[Senate Hearing 109-105]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-105
 
                   THE RURAL WATER SUPPLY ACT OF 2005

=======================================================================






                                HEARING

                               before the

                              COMMITTEE ON

                      ENERGY AND NATURAL RESOURCES

                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   ON

                                 S. 895

                   THE RURAL WATER SUPPLY ACT OF 2005

                               __________

                              MAY 11, 2005


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                COMMITTEE ON ENERGY AND NATURAL RESOURCES


                  PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
                  Bob Simon, Democratic Staff Director
                  Sam Fowler, Democratic Chief Counsel
                          Nate Gentry, Counsel
                    Mike Connor, Democratic Counsel
                Patty Beneke, Democratic Senior Counsel














                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     3
Craig, Hon. Larry E., U.S. Senator from Idaho....................     6
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Dunlap, Jim, on behalf of the National Rural Water Association, 
  Upper La Plata Water Users Association, and the National Rural 
  Water Association..............................................    19
Frazier, Harold, Chairman, Cheyenne River Sioux Tribe............    35
Johnson, Hon. Tim, U.S. Senator from South Dakota................     4
Keys, John W., III, Commissioner, Bureau of Reclamation..........     6
Lansford, David, Mayor of Clovis, NM, Chairman, Eastern New 
  Mexico Rural Water Authority...................................    25
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     5
Smith, Duane A., Executive Director, Oklahoma Water Resources 
  Board, Vice-Chair, Western States Water Council................    29
Smith, Hon. Gordon, U.S. Senator from Oregon.....................     2
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     2
















                   THE RURAL WATER SUPPLY ACT OF 2005

                              ----------                              


                              MAY 11, 2005

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici, 
chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. We are going to try to expedite this hearing 
this morning. Senator Bingaman, and other Senators are here. 
Thanks for attending.
    Today we are going to have a hearing on S. 895, the Rural 
Water Supply Act. Last year there were three water bills 
pending before this committee. I am very grateful that Senator 
Bingaman, Commissioner Keys and others on this committee agreed 
to work together with me and my staff to resolve some 
differences in the three bills, and so I understand that what 
we have before us is the culmination of that work.
    I understand the administration may have additional 
comments on the legislation, and I look forward to that.
    The current data indicates that millions of Americans still 
live without safe drinking water, and I know that does not 
sound right, but we understand it is true. This problem is 
especially prevalent in rural America, which in many cases is 
unable to afford the capital outlays required for new water 
infrastructure or upgrades which have deteriorated over time.
    The USDA has estimated that over one million people have no 
water piped into their homes and more than 2.4 million have 
critical drinking water needs. That is not astronomical, but in 
our country, it would seem that we ought to find some way to 
help with that.
    The New Mexico Finance Authority has provided us with a 
list of over a hundred rural communities in New Mexico that do 
not have sufficient water supply and water treatment 
facilities. This is a level of privation that would appear to 
me to be unacceptable in a country with our kind of wealth.
    While Congress has authorized various programs to address 
the problem over the last 30 years, there is a significant 
funding gap between rural water infrastructure needs and 
available Federal funds. According to 1999 EPA survey, capital 
improvement needs for public water systems, the total funding 
needs for small systems serving populations of 50,000 or less, 
could be as much as $74 billion over 25 years. It would seem to 
me that that is a burden that is not going to be able to be met 
at the local level, although we understand rural America is 
undergoing some very big changes, and, of course, we do not 
know what those are exactly.
    The bill we are going to consider today would help rural 
communities provide for their water and infrastructure needs. 
It establishes a Federal loan guarantee program, loans at the 
Bureau of Reclamation that they would allow the rural 
communities to access for required construction.
    That one is a difficult one to get our arms around, but we 
surely have to look at it. It also expedites the appraisal and 
feasibility studies which allow these communities to assess how 
to best address their water supply.
    Now we have only you, Commissioner, and Jim Dunlap, board 
member of National Rural Water in New Mexico; Mayor David 
Lansford, chairman of Eastern New Mexico; Duane Smith, vice-
chairman of Western States Water; and Harold Frazier, chairman 
of the Cheyenne River Sioux Tribe.
    [The prepared statements of Senators Smith and Thomas 
follow:]
   Prepared Statement of Hon. Gordon Smith, U.S. Senator From Oregon
    Chairman Domenici, I appreciate your ongoing leadership in 
addressing the growing water supply needs of the western United States. 
The bill we have before us today, S. 895, would establish a rural water 
supply program within the Bureau of Reclamation.
    I support your efforts to bring structure and to establish criteria 
for the Bureau of Reclamation's involvement in rural and tribal 
domestic water supply systems. In recent years, the Congress has 
authorized Reclamation's involvement in these programs on a case-by-
case basis.
    The needs of rural communities and tribes are certainly great, and 
I believe there is a federal role for assisting these communities in 
meeting the increasingly stringent requirements of federal statutes 
such as the Clean Water Act and the Safe Drinking Water Act.
    Many smaller communities have aging or inadequate water supply and 
wastewater treatment facilities. The needed upgrades and new 
infrastructure are often beyond the economic capabilities of these 
communities. I know that in Oregon alone, our small and mid-sized 
cities are facing hundreds of millions, if not billions, of dollars in 
water infrastructure needs.
    I am concerned, however, that this bill, as currently drafted, will 
result in long lead times and significant up-front costs for the non-
federal entities that choose to participate. There is a requirement to 
do both an appraisal investigation, for which two years is provided, 
and a subsequent feasibility study, for which there is no timeline 
established. Both of these processes must address numerous criteria 
established by the bill. This is all before construction must be 
congressionally authorized.
    I am also concerned about the Bureau of Reclamation's direct and 
indirect overhead costs, which are significantly higher than the 
overhead costs of private engineering firms. I believe these costs must 
be capped or administratively lowered so that rural communities don't 
have to pay these higher costs.
    We must also examine other federal programs, particularly the 
USDA's Rural Utilities Service, to determine whether changes to the 
eligibility criteria would be of more benefit to rural communities.
    Mr. Chairman, I want to work with you as this bill moves forward to 
ensure that rural communities can have access to cost-effective, 
streamlined federal programs to meet their water supply needs. I look 
forward to hearing from the witnesses here today.
                               __________
   Prepared Statement of Hon. Craig Thomas, U.S. Senator From Wyoming
    Access to safe and clean drinking water is important to every city 
and town across America. A town's water supply often limits its 
economic growth and viability as much as any other factor. Many small 
towns face the constant challenge of providing water that is not only 
safe and clean, but affordable.
    Because of limited financial resources, small and rural communities 
struggle to provide safe and affordable public drinking water and 
wastewater service. Construction of the necessary infrastructure is 
expensive, even for relatively small water systems. In addition, the 
technical expertise and resources needed to design and operate the 
systems are often in short supply in small communities.
    Complying with Environmental Protection Agency (EPA) water 
regulations and other federal restrictions provide additional burdens 
for many small communities. While laws and regulations mandate that a 
community's water system must meet certain standards, the funding to 
help meet federally mandated standards is often missing or limited. 
Several federal programs spread over a number of agencies provide 
funding and technical expertise to small and rural communities, but 
funding has historically been inadequate and needs often go unmet. 
While I am a strong believer in limited government spending, if federal 
regulations mandate changes to local communities' water systems, the 
federal government should help fund the changes.
    Many cities and towns in Wyoming cannot address their water and 
sewer system needs without federal assistance. Every year I hear from 
small Wyoming communities having to build or upgrade their water system 
infrastructure in order to replace old or inadequate systems to comply 
with EPA water regulations. Even small water systems can cost hundreds 
of thousands of dollars to design and build. Assisting our rural 
communities in this effort remains an important challenge, and one we 
cannot ignore.
    The legislation being considered today would create a rural water 
program within the U.S. Bureau of Reclamation. The Bureau of 
Reclamation is, in many ways, well suited for this role. I look forward 
to hearing the testimony today and discussing this legislation further.

    The Chairman. Senator Bingaman, would you like to make some 
opening remarks?

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Mr. Chairman, thanks for having the 
hearing. I do think it is a very important issue. You correctly 
pointed out that in the last Congress we each had bills, and I 
congratulate you on bringing us together on a single piece of 
legislation this year. I thank John Keys, our commissioner, for 
his willingness to work with your staff and with my staff to 
resolve many of the issues that were inherent in the bill, and 
I think we made real good progress.
    As you point out, the needs in rural America are enormous. 
In our State, the estimate I have seen is 35 percent of our 
State lives in a rural community, a rural part of the State. We 
have a lot of needs, and unfortunately, I think the approach 
has been too ad hoc up until now.
    Of course the administration has not been willing to 
support the level of funding that we have been authorizing in 
this committee repeatedly, and the budget proposal we have this 
year proposes cuts in Reclamation's budget again. So I think 
this legislation will do a lot to try to stabilize that 
situation, signal the priority that we attach--the Congress and 
the President attach to this issue of providing adequate 
potable water to all the rural communities in our country.
    And I join with you in welcoming, particularly, Jim Dunlap 
from New Mexico and Mayor Lansford from Clovis for being here 
as witnesses as well. Thank you.
    The Chairman. Thank you, Senator. Any other Senators who 
desire to comment?
    Sure, Senator Johnson, proceed.

          STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR 
                       FROM SOUTH DAKOTA

    Senator Johnson. Well, thank you, Mr. Chairman, for 
conducting this particular hearing. This hearing involves S. 
895, the Rural Water Supply Act of 2005. And I want to 
acknowledge that with us here today testifying in the second 
panel is Mr. Harold Frazier, who is the chairman of the 
Cheyenne River Sioux Tribe in the State of South Dakota. I 
extend my appreciation to the chairman for traveling here to 
Washington, DC, to testify before the committee.
    Mr. Chairman, as you fully appreciate, the 14,000 residents 
that reside in the Cheyenne River Sioux Indian Reservation, as 
well as in the neighboring communities, face what is a dire and 
urgent need to improve the water delivery infrastructure at 
Eagle Butte, South Dakota.
    Drought conditions have lowered the level of the Missouri 
River, leaving the water intake for the existing antiquated 
water system for the Cheyenne River Sioux Tribe almost out of 
the water. The Corps of Engineers has agreed that they will 
give us a temporary new water intake further out into the 
river. That will take at least 6 months to complete, and in the 
meantime, the overall water structure is woefully inadequate to 
provide sufficient water for the growing population of that 
area for a new medical clinic and for new housing that is 
intended to be built in that area.
    So this is an example of the kind of water crises that we 
have in too many places around the United States, where there 
is no program in place, frankly, that would allow for the 
significant upgrade that is needed, given the lack of financial 
resources and tax base and revenues of the tribe--or the BIA 
for that matter--in this particular case.
    So what we intend to do through the Rural Water Supply Act 
of 2005 is to create a more formal structure involving the 
Bureau of Reclamation to establish a program to design rural 
water supply projects for communities with populations of less 
than 50,000.
    Currently no such program exists within the Bureau. 
Congress then could authorize rural water projects to a 75 
percent Federal share of construction costs.
    So what we have done in the past, Mr. Chairman, again, as 
you know, and with the bipartisan support of membership of this 
committee, is that we have authorized large Bureau of 
Reclamation drinking water projects in my State of South Dakota 
and other places. Three of the bigger water projects would be 
Mni Wiconi, the Mid-Dakota and the Lewis and Clark Water 
Projects which are all under construction.
    But as you know, these all have been rather ad hoc efforts. 
We really have not had a systematic mechanism for determining 
the merits, relative merits, of projects or to do things in a 
more systematic manner. And I am hopeful that this legislation, 
along with other legislation that members of this committee 
have, including your own, will be a focus of trying to arrive 
at a consensus about how best to deal with these issues.
    Up to now, it has been sort of a--just a race to the finish 
line to see who can come up with a project and then get it 
authorized and funded. But we are overwhelming the funding 
capability of the Bureau of Reclamation, and in some ways 
changing the function of that particular agency.
    I think we need to have some orderly, more thoughtful, more 
deliberative process that will take care of the urgent needs 
such as we face with the Cheyenne River Sioux Tribe and yet 
make sure that things are done in a systematic matter.
    So I thank you for this hearing. I thank Mr. Keys for being 
here. I know that we have been dreaming up new functions for 
the Bureau faster than sometimes the Bureau can deal with it. 
But that is only a reflection of the dire need that is out 
there for drinking water in so many areas of America. So thank 
you, Mr. Chairman.
    The Chairman. Thank you very much, Senator. Anybody else?
    Senator Murkowski.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I, too, want to 
extend my appreciation and thanks to you and to Senator 
Bingaman, and to your staffs for working on this legislation, 
this consolidated bill that will address the critical public 
water needs in the West.
    While Alaska is not directly affected by this legislation, 
I think we have our share of, call them horror stories if you 
will, when it comes to how we deal with providing safe water 
into our communities and essentially developing 21st century 
water and sanitation facilities.
    Since Statehood, we have put approximately $1.4 billion 
into water and sewer projects in rural Alaska, and we still 
have about 6,000 households in rural Alaska where we do not 
have drinking water, safe drinking water.
    And what this means to us is that my constituents have to 
haul water buckets to the village watering house. This can lead 
to, as you are probably very aware, those issues that bring 
about disease, hepatitis, viral infections, as we have just a 
very unsanitary situation in way too many communities still at 
this point.
    We probably still have about another $650 million to go to 
complete our water projects in the many, many villages across 
the State and that is why we continue to seek Federal aid for 
our safe water projects. But we recognize that the need in the 
lower 48 is no less acute.
    The Environmental Protection Agency estimates that the 
communities under 10,000 still need to spend about $16 billion 
to meet the minimum clean water acts. And the price tag keeps 
rising, recognizing that as water systems need to expand, it is 
not going to get any better unless we are willing to put 
funding where it needs to go.
    This bill recognizes the comprehensive nature of that next 
step that has to happen by allowing the Bureau to help plan, 
design and construct the rural water projects and by creating 
the loan guarantee fund to help the local communities get the 
financing. We are taking the steps that I think are going to be 
necessary to speed up that process to provide and meet the safe 
water needs in the West.
    So, again, Mr. Chairman, I appreciate what you have done in 
presenting this to the committee and look forward to working 
with you on this issue as we meet the country's water needs. So 
thank you.
    The Chairman. Thank you very much, Senator.
    Senator Craig.

        STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR 
                           FROM IDAHO

    Senator Craig. Mr. Chairman, I agree with all that has been 
said. It is rare that I can do that in this committee, but 
obviously the combining of the two pieces of legislation, the 
consolidation is critical. We know the need that is out there. 
It is great to see John Keys before us again. I look forward to 
your testimony. Thank you.
    The Chairman. Thank you very much, Senator. Anything else? 
Let us proceed.
    Mr. Commissioner, we welcome you.

