Senate Report 109-315 - IRRIGATION DISTRICTS REPAYMENT REVISIONS ACT

[Senate Report 109-315]
[From the U.S. Government Publishing Office]

Calendar No. 558
109th Congress Report
SENATE
2d Session 109-315

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IRRIGATION DISTRICTS REPAYMENT REVISIONS ACT

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July 31, 2006.--Ordered to be printed

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

R E P O R T

[To accompany H.R. 4000]

The Committee on Energy and Natural Resources, to which was
referred the Act (H.R. 4000) to authorize the Secretary of the
Interior to revise certain repayment contracts with the
Bostwick Irrigation District in Nebraska, the Kansas Bostwick
Irrigation District No. 2, the Frenchman-Cambridge Irrigation
District, and the Webster Irrigation District No. 4, all a part
of the Pick-Sloan Missouri Basin Program, and for other
purposes, having considered the same, reports favorably thereon
without amendment and recommends that the Act do pass.

PURPOSE OF THE MEASURE

H.R. 4000 would authorize the Secretary of the Interior to
revise distribution works repayment contracts with the Bostwick
Irrigation District in Nebraska, the Kansas Bostwick Irrigation
District No. 2, the Frenchman-Cambridge Irrigation District,
and the Webster Irrigation District No. 4.

BACKGROUND AND NEED

The Bostwick Irrigation District in Nebraska, the Kansas
Bostwick Irrigation District No. 2, the Frenchman-Cambridge
Irrigation District, and the Webster Irrigation District No. 4
are irrigation districts served by the Pick-Sloan Missouri
Basin Program, a Reclamation Project. All of the irrigation
districts are located in the Republican River basin except for
Webster Irrigation District No. 4, which is located in the
Solomon River basin.
The four districts recently renewed a portion of their
water supply works repayment contracts to include a repayment
term of 40 years. All districts renewed their contract in 2000
except for Webster Irrigation District No. 4, which renewed its
contract in 2002. The districts' repayment obligations for
construction costs associated with distribution works were not
included in the renewal of the water supply works contracts.
Currently, repayment of construction costs associated with
distribution works must be completed between 2009 and 2015,
depending on the particular district. Within five years of the
fulfillment of the districts' distribution works construction
cost obligation, deposits into the distribution works reserve
fund and the district water supply reserve fund are scheduled
to increase significantly. In their testimony before the House
Resources Committee on H.R. 4000, both Reclamation and U.S.
Congressman Jerry Moran testified that the districts would be
unable to meet the current reserve fund obligations.

LEGISLATIVE HISTORY

H.R. 4000 was introduced by Representative Moran for
himself and Representative Osborn and referred to the Committee
on Resources. The House Resources Committee Water and Power
Subcommittee held hearings on the measure on December 7, 2005.
H.R. 4000 was discharged from the House Resources Committee,
passed the House of Representatives and was received by the
Senate on December 19, 2005. A similar measure, S. 1962 was
introduced on November 4, 2005, by Senator Roberts for himself
and Senators Brownback, Hagel and Nelson and referred to the
Committee on Energy and Natural Resources. The Subcommittee on
Water and Power held a hearing on March 30, 2006. The Senate
Committee on Energy and Natural Resources ordered H.R. 4000
favorably reported on May 24, 2006.

COMMITTEE RECOMMENDATION

The Committee on Energy and Natural Resources, in open
business session on May 24, 2006, by a unanimous voice vote of
a quorum present, recommends that the Senate pass H.R. 4000.

SECTION-BY-SECTION ANALYSIS

Section 1 authorizes the Secretary of the Interior to
revise the repayment contract with the Bostwick Irrigation
District in Nebraska (009D6B0121) by equalizing the total
annual repayment obligation for the distribution works
construction charge and the water supply repayment obligation.
The section also authorizes the Secretary of the Interior to
extend the date for adjusting the annual deposits into the
distribution works reserve fund and the district water supply
reserve fund for an additional 10 years.
Section 2 authorizes the Secretary of the Interior to
revise the repayment contract with the Kansas Bostwick
Irrigation District No. 2 (009D6B0120) by equalizing the total
annual repayment obligation for the distribution works
construction charge and the water supply repayment obligation.
The section also authorizes the Secretary of the Interior to
extend the date for adjusting the annual deposits into the
distribution works reserve fund and the district water supply
reserve fund for an additional 10 years.
Section 3 authorizes the Secretary of the Interior to
revise the repayment contract with the Frenchman-Cambridge
Irrigation District (009D6B0122) by equalizing the total annual
repayment obligation for the distribution works construction
charge and the water supply repayment obligation. The section
also authorizes the Secretary of the Interior to extend the
date for adjusting the annual deposits into the distribution
works reserve fund and the district water supply reserve fund
for an additional 10 years.
Section 4 authorizes the Secretary of the Interior to
revise the repayment contract with the Webster Irrigation
District (009D6B0002) by equalizing the total annual repayment
obligation for the distribution works construction charge and
the water supply repayment obligation. The section also
authorizes the Secretary of the Interior to extend the date for
adjusting the annual deposits into the distribution works
reserve fund and the district water supply reserve fund for an
additional 10 years.

