[Senate Hearing 112-63]
[From the U.S. Government Publishing Office]





                                                         S. Hrg. 112-63

                         WATER AND POWER BILLS

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON
                                     

                  S. 201                                S. 333

                  S. 334                                S. 419

                  S. 499                                S. 519

                  S. 808



                                     

                               __________

                              MAY 19, 2011


                       Printed for the use of the
               Committee on Energy and Natural Resources

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington           MIKE LEE, Utah
BERNARD SANDERS, Vermont             RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan            DANIEL COATS, Indiana
MARK UDALL, Colorado                 ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire        JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota                BOB CORKER, Tennessee
JOE MANCHIN, III, West Virginia
CHRISTOPHER A. COONS, Delaware

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel
                                 ------                                

                    Subcommittee on Water and Power

                JEANNE SHAHEEN, New Hampshire, Chairman

RON WYDEN, Oregon                    MIKE LEE, Utah, Ranking
TIM JOHNSON, South Dakota            JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington           DANIEL COATS, Indiana
BERNARD SANDERS, Vermont             JOHN HOEVEN, North Dakota
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
JOE MANCHIN, III, West Virginia

    Jeff Bingaman and Lisa Murkowski are Ex Officio Members of the 
                              Subcommittee












                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Lee, Hon. Mike, U.S. Senator From Utah...........................     2
Moe, Darrick, Regional Manager of the Desert Southwest Region, 
  Western Area Power Administration, Department of Energy........    10
Murillo, David, Deputy Commissioner, Operations, Bureau of 
  Reclamation, Department of the Interior........................     3
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    23

                              Appendix II

Additional material submitted for the record.....................    27

 
                         WATER AND POWER BILLS

                              ----------                              


                         THURSDAY, MAY 19, 2011

                               U.S. Senate,
                   Subcommittee on Water and Power,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:41 p.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeanne 
Shaheen presiding.

OPENING STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR FROM NEW 
                           HAMPSHIRE

    Senator Shaheen. Good afternoon. I want to call this 
hearing to order, of the, the first hearing for this year of 
the Water and Power Subcommittee. Welcome everyone. I apologize 
for being late. As you know, we had a vote, and obviously, 
Senator Lee is a lot faster than I am.
    Senator Lee is our ranking member, and I look forward to 
working with him on the subcommittee. As I said to him, many of 
the, particularly the bills that we're going to be hearing 
today, affect the West much more than the East, so his 
perspective will be very important.
    Today's hearing involves 7 bills that are pending before 
the subcommittee. The bills cover several different aspects of 
our water and power jurisdiction. We held hearings on these 
bills or similar bills during the 111th Congress, and we're 
looking forward to addressing them during this Congress as 
well.
    We're only hearing today from administration witnesses. 
We've already received statements for the record on some of 
these bills, and we will leave the record open for 2 weeks in 
order to receive additional statements.
    The bills we're covering today are S. 201, a bill to 
clarify the jurisdiction of the Secretary of the Interior with 
respect to the C.C. Cragin Dam and Reservoir, and for other 
purposes; S. 333, a bill to reinstate and extend the deadline 
for commencement of construction of a hydroelectric project 
involving the Little Wood River Ranch in Idaho; S. 334, a bill 
to reinstate and extend the deadline for commencement of 
construction of a hydroelectric project involving the American 
Falls Reservoir in Idaho; S. 419, the Dry Red Water Regional 
Water Authority System Act of 2011, to authorize a drinking 
water project in rural Montana and North Dakota; S. 499, the 
Bonneville Unit Clean Hydropower Facilitation Act, to 
restructure the repayment obligation for a portion of the 
central Utah project; S. 519, the Hoover Power Allocation Act 
of 2011, to reauthorize the contracts relating to hydroelectric 
power generated at Hoover Dam in Nevada for the benefit of 
power users in Nevada, Arizona and California; and S. 808, a 
bill to direct the Secretary of the Interior to allow for 
prepayment of the repayment amounts owed to the United States 
by the Uintah Water Conservancy District, and for other 
purposes.
    At this point I'd like to turn to Senator Lee in case he 
has any opening remarks.

       STATEMENT OF HON. MIKE LEE, U.S. SENATOR FROM UTAH

    Senator Lee. Thank you, Senator Shaheen. Thanks for 
chairing this hearing and for letting me serve on this 
subcommittee with you. I look forward to working on these 
issues.
    Two of the issues we'll be discussing today affect my home 
State--S. 499, the Bonneville Unit Clean Hydropower 
Facilitation Act, and S. 808, a bill to allow for prepayment of 
contracts between the United States and the Uintah Water 
Conservancy District. I've cosponsored both of these pieces of 
legalization with my friend and fellow Utahan, Senator Hatch.
    All of these issues here before us today address many of 
the issues we'll be examining over the next couple of years, 
and these includes things like mechanisms to provide safe and 
reliable water services to rural communities, different 
approaches to resolve jurisdictional issues among competing 
Federal agencies to avoid duplication of efforts, and 
opportunities to improve our power supplies. So, while the 
underlying purpose of each specific bill before us today may be 
different, they all attempt to identify tools that will help 
ensure that our water and power facilities are safe and 
reliable, and operating properly.
    I thank the Federal witnesses for their presence here 
today.
    I thank you, Senator Shaheen, for conducting this hearing.
    I look forward to the testimony we'll receive.
    Senator Shaheen. Thank you, Senator Lee.
    We'll now move to our testimony from the 2 witnesses.
    The first witnesses, witness is David Murillo, the Deputy 
Commissioner for Operations from the Bureau of Reclamation. 
He'll provide testimony relating to S. 201, S. 429, S. 499, and 
S. 808.
    The second witness will be Darrick Moe, the Regional 
Manager of the Desert Southwest Region of the Western Area 
Power Administration. Mr. Moe will testify regarding S. 519.
    So, welcome to both of you.
    I would also just point out that we've received testimony 
for the record from the Federal Energy Regulatory Commission 
regarding S. 333 and S. 334, and we will enter that into the 
record.
    [The prepared statement of Senator Baucus follows:]

   Prepared Statement of Hon. Max Baucus, U.S. Senator From Montana, 
                               on S. 419
    Madam Chair and members of the subcommittee, thank you for the 
opportunity to provide testimony to the subcommittee in support of 
Senate Bill 419, the Dry-Redwater Regional Water Authority System Act 
of 2011. This bill would bring clean drinking water to communities in 
east central Montana. It authorizes funding for construction of the 
Dry-Redwater municipal water project in Dawson, Garfield, Prairie, and 
Richland Counties, which will bring clean water to thousands of Montana 
families and support jobs through long-term economic development.
    Water is critical to every community. This bill would at last 
resolve water treatment challenges that have harmed the health and 
pocketbooks of eastern Montanans. All Americans deserve safe, clean 
drinking water for their families, their ranches and farms, and their 
businesses.
    Communities in Dawson, Garfield, Prairie, and Richland counties 
have problems accessing clean water with the current water system, 
which not only poses a health risk to residents but also stains sinks, 
destroys faucets and hinders new business and jobs to the area. Five 
central water treatment facilities currently address high fluoride, 
sodium, organics, and total dissolved solid levels in the raw 
groundwater. Centralizing treatment in a single regional facility will 
resolve persistently elevated pollutant levels in the current system, 
reduce long-term costs through economies of scale, eliminate wastewater 
storage problems at existing facilities, and shield municipalities from 
fluctuating user bases as populations shift. When completed, the Dry-
Redwater Project would provide clean, reliable water for thousands of 
families in east central Montana.
    I plan to work with the Bureau of Reclamation (Reclamation) to 
resolve several issues that remain outstanding in this introduced 
legislation. In particular, I am pleased that progress is being made on 
completing a feasibility study to address the concerns of Reclamation 
with respect to complying with criteria in the Rural Water Supply Act 
of 2006. I urge participants in this study to double-down their efforts 
in order to move quickly toward verifying the cost estimates of the 
project in a feasibility report. The current legislation authorizes 
funding contingent on a finding by the Secretary of the Interior of the 
project's feasibility. This contingent authorization is similar in 
structure to other rural water projects and reflects initial completion 
of the proposal prior to finalization of criteria under the Rural Water 
Supply Act of 2006.
    I stress the need to move forward on the Dry-Redwater project given 
the nine years that east central Montana has invested in its fruition.
    Thank you.

    Senator Shaheen. So, Mr. Murillo, if you would like to 
begin, and maybe we can ask you to summarize your testimony so 
we can keep it within about a 5-minute period.

 STATEMENT OF DAVID MURILLO, DEPUTY COMMISSIONER, OPERATIONS, 
       BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR

    Mr. Murillo. All right. I'll try to go quickly through 
this.
    Senator Shaheen. Oh, I'm sorry.
    Mr. Murillo. That's OK.
    Senator Shaheen. I'm reminded that you're, because you're 
testifying on a number of those pieces of legislation, you 
should feel free to take more than 5 minutes, and take the full 
10 minutes.
    Mr. Murillo. You already asked a touch question to begin 
with 5 minutes, so, now I get 10. Thank you.
    Madame Chairwoman, and members of the subcommittee, I am 
David Murillo, Deputy Commissioner of Operations at the Bureau 
of Reclamation. I am pleased to provide the views of the 
Department of the Interior on 4 bills before the subcommittee 
today--S. 201, S. 419, S. 499, and S. 808.
    With me today is Robert Cunningham, Assistant Director of 
Lands at the U.S. Forest Service, who's prepared to respond to 
any technical questions the subcommittee may have on S. 201.
    My written statements have been submitted for the record.
    [The prepared statements of Mr. Murillo follow:]

