[Congressional Record Volume 150, Number 126 (Thursday, October 7, 2004)]
[Senate]
[Pages S10682-S10685]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       CBO COST ESTIMATE--S. 2773

  Mr. INHOFE. Mr. President, I ask unanimous consent that a cost 
estimate prepared by the Congressional Budget Office to accompany 
Senate Report 108-314, the committee report to S. 2773, the Water 
Resources Development Act of 2004, be printed in the Record. The 
estimate was not available when the report was filed by the Committee 
on Environment and Public Works on August 25, 2004.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                          Cost of Legislation

       Section 403 of the Congressional Budget and Impoundment 
     Control Act requires that a statement of the cost of the 
     reported bill, prepared by the Congressional Budget Office, 
     be included in the report. That statement follows:
                               __________
                               


                      CONGRESSIONAL BUDGET OFFICE

     S. 2773, Water Resources Development Act of 2004, as reported 
         by the Senate Committee on Environment and Public Works 
         on August 25, 2004.
     Summary
       S. 2773 would authorize the Army Corps of Engineers (Corps) 
     to conduct water resource studies and undertake specified 
     projects and programs for flood control, inland navigation, 
     shoreline protection, and environmental restoration. The bill 
     would authorize the agency to conduct studies on water 
     resource needs and feasibility studies for specified projects 
     and to convey ownership of certain Federal properties. 
     Finally, the bill would extend, terminate, or modify existing

[[Page S10683]]

     authorizations for various water projects and would authorize 
     new programs to develop water resources and protect the 
     environment.
       Assuming appropriation of the necessary amounts, including 
     adjustments for increases in anticipated inflation, CBO 
     estimates that implementing S. 2773 would cost about $2.9 
     billion over the 2005-2009 period and an additional $4 
     billion over the 10 years after 2009. (Some construction 
     costs and operations and maintenance would continue or occur 
     after this period.)
       S. 2773 also would allow for the spending of certain 
     receipts from hydroelectricity sales associated with Army 
     Corps of Engineers projects for facility planning, operation, 
     maintenance, and upgrades, without further appropriation. 
     Most of the receipts would come from electricity sold by the 
     government's power marketing administrations (PMAs), 
     including the Bonneville Power Administration (BPA). This 
     provision also would direct the PMAs to reduce the 
     maintenance component of the electricity rate charged to 
     customers. The bill would convey parcels of land to various 
     nonFederal entities and would forgive the obligation of some 
     local government agencies to pay certain project costs. 
     Finally, the bill would allow the Corps to collect and spend 
     fees related to training courses and permit processing. CBO 
     estimates that enacting those provisions would increase 
     direct spending by $803 million in 2005, $5.3 billion over 
     the 2005-2009 period, and $10.8 billion over the 2005-2014 
     period. Enacting the bill would not affect revenues.
       S. 2773 contains no intergovernmental or private-sector 
     mandates as defined in the Unfunded Mandates Reform Act 
     (UMRA). Federal participation in water resources projects and 
     programs authorized by this bill would benefit state, local, 
     and tribal governments, and any costs to those governments to 
     comply with the conditions of this Federal assistance would 
     be incurred voluntarily.
     Estimated Cost to the Federal Government
       The estimated budgetary impact of S. 2773 is shown in the 
     following table. The costs of this legislation fall within 
     budget functions 300 (natural resources and the environment) 
     and 270 (energy).

                    TABLE 1. ESTIMATED BUDGETARY IMPACT OF S. 2773 OVER THE 2005-2009 PERIOD
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                                  2005      2006      2007      2008      2009
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level.................................       599       623       619       593       604
Estimated Outlays.............................................       419       609       614       595       595
                                           CHANGES IN DIRECT SPENDING
Estimated Budget Authority....................................     1,065     1,071     1,134     1,198     1,311
Estimated Outlays.............................................       803       981     1,109     1,170     1,274
----------------------------------------------------------------------------------------------------------------