         STATEMENT OF JOHN W. KEYS, III, COMMISSIONER, 
                     BUREAU OF RECLAMATION

    Mr. Keys. Mr. Chairman, Senator Bingaman, it is always a 
pleasure to appear before you and your committee, but today is 
special. Under your bipartisan leadership, I think we are about 
to see history improve today because of the coming together on 
this bill.
    Which is more unthinkable, that more than two million 
people in the United States lack adequate drinking water in 
their homes or that the Bureau of Reclamation, which was 
actually constituted to serve water needs in the very States in 
which many of these people live, has no coherent program to get 
a handle on those needs?
    Your bill, S. 895, will fill that gap. It would authorize 
Reclamation to develop criteria and guidelines for rural water 
projects, giving rural communities and taxpayers a consistent 
and fair process for evaluating water supply needs and 
prospects.
    During the last Congress, three different water bills were 
introduced. You each had your own and the administration sent 
you its version. Today there is just one water bill before 
Congress and that reflects the positive bipartisan spirit of 
consultation and collaboration as we have brainstormed 
solutions and shrunk the issues. We hope and expect this 
process will yield enactment of a well-crafted rural water 
program.
    Just for a second, let me review the history to see why 
this is so important. Since the 1980's, Congress has authorized 
13 separate rural water projects for Reclamation with a total 
authorization price of $2.3 billion.
    Congress authorized these projects without the benefits of 
rigorous economic analysis and objective design review that a 
rural water program at Reclamation could offer. Why? Because no 
such program existed. Was the least cost alternative chosen? 
Once constructed, could the project deliver national economic 
benefits to outweigh its cost? Within Reclamation, these 
questions were never asked, much less answered, before we took 
them on. Recently the Environmental Protection Agency estimated 
the systems serving populations of 3,300 or less could cost as 
much as $31 billion.
    The Departments of Agriculture, Commerce, Human Resources, 
and the Environmental Protection Agency all have rural water 
programs with specific eligibility criteria related to the 
missions of those agencies. In contrast, Reclamation has no 
program, therefore no eligibility criteria, no mechanism for 
qualitative or quantitative analysis. This came to light in 
2002.
    The President's budget and performance integration 
initiative examined Reclamation's rural water activities under 
the program assessment rating tools. The assessment said we 
need stronger controls for project development, and lack of 
agency involvement during project development may result in a 
project that is not in the best Federal interest. The PART 
exercise told us that we needed legislation, and that is when 
we started working with your offices. The bill before us today 
suggests you agree, and we are grateful for that.
    Now, let me turn to several specific elements of S. 895 
that the administration strongly supports. The first, S. 895 
would require Reclamation to identify the capability to pay of 
rural communities to determine the appropriate level of their 
contribution for development and construction cost. The 
administration strongly supports this approach. It will 
establish a fair matrix to identify the appropriate level of 
non-Federal contribution.
    S. 895 would allow communities to approach Reclamation for 
guidance early in the process and include Reclamation in early 
project scoping, appraisal and feasibility study processes. For 
example, projects to date have piped and pumped water at great 
expense. One option not yet tried is small localized 
desalination plants to treat brackish groundwater, avoiding the 
cost of pumps and miles of pipeline. Under S. 895, Reclamation 
and the communities could explore this option early in the 
process.
    No. 3, a clever innovation in S. 895 that had not appeared 
in any earlier bills would allow local communities to complete 
their own appraisal and feasibility studies either at their own 
expense or with Reclamation help as long as those studies meet 
our minimum criteria, and we will work with you on what those 
criteria should be. This could reduce costs and increase 
project sponsor sense of ownership in the project. The 
administration supports the requirement that non-Federal 
entities demonstrate capability to pay operations, maintenance 
and replacement costs.
    No. 4, section 107 requires the Secretary to coordinate the 
Reclamation Rural Water Program with other agencies. This would 
help all rural water supply programs to derive maximum value 
for their dollar.
    Mr. Chairman, title II of S. 895 would establish a loan 
guarantee program for the Bureau of Reclamation. We like the 
loan guarantee idea. It shows great promise for helping water 
users deal with maintenance or rehabilitation of aging 
infrastructure and potentially supplementing their 
participation in rural water supply programs, helping with 
other water supply problems and needs.
    At this time, we are still studying several aspects of this 
proposal. We will certainly work with you and your committee 
and your staffs to perfect this needed tool.
    Now let me turn to just a couple of areas of concern. We 
suggest that S. 895 establish an overall programmatic framework 
for all aspects of the rural water program, not just limited to 
the completion of the appraisal and feasibility studies, but as 
a framework for how projects, once authorized, would be 
planned, designed, constructed and managed after they were 
done. This would sort priorities and create more realistic 
expectations once projects are built.
    Second, S. 895 spells out eligibility criteria for the 
appraisal and feasibility studies. We support these. We suggest 
adding criteria for economic and financial benefits and 
impacts.
    Mr. Chairman, we are honored to work with you and Senator 
Bingaman and your colleagues to advance this legislation to 
establish a rural water program within the Department of the 
Interior that could benefit rural communities and taxpayers at 
large. I would certainly try to answer any questions you might 
have.
    [The prepared statement of Mr. Keys follows:]
        Prepared Statement of John W. Keys, III, Commissioner, 
                         Bureau of Reclamation
    Mr. Chairman, I am John W. Keys, III, Commissioner of the Bureau of 
Reclamation.
    It is my pleasure to present the Administration's views on S. 895, 
the Rural Water Supply Act of 2005, which would establish a rural water 
supply program within the Department of the Interior and authorize 
Reclamation to develop programmatic criteria and guidelines giving 
Reclamation and rural communities a consistent and fair process for 
evaluating water supply needs and prospects in rural communities.
    During the last Congress, three distinct bills were introduced for 
the purpose of creating a coherent rural water program within the 
Department: S. 1732, Senator Domenici's bill, S. 1085, Senator 
Bingaman's bill, and S. 2218, the bill which Senator Domenici 
introduced by request of the Administration.
    The fact that there is but a single rural water bill before the 
Committee in this Congress reflects the positive spirit of consultation 
and collaboration among this Committee's bipartisan leadership and the 
Department as we have brainstormed solutions and narrowed issues that 
require more work. It is a pleasure to be a part of this process which 
we hope very much will culminate in enactment of a rural water program 
that meets the fair expectations of rural communities and U.S. 
taxpayers.
    Before addressing the specific provisions of S. 895, I think it is 
important to place our shared desire for a rational rural water program 
in historical context.
                         historical background
    Since the early 1980s, Congress has authorized thirteen separate 
single purpose Reclamation projects for municipal and industrial water 
supply in rural communities in Reclamation States. The total federal 
budget authorization for those projects is over $2.3 billion. These 
have all come at a time when security and law enforcement costs, 
operation and maintenance costs, dam safety costs, and other program 
obligations continue to pressure Reclamation's already tight budget.
    Congress authorized and funded these projects without the benefit 
of rigorous economic justification and objective design review. Was the 
least cost alternative chosen? Once constructed, could the project 
deliver national economic benefits to outweigh its costs? These 
questions were never asked.
    By no means can we assume that those thirteen projects will be the 
last rural water projects ever authorized and funded. A 1995 needs 
assessment conducted by the U. S. Department of Agriculture's Rural 
Development State Offices estimated that over 1 million people in the 
United States had no water piped into their homes, and more than 2.4 
million had critical unmet drinking water needs. Recently released 
Environmental Protection Agency data revealed $31 billion in total 
funding needs for small systems serving populations of 3,300 or less. 
As expensive as the original thirteen Reclamation rural water projects 
are, they represent only the tip of the iceberg if no order and 
economic justification is introduced to screen projects.
    Compared to other Federal agencies with water-management mandates, 
Reclamation has maintained less control over rural water projects. 
Programs managed in the Departments of Agriculture, Commerce, Health 
and Human Services, and the Environmental Protection Agency feature 
specific eligibility criteria relating to the missions and authorities 
of their agencies and programs. In contrast, Reclamation currently has 
no program, therefore no eligibility criteria and no mechanism for 
qualitative or quantitative analysis.
                        ``program'' performance
    The thirteen rural water projects authorized for Reclamation's 
involvement constitute a major Federal budget issue that we are 
currently attempting to manage without benefit of an integrated rural 
water program.
    Lacking generic authority to screen, plan, design, and construct 
rural water projects, Reclamation has limited ability to set priorities 
and criteria for project development, and to budget accordingly. This 
deficiency was brought starkly to light when in 2002, as part of the 
President's budget and performance integration initiative, 
Reclamation's rural water activities were assessed under two lenses: 
the Program Assessment Rating Tool (PART) and the Common Measures 
exercise. Under the PART exercise our rural water program was rated 
``Results Not Demonstrated,'' despite the fact that Reclamation's rural 
water projects were meeting authorized project purposes. Further, the 
assessment concluded that stronger controls for project development 
were needed and ``lack of agency involvement during project development 
may result in a project that is not in the best Federal interest.''
    As a result of the PART exercise, the Administration concluded that 
legislation should be developed to establish a Reclamation rural water 
program with adequate controls and guidelines. We are gratified that S. 
895 reflects its sponsors' agreement that this is necessary.
    Let me turn now to several specific elements of S. 895 that the 
Administration strongly supports.
               authority to develop eligibility criteria
    Because each of the existing rural water projects has been 
authorized individually, and because of a lack of general programmatic 
authority, Reclamation and the Department have been limited in our 
ability to plan for projects effectively or to establish relative 
priorities both within the budget for rural water activities and within 
Reclamation's budget as a whole.
    Establishing a rural water program as proposed in S. 895 will allow 
for more realistic planning so that rural water projects are not 
proposed in a vacuum, but instead are guided through the program's 
planning process to use a consistent set of eligibility criteria. This 
approach will foster some competition, allow for the development of 
priorities, and create more realistic expectations when a project is 
authorized for construction that it will actually be developed.
        non-federal cost share based upon ``capability to pay''
    The non-Federal cost shares for each of the currently authorized 
rural water projects range from zero for the Indian portion of the Mni 
Wiconi Project in South Dakota to 25 percent for the non-Indian Dry 
Prairie Rural Water System connected to the Fort Peck Reservation Rural 
Water System in Montana.
    In contrast, capital investment costs associated with traditional 
Reclamation projects or portions of projects authorized for municipal 
and industrial (M&I) use must be fully repaid with interest. Further, 
traditional Reclamation irrigation projects require that repayment of 
costs be based upon a project sponsor's ability to pay, as determined 
through the study of both the project sponsor's financial information 
and the project's economic (cost/benefit) feasibility.
    S. 895 would require Reclamation to identify the ``capability to 
pay'' of rural communities to determine the appropriate level of their 
contribution for development and construction costs. The Administration 
strongly supports this approach. It will establish a fair matrix to 
identify the appropriate level of non-Federal contribution.
early reclamation involvement and development of criteria for appraisal 
                        and feasibility studies
    Because Reclamation does not have an integrated rural water 
program, communities initiate studies that have not been reviewed by 
Reclamation and do not meet current Federal planning and engineering 
standards. They do not necessarily explore all of the available options 
to meet their water supply needs beyond those designs that preceded 
them. While these plans become the basis for legislation, some of them 
are inadequate for sound decision-making or may not reflect an 
exploration of all the options. In these cases plans must be 
redeveloped once the project is authorized and funded. Project 
reformulation is complicated by the fact that the original project 
concept mandated in authorizing legislation cannot be changed without 
further legislation, even if it turns out to be a suboptimal option.
    The rural water program proposed in S. 895 will allow communities 
to approach Reclamation for guidance early in the process and, more 
importantly, will allow Reclamation to participate in the early project 
scoping, appraisal and feasibility study processes for rural water 
projects in the Western United States. For example, most projects 
developed to date have consisted of pumping water and then transporting 
it through long pipelines at great expense. One option that has not 
been explored yet, but which could be more economical to build and to 
maintain, would be to develop small localized desalination plants to 
treat brackish groundwater, thereby avoiding the cost of building and 
maintaining long pipelines. Under S. 895, Reclamation and the local 
communities can explore this option.
    A positive innovation in S. 895 that had not appeared in any of the 
rural water bills considered in the previous Congress allows local 
communities to complete their own appraisal and feasibility studies--
either at their own expense or through a grant from or cooperative 
agreement with Reclamation--as long as those studies meet a set of 
minimum criteria to be developed by Reclamation. Not only could this 
reduce the cost of these studies, but it should also increase the sense 
of ownership of the study and of its recommendations by the non-Federal 
project entity.
                    operation and maintenance costs
    In general, the Administration supports the provisions in S. 895 
that require the non-Federal entities (particularly for the non-Indian 
project beneficiaries) to demonstrate their capability to pay 100 
percent of the operations, maintenance and replacement (OM&R) costs 
associated with the projects proposed to be built for their benefit. A 
specific concern with how this issue relates to certain Tribal and 
Indian projects will be addressed later in my statement.
          coordination with other federal rural water programs
    Section 107(d) requires the Secretary to coordinate the rural water 
program established by the Act with existing Federal and state programs 
to facilitate the most efficient and effective solutions to meeting the 
water needs of the project sponsors.
    This will help the rural water supply programs in the various 
Federal and state agencies to derive maximum value for the dollar from 
the limited Federal and state resources identified for this purpose.
                        concerns and suggestions
    The Administration views S. 895 as having the potential to be one 
of the most positive legislative developments for the Department of the 
Interior in some time. Nevertheless, we have a few concerns that we 
will work with the Committee to address as this bill goes forward.
    Create a Programmatic Framework: The Administration recommends that 
S. 895 establish an overall programmatic framework for all aspects of 
the rural water program--not just limited to completion of the 
appraisal and feasibility studies, but as a framework for how projects, 
once authorized, would be planned, designed, constructed and then 
overseen and managed. This approach will allow for the development of 
priorities, and could create more realistic expectations when a project 
is authorized for construction that it will actually be developed. It 
would also facilitate the legislative process for future rural water 
activities and projects, since the programmatic framework would already 
be in place rather than having to be spelled out with each subsequent 
project authorization.
    Economic Factors for Eligibility Criteria and Evaluation: As 
introduced, S. 895 spells out a number of specific factors that must be 
included in the eligibility criteria and in the factors for 
consideration for the appraisal and feasibility studies. While we 
support including these factors, we also suggest that the bill include 
criteria for analysis and reporting of economic and financial benefits 
and impacts necessary to justify the Federal investment.
    For feasibility studies, Section 106(g)(3) allows the Secretary to 
increase the Federal share based upon a demonstration of financial 
hardship by the non-Federal entities. These relatively small local 
contributions are an important measure of the communities' commitment 
in pursuing a first indication of the level of priority that such a 
project holds for these rural communities. If an exemption is deemed to 
be necessary, we recommend that such exemptions be limited to Indian 
tribes or tribal organizations.
    Construction Cost Share: As introduced, Section 
106(e)(1)(A)(i)(II)(aa) requires that the Feasibility Report include 
non-Federal cost share of construction costs of no less than 25%. The 
Administration recommends that the non-Federal share of construction 
costs be increased to no less than 35%, which is similar to the 1/3 
local cost-share that is central to the landmark CALFED legislation 
passed by the 108th Congress.
    Operations and Maintenance Costs for Native American Projects: S. 
895, as introduced, requires that all O&M costs be the sole 
responsibility of the non-Federal project entities. This may be beyond 
the capability of some Tribes.
    In stark contrast, however, the authorizing legislation for the Mni 
Wiconi Project and the Garrison Project each directed the Secretary to 
operate and maintain project facilities constructed to serve the Indian 
reservations. As construction of these Indian rural water projects is 
completed, the associated O&M costs consume an increasing percentage of 
Reclamation's budget with no prospect of declining. These ongoing 
obligations will have increasingly significant budget impacts without 
any consideration for the improvements to the tribes' financial 
situation or to their improved capability to pay for these O&M costs 
due to the improved water supply systems.
    The Administration recommends some middle ground between these two 
approaches. We recommend some accommodation for Tribes that cannot 
cover 100% of their initial O&M costs in the near term. However, this 
should be structured to account for the positive economic impacts that 
the rural water delivery projects will have in these communities. It 
should also encourage greater tribal self-sufficiency, conservation, 
and the development of the technical and financial expertise needed to 
efficiently manage these water systems themselves. In contrast to the 
current practice of subsidizing all the OM&R costs associated with 
Indian rural water facilities, we recommend that the Secretary be 
authorized to seek appropriations to assist Tribes to pay for the 
difference between the actual OM&R costs and the projected revenues 
from water sales to project beneficiaries. As project benefits spur 
economic development, Tribes will have a greater capability to pay for 
their OM&R costs and the need for this assistance will decline. Such a 
provision is found in S. 2218, the Administration-sponsored rural water 
bill from the 108th Congress.
    Application of the Indian Self Determination and Education 
Assistance Act (P.L. 93-638): Another area that S. 895 does not address 
is the application of the Indian Self Determination and Education 
Assistance Act (P.L. 93-638), commonly referred to as 638. As 
introduced, S. 895 would not impact the application of provisions of 
P.L. 93-638 such that tribes would have priority in construction 
activities impacting or benefiting Tribal entities. The Administration 
strongly concurs. However, we recommend that S. 895 specifically 
provide that the amounts appropriated and made available to Indian 
project beneficiaries under a self determination contract or a self 
governance compact and all project revenues (including interest earned 
and all collected fees) should be: (1) reported to the Secretary by the 
Tribes, (2) expended only for the purposes for which they were 
originally appropriated; and (3) used by the Secretary to determine the 
amount of funds otherwise obligated to the contract or agreement in 
subsequent years.
    These provisions will improve the financial management of these 
projects; will guarantee that the appropriated funds and their 
associated revenues will directly benefit the rural water projects and 
will potentially reduce the need for some appropriated funds since some 
project construction costs could be addressed through interest and 
associated revenues.
    Indian Trust Responsibilities: As introduced, section 105(c)(1)(F) 
and section 106(c)(12) speak to ``Indian trust responsibilities.'' We 
believe these provisions may be read to create a trust responsibility 
for rural water systems that has not previously existed. We think these 
provisions should be removed.
                            loan guarantees
    Title II of the legislation presents a potentially valuable 
innovation, not only for the rural water program, but for other 
Reclamation customers. However, it would be an entirely new tool for 
the Bureau, with far-reaching programmatic, staffing, and budgetary 
impacts that are not yet fully understood. The Administration is 
interested in further exploring a loan guarantee program for 
Reclamation, but will reserve judgment on the merits of this proposal 
until we can complete our ongoing process of developing and vetting the 
idea, so that we can clearly say whether this is the best policy 
mechanism to address the particular challenges faced by water users, 
and what it will cost the taxpayer.
    In addition to the above comments, we have identified a few 
technical issues that may require clarification. We are confident that 
Committee staff will be able to determine quickly whether to 
incorporate them or not.
    In conclusion, Mr. Chairman, we are honored to work with you and 
Senator Bingaman to advance legislation to establish a rural water 
program within the Department of the Interior that can benefit both 
rural communities and taxpayers-at-large.
    I am pleased to answer any questions.

