Louisiana coastal work delays could cost billions of dollars, study says

By Mark Schleifstein — Adding another urgent note to Louisiana’s effort to rebuild its coastline, a new study says delays in creating wetlands and ridges in open water with sediment dredged from elsewhere could balloon costs by 200 percent to 600 percent. That’s because of additional wetlands erosion, increased construction costs and inflation during the delays.

The dredging projects make up about $18 billion of the $25 billion in restoration that was proposed in the 2012 version of the state’s 50-year, $50 billion coastal master plan. Delays could add $5 billion or more to the total.

“Cost per acre created for even the lowest scenario more than doubles in 20 years, and cost per acre continues to increase over time even for scenarios and fill criteria where less land is created over time,” says a summary of the report, released Tuesday (Dec. 13). The study was conducted by the Water Institute of the Gulf for:

  • The Coast Builders Coalition, which includes more than 20 businesses with present or hoped-for roles in coastal restoration, including dredging, engineering and project design firms
  • The Restore the Mississippi River Delta Coalition, which includes the Environmental Defense Fund, National Audubon Society, National Wildlife Federation, Coalition to Restore Coastal Louisiana and the Lake Pontchartrain Basin Foundation, and has been assisting state officials in restoration planning.

Both are concerned that delays in building coastal projects will reduce the amount of money available for actual construction when the 2017 master plan update is approved, clearing the way for new projects. The update is due Jan. 3.

The problem is that while Louisiana expects to receive at least $10.7 billion to pay for master plan projects, the money will be parsed out slowly to the state over 15 years.

“If you build these projects now, you don’t have to fill them to the same depth as you would if you waited 20 or 30 years,” said Steve Cochran, director of the Delta coalition. “You’re able to build above the water level now, and you also get the additional protection from the new wetlands during that period of time. That means you’re keeping our heads above water for a longer period of time.”

State also releases updated $812 million Restore Act coastal restoration projects plan for public comment.

Much of the money that will be flowing to the state is funneled through a variety of programs funded by BP or its drilling partners, as a result of settlements with the federal government and states over their roles in the 2010 Deepwater Horizondrilling rig explosion and ensuing 87-day oil spill. The settlements require the money to be paid out over 15 years.

The state also expects to begin receiving as much as $140 million a year from federal offshore oil lease payments in late 2017 or early 2018.

Louisiana already is examining several ways to speed delivery of the money and construction:

  • Borrowing big sums in advance via bonds, and paying off the debt over 15 years or longer as settlement payments and offshore oil revenue is received
  • Letting private wetlands restoration contractors build some of the projects. Their expenses could be repaid by selling credits to other businesses that need to mitigate expected environmental damage when building wetlands areas.
  • Hiring private wetlands restoration outfits under long-term contracts to complete master plan work, again based on the state’s expected receipt of the oil spill or offshore oil money.

The new study provides new ammunition in pushing those kinds of solutions forward. It says, for example, that the cost of bonding is likely to be dwarfed by the cost of delays.

The dredging projects involve mining sediment from the Mississippi River or open water areas then pumping or barging the material to other areas to build new wetland.

The study’s cost analysis took into account:

  • Project locations, local subsidence rates, the distance to potential soil borrow sources and the cost of moving the borrow material to the project sites over 10 to 50 years
  • The way sea-level rise and other climate-related factors will affect future coastal configurations
  • The time that elapses from the current condition to marsh creation, and how that affects the viability of the project location and size
  • The cost of borrowing money to speed project implementation, such as selling bonds, and the amount of interest that might accrue if money that’s available now is not used because of delays in construction. The report concludes that interest earned on money not spent also would be dwarfed by increased construction costs.

The report reviewed its assumptions at seven 2,000-acre locations with similar baseline conditions, applying five scenarios of subsidence and sea level rise. The review included estimates of the costs needed to fill those locations, then converted 2015 costs to present before applying 1 percent and 2 percent annual inflation rates over 10-year increments. The study also looked at the potential for cost savings by selling 10-year, 20-year and 30-year bonds to finance projects that are planned but where construction can’t begin immediately.

“Factors such as increasing inflation rates and worsening environmental conditions can dramatically increase project costs,” said a news release describing the report.

“Louisiana must seek ways to build on the significant work CPRA (the state Coastal Protection and Restoration Authority) has already executed to date by accelerating the funding of restoration projects,” said Coast Builders Coalition President Scott Kirkpatrick. “With over $10 billion committed to the Louisiana coast over the next 20 years, we must find ways to advance this funding, thereby allowing us to reduce project costs and realize marsh restoration benefits sooner.”

“We’re already seeing the challenges on a daily basis, Kirkpatrick said. “Now that we have some funding streams that continue in the future, what’s the best way to manage those? The main area we think is ripe at this time is looking at financing, using public and private financing opportunities to get money sooner and to begin projects sooner.”

Even the least expensive, or “lowest”, delay scenario among several reviewed across the coast more than doubled costs when construction was delayed by 20 years. That’s in part because of combined subsidence and sea level rise. For this alternative, the combined sea level rise was estimated at almost 1 1/2 feet by 2067.

Under a medium scenario, beginning construction immediately could save as much as 30 percent when compared to waiting 10 years to build projects. The medium scenario included 10 years of sea level rise at a rate of slightly more than 2 feet over 50 years.

You can view this online here.