[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
SECURING THE BUREAU OF RECLAMATION'S WATER AND POWER INFRASTRUCTURE: A
CONSUMER'S PERSPECTIVE
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON WATER AND POWER
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
Thursday, June 22, 2006
__________
Serial No. 109-56
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
Committee address: http://resourcescommittee.house.gov
______
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
Jim Saxton, New Jersey Eni F.H. Faleomavaega, American
Elton Gallegly, California Samoa
John J. Duncan, Jr., Tennessee Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming Donna M. Christensen, Virgin
Vice Chair Islands
George P. Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Grace F. Napolitano, California
Carolina Tom Udall, New Mexico
Chris Cannon, Utah Raul M. Grijalva, Arizona
John E. Peterson, Pennsylvania Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada Jim Costa, California
Greg Walden, Oregon Charlie Melancon, Louisiana
Thomas G. Tancredo, Colorado Dan Boren, Oklahoma
J.D. Hayworth, Arizona George Miller, California
Jeff Flake, Arizona Edward J. Markey, Massachusetts
Rick Renzi, Arizona Peter A. DeFazio, Oregon
Stevan Pearce, New Mexico Jay Inslee, Washington
Henry Brown, Jr., South Carolina Mark Udall, Colorado
Thelma Drake, Virginia Dennis Cardoza, California
Luis G. Fortuno, Puerto Rico Stephanie Herseth, South Dakota
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Marilyn N. Musgrave, Colorado
Vacancy
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
------
SUBCOMMITTEE ON WATER AND POWER
GEORGE P. RADANOVICH, California, Chairman
GRACE F. NAPOLITANO, California, Ranking Democrat Member
Ken Calvert, California Raul M. Grijalva, Arizona
Barbara Cubin, Wyoming Jim Costa, California
Greg Walden, Oregon George Miller, California
Thomas G. Tancredo, Colorado Mark Udall, Colorado
J.D. Hayworth, Arizona Dennis A. Cardoza, California
Stevan Pearce, New Mexico Vacancy
Cathy McMorris, Washington Vacancy
Vice Chair Nick J. Rahall II, West Virginia,
Louie Gohmert, Texas ex officio
Vacancy
Richard W. Pombo, California, ex
officio
------
C O N T E N T S
----------
Page
Hearing held on Thursday, June 22, 2006.......................... 1
Statement of Members:
McMorris, Hon. Cathy, a Representative in Congress from the
State of Washington, Statement submitted for the record.... 56
Napolitano, Hon. Grace F., a Representative in Congress from
the State of California.................................... 3
Radanovich, Hon. George P., a Representative in Congress from
the State of California.................................... 1
Prepared statement of.................................... 2
Statement of Witnesses:
Erickson, Richard L., Secretary-Manager, East Columbia Basin
Irrigation District, Othello, Washington, on behalf of the
National Water Resources Association....................... 4
Prepared statement of.................................... 6
Feider, James C., Director, Redding Electric Utility,
Redding, California, on behalf of The Northern California
Power Agency............................................... 21
Prepared statement of.................................... 23
Graves, Thomas P., Executive Director, Mid-West Electric
Consumers Association, Wheat Ridge, Colorado............... 7
Prepared statement of.................................... 9
Harrington, Russell P., Finance Director, Central Valley
Project Water Association, Sacramento, California.......... 9
Prepared statement of.................................... 11
Lambeck, Jon C., Manager of Operations Planning, The
Metropolitan Water District of Southern California, Los
Angeles, California........................................ 26
Prepared statement of.................................... 27
Lutgen, Will, Executive Director, Northwest Public Power
Association, Vancouver, Washington......................... 14
Prepared statement of.................................... 15
Moyes, Jay, Attorney at Law, Moyes Storey, Phoenix, Arizona,
on behalf of the Arizona Westside Irrigation and Electrical
Districts.................................................. 17
Prepared statement of.................................... 19
Todd, Larry, Deputy Commissioner, Bureau of Reclamation, U.S.
Department of the Interior, Washington, D.C................ 34
Prepared statement of.................................... 36
Additional materials supplied:
American Public Power Association, Letter submitted for the
record..................................................... 46
Colorado River Commission of Nevada, Letter submitted for the
record..................................................... 47
Colorado River Energy Distributors Association (CREDA),
Letter submitted for the record............................ 49
Lynch, Robert S., Counsel and Assistant Secretary/Treasurer,
Irrigation and Electrical Districts of Arizona, Letter
submitted for the record................................... 53
National Water Resources Association, Letter submitted for
the record................................................. 54
Northern Colorado Water Conservancy District, Statement
submitted for the record................................... 56
Sacramento Municipal Utility District (SMUD), Statement
submitted for the record................................... 60
Washington Public Utility Districts Association (WPUDA),
Letter submitted for the record............................ 62
OVERSIGHT HEARING ON ``SECURING THE BUREAU OF RECLAMATION'S WATER AND
POWER INFRASTRUCTURE: A CONSUMER'S PERSPECTIVE''
----------
Thursday, June 22, 2006
U.S. House of Representatives
Subcommittee on Water and Power
Committee on Resources
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 10:05 a.m. in
Room 1324, Longworth House Office Building. Hon. George
Radanovich [Chairman of the Subcommittee] presiding.
Present: Representatives Radanovich, Napolitano, Grijalva,
Costa, Hayworth, and Cardoza.
STATEMENT OF THE HONORABLE GEORGE RADANOVICH, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Radanovich. Good morning. Good morning, everybody, and
welcome to the Subcommittee on Water and Power. Today's meeting
is to hear testimony on securing the Bureau of Reclamation's
water and power infrastructure from a consumer's perspective.
Today's hearing is about protecting our water and power
infrastructure from modern-day terrorists. As we all know,
September 11, 2001, changed everything in our society. Within
just a span of a few hours Americans realized that we were no
longer safe within our own borders. The impossible became a
reality, and it was a wake up call for all Americans.
The Bureau of Reclamation, the nation's largest wholesale
water supplier, and second largest hydropower provider, rightly
responded by creating the site security program aimed at
protecting its facilities from a terrorist attack. Within
months, the concrete barriers were put in place, roads were
closed, and the guards appeared out of nowhere.
No one disagreed with the need for an enhanced security
program, but there were questions over who would immediately
pay for these costs. Water and power consumers cited
Reclamation's response after Pearl Harbor as a precedent for
the American public to pay for the added security.
For years, for a few years the agency agreed, but later
changed its mind, probably because OMB changed their minds for
them. Five years later everybody still agrees on the need to
protect our critical infrastructure, but the fissure over who
pays has grown deeper. Customers are being required to pay for
guards and patrols and other items. These costs are then passed
on to the end consumer, many of which are farming families and
with limited incomes.
Some customers are willing to pay for a portion of these
costs as long as there is transparency and certainty in the
program. After all, they don't want their hard-earned dollars
going toward something like the repaving of the Hoover Dam
parking garage. They have a right to know where their money is
being spent and why.
Reclamation is finally working to meet its customers' needs
for transparency and certainty, but neither party has agreed on
how best to do this. This hearing is a way to help foster an
agreement to perform oversight and see what legislation may be
necessary. Above all, it is about working together as Americans
to protect our critical infrastructure and the people who
depend on these facilities.
The Subcommittee is fortunate to have witnesses who know
firsthand about this issue and about the value of our
infrastructure, and I welcome you and commend you for your
leadership. I now recognize and turn to the Ranking Member,
Mrs. Napolitano, for her opening statement.
Grace.
[The prepared statement of Mr. Radanovich follows:]
Statement of The Honorable George Radanovich, Chairman,
Subcommittee on Water and Power
Today's hearing is about protecting our water and power
infrastructure from modern-day terrorists.
As we all know, September 11, 2001 changed everything in our
society. Within the span of just a few hours, Americans realized that
we were no longer safe within our own borders. The impossible became
possible. It was a wake-up call for all of America.
The Bureau of Reclamation, the Nation's largest wholesale water
supplier and second largest hydropower provider, rightly responded by
creating a site security program aimed at protecting its facilities
from a terrorist attack. Within months, concrete barriers were put in
place, roads were closed and guards appeared out of nowhere.
No one disagreed with the need for an enhanced security program,
but there were questions over who would ultimately pay for these costs.
Water and power consumers cited Reclamation's response after Pearl
Harbor as a precedent for the American public to pay for the added
security. For a few years, the agency agreed but later changed its
mind--probably because OMB changed it for them.
Five years later, everyone still agrees on the need to protect our
critical infrastructure. But, the fissure over who pays has grown
deeper. Customers are being required to pay for guards and patrols and
other items. These costs are then passed on to the end-use consumer,
many of which are farming families with limited incomes.
Some wholesale customers are willing to pay for a portion of these
costs, as long as there's transparency and certainty in the program.
After all, they don't want their hard-earned dollars going towards
something like the re-paving of the Hoover Dam parking garage--they
have a right to know where their money is being spent and why.
Reclamation is finally working to meet its customers' needs for
transparency and certainty, but neither party has agreed on how best to
do this. This hearing is a way to help foster an agreement, to perform
oversight and to see what legislation may be necessary. Above all, it's
about working together as Americans to protect our critical
infrastructure and the people who depend on those facilities.
The subcommittee is fortunate to have witnesses who know firsthand
about this issue and about the value of our infrastructure. I welcome
them and commend them for their leadership.
______
STATEMENT OF THE HONORABLE GRACE F. NAPOLITANO, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Napolitano. Thank you, Mr. Chair, and I concur with
your statement. I also want to point out the hearing
demonstrates the widespread and long-term effects of September
11 attacks, and I doubt that very many people at the time
thought about how their new security concerns might affect
their water or electric bills.
I have always, as you very well know, favor the beneficiary
pay policy and the justifiable cost sharing for recovering
construction not only the costs but also the maintenance of the
water projects, and I think that the project beneficiary should
pay the annual operating and maintenance costs of these
projects, but who really benefits from these projects?
Is there any flexibility in the Reclamation law to
recognize that some benefits of these projects are truly
nationwide in scope?
The Bureau says their hands are tied, and we hear that
quite often. In their regulations and existing law require them
to charge the water and power users for the post-9/11 costs of
the added securities in guards and patrols.
I do hope the testimony this morning will help us
eventually to achieve a resolution of the question, or at least
begin to air some of the issues of how should pay for these
costs.
I want to thank the witnesses who have come to Washington
for the hearing and look forward to the testimony. Thank you,
Mr. Chair.
Mr. Radanovich. Thank you, Mrs. Napolitano.
I would now like to introduce our first panel of witnesses.
Joining us today are Mr. Richard Erickson who is the Secretary-
Manager of the East Columbia Basin Irrigation District in the
National Water Resources Association; Mr. Thomas Graves,
Executive Director of the Mideast--excuse me--Mid-West Electric
Consumers Association; Mr. Russ Harrington, Financial Director
of the Central Valley Project Water Association in Sacramento;
Mr. Will Lutgen, the Executive Director of the Northwest Public
Power Association in Vancouver, Washington; Mr. Jay Moyes,
Attorney at Law, representing the Arizona Westside Irrigation
and Electrical Districts from Phoenix, Arizona. Now I know why
Mr. J.D. Hayworth is here. Mr. Moyes is accompanied by Ms.
Leslie James, Executive Director of the Colorado River Energy
Distributors Association; Mr. James Feider, the Director of the
Redding Electric Utility and representing the Northern
California Power Agency from Redding, California; Mr. John
Lambeck is the Manager of Operations and Planning of the
Metropolitan Water District of Southern California--I say
Southern California--Los Angeles, California.
Gentlemen, welcome to the Subcommittee. What we are going
to do is hear from all of your, and your testimony, if you
would limit it to about five minutes. We are going to use the
stop clocks here. This works just like a traffic light. Green
is go; yellow, speed up; and red is stop.
[Laughter.]
Mr. Radanovich. And yours is down there. But what I would
suggest is, since all of your written testimony is submitted in
full for the record, feel free to be extemporaneous in your
remarks, and if you could hold it to five minutes, we will hear
from all of you starting to my left and then open up the panel
for questions from the dais here.
So we will start with Mr. Erickson. Welcome to the
Subcommittee, and you may begin your testimony.
STATEMENT OF RICHARD ERICKSON, SECRETARY-MANAGER, EAST COLUMBIA
BASIN IRRIGATION DISTRICT, OTHELLO, WASHINGTON, [REPRESENTING
THE NATIONAL WATER RESOURCES ASSOCIATION]
Mr. Erickson. Mr. Chairman and Members of the Subcommittee,
thank you for the invitation to participate in this oversight
hearing.
My name is Richard Erickson, and I am the Secretary-Manager
of the East Columbia Basin Irrigation District. Along with the
Quincy and South Columbia Basin Irrigation Districts, we
operate the transferred works of the Bureau of Reclamation's
Columbia Basin project. All three districts are active members
of the National Water Resources Association.
The three districts and Reclamation are currently providing
irrigation water to approximately 670,000 acres. The source of
water and pumping energy for the Columbia Basin project is
Grand Coulee Dam, which is operated and maintained by
Reclamation.
The three Columbia Basin Districts advanced to Reclamation
the annual O&M cost for Grand Coulee to pump water from Lake
Roosevelt to Banks Lake, and to convey it through other
reserved works into the major canal systems that have been
transferred to the districts.
That advance this year just for the Grand Coulee Dam/Lake
Roosevelt/Bank Lakes components is $3,566,000. About 43 percent
of that amount is for electricity to lift water from Lake
Roosevelt to Banks Lake. This payment is termed the diversion
rate.
All three districts pay this diversion rate and it is to
the power component of this rate that Reclamation began adding
a guarded patrol security surcharge this year. All three
districts share a common view regarding the reimbursability of
these costs.
Columbia Basin Districts do not dispute the need to defend
important hydroelectric facilities like Grand Coulee. The
attacks of September 11 confirmed that foreign terrorists will
go to great lengths to destroy targets that are national icons.
The Federal government is to be commended for taking these
defensive measures. However, we believe national defense is a
Federal role, not a local role. These defense and security
costs should be a Federal responsibility paid for by all
Americans, and not be the responsibility of irrigation and
power ratepayers associated with specific Federal projects that
happen to have a high target value.
Beginning in 2006, Reclamation and Congress determined that
guarded patrol costs should become reimbursable. For 2006, this
reimbursability was capped at $10 million. Full reimbursement
is set to begin in 2007.
The Columbia Basin Districts respectfully recognize that
Congress is the final decisionmaker in this matter and we also
realize there are many competing pressures on the Federal
budget, but we ask that Congress give further consideration to
this decision.
One point we believe needs further consideration is the
equity of reimbursability of guard and patrol costs. Columbia
Basin is the only project in the Pacific Northwest region that
will be subject to reimbursable security costs. Similar
situations exist in Reclamation's other regions. Grand Coulee
and a few other Reclamation's larger hydroelectric projects
have the most security needs. That creates a disparity for
irrigators farming on Reclamation projects that depend on these
larger dams. These farmers will pay extra charges for water
compared to other farmers on the rest of the 10 million acres
using Reclamation water.
Another point about this reimbursability that we believe
Congress should consider is the ability to audit Reclamation's
guard and patrol costs. The Columbia Basin Districts believe we
have a positive relationship with Reclamation regarding our
payment of the irrigation diversion rate at Grand Coulee.
One source of this good relationship has been Reclamation's
willingness to allow the districts to view the documentation
relevant to the diversion rate. These reviews often lead to
frank discussions, but in the end result in a good relationship
and adequately funded operation, maintenance and replacement
budgets for the irrigation function at Grand Coulee.
The districts firmly believe that without this interaction
too many inappropriate costs would be charged against Grand
Coulee's irrigation diversion rate.
This type of review and interaction by the districts is
probably not possible for post-9/11 security costs. Those costs
result from Federal decisions based on classified intelligence
information related to national security. Irrigation districts
are not qualified or authorized to audit or interact in that
type of budgeting and accounting. These are Federal, not local
matters.
As mentioned earlier, power charges are about 43 percent of
our diversion rate. Irrigation pumping uses about 10 percent of
Grand Coulee's generation. Reclamation is telling us that our
share of the reimbursable guard and patrol costs will be about
that same proportion. They have also told us that for security
and clearance reasons they can't tell us exactly how these
costs are being allocated, so we really don't know.
Columbia Basin Districts believe the best way for Congress
to address this is to place a limit on the amount of guard and
patrol costs that are reimbursable and that Congress itself
exercise vigorous oversight of Reclamation spending for guard
and patrol functions. Such oversight should tend to keep the
future escalation of these costs within reasonable bounds.
If guard and patrol costs are to be permanently
reimbursable, the $10 million cap used for 2006 would be a
reasonable precedent. That cap could then be indexed for
inflation.
Thank you for your consideration.
[The prepared statement of Mr. Erickson follows:]
Statement of Richard L. Erickson, Secretary-Manager,
East Columbia Basin Irrigation District
Mr. Chairman and Members of the Subcommittee:
Thank you for the invitation to participate in this oversight
hearing on ``Securing the Bureau of Reclamation's Water and Power
Infrastructure''.
My name is Richard L. Erickson and I am the Secretary-Manager of
the East Columbia Basin Irrigation District. The East District along
with the Quincy and South Columbia Basin Irrigation Districts operate
the transferred works of the Bureau of Reclamation's Columbia Basin
Project. The three Districts and Reclamation are currently providing
irrigation water to approximately 670,000 acres in eastern Washington.
The source of water and pumping energy for the Columbia Basin
Project is Grand Coulee Dam on the Columbia River. Grand Coulee is a
CBP reserved works and, as such, is operated and maintained by
Reclamation. The three CBP Irrigation Districts advance to Reclamation
the annual O&M costs for Grand Coulee to pump water from Lake Roosevelt
to Banks Lake and to convey it through other reserved works into the
major canal systems that have been transferred to the Districts.
By way of illustration that advance this year, just for the Grand
Coulee Dam, Lake Roosevelt, Banks Lake components is $3,566,900. About
43% of that amount is for electricity to lift water from Lake Roosevelt
to Banks Lake. The budgeting and accounting procedures that determine
this payment are termed the ``diversion rate''. This diversion rate is
set by Reclamation's Regional Director after involving the three CBP
Irrigation Districts in the budgeting and accounting reviews.
All three Districts pay this diversion rate and it is to the power
component of this rate that Reclamation began adding a guard and patrol
security cost surcharge this year. The Boards of Directors of all three
Districts share a common view regarding the reimbursability of these
costs. I believe the comments I will present reflect that common view.
There has always been a small security component associated with
this diversion rate. However, until 9/11 these costs were for things
like fire protection and night watchmen. 9/11 obviously changed all
that.
The CBP Irrigation Districts do not dispute the need to defend
important hydroelectric facilities like Grand Coulee Dam. The attacks
of September 11th confirmed that foreign terrorists will go to great
lengths to destroy targets that are national cultural and economic
icons. The federal government is to be commended for taking these
defensive measures.
However, we believe national defense is a federal role, not a local
role. As was done after Pearl Harbor, and was done after September
11th, through 2005, these defense and security costs should be a
federal responsibility, paid for by all Americans. They should not be
the responsibility of irrigation rate payers and power rate payers
associated with specific federal projects that happen to have a high
target value for enemies of this country.
Beginning in 2006, Reclamation and Congress determined that guard
and patrol costs should become reimbursable. For 2006 this
reimbursability was capped at $10 million, Reclamation-wide. Our
understanding is that the 2006 decision contemplated the cap for 2006
only, full reimbursement would begin in 2007. The CBP Irrigation
Districts respectfully recognize that Congress is the final decision
maker in this matter and we realize there are many competing pressures
on the federal budget but we ask that Congress give further
consideration to this decision.
One point we believe needs further consideration is the equity of
the reimbursability of guard and patrol costs. The Columbia Basin is
the only project in the Pacific Northwest Region that will be subject
to reimbursable security costs. Similar situations exist in
Reclamation's other regions. That is because Grand Coulee Dam, Shasta
Dam and Hoover Dam and a few other of Reclamation's larger
hydroelectric projects have the most security needs. That creates a
disparity for irrigators farming on Reclamation's projects that depend
on these larger dams for their water supply if security costs are to be
reimbursable. Because of the large hydroelectric facility, these
farmers will pay extra charges for water compared to other farmers on
the rest of the 10 million acres using Reclamation water that don't
have these security concerns.
Another point about this reimbursability that we believe Congress
should consider is the ability to audit Reclamation's guard and patrol
costs. The CBP Irrigation District's believe we have a positive
relationship with Reclamation regarding our payment of the irrigation
diversion rate at Grand Coulee Dam. We believe one source of this good
relationship has been Reclamation's willingness to allow the District's
to review the documentation of the budgeting and accounting procedures
relevant to the diversion rate. These reviews often lead to frank
discussions and correspondence between the Districts and Reclamation
about some of the diversion rate decisions but, in the end, result in a
good relationship and adequately funded operation, maintenance and
replacement budgets for the irrigation function at Grand Coulee.
However, the Districts firmly believe that without this interaction too
many inappropriate costs would be charged against Grand Coulee's
irrigation diversion rate.
This type of review and interaction by the Districts is probably
not possible or appropriate for post-9/11 security costs at Grand
Coulee. Those costs, at least in part, result from federal decisions
based on classified intelligence information related to national
security. Irrigation District Boards of Directors and management are
probably not qualified or authorized to audit or interact in that type
of budgeting and accounting. These are federal, not local, matters.
Reclamation has decided to recover the Grand Coulee guard and
patrol costs by adding those costs to the cost of power production. As
mentioned earlier, power charges are about 43% of our diversion rate.
Irrigation pumping uses about 10% of Grand Coulee's generation.
Reclamation is telling us that our share of the reimbursable guard and
patrol costs will be about that same proportion. However, they have
also told us that for security and clearance reasons they can't tell us
exactly how these costs are being allocated. So we really don't know.
The CBP Irrigation Districts believe the best way for Congress to
address this is to place a limit on the amount of guard and patrol
costs that are to be reimbursable and that Congress itself exercise
vigorous oversight of Reclamation's spending for guard and patrol
functions. Such oversight should tend to keep the future escalation of
these costs within reasonable bounds.
If Congress decides that these guard and patrol costs are to be
permanently reimbursable, the $10 million cap used for FY 2006 would be
a reasonable precedent. That cap could then be indexed to somehow
adjust for inflation.
Thank you for your consideration.
______
Mr. Radanovich. Thank you, Mr. Erickson. Appreciate your
testimony.
Next is Mr. Thomas Graves. Mr. Graves, welcome to the
Subcommittee, and you may begin your testimony.
STATEMENT OF THOMAS GRAVES, EXECUTIVE DIRECTOR, MID-WEST
ELECTRIC CONSUMERS ASSOCIATION, WHEAT RIDGE, COLORADO
Mr. Graves. Thank you, Mr. Chairman and Members of the
Committee.
I am Thomas Graves, Executive Director of the Mid-West
Electric Consumers Association headquartered in Wheat Ridge,
Colorado.
Mid-West was founded in 1958, as the regional coalition of
consumer-owned electric utilities, Rural Electric Cooperatives,
municipal electric utilities, and public power districts that
purchase hydropower generated at Federal multi-purpose projects
operated by the United States Army Corps of Engineers and the
Bureau of Reclamation.
Since September 11, 2001, the Bureau has stepped up its
security at its multi-purpose projects throughout the West. The
security of Reclamation's national critical infrastructure
facilities is important to us as Federal power users as well as
to the entire country.
In April 2002, the Commissioner of Reclamation, following
historical precedent, deemed that the increased security costs
to be a Federal obligation. Subsequently the Bureau has engaged
in a back and forth policy over how these increased costs
should be treated.
In Fiscal 2003, Congress directed that only $10 million of
a $40 million budget be deemed the responsibility of project
beneficiaries.
Currently, the Bureau's report to Congress on security
costs indicates that the Bureau expects all of its 2007 costs
to be allocated amongst project purposes, with no cap on
reimbursable obligations.
To determine the obligation of each project purpose, the
Bureau has relied upon its operation and maintenance
allocations. It is an easy way to address the cost allocation
issue, but the methodology does not properly account for the
assessment of risk or the impact of threats.
