```

[Senate Hearing 109-96]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 109-96

OREGON RESOURCE CONSERVATION ACT; LITTLE BUTTE/BEAR CREEK SUBBASINS IN 
  OREGON; NEWLANDS PROJECT HEADQUARTERS; LOWER RIO GRANDE VALLEY; AND 
                   GLENDO UNIT OF THE MISSOURI RIVER

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   on
                                     

                           S. 166                                S. 251

                           S. 310                                S. 519

                           S. 592

                                     

                               __________

                             APRIL 19, 2005

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

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
22-931                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                                 ------                                

                    Subcommittee on Water and Power

                    LISA MURKOWSKI, Alaska, Chairman
                  GORDON SMITH, Oregon, Vice Chairman

LARRY E. CRAIG, Idaho                TIM JOHNSON, South Dakota
RICHARD M. BURR, North Carolina      BYRON L. DORGAN, North Dakota
MEL MARTINEZ, Florida                RON WYDEN, Oregon
CONRAD BURNS, Montana                DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                MARIA CANTWELL, Washington
JAMES M. TALENT, Missouri            JON S. CORZINE, New Jersey
                                     KEN SALAZAR, Colorado

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

                        Kellie Donnelly, Counsel
                Patty Beneke, Democratic Senior Counsel
                    Mike Connor, Democratic Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Ensign, Hon. John, U.S. Senator From Nevada......................     4
Halbert, Wayne, General Manager, Harlingen Irrigation District, 
  Harlingen, TX, on behalf of the Texas Irrigation Council.......    11
Heisler, Tod, Executive Director, Deschutes River Conservancy, 
  Bend, OR.......................................................    23
Hill, James, City of Medford Water Reclamation Division 
  Administrator, Medford, OR, on behalf of the Water for 
  Irrigation, Streams and Economy (WISE) Project Advisory 
  Committee......................................................    17
Rinne, William, Deputy Commissioner of Reclamation, U.S. 
  Department of the Interior.....................................     5
Schank, Ernest C., President of the Board of Directors, Truckee-
  Carson Irrigation District, Fallon, NV.........................    14
Smith, Hon. Gordon, U.S. Senator From Oregon.....................     1

                                APPENDIX

Responses to additional questions................................    29

 
OREGON RESOURCE CONSERVATION ACT; LITTLE BUTTE/BEAR CREEK SUBBASINS IN 
  OREGON; NEWLANDS PROJECT HEADQUARTERS; LOWER RIO GRANDE VALLEY; AND 
                   GLENDO UNIT OF THE MISSOURI RIVER

                              ----------                              

                        TUESDAY, APRIL 19, 2005

                               U.S. Senate,
                   Subcommittee on Water and Power,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3:12 p.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Gordon Smith 
presiding.

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

    Senator Smith. Ladies and gentlemen, we have convened this 
hearing of the Subcommittee on Water and Power. I have been 
asked to sit in for Chairman Murkowski, because of her 
commitment to another hearing in the Foreign Relations 
Committee that requires her presence.
    I want to welcome Deputy Commissioner William Rinne. He is 
here today to provide the Bureau of Reclamation's testimony on 
these bills. And I would also like to welcome those witnesses 
on the second panel, many of whom have traveled to be here 
today.
    I want to extend a special welcome to two Oregonians, Tod 
Heisler, executive director of the Deschutes River Conservancy; 
and Jim Hill with the city of Medford. I look forward to 
hearing from all of today's witnesses.
    As a sponsor of S. 166 and S. 251, which are co-sponsored 
jointly with my colleague, Senator Wyden, I want to reiterate 
my strong commitment to both these bills and the watershed 
enhancement efforts they represent.
    S. 166 will re-authorize the participation of the bureau in 
the Deschutes River Conservancy. The Deschutes Basin, in which 
there are several reclamation facilities, is truly one of 
Oregon's greatest natural resources. It drains Oregon's high 
desert along the eastern front of the Cascades, eventually 
flowing in the Columbia River. It is among the state's most 
intensively used recreational rivers. It provides water to both 
irrigators and also to municipalities.
    The Deschutes Basin also contains hundreds of thousands of 
acres of productive forests and range lands. It serves the 
treaty fishing and water rights of the confederated tribes of 
the Warm Springs Indian. And it has Oregon's largest non- 
Federal hydroelectric project.
    The potential for water conflicts in this--in that 
population is obviously very great. However, the DRC has been 
extremely successful in watershed restoration. It has helped 
the basin avoid many of the water conflicts that have been so 
destructive to local communities in other areas of Oregon.
    For the last 8 years, the DRC has helped restore stream 
flow, and improved the habitat, and water quality along a 
hundred miles of the Deschutes River and its tributaries.
    Even with these successes, the Deschutes River continues to 
face stream flow and water quality challenges. These challenges 
if unaddressed, could impact a Federal reclamation project and 
projects in the basin. That is one of the reasons why I have 
sponsored S. 166 and will push for its enactment.
    The other legislation before us today, that I sponsored, is 
S. 251. It would authorize the Bureau of Reclamation to conduct 
a water resources feasibility study for the Little Butte-Big 
Creek sub-basins in Oregon.
    This project is known as the Water for Streams, Irrigation 
and Economy Project, or WISE. And like DRC, the WISE project 
has brought together diverse agricultural, municipal, and 
environmental organizations dedicated to meeting the water 
challenges facing these sub-basins, which are tributaries of 
the Rogue River.
    The Bureau of Reclamation has a long history in this area. 
Since Reclamation's talent at division became operational in 
1958, there has been significant change in southern Oregon, as 
highlighted in Jim Hill's testimony, the Little Butte Creek and 
Bear Creek watershed space challenges, particularly in dry 
years like this; including unreliable irrigation supplies, 
degraded water quality for salmon, adverse recreational 
impacts.
    Population growth has increased the demand for domestic 
water supplies and has generated additional wastewater that 
must be managed by Medford Regional Water Reclamation Facility. 
The city of Medford is to be commended for its leadership in 
developing this consensus-based approach to resolving water 
supply and water quality issues for both irrigators and the 
city; and to improving in-stream flows and water quality for 
salmon.
    On July 2, 2004, Reclamation and the city of Medford 
entered into a memorandum of agreement which outlines 
responsibilities for a feasibility study/environmental impact 
statement for the WISE project.
    Under the MOA, the city of Medford is responsible for 
securing the funds necessary to hire the consultant to conduct 
the study. Medford officials estimate the city's costs at $2.8 
million.
    By contrast, S. 251 authorizes a half a million dollars for 
Reclamations to act as lead Federal agency and to provide the 
necessary technical oversight. Again, I will work with my 
colleagues from Oregon for the timely enactment of S. 251 and 
look forward to hearing from all of today's witnesses.
    I am joined by my colleague from Wyoming, Senator Craig 
Thomas. And, Senator, if you have an opening statement.
    [The prepared statements of Senators Smith and Ensign 
follow:]
   Prepared Statement of Hon. Gordon Smith, U.S. Senator From Oregon
    I appreciate Chairman Murkowski's willingness to convene this 
hearing today to receive testimony on several site-specific water bills 
that are very important to local communities. Those bills are: S. 166, 
to amend the Oregon Resource Conservation Act of 1996 to reauthorize 
the participation of the Bureau of Reclamation in the Deschutes River 
Conservancy; S. 251, to authorize the Secretary of the Interior to 
conduct a water resource feasibility study for the Little Butte/Bear 
Creek Subbasins in Oregon; S. 310, to direct the Secretary of the 
Interior to convey the Newlands Project Headquarters and Maintenance 
Yard Facility to the Truckee-Carson Irrigation District in the State of 
Nevada; S. 519, to amend the Lower Rio Grande Valley Water Resources 
Conservation and Improvement Act of 2000 to authorize additional 
projects and activities under that Act,; and S. 592, to extend the 
contract for the Glendo Unit of the Missouri River Basin Project in the 
State of Wyoming.
    I want to welcome Deputy Commissioner William Rinne here today to 
provide the Bureau of Reclamation's testimony on these bills. I'd also 
like to welcome those witnesses on the second panel, many of whom have 
traveled to be here today. I want to extend a special welcome to two 
Oregonians, Tod Heisler, the Executive Director of the Deschutes River 
Conservancy and Jim Hill with the City of Medford. I look forward to 
hearing from all the witnesses today.
    As the sponsor of S. 166 and S. 251, which are cosponsored by my 
colleague Senator Wyden, I want to reiterate my strong commitment to 
both these bills and the watershed enhancement efforts they represent. 
S. 166 will reauthorize the participation of the Bureau of Reclamation 
in the Deschutes River Conservancy (DRC). The Deschutes Basin, in which 
there are several reclamation facilities, is truly one of Oregon's 
greatest resources. It drains Oregon's high desert along the eastern 
front of the Cascades, eventually flowing in the Columbia River. It is 
among the state's most intensively used recreational rivers. It 
provides water to both irrigation projects and to rapidly growing 
municipal areas. The Deschutes Basin also contains hundreds of 
thousands of acres of productive forest and rangelands, serves the 
treaty fishing and water rights of the Confederated Tribes of Warm 
Springs, and has Oregon's largest non-federal hydroelectric project.
    The potential for water conflicts in this basin is great. However, 
the DRC has been an extremely successful watershed restoration 
organization that has helped the basin avoid many of the water 
conflicts that have been so destructive to local communities in other 
areas of Oregon. Participation by the Bureau of Reclamation was first 
authorized in 1996, and reauthorized in 2000. The current authorization 
of $2 million annually expires at the end of fiscal year 2006.
    The Deschutes River Conservancy has brought together diverse 
interests, including environmentalists, tribes, irrigators and power 
producers, to find cooperative, market-based solutions to the water 
supply and water quality challenges we are facing in the Deschutes 
Basin. As Tod Heisler's testimony points out, the DRC has obtained 
$3.60 in matching support for each federal dollar provided through the 
Bureau of Reclamation. These funds have been used effectively over the 
last eight years to help restore streamflow and improve the habitat and 
water quality along 100 miles of the Deschutes River and its 
tributaries.
    Even with these successes, the Deschutes River continues to face 
streamflow and water quality challenges. These challenges, if 
unaddressed, could impact the federal Reclamation projects in the 
basin. That's just one of the reasons why I sponsored S. 166, and will 
press for its enactment.
    The other legislation before us today that I sponsored, S. 251, 
would authorize the Bureau of Reclamation to conduct a water resources 
feasibility study for the Little Butte/Bear Creek Subbasins in Oregon. 
This project is known as the Water for Streams, Irrigation and the 
Economy (WISE) Project. Like the DRC, the WISE Project has brought 
together nineteen diverse agricultural, municipal and environmental 
organizations dedicated to meeting the water challenges facing these 
subbasins, which are tributaries of the Rogue River.
    The Bureau of Reclamation has a long history in this area. The 
Talent Division of the Rogue River Basin Project was authorized by 
Congress in 1954 for irrigation, flood control, hydroelectric power and 
other beneficial purposes. The Talent Division provides water to three 
irrigation districts and electricity from the Green Springs powerplant.
    Since the Talent Division became operational in 1958, there has 
been significant change in southern Oregon. As highlighted in Jim 
Hill's testimony, the Little Butte Creek and Bear Creek watersheds face 
challenges--particularly in dry years--including unreliable irrigation 
supplies, degraded water quality for salmon, and adverse recreational 
impacts. Population growth has increased the demand for domestic water 
supplies and has generated additional wastewater that must be managed 
by the Medford Regional Water Reclamation Facility.
    The City of Medford is to be commended for its leadership in 
developing this consensus-based approach to resolving water supply and 
water quality issues for both irrigators and the city, and to improving 
instream flows and water quality for salmon. On July 2, 2004, 
Reclamation and the City of Medford entered into a Memorandum of 
Agreement (MOA), which outlines responsibilities for feasibility study/
environmental impact statement for the WISE Project.
    Under the MOA, the City of Medford is responsible for securing the 
funds necessary to hire the consultant to conduct the study. Medford 
officials estimate the city's costs at $2.8 million. By contrast, S. 
251 authorizes $500,000 for Reclamation's to act as lead federal agency 
and to provide the necessary technical oversight.
    Again, I will work with my colleagues from Oregon for the timely 
enactment of S. 251. I look forward to hearing from all the witnesses 
here today.
                               __________
   Prepared Statement of Hon. John Ensign, U.S. Senator From Nevada, 
                               on S. 310
    Madam Chairwoman, Senator Johnson, thank you very much for holding 
a hearing today on S. 310, the Newlands Project Headquarters and 
Maintenance Yard Facility Transfer Act. I am grateful for your 
including this important bill on your busy hearing calendar.
    S. 310 would require the Secretary of the Interior to convey the 
Newlands Project Headquarters and Maintenance Yard Facility to the 
Truckee-Carson Irrigation District (TCID). I introduced S. 310, along 
with Senator Reid and Congressman Gibbons, because this title transfer 
is necessary if the TCID is to continue maintaining and operating the 
Newlands Project.
