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[Senate Hearing 112-624]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-624

 
                         WATER AND POWER BILLS

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                                   ON
                                     

                            S. 3265

                            S. 3464

                            S. 3483

                            H.R. 2842

                                     

                           SEPTEMBER 19, 2012

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

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington           MIKE LEE, Utah
BERNARD SANDERS, Vermont             RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan            DANIEL COATS, Indiana
MARK UDALL, Colorado                 ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire        JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota                DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia      BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel
                                 ------                                

                    Subcommittee on Water and Power

                JEANNE SHAHEEN, New Hampshire, Chairman

RON WYDEN, Oregon                    MIKE LEE, Utah, Ranking
TIM JOHNSON, South Dakota            JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington           DANIEL COATS, Indiana
BERNARD SANDERS, Vermont             JOHN HOEVEN, North Dakota
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia      BOB CORKER, Tennessee

    Jeff Bingaman and Lisa Murkowski are Ex Officio Members of the 
                              Subcommittee

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Johnson, Hon. Tim, U.S. Senator From South Dakota................     3
Katz, John, Deputy Associate General Counsel for Energy Projects, 
  Federal Energy Regulatory Commission...........................    14
Merkley, Hon. Jeff, U.S. Senator From Oregon.....................     1
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................    16
Payne, Grayford F., Deputy Commissioner for Policy, 
  Administration and Budget, Bureau of Reclamation, Department of 
  the Interior...................................................     6
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............     1
Tipton, Hon. Scott R., U.S. Representative From Colorado.........     4
Wyden, Hon. Ron, U.S. Senator From Oregon........................    18

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    25

                              Appendix II

Additional material submitted for the record.....................    29

                         WATER AND POWER BILLS

                              ----------                              

                     WEDNESDAY, SEPTEMBER 19, 2012

                               U.S. Senate,
                   Subcommittee on Water and Power,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:32 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeanne 
Shaheen presiding.

OPENING STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR FROM NEW 
                           HAMPSHIRE

    Senator Shaheen. Good morning. At this point I would like 
to welcome everyone. Clearly there's not a lot going on in 
Congress today. So all of you are here and we appreciate that.
    Today's hearing involves 4 bills that are pending before 
the subcommittee. The bills cover several different aspects of 
our water and power jurisdiction including rural water and 
hydropower.
    The bills we're covering today are S. 3265, a bill amending 
the Federal Power Act regarding the collection of land use 
fees.
    H.R. 2842, the Bureau of Reclamation's Small Conduit 
Hydropower Development and Rural Jobs Act.
    S. 3464, the Mni Wiconi Project Act amendments.
    S. 3483, the Crooked River Collaborative Water Security 
Act.
    I look forward to hearing more about these bills. We have 
several Senators who are going to be here testifying. Senator 
Murkowski will be here to make a statement. She's running a 
little late. We expect Senator Wyden also and possibly Senator 
Johnson.
    So while we're waiting for them before the testimony on the 
bills occurs, we have Senator Jeff Merkley and Congressman 
Tipton, who are here, who would like to testify on two of the 
bills that are pending before us. So we appreciate your 
willingness to go ahead while we're waiting for the others. 
I'll ask Senator Merkley if you would go first.

         STATEMENT OF HON. JEFF MERKLEY, U.S. SENATOR 
                          FROM OREGON

    Senator Merkley. Thank you very much, Chairman Shaheen. I'm 
delighted to be here particularly because I'm presenting a bill 
of critical importance to Central Oregon, the Crooked River 
Collaborative Water Security Act. I introduced this bill with 
my colleague, Senator Wyden, in early August.
    This bill is a product of many years of negotiations 
between a diverse set of stakeholders in the region who came 
together despite many differences. There is a saying in the 
West that, ``Whiskey, that's for drinking. Water, that's for 
fighting.'' It's nice when occasionally stakeholders can come 
together and wrestle with the very difficult issues about how 
to share this precious resource.
    The stakeholders have found common ground as presented in 
this legislation. I'm thrilled that one key stakeholder, the 
Prineville Mayor, Betty Ruppe, is here today, back here. She 
has played a crucial role in developing this agreement. She 
flew out here to DC specifically to attend this hearing to 
convey how important this legislation is to the city of 
Prineville and to the region.
    This bill is important for the economic security and the 
ecological health of the region. It's been endorsed by the city 
of Prineville, Crook County, the Governor of Oregon, Irrigation 
Districts, the Warm Springs tribe and environmental groups. 
These groups have written letters of support to both the Chair 
and Ranking Member. I have those letters here today to submit 
for the record.
    This bill addresses the use of water stored behind the 
Bowman dam. This dam in the Deschutes Basin has created a 
reservoir that has nearly doubled the necessary capacity for 
its primary uses, irrigation and flood control.
    Another key aspect of the Deschutes Basin is that it's 
undergoing the process of reintroducing an endangered species 
of fish, the Mid Columbia Steelhead, which used to exist in the 
Crooked River, but went locally extinct. The reintroduction of 
these native fish is still in the early stages. But the success 
or failure of this reintroduction will provide a model for 
other basins across the country.
    In this context this legislation determines how to make use 
of the water that exists in the reservoir. Quite simply, the 
bill provides greater security to farmers by allocating 
specific amounts of water to irrigation while also providing 
for management of the reservoir to enhance fish and wildlife 
habitat with increased flows. In addition this bill meets 
future water needs for the city of Prineville and creates a 
possibility for a new hydro electric turbine to be installed on 
Bowman dam.
    After decades of missed opportunities we now have the 
chance to change the management of the Bowman dam and do so in 
a way that benefits Oregon's economy and environment. I look 
forward to working with the Chair, the Ranking Member, 
certainly Senator Wyden and other members of the committee to 
move this legislation forward.
    Thank you, Madame Chair.
    [The prepared statement of Senator Merkley follows:]

         Prepared Statement of Hon. Jeff Merkley, U.S. Senator 
                              From Oregon

    Thank you Chairman Shaheen, Ranking Member Lee and members of the 
subcommittee.
    I am pleased to be here to present a bill of critical importance to 
central Oregon, the Crooked River Collaborative Water Security Act. I 
introduced this bill with my colleague, Senator Wyden, in early August.
    This bill is the product of many years of negotiations between a 
diverse set of stakeholders in the region who came together despite 
many differences. They have found common ground as presented in this 
legislation. I am thrilled that one key stakeholder, Prineville Mayor 
Betty Roppe, is here today. Mayor Roppe has played a crucial role in 
developing this agreement. She flew to Washington DC specifically to 
attend this hearing to convey how important this legislation is to the 
City of Prineville, and to the region.
    This bill is important for the economic security and the ecological 
health of the region. It has been endorsed by the City of Prineville, 
Crook County, the Governor of Oregon, irrigation districts, the Warm 
Springs Tribe, and environmental groups.
    These groups have written letters of support to both the Chair and 
Ranking Member. I would like to submit those to the record at this 
time.
    This bill addresses the use of water stored behind the Bowman Dam. 
This dam, in the Deschutes Basin, has created a reservoir that has 
nearly double the necessary capacity for its primary uses--irrigation 
and flood control.
    Another key aspect of the Deschutes Basin is that it is currently 
undergoing a process of reintroducing an endangered species of fish, 
the mid-Columbia steelhead, which used to exist in the Crooked River 
but went locally extinct.
    The reintroduction of these native fish is still in the very early 
stages, but the success or failure of this reintroduction will provide 
a model for other basins across the country.
    In this context, this legislation determines how to make use of the 
water that exists in the reservoir.
    Quite simply, this legislation provides greater security to farmers 
by allocating specific amounts of water towards irrigation, while also 
providing for management of the reservoir to enhance fish and wildlife 
habitat with increased flows.
    In addition, this bill meets future water needs for the city of 
Prineville and creates the possibility for a new hydroelectric turbine 
to be installed on Bowman Dam.
    After decades of missed opportunities, we now have the chance to 
change the management of the Bowman dam and to do so in a way that 
benefits Oregon's economy and environment.
    I look forward to working with the Chair, Ranking Member, Senator 
Wyden, and other members of the committee to move this legislation 
forward.

    Senator Shaheen. Thank you, Senator Merkley.
    Senator Johnson has joined us. Senator, I was going ahead 
to proceed with Senator Merkley and Congressman Tipton since 
they were here or would you like to go now?

 STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA

    Senator Johnson. Briefly.
    Senator Shaheen. Great.
    Senator Johnson. Senator, Chairman Shaheen and thank you 
for including the Mni Wiconi Amendments bill in today's 
hearing.
    The Mni Wiconi project serves 3 tribal rural water systems 
and one non-tribal rural water system in South Dakota. Mni 
Wiconi offers an economic lifeline and improved public health 
to 3 Indian Reservations in my State that are home to some of 
our Nation's most troubling levels of unemployment and poverty. 
My legislation is intended not to expand the project's scope, 
but to ensure that it is completed.
    I appreciate that the Administration has some concerns. I 
am hopeful that we can constructively work toward meeting the 
remaining needs of this critically important project.
    I would also ask that a letter from the Oglala Sioux tribe 
be included in the record.
    Senator Shaheen. Without objection, we will include the 
letter.
    Thank you very much, Senator Johnson.
    Now, Congressman Tipton.

  STATEMENT OF HON. SCOTT R. TIPTON, U.S. REPRESENTATIVE FROM 
                            COLORADO

    Mr. Tipton. Thank you, Chairwoman Shaheen for convening 
today's hearing on my bill H.R. 2842, the Bureau of Reclamation 
Small Conduit Hydropower Development Rural Jobs Act.
    At a time when our country needs to focus on domestic 
energy production and job creation, hydropower can play a 
critical role in providing clean, renewable electricity while 
expanding job opportunities in rural America. Hydropower is the 
cheapest and cleanest source of electricity available through 
modern technology. According to the Energy Information 
Administration, it's the highest source of non-carbon emitting 
energy in the world and accounts for approximately 70 percent 
of the United States total renewable electricity generation 
making it the leading renewable energy source of power.
    My home State of Colorado has hydropower. But there's still 
an enormous opportunity for new hydropower development at 
existing facilities. Canals and pipelines in the State, if 
developed, can generate as much power as the Glen Canyon Dam, 
enough emission free power for a million homes.
    Increased conduit hydropower serves a number of purposes.
    It produces renewable, emissions free energy that can be 
used to pump water or sell electricity into the grid.
    It can generate revenue for irrigation districts to help 
pay for aging infrastructure, the cost of facilities and 
modernization.
    It can create local jobs and generate revenue to the 
Federal Government.
    It's as simple as this poster demonstrates. As easy as 
putting a portable generator into moving canal water.
    What's stopping this low hanging fruit we might ask?
    Actually, we are by allowing Federal regulatory framework 
to stifle development and the entrepreneurial spirit. For this 
reason I introduced my bipartisan legislation, the Bureau of 
Reclamation Small Conduit Hydropower Development and Rural Jobs 
Act. This legislation authorizes power development at the 
agency's conduence to clear up multi Federal agency confusion 
and duplicative processes and reduces the regulatory costs 
associated with hydropower development.
    This legislation seeks to remove duplicative environmental 
analysis where doing so will considerably reduce costs for 
hydropower developers while retaining the level of analysis 
necessary to protect valuable natural resources. Under existing 
regulations even though the Bureau of Reclamation Conduit 
Hydropower units would already have been on disturbed ground 
within existing manmade facilities such as those in these 
posters, they've already gone through the Federal environmental 
review process, is still going to require another national 
environmental policy act or NEPA process, that would still have 
to be done.
    As an example, the House Natural Resources Committee heard 
from an Arizona witness who wanted to be able to install 15 
hydropower units on a Federal canal that had already gone 
through the NEPA process. The cost of installing each turbine 
would have cost $20,000. But going through the additional NEPA 
review would have cost an additional $50,000 each according to 
his testimony. That cost according to this chart is two and a 
half times the installation cost making it cost prohibitive for 
the irrigation district.
    This simply makes no sense. But I understood that there are 
some concerns with the wording of these provisions in my bill. 
I want to assure you that I'm willing to work with you on 
resolving those concerns.
    The legislation has also substantially reduced 
Administrative costs. Instead of the current process where the 
Bureau of Reclamation must painstakingly analyze each and every 
proposal for development, the bill gives to the first 
development right to the entity or entities operating and 
maintaining the Federal conduit. Most Reclamation irrigation 
water supply projects have an arrangement where operations and 
maintenance activities are transferred to the local beneficiary 
as a way to be able to reduce paperwork and other costs.
    The rationale for the legislation's right of first refusal 
provision is that the non-Federal operator knows the details of 
the facility and is locally invested in the project. This 
provision would significantly decrease hydro conduit hydropower 
planning costs.
    The bill also protects water users by specifically 
reaffirming hydropower development and as a secondary water 
supply and develop delivery purposes in ensuring that there 
will be no financial and operational impacts to existing water 
and power users.
    I'm proud to have the support of the Family Farm Alliance, 
the National Water Resources Association, the American Public 
Power Association, among others.
    If enacted this legislation will jump start the conduit 
hydropower development at the Bureau of Reclamation facilities 
while supporting the creation of badly needed rural jobs. I 
stand ready to work with the committee on making this bill a 
public law reality.
    Madame Chairwoman, with your permission I would like to be 
able to submit letters of support for the record. I'd like to 
thank you very much for this time.
    Senator Shaheen. We would appreciate those letters for the 
record and accept them without objection and appreciate, very 
much, Congressman Tipton your testimony and your willingness to 
work with the committee as we look at the wording of the 
legislation.
    Mr. Tipton. My pleasure, Madame Chairman.
    Senator Shaheen. Thank you.
    Since we are still waiting for Senators Wyden and Murkowski 
we will go ahead with the testimony from the witnesses. We have 
two witnesses today who are testifying on behalf of the 
Administration.
    Grayford Payne is the Deputy Commissioner for Policy, 
Administration and Budget from the Bureau of Reclamation.
    John Katz is an attorney with the Federal Energy Regulatory 
Commission.
    So, thank you very much to both of you for being here. Mr. 
Payne, would you like to begin as soon as you get seated?

STATEMENT OF GRAYFORD F. PAYNE, DEPUTY COMMISSIONER FOR POLICY, 
ADMINISTRATION AND BUDGET, BUREAU OF RECLAMATION, DEPARTMENT OF 
                          THE INTERIOR

    Mr. Payne. Thank you, Madame Chairman and members of the 
subcommittee.
    I'm Grayford Payne, Deputy Commissioner for Policy, 
Administration and Budget at the Bureau of Reclamation. Thank 
you for the opportunity to provide the Department's view on 3 
bills before the subcommittee today, H.R. 2842, S. 3464 and S. 
3483. My written statements have been submitted for the record.
    H.R. 2842, the Reclamation Small Conduit Hydropower 
Development and Rural Jobs Act of 2012, starting off with H.R. 
2842, the Department supports the goals of this bill. It would 
change to increase the generation of hydropower in existing 
canals and conduits. H.R. 2842 would clarify to Reclamation is 
responsible for permitting conduit hydropower development in 
all Reclamation owned facilities through our lease power of 
privileges or LOPP contracts.
    Section two of H.R. 2842 would provide that the Natural 
Environmental Policy Act or NEPA shall not apply to small 
conduit hydropower development excluding citing of associated 
transmission on Federal lands. Reclamation's existing LOPP 
procedures allow for a categorical exclusion under the NEPA to 
be applied to low impact hydropower projects without unduly 
delaying project development.
    The Department believes that environmental protection 
should continue to apply in the context of new construction 
undertaken on Federal lands and will continue to apply NEPA as 
appropriate through the use of categorical exclusions or 
environmental assessments.
    Finally several of the definitions in H.R. 2842 as drafted 
would affect the other authorities in the 1939 act. We 
recommend improvements which are detailed in my written 
statements.
    S. 3464, the Mni Wiconi Project Act Amendments of 2012 
would authorize funding for additional components on the Rural 
Water Project that have been under construction for several 
years and with appropriations requested in 2013, will be 
essentially completed.
    For reasons described in my written statement, the 
Department cannot support S. 3464. In the Rural Water Program 
Assessment report delivered to Congress this past July, 
Reclamation explained that about $1.4 billion of Federal 
obligations remain on Reclamation to complete the existing 
authorities authorized rural water projects. That figure is 
greater than Reclamation's total annual appropriations. The 
sheer size of that obligation factors heavily into our position 
on this bill which would authorize about $14 million of 
additional obligations.
    We recognize that the need continues to exist within the 
reservation served by the Mni Wiconi Project. For that reason 
Reclamation will continue to work with the sponsors, project 
sponsors, and other agencies to assess how best to meet these 
needs in the future.
    S. 3483, the Crooked River Collaborative Water Security 
Act.
    S. 3483 is an innovative piece of legislation that would 
accomplish several objectives for its sponsors. The bill 
corrects the unwieldy boundary line for the Wild and Scenic 
River designation on the portion of the Crooked River. It 
enables the use of un-contracted water stored behind Bowman dam 
for the city of Prineville as well as in stream flows to the 
benefit of fish and wildlife downstream. It authorizes early 
repayment of outstanding capital costs among other things.
    The Department supports these objectives and we can support 
S. 3483 if amendments are made consistent with points made in 
my written statement.
    In summary there are portions of the bill that depart 
somewhat from practices currently applied under Reclamation 
laws and policies particularly in the areas of operations and 
contracting. We regard our recommendations as primarily 
technical in nature and would be happy to work with the bill 
sponsors and subcommittee to refine the legislation.
    As a parting thought I want to relay that my day to day 
duties here in Washington are primarily as a CFO and do 
administrative capabilities working with the Department. That 
said, for some specific questions about leasing or procedures, 
leasing procedures or project construction or facility 
operations I may need to respond back to the committee in 
writing for the record. I'd be glad to do so.
    Thanks again for the opportunity to be here today.
    That concludes my statement.
    [The prepared statements of Mr. Payne follow:]

   Prepared Statements of Grayford F. Payne, Deputy Commissioner for 
Policy, Administration and Budget, Bureau of Reclamation, Department of 
                              the Interior

