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Draining Us Dry: How Diverting a New Mexico River Will Hurt Taxpayers

New Mexico could spend up to $1 billion of taxpayer money building a river diversion that will most certainly cost more than it benefits the region, according to the federal government’s own analysis.

The project’s estimated price tag has dramatically increased in the past year as more experts analyze the potential construction and operating costs for this diversion of the Gila River.

While proponents say the river diversion could bring more water to New Mexico residents, technical experts warn that the costly diversion will not be completed for decades, and it does not guarantee more water for citizens.

Background

The Gila River (pronounced Heela) flows through southwest New Mexico into Arizona, where it empties into the Colorado River. Following a 1964 Supreme Court ruling, New Mexico has been able to divert—that is, to artificially change the natural flow of the river using dams—a limited amount of water from the Gila River every year.

In 2004, Congress passed the Arizona Water Settlements Act, which grants New Mexico up to $128 million of federal funding for projects along the Gila River. But there’s a catch—or two.

Firstly, the law stipulates that, while the state can use $66 million of the funds for either water conservation projects or a diversion, the state can only receive the remaining $62 million if it decides to build a diversion.

Secondly, the law required New Mexico to request the funds from the federal government by the end of 2014. The state saw a flurry of activity over the past few years—but last year, in particular—to come up with a plan for how to spend the funds before it lost the money for good.

The New Mexico Interstate Stream Commission, the governor-appointed board at the helm of these financial decisions, whittled down an initial 45 proposals from local stakeholders to just one.  In November 2014, a month before the deadline, the Commission alerted the U.S. Secretary of the Interior that New Mexico intended to build a diversion on the Gila River.

Experts Warn the Diversion is Millions of Dollars Over-Budget…

However, technical experts began questioning the cost effectiveness of a diversion well before the Interstate Stream Commission made its decision. The independent cost estimates vary, but all of them put the cost of a diversion project hundreds of millions of dollars over budget.

In fact, the Commission hired engineering firm after engineering firm to assess the project, and not one said the state could build the diversion on budget.

The first damning critique came in May 2014 from water resources engineering firm RJH Consultants. The firm sent a memo to the Commission, identifying “fatal flaws” in a preliminary engineering report that another firm had created for the Commission a month earlier. The preliminary report had estimated that the diversion would cost $412 million (already three times the money available from federal funds). However, according to RJH Consulting, the state-commissioned engineering report failed to account for “costs for major elements required to safely design zoned embankment dams,”—that is, the dams that would make up the diversion project.

“When all of these elements are considered it is our opinion that the cost of the dams could be underestimated by more than 100 percent. Therefore it is our opinion that the overall project cost may be 25 to 50 percent higher than the current estimate,” the memo said.

Two months later, the U.S. Department of the Interior’s Bureau of Reclamation issued its own report evaluating the various stakeholder proposals for how to spend New Mexico’s $128 million of federal funds.  The report concluded that “the costs exceed benefits for all of the diversion proposals.”

According to the Bureau of Reclamation, the proposal that the Commission ultimately selected would cost an estimated $762 million to $775 million. Meanwhile the diversion’s potential benefits—for instance, to outdoor recreation and to agriculture—would only amount to an estimated $74 million to $458 million.

Even another state-commissioned report, released weeks before the Commission made its decision to go ahead with a diversion, estimated the cost of the project at $528 million—lower than the Bureau of Reclamation’s estimate, but still well over budget by hundreds of millions of dollars.

…And Most of the Cost Will Fall on Local Taxpayers

The Arizona Water Settlements Act only grants $128 million to New Mexico for Gila River projects, meaning that any additional costs will fall on New Mexico taxpayers. However, it’s now uncertain whether the state will even receive all $128 million.

At a meeting with the Interstate Stream Commission this August, officials from the U.S. Bureau of Reclamation noted that the cost of the diversion project was well over budget and that “future water users will bear all the costs of the project,” the Silver City Daily Press reported.

