```

[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]

 H.R. 3981, ACCELERATED REVENUE, REPAYMENT, AND SURFACE WATER STORAGE 
ENHANCEMENT ACT; H.R. 3980, WATER SUPPLY PERMITTING COORDINATION ACT; 
      AND DISCUSSION DRAFT, TO AMEND THE SECURE WATER ACT OF 2009

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

                           OVERSIGHT HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                     COMMITTEE ON NATURAL RESOURCES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      Wednesday, February 5, 2014

                               __________

                           Serial No. 113-60

                               __________

       Printed for the use of the Committee on Natural Resources

         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov

                  U.S. GOVERNMENT PUBLISHING OFFICE
86-620                    WASHINGTON : 2015
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001

                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
            PETER A. DeFAZIO, OR, Ranking Democratic Member

Don Young, AK                        Eni F. H. Faleomavaega, AS
Louie Gohmert, TX                    Frank Pallone, Jr., NJ
Rob Bishop, UT                       Grace F. Napolitano, CA
Doug Lamborn, CO                     Rush Holt, NJ
Robert J. Wittman, VA                Rauul M. Grijalva, AZ
Paul C. Broun, GA                    Madeleine Z. Bordallo, GU
John Fleming, LA                     Jim Costa, CA
Tom McClintock, CA                   Gregorio Kilili Camacho Sablan, 
Glenn Thompson, PA                       CNMI
Cynthia M. Lummis, WY                Niki Tsongas, MA
Dan Benishek, MI                     Pedro R. Pierluisi, PR
Jeff Duncan, SC                      Colleen W. Hanabusa, HI
Scott R. Tipton, CO                  Tony Caardenas, CA
Paul A. Gosar, AZ                    Steven A. Horsford, NV
Rauul R. Labrador, ID                Jared Huffman, CA
Steve Southerland, II, FL            Raul Ruiz, CA
Bill Flores, TX                      Carol Shea-Porter, NH
Jon Runyan, NJ                       Alan S. Lowenthal, CA
Markwayne Mullin, OK                 Joe Garcia, FL
Steve Daines, MT                     Matt Cartwright, PA
Kevin Cramer, ND                     Katherine M. Clark, MA
Doug LaMalfa, CA
Jason T. Smith, MO
Vance M. McAllister, LA
Bradley Byrne, AL

                       Todd Young, Chief of Staff
                Lisa Pittman, Chief Legislative Counsel
                 Penny Dodge, Democratic Staff Director
                David Watkins, Democratic Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON WATER AND POWER

                      TOM McCLINTOCK, CA, Chairman
           GRACE F. NAPOLITANO, CA, Ranking Democratic Member

Cynthia M. Lummis, WY                Jim Costa, CA
Scott R. Tipton, CO                  Jared Huffman, CA
Paul A. Gosar, AZ                    Tony Caardenas, CA
Rauul R. Labrador, ID                Raul Ruiz, CA
Doug LaMalfa, CA                     Alan S. Lowenthal, CA
Jason T. Smith, MO                   Peter A. DeFazio, OR, ex officio
Bradley Byrne, AL
Doc Hastings, WA, ex officio

                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, February 5, 2014......................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     5
        Prepared statement of....................................     7
    McClintock, Hon. Tom, a Representative in Congress from the 
      State of California........................................     2
        Prepared statement of....................................     3
    Napolitano, Hon. Grace F., a Representative in Congress from 
      the State of California....................................     4

Statement of Witnesses:
    Ellis, Steve, Vice President, Taxpayers for Common Sense, 
      Washington, DC.............................................    16
        Prepared statement on H.R. 3981 and Discussion Draft.....    19
    Hurd, Chris, Circle G Farms, San Joaquin Valley Farmer and 
      Family Farm Alliance Board Member, Firebaugh, California...    22
        Prepared statement on Discussion Draft...................    23
    O'Toole, Patrick, President, Family Farm Alliance, Savery, 
      Wyoming....................................................     8
        Prepared statement on H.R. 3980..........................    10
    Somach, Stuart L., Attorney, Somach Simmons and Dunn, 
      Sacramento California......................................    12
        Prepared statement of H.R. 3981..........................    14

Additional Material Submitted for the Record:
    Bettner, Thaddeus, PE, General Manager, Glenn-Colusa 
      Irrigation District, Prepared Statement on H.R. 3981, H.R. 
      3980 and Discussion Draft..................................    51
    Bureau of Reclamation, Department of the Interior, Prepared 
      Statement on H.R. 3981, H.R. 3980 and Discussion Draft.....    41
                                     

 
   LEGISLATIVE HEARING ON H.R. 3981, TO DIRECT THE SECRETARY OF THE 
  INTERIOR TO ALLOW FOR PREPAYMENT OF REPAYMENT CONTRACTS BETWEEN THE 
    UNITED STATES AND WATER USERS, TO PROVIDE SURFACE WATER STORAGE 
ENHANCEMENT, AND FOR OTHER PURPOSES. ``ACCELERATED REVENUE, REPAYMENT, 
 AND SURFACE WATER STORAGE ENHANCEMENT ACT''; H.R. 3980, TO AUTHORIZE 
     THE SECRETARY OF THE INTERIOR TO COORDINATE FEDERAL AND STATE 
 PERMITTING PROCESSES RELATED TO THE CONSTRUCTION OF NEW SURFACE WATER 
 STORAGE PROJECTS ON LANDS UNDER THE JURISDICTION OF THE SECRETARY OF 
  THE INTERIOR AND THE SECRETARY OF AGRICULTURE AND TO DESIGNATE THE 
BUREAU OF RECLAMATION AS THE LEAD AGENCY FOR PERMIT PROCESSING, AND FOR 
   OTHER PURPOSES. ``WATER SUPPLY PERMITTING COORDINATION ACT''; AND 
 DISCUSSION DRAFT, TO AMEND THE SECURE WATER ACT OF 2009 TO AUTHORIZE 
  THE SECRETARY OF THE INTERIOR TO IMPLEMENT A SURFACE WATER STORAGE 
              ENHANCEMENT PROGRAM, AND FOR OTHER PURPOSES.

                              ----------                              

                      Wednesday, February 5, 2014

                     U.S. House of Representatives

                    Subcommittee on Water and Power

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to notice, at 10:01 a.m., in 
room 1324, Longworth House Office Building, Hon. Tom McClintock 
[Chairman of the subcommittee] presiding.
    Present: Representatives McClintock, Lummis, Tipton, 
Mullin, LaMalfa, Hastings, Napolitano, Costa, and Huffman.
    Mr. McClintock. The subcommittee will come to order. The 
Chair notes the presence of a quorum, which, under committee 
rule 3(e), is two Members.

   STATEMENT OF THE HON. TOM McCLINTOCK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. McClintock. The Subcommittee on Water and Power has 
taken a great deal of testimony on what needs to be done to 
break down the barriers that have stopped serious development 
of new water storage. And this hearing begins the process of 
distilling that testimony into practical legislation. We have 
two bills and one discussion draft today to begin that process.
    Droughts are not preventable. But suffering from droughts 
is preventable. Water is abundant, but it is unevenly 
distributed over time and space. We build dams to take water 
from wet years so that it is available in dry ones, and we 
build aqueducts to move water from wet areas to dry areas.
    The poster child for California's failure to do so is the 
Folsom Dam, the principal water storage for Sacramento and its 
suburbs. One million acre-feet when full, it is now nearly 
empty. Up-river from Folsom is the site of the Auburn Dam. 
Half-built in the 1970s, and then abandoned in the first Jerry 
Brown administration, it would have provided 2.3 million acre-
feet of additional storage. It would have generated 800 
megawatts of clean and inexpensive electricity for the region 
at a time when we are spending billions of dollars for levees 
in the Sacramento Delta to protect against a 200-year flood. 
Auburn, by itself, would have provided protection against a 
400-year flood. That dam, by itself, could have stored enough 
water to fill Folsom Lake nearly 2\1/2\ times.
    Well, the first bill before us today, offered by Chairman 
Hastings, should be a no-brainer. It simply allows for the 
early payment of water contracts between water districts and 
the Bureau of Reclamation in the same manner as one would 
prepay a home loan. The cash-strapped Federal Treasury benefits 
by an immediate infusion of cash, and the local districts are 
relieved of long-term interest costs and the attendant 
paperwork requirements. Right now, any district that wants to 
do so must come to Congress. And, over the past decade, five 
pre-payment bills have been signed into law for water districts 
in Nevada, Utah, Idaho, Oregon, and California. Chairman 
Hastings' legislation proposes to standardize this bipartisan 
practice.
    Second, I am pleased to join Congresswoman Cynthia Lummis 
to present H.R. 3980, the Water Supply Permitting Coordination 
Act. It comes from exhaustive testimony we took last year 
concerning the cost-prohibitive and time-consuming duplication 
of regulations and requirements by overlapping Federal agencies 
when a district is trying to construct new water storage.
    Under current law, districts must navigate a convoluted 
permitting process for the construction of new storage, in 
which a host of Federal agencies carry out a dizzying array for 
permits, decisions, and approvals, each just disjointed from 
the other, despite the fact that they are studying the same 
project in the same location, and trying to evaluate the same 
data.
    To address this senseless bureaucracy, H.R. 3980 would put 
in place a framework in which Federal agencies with permitting 
responsibilities for the construction of new water storage must 
work together, coordinate their schedules, share data and 
technical materials, and make their findings publicly 
available. The end result would be fewer delays, more efficient 
use of taxpayer dollars, and, ultimately, more abundant water 
supplies.
    Finally, the subcommittee will consider a discussion draft 
text offered by Chairman Hastings that would create a surface 
water storage enhancement program for the construction of new 
storage facilities and augmentation to existing facilities. The 
dedicated revolving account created by this program is in 
keeping with the Beneficiary Pays principle, and will, for the 
first time in a long time, recommit the Bureau of Reclamation 
to its core mission of providing abundant water supplies for 
multiple use.
    These bills are intended to advance the theory that we can 
once again return to the policy of abundance. More water 
storage equals more water for a plethora of beneficiaries, 
including the environment. I am pleased to welcome our 
witnesses here today from the Family Farm Alliance, who will 
speak to this urgent need, and have been instrumental in 
providing input for these bills.
    For years, we have been told that water conservation is the 
answer to our problems. Well, water conservation is critically 
important in managing a major drought, but it does not add to 
supply. What we are now discovering is that, by confusing 
conservation with supply, we have no way to cope with a major 
drought. If this current crisis teaches us anything, it must be 
that there is no substitute for adding supply. And these bills 
begin to restore this process for a new generation that is 
sadder and wiser for the mistakes of their predecessors.
    [The prepared statement of Mr. McClintock follows:]
     Prepared Statement of the Honorable Tom McClintock, Chairman, 
                    Subcommittee on Water and Power
    The Subcommittee on Water and Power has taken a great deal of 
testimony on what needs to be done to break down the barriers that have 
stopped serious development of new water storage, and this hearing 
begins the process of distilling that testimony into practical 
legislation. We have two bills and one discussion draft today to begin 
that process.
    Droughts are not preventable. But suffering from droughts is 
preventable. Water is abundant, but it is unevenly distributed over 
time and space. We build dams to take water from wet years so that it 
is available in dry ones, and we build aqueducts to move water from wet 
areas to dry areas.
    The poster child for California's failure to do so is the Folsom 
Dam, the principle water storage for Sacramento and its suburbs. One 
million acre feet when full--it is now nearly empty. Up-river from 
Folsom is the site of the Auburn Dam. Half-built in the 1970s and then 
abandoned in the first Jerry Brown administration, it would have 
provided 2.3 million acre feet of storage. It would have generated 800 
megawatts of clean and inexpensive electricity for the region. At a 
time when we are spending billions of dollars for levees in the 
Sacramento Delta to protect against a 200-year flood, Auburn by itself 
would have provided protection against a 400-year flood.
    That dam by itself could have stored enough water to fill Folsom 
Lake nearly 2\1/2\ times.
    The first bill before us today offered by Chairman Hastings should 
be a no-brainer. It simply allows for the early payment of water 
contracts between water districts and the Bureau of Reclamation in the 
same manner as one would pre-pay a home loan. The cash-strapped Federal 
treasury benefits by an immediate infusion of cash and the local 
districts are relieved of long-term interest costs and the attendant 
paperwork requirements. Right now, any district that wants to do so 
must come to Congress, and over the past decade, five prepayment bills 
have been signed into law for water districts in Nevada, Utah, Idaho, 
Oregon and California.
    Chairman Hasting's legislation proposes to standardize this bi-
partisan practice.
    I am pleased to join Congresswoman Cynthia Lummis to present H.R. 
3980, the Water Supply Permitting Coordination Act.
    It comes from exhaustive testimony we took last year concerning the 
cost-prohibitive and time consuming duplication of regulations and 
requirements by overlapping Federal agencies when a district is trying 
to construct new water storage.
    Under current law, districts must navigate a convoluted permitting 
process for the construction of new storage in which a host of Federal 
agencies require a dizzying array or permits, decisions, and 
approvals--each disjointed from the other--despite the fact that they 
are studying the same project, in the same location, and trying to 
evaluate the same data.
    To address this senseless bureaucracy, H.R. 3980 would put in place 
a framework in which Federal agencies with permitting responsibilities 
for the construction of new surface water storage projects must work 
together, coordinate their schedules, share data and technical 
materials, and make their findings publicly available. The end result 
would be fewer delays, more efficient use of taxpayer dollars, and 
ultimately, more abundant water supplies.
    Finally, the subcommittee will consider discussion draft text 
offered by Chairman Hastings that would create a surface water storage 
enhancement program for the construction of new storage facilities and 
augmentation to additional facilities. The dedicated revolving account 
created by this program is in keeping with the beneficiary-pays 
principle, and will, for the first time in many years, recommit the 
Bureau of Reclamation to its core mission of providing abundant water 
supplies for multiple-use.
    These bills are intended to advance the long-neglected objective of 
returning to the policy of abundance. More water storage equals more 
water for a plethora of beneficiaries, including the environment.
    I'm pleased to welcome our witnesses here today from the Family 
Farm Alliance who will speak of this urgent need and have been 
instrumental in providing input on these bills.
    For years, we've been told that water conservation is the answer to 
our problems. Water conservation is critically important in managing a 
major drought--but it does not add supply. What we are now discovering 
is that by exhausting conservation measures in wet years, we have no 
latitude to manage a drought when it comes. If this current crisis 
teaches us anything, it must be that there is no substitute for adding 
supply, and these bills begin to restore this process for a new 
generation that is sadder and wiser for the mistakes of their 
predecessors.
                          ______
                                 
    Mr. McClintock. With that, I yield to the gentlelady from 
California, the Ranking Member Mrs. Napolitano, for 5 minutes.

STATEMENT OF THE HON. GRACE F. NAPOLITANO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Napolitano. Thank you, Mr. Chairman, and I welcome our 
first hearing of the new year.
    The bills we are hearing today have a common theme: 
increasing our water supplies, to which we have no objection. 
And we welcome this hearing. The legislation being vetted, 
however, only looks at one side of the water issue: surface 
storage. It doesn't look at ground water, it doesn't look at 
efficiencies, water recycling, desalination, education, et 
cetera.
    It also attempts to pay for new storage through pre-
payment, a debt owed to the government on projects built over 
50 years ago. Even if this process is allowed, it is unclear 
that they would take the option to pre-pay their debt, given 
the 40 years interest-free--I would say subsidized--free 
repayment period.
    If we are looking for solutions to our water problems, and 
for certainty for our communities, then we must have full 
consideration of all our options, including underground 
storage, aquifer, or other alternatives like conservation, 
desalination, recycling, et cetera. These bills do not account 
for any other option, except for surface storage.
    The Majority want to argue that the environmental 
regulations have hindered construction of new facilities in the 
West. There is a bigger issue here, from moving from study to 
construction, and that is cost. Even if you move from study to 
construction, how can you guarantee these communities the 
billions of Federal appropriated dollars, given our budget 
deficits, that is necessary for construction? The prepayment 
legislation seeks to solve this. But, again, it is still 
unclear whether there is enough interest from irrigators to 
offset the $2 billion this legislation allows.
    The water solutions presented today will not create new 
water for decades to come, and the cost will be exorbitant. 
Water managers have already realized they cannot wait to 
compete for the limited Federal dollars, or the 10 to 20 years 
or more it will take to construct a facility before one drop of 
water is realized. They need to solve their problems now.
    For some communities that include surface storage, like 
Contra Costa District, Los Vaqueros Project, or the self-funded 
Metropolitan Water District's Diamond Valley Reservoir. Los 
Vaqueros' 60,000-feet construction is expected to be completed 
this spring, on time, on budget, and no litigation. Water 
managers are looking for projects that have limited Federal 
involvement that can produce water, I mean real water, wet 
water, on a faster scale.
    This can also be seen in 53 water recycling projects 
Congress has authorized, and since 1992 has created 680,000 
acre-feet of water in California alone. That means title 16, 
gentlemen.
    New storage, when appropriate, is not impossible. 
California is at 5.6 million acre-feet in new ground water and 
surface water storage in the last 20 years. In this 
environment, not all of the water needs in the West can or 
should be met by new storage, dams or bigger dams. New storage 
is not always the right answer or the only answer. And the same 
can be said of water recycling. We must learn to conserve, 
educate, store, and do all of the above.
    If we were serious about creating more water, we should not 
discriminate between one solution or another. All solutions 
include recycling, the conservation, desalination, the brackish 
water, education of our general public, et cetera. They should 
all be on the table. We must review all methodology, all new 
technology, anything we can, and work with all parties to 
achieve a goal of more real, wet water.
    Thank you, Mr. Chairman, and I yield back.
    Mr. McClintock. The Chair is now pleased to recognize the 
distinguished Chairman of the Natural Resources Committee, Doc 
Hastings of Washington State.

    STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Hastings. Thank you very much, Mr. Chairman. And, 
again, thank you for the courtesy of allowing me to testify at 
this subcommittee hearing.
    Today's hearing represents a major step in advancing the 
need for new water storage. For generations, legendary 
facilities like the Grand Coulee Dam in my State, have 
impounded water for multiple uses. Deserts became the most 
productive farm land in the world. Communities, rural and urban 
alike, sprouted up because of abundant water supplies and 
renewable hydropower. Cold water flows for downstream fisheries 
became year-round, rather than seasonal. Ravaging flood cycles 
were tamed, and water-based recreation allowed boats to enjoy 
all of our western waters. These are just some of the benefits 
of water storage.
    I have often talked about how existing facilities have been 
undermined by litigious groups, judicial activism, 
environmental regulations not scientifically justified, and 
bureaucracy run amok. That remains today. One can only look at 
what is happening in California. When I lived in California as 
a young man, the Central Valley and the State water projects 
played a major role in making California the Golden State.
    Now, the State is in the midst of an unparalleled and 
emergency drought situation. The lack of rainfall has caused 
this calamity, but it has been exacerbated by Federal 
regulatory actions that place the needs of a 3-inch fish over 
people. This is not only heartbreaking for those about to lose 
their livelihoods, but it is also an avoidable travesty. And if 
it can happen in California, it can happen anywhere, even in my 
Pacific Northwest.
    In my Central Washington State district, the Yakima Valley 
is the poster child for needing new surface storage. 
Conservation plays an important part in meeting our water needs 
in the valley, but farmers, communities, and environmental 
needs demand that we create new water. And, time and again, the 
numbers alone dictate the need for new storage. From day one, I 
have supported efforts to build new storage in the Yakima 
Basin, and I commend and continue to urge forward the current 
integrated plan that is currently underway.
    However, for new and expanded storage reservoirs to become 
a reality in the Yakima Valley and elsewhere in the West, there 
must be a sea-change in how the Federal Government reacts to 
new storage. The current paralysis-by-analysis approach must be 
streamlined. And we, as policymakers, must find innovative ways 
to reinvest in storage, while adhering to the Beneficiaries Pay 
Rule.
    That is exactly what these bills before us do today. I have 
taken the lead in sponsoring two of these positive solutions. 
The first would provide for a voluntary early repayment for 
existing water Federal obligations--or Federal water 
obligations by water users, and the investment of these funds 
into a new account to be used explicitly for new and expanded 
water storage capacity.
    The second is a discussion draft that would dedicate a 
portion of existing authorized funding for the Bureau of 
Reclamation into a dedicated account for more storage. These 
bills complement each other, and both are aimed at the same 
goal: identifying new sources of funds for new storage. In 
these fiscal times, it is going to require creativity and new 
ideas to achieve water solution. This is true not just for more 
storage, but also for the corresponding commitments to habitat, 
efficiency, fisheries, and other identified priorities.
