ECONOMY
By George Oamek, PhD
My column in the last issue focused on flooding, and this column focuses on drought — or rather lack of irrigation water. Possibly a pestilence column will follow.
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It is evolving into an inspirational story of engineering challenge and community response.
n mid-July, portions of an irrigation tunnel in Western Nebraska and Eastern Wyoming collapsed. This tunnel is the second of three that delivers water from the federal North
Platte Project to the Goshen and Gering-Ft. Laramie Irrigation Districts, and the collapse resulted in serious damage to the delivery system and interrupted deliveries to about 105,000 acres of irrigated cropland during a critical period of crop production. This is resulting in real-time economic impacts to the Nebraska Panhandle and Eastern Wyoming regions along with uncertainty about the time frame of repairs.
A joint effort by agricultural economists at the University of Nebraska and University of Wyoming responded quickly, estimating that the direct economic impacts of yield losses, accruing primarily to irrigators themselves, will be about $52 million, or $494 per acre. The indirect and induced impacts, which account for input suppliers and the household spending of these input suppliers, was estimated to be $25 million, resulting in a total economic impact to the two-state region of about $77 million.
From an economist’s standpoint, I might argue that the indirect impacts are slightly overstated, but that’s esoteric on my part — it’s a major impact regardless. While I write this column, the U.S. Department of Agriculture announced that this incident is considered an unavoidable natural disaster due to cumulative impacts of high rainfall. Crop insurance payouts should be forthcoming. That’s great for the insured, of course, but crop insurance won’t cover all of this year’s loss and will not contribute to repairing the tunnel.
The cost and time frame of repairs are still up in the air because the physical damages have
32 Irrigation TODAY | Fall 2019
not yet been fully assessed. There seems to be an equal probability that deliveries may resume within a few weeks or not until next year. Regardless, it is evolving into an inspirational story of engineering challenge and community response.
The collapsed tunnel was constructed in 1917 by the Bureau of Reclamation, which maintains ownership of the three tunnels. The operation and maintenance of the diversion, delivery system and tunnels have historically been the responsibility of the two irrigation districts. Although they likely have reserves for normal operating contingencies, it’s safe to assume they lack the financial reserves to make this scale of needed repairs.
Based on 100,000 irrigated acres, a 40-year term and 4% interest, the repair cost would be approximately $5.00 per acre for every $10 million in repairs. If repair costs are $25 million, repayment would be approximately $15 per acre. At $100 million in repairs, the cost would be approximately $50 per irrigated acre. A saving grace for the irrigators would be the Bureau of Reclamation financing the repairs or reconstruction. Under Reclamation policy, the irrigators would only be responsible for costs up to their ability to pay, as calculated by Reclamation economists. There are specific guidelines for these calculations, but in most cases, irrigators would see significantly lower per acre costs than if they financed repairs or reconstruction themselves.
, is an economist with Platte River Recovery Implementation Program’s
irrigationtoday.org
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