     Basis of Estimate
       For this estimate, CBO assumes that S. 2773 will be enacted 
     near the beginning of fiscal year 2005 and that the necessary 
     amounts will be appropriated for each fiscal year.
       Spending Subject to Appropriation
       S. 2773 would authorize new projects related to 
     environmental restoration, shoreline protection, and 
     navigation. This bill also would modify many existing Corps 
     projects and programs by increasing the amounts authorized to 
     be appropriated to construct or maintain them or by 
     increasing the Federal share of project costs. Assuming 
     appropriation of the necessary funds, CBO estimates that 
     implementing this bill would cost $2.8 billion over the 2005-
     2009 period and an additional $4 billion over the 10 years 
     after 2009. For ongoing construction costs of previously 
     authorized projects, the Corps received a 2004 appropriation 
     of $1.6 billion.
       For new water projects specified in the bill, the Corps 
     provided CBO with estimates of annual budget authority needed 
     to meet design and construction schedules. CBO adjusted those 
     estimates to reflect the impact of anticipated inflation 
     during the time between project authorization and 
     appropriation of construction costs. Estimated outlays are 
     based on historical spending rates for Corps projects.
       Significant New Authorizations. S. 2773 would authorize the 
     Army Corps of Engineers to conduct water resource studies and 
     undertake specified projects and programs for flood control, 
     inland navigation, shoreline protection, and environmental 
     restoration. For example, the bill includes authorizations 
     for enhanced navigation improvements on the Upper Mississippi 
     River at an estimated Federal cost of $1.7 billion and an 
     ecosystem restoration project, also on the Upper Mississippi 
     River, at an estimated Federal cost of $1.46 billion. Another 
     large project authorized by this bill is the Indian River 
     Lagoon project in the Florida Everglades at an estimated 
     Federal cost of $604 million. Construction of those projects 
     would likely take more than 15 years.
       Fish and Wildlife Mitigation. Section 1011 would amend the 
     Water Resources Act of 1986 to establish a standard for fish 
     and wildlife habitat mitigation on certain Corps projects. S. 
     2773 would require the Corps to develop a mitigation plan 
     that restores the same number of acres of habitat that would 
     fully replace the hydrologic and ecological functions that 
     are lost because of construction of a Corps project. For this 
     estimate, CBO assumes that this provision would apply to 
     potential projects that are being studied but have not yet 
     been submitted to the Congress for authorization. CBO 
     estimates this provision would have no significant cost. 
     However, it is possible that the Administration could 
     interpret this provision to be applicable to authorized 
     projects that have not yet begun or completed construction. 
     Under that interpretation, this provision would increase 
     future construction costs significantly.
       Deauthorizations. S. 2773 would withdraw the authority for 
     the Corps to build over 55 projects authorized in previous 
     legislation. Based on information from the Corps, however, 
     CBO does not expect that the agency would begin most of those 
     projects over the next 5 years. Some do not have a local 
     sponsor to pay nonFederal costs, others do not pass certain 
     tests for economic viability, and still others do not pass 
     certain tests for environmental protection. Consequently, CBO 
     estimates that canceling the authority to build those 
     projects would provide no significant savings over the next 
     several years.
       Direct Spending
       Based on information from affected agencies, CBO estimates 
     that enacting S. 2773 would increase direct spending by about 
     $800 million in 2005 and $10.8 billion over the 2005-2014 
     period. Table 2 presents the direct spending components of 
     the bill. Most of the direct spending under the bill would 
     stem from provisions to allow for the spending of certain 
     receipts associated with Corps projects for facility 
     planning, operation, maintenance, and upgrades without 
     further appropriation.
       Improvement of Water Management at Corps of Engineers 
     Reservoirs. Section 1006 of the bill would designate that all 
     receipts associated with Corps projects be spent, without 
     further appropriation, on operations, maintenance, and 
     upgrades at its facilities. The Federal power marketing 
     administrations (including the Bonneville Power 
     Administration) collect receipts from the sale of 
     hydroelectric power at Corps dams. The Corps also collects 
     fees associated with other activities at its projects. 
     Overall, the bill would make available for spending, on 
     average, about $1 billion per year of those receipts. Because 
     those receipts would otherwise be deposited in the Treasury, 
     CBO estimates that enacting section 1006 would increase 
     direct spending by $595 million in 2005 and $9.7 billion over 
     the 2005-2014 period.
       The bill specifies how the funds would be spent. Most of 
     the funds, 80 percent, would be spent within the same Corps 
     district from which they are collected. The remaining 20 
     percent would be available agencywide for any Corps project.
       Spending of Receipts Collected by the Bonneville Power 
     Administration. The bill would make receipts collected by BPA 
     from the sale of hydroelectric power at Corps dams available 
     for spending by the Corps. Unlike hydroelectricity receipts 
     collected by the other PMAs, all receipts collected by BPA go 
     into a revolving fund and are spent for operating its 
     electricity system and repaying previous appropriations and 
     Treasury borrowing. Because a portion of BPA's generating 
     revenues from Corps dams are used to keep its system 
     functioning, CBO assumes that only those receipts that would 
     be used to repay previous appropriations and Treasury 
     borrowing, that is, BPA's intergovernmental payments, would 
     be available for spending by the Corps.
       Under current law, CBO estimates that BPA's 
     intergovernmental payments will be, on average, about $730 
     million per year over the 2005-2014 period. Under S. 2773, we 
     assume that such payments would continue to made but would be 
     spent without further appropriation for operations and 
     maintenance at Corps facilities. BPA's Treasury payments 
     fluctuate from year to year based on how much cash is 
     available at the end of each fiscal year (changing water 
     conditions and electricity prices can swing BPA's annual 
     revenues significantly) and the maturities and interest rates 
     of Treasury bonds issued on BPA's behalf. CBO estimates that 
     spending of BPA receipts by the Corps would total $457 
     million in 2005 and $7.1 billion over the 2005-2014 period.
       Spending of Receipts Collected by the Other Power Marketing 
     Administrations. Receipts collected by the Southwestern, 
     Southeastern, and Western Power Administrations from the sale 
     of hydroelectric power at Corps dams are currently deposited 
     in the Treasury. Under this bill, those funds would be spent 
     by the Corps, without further appropriation, for operations 
     and maintenance at its facilities. CBO estimates that 
     spending of PMA receipts by the Corps would total $117 
     million in 2005 and $2.4 billion over the 2005-2014 period.

