and pumps to supply surface water to groundwater-irrigated acres of the Odessa subarea that are within the CBP’s boundaries.

Work on the project began in earnest in 2006 when the Washington State Legislature directed the Washington State Department of Ecology (Ecology) to find alternatives to groundwater in the Odessa Subarea. Ecology partnered with the U.S. Bureau of Reclamation (Reclamation), which administers the CBP and has final say over projects using CBP water and infrastructure, to develop a plan that delivers the most surface water to as many acres as possible in the most cost-effective manner. In 2013, Reclamation decided on an $800 million plan that uses Columbia River water pumped into Banks Lake to provide surface water to approximately 70,000 acres north and south of I-90 by expanding the East Low Canal and installing additional pumps and pipeline. The irrigation district most affected by the project, the East Columbia Basin Irrigation District (ECBID), took on the task of implementing the project.

“This was a collaborative process,” explained Mike Schwisow, director of government relations for the nonprofit Columbia Basin Development League (CBDL). The CBDL has been around since the 1960s, and its purpose is to promote development of the CBP. Schwisow is also the lobbyist for the Washington State Water Resources Association, which is the statewide association of irrigation districts. “The public policy was to preserve irrigated agriculture that is responsible for jobs and millions in farm-gate crops. They also needed to preserve the aquifer for those that don’t have (irrigated) options. They needed to reach as many acres as possible and still come up with a project that has at least a 1-to-1 benefit cost ratio. This is not a program designed to expand irrigated acres. You have to have existing groundwater rights to exchange for a Columbia Basin Project water supply.”

Funding for the construction costs will come through a combination of state and federal monies and local money raised by ECBID through tax exempt municipal revenue bonds. The state has already invested $75 million, while the federal government has put in roughly $45 million. Landowners who accept a water service contract will pay a yearly assessment to ECBID, which will be used to repay the bonds over 30 years and for system operating and maintenance (O&M) costs and Reclamation water delivery costs. Initially, those assessments hovered around $300 per acre just for the bond repayment portion, but after more than a year of discussion, the ECBID board has since capped that amount at $190 per acre. The other costs, which include the O&M costs, currently average $73 per acre but can fluctuate.

Craig Simpson, manager of the ECBID since 2007, said that by capping the capital costs at $190 per acre, the ECBID board is trying to set an upper limit so landowners know what the maximum cost of the water will be. The exact capital costs repayment figure won’t be known until all the actual construction costs and the repayment terms are set. In addition, individual landowners are also likely to have some additional costs, especially if they have to retool their own systems to accept the surface water. Simpson said landowners’ concerns over the price of the water contracts are valid, but the goal of the project is to price the water so the ECBID can maximize the amount of land they can service.

“They (the landowners) are the only ones who can decide if it is feasible for them,” he said. “This is the cost to get water out to the lands that are interested. There are a lot of people who want water but can’t afford for us to get it out to them. That is frustrating.”

Landowners will have to weigh the cost of maintaining a deep well, the cost of pumping water to the surface and the possibility the well may run dry against the assessments. Another factor landowners have to consider is if they can grow enough high-value crops, such as potatoes, to make the system cost effective. Wheat is often used as a rotational crop with potatoes. “Some landowners are saying that’s too high, that they’ll never take water at that price,” Schwisow said. “Others are saying they are ready to go. I don’t want to make light of this. I recognize that landowners are making life-changing decisions. These are people who are multigeneration farmers, often on the same land their grandfathers farmed, who have to decide if they can grow crops to make it pay.”

The ECBID has normalized costs for the water for all landowners, meaning a landowner who owns land at the outer edge of the project will pay the same as landowners who are closer in, a point that has drawn contention from some quarters. Schwisow compared ECBID’s decision to normalize costs to the fee city residents pay for water. No matter where somebody lives in a city, they all pay the same costs to have water delivered to them. He added, “This is not a private entity activity. This is a public water system owned by the federal government, and the project is being done for a specific policy purpose. As such, people close to the canal are penalized, if you will, but people who are father away from the canal will have a benefit. Everybody pays the same. That’s the principle of the public service system.”

