[House Report 112-301]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    112-301

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



 
 BUREAU OF RECLAMATION SMALL CONDUIT HYDROPOWER DEVELOPMENT AND RURAL 
                            JOBS ACT OF 2011

                                _______
                                

December 1, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hastings of Washington, from the Committee on Natural Resources, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2842]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 2842) to authorize all Bureau of Reclamation 
conduit facilities for hydropower development under Federal 
Reclamation law, and for other purposes, 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 ``Bureau of Reclamation Small Conduit 
Hydropower Development and Rural Jobs Act of 2011''.

SEC. 2. AUTHORIZATION.

  Section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 
485h(c)) is amended--
          (1) by striking ``The Secretary is authorized to enter into 
        contracts to furnish water'' and inserting ``(1) The Secretary 
        is authorized to enter into contracts to furnish water'';
          (2) by striking ``(1) shall'' and inserting ``(A) shall'';
          (3) by striking ``(2) shall'' and inserting ``(B) shall'';
          (4) by striking ``respecting the terms of sales of electric 
        power and leases of power privileges shall be in addition and 
        alternative to any authority in existing laws relating to 
        particular projects'' and inserting ``respecting the sales of 
        electric power and leases of power privileges shall be an 
        authorization in addition to and alternative to any authority 
        in existing laws related to particular projects, including 
        small conduit hydropower development''; and
          (5) by adding at the end the following:
  ``(2) When carrying out this subsection, the Secretary shall first 
offer the lease of power privilege to an irrigation district or water 
users association operating the applicable transferred work, or to the 
irrigation district or water users association receiving water from the 
applicable reserved work. The Secretary shall determine a reasonable 
time frame for the irrigation district or water users association to 
accept or reject a lease of power privilege offer.
  ``(3) The National Environmental Policy Act of 1969 (42 U.S.C. 4321 
et seq.) shall not apply to small conduit hydropower development, 
excluding siting of associated transmission on Federal lands, under 
this subsection.
  ``(4) The Power Resources Office of the Bureau of Reclamation shall 
be the lead office of small conduit hydropower policy and procedure-
setting activities conducted under this subsection.
  ``(5) Nothing in this subsection shall obligate the Western Area 
Power Administration, the Bonneville Power Administration, or the 
Southwestern Power Administration to purchase or market any of the 
power produced by the facilities covered under this subsection and none 
of the costs associated with production or delivery of such power shall 
be assigned to project purposes for inclusion in project rates.
  ``(6) Nothing in this subsection shall alter or impede the delivery 
and management of water by Bureau of Reclamation facilities, as water 
used for conduit hydropower generation shall be deemed incidental to 
use of water for the original project purposes. Lease of power 
privilege shall be made only when, in the judgment of the Secretary, 
the exercise of the lease will not be incompatible with the purposes of 
the project or division involved, nor shall it create any unmitigated 
financial or physical impacts to the project or division involved. The 
Secretary shall notify and consult with the irrigation district or 
legally organized water users association operating the transferred 
work in advance of offering the lease of power privilege and shall 
prescribe such terms and conditions that will adequately protect the 
planning, design, construction, operation, maintenance, and other 
interests of the United States and the project or division involved.
  ``(7) Nothing in this subsection shall alter or affect any existing 
agreements for the development of conduit hydropower projects or 
disposition of revenues.
  ``(8) In this subsection:
          ``(A) Conduit.--The term `conduit' means any Bureau of 
        Reclamation tunnel, canal, pipeline, aqueduct, flume, ditch, or 
        similar manmade water conveyance that is operated for the 
        distribution of water for agricultural, municipal, or 
        industrial consumption and not primarily for the generation of 
        electricity.
          ``(B) Irrigation district.--The term `irrigation district' 
        means any irrigation, water conservation or conservancy 
        district, multicounty water conservation or conservancy 
        district, or any separate public entity composed of two or more 
        such districts and jointly exercising powers of its member 
        districts.
          ``(C) Reserved work.--The term `reserved work' means any 
        conduit that is included in project works the care, operation, 
        and maintenance of which has been reserved by the Secretary, 
        through the Commissioner of the Bureau of Reclamation.
          ``(D) Transferred work.--The term `transferred work' means 
        any conduit that is included in project works the care, 
        operation, and maintenance of which has been transferred to a 
        legally organized water users association or irrigation 
        district.
          ``(E) Secretary.--The term `Secretary' means the Secretary of 
        the Interior.
          ``(F) Small conduit hydropower.--The term `small conduit 
        hydropower' means a facility capable of producing 1.5 megawatts 
        or less of electric capacity.''.