[[Page S10684]]



                                TABLE 2. CHANGES IN DIRECT SPENDING UNDER S. 2773
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                   2005    2006    2007    2008    2009    2010    2011    2012    2013    2014
----------------------------------------------------------------------------------------------------------------
   CHANGES IN DIRECT SPENDING
Improvement of Water
Management at Corps
Reservoirs
  Estimated Budget Authority....     849     889     959   1,028   1,129     909   1,093   1,100   1,107   1,114
  Estimated Outlays.............     595     792     934   1,000   1,092     965   1,060   1,080   1,104   1,111
Loss of Power Marketing
Administration Receipts
  Estimated Budget Authority....     173     176     180     184     189     192       0       0       0       0
  Estimated Outlays.............     173     176     180     184     189     192       0       0       0       0
Recreation Fees
  Estimated Budget Authority....      34       6      -5      -7      -7      -7      -7      -7      -7      -7
  Estimated Outlays.............      27      13      -5      -7      -7      -7      -7      -7      -7      -7
Land Conveyances and Other
Direct Spending
  Estimated Budget Authority....       8       *       *      -7       *       *       *       *       *       *
  Estimated Outlays.............       8       *       *      -7       *       *       *       *       *       *
Total Changes
  Estimated Budget Authority....   1,065   1,071   1,134   1,198   1,311   1,094   1,086   1,093   1,100   1,107
  Estimated Outlays.............     803     981   1,109   1,170   1,274   1,150   1,053   1,073   1,097   1,104
----------------------------------------------------------------------------------------------------------------
NOTE: * = less than $500,000.

