[House Report 105-8]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                      105-8
_______________________________________________________________________


 
         OROVILLE-TONASKET CLAIM SETTLEMENT AND CONVEYANCE ACT

                                _______
                                

 March 10, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 412]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 412) to approve a settlement agreement between the Bureau 
of Reclamation and the Oroville-Tonasket Irrigation District, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Oroville-Tonasket Claim Settlement and 
Conveyance Act''.

SEC. 2. PURPOSES.

  The purposes of this Act are to authorize the Secretary of the 
Interior to implement the provisions of the negotiated Settlement 
Agreement including conveyance of the Project Irrigation Works, 
identified as not having national importance, to the District, and for 
other purposes.

SEC. 3. DEFINITIONS.

  As used in this Act:
          (1) The term ``Secretary'' means the Secretary of the 
        Interior.
          (2) The term ``Reclamation'' means the United States Bureau 
        of Reclamation.
          (3) The term ``District'' or ``Oroville-Tonasket Irrigation 
        District'' means the project beneficiary organized and 
        operating under the laws of the State of Washington, which is 
        the operating and repayment entity for the Project.
          (4) The term ``Project'' means the Oroville-Tonasket unit 
        extension, Okanogan-Similkameen division, Chief Joseph Dam 
        Project, Washington, constructed and rehabilitated by the 
        United States under the Act of September 28, 1976 (Public Law 
        94-423, 90 Stat. 1324), previously authorized and constructed 
        under the Act of October 9, 1962 (Public Law 87-762, 76 Stat. 
        761), under the Federal reclamation laws (including the Act of 
        June 17, 1902 (ch. 1093, 32 Stat. 388), and Acts supplementary 
        thereto or amendatory thereof).
          (5) The term ``Project Irrigation Works'' means--
                  (A) those works actually in existence and described 
                in subarticle 3(a) of the Repayment Contract, excluding 
                Wildlife Mitigation Facilities, and depicted on the 
                maps held by the District and Reclamation, consisting 
                of the realty with improvements and real estate 
                interests;
                  (B) all equipment, parts, inventories, and tools 
                associated with the Project Irrigation Works realty and 
                improvements and currently in the District's 
                possession; and
                  (C) all third party agreements.
          (6)(A) The term ``Basic Contract'' means Repayment Contract 
        No. 14-06-100-4442, dated December 26, 1964, as amended and 
        supplemented, between the United States and the District;
          (B) the term ``Repayment Contract'' means Repayment Contract 
        No. 00-7-10-W0242, dated November 28, 1979, as amended and 
        supplemented, between the United States and the District; and
          (C) the term ``third party agreements'' means existing 
        contractual duties, obligations, and responsibilities that 
        exist because of all leases, licenses, and easements with 
        third-parties related to the Project Irrigation Works, or the 
        lands or rights-of-way for the Project Irrigation Works, but 
        excepting power arrangements with the Bonneville Power 
        Administration.
          (7) The term ``Wildlife Mitigation Facilities'' means--
                  (A) land, improvements, or easements, or any 
                combination thereof, secured for access to such lands, 
                acquired by the United States under the Fish and 
                Wildlife Coordination Act (16 U.S.C. 661-667e); and
                  (B) all third party agreements associated with the 
                land, improvements, or easements referred to in 
                subparagraph (A).
          (8) The term ``Indian Trust Lands'' means approximately 61 
        acres of lands identified on land classification maps on file 
        with the District and Reclamation beneficially owned by the 
        Confederated Tribes of the Colville Reservation (Colville 
        Tribes) or by individual Indians, and held in trust by the 
        United States for the benefit of the Colville Tribes in 
        accordance with the Executive Order of April 9, 1872.
          (9) The term ``Settlement Agreement'' means the Agreement 
        made and entered on April 15, 1996, between the United States 
        of America acting through the Regional Director, Pacific 
        Northwest Region, Bureau of Reclamation, and the Oroville-
        Tonasket Irrigation District.
          (10) The term ``operations and maintenance'' means normal and 
        reasonable care, control, operation, repair, replacement, and 
        maintenance.