                          Purpose of the Bill

    The purpose of H.R. 2842, as ordered reported, is to 
authorize all Bureau of Reclamation conduit facilities for 
hydropower development under federal Reclamation law.

                  Background and Need for Legislation

    Congress established the Bureau of Reclamation 
(Reclamation) in 1902 to ``make the desert bloom.'' To this 
day, Reclamation's water projects play a significant role in 
the settlement of the West by providing a reliable source of 
water and power for irrigated agriculture and rural and urban 
communities. While the larger, multi-purpose projects such as 
Grand Coulee and Hoover Dams are relatively well-known, 
Reclamation has a number of much smaller projects that 
significantly contribute to the agency's original mission.
    Many of these smaller, single-purpose water supply projects 
were either authorized by Congress or created administratively 
over the last century. At the time of their creation, 
hydropower was usually not envisioned as a project component 
due to economics, lack of technology and other factors. Today, 
with the improved ability to harness the energy of moving water 
in canals and pipelines (collectively known as ``conduits''), 
many are looking at hydropower development on these smaller 
projects. Combined with non-federal conduits, there is enormous 
potential to develop vast amounts of hydropower at existing 
water supply infrastructure. For example, in the State of 
Colorado alone, over 1,400 megawatts--or the equivalent of the 
hydropower output of Glen Canyon Dam on the Colorado River--
could be produced from conduit hydropower development.
    H.R. 2842, as amended, seeks to jumpstart hydropower 
development on Reclamation conduits by reducing unnecessary and 
duplicative administrative and regulatory costs while 
protecting the original Congressionally-authorized purposes of 
these facilities from any unmitigated financial or physical 
impacts as a result of such development. The legislation makes 
it clear that hydropower is explicitly authorized at 
Reclamation's conduits. This authorization would allow 
Reclamation to issue a ``lease of power privilege,'' which 
would give a non-federal entity the right to generate 
hydropower and pay a rental fee to the federal government for 
such generation at a specific Reclamation facility. The 
legislation requires Reclamation to offer the lease of power 
privilege first to the entity operating the conduit or the 
conduit's direct beneficiaries. Most Reclamation water supply 
projects have an arrangement where operation and maintenance 
activities are transferred to the local water beneficiary as a 
way to reduce paperwork and other costs. This would 
significantly decrease conduit hydropower planning and study 
time by reducing staffing costs and time affiliated with 
analyzing competing and multiple conduit development 
applications. If the irrigation district refuses development, 
Reclamation could consider other proposals.
    The bill also attempts to reduce duplicative regulatory 
costs and paperwork while protecting the environment. A 
substantial regulatory barrier to future conduit hydropower 
development is duplicative environmental analysis. The 
hydropower units envisioned in H.R. 2842 would be installed on 
already disturbed ground within existing man-made facilities 
that do not contain endangered fish and wildlife. In addition, 
the water projects in which the hydropower units would be 
contained have already gone through federal environmental 
review. Despite these facts, another National Environmental 
Policy Act (NEPA) analysis must still be done under existing 
federal regulations. This has created a chilling effect on 
hydropower investment. For example, at a Water and Power 
Subcommittee hearing earlier this year, one witness indicated 
that installing 15 very small hydropower units on a nearby 
Reclamation canal system in Arizona would cost over $450,000--
or $30,000 per unit--for additional NEPA reviews that would 
ultimately conclude no environmental impacts. These paperwork 
costs would be greater than the actual capital cost of the 
hydropower units.
    These costs and their time-consuming nature help make most 
conduit hydropower installations cost prohibitive. Reclamation 
has failed to exempt these facilities from NEPA, despite the 
fact that the Federal Energy Regulatory Commission (FERC) 
provides for such exemptions. For this reason, H.R. 2842 
exempts ``small conduit hydropower'' (1.5 megawatts or less) 
from NEPA, while retaining NEPA application for larger 
installations and for transmission siting on federal land. Each 
facility would still be subject to environmental laws such as 
the Clean Water Act and other applicable federal and state laws 
that could require permits. The Minority unsuccessfully offered 
an amendment to remove the bill's NEPA exemption and replace it 
with an unworkable and more expensive NEPA regulatory 
arrangement and one different from FERC's NEPA exemption 
guidelines. That amendment was defeated on a bipartisan basis.
    The net effect of H.R. 2842 is that federal conduit 
hydropower will now be a cost-effective means to produce 
renewable and emissions-free energy that will empower local 
economic development and jobs while generating federal revenue 
and protecting the environment.

