[House Report 111-308]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    111-308

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



 
           BONNEVILLE UNIT CLEAN HYDROPOWER FACILITATION ACT

                                _______
                                

October 21, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Rahall, from the Committee on Natural Resources, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2008]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Natural Resources, to whom was referred the 
bill (H.R. 2008) to authorize the Secretary of the Interior to 
facilitate the development of hydroelectric power on the 
Diamond Fork System of the Central Utah Project, 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 all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Bonneville Unit Clean Hydropower 
Facilitation Act''.

SEC. 2. DIAMOND FORK SYSTEM DEFINED.

  For the purposes of this Act, the term ``Diamond Fork System'' means 
the facilities described in chapter 4 of the October 2004 Supplement to 
the 1988 Definite Plan Report for the Bonneville Unit.

SEC. 3. COST ALLOCATIONS.

  Notwithstanding any other provision of law, in order to facilitate 
hydropower development on the Diamond Fork System, the amount of 
reimbursable costs allocated to project power in Chapter 6 of the Power 
Appendix in the October 2004 Supplement to the 1988 Bonneville Unit 
Definite Plan Report, with regard to power development within the 
Diamond Fork System, shall be considered final costs as well as costs 
in excess of the total maximum repayment obligation as defined in 
section 211 of the Central Utah Project Completion Act of 1992 (Public 
Law 102-575), and shall be subject to the same terms and conditions.

SEC. 4. NO PURCHASE OR MARKET OBLIGATION; NO COSTS ASSIGNED TO POWER.

  Nothing in this Act shall obligate the Western Area Power 
Administration to purchase or market any of the power produced by the 
Diamond Fork power plant and none of the costs associated with 
development of transmission facilities to transmit power from the 
Diamond Fork power plant shall be assigned to power for the purpose of 
Colorado River Storage Project ratemaking.

SEC. 5. PROHIBITION ON TAX-EXEMPT FINANCING.

  No facility for the generation or transmission of hydroelectric power 
on the Diamond Fork System may be financed or refinanced, in whole or 
in part, with proceeds of any obligation--
          (1) the interest on which is exempt from the tax imposed 
        under chapter 1 of the Internal Revenue Code of 1986, or
          (2) with respect to which credit is allowable under subpart I 
        or J of part IV of subchapter A of chapter 1 of such Code.

SEC. 6. REPORTING REQUIREMENT.

   If, 24 months after the date of the enactment of this Act, 
hydropower production on the Diamond Fork System has not commenced, the 
Secretary of the Interior shall submit a report to the Committee on 
Natural Resources of the House of Representatives and the Committee on 
Energy and Natural Resources of the Senate stating this fact, the 
reasons such production has not yet commenced, and a detailed timeline 
for future hydropower production.

                          PURPOSE OF THE BILL

    The purpose of H.R. 2008 is to authorize the Secretary of 
the Interior to facilitate the development of hydroelectric 
power on the Diamond Fork System of the Central Utah Project.

