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[Senate Report 113-229]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 516
113th Congress                                                   Report
                                 SENATE
 2d Session                                                     113-229

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

 
    BUREAU OF RECLAMATION HYDROPOWER DEVELOPMENT EQUITY AND JOBS ACT

                                _______
                                

                 July 31, 2014.--Ordered to be printed

                                _______
                                

   Ms. Landrieu, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 2010]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 2010) to amend the Water Conservation and 
Utilization Act to authorize the development of non-Federal 
hydropower and issuance of leases of power privileges at 
projects constructed pursuant to the authority of the Water 
Conservation and Utilization Act, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill, as amended, do pass.
    The amendment is as follows:

  Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Bureau of Reclamation Hydropower 
Development Equity and Jobs Act''.

SEC. 2. AMENDMENT.

  Section 9 of the Act of August 11, 1939 (commonly known as the 
``Water Conservation and Utilization Act'') (16 U.S.C. 590z-7) is 
amended--
          (1) by striking ``In connection with'' and inserting ``(a) In 
        General.--In connection with''; and
          (2) by adding at the end the following:
  ``(b) Certain Leases Authorized.--
          ``(1) In general.--Notwithstanding subsection (a), the 
        Secretary--
                  ``(A) may enter into leases of power privileges for 
                electric power generation in connection with any 
                project constructed pursuant to this Act; and
                  ``(B) shall have authority over any project 
                constructed pursuant to this Act in addition to and 
                alternative to any existing authority relating to a 
                particular project.
          ``(2) Process.--In entering into a lease of power privileges 
        under paragraph (1), the Secretary shall use the processes, 
        terms, and conditions applicable to the lease under section 
        9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 
        485h(c)).
          ``(3) Findings not required.--No findings under section 3 
        shall be required for a lease under paragraph (1).
          ``(4) Rights retained by lessee.--Except as otherwise 
        provided under paragraph (5), all right, title, and interest in 
        and to installed power facilities constructed by non-Federal 
        entities pursuant to a lease under paragraph (1), and any 
        direct revenues derived from that lease, shall remain with the 
        lessee.
          ``(5) Lease charges.--Notwithstanding section 8, lease 
        charges shall be credited to the project from which the power 
        is derived.
          ``(6) Effect.--Nothing in this section alters or affects any 
        agreement in effect on the date of enactment of the Bureau of 
        Reclamation Hydropower Development Equity and Jobs Act for the 
        development of hydropower projects or disposition of 
        revenues.''.

                                Purpose

    The purpose of S. 2010 is to amend the Water Conservation 
and Utilization Act to authorize the development of non-Federal 
hydropower and issuance of leases of power privileges at 
projects constructed pursuant to the authority of the Water 
Conservation and Utilization Act.

                          Background and Need

    Both section 5 of the Town Sites and Power Development Act 
of 1906 (43 U.S.C. 522) and section 9(c) of the Reclamation 
Project Act of 1939 (43 U.S.C. 485h(c)) authorize the Bureau of 
Reclamation to lease Reclamation facilities to non-federal 
entities to produce electric power, through what is known as a 
``lease of power privilege.'' In 2013, the Bureau of 
Reclamation Small Conduit Hydropower Development and Rural Jobs 
Act (Public Law 113-24) amended section 9(c) of the Reclamation 
Project Act of 1939 to give the Bureau still broader authority 
to enter into leases of power privileges at Reclamation 
projects, including small conduit facilities, and to facilitate 
development of hydropower at these facilities.
    In addition to Reclamation projects built and operated 
under Reclamation law, the Bureau also administers 11 
reclamation projects that were built during the Great 
Depression pursuant to the Water Conservation and Utilization 
Act (16 U.S.C. 590z-7) (WCUA) with the assistance of the Works 
Project Administration. The 11 projects built under the WCUA 
are:
          1. Buffalo Rapids Project--southeastern Montana
          2. Intake Project--Montana
          3. Mancos Project--southwest corner of Colorado
          4. Mann Creek Project--west-central Idaho
          5. Milk River Project--north-central Montana
          6. Angostura Unit of PSMB--southwestern South Dakota
          7. Mirage Flats Project--northwestern Nebraska
          8. Rathdrum Prairie Project--panhandle of Idaho
          9. Newton Project--Newton, Utah
          10. Missoula Valley Project--west-central Montana
          11. Scofield Project--Price, Utah
    Because these 11 projects were not authorized under 
Reclamation law, the authority to enter into leases of power 
privileges granted by section 5 of the Town Sites and Power 
Development Act of 1906 and section 9(c) of the Reclamation 
Project Act of 1939 do not extend to them. Additional 
legislation is needed to authorize the Bureau of Reclamation to 
enter into leases of power privileges at the WCUA projects.

