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



 
 ENERGY AND WATER, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 
                                  2006

                              ----------                              


                        THURSDAY, APRIL 7, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Christopher S. Bond, presiding.
    Present: Senators Burns, Craig, Bond, Allard, Murray, 
Dorgan, and Johnson.

                      DEPARTMENT OF DEFENSE--CIVIL

                         DEPARTMENT OF THE ARMY

                       Corps of Engineers--Civil

STATEMENT OF JOHN PAUL WOODLEY, JR., PRINCIPAL DEPUTY 
            ASSISTANT SECRETARY OF THE ARMY (CIVIL 
            WORKS)
ACCOMPANIED BY:
        LIEUTENANT GENERAL CARL STROCK, CHIEF OF ENGINEERS
        MAJOR GENERAL DON RILEY, DIRECTOR, CIVIL WORKS
        ROB VINING, CHIEF, CIVIL WORKS PROGRAMS, INTEGRATION DIVISION

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Good afternoon. The hearing of the 
Subcommittee on Energy and Water, and Related Agencies, the 
Committee on Appropriations, will come to order. The chairman 
has gone with the delegation to Rome, and he was kind enough to 
ask if I would be willing to sit in for him. It's a great honor 
because of my interest in this area. I had the opportunity to 
deliver a full statement on the floor today, in support of our 
reauthorization. I will not bore you with it again this 
afternoon. For the three or four of you who may be interested 
it should be in the Congressional Record.
    Today the subcommittee will take testimony on the Fiscal 
Year 2006 Budget request for the U.S. Army Corps of Engineers 
and the Bureau of Reclamation. Our hearing will be in two 
panels. The first panel will consist of witnesses from the 
Corps of Engineers. Testifying for them will be John Paul 
Woodley, Principal Deputy Assistant Secretary of the Army for 
Civil Works and Lieutenant Carl Strock, Chief of Engineers for 
the U.S. Army Corps of Engineers. The second panel will consist 
of witnesses from the Bureau of Reclamation.

                     ADDITIONAL PREPARED STATEMENTS

    I will ask unanimous consent to place the entire opening 
statements of the Chairman Senator Domenici and Senators 
Cochran and Landrieu into the record.
    [The statements follow:]

             Prepared Statement of Senator Pete V. Domenici

    Good afternoon--the hearing will come to order.
    Today, the subcommittee will take testimony on the fiscal year 2006 
budget request for the U.S. Army Corps of Engineers and the Bureau of 
Reclamation.
    Our hearing today is broken into two panels.
    The first panel will consist of witnesses from the U.S. Army Corps 
of Engineers.
    Testifying for them will be: John Paul Woodley, Principle Deputy, 
Assistant Secretary of the Army for Civil Works, and Lieutenant General 
Carl A. Strock, Chief of Engineers for the U.S. Army Corps of 
Engineers.
    The second panel will consist of witnesses from the Bureau of 
Reclamation.
    Testifying for them will be: Mr. R. Thomas Weimer, Acting Assistant 
Secretary for Water and Science, Bureau of Reclamation, and Mr. John W. 
Keys, III, Commissioner, Bureau of Reclamation.
    I want to thank all the witnesses for appearing today.
    As you are aware, the President has made deficit reduction a top 
priority and as a result budgets are tight.

                         THE CORPS OF ENGINEERS

    The President's budget for the Corps of Engineers proposes $4.3 
billion, down nearly 8 percent ($336 million) from the current year 
appropriation.
    The Corps has taken an unfair, radical approach to developing a 
budget that rewards large and urban projects and punishes more rural 
projects and those closer to completion. By applying a one-size-fits-
all formula for funding prioritization, the Corps will end up focusing 
on a few projects while allowing others to be terminated.
    Several of the highlights for fiscal year 2006 budget include:
  --General Investigations is funded at $95 million, down 33 percent 
        ($48 million) from the current year.
  --Construction, General is funded at $1.637 billion, a decrease of 9 
        percent ($145 million) from the current year which certainly 
        doesn't help to reduce the more than $40 billion backlog in 
        unconstructed projects.
  --Mississippi River and Tributaries is funded at $270 million, a 
        decrease of 17 percent ($51.9 million) from the current year.
  --Operation and Maintenance, General is funded at $1.979 billion, an 
        increase of about 2 percent ($35.6 million) which is 
        essentially flat and does nothing to reduce the maintenance 
        backlog that has grown to more than $1 billion.
          remaining benefits to remaining costs ratio (rbrcr)
    As I mentioned earlier, this is your first budget assembled by 
business lines (navigation, flood control, environmental restoration) 
and prioritized by the use of the remaining benefit to remaining cost 
ratio (RBRCR). Based on my review of the budget, I believe you should 
choose another budgeting model for the fiscal year 2007 budget cycle.
    Thirty-one projects that you budgeted for in fiscal year 2005 were 
not budgeted in fiscal year 2006 because they did not meet your 
formula. However, you budgeted $80 million to suspend these 31 
projects. It is my understanding that had you included another $120 
million, you could have budgeted for all 31 of the projects.
    The appalling part of this budgetary decision is that six of these 
unbudgeted projects could be completed in fiscal year 2006. Yet you 
chose to schedule them for termination. I am amazed that you thought 
this was either reasonable or prudent.
    This budget relies heavily on a one-size-fits-all formula. My 
understanding of your criteria is that you have disregarded sunk costs 
and are only comparing the remaining project costs to the remaining 
project benefits and using solely that criteria to determine where 
funding should be spent. However, in a few cases, projects that didn't 
meet your criteria that you wanted to fund anyway were included in your 
budget. Further, if one looks at the distribution of projects in the 
budget proposal, the only conclusion that can be drawn is that the 
budget favors urban areas over rural areas.

                            BUDGET PROPOSALS

    The fiscal year 2006 budget has a number of proposals, some new for 
this year, some recycled from previous years.
    The budget has again assumed $181 million in hydropower revenues 
from the Power Marketing Administrations will be available to the Corps 
to for maintenance of hydropower facilities at Corps' projects. Once 
again, we will be forced to find funding to cover this proposal. We 
have tried several times to enact this proposal without success. Yet 
you continue to propose it annually.
    The budget has proposed the elimination of continuing contracts 
after fiscal year 2005 in favor of multiple year contracting. As I 
understand it, adoption of this proposal would severely limit your 
flexibility to manage the Corps' program. Not only is the use of 
continuing contracts mandated in law, we believe the use of continuing 
contracts along with reprogramming of project funds allows the Corps to 
efficiently utilize scarce funding and effectively manage a national 
program.
    The budget proposes a modification of the fiscal year 2005 beach 
policy that was rejected by the Congress. I think it is safe to assume 
that the modified policy will also be rejected.
    One other interesting proposal in the budget is that $200 million 
would be available only if the Secretary of the Army determines that 
the overall funding allocation among projects is substantially 
consistent with the performance budgeting guidelines set forth in the 
President's budget. How does the Corps plan to enforce this?

                BALANCE OF CORPS MISSIONS AND WORKFORCE

    Over the last 30 years, Congress has always attempted to balance 
the Corps program, not only among all of its competing missions but 
geographically as well.
    The value to the Nation of the Corps of Engineers' Civil Works 
water resource program has been debated for more than 150 years, 
however, the consensus has always been that the Civil Works program not 
only contributes to our national economy and it adds to our national 
defense.
    More than 3,000 Corps civilian employees have volunteered to serve 
in Iraq and Afghanistan in order to help with rebuilding efforts in 
those two countries. Most of the 200 or so uniformed services within 
the Corps have also served.
    This ability to project this type of expertise is what makes the 
Corps of Engineers unique and valuable among Federal Agencies.

                       THE BUREAU OF RECLAMATION

    The two major project accounts for the Bureau of Reclamation budget 
request are the Central Utah Completion Act Account and the Water and 
Related Resources Account.

                        THE CENTRAL UTAH PROJECT

    The Central Utah Project Completion Account is funded at $32.6 
million for fiscal year 2006, a decrease of 29 percent ($13.3 million) 
from the current year.

           BUREAU OF RECLAMATION, WATER AND RELATED RESOURCES

    The Water and Related Resources account is funded at $916.7 
million, a decrease of 5.5 percent ($52.8 million) from the current 
year.
    This account includes:
  --$128 million for the Central Valley Project;
  --$52.2 million for the Central Valley Project Restoration Fund;
  --$35 million for the California Bay-Delta Restoration;
  --$52 million for the Animas-La Plata project; and,
  --$30 million for the Water 2025 account.

                      ISSUES FOR FISCAL YEAR 2006

    The fiscal year 2006 budget proposes direct funding of routine 
Operations and Maintenance from the Power Marketing Administrations for 
the Bureau of Reclamation as well. Enabling legislation would be 
required to obtain this $30 million in revenues. If enacted on the E&W 
Bill, it would score against this subcommittee's allocation. As such, 
this is $30 million that will have to be accommodated within our 
allocation.
    Funding for rural water projects that are closer to completion are 
funded at average levels for fiscal year 2006. Rural water projects 
that were initiated within the last 3 years are not funded. This budget 
will further drag out completion of these projects and the delivery of 
fresh water to these communities.
    Two areas of your budget that I believe you have again seriously 
underfunded are Advanced Water Treatment technologies and water 
reclamation and reuse.
    Under Water 2025 you have included $2 million for advanced water 
treatment technologies. Perhaps under some of your challenge grants you 
anticipate work in this area as well. However, I believe that research 
and development on desalination and other advanced water treatment 
concepts is an important part of the West's future water supply.
    Likewise, water reclamation and reuse is a vital component of 
increasing near term water supplies for the West. The Federal share for 
most of these projects is about 25 percent or $20 million whichever is 
less. In many cases, the few Federal dollars involved are the 
difference as to whether these projects can move forward or not. The 
Federal dollars are leveraged against other funding to make these 
projects a success.
    The tight fiscal constraints under which we will be working this 
year will make it especially hard to find additional funds for both the 
Corps and Reclamation. We will do the best that we can.
                                 ______
                                 
               Prepared Statement of Senator Thad Cochran

    Mr. Chairman, I join you in welcoming the witnesses to this 
hearing.
    I appreciate the good work the Corps of Engineers does in the State 
of Mississippi. I do, however, have some serious concerns with the 
Corps' ability to continue to carry out its responsibilities due to 
declining levels of funding. The Civil Works program appears to be 
funded at a level that is insufficient.
    Locks and dams are deteriorating, and the Corps doesn't have the 
resources needed to dredge the waterways that carry commercial cargo, 
such as the Mississippi River, not to mention many other waterways. The 
maintenance backlog also continues to grow and become more serious.
    In addition, we are not adequately constructing or maintaining 
important flood control structures that are needed in any areas.
    Another area of concern is the recent change in the way the Corps 
of Engineers approaches reprogramming guidelines that were provided in 
the fiscal year 2005 Omnibus Appropriations bill. As you know, I signed 
a letter yesterday with Chairman Domenici and Ranking Member Reid 
expressing my concerns over the sudden change in this program and the 
change in the way you use the continuing contract clause. I look 
forward to hearing your explanation regarding these new policies.
    I appreciate the efforts of the Corps of Engineers but worry about 
inadequate funding of your important missions. The Corps is charged 
with improving safety and security for our Nation's citizens, and I 
hope that this committee will provide the resources necessary complete 
these missions.
                                 ______
                                 
             Prepared Statement of Senator Mary L. Landrieu

    Mr. Chairman, thank you for calling this hearing to review the 
President's budget for the Army Corps of Engineers and the Bureau of 
Reclamation.
    Before I comment on any specific budget matters, I wish to express 
my appreciation for being a member of this subcommittee. Its 
jurisdiction over both energy and water are matters of monumental 
concern to my State of Louisiana and our Nation. For these reasons and 
because of the relationships which we have built, I sincerely look 
forward to working with all of you.
    For many years, Congress has provided more funding for the Civil 
Works program of the Army Corps of Engineers than requested by the 
administration. In recent years, Congress has appropriated 
approximately 10 percent more funding; however, last year Congress 
enacted 14 percent more than requested. Once again, the administration 
has requested less funding for fiscal year 2006 for the Corps than was 
provided by Congress for the current fiscal year.
    The impact of the administration's inadequate Corps funding 
requests are felt throughout the Nation on vital projects causing a 
delay in their completion and resulting benefits. Many of these 
projects are physically located in Louisiana but greatly impact the 
entire Nation. The most notable project is the coastal restoration 
effort in Louisiana to save America's Wetland.
    The Louisiana Coastal Area comprises one of the Nation's largest 
expanses of coastal wetlands. As an environmental treasure, it supports 
a diverse collection of migratory birds, fish, and other species. As a 
productive natural asset, the Louisiana Coastal Area supports an 
extensive energy infrastructure network responsible for an estimated 20 
percent of our Nation's energy and provides over 20 percent of the 
seafood consumed in the United States. Additionally, offshore oil and 
gas production off of Louisiana's coast is one of the U.S. Treasury's 
largest revenue sources. In 2001, this production contributed 
approximately $5.1 billion to the Federal Government.
    Despite these significant national contributions made by the 
Louisiana Coastal Area and its resulting standing as America's Wetland, 
it accounts for 90 percent of the Nation's total coastal marsh loss. 
This destruction puts all of its national benefits at risks. 
Accordingly, the Corps along with the State of Louisiana has been 
engaged in the development of a comprehensive coastal restoration plan. 
Hopefully, implementation of this plan will begin soon, and this 
Congress will provide the Corps with the funding necessary to do the 
job. I will continue to work with all of you toward achieving this 
vital goal.
    Another example of a project physically located in Louisiana having 
national implications is the Inner Harbor Navigation Canal (IHNC) lock 
project. This project at the Port of New Orleans was improperly zeroed 
out in the President's budget, even though its ``Remaining Benefits to 
Remaining Costs'' ratio meets and exceeds the threshold established by 
the administration for projects such as this to be included in the 
budget. Congress first authorized the replacement of this lock in 1956! 
It is a project of national significance that impacts trade in over 25 
States on a daily basis. In fact, over 16 million tons of cargo move 
through this lock each year. I understand from the Corps that the 
fiscal year 2006 capability for this project is $25 million. I look 
forward to working with the chairman to fund this lock project at the 
best possible level in this year's Energy and Water bill.
    Another Louisiana project of major significance is the Southeast 
Louisiana Flood Control Project, otherwise known as the SELA project. 
It is only funded at $10.49 million in the President's budget request, 
even though the Corps' stated capability for this project is $63 
million. Mr. Chairman, you will remember from your visit to Louisiana 
in the past few years the importance of this project to the safety and 
well-being of literally millions of people in my State. Over 30 percent 
of the population of my State reside in the flood prone areas of south 
Louisiana. Only last year, we all watched with horror as four separate 
hurricanes battered the Gulf South, including, of course, Louisiana. 
That experience reminded us all of the urgent need to complete the SELA 
project as soon as possible. Thanks to your support, Mr. Chairman, this 
project has been a priority of this subcommittee for many years. I am 
again looking forward to working with you and your staff to ensure that 
the SELA project is funded at the highest possible level in this year's 
bill.
    Besides these and many other ongoing Corps construction projects in 
Louisiana, the Corps is presently engaged in two studies involving non-
traditional ports in Louisiana known as the Port of Iberia and the Port 
of Morgan City. These non-traditional ports serve as the host sites for 
fabrication of large offshore oil and gas platforms but do not move 
cargo as traditional ports do. Because of existing channel limitations, 
these fabrication ports are unable to deliver the large offshore 
structures that are currently needed in the deep waters of the Outer 
Continental Shelf. Consequently, the fabrication contracts for these 
structures are being lost to foreign ports. To protect the Nation's 
energy supply and these regional economies, these studies must be 
completed on time.
    Another Louisiana port that is vital to the Nation's energy supply 
is Port Fourchon. This port is the intermodal support base for over 75 
percent of the Gulf of Mexico's deepwater hydrocarbon development. 
Essentially, Port Fourchon serves as the jumping off point for 
personnel and supplies to operate offshore oil and gas platforms as 
well as a gateway for much of the oil and gas that is produced.
    Port Fourchon is serviced by the Leon Theriot Floodgate. In 1996, 
the Corps was asked to study the conversion of this gate into a lock to 
eliminate traffic interruptions during flood events. Because of the 
importance of this project and delays in the completion of the study, 
Congress provided the authority to the Secretary in WRDA 1999 to 
construct the conversion project upon his determination of its 
justification. Although the study has been favorably completed, the 
Secretary has not acted to make the justification determination so that 
the project can move forward. Accordingly, I encourage the Secretary to 
act on this vital project.
    In closing, Mr. Chairman, I thank you for your continued leadership 
on the Nation's water issues. I look forward to the testimony of our 
witnesses and would like to submit some questions for the record when 
appropriate.

    Senator Bond. Mr. Woodley, this is the second time in as 
many days, welcome. And General Strock, thank you for appearing 
before us. The programs administered by the U.S. Army Corps of 
Engineers are invaluable to this Nation, and provide drinking 
water, electric power, production, river transportation, 
environmental protection and restoration, protection from 
floods, emergency response and recreation.
    Few agencies in the Federal Government touch so many 
citizens with so few people who appreciate what they do, and 
they do it on a relatively small budget. In my State we have 
the high honor of working with five Corps Districts in three 
Divisions. In a water State like Missouri, we see the Corps as 
an indispensable partner in providing safety and economic 
development. The budget is ugly but this is not the only agency 
where cuts are proposed and Chairman Domenici and Senator Reid 
will do the best they can under the difficult circumstances and 
they will have broad bipartisan support in doing so. Your full 
statement will be included in the record. So I would ask you to 
summarize briefly your statements. And I would call on Senator 
Craig to see if he has an opening statement.

                    STATEMENT OF SENATOR LARRY CRAIG

    Senator Craig. Mr. Chairman, what I would do, is I have an 
opening statement that is tied to a series of questions I would 
like to ask. So why don't we take their opening testimony and 
then we can proceed into questions, if you don't mind?
    Senator Bond. Thank you very much. Now we will turn to Mr. 
Woodley.

                  STATEMENT OF JOHN PAUL WOODLEY, JR.

    Mr. Woodley. Mr. Chairman, members of the subcommittee, I 
appreciate the opportunity to testify before you today. I'm 
delighted to be accompanied this morning by Lieutenant General 
Carl Strock, the very distinguished Chief of Engineers, by 
Major General Don Riley, the Director of Civil Works for the 
Army Corps of Engineers, and Rob Vining, Chief of the Civil 
Works Programs, Integration Division.
    The fiscal year 2006 Budget for the Army Civil Works 
Program includes about $4.5 billion in Federal funding. My 
complete statement includes a breakout of this funding by Corps 
mission area, or business program as defined in the Civil Works 
Strategic Plan. In addition to the budget justification 
materials already provided, we plan to provide a 5-year budget 
plan later this month. This budget plan will help with long-
range planning for this program.
    The allocations from fiscal year 2006 Budget for planning, 
design and construction reflect a focus on those studies and 
projects with the highest expected returns in the Corps' 
primary mission areas, commercial navigation, flood and storm 
damage reduction, and aquatic ecosystem restoration.
    The budget sets priorities for construction using seven 
performance-based guidelines. A copy of the guidelines is 
attached to my complete statement.
    For the 105 projects that are funded, the budget bases the 
level of funding on relative performance. For 35 lower 
performing, previously budgeted projects that will have ongoing 
contracts, the budget has funding to either complete or 
terminate each contract, depending on the Corps of Engineers 
assessment of the relative cost of completion versus 
termination of that contract.
    The budget also proposes to place existing authority to 
award continuing contracts with new authority to award multi-
year contracts, to gain greater control over future costs.
    The Corps regulatory program to protect the aquatic 
resources receives $160 million, an increase of $10 million 
from the fiscal year 2005 Budget, and an increase of $15 
million from the fiscal year 2005 enacted appropriations. This 
funding will enable more effective protection for water and 
wetlands and more timely permit evaluations.
    The funding in the budget for other business programs such 
as recreation and emergency management is based on recent 
assessments of effectiveness.

                           PREPARED STATEMENT

    In summary Mr. Chairman, this budget and the forthcoming 5-
year plan incorporate performance budgeting principles. Many 
high performing activities would be well funded and it is true 
that many other activities, although highly justified and 
worthy, would be deferred, at least for the time being. In all, 
the budget moves ahead with many important investments that 
will yield enormous returns for the Nation's citizens. Thank 
you Mr. Chairman.
    [The statement follows:]

              Prepared Statement of John Paul Woodley, Jr.

    Mr. Chairman and distinguished members of the subcommittee, thank 
you for the opportunity to testify before the Subcommittee on Energy 
and Water Development of the Appropriations Committee and to present 
the President's budget for the Civil Works program of the Army Corps of 
Engineers for fiscal year 2006.

          OVERVIEW OF FISCAL YEAR 2006 ARMY CIVIL WORKS BUDGET

    The fiscal year 2006 budget for Army Civil Works provides funding 
to continue development and restoration of the Nation's water and 
related resources, operation and maintenance of existing navigation, 
flood damage reduction, and multiple-purpose projects, protection of 
the Nation's regulated waters and wetlands, and cleanup of sites 
contaminated as a result of the Nation's early efforts to develop 
atomic weapons.
    The budget continues the administration's focus on those activities 
within the Corps main mission areas that have high expected net 
economic and environmental returns. Building upon the administration's 
Principles for Improving Program Performance in the Civil Works 
program, which were announced in the fiscal year 2004 budget, the 
fiscal year 2006 budget uses performance criteria to allocate funding 
within each program area, in order to achieve a greater overall net 
return to the Nation from the total to be invested in fiscal year 2006.
    The budget emphasizes ongoing studies, projects and programs within 
the three main missions of the Civil Works program, namely, commercial 
navigation, flood and coastal storm damage reduction, and aquatic 
ecosystem restoration. As in the past, to be supported in the budget, a 
study or project must also meet current economic and environmental 
performance standards and be otherwise consistent with established 
policies.
    The budget provides funding for other activities as well, including 
regulatory protection of waters and wetlands, cleanup of sites 
contaminated by the Nation's early atomic weapons program, and the 
management of natural resources and provision of hydroelectric power 
and recreation services at Federally operated Civil Works projects. 
However, it does not include funding for work that should be the 
responsibility of non-Federal interests or other Federal agencies, such 
as wastewater treatment, irrigation water supply, and municipal and 
industrial water supply treatment and distribution.
    The budget includes new discretionary funding of $4.513 billion. 
This includes $200 million for the Construction account that is over 
and above the amount in last year's budget and that would be available 
if the overall allocation of funding among projects under the enacted 
legislation is substantially consistent with the performance budgeting 
guidelines proposed in the budget. The estimate for associated outlays 
is $4.643 billion.
    The budget also includes proposed appropriations language to 
reclassify certain receipts collected by three of the Federal power 
marketing administrations. The appropriations language, if enacted, 
would enable the power marketing administrations to directly fund the 
operation and maintenance costs associated with the power functions of 
the Civil Works projects that generate the power that these agencies 
sell. The budget proposes to make available $181 million in offsetting 
collections in fiscal year 2006 for this purpose, reducing the total 
discretionary funding request for the Civil Works program to $4.332 
billion.
    The first attachment to this testimony displays the current 
estimate for the distribution of the discretionary funding request by 
appropriation account, business program, and source.

                      PERFORMANCE-BASED BUDGETING

    Budget and Performance Integration, one of the initiatives of the 
President's Management Agenda, is central to the preparation of the 
fiscal year 2006 Army Civil Works budget. The budget targets funding to 
studies and projects with high returns, and incorporates performance 
planning into budget planning by program area.

Targeting Funding to Water Resources Studies and Projects with High 
        Returns
    For many years, there have been too many projects authorized and 
initiated without funding for timely completion, which has led to 
protracted construction schedules and the deferral of benefits for the 
most worthy projects. Consequently, the overall performance of the 
Civil Works program has suffered. The budget addresses this problem by 
allocations for planning, design, and construction that reflect a focus 
on those studies and construction projects with the highest expected 
returns in the Corps' primary mission areas, which are commercial 
navigation, flood and storm damage reduction, and aquatic ecosystem 
restoration. The budget also targets funding for operation and 
maintenance to the highest-return activities. These considerations are 
discussed below.
    Studies and Design.--The fiscal year 2006 budget supports funding 
for the most promising studies and preconstruction engineering and 
design (PED) activities.
    For the navigation and flood and storm damage reduction studies, 
performance was assessed based primarily on potential economic benefits 
and costs. For PED activities for such projects, the estimated ratio of 
remaining benefits to remaining costs is known, and PED activities for 
projects with ratios of 3.0 to 1 or greater at a 7 percent discount 
rate were funded. For aquatic ecosystem restoration studies and PED 
activities, performance was assessed based on relative cost-
effectiveness in solving regional and national aquatic ecosystem 
problems. In all cases, the likelihood of implementation also was 
considered, including the existence of an executed cost sharing or 
concurrent financing agreement. The fiscal year 2006 budget 
concentrates funding on the 142 most promising studies and PED 
activities. This compares to 272 studies and PED activities that were 
funded in the fiscal year 2005 budget.
    The budget for the General Investigations account is $95 million. 
Of this amount, $55 million is for studies, $6 million is for PED 
activities, and $34 million is for planning coordination, technical 
assistance, and research and development. In addition, the Flood 
Control, Mississippi and Tributaries (MR&T) account includes about $1 
million for studies and $720,000 for the collection and study of basic 
data.
    The budget provides a total of $20 million to continue planning and 
design work under the very high priority Louisiana Coastal Area study, 
which is needed to address the continuing loss of wetlands along the 
Louisiana coast. This increase of $12 million over the budget 
allocation for fiscal year 2005 reflects the progress that the Corps 
has been making in working with the State to establish priorities for 
implementation of restoration and related science and technology 
efforts over a 10-year period.
    The budget also includes funding to initiate four reconnaissance 
studies that competed successfully with the highest performing of the 
ongoing studies. Three of these studies are funded in the General 
Investigations account: Coyote Creek, California; Neches River, Texas; 
and St. Louis, Missouri. The fourth is funded in the MR&T account: a 
high priority study of opportunities to reduce flood damages and 
restore the aquatic ecosystem through the further acquisition of real 
property interests in the Atchafalaya Basin.
    One of my priorities is to improve analytical tools to support 
water resource planning and decision-making. The budget addresses this, 
for instance, by increasing funding for research and development on 
modeling and forecasting tools, including $2.4 million for the 
Navigation Economic Technologies research program funded in the General 
Investigations account.
    Construction.--The budget uses seven performance budgeting 
guidelines to allocate funds among projects in the Construction 
account, in order to achieve greater value to the Nation from the 
construction program. In conjunction, the budget proposes the repeal of 
existing continuing contract authorities and their replacement with 
modern, multi-year contracting authorities, as discussed in the section 
on ``Proposals for Programmatic Changes.''
    The performance guidelines are spelled out in the Appendix to the 
President's fiscal year 2006 budget and are provided as the second 
attachment to this testimony. Under the performance guidelines, 
construction projects are ranked and funded based on their estimated 
economic and environmental returns. The net effect is to redirect 
funding away from the lowest priority projects to accelerate completion 
of the highest priority projects. The guidelines are based on sound 
financial management principles similar to those used by private 
industry to rank and select investments.
    The budget provides $1.637 billion dollars for the Construction 
account, including $200 million that would be available only if the 
overall funding allocation among projects under the enacted 
appropriations legislation is substantially consistent with the seven 
proposed performance guidelines. The budget also provides $111 million 
dollars for construction activities in the MR&T account after a 
reduction for anticipated savings and slippages. The total of $1.748 
billion is the highest amount ever included for construction in a Civil 
Works budget. In all, the budget provides funding for 105 specifically 
authorized projects in the two accounts.
    Under the performance guidelines, all construction projects are 
ranked within their program area by their remaining benefits relative 
to their remaining costs, or, in the case of aquatic ecosystem 
restoration projects, by the extent to which they cost-effectively 
address a significant national or regional aquatic ecological problem. 
However, dam safety, seepage correction, and static instability 
correction projects are given the highest priority without regard to 
these rankings. The budget provides 100 percent of the maximum that the 
Corps can use to carry out work efficiently on 14 dam safety, seepage 
correction, and static instability correction projects.
    Based on these performance rankings, the budget identifies a total 
of 47 high priority projects. Among the 47 high priority projects are 
nine projects that the administration views as a national priority and 
38 other projects that have a high ratio of remaining benefits to 
remaining costs, or that are very cost effective in addressing a 
significant regional or national aquatic ecosystem restoration problem. 
To accelerate completion of the high priority projects, the guidelines 
provide that the budget must allocate at least 80 percent of the 
maximum that the Corps could use to carry out work on these projects 
efficiently. The Corps provided the estimates for the maximum that the 
Corps could use to carry out work on these projects efficiently in mid-
January, 2005.
    The national priority projects include eight that the 
administration previously has identified: Columbia River Fish Recovery; 
South Florida Everglades Ecosystem Restoration; Missouri River Fish and 
Wildlife Recovery; New York and New Jersey Harbor; Olmsted Locks and 
Dam; Sims Bayou, Texas; Upper Mississippi River Restoration; and West 
Bank and Vicinity, Louisiana. In addition, for the first time, Oakland 
Harbor, California, is included as a national priority.
    The budget includes $137 million for the Corps contribution to the 
Everglades restoration effort. Of this amount, $35 million is for the 
Corps to participate financially in the Modified Water Delivery 
project, along with the National Park Service. The administration has 
proposed appropriations language in the Construction account and 
companion appropriations language for the National Park Service to 
clarify that both agencies would be contributing financially to the 
Modified Water Delivery project. In addition, the budget proposes 
funding of the pilot projects program for the Comprehensive Everglades 
Restoration Plan (CERP) component of the Everglades program as part of 
design for the CERP features because the need to prove these 
technologies is central to the success of this restoration effort.
    The budget proposes funding to initiate construction of the 
Washington, DC and Vicinity flood damage reduction project, which is 
one of the highest-return projects in the Nation. The initiation of 
this project is necessary to reduce the risk of flood damage to the 
museums on the National Mall, the Franklin Delano Roosevelt Memorial, 
and the World War II Memorial.
    The budget also includes funding for an additional 44 construction 
projects. The funding is to continue work on contracts awarded before 
fiscal year 2006, and to initiate contracts in the instances of several 
beach nourishment projects to mitigate sand loss impacts due to the 
operation and maintenance of Federal navigation projects.
    The amount budgeted for the construction and major rehabilitation 
of inland waterway projects, $353 million, is the highest amount ever 
included in a Civil Works budget. This funding will help ensure the 
continued efficiency and reliability of the major locks and dams on the 
inland waterways system.
    The budget proposes that 35 previously budgeted construction 
projects with lower returns be examined for possible suspension. The 
budget provides a suspension fund of $80 million in the Construction 
account and a suspension fund of $8 million in the MR&T account for 
these projects. Where it would be less costly to complete an ongoing 
contract, that course would be pursued. Otherwise, the contract would 
not be funded, and the suspension fund would be used to pay the Federal 
share of settled claims. Construction of the suspended projects could 
be restarted in the future, to the extent that they compete 
successfully for future funding based on their relative economic and 
environmental returns.
    Operation and Maintenance.--The budget for operation and 
maintenance emphasizes essential operation and maintenance activities 
at key Corps facilities, including maintenance dredging and structural 
repairs. The program areas of navigation, flood control, hydropower, 
recreation, and natural resources management receive operation and 
maintenance funding. The overall budget for the Operation and 
Maintenance account is $1.979 billion, the highest ever included in a 
Civil Works budget. The budget provides an additional $157 million for 
operation and maintenance activities in the MR&T account, after a 
reduction for anticipated savings and slippages.
    In general, the budget provides funding for ``must-have'' operation 
and maintenance activities at Civil Works facilities. These include 
operations and time-sensitive maintenance necessary for meeting 
performance objectives at important facilities, plus efforts to comply 
with Federal environmental and other mandates.
    The budget continues the policy of establishing priorities for 
funding navigation maintenance based primarily on the extent to which a 
channel and harbor project or waterway segment supports high volumes of 
commercial traffic. The budget also funds channel and harbor projects 
that have low commercial traffic but support significant commercial 
fishing, subsistence, or public transportation benefits. Navigation 
operation and maintenance at other facilities is funded to support 
surveys and other caretaker activities.
    The budget includes funding for an assessment of the economics and 
long-term policy options for navigation facilities with relatively low 
levels of commercial traffic. The study will identify the universe of 
Federal channel and harbor projects and inland waterways segments that 
support lower levels of commercial use, classify these projects based 
on the kinds of contributions that they make, develop methods to 
quantify the differences in their attributes, and examine possible 
criteria for determining when a continued investment in operation and 
maintenance would produce a significant net return to the Nation. The 
study also will formulate a range of possible long-term options for the 
funding and management of navigation projects with lower levels of 
commercial use, evaluate these options, and examine their applicability 
to the various types of such projects.
    Since the events of September 11, 2001, the Civil Works program has 
received appropriations of $362 million to provide facility protection 
measures that have recurring costs (such as guards), to perform 
assessments of threats and consequences at critical facilities, and to 
design and implement the appropriate ``hard'' protection at those 
critical facilities. The administration is continuing its commitment to 
facility protection in fiscal year 2006, with an allocation of $72 
million for facility protection in the Operation and Maintenance 
account. Of the $72 million, about $30 million is for recurring costs, 
about $30 million is hard protection at operating projects, and $12 
million is included as a ``remaining item'' in the Operation and 
Maintenance account for recurring costs and hard protection at 
laboratory, administrative, and other facilities.
    The budget includes $20 million for an emergency maintenance 
reserve fund, from which the Assistant Secretary of the Army (Civil 
Works) would make allocations to meet high-priority, unexpected, and 
urgent maintenance needs at key facilities. When an unexpected 
emergency occurs under current practice, it is sometimes difficult to 
find the needed funds on a timely basis. The new arrangement will 
enable the Civil Works program to respond to these situations promptly, 
without interfering with other program commitments.

