```

[Senate Hearing 109-781]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 109-781
 
                  MISCELLANEOUS WATER AND POWER BILLS

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   on
                                     

                           S. 1106                               S. 3851

                           S. 1811                               S. 3798

                           S. 2070                               H.R. 2563

                           S. 3522                               H.R. 3897

                           S. 3832

                                     
                               __________

                           SEPTEMBER 21, 2006

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
32-736                      WASHINGTON : 2007
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD BURR, North Carolina         TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               KEN SALAZAR, Colorado
GORDON SMITH, Oregon                 ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky
                  Frank J. Macchiarola, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                                 ------                                

                    Subcommittee on Water and Power

                    LISA MURKOWSKI, Alaska, Chairman
                  GORDON SMITH, Oregon, Vice Chairman
LARRY E. CRAIG, Idaho                TIM JOHNSON, South Dakota
RICHARD BURR, North Carolina         BYRON L. DORGAN, North Dakota
MEL MARTINEZ, Florida                RON WYDEN, Oregon
CONRAD BURNS, Montana                DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                MARIA CANTWELL, Washington
JAMES M. TALENT, Missouri            KEN SALAZAR, Colorado
                                     ROBERT MENENDEZ, New Jersey

   Pete V. Domenici and Jeff Bingaman are Ex Officio Members of the 
                              Subcommittee

                          Nate Gentry, Counsel
                    Mike Connor, Democratic Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Allard, Hon. Wayne, U.S. Senator from Colorado...................     5
Craig, Hon. Larry E., U.S. Senator from Idaho....................     2
Donnelly, Thomas F., Executive Vice President, National Water 
  Resources Association..........................................    46
Feinstein, Hon. Dianne, U.S. Senator from California.............     4
Hatch, Hon. Orrin, U.S. Senator from Utah........................     2
Johnson, Hon. Tim, U.S. Senator from South Dakota................     4
Long, Bill, President, Southeastern Colorado Water Conservancy 
  District.......................................................    38
McNulty, Hon. Michael R., U.S. Represenative from New York.......    59
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     1
Radanovich, Hon. George, U.S. Represenatative from California....    14
Rinne, William, Acting Commissioner, U.S. Bureau of Reclamation..    17
Robinson, Mark, Director, Office of Energy Projects, Federal 
  Energy Regulatory Commission...................................    26
Salazar, Hon. Ken, U.S. Senator from Colorado....................    15
Schumer, Hon. Charles E., U.S. Senator from New York.............     8
Smith, Hon. Gordon H., U.S. Senator from Oregon..................    35
Thalacker, Marc, Manager, Three Sisters Irrigation District, on 
  behalf of the Oregon Water Resources Congress..................    41

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    53

                              Appendix II

Additional material submitted for the record.....................    59

                  MISCELLANEOUS WATER AND POWER BILLS

                              ----------                              

                      THURSDAY, SEPTEMBER 21, 2006

                               U.S. Senate,
                   Subcommittee on Water and Power,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:32 p.m., in 
room SD-628, Dirksen Senate Office Building, Hon. Lisa 
Murkowski presiding.

  OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM 
                             ALASKA

    Senator Murkowski. I call to order the subcommittee. It is 
a pleasure to welcome everyone today to the Water and Power 
Subcommittee. We have Senator Allard with us this afternoon at 
the subcommittee. We are expecting Senator Schumer and 
Congressman Radanovich will be joining us a little bit later. 
He is in a committee over on the House side, but will be coming 
across.
    But we do have a busy agenda, so I would like to begin with 
the bills that we have before us today. We have nine pieces of 
legislation: S. 1106, sponsored by Senators Allard and Salazar, 
to authorize construction of the Arkansas Valley Conduit in 
Colorado; S. 1811, sponsored by Senators Hatch and Bennett, 
which authorizes a feasibility study to enlarge the Arthur V. 
Watkins Dam; S. 2070, sponsored by Senator Schumer, to provide 
requirements for hydropower projects on the Mohawk River; S. 
3522, sponsored by Senators Wyden, Smith, Craig, and Murray, to 
reauthorize and amend the Fisheries Restoration and Irrigation 
Mitigation Act of 2007; S. 3798, sponsored by Senator 
Feinstein, to address Folsom Canal costs; S. 3832, sponsored by 
Senators Domenici and Bingaman, to direct the Interior 
Secretary to establish transfer title criteria for reclamation 
facilities; S. 3851, which I have sponsored, which extends FERC 
preliminary permits for hydro projects in Alaska; H.R. 2563, 
sponsored by Mr. Otter, to authorize feasibility studies to 
address water shortages within the Snake, Boise, and Payette 
River systems.
    We also have H.R. 3897, which is sponsored by Mr. 
Radanovich, to authorize the Secretary of the Interior to enter 
into a cooperative agreement on the Madera water supply and 
groundwater enhancement project.
    The subcommittee has received written testimony on several 
of the bills before us today and that testimony will be made 
part of the official record. After we hear from our 
congressional witnesses, we will have two panels which we will 
welcome at that point in time.
    Before we get started, I would like to ask, Senator Craig, 
if you have any opening statements that you would like to 
present.
    [The prepared statement of Senator Hatch follows:]
   Prepared Statement of Hon. Orrin G. Hatch, U.S. Senator From Utah
    Mr. Chairman, I am grateful for the opportunity to share my support 
for the Arthur V. Watkins Dam Enlargement Act of 2005 (S. 1811). The 
bill, if enacted, would authorize the Bureau of Reclamation to conduct 
a feasibility study on raising the height of the Arthur V. Watkins Dam 
in Weber County, Utah.
    The dam is a 14.5 mile long earthfill dam which encloses Willard 
Bay Reservoir. The reservoir has a storage capacity of roughly 215,000 
acre-feet of water. It is estimated that raising the dam by five to 10 
feet would increase the reservoir's storage capacity by 50,000 to 
70,000 acre-feet. My bill simply authorizes a feasibility study to 
determine whether enlarging the dam is an appropriate way to help 
address the Weber Basin's expanding water needs. I believe it is, and I 
believe it will be an easy, cost effective, environmentally sound way 
to increase water storage capacity in the Weber Basin.
    Thousands of Utah residents and businesses already rely on the 
reservoirs in the Weber Basin system to provide both culinary and 
secondary water. But, Mr. Chairman, the Weber Basin is one of the 
state's fastest growing areas. In order to meet the area's growth 
demands, we must find additional water sources and make better use of 
existing resources.
    Further, Utah is the second most arid state in the union, and 
increasing water storage capacity will help citizens in the Weber Basin 
better manage the state's frequent drought cycles. I believe that my 
bill is a simple way to help improve water management in Utah and 
provide citizens in the Weber basin with increased capacity to meet 
their rapidly-growing needs.
    Again, Mr. Chairman, thank you for holding this hearing today. I 
recognize that we are quickly running out of time in this legislative 
session, but I hope that the Committee will make S. 1811 one of its 
priorities and send it to the Senate floor this year. Thank you.

        STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR 
                           FROM IDAHO

    Senator Craig. Well, thank you very much, Madam Chairman, 
for holding this hearing and for getting all of these bills 
before the subcommittee and therefore the full committee. As 
you have mentioned, I am here on S. 3522, the Fisheries 
Restoration and Mitigation Act. Also, H.R. 2563, put in by my 
fellow colleague from Idaho, Congressman Otter, as it relates 
to studies in the Snake and the Payette River watersheds for 
purposes of looking for additional storage.
    Let me ask unanimous consent that my full statement be a 
part of the record and I will make some brief comments.
    Senator Murkowski. It will be included.
    Senator Craig. In fact, this afternoon I am flying out to 
San Diego to host a water conference. It will be the second 
that the Center for the New West, once in Denver, now in Boise, 
has hosted dealing with water in our Western arid States. I and 
my colleagues are putting a special emphasis now on the West 
and our very limited water resources, for obvious reasons, 
Madam Chairman. Three of the most arid States in the Nation are 
now some of our fastest populating States: Arizona, Nevada, and 
my State of Idaho. New Mexico is beginning to grow and there 
will be in time some very fundamental decisions to be made as 
to the allocation of water or the reallocation of water as it 
relates to human uses versus agricultural, fisheries, all of 
those other important issues.
    H.R. 2563 embodies an approach toward looking to see if we 
cannot retain more runoff, storage water. Obviously, more water 
is a part of a solution, but making decisions as it relates to 
how water gets used or where it gets used as a finite resource 
is another approach. So it is critical that through the Bureau 
of Reclamation we reenergize the reality that the West may some 
day need to build more storage, while at the same time 
recognizing the critical nature of water quality within our 
systems for fish and fish habitat, mitigation, all of those 
types of things that are addressed in S. 3522.
    So it is an issue that I am spending a good deal more time 
on, as are my Western colleagues, and I thank you very much for 
holding these hearings today. It is an issue in the West that 
we worry about because we do not have enough of it, whereas in 
some areas of our country they worry about it because there is 
too much of it. It is an interesting juxtapose.
    Thank you.
    [The prepared statement of Senator Craig follows:]

   Prepared Statement of Hon. Larry E. Craig, U.S. Senator From Idaho

    Madam Chair and members of the committee, the arid West is what it 
is today, with vast fields of green and growing, healthy, vibrant 
communities, because of our ability to store water and channel it 
through irrigation. The West is also fortunate to have a variety of 
fish populations that at times creates multiple demands from providing 
increased flows to fish screens.
    I would like to join my colleagues from Oregon in supporting S. 
3522, the Fisheries Restoration and Irrigation Mitigation Act (PRIMA) 
of 2006. It is important that we pool our resources and work together 
in the region to get serious about fish restoration. PRIMA has proven 
to be cost effective and efficient at this goal and, therefore, should 
be reauthorized.
    The FRIMA program exemplifies the great potential of forward-
thinking public-private partnerships, and the wisdom of working closely 
with local communities. Since it was enacted in 2000, we have achieved 
real results. In my home state of Idaho, according to the Fish and 
Wildlife Service, 13 projects have been completed and 206 miles of 
streams have been ``protected, enhanced, or made accessible to fish.'' 
One example of work being done is in the Salmon River Basin near 
Salmon, Idaho, where partners such as the Lemhi Soil and Water 
Conservation District and the U.S. Forest Service have installed fish 
screens on three irrigation water diversions. These screens protect 
salmon and other fish species and allow farmers to continue to irrigate 
their farms. Let me emphasize that in supporting the reauthorization of 
this program, there are important projects such as these that are yet 
to be completed.
    This program makes sense, especially from a financial perspective. 
FRIMA extends the reach of federal dollars by enlisting other 
interested parties. This results in more money for FRIMA projects and 
more talent and experience working to achieve success. In fact, from 
fiscal years 2002 to 2004, local and state government, businesses, 
irrigation districts, and environmental groups, to name just a few, 
have shouldered 58% of the cost. This cost-sharing surpassed the 35% 
threshold required in the original legislation. This program is making 
a difference on the ground and deserves to be reauthorized.
    Also helping fish is Idaho's storage capacity that is being 
stressed by increasing demands from irrigation, power generation, 
industrial users, municipal users, and also fish habitat.
    Idaho is growing at an unprecedented rate, particularly in the 
Treasure Valley. The assessment has already pointed out that, in less 
than 30 years, over 100,000 additional acre feet of water per year will 
be needed to meet increased demand. Beyond additional water, there is 
concern over current flood control because the increasing development 
and channelization of the Boise River is decreasing flood control 
capacity. Additionally, Idaho has four species of salmonids that are 
listed as threatened or endangered under the Endangered Species Act 
that require a significant amount of water for flow augmentation. This 
will reduce the pressure of other impoundments that are losing 
significant amounts of water causing different resource concerns.
    These increasing demands, coupled with limited storage, have caused 
concern for me and many of my constituents. In 2003, dialogue regarding 
needed water supplies began and a Stakeholder Working Group was created 
from many interest groups from federal, state and local partners to 
address irrigation, municipal, and environmental interests. These 
parties have worked collaboratively with the Bureau of Reclamation to 
locate appropriate storage options from adding to existing impoundments 
to building new structures to recharge.
    As you know, Madam Chair, the Bureau of Reclamation needs 
congressional authorization to take the next step and do feasibility 
studies in the areas identified by the Stakeholder Working Group. I 
support this legislation and hope through the feasibility study 
process, we can determine needed additional storage for my constituents 
in Idaho.
    Again, I support Representative Butch Otter and H.R. 2563 that 
authorizes the Secretary of the Interior to conduct feasibility studies 
and address certain water shortages within the Snake, Boise, and 
Payette River systems in Idaho.
    I ask unanimous consent that the Idaho Water Users Association 
testimony be made part of the record.
    Thank you Madam Chair.

    Senator Murkowski. Thank you, Senator Craig, and your full 
comments will be included as part of the record.
    Senator Johnson, did you want to make an opening statement?

 STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA

    Senator Johnson. Just briefly, Madam Chairman. Thank you 
for convening today's hearing. We have got a large number of 
bills before us today that address a diverse set of interests, 
so I will keep my remarks very short.
    I would like to extend a quick welcome to Senators Schumer 
and Allard and Congressman Radanovich, who are providing their 
statements today. I would also like to welcome back Acting 
Commissioner Rinne of the Bureau of Reclamation and Mark 
Robinson of FERC, who are once again giving testimony to the 
subcommittee, and thank our second panel of witnesses for 
making themselves available this afternoon.
    From the testimony we have received from the administration 
witnesses, it looks as if a number of today's bills will 
require some additional work before they can move through the 
committee. Nonetheless, this afternoon's hearing is an 
important first step in that process and I am ready to work 
with you, Madam Chairman, and the sponsoring members to try to 
address the identified issues and secure committee action on 
these bills in the near future. I look forward to receiving 
today's testimony and appreciate everyone's input, and thank 
you again, Madam Chairman.
    Senator Murkowski. Thank you, Senator.
    Senator Feinstein, would you care to make an opening 
statement?

       STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR 
                        FROM CALIFORNIA

    Senator Feinstein. No, Madam Chairman. Thank you. I want to 
thank you. You have been just terrific and I really appreciate 
it. There are a couple of bills on the calendar that relate to 
California and I just want to be here just in case.
    [Laughter.]
    Senator Murkowski. I appreciate you being here and again 
appreciate your cooperation as we work through the title 16.
    With that, we welcome to the committee Senator Allard and 
Senator Schumer. Senator Allard, if you would care to present 
your comments here this afternoon, and again welcome.

         STATEMENT OF HON. WAYNE ALLARD, U.S. SENATOR 
                         FROM COLORADO

    Senator Allard. Madam Chairman, thank you.
    Today Colorado is experiencing the fifth year of an 
unprecedented drought. This drought is a strong reminder that 
water is indeed our most precious natural resource. This is 
true most especially in rural Colorado. In southeastern 
Colorado, home of the Arkansas River, it is difficult to find 
clean, inexpensive water that can meet the ever-increasing 
Federal water standards. It is for this reason that I, along 
with my colleague Senator Salazar, introduced S. 1106. 
Identical legislation has been introduced by Congresswoman 
Musgrave in the House of Representatives.
    S. 1106 will ensure the construction of the Arkansas Valley 
Conduit, which is envisioned as a pipeline that will provide 
the small, financially strapped towns and water agencies along 
the lower Arkansas River with safe, clean and affordable water. 
By creating an 80 percent Federal and 20 percent local cost-
share formula to help offset the construction costs of the 
conduit, this legislation will protect the future of 
southeastern Colorado's drinking water supplies and prevent 
further economic hardships.
    It is extremely important to note that the Arkansas Valley 
Conduit was originally authorized by Congress in 1962, over 40 
years ago, as a part of the Fryingpan-Arkansas Project. The 
original Fry-Ark Project authorizing legislation grants the 
Secretary of the Interior the authority to construct the 
Arkansas Valley Conduit. Our legislation simply authorizes that 
authority and adds a cost share provision.
    Due to the authorizing statute's lack of a cost share 
provision and southeastern Colorado's depressed economic 
status, the conduit was never built and until recently there 
was no urgent need for it. The region was fortunate to enjoy an 
economical and safe alternative to pipeline transportation of 
project water and that was the Arkansas River itself.
    Unfortunately, this is no longer the case. While the 
Federal Government has continued to strengthen its unfunded 
water quality standards, these communities have fallen further 
and further behind in attaining those standards. As far back as 
1950, the Bureau of Reclamation determined that the quality of 
local drinking water supplies were simply unacceptable, and you 
can see that in House Document No. 187, 83rd Congress.
    In response to a number of water providers falling out of 
compliance with existing EPA water quality standards, the local 
communities formed a committee to evaluate alternative 
approaches to solving this problem. The committee ultimately 
hired an independent engineering firm to evaluate two competing 
options: constructing a series of treatment facilities and 
constructing the Arkansas Valley Conduit.
    That evaluate resulted in the recommendation to construct 
the conduit because of greater savings in taxpayer dollars. The 
engineers concluded that local communities were unable to fund 
either solution under existing circumstances. The long-term 
costs of operating individual water treatment facilities, 
including potential new Federal standards and the costs of 
disposal of treatment facility water, removed treatment as a 
viable long-term solution.
    The fixed long-term cost of the conduit contributed to the 
engineers' recommending this solution. In other words, the 
communities may be too poor not to spend the millions of 
dollars they would have to spend in partnership with the 
Federal Government to build the Arkansas Valley Conduit. When 
you weigh the promise of the conduit versus the fate of 
building new individual water treatment facilities, it is clear 
that the conduit is the best choice of action.
    S. 1106 is essential if we are to bring local water 
providers into compliance with Federal water quality standards 
and it will finally provide a long-term solution to the 
region's water quality concerns. The Arkansas Valley Conduit 
would deliver fresh, clean water to dozens of valley 
communities and thousands of people along the river. To be 
exact, the conduit will supply 16 cities and 25 water agencies 
in Bent, Crowley, Kiowa, Prowers, Pueblo, and Otero Counties 
with water when completed. The largest city served by the 
conduit is La Jonta, Colorado, population of 12,000.
    At this time, if the members would direct their attention 
to the maps--they should have those in their folders--you will 
see exactly where the conduit's beneficiaries are situated. One 
of the most stunning facts that I would like to point out is 
that the conduit will serve an area slightly larger than the 
State of New Hampshire.
    As I mentioned, the local sponsors of the project have 
completed an independently funded feasibility study of the 
conduit and have developed a coalition of support from water 
users in southeastern Colorado. I am also pleased that the 
State of Colorado has contributed a great deal of funding for 
the study through the Colorado Water Conservation Board. These 
local stakeholders continue to explore options for financing 
their share of the costs and are working hard to complete the 
final details surrounding the organization that will oversee 
the conduit project.
    Now, I would like to turn my attention to the Bureau of 
Reclamation, some of the questions they have raised pertaining 
to the legislation. I first want to make it clear that the 
purpose of the legislation is to provide an 80 percent Federal, 
20 percent local cost share formula for the cost of 
construction. The local beneficiaries are to be 100 percent 
responsible for operation and maintenance. If the Bureau of 
Reclamation believes that the language of S. 1106 does not 
reflect this commitment, I am prepared to make such changes as 
the Bureau believes are necessary to ensure local payment of 
operation and maintenance.
    I also understand that the Bureau of Reclamation is 
concerned about the cost of the project in light of the current 
project backlog. As a member of the U.S. Senate Appropriations 
Committee, you have my full commitment that if the cost share 
language is approved I will work tirelessly on behalf of this 
project to make sure that it does not impact other important 
Reclamation projects. This project was authorized 40 years ago. 
If the money is not spent now it will be spent later as 
communities seek Federal grants to fund their projects 
individually instead of using a systemwide conduit approach.
    The Bureau of Reclamation is also concerned that the cost 
share legislation will create a new precedent that it opposes 
changes to the Bureau's standard 100 percent repayment policy. 
I realize that my legislation is a change to standard policy. 
Indeed, that is the very purpose of this legislation. However, 
there are a number of other authorized projects that 
legislatively change the standard repayment policy. Therefore 
the Arkansas Valley Conduit cost share would not set a 
precedent. The precedent has already been set.
    With the help of my colleagues, the promise made by 
Congress 40 years ago to the people of southeastern Colorado 
will finally become a reality.
    Madam Chairman, thank you for your leadership and for 
holding this hearing today. I apologize for going over my time, 
but I felt like it is important that the committee get the full 
picture on this, and thank you for your patience.
    [The prepared statement of Senator Allard follows:]

  Prepared Statement of Hon. Wayne Allard, U.S. Senator From Colorado

    Madam Chairman, today Colorado is experiencing the fifth year of 
unprecedented drought. This drought is a strong reminder that water is 
indeed our most precious natural resource. This is true most especially 
in rural Colorado. In Southeastern Colorado, home of the Arkansas 
River, it is difficult to find clean, inexpensive water that can meet 
the ever increasing federal water standards.
    It is for this reason that I, along with my colleague Senator 
Salazar, introduced S. 1106. Identical legislation has been introduced 
by Congresswoman Musgrave in the House of Representatives. S. 1106 will 
ensure the construction of the Arkansas Valley Conduit, which is 
envisioned as a pipeline that will provide the small, financially 
strapped towns and water agencies along the lower Arkansas River with 
safe, clean, affordable water. By creating an 80 percent federal--20 
percent local cost share formula to help offset the construction costs 
of the Conduit, this legislation will protect the future of 
Southeastern Colorado's drinking water supplies, and prevent further 
economic hardship.
    It is extremely important to note that the Arkansas Valley Conduit 
was originally authorized by Congress in 1962, over forty years ago, as 
a part of the Fryingpan-Arkansas Project. The original Fry-Ark Project 
authorizing legislation grants the Secretary of the Interior the 
authority to construct the Arkansas Valley Conduit. Our legislation 
simply reauthorizes that authority and adds a cost-share provision.
    Due to the authorizing statute's lack of a cost share provision, 
and Southeastern Colorado's depressed economic status, the Conduit was 
never built. And, until recently, there was no urgent need for it--the 
region was fortunate to enjoy an economical and safe alternative to 
pipeline-transportation of project water: the Arkansas River. 
Unfortunately, this is no longer the case. While the federal government 
has continued to strengthen its unfunded water quality standards, these 
communities have fallen further and further behind in attaining them. 
As far back as 1950, the Bureau of Reclamation determined that the 
quality of local drinking water supplies were ``unacceptable'' (House 
Document Numbered 187, Eighty-third Congress).
    In response to a number of water providers falling out of 
compliance with existing EPA water quality standards, the local 
communities formed a committee to evaluate alternative approaches to 
solving this problem. The committee ultimately hired an independent 
engineering firm to evaluate two competing options: constructing a 
series of treatment facilities and constructing the Arkansas Valley 
Conduit. That evaluation resulted in the recommendation to construct 
the Conduit.
    The engineers concluded that local communities are unable to fund 
either solution under existing circumstances. The long-term costs of 
operating individual water treatment facilities, including potential 
new federal standards and the cost of disposal of treatment facility 
waste, remove treatment as a viable long-term solution. The fixed long-
term costs of the Conduit contributed to the engineers recommending 
this solution. In other words, the communities may be too poor not to 
spend the millions of dollars they would have to spend, in partnership 
with the federal government, to build the Arkansas Valley Conduit.
    When you weigh the promise of the Conduit versus the fate of 
building new individual water treatment facilities, it is clear that 
the conduit is the best choice of action. S. 1106 is essential if we 
are to bring local water providers into compliance with federal water 
quality standards and it will finally provide a long term solution to 
the region's water quality concerns.
    The Arkansas Valley Conduit will deliver fresh, clean water to 
dozens of valley communities and thousands of people along the river. 
To be exact, the Conduit will supply 16 cities and 25 water agencies in 
Bent, Crowley, Kiowa, Prowers, Pueblo and Otero counties with water 
when completed. The largest city served by the Conduit is La Junta, 
Colorado (population nearly 12,000). At this time, if the members would 
direct their attention to the maps, they will see exactly where the 
Conduit's beneficiaries are situated. One of the most stunning facts 
that I would like to point out is that the Conduit will serve an area 
slightly larger than the state of New Hampshire.