While the original cost of the project was estimated by Reclamation to be about $800 million, so far, bids and actual costs have been much lower. Extension work on the backbone of the system, the East Low Canal, has begun, financed by a $28 million grant from Ecology as part of the state’s $75 million investment. Installation of Lind Coulee siphons one and two were finished just last month. The next steps include construction of three more siphons and the first of the pipelines that will connect to the East Low Canal and deliver water to landowners. Construction of those pipelines will be funded through the revenue bonds. The initial pipeline slated for construction is the EL 47.5 pipeline, meaning it starts 47.5 miles from the head of the East Low Canal, and is considered to be one of the least expensive pipelines of the project. According to Simpson, the estimated assessments for this group are coming in at $210 per acre ($137 in capital repayment costs and $73 in O&M fees and other costs). Those landowners face the possibility of having another $53 added to their contracts (taking them up to the $190 cap), depending on what the final capital costs of the entire project pencil out to.

The project has also drawn fire from the Columbia-Snake River Irrigators Association (CSRIA) on behalf of a group of landowners who own land along the EL 22.1 pipeline. CSRIA has brought lawsuits against Reclamation and the ECBID, claiming the assessments aren’t consistent with state irrigation statutes and objecting to the normalized costs. These landowners have put together the financing to build their own system that would connect to the East Low Canal and are requesting that they have access to the water. In early February, a federal district judge dismissed CSRIA’s suit against Reclamation. The suit against ECBID is currently under consideration by the court.

“It (CSRIA’s position) is not consistent with the public policy purpose of the project to remove as many acres as possible from groundwater,” Schwisow said. “The East District, Reclamation and Ecology have a project that is viable that they are implementing. This is a private group that wants public water.”

Some landowners feel that the ECBID should look at alternate methods of financing or increase the payback period to more than 30 years in order to lower the assessments. Simpson said the irrigation district board has looked at other options, including longer-term financing, but longer terms makes it unlikely they’ll be able to get a competitive interest rate. The best rates, he said, come with a 30-year repayment term. The board is also exploring other avenues of funding from state and federal sources.

“There’s just not a lot out there,” he said. “I do know we’re not going to stop trying to find a solution.”

Originally, 70,000 acres in the Odessa Subarea were slated to receive surface water, but Reclamation now has enough water to service 87,700 acres, thanks to conservation efforts and secondary use permits acquired by Ecology. Those additional acres are currently available for the ECBID to write contracts on:

• Water for approximately 7,700 acres have been accumulated via Ecology-funded conservation projects throughout the CBP, mostly through canal lining and upgraded pipes. These acres are available for landowners who currently own land along the East Low Canal, but won’t have immediate access to one of the future pipelines. Landowners will be responsible for bringing their own equipment to pump water out of the canal. Schwisow said the irrigation district has begun making deliveries to more than 2,000 acres and expects to deliver to more than 5,000 acres in 2016. For those landowners that take the individual contracts, if a distribution system is built in their area, they are obligated to move to that system and cease using their own equipment.

• Approximately 10,000 acres will come out of a Lake Roosevelt Secondary Use water right permit through the EL 47.5 pipeline. The ECBID has identified the costs associated with delivering those acres and is currently offering contracts to landowners.

If ECBID is unable to contract all of the 17,000-plus acres of water that are currently available, Schwisow said they will probably need to reassess the plan. The next project after the EL 47.5 pipeline hasn’t been decided yet, nor has the funding been secured.

“There’s a lot of complexity there,” he explained. “The East District has set a deadline for responses from landowners, so we’ll see what happens. There will need to be some decisions made about what to do next.” That deadline was March 30.

For those landowners who decline a water contract, they might not have a second opportunity. Schwisow said the system is being built to serve those who sign up, and no extra capacity is being factored in.

For more information on the Columbia Basin Project, visit Reclamation’s website at usbr.gov/ under the “Water & Power” tab down to the “Projects” option. Information on the CBDL can be found at cbdl.org. Ecology’s website under the Office of the Columbia River at ecy.wa.gov/programs/wr/cwp/crwmp.html has information about the Odessa Subarea and the groundwater replacement project.