**Statement of William Rinne**

**Acting Commissioner, Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**Committee on Energy and Natural Resources**

**United States Senate**

**H.R. 2563**

**September 21, 2006**

I am William Rinne, Acting Commissioner for the Bureau of Reclamation. I
am pleased to be here today to provide the Administration's views on
H.R. 2563, legislation to authorize the Secretary of the Interior to
conduct feasibility studies to address water shortages within the Snake,
Boise, and Payette River systems in Idaho.

I previously provided testimony before the House Resources Committee's
Subcommittee on Water and Power on November 3, 2005, regarding the
Administration\'s views on H.R. 2563. At that time, I testified that the
Administration could not support H.R. 2563 as introduced because it did
not contain any time or funding limitations and it had no requirement
for a 50 percent non-federal cost share, as is required by Reclamation
policy. Since that time, Reclamation has worked with congressional staff
to modify the legislation. I am pleased to testify that the
Administration now supports H.R. 2563 as passed by the House and
referred to this committee on July 11, 2006.

The State of Idaho continues to experience the effects of a prolonged
drought as well as tremendous growth and urbanization in the Boise and
Payette River basins. Projected population growth will eventually
over-extend existing ground water supplies for these rapidly growing
areas. In light of this and other water resource issues elsewhere in the
state, the Idaho House of Representatives issued Joint Memorial No. 24
in 2004, which \"recognizes the need for additional water to meet
Idaho\'s emerging needs and encourages Federal and State agencies to
cooperate with Idaho in identifying and developing such water supply
projects.\"

Under existing authorities, Reclamation initiated an assessment level
water supply study specifically in the Boise and Payette basins.
Stakeholders with wide representation from the State, Federal,
agricultural, environmental and municipal sectors participated in that
study. The Final Boise/Payette Water Storage Assessment Report was
completed in July 2006 and was distributed to local State, Federal,
agricultural, environmental and municipal parties.

H.R. 2563 would go the next step by authorizing Reclamation to conduct
feasibility studies within the Boise and Payette River basins.
Reclamation supports focused, basin-by-basin water resource studies with
input and local involvement from the State and the stakeholder
communities. We recognize the need to address projected water supply
shortages in the Boise and Payette River systems. We would welcome the
opportunity to be an active partner in addressing these water supply
issues with the State of Idaho and its water users. However, even though
the technical difficulties with the legislation have been addressed, any
studies conducted under this new authority would still need to compete
with other needs within the Reclamation program for priority for funding
in the President's Budget.

That concludes my testimony. I would be pleased to answer any questions.

**Statement of William Rinne**

**Acting Commissioner, Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**Committee on Energy and Natural Resources**

**U.S. Senate**

**H.R. 3897**

**September 21, 2006**

My name is William Rinne, and I am Acting Commissioner of the Bureau of
Reclamation. I am pleased to provide the Department of Interior's views
on HR 3897, a bill to authorize the Secretary of the Interior, acting
through the Bureau of Reclamation, to prepare a feasibility study for
the Madera Water Supply Enhancement Project, Madera County, California.
The bill would also authorize construction of the Project and would
allow the Secretary to enter into a cooperative agreement with the
Madera Irrigation District for planning, design, and construction. The
Department does not support this bill as currently written.

In Fiscal Year 2006, Congress appropriated \$200,000 to conduct an
appraisal investigation. The purpose of the appraisal investigation is
to determine if the project is potentially feasible and if there is a
potential Federal interest. The Appraisal Report is in draft form at
this time. It is our hope to have it completed by the end of Calendar
Year 2006. Since the appraisal level report is not yet completed
sufficient information about this proposed project is not yet known.

HR 3897 would authorize the Secretary to (1) study the feasibility of
the Madera Water Supply Enhancement Project, that would provide
additional water supply, reduce the overdraft of the groundwater
aquifer, and improve water management reliability through the
development of new groundwater storage, extraction, and conveyance
facilities; (2) enter into a cooperative agreement with the Madera
Irrigation District for planning, design, and construction; and (3)
construct the project. Clearly there are many water supply issues in the
San Joaquin Valley and in Madera County in particular. Many of these
issues, related to the Central Valley Project, have a clear federal
nexus. The federal nexus with this project is unclear and speculative.

