Category Archives: Interest Rates

Indian Water Rights: A Series on the Appropriate Cost Benefit Analysis Framework for Economic Feasibility Assessment

I.                   Introduction

The near lack of progress in resolving the millions of acre-feet of outstanding Federal reserved water rights claims of many Native American Tribes is a significant contributor to the perilous uncertainty that plaques the water supply-demand landscape in many regions of the western United States.  This uncertainty poses a formidable constraint to the proactive and comprehensive water resource plan decision-making so particularly needed in these times of prolonged drought and widespread concern over the potential adverse hydrologic impacts of climate change.  It is no surprise, therefore, that stakeholders at the local, state and federal levels are ever searching for technical and political solutions to facilitate the settlement of native water rights claims as a means to jumpstart long stalled water resource development and management action.  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

Project Evaluation II: Thoughts about Interest Rates

Interest rates used in project evaluation should command the attention of anyone interested in water projects.  The lower (or higher) the interest rate used in project evaluation, the more (less) likely a given project will be judged economically viable.  The interest rate issue should NOT be viewed as an issue in the exclusive domain of economists and financiers.  Otherwise, project evaluation will be co-opted by “off-line” discussions among economists and financiers selecting the interest rate. Continue reading