    As I mentioned, the local sponsors of the project have completed an 
independently funded feasibility study of the Conduit, and have 
developed a coalition of support from water users in Southeastern 
Colorado. I am also pleased that the State of Colorado has contributed 
a great deal of funding for the study through the Colorado Water 
Conservation Board. These local stakeholders continue to explore 
options for financing their share of the costs, and are working hard to 
complete the final details surrounding the organization that will 
oversee the Conduit project.
    Now I would like to turn my attention to the Bureau of Reclamation 
and some of the questions they have raised pertaining to the 
legislation. I first want to make it clear that the purpose of the 
legislation is to provide an 80 percent federal--20 percent local cost 
share formula for the costs of construction. The local beneficiaries 
are to be 100 percent responsible for operation and maintenance. If the 
Bureau of Reclamation believes that the language of S. 1106 does not 
reflect this commitment, I am prepared to make such changes as the 
Bureau believes are necessary to ensure local payment of O&M.
    I also understand that the Bureau of Reclamation is concerned about 
the cost of the project in light of their current project back-log. As 
a member of the United States Senate Appropriations Committee, you have 
my full commitment that, if the cost-share language is approved, I will 
work tirelessly on behalf of this project to make sure that it does not 
impact other important Reclamation projects. This project was 
authorized 40 years ago. If the money is not spent now, it will be 
spent later as communities seek federal grants to fund their projects 
individually instead of using a system-wide conduit approach.
    The Bureau of Reclamation is also concerned that the cost-share 
legislation will create a new precedent and that it opposes changes to 
the Bureau's standard 100 percent repayment policy. I realize that my 
legislation is a change to standard policy--indeed that is the very 
purpose of the legislation. However, there are a number of other 
authorized projects that legislatively change the standard repayment 
policy. Therefore, the Arkansas Valley Conduit cost-share would not set 
a precedent the precedent has already been made.
    With the help of my colleagues, the promise made by Congress forty 
years ago to the people of Southeastern Colorado, will finally become a 
reality.
    Madam Chairman, thank you for your leadership and for holding this 
hearing today.

    Senator Murkowski. We appreciate your comments and your 
attendance here today, Senator Allard.
    Senator Schumer, if you would like to give us your 
comments. Welcome.

  STATEMENT OF HON. CHARLES E. SCHUMER, U.S. SENATOR FROM NEW 
                              YORK

    Senator Schumer. Thank you, Madam Chairman. First I want to 
thank you for replacing my sign. It said ``Sentor Schumer.'' It 
reminds me, I was once in New York City and I had an 
appointment with somebody I wanted very much to see and I said: 
It is Senator Schumer. She called back a few minutes and said: 
``Sendar''--she thought that was my first name--``you have no 
such appointment.'' Anyway----
    Senator Murkowski. Well, we are glad that you are here with 
us.
    Senator Schumer. So my staff kept joking that I was Sendar 
from some foreign planet or something like that.
    Anyway, I am glad to be here and I thank you all for your 
time. I want to thank my two dedicated staff people, Christine 
Parker and Bridget Petruczok, and one other gentleman who has 
been running my capital region office--that is Albany area--
since I have been Senator, and does a great job and has been, 
as they say up in Albany, like white on rice about this issue, 
and that is Steve Mann.
    The purpose of S. 2070, the Mohawk River Hydroelectric 
Projects Licensing Act, is to require FERC to reopen the 
relicensing proceeding for the School Street project. It is 
currently a 38 megawatt hydroelectric project located in the 
city of Cohoes on the Mohawk River near Albany. The bill simply 
asks that FERC consider all valid license applications when a 
facility has been operating under annual license for 10 years 
or more.
    My view, Madam Chairman, is that we should not let a 
technicality of the Federal licensing process stand in the way 
of progress. The existing situation, temporary annual licenses, 
should not continue when there are alternatives that will 
provide more power in an environmentally friendly way.
    The history goes like this. In 1991 when the relicensing 
proceeding for this facility started, the then owners, Niagara 
Mohawk Power, operated as a monopoly in New York's regulated 
energy industry. Given that a State-approved monopoly was 
operating and applying, it came as no surprise there was no 
competition. No one else applied.
    The original license for the current School Street project 
expired in 1993 and since then FERC has only issued annual 
licenses, which include no requirement to make improvements, as 
would the longer license. So this is the 15th year that this 
relicensing procedure has been before FERC. I understand that 
it often takes several years for FERC to work through one of 
these proceedings, but by any measure 15 years is an 
extraordinary amount of time. It is the second oldest 
application still pending before FERC.
    When former Chairman Patrick Wood attempted to address the 
backlog of these thorny relicensure cases a few years ago, this 
was one of the few that was left uncleared. They made an effort 
to clear all the others.
    When alternative projects attempted to raise the issue in 
the licensing case, relicensing case, the Commission issued a 
decision that stated it was barred from considering any 
alternative because of FERC's rules, that they prohibit 
consideration of applications that were not filed at the time 
the license expired. As I already mentioned and will explain in 
more detail, at the time the license was set to expire Niagara 
Mohawk had a monopoly. It was the only logical applicant.
    But unless FERC can look at other applicants who were not 
around at the time, this problem is going to be left in limbo 
for another 15 years. Now, I appreciate FERC is in a bind here. 
In 2005, in response to a letter I sent on this issue, Chairman 
Wood said: ``Should you decide that you would like to propose 
legislation to allow this type of application to be considered, 
we would be glad to provide technical assistance.'' FERC really 
wanted us to do this because they are sort of stuck as well.
    Now, absent such legislation, I have been informed by the 
Chairman of FERC that the Commission believes it is barred by 
law from considering any alternative. So we are going to be 
stuck with this [indicating] instead of that [indicating] 
forever. According to FERC, it cannot consider any alternative 
for Cohoes because the Federal Power Act requires them to only 
consider proposals that were 24 months before the expiration of 
the existing license. That was in 1991 in this case.
    But as I said, the circumstances were different then. We 
now have the opportunity to have low-cost, pro-environmental 
power. It is GIPA, the Green Island Power Authority, which is a 
public authority, that wants to do this. Everyone is on board, 
but we are stuck by this technicality.
    Cohoes Falls is a natural and historical landmark. It is on 
the Mohawk River. It is the second largest river waterfall in 
our State. I guess you can all guess the first. It is over 
there in Niagara. It was featured in paintings by John James 
Audubon, a poem by Thomas Moore, the national poet of Ireland. 
They are beautiful. But since 1911 these falls have remained 
dry on all but the rarest of occasions, because when the 
project was built it diverted the river through a canal, which 
leaves a one-mile stretch of the Mohawk River dry.
    The current situation prohibits an alternative. We could 
bring back the beauty of the falls. There are fish lanes that 
are proposed that would allow fishing. Most important of all, 
you would get much more power at a much lower cost. So it is a 
win-win-win for the one million people of the capital region.
    Our bill will allow FERC simply to consider other 
applications, to ensure the public does not lose the benefits 
of more energy production and a revitalized falls through a 
more environmentally sound and friendly approach.
    My bill takes into account the sweeping changes that have 
occurred since deregulation of the energy market and the 
important technological advances like the state of the art fish 
screens. Those did not exist 15 years ago and they would 
preserve the fish, and fishing again is a recreational activity 
that is very much appreciated and prized on the Mohawk.
    Most important, it would permit alternative applications 
that are supported by all of the surrounding communities. The 
existing owner does not want to change things. It is just 
sitting there. The new owner has great plans, as you can see, 
for lower cost energy, preserving the fish, and bringing back 
the beauty of the falls.
    So I hope that the committee will consider that. We do not 
want to be stuck with this for another 15 years. I have tried 
to abbreviate my statement. I feel pretty strongly about this, 
Madam Chair. But in the interest of time I would like that--I 
will conclude my remarks and ask that my full remarks be 
written into the record.
    [The prepared statement of Senator Schumer follows:]

      Prepared Statement of Hon. Charles E. Schumer, U.S. Senator 
                             From New York

    Thank you Madam Chair and members of the committee for welcoming me 
here today to talk about a critically important project for the Capital 
Region in upstate New York. The purpose of S. 2070, the Mohawk River 
Hydroelectric Projects Licensing Act of 2005, is to require the Federal 
Energy Regulatory Commission (FERC) to reopen the re-licensing 
proceeding for the School Street Project, currently a 38 Mega-Watt 
hydroelectric project located in the City of Cohoes on the Mohawk 
River.
    This bill simply asks that FERC consider all valid license 
applications when a facility has been operating under annual license 
for 10 years or more. We should not let a technicality of the. federal 
licensing process stand in the way of progress. The existing situation, 
temporary annual licenses should not continue when there are 
alternatives that will provide more power in a more environmentally 
friendly way.
    In 1991, when the re-licensing proceeding for this facility 
started, the then owners, Niagara Mohawk Power Corporation, operated as 
a monopoly in New York's regulated energy industry. Given that a state-
approved monopoly was operating and applying for the re-license, it 
should come as no surprise that there was no competition from other 
entities for the application.
    The original license term for the current School Street Project 
expired in 1993. Since then, FERC has issued only annual licenses, 
which include no requirements to make any improvements
    Madam Chairwoman, this is the fifteenth year that this re-licensure 
proceeding has been before FERC. I understand that it often takes 
several years for FERC to work through one of these proceedings, but by 
any measure, fifteen years is an extraordinary amount of time. Indeed, 
it is the second oldest application still pending before it.
    And, when former FERC Chairman Patrick Wood attempted to address 
the backlog of thorny re-licensure cases a few years ago, this project 
was one of the few that was left uncleared.
    When alternative projects attempted to raise the issue in the 
School Street re-licensing case, the Commission issued a decision that 
stated it was barred from considering any other alternative because of 
FERCs rules prohibit consideration of applications that were not filed 
at the time the license expired. As I already mentioned, at the time 
the license was set to expire in 1993, Niagara Mohawk had a monopoly 
and thus was the only logical applicant. But unless FERC is permitted 
to look to other applicants who were not around at the time of the re-
licensure, I am afraid this the problem could be left in limbo for 
another fifteen years. That in sum is why we are here today.
    I appreciate that FERC is in a bind here. In March, 2005 in 
response to a letter that I sent on this issue, former FERC Chairman 
Wood said, ``Should you decide that you would like to propose 
legislation to allow this type of application to be considered under 
the Federal Power Act, we would be glad to provide technical 
assistance.'' Soon after, based in large part on Chairman Wood's 
response, I proposed this legislation.
    Absent such legislation, I have been informed by the Chairman that 
FERC believes it is barred by law from considering any other 
alternatives, even a superior alternative. According to FERC, it cannot 
consider any alternative proposal for Cohoes Falls because the Federal 
Power Act requires them to only consider proposals that were filed 24 
months before the expiration of the term of the existing license, which 
in this case was all the way back in 1991.
    But circumstances were very different then. At that time, New 
York's regulated electric industry permitted Niagara Mohawk (NIMO) to 
have a monopoly. New Yorkers knew that this low-cost power would remain 
in the Region at state-regulated prices. But with deregulation, the 
world has changed. The monopoly is gone, and NIMO has long since sold 
off this facility. In fact, it has been sold and resold several times.
    In addition, the region served by the facility has changed. Any 
plant licensed at Cohoes Falls should meet the power needs of the 
growing Capital Region and protect the aquatic life and scenic beauty 
that have been nearly ravaged by the current facility.
    Cohoes Falls is a true natural and historical landmark and is 
located on the Mohawk River, just west of its confluence with the 
Hudson River. It's the second largest waterfall in New York State and 
the site is still considered sacred to the Iroquois. It is also was 
featured in a painting by John James Audubon and a poem by Thomas 
Moore, the National Poet of Ireland.
    Since 1911, these majestic falls have remained dry on all but the 
rarest of occasions. When the School Street Project was built, it 
diverted the flow of the river through a canal, which leaves a one mile 
stretch of the Mohawk River, including the Cohoes Falls dry on all but 
a handful of days a year.
    The current situation prohibits consideration of alternative 
projects or additional evidence into the existing School Street re-
licensing record despite the need of the electricity consumers in my 
State for clean, renewable resources. Existing regulations have thus 
created a situation where it has but one choice and that one choice is 
to re-license a power plant that under-utilizes the waters of the 
Mohawk River and wreaks adverse environmental effects. Now, 15 years 
have passed and it makes no sense to pretend, at the time of decision 
making, that we are back in 1991, when the world was a very different 
place.
    This is especially true when the decision making involves the next 
fifty years as well. Here, where the application of the existing law in 
this case works so patently against the public interest, then it is 
time for Congress to take steps to remedy the situation. My bill will 
allow FERC to consider other applications to ensure that the public 
does not lose benefits of more energy production and revitalized falls 
through a more environmentally friendly approach.
    My bill will take account of the sweeping changes that have 
occurred since the deregulation of the energy market and important 
technological advancements in areas like state of the art fish screens, 
which didn't exist fifteen years ago.
    Most important, however, it would also permit consideration of 
alternative applications that would be supported by the surrounding 
communities. The communities around the Projects are very enthusiastic 
both about the benefits of the new Cohoes Falls power project and the 
prospects of replacing the School Street Project, which has long been 
an eyesore. Local interests and associations thus support consideration 
of alternative applications in the re-licensing proceeding.
    I hope the committee will agree with me that this proceeding has 
gone on too long. In fact, it has been going on for twice the length of 
a FERC Commissioner's term. If a re-licensing proceeding cannot be 
worked out in that length of time, I believe it is in the best interest 
of the community that the process be opened up for alternative 
proposals.
    I believe that S. 2070 would preserve the integrity of FERC's 
procedures while allowing for new applicants to compete for this 
license. I look forward to working with the committee to move this 
important matter forward.
    As the Committee knows well, the Federal Power Act requires FERC to 
license only the ``best adapted'' proposal that will be in the public 
interest. Federal Power Act (``FPA'') Sec. 10(a)(1),16 U.S.C. 
Sec. 803(a)(1). I believe Congress gave FERC clear instructions that 
the public deserves ``the best'' project when FERC issues a license and 
that it authorized FERC to include conditions to protect the public 
interest. It is unfortunate that other provisions of FERC regulations 
have hampered this mandate from Congress in this case.
    Under these circumstances, the most appropriate way to avoid a bad 
result for the public and the Nation lies in the passage of a law to 
remove the barrier to FERC's inability to consider other applicants in 
the School Street re-licensing case. Specifically, S. 2070 would 
require the Commission to reopen the current School Street proceeding 
within 90 days of the enactment of this legislation, for a reasonable 
period of time to permit the filing of other license applications that 
would use the same waters as the School Street Project.
    After that time period, which must include adequate time to process 
a license application under the Commission's own regulations, the 
Commission would proceed to process all timely-filed applications and 
promptly make its decision as to which of the proposals before it 
constitutes the best adapted Project. If no acceptable license 
applications are filed, FERC would issue a license to the existing 
licensee, with appropriate conditions to protect the opportunity in the 
future for a better project to be developed.
    FERC may also want to consider the benefits of local ownership in 
the development of local resources when reviewing additional 
applications. Productive power projects can initiate other beneficial 
projects in local communities, whether economic, recreational or 
environmental. Local populations are highly aware of the potential uses 
for the natural resources in their respective communities and should be 
given the opportunity to develop them. All they ask for is an equal 
opportunity to participate in the process Congress established to issue 
licenses for these public natural resources in the public interest.
    I want to emphasize the uniqueness of this situation at Cohoes 
Falls. For almost 15 years, the public has been denied the benefits 
that could be achieved if a competitive application process were 
available including lower cost electricity and environmental 
protections and enhancements. Because the existing licensee has 
received annual temporary licenses, it has recouped substantial 
economic benefits of an outdated license, especially as the prices for 
electricity have sharply risen, without having to invest in the 
facility.
    FERC's role is to consider all options and select the one that best 
ensures the public interest will be served. That is what my legislation 
will do in this very unique circumstance where previous regulation of 
the industry created a monopoly and no other applicant was eligible. In 
other words, it will free FERC to allow it to engage in the very kind 
of reasoned and comparative decision making intended by the provisions 
of the Federal Power Act. I urge the Committee to move this bill 
forward as quickly as possible. I thank my colleagues for their time 
and consideration of this important bill.

    Senator Murkowski. They will be include as part of the full 
record.
    Senator Schumer. Thank you.
    Senator Murkowski. We appreciate you being here today.
    Senator Schumer. Thank you. I thank all the members of the 
committee for taking the time here.
    Senator Murkowski. Thank you.
    Senator Feinstein.
    Senator Feinstein. Could I ask a question of Senator 
Schumer?
    Senator Schumer. Please.
    Senator Murkowski. Certainly.
    Senator Feinstein. Let me ask you, talk about these two 
charts. Now, this is today [indicating].
    Senator Schumer. Correct.
    Senator Feinstein. And this was when at the latest 
[indicating]?
    Senator Schumer. I cannot see that, but----
    Senator Feinstein. When the falls were there.
    Senator Schumer. That is how it was and would be in the 
future.
    Senator Feinstein. When? When was it?
    Senator Schumer. 1911. That is a rendition.
    Senator Feinstein. When did it stop being that way?
    Senator Schumer. 1911.
    Senator Feinstein. Ah. And now, so you are----
    Senator Schumer. See, what they did is they built--back 
then, Niagara Mohawk built a bypass, so the falls are gone. 
Even though they were very famous in the 19th century, they 
were less environmental then, less environmentally oriented.
    It was a monopoly, so no one, when the license came up, no 
one tried to change it in 1991. Since then we have had 
deregulation and you have a group of people interested in going 
from this [indicating] to that [indicating]----
    Senator Feinstein. Oh, I see.
    Senator Schumer [continuing]. Which would provide three 
benefits----
    Senator Feinstein. So what is it you need?
    Senator Schumer. We simply need this legislation, which 
would--the rules of FERC are you can only consider a license 
within the 24 months. This license has not been renewed since 
1991. This would make an exception and allow--we do not even 
tell FERC what to do. We say just consider alternatives as if 
they have applied a year and a half ago.
    Senator Feinstein. Thank you.
    Senator Murkowski. Thank you for the clarification.
    Congressman Radanovich, your timing is impeccable. We have 
just concluded with the comments by Senator Allard and Senator 
Schumer on their respective pieces of legislation. We are 
delighted to have you come across to the Senate side and give 
us your comments to the subcommittee this afternoon. Welcome.

 STATEMENT OF HON. GEORGE RADANOVICH, U.S. REPRESENTATIVE FROM 
                           CALIFORNIA

    Mr. Radanovich. Thank you very much, Madam Chairwoman. I do 
appreciate your indulgence. We had votes on the other side, and 
also chairing a hearing on California water as well.
    But the bill that I wanted to speak today to is H.R. 3897, 
which is the Madera Water Supply Enhancement Act. It is 
legislation that is vital to the economic wellbeing of Madera 
County in the San Joaquin Valley. Water is the lifeblood of 
this region and the project ensures that Madera County has a 
stable, reliable, and efficient water supply. Specifically, the 
project will enable water users to store excess river flows in 
a nearby aquifer underground. This stored water bank would then 
be used during dry years and could prove critical to meeting 
water demands.
    The over 13,000-acre ranch where the water bank is located 
is well suited for this project. The soils on and underneath 
the land are ideal for percolating water from the surface into 
the aquifer for storage. In addition, the land is valuable 
habitat for numerous species and contains large sections of the 
region's native grasslands. In fact, this is a rare part of the 
San Joaquin Valley that has never been tilled since man arrived 
on the scene.
    Funding for the project is under way. The Madera Irrigation 
District which will operate and maintain the project issued a 
$37.5 million bond to purchase the property. Also, a fiscal 
year 2006 energy and water appropriations measure allocated 
$200,000 to conduct an appraisal study of the water bank, which 
is nearly complete.
    Further, H.R. 3897 includes a 50 percent Federal cost share 
for a feasibility study and a 25 percent Federal cost share for 
the capital cost of the project. The remainder of the funding 
will come from local and State funds.
    I recognize that there may be some questions raised as to 
why this legislation both authorizes a feasibility study and an 
underlying project in one bill. A little bit if history, if you 
will indulge me, will explain why we have chosen to take this 
comprehensive approach. For over a decade the Madera Ranch 
property on which the project will be located has been 
recognized as an ideal site for a water bank. In 1996 the 
Bureau of Reclamation began water bank investigations on the 
property. Two years later in 1998, the Bureau finalized plans 
to fund a water on the property in the amount of approximately 
$60 million.
    But the Bureau withdrew from the project due to local 
concerns regarding sizing, water quality, and the lack of 
ownership. As a part of this process, the Bureau conducted 
numerous studies of the property and the feasibility of 
utilizing it for a water bank, including the Madera Ranch 
groundwater bank phase 1 report in 1998 and other studies and 
reports.
    Following the Bureau's efforts to fund a water bank 
project, Azurex, which was an Enron subsidiary, attempted to 
pursue the same water bank project, but ran into the same local 
concerns.
    In 2003, millions of dollars were spent on feasibility 
studies for a reformulated project to ensure local concerns 
were addressed. To date over $8 million have been spent on 
studies related to the project, not counting the Bureau's own 
substantial efforts to fund a water bank at the site. All of 
this work, including four successful pilot tests, has verified 
that the project is not only feasible, but, with a certified 
environmental impact report now in place, is ready to move to 
the construction phase.
    I would like to submit for the record a document prepared 
by the Bureau entitled ``Suggested Content Feasibility Report 
and/or Planning Report, IES.'' And I am also submitting an 
annotated version of the Bureau document that identifies the 
specific studies and reports that have been done by the Bureau 
itself, the Madera Irrigation District and others that address 
each of the subject matter categories that the Bureau wants 
covered in a feasibility report and corresponding material for 
such category.*
---------------------------------------------------------------------------
    *The additional material has been retained in subcommittee files.
---------------------------------------------------------------------------
    This project may be studied more than any other comparable 
project in the history of the Bureau. As such, the Bureau 
should be able to utilize previously prepared material, updated 
required information, and complete the feasibility study soon 
for a modest cost.
    Madam Chairwoman, thank you so much for consideration of 
H.R. 3897. It does enjoy broad, widespread support in the 
district and I appreciate its fair consideration.
    Senator Murkowski. Thank you. We appreciate your being here 
and the reports that you referenced in your comments will be 
made a part of the full committee record.
    Mr. Radanovich. Thank you very much.
    Senator Murkowski. So we appreciate that and appreciate 
your willingness to come over this afternoon.
    Senator Salazar, I have given other members of the 
subcommittee time to make opening comments, if you would like 
to do the same.

          STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR 
                         FROM COLORADO

    Senator Salazar. Thank you. Thank you very much, Madam 
Chairman. I appreciate the opportunity. And thank you, ranking 
member Johnson, for holding this hearing today.
    I will submit a much longer comment for the record, but I 
want to summarize just a couple of points if I may. I join my 
colleague Senator Allard in support of S. 1106 for the 
construction of a conduit that would essentially fulfill a 
promise that was made back in 1962, take a pipeline from Pueblo 
Reservoir and essentially provide clean water supply for about 
100 miles downstream of Pueblo to an area in the lower Arkansas 
Valley which is very rural and struggles economically, perhaps 
more than any other region in the State of Colorado.
    Without us being able to build this pipeline to provide 
clean water into those communities, many of those communities 
do not have any economic development opportunities and will 
wither on the vine and we are going to have a southeastern part 
of Colorado that essentially is going to dry up and blow away. 
So I very much look forward to working with this committee, 
working with my colleague Senator Allard and all the 
stakeholders of the communities in the Lower Arkansas River 
Valley to get this project finally done after some 44 years in 
waiting.
    With that, Madam Chairman, I do have a more formal 
statement that I will submit for the record.
    [The prepared statement of Senator Salazar follows:]

   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado

    Thank you Madam Chair and Ranking Member Johnson for holding this 
hearing today to consider S. 1106, the Arkansas Valley Conduit Act. I 
want to welcome County Commissioner Bill Long and thank him for coming 
all the way from Las Animas, Colorado to be here today.
    In 1962, Congress authorized the Fryingpan-Arkansas project, a 
water diversion and delivery project that brings water from the Western 
Slope of Colorado to communities in the Arkansas Valley on the Eastern 
Slope of the Rockies.
