november 8-10, 2006 westin mission hills resort rancho mirage, california aglf
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November 8-10, 2006 Westin Mission Hills Resort Rancho Mirage, California www.aglf.org. 26th Annual Fall Conference. Water Supply, Demand, and Financing: New Models and New Opportunities. by. Lynn Sherman [email protected]. 1. □. Lawyer. □. Lobbyist. □. □. Water Developer. - PowerPoint PPT PresentationTRANSCRIPT
1
November 8-10, 2006Westin Mission Hills ResortRancho Mirage, California
www.aglf.org
26th Annual Fall Conference
Water Supply,Water Supply,Demand, and Financing:Demand, and Financing:
New Models andNew Models andNew OpportunitiesNew Opportunities
Lynn Lynn [email protected]@winstead.com
byby
Lawyer□
Lobbyist□
Water Developer□
X
X
X
Fast-Talking Texan□X
““He’s just as full of (expletive) He’s just as full of (expletive)
as a Christmas turkey. as a Christmas turkey.
I promise you.”I promise you.”
General Manager, Mesa Underground Water Conservation District,quoted in the San Antonio Express News,
August 13, 2006
Harvey Everheart
Lynn Lynn ShermanSherman
Let’s go
How much ofHow much ofthe Earth’s waterthe Earth’s water
is usable by humans?is usable by humans?
less than 1%less than 1%
0
Where is ourWhere is ourrenewablerenewable freshwaterfreshwater
in the in the United States?United States?
Available Precipitation = monthly precipitation — potential evapotranspiration.
Available Precipitation1934 to 2002
Source: Roy, Summers, and Goldstein, Sustainable Water Resources Roundtable presentation, March, 2004.
0
“Either you bring the water to L.A. or you bring L.A. to the water.” (Noah Cross, Chinatown)
DEMANDDEMAND
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
Po
pu
lati
on
Year
U.S. Population Growth Since 1850
Where Where will population growth will population growth
occur occur in the future?in the future?
Calif., New Mex., Ariz., and Nev.Calif., New Mex., Ariz., and Nev. willwill increase increase populationpopulation by more by more thanthan 50% 50% between between 1995 & 2025.1995 & 2025.
Source: GAO, July 2003, “Freshwater Supply: States’ Views of How Federal Agencies Could Help Them Meet the Challenges of Expected Shortages,” GAO-03-514, Figure 20.
Density in 2025
Source: S. Roy, et al., November 2003, “Water Sustainability in the United States and Cooling Water Requirements for Power Generation,” Universities Council on Water Resources, Water Resources Update, issue 126, Pages 94-99..
All these people
require water.Lots of it!
Total Nationwide UsageTotal Nationwide Usage
0
500
1,000
1,500
2,000
2,500
1960 1965 1970 1975 1980 1985 1990 1995
Y ear
1,500 to
2,000 gallons
per
person
in gallons per personin gallons per personper day per day
Source: USGS, “Estimated Use of Water in the United States in 2000,” Circular 1268.
Which states use the most water?
California,Texas,
&Florida
account for ¼of all withdrawals.
Where is usage most intense?
Source: USGS, “Estimated Use of Water in the United States in 2000,” Circular 1268.
USGS
Breakdown of Uses(excluding hydroelectric power)
What are the trends forWhat are the trends for““consumptive” uses?consumptive” uses?
Average Daily Water Usage (excluding water for hydroelectric and thermoelectric power)
0
50
100
150
200
250
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Year
Bil
lio
ns o
f G
all
on
s
Irrigation Self-Supplied Industrial Domestic & Livestock Municipal
Irrigation ≈ 65%
Source: derived from USGS’s “Estimated Use of Water in the United States” published every 5 years from 1950 to 2000.
growth is in municipal
Personal Personal Household UseHousehold Use
1950
post-2000145145
gallons a day
180180 gallons a day
The US leads the world in water usage.
Source: American Water Works Association, ““Residential End use of Water”.
Only 3%3% of tap water
is usedfor drinkingdrinking.
