[Senate Report 106-358]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 709
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-358

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



 
                      PALMETTO BEND CONVEYANCE ACT

                                _______
                                

                 July 24, 2000.--Ordered to be printed

                                _______
                                

  Mr. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1474]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1474) providing for conveyance of the 
Palmetto Bend project to the State of Texas, having considered 
the same, reports favorably thereon with an amendment and 
recommends 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 ``Palmetto Bend Conveyance Act''.

SEC. 2. DEFINITIONS.

    In this Act:
          (1) Project.--The term ``Project'' means the Palmetto Bend 
        Reclamation Project in the State of Texas authorized under 
        Public Law 90-562 (82 Stat. 999).
          (2) Secretary.--The term ``Secretary'' means the Secretary of 
        the Interior.
          (3) State.--The term ``State'' means the State of Texas, 
        acting through the Texas Water Development Board or the Lavaca-
        Navidad River Authority or both.

SEC. 3. CONVEYANCE.

    (a) In General.--The Secretary shall, as soon as practicable after 
the date of enactment of this Act and in accordance with all applicable 
law, and subject to the conditions set forth in sections 4 and 5, 
convey to the State all right, title and interest (excluding the 
mineral estate) in and to the Project held by the United States.
    (b) Report.--If the conveyance under Section 3 has not been 
completed within 1 year and 180 days after the date of enactment of 
this Act, the Secretary shall submit to the Committee on Resources of 
the House of Representatives and the Committee on Energy and Natural 
Resources of the Senate a report that describes--
          (1) the status of the conveyance;
          (2) any obstacles to completion of the conveyance; and
          (3) the anticipated date for completion of the conveyance.

SEC. 4. PAYMENT.

    (a) In General.--As a condition of the conveyance, the State shall 
pay the Secretary the adjusted net present value of current repayment 
obligations on the Project, calculated 30 days prior to closing using a 
discount rate equal to the average interest rate on 30-year U.S. 
Treasury notes during the proceeding calendar month, which following 
application of the State's August 1, 1999 payment, is currently 
calculated to be $45,082,675 using a discount rate of 6.070%. The State 
shall also pay interest on the adjusted net present value of current 
repayment obligations from the date of State's most recent annual 
payment until closing at the interest rate for constant maturity U.S. 
Treasury notes of an equivalent term.
    (b) Obligation Extinguished.--Upon payment by the State under 
subsection (a), the obligation of the State and the Bureau of 
Reclamation under the Bureau of Reclamation Contract No. 14-06-500-
1880, as amended shall be extinguished. After completion of conveyance 
provided for in Section 3, the State shall assume full responsibility 
for all aspects of operation, maintenance and replacement of the 
Project.
    (c) Additional Costs.--The State shall bear the cost of all 
boundary surveys, title searches, appraisals, and other transaction 
costs for the conveyance.
    (d) Reclamation Fund.--All funds paid by the State to the Secretary 
under this section shall be credited to the Reclamation Fund in the 
Treasury of the United States.

SEC. 5. FUTURE MANAGEMENT.

    (a) In General.--As a condition of the conveyance under section 3, 
the State shall agree that the lands, water, and facilities of the 
Project shall continue to be managed and operated for the purposes for 
which the project was originally authorized; that is, to provide a 
dependable municipal and industrial water supply, to conserve and 
develop fish and wildlife resources, and to enhance recreational 
opportunities. In future management of the Project, the State shall, 
consistent with other project purposes and the provision of dependable 
municipal and industrial water supply:
          (1) provide full public access to the Project's lands, 
        subject to reasonable restrictions for purposes of Project 
        security, public safety, and natural resource protection;
          (2) not sell or otherwise dispose of the lands conveyed under 
        Section 3;
          (3) prohibit private or exclusive uses of lands conveyed 
        under Section 3;
          (4) maintain and manage the Project's fish and wildlife 
        resource and habitat for the benefit and enhancement of those 
        resources;
          (5) maintain and manage the Project's existing recreational 
        facilities and assets, including open space, for the benefit of 
        the general public;
          (6) not charge the public recreational use fees that are more 
        than is customary and reasonable.
    (b) Fish, Wildlife, and Recreation Management.--As a condition of 
conveyance under Section 3, management decisions and actions affecting 
the public aspects of the Project (namely, fish, wildlife, and 
recreation resources) shall be conducted according to a management 
agreement between all recipients of title to the Project and the Texas 
Parks and Wildlife Department and shall extend for the useful life of 
the Project that has been approved by the Secretary.
    (c) Existing Obligations.--The United States shall assign to the 
State and the State shall accept all surface use obligations of the 
United States associated with the Project existing on the date of the 
conveyance including contracts, easements, and any permits or license 
agreements.