Incorporating Performance Planning by Program Area
    The findings and recommendations of program evaluations using the 
Program Assessment Rating Tool (PART) informed budget decisions. To the 
extent that performance data were available, the Corps used this 
information during the budget development process to allocate funding.
    The Corps also uses the PART to evaluate the performance of its 
program areas and determine whether they are achieving the desired 
results, and to improve the overall effectiveness and efficiency of 
these program areas. This year the recreation, storm damage reduction, 
and coastal channels and harbors program areas were assessed, and the 
hydropower program area was reassessed.
    On March 22, 2004, the then-Chief of Engineers and I provided the 
Civil Works Strategic Plan to the committees and subcommittees of 
Congress responsible for water development authorizations and 
appropriations, including this subcommittee. That plan included an 
effort to suggest some program-specific goals, objectives, and 
performance measures, as well as some that are crosscutting.
    Both the Civil Works Strategic Plan and the PART-based program 
evaluations are works in progress. As Civil Works programs are newly 
assessed and reassessed, the resulting findings will be addressed and 
recommendations implemented. Further, as new performance measures are 
identified and existing measures refined through the PART process, 
these changes will be reflected in the Strategic Plan through periodic 
updates.
    To illustrate how the fiscal year 2006 budget for Civil Works 
reflects performance planning, I would like next to discuss the 
Regulatory Program and the Emergency Management program.
    Regulatory Program.--The activities funded in the budget include 
permit evaluation, enforcement, oversight of mitigation efforts, 
administrative appeals, watershed studies, special area management 
plans, and environmental impact statements.
    The recent performance assessment for this program concluded that 
it is moderately effective. Better efforts are needed to ensure 
compliance with permit conditions and mitigation requirements. The 
volume of permits is growing, and billions of dollars of investments 
are affected by permit processing times. One of my priorities for the 
Civil Works program is to improve the effectiveness of aquatic resource 
protection and the efficiency of permit reviews and decision-making.
    For the regulatory program, the performance measures reflect a 
strong linkage between funding decisions and performance. The budget 
provides $160 million, which is $10 million more than included in the 
fiscal year 2005 budget, $16 million more than the enacted amount for 
fiscal year 2005, and more than has been budgeted for the regulatory 
program ever before. This increase is needed and will enable the Army 
to improve protection of aquatic resources and reduce permit evaluation 
times.
    Emergency Management.--The Emergency Management program includes 
work funded in the Flood Control and Coastal Emergencies (FCCE) account 
and the National Emergency Preparedness program, with FCCE comprising 
the bulk of the program. The FCCE account finances response and 
recovery activities for flood, storm, and hurricane events, 
preparedness for natural events, and preparedness to support to the 
Federal Emergency Management Agency through the Federal Response Plan.
    The recent performance assessment of FCCE activities concluded that 
they are moderately effective, and should be funded at the average 
annual cost of doing business so as to improve program management and 
reduce the likelihood of having to borrow from other accounts or obtain 
supplemental appropriations when disaster events occur. Accordingly, 
the fiscal year 2006 budget includes $70 million, which is 
approximately the amount that the Corps has spent in a typical year on 
flood and coastal storm emergency preparedness, response, and recovery 
activities.

                FOUR PROPOSALS FOR PROGRAMMATIC CHANGES

    Programmatic changes proposed in the budget include the following: 
the funding of beach nourishment and renourishment to address the 
impacts of navigation projects; replacement of continuing contracts 
with multi-year contracts; direct funding of hydropower operation and 
maintenance costs; and raising additional revenues to finance 
recreation modernization.

Beach Renourishment
    This year the coastal storm damage reduction program area of the 
Army Corps of Engineers (Corps) was evaluated using the Program 
Assessment Rating Tool (PART). That evaluation addressed concerns with 
having a long-term Federal involvement in periodic beach renourishment, 
which ties up out-year funds that in many instances could be invested 
in other projects that yield a greater return to the Nation. This 
finding supports a policy of not providing Federal funding for the 
costs of renourishment to replace sand lost due to ordinary, expected 
natural erosion. Therefore, the administration's view remains that non-
Federal interests should be responsible for those costs once the 
initial nourishment has been accomplished, just as they operate and 
maintain other types of projects once the installation is complete.
    The administration continues to support Federal participation in 
the initial phase of authorized beach nourishment projects for storm 
damage reduction and ecosystem restoration.
    The budget also includes funding for beach nourishment and 
renourishment to mitigate sand loss impacts to shorelines due to the 
operation and maintenance of Federal navigation projects. The budget 
proposes that both the initial nourishment and renourishment phases be 
funded by Civil Works 100 percent, but only to the extent that they 
address the impacts of Federal navigation operation and maintenance. 
The budget also proposes that this Civil Works funding be derived from 
the Harbor Maintenance Trust Fund. The budget recommends enacting this 
proposal through appropriations language for the Construction account.
    The Army will continue to participate financially in other coastal 
activities. These include the following: planning and design of coastal 
storm damage reduction and ecosystem restoration projects; deposition 
of dredged material from navigation projects on the adjacent shores 
when it is the least-cost, environmentally acceptable disposal method; 
one-time placements of dredged material for the beneficial use of storm 
damage reduction; and regional sediment management research.
    The budget also provides funding to continue renourishment-related 
activities for the Westhampton Shores area of the Fire Island Inlet to 
Montauk Point, New York, project, as called for by a court order in the 
settlement of the case of Rapf et al. vs. Suffolk County of New York et 
al.

Construction Contracting
    The budget proposes to replace the special continuing contract 
authorities of the Civil Works program with the authority to issue 
standard multi-year contracts, as are used elsewhere in the Federal 
Government. This change to multi-year contracting is needed to increase 
control over future contract costs, make more funding available in the 
out-years to complete Civil Works projects that have a high net return 
to the Nation, and subject contracting in the Civil Works program to 
the same rules and oversight that apply in other Federal agencies. The 
budget recommends enacting this proposal through an appropriations 
general provision.
    Continuing contracts involve unfunded obligations that sometimes 
can be large. This long-term commitment to fund projects regardless of 
their relative performance has reduced the overall performance of the 
Civil Works program. In addition, under continuing contracts, 
contractors may accelerate their earnings, which increases the 
immediate cost to the government of the accelerated work performed and 
could lead to contract termination, inefficient progress on remaining 
work, or the deferral or slowdown of important work on other projects.

Direct Financing of Hydropower Operation and Maintenance Costs
    In the past, the Congress generally has financed the operation and 
maintenance costs of Civil Works hydroelectric facilities from the 
General Fund, and the Federal power marketing agencies have repaid the 
Treasury for these costs from the revenues provided by ratepayers. The 
exception has been in the Pacific Northwest where, under section 2406 
of the National Energy Policy Act of 1992, Public Law 102-486, the 
Bonneville Power Administration (BPA) has directly financed the costs 
of operating and maintaining the Corps' hydroelectric facilities from 
which it receives power. BPA funds have been used in this manner since 
fiscal year 1999.
    Each year, Corps facilities experience unplanned outages around 3 
percent of the time. In 1999, the General Accounting Office found that 
the Corps' hydropower facilities are more likely to experience 
unplanned outages as private sector facilities, because the Corps does 
not always have sufficient funds appropriated from the General Fund to 
schedule the needed preventive maintenance. To address this problem, 
the budget proposes that the Southeastern Power Administration, the 
Southwestern Power Administration, and the Western Area Power 
Administration finance hydropower operation and maintenance costs 
directly, in a manner similar to the mechanism used by Bonneville. The 
budget contemplates that these power marketing administrations, in 
consultation with the Corps, would make more funding available for 
hydropower operation and maintenance in order to provide economical, 
reliable power to their customers. Unplanned outages would be expected 
to decline over time.
    The budget recommends enacting this proposal through appropriations 
language for the Operation and Maintenance account. The proposal, if 
enacted, would reclassify certain receipts collected by the power 
marketing agencies, and use the receipts to directly fund a category of 
expenses now being paid out of the General Fund.

Recreation Modernization
    The fiscal year 2006 budget proposes a recreation modernization 
initiative for Civil Works recreation facilities, based on a promising 
model now used by other major Federal recreation providers such as the 
National Park Service and the Forest Service. The goal of the 
modernization initiative is to ensure that quality public outdoor 
recreation opportunities may be provided on Corps lands into the 
future.
    The administration will propose legislation to allow the Corps to 
use additional fees and other revenues to upgrade and modernize 
recreation facilities at the sites where this money is collected. The 
legislation will include authority for the Corps to charge entrance 
fees and other types of user fees where appropriate.
    Specifically, the Corps would use the additional collections above 
a $37 million per year baseline to improve the Corps recreation 
program. This will give the Corps staff who manage Civil Works 
recreation facilities a stronger incentive to collect fees and develop 
other sources of revenue. I would expect that the people who enjoy 
recreation at Corps facilities will support this proposal as well, 
since they will know that the additional money would be used to improve 
the program.
    In conjunction with the proposed legislation, the Corps will focus 
on the following areas of interest: adjustments to fees and user 
charges under existing authority; new planning, financing, and 
management partnerships with local units of government such as Lake 
Improvement Districts; and expanded cooperation with local volunteers, 
other stakeholders, and interest groups. Demonstration projects in 
urban areas will be investigated, and the six demonstration projects 
initiated in fiscal year 2005 will be continued.

                        MANAGEMENT AND OVERSIGHT

    The Assistant Secretary of the Army (Civil Works) oversees Civil 
Works budget and policy. Corps executive direction and management of 
the Civil Works program are funded from the General Expenses account. 
The President's Management Agenda is the centerpiece of the Army's and 
the Corps' efforts to improve the effectiveness of program management.

Office of the Assistant Secretary of the Army for Civil Works
    Congress funded the Assistant Secretary's office from Energy and 
Water Development appropriations for the first time in fiscal year 
2005. The budget proposes that the Assistant Secretary's office be 
funded from the Operation and Maintenance, Army account in defense 
appropriations, as had been the custom until fiscal year 2005. The 
reasons are that the Assistant Secretary, as an advisor to the 
Secretary of the Army, has some oversight responsibilities outside the 
purview of the Subcommittee on Energy and Water Development, and the 
Assistant Secretary's office is a part of the Army headquarters, where 
many expenses are centrally funded and managed.

General Expenses
    Funding budgeted for the General Expenses account is $162 million. 
These funds will be used for executive direction and management 
activities of the Corps headquarters, the Corps division offices, and 
related support organizations that pertain to Civil Works.
    Audit activities will be financed by the Revolving Fund rather than 
under General Expenses. The fiscal year 2005 budget and enacted amount 
of $167 million includes $7 million for an audit of the Civil Works 
financial statements by the Department of Defense Inspector General. 
Financial audit activities formerly were carried out by the Army Audit 
Agency (AAA) using its own funding, but under new General Accounting 
Office auditing standards the AAA is not sufficiently independent of 
the Corps to conduct this audit. The balance statement audit being 
performed in fiscal year 2005 includes extensive review of historical 
data to remedy findings of the Inspector General. This type of review 
is appropriate for funding from the General Expenses account and is 
expected to be completed with the fiscal year 2005 funds. The costs of 
annual audits beginning in fiscal year 2006 will be considered normal 
costs of doing business and, as such, will be financed from the 
Revolving Fund and appropriately distributed to the appropriation 
accounts.

President's Management Agenda
    The Civil Works program is making progress on the President's 
Management Agenda. Like many agencies, the Corps of Engineers started 
out in 2002 with ``red'' ratings across the board.
    The Civil Works program is striving to attain ``green'' or 
``yellow'' status scores for most initiatives by July 2005. For the 
human capital initiative, significant progress is expected in reducing 
hiring time lags and integrating the accountability system into 
decisions. For competitive sourcing, the Corps has two ongoing 
competitions and is conducting preliminary planning for three more. For 
financial management, no change in status is expected until audit 
issues have been resolved and historical data have been collected. For 
e-government, efforts are underway to establish an effective Enterprise 
Architecture, adhere to cost and schedule goals, secure currently 
unsecured information technology systems, and implement applicable e-
government initiatives. For integration of budget and performance, 
efforts are under way to prepare additional program assessments and 
reassessments, to improve performance measures, and to begin to use 
performance information in short-range decision processes. For real 
property asset management, the goal is to develop and obtain approval 
of an asset management plan, an accurate and current asset inventory, 
and real property performance measures.
    I am confident that this work on the President's initiatives will 
yield greater program efficiency and effectiveness in the years to 
come.

                               CONCLUSION

    In his State of the Union Address of February 2, 2005, the 
President underscored the need to restrain spending in order to sustain 
our economic prosperity. As part of this restraint, it is important 
that total discretionary and non-security spending be held to levels 
proposed in the fiscal year 2006 budget. The budget savings and reforms 
in the budget are important components of achieving the President's 
goal of cutting the budget deficit in half by 2009, and we urge 
Congress to support these reforms. The fiscal year 2006 budget includes 
more than 150 reductions, reforms, and terminations in non-defense 
discretionary programs, one of which affects the Civil Works program, 
specifically, the Civil Works construction program: the adoption of 
performance guidelines and reduction in funding compared to fiscal year 
2005 enacted amounts. The Army wants to work with the Congress to 
achieve these savings.
    The fiscal year 2006 budget for the Army Civil Works program was 
developed using the modern management concept of performance-based 
budgeting, in line with the President's management principles.
    At $4.513 billion, this is the highest Civil Works budget in 
history. Specifically, the amounts for construction, operation and 
maintenance, and the Regulatory Program are the highest ever submitted 
to Congress.
    Nonetheless, the budget reflects explicit choices based on 
performance, particularly insofar as funding is targeted for high 
performing studies, design, and construction, and for areas where 
additional funding can make a real difference such as in the emergency 
management program and the regulatory program.
    As I have testified before, I have three priorities in mind for the 
Civil Works program. One priority is to develop the Civil Works budget 
and manage the program based on objective performance measures. My 
second priority is to improve the analytical tools that we use for 
water resources planning and decision-making, and my third priority is 
to improve the effectiveness and efficiency of the regulatory program. 
This budget contributes to the advancement of all three goals.
    The Army Civil Works budget for fiscal year 2006 will enable the 
Civil Works program to move ahead with many important investments that 
will yield good returns for the Nation in the future.
    Thank you, Mr. Chairman and members of the subcommittee, for this 
opportunity to testify on the President's fiscal year 2006 budget for 
the Civil Works program of the Army Corps of Engineers.

                              Attachment 1

 DEPARTMENT OF THE ARMY--CORPS OF ENGINEERS--CIVIL WORKS BUDGET, FISCAL
                                YEAR 2006
------------------------------------------------------------------------
                                                              Amount
------------------------------------------------------------------------
Requested New Appropriations by Account:
    General Investigations.............................     $95,000,000
    Construction.......................................   1,637,000,000
    Operation and Maintenance..........................   1,979,000,000
    Regulatory Program.................................     160,000,000
    Flood Control, Mississippi River and Tributaries...     270,000,000
    General Expenses...................................     162,000,000
    Flood Control and Coastal Emergencies..............      70,000,000
    Formerly Utilized Sites Remedial Action Program....     140,000,000
                                                        ----------------
      TOTAL............................................   4,513,000,000
                                                        ================
Requested New Appropriations by Business Program:
    Commercial Navigation..............................   1,796,000,000
        Channels and Harbors...........................    (882,000,000)
        Inland Waterways...............................    (914,000,000)
    Flood and Coastal Storm Damage Reduction...........   1,085,000,000
        (Flood Damage Reduction).......................    (998,000,000)
        (Coastal Storm Damage Reduction)...............     (87,000,000)
    Environment........................................     716,000,000
        (Aquatic Ecosystem Restoration)................    (483,000,000)
        (FUSRAP).......................................    (140,000,000)
        (Natural Resources)............................     (93,000,000)
    Hydropower.........................................     249,000,000
    Recreation.........................................     268,000,000
    Water Supply.......................................       2,000,000
    Emergency Management...............................      75,000,000
    Regulatory Program.................................     160,000,000
    Executive Direction and Management.................     162,000,000
                                                        ----------------
      TOTAL............................................   4,513,000,000
                                                        ================
Sources of New Appropriations:
    General Fund.......................................   3,436,000,000
    Harbor Maintenance Trust Fund......................     674,000,000
    Inland Waterways Trust Fund........................     184,000,000
    Special Recreation User Fees.......................      37,000,000
    Disposal Facilities User Fees......................       1,000,000
    Power Marketing Administration Direct Funding......     181,000,000
                                                        ----------------
      TOTAL............................................   4,513,000,000
                                                        ----------------
Additional New Resources:
    Rivers and Harbors Contributed Funds...............     445,000,000
    Coastal Wetlands Restoration Trust Fund............      61,000,000
    Permanent Appropriations...........................      18,000,000
                                                        ----------------
      TOTAL............................................     524,000,000
                                                        ----------------
      Total New Program Funding........................   5,037,000,000
------------------------------------------------------------------------

Attachment 2.--Department of the Army--Corps of Engineers--Civil Works 
                        Budget, Fiscal Year 2006

     PERFORMANCE BUDGETING GUIDELINES FOR CIVIL WORKS CONSTRUCTION

    1. Funding distribution and project ranking.--(a) All ongoing 
construction projects, including those not previously funded in the 
budget, will be classified as being primarily in one of the following 
program-based categories: Coastal Navigation; Inland Navigation; Flood 
Damage Reduction; Storm Damage Reduction; Aquatic Ecosystem 
Restoration; or All Other (including the major rehabilitation of 
existing commercial navigation, flood damage reduction, and hydropower 
facilities). (b) At least 70 percent of the construction budget will be 
allocated to projects in the first four of these categories. At least 5 
percent of the construction budget will be allocated to ``all other'' 
work. The funding allocated for the construction of aquatic ecosystem 
restoration projects will not exceed 25 percent of the budget in the 
construction program. Changes to these percentages are, however, 
permitted under the seventh guideline. (c) Projects in all categories 
except aquatic ecosystem restoration will be ranked by their remaining 
benefits divided by their remaining costs (RBRC). All RBRCs will be 
calculated using a 7 percent real discount rate, reflect the benefits 
and costs estimated in the most recent Corps design document, and 
account for the benefits already realized by partially completed 
projects. Aquatic ecosystem restoration projects will be ranked 
primarily based on the extent to which they cost-effectively address a 
significant regional or national aquatic ecological problem. (d) Dam 
safety, seepage, and static instability projects will be treated 
separately. They will receive the maximum level of funding that the 
Corps can spend efficiently in each fiscal year, including work that 
requires executing new contracts.
    2. Projects with very high RBRCs.--The budget will provide funds to 
accelerate work on the projects with the highest RBRCs within each 
category (or the most cost-effectiveness in addressing a significant 
regional or national aquatic ecological problem, for aquatic ecosystem 
restoration). Each of these projects will receive not less than 80 
percent or the maximum level of funding that the Corps can spend 
efficiently in each fiscal year, including work that requires executing 
new contracts.
    3. New starts and resumptions.--The budget will provide funds to 
start new construction projects, and to resume work on projects on 
which the Corps has not performed any physical construction work during 
the past 3 consecutive fiscal years, only if the project would be 
ranked in the top 20 percent of the ongoing construction projects in 
its category that year and appears likely to continue to qualify for 
funding as a project with very high RBRC under the second guideline 
thereafter.
    4. Continuing contracts.--Except for projects considered for 
deferral, the budget will continue to support work under continuing 
contracts executed prior to 2006. From 2006 onward, the Corps will 
issue contracts based only on the kinds of authorities that are 
available to other Federal agencies. All new contracts will include 
clauses to minimize termination penalties, cap cancellation fees, and 
ensure that the Corps is able to limit the amount of work performed 
under each contract each year to stay within the overall funding 
provided for the project during the fiscal year. The Corps will also 
reduce out-year funding commitments by using contracts whose duration 
is limited to the period needed to achieve a substantial reduction in 
costs on the margin.
    5. Lower priority projects.--All projects with an RBRC below 3.0 
will be considered for deferral, except for aquatic ecosystem 
restoration projects. Aquatic ecosystem restoration projects that do 
not primarily address a significant regional or national aquatic 
ecological problem and are less than 50 percent complete will be 
considered for deferral, except for those that are highly cost-
effective in addressing such problems. Where a project considered for 
deferral was previously funded, the budget will cover the cost of 
terminating or completing each ongoing contract, whichever is less.
    6. Redirection of funding.--Any budget year and all future year 
savings from the suspension of ongoing construction projects, after 
covering the cost of termination or completing ongoing contracts, will 
be used to accelerate projects with high RBRCs. The savings will be 
allocated to the projects with the highest RBRCs and the highest 
environmental returns in the construction program.
    7. Ten percent rule.--The budget may allocate up to a total of 10 
percent of the available funding to ongoing construction projects 
regardless of the requirements stated above. However, this may not be 
used to start or resume any new projects.

    Senator Bond. Thank you Mr. Woodley. Lieutenant General 
Strock.

              STATEMENT OF LIEUTENANT GENERAL CARL STROCK

    General Strock. Mr. Chairman and distinguished members of 
the committee. I too am honored to testify here before you 
today, along with Mr. Woodley and my colleagues from the U.S. 
Army Corps of Engineers on the President's fiscal year 2006 
Budget for the Army Civil Works Program.
    This budget is a performance-based budget that reflects the 
realities of the national budget supporting the global war on 
terror. This budget focuses construction funding on 47 projects 
that will provide the highest returns on the Nation's 
investment, plus 14 dam safety projects.
    Funds will be used for critical water resources 
infrastructure that improves the quality of our citizens' lives 
and provides a foundation for national economic growth and 
development. The budget incorporates performance-based metrics 
for continued efficient operation of the Nation's waterborne 
navigation, flood protection, and other water resource 
management infrastructure, fair regulation of wetlands, and 
restoration of important environmental resources, such as the 
Florida Everglades, the Upper Mississippi River, and Coastal 
Louisiana. It also improves the quality of recreation services 
through stronger partnerships and modernization.
    This budget provides approximately $48.9 million to 
complete 13 projects by the end of 2006. And as part of a 
comprehensive strategy to reduce the construction backlog, the 
fiscal year 2006 budget funds 44 other projects that provide 
high returns and are consistent with current policies.
    In all, 105 projects are funded so that we can provide 
benefits to the Nation sooner. The fiscal year 2006 budget 
includes $2.142 billion for the Operations and Maintenance 
program. And I can assure you that I will continue to do all I 
can to make these programs as cost effective as possible.
    The Corps is undergoing sweeping transformational changes 
as a result of our customer and stakeholder input. We have 
implemented USACE 2012 within the Corps, becoming a major team, 
and our business processes are now focused on eight Corps 
regional business centers to more efficiently serve the public 
and the armed forces.
    We continue to strengthen our management of resources, 
streamline our planning processes, and invite the involvement 
of other Federal, State, tribal, and local agencies sponsors, 
and interested organizations to participate early in the 
planning process to ensure concerns are addressed up front 
rather than at the end of the process.
    The Corps continues to strengthen its regulatory program, 
to ensure that Wetland mitigation is effective in retaining the 
quantity, quality and functions of those critical resources. We 
also look to continue the use of external independent review on 
major Corps project studies to help ensure those studies 
sufficiently address national economic and environmental 
concerns.
    Domestically, more than 2000 USACE volunteers from around 
the Nation responded to the call to help their fellow citizens 
when four hurricanes struck the southeast last fall, and again 
after this winter's heavy rains across the Nation. Corps dams, 
levees and reservoirs provided billions of dollars in flood 
damage reduction to protect lives, homes and businesses. The 
Corps has played an integral part in the global effort to 
provide relief to the victims of the massive tsunamis triggered 
by the December 26 earthquake off the coast of Indonesia.
    Corps engineers from the Engineering Research and 
Development Center in Vicksburg, Mississippi, three Forward 
Engineering Support Teams from Japan, Alaska and Arkansas, and 
the Corps 249th Prime Power Battalion were sent to help in the 
area's recovery and we're presently supporting the U.S. Agency 
for International Developments and their continuing recovery 
efforts.
    Finally the Corps' Civil Works experience is proving 
invaluable as soldiers and civilians with the Corps of 
Engineers help to rebuild infrastructure in Iraq and 
Afghanistan. Approximately 600 civilian members are currently 
serving in Afghanistan and Iraq, sharing their knowledge and 
expertise with local engineers and other professions. To date 
over 3,000 Corps civilians have volunteered and served in the 
theater of operations, sharing the dangers and hardships of the 
soldiers that they support.

                           PREPARED STATEMENT

    Almost as important, we're using technology in support of 
our deployed team members with the full capability of our 
organization.
    So in closing, the Corps is committed to selflessly serving 
the Nation. I truly appreciate your continued support to this 
end. Thank you Mr. Chairman, members of the committee; this 
concludes my statement.
    [The statement follows:]

          Prepared Statement of Lieutenant General Carl Strock

                              INTRODUCTION

    Mr. Chairman and distinguished members of the subcommittee, I am 
honored to be testifying before your subcommittee today, along with the 
Principal Deputy Assistant Secretary of the Army (Civil Works), the 
Honorable John Paul Woodley, Jr., on the President's fiscal year 2006 
budget for the United States Army Corps of Engineers' Civil Works 
Program.
    My statement covers the following 5 topics:
  --Summary of fiscal year 2006 Program Budget,
  --Civil Works Construction Backlog,
  --Civil Works Program Transformation,
  --Value of the Civil Works Program to the Nation's Economy, and
  --Value of the Civil Works Program to the Nation's Defense.

               SUMMARY OF FISCAL YEAR 2006 PROGRAM BUDGET

Introduction
    The Fiscal Year 2006 Civil Works Budget is a performance-based 
budget that reflects the realities of a national budget supporting the 
war on terror while cutting the deficit in half. The Corps used 
performance based criteria in developing this budget, which resulted in 
a focus on the projects and activities that provide the highest-net 
economic and environmental returns on the Nation's investment. The 
Civil Works Program, including the Direct and Reimbursed programs, is 
expected to approach $6.037 billion.
    Direct Program funding, including discretionary and mandatory 
funding appropriated directly to the Corps, totals $5.037 billion. 
Discretionary funding, plus the direct funding of hydropower operation 
and maintenance expenses totals $4.513 billion; additional mandatory 
funding totals $524 million.
    Reimbursed Program funding is projected to be $1 billion.

Direct Program
    The budget reflects the administration's commitment to continued 
sound development and management of the Nation's water and related land 
resources. It incorporates performance-based metrics for continued 
efficient operation of the Nation's navigation, flood protection, and 
other water resource management infrastructure, fair regulation of the 
Nation's wetlands, and restoration of the Nation's important 
environmental resources, such as the Florida Everglades, the Upper 
Mississippi River, and Coastal Louisiana. It also improves the quality 
of recreation services through stronger partnerships and modernization.
    The budget emphasizes funding for 61 projects including 14 dam 
safety, seepage correction, and static instability projects. Funding 
for 47 projects will provide the highest-net economic and environmental 
returns on the Nation's investment. Nine of the 47 projects are 
identified as national priorities. The 47 projects include a new 
construction start, Washington DC and Vicinity, to reduce the risk of 
flood damages to the museums on the National Mall, the Franklin Delano 
Roosevelt Memorial, and the World War II Memorial. There are also 3 new 
studies under the General Investigations (GI) program and 1 under the 
Mississippi River and Tributaries (MR&T) program.

