[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
    ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR FISCAL YEAR 2005

                              ----------                              


                        TUESDAY, APRIL 20, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:05 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Pete V. Domenici (chairman) 
presiding.
    Present: Senators Domenici, Cochran, Burns, Craig, Stevens, 
Reid, Murray, and Dorgan.

                       DEPARTMENT OF THE INTERIOR

                         Bureau of Reclamation

STATEMENT OF JOHN W. KEYS, III, COMMISSIONER
ACCOMPANIED BY:
        J. RONALD JOHNSTON, PROGRAM DIRECTOR, CENTRAL UTAH PROJECT 
            COMPLETION ACT OFFICE
        BOB WOLF, DIRECTOR, BUDGET OFFICE
        PAM HAYES, BUDGET OFFICE

             OPENING STATEMENT OF SENATOR PETE V. DOMENICI

    Senator Domenici. The hearing will please come to order. We 
understand Senator Reid will be joining us shortly, perhaps 
some other Senators, but we're going to go right on through 
with what we've got to do today.
    Okay, Panel One will be Mr. John Keys, Commissioner of the 
Bureau of Reclamation. We welcome you, Commissioner, and thank 
you for all your hard work. We know this is a very difficult 
time for you because of the budget. If you don't mind, and 
Senator Burns doesn't mind, I'd like to summarize where we are.
    We're once again in a difficult position because of some 
assumptions that the White House makes, that OMB makes, with 
reference to how we might save some money or maybe add some 
money to our pot, which I don't think we're going to be able to 
do. So today the Bureau of Reclamation and the Corps of 
Engineers--and we will appropriately address the General when 
he comes up here, with reference to this being his last 
testimony before he leaves--there will be two panels, and, in 
the tradition of the subcommittee, this year we will begin with 
the Bureau, and then we will go the Corps as a second panel.
    This subcommittee has jurisdiction over our country's water 
resources, under which falls the Bureau of Reclamation and the 
Corps of Engineers. Both agencies are responsible for managing 
this precious national resource in a cost-effective manner, 
while balancing the needs of its diverse users.
    I believe the mission of these two agencies will only 
become more critical over time, as increasing pressure is 
placed on our water resources. Unfortunately, I fear this is a 
budget request that only exacerbates the problem that we face 
in addressing our various water resource requirements. Overall, 
I believe it will be very difficult, if not impossible, to meet 
what I consider a workable budget for these two agencies 
because the administration has proposed such a low starting 
point.
    For the Bureau of Reclamation, for instance, the President 
has requested, for fiscal year 2005, $956 million, a $14 
million increase over 2004. However, that request assumes an 
offsetting collection of Power Marketing Association--Senator 
Reid, you know that's not possible; and welcome to the 
meeting--and the maintenance of activities which are not likely 
to be enacted, and, therefore, effectively becomes a cut of $30 
million. If you back out these assumed savings, which are not 
going to happen, which I regret--OMB continues to try, and puts 
them in, knowing full well, they're not going to happen--then 
if you back out these assumed savings, the true 2005 request is 
$926 million, a $17 million reduction over 2004.
    There are a few items of particular concern regarding the 
Bureau's budget. The proposed funding for the silver minnow, a 
listed species in my home State of New Mexico, is $18 million--
a listed species, which I don't believe can get along with that 
small amount--that's a $14 million reduction from 2004, and 
we've not been able to make any real headway in establishing 
alternatives that might cost less. Now, I know that the 
administration does not find this as high a priority as I do, 
but I believe this number is just not workable.
    Recently, the committee held a hearing regarding the 
Animas-La Plata. You're fully aware of that hearing's contents, 
Mr. Commissioner, and the understated cost estimate. As you 
know, I shared my frustration, as did some other Senators, with 
the Bureau, because they permitted this to occur. And the 
Department knows how a number of us feel about this 
predicament. As we look forward, I must say that I am concerned 
that this year's funding request does not take into account 
this recent cost increase in the project.
    This year, the administration proposes to replace the 
Western Water Initiative by Water 2025, and the request is $20 
million, up $11.6 million from 2004. The program is to continue 
to address critical western water issues. The biggest change 
here is that this program is proposed to become a grant-based 
effort, whereby local projects would meet criteria in order to 
be a recipient. Actually, with the water needs in the country, 
it is almost hilarious to have a proposal for $20 million for 
the water needs of our country.
    Last year in my State, the Middle Rio Grande District was 
provided funds under the Western Water Initiative. I'd like to 
hear from you how this effort has improved the situation in the 
West and on the Rio Grande and Albuquerque.

                           PREPARED STATEMENT

    Now, for the Corps, we have similar problems. I will wait 
until we get the Corps, and then make my statement regarding 
the same.
    [The statement follows:]

             Prepared Statement of Senator Pete V. Domenici

    The committee will please come to order.
    Today we have the Bureau of Reclamation and the Corps of Engineers 
before us to testify regarding their fiscal year 2005 budgets. There 
will be two panels, and as the subcommittee's tradition dictates, this 
year we will begin with the Bureau of Reclamation in the first panel 
and the Corps of Engineers in the second panel.
    This subcommittee has jurisdiction over our country's water 
resources, under which falls the Bureau of Reclamation and the Corps of 
Engineers. Both agencies are responsible for managing this precious 
natural resource in a cost-effective manner while balancing the needs 
of its diverse users.
    I believe that the mission of these two agencies will only become 
more critical over time, as increasing pressure is placed on our water 
resources. Unfortunately, I fear this is a budget request that only 
exacerbates problems we face in addressing our various water resource 
requirements. Overall, I believe it will be very difficult to meet what 
I would consider a workable budget for these two agencies because the 
administration has proposed such a low starting point.
    For the Bureau of Reclamation, the President has requested for 
fiscal year 2005 $956 million, a $14 million increase over fiscal year 
2004. However, the request assumes an offsetting collection for Power 
Marketing Association operation and maintenance activities which are 
not likely to be enacted and therefore effectively becomes a cut of $30 
million. If you back out these assumed savings, the true 2005 request 
for the Bureau is $926 million, a $17 million reduction from fiscal 
year 2004.
    There are a few items of particular concern to me regarding the 
Bureau's budget. The proposed funding for the silvery minnow, a listed 
species in my home State of New Mexico, is $18 million, a $14 million 
reduction from fiscal year 2004. Now I know that the administration 
does not find this as high as a priority as I do, but I believe this 
number is just not workable given the State's continued drought. I will 
discuss this further when we get to the questions.
    Recently, this committee held a hearing regarding the Animas-La 
Plata project and the understated cost-estimate. As you know 
Commissioner, I shared my frustration with the Bureau and the 
Department about how we got in this predicament. I am sure you share my 
same frustration. As we look forward, I must say that I am concerned 
that this year's funding request does not take into account this recent 
cost increase in the project.
    This year the administration proposes to replace the Western Water 
Initiative by Water 2025 and the request is $20 million, up $11.6 
million from fiscal year 2004. The program is to continue to address 
critical Western water issues. The biggest change here is that this 
program is proposed to become a grant-based effort whereby local 
projects must meet criteria in order to be a recipient. The proposed 
cost-share is 50/50.
    Last year the Middle Rio Grande Conservancy District was provided 
funds under the Western Water Initiative. I'd like to hear from you how 
this effort has improved the situation on the Rio Grande and elsewhere 
in the West.
    For the Corps in fiscal year 2005, the President has requested 
$4.215 billion, which is $356 million below the fiscal year 2004 
enacted of $4.571 billion. There are a variety of policy changes, most 
of which I find ridiculous and irresponsible. Mr. Woodley, I will tell 
you that in many instances in the Corps' budget it appears as if you 
cut the Corps' budget and then after the fact, you tried to justify it 
by proposing a change in policy.
    The two that come to mind are the beach restoration policy which 
you propose to abolish. The second is the 29 projects, currently mid-
construction--let me repeat, mid-construction--which you propose to 
cancel altogether. Now, how can you honestly propose to cancel a 
project half-way through construction, so that the Federal Government 
cannot realize any of the projects benefits and protections? I will 
tell you Mr. Woodley you will not find this provision enacted at the 
end of the year.
    The Corps' request, like the Bureau's, assumes again this year an 
offsetting collection for direct funding Power Marketing Association's 
operation and maintenance activities. This provision is included in the 
current draft of the Energy Bill but does not cover fiscal year 2005. 
The effect of not having this enacted is that it results in a further 
cut of $150 million making the true fiscal year 2005 request $4.065 
billion, an 11 percent reduction from fiscal year 2004.
    I would like to share with my colleagues who may not already be 
aware, that the Corps is the project management agent in Iraq. They are 
the agency directly tasked with the physical reconstruction of Iraq 
because of both its expertise in project management on a large scale, 
and in the rehabilitation of critical infrastructure.
    I find it ironic that the Corps' talent we are all relying on so 
heavily in Iraq is the very same one that is most negatively impacted 
by the administration's budget. I believe that if the administration 
had its way, the Corps would merely become an operations and 
maintenance agency. I will tell you Mr. Woodley that the very Corps 
talent we are utilizing in Iraq was only developed as a direct result 
of its domestic work in all of our States.
    I think the administration is missing the point that this country's 
economic well-being is closely linked to its waterways, be they rivers, 
harbors, or wetlands. Further, it is in our interest to ensure that we 
maintain these resources for our continued successful competition 
within the world marketplace.
    This country has an aging water resources infrastructure. For 
example, approximately 50 percent of the Bureau of Reclamation's dams 
were built from 1900 to the 1950's, before the current state-of-the-art 
construction techniques, therefore they require special maintenance 
measures. Even though budgets are tight, I am concerned that no one is 
working to address this longer term problem. An aging infrastructure is 
one of those problems that we all put off until we absolutely have to, 
which in the end, will just cost us more and may very well endanger 
life and property.
    More importantly, the budget exercise we go through each year is 
not an effort to figure out how little we can spend, but one that 
carefully balances the greatest needs with our limited resources.
    I would like to talk today about the impact the proposed fiscal 
year 2005 budget will have on both agencies and what the Congress can 
do to ensure that they can continue to effectively manage the country's 
water resources.
    On our first panel will be the Bureau of Reclamation. Appearing 
before us will be Commissioner of the Bureau of Reclamation, John Keys, 
and Program Director Ronald Johnston from the CUP Office.
    I would like to welcome the members of the second panel from the 
Corps of Engineers. They are Assistant Secretary for Civil Works, John 
Paul Woodley, Jr.; Lieutenant General Flowers, Chief of Engineers; 
Major General Griffin, Director for Civil Works; and Rob Vining, Chief, 
Programs Management Division.
    I would ask both panels to keep your statements to 10 minutes if 
possible.
    Senator Reid would you like to make your opening remarks before we 
start off with the Commissioner?

    Senator Domenici. Now, having said that, if you don't mind, 
Senator Reid, I will proceed on the basis of arrival, and----
    Senator Reid. Sure, that's fine.
    Senator Domenici [continuing]. Senator Burns has been 
waiting for a long time.
    Senator Burns. I'd yield to the Ranking Member.
    Senator Domenici. Thank you so much.
    Senator Reid.

                    STATEMENT OF SENATOR HARRY REID

    Senator Reid. Thank you very much, Senator Burns. 
Appreciate your courtesy.
    I first want to thank the witnesses that we're going to 
have today for the two panels, Commissioner of the Bureau of 
Reclamation, and, of course, General Flowers, who knows--and 
the Assistant Secretary, John Woodley.
    It's awkward and difficult, I know, for you to defend the 
budget proposals presented by the administration this year. For 
fiscal year 2005, as my friend, Senator Domenici has indicated, 
the administration has proposed large spending increases for a 
number of our Nation's defense and homeland security. And I 
support that. But to have a secure Nation includes things other 
than the things that explode. We have to do what we can with 
the Bureau of Reclamation and the Army Corps to make sure that 
these projects also are funded at a level that we can live 
with.
    Everyone should understand, if we went forward with this 
budget, it would cost the American people more to shut the 
projects down than would be available for few remaining. It's 
troubling.
    We cannot secure the homeland without a strong economy. We 
have with us today the Chairman of the Homeland Security 
Subcommittee of Appropriations, Senator Cochran, an important 
new subcommittee. And I support the subcommittee and the 
problems that they have.
    Take, for example, water resource projects funded in this 
bill. They, in my opinion, are a significant part of our 
national economy and provide important and positive economic 
benefits. The chief of engineers cannot even recommend a 
project to this administration or this Congress unless the 
analysis shows that positive net economic benefits will accrue 
to the national economy. The same is true for the Commissioner 
of the Bureau. Therefore, the only conclusion I can draw from 
this budget is that the administration places our economy, our 
economic security, in a different category than our homeland 
security. I don't share this view. I believe it's shortsighted.
    Water resource infrastructure benefits every American. How 
many of us realize that a typical household uses only 50 to 85 
gallons of water a day? However, it takes nearly 1,200 gallons 
of water per person per day to meet the needs of farmers, 
factories, electric utilities, and many other organizations 
that make it possible for us to have food on our table, a 
computer on our desk, and power for our homes.
    During a hundred years, the Bureau of Reclamation has had a 
major impact on life in the West. The first project ever in the 
history of the country was the Newlands Project in Northern 
Nevada, which is still operable. Without Bureau water projects, 
the western population economy could not be sustained. 
Certainly, that's the case in the State of Nevada.
    The Bureau and the Corps water-storage projects have a 
total capacity of nearly 570-odd-million acre feet. This 
provides municipal and industrial water supply to millions of 
our citizens. The water-supply infrastructure provided by the 
Bureau and the Corps in the West are the lifeblood of the 
communities they serve. Without these investments, the 
tremendous population growth in our western States would not 
have been possible. Further, the tremendous bounty of our 
western farms could not be achieved without these projects.
    Today, the Bureau is having a major impact on many of our 
citizens' lives in the Great Plains providing clean drinking 
water where many have never had it before. In many of our 
western States, the water that comes into people's homes is the 
color of a strong cup of tea. Water out of the Colorado, until 
it's strained, is like mud. When people try to wash their 
clothes without the work done by the agencies I've spoken of, 
it stains them. Sinks, tubs, and toilets are all stained by 
this water. The Bureau's rural water programs have been a 
godsend to these communities. However, funding for these 
programs needs to be increased, not decreased. I'm glad that, 
for the fiscal year 2005, the administration seems to recognize 
the worth of these programs. I hope so, anyway.
    Reclaimed water projects in the West have allowed many 
States to stretch their precious water resources. Nevada relies 
heavily on recycled water for golf courses and water features 
on the Las Vegas strip and for many other uses. Without this 
recycled water, Nevada would find it very difficult to live 
within its allocation on the Colorado River. Yet funding for 
these vital projects was again severely cut this year.
    The people preparing this budget don't realize it, but the 
Federal limit for most of these projects is extremely low to 
begin with. The Federal dollars, when leveraged with the State 
and local dollars, make these projects viable. The Bureau and 
the Corps provide about 35 percent of the Nation's 
hydroelectric power, which amounts to nearly 5 percent of the 
total U.S. electric capacity. Four out of five homes in the 
Northwest are powered by hydroelectric.
    The administration's budget request contains a huge number 
of gimmicks designed to mask the huge deficits they're running 
up. The administration has again recycled the hydropower 
gimmick for the Corps, and expanded it to include the Bureau. 
The budget proposal includes the assumption that the Power 
Marketing of the administration, as Senator Domenici has said, 
will contribute $30 million toward operation and maintenance of 
Bureau hydropower facilities and $150 million toward Army Corps 
facilities. This is just absolutely foolishness.
    Enabling legislation of these proposals has not been 
enacted. We could ignore the proposal and not fund a portion of 
Bureau and Army Corps hydropower. This would have an extreme 
impact on electricity production. The other option is for us to 
appropriate the necessary funds. To take funding away from 
other priorities to fund this unfunded necessary task is--due 
to these budget gimmicks. This is the third straight year that 
the administration has included this proposal for the Army 
Corps, and we still don't have the enabling legislation.
    One would think we're sending the appropriate message in 
this proposal, but someone doesn't understand it. Forty-one 
States are served by the Corps ports and waterways. These ports 
and waterways provide an integrated, efficient, and safe system 
for moving cargo. Two-point-three billion tons of cargo are 
moved through these ports and waterways. The value of this 
cargo to our national economy is $700 billion. Navigable 
waterways generate over 13 million jobs and nearly $150 billion 
in Federal taxes.
    The budget proposal cuts operation and maintenance funding 
to low-use waterways and ports. This is akin to not funding 
snow removal on secondary streets, while completely clearing 
the interstate highway system. You end up with a great system 
with no way to fully utilize it. The same is true of low-use 
waterways and ports and their relations to our deepwater 
harbors. The inland waterway system operates as an integrated 
unit. Not funding a portion of it drags down other parts of the 
system.
    Average annual damages prevented by the Corps flood-control 
projects exceed $20 billion. From 1928 to 2000, cumulative 
flood damages prevented, when adjusted for inflation, were $709 
billion, for an investment of $122 billion. That is nearly a 
6:1 return. It's hard to find many things in the Federal budget 
that have a 6:1 rate of return, and yet this area has been 
severely underfunded in the budget. Again, only the Simms 
Bayou, Eastern Texas project, and Westbank, in the vicinity New 
Orleans, projects were adequately funded. The Corps will likely 
have to juggle the funding shortfalls for remaining projects to 
keep work going on them. Remember what I said initially. To 
follow what we have in this budget would cost more than we 
would save, and that's an understatement.
    The President's budget proposals also include another new 
beach policy. It's the third year in 3 years. This is the worst 
one yet. I have to believe that someone in the bowels of the 
administration that comes up with these policies isn't 
thinking. Beaches are the leading tourist destination in our 
country. California beaches alone receive nearly 600 million 
tourist visits every year. This is more tourist visits than to 
all the lands controlled by the National Park Service and the 
Bureau of Land Management combined. Beach tourists contribute 
$260 million to the U.S. economy and $60 billion in Federal 
taxes, yet for this budget that we're asked to approve, the 
administration has decided that the Federal Government should 
only participate in the initial construction of beach 
restoration, and that local interests should be responsible for 
all subsequent beach renourishments. This proposal tells our 
citizens that government will provide your initial storm-damage 
protection, but after we finish, you're on your own.
    The impacts of this policy resonate through this budget, 
and are impacting execution of funding provided this year. Both 
the Corps and Bureau contribute to our Nation's environmental 
protection. Over $1 billion, or 25 percent of the Army's Corps 
fiscal appropriation, were targeted for environmental 
activities. Reclamation expended a similar percentage on their 
budget.
    One final note. I would be remiss if I didn't mention the 
Brazos Island Texas Project--the Island Harbor Texas Project. 
In fiscal year 2004, the first year of funding was provided to 
determine the Federal interest. The fiscal year 2005 budget has 
unilaterally determined that not only is the project in the 
Federal interest, but it should be funded for construction even 
though a feasibility study has not been conducted, nor has the 
project been authorized. Five hundred thousand dollars provided 
in the request to conduct a feasibility study, and $9\1/2\ 
million was provided to construct this unauthorized project. I 
can't remember a time when funding was provided for these two 
phases at the same time. This is astounding, in light of the 
fact that the administration is holding up funding for numerous 
projects that have been fully vetted by the Corps and the 
Assistant Secretary, yet the administration exempted this 
project not only from the entire review system, but also from 
being authorized by Congress for construction. This project 
should face the same scrutiny as all other projects, and I 
intend to treat this project the same as all other projects.

                           PREPARED STATEMENT

    It's clear to me, and it should be clear to all of us, that 
investments in our water infrastructure strengthen our economy 
and, thereby, directly contribute to our homeland security. So 
I intend to work with Senator Domenici, the full committee 
chairman, Senator Stevens, and Senator Byrd, to try to find 
additional resources to more adequately fund our water 
infrastructure.
    Thank you very much for your patience, and especially you, 
Senator Burns.
    [The information follows:]

                Prepared Statement of Senator Harry Reid

    Good morning.
    I am glad to be here today with my good friend, Senator Domenici 
and his staff as we work towards preparing our annual Energy and Water 
spending package.
    These hearings are intended to help us prepare our funding 
proposals. We depend on the open exchange of information that we 
receive in these hearings to explain and elaborate on the President's 
budget proposals.
    However, most importantly, we will develop our appropriations bill 
by taking into account the needs of our Members and the American 
people.
    I want to thank our witnesses from the Bureau of Reclamation and 
the U.S. Army Corps of Engineers for appearing before us today. I know 
that it is both awkward and difficult for you to defend the budget 
proposals presented by the administration in this year's budget.
    For fiscal year 2005, the administration has proposed large 
spending increases for our Nation's defense and our homeland security, 
and yet the budget proposals for the Bureau of Reclamation and the Army 
Corps are not only flat, they are counterproductive and will, if 
enacted, cost the American people more to shut projects down than will 
be available to move the few remaining.
    I find this very troubling.
    Homeland security has rightly been a priority within this 
administration. However, I do not believe that we can secure the 
homeland without a strong economy.
    The water resource projects funded in this bill are a significant 
part of our national economy and provide important and positive 
economic benefits.
    The Chief of Engineers cannot even recommend a project to this 
administration or this Congress unless the analysis shows that positive 
net economic benefits will accrue to the national economy. The same is 
true for the Commissioner of the Bureau of Reclamation.
    Therefore, the only conclusion that I can draw from this budget is 
that the administration places our economic security in a different 
category than our homeland security.
    I do not share this shortsighted view. Water resource 
infrastructure benefits all of us.
    I wonder how many of us realize that the typical household only 
uses 50 to 85 gallons of water a day. However, it takes nearly 1,200 
gallons of water per person per day to meet the needs of farmers, 
factories, electrical utilities, and the many other organizations that 
make it possible for us to have food on our table, a computer on our 
desk and power for our homes.
    During their 100-year history, the Bureau of Reclamation has had a 
major impact on life in the west. Without Bureau water projects, the 
western population and economy could not be sustained, including my 
home State of Nevada.
    Bureau of Reclamation and Army Corps water storage projects have a 
total capacity of nearly 575 million acre feet of storage and provide 
municipal and industrial water supply to millions of our citizens. The 
water supply infrastructure provided by the Bureau and the Army Corps 
in the West are the life blood of the communities they serve. Without 
these infrastructure investments the tremendous population growth in 
our western States would not have been possible. Further, the 
tremendous bounty of our western farms could not be achieved without 
these projects.
    Today the Bureau is having a major impact on many of our citizens' 
lives in the Great Plains by providing clean drinking water where many 
have never had it before. In many of our western States, the water that 
comes into people's homes is the color of a strong cup of tea. When 
people try to wash their clothes, it stains them. Sinks, tubs and 
toilets are all stained by this water.
    The Bureau's rural water programs have been a godsend to these 
communities, however, funding for these programs needs to be increased. 
I am glad that for fiscal year 2005 the administration seems to 
recognize the worth of these programs after the devastating cuts made 
in fiscal year 2004 that Congress had to restore.
    Reclaimed water projects in the west have allowed many western 
States to stretch their precious water resources. My own State of 
Nevada heavily uses recycled water for the golf courses and water 
features on the Las Vegas Strip and for other uses.
    Without recycled water, Nevada would find it very difficult to live 
within its 300,000 acre-foot allocation of the Colorado River.
    Yet, funding for these vital projects was again severely cut this 
year. Perhaps the people preparing this budget don't realize it, but 
the Federal limit for most of these projects is relatively low. 
However, the Federal dollars when leveraged with the State and local 
dollars make these projects viable.
    The Bureau of Reclamation and the Army Corps of Engineers provide 
about 35 percent of the Nation's hydroelectric power which amounts to 
nearly 5 percent of the U.S. total electric capacity. Four out of five 
homes in the northwest are powered by hydroelectric power.
    As always, the administration's budget request contains a huge 
number of budget gimmicks designed to mask the huge deficits they are 
running up. The administration has again recycled a hydropower gimmick 
for the Army Corps and expanded it to include the Bureau of 
Reclamation. The budget proposal includes the assumption that the Power 
Marketing Administrations will contribute $30 million towards operation 
and maintenance of Bureau of Reclamation hydropower facilities and $150 
million towards Army Corps facilities.
    Enabling legislation for these proposals has not been enacted. 
Absent this legislation, we have two choices. We could ignore the 
proposal and not fund this portion of Bureau and Army Corps hydropower. 
This would have extreme impacts on Federal hydropower production.
    The other option is for us to appropriate the necessary funds. That 
is, to take funding away from other priorities to fund this unfunded 
necessary task due to budget gimmicks. This is the third straight year 
that the administration has included this proposal for the Army Corps 
and enabling legislation has still not been enacted. One would think we 
were sending the appropriate message on this proposal, but obviously 
someone does not understand it.
    Forty-one States are served by Army Corps ports and waterways. 
These ports and waterways provide an integrated, efficient and safe 
system for moving bulk cargos. Two-point-three billion tons of cargo 
are moved though these ports and waterways. The value of this cargo to 
the national economy approaches $700 billion. Navigable waterways 
generate over 13 million jobs to the national economy and nearly $150 
billion in Federal taxes.
    The budget proposal again cuts operation and maintenance funding to 
``low use'' waterways and ports. This is akin to not funding snow 
removal on secondary streets while completely clearing the interstate 
highway system. You end up with a great system with no way to fully 
utilize it.
    The same is true of ``low use'' waterways and ports and their 
relationship to our deepwater harbors. The inland waterway system 
operates as an integrated unit. Not funding a portion of it drags down 
other parts of the system.
    I am gratified to see that the budget proposal adequately funds the 
New York and New Jersey Harbor project as well as the Olmstead Lock and 
Dam project on the Ohio River, however, it does this at the expense of 
all of the other navigation projects. Only these two chosen projects 
will be able to initiate any new work for fiscal year 2005. All of the 
projects will have to limp by on the remaining funding.
    Average annual damages prevented by Army Corps flood control 
projects exceed $20 billion. From 1928-2000, cumulative flood damages 
prevented when adjusted for inflation were $709 billion for an 
investment of $122 billion, adjusted for inflation. That is nearly a 6 
to 1 return on this infrastructure investment.
    It is hard to find many things in the Federal budget that have a 6 
to 1 rate of return, and yet this area has been severely underfunded in 
the budget. Again, only the Sims Bayou, Houston, Texas, project and the 
West Bank and Vicinity, New Orleans, project were adequately funded. 
The Army Corps will likely have to juggle the funding shortfalls for 
the remaining projects to keep work going on them.
    The President's budget proposal has also included another ``new'' 
beach policy, his third in 3 years. This is the worst one yet. I have 
to believe that someone in the bowels of the administration that comes 
up with these policies is just not thinking them through.
    Beaches are the leading tourist destination in the United States. 
California beaches alone receive nearly 600 million tourist visits 
annually. This is more tourist visits than to all of the lands 
controlled by the National Park Service and the Bureau of Land 
Management combined.
    Beach tourists contribute $260 billion to the U.S. economy and $60 
billion in Federal taxes.
    And yet, for fiscal year 2005, the administration has decided that 
the Federal Government should only participate in the initial 
construction of beach restoration projects and that the local interests 
should be responsible for all subsequent beach renourishments needed 
over the 50 year life of the project.
    This proposal tells our citizens, that the government will provide 
your initial storm damage protection, but after we finish, you're on 
your own!
    The impacts of this beach policy resonate throughout the fiscal 
year 2005 budget and are impacting execution of funding provided in 
fiscal year 2004.
    Both the Army Corps and the Bureau contribute to our Nation's 
environmental protection. Over $1 billion, or about 25 percent, of the 
Army Corps' fiscal year 2004 appropriations was targeted for 
environmental activities. Reclamation expended a similar percentage of 
their budget on these important activities.
    One final note about the President's proposal that I would be 
remiss if I did not mention is the Brazos Island Harbor, Texas, 
project. In fiscal year 2004, first year funding was provided to 
determine the Federal interest.
    The fiscal year 2005 budget proposal has unilaterally determined 
that not only is the project in the Federal interest, it should be 
funded for construction, even though a feasibility study has not been 
conducted nor has the project been authorized for construction. Five 
hundred thousand dollars is provided in the request to conduct a 
feasibility study and $9.5 million was provided to construct this 
unauthorized project. I cannot remember a time when funding was 
provided for these two phases at the same time.
    This is astounding in light of the fact that the administration is 
holding up funding for numerous projects that have been fully vetted by 
the Army Corps and the Assistant Secretary of the Army for Civil Works. 
Yet the administration has exempted this project not only from the 
entire review system established by the administration, but also from 
being authorized by Congress for construction.
    I believe this project should face the same scrutiny as all of the 
other projects in the President's proposal and intend to treat this 
project the same as all other projects as we prepare our Bill.
    It is clear to me and should be clear to all of us that investments 
in our water infrastructure strengthen our economy and thereby directly 
contribute to our homeland security.
    I intend to work with Chairman Domenici, Chairman Stevens, and 
Ranking Member Byrd to try to find additional resources to more 
adequately fund our water infrastructure.
    Thank you Senator Domenici.

    Senator Domenici. Thank you very much, Senator Reid.
    Let me ask the other Senators if they desire to speak. I'm 
more than willing to let them. This is a very, very serious 
budget.
    Senator Stevens and Senator Cochran were not here when I 
said this, and I will not repeat my remarks. I will just tell 
you that on both budgets, they are slim; but, in addition, in 
each of the two budgets, the OMB assumed that we would do 
something that we can't do. Power Marketing is assumed as 
something that will be done that will cause us to raise money. 
Since that won't happen, the net effect is that we're $180 
million short in the Corps and the Bureau combined, $180 
million. That's a lot of money, when you figure that that's 
below the line, less than what we would expect, based on last 
year's budget. I don't know how we're going to do it, but I 
just want you to know that.
    Now, who should go next, based----
    Senator Stevens. Senator, could I just make a comment?
    Senator Domenici. Absolutely.