SEC. 6. MANAGEMENT OF MINERAL ESTATE.

    All mineral interests in the Project retained by the United States 
shall be managed consistent with Federal Law and in a manner that will 
not interfere with the purposes for which the Project was authorized.

SEC. 7. LIABILITY.

    (a) In General.--Effective on the date of conveyance of the 
Project, the United States shall not be liable for damages of any kind 
arising out of any act, omission, or occurrence relating to the 
Project, except for damages caused by acts of negligence committed 
prior to the date of conveyance by--
          (1) the United States; or
          (2) an employee, agent, or contractor of the United States.
    (b) No Increase in Liability.--Nothing in this Act increases the 
liability of the United States beyond that provided for in the Federal 
Tort Claims Act, (28 U.S.C. 2671 et seq.).

SEC. 8. FUTURE BENEFITS.

    (a) Deauthorization.--Effective on the date of conveyance of the 
Project, the Project conveyed under this Act shall be deauthorized.
    (b) No Reclamation Benefits.--After deauthorization of the Project 
under subsection (a), the State shall not be entitled to receive any 
benefits for the Project under Federal reclamation law (the Act of June 
17, 1902 (32 Stat. 388, chapter 1093), and Acts supplemental to and 
amendatory of that Act (43 U.S.C. 371 et seq.).

                         purpose of the measure

    The purpose of S. 1474 is to provide for the conveyance of 
the Palmetto Bend project to the State of Texas.

                          background and need

    The Palmetto Bend Project (Lake Texana) was authorized by 
Public Law 90-562. The primary purpose of the project is to 
provide municipal and industrial water to a large area along 
the Texas Gulf Coast. The project was declared complete by the 
Bureau of Reclamation in 1985 and was turned over to the 
Lavaca-Navidad River Authority for operation and maintenance.
    The Lavaca-Navidad River Authority (Authority) and the 
Texas Water Development Board (Board) are signatories to the 
Federal repayment contact. Since all surface water in Texas is 
owned by the State, the Authority and the Board jointly hold a 
State water right permit for Lake Texana.
    The Authority is a political subdivision of the State, 
created by the Texas legislature in 1959 for the purpose of 
controlling, storing, preserving, and distribution flood waters 
of the rivers and streams of the Lavaca and Navidad Basins, for 
all useful and beneficial purposes. Its boundaries are 
coterminous with Jackson County. The Authority is governed by a 
nine member Board of Directors, appointed by the Governor and 
confirmed by the State Senate. The Authority is also under the 
Administrative oversight of the Texas Natural Resource 
Conservation Commission.
    The Texas Water Development Board is responsible for 
administering the State's water resources financing programs, 
and for long range water resources planning. The Board is 
governed by six directors appointed by the Governor and 
confirmed by the State Senate.
    Lake Texana is located near the Gulf Coast about midway 
between Houston and Corpus Christi. Lake Texana is capable of 
supplying a dependable yield of 79,000 acre feet annually 
(AFA). However, to maintain the environmental health of the 
downstream bays and estuaries, the amount available for water 
supply was reduced by the state to 74,500 AFA. All the 
reservoir's yield has been committed, including about 42,000 
AFA for municipal use (Corpus Christi and Point Comfort) and 
over 32,500 AFA for industrial use, largely in the regional 
petro-chemical-plastics industry. The city of Corpus Christi 
service area includes a 10 county service area.
    Currently, the Authority and the Board are obligated for 
repayment to the Federal Government of about $70 million with 
an interest rate of 3.5% over a term of 50 years. The contract 
between the Texas Water Development Board and Lavaca-Navidad 
River Authority permits the Authority to acquire the Board's 
interest in the project, and to assume all responsibility and 
potential liability of the Project.
    In addition to the federally financed portion of the 
project, the Authority financed, constructed, and owns and 
operates a $24 million pipeline, pumping plant and distribution 
system. The Authority has constructed an additional $8.9 
million intake-pumping plant complex for delivery of water to 
the Lake Texana-Corpus Christi pipeline. The bonds for the 
Authority project are guaranteed and being repaid by the water 
users. The Authority operates and maintains the entire project, 
both Federal and State financed portions.
    S. 1474 requires that the outstanding balance of 
indebtedness be repaid and the project purchased by the State 
project sponsors--the Authority and the Board. Purchase would 
be accomplished by payment of the net present value of the cash 
stream required to repay the current contractual indebtedness, 
discounted at U.S. Treasury rates on the date of purchase. The 
present value of the payment needed to repay the adjusted 
repayment obligation, is estimated to be $45,082,675. Title of 
the Federal portion of the project would be transferred to the 
Authority and the Board.