Reimbursed Program
    Through the Interagency and Intergovernmental Support Program we 
help non-DOD Federal agencies, State, and other countries with timely, 
cost-effective implementation of their programs, while maintaining and 
enhancing capabilities for execution of our Civil and Military Program 
missions. These customers rely on our extensive capabilities, 
experience, and successful track record. The work is principally 
technical oversight and management of engineering, environmental, and 
construction contracts performed by private sector firms, and is fully 
funded by the customers.
    Currently, we provide reimbursable support for about 60 other 
Federal agencies and several State and local governments. Total 
reimbursement for such work in fiscal year 2006 is projected to be $1 
billion. The largest share--nearly $388 million--is expected from the 
Federal Emergency Management Agency (FEMA) for hurricane disaster 
relief. These numbers represent and update to the President's Budget 
using the Corps internal Consolidated Civil Automated Budget accounting 
system.

                    CIVIL WORKS CONSTRUCTION BACKLOG

    The budget addresses the construction backlog primarily by 
proposing that the administration and the Congress use objective 
performance measures--the ratio of remaining benefits to remaining 
costs or, for aquatic ecosystem restoration projects, the extent to 
which the project cost-effectively addresses a significant regional or 
national ecological problem--to establish priorities among projects 
including potential new starts, and through a change in Corps contract 
authorities that would increase control over future costs. While up to 
10 percent of the available funds could be allocated to any project 
under construction regardless of performance, a greater proportion of 
the resources would be allocated to the projects that the Corps 
estimates will yield the highest returns. Over time, this approach 
would significantly improve the benefits to the Nation from the Civil 
Works construction program.
    This Budget includes $48.9 million to complete 13 projects 
(including 1 MR&T project) by the end of 2006. The figures are an 
update to the President's Budget contained in the main volume. This 
investment will enable each of these projects to begin delivering 
benefits. In all, 105 projects are funded. There are 47 projects that 
provide the highest-net economic and environmental returns on the 
Nation's investment, 14 dam safety, seepage correction, and static 
instability correction projects, and 44 ongoing construction projects.
    We believe that narrowing the focus on funding and completing a 
smaller, more beneficial set of projects will bring higher net benefits 
to the Nation sooner. That is why the Budget proposes only one new, 
high priority construction start and accelerates completion of the 
highest-return projects in each program area.

Maintenance Program
    Water and related land resource management facilities of the Civil 
Works Program are aging. As stewards of this infrastructure, we are 
working to ensure that it continues to provide an appropriate level of 
service to the Nation. Sustaining such service poses a technical 
challenge in some cases, and proper operation and maintenance, also is 
becoming more expensive as this infrastructure ages.
    The operation and maintenance program supports the operation, 
maintenance and security of existing river and harbor, flood and storm 
damage reduction and, aquatic ecosystem restoration, owned and operated 
by, or on behalf of, the Corps of Engineers, including administrative 
buildings and laboratories. Funds are also included for surveys and 
charting of northern and northwestern lakes and connecting waters, 
clearing and straightening channels, and removal of obstructions to 
navigation. Work to be accomplished includes dredging, repair, and 
operation of structures and other facilities, as authorized in the 
various River and Harbor, Flood Control, and Water Resources 
Development Acts. Related activities include aquatic plant control, 
monitoring of completed coastal projects and, removal of sunken 
vessels.
    In both the Operation and Maintenance and the Mississippi River and 
Tributaries accounts the fiscal year 2006 budget includes a total of 
$2.142 billion for operation and maintenance. To improve the efficiency 
of the investment in operation and maintenance, we will give priority 
to key features of our infrastructure and determine an appropriate 
level of service for others, considering the benefits to the Nation and 
the funding needed to support that level of service. Furthermore, we 
are searching for ways to reduce costs and thereby accomplish more with 
available resources.

                   CIVIL WORKS PROGRAM TRANSFORMATION

    Throughout its long history, the Civil Works Program has 
continually changed in response to advances in science, methods, and 
processes, changing public values and priorities, and laws. For our 
program to remain a viable contributor to national welfare, we must 
remain sensitive to such factors, and continue to reorient, rescope, 
and refocus the program in light of them. To that end, I am committed 
to reforming the Civil Works Program to meet the Nation's current water 
and related land resource management needs.
    The recently implemented USACE 2012 creates a team of teams within 
the organization. Our business processes are now being led by a 
business center within each of the eight Corps regions, in order to 
more efficiently serve the public and the armed forces. Our processes 
are more open and more collaborative. We are working to revitalize our 
planning capabilities to become more efficient, more centralized, with 
one planning center for each of our eight divisions.
    We continue to strengthen and streamline our planning processes, 
and to invite the involvement of other Federal, tribal, State and local 
agencies, sponsors, and interested parties to participate early in the 
planning process to ensure concerns are addressed up front rather than 
at the end of a plan.
    The Corps Regulatory Program is working to achieve our goal of ``no 
net loss of wetlands'', through measures that avoid and minimize 
impacts and by requiring effective mitigation to replace the functions 
of these critical resources, while making timely permit decisions.
    We also look to continue the use of external independent review on 
major Corps project studies where appropriate, to help ensure they are 
technically sound and properly address national economic and 
environmental concerns.
    Let me tell you about some of the major steps we took last year:
  --We are continuing to spread the spirit and the word of the Corps' 
        Environmental Operating Principles--a clear commitment to 
        accomplishing our work in environmentally sustainable ways--
        with the express purpose of instilling the principles as 
        individual values in all members of the Corps team.
  --The Corps of Engineers and the Office of the Assistant Secretary of 
        the Army for Civil Works have allocated additional resources to 
        strengthen our internal review capabilities, and are 
        considering other measures to further improve such capability. 
        With our restructuring under USACE 2012, we have created an 
        Office of Water Project Review in our Headquarters which 
        effectively doubled the size of our policy compliance review 
        staff. The goal is to have our economists, plan formulation 
        specialists, and environmental reviewers focus on early 
        involvement in study development to assure compliance with 
        established policy as projects are being developed. I am 
        committed to working with field commanders to provide training, 
        lessons learned and other tools to strengthen the policy 
        compliance quality control/quality assurance process.
  --We completed a Civil Works Strategic Plan that emphasizes the 
        sustainable development, management and protection of our 
        Nation's water and related land resources. This Strategic Plan 
        is a work in progress, and will be updated as performance 
        measures and objectives are developed and refined.
  --We established five national planning centers of expertise staffed 
        with some of our top engineers and scientists--a step that is 
        essential for successfully addressing the issues that 
        increasingly arise in planning a water resources project, 
        especially those that are costly, complex, or controversial, or 
        which otherwise require very specialized planning work.
  --I believe we have made progress on the President's Management 
        Agenda this year, particularly in the area of Budget and 
        Performance Integration. Specifically, we used objective 
        criteria to establish priorities for allocating funds among 
        projects in order to increase the overall net economic and 
        environmental return to the Nation from our construction and 
        general investigations programs.
    We are committed to change that leads to open and transparent 
modernization of the Civil Works Program. To this end, we are committed 
to continuing the dialogue with you and your staff. I have issued 
communication principles to ensure open, effective, and timely two-way 
communication with the entire community of water resources interests. 
We know well that we must continue to listen and communicate 
effectively in order to remain an effective origination.

  VALUE OF THE CIVIL WORKS PROGRAM TO THE NATION'S ECONOMY AND DEFENSE

    We are privileged to be part of an organization that directly 
supports the President's priorities of winning the global war on 
terror, securing the homeland and contributing to the economy.

The National Welfare
    Water resources management infrastructure has improved the quality 
of our citizens' lives and supported the economic growth and 
development of this country. Our systems for navigation, flood and 
storm damage reduction projects, and efforts to restore aquatic 
ecosystems contribute to our national welfare.
    Domestically, more than 2,000 USACE volunteers from around the 
Nation responded to the call to help their fellow citizens when four 
hurricanes struck Florida and the rest of the Southeast this last fall.
    Similarly, during this winter's heavy rains across parts of the 
Nation--Corps dams, levees and reservoirs operated as designed to flood 
damages and protect lives, homes and businesses.

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

The National Defense
    The Civil Works Program is a valuable asset in support of Homeland 
Security in that it helps to maintain a trained engineering workforce, 
with world-class expertise, capable of responding to a variety of 
situations across the spectrum of our operations. This force is 
familiar with the Army culture and responsive to the chain of command. 
Skills developed in managing large water and land resource management 
projects transfer to most tactical engineering-related operations. As a 
byproduct, Army Engineer officers assigned to the Civil Works Program 
receive valuable training, in managing large projects.
    The Corps of Engineers continues to contribute to the ongoing 
global war on terror, as our civil works experience proves invaluable 
in restoring and rebuilding the infrastructure of Iraq and Afghanistan. 
More than 3,000 civilians have voluntarily deployed and approximately 
600 are currently serving along with soldiers to provide engineering 
expertise and quality construction management in these nations.
    In Iraq, the Gulf Region Division has overseen the initiation of 
more than 2,000 reconstruction projects valued at over $4 billion. More 
than 500 projects are complete. These projects provide employment and 
hope for the Iraqi people. They are visible signs of progress.
    In Afghanistan, the Corps is spearheading a comprehensive 
infrastructure program for the Afghan national army, and is also aiding 
in important public infrastructure projects.
    The Corps has also played an integral part in the global effort to 
provide relief to the victims of the massive tsunamis triggered by the 
Dec. 26 earthquake off the coast of Indonesia. Corps engineers from the 
Engineering Research and Development Center in Vicksburg, Mississippi, 
three Forward Engineering Support Teams from Japan, Alaska, and 
Arkansas, and the Corps 249th Primary Power Battalion were sent to help 
in the area's recovery.

Homeland Security
    In addition to playing an important role in supporting the global 
war on terror, we are providing security for physical infrastructure 
owned or operated by the Corps throughout the Nation, based on risk 
assessment at each of our critical facilities. The Corps is also a 
member of the National Response Plan team with proven experience in 
support of disaster response.
    The Civil Works Program has completed over 300 security reviews and 
assessments of our inventory of locks, dams, hydropower projects and 
other facilities. We have improved our security engineering capability 
and prioritized infrastructure and are currently implementing 
recommended features at the highest priority security improvement 
projects.
    For fiscal year 2006, $72 million is targeted for recurring 
security costs and security enhancements at key Corps facilities. 
Facility security systems can include cameras, lighting, fencing, 
structure hardening, and access control devices designed to improve 
detection and delay at each facility.

                               CONCLUSION

    The Corps of Engineers is committed to staying at the leading edge 
in service to the Nation. In support of that, we are working with 
others to transform our Civil Works Program. We're committed to change 
that leads to open, transparent modernization, and a performance-based 
Civil Works Program.
    Thank you, Mr. Chairman and members of the committee. This 
concludes my statement.

    Senator Bond. Thank you very much General Strock. Do we 
have a timing device available? Well I will try to be 
judicious. First Mr. Woodley, I would be interested in knowing 
how the Corps budget was formulated this year. And I'm aware of 
the President, without getting yourselves in trouble. Can you 
generally explain the challenges you face in the field because 
of tight budgets in recent years, Mr. Woodley, first?
    Mr. Woodley. Absolutely, yes, sir, Mr. Chairman. The budget 
this year was a continuation of our efforts of the past 2. That 
began really with the submission for the Fiscal Year 2005 
budget to inaugurate, or incorporate, performance based 
principles based on the business lines within our program. 
Those are the broad mission areas, such as navigation, flood 
control and the like. The test that was used--what we set for 
those--was a set of performance metrics. In the construction 
arena, for example, that was based largely on our analysis of 
the benefit-cost ratio for each ongoing construction activity.
    Now, that of course does not apply in the area of ecosystem 
improvement and restoration. So we were unable to take that to 
one side, but in the other areas in which we were able to do 
cost-benefit analysis we wanted to fund those best performing 
projects. What we had found in the past had been that we had 
numerous projects ongoing, and insufficient funding to continue 
all of our projects at an efficient level. And so what we had 
was a constant effort to keep a large number of projects going 
at a very inefficient level, constantly pushing the time of 
their completion out into the out-years and therefore delaying 
the reaping of the benefits for the public. Instead of doing 
that, we asked this year that the constructions funds be 
strictly prioritized by remaining cost to remaining benefit, 
and that is a measure that takes into account the benefits that 
are yet to be gained from the project compared to the remaining 
costs that are needed to be invested to reap those benefits. So 
the idea is, we want the best bang for the buck, in each 
individual project.
    Now our difficulty there, of course, is that when we fund 
those projects that are best performing at efficient levels, we 
have to necessarily suspend, or in some cases terminate, some 
worthy and fully justified and good projects, Mr. Chairman. We 
have to leave them on the table.
    Senator Bond. Are there penalties assessed with those 
cancellations and deferments?
    Mr. Woodley. In many cases there would be. Although we 
would seek to manage the draw down of those and the wind down 
of those, to certainly minimize those penalties as much as we 
possibly can. You're exactly right, Mr. Chairman. You put your 
finger right on it.
    Senator Bond. Are there reprogramming restrictions that are 
not sufficiently flexible that may cause some problems? I would 
ask both of you to comment very briefly on that. Do you need 
more flexibility in reprogramming?
    Mr. Woodley. I would say that the way our program--or the 
way that construction in the construction arena and also in the 
operations and maintenance arena--that reprogramming 
flexibility is a very important part of our ability to manage 
day to day. And I would certainly ask the Chief to chime in on 
that.
    Senator Bond. General, do you have any comment on that?
    General Strock. Yes sir. It certainly is very important for 
us to be able to move the resources available around and to be 
able to manage this as a national program. Sir, I feel the 
guidance in last year's budget was sufficient; it is clear and 
we're complying with that guidance and we're not having any 
problems with that, sir.
    Senator Bond. Yesterday gentlemen, the nominee to be Deputy 
Secretary of Agriculture testified before the Agriculture 
Committee, where Senator Talent asked him if he would be an 
advocate in the administration for modernizing our Mississippi 
and Illinois river lots. His response was--this is from the to-
be-confirmed Deputy Secretary. He said, I will. It is not just 
important Senator it is absolutely essential. If we flat out 
have to get our agriculture commodities out of the Midwest down 
to New Orleans to a point of export, where we're absolutely 
dead in the water. So I will be an advocate of that within the 
administration, I assure you.
    When we get him confirmed you should have a partner, and I 
trust they will use him. If he doesn't meet that commitment I 
will be calling him, and I will be calling you, if I make 
myself clear. At this point I will turn under the Early Bird 
Rule to Senator Craig.
    Senator Craig. Mr. Chairman thank you. And gentlemen thank 
you very much for being with us today. There are several issues 
that I would like to take up with you, especially with you 
Secretary Woodley today.
    The first issue is one that I pursued for over a year with 
your agency. It is the issue of energy infrastructure reform. 
As I made clear to the Corps the last time we met in this room 
there is a growing concern about the natural gas infrastructure 
in the country. The market for natural gas has grown 
considerably. Its pricing is creating substantial dislocation 
in our economy at this moment. And that is particularly true in 
the northeast. This is a western Senator but senior member on 
the Energy Committee. Clearly, new pipeline construction is 
critical no matter where it is proposed.
    FERC is the agency jurisdictionally responsible for 
reviewing and approving natural gas pipeline construction in 
the United States. As we expressed to you last year Mr. 
Secretary, the pipeline construction process that FERC--at FERC 
is complicated. It has become even more so because other 
agencies like the Corps are also involved in the pipeline 
construction process, and bringing their own understanding of 
purpose and need for the project.
    One example used to portray the dysfunction of the current 
process is the extraordinary length of time it has taken to get 
a Corps Section 404 permit for the Islander East project in the 
northeast. FERC issued the certificate of construction for the 
line over 2 years ago, and today still, no permit has been 
issued by the Corps. Under any set of facts, that in my opinion 
is simply unacceptable. And there are other examples. But 
frankly, I don't have to describe them today, because of 
something you most recently did and I want to thank you very 
much for that action Mr. Secretary, though it has taken too 
long to get there.
    Mr. Secretary I do believe that what you've issued on April 
14 moves us in right direction, and I'm speaking to the 2005 
memorandum for Director of Civil Works. And I want to thank you 
again for taking that action. Let me just for a moment ask you 
a question about a statement in the memo.
    The memo states first that the Federal lead NEPA agency has 
the authority for, and the responsibility to define the purpose 
and need under NEPA. And second that the Corps will defer to 
the maximum extent allowable by law to the project purpose, 
project need and project alternatives that FERC determines to 
be appropriate for the project. Can you envision any instance 
where the Corps would not accept the determination by FERC, an 
agency that possesses energy expertise of what the need and the 
purpose of the project would be and the appropriate 
alternatives?
    Mr. Woodley. Senator, it would be difficult for me to 
imagine such a thing. That language is in there because 
advisedly, because I have on my staff numerous and very capable 
and learned attorneys--and I speak as one myself--whose 
imaginations are far more fertile than mine has been able to be 
in this area. So they wrestled me to the ground and made me put 
that language in there. I can't imagine it--how it would get--
how you get the thing from FERC that was the agency responsible 
for Federal energy policy and that it would not adequately and 
appropriately state the purpose and need in line with the 
Nation's energy needs in this arena.
    Senator Craig. Well, let's work on that a little bit.
    Mr. Woodley. I don't know how I would go about imagining 
it.
    Senator Craig. If so, and I'm talking about what those 
fertile minds might conceive, what do you think would dictate 
those circumstances? And if not, what would keep the Corps from 
developing an MOU with FERC, deferring to FERC in these areas?
    Mr. Woodley. Senator I can say that we have been working 
with FERC on an MOU since shortly after we met in this room 
last year. I called Chairman Wood--we had an excellent 
conversation about the parameters of the problem and the things 
that needed to be brought to bear in this area, and why some of 
the actions of some of our District offices were taken, were 
causing impediments in the development in the Nation's energy 
resources and infrastructure.
    I began with him at that time a process that has led to the 
exchange of drafts. His group that does this would do a draft, 
my group would do a draft. We said why don't we do it this way, 
why don't we do it that way. There were some delays in meetings 
between each draft. They had their preferred approach, we had 
ours. I can only say that I expect an MOU is in our future. My 
feeling was that an MOU is an excellent thing. We have MOU's 
with FERC in other arenas. We have some that, I think, would 
even be useful in this arena, but my thought was that the time 
had come to state as a matter of Corps regulatory policy what 
the appropriate rule should be, and that is what I did in the 
memorandum that you have.
    Senator Craig. Well I guess in looking at all of this and 
trying to grab the totality of it, if there's any reason that 
you may not be able to meet the time frames that FERC needs in 
authorizing energy infrastructure when they have the entire 
project to consider and you have the aspect of the project, 
like wetlands, I can't understand why you all can't come to an 
understanding that divides up that authority. You have 
responsibility, I don't dispute that. But I can't in anyway 
possibly imagine why it takes you 2+ years, to do something 
that they did in substantially less time.
    Mr. Woodley. In the case you described I believe that we 
were not following the concept that I've laid out in the 
memorandum.
    Senator Craig. I believe that's correct.
    Mr. Woodley. And I believe that was the particular sticking 
point. I certainly agree with you that that is not acceptable 
and that our regulatory process needs should dovetail with the 
FERC's process, and that is our goal. And that is what I have 
discussed with Chairman Wood.
    Senator Craig. I have some more questions. But for the sake 
of time and fairness, we have a crew here.
    Senator Bond. Thank you Senator Craig, we have a good 
turnout for this day and we want to move on, and we would call 
on Senator Johnson, after I congratulate him on winning the 
March of Dimes Gourmet Gala competition last night, even though 
he beat out one of my favorite recipes. I won't hold it against 
you, much.
    Senator Johnson.
    Senator Johnson. Thank you Mr. Chairman, and I would like 
to claim great credit for my wife's work on South Dakota 
buffalo chili. I would have to concede that the best of show 
award however is due to her work and not mine. I helped to dish 
it out and that is about the extent of my effort.
    I have only one question that I in particular want to ask 
in this hearing, in this case Mr. Woodley. We have, as Mr. 
Woodley knows we have an absolute crisis in South Dakota right 
now, particularly affecting the Cheyenne River Indian 
Reservation and some 14,000 individuals in that region. The 
looming crisis we have has to do with the Mni Waste drinking 
water intake in the Oahe reservoir, and the Oahe reservoir 
being of course one of the impoundments of the Missouri River 
that flows adjacent to the Cheyenne River Indian Reservation.
    As you know the entire basin is in severe drought, the 
mountain snow pack and precipitation less than 50 percent of 
normal. In August the water level elevation in the Oahe 
reservoirs is projected to be at an all time record low. The 
low water level poses an extraordinary threat to the Mni Waste 
water intake at Eagle Butte South Dakota.
    Members of this reservation and surrounding communities 
receive virtually all of their drinking water from that water 
intake. The Corps of Engineers is completing a PIR to identify 
solutions should water levels continue to fall, and that report 
as I understand it is due to be complete on April 18 and we 
will need approval then from the Corps Headquarters in 
Washington, DC.
    There's a great deal in jeopardy here, not only the literal 
access to water for thousands of citizens, but the proposed 
housing and construction of a hospital in Eagle Butte which has 
long been on the books and the funding is now available to go 
forward with those projects. Though without water, it simply is 
not possible to proceed. So you have some of the poorest of the 
poor in all of America under an extraordinarily difficult 
circumstance and Mr. Woodley can you ensure this subcommittee 
that the PIR will receive absolutely the utmost attention by 
Headquarters? And also can you assure the subcommittee that the 
Corps will provide the necessary funding to ensure the 
continued operation of the intake? Clearly long term we simply 
need to replace the entire water system for the Cheyenne River 
Reservation is going to be a costly and long-term project that 
is going to have to be done. That's not today's issue. But 
right now, the urgency of this water intake problem is just 
extraordinary. There are 14,000 people or more, who literally 
will not have water in their taps, in their schools, in their 
health clinics, in their senior citizen facilities, at all if 
something isn't done very very soon. Mr. Woodley.
    Mr. Woodley. Yes sir. The PIR will receive the absolute top 
priority in the Corps Headquarters and in my office. We have 
been briefed on this. The District Engineer at Omaha is in 
daily contact with this issue--in daily contact with the Tribe 
and with the other agencies that are concerned, and will do 
everything--we will first of all give that top priority and 
there will not be any slippage on the time. I have today been 
briefed by the Division Engineer, as well as the Chief himself, 
on this crisis. Having done that, we will commit to do 
everything within our power to achieve the--to put together the 
resources necessary to implement whatever recommendation of the 
PIR, which will identify alternatives--the recommendation that 
is selected by the tribe and the other authorities involved. We 
will do everything in our power to achieve the resources to 
undertake that recommendation, and to ensure that the viability 
of that intake now and in the future.
    Senator Johnson. Well thank you Mr. Woodley we will be in 
close communication with you, and as you can imagine there 
really is no plan B here. Trying to truck water to 14,000 
people or more, over an enormous expansive land would be just 
an almost impossible endeavor.
    We simply have got to have that intake in a place where it 
will work. And hopefully that emergency intake will dovetail 
with the longer term strategy for a new water system in that 
area, and hopefully we won't have to replicate, although I 
would appreciate that the first goal is simply to make sure 
these people get water as quickly as they can under an 
emergency circumstance. But thank you Mr. Woodley, Mr. 
Chairman.
    Senator Bond. Thank you very much, Senator Johnson. Now I 
turn to my ranking member on the THUD committee, Senator 
Murray.
    Senator Murray. Thank you Mr. Chairman, thank all of you 
for being here today. General Strock, the administration's 
budget has $15 million for the Columbia River Channel 
improvement project in it. And I really appreciate the 
inclusion of that money. Many of the folks out there tell us 
that it would move ahead much more effectively if $40 million 
were provided for that project. I just wanted to ask you today, 
can you confirm for me, that the Corps could actually spend $40 
million on the Columbia River deepening in fiscal year 2006, if 
those funds were provided.
    General Strock. Yes ma'am. The Division Commander reported 
that they have the capability of $41 million in fiscal year 
2006.
    Senator Murray. Well let me also ask you, in addition to 
that $15 million for the Columbia River deepening, there's $11 
million a year for ongoing yearly dredging. Both of those 
projects are up river of the mouth of the Columbia River, and 
it concerns me that while the budget provides funding for those 
dredging activities which I agree with and support, it doesn't 
provide any funding for the repair of the jetties that are at 
the mouth of the Columbia River. And I understand that there's 
real concern on the south jettie, in particular two areas that 
could fail. And it's pretty obvious to me that deepening the 
channel and channel dredging will be all for naught, if those 
jetties, can you talk to me about why money for repairing those 
jetties was not in the budget?
    General Strock. Well ma'am we certainly share your concerns 
and we do understand that this must be operated as a system, 
that without the jetties the deep channel does not function. 
Those jetties are in a very poor state of repair and we have an 
ongoing study now to do some interim upgrades to those jetties 
and have the capability to do that if we're provided funding, 
but we have not included a request for that in this year's 
budget.
    Senator Murray. Well that is very concerning to me, because 
if those jetties fail, all the money that we've put into 
channel deepening and other projects are not going to be worth 
it. So I will continue to work with this committee and with you 
on that. General you also know that we marked up the 
supplemental, emergency supplemental yesterday. It didn't 
include any money for the $30 million that is needed, $30 
million I understand for the Fern Ridge Dam that is in Oregon. 
Not in my State Mr. Chairman, but I am concerned about it, 
because I am told that this is an active state of failure. And 
if the Corps doesn't get the money, it's going to have to take 
it from all of the other active projects that are out there to 
fund that because it is an emergency, and so can you tell me 
General how much funding is needed to the Fern Ridge Dam in 
Oregon.
    General Strock. I might have to answer that for that record 
ma'am. We are, and want to make sure that you understand, that 
while we do describe that as an active state of failure we are 
taking measures in the operation of the reservoir to make sure 
that it is safe and the public is not in danger as a result.
    Senator Murray. I understand, but my point of that, to this 
Fern Project, is that is going to come out of all of the Corps 
projects in order to fund that, because it is failing?
    General Strock. That is correct. I am notified that we're 
going to reprogram about $31 million this year.
    Senator Murray. So, $31 million will be reprogrammed. Mr. 
Chairman, that's why I am--have discussed with Senator Cochran 
yesterday at the committee markup about getting an emergency 
supplemental for that, otherwise all the rest of us will see 
our money gone for projects that we think is going to be there, 
because it's failing.
    One last question General Strock. Do budget cuts, about 
third of the operation and maintenance funding for the Lake 
Washington ship canal. Can you explain to us how that project 
is going to be operated and maintained at this reduced funding 
level, and will that mean that the hours of operation of the 
locks themselves will be reduced?
    General Strock. Ma'am, we're looking at alternatives to 
address this inability to fund, to fully fund the operation of 
those locks, and we are considering alternatives such as 
limited operations, potentially user fees and that sort of 
thing.
    Senator Murray. User fees?
    General Strock. Yes ma'am.
    Senator Murray. Okay. I will tell you this is a huge issue 
out there. As you know, the locks are absolutely critical for a 
lot of shipping within the Puget Sound region and I want to 
hear from you more if you can in writing please, on what you're 
considering for funding that.
    General Strock. Ma'am we have committed to about $6.5 
million that would be required to keep those locks in 24 hour 
operations.
    Senator Murray. Thank you.
    Senator Bond. Thank you very much, Senator Murray. Senator 
Allard.

                           PREPARED STATEMENT

    Senator Allard. Thank you Mr. Chairman, I look forward to 
working with the committee and the Army Corps of Engineers on a 
number of projects important to the State of Colorado. Just to 
start off with, I have a prepared statement I would like to 
make a part of the record.
    Senator Bond. Without objection.
    [The statement follows:]

               Prepared Statement of Senator Wayne Allard

    Mr. Chairman, I want to thank you for holding this important 
hearing today.
    The Army Corps of Engineers and the Bureau of Reclamation are both 
important to Colorado.
    Throughout the West, water is one of our most important resources; 
this makes the role of the Bureau of Reclamation and the Army Corps of 
Engineers vital. When dealing with water I have a simple theory with 
several key principles that I keep in mind. These principles are: the 
Federal Government should ultimately defer to the States and their 
water rights, when the Federal Government does become involved it 
should be as a conduit of funding, and strategic water conservation and 
storage is necessary. The individuals here today each play a role in 
this theory, especially the final two points, and I thank them for 
appearing before us.
    As a conduit of funding, the Corps of Engineers plays a role as an 
important resource for communities to access funding and technical 
expertise for local projects. Through Civil Works Projects and The 
Continuing Authorities Program funding is made available to States and 
local communities to fund water projects. There are many of these 
projects currently underway in Colorado, including one in the Colorado 
Springs area, The Fountain Creek Tributaries project. I wanted to take 
a moment to thank you for the attention you have paid to this project, 
it is very important to me. Several years ago severe thunderstorms 
caused Fountain Creek to flood which caused a significant amount of 
damage to roads, homes, and business. My constituents in this area and 
I greatly appreciate the efforts taken on their behalf. And I would ask 
that the Corps continue to move forward with the local community on 
this project.
    Both organizations act as a tool for water storage and conservation 
and there is a good example of this in Colorado. The Bureau of 
Reclamation has an important project in Durango Colorado, the Animas-La 
Plata Project. In the past this committee has held hearings on The 
Animas-La Plata Project where concerns for discrepancies in the 
programs projected cost were raised. I am of the understanding that 
much has been done to address these concerns; I ask that the Bureau 
maintain diligence on this project.
    There is another project in Colorado which I would like to briefly 
mention. I look forward to working with all of you on the Arkansas 
Valley Conduit. I have appreciated the Corps willingness to work with 
us to this project. This same enthusiasm is not shared by the Bureau, 
but I hope to soon convince you otherwise.
    There are many examples of good Bureau and Corps leadership in 
Colorado--I look forward to a cooperative relationship with all of you.
    Again, thank you Mr. Chairman for holding this hearing and thank 
you gentlemen for appearing before us today.