       Spending of Receipts Collected by the Corps. S. 2773 also 
     would allow the Corps to spend any proceeds that it collects 
     in grazing fees, shoreline management permit fees, and 
     municipal and industrial water supply fees. The Corps could 
     spend such funds for operations and maintenance at its 
     facilities. CBO estimates that spending of such receipts 
     would total $21 million in 2005 and $288 million over the 
     2005-2014 period.
       Impact on Future Corps Appropriations. By making about $1 
     billion a year available for operations and maintenance at 
     Corps facilities without further appropriation, the bill 
     could lead to future reductions in the amounts appropriated 
     for such purposes. In fiscal year 2004, the Corps received an 
     appropriation of almost $2 billion for operations and 
     maintenance costs. Enacting this bill could result in a 
     reduction in future appropriations if the Congress chose to 
     maintain total Corps spending at a level similar to the 
     amount appropriated in 2004. For this estimate, however, CBO 
     assumes that Corps appropriations would remain at current 
     levels and that new spending authorized by the bill would be 
     in addition to what is annually made available.
       Reduction in the Maintenance Component of Electricity 
     Rates. CBO assumes that section 1006 of S. 2773 would result 
     in an overall reduction in electricity receipts collected by 
     the PMAs. Under current law, electricity sales rates charged 
     by the PMAs are set to recover the cost of generating 
     electricity, including operations and maintenance expenses 
     associated with hydroelectricity generation at Corps 
     projects. Over the 2005-2010 period, the bill would lower the 
     portion of electricity rates charged to PMA customers for 
     Corps-related expenses to 0.22 cents per kilowatt-hour. (BPA 
     rates are explicitly exempted by that provision.)
       The PMAs currently charge their electricity customers for 
     Corps-related expenses more than the 0.22 cents per kilowatt-
     hour that would be mandated by the bill. Such rates range 
     from as much as 1.2 cents per kilowatt-hour to 0.4 cents per 
     kilowatt-hour for the various Corps projects associated with 
     the Western Area Power Administration. CBO estimates that 
     this provision would reduce electricity receipts collected by 
     the PMAs by an average of about $180 million a year, over the 
     2005-2010 period.
       Spending of Recreation Fees. Section 1004 would direct the 
     Corps to establish a new system of recreation fees, including 
     charges for admission to Corps recreationsites and for the 
     use of recreation facilities, visitor centers, equipment, and 
     services. Under the bill, the new fees (which would be based 
     on the value of the admission or service purchased) would 
     replace charges authorized under the more-restrictive fee 
     authority contained in the Land and Water Conservation Fund 
     Act (LWCFA), which currently governs the Corps' recreation 
     fee program. The bill also would authorize the agency to 
     provide recreational services through contractors by leasing 
     Federal land or establishing other concession-like 
     arrangements with nonFederal entities. Finally, section 1004 
     would allow the Corps to retain and spend without further 
     appropriation all recreation user and admission fees it 
     collects under the LWCFA. CBO estimates that enacting this 
     provision would have a net cost of $27 million in 2005 and 
     $21 million over the 2005-2009 period. We estimate the 
     provision would result in a net reduction in direct spending 
     of $14 million over the next 10 years.
       CBO estimates that, once the fee authority that would be 
     provided by this section has been fully implemented, Corps 
     offsetting receipts would increase by $7 million a year from 
     the current annual level of about $34 million. (We estimate 
     that the increase would begin in fiscal year 2006 and would 
     initially amount to $4 million to $5 million a year because 
     of delays in determining the market value of similar local 
     recreation opportunities and establishing appropriate fee 
     schedules.) We estimate that the contracting and leasing 
     provisions of this section would have no effect on the budget 