                    STATEMENT OF SENATOR TED STEVENS

    Senator Stevens. I came by to tell the committee that I was 
privileged to attend a meeting about Brazil, and I was 
staggered to find that Brazil had changed its dependence on 
foreign oil, imported oil, from 70 percent to 17 percent by 
reassessing all its hydroelectric potential and by having a 
crash program of investment in hydro potential.
    I would like to ask that both of the panels--Mr. Keys and 
the Corps--deliver to the committee past studies of the 
hydroelectric potential of the United States. And I don't care 
where it is. If those lands have--some of these lands have been 
withdrawn now in order to prevent the hydro potential, I think 
we should have a complete review of the hydro potential. We're 
in a period of escalating gasoline prices, and we face, soon, 
escalation in even the price of natural gas because of our 
increased dependence upon imported natural gas.
    I do think it's one of our duties now to reassess all the 
alternative forms of energy that are available, and let the 
American public decide whether some of these hydroelectric 
projects should be constructed now, and that we should shift to 
a period of investment in future hydro potential.
    I would also ask your consent, your agreement, to let me 
place in the record the answers to a series of questions that 
General Flowers was kind enough to deliver to me. We did have a 
visit some time ago, before the recess, and I asked him some 
specific questions about Alaska, and he has delivered the 
answers to me, and I'd like those printed in the record.
    Thank you very much.
    Senator Domenici. Senator, they will be made a part of the 
record.
    And we will consider your two questions as if they were 
asked. And you understand, Commissioner, that that's been asked 
of you? Is General Flowers here yet?
    Senator Stevens. Well, I have the questions and answers 
right here.
    Senator Domenici. All right.
    Senator Stevens. I can put them in the record, if that's 
all right.
    Senator Domenici. Those are Alaska.
    Senator Stevens. They're Alaska Corps of Engineers project 
questions.
    Senator Domenici. Yes, but with reference to your request 
that there be an assessment of potential water projects, in 
terms of hydro----
    Senator Stevens. Well, I just want--they've done already--I 
know they did--they did some of them when I was down there, in 
the 1950's, but I think they updated those later.
    Senator Domenici. All right.
    Senator Stevens. All right?
    Senator Domenici. We'll get that.
    Senator Stevens. That was in the last century, Mr. 
President.
    Senator Domenici. Yes, I understand.
    I mean, you are very viable. I don't know how many more 
centuries you'll be here, but----
    You will outlive us.
    I want to comment, with reference to your last observation 
regarding hydro, that the Senator sitting by you, right there, 
Senator Larry Craig, has been working on hydro, the permitting 
process, which has been very cumbersome. He's been working on, 
in fact, the energy bill, had a tremendous reform that would 
have moved projects, of the type the Senator from Alaska's 
talking about, in a much more expedited--and yet safe, from the 
standpoint of the environment. It got through. If we don't do 
the energy bill, who knows where it will go, but we aren't 
going to give up on modernizing the permitting system.
    Senator Stevens. Well, Senator, God willing, if I'm able to 
so, I intend to invite Members of the Full Committee to take a 
trip to Brazil after the election and see what they have done. 
This is a staggering concept of reversing a total dependence--
--
    Senator Domenici. Terrific.
    Senator Stevens [continuing]. On foreign oil and replacing 
it with alternative forms of energy in your own country.
    Senator Domenici. Well, Senator, I just want, before you 
leave, to reiterate to you, when you start allocating the 
money--and I know you have an insurmountable problem, but you 
should know that you can't use the administration numbers as if 
we can get the job done with them, because, in each case, there 
is a very big amount of money that is assumed in that budget 
that will not occur. In each case, they assume things like the 
Power Marketing, which is a big one--and what's the other one? 
Yucca Mountain piece that they assume, and other things.
    Now, Senators who are here--Senator Burns, would you like 
to comment?

                   STATEMENT OF SENATOR CONRAD BURNS

    Senator Burns. Thank you, Mr. Chairman, I just have one 
comment. When you look at this budget, knowing the projects 
we've got, I think we ought to try to do what we're supposed to 
do, and focus on our highest priorities. Now, I guess that's 
pretty easy to say when you come from a watershed State, where 
we're hurting a little bit in some of our irrigation districts, 
and we need some help.
    So, I just want to make sure we keep this in mind when we 
set the priorities on what we're about and what we're supposed 
to be doing. In our part of the country food production is very 
important, and we've got a big problem with the Milk River that 
we'd like to start addressing. This budget will not get 
everything done, but we want to work with you and do everything 
we can.
    There are some private entities that are willing to take 
over irrigation districts. Willing to take over. They've 
already paid them off. And yet we come to the government, and 
we say, ``Well, now, we'd like to turn these back and--turn 
them over to private entities, where they paid money in, where 
they pay for the water, they pay for everything, and willing to 
do it,'' and yet we run into a stone wall about getting these 
irrigation systems moved into private entities because--they 
just don't want to release it because they're afraid they'll 
lose their job or something. I don't know what it is. But 
anytime that you've got the private sector wanting to take over 
something that's costing us money, and they're willing to 
assume the responsibilities of it, I think we ought to look 
very closely at that and how it impacts on our budget, year in 
and year out.
    So I've got another meeting to go to now, but I just want 
to thank the Bureau of Rec. and also the Corps of Engineers. 
We've had a great year in Montana, and we've worked together on 
some projects that are really going to make a positive impact. 
But we also have some very serious problems that we have to 
look at and come up with some imaginative ways to deal with 
those problems. And I think we can do this in a way that 
benefits both the people who live there and also the American 
taxpayer.
    Thank you, Mr. Chairman.
    Senator Domenici. Thank you.
    Senator Cochran.

                   STATEMENT OF SENATOR THAD COCHRAN

    Senator Cochran. Mr. Chairman, thank you very much. I have 
a statement specifically dealing with the budget request for 
the Corps of Engineers, and I ask unanimous consent that it be 
printed in the record.
    Senator Domenici. It'll be made part of the record.
    [The statement follows:]

               Prepared Statement of Senator Thad Cochran

    Mr. Chairman, I join you in welcoming the witnesses to this 
hearing.
    I appreciate the good work the Corps of Engineers does in the State 
of Mississippi. I do, however, have some serious concerns with the 
Corps' ability to continue to carry out its responsibilities due to 
declining levels of funding.
    The Corps' ability to accomplish their mission is becoming more 
than a serious challenge. I am disappointed in the budget request for 
the Civil Works program.
    More funding would provide greater economic and environmental 
benefits, as well as improved safety and security for our Nation's 
citizens.
    Locks and dams that allow for more efficient and environmentally 
responsible movement of goods on our waterways continue to deteriorate, 
and the Corps continues to struggle to find the resources to dredge 
waterways that carry commercial cargo such as the Mississippi and Ohio 
Rivers, not to mention many other smaller waterways. The maintenance 
backlog also continues to grow and become more serious.
    In addition, we are not adequately constructing or maintaining 
important flood control structures that are needed in many areas.
    I appreciate the efforts by General Flowers to meet the demands 
being made on the Corps, and I congratulate him on his exemplary 
service as Chief of Engineers. Since he's retiring later this year, it 
may be the last time he appears before the subcommittee. I congratulate 
him on his outstanding service to the country.

    Senator Domenici. Is that it?
    Senator Cochran. Yeah.
    Senator Domenici. All right.
    Senator Dorgan.

                  STATEMENT OF SENATOR BYRON L. DORGAN

    Senator Dorgan. Mr. Chairman, let me be brief, but I have 
another Appropriations subcommittee hearing going on just 
around the corner on this floor, and I'm involved in that, as 
well, so I won't be able to listen to all of the testimony. But 
I wanted to underscore the points you made. Water policy is 
critically important, and funding these represent not just 
ordinary expenditures, they represent good investments in the 
future that provide, in most cases, very high returns.
    And I wanted to say to Commissioner Keys that last 
Thanksgiving, as you know, the people of Fort Yates, on the 
Indian reservation, lost their water because of a problem with 
the Missouri River intake. And for several days, these folks, 
8,000 of them, had no water at all. And, Mr. Chairman, I should 
just tell you that the employees of the Bureau were down there 
working through the Thanksgiving holiday. They did a remarkable 
job. And your employees deserve a real big, hearty thank you. 
They worked around the clock during the Thanksgiving holiday, 
and they got water restored.
    But this relates to the need for a permanent solution down 
there. It relates to the management of the Missouri River by 
the Corps of Engineers. And it relates to bigger and broader 
issues that we have to address. We also need to deal with the 
rural water needs. Commissioner Keys, you were with us when we 
broke ground for the NAWS Project, which, by all accounts, is a 
great project, known as great to everyone except the Office of 
Management and Budget, apparently. Despite the fact that they 
don't allege there's anything wrong with it; they just put it 
as part of this PART process and don't fund it well enough. And 
then we also need to continue the flood-control project 
underway at Grand Forks, and complete that.
    So this subcommittee has an enormous charge, and all of it 
is critically important. Mr. Chairman, I look forward to 
working with you and other Members of the subcommittee to find 
ways to meet our obligations and to work with the Corps and the 
Bureau to get done what we need done. We need the Red River 
Valley studies in Eastern North Dakota. I won't recite my 
displeasure with the Corps and the master-manual rewrite right 
now, but----
    Senator Domenici. I understand.

                           PREPARED STATEMENT

    Senator Dorgan. I'll do that later.
    But thank you very much. And let me say, again, the part of 
the Chairman's statement and the part of Senator Reid's 
statement I heard is right on point. These are critically 
needed investments, and we need to find a way to do them.
    [The statement follows:]

             Prepared Statement of Senator Byron L. Dorgan

    Assistant Secretary Woodley, Mr. Keys and General Flowers, I 
welcome you to our subcommittee, and I thank you for your testimony. In 
North Dakota, we have enormous water challenges and depend greatly on 
the assistance of the Corps of Engineers and the Bureau of Reclamation 
for flood control, irrigation, and municipal, rural and industrial 
water needs. The President's budget request for fiscal year 2005 does 
not give your agencies the funding you need to accomplish the great 
challenges ahead of you in my State and throughout the Nation.
    I am very concerned that the President's fiscal year 2005 budget 
submission for water projects falls dramatically short of the 
investment that will be needed. The President proposes cutting nearly 
$356 million from the Army Corps of Engineers and $28 million from the 
Bureau of Reclamation's Water and Related Resources program. These cuts 
are coming at a time when the Federal Drought Monitor shows that almost 
every western State, including North Dakota, remains in drought. In 
North Dakota, low lake levels at Lake Sakakawea and Lake Oahe, two 
major lakes on the Missouri River created by the Federal Government in 
an effort to eliminate annual flooding of river lowlands, are causing 
extreme problems for communities that depend on these lakes for their 
water supply. We had a crisis earlier this year at Standing Rock Indian 
Reservation when the community of Ft. Yates lost water due to the low 
lake levels on Lake Oahe. To respond to this emergency, the Bureau had 
to divert already limited municipal, rural and industrial funds 
designated for other tribal projects. Other communities along Lake 
Sakakawea and Lake Oahe are in danger of suffering the same fate. 
Already, economies dependent on recreational uses of the lake have been 
devastated due to low lake levels and now the water supplies are also 
in danger.
    I blame this on the Corps' mismanagement of the Missouri River. The 
Corps had the opportunity to change their management practices on the 
river to practices that would have produced a net benefit for the 
entire country. Instead, the Corps issued its revised Master Manual 
last month which simply kept the status quo.
    Needless to say, I am unhappy with this so called ``revision.'' In 
the President's Fiscal Year 2005 Budget Request for the Army Corps he 
stated, ``A concerted effort by this Administration and the Congress is 
needed to ensure that the ongoing and future efforts of the Corps are 
environmentally sustainable, economically responsible, and fiscally 
sound. Achieving this goal will require a transformation in cultural 
attitudes.'' The President is correct in his assumption that attitudes 
must change in order for us to reap the economic benefits from water 
projects such as the Missouri River Basin.
    The President's Budget Request further states, ``In developing its 
budget proposal for 2005, the Corps assessed the relative merits of 
each potential investment in each of its program areas. This approach 
represents an important step towards the President's goal of making 
fiscally responsible funding decisions based more on results and less 
on factors such as `what did they get last year.' This is the essence 
of the Corps' performance-based budget. The Administration funds 
activities that will yield the greatest net benefit to society per 
dollar invested.''
    I wish it could be said that the Corps actually took this type of 
approach when revising the Master Manual. Studies show that every 
dollar the public spends to operate and maintain the Missouri River 
only generates 40.6 cents in transportation savings to barge companies, 
export elevators, importers and grain producers. It has been further 
shown that the actual O&M expenses for the Missouri River ($7.1 
million) exceed the net benefits provided by the barging industry ($6.9 
million). This, to me, seems like a waste of taxpayer funding. (There 
are only three barging companies currently operating on the MO River). 
If the administration is serious in its efforts to focus funding on 
those activities that will yield the greatest net benefit to society as 
a whole, then it would seem that reforming the management practices on 
the Missouri River would be an initiative the Corps would take 
seriously and address in a manner more consistent with the 
administration's directive.
    I hope the ``revised'' Master Manual is something the Corps will 
continue to look at and is not something they feel no longer needs to 
be reevaluated. I believe the Corps should do more than simply reprint 
the 1979 Master Manual. The people of the Missouri River Basin deserve 
and expect more. The towns and communities that have grown dependent on 
the reservoirs and river need to know what they can expect from the 
Federal Government in the future. They need to know that the government 
is more concerned with the safety and welfare of the Nation, rather 
than simply a few downstream barge companies. We need to reevaluate and 
set the goals for our future use on the river and judging from the 
past, the status quo is no longer an option.
    As you know, my top priority within the Bureau of Reclamation's 
budget is adequate funding for the Garrison project. A total of 155,000 
acres of Ft. Berthold Indian Reservation land was taken for building 
the second-largest earth filled dam in America, the Garrison Dam-Lake 
Sakakawea project. The water divided the Reservation down the middle. 
The Federal Government owes this tribe and others in North Dakota for 
its sacrifice for the Nation. We have promised, in an authorization 
bill, to provide $200 million for Indian municipal, rural and 
industrial water needs and $200 million for State MR&I. But this 
administration's budget once again fails to come through on that 
promise recommending only recommending $22.1 million for the Garrison 
project which does not even maintain the historic funding level, 
ignores the needs of the current program and does not keep up with the 
price increases expected in the major programs as delays occur. This 
year, the budget only provides about $5.485 million for rural water 
projects--half for the State program which includes the Northwest Area 
Supply (NAWS) and the other half for Indian programs. This is almost 
$45 million short of what North Dakota needs for Indian and State MR&I. 
We simply must do better or the costs of this project are going to 
overwhelm us in the outgoing years. If the current funding trend, a 
disaster will occur in only a few years when an additional $30 million 
will be needed for the Red River Valley program.
    I am also very concerned about the impact of the President's budget 
recommendation for the Grand Forks/East Grand Forks Flood Control 
Project. This year, the President only recommends $31 million for this 
project which is nearly $24 million short of the amount that will be 
needed to bring the project to substantial completion. We are so close 
to providing this community permanent flood control protection and I 
just don't understand why the administration would not choose to finish 
the project this year. A wet spring recently caused severe flooding in 
areas just west of Grand Forks and we are once again reminded that the 
community is not safe from another flood until this permanent 
protection project is finished. This subcommittee has invested so much 
into that project and I will be asking for my colleagues for their help 
in getting this project substantially completed this year before FEMA 
remaps the area only to have to spend the money to do it again after 
the project is completed.
    As you'll see, I think we have a lot of challenges in front of us 
but I thank you for appearing before us today.

    Senator Domenici. Thank you very much.
    Senator Larry Craig.

                  STATEMENT OF SENATOR LARRY E. CRAIG

    Senator Craig. Thank you, Mr. Chairman. I'll be brief. I 
got here late, but I do want to make a couple of opening 
comments because it's an opportunity to have John before us to 
talk about issues that are obviously critical.
    And, let's see, Commissioner, have you gone to Idaho yet? 
When are you going?
    Commissioner Keys. I'm sorry, sir?
    Senator Craig. I thought you were going to go to Idaho this 
coming week.
    Commissioner Keys. I am there the 6th and 7th of May to----
    Senator Craig. Okay.
    Commissioner Keys [continuing]. Work with them on the 
groundwater issue.
    Senator Craig. Right. I knew that you were--that your trip 
out there was timely in relation to what's happening in Idaho, 
but also what's happening in the West, Mr. Chairman.
    I just, during this Easter break, spent time with the Twin 
Falls Irrigation Company, the Twin Falls Canal Company. For the 
record, Mr. Chairman, that is one of the largest irrigation 
companies in the State of Idaho, that irrigates all--from, you 
know, Bureau of Rec. development programs, the whole 
development of the central/mid Snake River Basin area.
    Here is what I concluded from them, and here is what we 
have to conclude in the West today. The West is drying up, and 
it's getting progressively drier. And it is now extended over a 
near 10-year period, Mr. Chairman. Lake Meade is--or Lake 
Powell is at an all-time low since it was filled. Lake Meade is 
down. There is a guesstimate now, and the figures would show 
the progressive decline in the flow of the Snake River is 
upwards of 500,000 acre feet now, on an annualized basis. Every 
chart I see over the last decade shows a decline in overall 
springs and spring recharge. You're going out to talk about the 
need to try to recharge the Snake River Plain Aquifer and the 
Federal impediments that may or may not exist there as it 
relates to doing that.
    It quit raining and snowing in Idaho the 1st of March after 
what appeared to be a very good wet winter, and it hasn't 
snowed or rained since.
    Senator Domenici. What was that date?
    Senator Craig. First of March. The snow is evaporating or 
going into the ground, our rivers are showing little to no 
spring surge, and many of our reservoirs are nearly empty. The 
great American Falls Reservoir irrigation system, that 
reservoir will not spill this year. It appears that it may get 
only to 70 percent capacity.
    The West is in deep water trouble. It's also an area where 
everyone else wants to share water that was once dedicated for 
another purposes, and so the conflicts are growing, whether it 
is fish, or whether it is human consumption. It also is a 
segment of the region that is growing the fastest of any in the 
United States. Whether it's Idaho and Idaho's growth, or New 
Mexico, or Arizona, or Nevada, all of it's growing, and growing 
faster than any segment. And yet the one resource that will 
dictate its growth or dictate how people live is the resource 
of water. And, frankly, we're doing nothing to add to the 
overall capacity of the systems.
    We started dewatering the State of Idaho a decade ago, when 
we decided that it was important that we leave some water in 
the system for purposes of flush for fish, and we haven't added 
any upstream capacity. We've brought more water in that was 
once dedicated for something else, which meant water was 
leaving the ground to go into the system.
    But it is an alarming figure. And I have a variety of 
charts here in front of me, but probably this is the most 
significant one. That's a decade of flow in the Snake River 
system, all of it in decline. Used to be we had 5- to 6-year 
cycles. It's very difficult to find a decade or more of 
progressive decline in overall flows.
    I say that today--Mr. Chairman, you've experienced it in 
New Mexico, throughout the West. The arid, high-desert West is 
getting drier. And the one agency that can play a role in 
helping is your agency. And the problem we have today is that 
the idea--and the chairman of the full committee talked about 
hydro projects and putting dams in rivers--oh, how dare we even 
think about that idea again--but there is capacity in the 
systems off main stem, in areas that would have little 
environmental impact, to increase the overall abundance of 
water in an arid West, and much of that could be dedicated to 
in-stream flow to increase water quality within the main-stem 
systems. And yet even some of our environmental friends will 
ignore the obvious, because they have dedicated themselves to 
being anti- and not pro-environment in many instances.
    That's a conflict we're into, but it was brought to reality 
this week, this past week, when I sat down with Idaho's largest 
irrigation company and saw their dramatic declines in overall 
resource. And they're now rushed to manage, rushed to conserve, 
as we grow increasingly drier in the West.
    Thank you, Mr. Chairman.
    Senator Domenici. Thank you very much.
    Now, when you say the Bureau of Reclamation can help with 
this, let me say publicly that this gentleman has tried 
mightily, but the truth of the matter is they've made some 
mistakes in the past year. The biggest one is the Animas-La 
Plata, which turns out to be Animas-La Plata Lite. And even 
with Animas-La Plata Lite, they have messed up the estimates 
terribly. They promise me that they're going to fix it, and 
they're going to come back with estimates that are right, and 
spread it out a little bit so it doesn't beat our budget up. 
How could we pay for it with what we've got? I mean, if they 
end up with 40 to 50 million dollars that they need, they can't 
get it. We can't pay for projects right now that have, you 
know, been going for a long, long time.
    My last remarks are directed at OMB. I honestly don't 
believe that, in considering the budget, that they consider any 
of the things we've been talking about here. It's pure numbers. 
You know, pure numbers. Can you imagine to come up and say 
we've got a new water program he put in it for the West, and we 
put $20 million in it? You know, $20 million? We need a 
revolving fund of a billion dollars, with grants and matching 
funds. Anybody that sees that--sees what's going on out there 
knows that.
    Now, enough of us. Let's hear the Commissioner.
    Proceed.

                 SUMMARY STATEMENT OF COMMISSIONER KEYS

    Commissioner Keys. Mr. Chairman, good morning. It's my 
absolute pleasure to be here today to talk about the 
President's fiscal year 2000 budget request for the Bureau of 
Reclamation.
    We do appreciate all the support that we've had from the 
committee, and certainly look forward to working with you on 
Bureau projects in the future.
    I have a statement for the record that has been sent 
forward that I would certainly appreciate your including as 
part of the record.
    Senator Domenici. It will be made part of the record.
    Commissioner Keys. Assistant Secretary Bennett Raley, 
Assistant Secretary of Water and Science, could not be here 
today, and he has also submitted a statement that we would 
appreciate being put in the record.
    Senator Domenici. It will be made part of the record.
    Commissioner Keys. And I have with me Ron Johnston, who is 
here to talk, if you would like, about the Central Utah Project 
Completion Act, and I have Bob Wolf and Pam Hayes, our budget 
folks, with us if we need further information from them.
    Mr. Chairman, before I get to the budget, we would like to 
update you on water-supply situation in the Western United 
States. This year, unfortunately, as we've talked about, the 
drought remains with us and--put the green one up first, the 
big one----
    Senator Domenici. I didn't read your testimony beforehand, 
I'm sorry, Mr. Commissioner, but thank goodness you're covering 
this. Please proceed.
    Commissioner Keys. Mr. Chairman, you talked about growth in 
the West, and this first chart shows exactly what you were 
talking about. In the decade between 1990 and 2000, State of 
Nevada grew by 60 percent, State of Arizona by 40 percent, 
Colorado and Idaho by 30 percent, New Mexico by 20 percent. 
That, in itself, tells you some of the crisis and conflict that 
we face in the Western United States.
    The next chart shows that annual precipitation that we have 
depended on for a number of years, and certainly you can see 
that in the Western United States it ranges somewhere from 3 
inches up to an average of less than 20 inches in most places.
    Now, if you consider the drought that we're in, it almost 
looks like a bulls-eye on the Western United States. In the 
year 2003, there was only one State out of the 17 that 
Reclamation works with that experienced normal or above 
precipitation; that was California. This year, we're started 
out, and there's even some dry in Southern California that was 
not there last year. We anticipate it being a dry year, and 
certainly we're trying to manage toward that.
    Now, one of the efforts that we have entered into in trying 
to look at the drought, look at the demands for water and the 
conflict and crisis that we could get into is the Water 2025 
Program. This is a chart that we put together as part of that 
to show those hot-spots in the Western United States. Hot-
spots, meaning that they would have water requirements from 
exploding populations, from demands from the Endangered Species 
Act, demands from other fish and wildlife, from new industry, 
from new requirements that we didn't even know about. These are 
the hot-spots that we are trying to deal with in the Western 
United States.
    Now, with that said, I would go to the information on the 
fiscal year 2005 budget. The overall Reclamation budget totals 
$956 million in current authority and is offset by 
discretionary receipts from the Central Valley Project 
Restoration Fund of $46 million, and hydropower direct 
financing of $30 million. While the request is partially offset 
by underfinancing of $36 million, I'm concerned that increasing 
above this amount, as has occurred in the recent past, may 
adversely affect our ability to address activities at our aging 
infrastructure. And I look forward to working with the 
committee to identify ways to address this critical area.
    Our 2005 budget request continues the President's 
commitment----
    Yes, sir?
    Senator Domenici. Commissioner, did that last statement, 
that you want to work with us on these critical areas, were 
those presented to OMB?
    Commissioner Keys. Mr. Chairman, the under-financing is a 
figure that we work with the committee directly on every year. 
We propose a level of under-financing that we think makes good 
business sense, and then you work with us to see what it should 
be. In the past 2 years, it's actually been quite a bit more 
than we had recommended.
    Senator Domenici. Well, let me tell you, that's a very, 
very risky business. When you have a budget that's as tight as 
this budget, everywhere--you know, we don't know how we're 
going to do that, because every year the chairman of the 
committee that makes the allocations has mercy on us and gives 
us a little bit of allocation over an amount. But what if they 
don't do it this year? Then, you know, you better be prepared 
to tell us what can we cut or hold from your ongoing projects 
that we can use to keep this--you know, the parts that are 
desperate, to keep them alive.
    I don't know how. I've looked at it, and I don't know where 
the heck we're going to--I don't know where we're going to get 
the money.
    Commissioner Keys. Mr. Chairman, we certainly will work 
with you every step of the way on that.
    Senator Domenici. Good.
    Commissioner Keys. Our fiscal year 2000 continues the 
President's commitment to a more citizen-centered government 
founded on the principle of getting results rather than 
creating process, as well as the Secretary's four C's, 
``conservation through consultation, cooperation, and 
communication.''
    The request also continues to emphasize the operation and 
maintenance of Reclamation facilities in a safe, efficient, 
economic, and reliable manner while sustaining the health and 
integrity of ecosystems that address the water needs of a 
growing population.
    Mr. Chairman, the highlights of our budget are--the Water 
2025 Program in 2005 requests $20 million. That request would 
continue Secretary Norton's 2025 Initiative, building off of 
the fiscal year 2004 Western Water Initiative. Water 2025 is a 
high priority for Reclamation, focusing resources, both 
financial and technical, on areas of the West where conflict 
and crisis over water either exist now or can be predicted and 
prevented using the tools to deal with the realities outlined 
in the initiative.
    Water 2025 provides Federal seed money in the form of 
competitive grants with performance measures to empower local 
citizens and communities to do what the government cannot do 
alone. Our fiscal year 2004 budget included $4 million in the 
Western Water Initiative for these competitive grants. This 
request is about $20 million for those competitive grants.
    In the Klamath Project, in Oregon and California, we're 
asking for $25 million. The fiscal year 2005 request continues 
and increases funding for our efforts in the Klamath Basin that 
will improve water supplies to meet competing demands for water 
in the Basin and ensure continued delivery of water to this 
project. Coupled with efforts from other Federal agencies, 
Interior is proposing over $67 million in fiscal year 2005 to 
keep its commitment to help restore the Basin, provide water 
necessary to meet the needs of the farmers.
    Now, on the Middle Rio Grande Project, we're asking for $18 
million. The fiscal year 2005 request continues funding in 
support of the Endangered Species Collaborative Program. In 
addition, the request continues funding for requiring 
supplemental water, doing the necessary channel maintenance, 
and government-to-government consultation with Pueblos and 
tribes. The funding will continue efforts that support the 
protection and contribute to the recovery of the Rio Grande 
silvery minnow and the southwestern willow flycatcher.
    One effort that----
    Senator Domenici. How much less is that than the previous 
year?
    Commissioner Keys. Mr. Chairman, our request for fiscal 
year 2005 is $1 million more than it was in fiscal year 2004.
    Senator Domenici. We don't have that number. We ought to 
consult on that. We have a number that it's $14 million less. 
But, anyway----
    Commissioner Keys. Mr. Chairman, we'd certainly work with 
you on that number.
    Senator Domenici. Okay.
    Commissioner Keys. On the Animas-La Plata Project in 
Colorado and New Mexico, we're requesting $52 million. The 
Animas-La Plata Project is currently under construction and 
resolves, through authorizing legislation passed by the 
Congress in 2000, longstanding Indian water-right claims in the 
Basin.
    In response to your comments before, I can assure you that 
Reclamation has made changes in the personnel on the project 
and the procedures that we are using to complete the project as 
it was designed, and to ensure that we don't run into those 
problems on other projects throughout the Western United 
States. Those changes have been made. We are continuing to look 
at the organization and our engineering expertise to be sure 
that it is there for another century to come.
    On site security, we have asked for $43 million in fiscal 
year 2005. The funding request is necessary to cover the cost 
of site-security activities, including surveillance and law 
enforcement, antiterrorism activities, including physical, 
information, and personnel security, and threat management, and 
physical emergency security upgrades, with the primary focus on 
our national critical infrastructure facilities.
    I do want to call your attention to a change that will be 
occurring in how we address the cost of site-security 
activities. Beginning in fiscal year 2005, annual costs 
associated with activities for guarding our facilities will be 
treated as project operation and maintenance cost, subject to 
reimbursibility based upon project cost allocations. You'll be 
hearing more on this approach in the future.
    Our Safety of Dams Program, we ask for $64 million in 
fiscal year 2005. As our infrastructure ages, we must direct 
increasing resources toward upgrading and maintaining our 
facilities through the use of science and new technologies to 
ensure the continued reliability so important to our western 
stakeholders. The fiscal year 2005 request is being made to 
reduce risks to public safety, particularly those identified as 
having deficiencies.
    On the Rural Water Program, we have asked for $67.5 
million. The fiscal year 2005 funding for rural water projects 
emphasizes a commitment to completing ongoing municipal, rural, 
and industrial systems. This one, in fact, would complete the 
Mid-Dakota project in South Dakota that we've been working on. 
Funding is included for the Mni Wiconi, Mid-Dakota, Garrison, 
Lewis and Clark, and Perkins County projects.
    The administration will convene an interagency group to 
review programs of all Federal agencies with rural water 
infrastructure needs. We just, about 3 weeks ago, working with 
your office and Mr. Bingaman, submitted a new bill for which 
you have sponsored, Senate Bill 2218, the Reclamation Rural 
Water Act of 2004. That, we think, will give us a good 
structured approach to addressing rural water needs in the 
future, and give us a better way to handle them than we have 
been working with in the past.
    In talking about the hydropower direct financing, that's 
the $30-million figure that we had talked about before. The 
fiscal year 2005 budget proposes to finance the cost of 
operation and maintenance of certain Reclamation hydropower 
facilities directly from receipts collected by the Western Area 
Power Administration. Each year, Western Area Power 
Administration would transfer an agreed-upon amount to the 
Bureau of Reclamation for deposit in its ``water and related 
resources'' account. A direct-funding arrangement already is in 
place with the Bonneville Power Administration.

                          PREPARED STATEMENTS

    Mr. Chairman, in conclusion, I want to strongly reiterate 
that the fiscal year 2005 budget request demonstrates 
Reclamation's commitment to meeting the water and power needs 
of the West in a fiscally responsible manner. This budget 
continues Reclamation's commitment to sound water-resources 
management and the delivery and management of those valuable 
resources. Our goals for 2005 and accomplishments for fiscal 
year 2003 are described in my official statement, and I'd be 
glad to provide more detail if you would like.
    That concludes my prepared remarks, and I would certainly 
stand for any questions that you might have today.
    [The statements follow:]

                Prepared Statement of John W. Keys, III

    Thank you, Mr. Chairman, Mr. Reid, and members of the subcommittee, 
thank you again for the opportunity to appear before you today to 
support the President's fiscal year 2005 budget request for the Bureau 
of Reclamation. With me today is Bob Wolf, Director of Program and 
Budget.
    Our fiscal year 2005 request has been designed to support 
Reclamation's mission of delivering water and generating hydropower, 
``consistent with applicable state and Federal law, in an 
environmentally responsible and cost efficient manner.''
    Funding is proposed for key projects that are important to the 
Department and in line with administration objectives. The budget 
request also supports Reclamation's participation in efforts to meet 
emerging water supply needs to promote water conservation and sound 
water resource management, and help prevent conflict and crises over 
water in the west.
    The fiscal year 2005 current authority request for Reclamation 
totals $956.3 million and is offset by discretionary receipts in the 
Central Valley Project Restoration Fund of $46.4 million and proposed 
hydropower direct financing of $30.0 million. In addition, 
Reclamation's program includes permanent authority of $90.6 million. 
The total program, after offsets to current authority and the inclusion 
of permanent authority is $970.5 million.