SEC. 4. AGREEMENT AUTHORIZATION.

  The Settlement Agreement is approved and the Secretary of the 
Interior is authorized to conduct all necessary and appropriate 
investigations, studies, and required Federal actions to implement the 
Settlement Agreement.

SEC. 5. CONSIDERATION AND SATISFACTION OF OUTSTANDING OBLIGATIONS.

  (a) Consideration to United States.--Consideration by the District to 
the United States in accordance with the Settlement Agreement approved 
by this Act shall be--
          (1) payment of $350,000 by the District to the United States;
          (2) assumption by the District of full liability and 
        responsibility and release of the United States of all further 
        responsibility, obligations, and liability for removing 
        irrigation facilities constructed and rehabilitated by the 
        United States under the Act of October 9, 1962 (Public Law 87-
        762, 76 Stat. 761), or referenced in section 201 of the Act of 
        September 28, 1976 (Public Law 94-423, 90 Stat. 1324), and 
        identified in Article 3(a)(8) of the Repayment Contract;
          (3) assumption by the District of sole and absolute 
        responsibility for the operations and maintenance of the 
        Project Irrigation Works;
          (4) release and discharge by the District as to the United 
        States from all past and future claims, whether now known or 
        unknown, arising from or in any way related to the Project, 
        including any arising from the Project Irrigation Works 
        constructed pursuant to the 1964 Basic Contract or the 1979 
        Repayment Contract;
          (5) assumption by the District of full responsibility to 
        indemnify and defend the United States against any third party 
        claims associated with any aspect of the Project, except for 
        that claim known as the Grillo Claim, government contractor 
        construction claims accruing at any time, and any other suits 
        or claims filed as of the date of the Settlement Agreement; and
          (6) continued obligation by the District to deliver water to 
        and provide for operations and maintenance of the Wildlife 
        Mitigation Facilities at its own expense in accordance with the 
        Settlement Agreement.
  (b) Responsibilities of United States.--In return the United States 
shall--
          (1) release and discharge the District's obligation, 
        including any delinquent or accrued payments, or assessments of 
        any nature under the 1979 Repayment Contract, including the 
        unpaid obligation of the 1964 Basic Contract;
          (2) transfer title of the Project Irrigation Works to the 
        District;
          (3) assign to the District all third party agreements 
        associated with the Project Irrigation Works;
          (4) continue power deliveries provided under section 6 of 
        this Act; and
          (5) assume full responsibility to indemnify and defend the 
        District against any claim known as the Grillo Claim, 
        government contractor construction claims accruing at any time, 
        and any other suits or claims filed against the United States 
        as of the date of the Settlement Agreement.
  (c) Project Construction Costs.--The transfer of title authorized by 
this Act shall not affect the timing or amount of the obligation of the 
Bonneville Power Administration for the repayment of construction costs 
incurred by the Federal government under section 202 of the Act of 
September 28, 1976 (90 Stat. 1324, 1326) that the Secretary of the 
Interior has determined to be beyond the ability of the irrigators to 
pay. The obligation shall remain charged to, and be returned to the 
Reclamation Fund as provided for in section 2 of the Act of June 14, 
1966 (80 Stat. 200) as amended by section 6 of the Act of September 7, 
1966 (80 Stat. 707, 714).

SEC. 6. POWER.

  Nothing in this Act shall be construed as having any affect on power 
arrangements under Public Law 94-423 (90 Stat. 1324). The United States 
shall continue to provide to the District power and energy for 
irrigation water pumping for the Project, including Dairy Point Pumping 
Plant. However, the amount and term of reserved power shall not exceed, 
respectively--
          (1) 27,100,000 kilowatt hours per year; and
          (2) 50 years commencing October 18, 1990.
The rate that the District shall pay the Secretary for such reserved 
power shall continue to reflect full recovery of Bonneville Power 
Administration transmission costs.

SEC. 7. CONVEYANCE.

