Dam Fools

Why federal water management is all wet--and why environmentalists are right to question it.

James V. DeLong from the April 1998 issue

(Page 3 of 5)

When I asked a Corps of Engineers representative whether anyone had ever done a cost-benefit analysis on all the corps's activities, I was told that analysis was performed in advance on each individual project and that all of these could be found in the Library of Congress. Economists who have studied the matter say that the corps's estimates greatly overstate benefits and understate costs. Since the primary corps mission concerns flood control, there is a circular quality to the benefit calculations. If no one builds on a flood plain, floods cause no damage. Put up a dam to prevent the flooding, and people will build. Thereafter, every time the river rises, the total value of all this construction can be counted as "flood damage prevented."

Thus the corps can claim that its works prevented $17 billion in flood damages during 1994. But it is also no accident that the national bill for flood damage has increased as expenditures on flood control have grown. People get lured in, then wiped out when there is a large 100-year flood. (Not to worry, though--they can get federally subsidized flood insurance.) This provides justification for further flood control expenditures.

The corps now manages 383 major lakes and reservoirs, 18,281 square miles of land and water, and 4,329 recreation sites. A key factor in the growth of this empire was that national taxpayers provided local benefits. While the locals pay something, it was usually less than a quarter of the costs, and even this was often forgiven. In the 1980s, Ronald Reagan's budget office tightened the rules, which caused local political support for many projects to evaporate faster than water in a desert reservoir.

Water Futures

The federal dam circus has continued in all three of its rings--irrigation, flood control, and power generation--with ever more astounding performances. An irony of the continuing federal irrigation effort is that the irrigation water generated may not even be crucially important to agriculture. The 10 million western acres getting all or part of their crop water from the Bureau of Reclamation represent less than 3 percent of the nation's 340 million acres of cropland. They also represent only one-third of the total western acres under irrigation; the rest is irrigated by deep ground water, made possible by the invention of the turbine pump in the 1940s. California's Central Valley, site of one of the most important Bureau of Reclamation projects, is more dependent on ground water than on the federal dams. The necessity of the irrigation water can be questioned on another ground as well: Between 1929 and 1978, 60 percent of the increase in irrigated acreage was devoted to growing subsidized crops, most of which were in surplus.

All the economic legerdemain would be bad enough if it represented a simple raid on the public fisc, if there were a straight transfer of money from taxpayers to farmers. But that is not the case; many projects combine large subsidies with even more pure waste. The Central Utah Project sells water to farmers for $3.00 per acre-foot. The farmers use each acre-foot to produce crops worth $30. But the cost to the government of delivering each acre-foot is $350, so the dead-weight loss to the national economy is $320.

A fitting climax to this history is now being contested in Colorado, where the proposed $700 million Animas-LaPlata Dam would pump irrigation water up 900 feet over a ridge and would cost over $7,500 per acre irrigated. This is a stunning figure because, as Marc Reisner points out in Cadillac Desert, his classic 1986 book on the big dam era, the most fertile farmland in the world sells for only about $700 per acre. Projects such as Animas, Central Utah, Central Arizona, and others spend thousands of dollars per acre to bring water to land which will thereafter sell for only a few hundred dollars an acre. According to Interior's own analyses, Animas would produce benefits equal to only 40 percent of its cost. But the project just keeps rolling along.

In California, the battle is over the Auburn Dam, a $948 million flood-control project that would be 75 percent funded by federal taxpayers. Proponents say it would simply protect Sacramento to the same degree that the Corps of Engineers has protected other communities. Opponents claim that the dam would destroy 40 miles of river canyon visited by half a million people a year, that the existing city can be protected through cheaper alternatives, and that the purpose of the dam is to let real estate developers build fearlessly on a large flood plain.

The moral and intellectual bankruptcy of cost-benefit analyses of water projects is summed up in the story of the Tellico Dam in Tennessee. In the 1970s, the TVA proposed a dam that would destroy a beautiful valley and a splendid trout and canoeing stream to gain a trivial increase in power generation at a nearby dam. The project passed all the applicable cost-benefit filters and got under way. Construction was stopped by the discovery of the endangered snail darter, a tiny and hitherto obscure fish, and the Supreme Court ruled that the Endangered Species Act required that the dam be left unfinished to protect the fish.

Congress responded by passing a law giving a special cabinet level committee, nicknamed the God Squad, power to exempt any specific project from the Endangered Species Act when the benefits of doing so clearly outweigh the costs. Tellico was 95 percent completed, and it was a foregone conclusion that an exemption would be given. The committee, chaired by Charles Schultze, a distinguished economist, said no. Under honest cost-benefit analysis, all the benefits from the completed dam would not equal the 5 percent of the costs that remained to be paid. Leaving aside any environmental concerns, economic rationality dictated that the dam should be left unfinished and the sunk costs written off. Congress reacted by passing a special law exempting Tellico from the Endangered Species Act and ordering completion of the dam. To round out the comedy, a few years later the snail darter was found to flourish in several other nearby streams, so allowing Tellico did not finish it off after all.

Fluid Costs

From 1902 to 1994 the Bureau of Reclamation spent $22 billion on construction, of which $7 billion was specifically allocated to irrigation. The Corps of Engineers spent $34.7 billion on flood control from 1928 to 1994. The monetary expense may have been acceptable, but the nation paid a high price in other coin.

The dam building era ignored environmental values. It did not count as a cost the submersion of beautiful canyons or the destruction of the salmon runs of the Northwest that resulted from turning the Columbia into a series of lakes. It was not concerned with saltwater intrusions, or the residues of irrigation, or a host of other effects.

People can debate endlessly over assessment of the costs and benefits of these actions. Flooding Glen Canyon produced Lake Powell, which has 1,960 miles of shoreline, covers 266 square miles, and was recently described by one newspaper as "one of the West's premier watersports playgrounds." Is sacrificing a canyon to produce a water playground in a desert good or bad? It is not a question that produces unanimity of response. But at least the environmental impact should be thought about somewhere in the decision process, and it wasn't.

Another cost of the dam building era was distortion of the nation's economic and political decision making. Sometimes it makes sense to irrigate cropland, such as low-lying California valleys with long growing seasons that can supply high-value winter fruits and vegetables. Sometimes it does not, as when the land is on the high plains where the growing season is four months and the only viable crops are hay and alfalfa.