    The Chairman. Thank you very much. I would now ask Senator 
Bingaman if he has questions. And the rest of you, if you would 
prepare, I will yield to you in due course.
    Senator Bingaman.
    Senator Bingaman. Well, thank you very much, Mr. Chairman. 
Let me just ask a little bit, if you could elaborate on this 
idea you have in your testimony that the Secretary should be 
authorized to seek appropriations to pay down the annual OM&R 
costs of rural water projects for Indian tribes.
    Given the enormous backlog we have in the construction end, 
I guess I am wondering how realistic it is to think that 
Reclamation can also take on the operation and maintenance 
responsibility in these things. Obviously we would like to be 
able to help in all ways we can, but I am just trying to be--
trying to understand what we can do that is realistic. Maybe 
you could elaborate on your thoughts.
    Mr. Keys. Mr. Chairman, Mr. Bingaman, several of the 
authorized projects that we are working with now authorize 
those projects to receive operation, maintenance and 
replacement funds to run the projects after they are built. 
That is a serious drain on our budget and on the Federal 
treasury.
    The idea that we have is that tribes or other smaller 
communities would first see how much revenue they could 
generate from the delivery of water, and then if they could not 
quite make it, the Secretary would be authorized to either 
furnish or try to find another way to help them with operation 
OM&R costs.
    I do not think that any of us would like to see a program 
where we pay it all for every one of them. It would be such a 
drain that none of our budgets could stand it.
    This is a way that we could see just how much they could 
return. We could actually do some cost--some studies ahead of 
time to see how much they could generate and how much it would 
take before the project is authorized. If it takes too much, 
maybe we need to look at a different way to do it.
    Senator Bingaman. Let me also ask you about these localized 
desalination facilities that you think might be an option that 
people should look at, rather than building more pipelines to 
bring water from a long distance.
    There is some work going on in our State on developing 
that, and the Bureau of Reclamation has this new research 
center going in, in Alamogordo, to look into desalination. How 
realistic--how soon is this technology available? Is it 
available now?
    We met with the Minister of Energy from Qatar yesterday and 
he is saying 99 percent of their water that they use in that 
country is from desalination. I am just wondering, are we way 
behind the curve as far as actually using technology that is 
already developed, or do we need to make advancements in the 
technology in order for this to make sense?
    Mr. Keys. Mr. Chairman, Mr. Bingaman, the answer is yes and 
yes. Yes, there is technology available now that we could do 
that. Yes, we are still advancing that technology.
    One of the things that Reclamation is working on at 
Tularosa with the partners there, one of our reasons for being 
there is to look at this small plant capability to try to be 
sure that it is applicable to brackish groundwater and it will 
do what we think it will do.
    The water source there at Tularosa is brackish groundwater. 
Underlying most of the project areas in South Dakota, in that 
whole band of the Midwest, where there are a lot of demands for 
rural water, are brackish groundwater deposits.
    We have, on a trailer, a small mobile plant that we have 
been testing, using it at different small towns for 3 or 6 
months, to demonstrate that, yes, it will work there.
    Now the technology that we are using is reverse osmosis. It 
still depends on membranes and that technology. We are hoping 
that research will give us a breakthrough so that we are not so 
dependent on membrane technology. It has not yet come.
    If we can find some better way to do it, that is what we 
are trying to do. But there is technology now that would let us 
go in and put a small plant on a brackish groundwater deposit 
and help a small town. In a lot of cases, we think that would 
be much cheaper than the big pumping plant on the river with up 
to several hundred miles of pipeline to get the water to the 
communities.
    Senator Bingaman. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator. Let me go down our list 
here.
    Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman. Thank you, Mr. 
Keys, for being here. This is certainly an issue that is very 
important to my State, for these small communities of 50,000. 
We have two above 50,000. All the rest of our State is in that 
category.
    Is this a little bit aside from the major mission of the 
Bureau of Reclamation?
    Mr. Keys. Mr. Chairman, Mr. Thomas, we think that it is 
part of our mission. It is just that with the way projects were 
being authorized, it was stretching our ability to use the 
moneys we had for our traditional projects.
    The threats to our ability to operate and maintain the 
water supply facilities across the West because of budgetary 
reasons are large. We are trying to find a systematic way to 
deal with these without having different projects be authorized 
that would take a big hunk if we did not.
    Senator Thomas. Well, I am enthusiastic about it, but I 
think one of the challenges we obviously see is being able to 
maintain, to store and develop more water as demands increase 
and not be so much in the distribution. At least it seems that 
way to me, and I am all for it, but I do not want to see you 
all changing.
    We have a really--I worked quite a bit this year with the 
rural water people in Wyoming and they are a pretty impressive 
group. They have gotten organized. What other agencies are 
involved in rural water?
    Mr. Keys. Mr. Chairman, Mr. Thomas, the Department of 
Agriculture, Department of HHS, the EPA all have programs. 
There is an area that is not covered by those programs. It is 
the area where it takes a large investment of money to deliver 
small amounts of water to either a single community or a number 
of communities.
    Every time a community comes to talk with us about rural 
water systems, we ask them first, have you been to see these 
other agencies, because in a lot of cases, their application 
would fall within that jurisdiction.
    But when it gets into the larger project, where you have 
long distances to go or they have not been able to consider 
some of the desalination efforts, there is no program out there 
that would serve them.
    This--I do not want to call it a niche, because that 
indicates that it is a small amount. In our area there are a 
large number of communities out there. But there are that 
number that are not served by any of the existing programs.
    Senator Thomas. I see. Well, as I said, I am very much 
interested in rural water. I just do not want to see us put 
some things on there that change the mission and the 
responsibility of the Bureau which I see as a little broader 
responsibility than that. I mean we are working with you all 
the time, trying to divide water up among States, trying to 
store water, all those things, and if this is going to take 
away from what traditionally has been your system, I would be 
somewhat concerned.
    So what I am--I want to follow up on it and stay with it, 
because I am looking for ways. But I have to tell you, I am 
impressed with what the rural people are doing now, and they 
can do it pretty well, apparently, without you.
    Mr. Keys. Mr. Thomas, they do a very good job, and we work 
closely with the agencies trying to meet some of the needs out 
there. I think this bill gives us the opportunity to limit the 
portions of our budget that we would be obligated to put into 
rural water.
    In other words, we could develop a portion of our budget, 
put a number on it, 50 or 100 or 70 or whatever, million 
dollars, and in sight of that, we would see the competition 
between the communities for that money, rather than now it 
being an open-ended proposition where we do not have control 
over how much it might be.
    Senator Thomas. Well, Mr. Chairman, I certainly do not mean 
to be negative about this. Something needs to be there. But at 
the same time, we have to try and measure what is the role of 
the Federal agency. We hear quite a bit about that, as you 
know, and properly, and also spending. We have to watch that 
one as well. So all these things have to be balanced, and so I 
appreciate your comments.
    The Chairman. Senator Johnson.
    Senator Johnson. I do not have any questions.
    The Chairman. Senator Craig.
    Senator Craig. Thank you, John. I have no questions either. 
I am excited about the opportunity to get this program 
consolidated in a way that is--well, I think Senator Johnson 
put it pretty well. We are all racing to the Appropriations 
Committee to see who can get on first, first, and that is not 
working very well. It is very sporadic. It may even be a 
misallocation of resource, because of the analysis that 
oftentimes fails to happen in advanced or alternative 
approaches, as you have suggested, and as this bill would 
propose.
    I think framework, process, analysis, even allowing 
communities to go forward on their own to do their research and 
analysis out in the private sector to bring it to the public 
sector for confirmation into one of the programs is an 
extremely important approach, and it will help us all here a 
great deal, and I think all States will benefit from it. Thank 
you.
    The Chairman. Senator Salazar.
    Senator Salazar. Thank you, Mr. Chairman and ranking 
member. Let me first say that I applaud this effort, one, for 
its bipartisanship and, two, for its need, and I would be proud 
to be added as a co-sponsor of this legislation.
    Let me just ask one question, Commissioner Keys, and that 
is, it seems like there are a lot of programs out there that 
are focused on helping with rural water supply, I think, and 
this committee--at least most of us who are here from the 
Reclamation States--understand the importance of water supply 
out to rural communities. My question is whether or not there 
is a way of consolidating the efforts that are underway by many 
agencies that are already out there doing something. I think I 
read somewhere that there were some 17 programs that were 
focused on creating water supply for rural communities, and 
this is now an additional program which I applaud and I support 
this effort very much.
    I am wondering whether there would be a way of bringing in 
the efforts that we currently have in the Environmental 
Protection Agency, that we have in the Department of Commerce, 
that we have under the U.S. Department of Agriculture, so the 
rural area, whether it is in Wyoming or New Mexico or my State 
of Colorado, that there be a coherent program that somebody on 
the ground can say, you know, when I look to the Federal 
Government for assistance, I know that there is this one office 
of rural water supply that we can go to and that we can figure 
out to access those resources.
    Mr. Keys. Mr. Chairman, Mr. Salazar, I think there is a 
possibility of doing that. It is not there right now, and that 
is why we need this bill. Certainly it gives us the opportunity 
to cooperate with the other agencies so that if there is an 
existing program, we do not duplicate it.
    Now that being said, last year when we first started 
working the issue, we were working with the Office of 
Management and Budget, and they, at that time, looked into how 
many different agencies have programs and whether they could 
all be consolidated into one.
    That effort is still underway, but it--I do not know that 
it is going anywhere right now. Certainly we would be willing 
to work with you folks if you wanted to try to do something 
with that. But I think our first one is to look at the program, 
coordinate with those other agencies, and then, if there is an 
effort to put them together, we would certainly work with you 
to do that.
    Senator Salazar. I would think perhaps as this legislation 
goes forward, Mr. Chairman and Senator Bingaman, that that may 
be one thing that we can look at--whether or not there is an 
integration component of this legislation that we might want to 
consider as an amendment. Because it seems to me that if you 
are in any one of these communities and you are looking for 
assistance on how to develop a rural water supply, it would be 
good to go to one place that has the lead responsibility for 
making this rural water supply happen.
    I frankly would be comfortable if it was the Bureau of 
Reclamation, because I think they know water perhaps better 
than some of these other agencies. But there might be some 
other clarification that we could make on that point.
    Thank you very much and, again, congratulations. I think it 
is a great idea.
    The Chairman. Well, Senator, let me say just a little while 
ago you saw me bend over here and talk to Senator Bingaman. We 
got our staffer here talking to us, and I asked the very same 
question, but not here, and I was given an answer, and the bill 
does just what you ask, so we do not have to amend it.
    If you will look at section 104, Commissioner, it calls for 
water program assessment, and it has an entire provision which 
says that while the final conclusion is after they do certain 
things with all of the different agencies, they are supposed to 
report back to us and the comparable committee in the House no 
later than 2 years after the date, and in that they will give 
us a detailed assessment, conducted under subsection (a) above.
    And that section above talks about just what you have 
suggested--review appraisal investigations, that are, A, 
developed by the non-Federal project entity, independent of 
support from the Secretary, submitted to the Secretary, conduct 
an appraisal investigation or provide the grant to, et cetera.
    But anyway the section says the coordination will be done. 
They will look at it and do the assessments and report back to 
our committee on what they have found with reference to it and 
what recommendations there are for better coordination. You 
understand that, Commissioner?
    Mr. Keys. Yes, I do.
    The Chairman. So that would have been the answer to the 
Senator's observation 5 minutes ago when he made it; is that 
correct?
    Mr. Keys. That is correct.
    The Chairman. Now on that score, I think that is one of the 
most important ultimate things, because all of us have 
constituents coming in, either here or our State offices, 
talking about we are applying for help in water and we are 
using the Department of Agriculture, and they have two 
different grants, and we are using the Environmental Protection 
Agency.
    And then we are asked to intervene, and we do not have any 
idea how this fits into anything else. We do not know if they 
are using guidelines that are developed of the type you are 
going to develop here. So it seems to me that that is very 
important.
    But I might ask you, do you think because we tell you you 
should do it? Do you think that since these other programs are 
under other secretaries, that you will be able to assimilate 
the facts? Do you think they will give them to you? Will you be 
able to put them together, or do we need more in this bill to 
make sure that will happen?
    Mr. Keys. Mr. Chairman, I think the bill is adequate to do 
that. We have had excellent cooperation from the other agencies 
in trying to find support from them for cities that need water. 
I do not see any problem with us talking with them about a 
better way to do it.
    The Chairman. And one last question. This applies to a 
project in our State. There is a very longstanding water 
pipeline project that we call the Ute Water Project--you are 
probably aware of it--which will transfer water from a lake, 
after a very long period of time, to about five or six 
communities, and they have been working on it for an awful long 
time.
    And I understand that when they are getting near the end 
that the Bureau of Reclamation is looking at the project and 
saying they have to do some things differently than they have 
already done. Is that correct, mayor? Am I stating it kind of 
right? You will be testifying in a minute.
    Mr. Lansford. Yes, sir. I will speak to that, but that is 
correct. We kind of feel like it is somewhat of a moving target 
where the rules may be changed throughout the course of the 
project development.
    The Chairman. Now what I am concerned about is how do we 
fix that up? I mean, I hate to see that happen. They have been 
working for a long time. They will come into our office pretty 
soon. They think they will be finished. They will be looking 
for a very large funding source over many years, and we do not 
want them to have to start over or be told it is not adequate. 
What are we going to do about that?
    Mr. Keys. Mr. Chairman, passage of this bill does not 
affect those projects that are already authorized. We are 
authorized to do this study.
    I would tell you that we had some real concerns about some 
parts of the designs for eastern New Mexico, that they were not 
at the proper level that would warrant legislation to build it. 
And rather than us make a decision, we looked at a peer group. 
We went to an outside review to say what do you think about 
this, rather than us just making the decision ourselves.
    They came back with seven different recommendations to get 
that study where it needed to be that would support 
legislation. I sat down yesterday with these folks from eastern 
New Mexico and went through those. I think there is a plan for 
meeting those requirements for answering those seven areas of 
deficiency and that we can get on with it.
    The Chairman. Now I raised it because I do not think that 
is singularly our problem. I think that exists in various 
places, and I hope that this legislation for future projects 
will have some effect on it. Is that correct?
    Mr. Keys. Mr. Chairman, absolutely. It will lay out the 
criteria ahead of time so that they know what is necessary to 
meet the requirements for construction and authorization for 
construction.
    The Chairman. Okay. Thank you very much. Senator Smith, you 
arrived since we started. Do you have any questions or 
observations?
    Senator Smith. I do. Mr. Chairman, thank you for this 
hearing. And if I may include an opening statement in the 
record, I would appreciate that.
    The Chairman. It is submitted. It is accepted.
    Senator Smith. Mr. Keys, I don't know whether you hear a 
lot of ``thank yous'' as you go around, but I want to note 
publicly all of your terrific efforts in the Clement Basin and 
in other very contentious water basins in Oregon. I think you 
bring to your position a very constructive, if not a healing, 
sort of presence in trying to resolve these very, very 
contentious issues and I want you to know I appreciate it.
    I like much in this bill, but I do want to note a concern I 
have, particularly in rural places, about the up-front costs 
and timelines that I think are provided for in the bill, 
particularly for these non-Federal entities if they choose to 
participate.
    As I understand the legislation, there is a requirement to 
do both an appraisal investigation, which has a 2-year 
timeline, then a subsequent feasibility study that has no 
timeline, followed by congressional authorization, which who 
knows how long that time will take. So I am worried about the 
cost in all of this. Do you have a sense of timelines and costs 
that would be associated with this effort?
    Mr. Keys. Mr. Chairman, Mr. Smith, the times in there are 
maximum times because larger, longer, more expansive systems 
sometimes take a lot of time to put together.
    A smaller town could take an appraisal study, do it in a 
matter of months, I mean 3 or 4 months, and then go straight to 
feasibility without having to go the 2 year and so forth.
    We were trying to cover all of the possibilities there for 
larger systems and smaller systems. So I would read those as up 
to rather than it being that structured timeframe.
    Senator Smith. Is there a way to--obviously it is a 
language, a drafting issue, but maybe there is some more artful 
language we could use to reflect that, because that allays a 
lot of my concerns.
    Mr. Keys. Mr. Chairman, Mr. Smith, we would be more than 
happy to work with you. What you just raised is another reason 
that we worked with the folks to put the provision in there 
that the local folks can take the money and do the feasibility 
and appraisal studies themselves. In other words, it is really 
up to them to get them done as quickly, meeting the criteria 
that we put together with the committee.
    Senator Smith. I think that is a very important 
improvement, because I would hate to see a lot of little 
communities just simply be unable to participate because the 
cost and time required are simply prohibitive to them. So if we 
can reflect that somehow in the legislation, that would be 
great. Thank you very much.
    The Chairman. I think that is a very good, constructive 
observation, and let us work on it. Maybe we can indicate that 
this is outside and some kind of expectation or criteria for 
how long it should take for lesser ones. We might be able to do 
that.
    Senator Smith. Thank you, Mr. Chairman.
    The Chairman. Anything else? I thank you very much, 
Commissioner.
    Mr. Keys. Thank you, sir.
    The Chairman. You have helped us very much. And thanks to 
your staff for helping put this bill together. You are excused.
    The second panel: Mr. Jim Dunlap, welcome--we see you 
often--a board member of the National Rural Water Association 
from Farmington, New Mexico; Harold Frazier, previously 
introduced by Senator Johnson, and he is chairman of the 
Cheyenne River Sioux Tribe from Eagle Butte, South Dakota; 
Duane Smith, vice-chairman of the Western States Council, 
Oklahoma City; and Mr. David Lansford, from Eastern Rural Water 
Association, Clovis, New Mexico.
    We are going to proceed in the order that I announced you. 
If you have prepared statements, they will made a part of the 
record, and I will make them a part of the record now. We hope 
that you would not read them if they are longer than 5 minutes, 
that you would summarize them.
    We will proceed now, without any intervening questions, 
right through the witnesses, unless a Senator urgently wants to 
stop and ask somebody, in which event we will do that.
    Mr. Dunlap.