    And the third bill, offered by the subcommittee Chairman, 
Mr. McClintock, provides another new common-sense solution to 
help solve the challenge of new water storage by streamlining 
Federal red tape and empowering the Bureau of Reclamation to 
facilitate timely completion of regulatory requirements.
    Now, I realize that there are many who have reservations 
about these bills, and they are entitled, of course, to have 
their views. But simply saying no, and believing that the 
status quo--that is simply not the answer to meet our growing 
needs of the West.
    Without a doubt, conservation of our existing resources is 
a must. But it is not a panacea. We cannot conserve our way to 
prosperity when we lose water to the ocean and don't have any 
water to recycle. We need to create more water storage capacity 
in the Yakima River Basin, California, and other areas 
throughout the West, not divvy up every increasingly scarce 
resources in times of changing weather patterns and growing 
human and species needs.
    We have the power to continue our progress, and that is the 
purpose of these three bills, to further build upon the premise 
of capturing water in wet times to provide for dry times.
    [The prepared statement of Mr. Hastings follows:]
 Prepared Statement of The Honorable Doc Hastings, a Representative in 
                 Congress From the State of Washington
    Thank you, Chairman McClintock, for holding this important hearing.
    Today's hearing represents a major step in advancing the need for 
new water storage.
    For generations, legendary facilities like the Grand Coulee Dam 
impounded water for multiple uses. Deserts became the most productive 
farmland in the world. Communities--rural and urban alike--sprouted up 
because of abundant water supplies and renewable hydropower. Cold water 
flows for downstream fisheries became year-round rather than seasonal. 
Ravaging flood cycles were tamed and water-based recreation allowed 
boats of all kinds to enjoy our western waters. These are just some of 
the benefits.
    I've often talked about how our existing facilities have been 
undermined by litigious groups, judicial activism, environmental 
regulations not scientifically justified and bureaucracy run amok.
    That remains today. One can only look to what's happening in 
California. When I lived in California as a young man, the Central 
Valley and State Water Projects played a major role in making 
California the Golden State. Now, the State is in the midst of an 
unparalleled and emergency drought situation. The lack of rainfall has 
caused this calamity but it has been exacerbated by Federal regulatory 
actions that place the needs of a 3-inch fish over people.
    This is not only heartbreaking for those about to lose their 
livelihoods, but it's also an avoidable travesty. And, if it can happen 
in California, it can happen anywhere--even in the Pacific Northwest.
    In my Central Washington State district, the Yakima Valley is a 
poster child for needing new surface storage. Conservation plays an 
important part of meeting water needs in the Valley, but farmers, 
communities and environmental needs demand that we create new water. 
And, time and again, the numbers alone dictate the need for new 
storage. I commend the efforts underway in the region to move forward 
on new storage.
    However, for new and expanded storage reservoirs to become a 
reality in the Yakima Valley and elsewhere in the West, there must a 
sea-change in how the Federal Government reacts to new storage. The 
current paralysis-by-analysis approach must be streamlined and we, as 
policymakers, must find innovative ways to re-invest in storage while 
adhering to the ``beneficiaries pay'' rule. That's exactly what these 
bills before us do today.
    Without a doubt, conservation of our existing resources is a must, 
but it's not a panacea. We cannot conserve our way to prosperity when 
we lose water to the ocean or don't have any water to recycle. We need 
to create more water supplies, not divvy up ever-increasingly scarce 
resources in times of changing weather patterns and growing human and 
species needs.
    I realize some may have reservations about these bills and they are 
entitled to their views. But, ``No'' and believing in the status quo 
are not answers to meet the growing needs of the West.
    We have the power to continue our progress and that's the purpose 
of these bills--to further build upon the premise of capturing water in 
wet times to provide for dry times.
    Thank you.
                                 ______
                                 
    Mr. Hastings. With that, Mr. Chairman, I thank you for the 
courtesy, and yield back.
    Mr. McClintock. Good, thank you. If there are no other 
opening statements by Members, we will move right to the 
testimony. I think all of you have been before the subcommittee 
before, you know how the lighting system works, and you know 
that your testimony in full will be printed in the record, and 
that you are limited to 5 minutes, as timed by the lights.
    And now I would like to introduce the gentlelady from 
Wyoming, Mrs. Lummis, to introduce our first witness.
    Mrs. Lummis. Thank you, Mr. Chairman. It is very much my 
pleasure to welcome Pat O'Toole from Savery, Wyoming, to the 
hearing today. Before the hearing, Pat and I were visiting, and 
he said, ``Do you know that you served in the Wyoming 
legislature with my father-in-law, George Salisbury and/or me 
for 16 years?'' And it was--Pat became a father and I became a 
mother within just a few days of each other in 1985, when we 
were in the Wyoming legislature together. And, of course, our 
children are now adults, and we are very proud of them.
    And I can tell you that George Salisbury, Pat's father-in-
law and I, and Pat and I, since the 1970s, have been working on 
water issues, and working arm in arm and hand in hand. And what 
is so wonderful about States and families is George Salisbury 
and Pat O'Toole are devout Democrats. And, of course, I am a 
devout Republican. Water transcends partisan politics, it 
transcends regions, it transcends the kinds of issues that 
divide us here in Congress.
    So, I am a little surprised to hear a hearing, like, on 
water, of all things, this precious, important resource that 
starts on a bit of a partisan tone. Water should not be a 
partisan issue. And I am so proud to have Pat here today. He 
has worked on enormously important issues involving the 
Colorado River drainage his entire adult life in a practical, 
pragmatic, smart way. His input and that of the Family Farm 
Alliance has aided our efforts to draft water storage 
legislation, and I look forward to hearing his testimony. 
Welcome, Pat.

STATEMENT OF PATRICK O'TOOLE, PRESIDENT, FAMILY FARM ALLIANCE, 
                        SAVERY, WYOMING

    Mr. O'Toole. Thank you, Mrs. Lummis and Chairman McClintock 
and Ranking Member Napolitano. It is really a pleasure for me 
to be here. This committee has been very friendly to the Family 
Farm Alliance and to us working together for many years. And it 
is so exciting to see this bill as an opportunity to look at 
what we have all experienced, as ranchers and farmers.
    I will tell you that part of the motivation right now for 
me being in DC--not only this hearing, but many of my friends 
from California are here--the Family Farm Alliance has a 
monthly conference call and an annual meeting. And in all those 
years that I have been involved, I have never felt the raw 
emotion that I feel now for my good friends from California. 
And they are in dire straits. Because, in reality--and my own 
personal experience reflects this--we really stopped doing the 
infrastructure and the planning for America for a couple or 
three decades, and it is time to reinvigorate that process.
    It is, in some ways--I talked to my wife this morning, it 
is 18 below, we have some snow on the Upper Colorado River. And 
yet, when I see the pictures of the grazing lands and the 
farmlands in California--I took a tour last fall of the Central 
Valley and the San Francisco Bay area. I am looking at the kind 
of planning that needs to happen to make not just California, 
but all of the West, the reservoir of rural growth that it has 
always been.
    I serve on several different boards. One is called AGree, 
and it is an 8-year process of looking at our food supply. The 
fact that we have to almost double our food supply over the 
next 40 years is never going to go away. We recognize that the 
numbers are just so persuasive. And the American part of that 
is crucial. And the ability to store water is crucial to that 
process.
    You know, my personal experience is that it took 14 years 
to permit a project in our valley that was crucial to us. And 
it was built in 2 years, and resulted in--in the 1990s, during 
a drought--of late water coming to our ranchers and farmers so 
that they could have late-season irrigation. But what it also 
did is created fisheries that we now have taken a value that is 
so beautiful and productive. And what we have found is a 
balance in our watershed, working together in both the 
conservation side and the production side. But the time it 
takes to permit projects is unconscionable.
    And so, the bill anticipates a process where the Federal 
system will work together. And what I saw, personally, as a 
member of the Wyoming legislature and a proponent of a project 
in our valley is that multiple bites of the apple by the 
Federal system took so much time that our project, which 
initially was a 50,000 acre-foot project became a 25,000 acre-
foot project. It was half the size it needed to be the day it 
was built. And we all know that. We are now working on a second 
project with the Wyoming water development people to look at 
the upper part of the valley.
    And in our particular case, and our family's case, it is 
going to benefit not only our irrigation, but our fishery. And 
I think that there is a revolution going on in the West right 
now. Watershed groups are forming everywhere through the Family 
Farm Alliance, which represents irrigators from the 17 States. 
It is just remarkable, how people are coming together in a very 
non-partisan way that shows the balance of the future, and that 
we realize that single-purpose dams aren't appropriate. We all 
know that. But the Federal system hasn't moved fast enough to 
take advantage of that opportunity, and I think this bill is a 
great first step to begin that process.
    And I will tell you that I am so proud my daughter, Meghan, 
who is on our conservation district board, spoke to the 
National Association of Conservation Districts the day before 
yesterday in California, talking about how a watershed can come 
together and do multiple things.
    The ability to understand how important the storage 
component is I have heard over and over and over again 
throughout the West. Strategic, small storage is going to be 
anticipated by every watershed that comes together to work 
together. The process from the Federal system has to be able to 
anticipate that. Because if we don't, the costs are 
astronomical, in terms of 5 years, 10 years, 15 years from the 
time of agreement to go forward.
    And so, I welcome this bill, and the Family Farm Alliance 
will be here to help you in any way to go forward. Thank you so 
much.
    [The prepared statement of Mr. O'Toole follows:]
Prepared Statement of Patrick O'Toole, President, Family Farm Alliance, 
                            Savery, Wyoming
          h.r. 3980--water supply permitting coordination act
    Chairman McClintock, Ranking Member Napolitano and members of the 
subcommittee:
    Thank you for the opportunity to appear before you to discuss the 
``Water Supply Permitting Coordination Act'', legislation that provides 
a critical first step toward addressing current regulatory and 
bureaucratic challenges that many times will delay or even halt the 
development of new water supply enhancement projects in the Western 
United States. My name is Patrick O'Toole, and I serve as the president 
of the Family Farm Alliance. The Alliance advocates for family farmers, 
ranchers, irrigation districts, and allied industries in 17 Western 
States. The Alliance is focused on one mission--to ensure the 
availability of reliable, affordable irrigation water supplies to 
western farmers and ranchers.
    My family operates a cattle, sheep and hay ranch in the Little 
Snake River Valley on the Wyoming-Colorado border. I am a former member 
of Wyoming's House of Representatives and I served on the Federal 
Government's Western Water Policy Review Advisory Commission in the 
late 1990s. I currently serve on the Advisory Committee for AGree, an 
initiative that brings together a diverse group of interests to 
transform U.S. food and agriculture policy so that we can meet the 
challenges of the future. I also served for 2 years on a Blue Ribbon 
Panel intended to provide leadership for a project to support the 
development of the Natural Resource Conservation Service's [NRCS] 
Program and Policy Statement as a part of the process mandated by the 
Resource Conservation Act [RCA].
    Probably most pertinent to the focus of today's hearing is my 
personal experience in working with envisioning, designing, permitting, 
and finally building new water storage projects in the West. I was 
directly involved with one project that has already been built, and I 
am currently working with government agencies, conservation groups, and 
other stakeholder interests to advance another water storage project in 
my home State of Wyoming.
    Family Farm Alliance members rely on the traditional water and 
power infrastructure built over the last century to deliver irrigation 
water supplies vital to their farming operations. Our membership has 
been advocating for new storage for over 20 years, and we have provided 
specific recommendations to Congress and the White House on how to 
streamline restrictive Federal regulations to help make these projects 
happen. Water conservation and water transfers are important tools for 
improving management of increasingly scarce water resources. However, 
our members believe these demand-management actions must be balanced 
with supply enhancement measures that provide the proper mix of 
solutions for the varying specific circumstances in the West.
    Regardless of cause, climate variability is one critical factor 
that underscores the need to develop new water storage projects in the 
Western United States. There are several reports \1\ that suggest 
existing reservoirs will not be capable of safely accepting the 
earlier, more intense snowmelt that has been predicted for many western 
watersheds. A report released in 2006 by the State of California 
predicted that climate change would result in a drastic drop in the 
State's drinking and farm water supplies, as well as more frequent 
winter flooding. The report suggested that warmer temperatures will 
raise the snow level in California's mountains, producing a smaller 
snowpack and more wintertime runoff. This means more floodwaters to 
manage in winter, followed by less snowmelt to store behind dams for 
cities, agriculture, and fish. Water resources experts in other parts 
of the West also realize that new surface water storage projects may be 
necessary to capture more snowmelt or more water from other sources.
---------------------------------------------------------------------------
    \1\ Including: California Climate Change Center, 2006--Our Changing 
Climate--Assessing the Risks to California, Summary Report. Tanaka et 
al. 2007, Climate Warming and Water Management Adaptation for 
California. Department of Civil and Environmental Engineering, 
Department of Agricultural and Resource Economics, University of 
California, Davis. May 3, 2007 Testimony Submitted on Behalf of The 
Western Governors' Association to U.S. House Committee on Science and 
Technology.
---------------------------------------------------------------------------
    Some western water managers believe there will likely be a ``rush'' 
to re-operate existing multi-purpose water storage projects to restore 
some of the lost flood protection resulting from the changed hydrology 
associated with climate change. These projects were designed to provide 
a certain level of flood protection benefits that will be reduced 
because of more ``rain-induced flood'' events. There will be a call to 
reduce carryover storage and to operate the reservoirs with more flood 
control space and less storage space. If this is done, it will even 
further reduce the availability and reliability of agricultural and 
urban water supplies.
    Further, many water users are located upstream of existing 
reservoirs. These users must then rely on direct or natural flows that 
are primarily fueled by snowmelt. In the Rocky Mountain West, snowmelt 
traditionally occurs over several months during the onset of the 
irrigation season, and thus the snowpack can be referred to as a type 
of water storage. Since conveyance systems are never 100 percent 
efficient, water is diverted, conveyed and spread on the land in excess 
of the net irrigation demand. This surplus returns to the stream and 
recharges groundwater aquifers, which augments water supplies for all 
users located downstream from the original diversion. It also supports 
valuable habitat used by migrating waterfowl. If more runoff were to 
occur during warm cycles in winter before the onset of the irrigation 
season, this not only would impact water supply availability to these 
producers by decreasing the storage capacity usually provided by the 
tempered melting of the snowpack, but would also impact the utility 
associated with the return flows from their irrigation practices. As 
the snowpack is reduced by early melting, this reduced storage capacity 
must be replaced by new surface water storage just to stay on par with 
our currently available water supplies.
    As you are all aware, actually developing new storage projects is 
much easier said than done. I testified before this subcommittee 2 
years ago about the permitting challenges I encountered in building the 
Little Snake Supplemental Irrigation Supply Project (High Savery 
Project) in Wyoming. That project was built in less than 2 years, but 
took more than 14 years to permit. My experience with the High Savery 
Project showed me that cooperative efforts are important for moving 
projects through the National Environmental Policy Act [NEPA] and other 
permitting processes. On the High Savery Project, the lead Federal 
agency wasted a great deal of time making decisions on the project and 
at times seemed unable to make decisions. These delays not only 
postponed the project, they resulted in wasted time and money. I 
believe that State agencies (in my case, the Wyoming Water Development 
Commission, or WWDC) and local project sponsors should become 
cooperating agencies in the NEPA process if possible and if not, should 
be allowed to serve on the project NEPA interdisciplinary team. The 
bill provides for inclusion of States, at the State's discretion, at 
sec. 3(c). We believe the effect of this provision would be to provide 
equal footing for State agencies with all Federal agencies, including 
contributions to and evaluation of the unified environmental document 
(which includes NEPA) at sec. 3(b)(4).
    Establishing working relationships with the agencies involved in 
the NEPA process and permitting is important to keep projects on 
schedule and to avoid costly delays and disagreements. It is impossible 
to eliminate all problems associated with permitting dam and reservoir 
projects, but good cooperation and communications between agencies and 
groups, with an understanding of each participant's expectations, will 
help in problem resolution. The primary reason the High Savery Dam was 
permitted and constructed is the persistence and perseverance of the 
Savery-Little Snake Water Conservancy District and the residents of the 
valley. The sponsor's and the State's staying power prevailed in the 
end.
    Clearly, the existing procedures for developing additional water 
supplies need to be revised to make project approval less burdensome. 
By the time project applicants approach Federal agencies for permits to 
construct multi-million dollar projects; they have already invested 
extensive resources toward analyzing project alternatives to determine 
which project is best suited to their budgetary constraints. However, 
current procedure dictates that Federal agencies formulate another list 
of project alternatives which the applicant must assess, comparing 
potential impacts with the preferred alternative. These alternatives 
often conflict with State law. We appreciate that this subcommittee had 
explored opportunities to expedite this process and reduce the costs to 
the project applicant.
    For these reasons, the Family Farm Alliance supports the ``Water 
Supply Permitting Coordination Act, which authorizes the Secretary of 
the Interior to coordinate Federal permitting processes related to the 
construction of new surface water storage projects on Department of the 
Interior and Department of Agriculture lands and to designate the 
Bureau of Reclamation as the lead agency for permit processing. This 
``one-stop shop'' bill is a concept we have long advocated for. We 
support the current bill, and appreciate the provisions in sec. 5(a) 
that ensure the ``cooperating'' Federal agencies, some with very 
different mission statements from the Bureau of Reclamation, must 
actually buy into the process and work with the lead agency to 
accomplish the goals and purpose of the legislation by directing strict 
adherence to the project schedule established by the lead agency 
(Reclamation), including the coordination of all Federal agency reviews 
under sec. 4(a)(3). The bill, in sec. 3(a) also provides broad 
authority and responsibility to the lead Federal agency to coordinate 
all Federal reviews related to a project. We believe this definition 
includes Fish and Wildlife Service responsibilities under the 
Endangered Species Act [ESA]. Under this definition, all facets of an 
ESA review would be included (biological assessments, incidental take 
statements, and section 10 permits, and likely section 7 consultations 
as well). We ask that additional clarity may be provided on inclusion 
of ESA related processes by adding the word ``consultation'' to the 
bill language.
    Another concern relates to the high costs of environmental review. 
These types of reviews are expensive and often can be beyond the reach 
of most water associations. For example, the State of Wyoming via the 
WWDC would likely become a cooperating agency under this bill. The WWDC 
typically conducts many environmental, hydrologic feasibility studies/
analyses to make certain that the project being studied has a good 
chance of successfully navigating the NEPA/permitting process. We 
recommend that provisions be made within the bill whereby Reclamation 
accepts sound scientific/technical studies for review whenever 
submitted by the applicant. These analyses could be incorporated in 
Reclamation's review and subsequently reduce review time and costs when 
complying with NEPA and other Federal environmental law/regulations.
    Finally, we recommend that the bill include language with specific 
reference to non-Federal State and local projects that could be 
integrated with the operation of federally owned facilities. We want to 
ensure Reclamation is the lead agency in the case of permitting a non-
federally built storage project that has a direct Federal nexus with a 
Reclamation project--i.e. Sites Reservoir (California)--where it will 
be integrated into the Central Valley Project operations but (as 
proposed by the local Joint Power Authority) remain a non-federally 
developed and owned facility.
    The Family Farm Alliance will continue to work with Congress and 
other interested parties to build a consensus for improving the Federal 
regulatory and permitting process. A major reason the Alliance 
continues to push for improved water storage and conveyance 
infrastructure is not to support continued expansion of agricultural 
water demand (which is NOT happening in most places), but to mitigate 
for the water that has been reallocated away from agriculture toward 
growing urban, power, environmental and recreational demands in recent 
decades. If we don't find a way to restore water supply reliability for 
western irrigated agriculture through a combination of new 
infrastructure, other supply enhancement efforts, and demand 
management--our country's ability to feed and clothe itself and the 
world will be jeopardized. Thank you again for this opportunity to 
testify before the subcommittee, and I stand ready to answer any 
questions you may have.
                                 ______
                                 
    Mr. McClintock. The Chair is pleased to recognize Mr. 
Stuart Somach, Attorney at Somach, Simmons and Dunn, based in 
Sacramento, California.
    Welcome back.

 STATEMENT OF STUART L. SOMACH, ATTORNEY, SOMACH, SIMMONS, AND 
                  DUNN, SACRAMENTO, CALIFORNIA

    Mr. Somach. Thank you, Mr. Chairman and Mrs. Napolitano, 
members of the committee. I apologize for my voice; I had some 
vocal chord surgery about 2 weeks ago, and it just takes time 
to heal. So I hope you can hear me as I address you.
    My law practice focuses on water and environmental law, and 
in particular, it focuses on reclamation law, and always has. I 
have been practicing for about 35 years, and I practice in 
California, Nevada, Oregon, Arizona. I have represented the 
State of Arizona, and I currently represent the State of Texas, 
all on matters related to reclamation and reclamation law.
