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95–261 PDF 2005

S. HRG. 108–810 

INVESTIGATION INTO THE BUREAU OF 

RECLAMATION’S ANIMAS-LA PLATA PROJECT 

HEARING 

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

UNITED STATES SENATE 

ONE HUNDRED EIGHTH CONGRESS 

SECOND SESSION 

SPECIAL HEARING 

MARCH 24, 2004—WASHINGTON, DC 

Printed for the use of the Committee on Appropriations 

( 

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate 
(II) 

COMMITTEE ON APPROPRIATIONS 

TED STEVENS, Alaska, Chairman 

THAD COCHRAN, Mississippi 

ARLEN SPECTER, Pennsylvania 

PETE V. DOMENICI, New Mexico 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

CONRAD BURNS, Montana 

RICHARD C. SHELBY, Alabama 

JUDD GREGG, New Hampshire 

ROBERT F. BENNETT, Utah 

BEN NIGHTHORSE CAMPBELL, Colorado 

LARRY CRAIG, Idaho 

KAY BAILEY HUTCHISON, Texas 

MIKE DEWINE, Ohio 

SAM BROWNBACK, Kansas 

ROBERT C. BYRD, West Virginia 

DANIEL K. INOUYE, Hawaii 

ERNEST F. HOLLINGS, South Carolina 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

JAMES W. MORHARD, Staff Director 

LISA SUTHERLAND, Deputy Staff Director 

TERRENCE E. SAUVAIN, Minority Staff Director 

SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT

PETE V. DOMENICI, New Mexico, Chairman 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

ROBERT F. BENNETT, Utah 

CONRAD BURNS, Montana 

LARRY CRAIG, Idaho 

CHRISTOPHER S. BOND, Missouri 

TED STEVENS, Alaska (ex officio) 

HARRY REID, Nevada 

ROBERT C. BYRD, West Virginia 

ERNEST F. HOLLINGS, South Carolina 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

Professional Staff 

TAMMY CAMERON

SCOTT O’MALIA

DREW WILLISON (Minority) 

NANCY OLKEWICZ (Minority) 

ROGER COCKRELL (Minority) 

Administrative Support 

ERIN MCHALE
(III) 

C O N T E N T S 

Page 

DEPARTMENT OF THE INTERIOR 

Opening Statement of Senator Pete V. Domenici ................................................. 1 

Statement of Senator Ben Nighthorse Campbell .................................................. 3 

Prepared Statement of Senator Wayne Allard ...................................................... 4 

Statement of Bennett W. Raley, Assistant Secretary, Water and Science, 

Department of the Interior .................................................................................. 5 

Prepared Statement ......................................................................................... 9 

2003 Project Construction Cost Estimate .............................................................. 9 

The 1999 Project Construction Cost Estimate ...................................................... 10 

Costs To Comply with Public Law 93–638 ............................................................ 10 

Communications Between Reclamation and Project Sponsors ............................ 11 

Conclusion and Next Steps ..................................................................................... 11 

Additional Committee Questions ............................................................................ 19 

Questions Submitted by Senator Pete V. Domenici .............................................. 19 

Schedule and Cost ................................................................................................... 19 

Legislated Cost Ceiling ........................................................................................... 19 

Cost Reimbursement ............................................................................................... 20 

Changes in Design and Construction ..................................................................... 20 

638 Process ............................................................................................................... 20 

Bureau of Reclamation Processes ........................................................................... 21 

NONDEPARTMENTAL WITNESSES 

Statement of Howard D. Richards, Sr., Chairman, Southern Ute Indian 

Tribe ...................................................................................................................... 27 

Prepared Statement ......................................................................................... 28 

Statement of Selwyn Whiteskunk, Councilman, Ute Mountain Ute Tribe ......... 31 

Prepared Statement ......................................................................................... 33 

Statement of Mike Griswold, President, Animas-La Plata Water Conservancy 

District .................................................................................................................. 38 

Prepared Statement ......................................................................................... 39 

Statement of L. Randy Kirkpatrick, Executive Director, San Juan Water 

Commission ........................................................................................................... 42 

Prepared Statement ......................................................................................... 42 

Prepared Statement of John R. D’Antonio, Jr., State Engineer, New Mexico .... 52 

Prepared Statement of Phil Doe, Chair, Citizens Progressive Alliance .............. 52 

Prepared Statement of Russell George, Executive Director, Department of 

Natural Resources, State of Colorado ................................................................. 54 

Historical Context .................................................................................................... 55 

The 1986 Settlement Agreement and Subsequent Legislation ............................ 56 

Colorado Ute Settlement Act Amendments of 2000 ............................................. 57 

The Indian Self-Determination and Education Assistance Act (ISDEAA) ......... 57 

Public Law 93–638 .................................................................................................. 57 

Additional Committee Questions ............................................................................ 58 

Questions Submitted to Mike Griswold ................................................................. 58 

Questions Submitted by Senator Pete V. Domenici .............................................. 58 

Level of Involvement by Paying Partners ............................................................. 58 

Required Out Year Funds ....................................................................................... 59 

Questions Submitted to L. Randy Kirkpatrick ..................................................... 60 

Questions Submitted by Senator Pete V. Domenici .............................................. 60 

BOR Contract Obligations ...................................................................................... 60 

Level of Involvement by Paying Partners ............................................................. 61 

Required Out Year Funds ....................................................................................... 61 
Page

IV 

Question Submitted to the Ute Mountain Ute Tribal Council ............................. 62 

Question Submitted by Senator Pete V. Domenici ............................................... 62 

638 Process ............................................................................................................... 62 
(1) 

INVESTIGATION INTO THE BUREAU OF 

RECLAMATION’S ANIMAS-LA PLATA PROJECT 

WEDNESDAY, MARCH 24, 2004 

U.S. SENATE, 

SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT, 

COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 10:03 a.m., in room SD–124, Dirksen 

Senate Office Building, Hon. Pete V. Domenici (chairman) presiding. 

Present: Senators Domenici and Campbell. 

DEPARTMENT OF THE INTERIOR 

STATEMENT OF BENNETT W. RALEY, ASSISTANT SECRETARY, WATER 

AND SCIENCE 

ACCOMPANIED BY: 

WILLIAM E. RINNE, DEPUTY COMMISSIONER/DIRECTOR OF OPERATIONS 

RICK EHAT, PROJECT CONSTRUCTION ENGINEER 

OPENING STATEMENT OF SENATOR PETE V. DOMENICI

Senator DOMENICI. First let me welcome the witnesses and thank 

you all for making time to participate in this hearing. I would also 

like to thank all the parties for the courtesy and professionalism 

that they have shown my staff in preparing for this hearing. It is 

my intent that this hearing examine the issues relative to AnimasLa Plata, specifically the increase to the estimated cost project that 

were revealed last year. Let me begin then. 

We in the West are facing great challenges when it comes to 

available water supply. The Bureau knows that. If they do not they 

should. The current drought makes this challenge even more 

daunting at the same time our country faces other great challenges; reducing the debt, sustaining economic prosperity and protecting our environment. All these forces are brought to bear on 

large infrastructure projects such as this one. I think that all of us 

in this room understand the importance of providing sustainable 

water to the arid regions of the country. But we also understand 

that this must be balanced with environmental-sensitive and good 

economic stewardship. 

Let me start off by saying that I am committed to the construction of ALP. I prudently believe that the Animas-La Plata Project 

is important and I join with Senator Campbell, who has been the 

principal leader—Hi, Senator Campbell—because this project is im-
2 

portant to the West for numerous reasons. Being able to store 

available water is a critical element in providing a reliable supply 

of water to the western United States for there is usually not a reliable flow of sufficient water in streams, rivers to meet needs. This 

project is crucial to providing a degree of certainty to all the interests who depend on reliable water supply, whether they are agricultural or environmental. This certainty in turn fosters long-term 

economic health necessary to continue a way of life. The AnimasLa Plata Project is also somewhat unique in that it serves as a central mechanism to settlement once and for all of long-disputed tribal rights in the Four Corners area. In fact, like it or not, in many 

ways this project is being looked at as the vanguard when it comes 

to settlement mechanism, and as such it is being highly scrutinized 

through the western United States. I do not think I have spoken 

to anyone who deals with water in the West who has not heard of 

the Animas-La Plata Project. Having said that, I will get to the 

issue of today’s hearing. 

Regardless of how important this project is we cannot proceed 

with the idea that it will be completed at any cost. That will not 

work. We cannot continue down the path that is perceived as carte 

blanche expenditures of Federal tax dollars. This project, like every 

other project in which the Federal Government participates, must 

be managed such that the taxpayers get the best return on their 

money. The American taxpayer must have confidence in the Federal projects in that they are being implemented in a fair and reasonable manner for a fair and reasonable price. We here in Congress are responsible for making the decision to go forward with 

these projects based on information and analysis that you provide 

us. This cannot be taken lightly. The Congress must have confidence that their decisions are being based on complete and accurate information and when the Federal Government says that a 

project is going to cost x number of dollars the taxpayer must have 

confidence that when we in fact execute the project that we will do 

that for that amount. I was astounded to learn that last fall, of the 

$162 million increase in the cost estimate of this project. Now I 

know that it is not unusual for projects to creep up in price once 

they get underway, but 50 percent increase, from $338 to $500 million for me is unacceptable. The task at hand, and it starts today, 

is make sure that this never, never happens again. I understand 

from the report to the Secretary that there are several contributing 

factors to the grossly underestimated cost and I hope to examine 

these today. If I run out of time we will get you to give us the answers and if we have to we will call you back. But more important, 

a mutual understanding of what will be done to prevent this incident from happening again is terribly important. 

I would like to welcome Mr. Bennett Raley, Assistant Secretary 

of the Department of the Interior for Water and Science. We welcome you and thank you for coming. Accompanying him is Mr. Bill 

Rinne. Is that how you say your name? 

Mr. RINNE. Rinne, Rinne, sir. 

Senator DOMENICI. Rinne. Who is with us today to provide the 

subcommittee with an overview of the 638 Contracting process. Sixthirty-eight refers to Indian Self Determination and Education Assistance Act. Senator Campbell and I are fully aware of that Act. 
3 

We certainly did not promote it with the idea that it would be the 

cost of such overruns as this, if that is the case. I am not sure it 

is but my friend, Senator Campbell is nodding, and if it is that is 

not what we intended. So when 638 refers to Self Determination 

and authority utilized for all aspects of Animas-La Plata. It will be 

part of the first panel and I will begin by having Mr. Raley do his 

opening statement after I let Senator Campbell talk. And then if 

we could have your 638 specialist provide us an overview we will 

begin on questions and I would appreciate it if you would give us 

frank answers and that you not fear telling us if it is 638 that is 

not working, tell us. 

Our second panel we have a host of witnesses representing both 

the non-Federal sponsors, local water authorities, tribes that are 

party to the project. We appreciate you all taking time to be with 

us. 

With that, Senator Campbell, would you care to make your opening remarks? 

STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL

Senator CAMPBELL. Thank you, Mr. Chairman. First, I’d like to, 

with your permission, submit for the record a statement from Senator Allard, who could not be here this morning. If that would be 

all right? And second, I have to chair another hearing at 11:00 so 

I am going to stay as long as I can but I do have all of the testimony in writing here that I will read at length. 

Senator DOMENICI. Senator, I intend to come to your hearing so 

we are going to break here in time. 

Senator CAMPBELL. Thank you, thank you. 

Senator DOMENICI. If you will make sure that you say there that 

I am late and I am coming. 

Senator CAMPBELL. Yes, I will, thanks. We will have a vote in 

the middle of that hearing, as you know, but we will keep that 

going. 

As you know, Mr. Chairman, the Animas-La Plata is very important to southwestern Colorado and the northwest part of your State 

too, and it was an effort that you and I both worked on for a number of years. This was originally authorized, I don’t think a lot of 

people know it, but was authorized clear back in the 1950’s when 

Congressman Wayne Aspenall from western Colorado was in the 

House as the Chairman of the Interior Committee. It was authorized at the same time as the Central Arizona Project in the Central 

Utah Project, and never was built. And for years, since I first came 

to Congress, I have worked on this but the fight even goes back farther than that, clear back to 1868 when the Ute tribe signed a 

treaty with the United States that was never honored. And of 

course, as we both know in the history of the United States government, when dealing with Indian tribes most of them were never 

honored, unfortunately. But the Colorado Ute Indian Water Rights 

Settlement Act, as it was called, of 1988 was the bill that I first 

introduced when I came to Congress 18 years ago to try to move 

the project again. And as I leave the Senate my goal certainly is 

to make sure that this project is on-line with no further unexpected 

bumps in the road. 
4 

I am just as concerned as you are about the size of the cost overrun. The revised estimates increased the cost of over $162 million, 

as you have mentioned. That is a lot of money. And I am the last 

person who wants to spend more Federal money on unexpected cost 

overruns. But this is certainly unexpected for all of us. I was astounded when I was told by Secretary Norton that there was a cost 

overrun. But it is the United States’ honoring of a treaty that was 

signed in 1868. I think we need to look at that foremost. And also, 

we need to look at why these overruns have occurred to make sure 

that there is no additional cost to be incurred by the project in the 

future, as you have already mentioned. I know there has been some 

discussion about whether the 638 Contracting is largely to blame 

for the overruns. After examining the numbers as closely as I can 

I do not think there is a basis for that claim. While there are some 

additional costs associated with tribal contracting, some additional 

costs were envisioned by the Self Determination Act and the 638 

costs on the Animas-La Plata contract are well within the normal 

range. Part of the problem, in my view, is that there is a lot of confusion about what 638 Contracting is and is not. The Self Determination Act allows certain Federal agencies to contract with Indian tribes to conduct government programs or build Federal 

projects that are intended to serve Indian people. The act is intended to benefit tribes by permitting them to obtain the experience necessary to compete in today’s complex business and governmental world. The Act also recognizes that active tribal participation in programs and projects to serve Indian people will result in 

a product that is more likely to meet the needs of the tribes and 

tribal members. What 638 Contract is not, however, is a blank 

check to tribal organizations to build a project no matter what it 

costs. And you have certainly spoken to that. These contracts are 

very carefully negotiated, there are extensive scoping sessions, determinations of fair and reasonable prices, partnering agreements, 

secretarial revisions of plans based on tribal concerns and many 

other procedures to ensure that the government is not blind-sided 

by unexpected costs. And I want to make one thing very clear. The 

increases caused by these cost overruns should not and will not be 

passed on to local water users. The local water users did not know 

that there would be cost overruns and I think it would be unfair 

to have them have to pick up the slack. 

PREPARED STATEMENT OF SENATOR WAYNE ALLARD

Thank you, Mr. Chairman, I am looking forward to the testimony 

as long as I can stay. 

Senator DOMENICI. Senator Allard’s statement will be inserted 

for the record. 

[The statement follows:] 

PREPARED STATEMENT OF SENATOR WAYNE ALLARD

Thank you, Mr. Chairman, for allowing this statement to be presented before the 

committee. After listening to the testimonies presented today, it will become quite 

evident that the history of the Animas-La Plata project has been one of compromise 

and challenge. The witnesses gathered today have spent decades working toward 

the fulfillment of this project, including my colleague, Senator Ben Nighthorse 

Campbell. 
5 

Growing up in rural Colorado and throughout my tenure as a public servant, the 

Animas-La Plata conflict endured. In fact, it continued for more than three decades 

until the authorizing amendment passed in 2000. Until that point, every time water 

and water projects were discussed, the promises and unsettled claims to the Colorado Ute Indian Tribes persisted. Today, 4 years after the historic agreement of 

2000, the Federal Government is fulfilling its obligation to the Ute Indian Tribes 

and to satisfy the water treaty obligations. Dirt is finally moving and the reality 

of a promise fulfilled is beginning to take shape. 

I would like personally to commend Senator Campbell for his tireless efforts from 

his days in the House of Representatives to his current time in the Senate and 

through four different presidential administrations to fulfill our Nation’s treaty obligations. 

The current situation, indeed the reason for this hearing, has caused a moment 

for responsible reflection. I am concerned, as is everyone here, about the cost overruns. I also realize that we are all here today to assure that future projects learn 

from ALP. However, I would reiterate to the Committee that there remains strong 

support for this project from citizens and locally elected officials. I have no doubt 

that the issues brought forward today will build a stronger partnership between the 

Bureau and all Section 638 partners. It took 130 years for Congress and the administration to recognize the responsibility to build the project. I will continue to support the efforts of local partners and the efforts of Senator Campbell today, through 

completion of the project, and long after. 

Thank you Mr. Chairman. 

Senator DOMENICI. Senator Campbell, let me say, while I have 

joined you along the way from the original down to Animas-La 

Plata right to this day, I am sorry we will not have you around for 

a longer period of time. But I hope that during the ensuing months 

before you leave us that you will join in making sure, with me and 

others, that we can finish it in a reasonable manner. And a reasonable manner does not mean these kinds of overruns or we will end 

the project in the middle. And that is what will happen. 

Now with that I want to start. Secretary Raley, would you please 

give us your statement? Brief it. It will be made a part of the 

record at this point. 

STATEMENT OF BENNETT W. RALEY

Mr. RALEY. Thank you, Mr. Chairman, Senator Campbell. I want 

to thank you for this opportunity, and I mean that very seriously. 

My presence here today is simply a function and a reflection of the 

seriousness with which Secretary Norton and myself and the Commissioner take the construction cost estimate increase. We were 

horrified, as you are, to find it out, that it existed. And Secretary 

Norton directed, immediately, that there be an exhaustive review 

of the reasons. We’re here today to report on those reasons. But I 

want to harken back to your comments before the hearing started, 

Mr. Chairman. You said, well, come up and shake hands while we 

start friends. I know we’ll end friends, Senator, because friends 

have the obligation to be honest with one another. We will be honest with you and we will be honest with the public with respect to 

what happened here. We will depart friends because we share the 

same goals, protecting the public interest and moving forward with 

the Animas-La Plata Project in fulfillment of the United States’ obligations to the tribes, once, finally we hope. 

With me today are Bill Rinne, Deputy Commissioner of Reclamation and Rick Ehat, Project Construction Engineer. Mr. Rinne, in 

fact, was tasked by the Commissioner, having not had involvement 

in the Animas-La Plata Project, to assemble a team within Reclamation of individuals that had not been directly involved in the 
6 

Animas-La Plata Project, to do a review on lessons learned. Mr. 

Ehat, as you know, is the man on the ground, on the point to help 

us fulfill our obligations to you and the public. Senators, Mr. Chairman, these two gentlemen have my trust and I hope that they will 

earn yours. 

We’re here today to discuss what the Department has learned 

from the Animas-La Plata experience. More importantly, we’re here 

to discuss what the Department and Reclamation have done and 

will do in order to assure both you and the public that the AnimasLa Plata and future Reclamation projects will be constructed in a 

cost-effective manner based on the best information available. As 

I said before, I want to assure you that the Secretary, myself and 

the Commissioner were deeply disturbed when we found out that 

the cost of completion of the Animas-La Plata Project was approximately $500 million, in today’s dollars, instead of the $338 million 

we all previously thought. And in fact I will assure you, Mr. Chairman and members of this committee, that the questions internally 

have been far more pointed and far less tactful than are likely to 

ever emanate from this committee, given the conduct of the Senate. 

The Secretary immediately directed Reclamation to take three 

steps: find out what happened to Animas-La Plata; find out what 

can be done to fix this problem and review other Reclamation construction projects to see if similar problems exist elsewhere in Reclamation. From an analytical standpoint there were at least fundamental causal factors for the increase in the construction cost estimate. First, and let me be very clear about this, there were management failures by Reclamation in the management and implementation of this project. There were ample opportunities, both 

pre- and post-authorization, to fully analyze the cost estimate for 

ALP. I would add that there are other factors that may have contributed to the unhappy result that we face today, but my purpose 

here today is to focus on the Department’s responsibility and Reclamation’s responsibility for what happened and our ability to ensure, as you said, Mr. Chairman, that it never happens again. 

The first that I would mention is, due to the organizational 

changes, from 1993 to 1995, and I’m not suggesting a disagreement 

or, for that matter, agreement with those changes; they simply 

were and are what they are; the processes that had been in place, 

developed over decades for construction management, if you will, 

were sunsetted. In particular, the Reclamation instructions that 

had been built over the years to deal with complex construction 

projects were sunsetted effectively in 1995. In retrospect, and 

again, I am not distracting attention from or suggesting that this 

was the dominant reason; I started out by referring to Reclamation’s responsibility in the construction cost estimate increase and 

do not flinch from that. But we also must recognize, if we are to 

address this in the future, in retrospect it has become clear to us 

that what happened was in essence the wiring was ripped out and 

not replaced with anything in a systemic way. We know that now, 

we know that too late to avoid what happened at Animas-La Plata. 

What happened in the interim was that the wiring was put in 

place in an ad hoc and incomplete manner. And if it weren’t for the 

fact that this happened at Animas-La Plata, quite frankly, it was 

a function that was, it was a result that was bound to happen un-
7 

less and until the discipline and control and reporting functions to 

the public and Congress were replaced. And we recreate at a different level what was sunsetted with the Reclamation instruction. 

Finally, Reclamation, and perhaps others, lacked an adequate 

understanding of the cost differences, notice I say cost differences, 

of contracting under the Indian Self Determination and Education 

Assistance Act, or 638 as it’s commonly referred to, versus traditional Reclamation contracting. 

Let me respond explicitly and without ambiguity to questions 

that have been raised by yourself, Mr. Chairman, and Senator 

Campbell. Six-thirty-eight is not the cause of the construction cost 

estimate increase. The cause was, with respect to 638, a lack of understanding in the Bureau and elsewhere as to the differences between 638 and what Reclamation traditionally does. If there’s been 

a misunderstanding of the Department’s perception as to the factor 

that 638 plays in this, either on the Hill or with our partners in 

the tribes, I apologize for that. But it is the position of the Secretary and myself that 638 is not the cause of the increase. It was 

our lack of comprehension of the differences. And we are comfortable that 638, with what we know now, can be implemented 

throughout the Animas-La Plata Project and other projects in a 

way that fulfills the requirements and goals of that Act and also 

achieves the goals of protecting the public interest. 

Now, these causal factors represented themselves in what I 

would call symptoms. Among those symptoms include a dependence 

on appraisal level information as if it was a feasibility or higher 

level of certainty with respect to cost estimates. That was a fundamental error, the Bureau played a significant role in that. But the 

fact of the matter is that what was treated as feasibility-level work 

was in fact far less than that; it was appraisal-level work. And that 

was a symptom of the causal factors I’ve referred to. 

Another symptom, mischaracterizations. Not to my knowledge intentional, but omissions that were very serious of site conditions. 

To be blunt there was an assumption that the site for the pumping 

plant was soil and in fact it is bedrock. There’s a significant difference in cost for excavating that site. That was a management 

failure to not understand that. There was a failure to fully factor 

in the cost impacts of environmental and other constraints. 