                               H.R. 2842

    Madam Chair and members of the Subcommittee, I am Grayford Payne, 
Deputy Commissioner for Policy, Administration and Budget at the Bureau 
of Reclamation (Reclamation). I am pleased to provide the views of the 
Department of the Interior (Department) on HR 2842, the Bureau of 
Reclamation Small Conduit Hydropower Development and Rural Jobs Act of 
2011. The Department supports the goals of HR 2842, which aims to 
increase 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 areas where the Administration supports the 
objectives of HR 2842, as well as detail the areas in the bill where we 
believe improvements could be made.
    Before I share the Department's views on HR 2842, I want to 
highlight some of the activities underway at the Department to develop 
additional renewable hydropower capacity. Last year, Secretary Salazar 
and the U.S. Department of Energy Secretary Steven Chu announced nearly 
$17 million in funding over three years for research and development 
projects to advance hydropower technology. The funding included ten 
projects that will receive 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 Obama Administration's goal of meeting 80 
percent of our electricity needs from clean energy sources by 2035.
    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. In 
March of this year, 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 Hydropower Memorandum of Understanding (MOU)\1\ between the 
Department of the Interior, the Department of Energy, and the Army 
Corps of Engineers. While the first phase, completed in 2011, focused 
primarily on Reclamation dams, the second phase focused on constructed 
Reclamation waterways such as canals and conduits. The two studies 
revealed that an additional 1.5 million megawatt-hours of renewable 
energy could be generated through hydropower at existing reclamation 
sites.
---------------------------------------------------------------------------
    \1\ http://www.usbr.gov/power/SignedHydropowerMOU.pdf, 2010
---------------------------------------------------------------------------
    In summary, HR 2842 would do four things: 1) provide a blanket 
authorization for the installation of small hydropower units on all 
Reclamation-owned canals and conduits; 2) require that Reclamation 
offer preference to water user organizations for the development of 
canal/conduit hydropower under a Lease of Power Privilege (LOPP); 3) 
exempt small canal/conduit hydropower projects below 1.5 MW from the 
requirements of the National Environmental Policy Act (NEPA) and; 4) 
designate Reclamation's Power Resources Office as the lead point of 
contact for policy and procedure setting activities related to canal/
conduit hydropower under an LOPP.
    Section 2 of HR 2842 would clarify that Reclamation is responsible 
for authorizing conduit hydropower development on Reclamation-owned 
facilities through LOPP contracts. As background, Reclamation is 
authorized by existing law to issue LOPP contracts that utilize 
Reclamation-owned facilities for private hydropower development under 
Section 5 of the Townsites 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). Statutes that are specific to individual 
Reclamation projects may also apply. Similar to the LOPP process, the 
Federal Energy Regulatory Commission (FERC) may also issue licenses for 
hydropower development under the authority of the Federal Power Act, 16 
U.S.C. Sec.  791 et seq. To resolve potential confusion over whether a 
Reclamation LOPP contract or a FERC license should govern hydropower 
development at Reclamation facilities, Reclamation and FERC entered 
into agreements in 1981, 1992, and 2010 to address hydropower 
development. In particular, a 1992 memorandum of understanding between 
Reclamation and FERC (1992 MOU)\2\ established a process to resolve 
questions of jurisdiction over hydropower development at Reclamation 
facilities. Reclamation and FERC continue to work together to improve 
that process and make the process more efficient.
---------------------------------------------------------------------------
    \2\ The 1992 MOU is available in the Federal Register at: 58 Fed. 
Reg. 3269 (Jan. 8, 1993).
---------------------------------------------------------------------------
    Section 2 of HR 2842 would specifically authorize Reclamation to 
develop or enter into LOPP contracts for the development of new 
hydropower on conduits or canals on Reclamation-owned projects. This 
language would streamline the issuance of LOPP contracts by simplifying 
the Reclamation-FERC jurisdictional consultation that was established 
in the 1992 MOU. This language also could provide Reclamation with an 
opportunity to discuss programmatically resolving jurisdiction over 
hydropower development on Reclamation conduits with FERC, thus creating 
the potential to eliminate case-by-case jurisdictional consultations 
for development on Reclamation conduits.
    Section 2 of HR 2842 would also require that Reclamation offer 
preference in the award of LOPPs to ``irrigation districts or water 
users associations'' with which Reclamation has an existing contract 
for operations and maintenance of that project or project feature. 
Reclamation already provides preference to existing irrigation 
districts and water user associations pursuant to Section 9(c) of the 
Reclamation Projects Act of 1939. Reclamation would be happy to work 
with the sponsor of the bill and the Committee to resolve any concerns 
regarding preference.
    Section 2 of HR 2842 would provide that NEPA ``shall not apply to 
small conduit hydropower development, excluding siting of associated 
transmission on Federal lands[.]'' The Department opposes a waiver of 
NEPA. Furthermore, this language is in contrast to the existing 
provision in Section 30 of the Federal Power Act (16 U.S.C. 823a) that 
allows FERC to approve an application to develop hydropower within 
conduits located on non-federal lands under certain conditions. 
Accordingly, as provided in FERC's regulations at 18 CFR Sec.  
380.4(a)(14), FERC is not required to prepare an environmental 
assessment or environmental impact statement for certain conduit 
hydropower projects that meet the statutory and regulatory criteria and 
do not have the potential for significant environmental impacts.
    The Department understands the intent of HR 2842 to be that 
conduits and canals are existing, man-made structures where 
environmental impacts associated with construction have already 
occurred and/or been mitigated. However, the Department's view is that 
low-impact hydropower, particularly in conduits and canals, can be 
efficiently developed by utilizing existing environmental review 
provisions that will not unduly delay project development and ensure 
environmental health and safety. Environmental analysis for many LOPP 
contracts has, for example, been addressed through categorical 
exclusions or environmental assessments rather than environmental 
impact statements. The Department believes that environmental 
protections should continue to apply in the context of new construction 
undertaken on federal lands, and will continue to apply NEPA through 
the use of categorical exclusions or environmental assessments.
    Reclamation's existing Lease of Power Privilege procedures allow 
for an existing categorical exclusion under NEPA to be applied to low-
impact hydropower projects. Reclamation believes that low-impact 
hydropower developed in conduits or canals may be appropriately 
analyzed under those same procedures, which are documented in the 
Departmental Manual at 516 DM 14.5(C)(3) and (D)(4). The Department 
understands the value and importance of expedient environmental review 
and believes development of hydropower within Reclamation's existing 
conduits and canals can be efficiently analyzed utilizing these 
existing review processes.
    I would also like to address language in Section 2 of the House 
passed bill specifying that ``the Power Resources Office (PRO) of the 
Bureau of Reclamation shall be the lead office of small conduit 
hydropower policy and procedure-setting activities conducted under this 
subsection.'' The Department supports this language given that project-
specific expertise concerning Reclamation facilities resides first at 
the field level where ownership responsibility for the specific 
infrastructure resides. It is preferable for policies and procedures to 
be set within the PRO with developers continuing to approach the 
appropriate Reclamation regional or area office with proposals to 
develop conduit hydropower. There is a robust channel of communication 
between the PRO, other Denver Offices, and Reclamation regional and 
field offices that allows for successful implementation of a Lease of 
Power Privilege agreement.
    Finally, HR 2842 would amend 9(c) of the Reclamation Project Act of 
1939, which in addition to providing LOPP authority, authorizes the 
Secretary to enter into contracts for municipal water supply and 
miscellaneous purposes. Several of the definitions in HR 2842 as 
drafted would affect the other authorities in the 1939 Act. In 
particular, the proposed definition of ``transferred work'' is too 
narrow to refer to all works affected by subsection 9(c) of the 1939 
Act, since that subsection authorizes contracts involving works other 
than conduits. Either the definition would need to be broadened to 
include all affected works, or the term defined narrowed from 
``transferred work'' to ``transferred conduit.'' Also, the existing 
1939 Act has a definitions section. Any definitions that are of general 
application should be included in the existing definitions section, 
rather than in subsection 9(c). Definitions that apply solely to 
conduit hydropower need to do so explicitly, to avoid misapplication or 
confusion. Lastly, the 1939 Act definitions section already includes a 
definition of ``Secretary''. The Department would be happy to work with 
the Committee on these technical changes to the language of the 
proposed definitions and their placement within the existing 1939 Act.
    As referenced above, Reclamation has procedures in place through 
the LOPP process for the sites where Reclamation has the authority to 
develop hydropower. We are currently reviewing our LOPP policies and 
processes to look for ways to expedite and improve the process, 
especially for conduits and canals.
    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 HR 2842. This concludes my 
written statement, and I am pleased to answer questions at the 
appropriate time.

                                S. 3464

    Madam Chair and members of the Subcommittee, I am Grayford Payne, 
Deputy Commissioner for Policy, Administration, and Budget at the 
Bureau of Reclamation (Reclamation). I am pleased to provide the views 
of the Department of the Interior (Department) on S. 3464, the Mni 
Wiconi Project Act Amendments of 2012. If enacted, S. 3464 would expand 
the scope and authorization ceiling of the Mni Wiconi Rural Water 
Supply Project and have significant impacts on the budgets of both 
Reclamation and the Bureau of Indian Affairs. For the reasons described 
below, the Department cannot support S. 3464.
    The Mni Wiconi Rural Water Supply Project is a municipal, rural and 
industrial project that serves both tribal and non-tribal populations 
of the Pine Ridge, Rosebud, and Lower Brule Indian Reservations and the 
West River Lyman-Jones Rural Water System in seven counties of 
southwestern South Dakota. Responsibilities of the Secretary under the 
Mni Wiconi Rural Project Act (Public Law 100-516) include the operation 
and maintenance of existing water systems, including the core treatment 
plant and pipelines, and appurtenant facilities on the Pine Ridge, 
Rosebud and Lower Brule Indian Reservations. With the funding requested 
in the President's FY 2013 budget, the majority of the population of 
the project will be served. The Lower Brule and West River Lyman-Jones 
portions of the project will be completed. Generally those not 
connected to the project (approximately 2.5% of the population on 
Rosebud and Pine Ridge Reservation) are served by community water 
systems or individual wells. Reclamation would be happy to facilitate 
or coordinate action with other federal agencies to address the needs 
identified by the bill's sponsor. Reclamation has a backlog of 
authorized but not constructed projects. Therefore, we have concerns 
about adding to the scope of an existing project that is nearly 
complete.
    Section 3(a) of S. 3464 would expand the service area of the Oglala 
Sioux Rural Water Supply to include land that is part of the Pine Ridge 
Indian Reservation in the State of Nebraska. The Mni Wiconi Project 
Master Plan, a working document that identifies remaining construction 
contracts to be completed, does not include construction contracts to 
serve the population in Nebraska. It is our understanding that other 
entities are involved with funding new housing facilities in this area, 
which will include the costs for connecting these new facilities to the 
Mni Wiconi water system. Given these considerations, adding this 
portion of the Pine Ridge Indian Reservation to the authorized Project 
service area does not add to the current authorized cost ceiling of the 
project or schedule within the existing sunset date.
    Sections 3, 4, and 5 of S. 3464 direct the Secretary of the 
Interior to develop a plan for completion of the Oglala Sioux Rural 
Water Supply System, the Rosebud Sioux Rural Water Supply System, and 
the Lower Brule Sioux Rural Water System, respectively. Planning the 
completion of the systems is dependent on future appropriations as well 
as Reclamation's need for flexibility in decision-making relative to 
all authorized rural water projects. Reclamation must constantly assess 
and prioritize these kinds of projects to maximize the agency's ability 
to meet its programmatic goals, to maximize water deliveries to rural 
communities as efficiently as possible, and to reflect the diverse 
needs and circumstances facing each individual project. The Department 
would like to work with project sponsors of the bill to discuss plans 
for completion, and clarifying the roles, responsibilities, and 
authorities of Federal agencies involved in the project.
    Section 6 of S. 3464 would require the Secretary to submit to 
Congress recommendations for financing and implementing mitigation 
plans for fish and wildlife losses, and Native American cultural 
resources, resulting from the construction and operations of the Oahe, 
Fort Randall, and Big Bend Dams and Reservoirs. The legislation does 
not address how provisions of this section may have already been 
addressed by other Acts of Congress intended to provide equitable 
compensation to Indian tribes adversely impacted by Pick-Sloan projects 
on the Missouri River; including the Tribal Parity Act (PL 105-132) and 
the Cheyenne River Sioux Tribe Equitable Compensation Act (PL 106-511), 
as amended.
    Section 7 of S. 3464 would increase the authorized Mni Wiconi cost 
ceiling by an additional $14,308,000, based on October 1, 2011, price 
levels. Reclamation has worked closely with the project sponsors to 
ensure completed features will be functional and provide intended 
benefits within the currently authorized cost ceiling. The Department 
believes the FY 2013 President's request of $23 million for 
construction provides sufficient funding to meet the objectives of the 
Project as authorized. Reclamation has not been provided the details 
necessary to analyze the cost estimates that are contained in S.3464.
    Section 7(b)(1) would authorize appropriations for operation and 
maintenance to be used to reimburse costs for water service to members 
of the Rosebud Sioux Tribe living in White River, South Dakota. 
Reclamation is concerned that this shifts operation and maintenance 
costs that have been a non-Federal responsibility of the West River 
Lyman-Jones Rural Water System and the city of White River to the 
United States, further compounding the budget challenges during these 
fiscally difficult times. The Department is also concerned about the 
precedent of Federal funding to cover payment of water bills for tribal 
members residing in an incorporated city. The Department has testified 
in other circumstances about the concerns it has with taking on 
operation and maintenance obligations or subsidizing those costs.
    Section 7(b)(5) would authorize appropriations for operation and 
maintenance to be used for the improvement, repair, and replacement of 
existing public or tribal water systems prior to their transfer into 
the respective project system. Reclamation had previously determined 
that the costs of upgrading existing community facilities should be 
properly allocated to the construction component of the project. Since 
these existing systems were originally constructed using funds and 
authorities of other agencies, Reclamation believes any funding for 
improvements needed to correct deficiencies in existing systems should 
be discussed among the various responsible agencies before those 
systems are accepted into the project.
    Section 8 of S. 3464 would direct the Secretary to update and 
submit to Congress feasibility studies addressing wastewater disposal 
needs of the reservations, any deficiency assessments associated with 
existing waste water systems, and construction, operation and 
maintenance costs of new wastewater disposal facilities and systems 
that may be recommended. Reclamation's general authorities and 
expertise are associated with water supply and not wastewater treatment 
and disposal. Reclamation believes that other agencies with existing 
authorities and programs that address wastewater facilities and systems 
may be better suited as the responsible agency for completing these 
studies.
    Section 9 of the bill amends PL 100-516 to insert a ``Mni Wiconi 
Project Emergency Assistance Planning Act,'' which would require 
federal agencies to develop and implement a five-year plan to meet the 
needs of the Mni Wiconi Project Rural Water Systems in emergency 
situations. While we agree that it is important to document potential 
threats and emergency response measures in a written plan, it is not 
feasible to forecast the ``emergency management needs of each rural 
water system'' as described in the proposed Section 204(b)(1). 
Furthermore, the collaborative effort by the Secretaries of the 
Interior, Secretary of Defense, and Secretary of Homeland Security to 
carry out the provisions of this section with consultation with the 
Indian Tribes with an interest in the project would be extremely 
difficult to achieve by the date specified of January 1, 2014.
    The proposed Section 205 would establish an Emergency Assistance 
Fund to carry out this title. Reclamation is responsible for extensive 
water and power infrastructure that is exposed to the same natural 
disasters and potential man-made threats that could affect the Mni 
Wiconi Project Rural Water Systems. Funding needed for emergency 
repairs are made available from annual appropriations and prioritized 
as necessary to perform work to restore facilities to operational 
status after damage occurs. This is a more efficient use of federal 
funds than creating an emergency fund that is reserved for a specific 
project, such as the Mni Wiconi Project.
    This concludes my written statement. I would be pleased to answer 
questions at the appropriate time.

                                S. 3483

    Madam Chair and members of the Subcommittee, I am Grayford Payne, 
Deputy Commissioner for Policy, Administration and Budget at the Bureau 
of Reclamation (Reclamation). I am pleased to provide the views of the 
Department of the Interior (Department) on S. 3483, the Crooked River 
Collaborative Water Security Act. The provisions of S. 3483 address the 
Crooked River Wild and Scenic River designation along with water supply 
concerns relating to Reclamation's Crooked River Project.
    The Department supports the goals of correcting the Wild and Scenic 
River boundary near Bowman Dam and improving Reclamation project 
operations, where possible, to further enhance water use and 
availability. We also recognize refinements made since similar 
companion legislation was heard in the House in June of last year. We 
believe that some of the provisions of S. 3483 will advance the goal of 
water security on the Crooked River, and we offer the following 
recommendations for improvements to the bill. If the changes summarized 
below are incorporated to the bill, the Department can support S. 3483.
    S. 3483 includes seven sections which address: the Wild and Scenic 
River designation near Bowman Dam; water supply for the City of 
Prineville; first fill protection for water in Prineville Reservoir; 
operating requirements ``for the benefit of downstream fish and 
wildlife''; repayment contract provisions for the Ochoco Irrigation 
District (District); requirements that Reclamation participate in 
``dry-year management planning meetings''; and savings clause language 
clarifying the bill's effect on existing law. This statement summarizes 
the Department's interest in the most significant provisions of each 
section.
    An eight-mile segment of the Lower Crooked River near Prineville, 
Oregon was designated as a National Wild and Scenic River in 1988 with 
enactment of the Omnibus Oregon Wild and Scenic Rivers Act (Public Law 
100-557). The Lower Crooked River meanders through canyons of deeply 
eroded basalt and banks covered with riparian vegetation. A variety of 
wildlife including river otters, beaver, great blue herons and mule 
deer inhabit the corridor. A wide-range of recreation opportunities are 
available along the Lower Crooked River including native trout fishing, 
camping, hiking and boating.
    When the Wild and Scenic River boundary was administratively 
finalized for this section of the Crooked River, the centerline of 
Bowman Dam was used as the upstream terminus of the designation. 
However, the placement of the beginning of the designation within this 
man-made feature is both counterintuitive and cumbersome to administer. 
Section 2 of S. 3483 addresses this by moving that upper limit of the 
designated river one-quarter mile downstream. The Department of the 
Interior supports the proposed modification of the boundary as a 
reasonable solution consistent with the original intent of the Wild and 
Scenic designation. The Department is willing to work with the Sponsor 
and the Committee to determine the exact placement of the new boundary. 
Clearly the dam and related facilities were never intended to be 
included within the wild and scenic river designation.
    Section 2 of S. 3483 also contains language anticipating 
applications for hydropower development at Bowman Dam through the 
Federal Energy Regulatory Commission (FERC). The Department believes 
that Reclamation has the authority to permit non-Federal power on the 
Crooked River Project pursuant to the language of Section 2406 of 
Public Law 102-486. Therefore, Section 2 (B) should be modified to add 
``or Bureau of Reclamation'' after the words ``Federal Energy 
Regulatory Commission.''
    Section 3 of S. 3483 amends the Act of August 6, 1956 (70 Stat. 
1058), by increasing the statutorily-required minimum release flows 
from Bowman Dam to serve as mitigation for groundwater pumping by the 
City of Prineville. The Department does not oppose the concept of 
providing releases to mitigate for municipal use of groundwater. We 
believe the bill's language of ``without further action by the 
Secretary. . .'' and its references to a Reclamation Directive and 
Standard to be contradictory and subject to interpretation as to the 
need for NEPA compliance and a contract. The bill's language also 
requires delivery of water prior to receiving payment from the City and 
it is unclear as to whether or not the 5100 acre-feet is part of the 
currently required 10 cfs releases. We recommend deleting the words 
``Without further action by the Secretary of the Interior, beginning on 
the date of enactment of the Crooked River Collaborative Water Security 
Act'' and replacing it with, ``Upon passage of the Crooked River 
Collaborative Water Supply Act, the Secretary of the Interior is 
authorized to contract with the City of Prineville for up to 5,100 
acre-feet of water in Prineville Reservoir and upon receipt of required 
payments may release such water on an annual basis to serve as 
mitigation. . .'' We recommend deleting the words `Water and Related 
Contract and Repayment Principles and Requirements' as this does not 
refer to a Reclamation document and deleting the words `Directives and 
Standards PEC 05-01' as this is currently under revision. Substituting 
``in accordance with Reclamation law and policy'' would be more 
appropriate.
    An additional concern with S. 3483 is the bill's statement that 
``The Secretary is authorized to contract exclusively with the City for 
additional amounts in the future at the request of the City.'' This 
language would preferentially benefit the City of Prineville and 
appears to close the door to any potential future irrigation or 
municipal water contractors of the Crooked River Project (Project).
First Fill Storage and Release
    Section 4 of S. 3483 also proposes an entirely new addition to the 
1956 Act. The proposed addition would provide existing contractors and 
others with a ``first fill'' priority basis, rather than the current 
situation where both contracted and uncontracted storage space in 
Prineville Reservoir fill simultaneously. While this provision is not 
likely to have any immediate effect, it is possible under the proposed 
first fill priority system that in very dry water years the last fill 
entity could be shorted. This section also requires the release of all 
the contracted water in the reservoir every year. We recommend deleting 
the word `release' and substituting the words `make available' as it is 
common for irrigators to use less water than they have contracted in 
any given year.
Storage and Release of Remaining Stored Water Quantities
    The Department supports the concept of providing some of the now 
uncontracted space in the reservoir for fish and wildlife purposes. 
However, the inserted Section 7(a) requirements to release all 
remaining stored water quantities for the benefit of downstream fish 
and wildlife will prevent Reclamation from issuing new contracts.
    We note that the bill's language also inserts a Section 7(b) to the 
1956 Act which would require that if a consultation under the 
Endangered Species Act or an order of a court requires releases of 
stored water from Prineville Reservoir for fish and wildlife, the 
Secretary shall use uncontracted stored water. Reclamation would 
interpret this provision to set a new precedent in legislatively 
prescribing operation of the Crooked River Project. Reclamation 
interprets this section as altering but not eliminating agency 
discretion with respect to contract water supplies, therefore, 
sufficient discretion would remain with respect to the operation of the 
Project to warrant consultation under Section 7(a)(2) of the Endangered 
Species Act. The limit of Reclamation's discretion is not entirely 
clear, and could be subject to contrary interpretations. Also, the 
additional quantity of water reserved for the City of Prineville is not 
addressed in this section, and Reclamation interprets the bill such 
that any future quantities of water made available to the City (beyond 
the 5,100 acre feet) will not be subject to first fill protection and 
may affect the use of water for the benefit of downstream fish and 
wildlife.
    S. 3483 also includes amendments to the 1956 Act to coordinate the 
management of water for the benefit of fish and wildlife with the 
Confederated Tribes of the Warm Springs Reservation of Oregon and the 
State of Oregon. Reclamation notes the role of the U.S. Fish and 
Wildlife Service and the National Marine Fisheries Service with respect 
to the use of uncontracted water for the benefit of listed species is 
not entirely clear, resulting in a potential for conflict if the 
federal, state and tribal management priorities are not aligned. 
Likewise, the limitation of the use of the reservoir for downstream 
resources, could cause similar problems if a species were to be listed 
in or above the Reservoir. As drafted however, Reclamation would 
interpret the amended Section 7(c)(2) as not to alter Reclamation's 
obligations under Section 7(a)(2) of the Endangered Species Act.
    The ``Required Coordination'' language in the amended Section 7(d) 
continues to lack clarity with respect to the scope and purpose of the 
section. Specifically, striking the words ``and assist'' line 18 of 
page 7 would reduce the potential for conflict by clarifying the 
purpose of the section.
    Section 5 of S. 3483 would provide for early repayment of project 
construction costs by landowners within the District and the District's 
participation in conserved water projects of the State of Oregon. The 
Department fully supports these objectives and has no concerns 
regarding corresponding language in the bill.
    The Department does not see the need for language in Section 6 of 
S. 3483 requiring that Reclamation participate in and prepare a report 
from meetings by a ``Dry Year Management Planning'' group. Reclamation 
already has standing authority to provide technical and planning 
assistance to state, local and tribal government entities under Title 
II of the Reclamation States Emergency Drought Relief Act (PL 102-250 
as amended). This planning authority does not expire, and is not 
subject to a standing drought declaration being in place in the area of 
interest. The Drought Act authority is sufficiently broad to cover the 
topic areas proscribed in Section 6 of S. 3483, without creating a new 
Congressional reporting burden on the Department. However, if this 
language remains, we suggest deleting at the end of Section 6(d), 
``with the voluntary agreement of North Unit Irrigation District and 
other Bureau of Reclamation contract holders referred to in that 
paragraph, the Secretary may release that quantity of water for the 
benefit of downstream fish and wildlife as described in section 7 of 
that Act.'' This language limits Reclamation's authority and creates a 
burdensome requirement that could more efficiently be addressed by 
requiring entities to contact Reclamation prior to June 1 of any year 
or the water will be released downstream.
    The Department also supports the McKay Creek Exchange Project which 
has been the subject of periodic discussions between the District and 
Reclamation and which would provide enhanced instream flows in McKay 
Creek in exchange for water from a portion of the District's current 
contracted water supply from Prineville Reservoir. However, we have 
concerns with those portions of Section 5 of S. 3483 that address 
contract amendments relating to lands within the vicinity of McKay 
Creek. As written, the proposed legislation does not clearly identify 
the fundamental exchange element of the project. The language in 
Section 5 is unclear as to whether the proposed water supply would come 
from the District's current contract supply or from uncontracted water 
in Prineville Reservoir, and the amount of water is not specified. As a 
result, the Department believes the McKay Creek Exchange Project would 
be implemented more effectively by proceeding with contracting 
processes that Reclamation has typically used for such situations, and 
which have been the subject of prior discussions with the District.
    While the Department supports the goals of S. 3483, we believe that 
the bill would benefit from changes as outlined here. This concludes my 
written statement. I am pleased to answer questions at the appropriate 
time.

