LGWSP and Seawater Desalting

The Lake Gaston Project and Seawater Desalting:
A Cost Comparison Thomas M. Leahy, III, P.E.
Water Resources Manager
Virginia Beach Department of Public Utilities


Water Demand
Available Water Supply
Design Capacity of Alternatives
Cost Assumptions
Cost Comparisons


The City of Virginia Beach is located in southeast Virginia on the mid-Atlantic coast of the United States. A principle hydrologic feature of this region is the confluence of the Atlantic Ocean, Chesapeake Bay and James River which form a deep, warm-water seaport. The region includes one of the largest port facilities in the United States and the largest military complex in the world. However, the same estuary waters and flat, coastal plane topography which give rise to the commercial, industrial and military activity in the region, also limit development of significant fresh surface water supplies.

Virginia Beach is the largest jurisdiction in the region and second largest in the state. However, it has never had its own water supply. Historically, Virginia Beach has obtained all of its water from Norfolk, pursuant to a surplus only water contract. Over the years, Norfolk has been unable to provide Virginia Beach adequate quantities of water during any dry period. The City has had to restrict or ration water in every dry period since 1976, and it has been under continuing water use restrictions and a moratorium on extensions of the water system since 1992.

To solve this problem, Virginia Beach has recently completed construction of a 76-mile, 60-inch diameter pipeline to an existing system of hydroelectric and flood control impoundments on the Roanoke River, which straddle the North Carolina and Virginia border. The project will transfer up to 60 million gallons per day (mgd) of water from Lake Gaston, which is owned by Virginia Power, to existing reservoirs owned by Norfolk and located in Suffolk, Virginia. From there, Norfolk will provide storage, transmission and treatment services on behalf of Virginia Beach, using existing facilities which are being upgraded to handle the additional flow. Chesapeake is a partner in the project and will receive 10 mgd to augment its supply.

Although 75% of all the water in the reservoir system originates in Virginia, it all flows downstream to North Carolina. Although the diversion at its maximum is only 1% of the average discharge of the impoundments and only 3% during a major drought, any water diverted, no matter how little, is water that will not ultimately flow downstream, to North Carolina. This is a hydrologic reality with respect to most of the surface waters in and around southeast Virginia.

As a result, North Carolina and others living around Lake Gaston have opposed the project in numerous federal regulatory and judicial proceedings. Dating back to 1983, the project has been the subject of six environmental studies by three federal agencies and five lawsuits in four federal courts. Although some appeals are still underway, the project has survived the regulatory process to date. Construction is nearly complete and the project has been delivering water for testing purposes since August 1997. Final completion is scheduled for December 1997.

In 1993, Virginia Beach and Norfolk executed two water supply contracts. The first contract was a "Water Sales Contract" in which Virginia Beach would purchase surplus water from Norfolk until the Lake Gaston project was complete. The Sales Contract is a short-term agreement which expires when the Lake Gaston project comes on-line.

The second contract was a "Water Services Contract" in which Norfolk agreed to receive Lake Gaston water into its reservoir system, provide storage, transmission and treatment services, and deliver treated Lake Gaston water to the Virginia Beach distribution system. The Services Contract is a long-term agreement which becomes effective when the Lake Gaston project comes on-line and expires in 2030.

Both the Sales and the Services contracts require Virginia Beach to pay Norfolk the cost of service (including a rate of return) for that portion of Norfolk's water system infrastructure allocated to Virginia Beach. Additionally, the Sales Contact includes a Water Charge levied upon any Norfolk surplus water used. The Water Charge does not apply to Lake Gaston water and is not a component of the Services Contract.

Prior to executing the contracts with Norfolk or initiating major construction of the Lake Gaston project, both of which involved very large financial commitments, the Virginia Beach City Council requested a briefing from its staff on the cost of the project and several other alternatives. Two of those alternatives involved seawater desalting. This paper will review the costs of the Lake Gaston project and the two seawater desalting alternatives provided in the City Council briefing.

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Virginia Beach has been under mandatory water use restrictions since 1992. During that time it has maintained an average annual water demand of 32 mgd. In the absence of water use restrictions, the City's average annual treated water demand was estimated to be 35 mgd with a corresponding maximum day water demand of approximately 53 mgd. Maximum day water demands are typically 150% of average annual water demands. Projected demands for the year 2010 are 44 mgd (average annual) and 66 mgd (maximum day). See Table 1.