COST AND BUDGETARY CONSIDERATIONS

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

H.R. 4000--An act to authorize the Secretary of the
Interior to revise certain repayment contracts with the
Bostwick Irrigation District in Nebraska, the Kansas Bostwick
Irrigation District No. 2, the Frenchman-Cambridge Irrigation
District, and the Webster Irrigation District No. 4, all a part
of the Pick-Sloan Missouri Basin Program, and for other
purposes.
Summary: H.R. 4000 would authorize the Secretary of the
Interior to revise certain repayment contracts with several
irrigation districts that are a part of the Pick-Sloan Missouri
Basin Program. The repayment contracts are for reimbursable
construction costs. This act would amend the current schedule
of repayments by equalizing the amount of annual payments over
the remaining life of the contracts.
Under the legislation, the irrigation districts would make
smaller payments to the federal government during the first 10
years after enactment and larger payments in the later years of
their contracts, compared with the payments due under current
law. Those payments are recorded in the budget as offsetting
receipts (that is, offsets to outlays). Because the act would
reduce the amount of offsetting receipts collected by the
government over the next 10 years, CBO estimates that enacting
H.R. 4000 would increase direct spending by almost $35 million
over the 2006-2016 period. Over the next 35 years, aggregate
receipts to the government would be unchanged, assuming H.R.
4000 is enacted before the end of 2006.
H.R. 4000 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandate Reform Act.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4000 is shown in the following table.
The costs of this legislation fall within budget function 300
(water resources). For this estimate, CBO assumes that H.R.
4000 will be enacted before the end of fiscal year 2006.

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By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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CHANGES IN DIRECT SPENDING

Estimated Budget Authority...................................... 1 1 1 1 * * * * * * *
Estimated Outlays............................................... 1 1 1 1 * * * * * * *
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Note: * = less than $500,000.

Intergovernmental and private-sector impact: H.R. 4000
contains no intergovernmental or private-sector mandates. The
act would benefit some water districts by authorizing the
Secretary of the Interior to revise their repayment contracts
for construction and water supply projects, shifting some
payments into later years.
Estimate prepared by: Federal spending: Gregory Waring;
Impact on state, local, and tribal governments: Lisa Ramirez-
Branum; Impact on the private sector: Fatimot Ladipo.
Estimate approved by: Robert A. Sunshine, 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 H.R. 4000. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant 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 H.R. 4000.

EXECUTIVE COMMUNICATIONS

The testimony provided by the Bureau of Reclamation at the
Water and Power Subcommittee hearing on S. 1962, the Senate
counterpart to H.R. 4000, in the 109th Congress follows:

Statement of John Keys III, Commissioner of Reclamation, Department of
the Interior