                          Legislative History

    S. 2010 was introduced by Senator Barrasso on February 10, 
2014. A hearing was held on the bill by the Subcommittee on 
Water and Power on February 27, 2014. At its business meeting 
on June 18, 2014, the Senate Energy and Natural Resources 
Committee ordered S. 2010 favorably reported with an amendment 
in the nature of a substitute.
    Identical legislation, H.R. 1963, was introduced by Rep. 
Daines (R-MT) on May 14, 2013. The House of Representatives 
passed the measure on a voice vote on December 3, 2013. A 
hearing was held on the bill by the Subcommittee on Water and 
Power on February 27, 2014. At its business meeting on June 18, 
2014, the Senate Energy and Natural Resources Committee ordered 
H.R. 1963 favorably reported with an amendment in the nature of 
a substitute.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on June 18, 2014, by a voice vote of a 
quorum present, recommends that the Senate pass S. 2010, if 
amended as described herein.

                          Committee Amendment

    During its consideration of S. 2010, the Committee adopted 
an amendment in the nature of a substitute. The amendment is 
technical in nature and makes changes to clarify the processes 
used in the lease of power privileges and to make it consistent 
with the Reclamation Small Conduit Hydropower and Rural Jobs 
Act (Public Law 113-24). The amendment is explained in detail 
in the section-by-section analysis below.

                      Section-by-Section Analysis

    Section 1 provides the short title.
    Section 2 amends section 9 of the WCUA by adding a new 
subsection (b) to authorize the Secretary of the Interior to 
enter into leases of power privileges for electric power 
generation in connection with any project constructed under the 
WUCA, and to give the Secretary authority over any project 
pursuant to that Act. Paragraph (2) of the new subsection (b) 
requires the Secretary to use the same processes, terms, and 
conditions applicable under section 9(c) of the Reclamation 
Project Act of 1930 (43 U.S.C. 485h(c)). Paragraph (3) provides 
that no findings are required for a lease of power privileges. 
Paragraph (4) provides that the lessee retains all right, 
title, and interest in power facilities constructed by non-
Federal entities and all direct revenues derived from the 
lease. Paragraph (5) provides that lease charges shall be 
credited the project from which the power is derived. Paragraph 
(6) provides that nothing in the WCUA alters any agreement in 
effect on the date of enactment of S. 2010 for the development 
of hydropower projects or disposition of revenues.

