[Senate Report 114-352]
[From the U.S. Government Publishing Office]
Calendar No. 630
114th Congress } { Report
SENATE
2d Session } { 114-352
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ARKANSAS VALLEY CONDUIT, COLORADO MODIFICATIONS
_______
September 15, 2016.--Ordered to be printed
_______
Ms. Murkowski, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany S. 2616]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 2616) to modify certain cost-sharing and
revenue provisions relating to the Arkansas Valley Conduit,
Colorado, having considered the same, reports favorably thereon
without amendment and recommends that the bill do pass.
Purpose
The purpose of S. 2616 is to modify certain cost-sharing
and revenue provisions relating to the Arkansas Valley Conduit,
Colorado.
Background and Need
The Fryingpan-Arkansas Project was first authorized in 1962
to furnish irrigation water, municipal and industrial water,
and electric power, and to control floods in the Arkansas River
Valley in Southeastern Colorado. The last component of this
project, the Arkansas Valley Conduit, is a 130-mile pipeline
which would deliver water from the Pueblo Reservoir to more
than 40 communities in Colorado. Currently, revenue generated
by existing Fryingpan-Arkansas project facilities is used for
debt repayment associated with construction of related
facilities. Congress enacted legislation as part of the Omnibus
Public Lands Act of 2009 to require the water users to pay 35
percent of the reimbursable cost of the conduit. In addition,
the 2009 law credited the ``miscellaneous revenues'' that the
Project receives for the use of its excess storage capacity and
exchange contracts towards the water users' repayment
obligation. The cost of constructing the conduit still remained
subject to appropriation.
The Arkansas Valley Conduit is needed to supply clean
drinking water to communities that currently must use
groundwater that contains high levels of radium and uranium. S.
2616 is needed, first, to authorize the Secretary of the
Interior to spend the miscellaneous revenues from the Project's
excess storage capacity to construct the Arkansas Valley
Conduit without further appropriation. In addition, it is
needed to permit the Secretary to the use of the miscellaneous
revenues to repay funds borrowed from the State of Colorado by
the water users to help construct the conduit.
Legislative History
S. 2616 was introduced by Senator Gardner on March 2, 2016.
The Subcommittee on Water and Power held a hearing on S. 2616
on May 17, 2016.
The Committee on Energy and Natural Resources met in open
business session on July 13, 2016, and ordered S. 2616
favorably reported.
Committee Recommendation
The Senate Committee on Energy and Natural Resources, in an
open business session on July 13, 2016, by a majority voice
vote of a quorum present, recommends that the Senate pass S.
2616.
Section-by-Section Analysis
Section 1. Arkansas Valley Conduit, Colorado
Section 1(a) amends Public Law 87-590 to modify the water
users' repayment obligation such that it will be 35 percent of
the funds appropriated for construction in order to conform to
the amendment made by subsection (b), which permits the use of
non-appropriated funds to construct the conduit.
Subsection (b) directs that all revenue derived from
contracts for the use of Fryingpan-Arkansas project excess
capacity or exchange contracts using project facilities shall
be available to the Secretary without further appropriation.
The funds shall be used to pay for the construction of the
Arkansas Valley Conduit; for the payment to the Southeastern
Colorado Water Conservancy District to repay the principal and
interest on loans obtained by the District toward construction
of the Arkansas Valley Conduit; and be credited toward
repayment of the funds appropriated for the Arkansas Valley
Conduit, plus interest. The Secretary is further directed to
enter into one or more agreements with the District that
specify the distribution of funds.
Cost and Budgetary Considerations
The following estimate of the costs of this measure has
been provided by the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 6, 2016.
Hon. Lisa Murkowski,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
Dear Madam Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2616, a bill to
modify certain cost-sharing and revenue provisions relating to
the Arkansas Valley Conduit, Colorado.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Aurora
Swanson.
Sincerely,
Keith Hall.
Enclosure.
S. 2616--A bill to modify certain cost-sharing and revenue provisions
relating to the Arkansas Valley Conduit, Colorado
Summary: S. 2616 aims to facilitate the construction of the
Arkansas Valley Conduit (AVC), a component of the Fryingpan-
Arkansas Project designed to deliver potable water to six rural
counties in Colorado. Based on information from the Bureau of
Reclamation (BOR), the Southeastern Colorado Water Conservancy
District, and Colorado state agencies, CBO estimates that
enacting S. 2616 would increase direct spending by $60 million
over the 2017-2026 period and by $108 million after 2026.