Throughout the process there were costs associated with changes 

in site locations that were not adequately discussed with our partners or with you. There were omissions of costs in the 1999 estimate. There was, fundamentally, an inadequate review, in Reclamation, of the draft cost estimates that were relied upon by Congress. There was also and has been in the months since the discovery of the increase an inappropriate characterization by Reclamation personnel, inadvertent, I know, of the role that 638 

played in the cost increase. I said, without reservation, that 638 is 

not the cause of the cost increase, that it was—— 

Senator DOMENICI. Has the Bureau ever had big contracts under 

638? 

Mr. RALEY. Not to my knowledge, sir. And the experience, the institutional knowledge within the Bureau, let me put it this way, it’s 

far greater now than it was as Animas-La Plata was going through 

the process. That is something that the look back has identified as 
8 

a critical need and in fact the Bureau of Reclamation has reached 

out to other resources in the Department, at the BIA and elsewhere, where they have a longer and deeper history of working 

with 638, so that the misunderstandings and mistaken assumptions that were present in Animas-La Plata are not repeated. 

As I indicated, Secretary Norton has directed that there be a 

multi-level response or a review and assessment. In response to 

that, Reclamation has created a new organizational structure 

which clearly lays out the responsibility for project construction. 

Reclamation has doubled its efforts to consult with project sponsors 

on the scheduling of construction activities and reviewing design 

changes to save costs at every opportunity. Reclamation is tracking, on an on-going basis, the actual costs incurred against the 

overall 2003 construction estimate, something that was not previously done. We’re providing this information to project sponsors 

and the general public on a monthly basis. Reclamation is reviewing its procedures for cost estimates and construction to identify 

and correct process deficiencies that may have led to the ALP cost 

estimate problems. In essence, we need to rewire in a more effective manner what was taken away with the sunsetting of the Reclamation instructions. 

Senator DOMENICI. Now, you say rewire, you’re using that as an 

analogy, right? 

Mr. RALEY. Yes sir. There were very elaborate, some would say 

too elaborate, Reclamation instructions that in essence provided 

the discipline and structure for the management of projects starting with engagement of Congress moving forward to completion. 

With the sunsetting of the Reclamation instructions for a wide 

range of reasons, what we realize now and didn’t know until we 

thought about it, was that much of the discipline, much of the reporting and the identification of who’s responsible for what, where 

the buck stops for particular decisions was swept away and only replaced on an ad hoc basis. That was a management failure within 

Interior. Reclamation, as I said, has reached out to other resources 

to fully understand 638. And finally, Reclamation and the Department are engaged in a long-term process that’s intended to enable 

Reclamation to fulfill its core mission of delivering water and 

power in a manner from Reclamation facilities that achieves the 

goals set by Congress and our responsibility to the public. One of 

the most important parts of this process is an effort to identify the 

human capital and institutional structures that need to be in place 

so that Reclamation can fulfill its responsibility to you and the public for ensuring that projects like Animas-La Plata are completed 

in the most cost-effective manner. 

In summary, the Department reiterates its support for AnimasLa Plata completion and moving on. Reclamation takes responsibility for problems that occurred at Animas-La Plata. Reclamation 

has implemented measures for controlling costs on Animas-La 

Plata. Reclamation is actively consulting with project sponsors on 

all aspects of the project. Reclamation stands behind the 2003 cost 

estimate of $500 million plus indexing. Reclamation has streamlined reporting and accountability for construction management. 

And we’re using this as a lessons learned so we avoid this experience in the future. 
9 

If I could step back one last time and then turn this over for 

question from you, Mr. Chairman and Mr. Campbell, in the longrun our perspective is that there’s an irreducible minimum function 

or core concept that Reclamation needs to be able to serve. Reclamation in the next century will inevitably, or Reclamation or its 

equivalent, will have responsibility for operating and maintaining 

many of the projects built over the last century. Reclamation or 

someone in the Federal Government will have responsibility for rebuilding and modernizing what we’ve built over the last 100 years. 

As you mentioned, Senator, the demand for water and power is 

growing, not shrinking, and we must maintain existing capacity if 

we’re to meet the challenges of the future. 

And third, Reclamation will have a need to manage construction 

of whatever new projects Congress authorizes and funds within the 

Reclamation program. Our long-term goal is to take action now to 

put in place the pieces at Reclamation that will allow it to meet 

all of those goals and that we rebuild and restore the trust that 

must exist between Reclamation and Congress and Reclamation 

and the public. 

PREPARED STATEMENT

Senator, there’s nothing that’s been said with respect to 638 that 

we would disagree with, by either you or Senator Campbell. Mr. 

Ehat and Mr. Rinne are here if you wish to have a discussion of 

the details of the contract negotiations and I leave it to you, Mr. 

Chairman, as to whether you’d like them to summarize the actual 

process that Reclamation used and is using now for 638 or if you 

wish to move on to other areas of interest to you. 

[The statement follows:] 

PREPARED STATEMENT OF BENNETT W. RALEY

Mr. Chairman, I am Bennett Raley, Assistant Secretary of the Interior for Water 

and Science. My testimony today is intended to help the committee understand why 

the cost estimate to complete the Animas-La Plata Project (Project) increased from 

$338 million in 1999 to $518 million today, and to explain the steps we’ve taken 

to ensure that the problem does not recur. 

BACKGROUND

The purpose of the Project, essentially, is to divert, pump, store, and convey water 

from the Animas River at Durango, Colorado to provide water for both Indian and 

non-Indian municipal and industrial uses in Colorado and New Mexico. It is required to fulfill the requirements of the Colorado Ute Settlement Act Amendments 

of 2000. 

After several changes in the scope of the project over six decades, the project plan 

is now settled on four key project features: the Durango Pumping Plant; Ridges 

Basin Inlet Conduit; Ridges Basin Dam; and the Navajo Nation Municipal Pipeline. 

Project construction also required the relocation of parts of a county road and natural gas pipelines. 

2003 PROJECT CONSTRUCTION COST ESTIMATE

Reclamation began developing the new Project construction cost estimate in early 

2003, which contained a total estimate of $500 million, based on January 2003 price 

levels. The current indexed price for the project is $518 million. 

After these construction cost estimates for the Project were completed in July 

2003, Secretary Norton directed Reclamation to review the costs associated with the 

project to explain the reasons for the increase in the construction cost estimate. Reclamation undertook a detailed and critical review of technical and administrative 

data, held discussions with Reclamation staff involved in program and construction 

management, and met with project sponsors to prepare the report. The complete re-
10 

port, including a chronology of the project dating to 1956, is submitted for the record 

along with this statement. 

In summary, there is no single reason why the construction cost estimate for the Project increased from $337.9 million in 1999 to $500 million in 2003. There are, 

however, several factors that contributed to the increased estimate that I will focus 

on today: (1) the accuracy and completeness of the 1999 construction cost estimate, 

along with additional costs associated with final Project design and construction; (2) 

the failure to include the cost of contracting under the Indian Self-Determination 

and Education Assistance Act (ISDEA) Public Law 938–638; and, (3) inadequate 

communication between Reclamation and sponsors of the Project concerning cost 

factors related to design options and decision-making. 

THE 1999 PROJECT CONSTRUCTION COST ESTIMATE

In general, the report shows that, with the exception of the Ridges Basin Dam 

feature, the 1999 Project construction cost estimate was incomplete and inaccurate 

for the pumping plant, inlet conduit, gas pipeline and road relocations, and the 

newly-added Navajo Nation Municipal Pipeline. 

The 1999 estimate was prepared by qualified engineers hired by the Ute Mountain Ute Tribe (UMUT) who relied upon several years of Reclamation data and analyses. Key factors that contributed to the underestimate included: 

—Dependence on appraisal level information at the feasibility study phase; 

—Mischaracterization of site conditions; and 

—Failure to fully factor in the cost impacts of environmental and legislative requirements. 

A crucial problem with the 1999 estimates was that they were identified as being 

at the feasibility level, when they were actually based upon less developed appraisal 

level data. Another factor that contributed was oversight. In the early 1990’s, Reclamation was reorganized to give Area Offices greater autonomy to design and manage construction, eliminating the Technical Support Center’s (TSC) oversight role. 

This fact alone contributed to the lack of attention to the 1999 estimates accuracy 

or source. 

Despite concerns raised by TSC technical staff in Denver to the Western Colorado 

Area Office that the feasibility design and estimate used in the 1999 Draft Supplemental Environmental Impact Statement (DSEIS) did not contain sufficient information and detail to complete an in-depth review of cost estimates, work on the 

1999 DSEIS pushed ahead without addressing this concern. In 1999 and early 2000, 

attention was on completing environmental requirements with limited focus on accuracy of the cost estimate. 

Nevertheless, the 1999 cost estimate was included in the July 2000 Final Supplemental Environmental Impact Statement (FSEIS), used to support the Colorado Ute 

Settlement Act Amendments of 2000 authorizing the project, and formed the basis 

for negotiations of repayment contracts for some of the Project sponsors. 

The 2003 estimate for the Durango Pumping Plant is $52 million above the 1999 

estimate. Approximately $38 million of this increase was due to the type and quantity of material that must be excavated: bedrock vs. soil, and project management 

and site support costs. 

Neither the total volume to be excavated nor the bedrock was factored into the 

initial design concepts by the contractor. 

Another $28 million of the increase was to relocate parts of gas pipelines and 

County Road 211 from the Ridges Basin Reservoir site, again due to increased excavation and directional drilling. 

Reclamation did not identify these significant costs until completing final designs 

for the Durango Pumping Plant. 

COSTS TO COMPLY WITH PUBLIC LAW 93–638

The spirit and intent of the ISDEA is to provide Tribes an opportunity to be selfdetermining and to take a more active role in those activities that impact their daily 

lives. Under the ISDEA, the Secretary must allow a Tribe to contract for any work 

that is a program, service, function, or activity administered by the Secretary for 

the benefit of a Tribe. The ISDEA is not a sole-source program; it is a congressionally mandated, direct-source program that directs the Secretary to contract with 

Tribes under certain situations. In the 1988 Settlement Act, Congress mandated application of the ISDEA to the Animas-La Plata Project. 

Contracting under Public Law 93–638 (the ‘‘638 process’’) differs from traditional 

competitive bidding. Under the ISDEA, the fixed-price construction contracts (requested by the Ute Mountain Ute Tribe) are to be comprised of: (1) the reasonable 

costs to the Tribe of actually performing the work; (2) the costs to the Tribe of audit-
11 

ing the general and administrative expenses incurred by the Tribe in performing the 

work; (3) the costs of developing the project proposal; and (4) a fair profit. 

The objective of the negotiations is to arrive and a fair and equitable price for 

the award, not to obtain the lowest possible award price. Nor does the price have 

to conform to either party’s cost estimate. 

The 1999 cost estimate did not include additional costs of applying ISDEA. Instead, it was based on construction costs in a competitive bidding environment. The 

2003 Project construction cost estimate includes a 30 percent Estimating Difference 

Factor (EDF) that would be applied to future Project contracts. The intent of using 

the EDF was to try to more accurately estimate and account for Reclamation and 

contractor administrative and other costs likely to occur in negotiating future 

ISDEA contracts. While the 2003 EDF equate to $43 million to apply ISDEA, accounting for 24 percent of the increase (none of which was included in the 1999 estimate), there is some optimism that the actual amount could be less for the remainder of the Project as Reclamation, the Tribe, and other Project sponsors work more 

closely on Project implementation. 

COMMUNICATIONS BETWEEN RECLAMATION AND PROJECT SPONSORS

The report found that communications and discussions between Reclamation 

Project staff and Project sponsors about the cost factors related to design options 

and decision-making have been inadequate. Specifically, communication as required 

by existing contracts was not detailed or timely enough to allow sponsors input on 

construction plans and progress, changing conditions, or other information associated with the construction of the Project. 

As a result of this finding, the Project Construction Committee was established 

by Reclamation in 2001 to provide a system to assure that necessary internal and 

external coordination and management of the project occurred during construction. 

Reclamation has also reconfigured the Project Construction Committee to improve 

interaction and communications with the sponsors. It is our opinion that this reconfigured process seems to be working quite well at this time. 

CONCLUSION AND NEXT STEPS

Mr. Chairman, despite the cost increases, Animas-La Plata is still a viable project 

and a high priority for our customers. Moving the project forward is crucial to satisfying the Indian Water Rights Settlement and meeting future non-Indian municipal 

water supply needs in southwestern Colorado and northwestern New Mexico. 

Reclamation has completed or is taking steps to manage and complete the Project 

in the most cost effective and efficient way possible. These actions, when fully implemented, will provide the safeguards necessary to avoid similar occurrences on this 

and other Reclamation Projects in the future. 

First, the basic construction cost estimate for the Project has been redone by Reclamation. Management efforts will continue to save costs during scheduling of construction and final design of components of the Project. Second, Reclamation has reviewed its internal organizational approach to construction of the Project and reconfigured the organization as necessary to improve construction management and 

interaction and communication with sponsors. Third, the ISDEA processes are being 

reviewed to improve efficiencies in construction of the Project. Fourth, as noted 

above, Reclamation has reconfigured the Project Construction Committee to improve 

the external communications with Project sponsors. Fifth, Reclamation will use 

Value Engineering processes, in cooperation with Project sponsors, to seek additional ways to reduce Project construction costs. Finally, Reclamation is reviewing 

its procedures for cost estimates and construction to identify and correct process deficiencies that may have led to the Animas-La Plata Project cost estimate problems. 

Thank you for the opportunity to testify today and update this committee on the 

progress we are making in constructing the Animas-La Plata Project. I would be 

happy to answer any questions you may have at this time. 

Senator DOMENICI. Senator Campbell, knowing your schedule, 

and you have a very important hearing and it has to do with Indian problems also, would you like to question? 

Senator CAMPBELL. I have, yes, a couple. I appreciate it, Mr. 

Chairman. First of all, I have to tell you, Bennett, we have both 

known you for a long time, worked with you on a lot of different 

water projects. I am really upset about this, as is the Chairman, 

and reading your testimony while you were talking I have to tell 
12 

you that, as to your own omission, you guys really dropped the ball 

on this. As I understand it you had no experience dealing with 638 

contracts yourself, or your department had not, and you did not do 

any research with any government agencies which had experience 

dealing with 638 contracts or with the Indian Self Determination 

and Education Act. Is that right? 

Mr. RALEY. Senator, Reclamation had had minor exposure with 

638 and some other projects including Central Arizona and others 

but nothing of this significance and complexity. 

Senator CAMPBELL. Okay. 

Mr. RALEY. And it’s very clear that for good intentions, they 

thought that they could do it then move forward. The thing I love 

about Reclamation is they’re can do. You give them a job, they’re 

going to get it done. They did not stop and ask questions within 

the Department about the knowledge that was there, that could 

have avoided some of the misunderstanding and mischaracterizations that’s occurred over the last couple of months as to 

the role of 638. 

Senator CAMPBELL. All right. Well, let’s move on since we have 

a short time. Reading your testimony, it says that $38 million were 

increased over because of, and I quote, ‘‘site support costs, moving 

some gas pipelines and a county road.’’ The only county road I 

know that really has to be moved is one that is pretty far away 

from where the pumping station is now. Why would that be included in the county road? 

Mr. RALEY. Senator, may I ask Mr. Rinne to answer that? 

Senator CAMPBELL. Yes, please do. 

Mr. RINNE. Senator, the county road referred to there is within 

the Ridges Basin Dam site and that is the only one that was 

moved. That is part of the overall cost because it’s included in the 

Ridges Basin Dam feature. 

Senator CAMPBELL. Okay. It says you were not aware that it was 

going to be bedrock versus soil that would have changed the site 

support cost. Why did not somebody do some core drilling or something to find out what the hell was under the ground? 

Mr. RALEY. Senator, I asked the very same question. And I’m 

going to refer to Mr. Ehat for the answer. 

Mr. EHAT. Thank you, Mr. Raley. Senator Campbell, there were 

many exploration holes in the area. What I would characterize as 

the problem with the original estimate, the 1999 estimate, is that 

there were mistakes in interpreting that data that were not caught 

by Reclamation. We knew there was bedrock there sir, that was 

very clear. 

Senator CAMPBELL. So you did some core drilling and who did 

the analysis of that? 

Mr. EHAT. Reclamation had developed an extensive file of the information on the site, as well as Department of Energy, for the 

UMTE clean-up and that information was handed over to the estimators but as near as we can tell, Senator, that information was 

mischaracterized and mistakes were made. 

Senator CAMPBELL. By who? By Reclamation or Energy? Who 

made the mistakes? 

Mr. RALEY. I can answer that, Senator. Reclamation is responsible for the mistakes. 
13 

Senator CAMPBELL. Did I also understand you to say there was 

no single reason but design changes that were not anticipated were 

also part of it, between 1993 and 1995? 

Mr. RALEY. Yes sir. 

Senator CAMPBELL. What were some of the design changes? I 

know it was downsized to what is now called the Animas-La Plata 

Light. Is that the design changes you are talking about? 

Mr. RALEY. That’s one and in fact, some of the basis for the prior 

costs were based on the larger project where there were commonly 

assumed to be economies of scale that didn’t necessarily exist in a 

downsized project. And I’ll ask Mr. Rinne if there are others. 

Senator CAMPBELL. So you assumed that with the downsizing of 

the project the costs would go down too but some of them did not? 

Mr. RALEY. Yes. 

Senator CAMPBELL. You also mentioned, as I think I heard you 

say, the changes in law between 1993 and 1995, there were some 

environmental law changes or changes in requirements of fulfilling 

environmental impact statements. Is that correct? 

Mr. RALEY. Well, not changes in law, Senator, but a lack of foresight and incorporation of the costs of meeting environmental requirements. 

Senator CAMPBELL. Who do you think should foot the bill for the 

cost overruns? 

Mr. RALEY. That’s something the Secretary is reviewing at this 

very moment. As you well know, Senator, the issue of 

reimbursability is one that the statute provides. The Secretary has 

a role in consultation with the project partners. We have already 

started those discussions with project partners and with Congress. 

Senator CAMPBELL. Well, at this point do you believe as I do that 

the cost overruns should not be passed on to those water users who 

are going to be purchasing the water, since they had no idea that 

there was going to be this kind of a cost overrun? 

Mr. RALEY. Senator, I do not have an administration position on 

that point. 

Senator CAMPBELL. How will the flow of funds, including the request in this year’s President’s budget, on the Animas-La Plata affect its completion? 

Mr. RALEY. Well, conceptually, depending on what Congress does 

this year, that will define how much ground we have to catch up 

for future years. As you well know, the project was to be constructed over 7 years and appropriated over 5. Now we have two 

factors. We have the cost increase, which increases our challenges 

dramatically, but we also have funded the project at its basic capability so far and put off for succeeding years the building of the appropriations so that we can complete construction in 7. We have 

been engaged with committee staff to talk about various options for 

completing the project in accordance with the law, given the new 

realities of the remaining amount needed to be appropriated, including the cost increase. 

Senator CAMPBELL. So you do not have a revised schedule for 

completion at this time? 

Mr. RALEY. Well, at the present time, and Mr. Ehat can speak 

in greater detail, we’re proceeding under existing law and appropriations. The question, Senator, if I may, is given the additional 
14 

cost increase, we can either cover that by increasing the appropriations for Animas-La Plata, early and then ramping down. Or we 

can flatline the appropriations, stretch out the project longer. There 

are additional costs associated with stretching it out longer. 

Senator CAMPBELL. Can you compare those real quick? I mean, facing a $500 billion deficit this year, we are in a world of hurt and 

all of our subcommittees have already pretty much been told that 

we are going to have some very tight spending caps and I think 

that is going to last for a number of years, myself. 

Mr. RALEY. As do we, Senator. 

Senator CAMPBELL. And that reality tells me that we are probably not going to be increasing the money so we are going to have 

to go the other way if it is completed and extend the time frame 

in which it is built. You do not have an estimate on the number 

of years that would extend it if we went that, do you? 

Mr. RALEY. We have options. It’s not an infinite range but it’s a 

question of what can be done without increasing the costs unacceptably and fit within the administration’s budget and what Congress chooses to do. In all likelihood one option will be to extend 

the construction by a period of several years. There are also options 

for meeting the original 7 year. 

Senator CAMPBELL. When you said there is a cost of extending 

it also it is by several years? Did I understand that is what you 

just said? Do you have any kind of an estimate on that? What if 

we extended it several years, over and above this already cost overrun, what it would cost? 

Mr. RALEY. Senator, if you’ll allow me, given the sort of sorry 

record we’re dealing with right now with estimates that weren’t 

fully vetted and thought through, I’d like to decline compounding 

that error by giving you our rough estimates now and having, not 

you but others, mistakenly rely on those. I will commit to you, to 

the Chairman and to your staff, that we will provide you with all 

the data that we have in terms of options so that we fully understand the benefits and costs of a particular funding stream. I just 

don’t want to repeat a mistake we’re dealing with of giving with 

a number that is wrong. 

Senator CAMPBELL. I understand. This is one mess, you know 

that. 

Mr. RALEY. Yes sir. 

Senator CAMPBELL. You heard the chairman mention, in the middle of his statement, that maybe we ought to just stop the thing 

in the middle or something. I do not think, my own view is that 

that’s not an option because if we did stop it the cost would be 

more for stopping than it would be for building it, if you factor in 

the tribes going back to courts. And you know that is how we got 

in this in the first place. And if we had gone to court we had some 

estimates that, I mean, even before it was revised down to what 

is called Animas-La Plata Light, we had some estimates that costs 

of fulfilling our obligations to the tribes which probably would have 

won in court because they have those old, original treaty rights 

that pretty much gives them first priority in the water down there, 

it would have cost more than building a project even when it was 

at its highest level of funding, before it was downsized. In addition 

to that, some of the numbers that we got back with the number of 
15 

farmers and ranchers and homes and so on that would literally be 

without water if the tribes won in court and then appropriated 

their water. So in my view we are in a mess but it is a mess we 

have got to fix and move forward, we cannot just stop the thing, 

it has got to go forward. But there is no doubt in my mind too, it 

is going to be tough to find the money without the project time 

frame over a period of years. And I know that some of the other 

members even that could not be here today, they are pretty concerned about it too because a lot of the Western people who have 

been supportive of this over the years are now saying, ‘‘Oh my 

gosh, what has happened to us? How come we did not know all the 

numbers before we supported the project?’’ So I would just encourage you to get back with this information as quick as you can on 

some estimates about extending the building time frame. 

Mr. RALEY. Yes, sir. 

Senator CAMPBELL [presiding]. I have no further questions. Was 

the Senator coming back in a minute? Why do not we just sit for 

a recess for a few minutes until Senator Domenici comes back. 

You might not be the right one to answer this but I do have one 

more I was going to ask. Someone has told me, although I have not 

seen anything documented about it, that the amount of archaeological things that were found in the site far exceeded what had 

been expected and that was one of the things that took a lot more 

time and a lot more manpower because they are required by law 

to find all these things that are on the ground, pot shards or, you 

know, things that have been left there of eons of people that lived 

in that area before we ever got there. Do you happen to know the 

size of the increase? 