HR 3897 directs the Secretary, not later than December 30, 2006, to
complete and transmit to the Committee on Resources of the House of
Representatives and to the Committee on Energy and Natural Resources of
the Senate, a feasibility study. Although the bill does not establish a
ceiling for the Federal share of the cost to complete the study, under
current Reclamation policy the Federal share would not exceed 50 percent
of the total study cost. Feasibility studies, which integrate National
Environmental Policy Act compliance documentation, and are completed in
conformance with the Principles and Guidelines for such studies,
typically require a minimum of 3 years to complete, contingent upon
appropriation of funds by Congress. Legislation authorizing a
feasibility study should allow a minimum of 3 years for completing the
feasibility study after the appraisal investigation is concluded, and
should be separate from legislation to authorize project construction.
Moreover, project authorizing legislation should not be considered until
the results of the feasibility study are known.

[]{.mark}

It is premature to authorize a feasibility study before the appraisal
study has been completed and reviewed. Moreover, this study would
compete for funding with other currently authorized projects, including
several authorized storage feasibility studies authorized under CALFED.

I should also note that Reclamation did not seek funding for this
project in the President's Fiscal Year 2007 budget.

HR 3897 would also authorize the construction of the Madera Water Supply
Enhancement Project. However, the bill does not set a construction cost
ceiling, but only limits the Federal share of the construction cost to
not exceed 25 percent. We appreciate that the total cost of the project
may not be known at this time. This underscores our belief that it is
premature to authorize construction of the project and establish the
Federal share of the cost prior to completion of the feasibility level
cost estimates and the determination of the Federal interest.

The Administration appreciates local efforts to address future water
issues. However, in light of the concerns expressed above, the
Department cannot support this bill authorizing Reclamation
participation in a feasibility study for, and construction of, the
Madera Water Supply Enhancement Project. We would be happy to work with
local sponsors when the time is right to make improvements to the bill,
at which time the Administration will also consider whether pursuing
further studies for this project is in the best federal interest. That
concludes my prepared remarks. I would be pleased to answer any
questions.

**Statement of William E. Rinne**

**Acting Commissioner of the Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**United States Senate**

**Committee on Energy and Natural Resources**

**S 1811**

**September 21, 2006**

Madam Chairwoman, thank you for the opportunity to present the
Department of the Interior's views on S. 1811, a bill to authorize the
Secretary of the Interior to study the feasibility of enlarging the
Arthur V. Watkins Dam. I am William Rinne, Acting Commissioner of the
Bureau of Reclamation. The Department regrets that it is not possible to
support S. 1811 in its current form because it contains neither
non-federal cost sharing for the study nor an overall Federal cost
ceiling.

Arthur V. Watkins Dam, built in 1964, is located 12 miles northwest of
Ogden, Utah, on the shore of the Great Salt Lake. It is an off-stream
structure which extends into the Great Salt Lake and is constructed on
lake deposits. The embankment is 14.5 miles long, has a structural
height of 36 feet, and contains about 17 million cubic yards of
material. It encloses a reservoir of 215,000 acre-feet, with a surface
area of more than 9,900 acres.

Arthur V. Watkins Dam forms Willard Bay Reservoir. The dam is a
Reclamation feature of the Weber Basin Project and was authorized by
Congress in the Weber Basin Project Act of August 29, 1949 (PL 81-273).
The Weber Basin Project was constructed in the 1950's.

The original design anticipated settling of the foundation of the
embankment during the life of the dam. In the early 1990's, the
embankment was raised, re-establishing the original elevation of the
embankment. The project was completed by the Weber Basin Water
Conservancy District (WBWCD) under a Rehabilitation and Betterment loan.

The proposed feasibility study would analyze viable alternatives for
water storage and consider environmental issues, foundation stability,
and public safety. In addition, the feasibility study would evaluate
potential future foundation settling. Due to the limited focus of the 1
to 2 foot dam raise, the estimated cost of this study is \$2 million.