    Senator Shaheen. Thank you very much, Mr. Payne. We 
appreciate that responses might need to be in writing.
    Senator Murkowski has joined us, but we would like to go 
ahead and hear your testimony, Mr. Katz. She'll make her 
statement later.
    Thank you.

 STATEMENT OF JOHN KATZ, DEPUTY ASSOCIATE GENERAL COUNSEL FOR 
     ENERGY PROJECTS, FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Katz. Thank you, Chairman Shaheen, Senator Johnson, 
Senator Murkowski. It's a pleasure to be before you today.
    I'll go off topic for a minute just to thank Senator 
Shaheen for her State's hospitality. My family had a wonderful 
reunion at Lake Winnipesaukee this summer.
    Senator Shaheen. We very much appreciate that. Come back 
often.
    Mr. Katz. Thank you.
    I will be fairly brief. My name is John Katz. I'm Deputy 
Associate General Counsel for Energy Projects at the Federal 
Energy Regulatory Commission. I appear today as a Commission 
staff witness. My statements are my own and don't necessarily 
reflect the opinions of the Commission, the chairman or any 
commissioner.
    Section 10(e)(1) of the Federal Power Act provides that 
persons, states, and municipalities to whom the Commission has 
issued licenses are required to pay annual charges for a number 
of things, as relevant here, for the use and enjoyment of lands 
of the United States.
    Section 24 of the act provides that when an entity files an 
application either for a preliminary permit or for a license, 
the lands that are covered by that application, this is only as 
applies to Federal lands, become sort of exempt from disposal 
under the public land laws because the United States is deemed 
to have an interest in the power development potential of those 
lands. In some instances entities reach agreements with 
departments of the United States, such as the Department of 
Reclamation and particularly the Forest Service, where they 
will perhaps trade lands so that they can have lands available 
for a hydro project or they may sell or the lands will 
otherwise be transferred to those entities.
    However, section 24 provides, in a mandatory fashion, such 
that Reclamation and Agriculture don't have any choice, that if 
such lands are transferred they are required to be continued to 
be subject to the United States' power site reservation. In 
some instances therefore, there are lands that have been 
transferred entities who are operating hydro projects yet they 
still pay annual charges for the use and enjoyment of those 
lands.
    Senator Shaheen. Mr. Katz, pardon me for interrupting you. 
I just wanted to clarify for members of the audience that you 
are testifying on S. 3265.
    Mr. Katz. Oh, yes. I apologize. Indeed.
    The proposed legislation would provide that if lands are 
transferred or otherwise given to private entities by the 
United States, annual charges for use of those lands would no 
longer be charged by the Commission. It would amend section 
10(e) to provide that.
    Commission staff takes no position on the bill. It would 
not, in any way, undercut the Commission's ability to protect 
the public interest considerations that the Federal Power Act 
requires it to protect. It would not affect the Commission's 
budget in any way because the annual land use charges are paid 
directly into the Treasury of the United States.
    With that I'm happy to answer any questions you may have.
    [The prepared statement of Mr. Katz follows:]

 Prepared Statement of John Katz, Deputy Associate General Counsel for 
         Energy Projects, Federal Energy Regulatory Commission

                                S. 3265

    Chairman Shaheen, Ranking Member Lee, and Members of the 
Subcommittee:
    My name is John Katz and I am Deputy Associate General Counsel for 
Energy Projects at the Federal Energy Regulatory Commission. I appear 
today as a Commission staff witness. The views I express are my own and 
not necessarily those of the Commission or of the Chairman or any 
individual Commissioner. I appreciate the opportunity to appear before 
you to discuss S. 3265.

                             I. BACKGROUND

    Section 10(e)(1) of the Federal Power Act (FPA) provides that 
persons, states, and municipalities to which the Commission has issued 
a license to operate non-federal hydropower facilities must pay to the 
United States reasonable annual charges in an amount to be fixed by the 
Commission for, among other things, ``recompensing [the United States] 
for the use, occupancy, and enjoyment of its lands or other property.'' 
Section 17 of the FPA states that such charges will be paid into the 
U.S. Treasury, with 12.5 percent being allocated to ``Miscellaneous 
Receipts,'' 50 percent being paid into the Reclamation Fund, and the 
remaining 37.5 percent being paid by the Secretary of the Treasury to 
the state within which the lands at issue are located (there is an 
exception for proceeds from Indian reservations, all of which are 
credited to the Tribes).
    FPA section 24 provides that any lands of the United States 
included in any proposed hydropower project shall, from the date of 
filing of a project application, be reserved from entry, location, or 
other disposal until otherwise directed by the Commission or by 
Congress. If the Commission determines that the power development 
potential of reserved power sites will not be injured or destroyed by 
location, entry, or selection under the public land laws, the Secretary 
of the Interior will declare the lands open to location, entry, or 
selection, under any conditions imposed by the Commission and ``subject 
to and with a reservation of the right of the United States or its 
permitees or licensees to enter upon, occupy, and use any part or all 
of said lands necessary, in the judgment of the Commission, for the 
purposes of [Part I of the FPA], which right shall be expressly 
reserved in every patent issued for such lands.''
    It has been the Commission's policy for many years that, where 
federal lands subject to a power site reservation are transferred to a 
licensee, the licensee still must pay annual charges for the use of the 
lands, given that the United States retains the power interest in the 
lands. The Commission has no record of the amount of acreage that falls 
into this category, because the Commission assesses federal land use 
charges based on the amount of federal acreage that each licensed 
project occupies (typically, taken from information in a license 
application or license order), and for this purpose there is no 
practical distinction between lands that are wholly owned by the United 
States and those that have been transferred to a private entity subject 
to a power site reservation. Unless a licensee elects to identify any 
acreage that has been transferred from federal ownership but is still 
subject to a section 24 power site reservation, the Commission does not 
have that information.

                              II. S. 3265

    S. 3265 would revise section 10(e) of the FPA to provide that those 
federal lands as to which the Commission assesses annual charges to 
hydropower licensees will not include land that has been sold, 
exchanged, or otherwise transferred from federal ownership, 
notwithstanding the retention by the United States of a power site 
reservation on those lands.
    Commission staff has no position on the proposed legislation. S. 
3265 would not affect either the Commission's ability to protect the 
developmental and non-developmental values set forth in the FPA or the 
Commission's funding. The Commission will assess annual charges for the 
use, occupancy, and enjoyment of federal lands in any manner that 
Congress directs.

                            III. CONCLUSION

    This concludes my testimony. I will be happy to answer any 
questions you may have.

    Senator Shaheen. Thank you very much, Mr. Katz.
    Senator Murkowski, did you want to make a statement?

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Madame Chairman, thank you first of all 
for conducting this hearing including my bill on the agenda 
this morning. I appreciate, you, Mr. Katz, being here and 
speaking to S. 3265 which addresses FERC's collection of land 
use fees for hydro projects.
    Madame Chairman, I guess I look at this one and say I'm 
just not sure why it's even necessary to legislate in this 
area. But we are here this morning.
    Under the Federal Power Act FERC is authorized to collect 
these reasonable annual fees from project owners for use, 
enjoyment and occupancy of Federal lands. In a sense the 
Federal Government is a landlord for these types of projects 
and can collect the fees and the rents from its tenants. I 
understand that.
    But I was very surprised to learn that when the land in 
question is no longer owned by the Federal Government because 
it's been sold or it's been transferred that the government can 
continue to collect these fees. It's, you know, liking it to a 
situation where you're renting an apartment or you're owning 
the house. But you sell the house. Do you still have to pay for 
a house that you no longer own?
    I guess if there's an outstanding mortgage, yes. But if you 
owned--if you rented an apartment and you're no longer in that 
apartment, you've moved on. You've transferred. The fact that 
you're still paying rent to the landlord to me just doesn't set 
right. To me it's inherently unfair.
    Yet, the FERC is authorized to continue to collect these 
fees as long as the land retains something that is referred to 
as a Power Site Classification. So what my legislation does, 
Madame Chairman, is simply halt the collection of Federal land 
use fees when the Federal Government no longer owns that land. 
I've learned that even though it might sound simple on its 
face, there's nothing simple about this.
    We've had a difficult time even identifying how many 
projects are at issue. In my questions to you, Mr. Katz, I'm 
going to see if we can't drill down a little bit more on that.
    I would note, though, for my colleagues that many of the 
approximately 15 projects that we have identified so far many 
of them are located in Alaska. But there are some in Oregon, 
Washington and Colorado that are in the same situation. So it's 
for this reason that I have brought this bill forward.
    Madame Chairman, I don't know if you want to begin with 
your questions. But I certainly have a few for Mr. Katz just in 
terms of what we're really looking at here and how we might be 
able to better identify the projects in question.
    But thank you.
    Senator Shaheen. Thank you very much, Senator Murkowski. I 
know that you won't be asking about S. 3265 and Senator Johnson 
will be asking about the Mni Wiconi project. So I will start 
Mr. Payne, by asking you about the small conduit hydropower 
development, H.R. 2842.
    The committee has heard from a number of groups who have 
raised questions about the waiver, the NEPA waiver, that's in 
that legislation. So I wonder if you could begin by stating for 
the record what your understanding is of what the language 
would do with respect to waiving the NEPA process.
    Mr. Payne. Yes. Currently the language that's in the 
proposed legislation would basically waive the NEPA process for 
the development of small conduit hydropower on Reclamation 
owned facilities.
    Senator Shaheen. Is the Bureau looking at ways to expedite 
or improve the process for developing hydropower in these 
situations? Clearly as I listen to Congressman Tipton testify 
on his legislation he was suggesting that for projects that 
would include hydropower in construction that had already been 
completed and had already gone through the NEPA process that it 
might be an unnecessary burden on those developers. That was my 
interpretation of what he said.
    Can you speak to that and to what the Bureau is looking at 
and whether it's the Bureau's assessment that that's correct or 
not?
    Mr. Payne. Yes. Currently the Bureau has a directive in 
standards on leases, lease and power privileges that we're in 
the process of revising. The revised version will basically 
become more friendly in the sense it will be more efficient, 
more transparent and it will be basically allow more 
communication so that this whole process of developing 
hydropower at Reclamation facilities will be more streamlined.
    We feel confident that this will satisfy.
    Senator Shaheen. But it would still, based on that 
response, it would still require a NEPA process?
    Mr. Payne. Yes.
    Senator Shaheen. Before going forward.
    Mr. Payne. It would still require a NEPA process and what 
we would use would be under the NEPA process, categorical 
exclusions, which we've already used in 4 other instances in 
recent years. As a result when you look at categorical 
exclusion NEPA process, it has taken anywhere between 6 months 
to 15 months to complete which we feel is fairly streamline.
    Senator Shaheen. So how do you respond to the concern that 
he raises that if a project has already gone through NEPA that 
it shouldn't have to go through it again if just to add the 
hydro, the conduit, into the canal or whatever the body is?
    Mr. Payne. I'm not an expert on that. I'd like to get back 
to you in written testimony.
    But, I guess what I would say is what I've understood is, 
you know, when the original one was done maybe years ago, 
things can change. It's always good to honor the process and to 
make sure that we get it done right so that we don't get down 
the road and have to stop everything. I think it's more costly 
to do it that way.
    With, like I said, the categorical exclusion, which is more 
of a checklist kind of NEPA process, it would streamline it. 
That's why we feel this is kind of a win/win situation.
    Senator Shaheen. OK. Thank you.
    I want to go now to S. 3483, the Crooked River 
Collaborative Water Security Act.
    I was impressed as Senator Merkley was describing the 
effort that had gone into the legislation about the number of 
groups that have come together to come to some agreement on how 
to move forward. I just wonder if the Bureau is confident that 
the bill as written will bring about the intended results.
    Mr. Payne. Yes. Actually the Bureau is very comfortable 
with the bill. We like it a lot. We think that this current 
legislation will bring about the results that are intended.
    I think all the parties in Oregon support the bill. We 
support it. We think it's a win/win for everybody.
    We're very comfortable with it.
    Senator Shaheen. Thank you.
    Senator Wyden is here. I'm sure he will have a lot to say 
about that legislation. So Senator, would you like to make a 
statement before we go onto further questions?

        STATEMENT OF RON WYDEN, U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Madame Chair. This is a 
hectic morning, even by Senate standards.
    I thank you and Senator Murkowski and Senator Johnson for 
their courtesy. I particularly just wanted to commend Senator 
Merkley and his staff for their leadership on the Crooked River 
bill. I know Betty Ruppe is here today. She and so many in 
Central Oregon spent hours and hours with Senator Merkley and 
myself and our staff to put together this legislation on behalf 
of the irrigation districts, the Warm Springs tribes, the 
conservation groups, the city, Governor Kitzhaber, the State 
and the county.
    We have a long tradition in our State with trying to find 
common ground on these kinds of issues. I think all of us, 
particularly in the West, understand that water is the 
prerequisite to a quality of life in our part of the country. 
It's how we restore our salmon runs, the natural habitats. This 
bill strikes a balance between competing demands for a scarce 
resource.
    I'm particularly pleased that the city of Prineville is 
going to have water for economic development. Our irrigators 
will have a new level of certainty on their future water 
supply. It opens up the fish habitat. We particularly, Senator 
Shaheen, want to thank you for scheduling the hearing on this 
legislation so quickly.
    This has been an important issue for Oregon. We're very 
pleased to be able to move forward after all of the years of 
work to reach agreement. We look forward to working the Bureau 
of Reclamation.
    Congressman Walden, he has a related piece of legislation 
in the other body in order to be able to move this legislation 
forward.
    Mr. Payne, I'll have some questions for you. I think I'll 
submit those for the record.
    We appreciate the cooperation that you've shown and thank 
you, Senator Shaheen, Madame Chair, for the courtesy this 
morning. Thank you.
    Senator Shaheen. Thank you very much, Senator Wyden.
    Mr. Payne.
    Mr. Payne. Thank you.
    Senator Shaheen. I'll now go to Senator Murkowski for 
questions.
    Senator Murkowski. Thank you, Madame Chairman.
    Mr. Katz, let me ask you about that power site 
classification. My question relates to the purpose of these 
PCSs. It's my understanding that they're meant to preserve the 
power values of undeveloped areas or sites that could be 
developed.
    Is that a correct understanding?
    Mr. Katz. Yes. I think that's accurate.
    If you look at the legislative history of the section it 
seems that back in the tens and the twenties, when that section 
was being put together, that there was concern, particularly in 
the Senate also in the House, about large companies, sort of, 
obtaining huge swaths of power privileges so that the people of 
the United States wouldn't have a chance to develop them. I 
think that led to section 24.
    Senator Murkowski. So once we have a hydropower facility in 
place, once that project exists, just in terms of the practical 
effect or the benefit of a Power Site Classification. Isn't the 
power value protected by the PSC already being utilized then?
    Mr. Katz. Yes, it should be.
    Senator Murkowski. OK. OK.
    I had mentioned in my comments about the difficulty in 
identifying the projects out there. I know that you have worked 
closely with my staff on the legislation. But FERC was not able 
to provide us with a list of the hydropower projects that are 
still subject to Federal land use fees.
    Why is this so difficult? Why is it so hard to identify 
this?
    Mr. Katz. The reason it's difficult is because the 
Commission charges or sets annual charges for the use of 
Federal lands by hydropower licensees. But it doesn't have a 
separate schedule of fees so that the fees relating to section 
24 lands are different than fees that are not subject to 
section 24.
    Senator Murkowski. Would that be difficult to isolate that 
or to account for them in a different way so that we would have 
a better tracking on it?
    Mr. Katz. In the future, as I think I spoke with your staff 
recently, the Commission has fortunately due to new technology, 
been able to ask licensees for data like from GPS and similar 
processes. So in future, going forward, the Commission is 
asking licensees to provide information as to which of those 
lands might be subject to a power site reservation and which 
aren't.
    In the past the Commission didn't do that, as I said, 
because it didn't affect the fee. So the Commission could, if 
the Senate were to request or Congress were to request, could 
go back to each licensee and see and ask them to provide that 
information, but absent doing that which might be burdensome 
for some licensees it might not.
    There isn't a way to, sort of, go back to the past.
    Senator Murkowski. Do I understand correctly, though, that 
currently you have begun to ask for that information?
    Mr. Katz. Yes, that's correct.
    Senator Murkowski. Then I know that you have seen the list 
of projects that my staff has assembled working with the trade 
groups, including the National Hydropower Association, the 
Alaska Power Association. We've essentially gone out and 
surveyed these constituent and trade groups. We've shared this 
list with the folks at FERC.
    Does this list look complete to you? Do you that we pretty 
much identified the population out there?
    Mr. Katz. To the best of my knowledge, but again because 
the Commission doesn't do that, there may be some licensees who 
have, for example, very small amounts of lands that are subject 
to such things, so it doesn't trouble them, and they haven't 
brought that to your attention.
    So I can't be sure that it's the universe. I think it's 
probably the universe of people that make significant payments 
and they're concerned about it.
    Senator Murkowski. Is there anything else that you might 
recommend we do, any other groups that we might look to in 
trying to really firm up whether or not this is the universe? 
Is there anything else that we should be looking at or any 
other questions that we might be asking?
    Mr. Katz. No. It sounds like you're speaking to the right 
groups. I mean, certainly NHA is the industry trade 
association.
    Senator Murkowski. Right.
    Mr. Katz. But again, I don't know what steps they've been 
able to take to survey their membership.
    Senator Murkowski. OK.
    Mr. Katz. But you're asking the right folks.
    Senator Murkowski. I appreciate that, Mr. Katz. I 
appreciate you working with my staff on this to just better 
understand what we're dealing with.
    Again, I would like to think that this would be a simple 
enough issue to resolve. It's certainly common sense that we're 
trying to get to the point where common sense is going to rule. 
I appreciate that.
    I thank you, Madame Chair.
    Senator Shaheen. Thank you.
    Senator Johnson.
    Senator Johnson. Thank you very much for being here today.
    One of the primary goals of my legislation is to ensure 
that the construction of the pipeline and necessary service 
lines on the Pine Ridge Reservation and the Rosebud Reservation 
can be completed. Without this, my understanding is that more 
than 4,300 intended beneficiaries of the project on the two 
reservations will not be served. Reclamation has stated that a 
majority of the population will be served within their 
authorized construction ceiling, but won't there still be an 
unmet need within the existing scope of the project once the 
construction ceiling is reached?
    Mr. Payne. Yes, Senator, there probably will be some for 
those outlying areas. We estimate that the actual number of 
current residents that will not be serviced by the Mni Wiconi 
project to be currently about 1,000 people given and I think 
the 4 thousand is a projection down the road.
    But either way we do agree that there is a need. But 
currently what we understand with our research is that those 
locations currently do have either residential wells or 
community wells that they're currently being served by. NIH is 
working with them to test water quality. Currently it is good 
water quality.
    You know, we have, in the past, and I think recently in 
April or so we met with the various parties who have 
constructed some of these locations whether it's Agriculture's 
Rural Water Division or it's EPA or IHS or HUD and trying to 
get them to get together to actually help with these projects. 
But I think a lot of it has to do with their response is their 
lack of funding or the other priorities. I don't really want to 
speak for them. But I'm just what I'm understanding from our 
region.
    You know, I guess the best way would be we've proposed and 
drafted an MOA that would be with the other, our other 
agencies, that would basically, hopefully, outline roles and 
responsibilities to see what we can do to get this. But we'd be 
happy to work with the committee.
    Senator Johnson. Reclamation previously stated that given 
the magnitude of the work that will have to be completed on the 
project and the backlog of work awaiting action on other 
projects that the tribes should look for alternative funding 
sources that could be used to construct any remaining features.
    In Reclamation's view how does leaving the tribal sponsors 
to fend for themselves in finishing this construction square 
with the United States trust responsibilities to the tribes?
    Mr. Payne. Again, this is back to where we have worked with 
the tribes. The tribes have all done outreach to these other 
Federal agencies and that is where we think that in order to 
solve this problem may be an MOA with the other agencies to get 
them all at the table to get a collective solution would 
probably be the best.
    Senator Johnson. Currently there are other Federal agencies 
that operate existing community systems on their reservations, 
which the original Mni Wiconi Act contemplates incorporating 
into the project. Can you outline some of the challenges 
Reclamation has faced in getting other agencies to participate 
in plans to upgrade the existing community systems?
    Do you think this bill would help spur the other agencies 
to get involved at higher levels and make these issues a 
priority?
    Mr. Payne. In the actual Mni Wiconi project where we've 
done the water treatment plan as well as the pipelines that go 
throughout the communities, you know, we have known that there 
are areas that were serviced by other Federal agencies. We do 
recognize that some of these pipelines aren't up to standards 
and that in order to connect to these pipelines we would really 
need that the O&M that should have been performed on these to 
be performed to get them up to standards because I think there 
is possibly, if you were to connect them, very remote 
possibilities contaminating the newly constructed lines that we 
have as well as the fact that we would inherit a liability with 
these.
    I can't speak for the other Federal agencies. But I think 
the tribes are also looking at ways to try to get them to the 
table to help out. Once these systems are upgraded and they are 
connected to our project and you know, we would be happy to 
pick up the O&M for this.
    Senator Johnson. Thank you very much, Mr. Payne. I look 
forward to your cooperation.
    Mr. Payne. Thank you.
    Senator Shaheen. Senator Johnson, did you have any further 
questions? Thank you.
    I actually have one that is not clear to me that relates to 
this project. I know that you indicated, Mr. Payne, that the 
existing Mni Wiconi project is almost complete.
    Can you elaborate on what that means? Is it going to be 
complete in a year, in 6 months, in 5 years?
    Mr. Payne. Sure. No, this project should be, if we get our 
full appropriations for this project, should be completed in 
2013. We have it as one of our priorities in our 2013 budget 
submission.
    So if we do get full funding we will be able to complete 
this project in 2013. Then that would fulfill our Federal 
obligation.
    Senator Shaheen. OK. Thank you.
    Mr. Katz, I want to follow up on some of Senator 
Murkowski's questions relative to S. 3265.
    How does this legislation correspond with FERC's pending 
rulemaking on the collection of land use fees?
    Mr. Katz. It's really a separate matter. I mean, in the 
rulemaking the Commission noted what its current policy and 
legal requirements were, but this is not an issue in that 
rulemaking.
    Senator Shaheen. OK.
    It's my understanding that the Omnibus Budget 
Reconciliation Act of 1986 requires FERC to recover its budget 
through fees and annual charges on the industries that it 
regulates. So how would this legislation impact the funding 
that FERC has been dependent on to operate?
    Mr. Katz. The legislation would not affect that at all 
because section 17 of the Power Act provides that all the 
charges that are recovered for use and enjoyment of U.S. lands 
go straight to the Treasury. So those have never funded the 
Commission's operations.
    Senator Shaheen. OK. Thank you.
    I want to go back with a final question, Mr. Payne, on the 
S. 3483, the Crooked River Collaborative and would again note 
what both Senators Merkley and Wyden had to say about the 
collaborative effort that went into this project. I think it's 
very impressive. I certainly commend the Mayor of Prineville, 
who is here and all of those other individuals and groups who 
made this happen.
    But I just want to clarify that it is not the intent of 
this effort to waive any applicable environmental laws.
    Mr. Payne. That is correct.
    Senator Shaheen. OK.
    You're comfortable that the bill, as it's written, makes 
that clear?
    Mr. Payne. Yes, especially in the ESA portion. We would be 
willing to work with the committee to clarify anything that 
needs to be clarified. We don't have any problems with that.
    Senator Shaheen. OK.
    Thank you both very much for your testimony this morning. I 
have no further questions and clearly neither does anyone else 
since they're gone.
    The testimony and written submissions from today's 
witnesses will be part of the official hearing record. We will 
keep that record open for 2 weeks to receive additional 
statements.
    Again, thank you. The hearing is adjourned.
    [Whereupon, at 10:20 a.m. the hearing was adjourned.]