Mr. RALEY. Senator, I’ll ask Mr. Ehat to respond. The answer is 

yes, there was very substantial in terms of the additional cultural 

work that was done. 

Senator DOMENICI [presiding]. Mr. Ehat, you want to help with 

that? 

Mr. EHAT. Yes sir. 

Senator DOMENICI. Go ahead. 

Mr. EHAT. Our estimate of that increase is about $7.5 million. 

Senator CAMPBELL. Seven-and-a-half million dollars? That is in 

manpower and so on? 

Mr. EHAT. That’s correct, sir. 

Senator CAMPBELL. Thank you, Mr. Chairman. 

Senator DOMENICI. Well, if your estimating on that is as bad as 

the rest it could be $20 million. In any event, let me tell you that 

I know the Commissioner could not be here and I know the Secretary is very busy. But I want to tell you so you can carry it back 

to the Commissioner, I have been advocating for the last 3 years, 

trying to put more work in the Bureau. And it is a little easier up 

here, budget appropriation-wise, to try to do that. But you might 

as well tell them that I am not very impressed and I do not know 

if I am going to continue down that path. I do not know that the 

Bureau is going to be growing. If they cannot do this, you know, 

I am going to go with the Corps of Engineers. And I do not look 

for projects of this magnitude for awhile that I am any part of, 

going to the Bureau of Reclamation unless they convince me that 

they have had a material change in the way they do business. Now, 
16 

I am sorry about that but, I am in a position that we do not know 

where we are going to get the money. That is the problem. It is not 

a problem of just talking. The money given to this subcommittee 

is not enough to take care of the subcommittee on what we estimated. And then we have to argue about water every year, you 

know that, you guys go before OMB and it does not make a darn 

what we need, they give us less. Right? We cannot do it this year. 

There is not enough money. So I hope you understand. 

Mr. RALEY. Senator, I will deliver that message to the Secretary. 

Senator DOMENICI. Please do. 

Mr. RALEY. But I know she, philosophically, agrees with you. If 

we can’t fulfill our obligations to Congress and the public then 

something needs to change. 

Senator DOMENICI. The other thing I want to tell you is, you 

know, from my standpoint, this is one of the most important 

projects that I joined him in putting together. And we had plenty 

of opposition, right? 

Senator CAMPBELL. Right. 

Senator DOMENICI. And we did it because we thought the Indian 

solution was so big that it permeated the arguments that were 

given. And here we end up, those people who were opposed, they 

are probably laughing at us. And so I want to get on with this. And 

also, out there in the audience there are various groups, like mine, 

from San Juan County. They do not have a lot of money, they are 

up here saying, how do we find the $7 million or $9 million that 

this cost estimate is going to cost us? And I do not know how to 

find it. I do not want them to pay it but I do not know how to find 

it. So I wish you would be looking at that, the overruns for others 

who do not have the money. You know, they cannot come up here 

and ask us for it so they are there in San Juan County and there 

must be more of them, right? 

Senator CAMPBELL. Sure. All the water users. 

Senator DOMENICI. And they are getting shafted. So we have got 

to be concerned. In my opinion you ought to ask for more money 

in sort of an asterisk column, saying we cannot expect those who 

approved of this project and joined it, we cannot expect them to pay 

this overrun. The overrun we are paying for but I do not know if 

we are going to get the money we are paying for it, right? But I 

do not know how these others are going to do it so I am worried 

about it, all right? 

Now, has the Bureau developed a new completion schedule for 

this project? 

Mr. RALEY. Mr. Ehat? 

Mr. EHAT. Yes sir, we have, and we’re looking at, based on the 

new estimate and a reasonable funding level, about a 2-year delay 

on the features and about a 3-year delay on first fill. 

Senator DOMENICI. So you are going to spread the money and 

needs out a little? 

Mr. EHAT. That’s correct, sir. 

Senator DOMENICI. To ease up a little bit on our budget. Okay. 

Is this schedule based on optimum annual funding allocations or on 

historic funding levels? 

Mr. EHAT. Well Senator, we are working with you and your staff 

to provide options. 
17 

Senator DOMENICI. Okay. 

Mr. EHAT. In terms of future funding obviously we’re going 

through that internally with the 2006 budget as we speak and 

that’s going to be dependent on decisions you make with respect to 

the 2005 budget and, you know, we can’t select, at this point, exactly what the option will be. 

Senator DOMENICI. Right. 

Mr. EHAT. But we want to provide you with all the information 

we have. 

Senator DOMENICI. Well, what might the impact be to the total 

project cost if you assume less than optimal funding? 

Mr. EHAT. Well, depending sir, on how far it stretches out you 

could see increased costs over and above the $500 million plus indexing of, under one scenario for stretching out our number of 

years, $38 million, for example of additional costs just associated 

with an extended delay. But again, we’re working with the information, it’s almost a numeric analysis, we’re trying to figure out 

what the right suite of options are to share with you as we deal 

with the reality. 

Senator DOMENICI. All right. Report to the Secretary indicates 

that there has been a legislated cost ceiling in place. If the Bureau 

would have examined its cost data then that would have worked. 

This sends an awful, troubling message that unless there is a cap 

on the funds you do not have to worry about accuracy. But a cap 

is not good either. We do not like them because then we have to 

come back here and play with the caps because we do not expect, 

in a project of this magnitude, that there are no changes. So I hope 

that you are doing something to change this philosophy and I certainly hope you are doing that in a way that we can understand. 

And I would like you to tell us, not now, but to get us information 

on that as soon as you can. 

Mr. RALEY. Yes sir. 

Senator DOMENICI. If so, is the Department comfortable enough with their current estimate of $500 million that it could be used 

as a basis for a ceiling if we choose to do that? 

Mr. RALEY. Five hundred million dollars plus indexing. 

Senator DOMENICI. What? 

Mr. RALEY. The $500 million plus indexing. 

Senator DOMENICI. Yes. 

Mr. RALEY. Yes sir. 

Senator DOMENICI. What do you guys, you two experts, what do 

you say about that? 

Mr. RINNE. I agree, Senator. We feel that $500 million with indexing is something we should be able to stay with. 

Senator DOMENICI. Okay. There have been significant expenditures that cost the sharing partners and they do not feel they 

should be required to pay. I told you that. 

Mr. RALEY. Yes sir. 

Senator DOMENICI. Including costs associated with what appears 

to be errors on the part of the Bureau as well as old sunk costs 

that really are irrelevant to the projects currently under construction. Are there any remedies within the Department that would 

allow for relieving these cost-sharing obligations? And if not, would 

this have to be addressed legislatively? 
18 

Mr. RALEY. Senator, the statute itself, with respect to AnimasLa Plata provides for secretarial determination of reimbursability 

of costs and there’s a standard set out in the statute. We are part 

of the way through an intensive legal review of that issue. Obviously there’s the factual review of the basis for the cost increases 

and we have already started what is provided for in the statute 

and that is dealing with this issue in cooperation with the project 

sponsors. 

I’d like, if I could go back a moment, to say that our comfort in 

the $500 million plus indexing is predicated on the assumption 

that appropriations are. 

Senator DOMENICI. Senator Campbell, before you leave, could I 

ask you, do you feel comfortable with my assumption that these 

cost-sharing people that are not part of direct depart, that we 

ought to look at how much their increase is, the increase for which 

they had nothing to do. 

Senator CAMPBELL. Mr. Chairman, when you were out of the office I did mention that to Bennett that I did not think they should 

be responsible at all since they had nothing to do with it and they 

are just going to get blind-sided with an increase that the water 

users should not have to pay for this cost overrun. 

Senator DOMENICI. Okay. So what you are going to do is check 

this very carefully, Senator. 

Senator CAMPBELL. Yes sir, we are in the process. 

Senator DOMENICI. Now if that does not fit in the $500 million 

you have got to tell us, because if we have to pass separate legislation, No. 1, is it in, No. 2, is it legal? Right? Will you do that for 

us? 

Mr. RALEY. Yes sir. 

Senator DOMENICI. Okay. Thank you. I will be over at your hearing in about 30 minutes. 

Six-thirty-eight process. You indicated that $43 million increase 

in the cost is attributed to this process. I would like to know how 

much of that $43 million, or how it breaks down? In other words, 

how much of the Bureau of Reclamation oversight of the contract, 

how much is purely due to contract negotiation processes? 

Mr. RALEY. Well Senator, for purposes of the 2003 cost estimate 

for planning purposes the Bureau was conservative so there are no 

future surprises for you and others, put in a factor of 30 percent 

to cover the costs associated with 638. That does not mean that the 

tribes have or will have a 30 percent profit, as some have said, nor 

does it mean that the actual cost will be that. The Bureau, with 

its new understanding of what 638 is and is not, and with cooperation of the tribes, is working through the individual contracts and 

are quite hopeful if not comfortable that the 30 percent, which is 

put in there for planning purposes, will be in excess of what is actually required. 

Senator DOMENICI. Well, I do not know if the Indian leadership 

that accepted the responsibility under 638 are present here. Are 

they? They are in the second panel? Okay. Then we are going to 

take up a few questions with them. 

Mr. RALEY. Yes sir. 
19 

ADDITIONAL COMMITTEE QUESTIONS

Senator DOMENICI. I do not think we ought to give them carte 

blanche either. You know, they have got to do this in a way that 

is realistic and should minimize your employment needs on the civilian side. So with that, there are some things you have got to get 

us, would you get them to us as soon as possible? 

Mr. RALEY. Yes sir. 

Senator DOMENICI. All right. You are excused. 

Mr. RALEY. Thank you sir. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

SCHEDULE AND COST

Question. Has the Bureau developed a new completion schedule for the project? 

Answer. Yes, Reclamation has developed a revised completion schedule. This 

schedule is being evaluated in light of various funding scenarios. 

Question. Is this schedule based on optimum annual funding allocations or historical funding levels? 

Answer. The schedule currently used for project management is based upon a reasonable funding level with currently appropriated amounts, the President’s request 

of $52 million for fiscal year 2005. 

Question. What might the impact be to the total project cost if you assume less 

than optimal funding? 

Answer. Should a slow funding level result in decreasing the efficiency of construction which results in as much as a 2-year delay, an increase could be expected 

of as much as $38 million above the $500 million project cost estimate, not including 

indexing. We are continuing to study various funding scenarios and associated impacts on the construction schedule and corresponding impacts to the project cost estimate. 

Question. Has this information been communicated to the cost sharing partners? 

Answer. Reclamation is actively consulting with the project sponsors. During our 

last project coordination meeting, Reclamation discussed and highlighted this issue 

with the project sponsors and specifically described that delays in the project schedule could increase overall project costs. 

LEGISLATED COST CEILING

Question. The report to the Secretary indicates that had there been a legislated 

cost ceiling in place, the Bureau would have examined its cost data more rigorously. 

This sends an awfully troubling message: that unless there is a cap on the funds, 

you don’t have to worry about accuracy and dependability in your project data. I 

certainly hope that you are doing something to change that philosophy. 

My question to you is: Do you feel that imposing a cost ceiling at this stage of 

the project would be beneficial? 

Answer. A great deal of focus is towards containing costs and completing ALP 

within the updated cost estimate amount. This amount must, of course, be adjusted 

for inflation. While a cost ceiling may be perceived as beneficial, we do not feel it, 

by itself, would effectively control costs. However, should Congress impose a ceiling, 

we would not object. 

Question. And if so, is the Department comfortable enough with their current cost 

estimate of $500 million that it could be used as a basis for such a ceiling? 

Answer. Reclamation, in partnership with the project sponsors, is aggressively 

looking for opportunities for cost savings in the implementation of the ALP project. 

Barring any unforeseen external factors or funding delays driving up total completion costs, Reclamation believes we can construct the ALP within the 2003 construction cost estimate of $500 million. Of course this figure would be adjusted annually 

for inflation, possibly resulting in a larger total figure, but would still be considered 

at or below the $500 million level in January 2003 dollars. This would be the only 

increase in the total cost of that project that we can foresee, keeping in mind that 

construction of major civil works is an inherently uncertain field. 
20 

COST REIMBURSEMENT

Question. There have been significant expenditures that the cost sharing partners 

don’t feel they should be required to pay, including costs associated with what appear to be errors on the part of the Bureau, as well as old ‘‘sunk costs’’ that really 

are irrelevant to the project currently under construction. 

Are there any remedies within the Department that would allow for relieving 

these cost sharing obligations? 

Answer. Reclamation is reviewing the options available within current laws and 

policies to address the allocation of project costs among the various project purposes 

and beneficiaries. It is the firm position of the administration that project beneficiaries for all projects should contribute their fair share of the reasonable and unforeseen project costs. 

Question. If not, would this have to be addressed legislatively? 

Answer. Reclamation is working very diligently with the cost sharing partners to 

explain all of the costs and the associated allocations. 

CHANGES IN DESIGN AND CONSTRUCTION

Question. There were changes made to some of the project features that resulted 

in major increases in cost. 

Could you summarize these changes and explain why they were made? 

Answer. Additional costs relating to completion of final design and decisions made 

on project features or their components since the project was authorized for construction in December 2000 explain most of the revision in the cost estimate. The 

largest increases in the cost estimate were from: (1) the additional excavation requirements for two components of the Ridges Basin Dam (gas pipelines and County 

Road 211 relocations, and (2) the actual site conditions at the Durango Pumping 

Plant, (the presence of mostly bedrock rather than common soil materials and construction support requirements). In both cases, these requirements were identified 

after completion of the original cost estimate when decisions were made by Reclamation about relocations and when the design process had advanced sufficiently 

to expose under-estimates of quantities and types of material respectively. 

Question. Can you explain the process that was used for communicating these 

changes with the project partners? 

Answer. Some information was provided through compliance reviews such as environmental assessments and also as a part of the updates during Project Construction Committee (PCC) meetings. 

More recently, Reclamation has implemented a process to manage, track, and report cost and schedule changes. This process yields clear data that are shared with 

project sponsors on a regular basis. 

Question. Has anything been done to improve this process? 

Answer. Reclamation has reconfigured the PCC and has redoubled its efforts to 

consult with project sponsors on the scheduling of construction activities, tracking 

costs, reviewing design changes on an ongoing basis with all project sponsors. This 

process includes ‘‘real time’’ reporting of all issues and holding periodic (monthly) 

face to face project update meetings with all project sponsors. 

Question. Do you feel that these improvements will satisfy the obligations set 

forth in the contracts the Bureau has with the paying partners? 

Answer. Yes, we are confident that the changes will meet the obligations in the 

repayment contracts paying partners. 

638 PROCESS

Question. You indicated that a $43 million increase in the cost is attributed to the 

638 process. 

I’d like to know how that $43 million breaks down. In other words, how much 

is for Bureau of Reclamation oversight of the contract, how much is purely due to 

the contract negotiation process, etc.? 

Answer. The $43 million figure is a conservative estimate to account for both the 

additional costs that can be incurred through the application of Public Law 93–638, 

and changes in the scope of the contract that occur during any negotiated procurement. 

Question. In theory, the 638 process is supposed to provide the opportunity for 

Native Americans to ‘‘fill the shoes of federal employees’’, which should result in 

lower staffing levels by the Federal agency. Could you address the impacts to staffing levels on this project as a result of the process? 

Answer. The 1988 Settlement Act specifically allows the design and construction 

of ALP to be subject to the provisions of the Public Law 93–638 Act. The Tribes 
21 

have, in detail, designated the specific activities they will take the lead in performing. Reclamation’s project functions have been designed around those designated Tribal activities, resulting in no identified duplicated functions. The application of the 638 process at ALP has provided the Tribes many opportunities to enhance their skills and to become more self sufficient. We believe the Tribes are taking full advantage of these opportunities. 

Question. Had the 638 process not been congressionally mandated, would it have 

been a viable option for accomplishing this project? 

Answer. Yes. 

BUREAU OF RECLAMATION PROCESSES

Question. You claim that you have taken steps to improve the structure of the Bureau of Reclamation team that is working on the project. 

Can you explain these steps and also explain how they will improve the 

functionality of the team? 

Answer. First, we have realigned the reporting structure (chain of command) in 

Reclamation’s Upper Colorado Region so that the ALP Project Construction Engineer now reports directly to the Regional Director and all on-the-ground construction functions report to the Project Construction Engineer. This essentially utilizes 

highly experienced construction management staff in control of the project. 

Second, we have initiated new cost-tracking procedures that relate all project 

costs to the cost estimate in order to detect problems early and avoid surprises. This 

system provides an accurate ongoing evaluation of project progress vs. the construction cost estimate. Finally, the PCC provides a medium for constructive, ongoing 

input from project sponsors. 

Question. It concerns me that critical members of the Bureau’s project team are 

not co-located in Durango. As I understand, some functions reside in Grand Junction, and others even as far away as the Regional Office in Salt Lake. Wouldn’t it 

be a good idea, especially given the situation, to have a dedicated team on site? 

Answer. A dedicated on-site team is being utilized. Some support functions are 

being used from the Grand Junction and Salt Lake City offices for efficiency. These 

support services are for items such as environmental support, archeological support, 

personnel support, budget support, etc. This allows the on-site team to not fully staff 

for these functions, thereby reducing the overall project costs. 

Question. Please outline for the committee the Bureau responsibilities for ALP before and after the July cost overrun was identified. 

Answer. The organization charts shown on Attachment 1 identify Reclamation’s 

current organization and our organization prior to the issuance of the revised 

Project Cost Estimate in July, 2003. Reclamation has taken some aggressive actions 

to complete the Animas-La Plata Project in the most cost effective and efficient way 

possible. The newly established construction office has the sole responsibility to construct the project, a format that we have full confidence in being successful. We 

have increased the level of coordination and consultation with the project sponsors 

so that they are properly involved in decisions on the project, and I have developed 

a system to allow for open and complete cost accountability. 

Question. When the July estimate was released, how much had been spent on 

ALP activities up to that point—post-1998? Include sunk costs. 

Answer. When the revised project estimate of $500 million was released in July 

2003, a total of nearly $131 million had been obligated on the Project. This includes 

sunk costs of approximately $68 million (expended through fiscal year 1998) and 

$63 million obligated from fiscal year 1999 forward. 

Question. Please provide a categorical breakdown of non-contract costs of ALP. 

Answer. Attachment 2 provides a breakdown of the Reclamation non-contract 

costs in a tabular form. The table identifies the number of Full-Time Equivalent 

(FTE’s) Reclamation employees by office and by project feature. The table also provides a general description of the functions being performed by the various offices 

on each of the project features. 

Question. ALP report only discusses firm fixed-price contracts and obligations. 

Provide information on other ways the 638 contract is used for other than fixed 

price contracts. What other types of contracts are involved in 638 for ALP? Provide 

the size and cost of the contracts. 

Answer. The ISDEA (Public Law 93–638) process is used for a variety of contracting purposes with the Ute Mountain Ute and Southern Ute Indian tribes. The 

use of firm-fixed price contracts for the construction work on the features in Southwest Colorado is described in the Commissioner’s report. The following tables detail 

the work activities performed by the Ute Mountain Ute and Southern Ute Indian 

tribes under 638 contracts for non-construction work. 
22 

1 Industry resources—Construction Cost estimating resources such as; MEANS, Richardson, 

CAT Handbook, etc. 2 Abstract—Compiled by the Contracting Officer showing the bid results for each construction 

procurement. 

NON-CONSTRUCTION 638 CONTRACTING 

Value Number 

of Tasks 

Cultural Resource Mitigation Cooperative Agreement ........................................................................ $12,053,012 

Tribal Services Cooperative Agreements: 1

Ute Mountain Ute Tribe (Proposal preparation, Management of tribal activities, Tribal involvement in meetings, Vegetation management on mitigation lands, etc.) ...................... $1,692,253 8 

Southern Ute Indian Tribe (Aquatic monitoring, Land acquisition appraisals) ....................... $88,148 3 

Total ....................................................................................................................................... $1,780,401 11 

Future Services Cooperative Agreements: 2

Ute Mountain Ute Tribe (Tribal management, tribal involvement in meetings, etc.) .............. 3 $2,750,000 

Southern Ute Indian Tribe (Aquatic monitoring) ....................................................................... 3 $120,000 

Total ....................................................................................................................................... 3 $2,870,000 

1 Includes costs from start of construction in 2001 to current. Does not include value of work performed by tribes prior to 2001.

2 Does not include contingencies. 

3 Estimated value. 

Question. Please provide a briefing on the philosophy of the construction schedule 

for ALP—flow rate of funds, what it means from year to year. Clearly mark where 

funding authority ends. 

Answer. The schedule for Animas-La Plata has been revised to incorporate the 

2003 CCE. The net result of the revised project schedule is a delay of project features of approximately 3 years and a delay of reservoir first fill completion of approximately 3 years to 2011. Current funding authority expires in 2006. The revised 

project schedule is based upon a reasonable level of funding per fiscal year and 

maintains the high risk work of the Ridges Basin Dam and Durango Pumping Plant 

as high priority work. This allows the dam and the pumping plant to be constructed 

in an efficient fashion avoiding increased project costs due to stretching out production. However, in so doing other features have been moved in time to allow for the 

reasonable level of funding. One of these deferred features is completion of the Navajo Nation Municipal Pipeline (NNMP). The NNMP shows a delay of approximately 

32 months beyond the previously accepted project schedule. The Reclamation team 

is prepared to brief the chairman and other committee members and staff in greater 

detail at your earliest convenience. 

Question. Provide information on the IGCE estimate process. How accurate is it? 

What the estimates were, what was spent, how far over/under, on schedule, etc. 

What has BOR learned from the process so that it gets better? 

Answer. Reclamation prepares planning level (appraisal and feasibility) cost estimates through procurement related estimates Independent Government Cost Estimates (IGCE) bid estimates as tools for project management. Planning level cost estimates such as feasibility cost estimates are used for project authorization while 

IGCEs are required by the Federal Acquisition Regulations (FAR) for procurement 

of construction projects. Reclamation utilizes proven techniques, bureau-unique 

knowledge, and accepted industry resources 1 to develop its cost estimates. All 

IGCEs’ are developed as if Reclamation were submitting a proposal to compete for 

the work using the same technical information available to prospective bidders. 

Reclamation continually analyzes bid information on projects by evaluating the 

IGCE versus contractor’s bids. Reclamation maintains and monitors bid results by 

the use of abstracts 2 showing comparison between the IGCE and contractor’s bids. 

The IGCEs’ of each unit price are measured against the bid results shown on abstracts. These are updated and used to improve the accuracy of IGCEs’ and unit 

price for subsequent cost estimates (planning through IGCE). 

Reclamation publishes quarterly the Bureau of Reclamation Construction Cost 

Trends (published in the Engineering News Record). These trends track price fluctuations for features of work specifically being constructed by Reclamation. 