                      WATER AND RELATED RESOURCES

    The fiscal year 2005 request for the Water and Related Resources 
account is $828.5 million. The request provides funding for five major 
program activities: Water and Energy Management and Development ($376.4 
million); Land Management and Development ($39.4 million); Fish and 
Wildlife Management and Development ($82.7 million); Facility 
Operations ($188.6 million); and Facility Maintenance and 
Rehabilitation ($178.0 million). The request is partially offset by an 
undistributed reduction of $36.6 million, commonly referred to as 
underfinancing, in anticipation of delays in construction schedules and 
other planned activities.
    The request continues to emphasize the operation and maintenance of 
Reclamation facilities in a safe, efficient, economic, and reliable 
manner, while meeting our requirements to sustain the health and 
integrity of ecosystems that are connected to those operations. It will 
also assist the States, tribes, and local entities in solving 
contemporary water resource issues in advance of crises over water.
    Highlights of the Fiscal Year 2005 Request for Water and Related 
Resources include:
    Water 2025 ($20 million).--The Water 2025 Initiative allows 
Reclamation to continue playing an important role in working with State 
and local communities to develop solutions that will help meet the 
increased demands for limited water resources in the West, and avoid 
water conflicts in areas particularly susceptible to an imbalance 
between supply and demand. The request will benefit fast growing 
western communities that are struggling with increased water demands, 
inadequate water supplies, and compliance with the Endangered Species 
Act and other ecosystem water needs. The monies for the precursor 
effort, the Western Water Initiative, will be awarded in the form of 
competitive grants; this 2004 effort will assist in developing grant 
criteria and tracking program impacts; the experience from this effort 
will then be used to refine the Water 2025 effort for 2005. The 
projects in fiscal year 2004 will facilitate and promote new or 
existing intrastate water banks and provide cost sharing monies to 
assist various stakeholders in implementing measures that will lead to 
improved water management and help avoid future water supply conflicts.
    Klamath Project in Oregon and California ($25.0 million).--The 
fiscal year 2005 funding request will provide on-the-ground initiatives 
to improve water supplies to meet agricultural, tribal, wildlife 
refuge, and environmental needs in the Klamath Basin and to improve 
fish passage and habitat. This is part of a $67.2 million Department of 
Interior request spread across several bureaus, focused on making 
immediate on-the-ground impacts, while the Department, in consultation 
with the Klamath River Basin Federal Working Group, led by Secretary 
Norton, develops a long-term resolution to conflict in the Basin that 
will provide water to farmers and tribes while protecting and enhancing 
the health of fish populations, and meeting other water needs, such as 
those of the adjacent National Wildlife Refuge.
    Middle Rio Grande ($18.0 million).--The fiscal year 2005 request 
continues funding in support of the Endangered Species Collaborative 
Program. In addition, the request continues funding for acquiring 
supplemental water, channel maintenance, and pursuing government-to-
government consultations with Pueblos and Tribes. Finally, the funding 
will continue efforts that support the protection and contribute to the 
recovery of the Rio Grande silvery minnow and southwestern willow 
flycatcher.
    Animas-La Plata in Colorado and New Mexico ($52.0 million).--The 
fiscal year 2005 request includes $52.0 million for the continued 
construction of Ridges Basin Dam and Durango Pumping Plant and 
preconstruction activities for Navajo Nation Municipal Pipeline, Ridges 
Basin Inlet Conduit, utility relocations, and project support 
activities.
    Columbia/Snake River Salmon Recovery in Idaho, Oregon, Montana, and 
Washington ($17.5 million).--This program addresses the implementation 
of Reasonable and Prudent Alternatives (RPAs) included in two 
Biological Opinions issued in December 2000. The fiscal year 2005 
funding will address significantly increased regional coordination, 
off-site mitigation activities in selected sub-basins to offset 
hydrosystem impacts, and continue research, monitoring and evaluation 
efforts.
    Site Security ($43.2 million).--Since September 11, 2001, 
Reclamation has maintained heightened security at its facilities to 
protect the public, its employees, and infrastructures.
    The funding in fiscal year 2005 is necessary to cover the costs of 
site security activities including:
  --surveillance and law enforcement;
  --anti-terrorism activities including physical, information, and 
        personnel security, and threat management; and
  --physical emergency security upgrades, with a primary focus on our 
        National Critical Infrastructure facilities.
    Beginning in fiscal year 2005, annual costs associated with 
activities for guarding our facilities will be treated as project O&M 
costs subject to reimbursability based upon project cost allocations.
    Rural Water ($67.5 million).--The fiscal year 2005 funding for 
rural water projects emphasizes a commitment to completing ongoing 
municipal, rural, and industrial systems. Funding is included for Mni 
Wiconi, Mid-Dakota, Garrison, Lewis and Clark and Perkins County 
projects. Funding required for Mid-Dakota is sufficient to complete the 
project. The administration is convening an interagency group to review 
the rural water programs of all Federal agencies, with any 
recommendations coming out of this to be included in the President's 
Fiscal Year 2006 Budget. The administration has submitted legislation 
to formally establish a rural water program within Reclamation.
    Hydropower Direct Financing ($30.0 million).--The fiscal year 2005 
budget proposes to finance the costs of operation and maintenance of 
certain Reclamation hydropower facilities directly from receipts 
collected by the Western Area Power Administration from the sale of 
electricity. Western Area Power Administration would transfer an 
agreed-upon amount to the Bureau of Reclamation for deposit in its 
Water and Related Resources account. The transferred funds would be 
treated as an offsetting collection. A direct funding arrangement is 
already in place for the Bonneville Power Administration.
    Safety of Dams ($64.0 million).--The safety and reliability of 
Reclamation dams is one of Reclamation's highest priorities. 
Approximately 50 percent of Reclamation's dams were built between 1900 
and 1950, and 90 percent of those dams were built before the advent of 
current state-of-the-art foundation treatment, and before filter 
techniques were incorporated in embankment dams to control seepage. 
Safe performance of Reclamation's dams continues to be of great concern 
and requires a greater emphasis on the risk management activities 
provided by the program. The fiscal year 2005 request of $64.0 million 
for the Safety of Dams Program is being made to reduce risks to public 
safety at Reclamation dams, particularly those identified as having 
deficiencies. The slight reduction from the fiscal year 2004 level is a 
result of the completion of certain ongoing Safety of Dams actions, and 
does not reflect a reduced emphasis on the importance of this program.

                       POLICY AND ADMINISTRATION

    The request for Policy and Administration is $58.2 million. These 
funds are used to develop and implement Reclamation-wide policy, rules 
and regulations (including actions under the Government Performance and 
Results Act) and to perform functions which, by statute, cannot be 
charged to specific project or program activities covered by separate 
funding authority. These funds support general administrative and 
management functions.

                CENTRAL VALLEY PROJECT RESTORATION FUND

    The fiscal year 2005 Reclamation budget includes a request for the 
CVP Restoration Fund of $54.7 million, and is expected to be offset by 
discretionary receipts totaling $46.4 million collected from project 
beneficiaries under provisions of Section 3407(d) of the Act. These 
funds will be used for habitat restoration, improvement and 
acquisition, and other fish and wildlife restoration activities in the 
Central Valley Project area of California. This fund was established by 
the Central Valley Project Improvement Act, Title XXXIV of Public Law 
102-575, October 30, 1992. The funding request is calculated based on a 
3-year rolling average of collections. The increase is driven by 
formulas spelled out in the 1992 Act.
    Reclamation is seeking appropriations for the full amount of funds 
of the estimated collections for fiscal year 2005.

                    CALIFORNIA BAY-DELTA RESTORATION

    The fiscal year 2005 Reclamation budget includes a request of $15.0 
million for California Bay-Delta restoration. The funds will be used 
consistent with a commitment to find long-term solutions in improving 
water quality; habitat and ecological functions; and water supply 
reliability; while reducing the risk of catastrophic breaching of Delta 
levees. Further, the fiscal year 2005 budget contains funds for Bay-
Delta activities that can be undertaken within existing statutory 
authorities for implementation of Stage 1 activities. Those activities 
are included in the preferred program alternative recommended by CALFED 
and approved by the Secretary of the Interior. The majority of these 
funds will specifically address the environmental water account, 
storage studies, and program administration.

                 PROGRAM ASSESSMENT RATING TOOL (PART)

    Reclamation, in close cooperation with the Department and the 
Office of Management and Budget, completed one new PART analysis in 
conjunction with the fiscal year 2005 budget request, and revised a 
2004 PART. Our Science and Technology Program, with its emphasis on 
research with direct applicability to the operation of Reclamation 
facilities, received a favorable score of 87 percent. The PART review 
assisted the program by highlighting areas where more precise data 
gathering is needed, which will allow for increasingly accurate 
measures of performance.
    Also, the administration revised the PART analysis on our 
Hydropower Program, which had been one of three programs reviewed in 
the fiscal year 2004 budget request. As a result, improved performance 
measures were implemented and the program received a score of 92 
percent, indicative of a well-run effort.

                     PRESIDENT'S MANAGEMENT AGENDA

    E-Government.--Reclamation is actively participating in Recreation 
One-Stop, which provides citizens information about recreational 
activities on public lands; Geospatial One-Stop, which makes it easier, 
faster, and less expensive for all levels of government and the public 
to access geospatial information; and Volunteer.gov which provides 
information on volunteer activities. Reclamation program managers 
continue to work with stakeholders to leverage technology to accomplish 
our mission work.
    Financial Management Improvement.--Reclamation submitted its fiscal 
year 2003 Financial Statement on an accelerated schedule and received a 
clean audit opinion. We continue to make progress to ensure that our 
financial systems are compliant with the Joint Financial Management 
Improvement Program core requirements. To ensure that accurate and 
timely financial information is provided, our financial management 
program uses the Federal Financial System, the Program and Budget 
System, and its corporate database system to report summary and 
transactions data. Reclamation is enhancing its financial policies and 
procedures and is participating in the Department's development of a 
new financial management system.
    Competitive Sourcing.--Reclamation has completed competitive 
sourcing studies of 348.6 FTE and directly converted to contract 136.1 
FTE, for a reportable savings of approximately $1.1 million. Our goals 
for 2002, 2003, and 2004 have been completed and a strategy has been 
developed for completing competitive sourcing studies in 2005-2008.
    Human Capital.--Reclamation effectively deploys the appropriate 
workforce mix to accomplish mission requirements. The use of existing 
human resources flexibilities, tools, and technology is in a strategic, 
efficient, and effective manner, designed to address the serious 
challenges we face in terms of an aging workforce and increased 
competition for the engineering skills that Reclamation relies on to 
carry out our core activities. Our workforce plan addresses E-
Government and Competitive Sourcing and a plan is in place for 
recruitment, retention, and development of current and future leaders.
    Performance and Budget Integration.--Reclamation continues to 
integrate its budget, planning and performance processes by relating 
budget dollars to goals and performance.
    In October 2003, Activity Based Costing was fully implemented 
within Reclamation. The implementation of ABC will link our work to the 
Department activities, track the costs associated with those 
activities, and align cost and activities to strategic goals to further 
our integration of performance and budget. The availability of this 
information will provide Reclamation with additional tools for 
management and decisionmaking.

              DEMONSTRATED COMMITMENT AND ACCOMPLISHMENTS

    In fiscal year 2003, Reclamation delivered 10 trillion gallons of 
water to over 31 million people in the 17 western States for municipal, 
rural, and industrial uses. Reclamation facilities stored over 245 
million acre-feet of water, serving one of every five western farmers 
to irrigate about 10 million acres of land. Those irrigated lands 
produced 60 percent of the Nation's vegetables and 25 percent of its 
fruits and nuts. As the largest water resources management agency in 
the West, Reclamation continues to administer and/or operate 348 
reservoirs, 56,000 miles of water conveyance systems, and 58 
hydroelectric facilities, which generate 42 billion kilowatt-hours 
annually.
    Reclamation also continues to manage approximately 8.6 million 
acres of Federal land, plus another 600,000 acres of land under 
easements. In addition, our facilities provide substantial flood 
control, recreation, and fish and wildlife benefits. Reclamation and 
its employees take very seriously their mission of managing, 
developing, and protecting water and related resources in an 
environmentally and economically sound manner in the interest of the 
American public.
    The historic Colorado River Water Pact was signed on October 16, 
2003, by the Secretary, the governor of California and officials from 
San Diego County Water Authority, Imperial Irrigation District, 
Metropolitan Water District of Southern California and Coachella Valley 
Water District, embarking on a new era of cooperation on the river by 
fulfilling a promise the State of California made more than 70 years 
ago. Under Secretary Norton's leadership, California has agreed to take 
specific, incremental steps that will reduce its over-reliance on the 
Colorado River water in the next 14 years, allowing the State to live 
within its authorized annual share of 4.4 million acre-feet. The 
agreement allows the six other Colorado River Basin States to protect 
their authorized shares to meet future needs.
    The fiscal year 2005 budget request demonstrates Reclamation's 
commitment in meeting the water and power needs of the West in a 
fiscally responsible manner. This budget continues Reclamation's 
emphasis on delivering and managing those valuable public resources. In 
cooperation and consultation with the State, tribal, and local 
governments, along with other stakeholders and the public at large, 
Reclamation offers workable solutions regarding water and power 
resource issues that are consistent with the demands for power and 
water. With the need to pursue cost effective and environmentally sound 
approaches, Reclamation's strategy is to continue to use the 
Secretary's four ``C's:'' ``Conservation through Cooperation, 
Communication, and Consultation''. These principles provide Reclamation 
an opportunity, in consultation with our stakeholders, to use decision 
support tools, including risk analyses, in order to develop the most 
efficient and cost-effective solutions to the complex challenges that 
we face.
    Moreover, Reclamation's request reflects the need to address an 
aging infrastructure and the rising costs and management challenges 
associated with scarce water resources. As our infrastructure ages, we 
must direct increasing resources toward technological upgrades, new 
science and technologies; and preventative maintenance to ensure 
reliability; which will increase output, and improve safety.
    In fiscal year 2003, critical Safety of Dams modifications of 
significant cost and scope were initiated at Deadwood Dam, ID; and Deer 
Creek Dam, UT.
    The site security activities in fiscal year 2003 included 
integrated security system analysis to determine emergency security 
upgrades and long-term measures for four National Critical facilities 
and 14 of Reclamation's highest priority facilities. Facility 
fortifications totaling $5.5 million are now in place. In addition, we 
completed threat and physical security risk analyses and developed 
security plans.

                  FISCAL YEAR 2005 PLANNED ACTIVITIES

    In fiscal year 2005, Reclamation plans to continue making the 
required deliveries of water under Reclamation contracts; optimize 
hydropower generation, consistent with other project purposes, 
agreements, and the President's energy policy; and incorporate 
environmental, recreational, land management, fish and wildlife 
management and enhancement, water quality control, cultural resources 
management, and other concerns into the water supply and power 
generation actions of Reclamation. Finally, Reclamation plans to 
identify water supply needs for consumptive and non-consumptive 
purposes in Reclamation States in the next 25 years that are likely to 
be unmet with existing resources.
    Reclamation also plans to continue ranking within the upper 75th 
percentile of low cost hydropower producers; by comparing power 
production costs per megawatt capacity. Reclamation plans to achieve a 
forced outage rate of 50 percent better than the industry average which 
is currently 3 percent. While Reclamation anticipates completing the 
baseline condition assessments for 80 percent of the recreation 
facilities it manages, it plans to continue to maintain the overall 
facility condition rating assessed at the fiscal year 2003 baseline 
level.

                               CONCLUSION

    Mr. Chairman, Please allow me to express my sincere appreciation 
for the continued support that this committee has provided Reclamation. 
I would like to thank several members of the Appropriations staff that 
have provided invaluable support to Reclamation during this past year: 
Clay Sell, Drew Willison, Tammy Perrin, Erin McHale, and Roger 
Cockrell. We have enjoyed working with Clay Sell over the years and 
wish him well. This completes my statement. I would be happy to answer 
any questions you may have at this time.
                                 ______
                                 
 Prepared Statement of Bennett W. Raley, Assistant Secretary for Water 
                and Science, Department of the Interior

    Good morning. On behalf of the Secretary of the Interior, I am 
pleased to be here today before the Subcommittee on Energy and Water 
Development to discuss the fiscal year 2005 budget for the Department 
of the Interior. I appreciate the opportunity to highlight our 
priorities and key goals.
    The Department of the Interior's mission is complex and multi-
faceted. We provide recreation opportunities. We provide access to 
resources. We protect some of the Nation's most significant cultural, 
historic, and natural places. We serve communities through science, 
wildland firefighting, and law enforcement. We deliver water and power. 
We fulfill trust and other responsibilities to American Indians, Alaska 
natives, and the Nation's affiliated island communities.
    Interior's mission is also challenging. It is challenging because 
the world around is increasingly complex as expectations evolve, new 
technologies emerge, and our responsibilities to the American people 
increase.
    Above all, our mission is inspiring. We have close connections to 
America's lands and people, whether American Indians and naturalists, 
hikers and hunters, ranchers and recreation enthusiasts, or 
environmentalists and entrepreneurs. Our responsibilities touch the 
lives of individuals across the Nation. How well we fulfill our mission 
influences:
  --Whether farmers will have water and people can turn on the tap;
  --Whether our children will enjoy America's grand vistas, places, and 
        history;
  --Whether we can hike, bird watch, canoe, or hunt and fish; and
  --Whether we can warm our homes and fuel our transportation systems.
    By fulfilling Interior's mission, we can leave a legacy of healthy 
lands and waters, thriving communities, and dynamic economies. That 
legacy depends on our ability to work together across landscapes and 
with communities. It depends on the efforts of our 70,000 employees, 
200,000 volunteers and thousands of partners.

                            BUDGET OVERVIEW

    Our 2005 budget request for current appropriations is $11.0 
billion. The Department anticipates collection of $10.1 billion in 
receipts in 2005, equivalent to 92 percent of our current 
appropriations request.
    The 2005 request includes $10.0 billion for programs funded in the 
Interior and Related Agencies Appropriations Act, an increase of $228.4 
million or 2.3 percent over the 2004 enacted level.
    Our budget also includes $1.0 billion for programs funded in the 
Energy and Water Development Appropriations Act, an increase of $21.8 
million, or 2.2 percent above 2004.
    Interior's 2005 budget request provides the single clearest 
statement of how we plan to work toward our goals in the upcoming year. 
Our budget fulfills the President's commitments to fully fund the Land 
and Water Conservation Fund; address the backlog of park repair and 
maintenance needs; fix Bureau of Indian Affairs schools; and re-
establish healthy forests and rangelands.
    Our 2005 budget also advances other key goals. It accelerates the 
cleanup of abandoned coal mine lands; expands opportunities for 
cooperative conservation; advances trust reform; seeks to avoid water 
conflicts throughout the West through Water 2025; and supports the 
goals of the National Energy Plan.

                         BUREAU OF RECLAMATION

    The Bureau of Reclamation is the largest supplier and manager of 
water in the 17 western States. Its facilities include 348 reservoirs 
and 456 dams with the capacity to store 245 million acre-feet of water. 
These facilities deliver water to one of every five western farmers for 
about 10 million acres of irrigated land and provide water to over 31 
million people for municipal, rural, and industrial uses. Reclamation 
is also the Nation's second largest producer of hydroelectric power, 
generating 42 billion kilowatt hours of energy each year from 58 power 
plants. In addition, Reclamation's facilities provide substantial flood 
control, recreation, and fish and wildlife benefits.
    Since its establishment in 1902, Reclamation has developed water 
supply facilities that have contributed to sustained economic growth 
and an enhanced quality of life in the western States. Lands and 
communities served by the bureau's projects have been developed to meet 
agricultural, tribal, urban, and industrial needs. In more recent 
years, the public has demanded better environmental protections and 
more recreational opportunities, while municipal and industrial 
development has required more high quality water. Continuing population 
growth, especially in urban areas, will inevitably lead to even greater 
competition for the West's limited water resources. These increased 
demands are further compounded during periods of drought.
    The 2005 request for current appropriations is $956.3 million, a 
net increase of $13.5 million above the 2004 enacted level. The request 
for current appropriations is offset by discretionary receipts in the 
Central Valley Project Restoration Fund and by a proposal to finance by 
direct funding certain hydropower operation and maintenance activities, 
resulting in a net discretionary request of $880.0 million, a decrease 
of $32.1 million from the 2004 enacted level. The request for permanent 
appropriations totals $90.5 million.
    The request for the Water and Related Resources account is $828.5 
million. The account total includes an undistributed reduction of $36.6 
million in anticipation of delays in construction schedules and other 
planned activities. The 2004 Energy and Water Development 
Appropriations Act, for the first time, directed Reclamation to prorate 
underfinancing to each project and program. In accordance with this 
direction, the basis for comparing the amount of 2005 funding changes 
is the 2004 enacted level with underfinancing applied.
    The 2005 request provides a total of $366.6 million for facility 
operations, maintenance, and rehabilitation. This includes $64.0 
million for the Dam Safety program to protect the downstream public by 
ensuring the safety and reliability of Reclamation dams. The 2005 
request also includes a total of $498.4 million for resource management 
and development activities.
    Water 2025.--Chronic water supply problems in the West will 
continue to challenge the Nation to find effective approaches to long-
term management of water resources. Recent crises in the Klamath and 
Middle Rio Grande basins, where water shortages have affected American 
Indians, farmers, urban residents, and fish and wildlife vividly 
demonstrate the consequences of failing to address strategically the 
problem of competing demands for constrained water supplies.
    The 2005 budget includes $21.0 million for Water 2025 to minimize 
future western water crises by fostering conservation and interagency 
coordination, enhancing water supplies through improved technologies, 
and managing water resources in cooperation with others. Collaborative 
approaches and market-based water transfers will help address emerging 
needs. Federal investments in research and development will improve 
water treatment technologies such as desalination.
    A Water 2025 increase of $12.5 million for the Bureau of 
Reclamation will build on the 2004 Western Water Initiative, providing 
a total of $20.0 million to retrofit and modernize existing facilities, 
promote conservation and more efficient use of existing water supplies, 
improve water management by using excess capacity at Federal 
facilities, and facilitate research to provide alternative water 
supplies.
    The U.S. Geological Survey's 2005 budget includes $1.0 million for 
Water 2025 to conduct groundwater availability assessments, develop 
tools and techniques for protecting biological resources while meeting 
water supply needs, and to improve methods to characterize aquifers.
    Animas La Plata.--The 2005 budget proposes funding Animas La Plata 
at 2004 levels, prior to the application of underfinancing. This level 
of $52.0 million allows progress towards satisfying the Indian water 
rights settlement with the continued construction of Ridges Basin Dam 
and Durango Pumping Plant; road and utility relocations; 
preconstruction activities for the Navajo Nation municipal pipeline; 
and design and contract preparation for the Ridge Basin Inlet Conduit.
    In the fall of 2003, Reclamation completed an internal 
investigation into why Animas La Plata project costs were 
underestimated by $162 million or 48 percent. As a result of the 
investigation, Reclamation has recalculated the construction cost 
estimate and will review/reconfigure its internal organizational 
approach to the project; review its Indian Self-Determination and 
Assistance Act process to improve construction efficiencies; improve 
interaction and communication with the project sponsors; seek ways to 
reduce costs; and review its own procedures for developing construction 
cost estimates.
    CAP and CVP.--The request provides $34.1 million for the Central 
Arizona Project. The request also includes $162.9 million for 
operating, managing and improving California's Central Valley Project. 
This includes a total of $23.2 million for CVP's Replacement, 
Additions, and Extraordinary Maintenance program. The CVP request also 
includes the third and final $34.0 million payment to the plaintiffs 
for the settlement of Sumner Peck Ranch Inc. v. Bureau of Reclamation.
    Multiple-use Management.--The budget puts continued emphasis on 
Reclamation's core mission of delivering water and power, while 
focusing on ensuring site security and on maximizing efficient ways to 
conserve water for multiple uses, including endangered species 
protection. The Klamath, Columbia Basin, and Savage Rapids Dam 
projects, along with the Columbia/Snake Rivers salmon recovery and the 
ESA recovery implementation programs, are funded at $72.2 million, 
which is $15.7 million above 2004 enacted levels. These increases, 
together with the Water 2025 initiative, will help optimize water 
supply through effective and more efficient water management.
    The Middle Rio Grande project is funded at $18.0 million, $14.3 
million below the 2004 enacted level. This funding level is consistent 
with the President's budget request in recent years and addresses needs 
for ESA coordination, the Middle Rio Grande Endangered Species Act 
Collaborative program, and facility operations to manage and control 
water flow.
    Rural Water.--The 2005 budget request for rural water projects is 
$67.5 million, a decrease of $9.1 million from the 2004 enacted level 
(with underfinancing applied) and an increase of $49.5 million above 
the 2004 President's budget. The budget request supports the 
Department's strategy to complete construction projects to increase 
water delivery infrastructure and water availability. In the long-term, 
the water needs of rural communities may benefit from Water 2025 by 
helping communities look at new technologies and new management 
strategies for their water resources.
    Other Project Requests.--The budget includes $43.2 million, an 
increase of $15.4 million, for site security. This increase will be 
used to assure the safety and security of Reclamation facilities that 
will in turn lower the risk of harm to life and property. Beginning in 
2005, the budget assumes that the guards and surveillance-related 
security costs for Reclamation's facilities are reimbursed by project 
beneficiaries.
    The budget request also establishes a direct financing relationship 
between Reclamation hydropower facilities and their customers, for 
those facilities where such an arrangement is not already in place and 
includes an offsetting collection proposal of $30.0 million.
    Other funds are requested to assist the Bureau in meeting 
objectives in the areas of improved water management and environmental 
compliance. Examples include $15.3 million for the Lower Colorado River 
Operations program and $13.6 million for the Colorado River Storage 
Project.
    The 2005 Reclamation budget includes a request for $54.7 million 
from the Central Valley Project Restoration Fund, which is the 
estimated level of collections from CVP water and power users. This 
request is offset by collections estimated at $46.4 million from 
mitigation and restoration charges authorized by the Central Valley 
Project Improvement Act.
    The 2005 budget includes $15.0 million for the implementation of 
Stage one CALFED activities consistent with existing authorities. These 
activities are included in the preferred program alternative 
recommended by CALFED and approved by the Secretary of the Interior. 
The majority of these funds will specifically address the environmental 
water account, water storage and conveyance studies, and program 
administration.

                  CENTRAL UTAH PROJECT COMPLETION ACT

    The Central Utah Project Completion Act provides for completion of 
the project by the Central Utah Water Conservancy District. The 
Completion Act also authorizes funding for fish, wildlife, and 
recreation mitigation and conservation activities; establishes the Utah 
Reclamation Mitigation and Conservation Commission to oversee 
implementation of those activities; and authorizes funding for the Ute 
Indian Rights Settlement. A program office located in Provo, Utah 
provides liaison with the District, Mitigation Commission, and the Ute 
Indian Tribe and otherwise assists in carrying out responsibilities of 
the Secretary. Under the Act, the responsibilities of the Secretary 
cannot be delegated to the Bureau of Reclamation.
    The 2005 Central Utah Project requests $46.3 million, an increase 
of $8.3 million over the 2004 enacted level. Most of this increase is 
due to a transfer of budgetary authority and responsibility from the 
Western Area Power Administration to the Department. The request 
includes: $28.4 million for planning and construction activities 
administered by the District; $15.5 million for mitigation and 
conservation activities funded through the Mitigation Commission; and 
$2.4 million for activities administered by the program office, which 
includes $700,000 for mitigation and conservation activities funded 
through the program office.

                             KLAMATH BASIN

    The Department's partnership efforts are bringing about change in 
the Klamath Basin. Interior bureaus, partnering with other Federal 
agencies, are restoring habitat, removing fish migration barriers, 
acquiring land, using water banking, and researching the ecology of the 
federally-listed fish species. Through these partnership efforts, the 
Department is seeking long-term resolution of conflicts over water and 
land management.
    The 2005 budget includes $67.6 million for this effort, a $17.9 
million increase over 2004 funding levels. Other government agencies 
will provide an additional $38 million, bringing a total of $105 
million to this effort. The budget includes funds to remove the 
Chiloquin Dam, which impedes passage of endangered suckers to 70 miles 
of spawning habitat on the Sprague River, and to acquire lands adjacent 
to Agency Lake Ranch to increase water storage and fisheries habitat 
restoration. Additional funding will also support water banking, water 
supply enhancement, and water quality improvement. Reclamation's budget 
contains $25.0 million for Klamath.