  (a) Conveyance of Interests of United States.--Subject to valid 
existing rights, the Secretary is authorized to convey all right, 
title, and interest, without warranties, of the United States in and to 
all Project Irrigation Works to the District. In the event a 
significant cultural resource or hazardous waste site is identified, 
the Secretary is authorized to defer or delay transfer of title to any 
parcel until required Federal action is completed.
  (b) Retention of Title to Wildlife Mitigation Facilities.--The 
Secretary will retain title to the Wildlife Mitigation Facilities. The 
District shall remain obligated to deliver water to and provide for the 
operations and maintenance of the Wildlife Mitigation Facilities at its 
own expense in accordance with the Settlement Agreement.
  (c) Reservation.--The transfer of rights and interests pursuant to 
subsection (a) shall reserve to the United States all oil, gas, and 
other mineral deposits and a perpetual right to existing public access 
open to public fishing,hunting, and other outdoor recreation purposes, 
and such other existing public uses.

SEC. 8. REPAYMENT CONTRACT.

  Upon conveyance of title to the Project Irrigation Works 
notwithstanding any parcels delayed in accordance with section 7(a), 
the 1964 Basic Contract, and the 1979 Repayment Contract between the 
District and Reclamation, shall be terminated and of no further force 
or effect.

SEC. 9. INDIAN TRUST RESPONSIBILITIES.

  The District shall remain obligated to deliver water under 
appropriate water service contracts to Indian Trust Lands upon request 
from the owners or lessees of such land.

SEC. 10. LIABILITY.

  Upon completion of the conveyance of Project Irrigation Works under 
this Act, the District shall--
          (1) be liable for all acts or omissions relating to the 
        operation and use of the Project Irrigation Works that occur 
        before or after the conveyance except for the Grillo Claim, 
        government contractor construction claims accruing at any time, 
        and any other suits or claims filed as of the date of the 
        Settlement Agreement;
          (2) absolve the United States and its officers and agents of 
        responsibility and liability for the design and construction 
        including latent defects associated with the Project; and
          (3) assume responsibility to indemnify and defend the United 
        States against all claims whether now known or unknown and 
        including those of third party claims associated with, arising 
        from, or in any way related to, the Project except for the 
        Grillo Claim, government contractor construction claims 
        accruing at any time, and any other suits or claims filed as of 
        the date of the Settlement Agreement.

SEC. 11. CERTAIN ACTS NOT APPLICABLE AND TERMINATION OF MANDATES.

  (a) Reclamation Laws.--All mandates imposed by the Reclamation Act of 
1902, and all Acts supplementary thereto or amendatory thereof, 
including the Reclamation Reform Act of 1982, upon the Project 
Irrigation Works shall be terminated upon the completion of the 
transfers as provided by this Act and the Settlement Agreement.
  (b) Relationship to Other Laws.--The transfer of title authorized by 
this Act shall not--
          (1) be subject to the provisions of chapter 5 of title 5, 
        United States Code (commonly known as the ``Administrative 
        Procedure Act''); or
          (2) be considered a disposal of surplus property under the 
        Federal Property and Administrative Services Act of 1949 (40 
        U.S.C. 471 et seq.) and the Surplus Property Act of 1944 (50 
        U.S.C. App. 1601 et seq.).
  (c) Deauthorization.--Effective upon transfer of title to the 
District under this Act, that portion of the Oroville-Tonasket Unit 
Extension, Okanogan-Similkameen Division, Chief Joseph Dam Project, 
Washington, referred to in section 7(a) as the Project Irrigation Works 
is hereby deauthorized. After transfer of title, the District shall not 
be entitled to receive any further Reclamation benefits pursuant to the 
Reclamation Act of June 17, 1902, and Act supplementary thereto or 
amendatory thereof.

                          PURPOSE OF THE BILL

    The purpose of H.R. 412 is to approve a settlement 
agreement between the Bureau of Reclamation, an agency of the 
Department of the Interior, and the Oroville-Tonasket 
Irrigation District of Washington.