The loss of a power house at a Bureau multi-purpose
facility in Pick-Sloan, while certainly not a wonderful event,
would be dwarfed by the loss of the dam itself. Yet hydropower
generation at Bureau facilities is looking at picking up almost
70 percent of the total reimbursable costs for security in
Pick-Sloan.
Municipal and industrial water, on the other hand, is only
expected to pick up $78,000 of costs. The loss of a dam and the
water supply for a community, the impact is immediate and
catastrophic. The loss of a power house can be replaced in the
short and midterm on the market.
We are looking for something that has some rationality in
it. Right now in Pick-Sloan for 2007, in the non-reimbursable
costs, Fish and Wildlife is going to be paying 40 percent or it
will have 40 percent of the costs allocated to it. It is a non-
reimbursable function. Recreation will only have $43,000
allocated to it.
I would suggest we need to develop a sensible method for
figuring out how we are going to allocate security costs, and
that has not been done yet. It seems to me there are two
components: one is the risk of the loss of the asset or loss of
life in the case of the destruction of the dam; the other is to
what extent does this project purpose potentially bring risk to
a dam.
In that regard, I doubt that Fish and Wildlife are much of
a treat to national security. I doubt that Recreation could be
much of a threat, but I would point out that Recreation brings
lots and lots of people to many facilities for recreational
purposes, which also increases the potential for some kind of
adverse action at the dam.
We would certainly support the concept of non-
reimbursability and note that many state and local governments
have received grants from the Federal government to cover much
of their security costs. Recently the Congress just enacted or
is considering--excuse me--some legislation having to do with
state and local wastewater treatment plants, and I think it was
about a $700 million program.
Congress needs to step in and establish some parameters for
the Bureau's security program. The lack of transparency makes
it absolutely impossible for the customers to make any kind of
rational assessment over what is appropriate, what is not
appropriate. Congress should require that the Bureau develop
cost allocations that better balance the risks among project
purposes, and the extent of security needed needs to be
reevaluated periodically.
In the region that I work for, the best security we have
are the people of that region. It is very difficult in the
upper Great Plains for a stranger to come into town and remain
a stranger. We do believe in security costs. We do believe in
the importance of the program, and we do not believe that those
costs are being accounted for properly at this time.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Graves follows:]
Statement of Thomas P. Graves, Executive Director,
Mid-West Electric Consumers Association, Wheat Ridge, Colorado
Good morning, Mr. Chairman. I am Thomas Graves, Executive Director
of the Mid-West Electric Consumers Association, headquartered in Wheat
Ridge, Colorado. Mid-West was founded in 1958 as the regional coalition
of consumer-owned electric utilities--rural electric cooperatives,
municipal electric utilities, and public power districts--that purchase
hydropower generated at federal multi-purpose projects operation by the
U.S. Army Corps of Engineers and the U.S. Bureau of Reclamation.
Mid-West members utilize federal hydropower marketed by the Western
Area Power Administration (Western) under the Pick-Sloan Missouri Basin
Program in nine states--Montana, Wyoming, Colorado, North Dakota, South
Dakota, Nebraska, Kansas, Minnesota, and Iowa.
Since September 11, 2001, the Bureau of Reclamation has stepped up
its security at its multi-purpose projects throughout the West. The
security of Reclamation's National Critical Infrastructure (NCI)
facilities is important to us as federal power users as well as to the
entire country.
In April, 2002, the Commissioner of Reclamation, following
historical precedent deemed the increased security costs to be a
federal obligation. Subsequently, the Bureau has been engaged in a
back-and-forth policy over how these increased security costs should be
treated. In Fiscal Year 2006, Congress directed that only $10 million
of a $40 million security budget be deemed the responsibility of
project beneficiaries.
Currently, the Bureau's report to Congress on security costs
indicates that the Bureau of Reclamation expects all of its 2007
security costs to be allocated amongst project purposes with no cap on
reimbursable obligations.
To determine the obligation of each project purpose, the Bureau has
relied upon its Operations and Maintenance allocations. While an easy
way to address the cost allocation issue, this methodology does not
properly account for assessment of risk or impact of threats. The loss
of a power house at a Bureau multi-purpose facility, while certainly
not a happy event, would be dwarfed by the loss of the dam. Hydropower
generation at a Bureau facility can be offset in the short and mid-
term. Loss of drinking water for a community is immediately
catastrophic; yet, in Pick-Sloan only $78, 647 has been allocated to
municipal and industrial water.
In the Pick-Sloan Missouri Basin Program, federal power customers
will be responsible for repaying 50% of the $1.87 million in total
projected costs for 2007. Power's share of the $1.4 million allocated
to reimbursable project purposes is $936,000--just over 67%.
Understandably, the Bureau moved aggressively to protect national
assets when the terrorist threat emerged. But now is the time to
address a more equitable allocation of costs of this new security. That
consideration must be open and transparent. The Bureau has claimed
security concerns in protecting some data. No one is interested in
compromising the security of these sites but as the project
beneficiaries responsible for the lion's share of these costs; we do
feel a right to have a proper cost accounting.
Congress needs to step in and establish some parameters for the
Bureau's security program. The Bureau should be required to report
annually to Congress on its security activities and costs. Congress
should require the Bureau to develop cost allocations that better
balance risks among project purposes. The extent of security needed
should be reevaluated periodically.
______
Mr. Radanovich. Thank you, Mr. Graves.
Mr. Harrington, representing the great Central Valley of
California.
STATEMENT OF RUSS HARRINGTON, FINANCIAL DIRECTOR, CENTRAL
VALLEY PROJECT WATER ASSOCIATION, SACRAMENTO, CALIFORNIA
Mr. Harrington. Mr. Chairman and Members of the
Subcommittee, I appreciate this opportunity to appear before
you to discuss the issues concerning site security for the
Bureau of Reclamation's water and power infrastructure.
My name is Russ Harrington. I am the Finance Director of
the Central Valley Project Water Association. The Central
Valley Project Water Association represents the interests of
approximately 300 agricultural and municipal and industrial
water contractors. These contractors serve numerous agencies
and communities that are located in and near the Central Valley
of California.
Our water contractors are very concerned about the current
trend pertaining to the reimbursability of these site security
costs. From program inception in 2002 through last year, these
costs remain non-reimbursable. This year Congress determined
that 10 million should be subject to reimbursability. The
Administration is requesting that the guards and patrols
portion of these security costs be fully reimbursable in 2007.
If the 2007 guards and patrols budget does not change from
the 2006 level of 20.9 million, this would represent an annual
cost increase of slightly more than 100 percent.
In addition, Reclamation has announced plans to declare the
O&M and replacement aspects of the capital hardening cost to be
reimbursable costs as well. For all practical purposes, this
means that the capital items become reimbursable as originally
purchased equipment becomes worn or obsolete and is replaced.
The writing on the wall is clear. Through these proposed
year-over-year increases in O&M reversibility and proposed
reimbursability designation for the replacement of capital
items, Reclamation has shown an intent to make the majority of
the site security costs reimbursable.
Contractors feel that this is inappropriate. We still
believe that historical precedent and Federal government
responsibility support a fully non-reimbursable cost
allocation.
The activities and programs funded by these costs are a
direct response to the threat of foreign terrorism. National
defense is the explicit constitutionally required obligation of
the Federal government. We feel that the Federal government
should bear funding responsibility for specific constitutional
obligations.
Additionally, Reclamation law has traditionally allocated
costs for the benefit of the general public is non-
reimbursable. Flood control, navigation, and recreation
expenditures are clearly defined as costs incurred for the
benefit of the general public, and these costs are not charged
to Reclamation's contractors.
Security costs are yet another expenditure for the benefit
of the general public. The established precedent should dictate
that these costs be allocated as non-reimbursable public safety
benefits.
If Congress is unable to make these costs completely non-
reimbursable, then we feel that there are much more appropriate
alternatives to the reimbursability allocation proposal by
Reclamation.
One alternative would be to the proposal first put forth by
the Colorado River Energy Distributors Association, on which I
would defer to them to discuss further. Another alternative
method will be to use another of Reclamation safety programs as
the baseline for determining the reimbursability of these
security costs.
We believe that there are compelling reasons to use
preexisting legislation and Reclamation's safety of dams
program as such a benchmark. Both the safety of dams and
security activities are for the explicit purpose of protecting
the structural integrity of Reclamation facilities. Both
programs are explicitly prohibited from creating additional
project benefits, and are intended only to preserve the
existing project features. Thus the sole purpose of both
programs is safety.
Congress recognized the primary purpose of safety when the
reimbursability criteria of 15 percent was determined for the
safety of dams programs. Because the site security costs are
also for the purpose of safety, we believe that the same
reimbursability of 15 percent is a reasonable determination.
The other issue I would like to mention is the inability of
contractors to get information regarding the activities which
they are being asked to fund. Contractors have been given no
information regarding the equipment and activities that have
been implemented through either the reimbursable or non-
reimbursable components of this budget. At the same time
contractors understand the need to refrain from divulging this
information to the general public.
For this reason, contractors would appreciate the
Subcommittee's assistance in directing Reclamation to examine
methods for providing security cost information to contractors
without sacrificing necessary security protocols.
We believe that the inability to disclose the nature of
these costs is yet another reason that the majority of these
costs should not be subject to reimbursability.
Thank you for providing the CVP Water Association with the
opportunity to testify. I will be happy to answer any questions
that you might have, to the best of my ability.
[The prepared statement of Mr. Harrington follows:]
Statement of Russell P. Harrington, Finance Director,
Central Valley Project Water Association
Chairman Radanovich and Members of the Subcommittee:
My name is Russ Harrington, and I am the finance director for the
Central Valley Project Water Association. The Central Valley Project
(CVP) Water Association represents the interest of approximately 300
agricultural and municipal and industrial districts that have water
service contracts with the CVP in California.
The CVP is the nation's largest Bureau of Reclamation project. Our
membership covers a geographic region of 450 miles from Redding in the
north to Bakersfield in the south, and includes several municipalities
to the east and south of the San Francisco Bay. Each year, these
districts utilize CVP water supplies to meet the needs of 3 million
acres of farm land (comprising 1/3 of the total agricultural land in
California) and 1 million households. The CVP Water Association works
to preserve and protect CVP water supplies and ensure that these water
supplies are dependable and affordable.
On behalf of the CVP Water Association, I would like to thank the
committee for the opportunity to present our viewpoint. Because my
knowledge and background regarding this issue are concentrated in the
financial aspects of the CVP and Reclamation, I will confine my
comments to the financial implications of the Site Security costs.
Ultimately, it is our hope that an equitable solution to the site
security issue can be reached that will not excessively burden any
stakeholder group.
Observations and Concerns
The purpose of the proposed incremental Site Security cost measures
is the protection of the general public, which includes numerous other
entities beyond the Water and Power Contractors (Contractors) of the
Bureau of Reclamation. No additional capacity for water supply, power
generation, flood control, or any other authorized Reclamation project
purpose is created by any of these measures. Protecting against foreign
(or domestic) attack is one of the primary obligations of the Federal
Government, and national defense is the specific responsibility of the
Federal Government. As such, we believe that the Federal Government
should accept its constitutionally-mandated obligation and bear the
primary cost burden for its responsibility.
The various authorizing legislations for different components of
the CVP and other Reclamation facilities clearly distinguishes between
expenditures that are for the purposes of Water Supply or Power
Generation and expenditures that are for general public benefits such
as Flood Control and Navigation. It is long recognized within
Reclamation Law that expenditures for which the general public is the
beneficiary should be assessed to the general public and not to
Contractors. As an expenditure on behalf of the general public, it is
reasonable that Site Security costs should be accredited similar non-
reimbursability status. Moreover, Contractors already pay a share of
national defense costs through their personal and business income
taxes. Billing these Contractors a specific share of these costs again
through the water and power rates forces them to pay twice for these
costs.
The CVP Contractors are concerned about the recent trend in
proposed changes to the reimbursability criteria for the security cost
budget. As the Subcommittee is aware, the current year marks the first
instance in which a portion of the security costs are specifically
allocated for repayment by Contractors. From 2002 through 2004, all of
the incremental security costs were non-reimbursable. In 2005, the
Administration requested that the guards and patrols portion of the
Site Security costs be made fully reimbursable. However, Congress
declined this request pending the completion of a report pertaining to
these costs by the Bureau of Reclamation. For 2006, Congress agreed to
the Administration's request to make a portion of these costs
reimbursable. However, Congress limited the reimbursability of these
guards and patrol costs by providing a $10 million ceiling on the costs
that would be subject to reimbursability.
While $10 million has been allocated among the Reclamation projects
in the current year, the Administration has again requested that the
full costs of the guards and patrols component of these costs be
subject to Contractor reimbursability in 2007. Reclamation's Security
Cost report issued in May 2006 projected the guards and patrols portion
of the Site Security costs at $20.9 million in 2006. Unless the guards
and patrols costs budget will decline from 2006 to 2007, allocating all
guards and patrol costs to Contractors would create a year-over-year
cost increase to Contractors of slightly more than 100%.
Contractors have additional concerns regarding the Facility
Fortification, or ``capital hardening'' costs, which were outlined in
this report. Reclamation indicated that there are no current plans to
charge Contractors for the original Facility Fortification costs.
However, Reclamation has also taken the position that the operations,
maintenance, and replacement costs for these Facility Fortifications
will be reimbursable. On a de facto basis, the impact of this decision
would be to convert the capital hardening costs from non-reimbursable
to reimbursable status as the original equipment and facilities are
used and eventually replaced.
Reclamation has also raised the possibility that additional Site
Security costs may be needed in the future, and that these incremental
costs may be added to the Contractors' repayment responsibility.
Contractors have been informed that Reclamation may increase the level
of security requirements and expenditures due to unforeseen
circumstances. Specific details were not provided, but no limits on the
potential increases were defined. The possibility of limitless security
cost increases is a significant concern to Contractors. While
Contractors may be required to pay an increasing share of these costs,
it is worth noting again that Contractors are given very little
information regarding the activities that these expenditures are
funding. Contractors readily acknowledge that there are legitimate
national security concerns that prevent release of classified security
information to the general public. At the same time, we believe that it
is reasonable for Contractors to be given an indication of the security
measures that they are financing.
Recommendations for Consideration
For the reasons that have been noted in this document, the CVP
Water Association maintains that a decision to declare the majority of
the security costs reimbursable would not be equitable. We recommend
that the following alternatives be considered:
1. It is appropriate for the Federal Government to finance in full
its obligation for National Defense. It is not any more appropriate to
charge Contractors for this Federal Government responsibility than it
is to charge the cities of New York or Washington DC for the security
enhancements accorded these areas. Throughout the history of
Reclamation, the authorizing legislations have repeatedly and clearly
established the precedent that costs benefiting the general public
should be non-reimbursable. We do not see any justification for
deviating from that precedent here, and believe that full non-
reimbursability is warranted.
2. The reimbursability criteria offered through a Position
Statement from the Colorado River Energy Distributors Association
(CREDA) regarding Security Costs represents another viable alternative.
This alternative would permanently establish the $10 million
reimbursability level that was determined by Congress to be appropriate
during the 2006 Fiscal Year. The CVP Water Association supports the
principles regarding the Site Security costs that have been assembled
by CREDA.
3. As another alternative for determining reimbursability,
Contractors suggest that the reimbursability allocations that have been
legislated for the Bureau of Reclamation's Safety of Dams program can
also be used as the basis for allocating these Site Security Costs.
There are several significant parallels in both scope and purpose
between the Site Security and Safety of Dams programs. As is the case
with the security costs, the Safety of Dams program exists for the sole
purpose of public safety. The Safety of Dams program is prohibited from
creating new benefits such as water supply, power generation, or flood
control, which is also the case with the incremental security measures.
The Safety of Dams program authorizes activities to prevent seismic,
hydrologic, and structural damage to Reclamation dams. The security
costs have also been incurred for the purpose of preventing structural
damage to Reclamation Dams as well as selected other facilities. Within
the Safety of Dams program, the cost share that is subject to
reimbursability by Contractors is 15%. This 15% reimbursability level
represents a Congressionally established, pre-existing standard for
other public safety costs such as Site Security. We believe that the
reimbursability guidelines of the Safety of Dams program offer a
reasonable precedent for determining the reimbursable level for Site
Security costs.
Contractors should also be given the opportunity to obtain more
detailed information on the activities that are being funded with these
Site Security expenditures. We understand that these activities cannot
be divulged to the general public. At the same time, we believe that
Contractors have a right to a reasonable description and justification
of the activities that they are asked to help fund. We don't want to
propose specific suggestions for providing Contractors with information
prior to a review of the need to maintain the confidentiality of
specific security measures. We would appreciate the support of this
committee in asking Reclamation and other appropriate Federal Agencies
to determine appropriate methods for providing more comprehensive
activity/cost information regarding these Site Security costs to
Contractors.
Conclusion
In closing, I would like to reassert that it is inequitable to
assess Contractors for a disproportionate share of a national security
activity, which is undertaken for the benefit of general public safety.
We do not believe that it is appropriate to bill Contractors a
predominant share of the cost for an activity that does not increase
the amount or quality of water or power deliveries, and which
Contractors already pay through their business and personal federal
income taxes. This is particularly true in circumstances where
Contractors are not given a detailed accounting of the activities and
facilities that are supported with this funding. If Contractors are to
be allocated a portion of these Site Security costs, then Contractors
should be given better information regarding the activities toward
which they are contributing their payments.
In the event that Congress is unwilling to make these costs fully
non-reimbursable, the CVP Water Association proposes that the
reimbursability for the Site Security costs be determined along either
the guidelines established by CREDA or the same guidelines as that
utilized in the Safety of Dams program. The CREDA proposal is based on
an extension of the reimbursability standard that Congress determined
to be appropriate for the current year. As an alternative to the CREDA
proposal, pre-established and equitable cost share standards for public
safety costs--such as the Site Security costs--already exist within the
Safety of Dams program.
Again, thank you for providing the CVP Water Association with the
opportunity to testify today. I would be more than happy to answer any
questions that you may have.
______
Mr. Radanovich. Thank you, Mr. Harrington.
Next, Mr. Lutgen, welcome to the Subcommittee.
STATEMENT OF WILL LUTGEN, EXECUTIVE DIRECTOR, NORTHWEST PUBLIC
POWER ASSOCIATION, VANCOUVER, WASHINGTON
Mr. Lutgen. Good morning, Mr. Chairman and Members of the
Committee.
My name is Will Lutgen, and I serve as the Executive
Director of the Northwest Public Power Association. We
appreciate this opportunity on behalf of our members to comment
on the Bureau of Reclamation's security measures on national
critical infrastructure facilities.
NWPPA is a nonprofit association serving approximately 150
cooperatives, municipalities, public utility, peoples' utility
districts in western states. Our name has become somewhat of a
misnomer as we now have members in Alaska, Arizona, California,
Idaho, Montana, Nevada, South Dakota, Oregon, Washington, and
Wyoming. We even have a couple of members in Canada. Our
members serve some 5 million consumers in the western United
States and employ some 20,000 individuals.
I have submitted my full testimony for the record, so I
will just make a few comments on some key points.
The Pacific Northwest is still recovering from the energy
crisis of 2000-2001, and we have been working very hard to
contain costs with the Bonneville Power Administration.
Bonneville's rates are affected by many factors, including a
drought with the exception of this past year, fish and wildlife
obligations and contracts with our direct service industries.
As stewards of the public trust, we would like to make sure
that the cost of the Bureau's enhanced security measures at
Grand Coulee Dam, which also affect our rates, receive
congressional security and are fair to all ratepayers. I would
like to make four key points with regard to increased security
costs.
As some of the other speakers have indicated, given the
national security interests at stake we think there is good
reason for Congress to decide that funding of post-9/11
reclamation security measures remain a non-reimbursable Federal
obligation and be subject to congressional oversight.
Under the current situation, NWPPA is concerned that there
are no cost controls, authorized ceiling, sunset data, or
congressionally approved parameters to limit or control the
amount of money Reclamation can spend on increased security. We
believe Congress should authorize and appropriate spending
parameters for this program.
Third, project beneficiaries have no meaningful input into
the discussions about Reclamation security cost programs. We
understand that even some congressional staffers have been
denied crucial information regarding these costs.
Fourth, the Reclamation facilities provide for flood
control, water supply, recreation, and other benefits. If a
portion of the cost controls are made reimbursable, they should
be allocated fairly among all beneficiaries and capped to
ensure accountability.
For example, on the subject of allocating costs fairly, in
May of 2005, Reclamation reports that the Columbia River Basin
customers paid $2.34 million of $2.42 million for guards and
controls, or approximately 92 percent of reimbursable cost,
despite the fact that this multi-purpose facility serves many
functions.
More recently, in a 2006 report to Congress, Reclamation
stated its policy that the cost of guards and patrols should be
reimbursed by consumers, and added language that would also
make the cost of maintaining and replacing the newly fortified
facilities as reimbursable. Thus Reclamation's definition of
reimbursable O&M is expanding in its scope.
Further concerns have been repeatedly expressed to
Reclamation about the program's lack of information and
transparency, lack of objective criteria, and lack of spending
controls and an inequitable allocation of cost. NWPPA now
believes that Congress should expressly authorize Reclamation's
site security program and ensure accountability to Congress and
provide cost certainty to funding stakeholders throughout an
equitable and durable allocation of cost.
For that reason we are watching with interest as
alternatives such as those that are being described today or
proposed and pursued.
In conclusion, NWPPA members believe in being responsible
stewards of facilities and paying for their fair share of
costs. We are not seeking to circumvent our responsibilities.
However, we firmly believe that the burden our power customers
are being asked to shoulder for these counter-terrorism
measures is above and beyond normal O&M costs.
Thank you again for the opportunity to testify today. I
look forward to answering any questions you might have.
[The prepared statement of Mr. Lutgen follows:]
Statement of Will Lutgen, Executive Director,
Northwest Public Power Association (NWPPA)
Good morning Mr. Chairman and Members of the Committee. My name is
Will Lutgen, Jr. and I am the Executive Director of the Northwest
Public Power Association (NWPPA). I appreciate this opportunity to
testify on behalf of NWPPA on the Bureau of Reclamation's (Reclamation)
security measures at National Critical Infrastructure facilities.
NWPPA is a non-profit association of approximately 150 public/
people's utility districts, electric cooperatives, municipalities and
crown corporations in the Western states--including Alaska, Arizona,
California, Idaho, Montana, Nevada, South Dakota, Oregon, Utah,
Washington and Wyoming--and in Alberta and British Columbia, Canada.
NWPPA also serves the sales and networking needs of over 200 Associate
Members across the U.S. and Canada who are allied with the electric
utility industry.
Our utility members serve some five million consumers in the
Western U.S. and employ some 20,000 individuals. The association was
formed in 1940, when public power municipal utilities, public power
utility districts and rural electric cooperatives decided they needed
one regional organization to represent their interests. Since those
early days, NWPPA has been an advocate for public power in the Pacific
Northwest region and has provided services tailored specifically to
member needs. NWPPA exists to enhance the success of its members
through education, training, public information, governmental relations
and value added services.
In the Northwest, we are still recovering from the energy crisis of
2000-2001 and we have been working hard to control Bonneville Power
Administration's (BPA's) costs. Bonneville's rates are affected by many
factors, including drought, fish and wildlife obligations and contracts
with the direct service industries. As stewards of the public trust, we
are trying hard to make sure these security costs, which also affect
our rates, receive the needed scrutiny and are fair to our ratepayers.
I would like to make four key points today:
1. Given the national security interests at stake, funding of
post-9/11 Reclamation security measures should remain a non-
reimbursable federal obligation and be subject to congressional
oversight.
2. NWPPA is concerned that there are no cost controls,
authorization ceiling, sunset date, or Congressionally-approved
parameters to limit or control the amount of money Reclamation can
spend for increased security. To date, Congress has appropriated more
than $158 million for Reclamation's increased security activities, and
Reclamation is asking for nearly $40 million more in the President's FY
2007 budget. Congress should authorize appropriate spending parameters
for this program.
3. Project beneficiaries have no meaningful input into discussions
about Reclamation's security cost program. Even Congressional staff
have been denied critical information regarding these costs for
national security concerns.