Growth in the project area has been significant during the last decade.
The State population projections for the future show continued growth.
With the extensive growth, water development projects and supplies are
being investigated for the northern part of the Wasatch Front. The WBWCD
has asked Reclamation to provide additional storage in Willard Bay for
approximately 10,000 acre-feet of annual yield available under existing
Weber Basin Project water rights.

The additional storage of water would be used for municipal and
industrial, flood control, fish and wildlife enhancement, and recreation
purposes along the Wasatch Front in northern Utah. The added capacity
could postpone the need for the State of Utah to begin development of
the water resources of the Bear River in northern Utah. The additional
storage of water would be consistent with the purposes identified in the
original authorizing legislation (PL 81-273) and current contracts.

If the legislation were amended to include a reasonable Federal cost
ceiling and a minimum of fifty percent non-federal cost-sharing in the
financing of the feasibility study, in line with Reclamation policy and
practice applied in virtually every similar situation, we would not
oppose enactment of S. 1811. Of course, we will be happy to work with
the bill's sponsors, Senator Hatch and Senator Bennett, and this
Committee to make this improvement. However, any potential authorization
to raise the dam would have to compete with the many other Reclamation
projects vying for funding.

This concludes my testimony. I am happy to answer any questions.

**Statement of William E. Rinne**

**Acting Commissioner, Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**Senate Energy and Natural Resources Committee**

**Subcommittee on Water and Power**

**S 3798**

**Folsom South Canal, Auburn-Folsom South Unit and Central Valley
Project**

**September 21, 2006**

Madam Chairwoman, I am William E. Rinne, Acting Commissioner of the
Bureau of Reclamation. For the reasons discussed below, the Department
cannot support S. 3798. This legislation would defer repayment of the
capital cost of the unused capacity in the Folsom-South Canal,
Auburn-Folsom South Unit, Central Valley Project (CVP), Public Law
89-161 (79 Stat. 615). It would also authorize entities that pay capital
and operation costs associated with CVP water assigned to the
Folsom-South Canal service area to substitute for conveyance through the
Folsom-South Canal up to an equivalent amount of non-CVP water without
additional payment.

Only the initial two reaches of the planned five reaches of the
Folsom-South Canal were constructed. Both reaches contained deferred-use
capacity for the East Side Division. However, because of the incomplete
status of the Auburn-Folsom South Unit, water deliveries have never
developed as anticipated. Annual water deliveries generally average less
than 2% of the designed capacity of the canal. This act would allow the
Secretary to compute the deferred use capacity of the facility based
upon the overall unused capacity of the canal rather than just that
portion of the facility that was provided for the East Side Division.

Under the bill, these computations would be reevaluated "as appropriate"
to reflect any changes in the use of the canal and reflect those changes
in the pooled reimbursable capital conveyance costs of the CVP. This act
would not be retroactive to previous year payment computations. As
current and future capital costs are identified for CVP cost repayment
purposes they will be calculated in accordance with the then-current CVP
water rate setting policies.

Reclamation is still in the process of trying to ascertain the costs of
implementing this bill, but the bill sponsors estimate the reduced
revenues to the Treasury at \$2.2 million per year. The Department has
concerns about deferring the repayment of the costs of a Reclamation
facility based on the amount of capacity in use and its implications for
other projects. This precedent, if applied to other projects, could
result in significantly reduced revenues to the United States.

Estimating unused capacity also poses implementation challenges. This is
illustrated by the ambiguous language contained in this bill requiring
that the minimum unused conveyance capacity in the canal should "be
based upon actual historic measured flows in the canal and planned
future flows." Given the many factors that impact actual use of a
facility, making a determination about how to balance between historic
flows and planned future flows would not necessarily be straightforward.