                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

   Responses of Grayford F. Payne to Questions From Senator Murkowski

                               H.R. 2842

    Question 1. What are the financial challenges in developing conduit 
hydropower at federal canals and pipelines? In particular, what are the 
capital costs, regulatory costs and other costs on a project covered by 
this bill?
    Answer. The capital cost and other investments required to develop 
conduit hydropower on federal canals vary widely depending on the 
facility size and location. In general, conduit hydropower is developed 
with small units (under 10 megawatts), in locations where environmental 
and regulatory considerations are minimal. Environmental compliance, 
transmission agreements, operating arrangements and facility design are 
among the principal non-capital cost considerations. Because conduit 
hydropower units are typically small, the size of the investment is not 
on the scale of typical federal powerplants, which are much larger and 
have planning and development costs that can run into the tens of 
millions of dollars.
    Question 2. This bill waives the NEPA requirements for small 
conduit hydropower of less than 1.5 mw because the canals and pipelines 
necessary for conduit hydro have already been built. The proponents of 
the bill argue that the NEPA waiver eliminates just the paperwork 
requirements but not environmental statutes. Will environmental laws 
like the Endangered Species Act and the Clean Water Act still apply? 
What about state water laws?
    Answer. Many of Reclamation's existing projects pre-date the NEPA 
process, or are operating in conditions that have changed significantly 
since construction. For these and other reasons explained in the 
Department's written statement, we believe the NEPA waiver contained in 
HR 2842 to be unwarranted. The development of small conduit hydropower 
projects that meet the qualifications listed in a standard checklist 
will be eligible for categorical exclusions (CE) under NEPA, resulting 
in very little paperwork. That checklist is available as part of the 
Reclamation Manual's Directive and Standard titled Lease of Power 
Privilege (LOPP) Processes, Responsibilities, Timelines, and Charges 
(FAC 04-08) (http://on.doi.gov/SrhRrW). The only way to determine 
whether an individual project should be looked at more carefully under 
NEPA is to allow these processes to take place. Federal and state laws 
such as the Endangered Species Act and Clean Water Act will continue to 
apply regardless of what level of NEPA analysis is performed for new 
hydropower development or if the process is waived all together.
    Question 3. Please elaborate on the potential use of a NEPA 
categorical exclusion for conduit hydropower development.
    Answer. Reclamation's existing Lease of Power Privilege procedures 
allow for a categorical exclusion (CE) under NEPA to be applied to low-
impact hydropower projects. These procedures are also documented in the 
Departmental Manual at 516 DM 14.5(C)(3) and (D)(4), for use when the 
scope of a project is consistent with the terms of a CE, and there are 
no extraordinary circumstances. Key considerations in determining if 
the project is consistent with the terms of the CE are:

          (i) the project would utilize an existing dam or conduit;
          (ii) points of diversion and discharge of the LOPP powerplant 
        would be in close proximity to the existing infrastructure and 
        would not significantly affect the flow patterns of the water 
        source;
          (iii) there would be no increase or change in timing of 
        diversions and discharges; and
          (iv) the primary purpose of the infrastructure would remain, 
        e.g., most commonly irrigation.

    Reclamation's final Directive and Standard, Lease of Power 
Privilege (LOPP) Processes, Responsibilities, Timelines, and Charges, 
which was released on September 28, 2012, provides more detailed 
information on the potential use of a CE for conduit hydropower 
development.

                                S. 3464

    Question 1. Please describe all the Federal agencies that have 
existing authorities and programs to address wastewater facilities and 
systems within the region that may be better suited to play a role in 
the project.
    Answer. The other Federal agencies that have the authority to fund 
various additional water and wastewater features in the region of the 
Mni Wiconi project are: Indian Health Service (IHS) with the Department 
of Health and Human Services (HHS), Bureau of Indian Affairs (BIA) 
within the Department of the Interior, Housing and Urban Development 
(HUD), Environmental Protection Agency (EPA), United States Department 
of Agriculture Natural Resources Conservation Service (USDA NRCS), and 
USDA Rural Development. IHS in particular has an active program to 
assess and fund wastewater projects.
    Reclamation and the Tribe's rural water staff have met with the 
other agencies listed above on several occasions to discuss 
authorities, programs, and capabilities to assist with completion of 
remaining project components including wastewater facilities. 
Reclamation's understanding is that while other Federal agencies are 
supportive of addressing unmet needs, their budgets are limited and 
projects are objectively prioritized and ranked. Establishing a project 
specific interagency memorandum of agreement would help define needs, 
roles, and responsibilities to develop a multi?agency approach to 
improving these existing water systems. Reclamation introduced a draft 
interagency agreement at a multi?agency government to government 
consultation meeting on August 16, 2012. This agreement contemplates 
periodic meetings to develop a coordinated approach to the upgrades of 
the water systems.
    Question 2. Please describe your current repayment obligations for 
the Mni Wiconi project, as well as the remaining Federal Funding needed 
to complete the project. Do you consider it the role of Reclamation to 
pay for any additional operation and maintenance costs that the project 
may incur under this bill?
    Answer. The Mni Wiconi Act (P.L. 100-516), as amended and currently 
in force, does not require repayment of project costs. Instead, it 
required a 20% cost share for the non-tribal components, which has been 
fully met. Reclamation estimates that the FY 2013 appropriation request 
of $23 million will be sufficient to cover the remaining construction 
obligation for project completion as currently authorized. With respect 
to operation and maintenance costs, in general the Department opposes 
requirements for federal funding of projects' operation and maintenance 
costs. S. 3464 would increase Reclamation operation and maintenance 
obligations by adding payments of water bills on trust lands within 
White River and by funding initial improvements to existing community 
water systems.
    Question 3. Within your rural water program, if you were to 
prioritize the projects, where would the Mni Wiconi project fall within 
a prioritization system?
    Answer. Reclamation's recently completed draft assessment report 
titled ``Assessment of Reclamation's Rural Water Activities and Other 
Federal Programs that Provide Support on Potable Water Supplies to 
Rural Water Communities in the Western United States'' (www.usbr.gov/
ruralwater/docs/Rural-Water-Assessment-Report-and-Funding-Criteria.pdf) 
details the prioritization criteria to be applied to authorized rural 
water projects. Given Reclamation's application of funding criteria, 
the Mni Wiconi project has ranked favorably, qualifying for an 
appropriations request sufficient to complete the federal cost share 
under the authorized ceiling, assuming that the President's FY 2013 
request of $23 million is appropriated.

                                S. 3483

    Question 1. Has the Administration proposed that hydro should be 
developed at this facility? How long has the Administration studied the 
possible development of hydro at this facility? In addition, what 
process is being undertaken to ensure that all federal agencies are 
working towards making this a possibility?
    Answer. In 2010, Reclamation contracted with HDR to complete a 
conceptual level feasibility study that ultimately determined that 
development of hydropower by the Federal government at Arthur R. Bowman 
Dam (Bowman Dam) on the Crooked River was technically feasible. Since 
Bonneville Power Administration (BPA) is the federal power marketing 
agency in the Pacific Northwest, Reclamation provided the study to BPA. 
After reviewing the study and consulting with their rate payers, BPA 
notified Reclamation that while technically feasible, they did not 
believe federal development of hydropower at Bowman Dam was warranted 
at this time. Bowman Dam was listed as a potential development site in 
Reclamation's March 2011 Hydropower Resource Assessment at Existing 
Facilities. The reconnaissance level analysis contained in that report 
estimated that Bowman Dam could accommodate hydropower development of 
approximately 3,293 kilowatts, with annual production of approximately 
18,282 megawatt hours.
    As stated in the Department's written testimony on S. 3483, we 
believe that Reclamation has the authority to permit non-federal power 
on the Crooked River Project pursuant to the language of Section 2406 
of Public Law 102-486. Therefore, we have recommended that Section 2(B) 
of the bill be modified to add ``or Bureau of Reclamation'' after the 
words ``Federal Energy Regulatory Commission.'' Recently, two private 
entities have expressed interest in developing hydropower at this site. 
The U.S. Fish and Wildlife Service, the Bureau of Land Management, and 
the Bureau of Reclamation have all been involved to varying degrees 
with the private entities. However, neither the Federal Energy 
Regulatory Commission nor the Bureau of Reclamation will process 
applications before the Crooked River Wild and Scenic River boundary is 
relocated downstream of Bowman Dam.
    Question 2. Please describe what can be done administratively to 
help improve the water situation within the area if this legislation is 
not passed.
    Answer. Since the early 1990s, Reclamation has operated Bowman Dam 
to improve flow conditions in the Crooked River for downstream fish, 
wildlife and recreation needs, while also meeting water user 
contractual deliveries. With cooperation from the contract holders and 
State of Oregon, we have used our flood control authority to shape 
flood control releases to nearly a year round operation, such that we 
have been able to augment downstream Crooked River flows to provide 
fishery and recreation benefits. For example, while statutorily 
authorized to only provide a 10 cubic feet per second (cfs) minimum 
winter flow for fishery purposes, we have consistently provided a 
winter-long minimum flow of 50 -75 cfs (35 cfs in the driest of years) 
by reshaping flood control releases. In addition, during the irrigation 
season, Reclamation routinely releases additional flow above that 
needed strictly for irrigation (typically 15 to 30 cfs, but some years 
higher) to ensure stream continuity and fishery benefits accrue 
downstream of irrigation diversions.
    Absent this legislation, we would expect to continue similar 
operations, but recognize that current operations could change in the 
future if more of the reservoir were contracted for irrigation or other 
uses, thereby reducing our flexibility to shape flood control flows. 
Reclamation could potentially work with the Oregon Department of Fish 
and Wildlife, the Confederated Tribes of the Warm Springs, and other 
entities to coordinate and shape releases of non-contract water to 
benefit downstream fish and wildlife purposes. Administratively, 
Reclamation also could potentially work with Ochoco Irrigation District 
(OID) to adjust its district boundary to include and deliver project 
water to McKay Creek water users; S. 3483 exempts OID from 
environmental compliance for this inclusion. Reclamation also could 
continue to issue contracts upon request for irrigation purposes. 
However, the first fill provision for existing contractors and the City 
of Prineville would not be possible without legislation.
                                 ______
                                 
       Responses of John Katz to Questions From Senator Shaheen 
               (Submitted on Behalf of Senator Bingaman)

    Question 1. You testified that enactment of S. 3265 would not 
affect FERC's budget since the land use fees are paid into the Treasury 
rather than retained by FERC. But what effect would the bill's 
enactment have on Treasury collections? How much money do the annual 
land use charges on power site reservations bring into the Treasury? 
What effect would the bill's enactment have on payments to the 
Reclamation Fund, the States in which the sites are located, and the 
tribes on whose reservations the sites are located?
    Answer. If enacted, S. 3265 would likely reduce Treasury 
collections to some extent. In FY12, the Commission issued bills 
totaling $8,277,850.69 for the use of federal lands. As I explained in 
my written testimony, the Commission has never had a reason to track 
separately federal land use charges that are attributable to lands that 
have been opened to location, entry, or selection and transferred or 
exchanged. Thus, I do not know what part of the annual land use charges 
is based on power site reservations alone or what part of those charges 
is attributable to lands that would be exempted under the proposed 
legislation. Total FY12 federal land charges for the projects 
identified by Senator Murkowski's staff as including lands that have 
been transferred or exchanged by the United States were $240,216.35. 
The portion of those charges attributable to transferred or exchanged 
lands (as opposed to those still owned by the United States) would 
represent a smaller figure.
    Pursuant to section 17 of the Federal Power Act, 12 percent of 
charges for the use of federal lands are paid into the Treasury, 50 
percent of the charges are paid into the Reclamation Fund, and 37.5 
percent of the charges are paid to the state(s) in which the lands are 
located. These payments would be reduced, in appropriate percentages, 
by any charges that were foregone as a result of S. 3265. I do not 
believe that receipts by tribes on whose reservations power sites are 
located would be affected by the draft legislation. Annual charges for 
use of tribal reservations are established, pursuant to FPA section 
10(e), subject to the approval of the affected tribe. The Commission's 
practice is that the tribe and the licensee negotiate the annual 
charge, with the Commission intervening only if the parties cannot 
agree, something that has never to my knowledge occurred. Further, I am 
not aware of any instance in which the United States has transferred 
tribal reservation lands subject to a power site reservation to a 
licensee.
    Question 2. You appear to have said, in response to a question at 
the hearing, that once a power site reservation under section 24 of the 
Power Act has been developed, the purpose of the reservation has been 
served, and collecting a land use charge on the power site reservation 
serves no further purpose. But isn't the historic basis of the land use 
charge the notion that the nation's water resources belong to the 
nation as a whole and should not be given to private owners, ``forever 
and for nothing,'' without reasonable compensation to the public? (See, 
for example, Chemehuevi Tribe of Indians v. FPC, 489 F.2d 1207, 1219 
n.54 (D.C. Cir. 1973).) Hasn't the principle of assessing a reasonable 
charge for the use of the Nation's power resources been one of the 
principal tenets of the part I of the Federal Power Act since its 
enactment in 1920, and indeed, a fundamental principle of the Theodore 
Roosevelt and William Howard Taft Administrations before the Act's 
enactment? Wouldn't S. 3265 exempt the beneficiaries of federal power 
site reservations from this principle?
    Answer. The legislative history underlying section 24 makes clear 
that Congress intended to preserve for the people of the United States 
the ability to develop water power on federal lands, hence the 
requirement that any transfer by the United States of lands on which 
there is a power site reservation include a reservation of the right of 
the United States or its peuditees to enter upon, occupy, and use of 
any part of the lands deemed by the Commission to be necessary for 
water power purposes. The principle of assessing a reasonable annual 
charge for the use of federal lands has also been a long-term part of 
the FPA and its predecessors. The FPA does not, however, address the 
issue of collecting annual charges once entry is allowed to federal 
lands, and I am not aware of any legislative history that deals with 
the matter.
    Question 3. You stated that the views you expressed were ``not 
necessarily those of the Commission or of the Chairman or any 
individual Commissioner.'' What are their views on exempting power site 
users from the ``reasonable charge'' principle of the Federal Power 
Act?
    Answer. The Commission speaks through its orders and has not had 
occasion to address this matter. I do not know the views of the 
Commissioners regarding the proposed legislation.