    I have reviewed all the legislation, and I think all of it 
is good, and I think it is appropriate, and I think that, in 
some form, that type of legislation needs to move forward.
    I actually, parenthetically, noted Mrs. Napolitano's 
statement about Los Vaqueros Reservoir. That construction is 
actually on a second phase of the reservoir enlargement. I did 
all of the environmental permitting, the water rights, I 
negotiated the reclamation contracts associated with Los 
Vaqueros, and I agree that is a perfect example of the kind of 
project that can be done and can move forward. I do remember, 
however, that funding of that project was a significant issue. 
The first phase was funded primarily through bonds. Subsequent 
phases have also included bond money and also money that came 
from the Federal Government in the context of CALFED monies.
    And I think that the bill that I am most interested in 
right now, which is Mr. Hastings' H.R. 3981, has a provision, I 
think, that will assist in what I believe to be one of the most 
significant impediments to single-purpose projects funded 
locally, and that is, quite frankly, the significant problems 
with the cost of funding that, unlike Metropolitan, smaller 
districts, particularly in the North, don't have the kind of 
base that will allow for the type of rates that could repay 
those types of loans. So that the alternative to having the 
Federal Government or the State government come in and pay for 
these facilities is to have some kind of a loan program at 
lower, perhaps, interest rates in order to facilitate the 
construction of those projects while still allowing repayment.
    The early repayment provisions of H.R. 3981 I will tell you 
I have been personally interested in since I represented the 
Bureau of Reclamation in the late 1970s. It always seemed to me 
peculiar that there was no provision for early repayment. When 
I mentioned to my wife that I was going to be testifying here, 
and what I was going to be testifying to, she--and the Chairman 
mentioned the no-brainer quality of the early repayment 
provision--she was just astounded when I told her that, 
actually, you can't repay Reclamation loans. And her view--my 
view, quite frankly--is that early repaying a non-interest loan 
to the Federal Government has got to be a good deal. And 
critics of the so-called subsidy--and I don't want to get into 
that right now--but the easiest way to eliminate the so-called 
subsidy is to have people early repay.
    And people will early repay. And, in fact, there is a 
history of that. And I note in my written testimony that I was 
very much involved in what became the Southern Oregon Bureau of 
Reclamation Repayment Act of 2005, and that came out of the set 
of facts that it was not unique to southern Oregon. It was a 
situation where one of my clients wanted to go public, and were 
told by their bonding entities that, because of SEC 
regulations, they would have to disclose all of the reporting 
requirements and limitations associated with reclamation law.
    And luckily, we were able to work through legislation that 
allowed for the early repayment in that case. And I will say 
that the early repayment was not insignificant. This entity 
owned lands in three Reclamation districts in southern Oregon. 
And the total amount of money that they came out of pocket for 
in order to early repay was $250,000, a quarter of a million 
dollars, which could then be shifted, under this legislation, 
as seed money for a storage fund.
    This redirection of Federal dollars is also something I had 
been involved with. That was how we resolved, in Arizona, the 
dispute with the Federal Government, by redirecting dollars 
from repayment to other facility payment. Thank you very much.
    [The prepared statement of Mr. Somach follows:]
 Prepared Statement of Stuart L. Somach, Attorney, Somach Simmons and 
                      Dunn, Sacramento California
 h.r. 3981--accelerated revenue, repayment, and surface water storage 
                            enhancement act
    Mr. Chairman and members of the committee, my name is Stuart L. 
Somach. I am an attorney with the law firm of Somach Simmons & Dunn, 
located in Sacramento, California. We represent clients in California, 
Arizona, Texas, Oregon and Nevada on a variety of issues and matters, 
including those involving water and the environment. I have testified 
before this committee, and other House and Senate committees, on 
numerous issues and legislation, including hearings dealing with the 
Coordinated Operations Agreement, the Endangered Species Act, the 
Central Valley Project Improvement Act, and various versions of so-
called ``CALFED'' legislation. I also worked on legislation, which 
became the Southern Oregon Bureau of Reclamation Repayment Act of 2005 
(Pub. L. 109-138). That legislation deals with issues similar to those 
that are presented in the instant legislation. Most recently, on June 
4, 2012, I testified before this committee on a predecessor to the 
current legislation.
    Prior to entering private practice in 1984, I represented the 
United States and the United States Bureau of Reclamation, first as an 
attorney within the Solicitor's Office in Washington, DC, and in 
Sacramento, and then as an Assistant United States Attorney and a 
Senior Trial Attorney within the United States Department of Justice. 
This representation included both transactional work, such as 
negotiation of Reclamation contracts, providing legal advice on the 
interpretation of various aspects of and questions about Reclamation 
law, as well as working on and advising the Bureau of Reclamation on 
``regulatory'' compliance matters, including matters associated with 
the Reclamation Reform Act of 1982 [RRA]. My work in the United States 
Attorneys Office and with the Department of Justice involved 
representation of the United States in litigation involving the Bureau 
of Reclamation and Reclamation law.
    Since entering private practice I have represented clients west-
wide on a wide variety of issues associated with Reclamation law. This 
has included transactional work, as well as providing legal advice on 
various aspects of Reclamation law, including compliance with the 
provisions of the RRA. I have also litigated a great number of cases 
involving Reclamation law. For example, I intervened on the side of the 
United States on behalf of Reclamation Contractors West-wide in an 
attempt to defend the Bureau of Reclamation's rules and regulations 
implementing the RRA. I also represented clients before the Ninth 
Circuit Court of Appeals and the United States Supreme Court in Orff v. 
United States of America, Case No. 03-1566, which dealt with 
significant aspects and provisions of Reclamation law. I also 
represented the Central Arizona Water Conservation District in a 
significant piece of litigation challenging the way the Reclamation law 
was being applied to the Central Arizona Project [CAP]. Fundamental to 
that litigation and to its resolution was the CAP's repayment 
obligation and the allocation of funds once those dollars were repaid 
to the United States.
    I am currently lead counsel for the State of Texas in an Original 
Action in the United States Supreme Court. State of Texas v. State of 
New Mexico and State of Colorado, No. 141 Original. That litigation 
involves the 1938 Rio Grande Compact and the Rio Grande Reclamation 
Project.
    Matters dealt with in H.R. 3981 ``Accelerated Revenue, Repayment, 
and Surface Water Storage Enhancement Act'' have been of long-standing 
interest to me. How repayment is accomplished and the underlying policy 
issues associated with the repayment obligation are fairly fundamental 
to Reclamation law. I last grappled with these issues in 2004-2005 on 
behalf of clients in southern Oregon who wanted to take their business 
``public'' through stock offerings.
    The business involved the growing and selling of ``gift fruit.'' 
Most of the fruit orchards were irrigated with non-Federal water, but 
some fields were located within irrigation districts that received 
water from Bureau of Reclamation facilities (or facilities that had 
been enlarged by the Bureau of Reclamation) and were thus subject to a 
repayment obligation and all of the reporting and other requirements of 
the RRA. The clients did not understand Reclamation law and, more 
importantly, because of the various SEC regulations, most, if not all, 
of the RRA requirements would need to be disclosed as part of the stock 
offering. The clients were advised that these disclosures would cause 
the stock to be under-valued because they held out the potential for 
those with large holdings to be forced to fill out the RRA repayment 
forms. This was complicated by the potential of institutional buyers 
holding stock in other companies that were subject, in some way, to 
Reclamation law and the reality that stocks are bought and sold every 
day and the impossibility of attempting to keep up with the reporting 
requirements under those circumstances.
    In attempting to resolve this problem I exhausted every possible 
administrative remedy. Some within Reclamation were very helpful, but 
in the end they could not provide a solution. As a consequence, we 
worked on a legislative solution that ultimately was enacted in 
Southern Oregon Bureau of Reclamation Repayment Act of 2005 (Pub. L. 
109-138). That legislation, of course, provided for early repayment by 
districts or individuals within districts of their repayment 
obligations. This, then, allowed relief from many provisions within the 
RRA, including the reporting requirements which were plaguing my 
clients.
    At the time we were assisting in the development of Public Law 109-
138, I argued that the provisions should not be limited to southern 
Oregon, but should be applied on a west-wide basis. For various reasons 
not at all related to the question of repayment, there was a great deal 
of resistance to this broader effort. Because my clients had very real 
and immediate needs, I did not press the issue, and we were able to 
obtain needed relief through Public Law 109-138.
    Since that time I have represented numerous clients affected by the 
various reporting requirements associated with the RRA. In my view, 
these requirements add burdens that increase operating and other costs 
without, in most cases, providing a material benefit to anyone. In one 
example, when a landowner and the United States had entered into a 
water right settlement contract, RRA requirements were triggered 
because 600 acre feet of water out of an in excess of 50,000 acre feet 
of ``settlement'' contract water were denominated as reclamation 
project water. The ability to early repay the dollars associated with 
these 600 acre feet of water would greatly benefit the landowners 
involved and provide relief from many of their RRA obligations.
    I believe that reform of the repayment provisions of Reclamation 
law is needed and is good policy. In this context, for the most part, 
the United States has already expended the capital costs for Federal 
reclamation projects and facilities. In most cases those expenditures 
were made decades ago. Moreover, the irrigation component of these 
repayment obligations are interest free. Indeed, there has been a great 
deal of criticism about this so-called ``subsidy.'' While I could spend 
pages explaining and supporting the policy decisions behind this 
``subsidy,'' the fundamental reality is that if the Reclamation 
Contractor is able to ``pre-pay'' or ``early pay'' its capital 
reimbursement obligation, this ``subsidy'' is eliminated. For any 
number of reasons, therefore, early payment should be facilitated and 
encouraged. H.R. 3981 ``Accelerated Revenue, Repayment, and Surface 
Water Storage Enhancement Act,'' of course, does this.
    I also believe that the provisions of H.R. 3981 ``Accelerated 
Revenue, Repayment, and Surface Water Storage Enhancement Act,'' that 
deal with the establishment of a Water Storage Account are good 
additions to the bill. I do not think that any rational person can 
argue that additional surface water storage is not needed in the West. 
The water that would have been available from additional water storage 
facilities would certainly be of great value in California right now.
    In addition to the obvious environmental issues that need to be 
addressed in developing new surface water storage, issues associated 
with costs and financing loom large as impediments to putting these 
facilities online. Providing funding through what is, in essence, the 
recycling of Federal dollars, is an efficient way to begin to tackle 
this problem. Proceeding in this manner, among other things, allows 
non-Federal entities to obtain financing for water storage projects 
without the need for the United States to appropriate new Federal 
dollars for this purpose. It also insures that dollars that were once 
invested to assist in water development continue to work for that 
purpose.
    This type of funding mechanism is not new. I was involved in a 
similar re-direction of repayment dollars associated with the Central 
Arizona Project (Arizona Water Settlements Act of 2004, Pub. L. No. 
180-451, 118 Stat. 3478) which has worked very well and has served to 
advance broad public policy goals, again without the need to 
appropriate new dollars for this purpose.
    The provisions of H.R. 3981 ``Accelerated Revenue, Repayment, and 
Surface Water Storage Enhancement Act'' take into account numerous 
important aspects of Reclamation law in an appropriate fashion. Among 
these are:

     Allows for the conversion of certain contracts that are or 
            are in the nature of ``water service contracts'' to 
            ``repayment contracts.'' The use of water service 
            contracts, as opposed to repayment contracts, is, for 
            example, common in the Central Valley Project. It is of 
            note that most, if not all, of these water service 
            contracts provide for their conversion to repayment 
            contracts. However, these contractual provisions provide no 
            practical way for this to occur. The draft legislation 
            provides this needed detail.
     Adds the concept of ``accelerated repayment'' or 
            ``repayment'' without penalty to the early full payment of 
            the repayment obligation.
     Captures mechanisms for the collection of capital costs 
            incurred after the date of the contract or appropriate 
            ``rate schedule'' on an expedited basis up to $5,000,000, 
            with alternate means to insure repayment of amounts in 
            excess of $5,000,000.
     Eliminates the benefit of power revenues to those who 
            proceed under the provisions of this legislation.
     Allows the Contractor to determine how best to pre-pay, if 
            it uses alternate financing mechanisms to do so.
     Insures that the early or accelerated prepayment will not 
            affect the repayment obligations of any other Contractor or 
            any other obligations among or between the United States 
            and Contractors.
     Provides an adjustment in case this is needed once a 
            project's ``final cost allocation'' is completed.
     Insures continued compliance with Reclamation law and 
            relevant RRA requirements, but eliminates various 
            limitations and requirements, including the reporting 
            requirements of the RRA.
     Insures that all costs, including operation and 
            maintenance costs, properly payable but not otherwise 
            captured in the prepayment or accelerated payment, remain 
            an obligation that must be fulfilled by the Contractor.
     Provides that prepayment dollars be redirected and 
            deposited into a Surface Water Storage Account to fund or 
            provide loans for the construction of surface water 
            storage.
     Allows for cooperative agreements between the Secretary 
            and water users' associations to facilitate funding and 
            construction of surface water storage, thereby providing 
            needed flexibility with respect to surface water storage 
            development.
     Provides for repayment of the dollars loaned from the 
            Surface Water Storage Account back into that account so 
            that these funds can be used again for the purpose of 
            facilitating financing for surface water storage projects.

    I believe all of these provisions to be appropriate. Enactment of 
this legislation will provide a comprehensive means for those who 
desire early repayment to do so. It, of course, also avoids the 
``piecemeal'' legislative process that has been used in the past. It 
also provides a mechanism to assist in the financing and development of 
surface water storage without adding new Federal budget related 
pressures.
    I appreciate the opportunity to testify here today and would be 
happy to answer any questions you might have now, or to provide 
additional information if requested.
                                 ______
                                 
    Mr. McClintock. Thank you, Mr. Somach. The Chair is next 
pleased to recognize Mr. Steve Ellis, Vice President for 
Taxpayers for Common Sense, based in Washington, DC.

STATEMENT OF STEVE ELLIS, VICE PRESIDENT, TAXPAYERS FOR COMMON 
                     SENSE, WASHINGTON, DC

    Mr. Ellis. Thank you. Good morning, Chairman McClintock, 
Ranking Member Napolitano, members of the subcommittee. Thank 
you for the invitation to testify on the Accelerated Revenue, 
Repayment, and Surface Water Storage Enhancement Act, and the 
subcommittee's discussion draft to create a surface water 
storage enhancement program. I am Steve Ellis, Vice President 
of Taxpayers for Common Sense, a national, non-partisan budget 
watchdog.
    And, before I begin, Chairman McClintock, we may disagree a 
little here, but TCS appreciates your strong leadership that 
you have exhibited in tackling wasteful subsidies, and we look 
forward to working with you on that again in the near future.
    The first half of H.R. 3981 is virtually identical to a 
committee discussion draft that I testified on in June 2012. 
The issues that I raised at that time, both positive and 
negative, remain today. In fact, the Government Accountability 
Office is studying some of those issues. And when that 
assessment is released--hopefully in the next couple of 
months--some questions regarding the number of potential 
contractors benefiting from this legislation will be answered, 
and there will be case studies of prepayment deals that have 
already occurred, such as the one that Mr. Somach discussed.
    I would like to concentrate my testimony on issues 
presented by the new surface water storage programs created in 
H.R. 3981, and the discussion draft. But, before going to that, 
I would like to make some brief, overarching comments about 
Congress revisiting Reclamation water contracts and accelerated 
repayment legislation.
    We agree that Congress should take a fresh look at the 
underlying contractual relationships between Federal taxpayers 
and the recipients of water from Federal reclamation projects 
across the 17 Western States. This century-old goal of using 
subsidized water projects and other means to encourage 
settlement and development of arid western lands has been met 
and exceeded. But current epic drought conditions in California 
underscore the challenge created by these century-old 
subsidies, and the questionable policy perpetuating them.
    The connection between the price of a commodity like water 
and the level of demand and efficiency of use of such a 
commodity is based on--based relative pricing is well 
documented. It is time for Congress to examine whether taxpayer 
subsidies should be ended in favor of more market-based 
pricing, where prices would represent the true cost of 
developing and delivering water supplies, and send price 
signals that encourage efficiency and use west-wide.
    On the accelerated repayment legislation, we are concerned 
about the one-size-fits-all approach. Past legislation 
addressing project prepayment has involved a congressional 
judgment regarding project-specific changes. This legislation 
abdicates congressional oversight, leaving the decision 
regarding repayment changes entirely in the hands of water 
users. For larger projects, this might lead to a confusing 
variation among the water recipients in a single project or 
unit of a project.
    Congress, in 1982, expressly prohibited accelerated 
prepayment of capital, since it could undo the policy goal of 
preventing large-scale operations from gaining access to fully 
subsidized water. The Reclamation Reform Act of 1982 included 
numerous pricing reforms to protect taxpayers, discourage 
large-scale operations from receiving subsidies intended for 
small farms, encourage increased water conservation, and 
increase revenues to the government. H.R. 3981 would undo the 
accelerated prepayment prohibition, while failing to protect 
the taxpayer or mitigate this dramatic change in Federal law.
    A few questions should be answered. How will projects be 
operated, going forward? Does this draft contemplate a 
permanent commitment to water delivery to existing contractors 
without renegotiation of key contract terms? Specifically, what 
happens to the negotiation of water quantity terms as shorter-
term water service contracts become permanent contracts, simply 
by conversion and prepayment.
    Again, I am not against this legislation specifically, I 
just want--think there are some important questions that the 
Congress needs to address.
    As I noted earlier, the major difference between the 
current accelerated repayment legislation and the discussion 
draft from 2012 is this creation of the surface water storage 
enhancement program and reclamation surface storage account, 
which is also the subject of the discussion draft legislation 
that is being considered at this hearing. Together, these 
provisions would direct a portion of the revenue from 
prepayment of contracts and $400 million a year for 5 years 
into a separate, non-appropriated account in the Reclamation 
fund.
    Taxpayers for Common Sense strongly opposes this approach 
to funding water storage projects. Especially with the country 
running deficits in excess of $500 billion and more than $17 
trillion in debt, no spending should simply be put on 
autopilot. Furthermore, the drafts again fall into the trap of 
requiring repayment in accordance with existing reclamation 
law. Any investments in new water storage projects should be 
structured to not subsidize water use based on the 1902 
reclamation model.
    In addition, aside from general-purpose statements, neither 
piece of legislation establishes any criteria or metrics to 
evaluate what projects should be prioritized for construction. 
These bills require no mandated cost benefit analysis, no 
directions or limitations on what the Bureau can consider. As 
drafted, this account appears to be little more than a slush 
fund for the administration, a $2 billion slush fund--a more 
than $2 billion slush fund, in fact.
    Water storage projects should be subject to vigorous 
administrative and congressional oversight. TCS has long 
advocated that Congress establish a prioritization system with 
criteria and metrics that would objectively determine what 
projects should be authorized and funded. With this type of 
system, Congress could hold the administration accountable, 
adjust the metrics and criteria necessary, and not cede power 
to the administration or relapse into ear-marking funds on the 
basis of political muscle, rather than project merit.
    Taxpayers for Common Sense supports investing in our 
country's infrastructure in a targeted, prioritized way. We 
urge the committee to re-evaluate the legislation and address 
the issues and questions raised today.
    Thank you. And again, thank you for the opportunity to 
testify on this legislation. I would be happy to answer any 
questions you might have.
    [The prepared statement of Mr. Ellis follows:]
Prepared Statement of Steve Ellis, Vice President, Taxpayers for Common 
                         Sense, Washington, DC
 h.r. 3981--accelerated revenue, repayment, and surface water storage 
enhancement act and a discussion draft of legislation creating surface 
                   water storage enhancement program
    Good morning Chairman McClintock, Ranking Member Napolitano, 
members of the subcommittee. Thank you for the invitation to testify on 
the Accelerated Revenue, Repayment, and Surface Water Storage 
Enhancement Act, which would enable certain Reclamation water 
contractors to accelerate repayment of their existing Bureau of 
Reclamation contracts. I will also comment on the subcommittee's 
discussion draft to create a Surface Water Storage Enhancement Program. 
I am Steve Ellis, Vice President of Taxpayers for Common Sense, a 
national non-partisan budget watchdog.
    With one notable exception, the accelerated repayment legislation 
is virtually identical to a committee discussion draft that I testified 
on in June 2012. The issues that I raised at that time--both positive 
and negative--remain true today. In fact, the Government Accountability 
Office is studying some of those issues and when that assessment is 
released--hopefully in the next couple of months--some questions 
regarding the number of potential contractors benefiting from this 
legislation will be answered and there will be case studies of 
prepayment deals that have already occurred.