Prepared Statements of David Murillo, Deputy Commissioner, Operations, 
           Bureau of Reclamation, Department of the Interior,
                               on s. 499
    Madam Chairwoman and members of the Committee, I am David Murillo, 
Deputy Commissioner for Operations of the Bureau of Reclamation. I am 
pleased to be here today on behalf of the Assistant Secretary for Water 
and Science who oversees the Central Utah Project Completion Act 
activities to present the Administration's views on S. 499, the 
Bonneville Unit Clean Hydropower Facilitation Act. The proposed 
legislation is associated with development of hydropower on the Diamond 
Fork System, Bonneville Unit, Central Utah Project.
    The Central Utah Project Completion Act (CUPCA) provides for the 
completion of the construction of the Central Utah Project (CUP) by the 
Central Utah Water Conservancy District (CUWCD). CUPCA also authorizes 
programs for fish, wildlife, and recreation mitigation and 
conservation; establishes an account in the Treasury for deposit of 
appropriations and other contributions; establishes the Utah 
Reclamation Mitigation and Conservation Commission to coordinate 
mitigation and conservation activities; and provides for the Ute Indian 
Water Rights Settlement.
    Hydropower development on CUP facilities was authorized as part of 
the Colorado River Storage Project Act (CRSPA) under which the Central 
Utah Project is a participating project. The development of hydropower 
on the Diamond Fork System has been contemplated since the early days 
of the CUP. The 1984 Environmental Impact Statement on the Diamond Fork 
System described the construction of five hydropower plants with a 
combined capacity of 166 MW of power.
    However, these hydropower plants were never constructed and the 
1999 Environmental Impact Statement on the Diamond Fork System 
presented a plan which specifically excluded the development of 
hydropower, stating ``there are no definite plans or designs, and it is 
not known if or by whom they may be developed.''
    Although hydropower development was not included, construction of 
pipelines and tunnels for the Diamond Fork System were completed and 
put into operation in July 2004. Under full operation the Diamond Fork 
System will annually convey 101,900 acre-feet of CUP Water and 61,500 
acre-feet for Strawberry Valley Project water users.
    In 2002 CUPCA was amended to authorize development of federal 
project power on CUP facilities. With this new amendment plans for 
hydropower development at Diamond Fork were included in the 2004 Utah 
Lake System Environmental Impact Statement and the 2004 Supplement to 
the Definite Plan Report for the Bonneville Unit (DPR). These documents 
describe the construction of two hydropower plants on the existing 
Diamond Fork System for a total generating capacity of 50 MW.
    Section 208 of CUPCA included provisions that power on CUP features 
would be developed and operated in accordance with CRSPA and CUP water 
diverted out of the Colorado River Basin for power purposes would be 
incidental to other project purposes.
    There are two options for hydropower development on the Diamond 
Fork System: 1) federal project development or 2) private development 
under a Lease of Power Privilege contract with the United States.
    Under the first option the CUWCD would construct the Diamond Fork 
hydropower plants under contract with the United States and contribute 
an up front local cost share of 35 percent of the construction costs. 
In addition to the hydropower plant construction costs, the costs of 
conveyance facilities upstream of Diamond Fork System that are 
allocated to power would have to be repaid. The DPR allocates costs of 
the CUP according to project purposes. The reimbursable costs allocated 
to power are $161 million based upon the costs of developed features 
upstream of the Diamond Fork System. It is anticipated that under this 
option, these allocated costs would be repaid through an arrangement 
among Interior, CUWCD, and the Western Area Power Administration 
(WAPA).
    Under the second option, private hydropower could be developed. 
Although the DPR and 1999 EIS describe federal hydropower development, 
they also provide the option for a Lease of Power Privilege arrangement 
with the United States. Under this arrangement Interior would implement 
a competitive process to select a lessee for private development of 
hydropower at Diamond Fork. The lease arrangement would require 
repayment of the $161 million of upstream costs plus annual payments to 
the United States for the use of the federal facilities, amounting to 
at least a 3 mil rate paid by the lessee to the United States.
    S. 499 does not preclude federal development of hydropower, but it 
does increase the likelihood of private development. If enacted, this 
bill would indefinitely defer the $161 million in costs allocated to 
power development in the Diamond Fork System under section 211 of 
CUPCA, thus reducing the cost of hydropower development at this site. 
This bill would increase the likelihood that a private developer would 
pursue a Lease of Power Privilege arrangement because the private 
developer would not, under this legislation, be required to repay the 
$161 million of construction costs that were allocated to power as 
would be required under existing law.
    We understand and appreciate the goal of this legislation of 
facilitating the development of hydroelectric power on the Diamond Fork 
System.
    However, the Administration has serious concerns about losing our 
ability to recoup the Federal investment made in these facilities as 
set forth in this legislation. The Federal government may benefit in 
the medium term from the annual payments for the use of Federal 
facilities that would be paid if a lessee entered into a Lease of Power 
Privilege arrangement for production of hydroelectric power on the 
Diamond Fork System. Assuming only a summer water supply as under 
current deliveries, these payments are estimated at about $400,000 a 
year starting the year that the project is completed and continuing for 
the life of the project. However, because payment of $161 million of 
allocated power costs would be postponed indefinitely, it is unclear 
what the long-term fiscal implications of enactment of this legislation 
would be and how the United States Treasury would be made whole. This 
legislation would potentially permanently postpone anticipated receipts 
to the U.S. Treasury at the expense of the Federal taxpayer. While it 
is not clear at this time whether a nonfederal developer would propose 
a hydroelectric project at Diamond Fork under current law, if this were 
to occur, repayment of the allocated power costs would begin after the 
hydroelectric project is completed and average $5.3 million a year for 
50 years.
    Section 5 of S. 499 would prohibit the use of tax-exempt financing 
to develop any facility for the generation or transmission of 
hydroelectric power on the Diamond Fork System. This provision was 
added to the bill to prevent any loss of revenue to the federal 
government as a result of the financing mechanism used for development 
of hydropower at this site.
                               on s. 808
    Madam Chairman and Members of the Subcommittee, I am David Murillo, 
Deputy Commissioner of Operations of the Bureau of Reclamation 
(Reclamation). Thank you for the opportunity to provide the views of 
the Department of the Interior (Department) on S. 808, as introduced on 
April 13, 2011. This legislation allows for prepayment of the current 
and future repayment contract obligations of the Uintah Water 
Conservancy District (District) of the costs allocated to their 
municipal and industrial water (M&I) supply on the Jensen Unit of the 
Central Utah Project (CUP) and provides that the prepayment must result 
in the United States recovering the net present value of all repayment 
streams that would have been payable to the United States if S. 808 
were not enacted. S. 808 would amend current law to change the date of 
repayment to 2022 from 2037. The legislation would also allow repayment 
to be provided in several installments and requires that the repayment 
be adjusted to conform to a final cost allocation. The Department 
supports S. 808.
    The District entered into a repayment contract dated June 3, 1976, 
in which they agreed to repay all reimbursable costs associated with 
the Jensen Unit of the CUP. The Jensen Unit's total water supply was 
envisioned at this time to be roughly 18,000 acre-feet because plans 
anticipated completion of another pumping plant at a location on the 
Green River known as Burns Bench.
    However, for a variety of reasons, the Burns Bench feature was 
never built. And with the enactment of language in Section 203(g) of 
the Central Utah Project Completion Act of 1992 (P.L. 102-575), the 
District's contract was amended in 1992 to reduce the project M&I 
supply subject to repayment to 2,000 acre-feet annually, and 
temporarily fix repayment for this supply based upon a reduced interim 
cost allocation developed for the still-uncompleted project. The 
amended 1992 contract required the District to repay about $5.545 
million through the year 2037 at the project interest rate of 3.222% 
with annual payments of $226,585. The current balance due, without 
discounting, is $3,949,058 as of 2011.
    It is important to note that this $3,949,058 figure reflects a 
repayment amount that is statutorily lowered by the 1992 legislation, 
and does not reflect the true repayment costs of the Jensen Unit. The 
costs allocated to the 2,000 acre-feet of contracted M&I supply, and 
the M&I supply available through additional incomplete project 
features, may be significantly revised upward in the future upon 
project completion or enactment of this bill, both of which would 
require a Final Cost Allocation. An additional currently unallocated 
cost of $7,419,513 is expected to be allocated to the contracted 2,000 
acre-feet in order to achieve a full and final project repayment.\1\
---------------------------------------------------------------------------
    \1\ This allocation will be subject to revision should there be 
additions to the project.
---------------------------------------------------------------------------
    These are the costs that paragraph 3 of S. 808 requires to be 
included in the prepayment. The 2011 balance on the 1992 M&I repayment 
contract is $3,949,058 and the adjustment amount when factoring in the 
total project cost including interest on that debt is $7,419,513. 
Therefore, in total non-discounted dollars, the Conservancy District 
owes the Federal government $11,368,571.
    Under Reclamation law, water districts are not authorized to prepay 
their M&I repayment obligation based upon a discounted value of their 
remaining annual payments.
    This legislation would authorize early repayment by the Uintah 
Conservancy District to the Federal government. Because there is an 
interest component to the M&I repayment streams to be repaid early, 
early repayment without an adjustment for interest would result in 
lower overall repayment to the United States. To keep the United States 
whole, the Bureau of Reclamation would collect the present value of the 
whole amount that would be due without early repayment.
    The language in S. 808 has been amended from the language contained 
in an earlier version of this legislation, S. 1757 (111th Congress). 
The amended language clarifies that this legislation requires that the 
Federal government be paid what it is owed by the Conservancy District. 
Because the United States supports the goals of providing for early 
repayment under this contract so long as the United States is kept 
whole, and S. 808 clearly establishes that early repayment under this 
legislation must be of an amount equal to the net present value of the 
foregone revenue stream, the Department supports this legislation.
                               on s. 201
    Madam Chairman and Members of the Subcommittee, I am David Murillo, 
Deputy Commissioner of Operations of the Bureau of Reclamation 
(Reclamation). Thank you for the opportunity to provide the views of 
the U.S. Department of the Interior (Department) on S. 201, legislation 
specific to lands underlying the C.C. Cragin Dam, Reservoir and utility 
corridor (C.C. Cragin project) in Arizona. The legislation seeks to 
clarify federal jurisdiction with respect to the C.C. Cragin project, 
which includes a dam, reservoir, and 11.5-mile utility corridor 
containing a transmission line and high-pressure pipeline. The project 
is located nearly entirely within the Coconino National Forest in 
north-central Arizona.
    Language included in the Arizona Water Settlements Act (AWSA, 
Public Law 108-451) created questions about the respective jurisdiction 
of the U.S. Forest Service (Forest Service) and Reclamation related to 
the C.C. Cragin project. We have come to an agreement that we think can 
resolve this issue. This legislation is consistent with that 
arrangement. We look forward to continue working with the Committee on 
reaching a resolution.
    Reclamation and the Forest Service worked closely with the Salt 
River Project Agricultural Improvement and Power District (SRP), the 
entity that operates and maintains the C.C. Cragin project under the 
AWSA, and reached agreement in mid-2010 on legislation to clarify 
jurisdiction of the Federal agencies. The legislation, S. 1080, was 
considered during the 2nd session of the 111th Congress. The bill was 
not enacted during the last Congress, but both S. 201 and its companion 
bill, H.R. 489, contain the same provisions as S. 1080, as reported.
    This legislation accommodates the needs of Reclamation and SRP by 
ceding exclusive administrative jurisdiction over the lands underlying 
the C.C. Cragin project to Reclamation and by expressly acknowledging 
SRP's responsibility for operating and maintaining the C.C. Cragin 
project pursuant to the AWSA and the 1917 agreement between the 
Department and SRP. This is a unique situation due to the AWSA. In 
addition, this approach accommodates the Forest Service by allowing the 
agency to manage the lands underlying the utility corridor with respect 
to recreation, wildfire, law enforcement, and other activities 
consistent with the Forest Service's authorities, responsibilities, and 
expertise; the AWSA; the 1917 agreement; and the existing right-of-way 
over the utility corridor held by another party. This approach would 
allow for integrated management of tens of thousands of acres of 
ecosystems across National Forest System lands underlying and adjacent 
to the C.C. Cragin project, including watershed, wildlife habitat, 
range, and vegetation management. S. 201 allows for a workable 
agreement for both day-to-day activities and other activities that will 
improve the management and safety of the covered land. The 
Administration believes that this legislation provides a sound approach 
for future management of the C.C. Cragin project. Both Reclamation and 
the Forest Service are committed to working diligently with SRP to 
ensure needed work for the C.C. Cragin project can be accomplished 
expeditiously, including any necessary emergency and non-emergency 
repairs and replacement of improvements, in full compliance with 
applicable law, including the National Environmental Policy Act and the 
Endangered Species Act, as provided in the AWSA.
    Reclamation's long-standing experience working with SRP over nearly 
a century has been very productive. SRP has proven to be a responsible 
and reliable operator and caretaker of U.S. interests and resources. 
Reclamation and SRP have nearly a century of responsible stewardship in 
regard to both the technical operation of dams and reservoirs and 
protection of natural resources. It is our hope that combining that 
history with the Forest Service's land management authorities and 
expertise would result in even more effective stewardship.
                               on s. 419
    Madam Chairman and Members of the Subcommittee, I am David Murillo, 
Deputy Commissioner for Operations at the Bureau of Reclamation 
(Reclamation). I am pleased to provide the views of the Department of 
the Interior (Department) on S. 419, legislation authorizing 
construction of the Dry-Redwater Regional Water Authority System 
(System) in the State of Montana. We recognize that changes have been 
made to the language of this bill since the last Congress, however, the 
Administration still has concerns with this bill that we want to work 
with Congress to address.
    S. 419 would authorize the planning, design, and construction of 
the System in eastern Montana and would authorize appropriations of at 
least $115 million for the System. The bill would require that the 
Federal government provide up to 75 percent of the project's overall 
cost.
    The Department concurs in the need for a safe and reliable water 
supply for the citizens of eastern Montana, and earlier this year, 
Reclamation began providing financial assistance to complete a 
feasibility study of this project in accordance with Title I of the 
Rural Water Supply Act of 2006 (Public Law 109-451), as described 
below. However, we have concerns with the legislation as currently 
written. In particular, the Department is concerned about the process 
issues raised by this legislation authorizing a project for 
construction before the feasibility study is complete even while other 
rural water projects are being studied, the potential strain on 
Reclamation's budget that could come about from this authorization, the 
cost share requirement proposed in the bill, and the proposed use of 
power from the Pick-Sloan Missouri Basin Program (P-SMBP) for non-
irrigation purposes.
    Of Reclamation's seven currently authorized rural water projects 
being constructed or funded at some level today, five are in 
Reclamation's Great Plains (GP) region and are currently being 
constructed in the Dakotas and Montana.\1\ All of these projects pre-
date Public Law 109-451, which authorized the Secretary of the Interior 
to create a rural water supply program to address rural water needs in 
the 17 western States. Within the GP region, more than 224,926 people 
are presently being served by the six partially completed projects 
(approximately 45,860 on Indian reservations and 179,066 off 
reservations). The fiscal year (FY) 2012 rural water project request 
was $35.5 million. This includes $15.3 million for the operation and 
maintenance of tribal systems and $20.2 million for construction. In 
addition, the American Recovery and Reinvestment Act of 2009 provided 
approximately $232 million to these rural water projects. The remaining 
construction ceiling for these six projects totals approximately $1 
billion. The Department of the Interior (Bureau of Reclamation) 
prioritizes funding for these ongoing authorized projects based on (1) 
the required O&M component; (2) projects nearest completion; and (3) 
projects that serve on-reservation needs.
---------------------------------------------------------------------------
    \1\ Mni Wiconi Project (SD), PSMB/Garrison Diversion Project (ND), 
Forest Peck Reservation/Dry Prairie Rural Water System (MT), Rocky 
Boy's/North Central
---------------------------------------------------------------------------
    In view of these existing authorizations, the Department is 
concerned about the non-Federal cost share for the System. S. 419 
contemplates that the United States would fund 75 percent of the cost 
of constructing the System for the benefit of Montana citizens of 
Dawson, Garfield, McCone, Prairie, and Richland Counties, and North 
Dakota citizens of McKenzie County. While this has been the cost share 
level proposed in other rural water projects enacted into law, it 
represents the very maximum Federal cost share allowed under the Rural 
Water Supply Act of 2006, which includes a requirement for a 
Feasibility Report that includes an analysis of the sponsor's 
capability-to-pay and identifies an appropriate contribution by the 
local sponsors.
    The Dry-Redwater Regional Water Authority (Authority) prepared a 
study that was accepted by Reclamation as an appraisal study in June 
2010. The Authority then submitted a proposal to Reclamation for 
financial assistance to complete a feasibility study in accordance with 
Title I of the Rural Water Supply Act of 2006. Reclamation approved the 
request and provided cost-share funding in the amount of $120,500 in 
direct contributions. Reclamation also agreed to provide technical 
assistance valued at $119,500 using its own resources, resulting in a 
total Federal contribution of $240,000, which is 50 percent of the 
total study cost of $480,000. This cooperative agreement was executed 
in January 2011 and the feasibility study is scheduled for completion 
in September 2012. Reclamation will continue to work with the Authority 
to prepare the feasibility study and prepare a feasibility report to 
verify the accuracy of the cost estimates and provide information on 
what the sponsor's capability-to-pay would be which helps determine the 
appropriate non-Federal cost share.
    Section 5 of S. 419 authorizes the delivery of 1.5 megawatts P-SMBP 
pumping power to be used and delivered between May 1 and October 31 for 
the benefit of this System at the firm power rate. Section 5(b)(2) of 
the bill requires that the System be operated on a ``not-for-profit 
basis'' in order to be eligible to receive power under those terms. 
Reclamation is not certain of the impact the bill's requirements could 
have on Western Area Power Administration's existing contractual power 
obligations.
    In addition to those concerns mentioned above, we have yet to 
verify whether or not water rights issues associated with the System 
have been adequately addressed. Without an opportunity to thoroughly 
review the proposed System at feasibility study level, we are not in a 
position to verify that other technical issues do not also exist. We 
would like to suggest that the System sponsors continue working with 
Reclamation's GP Regional Office and the Montana Area Office to 
complete feasibility-level studies consistent with the Rural Water 
Supply Act of 2006.
    That concludes my statement. I am pleased to answer any questions.

    Mr. Murillo. S. 201 seeks to clarify Federal jurisdiction 
with respect to the C.C. Cragin project, which includes a dam, 
reservoir, and an 11.5-mile utility corridor containing a 
transmission line and high pressure pipeline. The project is 
located nearly entirely within the Coconino National Forest in 
north-central Arizona.
    Language included in the Arizona Water Settlement Act 
created questions about the respective jurisdictions of the 
Forest Service and the Bureau of Reclamation related to the 
C.C. Cragin project. Our agencies have come to an agreement 
that we think can resolve this issue, and this legislation is 
consistent with that arrangement.
    Reclamation and the Forest Service worked closely with the 
Salt River Project, or SRP, which operates and maintains the 
C.C. Cragin project, and reached agreement in May 2010 on the 
terms for managing the project. This legislation accommodates 
the needs of Reclamation and SRP by ceding administrative 
jurisdiction over the lands underlying the dam and reservoir to 
Reclamation, and by expressly acknowledging SRP's 
responsibility for operating and maintaining the dam, reservoir 
and utility corridor.
    In addition, this approach accommodates the Forest Service 
by allowing the agency to manage the lands underlying the 
utility corridor for recreation, wildfire, law enforcement, and 
other activities.
    The Administration believes that this legislation provides 
a sound approach for future management of the project.
    Both departments are committed to work diligently with SRP 
to ensure needed work for the project can be accomplished 
expeditiously.
    Reclamation's long-standing experience with SRP over nearly 
a century has been positive and very productive. It is our hope 
that combining that history with the Forest Service land 
management authorities and expertise will result in even more 
effective stewardship.
    S. 419, Dry-Redwater. S. 419 would authorize the planning, 
design, and construction of the Dry-Redwater Regional Water 
Authority System in eastern Montana and authorize 
appropriations of $115 million for the system. The bill would 
require that the Federal Government provide up to 75 percent of 
the project's overall cost.
    The Department recognizes the needs for a safe and reliable 
water supply for the citizens of eastern Montana, and earlier 
this year Reclamation began providing financial assistance to 
complete a feasibility study of this project in accordance with 
the Rural Water Act--Rural Water Supply Act of 2006.
    However, we are concerned about the process issues raised 
by this legislation, which authorizes the project for 
construction before the feasibility study is complete. The bill 
poses a potential strain on Reclamation's budget that could 
come about from enactment.
    The Dry-Redwater Authority prepared a study that was 
accepted by Reclamation as an appraisal study in June 2010. The 
authority then submitted a proposal to Reclamation for 
financial assistance to complete a feasibility study in 
accordance with the Rural Water Act. Reclamation approved the 
request and provided cost-sharing funding in the amount of 
$120,500 in direct contributions. Reclamation also agreed to 
provide technical assistance valued at $119,500, using its own 
resources, resulting in a total Federal contribution of 
$240,000, which is 50 percent of the total study cost of 
$480,000. This cooperative agreement was executed in January 
2011, and a feasibility study is scheduled for completion in 
September 2012.
    Reclamation will continue to work with the Authority to 
prepare the feasibility study and determine the appropriate 
non-Federal cost share. We would like to suggest that the 
system sponsors continue working with Reclamation's Great 
Plains Regional Office and the Montana Area Office to complete 
the feasibility study, consistent with the Rural Water Supply 
Act of 2006.
    S. 499, Diamond Fork. S. 499 would facilitate the 
development of hydropower on the Diamond Fork System of the 
Central Utah Project pursuant to the Central Utah Project 
Completion Act, or CUPCA.
    The provisions of S. 499 increase the likelihood of private 
hydro-development by deferring repayment of $160 million in 
reimbursable costs that would otherwise have to be repaid by a 
private developer of hydropower on the Diamond Fork System. 
Current law requires repayment of this $160 million in costs, 
which would incur in development, developing the Diamond Fork 
System, and allocated to the power generation purposes of the 
project.
    Since S. 499 would defer responsibility for these costs, it 
would effectively reduce the costs of private power hydro-
development at the site.
    The Department understands and appreciates the 
legislation's goal of facilitating the development of 
hydropower, hydroelectricity power on the Diamond Fork System. 
Nonetheless, the administration has serious concerns about 
losing the ability to recoup the Federal investment made in 
these facilities. The Federal Government may benefit in the 
midterm from annual payments for the use of the facilities that 
would be paid if a lease entered into, a lease, a lessee 
entered into a Lease of Power Privilege arrangement as a result 
of this bill.
    However, the long-term fiscal implications are unclear as 
to how the Federal Government would be made whole for the loss 
and repayment of the $161 million in costs.
    S. 808, Uintah pre-repayment. Last, S. 808, as introduced 
in the Senate on April 13, 2011, allows for a prepayment of the 
current and future repayment contract obligations to the Uintah 
Water Conservancy District of the costs allocated to their 
municipal and industrial water supply on the Jensen Unit of the 
CUP and provides that prepayment must result in the United 
States recovering the net present value of all repayment 
streams payable to the United States.
    The Department supports S. 808 as introduced. The District 
entered into a repayment contract dated June 3, 1976, in which 
they agreed to repay all reimbursable costs associated with the 
Jensen Unit of the CUP.
    The Jensen Unit's total water supply would was envisioned 
at that time to be roughly 18,000 acre-feet because plans 
envisioned completion of another pumping plant at a location on 
the Green River known as Burns Bench. However, for a variety of 
reasons, the Burns Bench feature was never built, and this is 
described in my written testimony. Under Reclamation law, water 
districts are authorized to prepay--water districts are not 
authorized to prepay their M&I repayment obligations based upon 
a discounted value of the remaining annual payments. However, 
this legislation would authorize early repayment by the 
District to the Federal Government. Because there is an 
interest component to the repayment streams to be repaid, early 
repayment without an adjustment for interest would result in a 
lower overall repayment to the United States.
    To keep the United States whole, the Bureau of Reclamation 
would collect a net present value of the whole amount that 
would be due without early repayment. The language in S. 808 
has been amended from the language contained in an earlier 
version of this legalization. The language introduced April 
13th clarifies that this legislation requires that the Federal 
Government be paid what it is owed by the Conservancy District. 
Because the United States supports the goals of providing for 
early repayment under this contract, and S. 808 clearly 
establishes that, the Department supports this legalization.
    Thank you again for this opportunity to testify, and I 
would be happy to answer any questions the subcommittee may 
have. Thank you.
    Senator Shaheen. Thank you. You came in under 10 minutes, 
so----
    Mr. Murillo. Thank you.
    Senator Shaheen [continuing]. Very good.
    Mr. Moe.