    Over 100 years ago, in 1903, the subject of this transfer proposal, 
a 40 acre parcel which is the site of the current office and 
maintenance yard for the TCID, was withdrawn for Reclamation purposes 
as part of the Newlands Project. Twenty-three years later in 1926, the 
TCID entered into a repayment contract with the United States 
Government to take over operation and maintenance of the Newlands 
Project. At that time, the TCID moved into an office and maintenance 
yard on property, near the 40 acre parcel, that the Government had 
purchased for the United States Reclamation Service.
    By 1975, the TCID had outgrown these original facilities and moved 
to the 40 acre parcel that is the subject of this transfer proposal. 
The land was available because it was not suitable for growing crops 
and therefore was never homesteaded or patented as were other irrigable 
acres. The U.S. Government did not contribute to any of the 
improvements to this property--all the improvements have been made by 
the TCID. However, in the early 1990's, the Bureau of Reclamation 
installed a field office on the property, tying into the improvements 
already made by the TCID in 1975. It occupies approximately 5 of the 40 
acres and would remain with the U.S. Government.
    In 1996, the TCID entered into an operation and maintenance 
contract with the Department of the Interior. Because of new mandates 
regarding water measurement and water control, the TCID needs to expand 
its facilities. This transfer is necessary so that the TCID can obtain 
financing for the necessary improvements--the first of which will be a 
new office building. The water users of the Newlands Project paid for 
an office and maintenance yard once and should not have to pay again.
    The TCID is a not-for-profit governmental agency organized under 
the laws of the State of Nevada. It services the public by maintaining 
and operating the Newlands Project and delivering water in accordance 
with existing contracts at a minimal cost to the U.S. Government. It is 
important to emphasize that this withdrawn land will continue to be 
used for public purposes, specifically the operation and maintenance of 
a federal water project.
    Early in February of 2004, after working with the Bureau of 
Reclamation and both sides of the isle on the House Resources 
Committee, H.R. 2831 was approved under suspension in the House with no 
opposition. S. 310 is almost identical to H.R. 2831, which had been re-
introduced as H.R. 540 in the current session.
    S. 310 has the support of our Congressional delegation, as well as 
from the Governor of Nevada and other elected officials in Nevada. I 
urge the Committee to support this legislation in order to ensure the 
efficient operation and maintenance of the Newlands Project.
    Thank you, Ms. Chairwoman and Senator Johnson, for holding this 
hearing today. I look forward to working with you and your staff to 
address any concerns you might have.

    Senator Thomas. Thank you. I really do not. I am 
particularly interested, of course, in the renewal of the 
Glendo contracts on the Missouri River, Platte River, so that 
is basically why I am here. Thank you.
    Senator Smith. Thank you, Senator.
    So, Bill, the mike is yours. We look forward to your 
testimony.

STATEMENT OF WILLIAM RINNE, DEPUTY COMMISSIONER OF RECLAMATION, 
                   DEPARTMENT OF THE INTERIOR

    Mr. Rinne. Thank you, Mr. Chairman. I am Bill Rinne, Deputy 
Commissioner of Reclamation. Thank you for the opportunity to 
share the Department of the Interior's views on the five bills 
today.
    We have submitted written testimonies on each of these 
bills and I would ask that they would be included for the 
record.
    Senator Smith. We will include them in the record without 
objection.
    Mr. Rinne. I will begin with the two Oregon bills, S. 166, 
that authorizes Reclamation's participation in the Deschutes 
River Conservancy, a locally created organization dedicated to 
the restoring of stream flow and water quality in the Deschutes 
Basin in Oregon.
    Already, the DRC has leased over 73 cubic feet a second of 
water during the 2004 irrigation season, restored nearly 100 
miles of stream corridor, and planted 100,000 native plants.
    The DRC has also acquired senior water rights that will 
remain in-stream during low flow periods, benefiting bull trout 
and summer steelhead.
    While Reclamation certainly does not oppose S. 166, we 
cannot predict the future funding requests by the 
administration to carry out the legislation. Regardless, we 
look forward to working with you, Senator, as these efforts in 
the Deschutes Basin progress.
    The second Oregon bill, S. 251, would authorize a 
feasibility study of the Little Butte and Bear Creek sub-basins 
of the Rogue River. And the primary goals of the bill's 
proponents are to increase stream flows for coho salmon; 
improve irrigation efficiency, and solve the effluent problems 
in the city of Medford.
    Considering our history of cooperating with this local 
collaborative effort, we wish we could support S. 251 at this 
time. However, the proposed legislation does not require the 50 
percent non-Federal cost sharing for the feasibility study. And 
the grants from the other Federal agencies do not qualify as 
cost-sharing.
    The Department on S. 592, the Department supports Senator 
Thomas's bill to extend contracts to the Glendo Unit of the 
Missouri River Basin project.
    We do have a couple of technical suggestions, Senator, for 
the legislation; which are set out in our prepared testimony. 
But we clearly see the need extend these contracts so that all 
parties will have the time needed to develop a long-term 
cooperative agreement.
    As you probably know, we are required to have a contract in 
effect in order to deliver water; so, this contract extension 
is important to Reclamation also.
    We are grateful to you, Senator Thomas, for your leadership 
on this.
    Turning to S. 310, Mr. Chairman, we would like to transfer 
title to the Newlands Project Headquarters and Maintenance 
property to the Truckee-Carson Irrigation District. However, 
the bill as introduced, would treat proceeds received by the 
United States as sale and lease of Fallon Freight Yard, which 
are acquired lands, as full payment for the 37 acres this bill 
would transfer, which were withdrawn land.
    From our point of view, this would mean that the Water 
District would not be required to pay anything for the 
property. We are concerned that this departure from normal 
Reclamation law and policy could set a precedent for others to 
follow.
    And finally, Mr. Chairman, S. 519 would amend the Lower Rio 
Grande Valley Water Resources Conservation and Improvement Act 
of 2000; to authorize an additional 19 projects, focused mostly 
on water conservation.
    Unfortunately, we cannot support adding these 19 new 
proposed projects to our long list of already authorized 
projects awaiting funding.
    Additionally, the bill pre-authorizes projects without 
benefit of involvement by Reclamation in the planning and 
development stages.
    These and other concerns prevent us from supporting S. 519, 
despite the worthwhile aim of the bill's proponents conserving 
water in the lower Rio Grande.
    That concludes my testimony. I will be happy to answer any 
questions.
    [The prepared statement of Mr. Rinne follows:]
      Prepared Statement of William Rinne, Deputy Commissioner of 
              Reclamation, U.S. Department of the Interior
                               on s. 166
    Madam Chairman and Members of the Subcommittee, I am William Rinne, 
Deputy Commissioner of Reclamation. Thank you for the opportunity to 
testify on S. 166.
    This legislation would amend the Oregon Resource Conservation Act 
of 1996 to reauthorize the participation of the Bureau of Reclamation 
in the Deschutes River Conservancy (DRC). The Bureau does not oppose S. 
166. However, in these lean budget times the Bureau must focus its 
scarce resources on its core mission of delivering water and generating 
power, and on aging infrastructure and O&M for existing Reclamation 
projects, therefore is not likely that the Conservancy will be a high 
priority for funding. Regardless of the level of federal financial 
support, we believe the Conservancy's goals of improving stream flow 
and water quality will certainly benefit the basin.
    The DRC was originally authorized by Congress in 1996 to implement 
water conservation measures in the Deschutes River basin. The DRC is a 
locally created private, nonprofit organization established to restore 
stream flow and water quality in the Deschutes Basin of Central Oregon. 
The DRC was founded by local irrigation districts, the Confederated 
Tribes of the Warm Springs Reservation, environmental conservation 
groups, and other local stakeholders, in an effort to focus on 
practical, incentive-based solutions to the basin's water management 
challenges. The DRC leased over 73 cubic feet per second of water in 
the basin's streams and rivers during the 2004 irrigation season and 
has restored nearly 100 miles of stream corridor using livestock 
management techniques, restored channel floodplain connectivity, and 
planted over 100,000 native plants in the riparian zone.
    The DRC has permanently acquired about 7,259 acre-feet of senior 
water rights in the Deschutes basin that will remain instream during 
critical low flow periods, benefiting fish species such as ESA listed 
bull trout and summer steelhead.
    The Administration does not understand the rationale for the 
provision that would define a quorum as only 8 people, less than half 
of the 19 people appointed to the Conservancy.
    This concludes my statement. I will be glad to answer any 
questions.
                               __________
                               on s. 251
    Madam Chairman and Members of the Subcommittee, I am William Rinne, 
Deputy Commissioner of Reclamation. Thank you for the opportunity to 
testify on S. 251.
    This legislation would authorize the Bureau of Reclamation to 
conduct a water resource feasibility study in the Bear Creek/Little 
Butte Creek sub-basins of the Rogue River in southwestern Oregon, and 
to prepare an environmental impact statement provided for in the Act. 
The study would investigate opportunities to implement water 
conservation measures within the three irrigation districts (Talent, 
Rogue River and Medford IDs) served by Reclamation's Rogue River 
Project, and to increase water supplies, including use of reclaimed 
water from the City of Medford and modifications to existing storage 
facilities. Because alternatives being studied would impact the 
facilities and operations of the Rogue River Project, Reclamation must 
be involved in the effort.
    It is Reclamation's understanding that a broad range of 
stakeholders has come together to achieve consensus on project goals 
and gain community support. The primary goals are to: 1) solve the 
sewage and storm water discharge problems of the City of Medford; 2) 
increase instream flows in Little Butte Creek and Bear Creek for 
threatened coho salmon; and 3) improve irrigation efficiency within the 
three irrigation districts. The project would improve the long-term 
viability of the three irrigation districts. The Bureau of Reclamation 
has cooperated with this local collaborative effort to proactively 
address water resource issues that could become contentious in the 
future.
    Partial funding for this study has been obtained by the City of 
Medford via a grant administered by the U.S. Environmental Protection 
Agency. The grant is being used to fund a contractor to initiate 
technical studies. The local study partners believe they will be able 
to obtain additional funding to complete the technical studies required 
to meet Reclamation's standards for water resources planning. 
Appropriated funds would be needed to cover Reclamation staff costs to 
review and revise as necessary the contractor's technical work, 
undertake Endangered Species Act consultations with other Federal 
agencies, and publish the notices and documents required under the 
National Environmental Policy Act.
    The administration cannot support S. 251 at this time. The 
legislation does not require at least 50% non-federal cost share for 
the feasibility study, as is required by Reclamation policy. Federal 
funds obtained by Medford through other agencies would not qualify for 
the cost-share requirement.
    This concludes my statement. I will be glad to answer any 
questions.
                               __________
                               on s. 310
    Madam Chairman, and members of the Committee, I am William Rinne, 
Deputy Commissioner of Reclamation. I am pleased to appear before this 
Subcommittee to provide the Administration's views on S. 310.
    S. 310 would authorize the Secretary of the Interior to convey the 
Newlands Project Headquarters and maintenance yard facility to the 
Truckee-Carson Irrigation District. The facilities cover about 37 acres 
of Reclamation withdrawn property in Fallon, Nevada.
    Mr. Chairman, over the past couple years, we have been working very 
closely with the District to resolve each of the issues on the title 
transfer of the headquarters property. In June 2003, Reclamation and 
the President of the District's Board of Director's signed an extensive 
Memorandum of Agreement governing the proposed title transfer. 
Reclamation actively supports transferring title to state and local 
entities when in the mutual interest of affected parties. Based on this 
coordination, the Administration supports the concept of transferring 
the title for the property to the Truckee-Carson Irrigation District.
    However, we are concerned that S. 310 directs that the proceeds 
received by the United States for the lease and sale of Fallon Freight 
Yard, the transfer of which was authorized in P.L. 107-339, be treated 
as full payment for the 37 acres. Under this language, the District 
will not be required to pay anything for the property. Under 
Reclamation law and policy, the proceeds from the sale of acquired 
lands and lease revenues such as those from Fallon Freight yard are to 
be treated as a tail-end credit to the applicable project. In this 
case, the Newlands Project, not the District, our Contractor who 
operates and maintains the Project on behalf of the United States, 
should receive the credit. The lands associated with the headquarters 
property that is proposed to be transferred under S. 310 are withdrawn 
lands and thus the District has not repaid their value. If enacted as 
is, we are concerned the bill could set a precedent that would allow 
the District and other irrigation districts to make additional claims 
on lease or eventual sale revenues from Reclamation acquired lands.
    In conclusion, I would like to take this opportunity to compliment 
District Board President Ernest Schank and the District's Board of 
Directors for their diligence and commitment in working with us on the 
issues surrounding this transfer. I also commend Senator Ensign for his 
leadership.
    That concludes my statement. I would be happy to answer any 
questions.
                               __________
                               on s. 519
    Madam Chairman, I am William Rinne, Deputy Commissioner of 
Reclamation, and I am pleased to present the Administration's views on 
S. 519, Senator Hutchison's bill to amend the Lower Rio Grande Valley 
Water Resources Conservation and Improvement Act of 2000 (Act) to 
authorize additional projects and activities.
    The bill authorizes an additional 19 water conservation projects, 
which include the replacement of canals and laterals with pipelines, 
the lining of canals and laterals, the installation of water 
measurement and telemetry systems, the renovation and replacement of 
pumping plants, and other activities that will result in the 
conservation of water. The legislation would enable the Secretary to 
participate in the funding of these projects, up to 50 percent of the 
total project cost, once they had met the review criteria and project 
requirements set forth in the Act. S. 519 aims to provide water saving 
measures to areas in Texas that have recently suffered drought.