STATEMENT OF TIM DUNLAP, ON BEHALF OF THE NATIONAL RURAL WATER 
 ASSOCIATION, UPPER LA PLATA WATER USERS ASSOCIATION, AND THE 
                NATIONAL RURAL WATER ASSOCIATION

    Mr. Dunlap. Thank you, Mr. Chairman, members of the 
committee. My name is Jim Dunlap. I am president of the Upper 
La Plata Water Users Association in San Juan County, New 
Mexico. I am a rancher, farm equipment business owner and also 
chairman of the Interstate Streams Commission for the State of 
New Mexico.
    All of these organizations and every State rural water 
association join me in thanking you and this committee for your 
support. Rural and small communities appreciate your assistance 
to improve and protect our drinking water and for the 
opportunity to testify before your committee on S. 895.
    Before discussing the details of the bill, let me say how 
happy I am to have New Mexico's two Senators, with separate 
party affiliations, holding the chair and the ranking position 
of this committee, working to better rural America's drinking 
water and looking at the Bureau to also do so. I may be out of 
my league on how to express my appreciation to both of you 
simultaneously, but it is an understatement to say all of rural 
New Mexico and all rural Americans are very appreciative of 
your efforts.
    One main point that rural America would like to leave with 
the committee regarding S. 895 is expanding the Bureau's 
mission to develop rural water supplies is the right step 
toward the solution to the water problem facing the rural West.
    To broaden the scope of the Bureau to drinking water is a 
bold and dramatic new initiative for Western America, and one 
that is sincerely supported and welcomed by rural communities 
and families.
    Currently there is no governmental instrument assessing the 
long-term needs in planning a Western States rural water 
supplies. We need the comprehensive and locally-supported 
planning effort that is proposed in S. 895.
    Mr. Chairman, let me give you a brief example of what is 
commonplace in the West. I have provided a series of pictures, 
which I believe illustrate that point. I am currently working 
to develop a means to regionalize the growing area around the 
city of Durango, Colorado, and two large unincorporated areas, 
one in Colorado, adjacent to one in New Mexico.
    Some residents of both of these rural areas are either 
hauling water or have an extremely limited supply. That is 
right, they fill up their trucks to haul water to their house 
to drink and use for other household needs.
    Due to the complexity and variety of the problems in each 
of these communities, the only real solution is a regional 
cooperative effort.
    In this example, it is critical to note that the two unused 
municipal industrial water rights, held by the conservancy 
districts, could be used by other communities if there was a 
large distribution system to move the drinking water. This is 
just the type of situation that could be solved by your 
legislation.
    In closing, I would like to acknowledge that small and 
rural communities sincerely appreciate the thought that went 
into the bill. If this legislation is enacted, the Bureau will 
come to be known as a solution to immediate and long-term 
Western rural water challenges.
    We will see dramatic public health improvements, farm 
families receiving clean water for the first time, entire 
regions that have been out of compliance with drinking water 
regulations for years developing solutions, and Western water 
arguments being settled with communities moving forward.
    Mr. Chairman and members of the committee, I would also 
like to congratulate Commissioner Keys and his staff for 
working with you. I believe that Commissioner Keys has a unique 
understanding of rural water needs and I would offer National 
Rural Water's assistance in developing the procedures that are 
used to work this bill through and the procedures to be used in 
the future.
    I want to thank you for the chance to be here today. I 
would stand for any questions at the appropriate time.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Dunlap follows:]
Prepared Statement of Jim Dunlap, on behalf of the National Rural Water 
 Association, Upper La Plata Water Users Association, and the National 
                        Rural Water Association
    Mr. Chairman, Members of the committee, my name is Jim Dunlap, I am 
President of the Upper La Plata Water District in New Mexico. I am a 
rancher, farm equipment business owner and I am currently the Chairman 
of the Interstate Stream Commission for the state of New Mexico. All of 
these organizations and every state rural water association join me in 
thanking you and this Committee for your support for rural and small 
communities in our efforts to improve and protect our drinking water--
and for the opportunity to testify before the Committee on your bill; 
S. 895.
    Before discussing the details of the bill, let me say how happy I 
am to have New Mexico's two Senators, with separate party affiliations, 
holding the chair and ranking positions on this Committee--working to 
better rural America's water and looking at the Bureau as an agency to 
do it. I may be out of my league on how to express my appreciation to 
both of you simultaneously, but it is an understatement to say all of 
rural New Mexico and all of rural Americans are very appreciative for 
your efforts. In addition to being very supportive of the legislation, 
I am also relieved that Senators Domenici and Bingaman worked out their 
differences in their bills from last year--before having me here on the 
record to testify.
    The fact is that many western rural areas have never had adequate 
water supplies and have a need for a reliable water supply to attract 
and maintain rural economic and public health. The nexus of three 
realities is resulting in a problem that merits additional federal 
water development assistance. These realities include: the fact that 
many U.S. rural households don't have decent, if any water service. 
Second, that unfunded mandates disproportionately impact rural 
households and these mandates are increasing. And the third reality is 
quantity--the fact that many rural areas in the west never had adequate 
water supplies. Expanding the Bureau's mission to develop rural water 
supplies is the right step toward a solution to the water problems 
facing the rural west. To broaden the scope of the Bureau to drinking 
water is a bold and dramatic new initiative for western American--and 
one that is sincerely supported and welcomed by rural communities and 
families. Here to fore, the Bureau of Reclamation has made water 
development, and the corollary human progress, of western American one 
of the unique enterprises of modern civilization; reordering the 
understating of society's interaction with its natural environmental.
    Senators Domenici and Bingaman are now compelled to evolve the 
Bureau into meeting the west's future rural water supply needs. 
Currently there is no governmental instrument assessing the long-term 
needs and planning of western states rural water supply. This is 
happening at the same time development is advancing in many western 
states. If we want to ``do it right,'' be the most effective, far-
sighted, and limit and unintended consequences--we need the 
comprehensive, long-term and locally supported planning effort that is 
proposed in S. 895. Such a new direction for the Bureau will result in 
improvements for western rural water supplies in the coming decades 
that will compare to the Bureau's historical advances in water 
development for energy, agriculture and commercial development.
    Mr. Chairman let my give you a brief example of what is commonplace 
in the west. I am currently working to develop a means to regionalize 
the growing city of Durango, Colorado and 2 large unincorporated areas, 
one in Colorado and one adjacent to it in New Mexico. Residents of both 
of these rural areas (one up on Red Mesa) are either hauling water or 
have an extremely limited supply. That's right they fill up their 
trucks to drive water to their houses to drink and use for cooking. Due 
to the complexity and variety of the problems in each of these 
communities--the only real solution is a regional cooperative effort. 
In this example, it is critical to note that the unused municipal and 
industrial water rights held by the Conservancy District could be used 
by the other communities if there was a large distribution system to 
move the drinking water. This is just the type of situation that could 
be solved by your legislation.
    One of the main concerns in our testimony last year was to include 
an independent process of submitting projects to the Bureau to serve as 
an incentive to timely analysis and completion of projects. I would 
like to thank the authors to including such a provision in the bill. My 
written testimony includes a few suggestions for enhancing the 
legislation including technical assistance, independent engineering, 
annexation protection, etc. However they are minor and should prove to 
be non-controversial. I will only briefly mention them here to put them 
into the record--not diverting attention away from our overwhelming 
support and appreciation of this legislation.
    I would like to acknowledge that small and rural communities 
sincerely appreciate the thought that went into the bill. If this 
legislation is enacted, the Bureau will come to be known as a solution 
to immediate and long-term western rural water challenges. We will see 
dramatic public health improvements; farm families receiving clean 
water for the first time, entire regions that have been out of 
compliance for years developing solutions, and intractable western 
water arguments being settled with communities moving forward. We 
encourage the committee and the Congress to make the Bureau a permanent 
and recognized solution to some of the county's most challenging water 
issues.
    Mr. Chairman, I strongly support the objective of having the Bureau 
fund more rural water development. The key points I want to make today 
with regard S. 895 are:

   There is a great need for public health, economic viability, 
        and compliance for additional financial resources for rural 
        water development.
   In certain circumstances, it is more cost-effective to 
        develop large region water supplies as opposed to multiple 
        local supplies.
   The Bureau of Reclamation should get into rural water 
        development as they have a unique mission not accomplished by 
        other federal agencies (namely the U.S. Department of 
        Agriculture and the U.S. Environmental Protection Agency).
   The unique situation of rural communities should make them 
        the priority for federal assistance for drinking water.
   We support the bill's provision for a local or independent 
        process that could determine cost, feasibility, coordination 
        and planning in the legislation.
   Due to the unique federal mission proposed in the bill, any 
        new water initiative within the Bureau of Reclamation should 
        include significant annual appropriations--comparable to EPA's 
        approximately $800 million state revolving fund and USDA's 
        approximately $700 million loan and grant effort.
   The west has changed since the passage of the original 
        authorizing statutes for the Bureau of Reclamation. Currently 
        we are faced with new challenges including the growing need for 
        municipal and industrial (M&I) water. We may need to modify the 
        mission of the Bureau and its ability to assist in providing 
        M&I water.

