Once legislative darlings, dams now face fresh scrutiny

As state water developers search for more than a half billion dollars for dam and reservoir projects, undertakings that have traditionally advanced with little resistance, they’ve run into a new buzz saw of uncertainty powered by rising costs, shaky construction estimates, a fickle bidding environment and cautious legislators.

Wyoming’s drive to store and distribute water comprises at least 17 projects — 13 of which are estimated to cost $541.7 million in 2020 dollars. That sum doesn’t even account for what may be the state’s biggest safety threat — the dangerous LaPrele Dam above Douglas — that an engineer said Wednesday could cost up to $112 million to rebuild.

Lawmakers are pausing to reexamine the dam-building environment, the potential funds available and the merits of the potential investments. They recently cut more than $71 million from a water funding bill and saw Gov. Mark Gordon veto a $45 million residential water/sewer appropriation.

Further, the state’s Water Development Commission on Wednesday rejected the lone bid on the Leavitt Reservoir expansion project in Big Horn County after it came in $31 million above the original $39 million estimate. Rep. Evan Simpson (R-Afton) urged the commission not to use $26 million in contingency funds to forge ahead with the project, even after it had been trimmed from $70.3 million to $66.6 million.

That move underscores a hesitancy to dole out water funds during a time of inflation, high fuel prices, a COVID-19-restrained supply line and a paucity of workers, one state senator said. A pause could allow legislators to better gauge the unsettled construction industry and also what one-time funds might be available through the federal Bipartisan Infrastructure Law.

“I think everybody is trying to be cautious,” Sen. Mike Gierau (D-Jackson), a member of the Legislature’s Appropriations and Select Water Committees, told WyoFile. “The last thing we want to do is screw it up — over-pay, over-engineer, cause a cost spiral of our own making — in a good-hearted attempt to solve an issue.”

“Not gonna fly”

Legislators’ hesitancy emerged as the Select Water Committee sought $155 million through Senate File 82 – Supplemental water development—funding, a bill that sponsors trimmed by more than $71 million when opposition became obvious. The quest for general fund money through SF 82 “was not gonna fly,” Simpson told the water commission Tuesday.

The amendment removed funding for the Leavitt expansion, and the proposed Alkali Dam and reservoir, another Big Horn County project. That cost-cutting saved the bill, which contained earmarks for key projects including LaPrele investigations, Fontenelle Reservoir improvements and Goshen irrigation tunnel repairs, Simpson said.

“[I]t was a function of the entire bill going down if they didn’t trim it back,” he said of negotiations in the Senate.

Gov. Gordon, too, took a step back in vetoing $45 million in American Rescue Plan Act funds earmarked for domestic and municipal water and wastewater improvements through the Water Development Commission. He said the money would still be available next year.

By then, “we will have a better idea of the actual utilization of these funds,” Gordon wrote in a letter explaining his line-item action. “[L]awmakers can then evaluate other competing priorities.”

Still, legislators appropriated about $140 million in water planning, construction and supplemental funding bills during the recently concluded budget session. (The money is in the House Bill 73 – Omnibus water bill–planning, Senate File 80 – Omnibus water bill–construction and the supplemental SF 82.) The State Loan and Investments Board also has $50 million earmarked for domestic water and sewer projects and another $50 million for “local government support” that can be used for water and sewage — all through the ARPA program.

That sum, Gordon wrote, “should be ample for the next 12 months while providing us time to better understand other water and sewer funding opportunities that are part of the Infrastructure Investment and Jobs Act,” aka the Bipartisan Infrastructure Law.

A pause will give lawmakers and planners an opportunity to see whether inflation and other market forces might settle down, Gierau said, cautioning that prices might not ameliorate. Construction costs typically increase at a rate of 2% to 3% a year, a consultant told the Water Development Commission Wednesday.

But in the past year and a half, they have jumped 15%, Pete Rausch, an engineer with RESPEC Consulting & Services, told the panel as he cited U.S. Bureau of Reclamation information.

“Maybe we should just hold off,” Gierau said. “There’s a lot of money floating around out there,” a factor that might be driving up costs.

“We know this [federal ARPA and infrastructure] money is one-time money,” he said. “Let’s just take it easy, try not to bid against ourselves.