Users can expect to pay at least $157 per acre-foot of water from the Gila River diversion, the Bureau of Reclamation’s Mary Reece told the Commission.

Additionally, Reece said that $62 million of the federal funds are in jeopardy, partly because it may go to other projects, and partly because the Treasury fund housing the money hasn’t earned as much interest as anticipated.

Reece’s estimate echoes the testimony of Norm Gaume, a former director of the Interstate Stream Commission. In October 2014, Gaume argued before the New Mexico legislature that a diversion project could dramatically increase the cost of water to local residents, such as those in Deming, New Mexico, the largest city in the region.

“If Deming were to pay its share for water from a Gila River diversion project, the typical monthly Deming water bill would increase from the current $13.68 per month to over $158 per month,” Gaume testified. Gaume’s own estimates place the total cost of the diversion project at $1 billion.

Local stakeholders are also concerned about footing the bill for the diversion project.

In January 2014, representatives from more than 1,000 local businesses sent a letter to the governor of New Mexico calling for a more cost-effective alternative to a diversion.

The local business coalition, which represents “Fortune 500 companies and main-street retailers who support common sense solutions to water challenges facing the southwest,” according to its website, noted that New Mexico taxpayers would have to pay for cost overages.

“Plus, we will have to pay millions more each year to use that water and maintain the pipeline,” the letter said.

New Mexico is Trying to Divert Water that Doesn’t Exist.

While New Mexico has already poured over $5 million of federal funds into the diversion project, experts have noted that, in addition to being costly, a diversion will not necessarily provide New Mexico with any additional water.

The Arizona Water Settlements Act stipulates that New Mexico may only divert water from the Gila River so long as Gila River water users in Arizona have sufficient water. As former Interstate Stream Commission Director Gaume noted in his testimony, this means water would likely only be available to New Mexico “during floods and spring peak flows.”

Historical data shows that Gila River flows have only been high enough on 9 percent of all days since 1936 to meet the diversion requirements, according to Gaume. In its assessment of the diversion proposals, the Bureau of Reclamation also highlighted the fact that rivers typically have less water flow during a drought.

In short, you can’t divert water that isn't there.

What’s more, the most recent state-commissioned report estimated that New Mexico would not start to see benefits from the diversion project for nearly 20 years. This means that citizens hoping for more water will have a long wait ahead of them for, potentially, very little water at all.

POGO’s Recommendations

By all accounts, the proposed Gila River diversion project is a clear waste of federal government funds and local taxpayer money. POGO recommends that the federal government and local New Mexico authorities take the following actions to mitigate the waste and to ensure that local residents are well served by this federal funding.

1. New Mexico should not use any more federal funds on this diversion project.  The state has already spent $5 million of its $128 million of federal funding planning this over-budget, ineffective diversion project. The more money that goes into this dead-end project, the less money will be available for more effective alternatives.

2. The Interstate Stream Commission should explore alternative projects. Analysis from the U.S. Bureau of Reclamation shows that other uses of the federal funds are both less costly and will have greater benefits to the local community. The Commission should reexamine all stakeholder proposals to identify more tenable projects. The Bureau of Reclamation should provide technical assistance to the Commission to assist in this process.

3. The U.S. Secretary of Interior should not sign off on this diversion project. In order for New Mexico to receive all federal funds, the Secretary must approve the project by publishing a Record of Decision in the Federal Register by the end of 2019, per the terms of the Arizona Water Settlements Act. Given that the Secretary’s own Bureau of Reclamation has published ample evidence against the cost-effectiveness of the proposed diversion project, the Secretary should reject New Mexico’s plan to waste its federal funding.

By: Mia Steinle
Investigator, POGO

Mia Steinle, Investigator Mia Steinle is an investigator for the Project On Government Oversight and the civil society coordinator for the U.S. Extractive Industries Transparency Initiative. Her work focuses on government management of the oil, gas, and mining industries.

Topics: Energy and Natural Resources

Authors: Mia Steinle

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