                  BACKGROUND AND NEED FOR LEGISLATION

    The Oroville-Tonasket Unit Extension Project is located in 
north-central Washington, near the towns of Oroville and 
Tonasket. The Project begins at the Canadian border north of 
Oroville, Washington, and extends south on both sides of the 
Okanogan River about 26 miles, providing irrigation water to 
about 10,000 acres.
    The original canal and the flume system serving the 
Oroville-Tonasket Irrigation District were built in increments 
by the District starting in the early 1900s. The old Works 
Progress Administration (WPA) conducted a major rehabilitation 
of the works between 1940 and 1942. At that time, the WPA 
renewed and replaced sections of the wood flume, earth sections 
of the delivery system were concrete lined, and the WPA 
constructed some tunnels and concrete flumes.
    In 1952, legislation was enacted that provided for studying 
of the prospects of irrigation near Chief Joseph Dam. Based 
upon these studies, the Congress approved legislation in 1962 
(Public Law 87-762) authorizing the rehabilitation of the 
original Project system and the construction of new works. This 
provided an additional and supplemental water supply to 8,450 
acres of the Project. In 1964, the District and the Bureau of 
Reclamation entered into a repayment contract for 
rehabilitation of the irrigation project. Work under this 
contract included rehabilitation of the headworks structure, 
reaches of the main canal, the Upper Okanogan siphon, and 
installation of three auxiliary pumping plants along the 
Okanogan River. Construction was completed in 1968.
    Even while this rehabilitation work was being conducted, 
the distribution system continued to deteriorate to the point 
that failure of the system was imminent. This prompted the 
District to request and Congress to enact legislation in 1966 
directing the Bureau of Reclamation to undertake a feasibility 
investigation of the Project. In 1976, Congress authorized 
Reclamation to construct the Oroville-Tonasket Unit Extension 
under Public Law 94-423, the Reclamation Authorizations Act of 
1976. The Oroville-Tonasket Unit Extension was to be 
constructed substantially in accordance with the feasibility 
report, and consists of a pressurized pipe irrigation 
distribution system and enhancement of fish resources. The 
District entered into a repayment contract with Reclamation for 
the work in 1979, and construction began in 1980.
    With the initial operation of the Project in 1984, problems 
were encountered with the inability of the project facilities 
to cope with substantial amounts of silt in the Okanogan River, 
and reauthorization was sought to increase the cost ceiling to 
modify some of the pumping plants and reduce the silt entering 
the irrigation system. Congressional reauthorization was 
provided in 1987, and the cost ceiling was increased by about 
$17.5 million, to $88 million.
    The District was notified that the project was 
substantially complete in 1990, which usually initiates 
repayment under federal reclamation laws. The District's first 
annual payment was dueJune 15, 1991. However, the District 
disputes the project's substantial completion and has refused to 
initiate repayment.
     The District alleges that the irrigation system still does 
not work as projected and that the annual operation and 
maintenance costs are much higher than the Bureau of 
Reclamation projected in the design phase. The District 
unsuccessfully sought legislative relief from its repayment 
obligations in 1993. In 1994, the District filed a lawsuit with 
the Court of Federal Claims (Fed.Cl. No. 94-779C). The 
complaint sought damages in excess of $44 million for alleged 
contract breaches; necessary remedial construction; and 
unfinished contractual obligations for which Reclamation 
allegedly remains responsible. The District also sought be to 
relieved of its repayment obligation to the United States in an 
amount of at least $12.9 million. The complaint and the United 
States' counterclaim were dismissed in 1995, without prejudice, 
upon the determination that the court lacked jurisdiction 
without a Contracting Officer's Decision pursuant to the 
Contract Disputes Act.
    Therefore, in April 1995, the District submitted a claim 
under the Contract Disputes Act seeking $51 million in damages, 
recision of its $13 million repayment obligation, and a 
reduction of and a cap on power rates. The Contract Disputes 
Act and the Bureau of Reclamation's own policies promote 
negotiated settlements, so Reclamation considered various 
options to litigating the disputed claim. An agreement to 
negotiate was signed by the parties on December 1, 1995, which 
included a provision giving the parties until April 1, 1996, to 
reach a negotiated settlement. Otherwise, a Contracting 
Officer's Decision would be issued unilaterally by the Bureau 
of Reclamation with respect to the disputed claim.
     On December 26, 1995, the parties executed a conceptual 