                            Committee Action

    H.R. 2842 was introduced on September 6, 2011, by 
Congressman Scott Tipton (R-CO). The bill was referred to the 
Committee on Natural Resources, and within the Committee to the 
Subcommittee on Water and Power. On September 14, 2011, the 
Subcommittee on Water and Power held a hearing on the bill. On 
October 5, 2011, the Full Natural Resources Committee met to 
consider the bill. The Subcommittee on Water and Power was 
discharged by unanimous consent. Congressman Tom McClintock (R-
CA) offered en bloc amendment designated .072 to the bill; the 
amendment was adopted by voice vote. Congressman Ed Markey (D-
MA) offered amendment designated .001 to the bill; the 
amendment was not adopted by a bipartisan roll call vote of 10 
to 28, as follows:


    The bill was then ordered favorably reported to the House 
of Representatives by a bipartisan roll call vote of 30 to 12, 
as follows:


                      Section-by-Section Analysis


Section 1. Short title

    This Act may be cited as the ``Bureau of Reclamation Small 
Conduit Hydropower Development and Rural Jobs Act of 2011.''

Section 2. Authorization

    Section 2 amends Section 9(c) of the Reclamation Project 
Act of 1939 to authorize ``power'' as a function at all Bureau 
of Reclamation conduits. This authorization will allow the 
agency to pursue hydropower development on conduits under its 
exclusive jurisdiction and within the framework of federal 
reclamation law.
    This section further amends Section 9(c) of the Reclamation 
Project Act of 1939 by adding a number of new provisions as it 
relates to small conduit hydropower development. Given the 
exclusive hydropower authorization, subsection 2 added by this 
bill requires the Bureau of Reclamation to offer the ``lease of 
power privilege'' (lease) first to the entity operating the 
conduit or the conduit's direct water user beneficiaries. This 
provision, based on legislative precedent, reinforces and 
strengthens Reclamation's current arrangement of giving 
irrigation districts the preference to lease hydropower 
projects on canals that the districts operate and maintain on 
behalf of the federal government. The Committee understands 
that these longtime operators/beneficiaries know the operating 
intricacies and primary water supply features of the respective 
Reclamation facility, as opposed to some outside, non-local 
interests not invested in water supply delivery. As such, the 
Committee expects Reclamation to work cooperatively and 
communicate directly with these operators/beneficiaries prior 
to and during the lease process, especially because a conduit's 
primary purpose is to deliver water. This provision does not 
prohibit the operators/beneficiaries of the conduit facility 
from participating with any third-party interest in the 
hydropower development on the respective conduit. The Committee 
also expects Reclamation to undergo a good faith effort to 
allow the operators/beneficiaries a reasonable and justifiable 
time frame to accept or reject a conduit lease of power 
privilege offer. Such time frames would factor in the 
complexity of the facility, prior communication with, any 
stated concerns of the operators/beneficiaries and other 
matters.
    This section also streamlines the duplicative federal 
regulatory process impacting hydropower development covered in 
the bill. As referenced above, the facilities are man-made 
canals that have already gone through the National 
Environmental Policy Act (NEPA) process. Unlike the Federal 
Energy Regulatory Commission, Reclamation does not 
categorically exempt these facilities from additional NEPA 
analysis. As a result, this subsection exempts only ``small 
conduit hydropower'' (1.5 megawatt or less), while retaining 
NEPA application for transmission siting on federal land.
    This section also designates the Power Resources Office in 
Reclamation's Denver headquarters as the lead office for small 
conduit development. Unfortunately, a number of irrigation 
districts pursuing hydropower have been unable to receive 
uniform answers from Reclamation on conduit development. This 
provision will set up a centralized location for uniform policy 
and procedure-setting purposes, yet does not prohibit area 
offices from implementing specific conduit development.
    Section 2 clarifies that the Western Area Power 
Administration, the Bonneville Power Administration and the 
Southwestern Power Administration are not obligated to purchase 
or market the conduit hydropower generated at Reclamation 
facilities and that none of the costs associated with the 
generation shall be assigned to these agencies' power rates. 
This provision intends to allow the free market to decide who 
will purchase the conduit hydropower.
    This section also provides a number of water supply 
savings. These provisions specifically ensure conduit 
hydropower development will not harm or impact existing water 
supplies and water deliveries and acknowledges that water used 
for conduit hydropower generation is incidental to water supply 
purposes. This incidental purpose specifically means hydropower 
development is subordinate to the original Congressionally-
authorized water supply project purposes.
    The provisions also make clear that Reclamation shall 
notify and consult with the applicable water users benefitting 
from the conduit. The Committee expects the agency to 
communicate in written and verbal form with the operators and 
beneficiaries of a Reclamation conduit facility prior to 
issuing any lease of power privilege or when identifying a 
conduit for potential hydropower development. These operators/
beneficiaries are acutely aware of facility operations and 
would provide valuable knowledge and experience to determine 
the feasibility of the contemplated small-scale hydropower 
development.
    The provisions also require the federal government to 
completely protect the planning, design, construction, 
operation, maintenance and other interests of the federally 
owned conduit. The Committee expects Reclamation to work with 
the applicable conduit operator/beneficiary on these terms and 
conditions prior to issuance. The Committee also expects that 
such terms and conditions will be written and detailed in 
nature, mandatory for the conduit hydropower developer, and 
shall be enforced by Reclamation. The Committee is aware that 
Reclamation has come under significant and justified criticism 
for not adequately communicating with operators/beneficiaries 
on existing conduit hydropower projects. H.R. 2842 seeks to 
improve the current process.
    Section 2 also ensures that nothing in the bill shall alter 
or affect any existing agreements for the development of 
conduit hydropower projects or disposition of revenues.
    Finally, the section provides definitions for terms used in 
the bill.