   STATEMENT OF DARRICK MOE, REGIONAL MANAGER OF THE DESERT 
SOUTHWEST REGION, WESTERN AREA POWER ADMINISTRATION, DEPARTMENT 
                           OF ENERGY

    Mr. Moe. Chairwoman Shaheen, Senator Lee, I'm pleased to be 
here today to speak on S. 519 regarding the allocation of 
Hoover Power.
    I'm Darrick Moe, the Regional Manager of the Desert 
Southwest Region of Western Area Power Administration.
    Western's mission is to market and deliver reliable cost-
based power for Federal hydroelectric power facilities such as 
Hoover Dam, which is within the geographic area of Western's 
Desert Southwest Region.
    The Hoover Plant is a significant power resource in the 
Desert Southwest. With a rated capacity of 2,074 megawatts, 
Hoover supplies clean hydropower to millions of homes in 
Arizona, California and Nevada.
    Western's post-2017 power allocation effort is composed of 
a series of proposals introduced to the public through Federal 
Register notices and public forums. Western makes policy 
decisions after all interested parties have had an opportunity 
for input. Western then considers this input to develop new 
Hoover Dam allocations in the public's interest.
    Western initiated the process to allocate Hoover Power in 
November 2009 by proposing the extension of 95 percent of the 
energy and capacity available to market from Hoover to existing 
contractors, while making a 5 percent pool available to new 
customers. We also proposed 30-year contract terms, and invited 
comments on other items. Based on comments from numerous 
parties, Western extended the comment period under this notice 
through the end of last September.
    Western issued its latest Federal Register notice on April 
27, 2011. Western therein decided it is appropriate to apply 
the Power Marketing Initiative, or PMI, to the Hoover 
allocation process. The PMI has been applied to all of 
Western's remarketing efforts since it was announced as a final 
rule in 1995, following a year public process.
    Through the application of PMI, Western balances the public 
interest of maintaining resource stability for existing 
customers and the regional power grid against the public 
interest of providing for widespread use of Federal hydropower 
resources by new customers, such as tribal governments and 
other eligible customers.
    Western also decided on a 30-year to term to achieve a 
balance between resource certainty and providing for an 
allocation opportunity for future customers at an appropriate 
time.
    Finally, Western made numerous proposals, including the 
amount of energy and capacity to market, the size of the 
resource pool for new customers, and provisions for marketing 
excess energy.
    Since publication of this notice in April, Western has 
received comments requesting an extension of the effective date 
of these decisions to allow additional time for ongoing 
legislative activities. In consideration of these comments, 
Western has decided to extend the effective date of those 
decisions from May 27 to December 31st of 2011. Additionally, 
Western will be extending the comment period for the proposals 
to September 1, 2011. The planned public information and 
comment forums are also being rescheduled to later dates. A 
Federal Register notice announcing these extensions will be 
published next week.
    There are numerous steps ahead of the administrative 
process. We currently project contracts for Hoover Power would 
be completed in the spring of 2015. It is important the process 
be finalized well ahead of 2017 to provide contractors time to 
balance their energy portfolios and make required transmission 
arrangements, and to allow related State agencies time to carry 
out their allocation process.
    Western has reviewed S. 519. We appreciate the work done 
over the last year to address concerns Western had with a prior 
version of this bill, such as allowing for 36 months for 
Western to complete its administrative process under the bill. 
Western's written testimony notes areas of departure between 
the current administrative process and S. 519, and provides 
additional background.
    The broad outline of S. 519, however, is similar in many 
respects to Western's current proposal. Both would result in a 
resource pool for new customers. Western's current proposal 
would result in a similar size resource pool being allocated to 
existing customers and new customers, as compared to S. 519.
    It is Western's mission to market Federal hydropower. We 
are using due diligence in moving this process forward to 
allocate the vitally important Hoover resource in the public's 
interest, and in a timely manner. We also stand ready to 
implement S. 519, and will apply ourselves accordingly should 
it be enacted by Congress.
    I would be pleased to answer questions.
    [The prepared statement of Mr. Moe follows:]

   Prepared Statement of Darrick Moe, Regional Manager of the Desert 
  Southwest Region, Western Area Power Administration, Department of 
                           Energy, on S. 519
    Madam Chairwoman and members of the Subcommittee, I am Darrick Moe, 
Regional Manager of the Desert Southwest Region, speaking on behalf of 
Timothy J. Meeks, the Administrator of the Department of Energy's 
Western Area Power Administration (Western). I am pleased to be here 
today to discuss S. 519, the Hoover Power Allocation Act of 2011. This 
legislation seeks to amend the Hoover Power Plant Act of 1984. The 
legislation proposes revised allocations of the generation capacity and 
energy from the Hoover Dam power plant, a feature of the Boulder Canyon 
Project (BCP), after the existing contracts expire on September 30, 
2017.
    Western's mission is to market and deliver reliable, renewable, 
cost-based hydroelectric power from facilities such as Hoover Dam. 
Hoover Dam was authorized and constructed in accordance with the 
Boulder Canyon Project Act of 1928. Pursuant to this Act, the Secretary 
of the Interior was authorized to contract for the sale of generation 
based upon general regulations as he may prescribe. Subsequent power 
sales contracts were executed that committed Hoover power through May 
31, 1987. With the passage of the Hoover Power Plant Act of 1984, 
Congress authorized the Secretary of the Interior to implement an 
uprating program, which increased the generation capacity of the Hoover 
Dam facilities, to make additional facility modifications, and to 
resolve issues over the disposition of Hoover power, post-1987. Western 
proceeded to market Hoover Dam power and entered into 30-year term 
contracts with the current Hoover contractors in accordance with the 
Hoover Power Plant Act of 1984, and Western's Conformed General 
Consolidated Power Marketing Criteria. This process resulted in the 
allocation of 1,951 megawatts of contingent capacity with an associated 
4,527,001 megawatt-hours of firm energy. Contingent capacity is 
capacity that is available on an as-available basis, while the firm 
energy entails Western'sassurance to deliver.
    The Hoover power plant is a significant Federal hydroelectric power 
resource in the Desert Southwest with a maximum rated capacity of 2,074 
megawatts. Under existing Federal law and policy, Western markets 
Hoover power at cost. Hoover power is hydropower and is considered 
``clean energy'' with a minimal carbon footprint. The Hoover Dam power 
plant is able to ramp up and down rapidly and is used by contractors 
for various power-related ancillary services. For these reasons, Hoover 
power is an extremely valuable resource for power contractors in the 
southwestern United States.
    The existing power sales contracts between Western and the 
contractors will expire on September 30, 2017. As this expiration date 
becomes more prominent on the planning horizon, efforts have progressed 
among both Federal and non-Federal sectors to determine the allocation 
of Hoover Dam power after 2017.
    In accordance with policy and existing Federal law, Western's post-
2017 power allocation effort comprises a series of proposals introduced 
to the public through public information forums andpublic comment 
forums. Western makes policy decisions only after all interested 
parties have been provided ample opportunity to be engaged in the 
process and public input has been carefully considered to develop new 
Hoover Dam allocations that are in the public's best interest and 
provide widespread use of this Federal resource.
    Western's public process to allocate Hoover Dam electricity was 
initiated on November 20, 2009, in a Federal Register notice that 
proposed several key aspects of the allocating effort. Among other 
things, this Federal Register notice proposed the application of 
Western's Power Marketing Initiative (PMI) developed under the Energy 
Planning and Management Program (EPAMP), the extension of amajor 
percentage of the marketable resource to existing contractors, 
reservation of an approximate 5% resource pool to be allocated to 
eligible contractors, and provision of 30-year contract terms.Western 
conducted three public information forums from December 1-3, 2009. 
These public information forums were well attended by current customers 
and interested parties, including Native American tribes, and engaged 
the attendees through question and answer sessions. Public comment 
forums were held from January 19-21, 2010. All interested parties were 
provided an opportunity to submit comments related to Western's 
proposals contained in the November 20, 2009 Federal Register notice. 
After considering comments received, in an April 16, 2010 Federal 
Register notice, Western extended the comment period from January 29, 
2010, to September 30, 2010. This extension provided interested parties 
additional time to submit comments and allowed Western to consult with 
tribes to inform them of the remarketing process.
    After considering comments received, Western announced in an April 
27, 2011 Federal Register notice its decision to apply its EPAMP PMI to 
the BCP remarketing effort. The PMI has been applied to all of 
Western's remarketing efforts since it was announced as a final rule in 
1995 following a four-year public process. Application of the PMI to 
the BCP expressly protects and reserves a major portion of the existing 
customers' allocations while also providing potential customers, such 
as tribal governments and other eligible customers, an opportunity to 
acquire an allocation. The PMI has historically provided a balancing of 
the needs of the existing customers with those of prospective 
customers. Western also decided on a 30-year contract term to achieve a 
balance between resource certainty and providing for an allocation 
opportunity for future customers at an appropriate time. Finally, 
Western also made additional proposals and is seeking further comments 
on the amount of marketable contingent capacity and firm energy, the 
size of the resource pool to be created for new customers, and excess 
energy provisions. As described in the Federal Register notice, a 
public information and comment forum was established for all interested 
parties to provide written and oral comments on these proposals. The 
comment period for these proposals was initially set to close June 16, 
2011.
    Western is currently in the process of publishing a Federal 
Register notice that will extend the close of the comment period 
established in the April 27, 2011 notice to September 1, 2011. This 
Federal Register notice will also extend the effective date of the 
decisions announced in the April 27, 2011 notice to December 31, 2011. 
Western is also rescheduling the public information and comment forums 
for later this year. This extension provides additional time for on-
going legislative activities, as well as additional opportunity for 
interested parties, including Native American Tribes, to consult with 
Western and comment on the proposals.
    There are numerous steps ahead in the administrative process. 
Western currently projects that this process will be completed with 
finalized contracts in the spring of 2015. It is important that the 
process be finalized well in advance of 2017 to provide customers the 
time to balance their energy portfolios and make required transmission 
arrangements, and to allow related state agencies time to carry out 
their allocations process.
    Western has reviewed S. 519. There are several similarities between 
the draft legislation and Western's proposals, and there are some 
departures. To provide background that may be useful to the 
Subcommittee members as this bill is considered, I'll address some of 
these differences in mycomments.
    All of Western's allocation efforts are open to public 
participation and conducted in accordance with the Administrative 
Procedure Act. At each stage of the process, Western proposes actions 
and/or policy to be considered and is open for public comment and 
input. Western believes soliciting and integrating public input into 
policy decisions allows Western to develop results that are in the 
public's best interest and lead to the most widespread use of this 
resource.
    Western has 15 current contractors who receive an allocation of 
Hoover power. Two of those existing contractors are the Colorado River 
Commission (CRC) and the Arizona Power Authority (APA). CRC and APA 
sub-allocate their Hoover power to customers under prescribed 
guidelines and regulations. Both S. 519 and Western's administrative 
effort propose an amount of resource to be allocated to new customers, 
including Native American Tribes. S. 519 proposes certain quantities to 
be allocated to APA and CRC for their disposition to new customers. 
While it is anticipated that new customers to APA and CRC could result 
from this effort, Western's process affords the opportunity to fully 
seek public input and assures all interested parties are considered in 
the power's disposition.
    Western has received numerous written comments and statements from 
Native American tribes expressing concern that their interests have not 
yet been fully vetted and considered. In recent years, tribes have been 
active in Western's remarketing efforts, and one goal of Western's 
Strategic Plan is to seek partnerships with tribes on numerous 
initiatives. I believe that soliciting input from tribes and other 
entities that do not already have an allocation of Hoover power is in 
the public interest. Western has reached out to tribes specifically in 
this remarketing effort through letters, phone calls, meetings, site 
visits, and consultations.
    S. 519 would direct that Hoover's full maximum rating of 2,074 
megawatts of capacity be allocated to Hoover customers in a multi-
faceted approach. As described in Western's April 27, 2011 
FederalRegister notice, we propose to market 2,044 megawatts of 
contingent capacity; 30 megawatts below the maximum rating. Retention 
of project capacity to support the reliability of the Federal electric 
system is relatively common among the Power Marketing Administrations. 
Western is currently able to utilize Hoover Dam capacity that is 
available in excess of 1,951 megawatts. The preservation of 30 
megawatts of contingent Hoover Dam capacity for use by Western for 
project integration purposes should provide the tools we need to meet 
our mission and statutory requirement ofdelivering reliable Federal 
hydro-generation. Western manages multiple federally owned generation 
and transmission projects in the Desert Southwest on a minute-by-minute 
basis 24 hours a day. While these projects are financially segregated, 
they are operated as an integrated system. This 30-megawatt capacity to 
be held by the Federal Government would provide significant benefit to 
theoperation of the integrated projects and the Western Area Lower 
Colorado balancing authority that Western operates. Retaining 30 
megawatts would also likely allow our Hoover Dam power customers to 
experience cost-neutral conditions. Should Western be unable to retain 
approximately 30 megawatts, we would expect to procure replacement 
power from the market at a higher cost, if itis available. These higher 
costs would in turn need to be passed through to Western customers in 
the form of higher rates.
    S. 519 expressly requires that each contract offered to a new 
allottee for Hoover Dam power should require the new allottee to 
execute the Boulder Canyon Project Implementation Agreement. 
Westernfinds significant value in the provisions and results of the 
Implementation Agreement. However, this agreement was jointly 
constructed between Western and our customers for unique circumstances 
that existed in 1994. Should this requirement be retained, the current 
Implementation Agreement wouldneed to be evaluated and potentially 
revised to accommodate current conditions. We support the universal 
benefits achieved by the Implementation Agreement and will work with 
our customers todetermine the appropriate documentation to meet all of 
our customers' needs; both current and future.
    S. 519 expressly requires that each contract offered to a new 
allottee for Hoover Dam power includes a provision requiring the new 
allottee to pay a proportional share of its State's funding 
contribution for the Lower Colorado River Multi-Species Conservation 
Program, known as the LCR MSCP. The LCR MSCP is a 50-year, multi-
stakeholder, Federal and non-Federal partnership, responding to the 
need to balance the use of lower Colorado River water resources and the 
conservation of native species and their habitats in compliance with 
the Endangered Species Act (ESA). The LCR MSCP isa comprehensive 
approach to species protection developed after nearly a decade of work. 
This program is funded on a cost-share basis comprised of 50-percent 
Federal and 50-percent non-Federal. The states of Arizona, California 
and Nevada have worked internally with water and power customers to 
fund each state's respective share. S. 519 recognizes these funding 
requirements and obligates new power customers to contribute to this 
funding in a proportional manner. Supporters of S. 519 note that the 
50-year obligation of the LCR MSCP is, in part, reason to proceed with 
50-year Hoover power supply contracts. Western continues to review the 
LCR MSCP requirements in our administrative process. However, Western's 
position is that the 50-year LCR MSCP term need not coincide with the 
Hoover Dam power sales contracts' term. The adoption of a 50-year 
contract term, as opposed to Western's decision to apply 30-year 
contract terms, could potentially exclude evolving classes of customers 
in decades to come. The modern day electrical industry is dynamic in 
its regulations, technologies, operations and participants. Western 
notes that we currently provide Federal hydropower allocations to 87 
federally recognized Native American tribes. Many of these tribal 
customers are new to Western in the last 20 years. The landscape of 
potential customers in decades to come has the capability to yield new 
Hoover customers, as we strive to meet the needs of all our customers; 
existing and future.
    As drafted, S. 519 states that Subdivision E of the General 
Consolidated Power Marketing Criteria or Regulations for Boulder City 
Area Projects published in the Federal Register on December 28, 1984, 
(Criteria) shall be deemed to have been modified to conform to this 
legislation. Western would like to refine this statement as Western's 
December 28, 1984, Federal Register notice is more precisely titled 
Conformed General Consolidated Power Marketing Criteria or Regulations 
for Boulder City Area Projects (Conformed Criteria). Western published 
the Criteria on May 9, 1983, which was in need of conformance per the 
Hoover Power Plant Act of 1984. Pursuant to the Hoover Power Plant Act 
of 1984, Western conformed the 1983 Criteria in its December 28, 1984, 
Federal Register notice. In doing so, the pertinent section is now 
Subdivision C of the Conformed Criteria. If S. 519 is to move forward, 
edits would be needed to refer to Subdivision C Western's Conformed 
Criteriaand not Subdivision E of the Criteria.
    Western respectfully recognizes that our administrative process is 
not the exclusive means of allocating Hoover power. I would welcome the 
opportunity to work with this Subcommittee to address the technical 
concerns I have raised and to ensure the widespread use of this 
valuable resource as work continues on this legislation. In the absence 
of congressional action, Western will uphold our authority and 
responsibility to market Hoover power consistent with historical 
statutes and in concert with the rules and regulations as the Secretary 
of Energy prescribes.
    This concludes my prepared remarks and I would be pleased to answer 
any questions you or members of the Subcommittee might have.

