What is in this article?:
- Arizona water uncertainties change farm lending practices
- CAP users shorted first
- Navajo Generating Station
- Farm Credit Services Southwest changes lending practices due to the uncertainty of future water supplies and energy costs in central Arizona.
- A FCSSW loan on property within a CAP district could have a shorter repayment period and/or lower loan to value limits based on the availability and costs of water.
- Arizona is in a water quandary due to more than a dozen consecutive years of drought.
Colorado River water delivered by the Central Arizona Project irrigates more than 300,000 acres of farmland in Arizona’s Maricopa, Pinal, and Pima counties.
Navajo Generating Station
Also tied to the Colorado River issue is the 2,250 megawatt coal-fired Navajo Generating Station (NGS) located near Page, Ariz., close to Lake Powell. NSG generates electric power for customers in California, Arizona, and Nevada, including power for pumping Colorado River water for the Central Arizona Project (CAP).
The NGS produces about 95 percent of the energy used by CAP. In fact, CAP is the single largest end user of power in Arizona.
The Environmental Protection Agency (EPA) is currently evaluating additional nitrogen oxide (NOx) controls for NGS under the agency’s regional haze rules to further improve visibility in the area.
Two types of controls are under consideration to reduce emissions: low NOx burners through a system called ‘separated overfire air’ at a cost of $46 million; and a selective catalytic reduction (SCR) system with a $1.2 billion price tag.
If EPA mandates the SCR method, Schorr says CAP energy costs could increase by at least 20 percent for irrigation-water users. If the Salt River Project, the NGS owner, chose to close the operation due to high NOx changeover costs, replacing NGS power and revenue could double or triple CAP water rates; making agriculture an unviable business for some producers in central Arizona.
The persistent drought could have serious implications for all Colorado River water users. Closing NGS could make central Arizona agriculture cost prohibitive due to increased energy and water costs.
These water-study findings led FCWSS to initiate changes in its lending policies where higher water costs and supply risks are involved.
“A loan on property within a CAP district could have a shorter repayment period and/or lower loan to value limits on the availability and costs of water,” Schorr said.