             ADDRESSING LONG-STANDING DEPARTMENT CHALLENGES

    Abandoned Mine Lands.--Since enactment of the Surface Mining 
Control and Reclamation Act in 1977, the Department has partnered with 
States, Tribes, local governments, and others to reclaim over 225,000 
acres of damaged and dangerous lands. Despite these accomplishments 
over the past two and a half decades, dangerous abandoned coal mines 
remain within 1 mile of the homes of more than 3.5 million Americans. 
Since 1999 a total of 100 people have died in incidents related to 
abandoned coal mines.
    The primary impediment to completing reclamation of abandoned mines 
is the fundamental imbalance between the goals of the 1977 Act and the 
requirements for allocating funds under the Act. The statutory 
allocation formula limits the ability of the Office of Surface Mining 
to meet its primary objective of abating the highest-priority abandoned 
coalmines. The majority of funding in the program, or 71 percent, is 
distributed to States on the basis of current production. Yet there is 
no relationship between current production and the number of priority 
sites in each State, which is a function of pre-1977 production.
    Over the past 25 years, the allocation formula has enabled some 
States and Tribes to complete reclamation of all abandoned coal mines. 
Others are decades away from completing work on the most critical, 
high-priority sites. We estimate it will take 60 years to reclaim 
dangerous abandoned mine sites in Pennsylvania and 50 years in West 
Virginia.
    Our 2005 budget proposal seeks to correct this problem. We propose 
to direct reclamation grants to sites where the danger is greatest. The 
reauthorization proposal will allow all States to eliminate significant 
health and safety problems within 25 years and would remove 142,000 
people from risk annually. At the same time, by shifting funds to speed 
resolution of serious health and safety problems, the proposal will 
reduce fee collections and spending by $3 billion over the life of the 
program.
    Under our proposal, States and Tribes that have certified 
completion of high-priority projects will be paid their accumulated 
State share balances in the abandoned mine lands fund as of September 
30, 2004. These payments will be made over a 10-year period. Going 
forward, the grants would be distributed for high priority mine 
reclamation projects.
    The 2005 budget proposes an appropriation of $243.8 million for the 
abandoned mine lands program, including $53.0 million for the initial 
State share balance distribution to certified States and Tribes.
    Indian Trust Programs.--Fulfilling the Department's trust 
responsibilities continues as one of our highest priorities and 
greatest challenges. The assets of the trust today include over 56 
million acres of land. On these lands, the Department manages over 
100,000 leases for individual Indians and Tribes. We collect 
approximately $194 million per year from leasing, use permits, sale 
revenues, and interest for 260,000 open individual Indian money 
accounts. About $378 million per year is collected in 1,400 tribal 
accounts for 300 Tribes. In addition, the trust manages approximately 
$2.9 billion in tribal funds and $400 million in individual Indian 
funds.
    For 2005, we are seeking $614 million for our Unified Trust budget, 
a net increase of $161 million.
    In 2003 we began to reorganize trust functions in the Bureau of 
Indian Affairs and the Office of the Special Trustee for American 
Indians. The new organization is based on a detailed analysis and a 
year-long consultation process with tribal leaders. Our reorganization 
reflects a synthesis of the views heard during the consultation 
process. When fully implemented, the new organization will better meet 
fiduciary trust responsibilities, be more accountable at every level, 
and operate with people trained in the principles of fiduciary trust 
management.
    To support continued implementation of the new organization, the 
2005 budget proposes a net increase of $7.2 million, including funding 
for 85 new trust-related positions at the local level. We request an 
additional $4.0 million to quicken the pace at which probate cases are 
resolved.
    Improving our trust organization will not by itself resolve the 
issues that we face in managing the trust. A still greater challenge 
remains. That challenge is the fractionation, or continuing 
subdivision, of individual Indian interests in the land that the 
Federal Government holds in trust. Indian trust lands are primarily 
transferred through inheritance. With each passing generation, 
individual interests in the land become further subdivided among heirs, 
each of whom holds a smaller and smaller interest in the land. Many 
acres of trust land are already owned in such small ownership interests 
that no individual owner will derive any meaningful value from that 
ownership. Without corrective action, this problem will grow 
exponentially.
    As the number of interests grows, we expect the cost to the Federal 
Government for managing, accounting for, and probating these interests 
to increase substantially, possibly to as much as $1 billion at the end 
of the next 20 years.
    The Indian Land Consolidation program, which acquires small 
ownership shares in allotted land from willing sellers, is a critical 
component of trust reform. We have conducted this program as a pilot 
for several years. The pilot has taught valuable lessons about the need 
to target purchases to maximize return of land to productive use and 
allow closure of accounts associated with fractional interests.
    The 2005 budget proposes an unprecedented amount of $75.0 million 
for Indian land consolidation, an increase of $53.3 million. This 
funding will support an expansion beyond the seven pilot reservations 
to include additional reservations with the most highly fractionated 
lands. On a nationwide basis, we are targeting opportunities to 
purchase the most fractionated interests. Interior plans to use 
contractual arrangements with Tribes or private entities to acquire 
individual interests.
    This commitment to end fractionation will also require legislative 
action to provide for workable probate reform, disposal of unclaimed 
property, and partition of land. We want to continue to work with the 
Congress to find meaningful and constructive solutions to these issues.
    The 2005 budget also proposes funding to address the issue of 
accounting for past transactions in the trust. As the committee is 
aware, the American Indian Trust Management Reform Act of 1994 requires 
the Secretary of the Interior to ``account'' for ``the daily and annual 
balance of all funds held in trust by the United States for the benefit 
of an Indian Tribe or an individual Indian which are deposited or 
invested pursuant to the Act of June 24, 1938.''
    The Department is currently involved in a major class action, 
Cobell v. Norton, and 25 tribal suits over the Department's management 
of Indian trust funds. On January 6, 2003, as ordered by the District 
Court in the Cobell litigation, the Department filed The Historical 
Accounting Plan for Individual Indian Money Accounts. This plan 
provides for an historical accounting for about 260,000 individual 
Indian accounts over a 5-year period at a cost of approximately $335 
million. The accuracy of the transactions would be verified by 
reviewing support documentation on a transaction-by-transaction basis 
for all transactions over $5,000 and by statistically sampling 
transactions under $5,000. The sampling methodology would be designed 
to provide a 99 percent confidence level at any error rate.
    On September 25, 2003, the Cobell court issued a structural 
injunction directing a far more expansive accounting and requiring that 
it be completed under more constrained time lines. We estimate that the 
cost of compliance with the structural injunction would be between $6 
billion to $12 billion. An appeal from the September decision is 
pending. The Court of Appeals for the D.C. Circuit has stayed the 
structural injunction. In addition, the 2004 Interior Appropriations 
Act provides that the Department is not required to commence or 
continue an accounting for IIM accounts until 2004 or the Congress 
amends the Trust Management Reform Act to delineate the Department's 
historical accounting obligations or until December 31, 2004, whichever 
occurs first.
    The 2005 budget includes $109.4 million for historical accounting. 
This increase of $65.0 million over the enacted 2004 appropriation is 
targeted to provide $80.0 million for IIM accounting and $29.4 million 
for tribal accounting. The budget for IIM accounting is based on the 
estimate of the Department's costs to continue implementation of its 
historical accounting process. This amount may be revised depending on 
how the Court of Appeals rules with regard to the structural injunction 
in the Cobell case and on whether Congress acts to delineate the 
specific historical accounting obligations of the Department as 
suggested in the 2004 Appropriations Act. The Department will continue 
to work with the Congress and trust beneficiaries to consider 
settlement of the historical accounting and related issues.

                       INVESTING IN CONSERVATION

    Cooperative Conservation.--Among Interior's most inspiring roles is 
its mission to conserve lands and waters across America. As we are all 
aware, nature knows no jurisdictional boundaries. Conservation in the 
21st century depends increasingly upon partnerships across a mosaic of 
land ownerships. At Interior, we recognize that we cannot manage 
Federal lands successfully unless we are able to work with adjacent 
landowners, States, Tribes, and communities. We also recognize that the 
Nation cannot achieve its conservation goals solely by relying upon--
and adding to--the Federal dominion of lands.
    These two perspectives underscore the importance of cooperative 
conservation. Through a variety of conservation partnerships, 
Interior's land managers are joining with citizen stewards to remove 
invasive species, reduce stream bank erosion, and enhance habitat for 
threatened and endangered species. Through these partnerships, the 
Department is building the new environmentalism of citizen stewards 
called for by President Bush. These partnerships leverage Federal 
dollars by a factor of two or more. They engage Americans in 
conservation. They help us work with citizens to find common ground and 
simultaneously achieve healthy lands, thriving communities, and dynamic 
economies. We look forward to working with members of Congress and 
their constituents in these conservation successes.
    The 2005 budget proposal expands opportunities for conservation 
partnerships with citizens, organizations, and communities throughout 
the Nation. The budget proposes to spend $507.3 million, a 20 percent 
increase, to expand opportunities for conservation partnerships with 
citizens, organizations and communities.
    A cornerstone of our conservation partnership budget is the 
Cooperative Conservation Initiative. The Department has a long history 
of working cooperatively with others to achieve its conservation 
mission. Yet the resources available to land managers to foster 
innovative and collaborative conservation have fallen short of the 
demand. Across the Nation, citizens are working to overcome conflict 
and, instead, work together to maintain healthy lands and waters. Our 
Cooperative Conservation Initiative seeks to address this growing, 
giving managers the support necessary to leverage funds with private 
citizens, States, Tribes, communities, and businesses to protect and 
restore habitats, wildlife and plants.
    Our Cooperative Conservation Initiative builds on existing 
conservation partnership programs that have established productive 
relationships with local communities and citizens. In total, we propose 
that this initiative will provide $129.5 million, an increase of $25.5 
million, for a suite of seven programs: the challenge cost share 
programs in the Bureau of Land Management, the Fish and Wildlife 
Service, and the National Park Service; the FWS Coastal program; FWS 
Migratory Bird Joint Ventures; FWS Partners for Fish and Wildlife; and 
Take Pride in America.
    The budget proposes $29.6 million for challenge cost-share 
activities, an increase of $8.4 million over 2004. This request will 
enable land managers to undertake additional natural resource 
restoration and species protection projects on or impacting Federal 
lands. Dynamic partnerships with individuals, Tribes, State and local 
governments, non-profit organizations, and others will support an array 
of projects to restore damaged habitats and lands and achieve the 
conservation goals of the Department's land management agencies. 
Projects require a one-to-one match or better, thereby at least 
doubling the benefits of Federal dollars. The request for the bureau 
traditional challenge cost-share programs is $24.4 million.
    In 2003, challenge cost-share programs funded 256 resource 
restoration projects with more than 700 partners in 40 States and 
Puerto Rico. The ratio of matching non-Federal funds to Federal funds 
was nearly 2 to 1, with the Federal portion at $12.9 million and total 
funding at $36.0 million.
    The 2005 budget includes $50.0 million for the Partners for Fish 
and Wildlife program. Through the Partners program, the Fish and 
Wildlife Service has established productive relationships with 
communities and over 30,000 landowners, providing financial and 
technical assistance and restoration expertise to private landowners, 
Tribes, and other conservation partners. Since its inception in 1987, 
the Partners program has restored 677,000 acres of wetlands; nearly 1.3 
million acres of prairie, native grassland, and other uplands; and 
5,560 miles of stream and streamside habitat.
    In 2005 the Partners program will leverage $5.0 million in the High 
Plans region through a public/private initiative that will restore 
grassland habitats and declining species over an 11-State region. In 
cooperation with landowners and other partners, the Fish and Wildlife 
Service will focus conservation efforts on restoring, enhancing, and 
protecting 2 million acres over the next 10 years. The 2005 Partners 
budget also includes $6.2 million for partnership efforts in the Upper 
Klamath basin.
    Augmenting our partnership achievements is the work of over 200,000 
volunteers who provide over 8 million hours to Interior's programs and 
projects throughout the Nation. These volunteers help repair and 
maintain trails, restore habitat, participate in monitoring and 
research programs, and assist our land managers in many other ways. To 
promote this spirit of volunteerism, the Department has reactivated the 
Take Pride in America program. In California, volunteers enlisted 
through Take Pride pledged 400,000 hours of service to help restore 
areas devastated by wild land fires. The 2005 budget includes $1.0 
million for the Take Pride program as part of the Cooperative 
Conservation Initiative.
    Also funded within the Cooperative Conservation Initiative is the 
Fish and Wildlife Service's Coastal program, for which we propose a 
funding increase of $2.9 million, bringing total funding to $13.1 
million. The Coastal program leads FWS conservation efforts in bays, 
estuaries, and watersheds around the U.S. coastline and leverages 
Federal funding at a rate of 4:1. We also propose to increase funding 
for the Migratory Bird Joint Ventures program by $1.2 million for a 
total of $11.4 million. The funding increase will allow FWS to enhance 
15 existing Joint Ventures and fund the Northern Great Plains and 
Central Hardwoods Joint Ventures.
    Endangered Species Grant Programs.--The Department's cooperative 
conservation efforts also include a number of grant programs that 
provide expanded opportunities for State, tribal, local and private 
partners to participate in conservation and protection of endangered, 
threatened, and at-risk species. These programs will help this nation 
invest habitat protection and recovery of species--the ultimate goal of 
the Endangered Species Act. Through these investments, we can achieve 
on-the-ground conservation results and help avoid the conflicts, land 
management stresses, and procedural workloads that ensue when species 
become endangered.
    The Landowner Incentive Program provides competitive matching 
grants to States, Territories, and Tribes to create, supplement, or 
expand programs to protect and manage habitats on private lands that 
benefit listed species or species at risk. The 2005 budget includes 
$50.0 million to assist private landowners in conserving and restoring 
habitat for endangered species and other at-risk plants and animals. 
This is an increase of $20.4 million over 2004.
    The Private Stewardship Grants program provides grants and other 
assistance to individuals and groups engaged in local, private, and 
voluntary conservation efforts that benefit federally listed, proposed, 
candidate or other at-risk species. A panel of representatives from 
State and Federal Government, agricultural and private development 
interests, and the scientific and conservation communities assess and 
make recommendations regarding these grants. The 2005 budget proposes 
$10.0 million for the program, a $2.6 million increase over 2004.
    The Cooperative Endangered Species Conservation Fund provides 
grants to States and Territories to participate in projects to conserve 
candidate, proposed, and threatened and endangered species. Grants to 
States and Territories allow them to participate in an array of 
voluntary conservation projects for candidate, proposed, and listed 
species. These funds may in turn be awarded to private landowners and 
groups for conservation projects. The CESCF grants include funding for 
States and Territories to implement conservation projects to support 
the development of Habitat Conservation Plans and to acquire habitat 
for threatened or endangered species. The 2005 budget proposes $90 
million, an increase of $8.4 million, for the appropriated portion of 
this program.
    Our grant programs also aid a wide variety of other wildlife. The 
2005 budget proposes $80.0 million for the State and Tribal Wildlife 
Grants program. These grants help develop and implement State and 
tribal programs for the benefit of wildlife and its habitat, not 
limited to species that are hunted or fished. The program exemplifies 
our cooperative conservation vision, allowing States and Tribes to 
tailor their conservation efforts in a manner that best fits local 
conditions. A $10.9 million increase for the program in 2005 will 
significantly advance efforts of State and tribal fish and game 
agencies to address on-the-ground wildlife needs. Based on the high 
level of interest in this program, we expect this program will have 
lasting benefits for fish and wildlife, while fostering stronger 
working relationships between Federal, State and tribal governments.
    Full Funding for the Land and Water Conservation Fund.--Our 
cooperative conservation programs are an important component of the 
2005 Land and Water Conservation Fund budget request. Overall, the 
Department's budget seeks $660.6 million from the Land and Water 
Conservation Fund for 2005, including $153.3 million for land 
acquisition and $93.8 million for the State grant program. The 
Department's request, combined with the request for the U.S. Forest 
Service, brings total government-wide LWCF funding to $900.2 million.
    The 2005 LWCF budget includes the same mix of programs proposed in 
2004. This mix strikes an effective balance between Federal land 
acquisition and cooperative efforts to fulfill LWCF goals.
    We believe effective conservation of lands and natural resources 
cannot rely primarily on expanding the Federal estate through land 
acquisition. Such acquisitions remove lands from the local tax base. 
Equally significant, each time we acquire more Federal lands, future 
operations and maintenance costs ensue in perpetuity. Supporting local 
recreation and conservation through partnership programs enables us to 
leverage Federal funding. In many cases, these programs match Federal 
funds at a ratio of more than 2:1. They give us an opportunity to work 
hand-in-hand with States, communities, and local landowners to build 
support for long-term conservation.

                               CONCLUSION

    The budget plays a key role in advancing our vision of healthy 
lands, thriving communities, and dynamic economies. Behind these 
numbers lie people, places, and partnerships. Our goals become reality 
through the energy and creativity efforts of our employees, volunteers, 
and partners. They provide the foundation for achieving the goals 
highlighted in our 2005 budget.
    This concludes my overview of the 2005 budget proposal for the 
Department of the Interior and my written statement. I will be happy to 
answer any questions that you may have.
                                 ______
                                 
                Prepared Statement of J. Ronald Johnston

    My name is Ronald Johnston. I serve as the Program Director of the 
Central Utah Project Completion Act Office under the Assistant 
Secretary--Water and Science in the Department of the Interior. I am 
pleased to provide the following information about the President's 
fiscal year 2005 budget for implementation of the Central Utah Project 
Completion Act.
    The Central Utah Project Completion Act, Titles II-VI of Public Law 
102-575, provides for completion of the Central Utah Project (CUP) by 
the Central Utah Water Conservancy District. The Act also authorizes 
funding for fish, wildlife, and recreation mitigation and conservation; 
establishes an account in the Treasury for deposit of these funds and 
other contributions; establishes the Utah Reclamation Mitigation and 
Conservation Commission to coordinate mitigation and conservation 
activities; and provides for the Ute Indian Water Rights Settlement.
    The Act provides that the Secretary may not delegate responsibility 
under the Act to the Bureau of Reclamation. As a result, the Department 
has established an office in Provo, Utah, with a Program Director to 
provide oversight, review, and liaison with the District, the 
Commission, and the Ute Indian Tribe, and to assist in administering 
the responsibilities of the Secretary under the Act.
    The 2005 request for the Central Utah Project Completion Account 
provides $46.3 million for use by the District, the Commission, and the 
Department to implement Titles II-IV of the Act, which is $8.3 million 
more than the 2004 enacted level. Most of this increase is due to a 
transfer of budgetary authority and responsibility from the Western 
Area Power Administration to the Department of the Interior ($6.1 
million).
    The funds requested for the District ($28.4 million) will be used 
to continue the completion of the Diamond Fork System ($8.5 million); 
to continue construction on Uinta Basin Replacement Project ($13.0 
million); and to implement water conservation measures, local 
development projects, and continue planning and NEPA compliance for the 
Utah Lake System ($6.9 million). We are pleased to report that the 
problems in the Diamond Fork System associated with a cave-in and 
dangerous levels of hydrogen sulfide gas have been resolved, the 
construction of the alternative facilities is nearly complete, and 
water should be delivered through the facilities this summer. We are 
planning a celebration of the completion of these major facilities this 
summer. The members of the committee will be invited to attend.
    The funds requested for the Mitigation Commission ($15.5 million) 
will be used to implement the fish, wildlife, and recreation mitigation 
and conservation projects authorized in Title III ($7.4 million); to 
implement the fish and wildlife activities associated with the Uinta 
Basin Replacement Project ($1.0 million); to complete mitigation 
measures committed to in pre-1992 Bureau of Reclamation planning 
documents ($1.0 million); and to fulfill the mitigation obligations 
required under section 402(b)(3)(B) of the Act ($6.1 million). Title 
III activities funded in 2004 include the Provo River Restoration 
Project; acquisition of habitat, access, and water rights; and fish 
hatchery improvements.
    Finally, the request includes $2.4 million for the Program Office. 
This includes $1.7 million for program administration, $300,000 for 
mitigation and conservation projects outside the State of Utah, and 
$400,000 for operation and maintenance costs associated with instream 
flows and fish hatchery facilities.
    In conclusion, we appreciate the opportunity to testify before the 
committee and would be happy to respond to any questions.

    Senator Domenici. Yes, sir.
    Senator Craig, do you have some questions?
    Senator Craig. Just a couple.
    Senator Domenici. All right.
    Senator Craig. And, again, John, let me thank you for your 
presence here and the work you're doing. Your reality check, by 
the graphs and charts you've shown us, clearly demonstrate what 
is really at risk in the West, and the problems we all face.
    In the area of site security, $43.2 million, there is a 
growing concern that some of this is overdone. And while site 
security is critically important, and we all know that, my 
guess is, when the dust settles from 9/11, we'll learn how to 
do it better with less. But what are going to be the costs to 
the users of these facilities? How much of--is there going to 
be a cost pass-through to users in fees that they might be 
expecting?
    Commissioner Keys. Mr. Craig, out of the $43 million that 
we have requested, $18 million of that is associated with 
guards and surveillance. Of that $18 million, $12 million would 
be part of the operation and maintenance budgets, and we would 
expect to be reimbursed by the water users. Water users being 
from the power side, from--all of the water users that have an 
allocation from those Federal projects.
    Senator Craig. So it's a direct cost pass-through of $12 
million.
    Commissioner Keys. That's correct.
    Senator Craig. And I assume that, because you've arrived at 
a figure of $12 million, you know how that breaks out.
    Commissioner Keys. Mr. Craig, we do. It is based on the 
authorized purposes for the project and the cost allocations 
that have been done over--well, when the projects were 
completed or when the cost repayments started. So it's along 
the cost allocations that are already in place.
    Senator Craig. But an increase.
    Commissioner Keys. It would increase over what they were 
paying before 9/11/2001.
    Senator Craig. Okay. I'd like to see those figures. I'd 
like to know how that impacts both users, from the standpoint 
of water users, and then--and the utility. I assume you're 
talking about WAPA rate payers in that case, would you not be?
    Commissioner Keys. Mr. Craig, it is all of the power users. 
It's WAPA, it's Bonneville----
    Senator Craig. Yeah, all of them.
    Commissioner Keys [continuing]. Power Administration, and 
the other water users. We can provide that breakdown for you.
    [The information follows:]

    In referencing preliminary estimates for guard reimbursability, 
Senator Craig has requested to see the figures. I have agreed to 
provide that breakdown. Below are those figures:

                                 REIMBURSABILITY OF GUARD COSTS--APRIL 20, 2004
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                 Fiscal Year 2005
                            Projects                             -----------------------------------------------
                                                                    Power Users     Water Users    Reimb. Amount
----------------------------------------------------------------------------------------------------------------
Hoover..........................................................             4.7  ..............             4.7
Parker/Davis....................................................             1.6  ..............             1.6
Yuma Area Projects..............................................  ..............  ..............  ..............
                                                                 -----------------------------------------------
      Lower Colorado Region.....................................             6.2  ..............             6.2
                                                                 ===============================================
Grand Coulee....................................................             2.9  ..............             2.9
                                                                 -----------------------------------------------
      Pacific Northwest Region..................................             2.9  ..............             2.9
                                                                 ===============================================
Central Valley Project..........................................             0.3  ..............             0.3
                                                                 -----------------------------------------------
      Mid-Pacific Region........................................             0.3  ..............             0.3
                                                                 ===============================================
Great Plains Region.............................................  ..............  ..............  ..............
                                                                 ===============================================
Colorado River Storage Project..................................             1.5             0.6             2.1
                                                                 -----------------------------------------------
      Upper Colorado Region.....................................             1.5             0.6             2.1
                                                                 ===============================================
      TOTALS....................................................            10.8             0.6            11.4
----------------------------------------------------------------------------------------------------------------

    These figures are generated from the best available information at 
the current time. They are preliminary estimates which will be further 
reviewed within the Bureau.
    After further refinement, the guards and surveillance costs remain 
at $18 million. There was a greater need identified with an armed 
response force at Grand Coulee, a National Critical Infrastructure 
facility. This was offset by changing needs at other facilities.
    After further review, the overall total reimbursable amount is now 
$17 million, based upon project cost allocations. The above table does 
not factor into account Mid-Pacific and Great Plains Region's shift to 
reimbursability, although the customers in these regions had been 
apprised that they would be subject to this new reimbursability policy.
    The table below clarifies the costs by region, as well as including 
the updated costs for guards and surveillance.

                                 REIMBURSABILITY OF GUARD COSTS--AUGUST 4, 2004
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                 Fiscal Year 2005
                            Projects                             -----------------------------------------------
                                                                    Power Users     Water Users    Reimb. Amount
----------------------------------------------------------------------------------------------------------------
Hoover..........................................................             3.9  ..............             3.9
Parker/Davis....................................................             1.6  ..............             1.6
Yuma Area Projects..............................................  ..............  ..............  ..............
                                                                 -----------------------------------------------
      Lower Colorado Region.....................................             5.5  ..............             5.5
                                                                 ===============================================
Grand Coulee....................................................             4.1             0.2             4.4
                                                                 -----------------------------------------------
      Pacific Northwest Region..................................             4.1             0.2             4.4
                                                                 ===============================================
Central Valley Project..........................................             0.4             2.1             2.5
                                                                 -----------------------------------------------
      Mid-Pacific Region........................................             0.4             2.1             2.5
                                                                 ===============================================
Great Plains Region.............................................             1.3             1.0             2.3
                                                                 ===============================================
Colorado River Storage Project..................................             1.4             0.6             2.0
                                                                 -----------------------------------------------
      Upper Colorado Region.....................................             1.4             0.6             2.0
                                                                 ===============================================
      TOTALS....................................................            12.8             3.9            16.7
----------------------------------------------------------------------------------------------------------------

    We will continue to refine these numbers as Reclamation's Security 
Program continues to assess its vulnerabilities and take appropriate 
measures. We will also work closely with our stakeholders to share data 
and guidance in the areas of risk, and take the necessary responses to 
ensure the delivery of water service to multiple water users.

