**TESTIMONY OF**

**PATRICIA A. LUNDSTROM**

**MEMBER**

**NEW MEXICO HOUSE OF REPRESENTATIVES**

**&**

**EXECUTIVE DIRECTOR**

**NORTHWEST NEW MEXICO COUNCIL OF GOVERNMENTS**

**serving as**

**STEERING COMMITTEE CHAIR**

**NAVAJO-GALLUP WATER SUPPLY PROJECT**

**before the**

**COMMITTEE ON ENERGY AND NATURAL RESOURCES**

**UNITED STATES SENATE**

**ON**

**S. 1171**

**"THE NORTHWESTERN NEW MEXICO RURAL WATER PROJECTS ACT"**

**Resolving the Navajo Nation's Water Rights Claims**

**in the San Juan River Basin in New Mexico and**

**authorizing the construction and rehabilitation of**

**water infrastructure in Northwestern New Mexico**

**JUNE 27, 2007**

Mr. Chairman and Members of the Committee, I am Patricia Lundstrom,
member of the New Mexico House of Representatives in my fourth term
serving House District 9, and Executive Director of the Northwest New
Mexico Council of Governments since 1985.

State House District 9 encompasses about 3,000 square miles in
northwestern New Mexico, including the western portion of the City of
Gallup and 9 rural Navajo communities lying within McKinley and San Juan
Counties. Navajos comprise about two-thirds of the population of this
District.

The Northwest New Mexico COG is the regional planning agency designated
by the State of New Mexico and the Federal government to serve the
State's three counties of the Four Corners region: Cibola, McKinley and
San Juan Counties. This is about 15,000 square miles of high desert
territory, including large reservation areas for four Indian tribes and
a population of about 225,000 people residing in 6 municipalities and 77
rural communities. About one-half of the land base and one-half of the
population are Native American.

I want to thank you for inviting me to participate in this historic
hearing today.

I come before you to speak in favor of the proposed Settlement of Navajo
Nation water rights in the San Juan River and the other associated
titles included in Senate Bill 1171. My primary interest in this bill
and in the Settlement is that this legislation is an essential
instrument for authorizing and financing the proposed rural water
infrastructure project we have been working on for decades. We have
known it as the *Navajo-Gallup Water Supply Project,* and in the context
of this bill it is titled the *Northwestern New Mexico Rural Water
Supply Project*.

Since 1991, I have served as Chair of the Intergovernmental Steering
Committee for the *Navajo-Gallup Water Supply Project*. This project is
the flagship of the proposed water rights Settlement, as it plans to
construct primary water pipelines to deliver water from the San Juan
River to rural Navajo communities in northwestern New Mexico, to the
southwestern portion of the Jicarilla Apache Nation, and to the City of
Gallup.

During these past 16 years, I have seen the Navajo-Gallup project
revived from its prior stalemate condition and, with the consistent
leadership and support of Senators Bingaman and Domenici, I have seen it
sustained as a planning initiative to the present day through a
minefield of legal, technical, bureaucratic, political, financial and
environmental issues.

The Steering Committee has been the primary nexus and forum in which
these issues have been addressed and resolved by a persevering coalition
of partners, including:

-   [The Navajo Nation]{.underline}, with representatives from the
    Nation's Natural Resources Division, Division of Justice,
    President's Office, and Water Rights Commission;

-   [The Jicarilla Apache Nation]{.underline}, with staff and policy
    representation from the Nation's Water Rights Commission and from
    the Office of the President;

-   [The City of Gallup]{.underline}, which serves as a project
    beneficiary (for 20% of the project's eventual capacity) and as a
    hub distribution system for the project's water supply at its
    southern end, to water users not only within the City limits but
    also in a number of neighboring Navajo communities;