                   Cost and Budgetary Considerations

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

S. 2010--Bureau of Reclamation Conduit Hydropower Development Equity 
        and Jobs Act

    S. 2010 would authorize the Bureau of Reclamation to enter 
into leases with nonfederal entities to develop hydropower at 
11 water project facilities owned by the government. Based on 
information from the bureau, CBO estimates that enacting the 
bill would affect direct spending; therefore, pay-as-you-go 
procedures apply. However, we estimate such effects would not 
be significant. Enacting the legislation would not affect 
revenues or discretionary spending.
    In 2011, the bureau completed an assessment of the II 
facilities and found that seven of the locations have potential 
for hydropower development. Under current law, the bureau is 
authorized to develop hydropower production at those seven 
facilities if it is federally financed and owned; however, it 
has no plans to do so. Under the bill, the bureau would also be 
authorized to work with nonfederal entities to develop 
hydropower through lease agreements at any of the 11 facilities 
specified in the legislation. Under such agreements, which we 
expect the bureau would take advantage of, nonfederal entities 
would finance the necessary hydropower improvements and own the 
electricity derived from those improvements in exchange for a 
lease payment to the federal government.
    Any such lease payments would either be applied to 
outstanding construction balances at the underlying facility 
where they are collected or would be available to be spent 
without further appropriation on rehabilitation work at the 
facility. As a result, CBO estimates the net effects from such 
lease payments would not be significant.
    S. 2010 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act. Public 
entities, such as irrigation districts and water use 
associations, would benefit from federal hydropower leasing 
contracts. Any costs to those entities would be incurred 
voluntarily as a condition of receiving federal assistance. On 
September 11, 2013, CBO transmitted a cost estimate for S. 
1963, the Bureau of Reclamation Conduit Hydropower Development 
Equity and Jobs Act, as ordered reported by the House Committee 
on Natural Resources on July 31, 2014. The two pieces of 
legislation are similar, and the CBO cost estimates are the 
same.
    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. 2010.
    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. 2010, as ordered reported.

                   Congressionally Directed Spending

    This bill, as 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

    The testimony provided by the Bureau of Reclamation at the 
February 27, 2014 Subcommittee on Water and Power hearing on S. 
2010 follows:

   Statement of Robert Quint, Senior Advisor, Bureau of Reclamation, 
                       Department of the Interior

    Chairman Schatz, members of the Subcommittee, I am Bob 
Quint, Senior Advisor at the Bureau of Reclamation 
(Reclamation). I am pleased to provide the views of the 
Department of the Interior (Department) on S. 2010, the Bureau 
of Reclamation Conduit Hydropower Development Equity and Jobs 
Act. The Department, with some technical amendments summarized 
in this statement, supports S. 2010, which amends the Water 
Conservation and Utilization Act (16 U.S.C. Sec. Sec. 590y et 
seq.) to authorize the development of non-federal hydropower 
and issuance of leases of power privilege at projects 
constructed pursuant to the authority of the Water Conservation 
and Utilization Act (WCUA). In general, the Department supports 
the increase in the generation of clean, renewable 
hydroelectric power in existing canals and conduits. As noted 
in previous hearings, the Department has an aggressive 
sustainable hydropower agenda, which we continue to implement 
under existing authorities. My testimony today will summarize 
the Department's efforts to encourage the development of 
sustainable hydropower, provide an overview of the history of 
WCUA, and detail the areas in the bill where we believe 
improvements could be made.