4. Reclamation facilities provide people with flood control, water
supply, recreation and other benefits. If a portion of the security
costs are made reimbursable, they should be allocated among all
beneficiaries and capped to ensure accountability.
Let me briefly describe the history of this program and how NWPPA
has come to arrive at the conclusion that Congressional intervention is
necessary to end this ongoing battle between the Bureau and its power
customers.
As you may recall, immediately after September 11, 2001, the Bureau
of Reclamation (Reclamation) aggressively increased security and anti-
terrorism measures at federal multi-purpose dams. Consistent with
federal policies adopted during World War II, the Commissioner of
Reclamation in April 2002 determined that these increased security
measures were a matter of national security and, therefore, the costs
should be paid by the federal government.
In the Administration's FY 2005 budget request, Reclamation changed
position and sought to recover a significant part of increased security
costs from project beneficiaries. Specifically, Reclamation sought to
make costs of increased guards and patrols reimbursable by customers.
In response, Congress in FY 2005, directed Reclamation: 1) to submit a
report detailing its new proposal, on a region-by-region and project-
by-project basis; and 2) not to implement its new reimbursability
policy until directed by Congress to do so. Therefore, all of the FY
2005 costs for increased security remained a federal expense.
A Reclamation report in May 2005 indicated that for the Columbia
River Basin, power customers would pay $2.34 million of the $2.42
million in costs for guards and patrols--approximately 92% of
reimbursable security costs, despite the fact that this multi-purpose
facility serves many functions and provides benefits to many user
groups. Reclamation's rationale for this allocation is that this is how
the agency allocates all operation & maintenance (O&M) costs for its
Columbia River projects, and it regards costs for increased guards and
patrols as an O&M expense.
In FY 2006, Congress allowed $10 million of the $19.6 million in
costs of guards and patrols at all Reclamation dams to be recovered
from project beneficiaries. However, Congress recognized that ``all
project beneficiaries that benefit from an enhanced security posture at
the Bureau's facilities should pay a share of the security costs'' and
directed Reclamation to submit ``a delineation of planned reimbursable
security costs by project, pro-rated by all project purposes.''
In the Administration's FY 2007 budget, Reclamation requested a
total of $18.9 million in reimbursable security costs from customers to
cover costs of guards and patrols. Reclamation plans to recover $11.6
million from power customers and approximately $7.3 million from other
project beneficiaries, such as irrigation, municipal and industrial
water users etc. Again, power is being asked to pay a disproportionate
share. No project by project breakdown of the FY 2007 reimbursable
costs is available at this time. However, in a February 2006 report to
Congress, Reclamation restated its policy that costs of guards and
patrols should be reimbursed by customers and added language that would
also make all the costs of maintaining (O&M) the newly fortified
facilities reimbursable. Thus, Reclamation's definition of reimbursable
O&M is expanding.
Currently, the Bureau is spending about $50 million per year on
enhanced security costs West-wide and is trying to recover about half
of that from water and power customers, mostly from power. For example,
in FY 2006 the Bureau sought to recover almost $5 million from BPA
customers for enhanced security at Grand Coulee. It is seeking a
similar amount in FY 2007 and there is no authorization cap on the
program.
We, as preference customers, have been fighting unsuccessfully with
the Bureau to have these security costs be fully non-reimbursable, that
is remain a federal obligation. Despite some initial positive signals,
a number of organizations representing Bureau water and power
customers, including NWPPA, no longer believe that it is possible to
reach a workable solution in dealing with the agency alone. For that
reason we are watching with interest as alternatives, such as those
being described here today, are proposed by others in the industry.
Further, concerns have been repeatedly expressed to Reclamation
about the security cost program's lack of information and transparency,
lack of objective criteria, lack of spending controls and inequitable
allocation of costs, and lack of Congressional authorization. We
understand that the nature of security costs does not allow for a full
review and comment by customers; however, allowing a limited review by
signing non-disclosure agreements or obtaining security clearances is
no substitute for the certainty that can be provided through a cost
cap.
Specifically, NWPPA now believes that Congress should expressly
authorize Reclamation's site security program to ensure accountability
to Congress and to provide cost certainty to funding stakeholders
through an equitable, durable allocation of costs.
Such legislation should:
1. Direct Reclamation to report annually to the House and Senate
Committees on Homeland Security, Resources and Energy and Natural
Resources, and Appropriations on security actions and activities
undertaken in the prior fiscal year and proposed for the upcoming
fiscal year and the sources and expected sources of reimbursable and
non-reimbursable funding for each action;
2. Provide that funding stakeholders will reimburse costs of
guards and patrols at National Critical Infrastructure (NCI) facilities
up to a level that does not exceed the FY 2006 Congressionally-approved
level of $10 million, indexed for inflation;
3. Specify that such reimbursable funds be spent only on guards
and patrols at NCI facilities and allocated among NCI facilities in the
same manner as they were allocated by Reclamation in FY 2006;
4. Provide that, in the event of a change in the level of a
national security threat, Reclamation will immediately notify Congress
and, with funding customers, seek approval of Congress to adjust the
reimbursable costs for guards and patrols until such time as the threat
level changes; and
5. Require the Bureau to allow stakeholder review and input on
work program elements of the entire security cost program on at least a
five-year planning horizon, detailed by pre- and post-9/11 and by
category (e.g., fortification, guards and patrols, etc.).
In conclusion, NWPPA members believe in being responsible stewards
of the facilities and for paying their fair share of the costs. We are
not seeking to circumvent our responsibilities. However, we firmly
believe that the burden our power customers are being asked to shoulder
for these counter-terrorism measures are above and beyond normal O&M
functions. Moreover, protection of these multi-purpose facilities,
which provide important flood control, water storage for irrigation,
municipal and industrial users, recreation and environmental mitigation
benefits and power generation is in the national interest and,
therefore, should remain a federal obligation. The post-911 security
costs appear to be intended to mainly protect the multi-purpose
facilities, and failure of these facilities would have the greatest
impact to the public at large.
______
Mr. Radanovich. Mr. Lutgen, thank you for your testimony. I
appreciate that.
Next is Mr. Jay Moyes. Mr. Moyes, welcome to the
Subcommittee.
STATEMENT OF JAY MOYES, ATTORNEY AT LAW, MOYES STOREY, PHOENIX,
ARIZONA [REPRESENTING ARIZONA WESTSIDE IRRIGATION AND
ELECTRICAL DISTRICTS], ACCOMPANIED BY LESLIE JAMES, EXECUTIVE
DIRECTOR, COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION,
TEMPE, ARIZONA
Mr. Moyes. Good morning, Mr. Chairman, Members of the
Committee.
Our Westside Irrigation and Electrical Districts group
includes nine farming districts in West-Central Arizona, but we
believe our positions are representative of the numerous
hydropower customers in Arizona.
These districts have small allocations of Hoover and Glen
Canyon hydropower to meet only a portion of the farmers total
electric needs. In some cases, our districts' farms and dairies
provide the only economic base for outlying rural communities
that have not urbanized like other once-farmed portions of
Arizona. Their survival depends heavily upon the affordability
of Federal hydropower.
Mr. Chairman, we share Reclamation's concern for protecting
our country's national critical infrastructure, or NCI
facilities as they have been referred to, and we support
prudent security measures and increases at key multi-purpose
dams.
After 9/11, the Commissioner of Reclamation recognized that
enhanced security at NCI facilities was vital to the national
interests. Accordingly, in 2002, he appropriately designated
the costs of new anti-terrorist measures to be a national
obligation. However, as has been mentioned, the
Administration's Fiscal 2005 budget directed him to charge
project beneficiaries for the new guards and patrols, some $21
million in that year, of which power customers were to pay
about 94 percent.
The customers objected citing precedent from Pearl Harbor
days that such expenditures in the national interest should
remain a Federal responsibility. We also challenged the
inequitable allocation of cost to power customers compared to
other beneficiaries.
As has been mentioned and you know, benefits from
Reclamation dams are wide and they support many good purposes,
the least of which may be power generation and statutory
priorities.
Obviously, the new security measures protect all features
of the dams, not just the generators. If, for example, Hoover
Dam were to be breached, the power generators would in fact and
power customers would be the least catastrophically impacted.
Reclamation's allocation to power consumers of these costs was
not based on risk of loss analysis, but simply administrative
convenience. They just used the normal O&M formula which
charges power users the lion's share.
The policy behind that formula has existed for decades, but
I don't think it ever contemplated defending dams from
terrorists.
Reclamation follows its standard O&M allocation simply
because there is a ready mechanism for easy pass-through of
these costs in the power rate-setting process, but ease of
administration should not be the reason that the bulk of these
ever-increasing security costs are dumped on power consumers.
We also voice concern about the program's lack of
transparency and lack of spending controls, as others have
mentioned. In response, Reclamation has offered to consider
security clearances, allowing a few customers, myself included,
to see sensitive details under nondisclosure restrictions. This
appreciated and well-intentioned offer, however, is
insufficient because it precludes such data from the rate
proceedings where these costs are imposed on us, and would not
allow customers a meaningful role in determining the costs they
are to bear.
There is no congressional authorization for and no limit on
Reclamation's future spending. As of April 30 this year they
have spent over $158 million on this new program, for Fiscal
2007, they seek nearly $40 million; and finally, there are no
boundaries on which costs they can unilaterally designate as
reimbursable.
Despite concerns expressed by Congress in 2005, Reclamation
submitted a February 2006 report expanding the scope of
reimbursable costs beyond guards and patrols, to add what they
call OM&R on upgrades to fortifications. The R being
replacement.
There has been no discussion of what might yet be fitting
into that definition, and we are, frankly, hard-pressed to
think of any expense of this program that couldn't arguably be
included in the phrase ``OM&R of dam fortifications.'' This
kind of blank check expansion is a material policy shift from
Reclamation's May 2005 report to Congress.
In closing, we believe Congress should vigorously oversee
this program and that funding stakeholders deserve a meaningful
role. To this end, we recommend that Congress legislatively
authorize the program to ensure oversight, allocation equity,
and some cost certainty for the stakeholders.
In brief, we think such legislation should require annual
reporting to Congress of both past and future expenditures, it
should limit stakeholder reimbursement to only costs of guards
and patrols at NCI facilities, not to exceed $10 million, a
level that could be adjusted only by Congress in the event of
changes in the threat level, and that it ought to be allocated
equally among beneficiaries, and finally, it should require a
measure of stakeholder input on some kind of a multi-year
planning horizon.
We recognize the difficulty in achieving these objectives
and are willing to work with the Bureau to accomplish them.
Mr. Chairman, the Westside Districts appreciate your
interest in this issue. We recognize these uncertain times
require increased security at these facilities, and we are
willing to bear our equitable share of this national cost
responsibility.
Thank you for your attention. I would be happy to answer
questions at the appropriate time.
[The prepared statement of Mr. Moyes follows:]
Statement of Jay Moyes, Esq., on Behalf of the
Arizona Westside Irrigation and Electrical Districts
Good morning, Mr. Chairman and Members of the Committee. My name is
Jay Moyes. I am here representing the Arizona Westside Irrigation and
Electrical Districts, on whose behalf I thank you for holding this
important hearing on the Bureau of Reclamation's (Reclamation) Building
and Site Security program.
The Westside Districts are an informal coalition of nine
agricultural districts located in Arizona's Maricopa, La Paz and Yuma
Counties. They contract for federal hydropower generated primarily at
the Hoover and Glen Canyon Dams, and use that power predominantly to
pump irrigation water. The Westside Districts are also members of, and/
or work in coordination with, other Arizona and regional organizations
such as the Colorado River Energy Distributors Association (CREDA), the
Irrigation and Electrical Districts of Arizona (IEDA), and the Arizona
Agri-Business Council (ABC) to address water and power policy issues.
As you know, Mr. Chairman, immediately after the September 11, 2001
attacks, Reclamation instituted an aggressive program to step-up site
security and anti-terrorist measures at federal multi-purpose dams,
including Hoover and Glen Canyon. We share Reclamation's concern for
the security of our country's ``National Critical Infrastructure''
(NCI) facilities, and we applaud the agency for taking steps to lower
the risk of attacks at these dams.
Consistent with federal policy adopted following the attack on
Pearl Harbor, the Commissioner of Reclamation recognized that enhanced
security measures to protect Reclamation's key water and power projects
were vital to the national interest. Accordingly, in April 2002, he
administratively determined that the costs of these new security
measures were appropriately a federal obligation.
However, the Administration's FY 2005 budget directed Reclamation
to shift course and, instead, charge the project beneficiaries for the
costs of additional guards and patrols. In FY 2005, the cost of those
services was $20,923,000 million, of which power customers were to pay
approximately 94 percent. Federal power customers objected, citing
legislative precedent establishing that such expenditures were in the
broader national interest and should remain a federal responsibility.
They also challenged the inequitable allocation of the increased costs
to power users.
It is a fundamental fact that Reclamation's security measures are
intended to protect all features of the projects, not just power
generation. Actually, if a terrorist attack were to successfully breach
Hoover Dam, for example, the power users would, in relative terms,
likely be the least catastrophically impacted among all beneficiaries
of the dam. Yet power customers are being burdened with nearly all of
the reimbursable costs of the new security measures.
Reclamation's disproportionate allocation of the reimbursable
security costs to power customers was not based on any objective risk
analysis. Instead, Reclamation simply decided that the costs of beefed
up guards and patrols should be allocated according to the formula it
uses to allocate normal Operation and Maintenance (O&M) costs at each
project. That formula, which prescribes that power users pay the lion's
share of the reimbursable O&M, was established many years ago and
certainly did not take into account the need to protect these
facilities from terrorist attack.
Reclamation defaulted to the standard O&M allocation formula for
the simple reason of administrative convenience. Although benefits from
Reclamation dams are widely distributed among flood control,
recreation, water supply, and fish & wildlife purposes--in addition to
power generation--there is generally no existing statutory
authorization or contractual mechanism that readily facilitates
Reclamation's equitable assessment of security costs to the other
project beneficiaries. Nevertheless, merely because there is a
contractual rate-setting mechanism for easy pass-through of increased
security costs to only power customers does not make such a
disproportionate pass-through either legally or equitably appropriate.
In addition to the inequitable cost allocations, we are also
concerned about the program's lack of transparency and the absence of
spending controls.
In response to expressed concerns about lack of transparency,
Reclamation has informed customers that it would consider providing
security clearances for a limited number of project customer
representatives to access sensitive program data, subject to non-
disclosure restrictions. We appreciate this well-intentioned offer; but
it does not suffice, because it would preclude the use of such data in
the rate-making proceedings, where the costs are imposed on power
customers, and it would not otherwise provide customers any substantive
role in determining the magnitude of security costs they are to bear.
With regard to lack of spending controls, the customers have
several additional concerns. First, there is no Congressional
authorization for the program, and no limit on Reclamation's future
spending. As of April 30, Reclamation has spent more than $158 million
on its post-9/11 Building and Site Security program. For FY 2007,
Reclamation has requested $39,600,000--$18.9 million of which
Reclamation intends to impose upon customers.
Second, and potentially most troubling to us, is the lack of any
boundaries on what Reclamation can unilaterally designate as
``reimbursable'' costs to be repaid by power customers. Despite
numerous expressions of Congressional and customer concern, Reclamation
submitted a February 2006 report to Congress highlighting its plan to
expand the scope of reimbursable costs beyond simply guards and patrols
to also include future OM&R on program ``upgrades to dam
fortifications.'' There has been no discussion of this expansion with
customers and no further definition of what might ultimately be
included in ``OM&R'' on dam fortifications. Does it include replacement
of security cameras that fail? Or a second layer of dam hardening? Or
integration of future equipment technology advances? In fact, power
customers are hard-pressed to think of any expense that might not
arguably be categorized as OM&R of dam fortifications. Such a ``blank
check'' approach to open-ended reimbursable costs constitutes a
material shift in policy from that articulated in the report
Reclamation provided to Congress in May 2005, and from a briefing
Reclamation provided to some customers in December 2005.
The Westside Districts believe that Congress should exercise
vigorous oversight of this important program, and that funding
stakeholders should have a meaningful opportunity to participate in
program planning and implementation. To this end, we recommend that
Congress legislatively authorize Reclamation's Building and Site
Security program to ensure effective Congressional oversight and to
provide cost certainty to funding stakeholders through an equitable
allocation of costs.
Such legislation should:
Direct Reclamation to report annually to Congress on
security actions undertaken in the prior fiscal year and proposed for
the upcoming year, and the sources of reimbursable and non-reimbursable
funding for each action;
Provide that stakeholders will reimburse costs of guards
and patrols at NCI facilities up to a level that does not exceed the FY
2006 Congressionally-approved level of $10 million, indexed for
inflation;
Specify that such reimbursable funds are to be spent only
on guards and patrols at NCI facilities, and are to be allocated in the
same manner as they were in 2006;
Provide that, should the threat level change, Reclamation
will immediately notify Congress and, with the funding customers, seek
approval to adjust the reimbursable costs for guards and patrols until
the threat level changes;
Require Reclamation to allow stakeholder review and input
on all elements of the entire security cost program on at least a five-
year planning horizon.
Mr. Chairman, the Westside Districts appreciate your attention to
this critical security program. We recognize that our Nation has
entered a new era in which increased security measures and costs will
be the norm. We support prudently increased security at these NCI
facilities, and are willing to bear our equitable share of the national
responsibility for the necessary costs. As Reclamation's program moves
forward, we believe additional Congressional oversight and stakeholder
involvement are needed and appropriate.
Thank you for the opportunity to submit this testimony. I will be
happy to answer any questions regarding my testimony or Westside
Districts' positions regarding Reclamation's Building and Site Security
program at the Committee's convenience.
______
Mr. Radanovich. Thank you, Mr. Moyes. Appreciate your
testimony.
Next is Mr. James Feider. Mr. Feider, welcome to the
Subcommittee. You may begin your testimony.
STATEMENT OF JAMES FEIDER, DIRECTOR, REDDING ELECTRIC UTILITY,
REDDING, CALIFORNIA, [REPRESENTING NORTHERN CALIFORNIA POWER
AGENCY
Mr. Feider. Thank you, Mr. Chairman and Members of the
Subcommittee.
I am James Feider. I am testifying today both as the
electric utility director of Redding, California, and on behalf
of the Northern California Power Agency.
Collectively, NCPA members purchase approximately 40
percent of the power generated at the Federal Central Valley
Project, a series of 11 Federal multi-purpose projects and
combined generating capacity of about 2,000 megawatts, like
Redding and Lodi and special districts like the Bay Area Rapid
Transit in the Turlock Irrigation District, along with other 14
members in Northern California Power Agency.
I commend the Subcommittee for holding this important
hearing today regarding the Bureau of Reclamation's post-
September 11 security program.
NCPA shares the desire of this Subcommittee and
Reclamation, and all the citizens of our country to protect
critical Federal infrastructure. No one questions the need for
sharing the appropriate share of the resulting cost. Rather,
our objective is to promote the site security program that is
effective, accountable, and with properly and fairly allocated
costs.
Other witnesses today have made a strong argument that the
additional security is a public benefit and should be paid
entirely by the Federal government. Unfortunately, when
Reclamation published its May 2005 report on security costs, it
indicated that about two-thirds of the security costs for the
CVP were proposed to be allocated to the CVP power customers.
While the subsequent 2006 Reclamation report changed the
allocation to more generally conform to the CVP multi-purpose
cost allocation, it is clear that a disproportionate amount of
the costs are still being proposed as reimbursable. Others have
expressed other slippery-slope expansion in the 2007 program.
This is compelling evidence that Congress action, congressional
action is needed.
If the power customers are required to pay some portion of
these costs, these new security costs, we believe that the
existing law regarding Reclamation safety of dam expenditures
provides a solid and rational approach to allocate these costs.
The Reclamation Safety of Dams Act of 1978 authorized
Reclamation to construct, restore, operate and maintain
features that preserve the structural safety of Reclamation
dams and facilities.
There is a simple and logical correlation between the
measures taken to preserve a catastrophic failure of the dam,
such as work done a few years ago on Folsom Dam to protect it
in the light of seismic events, and measures taken to prevent a
terrorist attack intended to cause catastrophic failure. Under
the Safety of Dams Act, 15 percent of the costs incurred are
allocated to the authorized purposes of Reclamation projects.
We believe it is appropriate to assign security costs on
the same basis. Treatment of site security cost as safety of
dams expenditures would provide a needed and durable solution
with reasonable cost accountability, and the approach provides
a simple solution. It provides for a fair share of costs to be
borne by the customers while protecting them against open-ended
cost. It is a durable solution that will spare Congress the
need to wrangle each year over the issue of what the annual
cost allocation percentage should be.
Moreover, this solution would easily be accomplished
legislatively. The Safety of Dams Act that was passed in 1978
was most recently amended in 2004. If the safety of dams
proposal is ultimately not adopted, we will need the protection
against sudden and sharp increases in security costs and
assurance that the following specific issues are addressed.
First, Congress should stipulate that only security costs
associated with projects on the national critical
infrastructure list can be assigned for repayment by water and
power users.
Second, only O&M and not capital costs should be eligible
for reimbursement.
And third, cost accountability and oversight should be
provided by use of a flexible cost cap as described by previous
witnesses, coordination of the security planning with the
Federal Western Area Power Administration, and consultation
with funding stakeholders similar to what we do now in
providing advanced customer funding for power O&M activities.
Then last, annual reports to Congress.
In conclusion, NCPA's view is the best way and most durable
approach to solve this issue would be for Congress to amend the
Reclamation Safety of Dams Act of 1978 to include these costs.
Mr. Chairman, thank you for your attention to this matter.
We look forward to fostering the oversight of this program.
[The prepared statement of Mr. Feider follows:]
Statement of James C. Feider, on Behalf of
The Northern California Power Agency
Introduction
Mr. Chairman and members of the Subcommittee, I am James C. Feider.
I am testifying today both as the electric utility director of Redding,
California, and on behalf of the Northern California Power Agency
(NCPA). Collectively, NCPA members purchase approximately 40 percent of
the power generated at the federal Central Valley Project (CVP), a
series of 11 federal multipurpose projects with a combined generating
capacity of about 2,000 MW.
NCPA, a joint powers agency, is engaged in the generation and
transmission of electric power and energy on behalf of its members.
NCPA members are committed to the well-being of the constituents they
serve, and provide low-cost electricity in an environmentally and
socially responsible manner. NCPA members serve approximately 400,000
customers with a peak load of 1,182 megawatts.
The cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc,
Palo Alto, Redding, Roseville, Santa Clara and Ukiah; as well as the
Bay Area Rapid Transit District, Port of Oakland, the Turlock
Irrigation District, and the Truckee Donner Public Utility District are
members of NCPA. The Lassen Municipal Utility District, Placer County
Water Agency and Plumas-Sierra Rural Electric Cooperative are associate
members of the agency.
The CVP is a multipurpose system, providing:
Water supply for agricultural users, municipalities and
industrial users.
flood protection for the Sacramento and San Joaquin
Valleys
water for wildlife refuges to facilitate fish migration
and spawning and other environmental purposes
flat water and white water recreational opportunities
power generation.
I commend the Subcommittee for holding this important hearing today
regarding the Bureau of Reclamation's (Reclamation's) post-September 11
site security program. NCPA shares the desire of this Subcommittee and
Reclamation--and all of the citizens of California and our country--to
protect critical Federal infrastructure. No one questions the need for
strong and effective security measures. Nor does NCPA or its members
object to paying an appropriate share of the resulting costs. Rather,
our objective is to promote a site security program that is effective,
accountable, with properly and fairly allocated costs.
It is my hope that this Subcommittee--and Reclamation--shares these
goals, and that together we can design a program that establishes a
durable policy approach, wisely spends finite resources, allocates
costs appropriately, provides needed oversight and accountability, and
engenders confidence from project users, the public, and Congress.
Allocating Reclamation Site Security Costs
Following the terrorists attacks of September 11, 2001,
expenditures for security costs for Reclamation facilities increased
dramatically. Reclamation initially decided that those additional
security costs would be non-reimbursable. Beginning in FY 2006,
Reclamation proposed to make the post-September 11 guards and patrol
costs reimbursable, while costs associated with facility fortification
and anti-terrorism management remained non-reimbursable.