    The notable exception and the discussion draft legislation creating 
a Surface Water Storage Enhancement Program present a new set of 
questions. But before going to that, I would like to make some 
overarching comments about Congress revisiting Reclamation water 
contracts and comments on the accelerated repayment legislation.
                 revisiting reclamation water contracts
    With regard to the overarching question, we agree that Congress 
should take a fresh look at the underlying contractual relationships 
between the Federal taxpayers and the recipients of water from Federal 
Reclamation projects across the 17 Western States. As Taxpayers for 
Common Sense and numerous government agencies and outside experts have 
frequently observed, the heavily subsidized Reclamation program has 
often led to unintended impacts in the management and use of scarce 
western water supplies. Those impacts extend far beyond the impacts on 
the Federal treasury, which have also exceeded anything that could have 
been contemplated at the creation of the program more than a century 
ago.
    It is amply clear that the policy justifications initially provided 
to launch the Bureau back in 1902, and even those used to justify 
various revisions of the Reclamation program in more recent decades, 
have often ceased to make sense under modern conditions. For example, 
it is entirely clear that the goal of using subsidized water projects 
and other means to encourage settlement and development of arid western 
lands back in the early 1900s has been met and exceeded. California, 
for instance, has more than 30 million residents, a large and vibrant 
agricultural industry, and one of the largest economies in the world. 
Perpetuating Federal taxpayer subsidies for California agribusiness 
based on the original Reclamation model ignores 100 years of history 
and today's reality of water shortages and Federal deficits. And to the 
extent that the legislation under consideration today could be taken to 
lock-in the water allocations made by existing contracts, that 100-
year-old thinking could determine California's water use for centuries.
    Current conditions in California underscore the challenge created 
by these century-old subsidies, and the questionable policy of 
perpetuating them. California is suffering from a drought of historic 
proportions. Water availability is so limited that the State Water 
Project, which runs parallel to Reclamation's Central Valley Project, 
has announced that it will be able to make no water deliveries this 
year. When anything, be it water or widgets, is this scarce, 
subsidizing its use makes little economic sense. Market forces will 
normally lead to price increases and reduced use--creating new 
subsidies or perpetuating old ones will simply lead to increased demand 
and distorted allocation.
    The time has come to reexamine the interest subsidy, and other 
intended or unintended subsidies, embedded in the Federal reclamation 
program. Water scarcity in the arid West and the likelihood of further 
shortages are driving numerous changes in State and local water policy. 
The connection between the price of a commodity like water and level of 
demand and efficiency of use of such a commodity based on relative 
pricing is well documented. It is time for Congress to examine whether 
taxpayer subsidies should be ended in favor of more market-based 
pricing, where prices would represent the true costs of developing and 
delivering water supplies and send price signals that encourage 
efficiency in use west-wide.
                         accelerated repayment
    On the accelerated repayment legislation, we are concerned about 
the one-size-fits-all approach to complicated issues that vary from 
water service contractor to water service contractor. Past legislation 
addressing subsidies and project prepayment has involved a 
congressional judgment regarding universal rules that would affect all 
Reclamation project subsidies, or project-specific changes. This 
legislation creates a system that abdicates congressional oversight 
leaves the question of the breadth of repayment changes entirely in the 
hands of water users, who could opt in. For larger projects this might 
lead to a confusing variation among the water recipients in a single 
project or unit of a project.
    Apart from this basic policy question, the legislation provides 
pluses and minuses for the taxpayer. At the most basic level, taxpayers 
would be receiving their repaid cash sooner. In my testimony from last 
Congress, I also noted that the bill appears to eliminate an outdated 
and often-criticized subsidy by which power customers have cross-
subsidized irrigation based on a perceived ``inability to pay'' by 
those irrigation users. This old loophole in the Reclamation program 
allowed costs to be shifted away from those receiving valuable 
irrigation water, instead of requiring them to conserve more, transfer 
some of their water supplies to other purchasers, or otherwise make 
necessary adjustments so they can repay their allocated costs. On 
closer reading of the language in the current draft, the outcome rests 
on what cost allocation is stated in the contract--this should be 
clarified to state simply that no power subsidy will be allowed.
    One the other hand, the bill completely fails to eliminate the 
largest and most broadly criticized subsidy of all: the interest-free 
repayment of the capital investments. In fact, rather than finally 
collecting interest from irrigators who have overly benefited from this 
huge subsidy program, the discussion draft appears to lock in this 
subsidy permanently. It then compounds the subsidy by reducing the 
amount to be repaid by calculating it based on ``net present value,'' 
as if the loan program had represented true market-based financing by 
private sector entities and had not already provided major benefits to 
recipients. Considering that most water contractors are local water 
districts entitled to Federal interest-free financing, the taxpayers 
will end up subsidizing them again through tax-free bonds if they 
finance the lump-sum prepayment.
    The bill appears to offer various other benefits to water 
contractors, such as permanently waiving all Federal acreage 
limitations intended to limit taxpayer subsidies for large 
agribusinesses. The Reclamation program was initially intended to 
benefit small family farms of 160 acres or less. After numerous 
documented abuses of that limit Congress expanded the limit to 960 
acres in the 1980s, while insisting on firmer enforcement and higher 
water prices to farms above that size. This draft would eliminate the 
acreage limit altogether for those opting for pre-payment.
    Congress in 1982 expressly prohibited accelerated prepayment of 
capital, since it could completely undo the policy goal of preventing 
large scale operations from gaining access to fully subsidized water. 
The Reclamation Reform Act of 1982 [RRA] included numerous pricing 
reforms to protect taxpayers, discourage large scale operations from 
receiving subsidies intended for small farms, encourage increased water 
conservation, and increase revenues to the government. The proposed 
legislation would undo the accelerated prepayment prohibition while 
failing to include any corresponding reforms to compensate or otherwise 
protect the taxpayer or mitigate this dramatic change in Federal law.
    Finally, in the case of municipal and industrial Reclamation 
contracts where some modest interest rates have been charged over the 
past several decades, it is not completely clear how the ``net present 
value'' formulation in the bill will handle the interest charges that 
would otherwise be paid. As we read the legislation, some of that 
interest that would otherwise have been paid to the government could be 
lost. In addition, for the largest and therefore wealthiest of the farm 
operations in the Reclamation program, those who were required by 
Congress in 1982 to start paying interest charges for all water 
delivered above the 960 acres, the prepayment of capital costs and 
elimination of all acreage limits could mean that the taxpayers 
permanently forgo those interest payments. The large-scale operations 
would get to keep their full supply of subsidized water, and the 
intended protections for smaller businesses with less than 960 acres 
would be removed permanently without any countervailing benefits or new 
protections.
    At the June 2012 hearing, I raised several questions that should be 
answered before the accelerated repayment legislation should move 
forward. Some or all of these may be answered in the ongoing GAO study, 
and I would encourage the committee to get the benefit of their insight 
before moving this legislation forward. The questions I raised were:

     How many projects in the Reclamation Program would be 
            affected? Under Reclamation law, water is most often 
            delivered to irrigators under section 9(d) contracts, which 
            include terms to repay allocated project costs (without 
            interest) or under section 9(e) contracts, which provide 
            water based on the cost of service on an interim basis 
            before project completion. The bill refers to ``water 
            service contracts'', which is a term of art in Reclamation 
            law and is defined in the draft bill to refer only to 
            section 9(e) of the 1939 Reclamation Act (i.e. for 
            irrigation water). But only a limited number of Reclamation 
            projects actually use 9(e) contracts instead of the more 
            widespread 9(d) repayment contracts.
     What will be the likely effect of the bill on the Central 
            Valley Project in California? The CVP is the largest 
            Reclamation Project and the site of some of the largest 
            farms and biggest subsidy controversies in the program. But 
            it also has one of the largest concentrations of 9(e) 
            contracts. Would the bill enable 9(e) contractors to 
            convert to 9(d) contracts, accelerate payment of capital, 
            and buy their way out of all acreage limitations by taking 
            advantage of current commercial borrowing rates that are at 
            all-time lows?
     How will projects be operated going forward? Does this 
            draft contemplate a permanent commitment to water delivery 
            to existing contractors without renegotiation of key 
            contract terms?
     Specifically, what happens to the negotiation of water 
            quantity terms if shorter-term water service contracts 
            become permanent contracts simply by conversion and 
            prepayment? In the CVP, the Reclamation program is faced 
            with over-appropriated rivers and intense competition for 
            supplies. When contracts expire, the government has the 
            opportunity to reduce the quantity term of the new renewal 
            contracts and, in fact, the Bush administration did just 
            that when some of the CVP contracts expired in recent 
            years. But when will such right-sizing of contract amounts 
            occur if there is no such negotiation for renewal contracts 
            and instead existing contracts are simply converted to 
            permanent agreements? While the ``reasonable use'' 
            requirements of Federal and State law allow such 
            reductions, the Bureau of Reclamation rarely (if ever) has 
            used that authority to reduce the quantity term in an 
            existing contract.
               surface water storage enhancement program
    As I noted earlier, the major difference between the current 
accelerated repayment legislation and the discussion draft from 2012 is 
the creation of the Surface Water Storage Enhancement Program and the 
Reclamation Surface Storage Account, which is also the subject of the 
discussion draft legislation that is being considered at this hearing.
    Together, these provisions direct a portion of the revenue from 
prepayment of contracts and $400 million per year for 5 years into a 
separate non-appropriated account in the Reclamation Fund. Taxpayers 
for Common Sense strongly opposes this approach to funding water 
storage projects.
    Any revenue generated by pre-payment of contracts should be 
returned to the Treasury and should be subject to congressional 
oversight and appropriation. Especially with the country running 
deficits in excess of $600 billion and a more than $17 trillion debt, 
no spending should be simply put on auto-pilot. Furthermore, the drafts 
again fall into the trap of requiring repayment in accordance with 
existing Reclamation law. Any investments in new surface water storage 
projects should be structured to not subsidize water use based on the 
1902 reclamation model.
    In addition, aside from general purpose statements, neither piece 
of legislation establishes any criteria or metrics to evaluate what 
projects should be prioritized for construction. There is no mandated 
cost-benefit analysis, and no direction or limitations on what the 
Bureau could consider. As drafted this account appears to be little 
more than a slush fund for the administration. A more than $2 billion 
slush fund.
    Water storage projects should be subjected to vigorous 
administrative and congressional oversight. After a feasibility study 
recommendation, Congress should make the decision whether or not to 
authorize the projects and then whether to appropriate funds for them. 
TCS has long advocated that Congress establish a prioritization system 
with criteria and metrics that would objectively determine what 
projects should be authorized and funded. With this type of system 
Congress could hold the administration accountable, adjust the metrics 
and criteria as necessary, and not cede power to the administration or 
relapse into earmarking funds on the basis of political muscle rather 
than project merit.
    Taxpayers for Common Sense supports investing in our country's 
infrastructure in a targeted, prioritized way. We urge the committee to 
re-evaluate the legislation and address the issues and questions raised 
today. Again, thank you for the opportunity to testify on this 
legislation and I would be happy to answer any questions you might 
have.
                                 ______
                                 
    Mr. McClintock. All right, thank you for your testimony. 
The Chair is next pleased to introduce Mr. Chris Hurd of Circle 
G Farms from Firebaugh, California, to testify. Welcome to 
Washington.

 STATEMENT OF CHRIS HURD, CIRCLE G FARMS, FIREBAUGH, CALIFORNIA

    Mr. Hurd. Good morning, and thank you so much, Chairman 
McClintock, Ranking Member and members of the committee, and 
all of you that have gathered. I bring a message today from my 
family farm. I come to talk about the hardship in California. I 
come to endorse the storage, the proposed bill that we have 
before us. And I come to lay at your need for leadership in 
fixing discretionary changes in the existing law and helping us 
continue to survive in the West.
    I am a fourth-generation family farmer on the west side of 
the San Joaquin Valley in California, farming almonds, 
pistachios, row crops. I am entirely operating under the 
Central Valley Project for 32 years. My wife and three sons and 
I are involved heavily in it, daily. Today I represent the 
Family Farm Alliance, as does Pat O'Toole, my friend, which is 
a grassroots organization with one mission: that is to keep the 
water going, secure and affordable, to western farms and 
ranches.
    H.R. 3980 would go a long way to helping us secure some 
additional storage, flexibility for the future. And we strongly 
support that. Storage is what built the West, but it has been 
skewed from its original intent. Certainly Congressman Hastings 
put it very well, that things have changed. Maybe we need to 
review those thoughts.
    In California, we have a current drought, but we have had 
them before, such as 1977, 1978, and a 5-year drought in 1987 
to 1992. Now, the last 25 years have seen layers of regulations 
taking our contracted water off of the land. We started last 
year, 2012, 2013, with above-average storage. But that system 
was operated to drain the water for fish and water-quality 
issues. Today there is no water in California in the system 
storage. And, even if it rains, it won't help us if the 
regulatory crisis isn't fixed, and the system is to be run with 
human imbalance consideration.
    We cry out for the leadership needed, non-partisan. 
Thousands of us California farmers have invested millions of 
dollars in conservation. Family farms, 5,000, 10,000 of us out 
there, are working the land to stay in business. We are aware 
of the conservation, we live it day to day.
    The water bill on my ranch has gone, in 5 years, from $300 
an acre to $1,800 an acre. The months of July, August, and 
September see 10 to 15 truckloads a minute going by my ranch, 
which borders Interstate 5, carrying grapes, almonds, 
pistachios, onions, garlic, row crops, 300,000 to 400,000 tons 
every 24 hours, feeding the world from safe, reliable food that 
we are producing.
    Certainly our country must be proud of our production, 
which equates to the U.S. consumers only spending 7 to 8 
percent of their disposable income for food, while our 
neighbors overseas are spending 20, 30, and 40 percent for 
their food supply.
    Hardship abounds in California right now. Most irrigation 
districts are facing a zero allocation for 2014. Schools are 
closing. My wife, a reading specialist, was laid off of a small 
community school, and the school was closed. Vendors are going 
broke. Tens of thousands of people are unemployed at the 
moment. There are food lines forming. This is not a reality 
show; this is happening.
    Federal agencies implementing ESA and the Clean Water Act 
must be held accountable, under the law, to help move more 
water. The cavalier attitude of the agencies implementing the 
ESA is ruining the West, currently. Are we so arrogant or 
foolish that we think depression, mass unemployment, and food 
shortages cannot happen in this country again, that we will 
always be able to produce the food, enough food for an 
exploding population? Maybe we should ask our parents or 
grandparents, who helped build the current systems that we so 
enjoy.
    Bluntly, I will say this. Putting ideology and partisanship 
ahead of public service is failure. California needs its 
elected representatives in Congress to provide the leadership, 
show courage and vision, and fix the problem now. Is the United 
States going to be a viable Ag producer in a volatile world, or 
not? Stop the bickering and serve the people now. Thank you, 
and I would appreciate any questions. I stand ready to speak 
with you. Thank you.
    [The prepared statement of Mr. Hurd follows:]
 Prepared Statement of Chris Hurd, Circle G Farms, San Joaquin Valley 
  Farmer and Family Farm Alliance Board Member, Firebaugh, California
        discussion draft, to amend the secure water act of 2009
    Chairman McClintock, Ranking Member Napolitano and members of the 
subcommittee:
    Thank you for the opportunity to appear before you to offer 
comments on the importance of water storage projects and related 
legislation intended to provide new opportunities to develop these 
projects. My name is Chris Hurd, and I serve on the board of directors 
of the Family Farm Alliance. The Alliance advocates for family farmers, 
ranchers, irrigation districts, and allied industries in 17 Western 
States. The Alliance is focused on one mission--to ensure the 
availability of reliable, affordable irrigation water supplies to 
western farmers and ranchers.
    Water users represented by the Family Farm Alliance use a 
combination of surface and groundwater supplies, managed through a 
variety of local, State, and Federal arrangements, to irrigate 
productive agricultural lands in the West. For the most part, however, 
many of our members receive their primary irrigation water supplies 
from the Bureau of Reclamation (Reclamation). In essence, we are 
Reclamation's customers. western family farms and ranches of the semi-
arid and arid West--as well as the communities that they are 
intertwined with--owe their existence, in large part, to the certainty 
provided by water stored and delivered by Reclamation projects. That is 
why we support the discussion draft bill under consideration today that 
would amend the Secure Water Act of 2009 to authorize the Secretary of 
the Interior to implement a surface water storage enhancement program, 
and for other purposes.
    I am a managing partner of Circle G Farms in California's San 
Joaquin Valley. My 1,500 acre family farm operation produces almonds, 
pistachios and row crops. I graduated from Cal Poly San Luis Obispo in 
1972 with a degree in mechanized agriculture. I am president of the San 
Luis Water District and a long-time board member of the Family Farm 
Alliance. My wife Anne and I have three sons.
    The increasingly complex Federal regulatory structure, and the 
increasingly expensive and protracted processes which this structure 
encourages, makes obtaining and sustaining water supplies increasingly 
difficult for both agricultural and municipal users alike. For the 
farmer or rancher, the current Federal water allocation and 
reallocation schemes in some areas of the West often create chaotic 
economic conditions, a sense of disillusionment and resignation, and 
uncertainty. Nowhere is the uncertainty of water supplies greater than 
where I live, in California's San Joaquin Valley (Valley) from the 
Federal Central Valley Project [CVP].
    Severe water shortages caused by the combination of Federal 
fisheries restrictions and drought on water supplies to the western 
side of the Valley forced hundreds of thousands of acres of farmland to 
be fallowed in 2009. University of California experts estimate that the 
combined effects of these restrictions on the water supply have cost 
Central Valley agriculture nearly $1 billion in lost income and more 
than 20,000 lost jobs. In 2009, water users that depend on the Federal 
Central Valley Project [CVP] received only 10 percent of the water they 
contracted to receive, the lowest allocation in the history of the 
project. We have calculated that without these Federal restrictions, 
the allocation would have been 30 percent. The U.S. Department of the 
Interior increased the allocation of water for south-of-Delta CVP 
agricultural water service contractors in 2010 to a whopping 25 percent 
of our contract. Last year, that same allocation was 20 percent of our 
contract. This year, even if we end up with average hydrologic 
conditions this winter, we face a ZERO allocation, and implementation 
of Federal laws such as the Endangered Species Act [ESA] and Clean 
Water Act [CWA] is a primary reason for this grim scenario.
    Certainty in western water policy is essential to the farmers and 
ranchers I represent, and that is why a suite of water conservation 
practices, improved water management, water transfers, and other demand 
reduction mechanisms must be balanced with proactive and responsible 
development of new water infrastructure. New storage projects must be 
part of that mix, and creative ways to finance those projects are 
needed.
    Title II of the Rural Water Supply Act of 2006 (Pub. L. 109-451) 
authorized a loan guarantee program for rebuilding and replacement 
costs of water infrastructure within Reclamation that would leverage a 
small amount of appropriated dollars into a large amount of private 
lender financing available to qualified Bureau-contractor water 
districts with good credit. In other words, the Congress has given the 
authority to Reclamation to co-sign a loan to help their water 
contractors meet their contract-required, mandatory share of rebuilding 
and replacement costs of federally owned facilities. Given this 
scenario, it is incredible that Reclamation loan guarantees, a long-
awaited critical financing tool for water users across the West, are 
now being held up because of incorrect interpretations of Federal 
policy by the Office of Management and Budget [OMB].
    The Family Farm Alliance will continue to work with Reclamation and 
OMB to implement this program and to investigate opportunities to 
develop similar loan guarantee programs that can help fund new water 
infrastructure projects. We stand ready to work with the committee and 
will look for its support as we work with the administration to find 
ways to leverage funding to meet even more needs for both aging and new 
water infrastructure projects.
    The discussion draft bill provides another creative financing 
mechanism. It would amend the Secure Water Act of 2009 to authorize the 
Secretary of the Interior to implement a surface water storage 
enhancement program. Such a program does not exist today, yet demand 
for new sources of water from storage has grown tremendously over the 
past two decades. The bill would authorize the Secretary to construct 
surface water storage and to enter into cooperative agreements with 
water users associations for the construction of surface water storage 
that would benefit agriculture and other water-dependent sectors of the 
economy in the West. This draft bill would establish in the Treasury of 
the United States an account to be known as the `Reclamation Surface 
Water Storage Account' which would be used to pay for surface water 
storage projects over a 4-year period using a total of $400,000,000 of 
revenues that would otherwise be deposited in the Reclamation fund. By 
making these funds available for investment in new surface water 
storage projects, to be repaid over time, the growing needs for new 
water supplies in the West could be met while protecting the jobs and 
communities so dependent on water for their very existence.