                  BACKGROUND AND NEED FOR LEGISLATION

    Under current law, the costs of constructing Bureau of 
Reclamation projects that serve multiple purposes are allocated 
among the project purposes and participants. Some project 
purposes are reimbursable, including irrigation, hydroelectric 
power production, and municipal and industrial water use. The 
reimbursable costs of Bureau of Reclamation projects are borne 
by the project beneficiaries and are paid based on contracts 
into which the beneficiaries enter. Depending on the type of 
project use, however, the beneficiaries may pay substantially 
different portions of the project cost.
    Water users repay the capital cost of a project based on 
whether the water is used for municipal and industrial purposes 
(M&I) or instead used for irrigating agricultural lands. M&I 
contractors are responsible for repaying the cost of a project 
that is allocated to them plus interest that accrues during the 
repayment period. Irrigators repay their allocated share of a 
project cost without interest. The irrigators' repayment, 
however, is typically subsidized by hydroelectric power 
production under a feature of current law called ``ability to 
pay,'' also referred to as ``irrigation assistance.''
    Hydroelectric power beneficiaries must repay their share of 
the construction costs of a project, with interest, over a set 
repayment period by recovering those costs through electricity 
rates. They also pay any amount of the irrigators' costs of a 
project that irrigators do not have the ability to pay. Any of 
the subsidized costs of a project shifted to hydroelectric 
power beneficiaries under irrigation assistance are paid over 
the repayment period, but without interest.
    The Diamond Fork System is a completed feature of the 
Bonneville Unit and is located in Utah County, Utah. It has the 
capacity to generate up to 50 megawatts of hydroelectric power. 
The Colorado River Storage Project Act of 1956 authorized power 
as a project purpose and required that project costs be 
allocated for repayment by power generation. These projects 
costs have increased over the decades of construction of the 
Bonneville Unit and now make hydroelectric power generation at 
two plants on the Diamond Fork System financially unfeasible. 
Under current law, approximately $161 million would be 
allocated to power beneficiaries if they install turbines at 
the two plants.
    H.R. 2008 would declare as final the allocation of $161 
million to hydroelectric power generation on the Diamond Fork 
System and would defer those costs indefinitely in accordance 
with section 211 of the Central Utah Project Completion Act of 
1992. The effect of this deferment is that any power developed 
on the Diamond Fork System would not be burdened with the $161 
million of debt or with any other reallocation of costs once 
the Bonneville Unit is substantially complete. Enacting the 
legislation would help facilitate the development of 50 
megawatts of clean hydroelectric power while generating revenue 
for the government for the use of its water facilities.

                            COMMITTEE ACTION

    H.R. 2008 was introduced on April 21, 2009, by Rep. Jim 
Matheson (D-UT). The bill was referred to the Committee on 
Natural Resources, and within the Committee to the Subcommittee 
on Water and Power. On May 14, 2009, the Subcommittee held a 
hearing on the bill.
    On September 10, 2009, the Subcommittee was discharged from 
further consideration of H.R. 2008 and the full Natural 
Resources Committee met to consider the bill. Subcommittee 
Chairwoman Grace Napolitano (D-CA) offered an amendment in the 
nature of a substitute to the bill, which adds an explicit 
definition of the Diamond Fork System, prohibits the use of 
tax-exempt financing to construct hydroelectric power 
facilities, and requires the Administration to report to the 
Congress on hydroelectric power development on the system 24 
months after the date of enactment of the legislation. The 
amendment in the nature of a substitute was adopted by 
unanimous consent. The bill, as amended, was then ordered 
favorably reported to the House of Representatives by unanimous 
consent.

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    Section 1 provides that this Act may be cited as the 
``Bonneville Unit Clean Hydropower Facilitation Act.''

Section 2. Diamond Fork System defined

    Section 2 defines the Diamond Fork System as the facilities 
described in chapter 4 of the October 2004 Supplement to the 
1988 Definite Plan Report for the Bonneville Unit.

Section 3. Cost allocations

    Section 3 declares the reimbursable costs allocated to 
project power on the Diamond Fork System as final, as well as 
in excess of the total maximum repayment obligation as defined 
in section 211 of the Central Utah Project Completion Act of 
1992 (Public Law 102-575).

Section 4. No purchase or market obligation; no costs assigned to power

    Section 4 allows the Western Area Power Administration to 
decline to purchase power that is developed on the Diamond Fork 
System. Section 4 also clarifies that none of the costs of 
transmission development on the Diamond Fork System will be 
assigned to power for the purpose of Colorado River Storage 
Project ratemaking.

Section 5. Prohibition on tax-exempt financing

    Section 5 prohibits entities from using tax-exempt 
financing to fund any portion of the development of 
hydroelectric power or transmission on the Diamond Fork System.