Reclamation has facilities designated as national critical
infrastructure because of their importance to the economy, and the need
for the Federal Government to ensure general public health and safety.
While a strong argument could be made that the additional security is a
public benefit, and should thus be entirely paid by the Federal
Government, NCPA is willing to pay our share of these costs to secure
national critical infrastructure within the CVP. The challenge will be
how to ensure these costs are prudent and predictable.
When Reclamation published its May 1, 2005, report on site security
costs, it was indicated that two-thirds of the security costs for the
CVP were proposed to be allocated to CVP power customers. While the
subsequent May 15, 2006 Reclamation report changed the allocation to
more generally conform to the CVP multipurpose cost allocation, it is
clear that a disproportional amount of the costs are being proposed as
reimbursable.
There are also serious problems related to the durability of the
existing allocation. Simply put, an annual debate and disagreement over
the scope and allocation of security costs is not a sound approach to
federal policy. It prevents Reclamation, and water and power customers
from having the predictability and consistency needed to perform their
respective responsibilities.
NCPA Supports Safety of Dams Proposal
We believe that existing law regarding Reclamation's Safety of Dams
expenditures provides a solid and rational approach to allocate costs
for these additional new security costs. The Reclamation Safety of Dams
Act of 1978 authorized Reclamation to construct, restore, operate, and
maintain features that preserve the structural safety of Reclamation
dams and facilities.
There is a simple and logical correlation between measures taken to
prevent a catastrophic failure of the dam--such as the work done a few
years ago to stabilize the Mormon Island Auxiliary Dam at Folsom in
light of seismic event concerns--and measures taken to prevent a
terrorist attack intended to cause catastrophic failure.
Under the Safety of Dams Act, fifteen percent of the costs incurred
are allocated to the authorized purposes of the Reclamation Safety of
Dams Act. We believe it is appropriate to assign security costs on the
same basis. Treatment of site security costs as Safety of Dams
expenditures would provide a needed durable solution with reasonable
cost accountability.
This approach provides a simple solution. It provides for a fair
share of costs to be borne by CVP customers, while protecting them
against open-ended costs. It is a durable solution that will spare
Congress the need to wrangle each year over the issue of what the
annual cost allocation percentages should be. Moreover, this solution
would be easily accomplished legislatively; the Safety of Dams Act has
been amended four times since its enactment in 1978--most recently in
2004. While this program structure can be best accomplished through
legislation, but we are open to other mechanisms that accomplish the
needed objective.
Amending the Safety of Dams Act to include site security costs
within the statutory definition of ``Safety of Dams'' activities is the
most direct and workable solution to provide much-needed consistency in
this area--while providing a long-term solution to an issue that,
despite long-standing debate, is yet to be resolved for Reclamation and
its stakeholders. NCPA encourages the committee to review and take
action to advance this policy solution.
Key Security Cost Issues and Objectives
If a Safety of Dams proposal is ultimately not adopted, we will
need protection against sudden and sharp increases in security costs,
and assurance that the following specific issues are addressed through
other legislative and/or administrative mechanisms:
National Critical Infrastructure
At all levels of government, homeland security funds are targeted
at projects that are both the most significant and most vulnerable.
Reclamation should allocate for reimbursement only those project costs
associated with facilities on the National Critical Infrastructure
(NCI) list. Use of the NCI is an appropriate metric for delineating
which projects warrant added security measures and which costs should
be assigned for reimbursement. We are concerned that Reclamation's
security program is being expanded beyond those designated NCI
facilities. In order to focus security efforts at the most important
facilities, Congress should stipulate that only security costs
associated with projects on the NCI list can be assigned for repayment
by water and power users.
O&M--Not Capital Costs--Should be Eligible for
Reimbursement
NCPA commends Reclamation for its initial decision to seek
reimbursement of only those security costs associated with guards and
patrols--not the capital costs to harden the facilities (barriers,
security cameras, etc.). Reclamation has appropriately concluded that
these costs were of national benefit, and should be 100 percent non-
reimbursable. However, Reclamation's commitment is eroded in its March,
2006 report, which states that replacements of the physical facilities
will be allocated for reimbursement. The distinction between capital
costs and annual expenses was clearly made at the initiation of this
program. A change in that fundamental rationale and logic only serves
to further demonstrate the lack of consistency and predictability that
has plagued this program.
Cost Accountability and Oversight
We all share a desire to protect these important projects and
prevent any future terrorist attack. Yet, clearly, no public program
should be beyond accountability and oversight. Let me be clear, we are
not looking to know the types of weapons the guards carry, the
placement of cameras or other classified details that are appropriately
shielded from general public review. As public officials, we have a
responsibility to the constituents and customers we serve to ensure
that our dollars are being well spent. Toward that end, a number of
steps can be taken to provide such accountability while preserving the
classified nature of this program:
1. Establish a Flexible Cost Cap
In the FY 2006 Energy and Water Appropriations bill, Congress
wisely limited the security costs that Reclamation could assign for
reimbursement to water and power customers. Establishing such a cap
ensures needed cost discipline. Allowing unlimited funds to be assigned
for reimbursement could lead to inappropriate cost shifting and
misguided spending. A cost cap on reimbursable security expenses also
provides power and water customers the ability to do rational
budgeting, and provides rate stability for our consumers. We are not
suggesting that Reclamation's total site security expenditures be
capped--only that portion that can be recovered from power and water
customers.
2. Coordinate Security Planning with Western
As a sister federal agency, the Western Area Power Administration
(Western)--which markets the power generated at the Reclamation dams--
should be consulted with in planning and budgeting for guards and
patrols. This can be accomplished without compromising security, since
employees of both agencies have the requisite security clearances.
3. Consultation with Funding Stakeholders
NCPA has had a positive and collaborative relationship with
Reclamation in creating and implementing a funding agreement for power-
related operation and maintenance activities. This constructive
arrangement has provided both power customers and Reclamation with
long-term planning and funding certainty, facilitated project
prioritization, improved the operations of the facilities, and created
a strong working relationship. Again, I do not expect Reclamation to
provide funding stakeholders with detailed information that could
compromise national security. However, utilization of the general model
of stakeholder oversight as is applied with Operations and Maintenance
functions should be considered.
In addition, NCPA would be open to execution of bilateral contracts
with Reclamation that allows Reclamation to receive advance customer
funding for the percentage of site security costs assignable to the
power function for repayment. Yet, such a relationship presumes a
cooperative partnership in addressing the issue.
4. Reports to Congress
This Committee and others in Congress deserve, at a minimum, an
annual briefing on Reclamation's site security program. Authorizing the
program in the first instance--with the ``sideboards'' I have outlined
in my testimony--provides Congress with both the responsibility and
benchmark to perform adequate oversight.
Conclusion
NCPA joins with other federal power customers in asking you to take
the steps necessary to ensure that Reclamation's site security program
meets its objective to protect federal facilities--an objective we all
share--in a responsible manner. In NCPA's view, the best and most
durable approach in this area would be for Congress to amend the
Reclamation Safety of Dams Act of 1978 to include these costs--and thus
ensure a proper allocation, establish accountability, ensure
predictability for stakeholders, and most importantly, provide the
Bureau of Reclamation with a consistent level of funding needed to
perform this vital security function.
Should such legislative action not occur, it is clear that other
specific legislative and/or administrative steps are needed to address
the issues raised in my testimony today.
Mr. Chairman, thank you for your review and consideration of this
important policy matter--and for the invitation to share our
perspective and recommendations. I look forward to working closely with
you as your examination of this important issue proceeds.
______
Mr. Radanovich. Thank you, Mr. Feider, for your testimony.
Appreciate that.
Next is Mr. Jon Lambeck with Metropolitan Water of Southern
California. Mr. Lambeck, welcome to the Subcommittee.
STATEMENT OF JON LAMBECK, MANAGER OF OPERATIONS PLANNING,
METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, LOS
ANGELES, CALIFORNIA
Mr. Lambeck. Thank you. Good morning, Mr. Chairman, Ranking
Member Napolitano, and Members of the Subcommittee.
My name is Jon Lambeck, and I am the Operations Planning
Manager for the Metropolitan Water District of Southern
California.
I would like to thank you for holding this hearing and
providing the opportunity to explain Metropolitan's position on
security costs at the Bureau of Reclamation's facilities. I
appreciate the Subcommittee's willingness to accept
Metropolitan's written comments for the record, and I am happy
to take this opportunity to verbally summarize our comments,
and I will primarily focus on Reclamation's Hoover and Parker
projects located on the Colorado River.
Simply stated, Metropolitan's position remains that the
extraordinary security actions instituted after September 11,
2001, at Hoover and Parker were taken in response to national
security concerns. Therefore, these actions, which were taken
to defend against acts of war or terrorist treats, should be
appropriately funded at the national level.
Metropolitan recognizes there are many demands for national
funding to pay for the increased security costs across the
country. However, we believe the Hoover and Parker security
costs legitimately should be paid for from Federal money.
The new defensive actions go far beyond the normal
operational and maintenance activities the power contractors
have paid for over the past 60 years. Metropolitan was one of
the original power contractors at Hoover and Parker. Today, it
receives 28 percent of the power generated at Hoover, and 50
percent of Parker's power. This power is used to pump water
from the Colorado River and transport it to Southern
California. There it is distributed at cost to Metropolitan's
26 member agencies who will then provide it to their customers.
Metropolitan provides one-half of the water used by the 18
million residents in our service territory. The power from
Hoover and Parker is critical in moving this water to Southern
California.
For the power Metropolitan receives, it pays 21 percent of
the operation and maintenance cost at Hoover and 50 percent of
these costs at Parker. Given these percentages and the large
payments that result from them, Metropolitan has growing
concerns with the movement toward treating the post-September
11th security cost as reimbursable.
As I stated earlier, Metropolitan's position is that the
new defensive security cost at Hoover and Parker should be
considered non-reimbursable and appropriately funded.
However, if funding is not made available, and some or all
of these new costs are to be reimbursable, then Metropolitan
proposes three changes:
First, paying for the security cost should be expanded to
include all beneficiaries. These multi-purpose facilities
benefit a large number of people. The security costs should be
proportionately allocated to all who benefit.
Second, decisions on security matters need to have
transparency and oversight. We understand the sensitive nature
of these decisions. However, Metropolitan believes a mechanism
should be found to keep the power contractors involved as full
partners in security decisions, or some other method of
effective oversight needs to be established.
And last, again, assuming funding is not made available,
some limit or cap should be set on security expenditures. A
reasonable limit would provide the foundation for fiscal
discipline and restraint.
Thank you again for the opportunity to speak with you
today. I would be happy to answer any questions you may have.
[The prepared statement of Mr. Lambeck follows:]
Statement of Jon C. Lambeck, Manager of Operations Planning,
The Metropolitan Water District of Southern California
Good morning Mr. Chairman and members of the subcommittee. My name
is Jon Lambeck and I am the Operations Planning Manager for The
Metropolitan Water District of Southern California (Metropolitan). I
would like to thank you for the opportunity to testify before your
subcommittee today and explain Metropolitan's position on the issue of
security costs at the Bureau of Reclamation's (Reclamation) facilities.
Simply stated, Metropolitan supports continued federal power customer
payment for the standard type of security activities for which they
were responsible prior to September 11, 2001. However, the additional
security costs incurred to address post-September 11th concerns are a
matter of national security, just as they were during World War II, and
should be appropriately funded.
Metropolitan is a quasi-municipal corporation, created in 1928 by
vote of the electorates of several southern California cities. Its
primary purpose is to provide supplemental water to its 26 member
agencies in southern California. Metropolitan is the largest wholesale
water supplier in southern California, ultimately providing water to
approximately 18 million consumers within the six county region of
southern California (Los Angeles, Orange, Riverside, Ventura, San
Diego, and San Bernardino counties), an intensely populated area
covering nearly 5,200 square miles. Approximately one-half of the water
used within the region is supplied by Metropolitan.
One of Metropolitan's two major sources of water is the Colorado
River. Metropolitan pumps water out of Lake Havasu on the Colorado
River and transports it through its Colorado River Aqueduct (CRA) to
southern California. Metropolitan's other source is the Bay-Delta in
northern California, which water is delivered through the California
State Water Project. Moving the water through both of these systems
requires over 5,000,000 megawatt-hours of energy annually, representing
2-3% of the State of California's total energy requirement. The pumping
necessary to bring this water to Metropolitan's service territory is
the single largest use of energy in California.
To obtain the power needed to meet its pumping requirements,
Metropolitan has established long-term contractual and operational ties
to two of the three power facilities operated by Reclamation on the
Lower Colorado River. For example, Metropolitan was one of the original
power contractors at Hoover Power Plant and currently receives 28
percent of the facility's energy production. At Parker, Metropolitan
paid for the entire cost of dam construction and for 50 percent of the
power plant cost. In consideration of its funding, Metropolitan
receives 50 percent of the power produced at Parker. The federal
hydropower from Hoover and Parker is critical to moving Metropolitan's
water 242 miles through the CRA to the 18 million inhabitants of
southern California.
Today, Metropolitan pays nearly 21 percent of the operation,
maintenance and replacement costs at Hoover and 50 percent of these
costs at Parker. Given the magnitude of these percentages and the
payments that result, Metropolitan has viewed with concern the
evolution of the treatment of the extraordinary security costs at both
of these Reclamation facilities since the events of September 11, 2001.
New security costs, which were originally determined to be a matter of
national security and declared as non-reimbursable, as they were during
World War II, are now being at least partially classified as
reimbursable, and therefore paid by the power contractors.
Additionally, Metropolitan has observed ``definition creep,'' as more
and more costs are identified as falling under the security umbrella.
It appears reimbursable ``security'' costs could become a magnet for
all manner of costs that could be tenuously linked to security.
Metropolitan believes that normal security costs at the Hoover and
Parker Dams, as existed prior to September 11th, should continue to be
paid for by the power contractors. However, the new, defensive measures
taken to protect these facilities from acts of war and terrorist attack
should be treated as non-reimbursable. Furthermore, these measures go
far beyond the normal reimbursable operation, maintenance and
replacement activities that were contemplated under the power
contracts. Since the additional security costs stem from national
security concerns, they should be so funded. If such federal funding is
unavailable, and some or all of the post-September 11th security costs
are treated as reimbursable, then the security costs should be charged
to all beneficiaries of these multi-purpose facilities in proportion to
the benefits received.
Another area of concern to Metropolitan is the lack of transparency
and oversight of security decisions. Metropolitan and the other power
contractors have worked very hard with Reclamation to develop a
cooperative and collaborative partnership in the management of its
Lower Colorado Region facilities. All parties recognize their
collective interest in maintaining reliable and efficient operations.
However, Reclamation is now making decisions on security issues with
little or no input from the power contractors who ultimately have to
pay the bills. This is the same type of management practice that
resulted in the cost of the Hoover Dam Visitor Center going from an
initial $32 million estimate in 1984 to the $124 million it ultimately
cost at completion in 1994, for which the power contractors were
obliged to pay. A mechanism must be found to keep the power contractors
involved as a true partner in security decisions if federal funding is
not provided or alternatively, some other method of appropriate
oversight should be established.
Finally, Metropolitan believes there must be some form of cap or
limit on the new security costs. Recent stories have highlighted the
difficult choices that must be made in allocating limited Homeland
Security funds to cities and towns across the country. These are tough
decisions, and everyone recognizes that there will never be enough
money to fund all the activities proposed. Under such circumstances, it
is critical an evaluation process be implemented to review each
proposal and assure that limited funds are spent in ways to achieve the
maximum benefit. Unfortunately, there appears to be no recognition of
the need for such a disciplined approach at Reclamation facilities
where the power contractors are expected to fund whatever security
activities are implemented. With no cap or limit on the amount of
security costs that could be imposed, and no restraint that would
normally come from having to pay for those costs from budgeted funds,
Reclamation faces no incentive to hold down costs. Metropolitan
believes some form of cap or limit on security expenditures must be
imposed in conjunction with the oversight function described above.
In conclusion, Metropolitan believes the new post-September 11th
security costs at the Bureau's facilities should continue to be treated
as non-reimbursable. If funding is not made available and some or all
of these new costs are determined reimbursable, then all beneficiaries
of the facilities operated by Reclamation should pay their appropriate
share of the costs. Additionally, decisions on security measures should
continue to include the power contractors as is done in other
operational areas, or a new method of oversight must be established.
Finally, some limit or cap must be placed on security expenditures
deemed to be reimbursable to assure fiscal discipline and restraint.
Thank you again for opportunity to testify before your committee. I
would be happy to answer any questions you may have.
______
Mr. Radanovich. Thank you for your testimony, Mr. Lambeck.
That concludes the testimony from all the witnesses.
I wanted to kind of get everybody on record if everybody
would respond to this. Everybody does believe that the Bureau
of Reclamation responded sufficiently to the nation's site
security needs after 9/11, and you do believe in the need for a
site security program, don't you?
Everybody on the panel, can I assume for the record that
everybody is shaking their head yes, and saying yes?
The Bureau of Reclamation's solution for transparency is to
give customers access to documents if they receive a security
clearance. Would this resolve your concerns over transparency?
Mr. Graves. Mr. Chairman, it might resolve my concerns, but
it might not resolve my customers' concerns. It is like the
joke if I tell you what I do, I am going to have to kill you.
There is no way to get the information down to the ultimate
consumer or to the local co-op boards, and I am not an expert
in security matters. So giving me the information, while it
might not pose a security risk, isn't going to solve the
problem.
Mr. Radanovich. With regard to the cost transparencies
though, you do believe that--well, if you had security
clearance, that may take care of your concerns, making sure
that the price was right, the costs--you know, the money is
going to where it should to onsite security programs, but you
are saying you are not able to convey that to your consumers?
Mr. Graves. Yes, sir.
Mr. Radanovich. OK.
Mr. Erickson. Mr. Chairman, I would add to that. Similar to
Mr. Graves, in our relationship I work for a board of directors
of the district. We have a contractual arrangement with
Reclamation whereby we pay for these O&M costs. I represent the
board of directors in that rate relationship.
It would put me in a difficult position if I had the
clearance and the Bureau of Reclamation convinced me that the
costs were equitable, but I couldn't explain to my board that
these are just and they should be paid. I would just have to
say ``Trust me.''
And like other local governments, irrigation districts are
somewhat political. I would see that to be a fairly untenable
position for the manager.
Mr. Lambeck. Mr. Chairman, for Metropolitan, just seeing
what the costs are or how the money is being spent is not the
type of collaborative and corroborative relationship we have
established with Reclamation on other operational matters.
In partnership with Reclamation, we view the needs for the
projects, and collectively decide on the best and most
effective way to move forward. Only being shown what the cost
would be for a particular expenditure is not in keeping with
that type of partnership that we have developed.
Mr. Radanovich. What kind of information are your consumers
looking for?
Mr. Lambeck. Well, the information that the consumers are
looking for is that the costs are appropriate, and effectively
being managed.
What we look for is reviewing the needs and priorities for
expenditures at the projects.
Mr. Feider. Mr. Chairman, on behalf of NCPA, my perspective
on this is it is a tough issue for the Bureau of Reclamation
trying to maintain the secure nature of what they are trying to
do, but having been a former Federal manager I think it is a
bit troubling that the tendency in a Federal agency might be to
oversecure or not spend the money in the most practicable way
possible.
So we don't want to get into a situation of second guessing
the need for the security or the amount of security guards, but
if someone tends to go way over the top because their career is
on the line and they want to be ultraconservative, we are
looking for some way of checks and balances to make sure that
isn't happening, especially if repayment of those costs is
coming from our customers.
Mr. Radanovich. Are you able to right now spot before it
happens the use of the money to pave a parking lot as was in
Hoover Dam? Are they easy things to pick up right now with the
security clearance that you would have? They still don't--you
know, does the opposite of conveying trust to the consumer, I
am sure, but are those easily picked up?
Mr. Feider. If they are related to security, they are not.
If they are related to just routine operation and maintenance
expense of the power facilities, we have a very good working
relationship with the Bureau to monitor and to provide
oversight to that type of a program.
Mr. Moyes. Mr. Chairman, if I might add. The Arizona
interests would second these recent comments that the nature of
the historical relationship has been a very good one for
identifying costs and budgeted programs and working together to
determine appropriate expenditure levels, and we recognize
that.
At a certain level of detail it goes beyond what is
appropriate to divulge in order to maintain the protection and
the security. But we have, frankly, some bad experience with a
visitor center once that was identified that cost $30 million,
and just sort of crept up to over $130 million, and the
oversight wasn't there.
Part of the problem here is that the process for customers
to participate in this is the public rate-setting process, and
that is where the money comes home to roost on us, and there
are some legal requirements for the nature of the explanation
that the Bureau and Western have to give in order to impose
those rates.
We think there is a balance to be found there that can
achieve both interests and consistent with this historical
rapport that we enjoy and appreciate from the Bureau of being
participants in some of the judgment calls that need to be made
that will allow us to preclude another debacle like the visitor
center, frankly.
Mr. Radanovich. Thank you. Mrs. Napolitano.
Ms. Napolitano. Thank you, Mr. Chair.
I would like to ask Jon Lambeck, you refer in your
testimony to definition creep, and your concern that more and
more costs are being defined under the security umbrella. Was
anybody consulted on this, and Metropolitan, were you
consulted?
Mr. Lambeck. No, we were not. The concern that we have, as
has been testified before, it was to be guards and patrols, and
now we are hearing that it is going to be the repair or
replacement of hardening that was done at the facilities. Our
concern is that this is just the first series of a number of
redefinitions or reclassifications of expenditures that will
fall under security, and will be treated as this collective
cost.
Ms. Napolitano. Were any of you consulted before the report
was----
Mr. Harrington. No. The way we found out about it, myself
and one of the power people at Sacramento Municipal Utility
just through a conference call with the Denver office Bureau of
Reclamation. They let us know, at that point I believe it was
toward the end of March, in addition to the guards and patrols
they were looking at--not the initial capital costs for the
hardening, but both the O&M for running that stuff, plus
replacement items.
They were very vague as to what replacement meant, but the
way I took it was to mean that the initial first unit wouldn't
be reimbursable but when they needed to replace that then it
probably would be.
Ms. Napolitano. At that time did they indicate any
reasoning for their adding this particular new items?
Mr. Harrington. No. I would suspect that it may have to do
with--they have the Office of Management and Budget that
reviews, and I think the Inspector General's Office, and they
have a bias toward trying to collect as much on behalf of the
Federal taxpayer as they can from us, and that may have
something to do with it.
Ms. Napolitano. Well, I agree they want to collect more,
but I don't think it goes back to the taxpayer. It is going to
Iraq.
Mr. Harrington. Right, or away from the taxpayers I should
say.
Ms. Napolitano. Personal comment.
Anybody else heard anything, have any comment?
Mr. Moyes. Ms. Napolitano, I might just add that in
contrast there was in fact, my understanding, a customer
briefing in December of 2005, in which the former concept of
guards and patrols was reiterated, and then in the February
2006 report this additional language simply showed up. And at
least from the interest that I am familiar with, there was no
prior discussion or advance notice of contemplating that
change.
Ms. Napolitano. OK. Mr. Harrington, how did the Bureau of
Reclamation consult with you or your organization's members
prior to imposing these security costs? Were you asked for the
input--again the same question--or were you simply told that
this is the way it is going to be?
Mr. Harrington. We were given the understanding that that
was just the way it would be. We weren't consulted before the
fact and asked what we thought that the appropriate
reimbursable amount would be, if that is what you are asking.
Ms. Napolitano. OK. And Mr. Moyes, how much impact does the
cost of power have on your crop production, and on the
districts you represent, and what impact does uncertainty about
future security costs have on your irrigators?
Mr. Moyes. Ms. Napolitano, as I indicated, the Federal
power component is just a small piece of the total electric
requirement. As you know, with fossil fuel prices doing what
they are, the rest of the power we buy in the marketplace has
become extraordinarily expensive.
Federal hydropower has also doubled or more in the last 2
years due in large part to environmental issues, administrative
inflation, and other soft costs for the dams that then get
tacked onto the power rates.