Reclamation would support section 1(e) of the bill. This provision
allows entities that are paying costs associated with the Folsom-South
Canal to substitute for conveyance through the Folsom-South Canal up to
an equivalent amount of non-CVP water without additional payment. This
bill addresses a situation where an assignor may have use of the
Folsom-South Canal but assigns all or part of their share of project
water entitlement to an assignee that does not use the facility. In an
assignment of this water, the assignee is required to pay for the canal
facilities so that the costs are not stranded for repayment by either
the federal government or other water users. The bill addresses the
concern that payments are made for the canal facilities but that the
assignee should be able to receive some benefit of Folsom-South Canal
use for non-project water without additional payment.

While Reclamation cannot support S 3798 as written, we are willing to
continue to work with the sponsors and this subcommittee to address
issues of fairness in the allocation of Folsom Canal costs. That
concludes my prepared remarks. I would be pleased to answer any
questions.

**Statement of William E. Rinne**

**Acting Commissioner, Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**Senate Energy and Natural Resources Committee**

**Subcommittee on Water and Power**

**S. 3832**

**September 21, 2006**

Madam Chairwoman and members of the Subcommittee, I am William Rinne,
Acting Commissioner of the Bureau of Reclamation. I am pleased to
provide the views of the Department of the Interior on S. 3832, *The
Reclamation Facility Title Transfer Act of 2006.* We support passage of
this measure.

S. 3832 would require the Secretary of the Interior to establish
criteria to transfer title to Reclamation facilities and for other
purposes. The Department believes that S. 3832 is consistent with an
initiative that the Bureau of Reclamation currently has underway, that I
will outline in my statement. We also believe that the goals of S. 3832
would be furthered by those efforts and we would appreciate the
opportunity to work together to develop a comprehensive approach to
title transfer.

**[Background]{.underline}**

In 1995, the Bureau of Reclamation began an effort to facilitate the
transfer of title to Reclamation projects and facilities in a consistent
and comprehensive way. Reclamation developed a process known as the
*Framework for the Transfer of Title* - establishing a process whereby
interested non-Federal entities would work with and through Reclamation
to identify and address all of the issues that would enable the title
transfer to move forward. Once completed, Reclamation and the entity
interested in taking title would work with the Congress to gain the
necessary authorization for such a title transfer. Over the past ten
years, the process has evolved and improved as we worked through various
transfers -- some were successful and some not. Over that time period,
we've learned important lessons and have modified the process to improve
the efficiency and reduce the associated costs.

Since 1996, the Bureau of Reclamation has transferred title to eighteen
(18) projects or parts of projects across the west ‑ pursuant to various
Acts of Congress. On October 2, 2006, several features of the Provo
River Project including the Salt Lake Aqueduct, as authorized by P.L.
108-382, are scheduled to be conveyed to the Metropolitan Water District
of Salt Lake and Sandy. The remaining features of this project, that are
authorized to be transferred by that Act, are scheduled to be
transferred by the end of 2007. Before that can take place, however,
several water districts and municipalities that benefit from these
facilities are working together to address a number of complicated
post-transfer project management operational issues. There are two
additional transfers that are authorized and awaiting completion. In
both of these cases, the districts receiving title are completing real
estate surveys and preparing the quit claim deeds necessary to record
the change of ownership with the county. In addition, there are two
other authorized transfers which require compliance with various Federal
laws including the National Environmental Policy Act (NEPA) and the
National Historic Preservation Act (NHPA) as called for by the
authorizing legislation.

Since each project is unique, each of the authorizing laws enacted has
different terms. Each requires that different actions be taken prior to
transfer such as the completion of the process under NEPA, or agreements
with State and local agencies over recreation or cultural resources
management.

**[Lessons Learned]{.underline}**

While Reclamation has had success with title transfer of projects and
facilities over the past ten years, we remain concerned that the process
still takes too long, is potentially too costly and the number of new
proposed transfers is declining. We believe that there may be a number
of opportunities of mutual benefit that could come from the transfer of
projects or facilities that are not being realized.

As such we have undertaken a number of important activities that I want
to outline that fit in with the goals of S. 3832.