                          legislative history

    S. 1474 was introduced by Senator Hutchison on August 2, 
1999 and a Subcommittee hearing was held on October 20, 1999. 
At the business meeting on June 7, 2000, the Committee on 
Energy and Natural Resources ordered S. 1474, as amended, 
favorably reported.

            committee recommendation and tabulation of votes

    The Committee on Energy and Natural Resources, in open 
business session on June 7, 2000, by a unanimous voice vote 
with a quorum present, recommends that the Senate pass S. 1474, 
if amended as described herein.

                          committee amendment

    During the consideration of S. 1474, the Committee adopted 
an amendment in the nature of a substitute that makes several 
significant changes in the bill, First, the Committee amendment 
strikes the requirement in the original bill that the Secretary 
convey the Project upon receipt of payment and replaces it with 
an new requirement that the Secretary convey the Project as 
soon as practicable after the date of enactment, and in 
accordance with all applicable law and subject to the 
conditions set forth in the Committee amendment. Second, the 
Committee amendment changes the purchase price for the Project 
from a set dollar amount to an amount to be determined from the 
adjusted net present value of current repayment obligations. 
Third, the Committee amendment adds a list of six specific 
management measures the State must undertake as a condition of 
the conveyance. Fourth, the Committee amendment strikes a 
provision that requires State approval for use of the Project's 
surface estate for mineral exploration and development and 
replaces it with a general direction that future mineral 
development must be consistent with Project purposes.