Over UsedOver Usedand and
Under SuppliedUnder Supplied
Source: WaterGAP 2.0 - December 1999
0for the geographically
challenged…
Source: Lieutenant General Robert B. Flowers, Chief of Engineers, U. S. Army Corps of Engineers, before the Subcommittee on Water Resources and Environment, Committee on Transportation and Infrastructure, United States House of Representatives, May 7, 2003.
underunder drought drought conditions,conditions,
46 states46 states expect expect shortages.shortages.
36 states36 states expect expect shortages under shortages under normalnormal
water conditions;water conditions;
Within the next Within the next 10 years,10 years,
Source: GAO, July 2003, “Freshwater Supply: States’ View of How Federal Agencies Could Help Them Meet the Challenges of Expected Shortages, GAO-03-514.
Cities surveyed that do not
have an adequate20-year water supply?
___
35%Source: U.S. Conference of Mayors Urban Water Council,
“National City Water Survey 2005.”
Basis of planning =Basis of planning =
““at least some part at least some part of the United Statesof the United States
has experienced has experienced severe or extremesevere or extremedrought conditionsdrought conditions
every year every year since 1896.”since 1896.”
Source: GAO, July 2003, “Freshwater Supply: States’ Views of How Federal Agencies Could Help Them Meet the Challenges of Expected Shortages,” GAO-03-514, p. 15.
Areas Prone to Drought 1895 to 1995
Source: GAO, July 2003, “Freshwater Supply: States’ Views of How Federal Agencies Could Help Them Meet the Challenges of Expected Shortages,” GAO-03-514, Figure 3.
Source: S. Roy, et al., October 2005, “Evaluation of the Sustainability of Water Withdrawals in the United States, 1995 to 2025,” Journal of the American Water Resources Association, calculated using typical withdrawals and the lowest 3-year rolling average
precipitation between 1934 and 2002 based on data from Solley et al. (1998) and CPC (2003).
Adequacy of Stored Supplies Adequacy of Stored Supplies During a Significant DroughtDuring a Significant Drought
Another Perspective:Thermoelectric Cooling Constraints
Source: S. Roy, et al., November 2003, “Water Sustainability in the United States and Cooling Water Requirements for Power Generation,” Universities Council on Water Resources, Water Resources Update, issue 126, Pages 94-99..
Breakdown of types of water used
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000Year
Bil
lio
ns
of
Ga
llo
ns
Reclaimed Water Groundwater Surface Water
Breakdown of types of water used
Surface Water ≈ 80%
(for all uses, except hydroelectric)
515 bgd = Estimated dependable yield for contiguous United States (1980)
0
Source: derived from USGS’s “Estimated Use of Water in the United States” published every 5 years from 1950 to 2000. Source: USGS, “Estimated Use of Water in the United States in 1975,” Circular 765, Table 4,
citing Woodward (1957), p. 49, with minor modifications.
↨
Groundwater ≈ 20%
0
Are Are we we
keeping keeping up?up?
NO
1950’s TODAY
De
vel
op
ed S
up
plie
s
Pe
r C
apit
a
ALMOST ON PAR WITH 50’S DROUGHT
Water Development Timeline
NEEDED
SUPPLIES
1950’sDROUGHT
UNPARALLELED GROWTH
FUTURE
DE
VE
LO
PE
D S
UP
PL
IES
DAM BUILDING ERA
1960’s-1980’s
POPULATION DOUBLES
IN 2050
EXISTING SUPPLIESDECREASE BY
20%
“NO DEVELOPMENT” PERIOD
1980’s to Date
Number and Capacity of Large Number and Capacity of Large Reservoirs Completed by DecadeReservoirs Completed by Decade
Source: GAO, July 2003, “Freshwater Supply: States’ Views of How Federal Agencies Could Help Them Meet the Challenges of expected Shortages,” GAO-03-514.
Currently,Currently,our our ““dam builders,dam builders,””
the Bureau of Reclamation the Bureau of Reclamation and the Corps of Engineers, and the Corps of Engineers,
have only have only oneone large water large water storage project underway!storage project underway!
In addition, our reservoirsare silting up
at a rate of about 1.5 million acre-feet a year.