    Senator Domenici. Okay.
    The Water 2025, first of all, I obviously applaud the 
initiative. I want all Americans to become more aware of the 
realities of the arid West and to better understand water needs 
out there. At the same time, to be able to work cooperatively 
with all of the entities involved out there, in conflict 
resolution and reallocation needs and all of that, will be 
extremely important.
    As you mentioned, you're going out to Idaho this next 
month. The Idaho legislature spent a fair amount of time 
resolving, in the short term, for the short term, a growing 
problem in an area of Idaho, but that's a good example of where 
the Bureau can really be a facilitator and an assister. And 
what I would hope you would do, when you find conflicts 
impossible to resolve because of Federal legislative or 
regulatory impediments, that you'd come to us and let us know 
about them so that we might assist you in removing those 
impediments.
    The reality check in the West, if this continues, is that 
we may have to change some law, we may have to rethink where we 
are. It isn't a matter of just cutting the slices of the pie 
thinner; we might need to enlarge the pie a bit. And that is a 
reality that we're all going to have to face.
    I think the chairman spoke to that when he talked about 
budgets, and we need to know those kinds of things, because I'm 
looking at Animas-La Plata. It was 1982, and I was a freshman 
Congressman when I assisted a Congressman from Colorado in this 
initiative. Do the math. Idaho can't wait 30 years for a 
decision out of Washington, nor can New Mexico, when it comes 
to drought and water resources.
    But that's what happened in Animas-La Plata. It's nearly 30 
years since that idea went on the books and began to be a 
motivator of public policy, and I just happen to think that's 
an interesting reality check at a time when we're seeing 
unprecedented dry numbers.
    Thank you, Mr. Chairman.
    John, thank you.
    Senator Domenici. Thank you very much, Senator. I greatly 
appreciate your participation.
    I have about five questions. A couple of them are 
parochial, some are not.
    Senator Craig, I don't know whether my observation 
regarding improving the use of water by farmers applies to your 
State, but I want to suggest sometimes there are issues that we 
don't quite know, in the bureaucracy of the government, where 
they fit. So since they don't exactly fit, nothing's done.
    I believe that farmers could improve the system whereby 
they apply water, and save a lot of water in the process, by 
building systems that use the water better, those systems where 
you feed by a drip system, or you feed by an underground system 
that delivers the water, or a sprinkler system. And it seems to 
me that one reason the farmer doesn't do it is because it costs 
a lot. Now, I wonder if you might seek, in your official 
capacity, an analysis of whether tax relief for the farmer who 
enhances the application and use of water in a field of 
agriculture.
    I know a farmer in New Mexico that is a very progressive 
farmer, but he also has money. And he spent a huge amount of 
money to make his water go further and to make sure that the 
application to the soil used far less water to get the job 
done. He came to see us, and we were talking about this 
approach, about tax credit of some type, and he quickly said, 
``Isn't it too bad that I've already made my expenditure before 
you consider this idea of giving us some kind of tax credit.''
    I would wonder--this may be a pipe dream, but I wonder if 
you would use your official hat to ask the Treasury Department 
and those who engage in agricultural funding whether this makes 
any sense, and get that for us.
    Commissioner Keys. Mr. Chairman, your suggestion makes all 
the sense in the world for us, because we are currently 
launched off on three major efforts on water conservation. The 
first one is one with the existing programs that we have in 
Reclamation, for which we have four or five already. And 
certainly we work mightily to not let the new initiative take 
monies away from those, so that we can keep working very 
closely with the farmers on our districts. The second effort is 
Water 2025, itself.
    Senator Domenici. Yes.
    Commissioner Keys. That is concentrating on trying to 
stretch those existing water supplies so that the new demands 
for water don't place undue pressure on the water supplies for 
our irrigation projects.
    If you look across the Western United States, about 80 
percent of our water rights are held for irrigation.
    Senator Domenici. Yes.
    Commissioner Keys. If we can do the conservation work and 
provide water for a lot of the new demands that are out there, 
we can keep that pressure off of the need for conversion, and 
that's one of the big goals of 2025.
    The third thing that we're doing is working very closely 
with Department of Agriculture. Reclamation's main focus is on 
the delivery facilities, the dams, the canals, the control 
facilities. We're working very closely with agriculture for the 
on-farm stuff.
    Senator Domenici. Well, they're not----
    Commissioner Keys. Your suggestion for a tax relief would 
fit very well into that, and we would certainly explore that 
with you and with Treasury.
    Senator Domenici. It may very well be that it fits one of 
the other agencies better than yours, but I'm not really 
interested in that; I'm interested in somebody finding out 
whether it makes sense to the farmer and makes sense to the 
Treasury. So if you would start that initiative, I----
    Commissioner Keys. Mr. Chairman, we will take the lead in 
talking with Treasury and working with you and trying to see 
what we can do there.
    Senator Domenici. It may very well be that it doesn't work.
    Middle Rio Grande, in New Mexico. First, I appreciate your 
support of our Endangered Species Collaborative Program with 
reference to that. I acknowledge your 2004 spending and the 
list of agencies and groups who have signed onto the memorandum 
of understanding. I'm very pleased that some of the tribes have 
signed up as participants.
    We spoke yesterday--``we,'' being you and our office, and 
you brought other people with you--we spoke about the idea of 
sanctuaries, which I came up with, for minnows, these 
endangered minnows. And I understand that the details are still 
being flushed out, and I look forward to your follow-up. There 
is a deficit of $1.5 million in your 2004 plan to do all that 
you have on the list of proposed activities for the year.
    Now, Senator Craig, I might tell you that we have an 
endangered species called a silvery minnow, and it generally 
saves itself and prevails by being very far downstream in a 
sandy, sandy river, so that we lose thousands of acres in 
carrying the water from upstream to the bottom, low stream in 
order to get it to the minnow's habitat. The idea of a 
sanctuary would be to build ponds upstream, where there is 
plenty of water, and let the water go in and out so you don't 
lose any, and prepare that water in a way that would fit the 
minnow, and then do what I thought of and recommended for a 
year and a half, that's take the water to the minnow--no, take 
the minnow to the water, instead of the reverse, of taking the 
water to the minnow.
    So I want to ask you, how do you plan to prioritize what 
can be done this year? And what kind of growing season do you 
see for this year for the farmers in my State? Will there be 
enough water for them? And where do the minnow sanctuaries 
figure into this?
    Commissioner Keys. Mr. Chairman, on the minnow sanctuary, 
we have a draft plan and a draft timeline for implementing that 
plan that we're meeting with your staff on to flesh out. There 
are four concerns that we're working with.
    Senator Domenici. Yes.
    Commissioner Keys. The turbidity, the biological opinion, 
the land area that it takes--those things, we're working on. We 
think that it will probably take about 2 years to get that 
done, and we're trying to find ways to accelerate that if we 
can.
    On the water year for the Basin, currently Mr. Craig's 
characterization of his State, for everything shutting off in 
March, has been true almost all over the West. We have seen all 
of our projected runoff figures drop about 20 percent since the 
first of March, and that is true in the Middle Rio Grande. We 
started out in the high 80 percent range, and we're below 70 
percent now.
    I would tell you that we have enough water identified to 
meet the requirements of the minnow for this year and to meet 
the requirements for the prior and paramount rights of the 
Pueblos. In looking at the water supply for the Middle Rio 
Grande Water Conservancy District, it appears that they have 
water to take them into and maybe through July, and then they 
may be out of water. We're working with some of the Water 2025 
monies to do conservation projects on that district and seeing 
if there are not some ways that we can stretch that supply.
    Senator Domenici. I have a very lengthy question about 
Animas-La Plata. I will submit it.
    For the last 2 years, this committee funded the 
rehabilitation of the Middle Rio Grande levies. What's the 
status of the rehabilitation?
    Commissioner Keys. Mr. Chairman, we are on schedule with 
that 10-year program that we discussed with you a couple of 
years ago. Our budget this year requests adequate money to keep 
us on that schedule. We are requesting about $11 million for 
those eight or ten levies that we are working with there.
    Senator Domenici. I have a Western Water Initiative 
question, and I have a contracting-out question.
    I'd like to talk about two issues that I think we ought to 
be worried about that come within the purview of seeing if we 
can get more water from existing sources that might help with 
the problem.
    In my State, Senator Craig, there is a huge basin called 
the Tularosa Basin. It's a salty water, underground basin. And 
on the edges, you can get it, just by going there and spooning 
it out. It's, in some places, not so salty; in other places, 
very salty. But I would submit that with the situation we've 
got, that somebody ought to take a lead in the desalinization. 
If we could desalinate that water, we would have huge 
quantities of water to move from that area to arid parts of New 
Mexico and maybe even some other States.
    So I think that you're aware of this issue. The schedules 
have slipped, such that an additional $1.8 million will be 
needed for the Tularosa Basin construction, and at least $7 
million for 2005. Have you been aware of the funding issues? 
And can you commit to bringing me a solution soon so that the 
partnership with ONR and DOE can be maintained?
    Commissioner Keys. Mr. Chairman, I am aware of that 
situation, and, yes, we can craft a solution that would provide 
the necessary money in 2004, and then we would work with you on 
the funding for 2005.
    Senator Domenici. Well, I don't know what you think about 
it, but I would submit to my friend, Senator Craig, that with 
our huge capacity and technology, it would seem rather 
unfortunate if, in the midst of a drought, if we had this huge 
underground basin right in the middle of the West, if we didn't 
set out sights using the best scientists and technologists to 
see if we can clean some of that up so we could use it, 
especially in the agriculture field.
    And my last one has to do with another source of saving 
water. That has to do with the salt cedar. This was brought to 
the West to help erosion. Unfortunately, there has been a 
considerable drain on the scarce water supply, approximately 
2.4 million acre-feet of water each year. I'm aware that you 
are using mechanical and chemical methods of removing them, and 
that you are replacing them with vegetation. Where are you with 
progress in this area? Is there a threat of erosion? And where 
are you with finding and certifying a biological control? Were 
you part of the recent Salt Cedar Conference in New Mexico?
    Commissioner Keys. Mr. Chairman, yes, we were part of that 
conference. I would tell you that the Department of the 
Interior has a large initiative on invasive species, and a 
large part of that initiative is on the salt cedar. And 
Reclamation is taking the lead for Interior in the efforts on 
salt cedar. We are part of that effort in Albuquerque earlier 
this year, and certainly we are looking at different ways to do 
it.
    You talked about the mechanical means. That is the 
traditional way of doing it. We have recently received approval 
to release the bugs. They have found a bug that eats salt 
cedar. And the problem is, they didn't know what he would eat 
after he ate up all of the salt cedar. And they think now that 
they have an answer to that. I think they think he'll drop 
dead. But we'll have to wait and see.
    But there are provisions----
    Senator Craig. John----
    Commissioner Keys [continuing]. For releasing him----
    Senator Craig [continuing]. It's possible that when the 
salt cedar is gone, he might become an endangered species.
    Commissioner Keys. Oh, my goodness.
    Senator Craig. There would be some who would be advocates 
of that, so be careful of the word use ``drop dead,'' okay?
    Don't mention it.
    Commissioner Keys. But it has been approved for release, 
and there are a number of control areas underway where they're 
trying that.
    On the erosion issue, it has been something that we're 
paying a large amount of attention to, and there are a number 
of ways--a number of different vegetations that you can put 
there that will control that erosion and not create the 
problems that the salt cedar did.
    Senator Domenici. Well, I just want to say--and I know that 
my friend, Senator Craig--and if we had the rest of this 
committee here, I think they would all agree that we can't 
ignore the problem of saving water that is being wasted, and 
converting water that is not too far from usable if it's there 
in large quantities, that we clearly ought to spend some money 
trying to fix it.
    I know if Israel is worried about it, we're just as bad 
off. It's just that they're a lot smaller, and they can focus; 
and we're a lot bigger, but, I'll tell you, if you saw a map of 
the United States, like I have, that showed the salty 
underground water repositories in America, you would be shocked 
at how much there is. Even over in your side, there's more than 
you think. But in my State, there just happens to be this 
monster underground basin, and I think it's worth some money. 
And we're sitting around rationing what we've got, and it might 
be equally as important to try to make what we have more 
functional. And I intend to pursue that with vigor. It's going 
to take some money, but so what? We've got the United States 
Navy working on it, incidentally. You know that.
    Commissioner Keys. Yes, sir.
    Senator Domenici. They have a very big interest, and 
they've got a major project going in this basin.
    I have no further questions. Do you have any, Senator 
Craig?
    Senator Craig. Just a parting observation. Your early 
discussion about conservation and water management is obviously 
going to be critical during shortages. And even with any 
abundance, with the kind of growth factors we're seeing in the 
western high-desert States, clearly management's going to be 
important.
    Interestingly enough, management and new ideas and new 
alternatives have consequences. The Commissioner is going to 
Idaho to look at the consequence. In the Snake River Plain 
Aquifer, when you use the old techniques of flood irrigation, 
Mr. Chairman, you once fed the aquifer directly by flowing 
water out over the ground. Starting in the 1970's, because of 
the Clean Water Act and because of PMDLs and all of that kind 
of thing, they shifted from flood irrigation to sprinkler 
irrigation, and that reduced the amount of water going into the 
aquifer.
    Senator Domenici. Right.
    Senator Craig. Now, that water flows out of the aquifer at 
a given point. And in the 1940's and the 1950's, people filed 
on the excessive flow as their source of water. It was an 
abnormal flow from normal flows----
    Senator Domenici. Water rights.
    Senator Craig. They developed water rights. Now that we are 
using the new technologies and sprinkler irrigation, and, some 
instances, drip, the water is no longer flowing underground 
into the aquifer and out to the point source that was filed on.
    So the value of 2025 is what we're calling it?
    Commissioner Keys. Yes.
    Senator Craig. Those kinds of initiatives that not only 
look at how you mitigate, but try to understand what the 
consequence of mitigation will produce, is going to be every 
bit as important, because we have traditional, we have western 
water law, we have fixed mandates, we have a whole complication 
of things that tie up inside this marvelous resource. And there 
are consequences for action and acts when the good intention is 
made. Now, when you dry these things up, are we going to dry up 
a wetland by that action, although it's positive? A wetland 
that was created by man's presence, not by Mother Nature, and 
on and on and on and on.
    Anyway, point made. It's interesting that as we work 
towards solution, we're now trying to find a way to solve a 
problem that is created by a positive action on the part of 
Idaho irrigators.
    Commissioner Keys. Mr. Craig, one of the real cornerstones 
of Water 2025 is looking at institutional barriers that are 
there, law-wise or whatever, trying to find ways to make it 
easier to address some of the problems you're talking about, 
especially the one on using government facilities to convey 
private water. The old Warren Act issue.
    Senator Craig. Um-hum.
    Commissioner Keys. And certainly we may have to come back 
for some help on the Warren Act one of these times. But we're 
looking at other laws that we can use to make that happen, like 
the 1906 Townsite Act----
    Senator Craig. Yeah.
    Commissioner Keys [continuing]. Or the 30--Section 14 of 
the 1939 act, or the 1958 act, trying to find ways to make that 
happen. In the end, we still may have to come back and work 
with you folks to see how we might change that Warren Act so 
that it's more compatible.
    Senator Craig. Well, we think you're headed in the right 
direction about those analyses. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Domenici. I thank you, Commissioner. We're finished 
with you, and----
    Commissioner Keys. Okay.
    Senator Domenici [continuing]. We'll be working with you, 
and thank you for your excellent testimony, and you were very 
well prepared.
    Commissioner Keys. Thank you, Senator.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

               Questions Submitted by Senator Harry Reid

                               WATER 2025

    Question. Commissioner Keys, we find that the budget request has 
effectively eliminated funding for Title XVI projects with the 
exception of ongoing projects. Even with that limited commitment, the 
level of funding has decreased. At the same time, the budget for Water 
2025 seeks almost $13 million in increases. What share of this increase 
will be dedicated to reuse projects and/or research projects?
    Answer. Improving desalination technology is important to purifying 
salty and brackish waters to increase their utility. Water 2025's goal 
is to aid technological advances and reduce the high costs that slow 
adoption of new desalination technologies. The fiscal year 2005 Water 
2025 budget includes $4.0 million for cost-shared demonstration 
projects for desalination. In addition, approximately $1.5 million for 
research relevant to desalination is included in the Title XVI budget.

                          WATER 2025/TITLE XVI

    Question. We also note that the bulk of the request is dedicated to 
conservation, efficiency, and markets and collaboration. Please explain 
how the Bureau intends to distribute these resources within the Water 
2025 program?
    Answer. With the support of Congress in the fiscal year 2004 
Budget, Secretary Norton has moved forward with the Western Water 
Initiative (precursor to Water 2025) Challenge Grant program that seeks 
projects that make real progress towards avoiding water crises in the 
West. The Challenge Grant Program requires a 50-50 cost share and 
targets irrigation and water districts in the West who are willing to 
leverage their money and resources with the Federal Government on 
projects that make more efficient and effective use of existing water 
supplies.
    For example, Water 2025 is seeking proposals that will retrofit and 
modernize existing water delivery facilities, and implement and use 
water banks and water markets as mechanisms to use our existing water 
more efficiently and effectively, providing such use is recognized by 
applicable State and Federal laws and authorities.
    Through the development of specific criteria and requirements, 
these projects and activities will focus, first and foremost on those 
areas where the competing demands for water by people and the 
environment mean that crises have the highest likelihood of occurring--
based upon demographic or population trends combined with endangered 
species needs.

             TITLE XVI WATER RECLAMATION AND REUSE PROGRAM

    Question. What role does the Bureau see itself playing in the 
advancement of research into recycling?
    Answer. Reclamation has requested $1.53 million for agency-wide 
activities associated with the Title XVI Water Reclamation and Reuse 
Program. This program allows Reclamation to conduct research on the 
treatment of impaired waters, including desalting, and to provide 
technical and financial assistance to local water agencies interested 
in investigating the potential for reusing impaired waters. In prior 
years, the program was focused on providing assistance to local 
agencies. In fiscal year 2005, the program's main emphasis will be on 
conducting research. The objective of this research will be to develop 
technologies that have broad application and that will help bring down 
the cost of treating all types of impaired water, including municipal 
and industrial wastewater used in water recycling.
    Question. We note that the Water and Energy Management and 
Development account includes support for desalination research as part 
of a new initiative begun in 2004. However, the funding for this 
account has been reduced from $4 million to $1.5 million to support the 
development of high priority recycling and desalination projects as 
well as research. How does this reduction affect the ability to 
maintain research project priorities underway and identify new needs 
that Congress has identified? (Page 56 of the justification)
    Answer. Reclamation's fiscal year 2005 Title XVI Water Reclamation 
and Reuse Program funding request for agency-wide activities is $1.53 
million. This is $100,000 more than was requested in fiscal year 2004. 
This account was increased to nearly $4.0 million due to Congressional 
action. Among other activities, Reclamation was directed to use these 
additional funds to continue support for the Water Reuse Foundation 
Research Program, which is focused primarily on research associated 
with the recycling of municipal and industrial wastewater. That 
research is currently underway and is expected to continue well into 
next year. The $1.53 million requested for fiscal year 2005 for agency-
wide Title XVI activities would be used to continue research on 
developing low-cost treatment technologies needed to make all types of 
impaired water suitable for beneficial use, including wastewater.

                              DESALINATION

    Question. Based on your response to question ``What role does the 
Bureau see itself playing in the advancement of research into 
recycling?'' How are we to interpret the Bureau's request of $100,000 
for desalination research from a current year level of $7.7 million?
    Answer. The administration continues to support desalination and 
water purification related research within the limitations of available 
funding, We also continue to support the development of other water 
supply and water management technologies that will ensure that 
Reclamation and other western water managers have a complete set of 
tools to tackle water supply problems. In fiscal year 2005, a request 
for desalination research and other water purification technologies has 
been submitted under the five programs as summarized in the following 
table:

------------------------------------------------------------------------
                                Approximate
                                Fiscal Year
                                   2005        Scope of Desalination and
           Program            Allocation for   Other Water Purification
                                Desalination          Related R&D
                                Related R&D
------------------------------------------------------------------------
WATER 2025..................      $4,000,000  External R&D and
                                               demonstration projects.
Water Reclamation and Reuse       $1,500,000  External and internal R&D.
 Program (Title XVI).
Desalination and Water              $100,000  External R&D.
 Purification Research
 Program (a.k.a.
 Desalination Act).
Science and Technology            $1,200,000  Internal R&D Reclamation-
 Program.                                      wide.
Colorado River Basin                $781,000  Internal R&D to reduce the
 Salinity Control Project                      costs of the Yuma
 (Title I).                                    Desalting Plant.
                             ----------------
      Total.................      $7,581,000
------------------------------------------------------------------------

    The $7.375 million enacted under the Desalination and Water 
Purification Program for fiscal year 2004 specified that $4.0 million 
shall be used for the construction of the Tularosa Basin National 
Desalination Research Facility. The reduction between fiscal year 2004-
fiscal year 2005 in the Desalination and Water Purification Program 
stems from the uncertainty of whether the Desalination Research Act 
will be reauthorized or extended and the uncertainty as to whether 
other authorities would allow us to continue this national program. The 
reduction has been partially offset by the increased allocation under 
Water 2025. In the event of no reauthorization of the Desalination 
Research Act, the Water Reclamation and Reuse Program (Title XVI) 
provides Reclamation with the general authority to continue to fund 
desalination research and demonstration activities.
    Question. What kind of work will not continue under the proposed 
budget cut? (Page 49 of the justification)
    Answer. For fiscal year 2005, the Water 2025 program has requested 
$4 million for desalination research with an emphasis on demonstration. 
The following work begun in fiscal year 2004 will continue under the 
fiscal year 2005 budget request: external research projects (bench-
scale, pilot-scale, and demonstration to increase water supplies, 
reduce desalination costs, reduce concentrate management issues, and to 
increase energy efficiency), technology transfer (desalination 
clearinghouse, desalination research road mapping efforts with Sandia 
National Labs and the guidance of the National Academies of Science, 
and an internal study of the potential use of advanced water treatment 
technologies as a resource to create net new water supplies), and 
partnerships and collaborations (including the Water Reclamation, 
Recycling, and Reuse Task Force).

             TITLE XVI WATER RECLAMATION AND REUSE PROGRAM

    Question. Overall, the West continues to face serious challenges in 
the development of alternative water supplies. A hallmark of 
confronting this challenge has been a strong Federal partnership in the 
form of Title XVI. Are we to assume that the Bureau no longer believes 
that a Federal partnership is advisable?
    Answer. Title XVI funding has helped local agencies offset the cost 
to plan, design, and construct water reclamation and reuse projects. 
These projects, when completed, will help local water agencies meet 
some of their existing and future water demand. Reclamation will 
continue to support those ongoing construction projects that were 
included in the President's budget request in prior years. We would 
rather focus resources on completing these projects, so that project 
benefits may be realized, rather than diffuse resources in support of 
the many new proposed Title XVI projects, many of which were developed 
with little, if any, Reclamation involvement.
    Question. If so, please explain the basis of this decision and how 
you propose to fill the gap created by this action.
    Answer. Through the Title XVI Water Reclamation and Reuse Program, 
Reclamation has helped demonstrate that water recycling is a successful 
means of increasing a municipality's water supply. Water recycling 
alone, however, will not be able to meet the anticipated future demand 
in all areas of the West, and other resources management strategies, 
such as conservation and desalination, will need to be pursued. 
Reclamation intends to focus its future new Title XVI activities on the 
development of treatment technologies that can be used to make all 
types of impaired water available for use, regardless of geographic 
location.
                                 ______
                                 
             Questions Submitted by Senator Byron L. Dorgan

                  FORT YATES INTAKE STRUCTURE FAILURE

    Question. Mr. Keys, I am know you are familiar with the water 
crisis at Fort Yates when it experienced loss of water due to extended 
droughts and low lake levels on Lake Oahe. If unaddressed, low lake 
levels on both Lake Oahe and Lake Sakakawea will continue to devastate 
local economies and endanger communities that depend on this water 
source.
    What action will the Bureau of Reclamation take to resolve this 
issue for communities who depend on these lakes for their water supply?
    Answer. We recognize that the drought conditions throughout the 
Missouri River system are having significant impacts on community water 
supplies. However, Reclamation's authority to address these issues is 
limited by the Dakota Water Resources Act of 2000 to the design, 
construction, operation, maintenance and replacement of the Indian 
municipal, rural, and industrial (MR&I) water supply facilities. Given 
current drought conditions, particular attention is being devoted to 
the Fort Berthold and Standing Rock MR&I systems which rely on the 
Missouri River as their water supply source. Reclamation became 
involved with development of the rural water system on Standing Rock 
with the passage of the Garrison Diversion Unit Reformulation Act of 
1986. Reclamation is currently working with the Standing Rock Sioux 
Tribe on a contingency plan for responding to possible future drought 
related impacts to their water system.
    With respect to the water crisis at Fort Yates, Reclamation 
completed the installation of a new interim intake for the Fort Yates 
water treatment plant. The intake was put into operation on March 16, 
2004, and has operated reliably since that time. Reclamation expects 
this intake to provide water until decisions can be made to determine 
the water treatment plant and intake option that will serve the long-
term needs of the Standing Rock MR&I system. Reclamation has also 
secured funding to investigate the feasibility of constructing 
horizontal wells as a replacement intake for the Fort Yates and Wakpala 
water treatment plants. These investigations began the week of April 
19, 2004.
    Question. Has there been any movement within your agency to find 
funds that have not been used and reallocate them to the tribal MR&I 
funding that had to be used during the water supply crisis last year?
    Answer. As noted in our letter to you dated April 27, 2004, 
Reclamation is monitoring other programs for potential surplus funding.

                       DAKOTA WATER RESOURCES ACT

    Question. Funding for the Dakota Water Resources Act is a top 
priority for me and for my constituents. Although Congress has promised 
to provide $200 million for Indian municipal, rural and industrial 
water needs and $200 million for State MR&I, the current budget fails 
to come anywhere close to what will be needed for the next fiscal year 
and provides only a total of $4.969 million for MR&I ($2.485 for State 
MR&I, including NAWS, and $2.484 for Tribal MR&I).
    Given the fact that this program is severely under funded, what do 
you plan to do to keep up with the current needs of the program, in 
light of expected price increases in the major programs if delays 
occur?
    Answer. It was recognized during the development of the Dakota 
Water Resources Act that funding would be provided over a number of 
years. To address the expected price increases caused by multi-year 
funding, the legislation authorized both the State and Indian MR&I 
project ceilings to be adjusted through the application of engineering 
cost indices. This measure, contained in Section 10, will account for 
ordinary increases in construction costs and ensure the appropriation 
ceiling continues to be adjusted to keep up with the current needs of 
the program.
    Reclamation recognizes that the State and the Tribes have 
construction capability that exceeds the funding level proposed by the 
President in the fiscal year 2005 budget. Furthermore, we understand 
that recent budget levels have not resulted in project accomplishment 
that keeps pace with the annual indexing of the appropriation ceiling 
previously described. However, the President's budget request seeks to 
continue progress on Garrison Diversion Unit, and other on-going 
construction projects throughout the agency, within the budget targets 
that have been established.

                 RED RIVER VALLEY WATER SUPPLY PROJECT

    Question. I am also very concerned about the status of the Red 
River Valley studies that will provide water to eastern North Dakota. I 
have heard some concerns that the BOR is scaling back on some of the 
key items it had planned on doing and cutting back on the 
investigations needed to prepare a comprehensive study.
    Can you update me on the status of these studies and assure me that 
the Bureau isn't taking shortcuts in this important matter?
    Answer. The purpose of the Red River Valley Water Supply Project is 
to meet the comprehensive water quality and quantity needs of the Red 
River Valley in North Dakota. As directed by the Dakota Water Resource 
Act of 2000 (DWRA), Reclamation is conducting analyses to identify 
future water needs for the Red River Valley and options for meeting 
those needs. The DWRA requires an analysis of Municipal Rural and 
Industrial Needs, Aquatic Environment Needs, Recreation Needs, Water 
Quality Needs and Water Conservation Needs. It also mandates two 
reports, the Needs and Options Report and an Environmental Impact 
Statement (EIS). Reclamation is the sole lead for analysis of Needs and 
Options and will complete the Needs and Options Report by November 30, 
2005. In accordance with DWRA, Reclamation and the State of North 
Dakota are preparing the EIS required to evaluate the environmental 
impacts of alternatives identified in the Needs and Options Report. The 
Draft EIS will be completed by December 31, 2005.
    Reclamation is placing a high priority on conducting all 
investigations required for the Needs and Options Report and the EIS 
using objective, scientifically sound analyses. The work needed to 
complete both reports is on schedule and being conducted in a rigorous 
and scientific manner. Reclamation is taking no shortcuts in the 
comprehensive evaluation of water quality and quantity needs of the Red 
River Valley, as well as, options for meeting those needs, and the 
environmental analysis required under NEPA and DWRA.

                         PICK-SLOAN HYDROPOWER

    Question. In Pick-Sloan the Bureau appears to be adding staff for 
hydropower activities. Please explain.
    Answer. Reclamation is adding staff for hydropower activities in 
Pick-Sloan. Reclamation has discussed this with the preference power 
customers on several occasions and they agree with our staffing 
proposal. This staff will perform operation and maintenance to ensure 
the necessary reliability and availability of the 20 Reclamation Pick-
Sloan Powerplants. Reclamation is facing a 40 percent attrition rate in 
hydropower staffing in the next 5 years and preparation must be made 
for this. Reclamation continues to deliver power at a cost that is less 
than the production costs of three-fourths of the other Federal and 
non-Federal hydropower facilities in the United States and with 
reliability twice that of the industry average. The impact to the power 
rate by adding this staff is minimal and Pick-Sloan customers will 
continue to benefit from the low wholesale rates. Furthermore, 
attention to such long-term operation and maintenance issues is in line 
with the recommendations from the 2003 re-PART of Reclamation's 
hydropower program, which reiterated the need to engage in long-term 
planning and act with foresight in managing its hydropower facilities.
    Question. In addition, where are these employees being placed both 
geographically and as between technical field positions or 
administrative/policy and review positions?
    Answer. As discussed with and agreed to by the preference power 
customers, Reclamation filled three positions last year: two 
apprentices in Wyoming, and one power facility manager at the Green 
Mountain powerplant in Colorado. In addition, by fiscal year 2006, we 
are in agreement to hire three apprentices and one O&M manager at the 
Flatiron powerplant in Colorado, and two engineering positions in the 
Great Plains Regional Office. These positions will be working on 
powerplant O&M.
    Question. What cost saving measures is the Bureau planning to 
undertake?
    Answer. Reclamation continues to undertake cost saving measures 
such as further standardizing O&M business practices and procedures and 
continually seeking measures to improve the efficiency of water use and 
power generation. Reclamation has been successful in doing this through 
changes in operations and installation of more efficient equipment.
    Question. Is the Bureau attempting to coordinate activities with 
other Federal agencies to avoid duplication of plant equipment and 
services, e.g., WAPA and Corps of Engineers?
    Answer. Reclamation, in conjunction with other Federal and State 
agencies, is utilizing the same microwave and radio communication 
systems. This has eliminated equipment duplication and generated cost 
savings. Reclamation coordinates monthly powerplant and transmission 
line outages with WAPA to avoid unnecessary outages and to allow both 
agencies to schedule work during each other's outages. Reclamation and 
WAPA continue to communicate in an effort to avoid duplication and 
reduce costs. Reclamation-wide coordination of asset management and 
facility condition assessment activities has occurred with the Corps of 
Engineers, Hydro Quebec, and Bonneville Power Administration. 
Reclamation's Great Plains Region has recently revised its information 
sharing agreement with its federal power customers. The new agreement 
includes Reclamation, the Corps of Engineers, WAPA, as well as the 
power customers. Through the agreement the parties coordinate budget, 
operation, and maintenance activities.

                             SITE SECURITY

    Question. The Bureau is proposing to spend $43 million for site 
security, including $12 million which will be reimbursable from Federal 
power customers. These appear to be annual costs and not one-time 
expenses.
    Since these multi-purpose projects are national assets, benefiting 
millions of Americans, why are they reimbursable from power customers?
    Answer. Beginning in fiscal year 2005, annual costs associated with 
activities for guarding our facilities will be treated as project O&M 
costs subject to reimbursability based upon project cost allocations 
and consistent with prior practices. The project beneficiaries who will 
be assigned these costs will be primarily power customers, water 
districts and some M&I water contractors.
    Reclamation recognizes there are challenges ahead of us, such as 
working with our stakeholders in analyzing security related O&M costs 
to determine the beneficiary's reimbursable obligation in fiscal year 
2005 consistent with project specific authorizations and contracts.
    Question. Why has the Bureau changed its existing policy on 
reimbursability and why should the power customers be required to pay 
these costs?
    Answer. Between September 11, 2001 and September 30, 2004, 
Reclamation has or will spend $124 million in anti-terrorism dollars, 
which include guard and surveillance activities.
    Reclamation's existing policy has always stated that upon project 
construction completion, the responsibility of O&M of single-purpose 
facilities transfers to the water-user entities responsible for the 
project's construction costs. Beginning in fiscal year 2005, annual 
costs associated with activities for guarding our facilities will be 
treated as project O&M costs subject to reimbursability based upon 
project cost allocations.
    The majority of Reclamation's expenditures for anti-terrorism 
measures, such as security reviews and subsequent implementation of 
anti-terrorism measures as a result of these reviews, are still 
considered non-reimbursable expenditures.

                               HYDROPOWER

    Question. The budget proposes that hydropower customers assume the 
cost of research and development expenses of the science and technology 
program. This program has always been a non-reimbursable activity of 
the Bureau.
    Why is the Bureau adding yet more costs to hydropower users?
    Answer. As a result of the Reclamation Science and Technology 
Program Assessment Rating Tool (PART) review by the Office of 
Management and Budget (OMB), we believe that it is appropriate to 
include hydropower research and development expenses as reimbursable 
costs in the Power Marketing Administrations' rates since the power 
customers directly benefit from the successes of Reclamation's 
hydropower research and development program related to hydropower. 
These research developments have resulted in significant cost savings 
to project customers.
    Question. Are there any activities with respect to reliability that 
you are not undertaking that you believe are appropriate?
    Answer. Reclamation continues to assess the reliability and long-
term viability of our generating facilities. We believe that we are 
doing everything that is appropriate at this time. We have recently 
conducted a condition assessment of our major equipment and have found 
that 46 percent of our major power components are in poor condition. As 
a result of the 2003 re-assessment of the PART on hydropower, we have 
revised our long-term performance measures and goals, and aim to reduce 
this percentage to 40 percent by 2014. Reducing the number of 
components rated in poor condition will increase generating 
reliability, and help avoid costly unplanned maintenance and 
replacement due to component failure. We will be scheduling funding to 
address this issue over the next several years to assure that our 
plants remain reliable. Another area we are evaluating is the 
responsiveness of our governors and excitation systems. Many of our 
governors are mechanical and as these governors are replaced, we are 
looking at replacing them with digital equipment, which improves our 
unit's responsiveness during periods of system distress.
    Finally, North American Electric Reliability Council (NERC) and 
Western Electricity Coordinating Council (WECC) policy require 
generation owners to perform reactive capability and limit verification 
of generators with a capacity of 10 megawatts or greater every 5 years. 
The policy further requires dynamic testing, maintenance, and 
calibration of voltage regulators, limit functions, power system 
stabilizers, and governor controls. Also, NERC and WECC policy require 
organizations to develop and maintain documented ratings of power 
equipment including powerplant equipment. The ratings must be 
consistent with documented rating methodology. Reclamation is striving 
to meet these requirements.

                         FIVE-YEAR EXPENDITURES

    Question. Please provide a specific breakdown of expenditures 
during the past 5 years by function and authorized project purposes.
    Answer. The Bureau appreciates the continued support the committee 
has provided over the years. The information requested, expenditures by 
function and authorized project purpose for the past 5 years, is 
voluminous. We would welcome the opportunity to discuss this request 
further with the committee staff and tailor the response to ensure it 
is suitable and useful.
    Question. I can be more specific, but it turns into three 
questions. The answer to these three questions should be a chart, 
probably with footnotes, explaining what has taken place with the 
funding provided. It should also show how they applied underfinancing 
to the project. Hope this helps.
    How much money has been allocated, and spent, on the MR&I program 
for the past 5 years?
    Answer. The attached worksheet provides the information you 
requested on the MR&I program for the Great Plains Region.