Because the legislation would affect direct spending, pay-as-
you-go procedures apply. Enacting S. 2616 would not affect
revenues. The new funding and financing activities authorized
in S. 2616 could lead to a reduction in the need for
appropriated funds to complete the AVC.
CBO estimates that enacting the bill would not increase net
direct spending or on-budget deficits by more than $5 billion
in any of the four consecutive 10-year periods beginning in
2027.
S. 2616 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 estimated
budgetary effect of S. 2616 is shown in the following table.
The costs of this legislation fall within budget function 300
(natural resources and environment).
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Fiscal year, in millions of dollars
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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-22021 2017-2026
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INCREASES IN DIRECT SPENDING
Use of Borrowed Funds for AVC Construction:
Estimated Budget Authority............................. 0 0 5 5 5 5 5 5 5 5 15 40
Estimated Outlays...................................... 0 0 5 5 5 5 5 5 5 5 15 40
Spending of Project Receipts:
Estimated Budget Authority............................. 0 0 0 0 0 4 4 4 4 4 0 20
Estimated Outlays...................................... 0 0 0 0 0 4 4 4 4 4 0 20
Total Changes:
Estimated Budget Authority......................... 0 0 5 5 5 9 9 9 9 9 15 60
Estimated Outlays.................................. 0 0 5 5 5 9 9 9 9 9 15 60
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Note: Components may not sum to totals because of rounding; AVC = Arkansas Valley Conduit.
Basis of estimate: For this estimate, CBO assumes that S.
2616 will be enacted near the end of 2016. S. 2616 would
authorize the BOR to effectively obtain and repay a
construction loan for part or all of the AVC that would be
arranged by the Southeastern Colorado Water Conservancy
District (the district), the nonfederal sponsor for the AVC.
The bill also would authorize the BOR to spend certain receipts
from the sale of excess capacity for water storage at the
Fryingpan-Arkansas Project to construct the AVC.
Based on an analysis of information from the BOR about
project costs and scheduling plans for constructing the AVC,
and assuming the new funding and financing authorities provided
in the bill are used, CBO estimates that planning and designing
of the project would be completed in 2018 and that construction
would be completed 20 years later, in 2038.
In 2011, the BOR estimated that completing construction of
the AVC would cost $400 million. In the last few years $21
million was appropriated to begin design and construction work
on the project. S. 2616 would not change the total cost of
completing the AVC, however, it would change how those funds
are provided by the Congress and it would reduce the portion of
total project costs that would be reimbursed by the local water
district.
Under current law, any funds to complete the AVC will be
provided in annual appropriation acts. S. 2616 aims to
facilitate the construction of the AVC by authorizing a
combination of funding sources, including permitting the BOR to
spend roughly $68 million of receipts from the sale of excess
water storage capacity over the 2022-2038 period and
authorizing the BOR to obtain a loan (through the district)
from the state of Colorado to finance about $100 million of the
project costs over the next 20 years. Net federal costs to
construct the AVC over the next several decades would increase
under the bill because the Southeastern Colorado Water
Conservancy District would be responsible for repaying a
smaller portion of project costs. Furthermore interest costs of
the construction loan provided by Colorado would probably be
greater than if the U.S. Treasury had borrowed those amounts.
Those costs, however, would not be incurred until repayment
begins in 2039.
DIRECT SPENDING
Nonfederal Financing of AVC Construction. S. 2616 would
effectively authorize the BOR to borrow and repay funds from
Colorado state agencies to construct the AVC.\1\ Under the
bill, the nonfederal financing of construction costs would be
arranged through the local water district. Based on information
from the BOR, the district, and the state, CBO estimates that
the district would obtain financing of $100 million for
constructing the AVC and that the loan would be dispersed in
roughly $5 million increments over the 20-year construction
period.\2\ CBO estimates that implementing those provisions
would increase direct spending by $40 million over the 2017-
2026 period and $60 million after 2026.