**Comprehensive Review of Title Transfer**: In 2003, a Team lead by the
Department of the Interior's Office of Policy Analysis undertook a
comprehensive review of Reclamation's title transfer effort. The review
looked, not only at the process, but also at the individual transfers
that succeeded and those that did not move forward. This effort included
a survey of Reclamation employees involved in title transfer, a water
users workshop and numerous interviews with water users that both
pursued title transfer and those that opted not to pursue title
transfer. It also included interviews with stakeholders from states,
local governments, the environmental community and congressional staff
members who were involved in various legislative efforts related to
individual transfers at the time.

With that data, the Team identified a number of important lessons and a
number of programmatic changes were implemented to make the process more
efficient and cost effective.

I would like to highlight some of the lessons that this Team identified:

> **Each Project is Unique:** One of the early lessons that we learned
> and that is reinforced with each new title transfer effort is that
> each project and set of facilities is unique. Each project was
> authorized to address a particular set of circumstances, both
> hydrologic as well as economic. As such, a "cookie cutter" or "one
> size fits all approach" wouldn't meet the needs of the water users,
> the customers, other stakeholders or Reclamation. That isn't to say
> that there cannot be a set of criteria developed, but those would need
> to be flexible.
>
> **No Such Thing As a "Simple Project":** Many Reclamation projects may
> appear to be "simple" title transfers or "simple" projects for title
> transfer because complex or controversial issues are absent. However,
> even the "simple" title transfers such as those involving the American
> Fall Reservoir District #2 in Idaho, the Carpinteria Valley Water
> District in California, and the San Diego Aqueduct in California, had
> unique complexities that were unknown when we started the process that
> must be identified and addressed. Older projects or projects with
> facilities that cover a relatively large geographical area and
> particularly those where significant amounts of land or structures,
> such as houses or warehouses, are to be conveyed, tend have
> complicating issues that arise unexpectedly. Land records associated
> with older projects may be missing or the quality of the information
> in existing records is poor. Projects covering a wide geographical
> area, such as the San Diego Aqueduct, have a large volume of land
> records which must be located, assembled, and reviewed.
>
> **Develop Local Agreements Prior to the Legislative Process:** While
> Reclamation's title transfer process has evolved, we believe that one
> central tenet of the process continues to hold true. Since each
> project is unique and has their own potentially complex circumstances,
> the analysis of the implications of that transfer should be completed
> and an agreement should be reached on the terms and conditions before
> seeking authorization of the transfer of projects and facilities.
>
> Early on in the title transfer effort, some districts opted not to go
> through Reclamation's locally negotiated process. Instead, they
> immediately approached their congressional representatives in hopes of
> getting legislation passed and the facilities transferred quickly. In
> most cases, this proved to be a slower route than those that went
> through Reclamation's cooperative process. In many of these cases,
> there were issues or controversies related to the facilities that were
> not addressed at the local level between customers and stakeholders of
> the facilities. Instead, they were being negotiated through the
> legislative process. In some situations, where legislation was
> authorized prior to the analysis being completed, circumstances or
> problems were identified that required further legislative action to
> address, thereby delaying the ultimate transfer even further.
>
> In many recent cases, we have seen districts and interested
> non-Federal entities work with Reclamation to complete all the
> necessary analysis and public involvement, then reach an agreement
> prior to pursuing the legislative authorization from Congress. This
> has made the legislative process less controversial and has made
> implementation, once the transfer was authorized, smoother, less
> costly and more efficient. Two excellent examples are two proposed
> transfers currently before this Committee \-- S. 2129, the American
> Falls Reservoir District #2 Conveyance Act of 2005 and S. 1965, the
> Yakima Tieton Irrigation District of 2005. In both these cases,
> Reclamation worked closely with the districts, the states involved and
> other stakeholders to identify all the issues and concerns and reached
> agreements. In doing so, we worked through some complications that
> arose, we reached agreement and the Administration was able to
> enthusiastically support both bills in testimony before this
> Committee.
>
> **Not a Significant Budgetary Savings Available**: When the title
> transfer effort began in 1995, there was an expectation that title
> transfer would result in a smaller Bureau of Reclamation (in terms of
> fewer staff and/or lower appropriations levels). While Reclamation's
> budget declined by 19% (between 1992 and 2000) and the number of
> Reclamation employees (FTEs) was reduced by 26 percent during this
> timeframe, this result has not occurred as a result of title transfer.
> The explanation for this is multifaceted:
>
> 1\) Nearly all those facilities transferred to date were already being
> operated and maintained by non-Federal entities. This means that
> neither Reclamation employees nor Reclamation appropriated funds were
> being used to operate and maintain the facilities. Therefore, there is
> limited budgetary savings, related to project operations, to be
> identified.
>
> 2\) Reclamation's administration of the facilities prior to transfer
> involved relatively few Reclamation employees (by FTE) and limited
> appropriated funds were associated with the projects and facilities
> that have been transferred. In those cases where some staff time may
> have been freed up, those resources have been redirected to other
> ongoing issues faced by their offices.
>
> 3\) The administration costs avoided due to the transfers have been
> relatively minor.
>
> 4\) Only relatively small facilities which tend to be widely scattered
> across Reclamation's jurisdictional areas have been transferred --
> thereby diluting any potential Reclamation-wide, region or even area
> office impacts. In other words, there has not been a concentration of
> title transfers which would result in a significant savings.

