Water projects stuck in regulatory limbo

In the past decade, Jeff Drager has watched his two daughters grow up, graduate from high school and college and start their first jobs. Yet he’s still stuck on the same project at work – winning state and federal approval to build a new water reservoir.

Begun in 2003 and scheduled to be up and running by 2011, the project, known as the Windy Gap Firming Project, like many others across the state, still is mired in regulatory delays.

Whether or when Windy Gap will be built is still unclear 10 years after the first regulatory review took place.

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Three other major water projects face similar delays and uncertainty.

Drager, an engineering project manager with the Northern Colorado Water Conservancy District, is in charge of bringing Windy Gap online. The project includes building Chimney Hollow Reservoir, one ridge over from Carter Lake in the foothills outside Loveland. It is designed to help Northern Water better manage and store water it developed in 1985.

Northern is working with 13 Northern Colorado water providers to develop the latest phase of Windy Gap, which is designed to serve 60,000 households.

Northern Water initially submitted the project for environmental review to the U.S. Bureau of Reclamation in 2003. Through the National Environmental Policy Act (NEPA), a project’s environmental impacts are reviewed during several stages of technical analysis and public comment. A 2005 Northern Water fact sheet projected a final “record of decision” could come by the end of that year, meaning construction could start soon after and the reservoir would be ready by 2011.

That forecast was wildly optimistic. The bureau didn’t issue a final environmental impact statement, a key step in NEPA, until late 2011. Reviews by federal and state scientists, environmental groups and western Colorado interests each triggered calls for mitigation and changes that added months and then years of delay.

“Nobody would have anticipated some of these things” said Drager.

Project partners have spent $12 million to date just on permitting, agreed to pay millions more than expected for environmental mitigation and watched the cost estimate jump nearly 28 percent, from $223 million to $285 million. That’s roughly $1,033 per household.

Similar delays and cost overruns have plagued nearly every other major Colorado water-development project that has sought regulatory approval since the 1990 defeat of Two Forks Dam. Proposed by Denver Water, the $1 billion Two Forks project passed through NEPA with government approval before the Environmental Protection Agency vetoed the decision because of study inadequacies and unresolved water-quality impacts.

After more than a decade of drought and a new wave of growth, water utility planners believe the project review system is broken and must be fixed. Legal experts and environmental watchdogs say the projects themselves are outdated in concept and that utilities need to rethink how they obtain, store and deliver water.

Starting and stopping

Drager has had to ask Windy Gap Firming Project partners for an extra $1 million four separate times in the past five years to pay for unexpected mitigation. Consideration of the upper Colorado River as a federally designated wild and scenic river triggered additional analysis. State fish and wildlife managers required further mitigation plans, including a study for a fish bypass around Windy Gap Reservoir. Northern Water also had to agree to enhance river habitat and operate water diversions to support endangered fish in the Colorado River. The EPA filed comments that led to further changes. When an end seemed near in June 2012, Grand County exercised its “1041 powers,” requiring a new permit and an agreement from partners to improve clarity for Grand Lake, which has deteriorated in part because of Northern’s water diversions. Now mostly settled, the Grand Lake revision marked the fifth major project stoppage.

“It’s not just NEPA,” Drager said. “There are a whole bunch of federal requirements – the Endangered Species Act, the Clean Water Act – and then you’ve got a group of state laws which don’t always work well with the federal laws. So, it’s very hard to know when is the last step. When are you done?”

Communities and water districts that are footing the bill have weathered the delays and tacked-on costs so far. The Little Thompson Water District in Berthoud has avoided charging existing customers extra, said district manager Jim Hibbard, because one developer is shouldering the district’s share of the costs and adding those dollars to the cost of new homes he is building. “Probably the most significant impact is the costs of the project keep going up,” Hibbard said.

The city and county of Broomfield, another project partner, has used money from water tap fees for its share of the project and paid the additional costs with reserve funds stashed away for such purposes, said public works director David Allen. But even with the added mitigation and expenses, both managers say the project remains an inexpensive and preferred alternative to purchasing shares in existing water projects, such as the Colorado-Big Thompson system or buying out farmers’ water rights and drying up local agriculture.

Analysis paralysis

Since Two Forks, federal agencies involved with NEPA reviews are “gun shy,” said Dave Little, planning director for Denver Water, which also has spent more than 10 years seeking approval for its own major water project, the Moffat Collection System.

The Moffat project would expand Gross Reservoir, southwest of Boulder, and fill it with flows diverted from the Fraser River near the Continental Divide. But progress has been slow, Little said, as government consultants have conducted detailed studies and assessments of low-probability or marginal scenarios. As an example, Little mentioned a “full-blown” environmental assessment that had to be done on the utility’s southern reservoir operations, which are located 100 miles away from Gross Reservoir and would be minimally altered by the Moffat project. Such detours have contributed to Moffat’s estimated price tag doubling to $280 million since formal review began a decade ago.

