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[Senate Report 111-143]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 293
111th Congress                                                   Report
                                 SENATE
 2d Session                                                     111-143

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  PREPAYMENT OF REPAYMENT CONTRACT BETWEEN THE UNITED STATES AND THE 
                   UINTAH WATER CONSERVANCY DISTRICT

                                _______
                                

                 March 2, 2010.--Ordered to be printed

                                _______
                                

   Mr. Bingaman, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1757]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1757) to provide for the prepayment of a 
repayment contract between the United States and the Uintah 
Water Conservancy District, and for other purposes, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                PURPOSE

    The purpose of S. 1757 is to provide for the prepayment of 
a repayment contract between the United States and the Uintah 
Water Conservancy District in the State of Utah.

                          BACKGROUND AND NEED

    The Uintah Water Conservancy District operates and 
maintains the Vernal and Jensen Units of the Central Utah 
Project, which was authorized as part of the Colorado River 
Storage Project Act of 1956. The district entered into a 
repayment contract dated June 3, 1976, requiring the repayment 
of the costs associated with the construction of the Jensen 
Unit. In 1992, the contract was amended to reduce the project 
water supply from 18,000 acre-feet per year to 2,000 acre-feet 
per year. S. 1757 is necessary in order to allow prepayment of 
the repayment obligations in the amended contract. According to 
the district, prepayment of the contract will substantially 
reduce the cost of water to the district. S. 1757 requires 
certain conditions to be met, including that the Bureau of 
Reclamation must receive the present value of the full amount 
that would be due without any early repayment and that the 
total repayment must by made by September 30, 2019.

                          LEGISLATIVE HISTORY

    Senator Bennett introduced S. 1757 on October 6, 2009. The 
subcommittee on Water and Power held a hearing on S. 1757 on 
November 5, 2009. At its business meeting on December 16, 2009, 
the Committee on Energy and Natural Resources ordered S. 1757 
favorably reported without amendment. On September 29, 2009, 
the companion measure, H.R. 2950, sponsored by Representative 
Matheson, passed the House by voice vote.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on December 16, 2009, by voice vote of a 
quorum present, recommends that the Senate pass S. 1757.

                      SECTION-BY-SECTION ANALYSIS

    Section 1 authorizes the Secretary of the Interior to allow 
for prepayment of the repayment contract no. 6-05-01-00143 
between the United States and the Uintah Water Conservancy 
District dated June 3, 1976, as supplemented and amended, under 
terms and conditions similar to those used in implementing 
section 210 of the Central Utah Project Completion Act (Public 
Law 102-575), as amended, and identifies certain additional 
conditions that must be met.

                   COST AND BUDGETARY CONSIDERATIONS

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office:

S. 1757--To provide for the prepayment of a repayment contract between 
        the United States and the Uintah Water Conservancy District, 
        and for other purposes

    S. 1757 would authorize the Uintah Water Conservancy 
District in Utah to prepay the net present value of certain 
amounts the district owes to the U.S. Treasury for its share of 
the cost to build the Jensen Unit of the Central Utah Project. 
Under current law, the district is expected to make annual 
payments totaling about $5 million over the 2010-2020 period 
and about $12 million more after 2020.
    Based on information from the Bureau of Reclamation, CBO 
estimates that enacting S. 1757 would result in two payments 
from the district of about $4 million in 2010 and $6 million in 
2016. Following those payments, the district would no longer 
make annual payments to the Treasury. The net effect of those 
changes would be an increase in offsetting receipts (a credit 
against direct spending) totaling $2 million over the 2010-2015 
period and $4 million over the 2010-2020 period.\1\ Over the 
2010-2037 period the bill would result in a net loss in 
offsetting receipts totaling about $7 million. Enacting the 
legislation would not affect revenues.
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    \1\The time periods for enforcing pay-as-you-go rules under the 
current budget resolution are different. CBO estimates that enacting S. 
1757 would reduce direct spending by $2 million over the 2010-2014 
period and would reduce direct spending by $5 million over the 2010-
2019 period.
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    For this estimate, CBO assumes that S. 1757 will be enacted 
near the middle of fiscal year 2010. The bill would allow the 
district to repay the costs by the end of fiscal year 2019 but 
requires payment of costs currently allocated to the project as 
well as those expected to be included in the project's final 
cost allocation. Based on information from the district, CBO 
expects that the district would make one payment after 
enactment of the bill for costs already allocated to the 
project and another payment in 2016 when the final cost 
allocation is expected to be completed. For this estimate, CBO 
used its projection of the 30-year Treasury rate for the 
discount rate to calculate the district's estimated payment in 
2010 (4.68 percent) and in 2016 (5.79 percent).
    S. 1757 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On September 28, 2009, CBO transmitted a cost estimate for 
H.R. 2950, a bill to allow prepayment of certain repayment 
contracts between the United States and the Uintah Water 
Conservancy District, as ordered reported by the House 
Committee on Natural Resources on September 10, 2009. The two 
pieces of legislation are the same.
    However, CBO's cost estimate for S. 1757 differs from the 
estimate prepared for H.R. 2950 because new information from 
the Bureau of Reclamation indicates that the final cost 
allocation for the Uintah project will not be completed until 
2015 instead of 2010, as assumed in the CBO cost estimate for 
H.R. 2950.
    The CBO staff contact for this estimate is Aurora Swanson. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                      REGULATORY IMPACT EVALUATION

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 1757.
    The bill is not a regulatory measure in the sense of 
imposing Government-established standards or significant 
economic responsibilities on private individuals and 
businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 1757, as ordered reported.