    Senator Allard. Just to summarize what I said in the 
statement--first of all I want to let you know what a pleasure 
it is for me to be on this committee, because water is really 
important and a precious commodity as far as the State of 
Colorado is concerned, and our water law dates back to the late 
1800's. The doctrine of prior appropriation, which basically 
stated that the Federal Government defers to the States on the 
management of the water, and the Federal Government works to 
help provide funding and work with the States in meeting 
whatever the needs are within the State. That's important to 
the State of Colorado, in the fact that we have some seven 
bases in the State, and four Districts in our State, I will 
follow-up with that on my questions a little bit later.
    We have some projects that are ongoing right now. I want to 
thank the Corps for working with our office in the past and I 
know you've worked with Senator Campbell's office on some of 
these projects. I'll mention a few, the Fountain Creek 
Tributaries project, which is on bank stabilization. Some local 
communities are impacted as a result of a flood we had in 
Colorado. I want to thank you for working on that project, and 
we'll continue to follow the progress on that. The Animas-La 
Plata project, I understand has had some problems with cost 
overruns; there have been hearings on that in this committee. 
It is just my feeling that it requires a lot of diligence and a 
lot of oversight. We would like to work with the Corps as that 
project moves forward to make sure that we have adequate 
oversight there to keep our costs down. My understanding is 
that they've worked and taken care of some of their problems 
and we just have to make sure that those policies are carried 
forward.
    Another thing that I'm working on is the Arkansas Valley 
Conduit, which you have not been particularly excited about, 
but is something that we're working, and something we think 
might be essential for the Arkansas Valley so we'll continue to 
stay in touch and work with the Corps on that particular issue. 
Related to whole Arkansas River, we have a number of issues 
down below there, and I would talk to you about those.
    And then on my questions, I think you've done some things 
according to my briefings that have improved communications 
between the four Districts within Colorado. There was a 
problem, I think, with communication between the four of those 
in some cases. There is a problem with my constituents 
communicating with the various offices. My understanding is 
that it has improved. But we continue to get some concerns 
raised, from my constituents, about communicating with the 
various offices. And so my question is, while you seem to have 
done a pretty good job of improving communication between the 
offices, the problem remains between my constituents and the 
offices. What have you done there to make sure that their 
concerns get heard? I think a lot of their offices are outside 
of the State of Colorado, so they're not particularly handy for 
my constituents. I would like to hear any comments you might 
have in that regard.
    Mr. Woodley. Senator, this is something that, you will 
recall, that you raised with me at least 2 years ago when we 
discussed the needs of Colorado, vis-a-vis the Corps of 
Engineers, at that time. And inspired by that leadership, once 
I took office and began to work in this arena, I went to Denver 
and met with many of the people concerned--people in 
aggregates, and development, and people with environmental 
concerns, just a considerable cross section. And what I learned 
was that there was an office in Omaha, and one in Albuquerque 
and another in--I'm getting to Sacramento, but another in 
Arizona I guess--and then Sacramento. And they asked me, Mr. 
Woodley, do you have any idea where Sacramento is located, and 
naturally I said, well it's out here someplace, isn't it. And 
they said sir, you are now almost as far from Sacramento as you 
are from Washington, DC. That's about right. And so that was a 
real epiphany for this young easterner. And so I got back to 
town and got to work on putting together the concept of having 
a lead District. Now the Corps--what happens, the way that 
happens is the Corps is divided by watershed and that's a good 
thing. I'm not opposed to that, it's a good thing, and we get 
enormous benefits from that. But Sacramento's a long way from 
Denver nonetheless, and so you have to try and craft a solution 
that maintains the benefit so we can work on a watershed basis, 
we can understand the needs of each separate area, and so that 
we can have--also have at the same time a powerful liaison and 
link up with the State Government and the State leadership in 
environmental and watershed, water related issues. And have 
consistency across the State. Because the people, your 
constituents, talk to one another, and the regulated community 
they talk to one another. If they get a deal in one part of the 
State, if they get a deal in Boulder that they can't get in 
Colorado Springs, then we hear about it. And so we established 
that assignment to Albuquerque, returned to Denver, and made 
that announcement there at the capital with the State 
regulatory authorities, and it was very very well received, I 
thought. We just began the year, so I'm confident that we have 
not reaped all the benefits we're going to reap. But I'm 
absolutely committed to improve our communication across the 
board with the regulated, with the land owners, essentially in 
this area, businesses, people that are concerned about 
preserving wetlands, and getting effective permits done on a 
consistent and a timely--consistent and predictable manner.
    Senator Allard. I appreciate your efforts, and I want to 
recognize what you've done. The chairman is showing me his 
wristwatch here so I know my time is up, but I do want to wrap 
it up here. As we run across specific instances I may share 
those with you, because I think you've made some strides. We 
just have to identify specifics, as I run across those I will 
bring them to you in a friendly manner, because we want to 
provide good services.
    Mr. Woodley. Senator, you know we're always at your 
disposal.
    Senator Bond. Thank you very much Senator Allard. Senator 
Burns.
    Senator Burns. Thank you Mr. Chairman, I don't have a lot 
of questions for the Corps other than the Missouri River. We 
are learning now in our eighth year of drought, that whiskey is 
for drinking and water is for fighting, and we've got a real 
problem up-stream as you well know. We've got three main 
reservoirs up-stream that are imperilment areas, that we're 
going to have to look at a different management module or 
something because we cannot have a healthy river unless we have 
healthy reservoirs. And right now we don't have healthy 
reservoirs as you well know. And so we've got Oahe Garrison and 
PET that are the major focus right now, and we've got about a 
60 percent snow pack. We know that your runoff this year is not 
going to be what we had hoped for this year, even though we're 
getting moisture now, we might get rain, we may get a little 
snow, but that's all going to go underground, there's not going 
to be any runoff this year, that river is going to stay low all 
year. And I would tell you right now, I appreciate the 
cooperation and the communications we've got with the Corps 
right now, I feel very good that we can solve some of these 
problems up there. But it's going to be tough on everybody on 
that Missouri River. Now, I was raised on one end of it, I'll 
probably die on the other, and I've traveled that river up and 
down, and I know a little bit about it, and the issues that 
surround it. We're very fortunate to have a great river like 
that in the center of our continent because as that sustains a 
lot of life and does a lot of great things for this great 
Nation. So I just came here today to say, thank you. Now we 
know we've got our little differences and all that, but we're 
trying to communicate them, we're trying to fix them. And as 
long as we keep talking I think we can get it done, but you've 
got all the way from Three Forks, Montana to Lake Oahe, South 
Dakota, we have a problem. And we'll never get it solved if we 
just kind of keep beating on one another and I would open up 
these communications and do some things that should have been 
done quite a while ago. So I appreciate the lines of 
communications and everything that we are trying to do to make 
that a healthy river. And there ain't nothing you can do on 
that river, except water.
    We've got to have a snow pack. And if we don't have it, 
then we've all got to work together to make the impact the same 
all the way to St. Louis. So I thank you, and I just want to 
continue to work with you and our State, and especially those 
three reservoirs. I'm concerned about those three reservoirs 
because they mean so much for the upper Midwest and the high 
plains. And I thank the chairman. Do you want to react to that, 
or General Strock?
    General Strock. Sir, I would just like to thank you, as you 
know I served on the Missouri River for a number of years, and 
I'm delighted to know that we're moving in the right direction. 
It is a tough problem. We put our best minds on it I know and 
the best minds of the States involved have also been at this 
and will continue to work very hard. But sir, thank you very 
much.
    Senator Burns. I think our lines of communication are as 
probably open now as they've ever been, so we just appreciate 
that, and we continue to work on it.
    General Strock. Thank you sir.
    Senator Bond. Thank you very much, Senator Burns. Having 
gotten the 50 percent increase in the minimum level I can see 
why you're expressing appreciation. We have had a slight 
difference but I would remind you that the difference is not 
just down to St. Louis that water flows into something called 
the Mississippi, and that shuts down when the river shuts down. 
And I will join you in praying for more rain, but I'm going to 
pray on one knee because last we did it was 1993 and we got the 
100-year floods in 1993. But we've got to be careful what we 
pray for. Along that line I would like to call on Senator 
Dorgan.
    Senator Dorgan. Mr. Chairman, thank you. I was surprised to 
see you in the chair when I came in the room. Not pleasantly 
surprised, but surprised nonetheless.
    I was thinking, we will discuss the Missouri River and you 
and I and Senator Burns have had long, tortured discussions 
about that.
    But, at any rate welcome to the chairmanship today. I guess 
I've had less sugar today than my colleague from Montana. I'm 
not prepared to thank anybody. And I remain enormously 
frustrated, as do my constituents about the Missouri. I share 
the statements that my colleague from Montana made. We're short 
of water, we're going to have less runoff, and our reservoir in 
North Dakota is down 30 feet. And what I would like to do is 
just run you through a couple of questions if I might, just 
before making a conclusion and asking you to comment. At this 
time of the year if we were not in a drought condition, and 
we're in repeated years of drought, what would we expect? What 
kind of quantity of water would we expect in the Missouri River 
system this time of year generally? I'm told it's about 50 
million acre-feet.
    Mr. Woodley. I would have said between 54 and 58 million 
acre-feet, Senator.
    Senator Dorgan. And what quantity of water exists in the 
Missouri water system now?
    Mr. Woodley. Less than 35 million acre-feet.
    Senator Dorgan. So normally we would have 58 million acre-
feet, and now there are less than 35 million acre-feet. My 
colleague from Missouri just referred to a change in the 
drought conservation level. It went from 21 to 31 million acre-
feet, which is a 50 percent increase. The 31 million acre-feet 
is largely an irrelevancy, to me anyway. That change from 21 to 
31 million acre-feet was that change a result of legislation, 
or a result of a determination through the master manual 
rewrite without legislation?
    Mr. Woodley. That was not determined by legislation, 
Senator, that was a master manual.
    Senator Dorgan. So the judgment in the master manual that 
drought conservation should be employed in the Missouri River 
system is not a function of the Congress, it's a function of 
the Corps and the people who live along the river, and who are 
involved the process to make these decisions, is that correct?
    Mr. Woodley. Yes, sir.
    Senator Dorgan. And so at this point, for a river that 
would have 58 million acre-feet normally, we're at 34 million 
acre-feet roughly, it sounds like less than 35 million acre-
feet and we don't have drought conservation measures yet, 
because it hasn't triggered the 31 million acre-feet. You might 
see why I'm not very thankful about the 21 to 31, I think it's 
irrelevant at this moment for the people in Montana and North 
Dakota who see nothing where they expect to see water. And I 
would just like to ask the question in the construct of the 
master manual, did you determine the net economic benefit of 
the barge industry on this river?
    Mr. Woodley. I believe that we did, yes.
    Senator Dorgan. Can you tell me what that was?
    Mr. Woodley. I believe that the net economic benefit figure 
was in the neighborhood of between $7 million and $8 million on 
an annual basis.
    Senator Dorgan. The net economic benefit of the barge 
industry is between $7 million and $8 million?
    Mr. Woodley. As we define that within the guidelines we're 
given under the Principles and Guidelines.
    Senator Dorgan. And for that we've written and rewritten 
the master manual that establishes that a level below 31 
million is the first time we would employ drought conservation 
measures, why? To protect an enterprise, down-stream with a net 
economic benefit of $8 million a year? That's unbelievable to 
me.
    Mr. Woodley. Senator, I will say that if--I certainly am 
not seeking to minimize the difficulty, nor seeking to justify 
the unjustifiable. But I am saying, and would like to suggest, 
that under the new master manual many drought conservation 
measures are employed well before the storage arrives at the 
navigation preclude level of 31 million acre-feet.
    One example of that is a reduction in the level of 
navigation support that is given in terms of the depth of 
channel that is supported from Sioux City to St. Louis. Another 
is that--and we are now at the minimum level for that. Another 
is that we began to shorten the length of the navigation 
season, the length of time during which navigation is supported 
on an annual basis. A full year would allow navigation support 
from April 1 to December 1. Last year it was curtailed and this 
year it will again be curtailed.
    Senator Dorgan. I understand all of that.
    Mr. Woodley. So I don't want to leave the impression that 
no conservation measures are taken prior to the 31 million 
acre-feet.
    Senator Dorgan. I wasn't alleging that. My point is during 
the navigation season that does exist, about one-third of the 
water that is flushed from the upper reservoirs is for the 
support of an industry that has an net economic benefit of $8 
million a year. Is that a signal?
    Senator Bond. Well your time is up, but go ahead, because I 
want to answer a little bit.
    Senator Dorgan. I understand that. Let me just make this 
point. I believe very strongly that the State of Missouri, all 
of the economic interests on the river, including the up-stream 
and down-stream States would have been benefited, had we during 
all of the years of this drought been storing water, rather 
than using it for an industry that has a net economic benefit 
of $8 million a year. And I'm not suggesting that that economic 
benefit should have been ignored. You could have doubled it, in 
simply payments to them and still been far ahead for everybody 
on that river including the citizens of Missouri. Now I have a 
great respect for my colleague. We have a disagreement on this. 
I don't intend in anyway to be personal. But I feel very 
strongly as do many of the up-stream States that we're 
systematically cheated, Mother Nature is part of this, I 
understand it. But the management of the river is another part 
of it, and we're tired of it and it needs to be solved.
    Mr. Woodley. And I'm deeply sympathetic with your views, 
Senator. The support for navigation is a statutorily created 
and Congressionally mandated project purpose, which within--as 
we formulate a master manual, as the Corps of Engineers 
formulates a master manual--they are absolutely required to 
consider and support. And they arrive at a balance that seems 
good at the time, but are certainly not--anxious not to 
consider any given balance as the final balance, and to await 
and to receive further instructions from the Congress and from 
the leaders of the basin, the Governors, the tribes, the 
agriculture people who earn their living on the land in 
agriculture and elsewhere. And certainly those who earn their 
living on the water in the great recreational industries that 
are supported on the lakes and reservoirs.
    Senator Bond. Thank you very much Mr. Woodley. Thank you, 
Senator Dorgan. I would point out Mr. Woodley, that the Eighth 
Circuit confirmed that one of the two purposes was to maintain 
river transportation. I think your statement about $7 million 
to $8 million being the impact on transportation is wildly out 
of whack. You well know, as I know, that 65 percent of the flow 
of the Mississippi River at St. Louis comes from the Missouri 
River and that when the flow was shut off on the Missouri River 
2 years ago, barge--all transportation in the mid-Mississippi 
was shut off as well.
    Furthermore I think you overlooked the fact that a study of 
the impact on barge traffic and the ability to get ship 
commodities by barge traffic means a $200 million saving for 
Missouri and Midwest farmers exporting to the world market. 
Because the exporters who are one of the few who actually 
provide a budget surplus, a trade balance surplus for us, 
depends upon the river to keep the rail costs from going 
through the ceiling which they have, because there's been 
adequate rail service.
    So water, water transportation saves $200 million. There 
are many other industries that depend upon getting inputs up 
the river, and I've got to believe that $7 million to $8 
million doesn't even touch it. You also should probably think 
about what almost happened in 19--or 2003 when the river was 
shut down, it came within 36 hours of shutting down power 
production on four major electric generating facilities. Three 
on the Missouri and one on the Mississippi River, and if you 
don't think there's going to be a cost to shutting down power 
cooling by shutting down the river then you've got another 
thing coming.
    We are already as you pointed out in drought conservations 
situations, have minimum loads on the Missouri River, 
shortening it, shortening the season by 2 months and I think 
that the situation is very serious on both the up-stream and 
the down-stream States.
    And I personally think, going from 21 million acre-feet to 
31 million acre-feet was unwarranted. You made that decision, 
so it stands. But there's going to a significant hardship all 
the way to New Orleans if we hit that 31 million acre-feet.
    I would ask General Strock about one possible solution that 
might be helpful to up- and down-stream States, and that is the 
flow to target regime. That could have saved a million acre-
feet of water last year, so that during the abbreviated season 
you release no more than necessary. You keep more water in the 
reservoirs. I would ask that you raise this as a real 
possibility when we're facing this catastrophic drought 
effecting the up-stream and the down-stream States that you 
raise this with the Fish and Wildlife Service who seem to be 
the ones who object to it. While many human activities, on both 
ends of the area are suffering. General Strock, would you like 
to comment on that?
    General Strock. Sir, at risk of exceeding my memory here, 
we are considering the flow to target and we do think that this 
year if the conditions are the same as last summer, that we 
could possibly save between 0.5 and 1 million acre-feet of 
water using flow to target. But our ability to do that is 
dependant upon our ability to meet the ESA restrictions on the 
support of--nesting. But it's certainly something that we will 
continue to examine and consider.
    Senator Bond. Thank you very much General Strock. Now we'll 
start back for a second round to Senator Craig.
    Senator Craig. Thank you very much Mr. Chairman, I know 
we're all struggling with lack of water, that is true in the 
Snake River and the Columbia River basins as it is on both 
sides of the Continental Divide and it is a very real 
management problem. Mr. Secretary let me go back to the line of 
questioning I was pursuing with you earlier as it relates to 
Section 404 permits. Section 404 permits, the Section 404 
permit program at the Corps as it relates to the policies 
addressing canals, drains, and other irrigations works. I'm 
going to focus on the Corps treatment of those water facilities 
as effecting navigable waters, or waters of the United States 
for the purpose of the Clean Water Act, and jurisdiction under 
Section 404. At the national level, has the Corps adopted any 
written policies on this matter?
    Mr. Woodley. No Senator, not specific to--not specific to 
canals, drains and the irrigation structures. I believe that 
the documents that we have are--express themselves in more 
general terms.
    Senator Craig. Isn't this jurisdiction only an issue 
properly addressed within the context of a proposed rule 
making?
    Mr. Woodley. I would say that a proposed rule making is 
certainly one of the possibilities. I don't think it's 
necessarily, Senator, the only possibility that can be 
effective administratively.
    Senator Craig. Well, if so I guess my question then is, why 
hasn't the Corps commenced that process, and let me go beyond 
that because you partially answered that. The Corps withdrew a 
notice of proposed rule making regarding waters of the United 
States in December of 2003; perhaps it is time that that effort 
be looked at again. Until this issue is resolved through rule 
making or other direction from the national level, what is the 
direction being provided in individual Districts?
    Mr. Woodley. The individual Districts are not given any 
more specific guidance than is in the general guidance that is 
in the existing rule. We have underway--we are very concerned 
about the issue of consistency and the appropriate scope of our 
jurisdiction in the aftermath of the Supreme Court's decision 
in the Solid Waste Authority of Northern Cook County. And we 
have subsequent to that received--as you know, we've had the 
effort that was initiated or inaugurated with the proposed rule 
making announcement. And we said that, after looking at the 
wide variety of comments that we had received on that, we 
decided that there was just not enough support behind any given 
approach to how to resolve the question to make rule making a 
useful endeavor at this time. The alternative--subsequent to 
that, we have received a study from the Government 
Accountability Office that indicated to us that there appeared 
to be a difficulty with consistency across our program.
    I confess I was not profoundly surprised by that finding, 
given that the rule that we were undertaking to enforce had 
several terms in it that appeared to me to need greater clarity 
and definition. Our thought at that time was that the 
appropriate thing for us to do would be to conduct a full scale 
study across the board of all of the professionals and experts 
that we have in the field conducting these determinations day 
by day. That would determine a level of those areas at which we 
had consistency. We could see then, those areas where we needed 
greater consistency. We would be able to develop that based 
upon the best practices from the people in the field.
    Senator Craig. Why don't we continue to pursue this and 
here's why I'm pursuing it. I think that you might receive 
assurances that activities and canals and drains can be covered 
under normal operation and maintenance exemptions. For ditches 
in Section 404 however, there does not seem to be routine 
nature to this, and my question is one you probably can't 
answer but we will pursue it, why is the Walla Walla District 
which covers Idaho, so aggressively asserting jurisdiction over 
irrigation delivery systems in the absence of a national 
direction. Now some believe, and I tend to be in that group 
that this is a result of a Ninth Circuit Court March 12, 2001 
decision in the Talent irrigation District case. However that 
case was very fact-specific. Also the so-called rule from that 
case is not being applied evenly across the Ninth Circuit for 
example. The focus seems to be in Idaho, and Washington. 
Washington the latter, pursuant to a court settlement by a 
Seattle Court which doesn't have jurisdiction over Idaho. I 
think this begs for some Headquarter guidance. It appears to be 
sporadic. One size should fit all in this situation and it 
doesn't appear to be that. And you're causing confusion and 
chaos in Idaho in many instances at this moment because what 
appears to be a rather arbitrary approach to decision-making 
based on what the broader sense of a Ninth Circuit Court 
decision was, versus the specifics of that case. And uniformity 
is important here for our operators in our large irrigation 
Districts and systems to understand that. It isn't an issue 
they won't comply; it is an issue of consistency of operation, 
and direction. And I'll continue to pursue this with you, 
because I think it is important, General and Mr. Secretary, 
that we get some uniformity here. And I do think it is 
appropriate that rule-making go forward in this area.
    Senator Bond. Thank you very much Senator Craig. Senator 
Allard.
    Senator Allard. Mr. Chairman, I don't have anything further 
for this panel.
    Senator Bond. Okay. Senator Dorgan, anything further?
    Senator Dorgan. Mr. Chairman, let me ask, I would like to 
submit some questions for General Strock on the issue of 
contracting in Iraq, sole source and other questions and I'll 
just submit those in writing relating to some issues that I 
raised yesterday.
    Let me say this, although I feel very strongly about the 
management of the Missouri River, I'm angry about it, and 
frustrated. I do want to say that we have had some help outside 
of the management of the river itself. We've had some good 
assistance from the Corps on some boat ramp issues, and other 
related issues that have been helpful to some local folks to 
deal with the consequences of the drought.
    So I don't want my angst to tarnish all the work of 
everybody in the Corps, but neither do I want to sound 
reasonable, and let you believe that I'm leaving the room 
completely satisfied with the Corps. This is a big, big, big 
problem. It's not going to go away, it's going to get worse 
this year, and how it's dealt with is critically important to 
my constituents. I understand the chairman has his constituents 
who are very concerned as well. But this conversation will last 
much longer than this hearing, Mr. Chairman, as you know. And I 
appreciate the conversation that we will continue to have about 
it.
    I would like to also ask, and send if I might, to submit 
some questions for the Bureau of Reclamation on the next panel.
    Senator Bond. Thank you very much Senator Dorgan. I've only 
been involved in these discussions now for 32 years. And I 
unfortunately if future generations come along I think they 
will probably continue to discuss them. But perhaps a little 
bit of help we can find in things like Flow to Target, which 
could provide some relief to both sides.
    Senator Craig. Mr. Chairman, can we just appropriate money 
to buy some rain, governments can do everything, can't they?
    Senator Bond. By unanimous consent in the Senate, we would 
make it rain without appropriating, but I don't want to try it.

                     ADDITIONAL COMMITTEE QUESTIONS

    I would like to thank our first panel. Gentlemen we will be 
continuing this discussion, you will be having some questions 
from us, as well as other members. The record will be open for 
questions to be submitted.
    As always, we appreciate your prompt response and then we 
will be calling you as always. Thank you very much Gentlemen.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
            Questions Submitted by Senator Pete V. Domenici

    Question. Can you tell us how the Corps budget was formulated this 
year?
    Mr. Woodley. The Corps developed its fiscal year 2006 budget by 
program area and then disaggregated the projects to the existing 
account structure. Studies and Preconstruction Engineering and Design 
(PED) were funded based on the likelihood they will result in high-
performing projects. For construction, the budget used seven 
performance guidelines to allocate funds among projects in order to 
achieve greater value to the Nation overall from the construction 
program. Under the performance guidelines, construction projects were 
ranked and funded based on their estimated economic and environmental 
returns. The effect is to redirect funding away from the lowest return 
projects to accelerate completion of the highest performing projects. 
For operation and maintenance work, the budget emphasizes essential 
operation and maintenance activities at key Corps facilities, including 
maintenance dredging and structural repairs that are necessary to keep 
projects operational in fiscal year 2006.
    Question. Can you explain a little about the methodology?
    Mr. Woodley. Studies and Preconstruction Engineering and Design 
(PED) efforts are funded based on the likelihood that they will result 
in high-performing projects. This involves consideration of two 
factors: (1) The likelihood that the study or PED would result in a 
project. This is largely determined by whether there is a willing cost 
sharing sponsor for the study or PED who will have signed a cost 
sharing agreement by the end of fiscal year 2005. (2) The expected 
relative performance of the project. For PEDs producing economic 
outputs, remaining benefit-remaining cost ratios (RBRCR's) are 
available. For aquatic ecosystem restoration PEDs, cost effectiveness 
in addressing significant regional or national ecosystem problems is 
considered. For studies, the Divisions were asked to identify the 
highest-performing projects.
    Studies and PEDs that are less likely to result in a high-
performing project are suspended or deferred. In particular, PEDs with 
remaining benefit to remaining cost ratios (RBRCRs) of less then 3 to 1 
are not funded in the budget.
    Construction projects producing economic benefits competed based on 
their RBRCRs. Those with RBRCRs below 3 to 1 would be considered for 
contract suspension. Aquatic ecosystem restoration projects compete 
based on their relative cost effectiveness in addressing significant 
regional or national ecosystem problems. Those that are not relatively 
cost effective, are limited in scope, and do not address relatively 
significant problems would be considered for suspension.
    A ``suspension fund'' of $80 million would be created in the 
Construction account for the projects considered for suspension, and a 
suspension fund of $8 million would be created in the Flood Control, 
Mississippi River and Tributaries account. If it would be less costly 
to continue or complete a contract than to pay claims, the contract 
would receive funding from the suspension fund. For other contracts, 
settled claims would be paid from the suspension fund.
    All projects that are individually funded (i.e. are not suspended) 
receive enough to pay earnings on ongoing contracts awarded before 
fiscal year 2006, plus associated in-house costs.
    Projects compete against each other within each mission area. Those 
projects that are the highest performing in each mission area receive 
at least 80 percent of the amount that could be expended efficiently on 
the project in fiscal year 2006. (In some cases the projects already 
are receiving at least 80 percent to fund earnings on already-awarded 
contracts, whereas in others the projects receive additional funding 
under this ``80 percent rule'' and can award additional contracts.)
    The highest performing projects include 14 dam safety projects, 9 
national priority projects, and 38 other projects.
    New projects or resumptions (projects not under physical 
construction for 3 years) are eligible for funding only if their 
estimated return is on par with the top 20 percent of other projects in 
their mission area. One such new start is in the fiscal year 2006 
budget: Washington, DC and Vicinity, a flood damage reduction project 
that is one of the highest-return projects in the Nation. The 
initiation of this project is necessary to reduce the risk of flood 
damage to the museums on the National Mall, the Franklin Delano 
Roosevelt Memorial, and the World War II Memorial.
    Under the performance guidelines, at least 70 percent of the 
funding in the construction account should be allocated for navigation 
and damage reduction, at least 5 percent for major rehabilitations, and 
no more than 25 percent for aquatic ecosystem restoration.
    Up to 10 percent of the funding in the account may be allocated to 
projects that do not meet the above performance criteria and allocation 
guidelines, but which, for extenuating reasons, warrant funding in the 
budget. However, none of the ``ten percent'' funds may be used for new 
starts and resumptions.
    The budget funds the highest performing operation and maintenance 
work.
    In general, ``must have'' operation and maintenance costs are 
funded. These are the costs that must be incurred to keep projects 
operational in fiscal year 2006. Any work that must be performed in 
fiscal year 2006 to meet a legal mandate would be carried out. In 
addition, all facility protection needs in fiscal year 2006 will be 
met. These include funding for completion of work to establish baseline 
security conditions at over 200 key projects, for recurring anti-
terrorism costs at water resources projects, and for continued 
protection of administration buildings and laboratories.
    The budget continues the policy of establishing priorities for 
funding navigation maintenance primarily on the extent to which a 
channel, harbor or waterway segment supports high volumes of commercial 
traffic. The budget also funds channel and harbor projects that have 
low commercial traffic but support significant commercial fishing, 
subsistence or public transportation benefits.
    The budget also includes funding for an assessment of the economics 
and long-term policy options for navigation facilities with relatively 
low levels of commercial traffic. The study will identify the universe 
of Federal channel and harbor projects and inland waterways segments 
that support lower levels of commercial use, classify these projects 
based on the kinds of contributions that they make, develop methods to 
quantify the differences in their attributes and examine possible 
criteria for determining when a continued investment in operation and 
maintenance would produce a significant net return to the Nation. The 
study will also formulate a range of possible long-term options for the 
funding and management of navigation projects with lower levels of 
commercial use, evaluate these options, and examine their applicability 
to the various types of such projects.
    An emergency reserve would be funded so that, if high-priority, 
unexpected, and urgent maintenance needs arise at key facilities, those 
needs can be met without disrupting other work.
    The hydropower operation and maintenance work that is programmed 
for fiscal year 2006 is the operation and maintenance work that the 
Federal power marketing administrations are willing to finance under 
the administration's proposal for direct funding of hydropower. The 
willingness of the party receiving the power to pay for some operation 
and maintenance activities and not others is a market-based performance 
test.
    Question. What do you believe is the traditional mission of the 
Corps of Engineers Civil Works program?
    General Strock. Army involvement in works of a civil nature goes 
back to 1824. Over the years, as the Nation's needs have changed, so 
have the Army's Civil Works missions. The Corps Civil Works program has 
three main missions: (1) facilitating commercial navigation; (2) 
reducing damages caused by floods and storms; and (3) restoring aquatic 
ecosystems. The Corps also performs related work through the emergency 
management and regulatory programs, and by providing hydropower and 
water supply from Corps multi-purpose reservoirs.
    Question. Would you agree that part of that mission includes having 
a trained, geographically dispersed workforce?
    General Strock. Yes, Sir. However, their current distribution is 
not necessarily optimal. We need to periodically assess whether our 
workforce is distributed in the best way to carry out the current and 
expected workload.
    Question. Are you aware that the Congress has directed that all of 
the Corps field offices be maintained?
    General Strock. Yes, Sir.
    Question. Do you feel that the methodology that you used to 
formulate the budget allows you to meet this mandate?
    General Strock. Yes, Sir.
    Question. How?
    General Strock. While some Districts are adversely impacted, the 
Regional Business Center concept enables cross-leveling of effort among 
districts and regions to optimize the use of expertise, wherever 
located.
    Question. It appears to me that a number of your field offices 
would not have enough work to maintain their workforce if this budget 
were implemented. What is your view?
    General Strock. We recognize that the budget could impact workload 
among the Districts. As I mentioned, however, we feel that through the 
use of the Regional Business Centers we will be able to manage any 
potential decline in FTEs and minimize the impacts of imbalances on 
particular districts.
    Question. Assuming you were aware that your budget assumptions 
would cause imbalances in your workforce, did you prepare accompanying 
plans for reductions in force or management directed employee moves to 
accompany the budget request? Why not?
    General Strock. The divisions and districts will do workforce 
analyses over the next few months. We would not finalize our plans 
until Congress has acted on fiscal year 2006 appropriations.
    Question. How did you plan to address these imbalances?
    General Strock. As stated earlier, our divisions will address 
geographic shifts in workload through the cross-level efforts of our 
Regional Business Centers.
    Question. In the fiscal year 2005 Omnibus Appropriations Act, we 
directed you to provide your Report on any action on which the Chief of 
Engineers has reported. Instead, you provided the Chief of Engineers 
Report. Why didn't you provide your report?
    Mr. Woodley. First let me say, without equivocation, that as a 
matter of principle and practice, I am fully committed to complying 
with all Federal laws. As a member of the Executive Branch, I am also 
compelled to execute my obligations, duties, and responsibilities in 
accordance with all authorized directions and orders from the 
President. As I believe you are aware, Executive Order 12322 requires 
that I coordinate my draft report on water resources projects with OMB 
prior to submitting my report and recommendations to Congress, ensuring 
that a proposed water resources project is consistent with the policies 
and programs of the administration. Within the time period provided, 
however, I could only inform the Committees, consistent with Section 
113 of the Omnibus Act, Public Law 108-77, that the administration's 
review of the applicable reports of the Chief of Engineers is still 
pending.
    Question. I believe the law as signed by the President, requires 
that you send us your Report. I would recommend that you comply with 
the law.
    Mr. Woodley. Sir, for a number of the projects in question, I did 
not have a report as of March 8, 2005.
    Question. In fiscal year 2005, we provided you comprehensive 
guidance as to how reprogramming actions should be undertaken for 
implementing the fiscal year 2005 program. I believe this was the first 
time that we had addressed reprogramming on a comprehensive basis. Has 
the new guidance affected the Corps' ability to efficiently and 
effectively manage the Civil Works program?
    General Strock. No, Sir.
    Question. It is my understanding that for fiscal year 2005, the 
Headquarters office of the Corps has taken a more active role in 
construction contract execution. Can you explain the traditional 
process that had been used and the changes you have implemented for 
fiscal year 2005?
    General Strock. The traditional process requires the contractor to 
develop a schedule and update it regularly through contract completion. 
These schedules are usually used by the District to compute a 
contractor's expected earnings per fiscal year and these earnings 
estimates are used by Headquarters in developing the annual budget 
requests for the project.
    For fiscal year 2005 we are requiring submittal of proposed new 
continuing contracts to HQ for review and approval prior to award. 
These submittals must address whether alternate contract options have 
been explored, the budgetability of the project, and reasonableness of 
out-year funding availability to meet those contract funding 
requirements. We also are notifying the appropriations committees prior 
to award of such contracts.
    Question. Have you recently made any changes to this process? Why?
    General Strock. Yes, Sir, prior to the award of new continuing 
contracts we are requiring HQ approval and we are notifying the 
appropriations committees. We are taking these steps to ensure that, in 
the aggregate, the out-year tails on continuing contracts are 
affordable.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell

    Question. The U.S. Army Corps of Engineers has been working to 
construct an additional chamber at the Kentucky Lock facility since 
fiscal year 1998 and has spent over $165 million to date. The 
administration, however, did not recommend funding for this project in 
its fiscal year 2006 budget proposal.
    The administration's lack of proposed funding for fiscal year 2006 
impacts the ability of the U.S. Army Corps of Engineers to execute 
fiscal year 2005 funds. The award of critical construction contracts, 
in particular, likely will be delayed.
    What is the estimated economic impact of such delays expected to 
occur in fiscal year 2005?
    General Strock. Compared to the capability level of funding, any 
funding level could be viewed as causing ``delays.'' However, the Civil 
Works program has not received the maximum amount that it could 
efficiently spend in any recent fiscal year. In the administration's 
view, devoting the capability level of funding to the Corps would not 
produce the best return for the Nation, considering the potential 
alternative uses of funds. The overall Budget allocation for the Civil 
Works program as well as the performance-based allocations for 
construction projects reflects, in the administration's view, the best 
way to realize overall net benefits for the Nation. If the award of 
contracts is delayed, there would be a corresponding deferral of 
benefits achieved from the project's completion.
    Question. What is the potential impact on the completion date of 
the project caused by a delay in awarding the ``critical path'' 
contract for the superstructure in 2005?
    General Strock. Any delay to a contract such as the Bridge 
Superstructure will have a corresponding direct delay to the completion 
date of the project.
    Question. How quickly can the contract for the superstructure be 
awarded to ensure that as much of the fiscal year 2005 appropriation 
for Kentucky Lock is utilized fully in a manner that contributes to the 
completion of this project sooner rather than later?
    General Strock. The earliest that the superstructure contract could 
be awarded is the middle of August, 2005. We would expect the fiscal 
year 2005 earnings for this contract to be no more than $2 million, 
subject to the usual qualifications on capability estimates.
    Question. What is the estimated economic impact of terminating 
construction of the Kentucky Lock Addition project in fiscal year 2006?
    General Strock. The Budget has not proposed termination of the 
project. Instead, the Budget proposed that this and other relatively 
lower-performing projects be considered for possible suspension at this 
time in order to direct available resources to projects producing 
higher benefits. If project construction were terminated in fiscal year 
2006, some portion of the project's total average annual benefits, 
estimated at $71 million (October 2003 prices), would be deferred to 
future years, assuming the project later resumed construction.
    Question. What is the estimated economic benefit of continuing to 
construct the Kentucky Lock Addition project in fiscal year 2006 and 
beyond on a funding schedule of expenditure levels equal to the average 
of actual expenditures over the course of the past 5 years?
    General Strock. In 4 of the last 5 fiscal years, an average of $30 
million per year has been appropriated to the project. If project 
funding remains in this range, then the project completion date would 
be 2022. Continued funding on this level would realize some portion of 
the $71 million in average annual benefits estimated in the Corps 
report on the project.
    Question. What is the estimated economic benefit of continuing to 
construct the Kentucky Lock Addition project in fiscal year 2006 and 
beyond on an efficient funding schedule?
    General Strock. Subject to the usual qualifications on capability 
estimates, if the Corps were to receive the maximum amount that it 
could efficiently spend in every fiscal year, the earliest possible 
completion date would be 2012. Based on the Corps' analysis of the 
economic impacts of the project and assuming an unconstrained funding 
schedule, about $71 million in navigation benefits could be realized by 
the project's completion.
                                 ______
                                 
            Questions Submitted by Senator Mary L. Landrieu

    Question. When will the Secretary determine whether the lock 
conversion for the Larose to Golden Meadow, Louisiana project is 
justified pursuant to Sec. 325 of Public Law 106-53 (WRDA 1999)?
    Mr. Woodley. The Leon Theriot Lock evaluation report is at the 
Office of the Assistant Secretary of the Army for Civil Works for 
review. The review is expected to be completed in June 2005.
    Question. The Corps owns and operates four hopper dredges which are 
to be used for urgent and emergency dredging and for national defense 
purposes. Do we really need four government hoppers in light of the 
current private hopper dredge capacity that exists?
    General Strock. The Corps of Engineers does own four hopper 
dredges, however, the WHEELER is maintained in a ready reserve status, 
and is not scheduled for work unless industry is fully engaged and is 
unable to respond. Industry has increased its capacity, and we are 
currently evaluating the need for the remaining three hopper dredges 
and the appropriate configuration of the Corps hopper dredge fleet.
    Question. I am told that the Corps is preparing a report to 
Congress to address use of its minimum dredge fleet. Can you tell me 
what progress you are making and when Congress can expect to receive 
that report? Will it arrive on the Hill in time to have an impact on 
this year's legislation?
    Mr. Woodley. The Corps is currently finalizing the report, which I 
expect to complete and, upon final clearance, forward to Congress in a 
timely manner.
    Question. I understand that since the Dredge Wheeler has been in 
ready reserve, you have improved the nationwide management of all 
hopper dredges through a public-private partnership with industry. Does 
the Corps view the partnership favorably, and what does it mean with 
regard to the number of dredges the Government must continue to 
operate?
    General Strock. The Corps and the hopper dredge industry have 
established a partnership called the Industry-Corps Hopper Dredge 
Management Group (ICHDMG). This partnership has effectively developed a 
process for managing the combined Corps and industry hopper dredges in 
a manner that ensures reliable service to ports and waterways requiring 
hopper dredging. The effectiveness of the partnership is being 
considered with regard to the report's recommendations for the final 
configuration of the Corps hopper dredge fleet.
    Question. I am told that $8 million is needed to keep the Wheeler 
in ready reserve. Is that correct? And, is it cost effective in terms 
of private investment in hopper dredges it has engendered?
    General Strock. Yes, $8 million is the estimated amount that is 
required to keep the WHEELER in ready reserve. The cost effectiveness 
and resultant industry investments are being considered in the 
evaluation and recommendations of the Corps future hopper dredge 
configuration.

                       DEPARTMENT OF THE INTERIOR

                         Bureau of Reclamation

STATEMENTS OF:
        R. THOMAS WEIMER, ACTING ASSISTANT SECRETARY FOR WATER AND 
            SCIENCE, DEPARTMENT OF THE INTERIOR
        JOHN W. KEYS, III, COMMISSIONER
ACCOMPANIED BY:
        BOB WOLF, DIRECTOR, PROGRAM AND BUDGET, BUREAU OF RECLAMATION, 
            DEPARTMENT OF THE INTERIOR
        JOHN TREZISE, DIRECTOR, BUDGET, DEPARTMENT OF INTERIOR
        J. RONALD JOHNSTON, PROGRAM DIRECTOR, CENTRAL UTAH PROJECT 
            COMPLETION ACT OFFICE
    Senator Bond. Now we would like to call forward our second 
panel. All right. If everyone will take their seats, we will 
begin panel two to take testimony on fiscal year 2006 budget 
requests for the Bureau of Reclamation. Testifying on behalf of 
the budget of the Bureau will be Mr. R. Thomas Weimer, Acting 
Assistant Secretary for Water and Science, U.S. Department of 
the Interior, and Mr. John W. Keys III, Commissioner of the 
Bureau of Reclamation.
    Gentlemen, we welcome both of you, your full statements 
will be included in the record, and we would ask that you 
summarize briefly your statements, and with that Mr. Weimer.
    Mr. Weimer. Thank you, good afternoon Mr. Chairman, and 
members of the subcommittee. I'm very pleased to be here today 
on behalf of Secretary Norton to introduce the Interior 
Department's 2006 Budget to you, and specifically those 
portions related to the Bureau of Reclamation and the Central 
Utah Project. As you noted, I'm joined by John Keys the 
Commissioner of the Bureau of Reclamation. May I also introduce 
Bob Wolf, to John's right. He is the Director of Budget for the 
Bureau and behind me, John Trezise, who is Director of Budget 
for the Department of the Interior. We also have Ron Johnston, 
again behind me, who is the Program Director of the Central 
Utah Project, and he's available for any questions on that 
project that you may have.

      DEPARTMENT OF THE INTERIOR'S FISCAL YEAR 2006 BUDGET REQUEST

    To briefly summarize, the Department's overall 2006 request 
for programs funded by the Energy and Water Development 
Subcommittee is $981 million. This is $32 million below the 
2005 enacted level. This includes $947 million for the Bureau 
of Reclamation, and $34 million for the Central Utah Project. 
In crafting the budget, four overarching principles were used 
to shape both the Department's budget, the Bureau's budget, and 
Central Utah Project's budgets. First is the power of 
partnerships to leverage resources and achieve results. Second 
is the imperative for fiscal restraint to maintain a dynamic 
economy. Our budget is consistent with the President's goal to 
cut the Federal deficit in half by 2009. Third is an emphasis 
on investments that will help Interior work smarter, more 
efficiently, and more effectively. Fourth is the importance of 
funding activities and programs linked to core Departmental and 
Bureau responsibilities. I want to briefly highlight just one 
of the Secretary's priority efforts that is underway in the 
Department, and that is the Water 2025 initiative. With the 
support of the subcommittee, we're able to report on the early 
successes, with funding provided last year. We're promoting 
conservation efforts through grant and cost sharing programs 
that emphasize local initiatives and partnerships. The 
overarching goal of Water 2025 is to reduce crises and 
conflicts over water. The 2006 budget includes $30 million for 
Water 2025, an increase of $11 million. We feel that this 
increase is due to the very positive response to the challenge 
grant program that we have seen last year, and this year, we 
think that that increase of support validates the success of 
the partnership approach that the Secretary has initiated. I 
will briefly mention the Central Utah Project budget request of 
$34 million, a decrease of $13 million below the 2005 enacted 
level. The decrease is for the Mitigation Commission and is 
primarily due to the transfer of budget authority from the 
Department to the Western Area Power Administration. Due to 
projected carryover balances in the Commission's account, we 
believe the work of the Mitigation Commission will not be 
adversely affected.

                         MANAGEMENT INITIATIVES

    Before closing, let me just mention that throughout the 
Department's and Bureau's budgets are a number of management 
initiatives. As public demands for Interior services increased, 
from Indian children who need schools, to water districts that 
depend on the water delivered by Reclamation, Interior must 
continue to find ways to enhance service and spend dollars 
wisely. Behind all of our programs, out of the limelight, rests 
the management foundation through which we strive to improve 
program efficiency and effectiveness.

                           PREPARED STATEMENT

    Mr. Chairman, that concludes my opening remarks. I'm 
available to the subcommittee for any questions you may have.
    [The statement follows:]
                 Prepared Statement of R. Thomas Weimer

    Good afternoon. On behalf of the Secretary of the Interior, I am 
pleased to be here today before the Subcommittee on Energy and Water 
Development to discuss the fiscal year 2006 budget for the Department 
of the Interior. I appreciate the opportunity to highlight our 
priorities and key goals.
    The Department of the Interior's mission is complex and 
multifaceted. Our 70,000 employees contribute to the Nation's 
environmental quality, economic vitality, and the well being of 
communities. Our mission encompasses resource protection, resource use, 
recreation, and scientific, educational, and other services to 
communities.
    The Department's geographically dispersed responsibilities are 
inspiring and sometimes challenging. Through our programs, we have 
close connections to America's lands and people. We protect some of the 
Nation's most significant cultural, historic, and natural places. We 
provide access to resources to help meet the Nation's energy and water 
needs, while protecting natural and cultural resources. We provide 
recreation opportunities to over 477 million people annually at our 
parks, refuges, and the public lands we manage. In addition, we fulfill 
trust and other responsibilities to American Indians, Alaska natives, 
and the Nation's affiliated island communities.
    Four principles shape our 2006 budget. First is the power of 
partnerships to leverage resources and achieve results. Second is the 
imperative of fiscal constraint. Third is an emphasis on investments 
that will help Interior work smarter, more efficiently, and more 
effectively. Fourth is the importance of funding activities and 
programs linked to core Departmental responsibilities.

                            BUDGET OVERVIEW

    Performance lies at the center of the President's 2006 budget 
request. The President's proposal also demonstrates the fiscal 
restraint necessary to halve the deficit by 2009 and maintain the 
Nation's dynamic economy.
    The 2006 budget request for current appropriations is $10.8 
billion. Permanent funding that becomes available as a result of 
existing legislation without further action by the Congress will 
provide an additional $4.2 billion, for a total 2006 Interior budget of 
$15 billion. We estimate that the Department will collect $13.8 billion 
in receipts.
    Our budget includes $981.1 million for programs funded in the 
Energy and Water Development Appropriations Act, a reduction of $31.5 
million or 3.1 percent below the 2005 enacted level.
    The 2006 Bureau of Reclamation request for current appropriations 
is $946.7 million, a net decrease of $18.2 million below the 2005 
enacted level. The request for current appropriations is offset by 
discretionary receipts in the Central Valley Project Restoration Fund 
and by a proposal to offset $30.0 million through direct funding of 
certain hydropower operations and maintenance activities, resulting in 
a net discretionary request of $872.8 million, a decrease of $45.8 
million below the 2005 enacted level. This decrease is primarily due to 
the 2006 hydropower direct funding proposal. The request for permanent 
appropriations in 2006 totals $80.0 million.
    Our budget also includes $9.8 billion for programs funded in the 
Interior and Related Agencies Appropriations Act, a decrease of $69.7 
million or 0.7 percent from the 2005 level.
    In his February 2 State of the Union Address, the President 
underscored the need to restrain spending in order to sustain our 
economic prosperity. As part of this restraint, it is important that 
total discretionary and non-security spending be held to levels 
proposed in the 2006 budget. The budget savings and reforms in the 
budget are important components of achieving the President's goal of 
cutting the budget deficit in half by 2009 and we urge the Congress to 
support these reforms. The Department will continually work with the 
Congress to achieve these savings.

                  CENTRAL UTAH PROJECT COMPLETION ACT

    The 2006 request for the Central Utah Project Completion Account 
provides $34.4 million for use by the District, the Commission, and the 
Department to implement Titles II-IV of the Act, which is $13.3 million 
less than the 2005 enacted level. A substantial portion of this 
decrease is due to a transfer of budgetary authority and responsibility 
from the Department of the Interior to the Western Area Power 
Administration (WAPA). WAPA is requesting $6.7 million for this 
purpose, and will transfer it to the Department of the Interior for use 
on the CUP. Of those funds, some will go to administrative expenses for 
the Mitigation Commission, and the balance will be added to the corpus 
of the Utah Reclamation Mitigation and Conservation Account, which is 
projected to have a balance of $150 million by the end of fiscal year 
2006. The reduced request for the Mitigation Commission reflects the 
Commission's substantial carryover balances from prior year 
appropriations.
    The funds requested for the District ($31.3 million) will be used 
to fund the balance of the Federal share of the completed Diamond Fork 
System ($14.6 million); to continue construction on Uinta Basin 
Replacement Project ($12.2 million); and to implement water 
conservation measures, local development projects, and continue 
planning and NEPA compliance for the Utah Lake System ($4.5 million).

                              RECLAMATION

    The Bureau of Reclamation is the largest supplier of water in the 
17 western States. It maintains 471 dams and 348 reservoirs with the 
capacity to store 245 million acre-feet of water. These facilities 
deliver water to one in every five western farmers covering about 10 
million acres of irrigated land and provides water to over 31 million 
people for municipal, and industrial uses. Reclamation is also the 
Nation's second largest producer of hydroelectric power, generating 42 
billion kilowatt hours of energy each year from 58 power plants. In 
addition, Reclamation's facilities provide substantial flood control, 
as well as many recreation and fish and wildlife benefits.
    Since its establishment in 1902, Reclamation has developed water 
supply facilities that have contributed to sustained economic growth 
and an enhanced quality of life in the western States. Lands and 
communities served by Reclamation projects have been developed to meet 
agricultural, tribal, urban, and industrial needs. Reclamation 
continues to develop authorized facilities to store and convey new 
water supplies.
    The 2006 request for Water and Related Resources, Reclamation's 
principal operating account is $801.6 million, which is $51.0 million 
below the enacted amount for fiscal year 2005. The account total 
includes an undistributed underfinancing reduction of $30.2 million in 
anticipation of delays in construction schedules and other planned 
activities.
    The budget proposal continues to emphasize assuring operation and 
maintenance of Bureau of Reclamation facilities in a safe, efficient, 
economic, and reliable manner; ensuring systems and safety measures are 
in place to protect the public and Reclamation facilities; working 
smarter to address the water needs of a growing population in an 
environmentally responsible and cost-efficient manner; and assisting 
States, Tribes, and local entities in addressing contemporary water 
resource issues. During development of Reclamation's budget request, 
funding for every project is reviewed based on Departmental and Bureau 
priorities and for compliance with the strategic plan.
    The 2006 budget request for Water and Related Resources provides a 
total of $391.7 million for facility operations, maintenance, and 
rehabilitation. Providing adequate funding for these activities 
continues to be one of Reclamation's highest priorities. The Bureau 
continues to work closely with its water customers and other 
stakeholders to ensure these funds are used to allow the timely and 
effective delivery of project benefits; ensure the reliability and 
operational readiness of Reclamation's facilities; identify, plan, and 
implement dam safety corrective actions and site security improvements; 
and undertake work to enhance environmental values.
    A total of $69.9 million is requested for the safety of dams 
program, an increase of $6.4 million. This funding includes $44.6 
million to initiate safety of dams corrective actions and $18.5 million 
for safety evaluations of existing dams.
    The 2006 request for Water and Related Resources also includes a 
total of $440.1 million for resource management and development 
activities.

         WATER 2025--PREVENTING CRISES AND CONFLICT IN THE WEST

    Meeting water needs is one of the most pressing resource challenges 
in some of the fastest growing areas of the Nation. In the West, 
demands for water for cities, Tribes, farms, and the environment exceed 
the available supply in many basins even under normal water supply 
conditions, as currently managed. Severe drought conditions over the 
past several years in the West have amplified water supply and 
management challenges. Without improved water management, conflicts and 
crises surrounding water supplies will likely increase.
    The overarching goal of Water 2025 is to meet the challenge of 
reducing crises and conflict over water. To minimize or avoid these 
water crises and enhance water delivery, Water 2025 advances three 
basic concepts in the 2006 budget request:
  --The implementation of water monitoring, measuring, conservation, 
        and management technologies will provide some of the most cost-
        effective gains in the ability to meet the demand for water in 
        the future.
  --The attainment of economic, social, and environmental goals 
        relating to water supply requires long-term stability that is 
        more likely to be provided by collaborative solutions than by 
        litigation.
  --Market-based tools that rely on willing buyer/willing seller 
        transactions are far more likely to provide stability and avoid 
        conflict than are regulatory or litigation-based alternatives 
        for meeting unmet and emerging needs for water.
    Solutions developed through Water 2025 must be based on and 
recognize interstate compacts and U.S. Supreme Court decrees that 
allocate water among States, water rights established under State and 
Federal law, tribal water rights, and contracts for the use of water.
    The 2006 budget requests $30.0 million for Water 2025, an increase 
of $10.5 million above the 2005 enacted level. The request includes 
funds for system optimization reviews, the Water 2025 challenge grant 
program, and improved technology.

                         CALFED IMPLEMENTATION

    The Sacramento-San Joaquin Delta serves as the hub of the State's 
water management system. The Sacramento and San Joaquin Rivers and 
their tributaries, provide potable water for two-thirds of California's 
homes and businesses, and irrigate more than 7 million acres of 
farmland on which 45 percent of the Nation's fruits and vegetables are 
grown. The Delta its tributaries and downstream service areas also 
provide habitat for 750 plant and animal species, some listed as 
threatened or endangered.
    Established in May 1995, the California-Federal Bay-Delta Program 
(CALFED) is a comprehensive program to address the complex and 
interrelated problems in the Bay-Delta system, the watersheds that feed 
it, and the areas served by waters diverted out of it. A consortium of 
Federal and State agencies fund and participate in the CALFED program, 
focusing on ecosystem improvements and improving water management and 
supplies. In addition, CALFED addresses issues related to flood 
control, levees, water quality and watersheds.
    After preparation of environmental documentation, the CALFED 
parties, including Interior, signed a record of decision formally 
approving a long-term programmatic plan for restoring ecosystem values 
and improving water management in the solution area. Approximately $68 
million was specifically provided to Reclamation in 2001 through 2005 
within various authorized programs of the Central Valley Project for 
activities that support the goals of the CALFED program. Beyond these 
funds, Reclamation and the other Federal agencies participating in the 
CALFED program fund numerous other programs and activities that are 
closely aligned with the CALFED program.
    On October 25, 2004, the President signed into law the Calfed Bay-
Delta Authorization Act. The legislation provides a 6-year Federal 
authorization to implement the collaborative plan for restoration and 
enhancement of the San Francisco Bay/Sacramento-San Joaquin Delta 
estuary.
    The 2006 budget includes $35.0 million for Reclamation to implement 
CALFED activities.

              OTHER BUREAU OF RECLAMATION PROJECT REQUESTS

    The $128.0 million request for the Central Valley Project includes 
a $3.1 million increase for the CVP replacements, additions, and 
maintenance program. Maintaining strong funding for these activities is 
critical to maintaining the long-term integrity of Reclamation's 
infrastructure. The 2006 request includes $16.6 million for the 
Colorado-Big Thompson project, an increase of $5.6 million.
    A total of $50.0 million is requested for site security to ensure 
the safety and security of facilities, an increase of $6.8 million. The 
2006 budget proposes that the operation and maintenance-related 
security costs for Reclamation facilities be reimbursed by project 
beneficiaries, consistent with the practice for other operation and 
maintenance expenses.
    The budget includes $52.0 million for the Animas-La Plata project 
to continue implementation of the Colorado Ute Settlement Act. This 
will provide for continued construction of the Ridges Basin Dam and the 
Durango pumping plant.
    The request funds rural water supply projects at $57.5 million, 
$29.5 million below the 2005 enacted level. Funding is requested for 
the Mni Wiconi, Garrison, and Lewis and Clark projects. The overall 
reduction is due, in part, to a decrease of $17.0 million resulting 
from the projected completion of the Mid-Dakota rural water project in 
2005. The balance of the reduction results from a decision to focus 
primarily on ongoing rural water projects until establishment of a 
formal Reclamation rural water program, as recommended in earlier PART 
and common measures evaluations. The administration submitted 
legislation to the 108th Congress to establish such a program, and 
looks forward to working with the 109th Congress to create a program 
that addresses the present programmatic problems.
    The budget proposes to re-allocate repayment of capital costs of 
the Pick-Sloan Missouri Basin program. Power customers would be 
responsible for repayment of all construction from which they benefit, 
whereas to date they have only been responsible for a portion of the 
costs. This change would increase reimbursements from power customers 
by $33.0 million in 2006, and declining amounts in future years. Rate 
increases for power customers could be phased in over time. Authorizing 
legislation will be submitted.

                         MANAGEMENT EXCELLENCE

    As public demands for Interior services increase--from Indian 
children who need schools to visitors who seek more outdoor 
recreational opportunities on our public lands--Interior must continue 
to enhance service and spend dollars wisely. Behind all our programs, 
out of the limelight, rests a management foundation through which we 
strive to improve program efficiency and effectiveness. The Departments 
and its bureaus continue to implement performance improvements.
    Reclamation and the Central Utah Project continue to strive for 
excellence in the President's management initiatives, which include 
competitive sourcing, strategic work force management, improved 
financial performance, expanded electronic government, and integrated 
budget and performance. The Bureau of Reclamation is committed to the 
administration's management reform agenda and has developed road maps 
for getting green ratings on its scorecards. Reclamation's use of 
activity-based cost management data, together with modifications to 
Reclamation's field-driven budget formulation process, will integrate 
performance and budget in Reclamation's decision-making process.
    As part of its 2006 budget development process, Reclamation and OMB 
evaluated the recreation program and the water management/supply 
planning and construction program using the Program Assessment Rating 
Tool process. The recreation program was rated adequate. The water 
management/supply planning and construction program was rated results 
not demonstrated, pending development of performance measures and base 
line data that assess progress toward bureau and strategic plan goals. 
The operations and maintenance portion of the water management/supply 
program, the site security program, the safety of dams program, and the 
Central Utah Project will be evaluated by PART during the development 
of the 2007 budget.
    The National Academies' National Research Council is reviewing 
Reclamation's organizational infrastructure as it relates to its core 
mission of delivering water and power. The NRC held its first committee 
meeting February 28 to March 1, 2005, and should conclude its report 
during 2005.
    Our 2006 budget also includes investments in tools to enable our 
employees to do their jobs more efficiently and generate cost savings 
by implementing standardized systems.
    The Department currently uses 26 different financial management 
systems and over 100 different property systems. Employees must enter 
procurement transactions multiple times in different systems so that 
the data are captured in real property inventories, financial systems, 
and acquisition systems. This fractured approach is both costly and 
burdensome to manage. We have underway an integration of our financial 
and business management systems to streamline and modernize basic 
administrative activities.
    The Department's budget request includes an increase of $9.5 
million to support continued implementation of the Financial and 
Business Management System, which is integrating financial management, 
procurement, property management and other systems and will be the 
basis for reengineered administrative processes throughout the 
Department. As FBMS becomes fully operational, over 80 legacy systems 
will be retired and their functionality replaced by standardized 
business processes within FBMS. In 2006, the National Park Service and 
Fish and Wildlife Service are scheduled to transition to FBMS. The 
Bureau of Reclamation will transition to FBMS in 2007.
    The 2006 Department budget also includes an increase of $7.0 
million to continue implementation of the Enterprise Services Network. 
ESN leverages the existing BIA Trustnet, expanding it Department-wide, 
to provide secure, state-of-the-art internet and intranet connections 
and a fully functional operational center for data communications. In 
addition to providing better services for many Interior offices, the 
system will provide a uniformly secure environment, standardized and 
efficient 24-hour/7-day operations, and improved technical support. The 
Reclamation budget includes $1.1 million for ESN.

                ADDRESSING OTHER DEPARTMENTAL CHALLENGES

    Over the past 4 years, the Interior Department has encouraged 
cooperative conservation through various grant programs, administrative 
actions, and policies. These efforts emphasize innovation, local 
action, and private stewardship. Water 2025 is an excellent example. 
They achieve conservation goals while maintaining private and local 
land ownership. They foster species protection through land management 
and cooperative, on-the-ground habitat improvements, complementing 
traditional funding of ESA regulatory programs.
    Two proposals in the Interior Appropriations Act are of particular 
relevance to this subcommittee--Klamath River Basin and Everglades, 
which demonstrate our ability to work across the landscape 
cooperatively to accomplish our goals.
    Klamath River Basin.--The 2006 budget commits $62.9 million toward 
addressing water issues in the Klamath Basin and proposes an 8.4 
percent increase for Interior Department programs in the basin. In the 
short-term, water-supply conditions will continue to present 
challenges. As of mid-February, the snow pack in the upper Klamath 
River basin was 47 percent below average. With depleted groundwater 
supplies and expected continued drought conditions, the risks to 
endangered and threatened fish in the basin persist. We also anticipate 
impacts to the people and communities dependent on the river, including 
upper basin irrigators and downstream Indian and commercial fishermen. 
Federal efforts in the basin will continue to focus on long-term 
solutions to resolving conflicts between the many competing uses for 
scarce water.
    Everglades Restoration.--Interior is also continuing its work with 
the Corps of Engineers and the State of Florida to complete the 
Modified Water Deliveries Project (Mod Water), a key to restoring 
natural flows in the Everglades. The Mod Water project includes water 
control structures to restore more natural hydrologic conditions within 
the Park as well as a flood mitigation system to protect adjacent 
residential and agricultural areas. The ability to deliver adequate 
supplies of clean water at the right time of the year is critical to 
the restoration of the Park's natural resources. Once completed, this 
project will provide much needed flexibility to water managers and 
serve as a strong foundation for future benefits under the 
Comprehensive Everglades Restoration Plan (CERP).
    Under a new agreement between the Department and the Corps of 
Engineers, the cost to complete the project will be shared by NPS and 
the Corps. Within the 2006 request for NPS construction is $25.0 
million. The NPS contribution consists of $8.0 million in new funding 
and $17.0 million redirected from unobligated balances for Everglades 
land acquisition not currently needed for high-priority acquisitions. 
The 2006 budget for the Corps includes $35.0 million for the project. 
Over the period 2007 to 2009, the Corps will contribute an estimated 
additional $88.0 million and the NPS an additional $41.0 million.
    Other Cooperative Conservation Programs.--Through partnerships, 
Interior works with landowners and others to achieve conservation goals 
across the Nation and to benefit America's national parks, wildlife 
refuges, and other public lands. The 2006 budget includes $381.3 
million for the Department's cooperative conservation programs. These 
programs leverage limited Federal funding, typically providing a non-
Federal match of 50 percent or more. They provide a foundation for 
cooperative efforts to protect endangered and at-risk species; engage 
local communities, organizations, and citizens in conservation; foster 
innovation; and achieve conservation goals while maintaining working 
landscapes.
    Our budget proposes funding for the Landowner Incentive and Private 
Stewardship programs at a total of $50.0 million, an increase of $21.4 
million from 2005. Through these programs, our agencies work with 
States, Tribes, communities, and landowners to provide incentives to 
conserve sensitive habitats in concert with traditional land management 
practices such as farming and ranching, thus maintaining the social and 
economic fabric of local communities.
    Our budget proposes to fund challenge cost-share programs in BLM, 
FWS and NPS at $44.8 million. These cost-share programs better enable 
Interior's land management agencies to work together and with adjacent 
communities, landowners, and other citizens to achieve common 
conservation goals. The 2006 proposal represents an increase of $25.7 
million.
    The challenge cost-share program includes $21.5 million for 
projects that are targeted to natural resource conservation. In 2004, 
the Congress provided $21.2 million for these cost-share grants. 
Leveraged with matching funds this provided a total of $52 million for 
on-the-ground projects including more than $19 million for projects to 
eradicate and control invasive species and weeds.
    For example, in New Mexico, the Bosque del Apache refuge is working 
with the local community to restore riparian habitat along the Rio 
Grande River by eliminating tamarisk on over 1,100 acres.
    We also propose level or increased funding for a suite of other FWS 
cooperative programs: the Partners for Fish and Wildlife program, the 
Coastal program, the Migratory Bird Joint Ventures program, the North 
American Wetlands Conservation Fund, the State and Tribal Wildlife 
grants program, and the Cooperative Endangered Species Conservation 
Fund. These programs support a cooperative approach to conservation 
that emphasizes voluntary partnerships with private landowners, local 
governments, Tribes, and community organizations.