There is a great need for public health, economic viability, and 
        compliance for additional financial resources for rural water 
        development
    The nexus of federal unfunded mandates, the fact that many rural 
areas have never had adequate water supplies, the shortage of local 
water supplies in the west, and need for a reliable water supply to 
attract and maintain any rural economic health reflects a great need 
for additional rural water development.
    According to the USDA at least 2.2 million rural Americans live 
with critical quality and accessibility problems with their drinking 
water, including an estimated 730,000 people who have no running water 
in their homes (USDA study available on the internet at 
www.ruralwater.org/water2000.pdf). About five million more rural 
residents are affected by less critical, but still significant, water 
problems, as defined by the federal Safe Drinking Water Act. These 
problems include undersized or poorly protected water sources, a lack 
of adequate storage facilities, and antiquated distribution systems. 
Today, many rural families are still hauling water to their homes and 
farms. In La Plata County, Colorado--an area near my home that we are 
trying to organize into a rural water district, lack of water is 
forcing hundreds of families to haul water for their home use and their 
livestock. Their wells and springs are drying up due to the drought. 
The results of the U.S. Department of Agriculture's (USDA) six-month 
assessment of the nation's most critical safe drinking water investment 
needs show that as many as eight million people have critical or 
serious drinking water quality problems. According to the 1990 Census, 
there are about 1.1 million people without indoor plumbing (RUS).
    Rural Americans have been living with inadequate water conditions 
that large communities could never imagine. For example: the Village of 
Hatch, New Mexico is located on the west side of the Rio Grande River 
in Dona Ana County. The County, in southern New Mexico borders both the 
State of Texas and the Republic of Mexico. Hatch is in northern Dona 
Ana County approximately 40 miles north of Las Cruces, the county seat 
and a community of over 130,000. The large metropolitan area of El 
Paso, TX--Juarez, Mexico lies 80 miles to the south.
    Hatch is an incorporated community with a population of 1136 per 
the 1990 census. However, the current estimated 1997 Village population 
is 1550. Due to the seasonal nature of agriculture, the main economic 
base, the population fluctuates as migrant laborers move in and out. 
The Village operates a community water system serving the Village and 
outlying rural areas including approximately 799 residents residing in 
the two ``Colonias'' known as Rodey and Placitas. The total population 
served by the water system is estimated at 2500. Over 75% of the 
population consists of minorities, primarily Hispanics. Projected 
population in the service area by the year 2010 is 3570. There is one 
health clinic, funded by the former Farmers Home Administration, two 
grocery stores, seven restaurants, a post office, two bank branch 
offices, two convenience stores, one motel, one public laundry, and 
several other retail and service-related businesses. Average income is 
extremely low as the 1990 census shows a Median Household Income (MHI) 
of $12,975 well below the National Poverty Line of $16,050. The New 
Mexico Statewide Non-Metropolitan MHI is $21,656.
    Rural Utilities Service (RUS) recently funded a water system 
improvements project to add additional storage capacity and run 
transmission lines directly from the storage tanks site to Placitas and 
Rodey. Before this project, water ran from the tanks to Hatch's 
distribution system, and then back uphill to the two Colonias. During 
summer peak usage, the Colonias experienced zero water pressure. The 
RUS project corrected this situation. Hatch, along with the Colonias, 
received the direct benefit of the additional storage.
    Small communities are often in the greatest need, lacking the 
technical resources to comply with federal mandates because of their 
limited economies of scale and lack of technical expertise. Of the 
approximately 54,000 community water systems in the country, more than 
50,000 serve populations under 10,000. Due to a lack of economies of 
scale, small-town consumers often pay high water and sewer rates. Water 
bills of more than $50 per month are not uncommon in rural areas. At 
the same time, the rural areas have a greater percentage of poverty and 
lower median household income. This results in a very high compliance 
cost per household in rural systems coupled with an increased inability 
to pay.
    Drinking water regulatory requirements affecting small drinking 
water systems have steadily increased since enactment of the Safe 
Drinking Water Act (SDWA) in 1974. Not only has the number of regulated 
contaminants increased, but regulations have also increased in 
complexity. Small communities are facing a compounding effect from each 
new regulation implemented by EPA. That is, compliance with one 
particular regulation may be much more difficult as a result of one or 
more prior regulations, or one or more future regulations. Currently, 
National Primary Drinking Water Regulations are set for 92 
contaminants. These include turbidity, 8 microbials or indicator 
organisms, 4 radionuclides, 19 inorganic contaminants, and 60 organic 
contaminants. Maximum contaminant levels have been set for 83 
contaminants and 9 contaminants have treatment technique requirements. 
EPA is currently in the process of developing new regulations as 
required by the SDWA including Long-Term 1 Enhanced Surface Water 
Treatment Rule, Long-Term 2, Ground Water Rule, Arsenic, Radon, Stage 2 
Disinfection Byproducts, and Candidate Contaminant List. The EPA list 
of communities that are likely to be out of compliance with the arsenic 
rule can be found on the internet at: www.ruralwater.org/arsenicus.xls.
In certain circumstances, it is more cost-effective to develop large 
        region water supplies as opposed to multiple local supplies
    The reason--that over 9 out of every 10 U.S. water supplies serve 
populations under 10,000 people--it has historically been more 
economical to build smaller utilities than expand larger ones. The cost 
of running main lines a few miles can be cost prohibitive. However, in 
certain circumstances, it is more cost effective (especially over the 
long-term) to build larger or region water supplies. The factors that 
are used in making these complex discussions include future regulations 
which may require centralized treatment, the need to share one supply 
that may be far from many of the communities, the need for a 
distribution system to share water rights, projected growth, economic 
planning, etc.
    For example, the regional Rocky Boys rural water supply, authorized 
by Congress for Bureau construction will allow many smaller communities 
to comply with the EPA's Surface Water Treatment Rule which they can't 
afford on their own, it will ensure long-term supply to numerous 
communities that currently lack quality supplies, it will provide an 
economy of scale for future regulations like disinfection by-products, 
and it will ensure the necessary infrastructure for those local 
economies.
    Another example is the Navajo-Gallup pipeline project in New 
Mexico. This is a project to supply much needed drinking water to the 
Navajo Reservation, parts of the Jicarilla Apache Indian Reservation 
and to the city of Gallup. This will involve 41 Chapters in New Mexico 
and two Chapters in Arizona (a Chapter is similar to county 
government). It will involve a population of some 98,000 people 
utilizing 38,000 acre-feet of surface water and 4,000 acre-feet of 
groundwater. The project will start from Fannington, NM with a 48-inch 
pipeline and extend to the community called Yah Ta Hey, which is 
adjacent to the City of Gallup. This pipeline will be approximately 
520,000 feet with laterals to Window Rock, Arizona and Crownpoint, New 
Mexico, with lateral extensions of 388,000 feet. There will be a 
separate lateral extending from Cutter Dam to Pueblo Contado and Ojo 
Encino. This lateral will be approximately 400,000 feet in length.
The Bureau of Reclamation should get into rural water development as 
        they have a unique mission not accomplished by other federal 
        agencies (namely the U.S. Department of Agriculture and the 
        U.S. Environmental Protection Agency)
    In the New Mexico-Colorado example provided in the previous 
section, there is no federal or state agency with the mission of 
looking at this type of project. We are organizing the parties as an ad 
hoc project and using local funds to do the planning. This project 
includes two states, multiple communities, conservancy districts, and 
unincorporated areas. Such a project does not fall within the USDA's 
rural water program guidelines for area and density of users. The list 
of communities funded last year by USDA is available on the internet at 
www.ruralwater.org/report2003. This program is truly the most 
successful rural public health and economic development program in the 
country. It was the reason piped water came to my community in 1966. It 
needs to be continued and funding needs to be increased, however, it 
has its own mission and it currently cannot meet the demands of the 
communities that fit into its guidelines. I believe S. 895 creates a 
new federal agency mission to assess and fund the type of project 
needed in New Mexico-Colorado and the rest of the western states. If 
projects would better fit in the USDA program or the EPA program then 
they should be referred to those agencies. However, it is clear to us 
working in the western states that there currently is no program to 
meet many of these pressing water problems.
The unique situation of rural communities should make them the priority 
        for federal assistance for drinking water
    Many water organizations have been petitioning Congress for 
additional water infrastructure funding through increased 
authorizations and appropriations in EPA and the Bureau. However, rural 
communities face greater economic and often greater public health need 
than most of these organizations. No large community consumer pays 
$100.00 a month for drinking water service. However, in the western 
states, this is not uncommon in rural districts. Also, compliance costs 
are typically much higher in smaller utilities. For example, Desert 
Sands water district in Anthony, New Mexico formed a water association 
more than two decades ago that finally provided clear water. However, 
to comply with the new arsenic rule, their estimates show customers' 
monthly water bills would at least triple under the new standard. The 
average bill last July was $32.18 per household. An Associated Press 
article (www.ruralwater.org/desartsands.htm) showed that one of the 
district's wells contained arsenic at 10.4 ppb and that ``many Desert 
Sands customers are factory or farm workers who live in wind-beaten 
mobile homes or modest frame houses on small, sandy, treeless lots 
separated by rickety metal fences. The sand that blows across the flat 
desert is deep enough in some of the area's unpaved roads for cars to 
get stuck.'' Affording a rate increase of three fold will be dramatic 
to say the least.
    We the bill recognizes this unique situation of rural America and 
the cost of providing safe water service. We are grateful for this 
recognition and the bill's attempt to ameliorate this situation.
Please retain the bill's local or independent process that could 
        determine cost, feasibility, coordination and planning in the 
        legislation
    S. 895 provides for a new authorization for the Bureau to study 
opportunities to construct rural water projects and report back to 
Congress on feasible projects for funding--through the Congressional 
appropriations process. We think this is the proper way to try to 
identity feasible projects. Also, we support the authorization of a new 
process that would act as an incentive for the Bureau to develop cost-
effective projects in a timely manner. This option for local advocacy 
would serve as an incentive for the Bureau to work cooperatively with 
the locals. If the local organizations and the Bureau had different 
options on which projects were feasible and how they should be 
designed, Congress could be provided both options--and the Bureau would 
be able to comment on any local plan/study submitted to Congress. This 
would also serve as an incentive to move projects through the process 
in a timely manner.
Any new initiative within the Bureau of Reclamation should include 
        significant annual appropriations
    Thank you Senator Domenici and Senator Bingaman for introducing 
this bill. Rural America is grateful. I appreciate the details and 
thought that went into S. 895 that seeks to find the best ways to 
divide up the intergovernmental responsibilities to plan, design, 
build, and fund public drinking water supplies under the federal 
umbrella. I have over 30 years of experience dealing with the various 
levels of government and the various federal funding agencies. I have 
learned that it can be a long, complicated and bureaucratic process. We 
support the effort to craft legislation that will allow the Bureau to 
fund the water supplies that evolve from the studies and assessments. 
The main ingredient in a successful Bureau of Reclamation drinking 
water initiative will be a commitment from the federal government to a 
significant amount of annual appropriations. When communities see 
funding available to solve their compliance, supply, and rural public 
health needs--they will put it to sound use immediately. The agency 
will come to be known as a solution to immediate and long-term water 
challenges. We will see dramatic public health improvements; farm 
families receiving clean water for the first time, entire regions that 
have been out of compliance for years developing solutions, and 
intractable western water arguments being settled with communities 
moving forward. This has happened under the Bureau's direction in ad 
hoc manners in some western states. We encourage the committee to 
change this and make the Bureau a permanent and recognized solution to 
some of the county's most challenging water issues by establishing an 
authorization for annual funding comparable to the USDA and EPA.
Background on State Rural Water Associations
    Each state rural water association membership is comprised of small 
non-profit water systems and small towns. All members have water supply 
operations as their primary daily activity. Membership averages about 
400-500 communities per state, with systems from all geographic areas 
of each state. These are active members--who continuously participate 
in the training and technical assistance program in an effort to 
improve their drinking water. This program actively assists all small 
water systems whether they are members of the state association or not. 
With a significant turnover in water operators and board members--and 
the ever-increasing regulatory burden--the need for training and 
technical assistance remains constant. The problem with delivering safe 
drinking water is that improving drinking water in small communities is 
more of a RESOURCE problem than a REGULATORY problem. Every community 
wants to provide safe water and meet all drinking water standards. 
After all, local water systems are operated by people whose families 
