| 4. Industry’s Profit Margin vs. Standard Investment
So how much could the City of Industry make on its reservoir and power generation ideas, verses simply investing the funds in a traditional manner (annuities, T-Bills, etc.). It is said that these projects would cost about $1 billion to complete (Save the Missing Middle, 2005, PDFs/industry_plan.pdf). If the City invested that money at 5%, which is conservative for that size of investment, they would make $50 million per year. If that same $1 billion were used for the reservoirs and road, they hope to collect revenue from the sale of the water and associated hydroelectric generation. Diamond Valley Lake, owned by the Metropolitan Water District, expects to collect about $1 million for the 13 megawatts of power that their reservoir generates (Orloff, 2001). However, Diamond Valley Lake is almost three times the size of the proposed 88 billion gallon Tonner reservoir system, and the Tonner idea will use a pumped storage generation system in which water is drained from the upper reservoir into the lower one during peak demand times to generate the power, but then pumped back into the upper reservoir at off-peak times when rates are lower (Consumer Energy Center, 2005). This means that they must use electricity to pump the water back uphill, thus negating much of the power that they generated because of the necessary associated costs of this type of power generation. A very generous estimate of $200,000 per year is what is appears that Industry could expect from this hydroelectricity endeavor. As far as the water is concerned, they plan to fill the reservoirs with natural stream flow, which will likely take years given the small annual flow rate of Tonner Creek. Once the system is full, if they decided to sell all of the water at one time at the current rate of $73 dollars per acre-foot, they would only make $19,715,000 and then have to waits years for the stream to recharge the reservoirs (Metropolitan Water District, mwdh2o/pages/finance/finance_03.html). Of course, if they were to do that, they could generate more hydroelectric energy since they would not have to use power to get the water back to the upper reservoir, but they are still 1/3 the size of the $1 million per year Diamond Valley Lake, so this would not be a huge profit in any case. To recap, the City of Industry can earn about $50 million per year investing their $1 billion at 5% annual yield through an annuity or T-Bill, and stands to make about $20 million per year in combined water sales and hydroelectricity generation. They can make $30 million more per year simply by investing the funds, which is 2 ½ times more profit than the development would bring! I fail to see the financial incentive to push for these projects, but perhaps there would be political windfalls in alliances with MWD, Diamond Bar, and other entities, as well as key political figures. This is not really a huge amount of water, or much of a potential for electricity generation, so neither project aspect will make a big difference in the future of the region especially considering it requires sacrificing the Corridor to do it. 5. What Industry is Saying Now . With all of the negative press and various lawsuits by environmental groups (Sierra Club, Center for Biological Diversity, WCCA, etc.), Industry began to downplay the reservoir and road ideas, saying instead that they no immediate plans for any development and had purchased the land for open space and recreation (Hills for Everyone, 2004, PDF_Files/Summer_2004 .pdf). This denial of their proposed plans was necessary because the second original lawsuit against the sale to Industry addressed the lack of producing the Environmental Impact Report needed if reservoirs were to be a legal possibility. By stating now that they had no current plans to alter the land, they nullified the need for the report and thus got around both the first and second initial lawsuits. But a series of public record memos between Industry and the Water District seem to say that the reservoir idea is still very much alive, mentioning everything from “waterfront property”, to being “part of the team for building of the dam”, to the ultimate smoking gun, speaking of a visit to Tonner Canyon “for the proposed reservoir project and the proposed new road from Chino to the 57 Freeway (Save the Missing Middle, 2005, PDFs/industry_charade.pdf)”. The Wildlife Corridor Conservation Authority, an agency consisting of cities near the hills, the State of California, and individuals responsible for preserving these hills, sent a comment letter to Brea and Orange County formally opposing the road (WCCA, 2004). Brea agrees, having just battled Industry over its recent purchase of yet another part of Tonner Canyon, 500 acres at the mouth of the canyon and in Brea’s sphere of influence, and which Brea was securing grants to purchase the land for an open space addition to the Corridor and to block Industry access to middle Tonner Canyon from that end of the canyon (Hills for Everyone, 2005, city_of_industry.htm). Industry won this battle also, and now owns over 5000 acres of the canyon. Brea stands to lose much from possible dam failure and Tonner Canyon road traffic funneling into the city, and will no doubt continue to fight the implementation of the reservoirs and road when they begin to be seriously pushed by Industry, which I believe is inevitable. |
| Tonner Canyon and its Significance to the Puente/Chino Hills Wildlife Corridor |