    Senator Shaheen. Thank you very much, both Mr. Murillo and 
Mr. Moe.
    Mr. Murillo, I will start with you on the C.C. Cragin 
project. We appreciate your having someone from the Forest 
Service here to help respond.
    Your testimony indicates that the Reclamation, that 
Reclamation and the Forest Service have previously worked 
together on management issues relating to this project, and 
that the administration believes that the legislation provides 
a good approach for the future management of the project.
    To your knowledge, are there any outstanding maintenance 
issues within the project corridor that are located on Forest 
Service lands that the Salt River Project has not been able to 
address?
    Mr. Murillo. My understanding is that they had some exposed 
pipe they there were trying to, that they addressed last year. 
The Salt River Project meet with us yearly, and they also meet 
with the Forest Service. So, what I've been told is, most of 
the work that they're looking at this year is pretty much 
routine work.
    Senator Shaheen. I assume the Forest Service agrees with 
that--the person who's here. Good.
    Are there any plans to develop an interagency agreement to 
ensure that the dam and pipelines can be properly maintained, 
and if it----
    Mr. Murillo. Thank you for the question. Yes, what we're 
looking at is, they're, the Salt River Project has, they have a 
tri-party agreement that the Bureau of Reclamation, the Forest 
Service, and Salt River Project signed, and it is associated 
with 6 other projects that they manage. So, we're looking at 
developing some type of MOU that basically mirrors that 
agreement that we have in place.
    Senator Shaheen. Do you expect that MOU to go forward 
pretty quickly, or are----
    Mr. Murillo. We're hoping we've been working together to 
try to come up with some language that's acceptable to 
everybody. So, we're hoping that--we've already got an MOU in 
place that we can go ahead and draft this memo from, so, we're 
hoping it will move forward fairly quickly.
    Senator Shaheen. Good. Although S. 201 specifies that 
Reclamation and the local water districts should have the 
responsibility for compliance with all environmental laws that 
are applicable, will Reclamation coordinate with the Forest 
Service if necessary during this process?
    Mr. Murillo. Absolutely. When we look at environmental 
compliance, we're going to coordinate with whatever agency it 
applies to.
    Senator Shaheen. Great.
    I'm then going to move on to S. 419, the Dry-Redwater 
Regional Water System. As I understand your testimony, Mr. 
Murillo, Reclamation does not question the need for a rural 
water system in the area of eastern Montana that's covered 
currently under the bill, but part of the reason that you're 
unable to support the project is that there's currently a 
backlog of funding for the projects that are already 
authorized. So, can you address how you might, what kind of 
plan you have in place going forward to address the backlog 
that currently exists, and how the Redwater project might 
ultimately fit in that?
    Mr. Murillo. Right now we have a Rural Water Program in 
place, and we have criteria that's in place that basically 
helps us prioritize the work that's in front of us. When you 
look at that O&M--there's existing facilities that have O&M 
costs. We allocate money to that initially. Also, we look at 
how complete a project is. If they're 80 percent complete, they 
get extra points. Then, also, the involvement of tribes. So, 
there's 3 major criteria we look at. Then, those that don't fit 
that fall into another category. Then we take a look at, see 
whatever aspects of the project would basically raise it to the 
top.
    The Dry Redwater project, once that gets approved, they're 
basically going to be falling within the same criteria, and 
there's only a limited amount of funding there, so they'll be 
competing against the other projects for that funding.
    Senator Shaheen. During his recent testimony to the Senate 
Energy and Water Appropriations Subcommittee, Commissioner 
Connor described a set of funding criteria for the Rural Water 
Program that are under development. Is the purpose of the 
criteria to help Reclamation prioritize funding needs for the 
program?
    Mr. Murillo. Yes, it is.
    Senator Shaheen. When will the new criteria be available 
for review?
    Mr. Murillo. We're hoping to have something available mid 
this year, mid to the end of this year.
    Senator Shaheen. Can you speak at all to how they will be 
different from the interim final rule that was put in place in 
2009?
    Mr. Murillo. My understanding is that we're going to try to 
be consistent with that rule.
    Senator Shaheen. OK.
    Just a final question on this legislation. One of the major 
concerns that Reclamation had when the bill came up during the 
last Congress was that the former version of the legislation 
didn't follow the procedures that had been outlined in the 
Rural Water Supply Act. It appears that the version of the bill 
that has been introduced in this Congress has attempted to more 
closely follow the process required by the existing law.
    If the project proponents are able to complete the 
feasibility study they're currently working on to your 
satisfaction, is Reclamation willing to continue to work with 
the sponsors on the next steps for the project?
    Mr. Murillo. Yes. If the feasibility study's complete, we 
have a Rural Water Program in place, and we'll go ahead and 
follow those, execute that program.
    Senator Shaheen. Do you have any other recommendations for 
the sponsors and the project proponents on how to get safe, 
clean drinking waters for their communities? I mean, obviously, 
this is an ongoing challenge.
    Mr. Murillo. Yes. That's part of why we need the 
feasibility study completed, because that will come up with 
different options of how to get safe drinking water there.
    Senator Shaheen. Thank you very much. My time has expired.
    Senator Lee.
    Senator Lee. Thank you, Senator Shaheen.
    Thank you both for your testimony.
    Mr. Murillo, I want to talk to you about S. 499 for a 
minute. You indicated in your written testimony that ``because 
payment of $161 million of allocated power costs would be 
postponed indefinitely under this legislation, it is unclear 
what the long-term fiscal implications of enactment of this 
legislation would be, and how the United States Treasury would 
be made whole.'' This is on the fourth to the last paragraph on 
the final page of your written testimony on S. 499.
    You then go on to say that ``the legislation would 
potentially permanently postpone the anticipated receipts to 
the United States Treasury at the expense of the Federal 
taxpayer.'' But this presupposes that there is money that would 
be paid if in fact you didn't develop this, doesn't it?
    Mr. Murillo. Yes. What we would be looking at is, we would 
be looking at completing the project itself--the distribution 
system. After that was complete, we would be looking at 
possibly developing hydropower ourselves. If we did that, we 
would be asking the power users to basically help us recoup 
that cost. If we didn't go there, then we may have to do 
another reallocation and see if we reallocate those costs to 
the current beneficiaries.
    Senator Lee. Right. But, there's a, the 2004 Definite Plan 
Report outlines the potential for construction of hydropower 
facilities at this location, and I believe estimates that it 
has a generating capacity of about 50 megawatts, is that right?
    Mr. Murillo. Yes.
    Senator Lee. In your opinion, is it feasible, you know, 
would it be feasible under any circumstance for a 50-megawatt 
facility to generate support, or, user fees to make it 
sufficient, that would be sufficient to support payment of $5.3 
million a year for the next 50 years? Is that possible?
    Mr. Murillo. I don't have those numbers. But I can get that 
information for you and provide it for the record.
    Senator Lee. OK. If it's not possible--if generating 
capacity of 50 megawatts couldn't support a payment of $5.3 
million a year for the next 50 years, and if this is, in fact, 
sub-cost that the U.S. Government has incurred, wouldn't it 
make more sense to allow this to move forward--to allow this 
source of clean, inexpensive, reliable power to be generated, 
with the understanding that it would likely generate about 
$400,000 a year in payments to the Federal Treasury--which is 
more than is being generated right now?
    Mr. Murillo. That's true. But, like I indicated, if we 
don't develop hydropower, and if we're looking for a revenue 
source, we may go back and have to reallocate that money to the 
current beneficiaries of the project.
    Senator Lee. OK. But, that's a pretty big ``if,'' isn't it?
    Mr. Murillo. It's something that we would definitely take a 
look at.
    Senator Lee. Another ``if'' is identified, I think, in the 
same paragraph of the, of your written testimony that I cited a 
minute ago. You say at the end of that paragraph, ``While it is 
not clear at this time whether a non-Federal developer would 
propose a hydroelectric project at Diamond Fork under current 
law''--meaning, without the change that would be brought about 
by S. 499--if this were to occur, repayment of the allocated 
power costs would begin after the hydroelectric project is 
completed, and average 5.3 million a year for 50 years.
    But again, it seems to me that that is a pretty big ``if.'' 
If by going in and starting this, someone would have to agree 
at the outset to pay $5.3 million a year every year for the 
next 50 years, it seems pretty unlikely that that's going to 
happen.
    Mr. Murillo. That's one of the things that we're going to 
have to take a look at if a private investor comes in, or the 
Federal Government looks at installing hydropower there.
    Senator Lee. OK. But if someone comes along and says, ``I 
will do this, and I will pay $400,000 a year throughout the 
life of the project,'' then, that would be $400,000 a year more 
than the Federal Government's getting right now. With it we've 
got 50 megawatts of additional, clean power on the grid.
    Mr. Murillo. As I mentioned, it's more than we're getting 
now. But in order for us to recoup the costs, like I mentioned 
before, if we have to, we may have to take a look at 
reallocating those costs.
    Senator Lee. OK. Thank you.
    Thank you, Chairman.
    Senator Shaheen. Thank you.
    Just to continue to follow up on S. 499, as I understand 
your testimony, it is possible that hydropower may be developed 
more quickly within this portion of the Central Utah Project if 
the legislation is passed than without the legislation. Is 
that, am I understanding that correctly?
    Mr. Murillo. If the legislation is passed, it's probably 
going to motivate the private investor to develop power at that 
facility. If they do that, since there's authorization for 
power there, you know, CUP may be looking at using the Lease of 
Power Privilege process. That will take them, you know, you've 
got to go out with an interest announcement on the Federal 
Register, and that may take, you know, 2 or 3, 4 months. Once 
they make the selection, the process that you have to go 
through to actually sign the agreement, that may take another 2 
or 3 years.
    Senator Shaheen. So, is there anything that can be done now 
to get a head start on this process?
    Mr. Murillo. You know, a few things that we can take a look 
at. It just depends on the site itself, and what resources we 
have. But when we talk to investors about how we can make this 
more affordable to the investor, some things we can look at is, 
identify any type of cultural resources that might be impacting 
the project, any type of land or water restrictions that are in 
place, and see if we can recommend any type of mitigation for 
them.
    Senator Shaheen. How will the environmental impacts of a 
future hydroelectric project be addressed?
    Mr. Murillo. If they install a hydro facility, and if it 
falls within the current footprint of the facility, and if the 
impacts have already been addressed, then you might be looking 
something like, if it was EA, Environmental Assessment, you 
might be looking, something, at a supplemental assessment, or a 
categorical exclusion. If it falls outside of the footprint, 
then we're just going to have to re-evaluate the need for, 
process itself. Sometimes it may fall outside because of the 
transmission line you have to install to make the 
interconnection.
    Senator Shaheen. Are you comfortable that that can be done 
in a way that ensures environmental safeguards?
    Mr. Murillo. Absolutely. Yes.
    Senator Shaheen. OK. Does Reclamation have any recent 
examples of offers to lease power within the Central Utah 
Project that could provide a roadmap for how hydropower in this 
part of the system may be developed?
    Mr. Murillo. Actually, we have 4 Lease of Power Privilege 
projects that are currently operating, and we can provide that 
information as a roadmap.
    Senator Shaheen. That would be helpful.
    So, are there any amendments that you might suggest that 
would make this legislation address your concerns?
    Mr. Murillo. There, if there were any amendments that we 
would be looking at, because of the budget climate we're in 
right now, we'd probably be focusing on how to recoup the 
capital investment.
    Senator Shaheen. Thank you.
    Finally, on S. 808, the Uintah Water District, your 
testimony identifies different repayments amount for, amounts 
for this project, depending on whether the amounts are 
discounted or whether total project costs are included.
    If the legislation passes, how will reclamation and the 
Water District determine the correct amount to be repaid, in 
order to keep the Federal Government whole?
    Mr. Murillo. We would have to perform a final cost 
allocation. Once that is performed, then we take a look at the 
payment stream and then apply the discount rate.
    Senator Shaheen. OK. Is that something that you do on a 
regular basis with projects?
    Mr. Murillo. I wouldn't say we do it on a regular basis. 
But I do know that there are other projects where we've 
executed early payment.
    Senator Shaheen. So, it's not something new?
    Mr. Murillo. It's not something brand new for us.
    Senator Shaheen. OK. Thank you.
    Finally, on S. 519, for Mr. Moe, you've described the 
administrative proceedings that Western announced earlier this 
year. But you've also indicated that Western published a notice 
that will delay the effective date of those decisions until 
December. So, is Western willing to withdraw the decisions 
themselves until a later date, in addition to extending the 
date on which Western intends to make them become effective?
    Mr. Moe. The Federal Register notice that we have 
discussed, based on comments that we've received recently, is 
to extend the effective date of those decisions. We have not 
had internal discussions about undoing the decisions 
themselves.
    Senator Shaheen. Why does Western feel like it's necessary 
to pursue an administrative allocation now, when the allocation 
has traditionally been done by Congress?
    Mr. Moe. We believe that it's appropriate to continue to 
keep the process moving. We think, based on the current 
roadmap, that it would take until about the spring of 2015 to 
complete our process, because there's an awful lot of steps 
ahead of us in the process. Of course, that needs to be 
finished well ahead of 2017, because you need time for the 
people to get the contracts, and those that don't get the 
contracts, to make other energy allocation decisions, to make 
transmission arrangements.
    So, well, we've been trying, well, we've certainly been 
using due diligence in moving the process along and taking 
plenty of time to consider comments and so on--we extended the 
last comment period for almost a year--we do feel it's 
important to continue to move the process along, in the event 
that Congress should decide not to act on S. 519.
    Senator Shaheen. Thank you.
    Senator Lee.
    Senator Lee. Mr. Murillo, I just wanted to follow up with 
you little bit on some of the comments on S. 499. We talked 
about the possibility of costs reallocation. I mentioned that 
that might be a big ``if.'' But, as I think about it, it may be 
an even bigger ``if'' than I was acknowledging previously.
    Doesn't Section 211 of the Central Utah Project 
Compensation Act--Completion Act, prohibit that kind of cost 
reallocation?
    Mr. Murillo. I'm not sure of that. I don't know if that----
    Senator Lee. OK.
    Mr. Murillo [continuing]. Does or not.
    Senator Lee. I believe that it does. If that's the case, 
let's assume for moment, let's assume for purposes of our 
discussion today and this hearing, that that is the case, as 
I'm pretty confident that it is. If I'm right, then wouldn't it 
make perfect sense to move forward with this legislation? In 
other words, if what we are faced with is a binary choice--we 
either proceed with S. 499 or we don't--if we proceed with it, 
the Federal Government, the U.S. Treasury gets $400,000 a year; 
we get 50 megawatts of clean energy on the grid that is not 
there now. If we don't, we get nothing. We get neither the 
power, nor the money. So, assuming I'm correct about Section 
211 of CUPCA, wouldn't it make the most sense for us to proceed 
with this?
    Mr. Murillo. You know, if we're looking at a proposal that 
makes fiscal sense, you know, that's something that we're 
definitely going to entertain.
    Senator Lee. OK. That would make fiscal sense, with that 
understanding, wouldn't it?
    Mr. Murillo. We'd have to do the analysis.
    Senator Lee. OK. Thank you very much.
    Mr. Murillo. Thank you.
    Senator Shaheen. I would like to go back, Mr. Moe, to S. 
519, because there have been some assertions from parties 
interested in this issue that Western doesn't have the 
authority to administratively allocate power from the Hoover 
Dam. How do you respond to those concerns?
    Mr. Moe. Thank you. I appreciate that. I, we published our 
first Federal Register notice in November 2009, and proposed 
the application of allocating power through the Power Marketing 
Initiative at that time; extended comments for that process all 
the way until September of last year. The Power Market--and 
have considered those comments since.
    The Power Marketing Initiative is a regulation that Western 
promulgated in 1995 after 4 years of public comment, under 
which, under that regulation, existing contractors would 
receive the majority of the pool, but new customers would be 
allowed to apply for a small percentage of the pool in order to 
allow for widespread use of the Federal asset. We've applied 
that process to every remarketing effort since it was issued as 
a final rule in 1995. Again, in the case of the Hoover 
allocations, we've asked for comment, and considered those 
comments in terms of Hoover specifically.
    We believe that the 1928 Boulder Canyon Act explicitly 
authorizes the allocation of a new pool by saying that the 
process should be in compliance with existing regulations, 
which our Power Marketing Initiative is an example of. So, 
that's a summary of why we believe it's appropriate.
    Senator Shaheen. So, if this legislation passes, will 
Western stop its current efforts to administratively allocate 
power from----
    Mr. Moe. Right. The legislation calls for Western to take 
action, but in, but under the legislation--the broad outlines 
of what the legislation would do are actually pretty similar to 
what our current proposals are. But, yes, we would, to the 
degree that our differences--clearly, we would move to adopting 
S. 519, or whatever the final legislation is, if Congress 
should enact it. Again, we believe--and we appreciate the 
efforts to work with us, and believe that it's something that, 
you know, could be done also.
    Senator Shaheen. So, would you elaborate a little bit more 
on how the Power Marketing Initiative criteria that Western 
proposes would be different than the criteria that are 
applicable to the existing contracts?
    Mr. Moe. The Power Marketing Initiative essentially is a 
regulation where you extend for the existing contractors a 
major percentage of the pool, but then you open a new pool for 
new customers to allow for widespread use. So, for example, 30 
years ago, when the Hoover bill in 1984 was passed, Western did 
not have regulations in place that accommodated tribal 
customers very well. The Power Marketing Initiative, when it 
was announced in 1995, also changed our regulations to allow 
for those customers to be able to be customers without having 
utility status, was kind of the major change we made in the 
regulations there. So, the Power Marketing Initiative is the 
regulation by which we allow for new customers.
    Now, the current--in terms of comparing it to S. 519--S. 
519, you know, also allows for a 5 percent pool for new 
customers. So, in terms of the eventual impact, you know, I 
think there'd be, they'd fairly similar. But I'm not sure--am I 
missing the----
    Senator Shaheen. No. No, that's----
    Mr. Moe. Is that your question? OK.
    Senator Shaheen [continuing]. That's why I'm asking.
    So, I don't have any further questions.
    Senator Lee, do you have anything else that you would like 
to ask?
    Senator Lee. Nothing further. Thank you.
    Senator Shaheen. OK.
    Thank you both very much for appearing here.
    At this time I will close the hearing.
    [Whereupon, at 3:22 p.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