                      section-by-section analysis

    Section 1 is a short title.
    Section 2 defines key terms used in the bill. Section 2(3) 
defines ``state'' to include both the Texas Water Development 
Board (TWDB) and the Lavaca Navidad River Authority (LNRA). 
Both the TWDB and the LNRA are responsible for all aspects of 
Project operations, including maintenance, protecting public 
safety, and maintaining the authorized project purposes at a 
level at least equivalent to that when the Project was owned by 
the United States. When the Project was build and repayment 
contracts executed, the Department of the Interior entered into 
contracts with both TWDB and LNRA, thereby obligating both 
entities to pay the reimbursable obligation of the Project. 
Current expectations are that LNRA plans to purchase TWDB's 
share of the Project. Until that time, both entities are 
responsible for protecting public safety and maintaining the 
public purposes of the Project. At such time as LNRA acquires 
TWDB's share, then LNRA assumes all responsibility and 
potential liability of the Project.
    Section 3 provides that, subject to the conditions in 
sections 4 and 5, the Secretary shall, ``as soon as 
practicable'' after enactment, convey the Project title of the 
State of Texas, subject to applicable law and the conditions 
set forth in sections 4 and 5. This section also requires a 
report from the Secretary if conveyance is completed later than 
1 year and 180 days after date of enactment. The report shall 
include status of conveyance, obstacles to conveyance and 
anticipated date for completion.
    Section 4 describes how payment shall be calculated and 
what obligations are extinguished upon payment. It also 
provides that the State bears transaction costs for conveyance 
and that all funds paid by the State shall be credited to the 
Reclamation Fund.
    Section 5 describes the general and specific conditions for 
future management of the Project. Specific conditions relating 
to fish, wildlife and recreation management and existing 
obligations are detailed.
    Section 6 provides that mineral interests in the Project 
retained by the United States shall be managed consisted with 
Federal law and in a manner that will not interfere with the 
purposes for which the project was authorized.
    Section 7 provides that the United States shall not be 
liable for any damages, effective on the date of conveyance, 
except for acts of negligence committed by either the United 
States or an employee, agent or contractor of the United 
States.
    Section 8 provides that, upon conveyance, the Project shall 
be deauthorized and that after deauthorization, the Project is 
no longer entitled to any benefits under Federal reclamation 
law.

                   cost and budgetary considerations

    The following estimate of costs for this measure has been 
provided by the Congressional Budget Office.

S. 1474--Palmetto Bend Conveyance Act

    Summary: S. 1474 would direct the Secretary of the Interior 
to convey the Palmetto Bend Reclamation Project to the state of 
Texas. As a condition of the conveyance, S. 1474 would require 
that the state pay the net present value of its repayment 
obligations on the project. This money would be deposited in 
the Reclamation Fund. The bill specifies the discount and 
interest rates that must be used to calculate the net present 
value of this revenue stream. The state also must agree to 
manage the project for its original purposes, which include 
providing a municipal and industrial water supply, conserving 
and developing fish and wildlife resources, and enhancing 
recreational opportunities. Once the project is conveyed, the 
Bureau of Reclamation would no longer pay for the operation and 
maintenance of the project.
    CBO estimates that enacting S. 1474 would result in a net 
decrease in direct spending of $34 million over the 2001-2005 
period. Estimated asset sale receipts of $51 million would 
provide near-term savings in 2001, but these savings would be 
offset by the loss of offsetting receipts of about $4 million a 
year over the 35-year period from fiscal year 2001 through 
2035. Because enacting S. 1474 would affect direct spending, 
pay-as-you-go procedures would apply. CBO estimates that 
implementing this bill would have no significant effect on 
discretionary spending.
    S. 1474 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
The state of Texas probably would incur some costs as a result 
of the bill's enactment, but these costs would be voluntary.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1474 is shown in the following table. 
The costs of this legislation fall within budget function 300 
(natural resources and environment).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2000     2001     2002     2003     2004     2005
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority................................        0      -48        3        3        4        4
Estimated Outlays.........................................        0      -48        3        3        4        4
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that S. 
1474 will be enacted by the end of fiscal year 2000. We expect 
that the state will have paid any amounts due for fiscal year 
2000 in August of this year and that the project will be 
conveyed to the state of Texas in fiscal year 2001.
    CBO estimates that enacting S. 1474 would reduce direct 
spending by $34 million over the 2001-2005 period, but would 
have very little net budgetary impact--on a present value 
basis--over the life of the Palmetto project. As a condition of 
conveyance, S. 1474 requires that the state pay the net present 
value of its repayment obligations on the project, using a 
discount rate based on the average interest rate on 30-year 
U.S. Treasury bonds in the month preceding the sale. CBO 
estimates that the state would pay $51 million in 2001 for the 
project, based on an estimated repayment obligation of $72 
million and a projected discount rate of 6.6 percent. Once 
conveyed, the government would forgo payments of roughly $4 
million a year for the next 35 years.
    Based on information from the bureau, CBO estimates that 
the agency currently spends less than $500,000 each year for 
the operation and maintenance of the project. Hence, we 
estimate that any discretionary savings from the conveyance 
would not be significant. Likewise, implementing this bill may 
change the timing of deposits to the Reclamation Fund, but CBO 
expects that such changes would have a negligible effect on 
discretionary spending.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays that are subject to pay-as-you procedures 
are shown in the following table. For the purposes of enforcing 
pay-as-you-go procedures, only the effects in the current year, 
the budget year, and the succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                      By fiscal year, in millions of dollars--
                                   -----------------------------------------------------------------------------
                                     2000   2001    2002   2003   2004   2005   2006   2007   2008   2009   2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays................      0     -48      3      3      4      4      4      4      4      4      4
Changes in receipts...............                                  Not applicable
----------------------------------------------------------------------------------------------------------------