**[Managing for Excellence]{.underline}**

While Reclamation's work thus far has lead to procedural improvements
and efficiencies, we determined that we needed to take further steps to
find ways to reap the benefits of title transfer for Reclamation and for
its customers. In 2006, as part of the Secretary's Managing for
Excellence initiative (M4E), a Team was established to "*determine if
opportunities exist for mutually beneficial transfer of title to project
sponsors in order to eliminate Reclamation's responsibility and costs
for those facilities."* This M4E Team is following up on the previous
effort to identify the barriers that exist and the incentives that may
encourage more entities to pursue title transfers.

The M4E Team, using the data, conclusions and analysis of the previous
effort is developing a set of recommendations on how Reclamation might
reinvigorate its title transfer effort -- finding ways to reduce the
barriers that discourage entities from pursuing title transfer and
identifying appropriate incentives that might encourage entities to
pursue title transfer.

The Team received significant input from stakeholders at the Managing
for Excellence workshop held in July, 2006 in Las Vegas, NV and they are
expected to complete their effort early in 2007.

We believe that the result of that effort will provide a significant
benefit to meeting the goals that the sponsors have identified, and
which we share, for title transfer. We hope we will have the opportunity
to continue to work with this Committee when that Team's effort has been
completed.

We laud and share the goal identified in S 3832 for title transfer of
Reclamation projects and facilities. Transferring title can result in
increased efficiencies and other benefits that would be of significant
importance to both the project beneficiaries as well as Reclamation.
Furthermore, we believe that our M4E effort will add significant value
to meeting this goal and we look forward to working with the Committee
in this effort.

That concludes my statement. I would be happy to answer any questions.

**Statement of William Rinne**

**Acting Commissioner, Bureau of Reclamation**

**U.S. Department of the Interior**

**Before the**

**Committee on Energy and Natural Resources**

**U.S. Senate**

**S. 1106**

**September 21, 2006**

Madam Chairwoman, I am William Rinne, Acting Commissioner of the Bureau
of Reclamation. I appreciate the opportunity to provide the Department
of the Interior's views on S. 1106, legislation to authorize the
construction of the Arkansas Valley Conduit in the State of Colorado.
The Administration cannot support S. 1106.

The Conduit is an authorized feature of the 1962 Frying-Arkansas
Project, but was never constructed. The Conduit would transport water
from Pueblo Dam, a feature of the Fry-Ark Project, to communities along
the Arkansas River, extending about 110 miles to near Lamar, Colorado.
The Lower Arkansas River Basin is comprised of rural communities, with
the largest town, Lamar, having an estimated population of 8,600. The
population anticipated to be served by the Conduit is approximately
68,000. This proposed rural water project would tap into an existing
reservoir and provide municipal, residential, and industrial water via
160 miles of pipeline to a series of small towns and surrounding rural
areas; one option would also include a water treatment plant. Total
project costs are roughly estimated at between \$265 million and \$340
million, depending on the particular project features. While the project
is technically do-able, the project sponsors have not identified where
they would get all the water identified as needed for the project, and
the financial capabilities of the project sponsors is unclear.

