[Senate Report 106-373]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 751
106th Congress                                                   Report
 2d Session                                                     106-373




                August 25, 2000.--Ordered to be printed

   Filed under authority of the order of the Senate of July 26, 2000


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

                              R E P O R T

                         [To accompany S. 1612]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1612) to direct the Secretary of the 
Interior to convey certain irrigation project property to 
certain irrigation and reclamation districts in the State of 
Nebraska, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill, as amended, do 
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:


    This act may be cited as the ``Missouri River Basin, Middle Loup 
Division Facilities Conveyance Act''.


    In this act:
          (1) Commissioner.--The term ``Commissioner'' means the 
        Commissioner of Reclamation.
          (2) District.--The term ``District'' means--
                  (A) the Farwell Irrigation District, a political 
                subdivision of the State of Nebraska;
                  (B) the Sargent Irrigation District, a political 
                subdivision of the State of Nebraska; and
                  (C) the Loup Basin Reclamation District, a political 
                subdivision of the State of Nebraska.
          (3) Project.--The term ``Project'' means Sherman Reservoir, 
        Milburn Diversion Dam, Arcadia Diversion Dam, related canals 
        and other related lands, water rights, acquired land, 
        distribution and diversion facilities, contracts, personal 
        property, and other associated interests owned by the United 
        States and authorized under the Act of June 17, 1902 (32 Stat. 
        388, chapter 1093), the Act of December 22, 1944 (commonly 
        known as the ``Flood Control Act of 1944'') (58 Stat. 887, 
        chapter 665), and the act of August 3, 1956 (70 Stat. 975, 
        chapter 917).
          (4) Repayment and water service contracts.--The term 
        ``Repayment and Water Service Contracts'' means all repayment 
        and water service contracts between the Secretary and the 
        District relating to the Project.
          (5) Secretary.--The term ``Secretary'' means the Secretary of 
        the Interior.


    (a) Conveyance.--
          (1) In general.--As soon as practicable after the date of 
        enactment of this Act and in accordance with all applicable 
        laws, the Secretary shall convey to the Districts, by quitclaim 
        deed, assignment, or patent, the interest of the United States 
        in the Project, in consideration of payment to the Secretary--
                  (A) by the Districts of $2,847,360, which--
                          (i) has been determined in accordance with 
                        the Bureau of Reclamation document entitled 
                        ``Framework for Title Transfer'' and the 
                        memorandum of understanding between the 
                        Commissioner and the Districts under section 5; 
                          (ii) includes all credits and adjustments 
                        provided for in that document and memorandum of 
                        understanding; and
                  (B) by the Western Area Power Administration, of 
          (2) Cancellation of obligation.--The obligation to make 
        payments due and owing from the Districts to the United States 
        under the repayment and water service contracts are canceled 
        for the year 2000 and thereafter.
          (3) Timing.--The conveyance under paragraph (1) shall be made 
        concurrently with the making of the payment under paragraph 
        (1)(A), but the payment under paragraph (1)(B) shall be made 
        from capacity and energy charges at Pick-Sloan Missouri Basin 
        Program firm power rates received in fiscal year 2000 or the 
        first subsequent fiscal year in which the amount of power sale 
        revenue received exceeds the amount of interest and operation 
        and maintenance obligations of the Western Area Power 
        Administration by at least $2,600,000, to the extent of the 
          (4) Satisfaction of obligations against the project.--The 
        payment under paragraph (1)(B) shall constitute full and 
        compete satisfaction of all obligations of the Western Area 
        Power Administration against the Project, the United States, 
        and the Districts existing before the date of the conveyance or 
        thereafter relating to the Project, including--
                  (A) future obligations for additional drainage 
                required in the project;
                  (B) obligations under any contracts entered into 
                between the United States, the Districts, and the 
                Western Area Power Administration of its predecessors; 
                  (C) any obligation that may have been required by the 
                Act of December 22, 1944 (58 Stat 887, chapter 665) or 
                other related Federal law.
          (5) Satisfaction of obligations for irrigation benefits.--The 
        conveyance of the Project and the payment of the consideration 
        under paragraph (1) shall constitute full satisfaction of any 
        and all obligations of the Districts or of the Pick-Sloan 
        Missouri Basin Program firm power users of the Western Area 
        Power Administration for irrigation benefits of the Project or 
        for any other benefits conveyed to the Districts.
    (b) Contaminated Property.--The Secretary shall convey the Project 
without regard to whether all necessary remedial action required under 
section 120(h)(3) of the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980 (42 U.S.C. 9620(h)(3) on any 
part of the Project has been completed.
    (c) Extinguishment of Obligations Between the Secretary and the 
Districts.--Effective on the date of the conveyance, all obligations 
not canceled under subsection (a)(2) between the Secretary and the 
Districts relating to the Project and the Repayment and Water Service 
Contracts are extinguished.