                    department's hydropower efforts

    Before I share the Department's views on S. 2010, I want to 
highlight some of the activities underway at the Department to 
develop additional renewable hydropower capacity. In March 
2011, the Department of the Interior and Department of Energy 
announced nearly $17 million in funding over three years for 
research and development projects to advance hydropower 
technology. The funding included ten projects for a total of 
$7.3 million to research, develop, and test low-head, small 
hydropower technologies that can be deployed at existing non-
powered dams or constructed waterways. The funding will further 
the Administration's goal of meeting 80 percent of our 
electricity needs from clean energy sources by 2035.
    In March 2010 the Department entered into a Hydropower 
Memorandum of Understanding (MOU)\1\ with the Department of 
Energy, and the Army Corps of Engineers to study and promote 
opportunities to develop additional hydropower. In March 2011, 
the Department released the results of an internal study, the 
Hydropower Resource Assessment at Existing Reclamation 
Facilities, that estimated the Department could generate up to 
one million megawatt hours of electricity annually and create 
jobs by addressing hydropower capacity at 70 of its existing 
facilities. While this first phase, completed in 2011, focused 
primarily on Reclamation dams, the second phase focused on 
constructed Reclamation waterways such as canals and conduits. 
In March 2012, Reclamation completed the second phase of its 
investigation of hydropower development, Site Inventory and 
Hydropower Energy Assessment of Reclamation Owned Conduits, as 
referenced in the 2010 MOU. The two studies revealed that an 
additional 1.5 million megawatt-hours of renewable energy could 
be generated through hydropower at existing Reclamation sites.
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    \1\http://www.usbr.gov/power/SignedHydropowerMOU.pdf, 2010
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    Reclamation worked diligently with our stakeholders and the 
hydropower industry to improve our lease of power privilege 
(LOPP) processes, and this collaboration culminated in the 
release of an updated and improved LOPP directive and standard 
in September 2012. These new procedures better define roles, 
timelines and responsibilities that will allow us to better 
support and encourage sustainable hydropower development at 
Reclamation facilities. This directive and standard was revised 
earlier this month to incorporate new process requirements 
established by Public Law 113-24, Bureau of Reclamation Small 
Conduit Hydropower Development and Rural Jobs Act. New process 
requirements updated in the document include: LOPPs being 
offered first to irrigation districts or water user 
associations operating or receiving water from Reclamation 
transferred or reserved works and establishing timeframes for 
irrigation districts or water user associations to accept or 
reject the LOPP offer. The temporary revised procedures are out 
for public comment until March 28, 2014.

                      overview of history of wcua

    The WCUA was enacted on August 11, 1939 (amended October 
14, 1940) to provide assistance to people hard hit by drought 
in the Dust Bowl and other similar arid and semiarid areas of 
the United States through the construction and development of 
irrigation projects. WCUA leveraged the considerable labor 
available by the Work Project Administration and other federal 
agencies during the New Deal, which absent congressional 
authorization, were precluded from using appropriations for 
many of the requisite needs of irrigation projects. For 
example, the Work Project Administration and other federal 
agencies did not have the authority to purchase water rights, 
rights-of-way, heavy machinery, and the services required to 
design and construct engineering features, prepare legal 
documents, and administer projects. WCUA resolved this issue by 
authorizing the Bureau of Reclamation to use appropriations to 
purchase rights-of-way, equipment and supplies, and for the 
payment of competent supervisory, technical, legal and 
administrative assistance, while the Work Project 
Administration and other federal agencies funded the costs of 
mechanics and laborers. Under WCUA, the Bureau of Reclamation 
retained the responsibility for the construction and 
administration of these projects. The Bureau of Reclamation has 
been authorized to construct 11 projects and three separate 
units under the WCUA.\2\
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    \2\WCUA Projects: Mancos Project, Colorado; Buford-Trenton Project 
(North Dakota); Buffalo Rapids Project, Montana; Scofield Project, 
Utah; Intake Project, Montana; Mirage Flats Project, Nebraska; Missoula 
Valley Project, Montana; Mann Creek Project, Idaho (not eventually 
constructed under WCUA); Newton Project, Utah; Rapid Valley Project, 
South Dakota; Balmorhea Project, Texas. The Eden Project, Wyoming, was 
originally considered under the WCUA but was constructed under separate 
authority. In addition, three units were authorized pursuant to WCUA 
authority. Each unit is part of a Reclamation project that was not 
altogether authorized by the WCUA. The three units include: Dodson 
Pumping Unit, Milk River Project, Montana; Post Falls Unit, Rathdrum 
Prairie Project, Idaho; and the Woodside Unit, Bitterroot Valley 
Project, Montana (no construction has been undertaken).
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    Reclamation is authorized to issue LOPP contracts on 
projects that were authorized under Reclamation law pursuant to 
Section 5 of the Town Sites and Power Development Act of 1906, 
43 U.S.C. Sec. 522, and Section 9(c) of the Reclamation Project 
Act of 1939, 43 U.S.C. Sec. 485h(c). However, WCUA projects 
were not authorized pursuant to Reclamation law and the 
provisions of WCUA are only subject to Reclamation law where 
explicitly identified in the WCUA. The LOPP authority granted 
in Section 5 of the Town Sites and Power Development Act of 
1906, 43 U.S.C. Sec. 522, and Section 9(c) of the Reclamation 
Project Act of 1939, 43 U.S.C. Sec. 485h(c) does not apply to 
WCUA projects since it is not identified in the WCUA, and 
therefore WCUA projects are not authorized to develop non-
federal hydropower absent congressional action. The Mancos 
Project in southwestern Colorado is such a case where Congress 
authorized the nonfederal development of hydropower on a WCUA 
project through project specific legislation (P.L. 103-434).

