Grand Coulee Dam and the Columbia Basin Project usa final Report: November 2000

 
8.2  Managing Debates on Project Operations  
 
Issue: 
Managing debates on project operations 
Component of Project Cycle: 
Operations 
 
Lesson: 
In a multipurpose water project, it is common for project purposes 
(eg, flood control and recreation) to conflict. Because conflicts 
among various purposes are practically inevitable, a process for 
managing stakeholder contributions to debates on project 
operations should be institutionalised on future projects. 
 
Evidence: 
Operation of GCD has changed in response to shifts in social 
values and changing political and economic circumstances. Some 
stakeholders concerned with resident fish and recreation feel that 
they lack a productive forum for advocating their interests related 
to project operations. 
 
Views (divergent): 
    
 
The need for a process that encourages stakeholders to participate in planning does not end with project 
construction. The history of operations at GCD provides ample evidence supporting the existence of 
continual debates about operations on long-lived water resources projects. In the early stages of GCD, 
the project was operated primarily for hydropower and irrigation. After the Columbia River Treaty was 
in place, flood control was given top priority in overall operations of FCRPS. At that point, GCD was 
operated according to a system-wide scheme that optimised hydropower and flood control, while 
meeting CBP irrigation requirements. In subsequent years, flow augmentation and spill control to 
mitigate damage to anadromous fish received increasing attention. 
 
Some of the above-noted project purposes interfere with uses related to recreation and residential fish. 
During our interviews, individuals concerned about recreation and residential fish frequently complained 
about the lack of priority given to these project purposes. Broadly speaking, debates on how much 
priority should be given to each of the principal project-related activities — hydropower, irrigation, 
flood control, anadromous fish, recreation, and residential fish — have been going on for many years. 
Shifts in priority for different project purposes are inevitable in the context of a long-lived water 
resources development project, and it would be beneficial to have a structured process for integrating 
stakeholder perspectives into the process of deciding which uses to prioritise in project operations over 
time. 
 

Grand Coulee Dam and Columbia Basin Project 
 
         128 
 
This is a working paper prepared for the World Commission on Dams as part of its information gathering activities. The views, conclusions, and 
recommendations contained in the working paper are not to be taken to represent the views of the Commission 
 
8.3   Incorporating Changing Social Values into Operations  
 
Issue: 
Changing social values 
Component of Project Cycle: 
Operations 
Lesson: 
For future projects, periodic, planned re-evaluations can provide a 
mechanism for incorporating temporal changes in social values 
into project operations. To meet social policy objectives, it might 
be necessary to reduce uncertainties for stakeholders whose 
decisions would be influenced by results of re-evaluations. 
Evidence: 
Support for the social goal of having small family farms located in 
the semi-arid Columbia Plateau has faded, but long-term contracts 
with subsidised prices for irrigation water persist; support for 
maintaining wild salmon and steelhead in the upper Columbia 
River is much stronger today than it was when the project was 
planned. 
Views (divergent): 
Issues related to uncertainty are of critical importance; re-
evaluation procedures need to be workable. 
 
As the experience of GCD and CBP demonstrates, changes in social values and political context can be 
expected during a water resource project’s useful life. For projects built in the future, periodic re-
evaluations and adjustments would allow decision-makers to accommodate changing political contexts 
and social values. Support for this finding is given by the experience with aspects of the project related 
to irrigation. During the 1930s, when CBP was first authorised, the idea that irrigation of arid lands was 
necessary to provide food for growing populations in the US Northwest, while controversial, at least had 
some credibility. Today, in the face of the international trade in agricultural commodities, this notion 
would be difficult to defend. During the past half-century, technological changes in everything from 
tractors to computers have resulted in extraordinary gains in output per acre of farmland. These 
productivity gains, coupled with the rise of international trade, have caused the number of farmers in the 
US to fall since the 1930s. Whereas a century ago, a notable percentage of all Americans lived on farms 
and ranches, only a very small fraction of the US population is engaged in farming today. The provision 
of irrigation water to the Columbia Plateau highlights the danger of making long-term commitments to 
support certain project operations without specifying a fixed future time for re-evaluating those initial 
commitments. If the farm families on the Columbia Plateau knew many years ago that their ability to 
obtain subsidised, low-cost irrigation water was going to change at a particular point (or at least that it 
was going to be seriously re-examined with the possibility that it would change), those farmers would 
have made very different decisions along the way. Under circumstances that now exist, farmers would 
feel betrayed by a change in the rules related to water pricing. A significant increase in price might cause 
enormous social disruption in the CBP area because many families have invested themselves and their 
futures in farming.
167
  