Reclamation’s Dam Safety Program is the single largest construction program in 

Reclamation at the present time. As noted in Appendix 2, page 2–5 of the Commissioner’s report to the Secretary, the program has completed 65 modifications at an 
23 

overall cost of approximately 86 percent of the total estimated cost of the projects. 

While there have been historical variations in actual costs from the originally estimated costs, our office actively engages in management techniques to both control 

costs and to evaluate cost saving measures. 

For the Animas-La Plata contracting, a process has been established where by the 

field construction office contracting staff provides pertinent actual costs of the construction contractor to the Technical Service Center. This information is evaluated 

and utilized where appropriate in development of subsequent IGCEs for the 

Animas-La Plata procurement process. This process is consistent with the provisions 

of the Public Law 638, Indian Self Determination, Education, and Assistance Act 

for fixed price construction contracts. 
24 
25 

ATTACHMENT 2.—ANIMAS-LA PLATA PROJECT—COLORADO AND NEW MEXICO—FISCAL YEAR 2004 RECLAMATION STAFF ESTIMATES AND FUNCTIONS (SEE LISTING 

BELOW) 

Activity 

ALPCO FCO WCAO–Durango WCAO–Grand Junction Regional Office TSC (Denver) 

FTE’s Function(s) FTE’s Function(s) FTE’s Function(s) FTE’s Function(s) FTE’s Function(s) FTE’s Function(s) 

1—Project Management ............................ 0.86 a, b, c, d ....... 0.23 a, b, c ............ 1.31 a, b, c, d, g, 

u.

0.40 a, b, c, d, u ... 0.41 d, g, u ........... 0.31 a, c 

2—Program Management ......................... 2.92 e, f, g ............ 0.00 ........................ 0.24 e, f, g ............ 0.05 e, g ................ 0.05 e, g ................ 0.25 g 3—Cultural Resources .............................. 0.21 o ..................... 0.05 n, o ................ 1.00 o, s ................ 0.00 ........................ 0.04 s ..................... ............4—Fish, Wildlife, and Wetlands Mitigation. 0.87 n, o ................ 0.00 ........................ 2.40 k, l, m, n, s, t. 0.10 s, t ................. 0.20 s, t ................. ............5—Fishery Enhancement .......................... 0.01 a, c ................ 0.00 ........................ 0.15 a, c, h, s ....... 0.62 l, m, n ........... 0.05 l, m ................ ............6—Ridges Basin Dam & Reservoir .......... 22.86 a, b, c, d, f, i, 

j, n, o, p, u.

0.00 ........................ 1.95 h, i, k, s ........ 0.01 c ..................... 2.92 c, h, i, j, n, o, 

p.

3.75 m, n, p, q, r 

7—Durango Pumping Plant ...................... 16.35 a, b, c, d, i, n, 

o, p, u.

0.00 ........................ 0.69 h, i, s ............. 0.00 ........................ 1.19 c, h, n, o, p ... 4.72 m, n, p, q, r 

8—Navajo Nation Municipal Pipeline ....... 0.00 ........................ 8.16 a, b, c, d, i, l, 

m, n, o, p.

0.22 h, s ................ 0.02 a, c ................ 0.10 c, p, o ............ 0.74 m, n, p, q, r 

9—Ridges Basin Inlet Conduit ................. 0.95 a, b, c, d, i, l, 

o.

0.00 ........................ 0.06 h, s ................ 0.00 ........................ 0.04 c, i, o ............. 0.01 l 

Totals ............................................ 45.03 ........................ 8.44 ........................ 8.02 ........................ 1.20 ........................ 5.00 ........................ 9.78 

Total FTE’s=77.47. Reclamation Staff Functions Include: (a) Project Management; (b) Sponsor Coordination and Consultation; (c) Federal & Non-Federal Agency Coordination; (d) Public Relations; (e) Budget and Accounting; (f) Project Scheduling and cost estimate updates; (g) Up Front Cost Share Agreement Administration and Repayment Contract Prep. & Admin; (h) Supplemental NEPA Compliance; (i) Land and Land Interest Acquisition; (j) Utility Relocations; (k) Land and Water Management; (l) 

Investigations and Pre design; (m) Design; (n) Contract Negotiation & Procurement Support; (o) Contract and Cooperative Agreement Administration; (p) Quality Assurance including safety; (q) Design Support during Construction; (r) Geology Support during Construction; (s) Environmental and Cultural Resources Oversight; (t) Mitigation Planning and Implementation; (u) Project Operations. 

Notes.—FTE—Full-Time Equivalent; ALPCO—Animas-La Plata Construction Office; FCO—Farmington Construction Office; WCAO—Western Colorado Area Office; Regional Office—Upper Colorado Regional Office, Salt Lake City, Utah; TSC— 

Technical Service Center, Denver, Colorado; Washington DC staff not charged to A–LP. 

(27) 

NONDEPARTMENTAL WITNESSES 

Senator DOMENICI. Can we have the next panel, please? Howard 

Richards, Chairman of the Southern Ute Indian Tribe. Selwyn 

Whiteskunk, Councilman of the Ute Mountain Ute Tribe. Mike 

Griswold, President of the Animas-La Plata Water Conservation 

District. And Randy Kirkpatrick, Executive Director of the San 

Juan Water Commission. If we can have you all there. 

Thank you all. In particular I thank my friend from San Juan 

for coming. You have been working on this project from the time 

your hair was black until it got gray. That is pretty long. 

Mr. KIRKPATRICK. That’s correct. 

Senator DOMENICI. Now, we are going to start right now. What 

shall we start with? Okay, Howard Richards, Chairman of the 

Southern Ute. Mr. Chairman, proceed. 

STATEMENT OF HOWARD D. RICHARDS, SR., CHAIRMAN, SOUTHERN 

UTE INDIAN TRIBE 

Mr. RICHARDS. Good morning. Mr. Chairman, thank you for the 

opportunity to testify today. I am Howard Richards, Chairman of 

the Southern Ute Indian Tribe. I ask that my full statement be 

part of the record. I will briefly summarize my testimony. 

Senator DOMENICI. It will be. 

Mr. RICHARDS. First I want to express the tribe’s appreciation to 

you and Senator Campbell for your support for the Animas-La 

Plata Project. 

Senator DOMENICI. Thank you. 

Mr. RICHARDS. And the settlement of the tribe’s water rights 

claim. Without this committee’s support the Southern Ute Tribe 

would face a difficult court battle to obtain the water rights to 

which the tribe is entitled. We believe that building ALP and settling the tribal claims through development of new water supplies 

is a much better choice for the tribe and its neighbors in Colorado 

and New Mexico. We appreciate that you and Senator Campbell 

continue to work hard to help us accomplish that goal. 

Mr. Chairman, ALP is the heart of the settlement of the water 

rights claim of the Southern Ute Indian Tribe. It will provide the 

tribe and our sister tribe, the Ute Mountain Ute Tribe, with water 

to meet tribal needs now and into the future. The tribe has always 

recognized that it needs a firm and reliable water supply to create 

a permanent homeland for which the Southern Ute Reservation 

was meant to provide. ALP is a critical part of that plan because 

it allows the tribe to obtain the water supplies which it needs without depriving our neighbors of the water supplies that they have 

used for many years. The tribe has worked hard to make ALP and 

the settlement of their tribal water claims a reality. We have been 

fortunate to have neighbors and State governments in New Mexico 

and Colorado who recognize the need for additional water supplies 
28 

and who have fought for ALP. The Tribe appreciates the many contributions and sacrifices that those parties have made. 

As you know, ALP has a long history. In 2002 Congress amended 

the 1988 Settlement Act to allow the settlement of the tribal claims 

through the construction of a smaller project that will provide Ute 

Tribes and water users in Colorado and New Mexico with water 

only for municipal and industrial uses. As this hearing demonstrates, the construction of the smaller ALP is a difficult job that 

requires the cooperation of many parties and the Federal Government. We were very disappointed by Reclamation’s announcement 

last summer of its increased cost estimate for the project. It is important to build the project in a cost-effective fashion and on time. 

The failure to build the project on time would once more upset the 

settlement of tribal water rights claims. It is also important that 

our neighbors receive project water at a reasonable cost consistent 

with their expectations at the time the 2000 amendments were 

passed. 

I want to emphasize that there is much to do and that we must 

all continue to work together. The actual construction of the project 

is complicated and there are a number of other obligations such as 

environmental mitigation that must be met to build the project on 

time. Funding is also crucial. Without adequate funding the schedule will be delayed and the cost of the project will increase. There 

are also some issues which must be resolved through the parties. 

I’m confident that we can meet those challenges and complete the 

project and the settlement. 

PREPARED STATEMENT

Mr. Chairman, in closing I want to emphasize the importance of 

ALP to the tribe. The tribe wants to do whatever it can to accomplish the goal of building the project on time and in a cost-efficient 

manner. With that, Mr. Chairman, I thank you and the committee. 

[The statement follows:] 

PREPARED STATEMENT OF HOWARD D. RICHARDS, SR. 

Mr. Chairman, thank you for the opportunity to testify today. I am Howard D. 

Richards, Sr., Chairman of the Southern Ute Indian Tribe. 

On behalf of the Tribe, I want to express our appreciation to you and Senator 

Campbell for your long-standing support for the Animas-La Plata Project (‘‘ALP’’) 

and the settlement of the Tribe’s water rights claims in southwest Colorado. We are 

grateful for the assistance you and the Committee have provided over many years. 

Without that support, we would be facing a long and difficult court battle to obtain 

the water rights to which the Southern Ute Indian Tribe is entitled. We believe that 

the construction of ALP and the settlement of the tribal claims through the development of additional water supplies is a much better choice for both the Tribe and 

its neighbors in Colorado and New Mexico. We are grateful that you both share that 

view and continue to work so hard to accomplish that goal. 

Mr. Chairman, ALP is the heart of the settlement of the water rights claims of 

the Southern Ute Indian Tribe and will provide the Tribe and our sister tribe, the 

Ute Mountain Ute Tribe, with water to meet tribal needs, now and in the future. 

Since at least 1968, ALP has been a critical part of the Southern Ute Indian Tribe’s 

plans for the future. The Tribe has always recognized that it needs a firm and reliable water supply to create the permanent homeland which the Southern Ute Indian Reservation was meant to provide. While Federal law promises Indian tribes 

the rights to use water to meet their present and future needs, tribes often are 

forced to resort to lengthy and bitter court cases to secure those rights. The recognition of tribal rights under Federal law frequently results in significant water shortages for farmers, ranchers and towns in the surrounding area. The Southern Ute 

Indian Tribe has always sought to secure the water supplies which it needs without 
29 

1See 43 U.S.C. § 620. 2 16 U.S.C. §§ 1531–44. 3 (Dec. 10, 1986) (‘‘Settlement Agreement’’). 

4 Colorado Ute Indian Water Rights Settlement Act of 1988, Public Law No. 100–585 (1988) 

(‘‘1988 Settlement Act’’). 5 25 U.S.C. §§ 450 to 458bbb–2 (‘‘Self Determination Act’’) (frequently called ‘‘Public Law No. 

93–638’’ or ‘‘638’’). 

depriving our neighbors of the water supplies that they have used for many years, 

sometimes for many generations. 

The Tribe has worked hard to make ALP and the settlement of the tribal water 

claims a reality. We have been fortunate to work not only with you and Senator 

Campbell, but also to have neighbors and State governments in New Mexico and 

Colorado who recognize the need for additional water supplies in southwest Colorado and northwest New Mexico, and who have fought equally hard for ALP. Our 

neighbors have acknowledged the validity of the tribal rights and have made many 

sacrifices to ensure the recognition of the Tribe’s water rights and the settlement 

of the tribal claims. The Tribe greatly appreciates those contributions to the settlement effort and the construction of ALP. 

As this hearing demonstrates, the construction of ALP is a complex and difficult 

task that requires the continued cooperation of many parties, as well as the Federal 

Government. Although our interests are not always the same, all of the parties who 

would benefit from the project have worked together to overcome many obstacles. 

Our interests have at times clashed, but we have always managed to find a solution 

that we could all accept. There are some issues which still must be resolved, but 

I am confident that we will continue to work together and continue to move forward 

with building and operating the project. 

Both legally and practically, the construction of ALP is required to settle the tribal water rights claims on the Animas and La Plata Rivers. The average flow of the 

Animas River out of the State of Colorado is more than 700,000 acre-feet per year. 

But like most western rivers, the run-off varies greatly from year to year and takes 

place mostly in the springtime. Without storage, this water supply is of only limited 

use. Since the early part of the 1900’s, parties in southwest Colorado and northwest 

New Mexico have sought to develop this resource to meet the needs of their communities. As a result of those efforts, ALP was authorized by Federal law in 1968.1

Until 2000, the purpose of ALP was to meet irrigation, municipal and industrial 

needs in the area. As structured in the late 1970’s, the project was to provide water 

to users along the Animas River and, in addition, take water from the Animas 

River, store that water in Ridges Basin Reservoir, and deliver the water west into 

the La Plata Basin where it could be used for a number of purposes, including irrigation. When negotiations over the tribal water right claims began in the mid1980’s, the Bureau of Reclamation had completed a ‘‘final’’ environmental impact 

statement, a definite plan report and obtained clearance for the full project under 

the Endangered Species Act,2 and other Federal environmental laws. 

Under the Colorado Ute Indian Water Rights Final Settlement Agreement,3 the 

construction of certain project facilities were required to settle the tribal claims on 

the Animas and La Plata Rivers. The Southern Ute Indian Tribe was to receive irrigation, municipal and industrial water supplies from the project. In addition, certain 

tribal agricultural delivery facilities were to be constructed. In 1988, Congress approved the Settlement Agreement and authorized the construction and use of the 

project as envisioned by the Settlement Agreement.4 Under the Settlement Agreement and 1988 Settlement Act, the two Ute Tribes could return to court to seek recognition of their water rights if the required project facilities were not completed 

by January 1, 2000. Section 10 of the 1988 Settlement Act directs that the ‘‘design 

and construction functions of the Bureau of Reclamation with respect to the Dolores 

and Animas-La Plata Projects . . .’’ were to be ‘‘subject to the provisions’’ of the Indian Self-Determination and Education Assistance Act,5 ‘‘to the same extent as if 

such functions were performed by the Bureau of Indian Affairs.’’ The only caveat 

was the section would not apply if it would ‘‘detrimentally affect the construction 

schedules.’’ 

Throughout the 1990’s, the project sponsors and Reclamation sought to begin construction of ALP but repeatedly ran into environmental problems involving the Endangered Species Act and water quality issues related to the irrigation component 

of the project. Following a series of public meetings over the fate of the project and 

the tribal water rights settlement, the Department of the Interior proposed resolving the tribal claims through the construction of a smaller project that would only 

serve municipal and industrial users and would reflect the depletion limits imposed 

on the project under the Endangered Species Act. Following the development of an-
30 

6 Record of Decision, Animas-La Plata Project/Colorado Ute Indian Water Rights Settlement 

Final Supplemental Environmental Impact Statement July 2000 (Sept. 25, 2000). 7Title III of Public Law No. 106–554 (Dec. 21, 2000) (‘‘2000 Amendments’’). 

other environmental impact statement comparing the greatly reduced project to the 

non-structural alternative advanced by the project opponents, the Secretary of the 

Interior issued a record of decision finding, among other things, that the reduced 

project was the ‘‘environmentally preferred alternative’’ for settling the tribal 

claims.6

In 2000, Congress enacted the Colorado Ute Settlement Act Amendments of 2000 7

which authorized the settlement of the tribal claims through the construction of a 

smaller project that would provide the tribes and water users in Colorado and New 

Mexico with statutory established water allocations for municipal and industrial 

uses. The 2000 Amendments directed the Attorney General of the United States to 

file the necessary papers with the Colorado Water Court to extend the deadline by 

which the Tribes must return to court to secure their water rights. The Attorney 

General has asked the Court to extend that deadline until 2012. 

The Southern Ute Indian Tribe has worked closely with the Ute Mountain Ute 

Tribe, Reclamation, and the other project sponsors over the past 3 years to build 

the smaller project. 

Reclamation’s announcement last summer of the greatly increased cost estimate 

was a shock and a disappointment. For a variety of reasons, it is extremely important to build the project in a cost-effective and timely fashion. In particular, the failure to build the project on time would once more upset the settlement of the tribal 

water rights claims. It is also important that our neighbors receive project water 

at a reasonable cost, consistent with their expectations at the time that the 2000 

Amendments were passed. 

The Southern Ute Indian Tribe continues to participate on both the Project Operating Committee (‘‘POC’’) and the Project Construction Coordination Committee 

(‘‘PCC’’). In addition, the Tribe, through Sky Ute Sand and Gravel provides 

‘‘batched’’ material for the construction of the project. The Southern Ute Indian 

Tribe has also worked with the Ute Mountain Ute Tribe on the cultural resources 

contract for the project. At the outset of project construction, the Southern Ute Indian Tribe, the Ute Mountain Ute Tribe, and Reclamation discussed the tasks that 

were required to complete the project and determined who would have the lead, who 

would provide input and who would provide oversight on each of those tasks. The 

Southern Ute Indian Tribe has not charged Reclamation for these types of planning 

and coordination activities under the Self-Determination Act, but has only sought 

reimbursement when it actually supplies a product, such as concrete, to the project. 

Tribal representatives worked with Reclamation, on behalf of the Tribe, when it 

was developing its report to the Secretary of the Interior on the factors that resulted 

in the increased cost estimates. These individuals have advised me that they believe 

Reclamation is working diligently to correct the problems that resulted in the increased cost estimate. As you know, the project sponsors were not aware of the 

issues associated the increased costs until they reached the crisis stage. 

In our view, Reclamation has taken two useful steps to address the basic problems that existed with regard to project management. First, Reclamation is working 

to improve communication with the project sponsors. This effort has focused on developing a more formal means of communication about the issues facing the project, 

as well as increased emphasis on the monthly meetings of the PCC. Second, Reclamation has made it clear that Rick Ehat, a construction engineer in Durango, is 

charged with building the project. We have been told to direct our questions and 

concerns in the first instance to Mr. Ehat. We are encouraged by these new procedures and hope that they will improve communication and allow those who are directly affected to work with Reclamation to ensure that the project is built on time 

and in a cost-efficient fashion. 

I want to emphasize the complexity of the tasks that face us in reaching those 

goals. Not only is the actual construction of such a project very complicated, there 

are a number of other obligations that must be met to complete the project on time. 

In particular, construction of the project requires substantial environmental mitigation both in the area and on related matters such as the environmental impact 

statement for the operation of Navajo Dam and Reservoir. These responsibilities require Reclamation to complete various activities and to consult with other Federal 

and State agencies to maintain the construction schedule. Funding is also critical. 

Without adequate annual funding, the schedule will be delayed and the cost of the 

project will increase further. In short, there is much to do, but working together, 

I am confident that we can meet the challenges before us and complete the project 

and the settlement. 
31 

Mr. Chairman, in closing, I want to emphasize the importance of ALP to the 

Southern Ute Indian Tribe. The Tribe wants to do whatever it can to accomplish 

the goals of building the project on time and in a cost-efficient manner. I would be 

glad to answer any questions you may have. Thank you. 

Senator DOMENICI. Thank you very much. Let me just say, Mr. 

Chairman, it is already pretty obvious that your wish that we complete it on time cannot be done. We can keep talking about it but 

we already heard it cannot be done. 

Now, Mr. Whiteskunk, you are next. 

STATEMENT OF SELWYN WHITESKUNK, COUNCILMAN, UTE MOUNTAIN UTE TRIBE 

Mr. WHITESKUNK. Thank you, Mr. Chairman. Honorable Chairman and members of the committee, I’d like to thank you for the 

opportunity to address the members of the Energy and Water Committee regarding the Animas-La Plata Project. I take very seriously 

the honor my tribe has given me by choosing me to represent the 

Mountain Ute Tribe for this hearing. 

The Tribe has waited many years to see the Colorado Ute Indian 

Water Settlement implemented through the negotiations and ultimately the construction of the Animas-La Plata Project. The settlement passed in 1988 provided the Colorado Ute Tribes to participate in the project construction through the Indian Self Determination Education Assistance Act, Public Law 93–638. The opportunity 

for the Mountain Ute Tribe to utilize its construction division to 

undertake this major project is an example of the very reason that 

Congress passed the Indian Self Determination Act, to foster economic development, education, training and employment. It also 

gives the Ute people pride in their work, which benefits our homeland, our people and the capability of all Indian nations utilizing 

Public Law 93–638. Amendments to the Settlement Act were 

passed in the year 2000, which we began our direct role in the 

project development through the Cultural Resource Efforts, which 

were mandated prior to the construction. The Ute Mountain Ute 

Tribe is conducting a cultural resource investigation for the 

Animas-La Plata Project under Public Law 93–638, Self Determination contract. 

In April, 2002, the Tribe contracted with the Bureau of Reclamation to perform these responsibilities under the terms of this contract. The Tribe is responsible for the management, cultural resource in compliance with several Federal laws, including the Archaeological Resource Protection Act, the National Historic Preservation Act, the Native American Graves Protection and Repatriation Act, also known as NAGPRA. The Tribe is working closely 

with 26 consulting tribes to compile the evidence affiliation that is 

necessary for compliance with NAGPRA. 

The Cultural Resource team comprises over 50 individuals, including a six-person oversight committee consisting of a contract 

coordinator, a Ute Mountain Ute Tribal council member, two 

Southern Ute tribal members, a Bureau of Reclamation representative and an external archaeologist. Due to the experience presented 

by the six-person committee, everything from finances to archaeological methodology and ethnographic research is closely scrutinized and kept on track. This has allowed the cultural resource 
32 

portion of the project to progress smoothly, on budget and on schedule. 

To date the Tribe has completed two of four field seasons and has 

excavated 50 archaeological sites. Many Native Americans are 

working on the Animas-La Plata Project, Cultural Resource 

Project, conducting excavation, laboratory analysis and learning 

technical specialties. Approximately 40 percent of the field crews 

were Native American in 2002 and 2003, and in 2004 field season 

numbers are expected to remain high. In addition, the Tribe has 

hired a Southern Ute environmental company to help recruit, hire 

and train Ute tribal members, some with and some without experience. 

Senator DOMENICI. Mr. Whiteskunk, we are going to make your 

whole statement part of the record. So we would appreciate it if 

you would be brief. 

Mr. WHITESKUNK. Yes sir. We have a Ute construction company 

who is doing the construction of the project, Mr. Chairman, and I 

have members of the company here as well to answer any of your 

questions if need be. 

Senator DOMENICI. Are those non-Indian contractors? 

Mr. WHITESKUNK. They are with tribal members. The tribe is 

owned by the tribe, the construction company is owned by the 

tribe. 

Senator DOMENICI. But you have some outside contractors as 

part of that? 

Mr. WHITESKUNK. Yes, employees. 

Senator DOMENICI. What percent of the contracts, I ask either of 

you, are done by non-Indians? 

Mr. WHITESKUNK. I would say 75 percent of the work is done by 

the Ute Mountain Ute Tribe, 25 percent would be non-Indian. 