                                s. 2010

    Reclamation testified on H.R. 1963, a companion measure to 
the legislation before the subcommittee today, last May before 
the House Water and Power Subcommittee. The legislation was 
amended by the House of Representatives, and that bill is 
identical to the legislation before the Subcommittee today, S. 
2010. The Department would be pleased to work with the 
Subcommittee to further refine the legislation.
    Section 2(c) of S. 2010 would specifically authorize 
Reclamation to develop or enter into LOPP contracts for the 
development of new hydropower on projects and facilities 
authorized by WCUA, consistent with the Reclamation Project Act 
of 1939. In accordance with federal Reclamation law, typically 
LOPP charges paid by Lessees are deposited in the Reclamation 
Fund as a credit to the affected project. However, WCUA 
projects were not funded by the Reclamation Fund, but rather 
the General Fund of the Treasury. To this point, the WCUA 
states that all receipts from WCUA project operations--
including power--are to be covered into the Treasury, rather 
than the Reclamation Fund, to the credit of miscellaneous 
receipts. Therefore, if the intention of S. 2010 is for WCUA 
LOPP charges to credit the affected WCUA project, additional 
clarification is necessary in Section 2(g) of S. 2010 detailing 
where the charges will be covered and how they will be applied 
to the affected project. The Department looks forward to the 
opportunity to work with the sponsors to address this issue.
    Sections 2(h), 2(i), 2(j), 2(k), and 2(m) are duplicative 
of Section 9(c) of the Reclamation Project Act of 1939, as 
amended by PL 113-24, Bureau of Reclamation Small Conduit 
Hydropower Development and Rural Jobs Act. If the 1939 Act is 
amended again, there will be two distinct LOPP processes, one 
for traditional Reclamation projects and one for WCUA projects, 
as prescribed in S. 2010. For that reason, the Department 
recommends deleting these duplicative areas of the bill. 
Reclamation would be happy to work with the Subcommittee to 
address these concerns.
    Finally, Reclamation is concerned that the bill as written 
may be interpreted in such a way that the LOPP authorization 
granted is restricted to small conduit hydropower development 
and would not apply to all WCUA conduit development or dam 
development. For context, all WCUA conduit sites that show 
hydropower potential are under 5 MW and would qualify as 
``small conduit hydropower;'' however, the majority of WCUA 
hydropower potential exists at WCUA dams. Therefore, if the 
intent of the bill is to ``unlock'' the WCUA for non-federal 
development through LOPP, the authorization needs to extend to 
all WCUA conduits and dams. As the bill is written, it is 
unclear if the authorization extends to all WCUA conduits and 
dams. Reclamation would be happy to work with the Subcommittee 
to address this concern.
    In conclusion, as stated at previous hydropower hearings 
before this subcommittee, Reclamation will continue to review 
and assess potential new hydropower projects that provide a 
high economic return for the nation, are energy efficient, and 
can be accomplished in accordance with protections for fish and 
wildlife, the environment, or recreation. As the nation's 
second largest hydropower producer, Reclamation strongly 
believes in the past, present and bright future of this 
important electricity resource.
    Thank you for the opportunity to discuss S. 2010. This 
concludes my written statement, and I am pleased to answer 
questions at the appropriate time.

