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[Senate Report 111-274]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 544
111th Congress                                                         
                                 SENATE
 2d Session                                         Report Mo. 111-274
======================================================================
 
                   BONNEVILLE UNIT CLEAN HYDROPOWER 
                            FACILITATION ACT

                                _______
                                

                 August 5, 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 H.R. 2008]

    The Committee on Energy and Natural Resources, to which was 
referred the Act (H.R. 2008) to authorize the Secretary of the 
Interior to facilitate the development of hydroelectric power 
on the Diamond Fork System of the Central Utah Project, having 
considered the same, reports favorably thereon without 
amendment and recommends that the Act do pass.

                                PURPOSE

    The purpose of H.R. 2008 is to authorize the Secretary of 
the Interior to facilitate the development of hydroelectric 
power on the Diamond Fork System of the Central Utah Project.

                          BACKGROUND AND NEED

    The Central Utah Project was authorized in 1956 as part of 
the Colorado River Storage Project Act. The Bonneville Unit is 
the largest unit of the Central Utah Project. The Diamond Fork 
System is a completed project within the Bonneville Unit and is 
located in Utah County, Utah. Pursuant to the Central Utah 
Project Completion Act of 1992 (CUPCA), the Central Utah Water 
Conservancy District is responsible for completion of the 
Central Utah Project, including the Bonneville Unit.
    Hydropower development on Central Utah Project facilities 
was authorized as part of the original Colorado River Storage 
Project Act of 1956. The 2004 Supplement to the 1988 Definite 
Plan Report for the Bonneville Unit and the 2004 Utah Lake 
Drainage Basin Water Delivery System Final Environmental Impact 
Statement detail the proposed power facilities that could be 
developed within the Diamond Fork System, which include two 
hydroelectric power plants. It is estimated that the Diamond 
Fork project has the capability to generate up to 50 megawatts 
of hydroelectric power.
    The Colorado River Storage Project Act requires that 
project costs be allocated for repayment by power generation 
and, as a result, any non-federal developer of power within the 
Diamond Fork system would be responsible for payment of those 
costs prior to initiation of power production. H.R. 2008 
provides that the project costs would be permanently deferred 
under the same terms as certain municipal and industrial costs 
are allowed to be deferred under section 211 of CUPCA so long 
as the Central Utah Water Conservancy District complies with 
certain water management requirements.

                          LEGISLATIVE HISTORY

    H.R. 2008, sponsored by Representative Matheson, passed the 
House of Representatives by voice vote on June 8, 2010. 
Companion legislation, S. 1758, was introduced by Senator 
Bennett on October 6, 2009. The Subcommittee on Water and Power 
held a hearing on S. 1758 on November 5, 2009 (S. Hrg. 111-
339). The Committee on Energy and Natural Resources considered 
H.R. 2008 at its business meeting on June 16, 2010, and ordered 
it favorably reported without amendment at its business meeting 
on June 21, 2010.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on June 21, 2010, by voice vote of a quorum 
present, recommends that the Senate pass H.R. 2008.

                      SECTION-BY-SECTION ANALYSIS

    Section 1 identifies the short title of the bill as the 
Bonneville Unit Clean Hydropower Facilitation Act.
    Section 2 defines the Diamond Fork System as the facilities 
described in chapter 4 of the October 2004 Supplement to the 
1988 Definite Plan Report for the Bonneville Unit.
    Section 3 provides that the current amount of reimbursable 
costs allocated to project power for the Diamond Fork System 
shall be the final costs.
    Section 4 provides that nothing in the Act shall obligate 
the Western Area Power Administration to purchase or market any 
of the power produced by the Diamond Fork power plant and that 
none of the costs associated with development of transmission 
facilities to transmit power from the Diamond Fork power plant 
shall be assigned to power for the purpose of Colorado River 
Storage Project ratemaking.
    Section 5 prohibits the use of tax-exempt financing to fund 
any facility for the generation or transmission of 
hydroelectric power on the Diamond Fork System.
    Section 6 requires the Secretary of Interior to report to 
the Committee on Natural Resources of the House of 
Representatives and the Committee on Energy and Natural 
Resources of the Senate if hydropower production on the Diamond 
Fork System has not commenced within twenty-four months after 
the date of enactment and to supply a detailed timeline for 
future hydropower production.
    Section 7 contains language complying with the Statutory 
Pay-As-You-Go Act of 2010.
    Section 8 provides that the authority under the provisions 
of section 301 of the Hoover Power Plant Act of 1984 (P.L. 98-
381; 42 U.S.C. 16421a) shall not be used to fund any study or 
construction of transmission facilities developed as a result 
of the bill.

