The Economic Consequences of the Proposed Flow Objective for the Lower San Joaquin River in Merced, San Joaquin and Stanislaus Counties

The Substitute Environmental Document (“SED”), recently issued by the California State
Water Resources Control Board (“SWRCB”), proposes substantial increases in the unimpaired
flows of the Merced, Stanislaus and Tuolumne Rivers that will fundamentally alter the water
supply portfolios of Merced, San Joaquin and Stanislaus counties (collectively the “Study Area”).
The SWRCB’s assessment, however, of the potential economic impacts of the SED is narrow in
scope and completely fails to account for the water supply reliability, sustainability and volatility
challenges that will confront the counties.

Stratecon estimates that the proposed flow objectives would reduce the counties’ reliable
surface water supplies on average by 60% or about 600,000 acre-feet per year, from 1.0 million
acre-feet to just short of 400,000 acre-feet. Stratecon estimates that this loss of reliable water
supply is partially offset by an increase in the expected annual yield of unreliable surface water
supplies from 290,000 acre-feet per year to 656,000 acre-feet per year. The partial offset is no
bargain. The SED would reduce the economic value of surface water rights by 50% and drastically
reduce the reliability of the region’s water supplies, which will have far reaching adverse impacts
on the region’s long-term economic stability and growth.

The SWRCB severely understates the potential regional economic impacts of the proposed
SED flow objectives.

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