            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.

                    Compliance With House Rule XIII

    1. Cost of Legislation. Clause 3(d)(1) 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)(2)(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. 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. 2842--Bureau of Reclamation Small Conduit Hydropower Development 
        and Rural Jobs Act of 2011

    Summary: CBO estimates that enacting H.R. 2842 would 
increase offsetting receipts to the government by $5 million 
over the 2012-2021 period by authorizing the Bureau of 
Reclamation to permit all nonfederal development of hydropower 
at facilities owned by the bureau. Pay-as-you-go procedures 
apply to this legislation because it would increase offsetting 
receipts (a credit against direct spending). Enacting the bill 
would not affect revenues.
    H.R. 2842 would authorize the Bureau of Reclamation to 
permit private entities to develop small hydropower units on 
all irrigation canals and conduits under the agency's 
jurisdiction. Under current law, the bureau or the Federal 
Energy Regulatory Commission (FERC) has jurisdiction over 
hydropower development at such facilities. H.R. 2842 would 
clarify that the jurisdiction for small hydropower development 
on all bureau irrigation canals and conduits lies solely with 
the bureau. CBO expects that the change would increase agency 
receipts from hydropower development because the federal 
government collects no funds from project developers if a 
project is authorized by FERC. CBO estimates that additional 
annual lease payments to the bureau would reach almost $1 
million by 2018 and increase to $2 million by 2021.
    H.R. 2842 contains no intergovernmental or private-sector 
mandates as defined in Unfunded Mandates Reform Act (UMRA) and 
would impose no costs on state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 2842 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--
                                                             -------------------------------------------------------------------------------------------
                                                               2012   2013   2014   2015   2016   2017   2018   2019   2020   2021  2012-2016  2012-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority..................................      0      0      0      0      *      *     -1     -1     -1     -2         0         -5
Estimated Outlays...........................................      0      0      0      0      *      *     -1     -1     -1     -2         0         -5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = between -$500,000 and zero.

    Basis of estimate: For this estimate we assume H.R. 2842 
will be enacted before the end of calendar year 2011. Based on 
information from the Bureau of Reclamation, CBO estimates that 
enacting the bill would result in additional collections to the 
federal government under the bureau's authority to share in the 
receipts from electricity sales that are generated at certain 
water projects that the agency controls. (FERC has no such 
authority to share receipts from projects it authorized.)
    Typically the bureau's agreements with developers of 
hydropower facilities on small conduits generate annual 
receipts to the federal government ranging from $15,000 to a 
few hundred thousand dollars depending on the capacity of the 
facility. Selecting the lessee, negotiating the leasing 
contract, and constructing new facilities takes anywhere from 
three to five years depending on the size of the project. Under 
the legislation, CBO expects that the federal government would 
receive some additional receipts beginning four years after 
enactment. We estimate that new facilities would begin to pay 
lease fees to the federal government beginning in 2016 and 
reach about $2 million by the end of 2021.
    Pay-as-you-go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. H.R. 2842 would increase offsetting receipts (a 
credit against direct spending) beginning in 2016 (receipts in 
2016 and 2017 would not be significant). The budgetary changes 
that are subject to those pay-as-you-go procedures are shown in 
the following table.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2842 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATURAL RESOURCES ON OCTOBER 5, 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       By fiscal year, in millions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               2012   2013   2014   2015   2016   2017   2018   2019   2020   2021  2012-2016  2012-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact..............................      0      0      0      0      0      0     -1     -1     -1     -2         0         -5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 2842 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    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.

