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

part of this planning process. The investigations, which involved over 300 people from over 40 
organisations during the period from 1941 to 1943, examined 28 potential issues related to the project, 
including the types of crops that should be grown, the optimum size of farm units, and the annual rate 
at which lands should be brought into production. The investigations played a key role in shaping CBP. 
 
Acreage Limitations and Anti-speculation Statutes 
 
The Roosevelt administration was concerned that word of the planned irrigation in the CBP area would 
cause individuals to buy out land with hopes that prices would rise and windfall profits could be made 
by selling project land at inflated prices. In response, Congress passed the anti-speculation pact, which 
limited the size of project farms in CBP to 40 acres (16ha) for an individual, and 80 acres (32ha) for a 
husband and wife. In 1943, these provisions were modified to allow farmers receiving CBP irrigation 
water to hold as much as 160 acres (64ha). This limit, while thought to be adequate, was low enough to 
maintain the vision of CBP as a project populated primarily with family farms, not the large corporate 
farms that have come to be referred to as “agribusiness”. 
 
7. CRITERIA AND GUIDELINES: POLICY EVOLUTION AND 
COMPLIANCE 
 
The most significant GCD-related policy changes after the mid-1950s were as follows: (i) the 
Columbia River Treaty, which formalised basin-wide management of operations for hydropower and 
flood protection; (ii) NEPA, which institutionalised an environmental impact statement (EIS) process 
that was used to considerable advantage in the context of FCRPS’s System Operation Review, and in 
Reclamation’s decision not to irrigate the CBP’s “second half” at the current time; (iii) the Northwest 
Power Act of 1980, which called for a fish and wildlife management programme for the US portion of 
the basin and opened up the decision-making process related to FCRPS operations to Native Americans 
and other previously excluded groups; and (iv) the ESA listings and NMFS Biological Opinions related 
to Columbia River Basin anadromous fish, because those listings and opinions have profoundly 
affected operations of FCRPS. 

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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. LESSONS LEARNED 
 
Open Planning Process  
 
Lesson: An open planning process facilitates identifying and resolving conflicts among stakeholders; a 
closed process serves the opposite purpose. 
 
Evidence: Inadequacies in opportunities for Native Americans and Canadian First Nations to 
participate in decision-making has fostered conflicts over GCD for several decades. 
 
Managing Debates on Project Operations  
 
Lesson: In a multipurpose water project, it is common for project purposes (eg, flood control and 
recreation) to be in conflict. Because conflicts among competing purposes are practically inevitable, a 
process for managing stakeholder contributions to debates on project operations should be 
institutionalised for 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 residential fish and recreation feel that 
they lack a productive forum for advocating their interests related to project operations. 
  
Incorporating Changing Social Values into 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 from 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.  
 
Incorporating Changes in Science and Technology into 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 the results 
of re-evaluations. 
 
Evidence: Biologists' views on native vs. hatchery fish have changed. Changes in farm technology have 
increased pressures for larger farms than anticipated by CBP planners. 
 
Sensitivity Analysis of Economic Parameters 
 
Lesson: Substantial inflation-corrected cost overruns in the GCD and the 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 be 
sure 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 

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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 
 
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 non-agricultural customers has increased. 
 
Developing a Shared Conceptual Framework for Project Appraisal 
 
Lesson: Stakeholders and planners involved in an open planning process need to work with a common 
conceptual framework and vocabulary in making formal project appraisals. Of particular importance is 
the distinction between private and social (economy-wide) perspectives. Failure to develop a shared 
conceptual framework and vocabulary can lead to unnecessary acrimony. 
 
Evidence: Interviews with and letters from stakeholders indicate that numerous disagreements and 
misunderstandings resulted because of the absence of a shared framework and vocabulary for 
appraising projects. Particular sources of difficulty include the distinctions between financial and 
economic prices and between direct and indirect (secondary) benefits. 
 
Mechanisms for Ensuring Just Compensation 
 
Lesson: In large water resources projects, those who bear the costs may not receive many benefits. 
Therefore, mechanisms for ensuring just compensation are important. In a project that has impacts that 
cross international borders, the usual forums for allowing parties to make compensation claims — 
typically the judicial system in the US — may not be satisfactory, and alternative forums should be 
considered. Alternative dispute resolution mechanisms may also be able to speed up the settlements of 
claims normally brought using the court system. 
 