    Much of the Fry-Ark Project is complete. Each year, over 69,000 
acre-feet of water flow from the Roaring Fork Basin through the Fry-
Ark's tunnels and reservoirs to farms and households in the Arkansas 
Valley. This water is the lifeblood of southeastern Colorado.
    But one key piece of the Fryingpan-Arkansas Project remains 
unfinished. Congress envisioned that the Bureau of Reclamation would 
not only help bring water for agricultural and municipal use to 
southern Colorado, but also that it would help deliver clean, safe, 
drinking water to towns like Eads, La Junta, Ordway and Lamar. Congress 
envisioned the construction of a pipeline, or conduit, which would pipe 
drinking water from the Pueblo Reservoir down the Arkansas River 
corridor to the communities in the southeastern corner of Colorado.
    Unfortunately, the original legislation did not include the 
federal-local cost-share provision needed for the conduit's 
construction. As a result, these communities have to rely on the 
compromised Arkansas River to deliver water for their citizens, 
factories and farms. Unfortunately, by the time the Arkansas River 
winds its way through eastern Colorado and reaches these small 
communities in the Lower Arkansas Valley, it is laden with natural 
contaminants like selenium and has picked up effluent from upstream 
communities and users.
    The small towns of Southeastern Colorado have been struggling for 
years under the weight of protracted drought, soaring energy costs and 
low commodity prices. Farms are drying up, Main Street shops are 
shuttering their windows, and families are struggling to pay the bills. 
And Washington seems to have forgotten its four-decade old commitment 
to help build the Conduit. Like so many other communities in Rural 
America, the southeastern corner of the state is withering on the vine.
    It is time for the federal government to keep its promise from 40 
years ago, and to help provide clean, safe, drinking water to 
southeastern Colorado. If we fail to fulfill this commitment, I am 
afraid that we will see more small farms dry up and more towns 
disappear. Colorado will lose a large component of its economic base. 
The agricultural heritage that built this country will be one step 
closer to becoming a quaint memory.
    Many of the towns and municipal water treatment systems in the 
Lower Arkansas Valley have already received notices from the Colorado 
Department of Public Health and Environment, advising them of the need 
to upgrade or replace their water treatment systems to treat water 
taken out of the Arkansas River. The fact is, these communities cannot 
afford to pay the estimated $640 million for new treatment systems that 
would be necessary to meet the new federal water quality standards. And 
if those communities were forced to upgrade their water treatment 
systems individually, they would have to come to the federal government 
for help--because they simply cannot afford to do it themselves.
    Therefore, Madam Chair, even though this is an expensive project 
and has a large federal cost-share, the conduit will be far more 
economical in the long run. And as you will hear today, it still places 
a sizable burden of funding on the local communities.
    I am proud to report, however, that the affected towns and counties 
have shown that they are able and willing to cover the local cost-
share. Remarkably, they have collected letters of intent for 94% of the 
Conduit's projected capacity, at a sufficient price to cover the local 
cost-share. The local communities have made this financial commitment 
because they understand that this is a valuable and wise long-term 
investment for the region.
    As one who feels that it is critical that local communities 
participate in and support these types of water projects, I am pleased 
that this bill has such strong backing in southeastern Colorado.
    And I am optimistic that the construction of the conduit will help 
spur a rural renaissance in southeastern Colorado. Farmers and ranchers 
are already excited about the new opportunities that renewable energy 
production offers--from hosting huge wind turbines to growing fuel for 
biodiesel. With a reliable, affordable source of clean drinking water, 
these communities can be at the forefront of our renewable energy 
economy. We need to get the conduit built for this to happen, and we 
need to do so as quickly as possible.
    Madam Chair and Ranking Member Johnson, I again thank you for 
holding this hearing today and I thank you for responding to my request 
that Mr. Long be invited to testify. This bill is of great importance 
to the future of tens of thousands of people across my state and I hope 
we will soon have an opportunity to pass it out of committee.

    Senator Murkowski. Your full comments will be included as 
part of the record.
    With that, we will go to our first panel and invite up 
William Rinne, the Acting Commissioner of the U.S. Bureau of 
Reclamation, as well as Mark Robinson, Director of Energy 
Projects at the Federal Energy Regulatory Commission.
    Welcome, gentlemen. Mr. Rinne, if you would like to proceed 
with your comments first.

       STATEMENT OF WILLIAM RINNE, ACTING COMMISSIONER, 
                   U.S. BUREAU OF RECLAMATION

    Mr. Rinne. Thank you, Madam Chairwoman. members of the 
subcommittee, I am Bill Rinne, Acting Commissioner of the 
Bureau of Reclamation. Thank you for the opportunity to present 
the Department's view on S. 1106, S. 1811, S. 3832, S. 3798, 
H.R. 2563 and H.R. 3897. Madam Chairman, I am sensitive of the 
committee's time and will be as brief as possible, although I 
may go a little over the 5 minutes since there are 6 bills to 
address, and I request my full statement be submitted for the 
record.
    Senator Murkowski. It will be included.
    Mr. Rinne. S. 1106 is a redraft of the Arkansas Valley 
Conduit legislation previously introduced. We commend the 
sponsors for addressing a number of Reclamation's concerns 
expressed in our prior testimony before this subcommittee in 
October 2003. Among these concerns was the assurance that the 
costs of the operation, maintenance, and replacement of the 
conduit will not be borne by the Federal Government. However, 
the current bill states that the Federal share of planning, 
design, and construction costs 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 interest 
of the M&I project costs. Therefore the administration cannot 
support the bill as introduced.
    S. 1811 authorizes study of enlarging Arthur Watkins Dam in 
Utah. The proposed feasibility study would analyze alternatives 
for water storage and consider environmental issues, foundation 
stability, and public safety. Due to the limited focus of the 
one to two-foot dam raise, the estimated cost of this study is 
$2 million. The Department cannot support S. 1811 in its 
current form. However, if the bill were amended to include the 
appropriate Federal cost ceiling and a minimum of 50 percent 
non-Federal cost sharing in the financing of the feasibility 
study in line with Reclamation policy and practice, the 
Department would not oppose enactment of S. 1811. Of course, 
any potential authorization to raise the dam would have to 
compete with the many other Reclamation projects vying for 
funding.
    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 under way under its Managing for Excellence 
Action Plan. The goals of S. 3832 would be furthered by those 
efforts and the Department supports passage of the measure.
    S. 3798 would defer payment and the cost of unused water 
capacity in Folsom South Canal in California. It would also 
authorize CVP customers to convey an equivalent amount of non-
CVP water through the canal without additional payment. Because 
of the incomplete status of the Auburn Dam, water deliveries 
from the canal have never occurred at the levels anticipated. 
This act would compute the deferred use of the canal based upon 
the unused capacity and adjust the reimbursable costs 
accordingly.
    However, the Department has not prepared a detailed cost 
estimate for this bill and has unanswered questions about its 
fiscal impact. The Department cannot support S. 3798 as 
written, but is willing to work with the sponsor on this 
legislation.
    Turning to H.R. 2563, it authorizes feasibility studies to 
address water shortages within the Snake, Boise, and Payette 
River systems in Idaho. I previously provided testimony before 
the House Subcommittee on Water and Power in November 2005 and 
said that the administration could not support H.R. 2563 
because it did not contain time or funding limitations and 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.
    H.R. 3897 would authorize a feasibility study for the 
Madera Water Supply Enhancement Project in 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. An appraisal 
report for this project is expected to be complete by the end 
of calendar 2006, so sufficient information about this project 
is not yet known. H.R. 3897 also directs that a feasibility 
report, which usually requires up to 3 years to complete, be 
completed by the end of 2006. Additionally, H.R. 3897 does not 
set a construction cost ceiling, but only limits the Federal 
share of the construction cost not to exceed 25 percent of the 
total cost of the project, which is not known at this time. 
This underscores the Department's position 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 a determination of Federal 
interest.
    Madam Chairman, this concludes my remarks and I would be 
pleased to try to answer any questions.
    [The prepared statements of Mr. Rinne regarding S. 1106, S. 
1811, S. 3798, S. 3832, H.R. 2563, and H.R. 3897 follow:]

  Prepared Statement of William Rinne, Acting Commissioner, Bureau of 
                Reclamation, Department of the Interior
                                S. 1106

    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.
                                S. 1811
    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.
                                S. 3798
    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.
                                S. 3832
    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

    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

    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

    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.
                               H.R. 2563
    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.
                               H.R. 3897
    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 H.R. 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.
    H.R. 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.
    H.R. 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.
    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.
    H.R. 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.

    Senator Murkowski. You did that in pretty good order. I 
think it was 13 seconds over your 5 minutes. Very fine job. We 
will probably have some questions for you.
    Mr. Robinson.

    STATEMENT OF MARK ROBINSON, DIRECTOR, OFFICE OF ENERGY 
         PROJECTS, FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Robinson. Thank you, Madam Chairman. My name is Mark 
Robinson. I am the Director of the Office of Energy Projects at 
FERC. We are responsible for LNG terminals, natural gas 
pipelines, and, more appropriate to the discussion today, the 
1,600 hydroelectric projects that we monitor and authorize 
across the United States.
    I would like to thank you for the opportunity to discuss S. 
2070, which would provide for the commission to review an 
application for a project at an existing project on the Mohawk 
River in New York, and S. 3851, which would provide for 
extensions of preliminary permits for three preliminary permits 
in Alaska.
    First I would like to say I have to do a disclaimer. I do 
not speak for the Commission or for the Chairman. I just 
represent my own views here.
    First, on S. 2070. As you heard earlier, specifically this 
goes to the School Street Project, which has been under 
relicensing since 1991. The Commission--I want to make this 
very clear up front. The Commission has been unable to 
relicense that project for one reason specifically. The Clean 
Water Act, section 401, requires that we have a Clean Water Act 
certification from the State prior to licensing. We do not have 
that certification from the New York Department of 
Environmental Conservation--New York DEC--and therefore by law 
we are precluded from relicensing.
    However, it has gone through the relicensing process and in 
2005 the School Street----
    Senator Feinstein. Madam Chairman.
    Senator Murkowski. Senator Feinstein.
    Senator Feinstein. Could I ask a favor, Mr. Robinson. When 
you mention the bill number, because there are so many of them, 
would you mention the subject as well.
    Mr. Robinson. Oh, okay.
    Senator Feinstein. Thank you.
    Mr. Robinson. S. 2070 is the bill that would allow the 
Commission to review a license application from Cohoes Falls or 
from Green Island Power actually for the Cohoes Falls Project 
on the Mohawk River in New York.
    As I was saying, we have been precluded from issuing a 
license to this project because we do not have the 401 from the 
State of New York. However, the New York DEC in 2005 signed a 
settlement agreement with the School Street licensee on how 
that project would operate, and so they have reached agreement 
on everything from flows over the falls to fishery protection 
to recreational development, protection of archaeological and 
historic resources. All of those things have been reached in an 
agreement with the New York DEC.
    In 2004, Green Island Power came in for a preliminary 
permit on the same site as the existing School Street Project 
and the Commission rejected that filing for a preliminary 
permit pursuant to section 15(c)(1) of the Federal Power Act. 
It is not a regulation of the Commission. It is not a policy of 
the Commission. It is the law in the Federal Power Act that 
competition for a particular site at relicensing can only be 
accomplished at a period in time set by the Federal Power Act, 
which is 2 years prior to the license expiration. That means 
anyone who wanted to compete for that site had to file by 1991, 
now 15 years ago. That is just the law, and the Commission has 
repeatedly made that clear to the applicant for the Cohoes 
Falls Project.
    If this bill would pass, it would provide a special 
advantage to a proponent of a proposal of a project that does 
not exist in the act and it would act in this way. The existing 
licensee filed their application in 1991, has pursued it during 
that entire period, passed the competition period when they 
would have had an opportunity to make a decision whether or not 
to pursue this project or not back in 1991 if in fact there had 
been competition and they had seen what that competition 
entailed. They have spent that money. They have pursued it. 
They have reached agreement and are moving forward with the 
project and it is ready to be relicensed once we get the 401 
from the State. So that would be, I think, sort of an injustice 
in the way the act is set up, if in fact this bill would pass 
as is.
    I want to just spend one more minute on this project and 
compare the two. There have been assertions about the Cohoes 
Falls Project, like the pictures that you saw here. Those are 
assertions. They have not been tested by the licensing 
procedure. The School Street Project has not only been tested, 
it has been redefined. It is now proposed under the settlement 
agreement to be expanded by 11 additional megawatts. Under this 
proposal it will use, on the flow duration curve, up to about 
20 percent of all the water that passes that site, except for 
perhaps the last 20 percent, which are the high flow periods. 
Typically rule of thumb, hydro projects are sited or sized in 
the 20 to 30 percent range, with 20 being the high end. As you 
go on the flow duration curve, it is sort of reverse logic.
    So this is a well sized by rule of thumb project to capture 
economically about as much of the water and the power as you 
can produce out of that site.
    There are assertions about what the Cohoes Falls Project 
would do. But those assertions have not been tested. We have 
not reviewed them because we have no application. The agencies 
have not reviewed them because it has not been before them. It 
is just, here is what we could do. That is the difference 
between what you are hearing right now. We have a project that 
has gone through the licensing process and we have assertions 
about another project, some of which I think would--well, I 
will just leave it at that.
    Turning to S. 3851, this would provide for license 
extension--or, I am sorry, for preliminary permit extensions in 
Alaska for three projects known as the Thomas Bay Project. 
Currently the preliminary--not currently. Preliminary permits 
are provided to ensure that someone can maintain priority over 
a site during the period when they would study the feasibility 
of it. They offer no opportunity to construct or get on the 
lands or anything like that. It is just a place in time that is 
held through the preliminary permit so that they can spend 
their money and study the site.
    Should somebody do that with all due diligence and 3 years 
turns out to be not enough, which is the term of a preliminary 
permit, then that permittee can come back in and ask for a 
successive permit, and the Commission has a history of granting 
successive permits where somebody has pursued a project and not 
completed those studies.
    Since the Commission has a mechanism for handling that type 
of scenario, I would not support S. 3851, which would give 
legislatively mandated extensions for those preliminary 
permits.
    Thank you very much. I appreciate the opportunity.
    [The prepared statement of Mr. Robinson follows:]

  Prepared Statement of J. Mark Robinson, Director, Office of Energy 
             Projects, Federal Energy Regulatory Commission

    Madam Chairman and members of the subcommittee, my name is J. Mark 
Robinson and I am the director of the Office of Energy Projects at the 
Federal Energy Regulatory Commission. Our office is responsible for the 
licensing, administration, and safety of non-federal hydropower 
projects; the certification of interstate natural gas pipelines and 
storage facilities; and the authorization, safety, and security of 
liquefied natural gas (LNG) terminals. I appreciate the opportunity to 
appear before you to comment on two bills: (1) S. 2070, a bill to 
provide certain requirements for hydroelectric projects on the Mohawk 
River in the State of New York; and (2) S. 3851, a bill that would 
allow extension of preliminary permit periods by the Federal Energy 
Regulatory Commission for the Thomas Bay projects in Alaska, defined as 
FERC Project Nos. 12495, 12619 and 12621.
    I appear today as a Commission staff witness speaking with the 
approval of the Chairman of the Commission. The views I express are my 
own and not necessarily those of the Commission or of any individual 
Commissioner.
    Under Part I of the Federal Power Act (FPA), the Commission issues 
licenses to non-federal interests authorizing the construction, 
operation and maintenance of water power projects on navigable waters 
of the United States, on federal lands and on streams, over which the 
Congress has jurisdiction. Licenses are also required to utilize 
surplus water or waterpower from government dams.
    Licenses are issued under the FPA for terms up to 50 years and 
contain conditions that reflect consideration of all environmental and 
developmental aspects of the project, including such factors as the 
effect of project construction and operation on fish and wildlife 
resources, irrigation, flood control, water supply, recreation, and the 
safety of the public. Section 15 of the FPA, authorizes the Commission, 
at the expiration of an existing license and where the United States 
does not exercise its right to take over the licensed project, to issue 
a new license to the existing licensee or to a new licensee. Where 
there is no federal takeover and where the Commission does not issue a 
new license before the existing license expires, the Commission must 
issue from year to year an annual license to the current licensee under 
the terms and conditions of the current license until the project is 
taken over or a new license is issued. Section 15(c)(1) provides that 
``[e]ach application for a new license pursuant to this section shall 
be filed with the Commission at least 24 months before the expiration 
of the term of the existing license.''
                                S. 2070
    S. 2070 would require the Commission to accept other valid license 
applications, if submitted not later than July 31, 2006, to develop the 
project works or water resources of a hydroelectric project located on 
the Mohawk River in the State of New York that has been operating under 
annual licenses for 10 or more years. S. 2070 would require that the 
Commission expeditiously process any pending valid license applications 
and issue a license only if the Commission determines that the project 
will best develop the affected water resources. S. 2070 further 
requires that any such new license issued shall include the same 
license conditions relating to the use of affected waters provided in 
articles 32 and 33 of the license for Potomac Light & Power Company's 
Millville Project, FERC No. 2343. The Commission included Article 32 in 
the Millville license to reserve its authority to issue a license for a 
project that was recommended in a comprehensive plan by the Department 
of the Army, Corps of Engineers to be constructed downstream of the 
Millville Project and would more completely utilize the water resources 
of the Shenandoah River. Article 33 requires the Millville Project 
licensee to surrender its license if its project becomes inoperative by 
reason of inundation by a more complete hydroelectric project.
    S. 2070 would affect one project licensing proceeding currently 
pending before the Commission. On December 23, 1991, Niagara Mohawk 
Power Corporation filed an application to relicense the 38.8-megawatt 
School Street Project, FERC No. 2539. The project is located at river 
mile 2.5 on the Mohawk River in Albany and Saratoga counties, New York.
    Since the application was filed, the license was transferred to 
Erie Boulevard, LP (Erie). The School Street Project was among a group 
of 10 projects filed in 1991 by Erie's predecessor for which the New 
York Department of Environmental Conservation (New York DEC) denied 
Clean Water Act water quality certification, the grant or waiver of 
which is a prerequisite to the Commission issuing a hydropower license. 
Following these denials, the state, along with Erie's predecessor and 
other interested parties, entered into settlement negotiations for each 
project. Settlement negotiations have been concluded for each of the 10 
projects. The New York DEC has issued water quality certifications and 
the Commission has issued licenses for nine of the projects. The School 
Street Settlement Agreement, dated March 7, 2005, was signed by Erie 
and seven other parties including the New York DEC, although New York 
DEC has not yet issued water quality certification for the project. The 
School Street Project, the last of the 10 projects, has been operating 
under annual licenses since 1993.
    In response to the draft water quality certification notice issued 
by New York DEC on March 7, 2005, Green Island Power Authority (GIPA) 
and the Town and Village of Green Island sought party status in the 
certification proceeding and challenged various aspects of the project. 
The water quality certification process before the New York DEC is 
currently undergoing adjudication proceedings. Because the New York DEC 
has not yet issued water quality certification for the project, the 
Commission has been unable to act on the School Street license 
application.
    On July 19, 2004, GIPA filed an application for a preliminary 
permit to study the potential development of the 100-megawatt Cohoes 
Falls Project and asked the Commission to waive its regulations to the 
extent necessary to consider GIPA's application. As described in its 
application, the project would be located at the site of the existing 
School Street Project. GIPA proposes to construct, slightly downstream 
of the School Street Project's dam, a new dam, remove part of the 
existing School Street dam, and decommission various other facilities 
of the School Street Project.
    On January 21, 2005, the Commission dismissed GIPA's application 
for preliminary permit for the proposed Cohoes Falls Project, stating 
that the statutory deadline established by FPA section 15(c)(1) for 
filing relicense applications for the Cohoes Falls Project (including 
competing applications) fell in 1991, 2 years before the School Street 
license would have expired, and that any development application GIPA 
might file would be more than 13 years late. Because such applications 
are not permitted by section 15(c)(1), the Commission found that there 
was no reason to process a preliminary permit to study a project for 
which an application cannot lawfully be filed.
    On February 22, 2005, GIPA filed a timely request for rehearing 
which was denied by the Commission on March 24, 2005. Subsequently, 
GIPA filed an appeal of the Commission's orders with the U.S. Circuit 
Court of the District of Columbia. The appeal was voluntarily dismissed 
in December 2005.
    On May 15, 2006, GIPA filed its offer of settlement in the 
proceeding to relicense Erie's School Street Project. GIPA's offer 
proposed two alternatives: (1) terminate Erie's license and dismiss its 
relicense application; or (2) issue a relicense to Erie that would 
terminate upon the licensing and construction by GIPA of its Cohoes 
Falls Project. GIPA attached to its offer of settlement an application 
for licensing the Cohoes Falls Project. By notice issued May 24, 2006, 
the Commission rejected GIPA's offer of settlement on the previously 
stated grounds that its competitive proposal was not filed within the 
time frame established by section 15(c)(1) of the FPA. On June 5, 2006, 
GIPA and Adirondack Hydro Development filed a motion to present 
evidence or, in the alternative, offer of proof and if necessary, 
motion to reopen the record in the proceeding to relicense the School 
Street Project. The motion sought to put into the record GIPA's 
previously rejected pleading. As before, the Commission rejected the 
motion by notice issued June 28, 2006. Rehearings of both Commission 
notices are currently pending.
    The FPA provides a complete and well-reasoned method for the 
orderly development of the nation's non-federal hydropower resources. 
It also provides hydropower licensees certainty regarding the period 
when competitive license applications may be filed. This bill would 
negate that certainty in the case of the School Street Project.
    In addition, this bill would provide a special advantage to an 
entity which did not meet the requirements of the FPA to the 
disadvantage of an entity which met the statutory deadline. Approval of 
this bill could encourage applicants in other cases and locations to 
petition Congress for similar relief in order to promote their 
interests at the expense of the FPA's well-established procedures and 
of other existing licensees and could introduce further uncertainty 
into the licensing process.
    As a result of these concerns, I do not support S. 2070.
                                S. 3851
    This legislation provides that notwithstanding section 5 of the FPA 
or any other provision of law (including regulations), on receipt of a 
request from the preliminary permit holder of a Thomas Bay project and 
after providing reasonable notice, the Commission may extend the period 
for the Thomas Bay project for not more than two consecutive three-year 
periods following the expiration of the initial preliminary permit for 
the Thomas Bay project, in accordance with applicable procedures of the 
Commission. S. 3 851 defines the term ``Thomas Bay project'' as 
including: (1) the hydroelectric project of the Commission at Cascade 
Creek, Alaska, preliminary permit number 12495; (2) the hydroelectric 
project of the Commission at Ruth Lake, Alaska, preliminary permit 
number 12619; and (3) the hydroelectric project of the Commission at 
Scenery Lake, Alaska, preliminary permit number 12621.
    Section 5 of the FPA allows for the filing of applications for 
preliminary permit by a potential hydroelectric project developer 
before the filing of a license application. The Commission issues 
preliminary permits for three years for the following purpose. The 
purpose of a preliminary permit is to maintain priority of application 
for a license during the term of the permit while the permittee 
conducts investigations and secures data necessary to determine the 
feasibility of the proposed project, and if the project is found to be 
feasible, prepares an acceptable license application.
    Cascade Creek LLC filed applications for preliminary permits for 
the proposed 80-megawatt (MW) Cascade Creek Project, FERC No. 12495, on 
May 4, 2004; 20-MW Ruth Lake Project FERC No. 12619, on October 12, 
2005; and 80-MW Scenery Creek Project, FERC No. 12621, on October 11, 
2005.
    The Cascade Creek permit was issued on October 8, 2004, and will 
expire September 30, 2007. The Ruth Lake and Scenery Creek permits were 
issued on February 23, 2006, and will expire January 31, 2009. Standard 
Article 4 of all issued preliminary permits requires a permittee to 
file six-month progress reports. If the permittee fails to comply with 
these conditions, the permit is subject to cancellation.