    2. Section 308(a) of 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. CBO estimates that 
enacting H.R. 2842 would increase offsetting receipts to the 
government by $5 million over the 2012-2021 period by 
authorizing the Bureau of Reclamation to permit all nonfederal 
development of hydropower at facilities owned by the bureau. 
Pay-as-you-go procedures apply to this legislation because it 
would increase offsetting receipts (a credit against direct 
spending). Enacting the bill would not affect revenues.
    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, as ordered reported, is to authorize 
all Bureau of Reclamation conduit facilities for hydropower 
development under federal Reclamation law.

                           Earmark Statement

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

                Preemption of State, Local or Tribal Law

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

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

            SECTION 9 OF THE RECLAMATION PROJECT ACT OF 1939

  Sec. 9 (a) * * *

           *       *       *       *       *       *       *

  (c) [The Secretary is authorized to enter into contracts to 
furnish water] (1)  The Secretary is authorized to enter into 
contracts to furnish water for municipal water supply or 
miscellaneous purposes: Provided, That any such contract either 
[(1)] (A) shall require repayment to the United States, over a 
period of not to exceed forty years from the year in which 
water is first delivered for the use of the contracting party, 
with interest not exceeding the rate of 3\1/2\ per centum per 
annum if the Secretary determines an interest charge to be 
proper, of an appropriate share as determined by the Secretary 
of that part of the construction costs allocated by him to 
municipal water supply or other miscellaneous purposes; or 
[(2)] (B) shall be for such periods, not to exceed forty years, 
and at such rates as in the Secretary's judgment will produce 
revenues at least sufficient to cover an appropriate share of 
the annual operation and maintenance cost and an appropriate 
share of such fixed charges as the Secretary deems proper, and 
shall require the payment of said rates each year in advance of 
delivery of water for said year. Any sale of electric power or 
lease of power privileges, made by the Secretary in connection 
with the operation of any project or division of a project, 
shall be for such periods, not to exceed forty years, and at 
such rates as in his judgment will produce power revenues at 
least sufficient to cover an appropriate share of the annual 
operation and maintenance cost, interest on an appropriate 
share of the construction investment at not less than 3 per 
centum per annum, and such other fixed charges as the Secretary 
deems proper: Provided further, That in said sales or leases 
preference shall be given to municipalities and other public 
corporations or agencies; and also to cooperatives and other 
nonprofit organizations financed in whole or in part by loans 
made pursuant to the Rural Electrification Act of 1936 and any 
amendments thereof. Nothing in this subsection shall be 
applicable to provisions in existing contracts, made pursuant 
to law, for the use of power and miscellaneous revenues of a 
project for the benefit of users of water from such project. 
The provisions of this subsection [respecting the terms of 
sales of electric power and leases of power privileges shall be 
in addition and alternative to any authority in existing laws 
relating to particular projects] respecting the sales of 
electric power and leases of power privileges shall be an 
authorization in addition to and alternative to any authority 
in existing laws related to particular projects, including 
small conduit hydropower development. No contract relating to 
municipal water supply or miscellaneous purposes or to electric 
power or power privileges shall be made unless, in the judgment 
of the Secretary, it will not impair the efficiency of the 
project for irrigation purposes.
  (2) When carrying out this subsection, the Secretary shall 
first offer the lease of power privilege to an irrigation 
district or water users association operating the applicable 
transferred work, or to the irrigation district or water users 
association receiving water from the applicable reserved work. 
The Secretary shall determine a reasonable time frame for the 
irrigation district or water users association to accept or 
reject a lease of power privilege offer.
  (3) The National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.) shall not apply to small conduit hydropower 
development, excluding siting of associated transmission on 
Federal lands, under this subsection.
  (4) The Power Resources Office of the Bureau of Reclamation 
shall be the lead office of small conduit hydropower policy and 
procedure-setting activities conducted under this subsection.
  (5) Nothing in this subsection shall obligate the Western 
Area Power Administration, the Bonneville Power Administration, 
or the Southwestern Power Administration to purchase or market 
any of the power produced by the facilities covered under this 
subsection and none of the costs associated with production or 