    Effective on the date of conveyance of the Project, the United 
States shall not be liable for claims, costs, damages, or judgments of 
any kind arising out of any act, omission, or occurrence related to the 
Project except for such claims, costs, or damages arising from acts of 
negligence committed by the United States or by employees or agents of 
the United States before the date of conveyance for which the United 
States is liable under chapter 171 of title 28, United States Code 
(commonly known as the ``Federal Tort Claims Act'').


    (a) In General.--The Secretary shall not make the conveyance under 
section 3 until the following events have been completed:
          (1) Compliance with the National Environmental Policy Act of 
        1969 (42 U.S.C. 4321 et seq.).
          (2) Execution of a memorandum of understanding between the 
        Commissioner and the Districts describing the purchase price 
        and other terms and conditions of the conveyance consistent 
        with this Act.
    (b) District Management of Project.--The Districts shall manage the 
Project in a manner substantially similar to the manner in which the 
Project was managed before the conveyance and in accordance with 
applicable Federal and State laws, including--
          (1) entering into an agreement with the Nebraska Game and 
        Parks Commission that preserves on a permanent basis the right 
        of the Commission to develop, provide, and protect the public 
        interest in Project fish, wildlife, and recreation facilities 
        related to the Projects, and
          (2) entering into an agreement with the University of 
        Nebraska Lincoln-State Museum that provides for protection of 
        cultural resources at the project after the conveyance 
        consistent with applicable law that authorizes the Districts or 
        others with responsibility to protect significant historic 
        features in situ or otherwise, and
          (3) providing that the Districts shall annually make payments 
        to local governments in the amounts in which the Commissioner 
        made payment to the local governments under chapter 69 of title 
        31, United States Code (commonly known as ``payments in lieu of 
        taxes'') for fiscal year 1999.
    (c) Crediting to Reclamation Fund.--All funds paid to the Secretary 
under this Act shall be credited to the Reclamation Fund in the 
Treasury of the United States toward repayment of capital costs of the 
project in an amount equal to the associated undiscounted obligation.
    (d) No Effect on Rates.--No payment under this act shall affect 
Pick-Sloan Missouri Basin Program firm power rates in any way.
    (e) Report.--If the conveyance under section 3 is not substantially 
completed on or before December 31, 2001, the Secretary and Districts 
shall promptly submit to the Committee on Resources of the House of 
Representatives and the Committee on Energy and Natural Resources of 
the Senate a report on the status of the conveyance describing the 
matters remaining to be resolved before completion of the conveyance 
and stating the anticipated date for the completion of the conveyance.
    (f) Future Benefits.--
          (1) In general.--Effective on the date of the conveyance 
        under section 3, the Middle Loup Division of the Missouri River 
        Basin Project--
                  (A) shall not be treated as a Federal reclamation 
                project, and
                  (B) shall not be subject to the reclamation laws or 
                entitled to receive any reclamation benefits under 
                those laws.
          (2) No flood control component.--After the date of the 
        conveyance under section 3, the Project shall no longer have a 
        flood control component.

                         purpose of the measure

    The purpose of S. 1612, as ordered reported, is to direct 
the Secretary of the Interior to convey certain irrigation 
project property to certain irrigation and reclamation 
districts in the State of Nebraska.