Madam. Chairman and Members of the Subcommittee, I am John
Keys, Commissioner of the Bureau of Reclamation. I am pleased
to be here today to give the Administration's view on S. 1962,
a bill to revise certain repayment contracts of four irrigation
districts that are part of the Pick-Sloan Missouri Basin
Program.
The Irrigation Projects Reauthorization Council (IPRC)
represents four member irrigation districts in support of this
legislation. The districts--the Kansas Bostwick Irrigation
District No. 2 and the Webster Irrigation District No. 4, both
in Kansas, and the Bostwick Irrigation District in Nebraska and
the Frenchman-Cambridge Irrigation District (also in Nebraska),
are served by Reclamation projects built as part of the Pick-
Sloan Missouri Basin Program. Webster Irrigation District No. 4
is located in the Solomon River basin; the others are in the
Republican River basin, both tributaries to the Kansas River.
The districts recently renewed their contracts with
Reclamation. The contract renewal addressed repayment of a
portion of the water supply works construction cost over a 40
year term. Webster Irrigation District No. 4 renewed its
contract in 2002; the others renewed their contracts in 2000.
However, each District's repayment of the distribution works
construction cost obligation remained unchanged during contract
renewal. Thus, the remaining term for repayment of the
distribution works is, in each case, significantly less than
that remaining for the water supply works. Under Reclamation
law, the irrigation districts repay irrigation capital costs
without interest charges.
As discussed above, currently each of these districts'
contracts has two different repayment periods: a water supply
works repayment term which extends until 2040 or 2042 (40 years
from when the respective district's contract was renewed) and a
distribution works repayment period which extends 40 years from
their first payment for the distribution works (to sometime
between 2009 and 2015 depending on the particular district).
This legislation would allow the repayment periods for the
distribution works to be extended to match the repayment period
for the water supply works, and allow for equal annual payments
over that period. Additionally, reserve fund payments were
slated to increase significantly in about 5 years, following
scheduled completion of repayment of the distribution works
construction costs obligation. Anticipating that this time
horizon is too short for the districts to ensure financial
recovery sufficient to make the increased reserve fund
payments, this bill delays these increases for an additional 10
years.
Drought conditions in southwest Nebraska and northwest
Kansas have significantly impacted inflows to reservoirs
providing a water supply to Kansas Bostwick Irrigation
District, Bostwick Irrigation District in Nebraska, Frenchman-
Cambridge Irrigation District and Webster Irrigation District.
Annual inflow into reservoirs providing these districts' water
supplies has reached new historical lows in the last three
years. Four of the five canals in the Bostwick Irrigation
District in Nebraska did not divert water the past two years.
The Kansas Bostwick Irrigation District has not delivered a
substantial amount of water to acres above Lovewell Reservoir
the past two years. Three of the four canals in the Frenchman-
Cambridge Irrigation District have not diverted any water the
past three years. The Webster Irrigation District did not
divert water into Osborne Canal this past year.
Despite the declining water supply available to these
Projects, the districts' contracts require that they pay a
portion of annual operation and maintenance costs for the water
supply works and repay construction cost obligations to the
United States. This payment obligation to Reclamation is in
addition to the districts' responsibility for 100 percent of
the operation and maintenance costs of the distribution works
and those water supply works that have been transferred to the
districts. Even with no water or a diminished supply, the need
for maintenance of these facilities continues.
The districts assess their irrigators in order to pay the
districts' annual expenses and repayment obligations. These
irrigators have received a diminished or no supply in recent
years. For the last couple of years most of these districts
have sought and been granted annual deferments to their
payments under Reclamation law (the Act of September 21, 1959,
73 Stat. 584). In order to grant a deferment, Reclamation
requires a determination that payment of the installments will
cause an undue burden on the water users and that there is no
alternative source of funds available to pay the installments.
When an annual payment is deferred, it is rescheduled to be
repaid as quickly as possible within the remaining term of the
contract. The deferments have helped the districts to weather
the drought in the short run, but have also caused the annual
distribution works payments to be substantially larger over
their remaining repayment period, because deferments do not
extend the total time period allowed for repayment.
For example, Kansas-Bostwick Irrigation District #2 would,
after execution of the annual deferment currently being
processed, have annual distribution works payments of $421,353
due through 2015, with annual water supply works payments of
$21,841 through 2015, increasing to $96,512 for 2016 and 2017,
then decreasing to $85,591 from 2018 through 2040. This results
in an annual repayment total for this district of $443,194
through 2015 when the distribution works are scheduled to pay
out in the absence of this legislation. If S. 1962 becomes law,
the district will have consistent annual payments of $188,387
from 2006 through 2040, thus providing relief to help the
district through the current financial crisis.
The total repayment obligation for the distribution works
and water supply works for all four districts together is
$12,442,447. This legislation does not change the dollar amount
of this repayment obligation. However, because Reclamation law
provides that irrigators do not pay interest on capital costs,
this bill would reduce the present value of expected Treasury
receipts. The difference between the present value of the
payout stream of the contracts as they currently exist and as
they would be amended by this bill is $1,620,637. This assumes
that, in the absence of this legislation, the districts would
pay the minimum payments due on time over the life of these
contracts.
The IPRC and the participating districts have done an
exemplary job of communicating with Reclamation as they sought
this legislation. They contacted us in early 2005 to explore
what opportunities were available to them under existing law to
address their financial concerns. Other than the deferments
discussed above, none existed. Reclamation also very much
appreciates the manner by which IPRC has kept us informed and
worked with us to identify issues. They addressed the possible
effect to power repayments through ``aid to irrigation'' early
on by working closely with Midwest Electric Consumers
Association and with Reclamation. It is our understanding that
``aid to irrigation'' is not affected by this legislation.
The legislation would provide needed financial relief to
the districts by rescheduling their financial obligations to
the United States. Extension of the repayment period will not
be a permanent solution to the water scarcity facing these
districts. However, taking this action will provide needed
relief for the districts and increase the likelihood that they
will be able to attain long-term financial viability and
fulfill their repayment obligation to the United States.
Therefore, the Department supports this legislation.
I am happy to respond to 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 Act H.R. 4000, as
ordered reported.