delivery of such power shall be assigned to project purposes 
for inclusion in project rates.
  (6) Nothing in this subsection shall alter or impede the 
delivery and management of water by Bureau of Reclamation 
facilities, as water used for conduit hydropower generation 
shall be deemed incidental to use of water for the original 
project purposes. Lease of power privilege shall be made only 
when, in the judgment of the Secretary, the exercise of the 
lease will not be incompatible with the purposes of the project 
or division involved, nor shall it create any unmitigated 
financial or physical impacts to the project or division 
involved. The Secretary shall notify and consult with the 
irrigation district or legally organized water users 
association operating the transferred work in advance of 
offering the lease of power privilege and shall prescribe such 
terms and conditions that will adequately protect the planning, 
design, construction, operation, maintenance, and other 
interests of the United States and the project or division 
involved.
  (7) Nothing in this subsection shall alter or affect any 
existing agreements for the development of conduit hydropower 
projects or disposition of revenues.
  (8) In this subsection:
          (A) Conduit.--The term ``conduit'' means any Bureau 
        of Reclamation tunnel, canal, pipeline, aqueduct, 
        flume, ditch, or similar manmade water conveyance that 
        is operated for the distribution of water for 
        agricultural, municipal, or industrial consumption and 
        not primarily for the generation of electricity.
          (B) Irrigation district.--The term ``irrigation 
        district'' means any irrigation, water conservation or 
        conservancy district, multicounty water conservation or 
        conservancy district, or any separate public entity 
        composed of two or more such districts and jointly 
        exercising powers of its member districts.
          (C) Reserved work.--The term ``reserved work'' means 
        any conduit that is included in project works the care, 
        operation, and maintenance of which has been reserved 
        by the Secretary, through the Commissioner of the 
        Bureau of Reclamation.
          (D) Transferred work.--The term ``transferred work'' 
        means any conduit that is included in project works the 
        care, operation, and maintenance of which has been 
        transferred to a legally organized water users 
        association or irrigation district.
          (E) Secretary.--The term ``Secretary'' means the 
        Secretary of the Interior.
          (F) Small conduit hydropower.--The term ``small 
        conduit hydropower'' means a facility capable of 
        producing 1.5 megawatts or less of electric capacity.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    H.R. 2842 would amend the Reclamation Project Act of 1939 
to allow for the development of small conduit hydropower at 
Bureau of Reclamation (Reclamation) facilities. The legislation 
clarifies the question of whether the Federal Energy Regulatory 
Commission (FERC) or Reclamation has jurisdiction over private 
hydropower development at Reclamation facilities by authorizing 
Reclamation to develop power at all such facilities. The Power 
Marketing Administrations are not obligated to purchase or 
market the power produced. Small conduit hydropower projects 
are defined as projects producing 1.5-megawatts or less.
    H.R. 2842 includes a controversial provision that exempts 
small conduit hydropower from National Environmental Policy Act 
(NEPA) compliance. Proponents of the legislation argue that 
NEPA compliance for small conduit hydropower is unnecessary and 
hinders developers from pursuing small conduit hydropower 
projects. However, FERC's licensing process for small conduit 
hydropower shows that compliance with NEPA need not hinder 
responsible development. FERC categorically exempts small 
conduit projects from NEPA. This approach works: from 2006-
2010, 13 conduit exemptions were completed in less than a year. 
Of the 11 conduit exemptions that were issued in 2011, orders 
regarding the nine conduit exemptions that presented no 
substantive issues were issued on average 40 days after the 
comment deadline established in the public notice.
    During the Committee's markup of H.R. 2842, Ranking Member 
Markey offered an amendment that would have given Reclamation 
the option to either do a programmatic Environmental Impact 
Statement or a categorical exemption similar to the FERC 
process. Unfortunately, our amendment was not adopted. For this 
reason, and because the legislation expands Reclamation's 
authority to develop small conduit hydropower without requiring 
them to develop a consistent regulatory process for developers, 
we oppose this legislation.
                                   Edward J. Markey.
                                   Rush Holt.
                                   Dale E. Kildee.
                                   Ben R. Lujan.
                                   Raul M. Grijalva.
                                   Niki Tsongas.
                                   Grace F. Napolitano.

                                  