drink the water every day, who are locally elected by their community, 
and who know, first-hand, how much their community can afford. Without 
the support of local people, regulations alone won't protect drinking 
water. Many small communities rely on volunteers or part-time 
administrators to operate their local water supplies.
    In my personal experience, two teachers, four farmers, one banker, 
and a group of kids from the Future Farmers of America acted locally to 
bring the first piped drinking water to my part of San Juan County in 
1966. I was one of the two teachers. The community had been relying on 
groundwater from individual shallow wells contaminated with minerals, 
oil, and methane gas for their farms and some household uses. Safe 
water used for drinking needed to be hauled in from town. We organized 
the 175 families in the area to incorporate a small rural water system 
and accept responsibility for repaying a 420 thousand-dollar start up 
loan from the U.S. Department of Agriculture's Farmers' Home 
Administration. At that time we did not have enough people to meet the 
threshold for population density to repay a loan, so a few of us 
accepted more than one water meter on our property. It was all the 
community could do to make the payments on the loans and the operations 
and maintenance of the systems was taken care of by community 
volunteers. Today, we have over 2,500 families on the system that has 
allowed for economic development in the area with over 100 new taxable 
businesses.

    The Chairman. Jim, thank you very much for that important 
testimony, and I am sure that we will enlist the efforts of the 
National Rural Water Association.
    We can just proceed up the table or however--mayor, please.

  STATEMENT OF DAVID LANSFORD, MAYOR, CLOVIS, NEW MEXICO, AND 
       CHAIRMAN, EASTERN NEW MEXICO RURAL WATER AUTHORITY

    Mr. Lansford. Thank you, Mr. Chairman, Senator Bingaman, I 
am joined today by Mayor Ortega from the city of Portales, New 
Mexico, as well as Scott Burhines, our program manager of the 
Eastern New Mexico Rural Water Authority, and we definitely 
want to thank the committee and especially those who took the 
leadership role in establishing the initiative to put this bill 
together.
    Before I begin to talk about some of the pros and cons of 
this legislation, I want to make a general comment. I would 
like to talk about the essence and the significance of this 
legislation.
    I believe that this bill is pioneering legislation because 
it lays the ground work and provides a mechanism for rural 
economic sustainability and expansion in the Western States.
    Rural communities are eager for growth and are the 
destination for many in our country who are seeking less 
congestion, less crime, and a more traditional lifestyle. Some 
sociologists see a third migratory shift in America. Couple 
this migration with a natural increase in population and we 
have an enormous opportunity and responsibility all in one.
    This legislation shows great leadership on the part of the 
U.S. Senate and in years to come will be recognized as the key 
legislation which allowed for economic growth, better quality 
of life, and the tool that eased the burden on government 
services in the population-dense cities of our country. I am 
more than convinced that millions will benefit both directly 
and indirectly from this legislation.
    We have taken the opportunity to review S. 895, 
particularly as it relates to our ongoing efforts in New 
Mexico, and offer the following comments.
    As you know, we are working diligently toward the 
development of a rural regional water supply project for 12 
communities and 3 counties in eastern New Mexico and have been 
doing so for over 6 years.
    In many respects, our project closely fits the model 
envisioned by this legislation. We recognize the need for a 
rural water program and strongly support its implementation.
    Projects like this involve many players. We are fortunate 
to have a partner in the Bureau of Reclamation and the New 
Mexico Interstate Stream Commission and the New Mexico Water 
Trust Board as our State partners. Ours is a unique initiative 
in New Mexico, and we are all learning the ropes in developing 
processes together. Consequently, the past few years have been 
something of a moving target.
    The current initiative in eastern New Mexico began over 6 
years ago as a collaboration of nine communities and three 
counties, Reclamation and the State of New Mexico, but our 
project was first conceived over 40 years ago.
    Positive aspects of this legislation: first of all, the 
legislation establishes a framework and a time schedule within 
which the Federal and non-Federal partners have better defined 
roles, eligibility criteria and direction on which to base 
project development decisions.
    The bill requires that eligible projects assess both 
Federal and non-Federal resources for capital project costs. It 
also provides for the appropriate level of non-Federal cost-
share to be based on an assessment of capability and 
willingness to pay.
    In our case, working closely with the 12 member agencies, 
the New Mexico Water Trust Board and the New Mexico 
legislature, we are leveraging local, State and Federal dollars 
to implement the project.
    Some concerns we have with the legislation: the legislation 
includes a factor that requires the project be cost effective 
and show positive benefit/cost ratio. These terms need 
additional definition and relevance. For example, our project 
may not be--well, may not present well, in a benefit/cost 
analysis without incorporating the detailed apples-to-apples 
comparison of the no-project alternative.
    What is the long-term economic impact on the region if 
nothing is done to develop a sustainable water supply and the 
deteriorating groundwater conditions persist? This no-project 
option is a much more difficult and subjective analysis, short 
of years of technical assessment.
    We encourage that S. 895 may include flexibility in 
assessing the non-Federal costs based on analysis of capability 
to pay, rather than application of a blanket, fixed Federal 
share approach. Much discussion has taken place regarding the 
member agencies' ability and willingness to pay for our 
project. Can we afford the cost?
    The more pressing question is not can we afford to do this 
project, but can we afford not to. We applaud you for taking 
this initiative to put in place a rural water program that will 
clarify the Federal and non-Federal roles and requirements and 
formally establish a process that will minimize the moving 
target syndrome that we have experienced.
    Though we are considerably well-advanced in our 
implementation plan, we do not desire to back up several steps, 
and potentially several years, or to lose the momentum we 
currently have.
    We feel that this act will undoubtedly benefit many other 
projects similar to ours that will come before you in the 
future.
    Thank you again for this time this morning, and we will be 
glad to answer any questions.
    [The prepared statement of Mr. Lansford follows:]
Prepared Statement of David Lansford, Mayor, Clovis, NM, and Chairman, 
                Eastern New Mexico Rural Water Authority
    Thank you for the opportunity to appear before you today to comment 
on Senate Bill 895, the ``Rural Water Supply Act of 2005''.
    My name is David Lansford. I am the Mayor of Clovis, New Mexico, 
and serve as the Chairman of the Eastern NM Rural Water Authority. With 
me this morning is Orlando Ortega, Mayor of the City of Portales, NM, 
and Vice Chairman of the Water Authority.
    We consider it an honor to be afforded the opportunity to 
participate in this dialogue.
    Before I continue on with my prepared statement, I would like to 
make a general comment regarding the essence and the significance of 
the legislation. I believe that this bill is pioneering legislation 
because it lays the groundwork and provides a mechanism for rural 
economic sustainability and expansion in the western United States. 
Rural communities are eager for growth and are the destination for many 
in our country who are seeking less congestion, less crime and a more 
traditional lifestyle.
    Some sociologists see a third migratory shift in America. Couple 
this migration with the natural increase in population and we have an 
enormous opportunity and responsibility all in one. This legislation 
shows great leadership on the part of the U.S. Senate and in years to 
come will be recognized as the key legislation which allowed for 
economic growth, better quality of life and the tool that eased the 
burden on government services in the population dense cities of our 
country. I'm more than convinced that countless millions will benefit 
both directly and indirectly from this historic legislation.
    We have taken the opportunity to review S. 895, particularly as it 
relates to our ongoing efforts in New Mexico, and offer the following 
comments:
    As you know, we are working diligently towards the development of a 
rural regional water supply project for twelve communities and counties 
in eastern NM, and have been doing so for over six years. In many 
respects, our project closely fits the model envisioned by this 
legislation. We recognize the need for a rural water program and 
strongly support its implementation.
    Projects like this involve many players. We are fortunate to have a 
federal partner in the Bureau of Reclamation, and the NM Interstate 
Stream Commission and NM Water Trust Board as our state partners. Ours 
is a unique initiative in NM and we are all learning the ropes and 
developing processes together. Consequently, the past few years have 
been something of a moving target for us.
    The current initiative for the Eastern NM Rural Water System began 
over six years ago as a collaboration of the 12 community and county 
members, Reclamation, and the State of New Mexico, but our project was 
first conceived over 40 years ago.
               positive aspects of the legislation . . .
    The legislation recognizes that a national interest exists for a 
water supply program in the Reclamation States to provide clean, safe, 
affordable and reliable water supplies to rural areas, on a regional 
basis. In particular, these are instances where limited viable options 
exist for sustainable water supply and where the available source of 
supply is geographically remote from the rural consumers.
    The legislation establishes a framework and a time schedule within 
which the federal and non-federal partners have better-defined roles, 
eligibility criteria and direction on which to base project development 
decisions.
    The legislation promotes and provides for a regional perspective to 
water resources management that could include elements not 
traditionally considered. For example, in our case, source water 
protection of both quality and quantity is critical. Authorizing 
legislation introduced by Senator Bingaman last year, for our project, 
included a wastewater collection and treatment component to assist the 
region in significantly reducing the potential for septic tank leakage 
into the reservoir which serves as our surface water source.
    This bill requires that eligible projects assess both federal and 
non-federal resources for capital project costs. It also provides for 
the appropriate level of non-federal cost share be based on an 
assessment of capability to pay by the non-federal entities. In our 
case, working closely with the 12 member agencies, the NM Water Trust 
Board and the NM Legislature, we are leveraging local, state and 
federal dollars to implement the project.
    The Loan Guarantee provisions of Title II--the Twenty First Century 
Water Works Act provide a powerful tool to assist non-Federal entities 
with private sector loans or financing, particularly those that 
otherwise may have limited financing options.
    The draft Act includes a provision to scale the level of effort 
needed to complete appraisal investigations and feasibility studies 
relative to the scope of the project to minimize the costs to the non-
Federal entities.
            concerns that we have with the legislation . . .
    The legislation includes a factor that requires the projects be 
``cost effective'' and show a positive benefit/cost ratio. These terms 
needs additional definition or relevance. For example, our project may 
not present well in a benefit/cost analysis without incorporating the 
detailed ``apples to apples'' comparison of the ``no project'' 
alternative--what is the long-term economic impact on the region if 
nothing is done to develop a sustainable water supply and the 
deteriorating groundwater conditions persist. This ``no project'' 
option is a much more difficult and subjective analysis short of years 
of technical assessment.
    The bill requires a minimum of a 25% non-federal cost share for 
capital costs if the Secretary deems the project eligible for 
authorization, not withstanding the rural regions' capability to pay.
    Sec. 105 Subsection (a), Part (3)(B), on Pg. 11, provides for the 
Secretary to enter into a cooperative agreement with a non-federal 
entity to conduct appraisal investigations and feasibility studies, if 
the Secretary determines that ``using the non-Federal project entity to 
conduct the work is the lowest cost alternative for completing the 
work''.
    In our case, finance consultants working on our project since 1999 
note that financing through tax exempt bonds or the NM Finance 
Authority may be more advantageous than loan guaranteed private sector 
financing and is typically 1 to 1\1/2\% lower than that obtained 
through private transactions.
    We have found that in many instances there are local resources, 
experience and knowledge that may be more ``cost effective'' and 
``timely'' while not necessarily the lowest cost. Our project has 
experienced a series of studies over 40+ years that have not 
necessarily advanced the project.
    It seems though, that as we progress and get closer to possible 
authorization, we run up against new questions and obstacles that 
impede our progress. We are very cognizant that time is of the essence 
for us. Not only are our groundwater supplies running out, but our 
water purchase agreement with the State of New Mexico is time 
sensitive, and construction costs are escalating annually. We 
understand that steel prices alone increased approximately 40% last 
year due to global demand factors.
    We are encouraged that S. 895 may include flexibility in assessing 
the non-federal costs, based on analysis of capability to pay, rather 
than application of a ``blanket'' fixed federal share approach. Much 
discussion has taken place regarding the member agencies ability and 
willingness to pay for our project. Can we afford the cost? The more 
pressing question is not can we afford to do this project but rather 
can we afford to not do the project.
    We applaud you for taking this initiative to put in place a rural 
water program that will clarify the federal and non-federal roles and 
requirements, and formally establish a process that will minimize the 
``moving target'' syndrome that we have experienced. Though we are 
considerably well advanced in our implementation plan and do not desire 
to back up several steps, and potentially several years, or to lose the 
momentum we currently have, we feel that this Act will undoubtedly 
benefit many other projects similar to ours that will come before you 
in the future.
    Thank you again for your time this morning, and we'll be glad to 
answer any of your questions.