 
The prospect of future re-evaluations will introduce uncertainties for those making investments based on 
the current distribution of a project’s benefits and costs. Consequently, it may be necessary to introduce 
contractual mechanisms that reduce uncertainties for stakeholders. The nature of these uncertainties is 
well illustrated by the circumstances surrounding CBP. Putting a fixed timeline on subsidies to irrigators 
would have provided flexibility for federal decision-makers, but it would also have introduced much 
uncertainty to the decision processes of CBP settlers. The result might have been that farmers would 
have decided not to settle on CBP land or, if they did settle, to make smaller investments to enhance 
productivity. A case could be made that, in the context of the original CBP objectives, the additional 
uncertainty would have been undesirable from a social policy perspective. 
 
If the uncertainties associated with periodic re-evaluations might interfere with attainment of social 
policy objectives, contractual mechanisms could be designed to offset the effects of uncertainty. In the 
case of CBP, the federal government might have agreed to compensate farmers adversely affected by the 
results of future re-evaluations as part of the costs of retaining policy flexibility. For example, the initial 
contracts with settlers might have included provisions for the government to compensate CBP irrigators 
for part of their capital investments if changes resulting from re-evaluations made it financially 

Grand Coulee Dam and Columbia Basin Project 
 
         129 
 
This is a working paper prepared for the World Commission on Dams as part of its information gathering activities. The views, conclusions, and 
recommendations contained in the working paper are not to be taken to represent the views of the Commission 
 
infeasible for irrigators to continue farming CBP lands. As another method of reducing uncertainty, the 
government might have specified, at the outset of a contract, the maximum change the government 
would be permitted to make at particular future dates. 
 
Issues related to anadromous fish also demonstrate that periodic, planned re-evaluations of a project can 
be beneficial in accommodating changing social values. During the 1930s, the majority of people in the 
US Northwest did not rise up in protest over the loss of salmon caused by the first three dams on the 
main-stem of the Columbia River: Rock Island, Bonneville, and Grand Coulee. And not many people 
(other than Native Americans and First Nations) seemed preoccupied with the fact that native salmon 
runs were being reduced and being replaced by runs supported by hatcheries. Moreover, many 
agricultural and industrial interests viewed water from the Columbia River that flowed to the sea as 
being a waste of natural resources. Contrasting the situation in the 1930s with the situation today reveals 
a much different scene. Large numbers of people now feel that wild salmon should run in the Columbia 
River. Moreover, there is increasing political support for the view that maintaining in-stream flows to 
support ecosystem functions is a legitimate, beneficial use of water. While these changes in social values 
have been reflected in changes in FCRPS operations, many of the changes in operations occurred long 
after significant damage to ecosystem functions and salmon runs had already taken place. Perhaps, if 
systematic and periodic project re-evaluations had been undertaken, interventions to restore salmon and 
steelhead and maintain ecosystem functions on the Columbia River could have come sooner, with less 
cost, and with a higher likelihood of success. 
 
The following were among the divergent views expressed at the stakeholder meeting of 13 January 2000 
in Portland: the only way this lesson would make sense is if those entering an agreement would be 
compensated if they made investments predicated on there being no change in arrangements and then 
changes were made later. Implementation of the proposed lesson would introduce too much uncertainty. 
For example, if CBP farmers thought their financial arrangements would be re-evaluated after 10 years, 
the resulting uncertainty would have been sufficient to keep irrigators from making investments and the 
goal of the project to settle farmers in the area would not have been attained.  
 
Another concern registered at the stakeholder meeting in Portland centred on the workability of re-
evaluation procedures. The periodic reassessment of licenses conducted by the Federal Energy 
Regulatory Commission (FERC) was cited as an example of a periodic re-evaluation process that was 
useful in theory, but highly bureaucratic and cumbersome in practice. The individual citing this example 
felt that periodic re-evaluation was a valuable concept, but that great attention needed to be given to the 
workability of the re-evaluation process. 
 
We also received correspondence from a CBP irrigator who took exception to our use of subsidies to 
CBP farmers as an illustration of the value of periodic re-evaluations to incorporate temporal changes in 
social values into project operations. In his view, an evaluation of monetary costs and gains would find 
that the government has benefited from CBP in excess of expenditures. 
 