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\1\Allowing the district to borrow on behalf of the BOR and for the
BOR to then use those amounts is considered federal borrowing, a form
of mandatory budget authority. Receipt of the borrowed amounts would be
considered a means of financing and thus would not be reflected in the
budget. However, the budget would record the obligations incurred by
using borrowed amounts at the time that such obligations occur. Outlays
would be recorded to reflect the timing and pace of capital
expenditures to construct the AVC.
\2\S. 2616 would not limit the amount of financing that the
district could obtain from Colorado. If future appropriations for the
AVC are lower (or higher) than assumed, the loan could be higher (or
lower) than $100 million and direct spending would be higher (or
lower).
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Spending of Project Receipts. Starting in 2022, S. 2616
would authorize the BOR to spend certain project receipts
without further appropriation to construct the AVC. Under
current law, those receipts result from excess capacity charges
to water users for storage and conveyance services during
periods when all available water storage capacity is not needed
to meet the authorized purposes of the project. In the last few
years, those receipts have totaled about $4 million each year.
CBO estimates that implementing this provision would
increase direct spending by $20 million over the 2017-2026
period and by $48 million after 2026.
Nonfederal Cost Share of the AVC. Under current law, the
district will be responsible for repaying the federal
government 35 percent of AVC construction costs (approximately
$400 million). Under the bill this repayment obligation would
remain at 35 percent, but it would not apply to the portion of
the project funded through amounts borrowed from Colorado state
agencies (about $100 million), or to the construction costs
covered by spending charges for excess water storage capacity
(about $68 million). Repayment of the nonfederal share of the
AVC would not begin until construction is complete in 2038,
thus no changes in the nonfederal cost share are reflected in
this cost estimate that covers the 2017-2026 period.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
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By fiscal year, in millions of dollars--
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016-2021 2016-2026
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NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go lmpact....................... 0 0 0 5 5 5 9 9 9 9 9 15 60
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Estimated impact on state, local, and Tribal Governments:
S. 2616 contains no intergovernmental mandates as defined in
UMRA. The bill would benefit the Southeastern Colorado Water
Conservancy District by allowing the district to obtain
nonfederal financing to construct a federal water project. Any
costs incurred by the district under the agreement with the
federal government to secure financing, including cost-sharing
contributions, would result from complying with conditions of
federal assistance.
Estimated impact on the private sector: S. 2616 contains no
private-sector mandates as defined in UMRA.
Increase in long-term net direct spending and deficits: CBO
estimates that enacting the bill would not increase net direct
spending or on-budget deficits by more than $5 billion in any
of the four consecutive 10-year periods beginning in 2027.
Estimate prepared by: Federal Spending: Aurora Swanson;
Impact on State, Local, and Tribal Governments: Jon Sperl;
Impact on the Private Sector: Amy Petz.
Estimate Approved by: H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
Regulatory Impact Evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out S. 2616. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of S. 2616, as ordered reported.
Congressionally Directed Spending
S. 2616, as ordered reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined in rule XLIV of the
Standing Rules of the Senate.
Executive Communications
The testimony received from the Bureau of Reclamation of
the U.S. Department of the Interior at the May 17, 2016,
Subcommittee on Water and Power hearing on S. 2616 follows:
Statement of Estevan Lopez, Commissioner, Bureau of Reclamation, U.S.
Department of the Interior
Chairman Lee and members of the Subcommittee, I am Estevan
Lopez, Commissioner of the Bureau of Reclamation, in the
Department of the Interior. I appreciate the opportunity to
testify on S. 2616. The Administration is still reviewing S.
2616 and does not have a position at this time. The Department
supports the goal of assisting non-federal sponsors with
accessing nonfederal capital for the construction of projects.
However, the bill raises some concerns discussed below.
The Arkansas Valley Conduit (AVC) was originally authorized
in 1962. However, the beneficiaries' inability to repay
construction of the project, along with competing water
infrastructure needs across the West have made it difficult to
fund large-scale projects like the AVC at the federal or local
level. Currently AVC area communities use groundwater to supply
most of their drinking water, and that water has been
determined to contain high levels of naturally occurring radium
and uranium. Twelve water providers have concentrations of
these elements in the water supplies that exceed federal Safe
Drinking Water Act mandatory standards. As a result, the State
has issued enforcement actions requiring these water providers
to remove the contaminants or find a better quality water
source. In addition, water providers in the lower Arkansas
River Basin generally have difficulty meeting non-mandatory
secondary drinking water standards for salts, sulfate and iron.
