Economists say review of Sask. irrigation megaproject shows cost would exceed return to provincial government

A Saskatchewan government funded report analyzing the costs and benefits of the proposed Lake Diefenbaker Irrigation Project reveals it is a risky venture that offers, at best, modest gains, according to economists who reviewed the report for CBC.

A spokesperson for the Saskatchewan government told CBC the 31-page KPMG report, released late last month, shows the project is "economical."

"We believe the project can move forward in a way that it could be economical for the province and the producers who are going to participate," said Patrick Boyle from the Water Security Agency, which is leading the initiative.

"So we're going to continue down that path."

Boyle echoed Saskatchewan Party Leader Scott Moe's commitment to begin construction next year. The province has already spent or committed almost $30M to this project, mostly on studies and engineering reports.

But Peter Phillips, a recently retired economics professor for the University of Saskatchewan's Johnson-Shoyama School of Public Policy, said the report is vague and based on shaky assumptions.

He said any private investor considering this project would walk away after reading the first few pages.

"I don't see anything there that I'd see anybody put private capital up for," he said. "If the public is willing to take the risk and front-end load it with public capital, there's a possibility we will get a modest increase in economic activity in one part of the province."

Ross Hickey, an associate professor of economics in UBC's faculty of management, was more blunt, saying if this project was pitched to the CBC's Dragon's Den program, "I don't think it would make it to broadcast."

He said that while the report does indicate the project would increase provincial GDP, which would benefit some people in the province, "it's not making money for the Government of Saskatchewan, in particular."

"[The project] costs today, in real terms, more money than the future lifetime value of benefits that come from the project," he said. "Which means why bother?"

The report analyzes the province's $1.15-billion proposal to create infrastructure that would irrigate 90,000 acres (35,000 hectares) near Lake Diefenbaker.

The 'base case" presented in the report says that, over a 50-year period, the project will create $5.9 Billion in GDP for Saskatchewan, resulting in a total of $410 Million in tax revenue for the province during that same period.

That means that the project would cost far more today — $1.15 billion — than it would return to taxpayers over the next 50 years — $410 million.