Section 6. Reporting requirement

    Section 6 requires the Secretary of the Interior to report 
on the status of hydroelectric power development on the Diamond 
Fork System if, after 24 months, hydroelectric power production 
has not commenced.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of Rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Article I, section 8 of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(2) 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 this bill. However, clause 3(d)(3)(B) 
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 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill is to authorize the Secretary of the 
Interior to facilitate the development of hydroelectric power 
on the Diamond Fork System of the Central Utah Project.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII 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 this bill from the Director of the Congressional Budget 
Office:

H.R. 2008--Bonneville Unit Clean Hydropower Facilitation Act

    Summary: H.R. 2008 would reduce the amounts that developers 
of hydropower resources at the Diamond Fork project in Utah 
would have to pay to the U.S. Treasury for certain reimbursable 
expenses. (Reimbursable expenses are the portion of a project's 
costs that are repaid to the federal government by other 
entities.) Under current law, a sponsor of this project would 
have to pay about $5.3 million annually for a period of 50 
years following the start of electricity production. H.R. 2008 
would effectively eliminate that obligation. Instead, sponsors 
would be required to pay certain annual fees, which are 
estimated to total about $400,000 a year, adjusted for 
inflation, beginning in 2015.
    CBO expects that enactment of H.R. 2008 would lead to the 
development of hydropower facilities by a nonfederal entity 
within a few years, sooner than expected under current law. In 
addition, CBO estimates that the government would receive 
payments from the hydropower developer of about $2 million over 
the 2010-2019 period.
    H.R. 2008 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The costs of this 
legislation fall within budget function 300 (natural resources 
and environment). CBO estimates that enacting this bill would 
increase offsetting receipts (a credit against direct spending) 
by $400,000 a year over the 2015-2019 period, or a total 
collection of $2 million.
    Basis of Estimate: Based on information from the Bureau of 
Reclamation, CBO expects that the federal government is 
unlikely--under current law--to develop the hydropower 
resources of the Diamond Fork project for at least the next 10 
years. Although there are no formal development proposals 
currently being considered by the bureau, two nonfederal 
entities--the Central Utah Water Conservancy District and the 
Strawberry Water Users' Association--have expressed interest in 
developing those resources since at least 1995. Whether one of 
those entities or another nonfederal developer will propose a 
hydroelectric project at Diamond Fork under current law over 
the next decade is unclear. Among the issues that have delayed 
development of the site is a requirement to pay the Treasury 
for the federal government's power-related investments in the 
water project. According to the bureau, such payments would 
begin after the hydroelectric facilities go into service and 
would average $5.3 million a year for 50 years.
    CBO expects that eliminating the required annual payment to 
the Treasury would encourage nonfederal entities to pursue 
development of the hydropower resources at Diamond Fork. 
Assuming that H.R. 2008 is enacted near the end of 2009, we 
expect that the Bureau of Reclamation would receive a proposal 
to develop the hydroelectric resources within a year or two and 
that such a project could be completed by 2015. In that case, 
the government would collect annual fees from the project 
developer totaling about $400,000 a year (adjusted for 
inflation) for the life of the project.
    Intergovernmental and private-sector impact: H.R. 2008 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Previous CBO Estimate: On June 22, 2009, CBO transmitted a 
cost estimate for H.R. 2008 as introduced in the House of 
Representatives on April 21, 2009. While the two versions of 
the bill are similar, in the cost estimate for the introduced 
bill, the Joint Committee on Taxation estimated that the use of 
tax-exempt financing to develop the Diamond Fork project would 
result in a loss of $9 million in federal revenues over the 
2010-2019 period. The version of H.R. 2008 that was ordered 
reported by the House Committee on Natural Resources would 
prohibit the use of tax-exempt financing to develop this 
project.
    Estimate Prepared by: Federal Costs: Aurora Swanson; Impact 
on State, Local, and Tribal Governments: Melissa Merrell; 
Impact on the Private Sector: Amy Petz.
    Estimate Approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                           EARMARK STATEMENT

    H.R. 2489 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.

                                  
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