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Economic and Financial Life-Cycle Costs of Conventional Surface-Water Treatment in South Texas: A Case Study of the McAllen Northwest Facility

C. Rogers, A. Sturdivant, M. Rister, R. Lacewell, J. Santiago

Conventional water treatment facilities are the norm for producing potable water for most U.S. metropolitan areas. Rapidly-growing urban populations, competing demands for water, imperfect water markets, and uncertainty of future water supplies contribute to high interest in alternative sources of potable water for many U.S. municipalities. In situations where multiple supply alternatives exist, properly analyzing which alternative is the most economically efficient (over the course of its useful life) requires a sound economic and financial analysis of each alternative using a consistent methodology. This report discusses such methodology and provides an assessment of the life-cycle costs for conventional water treatment using actual data from an operating surface-water treatment facility located in McAllen, Texas: the McAllen Northwest facility. This facility has a maximum-designed operating capacity of 8.25 million gallons per day (mgd), but due to required maintenance shutdown time and other limitations, it is currently operating at 78% of the maximum-designed capacity (6.44 mgd).

The economic and financial life-cycle costs associated with constructing and operating the McAllen Northwest facility are analyzed using an Excel® spreadsheet model, CITY H2O ECONOMICS©. Although specific results are applicable to the McAllen Northwest facility, the baseline results of $771.67/ac-ft/yr {$2.3682/1,000 gal/yr} provide insight regarding the annual life-cycle costs for conventional surface-water treatment.

The baseline results are deterministic (i.e., noninclusive of risk/uncertainty about datainput values), but are expanded to include sensitivity analyses with respect to several critical factors including the facility’s useful life, initial water rights purchase price, initial construction costs, and annual operations and maintenance, chemical, and energy costs. For example, alternative purchase prices for water rights associated with sourcing water for conventional treatment facilities are considered relative to the assumed baseline expense of $2,300/ac-ft, with life-cycle cost results ranging from a low of $653.34/ac-ft/yr (when water rights are $2,000/ac-ft) to a high of $1,061.83/ac-ft/yr (when water rights are $2,600/ac-ft).

Also, modifications to key limited data-input parameters and the modified results are included (in Appendix B) for a more precise basis of comparison across facilities and/or technologies. The modified life-cycle cost results of $667.74/ac-ft/yr {$2.0492/1,000 gal/yr} are considered appropriate to compare with similarly calculated values for other technologies and/or facilities.

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