I supported the Peripheral Canal [here and here], saying:

The combination of higher sea levels (global warming), earthquake risk and dodgy levees (really dikes) means that the Delta ecology is going saline and farming will end.

Combine this “soon to be fact” with the political necessity of continued water exports (otherwise agriculture in the south Valley will end as water is diverted to cities), and we arrive at the “Peripheral Canal Solution”.

But things look different now that I’ve read an analysis of the PPIC report by Jeff Michael (professor at University of the Pacific*). Michael highlights two assumptions that weaken the bottom line in the PPIC report (and my conclusions):

First, PPIC overestimated the 2050 population of California (at 65 million). An adjustment to realistic population levels (under 60 million) would mean that the benefits of exporting water from the Delta to SoCal are lower.

Second, PPIC overstated the cost of desalination (at $2,072/AF — in constant dollars, I assume). Now we know that desal currently costs $1,200-1,500/AF, a cost that will rise with energy prices (and they will rise!) and will fall with technology (and that will happen!). Thus, an adjustment to more realistic (lower) desal costs would make it cheaper to replace “lost” water.

These two problems, taken together, flip the cost/benefit ratio from favoring the Peripheral Canal to ending exports from the Delta to SoCal.**

Now, I don’t consider ending exports to be politically viable (see my words above), but I do agree that the economic argument in favor of the Peripheral Canal is much weaker. (The environmental argument for “no exports” has always been strong.)

To add a little more weight to Michael’s argument, consider how “south of the Delta” people are now dealing with the short-term, de facto ban on exports:*** They are trading more, changing crop patterns, raising prices, etc.

If exports ended permanently, they would do the same things (and more, with more intensity). I wonder, in fact, if ending exports — politics aside — would really mean the end of the world. After all, urban SoCal uses roughly 4 MAF/year and “local” supplies (the LA aqueduct, local rainfall, and the Colorado River Aqueduct) can cover at least half of that.

The BIG missing piece is water currently allocated to agriculture — especially ag in the southern Central Valley and near Imperial Valley; see post above.

As the PPIC authors remark, the unplanned end of Delta exports would mean the end of ag in the southern valley (as their water was seized/sold), but it would also put pressure on IID et al. to sell to cities.

What if exports ended on purpose? The results would be very similar. I am sure that competition over water in SoCal would raise prices and eliminate about half to two-thirds of ag (by water use, not value), but it would not be the end of the world.****

What’s left to prevent this outcome? Politics. But “we need the Peripheral Canal to support agriculture” isn’t quite as sexy as “…to keep the kids in LA from dying,” is it?

[BTW, I still think that farming the in Delta will end (should end) when the levees break — if not before.]

So, yeah — I am reversing my position in support of the Peripheral Canal. I now think that Plan B (end exports) should be Plan A. Political delusion, corruption, cynicism reality aside, the economics are not clear, and SoCal can manage with its existing supplies — via markets and higher prices, of course.

Bottom Line: Let’s not be overhasty in allocating $10 billion to build that canal. There are cheaper and better ways to reform water allocation in the State.

** Michael is so sure of his numbers that he’s offered to bet the PPIC folks (a la Simon-Ehrlich) that desal will cost less that $1,000/AF before the State population reaches 46 million. I’m with him on that!

*** Not really, but they are pretty low. 2008 SWP deliveries were 35% of contracted amounts. 2009 deliveries are forecast [doc] to be 15%.

**** Typical statement by an academic blogger