                               CONCLUSION

    The budget plays a key role in advancing our vision of healthy 
lands, thriving communities, and dynamic economies. Behind these 
numbers lie people, places, and partnerships. Our goals become reality 
through the energy and creativity efforts of our employees, volunteers, 
and partners. They provide the foundation for achieving the goals 
highlighted in our 2006 budget.
    This concludes my overview of the 2006 budget proposal for the 
Department of the Interior and my written statement. I will be happy to 
answer any questions that you may have.

    Senator Bond. Thank you. Mr. Keys.

                     STATEMENT OF JOHN W. KEYS, III

    Mr. Keys. Mr. Chairman, it's my pleasure to be here this 
afternoon, and we do appreciate the opportunity to come and 
talk to you about our fiscal year 2006 budget. As Tom said, 
with me today is Bob Wolf, my Director of Program and Budget. 
Before I go ahead with the statement, let me tell you how much 
we appreciate working with your committee staff and the 
committee members. They have been very understanding of what we 
tried to do and how we tried to do it. Before I get into the 
2006 budget discussion, I would just like to take a minute to 
update you on water supply conditions in the West.

                                DROUGHT

    We put out these charts for you before we got started. 
Unfortunately, the drought continues this year, and we are 
extremely concerned about it. 



    The chart that you have there--shows the typical El Nino 
setup for the western United States, rain in the southwest and 
almost nothing across the northern tier. For example, the 
Columbia River basin expects about 60 percent of normal runoff. 
In Eastern Oregon, Western Idaho, and parts of Montana, it's 
about 50 percent. Some parts of Montana and Wyoming are even 
less than 50 percent, and the Yakima basin, in the middle of 
the chart, is about 35 percent.
    Those are just some of the typical numbers that we're 
working with, and the drought continues in that part of the 
country. Now, I'd like to turn to the fiscal year 2006 budget. 
The overall Reclamation request totals about $947 million in 
current authority and is offset by discretionary receipts: for 
the Central Valley Project restoration fund of about $44 
million, and Hydropower direct financing is about $30 million. 
The request continues to emphasize the operation and 
maintenance of Reclamation facilities in a safe, efficient, 
economic, and reliable manner, while sustaining the health and 
integrity of ecosystems that address the water needs of a 
growing population in the West. As part of this emphasis, $65 
million is requested for our Safety of Dams program. Our fiscal 
year 2006 request has been designed to support Reclamation's 
mission of delivering water and generating hydropower 
consistent with the applicable State and Federal law in an 
environmentally responsible and cost efficient manner.

           HIGHLIGHTS OF THE FISCAL YEAR 2006 BUDGET REQUEST

    Some highlights of this budget proposal: Water 2025 request 
$30 million for fiscal year 2006. It builds off of the fiscal 
year 2005 Water 2025 effort that we feel has been very 
successful. It is a high priority in Reclamation, both 
financial and technical, and it has focused resources into 
those areas of the West where conflict and crisis over water 
exists now or could be predicted in the near future.
    The hotspot map that we also passed out for you, shows some 
of those areas in the West that are most likely to experience 
water supply crisis. These potentially water-short areas are 
the focus of the Water 2025 effort.



    In the Klamath project in Oregon and California, we're 
asking for $22 million. The fiscal year 2006 request continues 
and increases funding for our efforts in the Klamath basin that 
will improve water supplies to meet competing demands for water 
in the basin and ensure continued delivery of water to our 
project. The 2005 water supply forecast to date shows that 2005 
will be a challenging year for irrigators and resource 
managers. These early forecasts depict snow packs at about 47 
percent of normal. We're currently anticipating a dry water 
year operation and a dry water year in the Klamath River.
    For the Middle Rio Grande project in New Mexico, we're 
requesting $19 million. The 2006 request continues support of 
endangered species, through participation in the collaborative 
program. These efforts support the protection and recovery of 
the Rio Grande Silvery Minnow and the Southwestern Willow 
Flycatcher, and it requests funding for supplemental water 
channel maintenance, and government-to-government consultations 
with Pueblos and tribes.
    On the Animas-La Plata project in Colorado and New Mexico, 
we're asking for $52 million. The Animas-La Plata project is 
almost 21 percent complete and resolves, through authorizing 
legislation passed by the Congress in 2000, longstanding Indian 
water rights claims in the basin.
    In our rural water program we're asking for $57.5 million. 
The 2006 funding for rural water projects emphasizes a 
commitment to completing ongoing municipal, rural and 
industrial systems. Funding is included for the Mni Wiconi, 
Garrison, and Lewis and Clark projects. The administration 
submitted a proposal to Congress last year to authorize a 
formal rural water program, and while it did not pass in the 
last Congress, we're working closely with the authorizing 
committees to move this forward. Until such legislation is 
enacted, funding is only requested for ongoing rural water 
projects.
    For the CALFED Bay-Delta program, we're asking $35 million. 
President Bush signed the historic legislation on October 25, 
2004, authorizing the CALFED Bay-Delta program. The funding is 
intended for the following areas: $10 million for environmental 
water account, $10 million for the storage program, $3 million 
for water conveyance, $4 million for water use efficiency, $4 
million for ecosystem restoration, and $4 million for program 
and management, and Reclamation's oversight.

                           PREPARED STATEMENT

    Mr. Chairman, in conclusion I want to strongly reiterate 
that the fiscal year 2006 budget request demonstrates 
Reclamation's commitment in meeting the water and power needs 
of the West in a fiscally responsible manner. Thanks again for 
your continued support, and we would certainly try to answer 
any questions you might have.
    [The statement follows:]

                Prepared Statement of John W. Keys, III

    Thank you, Mr. Chairman, Mr. Reid, and members of the subcommittee, 
for the opportunity to appear before you today to support the 
President's fiscal year 2006 budget request for the Bureau of 
Reclamation. With me today is Bob Wolf, Director of Program and Budget.
    Our fiscal year 2006 request has been designed to support 
Reclamation's mission of delivering water and generating hydropower, 
consistent with applicable State and Federal law, in an environmentally 
responsible and cost efficient manner.
    Funding is proposed for key projects that are important to the 
Department and in line with administration objectives. The budget 
request also supports Reclamation's participation in efforts to meet 
emerging water supply needs to promote water conservation and sound 
water resource management, and help prevent conflict and crises over 
water in the west.
    The fiscal year 2006 request for Reclamation totals $946.7 million 
and is offset by discretionary receipts in the Central Valley Project 
Restoration Fund of $43.9 million and proposed hydropower direct 
financing of $30.0 million. In addition, Reclamation's program includes 
permanent authority of $80.0 million. The total program, after offsets 
to current authority and the inclusion of permanent authority, is 
$952.8 million.

                      WATER AND RELATED RESOURCES

    The fiscal year 2006 request for the Water and Related Resources 
account is $801.6 million. The request provides funding for five major 
program activities: Water and Energy Management and Development ($320.8 
million); Land Management and Development ($35.3 million); Fish and 
Wildlife Management and Development ($84.0 million); Facility 
Operations ($206.5 million); and Facility Maintenance and 
Rehabilitation ($185.2 million). The request is partially offset by an 
undistributed reduction of $30.2 million, commonly referred to as 
underfinancing, in anticipation of delays in construction schedules and 
other planned activities.
    The request continues to emphasize the operation and maintenance of 
Reclamation facilities in a safe, efficient, economic, and reliable 
manner, while meeting our requirements to sustain the health and 
integrity of ecosystems that are connected to those operations. It will 
also assist the States, Tribes, and local entities in solving 
contemporary water resource issues in advance of crises over water.
    Highlights of the fiscal year 2006 request for Water and Related 
Resources include:
    Water 2025 ($30 million).--Water 2025 allows Reclamation to 
continue playing an important role in working with State and local 
communities to develop solutions that will help meet the increased 
demands for limited water resources in the West, and avoid water 
conflicts in areas particularly susceptible to an imbalance between 
supply and demand. As in fiscal year 2004 and fiscal year 2005, funding 
will be directed to on-the-ground projects selected through a 
competitive challenge grant program with a 50:50 match.
    Klamath Project in Oregon and California ($22.0 million).--The 
fiscal year 2006 funding request continues on-the-ground initiatives to 
improve water supplies to meet agricultural, tribal, wildlife refuge, 
and environmental needs in the Klamath Basin and to improve fish 
passage and habitat. This is part of a $62.9 million Department of the 
Interior request that includes the collaborative efforts of several 
bureaus. The initiative is focused on achieving immediate on-the-ground 
benefits. The 2005 water supply forecasts show that 2005 will be a 
challenging year for irrigators and resource managers. These early 
forecasts depict snow pack at 47 percent below average. We are 
currently anticipating a dry water year in the lake and in the river.
    Lower Colorado River Operations Program ($17.9 million).--The 
fiscal year 2006 request will provide funding to continue work on 
development and anticipated implementation of the Lower Colorado River 
Multi-Species Conservation Program (MSCP). The MSCP will provide 
Endangered Species Act compliance for operations and maintenance 
activities associated with the Colorado River from the upper end of 
Lake Mead to the southern border with Mexico for 50 years. The 
Secretary of Interior, acting through the Bureau of Reclamation, has 
the unique role of ``water master'' for the lower Colorado River. LCROP 
includes river operations, water service contracting and repayment, 
decree accounting, oversight of hydropower activities, and fulfilling 
the requirements of the Secretary's role as water master.
    Middle Rio Grande ($19.0 million).--The fiscal year 2006 request 
continues funding in support of the Endangered Species Collaborative 
Program. In addition, the request continues funding for acquiring 
supplemental water, channel maintenance, and pursuing government-to-
government consultations with Pueblos and Tribes. Finally, the funding 
will continue efforts that support the protection and contribute to the 
recovery of the Rio Grande silvery minnow and southwestern willow 
flycatcher. One effort that may assist the silvery minnow is a proposed 
sanctuary that will support all life stages of the minnow. Reclamation, 
the U.S. Fish and Wildlife Service, and the Middle Rio Grande 
Conservancy District are cooperating in the planning of a sanctuary, 
and design is continuing. A site has been selected and is undergoing 
detailed evaluation for suitability.
    Animas-La Plata in Colorado and New Mexico ($52.0 million).--The 
fiscal year 2006 request includes $52.0 million for the continued 
construction of Ridges Basin Dam and Durango Pumping Plant and project 
support activities.
    Columbia/Snake River Salmon Recovery in Idaho, Oregon, Montana, and 
Washington ($17.5 million).--This program addresses the implementation 
of Reasonable and Prudent Alternatives (RPAs) included in two 
Biological Opinions issued in December 2000. The fiscal year 2006 
funding will address significantly increased regional coordination, 
off-site mitigation activities in selected sub-basins to offset 
hydrosystem impacts, and continue research, monitoring and evaluation 
efforts.
    Site Security ($50.0 million).--Since September 11, 2001, 
Reclamation has maintained heightened security at its facilities to 
protect the public, its employees, and infrastructure.
    The funding in fiscal year 2006 is necessary to cover the costs of 
site security activities including:
  --Surveillance and law enforcement;
  --Anti-terrorism activities that include monitoring of information, 
        personnel security, and threat management; and
  --Physical security upgrades, with a primary focus on our National 
        Critical Infrastructure facilities.
    The fiscal year 2006 budget request proposes that annual costs 
associated with activities for guarding Reclamation facilities be 
treated as project O&M costs and be subject to reimbursement based upon 
project cost allocations. A report with a breakout of planned 
reimbursable and non-reimbursable costs by project, by region, will be 
provided to the subcommittee by May 1, 2005.
    Rural Water ($57.5 million).--The fiscal year 2006 funding for 
rural water projects emphasizes a commitment to completing ongoing 
municipal, rural, and industrial systems that were previously included 
in the President's Budget. Funding is included for the Mni Wiconi, 
Garrison and Lewis and Clark projects. The administration submitted a 
proposal to Congress last year to authorize a formal rural water 
program in Reclamation and while it did not pass in the last Congress, 
we are working closely with the authorizing committees to again move 
this forward; and until such legislation is enacted, funding is only 
requested for on-going rural water projects.
    Hydropower Direct Financing ($30.0 million).--The fiscal year 2006 
budget proposes to finance the costs of operation and maintenance of 
certain Reclamation hydropower facilities directly from receipts 
collected by the Western Area Power Administration (WAPA) from the sale 
of electricity. Under this reclassification proposal, WAPA would 
transfer an agreed upon amount to the Bureau of Reclamation for deposit 
in its Water and Related Resources account. The transferred funds would 
be treated as an offsetting collection. A direct funding arrangement is 
already in place for the Bonneville Power Administration and some 
Western Area Power Administration facilities.
    Safety of Dams ($69.9 million).--The safety and reliability of 
Reclamation dams is one of Reclamation's highest priorities. 
Approximately 50 percent of Reclamation's dams were built between 1900 
and 1950, and 90 percent of those dams were built before the advent of 
current state-of-the-art foundation treatment, and before filter 
techniques were incorporated in embankment dams to control seepage. 
Safe performance of Reclamation's dams continues to be of great concern 
and requires a greater emphasis on the risk management activities 
provided by the program. The fiscal year 2006 request of $69.9 million 
for the Safety of Dams Program will reduce risks to public safety at 
Reclamation dams. The increase from the fiscal year 2005 level is for 
the purpose of initiating three Safety of Dams corrective actions.

                       POLICY AND ADMINISTRATION

    The request for Policy and Administration is $57.9 million. These 
funds are used to develop and implement Reclamation-wide policies, 
rules and regulations and to perform functions which, by statute, 
cannot be charged to specific project or program activities covered by 
separate funding authority. These funds support general administrative 
and management functions.

                CENTRAL VALLEY PROJECT RESTORATION FUND
 
   The fiscal year 2006 Reclamation budget includes a request for the 
CVP Restoration Fund of $52.2 million, and is expected to be offset by 
discretionary receipts totaling $43.9 million collected from project 
beneficiaries under provisions of Section 3407(d) of the Act. These 
funds will be used for habitat restoration, improvement and 
acquisition, and other fish and wildlife restoration activities in the 
Central Valley Project area of California. This fund was established by 
the Central Valley Project Improvement Act, Title 34 of Public Law 102-
575, October 30, 1992. The funding request is calculated based on a 3-
year rolling average of collections. The net amount requested for 
fiscal year 2006, after the offset, is the same as fiscal year 2005.

               CALIFORNIA BAY-DELTA RESTORATION (CALFED)

    CALFED legislation was signed into law on October 25, 2004, and the 
activities authorized in the legislation include water storage 
investigation, conveyance program activities, continuation of the 
environmental water account, levee construction activities, and 
oversight and coordination of the program. A total of $35.0 million is 
requested for California Bay-Delta Restoration in the following areas: 
$10.0 million for the environmental water account; $10.0 million for 
the storage program; $3.0 million for water conveyance; $4.0 million 
for water use efficiency; $4.0 million for ecosystem restoration; and 
$4.0 million for program and management and Reclamation's oversight 
function.

                 PROGRAM ASSESSMENT RATING TOOL (PART)

    As part of the fiscal year 2006 budget, Reclamation's Water 
Management/Supply--Planning and Construction and Recreation and 
Concessions programs were evaluated by the PART. The entire Water 
Management/Supply program has been separated into three components that 
will be reviewed over 3 years. The 3 components include: (1) Planning 
and Construction, fiscal year 2006; (2) Operations and Maintenance, 
fiscal year 2007; and (3) Environmental Protection and Mitigation, 
fiscal year 2008. In addition, Reclamation intends to PART the Site 
Security and Safety of Dams programs in fiscal year 2007.

                     PRESIDENT'S MANAGEMENT AGENDA

    E-Government.--Reclamation continues to support Federal and 
Departmental E-Gov and Web initiatives, and anticipates increased 
coordination as we adopt the Department's E-Gov Strategy and scorecard 
for rating progress in this area. This support includes participation 
in planning groups, such as the Web Council, e-Authentication and E-Gov 
teams, as well as implementation and integration of content. Some 
specific initiatives requiring Reclamation involvement are the 
Department's Financial and Business Management System, Recreation.gov, 
and the Geospatial One-stop efforts. In addition, Reclamation has 
partnerships with numerous local, State, and Federal organizations to 
share water management information and facilitate coordination using E-
Gov technology.
    Financial Management Improvement.--To support the President's 
Management Agenda on improving financial performance, Reclamation will 
continue to:
  --Provide management with accurate and timely financial information 
        to support operating, budget, and policy decisions;
  --Improve financial and performance information integration;
  --Ensure our financial information is fairly stated to achieve 
        ``unqualified'' opinions from auditors; and
  --Ensure our financial management systems fully comply with Federal 
        financial system requirements and accounting standards.
    Reclamation will continue to work closely with the Department of 
the Interior to improve financial processes and help consolidate 
information. To continue to achieve the President's and the 
Department's objectives for increased accountability, we will enhance 
our financial policies and procedures in support of the Department's 
Transformation of Interior Financial Management. This integrated 
business management plan, which is designed to achieve a consistent 
approach that will provide managers and employees with financial, 
performance, budget, and cost data that is timely and reliable, has 
many facets, including:
  --The Financial and Business Management System (FBMS) which will 
        combine various business management systems into one overall 
        system linking planning and budget data to information 
        performance and results;
  --New processes and procedures that will allow monthly, quarterly, 
        and annual reporting, analysis, and auditing to meet the 
        November 15 report and audit date;
  --Improving the process for issuing financial policies and procedures 
        to help ensure consistency throughout the Department; and
  --Performance measures and quality control procedures to provide 
        standards for evaluating our processes.
    Reclamation has made significant progress addressing financial 
management issues, including:
  --Meeting OMB's accelerated November 15 deadline for completion of 
        Reclamation's financial statements and receiving an unqualified 
        opinion on the statements;
  --Meeting and/or exceeding the Department's financial performance 
        standards;
  --Actively participating in the Department's FBMS initiative to 
        include the functional design requirements and project 
        management support;
  --Completing 11 of 12 financial statement audit findings;
  --Successfully implementing the Department's Activity Based Costing 
        (ABC) initiative in an effort to improve budget and performance 
        integration; and
  --Completing an erroneous payment risk assessment as required by the 
        Improper Payments Information Act of 2002.
    Reclamation has received an ``unqualified'' opinion on all reports 
issued, which demonstrates our strong commitment to accurate and timely 
reporting. We will continue providing timely and useful information for 
management, the administration, and Congress to forge effective 
decision-making and providing reliable and accurate information for our 
publics and partners to forge effective relationships.
    Reclamation has been actively involved in the Department's FBMS 
initiative to replace its existing legacy systems with an integrated 
financial and business management system, and has committed staff on a 
full-time basis to assist the Department with the implementation of 
FBMS in all bureaus over the next 4 years. Reclamation staff has also 
participated in the Department's fiscal year 2004 Blueprint effort to 
determine how to best design the functionality of the new enterprise 
system on a Department-wide basis. Reclamation will implement FBMS in a 
deployment to take place at the beginning of fiscal year 2008, and will 
use fiscal year 2007 to plan and prepare for the implementation.
    Competitive Sourcing.--Reclamation continues to comply with the 
Federal Activities Inventory Reform Act and OMB competitive sourcing 
requirement needs, e.g., training, contractor support and employee 
related competitive sourcing support costs. Under the revised OMB 
Circular A-76, Performance of Commercial Activities, all A-76 studies 
must now focus on either standard or streamlined competition, thus 
eliminating previously used direct conversion studies. Reclamation 
developed a ``Green Plan'' for fiscal year 2005-2008 to guide future 
efforts.
    Human Capital.--In support of the President's Management Agenda, 
Human Capital Initiative and the Department's Strategic Human Capital 
Management Plan (fiscal year 2003-2007), the Strategic Human Capital 
Management Implementation Plan (December 12, 2002), and Reclamation's 
Workforce Plan (2004 to 2008), numerous action items have been 
developed that identify implementation plans and expected results. 
Reclamation will dedicate staff and align human resources strategically 
in support of efforts necessary to close mission-critical competency 
gaps. It will do so by: successfully competing for talent and 
developing an accountability system to ensure that human capital 
management is merit based, effective, efficient and supportive of 
Reclamation's mission accomplishment.
    Reclamation is implementing a new performance management system in 
2005 that applies to all non-SES employees and provides for a five-
level system in contrast to the previous two-level system of pass/fail. 
It gives management the tools to reward exceptional performance and the 
ability to address performance problems. This system also assures the 
linkage of individual accomplishments with organizational goals. SES 
managers converted to this goal in 2004.
    In addition, there are plans to fully implement QuickHire, an 
automated staffing program by fiscal year 2006. Funding will also be 
directed to support additional e-Gov initiatives such as the Learning 
Management System for training and development.
    Performance and Budget Integration.--Reclamation continues to make 
strides in its budget and performance integration initiative. This 
progress includes strengthening its performance based budgeting 
framework through the use of integrated cost, budget and performance 
data to support decisionmaking. During the initial stages of budget 
development, budget and performance guidance are integrated and 
distributed to regional and area offices. The guidance sets forth 
requirements for integrating budget and performance on a project by 
project and/or program basis.
    Performance targets are set during the preliminary phase of budget 
development, and regions are required to link all funding requests to 
the Department's Strategic Plan and its associated goals and measures. 
Throughout the 2006 budget process, performance targets are adjusted 
for increases/decreases in funding and analysis of project/program 
impacts.
    During the 2006 budget development process, ABC data was used for 
the first time to help establish funding baselines. Implemented in 2003 
in conjunction with Department's system, Reclamation has refined its 
ABC activities and processes over the past year, and completed a trial 
run of ABC reporting. During the 2007 budget development process, cost 
data will be further refined, analyzed and presented to Reclamation 
leadership with recommendations for its use in the decision making 
process.

                  FISCAL YEAR 2006 PLANNED ACTIVITIES

    In fiscal year 2006, Reclamation plans to continue striving for 
excellence in the President's management initiatives, which include 
competitive sourcing, strategic work force management, improved 
financial performance, expanded electronic government, and integrated 
budget and performance and asset management. The Bureau of Reclamation 
is committed to the administration's management reform agenda.
    Reclamation's use of activity-based cost management data, together 
with modifications to making the required deliveries of water under 
Reclamation contracts; optimize hydropower generation, consistent with 
other project purposes, agreements, and the President's energy policy; 
and incorporate environmental, recreational, land management, fish and 
wildlife management and enhancement, water quality control, cultural 
resources management, and other concerns into the water supply and 
power generation actions of Reclamation, are one example. Reclamation 
also plans to identify water supply needs for consumptive and non-
consumptive purposes in Reclamation States in the next 25 years that 
are likely to be unmet with existing resources.
    The fiscal year 2006 budget proposes to re-allocate repayment of 
capital costs of the Pick-Sloan Missouri Basin program. Power customers 
would be responsible for repayment of all construction from which they 
benefit, whereas to date they have only been responsible for a portion 
of the costs. This change would increase reimbursements from power 
customers by $33.0 million in 2006, and declining amounts in future 
years. Rate increases for power customers could be phased in over time. 
Authorizing legislation will be submitted.
    The fiscal year 2006 budget request demonstrates Reclamation's 
commitment in meeting the water and power needs of the West in a 
fiscally responsible manner. This budget continues Reclamation's 
emphasis on delivering and managing those valuable public resources. In 
cooperation and consultation with the State, tribal, and local 
governments, along with other stakeholders and the public at large, 
Reclamation offers workable solutions regarding water and power 
resource issues that are consistent with the demands for power and 
water. With the need to pursue cost effective and environmentally sound 
approaches, Reclamation's strategy is to continue to use the 
Secretary's four ``C's:'' ``Conservation through Cooperation, 
Communication, and Consultation''. These principles provide Reclamation 
an opportunity, in consultation with our stakeholders, to use decision 
support tools, including risk analyses, in order to develop the most 
efficient and cost-effective solutions to the complex challenges that 
we face.
    Moreover, Reclamation's request reflects the need to address an 
aging infrastructure and the rising costs and management challenges 
associated with scarce water resources. As our infrastructure ages, we 
must direct increasing resources toward technological upgrades, new 
science and technologies; and preventative maintenance to ensure 
reliability; which will increase output, and improve safety.

                               CONCLUSION

    Mr. Chairman, please allow me to express my sincere appreciation 
for the continued support that this committee has provided Reclamation. 
This completes my statement. I would be happy to answer any questions 
you may have at this time.

                PREPARED STATEMENT OF J. RONALD JOHNSTON

    Senator Bond. Thank you very much Mr. Keys. Ronald Johnston 
has submitted a statement which will be included in the record 
as well.
    [The statement follows:]

                 Prepared Statement of Ronald Johnston

    My name is Ronald Johnston. I serve as the Program Director of the 
Central Utah Project Completion Act Office under the Assistant 
Secretary--Water and Science in the Department of the Interior. I am 
pleased to provide the following information about the President's 
fiscal year 2006 budget for implementation of the Central Utah Project 
Completion Act.
    The Central Utah Project Completion Act, Titles II-VI of Public Law 
102-575, provides for completion of the Central Utah Project (CUP) by 
the Central Utah Water Conservancy District. The Act also authorizes 
funding for fish, wildlife, and recreation mitigation and conservation; 
establishes an account in the Treasury for deposit of these funds and 
other contributions; establishes the Utah Reclamation Mitigation and 
Conservation Commission to coordinate mitigation and conservation 
activities; and provides for the Ute Indian Rights Settlement.
    The Act provides that the Secretary may not delegate her 
responsibilities under the Act to the Bureau of Reclamation. As a 
result, the Department has established an office in Provo, Utah, with a 
Program Director to provide oversight, review, and liaison with the 
District, the Commission, and the Ute Indian Tribe, and to assist in 
administering the responsibilities of the Secretary under the Act.
    The 2006 request for the Central Utah Project Completion Account 
provides $34.4 million for use by the District, the Commission, and the 
Department to implement Titles II-IV of the Act, which is $13.3 million 
less than the 2005 enacted level. A substantial portion of this 
decrease is due to a transfer of budgetary authority and responsibility 
from the Department of the Interior to the Western Area Power 
Administration (WAPA). WAPA is requesting $6.7 million for this 
purpose, and will transfer it to the Department of the Interior for use 
on the CUP. Of those funds, some will go to administrative expenses for 
the Mitigation Commission, and the balance will be added to the corpus 
of the Utah Reclamation Mitigation and Conservation Account, which is 
projected to have a balance of $150 million by the end of fiscal year 
2006.
    The funds requested for the District ($31.3 million) will be used 
to fund the balance of the Federal share of the completed Diamond Fork 
System ($14.6 million); to continue construction on Uinta Basin 
Replacement Project ($12.2 million); and to implement water 
conservation measures, local development projects, and continue 
planning and NEPA compliance for the Utah Lake System ($4.5 million).
    The funds requested for the Mitigation Commission ($946,000) will 
be used to implement the fish, wildlife, and recreation mitigation and 
conservation projects authorized in Title III ($475,000); to implement 
the fish and wildlife activities associated with the Uinta Basin 
Replacement Project ($210,000); and to complete mitigation measures 
committed to in pre-1992 Bureau of Reclamation planning documents 
($261,000). We note that the Mitigation Commission has approximately 
$19 million in prior year carryover balances that will make it possible 
to carry out a wide array of scheduled activities in 2006.
    Finally, the request includes $2.1 million for the Program Office. 
This includes $1.7 million for program administration, and $397,000 for 
mitigation and conservation projects outside the State of Utah and for 
operation and maintenance costs associated with instream flows and fish 
hatchery facilities.
    In conclusion, we appreciate the opportunity to testify before the 
committee and would be happy to respond to any questions.

                               WATER 2025

    Senator Bond. I would ask you how you respond to claims 
made by environmental groups that Water 2025 does not do enough 
to restore rivers and is therefore a missed opportunity, and 
that the initiative is merely a repackaging of previous Bureau 
activities.
    Mr. Keys. Well, Mr. Chairman, that's a good question. The 
approach that we've taken is to look throughout the western 
United States to find those areas where there are crises 
looming on the horizon, if they're not there already, because 
of exploding populations, because of new water requirements for 
industry or the Endangered Species Act or other recreational 
needs. They're hotspots on our map in that people could be 
short of water within the next 20 to 25 years.
    What we're trying to do there is through water 
conservation, use of new technologies, other cooperative 
agreements, and the infusion of seed money for projects 
encourage those people to stretch the existing water supplies 
much further than they have been doing. So to say that it's 
repackaging, let me just give you an example from the fiscal 
year 2004 program. We had $4.5 million for challenge grant 
programs that money was leveraged in projects that exceeded $30 
million in total cost. So the monies we put into it were 
leveraged in excess of seven times to address water 
conservation. So I would certainly not see that as repackaging 
of old ideas.
    Mr. Weimer. Mr. Chairman, may I add to that?
    Senator Bond. Please.
    Mr. Weimer. When we worked with Secretary Norton to craft 
this program, we targeted it, and we have been criticized for 
doing that. We've been criticized by environmentalists for not 
including in the program some of the things that they thought 
were important. We've also been criticized by people on the 
water supply side for not including in our grants new 
substantial water storage. We had to target it because it was a 
small program, a growing program that we wanted to have an 
impact. As Commissioner Keys said, we believe that through 
leveraging, we are beginning to see that impact now that we're 
in the third year of the program.