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

   Statement of Mark Crisson, President & CEO, American Public Power 
                       Association, on H.R. 2842

    On behalf of the American Public Power Association, I am writing to 
express our support for H.R. 2842, the Bureau of Reclamation Small 
Conduit Hydropower Development and Rural Jobs Act of 2011. APPA is the 
national service organization representing the interests of over 2,000 
community-owned, non-for-profit electric utilities. These utilities 
include state public power agencies, municipal electric utilities, and 
special utility districts that provide electricity and other services 
to over 46 million Americans.
    APPA supports authorizing power development at the Bureau of 
Reclamation's conduits. This new authorization in H.R. 2842 will help 
clarify and streamline the multi-agency inefficiencies associated with 
hydropower development on these federal projects by cutting duplicative 
processes and reducing the regulatory burdens that many of our members 
have encountered. Further, the legislation also protects existing 
agreements that water users have on conduit generation projects and 
provides additional safeguards to ensure such projects do not undermine 
water deliveries. This bill is a needed fix to a burdensome process.
    Also, APPA applauds the definition of a conduit in the bill that 
includes all the various small hydropower opportunities like ditches, 
pipelines, canals, and other similar manmade water conveyances that are 
operated for the distribution of water for agricultural, municipal, or 
industrial consumption and not primarily for the generation of 
electricity. The energy potential for these smaller projects will help 
alleviate power costs across the nation once in use.
    Thank you for scheduling this worthwhile legislative hearing on 
H.R. 2842. I hope you will feel free to contact me or the APPA 
government relations staff with any questions.
                                 ______
                                 
    Statement of Thomas O'Keefe, PhD, Pacific Northwest Stewardship 
         Director, American Whitewater, Seattle, WA, on S. 3483

    We are writing today in support of the Crooked River Collaborative 
Water Security Act (S. 3483), legislation that will improve flows in 
the Crooked River, improve water supply reliability for farmers and the 
local community, and allow for hydroelectric development on an existing 
dam. We ask that you consider one minor amendment to the bill that 
would further clarify and recognize the value and benefits of releases 
from the reservoir for downstream recreation.
    American Whitewater is a national non-profit 501(c)(3) river 
conservation organization founded in 1954. We have over 5500 individual 
members and 100 local-based affiliate clubs, representing whitewater 
paddlers across the nation. American Whitewater's mission is to 
conserve and restore America's whitewater resources and to enhance 
opportunities to enjoy them safely. As a conservation-oriented paddling 
organization, American Whitewater has an interest in the Crooked River 
that supports whitewater recreation. A large percentage of our members 
reside in Oregon and for those who do not, the state is a popular 
travel destination for whitewater paddlers from across the country and 
around the world.
    The Crooked River is a Wild and Scenic River in Central Oregon with 
a spectacular whitewater run downstream of Prineville Reservoir. The 
Crooked attracts whitewater boaters from Oregon, Idaho, and Washington 
when the river has sufficient flows to support recreation. Our 
organization initiated a recreational flow study between the summer of 
2006 and 2007 for two whitewater reaches on the Crooked River.\1\ 
Established methodology published by the National Park Service\2\ was 
used to examine the instream flow-recreation relationship for the 
river.
---------------------------------------------------------------------------
    \1\ http://www.americanwhitewater.org/content/Document/view/
documentid/430/
    \2\ Flows and Recreation: A Guide to Studies for River 
Professionals, by Doug Whittaker, Bo Shelby, and John Gangemi, for the 
Hydropower Reform Coalition and National Park Service--Hydropower 
Recreation Assistance, 2005 /www.nps.gov/hydro/flowrec.htm>
---------------------------------------------------------------------------
    Researchers found a range of acceptable flows, from a minimum of 
1,400 cfs ranging up to 4,600 cfs. In addition to providing a 
recreation opportunity, flows in this range also have an important 
ecological function--these flushing and channel maintenance flows are 
critical for maintaining and enhancing aquatic habitat.
    American Whitewater fully supports the goals and objectives 
outlined in this legislation but requests the committee consider 
alternative language in Section 7(a) that adds recreation. Our 
suggested language is as follows: ``. . .the Secretary shall store in 
and release from Prineville Reservoir all remaining stored water 
quantities for the benefit of fish, wildlife, and recreation downstream 
of Bowman Dam.'' Given concerns that have been expressed regarding 
impacts to reservoir recreation, we believe it is important to 
recognize that river-based recreation downstream of Bowman dam sees a 
benefit when water is released into the river. While these benefits are 
recognized in Section 2 with the proposed revised language for 16 
U.S.C. 1274(a)(72)(B)(i) that references the scenic, recreational, and 
fishery values of the river, we believe a reference to recreation 
should also be included in Section 7(a) of the legislation.
    We fully support all the other provisions of the legislation, 
including the amendment to the Wild and Scenic Rivers Act that will 
allow for hydropower development at the existing dam, language that 
will benefit the fish and wildlife resources of the Crooked River, and 
the opportunity to provide water certainty for the City of Prineville 
and local farmers.
    The Crooked River Collaborative Water Security Act (S. 3483) 
resolves longstanding conflicts about unallocated water in the Crooked 
River watershed and strikes a balance between community water needs and 
those of fish, wildlife, and river-based recreation.
                                 ______
                                 
                                                September 18, 2012.

Hon. Jeff Bingaman,
Chairman.
Hon. Lisa Murkowski,
Ranking Member, U.S. Senate, Committee on Energy and Natural Resources, 
        304 Dirksen Senate Building, Washington, DC.
    Dear Chairman Bingaman and Ranking Member Murkowski: On behalf of 
our organizations' members, we are writing to express our opposition to 
H.R. 2842, the Bureau of Reclamation Small Conduit Hydropower 
Development and Rural Jobs Act of 2012. Specifically, we strongly 
oppose the provision in Section 2 of H.R. 2842 that waives the National 
Environmental Policy Act (NEPA) with respect to small conduit 
hydropower projects at Bureau of Reclamation (BOR) facilities.
    Our organizations support the responsible development of conduit 
hydropower projects at Bureau facilities. We believe that there is 
significant potential for new hydropower generation at these facilities 
that can be tapped with minimal impact to the local environment. This 
development can and should be encouraged.
    H.R. 2842 does not represent a balanced approach to promoting new 
conduit hydropower development. While the bill attempts to resolve some 
jurisdictional and process issues associated with developing conduit 
hydropower at BOR facilities, these issues were largely resolved 
administratively when BOR updated the Reclamation Manual earlier this 
year to improve the process for obtaining a Lease of Power Privilege at 
its facilities. These revisions to the Reclamation Manual have made 
many of H.R. 2842's provisions superfluous.
    More troubling, H.R. 2842 creates a harmful blanket waiver of NEPA 
for small conduit hydropower projects at Bureau facilities. Not only is 
this bad policy, it is completely unnecessary. The Federal Energy 
Regulatory Commission (FERC) has successfully employed a categorical 
exclusion from NEPA for many years to permit small conduit projects in 
order to facilitate their construction. Reclamation's revisions to the 
Reclamation Manual follow this example, relying on an existing 
categorical exclusion for small construction projects to expedite the 
permitting and review of small conduit projects that will have minimal 
environmental impact. Waiving NEPA will not result in the deployment of 
one additional kilowatt of new generation at a BOR facility.
    At its best, H.R. 2842 largely restates existing regulations. At 
its worst, it unacceptably and without purpose waives basic 
environmental review requirements. We hope that in the course of Senate 
consideration of the bill, the NEPA waiver language can be removed. 
Pending that, we oppose H.R. 2842 in its current form.
            Sincerely,
                                        Thomas Christopher,
                                        Director, New England FLOW.
                                             Kevin Colburn,
                National Stewardship Director, American Whitewater.
                                               Kevin Lewis,
                        Conservation Director, Idaho Rivers United.
                                              John Seebach,
        Senior Director, Federal River Management, American Rivers.
                                              Chris Shutes,
        FERC Projects Director, California Sportfishing Protection 
                                                          Alliance.
                                 ______
                                 
     Statement of Robert S. Lynch, Counsel and Assistant Secretary/
 Treasurer, Irrigation & Electrical Districts Association of Arizona, 
                              Phoenix, AZ

    The Irrigation & Electrical Districts' Association of Arizona is an 
Arizona non-profit association celebrating its 50th year of service to 
the State of Arizona. Our 25 Members and Associate Members take power 
and water from federal facilities on the Colorado River either directly 
or, in case of Hoover power, through the Arizona Power Authority, and 
in case of Colorado River water in central Arizona, the Central Arizona 
Water Conservation District, one of our Associate Members.
    A number of our members operate federal water facilities and others 
built or acquired water facilities from the federal government. One of 
our members has already gone through the painful process under Section 
30 of the Federal Power Act in dealing with the Federal Energy 
Regulatory Commission. Others would like to go through a sensible and 
streamlined process with the Bureau of Reclamation to install small 
hydropower units in existing water facilities whose water energy is 
currently being wasted. With this interest in mind, we offer the 
following comments on the April 4th Temporary Directive & Standard and 
appreciate the opportunity to do so.

                               TIMELINES

    The Temporary Directive & Standard (D&S) is structured along lines 
of responsibility by various officials within the Bureau of 
Reclamation. As such, it is very difficult to get a sense of when 
things are supposed to happen and what timelines exist for seeing to it 
that they do. A number of the tasks assigned to various people are not 
identified as being associated with any particular timeline and the 
timelines that are stated in the D&S. For that reason, we have 
attempted to create a timeline that would show a potential applicant 
the path it would have to take between expressing a ``formal request'' 
to Reclamation and actually having an operating electrical device. Our 
timeline is attached. It contains a number of question marks that 
indicate that the timeframe and positioning of that particular task was 
not identified. In our view, it is this very sort of checklist that 
potential applicants need up front in order to understand what they are 
getting into, what the requirements are and when they occur. We think 
Reclamation should consider developing such a timeline and going one 
step further by identifying the as yet un-timelined tasks as either 
fitting within a timeline already identified or one you assign in order 
to properly gauge the sequence and timing of events.

                             OTHER COMMENTS

    For ease of reference, we will now provide other comments to you in 
the order in which they relate to the Temporary D&S.
Applicability
    We do not understand the reference to Reclamation ``development 
authority''. Does that mean that there is a specific authorized feature 
of a project that Reclamation has not developed and is therefore off 
limits to an applicant? Currently Reclamation only has jurisdiction 
over its facilities that are part of a project authorization that 
includes power development. One could read this paragraph as saying 
that any proposed application where Reclamation has jurisdiction could 
be denied on the basis of Reclamation deciding to do itself. We doubt 
that was the intent but this divergent point of who does what needs 
clarifying. No one wants to go through a process or begin to go through 
a process only to find out that the agency has decided to do it itself.
Definitions
    We do not understand the meaning of the phrase ``conveyance of 
water over or through a dam, its abutments, or foundation via existing 
or proposed conveyance features.'' This is an addition to the 
definition of conduit that has been used in pending federal legislation 
and is very close to the definition used by the Federal Energy 
Regulatory Commission (FERC). Are there existing conveyance features 
that convey water over or through a dam, its abutments, or foundation? 
We are not familiar with such facilities but knowing what is already 
out there may make it easier for us to understand why this addition is 
important and necessary.
    We do not understand why gross revenue would be something that 
includes renewable energy certificates (RECs). If one of your water 
districts or water users associations or someone else is going to spend 
money, go through this process and essentially do all the work and pay 
Reclamation for its oversight, why would gross revenue be the parameter 
for deciding the fee and most especially why would it also include the 
REC. Reclamation has done absolutely nothing except allow a portion of 
one of its facilities to be utilized at someone else's total expense to 
generate electricity. The portion of the facility used will most likely 
be very small in comparison to the overall project of which the site is 
a part. In a shopping center lease, the triple net lease would be based 
on gross revenue of whatever store is occupying that particular space 
but not on its tax breaks. Moreover, for small projects, say 5 
megawatts or below, the paperwork to keep track of these calculations 
and collections would be more expensive than the revenue that would be 
created. We think the basis for charging needs to be rethought. All of 
the comments we have seen show that everyone wants the new facilities 
owner or benefactor to pay a fair share of project obligations. To the 
best of our knowledge, there has been no real public debate over how 
one would calculate that. Nor has there been any debate over what 
concepts should be used for the very smallest of facilities that should 
not have to go through the entire process. In short, a one-size-fits-
all rate structure will only inhibit the development of additional 
hydropower in Reclamation facilities in our view. We think this process 
needs work.
Formal Request
    This term first appears in subparagraph 5.A(3) on page 4. There is 
no discussion within the document about what constitutes a formal 
request, what paperwork is required for such a request and whether or 
not there is any information requirement that precedes it. Yet it is 
the precipitating event of the process, initiating everything that 
follows. We presume without knowing that receiving a formal request 
will initiate the process within Reclamation to decide whether or not 
Reclamation will turn the requester aside and develop the site in 
question. Certainly Reclamation would make that decision early and not 
let an applicant spend a lot of time and money before shutting them 
out. That Reclamation decision should have a timeline of its own in 
order to ensure an applicant that it will not get played.
Requests for Extension of Time
    This first appears in subparagraph 5.A(9) and appears to only apply 
to timeframes outlined in the Lease of Power Privilege (LOPP). 
Reclamation does intend to consider extension requests for an entity 
holding a Preliminary Lease. See Section 8. That reference should be 
included here.
Public Safety
    In paragraph 5.C, the responsibility of the Chief of the Dam Safety 
Office is outlined but that individual's role in the timeline is 
nowhere to be found. The subject matter is brought up in a number of 
places but not with regard to the role this individual plays in 
executing the timeline.
Notifications
    The appropriate Regional Power Manager or Area Office Manager is 
responsible for ensuring the publication of solicitations for 
applicants for a LOPP, apparently after being notified of the receipt 
of a ``formal request'' and a ``formal determination of jurisdiction 
(5.A(3)). The 3 following responsibilities are all intended to precede 
that event. The list appears to have been created backwards rather than 
forwards. Just as importantly, this duty includes notifying ``any other 
appropriate stakeholders''. If someone claims to be an appropriate 
stakeholder and was not notified, is that grounds for stopping work on 
the timeline? Is there a remedy for being excluded? What standard is 
supposed to be applied in the various regions to decide who is an 
``appropriate'' stakeholder? It is our experience that these 
discretionary vague terms only lead to conflict. Reclamation should 
consider clarifying this mechanism.
LOPP Lead
    In subparagraph (2), federal power customer organizations are added 
to a requirement that Reclamation meet with a federal water user that 
has an operation, maintenance and replacement transfer contract with 
the relevant project but is not a participant in the proposed LOPP. 
Reclamation law only allows irrigation districts and water users 
associations to play that role and so the reference to a federal power 
customer organization is inappropriate where it is placed. It should be 
inserted on the next line after the word ``project''. It is certainly 
worthwhile to bring federal power customer organizations into these 
dialogues early and we think this is a good provision. However, the 
qualification of the federal power organization should be not based on 
a task it cannot by law undertake. We are also concerned because we are 
not sure whether the 30-day requirement follows after the issuance of 
the Preliminary Lease or comes before. Whichever is intended should be 
clarified but we rather suspect that your water and power customers 
would prefer it being before and not after you've already selected a 
Preliminary Lessee. The same paragraph also requires a documentation of 
``agreed upon terms, roles and responsibilities resulting from this 
meeting''. What happens if agreement does not ensue? Are the terms, 
roles and responsibilities those outlined in an already issued 
Preliminary Lease? Is the documentation in question to become part of 
the Preliminary Lease? Part of the LOPP?
    The same assumption about agreeing is also found in Section 6 
noting the need for agreement on jurisdiction between the Senior 
Advisor, Hydropower and the respective Regional Director. Here again, 
what if they don't agree? What happens? What if FERC doesn't agree?
Selection of Lessee
    In paragraph C., there are criteria that Reclamation intends to 
apply that ``will give more favorable consideration to proposals'' that 
meet two criteria. The two criteria talk about developing and 
conserving and utilizing water and natural resources. We fail to see 
what that has to do with putting a turbine in a conduit. Reclamation 
will also favor an application that demonstrates that the offeror is 
qualified to develop the facility and to maintain it but does not say 
how one demonstrates those qualifications. Is an irrigation district 
that wants to put a turbine in a conduit but has never done so before 
less qualified than a private company that would do that same thing 
merely because the company has done it elsewhere? Does the preference 
stated in the following paragraph override the considerations in 
paragraph C.?
    In the following subparagraphs in paragraph D., the language in 
subparagraph (1) is not the same as in paragraph C. Subparagraph (2) 
does not address the issue of what happens when there are two equally 
qualified preference entities, such as two irrigation districts that 
take water from the same conduit. Is an irrigation district that takes 
water less qualified automatically than the other irrigation district 
that's maintaining the conduit? Subparagraph (3) likewise delves into 
the use of preference concept but does not deal with the competing 
preference entity problem. Nor does it tell us what ``utilize in the 
public interest or water resources project'' is supposed to mean. If 
you are putting a turbine in a conduit, the water is already flowing 
down the conduit. You are not using the water. You are using the energy 
in the water and the water is continuing on down the conduit. What 
public interest differentiation could be made in such a situation?
    In paragraph 7.E., subparagraph (1) mentions ``scoring criteria'' 
but does not tell us what they will be, who will develop them, and 
whether or not they will be tailored to the specific solicitation or be 
a set of standards developed separately. In the following 
subparagraphs, proposal requirements must include expected generation 
under average, wet and dry hydrologic conditions. Are these to be 
predefined in the solicitation? Will they be the same for all 
applications or project by project standards? If these brackets have to 
be determined by the applicant, what standards will they use? The 
proposal also has to define the ability of the generation to provide 
ancillary services. Shouldn't there be a cutoff level of say 15 
megawatts at or below which one would not expect a facility to be able 
to generate ancillary services? Likewise, it is really necessary to do 
a present worth analysis of a small turbine installation in a conduit?
Timeframes for Development
    These two paragraphs (8.A.&B.) delineate timeframes for 
installation of a facility on a dam on the one hand and in a conduit on 
the other. They are not cross-referenced to the duties of the Regional 
Director nor is the prior reference cross-referenced to these or 
inclusive of both. Also, since the Regional Director will determine 
whether there is just cause for any delay, should we assume that some 
more detail on what that constitutes, akin to a force majeure clause in 
a contract, will be articulated in the Preliminary Lease and the LOPP? 
If not, how will this process of deciding on delays be standardized 
throughout the agency?
PMA Right of First Refusal
    In paragraph 9.D. and again in subparagraph H(3), there is a 
discussion of right of first refusal. One provision relates to PMAs and 
the other to ``the federal government'', whatever that means. Is this a 
clerical error? If not, are you saying that the local air force base 
could swoop in and take the turbine power away from the irrigation 
district? Is there a real need to a right of first refusal for small 
conduit installations? What would the PMA do with a 12 kV turbine?
LOPP Charges
    In Section 10 and then in Section 11, this subject is treated. We 
do not understand why charges would be determined differently on 
transferred works rather than those that have not been transferred. A 
turbine is a turbine. A project is a project. If there is capital 
repayment, there is capital repayment. If there is O&M, there is O&M. 
Determining what a fair contribution to these costs ought to be depends 
on a number of factors, including whether the project is paid out or 
not and whether the particular installation has any impact on project 
O&M. LOPP charges ought to be fair and ought to be simple. One-size-
fits-all charging will not promote the widest range of hydropower 
development on existing Reclamation facilities. We agree that an 
installation that is devoted to project use and thus relieves 
Reclamation from supplying that power from the project itself should be 
treated differently than others. But we also believe that small 
installations should have a simplified method of contributing to costs 
in terms of charges that are rational and don't require a lot of 
paperwork. A 50 megawatt power plant at a dam and a 1 megawatt turbine 
in a conduit are two totally different things. They should be 
recognized as such in the charging scheme that Reclamation ultimately 
settles on.
    In summary, we have offered these comments because we very strongly 
believe in this program and very strongly believe that the wasted 
hydropower in our existing water deliveries should be harnessed. We 
believe it is imperative that the ultimate Directive & Standard for 
this process define a series of business models that will make the 
process attractive to your existing water and power beneficiaries as 
well as to third parties who may wish to participate. A good start 
would be the development of a checklist for 15 megawatt and below 
conduit applications, similar to the CE checklist in Reclamation's NEPA 
Manual, that would allow a proposal to bypass most of this process and 
most of the cost associated with it.
    We appreciate the opportunity to comment on the Temporary Directive 
& Standards and we look forward to working with Reclamation in further 
refinement of this program.