Grand Coulee Dam and Columbia Basin Project 
 
         130 
 
This is a working paper prepared for the World Commission on Dams as part of its information gathering activities. The views, conclusions, and 
recommendations contained in the working paper are not to be taken to represent the views of the Commission 
 
8.4  Incorporating Changes in Science and Technology into 
Operations 
 
Issue: 
Changes in science and technology 
Component of Project Cycle: 
Operations 
Lesson: 
For future projects, periodic, planned re-evaluations provide a 
mechanism for incorporating changes in science and technology 
into project operations. To meet social policy objectives, it might 
be necessary to reduce uncertainties for stakeholders whose 
decisions would be influenced by results of re-evaluations. 
Evidence: 
Biologists' views on native versus hatchery fish have changed; and 
changes in farm technology have increased pressures for larger 
farms than anticipated by CBP planners. 
Views (divergent): 
Issues related to uncertainty are of critical importance; re-
evaluation procedures need to be workable. 
 
This lesson is closely related to the previous one, and the discussion above concerning uncertainty also 
applies here. We chose not to combine sections 8.3 and 8.4 into a single lesson because we felt there was 
value in separating issues tied to changing social values from those related to changes in science and 
technology. 
 
Rapid scientific and technological changes were a hallmark of the 20
th
 century, and there is no reason to 
expect the rate of change in science and technology to decrease in the future. Periodic, planned re-
evaluations of project operations can provide a basis for accommodating changes in technical and 
scientific knowledge. A forceful demonstration of this is given by the way changes within the scientific 
community surrounding the significance of genetic biodiversity have affected biologist’s views on native 
versus hatchery fish.  During the 1930s, when the fish maintenance programme for GCD was being 
created, the biologists designing the programme did not favour runs of native salmon and steelhead over 
runs that involved fish propagated via transplantation and hatchery operations. Today, many biologists 
view hatcheries and fish transplantation in very different ways, and they would distinguish among 
ecologically significant units of salmon (and steelhead). The goal for the GCFMP — to maintain the 
aggregate size of the anadromous fish runs and not the individual ecologically significant units — would 
be untenable today. 
 
Periodic project re-evaluations would also allow decision-makers to account for changes in technological 
conditions associated with project operations, such as changes in technology that affect economically 
viable farm sizes on CBP lands. From the earliest days of the planning for CBP, maximum farm size was 
an issue. Reclamation planners knew that if farm sizes were too small, settlers would go bankrupt. At the 
same time, they wanted to ensure that the irrigation water was used on small family farms, since the 
creation of family farms was a policy objective of the project. As noted in section 3.1, there have been 
numerous changes in irrigation technology, earth moving equipment, and other aspects of modern 
farming, and these changes made the original constraints on farm size untenable. Reclamation made 
several adjustments in the maximum CBP farm size over time, but these changes were based on 
modifications in federal reclamation law. The process of changing CBP farm size could have been 
carried out more systematically if there had been opportunities for regular project re-evaluations that 
considered the changing technological context in which irrigated agriculture took place on CBP lands. 
 
The call for systematic project re-evaluations is based not only on the need to accommodate changes in 
science and technology, but also on opportunities to monitor project outputs systematically and to 
respond to monitoring results expeditiously. In 1978, Professor Holling and his colleagues at the 
University of British Columbia introduced the term “adaptive environmental management,” and they 
urged that this form of management be practised on projects that (like GCD) had the potential to change 
ecosystems in extraordinary ways.
168
 Holling recognised the limitations on data and scientific knowledge 
available for pre-project impact assessment activities. He and his colleagues argued that impact 
assessment specialists should view a project as an experiment with uncertain outcomes that need to be 

Grand Coulee Dam and Columbia Basin Project 
 
         131 
 
This is a working paper prepared for the World Commission on Dams as part of its information gathering activities. The views, conclusions, and 
recommendations contained in the working paper are not to be taken to represent the views of the Commission 
 
monitored carefully. Results from monitoring a project’s ecosystem impacts could be used to determine 
unacceptable effects. Using this information, project officials could implement mitigation activities to 
offset adverse outcomes as quickly as possible. 
 
8.5  Sensitivity Analysis of Economic Parameters 
 
Issue: 
Sensitivity analysis and the evaluation of project robustness  
Component of Project Cycle: 
Planning 
Lesson: 
Substantial inflation-corrected cost overruns in GCD and CBP 
reflect the uncertainties that surround large construction projects. 
These uncertainties underscore the need for wide-ranging sensitivity 
analyses to ensure that project goals and objectives are robust and 
can be met with available resources. Implicit or indirect subsidies 
need to be evaluated under alternative market conditions to ensure 
that the subsidies are in line with a project’s social objectives.    
Evidence: 
Inflation-corrected Third Powerplant costs were approximately 55% above 
planned costs. CPB costs were nearly three times those projected with the 
result that repayments by beneficiaries is roughly 15% of construction costs 
rather than the planned 50%. Indirect energy subsidies of the CPB have 
increased over time as the value of firm power to BPA’s non-agricultural 
customers has increased. 
Views: (convergent/divergent) 
 
