Price tag climbs to $3.2B for Fargo-Moorhead flood diversion project
Inflation resulting from delays caused by legal challenges have increased the project's cost from $2.75 billion to $3.2 billion, but officials say approximately $830 million in savings will come from low-cost financing and efficiencies through a novel private-public partnership
FARGO — Inflation has dogged the massive Fargo-Moorhead flood diversion project since it was proposed soon after the record 2009 Red River flood nearly inundated the cities.
The initial estimated cost of the flood diversion project was pegged at $1.8 billion in 2011.
That early estimate was revised to more than $2.1 billion in 2016 .
In recent years, the price tag crept up to $2.75 billion, the amount after the project was significantly altered to win approval from Minnesota regulators, forcing changes that added $400 million.
Now, just as the project has reached the milestone of selecting a consortium of companies that will build the 30-mile diversion channel for the project, which will split the Red River’s flows during extreme floods, the price tag stands at $3.2 billion.
“There was no cost escalation other than inflation,” said Joel Paulsen, the Metro Flood Diversion Authority’s executive director, who added that the $2.75 billion estimate dates back to 2018 .
Sen. John Hoeven, R-N.D., recently acknowledged the new $3.2 billion price tag even as he was pointing out how a federal guaranteed loan program will save almost $500 million over the 41-year life of the $569 million loan.
Compared to traditional construction, the innovative public-private partnership to build the $1.1 billion diversion channel will save another $330 million and 10 years, Hoeven said.
Other than the design changes to win Minnesota’s approval, delays caused by legal challenges have caused most of the cost increases.
Upstream opponents filed a federal lawsuit in 2017 and challenged the key permit that Minnesota granted for the project, initially halting and then slowing the project. The administrative challenge and lawsuit were settled last fall in an agreement that includes a $75 million payment for an economic relief fund to address upstream impacts.
In 2019, in arguing for work on North Dakota project features to resume even though the lawsuit and administrative appeal still were pending, lawyers for the diversion estimated “conservatively” that every year of delay added $70 million to the project’s cost.
Given the approximately $830 million in savings from the low-interest loan program and the efficiencies of the private-public partnership, taxpayers are getting a good deal in spite of the inflation escalation caused by delays, Paulsen said.
“I still feel like given the delays, we’re in a very good place to provide this project in the most cost-effective way possible,” he said.
Despite the inflation cost increases, the project remains on budget and has not had to tap contingency funds, Paulsen said.
Construction continues on two of three gated control structures that will regulate the release of water into the diversion channel as it bypasses the metro area and discharges the water downstream near Georgetown, Minn.
Next year, construction will start on the third and largest control structure, the Red River control structure, which will finish design work in August. The three control structures will be located within a 22-mile embankment south of the metro area that will temporarily store floodwaters to allow a controlled release downstream.
Construction is expected to begin next spring on the diversion channel, which will be designed and built by an international consortium of companies called the Red River Valley Alliance, selected Friday, June 18, as the low bidder.
The Red River Valley Alliance's members are Corporacion Acciona Infraestruras S.L., Shikun & Binui Ltd. and North American Construction Group Ltd.
Acciona is based in Spain but has significant experience in construction management in North America, including renewable energy projects and public-private partnerships in Canada. It has completed more than 20 major infrastructure projects in North America over the past two decades, ranging from hospitals and renewable energy projects as well as highways and bridges.
The company owns and operates more than 1,000 megawatts of renewable energy assets in the U.S., including wind farms near Velva, N.D., and along the North Dakota-South Dakota border.
Under the consortium's contract, expected to be signed in the coming months, the project must be done in 2027.
“The Fargo-Moorhead Diversion Project is one of the most important climate mitigation projects in the United States to date,” said Martin Landry, Acciona North America’s vice president of business development. “When completed, this project will save billions of dollars in disaster losses and give families across the metro area peace of mind.”
Shikun & Binui is based in Israel and describes itself as a firm that “builds complex infrastructure projects and specializes in private-public partnerships.”
North American Construction Group is based in Acheson, Alberta, and bills itself as “Canada’s heavy construction and mining heavyweight” holding the country’s largest independently owned heavy construction and mining fleet.
Acciona and its partners plan to open an office in Fargo in the near future, possibly before the end of the summer.
“This project brings together a team that offers global experience in flood protection management and climate mitigation, and pairs that with local expertise, to ensure its success,” Landry said.
Local construction firms will be able to participate in the project as subcontractors, Paulsen said.
Diversion officials have adopted a goal of having workers from a 400-mile radius of Fargo-Moorhead make up at least 50% of the project’s workforce , a benchmark he said will be monitored during construction.
The Diversion Authority, in partnership with the Red River Valley Alliance, is responsible for the diversion channel, while the U.S. Army Corps of Engineers is designing and building the three control structures and embankment.