                                 ______
                                 
 Statement of Robert S. Lynch, Robert S. Lynch & Associates, on Behalf 
 of the Irrigation & Electrical Districts' Association of Arizona, on 
                               H.R. 2842

    The Irrigation & Electrical Districts' Association of Arizona 
(IEDA) is a voluntary association organized in 1962 to represent the 
interests of irrigation, electrical and other special districts, rural 
communities and other public entities in the acquisition and use of 
federal hydropower and water from Reclamation projects. As our 50th 
anniversary approaches on December 14th, we are pleased to file this 
Statement supporting H.R. 2842, the Bureau of Reclamation Small Conduit 
Hydropower Development and Rural Jobs Act of 2012. We supported and 
testified in favor of the bill in the House of Representatives and are 
pleased to offer you our views on this excellent bill for your 
consideration.
    Over the last century and more, Arizona has a long history of 
developing irrigated agriculture, both in central Arizona and along the 
Colorado River. We have developed systems of canals and laterals which 
now serve both irrigated agriculture and municipal and industrial water 
users. Much of these canal systems are Reclamation project systems 
built over the years as successive projects were authorized by 
Congress. The water that flows in these systems contains energy. 
Indeed, the water would not flow if it did not. That energy is largely 
unused as the water courses through these systems until it reaches its 
ultimate destination and stops moving. The energy is dissipated at that 
point. Lost.
    Recent improvements and innovations in the development of small 
hydropower generating turbines has made the idea of installing multiple 
small turbines in these systems a potentially attractive source of 
electric energy. This technical advance comes at a time when our 
electricity providers are scrambling to find alternatives to fossil 
fuel generation, developing conservation and demand side management 
programs and otherwise trying to make existing electric resources go 
farther.
    Our members would very much like to be part of that effort and 
participate in a new widespread small hydropower installation program 
that could be implemented throughout the West.
    One key to making this happen is to reduce bureaucratic red tape 
and costs to make small hydropower installation economically attractive 
in the same fashion it has become technically attractive. Since the 
Bureau of Reclamation holds title to so many of these facilities in the 
West, we and others in the Western Reclamation states have been working 
with the Bureau of Reclamation to try to reduce costs and paperwork 
toward that end. Some of the hurdles we identified along the way needed 
to be addressed by Congress. Hence, H.R. 2842.
    H.R. 2842 provides a simplified path for the development of small 
hydropower facilities in Reclamation managed federal conduit. It 
recognizes the primacy of water delivery as a Reclamation mission. It 
recognizes the position that Reclamation law has always historically 
given to irrigation districts and water users' associations. It answers 
questions that Reclamation officials have been debating and it gives 
those of us in the Reclamation West a clear incentive to begin working 
aggressively toward using flowing water in these conduits for electric 
generation instead of letting that energy go to waste.
    At the same time, we have been working with Reclamation to develop 
environmental and permitting guidelines that would complement the 
direction Congress, we hope, will give the agency on this subject. 
However, Reclamation's reaction to this legislation has not been as 
helpful as we would have hoped for. Indeed, the Interim Directives and 
Standards that Reclamation produced this spring appears to us to 
complicate rather than simplify the process. We are attaching the 
comments that we made on the Interim Directives and Standards to give 
you an idea of the problems we have identified in them. These include a 
two-page timeline we tried to piece together because the Interim 
Directives and Standards address who does what rather than giving us a 
path and a timeline.
    In sum, we strongly support H.R. 2842. We hope the Committee will 
mark and report it, if possible, in this session. There is an enormous 
amount of energy being wasted every day as water flows through these 
conduits to its ultimate destination. We now have the technology to 
capture a great deal of that energy in small increments which 
collectively can provide an enormous resource for the West. This clean, 
renewable hydropower is waiting for us to use it. We need your help. 
H.R. 2842 is a big step forward toward that end.
    Thank you for the opportunity to provide this Statement to the 
Subcommittee. We would be happy to answer any questions or provide any 
additional information that the Committee might desire as it 
deliberates over this important and very much needed legislation.
                                 ______
                                 
 Statement of the Oglala Sioux Tribe, Rosebud Sioux Tribe, Lower Brule 
           Sioux Tribe And West River/Lyman-Jones, on S. 3464

                              INTRODUCTION

    Thank you for the opportunity to submit testimony on this most 
important legislation, S.3464, the Mni Wiconi Project Act Amendments of 
2012. This testimony has been developed conjunctively and is offered on 
behalf of the Oglala Sioux Tribe, West River/Lyman-Jones, Inc., the 
Rosebud Sioux Tribe and the Lower Brule Sioux Tribe, the four 
beneficiaries and sponsors of the Mni Wiconi Rural Water Supply System 
in southwestern South Dakota (Figure 1)*. S. 3464. re-authorization of 
the Mni Wiconi Project, will:
---------------------------------------------------------------------------
    * Figure has been retained in subcommittee files.

   increase the authorized project ceiling for construction by 
        $14.308 million (October 2011 dollars) for completing drinking 
        water distribution projects on the Pine Ridge and Rosebud 
        Indian Reservations,
   extend the completion of construction through 2015
   ensure the service area of the Oglala Sioux Rural Water 
        Supply System (OSRWSS) includes a small area of reservation 
        trust land in Nebraska
   provide for interagency agreements between the Bureau of 
        Reclamation and

    --EPA,
    --Department of Agriculture
    --Department of Health and Human Services and
    --Department of Housing and Urban Development
    --Bureau of Indian Affairs

    to assist with completing the tribal water systems including the 
upgrade of existing facilities in Reservation communities and, in the 
case of the Department of Agriculture and Bureau of Indian Affairs, 
assist in distribution of livestock water to Reservation rangelands 
consistent with the original intent of the project.
    S. 3464 will also require federal agencies to work with the tribes 
to establish an emergency plan for the water systems, address specific 
cultural resources concerns, and update the waste water disposal system 
needs.
    Individually and collectively, the Project Sponsors support S. 3464 
and seek the support of the Subcommittee.

                            PROJECT HISTORY

    The Mni Wiconi Project Act of 1988 (Public Law 100-516) authorizes 
and directs the Secretary of the Interior to construct the Mni Wiconi 
Rural Water Supply Project to provide a safe and adequate municipal, 
rural, and industrial water supply to both Indian and non-Indian 
residents of South Dakota. The Act recognizes the poverty on the 
reservations and severely poor water quantity and quality on the 
reservations and in the West River/Lyman-Jones service area.
    The Mni Wiconi Project has reached an historic milestone following 
the long struggle beginning in 1988 of the Oglala Sioux Tribe and West 
River/Lyman-Jones to complete this invaluable drinking water project. 
Similarly, the Rosebud Sioux Tribe began work on their rural water 
system in 1984 and became part of the Mni Wiconi Project with the 
passage of P.L. 103-434 in 1994. S. 3464 provides the means to fulfill 
the vision of safe and adequate water supply for Rosebud Sioux.
    The Project is a testament to the ability of the tribal sponsors 
and non-Indian neighbors to collaborate to improve the health and 
welfare of our respective constituencies. When the Project was 
initiated, relationships between us were strained at best and governed 
by events many generations before us but still fresh in the minds of 
our peoples. As the Project reaches its conclusion, we have built a 
mutual respect and relationship that evolved from the necessity of 
working together toward a common good. None of this would have been 
possible without the continuous efforts of the Committee and the South 
Dakota delegation, and especially the sponsor of S. 3464, the Honorable 
Tim Johnson.
    It is important that the Committee understand the background upon 
which we embarked to build the largest rural water project in the 
world. In the beginning we were joined by our partners in the project, 
West River/Lyman-Jones, for the purpose of bringing good quality water 
from the Missouri River to the Badlands of Western South Dakota. The 
Missouri River as a water source is important to the Lakota people 
because the River is contained within the Great Sioux Reservation 
established by the Treaty of 1868. Our forefathers saw to it that the 
entire Missouri River was included in the lands reserved to us. The 
water users in the West River/Lyman-Jones service area live within the 
boundaries of the Great Sioux Reservation, which includes all of South 
Dakota west of the east high bank of the Missouri River.
    As formulated in the late 1980s, the Project was of great concern 
to the members of the Oglala Sioux Tribe. They felt the history of 
water projects on Indian reservations at that time would be played out 
on the Pine Ridge Indian Reservation: that non-Indian interests would 
receive water and project benefits quickly and Indians would be left 
with delay and necessary project features unfinished. They looked at 
the projects authorized on the San Juan River in June 1962, and 
observed that non-Indians received project benefits immediately, but 
the Indians still struggle to get their projects completed decades 
later, even though they were authorized half a century before. They 
observed opposition to Indian projects from the Office of Management 
and Budget. Based on these concerns, the majority of members of the 
Oglala Sioux Tribe were opposed to the Project in its early years.
    The initial concerns were overcome by a better understanding of the 
provisions of the Mni Wiconi Project Act, PL 100-516 (102, Stat 2567, 
October 24, 1988), a reformulation of the project in the Final 
Engineering Report of May 1993 and amendment of the Act to include the 
Rosebud Sioux Tribe and Lower Brule Sioux Tribe. Significantly and of 
high importance to the Tribe, the United States acknowledged a trust 
responsibility in the Mni Wiconi Project Act to ensure that adequate 
and safe water supplies are available to meet the economic, 
environmental, water supply, and public health needs of the Pine Ridge 
Indian Reservation.
    Also, important to the comfort level of the Oglala Sioux Tribe was 
the Act's provision that title to the Oglala Sioux Rural Water Supply 
System (OSRWSS) would be held in trust by the United States for the 
Tribe. This includes the principal components of the Mni Wiconi Project 
such as the intake on the Missouri River, the regional water treatment 
plant on the Missouri River and the main transmission pipelines from 
the Missouri River to West River/Lyman-Jones, the Rosebud Sioux Tribe 
and the Lower Brule Sioux Tribe.
    Pursuant to the Act, the Oglala Sioux Tribe entered into a PL 93-
638 (Indian Self-Determination and Education Act) cooperative agreement 
with the Bureau of Reclamation to plan, design, construct, operate, 
maintain and replace OSRWSS.
    The Mni Wiconi Act Amendments of 1994 (Public Law 103-434, Title 8) 
added construction of the Rosebud Sioux and the Lower Brule Sioux Rural 
Water Systems to serve the respective reservations, thereby increasing 
the number of Project ``Sponsors'' to four. The amendments also raised 
the authorized appropriation ceiling for the Project from $87.5 to 
$263.2 million (1993 dollars), subject to cost indexing, and provided 
that the systems would generally be constructed in accordance with the 
Project's Final Engineering Report, dated May 1993 for the purpose of 
providing domestic, commercial, municipal, rural, industrial, and 
livestock water.
    The overall Project includes a 14.5 million gallon per day regional 
water treatment plant, 4,500 miles of pipeline, 60 booster pump 
stations, and 35 water storage reservoirs. The Project will ultimately 
serve more than 52,000 people, including more than 40,000 on the three 
Indian reservations. It is a monumental endeavor which is providing 
myriad benefits to those most in need. It is a project that must be 
reauthorized.

                  IMPACT ON QUALITY OF LIFE AND HEALTH

    It is respectfully submitted that the Project is unique and that no 
other project in the Nation has greater human needs. The Project 
beneficiaries, particularly the three Indian Reservations, have the 
lowest income levels in the Nation. Poverty in the Indian service areas 
is consistently deeper than elsewhere. At the beginning of the third 
millennium one could not find a region in our Nation in which social 
and economic conditions were more deplorable.
    Before the Mni Wiconi Project, health risks to the Indian people 
from drinking unsafe water were severe. Health effects of water borne 
diseases were consistently more prevalent than elsewhere in the Nation, 
due in part to (1) lack of adequate water in the home and (2) poor 
water quality where water was available. Higher incidences of impetigo, 
gastroenteritis, shigellosis, scabies and hepatitis-A were well 
documented on the Indian reservations of the Mni Wiconi Project area.
    Poverty is the harbinger of the severe health care crisis facing 
the Indian people in the Northern Great Plains. The extra costs of 
health-care during the lifetime of each 24,000 members of the Indian 
population in the Mni Wiconi Project are estimated at $1.12 to $2.25 
billion (in 2010 dollars). This is not total costs of health care; it 
is the present value of the extra cost of life time health care 
relative to the rest of the population off the reservations. Regional 
data suggests clear relationships between income levels and higher 
mortality rates for heart disease, cancer and diabetes with 
correspondingly higher federal health-care costs.
    The Mni Wiconi Project is a part of the solution. It brings much 
needed employment, which, in turn, engages part of our unemployed and 
underemployed and brings about measurable improvement in the health of 
the Lakota Nation, thereby reducing federal health-care costs and, most 
of all, the tragedy in the families affected. Mni Wiconi builds the 
dignity of many, not only through improvement of drinking water, but 
also through increased employment and earnings during planning, 
construction, operation and maintenance and from commercial enterprises 
supplied with Project water.
    The Project has accomplished much improvement of water quality . 
Using a combination of water from the Missouri River and from the 
Ogallala Aquifer. Homes previously reliant on water laced with unsafe 
levels of arsenic, uranium and nitrite/nitrates have been placed on a 
safe and reliable drinking water system, and we expect corresponding 
reductions in mortality.

                         PROJECT FUNDING STATUS

    As shown in the table below, the Project will be 95% complete at 
the end of FY 2012. Construction funds remaining after FY 2012 will 
total $23.137 million within the current authorization (in October 2010 
dollars). The funds will not be adequate to complete the Project as 
originally planned. 

    Cost indexing over the last five years has averaged 4.72% for 
pipelines and last year was 7.83%. Pipelines are the principal 
components yet to be completed.
    The extension of the Project from 2008 to 2013 did not provide for 
budgeting of Reclamation oversight, administration or other 
``overhead'' costs, which will have diverted $26.696 million from 
construction. These costs have been and will continue to be incurred at 
the expense of construction elements. The slow pace of budgeting and 
appropriations has extended the project by six additional years. The 
overhead costs in those years have depleted construction funds by 
$26.696 million. S. 3464 asks that $14.3 million be restored.

                     CONSTRUCTION CEILING INCREASE

    Reauthorization of the funding ceiling by $14.3 million and a time 
extension through 2015, the fourth construction sunset date extension, 
are needed on the Pine Ridge and Rosebud Indian Reservations to 
complete the drinking water systems. The West River/Lyman-Jones and 
Lower Brule Rural Water Systems are complete. Under-budgeting and the 
slow pace of appropriations underlie the need to reauthorize and extend 
the Project.
    The $23 million remaining in authorized construction funds was 
included in the President's FY2013 Budget Request. The budgeting will 
be adequate to complete the allocation of currently authorized funding 
but will be inadequate to fully complete the drinking water system to 
people in need. These are people that were contemplated in the Final 
Engineering Report and included in the project design.
    The Project authorization date was extended by PL 110-161 (2008) 
through 2013 without accompanying budgeting for administration and 
other overhead costs after FY 2007. The extension was necessary because 
funds had not been appropriated at a rate sufficient to complete 
funding of Project construction within the authorized construction 
ceiling. Funds that would have gone to construction were necessarily 
used to cover annual overhead costs, and Reclamation encouraged the use 
of construction funds allocated for livestock to cover overhead. 
Overhead costs for the OSRWSS ($17.990 million) and the Rosebud Sioux 
Rural Water System (RSRWS) ($8.706 million), a total of $26.696 
million, severely impacted the funding available for construction.
    Because the budgeting of non-contract costs was not included in 
previous funding authorities after FY 2007, the necessary expenditures 
for Reclamation oversight and Project administration have reduced the 
funds to complete construction projects. OSRWSS would have ended the 
Project with a surplus in its construction budget of $5,101,000 after 
finishing its construction projects if it had not been required to 
expend unbudgeted funds on non-contract costs after FY 2007. The 
surplus could have been applied to community systems upgrades or the 
livestock program.
    The Concept Paper for completing the Project (prepared in several 
versions in 2011 and included for the record as Exhibit A) documented a 
need for an increase in the authorized construction ceiling of $29.369 
million. Since the Concept Paper was completed the Director of OWRWSS , 
Mr. Frank Means, took every possible step to achieve cost savings and 
to limit activities strictly to our first priority of completing the 
drinking water systems to serve the present and future growing 
populations on the Reservations. The Rosebud Sioux Tribe did likewise. 
Lower Brule dropped $1.74 million in reservoir expansions that would 
improve their system completed 5 years ago. The cost reductions limit 
the necessary reauthorization to $14.3 million as presented in Table 1 
and as shown in Figure 2* on the Pine Ridge Indian Reservation.
---------------------------------------------------------------------------
    * Figure has been retained in subcommittee files.
---------------------------------------------------------------------------
    In an effort to be reasonable yet steadfast to complete the 
Project, our request for reauthorization of the Project is focused only 
on completing the drinking water systems. We propose to use other 
avenues to accomplish community system upgrades and livestock watering 
projects:

          1. Funds to upgrade existing community systems on the 
        Reservations, a pre-requisite, according to Reclamation, for 
        transferring them to the Project as contemplated by the Act and 
        the Final Engineering Report (FER) are not requested. The re-
        authorization requires Reclamation to submit a plan to Congress 
        for upgrades and transfer within two years of the 
        reauthorization and to implement the transfer according to the 
        plan. While we disagree, Reclamation requires transfer before 
        making operation, maintenance and replacement funding 
        available.
          2. The high level of investment now required by Reclamation 
        for upgrading the community systems was not contemplated by 
        Reclamation in the 2002 reauthorization (PL 107-367), December 
        19, 2002. This high level of cost prevents the transfer of 
        existing community systems to the Project and enables their 
        continued deterioration due to absence of funding for 
        operation, maintenance and replacement.
          3. The livestock components of the Project on the Pine Ridge 
        and Rosebud Indian Reservations will be developed outside the 
        new authorization through existing programs of the Bureau of 
        Indian Affairs and the Department of Agriculture, and new 
        funding authorization is not requested,
          4. While $26.969 million in unbudgeted overhead costs from 
        2007 through 2015 will be spent, an amount that has and will be 
        expended at the expense of construction elements, we are only 
        requesting $14.308 million to complete the drinking water 
        systems on the Pine Ridge and Rosebud Indian Reservations.

    The completion of the Project on the Pine Ridge Indian Reservation 
with the $8.633 million requested in the construction ceiling 
reauthorization will serve 2,350 people or 11% of the design 
population. The completion of the Project on the Rosebud Indian 
Reservation will serve 2,000 people or11% of the design population. The 
$14.3 million is necessary to ensure that these intended beneficiaries 
will be served. S. 3464 will increase the authorized appropriations 
ceiling by this amount. We support the bill on this ground. We also 
support it for its several other provisions that address the other 
needs for finishing the Project as intended which are not covered by 
the $14.3 million increase.

                       COMMUNITY SYSTEM UPGRADES

    The Mni Wiconi Act clearly states that the OSRWSS, RSRWS, and Lower 
Brule Rural Water System (LBRWS) shall include the purchase, 
improvement and repair of existing water systems, including systems 
owned by individual tribal members and other residents on the 
reservations. Sections 3(a)(4), 3A(a)(4), and 3B(a)(4). Further, 
Sections 3(a)(8), 3A(8), and 3B(a)(8) state that the aforementioned 
authorized rural water systems shall also include other facilities 
deemed necessary to meet the water supply, economic, public health and 
environmental needs of the reservations, including facilities for the 
tribes, reservation villages, towns and municipalities. Finally, 
Sections 3(b)(3), 3A(b)(3) and 3B(b)(3) reference the purchase, 
improvement and repair of existing systems. Congress intended for 
existing water systems to become a part of the Mni Wiconi Project. In 
fact, the objectives of the Mni Wiconi Project cannot be met unless the 
community systems are connected. Without inclusion of such systems, the 
Project as intended by Congress and the Tribe would not be complete.
    Reclamation has determined the costs for community system upgrades. 
Overall, the costs for community system upgrades total $26.657 million. 
Of this, $13.164 million is for OSRWSS. The total for the RSRWS is 
$11.693 million and for the LBSRWS is $1.8 million.
    Upgrades of the cost magnitude now proposed by Reclamation for 
these existing systems were not previously contemplated in the FER or 
by Reclamation in PL 107-367, the 2002 reauthorization of the Mni 
Wiconi Project Act. Reclamation's current proposal would have the 
systems in near perfect condition prior to their transfer into the 
Project rather than accepting these currently working systems and 
improving them as needed over a period of time--when the lifetime of a 
feature has come to an end. S. 3464 contains language to direct the 
transfer of existing community systems to OSRWSS, RSRWS or LBSRWSS as 
other federal agencies' funds and project operation, maintenance and 
replacement funds are applied to the upgrade of those systems.
    It does not make sense to hold up completing the Project, which 
must include these existing systems, by requiring the existing systems 
to be in nearly new condition prior to transfer. Instead, systems 
should be transferred into the Project and a schedule for conducting 
priority upgrade work should be established using operation, 
maintenance and replacement (OMR) Project funding.
    OSRWSS is working to seek funding from other federal agencies such 
as HUD, Rural Development, IHS and EPA to assist in upgrading the 
existing community systems. Two central issues have arisen: (1) the S. 
3464 language on the community system upgrades is needed to direct the 
agencies to assist; and (2) Reclamation cannot evade its 
responsibility. Reclamation is still the responsible federal agency, 
and it must adhere to its trust responsibility and share a portion of 
the costs of community systems upgrades, a central component for 
ensuring adequate and safe water to the people on the reservation, 
through the operation, maintenance and replacement program. This said, 
we support the continuation of operation, maintenance and replacement 
funding by other agencies that have historically contributed, including 
HUD and BIA, to assist in limiting funding required from Reclamation.
    S. 3464 would direct the necessary other agency assistance for the 
community systems upgrades and direct that the systems be transferred 
and the operation, maintenance and replacement monies appropriated to 
Reclamation under the Act be used to improve, repair and replace those 
systems. These provisions of S.3464 are fundamentally important to the 
completion of the overall Project and for ensuring the Project can 
function and serve its beneficiaries as intended.

               LIVESTOCK NOT INCLUDED IN FUNDING REQUEST

    Water for livestock on the Pine Ridge Indian Reservation was 
contemplated in the Final Engineering Report and in the original 
Project authorization and subsequent reauthorization.
    OSRWSS has reduced its livestock distribution system from $24.024 
million to $11.380 million, and OSRWSS has removed its reduced 
livestock plan from the funding needed in the amendment of the Mni 
Wiconi Project Act. The Oglala Sioux Tribe plans are to work with the 
Natural Resources Conservation Service and the Bureau of Indian Affairs 
to construct the livestock distribution systems over a period of 15 
years. However, enactment of S. 3464 is needed to direct these agencies 
to undertake the work and fund this important and intended component of 
the Project. As stated previously, the Bureau of Reclamation urged that 
funding intended for livestock construction be used to finance the 
overhead costs after 2007, and the livestock program was sacrificed for 
necessary non-construction activities that had not been budgeted.