                   CONGRESSIONALLY DIRECTED SPENDING

    S. 1757, as ordered reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        EXECUTIVE COMMUNICATIONS

 Statement of Michael L. Connor, Commissioner, Bureau of Reclamation, 
                       Department of the Interior

    Madam Chairwoman and members of the Subcommittee, I am Mike 
Connor, Commissioner of the Bureau of Reclamation. Thank you 
for the opportunity to provide the Department of the Interior's 
views on S. 1757. The legislation allows for prepayment of the 
current and future repayment contract obligations of the Uintah 
Water Conservancy District (District) of the costs allocated to 
their municipal and industrial water (M&I) supply on the Jensen 
Unit of the Central Utah Project (CUP) and provides that the 
prepayment must result in the United States recovering the net 
present value of all repayment streams that would have been 
payable to the United States if S. 1757 were not enacted. S. 
1757 would amend current law to change the date of repayment to 
2019 from 2037. The legislation would also allow repayment to 
be provided in several installments and requires that the 
repayment be adjusted to conform to a final cost allocation. 
The Department supports S. 1757.
    The District entered into a repayment contract dated June 
3, 1976, in which they agreed to repay all reimbursable costs 
associated with the Jensen Unit of the CUP. However, pursuant 
to Section 203(g) of the Central Utah Project Completion Act of 
1992 (P.L. 102-575) the District's contract was amended in 1992 
to reduce the project M&I supply under repayment to 2,000 acre-
feet annually and to temporarily fix repayment for this supply 
based upon an interim allocation developed for an uncompleted 
project. The 1992 contract required the District to repay about 
$5.545 million through the year 2037 at the project interest 
rate of 3.222% with annual payments of $226,585. The net 
present value of the amount remaining from this income stream 
starting in 2009 is $4,028,443.\1\
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    \1\All net present value figures cited in this testimony were 
calculated by discounting the payment stream to the year 2009 using the 
rate from 30-year Treasury constant maturities for the week ending 
October 9, 2009. The exact net present value will fluctuate based on 
the date of the calculation and the Treasury rate.
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    However, the costs allocated to the contracted M&I supply, 
and the M&I supply available through additional contract 
amendments, may be significantly revised in the future upon 
project completion and Final Cost Allocation. An additional 
currently unallocated cost of $7,419,513 is expected to be 
allocated to the contracted 2,000 acre-feet.\2\ These are the 
costs that paragraph 3 of S. 1757 requires to be included in 
the prepayment. Assuming that the costs allocated to the 
contracted 2,000 acre-feet will be increased by $7,419,513 with 
the reallocation in 2019, the net present value of the stream 
of benefits from this reallocation is $4,924,701. Therefore, 
under Reclamation's assumptions, the net present value of the 
total stream of benefits anticipated under this contract is 
$4,924,701 plus $4,028,443, or $8,953,144. The contracted M&I 
amount is $4.1 million and the adjustment amount is $7.4 
million. In total non-discounted dollars, the Conservancy 
District owes the Federal government $11.6 million.
---------------------------------------------------------------------------
    \2\This allocation will be subject to revision should there be 
additions to the project.
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    Under Reclamation law, water districts are not authorized 
to prepay their M&I repayment obligation based upon a 
discounted value of their remaining annual payments.
    This legislation would authorize early repayment by the 
Uintah Conservancy District to the Federal government. Because 
there is an interest component to the M&I repayment streams to 
be repaid early, early repayment without an adjustment for 
interest would result in lower overall repayment to the United 
States. To keep the United States whole, the Bureau of 
Reclamation would collect the present value of the whole amount 
that would be due without early repayment. Thus, given 
Reclamation's assumptions the present value of the payments 
collected under this legislation will be at least $8,953,144, 
although the legislation allows some flexibility in the timing 
of the repayment and under some scenarios the total amount due 
could be higher.
    The language in S. 1757 has been amended from the language 
contained in an earlier version of this legislation, H.R. 2950. 
The amended language clarifies that this legislation requires 
that the Federal government be paid what it is owed by the 
Conservancy District. Because the United States supports the 
goals of providing for early repayment under this contract, and 
S. 1757 clearly establishes that early repayment under this 
legislation must be of an amount equal to the net present value 
of the foregone revenue stream, the Department supports this 
legislation.
    This concludes my testimony. I will be pleased to answer 
any questions.

                        CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by S. 1757, as ordered 
reported.

                                  
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