Testimony of:

Shannon McDaniel, Secretary/Manager

Before the:

Subcommittee on Water and Power

Committee on Energy and Natural Resources

U.S. Senate

Oversight hearing on:

S. 1258 to amend the Reclamation Safety of Dams Act of 1978

to authorize improvements for the security of dams and other facilities

July 26, 2007

Mr. Chairman and Members of the Subcommittee:

Thank you for the invitation to participate in this hearing on S. 1258,
"to amend the Reclamation Safety of Dams Act of 1978."

I am here today to support the passage of S. 1258.

My name is Shannon McDaniel and I am the Secretary/Manager of the South
Columbia Basin Irrigation District. The South District along with the
Quincy and East Columbia Basin Irrigation Districts operate the
transferred works of the Bureau of Reclamation's Columbia Basin Project.
The three Districts and Reclamation are currently providing irrigation
water to approximately 670,000 acres in eastern Washington.

The source of water and pumping energy for the Columbia Basin Project is
Grand Coulee Dam on the Columbia River. Grand Coulee is a CBP reserved
works and is operated and maintained by Reclamation. The three CBP
Irrigation Districts advance to Reclamation the annual O&M costs for
Grand Coulee to pump water from Lake Roosevelt to Banks Lake and to
convey it through other reserved works into the major canal systems that
have been transferred to the Districts.

In 2007 the Grand Coulee Dam, Lake Roosevelt, and Banks Lake components
were \$3,501,445. About 43 percent of that amount is for electricity to
lift water from Lake Roosevelt to Banks Lake. The budgeting and
accounting procedures that determine this payment are termed the
"diversion rate." This diversion rate is set by Reclamation's Regional
Director after involving the three CBP Irrigation Districts in the
budgeting and accounting reviews.

All three Districts pay their apportioned share of the diversion rate.
This year Reclamation began adding a guard and patrol security cost
surcharge to the power component of this rate. The boards of directors
of all three Districts share a common view regarding the reimbursability
of these costs. I believe the comments I will present reflect that
common view.

There has always been a security component associated with this
diversion rate. However, until 9/11 these costs were for fire protection
and night watchmen. These costs were approximately \$600,000 annually.
The estimated costs for security guards and patrols for 2007 are
estimated to be \$5,500,000.

The CBP Irrigation Districts do not dispute the need to defend important
hydroelectric facilities like Grand Coulee Dam. The attacks of September
11 confirmed that foreign terrorists would go to great lengths to
destroy targets that are national, cultural, and economic icons. The
federal government is to be commended for taking these defensive
measures.

We believe national defense is a federal responsibility, and the cost of
security of large federal assets lies with the government, not local
ratepayers. After September 11 through 2005 these defense and security
costs were considered a federal responsibility and paid for by all
Americans through Reclamation appropriations.

These costs should not be the responsibility of irrigation and power
ratepayers associated with specific federal projects that happen to have
a high target value for enemies of this country.

The Columbia Basin is the only project in the Pacific Northwest Region
that is subject to reimbursable security costs. Similar situations exist
in Reclamation's other regions. That is because Grand Coulee Dam, Shasta
Dam, Hoover Dam, and a few of Reclamation's other larger hydroelectric
projects have the most security needs. If security costs are to be
reimbursable it creates a disparity for irrigators farming on
Reclamation's projects who depend on these larger dams for their water
supply. Because of the large hydroelectric facility, these farmers will
pay extra charges for water compared to other farmers who do not have
these security concerns but are using Reclamation water on the rest of
the 10 million Reclamation irrigated acres.

Beginning in 2006, Reclamation and Congress determined that guard and
patrol costs should become reimbursable. For 2006 this reimbursability
was capped at \$10 million, Reclamation-wide. The 2006 decision
contemplated the cap for 2006 only, with full reimbursement beginning in
2007. In fact, the CBP Districts were charged a security component on
their 2007 billings from Reclamation. The CBP Irrigation Districts
respectfully recognize that Congress is the final decision maker in this
matter and realize there are many competing pressures on the federal
budget. For this reason we are in support of S. 1258 to amend the Safety
of Dams Act to control the Districts' costs in support of the security
of Grand Coulee Dam and the associated works related to water and power.

The CBP Irrigation Districts believe we have a positive relationship
with Reclamation regarding our payment of the irrigation diversion rate
at Grand Coulee Dam. We believe one source of this good relationship has
been Reclamation's willingness to allow the Districts to review the
documentation of the budgeting and accounting procedures relevant to the
diversion rate. These reviews often lead to frank discussions and
correspondence between the Districts and Reclamation about some of the
diversion rate decisions but, in the end, result in a good relationship
and adequately funded operation, maintenance and replacement budgets for
the irrigation function at Grand Coulee. However, the Districts firmly
believe that without this interaction inappropriate costs may be charged
against Grand Coulee's irrigation diversion rate.

This type of review and interaction by the Districts is not possible or
appropriate for post-9/11 security costs at Grand Coulee. Those costs,
at least in part, result from federal decisions based on classified
intelligence related to national security. Irrigation District boards of
directors and management are not qualified or authorized to audit or
interact in that type of budgeting and accounting. S. 1258 limits the
financial responsibility in security costs to a manageable share of the
total security obligation without input from the Districts.

I would like to emphasize that as Reclamation contractors the CBP
Irrigation Districts work on annual budgets, and those budgets are
funded by annual assessments to the farmers we serve. Irrigation
Districts share many of the same challenges in the budgeting process as
the federal government. We need to have stability and predictability
from year to year in our Reclamation payments. S. 1258 would essentially
allocate the costs at a level to all ratepayers that would be
manageable.

S. 1258 would, for the most part, distribute the annual costs of
security to the federal government by the allocation of 85 percent of
those costs to appropriated dollars.

I would reiterate that the CBP Irrigation Districts are supportive of S.
1258 and the allocation of security costs to the federal
government---where we believe the responsibility for national security
lies---to the maximum extent possible.

Thank you for your consideration.