    As required by Article 4 of the issued permits, Cascade Creek LLC, 
the permittee, filed six-month progress reports for Project No. 12495 
on May 25, 2005, September 29, 2005, and March 31, 2006, generally 
describing for that report period, the nature and timing of what it has 
done under the pre-filing requirements, and other applicable Commission 
regulations and what studies it was planning on conducting the 
following six months. The first report shows that the permittee 
obtained information from previous studies, from the British Columbia 
Transmission Corporation, and from British Columbia, Canada; on 
transmission line routing, characteristics, and permitting 
requirements. The second report indicates the permittee provided 
drawings and consulted with U.S. and Canadian government agencies and 
private companies. The third report shows the permittee persuaded the 
State of Alaska and British Columbia Transmission Corporation to 
conduct feasibility studies for an interconnection, which found the 
interconnection to be feasible.
    Likewise, Cascade Creek, LLC filed timely progress reports for 
Project No. 12619 and Project No. 12621 on July 31, 2006. The initial 
progress reports for these two projects indicate the permittee has 
developed stream flow data and did reconnaissance inspections of the 
sites.
    In general, if a permittee has not completed the studies and 
consultation at the expiration of a permit necessary to file an 
application for license, it may file an application for a new 
preliminary permit. The Commission may grant another permit if it 
concludes that the applicant has diligently and in good faith pursued 
the requirements of its prior permit. Because there is already a 
mechanism whereby a permittee can apply for a new three-year permit to 
pursue development of a proposed hydroelectric project, I do not 
support the proposed legislation.
    I appreciate the opportunity to present my views to the 
Subcommittee. Thank you.

    Senator Murkowski. Thank you, Mr. Robinson.
    I will turn to my colleagues here before I ask my series of 
questions. Senator Feinstein, would you like to propound some 
questions?
    Senator Feinstein. I would if I might. Mr. Rinne, if I 
might. My understanding is that, while the Folsom South Canal 
capacity is 2.5 million acre-feet of water per year, it is used 
for a maximum of 20,000 acre-feet a year. This means California 
water payers are paying a bill that is 1,200 percent or 12 
times greater than the amount of water they are actually 
getting.
    I think you think that this is a fine arrangement, and I 
think that it is not a fine arrangement. I think government 
ought to charge people fees that are reasonably related to the 
benefits they are receiving and that is the point. If you would 
respond to that I would appreciate it.
    Mr. Rinne. Senator Feinstein, I appreciate your point, and 
I would just say that it is a challenging issue. It is one that 
we have been trying to work with some of the contractors on. I 
know that you are real familiar with the area and the 
arrangement there. But the fact that it is part of what is 
called the CVP pool for the repayment there, that is where that 
gets picked up.
    Senator Feinstein. Wait a minute. You are saying that money 
is used to pay the capital costs of the CVP, is that right?
    Mr. Rinne. What I am saying is for the M&I, the CVP 
ratepayers have pooled costs for the capacity that they are 
helping to repay the CVP features that are paid back, that is 
correct. The end use capacity there, as I started to say, was 
not--while it is an unfortunate thing, it is the type of 
thing--and I know you are aware of it--only the first two 
sections, the first two reaches of the Folsom South Canal were 
completed. So you have a situation where that is part of the 
reason for the capacity not being used. Auburn Dam was not 
completed.
    But the repayment of that project on the CVP on the M&I 
repayment, I think you have somewhere in the neighborhood of 58 
entities that would share in the capital cost repayment along 
with the interest. So it is a hard thing just to separate that 
out, so it is when I say pooled costs.
    Senator Feinstein. Madam Chairman, I think what happened 
was this canal was built with the predicate that the Auburn Dam 
would be built and then a fracture zone was located under the 
dam and a lot of conflict with the area. In any event, it has 
not been built. But the water coming into this canal is 
drastically reduced, but the contractors are paying fees as if 
it were full. That is a shorthand version of what I understand 
in any event.
    So I would like to talk to you a little bit more about it 
and see if there cannot be some way fairness can be worked into 
this situation.
    I also wanted to ask: You oppose the Madera Water Bank bill 
because it authorizes the project without formal completion of 
a feasibility study. Now, here is a draft appraisal study and 
it seems to me the Bureau has already conducted extensive 
feasibility investigations in the late 1990's. In 1998 the 
Bureau finalized plans to fund a water bank on the property. 
The Bureau did not go ahead then.
    Another private property, private party, subsequently 
analyzed the feasibility. So have not enough reports been done?
    Mr. Rinne. I guess the best way I can respond to that--and 
I am aware of the earlier studies that you are speaking of and 
were mentioned in some of the earlier testimony. At the current 
time, Senator Feinstein, that we are talking about, I believe 
it is probably the draft report that shows there the appraisal 
level. I think that is the one that was authorized to get done 
at the end of 2006.
    Senator Feinstein. That is correct, September 2006.
    Mr. Rinne. So underneath our process that would be the 
appraisal level study, and it would be my sense--and I have not 
looked at it in detail, but it would be my sense that much of 
the information you talk about in they early studies, we would 
try to draw from it. As I understand this proposed legislation, 
we would be talking about authorizing a feasibility study. I 
will just call that the next step. Then that feasibility 
study--it would also authorize construction.
    What our concern is is that the draft appraisal report you 
have there would be finalized at the end of the year. We 
technically would finish----
    Senator Feinstein. The second week of October is my 
understanding.
    Mr. Rinne. Is the final report?
    Senator Feinstein. Yes.
    Mr. Rinne. Due at the end of calendar 2006, and you may 
have more updated information than I do.
    Senator Feinstein. I can show this to you. This is rebuttal 
to the Bureau's testimony, so I would be happy to share it with 
you.
    Mr. Rinne. Okay. We would want to have the appraisal level 
study completed and it is always on that basis, then we would 
move to the feasibility study that is in fact proposed in here. 
So what we are saying is that you would authorize the 
feasibility study before we have the results of the appraisal 
study, which is what you typically do to identify are there 
feasible things here and do you move forward.
    So it is sort of like there----
    Senator Feinstein. Well, is it possible then to give a 
conditional opinion based on a draft, which is September? The 
final will come out in October. Now, this is our one shot to 
move something. It has passed the House. We are ready. It is on 
the priority list. It will be signed by the President. Is there 
a possibility of putting a condition on it that if the final 
report reflects the findings of the draft?
    Mr. Rinne. Well, I am not sure if I am being real 
responsive here, but let me try anyway. The appraisal level 
study that you have there, the draft, when that gets--it will 
move to be finalized, and if your dates on the October, let us 
just talk about that. Then based on what is there in that 
appraisal level study, it will talk about the next step and is 
there something there feasible to move forward.
    Obviously, if this legislation is passed we will do exactly 
what we are directed and move into a feasibility study. But our 
preference would be, as in the process--it is sort of, it is 
like we start out now, we call some things an assessment level. 
Then we move to an appraisal level. The whole idea is to 
scrunch down and throw off alternatives that really do not have 
feasibility, and I know you would be aware of that.
    That is what I am saying, is we are sort of at that step. 
It is sort of like jumping into a feasibility before you get an 
appraisal done.
    Senator Feinstein. It is just that for many of us when 
there is a pressure of so much that needs to be done, all of 
the money that is spent by study after study after study just 
wastes it. This is the frustration. I do not understand why the 
two cannot be combined in one or why--this seems to me to be a 
rather thorough study--why another one is necessary.
    Mr. Rinne. If I had just one last thing----
    Senator Feinstein. Sure.
    Mr. Rinne. One of the things--this probably will not 
relieve all your frustration on this, but I would just like to 
say that what we have experienced on some other projects is 
sometimes when they move to--the feasibility of course will 
lead to authorization or can lead to authorization of a project 
for construction. We have actually experienced one and one 
example I give would be where we probably did not do our 
homework well enough in Reclamation and moved on the Animas-La 
Plata Project, for example. It ended up with a cost that we 
missed the boat. I mean, it was not fair to people.
    So the problem with costs is they are only as good as the 
data behind them, and if we are not quite there and we put 
something out for being authorized and we have missed it by 
quite a few factors, that is the difficulty. That is sort of 
the rationale for why we are doing it. I appreciate your 
concern and I understand about studies and studies and studies.
    Senator Feinstein. Since this has passed the House, I would 
just ask that you take another look at it and see if there 
cannot be some accommodation made.
    Mr. Rinne. We will definitely work with you. I think that 
is fair, yes.
    Senator Feinstein. I would appreciate that very much. Thank 
you.
    Senator Murkowski. Let us go on to Senator Salazar.
    Senator Salazar. Thank you. Thank you very much.
    Commissioner Rinne, I have a question concerning S. 1106. 
Reading your testimony, it is very clear that the 
administration has taken a position in opposition to the 
legislation that Senator Allard and I have proposed, and my 
sense of the opposition is that you do not like the proposed 
Federal-State cost share that we have included in there and 
that is the centerpiece of your opposition for it.
    If I look back at the testimony that you provided in front 
of this committee a few months ago, you said that since the 
1980's there had been 13 separate single purpose reclamation 
projects for municipal and industrial water supply in rural 
communities in the reclamation States. So is it not true that 
we have had these Federal-State cost share proposals that have 
been in fact authorized for other rural communities in the 
reclamation States?
    Mr. Rinne. Certainly, Senator, we certainly have had in the 
rural water type projects I am speaking of, we definitely have 
had individual, individually authorized rural water projects. 
And they all had their own uniqueness, I might say, in the 
Federal/non-Federal arrangement, that is correct.
    Senator Salazar. Now, knowing, Mr. Rinne, how well you know 
my State of Colorado and knowing how you also are familiar with 
the Fryingpan-Arkansas Project and the communities downstream 
of Pueblo, I would imagine that you would reach the same 
conclusion that I have reached for many years, and that is that 
those rural communities are very poor, struggling on the vine 
just to keep alive.
    So if this Congress were to pass some kind of a legislation 
that would have a Federal-State cost sharing proposal, do you 
think it would be beneficial to those rural communities in the 
same way that these previously 13 authorized projects that have 
helped rural communities, I am sure have been helpful to those 
13 communities.
    Mr. Rinne. Yes, and I do want to say--and I understand--and 
this is not about need. I certainly concur with you on needs, 
that we see this throughout. The thing that I would want to 
say, and you did get right on the main point or the main 
concern, is this. Typically on a municipal or industrial type 
project, generally I would say in policy and law that we would 
look for 100 percent of the capital repayment with interest.
    So when this one is proposed as 80 percent Federal and 20 
percent non-Federal, then, as you would recognize, that is a 
departure from what we would desire to see. It is not saying 
that there have not been other ones because sometimes they are 
authorized in that manner. So that is really where a lot of the 
opposition. We do appreciate that there was a lot of work done 
by people on the O&M cost, which is now I understand would be, 
under this bill, would be all non-Federal. In other words, 
Southeastern in this case would pick that up, and I think that 
is an improvement. We would like to work with people on this.
    Senator Salazar. Well, I appreciate that very much. I note 
that, for example, one of the rural reclamation projects in 
South Dakota actually had a zero local cost share. I know there 
are others that have had 10 percent cost shares, 15 percent 
cost shares, and the like. The fact of the matter is that Mr. 
Long, who is here to testify in the succeeding panel, who is 
the president of the Southeast Water Conservancy District and 
who comes from Bent County, will tell you that getting those 
very poor, very poor communities together to agree to come up 
with a 20 percent Federal cost share has been a monumental 
undertaking and achievement, and I am very proud of his work 
and the work of the Southeast Water Conservancy District. And I 
am hopeful, very hopeful, that we will be able to work with the 
Bureau and with the members of this committee in making this 
legislation a reality, because it is very essential to the 
future of those communities.
    Madam Chairman, I know I have just 50 seconds. I am going 
to have to leave because I am not going to be able to stay for 
the next panel, but I do want to recognize Bill Long, who is 
the president of the Southeast Colorado Water Conservancy 
District. I will not be here for his testimony. Next to him is 
former Congressman Ray Cagosic, also from Pueblo, Colorado--two 
champions of rural and forgotten America. Thank you for being 
here.
    Thank you, Madam Chairwoman.
    Senator Murkowski. Thank you, Senator Salazar.
    Senator Smith, if you would like to ask any questions of 
our administration witnesses.

        STATEMENT OF HON. GORDON H. SMITH, U.S. SENATOR 
                          FROM OREGON

    Senator Smith. I do not have any questions for them, Madam 
Chairman, but I am grateful for this hearing. I know you have 
got a number of bills that you are considering, one of which is 
S. 3522, the Fisheries Restoration and Irrigation Mitigation 
Act of 2004, of which I am a cosponsor. It will reauthorize an 
important partnership program in the Pacific Northwest that has 
provided Federal funding for screening of water diversions and 
other facilities to protect the fish in our region. It is 
supported by the Oregon Water Resources Congress, the Idaho 
Water Users, and the Washington State Water Resources 
Association.
    It goes without saying, madam, in our dry part of the 
country that this is very important, both to keeping the 
livelihoods of our farm community up as well as the life of the 
fish in our region going as well. So it is very important that 
we continue this.
    I wanted to welcome and recognize Mark Thalacker, who is 
here from Oregon. He is the manager of the Three Sisters 
Irrigation District, a member of the Oregon Water Resources 
Congress, who is here to testify about this very bill.
    Other than that, I have no questions, Madam Chair.
    Senator Murkowski. Thank you for your comments on behalf of 
that legislation.
    Mr. Rinne, I want to follow up with the question that 
Senator Salazar had asked, and this is in regards to S. 1106, 
the Arkansas Valley Conduit. You are discussing the non-Federal 
cost share. In your written testimony you mention the rural 
water legislation that the administration had submitted to 
Congress in 2004 sets a 35 percent non-Federal cost share. 
Would you be willing to support, would the administration 
support, this legislation if it contained a 35 percent non-
Federal share, cost share?
    Mr. Rinne. I think if the legislation had a 35 percent cost 
share that would certainly help, it would help lots. I mean, 
that would be there. Now, I do not know. There may be other 
issues that the administration wanted to address. Not like 
there is another one pulled out of the hat, but I think that 
would help a lot.
    Senator Murkowski. All right.
    On S. 1811, this is the Arthur Watkins Dam enlargement. 
Again referring to your written testimony, you state that 
raising the Arthur Watkins Dam would postpone the need for Utah 
to begin development of the Bear River. Do you think that by 
raising the Arthur Watkins Dam, this would be cheaper than 
developing the Bear River?
    Mr. Rinne. It could be. I am not 100 percent sure. Let me 
say why. I do not think the Bear River development, looking at 
that, has been extensively studied. So I suppose it is a 
question of what kind of things come with it. But it could 
help.
    Senator Murkowski. You think it could make a difference?
    Mr. Rinne. We think it would, yes.
    Senator Murkowski. In response to Senator Feinstein's 
question on the Folsom South Canal deferment, S. 3798, she 
brought up the issue of the inequities that are at issue there. 
It is my understanding that the Central Valley Project 
contractors are paying for canal capacity that they are not 
using and this is the point here.
    Do you have any specific suggestions as to how the current 
arrangement could be made more equitable?
    Mr. Rinne. You know, that is the real challenge. You have 
got your finger right on it. Very challenging. I do not have a 
specific. I think the answer probably lies in trying to 
continue to work with the contractors and talk this through. 
The things Senator Feinstein raises, they are concerns to us 
too. But it is the way the repayment structure is set up on 
capital costs.
    I think the best way through it is to probably sit down and 
continue to work with the contractors.
    Senator Murkowski. And that effort is ongoing, then?
    Mr. Rinne. There are discussions back and forth, but at the 
current time, just so that I am real clear, that repayment 
arrangement remains in place. So I mean, we need to try to 
figure out a way to get through this. But it sort of--it is 
there right now and they will continue to be paying for this in 
their rates unless there is some change made.
    Senator Murkowski. Well, we would certainly encourage the 
ongoing dialogue there.
    The legislation relating to the Snake, Boise, and the 
Payette River System study was addressed by several of my 
colleagues here this afternoon. You have stated in your 
testimony that Reclamation completed a water supply study for 
these basins in July. What did you identify as perhaps the most 
promising opportunities to increase the water supplies in these 
basins?
    Mr. Rinne. I think there were, Madam Chairman, I think 
there were like eight kind of--it kind of goes back to this 
assessment level and now an appraisal. There are about eight 
out of a whole suite of ones studied that we were looking at. I 
am trying to remember. We had--well, we had eight, yes, eight 
sites, two possible--excuse me. Eight sites for new surface 
storage. Two were sort of retrofits of existing facilities. In 
other words, that would be maybe you enlarge and can get more 
storage through some modification. The others would all be new 
projects, new surface storage projects.
    So there were many. I think there was actually several 
hundred that were looked at in those systems, and so you just 
sort of weed that down and now these we would think could move 
from appraisal, from assessment level forward.
    Senator Murkowski. Mr. Robinson, the Mohawk River 
hydroelectric project. You had indicated that the one reason 
you are not able to go forward right now is the Clean Water 
Act, the certification requirement. You have got that 
procedural hurdle in place. Has that been requested?
    Mr. Robinson. Oh, yes, repeatedly. The licensee has been 
pursuing a 401 certification with the State for over 10 years. 
I believe the status of it right now is that it is under some 
appeal process within the State, reviewing a concern raised by 
Green Island Power about the actual authorization. So the 
agency that would issue the 401 has reached settlement with the 
licensee for the existing School Street project. They are just 
now going through their final procedural steps to issue or to 
take action on the 401.
    Senator Murkowski. But if that certificate were then 
issued, what then is the next step?
    Mr. Robinson. The Commission's licensing step.
    Senator Murkowski. And the Commission--but you are saying 
that the Commission could not license because of the FPA 
relicensing requirements?
    Mr. Robinson. The Clean Water Act requires that anybody 
that is authorizing a project, like the Commission under the 
Federal Power Act, have a clean water certificate or a waiver 
of that certificate in hand prior to issuance of their action. 
So we are precluded from acting under the Federal Power Act by 
the Clean Water Act. And the State controls the Clean Water Act 
process.
    Senator Murkowski. Are you aware of any other instances 
where the Congress has modified the relicensing requirements in 
order to benefit a competitor that did not meet the deadlines 
for the relicense applications? Does this happen?
    Mr. Robinson. I have been in hydropower licensing for 
almost 29 years now and I can say with pretty good confidence 
it has never happened.
    Senator Murkowski. I just want to make sure I understand 
the situation with the Thomas Bay hydroelectric and just how 
this process works. As you know, with the Thomas Bay project we 
have got three different projects there. We have got an 
applicant who has spent several million dollars during this 
preliminary permit period, and there is a time limit on those 
preliminary permits. My understanding is that, what they are 
telling me is, this money is basically going to go down the 
drain if those preliminary permits expire and the money is 
gone.
    Now, it is my understanding that FERC has the authority to 
grant a new preliminary permit once the old one has expired, 
provided that the applicant has acted in good faith. So you 
have got the authority to go ahead and do it. But if the 
applicant who is--if a municipal entity is the applicant and 
they come seeking a new preliminary permit, that FERC is 
obligated to give the preference to the municipal entity? Am I 
understanding this right?
    Mr. Robinson. You are correct. Under section 7 of the 
Federal Power Act there is a municipal preference for the 
preliminary permit.
    Senator Murkowski. But if it were a private entity that 
were to come in, then you would be required to give--to reissue 
an extension to the entity that had sunk the initial investment 
in. But if it is a municipal entity you are required to give it 
to them regardless of the fact that they have invested no 
dollars?
    Mr. Robinson. The second is correct. The first part--if 
there are two privates that come in and one is the previous 
permit holder, there is no legislative, statutory or regulatory 
preference in place for either of those parties. Further, I 
cannot recall where the Commission has had to address that, 
where you had competing preliminary permits, one being 
successive where there has been due diligence and one being 
new. So it would be a new condition for the commission.
    Senator Murkowski. But really what it comes down to is 
whether or not you have a municipal entity that might be eyeing 
the same project, and as long as they come in, make that 
application, they can bump the private entity regardless of the 
dollars that have been spent to further that project?
    Mr. Robinson. That is correct.
    Senator Murkowski. Regardless of the due diligence?
    Mr. Robinson. That is correct.
    Senator Murkowski. Okay, I thought I understood it right 
and I did. I do not like it, but at least I understand what 
your regulations provide for at this point and why it is 
important that we figure out a way to address this for Thomas 
Bay.
    Thank you. If there are no further questions, we will 
excuse you gentlemen, appreciate your testimony this afternoon, 
and we will call up the second panel. Thank you.
    At this time we will bring up panel two. We have Mr. Bill 
Long, who is the president of the Southeastern Colorado Water 
Conservancy District, based out of Pueblo, Colorado. We also 
have Mr. Marc Thalacker, manager for the Three Sisters 
Irrigation District, on behalf of the Oregon Water Resources 
Congress, based out of Salem, Oregon; and Mr. Thomas Donnelly, 
the executive vice president of National Water Resources 
Association here in Virginia.
    Gentlemen, good afternoon.
    Mr. Long. Good afternoon.
    Mr. Donnelly. Good afternoon.
    Senator Murkowski. Let us start, for no particular reason, 
with you, Mr. Long, and move right down the line. Welcome and 
we appreciate the distances you have traveled to join us here 
this afternoon.

STATEMENT OF BILL LONG, PRESIDENT, SOUTHEASTERN COLORADO WATER 
                      CONSERVANCY DISTRICT

    Mr. Long. Thank you. Madam Chair, I am Bill Long, president 
of the Southeastern Colorado Water Conservancy District. I 
would like to thank you and the committee for the opportunity 
to present testimony in support of S. 1106. I would also like 
to take this opportunity to thank both Senator Allard and 
Senator Salazar for their leadership in sponsoring this 
legislation.
    The Fryingpan-Arkansas legislation enacted in 1962 created 
a multi-purpose project that includes a water collection system 
on the west slope of Colorado that collects and delivers water 
to the east slope of Colorado. The project also includes three 
storage facilities to assist in the delivery of clean water to 
both municipal and agricultural users in the Arkansas River 
Basin of southeast Colorado.
    Poor water quality and quantity concerns in the Arkansas 
River identified by the Bureau of Reclamation as early as 1950 
were the reasons why the Arkansas Valley Conduit was included 
in the original Fry-Ark legislation. Although construction of 
the conduit was not funded, the problems it would have 
addressed have only gotten worse, much worse. In addition, 
utilizing the current raw water supply it is extremely 
difficult to meet the Safe Drinking Water Act standards.
    In the year 2000, over 40 communities and water providers 
joined together to evaluate solutions to water quality and 
supply problems they faced. During the past 5 years, two 
project design engineering studies have been completed. Most 
recently, a third study to reconfirm the results and answer 
questions raised by the previous studies.
    Two other questions that were a part of this most recent 
study were at the request of Senator Allard and Senator 
Salazar, and those two questions were: one, is there enough 
water for this project; and two, can the participants afford 
their share of the project?
    Some of the relevant conclusions reached include: First, 
the cost of the project compares favorably with any no-action 
alternative, which would still require the communities involved 
to make substantial financial investments to address current 
water quality and safe drinking water standards. A single water 
plant as proposed in this project would be 60 percent less 
expensive than each community trying to build their own.
    Second, the financial capabilities of the participating 
agencies are inadequate to fund the construction of the 
proposed Arkansas Valley Conduit under the 100 percent funding 
requirement. But the conduit participants could afford to pay 
back the 20 percent cost share as provided in S. 1106.
    Third, there is more than an adequate supply of water to 
make the Arkansas Valley Conduit feasible. With all due respect 
to the Bureau's written statements, our last study did in fact 
indicate there was a great deal of water available for the 
project proposed. The Bureau study, look-back study, looked at 
the original GEI study--that was our first study--and in fact I 
believe the Bureau drew the correct conclusions based on that 
study.
    But our most recent study, that was again at the request of 
Senator Salazar, there is in fact more than enough water. 
Although it may not be project water, we have other water and 
water rights in the Arkansas River available for the project.
    The conduit project and this legislation are needed today 
to assist the communities of the Lower Arkansas River Basin. 
Water quality concerns are only increasing. Many of our water 
providers do not satisfy or only marginally satisfy current 
drinking water standards. In fact, one-third of the providers 
are currently under active enforcement orders from the State of 
Colorado to improve water quality.