    The Department lauds local and state efforts to improve and 
encourage water efficiency and to responsibly manage water quantity in 
the border region. The Department testified in general support (with 
some suggested revisions) of the original legislation that became P.L. 
106-576 and of the subsequent amendment (P.L. 107-351). Together, these 
laws authorized 19 projects with a cost ceiling of $47,000,000. The 
amendments offered in S. 519 appear to maintain the intent of the 
existing law while authorizing an additional 19 projects with a cost 
ceiling of $42,356,145. However, Reclamation must continue to direct 
limited resources toward constructing ongoing projects, and toward 
operation, and maintenance, and rehabilitation of existing projects. 
Therefore we cannot support adding these additional projects to the 
long list of already authorized projects awaiting Federal funding. 
Reclamation has several additional concerns with the legislation, which 
we will mention later in this testimony.
    Since late December 2000, when P.L. 106-576 was enacted, 
Reclamation has been working with local entities in the Lower Rio 
Grande Valley, the Texas Water Development Board, and the Texas 
Agricultural Extension Service of Texas A&M University. The first 
requirement of the public law was issuance of criteria by which 
Reclamation would administer the law and determine project eligibility 
for federal funding. These criteria were prepared, shared with state, 
local and other federal entities and issued in late June 2001, within 
the six month timeframe required by the law.
    Next, the irrigation districts involved with the 19 currently 
authorized projects and the Texas Water Development Board have worked 
with Reclamation to begin planning, designing and construction of 
authorized projects. To date, Reclamation has approved 15 Project 
Reports and 11 of the projects have initiated construction, five of 
which are substantially complete and under operation. The 19 presently 
authorized projects, if constructed, could save a projected 79,000 
acre-feet of water, 6.1 million kilowatt hours of energy, and $742,000 
of operation and maintenance expense annually.
    Reclamation is administering this program on a reimbursable basis, 
with each District submitting quarterly requests for payment. To date, 
Congress has appropriated $7,625,000 for implementation of this program 
($1.5 million in FY 2003, $4.5 million in FY 2004 and $1.625 million in 
FY 2005). Of this amount, Reclamation has obligated a total of 
$6,438,000 to reimburse Districts for project costs, which represents 
all available funding appropriated to date. As of the end of March 
2005, Reclamation has received reimbursement requests for completed 
work that exceeds our available funds by approximately $2.94 million.
    The emphasis placed by the Act on the initial 19 authorized 
projects is primarily on a project's scope, not upon its costs. For 
example, the scope of each authorized project is defined by the 
language in the Act itself and in the cited engineering report. In some 
cases, the specificity of this language has limited the authorization 
of (and therefore Reclamation's participation in) a project to only a 
portion of what an irrigation district has proposed to construct. The 
total project costs of each of these projects are not, however, 
specified in the legislation or in the cited engineering reports, but 
are determined once the authorized components are sufficiently 
developed in the Project Report and a project budget developed. In 
accordance with Section 4(b) of the Act, the Federal share of each 
project is then determined to be 50 percent of this total project cost.
    In contrast, the emphasis that would be placed by S. 519 on the 
second 19 projects considered for authorization would be on the 
project's cost, not upon its scope. Without changing the conditions for 
implementation of the first 19 projects, S. 519 imposes different 
conditions for implementation on the proposed 19 projects. For example, 
unlike the previous two bills, Section 2(b) of S. 519 would amend the 
Act to authorize virtually any project component that would result in 
the conservation of water or an improved supply of water, whether or 
not this component lies within the scope of the cited engineering 
report for that project. Also unlike the Act, S. 519 would identify a 
maximum total cost for each project, half of the sum of which equals 
the identified ceiling. Furthermore, Section 3 of S. 519 maintains 
separate ceilings for each of the groups of projects; namely, 
$47,000,000 (2001 dollars) for projects 1 through 19, and $42,356,145 
(2004 dollars) for projects 20 through 38.
    These differences, while not affecting the requirements for project 
qualification, would require somewhat different treatment of projects 
with regard to determining scope and cost, depending upon specific 
project authorizations.
    Another concern is that the proposed legislation pre-authorizes 
projects that have had limited, if any, involvement from the Bureau of 
Reclamation in the project planning and development process, and which 
have not undergone Administration review. Although the Administration 
supports the efforts of local project beneficiaries to address their 
local water needs, we cannot support either authorization or funds for 
projects that have not undergone rigorous Administration review.
    Madam Chairman, this concludes my testimony. I am pleased to answer 
any questions.
                               __________
                               on s. 592
    Madam Chairman and Members of the Subcommittee, I am William Rinne, 
Deputy Commissioner of Reclamation. Thank you for the opportunity to 
testify on S. 592. The Department supports the goals of S. 592.
    On July 1, 1997, the State of Wyoming, Nebraska, and Colorado and 
the United States Department of the Interior entered into a cooperative 
agreement for Platte River research and other efforts relating to 
endangered species habitats along the Central Platte River in Nebraska. 
The purpose of the cooperative agreement is to jointly undertake a 
basin-wide effort to improve the habitat of four threatened and 
endangered species along the Platte River. The cooperative study is 
designed to help develop a basin-wide program to be the reasonable and 
prudent alternative to minimize the effects of existing and new water 
related activities in the Platte River Basin.
    Glendo Dam and Reservoir is one of several Bureau of Reclamation 
dams and reservoirs on the North Platte River that operate as an 
integrated system. The Bureau of Reclamation is required to consult 
under the Endangered Species Act (ESA) on the operations of the entire 
reservoir system.
    Successful consultation completion will be dependent upon achieving 
a Recovery Implementation Program (Program) that will serve as a 
reasonable and prudent alternative for the ESA consultation. A final 
programmatic environmental impact statement which leads to a Program is 
scheduled to be completed in the fall of 2005, with a record of 
decision to follow in December 2005. We anticipate the Governors of the 
States of Colorado, Nebraska, and Wyoming and Secretary of the Interior 
will enter into such a Program in April 2006. S. 592 will allow 
Reclamation to renew the Glendo contracts when the Program is in place.
    The intent of S. 592 is to amend the Irrigation Project Contract 
Extension Act of 1998 to require the Secretary of the Interior to 
extend each of the water service or repayment contracts for the Glendo 
Unit of the Missouri River Basin Project for a period of 2 years until 
December 31, 2007, or for the term of the cooperative agreement entered 
into by the State of Wyoming, Nebraska, Colorado and the Secretary of 
the Interior.
    To ensure that the intent of this bill to amend the Irrigation 
Project Contract Extension Act of 1998 is clearly identified, the 
Department recommends the long title of the bill read as follows: ``To 
amend the Irrigation Project Contract Extension Act of 1998 to extend 
certain contracts between the Bureau of Reclamation and certain 
irrigation water contractors in the States of Wyoming and Nebraska.''
    With this clarification, the Department supports S. 592. Thank you 
for the opportunity to appear before you today.

    Senator Smith. As I understand your opposition to S. 166, 
it sounds like you are not opposed to the policy the DRC is 
advocating but it really comes down to a money thing. Is that 
about it?
    Mr. Rinne. Correct.
    Senator Smith. And the same with S. 251?
    Mr. Rinne. S. 251 is, Senator, on the 50/50 cost-share is 
probably our major opposition to it.
    Senator Smith. So, again, it is more of a money issue 
than--or just the policy that it has got to be 50/50?
    Mr. Rinne. The policy of the 50/50 and using--and not using 
other Federal funds to qualify for 50/50.
    Senator Smith. So, if we put in cautionary language, will 
the administration support enactment of the bill?
    Mr. Rinne. Yes, we would.
    Senator Smith. Okay. And does not the DRC advocate exactly 
the types of solution that Reclamation is advancing through the 
Water 25 program?
    Mr. Rinne. Yes.
    Senator Smith. I guess we have got to find some money 
around here. Thank you.
    Senator?
    Senator Thomas. That is a brand new idea.
    As I understand it, you would like to have this title 
changed to this little short title, to amend the Irrigation 
Project Contract Extension Act of 1998 to extend certain 
contracts between the Bureau of Reclamation and certain 
irrigation and water contractors in the State of Wyoming and 
Nebraska.
    Mr. Rinne. Yes, it is--I would agree.
    Senator Thomas. Okay. Sounds good. Thank you.
    Mr. Rinne. You are welcome.
    Senator Smith. On S. 310, the Newlands project, as 
consideration for this title transfer, S. 310 allows the use of 
any amounts previously received by the Federal Government for a 
lease or sale of land associated with the Fallon Freight Yard, 
a proposition not supported by the administration.
    Is it correct that the land at issue here, where the 
project headquarters and maintenance yard are located, and the 
Fallon Freight Yard are two separate tracts of land?
    Mr. Rinne. Yes, that is correct, Senator.
    Senator Smith. And what is the proper consideration for the 
property to be conveyed? Namely, the land associated with the 
Newlands Project headquarters and maintenance yard facilities?
    Mr. Rinne. We would request a new appraisal to do that. 
There was an earlier appraisal that we have not seen, a Fish 
and Wildlife Service appraisal, so we feel we need a new 
appraisal.
    Senator Smith. Would the administration support S. 310 if 
the consideration section was modified and the TCID had 
compensated the Federal Government for the land at issue?
    Mr. Rinne. Absolutely.
    Senator Smith. I think that is it, Bill. Thank you very 
much.
    Oh, I am sorry. We can take time, Senator.
    Senator Johnson. No, we do not have to----
    Senator Smith. Okay. Senator Johnson has joined us and has 
no questions for the Bureau.
    Senator Johnson. Thank you very much.
    Senator Smith. You are welcome, Senator.
    On panel two, we have Wayne Halbert, general manager of the 
Harlingen Irrigation District from Harlingen, Texas. We have 
Tod Heisler, executive director, Deschutes River Conservancy of 
Bend, Oregon; Jim Hill, city of Medford Water Reclamation 
Division administrator, and he is the chair of the WISE Project 
Advisory Committee; and Early--excuse me, Ernie Schank, 
president, Board of Directors of TCID of Fallon, Nevada.
    Gentlemen, we welcome you all. We thank you for your 
traveling so far to be here, to be part of the Senate record, 
and the leadership you are providing on these issues is noted 
and again, appreciated.
    Why do we not start over here with Wayne? The mike is 
yours.

    STATEMENT OF WAYNE HALBERT, GENERAL MANAGER, HARLINGEN 
  IRRIGATION DISTRICT, HARLINGEN, TX, ON BEHALF OF THE TEXAS 
                       IRRIGATION COUNCIL

    Mr. Halbert. Thank you, Mr. Chairman.
    Mr. Chairman, committee members and staff, we thank you for 
the opportunity to testify before you today on behalf of the 
communities and water districts along the Texas border.
    I am Wayne Halbert, general manager of the Harlingen 
Irrigation District and represent irrigation districts that 
supply irrigation water to over a million acres of farmland and 
raw water to municipalities for over 1.5 million people.
    Our testimony is in support of S. 519, which amends the 
Lower Rio Grande Valley Resources Conservation Improvement Act 
of 2000, to authorize additional projects under that act, and 
for other purposes.
    Our written testimony has been submitted for the record. 
But in the interest of time and respect to the committee, I 
would like to summarize my comments here today.
    First of all, I want to express our gratitude to the 
committee for passing previous legislation that has resulted in 
a great deal of conservation work along the Rio Grande.
    Mexico continues to use more and more water the United 
States used to have available. And the rapid urbanization on 
both sides of the border increases the demands on the water 
resource.
    These factors force us to step up our water conservation 
work, to keep a reasonable balance to the users of the 
resource. With agriculture the major user of the Rio Grande 
water, agriculture water conservation projects are the best 
source of savings possible.
    In your packet are two reports of the success of projects 
funded as a result of previous legislation passed by this 
committee. These projects are among the first to be completed. 
The first report is a project by Cameron County Irrigation 
District No. 2, which shows a savings of water by this portion 
of their project equal to the municipal standard the district 
delivers every year.
    The second report is from Hidalgo County Irrigation 
District No. 2. And this report was compiled by Texas A&M, 
which did testing before and after their project. Their result 
show an 81 percent savings of water in the area of the 
project.*
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    * The report has been retained in subcommittee files.
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    There are approximately $30 million worth of projects in 
the same--in some stage of activity, each of which when 
completed, would show equivalent savings of water. All of this 
has been, and will continue to be, a tremendous positive impact 
to the entire border region.
    Two things that authorization of this--this new 
authorization does for us: No. 1, it encourages our board of 
directors. All of our districts are formed by boards of 
directors, who are the landowners. It encourages them to seek 
ways to fund the cost-share, the 50 percent of the projects 
from the district's perspective. And No. 2, NAD Bank funds, 
North American Development Bank funds, have been authorized for 
many of the projects that are listed in this legislation. The 
NAD Bank funds put a great deal of weight on the authorization 
of projects for the awarding of NAD Bank dollars. So, it is 
important that these projects be authorized for us to be able 
to have access to those funds.
    We owe a great deal of thanks to Senator Hutchison and this 
committee for their support on these projects and for their 
continued support on the projects of S. 519.
    Thank you for your time and interest and we are available 
for--to answer any questions.
    Senator Smith. Thank you very much.