Given these circumstances, it is extremely important for
these communities to find an alternative water supply that
would meet existing and future municipal and industrial potable
water demands for citizens in the six southeastern Colorado
counties of the Lower Arkansas River Basin: Pueblo, Crowley,
Otero, Bent, Prowers, and Kiowa. AVC would serve approximately
53,000 residents (estimated to increase to 74,000 by the year
2070) with an estimated construction cost of $400 million (2011
dollars). Feasibility level designs are being prepared with an
anticipated completion date of September, 2016.
Replacing contaminated groundwater supplies with local
surface water from the Arkansas River is problematic because
the river downstream of the City of Pueblo contains high levels
of selenium, sulfates, uranium, and salts. The AVC, which is an
authorized feature of Reclamation's Fryingpan-Arkansas Project
(Fry-Ark Project), would address these problems by providing
high quality surface water via a least-cost regional system.
The existing Fry-Ark Project Act, as amended in 2009 by
Public Law 111-11, authorizes appropriations for construction
of the AVC; allows miscellaneous revenues to be used to
construct AVC; and, upon completion, provides for miscellaneous
revenues to be credited to the actual costs of AVC. P.L. 111-11
also provides a cost sharing plan of 100% percent federal
financing and 35 percent non-federal repayment, over a period
of 50 years, starting after project completion. In August 2013
a Final Environmental Impact Statement was completed and the
Record of Decision was signed in February 2014. Through FY
2016, approximately $21 million in federal appropriations has
been provided for AVC.
Representatives of the Southeastern Colorado Water
Conservancy District (District) and the Department and Bureau
of Reclamation (Reclamation) began discussions in the summer of
2015 to develop an approach for funding AVC construction while
reducing the need for federal appropriations. With an objective
of accomplishing sufficient final engineering and design work
to allow award of the first construction contract during fiscal
year (FY) 2019, the goal is to obtain funding from multiple
sources to permit completion of construction in a timely
fashion.
The District and the state of Colorado are contemplating a
$100 million loan to finance part of the construction of this
project. S. 2616 authorizes and directs Reclamation to provide,
without appropriation, miscellaneous revenues to the District
so they can, in turn, use those funds to the extent needed,
repay a loan or loans from the Colorado Water Conservation
Board (CWCB). Under current law, those miscellaneous revenues
are controlled by Reclamation, and at the Secretary's
discretion, can be used to offset various project costs,
finance further construction of the Fryingpan-Arkansas Project
(potentially including the AVC), or deposited to the
Reclamation fund to reduce the Federal deficit.
If S. 2616 were enacted:
The District would remain obligated to repay
35 percent of the federal appropriations made for the
AVC, with such repayment to come from the crediting of
miscellaneous revenues to the AVC or from District
sources if those miscellaneous revenues are
insufficient.
The miscellaneous revenues not needed to
repay a loan or loans to the District from the CWCB or
to meet the District's obligation to repay 35 percent
of federal appropriations would be available for
Reclamation to credit to the repayment of the remaining
65 percent of the AVC's construction costs paid for
with federal appropriations.
The costs of the Ruedi Dam and Reservoir,
Fountain Valley Pipeline, and South Outlet Works at
Pueblo Dam and Reservoir, plus interest, will be repaid
before miscellaneous revenues could be used to pay for
AVC costs during construction.
Under current law, all miscellaneous revenues generated by
the Fry-Ark Project are currently devoted to repayment of the
investment in the AVC.
S. 2616 directs that miscellaneous revenues be provided to
the District. The District envisions that these revenues would
be used to repay the monies it would borrow from the CWCB for
about $100 million in non-federal financing for the
construction of the AVC. While we are still undertaking a
detailed analysis of the full implications of such a
reallocation of federal receipts, the reallocation of federal
revenues to a non-federal entity for the benefit of that non-
federal entity should be given careful consideration, including
budgetary effects.