    Other providers who have previously received enforcement 
orders have made improvements that provide temporary 
compliance, but now cannot meet discharge regulations. In 
addition to the difficulty in meeting water quality standards, 
the current raw water supply also has very high concentrations 
of unregulated water quality constituents such as iron, 
manganese, and hardness. These constituents cause accelerated 
infrastructure decay, loss of tax base, and economic impacts 
associated with businesses locating elsewhere. The Federal 
funding authorized in S. 1106 is necessary to make this project 
a reality and to provide the means necessary to address water 
quality concerns of the Lower Arkansas Valley.
    Southeastern and other project proponents are prepared for 
the hard work ahead and ask for your help. Madam Chair, in 
closing I would request that my oral presentation be included 
in the permanent record and I once again thank you and the 
committee and would be happy to answer any questions you may 
have.
    [The prepared statement of Mr. Long follows:]

   Prepared Statement of Bill Long, President, Southeastern Colorado 
                      Water Conservancy District@

    Madam Chair, my name is Bill Long, president of the Southeastern 
Colorado Water Conservancy District, and I am testifying today in 
support of S. 1106, a bill to provide a cost-sharing requirement for 
the construction of the Arkansas Valley Conduit in the State of 
Colorado. I would like to thank the Subcommittee for the opportunity to 
testify today. I also thank Senators Allard and Salazar for their 
leadership in introducing this legislation and the Subcommittee for 
holding this hearing today.
    The Southeastern Colorado Water Conservancy District (Southeastern) 
is the local sponsor of the Fryingpan-Arkansas Project (the Fry-Ark 
Project), a multipurpose project constructed by the Bureau of 
Reclamation (Reclamation) that stores and delivers water for municipal 
and agricultural use within the nine-county service area of the 
District, Arkansas River basin, Colorado. Southeastern, through its 
Water Activity Enterprise, has agreed to manage and organize the 
efforts necessary to make this project a reality.
    The Fry-Ark Project was originally authorized by Congress in 1962 
and that authorization was amended in 1978. The goal of the legislation 
was to provide a supplemental supply of water, and storage for native 
agricultural and municipal water supplies. Both the 1962 and 1978 Acts 
contemplated the construction of the Arkansas Valley Conduit.
    Like many other regions in the western United States, southeastern 
Colorado is growing. The need for the Arkansas Valley Conduit is driven 
by projected population growth, the economically-disadvantaged nature 
of the lower Arkansas Valley, and increasingly costly water treatment 
requirements being experienced by certain water providers in the basin. 
In addition to population growth pressures, the District's smaller 
communities, especially those east of Pueblo, Colorado, who rely on 
groundwater for their main water supply, need to develop a higher 
quality drinking water supply for their residents. As early as 1953, 
the Secretary of the Interior acknowledged that additional quantity and 
better quality of domestic and municipal was critically needed for the 
Arkansas Valley, and in particular for those towns and cities east of 
Pueblo. House Document 187, 83d Congress, 1st Session, and the 
Fryingpan-Arkansas Final Environmental Statement dated April 16, 1975 
(``1975 FES''), both of which have been incorporated by reference into 
the Fry-Ark Project Act, recognized that the Arkansas Valley Conduit 
would be an effective way to address this need. The local water 
available from the Arkansas River alluvium has historically been high 
in Total Dissolved Solids (TDS), sulfates, and calcium, and has 
objectionable concentrations of iron and manganese. Additionally, 
various water suppliers have recently reported measurable 
concentrations of radionuclides in their water. This extremely poor 
groundwater quality, combined with increasingly stringent water quality 
regulations of the Safe Drinking Water Act, has caused several local 
water suppliers to invest in expensive water treatment facilities to 
assure a reliable water supply for their customers.
    Generally, all drinking water systems in the Lower Arkansas River 
Basin, from St. Charles Mesa in eastern Pueblo County to Lamar in 
Prowers County, are concerned with the poor water quality in this 
region. Many of the water providers do not satisfy, or only marginally 
satisfy, current drinking water standards. More than 40 water providers 
in the Lower Arkansas River Basin could benefit from this project, if 
implemented.
    All communities must meet the state and federal primary drinking 
water standards through treatment or source replacement. Less 
documented, however, is the potential burden placed upon communities by 
high raw water concentrations of various unregulated water quality 
constituents such as iron, manganese and hardness. These constituents 
can cause accelerated infrastructure decay and loss of tax base and 
economic impacts associated with factories and businesses locating 
elsewhere.
    To address these issues, representatives of local and county 
governments, water districts and other interested citizens of the Lower 
Arkansas River Basin formed a committee in 2000 to consider a 
feasibility study of the Arkansas Valley Pipeline. These interested 
parties formed the Water Works! Committee and, along with Southeastern, 
began to review the feasibility of developing the Arkansas Valley 
Pipeline. Some of the relevant conclusions reached are as follows:

   The cost of the project compares favorably with any ``no 
        action alternative,'' which would still require the communities 
        involved to make substantial financial investments to address 
        current water quality and safe drinking standards.
   The financial capabilities of the participating agencies are 
        estimated to be inadequate to fund the construction of the 
        proposed Arkansas Valley Conduit, under a 100 percent funding 
        requirement, but Conduit participants could afford to pay the 
        20 percent cost-share provided in S. 1106.
   There is an adequate water supply to make the Arkansas 
        Valley Conduit feasible.

    As mentioned above, the Arkansas Valley Conduit was included in the 
originally Fry-Ark reports integrated into the Fry-Ark Act. The project 
was not built because communities in the Lower Arkansas River Basin 
could not fully fund the Conduit project. A study of the Arkansas 
Valley Conduit was prepared for Southeastern, the Four Corners Regional 
Commission and the Bureau of Reclamation in 1972. The report's 
recommendations for construction of a water treatment plant, pumping 
station and conduit to serve 16 communities and 25 water associations 
east of Pueblo were not implemented at that time due to the lack of 
federal funding. Evaluations on the quantity of water needed to satisfy 
long-range objectives for water users in the Southeastern District area 
were prepared in 1998. Additionally, an update of the estimated 
construction costs presented in the 1972 report was prepared in 1998.
    The citizens and communities of the Lower Arkansas River Basin have 
waited 30 to 50 years for this project that will improve their water 
quality and supply. The need for this project has been well established 
for more than 50 years. S. 1106 fulfills the promise of the Arkansas 
Valley Conduit nearly 45 years ago with the passage of the Fry-Ark Act 
by providing the one thing that has been missing for all of these 
years: a realistic acknowledgement of these communities' ability to pay 
and a partnership to allow this much-needed project to move forward.
    I understand that there are some who have concerns with this 
legislation as it is currently written. Southeastern and the other 
project proponents are prepared to work with anyone who has realistic 
concerns and suggestions for improving this legislation. It is my hope 
that, to the extent there are issues regarding conflicts of funding and 
priorities between and among federal agencies, the Administration, with 
the help of our fine Senators, would quickly bring these agencies 
together to resolve these interagency issues.
    I urge this Subcommittee to act quickly to move this legislation 
towards enactment. I would be happy to answer any questions the Chair 
or Committee members may have on this legislation.

    Senator Murkowski. Thank you, Mr. Long, and your full 
statement will be included as part of the record, as will the 
comments of all of our individuals giving testimony.
    I have been asked as a courtesy to move next to Mr. 
Thalacker, if we can skip you for a second, Mr. Donnelly. 
Senator Smith has got to excuse himself and he wanted to make 
sure he was here for the testimony from Mr. Thalacker.

STATEMENT OF MARC THALACKER, MANAGER, THREE SISTERS IRRIGATION 
   DISTRICT, ON BEHALF OF THE OREGON WATER RESOURCES CONGRESS

    Mr. Thalacker. Thank you very much. Madam Chairman and 
members of the subcommittee: My name is Marc Thalacker and I am 
manager of the Three Sisters Irrigation District in Oregon, and 
I am here on behalf of the Oregon Water Resources Congress. 
OWRC is a statewide association founded in 1912 to represent 
local governments that supply water for irrigation, primarily 
irrigation districts, drainage and water control districts. 
These entities operate water management systems, including 
water supply reservoirs, canals, pipelines, and hydropower 
production.
    OWRC strongly supports the reauthorization of the Fisheries 
Restoration and Irrigation Mitigation Act, along with the 
amendments embodied in S. 3522. We greatly appreciate the 
leadership efforts of Senators Wyden, Senator Smith, Senator 
Craig, and Senator Murray to continue this vital program for 
fish screening and passage in the Pacific Northwest. We are 
joined in this support by our sister organizations in Idaho and 
Washington, the Idaho Water Users Association and the 
Washington State Water Resources Association.
    OWRC strongly believes this has been one of the most 
successful programs for our members. Fish passage and fish 
screens have become critical to fishery protection. There are 
over 200 irrigation and water control districts in Oregon that 
provide water supplies to over one million acres of cropland in 
the State. Almost all of these districts are affected by either 
State or Federal Endangered Species Act lists of salmon, 
steelhead, bull trout, and other sensitive, threatened, or 
endangered species. This program, which is cost-shared on a 65 
percent Federal and 35 percent non-Federal basis, has been 
overwhelmingly supported by all involved.
    From a water user's standpoint it has been a success 
because it keeps protected fish species out of the water canals 
and delivery systems and power generation facilities, allows 
fish to be safely bypassed around reservoirs and facility 
structures, and provides local funding to local governments for 
construction of facilities to protect fish.
    The FRIMA program was authorized to receive $25 million a 
year divided among four States. We have been disappointed that 
the administration through the U.S. Fish and Wildlife Service 
has not requested funding for the FRIMA program in any of the 5 
years since it was authorized. Our members appreciate the 
limited funding Congress has written into the annual Interior 
appropriations bills these several past years for the program.
    FRIMA was intended for local governmental entities to carry 
out the work to mitigate the impacts of irrigation diversions 
on fish, rather than face loss of their water if their 
facilities were not screened. We greatly appreciate codifying 
what is already in practice with respect to the use of 
Bonneville Power Administration funding in the Pacific 
Northwest. This legislation makes clear that BPA funds coming 
from ratepayers should be considered nonfederal share money.
    One of the strengths of the FRIMA program is the return on 
the Federal investment. The States do a tremendous amount of 
work as their part of the partnership, including project 
review, ranking, and selection. Turning against the history--
again to the history behind this legislation, there was a 
strong feeling that, rather than have the U.S. Fish and 
Wildlife Service incur administrative activity, funding would 
pass through to the individual States, who had a stronger 
understanding and responsibility for the inventories on the 
need and priority for projects.
    Dividing the funding evenly with the States helps ensure 
the collective effort is never put to risk because of 
unforeseen circumstances at the State level and recognizes the 
role the States play in the FRIMA partnership.
    While the report prepared by the U.S. Fish and Wildlife 
Service is not the report called for in the authorizing 
legislation, it does nevertheless provide an excellent overview 
to the projects built using FRIMA funding. We encourage the 
committee members to look at this report with regard to the 
accomplishments of the program in the four respective States. I 
would like to submit this report for the record.*
---------------------------------------------------------------------------
    * The report has been retained in subcommittee files.
---------------------------------------------------------------------------
    Senator Murkowski. We will include it.
    Mr. Long. Thank you very much.
    A lot has been accomplished with little funding, but 
greater good could occur if the Service requested the funding 
authorized. We strongly believe that the success of the FRIMA 
program as evidenced by the projects that have been built and 
the partnerships that have been developed provide the 
justification for a continuation of this program through the 
year 2012. The report and the last page of my testimony provide 
a number of good examples.
    We strongly support the improvements to the program as 
contained in S. 3522. We would also ask that, even though this 
is the authorizing committee, that you would let the 
Appropriation Committee know the importance of this program and 
how noncontroversial and successful the effort has been with 
the limited resources that have been provided.
    FRIMA is an excellent example of cooperative conservation 
and FRIMA now and in the future will play a key role in 
complying with the Columbia Basin 2004 buyup remand.
    I want to thank the committee for hearing my testimony and 
I am happy to answer any questions. Thank you.
    [The prepared statement of Mr. Thalacker follows:]

Prepared Statement of Marc Thalacker, Manager, Three Sisters Irrigation 
         District, on Behalf of Oregon Water Resources Congress

    Madam Chairman and members of the subcommittee, my name is Marc 
Thalacker and I am the manager of the Three Sisters Irrigation District 
in Oregon and am here on behalf of the Oregon Water Resources Congress 
(OWRC). The OWRC is a statewide association founded in 1912 to 
represent local governments that supply water for irrigation, primarily 
irrigation districts and water control districts, and including member 
ports, other special districts and local governments. The association 
represents the entities that operate water management systems, 
including water supply reservoirs, canals, pipeline, and hydropower 
production.
    OWRC strongly supports the reauthorization of the Fisheries 
Restoration and Irrigation Mitigation Act along with the amendments 
embodied in S. 3522. We greatly appreciate the leadership efforts of 
Senators Wyden, Smith, Craig and Murray to continue this vital program 
for fish screening and passage in the Pacific Northwest. We are joined 
in this support by our sister organizations in Idaho and Washington: 
the Idaho Water Users Association and the Washington State Water 
Resources Association.
    As one of the lead organizations with Congress to help create the 
Fish Restoration Irrigation Mitigation Act (FRIMA) in 2000, and with 
five years of experience of active involvement in the implementation of 
the program, OWRC strongly believes this has been one of the most 
successful programs for our members and for similar water supply 
entities in Idaho, Washington and Montana.
    FRIMA created a new Federal partnership fish screening and passage 
program in the Pacific Ocean Drainage areas of Oregon, Idaho, 
Washington and western Montana. The U.S. Fish and Wildlife Service 
administers the program in partnership with state fishery agencies.
    Fish passage and fish screens have become critical to fishery 
protection. There are over 200 irrigation and water control districts 
in Oregon that provide water supplies to over one million acres of 
cropland in the state. Almost all of these districts are affected by 
either state or Federal Endangered Species Act lists of salmon and 
steelhead, bull trout, or other sensitive threatened or endangered 
species. This program, which is cost-shared on a 65% Federal/35% non-
Federal basis, has been overwhelmingly supported by all involved. From 
a water user standpoint, it has been a success because: 1) it keeps 
protected fish species out of water canals and delivery systems and 
power generation facilities; 2) allows fish to be safely bypassed 
around reservoirs and facility structures; and 3) provides funding to 
local governments for construction of facilities to protect fish.
    The FRIMA program was authorized to receive $25 million a year, 
divided among the four states. We have been disappointed that the 
Administration, through the U.S. Fish and Wildlife Service, has not 
requested funding for the FRIMA program in any of the five years since 
it was authorized. Our members appreciate the limited funding Congress 
has written into the annual Interior Appropriations bills these several 
past years for the program. As you can see from the attachment to my 
testimony, projects in Oregon have provided a much larger non-federal 
match than required and as a result have been able to maximize the 
limited FRIMA resources. Further, much FRIMA's success comes from the 
large proportion of the federal appropriations that is used for 
projects rather than for federal or state administrative costs.

                      SPECIFIC COMMENTS ON S. 3522

    We are disappointed that the U.S. Fish and Wildlife Service, the 
partner in this effort, never produced the report called for in section 
9 of P.L. 106-502 that would have recommended changes to the program 
based on experience in constructing projects under the Act. In lieu of 
that report, OWRC surveyed its membership and talked with our fellow 
partners and recommended changes that are incorporated in S. 3522.
Project Eligibility
    Our members' experience in defining the type of projects that 
provide the most cost-effective solution to needs has demonstrated that 
we no longer need to be concerned with the likelihood of very expensive 
solutions to problems. Reducing the cap on the size of the project, 
from $5 million to $2.5 million, is appropriate at this time.
    As we understand the history of the original authorizing 
legislation, this program was intended for local governmental entities 
to carry out the work to mitigate the impacts of irrigation diversions 
on fish rather than face loss of their water if their facilities were 
not screened. With that in mind, we also believe the original intent 
was to have the funding passed through to the states that would, in 
turn, provide the funding to the local governments. It was never 
envisioned that the Federal government or the Tribes were to get part 
of the $25 million authorized per year, other than for the up to 6% of 
the funding to cover administrative expenses.
    If it was determined that a project on Federal land or land in the 
Native American community is the most effective approach to addressing 
a fish-screening or fish passage problem in a system, the costs for 
those projects should be non-reimbursable. This was to provide the 
flexibility to use a common sense approach that would be 
environmentally, economically sound with regard to the facility that 
needed to be addressed in a watershed.
    We do not believe Congress intended FRIMA be used by municipal, 
Federal or Tribal governments to fund their facilities. While they may 
all have needs for this type of funding, the need for fish protection 
at irrigation diversions remains high and exceeds divertors' ability to 
pay.
Cost Sharing
    We greatly appreciate codifying what is already in practice with 
respect to the use of Bonneville Power Administration (BPA) funding in 
the Pacific Northwest part, but not all, of the time. There is a lack 
of consistency among federal programs with some allowing the use of BPA 
funding as local share to address fish and wildlife recovery, but not 
for FRIMA. This legislation makes clear that BPA funds, coming from 
ratepayers, should be considered non-federal share money.
Federal Administrative Expenses
    We believe that S. 3522 takes an appropriate step in addressing 
administrative expenses at the Federal and state level. One of the 
strengths of the FRIMA program is the return on the Federal investment. 
Part of this success can be attributed to the limited draw of the 
funding for administrative costs in order to ensure that most of the 
funding is used to build projects to protect fish.
    The states do a tremendous amount of work as their part of the 
partnership including project review, ranking, and selection. Turning 
again to the history behind this legislation, there was a strong 
feeling that rather than have the U.S. Fish and Wildlife Service incur 
an administrative activity, funding would pass through to the 
individual states who had a stronger understanding and responsibility 
for the inventories on the need and priority for projects. Dividing the 
funding evenly with the states helps ensure the collective effort is 
never put at risk because of unforeseen circumstances at the state 
level and recognizes the role the states play in the FRIMA partnership.
    We think the graduated levels that determine administrative costs 
based on Federal appropriation levels is the type of incentive-based 
approach that sends a signal for all to understand. This graduated 
administrative allocation reflects the fact that as more money is 
appropriated, the time required for Federal and state program 
administration will expand.
    Technical assistance requested by a project sponsor after receiving 
a grant is one thing; technical assistance designed to recruit and 
assist potential project sponsors is quite different. That kind of 
recruitment and assistance is part of the administration of the program 
and should fall under the administrative expense provisions, not be 
handled outside that limitation. To do otherwise limits the funding 
available for actual projects.
    We do agree that technical assistance provided by the U.S. Fish and 
Wildlife Service at the request of the local government grantee should 
not be part of the administrative expenses for the agency. Such 
technical assistance should be part of the overall project costs and be 
subject all the other requirements under FRIMA including local match.
    Given the critical need for on-the-ground work under this program, 
and the history of limited funding, there is an important need for the 
U.S. Fish and Wildlife Service to understand the intent of the program 
to provide for projects that protect fish rather than cover federal 
administrative and staff costs.
Expansion of the FRIMA Program
    While the report prepared by the U.S. Fish and Wildlife Service is 
not the report called for in the authorizing legislation, it does, 
nevertheless, provide an excellent overview to the projects built using 
FRIMA funding. We encourage the Committee Members to look at this 
report with regard to the accomplishments of the program in the four 
respective states.
    A lot has been accomplished with little funding, but a greater good 
could occur if the Service requested the funding authorized. Before any 
thought is given of expanding the program beyond its originally 
authorized purpose, the total work program as identified by the state 
inventories needs to be completed. Those inventories indicate a need 
for irrigation diversion mitigation that continues to exceed the 
available funding.
    We strongly believe that the success of the FRIMA program as 
evidenced by projects that have been built and the partnerships that 
have developed provide the justification for the continuation of this 
program through year 2012.

                               CONCLUSION

    OWRC is asking Congress to continue to improve conditions for 
threatened and endangered fish species in Oregon and the rest of the 
Pacific Northwest by passing this legislation into law and 
reauthorizing the FRIMA program. We strongly support the improvements 
to the program as contained in S. 3522. We would also ask that even 
though this is the authorizing committee, you let the Appropriation 
Committees know of the importance of this program and how non-
controversial and successful the effort has been with the limited 
resources that have been provided.
                                 ______
                                 
                    Oregon's FRIMA Project Benefits
    The following are examples of how Oregon has used some of its FRIMA 
money:

          Santiam Water Control District Project: fishscreen project on 
        a large 1050 cfs multipurpose water diversion project on the 
        Santiam River (Willamette Basin) near Stayton, Oregon. Partners 
        are the Santiam Water Control District, Oregon Department of 
        Fish and Wildlife, Marion Soil and Water Conservation District, 
        and the City of Stayton.
          Approved FRIMA funding of $400,000 leverages a $1,200,000 
        project.
          Species benefited include winter steelhead, spring Chinook, 
        rainbow trout, and cutthroat trout.
          South Fork Little Butte Creek: fishscreen and fish passage 
        project on a 65 cfs irrigation water diversion in the Rogue 
        River Basin near Medford, Oregon. Partners are the Medford 
        Irrigation District and Oregon Department of Fish and Wildlife.
          Approved FRIMA funding is $372,000 and leverages a $580,000 
        total project cost.
          Species benefited include listed summer and winter steelhead, 
        Coho salmon, and cutthroat trout.
          Running Y (Geary Diversion) Project: fishscreen project on a 
        60 cfs irrigation water diversion in the upper Klamath Basin 
        near Klamath Falls, Oregon. Partners are the Wocus Drainage 
        District, Oregon Department of Fish and Wildlife, and Jeld-Wen 
        Ranches.
          Approved FRIMA funding of $44,727 leveraged a total project 
        cost of $149,000.
          Species benefited included listed red-band trout and short-
        nosed sucker.
          Lakeshore Gardens Project: fishscreen project on a 2 cfs 
        irrigation water diversion in the upper Klamath Basin near 
        Klamath Falls, Oregon. Partners are the Lakeshore Gardens 
        Drainage District and Oregon Department of Fish and Wildlife.
          Approved FRIMA funding is $5,691, leveraging a total project 
        cost of $18,970.
          Species benefited include red-band trout, short-nosed sucker 
        and Lost River sucker.
          Oregon Department of Fish and Wildlife Inventory Project: an 
        inventory to be conducted by Oregon Department of Fish and 
        Wildlife to identify FRIMA-eligible passage and screening 
        projects within the Rogue and Klamath basins of southwestern 
        Oregon.
          Approved FRIMA funding is $76,000. Estimated total project 
        cost is $125,000.

                              WHY FUND NOW

    Dollar-for-dollar, providing screening and fish passage at 
diversions is one of the most cost--effective uses of restoration 
dollars, creating fishery protection at low cost, with low risk and 
significant benefits. That is why it is important that this program be 
funded now.
    We urge the full authorization funding for FY 2007 and urge 
Congress' oversight in encouraging the Service to budget for this 
successful program in the future.

    Senator Murkowski. Thank you, Mr. Thalacker.
    Now, Mr. Donnelly, we will turn to you.

  STATEMENT OF THOMAS F. DONNELLY, EXECUTIVE VICE PRESIDENT, 
              NATIONAL WATER RESOURCES ASSOCIATION

    Mr. Donnelly. Thank you, Madam Chairwoman. Our association 
has worked hand in hand with the Bureau of Reclamation since it 
first raised the prospect of transferring title of facilities 
to project beneficiaries in August 1995. The first several 
years were difficult and a learning exercise for both 
Reclamation and its customers. Project beneficiaries harbored 
some unrealistic expectations. For example, some districts 
wanted title to their facilities, but expected the Federal 
Government to retain all liability for failure and the 
resulting loss of property and life. Others expected the 
transfer of project operations would exempt them from the 
provisions of national environmental law. Costs were also a 
huge impediment for some districts. Some of Reclamation's 
managers were slow to embrace the concept of title transfer. In 
addition, many unanticipated issues and concerns developed 
which were difficult to resolve.
    Combined, these factors contributed to bringing the whole 
process of title transfer to an abrupt halt. Both Reclamation 
and its customers persevered through these difficult efforts 
and ultimately we developed a framework for negotiations and a 
checklist for districts to follow in preparation for their 
initial meetings with Reclamation and the subsequent title 
transfer process.