Senator DOMENICI. I find that very hard to believe but I do not 

have anything else to argue with you about. But I find that very 

hard to believe. This is highly technical and difficult construction 

and I do not know how you could do it with 75 percent Indian. You 

have no experience, right? 

Mr. WHITESKUNK. We, the Ute Mountain Ute Tribe and its company has experiences in a lot of construction-type construction. For 

this project it is the first time that we’ve undertaken this magnitude of a project. 

Senator DOMENICI. How about you, Mr. Richards? 

Mr. RICHARDS. The only involvement we have as far as the 

Southern Ute Tribe is in respect to the cultural resources, mitigation of Animas-La Plata. I sat on the Cultural Resources. 

Senator DOMENICI. You do not build anything? 

Mr. RICHARDS. No, we don’t. We do provide material to the 

project such as concrete, sand and gravel and that’s our only involvement in that, the tribal. 

Senator DOMENICI. All right. Mr. Whiteskunk, could you proceed? 

Mr. WHITESKUNK. Yes sir. From its beginning, as the construction organization, Limited Construction Authority has successfully 

completed a variety of projects in the Four Corners region. The 

types of projects include heavy and highway construction, residential and commercial buildings, municipal improvement, oil field 

construction. All of these are performed on a merit shop basis with 
33 

maximum utilization of Indian laborers and craftsmen. The Ute 

Mountain Ute Tribe Limited Construction Authority subject to the 

provision of the Indian Self Determination Act is performing the 

construction function of the Animas-La Plata Project. To date, five 

separate construction contracts have been negotiated to 

Weeminuche Construction Authority by the Bureau of Reclamation, 

two of which have been successfully completed, three are on-going. 

Other Animas-La Plata construction components are in the process 

of being bid or negotiated and were comprised a majority of the 

project. Weeminuche Construction currently employs 170 people, 

nearly 100 are currently working on the Animas-La Plata Project. 

Native Americans comprise approximately two-thirds of this workforce. As work progresses into the summer of 2004, it is anticipated 

the number of people working on the project will increase substantially. 

Recruitment efforts are made with Native American presence 

and much of the recruiting is accomplished through the Tribal Employment Rights Office of the Ute Mountain Ute Tribe and the 

Southern Ute Tribe. To further enhance the construction skills of 

the workforce the company is training a group of Native Americans 

as heavy equipment operators, mechanics and carpenters to work 

on the Animas-La Plata Project. 

PREPARED STATEMENT

The roles of the Ute Mountain Ute Tribe and Southern Ute Tribe 

have played in the Cultural Resource Mitigation Project construction very simply add more significance to our water rights settlement, the history of which spans more than two decades and represents a very real cooperation between the two tribes and our nonIndian neighbors in the San Juan Basin. The commitment we have 

to see this settlement through the act of 2000 is equally matched 

by our present commitment to build this water project correctly, on 

time and cost effectively. Reaching this goal will be a proud moment for the Ute Mountain Ute Tribe and the Southern Ute Tribe 

and its people. 

I thank you. 

[The statement follows:] 

PREPARED STATEMENT OF SELWYN WHITESKUNK

Mr. Chairman, Senator Campbell and members of the committee. Thank you for 

the opportunity to participate in this important hearing. I am honored to represent 

the Ute mountain Ute tribe and its members today. We have worked very hard and 

have waited many, many years to see the Colorado Ute Indian Water Rights Settlement implemented through the construction of the Animas-La Plata project. 

The Ute Mountain Ute tribe is not a mere bystander in the implementation process. The settlement passed in 1988 provided for the Colorado Ute tribes the opportunity to participate in the project construction through the Indian Self Determination and Education Assistance Act. For the Ute Mountain Utes, this opportunity is 

meaningful for the very reasons Congress passed the Act: 

—this project brings economic development to the tribe and its members, 

—it further promotes education, training and employment among our members, 

—it provides real world experiences in cooperation and management, particularly 

on such a large scale involving so many tribal and governmental programs, 

—it promotes pride in our work and the benefit it brings to our homeland and 

our people. These benefits ultimately make the tribe stronger and better able 

to participate in its own evolution. 

After amendments to the Settlement Act were passed in 2000 and the project was 

ordered to proceed, we immediately began our direct role in project development by 
34 

contracting the cultural resources mitigation responsibilities which must be completed prior to construction and which continue throughout the life of the project. 

The Ute Mountain Ute tribe and the Southern Ute Indian tribe entered into the 

contract for cultural resources mitigation in 2002. The area surrounding the project 

is very important archaeologically in that there are thousands of artifacts, ranging 

primarily from 2,000 to 10,000 years old, and the area is also important to our 

tribes culturally in that it contains a portion of a popular route through the mountains that was used by the Ute people for generations. I am pleased to inform you 

that the contract has proven to be a great success in areas that are very important 

to the tribes: 

—nearly 40 percent of all employees working on the contract are Native American, as well as our own tribal members, 

—we have implemented a popular 5-week Native American training program, 

—the mitigation work has coordinated very well with the construction work, 

—and we have made findings of significant archaeological interest. 

The Weeminuche Construction Authority plays an even larger role in the actual 

building of this critical water storage facility. 

The Ute Mountain Ute tribe owns and operates its own construction company, the 

Weeminuche Construction Authority, and we have designated Weeminuche as the 

prime contractor on the construction of the project. Building a dam such as this is 

extremely complicated and requires a wide range of skills and expertise. We are 

very proud of the work Weeminuche is doing and we see many benefits in the 

project for our own people, and the local community. Our people are gaining handson experience in areas that will prove useful to them in the future. Although the 

opportunities for employment in construction on the project varies with the time of 

year and the particular contract being executed, Weeminuche generally employs 

about 100 people, about 67 of whom are Native American. Weeminuche also utilizes 

many subcontractors, many of which are local to the area. 

The hands-on role the Ute Mountain Ute tribe has played in cultural resources 

mitigation and project construction very simply adds more significance to our Water 

Rights Settlement, the history of which spans more than two decades and represents very real cooperation between our two tribes and our non-Indian neighbors 

in the San Juan basin. The impetus behind the Act is to provide to the tribes the 

water they were promised, but, in the end, we sincerely hope this reservoir will help 

to better serve the needs of all people in the area, particularly during these times 

of drought and severe water shortages. We want this project to remind people forever that the Federal Government’s trust responsibility to native peoples can result 

in great things for all people, and that by working together, local residents, tribes, 

local, State, and Federal governments can achieve real, tangible success. 

The commitment we have made to see this settlement through to the Act of 2000 

is equally matched by our present commitment to build this water project correctly, 

on time, and cost-effectively. Reaching that goal will be a proud moment for the Ute 

Mountain Ute tribe, and when the reservoir is filled with the wet water we have 

dreamed of for so many years, our pride will shine a bright light on Ute Mountain 

and the entire Four Corners. 

Thank you. I will be happy to respond to any questions. 
35 
36 
37 
38 

Senator DOMENICI. Thank you. Our two next witnesses are Mr. 

Griswold and Mr. Kirkpatrick. I would like you to proceed in that 

order and make your statements part of the record and be as brief 

as you can. 

Mr. GRISWOLD. Thank you, Mr. Chairman. 

Senator DOMENICI. You are welcome. 

STATEMENT OF MIKE GRISWOLD, PRESIDENT, ANIMAS-LA PLATA 

WATER CONSERVANCY DISTRICT 

Mr. GRISWOLD. I appreciate that. I’ve been associated with this 

project for 10 years as a director of the Animas-La Plata Water 

Conservancy District and 6 of those years I was president. During 

much of the downsizing and up through 6, 7 months after our July 

31 date. We measure time by that date. We believe that the Bureau doesn’t want to go to the woodshed twice on this project and 

we think there were some mistakes made. We haven’t reached complete agreement with the Bureau on some of the underlying for 

some of the mistakes but we think the Bureau recognizes those. 

And my personal opinion is that I think they were very candid in 

the report that they made to the Secretary. I think that they fully 

intend to be within that indexed $500 million cost. I certainly hope 

so. 

Our district represents a relatively small amount of use of water 

from the project, about 5 percent of the water, but we do believe 

that some of the costs are costs that should not be borne as reimbursable cost by our organization in paying our full and fair share 

of the water, such as the arrangement under 638, which we applaud, we admire that effort to assure assistance for the tribes to 

be able to improve their capabilities. But that isn’t actually a unit 

construction cost, or construction unit cost, I should say, that we 

believe that we should be reimbursing to the Federal Government. 

Let me just say this. For our users of water the resolution, the 

bottom line is pretty straightforward. Is the water affordable? Our 

two principle purchasers of water from our district are going to be, 

we hope, the city of Durango and a rural domestic water system 

for the southwestern third of our county. The price of the water is 

a very significant factor in their planning for feasibility. The city 

will not pay more than they would pay if they had to build their 

own storage facilities. So their possibility of expanding the amount 

that they pay is relatively slight. We were in the final stages of negotiation with them for this purchase when July 31 occurred. The 

Rural Domestic Water Distribution Company is something that is 

still in the future but they’re going to have to get ahead of the 

curve if they’re going to be delivering water. As a matter of fact, 

my successor as president of the District is a person who has to 

haul their domestic water for their home. There are a lot of people 

in our area that are in that position. 

PREPARED STATEMENT

So we do support Resolution. I have been very encouraged about 

the things that I have heard, both from you and from Senator 

Campbell and from Secretary Raley, that by golly, we’re going to 

binge down and really put our efforts to this and we’re going to finish it in a high style. And I support that wholeheartedly. 
39 

[The statement follows:] 

PREPARED STATEMENT OF MIKE GRISWOLD

Mr. Chairman, I appreciate the opportunity today to speak on behalf of the 

Animas-La Plata Water Conservancy District (the District). The District was formed 

under the Colorado law about 22 years ago to plan for and develop the water resources within our boundaries. A primary undertaking of the District has been promotion of the Animas-La Plata Project. The District also expected to be the agency 

to collect payments from irrigators using Animas-La Plata project water, and then 

to pass those funds on as repayments for construction by the Bureau of Reclamation. 

I have been a Director on the District board for 10 years, and its president for 

the past 6 years, until I stepped down in February of 2004. During that period, a 

combination of environmental, financial and political concerns about the original 

Project’s scope brought home the realization that the Project, as originally configured, would not be built in the foreseeable future. Then Secretary of the Interior 

Babbit was adamant that the downsized project could not include any irrigation features. With reluctance, our District supported building a down-sized version of the 

ALP which will allow for the settlement of the reserved water right claims of the 

two Ute Indian tribes of Colorado and provide M&I water for use in our county and 

in San Juan County, New Mexico. The ALP, authorized by Congress in 2000 and 

now under construction, will also allow the Navajo Nation to receive M&I water and 

have it delivered from Farmington, NM to Shiprock, NM by a pipeline to be built 

as part of the Project. 

The Bureau of Reclamation contracted the cost estimation process for the downsized project, and included those costs in the 2000 FSEIS. Our District did not participate in either the preparation or the presentation to the public of these cost estimates. We did argue, however that the ‘‘sunk costs’’ associated with the earlier 

Project’s irrigation features should not be considered as a cost of the downsized 

Project. 

The non-Indian participants in this Project have been consistent in their commitment to pay for their proportionate share of the reasonable construction costs for 

the three remaining Project features which are the pumping station, the conduit, 

and the off-stream reservoir. The 2000 Amendments provide that non-Indian participants could elect to pay their share of the construction costs up front, thereby avoiding being charged interest during construction, or they could execute repayment 

contracts. The District arranged to have the full amount of our share of the project 

costs paid out of funds available to the Colorado Water Resources and Power Development Authority (the Authority). Our share of the Bureau’s construction cost was 

deposited by the Authority in an interest earning escrow account from which the 

Bureau has already made withdrawals in direct ratio to the expenditures of Federal 

appropriations for Project construction. 

Construction officially began on November 9, 2001. Our borrowed money was at 

risk from that date onward, under a contract between the Bureau and the Authority. For the last 2 years, I personally represented our District at construction coordination meetings held by the Bureau. I also served on a task force which drafted 

agreements to be in place when construction was completed. During this time I attended almost all of the Project meetings. As several contracts were let for segments 

of the construction activity, we became aware that some of the price tags for these 

segments were higher than we expected. However, the Bureau did not have its construction activity segmented in a fashion that would permit us to easily compare 

cost segments in the FSEIS. I, personally, questioned the Durango Area Office director regarding the cultural resources contract the Bureau awarded, and was told 

that, yes, the price was higher than anticipated, but that was because it covered 

additional work, such as compliance with the Native American Graves Repatriation 

Act and other added costs resulting from a higher density of archeological sites in 

the Project area. 

Let me emphasize at this point that the Animas-La Plata Water Conservancy District did not employ independent engineering consultants to review or oversee the 

work of the Bureau of Reclamation. We, as many sponsors, relied upon the Bureau’s 

expertise in Project construction. Let me also emphasize that because we had elected to pay our share of the project costs up front, we had placed significant reliance 

upon our contractual agreements with the Bureau which required full consultation 

on Project construction decisions and which limited any further or additional payments towards Project construction costs to those which were reasonable and unforeseen. Despite the fact that there were numerous meetings of the Project Construction Committee during the period from November 2001 until July 2003, little, 
40 

if any, consultation took place. At no time were we informed that there was overall 

concern about the construction cost estimates against which we were operating. 

As a result, we were shocked when the July 31, 2003 letter from Regional Director, Rick Gold, arrived announcing that the cost estimate for completion of the 

greatly reduced Animas-La Plata Project would have to be increased by approximately $162 million. The reasons given by the Bureau for the estimated cost increase are a matter of record that I will not detail in this statement. I have read 

the report the Bureau prepared for the Secretary on the issue. Our District believes 

that report was candid, and evidenced a detailed effort to investigate and explain 

the reason for the cost increases. Several factors included in the report, however, 

did not accurately state the conditions that we believe existed at the time the 1999 

estimates were made and used by the Bureau. 

I will mention a few instances. The bedrock at the pumping plant site was, or 

should have been, known to a high degree of accuracy, as some three dozen test 

wells had been drilled by the Department of Energy (DOE) and monitored by, 

among others, the Bureau. From these test wells the Bureau had the information 

to accurately assess the materials to be excavated but, inexplicably did not use it. 

The fault line which the Bureau states required realignment of the pumping plant 

subsequent to cost estimating was a known feature long before the original estimate 

was approved by the BOR and, in fact, was cited in the 2000 FSEIS. DOE’s UMTRA 

(Uranium Mill Tailings Recovery) team had stated, at a public meeting it conducted 

in Durango, that the ground water recovery on the 46 acres where the pumping 

plant is sited was progressing naturally, and that it did not need any special remedial treatment. Despite that statement the BOR letter suggests that another reason 

the reconfiguration of the pumping plant was dictated, was because of ground water 

recovery needs. These positions seem to be inconsistent with the facts and circumstances known at the time the project cost estimate was accepted by the Bureau. In addition, the decisions to change the pumping plant location, for whatever 

reason, was never the subject of consultation with the Project participants and no 

assessment of the potential for a change in project cost was ever performed. 

There were also other design changes made without consultation with partners 

contrary to the payment contracts the Bureau executed with the two participating 

entities. For some changes limited information was shared—for instance, for the relocation of County Road 211—but these did not, in my estimation, rise to the level 

of consultation. We were told by the Bureau in essence, ‘‘Here is what we are doing 

or are going to do.’’ More importantly, no comparison of the cost difference between 

alternatives was ever presented. The same circumstances occurred with regard to 

decisions on how and where to relocate natural gas pipelines in the Project Area. 

Please be assured that in the Post-July 31 2003 era, the Bureau has devised and 

employed processes which specifically identify issues and changes, and sets forth a 

process for consultation with Project supporters. My opinion is that the increases 

reported in July 2003 should be, for the most part, characterized as CORRECTIONS 

TO THE ESTIMATES and not as COST OVERRUNS. Effectively all of the reasons 

for the significant increase in the project cost relate to mistakes made in the estimate that were not carefully checked by the Bureau or to changes in project design 

that were made by the Bureau after the estimates were prepared without adequately considering the cost consequences. Examples to support this statement include the following: 

—there was only a small increase in cost for the reservoir proper, essentially for 

general inflation and for the cost of 638 process. The estimates for the reservoir 

were generally on target. 

—the one facet of the reservoir construction that did change was in the nature 

and number of drop structures in Basin Creek between the reservoir and the 

confluence with the Animas River. The original cost estimates were inadequate 

because they included too few drop structures. 

—by comparison, the errors in estimating costs for the pumping plant and conduit 

were horrendous. Some of the omissions were: not including an administration 

building; absence of pressure reduction and anti-backflow valves for the conduit 

(I personally asked the Bureau’s lead man about this in mid-2002, and was told 

that they were planned.); insufficient diameter for the conduit to carry the 

planned capacity of the pumps, as examples. 

—redesign of features after the cost estimate was prepared, such as County Road 

211 changed from replacement in kind just outside the high water level to replacement high on the ridge with a road greatly improved in design standards; 

relocating the pumping plant and placing deep into the bedrock; changing the 

gas pipelines’ relocation route to include boring two 36-inch diameter holes for 

over one-quarter of a mile, as examples. 
41 

—costs to be expected from implementation of the Indian Self Determination and 

Education Act (638) contracting process were not included. 

—unspecified Homeland Security features, have also been added. 

I would also like to address the relationship of the 638 Process to the AnimasLa Plata Project. In 1988 and again in 2000, the Congress specifically directed the 

Bureau of Reclamation to utilize 638 procedures in constructing the Animas-La 

Plata Project. The congressional direction was unmistakable. The Animas-La Plata 

Project was to be built, to the extent feasible, utilizing resources of the Colorado Ute 

tribes. Even a cursory review of the underlying law makes it clear that Congress 

did intend to provide additional financial benefits to the Indian tribes over and 

above those that might be enjoyed by a non-Indian contractor. At no time has Congress suggested that these additional costs should be considered part of the reimbursable cost of the Project. In fact they are costs the Federal Government incurs 

in order to encourage the improvement of the economic condition of American Indian tribes generally. We, as financial contributors to and participants in the 

Animas-La Plata Project want to make it perfectly clear that we have no disagreement with this congressional decision so long as those costs do not become a part 

of our reimbursable share. We also want to be clear that we are very confident in 

our Indian neighbors’ ability to perform the tasks necessary to build the AnimasLa Plata Project for a reasonable and competitive price. There is nothing in the circumstances surrounding the construction record that exists today to suggest the 

tribes have benefited inappropriately from the congressional decision nor have they 

taken advantage of the process. In fact, the work that has been done on the Project 

to date has been completed in a highly professional manner and we are proud to 

have the tribes as our partners. 

To the extent that there has been a suggestion by some that the application of 

the 638 Process to this Project has resulted in an increase in project costs approaching 30 percent, or that the tribes have received a largess approaching 30 percent 

of the project costs, we categorically disagree with any such assertions. It is our 

strong belief that if there are increases in the cost of the Animas-La Plata Project 

due to the 638 interaction, those increases will first have been sanctioned by the 

Congress and second that they will in all likelihood not exceed 10 percent. The tribal participation in constructing the Animas-La Plata Project is not, and should not 

be cited as, a major reason for the change in project costs. From our perspective, 

the enormous bulk of the change in project cost results from inaccurate assessments 

of the costs prepared for the 1999 EIS and subsequent changes in Project facilities 

which were made by the Bureau of Reclamation without consultation with Project 

supporters and without assessing the impact of the changes on ultimate project 

costs. 

The bottom line for the Animas-La Plata Water Conservancy District and the 

water users which it represents is a straightforward proposition. We obtained funding from the Colorado Water Resources and Power Development Authority in order 

to pay upfront for the cost of the Project. The price which was paid was within the 

ability of our citizens to repay. Included within the group of our potential customers 

is the City of Durango as well as the District’s own plans to construct a rural domestic water system in western La Plata County. The cost of water from the 

Animas-La Plata Project is the most critical element in providing both of these systems with a water supply. Any significant increase in the cost of project water over 

and above that already committed will seriously jeopardize the ability of either entity to continue participating. It is absolutely essential that the costs associated with 

constructing the Animas-La Plata Project resulting from reliance on the 638 Process 

and resulting from the Bureau’s omissions in estimating the cost of the Project and 

changing project facilities without considering the cost implications should not be 

borne by the non-Indian Project participants. 

We must find ways to keep the cost to our District within the ability of our customers to pay. I believe Commissioner Keys and the Department of the Interior are 

dedicated today to taking every step they can to meet this need. Our region in Colorado needs the long-term security that stored water in this project will provide. I 

am optimistic that it can happen. Significant progress can be made by assuring that 

the non-Indian participants pay for their proportion of reasonable construction costs 

but that costs for other purposes be appropriately assigned elsewhere. 

We continue to support the completion of the project. We support the overall goal 

of meeting the treaty commitments to the Colorado Ute tribes to provide a reliable 

supply of water for their present and future needs, a promise dating from 1868. We 

support the Bureau in continuing a well-reasoned use of the 638 process with the 

tribes in constructing this project. We support fiscally responsible cost allocations. 

We stand ready to support the mutual goals shared by our Native American friends, 
42 

the San Juan Water Commission of New Mexico, the State of Colorado, and the Bureau of Reclamation, all in a well functioning partnership. 

And we thank this subcommittee for its dedication to these goals. 

Senator DOMENICI. Thank you very much. 

STATEMENT OF L. RANDY KIRKPATRICK, EXECUTIVE DIRECTOR, SAN 

JUAN WATER COMMISSION 

Mr. KIRKPATRICK. Senator Domenici, I want to thank you for the 

opportunity to come before you and I appreciate you incorporating 

my testimony in that effort. I will try to keep my comments as 

short as possible. 

I want to thank you for what I heard from you and Senator 

Campbell regarding the holding down of our costs. The only one 

that we’re still concerned, it was brought up earlier this morning 

was the concern about the extended construction time and how 

those costs will be allocated as well. We’re very concerned that they 

could push the cost of this project beyond our ability to pay. 

Senator DOMENICI. I agree with you. That is a very serious problem. 

Mr. KIRKPATRICK. The second part that I would like to address 

this morning before I close is, we have been very concerned with 

the willingness of the Bureau of Reclamation to comply with the 

existing contract between the San Juan Water Commission and the 

Bureau of Reclamation. It is the opinion of the Commission that we 

would have avoided some of these problems had they fully consulted and informed us of these changes and we would encourage 

you to urge their coming to settlement on that. We see improvement but we have not seen full compliance at this point. 

PREPARED STATEMENT

And to shorten my thing as slow as I can I would like to make 

one final comment here. Despite the issues we raised in our written 

testimony we still feel it is appropriate that the Bureau of Reclamation and Weeminuche Construction Company continue construction of this project, and feel that it would be very shortsighted 

to change horses in the middle of the road on the construction. 

They are coming up to standard and doing a very good job, an excellent team. 