But the margins of the farming operations in much of these
areas in Arizona are very thin, and in fact much of this land
was not farmed years ago. And until, in the west side
particularly, we achieved a small piece of Federal preference
power, it wasn't farmed. We were able to bring that back into
production with this power.
But there is a great deal of sensitivity to even small
increases because we are incurring so many other increases in
the total farming budget without commensurate commodity price
increases.
Is that responsive? I appreciate the question.
Ms. Napolitano. No, that answers most of the question that
I had on that. Thank you, Mr. Chair.
Mr. Radanovich. Thank you, Mrs. Napolitano.
The gentleman from Arizona, Mr. Hayworth.
Mr. Hayworth. Mr. Chairman, thank you very much, and thanks
also for your parenthetical editorial comment earlier today.
[Laughter.]
Mr. Hayworth. For purposes of full disclosure, indeed I am
very pleased to have an Arizonan on the panel. We welcome all
the panelists and those who joined them, doing hardship duty
this morning in the nation's capitol, but surprise, surprise,
especially Mr. Moyes.
Mr. Moyes. Thank you.
Mr. Hayworth. And for the record, Jay, I would like to have
you expound a bit on the written testimony you provided. In
that testimony, you state that the way in which the Bureau
currently allocates reimbursable security costs is inequitable.
Please describe how you believe this can be done more
fairly.
Mr. Moyes. Thank you, Congressman Hayworth, and again I
appreciate your being here and also Congressman Grijalva I
should have mentioned specifically. I hope the record will
reflect that. I will take the opportunity later.
I don't have all of the answers but I do have some
examples. I boat on Lake Powell. Some of my colleagues may boat
on Lake Mead. When I pay a substantial fee to the National Park
Service to go into that lake, not a dollar of that fee goes
toward security for these dams.
When I buy an airline ticket, I pay a $5 security
surcharge, and a few other costs are being added with specific
identification for this purpose.
I believe, for example, when people recreate on Lake Powell
or Lake Mead they would not be unhappy, I would not be, to see
an additional security charge added to that fee which is then
forwarded through to the Bureau to address these costs on a
more equitable basis.
The power generators would buy power tomorrow on the open
market if Hoover Dam disappeared. The rest of the beneficiaries
would be catastrophically damaged permanently for decades, if
ever recovered, and there are ways. I think that the most
difficult one for me is the flood plain and how you might
recover from the property owners.
I do know that the Bureau has analyzed the damage that
would occur from such a catastrophic breach, and they know what
lands would be wiped out. How one achieves collection of funds
from those landowners is a daunting challenge. I am not sure it
is impossible, however, and I think we need to be creative
about ways to find solutions to that problem so that it is more
equitably spread.
The power users have been the cash register for these dams
historically. They were set up that way. But this is
extraordinary. It is not what was contemplated when those
arrangements were made, and we don't think it ought to just be
the standard practice to pass everything through to the power
because that is the way it has always been done.
Mr. Hayworth. Mr. Moyes, I think a word of commendation is
appropriate to direct toward the water and power customers who
have been willing to become a partner in the government's
efforts to secure sites sensitive to our national security.
How can Congress provide the utility customers with an
assurance that this good faith effort to assist the Federal
government will not lead to an unfair level of cost increases
in the future?
Mr. Moyes. I think the two things that we have asked for
here would achieve that objection, and that is, first detailed
security and oversight from Congress through the authorizing
committee, and appropriate legislation.
The second way that would give us cost certainty would be
to make a certain cap on the component of these costs that we
must bear, and then as part of that scrutiny and oversight an
opportunity for some measure of customer input to the judgment
calls that have to be made when determining the level of these
expenditures.
We see them growing rapidly from their inception. I have
heard talk. I don't want to attribute it to anyone, it may just
be rumor, but we have heard the number 100 million thrown
around in some circles for what the anticipated ultimate annual
costs of this program could be.
Caps on our components and allocation to others and
oversight I think will address those concerns and keep this
under a reasonable level of control.
Mr. Hayworth. Again I thank you very much, Mr. Moyes, and
to all the panelists, and Mr. Chairman, I yield back the
balance of my time.
Mr. Radanovich. Thank you, Mr. Hayworth.
I guess one question that did come up was, this is a cost,
of course, that was borne out of 9/11. Is there a sense that
this is a cost that goes clear into the future? Is this a
forever additional cost to the water users and your facilities,
or do you suspect at some time there will be a need to drop
off?
I am not sure that any of you can answer that, but give it
a shot if you want to.
Mr. Harrington. I mean, as far as we can tell, it is going
to go on for the foreseeable future. I mean, we don't see any
end point to it in sight, so that is another concern that we
have.
Mr. Moyes. Without casting aspersions, it is pretty
atypical for a bureaucratic component that once gets underway
with good reason that it may well need to continue to some
degree for good reason to ever stop, or in fact to ever shrink
or be reduced. I mean, that is just the fact of life from our
perspective.
Mr. Radanovich. Right.
Ms. Napolitano. Mr. Chair, will you yield?
Mr. Radanovich. Yes.
Ms. Napolitano. Well, there may be in an proposal that
might require legislative action, there should be a review of
its validity within 10 years, 15 years or some set time of
frame that you feel might be adequate to go back and say, OK,
cut down; not necessarily strike it all out, but begin to down-
face, whatever, because if you are going to continue to have
those costs, then you need to factor them in in whatever else
budgetarily that you do. Am I correct?
Mr. Moyes. Yes. Some sunset measures. We would concede, I
believe, that the decision as to the need to continue the
program is something that would entail national input from
Homeland Security, and other agencies, perhaps the military, et
cetera. That is not within our expertise, but again some vice
and some role in the concept of sunsetting and reduction would
certainly be appreciated.
Mr. Radanovich. Very good. I want to thank the gentlemen
for your input this hearing, and let the record reflect too
that Mr. Grijalva has submitted some questions into the record,
that will be delivered to you for response within a certain
amount of time. I think you only have about 20 days to respond
to questions.
Thank you very much for your input, and I will dismiss the
first panel and call up the second panel, and again, thank you
very much.
The second panel is Mr. Larry Todd, Deputy Commissioner of
the Bureau of Reclamation in Washington, D.C.
Mr. Todd, welcome to the Subcommittee, of course, welcome
back I should say. You have been a regular customer these days,
and please feel free to begin your testimony.
STATEMENT OF LARRY TODD, DEPUTY COMMISSIONER, BUREAU OF
RECLAMATION, WASHINGTON, D.C.
Mr. Todd. Thank you, Mr. Chairman and Members of the
Subcommittee.
I am Larry Todd, Deputy Commissioner of the Bureau of
Reclamation. It is a pleasure to appear before you today to
discuss how Reclamation is securing its water and power
infrastructure. I would like to summarize my remarks and ask
that the full statement be submitted for the record.
Mr. Radanovich. No objection, so ordered.
Mr. Todd. The Reclamation security program was formed after
the 1995 Oklahoma City bombing to protect the public, its
employees, and the facilities that support our mission. As you
know, the crippling of these facilities could bring tremendous
consequences for the delivery of water, power, generation, food
control, and the environmental obligations. The seriousness of
these responsibilities has guided our security efforts to date.
In 2000 and 2001, the pre-9/11 security program was
sufficiently established and certain physical security measures
were in place. Historically, Reclamation employed law
enforcement personnel only at Hoover Dam and guards on an as-
needed basis at other facilities. It is very important to note
that, consistent with Reclamation's longstanding practice of
treating annual costs to care for the facilities as project
operating and maintenance, or O&M costs, the expenses for
guards and patrols at these facilities before 9/11 were
considered to be O&M costs, subject to reimbursement by project
beneficiaries.
Following the attacks of 9/11, addressing or
vulnerabilities took on an even greater urgency. Guards and
patrols were immediately increased at Reclamation's five
critical infrastructure facilities as well as at other critical
installations.
The escalated posture after 9/11 obviously brought with it
an escalation of security expenses. After 9/11, Reclamation
instituted interim guidance that these expenses, including for
guards and patrols at facilities where they were not
previously, be treated as non-reimbursable until further
notice.
One of the main reasons for this action was concern about
the hardship to customers that would result from previously
unexpected and significant escalation in expenses for guards
and patrol costs.
Emergency appropriations provided by Congress immediately
after 9/11 did not address whether that funding should be
reimbursed by project beneficiaries. However, Reclamation
continued to view its pre-9/11 guards and patrol program funded
at roughly $3.2 million per year as reimbursable.
So while pre-9/11 levels of security expenditures continue
to be reimbursable, the much larger post-9/11 security cost
increases were treated as non-reimbursable through Fiscal Year
2005.
Reclamation has a longstanding practice of treating annual
costs to care for the facilities as a project O&M reimbursable
cost, but did not apply this policy in the immediate years
after 9/11.
Today, the security guard and patrol program has moved from
a period of dramatic escalation to more stable course, and
project beneficiaries have had several years to adjust their
budgets and planning to current guard and patrol levels.
During this time Reclamation has also had the opportunity
to track and quantify these costs. In Fiscal Year 2007,
Reclamation's budget request proposes to treat 20.9 million
guards and patrol costs as project O&M, subject to allocation
and reimbursement from project beneficiaries.
We understand that it is important to communicate with our
customers about this issue, and since 2004, Reclamation has had
a thorough effort to communicate with our customers to explain
the reimbursability of security guard and patrol costs.
There have been numerous presentations to stakeholder
organizations in 2005 and early in 2006. Briefings have been
held with numerous groups, including the National Water
Resource Association, Family Farm Alliance, Sacramento
Municipal Utility District, Central Valley Project Water
Association, and the Colorado River Energy Distributors
Association. Reclamation's regional and area offices have also
provided the relevant information to numerous other water and
power customers at local level on that subject.
At the same time Reclamation understand the water and power
users' need for accountability with respect to O&M
expenditures. Moving forward, Reclamation will work with
Congress regarding security cost allocations and how to
maintain coherent, consistent policies for our customers. We
believe increased investment in security measures will continue
to be a normal part of the way we operate in the future. We
believe it is fair and reasonable for the costs of guards and
patrols to be allocated to the beneficiaries of the projects
being protected.
Mr. Chairman, thank you for the opportunity to present this
testimony today. I am pleased to answer any questions.
[The prepared statement of Mr. Todd follows:]
Statement of Larry Todd, Deputy Commissioner,
Bureau of Reclamation, U.S. Department of the Interior
Mr. Chairman and Members of the Subcommittee, I am Larry Todd,
Deputy Commissioner of the Bureau of Reclamation. It is a pleasure to
appear before you today to discuss how the Bureau of Reclamation is
securing its water and power infrastructure.
Reclamation's Security Program was originally formed in response to
the 1995 bombing of the Alfred P. Murrah building in Oklahoma City.
Reclamation initiated the program to protect the public, its employees,
and the assets required to support Reclamation's mission. Reclamation
facilities provide resources that serve the American society and
economy. The crippling of these facilities could cause significant
destruction with tremendous consequences related to the delivery of
water, generation of power, the provision of flood control, and
environmental benefits. The seriousness of these responsibilities is
clear to Reclamation as we continue to maintain the security posture
necessary to deal with potential criminal threats to Federal dams,
powerplants, and water supplies.
Reclamation Security Costs Prior to September 11th
Historically, Reclamation employed law enforcement personnel at
Hoover Dam and guards at other facilities. These costs were treated as
reimbursable project Operation and Maintenance (O&M) expenses. After
the 1995 Oklahoma bombing, Reclamation began a Site Security Program
and for 3 years (1997 through 1999) funded the start-up program at $5
million each year. These funds were considered non-reimbursable. In
2000 and 2001, after the Site Security Program had been sufficiently
established and certain initial physical security measures had been
implemented, funding for the program continued at approximately $2
million per year. These non-reimbursable funds provided a very basic
physical security program. Costs for law enforcement personnel and
guards continued to be treated as reimbursable project Operation and
Maintenance (O&M) expenses.
Reclamation Response to September 11th
Following the terrorist attacks of September 11, 2001, addressing
vulnerabilities to terrorism and other criminal activity became a
higher priority. Although Reclamation had a security program at that
time, guards and patrols were immediately increased at Reclamation's
five National Critical Infrastructure facilities (Hoover, Shasta, Grand
Coulee, Glen Canyon and Folsom Dams and Powerplants) as well as at
other crucial facilities. The events of September 11th caused
Reclamation to review the policies and activities of the security
program due to the need for dramatically increased security measures.
This review and analysis was not unique to Reclamation, of course. All
across government and throughout society, life has changed and we are
investing in security measures in order to protect life and property.
In an October 12, 2001 memorandum, then-Commissioner John Keys took
additional steps to expand Reclamation's security program, including
designation of a Reclamation Security Coordinator to lead a
comprehensive plan to reevaluate the entire program, and establishment
of an executive Steering Committee to provide support to the Security
Coordinator. Additionally, the Commissioner outlined a number of
initiatives to enhance Reclamation's security posture and ordered an
independent review of the security program and facility security by
experts from the Sandia National Laboratories and the Interagency Forum
for Infrastructure Protection. The result of this review was the ``Top-
Down Security Program Review'' which has served as a road map for
implementing long-term policies and strategies that provide a
dramatically heightened level of security at Reclamation facilities.
Increased Guard and Patrol Costs Initially Non-reimbursable
The emergency appropriations provided by the Congress (P.L. 107-
117) as an immediate response to the September 11th attacks did not
address the question of whether that funding should be considered
reimbursable by project beneficiaries. The initial view from
Reclamation, first outlined in the October 12, 2001 memorandum, was
that these emergency measures aimed at the physical fortification of
facilities should not be considered normal O&M expenditures. At the
time, Reclamation did not know the extent of emergency and security
measures that would be required and believed that initial costs to
acquire the knowledge and establish protection should be treated as
non-reimbursable. Reclamation also issued an interim policy that these
costs should be considered non-reimbursable until further notice.
Part of the rationale for the initial determination to make guard
and patrol cost increases non-reimbursable was that it would have been
a significant hardship for the project beneficiaries to bear the entire
burden of the urgent, dramatic, and unplanned cost escalation.
Therefore, while pre-September 11th levels of security expenditures
continued to be reimbursable, post-September 11th security cost
increases were treated as non-reimbursable through FY 2005.
Reclamation Discretion Concerning Determination of O&M Costs
The Reclamation Project Act of 1939 establishes the Secretary of
the Interior's authority to exercise judgment in establishing rates
that will cover an appropriate share of annual O&M costs. In its May
2000 audit of O&M cost allocations, the General Accounting Office
recognized this authority by stating ``...the Bureau has broad
discretion in defining which of the activities it undertakes constitute
O&M that can be charged to customers.'' Costs that are considered to be
project O&M are allocated to authorized purposes in accordance with
original project cost allocations and existing contracts. This process
establishes the portion of O&M funding that is reimbursable by project
beneficiaries, and the portion borne by the United States. Reclamation
has a long-standing practice of treating annual costs to care for the
facility as project O&M reimbursable costs.
Movement Toward Reimbursement of Post-September 11th Guard and Patrol
Cost Increases
The security guard and patrol program has now moved from a period
of dramatic escalation to a course of sustained effort and stability,
and project beneficiaries have had several years to adjust their
expectations, as well as their budgets and planning, to current guard
and patrol levels. During this time, Reclamation has also had an
opportunity to track and quantify these costs.
Reclamation's FY 2005 budget request was based on our conclusion
that the $20.9 million in post-September 11th guard and patrol costs
increases should be considered project O&M expenses and allocated among
all project purposes, some of which would be reimbursable. However, in
its FY 2005 appropriations report language, the Congress stated that
Reclamation should not initiate the collection of those costs, and that
Reclamation should provide a report to the Congress concerning the
reimbursement of security guard and patrol costs on Reclamation
facilities.
Reclamation's FY 2006 budget request again proposed reimbursable
guard and patrol costs. For FY 2006, Congress responded by providing
for the reimbursement of $10 million out of the $20.9 million in post-
September 11th guard and patrol costs, and again asked Reclamation to
provide additional information on that subject. In FY 2007,
Reclamation's budget request proposes to treat approximately $18.9 of
the $20.9 million post-September 11th guard and patrol cost as project
O&M subject to allocation and reimbursement from project beneficiaries.
The $2 million in security guard and patrol costs for which Reclamation
does not propose to seek reimbursement represent expenses incurred for
the security of project functions related to flood control, fish and
wildlife, recreation, or other non-reimbursable project functions.
While the Senate has not yet taken action on the FY 2007 Energy and
Water Development Appropriations Act, the House version supports the
Reclamation proposal regarding reimbursement of security guard and
patrol costs based on project cost allocations.
We believe it is fair and reasonable for the costs of guards and
patrols to be allocated to the beneficiaries of the projects being
protected.
Reports to the Congress
At the request of Congress, Reclamation provided reports in May
2005 and March 2006 concerning the reimbursement of security guard and
patrol costs on Reclamation facilities. The March 2006 report was
modified to provide information requested by Representatives Richard W.
Pombo and John T. Doolittle in their letter of December 13, 2005 to
then-Commissioner Keys. We believe these reports thoroughly addressed
Reclamation's plan to make most FY 2006 security guard and patrol costs
reimbursable, and the reports have been shared widely with water users,
power users, and other concerned parties.
Outreach
Reclamation has made a thorough effort to communicate with water
and power user entities to explain the reimbursability of certain
security guard and patrol costs. These efforts include numerous
presentations to water and power stakeholder organizations during the
fall of 2005 and early 2006. Briefings and discussions were held with
representatives of the National Water Resources Association and Family
Farm Alliance in December 2005, as well as with representatives of the
Sacramento Municipal Utility District and the Central Valley Project
Water Association in March 2006. Meetings were also held with the
Colorado River Energy Distributors Association, including most recently
in May 2006. Reclamation regional and area offices have also provided
information as requested to water and power users on this subject.
Transparency
Transparency is one of the key elements in assuring Reclamation
project water and power users that the reimbursable costs of project
O&M are reasonable and not excessive. However, under Reclamation
policy, much of the data on security-related activities falls into the
category of ``For Official Use Only'' (FOUO) information and is only
available on a need-to-know basis. At the same time, Reclamation
understands water and power users' need for accountability with respect
to O&M expenditures. Therefore, we have communicated to water and power
user organizations our willingness to provide an appropriate level of
detail concerning security-related expenditures consistent with our
security and policies.
In order to have access to such information, water and power user
organization representatives may need to consent to protect the FOUO
information via non-disclosure agreements. If the appropriate
clearances are obtained, they may also be permitted to review relevant
classified information.
Accountability
Reclamation has utilized the security funds provided by the
Congress for the activities identified by formal security evaluations.
Audits on two occasions by the Office of the Inspector General have
confirmed Reclamation's appropriate use of security-related funding.
The way our government functions and indeed the way our society
functions was changed on September 11, 2001. Responding to legitimate
public concern about the security of critical Federal infrastructure,
we have devoted significant human and financial resources to improve
our security posture at thousands of facilities.
Increased investment in comprehensive security measures to protect
Reclamation's assets will continue to be a normal part of the way we
operate in the future.
Moving forward, Reclamation will work with the Congress regarding
security cost allocations, and how to maintain coherent, consistent
policies affecting our customers. Reclamation is committed to working
with stakeholders and this subcommittee on additional suggestions in
this area.
Mr. Chairman, thank you for the opportunity to present testimony
today. I am pleased to answer any questions.
______
Mr. Radanovich. Thank you, Mr. Todd.
Just to kind of get this in the record, Mr. Todd, have you
received any negative feedback about the actual need for site
security program after 9/11?
Mr. Todd. With regard to reimbursability?
Mr. Radanovich. Or just the need for the programs.
Mr. Todd. No, I have not.
Mr. Radanovich. OK. One of your goals in your managing for
excellence effort is to improve communication between the
agency and its customers, and yet it sounds like there is a
real communication problem going on with the security program.
How do you plan to improve this communication problem to
fit your overall communications goals?
Mr. Todd. I believe that there is several things that we
can do and we have invited the customers in for, but certainly
they have a need to know, and we have several ways for them to
get this kind of information and several different levels of
information that we could provide them.
There are levels of information of guards and patrols that
are for official use only. It is not for public consumption,
but certainly we can provide that to them, and we have a
process by where they can get that information, and we
definitely are willing to do that.
Then there is the national security information which, of
course, is classified, and there is a process for us to go
through with them if they want to get to the vulnerabilities of
these projects, and see how that information ties into the
costs, and we are willing to do that as well.
Mr. Radanovich. And yet the testimony from the panel the
time before it is rather difficult, I think, in the security
clearance program you can give confidence to the person who has
seen it, but the difficulty that they have is going back to
their boards, effectively convincing them or clear down to the
consumer level.
Have you got any ideas on how to----
Mr. Todd. Well, there is some truth to that. The
information isn't for public consumption, and so there is some
controls on it. However, we are willing to work with them to
get the appropriate people in the room and they have some
discussion about who they would like to have there or how many,
and we would definitely work with them to get the right folks
there.
Mr. Radanovich. Right now site security construction costs
are borne by the American taxpayer. Can you commit that such
costs will continue to be paid for in this way for the next
five years?
Mr. Todd. That is the capital costs you are talking about?
Mr. Radanovich. Yes.
Mr. Todd. Yes. I believe that we have no intention of
changing that policy right now. I can assure you of that. And I
believe that it would be maintained as non-reimbursable, and we
have said that to you in the report to Congress here in the
2006 report we sent to you.
Mr. Radanovich. And we are made aware of the problem that
we had with using the money for paving parking lots and such.
Can you guarantee that kind of thing won't happen again in the
future?
Mr. Todd. Well, I am not familiar with that particular
issue, using security costs to pay for paving. As we have
installed facilities and maybe there was some paving around the
facilities that we installed, but to pave a mere parking lot, I
am not familiar with that. As a matter of fact, the Inspector
General's Office has just finished an audit this past year on
our costs. They raised no inconsistencies with us spending
dollars on funds specifically for security of the facilities.
Mr. Radanovich. You indicated that you want to work with
Congress on security costs. Are you willing to work with
Congress on legislative authorization to this program?
Mr. Todd. Certainly we would work with you.
Mr. Radanovich. Thank you very much.
Mrs. Napolitano.
Ms. Napolitano. Mr. Todd, you said you would work with the
committee. Do you think there is a need for one?
Mr. Todd. Not in my estimation right now. I think we have
the particular policies and procedures in place. We have a
mature and stable program right now, and we can certainly brief
you on not only what that is, but if you would like, we will
even give you a classified briefing as to what the
vulnerabilities are and why it is stable and why it is mature.
But certainly we will work with you in any way that you
would like us to.
Ms. Napolitano. Well, do you actually believe the
legislation may be needed though to clarify how the security
program should be funded?
In other words, because there seems to be a question as to
Reclamation setting standards in December and changing them in
March. Would there be a need to be able to solidify so they
know where their budgets are going to have to be going to
rather than change in the middle of the stream?
Mr. Todd. Well, certainly. We definitely need to
communicate with the customers, and we believe that we have
given a lot of time to allow these kind of costs to get into
their budgets, and if we were talking about changing our
practice legislatively, it would be a change from our pre-9/11
practice as well. This is really not change.
We took a break in the middle here to give some flexibility
here to the customer so that they wouldn't have to pay
reimbursability costs immediately until we figure out what this
security program was like.
Ms. Napolitano. Was that the way it was posed to them?
Mr. Todd. Was that the way what?
Ms. Napolitano. It was posed to them. Was this the way they
were notified that it was just going to be an interim thing
until you decided what to do with it?
Mr. Todd. Well, we believe that our policy did state that
to future costs.
Ms. Napolitano. No, did you talk to these individual
groups?
Mr. Todd. I believe we did. There is the numerous speeches
that the Commissioner gave and other----
Ms. Napolitano. But speeches are different than a directive
or a notification, or as you have heard, none of them were
aware that there was a change coming until the change came
through a phone call.
Mr. Todd. Well, I heard that. I believe though that we have
worked with them and notified them in meetings, in numerous
meetings.
Now, it is possible we missed, you know.