                                                                                   PROJECTS WITH RURAL WATER COMPONENTS--WATER & RELATED RESOURCES \1\
                                                                                                        [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Fiscal Year                Fiscal Year                Fiscal Year                Fiscal Year                Fiscal Year                                                        Fiscal
                                                      1999                       2000                       2001                       2002                       2003                     Fiscal     Fiscal     Fiscal Year   Year 2004
                                                    Enacted/    Fiscal Year    Enacted/    Fiscal Year    Enacted/    Fiscal Year    Enacted/    Fiscal Year    Enacted/    Fiscal Year  Year 2004  Year 2004       2004         Enacted
                                                     Final         1999         Final         2000         Final         2001         Final         2002         Final         2003        Enacted   U/F \2\   Rescission \2\    w/ U/F
                                                  Expenditure  Expenditures  Expenditure  Expenditures  Expenditure  Expenditures  Expenditure  Expenditures  Expenditure  Expenditures    Budget     Budget       Budget      and Resc.
                                                     Budget                     Budget                     Budget                     Budget                     Budget                                                          Budget
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Mni Wiconi Rural Water Component (only).........     *31,344   ............     *29,400   ............     *33,735   ............     *37,489   ............     *38,800   ............    *31,471     -2,547         -171       *28,753
                                                      32,706       32,131        28,429       27,306        31,715       31,681        34,234       34,080        37,115       36,011    .........  .........  ..............  .........
Mid-Dakota Rural Water Component  (only)........     *15,000   ............     *14,000   ............      *8,000   ............     *15,000   ............     *17,860   ............    *15,000     -1,450          -80       *13,490
                                                      19,208       19,195        13,882       13,847         9,539        9,459        14,384       14,020        17,297       17,295    .........  .........  ..............  .........
Garrison Rural Water Component (only)...........     *13,413   ............     *17,386   ............     *14,059   ............     *16,305   ............     *13,933   ............     *9,031        -63          -17        *8,951
                                                      17,966       14,566        17,431       16,678        13,707       13,456        14,349       14,183        11,214       11,134    .........  .........  ..............  .........
Fort Peck Rural County Water System.............      *1,500   ............      *3,000   ............      *1,500   ............          *0   ............          *0   ............         *0         *0            0             0
                                                       1,126          590         3,412           84         4,687        4,508           397          331           107           -3    .........  .........  ..............  .........
Fort Peck Reservation/Dry Prairie...............        *360   ............          *0   ............        *435   ............      *4,000   ............      *7,500   ............     *7,500      *-719          -40         6,741
                                                         550          329           221          199           578          500         3,697        3,627         4,840        4,492    .........  .........  ..............  .........
Lewis and Clark Rural Water System..............          *0   ............          *0   ............      *1,000   ............      *2,000   ............      *7,000   ............    *17,000    *-1,630          -91        15,279
                                                           0            0           600           10         1,524        1,499         1,835        1,824         5,800        5,800    .........  .........  ..............  .........
Perkins County Rural Water System...............          *0   ............          *0   ............          *0   ............      *3,400   ............      *4,300   ............     *1,000       *-96           -5           899
                                                           0            0             0            0             0            0         3,077        3,050         3,622        3,619    .........  .........  ..............  .........
                                                 ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rural Water Program--GREAT PLAINS REGION:
      Enacted Budget............................     *61,617   ............     *63,786   ............     *58,729   ............     *78,194   ............     *89,393   ............    *81,002    *-6,505        *-404       *74,113
      Expenditure Budget/Expenditures...........     *71,556      *66,811       *63,975      *58,124       *61,750      *61,103       *71,973      *71,115       *79,995      *78,348           *0         *0           *0            *0
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Figures marked with an *: see footnote 1.
\1\ Columns entitled ``Enacted/Final Expenditure Budget'': The first number in the column is marked with an asterisk to clearly show what was Enacted by Congress. The second number in the column, represents what was Enacted plus
  adjustments which can include prior year funds, carryover, underfinancing, rescissions, and fund transfers.
Expenditure information must be compared to the Expenditure Budget in order to receive an accurate picture.
\2\ The columns entitled Fiscal Year 2004 U/F and Fiscal Year 2004 Rescission provide a breakdown of how the reductions associated with underfinancing and the rescission were applied.
In both instances, each project received an across-the-board reduction per the Fiscal Year 2004 Water and Energy Appropriation Act. For Garrison, the majority of the reductions were applied to the non MR&I components not shown on
  the chart. No reductions were applied to the $6 million allocated to the construction MR&I program.

    Question. Did the extra $10 million that was provided by Congress 
in fiscal year 2004 get spent on the MR&I program?
    Answer. The Great Plains Region's fiscal year 2004 Enacted MR&I 
program was $81,917,000 which was $63,915,000 over the President's 
requested amount of $18,002,000. Garrison was the only project that 
received a Congressional write-in of $10 million. Therefore, the 
following response is based on the assumption that the $10 million 
referred to is related to Garrison. However, we would welcome the 
opportunity to discuss this request further with the committee staff 
and tailor the response to ensure it is suitable and useful. The fiscal 
year 2004 President's request for the Garrison project included zero 
dollars for MR&I construction and $3,031,000 for MR&I operation and 
maintenance for the Tribal program. Of the additional $10 million 
received for the Garrison project, $6 million was allocated for the 
MR&I construction program (bringing the total Garrison MR&I program to 
$9,031,000); $2 million was allocated for Red River Valley to complete 
the studies and EIS on the schedule testified to in the December 2002 
Senate Field Hearing; and $2 million was allocated to complete work at 
the Arrowwood National Wildlife Refuge.
    Question. If not, is there any likelihood of the same occurring in 
fiscal year 2005?
    Answer. If Congress provided additional funds for general Garrison 
program purposes, we anticipate they would be allocated to the MR&I 
programs.
                      DEPARTMENT OF DEFENSE--CIVIL

                         DEPARTMENT OF THE ARMY

                       Corps of Engineers--Civil

STATEMENT OF JOHN PAUL WOODLEY, JR., ASSISTANT 
            SECRETARY OF THE ARMY (CIVIL WORKS)
ACCOMPANIED BY LIEUTENANT GENERAL ROBERT B. FLOWERS, CHIEF OF ENGINEERS

    Senator Domenici. Now, Senator Craig, I have to step out 
with some constituents. I wonder if you would let Panel Two, 
Mr. John Woodley, Assistant Secretary, and Lieutenant General 
Robert Flowers--although he's not here, is that right? He'll be 
here?--Chief of Engineers, U.S. Army Corps of Engineers. If 
you'd start that, I'll be back very, very soon.
    Senator Craig [presiding]. So if the second panel would 
come forward, we'll proceed with testimony from the Army Corps. 
Army first, yeah.
    Well, thank you all very much. Assistant Secretary Woodley, 
we appreciate you being here.
    We'll allow you to proceed with your testimony, and then 
we'll move to--I assume both you and the General are the ones 
prepared for the testimony. Is that correct?
    General Flowers. Yes, sir.
    Senator Craig. All right, fine. Please proceed.

                  STATEMENT OF JOHN PAUL WOODLEY, JR.

    Mr. Woodley. Mr. Chairman, I appreciate the opportunity to 
testify before the subcommittee about the President's fiscal 
year 2005 budget for the Civil Works function of the Army Corps 
of Engineers.
    I'm especially delighted to be accompanied this morning by 
a very distinguished soldier, Lieutenant General Robert 
Flowers, the 50th Chief of Engineers. Mr. Chairman, this is 
General Flowers' last opportunity to appear before the 
subcommittee, and so I think that should be made note of in the 
record, and I'd like to express my particular appreciation, on 
behalf of the President, for his very fine service as Chief of 
Engineers.
    May I also ask leave to summarize my statement and put a 
complete statement----
    Senator Craig. Yeah----
    Mr. Woodley [continuing]. In the record?
    Senator Craig [continuing]. Your full statements will 
become a part of the committee record. Thank you.
    Please proceed.
    Mr. Woodley. Our total fiscal year 2005 Civil Works budget 
is $4.2 billion, which is about the same as last year's Civil 
Works budget request. This year, to develop the budget, we 
began the use of a performance-based approach built around 
programmatic goals for our eight business programs. This 
approach, we feel, has and will continue in the future to 
enable us to make the most effective use of the limited funding 
available to us.
    For new projects, the budget focuses on commercial 
navigation, flood and storm damage reduction, and aquatic 
ecosystem restoration. The budget directs substantial funding 
to the ongoing construction projects that have among the 
highest economic and environmental returns to the Nation. We 
also have given priority to 11 projects that we are able to 
complete in fiscal year 2005, and to eight projects that we 
consider high-priority projects, and to a number of dam safety 
and seepage correction projects.
    Funding to plan or design new projects this year is 
limited, and is targeted to the most productive study and 
design activities, including five new studies, 23 design 
efforts, and the current phases of ongoing studies, including 
an expanded Louisiana Coastal Area study.
    Mr. Chairman, the 2005 budget does not include a request 
for funding for beach renourishment. Our view is that non-
Federal interests should carry out renourishment activities 
once the initial construction of the beaches has been 
completed. We have an exception to this, at a case in which we 
are obliged to perform renourishment under a court order.
    We have also asked for leave, to free up funding for 
higher-priority needs, to cancel unobligated balances of 
projects that may not be the best--the top investments, or, for 
one reason or another, are not ready to proceed. This 
recommended cancellation, if it's approved, would take effect 
with the enactment of the fiscal year 2005 appropriations.
    The budget also includes a number of initiatives for 
operation and maintenance of our existing projects. We ask 
leave to finance, up front, the operation and maintenance cost 
of hydropower facilities, with funds provided by three Federal 
Power Marketing Administrations. Second, we would ask to 
accomplish recreation modernizations by using new fees and by 
entering into planning and management partnerships. Third, we 
would continue antiterrorist protection at key projects and 
facilities. And finally, we ask to reserve a pool of funds for 
unforeseen and urgent maintenance and repairs at key projects.
    Mr. Chairman, I have three priorities in mind for the Civil 
Works program during my time as Assistant Secretary. You will 
see these priorities reflected, in part, in this budget, and I 
believe to a greater extent in the next. One priority is to 
develop the Civil Works budget and manage the program based on 
objective performance measures. In that regard, General Flowers 
and I have recently provided our Civil Works strategic plan to 
the committee, and we look forward to working with you on 
developing it further and hearing your views on it. A second 
priority is to improve the analytical tools that we use for 
water resource planning and decision-making. And my third 
priority is to improve the effectiveness and efficiency of the 
Corps' regulatory program, the primarily wetlands and 
navigation regulatory program.

                           PREPARED STATEMENT

    Mr. Chairman, this is a frugal budget that reflects the 
priorities of a Nation at war. Understandably, and I will say 
immediately, it does not fund all the good things that the 
Corps of Engineers is capable of doing, but it does move ahead 
with many important investments that will yield enormous 
returns for the Nation next year and in the future.
    Thank you, Mr. Chairman.
    [The statement follows:]

              Prepared Statement of John Paul Woodley, Jr.

    Mr. Chairman and distinguished members of the subcommittee, thank 
you for the opportunity to testify before the Energy and Water 
Development Subcommittee of the Appropriations Committee and to present 
the President's budget for the Civil Works program of the Army Corps of 
Engineers for fiscal year 2005.

          OVERVIEW OF FISCAL YEAR 2005 ARMY CIVIL WORKS BUDGET

    The fiscal year 2005 budget for Army Civil Works provides funding 
to continue the development and restoration of the Nation's water and 
related resources, the operation and maintenance of existing 
navigation, flood damage reduction, and multiple-purpose projects, the 
protection of the Nation's regulated waters and wetlands, and the 
cleanup of sites contaminated as a result of the Nation's early efforts 
to develop atomic weapons.
    The fiscal year 2005 budget for Army Civil Works includes new 
discretionary funding requiring appropriations of $4.215 billion and an 
estimated $4.132 billion in outlays from discretionary funding (see 
Table 1). These figures are approximately the same as in the fiscal 
year 2004 budget.
    The new discretionary funding includes $610 million from the Harbor 
Maintenance Trust Fund for harbor operation and maintenance and dredged 
material disposal facility construction. The discretionary funding also 
includes $115 million from the Inland Waterways Trust Fund for 
construction and rehabilitation on the inland waterways.
    The budget includes proposed appropriations language for direct 
funding of hydropower facility operation and maintenance by Federal 
power marketing administrations. New discretionary funding of $150 
million would be derived from direct funding in fiscal year 2005. This 
proposal is described in greater detail below.
    Other sources of new discretionary funding include $3.303 billion 
from the general fund and $37 million from Special Recreation User 
Fees.
    Additional program funding, over and above funding from the sources 
requiring discretionary appropriations, is estimated at $437 million. 
This total includes $71 million from the Bonneville Power 
Administration (BPA) for operation and maintenance of hydropower 
facilities in the Pacific Northwest, $287 million contributed by non-
Federal interests for their shares of project costs and for project-
related work, $63 million from the Coastal Wetlands Restoration Trust 
Fund, and $16 million from miscellaneous permanent appropriations.
    The budget proposes cancellation of at least $100 million of 
previous discretionary budget authority. Net discretionary budget 
authority, including this proposal and the direct funding proposal, is 
$3.965 billion.

                      PERFORMANCE-BASED BUDGETING

    Performance-based budgeting is one of the President's Management 
Initiatives, and the one that is most central to the preparation of the 
budget. For the Army Civil Works program, performance planning is built 
around eight program areas: Navigation (including inland waterway 
navigation and coastal channels and harbors); Flood and Storm Damage 
Reduction (including from riverine flooding and coastal storms); 
Environment (including aquatic ecosystem restoration, stewardship of 
natural resources at operating projects, and the Formerly Utilized 
Sites Remedial Action Program); Hydropower; Recreation; the Regulatory 
Program, Emergency Management; and Water Supply (storage at existing 
reservoirs).
    The first element in our performance planning is a strategic plan, 
which is required by the Government Performance and Results Act (GPRA). 
I am happy to announce that on March 22, 2004, General Flowers and I 
provided our strategic plan to the committees and subcommittees of 
Congress responsible for water development authorizations and 
appropriations, including this committee and subcommittee. This plan is 
a work in progress. We will continue to work with the Office of 
Management and Budget to establish program goals, objectives, and 
performance measures that are called for by GPRA and that provide a 
sound basis for setting performance targets and building future 
budgets.
    The second element in our performance planning is the use of a 
government-wide process to assess program performance, which first was 
instituted for the fiscal year 2004 budget. These assessments are 
intended to improve the effectiveness of programs and to improve the 
quality of their management and oversight. Five business programs, 
program components, or sets of activities were assessed for the fiscal 
year 2004 budget: the Hydropower program; the riverine flood damage 
reduction component; the inland waterway navigation component; the 
Emergency Management program; and wetlands-related activities apart 
from the Regulatory Program. For fiscal year 2005, the Regulatory 
Program was assessed. Two of the programs--the Regulatory Program and 
Emergency Management--have been rated as moderately effective and have 
received substantial funding in the fiscal year 2005 budget.
    The third element is to develop the Civil Works budget and manage 
the program based on objective performance measures. The fiscal year 
2005 budget for Army Civil Works focuses funding on the most productive 
investments. This is reflected, for instance, in the allocation of 
funding to the most productive design activities, construction 
projects, and maintenance activities. At the same time, I recognize 
that we can do a better job of performance-based budgeting, and one of 
my priorities is to improve our capabilities in this area. I have 
placed a priority on making significant progress on further development 
of sound performance measures for each business program and on using 
the measures to build our fiscal year 2006 budget. A great deal of hard 
work is in store for us as we transition to this approach, but the 
advantages are enormous, and the Army is fully committed to this 
effort.

                  FOCUS ON HIGH-RETURN NEW INVESTMENTS

    The fiscal year 2005 budget for Army Civil Works targets funding to 
the new investments that have very high economic or environmental 
returns. The budget does so by emphasizing priority missions and 
allocating substantial funding to new and continuing high return 
continuing construction projects while de-emphasizing the design and 
initiation of new projects. However, the budget funds three new 
projects that have high economic or environmental returns and several 
new high priority studies that competed successfully for funding. The 
budget also discontinues Federal participation in beach renourishment 
activities, and proposes to cancel unobligated balances for projects 
that do not provide high returns or that are not Civil Works 
responsibilities.
Priority Missions
    The budget emphasizes ongoing studies, projects and programs that 
provide substantial benefits in the priority missions of the Civil 
Works program for new investments, namely, commercial navigation, 
aquatic ecosystem restoration, and flood and storm damage reduction.
    The budget also provides funding for other areas of Corps 
involvement, including regulatory protection of waters and wetlands, 
cleanup of sites contaminated by the Nation's early atomic weapons 
program, and the management of natural resources and provision of 
hydroelectric power and recreation services at Federally operated Civil 
Works projects.
    No funds are provided for studies and projects that carry out non-
traditional missions that should remain the responsibility of non-
Federal interests or other Federal agencies, such as wastewater 
treatment, irrigation water supply, and municipal and industrial water 
supply treatment and distribution. Furthermore, the budget does not 
fund individual studies and projects that are inconsistent with 
established policies governing the applicable missions.
Ongoing, Budgeted Construction Projects
    In recent years, ongoing construction projects that the budget 
funds have had to compete for funding with numerous new construction 
starts. To maximize the net returns of the construction program and 
finish the construction backlog more quickly than under current trends, 
the budget directs funding to complete 11 ongoing projects in fiscal 
year 2005, and continues progress on projects consistent with long-
established policies, including eight projects that are the highest 
priorities in the Nation. It also provides substantial funding for dam 
safety investments. In addition, the budget funds three new projects 
with high economic and environmental returns.
    Altogether, the budget includes funding for construction of 149 
projects, not including the projects constructed under the Continuing 
Authorities Program.
    Consistent with this focus on projects already under construction, 
the budget includes funding to continue or complete design of 23 
proposed projects that were selected based on their economic and 
environmental returns. The budget defers work on all lower priority 
design efforts. Similarly, we made an effort to prioritize studies of 
proposed projects. In general, funding is targeted to the most 
productive study and design activities, including $8 million for the 
expanded Louisiana Coastal Area Study. Funding is provided for five new 
studies that competed successfully with ongoing work.
Beach Renourishment
    The budget does not include any funding for beach renourishment. 
The administration's view is that non-Federal interests should carry 
out renourishment activities once the initial nourishment has been 
accomplished, just as they operate and maintain other types of projects 
once the installation is complete. This policy applies to all types of 
projects involving beach renourishment, including projects for which 
Project Cooperation Agreements already have been executed. Work under 
such agreements is subject to the availability of funding, and the new 
policy specifies that funding no longer will be sought for 
renourishment phases.
    We will continue to plan for and design shore protection projects, 
and we will continue to construct initial nourishment phases as well as 
the structural measures for coastal projects. We also will continue to 
deposit dredged material from navigation projects on the adjacent 
shores when it is the least-cost, environmentally acceptable disposal 
method. In addition, we will participate financially in one-time 
placements of dredged material for the beneficial use of shore 
protection, and we will perform follow-on placements for the beneficial 
use of shore protection if non-Federal interests finance the 
incremental costs. Within these ground rules, we will continue to 
participate in regional sediment management activities.
    There is one exception to the policy in fiscal year 2005, for the 
Westhampton Shores, New York, area. We are funding periodic 
renourishment program as ordered by the district court in the 
settlement of the case of Rapf et al. vs. Suffolk County of New York et 
al.
Cancellation of Unobligated Balances
    To free up funding for higher priority needs, the budget proposes 
to cancel the unobligated balances of 41 projects that are not 
consistent with current policy. The cancellation would take effect with 
enactment of fiscal year 2005 appropriations.

      FINANCING AND MANAGEMENT INITIATIVES FOR OPERATING PROJECTS

    The Operation and Maintenance program includes funding for four 
significant initiatives: direct funding of hydropower operation and 
maintenance costs; recreation modernization; a new emergency 
maintenance reserve fund; and anti-terror facility protection.
Direct Financing of Hydropower Operation and Maintenance Costs
    Historically, each year the Army Civil Works program has financed 
the operation and maintenance costs of Corps of Engineers hydroelectric 
facilities, and Federal power marketing agencies have repaid the 
Treasury for these costs from the revenues provided by ratepayers. The 
exception has been in the Pacific Northwest, where under section 2406 
of the National Energy Policy Act of 1992, Public Law 102-486, the 
Bonneville Power Administration (BPA) has directly financed the costs 
of operating and maintaining the Corps' hydroelectric facilities from 
which it receives power. BPA has been providing operation and 
maintenance funds in this manner each year, beginning in fiscal year 
1999.
    Each year, Corps facilities experience unplanned outages around 3 
percent of the time. In 1999, the General Accounting Office found that 
the Corps' hydropower facilities are twice as likely to experience 
``unplanned outages'' as private sector facilities, because the Corps 
does not always have funds for maintenance and repairs when needed.
    To address this problem, the budget proposes that the Southeastern 
Power Administration, the Southwestern Power Administration, and the 
Western Area Power Administration finance hydropower operation and 
maintenance costs directly, in a manner similar to the mechanism used 
by Bonneville. The budget contemplates that these power marketing 
administrations, in consultation with the Corps, would make funding 
available for those hydropower operation and maintenance expenditures 
that they believe are justified in order to provide economical, 
reliable hydropower to power customers. We believe that, as a 
consequence, unplanned outages would decline over time to levels 
comparable to the industry average. The administration is submitting 
this as an appropriations proposal. Under current Congressional Budget 
Office and Office of Management and Budget scoring, the funds provided 
by the power marketing administrations offset appropriated funds 
without PAYGO consequences.

Recreation Modernization
    The second initiative is to modernize recreation facilities. The 
recreation modernization initiative has three components. The first is 
a legislative proposal that: 1) authorizes the Corps to establish a 
permanent recreation fee program that is consistent with the existing 
Federal Recreation User Fee Demonstration program; 2) authorizes the 
Corps to collect entrance fees; and 3) authorizes the Corps to retain 
all recreation use fees over $37 million per year and to use the 
retained fees for its recreation facilities. To support this proposal, 
we currently are developing a proposed schedule of recreation use fees, 
lease receipts, and other sources of revenue, showing the locations 
where we expect to collect revenue and the kinds and amounts of revenue 
we expect to collect at each location.
    The second is six recreation demonstration projects, at Texoma Lake 
in Texas, Shelbyville Lake in Illinois, Rathbun Lake in Iowa, W. Kerr 
Scott Lake in North Carolina, Cumberland Lake in Kentucky, and Beaver 
Lake in Arkansas. At each location, the Corps will demonstrate new 
planning, management and financing partnership arrangements with State 
and local government park authorities and private sector 
concessionaires. These will be designed to upgrade Corps recreation 
facilities at little or no cost to the Federal Government. If these six 
demonstration projects are a success, the Corps will expand the model 
to other Corps facilities in the future.
    The third is $6 million to upgrade Corps recreation facilities 
related to the Lewis and Clark Bicentennial commemoration.

Emergency Maintenance Reserve
    The budget includes $35 million for an emergency maintenance 
reserve fund, from which the Assistant Secretary of the Army for Civil 
Works will make allocations to meet high-priority, unexpected, and 
urgent maintenance needs at key facilities. When an unexpected 
emergency occurs under current practice, it is sometimes difficult to 
find the needed funds on a timely basis. The new arrangement will 
enable us to respond to these situations promptly, without interfering 
with other program commitments.
    The Assistant Secretary will make the allocation decisions based on 
the urgency of the maintenance or repair requirements, the relative 
availability of funding from lower-priority work, and the likelihood 
that additional high-priority needs would be identified in the 
remainder of the fiscal year.

Anti-Terrorist Facility Protection
    Since the events of September 11, 2001, the Civil Works program has 
received appropriations of $278 million to provide facility protection 
measures that have recurring costs (such as guards), to perform 
assessments of threats and consequences at critical facilities, and to 
design and implement the appropriate ``hard'' protection at those 
critical facilities. The administration is continuing its commitment to 
facility protection in fiscal year 2005, with a budget of $84 million 
for facility protection. Of the $84 million, $72 million is for 
projects funded from the Operation and Maintenance account and $12 
million is for other projects and facilities.

                     PRESIDENT'S MANAGEMENT AGENDA

    We are pleased with the progress we are making on the President's 
Management Agenda. Like most agencies, we started out in 2002 with 
``red'' ratings across the board. Our status rating for the human 
capital initiative is now ``yellow.'' We now have ``green'' or 
``yellow'' progress ratings for all five of the President's Management 
Agenda initiatives.
    The Army Corps of Engineers has developed a sound, comprehensive 
human capital plan and has implemented its ``USACE 2012'' plan. The 
2012 plan is the Corps guiding document for organizational changes and 
process changes to improve service delivery.
    The Corps continues to be a strong supporter of E-Gov initiatives 
such as Recreation One-Stop, Geospatial, and Disaster Management. It is 
aggressively working to improve the overall management of its 
information technology investments by extensively using the Federal 
Enterprise Architecture to identify opportunities to identify like 
systems and identify possible opportunities to collaborate.
    The Corps has developed a plan and management infrastructure to 
conduct competitive sourcing and has completed all preliminary planning 
steps for its first two standard competitions to be announced in fiscal 
year 2004.
    To identify problems identified in its audits for 2002 and 2003, 
the Corps is improving documentation to support older assets.
    We are confident that our work on the President's initiatives will 
yield greater program efficiency and effectiveness in the years to 
come.

                         APPROPRIATION ACCOUNTS

    Although the budget was formulated largely by program area, it is 
presented to Congress by traditional appropriation account.
General Investigations
    The budget for the General Investigations program is $90.5 million. 
This funding level reflects an emphasis on completing policy-consistent 
projects that are already budgeted in the Construction account, rather 
than continuing to plan, design, and initiate new work.
    Within this amount, $8.6 million is to continue or complete 
preconstruction engineering and design of the 22 projects with the 
highest expected economic or environmental returns. The remaining 
funding will be used to continue the ongoing phases of policy-
consistent reconnaissance and feasibility studies, and to continue 
coordination, technical assistance, and research and development. The 
budget funds four new studies that competed successfully with ongoing 
work. These studies are as follows: Southern California Wetlands 
Restoration, California; Boulder Creek, Colorado; Chesapeake and 
Delaware Canal Environmental Restoration, Delaware and Maryland; and 
Mississippi River-Gulf Outlet Ecosystem Restoration, Louisiana.
    One of my priorities is to improve analytical tools to support 
water resource planning and decision-making. The budget addresses this, 
for instance, by increasing funding for research and development on 
modeling and forecasting tools, including $2.5 million for the 
Navigation Economic Technologies research program funded in this 
account.

Construction
    The fiscal year 2005 budget for the Construction program is $1.4215 
billion. Of that total, $115 million would be derived from the Inland 
Waterways Trust Fund to fund 50 percent of the costs of construction 
and major rehabilitation of inland waterway projects, and $10 million 
would be derived from the Harbor Maintenance Trust Fund to fund the 
Federal share of dredged material disposal facilities at operating 
coastal harbor projects.
    The budget proposes funding for three new starts that have very 
high economic and environmental returns: the Washington, DC, and 
Vicinity flood damage reduction project; the Rio Guanajibo, Puerto 
Rico, flood damage reduction project; and the Everglades Pilot Projects 
Program, Florida. The pilot projects program is part of the 
Comprehensive Everglades Restoration Plan, which in turn is part of the 
Central and South Florida project.
    Substantial funding is provided for the 11 projects completing 
construction in fiscal year 2005, for dam safety assurance, seepage 
correction, and static instability correction projects, and for eight 
high priority projects nationwide. The high priority projects are the 
New York and New Jersey Harbor deepening project ($103 million); the 
Olmsted Locks and Dam, IL & KY, project ($75 million); projects to 
restore the Florida Everglades ($125 million) and the side channels of 
the Upper Mississippi River system ($28 million); two projects to 
provide flood damage reduction to urban areas, namely, the Sims Bayou, 
Houston, TX, project ($16 million) and the West Bank and Vicinity, New 
Orleans, LA, project ($37 million); and projects to meet environmental 
requirements in the Columbia River Basin ($107 million) and the 
Missouri River basin ($69 million). The Everglades work actually is 
comprised of three distinct projects, as is the Columbia River Basin 
work.
    The budget provides $52.9 million for the planning, design, and 
construction of projects under the Continuing Authorities Program. 
These are small projects for flood damage reduction, navigation, 
shoreline protection, streambank protection, navigation project impact 
mitigation, clearing and snagging, aquatic ecosystem restoration, 
project modifications for improvement of the environment, and 
beneficial uses of dredged material (including beneficial uses for 
environmental purposes as well as beneficial use for coastal storm 
damage reduction).

Flood Control, Mississippi River and Tributaries
    The budget includes $270 million for the Flood Control, Mississippi 
River and Tributaries account.
    The budget includes funding for preconstruction engineering and 
design for the Morganza to the Gulf, Louisiana, project. The budget 
also includes funding for one new study of opportunities for the 
acquisition of additional real property interests in the Atchafalaya 
Basin.

Operation and Maintenance
    The budget for Operation and Maintenance emphasizes essential 
operation and maintenance activities at Corps facilities, including 
maintenance dredging and structural repairs. The overall budget for the 
Operation and Maintenance account is $1.926 billion.
    The budget continues the past policy of directing funding for 
navigation maintenance primarily to those harbors and waterways that 
have high volumes of commercial traffic. For small ports and 
recreational harbors, the budget funds maintenance work where needed to 
support significant commercial navigation, commercial or subsistence 
fishing, or public transportation benefits.
    Approximately $1.103 billion is to fund projects and programs 
supporting navigation for commercial cargo, commercial or subsistence 
fishing, and public transportation. Within this amount, the budget 
provides about $539 million for deep draft harbors (harbors with 
authorized depths of greater than 14 feet); $28 million for shallow 
draft harbors; $411 million for inland waterways with commercial 
traffic of more than 1 billion ton-miles per year; and $49 million for 
waterways with less commercial traffic. An additional $74 million 
represents joint use costs at multi-purpose projects that are allocated 
to navigation.
    Approximately $823 million is for projects and programs other than 
navigation, including flood damage reduction ($286 million), recreation 
($253 million), natural resources management ($92 million), 
hydroelectric power generation ($153 million), and emergency management 
($40 million, including the $35 million emergency maintenance reserve).

Regulatory Program
    The recent performance assessment of this program concluded that it 
is moderately effective overall. The budget provides $150 million, 
which is a substantial increase over the fiscal year 2004 enacted 
amount and reflects our assessment that this program needs additional 
funding. The activities funded in the budget include permit evaluation, 
enforcement, oversight of mitigation efforts, administrative appeals, 
watershed studies, special area management plans, and environmental 
impact statements.
    One of my priorities for the Civil Works program is to improve the 
effectiveness of aquatic resource protection and the efficiency of 
permit reviews and decision-making. The budget will enable us to reduce 
permit evaluation times, improve protection of aquatic resources, and 
continue wetlands protection through watershed approaches.

Formerly Utilized Sites Remedial Action Program (FUSRAP)
    The Formerly Utilized Sites Remedial Action Program (FUSRAP) is an 
environmental cleanup program for sites contaminated as a result of the 
Nation's early efforts to develop atomic weapons. Congress transferred 
the program from the Department of Energy in fiscal year 1998. We are 
continuing to implement needed cleanups at contaminated sites. This 
year's budget is $140 million.

General Expenses
    Funding budgeted for the General Expenses program is $167 million. 
These funds will be used for executive direction and management 
activities of the Corps of Engineers headquarters, the Corps division 
offices, and related support organizations. Within the budgeted amount, 
$7 million is to audit the Civil Works financial statements, a function 
formerly carried out by the Army Audit Agency (AAA) using its own 
funding. The AAA has done this work in the past, but it is not 
sufficiently independent of the Corps to conduct this audit under new 
General Accounting Office auditing standards.

Flood Control and Coastal Emergencies
    The Flood Control and Coastal Emergencies account finances response 
and recovery activities for flood, storm, and hurricane events, as well 
as preparedness for these natural events and for support to the Federal 
Emergency Management Agency through the Federal Response Plan.
    The recent performance assessment of this program concluded that it 
is moderately effective overall. Accordingly, the fiscal year 2005 
budget includes $50 million, which is the approximate amount the Corps 
of Engineers spends on flood and coastal storm emergency preparedness, 
response, and recovery activities in a typical year. This funding will 
reduce the likelihood of having to borrow from other accounts or obtain 
supplemental appropriations.