    Under the Balanced Budget Act (BBA), proceeds from 
nonroutine asset sales (sales that are not authorized under 
current law) may be counted for pay-as-you-go purposes only if 
the sale would entail no financial cost to the government. CBO 
estimates that the sale of the Palmetto Bend Project as 
specified in S. 1474 would satisfy the conditions in the BBA, 
and therefore, the proceeds would count for pay-as-you-go 
purposes.
    Intergovernmental and private-sector impact: S. 1474 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The conveyance authorized by this bill would 
be voluntary on the part of the state, and any costs it would 
incur to meet the conditions imposed by the bill also would be 
voluntary. Before the property could be conveyed to the state, 
the bill would require the state to pay the present value of 
its outstanding obligation to the United States and to pay 
certain transaction costs. It also would require the state to 
assume responsibility for operating and maintaining the 
project.
    Estimate prepared by: Federal Costs: Rachel Applebaum. 
Impact on State, Local, and Tribal Governments: Marjorie 
Miller. Impact on the Private Sector: Jean Wooster.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      regulatory impact evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 1474. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 1474, as ordered reported.

                        executive communications

    On October 13, 1999, the Committee on Energy and Natural 
Resources requested legislative reports from the Department of 
the Interior and the Office of Management and Budget setting 
forth Executive agency recommendations on S. 1474. These 
reports had not been received at the time the report on S. 1474 
was filed. When the reports become available, the Chairman will 
request that they be printed in the Congressional Record for 
the advice of the Senate. The testimony provided by the 
Commissioner of the Bureau of Reclamation at the Subcommittee 
hearing follows:

     Statement of Eluid L. Martinez, Commissioner, U.S. Bureau of 
                Reclamation, Department of the Interior