Ms. Napolitano. Would you then believe that you might want
to establish a format to where whenever you have a definite
change of procedure that you can notify them all individually
or collectively, or however at the same time so then you can
get the feedback, or then they are aware rather than having to
find out from somebody else?
Mr. Todd. Certainly, we would consider that. We have done
this though through our normal O&M meetings with them that are
frequently had out in the field. And so that is what we are
relying on as those processes to convey this information.
Ms. Napolitano. Going back to the legislation, has your
agency drafted anything yet?
Mr. Todd. Excuse me. I didn't quite catch that.
Ms. Napolitano. Has your agency drafted any legislation to
be able to work on this? No?
Mr. Todd. No, we have not.
Ms. Napolitano. OK. What do you think about the proposal to
amend the Safety of Dams Act to include site security costs
within the statutory definition of safety of dams, and also as
you heard, provide possibly a sunset date?
Mr. Todd. Using the Safety of Dams Act to give more
credence to security, you know, I don't know that we would have
a problem with that. Using that as a model might cause some
problems because the Safety of Dams Act, the 15 percent is on
the capital side whereas on the security right now that is zero
percent, and so there is a better break, if you will, on the
security in our policies right now than what the Safety of Dams
gives. Both programs is the operation and maintenance, and that
is 100 percent.
Ms. Napolitano. Right, and that could be included in the
act itself, however. When you amend or when you upgrade an act,
you want to include new innovative ways of getting things done,
or--well, 9/11, who knew.
Mr. Todd. Well, one point of confusion about the word
``upgrade'' is in the report that we sent you there is a table
and at the bottom of the table under the OM&R, it says
``Upgrades''. We recognize that there is confusion in that
word, and we have promised our water users that we will come
out with a memo that clarifies that.
What that means is that under regular replacement of
equipment and when you replace equipment sometimes you got to
upgrade it just because the equipment upgrades itself through
technology, but that would be OM&R and reimbursable.
The upgrades though for a security level, in fact, if we
had a security level that we needed to have quite substantial
additional equipment to take care of or a different methodology
we had to address or a different vulnerability, that would be
on the capital side and that would be non-reimbursable.
So we will definitely clarify that word ``upgrade'' under
the OM&R piece.
Ms. Napolitano. OK, I will wait for the second round, Mr.
Chair. You have Mr. Costa.
Mr. Radanovich. Mr. Costa, did you have any questions?
Mr. Costa. Yes. Thank you very much, Mr. Chairman.
When it comes to these kind of discussions, Mr. Todd, I am
always one who likes to go back to the basics, and that is to
try to assess risk management versus risk assessment. In
looking at your testimony here, while you talk about your top-
down security program review, and you cite the incidences going
back to the initial bombing in Oklahoma City in 1995, I am
wondering has there been any new detailed analysis, first of
all, in terms of the risk assessment for the Bureau projects
that we are looking at that you cite here in the West?
Obviously, they cover a number of states. But what is the
current criteria that you are using for risk assessment?
Mr. Todd. The process that we went through after 9/11 we
had the facilities that we had designated that we were going to
do a security risk assessment on, a security assessment. Those
came out of our safety of dams list of high and significant
hazard facilities.
Mr. Costa. Time significant hazards facility?
Mr. Todd. High and significant hazard facilities. That is a
public designation of the safety of dams and how they might
fail and who and what that that would impact, and so there is a
designation that we have. But not all of our facilities have
that designation, but many, many do, about 250 do.
We did security assessments on each and everyone of those
after 9/11 for the next three years. And in that security
assessment we used three different methodologies. There is the
RAM-D methodology that was established through the Sandia
National Labs. We had other risk methodologies that we used for
lower priority facilities. We used the Defense Department for
the national critical infrastructures.
Mr. Costa. Yes, OK.
Mr. Todd. So those we finished, and then that is what we
based our vulnerabilities on, and what needed to be upgraded
and mitigated.
Mr. Costa. But I mean, are there vulnerabilities based upon
in terms of if these sites were to be predetermined as
vulnerable from a terrorist attack or some sort of attack, and
where they would cause, obviously, significant damage?
I mean, this gets to homeland security, but the fact is
that a small earthen-filled dam in a remote area is going to
have a lot less attractiveness vis-a-vis vulnerabilities versus
Folsom Dam, for example, in Sacramento, or Shasta where you
could have a lot more havoc and chaos and economic and lives
that would be lost.
Mr. Todd. Absolutely. The formula that we used in there
considered three factors. It was intelligence information, the
vulnerabilities themselves, and then, of course, the
consequences, and those consequences were very significant in
our decisions about what kind of security need was necessary.
Mr. Costa. I am not as familiar with some of the other
states but I am familiar with California in the case of Folsom
and Shasta. The Central Valley Project, as the earlier witness
alluded to, we have a circumstance where we have our state
water project in which the last decade or so we have tried to,
to the degree possible, run the projects in a harmonious
fashion.
So how does that feed out when you are looking at cost
sharing on security issues with regards to the projects?
Mr. Todd. The way Reclamation----
Mr. Costa. I mean, we were spending a lot of money I know
post-9/11 to guard the aqueduct, to provide additional security
within the Delta and some of the other key water facilities in
the state.
Mr. Todd. Yes, and most of those costs are on the national
critical structure, both Folsom and Shasta, and those----
Mr. Costa. They fall under the category of reimbursable or
non-reimbursable?
Mr. Todd. The capital costs that went into fortifying those
facilities were non-reimbursable, so all of the barriers,
cameras, any other kind of equipment like that was non-
reimbursable.
The guards and patrols were non-reimbursable, and in 2006,
this year, they have become reimbursable, and those guards and
patrols or the determination for them was based on these
assessments and what was necessary there with the kinds of
fortifications that we had put in place.
Mr. Costa. And so how would you define the cost-sharing
arrangement between the state and the feds?
Mr. Todd. The cost sharing is the annual cost, which is
really the guards and patrols, and any operation and
maintenance after the capital costs have been put in or after
the capital improvements have been put in.
So the cost-sharing distribution then is based on a regular
O&M allocation for the CVP, and that is how that cost then
would be shipped out to the customers.
Mr. Costa. OK. I see my time is up. Thank you very much,
Mr. Chairman.
Mr. Radanovich. Thank you, Mr. Costa.
Mrs. Napolitano.
Ms. Napolitano. Thank you, Mr. Chair.
Mr. Todd, how many Reclamation projects have security needs
that require guards and patrols that were not contemplated
prior to 9/11? And when these projects were originally
authorized for construction, were they in part justified
because of any benefits that were considered national in scope?
Mr. Todd. Well, for the first part of your question is pre-
9/11 we did not have a lot of guards and surveillance.
Ms. Napolitano. But you did have some.
Mr. Todd. We had some. Of course, that expanded. So far as
whether security was a part of the original authorization, it
was not. In other words, security, I don't believe, is in any
particular authorization for any project.
Ms. Napolitano. But I don't think that is what I have
asked. How many of these projects have security needs that
require guards and patrols?
Mr. Todd. Let me see, I don't have the information with me
about the numbers of guards and patrols.
Ms. Napolitano. Give me a ballpark figure.
Mr. Todd. You know, I guess I could go through the report
we sent you, and look at that, but I don't know. Maybe 50.
Ms. Napolitano. OK. But when they were authorized for
construction were they, in part, justified because any of those
benefits were considered national in scope?
Mr. Todd. I really don't--I don't know the answer. I don't
believe that any authorization ever said that they were a
national security in scope.
Now, national benefits, yes. National benefits, yes,
because any of these projects based on the economics had to
meet the national benefits criteria.
Ms. Napolitano. That is the answer I was looking for. OK.
Is there any way under current law to consider benefits
when operation, maintenance and repair charges are calculated?
Mr. Todd. I am sorry. I am not understanding what you are
asking.
Ms. Napolitano. Well, the current law considers it, as you
say, national in scope, because they have to meet a certain
criteria. When that law is set up, does it also consider the
operation, maintenance and repair charges to be calculated into
that?
Mr. Todd. Well, in general, the O&M charges, yes, and we
have direction from Congress on the care of the facilities and
how that process works and how the O&M reimbursability piece
works, and the beneficiaries of certain functions, power,
municipal and industrial irrigation would reimburse the United
States for the benefits and the costs of that project.
Ms. Napolitano. OK. That means you do have some flexibility
then?
Mr. Todd. Yes, the Secretary does have discretion to
determine exactly how that works, yes.
Ms. Napolitano. OK. It kind of brought something over when
there was a discussion earlier, and I wanted to ask to bring it
forth because it goes in one ear and out the other if I don't
ask it when I am thinking about it.
But it has to do with the actual replacement of say
cameras, very simple thing. That was pre-9/11, you have had
those installed for protection of any nut who comes and wants
to do damage to a dam, am I correct?
Mr. Todd. Yes.
Ms. Napolitano. In some of them, maybe not all of them, but
you have the major ones, right? You have some oversight
capability?
Mr. Todd. Yes. Pre-9/11, yes, and it was reimbursable at
that time.
Ms. Napolitano. And post-9/11, but the idea then would be
if these cameras which get dated, they get old.
Mr. Todd. Right.
Ms. Napolitano. You break down, you have to replace them,
who bears the cost? And if you are going to replace them with a
newer, more, a better operating camera that is going to
naturally have an additional cost, who is going to bear that?
Mr. Todd. Using the camera as an example, that would fall
into operation and maintenance. That would be allocated out and
there would be a reimbursability factor to the replacement of
that camera.
If in fact the camera was upgraded, or you couldn't buy the
same exact camera but had to buy something new in order to
replace it and it comes with additional cost, that may be
classified as an upgrade--but just specific to that particular
piece of equipment.
It is not necessarily an upgrade to the security risk. Once
we move into us determining that a upgrade to a security risk,
which involves a lot of cameras and a lot of equipment, a lot
of processes on that facility, then that would be non-
reimbursable for the installation.
Ms. Napolitano. OK. But you may not find the same
equipment.
Mr. Todd. That is right. It might be completely different,
right.
Ms. Napolitano. What does the Bureau project for spending
on security over the next five years, and will that differ if
the national threat level changes?
Mr. Todd. Well, our projection is roughly that 50 million
figure that we have submitted to you in our budget documents.
Ms. Napolitano. I am sorry. Is that going to be enough?
Mr. Todd. Pardon?
Ms. Napolitano. Is that going to be enough?
Mr. Todd. I believe so, yes. I believe so. We have been
functioning on that. We have our priorities set.
Ms. Napolitano. That is true, Mr. Todd, but cost of
everything has gone up. The cost of replacement, the labor,
everything else has gone up. And if you are using the same
amount, that means you are going to have less to be able to do
replacement.
Mr. Todd. Well, barring inflation and some of those minor
increases----
Ms. Napolitano. Inflation is a fact of life.
Mr. Todd.--I still think it is going to be about that
figure. I think our program is stable now. I really don't
believe that we have any large increases coming up in the
future.
Ms. Napolitano. What about if the threat level changes and
you are going to have to add to that security process?
Mr. Todd. If the threat level changes, certainly that
adds----
Ms. Napolitano. Then we have to come back and ask for more?
Mr. Todd. That adds costs, and if we can't adjust our
programs to take care of it internally and transfer some money
around to take care of it, then definitely we would have to ask
for more.
Ms. Napolitano. Thank you, Mr. Chair.
Mr. Radanovich. There being no other questions of the
panel, I want to thank the witness, Mr. Todd, for being here,
and it concludes the testimony.
I will say in closing that I think we need to work together
on possible legislation to protect our facilities, bring
certainty and transparency for our consumers, and allow
Congress to have more oversight, and with that again thank you,
and this does conclude this hearing.
Mr. Todd. Thank you.
[Whereupon, at 11:35 a.m. the Subcommittee was adjourned.]
[Information submitted for the record is listed below and
follows:]
American Public Power Association, Letter
submitted for the record
Colorado River Commission of Nevada, Letter
submitted for the record
Colorado River Energy Distributors Association
(CREDA), Letter submitted for the record
Lynch, Robert S., Counsel and Assistant
Secretary/Treasurer, Irrigation and Electrical Districts of
Arizona, Letter submitted for the record
National Water Resources Association, Letter
submitted for the record
Northern Colorado Water Conservancy District,
Statement submitted for the record
Sacramento Municipal Utility District (SMUD),
Statement submitted for the record
Washington Public Utility Districts Association
(WPUDA), Letter submitted for the record
AMERICAN PUBLIC POWER ASSOCIATION (APPA)
2301 M Street, N.W.
Washington, D.C. 20037
July 5, 2006
The Honorable George Radanovich
Chairman
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
The Honorable Grace Napolitano
Ranking Member
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Radanovich and Ranking Member Napolitano:
I am writing regarding the Subcommittee hearing held on June 22,
2006, on the Bureau of Reclamation's site security program. I
respectfully request that this letter and the accompanying attachments
be included in the Subcommittee's record for that hearing.
APPA is the service organization for the nation's more than 2,000
community-owned (public power) electric utilities that collectively
serve over 43 million Americans. Public power utilities include state
public power agencies, municipal electric utilities, and special
utility districts that provide electricity and other services to some
of the nation's largest cities such as Los Angeles, Phoenix, Seattle,
and San Antonio, as well as some of its smallest towns. Indeed, the
vast majority of public power systems serve communities of less than
10,000 people in 49 states (all but Hawaii).
Many of these communities purchase all or a portion of their
wholesale power from the federal Power Marketing Administrations
(PMAs). The PMAs provide millions of Americans served by public power
systems and rural electric cooperatives with low-cost hydroelectric
power produced at dams operated by the U.S. Army Corps of Engineers and
the Bureau of Reclamation (Bureau). These federal multi-purpose dams
were authorized by Congress to provide a wide range of significant
benefits to millions of citizens in the United States and elsewhere,
including: flood control; irrigation; municipal water supply;
interstate and international compact water deliveries; lake and stream
recreation; blue ribbon trout fisheries; river regulation; economic
development; fish and wildlife propagation and mitigation; and power
generation and transmission.
Ensuring the security of these federal dams and related facilities
is of utmost importance to all citizens of the United States, not just
to the direct beneficiaries of these resources. Since World War II, the
Bureau has agreed with the premise that security costs for these
facilities is in the broader public interest and has not required the
power customers to pay for these costs (although it should be noted
that consumer-owned electric utilities have traditionally paid the
majority of the total reimbursable costs of the dams, including
subsidizing the costs of irrigation features and environmental
programs--thereby ensuring repayment of the federal debt plus
interest).
After the terrorist attacks of September 11, 2001, the Bureau
increased security measures at federal dams, but in the spring of 2002
determined that these expenditures served the public interest, and
should be paid for by the federal government. In 2005, however, the
Bureau reversed this decision and determined that expenditures for
guards and patrols should be considered Operation & Maintenance (O&M)
costs and reimbursed by ``project beneficiaries.'' This effectively
means that power customers pay the majority of the costs.
Despite numerous expressions of congressional and customer concern,
the Bureau is proceeding to expand and implement its reimbursable site
security cost plan. In a report submitted to Congress in February of
2006, the Bureau expanded the scope of reimbursable costs beyond guards
and patrols, to include operation, maintenance and repair (OM&R) on
upgrades to fortifications done at the dams. This scope has expanded
from the report the Bureau provided to Congress in May of 2005, and
from a briefing the Bureau provided to customers in mid-December of
2005.
The level of concern by APA's members about the Bureau's actions is
expressed in the attached policy resolution that APA's members adopted
at our recent annual conference in June. As is stated in the
resolution, APPA continues to believe that the appropriate allocation
of these additional security cost measures should be through annual
non-reimbursable appropriations. However, APPA recognizes that this
approach may not be viable, at least in the near-term. Therefore,
should the Bureau proceed to charge power customers for any portion of
their site security costs, we ask that Congress take steps to limit
these costs as well as to allocate the costs equitably. We have also
endorsed the attached draft principles that delineate in more detail
the legislative actions that we would support to address this issue.
We greatly appreciate the Subcommittee's interest in this issue,
and look forward to working with you to address this situation in a
manner that maintains the appropriate balance between a rational site
security policy and equitable allocation of costs.
Sincerely,
Alan H. Richardson
President and CEO
[NOTE: Attachments to Mr. Richardson's statement have been retained in
the Committee's official files.]
______
COLUMBIA RIVER COMMISSION
OF NEVADA
555 E. Washingtn Avenue, Suite 3100
Las Vegas, Nevada 89101-1065
July 6, 2006
The Honorable George Radanovich
Chairman
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
The Honorable Grace Napolitano
Ranking Member
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Radanovich and Ranking Member Napolitano:
I am writing in regard to the subcommittee hearing held on June 22,
2006, on the Bureau of Reclamation's site security program. I
respectfully request that this letter and the accompanying attachment
be included in the subcommittee's record of that hearing.
The Colorado River Commission of Nevada (``CRC'') is the state
agency that represents Nevada in negotiations regarding Colorado River
resource issues. CRC works closely with Reclamation and the other basin
states on a range of issues related to river operations, water
delivery, endangered species and power production. Nevada purchases
approximately 460 megawatts of hydroelectric energy generated for the
most part at Hoover, Parker, and Davis Dams on the Colorado River. In
its unique role as steward of this power, CRC, in turn, markets the
power within Nevada under long-term contracts. We write this letter in
support of the testimony provided to the subcommittee regarding the
concern over post-9/11 security cost allocations to project
beneficiaries. We also support the principles outlined in the
attachment to this letter.
Like other federal multi-purpose dams, Hoover, Parker, and Davis
Dams were authorized by Congress to provide a wide range of significant
benefits including: flood control; irrigation; municipal water supply;
interstate and international compact water deliveries; lake and stream
recreation; blue ribbon trout fisheries; river regulation; economic
development; fish and wildlife propagation and mitigation; and power
generation and transmission to millions of people in the United States
and elsewhere. Ensuring the security of these federal dams and related
facilities is of utmost importance to all citizens of the United
States, not just to the direct beneficiaries of these resources.
After the terrorist attacks of September 11, 2001, the Bureau
increased security measures at federal dams, and in the spring of 2002
determined that these measures served the wider public interest and
their costs should be borne by the federal government. However, in
2005, the Bureau reversed this decision and determined that
expenditures for additional guards and patrols should be considered
operation and maintenance (``O&M'') costs reimbursable by ``project
beneficiaries.'' This effectively means that power customers alone pay
the majority of these costs.
Despite numerous expressions of congressional and customer concern,
the Bureau is proceeding to expand and implement its reimbursable site
security cost plan. In a report submitted to Congress in February of
2006, the Bureau expanded the scope of reimbursable costs beyond guards
and patrols to include operation, maintenance and repair (``OM&R'') on
upgrades to fortifications done at the dams. This represents a
substantial expansion from the report the Bureau provided to Congress
in May of 2005, and from a briefing the Bureau provided to customers in
mid-December of that year.
We greatly appreciate the subcommittee's interest in this issue,
and look forward to working with you to address this situation in a
manner that maintains the appropriate balance between a rational site
security policy and an equitable allocation of costs.
Sincerely,
George M. Caan
Executive Director
Enclosure
______
Bureau of Reclamation Building and Site Security Program
July 4, 2006 DRAFT
Position Statement
The Colorado River Energy Distributors Association (CREDA), the
Northern California Power Agency (NCPA), the Sacramento Municipal
Utility District (SMUD), the Washington Public Utility District
Association (WPUDA), the Mid-West Electric Consumers Association (Mid-
West), the Northwest Public Power Association (NWPPA), the National
Water Resources Association (NWRA), the American Public Power
Association (APPA), the National Rural Electric Cooperative Association
(NRECA), the Family Farm Alliance (FFA), the CVP Water Association, the
Upper Colorado River Commission and the four Upper Colorado River Basin
States (collectively ``Parties'') believe that Congress should
expressly authorize oversight of the Bureau of Reclamation's (BOR)
Building and Site Security program to ensure accountability to Congress
and provide cost certainty to funding stakeholders through an
equitable, durable allocation of reimbursable costs.
BACKGROUND
The Parties believe that security measures instituted at Bureau of
Reclamation Facilities as a response to the attacks of 9/11 should be
the cost responsibility of the United States Government and should be
funded through appropriated, non-reimbursable dollars. The Parties have
worked diligently with Congress, the Administration, and other
stakeholders over the past five years on this issue.
The protection of these facilities benefits all project
beneficiaries, as well as the public. If power facilities were not part
of the project there would still be substantial security cost
investments. If a portion of security costs is to be a repayment
responsibility of the power and water customers it should be based on a
fair share of the costs with some level of certainty that these costs
will remain reasonable, stable and appropriate.
In its proposed FY 2006 budget as well as discussions with the
Parties, the Bureau of Reclamation (BOR) indicated that only the costs
of guards and patrols would be reimbursable, and that the costs of
facility fortification would remain nonreimbursable. However, in its
2006 Report to Congress (issued in March), the costs of ``facility
fortification upgrades'' 1 are also listed as reimbursable.
The practical effect of this approach is that ALL costs at some point
are reimbursable. Not only is this inconsistent with stated BOR
direction, it is inconsistent as well with the title of the report
(``Reimbursement of Security Guard and Patrol Costs on Bureau of
Reclamation Facilities'').
---------------------------------------------------------------------------
\1\ Report to Congress ``Reimbursement of Security Guard and Patrol
Costs on Bureau of Reclamation Facilities'', February 2006, page 5.
---------------------------------------------------------------------------
The Parties believe that authorizing legislation is necessary to
ensure appropriate Congressional oversight and to provide some
certainty to the funding stakeholders in terms of a fair, durable and
equitable allocation of costs.
The Parties take no position as to the mechanism used to generate
funds that are not funded through reimbursable revenues.
LEGISLATIVE PRINCIPLES
Authorizing legislation should include the following essential
features:
1. BOR will report annually to the House and Senate Committees on
Homeland Security, Resources and Appropriations on security actions/
activities taken in the prior fiscal year and proposed for the upcoming
fiscal year and the sources and expected sources of reimbursable and
nonreimbursable funding for each type of action.
2. The capital cost of security enhancements or fortifications
(``hardening''), including the operation, maintenance and replacement
of such enhancements or fortifications, shall continue to remain non-
reimbursable.
3. Funding stakeholders to reimburse costs of Guards and Patrols
at National Critical Infrastructure (NCI) Facilities up to a level that
does not exceed the FY 2006 Congressionally-approved level of $10
million 2, indexed for inflation.
---------------------------------------------------------------------------
\2\ Id, page 1.
---------------------------------------------------------------------------
4. Such reimbursable funds to be spent only on Guards and Patrols
at NCI facilities and allocated among NCI Facilities in the same
delineation as allocated in FY 2006. 3
---------------------------------------------------------------------------
\3\ Id, page 11.
---------------------------------------------------------------------------
5. BOR is authorized to enter into bilateral contractual
arrangements with funding stakeholders, if stakeholders are willing to
do so, in lieu of seeking appropriated funds for Guards and Patrols.
6. In the event of a change in the level of national security
threat, BOR will immediately notify Congress and with the funding
stakeholders seek approval of Congress to adjust the reimbursable costs
for Guards and Patrols until such time as the threat level changes.
7. BOR must facilitate appropriate actions to allow funding
stakeholder review, input on and management of work program elements,
including security enhancements, on at least a five-year planning
horizon, detailed by pre- and post-9/11 and by category (fortification,
guards and patrols).
______
Statement submitted for the record by the
Colorado River Energy Distributors Association (CREDA)
CREDA appreciates the opportunity provided to its Executive
Director, Leslie James, to accompany Mr. Jay Moyes as a witness in the
above-referenced hearing. Following are our comments for the record of
that hearing. In addition, attached hereto is a set of principles
related to Reclamation's site security program, which have been
endorsed by several organizations. The principles continue to be noted
as ``draft'' as we welcome the opportunity to continue to work with the
Agency and Congress to address the concerns associated with this
program, its oversight and funding.
By way of background, CREDA is a non-profit, regional organization
representing 155 consumer-owned, non-profit municipal and rural
electric cooperative utilities, political subdivisions, irrigation and
electrical districts and tribal utility authorities that purchase
hydropower resources from the Colorado River Storage Project (CRSP).