Evidence: In the case of GCD and CBP, there were not adequate opportunities for Native Americans 
and Canadian First Nations to obtain appropriate compensation for project-related losses in a timely 
fashion 
 
Limits to Government Planning in a Market Economy 
 
Lesson: Limits exist on the extent to which government plans can be implemented effectively in a 
market-driven, capitalistic economy. 
 
Evidence: Changes in the economics and technology of farming provide irrigators with incentives to 
circumvent Reclamation's acreage limitations. 
 
 
Centralised vs. Decentralised Basin Management Institutions 
 
Lesson: In designing institutions for river basin management, centralisation and decentralisation each 
have their advantages and disadvantages. 
 
Evidence: Co-ordinated decision-making process by four agencies — BPA, the Corps, Reclamation, 
and BC Hydro — has been effective in managing flood control and hydropower, but some stakeholders 
feel left out of the decision-making processes for operations. Decentralised decision-making can mean 
responsiveness to particular constituencies, but inter-agency co-ordination difficulties in the Columbia 
River Basin have led to problems in this regard. 
 
Actions Having Significant Irreversible Effects   
 
Lesson: Decisions that introduce significant irreversible effects should only be taken after very careful 
study and broad input from those affected at the grassroots level. 
 

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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 
 
Evidence: Building GCD without fish passage facilities was, for all practical purposes, virtually 
irreversible; the decision was made without significant study and participation by all affected parties. 
Cumulative Impact Assessment  
 
Lesson: Tools for cumulative impact assessment need to be applied to avoid resource management 
problems. 
 
Evidence: Failure in the past to account for cumulative impacts of dams is at the heart of many 
fisheries-related controversies within the Columbia River Basin today. The lack of a cumulative impact 
assessment for the series of major dams on the Columbia and Snake rivers constituted a failure to 
recognise a major fisheries management problem before it occurred. 
 
9. REFLECTIONS ON THE DEVELOPMENT EFFECTIVENESS OF 
GCD AND CBP 
 
Criteria for Gauging Effectiveness 
 
An assessment of development effectiveness cannot be undertaken without first delineating the criteria 
to be used in judging effectiveness. In the context of GCD and CBP, applicable criteria can be 
categorised as follows: economic efficiency, income redistribution, regional economic development, 
and environmental quality. Inevitably, significant differences of opinion arise about the value of GCD 
and CBP because the relative weight attached to different criteria for judging effectiveness varies 
across individuals and groups. Finding a consensus about weights is complicated further because 
weights frequently vary over time as a result of changes in cultural values, social norms, and economic 
conditions. A mechanical calculation cannot be used to determine weights or to combine weighted 
objectives and make choices; a political process is employed to accomplish these ends. 
 
At a conceptual level, the above-noted factors used to characterise development effectiveness can be 
defined as follows. “Economic efficiency” refers to the condition in which the difference between the 
present value of economic benefits of a project and the present value of economic costs is as large as 
possible. (Economic benefits are not the same as monetary benefits except in the case where markets 
are reasonably competitive.) “Regional development” refers to the objective of fostering growth in a 
particular geographic area. “Equity” refers to the fair distribution of a project’s economic, 
environmental, and social effects (both positive and negative) among stakeholders. The lack of 
widespread agreement on what constitutes a fair outcome makes it difficult to apply this criterion. 
Project analysts do not have formal calculation procedures for gauging whether project outcomes are 
distributed fairly; a helpful analysis is one that makes the distribution of project gains and losses clear 
to decision-makers. “Environmental quality” is a broad category that includes a project’s effects on the 
biological and physical environment as well as effects on social conditions and cultural resources. It is 
possible to conceive of additional objectives of water resources development projects, such as the 
maintenance of national food security, but the four categories of factors above are appropriate for 
characterising development effectiveness in the context of GCD and CBP. 
 