-   [The State of New Mexico]{.underline}, primarily through its State
    Engineer's Office and the Interstate Stream Commission; the State is
    a party to the interstate compacts affecting the Colorado River and
    its tributaries, as well as to a negotiated settlement of the Navajo
    Nation's water rights in the San Juan River, and (through its
    Legislature) the State is a major contributor to infrastructure
    improvements in support of the overall Navajo-Gallup Water Supply
    Project;

-   [The Bureau of Reclamation]{.underline}, which serves as federal
    lead for the project out of its Western Colorado Area Office; and

-   [The Bureau of Indian Affairs]{.underline}, which is federal
    administrator of the Navajo Indian Irrigation Project, and which has
    a substantial role with regard to real properties and rights-of-way
    affected by the project;

-   [The Navajo Tribal Utility Authority]{.underline}, the Navajo
    Nation's utility enterprise that operates all of the public water
    systems on the Navajo Reservation;

-   [The Navajo Area Indian Health Service]{.underline}, a division of
    the Public Health Service in the US Department of Health & Human
    Services, which is responsible for planning and constructing water
    facilities in service to Navajo communities; and

-   [The Northwest New Mexico Council of Governments]{.underline}, a
    federal- and state-designated regional planning agency which chairs
    the Steering Committee.

In addition to these Steering Committee groups, we have enjoyed the
professionalism and cooperation of two agencies in particular that have
also contributed greatly to the success of our planning efforts thus
far:

-   [The Upper Colorado River Commission]{.underline} has worked
    thoughtfully and cooperatively with the State of New Mexico and the
    Navajo Nation in accommodating the unique needs and configurations
    of this project. In particular, in 2003 the Commission resolved to
    support and consent to diverting water from the Upper to the Lower
    Basin of the Colorado River for the purposes of the Navajo-Gallup
    project, and it certified its support for "such Congressional action
    as may be necessary to authorize the Navajo-Gallup Water Supply
    Project."

-   [The United States Fish and Wildlife Service]{.underline} worked
    cooperatively with all parties to complete appropriate planning
    studies in the San Juan River that would identify the depletions
    from the river that could be made without negatively impacting the
    recovery of endangered species of fish in the river.

This project is the most ambitious and complex of the many local and
regional initiatives I have been a part of for over two decades. It has
also evoked the highest levels of cooperation, professionalism and
commitment by a group of agencies and individuals that I have ever seen.
My Council of Governments staff and I have been working on this project
continuously since the early 1990s, and there have been many other
individuals from all the participating agencies who have worked with us
on it for years at a time. For all of us, this is not just "any
project"; it's personal. Getting it done makes so much sense, at so many
levels, that we are all committed to it for the long-haul.

Since the late 1950s, State and Federal officials have concurred with
the Southwest region's top hydrologists that the only hope for long-term
sustainable water supply for the eastern Navajo Reservation and for the
City of Gallup lies in the surface water supply provided by the San Juan
River. The San Juan is a tributary to the Colorado River, originating in
the mountains of southwestern Colorado, flowing through a portion of
northwestern New Mexico, and proceeding to join the Colorado River at
Lake Powell in southern Utah and northern Arizona. Through allocations
confirmed in the hydrologic determination recently approved by Interior
Secretary Kempthorne, the San Juan River provides about 40% of New
Mexico's surface water supply. The Navajo-Gallup project would divert
nearly 38,000 acre-feet of water from the river, or about 5½ percent of
New Mexico's river allocation.

The needs for the Navajo-Gallup Water Supply Project are clear and
evident:

-   For the Navajo Nation, there is a significant population of Navajo
    people in the northwestern New Mexico service area who do not have,
    and have never had, a public water system. To this day, nearly 40%
    of Navajo families in the service area still haul water to meet
    basic household and livelihood needs. It is also clear that the
    Navajo economy, already struggling well below the poverty line,
    stands no chance of development without the provision of water as
    the most basic of all human needs.

-   For the Jicarilla Apache Nation, there is already in place a
    settlement agreement under which this neighboring tribal community
    has secured water rights, but for which significant economic and
    infrastructure development is needed in order to tap the fullness of
    these rights.