    My name is Eluid L. Martinez. I am Commissioner of the U.S. 
Bureau of Reclamation. I am pleased to provide the 
Administration's views on S. 1474, legislation providing for 
the conveyance of the Palmetto Bend Project to the State of 
Texas.
S. 1474--Palmetto Bend Conveyance Act
    S. 1474 directs the Secretary of the Interior to convey the 
Palmetto Bend Project in coastal Texas to the State of Texas, 
acting through the Texas Water Development Board (TWDB) and/or 
the Lavaca-Navidad River Authority (LNRA), which are 
governmental entities created by the State of Texas. As 
drafted, the Administration opposes S. 1474. However, let me 
state that good progress has been made in the past year. This 
is a complex multipurpose project. Apart from technical issues 
with the language of S. 1474, it is our view that the long list 
of concerns that we have raised in the past, has been narrowed 
down to several issues, which I will highlight in my statement. 
If these remaining issues could be resolved, the Palmetto Bend 
Project could be an appropriate candidate for title transfer.
Background
    The Palmetto Bend Project is a multipurpose project located 
in Jackson County, Texas near Edna on the Navidad River, with 
the dam site about 4 miles above the confluence of the Lavaca 
and Navidad rivers. Project features consist of Palmetto Bend 
Dam and Lake Texana, including recreation facilities on 
approximately 7,000 acres of public land surrounding the lake. 
Palmetto Bend Dam regulates natural flows of the Navidad river 
to provide municipal and industrial water supplies in the 
counties of Jackson and Calhoun, and to the City of Corpus 
Christi. Through contract with Reclamation, the Lavaca-Navidad 
River Authority has operation and maintenance responsibility 
for the facilities. This project was originally authorized by 
Public Law 90-562 in October 1968.
    In August 1997, LNRA formally requested that Reclamation 
enter into a process to consider transferring title of the land 
and facilities associated with the Palmento Bend Project from 
federal to non-federal ownership. In October, 1997, Reclamation 
and LNRA signed an agreement to ``evaluate the Authority's 
proposed transfer of title to the Palmetto Bend Project in an 
Environmental Assessment in accordance with the National 
Environmental Policy Act (NEPA), other applicable laws and 
Reclamation policy.''
    In December, 1997, as part of that NEPA process, two public 
scoping meetings were conducted in the towns of Edna and 
Victoria, Texas to identify issues and concerns by members of 
the local community and other stakeholders. At both sessions, a 
variety of viewpoints were represented and several important 
issues were raised that needed to be addressed as part of the 
process. In February 1998, the results of the scoping meeting, 
and the NEPA document outline, were provided to LNRA.
    In March 1999, Reclamation released a draft environmental 
assessment (EA) and received numerous comments. These comments 
were incorporated and addressed in a final EA which was 
released on June 21, 1999. The issues and analysis documented 
in that EA form the basis for much of my testimony today.
Concerns about S. 1474
    Mr. Chairman, as I stated, a great deal of progress has 
been made on Palmetto Bend in the past year. A final 
environmental assessment has been completed, and productive 
discussions with stakeholders are underway. However, the 
Department does not have some important policy as well as 
technical concerns about the proposal as drafted:
    (1) Compliance with NEPA and Other Laws and Treaties: S. 
1474 as introduced directs rather than authorizes the Secretary 
to convey the facilities of the Project. The Administration 
strongly opposes such directives. Such a mandate would severely 
diminish the value of the NEPA process by removing the 
Secretary's discretion to make decisions on proposed title 
transfers based on the results of environmental analysis and 
public involvement. The Administration firmly believes that 
meaningful NEPA compliance is critical prior to title transfer, 
to allow the Department, the Congress, and the public to fully 
explore the impacts of the proposed transfer, its alternatives, 
and opportunities to avoid undesirable effects on public 
resources and values. The Secretary's authority to condition 
the transfer to resolve important issues identified during the 
NEPA process prior to title transfer must also be clear.
    (2) Mineral Development: As introduced, S. 1474 effectively 
gives the State veto authority over any development of the 
retained Federal mineral estate at the Project. This is 
problematic for a number of reasons. First, in the State of 
Texas, as in many States, the mineral estate is dominant over 
the surface estate, putting S. 1474's Section 7 in conflict 
with existing law. Second, the title transfer valuation assumes 
that the mineral estate would be administered by the United 
States, and would be available for leasing, development, and 
production consistent with applicable Federal and State laws. 
As written, Section 7 is likely to change the valuation as it 