agreement which defined the broad areas of agreement. The 
parties reached a settlement agreement on April 1, 1996, and 
executed the settlement agreement on April 15, 1996. The 
Settlement Agreement includes transfer of the title to the 
Project Irrigation Works to the District. The United States 
will also be relieved of financial liability for needed pipe 
repairs on the Project, estimated to cost around $14 million. 
Although this action is independent of the Bureau of 
Reclamation's Title Transfer Initiative, Reclamation officials 
have stated that the asset valuation was calculated pursuant to 
procedures in that initiative.
    Under the settlement agreement, the District agrees to: 
release and discharge all past and future claims against the 
United States associated with the Project; assume full 
responsibility to indemnify and defend the United States 
against any third-party claims associated with the Project; 
makes a cash payment of $350,000 to the United States (this 
condition has been met); and release the United States from its 
obligation to remove existing dilapidated facilities.
    The United States, under the terms of the settlement 
agreement, agrees to: release and discharge the District's 
construction charge obligation under the 1979 Repayment 
Contract; limit power for irrigation water pumping not to 
exceed 27.1 million kilowatt-hours per year for 50 years from 
October 18, 1990; and transfer title to the Project Irrigation 
Works to the District at no additional cost to the District. 
With respect to the power agreement, it should be noted that 
Public Law 94-423 authorized power to be made available to the 
District without limits on quantity and in perpetuity.
    The responsibilities for the protection of the cultural and 
historical archaeological sites are being defined through a 
separate agreement that has been negotiated between the 
Confederated Tribes of the Colville Reservation, the District, 
and the Bureau of Reclamation.
    During the Committee markup, there was opposition expressed 
to the discharge of the District's repayment obligation. 
However, the Committee agreed with the position of the federal 
negotiators, and with the Administration on this issue. While 
federal negotiators did not recognize the validity of all of 
the $51 million in claims filed by the District, they did 
recognize the legitimacy of claims totaling slightly more than 
the present value of the District's $13.3 million repayment 
obligation, which is payable over the next 45 years. At the 
time of the negotiations, the present value of this revenue 
stream to the United States was estimated at $4.2 million. This 
was calculated using 6.71 percent, the average 30-year Treasury 
rate in August and September 1995, when the calculations were 
performed.
    It is the understanding of the Committee regarding this 
legislation that the amount of Oroville-Tonasket Project 
irrigation assistance that the Bonneville Power Administration 
will repay is not expected to exceed $75 million, and that the 
repayment is now scheduled to be made in the year 2042.
    The Committee further notes that the settlement terms 
approved in H.R. 412 were based on negotiations to resolve 
litigation over the Oroville-Tonasket Unit. While the Committee 
has approved the terms for transferring the project to the 
Oroville-Tonasket Irrigation District, H.R. 412 should not be 
regarded as Congressional ratification of any of the judicial 
decisions underlying the settlement negotiations. In 
particular, the Committee has not approved the court order in 
Oroville-Tonasket Irrigation District v. United States holding 
that the Contract Disputes Act should govern disputes of this 
kind with the Bureau of Reclamation. The Committee finds that 
decision troubling, and possibly contrary to the underlying 
purposes of the Contract Disputes Act.
    H.R. 412 also should not be regarded as a precedent for 
legislative action to transfer Bureau of Reclamation facilities 
at other projects. The litigation problems surrounding the 
transfer of the Oroville-Tonasket Unit and continued provision 
of power at low project power rates are unique. While the 
Committee will consider transferring other Reclamation 
facilities to local project beneficiaries under appropriate 
circumstances, the terms of this transfer will not serve as 
precedent for future transfers.
    Similar legislation, H.R. 3777, was introduced by 
Congressman Richard ``Doc'' Hastings (R-WA) in the 104th 
Congress. H.R. 3777 was the subject of a legislative hearing in 
the Subcommittee on Water and Power Resources on September 26, 
1996. At that time, the Administration took no position on the 
bill. However, on March 3, 1997, Chairman Don Young of the 
Committee on Resources received a letter from the Commissioner 
of Reclamation stating that the Administration could only 
support H.R. 412 if certain specified amendments were adopted. 
All of those amendments were adopted by the Committee during 
consideration of the bill.