    In 1996 the first title transfer bills were signed into 
law. Since then title to 18 projects or parts thereof have been 
transferred to project beneficiaries. Five are authorized 
pending transfer and several more are currently before 
Congress.
    Through these difficult early years we learned some 
valuable lessons. It is important for districts pursuing 
transfer of title to engage Reclamation early in the process 
and work through the various issues and circumstances unique to 
each individual project. There is no such thing as a simple 
transfer. Even single-purpose projects present unique 
challenges for Reclamation and its customers.
    We are in agreement that it is impractical and in some 
cases not in the public interest to transfer large multi-
purpose projects. It is also important that Reclamation and 
Congress is satisfied that title transfer applicants have the 
financial and technical resources to adequately and efficiently 
operate and maintain transferred works into the future.
    While we have struggled over the past 10 years to get where 
we are today, a process and procedures are in place that 
provide project beneficiaries the opportunity to accomplish the 
transfer of title to their facilities. It is not a perfect 
process. It is still too expensive for most and in many cases 
unnecessarily time-consuming. Regardless, we are satisfied that 
Reclamation is attempting to make the process more user-
friendly.
    I returned last night from the public meeting on 
Reclamation's Managing for Excellence process and if it is 
helpful to the committee I would provide for you an overview of 
their title transfer work so far.
    Senator Murkowski. Great. Thank you.
    Mr. Donnelly. In closing, Madam Chairman, we support S. 
3832 and believe it is complementary to efforts being 
undertaken by the Bureau of Reclamation in their Managing for 
Excellence process. This legislation will codify the process 
and procedures of an important management tool. Thank you very 
much.
    [The prepared statement of Mr. Donnelly follows:]

  Prepared Statement of Thomas F. Donnelly, Executive Vice President, 
                  National Water Resources Association

    The National Water Resources Association (NWRA) is a nonprofit 
federation of state associations and individuals dedicated to the 
conservation, enhancement, and efficient management of our Nation's 
most precious natural resource--WATER. The NWRA is the oldest and most 
active national association concerned with water resources policy and 
development. Its strength is a reflection of the tremendous 
``grassroots'' participation it has generated on virtually every 
national issue affecting western water conservation, management, and 
development.

                               BACKGROUND

    The U.S. Bureau of Reclamation (Reclamation) first raised the 
prospect of transferring title of facilities to project beneficiaries 
in August of 1995. Given the contentious debate and subsequent 
legislation over the rules and regulations implementing the 1982 
Reclamation Reform Act in the late 80's and early 90's, many of our 
members were looking for an opportunity to get out from under the 
onerous reporting requirements and resulting rules and regulations. 
Title transfer appeared to provide that opportunity for many irrigation 
districts. To give the Committee an idea of the interest that the 
prospect of title transfer raised in the West, NWRA held a two day 
conference on the subject of title transfer in June 1996 expecting 
approximately 50-60 project managers to attend. Over 250 project 
managers from throughout the West attended.
    Early on project beneficiaries harbored several unrealistic 
expectations. Many districts wanted title to their facilities, but 
expected the federal government to retain all liability for failure and 
the resulting loss of property and life. Some expected the transfer of 
title project operations would exempt them from the provisions of the 
Endangered Species Act, the Clean Water Act and other environmental 
laws. Others expected the Bureau of Reclamation to bear all costs 
associated with the transfer including the costly requirements of the 
National Environmental Policy Act. Within the agency, some of 
Reclamation's managers were slow to embrace the concept of title 
transfer. Also, many unanticipated issues and concerns developed which 
were difficult to resolve. Combined these factors contributed to bring 
the whole process of title transfer to an abrupt halt.
    Frustrated with the lack of progress in working through 
Reclamation, some districts chose to bypass the agency altogether and 
appeal directly to Congress. For the most part, this resulted in a 
stalemate where Reclamation was forced to testify in opposition to 
proposed project transfer legislation.
    After months of frustrating delay, then Commissioner Eluid Martinez 
facilitated a working session of NWRA's leadership and Reclamation's 
managers. We analyzed the problems associated with the existing process 
and procedures from both perspectives. This meeting led to the 
development of a framework and ``road map'' for districts to follow in 
preparation for their initial meetings with Reclamation and the 
subsequent title transfer process.
    In 1996 the first title transfer bills were signed into law. Since 
then, title to eighteen projects or parts thereof have been transferred 
to project beneficiaries, five are authorized pending transfer and 
several more are currently before Congress.

                            LESSONS LEARNED

    In the past ten years, the Bureau of Reclamation and project 
beneficiaries have learned several lessons related to the transfer of 
title to Reclamation facilities.
    We have learned that little is gained by attempting to circumvent 
the process. It is important for districts pursuing the transfer of 
title to engage Reclamation early in the process and work through the 
various issue and circumstances unique to each individual project. It 
has become clear to us that there is no such thing as ``low hanging 
fruit'' when it comes to title transfer. The simplest projects present 
unique challenges for Reclamation and the districts.
    We acknowledge that it is impractical and, in some cases, not in 
the public interest to transfer large multi-purpose regional projects. 
It is also important that Reclamation and Congress is satisfied that 
title transfer applicants have the financial and technical resources to 
adequately and efficiently operate and maintain transferred works into 
the future.

                                SUMMARY

    While we have struggled over the past ten years to get where we are 
today, a process and procedures are in place at Reclamation that 
provide project beneficiaries the opportunity to accomplish the 
transfer of title to their facilities. It's not a perfect process. It's 
still too expensive for most districts and in some cases unnecessarily 
time consuming. Regardless, we are satisfied that Reclamation is 
attempting to make the process more user-friendly. Also, they are 
cooperatively pursuing those projects that are in the best interest of 
the American taxpayer to transfer to the project beneficiaries under 
reasonable terms and conditions.
    In closing, Mr. Chairman and Senator Bingaman, we support S. 3832 
and believe it is complementary to the efforts being undertaken by the 
Bureau of Reclamation in their ``Managing for Excellence'' process. 
Therefore it should be quite easy for the Bureau to implement the 
provisions of S. 3832 in a timely manner. More important, this 
legislation will codify the process and procedures of an important 
management tool.

    Senator Murkowski. Thank you, Mr. Donnelly.
    Senator Wyden, would you care to ask some questions first?
    Senator Wyden. Madam Chair, thank you very much, and thank 
you on behalf of Senator Smith and myself for scheduling our 
witness. We appreciate your courtesy.
    I think I just wanted to ask Mark Thalacker one question. 
We are going to try to secure the funds. That has been a 
priority for Senator Smith and I. I think it would be helpful 
if you could lay out the consequences of not having this kind 
of program. It seems to me in plain simple English a lot of 
fish are going to die. Is that pretty much it? If that is the 
case, why do you not lay this out in something resembling 
English that people can really see as being the consequences of 
an important Federal program.
    Mr. Thalacker. Well, one of the things that makes FRIMA so 
important is--currently I personally serve on the Mid-Columbia 
Steelhead Recovery Team, and one of the things that I have seen 
through this process is that screening projects tend to come to 
the various granting agencies one by one. What FRIMA has 
allowed is it has allowed basically the Columbia Basin States 
to target key screens that help comply with the Endangered 
Species Act.
    I think that when we eventually get final decision on the 
remand from Judge Reddon, FRIMA is going to be a key tool. So 
if it was authorized and funded going forward--it is something 
that the Power Planning Council has made a specific request 
that it be authorized and funded because, as you can see from 
the list of all the projects that have been done, it has been a 
very successful program. And yes, if we leave all these 
diversions unscreened a lot of fish will perish and there will 
be litigation and regulation.
    Senator Wyden. Well, thank you for making the journey 
eastward and we appreciate all your good work. Suffice it to 
say, after what has happened in the Klamath, we have had one 
instance after another of Federal policies not being built 
around cost-effective ways to both balance the needs of fish 
and the needs of people. I think you found one. I think that is 
why Senator Smith and I have been such strong supporters of it.
    So you continue to do the advocacy work that you are doing. 
We will try to back you up.
    Thank you very much, Madam Chair, for your courtesy.
    Mr. Thalacker. Thank you, Senator.
    Senator Murkowski. Absolutely.
    Mr. Thalacker, let me continue with some questions for you. 
In your written testimony you state that you do not believe 
that Congress intended FRIMA to be used by municipal, Federal, 
or tribal governments to fund their facilities. Is this 
happening? Are there any cases that you are aware of where 
there has been an effort to use the FRIMA funding to fund 
facilities?
    Mr. Thalacker. Not that I was aware of. There are a number 
of other programs, screening programs, that are available 
through the Corps and also BPA works with the tribes quite a 
bit on their screens. So this is a program that basically 
reached out to literally thousands of diversions, large and 
small, all over the Columbia Basin, as well as other States, 
where there were Endangered Species Act problems.
    Senator Murkowski. But so far as you know we do not have an 
issue with municipal or Federal entities?
    Mr. Thalacker. We have not had a problem that I am aware 
of.
    Senator Murkowski. The other question that I have for you, 
the legislation would give priority to projects costing less 
than $2.5 million and this is down then from the current 
threshold of $5 million. Why do you support the decrease?
    Mr. Thalacker. The decrease is, one, a lot of the larger 
screens, the more expensive ones, have been completed. So what 
this does is this spreads the resource even farther and gets 
more screens accomplished. Large screens tend to be on Federal 
projects and so, once again, there are other funding sources 
available for those bigger projects.
    Senator Murkowski. Thank you for clarifying that.
    Mr. Donnelly, you mentioned the Reclamation's Managing for 
Excellence process. I do appreciate you bringing the Powerpoint 
there and we will include that as part of the record. But it 
sounds from your testimony that you are optimistic that there 
is a process that is being set forward, that initially when it 
came to title transfer things were slow, you mentioned that 
they were expensive, but it sounds from your testimony that 
there is an increasing satisfaction with the process and that 
the efforts to improve the title transfer process is really 
proceeding in a positive vein.
    Mr. Donnelly. I believe that is accurate. I think what the 
Bureau is now doing under Managing for Excellence is very much 
in keeping with the legislation that has been introduced.
    Senator Murkowski. Good. Well, we will look forward to 
reading that that you will submit in the written record.
    Mr. Long, in talking about the Arkansas Valley Conduit 
project, what progress have you made toward securing a water 
right for that project?
    Mr. Long. There currently exists project water that is 
allocated to the lower valley. That water is adequate to meet 
the current request that we now have. So we actually have the 
water necessary to meet today's need.
    Senator Murkowski. What about tomorrow's need?
    Mr. Long. Tomorrow's need. There is more than adequate 
supply. Many of our cities and communities actually own water 
rights in the Arkansas River Basin. To meet the first initial 
need we will use the project water that has been allocated to 
the valley.
    Senator Murkowski. All right.
    I have got a piece of legislation. I am a cosponsor on a 
Rural Water Supply Act which would authorize a loan guarantee 
program within the Reclamation loans. It allows that the loans 
be repaid over a 40-year period. Do you think that the 
communities in your region could benefit from this type of a 
loan guarantee program? This is something that would work out 
there?
    Mr. Donnelly. Absolutely. We are actually working too with 
the State of Colorado with a similar program that they have. We 
still could not afford the full 100 percent funding of the 
project. But we can handle the 20 percent. And yes, a program 
like that would be beneficial.
    Senator Murkowski. Good. You also mentioned in your 
comments here this afternoon, you spoke to some of the water 
quality issues. Would the water then that is to be supplied 
under the Arkansas Valley Conduit--is this going to require 
treatment?
    Mr. Donnelly. Minimal treatment. Currently the city of 
Pueblo, Colorado, is using basically the same water that we 
would use. They just filter it and treat it with disinfectant.
    Senator Murkowski. So even though you have got some solids 
and some other things in there that you would rather not have, 
it is a pretty minimal treatment?
    Mr. Donnelly. Absolutely. In relation to that, in the lower 
valley to meet water standards today we need to build reverse 
osmosis plants, which are very expensive to build, very 
expensive to operate, and cause a secondary problem in what to 
do with the reject from reverse osmosis plants. So we are faced 
with a new problem when we do build reverse osmosis plants.
    So providing a better quality raw water is absolutely by 
far the best way for us to proceed to meet our needs.
    Senator Murkowski. Good.
    Well, that is all the questions I have. I appreciate again 
the opportunity to have you all in front of us, appreciate your 
willingness to come this far and help us out with this 
legislation. I appreciate it.
    With that, we stand adjourned.
    [Whereupon, at 4:02 p.m., the hearing was adjourned.]

                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

    Responses of Marc Thalacker to Questions From Senator Murkowski

    Question 1. In your written testimony you state that you ``do not 
believe Congress intended FRIMA be used by municipal, Federal or Tribal 
governments to fund their facilities.''
    Are you aware of any cases where this has been occurred?
    Answer. As OWRC has reviewed the respective Congressional Committee 
reports that accompanied the legislation that became Public Law 106-502 
and as we have spoken with the parties involved who developed the ideas 
and concepts and worked on the language that became that Public Law, 
and further as we participated in the process that implemented the 
program once funding was provided, it is clear to our members that the 
intent of the program was to mitigate the diversions of irrigation 
systems of local governmental entities, of which water districts are 
defined as stipulated in the preface of the Act
    Furthermore, municipal governments do not irrigate agricultural 
lands; Tribal governments are sovereign governments and thus not local 
government entities; and the Federal government is not a local 
governmental entity. There was to be a ``commonsense'' approach to 
these facilities if it made sense to have a fish screen, fish passage 
device or related feature placed on a water diversion that passed 
through Federal, Tribal, or municipal lands. The intent was to allow 
for such placement and provide authorization so someone couldn't say 
``the law doesn't allow that'. The whole idea was to do what made the 
most sense for the fish resource that was in need of mitigation 
assistance. Examples of this appear in the USFWS Fisheries Restoration 
and Irrigation Mitigation Program FY 2002-2004 report
    Question 2. Why do you believe it is necessary to specify that BPA 
funds be considered non-federal share money? Has any entity been 
prohibited from accepting BPA funds as part of the non-federal share?
    Answer. It is OWRC's understanding that the Bonneville Power 
Administration (BPA) believes that its funds can be used as the non-
Federal match for Federal grants. We would like to submit along with 
this answer, two letters from BPA stating its position the ratepayer 
funds are non-federal funds and a guidance statement from USFWS 
concerning FRIMA/BPA funds. Unfortunately USFWS has taken the position 
that BPA funds are not allowed to be used for non-federal cost sharing 
purposes. This provision would make it clear that BPA funds may be used 
for non-Federal cost share purposes.
     Responses of Marc Thalacker to Questions From Senator Johnson
    Question 1. According to the Fish & Wildlife Service's 2002-2004 
Report, $8.8 million was appropriated to support the Fisheries 
Restoration and Irrigation Mitigation Program. Of that, $675,000 was 
used for Administrative purposes--about 7.8%.
    Have the Administrative costs been excessive in your view?
    Answer. It is our understanding that when discussions were taking 
place for the concepts resulting in Public Law 106-502 that 3 percent 
was seriously considered as an administrative cap figure. The six 
percent figure was arrived at in recognition of the need to ramp up for 
a new Federal program with the expectation that this was to be a pass 
through program of funding to the local governments to carry out the 
work. Further, it was expected that the states, not the Federal 
government, would play a strong role in this program because they had 
the best understanding of the work that needed to take place and were 
to do the inventories.
    It was also expected that the full $25 million a year would be 
appropriated and 6 percent of that funding for ``administration'' was a 
significant amount of money. Unfortunately the Administration has never 
requested any money in the Budget submission to Congress.
    Question 2. Do you know how much was appropriated for the program 
in fiscal years 2005, and 2006?
    Answer. $2.0 in funding was provided in FY05. The FY 06 
appropriation of $2.0 million was subject to budget rescissions. We do 
not have information about rescissions for other years' appropriations. 
Because USFWS has never requested funding for the program, it is 
difficult to understand their budgeting/accounting for the money since 
it is to be allocated among the four states and not more than 6% is 
available for administrative costs.
    We are concerned that the funding that Congress has provided in 
FY07 is at risk because of the authorization lapse.
    Question 3. Your testimony seems to indicate that you would like to 
exclude tribal irrigation projects from participating in the FRIMA 
program. Is that the case, and if so, why?
    Answer. It is not a question of exclusion, but more of 
clarification as we stated in our response to question 1 from Senator 
Murkowski. There are other Federal programs available to the tribes for 
this work. Currently the tribes seek funding for screening projects 
through BPA's capital fund and BPA's fish and wildlife program.
    Further, it is unclear what work needs to be done, if any, because 
the inventories conducted by the states do not cover Federal and Tribal 
lands.
    As an example of the partnerships using FRIMA funding, tribes have 
provided funding to Soil and Water Conservation Districts and Watershed 
Councils who in turn work on smaller screening projects that use FRIMA 
funds.

    R1 FRIMA Program Policy Guidance:
    Use of BPA funds as the Non-federal Cost-share of a FRIMA Project.
    The DOI Regional Solicitor's Office was consulted on this issue and 
has indicated the following.
    BPA dollars cannot be used as non-federal match. The letter from 
the BPA legal advisor clearly states that BPA funds are federal funds. 
BPA has no specific legislation regarding this issue. FRIMA has 
specific legislation regarding this issue, hence the FRIMA legislation 
takes precedence. The FRIMA language is prohibitive, not permissive, 
regarding the use of federal funds as non-federal matching funds. 
Hence, BPA dollars cannot be used as the non-federal cost-share of a 
project. The BPA legal advisor agreed with the Solicitor's view.

                            J. Van Meter
                            Fish Passage Program Manager
                            September 17, 2004
                                 ______
                                 
        Responses of Bill Long to Questions From Senator Johnson

    Question 1. What do you expect to be the source of water that will 
supply the communities participating in the Arkansas Valley Conduit?
    Answer. Initially, an allocation of Fryingpan-Arkansas Project 
water, including re-use of return flows, will adequately address water 
needs for the participating communities. Over the longer life of the 
Conduit, additional non-Project water supplies may be necessary to 
fully address water needs. These additional supplies may be acquired by 
interruptible supply agreements, rotational crop management leasing 
programs, adaptive management of existing community water supplies or 
by purchasing water from willing sellers.
    Question 2. Is Reclamation's suggested minimum 35% cost-share for 
construction costs beyond the ability-to-pay of the participating 
communities?
    Answer. We have not made an analysis of a 35% cost-share, since S. 
1106 proposes to use a 20% cost-share. Prior to the hearing, 
Reclamation consistently stated its position that the participating 
communities must repay 100% of construction costs. Because the average 
household incomes in the counties served by the conduit are 
significantly lower than the state average (approximately 55% of the 
state average), we are concerned that a cost-share significantly higher 
than the one provided in S. 1106 may be beyond the ability-to-pay of 
the participating communities.
    Question 3. What are the estimated OM&R costs for the Conduit 
project? Have the participating communities worked out a cost-
allocation arrangement to ensure that they can pay those annual costs?
    Answer. Based on project cost estimates, annual debt service and 
O&M costs range between $2.5 and $4.8 million. The estimated annual O&M 
cost alone ranges from $775,000 to $1.9 million. To assist the 
participating communities in working out a cost-allocation arrangement, 
consultants to the Southeastern Colorado Water Activity Enterprise, a 
water enterprise created by the Southeastern Colorado Water Conservancy 
District, developed two approaches to establish cost allocations: a 
cost of service approach and an all-equal approach. The participating 
communities are still discussing these approaches, with assistance from 
state funding agencies.

       Responses of Bill Long to Questions From Senator Murkowski

    Question 1. How much water would be conveyed by the Conduit?
    Answer. The Arkansas Valley Conduit is designed to convey about 
22,100 acre-feet of water in one year. The flow rate will be 30.94 cfs 
or about 20 million gallons per day.
    Question 2. Do you believe the communities that would receive water 
from the proposed project could use this loan guarantee program 
[contained in the Rural Water Supply Act of 2005]?
    Answer. The participating communities intend to use all of the 
financial resources available for which they appropriately qualify. 
Because the Rural Water Supply Act of 2005 loan guarantee program 
requires the Secretary of the Interior to develop eligibility criteria 
following passage of the Act, it is unclear whether the participating 
communities will be able to effectively utilize this program.
    Question 3. Is there also a concern that the aquifer on which the 
lower Arkansas Valley currently relies is being depleted at an 
unsustainable rate?
    Answer. No, the primary water supplies utilized by the communities 
that would benefit from the Arkansas Valley Conduit are surface water 
supplies or tributary ground water. As discussed in my testimony, water 
quality of those surface and tributary ground water supplies, is the 
primary concern. Other communities in Colorado, not proposed to be 
served by the Arkansas Valley Conduit, including some in other areas of 
southeastern Colorado, may face problems with aquifer over-draft.

    [Responses to the following questions were not received at 
the time the hearing went to press:]

         Questions for J. Mark Robinson From Senator Murkowski

       S. 2070, MOHAWK RIVER HYDROELECTRIC PROJECTS LICENSING ACT

    I understand that the licensee, the federal and state resource 
agencies, and other significant stakeholders in the School Street 
Project relicensing proceeding have reached a settlement.
    Question 1. Is it correct that the only procedural hurdle to FERC 
issuing the license is a delay caused by the green Island Power 
Authority's appeal of New York's water quality certification for the 
Project?
    Question 2. Are you aware of any other case in which Congress has 
required FERC to issue a license that contemplates the destruction of 
the licensed project in the foreseeable future?

               S. 3851, THOMAS BAY HYDROELECTRIC PROJECT

    Question 1. It is my understanding that all three of these proposed 
hydropower projects depend upon the applicant securing a power purchase 
agreement. The applicant will likely spend several millions of dollars 
during the preliminary permit period but is concerned that the money 
will ``go down the drain'' when those preliminary permits expire. One 
permit expires about a year from now.
    Pursuant to the Federal Power Act, FERC has the authority to grant 
a new preliminary permit once the original permit expires--as long as 
the applicant has acted in good faith. However, if a municipal entity 
also applies for that new preliminary permit, FERC is obligated to give 
preference to that municipal entity--regardless of how much work and 
money the original permit holder invested. Is that correct?
          Questions for J. Mark Robinson From Senator Johnson

       S. 2070, MOHAWK RIVER HYDROELECTRIC PROJECTS LICENSING ACT

    Question 1. It sounds like the only thing holding up the issuance 
of a license for the School Street project is the water quality 
certification by New York.
    Do you have any estimate on when the certification might be issued? 
Once that occurs, has the applicant met all the other licensing 
requirements pursuant to FERC's regulations?
    Question 2. There is a provision in S. 2070 that would require in 
any license the inclusion of Articles 32 & 33 of the Millville Project 
license issued by FERC.
    What applicability would these articles have in this situation? Has 
the Corps of Engineers developed a comprehensive water resource plan 
for the Mohawk River?
                                 ______
                                 
       Questions for Secretary Kempthorne From Senator Murkowski

                    S. 1106, ARKANSAS VALLEY CONDUIT

    Question 1. In your testimony, you mention that the re-evaluation 
statement of the Conduit included an assessment of the sponsor's 
ability to pay.
    In that study, what was Reclamation's determination?

               S. 1811, ARTHUR V. WATKINS DAM ENLARGEMENT

    Question 1. It is my understanding that the dam was raised in 1990.
    Based on this experience, do you believe that raising the Dam an 
additional one to two feet is technically feasible?

                 S. 3798, FOLSOM SOUTH CANAL DEFERMENT

    You state in your testimony that you have concerns with deferring 
the repayment of the costs associated with a Reclamation facility based 
on the amount of capacity in use.
    Question 1. Please explain more fully to the Subcommittee your 
concerns with the precedent this would establish.
    Question 2. Are there any other parties who could benefit from the 
unused Canal capacity?

              S. 3832, RECLAMATION FACILITY TITLE TRANSFER

    Question 1. What types of Reclamation projects do you believe 
should not be transferred?
    Question 2. What changes, if any, would you make to S. 3832?
    Question 3. As you mention in your testimony, Reclamation is 
currently investigating opportunities for the transfer of title to 
Reclamation facilities as part of its Managing for Excellence Plan.
