**Testimony of Dave Sabo**

**Bureau of Reclamation, Upper Colorado Region**

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

**Before the**

**Senate Energy and Natural Resources Committee**

**On the**

**Eastern New Mexico Rural Water Project and**

**the implementation of PL 109-451**

**August 14, 2007**

Mr. Chairman and Members of the Committee, my name is Dave Sabo, and I
am the Assistant Regional Director of the Bureau of Reclamation's Upper
Colorado Region. I am pleased to be here today on behalf of the
Department of the Interior to discuss both the status of the Eastern New
Mexico Rural Water Project, and separately, Reclamation's implementation
of Public Law 109-451, the Rural Water Supply Act of 2006.

Reclamation has been working with the state of New Mexico and local
parties on developing concepts for the Eastern New Mexico Rural Water
Project since Congress authorized feasibility studies in 1966.
Reclamation has participated in a number of studies on this evolving
project over the years. Since 1998, Congress has provided \$1,763,000
for planning and technical assistance, of which more than \$1.2 million
has been transferred directly to the City of Clovis, acting as the
fiscal agent for the local communities, for work on the project.

The proposed Eastern New Mexico Rural Water Project would provide a
sustainable water supply for the eastern New Mexico municipalities of
Clovis, Elida, Grady, Melrose, Portales, and Texico, as well as Curry
and Roosevelt counties and Cannon Air Force Base. The area currently
depends entirely on a groundwater source that is diminishing in both
quantity and quality. The currently envisioned project would supply
16,400 acre-feet of water per year through a pipeline from Ute
Reservoir, which was built by the State of New Mexico in 1963 as a water
supply source for eastern New Mexico

In 2004, Reclamation testified on legislation (HR 4623) to authorize
construction of the Eastern New Mexico Rural Water Supply Project.
During that hearing, Reclamation cited concerns with the adequacy of the
Conceptual Design Report to support authorization and identified some
critical questions that needed to be answered before construction should
proceed, such as whether all economically viable alternatives had been
considered, whether design and construction costs were consistent with
comparable projects, and whether the communities that would be sharing
project costs had an accurate estimate of how much those costs might be.
Reclamation also expressed concerns with the proposed cost sharing
formula, which assumed an 80% federal share for construction of the
project.

Since that time, a Reclamation "Oversight Committee" has been assisting
the Eastern New Mexico Rural Water Authority (Authority) and their
consultants in developing a more complete and thorough feasibility
report.

A "Preliminary Engineering Report" prepared for the Authority by their
consultant that was submitted in December 2006 represents significant
progress toward a feasibility-level analysis. Reclamation is continuing
to work with the Authority as they further develop the proposed
project's design, cost estimates, financing plan, and environmental
analysis.

The Authority is working with their consultant to take the design and
associated cost estimate to the feasibility level. Feasibility-level
cost estimates are based on information and data which is sufficient to
permit the preparation of preliminary layouts and designs used to
estimate each kind, type, or class of material, equipment, and labor
necessary to complete a project. A second consultant has been selected
by the Authority to work on National Environmental Policy Act
compliance. A third consultant for the Authority is working on a
detailed plan for financing the project.

The most recent cost estimate for construction, prepared last year by
the Authority's consultant, is \$436 million, with an estimated annual
operation and maintenance cost of \$8.2 million. The local communities
are planning to pay about 10% of capital costs with state and federal
shares being 15% and 75% respectively. The local communities would pay
100% of the operation, maintenance, and replacement costs.

Because this hearing is not focused on specific project-authorization
legislation, Reclamation cannot provide a statement on the relative
merits of the project from a policy standpoint. However, we are working
with the Authority and the State to bring the project to a point where a
feasibility determination is possible.

At this point, I would like to comment and, as requested by the
Committee, provide a status report on Reclamation's implementation of
Title I of Public Law 109-451, the Rural Water Supply Act of 2006, and
briefly consider how this new program may be applicable to the Eastern
New Mexico Rural Water Project.

In December 2006, Congress and the President enacted the Rural Water
Supply Act of 2006. Title I authorizes the Secretary of the Interior to
create a rural water supply program (Program) to address rural water
needs in the 17 Western United States. We are enthusiastic about this
Program, as its intent is to enable Reclamation to work cooperatively
with rural communities across the West in a consistent manner to
identify rural water supply needs and cost effective options for
addressing that need. Prior to the enactment of legislation authorizing
this Program, Reclamation has had no authority to get involved \-- early
in the process \-- in the analysis and development of solutions for
meeting the potable water supply needs of rural communities in the West.

To summarize, Title I of the Act requires Reclamation to: (1) develop
programmatic criteria for prioritizing requests for assistance under the
Program and for determining eligibility for non-Federal entities to
participate in the Program; (2) develop criteria for what must be
included in both the appraisal studies and the feasibility studies that
are to be completed under the Program, in terms of data, alternatives,
and level of analysis; (3) complete an assessment of the rural water
programs that exist in other agencies to ensure that we are filling an
unmet niche and to ensure that we coordinate and leverage resources, as
well as evaluate the status of rural water projects that are already
authorized; and (4) complete an annual report of Reclamation's staff
costs for carrying out the Act.

We expect there to be great interest in this program and given the
budget realities, we will not be able to get involved in every worthy
project. Furthermore, it is important to note that the Act does not
authorize project construction**.** Instead, the focus of the Program is
on ensuring thorough analysis of rural water needs and options through
the completion of appraisal and feasibility studies that meet program
criteria. At the end of the process, Reclamation is required to submit a
feasibility study to Congress. In the report that accompanies each
study, the Secretary (through Reclamation) will make a recommendation to
Congress as to whether the project is technically and economically
feasible, and whether it is in the Federal interest. The report must
make a recommendation on whether Congress should authorize Federal
involvement in construction of the rural water supply project that is
identified, as well as the appropriate non-Federal share of construction
costs, which must be at least 25% of the total construction costs for
the proposed project and determined based on an analysis of the
non-Federal entities' capability-to-pay.

Before the Rural Water Program can be implemented, P.L. 109-451 requires
that the Secretary (through Reclamation) promulgate and publish the
program's rules and criteria in the Federal Register. This is being done
through a rulemaking process in accordance with the Administrative
Procedure Act (APA) which provides opportunities for public review,
involvement and comment.

A team comprised of Reclamation employees from all five regions and the
Commissioner's office is leading the effort to develop the rules and
criteria for the rural water program. Because of the Act's specific
timelines and deadlines for the development of the criteria, Reclamation
has set an ambitious time-frame for the rulemaking. We expect to publish
proposed and then final Criteria in the Federal Register in the next
year.

Reclamation is aware of significant interest on the part of rural
communities in the West in this program. We have held conversations with
various stakeholder groups and plan to hold dialogues with Native
American Tribes. We will continue that outreach and dialogue throughout
the process of implementing this new program.

As I stated earlier, we are enthusiastic about this program, which will
provide a clearly defined process for Reclamation and rural communities
throughout the West to work together to identify options for meeting
potable water supply needs in a technically feasible, environmentally
responsible, and cost effective manner. P.L. 109-451 gives Reclamation
authority to review, evaluate, and make recommendations to the Congress
regarding the feasibility of proposed rural water projects such as the
Eastern New Mexico Rural Water Project.

With all of this work underway, we look forward to finalizing the
relevant rules and criteria that will underlie this program, and working
closely with the large base of stakeholders on implementation. Thank you
for the opportunity to appear today.

This concludes my statement, and I am happy to answer any questions the
Committee may have.