                          background and need

    S. 1612 would provide for the transfer of title of 
irrigation project facilities and lands from the Bureau of 
Reclamation to the Loup Basin Reclamation District, including 
the Sargent Irrigation District and the Farwell Irrigation 
District. The project facilities are part of the Missouri River 
Basin Project in central Nebraska, and provide water from the 
Middle Loup River to just under 64,000 acres of irrigable 
lands, as well as providing recreation and fish and wildlife 
benefits. Principal features of the projects include the 
Sherman Dam and Reservoir, the Arcadia Diversion Dam, the 
Milburn Diversion Dam, irrigation canals and laterals, drains 
and pumping plants. Crops grown on the project lands include 
alfalfa, small grains, sugar beets and feed corn.
    The projects were constructed between 1955 and 1966 under 
authorities of the Flood Control Act of 1944, and are operated 
and maintained by the Districts under contracts between each 
project and the Bureau of Reclamation. The transfer will 
provide for total repayment, at net present value, of all 
outstanding obligations on behalf of the irrigation districts 
and power producers in accordance with law, construction plans 
and obligations. All current uses and purposes for the projects 
will be retained, except that flood control benefits, which 
have never existed, will be removed from the listed benefits. 
The Bureau of Reclamation and the Corps of Engineers, the 
agency responsible for flood control management in the Missouri 
River Basin, have agreed to this deletion.
    The legislation provides for the conveyance of the project 
and facilities on or before January 1, 2001, at a cost of 
approximately $5.4 million. The irrigation districts will pay 
$2,847,360 of this obligation and power producers will pay 

                          legislative history

    S. 1612 was introduced by Senators Kerrey and Hagel on 
September 22, 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. 1612, as 
amended, favorably reported.

                        committee recommendation

    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. 1612, 
if amended as described herein.

                          committee amendment

    During the consideration of S. 1612, the Committee adopted 
an amendment in the nature of a substitute. Significant changes 
made in the substitute amendment were the elimination of the 
trust fund and the establishment of a purchase price. Other 
changes are described in the section-by-section analysis, 

                      section-by-section analysis

    Section 1 is a short title.
    Section 2 defines key terms used in the bill.
    Section 3 provides that the Project shall be conveyed as 
soon as practicable (to provide Reclamation with some 
flexibility in time to comply with NEPA requirements) and 
includes conditions regarding financial consideration (specific 
purchase price of $2,847,360 by District and $2,600,000 by 
WAPA); timing; satisfaction of obligations against the Project; 
and contaminated property. Further district payments on present 
water service and repayment contracts for 2000 and beyond are 
terminated. Reclamation does not retain any obligation for 
remedial action at CERCLA sites and District assumes such 
liability upon transfer of title.
    Section 4 provides that, upon conveyance, the United States 
shall have no liability except for that arising out of acts of 
negligence committed by the United States or its employees, 
agents or contractors.
    Section 5 describes events that must occur before 
conveyance, including compliance with NEPA, execution of a 
memorandum of agreement describing terms and conditions of the 
conveyance and an agreement regarding: (1) management of the 
Project in accordance with Federal and State laws; (2) 
protection of cultural resources; and (3) PILT payments. 
Section 5 requires that all funds paid to the Secretary be 
credited to the Reclamation Fund. Also, the Secretary and the 
Districts must submit a report to Congress if the conveyance is 
not substantially completed on or before December 31, 2001. 
Upon conveyance, the Districts are no longer entitled to 
benefits under reclamation law and the Project shall no longer 
have a flood control component.

                   cost and budgetary considerations

    The Congressional Budget Office cost estimate report had 
not been received at the time the report was filed. When the 
report becomes available, the Chairman will request that it be 
printed in the Congressional Record for the advice of the 

                      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. 1612. 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 
    Little, if any, additional paperwork would result from the 
enactment of S. 1612, 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. 1612. These 
reports had not been received at the time the report on S. 1612 
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, Bureau of Reclamation, 
                       Department of the Interior