CRSP is a multi-purpose federal project that provides flood control;
water storage for irrigation, municipal and industrial purposes;
recreation and environmental mitigation, in addition to the generation
of electricity. CREDA was established in 1978 and serves as the
``voice'' of CRSP contractor members in dealing with Reclamation
regarding its programs, including resource availability and
affordability issues.
CREDA members serve over four million electric consumers in six
western states: Arizona, Colorado, Nevada, New Mexico, Utah and
Wyoming. CREDA's member utilities purchase more than 85 percent of the
power produced by the CRSP.
Following the September 11, 2001 terrorist attacks, Reclamation
initiated an aggressive program to enhance the security of the federal
dams it owns and operates to protect against possible attacks. Based on
World War II Congressional precedent and internal analysis by the
Department of the Interior, the Commissioner of Reclamation issued an
administrative decision in 2002 that the costs of increased security
measures should be a federal obligation, non-reimbursable by project
beneficiaries.
Congress approved $28.4 million in funding for security costs in
the FY 2003 Energy and Water Development Appropriations and another $25
million in supplemental appropriations. In FY 2004, Congress approved
another $28.5 million for increased security. Although CREDA expressed
concerns at the time about the increasing level of these costs, its
members and other federal power customers were shielded by the
Commissioner's administrative determination.
The following year, however, the Office of Management and Budget
directed Reclamation to change its position and to recover a portion of
the increased security costs from customers. Thus, in FY 2005, the
Administration's budget directed Reclamation to recover $12 million
from entities that benefit from the multi-purpose projects. Of that
amount, Reclamation determined that 94 percent would be recovered from
power customers alone.
Because OMB's directive was in conflict with previous legislative
precedent, and because we did not think it was fair for power users to
bear 94% of the reimbursable costs, CREDA and other federal power
customers objected. Further, power users noted that Bureau's decision
to allocate a majority of the reimbursable costs to power users was not
based on any objective or risk analysis of the benefits of the security
upgrades.
In response to these objections, Congress, in the report
accompanying the FY 2005 Energy and Water Development Appropriations
Act, noted the dramatic increase in security needs and corresponding
costs at Reclamation facilities post 9/11 and found that Reclamation's
security posture ``will not likely approach pre-September 11, 2001
levels for many years, if ever.'' The Conferees then underscored their
concern about the reimbursability of security costs by directing
Reclamation report to Congress no later than May 1, 2005, with a
breakout of planned reimbursable and non-reimbursable security costs by
project, by region.
In addition to the report, the conferees directed Reclamation ``not
to begin the reimbursement process until Congress provides direct
instruction to do so.'' Even though Reclamation was given this specific
direction, then-Commissioner John Keys, in his July 19, 2005 testimony
before this Subcommittee, stated Reclamation's intention to make FY
2006 guards and surveillance costs reimbursable and that ``New
legislation is not needed to implement this policy.'' In effect,
Commissioner Keys was informing Congress that Reclamation did not
intend to abide by the FY 2005 report language.
Reclamation's May 2005 Report indicated its intent, in the future,
to collect the costs of all guards and patrols from project
beneficiaries, based on the existing project cost allocations for
operation and maintenance (O&M). In the CRSP, this would require about
95% of the costs to be borne by the power customers. Again, CREDA and
others objected, citing in particular the inequity of allocating such a
large share of the costs to power alone.
In the FY 2006 Energy and Water Development Appropriations Act,
Congress directed that $10 million of the $18 million Reclamation
requested for guards and patrols be provided by reimbursable funding.
In the accompanying report, Congress stated that it agreed that ALL
project beneficiaries that benefit from an enhanced security posture at
Reclamation facilities should pay a share of the costs and directed
that another report be provided to Congress within 60 days, delineating
``planned security costs by project prorated by all project purposes.''
CREDA believes that this direction means that Reclamation must
allocate reimbursable costs among all project purposes. Unfortunately,
Reclamation does not agree with this interpretation and, in its March
2006 report to Congress, it proposed an allocation of reimbursable
costs according to the O&M formula for each project, NOT according to
all project purposes, as Congress directed.
In addition, the March 2006 report indicates that Reclamation now
proposes to include ``facility fortification upgrades'' as a
reimbursable cost. This additional obligation, in essence, makes
everything reimbursable at some point. The March 2006 report is an
expansion of the scope of reimbursable costs that differs from what
Reclamation told Congress in May 2005, and from what it told CREDA in
mid-December 2005.
CREDA believes that the historic rationale established in the 1942
and 1943 Interior Department Appropriation Acts for treating costs of
increased security at multi-purpose federal projects as non-
reimbursable obligations of the federal government is still valid.
Further, we have repeatedly expressed concerns to Reclamation about the
security cost program's lack of information and transparency, lack of
objective criteria, lack of spending controls and inequitable
allocation of costs, and lack of Congressional authorization. Despite
some initial positive signals, CREDA no longer believes that it is
possible to reach an equitable workable solution without further
direction from Congress.
For that reason, CREDA believes that Congress should expressly
authorize Reclamation's site security program to ensure accountability
to Congress and to provide cost certainty to funding stakeholders
through an equitable, durable allocation of costs.
Such legislation should:
1. Direct Reclamation to report annually to the House and Senate
Committees on Homeland Security, Resources and Energy and Natural
Resources, and Appropriations on security actions and activities
undertaken in the prior fiscal year and proposed for the upcoming
fiscal year and the sources and expected sources of reimbursable and
non-reimbursable funding for each action;
2. Provide that funding stakeholders will reimburse costs of
guards and patrols at National Critical Infrastructure (NCI) facilities
up to a level that does not exceed the FY 2006 Congressionally-approved
level of $10 million, indexed for inflation;
3. Specify that such reimbursable funds be spent only on guards
and patrols at NCI facilities and allocated among NCI facilities in the
same manner as they were allocated by Reclamation in FY 2006;
4. Provide that, in the event of a change in the level of national
security threat, Reclamation will immediately notify Congress and, with
funding customers, seek approval of Congress to adjust the reimbursable
costs for guards and patrols until such time as the threat level
changes;
5. Require the Bureau to allow stakeholder review and input on
work program elements of the entire security cost program on at least a
five-year planning horizon, detailed by pre- and post-9/11 and by
category (e.g., fortification, guards and patrols, etc.)
We note that CREDA, Reclamation and the Western Area Power
Administration that markets CRSP power, have a long history of
collaborative, cooperative decision making on a range of operational
and cost issues. We regret that we have been unable to resolve our
concerns about the site security program with Reclamation with the same
level of success. Perhaps this is due to the ``national security''
nature of the issues, which may prevent Reclamation from working as
openly as it usually does with its water and power customers.
CREDA shares Reclamation's concerns about the security of its
multi-purpose facilities. However, the power users also need certainty
and stability with regard to the cost of those security enhancements.
We have been unable to achieve that certainty and stability to date;
for that reason, we are requesting that Congress formally authorize the
program, with specific oversight and cost safeguards for project users.
We are confident and secure in the level of action that the Bureau has
taken to protect taxpayer assets from attack. However, since we have
partnered with the Bureau to provide funding for these priorities, we
deserve some cost certainty, a seat at the table and a real ability to
impact the decision-making process as this indispensable program goes
forward.
Thank you for including these comments in the formal record.
Leslie James
Executive Director
CREDA
4625 S. Wendler Dr. #111
Tempe, AZ 85282
602-748-1344
creda@qwest.net
______
Bureau of Reclamation Building and Site Security Program
June 15, 2006 DRAFT
Position Statement
The Colorado River Energy Distributors Association (CREDA), the
Northern California Power Agency (NCPA), the Sacramento Municipal
Utility District (SMUD), the Washington Public Utility District
Association (WPUDA), the Mid-West Electric Consumers Association (Mid-
West), the Northwest Public Power Association (NWPPA), the National
Water Resources Association (NWRA), the American Public Power
Association (APPA), the National Rural Electric Cooperative Association
(NRECA), and the Family Farm Alliance (FFA), (collectively ``Parties'')
believe that Congress should expressly authorize oversight of the
Bureau of Reclamation's (BOR) Building and Site Security program to
ensure accountability to Congress and provide cost certainty to funding
stakeholders through an equitable, durable allocation of reimbursable
costs.
BACKGROUND
The Parties believe that security measures instituted at Bureau of
Reclamation Facilities as a response to the attacks of 9/11 should be
the cost responsibility of the United States Government and should be
funded through appropriated, non-reimbursable dollars. The Parties have
worked diligently with Congress, the Administration, and other
stakeholders over the past five years on this issue.
The protection of these facilities benefits all project
beneficiaries, as well as the public. If power facilities were not part
of the project there would still be substantial security cost
investments. If a portion of security costs is to be a repayment
responsibility of the power and water customers it should be based on a
fair share of the costs with some level of certainty that these costs
will remain reasonable, stable and appropriate.
In its proposed FY 2006 budget as well as discussions with the
Parties, the Bureau of Reclamation (BOR) indicated that only the costs
of guards and patrols would be reimbursable, and that the costs of
facility fortification would remain nonreimbursable. However, in its
2006 Report to Congress (issued in March), the costs of ``facility
fortification upgrades'' 1 are also listed as reimbursable.
The practical effect of this approach is that ALL costs at some point
are reimbursable. Not only is this inconsistent with stated BOR
direction, it is inconsistent as well with the title of the report
(``Reimbursement of Security Guard and Patrol Costs on Bureau of
Reclamation Facilities'').
---------------------------------------------------------------------------
\1\ Report to Congress ``Reimbursement of Security Guard and Patrol
Costs on Bureau of Reclamation Facilities'', February 2006, page 5.
---------------------------------------------------------------------------
The Parties believe that authorizing legislation is necessary to
ensure appropriate Congressional oversight and to provide some
certainty to the funding stakeholders in terms of a fair, durable and
equitable allocation of costs.
The Parties take no position as to the mechanism used to generate
funds that are not funded through reimbursable revenues.
LEGISLATIVE PRINCIPLES
Authorizing legislation should include the following essential
features:
1. BOR will report annually to the House and Senate Committees on
Homeland Security, Resources and Appropriations on security actions/
activities taken in the prior fiscal year and proposed for the upcoming
fiscal year and the sources and expected sources of reimbursable and
nonreimbursable funding for each type of action.
2. The capital cost of security enhancements or fortifications
(``hardening''), including the operation, maintenance and replacement
of such enhancements or fortifications, shall continue to remain non-
reimbursable.
3. Funding stakeholders to reimburse costs of Guards and Patrols
at National Critical Infrastructure (NCI) Facilities up to a level that
does not exceed the FY 2006 Congressionally-approved level of $10
million 2, indexed for inflation.
---------------------------------------------------------------------------
\2\ Id, page 1.
---------------------------------------------------------------------------
4. Such reimbursable funds to be spent only on Guards and Patrols
at NCI facilities and allocated among NCI Facilities in the same
delineation as allocated in FY 2006. 3
---------------------------------------------------------------------------
\3\ Id, page 11.
---------------------------------------------------------------------------
5. BOR is authorized to enter into bilateral contractual
arrangements with funding stakeholders, if stakeholders are willing to
do so, in lieu of seeking appropriated funds for Guards and Patrols.
6. In the event of a change in the level of national security
threat, BOR will immediately notify Congress and with the funding
stakeholders seek approval of Congress to adjust the reimbursable costs
for Guards and Patrols until such time as the threat level changes.
7. BOR must facilitate appropriate actions to allow funding
stakeholder review, input on and management of work program elements,
including security enhancements, on at least a five-year planning
horizon, detailed by pre- and post-9/11 and by category (fortification,
guards and patrols).
______
IRRIGATION & ELECTRICAL DISTRICTS
ASSOCIATION OF ARIZONA
SUITE 140
340 E. PALM LANE
PHOENIX, ARIZONA 85004-4603
(602) 254-5908
Fax (602) 257-9542
Email: rslynch@rslynchaty.com
E-MAILED AND MAILED
May 31, 2006
Mr. J. Tyler Carlson
Regional Manager
Desert Southwest Customer Service Region
Western Area Power Administration
P.O. Box 6457
Phoenix, Arizona 85005-6457
Re: Proposed rate increase for the Boulder Canyon Project (Hoover Dam)
electric service base charge and rates, 71 Fed.Reg. 10664-6 (March 2,
2006); Denial of post-9/11 increased security costs supporting
information
Dear Mr. Carlson:
We are writing today to supplement our prior letters and oral
testimony in this rate case. The above-cited Federal Register notice
proposes a composite rate increase beginning October 1 of this year of
15% in the cost of power generated at Hoover Dam. The notice also
promised customers a detailed rate package that identifies the reasons
for this large rate increase, which was to be available that same
month, i.e., March 2006.
At the March 8 Informal Customer Meeting conducted by your agency,
a certain amount of data was distributed to those of us who attended or
sent representatives. Included in that data were summary numbers
concerning increased post-9/11 security costs. No detail nor supporting
information were provided with regard to these increased costs.
At the April 4 Public Information Forum, I had hand delivered to
you and to Reclamation's representative letters requesting detailed
information about these costs, which comprise a significant portion of
the proposed rate increase. I note also that the information provided
at the Public Information Forum concerning security costs was even more
limited than that provided at the prior Informal Customer Meeting.
On May 2, 2006, the day before the Public Comment Forum at which I
needed to testify on behalf of IEDA members about this rate proposal, I
received a letter from Reclamation Regional Director Bob Johnson
denying me the answers to the questions I had posed in my earlier
letter. In that letter, he informed me that I could only find out
additional information by signing a nondisclosure agreement, which, of
course, would make the information useless for purposes of the rate
case and the IEDA members' due process rights. You indicated at the
Public Comment Forum that his response was intended also to be a
response to my parallel request to you for the information.
At the Public Comment Forum, the transcript of which I have
reviewed and is part of the record, I again reiterated the lack of
information we had received on security costs, submitted Bob Johnson's
letter denying us the information as part of the record and, once
again, noted the lack of due process that we had suffered on this
important element in this rate process.
I take pains to outline this process for several reasons. First, it
is obvious that both Western and Reclamation had ample time during this
process to supply the supporting information if either agency chose to
do so. That did not happen. Second, the refusal to supply the
information works as substantial prejudice on IEDA members and other
users of Hoover power because the information the agencies have, but
refuse to disclose, is being used to support a significant part of the
rate action proposed to be finalized and put in place by October 1.
Third, designating the information as ``for official use only'' and
describing it as ``sensitive'', as those labels are used in Bob
Johnson's letter denying us the information, are not grounds for
overcoming the due process rights of those paying for Hoover power.
Fundamental rights to due process are denied when a decision is
made ``upon the strength of evidential facts not spread upon the
record''. Ohio Bell Telephone Co. v. Public Utilities Commission of
Ohio, 301 U.S. 292, 300 (1937). ``This is not the fair hearing
essential to due process. It is condemnation without trial.'' Ibid.
``From the standpoint of due process--the protection of the individual
against arbitrary action--a deeper vice is this, that even now we do
not know the particular or evidential facts...on which [the decision
maker] rested its conclusion. Not only are the facts unknown; there is
no way to find them out.'' Id. at 302.
The failure to provide the information we requested is also a
violation of the requirement of the Administrative Procedure Act that
we be allowed to show contrary information or dispute the basis for the
calculations of these costs. Union Electric Company v. Federal Energy
Regulatory Commission, 890 F.2d 1193, 1203 (App. D.C. 1989).
Nor can the agencies hide behind the putative designation ``for
official use only''. The prejudice to the purchasers of Hoover power
here is not minimal and there is and has been no need to expedite this
process that would make it difficult or impossible for the agencies to
provide the information. Robbins v. United States Railroad Retirement
Board, 594 F.2d 448, 451-2 (5th Cir. 1979), and cases cited therein.
In sum, there is no valid reason for Western and Reclamation not to
provide supporting documentation for the numbers being used for
increased post-9/11 security costs and the projected Hoover rate
beginning October 1. Having failed to do so, the agencies have fatally
flawed this process. The record needs to be reopened, the information
supplied, and IEDA, its members and other Hoover power users given a
reasonable opportunity to comment on these proposed expenditures.
Sincerely,
Robert S. Lynch
Counsel and Assistant
Secretary/Treasurer
cc: William Rinne, Acting Commissioner, Bureau of Reclamation
Robert W. Johnson, Regional Director, USBR
Mike Hacskaylo, Administrator, Western Area Power Administration
IEDA Members
______
NATIONAL WATER RESOURCES ASSOCIATION
3800 North Fairfax Drive, Suite #4
Arlington, Virginia 22203
July 6, 2006
The Honorable George Radanovich
Chairman
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
The Honorable Grace Napolitano
Ranking Member
House Water & Power Subcommittee
1522 Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Radanovich and Ranking Member Napolitano:
The National Water Resources Association (NWRA), appreciates the
opportunity to submit the following comments for the record of the June
22, 2006 Water and Power Subcommittee hearing on the Bureau of
Reclamation's site security program.
NWRA is a nonprofit federation of associations and individuals
dedicated to the conservation, enhancement, and efficient management of
our Nation's most precious natural resource--WATER. The NWRA is the
oldest and most active national association concerned with water
resources policy and development. Its strength is a reflection of the
tremendous ``grassroots'' participation it has generated on virtually
every national issue affecting western water conservation, management,
and development.
NWRA's views were represented at the hearing by Mr. Richard
Erickson, Secretary-Manager of the East Columbia Basin Irrigation
District, Othello Washington. NWRA fully agrees with Mr. Erickson's
remarks. As summarized by Mr. Erickson, we do not dispute the need to
defend important Bureau of Reclamation facilities. However, we believe
the protection of national critical infrastructure facilities should be
a federal role, not a local role.
NWRA believes that the historic rationale established after the
attacks on Pearl Harbor for treating the costs of increased security at
multi-purpose federal projects as non-reimbursable obligations of the
federal government is still valid. NWRA is concerned with the policy
change that occurred in Fiscal Year 2005 appropriations where the
Bureau sought for the first time to make the enhanced guards and
patrols costs a reimbursable expense.
Bureau of Reclamation facilities are multi-purpose projects
throughout the West that serve critical roles in water supply, flood
control, electric power development, fish and wildlife protection, and
recreation. An attack on Bureau facilities could cause catastrophic
damage to surrounding and downstream areas, jeopardize lives, cause
wide-spread power outages, and cripple the economy. Water and power
would only be a fraction of the loss in the event of an attack on one
of these facilities, yet the Bureau is requesting that water and power
customers pick up the entire tab for securing these facilities.
NWRA is troubled by the Bureau's shifting site security policy
which included for the first time this year, a charge to water and
power customers for ``facility fortification upgrades''. NWRA believes
that it is time for Congress to officially authorize the Bureau's site
security program. Without such authorization, there will remain
uncertainty and instability for water users throughout the West. NWRA
believes that officially authorizing the program will strike the
correct balance between defending our nation's critical infrastructure
and ensuring that stakeholder interests are appropriately addressed.
NWRA has endorsed the following set of principles for legislation
as drafted by our member association, the Colorado River Energy
Distributors Association. The principles call for the following to be
included in federal legislation:
1. BOR will report annually to the House and Senate Committees on
Homeland Security, Resources and Appropriations on security actions/
activities taken in the prior fiscal year and proposed for the upcoming
fiscal year and the sources and expected sources of reimbursable and
nonreimbursable funding for each type of action.
2. The capital cost of security enhancements or fortifications
(``hardening''), including the operation, maintenance and replacement
of such enhancements or fortifications, shall continue to remain non-
reimbursable.
3. Funding stakeholders to reimburse costs of Guards and Patrols
at National Critical Infrastructure (NCI) Facilities up to a level that
does not exceed the FY 2006 Congressionally-approved level of $10
million, indexed for inflation.
4. Such reimbursable funds to be spent only on Guards and Patrols
at NCI facilities and allocated among NCI Facilities in the same
delineation as allocated in FY 2006.
5. BOR is authorized to enter into bilateral contractual
arrangements with funding stakeholders, if stakeholders are willing to
do so, in lieu of seeking appropriated funds for Guards and Patrols.
6. In the event of a change in the level of national security
threat, BOR will immediately notify Congress and with the funding
stakeholders seek approval of Congress to adjust the reimbursable costs
for Guards and Patrols until such time as the threat level changes.
7. BOR must facilitate appropriate actions to allow funding
stakeholder review, input on and management of work program elements,
including security enhancements, on at least a five-year planning
horizon, detailed by pre- and post-9/11 and by category (fortification,
guards and patrols).
We greatly appreciate the Subcommittee's interest in this very
important issue and look forward to working with you to draft
legislation which would provide more transparency and certainty for
water users throughout the West, while ensuring that the nation's
critical infrastructure is safe and secure for all beneficiaries. Thank
you for time on this issue.
Sincerely,
Thomas F. Donnelly
Executive Director
______
Statement of The Honorable Cathy McMorris, a Representative in Congress
from the State of Washington
Thank you, Mr. Chairman.
The terrorist attacks of 9/11 reminded everyone that we must make
Homeland Security a priority in order to keep the Nation and our
communities safe. This includes protecting the dams and power plants
throughout the West that are critical to our economy and culture.
I know firsthand about the importance of protecting facilities like
Grand Coulee Dam. This multipurpose dam is a tremendous asset to the
Pacific Northwest. Just as FDR envisioned, Grand Coulee has provided
flood control, water, power and recreation to help win World War II and
fuel the economy in modern times.
No one will disagree that we need to manage and protect assets like
Grand Coulee Dam from future terrorist attacks. I am concerned,
however, about how the Bureau of Reclamation is balancing the
protection of this National Treasure on the backs of our water and
power consumers.
Power rates in the Pacific Northwest have increased substantially
since 2001, yet Reclamation wants to add more costs to our power
customers by imposing site security costs despite the fact that Grand
Coulee benefits the general public. To make matters worse, the agency
lacks transparency in these costs and there is no certainty on whether
these costs will spiral out of control.
I am concerned that the uncertain costs and additional expenses
from Reclamation's security program will translate to increased rates
that will further hurt farmers, business owners and families who are
already paying 30% of their electric bills to protect endangered
salmon. Everyone wants to do their part for homeland security, but
Reclamation is imposing a ``pay, pay, patriotism'' policy on certain
folks, and that's not right.
I look forward to working with Reclamation and its water and power
customers to find a win-win solution that will protect our water and
power infrastructure and continue to provide reliable and affordable
water and electricity.
Thank you.
______
Statement submitted for the record by the
Northern Colorado Water Conservancy District
INTRODUCTION
The Northern Colorado Water Conservancy District (NCWCD) was
created by decree of the Weld County District Court in September 1937
as the first water conservancy district in the State of Colorado. As
can be seen on the accompanying map, the NCWCD is located along the
northern front range of Colorado, extending from the City and County of
Broomfield and Fort Lupton on the south, to north of Fort Collins and
Greeley on the north, and then extending northeastward along the South
Platte River to the Colorado/Nebraska state line. The NCWCD encompasses
parts of eight counties and includes approximately 1.6 million acres
within its boundaries, including about 720,000 acres of farmland. The
constituency population of the NCWCD is approximately 585,000 people.
The area within NCWCD boundaries has historically been water-short
because of the region's semi-arid climate and the significant demands
for water in the region for agricultural, domestic, municipal, and
industrial uses. Settlers moved into this area in the mid-1800s with
the area's water resources being first placed to beneficial use for
irrigation purposes in 1859. The water resources provided by the South
Platte River and its tributaries became over-appropriated as early as
the turn of the 20th century. Continued growth and development in this
region over the past 100 years has exacerbated this water-short
situation to a point where water supply planning and management of
available water supplies is critical to continued economic health and
sustainability.
The impetus for the creation of the NCWCD was to serve as the
sponsoring agency to contract with the United States, through the
Bureau of Reclamation (Reclamation), for the design, construction,
operation, and maintenance of the Colorado-Big Thompson Project (C-BT
Project or ``Project''). The C-BT Project provides an extremely
valuable and essential supplemental water supply for the constituents
of the NCWCD. A brief explanation of the background and history related
to the development and operation of the C-BT Project is contained in an
attachment to this testimony entitled ``Background and History of the
Northern Colorado Water Conservancy District and the Colorado-Big
Thompson Project.''