               EXTENSION OF OSRWSS BOUNDARY INTO NEBRASKA

    S. 3464 is needed to ensure that the portion of the Pine Ridge 
Indian Reservation that extends into Nebraska is included in OSRWSS 
under the Mni Wiconi Project Act, and, specifically, to ensure the 
Tribe's nursing home can be served with Mni Wiconi Project water.
    There are no associated construction costs as the Indian Health 
Service is expected to construct the pipeline extension to the Nebraska 
tract from existing authority. There would be minor operation and 
maintenance costs for the line estimated at less than $5,000 per year.

         SERVICE TO ROSEBUD SIOUX ON TRUST LAND IN WHITE RIVER

    S. 3464 is needed to ensure that tribal members and tribal 
facilities located on trust lands in the town of White River receive 
the same benefits as other tribal members in the Primary Service Area 
of the RSRWS. Indians in White River were included in the design 
population of RSRWS but because they are customers of the town rather 
than WR/LJ they are not addressed by the comprehensive agreement 
between RSRWS, WR/LJ and Reclamation for water service in Mellette 
County.
    S. 3464 authorizes the reimbursement to the town of White River for 
operation and maintenance costs for the provision of water to service 
connections of the Rosebud Sioux Tribe and tribal members located on 
trust land within the town. This is similar to the current agreement 
with Tripp County Water Users District in Tripp and Gregory Counties 
and does not involve any construction. There are very few trust lands 
within the town and the cost is estimated at less than $6,000 per year.

      ADEQUATE FUNDING FOR OPERATION, MAINTENANCE AND REPLACEMENT

    In addition to expressing our support for S. 3464, we take this 
opportunity to raise a very important concern of the tribal sponsors: 
the need for adequate operation, maintenance and replacement (OMR) 
funding. The Mni Wiconi Act clearly sets forth the trust responsibility 
of the United States to ensure adequate and safe water supplies are 
available to meet the economic, environmental, water supply and public 
health needs of the reservations, and established the framework for 
Reclamation to fund the construction and OMR of the Project. Section 
2(a)(5), Section 10(a) and (b). The Act authorizes, among other things, 
the construction, operation and maintenance of municipal, rural and 
industrial water systems which include the existing water systems. 
Section 3(a), 3A(a) and 3B(a). Reclamation needs to work with the 
OSRWSS, RSRWS and LBRWS to ensure the remaining features of the 
Project, including the work related to existing community systems, are 
completed as planned and the intended beneficiaries are served.
    The Act's trust responsibility provision also applies equally to 
construction and OMR. Anything less than sufficient funding for OMR 
threatens the significant investment of the United States in 
construction.
    Reclamation needs to work with the OSRWSS to adequately fund OMR of 
the core and distribution systems. The OSRWSS core facilities serve all 
Project Sponsors, including the Lower Brule Sioux Tribe, Rosebud Sioux 
Tribe and West River/Lyman-Jones, as well as the Pine Ridge Indian 
Reservation. Reclamation advises us that OMR is its first priority. The 
statutory trust responsibility requires OMR to remain at the forefront 
of Reclamation's funding obligations. Funding should be adequate to 
ensure a safe drinking water supply for all Project Sponsors. As we 
move forward, the Mni Wiconi Project must remain a Reclamation 
priority. Our OMR funding needs should not be affected by other 
authorized projects' construction funding needs or by Indian water 
rights settlements in the years ahead.
    Threatening an unnecessary increase in the costs of OMR for the Mni 
Wiconi project are the Surplus Water Policies of the Corps of Engineers 
that would require payment for stored water in Lake Oahe. The Corps of 
Engineers proposes a cost of $15-$20 per acre foot of water derived 
from Pick Sloan storage. The Oglala Sioux Tribe believes that the Corps 
of Engineers policy on surplus water is flawed and that the charges 
proposed would simply require Congress to appropriate more OMR funds 
for the Mni Wiconi Project for payment of Corps of Engineers charges.

                   MNI WICONI PROJECT EMERGENCY PLAN

    S. 3464 includes a new Title for the Mni Wiconi Act which would 
direct the Departments of Interior, Homeland Security and Defense (Army 
Corps of Engineers) to work with the Project Sponsors to develop a 
comprehensive emergency plan for the Project in case of major 
breakdowns of the systems.
    Project Sponsors, Reclamation and the Federal Emergency Management 
Agency have met and will continue to meet and update state-of-the-art 
emergency response plans. S. 3464 would assist efforts to address any 
major catastrophe that might adversely impact the Project's rural water 
systems.
    Of considerable concern to the Oglala Sioux Tribe is the crossing 
by the Keystone XL Pipeline of the Missouri River in Montana and the 
Western Dakota tributaries of the Missouri River, including the 
Cannonball, Grand River, Moreau, and Cheyenne River crossings that 
enter Lake Oahe and pose a risk to the Mni Wiconi Project intake below 
Oahe Dam. A major spill from this pipeline would be carried by those 
streams to our water source. We oppose the pipeline, but if we are 
unsuccessful in our opposition and the pipeline is built, it provides a 
prime example of the need for a specific Mni Wiconi Project emergency 
plan.

                  MITIGATION OF FISH & WILDLIFE LOSSES

    Section 6(b) of the Mni Wiconi Act was included in the original 
version of the Act. The Section requires the Secretary, in cooperation 
with the State, all Indian tribes residing on reservation within the 
State and other federal agencies, to develop and submit recommendations 
to Congress for implementing and financing mitigation plans for fish, 
wildlife and terrestrial losses incurred as a result of the 
construction and operation of the Oahe Dam and Reservoir and the Big 
Bend Dam and Reservoir. Section 6 of S.3464 would include important 
revisions to Section 6(b). First, it would add a date by which the 
recommendations would be submitted to Congress. Further, it would 
ensure that the recommendations for the mitigation plans include losses 
of Native American cultural resources, human remains, ceremonial plants 
and herbs, gathering rights, access to sacred sites, other usufructuary 
rights and impacts to groundwater on the Missouri River tributaries. It 
would also include the Fort Randall Dam and Reservoir. Significantly, 
S. 3464 would require the Secretary to set forth a process by which the 
he will carry out meaningful consultation with the tribes on the 
development of the recommendations, something of utmost importance to 
the tribes. S.3464 also specifically directs relevant agencies, the 
Army Corps of Engineers, the National Park Service, and the Fish and 
Wildlife Service to provide the Secretary with assistance in completing 
the recommendations, which would ensure their cooperation and 
engagement on these issues.

                      WASTE WATER DISPOSAL SYSTEMS

    In 1994, the Mni Wiconi Act was amended to include a provision 
authorizing and directing the Secretary, in consultation with the 
tribes, to conduct feasibility studies on the need to develop waste 
water disposal facilities and systems and rehabilitate existing systems 
on the reservations. S. 3464 revisits the waste water disposal systems 
provisions, Section 12(c), to ensure that their intent is carried out. 
Importantly, S. 3464 would have the tribes, in consultation with the 
named relevant federal agencies, update and complete the feasibility 
studies and sets forth what specifically the studies must address. The 
amendment is necessary to move waste water disposal systems piece of 
the Act forward.

                               CONCLUSION

    The Mni Wiconi Project is like no other in terms of human needs. 
Mni Wiconi means ``the water of life.'' It is unique in that the Act 
which authorized it acknowledges the United States trust responsibility 
to ensure adequate and safe water supplies for the Pine Ridge, Rosebud, 
and Lower Brule Reservations. S.3464 will enable the United States to 
carry out this trust responsibility by completing the Project as 
contemplated. Without S.3464, thousands of intended project 
beneficiaries, some who have been waiting for clean water since 1988, 
will not be served.
    We thank the Committee for its consideration of this important 
legislation and respectfully request that S. 3463 move forward to 
enactment as soon as possible.
supplemental statement of the oglala sioux tribe, rosebud sioux tribe, 
     lower brule sioux tribe and west river/lyman-jones, on s. 3464
    Thank you for the opportunity to submit supplemental testimony on 
S.3464, the Mni Wiconi Project Act Amendments of 2012 following the 
hearing on September 19, 2012. This supplemental testimony has been 
developed conjunctively and is offered on behalf of the Oglala Sioux 
Tribe, West River/Lyman-Jones, Inc., the Rosebud Sioux Tribe and the 
Lower Brule Sioux Tribe, the four beneficiaries and sponsors of the Mni 
Wiconi Rural Water Supply System in southwestern South Dakota (Figure 
1).
    Having reviewed the testimony of Mr. Grayford Payne, Deputy 
Commissioner for Policy, Administration and Budget, on behalf of the 
Bureau of Reclamation, the Oglala and Rosebud Sioux Tribes, in 
particular, will seek mutually agreeable resolution of conflicts 
between our positions and those of the Bureau of Reclamation on the 
amount of funding required to complete the remaining components of the 
Project, the number of persons that will benefit by the completion of 
the Project and other subject areas where the testimony of the Sponsors 
and the Bureau of Reclamation may be different.
    Because the Tribes, through the efforts of the Oglala Sioux Tribe, 
had kept the Bureau of Reclamation fully informed of funding needs to 
complete the drinking water portion of the Project and had provided 
documentation of detailed costs frequently (including quantities and 
unit prices of incomplete Project segments), we were surprised that the 
Bureau of Reclamation claimed (1) it did not have necessary details to 
evaluate the proposed increase in the authorized Project ceiling for 
construction by $14.308 million (October 2011 dollars) and (2) that the 
Project could be ``completed'' with the FY 2013 funding request in the 
President's budget.
    Clearly, a fundamental difference for the Oglala and Rosebud Sioux 
Tribes is our definition of Project ``completion'' for which the 
$14.308 million will be used. To us, this means the completion of the 
construction of the drinking water portion of the Project without 
completing the livestock portion or community upgrades. The Bureau of 
Reclamation definition of Project ``completion'' apparently means 
simply the expenditure of the currently authorized funding ceiling. The 
currently authorized funding ceiling, however, will not be adequate to 
complete the construction of the drinking water portion of the Project. 
Further, the livestock portion and community upgrades are essential 
components of the overall Project, which also must be addressed. S. 
3464 sets out methods for ensuring these features are addressed and 
finished so that the Project can function as intended.
    The intent of the Oglala and Rosebud Sioux Tribes is to work with 
the Bureau of Reclamation during the congressional recess to reach 
agreement on the full scope of S. 3464 and to inform the Committee upon 
its return of the areas where we have reached complete agreement and 
areas where we have not, if any. Our working relationship with the 
Bureau of Reclamation has been extremely good over the last 20 years of 
development, and we are confident that differences are minimal and can 
be resolved.
    We will work with the Bureau of Reclamation and fully advise the 
Committee of the resolutions we have successfully reached so that 
legislation necessary for the Project can move forward.
                                 ______
                                 
   Statement of Steve Moyer, Vice President for Government Affairs, 
                      Arlington, VA, on H.R. 2842

    On behalf of Trout Unlimited and its nearly 150,000 members 
nationwide, we write in support of S. 3483 and in support of an amended 
H.R. 2842 as described below. Please include this letter in the record 
for the above-referenced hearing.
    Trout Unlimited is a national not-for-profit membership 
organization dedicated to conserving, protecting and restoring our 
nation's coldwater fisheries and their habitats.

        S. 3483--CROOKED RIVER COLLABORATIVE WATER SECURITY ACT

    Trout Unlimited supports S. 3483--a bill designed to improve water 
management at Bowman Dam and provide more dependable flows for fish and 
wildlife habitat in the Crooked River basin. This bill encourages 
pragmatic, creative solutions and partnerships to restore Crooked River 
fisheries, including steelhead. The bill improves water supply 
certainty for the City of Prineville and local irrigators, and sets the 
stage for hydropower development at Bowman Dam, while at the same time 
creating new opportunities for improved flows for fish and wildlife in 
the Crooked River downstream.
    Among other benefits for fisheries habitat, the bill:

   Gives clear authority and direction to store and release 
        water for downstream fish and wildlife purposes.
   Gives state and tribal officials more authority and 
        flexibility to manage releases and target them for the benefit 
        of downstream fish and wildlife resources.
   Supports year-round flows in the Crooked River by 
        authorizing release of mitigation water for the City of 
        Prineville, regardless of whether it is needed by the City for 
        mitigation purposes, thereby ensuring an additional 5,100 acre 
        feet of flows annually through the Crooked River.
   Provides a path forward to reduce or eliminate water 
        diversions from McKay Creek, a tributary of the Crooked that 
        provides critical habitat for steelhead below the dam. By 
        reducing or eliminating surface diversions from this key 
        tributary, this bill helps to ensure that McKay Creek will be 
        ready once again to support steelhead and native trout.
   Creates new opportunities for voluntary measures to improve 
        fish flows and habitat by providing opportunities for instream 
        leasing, water conservation and other voluntary water sharing 
        agreements.
   Supports opportunity for future development of hydropower at 
        Bowman Dam.
   Establishes a clear path forward for development of 
        collaborative solutions to improve river conditions in dry 
        years.

    The western states have a long history of water shortage and over-
allocations. In a situation that is nearly unheard of in the West, 
Prineville Reservoir behind Bowman Dam holds nearly 80,000 acre-feet of 
unallocated water. This situation presents a unique opportunity to 
provide for downstream fisheries while continuing to meet existing 
irrigation demand and support economic development opportunities for 
the City of Prineville. Since the completion of Bowman Dam in the 
1960s, there have been multiple attempts to reach agreement on expanded 
water management.
    S. 3483 represents the carefully balanced solution to this decades 
old effort. S. 3843 breaks a nearly 40-year old log-jam related to 
water management at Prineville Reservoir and creates an opportunity to 
improve conditions in the Crooked River in a manner that supports local 
irrigators, communities and business development. We thank Senators 
Merkley and Wyden for their leadership on this issue and strongly urge 
the committee's support for this bill in its current form.

 H.R. 2842--BUREAU OF RECLAMATION SMALL CONDUIT HYDROPOWER DEVELOPMENT 
                       AND RURAL JOBS ACT OF 2012

    H.R. 2842 aims to clarify jurisdictional issues and improve the 
regulatory process for developing hydroelectric projects at Bureau of 
Reclamation (BOR) facilities.
    Trout Unlimited supports hydropower projects that are properly 
managed and operated to minimize impacts to coldwater fisheries and 
their habitats. We believe that significant potential exists for 
responsible development of hydropower at existing BOR facilities that 
can be tapped with minimal impact to the local environment
    Although we generally support the objectives of this bill, we have 
concerns with some of its provisions--specifically we oppose bill 
language in Section 2 amending the Reclamation Project Act of 1939 to 
exclude small conduit hydropower development from review under the 
National Environmental Protection Act (NEPA).
    Trout Unlimited generally supports regulatory efficiency; however, 
we do not support elimination of regulatory oversight or reduction of 
environmental standards for projects simply in the name of expediency. 
A waiver of the NEPA review process is a harmful and unnecessary 
sacrifice. Alternatives exist to promote expediency without sacrificing 
environmental safeguards. For instance, the NEPA process allows for 
development of categorical exclusions to help move certain categories 
of activities through the review process more quickly. The Federal 
Energy Regulatory Commission (FERC) has successfully employed a 
categorical exclusion from NEPA for many years to permit small conduit 
projects in order to facilitate their construction. Reclamation's 
revisions to the Reclamation Manual follow this example, relying on an 
existing categorical exclusion for small construction projects to 
expedite the permitting and review of small conduit projects that will 
have minimal environmental impact. Such approach could be taken here.
    Furthermore, the BOR has recognized the need to provide clarity for 
small conduit hydro development and has updated their manual 
accordingly. We encourage the committee to examine whether those 
updates satisfy the needs of hydro developers prior to advancing 
legislation.
    Finally, H.R. 2642 precludes NEPA review for projects producing 
1.5MW or less. However, even small-scale developments can have 
significant adverse effects. Development of a categorical exclusion 
with strong impact based sideboards would more appropriately 
distinguish minimal impact projects from those with more significant 
environmental effects--allowing for minimal impact projects to proceed 
quickly while ensuring that harmful or damaging projects are subject to 
more thorough review under NEPA.
    We thank the Subcommittee for the opportunity to comment on these 
bills.
                                 ______
                                 
 Statement of Kimberley Priestley, Senior Policy Analyst, Waterwatch, 
                        Portland, OR, on S. 3483

    Founded in 1985, WaterWatch of Oregon is a non-profit river 
conservation group dedicated to the protection and restoration of 
natural flows in Oregon's rivers. We work to ensure that enough water 
is protected in Oregon's rivers to sustain fish, wildlife, recreation 
and other public uses of Oregon's rivers, lakes and streams. We also 
work for balanced water laws and policies. WaterWatch has members 
across Oregon who care deeply about our rivers, their inhabitants and 
the effects of water laws and policies on these resources.
    On behalf of WaterWatch of Oregon's members and supporters we write 
in support of S. 3483, the Crooked River Collaborative Water Security 
Act, as introduced.

        S. 3483, CROOKED RIVER COLLABORATIVE WATER SECURITY ACT

    In the Crooked River Basin there exists a rare opportunity to pass 
a bill that could benefit all economic sectors in the region---farmers, 
cities and fisheries. In a situation that is nearly unheard of in the 
water parched West, Prineville Reservoir behind Bowman Dam holds over 
80,000 acre feet of water that has not been allocated to any particular 
use. This fact presents an extraordinary opportunity to release the 
unallocated stored water to restore flows to the river and its 
economically important fisheries, without taking water away from 
existing irrigation districts or impeding growth opportunities for the 
City of Prineville.
    S. 3483 takes advantage of this rare opportunity and delivers a 
bill that:

   Dedicates nearly 80,000 acre feet of water stored in 
        Prineville Reservoir to downstream fisheries. The water must be 
        released in a way to maximize the biological benefits to 
        downstream fish, including newly reintroduced steelhead. This 
        bill will result in significant flow increases to the 
        historically water-parched Crooked River.
   Provides the City of Prineville with 5,100 acre-feet of 
        water to serve as instream mitigation to offset the impacts of 
        new groundwater pumping (under state law, new groundwater wells 
        in this basin must provide instream mitigation).
   Provides farmers who currently hold irrigation contracts for 
        water from the reservoir with guarantees to their longstanding 
        use.
   Allows hydropower development to now proceed on Bowman Dam.
   Charts a path forward for flow restoration projects on McKay 
        Creek (a creek that is key to steelhead introduction efforts).
   Requires dry year management planning.

    S.3483, as introduced, represents a carefully crafted agreement 
between conservation groups, irrigation districts, the State of Oregon, 
the City of Prineville and the Confederated Tribes of the Warm Springs 
Reservation. We thank Senators Merkley and Wyden for introducing this 
bill that represents a balance amongst varied basin interests that, 
until now, was unattainable.
    S. 3483 marks the end of over 30 years of fighting over the 
unallocated water behind Bowman Dam. The vision provided by this 
groundbreaking legislation could not only help save the Crooked River, 
its prized redband trout, and its newly reintroduced steelhead--it 
could also make a major contribution to the region's economy.
    We urge the subcommittee to pass S. 3483 as introduced.
    Thank you for this opportunity to comment.
                                 ______
                                 
Statement of Brett Swift, Northwest Regional Director, American Rivers, 
                        Portland, OR, on S. 3483

    American Rivers is the nation's leading voice for healthy rivers 
and the communities that depend on them. We believe that rivers are 
vital to the health, safety and quality of life of all Americans. Since 
our founding in 1973, we have worked to protect and restore rivers and 
seek balanced solutions that benefit all stakeholders. On behalf of 
American Rivers' thousands of members and supporters I write in support 
of S. 3483, the Crooked River Collaborative Water Security Act in its 
current form.

        S. 3483, CROOKED RIVER COLLABORATIVE WATER SECURITY ACT

    The Crooked River is one of Oregon's treasures. It has an 
outstanding fishery, spectacular scenery and various recreational 
activities that depend upon a healthy river with adequate flows. S. 
3483 takes advantage of a rare opportunity found in the West--water in 
Prineville Reservoir that is not currently allocated to any particular 
use--to improve flows in the Crooked River for the benefit of fish and 
wildlife below Bowman Dam. In addition, S. 3483 provides greater 
certainty to water users in the basin including local farmers and the 
City of Prineville.
    S. 3483 provides the following benefits:

   Allocates water stored in Prineville Reservoir to downstream 
        fisheries, which will benefit ESA listed steelhead that 
        recently have been reintroduced to their historic habitat.
   Allows for flow restoration projects on McKay Creek, a 
        critical tributary supporting steelhead reintroduction efforts.
   Removes barriers to voluntary water leasing and conservation 
        projects in the basin.
   Provides the City of Prineville with water to support the 
        community's municipal water needs.
   Provides local farmers with a reliable supply of water from 
        Prineville Reservoir.
   Opens the door to new hydropower development on Bowman Dam.