    My name is Eluid Martinez. I am Commissioner of the U.S. 
Bureau of Reclamation (Reclamation). Thank you for the 
opportunity to provide the Department's views on S. 1612 to 
direct the Secretary of the Interior to convey the Middle Loup 
Division of the Pick Sloan Missouri Basin Program to the Loup 
Basin Reclamation District, the Sargent River Irrigation 
District, and the Farwell Irrigation District (Districts) in 
Nebraska. While we believe this project to be a good candidate 
for title transfer and have made significant progress on many 
issues, the Administration opposes S. 1612 as drafted.
    However, we are continuing to work closely with Senator 
Kerrey, Representative Barrett, who introduced a similar bill 
in the House, the Districts and the other stakeholders to 
address the outstanding issues.
    The Middle Loup Division of the Pick Sloan Missouri Basin 
Program provides water for irrigation to the Sargent and the 
Farwell Irrigation Districts in central Nebraska. The Loup 
Basin Reclamation District operates and maintains the water 
supply for both irrigation districts. The project costs were 
principally allocated to irrigation and a majority of the costs 
will be recovered through revenues from power generation known 
as ``aid-to-irrigation.'' However, a small amount of the costs 
are allocated to recreation and fish and wildlife. The project 
proposed for transfer includes the dam and reservoir at the 
Sherman site, as well as supply and distribution canals, 
laterals, drains, and all lands or interest in lands associated 
with the project.
    While primarily an irrigation project, Sherman Reservoir 
also provides significant recreation and wildlife benefits in 
the area. The Nebraska Game and Parks Department manages the 
recreation and wildlife components through a lease agreement 
with the Bureau of Reclamation. Reclamation expects that there 
will be a similar agreement between the Districts and the State 
if the facilities are conveyed.
    Mr. Chairman, we have been working with the irrigation 
districts along with the State of Nebraska, the State Historic 
Preservation Office, the University of Nebraska--Lincoln, the 
neighboring Middle Loup Public Power and Irrigation District, 
the U.S. Fish and Wildlife Service, the U.S. Army Corps of 
Engineers and a number of other stakeholders for a number of 
years on the issues associated with this title transfer. 
Reclamation participated in two public meetings, sponsored by 
the Districts in January 1996 to identify issues of concern. 
Since that time we have been working cooperatively with the 
Districts to address the myriad of issues that have arisen. In 
addition, Reclamation, in consultation with the Districts has 
been working to complete an environmental assessment on this 
transfer, which we hope will be completed shortly. We have also 
completed discussions on, and signed, the memorandum of 
understanding, referenced in S. 1612, which addresses a clear 
process and delineates roles and responsibilities for 
completing this title transfer in a timely fashion.
    As we testified on a similar bill, H.R. 2984, we are 
concerned about directed transfer provisions in the bill.
    Compliance with Federal Laws and Agreement: S. 1612 as 
introduced ``directs'' rather than ``authorizes'' the Secretary 
to convey the facilities of the Project. The Department 
strongly opposes such directive. This mandate directing the 
Secretary would severely diminish the review process to be 
conducted pursuant to the National Environmental Policy Act 
(NEPA), as the Secretary's ultimate decision regarding the 
transfer would be predetermined. The Administration firmly 
believes that a meaningful NEPA analysis must occur prior to 
title transfer to allow the Department, the Congress, and the 
public to fully understand the impacts of the proposed 
transfer, its alternatives, and potential mitigation measures. 
Reclamation has almost completed the environmental assessment 
and does not anticipate encountering significant environmental 
issues in this transfer. However, the Secretary's authority to 
condition the transfer in ways that resolve any issues 
identified during the NEPA process prior to title transfer must 
also be clear. Additionally, I must make clear that final 
Administration approval of the transfer is predicated on 
satisfactory implementation of the memorandum of Understanding.
    In addition, S. 1612, as drafted, raises additional policy 
and technical concerns.
    (1) Price: While S. 1612 states that the price should be 
determined with Reclamation's ``Framework for Title Transfer,'' 
and the Memorandum of Understanding (MOU) that is in place 
between Reclamation and the Districts, it places an artificial 
ceiling on the amount the District and the Western Area Power 
Administration should pay. The payment to be made for the 