Source: GAO, July 2003, “Freshwater Supply: States’ Views of How Federal Agencies Could Help Them Meet the Challenges of Expected Shortages,” GAO-03-514 (citing a 1995 Resources for the Future report).
card
2005
How is America’s water and wastewater infrastructure graded?
D-Grade=
American Society of Civil Engineers, Infrastructure Report Card 20005
What aboutWhat aboutwater quality?water quality?
According to the EPA,According to the EPA,
45%45%of assessed watersof assessed waters
nationwidenationwidedo not fully meetdo not fully meet
water quality water quality standardsstandards
Source: ASCE, et al., September 2004, “All Dried Up: How Clean Water is Threatened by Budget Cuts.”
Source: EPA, December 2004, “National Coastal Condition Report II. Office of Research and Development/Office of Water,” EPA-620/R-03/002 (evaluating the overall national and regional coastal condition between 1997 and 2000).
Also, conditions of coastal areas are largelyAlso, conditions of coastal areas are largely
Fair to Poor.Fair to Poor.
there’sthere’sa lota lotto be doneto be done
So,So,
How much will it How much will it costcost
over the next 20 yrsover the next 20 yrs??Depends on who you ask.Depends on who you ask.Between Between $245 $245 billionbillion and $1.2 and $1.2 trilliontrillion
Sources: EPA, June 2005, “Drinking Water Infrastructure Needs Survey and Assessment,” EPA 816-R-05-001; General Accounting Office (GAO), March 2004, “Water Infrastructure: Comprehensive Asset Management Has Potential to Help Utilities Better Identify Needs and Plan Future Investments,” GAO-04-461; Congressional Budget Office (CBO), Nov. 2002, “Future Investment in Drinking Water and Wastewater Infrastructure”; EPA, Sept. 2002, “Clean Water and Drinking Water Infrastructure Gap Analysis”; Water Infrastructure Network (WIN), April 2000, “Clean and Safe Water for the 21st Century – A Renewed National Commitment to Water and Wastewater Infrastructure.”
More than More than halfhalf is for is for
currentcurrent needsneedsSource: EPA, June 2005, “Drinking Water Infrastructure Needs Survey and Assessment,” EPA 816-R-05-001.
Yikes,that’s a lot of money!
According to the Water Infrastructure Network (WIN), a water industry coalition, and the American Society of Civil
Engineers:
must be spent above
current investments. WIN, “Water Infrastructure Now: Recommendations for Clean and Safe Water in the 21st Century”;
American Society of Civil Engineers, 2001 Report Card for America’s Infrastructure.
$23+ billion a year
___is almost a
40% increase in current spending
levels
Yikes, again -- since 1980, federal
spending has been flat.
CBO, May 1999, “Trends in Public Infrastructure Spending”
0
10,000
20,000
30,000
40,000
50,000
60,000
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
Year
Mil
lio
ns
(no
min
al d
oll
ars)
Total Public Spending
Federal Spending
70%
FEDERAL SPENDING
In Last Twenty YearsIn Last Twenty Years
Actually, in real terms . . .
• Storage = Storage = 9%9%
• Supply = Supply = 5%5%
• Other = Other = 1%1%Sources: EPA 816-R-05-001, June 2005; GAO-04-461, March 2004.
Where is $ needed?Where is $ needed?
• Treatment = Treatment = 19%19%
• Transmission and Distribution = Transmission and Distribution = 66%66% (more than 1/3 of U.S. utilities have major pipelines ending their useful life)(more than 1/3 of U.S. utilities have major pipelines ending their useful life)
Source: EPA, June 2005, “Drinking Water Infrastructure Needs Survey and Assessment,” EPA 816-R-05-001.
Where is Where is $$ needed? needed?
Where will the Where will the money come money come
from?from?
3 out of 10 drinking water utilities
and4 out of 10
wastewater utilities
do not collect enough revenue from users and other local
sources to cover the cost of service.Source: GAO, March 2004, “Water Infrastructure: Comprehensive Asset Management Has
Potential to Help Utilities Better Identify Needs and Plan Future investments” GAO-02-764.
