[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



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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
[email protected]
                                 ______
                                 
        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: [email protected]

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

                                 
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