This concludes my written statement. I would be pleased to
answer questions at the appropriate time.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the original 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):
Public Law 87-590, as amended
* * * * * * *
(c) No part of the single purpose municipal and industrial
water supply works involved in the Fryingpan-Arkansas project
shall be constructed by the Secretary in the absence of
evidence satisfactory to him that it would be infeasible for
the communities involved to construct the works themselves,
singly or jointly. In the event it is determined that these
works, or any of them, are to be constructed by the Secretary,
a contract providing, among other things, for payment of the
actual cost thereof, or in the case of [the Arkansas Valley
Conduit, payment in an amount equal to 35 percent of the cost
of the conduit that is comprised of revenue generated by
payments pursuant to a repayment contract and revenue] the
Arkansas Valley Conduit, for payment in an amount equal to 35
percent of the funds appropriated for the conduit that is
comprised of revenue generated by payments pursuant to a
repayment contract and of revenue that may be derived from
contracts for the use of Fryingpan-Arkansas project excess
capacity or exchange contracts using Fryingpan-Arkansas project
facilities, with interest as hereinafter provided, as rapidly
as is consistent with the contracting parties' ability to pay,
but in any event, within fifty years from the time the works
are first available for the delivery of water, and for
assumption by the contracting parties of the care, operation,
maintenance, and replacement of the works shall be in a
condition precedent to construction thereof.
Sec. 2(a)--Contracts to repay the portion of cost of the
Fryingpan-Arkansas project * * *
(b) Rates.--
* * * * * * *
(2) Ruedi dam and reservoir, fountain valley
pipeline, and south outlet works at pueblo dam and
reservoir.--
(A) In general.--Notwithstanding the
reclamation laws, [until the date on which the
payments for the Arkansas Valley Conduit under
paragraph (3) begin], any revenue that may be
derived from contracts for the use of
Fryingpan-Arkansas project excess capacity or
exchange contracts using Fryingpan-Arkansas
project facilities shall be credited towards
payment of the actual cost of Ruedi Dam and
Reservoir, the Fountain Valley Pipeline, and
the South Outlet Works at Pueblo Dam and
Reservoir [plus interest in an amount
determined in accordance with this section]
until those costs, plus interest, have been
fully repaid.
(B) Effect.--Nothing in the Federal
reclamation law (the Act of June 17, 1902 (32
Stat. 388, chapter 1093), and Acts supplemental
to and amendatory of that Act (43 U.S.C. 371 et
seq.)) prohibits the concurrent crediting of
revenue (with interest as provided under this
section) towards payment of the Arkansas Valley
Conduit as provided under this paragraph.
(3) Arkansas valley conduit.--
[(A) Use of revenue.--Notwithstanding the
reclamation laws, any revenue derived from
contracts for the use of Fryingpan-Arkansas
project excess capacity or exchange contracts
using Fryingpan-Arkansas project facilities
shall be credited towards payment of the actual
cost of the Arkansas Valley Conduit plus
interest in an amount determined in accordance
with this section.]
(A) Use of revenue.--
(i) In general.--Notwithstanding the
reclamation laws, all revenue derived
from all contracts for the use of
Fryingpan-Arkansas project excess
capacity or exchange contracts using
Fryingpan-Arkansas project facilities
shall be available to, and used by, the
Secretary, without appropriation--
(I) subject to paragraph (2),
for the payment of costs
associated with the
construction of the Arkansas
Valley Conduit;
(II) for the payment to the
Southeastern Colorado Water
Conservancy District, including
any enterprise established by
the District in accordance with
Colorado State law
(collectively referred to in
this subparagraph as the
`District') of amounts needed
for the District to repay the
principal and interest on loans
obtained by the District from
agencies of the State of
Colorado for construction of
the Arkansas Valley Conduit;
and
(III) to be credited towards
repayment of the funds
appropriated for the Arkansas
Valley Conduit, plus interest.
(ii) Agreements.--The Secretary shall
enter into 1 or more agreements with
the District that specify the
distribution, in amount and timing, of
the revenue described in clause (i), as
between the uses described in
subclauses (I), (II), and (III) of that
clause.
(B) Adjustment of rates.--Any rates charged
under this section for water for municipal,
domestic, or industrial use or for the use of
facilities for the storage or delivery of water
shall be adjusted to reflect the estimated
revenue derived from contracts for the use of
Fryingpan-Arkansas project excess capacity or
exchange contracts using Fryingpan-Arkansas
project facilities.
* * * * * * *