    How is this progressing? When do you anticipate it will be 
completed?

          H.R. 2563, SNAKE, BOISE, PAYETTE RIVER SYSTEMS STUDY

    Question 1. If H.R. 2563 is enacted, does Reclamation plan to 
solicit stakeholder comment as it did for the Boise and Payette Basin 
studies?
    Question 2. H.R. 2563 authorized $3 million to be appropriated for 
the feasibility studies.
    Do you believe that this amount is adequate?

           H.R. 3897, MADERA WATER SUPPLY ENHANCEMENT PROJECT

    Question 1. What do you believe the total cost of a feasibility 
study would be for the proposed project?
    Question 2. How long would the feasibility study take to complete?
    Question 3. You state in your testimony that Reclamation is 
undertaking an appraisal level study of the proposed project.
    What involvement have the stakeholders had in this process?
        Questions for Secretary Kempthorne From Senator Johnson

                    S. 1106, ARKANSAS VALLEY CONDUIT

    Your testimony indicates that the water supply for the Arkansas 
Valley Conduit is not identified.
    Question 1. How much water is needed for the project on an annual 
basis?
    Question 2. Won't the water come from the existing Fry-Ark project? 
If not, what are the potential sources for the water rights needed for 
the project?
    The Re-evaluation statement mentioned in your testimony contains 
updated construction and annual O&M costs as well as an assessment of 
the sponsors' ability to pay.
    Question 3. Will you please provide a copy of the Re-evaluation 
statement for the Subcommittee?
    Question 4. What additional work is necessary to go beyond the 
Statement to provide Reclamation with the information necessary to 
determine whether or not the Project should go forward?

               S. 1811, ARTHUR V. WATKINS DAM ENLARGEMENT

    You mention that the feasibility study for raising the height of 
the Arthur V. Watkins Dam would cost approximately $2.0 million.
    Question 1. How long would the study take?
    Question 2. Does the Project have sufficient water rights under 
state law to store additional water if the Dam height is raised?

                 S. 3798, FOLSOM SOUTH CANAL DEFERMENT

    The construction of the Folsom-South Canal sounds like it was a 
significant error in judgment based on its under-utilization.
    Question 1. Why does Reclamation think it's fair that the CVP 
contractors pay for the construction of a canal that benefits hardly 
anyone?
    Question 2. What are the overall construction costs of the Folsom-
South Canal? How much has been repaid to date?
    Question 3. Is there any potential use for this canal in the 
future? Will it simply go on with only 2% of its capacity used?

              S. 3832, RECLAMATION FACILITY TITLE TRANSFER

    Your testimony indicates that Reclamation has an existing framework 
for title transfer, and is currently working on improving that 
framework.
    Question 1. Does the existing framework address the transfer of 
complex multi-purpose projects?
    Question 2. Does Reclamation think that Congress should hold off on 
considering S. 3832 until it has completed its Managing for Excellence 
review?

           H.R. 3897, MADERA WATER SUPPLY ENHANCEMENT PROJECT

    Question 1. Is the appraisal-level work for the Madera water supply 
enhancement project sufficiently far along to provide some type of cost 
estimate for the project as currently configured?
    Question 2. What are the type of project features being looked at 
in the appraisal-report?
    Question 3. What is your estimate of the cost to complete a 
feasibility study of the project?

        Questions for Secretary Kempthorne From Senator Salazar

    I have a list of 13 community public water systems in Southeastern 
Colorado that are under an active enforcement order from the Colorado 
Department of Public Health and Environment for failure to comply with 
drinking water standards. These are all small towns and rural water 
associations that simply cannot cover the costs of upgrading their 
water treatment facilities on their own. They, along with many other 
communities in the region, will need to seek federal assistance to 
upgrade their water treatment systems, at an estimated cost of $640 
million, most of which will be born by the federal government.
    Question 1. Given that the Conduit is estimated to cost 
approximately $300 million, of which 20% will be provided by the local 
communities, and upgrading individual water systems in southeastern 
Colorado is estimated to cost $640 million, most of which would be born 
by the federal government through grants and other funding mechanisms, 
isn't it true that, from a financial standpoint, the Conduit will end 
up costing the federal government less than it would spend if it had to 
help upgrade all of these water treatment systems?
    In your testimony you raise a concern with the 80-20 cost share 
provision in this bill. But as you noted in your testimony before the 
House Resources Committee in July, since the early 1980s, Congress has 
authorized thirteen separate single purpose Reclamation projects for 
municipal and industrial water supply in rural communities in 
Reclamation States, at a total federal budget authorization for of over 
$2.3 billion.
    Question 2. Isn't it true that the non-Federal cost shares for each 
of the currently authorized rural water projects range from zero for 
the Indian portion of the Mni Wiconi Project in South Dakota to 25 
percent for the non-Indian Dry Prairie Rural Water System connected to 
the Fort Peck Reservation Rural Water System in Montana.?
    Question 3. Do you stand by your statement that these types of 
water supply projects, like the Arkansas Valley Conduit, should be 
based on a community's ``capability to pay?''
                                 ______
                                 
        Questions for Thomas F. Donnelly From Senator Murkowski

    Question 1. From your perspective, what are greatest problems with 
Reclamation's existing title transfer process and what improvements 
would you make?
    Question 2. What are some of the benefits to project beneficiaries 
associated with receiving title to Reclamation projects?
          Question for Thomas F. Donnelly From Senator Johnson
    Question 1. In your view, is Reclamation's process to review its 
title transfer procedures sufficient to warrant holding off on any 
legislation until that process is complete?

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

Statement of Hon. Michael R. McNulty, U.S. Representative From New York
    Madam Chairwoman, thank you for this opportunity to address an 
issue that has been a cause of concern for many of my constituents: the 
relicensing of a hydro project known as the School Street Project (FERC 
Project No. 2539).
    The license for this project, which is located on the Mohawk River 
near Albany, New York, expired in 1993 and only the Federal Energy 
Regulatory Commission (FERC) can issue a new license.
    The School Street Project, in place since the early 1930's, is an 
antiquated, sub-optimal hydro facility that has robbed my community of 
a wonderful, natural waterfall, the Cohoes Falls. The School Street 
Project also diverts water from amile of the Mohawk River so that this 
mile of the river is mostly dry during the summer, is fish unfriendly, 
and produces less than half the power that could be generated by a 
modern hydroelectric power plant.
    The Green Island Power Authority (GIPA), a publicly owned municipal 
power authority created under the laws of the State of New York, would 
like to file an alternative proposal with FERC for consideration prior 
to the Commission issuing another 30 to 50 year exclusive license to an 
existing hydroelectric project.
    GIPA's proposal would address four important generation, 
environmental, and community concerns. It would:

   replace the antiquated existing hydro project with a state 
        of the art facility that will produce more hydropower;
   restore what the School Street project took away, the visual 
        beauty of a continuously flowing waterfall;
   save fish, which have been dying due to the setbacks of the 
        current hydroelectric project;
   give a real boost to the economic health of the community.

    Under current Federal law, competing applications must be submitted 
two years prior to the School Street Project's license expiring. The 
School Street project license expired 14 years ago. As a result, 
despite the existence of a more energy efficient project that would 
better serve the public interest, FERC has mandated that GIPA's Cohoes 
Falls Project cannot even be considered.
    I support S. 2070, one of the bills being reviewed today. This 
legislation, proposed by Senator Schumer, is simple but effective. It 
requires FERC to allow the introduction of new evidence about a better 
project into the record in the School Street case. It does not disturb 
the right of FERC to make the final decision, but it does require FERC 
to make a fair record. It makes FERC accountable to the courts if they 
don't apply the law the way Congress intended.
    This legislation is badly needed now in a community that is losing 
confidence in the ability of its national government to understand or 
even permit fair play when it comes to giving out exclusive licenses to 
private entities for the valuable natural resources belonging to the 
public.
    For the people in my district and the region, the restoration of 
the Cohoes Falls, the rewatering of the Mohawk River, and the beauty 
and value they could bring to our local communities in the future are 
profound issues. It is not simply another case to be dealt with in the 
large pile of casework.
    Because of my community's great interest in the new license, I have 
been personally involved in this effort since 2001. To date, I have 
failed to persuade FERC to make even the most simple changes:

   Update a stale record to accept current information;
   consider a superior alternative project to the status quo;
   permit participation by local community organizations;
   actively protect the public interest.

    Thus far, I have been unable to persuade this federal agency to 
allow my constituents and local organizations and communities to 
participate in any meaningful way in the School Street relicensing 
process. Instead, the community has been excluded from the hearing 
process and denied party status, so they cannot appeal any decision 
issued by FERC in court.
    When the public is prevented from making its case before a federal 
agency, citizens and local officials alike have wonder what's going on. 
For whom was this agency created and what did Congress intend it to do?
    The applicable law is clear: Congress intended in 1920 when it 
enacted the Federal Power Act, that the agency it created, now the 
Federal Energy Regulatory Commission, should pick the ``best project'' 
to comprehensively develop our Nation's rivers, in the public interest.
    When the Commission strayed from its original mission, the courts 
stepped in to remind the Commission that its duty was to see that ``the 
record is complete. The Commission has an affirmative duty to inquire 
into and consider all relevant facts.'' Scenic Hudson Preservation 
Conference v. FPC, 354 F. 2d 508 (1965), at 620. The Court said this in 
a case involving the location of a huge pumped storage project on the 
Hudson River, proposed by Consolidated Edison Company, just south of 
the Capital Region of New York. Moreover, the Court noted that the 
agency's refusal to receive the testimony about alternative sources of 
power and information about fish protection devices and underground 
transmission facilities, even in some cases offered by a non-party to 
the case, was inappropriate and ``exhibits a disregard of the statute 
and of judicial mandates instructing the Commission to probe all 
feasible alternatives.'' That quote comes from the same case and the 
same page.
    In Scenic Hudson, the Court noted that the agency had denied 
participation to some of the interests, thereby depriving the record of 
their evidence; in other words, the same kind of activity that has been 
occurring in the present School Street case. Quoting from another case, 
the Scenic Hudson Court found persuasive a holding that ``it is not 
fair play for it (i. e., the agency) to create an injustice, instead of 
remedying one, by omitting to inform itself and by acting ignorantly 
when intelligent action is possible . . .'' Scenic Hudson at 621. I 
note that Scenic Hudson occurred in the mid-1960s and it seems as if 
the current FERC is suffering the same problems that afflicted the 
agency back then.
    Unlike the existing School Street Project, the new Cohoes Falls 
Project would double the renewable energy available from the waters of 
the Mohawk. It would restore the historic Cohoes Falls to the way they 
used to be. It would rewater a mile of the Mohawk River where it now 
runs dry. GIPA proposes to dedicate a portion of the additional power 
input to create jobs in the community, and we could use those jobs. 
Another portion of the hydro power would be earmarked for public 
institutions, to help those communities with their budgets and maintain 
our local institutions. Recreation and public access to the river and 
to the falls would be enhanced, after consulting with the Tribal groups 
that have a special religious interest in preserving certain aspects of 
the falls and site. How to meet these objectives is the information 
being excluded by FERC.
    This is why my community needs S. 2070. I thought the Federal Power 
Act was clear, as did the courts. In 1965 however, the courts had to 
remind the agency administering the Federal Power Act of its duty, 
despite the clarity of the law. It seems that the time is here again. 
But rather than burdening the court system with this case and delaying 
the resolution for another three to five years, Congress should act to 
pass S. 2070. Otherwise, the bottom line is that delay only benefits 
the current Licensee, who has taken an old Project that should be 
costing the consumers less than a penny per kwh and instead is selling 
it to them at 5-10 cents/kwh, under the new rules of the electricity 
market. That's taking a lot of money out of the community and the 
pockets of my constituents, and preventing us from using our own 
region's resources to ensure our own future.
    Delay also means that the current Licensee, a Canadian corporation, 
will be able to take those profits and invest them elsewhere and not in 
the surrounding community. I submit this testimony today because my 
community has been waiting for 15 years for FERC to take an affirmative 
step to improve the conditions at the School Street site, and FERC is 
choosing to ignore an opportunity to do just that.
    I am attaching two letters I have written to the Commission in the 
past, including one signed by Senators Schumer and Clinton.* The 
results are the same: FERC continues to reject the community's efforts 
and gives every intention of closing down the case and issuing a 
license for pretty much the same antiquated project that provides 
little benefit to the surrounding community. And this is at a time when 
prompt development of an alternative would give us double the energy!
---------------------------------------------------------------------------
    * The letters have been retained in subcommittee files.
---------------------------------------------------------------------------
    The development of a new Project and the restoration of the Cohoes 
Falls and the Mohawk River flows will do much to restore pride and 
beauty to my community and it will bring economic benefits to a 
community that has already been abandoned by the large corporations who 
found it more efficient to move than to invest money for modernization 
and new industries in the same communities.
    Madame Chairwoman, thank you for including S. 2070 within the scope 
of today's hearing. I look forward to further discussions on how we 
might proceed in enacting legislation that would level the playing 
field so that the people in my district might have a fair chance to 
obtain and develop their own natural resources.
                                 ______
                                 
                     Statement of Brookfield Power
     Clarification on Matters Raised at the 9/21 Hearing on S. 2070

    It was suggested at the hearing that the existing owner (Brookfield 
Power) does not want to do anything to improve the (School Street) 
facility, the environment, or its surrounding community and that the 
surrounding community supports the GIPA proposal over the Brookfield 
proposal.
    In fact, Brookfield has negotiated an extensive settlement 
agreement--years in the making and supported by hydropower experts, 
resource agencies, environmental advocates and the surrounding 
community--to make facility improvements benefiting the community and 
the environment. Brookfield's settlement agreement for School Street 
provides for continuous flows over historic Cohoes Falls; new 
recreational amenities including two viewing areas and a new 
footbridge; new foot trails; new fish protection and passage systems 
that have been approved by the U.S. Fish and Wildlife Service; an 
Historic Properties Management Plan; and ongoing work with indigenous 
peoples to ensure they have continued access to the falls for cultural 
purposes. This agreement is supported by the New York State Department 
of Environmental Conservation (NYS DEC), the NY Power Authority, NOAA 
Fisheries, U.S. Fish and Wildlife Service, the Mayor of the City of 
Cohoes NY, the NYS Conservation Council, and NY Rivers United.
    School Street is also seeking to become one of only two locations 
in the nation to install and test cutting edge fish-friendly turbine 
technology developed with the United States Department of Energy. 
Brookfield will enhance School Street to 50 MW capacity which should 
generate more than 200,000 MWh of energy annually. FERC Director of the 
Office of Energy, Mark Robinson, called this capacity addition ``well-
sized'' for the area.
    It was suggested that GIPA's proposal would enhance the environment 
and give New Yorkers better access to clean energy than would the 
Brookfield School Street proposal.
    GIPA's claims have not been tested or verified by the major 
resource agencies, environmental advocates, or a range of hydropower 
experts as Brookfield's proposal has. In order to achieve its claimed 
energy output, GIPA will have to build a new, larger dam on top of the 
falls and blast a section of the face to insert a massive powerhouse. 
This new dam would mean the certain inundation of one of the last 
stretches of natural flow and habitat left on the Mohawk River, but it 
is uncertain whether GIPA's energy claims can ever be realized.
    It was suggested that the amount of time Brookfield has been 
operating on an annual license is unduly long.
    Brookfield's School Street facility was one of nine of its project 
licenses in NY that expired in 1993. Through an agreement with FERC and 
stakeholders, those licenses were settled one at a time, with School 
Street designated as last in that settlement agreement process. 
Therefore, while waiting its turn, the School Street facility was given 
annual licenses. Additionally, once the licensing process began at 
School Street, time was put into negotiating a thorough settlement 
agreement, one which would ensure proper upgrades and the benefit of 
the surrounding community. The fact is, that but for GIPA's 
intervention and repeated appeals, the licensing process would be over.
    It was suggested that FERC has rejected GIPA's request to apply for 
a license at School Street because of technicalities.
    In fact, FERC has refused to permit GIPA to apply for a license at 
the School Street facility because the Federal Power Act and its rules 
prohibit a new license application from being filed on an ``untimely'' 
basis--in this case, more than thirteen years after the deadline for 
such applications. It is the law that FERC follow clear timelines for 
licensing set forth in the Federal Power Act. It is important not only 
for Brookfield, but for licensees across the nation, that the law 
governing relicensing has certainty and integrity and is not subject to 
undue political interference.
    It was suggested that GIPA was somehow precluded from competing for 
the School Street license when the window of opportunity lawfully 
existed in the early 1990's.
    GIPA, like any other prospective applicant, was free to file a 
competing application for the School Street project during the window 
of opportunity that existed in the early 1990's. The fact that Niagara 
Mohawk, the owner at that time, operated as a regulated monopoly in New 
York has no bearing, and that business structure in no way precluded 
GIPA from competing. GIPA simply chose not to compete when the lawful 
opportunity existed.
                                 ______
                                 
           Southeastern Colorado Water Activity Enterprise,
                                         Pueblo, CO, June 13, 2006.
Senator Ken Salazar,
U.S. Senate, Hart Senate Office Building, Washington, DC.
    Dear Senator Salazar: At last summer's July 16 Arkansas Valley 
Conduit Forum in La Junta, Colorado, Senator Wayne Allard, 
Representative Marilyn Musgrave, and yourself agreed that key 
information was needed before legislation would be moved through 
Congress. Additionally, Representative John Salazar agreed with the 
request from the Forum. Specifically, it was requested the District 
verify that enough water is available for the conduit, and the 
participants can afford their portion of the cost of the conduit.
    In November of 2005, Black & Veatch Engineering was hired to 
perform an Investigation Study to obtain answers to these questions. As 
part of this Investigation, all the water-providing entities were 
contacted and information was gathered. Black & Veatch has completed 
that Investigation and we are excited to provide you with the 
Investigation results. Enclosed is a copy of the Executive Summary for 
your perusal, and the complete study can be made available should you 
wish to see more detail.
    The Investigation found that there is an adequate water supply for 
the conduit. Project water is available to meet the current demands of 
the participants. Regarding the funding question, cost ranges were 
determined by the minimal size of the conduit as the lower bookend, and 
the largest size with some water filtration included in the upper 
bookend. To assure that each entity was on board and understood the 
costs, Letters of Intent were obtained from each entity. Attached is 
the list of the Letters of Intent in hand to date, representing all but 
a few very small providers who have not yet completed the letter 
process.
    Additionally, the District will be submitting a loan application in 
August to the Colorado Water Conservation Board. In discussions with 
them, we have learned that they have money available to loan for this 
project at rates between 3.0% and 3.5%. The final rate would be 
determined by the per capita income of the participating entities 
versus the state average.
    Now that the Investigation has been completed and the findings 
enclosed, it is the hope of the participants that our congressional 
delegation will undertake the effort necessary for Congress to act upon 
the authorizing legislation for this critical project, and seek the 
subsequent funding needed to build it. The District's staff, legal 
counsel, and consulting firm Kogovsek & Associates, look forward to 
meeting with you at your earliest convenience in an effort to finalize 
the language in the legislation.
    Thank you for your support.
            Respectfully,
                                      Bill Long, President,
                                       Chairman, Conduit Committee.
                                 ______
                                 
                                           American Rivers,
                                Washington, DC, September 21, 2006.
Senator Pete Domenici, Chairman,
Senator Jeff Bingaman, Ranking Member
Senate Energy and Natural Resources Committee, Washington, DC.
    Dear Mr. Chairman and Senator Bingaman: American Rivers is a 
national non-profit conservation organization dedicated to protecting 
and restoring healthy natural rivers and the variety of life they 
sustain for people, fish, and wildlife. American Rivers has a 
membership of more than 45,000, with members in each of the fifty 
states.
    We have significant concerns about S. 2070. Our concerns are not 
based on the relative merits of the competing hydropower projects that 
are the subject of this legislation, but rather a policy principle: 
Congress should not legislate the results of individual hydropower 
licensing proceedings or the terms of a hydropower license. Instead, 
Congress should allow FERC and appropriate state and federal agencies 
to implement the Federal Power Act and other applicable laws. The 
hydropower licensing process must operate in a consistent, pre-defined 
manner in every hydropower project. Any legislation that creates case-
by-case exceptions to these rules sets a dangerous precedent that 
creates uncertainty and could severely undermine the confidence of 
participants in this lengthy and complex process.
    Because we only just became aware of the September 21st hearing and 
consideration of S. 2070, we have not yet had time to discuss our 
concerns with Senator Schumer or his staff. We look forward to 
discussing our concerns with them in the near future.

                               BACKGROUND

    Erie Boulevard Hydropower (Erie) owns the School Street hydropower 
project on the Mohawk River in New York. When its license for the 
project expired in 1993, Erie engaged in settlement talks with state 
and federal agencies, environmental and recreation groups, and other 
stakeholders to negotiate a new license. Based upon those settlement 
talks, Erie has a license application pending before FERC. In January 
2005, Green Island Power Authority (GIPA) filed a preliminary 
application with FERC to construct the Cohoes Falls hydropower project, 
which would require usurpation of the site of the School Street 
Project. In rejecting GIPA's application, the Commission concluded that 
the Federal Power Act barred it from considering a competing license 
application filed more than 13 years after the statutorily-defined 
deadline for such applications. FERC also determined that it could not 
issue a license that would require that another existing licensed 
project be decommissioned over the objection of its licensee (in this 
case, by issuing a license that would allow a new, larger dam to bury 
an older dam under water).
    We do not wish to take sides in the debate over which project would 
be a better use of the Mohawk River. GIPA claims that its proposed 
hydropower project will offer even more significant improvements that 
would benefit the environment and other public values than the 
negotiated deal arrived in the School Street settlement. If they are 
right, then it is unfortunate that they did not act at the appropriate 
time during the licensing process. Many stakeholders come in late to 
hydropower licensing proceedings with ideas or proposals that they 
believe to better represent the public interest, but they are not 
considered because to do so would invite a process with no end. And 
before anyone can accept GIPA's assertion that its application is more 
in the public interest than Erie's, the project would have to undergo 
the same level of scrutiny and evaluation as the School Street Project 
settlement agreement. But allowing this process to drag on any further 
would set a very dangerous precedent and throw licenses and settlement 
agreements into an environment of great uncertainty.

   CONGRESS SHOULD NOT ENGAGE IN HYDROPOWER LICENSING BY LEGISLATION

    When Congress created the Federal Power Commission with the passage 
of the Federal Power Act in 1920, it delegated the responsibility for 
making decisions about individual projects to an independent regulatory 
agency with the high level of expertise necessary to make informed 
decisions about how best to allocate the nation's limited number of 
sites with hydropower potential. As a result, federal hydropower 
licensing is governed by a set of rules that are generally consistent. 
These rules provide utilities and other stakeholders with a process 
that guarantees a reasonable amount of stability and certainty.
    We are worried by the idea of direct Congressional involvement in 
licensing decisions. When a piece of legislation attempts to circumvent 
FERC's rules and delegated authority--especially to benefit a single 
utility on a single hydropower project--the very stability of the 
licensing process is threatened. Once individual license applicants or 
other licensing stakeholders with political connections believe that 
they can skirt this process by asking Congress to legislate the terms 
of a hydropower license, we will be on a very slippery slope. Each 
exception further erodes the underlying stability and fairness of the 
regulatory environment.
    In order to maintain the integrity of the licensing process, 
American Rivers must object just as strongly where Congress is 
intervening in a case that may result in greater environmental 
protection as we must in a case where Congress is allowing a licensee 
to avoid those protections. As a matter of principle, American Rivers 
has opposed even minor attempts by Congress to bend or make exceptions 
to the rules of hydropower licensing. One fairly common exception takes 
the form of a preliminary permit extension,\1\ which requires that FERC 
grant a licensee additional time to commence construction of a project 
when it has missed the deadlines specified in its license. Our 
opposition is based on a simple principle: If Congress begins to 
arbitrarily extend license terms, then it might go further, requiring 
the Commission to issue a license in a case where issuing a license may 
not be justified. Or it might choose to dictate specific conditions in 
a license, even if the Commission has determined that those conditions 
are not in the public interest. Neither situation is acceptable.