                            COMMITTEE ACTION

     H.R. 412 was introduced on January 9, 1997, by Congressman 
Richard ``Doc'' Hastings (R-WA). The bill was referred to the 
Committee on Resources, and within the Committee to the 
Subcommittee on Water and Power. On March 5, 1997, the Full 
Committee met to consider H.R. 412, which was discharged from 
the Subcommittee by unanimous consent. Congressman John T. 
Doolittle offered an en bloc amendment to: stipulate that the 
transfer of title does not affect the obligation of the power 
customers for construction costs incurred that have been 
determined to be beyond the ability of the irrigators to pay; 
stipulate that the electric transmission rate paid by the 
District will continue to reflect full cost recovery; 
deauthorize that portion of the Oroville-Tonasket Unit 
Extension referred to as the Project Irrigation Works as a 
federal reclamation project; and to make several technical 
corrections to the bill as introduced. The amendment was 
adopted by voice vote. The bill, as amended, was then ordered 
favorably reported to the House of Representatives by voice 
vote.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to the requirements of clause 2(l)(3) of Rule 
XI of the Rules of the House of Representatives, and clause 
2(b)(1) of Rule X of the Rules of the House of Representatives, 
the Committee on Resources' oversight findings and 
recommendations are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Article I, section 8 and Article IV, section 3 of the 
Constitution of the United States grants Congress the authority 
to enact H.R. 412.

                        COST OF THE LEGISLATION

    Clause 7(a) of Rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs which would be incurred in carrying out 
H.R. 412. However, clause 7(d) of that Rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974.

                     COMPLIANCE WITH HOUSE RULE XI

    1. With respect to the requirement of clause 2(l)(3)(B) of 
Rule XI of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, H.R. 
412 does not contain any new budget authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures. Enactment of H.R. 412 could affect direct 
spending, as described in the Congressional Budget Office cost 
estimate contained in this report.
    2. With respect to the requirement of clause 2(l)(3)(D) of 
Rule XI of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 412.
    3. With respect to the requirement of clause 2(l)(3)(C) of 
Rule XI of the Rules of the House of Representatives and 
section 403 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 412 
from the Director of the Congressional Budget Office.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 7, 1997.
Hon. Don Young,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 412, the Oroville-
Tonasket Claim Settlement and Conveyance Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Gary Brown.
            Sincerely,
                                          Paul Van de Water
                                   (For June E. O'Neill, Director).
    Enclosure.

Summary

    H.R. 412 would approve a Settlement Agreement between the 
United States Bureau of Reclamation (the Bureau) and the 
Oroville-Tonasket Irrigation District (the District). The 
agreement would settle litigation over disputes arising from 
the construction of the Oroville-Tonasket Unit Extension, an 
irrigation delivery unit. Under the Settlement Agreement, the 
District would release and discharge all past and future claims 
against the United States associated with the project, make a 
cash payment of $350,000 to the United States (this condition 
has already been met), and release the United States from its 
obligation to remove existing dilapidated facilities. In 
exchange, the Secretary of the Interior would release and 
discharge the District's annual construction charge obligation 
of roughly $300,000 under the 1979 Repayment Contract, transfer 
title to the irrigation works to the District at no additional 
cost to the District, and continue to provide power for the 
pumping of irrigation water.
    CBO expects that the federal government would probably save 
money if this bill were enacted. However, we have no clear 
basis for estimating the amount of such savings because they 
would result from the release of the United States from future 
legal claims against it by the District. CBO cannot estimate 
the amount or timing of any potential judgments that might 
occur if H.R. 412 is not enacted.
    Because enacting the bill could affect direct spending, 
pay-as-you-go procedures would apply. The legislation does not 
contain any intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act of 1995.