                        Changes In Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill S. 2010, as ordered reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is in italic, and existing law in which no 
change is proposed is shown in roman):

                 WATER CONSERVATION AND UTILIZATION ACT

                           Public Law 76-848

 AN ACT Authorizing construction of water conservation and utilization 
projects in the Great Plains and arid and semiarid areas of the United 
States

           *       *       *       *       *       *       *

    Sec. 9 [In connection with] (a) In Generall.--In connection 
with any project undertaken pursuant to this Act, provisions, 
including contracts of sale, may be made for furnishing 
municipal or miscellaneous water supplies, or for developing 
and furnishing power in addition to the power requirements of 
irrigation: Provided, That expenditures from appropriations 
made directly pursuant to the authority contained in section 12 
(1) to meet costs allocated to municipal or miscellaneous water 
supplies or surplus power shall not exceed $500,000 for any one 
project: Provided further, That no contract relating to a water 
supply for municipal or miscellaneous purposes or to electric 
power shall be made unless, in the judgment of the Secretary, 
it will not impair the efficiency of the project for irrigation 
purposes. On any project where such provisions are made, the 
Secretary shall allocate to municipal or miscellaneous water 
purposes or to surplus power the part of the estimated 
construction costs of the project which he deems properly so 
allocable; and such allocations shall not be included in the 
reimbursable construction costs covered by the repayment 
contract or contracts required under section 4. All right, 
title, and interest in the facilities provided for such 
municipal or miscellaneous water supplies or surplus power and 
the revenues derived therefrom shall be and remain in the 
United States. Contracts for such municipal or miscellaneous 
water supplies or for such surplus power shall be at such rates 
as, in the Secretary's judgment, will produce revenues at least 
sufficient to cover the appropriate share of the annual 
operation and maintenance cost of the project and such fixed 
charges, including interest, as the Secretary deems proper. 
Contracts for the sale of surplus power shall be for periods 
not to exceed forty years and contracts for water supply for 
municipal or miscellaneous purposes shall be for such periods 
as the Secretary may determine and may include such renewal 
options as the Secretary deems desirable: And provided further, 
That in sales or leases of such power, preference shall be 
given to municipalities and other public corporations or 
agencies; and also to cooperatives and other nonprofit 
organizations financed in whole or in part by loans made 
pursuant to the Rural Electrification Act of 1936 and any 
amendments thereof.
    (b) Certain Leases Authorized.--
          (1) In General.--Notwithstanding subsection (a), the 
        Secretary--
                  (A) may enter into leases of power privileges 
                for electric power generation in connection 
                with any project constructed pursuant to this 
                Act; and
                  (B) shall have authority over any project 
                constructed pursuant to this Act in addition to 
                and alternative to any existing authority 
                relating to a particular project.
          (2) Process.--In entering into a lease of power 
        privileges under paragraph (1), the Secretary shall use 
        the processes, terms, and conditions applicable to the 
        lease under section 9(c) of the Reclamation Project Act 
        of 1939 (43 U.S.C. 485h(c)).
          (3) Findings not required.--No findings under section 
        3 shall be required for a lease under paragraph (1).
          (4) Rights retained by lessee.--Except as otherwise 
        provided under paragraph (5), all right, title, and 
        interest in and to installed power facilities 
        constructed by non-Federal entities pursuant to a lease 
        under paragraph (1), and any direct revenues derived 
        from that lease, shall remain with the lessee.
          (5) Lease charges.--Notwithstanding section 8, lease 
        charges shall be credited to the project from which the 
        power is derived.
          (6) Effect.--Nothing in this section alters or 
        affects any agreement in effect on the date of 
        enactment of the Bureau of Reclamation Hydropower 
        Development Equity and Jobs Act for the development of 
        hydropower projects or disposition of revenues.

           *       *       *       *       *       *       *

                                  
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