    We support this discussion draft bill, although additional detail 
would improve it. One of the areas that require further clarification 
include the terms of repayment, and the manner in which projects would 
be selected and how funds are allocated. Also, the bill is not clear on 
who would get funding support and on what basis the Federal agency can 
or will determine who receives said support. Possibly, the bill could 
direct the Bureau of Reclamation to develop a proposal on how they 
would administer funding and loans made available by the bill, working 
with the contractors and storage project proponents, and report back to 
Congress on a final set of program policies and guidelines within a set 
period of time.
    As a side note, the Board of Directors of the Family Farm Alliance 
in 2005 launched an aggressive and forward looking project that pulled 
together a master data base of potential water supply enhancement 
projects from throughout the West. While many of these supply 
enhancement projects include projects like canal lining and piping, 
reconstruction of existing dams, and regional integrated resource 
plans, the report also identifies some potentially beneficial new 
multipurpose surface storage projects. The benefits from these projects 
include providing certainty for rural family farms and ranches, 
additional flows and habitat for fish, and cleaner water and energy. We 
would be happy to utilize this tool to assist the subcommittee in 
developing a quick assessment that might provide a sense of which 
proposed storage projects in West are ready to apply for this funding, 
and how far the anticipated funding amounts would stretch. While making 
up to $400 million available to build new projects is a great start, 
realistically we may be only able to fund a few new projects. But, we 
believe this is a significant beginning toward advancing new surface 
water storage projects in many areas of the West.
    People like me who live and work on the west side of the San 
Joaquin Valley have disproportionately borne the costs associated with 
actions under the Endangered Species Act [ESA] to protect fish species 
that occupy the Sacramento-San Joaquin River Delta. These costs are 
astounding. And they extend well beyond the farmer's gate. These costs 
extend to our local communities--impacting the tax base, unemployment 
and social support programs--all the way to the consumer in the form of 
higher prices for food. The bill, by allowing for the expansion of 
surface storage by financing the construction of new water storage 
projects, could reduce these high costs associated with reallocating 
water away from agriculture and municipal needs by restoring certainty 
to critical irrigation and city water supplies and meeting 
environmental needs in the process.
    For instance, the costs for water supplied by the Bureau of 
Reclamation to irrigate orchards on my farm near Firebaugh over the 
last 5 years have grown from $300 per acre to $1,800 per acre, per 
year. We are facing a potential ZERO water allocation this year. For a 
farmer trying to make business decisions, some of which may implicate 
family, farmworkers, neighbors and community for the next 30 years, 
this is an impossible situation. It's the kind of thing that leads to 
extreme financial and emotional stress felt by farmers who don't know 
if they will still be in business in 5 years. It becomes harder and 
harder to simply hang on when our most important input, our irrigation 
water, has become the biggest unknown in our farming operations.
    Some of the real costs of these decisions are on the people in our 
community: Schools are closing, vendors are going broke, tens-of-
thousands of workers are unemployed, food lines are forming, and family 
relationships are strained. In my situation, eight people who would 
otherwise be employed now don't have work because I could not hire them 
due to the lack of water. That may not seem like much, but mine is one 
of almost 4,000 farms in the San Joaquin Valley suffering from chronic 
water supply shortages due in part to Mother Nature this year, but also 
due to regulatory decisions made by the Federal agencies in previous 
years. In big cities, maybe these numbers aren't considered important, 
but in our small, rural, often disadvantaged communities, where one of 
four workers is unemployed, they are vital. Towns, once thriving, are 
now shells.
    Will this discussion draft bill help my farm this year? No, it will 
not; but we must consider how many droughts we need to go through 
before our ability to grow our Nation's food supply is imperiled beyond 
repair. We must start managing water in California (and across the 
Western United States) to meet the future needs of humans and their 
communities, and not just the environment. That includes better 
managing our current water supplies for multiple needs (including 
agriculture), and by developing new storage projects that will allow 
the greater flexibility we will need to meet the challenges of a 
drought year like this one in the future. It also means applying the 
Federal discretion allowed by the Federal Endangered Species Act [ESA] 
and other Federal laws in a way that maximizes water supply for human 
uses without imperiling species. The ESA was also not intended to avert 
environmental disaster by creating other disasters. The ESA is a 
reality, but the manner in which it is being applied is not utilizing 
any of the flexibilities inherent to the act, or in consideration of 
the collateral human disasters that are being caused through such 
Federal decisionmaking. Lawmakers and policymakers must use their 
leadership positions to help give agency implementers the tools to 
understand that it's not all just about mathematics and science, that 
there are truly human costs associated with their decisions. We believe 
there is flexibility built into the ESA that must employed in 
situations like ours that do the least harm to our communities.
    Are we so arrogant or foolish that we think depression, mass 
unemployment and food shortages cannot happen here again; that we will 
always be able to produce enough food for an exploding global 
population? Maybe we should ask our grandparents and our parents, whose 
hardships led to the foresight to build our existing reservoirs, canal 
systems and other infrastructure we enjoy today, and upon which our 
quality of life depends, whether or not these costs are justified. Our 
generation must step up and continue to develop our water resources to 
better meet our future needs, including those of our environment, and 
this water storage discussion draft bill would go a long way in helping 
us in that endeavor. Thank you for the opportunity to testify today, 
and I would stand for any questions the subcommittee may have.
                                 ______
                                 
    Mr. McClintock. Thank you for your testimony. We will now 
move to questions of witnesses. Each of the Members is also 
bound by the 5-minute limit. And I will begin with Mr. O'Toole.
    You mentioned that, on a dam in your neck of the woods, it 
took 14 years to go through the paperwork process, and only 2 
years to actually construct the dam. Did I hear that correctly?
    Mr. O'Toole. Yes, sir, that is accurate.
    Mr. McClintock. What does that do to the cost of the dam?
    Mr. O'Toole. Well, as I said in my testimony, not only did 
the costs increase appreciably, but the project itself went 
from 50,000 to 25,000 acre-feet. And so, to meet the Federal 
specifications that I think you are addressing in this bill in 
a much more user-friendly way, where the State actually can 
build what it needs to build, it is not only a money cost, it 
is a time cost.
    And, as I said in my testimony, the ability, as soon as it 
was built, to have those irrigators be able to have late water 
in a drought was just crucial, and at the same time maintaining 
a vibrant fishery. So, I think that the answer to your question 
is it is a money deal.
    In Wyoming, we created--let me expand just a little bit. We 
had two 50,000 acre-foot reservoirs that are still authorized 
in Congress that were not funded. And that was in the 1970s 
that changed. So the 14 years doesn't include all that time.
    Mr. McClintock. Well, as I said, we have a 2.3 million 
acre-foot dam in Auburn----
    Mr. O'Toole. Yes, sir.
    Mr. McClintock [continuing]. That was federally authorized, 
and was actually half constructed before it was canceled in the 
mid-1970s, during that same period when our public policy 
shifted from one of abundance to one of shortage and rationing.
    We are just told that the costs are prohibitive on these 
projects now. And I look at the Hoover Dam and all the other 
magnificent dams during the Roosevelt years. They weren't cost-
prohibitive. The cost of construction has not increased to a 
point where it is cost-prohibitive, so something else is going 
on. Is that the regulatory burden that is now attached to these 
dams?
    Mr. O'Toole. Chairman McClintock, that is absolutely 
accurate. And what we have found is that the process is so 
expensive to go--as I said earlier, the bit of the apple. It is 
multiple bites of the apple by the agencies. And so, not only 
do you go through one process with Fish and Wildlife, EPA, 
Corps of Engineers, and others, you do that multiple times. So 
your bill and the bill that is anticipated by this committee 
would change that----
    Mr. McClintock. So that is the difference, then, is that in 
those days, when we were constructing these massive reservoirs, 
we didn't have to go through the costly and time-consuming 
paperwork that is now required by the modern bureaucratic 
state, and the result was these dams were not only cost-
effective, they were magnificently cost-effective, and 
producing a cornucopia of benefits, not just water, but also 
hydroelectricity, flood control, and recreational resources 
down through generation after generation. And that is what this 
generation has now blocked by its bureaucracy. Is that 
accurate?
    Mr. O'Toole. Yes, sir. And I would tell you that the 
anticipation of use of water is the envy of the world.
    Mr. McClintock. By the way, I am told that private 
financing would not be a problem for constructing new dams, if 
there was some degree of certainty, and if the money wasn't 
bled away by a multi-year, sometimes multi-decade, process of 
bureaucratic delay. They say, ``Look, these dams store a lot of 
water.'' That is a very valuable thing to do. They generate 
lots of hydroelectricity; that is very valuable. They provide 
flood control to entire regions, and they produce magnificent 
recreational resources, all of which are valuable. And 
investments would not be a problem, if there was some certainty 
in the process. Is that accurate?
    Mr. O'Toole. Yes, sir, Mr. Chairman. And I will tell you 
that Representative Lummis was in the Wyoming legislature when 
they created a concept of funding renewables--water, 
government, education, wildlife--with non-renewables. And that 
funding mechanism is the State's money. That was what was so 
frustrating. It was the State's water, the State's money. And 
this 14-year process was just--it was very antagonistic, and it 
was not correct. And I think what you are anticipating is a 
much more user-friendly process.
    Mr. McClintock. Thank you. Mr. Ellis, however we may 
disagree on the details of financing, wouldn't it be a good 
idea to bring these costs down by streamlining the regulatory 
process?
    Mr. Ellis. Well, Mr. Chairman, I am not an expert on the 
regulatory process, and that is why my testimony concentrated 
on the other bills. But my understanding is that your bill is 
being based on----
    Mr. McClintock. But your organization is based on the 
claim--usually quite well-honored--that you want to reduce 
unnecessary government costs.
    Mr. Ellis. Yes, absolutely, and----
    Mr. McClintock. Wouldn't you think it is a good idea to 
reduce unnecessary government costs in the construction of 
these facilities, however they might be financed?
    Mr. Ellis. Absolutely, Mr. Chairman.
    Mr. McClintock. Thank you. The Chair recognizes Mrs. 
Napolitano for 5 minutes.
    Mrs. Napolitano. Thank you, Mr. Chair, and it is good 
information.
    You know, you may think I am not for farms, and I am not 
for storage. I am. It has been one of the hallmarks of sitting 
on this committee for 16 years, is that we need to find a way 
to work collaboratively. You are right. Put politics aside. But 
when we don't get a bill until last week to be able to 
determine what is in it, I don't call that working on a 
bipartisan basis, so that we can be able to look at what is 
being proposed and how it is being proposed.
    So, there are many things I could tell you, but my time 
will be running low. So, Mr. Somach, you mentioned the surface 
water storage. And we are really talking about dams, right?
    Mr. Somach. Yes.
    Mrs. Napolitano. Right. Which is something that my Chairman 
has been advocating for as many years as he has been in 
Congress, that I know of. Can you give me, just very quickly, 
just a synopsis, the approximate cost of building dams, small, 
medium, or large, just a offsite figure? How much time would it 
take to site, obtain permits, build a dam? How long before one 
drop of water is stored? How long before it is filled? And how 
long before one drop of water can actually be realized for 
farms?
    Mr. Somach. Let me give you an example----
    Mrs. Napolitano. Quickly, please.
    Mr. Somach [continuing]. We are working on right now, and 
that is Sites Reservoir. If you compare what it will take if 
that is proceeded through, in terms of a Federal project built 
by the Federal Government, going through all the Federal 
regulations--and that process started way back because that was 
identified as a CALFED reservoir----
    Mrs. Napolitano. Quickly, sir.
    Mr. Somach [continuing]. You are looking at 2025 before you 
would be ready to construct, and then 5 years of construction. 
If we were able to cut through all of that stuff, we are 
looking at a timeline that takes us into the teens, so that by 
2025 we could be swimming in that reservoir, we can be drinking 
water from that----
    Mrs. Napolitano. And the cost?
    Mr. Somach. The cost of those reservoirs will be in the 
billions of dollars.
    Mrs. Napolitano. Right. And then we have the issues of 
being able to discuss openly and transparently what actually 
are the roadblocks, what are the things that the farms and the 
coalitions can give to us to be able to say to Bureau of 
Reclamation, Army Corps, whoever, ``These are things that need 
to be taken care of and need to be taken care of 
expeditiously.''
    Mr. Somach. I could give you a list right now for----
    Mrs. Napolitano. Yes, I know, I know. But I am just saying 
these are things we don't talk about here, OK? These are the 
things that do not go into the record.
    Mr. Somach. We could be as specific----
    Mrs. Napolitano. Would you submit into the record, sir?
    Mr. Somach. I would absolutely submit it for the record.
    Mrs. Napolitano. Thank you, sir. The other questions, sir, 
to Mr. Ellis, is you make the point that in 1902, when the West 
was formed, it was to attract farmers to the West to be able to 
feed people. The policies advocated for include 40-year 
repayments for any facility with 0 percent interest, which are 
out of date. Do you agree taxpayers should continue to 
subsidize a zero percent loan?
    Mr. Ellis. No, we don't. I think that times have changed. 
And, actually, that has changed, especially after the Central 
Valley Project Improvement Act, and some of the changes. But, 
clearly, we need to be moving toward more pricing water 
appropriately. And I am very sympathetic to the----
    Mrs. Napolitano. Yes.
    Mr. Ellis [continuing]. What is going on in the drought, 
and everything else, but I think these are important ways to 
move forward.
    Mrs. Napolitano. Mr. O'Toole, I congratulate you. My 
understanding is you have a very efficient methodology you have 
undertaken for years. And congratulations. So we talk about 
recycling water runoff, and yes, you have done a lot. So has 
southern California. We have been rying to get weaned off of 
imported water for the last almost three decades, and we are 
succeeding in that.
    But you mentioned before this committee--some time before, 
the conservation and efficiency efforts you and others in your 
State have undertaken. And today we are only finding the 
mechanism for surface storage. And my concern--not only is the 
cost, the time--it is not going to produce water tomorrow that 
is so desperately needed. But the conservations, shouldn't we 
look at funding other conservation methods as going to be 
effectively more--deliver more wet water sooner?
    Mr. O'Toole. Ms. Napolitano, I agree so much with what you 
said in your opening statement about the tools in the toolbox 
have to be varied. What I have found in my own personal 
experience is that, as you watch these watershed groups come 
together, which are made up of ranchers, farmers, 
conservationists, municipalities, they understand that is one 
of the main tools. But there are other tools.
    I have worked in my own career on cleaning water. I spoke 
in Los Angeles this year on the need for other types of 
technology. It is going to be a whole toolbox that we have to 
have. And what I think--and my experience is that this one is 
one of the easiest, and it is one of the most difficult to 
achieve. All of the toolbox has to be----
    Mrs. Napolitano. And I agree with you, sir. It just takes a 
lot more time to be able to bring all those facts out. Thank 
you.
    Mr. O'Toole. Yes, ma'am.
    Mr. McClintock. Mrs. Lummis?
    Mrs. Lummis. Thank you, Mr. Chairman. I might comment I 
have never thought about water as being a commodity. I think 
about water as being an absolute necessity. My body is mostly 
made out of water, and I don't think of myself as a commodity.
    Mr. Hurd, California currently has one of the lowest 
snowpack precipitation levels on record. California's 
precipitation levels 2 years ago were so high that reclamation 
was allowed to turn water out of dams in northern California. 
Is that true?
    Mr. Hurd. That is correct, ma'am.
    Mrs. Lummis. If additional storage had been in place, would 
some of the water that was turned out, would it have been 
available for capture, increasing storage water?
    Mr. Hurd. Yes, it would. And some of it would be there 
right now for usage by this State.
    Mrs. Lummis. So, it would allow for higher water 
allocations this year, at a time when it is needed----
    Mr. Hurd. Yes, ma'am.
    Mrs. Lummis [continuing]. Had it been stored back then.
    Mr. Hurd. Depending upon the way the system had been run.
    Mrs. Lummis. Mr. O'Toole and Mr. Hurd, what will western 
agriculture look like in 20 years, if new storage isn't built?
    Mr. O'Toole. Well, our experience--and, again, I refer to 
the 17 States that the Family Farm Alliance deals with--we all 
know that in some aquifers there is a depletion. We all know 
that we are in a climate variable State. We see our neighbors, 
you know--absolute survival is happening.
    And when I listened to some of the testimony yesterday, and 
the meetings we had here on the Hill, there are people with 
permanent crops that, this year, if they do not have water, 
they will start tearing those permanent crops out. That just 
tears your heart out, because you know, Representative Lummis, 
just as I do, those are people, those are families, those are 
multi-generational, heartbreaking experiences. And we are going 
to see more of that if we don't allow ourselves to plan for the 
future with all the tools in the toolbox.
    Mrs. Lummis. Mr. Hurd?
    Mr. Hurd. My comment is part of what my testimony was, in 
that the exploding population here and globally is depending 
upon us to feed them. And we have to have water as the tool to 
do that.
    We are smart enough, I feel, that we have already shown the 
conservation, the technology, the mindset to continue to 
improve and deliver that food. Yes, the West, 20 years from 
now, will look different. But God help us if we are not smart 
enough to seize the moment. And that moment is the water, as 
the underlying blood of all of us.
    Mrs. Lummis. Mr. Hurd and Mr. O'Toole, will conservation 
alone meet the West's water needs?
    Mr. O'Toole. You know, it is a really interesting matrix. 
And I told you, the committee, that I did a tour of California, 
and many of the Family Farm Alliance members use the most 
efficient water usage drip irrigation in the history of the 
world. The Israelis come to California to learn how to do 
irrigation. So in some places, conservation is appropriate.
    I also serve on a group called the Intermountain Joint 
Venture, which was the Western States' migratory bird group 
that oversees, through the States, how we maintain our 
populations of birds. And they have come out with a study that 
indicates that upper flood irrigation in the upper valleys of 
the West is why the bird populations are the highest they have 
been in 50 years.
    And so, you have to look at each individual. But, you 
mentioned my father-in-law. He had a saying. He said that 
resources are too important to manage generically; they must be 
managed specifically. And what that means is you go watershed-
by-watershed, and understand what is the appropriate 
technology, what is the appropriate storage, and what is the 
appropriate conservation.
    Mrs. Lummis. I was in Israel just last week, and a big 
water project, Red Sea-Dead Sea, is being contemplated to 
provide water to Jordan. And the Israelis and the Jordanese are 
working together on this, because of the precious needs of 
water for Jordan that Israel is willing to help with.
    So, even in the land where Isaac, King David, walked, Jesus 
walked, water issues and water storage issues are critically 
important right now. We should learn from not only our biblical 
predecessors, but from the people who are living there now, 
about the importance of storage and cooperating.
    Mr. Ellis, I am curious about Taxpayers for Common Sense. 
Does the Sierra Club fund Taxpayers for Common Sense?
    Mr. Ellis. No, ma'am.
    Mrs. Lummis. Who does?
    Mr. Ellis. We get money from charitable contributions from 
individuals and charitable foundations. We don't take any money 
from the government, we don't take any money from unions, we 
don't take any money from corporations.
    Mrs. Lummis. And so the Pew Charitable Trust, for example?
    Mr. Ellis. No, ma'am.
    Mrs. Lummis. Can you name some?
    Mr. Ellis. The McKnight Foundation was one. There is 
Carnegie, you know, so there is a variety of different 
charitable foundations.
    Mrs. Lummis. My time is up. Thank you, Mr. Chairman.
    Mr. McClintock. Mr. Costa?
    Mr. Costa. Thank you very much, Mr. Chairman and members of 
the subcommittee. My colleague from Wyoming's comments about 
her recent visit to the Holy Land reminds me of a couple 
thoughts. One, California and the West is going to need 
rainfalls of biblical proportions if we are going to get past 
these dry periods, which are catastrophic. And I am also 
reminded of another quote from the Bible, ``Blessed are the 
peacemakers, for they shall inherit the world.'' And we need 
some peacemakers today in California to, as Mr. Hurd indicated, 
to use some common sense and work together on a bipartisan 
basis.
    I consider myself one of those peacemakers. As difficult as 
this is, being at ground zero, where we have farm communities, 
farmers, and farm workers that have, not only in 2009 and 2010, 
experienced horrific conditions--and I am talking about levels 
of 40 to 48 percent--but now, with 13 percent of our snowpack, 
seemingly looking at perhaps the worst drought that we have 
experienced since 1977, and perhaps a mega-drought, I mean, it 
is going to be bad, not only for my area, but for the entirety 
of California.
    And I would hope, for those of us who would like to figure 
out where the middle ground is, that we use this crisis to 
understand that we have been kicking this can down the road way 
too long. We have a broken water system in California. The West 
has other, similar, related issues, but we have a broken water 
system designed for 20 million people and the farms that are 
the most productive anywhere in the world, that are the most 
water-efficient anywhere in the world, and that pay some of the 
highest prices for water that any comparative farming 
operations do anywhere in the country.