effectively reduces potential Federal revenues from future 
mineral development. Third, the Bureau of Land Management has 
issued approximately 20 leases for the development of 
Federally-owned oil and gas estate within the project boundary, 
and the imposition of new restrictions would place an 
unanticipated burden upon these lesses. Fourth, in its 
strictest application, such as a total prohibition of surface 
occupancy for mineral development, this section may result in a 
taking of property interests.
    To protect the rights of the State while addressing the 
above concerns, we suggest the following language: ``All 
mineral interests in the Project retained by the United States 
shall be managed consistent with Federal law and with the 
purposes for which the Project was originally authorized.''
    (3) Future Management of Public Purposes: The Department 
believes that this is a crucial issue that must be resolved 
before title transfer can be completed. Reclamation policy for 
title transfer requires that public aspects of the transferred 
project be protected. In the case of multipurpose projects such 
as Palmetto Bend, where more than $21 million of public Federal 
funds have been invested in non-reimbursable recreation, fish 
and wildlife purposes, there are a number of authorized public 
purposes. They include public access to public lands and 
waters; and public uses and benefits, such as recreation, fish 
and wildlife. The Administration must protect the significant 
taxpayer investments.
    During the environmental review process for the proposed 
Palmetto Bend title transfer, a number of concerns were raised 
by the public and government agencies regarding the need to 
protect fish, wildlife, environmental, recreation and other 
public benefits of the Project to ensure that no future 
degradation or diminishment occurs in these public resources 
and benefits. The Department shares this concern. Reclamation 
believes it is possible to develop a legally enforceable, long-
term arrangement with an agency such as the Texas Parks and 
Wildlife Department (TPWD), to assure that these public 
resources are protected. In essence an agency such as the TPWD 
would assume Reclamation's public trust responsibilities for 
the oversight and management of fish and wildlife resources and 
public recreational opportunities at the project.
    I understand that for several months, LNRA and TPWD have 
been working on such an agreement. While a preliminary 
Memorandum of Understanding has been signed between these 
agencies, we have identified a number of areas where changes 
are needed. We have articulatedthose concerns and are pleased 
that LNRA has expressed a willingness to address them.
    S. 1474 can provide an important statutory foundation to 
assure protection of the public aspects of the project. 
Reclamation recommends that Section 6(a) be modified to include 
the following:
          Assurance that full public access to the project's 
        lands and waters will be continued, subject only to 
        restrictions for purposes of project security, public 
        safety, and natural resource protection;
          Assurance that the project's public lands will not be 
        sold or otherwise disposed of;
          Assurance that the project's public lands will not be 
        made available for private or exclusive uses;
          Assurance that the project's fish and wildlife 
        resources and habitats will continue to be managed for 
        the benefit and enhancement of those resources;
          Assurance that the project's existing recreational 
        facilities and assets will be maintained for the 
        benefit of the general public;
          Assurance that the public will be charged recreation 
        use fees that are no more than is customary and 
        reasonable.
    (4) Payment: Additional Administration review is needed to 
determine whether the proposed payment adequately protects the 
Federal financial interest. In addition, it is important to 
understand that in calculating the valuation, certain 
assumptions about future management of public surface resources 
and Federal mineral estate were made. Given these assumptions, 
clarifications in the proposed legislation, as outlined above, 
regarding management of surface resources and Federal estate 
are needed.
    (5) Tax Exempt Financing: It needs to be clear that 
payments made to the United States should not be financed with 
the proceeds of obligations that qualify as Federally tax 
exempt under Section 103 of the Internal Revenue Code as 
amended.
Technical amendments
    In addition to those issues raised above, I have a number 
of technical and clarifying modifications which I would like to 
provide:
    (1) Section 2(3) Definition of ``State'': As introduced, S. 
1474 is not clear on which entity--the Texas Water Development 
Board or the Lavaca Navidad River Authority--will actually hold 
title and make the management decisions. The roles, 
responsibilities and liabilities of each need to be clarified.
    (2) Section 3 Conveyance: This section states that the 
Project would be transferred upon payment. H.R. 2764 needs to 