-   For the City of Gallup, the water table is dropping 200 feet every
    ten years, and the City will be facing peak-use shortages within
    five years and chronic shortages within fifteen years.

To focus further on the needs of the City of Gallup: Gallup serves as a
multimodal transportation portal for the Southwest and a major
commercial center for the Navajo Reservation. As such, it is as much a
"home" and integral part of Navajo life as most other places in the
region. Within a few decades, we expect that Navajos will make up over
50 percent of Gallup's population. Despite a checkered history of
relationships between Gallup and the Navajo people, with some residue of
tension and mistrust even today, the partnership that has been forged
between Gallup and the Navajo Nation in the context of this project has
been remarkable. I foresee only further progress in this relationship as
this project moves forward.

It is important to note that, in my 16 years with the Steering
Committee, at no point has the City of Gallup attempted to insert its
needs and priorities in front of those of the Navajo Nation. Rather, it
has been a supporting partner, ensuring that its participation is
mutually beneficial to the City and to its Navajo neighbors.

As an example of this partnership, there has been a joint effort to
provide municipal water supply to Navajo households bordering the City
of Gallup on its east side. Past bureaucratic barriers to this service
have been erased, and by this summer's end, those Navajo families will
have running water for the first time.

Another example is the multilateral partnership between the City, the
State of the New Mexico, the Navajo Nation, the Indian Health Service
and the Navajo Tribal Utility Authority to finance and build components
of the Gallup regional water system, with the specific objective of
moving water through the City's system to the neighboring Navajo
communities adjacent to the City. The State has committed over \$9
million to this initiative, which is being developed in accordance with
the plans of the *Northwestern New Mexico Rural Water Supply Project*.

The Navajo-Gallup partnership was further extended when the City
concurred with the request by the Navajo Nation, the Governor's office
and other agencies for State funding in support of urgently needed water
infrastructure serving five rural communities in the northeastern sector
of the Navajo-Gallup project service area. Over \$15 million has now
been committed by the State to what is referred to as the "Cutter
Lateral" project, since this infrastructure will ultimately tie into and
be served by the pipeline to be built under the *Northwestern New Mexico
Rural Water Supply Project*.

These regional system partnerships have generated broad commitment to
the motto: **"Real water to real people in real time."**

Realizing the shortages that are likely prior to the advent of surface
water into the City's water supply, the City of Gallup has also risen to
the challenge of the region's impending water crisis by exploring and
implementing various initiatives to secure its water future -- both
leading up to and in conjunction with the completion of the
*Northwestern New Mexico Rural Water Supply Project*.

-   In 2003, the City sponsored a Town Hall on Water, co-facilitated by
    the public policy group New Mexico First, at which participants
    adopted a consensus plan to establish Gallup as a model town in the
    American West in terms of its commitment to secure its water future
    and cooperate with its neighbors in the "water commons" shared by
    all residents in the region.

-   Emerging from the Town Hall was the formation the Gallup Water
    Board, which assisted the City Council in the radical revision of
    the City's water rate structure in support of conservation and the
    generation of local financing for water infrastructure and future
    water supply.

-   Another initiative was a partnership with the Bureau of Reclamation
    to study the feasibility of implementing a comprehensive wastewater
    recycling program utilizing reverse osmosis technology.

-   Yet further, Gallup has pursued a permit to develop water supply in
    water fields east of the City formerly owned and developed by
    extractive industries.

-   Finally, a Memorandum of Understanding is in its final draft stages
    between the City, the Navajo Nation and the Jicarilla Apache Nation,
    by which the parties will commit to ensure that the City is afforded
    legal access to a share of the water to be supplied by the
    Navajo-Gallup project.

Within the overall scenario of the Navajo-Gallup project, the City of
Gallup remains in full support of the project and of the water rights
settlement which is its primary facilitating instrument. At the same
time, the City is concerned about the cost of its participation in the
project.