[The statement follows:] 

PREPARED STATEMENT OF L. RANDY KIRKPATRICK

Thank you for the opportunity to testify in this important hearing today. Before 

I begin, I would like to introduce to you the Chairman of the San Juan Water Commission, Mark Duncan. 

Today I want to address two points that are important to the San Juan Water 

Commission and the State of New Mexico. They are: (1) the Bureau of Reclamation’s 

management of the Animas-La Plata Project and (2) cost reimbursement. 

However, I want you to know that despite the concerns I am raising today, the 

San Juan Water Commission remains committed to the completion of the Project. 

The Project is now under way, and it must be completed and put into operation. 

The Project and the water storage it will provide for New Mexico are critical to the 

future of the northwest part of the State. Further, the Bureau of Reclamation remains the best agency to complete the project—their construction team is excellent. 

The Bureau is working diligently to manage the construction, and it would be foolhardy—not to mention expensive and time-consuming—to change the construction 

team now. 
43 

INTRODUCTION—BACKGROUND

The San Juan Water Commission (‘‘SJWC’’ or the ‘‘Commission’’) is a New Mexico 

joint powers organization, and it is composed of representatives of the San Juan 

Rural Water Users Association, San Juan County, and the Cities of Aztec, Bloomfield and Farmington. These entities collectively provide Municipal and Industrial 

water to more than 110,000 people, including many people on the Navajo Nation. 

The SJWC was the first entity to contract with the Bureau of Reclamation (‘‘BOR’’ 

or ‘‘Bureau’’) for storage in the Animas-La Plata Project (‘‘the Project’’), as required 

in the authorizing legislation. We at the SJWC have paid up front our share of the 

cost of the Project as originally estimated by the BOR, or $6.9 million. We have advanced funds pursuant to our contract from an escrow account as requested, based 

on the BOR’s invoices. 

The SJWC was shocked and dismayed to learn of the Bureau’s extreme cost underestimate on July 31, 2003. We attempted to understand the basis for our money 

advances and the cost of the construction contracts since construction began, but we 

frankly had little success obtaining the information we requested from the Bureau. 

Although apparently we were asking the right questions at the right time, we did 

not anticipate the magnitude of the Bureau’s underestimate. 

It appears that the old construction estimate, which formed the basis of our contract and our $6.9 million payment, was incomplete. Apparently, the estimate was 

not a construction-level estimate, but rather was based only on an appraisal- or feasibility-level study. Further, the Bureau made changes to the Project that added significant costs. These two factors—an incomplete estimate and design changes—significantly contributed to the great disparity between the original cost estimate and 

the new cost estimate. The third significant factor contributing to the disparity between the two cost estimates is the use of the Indian Self-Determination and Education Assistance Act (Public Law 93–638) (the ‘‘638 process’’), which the Bureau 

has interpreted to require the use of sole-source contracting for the construction of 

the Project, as well as to require the training and supervision of Indian contractors, 

often at significant expense. Additionally, the Bureau has maintained and increased 

its own non-contract staffing inconsistent with the spirit of the 638 process. 

The first information the Project sponsors received concerning increased costs was 

the letter dated July 31, 2003, from Rick Gold, the Bureau’s regional director in Salt 

Lake City. This letter was released to the media the same day. The July 31 letter 

shocked the SJWC, and it unfairly placed much of the blame for the cost estimate 

differences on the Ute Mountain Ute Tribe (‘‘UMUT’’), which is the primary 638 contractor and whose consultant developed the old cost estimate. Although the letter 

threatened to split the sponsors, we agreed to continue to work together and to support continued appropriations for the Project. 

In response to this unexpected bombshell, the SJWC prepared a report about how 

and why the mistakes were made in preparing the original cost estimate, which is 

attached. As we acknowledged in our report, the BOR must make some significant 

changes in the way it does business in order to regain our confidence and to maintain our support for the Project. Much to the credit of John Keys, Bill Rinne and 

Rick Gold, some progress has been made since July 31, but more remains to be 

done. Following are the two areas in which changes must still be made: the Bureau’s operations and the SJWC’s reimbursement obligations. 

The Bureau must continue to change the way it is managing the Animas-La Plata 

Project.—First and foremost, the Bureau must staff the Project with people who 

have the construction experience and project management judgment necessary to 

complete the Project. The Bureau has made these modifications for the construction 

phase of the project, and it is a welcome change. 

Second, the Project Construction Coordination Committee meetings must comply 

with contractual obligations. This is a very challenging but necessary task, and we 

appreciate the Bureau’s efforts to change the structure and content of the meetings. 

Although the consultation function of the committee is difficult, it is necessary because it is mandated in Article 4(a) of our contract with the Bureau. Incorporating 

consultation with us into their process has been difficult for Bureau officials, and 

we appreciate the structural changes that have been made. However, a full, satisfactory consultation process has not yet been put into place. 

Issues regarding the cost of the Project and the SJWC’s reimbursement obligations 

must be resolved.—Bureau officials have told us about their internal efforts to allocate costs in a way that is equitable. However, although we appreciate what the Bureau has told us, we need to review the Bureau’s final cost allocations in order to 

determine whether they are equitable to the San Juan Water Commission. In addition, we believe some of the measures listed below must be implemented to ensure 

that the increased construction costs are fairly allocated. It is simply too early to 
44 

tell whether the Bureau will incorporate these measures, but we do not doubt the 

sincerity of the people we have worked with most closely—John Keys, Bill Rinne 

and Rick Gold. 

First, the Bureau must develop a cost-tracking procedure to prevent the underestimates and mistakes that have occurred from happening again. Such a process 

is under development, and time will tell whether it is successful. 

Second, Bureau staff (and staff costs) must be reviewed and reduced. As part of 

this evaluation, Bureau and tribal staffing must be visible to the project sponsors 

and to the public. In fact, the UMUT’s contract with the Bureau addresses the need 

to examine Bureau staffing directly, but we understand that this information has 

not been provided to the Tribe. The Master Contract for General Provisions for SelfDetermination Construction Contracts for the ALP, October 22, 2002, states: 

‘‘M. Design and Construction Management Expenditures. In order to reduce 

project costs associated with 638 undertakings, Reclamation agrees to implement its 

design and construction management responsibilities in the most economical and efficient manner possible. Reclamation will provide to the Contractor [WCA], in writing, its work plans, which lay out planned staffing, projected level of effort required 

to carry out these responsibilities, and proposed expenditures.’’ 

As of November 2003, counsel for the UMUT had not received any such information 

from the Bureau. At the recent Project Construction Coordination meetings, the Bureau has explained some of the inner-workings of the Bureau and how costs are 

charged to the Project. The Bureau, however, must still link its costs to specific 638 

functions. We understand that the 638 process is being used here in a novel way, 

and we have a need to know how much it is costing and why. 

Third, the Bureau must continue to review the 638 process. Such review is ongoing, and the 638 process appears to be improving in efficiency and cost control. The 

Colorado Ute Indian Water Rights Settlement Act of 1988 (Public Law 100–585) requires the use of the 638 process in the design and construction functions of the 

Bureau with respect to the ALP. However, the legislation does not direct exactly 

how the 638 process will be used. Because this process is still developing, it is imperative that all 638 costs be visible and reviewable. 

Fourth, all sponsors, including SJWC, must have a role in future contracts between the UMUT’s construction company and the Bureau. Such participation would 

give us more comfort with the process and enable us to tell our taxpayers that the 

Federal Government and Indian contractors are working hard to hold down costs 

between the Bureau and the tribal construction company. We understand that the 

contract negotiations have been hard-hitting and have resulted in lower costs, but 

we need to see this process for ourselves. 

Fifth, the cost of the 638 process, including costs incurred by the BOR, should not 

be reimbursable by the non-Tribal sponsors. The 638 process represents a Federal 

policy choice to help Indians gain skills and experience on government jobs. That 

Federal policy choice should not be implemented in a way that increases costs to 

the non-Indian cost-share partners in the Project, including the Commission. Such 

costs should be non-reimbursable. 

Finally, the Commission’s contract specifically states that the SJWC can be assessed additional costs only if those costs are ‘‘reasonable and unforeseen costs associated with Project construction as determined by the Secretary in consultation with 

the Commission.’’ Article 8(d). The Bureau’s mistakes in the original cost estimates 

should not be considered ‘‘reasonable and unforeseen’’ additional costs because they 

resulted from decisions that the Bureau made without consultation with the SJWC. 

Moreover, the definition of ‘‘reasonable and unforeseen’’ costs (still to be determined) should not include costs resulting from design changes the Bureau made 

after the SJWC executed its contract with the Bureau. For example, the Bureau 

made a decision to relocate the pumping plant, in part, because of the presence of 

a fault line and potential contamination from an old mining site. The Bureau did 

not advise the SJWC when it was considering this change, or consult with the 

SJWC or other sponsors. The costs associated with this change should not be attributable to the joint costs for which the SJWC is responsible because the SJWC paid 

its upfront $6.9 million payment in good faith and under a contract that requires 

consultation on ‘‘final plans for Project Works, project completion schedule, and 

Project construction costs.’’ [Article 4(a)] In effect, the Bureau has not fulfilled its 

contractual obligations to the SJWC regarding this and many other changes, and 

the SJWC should not be forced to pay for such expenses. The Bureau’s contract with 

the State of Colorado for the Animas-La Plata Conservancy District has similar language. 
45 

Thank you again for the opportunity to present this testimony today, and thank 

you for your interest in this important issue. Please feel free to contact me if you 

have any additional questions. 

MEMORANDUM

TO: San Juan Water Commission 

FROM: L. Randy Kirkpatrick and Staff 

DATE: November 19, 2003 

RE: ALP Cost Increases 

This briefing paper reviews the process that led up to the Bureau of Reclamation’s 

(‘‘Bureau’’) announcement on July 31, 2003, that it had underestimated the cost of 

construction of the Animas-La Plata Project (‘‘ALP’’) by more than $163 million. 

While we attempted to grasp the full extent, there may be additional information 

that changes these findings. It also will suggest changes that should be put into 

place to prevent this from occurring again and to make the San Juan Water Commission (Commission) whole. The increases in the Navajo/Shiprock pipeline are not 

addressed since they are not reimbursable by the Commission. 

The information in this paper is based on limited information and documents obtained from the Bureau before August 21, 2003, and from a meeting with Bureau 

officials in Durango on August 27, 2003 (outside of the review team process), and 

from independent analysis of Bureau documents. This report does not in any way 

draw on information obtained from the Bureau during the preparation of its report 

to the Secretary. 

The construction cost estimate the Bureau used in the 2004 Budget Justification 

documents was $336.9 million at the January 2003 price level—this estimate (the 

‘‘old estimate’’) was based on a cost estimate developed for the Final Supplemental 

Environmental Impact Statement (‘‘FSEIS’’) in 1999 and indexed up. The new construction cost estimate, at the January 2003 price level, is $500 million (which is 

now estimated by indexing, in October 2004 dollars, at approximately $517 million), 

and it was developed independently, from the ground up, by the Bureau beginning 

in January 2003. One way to understand why the cost estimates are so far apart 

is to trace the development of the old estimate from 1999 to the present, and to 

trace the changes in the project since 1999. 

The Commission relied on the Bureau in the design and estimating of the project. 

In the preparation of this report the Commission engaged the services of professional consultants to review the Bureau’s work and develop this report. 

In essence, it appears that the old estimate was incomplete because it was generally at an appraisal or feasibility level only, not construction-level estimates, and 

that the Bureau made changes to the project that added significant costs. These two 

factors—an incomplete estimate and design changes—significantly contribute to the 

great disparity between the old estimate and the new estimate. The third significant 

factor contributing to the disparity is the use of the 638 process, which the Bureau 

has interpreted as requiring the use of sole-source contracting for the construction 

of the project, as well as requiring the training and supervision of Indian contractors, often at great expense. Additionally, the Bureau has maintained and increased 

its own non-contract staffing inconsistent with the spirit of the 638 process. 

A. Development of the Old and New Estimates, and How the Sponsors Were Informed 

The cost estimates in the FSEIS that were used to support the ALP and the legislation passed in 2000 were based on 1985 estimates from a feasibility study, and 

then indexed upward for inflation in 1993 and 1999. They have since been indexed 

up to 2003. 

The estimates were never more than feasibility level estimates. They may have 

been at the lower appraisal level for some items. The estimates included some mistakes in estimating the volume of material to be excavated and in some unit prices. 

The Bureau changes to certain features were made without considering the increased costs or consulting with all the sponsors. The Bureau supplied most of the 

information used by the Ute Mountain Ute Tribe’s (‘‘UMUT’’) consultant to develop 

the estimates. 

Construction management in the 1999 estimate was at a level of 12 percent; more 

typical of BOR projects is 15 percent, which is where it is in the new estimate. 

Normally, on any Bureau project, before construction begins on individual features, the Bureau will prepare construction cost estimates. That has not been done 

on this project. 
46 

In early 2003, the Bureau began an independent cost estimate for ALP. The Bureau’s rule (and OMB’s rule) only allows cost indexing for 5 years before a new estimate is made. This new estimate was from scratch and was not an updating of previous costs. It was done with the Bureau’s Technical Service Center in Denver. 

About June 1, all the costs began to come together and it seemed clear that a 

huge difference was likely. When Bureau management became aware of the magnitude (they expected a $30 million to $50 million increase), they were embarrassed and set out to determine 

where the differences were. Rick Ehat, the Construction Engineer on the project, 

outlined the differences in the ‘‘Construction Cost Estimate Variances’’ document, 

dated August 6, 2003, which is attached for your review. Also attached are two 

spreadsheets that detail the old estimate, entitled ‘‘A-LP Construction Cost Estimate, April 2002,’’ and the new estimate, entitled ‘‘A-LP Construction Cost Estimate, Draft #3K—Updated as of 7/29/03.’’ The Bureau provided these documents at 

a meeting with project sponsors on August 7, 2003. 

The project sponsors were not advised of the new cost estimate prior to its public 

release. 

The first information the project sponsors received was the July 31 letter from 

Rick Gold, regional director in Salt Lake City. This letter was released to the media 

the same day. 

The July 31 letter shocked the project sponsors, and it unfairly placed much of 

the blame for the cost estimate differences on the UMUT, which is the primary 638 

contractor and whose consultant developed the old estimate. It threatened to split 

the sponsors, but they agreed on August 14, 2003 to continue to work together and 

to support the current appropriation for the ALP. 

Also on July 31, Secretary Norton sent a memo to John Keys, through Bennett 

Raley, that she wanted a report by September 2 on the procedures that caused the 

problem and recommendations for improvements. Bill Rinne, Deputy Commissioner, 

is in charge of the review and report. Project sponsors have participated in the review process by commenting on drafts of the report. Project sponsors agreed to a 

non-disclosure agreement to protect the information generated by the review effort 

until the report is released. As of this writing (November 19, 2003), the report has 

not been released. 

On August 1, 2003, the San Juan Water Commission sent a letter (attached) to 

Rick Gold asking for specific information on the cost estimates and confirmation 

that the July 31 letter did not constitute any formal notice that construction costs 

have increased, which could immediately increase the cost to the Commission. 

On August 7, 2003, a small group from the project sponsors met with the Bureau. 

The presentation was nothing like the July 31 letter. The group expressed the deep 

sense of betrayal caused by the letter. The letter appeared to be purely a CYA action and put the sponsors, especially the Utes, in a terrible position. The group 

urged the Bureau to take responsibility. 

On August 13, 2003, Rick Gold sent a follow-up letter to Harold Cuthair (attached) in which he apologized for blaming the UMUT. But the letter failed to address what role design changes played in increasing the costs. It also did not retract 

the cost increases laid at the feet of the UMUT. 

On August 14, 2003, sponsors met to hear the attendees from the August 7, 2003 

meeting communicate their understanding issues (which forms much of the basis of 

the report). Additionally, the group recognized the need to continue construction activities and appropriation efforts, while evaluating the impacts of the estimates and 

the appropriate responses, including the possibility of litigation. 

On August 15, 2003, the Commission sent a follow-up letter to Rick Gold (attached) that listed the information received. At that point, the Bureau had supplied 

information in only three of eight categories requested. 

On August 20, 2003, the Commission sent a letter to Pat Schumacher (attached) 

confirming that no formal notice has been issued raising the cost to the Commission. 

The Bureau has formally acknowledged this by letter August 26, 2003 (attached). 

B. Design Changes That Increased the Costs 

The Bureau made several significant design changes after 1999 that were not reflected in the old estimate as it was ‘‘updated’’ each year by indexing. The Bureau 

did not consult with Commission on the changes. 

The Commission’s contract, negotiated in 2001, has a specific requirement that 

the Bureau involve the sponsors in significant construction and design decisions: 

‘‘The Project Construction Coordination Committee will be made up of representatives of those entities that have been identified by the Settlement Act, as amended, 

to receive a water allocation and the Bureau of Reclamation. This committee will 

provide coordination and consultation on the construction activities among all the 
47 

project beneficiaries, seeking common understanding and consensus on decisions associated with such items as final plans for Project Works, project construction completion schedule, and Project construction costs.’’ 

Article 4(a) of Contract between the Bureau and the Commission, finalized in February 2002. The Bureau’s contract with the State of Colorado on behalf of the ALP 

District has similar language. 

The first meeting of the Project Construction Coordination Committee (‘‘PCC’’) in 

early 2002 did not review the costs associated with changes that had been made up 

to that point in designs for the project. The PCC meetings, which were monthly and 

open to the public, did not raise any issue for consultation or discussion among the 

committee members. Recognizing the shortcomings of these meetings, the Commission began trying to monitor the costs of the ALP through ‘‘contract compliance’’ 

meetings. Even so, the Commission still had trouble getting concrete information on 

aspects of the project. 

Some of the design changes that had the biggest impact involve the pumping 

plant. It was turned 90 degrees so that it is perpendicular to the Animas River instead of parallel to it. The Bureau made this change to meet environmental requirements related to the uranium tailings pile that is on the river bank. However, the 

Bureau ‘‘sold’’ the change as a design enhancement and aesthetic improvement. The 

resulting cost increase, however, is staggering—the new plant is about $40 million 

more than the pumping plant described in the old estimate. Part of the increased 

cost results from turning the plant 90 degrees. Also, the earlier design missed the 

elevation of the plant, and it must be put lower in the ground (and rock). Also, the 

new design eliminated some office space, and so a new O&M building (costing $2.5 

million) must be added. 

Another significant design change was the relocation of the natural gas pipelines 

that go through Ridges Basin. In the old estimate, the lines were to be relocated 

around the southern side of the reservoir. Then the Bureau, for uncertain reasons, 

decided to relocate them around the north end of the reservoir, which required using 

horizontal drilling, at a much higher cost, and making other costly changes to the 

inlet conduit; e.g., going deeper into rock to build a sleeve to run the conduit 

through. 

The Bureau also upgraded the replacement of County Road 211, without any 

Commission input. The old estimate accounted for moving and replacing CR 211 at 

its existing condition, a marginal gravel road. The Bureau upgraded the road and 

made other changes that increase the cost by about $10 million. The Commission 

asked to participate in the process that the Bureau had in negotiating with La Plata 

County about the road, but was not invited. 

Jerry Knight, Ute Mountain Ute cultural resources on August 14, 2003, said that 

they knew the estimates were wrong for the cultural resources program when they 

began the work. The BOR changed the design, and the budget was inadequate. This 

occurred in late 2001, but the official cost estimates were not changed. Nor were 

the redesign changes a subject brought to the ALP sponsors for consultation. 

The Commission’s contract specifically states that it can only be assessed additional costs if they are ‘‘reasonable and unforeseen costs associated with Project construction as determined by the Secretary in consultation with the Commission.’’ Article 8(d). The Bureaus’ mistakes in the cost estimates should not be considered 

‘‘reasonable and unforeseen.’’ 

C. Use of 638 Process Raises Costs for Construction and Administration 

The Colorado Ute Indian Water Rights Settlement Act of 1988 (Public Law 100– 

585) requires the use of the Indian Self-Determination and Education Assistance 

Act (Public Law 93–638) in the design and construction functions of the Bureau 

with respect to the ALP. 

However, the legislation did not direct exactly how the 638 process would be used. 

The UMUT concedes that its start-up as construction manager was not efficient, 

and that it spent money on gearing up. The Bureau, however, has been much less 

forthcoming in how the 638 process affects the Bureau’s non-contract costs in the 

Project. 

The construction engineer convinced the UMUT to hire experts in dam construction to help the tribe learn the business. He was concerned that the Weeminuche 

Construction Authority (‘‘WCA’’) was not prepared to handle the project without 

these consultants. He said WCA is a road contractor, and not a dam contractor, 

which makes a big difference. Those costs apparently have been attributed to the 

project, but non-Indian project sponsors were not consulted or even advised before 

the experts were hired. In the case of the Pumping Plant, the Bureau determined 

that the WCA could not perform the design work and declined to have the WCA 

take over that part of the project. 
48 

The Bureau appears to have kept a number of employees on the payroll who duplicate the UMUT construction management and WCA work. The Commission, even 

after repeated requests and several meetings, has not been able to get the information that would explain duplicative work by the Bureau. The Bureau did not address 

this aspect of 638 contracting at all in its July 31 letter. 

However, the UMUT’s contract with the Bureau addresses the issue directly. The 

Master Contract for General Provisions for Self-Determination Construction Contracts for the ALP, October 22, 2002, states: 

‘‘M. Design and Construction Management Expenditures. In order to reduce 

project costs associated with 638 undertakings, Reclamation agrees to implement its 

design and construction management responsibilities in the most economical and efficient manner possible. Reclamation will provide to the Contractor [WCA], in writing, its work plans, which lay out planned staffing, projected level of effort required 

to carry out these responsibilities, and proposed expenditures.’’ 

Councel for the UMUT says they’ve never received any of this. 

The 638 contracting process operates much like a sole-source contract. As a result, 

the final contract prices may be significantly higher than they would be in the normal competitive bid process. 

The 638 process represents a Federal policy choice to help Indians gain skills and 

experience on government jobs. That policy choice should not be implemented in a 

way that increases costs to the non-Indian cost-share partners in the ALP. Such cost 

should be non-reimbursable. 

D. Role of the Culture of the Bureau in This Process 

The Bureau staff in the chain of command that managed the ALP is fairly skilled 

in dealing with the public, the environmentalists and the local politics. That staff 

was woefully unprepared, however, for managing the construction of the ALP in 

partnership with the sponsors. 

The Bureau’s culture has changed significantly in the last 20 years, and so it is 

understandable, but not excusable, that appraisal level estimates would be used 

after they were included in the FSEIS and never reviewed critically again. The emphasis after 1999 was on environmental compliance and placating the local opponents. But no one in the Bureau looked hard at the cost estimates. 

Construction managers were not brought into estimate the costs in the project at 

the contracting stage in early 2001, when it would have been appropriate. Construction mangers were finally brought in to Durango in early 2002. The real construction managers are the ones who realized the cost estimates had no connection with 

reality. 

