Author Archives: Rodney T. Smith

About Rodney T. Smith

Rodney T. Smith, Ph.D., President of Stratecon Inc.—an economics and strategic planning consulting firm—advises public and private sector water users on the acquisition, sale and leasing of water rights and water supplies in the western U.S. He is routinely involved in economic valuation of water rights, water investments, and negotiation of water acquisition and transportation agreements and has served as an expert witness in the economic valuation of groundwater resources, disputes over the economic interpretation of water contracts, economics of water conservation and water use practices, and the socio-economic impacts of land fallowing. For more information, see www.stratwater.com.

Increasing Hydrologic Risk in the Colorado River Basin

Climate change received added buzz with President Obama’s second inaugural speech on January 21st.  Climate change poses at least three issues for water resource management and investment:

  • What is the anticipated magnitude and timing of climate change?
  • Has anticipated changes already been reflected in actual hydrologic conditions?
  • What does it mean and what to do about it?

For the Colorado River Basin, the issue of changing hydrologic conditions has been alive for decades and steps have already been taken.  Judging by the changes in actual hydrologic conditions, the challenge is significant—especially for water users down the priority list of water rights.   Continue reading →

Project Evaluation IV: Time Horizon

Project evaluation must select a time horizon.  Especially for projects front-loaded with significant capital investment, the longer the time horizon, the greater the prospect that the present value of project benefits exceeds the present value of project costs. This fourth post in the series on “Project Evaluation” argues that, rather than debating the choice of a fixed number for the time horizon, one should focus on the sources of project termination risk.  Continue reading →

Project Evaluation III: Risk Premium and Risk Assessment

Project evaluation must consider project risk.  Water yields vary with hydrologic and regulatory conditions.  Project construction and operations face potential pitfalls.  Will a 100-year flood or earthquake impair/destroy facilities?  Prices of project outputs and inputs are variable.  Will run-up in energy prices or decline in water demands from a weak economy threaten project viability?  The list of project risks is long.  Continue reading →

Proposed Down Payment for Financing the Texas Water Plan

Texas Representative Allan Ritter (R-Netherland) recently introduced HB 4 and HB 11 to finance the Texas Water Plan through a one-time $2 billion capitalization of a dedicated revolving fund.  The legislation will also address the fund’s management and operation.  This post discusses two key aspects of revolving funds that will shape how far the Texas Water Development Board (“TWDB”) can stretch the $2 billion capitalization to meet Texas’s financing needs: Continue reading →