---------------------------------------------------------------------------
    \1\ For example, see S. 3851, a bill which is also currently 
pending before this Committee (and to which we are opposed for the 
reasons described here).
---------------------------------------------------------------------------
    American Rivers has had many quarrels with both the hydropower 
industry and FERC and we remain strong advocates for reforms of both, 
but we cannot support the kind of piecemeal approach suggested in S. 
2070. While extraordinary circumstances may some day arise when 
American Rivers may believe that Congressional involvement at this 
level is necessary, this case does not meet that threshold.

                EXTRAORDINARY CIRCUMSTANCES DO NOT EXIST

    Proponents of this legislation have argued that extraordinary 
circumstances do exist that warrant Congressional involvement in the 
Mohawk River cases. They claim that much has happened between the 
deadline for filing a license application (which was in 1991)--an 
alternative use of the hydropower site has been conceived, community 
attitudes have changed, and economic and other conditions warrant a 
reexamination of what is in the public interest. While we can empathize 
with their perception of the situation, it does not represent an 
extraordinary circumstance worthy of Congressional intervention.
    When the Commission is unable to issue a new license for an 
existing project before its license expires, FERC issues an ``annual 
license,'' that allows the utility to operate the project under the 
terms of its original license. In many cases, an annual license gives 
utilities an opportunity to delay. If the status quo conditions are 
cheaper than the terms of a new license, then some utilities will do 
what they can to delay and maintain those original, cheaper conditions. 
This behavior is a clear abuse of the provisions of the Federal Power 
Act that guide hydropower licensing, and we encourage Congress to 
consider ways in which it might curb this practice. However, there are 
instances when annual licenses are valuable tools that give 
stakeholders the necessary time and freedom to work out differences and 
settle disputes outside of the traditional FERC licensing process that 
can then feed back into the establishment of a new license. It is this 
very set of circumstances that we find on the Mohawk River.
    The School Street project is one of dozens of licenses in New York 
that all expired in 1993. To deal with the glut of licensings, 
stakeholders reached an agreement in which the New York State 
Department of Environmental Conservation would address each of the 
relicensing applications sequentially. The School Street project was at 
the bottom of this list, and has therefore been issued annual licenses 
for the past 13 years. However, we believe that the owners of the 
School Street Project acted in good faith during those 13 years to work 
towards obtaining a license from FERC and other necessary permits from 
other federal and state agencies. If FERC had issued Erie a license for 
the School Street Project back in 1993, GIPA would find itself in 
almost the same position as it is today--unable to develop the site 
until the current license expires. They can and perhaps should argue to 
FERC that within its legal discretion, it issue a shorter license term 
since Erie benefited from 13 years of annual licenses. This would at 
least give GIPA the opportunity to compete for the contested site 
sooner.
    If Congress intends to do something about the abuse of annual 
licenses, it should look to a broader and more equitable solution.

              S. 2070 DICTATES UNREASONABLE LICENSE TERMS

    The most troubling aspect of this bill is that it dictates specific 
conditions which FERC must include in any hydropower license issued on 
the Mohawk River. Subsection (d) of the bill requires that FERC ``shall 
include the same license conditions relating to the use of affected 
waters provided in articles 32 and 33 of the license included in 
Potomac Light & Power Company, Project No. 2343, 32 F.P.C. 584, 588 
(1964).'' Those articles read as follows:

          Article 32. The right, power, and authority is reserved to 
        the United States to construct or to the Commission to issue a 
        license authorizing the construction, operation and maintenance 
        of hydroelectric project which will more completely utilize the 
        water resources of the reach of the Shenandoah River in which 
        the project is located.
          Article 33. The acceptance of this license by the Licensee 
        shall constitute its stipulation, consent and agreement made 
        upon its own behalf and upon the behalf of its successors and 
        assigns for the benefit of the United States, or the person or 
        persons hereinafter constructing, operating and maintaining 
        such more complete water resource project or his or their 
        successors and assigns that said Licensee, its successors or 
        assigns, shall surrender its license at such time as the 
        project becomes inoperative by reason of inundation by such 
        more complete hydroelectric project; provided, that Licensee 
        shall be paid the net investment in Project No. 2343 upon 
        surrender of its license; and provided further that Licensee 
        shall not be entitled to any compensation for severance damages 
        sustained by reason of inundation or destruction of the project 
        or project works of Project No. 2343.

    By legislating the specific conditions of a license, this bill 
would set a very dangerous precedent. If Congress begins to insert 
line-item provisions into licenses, then a member of Congress could 
conceivably strip--or add--environmental protections from a license 
allowing a license to never expire or require it be decommissioned. The 
result would be undermine the public's and the industry's confidence in 
the integrity of the hydropower licensing process.

 S. 2070 WILL DISRUPT A SETTLED HYDROPOWER LICENSING AND CAUSE FURTHER 
                                 DELAYS

    Stakeholders (State and federal agencies, NGOs, and others) have 
already invested significant time and resources into the relicensing of 
the School Street project, and have reached a settlement. This bill 
would throw the licensing process and settlement into chaos, despite 
years of work. By requiring FERC to consider a competing application at 
the end of the process, it would extend the period that the School 
Street project may operate under an annual license, further delaying 
the implementation of environmental improvements.
    In conclusion, we thank you for considering our perspective, and 
strongly urge you to oppose this bill at this time. If you or your 
staff have any questions or concerns regarding this testimony, I would 
be happy to discuss them.
            Sincerely,
                                            Andrew Fahlund,
                                   Vice-President for Conservation.
                                 ______
                                 
                           National Hydropower Association,
                                   Washington, DC, October 2, 2006.
Senator Pete Domenici, Chairman,
Senator Jeff Bingaman, Ranking Member,
Senate Committee on Energy and Natural Resources, Dirksen Senate Office 
        Building, Washington, DC.
Re: Statement for the Record of the National Hydropower Association 
        (NHA) on S. 2070
    Dear Senators Domenici and Bingaman: The National Hydropower 
Association \1\ writes to express its concerns regarding S. 2070, the 
Mohawk River Hydroelectric Projects Licensing Act of 2005. On September 
21st, the Committee's Water and Power Subcommittee held a hearing on 
the bill.
---------------------------------------------------------------------------
    \1\ NHA is a non-profit national association dedicated exclusively 
to advancing the interests of the U.S. hydropower industry. The 
association represents 61 percent of domestic, non-federal 
hydroelectric capacity. Its membership consists of more than 140 
organizations including public utilities, investor-owned utilities, 
independent power producers, equipment manufacturers, environmental and 
engineering consultants, and attorneys.
---------------------------------------------------------------------------
    S. 2070 would prohibit the Federal Energy Regulatory Commission 
(FERC) from issuing a new license for a hydroelectric project on the 
Mohawk River in New York if the project has been operating under annual 
licenses for 10 or more years, unless FERC issues a public notice that 
it will accept other valid license applications to develop the project 
works or the water resource, and FERC approves a license application 
with terms consistent with the legislation.
    Under the Federal Power Act, FERC is given the authority over the 
licensing of hydropower projects. The FERC regulatory regime provides a 
comprehensive process to determine necessary license terms and includes 
procedures governing competing license applications. S. 2070 would 
usurp FERC's authority in this one case, inserting the Congress into 
the middle of an ongoing licensing proceeding. Simply put, this is bad 
public policy.
    While NHA does not intervene in proceedings regarding individual 
licensees, the Association is concerned that S. 2070 sets a precedent 
for the licensing of hydropower projects that is disconcerting and 
should be carefully and deliberatively reviewed prior to Congress 
taking such a dramatic departure from practice.
    NHA believes it is inadvisable for the Congress to dictate by 
legislation hydropower licensing outcomes. FERC is the appropriate 
decision maker with the necessary expertise and experience to fully 
analyze and equitably resolve licensing issues. FERC should be allowed 
to conduct its work free from legislative intrusion. This arbitrary 
involvement would create instability and uncertainty in the licensing 
of hydropower projects.
    Over the years, NHA has advocated for regulatory and legislative 
improvements to the licensing process aimed to bring transparency, 
accountability, and equitable treatment for licensees and stakeholders. 
Responding to this call, FERC, in 2003, adopted the new integrated 
licensing process (ILP) and Congress enacted several licensing reform 
procedures in the Energy Policy Act of 2005.
    S. 2070 appears to be a step backward from these advancements and 
NHA encourages the Committee to consider the effects this intervention 
could cause. Also, American Rivers, a non-profit conservation 
organization that regularly participates in hydropower licensing 
proceedings has urged the Committee to oppose S. 2070. NBA agrees and 
respectfully urges the Committee to do the same.
    NHA appreciates this opportunity to share its views on S. 2070 and 
its potential effect on the hydropower licensing process. Please feel 
free to contact me if there are any additional questions regarding S. 
2070 or NHA's position on the bill.
            Sincerely,
                                       Linda Church Ciocci,
                                                Executive Director.
                                 ______
                                 
 Statement of Thomas P. Graves, Executive Director, Mid-West Electric 
                         Consumers Association
    The Mid-West Electric Consumers Association appreciates the 
opportunity to submit testimony on S. 3832, the ``Reclamation Facility 
Title Transfer Act of 2006.''
    The Mid-West Electric Consumers Association was founded in 1958 as 
the regional coalition of consumer-owned utilities (rural electric 
cooperatives, public power districts, and municipal electric utilities) 
that purchase hydropower generated at federal multi-purpose projects in 
the Missouri River basin under the Pick-Sloan Missouri Basin Program. 
In Pick-Sloan, power generated at Bureau multi-purpose projects is 
marketed by the Western Area Power Administration and is under long 
term contracts.
    The legislation before the committee, S. 3832, the ``Reclamation 
Title Transfer Act of 2006,'' directs the Bureau of Reclamation to 
establish criteria for the title transfer to irrigation districts and 
to recommend facilities appropriate for such transfer. In his remarks 
introducing the legislation, Senator Domenici noted that he intended to 
broaden the Bureau's current efforts, which have heretofore focused on 
single-purpose projects, to address title transfer of Bureau of 
Reclamation multi-purpose facilities as well.
    Mid-West has supported title transfer of single-purpose Bureau 
facilities in the past and will continue to do so where the proposed 
transfer is fair to federal power users. Mid-West has concerns about 
the process outlined in the legislation as it might apply to the 
Bureau's multi-purpose facilities.
    Title transfer of federal assets to the private sector is a 
complicated business. Mid-West has worked with the Bureau of 
Reclamation and irrigation projects in Pick-Sloan where there has been 
an interest in title transfer of these single-purpose projects. Single-
purpose projects have dams and reservoir storage, along with all the 
appurtenant irrigation facilities to serve the project (canals, etc.). 
There are no existing hydropower generation facilities in the project 
nor are any authorized for federal development. Recreation may or may 
not have developed around a project's reservoir.
    Nonetheless, federal power is still involved in those projects, at 
least those projects that are in the Pick-Sloan Missouri Basin Program 
(Pick-Sloan). Whatever power that may be needed to provide ``first-
lift'' of irrigation water is sold to irrigators during the irrigation 
season at the ``project use'' rate, currently calculated at 10 mills/
kWh. That rate is significantly below the firm power rate of 18.74 
mills/kWh, which is already scheduled to increase to 19. mills/kWh in 
January 2007. Where the Bureau project is not directly served by 
federal transmission, federal firm power customers also pay the 
transmission costs of the transmission to deliver that power.
    In addition, Pick-Sloan firm power customers subsidize the 
construction costs of the project through ``aid-to-irrigation.'' In 
practical terms, that means that Pick-Sloan federal firm power 
customers are responsible for repayment to the U.S. Treasury of roughly 
80% (on average) of an irrigation project's construction costs.
    These can be thorny issues, but they are not insurmountable so long 
as all parties are treated equitably.
    Mid-West not only supported but also lobbied for the title transfer 
of the Middle Loup irrigation project in Nebraska. Mid-West supported 
transfer of that project because the terms of the legislation were fair 
to all parties--both water and power users. The terms of the settlement 
called for the irrigation district to repay the U.S. Treasury the net 
remaining present value of their federal debt. Power users repaid the 
aid-to-irrigation at the net present value of that debt as determined 
by the rate-setting Power Repayment Study of the Western Area Power 
Administration. Since the transfer of the project removed ownership 
from the federal government, the irrigation district gave up the 
project-use power rate. The irrigation district was deemed eligible to 
receive seasonal Pick-Sloan power at the firm power rate. Mid-West 
supported that allocation. For Pick-Sloan firm power customers the 
critical elements to the settlement were:

   proper application of net present value to the remaining 
        federal obligations of water and power users; and
   title transfer to the irrigation project beneficiaries 
        without continued federal subsidies, including withdrawal of 
        subsidized federal power rates and transmission costs.

    Negotiations have failed in other instances where Bureau project 
beneficiaries in Pick-Sloan were attempting to transfer title while 
retaining federal benefits of the project use power rate and power 
delivery.
    Transfer of multi-purpose Bureau projects is far more complicated.
    The legislation before the committee (S. 3832) directs the Bureau 
to include four criteria that require: (1) project beneficiaries or an 
entity that the project beneficiaries approve of be willing to take 
title to the project; (2) project beneficiaries be capable of assuming 
operation, maintenance and rehabilitation of the facility if they have 
not already done so; (3) where there are multiple project beneficiaries 
they be in agreement on taking title; and (4) project beneficiaries be 
willing to assume any liability associated with the reclamation 
facility. Sec. 3(b)(A)(B)(C)(D). These are the only directions given to 
the Bureau.
    The rest of the legislation calls for:

   assessments of a variety of issues associated with a title 
        transfer, including an assessment whether stakeholders would be 
        adversely affected. Sec. 3(b)(2)(E); and an assessment of any 
        legal considerations associated with title transfer 
        Sec. 3(b)(2)(G);
   procedures for ``soliciting stakeholder involvement in the 
        transfer of title to a reclamation facility'' Sec. 3(b)(3)(A), 
        and ``involving appropriate Federal, State, and local entities 
        in evaluating and carrying out the transfer of title to a 
        reclamation facility'' Sec. 3(b)(3)(B); and
   a comprehensive list of actions that must be accomplished 
        prior to transfer and procedures to allow the Secretary to 
        address real property, cultural and historic preservation 
        issues ``in a more efficient manner'' Sec. 3(b)(4)(5).

    Mid-West believes that the legislation does not provide sufficient 
direction to the Bureau on issues relating to federal hydropower 
facilities. Assessments and procedures are certainly needed and 
important, but the legislation does not provide Congressional guidance 
on what to do with the results of those assessments.
    For example, the legislation is silent as to the treatment of 
federal power facilities, requiring no criteria and providing no 
guidance to the Bureau relating to treatment of power generation at 
Bureau facilities.
    Neither the Western Area Power Administration nor its federal power 
customers--who are, in large part, the financial engine of these 
projects--is included in the process. Instead, power interests are 
relegated to stakeholder status, where the only requirement is that 
stakeholders have been involved in the ``transfer of title to a 
reclamation facility.'' (Project beneficiaries are also included as 
stakeholders, in addition to their status as project beneficiaries.)
    The hydropower generation at the Bureau's multi-purpose projects is 
an important part of the resource mix of Pick-Sloan firm power 
customers. The rural electric cooperatives, municipal electric 
utilities, and public power districts in the region chose not to 
develop electric generation development but rather joined with the 
federal government in a partnership under the Flood Control Act of 
1944.
    Transfer of the Bureau's hydropower generation could seriously 
threaten the financial and operational viability of the federal power 
program. Federal firm power customers would be stunned to find that, 
after paying for 100% of the hydropower costs of a project 
(construction and operations and maintenance), and after paying 
hydropower's allocated share of joint costs, and after paying roughly 
80% of the construction costs of Bureau irrigation projects, and after 
subsidizing power rates to Bureau irrigation projects that the 
hydropower generation is to be transferred to a third party. In fact, 
under the terms of the legislation, federal firm power customers would 
not even be eligible to purchase those assets, unless the project 
beneficiaries, i.e. the irrigation project, agreed.
    Mid-West believes that Congress should provide specific direction 
to the Bureau to involve the Power Marketing Administration and their 
affected power customers as fully participating parties in any 
negotiations relating to federal hydropower facilities and operations 
at Bureau multi-purpose projects. Further, Mid-West suggests that the 
Power Marketing Administrations and their customers should be consulted 
while criteria that provide a clear road map on how to treat an 
enormously complicated and sensitive issue are developed.
    Thank you for the opportunity to provide written testimony to the 
Committee on these important issues. We stand ready to respond to any 
questions.
                                 ______
                                 
     Statement of Walter J. Bishop, General Manager, Contra Costa 
                             Water District

    The Contra Costa Water District (CCWD) appreciates the opportunity 
to submit testimony in support of S. 3798 introduced by Senator Dianne 
Feinstein with a request that it be amended to include an additional 
provision to address an issue associated with O&M costs for the Folsom 
South Canal, the Freeport Project and related Central Valley Project 
(CVP) facilities. The language of S. 3798 regarding the deferral of 
capital costs on the Folsom South Canal addresses only part of the 
inequitable allocation of costs associated with the operation of this 
facility. While the bill appropriately deals with relieving East Bay 
Municipal Utility District (EBMUD), Sacramento Municipal Utility 
District (SMUD) and Santa Clara Valley Water District (SCVWD) of 
capital costs for the Folsom South Canal, it does not deal with the 
allocation of annual Operations and Maintenance (O&M) costs for EBMUD, 
which are now being paid by other Central Valley Project Municipal & 
Industrial (M&I) contractors.
    This was an important issue in the CCWD/EBMUD Freeport Settlement 
Agreement. Specifically, the settlement agreement between the Freeport 
partners and CCWD in Paragraph 18 states the following:

          ``18. The parties will work together immediately after 
        execution of this Settlement Agreement on Federal Legislation 
        to:
          A. Increase Folsom South Canal Deferred Use to reflect actual 
        municipal and industrial (M&I) use and capacity needs (similar 
        to Sly Park and Sugar Pine). Revise M&I conveyance cost pool to 
        realign cost to reflect repayment obligation for contractors on 
        the basis of percentage of individual facility use.
          B. Revise M&I conveyance cost pool to realign cost to reflect 
        repayment obligation for contractors on the basis of percentage 
        of individual facility use.
          C. Include the concept of a ``stand-by'' charge in the 
        current evaluation and update of the Interim M&I Rate Policy.''

    We are disappointed that all three of the agreed to cost allocation 
issues associated with the Freeport Agreement are not addressed by this 
legislation. It has been estimated that without the implementation of 
an O&M stand-by charge assessed to the sponsors of the Freeport 
Project, over the term of the current contract other CVP M&I 
contractors will be unfairly assessed over $25 million in Folsom South 
Canal and related CVP facilities O&M charges.
    In an effort to constructively address CCWD's concerns consistent 
with the settlement agreement and enable our District to actively 
support the bill, we respectfully provide the following specific 
amendment language and request that it be considered for inclusion in 
the bill at markup:

          The Secretary of the Interior shall establish a ``stand-by'' 
        charge for the East Bay Municipal Utility District consistent 
        with the Settlement and General Release Agreement between 
        Contra Costa Water District and Freeport Regional Water 
        Authority, East Bay Municipal Utility District, Sacramento 
        County Water Agency executed in January 2004. The ``stand-by'' 
        charge shall contribute toward the annual operations and 
        maintenance expenditures of the Central Valley Project 
        allocated to the Central Valley Project municipal and 
        industrial water contractors for repayment. The ``stand-by'' 
        charge shall be implemented in the 2008 Central Valley Project 
        rate year beginning March 1, 2008.

    We believe that the inclusion of this language in federal 
legislation will bring to a conclusion the successful implementation of 
the Freeport settlement agreement. We have reviewed the Freeport 
settlement agreement and have been unable to identify any term or 
condition that is either not already completed, or near completed, 
except for the assurances described in Paragraph 18 (A-C). In fact, 
after the history of more than six years of conflict on negotiating 
resolution to the litigation on the water supply and water quality 
impacts of the Freeport Project, implementing the settlement agreement 
to date has been a model of interagency cooperation. Our respective 
Districts have completed the design of the Mokelumne pipeline and Los 
Vaqueros Pipeline Intertie Project and awarded the construction 
contract to complete that connection. The property rights necessary for 
the Intertie Project have been exchanged, the operations and 
maintenance agreement has been developed and is near completion. With 
the passage of legislation which addresses all three of the outstanding 
cost allocation issues raised in the Freeport Settlement Agreement, all 
components of the agreement will have been successfully accomplished.
    Thank you.
                                 ______
                                 
   Statement of Tage I. Flint, General Manager and CEO, Weber Basin 
                       Water Conservancy District

    The Weber Basin Water Conservancy District (District) appreciates 
this opportunity to present written testimony in support of S. 1811 to 
authorize a feasibility study to enlarge the Arthur V. Watkins dam. The 
District was created in 1950 to serve as the local sponsor to operate, 
maintain and repay the U.S. Bureau of Reclamation's (USBR) Weber Basin 
Project (Project). The District is a regional water-supply agency, 
which develops and supplies both urban and agriculture water to lands 
and municipalities within Weber Davis, Morgan, Summit and part of Box 
Elder Counties. These areas are experiencing explosive growth rates. 
Utah as a whole grew nearly 30 percent in the last decade. Some urban 
areas are growing at a rate of double digits per year. Utah, being the 
second driest state in the nation, with an average annual precipitation 
of only 13 inches per year, faces unique challenges with inadequate 
existing water supplies compounded with high growth rates and widely 
varying annual precipitation.
    The USBR has prepared an assessment of where existing water 
supplies are likely to be inadequate to meet water demands for farms, 
ranches, cities, recreation and the environment over the next 25 years. 
The greater Wasatch Front areas (including Davis, Summit and Weber 
Counties) were identified by the USBR as to where the next crisis over 
water may occur. This conflict potential was identified as ``highly 
likely'', the highest potential on the scale.
    The Arthur V. Watkins Dam, Willard Bay Reservoir, (Willard Bay) a 
major Project feature, was constructed in four planned phases. The 
first three phases were constructed between 1957 and 1964 and the 
fourth phase occurred between 1989 and 1990. Willard Bay is a vital 
water source for the Project. It stores and regulates winter power 
releases, surplus high flows originating below the upstream reservoirs, 
upstream spills, fish releases, and return flow from higher diversions. 
These flows are diverted at the Slaterville Diversion Dam built on the 
Weber River, and travel through the Willard gravity canal to Willard 
Bay.
    Willard Bay is a multiple use reservoir providing water for: a) 
irrigation of approximately 190,000 acres of project lands, b) 
municipal and industrial water for a growing population of over 500,000 
people, c) recreation; Willard Bay has one of the very highest use 
rates for recreation in the state of Utah, and d) fish and wildlife 
including the Harold S. Crane and Ogden Bay Water Fowl Management 
Areas.
    Currently, the Willard Bay water rights (Utah Water Right Number 
35-831) are approved at 250,000 Acre Feet per year. However, Willard 
Bay was constructed to capture and store only 215,000 Acre Feet. The 
difference of 35,000 Acre Feet could be stored and utilized in an 
enlarged Willard Bay. Additional storage capacity is needed to utilize 
the full Willard Bay water right. In addition, since the Weber Basin 
Project has already received Warren Act Authority to store non project 
water in an enlarged Willard Bay facility to better manage and 
coordinate water deliveries. Because of the large surface area of the 
reservoir, the additional storage capacity can be achieved by adding 
just a few feet to the height of the dam.
    The most recent drought cycle demonstrated the absolute reliance 
the District has on Willard Bay water to bridge between prolonged 
drought cycles. In each of the last five drought years, Willard Bay 
levels were lowered and used. In 2004, the water level was so low that 
extensive dredging was required to access and pump practically all the 
stored water. The reservoir was drawn down to only 10 percent of its 
capacity.
    In order to continue serving water to the growing population of the 
District and to help bridge the certain reality of future droughts, 
additional stored water in Willard Bay is vital. A study is recommended 
to investigate the feasibility of enlarging Willard Bay, Utah to 
provide additional water for the Project to fulfill the purposes for 
which the Project was authorized.


```