More distressing, the ‘‘new’’ Bureau staffers seem intent on protecting their positions, instead of coming clean about the mistakes made and the failures in personnel. In short, the Commissioners cannot trust many of the Bureau staff that they 

had put their confidence in before. It remains to be seen if the Bureau will honestly 

evaluate itself in the report to the Secretary, but that is a very hard task for any 

organization. 

The Commission is concerned that as the ALP moves forward, the Bureau must 

put in charge people who can be trusted. That does not include many of the current 

people in the old chain of command. Their culture is the ‘‘new’’ Bureau, and the ALP 

now needs old line, hard-headed construction experts. 

E. Suggestions for Addressing the Problems 

The Bureau must be staffed with people with the construction experience and 

project management judgment necessary to complete the project. 

The Bureau must be a real partner with the Commission and other sponsors. 

The Project Construction Coordination Committee meetings must comply with 

contractual obligations, such as consulting with the sponsors prior to decisions affecting construction. 

The Bureau must develop a cost-tracking procedure to prevent the mistakes that 

have occurred from happening again. 

The Bureau must revisit the 638 process to determine if other tasks may be beyond the resources of the Tribes, such as it did with the pumping plant. The Bureau 

must evaluate the duplication of activities involved in the 638 process and eliminate 

them. 

The San Juan Water Commission must have a role in the development of agreements between the Bureau and WCA on future contracts. 

Bureau and tribal staffing, and costs for 638 contracts must be visible to the 

project sponsors and to the public. 

Bureau staff must be reduced in the organizational chart. 
49 

The Commission must be charged only with additional costs that are ‘‘reasonable 

and unforeseen,’’ meaning that it must not be charged with the increased costs of 

mistakes and decisions made by the Bureau without consultation with the Commission and the 638 process. 

The Congress should reaffirm its commitment to the Animas-La Plata Project and 

support continuing appropriations that will permit the project to be completed consistent with the Colorado Ute Amendments of 2000. 

Senator DOMENICI. Well, the thing that bothers me with reference to Mr. Griswold and you saying that, you know, they have 

made these great commitments and they sure sound good and they 

are redone the way they have done in the past and now they are 

really on the ball, the thing that bothers me is why we should believe that? Why should we believe that when there has been a mess 

up of this proportion in the past? 

Mr. KIRKPATRICK. Mr. Chairman with all due respect to the Bureau, I am very concerned that they will fulfill what they have suggested at this point to solve the problem. But we have seen very 

strong improvements, particularly in the area of construction, of 

how the Bureau is managing this project for the period of construction. 

Senator DOMENICI. How about you, Mr. Griswold? 

Mr. GRISWOLD. There has been considerable change in communications and sharing of information, an early warning system for 

changes that would make us aware of them, so I have a greatly improved confidence. 

Senator DOMENICI. Chairman Richards, I want you to know and 

I want Mr. Whiteskunk to know that we understand why this 

agreement was a good thing. And we think you were very prudent 

in saying we are not going to get as a good a deal if we go to court 

and win. Much less, there is a chance you would not get everything 

you take to court. But I do want to tell you that I am very concerned about overruns that might be caused by 638. And you know, 

we are here now saying we want the Bureau to do better. I think 

we cannot leave here without saying to you, Indian participation, 

that you have got to do better. You cannot be part of overruns. 

They did not account for all this but it is pretty much money and 

you have got to either be better at it or you have got to call to the 

attention of the Bureau what kinds of problems you are having 

that caused the increase. 

Mr. Whiteskunk, I am very sympathetic to how much you have 

to put together with reference to the Federal laws. Tremendously 

complicated and certainly, when you told us the scope of participation, you know, it is a wonder that you can get anything done. The 

way you are doing it, I am narrowing it down to some leaders, is 

probably the only way. And we hope that when you have finished 

all those people, the 26 that had been on the periphery, will think 

that what you have done is right. And I would be very careful, and 

I would have good lawyers. I would include in your estimates to the 

Bureau that you have got to have good lawyers because when we 

did this there were people who did not want us to do that. You 

know that. And they are tough. And they file lawsuits. And they 

love that. So you have to be in a good position, both of you in your 

tribes, to defend your interests and the interests that you have 

complied with these things like archaeological, which you told us 

about. They are important. In my opinion they could still stop this 
50 

project. So I do not know if you wanted any opinion from me but 

I tend to think it is my job and I am going to have to approve this. 

You do not know it but I wear two hats. I do not necessarily like 

it when it comes to water because we always get under funded. But 

I have to appropriate the money in this other committee. So we 

could sit up here and gab but then over here comes the appropriations bill and they do not put in enough money to get the job done. 

Now, I cannot do anything about that. That is OMB and by the 

time it gets to me it is all finished. So we are going to have to 

watch it next year and the year after. And you are, too, when you 

make your plea to OMB that they give us enough money. Because 

if this thing falls apart the Federal Government has a pretty big 

obligation and it is going to mess up a lot of water users. That is 

why we made the deal, right? 

Mr. KIRKPATRICK. That’s correct. 

Senator DOMENICI. The deal was not made because we wanted 

to be nice. The deal was made because you looked at it, said, ‘‘If 

we have to spend time with lawyers and go through all these 

courts we are apt to be here 20 years and we do not know what 

is going to happen.’’ 

You know, we have a case in New Mexico, you might not have 

heard of it, with the Indians fighting the non-Indians and it is 

called the Amont case. A-M-O-N-T. It is 40 years old. Now, you 

know, you are an old man but 40 years is more than half your life. 

And we have not fixed it. But I am trying. And you think that I 

can continue that in court? If it has not worked for 40 why would 

I think that it would work in 50? So we have to negotiate, right? 

Mr. KIRKPATRICK. That’s correct. 

Senator DOMENICI. There is no way out. And people that are nonIndians do not like Indians who get everything. You know, they 

look at it and say they got too much, we did not get anything. So 

I have to find out how to give them something. Right? 

Mr. KIRKPATRICK. That’s correct. 

Senator DOMENICI. And the Indians are not going to object, they 

just want to get what they want. Right? That is what you are 

doing. 

Mr. KIRKPATRICK. Right. 

Senator DOMENICI. Now, let me ask my San Juan County friend. 

How much is the current estimate of the overage that you would 

have to pay if we do not fix this, if we do not fix the cost? 

Mr. KIRKPATRICK. The best number, and I don’t have a good and 

somewhat unlike Bennett, probably would increase our cost about 

$3.8 million at this time, versus about $7 million. 

Senator DOMENICI. What is the baseline on what you are adding 

that to? 

Mr. KIRKPATRICK. We would be adding that to approximately $7 

million. 

Senator DOMENICI. That is a big increase. 

Mr. KIRKPATRICK. Yes, it is. 

Senator DOMENICI. We have got to get that fixed. And Mr. Griswold, you have a big problem, too. How much is yours? 

Mr. GRISWOLD. Our investment right now is about $7.3 million 

and we figure it would go up 50 percent. 
51 

Senator DOMENICI. Okay. So we are not talking about lots of 

money. How many districts are there? Two. 

Mr. KIRKPATRICK. Actually there will be three. There will be another district in New Mexico that will be forced to pay additional 

funds. 

Senator DOMENICI. Where is that one? 

Mr. KIRKPATRICK. That would be the La Plata Conservancy District. Stella Montoya, you know Stella, I know very well. 

Senator DOMENICI. All right. Well, we want a message to get out 

to them if you will give it to them, that we are trying to work out 

some way that that is included in the cost. 

Mr. KIRKPATRICK. We would be glad to do so. 

ADDITIONAL SUBMITTED STATEMENTS

[CLERK’S NOTE.—The following statements were submitted for inclusion in the record.] 

PREPARED STATEMENT OF JOHN R. D’ANTONIO, JR., STATE ENGINEER, NEW MEXICO

Mr. Chairman and members of the subcommittee, thank you for the opportunity 

to submit testimony at this hearing on the Animas-La Plata Project. New Mexico 

has for many years supported an Animas-La Plata Project that would provide storage of Animas River flows to meet the needs of water users in New Mexico. Also, 

New Mexico has supported the Colorado Ute Indian Water Rights Settlement Act 

of 1988 as well as amendments to the Act enacted by the Congress in 2000. 

It is very important, not only to New Mexico water users but to all water users 

of the San Juan River system, that storage of Animas River flows be provided to 

make the water supply available from the San Juan River system usable for development of the water apportioned to the States of Colorado and New Mexico by the 

Upper Colorado River Basin Compact. Further, the storage and regulation of 

Animas River flows in concert with the regulation afforded by Navajo Reservoir on 

the main stem of the San Juan River above the mouth of the Animas River will 

enhance the success of the San Juan River Basin Recovery Implementation Program 

to achieve its goals to conserve endangered fish species and to proceed with water 

development in the basin. An example of current development of the basin water 

supply is the proposed Navajo-Gallup Municipal Water Supply Project in New Mexico, currently under consideration, which is much needed to provide domestic water 

supplies to Navajo Indian communities and to the City of Gallup, New Mexico. 

It is our understanding that construction of the Animas-La Plata Project facilities 

is currently progressing satisfactorily. I urge that funding be provided up to the full 

capability of the Bureau of Reclamation in order that the project be completed as 

soon as is reasonably possible. Concern has arisen over the recent release of the revised cost estimate for the project which resulted in a cost increase estimated to be 

$160 million. 

The local entities are very concerned that this cost increase will affect their timely 

re-payment of project costs to complete the project works. I believe that Reclamation 

should carefully review the causes of the increase looking towards alleviating any 

increase in the repayment of project costs. 

PREPARED STATEMENT OF PHIL DOE, CHAIR, CITIZENS PROGRESSIVE ALLIANCE

Thank you for the opportunity to provide testimony on the Animas-La Plata 

project cost overruns. We will supplement these remarks with more detailed information in the coming weeks. 

The recent disclosure that the Animas-La Plata Project is already $150,000,000 

over the original cost estimates is not the real news. The real news is that the BOR 

knew the estimates to be bogus back in 1999 when they submitted them to Congress. Indeed, these cost estimates were commissioned not by the BOR, but, in a 
52 

1The Southern Ute and Ute Mountain Ute tribes are the chief beneficiaries of ALP, receiving 

the lion’s share of project water free of cost. These two small but very wealthy tribes have a 

combined population of about 3,000 people, counting man, woman and child. And despite claims 

made by some in support of building ALP, these tribes are not without water. In fact, they already control about 150,000 acre feet of water, most of it developed with Federal assistance. 

This constitutes half the water the entire State of Nevada is entitled to under the Colorado 

River Compact. Approximately 2,000,000 people live in Nevada. 

callous and calculated misuse of the Indian Self-Determination Act, by the Ute 

tribes,1 the project’s primary contractors and chief beneficiaries. 

Moreover, as internal documents show, these estimates underwent little or no 

governmental review, and were actually devoid of cost estimates for whole portions 

of the project. Some suspect these rascally ‘‘accounting errors’’ to be deliberate so 

as to convince the Congress and the public that the project really had been 

downsized, both in cost and size. Actually, the public costs of the project are much 

greater than have ever yet been reported, and the project has not really been 

downsized despite the PR to the contrary. 

First the costs: The BOR’s policy has been to tailor the truth about the project’s 

overall costs by focusing only on the construction costs, while totally ignoring all 

other costs, past and future. We ask that there be a true accounting. If done honestly, both the Congress and the public will be agog at the outcome. Here are a few 

of the hidden costs that need to be accounted for: 

—The interest on the public debt that the project will burden us with over the 

100-year life of the project needs to be calculated and added as a project cost. 

The interest component alone will add billions of dollars to the true cost of this 

project. The taxpayers also have to repay all but a sliver of project construction 

costs. And those costs, too, for reasons outlined below, will reach well into the 

billions when all is said and done. 

—The construction cost estimates need to include estimated cost increases from 

inflation. With a modest 3 percent rate of inflation over a 15 to 20 years construction phase present costs estimates might increase by 50 percent from inflation. 

—The estimated costs should be calculated based on a range from high to low. 

Presently, the BOR prefers to give only a low-range cost estimate. They persist 

in the fanciful notion that their forecasting is precise and unsusceptible to unknowns and human error. Yet, the last three major BOR construction projects, 

the Dallas Creek and Dolores Projects, both in Colorado, and the Central Arizona Project have all been at least 300 percent over original cost estimates. Recently, the project construction engineer admitted ALP was one of the most 

complicated projects ever. Cost sensitivity analysis is a must if we are to have 

any confidence in BOR cost projections, even those they admit to. 

—Adding to our concern over the final price tag is the fact that, while hundreds 

of millions in Federal tax dollars have already been spent on this project, ALP 

construction is only 3 to 4 percent completed according to a recent admission 

by the project construction engineer. Even if the project were to experience annual cost overruns of 10 percent annually, rather than last year’s 50 percent 

jump, we are looking at well over another 100 percent increase in public costs, 

assuming a 15 to 20 years construction period. 

—Over $60,000,000 in planning costs have been shaved off because the BOR has 

determined they were incurred for the agricultural portion of the project that 

was supposedly eliminated by the so-called 1999 compromise. These are still 

part of the project’s cost to the public and should be shown as such. Moreover, 

as we will discuss later, the agricultural portion of this project is still very much 

alive in the minds of the major backers of the project. 

—The Ute tribes received $60,000,000 in ALP settlement money back in 1987. 

This money also should be added in as a public cost. Indeed, the Utes were 

awarded another $40,000,000 in the 1999 amendments. This money should also 

be shown as a public cost even though the BOR is asking the BIA to budget 

for that money so that it does not undercut the money they have to spend on 

construction and does not show up as a project cost. 

—The BOR’s 1999 cost estimates failed to account for the power lines and other 

infrastructure required to bring federally subsidized power to the project pumping plant at Durango. The BOR is presently asking WAPA to request 

$10,000,000 in its budget to fund this portion of the project. Once again this 

is a project cost and should be added in even if it comes disguised in WAPA’s 

budget. 

—In 1996, we asked the Department of Interior to calculate the value of lost hydropower and increased salinity from project water diversions. Their estimate 
53 

was a public cost of $18,000,000 annually. Clearly, over the 100-year life of the 

project those public costs will reach into the billions of dollars. Moreover, the 

huge power requirements for project pumping will be robbed from present CRSP 

users. It is not unlikely, therefore, that another coal-fired power plant will be 

required in the four-corners area to replace the power needed for project pumping and that lost because of project diversions. These costs, too, have not been 

estimated or acknowledged for what they are, project induced costs to the public. 

There are many other costs which remain hidden or half buried, but even the foregoing give ample proof that this project is a bank buster. So, when we add into this 

putrid mix the fact that there are no known uses for most project water, the burdensome imbecility of this project becomes even more pronounced. In fact, we have been 

in court for almost 2 years trying to find out the intended uses of project water, 

for ‘‘beneficial use’’ is a requirement before a water right can be granted under Colorado law. Project proponents have refused to provide any information on use. As a 

result, the American taxpayer is advancing truck loads of scarce public dollars for 

a project that doesn’t even have a secured water right with which to fill the reservoir. 

On top of that, the BOR rushed into the few repayment contracts it has for small 

amounts of project water knowing that the cost estimates they were basing these 

contracts on were wrong. They even threatened project backers that if they didn’t 

sign up for water immediately they would have to pay more when the real costs became known. These contractors are now refusing to pay more no matter what the 

final costs of the project may be. This threat defies Federal reclamation law requiring full repayment of the costs of M&I water, plus interest. It also helps explain 

why BOR is attempting to have other agencies such as WAPA fund some of the construction outlays. 

We mentioned earlier that the agricultural portion of the project is still alive and 

well. We know this from recent court briefs in which one of the project’s chief backers, the Southwest Water Conservation District, is fighting our efforts to have them 

abandon the agricultural water rights for the Animas-La Plata Project. Despite the 

1999 legislation which supposedly eliminated agricultural water from the project, 

they’ve declared they intend to use this water for irrigation. Perhaps that explains 

why project pumps were greatly increased in size in the final design. Now multiple 

filling of the project reservoir can be easily accomplished so that project backers can 

have their cake and eat it too. It is Candide! 

In summation we make two requests. We ask Congress to suspend funding for 

this project until an independent GAO audit exposes the real public costs and Congress has an opportunity to evaluate those costs against the purported benefits. We 

also ask that, if this audit discloses criminal intent to defraud the American taxpayer, as we think it will, Congress join us in asking for a Federal grand jury investigation and prosecution of those responsible. 

Finally we note with great approval present efforts to adopt a pay-as-you-go budgetary process in the Senate. This is not only necessary and wise public policy, in 

our opinion, but one of its minor consequences must surely be the red lining of that 

mountain of lies known as the Animas-La Plata Project. 

Thank you for the opportunity to testify. 

PREPARED STATEMENT OF RUSSELL GEORGE, EXECUTIVE DIRECTOR, DEPARTMENT OF

NATURAL RESOURCES, STATE OF COLORADO

INTRODUCTION

The State of Colorado appreciates this opportunity to provide testimony before the 

Senate Subcommittee on Energy and Water Development concerning the AnimasLa Plata Project (ALP). Construction of the Animas-La Plata Project is extremely 

important to the State of Colorado as it is the final piece required to bring closure 

to the resolution of the Tribal reserved water rights claims under the 1986 Colorado 

Ute Indian Water Rights Final Settlement Agreement, in particular those portions 

of the Settlement concerning the Animas and La Plata Rivers. 

Despite the considerable controversy that has been generated by the Animas-La 

Plata Project, there exists an extraordinary partnership between the States of Colorado and New Mexico, and the Indian and non-Indian communities in southwestern 

Colorado and northwestern New Mexico. Together, we have successfully quantified 

the reserved water right claims of the Southern Ute and Ute Mountain Ute Tribes 

in Colorado, and implemented most of the Settlement Agreement, in a unique way 

that serves as a national model. More than that, however, is a genuine sense of 
54 

pride that exists between the Indian and non-Indian communities in the area, over 

shared use and development of water and mineral resources, economic opportunity, 

and preserving the quality of life and environmental heritage of the area. 

Through the 1986 Settlement Agreement, we have avoided protracted, expensive 

and divisive litigation. We have preserved non-Indian economies and provided for 

stable development of Tribal economies. We have avoided the social disruption resulting from the enforcement of Tribal reserved right claims. We have integrated 

the administration of Indian and non-Indian water rights into the State water 

rights system. 

Completion of the Animas-La Plata Project is critical to preserving the benefits 

of the 1986 Settlement Agreement with the Ute Tribes and the stability that it 

brings to the citizens of the San Juan River Basin. 

Accomplishing these results has required vision, extraordinary leadership, respect 

for the needs of all sides, a willingness to listen to and explore new solutions, and 

a commitment to stay at the table until a solution is reached. To fully understand 

the importance of the Animas-La Plata project in this process, it helps to review the 

history of the Reservations, the Animas-La Plata Project and the 1986 Settlement 

Agreement. 

HISTORICAL CONTEXT

The original Ute Reservation was established by treaty in 1868, prior to the arrival of non-Indian settlers to the area. The arrival of non-Indians resulted in conflicts, and reconfiguration of the Reservation lands. In 1895, Indians living on the 

Reservation were given the option of settling on 160 acre allotments, or moving to 

the western portion of the Reservation. Non-Indians were able to acquire some of 

these allotments as well. In 1934 this homesteading process was closed. The result 

was the present configuration of checkerboard Indian and non-Indian lands on the 

Southern Ute Reservation and the contiguous block nature of the Ute Mountain Ute 

Reservation. These lands are downstream from non-Indian development in Colorado. 

Almost every river in southwestern Colorado passes through one or both of the Reservations. 

The rights of Indian Tribes to reserved water is based on the date of the reservation. In the late 1800’s, non-Indian irrigation was beginning upstream from the Reservation, on the Pine River. The Southern Ute Tribe filed claims for irrigation purposes in 1895, and water litigation ensued which lasted until 1930, when a Federal 

court awarded the Indian claimants the No. 1 water right on the Pine River. This 

created a severe water shortage for the non-Indian irrigators, and resulted in the 

construction of Vallecito Dam in 1941, to serve both Indian and non-Indian lands. 

In contrast, the Mancos Project was developed on the Mancos River by 1950. Although the Mancos River is the primary river through the Ute Mountain Ute Reservation, the Tribe did not receive the benefit of water service from the Project. In 

fact, the town of Towaoc, which is on the Ute Mountain Ute Reservation, did not 

even have a potable water supply until 1990, as part of the implementation of terms 

under the 1986 Settlement Agreement. 

Colorado is a semi-arid State and the precipitation it receives, 16.5 inches on average, varies significantly from year to year. Droughts occur frequently and can last 

several years. Therefore, the ability to capture and store water during times of plenty is critical to providing a stable economy. In 1956, Congress enacted the Colorado 

River Storage Project Act (CRSP), which provided for comprehensive water development throughout the Upper Colorado River Basin. This Act authorized the construction of the initial CRSP units—Curecanti, Flaming Gorge, Navajo and Glen Canyon; 

a number of participating projects, including the Florida Project; and the preparation of planning reports—including the Animas-La Plata and Dolores Projects. The 

Florida Project was completed to serve lands on Florida Mesa in 1963, which included some Indian lands but which did not completely meet Indian needs. 

The CRSP Act also established a mechanism for assisting in the funding of construction of these and other projects, through the creation of the Upper Colorado 

River Basin Fund (the ‘‘Basin Fund’’). In short, hydroelectric power revenues generated from the CRSP Units are credited to the Fund to pay for certain construction, operation and maintenance costs of the initial CRSP units. The balance of any 

revenues are credited to each of the upper basin States to pay for that portion of 

the construction costs of participating projects allocated to irrigation, that are beyond the ability of irrigators to repay. Additionally, participating projects can take 

advantage of favorable rates for CRSP power. 

In 1968, Congress enacted the Colorado River Basin Project Act (CRBP). Among 

other things, the CRBP Act authorized the construction of the Animas-La Plata and 

Dolores Projects, concurrent with the completion of the Central Arizona Project. The 
55 

authorization for the Animas-La Plata project was for a configuration substantially 

different than the presently proposed configuration. However, the Project was always contemplated to serve both Indian and non-Indian needs. 

Thus, as of the late 1960’s, there was some resolution of Tribal claims, and a good 

deal of water development undertaken and contemplated in the San Juan River 

Basin. Some but not all of this development benefited the Tribes. However, quantification of Tribal claims, and their impact on non-Indians, were certainly open 

questions. The United States Supreme Court established a test for the amount of 

such claims, based on practicably irrigable acreage, which includes both present and 

future irrigation needs. 

Quantification of the Tribal claims in Colorado commenced in 1972, when the 

United States Department of Justice filed reserved rights claims on behalf of the 

two Ute Tribes in Federal district court. The State of Colorado and other parties 

intervened, and moved to dismiss on the grounds that under the McCarren Amendment jurisdiction belonged in State water court. The United States Supreme Court 

ruled that State court was the most appropriate forum in which to achieve integrated adjudication of reserved rights claims. Immediately thereafter, the United 

States filed extensive claims in State water court. 