     because such authorities already exist.
       CBO further estimates that the authority that would be 
     provided by the bill to spend without appropriation any 
     offsetting receipts earned under the LWCFA would increase 
     direct spending by $27 million in fiscal year 2005 and by $17 
     million in 2006. After the Corps implements the new fee 
     program mandated by the bill (in mid-2006), no additional 
     receipts would be earned under the LWCFA, and the authority 
     to spend such amounts would no longer be in effect. Because 
     the bill would not specifically authorize the appropriation 
     of, or spending of, any fees collected under the new program, 
     CBO assumes that those recreation receipts would be deposited 
     into the general fund of the Treasury.
       Various Land Conveyances. S. 2773 would authorize the Corps 
     to convey certain land in Alabama, Pennsylvania, Georgia, and 
     Missouri. CBO estimates that those conveyances would have no 
     significant impact on the Federal budget.
       The bill also would convey at fair market value 13 acres of 
     land and the structures on the land, including a loading dock 
     with mooring facilities, in Alabama. In addition, S. 2773 
     would convey at fair market value 650 acres at the Richard B. 
     Russell Lake in South Carolina to the state. Based on 
     information from the Corps, CBO estimates that the Federal 
     Government would receive about $7 million in 2008 from this 
     sale.
       Arcadia Lake, Oklahoma. Section 5303 would eliminate the 
     obligation of the city of Edmond, Oklahoma, to pay 
     outstanding interest due on its water storage contract with 
     the Corps. CBO estimates that this provision would result in 
     a loss of receipts of about $8 million in 2005.
       Waurika Lake Project. Section 5304 would eliminate the 
     obligation of the Waurika Project Master Conservancy District 
     in Oklahoma to pay its outstanding debt related to the 
     construction of a water conveyance project. Due to an 
     accounting error, the Corps inadvertently undercharged the 
     district for costs associated with a land purchase related to 
     the water project in the early 1980's. Under terms of the 
     construction contract, the district is required to pay all 
     costs associated with building the project, including the 
     full cost of the land purchases. CBO estimates that enacting 
     this section would cost less than $200,000 a year over the 
     2005-2014 period.
       Funding to Process Permits. Section 5401 would extend the 
     Corps' current authority for two more years to accept and 
     spend funds contributed by private firms to expedite the 
     evaluation of permit applications submitted to the Corps. CBO 
     estimates that the Corps would accept and spend less than 
     $500,000 during each year of this extension and that the net 
     budgetary impact of this provision would be negligible.
       Training Funds. Section 1003 would allow the Corps to 
     collect and spend fees collected from the private sector for 
     training courses. CBO estimates that the Corps would accept 
     and spend less than $500,000 annually and that the net 
     budgetary impact would be negligible.
     Intergovernmental and Private-Sector Impact
       S. 2773 contains no intergovernmental or private-sector 
     mandates as defined in UMRA. Federal participation in water 
     resources projects and programs authorized by this bill would 
     benefit state, local, and tribal governments, and any costs 
     to those governments to comply with the conditions of this 
     Federal assistance would be incurred voluntarily.
     Previous CBO Estimate
       On September 3, 2003, CBO transmitted a cost estimate for 
     H.R. 2557, the Water Resources Development Act of 2003, as 
     ordered reported by the House Committee on Transportation and 
     Infrastructure on July 23, 2003. CBO estimated that enacting 
     H.R. 2557 would increase direct spending by $32 million over 
     the 2004-2013 period. In addition, assuming appropriation of 
     the necessary amounts, CBO estimated that implementing H.R. 
     2557 would cost about $2.6 billion over the 2004-2008 period. 
     The differences in the cost estimates stem from different 
     levels of authorized funding.
       Estimate Prepared By: Federal Costs: Julie Middleton, Lisa 
     Cash Driskill, Deb Reis, and