Source: U.S. Conference of Mayors Urban Water Council, “National City Water Survey 2005.”
Popularity of Financing Methods
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
"Pay As You Go" Revenue Bonds State Revolving
Fund
General Obligation
Bonds
Private Activity
Bonds
0
Compare experience in solid waste
• Crisis in early ’80’s due to declining landfill capacity and rapidly increasing costs.
• Congress responded by eliminating tax-exempt private activity bond cap for municipal solid waste disposal projects.
• As a result, over $15 billion in PABs have been issued since 1986 to solve the crisis.
Source: Stephen H. Howard, Sr. V.P., Lehman Brothers, Inc., testifying to the Congressional Transportation and Infrastructure Subcommittee on Water Resources and Environment, June 14, 2005.
What is the size of What is the size of the U.S. water the U.S. water
industry?industry?
It is expected to grow 7% a It is expected to grow 7% a yearyear
to to $150 billion$150 billion in in
2010.2010.
$107 billion$107 billion
Private CompaniesPrivate Companiesand and
Private CapitalPrivate Capital
80 % Gov’t share historically
Gov’t share of water business historically
80 % Private sector in 2050
Private share of water business in the future
Why is private capital so important?
risk
availability&
0
10
20
30
40
50
Prop
osal
Dev
elop
men
t
Cons
truc
tion 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Project Phase (years)
Level of R
isk/R
etu
rn (
$ m
illion
s)
RiskReturn
Potential Return
Operation Residual
Typical Project Risk/Return Profile
Source: The National Council for Public Private Partnerships
Sustainable Water Sustainable Water ResourcesResources
www.SustainableWaterResources.com
SH130 CorridorSH130 Corridor
Source: SH130.com
Carrizo-Wilcox Aquifer (Simsboro area)
Source of SupplySource of Supply
Austin
Round Rock
Georgetown
Guadalupe-BlancoRiver
Authority
Hays, Travis, and Williamson Counties Hays, Travis, and Williamson Counties are projected to are projected to DOUBLEDOUBLE by 2030by 2030
to 2.75 million people.to 2.75 million people.
In the last 5 years, In the last 5 years, Hays County grew by Hays County grew by more than 25%.more than 25%.
Nearly all cities and water utilities are Nearly all cities and water utilities are looking for new sources of water looking for new sources of water TODAY.TODAY.
SWR Project ElementsSWR Project Elements• 65,000 to 150,000 acre feet of water, which 65,000 to 150,000 acre feet of water, which can serve up to 500,000 peoplecan serve up to 500,000 people
• groundwater supply is 70 to 80 miles awaygroundwater supply is 70 to 80 miles away
• less than $3 per thous. gals., and structuredless than $3 per thous. gals., and structured to protect customers from “rate shock”to protect customers from “rate shock”
• Long-term contract (99 total years)Long-term contract (99 total years)
• Target completion date = 2011Target completion date = 2011
• Privately financed @ capital cost of Privately financed @ capital cost of $250 million to $500 million$250 million to $500 million
Gilmore Investments,LLP
A bit aboutA bit aboutwater values.water values.
““Water is more Water is more valuable than oil; valuable than oil;
water is life.”water is life.”
Mohamar Ghadafi
1,000
of water
gallons
$1.83 = City of Lubbock tap water
$11,280 = evian
(Source: Wine Spectator, April 30, 2003)
$13,000 ≈ most expensive
Edwards Aquifer
Jan-93
Jun-94
Oct-95
Mar-97
Jul-98
Dec-99
Apr-01
Sep-02
Jan-04
May-05
Oct-06
Feb-08
$1.15 $2.15 $2.03 $1.53 $2.15 $2.15 $2.15 $2.15 $2.15 $2.15 $5.37 $7.67 $16.19 $16.88
Price Comparison
Ag-to-Urban =
$615
Ag-to-Ag =
$152
ConservationConservation
“There it is. Take it.”
William Mulholland’s entire speech celebratingthe first water reaching the San Fernando Valleyfrom the Owens Riveron November 5, 1913.
U.C. Berkeley Water Resources Archives