The Tribal claims encompassed the potential irrigation of some 93,000 acres, in 

over 25 stream systems tributary to the San Juan River. Most of these lands were 

in the La Plata and Mancos River Basins, which are water-short and over-appropriated. Success by the Tribes would totally eliminate existing non-Indian irrigation, 

disrupt local economies and create regional hostility. 

THE 1986 SETTLEMENT AGREEMENT AND SUBSEQUENT LEGISLATION

In April 1985, many parties, public and private, convened negotiations to address 

the issues raised by the Tribe’s reserved rights claims. The State of Colorado’s negotiating position was based on several principles: 

—vested property rights held by owners of State decreed water rights would not 

be compromised; 

—existing economies should be protected; 

—existing uses should be protected by a ‘‘no injury’’ standard; 

—reserved rights claims should be quantified by State water court, not by Congress or in Federal courts; and 

—the Tribes legitimate needs, such as the lack of a potable water supply for 

Towaoc, should be met. 

After intense and complex negotiations, an agreement in principle was reached 

that included a binding cost-sharing agreement for construction of the Animas-La 

Plata Project. This Agreement was titled the ‘‘Agreement in Principle Concerning 

the Colorado Ute Indian Water Rights Settlement and Binding Agreement for 

Animas-La Plata Project Cost Sharing.’’ By signing the Agreement in Principle, the 

Secretary of Interior certified that the non-Federal cost share contributions were 

reasonable, allowing for the Federal release of the first $1 million for construction 

of ALP. In addition to the cost sharing elements of the Agreement, the parties to 

the State water court litigation agreed to a set of principles that established the parameters for settlement of the reserved right claims. 

After 6 months of intense negotiations, the Colorado Ute Indian Water Rights 

Final Settlement Agreement was signed on December 10, 1986. The Settlement 

Agreement contains six major elements: (1) In each of the drainage basins, the reserved rights of the Tribes were quantified; (2) The Tribes waived ancillary breach 

of trust claims against the United States; (3) The Tribes agreed to specific conditions concerning the administration and use of reserved water rights, so as to integrate such administration into administration of non-Indian water rights. These 

conditions included beneficial use as a limiting condition, monitoring of water usage, 

sharing of streamflow data, and judicial change in use proceedings in Colorado State 

water court when required. The State court was given jurisdiction over all water on 

the Reservations not decreed to the tribes as reserved water rights, including both 

unappropriated water and State appropriative rights. The parties agreed to the 

entry of consent decrees in State water court; (4) The Tribes received commitments 

to obtain $60.5 million in Tribal Development Funds, to enable the development of 

water and assist in economic self sufficiency; (5) The non-Federal parties agreed to 

significant cost sharing of the Animas-La Plata Project and Tribal Development 

Funds. The parties agreed to seek Congressional deferral of Tribal repayment of certain project costs until the water from the projects was actually put to beneficial 

use; (6) The parties agreed to seek Congressional relief from the Non-Intercourse 

Act limitations on Congressional oversight over the use of reserved water rights. 

The Tribes were allowed to sell, exchange or lease water outside the Reservations, 
56 

within or outside the State of Colorado, subject to State and Federal law, interstate 

compacts and the law of the Colorado River. 

The Settlement Agreement specified certain contingencies that had to be met before the settlement became final. The parties agreed to submit consent decrees to 

the Division 7 water court for judicial approval. A stipulation setting forth this commitment was filed, but was subject to legislative enactments by the United States 

Congress and Colorado legislature prior to becoming final. 

Federal legislation was introduced, and was enacted in 1988. The Act approved 

the settlement and contained all the provisions contemplated by the parties, except 

for those relating to the interstate marketing of water. The legislation as introduced 

reflected the neutral nature of the Settlement Agreement concerning the legality of 

interstate marketing of reserved water rights under the Law of the River. However, 

Lower Colorado River Basin States adamantly opposed the provision, and demanded 

that the Tribes be prohibited from applying for any out of State changes in place 

of use. Other western States objected to the potential alienation of any Federal reserved water right from the Federal reservation. The final Act therefore limited use 

of Tribal rights in the Colorado River Basin until a final court order or agreement 

of all seven Colorado River Basin States has previously allowed such right for nonFederal, non-Indian water rights. Moreover, the Act provides that any use of water 

off Reservation will result in the right being changed to a State of Colorado water 

right for the term of such use. 

The Colorado General Assembly also enacted the legislation contemplated by the Settlement Agreement. This legislation appropriated $5 million to the Tribal Development Funds, so much as needed for the Towaoc Pipeline, and $5.6 million for the 

Ridges Basin cost sharing. 

In December 1991, the Water Court approved the consent decrees that had been 

submitted to it based on the stipulations entered pursuant to the Settlement Agreement, and following the enactment of necessary Federal and State legislation. 

COLORADO UTE SETTLEMENT ACT AMENDMENTS OF 2000

The debate over construction of the Animas-La Plata Project with environmental 

opponents did not stop despite the 1988 Agreement and the entry of the water court 

decrees. A separate process, was undertaken to try to bring final closure to the Tribal claims on the Animas and La Plata Rivers. The culmination of that process was 

the Amendments of 2000 to the 1988 Settlement Agreement which in short reduced 

the size of Ridges Basin Reservoir by approximately one-half and restricted the 

project to municipal, industrial and recreational purposes, eliminating the irrigation 

component of the project. The amendments also reduced the water allocations to 

various project beneficiaries and created ‘‘resource funds’’ for the Southern Utes and 

Ute Mountain Utes. 

CONCLUSION

In summary, all of the conditions of the Settlement have been satisfied, except 

for the construction of the Animas-La Plata Project, and the Agreement remains in 

full effect. Therefore, completion of the Animas-La Plata Project is of the upmost 

importance to Colorado if it is to avoid litigation with the Ute Tribes over their reserved water rights claims on the Animas and La Plata Rivers. After the extraordinary efforts by all the parties involved in these settlement discussions since 1972, 

the only responsible action is to complete implementation of the Settlement Agreement by constructing the Animas-La Plata Project. 

THE INDIAN SELF-DETERMINATION AND EDUCATION ASSISTANCE ACT (ISDEAA)

PUBLIC LAW 93–638

The ISDEAA is designed to provide meaningful involvement by Tribes in the administration, planning and conduct of Indian programs. The Act requires the Federal Government to contract with Indian Tribes for programs, functions, services 

and activities that are designed to benefit Indians. The design and construction of 

ALP has been made subject to the ISDEAA through the Colorado Ute Indian Water 

Rights Settlement Act of 1988 and we are fully in support of that settlement provision. 

With respect to the ISDEAA or the 638 process, the State of Colorado has no experience other than through the Animas-La Plata Project. We understand that a 

Tribe under ISDEAA is entitled to negotiate reasonable costs for performing the 

contract, the costs for preparing the proposal, reasonable general administration 

costs, a reasonable profit, and auditing expenses. The negotiating process provides 

the tribes access to project cost estimates, in this case those of the U.S. Bureau of 
57 

Reclamation, in advance of the negotiations. This process may not result in a project 

cost as low as what would likely occur through a competitive bid process. Furthermore, it appears difficult to identify what the increased cost of working through 

ISDEAA would be. Based on information from the Bureau of Reclamation for the 

Stage 1 work on the Ridges Basin Inlet Conduit and Ridges Basin Dam Outlet 

Works Excavation, both of which are now complete, the final contract values have 

exceeded the original contract values. Some of this may actually be a savings due 

to the inclusion of work that was scheduled for a future phase, but breaking that 

out requires day-by-day monitoring of the project. 

Our main concern is that the ISDEAA or 638 costs, which are non-reimburseable 

by law, be carefully monitored and not passed on to those that have or potentially 

could have repayment contracts. Given the cost increases to the Animas-La Plata 

Project, we desire assurances that the ISDEA or 638 costs do not make the cost of 

project unaffordable to the end users. 

We appreciate the opportunity to comment before the committee today on the importance of the Animas-La Plata Project to Colorado and to the completion of the 

Ute Water Settlement Agreement. 

ADDITIONAL COMMITTEE QUESTIONS

[The following questions were not asked at the hearing, but were 

submitted to the witnesses for response subsequent to the hearing:] 

QUESTIONS SUBMITTED TO MIKE GRISWOLD

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

LEVEL OF INVOLVEMENT BY PAYING PARTNERS

Question. Could you please describe your level of involvement in the construction 

of the project prior to last fall when the report came out, and contrast that with 

your level of involvement now? 

Answer. As described in my testimony before the committee, there was ongoing 

and regular personal involvement between myself and other members of the Board 

of Directors of the Animas-La Plata Water Conservancy District and our counsel 

with the Durango field office of the Bureau of Reclamation concerning the construction of the Animas-La Plata Project. We attended every project operations committee meeting and project coordinating committee meeting. In addition, we attended numerous other meetings, both formal and informal with Bureau of Reclamation staff to discuss a wide variety of issues related to the Animas-La Plata 

Project. These meetings began before 1999 and continued through the issuance of 

the letter to the Ute Mountain Ute Tribe on July 31, 2003. During these meetings, 

the Bureau of Reclamation regularly informed us of their intentions but rarely 

asked us for input whether the topics related to 638 issues, wetland mitigation 

issues or project construction issues. 

If there was one single point of dissatisfaction, which we experienced during this 

extended process, it was the lack of a ‘‘dialogue’’ between the Bureau of Reclamation 

staff and the project supporters. Instead of a process of consultation, we were engaged in a process wherein the Bureau of Reclamation reported on their decisions 

and/or intentions. 

From the issuance of the final supplemental and environmental impact statement 

containing the project cost estimates until the July 2003 letter, there was never any 

discussion of the cost consequences of the decisions that were being made, despite 

requests that those discussions occur. In addition, there were never any budgets 

prepared showing the costs of various alternative solutions to design decisions being 

made by the Bureau of Reclamation. 

In contrast, since the outcry arising from the July 31, 2003 letter to Ute Mountain 

Ute Tribe, the Bureau officials have been extraordinarily responsive. They have provided, through a series of ongoing meetings, careful and complete analysis of the 

original 1999 cost estimate, the 2003 reformulation of a cost estimate and the differences. The most important difference to note is not that there has been a significant increase in the amount of time spent, but rather the change in the level of detail provided and the opportunity to discuss decisions at a preliminary level. 

The time spent in meetings with Bureau officials has not changed appreciably. 

The level of interaction with Bureau officials, and in particular the opportunity to 

interact with the responsible construction official, Mr. Rich Ehat, has increased significantly. Clearly we will continue to have reasons to question proposals made by 

the Bureau, and we may not always agree with their decisions, but the opportunity 
58 

to raise those questions and express those disagreements is clearly now a matter 

of importance to the Bureau of Reclamation at all levels. It is a welcome change 

from the perspective of those who will be responsible for paying their reasonable pro 

rata share of the cost of this project. 

Question. What improvements would you like to see made? 

Answer. As described in the preceding response, the Bureau has become very responsive to the project supporters’, and upfront repayment participants’, concerns. 

The Bureau of Reclamation has made the changes that procedure should have been 

in place from the beginning. Despite the embarrassment of responding to the criticism resulting from the range in project cost, we must respectfully respond that it 

is ‘‘better late than never’’ and we heartened by our current relationship with the 

Bureau of Reclamation. There procedures appear to be adequate to permit the input 

from project sponsors and participants and they are endeavoring to provide whatever information we request or require. 

REQUIRED OUT YEAR FUNDS

Question. Do you feel you have adequate information from the Bureau to insure 

that you will be able to meet your financial obligations? In other words, do you feel 

project accounting is such that you have a good handle on where you stand, and 

where you will end up financially when the project is completed? 

Answer. The answer to this question is both yes and no. Before describing the reason for such an ambivalent answer, it is necessary to understand the position of the 

Colorado project sponsors. The non-Indian sponsors of the Animas-La Plata Project 

made enormous sacrifices in agreeing to the downsized Animas-La Plata Project proposed by former Secretary Babbitt. The significant part of the benefit from the 

Project to these individuals and organizations was foregone and the remaining demands for M&I water must compete with alternatives on a leased cost basis. Relying upon the Bureau’s acceptance of the 1999 cost estimates, the Colorado Water 

Resources and Power Development Authority paid up front the pro rata share of the 

project cost based upon a marketing agreement with the Animas-La Plata Water 

Conservancy District. That marketing agreement contemplated that the City of Durango would acquire approximately 1,900 acre-feet of project consumption and that 

the Animas-La Plata Water Conservancy District would acquire the remaining 700 

acre-feet. Naturally, if the entire 40 percent increase in project costs were determined to be fully reimbursable, the cost of those water supplies so far outweighs 

other alternatives as to place the project outside of the financial reach of the nonIndians. 

The Bureau has been exceedingly forthright in discussing the issue of project costs 

and the allocation of those costs between the reimbursable and non-reimbursable 

categories. To the extent that this question requires whether or not the Bureau is 

providing as much information in as much detail as is reasonably available under 

the present circumstances, the answer must be ‘‘yes.’’ To the extent that the questions seek the project sponsors’ confirmation that the Bureau has provided enough 

hard data to permit the project sponsors to conclude that they will be able to repay 

their share of project costs when the project is completed, the answer is ‘‘no.’’ The 

inherent uncertainty in projecting the final cost of the project creates this dichotomy. 

In order for the Colorado project participants to have confidence that they can 

meet their financial obligations end up in a position where they can pay for their 

pro rata share of their project obligations it is necessary to identify and set in stone 

a maximum financial cost, which they will have to bear. That cost should be based 

upon the best current available information and reflect all of the costs of the project 

that are fairly attributable to the provision of municipal and industrial water to 

non-Indian participants. That allocation of cost must recognize the Indian water 

rights settlement purposes which currently support the development of this project 

and which must recognize the fact that the cost of water from the Animas-La Plata 

Project must be competitive with other reasonable alternatives for project water 

supply. 

Finally, it is important that the cost of water from the Animas-La Plata Project 

to non-Indian participants be uniform on a per-acre foot of water delivered basis. 

As the committee considers the consequences of the change in cost of the AnimasLa Plata Project, it must also consider the fact that the non-Indian water supplies 

from the Project ought to be equal among all of the non-Indian participants on an 

acre-foot for acre-foot delivered basis. 
59 

QUESTIONS SUBMITTED TO L. RANDY KIRKPATRICK

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

BOR CONTRACT OBLIGATIONS

Question. Mr. Kirkpatrick, you have touched on your desire for the Bureau to live 

up to their contract obligations with the San Juan Water Commission. Would you 

briefly outline for us those areas in which you feel they did not meet these obligations? 

Answer. Contract Obligations.—The following outlines the Bureau’s obligations to 

the San Juan Water Commission under the Contract, which was agreed upon in late 

2001 and signed in 2002, and the areas in which the Bureau did not meet its obligations. 

(A) Failure to consult with the Commission.—(1) Consultation is required in several contract provisions: 

—(a) The definition of consultation is: ‘‘Consultation means the United States 

shall notify and confer with the Commission regarding significant decisions pertaining to this contract. In the event that consensus cannot be reached and the 

United States makes a decision, appeals are available to the extent allowed 

under applicable laws. Article 1(j), page 4. 

—(b) Under ‘‘Project Works’’ in Article 2, the Contract requires consultation at two 

places, the introductory paragraph and in Article 2(a)(4). 

—(c) Article 4, ‘‘Project Coordination Committees,’’ describes the establishment of 

two committees to provide consultation on project construction issues and, later, 

on project operation issues. 

Article 4(a): ‘‘The Project Construction Coordination Committee will be made 

up of representatives of those entities that have been identified by the Settlement Act, as amended, to receive a water allocation and the Bureau of Reclamation. This committee will provide coordination and consultation on the construction activities among all the Project beneficiaries, seeking common understanding and consensus on decisions associated with such items as final plans 

for Project Works, Project construction completion schedule, and Project construction costs. Upon Project completion, this committee will be dissolved.’’ (emphasis added) 

(2) The BOR failed to meet its obligations to consult. 

The BOR notified us of the organization of the required ‘‘Project Construction 

Committee’’ (PCC) on April 20, 2001, and reported May 22, 2001, on the formation 

of the PCC. Subsequent to these early meetings, we notified the BOR that the PCC 

as they organized it was not meeting the requirements of our contract. Then, the 

BOR established a ‘‘Contact Compliance’’ meeting with us in an attempt to meet the 

intent of our contract. We tried to use the Contract Compliance meetings to obtain 

essential information, but with little success. We asked the questions and engaged 

consultants familiar with the BOR, but we were not provided useable information. 

We had realized early on that the costs being reported to us were inconsistent with 

the interim cost estimate in the 2000 FSEIS. Also evident in the PCC meetings were 

the lack of common understanding and any engagement of the sponsors to reach a 

consensus about decisions the BOR was facing. At the meetings, the BOR was simply informing us of some of the decisions it had made, without consultation with 

us. 

(B) Non-contract cost overruns.—The BOR has failed to maintain non-contract 

costs at or below 30 percent, as it said it would try to do in Article 8(i). Also, we 

had not been afforded an annual report specifying the dollar amount of the non-contract and all other construction cost in a timely manner. 

(C) The BOR fails to support cost allocation for operations as specified in the Contract.—The BOR has not supported the use of facilities procedure as the methodology to use to allocate the costs of operations, as clearly called for in our contract. 

Article 11(a). This dispute has been central to the delay in developing the Project 

Operations Committee so that it may function to develop and operations plan. 

(D) The Bureau has not assured the Commission that it can deliver the full Statutory Water Allocation under all scenarios.—Our Contract states: 

‘‘Sufficient water will be delivered from Project storage or bypassed to ensure that 

the Commission annually receives its Statutory Water Allocation to be available for 

diversion at all approved points of diversion on the San Juan River.’’ Article 5(a). 

Based upon information and discussion prior to our execution of our Contract, we 

were assured that 3,025 acre feet of storage would be sufficient to assure our water 

supply, and that in fact that this was a conservative position. Again, subsequent re-
60 

view resulted in a discovery that, in fact, the adequacy of this amount of storage 

depended on a model of operations that was not consistent with the ROD, and laws 

governing the water. In particular, the model assumed that the Commission and 

Navajo Nation would have first call on water in the river, and that the Ute Tribes 

and the State of Colorado would take all of their water from the Reservoir. 

Consequently, if the two Ute Tribes, La Plata Conservancy District (NM), and the 

State of Colorado chose to obtain their Statutory Water Allocation from direct flows 

in the Animas, as allowed in the ROD, our storage would be inadequate almost directly proportional to the amount used from the River. The BOR cannot assure us 

now that we will be able to receive our full Statutory Water Allocation if the tribes 

or others choose to use the Animas River to deliver water instead of the reservoir. 

(E) Poor forecasting of money required results in advances that are too big.—Our 

Contract requires that we advance only the actual money spent on construction in 

a given quarter, but the Bureau has never provided an estimate that even closely 

approximated the actual construction amount. Each Bureau request has exceeded 

the actual construction expenditures by as much as $400,000 per quarter. The Bureau’s overestimates are costing us significant interest income, which we depend 

upon to cover inflation and other associated cost increases. 

Question. In your opinion, has the Bureau done anything to rectify this problem? 

Answer. Effort to rectify problems.—In our opinion, the Bureau has made an effort 

to rectify the problems, but the Bureau has not reached the level of consultation 

for decision-making that we understand is required in our Contract. We are provided information in a more timely manner, but at this late stage of design and active construction, most discretionary actions have occurred with little chance of 

modification. Further, the Bureau recently informed us that it has determined that 

all actions it has taken are necessary and reasonable, by their definition, which we 

had no say in developing. The PCC process is more open, with significantly improved reporting. We are definitely progressing, but we are short of success. 

LEVEL OF INVOLVEMENT BY PAYING PARTNERS

Question. Mr. Kirkpatrick, could you please describe your level of involvement in 

the construction of the project prior to last fall when the report came out, and contrast that with your level of involvement now? 

Answer. Our level of involvement prior to July 31, 2003 was significant, but it 

was met with resistance by BOR staff in the Durango Office and the Western Colorado Area Office. They were courteous and seemed to meet with us on each request, 

but they seemed intent on saying that understanding the system of the BOR was 

our responsibility, it was not their responsibility to modify their reporting to make 

it track with the estimates we had. We engaged the services of a former Deputy 

Commissioner in an effort to understand the Bureau’s reports, and he had difficulty 

tracking construction and cost as we received the information. It was easily consuming more than 50 percent of my time. 

Question. What improvements would you like to see made? 

Answer. Currently, it is a pleasure to say the current construction engineer has 

diligently sought to improve communications, and provide updates on ongoing activities. The problem we now face is catch-up on agreements made that we were not 

informed of, much less adequately consulted with, prior to July 31, 2003. On a regular basis we visit the site, and we are briefed on the progress, including identified 

challenges. The only shortcoming is a shortage of realistic alternatives. It is now 

consuming about 70 percent of my time. 

REQUIRED OUT YEAR FUNDS

Question. Mr. Kirkpatrick, do you feel you have adequate information from the 

Bureau to ensure that you will be able to meet your financial obligations? In other 

words, do you feel project accounting is such that you have a good handle on where 

you stand, and where you will end up financially when the project is complete? 

Answer. We are continually seeking, through a series of discussions, to get a handle on the ability to meet our financial obligation. We have been given a variety of 

answers to the question, ‘‘What is the impact of extending the construction schedule?’’ The answers seem to change frequently. Current accounting has improved exponentially from what it was prior to July 31, but it still is not at an acceptable 

level regarding outyears. We understand that for fiscal year 2006 and 2007, at least 

$70 million will be needed each year to keep the project on schedule. We would appreciate a question from the committee to the Bureau to confirm the level of funding 

it needs to construct the project most efficiently. 

We are extremely concerned the cost of the project will exceed our ability to pay, 

and thereby diminish or deny the benefits of the project to our citizens. It seems 
61 

that we should be able to determine the cost definitively now through a cap on our 

obligation and encourage the continued efficiency we see applied today in the 

project. 

QUESTION SUBMITTED TO THE UTE MOUNTAIN UTE TRIBAL COUNCIL

QUESTION SUBMITTED BY SENATOR PETE V. DOMENICI

638 PROCESS

Question. We have talked about the theory behind the 638 process... that it 

is intended to provide the opportunity for Native Americans to ‘‘fill the shoes of Federal employees.’’ 

In your opinion, is this the way 638 is working on this project? In other words, 

do you feel that there is unnecessary duplication of effort? 

Answer. [The witness failed to respond by the time of publication.] 

CONCLUSION OF HEARING

Senator DOMENICI. Okay. Thank you all very much. No other 

questions. We stand in recess. 

[Whereupon, at 11:25 a.m., Wednesday, March 24, the hearing 

was concluded, and the subcommittee was recessed, to reconvene 

subject to the call of the Chair.] 

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