“Let’s sharpen our pencils, make sure we have these projects right,” Gierau said. “We’re not turning them down. Infrastructure money — we’re not walking away from that.”

Poster-child project

The Water Development Commission is not walking away from the Leavitt Reservoir expansion either, a poster-child dam for today’s problems, even though it didn’t accept the $70.3 million bid. The project’s history illustrates the changing landscape for large construction efforts.

Developers estimated in 2017 that the 10-times expansion of the existing reservoir west of the Bighorn Mountains would cost $39 million. By 2020 that grew to $46 million and although several firms expressed interest in constructing a larger dam, only one eventually submitted a bid.

The appointed Water Development Commission, which vets and approves major construction proposed by the water agency, could have transferred $26 million from a contingency account to fund a trimmed-down Leavitt expansion. But that “horizontally sliding” funding method is inappropriate, Simpson, a member of the Legislature’s Select Water Committee, told the water board.

Instead of the administrative transfer, elected lawmakers should scrutinize the project again and have an opportunity to fund it directly, he said.

“Twenty-six million dollars horizontally sliding just makes us shiver,” he said of himself and fellow lawmakers. “You folks have the authority to slide it across tomorrow if you choose to. But talking with my Select Water Committee, we strongly urge you to resist that.

“We believe it could put a very bad rap and bad experience with both your commission and our committee,” Simpson said. “We really need to go back to the Legislature and appropriate the money specifically to that purpose, and frankly, reevaluate whether the feasibility of the project is legitimate.”

Interim Water Development Office Director Jason Mead said the Leavitt expansion remains a “very good” project. “Economic benefits that have been determined there, or calculated, are $118-plus million,” he said. “Eighty million dollars of that is of a public benefit.”

Climate variability, weather extremes and irrigation challenges, “I’m guessing that’s going to be the new normal into the future,” he said. “Trying to make this state and agriculture as drought resilient as we can, we really need to move forward with reservoir projects when we can.”

Mead will bring the reworked project, which already has more than $40 million in appropriated, earmarked funds, back to the commission later this year with the goal of putting it in front of legislators in early 2023, the water commission decided.

Looming LaPrele

When sponsors cut $71 million from the supplemental water funding bill — SF 82 — that action also stripped a $35 million general fund tranche for the proposed Alkali Reservoir in Big Horn County near Hyattville. The project has an existing $59 million appropriation in Water Development Office funds and the general fund allocation presumably could have freed some of that up for other projects.

But the cost of Alkali has ballooned too, even before reaching the bidding and contracting phases. In 2015 developers estimated Alkali would cost $35 million.

But that jumped in 2020 by $24 million, bringing the estimate to the current $59 million. Engineers attribute the 69% increase to geotechnical investigations that revealed a crummy site and embankment material, plus other supply, construction and inflation factors.

Alkali, Leavitt, Fontenelle and most other dam and reservoir projects on the state’s half-billion-dollar list are state development initiatives. The LaPrele reconstruction, however, falls under the safety umbrella.

Although it’s only become a worry in recent years, the threat from LaPrele, which could inundate parts of Douglas and Interstate 25 should it fail, has been noted since the 1970s.

It was in that decade some 50 years ago that water managers determined the structure had reached the end of its useful life. Patchwork enabled irrigators and others to brush off the increasing danger until sizeable rockfall hit and damaged the Ambursen-style structure in 2016.

Managers in 2019 restricted the amount of water the 130-foot high, 113-year-old LaPrele Dam could hold back and only then began seriously addressing potential replacement. That could cost as much as $112 million, consultant Rausch told the water commission Wednesday.

A preliminary estimate for reconstruction ranges from a low of $67 million and settles in the middle with an $84 million price tag, Rausch said. Water developers had previously estimated that LaPrele replacement would cost between $50 million and $80 million.

“[A] lot of uncertainty [swirls] around costs and inflation,” Rausch said.

Gov. Mark Gordon is seeking federal help through the Bipartisan Infrastructure Law, for LaPrele reconstruction.

Although Wyoming is uncertain of the outcome of that request, “we’ve heard some positive feedback from our congressional representatives that have helped us … as well as the Bureau of Reclamation,” water office head Mead told his oversight commission.