       Responses of Darrick Moe to Questions From Senator Shaheen
    Question 1. Which provisions of federal law support Western's 
position that it has authority to allocate power from Hoover Dam after 
the existing controls expire in 2017?
    Answer. Section 5 of the Boulder Canyon Project Act (Project Act) 
(43 U.S.C. Sec.  617d) authorized the Secretary of the Interior to 
contract for the generation and delivery of electrical energy to 
States, municipal corporations, political subdivisions, and private 
corporations under such regulations as he may prescribe. Exercising 
this authority, the Secretary made initial allocations of Hoover Dam 
power under regulations promulgated in 1930 and amended in 1931. The 
1931 regulations allocated all of the Hoover firm energy to California, 
Arizona, and Nevada entities, although initially all of the power was 
placed under contracts with California entities because Arizona and 
Nevada did not take their allocations until 1940 and 1945 respectively. 
Contracts under the 1931 regulations ran for 50 years (the maximum 
length permitted under the Project Act), from June 1, 1937, when Hoover 
power generation began, until May 31, 1987.
    On July 19, 1940, the Boulder Canyon Project Adjustment Act 
(Adjustment Act) was enacted for the purpose, among other things, of 
modifying the method of amortizing the Government's investment in the 
project. Pursuant to the Adjustment Act, the Secretary of the Interior 
issued regulations setting forth the basic principles the Bureau of 
Reclamation would follow in establishing electricity rates for the 
project.
    The Department of Energy Organization Act of 1977 (DOE Act), 
transferred the power marketing functions previously held by the 
Secretary of the Interior to the Secretary of Energy. Pursuant to 
section 302 of the DOE Act (42 U.S.C. Sec.  7152), authority to perform 
these functions for the Boulder Canyon Project (BCP), was vested in the 
Administrator of the Western Area Power Administration.
    The Hoover Power Plant Act of 1984 provided for the allocation of 
Hoover Dam power for the period from June 1, 1987, to September 30, 
2017, however it did not alter Western's underlying authority to market 
power from Hoover Dam under the Project Act. If new allocation 
legislation is not enacted, Western still retains the statutory 
authority to market Hoover Dam power pursuant to section 5 of the 
Project Act.
    Question 2. What differences exist between Western's Power 
Marketing Initiative criteria, and the marketing criteria that 
currently apply?
    Answer. As proposed, Western's Power Marketing Initiative (PMI) 
would extend 95% of the BCP resources to existing customers, resulting 
in a 5% resource pool to be allocated to eligible customers. It also 
would increase the marketed capacity from 1,951 megawatts (MW) to 2,044 
MW. Otherwise, the application of the PMI would retain the existing 
criteria for the BCP marketing area.
    Question 3. What public process will Western follow for allocations 
of power from Hoover Dam, if S. 519 is enacted?
    Answer. If S. 519 is enacted by Congress, Western will implement 
the provisions of the legislation, including the allocation of certain 
``Schedule D'' power. To accomplish this allocation, Western would 
follow a process consistent with the Administrative Procedure Act, that 
entails publically announced proposals, public information forums, 
public comment forums, and decisions made in consideration of comments 
received.
    Question 4. What would cause Western to procure power at a higher 
cost if it was unable to retain an allocation of the power generated at 
Hoover Dam?
    Answer. In order to reliably operate and maintain its extensive 
transmission systems and balancing authorities, Western is obligated to 
carry operating reserves to maintain generation capacity set aside to 
be used in the event of a system contingency. Due to persistent drought 
conditions and the operation of the Colorado River over the last 20 
years, Western has very rarely had the opportunity to utilize the 123 
MWs of capacity potentially available under the current BCP contracts 
for this purpose. Therefore, Western has, and will continue to be 
required to procure market-based capacity or supporting energy 
products, and pass the costs to its customers through higher rates. 
Western has proposed to retain 30 MWs of BCP capacity as an operating 
reserve that would greatly diminish the need for these purchases and 
provide additional stability to the operation of the Federal electrical 
infrastructure. Western's proposal would result in all Hoover-generated 
energy (as opposed to capacity) being delivered to the customers of the 
project and keep the customers financially neutral.
    Question 5. What elements of the current Implementation Agreement 
does Western believe should be re-evaluated?
    Answer. The current Implementation Agreement (IA) was entered into 
between Western and BCP customers to resolve issues present in 1994 
relative to the following eleven topics:

          1) Replacements
          2) Visitor Facilities
          3) Amending CFR 904
          4) Multi-Project Benefits and Costs
          5) Engineering & Operating Committee and Coordinating 
        Committee
          6) Billing and Payment
          7) Working Capital
          8) Audits
          9) Principal Payments
          10) Annual Rate Adjustments
          11) Uprating Credits

    To bring the agreement up to current conditions, there would be 
innumerable updates or modifications needed. As an example, the IA 
contains references in the Billing and Payment sections to the existing 
marketed 1,951 MW of contingent capacity and 4,501,001 of annual firm 
energy in its methodologies. S. 519 would modify the marketed capacity 
to 2,074 MW. Updates of this nature do not appear to be a major 
departure from the intent of the agreement. However, Western believes 
it would be in all parties' best interests to re-evaluate the language 
in the IA and not unreasonably reinstate existing language which would 
be confusing to new Contractors or be inappropriate given the 
circumstances.
    Question 6. If Western goes forward with its administrative 
process, how many tribes would be eligible to receive contracts for 
power beyond the 87 tribes that currently receive Federal hydropower 
allocations?
    Answer. Western has identified 59 Federally recognized Native 
American tribes in the BCP marketing area. All 59 of these tribes would 
be eligible customers and be able to apply for an allocation under 
Western's PMI. Approximately 24 of those 59 tribes currently receive 
Federal hydropower allocations from other projects administered by 
Western.
    Question 7. Does Western have any technical concerns regarding S. 
519 beyond the issue raised for Subdivision C of the Conformed 
Criteria?
    Answer. No, Western has no other technical concerns beyond the 
issue raised for Subdivision C.
         Responses of Darrick Moe to Questions From Senator Lee
    Question 1. Proponents of the legislation argue that Congress, and 
not the Administration, should allocate Hoover's future capacity. Why 
then, did WAPA decide to proceed with a Federal Register notice action? 
Is there a benefit to proceeding administratively? Do you believe the 
Administrative process is preferable to Congressional action?
    Answer. Western believes there is a public benefit in the 
continuance of the current administrative process in parallel to these 
legislative efforts because no matter how BCP power is allocated, 
structuring agreements between Western and its Contractors will require 
time. Western must be prepared to offer and execute BCP contracts 
regardless of whether S. 519 is enacted. Interested parties need ample 
time to adjust their power resource portfolios after allocations have 
been determined. State agencies also need sufficient time in order to 
conduct their own allocation processes. Western has no preference for 
either the administrative process or Congressional action, however, 
under the administrative process, it is possible that a wider customer 
distribution of Hoover allocations could occur.
    Question 2. The legislation before us would, upon the 2017 
expiration of the existing Hoover contracts, allocate the project's 
power for the next 50 years. The last time Congress reauthorized the 
Hoover project, we approved 30 year contracts--the same time period 
envisioned by Western in their Administrative proceeding.
    While supporters of the legislation argue that 50 years is needed 
in order to coincide with the 50 year Lower Colorado River Multi-
Species Conservation Program (LCR MSCP), Western notes that the 
contracts terms do not coincide with the LCR MSCP terms. Will you both 
please comment on the issue of a 50 year versus 30 year contract term? 
Do you believe the adoption of a 50 year term potentially excludes 
evolving classes of customers in decades to come?
    Answer. Western does not find a need for Hoover Dam power sales 
contract terms to coincide with the LCR MSCP. The initial 50-year term 
authorized in the Boulder Canyon Project Act was a means of providing 
potential customers flexibility to finance capital investments over a 
long period of time. Considering that the initial project investments 
have been paid in full, the original logic behind the 50-year term no 
longer exists. The adoption of a 50-year contract term would likely 
exclude new and evolving classes of customers and perhaps stifle 
economic growth and flexibility. The electrical industry is dynamic in 
its regulations, technologies, operations and participants. With the 
North American Electric Reliability Corporation and Western Electric 
Coordinating Council continually changing requirements, growth in 
renewable programs, increased tribal interest, and heightened climate 
and environmental issues to consider, the hydro-electric industry has 
the capability, and strong potential to yield new prospective customers 
as well as result in a dramatic evolution of existing customers. The 
development of Native American tribes in the electric utility market in 
the last 10 to 15 years is an example of how new customers can emerge 
in a relatively short period of time. Western's preference to apply a 
30-year term is intended to balance the existing
    Contractors' needs for sufficient resource planning horizons and 
stability and to provide for increased present and future widespread 
use of the Federal hydropower resource.
    Question 3. In its Administrative proceeding to allocate future 
Hoover capacity, WAPA has proposed to retain 30 megawatts of contingent 
Hoover Dam capacity for project integration purposes. I'd like Mr. Moe 
to explain to the Committee why the 30 mw retention is important to the 
Administration. Mr. Murillo, does the Bureau agree that such retention 
is necessary?
    Answer. In order to reliably operate and maintain its extensive 
transmission systems and balancing authorities, Western is obligated to 
carry operating reserves to maintain generation capacity set aside to 
be used in the event of a system contingency. This operating reserve 
requirement varies per hour in the 90-130 MW range. Due to persistent 
drought conditions and the operation of the Colorado River over the 
last 20 years, Western has very rarely had the opportunity to utilize 
the 123 MWs of capacity potentially available under the current BCP 
contracts for this purpose. Therefore, Western has, and will continue 
to be required to procure market-based capacity or supporting energy 
products and pass the costs to its customers through higher rates. 
Western studied its anticipated long term operating reserve 
requirements and identified the retention of 30 MWs to be an optimal 
balance of meeting operating reserve requirements and potential impacts 
to Western's customers. Western has proposed to retain 30 MWs of BCP 
capacity that would greatly diminish the need for these purchases and 
provide additional stability to the operation of the Federal electrical 
infrastructure. Western's proposal would result in all Hoover-generated 
energy (as opposed to capacity) being delivered to the customers of the 
project, and keep the customers financially neutral.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

Statement of Phyllis Currie, General Manager, Pasadena Water and Power, 
                               on S. 519
    Chairman Shaheen and Ranking Member Lee, thank you for holding 
today's hearing and for allowing me to submit testimony on S. 519, the 
Hoover Power Allocation Act of 2011.
    I am Phyllis Currie, the General Manager of the Pasadena Water and 
Power. I am submitting testimony on behalf of the city of Pasadena and 
the other nine Hoover contractors who are members of SCPPA, the 
Southern California Public Power Authority.
    The SCPPA is a joint powers authority consisting of 11 municipal 
utilities and one irrigation district. Our members deliver electricity 
to approximately 2 million customers over an area of 7,000 square 
miles, with a total population of 4.8 million consumers. SCPPA members 
that are Hoover participants include the municipal utilities of the 
cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los 
Angeles, Pasadena, Riverside and Vernon.
    Pasadena was one of the original contractors for power from Hoover 
Dam. In 1931, Pasadena, along with Glendale, Burbank, Los Angeles, 
Metropolitan Water District of Southern California, Southern California 
Edison and the States of Arizona and Nevada agreed to pay rates 
sufficient to guarantee the federal government that construction costs 
of the multi-purpose, almost 1,500 megawatt dam would be repaid in 50 
years.
    Hoover Dam and power plant were entirely paid for by the original 
power users-not by the federal taxpayers. All the benefits of this 
multi-purpose dam, including flood control, municipal and industrial 
water supply, irrigation and recreation were made possible by the 
commitment of these original power users to pay for the dam. Since its 
inception, Hoover Dam has provided these multiple benefits to millions 
of citizens in Arizona, California and Nevada.
    Pasadena was also one of the parties that agreed, in 1984, to 
advance fund the costs of uprating the turbines at Hoover, which 
resulted in another 500 MW of generation from the dam. Pasadena joined 
SCPPA cities Glendale, Anaheim, Riverside, Azusa, Banning, Colton, 
Vernon and the States of Arizona and Nevada in that uprating effort 
which, again, used no taxpayer money.
    The Boulder Canyon Project Act of 1928 authorized construction of 
the dam and related facilities, and authorized the Department of the 
Interior to allocate the power to the original contractors, including 
Pasadena. The Hoover Power Plant Act of 1984 authorized the Hoover 
uprating project, re-allocated power to the original contractors and 
allocated the new capacity and energy to the uprating participants.
    In anticipation of the expiration of current contracts for Hoover 
in 2017, power users in Arizona, California and Nevada got together 
more than three years ago to begin negotiations that led to S. 519.
    The key features of this legislation are as follows:

   Authorizes the Secretary of Energy to enter into 50-year 
        contracts with existing contractors for 95% of the capacity and 
        energy they now receive;
   Gives power users a contract term that matches the financial 
        commitment made by water and power contractors in the Lower 
        Colorado River Multi-Species Conservation Plan (MSCP) 
        legislation signed into law in 2009. The MSCP funds will be 
        used for 50 years of environmental mitigation on the Lower 
        Colorado River; and
   Creates a 5% ``set aside'' of capacity and energy for new 
        entrants, including Indian tribes, municipalities, rural 
        electric cooperatives and irrigation districts that do not now 
        receive Hoover power.