    The Chairman. Thank you, mayor.
    Mr. Smith.

STATEMENT OF DUANE A. SMITH, EXECUTIVE DIRECTOR, OKLAHOMA WATER 
 RESOURCES BOARD, AND VICE-CHAIR, WESTERN STATES WATER COUNCIL

    Mr. Smith. Good morning, Mr. Chairman, members of the 
committee. My name is Duane Smith. I am the executive director 
of the Oklahoma Water Resources Board. I am testifying as vice-
chairman of the Western States Water Council, representing the 
Council. I have been authorized to provide this testimony on 
behalf of the Western Governors' Association, to which the 
Council is closely affiliated.
    The Council is an organization of representatives appointed 
by the Governors of 18 States. The Council is an advisory body 
made up of experts in water law and policy, water rights 
administration, water conservation, water quality and water 
supply.
    On July 16, 2004, the Western States Water Council sent 
comments on three bills that were the subject before this 
committee, and we certainly strongly support the Federal 
legislation.
    And I will say that in S. 895, most of our comments have 
satisfactorily been addressed and we do support that 
legislation.
    I would also like to say, Mr. Chairman, if I may, that we 
also strongly support enactment of S. 802, the National Drought 
Preparedness Act of 2005, which would establish a National 
Drought Council, develop a drought preparedness policy, improve 
the national integrated drought information system, and 
establish a drought assistance fund. The bill would provide 
small, rural communities additional technical and financial 
assistance.
    S. 895 responds favorably to many of our comments. The loan 
guarantee authority would be an important financing tool to add 
to what the States have already done.
    The needs assessment should be undertaken in cooperation 
with the States, integrated in the current programs. Many of 
the States have needs assessments of various programs that are 
currently going on.
    I believe that what rural Oklahoma cities and rural water 
districts need are assessments of what is currently on the 
ground. Are we meeting our current infrastructure needs? If we 
are, fine. Most of them are not.
    If we are not, then what are the alternatives to go 
forward? We need to analyze those from a financial, technical, 
and environmental aspect.
    The main financing infrastructure for our rural communities 
is the Safe Drinking Water Act. And through the Environmental 
Protection Agency's Clean Water Act funding, that is really 
primarily the way that small, rural communities in Oklahoma and 
throughout the west obtain their financing.
    We know that there are strings attached to that money and 
oftentimes that that program is very expensive to meet the 
requirements of.
    In the House Appropriation Interior Subcommittee on May 4, 
for the fiscal year 2006 budget, it had $850 million into the 
drinking water revolving fund. We know that the Environmental 
Protection Agency has estimated that for 20 years the small 
communities' need is over $74 billion. So we know that that gap 
is only widening. But we do not think that S. 895 should take 
any money out of the current programs that are used to finance 
our rural communities.
    Any program must be implemented in cooperation with State 
and local groups. And I think that one of the main things that 
the Western States would like to say that we appreciate in the 
bill is the recognition of the Federal Government that the 
States have the water rights. And, of course, that is something 
that to the States is very important.
    We have done $1.4 billion of financing in the last 20 years 
for water and waste water infrastructure needs. We believe that 
the Environmental Protection Agency's estimates of the $75 
billion in rural needs in the next 20 years is grossly 
underestimated.
    We see $4 billion of need in Oklahoma alone in the next 20 
years just to bring our water and waste water infrastructure up 
to current standing. Forty percent of Alaska's rural households 
lack drinking water and waste disposal. California's fast-
growing rural areas rely on limited groundwater supply. In 
Colorado, nitrates, total dissolved solids, natural arsenic, 
heavy metals, radon, salt and uranium are problems. Drought and 
conjunctive use challenges afflict rural users in Idaho. Rural 
communities in Montana face conflicts between consumptive uses 
and in-stream environmental needs due to drought and low flows.
    And, of course, New Mexico, which is here today, 
particularly in rural areas and Indian reservations, suffer due 
to limited surface and groundwater supplies, environmental 
demands, and particularly the money to build infrastructures to 
tap distant supplies.
    North Dakota finds it increasingly difficult to comply with 
drinking water standards for fluorides, nitrates, lead and 
copper given limited State resources. Oregon struggles with 
growing rural water demands and aging infrastructure. South 
Dakota, with minerals in its groundwater, makes it undesirable 
for drinking and household uses, necessitating development of 
the Missouri River supplies. Washington State has 20,000 small 
systems with less than 15 taps. And, of course, rural Wyoming 
communities are frustrated by expensive Federal monetary 
demands.
    Mr. Chairman, thank you for the opportunity to testify. We 
look forward to working with the committee to make this a great 
bill.
    [The prepared statement of Mr. Smith follows:]
  Prepared Statement of Duane A. Smith, Executive Director, Oklahoma 
    Water Resources Board, Vice-Chair, Western States Water Council
    Dear Mr. Chairman and Members of the Committee, my name is Duane 
Smith and I am the Executive Director of the Oklahoma Water Resources 
Board. I am also testifying as Vice-Chairman of the Western States 
Water Council, representing the Council. I have also been authorized to 
provide this testimony on behalf of the Western Governors' Association, 
with which the Council is closely affiliated. The Council is an 
organization of representatives appointed by the Governors of eighteen 
states. The Council is an advisory body made up of experts in water law 
and policy, water rights administration, water conservation, water 
quality and water supply. Rural water issues are important to our 
members and states, and we applaud you, Mr. Chairman and those that 
have cosponsored this bill, as a means to address some of the most 
pressing needs of water users in the West. Much of the West is 
characterized by its aridity, and the current drought highlights the 
fact that water availability continues to define and circumscribe our 
economic and environmental well being and quality of life. This is 
particularly true in many small rural communities.
    In a letter last year dated July 16, 2004, we commented on S. 2218, 
S. 1732 and S. 1085, introduced respectively by Chairman Domenici and 
Senator Bingaman. We strongly support federal legislation to provide 
technical and financial assistance for small rural communities. We 
appreciate your efforts in this regard, and hope to see appropriate 
legislation enacted to create a systematic, integrated approach to 
investigating, authorizing and constructing projects to meet rural 
western water demands in close cooperation with State, local and 
regional entities, as well as tribes. We hope we can work together to 
ease the burden and improve the lot of many of our rural citizens 
struggling to ensure that their water supplies meet minimal standards 
for public health and safety, and are sufficient to carry them through 
shortages, such as the current drought.
    May I add here, Mr. Chairman, that we also strongly support 
enactment of S. 802, the National Drought Preparedness Act of 2005 
which would establish a National Drought Council, develop a drought 
preparedness policy, improve the National Integrated Drought 
Information System (NIDIS) and establish a Drought Assistance Fund. The 
bill would provide small rural communities additional technical and 
financial assistance.
    Many of the issues we raised in our July 16 letter have been 
addressed in S. 895, but we would offer a few additional suggestions. 
There is one overriding issue that the Congress must still address, and 
that is the chronic lack of adequate funding for past and present 
programs designed to achieve a reasonable degree of security for our 
water supplies, as it relates to quantity and quality, particularly in 
the West.
    EPA's 1999 Drinking Water Infrastructure Needs Survey estimated the 
total national need for a 20-year period to be $150.9 billion, 
including $74.5 billion for systems serving less than 50,000 people and 
another $2.2 billion for American Indian and Alaska Native Village 
Water Systems. EPA's September 2002 Gap Analysis and Needs Survey 
estimated the 20-year funding gap for Drinking Water (capital and 
operation and maintenance), given current spending levels, to be $263 
billion. The Safe Drinking Water Act Amendments of 1996 authorized 
Drinking Water SRF appropriations of $9.6 billion, but actual 
appropriations through Fiscal Year 2001 totaled $4.4 billion. The House 
Appropriations Interior Subcommittee approved $850 million for FY2006, 
on May 4, which is $7 million more than actually appropriated for 
FY2005. The Drinking Water SRF is a principal source of federal 
assistance for many rural communities.
    Existing authorities and past appropriations are not sufficient to 
meet the needs of the West and small rural communities, which are 
facing serious obstacles in securing the resources necessary to ensure 
an adequate and reliable water supply for their future. S. 895 could 
become an important addition to the ``tool box'' available to rural 
water users, but the bill provides no new authority, assistance or 
funding for the construction of projects. Any future construction 
assistance would require authorization and the appropriation of funds 
or application of the new federal loan guarantees. The authority to 
provide federal loan guarantees is an important new tool. However, S. 
895 cannot replace adequate appropriations for the current SRF 
programs, which the Congress and the Administration must continue to 
support.
    Nor will S. 895 make up for the Congress' diversion of Reclamation 
Fund revenues for other unrelated government purposes. New authority 
and significant new funding is essential to meeting future western 
rural water needs. The Council suggested recently during the 
Committee's Water Conference last month that it is past time to 
consider seriously the use of the unobligated amounts in the 
Reclamation Fund to support western water supply needs, which would 
include those of small rural communities.
    That said, there is much to recommend S. 895. The draft bill would 
provide for a general assessment of rural water supply needs, existing 
programs and any gaps. This assessment would be undertaken in 
cooperation with various federal agencies. It should be noted that 
there are many existing state programs and information compiled by the 
states that should not be overlooked as part of any assessment. 
Examples from several states are included herein. The bill provides for 
project appraisal investigations, feasibility reports and 
recommendations for construction authority (but no construction 
authority). It also requires the Secretary to identify what funding 
sources are available for a proposed project, and the availability of 
loan guarantees (authorized under Title II). The Secretary is also to 
recommend what grants, loan guarantees or combination of both should be 
used to provide the federal share of project costs.
    Various considerations are listed for appraisal and/or feasibility 
reports, including whether water rights exist to supply the project. 
The availability of water rights and conservation measures are 
considerations specifically listed. States must have a say in 
determining the availability of water rights to support project 
development and actual water delivery, as well as appropriate water 
conservation measures. The states are primarily responsible for water 
allocation, and the Council appreciates the inclusion of language 
explicitly stating that nothing in the bill is intended to nor shall be 
construed to affect any state granted water rights. The bill states: 
``Nothing in this title preempts or affects State water law or an 
interstate compact governing water.'' Further, ``The Secretary shall 
comply with State water laws in carrying out this title.'' The same 
language is included in Title II.
    Numerous other considerations are listed. The states should have a 
key role in the development and establishment of guidelines and 
criteria for determining program eligibility and in selecting project 
priorities. There is no apparent provision for establishing priorities 
among eligible projects in the bill. Each state has a formula for 
establishing priorities for allocating SRF money.
    It is important to note that rehabilitation and replacement of 
existing sub-standard rural water supply systems must be an important 
part of the program. Some areas depend on water systems that fail to 
meet Safe Drinking Water Act standards. The bill directs the Secretary 
to recommend whether a project should be authorized (with a minimum 25% 
non-federal cost share). It also provides for federal loan guarantees 
or insurance for up to 90% of project costs. Project operation, 
maintenance and replacement costs are to be 100% non-federally 
financed. The Secretary is to assess the financial capability of each 
non-federal entity to pay for its share of various study and 
construction costs as part of the feasibility report--including whether 
the non-federal entity has an O&M and replacement plan and necessary 
rates and fees. Upgrading and replacing antiquated and inadequate 
systems may require finding new water supplies, which could entail 
acquiring adequate water rights and building the necessary 
infrastructure. But the bill does not authorize construction of any 
project. Further, the bill specifically excludes construction of 
``major impoundment structures'' or projects for ``commercial'' 
irrigation or livestock watering, although it addresses opportunities 
to use low-quality water supplies. There is no discussion of the use of 
funds to acquire water rights.
    The Council believes any program must be implemented in cooperation 
with other federal and non-federal programs, including coordinating 
actions with state and local watershed groups. The needs and resources 
assessment is to be undertaken in consultation with other federal 
agencies, but states and other entities are not mentioned. Appraisal 
investigations are to be undertaken in consultation and cooperation 
with appropriate state, tribal, regional and local authorities. A 
project feasibility report is to include the extent to which it 
involves partnerships with other state, local, tribal and federal 
government entities (which are also to be consulted during the conduct 
and development of reports).
    Cost sharing and repayment requirements and ``capability-to-pay'' 
measures should recognize the potential hardship some rural communities 
face, and the Secretary should have the flexibility to make appropriate 
adjustments. In this regard, the bill is to be commended in providing 
that the Secretary, in evaluating a proposed project, ``shall'' 
consider an entity's financial capability to pay the capital 
construction costs and recommend an ``appropriate'' federal cost share, 
taking into account a number of listed factors. In cases of financial 
hardship, the Secretary may also adjust the federal cost share for 
feasibility studies.
    It is also important that non-Federal entities retain title to 
projects. Importantly, the bill states: ``Nothing . . . authorizes the 
transfer of pre-existing facilities or . . . components of any water 
system from Federal to private ownership or from private to Federal 
ownership.'' Title to ownership of new facilities is to be held by the 
non-federal entity.
    In determining and allocating project costs among beneficiaries, 
which federal costs are or are not reimbursable should be clearly 
defined. Federal oversight or overhead costs, which are beyond the 
control of non-Federal project sponsors, should be non-reimbursable. 
The bill provides that the first $200,000 of the appraisal 
investigations would be paid by the federal government, with any 
additional costs shared on a 50%-50% basis. Further, the Secretary 
should be allowed to accept appropriate non-Federal in-kind 
contributions as part of cost-sharing requirements. The bill provides 
that the Secretary may accept in-kind services determined to contribute 
substantially toward the conduct and completion of feasibility studies.
    The balance of this statement underscores the need to address rural 
water supply needs, and highlights state programs striving to address 
these needs.
    According to EPA's 1999 Needs Assessment, approximately 45,000 of 
the Nation's 55,000 community water systems serve fewer than 3,300 
people. Regardless of their size and configuration, small water systems 
face many unique challenges in providing safe drinking water to 
consumers. The substantial capital investments required to 
rehabilitate, upgrade, or install infrastructure represent one such 
challenge. The per-household costs borne by small systems are 
significantly higher than those of larger systems. The per-household 
costs for infrastructure improvements is almost 4-fold higher for small 
systems than for large systems. Small systems lack the economies of 
scale that allow larger systems to spread the costs of capital 
improvements among their many consumers.
    In 1996 and 1997, the Council compiled information on states' views 
regarding their water problems for the Western Water Policy Review 
Advisory Commission--created by this Committee. One of the questions 
addressed the problems of rural communities related to water supply, 
potable water treatment and wastewater treatment. The results were 
published in a report, Water in the West Today: A States' Perspective 
(February 1997), together with appendices detailing individual state 
responses. I would like to summarize some of the findings related to a 
few states, including my state of Oklahoma.
    There are a number of state and federal programs that provide some 
type of technical and/or financial assistance to rural communities in 
Oklahoma. The primary source of state financing for water and 
wastewater programs is the Statewide Water Development Revolving Fund 
(SWDRF). The state legislature created the SWDRF in 1979 and the state 
reaffirmed that action by a popular vote in 1984. The corpus of the 
SWDRF provides a reserve for bonds issued by the Oklahoma Water 
Resources Board (OWRB), on behalf of small borrowers, at lower interest 
rates than they could otherwise obtain. Interest earned on the SWDRF 
provides money for emergency grants. OWRB also administers the 
Statewide Rural Energy and Water Conservation Program, which is 
designed to identify and eliminate energy and water losses from rural 
systems. The Oklahoma Rural Water Association coordinates leak 
detection audits, which has found water losses of up to 51%, and helped 
finance remedial measures. The Oklahoma Department of Commerce may also 
provide grants to communities under 50,000 people. However, these are 
very small programs compared to the state and federally capitalized 
Clean Water and Safe Drinking Water revolving funds, which continue to 
be the largest source of money for meeting rural water needs in 
Oklahoma.
    In Alaska, reportedly some 40% of rural households lacked safe 
drinking water and indoor bathrooms. Water is hauled by hand from a 
central community spigot, tapping shallow groundwater, or walk to and 
from a nearby river or stream. Some use an outhouse as a restroom, or 
many people use a bucket as a toilet and human waste is disposed of 
directly on the ground outside homes or in unlined sewage pits, 
allowing wastes to leach into groundwater and surface streams--causing 
public health and safety problems--and contributing to an alarming rate 
of waterborne disease such as meningitis and Hepatitis A, which is 
considered endemic in several rural regions. The state of Alaska 
provides grants and technical assistance, as well as managerial 
training to try to help rural communities and utilities meet their 
public health needs.
    Most of California's small rural communities rely on groundwater, 
and their existing supplies are often limited by the local 
hydrogeology--such as low-yield wells tapping fractured rock aquifers 
or small coastal aquifers affected by seawater intrusion. They are also 
threatened by increasing population pressures. Many of California's 
fastest growing counties are located along the Sierra Nevada foothills, 
and rely on limited water supplies. Further, the scattered pattern of 
development also limits their ability to join regional consolidated 
water and wastewater systems. The state has historically provided 
financial assistance in the form of various loans and grants, backed by 
the sale of general obligation bonds--without significant federal 
assistance. In its 2000 Critical Water Shortage Contingency Plan, the 
Governor's Advisory Drought Planning Panel singled out the 
unreliability of small, rural water systems as an issue requiring 
special attention, noting that ``small water users bore the brunt of 
the actual public health and safety impacts--lack of water for basic 
domestic, sanitation, and firefighting purposes--felt during recent 
droughts''.
    Water quantity and water quality problems afflict several rural 
areas in Colorado. Drought has accentuated supply problems that are 
growing with rural populations. Nitrates and dissolved solids affect 
surface and groundwaters, which are also impacted by naturally 
occurring uranium, radon, arsenic, salinity and heavy metals. The Safe 
Drinking Water Act (SDWA) and its testing and treatment requirements 
are too costly for many rural communities. Further, they face an 
additional financial burden related to replacing aging infrastructure 
and filtration systems. Many will not be able to make the improvements 
needed without assistance. The state provides technical assistance and 
provides some loans, grants or a combination of both.
    In Idaho, the drought has highlighted the interconnected nature of 
the state's surface and groundwater resources, particularly across the 
Eastern Snake Plain Aquifer. Groundwater pumping is having a serious 
impact on surface flows, and the state is struggling to balance the 
impact on rural water supplies and rural economies. Many supply 
problems also involve water quality and treatment requirements. Many 
rural communities lack the financial resources and technical expertise 
to address their problems in an acceptable fashion. There are a number 
of state programs that provide some planning and financial assistance, 
including loans and grants.
    Montana faces many challenges in meeting competing demands for 
consumptive uses and instream flows, particularly during drought, when 
surface waters are low. Rural communities with inadequate 
infrastructure face poor water quality in some areas, and expensive 
changes to bring their drinking water systems up to SDWA compliance 
standards. The costs often exceed the water users' ability to pay.
    For many rural communities in New Mexico, limited groundwater and 
surface water resources are or will become a problem. Often the 
infrastructure necessary to tap distant water supplies is too costly 
for rural communities. Two examples are the Eastern New Mexico Pipeline 
serving communities from Ute Lake, and the proposed Navajo-Gallup 
pipeline, included in the recent Navajo Water Settlement, to serve both 
Indian and non-Indian communities. The state provides some assistance 
in the form of grants for improving water supply or wastewater 
treatment facilities, and the state legislature has on occasion 
directly appropriated money for communities to improve their systems 
and/or buy water rights. New Mexico has also received federal 
assistance from a variety of sources in an attempt to meet its rural 
water needs, including the needs of a number of Indian tribes and 
pueblos. The Bureau of Reclamation has helped in assessing the needs of 
rural water users in eastern, southwest and northwest New Mexico and is 
working with state and local water agencies to develop plans to bring 
renewable surface water supplies to rural areas, including the large 
Navajo reservation. The state and federal government are also working 
together to clean up Superfund sites that threaten wells in a rural 
area south of Albuquerque.
    Rural communities in North Dakota find it increasingly difficult to 
comply with Environmental Protection Agency (EPA) drinking water 
standards for fluoride, nitrates, lead and copper. Many communities 
have had to change their treatment processes in order to comply with 
the Surface Water Treatment Rule and requirements for groundwater 
sources that require they be evaluated to determine if the groundwater 
is directly influenced by surface water. State resources are limited, 
and are not sufficient to undertake the projects required to provide 
adequate and safe drinking water for North Dakota's rural communities. 
The Congress recognized this, and its prior promises in authorizing the 
Garrison Project, when it created a program to provide municipal and 
industrial water (in lieu of irrigation) for North Dakota and 
authorized the Southwest Pipeline Project and Northwest Area Water 
Supply Project to bring Missouri River water to scores of rural 
communities.
    In Oregon there are some 800 small community water systems that 
serve less than 3,300 people, and most of these are in rural areas. The 
Oregon Water Resources Department offers limited technical assistance 
to these communities, which face the duel challenge of growing demands 
due to an increasing population, while their aging infrastructure can 
no longer be maintained in a manner to ensure water is delivered 
efficiently. Further, rural communities face significant expenses for 
monitoring and treatment of their water supplies.
    South Dakota has found that the quality of groundwater in rural 
areas typically meets state and federal drinking water requirements, 
but its high mineral content often makes it undesirable for drinking 
and other household uses. With the exception of the Missouri River, 
finding adequate quantities of both surface and groundwater can be a 
struggle in many parts of the state. Most rural communities have 
limited financial resources or lack the expertise necessary to maintain 
and improve their infrastructure adequately. South Dakota provides some 
help through the state's dedicated water funding program which awards 
state grants and loans to small communities. However, the state relies 
heavily on federal grants such as EPA's Drinking Water Revolving Fund 
grants to capitalize the state's Drinking Water State Revolving Fund 
(SRF) Program. The federal SRF programs are the primary source of 
funding for many small communities' water and wastewater needs.
    The Utah Board of Water Resources administers three small revolving 
loan programs that provide low cost financing for water development and 
water treatment facilities and technical assistance, including special 
studies and investigations. Project sponsors are required to develop 
and implement a water management and conservation plan. The Utah 
Department of Environmental Quality's Division of Drinking Water also 
provides some technical and financial assistance to rural communities 
through its State Drinking Water Program, including limited money for 
infrastructure repairs and upgrades. The Rural Water Association of 
Utah also provides training and other managerial assistance to small 
water systems. Often, in rural areas, the operator of the water system 
may also have to operate the wastewater system and maintain the 
cemetery, etc. Since 1972, EPA's Construction Grants Program and 
subsequently the Clean Water and Safe Drinking Water SRFs have been 
invaluable in assisting small rural communities meet minimum public 
health and safety requirements.
    Washington State has nearly 20,000 small water systems and the vast 
majority serve fewer than 15 hookups and generally lack the 
professional expertise and financial resources to adequately monitor 
water quality and maintain their systems in compliance with state and 
federal requirements. The state has taken some important steps to 
require operator certification, deny proliferation of small systems 
where an existing system is viable, and clarify receivership for 
failing systems. Still major challenges remain, not the least of which 
is the current drought that is straining surface and groundwater 
supplies.
    Expensive water supply and treatment facilities are often beyond 
the reach of many of Wyoming's small rural communities. Fortunately, 
there are many high quality supplies available to small towns. 
Unfortunately, federal regulations sometimes force treatment 
requirements upon communities in a one-size-fits-all fashion. Many 
rural communities also lack the resources to employ a full-time system 
operator, water testing laboratories can be far away and monitoring can 
be expensive. Towns are sometimes frustrated when they are required to 
test for contaminants that are unlikely to be found in their area. 
Water and wastewater assistance is available from the Water Development 
Commission, the Farm Loan Board and Wyoming Association of Rural Water 
Systems. These provide technical and some financial assistance, 
including well-head protection advice on recognizing activities that 
could potentially put their water supplies at risk. The Department of 
Environmental Quality administers the federal SRF grants to help 
communities build and upgrade treatment facilities.
    I appreciate the opportunity to testify on behalf of the Western 
Governors' Association and the Western States Water Council and we hope 
to be able to work with the Committee as it strives to find ways to 
assist rural areas meet their growing water demands.