[[Page S10685]]

     Mike Waters; Impact on State, Local, and Tribal Governments: 
     Marjorie Miller; Impact on the Private Sector: Karen Raupp.
       Estimate Approved By: Peter H. Fontaine, Deputy Assistant 
     Director for Budget Analysis.
  Mr. INHOFE. I would also like to take this opportunity to note for 
the record that I believe there are several unrealistic sections of the 
CBO score that appear to be based on several unconventional 
interpretations of the Committee reported bill.
  CBO estimates that the recreation fee program will result in $27 
million in estimated outlays for 2005 and $13 million in estimated 
outlays for 2006, at which point CBO assumes that the outlays become a 
$7 million annual revenue. The recreation user fee program established 
in the bill, creates a program to directly fund the operation and 
maintenance needs associated with recreation at Corps reservoirs. The 
committee reported bill amends section 225 of WRDA 1999. That 
particular section of WRDA 99 provides the Secretary of the Army a 
temporary authority under the Land and Water Conservation Fund, to 
withhold a limited portion of recreation user fees and provides 
authority to spend those revenues on the operation and maintenance of 
recreation facilities at Corps reservoirs. The committee bill further 
amended this authority to allow the Corps to withhold 100 percent of 
the recreation fees, on a permanent basis and directed the Corps to 
establish a progrm to facilitate the efficient collection of revenues. 
The CBO interpretation of this section assumes that the Corps will 
withhold the recreation fees it currently collects and spend them 
directly on O&M. However, when the Corps implements the program for 
fees CBO assumes that the agaency's authority for withholding such fees 
disappears, and the agency will blithely turn them over to the General 
Treasury leaving their O&M budget in shambles. Such an outcome is in 
direct contravention of the obvious purpose of the entire section. And 
while such an interpretation of the section is possible, I have yet to 
encounter a situation where an agency turned funds over to the Treasury 
when they were authorized to withhold and spend them directly.
  Section 1006 authorizes the Corps to deposit revenues collected in 
conjunction with operations at Corps reservoirs. With respect to the 
generation of hydro-power, the Corps does not currently collect any 
fees from the Power Marketing Administrations, PMAs. In the case of PMA 
revenue, the PMAs send a portion of their revenue to the Treasury. In 
order to provide direct funding for the Corps, the committee bill 
provides for a 0.22 cent charge per kilowatt of electricity produced. 
Bonneville Power Administration is specifically exempt from the 0.22 
cent per kilowat hour fee. Despite this exemption, CBO assumes that 
Bonneville Power will ignore it's other authorizing statutes and 
turn over more than $800 million a year to the Corps. I would point out 
that the 0.22 cent per kilowatt fee, was the committee's best estimate 
at the size of a fee that would be required to directly fund $150 
million for O&M, which was the amount recommended in the president's 
budget. Excluding Bonneville Power Administration, CBO estimated that 
the 0.22 cent per kilowatt hour would result in $173 million in direct 
O&M outlays. I believe that CBO erroneous included Bonneville Power 
Administration in the estimate of direct spending. Bonneville Power 
Administration receipts, if collected by the Corps, would total $7.1 
billion over a 10-year period.

  While CBO erroneously overestimates, the direct spending associated 
with O&M at Corps reservoirs, it completely underestimates the direct 
spending that will likely be required should the Fish and Wildlife 
mitigation provision become enacted. Section 1011 establishes a new 
standard for fish and wildlife mitigation for Corps of Engineers 
projects. Because the standard specifically amends WRDA 1986 with 
changing the dates specified in WRDA 86 with respect to the 
applicability of the standard to completed and on going projects, a 
strict reading of the new standard makes it applicable to all projects 
authorized after November 17, 1986. Moreover, the standard sets a very 
high bar by requiring the Corps to ``acquire and restore the same 
number of acres of habitat'' to fully replace the hydrologic and 
ecological functions of ``each acre of habitat adversely affected.'' 
While on its face such a requirement may seem innocuous, there is no 
deminimus level for the determination of an adverse effect. Strictly 
speaking, even relatively minor changes to land use or hydrology would 
trigger the requirement for the Corps to acquire an equal number of 
acres as those that are modified, and restore all of those acres. The 
liability that this imposes on the Corps for mitigation of projects to 
this standard for everything since 1986 is likely substantial. Given 
that most non-Federal sponsors are local and State governments, this 
potentially represents a significant unfunded mandate as well.

                          ____________________