                   COST AND BUDGETARY CONSIDERATIONS

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

H.R. 2008--Bonneville Unit Clean Hydropower Facilitation Act

    Summary: CBO expects that enacting H.R. 2008 would lead to 
the development of hydropower facilities at the Diamond Fork 
Project in Utah by a nonfederal entity within a few years, 
sooner than expected under current law. As a result, CBO 
estimates that the government would receive payments from the 
hydropower developer of about $2 million over the 2011-2020 
period. Pay-as-you-go procedures apply to this legislation 
because it would increase offsetting receipts (a credit against 
direct spending).
    H.R. 2008 would reduce the amounts that developers of 
hydropower resources at the Diamond Fork Project would have to 
pay to the U.S. Treasury for certain reimbursable expenses. 
(Reimbursable expenses are the portion of a project's costs 
that are repaid to the federal government by other entities.) 
Under current law, a sponsor of this project would have to pay 
about $5.3 million annually for a period of 50 years following 
the start of electricity production. H.R. 2008 would 
effectively eliminate that potential obligation. Instead, under 
H.R. 2008, sponsors would be required to pay certain annual 
fees, which are estimated to total about $400,000 a years, 
adjusted for inflation, beginning in 2016.
    H.R. 2008 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The costs of this 
legislation fall within budget function 300 (natural resources 
and environment). CBO estimates that enacting H.R. 2008 would 
increase offsetting receipts by $400,000 a year over the 2016-
2020 period, or a total collection of $2 million.
    Basis of estimate: Based on information from the Bureau of 
Reclamation, CBO expects that the federal government is 
unlikely--under current law--to develop the hydropower 
resources of the Diamond Fork project for at least the next 10 
years. Although there are no formal development proposals 
currently being considered by the bureau, two nonfederal 
entities--the Central Utah Water Conservancy District and the 
Strawberry Water Users' Association--have expressed interest in 
developing those resources since at least 1995. Whether one of 
those entities or another nonfederal developer will propose a 
hydroelectric project at Diamond Fork under current law over 
the next decade is unclear. Among the issues that have delayed 
development of the site is a requirement to pay the Treasury 
for the federal government's power-related investments in the 
water project. According to the bureau, such payments would 
begin after the hydroelectric facilities go into service and 
would average $5.3 million a year for 50 years.
    CBO expects that eliminating the required annual payment to 
the Treasury would encourage nonfederal entities to pursue 
development of the hydropower resources at Diamond Fork. 
Assuming that H.R. 2008 is enacted near the end of 2010, we 
expect that the Bureau of Reclamation would receive a proposal 
to develop the hydroelectric resources within a year or two and 
that such a project could be completed by 2016. In that case, 
the government would collect annual fees from the project 
developer totaling about $400,000 a year (adjusted for 
inflation) for the life of the project.
    Pay-as-you-go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. H.R. 2008 would increase offsetting receipts (a 
credit against direct spending) beginning in 2016. The 
budgetary changes that are subject to pay-as-you-go procedures 
are shown in the following table.

  CBO ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS FOR H.R. 2008, THE BONNEVILLE UNIT CLEAN HYDROPOWER FACILITATION ACT, AS ORDERED REPORTED BY THE
                                            SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES ON JUNE 21, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2010    2011    2012    2013    2014    2015    2016    2017    2018    2019    2020   2010-2015  2010-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact............       0       0       0       0       0       0       0       0       0       0       0         0         -2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 2008 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Previous CBO estimate: On September 23, 2009, CBO 
transmitted a cost estimate for H.R. 2008 as ordered reported 
by the House Committee on Natural Resources on September 10, 
2009. The two pieces of legislation are identical, and the 
estimated costs are the same.
    Estimate prepared by: Federal Costs: Aurora Swanson; Impact 
on State, Local, and Tribal Governments: Melissa Merrell; 
Impact on the Private Sector: Amy Petz.
    Estimate approved by: Peter H. Fontaine, 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 H.R. 2008.
    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 H.R. 2008, as ordered reported.