The Fryingpan Arkansas Project Act required that municipal water supply
works either be constructed by communities themselves or, if infeasible,
by the Secretary, with repayment of actual costs and interest within 50
years.

During development of the original Project, Reclamation found the
Conduit to be economically feasible, but the beneficiaries lacked the
bonding capability to construct the works themselves. The beneficiaries
of the Conduit found that it also was financially infeasible to repay
Reclamation within 50 years if Reclamation were to construct the
Conduit.

Increased water treatment costs, due to the poor quality of locally
available groundwater, and requirements of the Safe Drinking Water Act
have renewed local interest in the need for alternative means of
obtaining safe and clean water supplies. We understand that the
beneficiaries are looking for Federal financing for the Conduit, given
that some of the communities in the Arkansas River Valley may be facing
considerable expense to comply with federally mandated water quality
standards.

S. 1106 is a re-draft of legislation previously introduced. The
legislation addresses a number of Reclamation's concerns, including some
that the previous Commissioner Mr. John Keys discussed in testimony
before this Subcommittee on October 15, 2003. This includes
clarification that the cost for operation, maintenance and replacement
of the Conduit will not be borne by the Federal Government.

The current bill, as introduced, again contains a Federal and a
Non-Federal cost share. The legislation states that the Federal share of
total costs of the planning, design, and construction of the Conduit
shall be 80 percent. This is contrary to the original Fry-Arkansas
authorizing legislation, general Reclamation law and current policy, in
that generally municipal and industrial beneficiaries pay 100 percent,
plus interest, of M&I project costs. The legislation as drafted is also
inconsistent with the 35 percent local cost share set forth in the
Administration's proposed rural water legislation that was transmitted
to Congress on March 3, 2004.

Therefore, the Administration does not support the bill.

At the request of Otero County Water Works Committee, and with funding
provided in fiscal years 2003 and 2004 appropriations bills, Reclamation
prepared a Re-evaluation Statement on the feasibility and viability of
the conduit. The Statement assesses if the construction of the conduit
would be responsive to current needs and are consistent with the
Principles and Guidelines; and the National Environmental Policy Act.
The Re-evaluation statement contains updated implementation costs for
construction and O&M, and provides an assessment of the Conduit
sponsors' ability to pay. The final Statement incorporates comments
received from direct beneficiaries and includes a revised draft cost
estimate, which compares favorably with the cost estimate recently
prepared by Black & Veatch, under a contract with Conduit proponents.

In addition, Reclamation has a concern about the requirement in the
current legislation requiring the Federal Government to pay the entire
cost of fundamental design changes conducted at the request of any
person other than the lead non-Federal entity. This language leaves open
the possibility that design changes recommended by the direct
beneficiaries become the sole financial responsibility of the Federal
Government. This provision is not in the best interest of the taxpayer.
Furthermore, we are concerned about the implications this has to
restrict the ability of Reclamation's engineers to exercise their
professional judgment in designing projects. The legislation as written
could create undue pressure to avoid changes to the original project,
even if those changes would be in the best public interest.

In conclusion, Madam Chairwoman, the Administration cannot support a
bill with a Federal cost share that is inconsistent with Fry-Ark
legislation, general Reclamation law and current policy. There are also
many uncertainties regarding project water supply and the financial
capability of the project sponsors to go forward with project
authorization. I would like to emphasize that the existing Fry-Ark
Project authorization appropriately address the responsibility of the
beneficiaries to pay for associated reimbursable costs. Finally, if
authorized, this project would need to compete with other, ongoing rural
water projects for scarce funds. Although we cannot support this bill,
the Administration recognizes the water quality issues facing the
Arkansas River Valley and we are open to working with the project
sponsors and members of the Committee to explore other options.

This concludes my statement. I would be pleased to answer any questions.