    [The prepared statement of Mr. Halbert follows:]
 Prepared Statement of Wayne Halbert, General Manager of the Harlingen 
 Irrigation District, Harlingen, TX, on behalf of the Texas Irrigation 
                                Council
    Mr. Chairman, Committee Members and staff, thank you for the 
opportunity to testify before you today on behalf of the communities 
and water districts along the Texas Border. I am Wayne Halbert, General 
Manager of the Harlingen Irrigation District and represent irrigation 
districts that supply irrigation water to over a million acres of 
farmland and raw water to municipalities for over 1.5 million people. 
Our testimony is in support of S. 519, which amends the Lower Rio 
Grande Valley Resources Conservation and Improvement Act of 2000, to 
authorize additional projects under that Act, and for other purposes.
    For the past several years the Border Region has been deeply 
involved in Integrated Resource Management studies to determine a 
direction for our communities to take in water resource management. The 
State of Texas gave direction to these studies in 1997 with legislation 
that required even more comprehensive determinations of water resource 
status. These studies have given us some stark revelations as to 
unprecedented predictions in population growth and needs for water 
resources over the next few years. The Rio Grande Valley Irrigation 
Districts have partnered with the Bureau of Reclamation on projects 
since the early 1950's. Most of the Districts have utilized BOR loan 
programs to do conservation projects. Many developed projects remain 
undone due to a lack of funding available to meet the needs. Districts 
have systematically chipped away at these projects within their budget 
restraints.
    Today water supplies are in better shape than they have been since 
1992, however the twelve years of drought or near drought conditions 
taught us the frailty of our situation. The slow progress of completing 
water conservation projects as local funds are available has become 
obviously unacceptable and has placed the agricultural and municipal 
supply needs in peril. We saw exhausted water supplies that caused 
thousands of acres of land to become unproductive and unable to sustain 
the industry that depends on that production. Explosive developments in 
Mexico, which share the waters of the Rio Grande, have deprived the 
United States of a greater amount of the water resource, accelerating 
the crisis. Admittedly a part of the Mexico issue is drought related 
but a greater part is a change in Mexico's operations of their system 
that has deprived the U.S. users of much of the water supply we 
traditionally have received. Recent flood waters and negotiations with 
Mexico have reportedly settled the debt issue and Mexico's violation of 
the terms of the 1944 Water Treaty but no long term solutions, thus 
insuring that this will occur again.
    The population explosion in the Rio Grande Valley area continues to 
be a real concern in dealing with our water resource issues and 
balancing the resource between our urban growth needs and our 
continuing farm needs. As if our population problems are not enough, 
Mexico's along the border are many times worse and they draw from the 
same resource.
    All of these pressures turn up the heat on the water resources for 
the Rip Grande. There are many valid concerns and frustrations over 
various issues that we desperately need congressional help with, but we 
also want to offer you a blue print for at least some of the solutions.
    In the comprehensive water resource studies of which copies of 
these reports have been provided to this committee, an emphasis was 
made to seek solutions that would provide balance to the fragile 
economy and environment of the border region. The committees and 
consultants were charged with the responsibility of finding ways to 
provide an adequate water supply for the least amount of impact, both 
financial and physical. Our goal was to find enough firm yield water to 
provide for the municipal, industrial, environmental and agricultural 
needs of the region and to dovetail that plan into the expected growth 
needs of the Valley.
    The studies looked at desalination, reverse osmosis, runoff reuse, 
groundwater recovery, new dam sites, long distance pipelines and any 
other opportunity that presented any semblance of credible water 
supply. After several years of study it has become apparent that 
because agriculture uses 85% of the water available, agriculture must 
be the target for the major water conservation projects.
    S. 519 amends original authorization for the Bureau of Reclamation 
to implement the programs and projects that surfaced as the most cost 
effective way to provide for the water resource needs of the Texas 
Border region. Most of the irrigation systems were built in the early 
1900's and many of the delivery systems that are the lifeblood of the 
municipalities as well as agriculture must be renovated. Improvements 
to these canals would provide annually one half of a years current 
municipal needs in saved water. Other conservation projects that 
include volumetric accounting of the water and new technologies in 
water delivery could save another 75% of the municipal current annual 
needs. All of these projects can be accomplished for construction costs 
of from $0.02 to $3.07 per 1000 gallons which projects on a debt 
service basis from a fraction of a cent to $0.23 per 1000 gallons of 
water saved. The projects outlined in this legislation would once again 
increase dramatically the water available for municipal and industrial 
use without collapsing the agricultural economy.
    The agricultural economy is extremely important to our region as a 
large portion of the workforce is dependent on the agriculture 
industry. The Border aspects of the region only increases this problem 
and agricultural layoffs create immediate social problems far beyond 
the normal expectations. We have testified twice before this committee 
on the forerunner of this legislation that an undependable water supply 
could do irreparable damage and would push our local unemployment 
figures out of sight. We have previously presented a report from Texas 
A&M that estimates as many as 30,000 jobs have were lost during the 
1990's and up to a billion dollars in lost revenues directly related to 
the water shortage on the Mexico shortfall alone.
    Today we are bringing examples of the fruits of legislation you 
passed a few years back. We have included in our testimony two reports 
from district projects that have recently been completed. One shows a 
savings of water equal to all the water the cities they serve use in a 
year. The other project shows reduction in canal water losses at 81% 
for the project area involved. The dollars your previous legislation 
has authorized and appropriated have reaped huge benefits to the Rio 
Grande Valley.
    The additional projects requested in this amendment are of utmost 
importance as authorized projects encourage the local districts by 
freeing up funds from the North American Development Bank, state and 
local sources to begin the projects. We recognize that we may have to 
live and grow on less water than we have been accustomed to. We have 
lost farms and businesses that have been a part of the Rio Grande 
Valley heritage for over a hundred years, mostly because water resource 
demands during the recent drought period have been inadequate. The 
greatest impacts of these losses today are to our agricultural 
community; however, the associated impacts have taken their toll on the 
Border Region as a whole. The cost of water to the general public is on 
the rise and will continue to do so as the scarcity of the resource 
manifests itself. Water shortages to the general populace have been 
held to a minimum but if we do not act we could experience a crisis in 
this arena also.
    This legislation allows us to turn these tragic losses around and 
provide new life and new hope to the whole Rio Grande Border Region. 
The infrastructure that is needed to solve these problems is apparent. 
Districts have planned these needed projects for years and anticipated 
accomplishing them over the next twenty or so years. Testimony today 
has shown you that we do not have that luxury. Every few acre feet of 
water not conserved is another family farm gone, another few jobs lost, 
another business who had to close their doors. Our future is in your 
hands.
    We appreciate your support for S. 519. Thank you for your 
attention.

    Senator Smith. Ernie Schank.

   STATEMENT OF ERNEST C. SCHANK, PRESIDENT OF THE BOARD OF 
   DIRECTORS, TRUCKEE-CARSON IRRIGATION DISTRICT, FALLON, NV

    Mr. Schank. Mr. Chairman and Mr. Johnson, I am glad to see 
you, because I had an airplane that I had to catch tonight and 
I really did not want to have to stay again overnight.
    I am Ernest C. Schank, president of the Board of Directors 
of the Truckee-Carson Irrigation District, also known as TCID, 
located in Fallon, Nevada. We are the home of one of the first 
five authorized projects and the first one to start 
construction. We boast U.S. Bureau of Reclamation specification 
0001, which was the Derby Dam facility. I am here to testify 
today in support of S. 310.
    The legislation would require the Secretary of the Interior 
to convey the Newlands Project Headquarters and Maintenance 
Yard Facility to the TCID. I would like to thank Senators Reid 
and Ensign and Congressman Gibbons for introducing this 
legislation, Commissioner Keys and the Bureau of Reclamation 
people for working cooperatively with us on this proposal.
    I did submit written testimony, and I will make a few 
comments that I think are of interest, but would ask that my 
written testimony be included in the record.
    Senator Smith. Without objection.
    Mr. Schank. In 1903, over 100 years ago, the 40-acre 
parcel, which is the subject of this transfer proposal and is 
the site of the current office and maintenance yard for TCID, 
was withdrawn for Reclamation purposes, as a part of the 
Newlands Project.
    This title transfer proposal is narrowly tailored to 
include approximately 35 acres of the 40-acre parcel and should 
not be viewed as a project title transfer.
    In 1926, the TCID entered into a repayment contract with 
the U.S. Government, to take over operations and maintenance of 
the Newlands Project. At that time, the TCID moved into an 
office and maintenance yard on property that the Government had 
purchased from the U.S. Reclamation Service. The cost of this 
land was included as a project cost that has since been repaid 
by the TCID. The Fallon Freight Yard and the Post Office 
currently occupy these properties.
    By 1975, the TCID had outgrown those original facilities, 
and moved to the 40-acre parcel that is the subject of this 
title transfer proposal. The land was available because it was 
not suited for growing crops and was therefore never 
homesteaded or patented, as were acres that were irrigable.
    All of the improvements to this property have been made by 
the TCID, the U.S. Government has not contributed to these 
improvements. In the early 1990's, the Bureau installed a field 
office on the property, tying into our improvements. It 
occupies approximately five of the 40 acres and would remain 
with the U.S. Government.
    By 1996, the TCID had repaid the original construction 
charges designated for repayment. Thus the Newlands Project is 
considered to be a paid-out project under Reclamation law.
    In 1996, the TCID entered into an operation and maintenance 
contract with Interior. Because of new mandates regarding water 
measurement and water control, the TCID needs to expand our 
facilities.
    The transfer is necessary so that TCID can obtain 
financing, and I might mention private financing, for the 
necessary improvements, the first of which will be a new 
building, office building.
    Consideration for the property will be all of the accrued 
moneys received from the lease of our old maintenance yard, now 
known as the Fallon Rail Freight Yard, which are currently held 
in a reclamation fund in the name of the Newlands Project. And 
any future lease payments and sales proceeds when provisions of 
Public Law 107-339 are completed and the property transfers to 
the city of Fallon.
    The water users of the Newlands Project paid for an office 
and maintenance yard once and should not have to pay again. 
Early in February 2004, after working with the Bureau of 
Reclamation and both sides of the aisle on the Republican 
Resource--House Resources Committee, H.R. 2831 was approved 
under suspension in the House with no opposition.
    S. 318 is almost identical to H.R. 2831, which has been 
reintroduced by Congressman Gibbons as H.R. 540 in this current 
session.
    TCID is a not-for-profit governmental agency, organized 
under the laws of the State of Nevada. TCID provides a service 
for the public by maintaining and operating the Newlands 
Project and has since 1926, and delivers water in accordance 
with existing contracts at minimal cost to U.S. Government.
    It is important to emphasize that this withdrawn land will 
continue to be used for a particular public purpose, that is 
the operation and maintenance of a Federal water project.
    TCID is a local job provider with 55 to 60 employees and 
contributes, thereby, to the regional economy.
    The Governor, and the State, and other elected officials in 
our State support this transfer title.
    I am not aware of any opposition, from any interested 
entities within the State of Nevada, to this transfer. I would 
like to request that the subcommittee include the letters from 
the Governor and several other elected officials in the record 
of this hearing; and I will provide those at the conclusion of 
my testimony.
    I thank you for allowing me to appear today and will be 
glad to answer any questions.
    Senator Smith. Thank you, Ernie. We will include those 
letters in the record.*
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    * The letters have been retained in subcommittee files.
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    [The prepared statement of Mr. Schank follows:]
   Prepared Statement of Ernest C. Schank, President of the Board of 
             Directors, Truckee-Carson Irrigation District
    Mr. Chairman, Members of the Committee, I am Ernest C. Schank, 
President of the Board of Directors of the Truckee-Carson Irrigation 
District (TCID) in Fallon, Nevada. I am here to testify in support of 
S. 310.
    This legislation would require the Secretary of the Interior to 
convey the Newlands Project Headquarters and Maintenance Yard Facility 
to the TCID. This title transfer is narrowly tailored to only transfer 
ownership of federal land currently being used by the TCID for an 
office and maintenance yard facility.
    We would like to thank Senator John Ensign R-NV and Senator Harry 
Reid D-NV for introducing this legislation in the Senate and 
Congressman Jim Gibbons R-NV for introducing companion legislation in 
the House, (H.R. 540), to make this title transfer possible. We also 
would like to thank Commissioner John Keys and the Bureau of 
Reclamation (BOR) for working cooperatively with us on this proposal.
    The Newlands Project, one of the first five Reclamation projects, 
was authorized on March 14, 1903 and provides for irrigation and other 
purposes in the lower Carson River Basin near Fallon, in western 
Nevada. Construction began in 1903 on the first project works, the 
Derby Diversion Dam and the Truckee Canal. The TCID was created under 
the laws of the State of Nevada in 1918 as a non-profit governmental 
agency to undertake the building of a drainage system and begin 
operating and maintaining the project works beginning in 1926 under 
contract with the United States.
    In 1926, the TCID entered into a repayment contract with the United 
States Government. The TCID moved into the office and maintenance yard 
previously occupied by the United States Reclamation Service (USRS). 
These properties were held in fee title, and the costs of those assets 
were repaid by the water rights owners of the TCID although a title was 
never transferred from the U.S.