    And for the life of me, I can't understand why we have this 
attitude sometimes that pits the farmer against our urban, our 
environmental constituencies. I mean I remember the movie, 
``Oklahoma,'' where the farmer and the cattleman had a fight, 
but this is nuts. We need farmers and we need our urban 
constituencies, and we need to work together. And when you deny 
any region of California, or any region of this country, the 
ability to have water reliability, it makes absolutely no 
sense, whatsoever, to me. And that has been part of what this 
fight has been about in California for decades. This is a new 
one, by the way. I can tell you where all the political fault 
lines lie in California. They are deep and they are historic. 
And it is high time we put them aside.
    Now, on this legislation--and I will get off my soapbox 
here--that we are looking at, Mr. Somach, you have been around 
here for a long time. I think this accelerated revenue 
repayment efforts for surface water enhancement is something 
that there is plenty of precedent for, right?
    Mr. Somach. Correct. There is precedent. The early 
repayment, there is precedent. Other specific pieces of 
individual legislation that have occurred over the period of 
time, and the redirection of funds, there is also precedent for 
that. Certainly the San Joaquin River restoration legislation 
in California is an example. And, as I said in my testimony, 
the Arizona Water Rights Settlement Act was a very big----
    Mr. Costa. Well, and the drainage settlement thing that we 
are looking at----
    Mr. Somach. Correct.
    Mr. Costa [continuing]. Would offer a repayment. I mean 
there is a whole lot of precedent. This is good legislation, 
and I think we need to work on it.
    In terms of coordinating the Permitting and Coordination 
Act, let me make this local. And I don't know, Mr. Hurd, if you 
want to comment. And, Mr. O'Toole, let me thank you and the 
Family Farm Alliance, and some of your board members. We 
appreciate the good work you do, and the advocacy you provide.
    I am looking at Shasta, I am looking at Sites, I am looking 
at Los Vaqueros, I am looking at Temperance Flat, I am even 
looking at the seismic issues we are dealing with in the San 
Luis Reservoir as being opportunities to increase capacity. 
Should the Bureau fulfill their commitment this year and 
complete the studies on Shasta and Temperance Flat? I know the 
Sites is being handled more by the State.
    How far off are we, then, from determining when we could 
begin an effort on construction? And I know my time has run 
out.
    [No response.]
    Mr. Costa. Can I get the questions answered, Mr. Chairman?
    Mr. McClintock. Yes, sure, just very briefly.
    Mr. Costa. Sure.
    Mr. Hurd. I don't have an exact number, Jim. But however, 
the importance of it can't be emphasized enough. And the 
ability to move forward on these projects, instead of just 
putting on the shelf----
    Mr. Costa. I mean this is long term, of course, as we know.
    Mr. Hurd. Sure.
    Mr. Costa. That is not going to deal with our current--Mr. 
Somach?
    Mr. McClintock. We are going to do another round of 
questions.
    Mr. Costa. OK.
    Mr. McClintock. But in deference to the other Members----
    Mr. Costa. All right.
    Mr. McClintock [continuing]. I would like to move along, if 
we can.
    Mr. Tipton?
    Mr. Tipton. Thank you, Mr. Chairman, and I would like to 
echo some of Congressman Costa's statements in regards to 
water, that this shouldn't be a partisan issue. Everybody likes 
to eat and be able to have crops to be able to grow. And this 
is something that, as Americans--Mr. Hurd, you had noted, in 
terms of the importance of being able to feed America, and to 
be able to feed the world.
    In 1960, the census in the country showed that we had about 
130 million Americans. Our last census showed we have well over 
300 million Americans. That means we are going to have to be 
able to have the water for them not only to be able to bathe, 
but to be able to grow the crops for them to be able to eat. 
And probably on the conservation end of it, we do need to be 
able to have that common-sense, all-of-the-above approach.
    But it also means that we are going to have to be able to 
store more water. And we need--I come from a headwater State. 
If we step back just a couple of years ago now, in Colorado, 
the Colorado River, as I drove past it, and the Animas River, 
the San Juan and San Miguel Rivers, driving through there, were 
running high in late August, because of the great snowpack. We 
have different seasons, different times when we are going to be 
able to have those opportunities to be able to capture that 
water, and we need to be able to take advantage of that. But we 
have some challenges, I think, that many of you, in your 
testimony, are certainly speaking to.
    Mr. O'Toole and Mr. Hurd, could you describe, just briefly, 
what are the most important hurdles in moving a new storage 
project forward?
    Mr. O'Toole. Well, Mr. Tipton, the hurdles are the funding. 
In Wyoming, for example, we have adequate funding to do the 
construction on our own, although, as I mentioned, our valley, 
which is--half of it is in your district and half of it is in 
Representative Lummis's district--we had two projects that are 
federally authorized that could still be constructed, with 
funding. But the State of Wyoming has its own funding. The next 
step is going into the Federal system.
    And the Endangered Species Act clearly has made an impact 
on the analysis of the process, and I think--let's be blunt. 
The experience with the delta smelt in California is really 
almost the worst case scenario of what can happen with using 
that act in a way that was never anticipated. So I----
    Mr. Tipton. Could you maybe clarify and just remind me? 
Because when you brought up the ESA, we also have NEPA, Clean 
Water Act, a variety of different regulatory processes that are 
out there. How long was the permitting portion of this to be 
able to get to that stage to where it is ready to go and you 
just need the financing?
    Mr. O'Toole. In our case it was 14 years.
    Mr. Tipton. In 14 years.
    Mr. O'Toole. Yes.
    Mr. Tipton. The Chairman had noted it a little bit earlier. 
Has that driven up the costs?
    Mr. O'Toole. Well, I think it--as I said, it doubled the 
cost and halved the project. So it had a----
    Mr. Tipton. Doubled the cost of the project. Can you 
describe for me what type of coordination was going on between 
those different agencies to be able to try and accelerate a 
good end, having water to be able to grow crops and to be able 
to have use for our cities?
    Mr. O'Toole. Mr. Tipton, I attended many of those meetings, 
some in Denver with the EPA, some in Cheyenne, with the Corps 
of Engineers, some with the Fish and Wildlife Service. And what 
I found was there was very little coordination. It was really 
individual agencies responding. And there was a--as you know, 
there was a philosophy over the last couple decades of not 
doing storage.
    Mr. Tipton. No coordination that is going on----
    Mr. O'Toole. None----
    Mr. Tipton. Increasing costs----
    Mr. O'Toole. Virtually none, whatsoever.
    Mr. Tipton. Family Farm Alliance, Mr. Hurd, maybe you can 
comment quickly, as well. Is that a good way to run a business?
    Mr. Hurd. Well, respectfully, sir, I will tell you the 
numerous numbers of projects that are identified are certainly 
important, but think of one thing. Everything stops at the 
delta, where I live and we farm. Right next to where I live, 
there are thousands of acres in the Grasslands Water District 
for wildlife refuges. They are sitting dry right now, today. 
Los Angles Metropolitan Water District receives over about 15 
to 20 percent of their supply through the same canal systems 
that I irrigate my farm. So it is not that we are isolated, 
farmer fighting farmer. This is the whole State, as Mr. Costa 
represents.
    So, the decisionmaking on some of these funds to fund a 
particular project really should also be focused on a very 
tough issue of the delta. We, in the Ag sector, have been 
willing to step forward to--$15 to $18 billion to build the 
DHCCP project for conveyance. And yet, we get absolutely no 
assurance that, once the project would be built, we would get 
any more appreciable water. Is the bank going to loan me money 
and, for my grandchildren to pay if we build a project and 
there is no water to run through it? Let's have some direction. 
Let's have some guidance, sir.
    Mr. Tipton. Great, thank you. We are going to have another 
round, Mr. Chairman?
    Mr. McClintock. Yes, we will, sir.
    Mr. Tipton. Thank you.
    Mr. McClintock. Mr. Huffman?
    Mr. Huffman. Thank you, Mr. Chair, and thanks to the 
witnesses for traveling to be with us, and for your testimony.
    I think the drought that we are talking about is of great 
concern to all of us. And sometimes, when we discuss this in 
this body, the media and others get the perception that it is 
about one part of California, or about one sector of 
California, and it is really not. I will tell you, representing 
about a third of the California coast, the north coast, I have 
areas in my district that are hit every bit as hard or harder 
than some of the most dire situations that we have heard 
described today and that we have heard described in other 
narratives about the San Joaquin Valley.
    So, we should just stipulate, I think, at the outset, that 
we are all concerned about this drought, and that wherever you 
are in California, with a few happy exceptions, there is a lot 
of pain going on, and a lot of angst about how we are going to 
get through the summer. I have three decent-sized 
municipalities that, if it doesn't rain significantly, are 
going to run out of water in about 2 months. That is a big 
deal. They don't have other water they can buy, they don't have 
other water they can find. It is over for them. And you can't 
really fallow municipalities. So this is a bad situation, and I 
take it very seriously.
    But I am also mindful of the experience in Marin County in 
the last really scary, critical drought, 1976/1977. In the 
immediate aftermath of that there was a feeling that we needed 
to do something to protect against that in the future, that 
surface storage should be part of the mix, and we built a dam 
called Soulajule that made everybody feel pretty good because 
they built a dam. But it hasn't provided any water since, 
because it wasn't in a good location, it didn't really 
operationally fit within the system. And, frankly, after 
several decades of finally paying off the debt from that 
project, Marin is looking for other sources of water, because 
that didn't help us. It won't even really help us with any 
water this year, in the most critical drought year of record.
    So, I think we should be very careful. There may have been 
a time in California water when you built it first and then 
asked questions. I think it was Harvey Banks that said that 
about the State water project back in the day. That may have 
worked when you had a lot of low-hanging fruit in California, 
projects that you knew were going to generate large amounts of 
yield, projects that had financing in place, that had partners.
    But I don't think those are the times we are in right now. 
And we need to remember that none of the surface storage 
projects we are talking about here today will help us in this 
drought. They may not even help us in the next drought. They 
may be two or three droughts from now before they could even 
help, if they were finally brought online, because they just 
take too long to plan, construct, and finance--finance should 
probably be before construct in that sequence.
    So, I think we have to aim carefully before we shoot. And, 
in that regard, I am curious about these north-of-delta surface 
storage projects, because one of the problems we are grappling 
with--have been for years--is the carrying capacity of the Bay 
Delta. How much water can be sustainably extracted and exported 
from that system without crashing the system? And we are having 
a robust debate about that in California.
    There continue to be proposals to maintain record-high 
levels of exports, which the scientists have told us cannot be 
sustained, that we will simply run into more and more conflicts 
and litigation. And, ultimately, we need to accept the fact 
that we are going to need to export less from the delta, not 
more, in the future. That, I would argue, is one of the 
fundamental premises of the California water package of 2009.
    And so, my question, Mr. Somach--or, perhaps, to others--
is, if we are possibly facing a future where less water is 
exported from the delta, rather than more, do we run the risk 
that investing billions of dollars in new surface storage north 
of delta could create the equivalent of the Soulajule Reservoir 
that was constructed in Marin County, a big, shiny, new dam 
that everybody feels good about, but you can't move the water 
and integrate it into the system and operate it in a way that 
gives value for that investment?
    Mr. Somach. No, not at all. In fact, focusing on just 
environmental needs, just--let's forget about any export 
needs--one difference between now and the 1977 drought, for 
example, is there is 1.2 million acre-feet of outflow that is 
required that wasn't required in 1977. Where does that water 
come from in a year like that, if we don't have above-the-delta 
storage?
    The Fish and Wildlife Service and the National Marine 
Fisheries Services are saying they want to hold back in Shasta 
this year 1.7 million acre-feet for a cold-water pool. That 
didn't exist in 1977. If that occurs this year, where does that 
water come from if we don't have additional storage?
    Mr. Huffman. I am almost out of time, but have you 
calculated--what would the yield of Sites be, Mr. Somach?
    Mr. Somach. The yield itself is 500,000 acre-feet and, used 
in conjunction with Oroville, Shasta, and Folsom, it will 
increase upstream storage by another 500,000 acre-feet. So you 
are talking----
    Mr. Huffman. OK, thank you----
    Mr. Somach [continuing]. About a million acre----
    Mr. Huffman. If I can sneak in one last question.
    Mr. McClintock. Well, you can on the next round.
    Mr. Huffman. Very good, thanks.
    Mr. McClintock. In fact, you can sneak in several in the 
next round if you are brief in your opening comments.
    [Laughter.]
    Mr. McClintock. Mr. LaMalfa?
    Mr. LaMalfa. Thank you, Mr. Chairman. I appreciate the time 
and for everybody traveling here today to be on this panel.
    You know, it is an interesting argument here. But any time 
you have a project that you can store water in, you have more 
water. You have available water for some purpose. So I can't 
believe that if we build projects somewhere, enhance existing 
projects, that with additional water, whatever that yield is, 
that someone will not find a place to use it.
    So, as we see with our shortage--I look at it as buckets. 
The more buckets you have that have stored and been filled to 
capacity when we have plenty of rain, the longer you can draw 
up on it. If you have--instead of 4 gallons of distilled water 
in your garage, if you have 6, you have more water that will 
last longer. So it just seems like common sense that you build 
as many as you can in a State that needs more.
    But the difficulty is--Sites Reservoir, which is pretty 
close to my neighborhood, has been talked about, not just for 
the last 20 years, but, really, in concept, for 50 or 60 years. 
It makes you wish that back in the day, when things were easy 
to build, they just built everything, and we would still be 
enjoying these benefits. You know, California, the crisis we 
are talking about for urban areas, for Ag, even for 
environmental use that we are seeing, we haven't even talked 
about hydropower. I don't know where the electricity is going 
to come from a little bit later in the year.
    The issue is that we need to build it while the sun shines. 
When we have flush years we don't talk about water any more. 
This is the year we really need to get the public's attention 
and move these projects forward as much as possible. So the 
biggest impediment hasn't been, really, the financing; it has 
been the confidence of the people that would finance that we 
can build a project. It comes right back to the red tape.
    So, Mr. O'Toole, I would like to touch base with you on 
that. You noted that the conflicting requirements from Federal 
agencies, State agencies, and the time that it takes to do 
that, what do you think that is really doing--I mean with 
regards to Sites or any of the other ones--in cost, in time, 
lost opportunity? What does that look like? If you want to, 
emphasize that a little bit more.
    Mr. O'Toole. I had mentioned earlier, Representative, that 
I did a tour of California last fall, and went into the Bureau 
of Reclamation offices near the San Luis project, and saw the 
vision of what the Bureau of Reclamation had in California. I 
had no idea that the Shasta Dam was built with the anticipation 
of raising 200 feet. There is--reservoir was anticipated that, 
if we hadn't gone through a multi-decade let's-not-do-anything 
phase, we would have them today. And I think that is the beauty 
of this vision of the bill, is to make the system user 
friendly.
    And it is really a question of commitment. Is your 
commitment to the long term, or is your commitment to the short 
term? And my experience has been--the State of Wyoming just did 
a study, the Governor did a 2-year study. What did it come out 
and say? More storage. The Governor of Idaho last week got a 
multi-million-dollar appropriation from the legislature to do 
more storage, to raise some projects.
    So, I think the policymakers on the local levels are 
understanding how important this question is. And, again, I 
appreciate your committee looking at a solution.
    Mr. LaMalfa. What do you think, with the extended studies, 
what are we learning that we don't already know, either from 
previous projects--what new information are we turning up that 
is really going to be helpful to the public interest that we 
don't already know?
    I mean, we toured Sites Reservoir just a few years ago, 
when I was in the State Assembly. And the representative, I 
think he was from DWR, said, ``If you can't build it here, 
environmentally, you can't build it anywhere.'' What are we 
learning with these extended studies that study it, seemingly, 
to death?
    Mr. O'Toole. The Family Farm Alliance did an analysis with 
the Bureau of Reclamation a few years ago on the potential 
storage, and there are many sites that are ready to go. All 
they need is a go-forward. So I think that there is more to 
learn. In my watershed, we identified a few new places that we 
think, down the road, are going to be appropriate.
    Mr. LaMalfa. No, I am speaking of the environmental 
studies, not the engineering of where they would go. It just 
seems that they are used as tools to block projects from moving 
forward.
    Mr. O'Toole. I think, in the worst case scenarios, they 
have. But I will tell you in sort of the new world where you 
have to have the buy-in of everybody to get any projects done, 
the understanding of hydrology has been expanded, the 
understanding of wildlife benefits has been expanded. The 
purpose and need is the crucial analysis by the Government as 
to why you build. Expanding that understanding is how we are 
going to get things done faster in the future.
    Mr. LaMalfa. OK, thank you. Going back to the biblical 
reference here, I think this bill, H.R. 3980, could actually be 
like Moses parting the red tape to get the job done here.
    [Laughter.]
    Mr. LaMalfa. So----
    Mr. McClintock. Thank you.
    Mr. LaMalfa [continuing]. Mr. Chairman, I yield back.
    Mr. McClintock. We are going to go to a second round. And I 
will begin.
    There was a criticism raised earlier that these bills were 
just introduced last week and are moving very fast. I would 
point out that this subcommittee conducted painstaking hearings 
all through last year on these subjects. The details of these 
measures were all meticulously fleshed out at the time. And, in 
fact, those hearings were the genesis of these bills. So the 
details should not come as a surprise to anyone who followed 
the hearings last year.
    The other point that was raised that I just want to mention 
in passing is that, well, these big projects, they just take 
too long to construct, it is not going to help in the current 
crisis--which is true, it will help to prevent future crises--
and I am reminded of the story of General de Gaulle, who wanted 
to plant some oak trees at his headquarters. And when he was 
informed, well, oak trees will take many, many years before 
they grow to maturity, his response was, ``Well then, you 
shouldn't waste any more time, should you?'' And that is 
exactly the stage that we are at right now.
    Mr. Ellis, you objected to Federal financing. And I assume 
that is because--even though it is a loan payback by the 
beneficiaries, your objection is that it is a below-market-rate 
loan and, therefore, represents a subsidy to those 
beneficiaries. Is that, essentially, the--really, the 
objection?
    Mr. Ellis. Yes, sir, in a nutshell.
    Mr. McClintock. But you don't object to the general 
position that the beneficiaries should pay to redeem these 
loans through their purchases of water and power; the only 
question is at what rate.
    Mr. Ellis. Right. And then, also, with at least the way the 
system is set up in the way the two bills interact, is that 
there are going to be cases of where people are paying back 
their projects, and then that is cross-subsidizing or going 
over to another project. And part of our major concern is that 
it is moving outside of the congressional appropriation and 
authorization process.
    Mr. McClintock. And also, I assume, because of the prices, 
if they are left alone, send accurate signals to people of the 
actual cost of these various forms of water delivery, so that 
people can then make rational choices as to how much they buy, 
and at what rates.
    Mr. Ellis. Yes, Mr. Chairman.
    Mr. McClintock. OK. Well, now, we are told that 
desalination is an important measure that we need to move 
forward. I have had a lot of people come up to me and say, 
``Well, why don't we just go to desalination?''
    And my response to that is, ``Well, that is great, if you 
don't mind $1,000-a-month household water bills''. But, of 
course, the desalination bills that are being proposed here are 
not reflecting the actual price. That is all being handed over 
to the taxpayers. They wouldn't dare actually present the price 
to consumers of this water. Would you object to such bills?
    Mr. Ellis. Certainly we have concerns, yes. I mean, 
basically, in a nutshell, we are coming down to dollars and 
cents. That is what we are concerned about. And we are here to 
represent the taxpayers. And so, our concern is that water be 
priced appropriately, and that it recommend that those avenues 
be pursued.
    Mr. McClintock. So desalination----
    Mr. Ellis. And it is----
    Mr. McClintock. So desalination should also be subject to 
the Beneficiary Pays principle, so that people get accurate 
price signals?
    Mr. Ellis. Yes.
    Mr. McClintock. Would that apply also to title 16 
recycling, which is entirely paid for by taxpayers?
    Mr. Ellis. I have to say I am not familiar with the 
program, Mr. Chairman, to answer that appropriately.
    Mr. McClintock. So we would agree that, basically, all of 
our water projects ought to reflect the actual price of those 
projects. The only question in contention, from your point of 
view, is whether the loans are actually being repaid at market 
rates.
    Mr. Ellis. Yes, sir. The only other exception is both the 
Corps projects and with Bureau projects there is this ability-
to-pay provisions that are in the law, and I think are 
appropriate, because, as Congresswoman Lummis said, water is 
essential to life. But, yes, in a nutshell, yes, sir.
    Mr. McClintock. Mr. O'Toole, we heard Los Vaqueros 
mentioned. That is 60,000 acre-feet, I believe, was the figure. 
Would it surprise you that simply raising the spillway at the 
Exchequer Dam of Lake McClure in California would yield an 
additional 70,000 acre-feet of water?