​Table 1​
Virginia Beach Treated Water Demand
Average Annual
Max Day
35 mgd
53 mgd
44 mgd
66 mgd

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The amount of Norfolk surplus available to Virginia Beach has fluctuated widely over the years. In terms of average annual demand, Norfolk reduced water supply to Virginia Beach to 15 mgd during the 1980/81 drought. In wet and normal years, Norfolk has supplied Virginia Beach up to 32 mgd. However, it has also restricted or otherwise called upon Virginia Beach to reduce water demand on several occasions when the City's water demand was much less than 30 mgd.

Norfolk supplies water to its wholesale water customers on a surplus only basis. If Norfolk's water demand were to increase or parts of its water system were to fail, be retired, or taken off line, for whatever reason, Virginia Beach would have to absorb the resultant shortages. In addition to the uncertainty of the supply, there are other aspects of the Water Sales Contract that Virginia Beach might not agree to on a long term basis. That discussion, however, is beyond the scope of this paper.

Because of the uncertainties surrounding Virginia Beach's access to Norfolk's surplus water, certain assumptions had to be made for the purposes of estimating the cost of an alternative in which the City purchased surplus water from Norfolk and provided the balance from seawater desalting. These assumptions are not binding upon either City, do not reflect what might actually evolve from a long-term Sales Contract, or imply that such a contract could necessarily be reached. That being said, for the purposes of this analysis, it was assumed that the annual average Norfolk surplus would range from 20 mgd in dry years to 30 mgd in wet years, with an average of 25 mgd. See Table 2.

​Table 2
Norfolk Surplus (Assumes Availability)
Annual Average
Max Day
25 mgd
38 mgd
Dry Year:
20 mgd
30 mgd

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All alternatives were sized to provide at least the projected treated water demands for the year 2010 of 44 mgd (average annual) and 66 mgd (maximum day). See Table 1.

Virginia Beach's share of the Lake Gaston project is 50 mgd as raw water. There is a 10% loss through the transmission, reservoir and treatment system which reduces that to 45 mgd as treated water. The Services Contract also provides that Norfolk will provide storage and treatment for seasonal demands, including a maximum day capacity of 68 mgd (150% of average annual demand).

Two seawater desalting alternatives were evaluated. The first assumed that Virginia Beach and Norfolk would be able to reach agreement on a long-term Sales Contract to purchase Norfolk surplus water, and that the balance of its needs would be met by seawater desalting. The seawater desalting facilities were sized based upon the "Dry Year" Norfolk surplus of 20 mgd annual average and 30 mgd maximum day. To do otherwise would result in insufficient supply during dry periods. This would require a seawater desalting facility, including related appurtenances and infrastructure, of 36 mgd (66 mgd maximum day demand in 2010 less 30 mgd maximum day demand provided by Norfolk).

The second seawater desalting alternative assumed that all of Virginia Beach's water needs would be met by seawater desalting. The plant and its appurtenant facilities were sized at 66 mgd capacity (year 2010 maximum day demand). See Table 3.

​Table 3
Design Capacity of Alternatives
Average Annual
Max Day
Lake Gaston Project with Norfolk Treatment45 mgd68 mgd
Norfolk Surplus25 mgd30 mgd
+Seawater Desalting19 mgd36 mgd
Total44 mgd66 mgd
Independent Seawater Desalting44 mgd66 mgd

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Lake Gaston Project with Norfolk Treatment

The capital cost of Virginia Beach's share of the Lake Gaston project is $125 million. This is a total cost which includes the direct cost of construction and all indirect costs such as design, land, legal, and administration. Operation and maintenance costs of the Lake Gaston project are expected to average $0.10 per 1000 gallons through 2010.

The Water Services Contract has three charges. The first is a Fixed Capacity Charge which represents the capital cost and a return on investment for that portion of Norfolk's water system allocated to Virginia Beach. That charge is approximately $16 million per year. The second charge is a Demand Charge which represents fixed operation and maintenance costs. It is approximately $0.35 per 1000 gallons based upon maximum day demand that year. The third charge is a Commodity Charge which represents variable operation and maintenance expenses. It is $0.26 per 1000 gallons based upon actual water use.

Norfolk Surplus augmented by Seawater Desalting

The costs associated with a Water Sales Contract would be the same as those for the Water Services Contract, above. Virginia Beach is obligated to pay Norfolk the Fixed Capacity Charge for 45 mgd annual average capacity and 68 mgd maximum day capacity, as part of the Lake Gaston project. However, for the purpose of this analysis, the Fixed Capacity Charge was reduced from $16 million per year to $10.667 million per year to be consistent with the assumption that Norfolk would limit capacity to 30 mgd annual average capacity and 45 mgd maximum day capacity during wet years. In addition, the Water Sales Contract would also include a Water Charge of $0.60 per 1000 gallons.