                               CONCLUSION

    The Army Civil Works budget for fiscal year 2005 will enable us to 
move ahead with many important investments that will yield enormous 
returns for the Nation in the future.

 TABLE 1.--DEPARTMENT OF THE ARMY CORPS OF ENGINEERS--CIVIL WORKS FISCAL
                            YEAR 2005 BUDGET
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Requested New Appropriations:
    General Investigations..........................        $90,500,000
    Construction....................................      1,421,500,000
    Operation and Maintenance.......................      1,926,000,000
    Regulatory Program..............................        150,000,000
    Flood Control, Mississippi River and Tributaries        270,000,000
    General Expenses................................        167,000,000
    Flood Control and Coastal Emergencies...........         50,000,000
    Formerly Utilized Sites Remedial Action Program.        140,000,000
                                                     -------------------
      TOTAL.........................................      4,215,000,000
                                                     ===================
Sources of New Appropriations:
    General Fund....................................      3,303,000,000
    Harbor Maintenance Trust Fund...................        610,000,000
        (O&M).......................................       (600,000,000)
        (Construction--Disposal Facilities).........        (10,000,000)
    Inland Waterways Trust Fund.....................        115,000,000
    Special Recreation User Fees....................         37,000,000
    Power Marketing Administration Direct Funding...        150,000,000
                                                     -------------------
      TOTAL.........................................      4,215,000,000
                                                     ===================
Additional New Resources:
    Rivers and Harbors Contributed Funds............        287,000,000
    Bonneville Power Administration.................     \1\ 71,000,000
    Coastal Wetlands Restoration Trust Fund.........         63,000,000
    Permanent Appropriations........................         16,000,000
                                                     -------------------
      TOTAL.........................................        437,000,000
                                                     ===================
      Total New Program Funding.....................      4,652,000,000
Proposed Cancellation of Prior-Year Funds...........       (100,000,000)
------------------------------------------------------------------------
\1\ Beginning in fiscal year 2005, budget authority from BPA is limited
  to budget authority for joint use costs. Funding for the specific
  costs of hydropower will be executed in a BPA account and will not
  count as Corps budget authority. Accordingly, the amount of $71
  million for fiscal year 2005 appears to be a reduction from the total
  fiscal year 2004 amount of $143.205 million, but in fact is a slight
  increase from the corresponding fiscal year 2004 amount of $69.5
  million for joint use costs.

    Senator Domenici [presiding]. Thank you very much.
    General, would you like to comment also? Excuse me, I 
didn't have my mike on. Would you like to comment also?
    General Flowers. Yes, sir.
    Senator Domenici. Your statement will be made a part of the 
record.

           STATEMENT OF LIEUTENANT GENERAL ROBERT B. FLOWERS

    General Flowers. Sir, I am honored, again, to be testifying 
before you, along with the Secretary, on the President's fiscal 
year 2005 budget for the Army's Civil Works program.
    Today, thanks to this subcommittee's strong support, this 
Civil Works program is balanced, responsive, and highly 
productive. I look forward to your continued partnership in 
this important program, so broadly beneficial to the Nation.
    My complete statement covers more details on the fiscal 
year 2005 program, including the backlog, transforming the 
Corps, our business-management system----
    Senator Domenici. Oh, yeah.
    General Flowers [continuing]. And the Corps' overall value 
to the Nation's economy, the environment, and national defense. 
With your permission, I'll summarize some of the main points.
    First, a word about the President's budget and the value of 
the Civil Works program to the Nation's economy and the 
environment. This budget funds the critical water-resources 
infrastructure that has improved the quality of our citizens' 
lives and provided a foundation for the economic growth and 
development of this country. Our projects for navigation, flood 
protection, ecosystem restoration, hydropower generation, and 
recreation directly contribute to national economic well-being. 
The sum of benefits realized as reduced transportation costs, 
avoided flood and storm damages, and improvements in 
environmental value is considerable.
    And I'd like to share some numbers with you that illustrate 
the direct effect of the Civil Works mission.
    First, the navigation program enables 2.4 billion tons of 
commerce to move on navigable waterways. The U.S. Department of 
Transportation estimates that these cargo movements have 
created jobs for 13 million people.
    Second, the Corps flood-damage reduction structures have 
saved lives and property loss. Taxpayers save $21 billion in 
damages each year.
    And, third, almost all of our construction work and over 
half of our civil planning and engineering is completed by 
private-industry contractors funneling money directly into the 
economy.
    This budget also includes funding to support watershed 
studies. These studies will allow us to work collaboratively 
with many stakeholders. With the complexity of water problems 
today, we believe this is the direction we must take to develop 
the best, most comprehensive solutions.
    Moving now to our backlogs, we estimate it will cost 
approximately $11 billion to complete the construction projects 
funded in the fiscal year 2005 construction general budget. The 
maintenance backlog continues to be challenging. The work the 
Corps is completing on our infrastructure is a critical element 
to a strong economy. Sustaining this level of service becomes 
more of a challenge as our infrastructure ages. The fiscal year 
2005 budget includes $1.926 billion for the operations and 
maintenance program. I can assure you that I will continue to 
do all that I can to make these programs as cost effective as 
possible.
    There are many who are interested in transforming the 
Corps, inside and outside of the organization. Some may have 
the larger goal of changes in current water policy in mind; 
others may want us to operate more efficiently and effectively. 
What I'd like to make clear is that we're listening. I've met 
with individuals, industry groups, and interest groups to hear 
what they have to say. The Corps is undergoing sweeping changes 
as a result of our customer and stakeholder input. We are 
becoming a team of teams within the organization focusing on 
eight regional business centers, which will more efficiently 
deliver service to the public and the Armed Forces. And let me 
assure you, I'm committed to working with you and all who are 
interested, and to doing all in my power to transform the Corps 
to meet the Nation's needs.
    I'm very proud of the Civil Works program and its support 
to the national security strategy. The Corps' Civil Works 
experience is proving invaluable as soldiers and civilians of 
the Corps of the Engineers help to rebuild Iraqi 
infrastructure. To date, over 1,000 civilian volunteer members 
have served in Iraq, sharing their knowledge and expertise with 
Iraqi engineers and other professionals, assisting the 
Coalition Provisional Authority and the Combined Joint Task 
Force in repairing and rebuilding Iraqi infrastructure.

                           PREPARED STATEMENT

    The Corps is committed to staying at the leading edge in 
providing service to the Nation, and I truly appreciate your 
continued support to this end.
    Thank you, Mr. Chairman, members of the committee. That 
concludes my statement.
    [The statement follows:]

       Prepared Statement of Lieutenant General Robert B. Flowers

    Mr. Chairman and distinguished members of the subcommittee, I am 
honored to be testifying before your subcommittee today, along with the 
Assistant Secretary of the Army for Civil Works, the Honorable John 
Paul Woodley, Jr., on the President's fiscal year 2005 (fiscal year 
2005) Budget for the United States Army Corps of Engineers' Civil Works 
Program.
    My statement covers the following 6 topics:
  --Summary of Fiscal Year 2005 Program Budget,
  --Civil Works Construction Backlog,
  --Civil Works Program Transformation,
  --Need for a More Robust Business Management System,
  --Value of the Civil Works Program to the Nation's Economy, and
  --Value of the Civil Works Program to the Nation's Defense.

               SUMMARY OF FISCAL YEAR 2005 PROGRAM BUDGET

Introduction
    This budget provides new funding for the Civil Works Program, 
including the Direct and Reimbursed programs, is expected to approach 
$5.602 billion.
    Direct Program funding, including discretionary and mandatory 
funding appropriated directly to the Corps, totals $4.652 billion. 
Discretionary funding, including amounts ultimately replaced by 
mandatory funding, totals $4.215 billion; additional mandatory funding 
totals $437 million.
    Reimbursed Program funding is projected to be $950 million.
Direct Program
    The proposed budget reflects the administration's commitment to 
continued sound development and management of the Nation's water and 
related land resources. It provides for continued efficient operation 
of the Nation's navigation, flood protection, and other water resource 
management infrastructure, fair regulation of the Nation's wetlands, 
and restoration of the Nation's important environmental resources, such 
as the Florida Everglades.
    The budget provides for continued funding of nearly all studies and 
projects underway, including many started in fiscal year 2005. It also 
provides for funding of 4 new studies under the General Investigations 
(GI) program.

Reimbursed Program
    Through the Interagency and Intergovernmental Support Program we 
help non-DOD Federal agencies, State, and other countries with timely, 
cost-effective implementation of their programs, while maintaining and 
enhancing capabilities for execution of our Civil and Military Program 
missions. These customers rely on our extensive capabilities, 
experience, and successful track record. The work is principally 
technical oversight and management of engineering, environmental, and 
construction contracts performed by private sector firms, and is fully 
funded by the customers.
    Currently, we provide reimbursable support for about 60 other 
Federal agencies and several State and local governments. Total 
reimbursement for such work in fiscal year 2005 is projected to be $950 
million. The largest share--nearly $250 million--is expected from the 
Environmental Protection Agency (EPA) for cleanup of wastes at numerous 
sites under its Superfund program. Ninety percent of Reimbursed Program 
funding is provided by other Federal agencies.

Staffing
    Total staffing for the Civil Works Program for fiscal year 2005 is 
24,800 FTEs, unchanged from fiscal year 2004. Of the total, 23,700 FTEs 
are for the Direct Program and 1,100 FTEs are for the Reimbursed 
Program. Total staffing is allocated 90.6 percent to districts, 4.9 
percent to laboratories and other separate field operating agencies, 
2.7 percent to division offices, and 1.8 percent to headquarters.

                    CIVIL WORKS CONSTRUCTION BACKLOG

    In the broadest sense, the ``construction backlog'' is unfunded 
work. For the Civil Works Program, it is defined more specifically, as 
the Federal share of unfunded continuing and future construction work 
at some point in time, e.g., the beginning of some funding period, such 
as fiscal year 2005. This definition can be further variously 
qualified. Such continuing and future work could include, for example, 
only work that is currently programmed on projects now actively under 
physical construction, while excluding such work where a project has 
not yet begun physical construction or where physical construction has 
been suspended for more than a year.
    At the end of fiscal year 2005, it will cost approximately $11 
billion in non-inflated dollars to complete the construction projects 
of the Construction, General, Program funded in the fiscal year 2005 
budget, which represents a decrease from last year. The decrease partly 
reflects a decision to display the backlog in fiscal year 2005 dollars 
rather than inflating amounts to future dollars. The decrease is also 
the result of project completions, as well as the decision not to 
budget for periodic renourishment of shore protection projects.
    As part of a comprehensive strategy to reduce the construction 
backlog, the Fiscal Year 2005 Budget focuses on completing those 
ongoing construction projects that are consistent with current policies 
and accelerating work on eight high-priority projects. We believe that 
narrowing the focus on funding and completing a smaller, more 
beneficial set of projects will bring higher net benefits to the Nation 
sooner. We need to be careful that we do not continually start new 
projects and subsequently stretch out the completion of existing ones. 
That is why the Budget proposes only three new starts of projects that 
have a very high benefit-cost ratio.

Maintenance Program
    Water and related land resource management facilities of the Civil 
Works Program are aging. As stewards of this infrastructure, we are 
challenged to ensure that it continues to provide an appropriate level 
of service to the Nation. Sustaining such service, and the resultant 
flows of benefits, through proper operation and maintenance projects, 
is becoming increasingly more expensive as infrastructure ages.
    The ``Operation and Maintenance (O&M) Program'' includes costs 
funded under the Operation and Maintenance, General, and Mississippi 
River and Tributaries, Maintenance, appropriation accounts, for the 
operation, maintenance and security of existing river and harbor, flood 
and storm damage reduction, aquatic ecosystem restoration, owned and 
operated by, or on behalf of, the Corps of Engineers, including 
administrative buildings and facilities and laboratories. Funds are 
also included for surveys and charting of northern and northwestern 
lakes and connecting waters, clearing and straightening channels, and 
removal of obstructions to navigation. Work to be accomplished includes 
dredging, repair, and operation of structures and other facilities, as 
authorized in the various River and Harbor, Flood Control, and Water 
Resources Development Acts. Related activities include aquatic plant 
control, monitoring of completed coastal projects and, removal of 
sunken vessels.
    The fiscal year 2005 budget includes $1.926 billion for the 
Operation and Maintenance Program. In an effort to improve the 
efficiency of our investment in operation and maintenance, we are 
looking closely at how we determine the appropriate level of service 
and the amount of spending needed to support that level of service. 
Furthermore, we are searching for ways to reduce costs and thereby 
accomplish more with available resources.

                   CIVIL WORKS PROGRAM TRANSFORMATION

    Throughout its long and distinguished history, the Civil Works 
Program has continually changed in response to advances in science, 
methods, and processes, changing public values and priorities, and 
laws. For our program to remain a viable contributor to national 
welfare, we must remain sensitive to such factors, and continue to 
reorient, rescope, and refocus the program in light of them. To that 
end, I'm committed to reforming the Civil Works Program to meet the 
Nation's current water and related land resource management needs.
    We have been working very hard internally, within the Corps of 
Engineers, to transform. We are making our processes more open, and 
more collaborative. We are working to revitalize our planning 
capabilities, and to become more efficient, more centralized, with one 
planning center for each of our eight divisions.
    We are becoming a team of teams within the organization, focusing 
on eight regional business centers, which will move efficiently and 
deliver service to the public and the armed forces.
    Let me tell you about some of the major steps we've already taken:
  --We are continuing to spread the spirit and the word of the Corps' 
        Environmental Operating Principles--a clear commitment to 
        accomplishing our work in environmentally sustainable ways--
        with the express purpose of instilling the principles as 
        individual values in all members of the Corps team.
  --We are continuing a rigorous training curriculum to improve our 
        planning capability. This will ensure that the best science is 
        applied in project development and that our planners will 
        integrate economics and ecology in developing Corps projects. 
        We're cooperating with major universities and have begun to 
        sponsor graduate education in water resources planning. We've 
        re-instituted our very successful Planning Associates Program, 
        the first class graduated last year.
  --Our Fiscal Year 2005 Budget for the Research and Development (R&D) 
        Program includes funding to improve economic models. One of our 
        principal efforts will be to focus on economic methods and 
        tools for navigation evaluations designed to address, update, 
        and improve specific models, and to address modeling issues 
        raised by the Corps and others. We need to make substantial 
        modeling advances to support decision making on proposed major 
        investments.
  --We have redoubled our efforts to engage Federal, State, and local 
        agencies, stakeholders, and the public in meaningful dialogue. 
        We have brought the major resource agencies to the table to 
        assist in decision-making.
  --The Corps and ASA(CW) have allocated additional resources to 
        strengthen our internal review capability, and are considering 
        other measures to further improve such capability. With our 
        restructuring under USACE 2012, we have just created an Office 
        of Water Project Review here in Headquarters which effectively 
        doubled the size of our policy compliance review staff. The 
        goal is to have our economists, plan formulation specialists, 
        and environmental reviewers focus on early involvement in study 
        development to assure compliance with established policy as 
        projects are being developed. This group is equipped to 
        additionally oversee administration of external independent 
        review on controversial and complex projects through contracts 
        with outside experts. Over the past year, we have also 
        developed a series of policy compliance checklists to assist 
        District and Division Commanders in the early identification 
        and resolution of issues. I am committed to working with field 
        commanders in providing training, lessons learned and other 
        tools to strengthen the policy compliance quality control/
        quality assurance process.
  --We are making good progress on developing a new Civil Works 
        Strategic Plan that emphasizes the sustainable development, 
        management and protection of our Nation's water and related 
        land resources.
  --We have established 5 national planning centers of expertise 
        staffed with engineers and scientists--a step that is essential 
        for successfully addressing the issues that increasingly arise 
        in planning a water resources project, especially those that 
        are costly, complex, or controversial, or which otherwise 
        require very specialized planning work.
    We're committed to change that leads to open and transparent 
modernization of the Civil Works Program for the 21st Century. To this 
end, we're committed to continuing the dialogue with you and the Corps 
Reform Network Steering Committee. Additionally, I have issued 
communication principles to ensure open, effective, and timely two-way 
communication with the entire community of water resources interests. 
We know well that we must continue to listen and communicate 
effectively in order to remain relevant.

           NEED FOR A MORE ROBUST BUSINESS MANAGEMENT SYSTEM

Introduction
    We have a reputation as the world's premier public engineering 
organization, which we aim to keep. Our challenge, to this end, is to 
``stay at the leading edge'' in service to the Army, Federal 
Government, and Nation. The degree to which we will succeed will depend 
largely upon improved business operations. To enable providing service 
of highest relevance, we must improve our operations for more 
expeditious and productive performance. In recognition of this, I have 
been engaged, throughout my tenure as Chief, in an effort, initiated by 
my predecessor, to reengineer the organizations and business operations 
of the Corps of Engineers Civil Works and Military Programs. In that 
effort we have selected the project management way of doing business, 
or ``modus operandi,'' as the basis for developing a business 
management system and attendant organizations and operations. 
Accordingly, we have come to call our effort the Project Management 
Business Process (PMBP) Initiative.

Project Management Business Process Initiative
            Rationale for Selection
    Our philosophy is that everything we do is a project, and every 
employee is a member of some one or more project teams. Selection of 
the project management modus operandi as the basis for developing a 
business management system is consistent with this philosophy. 
Furthermore, the Corps has used project management principles and 
methods in accomplishment of much of its business throughout its 
existence, providing seamless, flexible, efficient, and effective 
service for its customers. Applying this highly successful model to all 
of our business was eminently logical.

            Purpose
    In order that our 41 districts, 8 laboratories, 2 centers, and 8 
divisions to work together as one United States Army Corps of Engineers 
(UCSACE), we established common business practices that transcend 
organizational and geographic boundaries. Accordingly, the purpose of 
our PMBP Initiative is to develop, implement, and sustain a set of 
modern, standardized business processes, based on industry's best 
business practices, and an automated information system (AIS) to 
facilitate use of the PMBP throughout USACE. In short we call our 
Project Management AIS ``P2''.

            Implementation
    The PMBP Initiative focuses on the business relationships between 
and among people, including customers and stakeholders; process, and 
communication. To create and sustain the PMBP we must examine and 
define, to the PMBP system, how we do our work. In the process, we are 
transforming ourselves into a customer-focused, team-based, learning 
organization. Implementation of PMBP will be accomplished in four 
steps, described below, under the aegis of subject matter experts from 
all functions and echelons of the Corps.

            Business Process Manual
    The PMBP Manual provides guidance for achieving our policy and 
doctrine. It establishes standard business processes for Corps-wide 
application that:
  --ensure consistency in program and project execution,
  --focus on meeting customer expectations,
  --set parameters for means to measure progress across the entire 
        organization, and
  --enhance our ability to function both regionally and virtually with 
        efficient management of diverse resources.
    These standard business processes are used to accomplish project 
delivery and provide services. They enable sharing workforce resources 
throughout the Corps to complete projects. If a project delivery team 
needs someone with a particular skill to accomplish work on its 
project, it can borrow service of whomever may be available with that 
skill in any Corps office. The processes enable effective management of 
projects in all lines of business in our Civil Works and Military 
Programs. The processes are open for continuous improvement, giving all 
team members opportunity to change them for the better. This will lead 
to addressment of concerns of project managers, technical experts, and 
customers to assure improvements in quality, project performance, and 
customer satisfaction.

            Automated Information System ``P2''
    Management of projects in accordance with the PMBP will be 
facilitated through use of ``P2''--an automated information system. 
This system, expanding upon and replacing PROMIS, will be used by the 
Corps team for project delivery in all lines of work. It comprises 
commercial-off-the-shelf (COTS) software configured with templates of 
our standard business processes to assist project delivery teams in 
managing their projects. The manufactures of this software--Oracle, 
Primavera, and Project Partners--are assisting the Corps in configuring 
the software to provide the templates.
    P2 software employs state-of-the-art technology embracing program 
and project management best-practices and enabling compliance to our 
PMBP Business Manual. P2 will become the principal tool of Corps 
project and technical managers in collecting, manipulating and storing 
program and project data. P2 provides a single source of all project-
related information for all programs and projects managed by field 
commands, and will interface with other modernized systems to assure 
single-source data entry. P2 will enable streamlined project and 
resource management, affording wider availability and Web interfaces. 
And, finally, because of lower costs to maintain and upgrade COTS 
software in future years, P2 will be more cost-effective than PROMIS.

            PMBP Training
    We have developed a training curriculum to promote PBBP as our new 
way of conducting business within the Corps and to guide individuals 
and organizations in the progressive development of skills for using 
PMBP. The curriculum promotes cultural change through individual self-
paced compact-disk courses followed by small group discussions on the 
courses. Each individual covers the material and shares his/her 
interpretation with others in facilitated small group discussions. This 
process promotes common understanding of PMBP, its purpose, the roles 
of individuals, and the means to develop projects though teamwork.

            Summary
    In summary, the PMBP is being implemented Corps-wide to manage all 
Corps projects more efficiently and effectively. Supporting policy and 
doctrine, definitions of our business processes, and curriculum are in 
now in place Corps-wide. We are currently in the process of deploying 
P2 throughout the Corps. P2 is scheduled to be fully deployed during 
June of this year. Once fully deployed, the PMBP system will greatly 
enhance our ability to better support the Army, other Federal agencies, 
and the Nation.
  value of the civil works program to the nation's economy and defense

The National Welfare
    Water resources management infrastructure has improved the quality 
of our citizens' lives and supported the economic growth and 
development of this country. Our systems for navigation, flood and 
storm damage reduction projects, and efforts to restore aquatic 
ecosystems contribute to our national welfare. The stream of net 
benefits, realized as reduced transportation costs, avoided flood and 
storm damages, and improvements in environmental value can be 
considerable.

Research and Development
    Civil Works Program research and development provides the Nation 
with innovative engineering products, some of which can have 
applications in both civil and military infrastructure spheres. By 
creating products that improve the efficiency and competitiveness of 
the Nation's engineering and construction industry and providing more 
cost-effective ways to operate and maintain infrastructure, Civil Works 
Program research and development contributes to the national economy.

The National Defense
    The Civil Works Program is a valuable asset in support of the 
National Security Strategy in that it provides a way to maintain a 
trained engineering workforce, with world-class expertise, capable of 
responding to a variety of situations across the spectrum of national 
defenses This force is familiar with the Army culture and responsive to 
the chain of command. Skills developed in managing large water and land 
resource management projects transfer to most tactical engineering-
related operations. As a byproduct, Army Engineer officers assigned to 
the Civil Works Program receive valuable training, in contracting and 
managing large projects.
    The Corps of Engineers continues to contribute to the ongoing war 
on terrorism, as our civil works experience proves invaluable in 
restoring and rebuilding Iraqi and Afghanistan infrastructure. To date, 
over 1,000 Corps soldiers and civilians have volunteered to serve in 
Iraq, sharing their technical knowledge and expertise along with their 
project management skills and experience with Iraqi Engineers and other 
professionals. Corps employees have also served in other Central 
Command areas of operations providing a wide range of services and 
support to the CENTCOM commander's efforts.
    In Iraq, we have been deeply involved in the restoration of the 
Iraqi Oil industry. Our involvement has helped ensure that more than 
268 Million Barrels of crude oil have been exported, resulting in more 
than $7 billion being returned to the Iraqi economy. This income is 
forming the basis of the emerging national economy in Iraq, with much 
of the profit being reinvested in restoring Iraqi infrastructure. We 
are also assisting in the procurement of refined oil products in Iraq, 
which are essential to every day life in Iraq.
    The Corps is proud to have worked closely with the Coalition 
Provisional Authority, U.S. Agency for International Development, and 
the Iraqi Governing Council in restoring reliable electricity 
throughout Iraq. When it became obvious that years of neglect and 
sabotage had brought the Iraqi electrical power production and 
transmission to near collapse, the Corps, working with the CPA and 
USAID exercised its time-proven civil emergency response capabilities 
and provided a much-needed boost to electricity delivery across Iraq. 
We continue to assist the CPA and USAID in electrical power production 
and distribution, and today, the average Iraqi has greater access to 
electricity than he had before the war. No longer is access to 
electricity a measure of loyalty to the Iraqi regime.
    The Corps is also playing a major role in securing and making safe 
the more 600,000 tons of former regime munitions spread cross Iraq 
through our Captured Enemy Ammunition mission. As of February 10, 
350,000 tons of captured enemy ammunition had been secured and 
protected from the hands of saboteurs and terrorists. Another 43,00 
tons has been destroyed. This mission is vital to the safety of our 
soldiers, coalition partners, and innocent citizens of Iraq, as it 
helps deny terrorists access to raw materials they need to make weapons 
and explosives.
    We are also contributing to the continuous improvement of the 
safety and quality of life for soldiers, sailors, airmen and marines in 
both Iraq and Afghanistan as we continue to construct and upgrade their 
living and working areas. In Afghanistan, we are also working with the 
USAID and the Ministry of Transportation as they restore the 
infrastructure necessary for a prosperous Nation.

                           HOMELAND SECURITY

    In addition to playing an important role in supporting the war on 
global terrorism. We are providing security for critical physical 
infrastructure, throughout the Nation, including components of 
transportation, water, and power systems vital to our Nation's welfare. 
The Corps is also a key member of the Federal Response Plan team with 
proven experience in support of disaster response.
    The Civil Works Program has completed over 300 security reviews and 
assessments of our inventory of locks, dams, hydropower projects and 
other facilities. We have improved our security engineering capability 
and prioritized infrastructure and are currently implementing 
recommended features at the highest priority security improvement 
projects.
    For fiscal year 2005, $84 million is targeted for security 
enhancements at key Corps facilities. Facility security systems can 
include cameras, lighting, fencing, structure hardening, and access 
control devices designed to improve detection and delay at each 
facility.

                               CONCLUSION

    Under both our Civil Works and Military Programs, we are committed 
to staying at the leading edge in service to the Nation. In support of 
that, we are working with others to transform our Civil Works Program. 
We're committed to change that leads to open and transparent 
modernization of the Civil Works Program for the 21st Century. We also 
are strengthening our business management capability for best 
performance of both programs Corps-wide.
    Thank you, Mr. Chairman and Members of the committee. This 
concludes my statement.