Jim Lochhead, Denver Water chief executive, said he hopes the process can be improved and perhaps expedited.

“We’re committed to doing this the right way, but we seem caught in this series of processes that really inhibit our ability to meet the needs of our customers,” he said. “Circumstances are changing much more rapidly than in the past, and we have a very rigid regulatory process that is not nimble, adaptable or capable of allowing for critical, timely decisions on key infrastructure.”

In May, President Obama addressed analysis paralysis on major energy and transportation projects by ordering agencies to expedite federal permitting processes. U.S. Rep. Cory Gardner, R-Colo., also plans to introduce legislation to expedite decisions on major water projects when supported by state officials, a direct response to the logjam of Front Range water projects.

Another problem is that government agencies lack the personnel and resources to effectively perform reviews. This summer, Northern Water, to the dismay of environmental groups, gave the Army Corps $140,000 for a project manager position to keep moving forward with review of the Northern Integrated Supply Project, which would build Glade and Galeton reservoirs to serve up to 80,000 new households in the region.

Creative approach

Drew Beckwith, a policy analyst with the Boulder-based Western Resource Advocates, compares large water projects to the lyrics of sad country-western songs: They’re always late and in need of money. They don’t live up to expectations and they’re risky. Beckwith said he believes the delays and overruns are more indicative of a planning issue than a process problem.

“It’s no surprise that the environmental-review process takes a long time,” he said. “These are big, complex projects that have lots of impacts on communities and the environment, and it’s appropriate to take a long hard look.”

Cost overruns may look excessive, but initial estimates often come in low to ease early acceptance of a project, Beckwith said, adding that some delays are squarely on the shoulders of project managers who haven’t adequately analyzed certain impacts or mitigation actions.

“I don’t think anyone is really happy with the way the process works right now,” Beckwith said. “Utilities think it takes too long. Conservationists would say there’s not enough good input.”

He said he would like to see a more open-ended, upfront approach to water-supply challenges instead of a water agency selecting a preferred solution and then following a “decide and defend” strategy.

The changing pressures from environmental organizations also have factored into delays. The proposed $140 million Chatfield Reservoir Reallocation southwest of Denver, another storage expansion project under consideration, has received support from several conservation groups, including Western Resource Advocates, because it avoids building an entirely new reservoir, but the Audubon Society of Greater Denver opposes the development because it would flood wetlands and other bird habitat.

The current system may be frustrating, but water-law experts say it’s also serving its purpose. This spring, 50 water-law professors wrote to the U.S. Senate, warning that provisions in the 2013 Water Resources Development Act to loosen environmental review of federal projects would gut NEPA and other laws. Congress is still considering the legislation.

“If I was one of the entities that was proposing a project, I would find it enormously frustrating with the extent that every aspect of the project gets scrutinized and with the problem of satisfying every environmental law,” said Larry MacDonnell, recently retired professor of the University of Wyoming College of Law, “but I think that’s inherent in the process. I don’t believe there’s anything out of joint.”

The plodding pace of regulatory review may remain an annoying reality – unless a water utility can devise ways to provide water without massive new storage or delivery pipelines.

Aurora did just that. A decade ago, facing water shortages and drought, Aurora Water planners recognized the need for swift action to protect system reliability and service for existing customers. The utility decided to build its Prairie Waters Project, an $854 million pipeline and treatment facility that would allow the city to reuse 50,000 acre-feet of water annually and meet its water demands through 2030. Since the project didn’t include new storage, managers avoided prolonged federal review, said Darrell Hogan, the project manager, and Aurora Water further expedited its work by tunneling under waterways. To have disturbed the waterways otherwise would have required Clean Water Act 404 permits. Hogan said the project didn’t evade environmental protections; planners still consulted with government scientists and conservationists, and had to acquire more than 400 permits for local construction and operations. However, working around the federal system facilitated progress. Prairie Waters went from concept to completion in less than six years, delivering water in October 2010 on time and under budget.

“It’s an interesting example of a creative approach to try to be more efficient in how we use water,” MacDonnell said.

Projects such as Prairie Waters may represent a relatively hassle-free water-development future, but Drager and colleagues still are wedged between historical practices and current needs. Drager guessed – hesitantly – that the regulatory go-ahead for Windy Gap might come in 2014, so water could be delivered by 2020. But that’s assuming the project is approved.

“I was 44 (when the process began) and I’m 54 now,” Drager said“and I already have gray hairs.” He said he isn’t sure if those are from raising two daughters or waiting out Windy Gap.