Estimated cost to the Federal Government

            Direct spending
    Enacting the legislation would settle claims pending 
against the United States under the Contract Disputes Act. 
Thus, the bill would allow the United States to avoid future 
costs that could result from claims brought against it by the 
Oroville-Tonasket Irrigation District. The District alleges 
that the irrigation system does not work as anticipated and 
that the annual operation and maintenance costs are much higher 
than the Bureau of Reclamation projected in the design phase of 
the project. The potential liability of the United States under 
pending claims exceeds $51 million, but CBO cannot predict the 
outcome of court proceedings of future negotiations that might 
occur if the claims are not dropped. Any payments that might be 
made under current law would be likely to occur after 1997.
    Other provisions of the Settlement Agreement would have no 
budgetary impact. Discharging the district of its obligation to 
repay the cost of the Oroville-Tonasket Unit Extension would 
not result in a loss of receipts that would otherwise have 
accrued to the United States. The District has refused to repay 
this cost since 1991, the first year in which repayment was 
required, and is unlikely to begin repaying with or without the 
proposed Settlement Agreement or in the absence of successful 
legal action on the part of the United States. The District has 
already made the separate $350,000 payment to the United States 
that would be required under the agreement. Finally, the 
agreement provides for the Secretary of the Interior to 
continue providing power for irrigation pumping, just as he 
would under current law.
    For purposes of this estimate, CBO assumes that the 
legislation will be enacted before April 15, 1997, the date on 
which the District will proceed with litigation if the 
Settlement Agreement has not been approved. The statute of 
limitations for pursuing a legal claim expires in June of 1997.
            Spending subject to appropriation
    Based on information provided by the Bureau, CBO expects 
that enacting the bill would not have a significant impact on 
discretionary spending. The cost of transferring title to the 
facility would be less than $500,000. Enacting the bill would 
release the Bureau from certain obligations and expenses, 
including the cost of removing dilapidated facilities from the 
property to be transferred, likely legal fees, and annual 
contract administration costs, but CBO estimates that 
eliminating these costs would save less than $500,000 each 
year.

Pay-as-you-go considerations

    Section 252 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 sets up pay-as-you-go procedures for 
legislation affecting direct spending or receipts through 1998. 
CBO estimates that enacting H.R. 412 could affect direct 
spending, but it is unclear whether direct spending would be 
affected by 1998, if ever. CBO estimates that there would be no 
effect on 1997 spending and that any potential effect on 1998 
spending would be a savings relative to current law because 
enacting H.R. 412 would eliminate the possibility of judgments 
against the United States. CBO cannot predict the likelihood or 
the timing of any judgment payments that might occur if H.R. 
412 is not enacted.

Estimated impact on State, local, and tribal governments

    H.R. 412 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4), 
and would impose no costs on state, local, or tribal 
governments. Any costs resulting from the Settlement Agreement 
covered by this bill would be incurred voluntarily by the 
District as a party to the agreement. The obligations of the 
District and of the United States under this agreement are 
discussed in detail in other sections of this estimate.
    In addition to releasing the United States from future and 
pending legal claims, the District has agreed to make (and has 
already made) a cash payment to the United States and to assume 
responsibility for removing dilapidated facilities. We estimate 
that the cost of this latter obligation would be about 
$300,000.

Estimated impact on the private sector

    The bill would impose no new private-sector mandates as 
defined in Public Law 104-4.
    Estimate prepared by: Federal cost: Gary Brown; impact on 
State, local, and tribal governments: Marjorie Miller; and 
impact on the private sector: Lesley Frymeir.
    Estimated approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                    compliance with public law 104-4

    H.R. 412 contains no unfunded mandates.