    Mr. O'Toole. I am not familiar with the project, but I 
think the Pathfinder in Wyoming is being raised, as we speak. 
And that raising of projects, whether it be Shasta or 
Pathfinder or others, are all going to take an existing project 
to an increased----
    Mr. McClintock. My point is raising the spillway 10 feet at 
the Exchequer Dam is 70,000 acre-feet of additional water 
storage. And we are running into a lot of opposition from the 
other side because it requires adjusting a wild and scenic 
river boundary to conform to the pre-existing FERC boundary. 
Does that surprise you, that a State in which such a 
controversy can arise is now wanting for water?
    Mr. O'Toole. I have to tell you nothing surprises me any 
more in the water world. But I think efficiencies are where we 
are trying to get to, yes.
    Mr. McClintock. Thank you. Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair. Mr. Ellis, could you 
explain the ability-to-pay provision, and how does this affect 
repayment, and who makes up the difference?
    Mr. Ellis. Well, from our perspective, at least on the 
payment--well, in the Corps, they have never even used the 
ability-to-pay, I have to admit. I am not as familiar in the 
Bureau of Reclamation, I just know that it exists.
    But, from our perspective, it generally--yes, the user 
should be repaying for the project, and they should be paying 
with interest, and the water should be priced appropriately, 
because that is going to send the market signal to 
conservation, into wise and appropriate use.
    Mrs. Napolitano. Thank you. Then the Majority makes the 
fiscal argument that allowing for prepayment pays back the 
taxpayers sooner. Do you think the issue of prepayment only 
involves money?
    Mr. Ellis. Well, it is interesting. It is one of the things 
that Mr. O'Toole indicated that his--I think it was your 
father-in-law that said that these projects need to be managed 
specifically. And so, one of our concerns is about this sort of 
blanket, one-size-fits-all approach to prepayment, rather than 
having the negotiated approaches that Mr. Somach had discussed, 
and what I under the GAO are looking at. So that is another 
issue there, as well.
    Mrs. Napolitano. Thank you. And to Mr. Somach, I kind of 
have--I am sorry, Mr. Ellis, I am looking back at my notes--we 
have not really spoken to the issue of evaporation, climate 
change, and the increase in temperature that has--really is 
playing havoc with our above-ground storage or canals and 
rivers. If it continues to increase, how will we be able to 
store more water above ground?
    And, added to that is, have we looked at how we can remove 
sediment from some of the dams and some of the areas of, say, 
holding water for recharge of aquifers?
    Mr. Ellis. These are all areas that--it is going to become 
an increasing challenge, going forward, with the issues around. 
You know, evaporation and these type of things. And so, yes, 
Congresswoman Napolitano, these are going to be challenges that 
have to be addressed.
    And the other thing is that there is a lot of talk about 
building more dams. I mean, part of the reason why--everywhere 
isn't a good dam site, which was indicated by Mr. Huffman's 
testimony, or comments. And so, that is one of the things that 
is happening, we are having fewer and fewer good dam sites, we 
are having fewer and fewer buckets, good buckets that are 
available, as Mr. LaMalfa was talking about. And so, I think 
that is going to be one of the challenges, going forward, in 
identifying where is adequate storage or other needs.
    Mrs. Napolitano. Thank you. Yes, and I do agree with Mr. 
LaMalfa. We need to sit and really go over the different types 
of programs that we talk about but never really listen to, and 
how do we address the future, and how do we get all the 
agencies to start talking to each other and to those affected. 
And how do we listen to all of them with--instead of just 5 
minutes and you are gone. And we don't have the ability to re-
rationalize and be able to put two and two together and work 
bipartisan on this issue that is so critical for all of the 
United States, not just the Western States, and certainly not 
only California.
    There are many other questions I would like to ask, but I 
think I would like to put them on the record and send them to 
you. But one of the things that I would like to ask Mr.--not 
Mr. Chairman, but--that our discussion should be for all 
storage. It should have started over a decade, maybe even two 
decades ago. And you are right, we are way behind, because we 
had plentiful in precipitation. But our discussion on water 
will continue on the Floor today.
    But we all are in consensus, believe it or not. We are in 
drought. The West is in drought. And we just need to look at 
all options, not just one. And yes, we do need storage, above 
ground, below ground, we need all of the above. But it has got 
to be in a bipartisan solution. You need to help us on that.
    How can we reach out to you, and have you input to us 
recommendations that are going to be viable for us to discuss 
on the Floor and with our agencies, and start not necessarily 
saying--holding them accountable, but starting to ask the 
questions, ``What are you doing to help our communities?'' And 
just getting the agencies to coalesce, getting our folks to be 
able to cut on the regs, figure out how do we expedite things 
that are going to bring about the solutions that we all need.
    And, with that, I would like to submit for the record the 
Bureau of Reclamation statement on this bill, on both of them, 
H.R. 3981 and H.R. 3980--were received this morning.
    Mr. McClintock. I believe that is already part of the 
record, but without objection.
    [The information submitted for the record by Mrs. 
Napolitano follows:]
  Prepared Statement of the Bureau of Reclamation, Department of the 
                                Interior
  h.r. 3981--accelerated revenue, repayment and surface water storage 
 enhancement act, h.r. 3980--water supply permitting and coordination 
   act, and a discussion draft, to amend the secure water act of 2009
    Chairman McClintock and members of the subcommittee, the following 
statement represents the initial review of the Department of the 
Interior (Department) and Bureau of Reclamation (Reclamation) on the 
three bills. All of these bills were only presented to the Department 1 
week ago, and the Department has not had adequate time to conduct an 
in-depth analysis and develop detailed, thorough testimony.
    The Department has expressed concern to the committee that short 
notice of the hearing on multiple new bills would deprive the 
Department and the administration the opportunity to provide testimony 
containing thorough analysis of the language. The Department may 
provide additional views on this legislation after conducting further 
analysis.
    H.R. 3981--Accelerated Revenue, Repayment and Surface Water Storage 
Enhancement Act
    H.R. 3981 contains language to authorize pre-payment of outstanding 
construction cost obligations, and also authorizes the conversion of 
water service contracts to repayment contracts. In general, Reclamation 
supports legislation authorizing the pre-payment of repayment 
contracts, and has done so before this subcommittee.\1\ Below is some 
background on Reclamation's initial reaction to legislation authorizing 
pre-payment, and our interpretation as to the effect of the bill.
---------------------------------------------------------------------------
    \1\ H.R. 818 testimony May 12, 2011; H.R. 5666 testimony July 27, 
2006; H.R. 4195 testimony November 9, 2005.
---------------------------------------------------------------------------
    As background, we note that specific statutory authorization for 
accelerated repayment is not required in all cases involving 
construction costs that are allocated to irrigation. The Reclamation 
Reform Act of 1982 [RRA] subsection 213(c) specifies that no authority 
is provided for lump sum or accelerated repayment of construction 
costs, except for repayment contracts that provide for lump sum or 
accelerated repayment that were in effect as of the enactment of RRA. 
Therefore, Reclamation and the Congress have interpreted current law to 
require water contractors to obtain additional statutory authority to 
make accelerated repayments of construction costs allocated to 
irrigation, except for those contracts already in effect as of the 
RRA's enactment, or for contracts otherwise exempt from the provisions 
of the RRA. As written, the bill would primarily benefit irrigation 
contractors on Reclamation's Central Valley Project based on the number 
of water service contracts connected with the Project. For municipal 
and industrial water service contracts, additional statutory authority 
may not be necessary for conversion of municipal and industrial water 
service contracts to repayment contracts, or for pre-payment of 
outstanding obligations, depending upon the circumstances applicable to 
each case. With this background, Reclamation can foresee some concerns 
with equity in implementation of the draft H.R. 3981 as currently 
written, specifically related to the contract conversion authority 
provided in the bill. While contract conversion legislation has been 
implemented for certain Reclamation project units (e.g., the San 
Joaquin River Restoration Settlement Act, 2009), the general concern is 
that this legislation proposes a broad, Reclamation-wide, ``one-size-
fits-all'' approach, while the unique aspects of most Reclamation 
projects argue for a more case-by-case approach to accommodate the 
nuances of each project and its contracts.
    For example, there are instances where contract conversions would 
be in direct conflict with existing statutory law applicable to the 
Reclamation project in question. On the Colorado River Storage Project 
[CRSP], enforced contract conversions required under the language of 
the draft bill would likely conflict with section 5 of the CRSP Act, 
which establishes very specific requirements for the collection and 
disposition of revenues from various project elements into funds 
specific to that comprehensive, multi-purpose project. Section 5 of the 
CRSP Act specifically directs where all project revenues are to be 
distributed. The bill language would change that arrangement, impacting 
the funding for the project.
    Where longstanding pricing systems and/or negotiated payment 
agreements are in place, those could be completely disrupted by the 
mandates of this legislation (again, CRSP being a good example). In 
other cases there is ongoing litigation associated with existing water 
service contracts that would be further complicated by the 
legislation's mandate that conversions be granted ``upon request of the 
contractor''. Providing this authority to be used at the Secretary's 
discretion would likely address many of these concerns. Another concern 
with the bill is that in many cases it would be very difficult to 
determine the appropriate construction repayment obligation within the 
proposed 30-day timeframe envisioned by this legislation. Water service 
contracts often are entered into because a final repayment obligation 
associated with various project purposes has not yet been determined. 
Many projects operate under an interim rather than final cost 
allocation, and therefore only an initial determination of an 
appropriate repayment obligation could be made within the compressed 
period allowed under the bill. On projects with several contractors, 
pay off dates may vary from one contractor to the next (no guidance is 
provided by the legislation), which would complicate the determination 
of the appropriate payment amount.
    There are other concerns with the financial and discounting 
language in the bill, which require additional analysis. In particular, 
the offer of a discounted repayment in section 2(a)(2)(A) may have 
implications for revenues to the Treasury, and raises questions as to 
fairness given the contractors who have already pre-paid their 
obligations under different allowances. For example, similar 
legislation in the San Joaquin River Restoration Settlement Act of 2009 
(section 10010) provided for prepayment on the basis of the outstanding 
obligation, not the net present value of that obligation. Combined with 
the discounting at \1/2\ the Treasury rate provided in this same 
section, this could amount to double-discounting of outstanding 
repayment obligations. It is also unclear why the Treasury rate 
specified in the legislation is the 20-year rate. OMB Circular A-129 
suggests that, for discounted prepayments, a current market yield on 
Treasury securities of comparable maturities should be applied. 
Finally, while section 2(e) of the bill diverts receipts generated to a 
new account, the legislation has no cost-recovery provisions for the 
staff time and expenses that would be incurred by Reclamation in 
accommodating the accelerated repayment determinations, and in 
developing and executing the new contracts.
    Section 2(e) and the remainder of the legislation create a 
``Surface Water Storage Enhancement Program'' to be funded with 
receipts generated from prepayment of contracts ``to fund or provide 
loans for the construction of surface water storage.'' Authority for 
cooperative agreements with water users associations is provided, and 
funds would be available without appropriation for a variety of storage 
projects identified in section 2(e)(5). Without any accompanying 
offset, we believe this provision would increase direct spending and 
would score under existing Pay-As-You-Go [PAYGO] provisions. 
Furthermore, while the administration welcomes and supports efforts to 
efficiently maintain water assets, any proposals should result in the 
most efficient long-term use of the available Federal and non-Federal 
funds and be consistent with Federal budgetary requirements.
    Reclamation is proud of its history constructing the surface water 
storage projects that are central to life in the West and our national 
economy. What is rarely considered in the political discussion of 
surface storage are the realities of project repayment and market 
conditions associated with building large dams today. In February of 
2012, Reclamation testified before this subcommittee at a hearing 
titled ``Water for Our Future and Job Creation: Examining Regulatory 
and Bureaucratic Barriers to New Surface Storage Infrastructure.'' As 
stated at that hearing, the most frequent reasons for fewer large 
surface storage projects being built today center around economics or 
an inadequate potential water market associated with the given 
facilities. In other cases, environmental, safety or geologic 
challenges came to light during a project's development, and rendered 
construction, completion or operation unfeasible. Local opposition 
sometimes contributed, leaving the facilities ``on the books'' awaiting 
further action, but with external events and new priorities passing 
them by. This legislation devotes significant new resources to the 
prospective construction of new surface water storage. But the 
underlying economic issues that prevent projects from being built--the 
difficulty of repayment--are unchanged by this bill. Reclamation's 
focus has instead been on meeting the challenge of rehabilitating the 
existing, aging, water and power infrastructure on which western 
economies depend. We would be glad to work with the subcommittee on 
this important aspect of the debate surrounding new surface water 
storage. However, we believe that any potential revenues from 
accelerated repayment of outstanding contractor obligations should be 
repaid to the Treasury or Reclamation Fund to fulfill the project 
beneficiaries' obligations to the taxpayers who originally financed 
these projects.
        h.r. 3980--water supply permitting and coordination act
    H.R. 3980 directs the Secretary of the Interior to coordinate 
Federal and State permitting processes related to the construction of 
new surface storage projects on lands managed by Interior and the U.S. 
Department of Agriculture [USDA]. Section 3 of the bill would establish 
Reclamation as the lead agency for all reviews, analyses, permits and 
other requirements necessary for construction. A series of deadlines 
and timelines are mandated for notifying and consulting with 
cooperating agencies, completing environmental reviews, and determining 
project schedules. While nothing in the bill would facilitate more 
regular Federal funding for any of these activities, the bill does 
allow for contributed funds from non-Federal entities. However, section 
6(c) of the bill would prohibit use of any contributed funds for ``a 
review of the evaluation of permits'' by the Reclamation Regional 
Directors in the region in which qualifying projects would be built.
    This legislation raises several concerns. In section 2(4) the 
definition of ``cooperating agency'' leads to confusion and is 
inconsistent with established regulations and judicial interpretations. 
For example, it is inconsistent with the definition under NEPA and its 
implementing regulations which identify Federal, tribal, State, and 
local governmental entities as potential cooperating agencies and 
further allow those governmental entities with subject matter expertise 
to be designated cooperating agencies. In section 6(c) and throughout 
the bill, it is unclear what public policy problem would be addressed 
by the bill. Under the National Environmental Policy Act, the Economic 
and Environmental Principles and Guidelines for Water and Land Related 
Resources (P and G's), existing regulation and other laws, there is 
already ample basis for review of projects and coordination among 
Federal agencies involved in water supply planning. We do not know of 
any Reclamation or USDA-sited surface water storage projects that have 
been denied construction because of delays associated with project 
review or permitting, or shortcomings in communication among 
Reclamation, USDA, or any other State or Federal partners. Rather, as 
stated above and in prior testimony at the 2012 hearing, project 
economics and the pricing and repayment challenges in the potential 
markets where projects would be built are the primary reasons for some 
projects being authorized but not constructed. If nothing else, this 
bill reduces the time necessary to establish the merits of projects 
and, in some ways, could make favorable recommendations for project 
construction less likely.
    An additional problematic aspect of the bill is that it establishes 
Reclamation as the lead agency for permitting for storage projects on 
Interior and USDA administered lands. Since those lands exist in all 50 
States, this would put Reclamation in a significantly expanded role of 
administering the permitting process for activities outside the 17 
Western States where Reclamation has typically had jurisdiction.
           draft bill--to amend the secure water act of 2009
    H.R. _____ (Discussion Draft) would amend the Secure Water Act to 
create a new ``surface water storage enhancement program'' within the 
Department, funded for 5 years with $400 million per year in receipts 
that under current law would be deposited in the Reclamation Fund. 
These are revenues that would otherwise flow to the U.S. Treasury, but 
which would, under the draft bill, be made available for construction 
of surface water storage projects without appropriation. This provision 
would increase direct spending by $2 billion and score under existing 
PAYGO provisions. Construction could be funded with these revenues 
``exclusive of any Federal statutory or regulatory obligations relating 
to any permit, review, approval or other such requirement.'' Section 
1(b) of the bill would add language to the Secure Water Act defining 
``any non-Federal facility used for the surface storage and supply of 
water resources'' eligible for construction funding.
    We recognize that this is a ``discussion draft'', and would be glad 
to engage in further discussion with the subcommittee on the bill. We 
believe that spending on surface-storage projects should reflect 
consideration for the economic return to the Nation. We would like 
additional clarity on the meaning of several phrases in the bill, and 
have questions as to how Reclamation would establish eligibility for 
funding under the proposed program. We would be glad to work with the 
subcommittee to explore these issues further. In conclusion, the Bureau 
of Reclamation has a long history of constructing, managing and 
operating surface storage for the benefit of the arid West, and where 
projects make environmental and economic sense, will continue to pursue 
surface storage as one of many options to meet water demands in the 
West.
                                 ______
                                 
    Mrs. Napolitano. And, with that, I yield back the time.
    Mr. McClintock. Mrs. Lummis?
    Mrs. Lummis. Thank you, Mr. Chairman. Mr. Somach, regarding 
the benefits of prepayment, Chairman Hastings' bill, why would 
an irrigation district want to give up an interest-free loan, 
when they would have to replace it with a loan that has an 
interest payment? What is the benefit of doing that? Obviously, 
it is not financial.
    Mr. Somach. No, it is not financial. It has a little bit to 
do with the--and we use the word a lot here--red tape. The 
example that I gave you in the Oregon situation, in fact, they 
didn't go out and refinance, they pulled money out of their 
pocket, so to speak. That $250,000 was not financed, it was 
simply paid as an early repayment.
    The other example I gave in my written testimony is a 
current situation that I am dealing with, where I have a 
settlement contractor on the Sacramento River, and its 
settlement contract is for about 50,000-plus acre-feet of 
water. And because of the peculiarities of the way the 
settlement contract read, 600 acre-feet out of the 50,000-plus 
acre-feet is denominated as Federal project water. That Federal 
project water requires the land owners to report all of their 
land holdings westwide on an annual basis. And it has, 
actually, as a practical, plain, old practical matter, just 
wreaked havoc, in terms of what they have to do annually.
    And, moreover, every time they buy a piece of property 
elsewhere in the entire Western United States, they have to 
kind of ripple through because of this 600 acre-feet of water. 
The ability to just simply early pay that 600 acre-feet has 
very practical ramifications.
    I also note that what it does is it relieves one of some of 
the more burdensome or onerous provisions of the Reclamation 
Reform Act. But that policy actually comes out of the 
Reclamation Reform Act itself, because if they just were to pay 
this out in the normal and ordinary way, once repayment took 
place, all of those burdensome requirements would fall away by 
operation of the Reclamation Reform Act. So that all we are 
talking about here is accelerating, through early repayment, 
what would have happened in any event. So it is not a----
    Mrs. Lummis. Thanks, Mr. Somach. I appreciate it.
    Mr. O'Toole, now I am flipping back to the other bill. In 
your view, does State involvement in permitting need to play a 
stronger role? And should State findings and data be part of 
the overall review process?
    Mr. O'Toole. Representative Lummis, the State participation 
is crucial. I think you know the Wyoming Water Development 
process is multi-year involvement in these processes right now. 
In our valley we are looking at an appropriation last year from 
the legislature to begin the planning process, and it is 
absolutely crucial. That is where the information is, and the 
motivation.
    And I might just say that part of the process, as it is 
now, is that essentially the Federal Government gets to decide 
which of the priorities--there may be several priorities that 
the State has identified, and the Federal Government gets to 
identify. Often that isn't the right place. And so, I think the 
knowledge at the State level is crucial to make these things 
work.
    Mrs. Lummis. Following up on that, do you believe that 
allowing non-Federal governmental entities to financially 
contribute to the coordinated permitting process should be 
acceptable for all water users, and not just for, for example, 
San Francisco, as was supported by the previous House Majority 
party?
    Mr. O'Toole. Representative Lummis, I am not that familiar 
with that process, but I know that Wyoming and Colorado spent a 
tremendous amount of money in the permitting process. I mean it 
is--that is the responsibility that they have to make the 
process work. Otherwise, it wouldn't happen.
    Mrs. Lummis. For each of you, if water is treated solely as 
a commodity, what is the likely human response to a shortage, 
if it is completely commoditized, and you have to pay for water 
to have water, regardless of its price?
    Mr. O'Toole. I will just use the example right now in the 
Eastern Slope of Colorado. Oil and gas can pay $3,200 an acre-
foot for water. And the result of that is farmers out of Fort 
Collins, for example, cannot afford to compete.
    The resource is going to be more competitive. I sit on the 
Bureau of Reclamation's group that is looking at the Colorado 
River right now. And the unfortunate reality is that Ag is the 
reservoir for growth, for energy, for all the other needs for 
the environment. And I testified earlier that we are expected 
to produce more food, not less. And there is a conundrum there.