    From Pasadena's point of view, passage of this legislation will 
enable us to plan effectively for long-term power supplies to meet 
customer demand. It will also offset the higher cost of renewable 
resources we will acquire to meet the 40 percent by 2020 target 
Pasadena has adopted. All of the other SCPPA Hoover contractors have 
adopted similar renewable energy targets. Additionally, California has 
enacted state legislation that would require all utilities, including 
SCPPA members, to meet a 33% renewable energy standard and 30% 
reduction in greenhouse gas reduction by 2020.
    And, passage of this bill will match the commitment water and power 
users made to fund the MSCP with contracts that ensure the benefits of 
the power generated at Hoover.
    Pasadena is proud that it was one of the original Hoover 
participants and that we were participants in the uprating authorized 
in 1984. This unique facility, paid for by power users, not by the 
federal government, provides immeasurable benefits to citizens Southern 
California, Arizona and Nevada.
    We are also proud that the legislation we are discussing today was 
agreed-to unanimously by Hoover contractors in the three states. And, 
we are gratified to have strong bipartisan support for the bill from 
Members of Congress from Arizona, California and Nevada, including 
Senators. Dianne Feinstein and Barbara Boxer.
    Thank you for the opportunity to submit this statement for the 
record. I would be happy to provide the Subcommittee answers to any 
questions that you may have.
                                 ______
                                 
  Statement of Donald A. Christiansen, General Manager of the Central 
               Utah Water Conservancy District, on S. 499
Introduction
    Thank you for the opportunity to submit a written statement for 
this hearing. I am General Manager of the Central Utah Water 
Conservancy District (District), the State sponsor of the Central Utah 
Project. I appreciate Senator Orrin Hatch and Senator Mike Lee's 
leadership on this bill. The Bonneville Unit of the Central Utah 
Project develops water for communities in 10 counties covering three 
Congressional Districts. S. 499 will clear away sunk system-wide costs 
which constitute an economic roadblock to the development of clean 
hydropower in the Diamond Fork feature of the Bonneville Unit. Adding 
hydropower capability at existing facilities is a cost-effective and 
environmentally sustainable way to build our clean-energy portfolio, 
create local jobs and stimulate the economy.
Potential for Diamond Fork Hydroelectric Power Plants
    The Supplement to the 1988 Definite Plan Report for the Bonneville 
Unit (2004) and the Utah Lake Drainage Basin Water Delivery System 
Final Environmental Impact Statement (September 2004) detail the 
proposed power facilities that could be built at Diamond Fork. In 
general, two hydroelectric power plants would be located in Diamond 
Fork Canyon. They are at:

          1. The Sixth Water Flow Control Structure with a capacity of 
        45 MW and,
          2. The Upper Diamond Fork Flow Control Structure with a 
        capacity of 5 MW

    The potential Diamond Fork power plants have some similarities and 
yet some distinct differences from the Jordanelle power plant. Of 
particular importance is the manner in which power costs have been 
assigned by the Department of the Interior. $161 million in Strawberry 
Collection System sunk costs have been assigned to be recovered from a 
future Diamond Fork power plant. This significantly complicates 
hydropower development at Diamond Fork. In essence, any developer of 
power at Diamond Fork starts in an economic ``hole'' of $161 million 
before installing any power turbines or constructing any transmission 
lines.
    Moreover, power generation at Diamond Fork is based on the ``run of 
the river'' (generation which is incidental to water releases), and 
therefore Diamond Fork hydropower has less value in energy markets 
because it cannot be scheduled to meet peak demands. In fact, Section 
208 of PL 102-575 places limitations on the operation of the power 
plants at Diamond Fork. The Central Utah Project Completion Act or 
``CUPCA'' says; ``Use of Central Utah Project water diverted out of the 
Colorado River Basin for power purposes shall only be incidental to the 
delivery of water for other authorized project purposes. Diversion of 
such waters out of the Colorado River Basin exclusively for power 
purposes is prohibited.'' Hence, flow releases through the Diamond Fork 
System of aqueducts and pipelines would be dictated by Central Utah 
Project (CUP) and Strawberry Valley Project (SVP) water needs and would 
be used for electric energy generation at the hydroelectric power 
plants as a secondary purpose.
Legislation is needed to defer sunk system costs allocated to Diamond 
        Fork Power
    Because the power costs allocated to Diamond Fork make the project 
uneconomic, we approached the Utah delegation with a remedy to defer 
these costs similar to other costs that have already been deferred. The 
cost allocation was initially done using the Use of Facilities (UOF) 
method as directed by the Comptroller General in a letter of January 
26, 1994. Application of a strict UOF allocation of costs to power 
resulted in an allocation of $540.3 million to power. This amount would 
result in a power rate significantly higher than its market value. 
Consequently, a modified use of facilities approach was used to 
calculate the power allocation. Under this approach, the cost allocated 
to power is $161.0 million.
    Even with the modified use of facilities approach this amount 
allocated to power makes power development very expensive and 
infeasible. At a time when the demand for energy is skyrocketing and 
the need for renewable energy is paramount, the sensible approach of S. 
499 is to defer the costs assigned to power and allow development of 
this valuable resource. As was done with Jordanelle dam, the fee paid 
to the Federal government for the investment in facilities which make 
power development feasible could be negotiated through a competitive 
Lease of Power Privilege process. Current market conditions and 
construction costs would be known and a reasonable fee could be 
established.
The District is an experienced developer of hydropower
    The District has a proven track record of developing non federal 
hydropower on federal facilities of the Bonneville Unit. In Summit and 
Wasatch counties, we worked from the initial design of the Jordanelle 
Dam to facilitate outlet plumbing for the eventual installation of the 
recently constructed Jordanelle hydropower plant. The District has been 
involved in each step of this very successful project, which has a 
maximum capacity to generate 12 megawatts of hydropower at Jordanelle 
dam. The project has been certified by the Low Impact Hydropower 
Institute as ``Green Power''.
    The plant began commercial operation on July 1, 2008. The District 
developed the Jordanelle power plant in partnership with Heber Light & 
Power (a local public power entity) who purchases and markets the 
energy. Since it was originally anticipated that federal power would 
not be developed at Jordanelle dam, none of the costs of the dam or 
system-wide project costs were allocated to power. Therefore, during 
the negotiation of the Lease of Power Privilege one of the negotiation 
points was to determine a reasonable fee to be paid to the federal 
government that would not push the cost of the power beyond market 
conditions. The negotiated fee is 3 mills per kilowatt hour escalating 
at 3% per annum.
Conclusion
    The District stands ready to initiate a process to apply for the 
right to develop clean hydropower at Diamond Fork if the economic hole 
created by the allocation of sunk system-wide costs is deferred. We 
strongly urge your approval of this important legislation as soon as 
possible.
                                 ______
                                 
 Statement of Calvin Crandall, Chairman of the Board, Strawberry Water 
                      Users Association, on S. 499
    Madam Chairwoman, our own Senator Lee and Members of the Committee, 
on behalf of the Strawberry Water Users Association (SWUA) we want to 
thank you for allowing us to provide written testimony in support of S. 
499, the Bonneville Unit Clean Hydropower Facilitation Act.
    S. 499 opens the door to hydropower development in the Diamond Fork 
System of the Central Utah Project (CUP), a portion of the CUP shared 
with the Strawberry Valley Project (SVP). Diamond Fork power would not 
be practicable without passage of S. 499.
    Diamond Fork power will produce clean energy by harnessing the 
power of SVP and CUP water which is already carried in the Diamond Fork 
System. The reason SVP and CUP water is carried in the pipe that makes-
up the Diamond Fork System is to protect natural streams from erosion.
    Today the tremendous energy of falling project water is being 
wasted, in part as the result of federal red tape that produces 
illogical results. S. 499 will remove the barriers, allowing this clean 
renewable Diamond Fork energy to be used. Additionally, where no 
revenue is currently being produced, a portion of the produced power 
revenues will be used for the two Reclamation projects involved. This 
is vital as both the SVP and CUP are critical to the future of Utah.
    With passage of S. 499, a portion of the power revenue will flow to 
the federal government. No federal dollars, and no tax-exempt bonding, 
will be used in the construction of Diamond Fork power facilities. This 
truly is a win win for everyone involved. We appreciate very much your 
leadership in this endeavor.
    We would also like to express public appreciation to Central Utah 
Water Conservancy District and Don Christiansen for their 
thoughtfulness and leadership on this issue. SVP and CUP have much to 
gain from the completion of this important project.
    When the two projects and the federal government sat down to 
negotiate the sharing of project facilities, both parties were clear 
that opportunities for the SVP's development of power, using SVP water, 
would not be impaired by reason of SVP water being carried in the 
Diamond Fork System for the benefit of the environment. We are 
appreciative of the ongoing commitment that will assure SWUA that we 
will be rightfully compensated for our property right.
    That strong commitment is reflected in paragraph 19 of the 1991 
Contract that governs the sharing of CUP facilities by both SVP and 
CUP. That commitment is also reflected in the Opinion of the Regional 
Solicitor dated July 30, 1986. We are also very grateful for Don 
Christiansen's personal public reiteration of that commitment during 
discussions that lead to SWUA's full support for S. 499.
    We very much appreciate your leadership in holding this hearing and 
that of Senator Lee and Senator Hatch on this important issue and look 
forward to working with you all as this bill moves forward in the 
legislative process.
                                 ______
                                 