                   CONGRESSIONALLY DIRECTED SPENDING

    H.R. 2008, 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 Committee, I am Michael 
Connor, Commissioner of the Bureau of Reclamation. I am pleased 
to be here today on behalf of the Assistant Secretary for Water 
and Science who oversees the Central Utah Project Completion 
Act activities to present the Administration's views on S. 
1758, the Bonneville Unit Clean Hydropower Facilitation Act. 
The proposed legislation is associated with development of 
hydropower on the Diamond Fork System, Bonneville Unit, Central 
Utah Project.
    The Central Utah Project Completion Act (CUPCA) provides 
for the completion of the construction of the Central Utah 
Project (CUP) by the Central Utah Water Conservancy District 
(CUWCD). CUPCA also authorizes programs for fish, wildlife, and 
recreation mitigation and conservation; establishes an account 
in the Treasury for deposit of appropriations and other 
contributions; establishes the Utah Reclamation Mitigation and 
Conservation Commission to coordinate mitigation and 
conversation activities; and provides for the Ute Indian Water 
Rights Settlement.
    Hydropower development on CUP facilities was authorized as 
part of the Colorado River Storage Project Act (CRSPA) under 
which the Central Utah Project is a participating project. The 
development of hydropower on the Diamond Fork System has been 
contemplated since the early days of the CUP. The 1984 
Environmental Impact Statement on the Diamond Fork System 
described the construction of five hydropower plants with a 
combined capacity of 166 MW of power.
    However, these hydropower plants were never constructed and 
the 1999 Environmental Impact Statement on the Diamond Fork 
System presented a plan which specifically excluded the 
development of hydropower, stating ``. . . there are no 
definite plans or designs, and it is not known if or by whom 
they may be developed.''
    Although hydropower development was not included, 
construction of pipelines and tunnels for the Diamond Fork 
System was completed and put into operation in July 2004. Under 
full operation the Diamond Fork system will annually convey 
101,900 acre-feet of CUP Water and 61,500 acre-feet of 
Strawberry Valley Project Water.
    In 2002 CUPCA was amended to authorize development of 
federal project power on CUP facilities. With this new 
amendment plans for hydropower development at Diamond Fork were 
included in the 2004 Utah Lake System Environmental Impact 
Statement and the 2004 Supplement to the Definite Plan Report 
for the Bonneville Unit (DPR). These documents describe the 
construction of two hydropower plants on the existing Diamond 
Fork System for a total generating capacity of 50 MW.
    Section 208 of CUPCA included provisions that power on CUP 
features would be developed and operated in accordance with 
CRSPA and CUP water diverted out of the Colorado River Basin 
for power purposes would be incidental to other project 
purposes.
    There are two options for hydropower development on the 
Diamond Fork System: (1) federal project development or (2) 
private development under a Lease of Power Privilege contract 
with the United States.
    Under the first option the CUWCD would construct the 
Diamond Fork hydropower plants under contract with the United 
States and contribute an upfront local cost share of 35 percent 
of the construction costs. In addition to the hydropower 
construction costs, the costs associated with conveyance 
facilities upstream of the Diamond Fork would have to be repaid 
by the non-Federal project sponsors.
    The DPR allocates costs of the CUP according to project 
purposes. The reimbursable costs allocated to power are $161 
million based upon the costs of developed features upstream of 
the Diamond Fork System. It is anticipated that under this 
option, these allocated costs would be repaid through an 
arrangement among Interior, CUWCD, and the Western Area Power 
Administration (WAPA).
    Under the second option, private hydropower could be 
developed. Although the DPR and 1999 EIS describe federal 
hydropower development, they also provide the option for a 
Lease of Power Privilege arrangement with the United States. 
Under this arrangement Interior would implement a competitive 
process to select a lessee for private development of 
hydropower at Diamond Fork. The lease arrangement would require 
repayment of the $161 million of upstream costs plus annual 
payments to the United States for the use of the federal 
facilities, amounting to at least a 3 mil rate paid by the 
lessee to the United States.
    S. 1758 does not preclude federal development of 
hydropower, but it does increase the likelihood of private 
development. If enacted, this bill would indefinitely defer the 
$161 million in costs allocated to power development in the 
Diamond Fork System under section 211 of CUPCA, thus reducing 
the cost of hydropower development at this site. This bill 
would increase the likelihood that a private developer would 
pursue a Lease of Power Privilege arrangement because the 
private developer would not, under this legislation, be 
required to repay the $161 million of construction costs that 
were allocated to power as would be required under existing 
law.
    We understand and appreciate the goal of this legislation 
of facilitating the development of hydroelectric power on the 
Diamond Fork System.
    However, the Administration has serious concerns about 
losing our ability to recoup the Federal investment made in 
these facilities as set forth in this legislation. The Fedearl 
government may benefit in the medium term from the annual 
payments for the use of Federal facilities that would be paid 
if a lessee entered into a Lease of Power Privilege arrangement 
for production of hydroelectric power on the Diamond Fork 
System. Assuming only a summer water supply as under current 
deliveries, these payments are estimated at about $400,000 a 
year starting the year that the project is completed and 
continuing for the life of the project. However, because 
payment of $161 million of allocated power costs would be 
postponed indefinitely, it is unclear what the long-term fiscal 
implications of enactment of this legislation would be and how 
the United States Treasury would be made whole. This 
legislation would potentially permanently postpone anticipated 
receipts to the U.S. Treasury at the expense of the Federal 
taxpayer. While it is not clear at this time whether a 
nonfederal developer would propose a hydroelectric project at 
Diamond Fork under current law, if this were to occur, 
repayment of the allocated power costs would begin after the 
hydroelectric project is completed and average $5.3 million a 
year for 50 years.
    Section 5 of S. 1758 would prohibit the use of tax-exempt 
financing to develop any facility for the generation or 
transmission of hydroelectric power on the Diamond Fork System. 
This provision was added to the bill to prevent any loss of 
revenue to the federal government as a result of the financing 
mechanism used for development of hydropower at this site.
    Further analysis would help to determine whether this 
legislation to facilitate private development of hydropower at 
Diamond Fork would provide sufficient benefits to justify the 
costs.
    This concludes my testimony. I am happy 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 H.R. 2008, as ordered 
reported.

                                  
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