Category Archives: Project Evaluation

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 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 →

Blind Men, Elephants, and Zen – Approaching Basin Evaluation Like a Cup of Tea

This post presents a point of view that I have found tremendously useful when approaching basin evaluation, and evaluating behavior of water resources.  In particular, it applies to approaching relatively complex structural basins.  Within these types of reservoirs – water is often significantly controlled by structural geology.  Geologic structure and its underlying driving tectonics impart a rock “fabric” – or “grain” – that is not a function of sedimentation.  This “fabric” is in the form of faulting, jointing, fracturing, and other phenomena, and can facilitate, re-direct, or impede groundwater.  Small, let alone large, variations in stratigraphy and sedimentary development can have orders of magnitude influences on storage and transmissivity.  As important as these factors are – however it is my experience that they are so often ignored for the sake of modeling and “conservatism” – and/or because of a lack of recognition, appreciation and understanding of these phenomena for whatever reason.  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 →