    Mr. McClintock. Thank you. I am going to have to cut it off 
there. If you have additional testimony, by the way, you will 
be invited to provide it for the committee for the record.
    Mr. Costa?
    Mr. Costa. Thank you, Mr. Chairman. Mr. Somach, let's 
continue where we were, and you were about to answer my 
questions with regards to the progression of the completion of 
the studies for High Shasta, for Temperance Flat, and Sites--as 
I understand it, it is kind of in a different category----
    Mr. Somach. Well, Sites also is having a Federal 
feasibility study completed.
    Mr. Costa. Right. This year?
    Mr. Somach. It won't be completed this year. The other two 
should be completed this year.
    Mr. Costa. This year?
    Mr. Somach. Yes.
    Mr. Costa. That is what I have been told. Upon the 
completion of the study, then, our next step would be to 
determine the financing?
    Mr. Somach. No, see, I think that that is part of the 
problem with the process that has gone on. There will be a 
determination of the cost benefit, you know----
    Mr. Costa. Analysis.
    Mr. Somach [continuing]. Analysis of those projects. The 
projects, the way they have been analyzed by the Federal 
Government, have been analyzed in the normal and ordinary 
construct of the way the Federal Government visualizes these 
things. So, as a consequence, what you have is a set kind of 
project. They go through this long feasibility study. At the 
end they determine whether or not the project they studied was 
feasible.
    Whereas, if you are Los Vaqueros. So, if you are any one of 
these other projects----
    Mr. Costa. Which would be expanded for a second time.
    Mr. Somach. Well, and the point I am trying to make, 
though, is simply if you look at those from the needs 
perspective--in other words, rather than formulaically 
analyzing the feasibility of the project, take a look at what 
is really needed out of a project, and construct that as part 
of your feasibility analysis. Then what you can do is tell 
whether or not you simply have a project that meets the needs 
that you are trying to meet, whether people can afford that. 
And that doesn't get done.
    So, what happens is, after you get these Federal 
feasibility projects done, and you determine nobody can afford 
them, because they analyze the wrong thing, then you have to 
start all over again to try to figure out what people can 
afford.
    Mr. Costa. Well, when we get those studies completed this 
year, then we will be able to make a determination where we 
are, to your point.
    Mr. Somach. Exactly. And I think that is what will come out 
of those things. It takes way too long to get these feasibility 
studies done in the first place. There is too much drift in the 
process. It is not that doing the studies are bad, it is that 
it just simply takes way too long, it soaks up so much in the 
way of dollars that the projects escalate in cost beyond 
anything that anyone rational----
    Mr. Costa. Well, I mean, High Shasta is not new. Everyone 
kind of--even some of my environmental friends suggest that it 
is one of the better bangs for the buck. But, we get a 
completed study there, we talk about $1 billion for the cost of 
the level that they are talking about increasing the size of 
the Shasta Dam. You don't have to move the freeway, you don't 
have to move the railroad track. It seems like we ought to be 
able to focus on some big projects, as a result of this crisis.
    Mr. Somach. And particularly with the Shasta or anything 
that is relying upon Upper Sacramento Valley water, like Shasta 
does, is climate change is actually something that works very 
conducively with those types of facilities, because Shasta is 
already a rain-driven, not a snow-driven reservoir.
    Mr. Costa. Right. And that is going to change the whole 
operation of both the State and Federal projects, as we better 
understand the changes in climate and we see, potentially, a 
receding snowpack that obviously is going to make a broken 
water system in California even more difficult to provide the 
water for every region of the State that needs that water.
    It seems to me that Doc Hastings' legislation is something 
that we ought to look on and maybe use Shasta's completion of 
the feasibility study as a pilot project for where we can move 
ahead and try to maybe fix a process that clearly, in my 
opinion, is broken.
    Let me just end on this note, and it is a statement. And I 
worry a lot about the sustainability of the planet, I worry a 
lot about the sustainability of our Nation. Last year, we 
clicked 7 billion people. And by the middle of this century, we 
are going to have 9 billion people on this planet. And the 
notion that the climate is changing, we are, I think most of 
us, are aware of. How we provide water for our urban 
communities, at the same time to try to do our best to protect 
the environment--I mean Peter Moyle said that this effort to 
maintain a lot of native species in California with temperature 
changes may be all for nought 80 years from now.
    And how do we maintain the food, the food production that 
is--we take for granted? We simply take the production of food, 
whether it is in California or anywhere in America, for 
granted. And therein lies our problem.
    Mr. McClintock. All right, thank----
    Mr. Costa. That is a comment, not a question.
    Mr. McClintock. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. And, Mr. O'Toole, just 
to kind of follow up, we talked a lot about regulatory process, 
the costs that are being associated. In your view, does State 
involvement in permitting need to play a stronger role, and 
some of the advice for the people on the ground, in terms of 
some of the processes to move forward with these projects?
    Mr. O'Toole. Yes, sir, Mr. Tipton. And, as you know, the 
law of prior appropriation gives the priority to the States in 
the West. And their participation is the crucial participation. 
What they are trying to do is develop their legal allocations 
in a system that really deflects the power of the States in 
favor of sort of other visions. And it has not been--the 
reality is--reality has shown us what that meant. It means we 
are not getting projects done. So, I think you are absolutely 
right.
    Mr. Tipton. Great. And, Mr. Somach, I would like to maybe 
have you expand just a little bit. When we have been talking 
about prepayment of loans, I did happen to write down when you 
visited with your wife and--probably always taking good advice, 
early repayment of interest loan has to be able to be a good 
deal.
    But let's talk about, for just a moment, if you would, some 
of the collateral benefit of that. Would that help attract 
private investment?
    Mr. Somach. Yes. I don't think there is any question. In 
other words, if the problem--there are a number of reasons why 
someone would look toward early repay. So then, now, the flip 
side is, are there benefits that ripple out from that?
    Well, if you are complaining about the subsidy, the subsidy 
ends. And then, if you are looking toward the privatization, or 
moving the capital aspects of this out into the financial 
markets, it, of course, then expands that out there, where 
people are going to start looking at stability, taking a look 
at the underlying investment that is being talked about. And I 
think that is a positive thing, not a negative thing, in any 
way, shape, or form.
    Mr. Tipton. Great. When you get a lot of moving parts, as 
many of you have already noted, in terms of a lot of different 
policies--and just kind of curious. I noted yesterday that 
Secretary Vilsack, Department of Agriculture, is going to be 
coming out with seven regional climate hubs. One of them 
happens to--apparently, going to be based in Colorado.
    I haven't heard of it, we haven't had any contact out of 
the Secretary's office or the Department of Agriculture, but it 
is going to be impacting, apparently, with some consultation--
sounds nice on the surface--they are going to assess local 
climate risks, such as drought, wildfire, and then develop 
plans for dealing with them, such as improved irrigation 
techniques.
    Has the Family Farm Alliance been contacted by--this sounds 
like policy coming out of the Federal Government right now. 
Have you been contacted by the Department of Agriculture in 
regards to these climate zone hubs?
    Mr. O'Toole. We have not, as an organization. Although I 
will tell you that we wrote a paper on climate in 2007 that 
anticipated a lot of these discussions, the need for 
adaptability and flexibility. And I will just tell you on a 
personal note, as a permittee on both the National Forest and 
the BLM, they have now sent us letters saying that climate will 
be a part of every decision that goes forward. We can't 
understand what that means. I think, in reality, it will mean a 
slower process, rather than a more flexible process. That is my 
personal observation.
    Mr. Tipton. Well, we have--actually, this is a complete 
side note--we have a Protecting Our Water Rights Act to make 
sure that the Federal Government--you just noted about the BLM 
and the Forest Service, where they have tried to appropriate 
actual water rights in our State and the Western States, simply 
by Federal fiat, to take those waters from our local 
communities.
    And this is something that, if you would, sir, through your 
organization, we would love to be able to hear Mr. Hurd--you 
happen to be a real farmer, real rancher--to be able to get 
some actual feedback coming in as you hear about another policy 
coming out of Washington. Because, I don't know about you, but 
a lot of times I just don't get the warm fuzzies when I hear 
that the Federal Government is here to help me, that we need to 
be able to have policies that are streamlining the process, as 
we look at Doc Hastings' bill, the Chairman's bill, to be able 
to actually make a process that is actually going to work, to 
be able to look out the windshield and anticipate the needs not 
only of our Ag communities, but our urban centers, as well.
    We can streamline it, we can make it more cost effective to 
be able to achieve. But another government program, another 
government regulation, coupled with the lack of coordination 
that we see, seems to be a stumbling block, rather than a 
stepping stone to the success that I think that we would like 
to be able to see.
    So, gentlemen, thank you for your testimony. I yield.
    Mr. McClintock. Mr. Huffman?
    Mr. Huffman. Just a limited defense of big, bad government, 
in light of my friend's comments. The wonders of western 
reclamation and all of the agriculture and water delivery and 
all that, that was all government. Right? Anybody disagree that 
none of that would have happened without a big, huge government 
program?
    [No response.]
    Mr. Huffman. I think we need to remember some context when 
we fall into some of the old talking points around here.
    And one of the talking points that we hear most often in 
the Natural Resources Committee is sort of the wonders of 
fracking and oil and gas extraction.
    So, Mr. O'Toole, I want to thank you for acknowledging one 
of the darker sides of all of the Kool-Aid that has been drunk 
around here on fracking, and that is there is an awful lot of 
water involved, and it sounds like, in Colorado, the price of 
some of that water may be driven up beyond the ability of 
agriculture to compete for it, which doesn't surprise me, and I 
think, in some ways, may be a preview of what California could 
face, as we see more and more proposals to expand fracking.
    So your point was useful for a point that I wanted to 
continue in discussion with Mr. Somach, and that is there is a 
price point beyond which agriculture has a hard time competing, 
in terms of purchasing water. I think we all know that. I think 
we all acknowledge that urban water agencies--desalination was 
brought up--$1,000 or $2,000 per acre-foot, some urban water 
agencies are willing to say, with their eyes wide open, ``We 
need water so badly that we are willing to do that.'' And in 
some ways, that is the ultimate beneficiary pays situation, it 
is a very transparent, non-subsidized decision when that is the 
way it works. Water can fetch a pretty high price when it gets 
scarce. But I am not aware of anybody in agriculture that is 
paying, on any kind of a regular basis, at least, $1,000 or 
$2,000 an acre-foot.
    And so, Mr. Somach, I guess my question for you is, really, 
shouldn't we kind of flip this study process around a little 
bit? Shouldn't we identify the users out there in agriculture 
who are willing to pay a certain amount of money per acre-foot, 
and then go out and start looking for projects that can be 
brought in at that price point, perhaps with some partnership 
and cooperation with the Federal Government? But shouldn't that 
price point be driving the exploration, instead of the other 
way around?
    Because all of the initial dollar-per-acre-foot numbers I 
have, at least, seen--and maybe you can correct me if you know 
of other information--but it has been way more than anybody 
that I know of in agriculture has ever been willing to pay on a 
sustained basis.
    Mr. Somach. Yes. Well, let me say three things about that. 
Number one, that was, in fact, the point I was trying to make, 
in part, when I was addressing Mr. Costa's comments, is that 
feasibility studies need to take a look at what people can pay 
and what people want. And if what comes out of that is just too 
expensive, then you shouldn't proceed with a project that 
people can't pay for.
    I do think, though, that--because I also agree that 
providing Federal loans, Federal dollars, is not a bad thing; 
that is a good thing, because it is a broad, public benefit--
but those things help offset some of what would be the higher 
cost.
    Second point I want to make is that, while agriculture 
can't necessarily compete across the board, the competing 
needs--and let's call those urban needs--are not necessarily so 
large that agriculture and urban needs can't be accommodated. 
And I think the best example of that is the fact that water and 
water rights--this is something I mentioned yesterday--have 
always been alienable, which means they can be transferred, 
they can be sold on a temporary basis, to move from where there 
is surplus--for example, at times, certainly not this year, but 
at times, from the Sacramento Valley down into either other 
agricultural areas, or down into southern California--and I 
think those are good things that need to happen, and they help 
address this issue that you are raising, in terms of 
affordability of water.
    Mr. Huffman. Just in the limited time I have left, I see 
that there is an assumption. Putting aside the concerns that 
the Bureau of Reclamation may have about the accelerated 
prepayment, and assuming that could be worked out, but the 
assumption is that it is about $400 million a year that could 
be created as a revenue source if this worked.
    Can anyone speak to what that assumes? Does that assume all 
Central Valley project water contractors are opting to prepay? 
What level of uptake is required to get to that very 
significant revenue stream? And--yes?
    Mr. Ellis. Mr. Huffman, as I read the bill, it is actually 
the prepayment--so the conversion of the contracts--that is in 
excess of what is in the discussion draft, which is $400 
million per year for 5 years. So it is additive, on top of 
that. But if the discussion draft, working with Chairman 
Hastings' bill was actually enacted, that is the way it would 
work. So it is actually more--that is just gravy, if you would, 
on top of this $2 billion slush fund.
    Mr. Huffman. Thank you, Mr. Chair. I was just curious where 
that money comes from.
    Mr. McClintock. And the opportunity exists for Members to 
submit additional questions, and for the witnesses to provide 
additional testimony in writing to be part of the record.
    I want to thank our witnesses and our Members for a very 
interesting discussion on this subject. The hearing record is 
going to be open for 10 days in order for additional questions 
to be submitted and answers to be received. And, if there is no 
further business before the committee, without objection, the 
subcommittee stands adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]

             [Additional Material Submitted for the Record]

  Prepared Statement of Thaddeus Bettner, PE, General Manager, Glenn-
                       Colusa Irrigation District
 legislative hearing on h.r. 3981, h.r. 3980, and discussion draft to 
         authorize a surface water storage enhancement program
    Chairman McClintock and members of the subcommittee, I am Thaddeus 
Bettner, the General Manager of the Glenn-Colusa Irrigation District 
[GCID], the largest irrigation district in the Sacramento Valley and 
the third largest irrigation district in the State of California. I 
appreciate the opportunity to provide GCID's perspective on the issue 
of how the Federal Government can help address the challenge of 
building new water supply projects in the Western United States.
    GCID covers approximately 175,000 acres in Glenn and Colusa 
Counties, and is located about 80 miles north of Sacramento. Our 
district contains a diverse working landscape including a variety of 
crops such as rice, tomatoes, almonds, walnuts, orchards, vine seeds, 
cotton, alfalfa, and irrigated pasture. Just as important, we convey 
water to three Federal wildlife refuges totaling more than 20,000 
acres, and also deliver water to more than 50,000 acres of seasonally 
flooded wetlands. GCID is a Sacramento River Settlement Contractor and 
diverts water directly from the Sacramento River through the largest 
flat plate fish screen in the world. GCID's Settlement Contract was 
first entered into in 1964 and it resolved disputes with the United 
States related to the seniority of GCID's rights over those of the 
United States and, in fact, allowed the U.S. Bureau of Reclamation 
(Reclamation) to obtain water rights from the State Water Resources 
Control Board for the Central Valley Project. GCID's water rights 
originated with a filing in 1883 for 500,000 miner's inches under 4 
inches of pressure, one of the earliest and largest water rights on the 
Sacramento River. Other Sacramento River Settlement contracts were also 
entered into among water right holders on the Sacramento River and 
Reclamation.
    Notwithstanding the seniority of our water rights on the Sacramento 
River, the greatest water infrastructure challenge we face is in 
securing new storage. The pressures on our water infrastructure 
continue to grow each year from changed hydrology associated with the 
climate change, population growth and new demands for water for the 
environment. In this context, I want to focus on three issues: (1) why 
we need additional storage in the Sacramento Valley; (2) the importance 
of streamlining the environmental review processes related to the 
construction of new surface water storage projects as provided for in 
H.R. 3980; and, (3) the need for additional Federal support for Federal 
and non-Federal surface water storage projects as provided for in the 
discussion draft authorizing the Secretary of the Interior to implement 
a surface water storage enhancement program.
                       the importance of storage
    New storage is vitally important to GCID and all of northern 
California because the Federal Central Valley Project [CVP], which our 
water diversions are intertwined with, and the State Water Project have 
both lost water supply yield and operational flexibility. That yield 
and flexibility has eroded over time due to increased contractual 
obligations and increased water demands to meet the needs of endangered 
species and the State and Federal refuge system. And, in periods of 
severe drought like the one we are experiencing now, the lost water 
supply yield and operational flexibility is only compounded.
    We do not need much in the way of additional water supplies in the 
Sacramento Valley, but without new storage, the pressure on our 
existing water supplies will continue to grow. The State's population 
continues to increase and the reallocation of water to environmental 
uses is expanding. This reality continues to play itself out, 
especially given that no new investments in the development of 
additional water supply or storage have occurred. For water users north 
of the Delta, in the area of origin, the ever-increasing demand for 
water, coupled with no new storage, represents a threat to the vitality 
of irrigated agriculture in the Sacramento Valley, our local 
environment including the protection of the Pacific Flyway, and our 
groundwater system which sustains our rivers, creeks and streams. A 
strong agricultural sector and healthy environment depend heavily upon 
a certainty of water supply. Disrupt that certainty, allow the strain 
on existing water supplies to persist, and investments in agriculture 
will not be as readily forthcoming. That lack of investment translates 
into a dim future for agriculture and continued instability in water 
supplies, which will threaten the economic health of the State as a 
whole.
                               h.r. 3980
    As I have shared with the committee before, the greatest obstacles 
to completing the Sites Project, the CALFED North-of-the-Delta 
Offstream Storage [NODOS] project currently being carried out by the 
California Department of Water Resources [DWR] and Reclamation, in 
partnership with local interests, are the convoluted planning and 
environmental review processes.
    While part of the delay is certainly due to the complexities 
associated with multiple State and Federal agencies being involved in 
the project, other delays are attributable to shifting environmental 
requirements. For example, delays in completing the Sites project 
environmental review process are attributable in part to changes in 
operational conditions described in the Central Valley Project 
Operations Criteria and Plans [OCAP] Biological Opinions [BOs] in 2004/
2005 and then again based upon a Biological Opinion from U.S. Fish and 
Wildlife Service regarding the Delta Smelt issued in 2008. In both 
instances, DWR and Reclamation had to go back and remodel the project, 
based on the revised BOs. As Reclamation's Mid-Pacific Regional Office 
noted in a letter to ``Interested Parties'' in May 2009, ``Changes are 
continuing so rapidly that our studies and reports are not keeping 
pace.''
    This new information did not, in fact, change the fundamentals of 
the project. The fundamentals of the project remained sound, but the 
process stalled further increasing costs and further delaying the 
availability of the many benefits a Sites Reservoir will provide.
    H.R. 3980 seeks to address many of the challenges we have faced in 
trying to move the Sites project forward by establishing a lead agency 
to coordinate all Federal environmental reviews related to a surface 
water storage project and directing that a schedule be established and 
strictly adhered to by Reclamation for the completion of all 
environmental review processes. While H.R. 3980 only applies to 
projects on Department of Interior and Department of Agriculture lands, 
I encourage the committee to consider expanding this directive to cover 
projects, like the Sites project, that are now expected to be 
constructed by non-Federal entities in cooperation with Reclamation and 
other Federal agencies on non-Federal lands.
    H.R. 3980 makes a significant contribution to efforts to make the 
permitting and environmental review process for water supply projects 
more efficient and effective, and I look forward to working with the 
committee to identify other measures that will help streamline the 
Federal planning and environmental review processes further.
      discussion draft--surface water storage enhancement program
    I strongly endorse the committee's efforts to identify ways the 
Federal Government can provide financial support to new surface water 
storage projects west-wide. The discussion draft proposes to establish 
a new Surface Water Storage Enhancement Program that would provide 
financial support to both Federal and non-Federal surface water storage 
projects alike. The inclusion of non-Federal water users is 
particularly important to the Sites Joint Powers Authority, which, as I 
have discussed with the committee in the past, was formed in August of 
2010 for the sole purpose of establishing a public entity to design, 
acquire, manage and operate Sites Reservoir and related facilities to 
improve the operation of the State's water system.
    Those of us in the Sites JPA believe we can complete the planning, 
design and construction of a Sites project in no less than half the 
time and at less cost than would be required if the project were to 
constructed as a traditional Reclamation project. And, as the current 
drought highlights, we do not have time to waste. This facility, if it 
is going to be built, needs to be constructed quickly and efficiently, 
and having the ability to compete for the Federal financial support 
that would be available through the Surface Water Storage Enhancement 
Program would be greatly beneficial and allow Sites to move forward on 
an expedited basis.
    Thank you for the opportunity to submit this testimony, and I 
greatly appreciate the subcommittee's proposals to streamline the 
environmental review processes and support the construction of new 
surface water storage.

                                 [all]

```