Temporal Shifts in Weights Ascribed to Different Effectiveness Criteria 
 
Each of the above-noted objectives plays a role in water resources planning, but the roles of economic 
efficiency, regional development, equity, and environmental quality in contemporary US water 
resources planning are different from those roles at the time GCD and CBP were being planned. In 
examining the development effectiveness of GCD and CBP, it is useful to review how criteria for 
gauging the effectiveness of US water projects have changed over the past several decades. 
 
Both the Butler and Reclamation reports were focused on regional development and neither was 
concerned with economic efficiency in the sense of maximising net economic benefits. When the 

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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 
 
authors of those reports talked of the economic feasibility of GCD and CBP, they had in mind whether 
or not the beneficiaries of the project could, collectively, pay for the project’s monetary costs. In the 
view of the US Army Chief of Engineers writing in 1932, “the irrigation of land as pertains to the 
Columbia River area under consideration is not an economical proposition at this time and should await 
the future” (USACE, 1933: 4).  
 
Writing in 1932, the Commissioner of Reclamation, Elwood Mead, took exception to the US Army 
Chief of Engineers. Mead argued that GCD and CBP “will enable the largest single water supply of the 
arid region to be used to give cheap power to industries, and make feasible the irrigation of the largest 
and finest body of unreclaimed land left in the arid region” (USACE, 1933: 5). Both the Butler and 
Reclamation reports recognised that the goal of bringing irrigated agriculture to the Columbia Plateau 
could not be satisfied without using hydroelectric power revenues to cover a sizeable portion of the 
investment costs for irrigation. 
 
Because an economic efficiency objective (ie, the condition that economic benefits exceed costs) for 
water resources projects developed by Reclamation and the Corps did not come about until the late 
1930s and early 1940s, this objective had little formal influence on the planning of GCD and CBP. 
However, concerns about what would now be termed economic efficiency were raised in the context of 
GCD and CBP. For example, the US Secretary of Agriculture and the Chief of the US Army Corps of 
Engineers both used economic efficiency arguments to support their opposition to the project. Both 
were concerned with what they perceived as the absence of sufficient demand for agricultural outputs. 
However, these critics of the economics of the project did not carry the day. Political factors — 
including extensive lobbying by local project supporters and Franklin Delano Roosevelt’s strategy for 
using water projects to increase employment and his desire to honour political commitments to the US 
Northwest — played the key roles in the decision to proceed with GCD. 
 
The overriding significance of regional development as an objective of GCD and CBP has continued, 
and it is reflected in contemporary project assessments by some stakeholders. For example, the 
consensus of the 12 individuals we interviewed representing irrigators, PUDs, and local governments 
in the CBP area was that the net positive impacts of GCD and CBP for the region far outweighed the 
costs to Native Americans. Such regional development arguments frequently ignore the subtleties 
involved in making arguments related to economic efficiency. Indeed, some of those who trumpet the 
economic significance of the project do not recognise either the failure to pay interest on the capital 
cost of irrigation or the lost power revenues associated with providing below-market price energy to 
pump irrigation water as signs of economic inefficiency.  
 
The other components of development effectiveness — what we have termed equity and environmental 
quality — did not become major elements of US water resources planning until the late1960s and early 
1970s. This is reflected in passage in 1969 of NEPA, which intended to force all agencies of the federal 
government to integrate environmental and social concerns into their planning and decision-making. 
This Act introduced requirements for environmental impact statements, documents that were to 
disclose fully the environmental and social impacts of proposed federal projects and alternatives to 
those projects. Implementation rules issued subsequently by the US Council of Environmental Quality 
required that EISs highlight any irreversible and irretrievable commitments of resources which would 
be involved in a proposed action should it be implemented.  
 
The period from the1960s through the 1980s witnessed an upsurge in use of the US judicial system by 
citizens making claims of unjust treatment in cases involving environmental impacts. US Supreme 
Court decisions in the 1960s and 1970s made it possible (for the first time) for environmental groups to 
bring suit in US courts in instances where adverse environmental impacts were significant but plaintiffs 
had not suffered direct monetary damages. Since the late 1960s, citizens and non-governmental 
organisations have used the courts to press claims centring on the adverse environmental effects of 
development projects or alleged instances of “environmental injustice” (ie, the inequitable distribution 
of environmental costs and gains).  
 