    By 1975, the TCID had outgrown those original facilities, so we 
moved to a 40-acre parcel of land withdrawn for Reclamation purposes in 
1903. The TCID built a new office and maintenance shop facility on this 
withdrawn land. As withdrawn land, this parcel previously to this time 
was available for homesteading, proving up, and patient. The land 
remained unimproved as it was not irrigable because of the high clay 
and alkaline content of the soil. It was, however, suitable for an 
office and maintenance yard at one location whereas the previous 
facilities were at two separate locations.
    The original lot where the office had been was eventually 
transferred by the Department of the Interior (DOI) to the United 
States Postal Service. The mechanism to dispose of the original 
maintenance yard was passed in the 107th session in legislation titled 
``Fallon Rail Freight Loading Facility Transfer Act'' (P.L. 107-339). 
Provisions were approved by Congress for the transfer of title to the 
City of Fallon. The pending transfer has not yet taken place.
    Today the parcel which we are seeking to transfer and the attendant 
improvements make up the hub of operation and maintenance of the 
Newlands Reclamation Project. The TCID has rented the 40 acres for a 
nominal fee from the BOR since 1972. The value of the land was 
increased significantly by the improvements all made by the TCID. No 
federal monies have been used for improvements
    In 1996, the TCID entered into an operation and maintenance 
contract with the DOI. A part of that contract requires an aggressive 
water measurement program. This modernization in water measurement at 
each turnout and the increased automation of water control in the many 
canals and laterals require more employees, more computer and 
electronics space, and more storage space for records.
    In 1996, the BOR certified that the TCID had repaid the U.S. 
Government the original construction charges designated for repayment. 
At this time, the Newlands Project is considered to be a ``paid out 
project'' under Reclamation law. Although the original construction 
charges and other costs to the U.S. have been repaid, no title to any 
of the Newlands Project facilities have been transferred to the TCID.
    Although the U.S. Government has leased the land to the TCID for a 
nominal value, the lease will eventually expire and the TCID would like 
to own the land to make permanent improvements to existing facilities 
that have become outdated. The transfer of approximately 35 acres of a 
40-acre parcel of federal land is to allow the TCID to make permanent 
improvements on the land for continued operation and maintenance of the 
Newlands Project. The remaining approximately five acres will be 
reserved for a local Bureau of Reclamation field office.
    The TCID has out grown its office and shop and needs to expand. The 
transfer is necessary so that financing can be obtained for the 
improvements--the first of which will be a new office building. The 
TCID has made all previous improvements to this land. In order to 
secure the necessary financing to make the improvements we need to own 
the ground upon which the improvements will stand.
    The legislation would direct the transfer pursuant to a memorandum 
of agreement we have entered into with the Bureau. The conveyance would 
not occur until the National Environmental Policy Act has been fully 
complied with. Moreover, any necessary environmental site assessments, 
remediation or removal would have to be completed.
    Consideration for the property will be all the accrued monies 
received from the lease of our old maintenance yard, now known as the 
``Fallon Rail Freight Yard'' which are currently held in a reclamation 
fund in the name of the Newlands Project and any future lease payments 
and sales proceeds when provisions of 107-339 are completed and 
property transfers to the City of Fallon.
    The Governor of Nevada supports this title transfer. I would like 
to ask that the subcommittee include the attached letter from Governor 
Guinn, dated July 11, 2002, in the record of this hearing.
    On October 15, 2003, during the 108th Congress, I appeared before 
the House Subcommittee on Water Power and Resources, and testified in 
behalf of H.R. 2831 sponsored by Congressman Jim Gibbons R-NV. Early in 
February of 2004 after working with the Bureau of Reclamation and both 
sides of the isle on the House Resources Committee, the Bill was 
approved under suspension in the House with no opposition. S. 310 is 
almost identical to H.R. 2831 from the 108th Session and H.R. 540 
introduced in this 109th Session, except a section of definitions has 
been added.
    In closing, I want to emphasize that the TCID provides a service 
to, the public by maintaining and operating the Newlands Reclamation 
Project and delivering water in accordance with contracts previously 
entered into between the United States and the water rights owners of 
the Project. We provide jobs and those employed thus provide assistance 
to the Counties, the State of Nevada and the U.S. government as 
taxpayers.
    I am not aware of any opposition from any interested entity within 
the State of Nevada to this title transfer. Nevertheless, we will 
commit to addressing any issues that are raised as this legislation 
moves forward.
    This concludes my remarks. Thank you for allowing me to appear 
before your committee today. I would be pleased to answer any questions 
you might have.

    Senator Smith. What time is your flight?
    Mr. Schank. I leave from Baltimore-Washington at 8:15, so I 
will have time now.
    Senator Smith. Okay. We do not want to----
    Mr. Schank. But I was worried.
    Senator Smith. All right. Well, we do not want you to miss 
your flight.
    Jim Hill, a constituent, welcome.

   STATEMENT OF JIM HILL, CITY OF MEDFORD WATER RECLAMATION 
DIVISION ADMINISTRATOR, MEDFORD, OR, ON BEHALF OF THE WATER FOR 
    IRRIGATION, STREAMS AND ECONOMY (WISE) PROJECT ADVISORY 
                           COMMITTEE

    Mr. Hill. Thank you. My name is Jim Hill. I am the water 
reclamation division administrator for the city of Medford, and 
also the chair of the WISE Advisory Committee.
    Chairman Smith, I want to thank you for the opportunity to 
provide testimony in support of S. 251, which would authorize 
the Bureau of Reclamation to conduct a water resource 
feasibility study for the Little Butte-Bear Creek sub-basins in 
Oregon, also known as the WISE Project.
    I have submitted written testimony that I request be put 
into record.
    Senator Smith. Without objection.
    Mr. Hill. Thank you.
    Today's testimony is presented on behalf of the 19 
agricultural, municipal, environmental, and water resource 
agencies and groups that comprise the WISE Project Advisory 
Committee; and will address the need for the WISE Project, as 
well as the need for Reclamation authorization as lead agency 
for the project.
    At this time I would like to thank both you and Senator 
Wyden for introducing and supporting this legislation. It is 
great to have two Senators that work so well together and put 
the interest of the citizens first.
    Reclamation is the architect of the Talent Project, which 
has provided irrigation water for the growers in the Bear Creek 
Valley since 1958; and utilizes flows from Bear Creek and 
Little Butte Creek, the reservoir system connected to the two 
streams, and over 200 miles of canals to irrigate over 34,000 
acres of prime agricultural land.
    The Talent Project also provides flood control, and power 
generation, and the reservoir system is heavily used for 
fishing, and water sports.
    Both Little Butte Creek and Bear Creek are tributaries to 
the Rogue River, a world class salmon and steelhead river. 
Little Butte Creek is prime Coho spawning habitat and its 
health is a key component of the continued economic success of 
the Rogue River fisheries, which extend over 130 miles 
downstream to the ocean.
    Since the initial construction of the Talent Project, 
considerable growth has taken place in southern Oregon, as you 
have mentioned previously. And we are now suffering from 
unreliable and inefficient irrigation water supplies, degraded 
water quantity and quality affecting both the fish and the 
recreation values of our reservoirs, streams, and rivers.
    Even the municipal water supply for the Medford Water 
Commission is impacted by Little Butte Creek's reduced water 
quality.
    About 5 years ago, local interests started planning efforts 
to address the above-mentioned water resources issues for the 
next 50 years. At the same time, Reclamation was completing its 
Bear Creek-Little Butte Creek Water Management Study Appraisal 
Report, a lot, which analyzed water conservation measures to 
improve irrigation deliveries, enhance streams flows, and 
improve water quality and fish habitat in Bear Creek and Little 
Butte Creek, including the use of reclaimed effluent from the 
Regional Water Reclamation Facility as an additional valuable 
source of irrigation water. It ends up that these two groups 
were doing the same things, so we put it together and called it 
the WISE Project, and that is what we are here to talk about 
today.
    On June 2, 2004, Reclamation and the city of Medford 
entered into a Memorandum of Agreement, which defines the roles 
and responsibilities of each agency in the development and 
preparation of a WISE environmental study. Reclamation's role 
will be to provide technical review of the NEPA process and 
assure that NEPA compliance is achieved.
    Medford, with Reclamation input on the selection process, 
is responsible for hiring a consultant to prepare the study 
with Reclamation oversight and technical review.
    It is estimated that the cost for the WISE study will be 
$2.8 million. That is for the feasibility consultant, and it is 
Medford's responsibility to secure. S. 251 would authorize the 
appropriation of $500,000 for Reclamation to act as lead agency 
and provide the necessary technical oversight.
    Medford has retained a consultant for the first phase of 
the study. And the preliminary scoping work has been done, and 
we are now at a point where your committee's approval of S. 
251, authorizing Reclamation to act as lead agency for the WISE 
study and appropriating $500,000, is critical, so we can start 
the next process, which is the formal scoping process and 
filing of the Notice of Intent.
    And just in one quick response, I first testified before 
the House, introducing this legislation, back in October 2003; 
and I just wanted to note that this is the first time that the 
Bureau has brought up the issue of a 50/50 cost share. We were 
never aware of that and it has been like 2 years.
    It has kind of caught--it has caught me by surprise. We 
will go back and we will have to investigate that; because if 
that is the only thing and truly is the only thing we can see 
what we can do about resolving that issue regarding getting 
passage of this legislation.
    And once again, I want to thank you for the opportunity to 
submit this testimony, and this is really important for Little 
Butte Creek and Bear Creek and the entire Rogue Valley and the 
people around there, because they depend heavily upon the water 
resources in that area.
    Thank you very much.
    Senator Smith. Thank you very much.
    [The prepared statement of Mr. Hill follows:]
   Prepared Statement of Jim Hill, City of Medford Water Reclamation 
Division Administrator, on behalf of the Water for Irrigation, Streams 
        and Economy (WISE) Project Advisory Committee, on S. 251
    Chairman Domenici, thank you for the opportunity to provide 
testimony in support of S. 251, which would authorize the Secretary of 
the Interior, acting through the Bureau of Reclamation (Reclamation), 
to conduct a water resource feasibility study for the Little Butte/Bear 
Creek Subbasins in Oregon. This project has become known as the Water 
for Streams, Irrigation and the Economy (WISE) Project.
    Today's testimony is presented on behalf of the nineteen 
agricultural, municipal, environmental and water resource agencies and 
groups that comprise the WISE Project Advisory Committee, and will 
address the need for the WISE Project, as well as the need for 
Reclamation authorization as lead agency to provide project review and 
oversight for the Feasibility Study and Environmental Impact Statement 
(FS/EIS).
    At this time I would like to thank our Senators Smith and Wyden for 
introducing this legislation. It is cooperative and proactive projects 
such as this that help to avoid the water resource management 
controversies that often plague western states. It's great to have two 
Senators that work so well together, and put the interest of the 
citizens first.
                               background
    Reclamation was the architect for the Talent Project, which has 
provided irrigation water for the growers in the Bear Creek Valley 
since 1958, utilizing flows from Bear Creek and Little Butte Creek, the 
reservoir system connected to the two streams, and over 200 miles of 
irrigation canals. The Bear Creek Valley is famous for its pears, and 
the Bear Creek Corporation, which grows, processes and distributes the 
pears, is the largest employer in the valley. In total there are over 
34,000 acres of agricultural land in the Bear Creek Valley.
    The Talent Project has also provided flood control, power 
generation and recreational benefits. The several reservoirs that are 
part of the irrigation system also provide fishing and water sports for 
the citizens of Jackson County.
    The Rogue River is a world class salmon and steelhead river, 
visited by anglers from around the world. Both Little Butte Creek and 
Bear Creek are tributaries to the Rogue, and serve as spawning areas 
for the Chinook and Coho salmon. Little Butte Creek has been designated 
as prime Coho spawning habitat, and its health is a key component of 
the continued economic success of the Rogue River fisheries, which 
extend over 130 miles downstream to the ocean.
    Since the initial construction of the Talent Project, considerable 
growth has taken place in southern Oregon. The Little Butte Creek and 
Bear Creek watersheds now suffer from unreliable irrigation water 
supplies during drought years and degraded water quantity and quality 
for native anadromous salmonids and other uses during low flow periods. 
The aging and increasingly inefficient water delivery infrastructure 
results in high water losses to irrigation districts and water users. 
Full appropriation, if not over-appropriation, of water in Bear Creek 
and Little Butte Creek threatens the reliability of irrigation water 
supply. Degraded water quality and low flows are detrimental to 
anadromous salmonids and other species. Increasing stream and river 
withdrawals and decreasing reservoir levels adversely affect aesthetic 
recreation values of reservoirs, streams, and rivers.
    In addition to the agricultural and environmental issues, growth in 
the Bear Creek Valley has increased the demand for additional drinking 
water, and has generated larger quantities of wastewater, which is 
currently treated and discharged into the Rogue River. Degrading water 
quality in Little Butte Creek directly affects the Medford Water 
Commission (MWC) municipal raw water supply, which is located 
downstream of the confluence of Little Butte Creek with the Rogue 
River. Increasingly stringent regulatory discharge requirements also 
dictate that the Medford Regional Water Reclamation Facility (RWRF), 
which treats wastewater from approximately 120,000 customers in the 
Bear Creek Valley, seek alternative means of treated effluent disposal 
during critical summer flow periods.