                        changes in existing law

    If enacted, H.R. 412 would make no changes to existing law.
                            DISSENTING VIEWS

    The Oroville-Tonasket Unit of the Bureau of Reclamation's 
Chief Joseph Dam project was completed in 1990. The local 
Oroville-Tonasket Irrigation District (OTID) had entered into a 
contract with the Bureau to receive irrigation water and repay 
a portion of the project costs--over 80% of the irrigation 
repayment costs would actually be paid by Northwest power 
users, because the Bureau concluded that the entire project 
cost exceeded the irrigators' ``ability to pay'' under 
Reclamation law. When the project was completed, OTID became 
obligated to begin repayment under its contract. But OTID 
refused to pay. The district cited continuing problems with 
siltation and project operations, some of which had already 
been addressed in project modifications. The Bureau continued 
to deliver water despite the district's failure to pay, and 
interest accumulated on the mounting debt.
    OTID was dissatisfied with the Bureau's performance, and 
brought suit in the Court of Federal Claims. The court 
concluded that the dispute should be handled under the 
procedures specified in the Contract Disputes Act, and 
dismissed the case without prejudice while the parties pursued 
that process. Eventually, OTID signed a settlement agreement 
with the regional director of the Bureau of Reclamation, which 
would give OTID the project works for free and ensure OTID 
another 45 years of cheap power supplies from federal power 
facilities for operating the project. These settlement terms 
exceeded the authority of the Bureau's regional director, 
however, so he committed to try to obtain congressional 
approval for the project transfer.
    Despite the claims made by OTID regarding problems with the 
operation of the Oroville-Tonasket Unit, we must oppose H.R. 
412's free transfer of the project to OTID. If the Congress had 
been given an opportunity to address the project's problems and 
work out a solution with the irrigation district, we might well 
have found a way to correct the deficiencies while assuring 
reasonable project repayment. Instead, we have been presented 
with a proposal to hand over the project to OTID at no cost, 
forgiving over $1 million in past-due bills and a $14 million 
repayment obligation, and providing another 45 years of cheap 
power for project operations. This proposal has been presented 
on a take-it-or-leave-it basis; we choose to leave it.
    In the past, this Committee and the Congress on occasion 
have provided relief to Bureau of Reclamation water users whose 
projects have proved defective. For example, in 1992, we passed 
legislation forgiving 50% of the costs of replacing defective 
siphons installed on the Central Arizona Project. If OTID had 
made its case in the Committee for forgiving some of the 
project costs, or for federally financed repairs, we would have 
been more receptive than we can be to the present legislation.
    Instead, OTID decided to litigate, and now asks Congress to 
step into the middle of the judicial process and ratify a 
settlement that reduces their capital cost repayment obligation 
to nothing. Over 80% of the project costs will be paid by power 
customers in the Northwest region, to the tune of $73 million.
    OTID has refused to pay its water bills for the last five 
years, and thus has paid nothing toward project repayment. Now, 
OTID wants taxpayers to give away the entire project for 
nothing: the power users will pay 80%, the taxpayers will pay 
20%, and the irrigators who actually use the project will pay 
zero. This deal is simply too good.
    Neither OTID nor anyone else can assert that the project is 
worthless. If it were, OTID would hardly be seeking its 
transfer to the district. In fact, OTID has received and will 
continue to receive substantial benefits from the project for 
decades to come. The project has delivered water for the last 5 
years, and the irrigation district is planning on using it for 
at least another 45 years.
    In addition, OTID will continue to profit from a reliable 
water supply and cheap power provided by the project throughout 
that period. We cannot justify giving away such a valuable 
capital asset constructed with the taxpayers' money.
    This bill also fails the procedural requirements of the 
House of Representatives, because it will violate the ``Pay As 
You Go'' requirements of the Budget Act. Under this bill, the 
Treasury will forego annual payments due from OTID, and receive 
nothing in return. Thus, the bill will contribute to the annual 
budget deficit in each of the next five years, and beyond.
    For all of these reasons, we dissent from the Committee's 
decision to report H.R. 412 as amended. We do agree with 
amendments offered by the majority that will ensure that the 
power users' portion of the repayment obligation will continue 
to be repaid. We also agree strongly with language in the full 
Committee report that expresses the view that this bill should 
not be regarded as a precedent for Bureau of Reclamation 
transfers generally, or as a ratification of judicial decisions 
in OTID's litigation.

                                   George Miller.
                                   Ed Markey.
                                   Peter DeFazio.
                                   Ron Kind.
                                   Sam Farr.
                                   Maurice Hinchey.

                                
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