                             WATER STORAGE

    Senator Bond. Thank you. A general question on the 
administration's 2006 budget proposal, how does it address the 
ever increasing water needs in the West, particularly the need 
for increased water storage, and what is the administration's 
position, I think you mentioned to it, and alternative funding 
mechanism such as allowing guarantee program or water trust 
fund?
    Mr. Keys. Mr. Chairman, we have a number of efforts 
underway. Looking at new storage in the CALFED bill we talked 
about, there's $10 million for new storage studies. There are 
four main projects there: the raising of Shasta Dam, the 
enlarging of Los Vaqueros reservoir, working with the State on 
Sites Reservoir, and looking at new storage in the San Joaquin 
basin and the Temperance Flats area. We're working in the State 
of Washington in the Yakima basin on a storage study for that 
basin. We're building a new project in Southwestern Colorado, 
the Animas-La Plata Project, so there are studies of storage 
going on there.
    I would certainly say that we are looking in those areas 
where we might need new storage. The water conservation efforts 
that we have underway at sometime will point to where we need 
new storage.
    Senator Bond. Alternative funding?
    Mr. Keys. I'm sorry, I almost forgot. Thank you for 
reminding me. One of the things that we're trying to see is how 
we can keep our aging infrastructure functioning for years to 
come. Over the years in Reclamation, we lost those funding 
mechanisms we had: the Small Reclamation Project Loan, the 
Rehabilitation and Loan Program, and Drainage and Minor 
Construction Program. We're trying to look at a guaranteed loan 
program that we will work with the Department of Agriculture to 
implement the program would give us and our water users funding 
mechanisms to address maintenance work that may be overdue on 
some of their projects and to look at new storage.
    I was asked the other day, what a dam in the future might 
look like, or a reservoir. I think if you look at the physical 
structure, it will be almost the same, but if you look at the 
funding mechanism behind it and the storage in the reservoir, 
it will probably be much different because of the cooperative 
agreements between the Federal Government and the States, the 
counties, municipalities, and other groups that fund the 
project and have water in there to operate. Certainly the 
challenge grant program would fit very well into that.
    Senator Bond. Thank you very much gentlemen, I have a 3:30 
compelling appointment that is set up, so I'm going to turn the 
gavel over to Senator Allard, a distinguished member of the 
committee and I would ask him to continue as long as he feels 
it's necessary and then to conclude the hearing. And I thank 
you very much for your testimony, thank you Senator Allard.
    Senator Allard [presiding]. Thank you, Mr. Chairman. I want 
to start off with a question that's a little bit astray. But 
you do, the Bureau of Reclamation, control water releases from 
Lake Powell, is that correct?
    Mr. Keys. That is correct.

                              LAKE POWELL

    Senator Allard. Then you're familiar with the 8.23 release 
requirement--8.23 million release requirement there at Lake 
Powell?
    Mr. Weimer. Yes, we are.
    Senator Allard. Apparently there's an argument going on as 
to whether you have the authority or not to, in some cases not 
to release that water. The water interest in Colorado think you 
have the authority to hold the water to restore levels in Lake 
Powell up to where they're adequate, and apparently there are 
some other interests that are arguing otherwise. I just want to 
know what you feel about that particular issue. Because 
everybody on our side is in agreement that you should be 
holding that so we don't get a draw that breaks the Colorado 
River compact agreement in Colorado. I'd like to hear your 
comments on that, if you would, please.

                             COLORADO RIVER

    Mr. Weimer. Senator Allard, we are spending a substantial 
amount of time looking at this issue right now. In fact, John 
and I were both on a teleconference call with the seven basin 
States yesterday, monitoring their progress and discussions on 
how to handle a shortage on the Colorado River.
    The Secretary has committed this month, April, to 
conducting a mid-year review of the annual operating plan for 
the Colorado River. One of the key elements of that is how much 
water should go through Glen Canyon Dam. We have been working 
with her, with the seven States in trying to identify what the 
options are. Clearly, if the drought were to deepen and 
continue, Lake Powell will continue to go down and you could 
lose the ability to generate power there within a couple of 
years. There's a little bit of good news in that this year, the 
April 1 runoff reports we just received for both the upper and 
lower basins indicate that we have a better-than-normal year. 
We will be getting some more inflows into Powell and the lake 
is projected now to come up about 45 feet.
    Senator Allard. Southern Colorado has had their snow fall 
at about 200 percent of normal, northern Colorado I think we're 
at normal, maybe just a little bit below normal. This is an 
important issue to the State. So I wanted to get that question 
out there on the record and let you know that I'm concerned 
about it.
    Mr. Weimer. Yesterday, we offered to meet with the States 
in the lower and upper basins, and the seven individual States 
throughout this month, and we're beginning to set those 
meetings up to have those discussions.

                             COST OVERRUNS

    Senator Allard. Very good, thank you. Now the other 
question I have is, at a recent Energy Committee meeting on 
water, the Family Farm Alliance stated that a number of its 
members had dealt with situations where cost estimates for work 
that would be done by the Bureau substantially were over the 
cost of having had the work done, if it had been done by 
consultants. This is part of the public record apparently in 
the committee, I didn't happen to be there at the time. Are 
there situations where you feel it can be done better in the 
private sector, and what is your reaction to that comment?
    Mr. Weimer. Let me start, if I may Senator, and then invite 
Commissioner Keys to respond. We're well aware of those 
criticisms, and some of them are valid. We have commissioned a 
study by the National Research Council, National Academy of 
Sciences, which began last month and which we hope to have 
finished before the end of the year, looking at this very 
issue, which is the future organization of the Construction 
Management components of the Bureau of Reclamation. We've 
certainly heard criticisms over the last several years, that's 
one of the reasons we went to the Secretary and said we really 
think we need to get an independent study. That is what we're 
doing this year.
    Senator Allard. So your plan right now is that you're going 
to have a study and see what that shows, and if that shows some 
validity to it, then you move forward?
    Mr. Weimer. That's correct, although we have had some 
internal studies as well, and I might invite Commissioner Keys 
to comment on those.
    Mr. Keys. Mr. Chairman, the management of costs estimates 
is one of the most tricky things that an engineer has to do 
because the first thing when you talk to a water user they want 
to know is how much it's going to cost. Of course, we try to 
accommodate and give them a cost estimate. Typically, it takes 
several years to get the project up to where it's going, and 
you reiterate the design several times, and we end up having 
different cost estimates at the end.
    The construction industry is pretty much ``on its ear'' 
right now, with the cost of materials around the world. The 
steel industry, the cement industry, and the diesel fuel costs 
are just ``out of the roof'' these days. China has had a severe 
impact on the supply of both cement and steel. That's a good 
excuse for a portion of it, but it's not all of it. That is why 
we're looking for the results of this study.

                     PERFORMANCE-BASED CONTRACTING

    Senator Allard. Do you look at performance-based 
contracting on some of this? We've had some big projects in 
Colorado, they're cleanup projects, one is transportation--it 
is a combination of roads and mass transit, and another one is 
the cleanup of Rocky Flats. These projects had performance-
based contracts and it helps them be more forthright on their 
bidding. Once they get the bid there are incentives in there to 
do better than what the bid provides for. Do you look at using 
that kind of mechanism?
    Mr. Keys. Mr. Chairman, we do use performance-based 
contracts. We use another process even before we even get to 
the contract, and it's called a value engineering process where 
we take the cost estimate and the final design, and with a peer 
group from outside, look at it and see if there's a better way 
to do it. That has helped some. We're looking at a number of 
things that we do contract out. There was a requirement by this 
committee in fiscal year 2003 that we use private contractors 
for 10 percent of our engineering service, and 2004, 20 
percent, 2005, 30 percent, and in 2006, 40 percent, and we are 
honoring that requirement that was put by this committee.

                           PERMITTING PROCESS

    Senator Allard. Thank you, just one more question and I'll 
let you go. In the permitting process, there was one reservoir 
project that took 18 years to get going on the project; what 
recommendations does Reclamation have to streamline the 
permitting process so that water projects don't dry up on the 
vine, before they go through the entire process of permitting?
    Mr. Keys. Mr. Chairman, I'm not familiar with the permit 
you're talking about, because Reclamation doesn't give permits 
to build reservoirs. We work with a project sponsor to see what 
they want in a project. Then that project sponsor comes to the 
Congress and gets it authorized, and then we build it. So I 
don't know about the permitting process other than we have to 
do permits with the Fish and Wildlife Service, with NOAA 
Fisheries, with--for all of the endangered species, and so 
forth.
    Senator Allard. My understanding is the 18 years started 
after initial authorization by the Congress. I mean it ran from 
the point of authorization by Congress, until we finally got 
the permitting.
    Mr. Keys. Mr. Chairman, if you'll give me the name of that 
one, I would certainly get the details for you, I will tell you 
over the past few years that we have taken a number of steps to 
try and streamline this process. We've reorganized several 
times, and I would say that these days, that 18 years would be 
out of the norm.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Allard. Okay. We will get that specific project to 
you, and we will have some discussion between my staff and your 
staff, and see what's there. Okay. Thank you very much. I want 
to thank you for your testimony. And do we leave the record 
open for comment for a period of time? Okay. The subcommittee 
will leave the record open for a week, for additional comments 
and questions and if you get any comments or questions from the 
Missouri Committee I would ask that you respond expeditiously 
if you would please.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Pete V. Domenici

                           MIDDLE RIO GRANDE

    Question. The Reasonable and Prudent Alternatives specified in the 
2003 Fish and Wildlife Service's Biological Opinion on the Rio Grande 
Silvery Minnow required the construction of two minnow refugia. In 
order to comply with this mandate, I have been working with the BOR 
Albuquerque Area Office to construct a minnow sanctuary. While the BOR 
has undertaken some pre-construction activities, there has been some 
question if the BOR had adequate authority to undertake construction of 
the sanctuary. I am pursuing legislation in Congress that would provide 
the authority necessary to construct the project. What is the status of 
the pre-construction activities underway?
    Mr. Keys. Reclamation is closely cooperating with the U.S. Fish and 
Wildlife Service and the Middle Rio Grande Conservancy District on the 
sanctuary project. Reclamation issued a contract order on March 7 for 
assistance in development of the appraisal level sanctuary conceptual 
design and preliminary environmental compliance requirements. With the 
passage of Public Law 109-13 on May 11, Reclamation now has authority 
to begin actual design work and environmental compliance, now scheduled 
to be completed by September 2005, with construction to begin as soon 
as possible thereafter.
    Question. Assuming authorizing legislation is passed by Congress, 
how long following passage will it take to begin construction and 
ultimately complete the project?
    Mr. Keys. Planning activities are scheduled to be completed so that 
construction of the project could begin as early as October 2005 if 
appropriate authority and funding are in place. Construction of the 
project is expected to take 6 to 9 months.
    Question. What do you anticipate will be the total cost for 
construction and operations of this facility?
    Mr. Keys. Preliminary cost estimates range from $2 million to $10 
million for planning, design, and construction of the pilot phase of 
the sanctuary. Rights-of-way, land and water acquisition, and operation 
and maintenance expenses were not included in these estimates. Refined 
cost estimates will become available over the next few months as the 
design details of the sanctuary are solidified.
    Question. Despite encouraging run-off forecasts, there remains a 
paucity of water in storage in the Rio Grande Basin. The BOR is tasked 
with meeting compact deliveries and complying with the Fish and 
Wildlife Service 2003 Biological Opinion. Meeting the Biological 
Opinion requires providing water to meet minimum flow requirements.
    Over the past 4 years, Congress has provided funding to assure that 
BOR can meet these obligations. It concerns me that the President's 
budget proposes an $8 million cut in funding for Middle Rio Grande 
projects.
    Question. How will the BOR meet its statutory and court-ordered 
obligations with such a greatly decreased budget?
    Mr. Keys. Our challenge is integrating requirements associated with 
the March 17, 2003, Biological Opinion, the Collaborative Program, and 
the Recovery Plan currently being developed in the Fish and Wildlife 
Service. We believe the fiscal year 2006 budget request, which is $1 
million more than the fiscal year 2005 request, is sufficient to meet 
the requirements of the Biological Opinion for fiscal 2006.
    Question. Where does the BOR anticipate it will get water from this 
year in order to meet the regulatory requirements?
    Mr. Keys. Reclamation currently has in storage about 30,000 acre 
feet of water to meet the minimum water flows required by the 2003 
Biological Opinion for the endangered Rio Grande silvery minnow and 
Southwestern willow flycatcher. With the above-average precipitation in 
the Rio Grande Basin, the water in storage should be enough to meet 
these requirements during 2005. In addition Reclamation will pursue 
leasing additional water from San Juan-Chama contractors.
    Question. Pursuant to the 1982 agreement between the MRGCD and the 
six Middle Rio Grande Pueblos, the BOR is responsible for delivering 
water to meet the Pueblos ``prior and paramount'' rights. The BIA was 
also given authority to ensure that these obligations were met. The 
signatory Pueblos rely upon the BOR to deliver the water that they hold 
rights to in order to irrigate over 8,000 acres of land. The Pueblos 
question if the BOR is delivering water consistent with the 1982 
agreement and has questioned if the BIA is fulfilling its trust 
responsibility. Furthermore, the Pueblos rely on the BOR for irrigation 
infrastructure which has fallen into a state of disrepair and needs to 
be upgraded. How does your department plan to resolve the conflict that 
has arisen between the BIA, BOR, and Pueblos?
    Mr. Weimer. The Department of the Interior established a technical 
team consisting of representatives from Reclamation, the U.S. 
Geological Survey, and the Bureau of Indian Affairs to evaluate 
potential differences regarding the interpretation of the 1981 
Agreements in ``prior and paramount'' storage calculation procedures 
and to provide recommendations. This review, as well as further 
discussions with the Pueblos and others should help resolve any 
remaining issues regarding ``prior and paramount'' storage.
    Question. Does the department have any plans to quantify Indian 
rights?
    Mr. Weimer. No adjudication of water rights, including Pueblo water 
rights, has been instituted on the Middle Rio Grande.
    Question. How does the BOR plan to upgrade and maintain the Pueblo 
water delivery infrastructure?
    Mr. Keys. Portions of the six Middle Rio Grande Pueblos irrigation 
infrastructure fall within the boundaries of the Middle Rio Grande 
Project and can be served by Reclamation. There are two types of 
facilities that deliver water to Pueblo lands: Middle Rio Grande 
Project facilities that deliver water to a Pueblo as a whole and 
facilities which are tribal-owned that deliver water to individual 
farms. Reclamation works with the Middle Rio Grande Conservancy 
District to ensure that Middle Rio Grande Project facilities are 
maintained, including those which deliver water to the Pueblos. 
Reclamation has no legal authority to rehabilitate Pueblo on-farm 
ditches. Rather, the Bureau of Indian Affairs has responsibility and 
authority to work on non-Reclamation Project systems on Pueblo lands.
    Question. Is funding available for these purposes through Water 
2025 or other grants?
    Mr. Weimer. Congress has specified that the Middle Rio Grande 
Conservancy District receive about $3 million under Water 2025 for 
water conservation and infrastructure improvements. A Water 2025 
contract has been awarded to the District for specific work activities 
on four of the six Pueblo facilities within the Middle Rio Grande 
Project. The completed work will benefit all six Pueblos with improved 
water delivery, management, and efficiency.
    In addition, Reclamation has authority to expend general planning 
and technical assistance funds, as well as funding from its Native 
American Affairs Program to assist tribal governments with plans to 
protect, manage, and develop water and related resources.
    Question. How do you plan to meet these trust responsibilities?
    Mr. Keys. The Bureau of Reclamation has taken and will continue to 
take actions authorized under Reclamation law which benefit Indian 
tribes. To the extent that Reclamation can act pursuant to law to 
protect trust assets of Indian tribes and provide them water resource 
assistance, Reclamation will do so.

                            ANIMAS-LA PLATA

    Question. Despite past claims of mismanagement and poor planning 
and oversight, the A-LP project is now proceeding at an acceptable 
rate. The President's budget calls for $52 million for the project in 
fiscal year 2006. However, some of the project beneficiaries claim that 
the project requires $75 million in fiscal year 2006 to keep it on 
schedule. This project is of great importance to the communities of 
northern New Mexico and southern Colorado. Do you believe that the $52 
million requested by the administration is adequate to keep the project 
on schedule?
    Mr. Keys. The amount requested by the administration is adequate to 
maintain the current schedule.
    Question. What precautions are being taken to ensure that there are 
not further cost overruns with the project?
    Mr. Keys. We have made several significant changes in one approach 
to management of Animas-La Plata construction and coordination with 
sponsors. We have made changes to streamline reporting on 
accountability within Reclamation for the ALP. The ALP Construction 
Office is responsible for all matters pertaining to the construction of 
the project. This office is managed by a Project Construction Engineer 
who reports directly to the Regional Director of the Upper Colorado 
Region in Salt Lake City, Utah. The construction office continually 
evaluates ways to save costs and still maintain the project features. 
Additional cost tracking procedures implemented in 2004 now relate all 
project costs to the cost estimate (indexed for inflation) for early 
detection of problems. This cost information is shared with the Project 
Sponsors on a monthly basis.
    Question. How is the BOR addressing recent environmental 
challenges?
    Mr. Keys. Funding for the completion of the cultural and 
environmental mitigation features of the project has been given a high 
priority within the ALP project budget. Although construction of 
project facilities has been faced with many environmental challenges, 
ranging from controlling extreme flood events to protection of nesting 
golden eagles, these challenges have been resolved in a timely fashion. 
All environmental compliance and mitigation obligations are currently 
either being met or are on schedule to be completed concurrent with 
project facility construction.

                          WATER TECHNOLOGY R&D

    Question. Recent drought and population growth in the western 
United States requires that we make more efficient use of water and 
develop technologies to make use of previously impaired or unusable 
water. During the 1960's, the Federal Government funded extensive 
research in water technology which resulted in reverse osmosis--the 
desalination technique most widely used today.
    I believe that the Federal Government should renew its investment 
in water treatment technology. Toward this end, I have funded 
construction of a Tularosa Basin Desalination Research and Development 
center in New Mexico. Also, I plan to introduce legislation this year 
that would create a program to develop the next generation of water 
treatment technologies. What do you believe is the Federal Government's 
role in water technology research?
    Mr. Weimer. The administration is currently evaluating Federal 
research and development efforts in desalination, to clearly establish 
long-term goals and ensure that our efforts are carried out in 
accordance with the administration's Research and Development 
Investment Criteria, and that these efforts represent the best 
investment of Federal resources.
    Question. As you are aware, the authority for the BOR's Water 
Desalination Research and Development Act of 1996 expires this year. Do 
you believe that this program should be reauthorized and with what 
changes?
    Mr. Weimer. Yes. Public Law 104-298, the Water Desalination 
Research and Development Act of 1996 (the Act), authorizes the award of 
desalination research grants and contracts. Extended authority would 
enable Presidential requests and Congressional appropriations for these 
purposes to continue under this Public Law. We do not recommend changes 
to the program at this time.

                        RURAL WATER LEGISLATION

    Question. As you are aware, my staff has been working with the BOR 
and the minority staff to develop legislation to aid small and rural 
communities to meet their often extensive water needs. Many western 
communities rely on aquifers for water that will be depleted within the 
next decade. This fact makes the situation especially desperate.
    There are also rural water programs within several other agencies. 
However, they are not as broad is scope and not of the scale that would 
allow many communities to make use of them.
    Furthermore, it is my belief that the BOR has the technical 
expertise to undertake such a project. Is a rural water program a new 
authority that you feel would be appropriate for the BOR to undertake?
    Mr. Keys. Yes, we believe that legislation to establish a rural 
water program would enable the Secretary, through the Bureau of 
Reclamation, to set priorities and establish clear criteria and 
guidelines for the rural water supply projects authorized by Congress 
for Reclamation's involvement. Although the administration supports 
establishing a formal rural water program within the Bureau of 
Reclamation, the President's fiscal year 2006 Budget states that a 
recommendation regarding potential consolidation and re-alignment of 
the Federal rural water programs will be forwarded to a proposed 
``Results Commission.'' The administration will purse both options 
simultaneously.
    Since the early 1980's, Congress has directed Reclamation to 
develop 13 independently authorized, single-purpose municipal and 
industrial water supply projects for rural communities throughout the 
West. In the course of developing the 2004 budget, Reclamation 
participated in two performance assessments--the Program Assessment 
Rating Tool (PART) and a review to develop a set of common performance 
measures for all Federal agencies that play a role in delivering water 
to rural areas. Both assessments found shortcomings in Reclamation's 
involvement in rural water projects, mainly due to the lack of a formal 
rural water program. Consistent with the assessments' recommendations, 
legislation was introduced in the 108th Congress that would allow the 
Department of the Interior to set priorities and establish a 
Reclamation rural water program with adequate controls and clear 
guidelines for project development. We are continuing to work with the 
Committee staff on this effort in the 109th Congress.
    Question. What form do you see this program taking?
    Mr. Keys. During the 108th Congress, the administration submitted 
legislation (S. 2218), to establish a rural water program within the 
Bureau of Reclamation. While there was a hearing before the Senate 
Committee on Energy and Natural Resources in March, 2004, no further 
action was taken on this bill, or on the two other proposals (S. 1732 
and S. 1085) that were introduced by Chairman Domenici and Senator 
Bingaman respectively before the 108th Congress adjourned. Since the 
beginning of the 109th Congress, we have been working very closely with 
the Senate Energy Committee staff from both the majority and minority 
sides to brainstorm solutions to address the complicated issues we are 
facing and we believe that we have narrowed issues that require more 
work. As you may be aware, Chairman Domenici and Ranking Member 
Bingaman, along with several other committee members have introduced S. 
895 to establish a rural water program within the Bureau of 
Reclamation. It has been a pleasure to be a part of this bi-partisan 
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. 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 bi-partisan 
leadership and the Department. We look forward to continuing the effort 
to work through the remaining issues and move ahead with this proposal 
on a bi-partisan basis.
    Question. Do you feel that a loan guarantee program is a viable 
mechanism to aid rural communities?
    Mr. Keys. A loan guarantee program could offer many mechanisms for 
providing assistance to communities to develop rural water projects. 
One concern is the capability of rural communities to pay off these 
interest-bearing loans when they would also be paying 100 percent of 
the annual operation, maintenance and replacement costs for these water 
facilities. We are currently evaluating budgetary, programmatic, and 
staffing implications for the Bureau.

                               WATER 2025

    Question. The Bureau of Reclamation has advocated for the new Water 
2025 program for 2 years and the administration has now proposed $30 
million for fiscal year 2006 to carry on these activities. The 
administration has been articulate about the tools used to implement 
this program to include cooperation, new water treatment technology and 
so forth, but the actual goals of the program are not clear. Can you 
re-articulate the concrete goals of the Water 2025 program and provide 
us with an assessment of how these goals are being met with the first 2 
years of investment?
    Mr. Keys. The overarching goal of Water 2025 is to help prevent 
crises and conflict over water in the West. Water 2025 can reach this 
goal by using the most effective low-cost options for increasing water 
supplies that are available, including: (1) Conservation, Efficiency, 
and Markets, (2) Collaboration, (3) Improved Technology, and (4) Remove 
Institutional Barriers and Increase Interagency Cooperation. In an 
effort to strengthen and further focus Water 2025, the program is 
currently developing measurable program goals and performance measures 
to track progress toward those goals.
    In the 2 short years since Water 2025 was initiated, the program is 
already making progress towards preventing crisis and conflict over 
water in the West. We are very pleased with the enthusiastic response 
to the fiscal year 2005 Challenge Grant Request for Proposals, having 
again received over 100 proposals for Challenge Grant funding for the 
second year in a row.
    The fiscal year 2004 Challenge Grant Program demonstrated how 
leveraging the Federal investment can provide tremendous benefits. For 
the $4 million available for the fiscal year 2004 Challenge Grant 
Program, 19 projects were selected in 10 different States. These 
projects represent a total of almost $40 million in on-the-ground water 
delivery system improvements, including Reclamation's contribution of 
$4 million and a non-Federal contribution of approximately $36 million. 
This represents a 10 percent investment from the Federal side. These 
projects broke ground in 2004 and will be completed by the fall of 
2006.
    While not all of the 19 projects have been completed, significant 
progress is being made. For example, the Mancos Water Conservancy 
District in Colorado has already installed five different types of 
canal lining materials along five sections of their inlet canal which 
are now being tested to determine which technique is most effective. 
Durability, application methods, and repair methods will be documented 
during the test, and the District will use the results to determine the 
best way to line the entire canal. The San Juan Dineh Water Users 
Association (Association), which serves water users in the Navajo 
Nation near Shiprock, New Mexico, is using its Challenge Grant to 
replace three unlined canal laterals with underground pipelines, 
potentially saving 5,500 acre feet per year for the Association's water 
users. The Association has nearly completed work on one of the laterals 
and will begin construction on the other two this fall. This project 
will decrease demand on the San Juan River, which will benefit 
endangered fish, and will ensure equitable distribution of water among 
the Association's water users, helping to preserve Native American 
farming methods.
    The deadline for submittals to the fiscal year 2005 Challenge Grant 
Program was January 21, 2005. For the $10 million available in fiscal 
year 2005, we received 117 proposals requesting $35.5 million in 
Federal assistance $10 million more than was requested in fiscal year 
2004. The 117 proposals represent $115 million in water delivery system 
improvements across the West, with $79.5 million proposed to come from 
non-Federal matching funds. Reclamation just announced the 43 projects 
in 13 States selected for funding. The $9.9 million in Federal grants 
awarded equates to more than $27 million in improvements.
    In fiscal year 2004, Reclamation also entered into a cooperative 
agreement with the Middle Rio Grande Conservancy District (District) 
through the Water 2025 Program for water conveyance system 
improvements. This project will improve and modernize irrigation water 
conveyance facilities to increase efficiency, reduce system losses due 
to seepage and evaporation, and improve water management in the Middle 
Rio Grande Valley. System improvements include replacement of turnouts 
and old gates, concrete lining of canals, telemetry and measuring 
devices, automation and a computer system able to manage hundreds of 
gates with information published on the internet for improved 
management of the flows of the Rio Grande River. These improvements are 
intended to reduce diversions by the District, so that it can retain 
more water in upstream storage to meet future demands. Work on these 
improvements is currently underway and is anticipated to be completed 
by December 2007.

                  TULAROSA BASIN DESALINATION FACILITY

    Question. The Bureau of Reclamation has led the development of the 
Tularosa Desalination Demonstration test facility in New Mexico for 3 
years. I enjoyed my recent visit to the site accompanied by 
Representative Pearce of New Mexico. The demonstration of the Office of 
Naval Research's expeditionary unit was well done. The partnership 
between the BOR, the Office of Naval Research and the Department of 
Energy represented by Sandia National Laboratories is a priority for me 
and I am anxious to have the facility completed and serving its 
intended purpose. Is the BOR committed to complete this project and use 
it to its fullest extent possible?
    Mr. Keys. Yes, Reclamation is committed to getting the facility up 
and running as soon as possible. Reclamation, its contractor, and the 
designer are working closely to reduce overall costs and ensure that 
the construction schedule can rapidly execute completion of the 
facility as construction funding is made available.
    Although the building is not yet completed, our strategic approach 
to construction allowed demonstration testing of the Navy's 
expeditionary unit to get underway at the end of April 2005. Under 
current funding and scheduling scenarios, the earliest the building 
will be available and able to offer the full scope of capabilities is 
2006.
    The facility is designed to attract researchers from the private 
sector, universities, cities, States, other Federal agencies, and 
interested international entities. Testing on improvements and cost 
reductions for inland brackish desalination processes will be carried 
out through research studies, pilot plant testing, and small 
demonstration testing. Currently, it is envisioned that the research 
areas will focus on the unique attributes of the facility to support 
studies on improved brackish desalination technologies, concentrate 
disposal, renewable energy driven processes, new innovative processes 
for brackish desalination, and small rural systems.
    Many companies, universities, and government partners have 
expressed interest in the availability of the facility. Every effort 
will be made to involve these potential partners in the research work 
at the facility.
    Question. What is the BOR doing to plan for this future and what 
are those plans?
    Mr. Keys. A business plan is being developed. A draft will be 
available at the end of fiscal year 2005. The business plan will 
identify the organizational structure, a more refined estimate of 
operation and maintenance costs, potential revenue sources, and an 
identification of research opportunities based on their alignment with 
the Administration's Research and Development Investment Criteria.
    Research will be carried out through several different vehicles, 
(e.g. intramural, cooperative agreements, Cooperative Research and 
Development Agreements (CRADAs), and interagency partnerships with the 
Navy, Army, EPA, Sandia, and others). The business plan will identify 
future opportunities for external input by interested parties.
    Question. What has the BOR done to strengthen and expand the 
interagency relationships so critical to the success of our national 
efforts?
    Mr. Keys. Efforts to strengthen and expand interagency 
relationships have been undertaken by Reclamation. In 1992, the 
Interagency Consortium for Desalination and Membrane Separations 
Research was created to leverage Federal Government resources. The 
consortium has been a grassroots organization which has been able to 
share expertise across government agencies such as the Army, Navy, EPA, 
Reclamation, National Institute for Standards and Technology and 
others. The best known outcome from this relationship has been the 
partnering among the Navy, Reclamation, and the Army on the 
Expeditionary Unit for Water Purification currently under testing at 
the Tularosa Facility. In an effort to expand the consortium's reach, 
the national laboratories were invited to the fiscal year 2004 annual 
consortium meeting to make presentations on their missions and 
programs.
    Reclamation has also engaged in a successful collaboration with 
Sandia National Laboratories in the development of both the Tularosa 
facility and the desalination research roadmap. The roadmapping process 
currently involves other agencies in an effort to coordinate mission 
specific needs and to address national priorities in a timely and 
systematic manner.