    In September of 2000 the MWC prepared a scoping report for what was 
then called the Irrigation Point of Diversion (IPOD) project. The MWC 
withdraws water from the Rogue River just downstream from the 
confluence of Little Butte Creek. The intent of the IPOD project was to 
move the irrigation points of diversion from Little Butte Creek to the 
Rogue River downstream of the MWC treatment plant, thereby improving 
the water quality and quantity in Little Butte Creek for the salmon, 
while at the same time improving the water quality at the MWC treatment 
plant intake.
    At the same time, Reclamation was completing its Bear Creek/Little 
Butte Creek Water Management Study Appraisal Report, which came out in 
February of 2001. The purpose of the study was to analyze water 
conservation measures that would reduce losses in the irrigation 
delivery systems in the Bear Creek subbasin. The saved water would then 
be redistributed to (1) improve irrigation deliveries, and (2) enhance 
streams flows and improve water quality and fish habitat in Bear Creek 
and Little Butte Creek. One of the recommended options involved piping 
the Hopkins Canal, which serves the Rogue River Valley Irrigation 
District (RRVID), and pumping reclaimed effluent from the RWRF into the 
pipeline as an additional valuable source of irrigation water.
    The IPOD Steering Committee which had expanded to include the RWRF, 
irrigation districts, environmental groups, and any other concerned 
interests, recognized that additional outside funding assistance would 
be required for the project to go ahead. The Committee asked 
Reclamation, because of its history with the Talent Project, to provide 
funding support for the IPOD Project as a key component of its February 
2001 appraisal report. Reclamation pointed out that a Feasibility Study 
and Environmental Impact Statement (FS/EIS) would be required before it 
could participate. At this time the IPOD Steering Committee joined 
forces with Reclamation to develop the WISE Project, and to seek 
Congressional authorization for Reclamation to act as lead agency for 
the WISE FS/EIS.
                       what is the wise project?
    The WISE Project is a proposed water management project to improve 
the Bear Creek and Little Butte Creek watersheds within Jackson County 
in southern Oregon. The WISE Project aims to use water wisely to 
benefit agriculture, irrigation, municipalities, the environment, 
recreation, and fisheries interests. The defined study area includes 
the Bear Creek and Little Butte Creek watersheds and their associated 
tributaries and reservoirs. The purpose of the WISE project is to:

   Improve efficiency of water deliveries to the Medford, Rogue 
        River Valley, and Talent irrigation districts.
   Improve irrigation water supply reliability for the Medford, 
        Rogue River Valley, and Talent irrigation districts.
   Improve water conservation through both system-wide and on-
        farm irrigation improvements.
   Improve water quantity, water quality, and water reliability 
        for native anadromous salmonids.
   Improve aesthetics and recreation values of reservoirs, 
        streams, and rivers.
   Improve water quality at the MWC Water Treatment Facility 
        intake by improving water quality in Little Butte Creek.

                          local collaboration
    The WISE project is a collaboration of virtually all parties in the 
Bear Creek and Little Butte subbasins with an interest in water 
resources management. As a follow up to the IPOD Congressional letter 
of support, a Memorandum of Support was circulated for signature. Over 
25 agencies and groups signed on in support of the WISE project. These 
groups include the Farm Bureau, cities throughout the valley, the 
irrigation districts, Oregon Water Trust, Headwaters, and the Sierra 
Club, to name a few. Irrigators, environmentalists and municipalities 
all stand to benefit from the WISE project, and are active 
participants. The IPOD Steering Committee members also signed a 
Memorandum of Understanding and formed the WISE Project Advisory 
Committee (PAC). Even with this local support, though, there is a need 
for Reclamation authorization to oversee the project. The following are 
the WISE PAC members: City of Medford; Medford Water Commission; Talent 
Irrigation District; Medford Irrigation District; Rogue River Valley 
Irrigation District Jackson County Farm Bureau; Jackson Soil & Water 
Conservation District Bear Creek Watershed Council; Little Butte Creek 
Watershed Council Bear Creek Corporation; Oregon Water Trust; 
WaterWatch; Oregon Watershed Enhancement Board; Oregon Water Resources 
Department; Rogue Basin Coordinating Council; Rogue Valley Council of 
Governments; Bureau of Reclamation; Rogue Valley Sewer Services; 
Jackson County.
                        reclamation/medford moa
    To address impending water supply and regulatory issues, the WISE 
project proposes to modify and supplement the Talent Project system to 
improve stream flows and water quality, improve irrigation system 
efficiencies, and utilize reclaimed effluent from the RWRF as an 
additional irrigation water source. Due to the complexity of the 
project and history of Reclamation involvement in the Talent Project, 
Reclamation needs to be authorized to act as lead agency at the very 
beginning of the WISE project, during preparation of the FS/EIS.
    On July 2, 2004, Reclamation and the City of Medford entered into a 
Memorandum of Agreement (MOA), which defined the roles and 
responsibilities of each agency in the development and preparation of 
the FS/EIS for the WISE Project. Reclamation's role will be to provide 
technical review of the FS/EIS process, and assure that NEPA compliance 
is achieved. Medford, with Reclamation input on the selection process, 
is responsible for hiring a consultant to prepare the FS/EIS in 
accordance with Reclamation oversight and technical review.
                        funding for wise fs/eis
    It is estimated that the cost for the City of Medford to hire a 
consultant to prepare the WISE FS/EIS will be $2.8 million. Reclamation 
has estimated that the cost to act as lead agency and provide technical 
oversight will not exceed $500,000. Per the MOA, Medford is responsible 
for securing the funds necessary to hire the FS/EIS consultant. S. 251 
includes a provision authorizing the appropriation of $500,000 for 
Reclamation to act as lead agency and provide the necessary technical 
oversight.
    Medford has already secured funding to hire a consultant for the 
first phase of the FS/EIS. The preliminary scoping work has been done, 
and we are now at a point where your committee's approval of S. 251 
authorizing Reclamation to act as lead agency for the WISE FS/EIS and 
appropriating $500,000 to fund Reclamation's participation is critical, 
so that we can file the Notice of Intent and start the technical 
alternatives analyses.
    Thank you once again for the opportunity to submit testimony on 
this matter that is so important to the citizens of the Little Butte 
Creek and Bear Creek Basins of Oregon, and to those around us that may 
well be positively impacted by the efforts of the WISE Project. We are 
available at any time if you, your staff or committee members would 
like further information.

    Senator Johnson. Mr. Chairman?
    Senator Smith. Yes.
    Senator Johnson. I regret that I am going to have to excuse 
myself. I do, however, have a series of questions that, with 
your consent, I would submit into the record to be directed 
toward the panel members of the two panels that were here 
today.
    Senator Smith. Thank you. We will certainly include those 
in the record. And thank you, Senator, for being here.
    We are also joined by Senator Salazar of Colorado. Welcome.
    Senator Salazar. Thank you, Senator Smith.
    Senator Smith. Do you have an opening statement or anything 
you want to say at this time?
    Senator Salazar. I do, thank you, Mr. Chairman. I would 
only say that I am very interested in general in the water 
issues that you are working on, and the legislation that you 
are discussing today. And I recognize, like my colleagues on 
this committee, the great importance of water, especially in 
the western states; and so I very much look forward to working 
with you.
    And I wanted to stop by, Mr. Chairman, because this was our 
first meeting of this subcommittee.
    Senator Smith. Thank you very much, Senator. Colorado is 
not unlike a lot of places in eastern Oregon, same sorts of 
water issues, so on.
    Senator Salazar. Did you hear about that pipeline we are 
trying to build from Oregon to Colorado?
    Senator Smith. Yes, I heard about that. I heard about that. 
No, just kidding.
    [Laughter.]
    Senator Smith. It is interesting. What is the cubic feet of 
the water in the Colorado? A good year is 75 million, 100 
million; and I think the Columbia River is 300 million, so it 
is--we have got water up there but it needs to stay there.
    Senator Salazar. You have got a lot more water in Oregon 
than we do in the Colorado River Basin. That is for sure.
    Senator Smith. Tod, are you related to the Heislers of 
Hepner?
    Mr. Heisler. No.
    Senator Smith. Okay. All right. Well, we are glad to have 
you here anyway.
    Mr. Heisler. Thank you very much.
    [Laughter.]
    Senator Smith. Annie Heisler was on the Pendleton Round-Up 
court with my daughter.
    Mr. Heisler. Yes.
    Senator Smith. And it is a great family in that part of the 
world.
    Mr. Heisler. I have a sister named Annie, but it is not the 
same one.
    Senator Smith. She was not on the Roundup Court, then.
    Mr. Heisler. No, she was not.
    Senator Smith. Tod, the mike is yours.

 STATEMENT OF TOD HEISLER, EXECUTIVE DIRECTOR, DESCHUTES RIVER 
                     CONSERVANCY, BEND, OR

    Mr. Heisler. All right. Well, thank you very much, Senator 
Smith. I appreciate your support and Senator Wyden's support 
for S. 166 and for giving me the opportunity to testify about 
the critical need to re-authorize the Deschutes River 
Conservancy.
    There are only two changes from the 2000 authorization that 
we are seeking. The new bill extends for 10 years but does not 
increase the $10 million of Federal funding and modifies the 
quorum requirement.
    The Deschutes River Conservancy uses a balanced approach 
and seeks to satisfy all of the critical needs for water in the 
basin, whether they are farmers, for tribes, growing cities, or 
the streams.
    The DRC is pioneering a proactive, collaborative approach 
intended to avoid conflict and litigation and increase water 
supply in the most cost-effective manner possible. So, the 
Deschutes River Conservancy, we believe, is a clear alternative 
to the Klamath Basin-style conflicts south of us.
    The Federal investment from all agencies in the Klamath 
Basin will exceed $100 million in this fiscal year. By the time 
it is over, the Klamath could consume over $1 billion of 
Federal funding.
    The Deschutes is one basin to the north of the Klamath and 
we know that all of the conditions that created conflict in the 
Klamath are also present in the Deschutes. Those conditions are 
over-appropriated streams, causing long stretches of them to 
run nearly dry in the summer, poor water quality, a number of 
stretches listed in the 303(d) list under the Clean Water Act. 
We have an endangered species, the bull trout. And with the re-
licensing of the Round Butte Complex, the hydroelectric complex 
in the middle of the basin, we are going to see some more 
listed species up in the upper basin for the first time in 50 
years; that would be Chinook salmon and steelhead.
    So of course, we also have farmers who are trying to make a 
living on the land and struggling doing that in central Oregon 
these days. And we have the fastest growing cities in Oregon; 
and I have been told some of the fastest growing cities in the 
nation.
    So, these are all the ingredients for conflict in a big 
way. So we think that the question is not whether an adjustment 
will be needed in the Deschutes but rather when it will be made 
and how much it will cost. And so the more delay, the more 
there is potential for conflict. And when conflict and 
litigation emerge, we all know the price to fix the problem 
skyrockets.
    So, a relatively modest investment now cannot meet the need 
for a much larger investment in the future. So, how does the 
DRC avoid conflict and produce cost-effective solutions?
    Well, it starts with its basic structure. We were created 
as a 501(c)(3) organization to bring all of the competing 
interests for water together in one body. We represent private 
interests and public interests; ranching, timber, tourism, 
development, environment, Federal, State, and local agencies.
    We also focus on the win-win solutions. We made steady 
progress--is being made. And we have restored over 100 cfs of 
stream flow, while firming up water supplies to farmers.
    One of the primary ways to do that is through conservation 
projects. Those irrigation canals on average lose 50 percent 
transmission loss due to seepage. So, you put the water in a 
pipe and you have 100 percent gain. You double the water supply 
available for all of these competing uses. We have transferred 
permanently, in stream, 20 cubic feet per second from--of 
conserved water from those kinds of projects already.
    We also focus not just on water infrastructure but on water 
marketing. We have an annual water leasing program that has put 
80 cubic feet per second in the Deschutes River while 
protecting farmers' water rights from forfeiture.
    We have financed these projects from a great diversity of 
sources. We are not too reliant on the funding that we receive 
from Reclamation. For every dollar of Reclamation investment, 
the DRC has obtained three dollars of matching support.
    We have been in business now for about 9 years and we are 
really poised to scale this up to a level at which it can 
really make a difference and have the impact that is needed in 
order to avoid the Klamath.
    We have got a project in design right now with Morris Unit 
Irrigation District. That single project will return 20 cfs to 
the stream. It would improve water reliability to that 
irrigation district. And it would save them over $200,000 a 
year in power.
    So, we want to scale up with the conservation, the water 
banking, and marketing. We believe this is the way to solve the 
problem.
    So, Secretary Norton came to town, to Bend, just 8 months 
ago to tout our successful effort. And I would like to conclude 
with a quote from her article in that summer on the drought 
water in the West.
    She said, ``The DRC has leveraged Federal funds with other 
cost-share dollars to complete a number of important ecosystem 
restoration projects and set up the Deschutes water bank.''
    She concludes by saying, ``In the final analysis, long-
lasting solutions to chronic water shortages will come from the 
people who are most effected. The difficult work of preventing 
conflict must be addressed by local communities in long-range 
collaborative efforts that focus Federal, State, and local 
resources on conservation and alternative water supplies; and 
by assuring that the projects are locally driven practical 
solutions.''