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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 
 
GCD and CBP: Trade-offs Between Regional Development and Economic 
Efficiency 
 
If judged only in terms of regional development goals (without regard to environmental and social 
impacts), GCD and CBP would be judged as developmentally effective by many people. Indeed, this is 
clear from our interviews with irrigators and users of the relatively inexpensive hydroelectric power in 
the US Northwest who feel that GCD and CBP is a great success. They point to the contributions of 
low-cost electricity to: 1) the booming economy of the US Northwest, 2) the contributions of 
agriculture to the regional economy and food supply, 3) the numerous monetary benefits associated 
with recreation and flood control, and 4) the way storage at GCD creates opportunities to generate 
additional power at downstream dams. 
  
Circumstances exist under which projects advocated from a regional perspective are perfectly 
compatible with the efficient use of resources as seen from a national point of view. However, when 
regional development becomes a principal policy objective, governments frequently intervene (directly 
or indirectly) in markets for inputs to and outputs from production processes. With the exception of 
instances where such interventions are a response to incomplete or imperfect markets, the distorting 
policy interventions needed to implement a regional development objective lead to an inefficient 
allocation of national resources. 
 
The attitudes of regional stakeholders toward such government interventions depend, of course, upon 
whether the interventions constitute a tax or a subsidy. The formation of these attitudes is  complicated 
by the fact that many taxes and subsidies are implicit or indirect. In our interviews with people affected 
by GCD and CBP, for example, interviewees acknowledged that direct payments, such as those used to 
cover a large part of the cost of CBP’s construction, were a subsidy. They often failed to see, however, 
that market interventions that indirectly enhance an industry’s financial competitive position are 
subsidies. 
 
In the case of GCD and CBP, the criterion for efficient energy use has been met, to some degree, by the 
energy component of the project. Environmental and social issues aside, energy production by GCD, 
including its associated Third Powerplant, has contributed greatly to the development of the US 
Northwest. Although below-market energy pricing has reduced revenues to the government from what 
they might have been, the project has repaid the US Treasury for the cost of constructing hydroelectric 
power facilities at GCD, and the portion of the project related to hydropower clearly has a positive 
economic benefit-cost ratio.  
 
Supporters of agricultural development in CBP, past and present, have argued that development of 
irrigation facilities should also be seen as positive from a national perspective. Although the original 
planners acknowledged that agricultural development could not pay for itself, those planners 
maintained that substantial national benefits would accrue from the regional development in the form 
of secondary benefits. This claim was controversial when it was made in the 1930s, and secondary 
benefits are now inadmissible in evaluating the economic efficiency of federal water projects. 
 
When GCD and CBP are analysed separately, it is apparent that the magnitude of the direct 
government subsidy involved in the construction of CBP has been substantial. Irrigators will pay only 
about 15% of this cost in dollars uncorrected for inflation. The US Treasury has paid the remaining 
cost. Eventually, this remainder will be repaid (in dollars uncorrected for inflation) by BPA using 
revenues power sales. 
 
But direct construction subsidies to the CBP covered by power sales have not been the only drain on 
funds that would otherwise have remained with the US Treasury. Indirect subsidies have been provided 
to a variety of regional power users (eg, DSIs and PUDs) by contractual and regulatory arrangements 
that have delivered energy at below-market costs. Also, energy used for pumping water has been 
provided to the CBP at roughly the cost of production at the GCD, again well below the market price.  

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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 
 
 
Interventions that distort prices also create second order effects as inefficiencies become embedded in 
private decisions. For example, BPA has been criticised for setting prices of electricity at below-market 
levels for some consumers (as BPA must as a matter of federal law) because these below-market costs 
failed to encourage parsimonious use of electricity. Experiences from other areas (eg, California in the 
drought years of the mid-1980s) indicate that there is substantial room for better water management 
when water becomes truly scarce. When subsidies keep the cost of irrigation water low, farmers are 
less likely to give attention to a more water-efficient agriculture. 
 
The regional development objectives of GCD and CBP have, to a considerable extent, been achieved. 
But they have come at a substantial cost to the rest of the economy, both in terms of direct construction 
subsidies and in revenues foregone from indirect subsidies in the form of below-market energy prices.