Feds ask state to prove it can pay for proposed Lake Powell Pipeline

Federal Energy Regulatory Commission gives state officials 60 days to produce a financial study, along with more data on water use and cultural riches along proposed pipeline route.<br>

(Leah Hogsten | Tribune file photo) Officials from the Federal Energy Regulatory Commission (FERC) have given the state of Utah 60 days to provide a financial feasibility study on how the state would pay for the billion-dollar-plus Lake Powell pipeline.

State officials and other proponents of the Lake Powell pipeline may have just two months to convince federal regulators that their project is backed by a robust plan to pay off more than $1 billion in costs.

The Federal Energy Regulatory Commission (FERC) has indicated it cannot review the state’s yet-to-be-completed application for permission to build the pipeline in southern Utah because it lacks an adequate financial analysis.

In an Aug. 11 letter to the state’s Board of Water Resources, federal regulators have given Utah 60 days to submit the financial feasibility study, including estimated costs to new and existing water users in Washington and Kane counties. FERC has also asked for additional water use data and for more details about cultural resources along the proposed route of the pipeline, which would carry Colorado River water from Glen Canyon Dam 140 miles to St. George. 

A spokeswoman for the federal agency, Celeste Miller, said Tuesday that state officials had indicated the requested information would be part of Utah’s final application. But the study still has not been submitted.

Joel Williams, assistant director of the development branch of the Utah Division of Water Resources, said the state does intend to submit at least some additional financial information to FERC in the next 60 days.

However, Williams said, the state does not have all the specifics the feds have requested, such as how much the pipeline will cost Washington and Kane County residents. The agency is working on those figures, Williams said, but is not likely to have estimates ready in two months.

At a Tuesday meeting on Capitol Hill, Eric Millis, director of the Utah Division of Water Resources, told lawmakers that a financial plan would not be done until the pipeline’s environmental permits have been approved by all relevant federal agencies. The state expects FERC to apply for those permits on Utah’s behalf, once federal officials complete a review of Utah’s pipeline application — a milestone Millis said he expects to reach this fall.

Until then, Millis said, state officials won’t have enough data to determine the pipeline’s specific costs. 

Whether or not Utahns can actually afford to build the pipeline — last estimated to cost in the range of $1.4 billion — has been a central issue in a long-running debate over the proposed project. Zach Frankel, executive director of the Utah Rivers Council and an outspoken pipeline opponent, said he was pleasantly surprised to see FERC wading into the issue.

“We’re pleased to see they’re at least asking the right questions,” he said.

Under current state law, the state Division of Water Resources would pay for the construction of the Lake Powell pipeline, with taxpayer money. But the recipients of the water — currently Kane and Washington county water conservancy districts — would be required to repay the state through the purchase of pipeline water over the course of 50 years. How much that water will cost remains a matter of dispute.

Frankel pointed to an analysis by economists at the University of Utah, which concluded that water rates in Washington County would have to rise by more than 500 percent to pay for the water the Washington district would be obligated to buy.

The water district, on the other hand, has contended it has a plan that would enable it to pay for the pipeline by increasing customers’ water bills just a few dollars each month. But, when pressed for documentation of its plan, the water district released a series of slides and spreadsheets it said were used in interactive focus groups in 2013 and 2014. The documents did not represent an actual repayment plan, according to the water district.

During Tuesday’s meeting, before the Legislative Water Development Commission, state Sen. Howard Stephenson, R-Draper, suggested that state lawmakers consider backing bonds to pay for the pipeline, rather than funding the loan directly with taxpayer funds.

While Stephenson said he supported building the pipeline to guarantee future growth in southern Utah, he believed the water users, rather than state taxpayers, should foot the bill.

“Rather than being the bank,” he said, “we ought to back the bonding to keep the best rates possible and to ensure that we aren‘t taking a billion or more out of the taxpayer’s pockets.”

But Ron Thompson, general manager of the Washington County Water Conservancy District, said the state state should to be open to all potential financing options. Thompson noted that the world’s advanced civilizations were all supported by water systems built by a centralized government.

The state’s Lake Powell Pipeline license application, which was initially submitted in March 2016, contains few specifics about the pipeline’s costs and financing. The application remains incomplete in other ways as well; shortly after filing it, regulators at the Division of Water Resources indicated that the 6,000-page document contained numerous errors and would require revision.

The state has intermittently filed supplementary material correcting and expanding its application since it was first submitted.

Frankel said he believes the state is stalling in order to avoid having to admit it does not know how to pay for the pipeline.

“I think Utah taxpayers are going to pay $6 of every $7, or $8 of every $10, for the Lake Powell Pipeline and the proponents of the project know it,” Frankel said. “They‘re stalling and they’re hiding, and they’re pretending like they have a viable repayment plan, but they know it can’t be done.”

Utah’s congressional delegation, as well as Gov. Gary Herbert, have asked FERC to complete its review of the as-yet-unfinished application by 2018. Millis told lawmakers on Tuesday that he still hopes to begin construction of the pipeline sometime after 2020.