    The Chairman. Thank you very much. Very informative and we 
are glad we have had cooperation with you all. Some things you 
suggest we have to do.
    Mr. Frazier.

            STATEMENT OF HAROLD FRAZIER, CHAIRMAN, 
                   CHEYENNE RIVER SIOUX TRIBE

    Mr. Frazier. Thank you. Chairman Domenici and all the 
members of Energy and Natural Resources Committee, thank you 
for allowing me to testify today. My name is Harold Frazier, 
and I am chairman of the Cheyenne River Sioux Tribe.
    Before discussing a few important details about this 
legislation, I would like to tell you about the water situation 
on my reservation as it relates to S. 895.
    The Cheyenne River Sioux Reservation is located in north 
central South Dakota. It encompasses 2.8 million acres of land. 
Our tribal membership number is 14,668 members. Lake Oahe, one 
of the largest reservoirs on the Missouri River forms the 
eastern boundary of our reservation.
    At one point in history, the Great Sioux Nation consisted 
of hundreds of millions of acres of land. Through various 
Federal actions over a period of 150 years, the Sioux People 
were forced to give up millions of acres as various smaller 
Sioux reservations were established.
    It is important to know that the Sioux treaties of 1851 and 
1868 both recognize the importance of the Missouri River to our 
people. And even though our land base was west of the Missouri, 
these treaties established that the eastern boundary would be 
the east bank of the Missouri River.
    In 1944, Congress passed the Pick-Sloan Act. This resulted 
in the flooding of 104,000 acres of land at Cheyenne River and 
the dislocation of the largest settlement of people on the 
Missouri River at the Cheyenne River Reservation.
    The decision to build the Oahe Dam resulted in the loss of 
90 percent of our timber and over 75 percent of our wildlife 
habitat. The tribe was not even informed of this project until 
1947, 3 year after Congress authorized this project and in 
spite of the fact that we have federally reserved water rights 
for our homelands.
    During the development of the Lake Oahe project, the U.S. 
Government spent millions of dollars so our families would 
receive clean water. When the Lake Oahe project was completed, 
there were families who received the clean water but not the 
Indian families residing on the Cheyenne River Sioux 
Reservation.
    Our lands were taken. They were flooded. The water supply 
for our people was not built. Neither the Bureau of Reclamation 
nor the Corps of Engineers ever built a water supply system at 
Cheyenne River despite repeated requests to Congress and these 
agencies.
    The tribe and surrounding communities cobbled together 
funds from HUD, IHS, BIA and FMHA to build a small water 
system, one that is now obsolete and falling apart.
    The water intake in the Cheyenne River arm of the Oahe 
Reservoir that serves Dewey and Ziebach Counties on our 
reservation, as well as parts of northeastern Meade County off 
our reservation, may very well run out of water this summer. 
This is due to the drought and scheduled draw-down to the 
Missouri River for downstate barge traffic.
    Projected water levels show that our pipe may become 
dysfunctional this August. At that point, 14,000 people, Indian 
and non-Indian alike, in an area the size of Connecticut, will 
be without water. All businesses will close, as well as our 
schools, our clinics and the only hospital for a hundred miles. 
Sixteen tribal communities and four towns will be without 
water.
    The existing water supply system cannot meet critical needs 
of our reservation. Even with the intake fully under water, we 
have serious problems with the lack of water quantity.
    Last year, we ran out of water in fighting a house fire. 
Four Indian children died in that fire. Last time we ran out of 
water, we had to pump water out of a sewage lagoon to fight a 
prairie fire that was threatening the town of Eagle Butte.
    We presently suffer from severe housing shortages and we 
have overcrowding, where as many as 20 people live under the 
same roof. Senators, we cannot build another house because we 
have no water available to send to a new house. The only way we 
can get water to a new house would be if we decommission an 
existing one.
    Banner Engineering firm from Brookings has completed a 
technical engineering study for us. It indicated that we need a 
water treatment plant and distribution system capable of 
processing 13.5 million gallons of water a day. Our present 
water treatment plant has a maximum capacity of 1.2 million 
gallons a day.
    Additionally our intake is in the Cheyenne River arm of the 
Oahe Reservoir, and the Cheyenne River has at least two serious 
problems. The first is that it is being silted at a very rapid 
pace. We lowered our intake once in 1989. We cannot lower it 
anymore due to its location. Second, the Cheyenne has the 
deadly remnants of millions of tons of mine tailings in it, 
including heavy metals, arsenic and mercury.
    On our reservation, since 1996, according to Indian Health 
Service data, we have had 18 cases of brain cancers, including 
glioblastoma. Eleven of those 18 are now dead. The national 
incidence of brain cancers range from 3\1/2\ to 6 per 100,000, 
according to the National Cancer Institute. There have also 
been seven cases of scleroderma, including four deaths on our 
reservation since 1996, whereas the incidence of those cases in 
the U.S. population is 1 in 100,000.
    Mr. Chairman, when you introduced this bill, your 
introductory remarks in the Congressional Record indicated that 
the deteriorating water infrastructure combined with the 
inability to raise the capital necessary to build a new water 
system was leading to substantial want and leaving a number of 
western communities in a dire situation.
    The Cheyenne River Sioux Tribe is probably the poster child 
for the situation that you describe, but a far more severe 
scenario than anything most Americans can envision.
    We view S. 895 as a wake-up call to the Nation. We also 
view it as an important step toward honoring----
    The Chairman. Could you talk just a little louder.
    Mr. Frazier. We also view it as an important step toward 
honoring our treaties with the U.S. Government. This bill 
essentially does four things. It creates an authorization for a 
rural water program at the Bureau of Reclamation. It expedites 
appraisal and feasibility studies that have traditionally been 
lengthy. Prerequisites to the Bureau of Reclamation have all 
been in rural water projects. It allows the Bureau to set 
private studies that communities have undertaken on their own 
or fund such studies. And it creates a loan guarantee program 
for the construction.
    Ziebach County, wholly enclosed in our reservation, is the 
poorest county in South Dakota and the fifth poorest county in 
the entire United States. The unemployment rate at Cheyenne 
River is 78 percent, with 96 percent of working families living 
below national poverty level, according to the BIA 2000 report.
    Taking into consideration our depressed social and economic 
conditions, we are concerned if we would even qualify for loans 
even with a Federal loan guarantee program. We ask you to work 
with my tribe and others in the Dakotas to examine 
alternatives, including direct assistance, perhaps amending the 
bill to allow for the repayment of such loans by the Bureau of 
Reclamation in case of an Indian tribe meeting certain 
criteria, or alternatively authoring Bureau of Reclamation 
grants to transfer the construction of such water projects.
    While we understand that this may be outside the 
jurisdiction of the Energy Committee, we think the bill should 
be amended to include a role for the Army Corps of Engineers. 
The total need in the West for rural water projects is simply 
too large for the Bureau of Reclamation to handle this problem 
on its own. This is going to take a multi-agency approach, and 
we believe the Corps has the significant expertise in this area 
to be most helpful to Indian reservations.
    The Chairman. Mr. Chairman, would you try and summarize 
your statement?
    Mr. Frazier. Okay.
    The Chairman. Please. You are running over time and the 
Senators are having to leave.
    Mr. Frazier. Okay.
    The Chairman. So it is not going to do any good.
    Mr. Frazier. Okay. I will close right now, because I will 
submit written testimony, but thank you for the opportunity to 
be here today. And I just want to close by saying in our 
language mni wiconi, which means water is life. And it is 
important, because the lives of our people are at stake as well 
as our future generations, so thank you.
    [The prepared statement of Mr. Frazier follows:]
            Prepared Statement of Harold Frazier, Chairman, 
                       Cheyenne River Sioux Tribe
    Chairman Domenici, Senator Bingaman and honorable members of the 
Energy and Natural Resources Committee. My name is Harold Frazier, and 
I am the Chairman of the Cheyenne River Sioux Tribe located in South 
Dakota. I want to extend my sincere appreciation to Senators Domenici 
and Bingaman for taking the lead and introducing this extremely 
important bill and I wish to thank Senators Bennett, Murkowski and our 
own Tim Johnson for co-sponsoring the Rural Water Supply Act of 2005. 
It is certainly legislation that is needed in the western United 
States.
    Before discussing details, I want to tell you about my homeland as 
it relates to S. 895. Through federal actions over a period of about 
150 years millions of acres were taken from the Sioux Nation by the 
United States, often without compensation of any kind. Many people are 
aware of that aspect of U.S. history. What many are not familiar with 
is the astonishing degree of land that was subsequently taken from us 
WITHIN the boundaries of our reservations via the Indian Allotment Act 
of the late 1800s and the forced fee patenting of our lands. It is a 
history that should be shocking to members of this Committee but 
unfortunately it does not stop even there.
    In 1944 Congress passed the Pick Sloan Act to build dams on the 
Missouri River including the Oahe Dam. This Project resulted in the 
flooding of 104,000 acres of land at Cheyenne River and the dislocation 
of the largest settlement of people on the Missouri. In the flooding, 
Cheyenne River lost 90 percent of its timber and over 75 percent of its 
wildlife habitat. The entire Cheyenne River Agency was moved to Eagle 
Butte, over 40 miles from the Missouri River, instead of our preferred 
location at Swiftbird right next to the River. The Tribe was not even 
informed of the Oahe project until 1947--three years after Congress 
authorized it. The Project was called a ``balanced project'' by the 
Corps and Congress, because, in exchange for the flooding of the best 
farmlands, irrigation projects would be built to make the arid plains 
farmable. Not one irrigation project was ever built by the Corps of 
Engineers on Indian lands at Cheyenne River. The economic loss of the 
best 104,000 acres of Cheyenne River lands is still being felt today.
    That it is even possible for 104,000 acres of the Cheyenne River 
Sioux Reservation to have been flooded by Lake Oahe and that my people 
TODAY do not have enough water to drink, much less thrive, is to me one 
of the darkest chapters in the history of the United States. That the 
United States government spent hundreds of billions of dollars in the 
``greening of the West'' through BOR and Corps Projects but managed to 
bypass Indian country is nothing short of disgraceful. Our lands were 
taken and they were flooded. But water supply for our people was not 
built so that the people whose lands were flooded could benefit like 
our non-Indian neighbors from clean water. Neither the BOR nor the 
Corps of Engineers ever built a water supply system at Cheyenne River, 
despite repeated requests to Congress and these agencies. The Tribe and 
surrounding communities cobbled together funds from HUD, IHS, BIA, and 
FMHA to build a small water system which is now breaking down and 
wholly inadequate.
    The water intake in the Cheyenne River Arm of the Oahe Reservoir 
that serves Dewey and Ziebach Counties on our reservation, as well 
parts of northeastern Meade County off our reservation, may very well 
stop working this August. This is due to the drought and scheduled draw 
downs of the Missouri River for down state barge traffic. At that 
point, 14,000 people--Indian and non-Indian alike--in an area the size 
of Connecticut, will be without water. All businesses will be affected, 
as will our schools, our health clinics and the only hospital within 
100 miles. 16 communities will be without water!
    Today, as I sit here, even with the intake under water, we have 
serious problems with a lack of water quantity and quality. Last year, 
we ran out of water in fighting a house fire. Four children died in 
that fire. Last year, we ran out of water and had to pump water out of 
a sewage lagoon to fight a prairie fire that threatened Eagle Butte--
the headquarters of the Tribe. With the severe drought continuing, this 
fire protection problem will worsen this year.
    We have a severe housing shortage and overcrowded homes where as 
many as 20 people live under the same roof. The shortage is not due 
solely to a lack of money to construct homes; we actually have funds 
from HUD and are ready to construct new homes. Senators, we can't build 
another home because we have no water available to send to a new home. 
The only way we can get water to a new home is to take an existing home 
off the water system.
    The Banner Engineering firm of Brookings, South Dakota has 
completed a technical engineering study that indicates that we need a 
water system capable of processing 13.5 million gallons of water a day. 
Our present water treatment plant has a maximum capacity of 1.2 million 
gallons a day.
    As if this isn't serious enough, our water intake is in the 
Cheyenne River Arm of the Oahe Reservoir and the Cheyenne River has at 
least two serious problems. The first is that it is silting in fast. We 
can't lower the intake any more. Secondly, the Cheyenne River has 
millions of tons of mine tailings in it including heavy metals, arsenic 
and mercury. On our reservation, we have had 18 cases of brain cancers 
since 1996 in a service population of 11,583. Eleven of those 18 are 
now dead. The national incidence of brain cancers ranges from 3.5 to 6 
per 100,000 according to the National Cancer Institute. There have also 
been 7 cases of Scleroderma including four deaths on the reservation 
since 1996 whereas the incidence of those cases in the U.S. population 
is 1 in 100,000. There are high rates of other auto-immune diseases as 
well.
    Right now, there are over 30 tribal members from Cheyenne River in 
active military service, and many more veterans of foreign wars at 
home. Some served in Iraq and Afghanistan and participated in 
rebuilding vital infrastructure in those nations. Yet, they are coming 
home, after proudly serving this Nation, to a lack of that same 
infrastructure they built for other nations. Something is very wrong 
with that picture.
    We have an emergency Mr. Chairman and we hope that when you are 
wearing your other hat, as Chairman of the Appropriations Subcommittee 
on Energy and Water, that you will direct the Corps of Engineers to use 
any and all funds they have available to assist us in securing good 
quality water.
    Senator Domenici, when you introduced this bill, your introductory 
remarks in the Congressional Record indicated that the deteriorating 
water infrastructure combined with the inability to raise the capital 
necessary to build new water systems was leading to ``substantial 
want'' and leaving a number of western communities in a ``dire 
situation.'' It pains me to say that the Cheyenne River Sioux Tribe is 
probably the poster child for the situation you describe--a situation 
worse than anything most Americans could envision.
    We view S. 895 as a wake up call to the nation and we also view it 
as a very good start. This bill essentially does three or four things. 
First it creates an important authorization for a rural water program 
at BOR. It expedites authorizations and non-reimbursable appropriations 
for appraisals and feasibility studies. It also allows the BOR to 
accept private studies that communities have undertaken on their own 
(or funds such studies) and it creates a federal loan guarantee program 
for the construction of rural water systems. Ziebach County, wholly 
enclosed in the Reservation, is the fifth poorest county in the entire 
United States. The unemployment rate at Cheyenne River is 78% with 96% 
of families working living below the national poverty level according 
to BIA 2000 Reports. We are therefore somewhat concerned as to how we 
or the other impoverished Sioux Tribes--including those desperately in 
need of rural water systems--could qualify for loans even with low 
interest federal loan guarantees authorized in this bill. We ask the 
Committee to consider working with my Tribe and others and with the 
Senate Indian Affairs Committee to consider amendments that might 
authorize BOR programs to provide direct assistance to tribes in need 
or water systems. We will check with other tribes in the Dakotas and 
solicit their input and endeavor to get back to you on this question 
within the next two weeks.
    Additionally, and while we understand that this may be outside the 
jurisdiction of the Energy Committee, we think the bill should be 
amended to include a role for the Army Corps of Engineers. We have just 
begun working with the Corps on the crisis surrounding our water intake 
and have found them to be extremely professional and very helpful. The 
total need in the west for rural water projects is simply too large for 
the Bureau of Reclamation to handle this problem on its own. This is 
going to take a multi-agency approach and we believe the Corps has 
significant expertise in this area and could be most helpful to Indian 
reservations. I don't mean to be cynical, but since the Corps did such 
an effective job flooding lands on a number of reservations, the least 
they could do now would be to help tribes put all that water to good 
use and restore the Pick Sloan Project to the balanced project it was 
intended to be! Again I would think in the case of impoverished Indian 
reservations, the Corps and the BOR should be authorized and funded to 
directly do the work. Many Indian Tribes may not be able to participate 
in this program if they have to repay millions of dollars in loans even 
at low interest rates.
    There are some provisions in S. 895 that require the Secretary to 
consider how a project may affect Indian trust responsibilities but we 
think it needs to go further and ensure that Indian treaty rights are 
protected and fulfilled. The language in the bill discusses Indian 
trust responsibility as if it is merely one factor for the Secretary to 
take into account and that consideration of it is discretionary. The 
trust responsibility of the United States to protect tribal water 
rights and tribal lands is not discretionary and should not be lumped 
together with other sections as merely one of many factors to weigh.
    Other sections of the bill reference the fact that nothing in the 
bill is intended to preempt or affect State water rights and stipulate 
that State water law must be complied with in carrying out the bill. 
That does not protect our water rights which are not founded in state 
water law. In fact, it may be harmful to tribal water rights as this 
language grants primacy to state water law and rights. We have 
federally reserved rights recognized through federal court cases, 
treaties, statutes and executive orders. A similar savings clause 
should be added to the bill, as Congress has done in many other 
statutes, ensuring that nothing in the bill will diminish, divest, 
alter, or be contrary to any Indian reserved water rights, treaties or 
statutory obligations.
    Again Senators, thank you for the opportunity to talk with you 
today and to offer our support for expanding access to vital water 
resources in the West. We appreciated the numerous provisions in the 
legislation where the sponsors have clearly endeavored to include 
Indian reservations in the scope of the bill.
    The Lakota people say ``Mni Wiconi'' which means ``Water is Life.'' 
We must have water to complete a new hospital and nursing home already 
ready to construct that will bring good health care to our people for 
the first time in the history of our Nation and over 200 new jobs with 
them. We must have access to water for our planned economic development 
projects and new businesses that cannot open their doors without water. 
We must have water if we are to become economically self-sufficient. 
And soon, we must have water just to drink for survival. We hope that 
you are successful in your efforts to secure access to the water that 
is needed to allow the people of Cheyenne River, and all communities 
and peoples of the West to live.

    The Chairman. We will take your suggestions into 
consideration, except you must know we cannot put the Corps in 
this. We have to do it another way. We have to call them into 
consult. But we cannot merge the two or put them in this bill. 
It is not possible. But we know your concern.
    Mr. Frazier. Okay. Thank you.
    The Chairman. Mayor Lansford, let me just ask--the 
Reclamation requirements for feasibility and appraisal studies 
are a moving target. Recently your association was informed 
that its study will require additional data and analysis.
    Do you believe that having set criteria for feasibility and 
appraisal level criteria will do away with the moving target 
that you refer to in your testimony and do you believe that S. 
895, requiring that Reclamation assess studies undertaken 
independently by communities and inform them of what they are 
lacking, would expedite the rural water planning efforts?
    Mr. Lansford. Mr. Chairman, yes is the answer to your 
question. And we feel like this moving target is something that 
has been a point of frustration for us. As we have gotten 
closer to authorization, it seems like we have had to be 
responsible for answering questions that perhaps we should have 
answered many years ago but did not feel like it was necessary, 
for example, alternative water supplies, have you really 
studied your groundwater, are you looking at brackish water, 
prove the need for the project.
    When you look at eastern New Mexico right now and you hear 
the tales of like, for example, the city of Portales having to 
spend $33 million over the next 20 years just to drill four or 
five times as many wells as they currently have to meet current 
need, you can probably at least double that in Curry County, 
which is where Clovis is, and you can see pretty much on a 
practical basis that our groundwater supplies are running out.
    So to go to the two or three studies on groundwater 
analysis, it seems like a huge step backward for us. So by this 
bill establishing the criteria and the rules up-front, if we 
would have known that 4 or 5 years ago, we would not be as 
frustrated as we are today, seeking authorization.
    The Chairman. Do you want to comment, Mr. Dunlap?
    Mr. Dunlap. Yes, Mr. Chairman. And while you look at the 
Ute project in eastern New Mexico, the water rights are 
available for those communities out of our Ute Lake system and 
it would be unwise, I think, to further deplete the groundwater 
storage or groundwater that we have in that area when that 
water is available to those communities and it is a sure and 
certain supply of water where the groundwater is depleting 
itself. I agree with the mayor.
    The Chairman. Thank you very much.
    Senator Bingaman.
    Senator Bingaman. Thank you, Mr. Chairman. Let me sort of 
ask the same question that you just asked and probably evoke 
the same kind of answer. But Commissioner Keys did talk about 
the need for communities to explore all available options in 
assessing these rural water projects.
    I would just ask Mayor Lansford if you feel comfortable 
that the authority has done that in this case and has really 
made objective assessment of what your options are and which 
one is the best?
    Mr. Lansford. Mr. Chairman and Senator Bingaman, thank you 
for that question. I believe that we have reviewed all of the 
available options for the water authority. Brackish water is 
one that we certainly have not spent any money on, but what we 
are hearing from our technical source is that the cost to do 
that is astronomical.
    When you look down at Alamogordo, for example, they have 
spent tremendous amounts of money to get a small amount of 
water. And as Commissioner Dunlap just pointed out, our 
communities have been reserving water at Ute Reservoir for 
years. It is a sustainable water supply. It is a healthy 
resource, and it is clearly the most obvious solution for 
eastern New Mexico without exploring these other options.
    Obviously we can drill more wells. But that has a cost to 
it as well, and it is not sustainable. It is depleting rapidly 
and really only provides a short-term solution for our needs.
    And even if we did do brackish water, that still again is a 
limited supply. The surface water is obviously the best long-
term supply for our area.
    Senator Bingaman [presiding]. Mr. Dunlap, did you have a 
comment on that?
    Mr. Dunlap. Yes, Mr. Chairman. That is one reason National 
Rural Water put an item into one of the previous draft bills. 
It would assist a community in their technical evaluation of 
the various alternatives.
    Most of these small rural water districts are certainly not 
as fortunate. And I should not say this this way maybe, but 
Portales has the ability to hire engineers and planners where 
most of the rural water districts do not.
    And if you do not have a means for that local community to 
assist in the assessment of what is available in their 
community, then they cannot meet this criteria, and that is one 
reason that we had had a component in here for National Rural 
Water in their local and their State associations to provide 
technical assistance to those local communities to do that.
    Senator Bingaman. Well, very good. I am sure there are 
other things we could inquire about, but Senator Domenici asked 
me to go ahead and close the hearing, and so I thank you all 
very much for testifying. I think it has been a useful hearing, 
and we hope we can pass this legislation and get it signed. 
Thank you very much.
    Mr. Dunlap. Thank you.
    [Whereupon, at 11:29 a.m., the hearing was adjourned]

                                    

      
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