The Economics analysis contained in the project's Planning Report and
Draft Environment Impact Statement suggests that the City's ability to
pay is fairly close to the threshold formula applied by the federal
government in terms of median household income. The somewhat misleading
conclusion that might be derived is that the City can afford to
self-fund its share of the project.

A number of factors mitigate against such a conclusion:

-   Gallup's status as a hub commercial center for a broad geographic
    area results in a unique pattern of impact on the City's
    infrastructure. Although the current municipal population is about
    22,000, the number of people moving around and doing business within
    the City may soar to between 70,000 and 100,000 people -- especially
    on weekends and on ceremonial occasions. It is essential to
    understand that Gallup serves a broader service area than its
    municipal boundaries would indicate. Over 80 percent of the students
    in Gallup schools are Navajo. The Gallup Indian Medical Center
    serves the regional Native American population. Due to the lack of
    water service on the Reservation, area residents regularly use City
    laundry, car wash and other facilities that increase the demand for
    water. Higher rates resulting from the City's cost for participating
    in the new water supply project will be passed on to the low-income
    residents in the broader regional community, thus affecting the
    overall "affordability" of the project.

-   Although the influx of visitors generates a disproportionately high
    level of gross receipts tax revenues in the City, the City and
    surrounding County are severely limited in the development of
    property tax revenues, and the City is virtually land-locked by
    public, non-taxable lands on all sides, for which compensation by
    such funds as Payment in Lieu of Taxes (PILT) is only a fraction of
    the revenue shortfalls actually occurring.

-   Although Gallup's median household income is shown in the Economics
    report as only a shade or two below the "affordability level" of the
    project, yet this income figure is deceptive as well, since there is
    a large gap between the minority of well-to-do households and the
    majority of low and moderate-income households in the City. Not
    surprisingly, two-thirds of the City's residential water revenues
    come from the population group utilizing the lowest quantities of
    water, that is, fewer than 6,000 gallons per month. These lower
    water users are predominantly the City's lowest-income households.
    The City's inverted water rate structure provides some cost
    protections for these lower users, but these may be insufficient to
    keep rates within the affordable range for this population.

-   The Economics analysis in the Final Report does not take into
    account the need for replacing aging infrastructure. Even with
    Gallup's new progressive water rate structure and at maximum bonding
    capacity, the City's funds are insufficient to meet even current
    operations, maintenance and replacement costs, much less to develop
    new infrastructure or participate in a new water supply initiative.

-   The City's stake with respect to the Settlement of the Navajo
    Nation's water rights in the San Juan River is clearly secondary to
    that of the Nation, the State of New Mexico and the Federal
    government. With respect to accessing a legal water supply, the City
    is essentially at the mercy of the two Indian tribes involved in the
    project. The City's pursuit of the independent purchase of water
    rights in the San Juan River would be high in cost, high in
    controversy and low in feasibility at this point.

-   It is the City's position, therefore, that it will need a high level
    of Federal funding support for its share of the project costs.

All in all, the *Northwestern New Mexico Rural Water Supply Project*
represents a "perfect storm" of opportunity for the Federal government
to meet the critical water needs of the people in this region of New
Mexico, while settling the water rights claims of the Navajo Nation as
an essential component of the overall initiative. The project's promise
of **"real water to real people in real time"** forms a primary basis
for the economic viability of the northwestern quadrant of New Mexico.

The Steering Committee for this longstanding and critical project
effort, along with the institutions I represent -- the Northwest New
Mexico Council of Governments and the New Mexico State Legislature --
urge your support for Senate Bill 1171, and by implication, for
authorization of the *Northwestern New Mexico Rural Water Supply
Project*. I acknowledge that the projected costs for this project are
high, but we dare not delay any longer in meeting the human and economic
needs represented in this initiative.

For our Steering Committee, this worthy cause has been on our watch for
a couple of decades, and we hope -- now that it's on your watch as well
-- that you will not let this opportunity fail.

Thank you for your most favorable and timely consideration of Senate
Bill 1171.