Jeffrey Michael runs the numbers and suggests the marginal cost of water from a new Peripheral Thingie (canal or tunnel beneath/around the Sacramento-San Joaquin Delta) will be prohibitive for agricultural users asked to foot a share of the bill:
According to the draft BDCP, the marginal cost of new water the contractors get out of the tunnel is going to be $1,000 af ($1.2 billion in debt service and new operation cost for an average of 1.2 maf of new water). Environmental deficiencies with the draft BDCP could mean even less new water, driving the marginal cost of new water supplies even higher for the contractors.
My question, posed in a comment on Jeff’s blog, is whether this project will collapse under this economic reality, or whether, as some California water veterans have suggested to me, the project will move ahead anyway in classic Western water tradition, subsidized by state and/or federal taxpayers. I’d love to hear the thoughts of the California water wonks in the audience.