    The Secretary's words describe precisely what the Deschutes 
River Conservancy is. Our collaborative approach will be more 
cost-effective than an adversarial approach. We have the 
ability to match Reclamation investment three-to-one. Our role 
in the basin is fundamental. We have catalyst, convener, 
facilitator of the diverse stakeholders. Our leadership and 
technical expertise is critical to the success at the local 
level.
    So, we strongly urge you to re-authorize and find 
appropriations for the Deschutes River Conservancy and to keep 
water management in the Deschutes Basin on a positive track for 
years to come. Thank you very much.
    [The prepared statement of Mr. Heisler follows:]
        Prepared Statement of Tod Heisler, Executive Director, 
                      Deschutes River Conservancy
                                summary
    Reauthorization of the Deschutes River Conservancy (DRC) is 
critical to the development of fair and rational water allocation to 
tribes, cities, farmers, and the streams in the Deschutes River Basin. 
The DRC's proactive, collaborative approach to water management will 
assure that the pervasive conflicts experienced in the Klamath Basin 
can be avoided in the Deschutes Basin. This year, the federal 
government will spend $100 million in an effort to resolve conflicts 
over water in the Klamath Basin. The DRC requests reauthorization for 
$2 million per year on a matching basis through 2016. This modest 
investment will be matched by at least four-to-one from non-federal 
sources, and will assure that cooperative, market-based approaches can 
guide sustainable water management in the Deschutes Basin for years to 
come.
                         the drc success story
    The Deschutes River Conservancy (DRC), is a non-profit, private 
corporation established in Oregon in 1996. In September 1996, Congress 
enacted and the President signed Public Law 104-208, which included 
S.1662, the Oregon Resources Conservation Act establishing the DRC 
(then known as the Deschutes Basin Working Group under Section 301(h) 
(Division B, Title III)). In 2000 Congress reauthorized the DRC through 
P.L. 106-270, the Deschutes Resources Conservancy Reauthorization Act 
of 2000 which authorized $2.0 million per year on a matching basis 
through FY06.
    The DRC was created to bring together all of the key stakeholders--
farmers, tribes, irrigation districts, cities, private business, public 
agencies and environmental organizations--to proactively devise 
solutions that work for the river and for all parties. The DRC's 
mission is to restore streamflow and improve water quality in the 
Deschutes River Basin. Rather than relying on regulation, the DRC has 
successfully employed voluntary, market-based programs to restore over 
90 cfs of streamflow in the Deschutes Basin. Furthermore, by planting 
more than 100,000 trees, installing 40 miles of riparian fencing, 
removing berms and reconstructing stream beds, and many other 
restoration activities, the DRC has improved the habitat and water 
quality along 100 miles of the Deschutes River and its tributaries. In 
eight short years an enormous amount has been accomplished, but there 
is much more to do.
                             the challenge
    Long stretches of the Deschutes River and its tributaries still 
suffer from poor streamflow and water quality. Much of the river fails 
to meet water quality standards set by the Clean Water Act and Oregon's 
Department of Environmental Quality. These conditions present 
significant threats to the fish and wildlife and are the potential 
basis for legal challenges under the Clean Water Act and Endangered 
Species Act. These potential legal challenges are imminent due to the 
recent relicensing of the Pelton Round Butte Hydroelectric Project that 
will provide for fish passage of listed species (steelhead and Chinook 
salmon) to the Upper Deschutes Basin for the first time in over fifty 
years.
    The Deschutes is urgently trying to avoid becoming another area of 
Klamath-like conflict, but that possibility still exists. In the 
Klamath River Basin, intense conflict over water has financially 
crippled many farmers and killed tens of thousands of fish. The DRC is 
facilitating win-win solutions among irrigators, cities, and tribes to 
resolve conflict while it is still possible to do so.
                         the drc's pivotal role
    The DRC has played a critical catalytic role in galvanizing the 
many and diverse constituencies in the basin around the view that 
restoration of the Deschutes River Basin serves everyone's interests. 
The current political, social and economic conditions create superb 
opportunities to achieve lasting results for the Deschutes Basin.
    In August 2004, Secretary of Interior, Gail Norton, visited Bend to 
tout Interior's new program, Water 2025--Preventing Crisis and Conflict 
in the West, and to highlight the innovative nature of a recent grant 
to the Deschutes Water Alliance. This alliance between the DRC, five 
Central Oregon cities, seven irrigation districts, and the Confederated 
Tribes of Warm Springs holds great promise to design and implement a 
water bank and conduct conservation projects that can more efficiently 
allocate water to all competing uses--the streams, the cities, 
recreation, and irrigated agriculture.
    Reauthorization for the DRC is critical. The DRC has built the 
staff expertise and experience in water conservation and marketing that 
is essential for the success of the water bank and the Deschutes Water 
Alliance. Reauthorization will allow the DRC and its partners to 
capitalize on the current set of opportunities while the conditions are 
ripe. Without the DRC's leadership and technical expertise the Alliance 
would be significantly handicapped. Beyond its technical expertise in 
water rights, transfers and conserved water, the DRC has the knowledge 
and experience to raise significant non-federal capital from a variety 
of sources to finance its water initiatives.
    Over six years the DRC obtained $3.60 of matching support for every 
$1.00 of BOR federal funds invested
            water conservation and water banking initiatives
    The importance of the DRC reauthorization lies in the huge ground 
breaking opportunities for major water conservation and water banking 
initiatives in the Deschutes Basin. These are the precise opportunities 
that the DRC was created to develop. The current funding to the 
Deschutes Water Affiance from Interior's Water 2025 program finances 
significant data gathering and analysis. The studies are assessing 
water allocation optimization alternatives using water conservation, 
water banking and water storage. The studies and the pilot water bank 
will enable the Deschutes Water Alliance to develop a cost effective, 
politically palatable water management master plan that addresses all 
of the significant needs for water in the Deschutes Basin. 
Subsequently, the DRC and its partners will pursue major water 
conservation and water banking projects.
                 drc reauthorization legislation needs

    1. Term: 10 years
    2. Amount: $2 million
    3. Modify quorum to be eight directors for conducting all business
    4. Schedule: The DRC needs to be reauthorized no later than 
September 30, 2005.

    Only two changes are requested from the 2000 authorization of the 
DRC: 1) term increases from five to ten years and 2) quorum is fixed at 
eight directors for all kinds of business. The DRC is deeply involved 
and has played an important catalytic role in a long term effort that 
that is likely to fail without the DRC. The problems are resolvable in 
ten to twenty years and another ten years of federal authorization is 
critical to success.

    Senator Smith. Tod, I guess given the Secretary's words, 
you would probably say the DRC is helping to solve the issues 
Reclamation is charged with solving?
    Mr. Heisler. Correct.
    Senator Smith. So, I would probably recommend we find some 
money.
    Mr. Heisler. Thank you.
    Senator Smith. Jim Hill, under the current MOA, which is 
referenced in S. 251, what percentage of the feasibility study 
costs will be borne by the city of Medford?
    Mr. Hill. The city is going to be--is responsible for 
seeking funds. We will be searching for a variety of sources of 
funds to pay for that $2.8 million.
    Right now, we have gotten a $900,000 EPA grant that is 
funding the first phase of it. And we will be working with 
Oregon Watershed Enhancement Board and with local funding 
through the city and other agencies, as well as looking for 
more Federal funds to support that; the remainder of the cost 
of the feasibility study.
    Senator Smith. Wayne, your projects, what kind of bearing 
do they have on treaties with Mexico, and do they help us 
comply with those treaties?
    Mr. Halbert. The problem with the treaties in Mexico is 
Mexico has a treaty to deliver so much water to the Rio Grande 
on an annual basis. But Mexico has developed a need for that 
water that far extends their ability to meet the terms of the 
treaty. So, they are not abiding by the treaty and have not for 
the last 10 or 15 years, except accidental. And by accidental, 
I mean when nature--when Mother Nature gives them enough water 
that they cannot capture it all, then we get some of that water 
and that water is water that goes in favor of Mexico for the 
treaty issue.
    The problem that this has created for us in the United 
States is that we were dependent on about--a little over 
400,000 acre- feet of water a year from Mexico that we are 
not--we are no longer getting. And so, these water conservation 
projects are important for us to make up that difference.
    We are having--in other words, we are having to come from 
behind to find ways to satisfy the needs the needs of our 
agricultural interests along the Rio Grande, as well as our 
municipal and urban needs, also. And the only way we can do it 
is--since agriculture is--uses 85 percent of the water, the 
only way we can do it is through agricultural water 
conservation projects.
    Senator Smith. The administration has testified that, 
unlike the previous authorization for the lower Rio Grande 
Valley, S. 519 shifts the focus from the project's scope to the 
project's cost. And do you agree with the Bureau of 
Reclamation's characterization of that? And if so, do you think 
such a shift in costs is appropriate?
    Mr. Halbert. Well, a part of the problem that we were 
trying to solve there was that the--when the projects would 
occur, when we would actually do the projects--I will try to 
explain it by giving you an example of what happened in our 
district. We were putting in several miles of pipeline within 
our district, putting canals underground in a pipeline. It did 
not seem to make any difference to the Bureau that we put in--
if we had two miles of pipeline to construct, it did not make 
any difference to the Bureau if that cost us a million dollars 
more than it was supposed to cost us. We just could not go two 
miles and two feet.
    And yet when we got out there in doing the project, we 
might could go two miles and another quarter of a mile for less 
money but that was not satisfactory with the Bureau. And so, it 
was creating all kinds of problems with us being able to comply 
with what the Bureau was wanting to do.
    There was also some other issues with that, in that we 
wanted to spread the amount of money that might be appropriated 
over several of the districts so that the districts could do 
some of their projects and all of the money not go to one 
project. And that was a part of the other issue.
    Those two issues were--we tried to address in this 
legislation, in the changes in this legislation.
    Senator Smith. Would it not have, in effect, then be a 
preauthorization of projects if this legislation passes?
    Mr. Halbert. I am not sure that I understand the question.
    Senator Smith. Well, by this cost shift, the question is if 
you are going to start at all, you are going to essentially 
pre-approve the entire project and not just components of it?
    Mr. Halbert. Right. Well, the studies to do the projects 
are still required and complete. It is just that when you 
actually do the projects, sometimes even under the best of 
study conditions, it is--it does not actually happen on the 
field exactly like it does on paper.
    Senator Smith. Okay. Ernie, you are off the hook. I do not 
have any questions for you.
    Mr. Schank. Okay.
    Senator Smith. So thank you all again, and we appreciate 
your willingness to come this far to participate in this public 
record. And we look forward to moving on all of these bills. 
With that, we are adjourned.
    [Whereupon, at 3:52 p.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

                               Deschutes River Conservancy,
                                             Bend, OR, May 9, 2005.
Hon. Lisa Murkowski,
Chairman, Subcommittee on Water and Power, Committee on Energy and 
        Natural Resources, U.S. Senate, Washington, DC.
    Dear Ms. Murkowski: Thank you for giving me the opportunity to 
testify before your Subcommittee on April 19th in support of S. 166--
The Deschutes River Conservancy Reauthorization Act.
    Enclosed, please find responses to the questions you posed in your 
April 27th letter.
    If you have any further questions, I would be happy to submit 
responses to them as well.
            Sincerely,
                                               Tod Heisler,
                                                Executive Director.
[Enclosures.]

             Questions From Senators Murkowski and Johnson
    Question 1. Please describe the DRC's Water Conservation and Water 
Banking Initiative.
    Answer.
                     the water acquisition program
    Water acquisitions undertaken by the DRC since 1998 total 100 cfs 
of restored streamflow in the Deschutes Basin. The DRC acquires water 
for instream flow restoration in three ways:

    1. Agricultural Water Conservation projects.
    2. Water Banking: Leasing natural flow, storage and conserved water 
from water rightholders.
    3. Transfers: Acquiring water rights or undertaking source switches 
(i.e. substituting groundwater for surface water rights).

    The DRC's water banking activities also include the State-chartered 
Groundwater Mitigation Bank that the DRC runs as part of its leasing 
program.
                              conservation
    Irrigation canals in the upper Deschutes Basin have, in most cases, 
been excavated into permeable lava flows which dominate the high plains 
geology of Central Oregon. Unlined canals and laterals leak large 
quantities of water into the ground, requiring large diversions from 
the Deschutes River to deliver irrigation water to the places of use. 
While the percentages vary from district to district, the overall range 
of losses falls within 40-55%. Piping and lining of canals and 
laterals, as well as on-farm water use efficiency projects save water 
that otherwise seeps into the ground. Oregon's Conserved Water Program 
allows this saved water to be protected instream or certificated as new 
water rights for use on land. Instream water rights from saved water 
can be protected in the 30 mile reach between Bend and Lake Billy 
Chinook, making an important contribution to restoration of depleted 
flows in the Middle Deschutes River.
Conservation Projects
    Conservation projects are typically implemented as a cost-share 
between an irrigation district and restoration funders like the DRC. 
The DRC uses its federal, state, and hydro power mitigation funds to 
finance the capital costs of conservation projects (pipe and 
materials), and the irrigation districts usually fund installation and 
contractors. The resulting saved water is allocated based on the 
proportionate shares of financing by the district and the DRC. The 
restoration share of the water is protected permanently instream 
through a new instream water right. The district's water is `banked' by 
leasing it instream until such time as it is either placed on land 
(within the district or in another
    district) purchased for permanent instream protection, or provided 
for municipal uses through the state's Groundwater Mitigation Program. 