    Senator Domenici. Senator Craig, would you come down with 
me? We have a Senate photographer. This is the last appearance 
of the General, and we'd like to take a picture.
    Senator Craig. I'm sure he'll want this committee etched 
firmly in his memory banks.
    Senator Domenici. Come on, we'll do it up here. Actually, I 
think that his appearance before us will be memorable.
    And good, not bad. Right here. Gosh, I've got to straighten 
up here. I don't look like a general, but--thank you. He came 
in a hurry.
    General Flowers. Thank you, sir.
    Senator Domenici. Okay. Mr. Secretary, we're not going to 
take your picture. You're probably going to be around here a 
little while.
    Mr. Woodley. You're very optimistic.
    Senator Craig. We're hoping.
    Senator Domenici. I am. Why not?
    Well, I want to say that all of these good things that you 
all have talked about may not get done, because the President's 
budget is pretty weak. We may be challenged, but we're doing 
the best we can on the numbers, and we figure that the fiscal 
year 2004 enacted is $4.571 billion, and the real request for 
2005 is $4.065 billion. The difference is $506 million. That's 
the cut. Now, I hope that's wrong, but that's what my staff 
tells me. Now, I don't know how we can do all the things we 
have to do with those kinds of budgets.
    General, I want to say, for the record, that you've gone 
through some hard times. You've gone through a period of time 
when you were strained by accusations and allegations that 
turned out to be much, much less than the hullabaloo made about 
them. But the Corps continues on.
    And I would like to share with my colleagues, who may not 
already be aware, that the Corps is the project management in 
Iraq. They are the agent. They are the agency directly tasked 
with the physical reconstruction of Iraq because of both its 
expertise and in management, on a large scale, and its 
rehabilitation of critical infrastructure. I find it ironic 
that the Corps' talent that we are heavily relying on in Iraq 
is the very same one that is most negatively impacted by the 
budget of the administration.
    I believe the administration, if it had its way, the Corps 
would merely become an operations and maintenance agency. I 
will tell you, Mr. Secretary, that the very core talent we are 
utilizing in Iraq was only developed as a direct result of the 
domestic work that we're doing in all of our States.
    I think the administration is missing the point, that this 
country's economic well-being is closely linked to the 
waterways, be they rivers, harbors, or wetlands. Further, it's 
our interest to ensure that we maintain these resources for our 
continued successful competition with the world marketplace. We 
talk a lot about it, but we never mention that our waterways, 
our harbors are terrifically important as that goes on in the 
world.
    This country has an aging water-resource infrastructure. 
For example, 50 percent of the Bureau of Reclamation's dams 
were built from 1900 into the 1950's, before the current state-
of-the-art construction and the techniques that go with it; 
therefore, they require maintenance of a special type. Even 
though the budgets are tight, I am concerned that no one is 
working to address the longer-term problem, an aging 
infrastructure, one of these problems that we all put off. We 
absolutely have to address them.
    It costs us more when we delay them, and we are going to 
wait around until something drastic happens, and then 
somebody's going to be blamed. At least we know it, at least 
you tell us, at least you warn us. Nobody seems terribly 
interested, from what I can tell.
    Now, I note that in my opening statement, which I'll make 
part of the record that the administration's budget is about 11 
percent, that's what that number is, below the 2004 funding 
level. Now, that's my evaluation, because I take into 
consideration some things the administration assumes we're 
going to get, that will be moved over to the budget and be a 
plus. Same thing with the Bureau of Reclamation.
    Mr. Woodley, if the Congress were to enact the President's 
request--I don't intend to put you, as an administration 
appointee, in too much of a bind--but if we were to enact the 
President's request, without modification, can you tell us now, 
or would you prefer to tell us in writing, what the impact on 
the Corps of Engineers would be?
    Mr. Woodley. Mr. Chairman, I'll explain--I'll give you my 
views to the maximum extent possible now. If you'd like for me 
to elaborate in writing, I'd be delighted to.
    Senator Domenici. Well, we need to know.
    Mr. Woodley. Yes. This is a very frugal budget that will 
allow us to continue generally with the things that are 
underway in 2005, with contracts that are already in place in 
2004. It will allow us to move forward in an appropriate way on 
the 11 projects that are expected to be completed in 2005. It 
will allow us to continue in an aggressive way with the 
priority projects that we've identified, that are very good 
projects. But it will cut back substantially on our ability to 
do studies that are needed for future work, going forward, and 
it definitely will not allow us to make a great deal of headway 
on deferred maintenance, for instance. It is a very frugal 
budget.
    Senator Domenici. Well, let me tell you, Mr. Secretary, the 
budget contains multiple proposals, which, if enacted as 
proposed, would terminate many ongoing projects. You know that.
    Mr. Woodley. Yes, sir.
    Senator Domenici. The Energy and Water bill, and the 
proposal is to carry a general provision as part of that to 
cancel specific projects. States affected are Alabama, Alaska, 
Mississippi, North Dakota, West Virginia, just to name a few. 
Specifically, there are 29 projects which would be 
legislatively terminated. How this list was arrived at, I don't 
know. Maybe you know. Do you?
    Mr. Woodley. Yes, sir, I do.
    Senator Domenici. Do you want to tell us?
    Mr. Woodley. These are projects that, for a variety of 
reasons, it was felt were not the best investment at the time 
or were not prepared and fully vetted and ready to proceed with 
the investment in fiscal year 2005.
    Senator Domenici. Well, I'll tell you, I hope you know that 
this committee and this chairman are put in a terrific bind 
because you may not know, but the General knows; he's been 
around here long enough, but we don't have complete control 
over this. Senators want projects. Senators have approved of a 
number of these projects. And you can sit around all you want 
over there saying they don't make sense, et cetera, but there 
are none of them that don't fit the cost-benefit ratios 
required by the Corps.
    You now say they don't fit, whatever you just said--but the 
cost benefit was established as a way to clear projects so they 
would not be irrelevant, pork-barrel, and whatever else you 
call them. How many of these projects are under construction, 
if you know? And what would be the impact of terminating?
    Mr. Woodley. I would have to provide that for you, unless--
--
    Senator Domenici. Do you know, on the Corps side, General?
    General Flowers. I think there are 12 projects currently 
under contract, and 5 more were planned to be awarded in fiscal 
year 2004, so 17 projects, sir.
    Senator Domenici. Seventeen projects, between those that 
are in-being, ongoing, and five that were ready to go that 
Senators and their States are expecting.
    General Flowers. That's correct, sir.
    Senator Domenici. Okay.
    The Corps is carrying out a study to restore the Bosque 
along the Rio Grande, in Albuquerque. That's our green way that 
runs through it. You've been there, General, I think.
    General Flowers. Yes, sir.
    Senator Domenici. Can you update me on the status of the 
study and next steps? And when do you anticipate the project 
will be ready for construction authorization?
    Anybody know?
    General Flowers. Yes, sir. We have completed the 
reconnaissance phase through--or will complete that, through 
fiscal year 2004 funding. And fiscal year 2005 funds are used 
to initiate the feasibility study. And so the budget does 
include $175,000 toward completing the study.
    Senator Domenici. Okay. Now, I'm fully aware, General and 
Mr. Secretary, that we are short of money, but, I'll tell you, 
I don't intend to wait around forever for this project. It's 
very important. It's one that will establish, for the city of 
Albuquerque, kind of what the city is, and that's pretty 
important, if you know about cities.
    I want to ask a question about the internal operation of 
the OMB versus the Corps. What I've heard is startling, but I'd 
like you to tell me.
    Mr. Woodley, how many OMB examiners does the Corps, which 
is a $4.5 billion agency, have? And how many does the rest of 
the Department of Defense have? Who knows?
    Mr. Woodley. I don't know the answer to that.
    Senator Domenici. General?
    General Flowers. Sir, I think the last count I had, there 
were eight Corps examiners. That includes the two supervisors 
that are a part of that group.
    Senator Domenici. Okay.
    General Flowers. And I am not sure on the number for the 
rest of the Department of Defense, but I believe that number to 
be three.
    Senator Domenici. Three. Well, I wonder who makes the 
decision that the Corps of Engineers needs eight examiners, and 
all of the Department of Defense has three. Who makes that kind 
of decision? Who knows? You don't know?
    Mr. Woodley. I would have to ask the director of the----
    Senator Domenici. OMB.
    Mr. Woodley [continuing]. Of the office, Mr. Chairman.
    Senator Domenici. Well, we're going to ask him.
    Mr. Woodley. I don't know.
    Senator Domenici. If the committee doesn't mind, we'll ask 
him now, as a result of this hearing. And if he doesn't answer, 
we'll haul him up here and ask him why.
    I'm of the opinion that they're out to get you and it's 
rather strange to me that this goes on, and nobody raises any 
Cain. But we will. That's an unfortunate situation, unless they 
have some justification that I'm not aware of.
    I want to close by telling you I have about eight or nine 
questions, but we're close to lunch, and we have two Senators 
who want to ask questions, and I want to let 'em.
    Senator Craig, would you mind if we let the Senator proceed 
with a few questions? She's told me it's going to take 6 
minutes.
    But then she suggested 6 minutes on Senate time.
    And then I suggested 6 minutes on the chairman's time.
    Senator Murray. And I'm not sure which is better. I'll take 
the better one.
    Senator Domenici. Okay. Proceed.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Thank you, Mr. Chairman. Thank you to all 
of you for being here today.
    General Flowers, as you know, I and my Northwest colleagues 
have been supporting the Columbia River Channel Improvement 
Project. With the support of Chairman Domenici and Senator 
Reid, I've been able to provide $10 million for that project 
over the past 4 years. Each time, this subcommittee has had to 
add money, because the President's budget never provides any 
funds for the project, and this year is no different.
    This page from the budget shows that, once again, the 
administration's budget is zero for this project, and I wanted 
to be here today to ask you a series of questions about the 
Columbia River Channel Improvement Project and the 
administration's lack of funding.
    First, General Flowers, is it true that the recon study, 
feasibility study, authorization, and Chief of Engineer's 
report on the Columbia River Channel Improvement Project are 
all complete?
    General Flowers. Yes, ma'am, it is.
    Senator Murray. Thank you. General, in its original budget 
submittal to the Office of Management and Budget, did the Corps 
request funding for the Columbia River Channel Improvement 
Project in fiscal year 2005? And if they did, how much did they 
ask for?
    General Flowers. Ma'am, there are a number of internal 
deliberations that go on inside the Agency and Administration, 
and there's a process that's put together to vet projects 
before--and clear them--before they can be included in the 
budget, and this one was not fully vetted and cleared, so it 
was not.
    Senator Murray. So the Corps did not request funding for 
this project.
    General Flowers. No, ma'am.
    Senator Murray. Well, it was my understanding that the 
Corps did want to move on this project. Can you tell us why the 
President's budget did not contain any funding for this?
    General Flowers. We were--the project was not cleared by 
OMB.
    Senator Murray. Was not cleared by OMB. General, what would 
be the minimum funding level necessary to move on this project 
in fiscal year 2005?
    General Flowers. It's $15 million, ma'am.
    Senator Murray. Okay. Well, I want to ask you about a Texas 
project, called Brazos Island. And let me be clear with the 
committee, I don't know anything about that project, I have no 
position on it, but I do find its situation really interesting 
in comparison to the Columbia River Project.
    Have the recon study and feasibility study been completed 
for the Brazos Island Project?
    General Flowers. No, ma'am.
    Senator Murray. Has not. Has the Chief Engineer's report 
been completed for that project?
    General Flowers. Has not.
    Senator Murray. Well, in its original 2005 budget submittal 
to the Office of Management and Budget, did the Corps request 
construction funding for Brazos Island?
    General Flowers. No, ma'am. We--I would not request funds 
for a project that did not have a favorable Chief's report.
    Senator Murray. Well, who put funding in, then, for Brazos 
Island?
    General Flowers. I do not know.
    Senator Murray. Well, in light of the Brazos Island budget, 
it seems clear that OMB could have provided funding for the 
Columbia River Channel Improvement Project based on same 
criteria. Would you agree with that?
    General Flowers. Yes, ma'am.
    Senator Murray. The Corps budget has language suggesting 
that the administration may propose construction funding in 
fiscal 2005, pending OMB review. Has the ASA report been 
submitted to OMB for review?
    Mr. Woodley. Do you want me to answer that, ma'am?
    Senator Murray. Yes. Well, I would prefer that the General 
did.
    General Flowers. Yes. The answer is yes, ma'am.
    Senator Murray. Okay. Should we expect a fiscal year 2005 
revised budget request supporting construction for Columbia 
River Channel Project? And if so, when?
    Mr. Woodley. Well, I'm sorry, I must not have understood 
the prior question----
    Senator Murray. Should----
    Mr. Woodley [continuing]. Senator.
    Senator Murray. Well----
    Mr. Woodley. I apologize. Let me say, Senator, that I have 
just returned----
    Senator Murray. I----
    Mr. Woodley [continuing]. From the region.
    Senator Murray. I understand.
    Mr. Woodley. I spoke with the directors of the ports and 
with the leaders of the division and district. We are very 
anxious to get that project moving forward, in spite of the 
fact that, as you know, we are facing litigation with respect 
to the project that I certainly hope will not be any kind of 
impediment to us.
    Senator Murray. Well, I understand that, but----
    Mr. Woodley. As I understand the status right now, the 
report is under review in my office. I have given it the 
highest priority, and I want it to be sent to OMB as soon as 
possible. And I want it to be sent this month.
    Senator Murray. So are we to expect a revised budget 
request supporting construction?
    Mr. Woodley. That is certainly something that is seriously 
under consideration. I certainly am not in a position to make a 
commitment to that, but it is under very serious consideration, 
and it will be done as soon as possible.
    Senator Murray. Well, given the shortfall in the Corps 
overall budget, what projects that are included are going to 
give up funding for the Channel River Improvement Project?
    Mr. Woodley. I think that we would have to consult on that 
and see what other adjustments can be made elsewhere in our 
budget, or elsewhere, working very closely with the Office of 
Management and Budget to provide the funding at the appropriate 
level for fiscal year 2005, but that is a----
    Senator Murray. Well----
    Mr. Woodley [continuing]. Project that I am anxious to move 
forward. I am----
    Senator Murray. So you can't----
    Mr. Woodley [continuing]. Doing everything I can----
    Senator Murray [continuing]. Tell us where the money'll 
come from right now?
    Mr. Woodley. Not today. No, ma'am.
    Senator Murray. Well, General Flowers, another project, the 
Green/Duwamish Restoration Program, was given a new start by 
this subcommittee in 2004. It's authorized, and its studies are 
complete. Can you tell me if the Chief of Engineer's report on 
that program is complete?
    General Flowers. Yes, it is.
    Senator Murray. Can you tell me why OMB has not provided an 
administration position on that program, and not provided any 
funding for that program?
    General Flowers. No, ma'am, I cannot. To my knowledge, it's 
still under OMB review.
    Senator Murray. Well, General--Mr. Chairman, really--I am 
concerned about the role that OMB seems to be playing in 
delaying or advancing these projects, and I'm wondering if OMB 
is also playing a role in the final position of the Chief of 
Engineer's report.
    Can we be assured, General, that the Corps alone is 
determining all final reports and can stand before a judge and 
swear to each one's integrity?
    General Flowers. Ma'am, until this year, the answer to that 
question would have been absolutely yes, but I am now 
concerned. And I would like to give a very brief explanation.
    No intent to beat up on OMB. I think they are civil 
servants, who are trying to do their job. And in so doing, they 
are now trying to take a more active role in looking at 
projects as the Corps is going through its process. And I 
commit to you that I will resist the--I will resist any attacks 
on the integrity of the Chief's report, because my job is to 
provide you the best engineering and science and 
recommendations----
    Senator Murray. Sure.
    General Flowers [continuing]. Based on that, that's 
possible. But there is a tendency now for the Office of 
Management and Budget to try to clear pieces of our process 
before we are permitted to continue. And we are internally 
debating that right now, and I can't tell you what the outcome 
will be.
    Senator Murray. Well, thank you, General, for your honesty.
    Mr. Chairman, I find that deeply disconcerting, and I hope 
this committee pursues that.
    Senator Domenici. You heard me awhile ago.
    Senator Murray. I did.
    Senator Domenici. The reason they can do it is because they 
have so many of their people, OMB's people, hanging around the 
Corps----
    Senator Murray. Yeah.
    Senator Domenici [continuing]. Doing all kinds of 
investigations and analysis, and that's a lot. I mean, there 
are some big departments that don't have eight, I can tell you 
that. If they did, they wouldn't have enough space for OMB. 
They'd be coming out--they'd have to have an office of their 
own.
    Senator Craig.
    Senator Craig. Thank you, Mr. Chairman.
    General Flowers, what the Senator from Washington has just 
led you through is something that is strongly supported by the 
delegations of the three States affected by that Lower Columbia 
Basin--or Lower Columbia River dredging. If we want to render 
the Port of Portland and Tacoma, and all of that area down 
through there, ineffective after hundreds of millions of 
dollars of investment, all the way through to Lewiston, Idaho, 
which is the last port facility in that series of facilities 
along the Snake and the Columbia system, then we will do so by 
simply not dredging that stretch from Portland, west to the 
mouth. And it's been a long time coming, a tremendous 
investment has been made, phenomenal efforts at environmental 
mitigation have occurred. It is ripe and ready, and there is no 
reason it should not move forward.
    Or you simply turn the lights out at the Port of Portland, 
and then you progressively turn the lights out up the system, 
and that is not our intent. It will not be our intent. And I'm 
glad to hear that it's under critical review again. I hope it 
becomes a priority, posthaste, as it relates to funding. Enough 
said about that.
    All I will comment, Mr. Secretary--as it relates to the 41 
projects that are not consistent with current policy, here's 
the operative question. And the question goes like this. 
Senator x says to this Chairman, ``Mr. Chairman, is one of my 
projects of the 41?'' And if it is, then that Senator is going 
to put phenomenal pressure on this chairman to deny you what 
you're attempting to do. I've not yet asked that operative 
question of the chairman ``Are any one of these 41 in Idaho?'', 
but the question will get asked. Here is----
    Senator Domenici. And then, besides, when you get the 
answer, if it is that it is, you will go to work----
    Senator Craig. Of course.
    Senator Domenici [continuing]. In the committee to try to 
get it.
    Senator Craig. Yeah.
    Senator Domenici. Not just me. If you go to work on me, I 
don't have all the votes; I might say I won't do that, Senator 
Craig. But then you'll go to work on Senators, and they will 
have what we always have, and that's that Senators of the 
United States want it.
    Senator Craig. Yeah.
    Senator Domenici. All right?
    Senator Craig. Yeah.
    Mr. Secretary, here is--before I close, General Flowers, 
let me again thank you for your service to this country and to 
this area, and, most importantly, your work before this 
committee, your forthright-fulness. We appreciate it greatly, 
and we thank you, and we hope you have success in a different 
role in a different life.
    General Flowers. Thank you, sir.
    Senator Craig. Mr. Secretary, let me turn to you for my 
last question, and it's a bit involved, but I think it's an 
important one. And, Mr. Chairman, for the work that you've been 
doing the last good number of years, along with me and others, 
I think this is an important question.
    Congress has been working on a comprehensive energy bill 
for over 3 years now, and this chairman has led a phenomenal 
effort. There is no question that our country needs an energy 
policy, and we've been trying to deliver that to the American 
people. One of the key elements of the pending legislation is 
infrastructure reform.
    Although we've focused on infrastructure nationwide, there 
is a growing concern about natural-gas infrastructure in the 
Northeast. The market for natural gas has grown considerably in 
the Northeast, and new pipeline construction is critical to 
meet this growth. The Federal Energy Regulatory Commission is 
the jurisdictional agency for reviewing and approving natural-
gas pipeline construction in the United States.
    Like the hydroelectric licensing process at FERC, the 
pipeline construction process at FERC is substantial and 
complicated, but I'm learning that the process is becoming even 
more complicated because other agencies, like the Corps are 
also involved in the pipeline construction process and bringing 
their own understanding of purpose and need to the project. In 
the Corps' case, your agency is involved in a--is a 
consequence--the Corps' involvement is a consequence of the 
Clean Water Act authority to issue Section 404 permits before 
construction can take place.
    Here's my problem. FERC is the agency given the 
responsibility to determine whether a pipeline project can--
should be constructed. That determination must include an 
assessment of need, as well as environmental impact. By law, 
the Corps, as well as other interested Federal and State 
agencies, have been given the opportunity to participate in the 
process.
    Here are the questions. Why, then, would it take over 17 
months since the issuance of the FERC certificate for the 
Islander East Pipeline for the Corps to act on a Section 404 
permit for that project? If you don't have the answer, I'd like 
to know the answer. Seventeen months. A year and a half, or 
nearly that. Why would you act in a sequential fashion after 
the Commission has acted on this project?
    My bigger question is--and one more focused on the purpose 
of this hearing today--why are you using resources to redo work 
already done by a Federal agency with the exclusive 
jurisdiction of determining the need and environmental 
sufficiency of a pipeline project? This is government 
redundancy run amok. Or by at least appearance, it is.
    What expertise does your district office have in pipeline 
siting and construction that would put your staff in a position 
to second-guess the Commission's staff, public review, and 
determination of what constitutes a reasonable set of viable 
alternatives? Would you support the concept of one Federal--one 
lead Federal agency record for the review of infrastructure 
proposals by all agencies?
    Those are the series of questions that we're trying to 
address in the energy bill. And in sorting through what's going 
on out there, the Islander East Pipeline appears to be a 
perfect example of why we ought to be changing the way this 
system doesn't work.
    Your response?
    Mr. Woodley. Senator, certainly the question of taking 17 
months on a single permit cries out for an investigation, and I 
will investigate that. I am not aware of the details of the 
project as I sit here before you. We are very much in need of a 
streamlined process, and the administration has been working on 
streamlining our processes in many arenas. I'm aware of 
transportation work, I'm aware of some work in the energy 
arena, and the Corps has been part of that, and I want to 
continue that and foster it and support it in every way.
    We have to proceed very carefully, however, because of the 
potential for litigation in these contexts. I'm concerned. For 
instance, if you look at the situation that we're facing with 
coal mining in the Appalachian region, where we have the Office 
of Surface Mining, for many years the Corps deferred to their 
expertise in this arena, which I believe was entirely 
appropriate. Unfortunately, a Federal court decided that it was 
not appropriate, and we have a very difficult situation that we 
are trying to manage in that region to get a permitting 
operation in place there that will be effective and efficient, 
and will survive Federal court scrutiny.
    Senator Craig. Well, I've asked a series of questions, and 
I would hope that you would search for answers----
    Mr. Woodley. I will, indeed.
    Senator Craig [continuing]. Because the reason it is asked 
is, in part, to be critical, but it is also to point out that 
you may be part of a problem. And it's a problem we're trying 
to solve. And when you have district offices who would assume 
to have the expertise that a national office who specializes in 
a given area has, and would second-guess them or third-guess 
them, that's a kind of duplication this country can ill afford. 
And I've not even talked about State agencies' roles yet, or 
role that they play in these siting situations. While they are 
critical--and we're trying to bring a major delivery system 
down out of Alaska into the Lower 48 to distribute gas and 
drive down costs and hopefully drive up employment and avoid 
the dislocation of industries that are today employing 
thousands of people that are now going offshore, and we can't--
and we have to wait 17 months for a process, why should we do 
our effort? Unless we go right down to the system and clean it 
out.
    Now, I know that the administration is very intent on 
trying to streamline and organize. We've talked about 
centralizing and--so that we can get a certification or a 
movement process that isn't redundant upon--this idea of time, 
time, time. The chairman spoke of my effort in hydro 
relicensing. Perfect example is right here now in pipeline. You 
know, 2, 3, 4, 5, 6, 7 years? Because agencies upon agencies 
thought they knew better than somebody else and could dot an 
``i'' better than somebody else could? It would seem to me 
almost easier to do it within your authority, to do it 
reasonably. And if you get locked up in the courts, you might 
get into court and get a decision sooner than 17 months. And 
you're not even guaranteed now that you will get that after the 
fact. So another 17 months from now, we may still be waiting 
for this to be processed by a court.
    Senator Domenici. Yup.
    Senator Craig. And now we're into another couple of years. 
I mean, I've spoken my frustration here. I'm very happy to work 
with you on this. These kinds of problems have to get resolved, 
unless our country just implodes on its own ability to produce 
and supply energy, and we drive everything offshore. Shame on 
us if we do. But if we can solve it, and we're trying to, and 
we want you to work with us, here's a good example. And maybe 
this ought to be a template by which we can make a decision on 
what ought to be improved and changed.
    Mr. Woodley. Yes, sir.
    Senator Craig. I thank you all very much.
    Senator Domenici. Well, General, you got by without me 
asking you about our famous Acequias in New Mexico, but I think 
we've at least taught you how to say it.
    General Flowers. Yes, sir.
    Senator Domenici. These are these little ditches in New 
Mexico that are historic, and it's one of the few projects that 
you don't have to have a cost-benefit ratio, because there's a 
statute saying we want to protect them. They're 400 years old.
    But I will say, just ask, there's nothing holding this 
project up other than budgeting, is that right?
    General Flowers. No, sir, there's nothing holding it up.
    Senator Domenici. All right. And this is another year where 
the administration didn't fund it. Didn't even fund $2 million 
worth. We'll find it and keep it going.
    Let me ask, General, what's the difference between the 
Corps that you are part of and the soldiers that are part of 
the Corps that are going to Iraq? Aren't they all the same?
    General Flowers. Yes, sir. We have a way of describing 
ourselves. We call ourselves the Engineer Regiment, and it's 
made up of soldiers from all components--active, guard, and 
reserve--Department of the Army civilians, and contractors, who 
work, in some cases as part of our staff, and who perform all 
of the work that we do. Then the Civil Works program that is a 
great part of the Corps of Engineers is a capability that the 
Nation leverages, particularly when it transitions from peace 
into conflict, or conflict back into peace. And, as I 
mentioned, we've had over a thousand of our civilian employees 
volunteer and serve, many from our Civil Works program, and 
have served both in Iraq and Afghanistan.
    Senator Domenici. I tell you why it comes to my mind. You 
know there's such a rotation system, and it's so firm that we 
lose our colonel in New Mexico just about the time he 
understands how to say Acequia and just about the time he knows 
what New Mexico's problems are. But this last time, he was down 
on the Rio Grande River, where such a beautiful job was being 
done in cutting down salt cedar and burned-down trees, and he 
didn't look too happy. And I asked him what was the matter. He 
said, ``Well, I'm going to leave here in a couple of weeks, and 
I have a wife and one baby--and she's pregnant--and I'm going 
to Iraq.'' I had no idea, at that point, that somebody like 
that would go to Iraq, but I found out from him that he's very 
much needed, and he'll go over there and fit right in and be 
part of the team that's building things, right?
    General Flowers. Yes, sir.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Domenici. And they're good at it, and it is 
amazing, to me. And I'm going to find out why that the Office 
of Management and Budget spends so much time and effort and so 
many people dedicated to trying to find out what you do and how 
you do it, and what you do right and what you do wrong. I just 
don't understand it. I'm going to ask them how many they'd need 
if they gave this ratio to all the departments in the 
government. It would be a very interesting fact. In fact, we'll 
submit that question to them as a result of this meeting, just 
tell them we've heard about this and found out about this and 
we'd like to know.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

               Questions Submitted by Senator Ted Stevens

    Question. The Corps started studying the Tatitlek breakwater and 
harbor in 1994, it was approved as a Section 107 project in 1995, the 
study phase was almost completed in 2001, with a draft report 
circulated within the Corps and submitted to the Pacific Ocean 
Division. Since then it has been stalled with little progress in the 
last 2 years. Does the Corps plan to get this project back on track?
    Answer. A Draft Detailed Project Report and EIS was presented to 
the Local Sponsor and the Village of Tatitlek on March 11, 2004 
regarding development of a harbor at Tatitlek using the Section 107 
Continuing Authority Program for small navigation projects. The cost 
for the National Economic Development plan was estimated at $10.3 
million of which a non-Federal sponsor would need to provide about $6.8 
million due to the $4 million statutory Federal limit on Section 107 
projects. The Local Sponsor (Alaska DOT and PF) and the Village of 
Tatitlek are currently evaluating their options and trying to identify 
potential sources of funds to build a harbor. Due to depletion of 
existing funds, if the Local Sponsor decides to continue the Section 
107 study, the Local Sponsor will be required to provide additional 
matching funds (as required by the Water Resources Development Act of 
1986) to finalize the Detailed Project Report and EIS.
    Question. Language was included in the fiscal year 2004 Omnibus 
Appropriations Bill to waive the matching requirements for the City of 
Sitka to correct the design deficiency for the breakwater for the 
Thomsen Harbor. However, the Corps has informed us that the language 
was not sufficient to waive the local match and that Sitka must still 
provide a match to redesign the breakwater that was not designed/
constructed properly in the first place. Does the Corps intend to 
require Sitka to fund the local match of the breakwater for a second 
time?
    Answer. The State of Alaska, rather than the City and Borough of 
Sitka (CBS), funded construction of the Thomsen Harbor breakwaters. The 
breaks in the breakwaters were installed at the request of 
environmental resource agencies with the full knowledge of the State 
and the CBS. At the time the State and the CBS did not want to spend 
the money and take the time required to conduct a physical model study 
of the breakwaters configuration. If physical modeling were performed 
at that time, the deficiency in the breakwaters would have been 
apparent. A technical study, which includes physical modeling and 
updates of the economics and environmental aspects of Thomsen Harbor, 
would need to be performed before design and construction could be 
initiated. Unfortunately, the language to waive cost sharing in the 
fiscal year 2004 Appropriation Bill Senate Report does not override the 
cost sharing law of WRDA 1986.
    Question. All of the Alaska District construction projects require 
additional funding for the projects to stay on track. Why is there such 
limited funding for construction projects in Alaska?
    Answer. The Alaska District has received almost $20 million from 
other Districts in fiscal year 2004 for construction projects. The 
Alaska District has funding for four construction projects in the 
fiscal year 2005 budget proposal, Chignik, Nome, St. Paul, and Sand 
Point harbors. The funding for these projects was limited to the 
appropriate amount consistent with the administration's assessment of 
national priorities for Federal investments. Additional capabilities 
have been expressed for each of these projects as follows: Chignik--$3 
million, Nome--$23 million, St. Paul--$16 million, and Sand Point 
harbor--$10 million. Kake Dam, False Pass, Seward, and Wrangell harbors 
will also be under construction in fiscal year 2005 but have not been 
budgeted. Kake Dam's outcome is not considered a high priority by the 
administration and the remaining projects will not be budgeted until 
after OMB review of the respective decision documents is complete. 
Capabilities for these projects are Kake Dam--$7 million, False Pass--
$10 million, Seward--$6 million, and Wrangell harbor--$10 million.
    Question. There is $50,000 in fiscal year 2005 budget for the 
Anchorage Harbor Deepening. Is the Corps coordinating this work with 
the Port of Anchorage with regard to the port expansion?
    Answer. Yes, we have been working closely with the Port of 
Anchorage and congressional staffers to develop authorizing language 
for dredging that will be required as a result of the port expansion.
    Question. There is no funding in the fiscal year 2005 budget for 
ongoing construction work at Seward Harbor. Does the Corps intend to 
complete this project?
    Answer. Please refer to the response to question No. 3. The 
construction contract for Seward Harbor was awarded on Feb. 3, 2004 in 
the amount of $8.47 million. Alaska District was given authority and 
funding (Public Law 108-7) to award the construction contract even 
though OMB has not approved the feasibility report. The Corps will not 
be allowed to budget for this project until it receives OMB approval of 
the project. The anticipated construction placement in fiscal year 2005 
for this project is $6 million, which will complete this project. If 
sufficient funding is available, the Corps intends to complete 
construction activities in fiscal year 2005.
    Question. The Permit for King Cove road was issued on January 22, 
2004 and the preferred alternative for the road is one supported by the 
community which extends the road 17 miles and utilizes a hover craft to 
cross Cold Bay to King Cove. Do you anticipate any further problems or 
potential delays for King Cove road?
    Answer. There is no reason to expect any delays caused by 
permitting requirements. Aleutian East Borough has awarded the 
construction contract to SKW (Arctic Slope Regional Corporation-
Nugget); they are scheduled to start fieldwork in June 2004. The Corps 
has received no indication from any organization or group indicating 
that there would be any legal challenge to the permit authorization.
    Question. I understand there are some concerns with work being done 
at St. Paul Harbor regarding NOAA requesting the Corps to perform 
diesel seep site remediation. What is the status of these discussions?
    Answer. NOAA did ask the Alaska District to modify the existing 
Saint Paul Harbor, Phase II, contract. We had several concerns about 
modifying the existing contract, and suggested that we use another 
contract mechanism that would allow the diesel seep work to be awarded 
in fiscal year 2004 and performed in fiscal year 2005. NOAA has 
verbally informed us that they will use one of their own contracts to 
perform the work in fiscal year 2004. We will continue to work closely 
with NOAA to assure that our respective work that is in the same area 
proceeds smoothly.
    Question. It is my understanding that the Corps does not believe 
that there will be any Federal interest in the proposed Knik Arm 
Bridge. What is your understanding of this matter and do you believe 
the Corps should be involved in the planning, be it greater dredging 
and deepening in the Cook Inlet, or otherwise for the Knik Arm Bridge?
    Answer. The Corps is still performing the Knik Arm Bridge 
reconnaissance study. Funding is being used to complete a 905(b) 
assessment that will determine if there is Federal interest in further 
studies. However, the addition of bridge approaches, abutments, and 
piers could greatly affect the sediment deposition patterns and tidal 
currents at the Port of Anchorage, which in turn will affect the 
ongoing operation and maintenance of the Corps' navigation project. If 
the 905(b) assessment recommends proceeding with a feasibility study, 
these affects on the port will be included in the future study. Due to 
the large tides and complex tidal currents in Cook Inlet, a detailed 
hydrodynamic mathematical and physical model would be needed to 
identify the most acceptable design for the bridge length, abutments, 
and pier configuration required to maintain efficient operations at the 
Port of Anchorage. Other authorities that would enable Corps assistance 
in future planning studies in Cook Inlet include Section 216 of the 
Flood Control Act of 1970 (Public Law 91-611) which authorizes the 
Corps to assess modification of existing projects due to changed 
physical or economic conditions. The Section 216 language is as 
follows.

    ``The Secretary of the Army, acting through the Chief of Engineers, 
is authorized to review the operation of projects the construction of 
which has been completed and which were constructed by the Corps of 
Engineers in the interest of navigation, flood control, water supply, 
and related purposes, when found advisable due to significantly changed 
physical or economic conditions, and to report thereon to Congress with 
recommendations on the advisability of modifying the structures or 
their operation, and for improving the quality of the environment in 
the overall public interest.''

    We have also met with members of the Knik Arm Bridge Authority to 
discuss future Corps assistance. There was some interest expressed in 
using our physical model capabilities, engineering services such as 
surveying and drilling, and gathering data, developing, and performing 
portions of the EIS. Unless other specific Congressional instructions 
and funding are provided, these services could be provided under such 
programs as Planning Assistance to States and cost shared 50/50 with 
the Sponsor.

                         CONCLUSION OF HEARINGS

    Senator Domenici. Okay, we're in recess until the call of 
the Chair. Thank you.
    [Whereupon, at 12:15 p.m., Tuesday, April 20, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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