  Statement of Tod Kasten, Dry Redwater Regional Water Authority (Dry-
Redwater), McCone, Garfield, Richland, Dawson, Prairie County, Montana 
       and a Portion of McKenzie County, North Dakota, on S. 419
    Madam Chair and members of the subcommittee, my name is Tod Kasten. 
I am Treasurer of the Dry-Redwater Regional Water Authority. Thank you 
for the opportunity to provide testimony the subcommittee in support of 
authorizing the Dry-Redwater Regional Water System. I would also like 
to thank Senator Max Baucus and Senator Jon Tester for their strong and 
continuing support for this project.
    The Dry-Redwater will provide a safe and dependable municipal and 
rural water supply for the public water supply systems and rural users 
that comprise the Dry-Redwater Regional Water Authority. Speaking on 
behalf of the Dry-Redwater, I can assure you that our primarily 
agricultural based frontier communities in eastern Montana strongly 
support all components of the project as a good, clean, reliable source 
of water is vital to our existence.
    This great local support is evidenced by nearly 3,500 good 
intention fees collected. These pre-paid fees show the financial 
commitment of the area users for this project. This financial support 
represents an equivalent population of nearly 15,000 users which is 
nearly 70% of the potential users already financially committed to this 
project.
Need for the Project
    The Dry-Redwater service area is plagued by problems with water 
quality and adequate supply. The public water supply systems within our 
boundaries are unable to meet the requirements of the Safe Drinking 
Water Act without expensive energy intensive treatment options. 
According to the Montana Department of Environmental Quality (DEQ), one 
of the public water supply systems who would be served by the proposed 
regional system is out of compliance with the Federal Clean Water Act 
due to levels of secondary contaminants - sodium and total dissolved 
solids.
    Many of the existing systems treat their water with chlorine which 
in turn has caused problems with elevated levels of disinfection by-
products. Other systems have problems with bacterial contamination and 
elevated levels of total dissolved solids, iron, manganese, lead, 
copper, sulfate and sodium that render the water nearly undrinkable.
    The rural residents in the proposed project area currently obtain 
their water, in the majority of instances, from private wells drilled 
into shallow aquifers, gravel pockets or deep confined aquifers. Some 
rural residents are hauling all of their drinking and cooking water 
used either because their well water is undrinkable or there is not a 
sufficient quantity to be usable. Many rural residents do report water 
quality and/or quantity problems, which is evidenced by the chart of 
private well water quality attached at the end of our testimony at the 
first hearing of this project under old Senate Bill 637 in July of 
2009. There is a Montana Department of Transportation rest stop at 
Flowing Wells that is categorized as a public water supply system. This 
rest area is located at the junction of MT Highways 200 and 24; which 
is a main route to Fort Peck Lake. This rest area is heavily used by 
tourists and recreationist visiting Fort Peck Lake. The water source 
for this public area has signed for non-use as a potable system-do not 
drink the water due to high levels of nitrates and high levels of 
coliforms. This system has had to be renovated several times to correct 
those deficiencies, but due to the depth of the well and proximity to 
on-site sewage disposal facilities this will be a chronic problem.
    The majority of the proposed communities to be served are currently 
operating their own municipal water systems; all of the communities are 
using wells as a source of water. Three communities must treat their 
water because of high levels of fluoride which is a health hazard and a 
regulated contaminant. A fourth community-Jordan-does not treat its 
water but it is high in sodium and total dissolved solids which are not 
currently regulated, but has detrimental effects on those drinking it. 
A fifth system-Fairview- has high organic levels in its water that has 
lead to a disinfection by product violation. The Town operates an iron 
and manganese removal water treatment facility that uses chlorine as 
the oxidizer; which while effective at removing the iron and manganese, 
does have the problem of forming disinfection byproducts.
    Based upon preliminary review of the water quality in the wells of 
rural users in the proposed service area it indicated that the majority 
of them do not have access to the quality of water needed for a healthy 
existence. One of the wells, in the project area, serves Garfield 
County School District No. 15 and it shows that the sodium level is 447 
parts per million (ppm) which exceeds the recommended level of 250 ppm, 
the fluoride is 3.35 ppm which exceeds the recommended level of 2 ppm 
and it has 1049 ppm of total dissolved solids which is over twice the 
recommended level of 500 ppm. This well and the other private wells are 
not regulated by National Drinking Water Standards but the detrimental 
effects of the water on their users are not any less because they are 
not regulated. The treatment of water in a private well is costly and 
sometimes complicated depending on what is in the water. A regional 
rural water system will allow the rural user to have access to a 
reliable, safe, high quality water supply. The public water systems in 
the service area are regulated by Drinking Water Standards and must 
treat the water they provide to their user to these standards. The use 
of a membrane type water treatment facility (reverse osmosis or nano-
filtration) are not typical systems found in smaller towns, but due to 
the limited alternatives to remove the regulated contaminates 
(fluoride) Circle, Richey and Lambert were forced to use this energy 
intensive system that requires a high pressure pump to force the water 
through a membrane in order to remove the contaminates. This method of 
treatment does not conserve water as much of the water treated is 
wasted in back flushing and the process is a large consumer of 
electrical power. The requirements for safe drinking water are getting 
more stringent every year and these increased regulations equal 
increased costs to all public water systems. A small system that 
currently treats their water such as Circle, Richey, Fairview and 
Lambert will be greatly impacted financially for even minor 
modifications needed to meet new drinking water treatment standards. 
These costs will be in treatment, distribution and operator 
certification costs. The Town of Jordan currently does not treat its 
ground water source but does provide disinfection by means of 
chlorination. The Town of Jordan, like other public drinking water 
systems, must publish an annual drinking water report and following is 
an excerpt from the latest report: ``We're pleased to report that our 
drinking water is safe and meets federal and state requirements. 
However, as many of you know, although our water is labeled as safe to 
drink under the Safe Drinking Water Act, some of the unregulated 
parameters affect the taste and may affect the health of a limited 
population. The concerns are sodium and the total dissolved solids in 
the water. The sodium level is high enough that people with high blood 
pressure may want to consider a separate source of drinking water. The 
total dissolved solids are high enough to have a laxative effect on 
people that have not become conditioned to the water. We are aware of 
these problems with our source of drinking water, but have been unable 
to find a solution that is financially feasible.'' The drinking water 
standards for sodium and total dissolved solids will be addressed in 
future regulations and the Town of Jordan will need to address these 
regulation changes and the costs that will be associated with meeting 
those new regulations. By belonging to a regional water system these 
small systems will be part of a larger user base, so future 
improvements will not have as great of financial impact to the 
individual user. In the proposed regional water system there is one 
source of water treatment which will replace 5 existing central water 
treatment systems. This will greatly reduce the costs, improve 
efficiency and effectiveness in the delivery of safe water to all area 
users. The installation of a single conventional water treatment plant 
will greatly reduce the energy consumption utilized in the treatment 
process since the 3 energy intensive reverse osmosis system will be 
retired. Another benefit of the regional water treatment facility is 
the reduced volume of wastewater generated during the treatment 
process. A reverse osmosis facility must reject 35% to 50% of the water 
that comes into it to remove the fluoride and sodium down to acceptable 
levels. This reject water must be stored and treated in the Town's 
wastewater system which in Richey, Circle and Lambert causes storage 
problems. A conventional water treatment plant will waste 5% to 10% of 
the incoming water to clean the filters of the contaminants removed 
during the treatment process. Unlike the waste stream from a reverse 
osmosis treatment facility that has high concentrations of sodium, 
fluoride and other deleterious chemicals the waste stream from the 
surface water plant can be placed in a settling pond and after a period 
of 2 to 3 weeks over 80% of the waste water could be reused for 
irrigation or stock watering. The landowner that is selling the land 
for the proposed water treatment facility has expressed a great 
interest in being able to utilize this water. A regional water system 
also mitigates the potential negative impacts of migration from one 
small community. For example, if 15 users leave Richey that is 10% of 
their user base, but if Richey joins the Dry-Redwater project and 
Richey loses 15 users; it is less than 1% of the total user base.
Town of Circle
          1.The Town of Circle has a municipal water distribution 
        system which consists of 2 deep (1,500 ft) water wells, an 
        elevated 50,000 gallon water storage tank, a 250,000 gallon on-
        ground water storage tank and a reverse osmosis water treatment 
        plant with a 50,000 gallon clearwell. The Town has experienced 
        heterotrophic bacterial growth in their wells that has required 
        extensive rehabilitation work and replacement of one well. This 
        bacterial growth is starting to build up on a second well and 
        in several years will become problematic and will require 
        replacement. This well screen problem is chronic and is on 
        going. The current groundwater raw water supply is over the 
        Maximum Contaminant Level (MCL) established in the Safe 
        Drinking Water Act for fluoride and above the secondary limit 
        for sodium. The Town of Circle must remove these contaminants 
        and since conventional treatment processes won't remove 
        fluoride they must utilize an energy intensive reverse osmosis 
        treatment process. If the current treatment process has 
        mechanical problems the Town would be forced to put water into 
        the distribution system that is a documented health hazard. The 
        Town of Circle will benefit in the long term by connecting to 
        the Dry-Redwater. The uncertainty of the life of their wells, 
        the cost to replace a well (over $150,000) and the cost to 
        treat the water are all items that strengthen their commitment 
        to this project.
Town of Jordan
    The Town of Jordan has a municipal water distribution system which 
consists of 2 water wells and a 200,000 gallon on-ground water storage 
reservoir. There is no treatment of the water but it is disinfected by 
being chlorinated. The quality of the water exceeds many of the 
secondary limits, such as sodium and total dissolved solids, of the 
amendments to the 1996 Safe Drinking Water Act. The potential for 
increased regulation of the groundwater rule (GWR) and disinfection by 
products rule would cause an additional cost to each user in Jordan in 
order to be in compliance with the rule. The Town of Jordan will 
benefit from the Dry-Redwater project by having a water supply that is 
treated to the most current water quality standards and delivered at a 
consistent volume and pressure.
Town of Richey
    The Town of Richey has a municipal water system that consists of 
two deep water wells (1400 ft), an on-ground 100,000 gallon steel 
water storage reservoir and a reverse osmosis water treatment facility. 
The raw water source for Richey is identical to Circle in that exceeds 
the MCL for fluoride and the secondary limits for sodium so that is why 
the Town of Richey also utilizes the energy intensive reverse osmosis 
treatment process. If the current treatment process has mechanical 
problems the Town would be forced to put water into the distribution 
system that is a documented health hazard. The water treatment facility 
reduces the levels of each contaminant to below the limits. The Town of 
Richey will benefit from inclusion in the Dry-Redwater project since 
its current raw water source is in violation of the drinking water 
standards if not treated and the current system has a fairly high cost 
to operate when compared with conventional treatment. The replacement 
costs of membranes and increased electrical costs in the future will 
also make connecting to the regional system more economical.
Lambert County Water and Sewer District
    Lambert County Water and Sewer District has a central water 
distribution system. This unincorporated town has two deep water wells 
( 1,200 ft), a 50,000 gallon on-ground steel water storage tank and a 
nano-filtration (membrane) water treatment facility. The water supply 
exceeds the MCL for fluoride and exceeds the secondary limit for sodium 
that is why the District utilizes an energy intensive nano-filtration 
treatment process. If the current treatment process has mechanical 
problems the Town would be forced to put water into the distribution 
system that is a documented health hazard. The District will benefit 
from connection to the Dry-Redwater for the same reasons as Circle and 
Richey.
Fairview
    The Town of Fairview draws its water from two wells approximately 
240 feet deep. The central distribution system has a 100,000 gallon 
elevated water storage tank and a 300,000 gallon on-ground steel water 
storage tank. The ground water source is high in tannins, lignens, iron 
and manganese. The Town utilizes an iron and manganese removal process 
and gas chlorine for disinfection. The Town has recently received a 
notice from the Montana Department of Water Quality that they had a 
test for haloacetic acids (HAAS) and total trihalomethanes (TTHMs) 
(disinfection by product contamination) that exceeded the limits set by 
the Safe Drinking Water Act. The Town is now studying and determining 
what changes in their disinfection process they need to make to meet 
the Disinfection by Products Rule. The high organic content of their 
raw water is a significant factor in the creation of the by products. 
The Town of Fairview will benefit greatly by receiving its water from 
the Dry-Redwater Regional Water Authority system.
    New Rural Users--New users would include rural residents who have 
not had the opportunity to be connected to a high quality treated 
source of water as provided by a regional water system. These residents 
use individual wells for domestic and agricultural needs, haul water 
from other sources or purchase bottled water for drinking purposes. The 
water quality varies greatly throughout the project area but generally 
has levels exceeding the U.S. EPA Secondary Health Standards with high 
levels of total dissolved solids, hardness, sulfates, sodium, iron, 
manganese and areas of high fluoride. The majority of these wells are 
constructed in glacial till materials typical of the project area, 
resulting in wells which have varying abilities to provide a sufficient 
quantity and adequate quality of water supply. The cost to install new 
water well has been determined, based on information provided by NRCS, 
to be over $90 / month when you factor in the replacement cost of the 
various components of a well system. The box below shows how this cost 
was determined:

    Drill and case well: $35.00/ft average depth 200-250 ft Cost: 
$7,000-$8,750
    If a well lasts 15 years the monthly cost is $39.00 to 48.00 per 
month.
    Pump and Motor: $1,000.00 If a pump lasts 5 years the monthly cost 
is $16.70.

    Control pit/pressure tank: $2,800 with a 15 years life has a 
monthly cost of $15.60.
    Annual stock well electrical base rate is $240.00 per year or 
$20.00/month before electrical use.
    The cost to run electricity to a new well site is $17,160.00/mile 
or $3.25/ft. This cost was provided by McCone Electric.
    For a new well that already has electric service the monthly costs 
before any water is pumped is $91.30 to $100.30.

    When you have bad groundwater to start with, treatment doesn't 
improve its quality, it only reduces some of the chemical components to 
meet regulation standards, this does not necessary mean the water is 
free from taste and odors. Second, maintaining the individual systems 
does not address the benefits of providing a firm water supply that 
protects the communities against future drought. The individual user 
also relies on a well pump and small pressure tank to provide water, 
and when the power is out they lose the ability to access their 
domestic water source. The regional system will have storage tanks that 
will pressure the system and backup power systems.
    From a regulatory aspect a regional water system has significant 
benefits. At the present time, there are six different regulated public 
water systems within the region that are part of the Authority. Meeting 
regulatory requirements of the Safe Drinking Water Act must be 
currently demonstrated by each system. When a rule changes, all those 
systems must react to the change individually. Many of the systems 
serve small municipalities or county water districts, some with fewer 
than 150 connections, there is a reduced capacity on their part to 
maintain and operate a water system. That means that the Montana 
Department of Environmental Quality is perennially facing problems with 
compliance issues in these smaller public water systems. A regional 
water system would provide one point of regulation for all of the 
member systems. If a rule were changed, it would only affect one 
treatment plant and due to economies of scale, a regional system can be 
upgraded and operated at a higher level of oversight and management at 
a smaller per user cost than smaller individual municipal water supply 
systems. An increased degree of compliance can be expected from a 
regional water system which further assures the water users of a safe 
and reliable source of water.
The Project
    The effort began in 2002 with a steering committee of volunteers, 
with the Dry-Redwater Regional Water Authority becoming a legal entity 
in 2005. The Dry-Redwater has enjoyed strong support from the local 
people and the State of Montana. Currently about 70% of the households 
in the area, have provided letters of support and or have already paid 
a `good intention' fee to show their financial commitment. Over $60,000 
of locally raised funds have been put toward the project and thousands 
of hours of volunteer efforts have helped move the proposed regional 
water system forward. The State of Montana thru the Department of 
Natural Resources has committed over $400,000 to the studies and 
organizational efforts of the project to date. The Montana Department 
of Commerce provided $40,000 of CDBG funds and the Federal Economic 
Development Administration provided $40,000 used to help pay for the 
completed feasibility study. This current investment of over $500,000 
does not include the thousands of hours of volunteer time and effort.
    The project as conceptualized will consist of 1,220 miles of 
pipeline, 38 pump stations and 20 major water storage reservoirs. It is 
projected to cost $115,116,000. By working together, the communities in 
the area can more efficiently provide affordable safe and reliable 
water to people in the project area. The water for this project will be 
obtained from the Dry Arm of Fort Peck Lake near Rock Creek. The 
water--approximately 3,500 acre feet, of the 18 million acre feet 
available--will include a storage lease from the Corp of Engineers. The 
in-take and conventional treatment facility will be located at North 
Rock Creek on the Dry Arm of Fort Peck Lake. The process to find a 
location for the intake facility was done as a joint effort with the 
Corp of Engineers and the Charles M. Russell National Wildlife Refuge.
    The feasibility study and addendum, completed in 2007, and as well 
as significant public participation in over 20 public meetings show 
that the need for safe and reliable water is a priority for the area's 
residents. The project is financially feasible given the funding 
packages used by the rural water systems in Montana and in comparison 
to rural water system costs in our three state region of Montana, South 
Dakota and North Dakota. The completed feasibility study includes 
preliminary engineering analysis of the system. The Dry-Redwater has 
also completed some preliminary cultural and environmental reviews. 
There are no fatal flaws found in these preliminary studies which 
included contacts with State, Federal and Local officials on NEPA 
compliance.



    The median household income for the service area, from our 
feasibility study in 2007, is $28,917 and using a 1.6% factor for 
estimating a reasonable cost of water the average monthly rate is 
calculated at $38.55. The rates proposed for the Dry-Redwater shows 
that utilizing the typical rural water funding package the project is 
affordable to the users.
    Dry-Redwater has been working closely with the Billings office of 
the Bureau of Reclamation (Reclamation) to move the project thru its 
brand new process as stipulated in the Rural Water Supply Act of 2006, 
and as expressed in the Interim Final Rules. However, given the 
investment made in time and money and the fact that the system's 
authorization bill was introduced by Senator Baucus in 2008, again in 
2009 as old SB 637, and again now as Senate Bill 419, it has been 
agreed by the Authority Board and other supporters of the regional 
concept that the project must move forward. In 2010 Reclamation finally 
provided the Dry-Redwater an outline of the requirements for the 
Appraisal Investigation and Report under the Rural Water Supply Act of 
2006. The Dry-Redwater Feasibility Study and addendum completed in 2007 
will substantially satisfy the requirements ofAppraisal and 
Investigation Report as provided by the Reclamation Billings office. 
The 2007 Feasibility Report is being augmented and reformatted into 
reclamations required format and will be submitted to them by the end 
of December 2011. Congressional Authorization is a requirement of this 
process and thus this request for Congressional Authorization of the 
project is considered the correct and timely process, as the system 
planning has reached a point beyond which it cannot easily move 
forward, without the ability to work formally with Reclamation, U.S. 
Fish and Wildlife and other federal agencies. In addition, the State of 
Montana has funds available to help start construction, but the 
projects must be federally authorized to access these funds. Senate 
Bill 419 Authorization allows Reclamation to make a determination if 
the project is feasible prior to any federal funding used for 
construction following the guidelines of the Rural Water Act of 2006.
    The Engineers that completed our study made the following finding 
in our feasibility efforts. ``Based upon preliminary review of the 
water quality in the wells of rural users in the proposed service area 
it indicated that the majority of them do not have access to a quality 
of water needed for a healthy existence.''
    Many area residents are not served by any public water system. Due 
to the limited availability and poor quality of groundwater, these 
residents must haul their own water. The available water supply fails 
to meet water quality standards and poses real health risks to the 
area's population.
    By working together all of the communities in the area can better 
provide affordable good quality water to all of the people. Currently, 
the primary source of drinking water in our service area is 
groundwater. It is generally of very poor quality and quantity. The 
drinking water in most groundwater wells in the area exceeds the 
secondary standards and in some cases are four times the recommended 
EPA standards. Water quality problems are exacerbated by water supply 
issues and because of the general lack of good quality groundwater, 
most of the area's larger public water systems use expensive energy 
intensive treatment methods to produce clean water. The positive health 
benefits of good quality drinking water will without a doubt be a 
tremendous benefit to the area citizens and to the overall economy of 
the region.
Economic Benefits
    A dependable supply of water is essential to ongoing efforts to 
attract new businesses and people to this primarily agricultural based 
frontier area of Montana in order to provide for future economic 
growth. In addition to long term benefits, the regional water project 
will provide an immediate economic boost for eastern Montana. Assuming 
labor costs for the project at 25 percent of the total construction 
budget, the project will generate approximately $30 million in wages. 
These construction dollars will provide a much needed stimulus to the 
regional economy of McCone, Garfield, Dawson, Richland, Prairie 
Counties and the statewide economy.
    The Dry-Redwater's service area has many natural resources that 
could be developed to help the United States become more self reliant 
when it comes to energy. The area has tremendous resources in water, 
ground to grow crops for bio-fuels, one of the nation's largest on 
shore oil reserves in the Bakken Formation Oil Field, the largest 
lignite coal reserve in the United States and a huge potential for wind 
farm development. There are a number of energy related projects that 
have been and are proposed within the Dry-Redwater service territory. 
An example is a nationally important oil transmission pipeline known as 
the TransCanada Keystone XL project will pass through the area. A good 
source of safe and reliable water supply is critical infrastructure to 
support the development of any of these nationally important energy 
sources.
    The regional pipeline will provide one of the key resources that 
enterprising businesses and people look for when they locate in an 
area-a safe water supply. Ranch/farm operations will benefit from the 
stock water available through the system. This will immediately improve 
their bottom line, as increased weight gain can be achieved with higher 
quality water. Efforts to diversify the agriculturally based economy 
with tourism, wildlife enhancement, hunting, fishing, dinosaur 
discoveries, outdoor recreation has been somewhat successful but a high 
quality water source will help its development to improve recreation 
facilities owned by the COE, the State of Montana and the counties of 
the Dry-Redwater Service area. This project will not resolve all of the 
economic problems that eastern Montana faces; however, it will serve as 
a cornerstone to future success upon which the people in the area can 
build.
    Finally and perhaps most importantly, we believe the health 
benefits of safe water will help save the citizens by reducing water 
related medical problems and thus decreasing medical costs. A rural 
resident L. Taylor from McCone County stated ``that her doctor told her 
not to drink their water as they attributed their well water to her 
numerous bladder infections''.
Alternate Sources
    The Dry-Redwater Regional Water Authority has studied possible 
alternatives to supply water to the region. The option of updating the 
six existing public water supply systems to comply with the Safe 
Drinking Water Act was rejected due to the high cost and multiple water 
sources to test and monitor. The use of additional groundwater sources 
was also investigated. This option was not feasible because there is 
very little groundwater physically available in the quantity needed, 
and the groundwater that is available is of very poor quality and would 
require an expensive treatment process. Of all the alternatives 
reviewed, the proposed regional water project found that utilizing the 
high quality surface water found in the upper Missouri River basin 
proved to be the best.
    The water impounded in Fort Peck Lake provides a very dependable 
water supply while offering the lowest capital project and life-cycle 
costs to treat and deliver water to the end user. The cooperative 
efforts of the USACOE staff at Fort Peck and the staff of the CMRNWR 
provided an excellent location for the intake structure that is in a 
deep water portion of the lake and will have minimal impacts on the 
wildlife found in the refuge.
    A water treatment plant, using conventional filtration, will be 
located near the intake in the Dry Arm of Fort Peck Lake near North 
Rock Creek. The water will be treated to meet both the primary and 
secondary requirements of the Safe Drinking Water Act standards. A 
series of transmission pipelines will provide water to smaller 
distribution lines belonging to the area's public water supply systems 
and to the rural users. The regional water system will take advantage 
of the infrastructure of the existing distribution systems. When 
completed, the regional water system will provide a safe and dependable 
water supply for over 15,000 people. Water will be provided to all or 
parts of six counties which includes an 11,100 square mile area.
    Without the proposed centralized water treatment plant, most of the 
participating systems would be required to build new or to 
significantly upgrade existing high energy use, water treatment plants 
as the Safe Drinking Water Standards are made more stringent. The low 
population densities and limited income potential in eastern Montana, 
individual communities will not be able to afford own and operate their 
own water treatment plants. A central water treatment plant will allow 
these existing systems to economically meet both the current and future 
requirements of the Safe Drinking Water Act and continue to provide 
their users with safe, reliable and affordable water.
    The estimated total project cost is $115.1 million. The Bill 
proposes the federal share of the construction to not exceed 75 
percent. The Dry-Redwater Regional Water Authority will be responsible 
for the cost of operating, maintaining and repairing the overall 
system.
    There are distinct benefits of a regional water system:

   Communities will not absorb the costs of upgrading numerous 
        smaller water facilities to keep up with water quality 
        standards.
   A greater number of regional system users helps defray the 
        cost of good water for every individual in the area.
   This system will provide jobs, not only during construction, 
        but also for ongoing operation and maintenance.
   Economic and community development opportunities with the 
        ability to attract businesses and people that need a reliable 
        water source is greatly enhanced.
   Total water and energy consumption by all communities will 
        be substantially less than if each community provides water 
        treatment.
   A dependable, high-quality drinking water sources provides 
        an incentive for business and industry to consider relocation 
        to eastern Montana.
   Reduction in chemical usage and cost as a result of 
        increased crop sparying efficiency.
   Rural area fire protection capacity
   Increased property values
   An alternative water sources for livestock.
   Safe and reliable household drinking water to improve the 
        health and existence of the people.

    Many people in eastern Montana presently do not have a reliable 
source of high quality water. The proposed regional water system will 
provide water to an area historically afflicted by water supply and 
quality problems. The positive health benefits of safe household 
drinking water is critical to the well being of the people of eastern 
Montana and will provide the required infrastructure for the regions' 
and State's economy. We ask this subcommittee's support in passing this 
important legislation to protect the health, social and economic future 
of our region.
    Thank you again for the opportunity to testify in support of the 
Dry-Redwater Regional Water Authority and the passage of Senate Bill 
419. I would be pleased to answer any questions.
                                 ______
                                 
   Statement of Mike McKeever, Chairman, Dry-Redwater Regional Water 
                 Authority, State of Montana, on S. 419
    Madam Chairman and Members of this Subcommittee,
    I am pleased to comment on behalf of the Dry-Redwater Regional 
Water Authority and thank you for the opportunity to provide a brief 
written testimony in favor of S. 419. This important legislation allows 
us to be authorized and eventually provide good, clean, safe water to 
nearly 20,000 people in an 11,000 square mile area of Eastern Montana. 
Hardly a day goes by that we don't have a sign up or an inquiry on when 
the project is ready to lay pipe. This is becoming more evident as the 
oil activity increases in Eastern Montana--more people want good, 
clean, safe water.
    We completed our appraisal study in June of 2010 and that was 
accepted by the Bureau of Reclamation. Our request for financial 
assistance was accepted and we are currently working with Reclamation 
to complete our feasibility study. The path that Reclamation has 
provided for us to follow, along with their technical assistance, will 
enable us to address their concerns in an acceptable format. Our 
feasibility study should be done the last quarter of 2011 and be ready 
for review.
    Authorization would allow us to continue with the planning, design 
and eventual construction of this important infrastructure project in 
Eastern Montana. Please consider this as a favorable project for 
Montana and vote for S. 419.
    Thank You,
                                 ______
                                 
 Statement of Ann C. Pongracz, Senior Deputy Attorney General, Counsel 
         to the Colorado River Commission of Nevada, on S. 519
    My name is Ann C. Pongracz, Senior Deputy Attorney General, and I 
serve as Counsel to the Colorado River Commission of Nevada. I 
appreciate Senator Harry Reid and Senator Dean Heller for their 
leadership on this bill. The Hoover Power Allocation Act of 2011 (S. 
519) is very important to the State of Nevada, which is one of the 
three lower basin states directly affected by the Hoover power 
contracts. The Colorado River Commission of Nevada strongly supports S. 
519.
    The Colorado River Commission is the state agency charged with, 
among other duties, receiving and allocating federal hydropower from 
the Colorado River that is provided to the State of Nevada. This 
legislation is crucial to my state. On behalf of the State in its 
sovereign capacity and also as principal on its own behalf, the 
Colorado River Commission receives electric power generated by Hoover 
Dam through delivery contracts with the Western Area Power 
Administration of the U.S. Department of Energy. The Commission, in 
turn, contracts to deliver Hoover power to retail and wholesale 
customers in Southern Nevada. We also operate a power delivery system 
to deliver this critical resource to our customers.
    The Colorado River Commission of Nevada has worked for three years 
with representatives of Arizona and California to develop this 
consensus approach to ensuring that the benefits of Hoover power will 
continue to be delivered to the citizens of our three states after 
current contracts expire in 2017.
    S. 519 extends current Hoover power contracts for fifty years to 
2067. It re-directs five percent of Hoover capacity and associated 
energy from current contractors to a resource pool that will be made 
available to new allottees in Nevada, Arizona and California who do not 
receive any Hoover power today. This bill will allow federally-
recognized Indian tribes to apply to access the dam's power for the 
first time, as well as entities eligible under section 5 of the Boulder 
Canyon Project Act such as states, municipal corporations and political 
subdivisions.
    S. 519 provides coordinated Federal/ State management of the new 
allottees' resource pool. The Western Area Power Administration will 
allocate two-thirds of the pool, and the remaining one-third of the 
pool will be distributed in equal shares through the Arizona Power 
Authority (for new allottees in Arizona), the Colorado River Commission 
of Nevada (for new allottees in Nevada), and Western (for new allottees 
in California). S. 519 requires new allottees to pay a proportionate 
share of the costs borne today by current contractors for operational 
and environmental purposes.
    We urge the Congress to approve S. 519. We believe that Congress 
should allocate post-2017 Hoover power as it has done since Hoover Dam 
was constructed in 1935. Congressional approval is needed to ensure the 
continued availability and reliability of Hoover power to the citizens 
of Nevada, Arizona and California. The State of Nevada supports S. 519 
in its entirety and urges the Committee to approve the bill.
    Thank you for the opportunity to submit this statement for the 
record. I will also submit support letters from the Nevada customers 
who benefit from Hoover power including the Southern Nevada Water 
Authority and NV Energy.
                                 ______
                                 
  Statement of Gawain Snow, General Manager, Uintah Water Conservancy 
                            District, S. 808
    To direct the Secretary of the Interior to allow for prepayment of 
repayment contracts between the United States and the Uintah Water 
Conservancy District.
    I want to thank Senator Orrin Hatch and Senator Mike Lee for 
introducing this bill on behalf of the Uintah Water Conservancy 
District (District). The District was formed in 1956 for the purpose of 
``conserving, developing and stabilizing supplies of water for 
domestic, irrigation, power, manufacturing, municipal and other 
beneficial uses, and for the purpose of constructing drainage works.'' 
The District operates and maintains the Vernal and Jensen Units of the 
Central Utah Project, which was authorized by Congress as part of the 
Colorado River Storage Project Act of 1956. The District encompasses 
almost all of Uintah County, Utah in eastern Utah adjacent to the 
border of Colorado.
    At the time of its construction (1984-1987), the Jensen Unit was to 
provide 18,000 Acre Feet (AF) of M&I water to the residents of Uintah 
County. Six thousand AF were to be developed with the construction of 
Red Fleet dam (which was built) and another 12,000 AF were to be 
developed at a later date with the construction of the Burns Bench Pump 
station on the Green River in Jensen, Utah. Due to the economic bust in 
the mid to late 80's, the demand for water that had been foreseen was 
no longer there. Also, in 1989 an amendatory contract was signed with 
the Bureau of Reclamation (Bureau) reducing the amount of water 
subscribed to by water providers to 2,000 AF.
    The Bureau of Reclamation desires to do a final cost allocation on 
the Jensen Unit. Such action would be premature without developing the 
remaining 12,000 AF on the Green River, because the cost per acre-foot 
would be approximately 2.5 times as much as if the 12,000 AF were 
developed. Also, at this time, not all of the 6,000 AF of water in Red 
Fleet Dam has been subscribed. A Block Notice was issued to the 
District from the Bureau of Reclamation for the 2,000 AF and the 
District contracted with the municipalities, water improvement 
districts, and a private company for all of that water. Since that time 
the additional 4,000 AF of M&I water remains unsubscribed. The Bureau 
of Reclamation took 700 AF to increase the conservation pool in the 
reservoir leaving 3,300 AF of available water in Red Fleet Dam. The 
Burns Bench pump station will not be constructed until all of the M&I 
water available in Red Fleet is subscribed. In the past year, the 
District has received several inquiries for the remaining M&I water in 
Red Fleet but no contracts have been signed. The price of the water is 
set by the amendatory contract. The amount per acre-foot was based on 
the cost of the Jensen Unit (including an estimated cost of the pump 
station) divided by 18,000 AF. The resulting cost is $5,555.21 per 
acre-foot and is payable by dividing that amount by the number of years 
remaining until 2037 with the last payment being made in 2037. Water 
purchased in 2006 would be paid for at a rate of $179.07 per acre-foot 
per year for 31 years. The District approached the Bureau of 
Reclamation about the possibility of discounting those payments at 
either the 3.222% rate, which is used by the Bureau to calculate the 
repayment, or the federal funds rate, which is determined at the time 
of the discounting. However, according to the Bureau, the amendatory 
contract does not allow for prepayment. The District then determined 
that it would seek legislation similar to a bill that was used by the 
Central Utah Water Conservancy District, which allowed for prepayment 
of the repayment contracts for the Bonneville Unit. Prepayment of our 
contract with the Bureau will substantially reduce the cost of water to 
the District. S. 808 will also produce a substantial payment to the 
federal treasury, which we estimate to be between $4-5 million.
    S. 808 directs the Secretary of the Interior to allow for 
prepayment of the specified contracts and amendments to them between 
the United States and the Uintah Water Conservancy District providing 
for repayment of municipal and industrial water delivery facilities 
under terms and conditions similar to those used in implementing 
provisions of the Central Utah Project Completion Act. It also provides 
that the prepayment: (1) may be provided in several installments to 
reflect substantial completion of the delivery facilities being 
prepaid; (2) shall be adjusted to conform to a final cost allocation; 
and (3) may not be adjusted on the basis of the type of prepayment 
financing utilized by the District.
    Again I want to thank you for the opportunity to testify today and 
will be happy to respond to any questions.
                                 ______
                                 
                      Federal Energy Regulatory Commission,
                                      Washington, DC, May 18, 2011.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, 304 Dirksen Senate 
        Office Bldg., Washington DC.
Re. S. 334

    Dear Chairman Bingaman: This letter is in response to your request 
for my views on S. 334. That bill would require the Federal Energy 
Regulatory Commission to reinstate the license for the proposed 1.5-
megawatt Lateral 993 Hydroelectric Project No. 12423, to be located at 
the juncture of the 993 Lateral Canal and the North Gooding Main Canal, 
northwest of the town of Shoshone, in Lincoln County, Idaho. The bill 
also would require the Commission to extend the commencement of 
construction deadline for the project to September 25, 3013.
    The Commission issued an original license for this project, to 
American Falls Reservoir District No. 2 and Big Wood Canal, on 
September 26, 2003. The license provided that the company was required 
to commence project construction within two years of the date of the 
license, the maximum period permitted by section 13 of the Federal 
Power Act. The Commission subsequently granted a two-year extension of 
the commencement of construction deadline, again the maximum authorized 
by section 13, Construction had not commenced when that deadline 
expired, on September 26, 2007. Section 13 provides that, when 
construction has not timely commenced, the Commission must terminate 
the license. The Commission terminated the license by order dated 
August 3, 2009.
    I and the last several Commission Chairmen have taken the position 
of not opposing legislation that would extend the commencement of 
construction deadline no further than 10 years from the date that the 
license in question was issued. Where proposed extensions would run 
beyond that time, there has been a sense that the public interest is 
better served by releasing the site for other public uses. Because S. 
334 requires the Commission to an extension to September 25, 2013, thus 
extending the commencement of construction deadline to 10 years from 
when the license was issued, I do not oppose the bill.
    If I can be of further assistance to you on this or any other 
Commission matter, please let me know.
            Sincerely,
                                           Jon Wellinghoff,
                                                          Chairman.
                                 ______
                                 
                      Federal Energy Regulatory Commission,
                                      Washington, DC, May 18, 2011.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, 304 Dirksen Senate 
        Office Bldg., Washington, DC.
Re: S. 333

    Dear Chairman Bingaman: This letter is in response to your request 
for my views on S. 333. That bill would require the Federal Energy 
Regulatory Commission to grant a three-year extension of the 
commencement of construction deadline for the proposed 1.5-megawatt 
Little Wood River Ranch II Hydroelectric Project No. 12063, to be 
located on the Little Wood River, near the town of Shoshone, in Lincoln 
County, Idaho, and to reinstate the project license if necessary.
    The commission issued an original license for this project, to 
William Arkoosh, on March 17, 2006. The license provided that the 
company was required to commence project construction within two years 
of the date of the license, the maximum period permitted by section 13 
of the Federal Power Act. The Commission subsequently granted a two-
year extension of the commencement of construction deadline, again the 
maximum authorized by section 13. Construction had not commenced when 
that deadline expired, on March 16, 2010. Section 13 provides that, 
when construction has not timely commenced, the Commission must 
terminate the license. The Commission issued an order terminating the 
license on February 8, 2011.
    I and the last several Commission Chairmen have taken the position 
of not opposing legislation that would extend the commencement of 
construction deadline no further than 10 years from the date that the 
license in question was issued. Where proposed extensions would run 
beyond that time, there has been a sense that the public interest is 
better served by releasing the site for other public uses. Because S. 
333 requires the Commission to grant a three-year extension from the 
date of the bill's enactment, thus (assuming enactment during this 
session of Congress) extending the commencement of construction 
deadline to less than 10 years from when the license was issued, I do 
not oppose the bill.
    If I can be of further assistance to you on this or any other 
Commission matter, please let me know.
            Sincerely,
                                           Jon Wellinghoff,
                                                          Chairman.

                                    

      
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