In districts that are water short (in particular Tumalo and Three 
Sisters Irrigation Districts) the district uses its portion of the 
saved water to firm up delivery to its existing patrons (rather than 
banking the water and providing water to new uses).
Accomplishments
    The DRC has contributed $1.4 million of federal funds to 7 
conservation projects with a total investment of $6.8 million (as shown 
below). Water conserved for instream use from these projects is 24 cfs 
(8,400 AF). The DRC is currently working with irrigation districts on 
second generation projects which will include both an annual revolving 
conservation fund for piping laterals and carrying out on-farm 
projects, as well as developing large piping and lining projects for 
district main canals.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Length     Total       Total Conserved
                                                               Piped      Water            Water                                                Other
              Project                  Irrigation District  -----------   Saved   ---------------------- Total Cost    Sponsor    DRC Cost   Restoration
                                                                       -----------                                      Cost                     Cost
                                                              (miles)    (ac-ft)     (cfs)     (ac-ft)
--------------------------------------------------------------------------------------------------------------------------------------------------------
NUID 51-4..........................  North Unit............      4.89     1,022        1.51       421       425,400     223,900      89,500      112,000
Alfalfa............................  Central Oregon........      1.91     1,003        3.09     1,003       121,287      62,363      58,924           --
Thompson Ditch.....................  Three Sisters.........      1.03       887        2.09       887       131,578      45,978      59,800       25,800
Bend Feed Canal....................  Tumalo................      1.40     7,251       13.62     4,447     4,842,594   2,811,471     821,123    1,210,000
Cloverdale.........................  Three Sisters.........      3.09     1,189        2.00       849       660,000     400,000     160,000      100,000
Lost & Boulder.....................  Lost & Boulder........     10.44       327        0.40       170       106,696      47,111      49,085       10,500
Fryrear............................  Three Sisters.........      3.40     1,273        1.50       637       541,983     271,000     125,000      145,983
                                    --------------------------------------------------------------------------------------------------------------------
    TOTAL..................................................     16.17    12,951       24.21     8,413     6,829,538   3,861,823   1,363,432    1,604,283
                                    ====================================================================================================================
--------------------------------------------------------------------------------------------------------------------------------------------------------

                             water banking
    Broadly defined, water banking is the temporary exchange of 
surface, groundwater, and storage water rights from one use to another 
by an intermediary.
Leasing
    The DRC's leasing program is a voluntary, market-based program that 
temporarily restores streamflow to the Deschutes River and its 
tributaries while meeting the needs of local irrigators. Oregon water 
law requires that farmers maintain the validity of their water right by 
using it `beneficially' once every five years and leasing water 
instream constitutes beneficial use under Oregon State law. The leasing 
program also educates landowners on options for their water and 
provides an introduction to permanent instream transfers. Leasing is 
also beneficial to local cities and other groundwater users because the 
surface water right can be exchanged for the right to use groundwater.
    Formally established in 1998, the program has grown from a small 
donation based campaign to an eight-district, paid program comprising 
the largest portion of protected water in the Deschutes River. In 2004, 
the program was responsible for more than doubling the average summer 
flow in the Middle Deschutes, contributing 50 cubic feet per second 
(cfs) instream. In addition, the program contributed 5.30 cfs of 
protected water to Squaw Creek, 6.60 cfs to Tumalo Creek and 11.4 cfs 
in the Crooked River. In total, more than 24,000 acre-feet have been 
leased through the program in 2004 (Fig 1).*
---------------------------------------------------------------------------
    * All figures have been retained in subcommittee records.
---------------------------------------------------------------------------
    Approximately 174 landowners are currently participating in the 
program, up from 108 in 2003. The increase in water leased was 
accompanied by an increase in landowner participation from nearly all 
districts.
    In the early years of the program all leases were donated. However, 
in 2001 the DRC established its current fixed price of $7/acre-foot and 
nearly twice the acre-feet were leased (Fig 1). The DRC has also tested 
a reverse auction methodology to increase participation in the Ochoco 
Irrigation District in 2003 and 2004. Landowners submitted sealed bids 
for amounts of water they were willing to lease at a given price. 
Ultimately the DRC accepted bids up to its reserve price, ultimately 
leasing 196.9 acres instream in 2003 and 642 acres instream in 2004.
Alliance Water Bank
    The DRC is a partner in the Deschutes Water Alliance's Water Bank, 
which will serve as a parking place for surplus agricultural water. 
This water will be held by various accountholders including irrigation 
districts, cities, tribes and conservation groups like the DRC. Water 
will be deposited in the bank through a variety of mechanisms, 
including conserved water projects, piping, and urbanizing acreage. 
Through reverse price auctions, fixed price agreements and bilateral 
negotiations the water will be traded between the designated 
accountholders. Trading opportunities will be subject to reserve 
requirements set by the Bank in conjunction with accountholders, in 
order to ensure that adequate water right supplies are maintained for 
current uses before permanent transactions take place.
    The program is process-based and ensures that irrigation 
districts--the primary suppliers of water--will move at a rate that is 
comfortable with their members and board. For example, to `bank' water, 
the DRC quitclaims the water, acquiring ownership. Depending on the 
district, the DRC might lease the water instream for one or more years, 
and then later negotiate the exit price for the water. Once the exit 
fee is paid, the water rights are moved into the transfer process. In 
2004, the DRC completed its first cycle of quitclaim, lease and 
transfer by moving 31 acres of district water, its first `banked' 
water, into the transfer process. The Alliance partnership is likely to 
ensure an orderly and planned process for future banking transactions.
                               transfers
    The Transfers Program is focused on permanent transfers of water 
rights to create new, senior instream water right certificates or by 
moving diversions downstream. In the Deschutes, transfers can also be 
used to create new groundwater rights through the State's Groundwater 
Mitigation Program. These projects can be donations (the DRC is a 
501(c)3 non profit) or based on market prices for water. With rapid 
urbanization, demographic and land use change ongoing in the basin, 
there are many opportunities to acquire surplus agricultural rights. 
There is a limited track record of these transactions in the basin as 
they face many issues and hurdles. The DRC has participated in the 
first instream transfers of rights in the Squaw Creek, Middle Deschutes 
and Lower Crooked reaches, in a number of cases as an agent for clients 
involved in groundwater mitigation transactions.
    Question 2. How was the DRC able to bring together and work 
collaboratively with so many diverse interests?
    Answer. The origins of the DRC derive from the process of water 
rights adjudication undertaken by the Confederated Tribes of Warm 
Springs in the 1980s. At that time, the Tribes recognized that by 
exercising the full water rights entitled to them by treaty, they would 
cause enormous conflict and do more harm than good to themselves. They 
also realized that the issues they cared about most--water quality and 
fisheries--were larger than the reservation and could only be 
effectively managed at a basin-wide scale. Thus, in cooperation with 
Environmental Defense and Central Oregon Irrigation District they 
established the Deschutes Basin Working Group, an informal body 
convened to discuss cooperative ways to improve water quality, and 
restore streamflows and fisheries in the Deschutes.
    This cooperative approach of the Deschutes Basin Working Group 
evolved over the next decade, and in 1996 the organization became a 
501(c)(3) nonprofit corporation and received Federal authorization 
under the Oregon Resource Conservation Act. Thus, the original values 
instilled in the Deschutes River Conservancy were those of proactive 
collaboration.
    In addition to original values, the DRC has been able to bring 
together and work collaboratively with so many diverse interests 
because of the presence of strong incentives to work together toward 
common aims. These incentives are as follows:
    Common Purpose: All constituencies whether they be farmers, 
developers, sportsmen, environmentalists or government agencies share 
fundamental values about the importance of protecting Oregon's natural 
heritage. They may differ on the means to protect it but they all share 
this fundamental value. This enabled the DRC to formulate and reach 
consensus on a mission to restore streamflow and improve water quality.
    Regulation: The existence of the Endangered Species Act and the 
Clean Water Act create strong incentives for diverse groups to work 
together. They become powerfully motivated to avoid the regulatory 
hammer. When the DRC began ten years ago, there were no listed species 
in the basin. The farmers and ranchers knew that species would likely 
be listed in the future and that they had time to be proactive to avoid 
regulation. Today one species, bull trout is listed and two other 
listed species, steelhead and Chinook salmon will be reintroduced above 
the Pelton dams in the near future. This has created new urgency to 
accelerate the collaboration.
    Win-win solutions: The key to holding this diverse group together 
has been the DRC's ability to craft win-win solutions and this is the 
strongest incentive of all. When people know that to solve one problem 
they don't have to create a problem for someone else they are motivated 
to advance that solution. The DRC has developed a number of powerful 
win-win solutions.

   Irrigation canal lining and piping. With transmission losses 
        of around 50%, piping canals can double the water supply, 
        firming up supplies to farmers and restoring streamflow at the 
        same time.
   Water rights leasing. By leasing their water rights 
        instream, farmers can restore streamflow and protect their 
        water rights from forfeiture.
   Water rights transfers. By employing the DRC method of 
        transferring water rights instream, the stream benefits, the 
        landowner is compensated, and the irrigation district is able 
        to maintain financial solvency.

    In summary, the keys to achieving effective collaboration among 
diverse groups are 1) to unify them around a common purpose (Oregon 
natural heritage), 2) galvanize action by creating urgency (impending 
regulatory or legal action) and 3) give the group solid opportunities 
to solve the problem in a manner that does not harm others (win-win 
solutions).
    Question 3. Would the DRC be able to continue without the Bureau of 
Reclamation's participation?
    Answer. The simple answer to this question is no. Managing water 
resources for growing cities, the needs of fish and wildlife, and 
farmers can not be accomplished without the participation of the Bureau 
of Reclamation.
    In Central Oregon, two major Reclamation projects serve the needs 
of North Unit and Ochoco Irrigation Districts. North Unit and Ochoco 
Irrigation Districts divert water from the Crooked River which, as a 
result, suffers from low streamflow and poor water quality. Before the 
Pelton Round Butte Hydroelectric project was built in the 1960s, the 
Crooked River and its major tributaries were significant spawning 
grounds and habitat for steelhead and salmon. With the imminent 
relicensing of the dams at Pelton Round Butte, these listed species 
will be present in the Crooked River once again. Significant 
improvements to streamflow and water quality will be necessary to avoid 
legal conflict under the Endangered Species Act and Clean Water Act.
    In addition, the city of Prineville is on a trajectory for high 
population growth. Its neighbor, Redmond, is the fastest growing city 
in Oregon. As urban growth occurs a new demand for water will come with 
it. This sets up a potential three-way competition for water between 
the irrigators, the city, and the endangered species.
    It is not possible to resolve this situation without the full 
participation of the Bureau of Reclamation and Congress. Successful 
outcomes cannot be achieved without Reclamation's technical and 
financial support. The management of Prineville and Wickiup reservoirs 
must be optimized and releases from them should serve the needs of 
cities and streams as well as irrigators. In addition, the water 
conveyance infrastructure should be lined or piped to achieve enormous 
water savings. Numerous legal, technical and financial hurdles still 
prevent progress from being made in these critical areas and the Bureau 
of Reclamation must be a part of the solution.
    No one expects, however, that the Federal government should foot 
the entire bill. The Deschutes River Conservancy, Central Oregon cities 
and irrigation districts and the Confederated Tribes of Warm Springs 
are working together to secure a diverse array of financial resources 
including State funding, Hydroelectric mitigation funding, investment 
by cities, and private investment by individuals and foundations. We 
expect that Federal investment including both Reclamation and USDA 
needs to amount to approximately 23%-33% of the total investment if we 
are to have any chance to achieve the proactive collaborative solution.
    Question 4. Explain the rationale for a quorum of eight directors?
    Answer. Currently, the Deschutes River Conservancy board operates 
under a two-quorum system--a quorum of eight directors for all business 
except for approving projects and a majority quorum (50% plus one) to 
approve projects.
    When the organization was founded, the majority quorum requirement 
seemed to make sense in order to build trust among the diverse 
stakeholders on the board. Now, the organization has a long track 
record of excellent collaboration among its directors and the majority 
quorum is more of a hindrance than a help.
    The DRC board is comprised of top civic and business leaders in 
Central Oregon including the Forest Supervisor of the Deschutes 
National Forest, the mayor of Madras, the Chairman of Brooks Resources 
(largest real estate development company in Central Oregon), the 
President of Ochoco Lumber, and two prominent ranchers. These prominent 
individuals lead very busy lives, making it difficult for them to 
attend all of the DRC's board meetings. From a nineteen member board, 
we usually get eight or nine directors to attend meeting, but often 
find it difficult to secure the tenth director for project votes.
    We do not believe that it would benefit the organization to reduce 
the stature of the board's membership simply to have directors that are 
more readily available. We think it is critical to maintain prominent 
individuals on the board and think that reducing the quorum requirement 
is a reasonable course of action after nine years of successful 
collaboration.
    By reducing the quorum to eight, we can more easily conduct 
business and make the quorum requirement uniform for all decision-
making, thereby eliminating the awkward two-quorum system under which 
we currently operate.

                                    

      
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