EVOLUTION OF DEMANDS
The area included within the boundaries of the NCWCD in 1937
contained a constituency population of approximately 125,000, compared
to the current population of 585,000. Growth experienced within NCWCD
boundaries has impacted the demand for, and use of, C-BT Project water.
In 1957, 85 percent of the C-BT Project water allotment contracts
issued by the NCWCD were owned by agricultural interests. Today, 62
percent of the Project's allotment contracts are owned by municipal,
domestic, and industrial interests. NCWCD's free-market ownership
transfer and rental systems have allowed the project to adapt to
changing needs over it's nearly 50 years of successful operations.
Transfers of Project water from agricultural use to municipal or
domestic use has proven to be the ``water of choice'' to supply the
growth experienced within NCWCD's boundaries--a trend that will
continue until there is no water left that has not already been
transferred. At that time, there will be a significant increase in the
need to develop additional water supply projects and in the conversion
of native water rights used for agricultural purposes to municipal and
domestic uses.
Studies conducted by the Colorado Water Conservation Board indicate
that future additional domestic, municipal, and industrial demands
within the South Platte River Basin in Colorado could cause the dry-up
of an estimated 250,000 acres of irrigated farmland within the South
Platte River Basin in Colorado downstream of the Denver metropolitan
area to provide supplies to meet these future demands. Most of the
lands which would be dried-up are within the boundaries of the NCWCD.
EVOLUTION OF OPERATION AND MAINTENANCE REQUIREMENTS
The facilities of the C-BT Project were initially divided into
three categories, namely, single-purpose water conveyance facilities,
single-purpose power facilities, and multi-purpose facilities. The
facilities of the C-BT Project are displayed on the attached map.
The single-purpose water conveyance facilities are those facilities
used only to move water from the east slope distribution facilities of
the C-BT Project, primarily Carter Lake Reservoir and Horsetooth
Reservoir, to the C-BT Project allottees. Since 1957 when the C-BT
Project went into full operation, the NCWCD has funded and performed
the operations and maintenance activities of the single-purpose water
conveyance facilities. In 2000, title to the single-purpose water
conveyance facilities north of Horsetooth Reservoir were transferred
from Reclamation ownership to the NCWCD. House Bill H.R. 3443,
currently under consideration by the House of Representatives and the
Senate, contemplates the transfer of title for the single-purpose water
conveyance facilities south of Carter Lake Reservoir from Reclamation
ownership to the NCWCD. Once title to the single-purpose water
conveyance facilities south of Carter Lake Reservoir are transferred,
NCWCD will have title to all single-purpose water conveyance facilities
and will continue to have sole responsibility for the funding and
execution of operations and maintenance (O&M) activities for those
facilities.
Single-purpose power facilities are the power plants and the
ancillary facilities of the C-BT Project needed for the generation of
hydro-electric energy. Reclamation has always operated and maintained
the single-purpose power facilities, with all the resulting capacity
and energy being marketed by the Federal Government. Since 1977, The
Western Area Power Administration (WAPA) has been responsible for the
marketing of the hydro-electric energy generated by the C-BT Project.
All power generation revenues remain with the Federal Treasury.
Any facility of the C-BT Project that is not classified as a
single-purpose water conveyance facility or a single-purpose power
facility is a classified as a multi-purpose facility, i.e facilitating
both the delivery of water and the generation of power. Costs for the
multi-purpose facilities are shared evenly by NCWCD and the Federal
Government through the auspices of either Reclamation or WAPA. From the
time that the C-BT Project was put into operation in the mid-1950's
until 1986, Reclamation employees manned the majority of the multi-
purpose facilities. In 1986, 1987, and 1989, O&M responsibilities for
the majority of the multi-purpose works were transferred to NCWCD under
contract between Reclamation and the NCWCD. Before 1986, the majority
of the O&M expenses for the multi-purpose works were incurred by
Reclamation and WAPA. After 1987, the majority of the O&M expenses for
the multi-purpose facilities were incurred by NCWCD. In either case,
when it came time to reconcile the charges, Reclamation, WAPA and the
NCWCD were given credit for the expenses that each entity incurred
while operating or maintaining the multi-purpose facilities during the
fiscal year under consideration.
In Fiscal Year (FY) 2005, NCWCD's total expenses associated with
the O&M activities of the multi-purpose works were $2,734,200.
Reclamation's total expenses in FY 2005 associated with O&M of the
multi-purpose facilities were $3,863,700. The NCWCD is obligated to
pay, in advance of the fiscal year, one-half of Reclamation's
anticipated expenses for O&M of the multi-purpose facilities for the
coming fiscal year. On the other hand, NCWCD must wait until the end of
the fiscal year to collect from Reclamation one-half its expenses
associated with NCWCD's O&M of the multi-purpose works.
SECURITY ACTIVITIES AND COSTS
The two elements of Reclamation's security activities with respect
to the C-BT Project are guards and patrols, and site security. Site
security is the structural and procedural changes that Reclamation is
implementing at its facilities to increase the level of security.
GUARDS AND PATROLS
Following September 11, 2001, Reclamation increased the security
levels at all C-BT Project facilities. For a period of time following
September 11, 2001, Reclamation and NCWCD employees provided 24-hour
security patrols at all facilities of the C-BT Project. As the
situation calmed, 24-hour patrols at all facilities were suspended,
particularly on the single-purpose water conveyance facilities. Later,
Reclamation lowered its patrol requirements and determined that NCWCD
staff could satisfy Reclamation's patrolling requirements during
normal, daylight working hours by NCWCD employees passing by the
facilities while performing routine O&M assignments. Reclamation then
contracted with the County Sheriff's Offices in Larimer and Grand
Counties to provide for security patrols during those times when NCWCD
staff are not passing by C-BT Project facilities, i.e., nights and
weekends. In Grand County, NCWCD initially provided the Grand County
Sheriff with a vehicle to be used for security patrolling until such
time as the County could acquire an additional vehicle for use by the
officer assigned to patrol C-BT Project facilities. The NCWCD was not
reimbursed for the use of this vehicle. Since the time, NCWCD's vehicle
needed to be replaced, and Grand County has provided its own vehicle.
The rate charged to Reclamation by Grand County was increased when the
County stopped using the District vehicle and began using its own
vehicle. In the Granby area, Grand County Sheriff's Office personnel
communicate via radio directly with NCWCD's control room, which is
manned 24/7. Larimer County Sheriff's officers, while on patrol,
communicate via radio with Reclamation's Joint Operations Center, which
is also manned 24/7.
It is NCWCD understands that Reclamation costs for guards and
patrols totaled $879,000 for FY 2006 for the C-BT Project.
Reclamation's projected costs for FY 2007 for guards and patrols at C-
BT Project facilities will be lowered to $687,000. In FY 2006,
Reclamation's assessment to irrigation, i.e., NCWCD, will be $101,825.
In FY 2007 the allocation to irrigation/NCWCD will be $192,000. Under a
worst-case scenario, NCWCD's allocation could be treated as all other
multi-purpose facilities and the NCWCD's allocation could rise to one-
half of the total, or approximately $345,000. NCWCD will need to add
this additional cost allocation into its FY 2006 budget. NCWCD would
also have to include such costs in its FY 2007 budget. Reclamation has
provided NCWCD with a copy of Reclamation's Security Response
Principle, which spells out how NCWCD employees are to react if they
encounter questionable activities at any of the C-BT Project
facilities. The NCWCD employees are currently complying with
Reclamation's Principle.
SITE SECURITY
In addition to security patrols, Reclamation has conducted a series
of Vulnerability Assessments at each facility of the C-BT Project,
including the multi-purpose facilities. Following the completion of a
background check, Reclamation allowed NCWCD's General Manager, Chief
Engineer, or Assistant Manager to participate in the Vulnerability
Assessments studies and analysis. Reclamation has provided NCWCD with a
list of security measures that NCWCD must take at each of the multi-
purpose facilities for which the NCWCD has O&M responsibility.
The list of requirements from Reclamation to the NCWCD is a
classified document that is 18 pages in length. Reclamation is
continuing to refine its Site Security Plans, so the total scope of the
required structural and procedural changes is not known at this time.
NCWCD has implemented the changes that have been identified by
Reclamation. With the exception of installing a security gate at Shadow
Mountain Dam and fully implementing a lock control program, the
security changes dictated by Reclamation have been completed by NCWCD's
O&M staff. The security requirements implemented to date have been
accomplished as part of NCWCD's routine operational expenses. The
measures already implemented have included such items as securing the
operating mechanisms at control structures, and more secure storage of
Standard Operating Procedures (SOPs), etc. The new gate at Shadow
Mountain is estimated to cost approximately $10,000. A lock control
program could cost in the range of $2,000 to $3,000 per system each
year.
NCWCD anticipates that the security measures needed to be
implemented when Reclamation completes its Site Security Plans will
have more of an operational and financial impact than the measures
implemented to date. NCWCD must wait until it has been provided with
the Site Security Plan requirements before determining the financial
and operational impacts of the additional security requirements.
IMPACT TO NCWCD's ABILITY TO ABSORB ADDITIONAL C-BT O&M COSTS
Over time, the changes in demands on the C-BT Project have required
some facilities to be modified to allow operations on a year-round
basis to meet changing demand patterns. As more and more of the C-BT
Project yield is being utilized for municipal, domestic, and industrial
purposes, the demands for year-round water deliveries have increased
and the reliability and security of those deliveries has become
increasingly important. This changing demand dictates that the original
Project facilities must be modified and modernized to meet current and
envisioned needs. Further, as the population along the Front Range of
Colorado continues to grow, the extent and density of the population
and development also increases. Consequently, to assure that C-BT
Project facilities do not pose a threat to public safety, the levels of
operation and maintenance associated with Project facilities must meet
ever-higher standards--standards that are commensurate to the higher
consequences that might be suffered should a Project feature not
perform satisfactorily or, in the extreme, fail. An example of this is
the need for higher maintenance levels and structural standards on
canals to assure the canals do not pose any threat to development that
has grown into areas adjacent to, and downstream of, those canals. The
same is true for dams associated with C-BT Project reservoirs. The
increased population in the vicinity of the C-BT Project facilities has
put pressure on the safety and security of single-purpose water
conveyance facilities. There is constant pressure to utilize the canal
rights-of-way for recreational purposes. The NCWCD and Reclamation have
so far prevented public use of canal rights-of-ways; however, that may
change in the near future. Maintaining water quality in canals that are
open, and protecting the quality of the water in the canal from a
vandal or terrorism attack, continues to be an issue and an issue that
gets more and more difficult and expensive as each year goes by and
population near the canals continue to increase.
NCWCD POSITIONS AND CONCERNS
The NCWCD supports Reclamation's objective of increasing the
security of Reclamation-owned water infrastructure. The NCWCD does,
however, urge Reclamation to return to the position that the protection
of the water infrastructure is a national concern and therefore should
be a non-reimbursable cost. NCWCD, as does the National Water Resource
Association (NWRA), believes that the historic rational established in
the 1942 and 1943 Interior Department Appropriations Acts for treating
costs of increased security at multi-purpose federal projects as non-
reimbursable obligations of the federal government is still valid.
This is particularly important if project beneficiaries are paying
in excess of 50 percent of the project costs. Any increase in costs for
security or other reasons associated with the O&M of the C-BT Project
are passed along to the NCWCD by Reclamation and must in turn be
absorbed by NCWCD, which in most cases, is then passed along to NCWCD
allottees. This increased cost for water supplies in turn increases the
cost for farmers to produce their products, and the revenues that
purveyors of residential and commercial water must collect from their
customers. Because of the unknown costs of the implementation of Site
Security Plans, it is not possible at this time to accurately predict
the magnitude of the impact for increased costs that will be passed
along to the water user community. Suffice it to say, at this time, any
increased costs will be met with a reluctance to pay. This is
especially true when purveyors of residential and commercial water have
already had to make investments in additional security measures at
their water treatment and distribution facilities to make them more
secure. Increased costs will also make it more difficult for the
agriculture community to survive economically.
The NCWCD highly values its continuing relationship, indeed its
partnership, with Reclamation on the C-BT Project. In fact, NCWCD would
be willing to compare the quality of its relationship with Reclamation
to the quality of any other district/Reclamation relationship in the
western United States. Since entering into the initial Repayment
Contract for the C-BT Project with Reclamation in July 1938, the
NCWCD's relationship with Reclamation has been, in NCWCD's opinion,
mutually beneficial and extremely productive. Without question, it is
NCWCD's intent to continue to maintain and improve that relationship.
It is imperative that Reclamation continue to consider the needs of
its contractors and those contractors' beneficiaries and constituents.
Further, it is imperative that Reclamation implement policies to make
the structural and policy changes necessary to ensure the facilities
for which they are responsible are more secure, but do so in a manner
that respects the impacts that any additional costs will have on the
beneficiaries and constituents of Reclamation's water projects.
RECOMMENDATIONS
The C-BT Project and the NCWCD are real-world examples of the
evolution taking place west-wide regarding the security of our nation's
water infrastructure. The need to modernize existing infrastructure and
to develop new water management projects to meet rapidly changing,
growing, and evolving needs is very real. The federal government has a
significant role in that evolution. This role includes responsibilities
associated with federal reclamation projects, as well as realistic
interpretation and administration of environmental and other applicable
laws, and the implementation of sound site security plans.
It is imperative that the federal government cooperate with local
entities to ensure the continuing safety and efficient operation of
federal projects to maximize the benefits that can be realized from
those projects in the management of available water resources. Actions
the federal government should take in cooperation with local entities
should include making the costs of providing security at Reclamation
projects throughout the 17 western States a non-reimbursable expense,
and includes the following:
Facilitating the modernization of existing infrastructure
to meet the changing needs placed on project facilities, and providing
the necessary flexibility through modified or new statutes, policies,
or regulations that will allow existing infrastructure to be modified
and used to meet changing needs, including making them more secure.
Continued funding of the National Dam Safety Act at
adequate levels. This program is essential to ensure dams associated
with federal projects meet current dam safety criteria and that those
reservoirs can continue to operate through their full operating range,
while continuing to provide the benefits the project beneficiaries and
the region have historically relied upon.
Continued federal funding of the increasing security
costs being incurred that are associated with required, enhanced
security measures being placed on federal water project facilities.
These security programs should continue on a non-reimbursable basis.
CONCLUSION
Demands on federal water projects west-wide are changing, as are
the demands being placed on existing infrastructure. It is becoming
increasingly important that the security of this infrastructure be
increased and adequately maintained. Continued security at Reclamation
sponsored water project infrastructure is essential if the public is to
continue to realize the benefits these projects were intended to
provide.
Thank you very much for giving us this opportunity to present
NCWCD's experiences and point of view.
______
Statement submitted for the record by the
Sacramento Municipal Utility District
The Sacramento Municipal Utility District (SMUD) presents this
testimony to urge Congress to ensure that costs of increased counter-
terrorism and site security at hydropower facilities owned and operated
by the Bureau of Reclamation (Reclamation) remain an obligation of the
federal government and are treated as a non-reimbursable expense. In
the event that it is not possible to maintain these security costs as
an obligation of the federal government, SMUD urges the adoption of
legislation that will provide: 1) effective Congressional oversight of
the security cost program; and 2) fair allocation of security costs
among water and power interests that are asked to bear a share of
reimbursable costs of the program, and downstream beneficiaries of the
project flood control benefits that are non-reimbursable.
In FY 2005 and 2006, the President's budget recommended that a
significant portion of the costs requested for increased security
measures at federal dams be recovered from project water and power
customers, not from downstream flood control beneficiaries. Most of the
costs proposed to be reimbursed by project beneficiaries are
attributable to increased guards and surveillance. Further, the Bureau
proposed that the lion's share of those costs be recouped from power
customers, even though the primary risk posed by security threats to
Reclamation dams is to residents and developments located downstream of
these dams within the inundation areas in the event of a dam failure or
severe flood event.
SMUD strongly believes that these counter-terrorism measures are
not normal operation & maintenance (O&M) functions and that protection
of these multi-purpose facilities, which provide important flood
control, water storage for irrigation, municipal and industrial users,
recreation and environmental mitigation benefits and power generation,
``is in the national interest and, therefore, should remain a federal
obligation. The post-911 security costs appear to be intended to mainly
protect the multi-purpose facilities, and failure of these facilities
would have the greatest impact to the public at large. It is this fact
that causes SMUD to question the logic and equity of assigning such a
large share of the post-911 security costs to the water and power
users.
In its proposed FY 2006 budget as well as discussions with the
Parties, Reclamation indicated that only the costs of guards and
patrols would be reimbursable, and that the costs of facility
fortification would remain nonreimbursable. However, in its March 2006
Report to Congress, Reclamation stated that the costs of ``facility
fortification upgrades'' are also to be listed as reimbursable. The
practical effect of this change is that ALL costs at some point will
become reimbursable. This is inconsistent with the Reclamation's stated
direction, and is a clear expansion of the definition of reimbursable
costs.
For FY 2006 only, Congress provided that the costs that
stakeholders would be required to reimburse for Guards and Patrols at
National Critical Infrastructure (NCI) Facilities cannot exceed the FY
2006 Congressionally-approved level of $10 million, indexed for
inflation. The table below shows a breakdown in FY 2006 security costs
and how these costs will be allocated for the Mid-Pacific Region:
[GRAPHIC] [TIFF OMITTED] T8363.001
It is SMUD's understanding that in FY 2006 the funding stakeholders
should only have to reimburse costs of Guards and Patrols at the NCI
Facilities up to a level that does not exceed the FY 2006
Congressionally-approved level of $10 million 1, indexed for
inflation, Reclamation wide.
---------------------------------------------------------------------------
\1\ Report to Congress ``Reimbursement of Security Guard and Patrol
Costs on Bureau of Reclamation Facilities'', February 2006, page 1.
---------------------------------------------------------------------------
In FY 2006, Reclamation's planned security program totaled $50.0
million. This total included $29.1 million for facility fortification
and anti-terrorism management and $20.9 million for guards and patrols.
Facility fortification and anti-terrorism management are non-
reimbursable activities.
Reclamation has stated that $18.9 million represented the original
reimbursable component of the total $20.9 million allocated for
security in FY 2006. The reimbursable amounts were pro-rated down to
the $10 million limit as required by Congressional legislation.
In the future, if it is not feasible for Congress to declare that
all of the post-911 increased security costs are a non-reimbursable
federal obligation, SMUD recommends that Congress expressly authorize
Reclamation's security program to reflect the following principles,
which are supported by a number of federal water and power customers:
1. Reclamation should report annually to the House and Senate
Committees on Homeland Security, Resources and Appropriations on
security actions/activities taken in the prior fiscal year and proposed
for the upcoming fiscal year and the sources and expected sources of
reimbursable and nonreimbursable funding for each type of action.
2. The capital cost of security enhancements or fortifications
(``hardening''), including the operation, maintenance and replacement
of such enhancements or fortifications, shall continue to be non-
reimbursable.
3. Funding stakeholders to reimburse costs of Guards and Patrols
at National Critical Infrastructure (NCI) Facilities up to a level that
does not exceed the FY 2006 Congressionally-approved level of $10
million, indexed for inflation.
4. Such reimbursable funds are to be spent only on Guards and
Patrols at NCI facilities and allocated among NCI Facilities in the
same delineation as allocated in FY 2006.
5. Reclamation is authorized to enter into bilateral contractual
arrangements with funding stakeholders, if stakeholders are willing to
do so, in lieu of seeking appropriated funds for Guards and Patrols.
6. In the event of a change in the level of national security
threat, Reclamation will immediately notify Congress and with the
funding stakeholders seek approval of Congress to adjust the
reimbursable costs for Guards and Patrols until such time as the threat
level changes.
7. Reclamation must facilitate appropriate actions to allow
funding stakeholder review and input on and management of work program
elements, including security enhancements, on at least a five-year
planning horizon, detailed by pre- and post-9/11 and by category
(fortification, guards and patrols).
______
Washington Public Utility Districts Associationuc
(WPUDA)
1411 Fourth Ave., Suite 810
Seattle, WA 98101-2225
(206) 682-3110
(800) 736-3803
Fax: (206) 682-3913
www.wpuda.org
July 5, 2006
The Honorable George Radanovich, Chairman
House Subcommittee on Water and Power
1522 Longworth House Office Building
Washington, DC 20515
The Honorable Grace F. Napolitano, Ranking Member
House Subcommittee on Water and Power
1522 Longworth House Office Building
Washington, DC 20515
Dear Chairman Radanovich and Ranking Member Napolitano:
On behalf of the Washington Public Utility Districts Association
(WPUDA), I would like to request that this letter be submitted for the
record of the oversight hearing the Subcommittee conducted entitled,
``Securing the Bureau of Reclamation's Water and Power Infrastructure:
A Consumer's Perspective'' on Thursday, June 22, 2006.
WPUDA represents 28 nonprofit, community-owned utilities that
provide utility services including electricity, water, sewer and
wholesale telecommunications to over 1.7 million people in the State of
Washington. Our members serve a total of 831,660 (730,127 residential)
electricity customers and provide electricity service to 28 percent of
Washington's population. Publicly-owned PUDs and municipal utilities
combined serve 49 percent of the state's population, with co-ops and
mutuals serving an additional 5 percent.
I would like to endorse the statement of Will Lutgen, Executive
Director of the Northwest Public Power Association (NWPPA), who
testified at the June 22 hearing. Like the members of NWPPA, the PUDs
and the customers we serve are still recovering from the Western energy
crisis of 2000-2001. We have been working hard to control Bonneville
Power Administration's (BPA's) costs, which are affected by many
factors, including drought, fish and wildlife obligations and contracts
with the direct service industries as well as enhanced security
measures at the Bureau's Grand Coulee Dam.
The PUDs are trying hard to make sure that the cost of the Bureau's
security program receives congressional scrutiny and is fair to our
ratepayers. Therefore, WPUDA also believes that:
1. Given the national security interests at stake, there is good
reason for Congress to decide that funding of post-9/11 Reclamation
security measures remain a non-reimbursable federal obligation and be
subject to congressional oversight.
2. Congress should authorize appropriate spending parameters for
this program. We are concerned that there are no cost controls,
authorization ceiling, sunset date, or congressionally-approved
parameters to limit or control the amount of money Reclamation can
spend for increased security. To date, Congress has appropriated more
than $158 million for Reclamation's increased security activities, and
Reclamation is asking for nearly $40 million more in the President's FY
2007 budget.
3. Project beneficiaries have no meaningful input into discussions
about Reclamation's security cost program. We understand that even
congressional staff have been denied critical information regarding
these costs for national security concerns.
4. Reclamation facilities provide people with flood control, water
supply, recreation and other benefits. Therefore, if a portion of the
security costs are made reimbursable, they should be allocated fairly
among all beneficiaries and capped to ensure accountability.
We, as preference power customers, have been fighting
unsuccessfully with the Bureau to have these security costs be fully
non-reimbursable that is, remain a federal obligation. Power customers
continue to be asked to pay a disproportionate share of the costs,
despite the fact that Congress continues to include report language in
appropriations bills recognizing that all project beneficiaries benefit
and stating that it wants more transparency in what the Bureau is
spending its money on.
Further, concerns have been repeatedly expressed to Reclamation
about the security cost program's lack of information and transparency,
lack of objective criteria, lack of spending controls and inequitable
allocation of costs, and lack of Congressional authorization.
Because we no longer believe that it is possible to reach a
workable solution in dealing with the agency alone, WPUDA now believes
that Congress should expressly authorize Reclamation's site security
program to ensure accountability to Congress and to provide cost
certainty to funding stakeholders through an equitable, durable
allocation of costs.
WPUDA members believe in being responsible stewards and for paying
their fair share of the security costs. However, we firmly believe that
the burden our power customers are being asked to shoulder for these
counter-terrorism measures are disproportionate and above and beyond
normal O&M functions.
We greatly appreciate the Subcommittee's interest in this issue,
and look forward to working with you to address this situation in a
manner that maintains the appropriate balance between a sensible
security policy and a fair allocation of costs. Please do not hesitate
to contact me with any further questions.
Sincerely,
Steve Johnson
Executive Director