Shallow wells and lateral collectors have very low capacity in southeast Virginia due to the fine-grained sands and clays present in the shallow sediments. A large seawater desalting facility would require a seawater intake, a concentrate outfall, and surface water pretreatment.

Since early in its history, Virginia Beach's distribution system has been designed and constructed to receive water from its western boarder and convey that water east and southeast through pipelines which decrease in diameter at the farther reaches of the distribution system. The capacity of the distribution system to receive and convey any significant quantities of water westward from anywhere along its northeastern to southeastern boarder, where a desalting plant would have to be located, is virtually non-existent. Significant distribution system modifications would be necessary.

The total capital costs (direct and indirect) of a 36 mgd seawater desalting facility, surface water pretreatment, intake, outfall, and distribution system modifications were estimated to be $288 million. Fixed operation and maintenance costs were estimated to be $0.77 per 1000 gallons. Variable operation and maintenance costs were estimated to be $2.04 per 1000 gallons.

Independent Seawater Desalting

The total capital costs (direct and indirect) of a 66 mgd seawater desalting facility, surface water pretreatment, intake, outfall, and distribution system modifications were estimated to be $396 million. Fixed operation and maintenance costs were estimated to be $0.77 per 1000 gallons. Variable operation and maintenance costs were estimated to be $2.04 per 1000 gallons.

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All capital costs were amortized over twenty years using 6.5 percent interest and level debt repayment. Annual fixed operation and maintenance expenses were based upon maximum day capacity for that year. Annual variable operation and maintenance expenses were based upon actual water produced that year. Costs were estimated for 1996 through 2010 and averaged for the period. Table 4 lists the annual costs and unit cost of the three alternatives.

​Table 4
Cost Comparison of Alternatives
(Costs in millions of dollars per year, unless otherwise noted)
Lake Gaston Norfolk/SeawaterDesalting Seawater Desalting
Average Water Demand (1996-2010)39.6 mgd39.6 mgd39.6 mgd
Average Gaston Supply39.6 mgd
Average Norfolk Surplus25.0 mgd
Average Desalted Supply14.6 mgd39.6 mgd
Norfolk Fixed CapacityCharge16.00010.667
Norfolk Fixed O&M(0.35/kgal)7.5924.791
Norfolk Variable O&M(0.26/kgal)3.7602.373
Norfolk Water Charge(0.60/kgal)5.475
Lake Gaston Debt Service11.345
Lake Gaston O&M(0.10/kgal)1.446
Desalting Plant DebtService26.13835.940
Desalting Fixed O&M(0.77/kgal)6.16316.703
Desalting Variable O&M(2.04/kgal)10.88629.501
Lake Gaston Norfolk/SeawaterDesalting Seawater Desalting
Total Annual Cost (millions of dollars/yr) 40.14366.49282.143
Total Unit Cost ($/kgal) 2.794.615.69
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Table 4 shows that costs for the Lake Gaston project are $40.1 million per year ($2.79/kgal) compared to $66.5 million per year ($4.61/kgal) for the Norfolk surplus with seawater desalting option and 82.1 million per year ($5.69) for the independent seawater desalting option. In reality, the annual costs for the Lake Gaston project alternative are only $28.8 million per year ($1.99/kgal) because the Lake Gaston project has already been paid for. In anticipation of construction, Virginia Beach raised connection fees and water rates to pay for the project in the late 1980's. Revenues from these sources were escrowed during the period that construction was delayed by opposition from North Carolina. When construction did start, Virginia Beach had accumulated enough funds to cash finance the project. However, for the purposes of this analysis, an equivalent debt service was calculated.

The Norfolk surplus-seawater desalting alternative is 65% more than the Lake Gaston project. The independent seawater desalting alternative is 104% more than the Lake Gaston project. One reason that the Norfolk surplus-seawater desalting alternative was not lower in cost is because in the Sales Contract, Norfolk would require Virginia Beach to pay the capital charges associated with the maximum capacity allocated to Virginia Beach. These facilities must be paid for whether inflow to the reservoirs is sufficient to meet that maximum capacity or not. On the other hand, the seawater desalting facility and its associated infrastructure must be sized to meet demands when the supply from Norfolk is at its lowest. Otherwise, Virginia Beach citizens would be funding rate increases to pay for an alternative that would not be sufficient when drought struck. The net result is an overlap in supply capacity during wet years, which contributes to higher costs.

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