 
Undertaking projects in support of non-market social objectives, such as providing opportunities for 
small farmers, fostering national food security, and developing sparsely settled regions, could be the 
outcome of legitimate political processes. However, for administrators and politicians to make informed 
judgments about the trade-offs that are invariably involved in such decisions, they need to be aware of a 
project’s uncertainties. Projects whose acceptance hinges on best-case outcomes in terms of technical 
and economic parameters should be viewed with more scepticism than projects that look promising even 
when technical and economic parameters are varied. An example of the latter is GCD’s Third 
Powerplant. The original planned benefit-cost ratio was 3:1. A sensitivity analysis that simulated the 
substantial cost overruns that actually occurred would have produced a benefit-cost ratio greater than 1, 
giving planners and politicians confidence in their decision to build the powerplant. 
 
In a sensitivity analysis, technical and economic parameters are varied over the range of possible values 
to investigate the extent to which different estimates of parameters might lead to a change in a proposed 
action. Sensitivity analysis of parts of the project other than the Third Powerplant might have produced a 
different outcome. For example, construction of CBP ultimately cost nearly three times the estimates 
made by early planners. The result of the cost overruns is that only about 15% of the project construction 
cost is being repaid by CBP irrigators rather than the anticipated 50%. No one can say in hindsight 
whether the decreased percentage repayment associated with a much higher construction cost would 
have influenced the final outcome had this information been available to the politicians who made the 
construction decision. What can be said, however, is that no such analysis was ever done.  
 
Assessing the impact of potential changes in overall economic conditions should also be an objective of 
sensitivity analysis. Conventional project appraisals assume, for example, that inflation can be neglected 
because inflation is likely to influence all elements of a project in approximately the same way. 
However, where contractual arrangements do not provide for inflation adjustments, the impact of these 
arrangements needs to be examined explicitly. For example, the decision not to index the repayments by 
CBP cultivators to inflation has meant that a farmer’s annual repayment costs, based on a 1962 
settlement, are being made in dollars that, in 1998, were worth only 18.5% of the 1962 dollars. Thus the 
real cost to irrigators, and by implication, the real value of repayments to the project, has declined over 
time.  
 

Grand Coulee Dam and Columbia Basin Project 
 
         132 
 
This is a working paper prepared for the World Commission on Dams as part of its information gathering activities. The views, conclusions, and 
recommendations contained in the working paper are not to be taken to represent the views of the Commission 
 
Lastly, sensitivity analyses need to include an examination of alternative assumptions about the direction 
of key markets on which indirect or implicit subsidies are based. According to Gittinger (1984: 500-
501), “An indirect subsidy may occur when manipulation of the market produces a price other than that 
which would have been reached in a perfectly competitive market”. For example, in the case of the 
market for energy, the indirect subsidy is the difference between the price at which the government (ie, 
BPA) provides energy to users and the price determined by the functioning of supply and demand.  
 
Because the indirect subsidy is the difference between the contract and the prevailing market price, 
possible changes in market prices must be explored. In the case of energy, prices have varied over time. 
In recent years, for example, natural gas from Canada has reduced alternative generation costs and 
placed a downward pressure on energy prices. The result is to reduce the indirect subsidy to public 
power utilities and their customers by reducing the difference between market prices and the regulated 
below-market costs provided through BPA.  
 
The indirect energy subsidy to CBP irrigators has also varied over time. The indirect subsidy for 
irrigation results from a contractual arrangement that provides pumping power for CBP at roughly the 
cost of production at GCD, substantially below the market price and well below the firm power price 
that BPA charges its other customers. The difference between the CBP price and the subsidised BPA 
firm power price provides a lower-bound estimate on the size of the indirect subsidy. With 
approximately constant production costs, the indirect subsidy has increased substantially as BPA firm 
power prices have gone from 0.33 cents per kWh in the early part of the project to between two to three 
cents per kWh in recent years.  
 
The examples of unexpected economic consequences given above are not intended as a criticism of 
government policy. Rather, our intention is to emphasise that the future may yield parameter values that 
are very different than the expected values on which decisions to proceed with such large scale projects 
are based. A robust project is one that has the following characteristics: when parameters (eg, technical 
co-efficients and prices) that could affect the decision are varied, the project still meets its economic and 
social objectives. For robust projects, those responsible for the ultimate outcome can make their 
decisions with some degree of confidence.