Project should reflect a price that protects the financial 
interests of the taxpayers. Placing this limitation restricts 
our ability to do that and contradicts the provisions of the 
MOU in terms of the process that was agreed to. Additionally, 
the Administration objects to S. 1612's requirement that the 
Federal government assume or maintain responsibility for costs 
associated with certain remedial and historic preservation 
activities. This is contrary to both our signed MOU with the 
district and the Administration's fiscal policy on title 
transfers, as the provision requires continued Administration 
financial responsibility for aspects of the transferred 
    (2) Drains: For several years, we have been working with 
the Districts, the State and the neighboring community of Loup 
City to identify the source of drainage problems that exist in 
the area. As drafted S. 1612 proposes to transfer all of the 
facilities, but proposes to require that all of the obligations 
for the drains, which may be directly related to the project 
would remain with the United States. In taking title to this 
project, the Districts must take all the obligations along with 
the benefits that come along with holding title.
    Mr. Chairman, the most significant benefits to Reclamation 
in this title transfer is that we would get out of the 
management and oversight obligations as well as being relieved 
of the liability for this project. If the liability for the 
drains is left with the United States, that benefit is not 
realized. In summary, it is our view that the Districts should 
take title to the entire project, including the drains.
    (3) Trust Funds: S. 1612 as introduced establishes the 
Nebraska-Middle Loup River Community Environmental Trust and 
the Nebraska-Middle Loup River Game and Parks Trusts--which 
propose to undertake--at a local level--a number of important 
activities including stabilizing surface and groundwater 
supplies, conserving water, improving and enhancing fisheries 
and recreational opportunities. While we applaud these program 
goals, we are concerned that S. 1612 proposes to capitalize 
these trust funds with the proceeds from the transfer that 
would otherwise go to the Treasury. The Administration is 
strongly opposed to this provision. As a base criteria of its 
title transfer policy, the Administration requires that the 
Federal Treasury and the taxpayers' financial interests be 
adequately protected.
    Further concerns are raised by the fact that S. 1612 does 
not indicate who would be managing the funds. In previous 
drafts of legislation to transfer title to this project, there 
were provisions indicating what organizations or types of 
organizations would be represented on the entity that 
administers the trust fund. No such provision is included in S. 
    (4) Project Power: As drafted, it is unclear how S. 1612 
deals with issue of the District's ability to continue to 
receive Pick Sloan power at subsidized rates for irrigation 
pumping even though the projects are no longer owned by the 
Federal government. It is the Administration's policy that, 
after title transfer, districts previously receiving pumping 
power would no longer be eligible for the ``project use pumping 
power rate.'' They would be eligible to receive the same amount 
of power as they did when it was a Federal project, but would 
be required to pay the wholesale preference customer rate, 
currently at 14.54 mills/Kwh for this project.
Technical concerns
    In addition to those issues raised above, there are a 
significant number of technical and clarifying concerns that 
need to be addressed. We would be pleased to work with the 
Districts, Senator Kerrey, and the Committee to work to clarify 
or address these concerns which are likely to be technical in 
nature. These issues include, but are not limited to, 
provisions relating to: (1) the drains; (2) the ``obligations'' 
that are ``satisfied'' by this legislation; (3) how remediation 
under the Comprehensive Environmental Response, Compensation 
and Liability Act of 1980 (CERCLA) is carried out; (4) 
crediting of certain items toward payment; (5) references to a 
Memorandum of Agreement; (5) ``Nonreimbursability'' of funds 
deposited into the trust funds; (6) provisions relating to 
funding of planning and the potential implementation of work on 
drains; and (7) eligibility for future benefits under 
Reclamation law.
    At this time I would like to thank Tom Knutson, General 
Manager for the Loup Basin Reclamation District, Senator Kerrey 
and his staff, and Congressman Barrett, sponsor of H.R. 2984 
for their cooperation as we have worked through a variety of 
complicated and technical issues.
    That concludes my testimony. I would be happy to answer any 

                        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. 1612, as 
ordered reported.