               NEW MEXICO PROJECT OPERATIONS IMPROVEMENTS

    Question. Both the contractors for the San Juan Project and the 
contractors for the San Juan Chama Projects in New Mexico have 
contacted the BOR about their desire to discuss optimization of the 
operations of the facilities in those projects. They feel that the 
Bureau has been slow to respond to their requests for consultation. 
Will the BOR commit to consultations with these contractors to evaluate 
proposals for modification to the operations of these projects seeking 
to improve the yield of the projects?
    Mr. Keys. We believe this question refers to Santa Fe's request for 
carryover storage in Heron Reservoir. Reclamation has discussed this 
request with the contractor and will continue to do so. At this time, 
Reclamation believes it has no authority for carryover storage. 
However, Reclamation is involved in the Upper Rio Grande Water 
Operations EIS, which is attempting to optimize water operations under 
existing authorities.
    Question. Will you include our office in the discussions?
    Mr. Keys. Yes, your office will be included in the discussions.

              MIDDLE RIO GRANDE ESA COLLABORATIVE PROGRAM

    Question. The Middle Rio Grande area in central New Mexico has been 
in turmoil over addressing requirements of the Endangered Species Act 
for the Rio Grande Silvery Minnow and the Southwest Willow Flycatcher. 
Since 2001 the Middle Rio Grande Collaborative Program has attempted to 
use collaborative efforts to address these issues and avoid 
unproductive litigation. The program has made great progress in 
development of a long-term plan and to implement projects consistent 
with the 2003 Biological Opinion's Reasonable and Prudent Alternatives. 
However, the decision and administrative structure of this program has 
yet to function efficiently. It is my goal to finalize the organization 
of this program and to introduce authorizing legislation to fully 
implement it. Will your two agencies (Army Corps of Engineers and 
Reclamation) commit to working with my staff in developing a final 
organization and moving this program forward in a positive manner?
    Mr. Keys. Yes. We are committed to working with your staff and the 
Corps in developing the final organizational structure and moving the 
program forward.
    The Collaborative Program is currently developing a governance 
structure with anticipated completion within the next few weeks. 
Reclamation is providing input into this process. Reclamation's 
Albuquerque Area Manager met with members of your staff on April 12, 
2005, to discuss Reclamation's organizational proposal for the 
Collaborative Program.
    Question. Will the BOR commit to streamlining and providing the 
full administrative and contracting resources needed to implement this 
program and thus overcome current and historical problems?
    Mr. Keys. Yes. Reclamation will support the administrative and 
contracting needs of the Program while seeking opportunities to 
streamline processes.
    Question. Will BOR commit to increasing the engagement of the 
Executive Committee?
    Mr. Keys. Yes. Reclamation will work with the Program's signatories 
towards increasing the engagement of the Executive Committee.

                             TRINITY RIVER

    Question. As you know, the Federal Court of Appeals recently upheld 
the Trinity Record of Decision. As a result, Trinity River flows will 
now vary between 369,000 and 815,000 acre-feet per year (excluding 
safety of dam releases). This represents an average flow increase of 
approximately 260,000 acre-feet per year.
    Water diverted from the Trinity River to the Sacramento River flows 
through three different power plants, generating 1,100 kWh for every 
acre foot of water. With this water no longer being diverted to the 
Sacramento River, the output of the Central Valley Project power system 
will be reduced by almost 10 percent.
    According to the public power customers in Northern California, 
they will incur $15 million to $22 million in costs per year to replace 
that power. Does the Department agree with that assessment?
    Mr. Keys. The Department's power value estimate was based on a 
consultant's forecast of energy prices and these are comparably lower 
than that claimed by some Northern California power customers. The 
Environmental Impact Statement/Report and the Supplemental 
Environmental Impact Statement provided detailed analysis of the 
potential impacts associated with increased flows in the Trinity River 
and resulting associated decrease in Central Valley Project generation. 
The amount of foregone generation (kilowatt-hours) is generally agreed 
upon but the value of that generation is where differences often occur. 
For instance, based on the Record of Decision flows, the value of 
foregone CVP generation forecast by the Department's consultants is 
$7.2 million to $21.2 million depending on the water year type. It is 
also noted that the CVP is operated as an integrated project 
incorporating several major rivers. Focusing on perceived Trinity River 
flow changes alone does not represent an entirely accurate assessment 
of CVP-wide impacts. As an illustration, reducing Trinity River 
diversions to the Sacramento River will likely require additional 
releases from Shasta Dam in order to meet those same Sacramento River 
flows previously augmented by the Trinity diversions. This means higher 
Shasta generation would then be produced and such generation will, in 
effect, offset some of the lower Trinity generation.
    Question. Since the allocation of costs is supposed to track the 
distribution of benefits, does the Bureau intend to reallocate costs 
associated with the Trinity Project to reflect this operational change?
    Mr. Keys. The Region currently is developing a formal response to a 
request that has been received from CVP water and power customers. A 
forecast schedule for performing the cost-allocation process as well as 
a budget estimate of its cost is being prepared and will be reviewed 
with these customers within the next few weeks. Any such cost-
allocation process would include operating conditions in place and 
expected to be in place in the foreseeable future. As the CVP is 
operated as in an integrated project, the cost allocation would be CVP-
wide and not just focus on the Trinity Project.
    Question. If so, when do you expect to have this change in place?
    Mr. Keys. The CVP is an expansive, multi-purpose project with a 
capital cost allocation base of $3,359 million as of September 30, 
2004. The method that has been used to allocate the capital costs of 
the CVP in the past and the one that would be used to allocate the 
capital costs of the CVP is known as separable costs-remaining 
benefits. This method requires estimating not only project benefits but 
also the costs of ``single-purpose alternatives'' that would generate 
the same level of benefits and the costs of project facilities with 
each project purpose removed.
    The two most time consuming and costly tasks in a new allocation 
would be water and power operation studies and facilities design and 
cost estimates. Water and power operation studies would need to be 
performed in order to estimate the power and water supply benefits of 
the project. This would involve developing basic assumptions, 
validating them, developing a matrix for computer model runs, 
performing the runs, and presenting the results. It has been estimated 
that this process would require at least 4 years to complete and cost 
at least $4 million.
    Appraisal-level cost estimates for at least 50 facilities with 
multiple operational scenarios and multiple features for each facility 
would have to be made. This process itself would cost more than $3 
million and require 3 years to complete.
    Necessary changes to the Trinity River flows have been implemented 
and will continue to be implemented as required.

                         O&M COSTS FOR SECURITY

    Question. The administration has requested $50 million for site 
security efforts, an increase of $6.8 million from fiscal year 2005 
levels. The budget further proposes that the O&M related security costs 
will be reimbursable from project beneficiaries. Can the Department 
make such a change administratively or does legislation need to be 
enacted?
    Mr. Keys. The proposal is consistent with existing law. Reclamation 
has the administrative discretion to determine the circumstances in 
which additional security measures are reimbursable, and proposes that 
annual costs associated with activities for guarding our facilities be 
treated as project O&M costs subject to reimburseability based upon 
project cost allocations. Funding for capital improvements, including 
physical security upgrades, will remain non-reimbursable.
    Question. The Reclamation Project Act of 1939 (53 Stat. 1187) which 
authorizes Reclamation to enter into contracts to furnish water from 
its projects provides at Section 9(e): ``Each such contract shall be . 
. . at such rates as in the Secretary's judgment will produce revenues 
at least sufficient to cover an appropriate share of the annual O&M 
cost and an appropriate share of such fixed charges as the Secretary 
deems proper.'' How does the Department plan to deal with any O&M costs 
that are related to meeting its Trust responsibilities for Indian 
Tribes?
    Mr. Keys. Reclamation will allocate O&M costs based on project cost 
allocations pursuant to individual project authorizations. Where those 
allocations are reimbursable, the costs will be reimbursed from other 
sources, including Indian Tribes. Where those allocations are non 
reimbursable, the cost will not be reimbursed from other sources.
    Question. The proposal notes that the ``project beneficiaries'' 
will be responsible for these O&M related security costs. Does this 
include M&I users or will the Department only target power customers?
    Mr. Keys. Reclamation will allocate costs to all authorized project 
functions which could include in any one project the following types of 
functions: irrigation, M&I, power, recreation, flood control, fish and 
wildlife. Although cost will be allocated to all authorized project 
functions, costs will not be recovered from those functions that are 
non-reimbursable, i.e. recreation, flood control, and fish and 
wildlife.
    Question. Will the Department consider only the primary purposes of 
the project or will it consider secondary purposes as well?
    Mr. Weimer. Unauthorized secondary functions have no allocations 
and therefore, costs will not be reimbursable to those functions.

                                DROUGHT

    Question. The Southwestern United States has been experiencing 
drought conditions since 2000. The Pacific Northwest is also 
experiencing water supply shortages and the current snow pack is almost 
50 percent below average.
    It is my understanding that in your role as Water Master for the 
Colorado River, you are working with the basin States to develop a 
voluntary protocol to deal with water shortages. What is the status of 
the protocol?
    Mr. Weimer. Interior asked the Basin States in the spring of 2004 
to provide consensus-based recommendations concerning mitigating the 
effects of the drought in the Colorado River Basin, for both the short-
term, 1 to 2 years, and long-term, more than 2 years. Because of the 
need to improve coordinated management of the Colorado River reservoirs 
due to the current and future droughts, Interior held a Work Group 
meeting on May 26, 2005, in Henderson, Nevada.
    Based on input received from the Work Group, the Bureau of 
Reclamation published ``Notice to Solicit Comments and Hold Public 
Meetings on the Development of Management Strategies for Lake Powell 
and Mead, Including Lower Basin Shortage Guidelines, Under Low 
Reservoir Conditions'' in the Federal Register on June 15, 2005. To 
date, the States have submitted one recommendation, asking that the 
Department of the Interior begin a process with the State Department to 
engage the Republic of Mexico in shortage discussions.
    Question. When will it be completed?
    Mr. Weimer. The public process to adopt shortage guidelines for the 
Lower Basin would not be completed for at least 2 years. At a minimum, 
Interior expects to complete the consultation process by December 2007.
    Question. Are the States willingly engaged in this effort?
    Mr. Weimer. Yes. In May 2004, Interior asked Reclamation to provide 
technical assistance to the States with regard to studies that might 
help them recommend consensus-based measures. The Basin States formed a 
technical ``work group'', and have enlisted Reclamation's assistance in 
studying the effects of various measures, primarily potential water 
conservation and shortage strategies for the Lower Basin. Reclamation 
also provides ``outreach'' to other stakeholders to keep them informed 
of the issues being considered.
    Several workshops and meetings have been held by the technical work 
group, as well as by the principal decision-makers representing each 
State.
    Question. How are the Department, and the administration as a 
whole, dealing with the drought situation?
    Mr. Keys. The Reclamation States Emergency Drought Relief Act of 
1991 (Public Law 102-250) as amended (Drought Act) authorizes the 
Bureau of Reclamation to undertake drought relief measures through 
emergency assistance (Title I) and planning activities (Title II).
    Title I provides authority for construction, management, and 
conservation measures to alleviate the adverse impacts of drought. Only 
temporary construction activities are authorized, except for the 
construction of permanent wells. Title I also authorizes temporary 
contracts to make available project and nonproject water and to allow 
for the use of Reclamation facilities for water storage and conveyance. 
The 17 Reclamation States and Hawaii, as well as tribes within those 
States, are eligible for this assistance. In fiscal year 2006, the 
request for drought assistance is $500,000.
    Over the years, much of the funding appropriated under the Drought 
Act has been used to reduce effects from drought in several river 
basins, including the Rio Grande and Pecos River. Also, significant 
funding has been used to construct wells on tribal lands and for 
smaller towns and counties. Reclamation has constructed many wells for 
drinking water for smaller financially-strapped entities (towns, 
counties, tribes) that do not have the financial capability to deal 
with the impacts of drought.
    In addition to utilizing the Drought Act authority, the Department 
of the Interior developed Water 2025 to focus Reclamation's financial 
and technical resources on areas in the West where conflict over water 
either currently exists or is likely to occur in the next 25 years, 
even in non-drought conditions. The Water 2025 program identified Hot 
Spots, geographic problem areas where there are competing demands for 
water, which are exacerbated by drought. The program proactively seeks 
to stretch water supplies through conservation, efficiency, and 
markets, particularly in the Hot Spots. Water 2025 provides additional 
tools that help minimize drought impacts.
    Reclamation's Water Conservation Field Services Program also 
addresses drought conditions on a proactive basis, providing technical 
advice and cost-share financing for water management and conservation 
improvements before a drought hits. Finally, Reclamation Project 
reservoirs continue to protect against water shortages due to drought 
conditions. These reservoirs are doing what they were designed to do, 
and Reclamation programs such as Safety of Dams Program and the O&M 
Program maintain these facilities to meet the challenges of drought in 
the West.
    Question. If there are multi-agencies engaged in this effort, how 
are you coordinating them?
    Mr. Weimer. The activities funded by Reclamation through the 
provisions of the Drought Act are unique to that Act and do not require 
partnership arrangements. However, through its Water 2025 program, the 
Department of the Interior is working with local entities and States to 
improve water management through conservation, efficiency, and markets, 
and to improve advanced water purification technologies.
    Reclamation is also working closely with other Federal agencies, 
associations and water users both at the Reclamation project level and 
at the agency level to improve the management, efficiency and 
conservation of water in the West. These efforts help to stretch 
otherwise limited water supplies and protect water users in the event 
of drought. Through the Water 2025 tool of improving interagency 
cooperation, Reclamation has established MOU's with the Army Corps of 
Engineers, the ``Bridging the Headgates'' partners, and is working with 
the Department of Agriculture to establish an MOU that would initiate 
cooperation on water management programs and activities of mutual 
benefit. Reclamation is also working with the USDA to deploy drought 
action teams in drought stricken areas of the West to coordinate the 
communication and delivery of drought-relief resources to affected 
users.
    In operating our facilities, we work closely with other agencies 
(Corps of Engineers, NOAA, State and local governments, irrigation 
districts, etc.) to monitor and share data that pertain to water 
conditions. We coordinate water management activities (releases and 
timing) with those entities to help minimize effects of the drought on 
communities and citizens of the West. Water rights have previously been 
adjudicated in the upper Sprague River Valley, west side of the Wood 
River valley, and the Lost River basin; additionally there are abundant 
post-1909 certificated water rights upstream of Upper Klamath Lake. If 
funded, interest from willing sellers would be solicited and offers 
evaluated in terms of price, transferability, and yield. It is also 
expected that substantial information would be gained in exercising the 
Oregon State water-right transfer mechanisms since they have not 
previously been used in this basin. Such information would also be of 
interest to Klamath Project Irrigators who may want to acquire senior 
upstream water rights. Appropriations language was included with the 
administration's budget request for this pilot program to assure that 
if lands or other interests in lands were acquired along with the water 
rights that they would have to be sold back into the private market.

                          KLAMATH RIVER BASIN

    Question. In a time when many programs are experiencing significant 
cuts, the administration's fiscal year 2006 Budget requests $62.9 
million for the Klamath River Basin. This represents an 8.4 percent 
increase from the fiscal year 2005 funding levels. Why did the 
administration prioritize funding for the Klamath River basin?
    Mr. Weimer. The administration chose to prioritize the funding for 
the Klamath River Basin due to the problems encountered from several 
consecutive years of drought, and the high level of controversies in 
the basin over Interior's responsibilities. The fish species are tribal 
trust resources, as well as being listed under the Endangered Species 
Act. Efforts to provide increased lake levels and river flows for the 
fish have also had a large and lasting effect on the agricultural 
economy of the Klamath Basin and commercial and sports fishing 
downstream. Efforts to restore habitat, improve water management, 
investigate the development of potential new storage options and 
sources of water will contribute to stabilizing the cultural and 
economic well being of the basin. The Department is developing and 
implementing long-term solutions to the water problems in the Klamath 
Basin.
    Question. The Budget notes that Interior is in the process of 
putting together a water bank of approximately 100,000 acre-feet to 
help meet the water needs for coho salmon. Please explain this effort.
    Mr. Keys. In 2001, Reclamation conducted a 1-year pilot demand 
reduction program which provided a payment to irrigators in lieu of 
applying surface water to land previously irrigated. In 2002, 2003, and 
2004, a pilot water bank program was implemented to assist in meeting 
National Oceanic and Atmospheric Administration Fisheries (NOAA) 
Biological Opinion (BO) requirements for threatened salmon in the 
Klamath River. The pilot water bank consists of compensating 
agricultural water users to either forebear use of water, substitute 
groundwater for surface water, or pump ground water to increase the 
supply. The results of the pilot water bank program for the various 
years have been or are being reviewed by Cal Poly-San Luis Obispo and 
the U.S. Geological Survey. Reclamation refines the water bank program 
each year, changing its selection process, contracting process, and 
program rules based on what was learned in previous years to meet its 
increasing obligations. For example, in 2002 Reclamation paid a flat 
fee per acre foot of water. Since then they have instituted a new 
process where landowners offer to enroll their lands in the water bank 
by bid. The least expensive, highest yield lands receive priority.
    Question. Is this supported by the Klamath River stakeholders, 
including the environmentalists?
    Mr. Keys. The stakeholders support the Water Bank generally as a 
short-term solution, but not for the long-term. The water bank has been 
successful in that large numbers of irrigators have voluntarily signed 
up for it, and it has allowed Reclamation to meet the requirements in 
the NOAA Fisheries and Fish and Wildlife Service biological opinions 
and provide sufficient water to meet the need of contracts for 
irrigation. The high annual cost of the water bank is problematic, and 
the water bank is viewed as a temporary solution while long-term 
solutions are developed. Water users are seeking assurance of a water 
supply which the water bank does not provide, and are concerned that 
idling land will negatively affect agribusiness in the basin. The 
environmental community and the tribes support the concept of a water 
bank; however, they believe 100,000 acre feet annually is insufficient 
and that lands should be permanently retired.
    Question. I would also like to know more about the $500,000 
requested for a Fish and Wildlife Service prototype program to acquire 
and transfer water rights to the wetlands in the Klamath Basin refuges. 
Will the Department buy or lease these water rights?
    Mr. Keys. The intent is to buy the water rights.
    Question. Have you identified people who would be willing to let 
the Department acquire their water rights?
    Mr. Weimer. The administration's request to fund the FWS water 
rights acquisition pilot program is designed to test the market for 
water right acquisitions and the Oregon water right transfer procedures 
for transferring water rights to the FWS refuges. Currently, Lower 
Klamath Lake and Tule Lake refuges are mostly dependent on tailwater 
from irrigated lands for their water supply, and the refuges are 
disproportionally hard hit during dry years. A substantial amount of 
water-righted land is always on the market in the basin, but no 
specific water rights for the program have been pre-identified. Water 
rights have previously been adjudicated in the upper Sprague River 
Valley, west side of the Wood River valley, and the Lost River basin; 
additionally there are abundant post-1909 certificated water rights 
upstream of Upper Klamath Lake. If funded, interest from willing 
sellers would be solicited and offers evaluated in terms of price, 
transferability, and yield. It is also expected that substantial 
information would be gained in exercising the Oregon State water-right 
transfer mechanisms since they have not previously been used in this 
basin. Such information would also be of interest to Klamath Project 
Irrigators who may want to acquire senior upstream water rights. 
Appropriations language was included with the administration's budget 
request for this pilot program to assure that if lands or other 
interests in lands were acquired along with the water rights that they 
would have to be sold back into the private market.

                         O&M COSTS FOR SECURITY

    Question. With regard to the treatment of security costs for 
Reclamation facilities following the events of 9/11/01, what 
consideration have you given to a ``risk of loss'' assessment in 
developing an equitable allocation of costs to all of the multiple 
purposes and beneficiaries of the facilities?
    Mr. Keys. Reclamation has conducted comprehensive security risk 
assessments at all critical facilities, evaluating vulnerabilities, 
threats and consequences (including loss of mission, loss of life, and 
public safety). Based on these assessments, Reclamation has developed 
risk management strategies to protect the public, its employees, and 
the facilities and their mission. Reclamation does not allocate project 
costs based on ``risk of loss'' but allocates costs based on the 
project benefits portion of operations and maintenance costs in 
accordance with established Reclamation law and policies.
    Question. What steps has Reclamation taken to mitigate the level of 
security costs for guards and surveillance?
    Mr. Keys. Reclamation has taken several steps to mitigate the level 
of security costs for guards and surveillance. In July 2004, 
Reclamation revised its Threat Condition Protective Measures to 
eliminate the across-the-board requirement for random patrols at yellow 
and orange National threat levels for specific classes of facilities. 
The need for increased patrols and surveillance due to changes in 
threat condition is now determined based on local conditions, such as 
local or regional threats, existing electronic surveillance systems, 
and the presence of on-site operations and maintenance staff.
    Reclamation also eliminated across-the-board patrol requirements 
for dams when the water surface elevation is reasonably low, for 
example during drought conditions. Reclamation has also reviewed the 
need for guards and surveillance at several facilities and has examined 
alternatives such as modifying contracts from routine daily patrols to 
``as needed'' contracts that are only exercised under certain 
conditions.
    Question. Has Reclamation considered a user fee program, which 
could significantly defray the costs of guards?
    Mr. Keys. Reclamation has not investigated user fee programs.
    Question. Has Reclamation requested co-funding from the National 
Park Service for jointly used facilities?
    Mr. Keys. Reclamation has not requested co-funding from the 
National Park Service. Reclamation and National Park Service work 
together to find the most efficient and effective ways to protect 
facilities.
    Question. Commissioner Keys, how much has the Bureau requested and 
received for increased security costs at its multi-purpose dams in the 
wake of the attacks of September 11, 2001?
    Mr. Keys. Between September 11, 2001 and September 30, 2005, 
Reclamation will spend $169 million in non-reimbursable anti-terrorism 
dollars, which include guard and surveillance activities.
    Question. Please break those numbers down by fiscal year.
    Mr. Keys.

                        [In millions of dollars]
------------------------------------------------------------------------
                                                              Amount
------------------------------------------------------------------------
Fiscal Year 2002 Actual.................................            35.6
Fiscal Year 2003 Actual.................................            53.2
Fiscal Year 2004 Actual.................................            36.9
Fiscal Year 2005 Enacted................................            43.2
Fiscal Year 2006 Request................................            50.0
------------------------------------------------------------------------

    Question. Who has paid for that increased security?
    Mr. Keys. Reclamation has paid for 100 percent of increased 
security costs since 9/11/01.
    Question. How much does the Bureau anticipate it will request from 
increased security measures in fiscal years 2007 through 2012?
    Mr. Keys. Reclamation will continue budgeting for guard and 
surveillance needs as appropriate and anticipates outyear budget 
requests will be maintained at a level similar to recent budget 
requests. The annual number will vary based on programmatic priorities 
and long-term goals for meeting security needs.
    Question. Who will pay the anticipated costs?
    Mr. Keys. Annual costs associated with facility guard and patrol 
activities will be treated as project O&M costs subject to 
reimbursability based upon project cost allocations. Reclamation will 
continue to fund the costs of facility hardening and program management 
on a non-reimbursable basis.
    Question. How does the Bureau determine which part of the costs of 
increased security should be reimbursable and which part should be non-
reimbursable?
    Mr. Keys. Reclamation considers the ongoing costs of guards and 
patrol to clearly fall within the definition of project operation and 
maintenance (O&M) costs. Therefore, those costs are subject to 
reimbursement based on project cost allocations. Like equipment 
maintenance, routine facility security activities such as guards and 
patrol are critical in ensuring the uninterrupted supply of Reclamation 
water and power. The determination to treat guard and patrol costs as 
reimbursable project O&M is within Reclamation's authority under 
Federal reclamation law, in particular the Reclamation Project Act of 
1939, and is consistent with longstanding policy and practice.
    Following the terrorist attacks of September 11, 2001, expenditures 
for security enhancements on Bureau of Reclamation facilities increased 
rapidly and dramatically through emergency supplemental appropriations. 
Although Reclamation's practice at that time provided for the ongoing 
costs of security-related activities (including guards and patrol) on 
Reclamation facilities to be a project cost subject to reimbursement by 
project beneficiaries, it was decided that initially, the post-9/11 
facility security-related cost increases should be borne by the United 
States.
    The rationale for making guard and patrol cost increases 
temporarily nonreimbursable was that it would have been a significant 
hardship for the project beneficiaries to bear the entire burden of the 
urgent, dramatic, and unplanned cost escalation.
    Question. Once the Bureau determines which costs should be 
reimbursed by project beneficiaries, how does it allocate those costs 
among beneficiaries?
    Mr. Keys. The capital costs of a Reclamation project are allocated 
to all authorized project functions by percentage of the total 
construction costs attributable to each function. The beneficiaries of 
the functions of irrigation, power, and municipal and industrial water 
supply reimburse the Federal Government for the percentage of project 
capital costs allocated to their particular function. Functions such as 
flood control, fish and wildlife, recreation, water conservation, and 
land resource management are considered to benefit the general public 
and thus are nonreimbursable. Annual operation and maintenance (O&M) 
costs for a project are reimbursed in accordance with the same 
allocated percentages as the capital costs. Reimbursable O&M costs are 
billed to and recovered from the project beneficiaries in the year in 
which they are incurred.
    Question. Are all classes of project beneficiaries allocated a 
portion of the costs the Bureau determines should be reimbursed?
    Mr. Keys. Irrigation, M&I water supply, and hydroelectric power 
generation are categorized as reimbursable; O&M costs allocated to the 
functions of flood control, fish and wildlife, water control/
conservation, recreation, and land resource management, all of which 
are considered beneficial to the general public, are nonreimbursable. 
Reimbursable costs are billed to and recovered from the beneficiaries; 
nonreimbursable costs are not and are instead borne by the Federal 
Government.
    Question. What kind of benchmarking does the Bureau use to 
determine which proposed security enhancements are appropriate?
    Mr. Keys. Upon the completion of vulnerability risk assessments, 
many of which were conducted through contracts with security experts, 
Reclamation employs a Security Advisory Team review process and a 
decision making process to critically evaluate all recommendations made 
in the risk assessment report. Reclamation includes outside experts in 
this process.
    Reclamation also is an active member of the Interagency Forum on 
Infrastructure Protection (IFIP), which meets regularly to discuss 
issues, methodologies, and best practices. IFIP members include 
Reclamation, the Army Corps of Engineers, Tennessee Valley Authority, 
Bonneville Power Administration, Western Area Power Administration, 
Federal Emergency Management Agency, Federal Energy Regulatory 
Commission, Sandia National Laboratory, the Association of State Dam 
Safety Officials, and others.
    Question. Does the Bureau use any kind of risk analysis when 
proposing increased security measures?
    Mr. Keys. Yes. Reclamation uses a comprehensive security risk 
assessment process to determine the risk at each critical 
infrastructure facility. The assessment methodology examines the 
threats, vulnerabilities, consequences, and existing security measures 
at each facility. The risk analysis process includes a review of 
proposed risk reductions by peer reviewers and external security 
experts to validate each recommendation in relation to risk reduction 
strategy.
    Question. Does the Bureau use any cost-effectiveness analysis when 
proposing increased security measures?
    Mr. Keys. Yes. Reclamation conducts cost-effectiveness analysis in 
the areas of the cost of a proposed recommendation relative to the 
projected reduction in risk that the recommendation provides. 
Reclamation also performs front-end cost effectiveness analysis of 
security guard functions at its National Critical Infrastructure 
facilities.

                         UPPER COLORADO REGION

    Question. In the event that minimum power generation level is 
reached in the Colorado River Storage Project (CRSP) as a result of 
drought conditions, what precautions is the Bureau taking to avoid 
laying the burden of financing non-power program--such as the Glen 
Canyon Adaptive Management Program, the Salinity Control Program, and 
the Endangered Fish Recovery Program--on CRSP power customers?
    Mr. Keys. Funding from power revenues for the non-power programs, 
such as the Glen Canyon Adaptive Management Program, the Salinity 
Control Program, and the Endangered Fish Recovery Program, is provided 
by Federal legislation. Reclamation is meeting with both the Western 
Area Power Administration and the Colorado River Energy Distributors 
Association to discuss issues related to the CRSP and the drought. 
Discussions have dealt with how these programs can continue to be 
funded if Lake Powell approaches the minimum power generation level.
    The Legislation for the Endangered Fish Recovery Program addresses 
funding through the Basin Fund with provision for appropriations. That 
is, if ``. . . the Western Area Power Administration and the Bureau of 
Reclamation determine that the funds in the Colorado River Basin Fund 
will not be sufficient to meet the obligations of section 5(c)(1) of 
the Colorado River Storage Project Act for a 3-year period, the Western 
and Reclamation shall request appropriations to meet base funding 
obligations.''
    Question. Is the Bureau considering an appropriations request to 
Congress in order to cover such an eventuality?
    Mr. Keys. Based on the legislation, we must determine that funding 
will not be available for a 3-year period. That determination has not 
been made at this point in time.
    The legislation for the Adaptive Management Program and the 
Salinity Control Program does not address funding through 
appropriations. The current process for funding operation and 
maintenance activities and non-power programs is to look at all program 
items and request funding for work based on the priority of each item. 
Such programs as these would be considered in this process.
                                 ______
                                 
            Questions Submitted by Senator Daniel K. Inouye

                         HAWAII WATER RESOURCES

    Question. In fiscal year 2004, funds were provided to the Bureau of 
Reclamation to initiate activities on water recycling opportunities. 
Such activities are critical to Hawaii since water use rates in Hawaii 
are increasing and groundwater recharge rates are declining. What is 
the current status of the Bureau's work on this issue?
    Mr. Keys. Last June, Reclamation retained a contractor to complete 
an appraisal study of potential opportunities for storm-water 
collection, treatment, and reuse. In cooperation with State and local 
agencies, the contractor has identified such opportunities and is 
currently completing their analysis. A final report is due by the end 
of June 2005.
    Question. What recommendations does the Bureau have for future 
actions in Hawaii pertaining to water recycling, in general, and storm-
water capture and reuse, in particular?
    Mr. Keys. The potential for storm-water collection and reuse will 
not be known until the on-going study is complete, but early 
indications are that small, local projects may present opportunities to 
increase water supply as well as provide other benefits. Hawaii 
recognizes the value of water reclamation and reuse as part of a broad 
strategy for developing new water sources to serve increasing needs. 
This is particularly relevant on the islands of Oahu and Maui because 
reuse opportunities are being identified and evaluated. Given 
Reclamation's limited resources and current needs for existing 
Reclamation Projects, a future role for Reclamation is difficult to 
envision for Hawaiian recycling projects.

                          SUBCOMMITTEE RECESS

    Senator Allard. Having said that, we'll go ahead and recess 
the subcommittee meeting.
    [Whereupon, at 3:40 p.m., Thursday, April 7, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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