be clarified to show that payment is one of a number of steps 
that must occur prior to transfer. Other activities, such as 
NEPA compliance, must be completed prior to transfer. 
Furthermore, it needs to be further clarified that the United 
States will retain ownership to all Project museum properties.
    (3) Section 4 Completion of Conveyance: This section needs 
to make clear that in addition to NEPA, compliance with the 
National Historic Preservation Act and the Endangered Species 
Act must be completed prior to conveyance.
    (4) Section (5) Payment: Language needs to be added to 
establish a ``due date'' for the payment.
    (5) Section 5(b): This subsection should be clarified to 
make clear that while the contracts will be extinguished, the 
obligations of the State in terms of management and operations 
will not be extinguished upon payment. Therefore the title of 
this subsection should be changed from ``Obligations'' to 
``Contract'' Extinguished. Additionally the subsection should 
be modified to make this more clear. We suggest the following 
revision: ``On payment by the State under subsection (a), 
Contract No. 14-06-500-1880, as amended, between the United 
States and the State shall be extinguished. After completion of 
conveyance provide for in Section 3, the State shall assume 
full responsibility for all aspects of operation, maintenance 
and replacement of the Project.''
    (6) Section 6. Future Management: The State does not 
currently hold, nor is it envisioned to hold, an interest in 
the Federal mineral estate. Therefore the reference to 
``mineral estate'' in this subsection should be deleted.
    (7) Section 6(a). Future Management: This section needs to 
be clarified to ensure that the Project benefits will not be 
diminished after transfer. We recommend replacing the phrase 
``implementation of fish, wildlife, and recreational 
activities,'' with ``conservation and development of the fish 
and wildlife resources and the enhancement of recreational 
activities.'' We also recommend that previously discussed 
concerns related to public access, land disposal, private and 
exclusive uses, and recreation use fees be addressed in this 
section.
    We also recommend adding the following subsection in 
section 6:
    (b) Management Decisions.--As a condition of conveyance 
under section 3, specific management decisions affecting the 
public aspects of the project (namely, fish and wildlife 
resources and recreation opportunities) shall be conducted 
according to a management agreement between all recipients of 
title to the project and TPWD. This agreement is subject to the 
review and approval of the Secretary.
    (8) Section 6(b) Existing Obligation: This subsection needs 
to be revised to clarify that the responsibilities being 
transferred are obligations to be assigned by the United 
States. The nature of the obligations also needs to be 
clarified. We recommend the following revision: ``As a 
condition of the conveyance under Section 3, the United States 
shall assign all obligations of the United States associated 
with the Project existing on the date of conveyance including 
for contracts, recreation, fish and wildlife easements, and any 
permits, or license agreements including oil and gas.''
    (9) Section 7. Mineral Development: Management of the 
mineral estate, which is what is envisioned in this section, 
constitutes more than development of the resources. As such, 
Reclamation recommends this section be renamed: Section 7. 
Management of Mineral Estate.
    (10) Section 8(a) and 8(b) Liability: To make this 
consistent with liability language that we have worked out with 
other entities interested in title transfer, we suggest two 
modifications to subsection (a) and two in subsection (b). In 
8(a) delete the phrase ``except as related to retained mineral 
interests,'' also, delete ``with respect'' and insert in lieu 
thereof ``relating.'' In 8(b), after ``nothing in this'' 
replace ``section'' with ``Act'' and following the phrase 
``provide for in,'' replace ``chapter 171 of title 28, United 
States Code'' with ``the Federal Tort Claims Act, 28 U.S.C. 
Section 2671 et seq.''
    (11) Section 9(b) No Reclamation Benefits: As drafted, this 
subsection can be read to say that the State would not be 
eligible for any benefits under Federal Reclamation law for any 
Reclamation Project throughout the State (where the Texas Water 
Development Board has an interest). As such, this needs to be 
clarified by inserting the words, `` for the Palmetto Bend 
Project'' after ``not entitled to received any benefits.''
    As you can see, Mr. Chairman, together with LNRA, we have 
come a long way toward addressing the Administration's concerns 
and those of the other stakeholders who have raised concerns 
about this proposed title transfer.
    That concludes my remarks on S. 1474. I would be pleased to 
answer any questions.

                        changes in existing law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the bill S. 1474, as 
ordered reported.

                                
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