    S. 3483 resolves a longstanding conflict over unallocated water in 
the Crooked River Basin and strikes a balance for water users and the 
environment while improving conditions for the fish and wildlife that 
rely on the Wild Scenic Crooked River. Importantly, it sets the basin 
on a path toward working collaboratively to address water needs and 
meet a range of interests in the long-term.
    In conclusion, thank you for holding a hearing on this bill 
concerning Oregon's outstanding Crooked River. We urge the subcommittee 
to pass S. 3483 as introduced. Thank you for considering our views.
                                 ______
                                 
  Statement of Betty Roppe, Mayor, City of Prineville, OR, on S. 3483

    I am writing on behalf of the City of Prineville in support of S. 
3483, the Crooked River Collaborative Security Act, introduced by 
Oregon Senators Ron Wyden and Jeff Merkley.
    For over 30 years, local, state and federal agencies, and many 
stakeholders, have sought agreement on the best management of the U.S. 
Bureau of Reclamations' Bowman Dam and Prineville Reservoir. Each of 
those efforts has failed to produce consensus, until now.
    Senators Wyden and Merkley, and their staff, are to be commended 
for writing legislation that amends several outdated laws and policies 
to equally promote social health, economic prosperity and environmental 
enhancement. We are pleased the legislation ensures our City would have 
access to a long-term water supply, so we can responsibly plan for the 
future and our local businesses can create jobs and make essential 
capital investments. Of course, we are also pleased with the other 
benefits that the legislation would create for Central Oregon.
    Upon enactment, the Crooked River Collaborative Water Security Act 
would provide immediate benefits to our region. In addition to the new 
water supply for the City, many local farm and ranch families would 
secure long-term certainty to continue to produce crops and livestock. 
On the Crooked River, fish and wildlife species, including reintroduced 
steelhead, would benefit from a new release schedule of uncontracted 
water stored annually in the reservoir. And a ``water rights switch'' 
on McKay Creek would benefit local families and result in higher 
instream flows for steelhead and other species. Finally, the Portland 
General Electric Company could seek approval to build a small 
hydropower facility at the base of the dam, capable of serving 4,500 
homes.
    The City of Prineville appreciates the Subcommittee's expedited 
hearing on the bill, and we encourage you to immediately work to secure 
its passage. Please call me personally if we can provide you with any 
additional information on our community's needs or why this 
legislation's enactment is so crucial to the City of Prineville.
                                 ______
                                 
         Statement of Ken Fahlgren, Crook County Commissioner, 
                       Prineville, OR, on S. 3483

    I am writing on behalf of Crook County in support of S. 3483, the 
Crooked River Collaborative Water Security Act, introduced by Oregon 
Senators Ron Wyden and Jeff Merkley.
    We are pleased the legislation would provide Crook County, the City 
of Prineville, and many of our local farmers and ranchers with the 
water supply certainty they need to meet current and future needs. This 
certainty will enable our agricultural sector and other businesses, 
including new technology companies, create jobs, make significant 
investments, and responsibly plan for the future.
    We understand the bill would provide numerous benefits to our 
community and the environment. For example, farmers and ranchers with a 
U.S. Bureau of Reclamation contract would be able to accelerate their 
payments to the U.S. for their share construction costs for Bowman Dam, 
and could also temporarily lease water instream for fisheries purposes. 
Further, providing farm families on McKay Creek with a supply of water 
from Bowman Dam would result in greater water supply reliability, and 
also increase instream flows for steelhead and other species on this 
creek. The management of uncontracted water supplies for fish and 
wildlife would also benefit steelhead, redband trout and other species 
in the Crooked River. Finally, moving the wild and scenic boundary 
would enable the construction of a small hydropower facility at the 
base of the dam, creating carbon-free electricity and new property tax 
revenues. The Portland General Electric Company is well respected in 
our community, and I understand the company will seek the approval to 
build that facility.
    Crook County appreciates your scheduling this hearing. Please call 
me personally if I can provide you with additional information 
regarding our support for the Crooked River Collaborative Water 
Security Act.
                                 ______
                                 
   Statement of Mike Britton, Secretary/General Manager, North Unit 
              Irrigation District, Madras, OR, on S. 3483

    I am writing on behalf of the North Unit Irrigation District in 
support of S. 3483, the Crooked River Collaborative Water Security Act, 
introduced by Oregon Senators Ron Wyden and Jeff Merkley. We appreciate 
your scheduling this hearing on the bill.
    We commend Senator Wyden and Senator Merkley, and their staff, for 
writing this legislation and doing so in a manner that fully protects 
agricultural water supplies, including the North Unit Irrigation 
District. This certainty will enable our district as well as the other 
districts, farm and ranch families that rely upon the water supplies of 
Bowman Dam, to have the same assurances of an annual irrigation supply 
as we all have now. For our district, this is the most important aspect 
of the bill as North Unit and its patrons rely on the Crooked River to 
supply irrigation water to nearly 9,000 acres of productive 
agricultural lands in Jefferson County. The 10,000 acre-feet of water 
set-aside for our district in the bill is an absolute need and must be 
available to the district every single year, whether we call upon those 
supplies or not. Further the bill should ``do no harm'' to existing 
water right holders so that irrigators who are using these water 
supplies today have the same access to the legal use of this water in 
the future, after enactment of the bill. This is consistent with the 
position of Oregon Governor John Kitzhaber, noted in his August 1, 2012 
letter to Senator Wyden and Senator Merkley.
    Our district appreciates your scheduling this hearing. Please call 
me personally if I can provide you with additional information 
regarding our support for the Crooked River Collaborative Water 
Security Act.
                                 ______
                                 
              Statement of Steve Forrester, City Manager, 
                   City of Prineville, OR, on S. 3483

    I am writing on behalf of the City of Prineville in support of S. 
3483, the ``Crooked River Collaborative Water Security Act,'' 
introduced by Oregon Senators Ron Wyden and Jeff Merkley. We would 
appreciate your including this letter in the September 19, 2012 
Subcommittee on Water and Power hearing record.
    The City of Prineville, as well as Crook County, Ochoco Irrigation 
District and many others are pleased to support S. 3483, the ``Crooked 
River Collaborative Water Security Act.'' Senator Wyden and Senator 
Merkley deserve credit for their hard work, extraordinary patience, and 
understanding of our Community in the development of this legislation. 
We are appreciative of their work in writing this legislation and look 
forward to the benefits that enactment would provide for our entire 
community.
    Prineville, located in Central Oregon's Deschutes Basin, is one of 
Oregon's most historic cities. It is the largest city in Crook County 
with a population of 10,000. Today, our City is facing an unusual 
combination of challenges and opportunities. This legislation would 
take a tremendous step forward in addressing them.
    Over the past several years, our unemployment rate has ranged 
between 14 and 20 percent, one of the highest rates in the United 
States. Business failures, job losses, and home foreclosures have been 
a constant problem for us, and they've significantly stressed our 
City's social services.
    Not long ago, vibrant timber operations, a highly successful 
national tire business, and small productive family farms and ranches 
served as our economic foundation. But changes to our Nation's timber 
harvest policy drove once-thriving mills and family-owned businesses 
into closure. The tire operation moved away. And then, our national 
economy collapsed. These events struck our region particularly hard. We 
lost one family business after another, and along with them, hundreds 
of family-wage jobs. Successful family farms and ranches kept our 
community from spiraling even further downward.
    In the midst of the downturn, Apple and Facebook selected 
Prineville as a location for their new data centers. Facebook has 
completed construction on a new, state-of-the-art, LEED certified, 
300,000 square-foot data center near our airport. Facebook is now 
beginning to develop a second facility. Apple is also constructing a 
new facility in our community. Both companies have created family wage 
jobs, made significant financial investments in our community, and have 
sparked an economic resurgence we have not seen in a long time.
    Prineville is a progressive city regarding natural resources. Mayor 
Betty Roppe serves on the board of directors of the Deschutes River 
Conservancy, a consensus-based, non-profit organization dedicated to 
river restoration. The City is collaborating with irrigation districts, 
conservation groups, and others to develop a multi-species Habitat 
Conservation Plan, which will ultimately set in motion conservation 
measures designed to improve habitat for species including bull trout 
and reintroduced hatchery steelhead listed as ``threatened'' under the 
Endangered Species Act. Finally, the City is re-creating a 280-acre 
lower Crooked River wetland at a cost of $8.5 million, which will 
improve riparian habitat and further cleanse our wastewater discharges. 
The Portland General Electric Company and Confederated Tribes of Warm 
Springs are helping to finance this innovative project.
    At this point, we have taken as many steps as we possibly can to 
recover our economy and enhance our environment. But we can only fully 
resolve our problems if Congress enacts new law to remove several 
barriers to our recovery, including a lack of water supply certainty. 
To resolve this problem, Congress must amend the underlying 
authorization of the Crooked River Project to ensure our community has 
certainty for economic and environmental uses. Doing so will promote a 
more dynamic business climate that will allow us to strengthen our 
commitment to basic social services, improve environmental conditions, 
and bring about real, permanent improvements for Prineville, Crook 
County, and Central Oregon.

                       THE CROOKED RIVER PROJECT

    The U.S. Bureau of Reclamation's Crooked River Project was 
authorized on August 6, 1956 (70 Stat. 1058) for irrigation and flood 
control purposes. A key feature of the Crooked River Project is Arthur 
R. Bowman Dam, constructed in 1960 and 1961, which has an active 
storage of approximately 148,633 acre-feet of water annually.
    Sixteen irrigation districts and families have long held contracts 
to 68,273 acre-feet to irrigate 25,000 acres of small, family farms and 
ranches in Crook County. Valuable crops, including grain, garlic, hay, 
mint, and seed are grown on these lands, along with livestock. Because 
irrigation needs are also satisfied with natural flow rights, the use 
of stored water for irrigation is often less than the total stored 
water contract amounts. Since the late 1960s, Reclamation has 
contracted five times with North Unit Irrigation District to supply 
water to that district's farmers and ranchers. These contract amounts 
have averaged roughly 13,600 acre-feet. Reclamation also provides 
releases for fish and wildlife purposes, including releases of an 
authorized minimum 10 cubic feet per second (cfs) annually, and often a 
voluntary release up to 75 cfs in the winter months. For more than 
thirty years, there has been an ongoing community discussion about this 
project, and the potential to use the uncontracted water stored in 
Bowman Dam for various purposes. Every effort to address this situation 
has failed to produce consensus, until now. This legislation is 
supported by a broad array of interests, including Oregon's Governor 
John Kitzhaber, agricultural, conservation and irrigation interests, 
the Confederated Tribes of Warm Springs, Crook County, City of 
Prineville and Portland General Electric Company. The broad support for 
the legislation is based on the unprecedented social, economic, and 
environmental benefits it would create for Central Oregon.

    REMOVING FEDERAL BARRIERS TO PROMOTE ECONOMIC AND ENVIRONMENTAL 
                                BENEFITS

    I want to compliment Senator Wyden and Senator Merkley, and their 
staff, for writing this legislation. The legislation includes changes 
to specific provisions of the underlying authorization for the Crooked 
River Project, and adds several new provisions. All of these provisions 
are collectively necessary to remove the barriers that stand in the way 
of meaningful economic recovery and environmental enhancements. The 
legislation would provide significant benefits, including a new water 
supply for the City of Prineville, longterm water supply certainty for 
irrigation districts and farming families, dedicated water releases for 
reintroduced steelhead and for other fish and wildlife on McKay Creek 
and the Crooked River, and the potential to develop carbon-free 
hydropower at an existing dam. The legislation also enables local 
farmers to accelerate the repayment of their obligations to the Bureau 
of Reclamation and would establish a process for a dry-year management 
plan, developed collaboratively and relying upon voluntary measures.
    This legislation presents a remarkable opportunity to enhance not 
only social and economic values in Oregon, but to significantly enhance 
instream values for fish and wildlife as well. We understand some may 
not fully appreciate the specific language in the bill to accomplish 
these tremendous benefits, but I have come to learn that there is a 
price for consensus. In this case, it is not federal funding or the 
construction of new federal facilities, but instead it is legislative 
recognition of the extraordinarily unique situation of Bowman Dam and 
its potential value for all of Central Oregon. The real precedent of 
this bill is a remarkable series of collaborative benefits, socially, 
economically and environmentally, at no federal expense.

                    WATER FOR THE CITY OF PRINEVILLE

    The City of Prineville needs a long-term, reliable water supply to 
meet its current and future needs. All of the City's supplies are met 
with groundwater. In addition to the needs of two new companies, Apple 
and Facebook, the City needs new supplies for our current residents. 
There are 500 homes inside our City limits without City water service, 
not because the City does not want to serve them, but because we lack a 
reliable supply. These homes, many with low-income families, draw their 
potable water from private, unregulated on-site wells connected to a 
shallow aquifer. Many of these homes also maintain on-site septic 
systems, and given the small sizes of the lots, the situation presents 
an unacceptable long-term risk.
    Prineville has evaluated every practical option to meet its needs. 
For example, we've taken conservation as far as we can. Almost all of 
the homes and businesses in the City are fully metered; we adhere to a 
strict odd/even summer residential landscape-watering schedule; and we 
are replacing nearly one-mile of our main water line each year. Our 
water rates are also higher than nearly every other major city in 
Central Oregon.
    While the City is capable of drawing more water from its existing 
wells, it is restricted from doing so by the State. Because Oregon has 
deemed groundwater in the Deschutes Basin to be hydrologically 
connected to surface water, and because all surface water in the basin 
is fully appropriated, the State requires any new groundwater use to be 
``mitigated.'' Such mitigation typically involves buying irrigation 
rights and leaving those supplies instream. Under State law, this 
transfer of an existing out-of-stream surface water right to a new 
instream use (resulting in a ``mitigation credit'') offsets any impacts 
arising from the new groundwater pumping. In the Crooked River 
subbasin, however, mitigation credits are scarce due to a lack of 
willing sellers and other constraints. Lacking these credits, the City 
cannot pump any additional groundwater.
    This legislation meets the City's needs by authorizing the Bureau 
of Reclamation to release 5,100 acre-feet of water annually as a 
mitigation credit under state law. This step will enable the City to 
pump the additional groundwater necessary to meet all of its needs into 
the foreseeable future. The bill also directs the Secretary to work 
with the State of Oregon to ensure these supplies are protected 
instream.

                     PROTECTING EXISTING WATER USE

    Agriculture, one of our region's economic mainstays, also needs 
certainty. To provide it, the bill clarifies that Bowman Dam will 
continue to be managed so the water supplies of the existing contract 
holders, and one district that occasionally purchases water from 
Reclamation (North Unit Irrigation District), will be available each 
year as these supplies have been since the project's construction. This 
is absolutely essential for our community's social and economic 
standing. It will ensure family farms and ranches continue to receive 
their water supplies without interruption. This will sustain 
agricultural productivity, enabling farmers and ranchers to continue to 
invest in seed, fertilizer, and fuel, and to rely upon local businesses 
for custom farming, insurance, and other needs.
    S. 3483 requires Reclamation to store and release a sufficient 
amount of water, whether from infill or carryover, to meet the sixteen 
existing irrigation contracts, the City's needs, and the needs of North 
Unit Irrigation District that may arise from time to time. It is 
important to note this provision is limited to the districts and 
families who presently hold contracts with Reclamation, including North 
Unit Irrigation District. No new contracts will be approved and no new 
supplies will be made available, with the exception of the McKay Creek 
Water Rights Switch, discussed below.
    S. 3483 provides clear assurances to the families who live and work 
in our community that their water supplies will be protected, and that 
their way of life will be improved. Right now, that is critical for our 
community's well being.

                         PROTECTING RECREATION

    Recently, some members of our community have raised questions 
regarding the potential drawdown of Prineville reservoir to provide 
higher downstream releases of water for fish and wildlife. In 
particular, questions have been raised as to whether this may affect 
recreation at the reservoir. We understand these concerns are related 
to the potential ``stranding'' of several boat ramps in consecutive dry 
years, and the possible long-term impacts to fish and wildlife habitat 
in the reservoir.
    For the past 52 years, Prineville Reservoir has been a recreational 
treasure. With 43 miles of shoreline, and nearly 100 homes, it is a 
camping, fishing, and water destination for families from all over 
Oregon. It is also an economic asset for our community. A 2005 census 
report showed that over 90 percent of the 615,000 visits to Prineville 
Reservoir were from out of our area. Purchases of food, fuel, and 
supplies are a key source of revenue for local businesses.
    Governor Kitzhaber's August 1, 2012 letter to Senators Merkley and 
Wyden (see attached) acknowledges this concern. Importantly, the 
Governor's letter commits the State to work with our community, and 
others, to address impacts on recreation and fish and wildlife in the 
reservoir if they occur. We're committed too. We are also very 
comfortable with our partners, the Confederated Tribes of Warm Springs 
and the Portland General Electric Company, and their respective roles 
established by the legislation, and in conjunction with it. While some 
may be uncomfortable with the State and tribal management of the 
uncontracted water supplies, we are supportive of this provision 
because it builds upon an existing relationship between Oregon 
Department of Fish and Wildlife, and the Confederated Tribe of Warm 
Springs and would include Ochoco Irrigation District, United States 
Bureau of Reclamation.. We understand annual management decisions of 
the uncontracted water supplies will be based upon the best available 
information and science, and adaptively managed. The City of Prineville 
and Crook County will work with our community, and all our partners, 
including our community, our Congressional delegation, and others to 
improve Prineville Reservoir so that it continues to be a safe, fun, 
and enjoyable destination.

                  THE MCKAY CREEK WATER RIGHTS SWITCH

    S. 3483 will also accelerate the McKay Creek fisheries restoration 
project. Local farm and ranch families, currently outside of OID's 
boundary, have expressed interest in exchanging their existing McKay 
Creek water rights for stored water supplies from Bowman Dam. Up to 
twenty-three families may ultimately participate in this exchange, 
which could result in less overall water use per acre, but provide a 
more reliable supply for these families. State and private funds would 
finance the entire cost of the project.
    To accomplish this exchange, S. 3483 authorizes two important 
steps. First, the bill expands OID' s boundary from its present size, 
which includes approximately 20,000 irrigated acres, to add 
approximately 685 additional acres that are currently irrigated with 
water from McKay Creek. Second, the bill enables OID to supply stored 
water to these additional 685 acres, but only after the landowners 
permanently transfer their existing natural stream flow water rights, 
with some of the water rights dating to the 1800s, to instream use. 
Thus, S. 3483 authorizes OID to supply up to 2,740 acre-feet to enhance 
instream flows in McKay Creek. This project is an important steelhead 
restoration initiative supported by the Confederated Tribes of the Warm 
Springs Reservation, the Crooked River Watershed Council, Deschutes 
River Conservancy, Portland General Electric Company, the Deschutes 
Land Trust, and many others.

                          WILD AND SCENIC MOVE

    S. 3483 also proposes to move an existing wild and scenic river 
boundary on the Crooked River. This will allow the construction of a 
small hydropower facility at the base of Bowman Dam, above the new 
boundary. In 1988, Congress designated the Lower Crooked River (or 
Chimney Rock Segment) as a Recreational River Area in the Omnibus 
Oregon Wild and Scenic Rivers Act. Following passage of this law, the 
Bureau of Land Management (BLM) established the upstream ``interim'' 
boundary of this 8-mile long segment on the crest of Bowman Darn, in 
the center of State Highway 27. Although BLM has stated this location 
was never intended to be the final starting point of the designation, 
it has been unable or unwilling to administratively move the boundary. 
The current boundary is an absolute restriction on the development of 
carbon-free, renewable hydropower generation at Bowman Darn.
    S. 3483 will require the Secretary to relocate the upstream 
boundary of the wild and scenic designation to a point one-quarter mile 
downstream from the toe of the dam. This minor shift would enable a 
small, minimally intrusive facility to be constructed, including a 
small powerhouse and related facilities.
    I understand the project would operate with existing water 
releases, without any changes to release schedules, amounts, or 
reservoir recreation levels. In addition to power generation, the 
project may also improve water quality below the dam by reducing total 
dissolved gas (TDG) concentrations. Fish can be affected by elevated 
TDG concentrations, which has occurred recently, for example, in the 
Columbia River. Relocating the boundary and the construction of a 
hydropower facility will not impair Redband trout spawning areas, and 
river access for fishing will not be impacted except as necessary for 
public safety.
    Finally, the eventual license holder will be required by the 
Federal Energy Regulatory Commission to evaluate impacts to the 
designated ``Outstandingly Remarkable Values'' in the quarter-mile 
reach between the dam and the new boundary. If impacts are identified, 
full mitigation will be required. Besides the potential fisheries 
benefits, this project will create enough carbon-free, renewable 
electricity to power 4,500 homes.

              OCHOCO IRRIGATION DISTRICT CONTRACT CHANGES

    Ochoco Irrigation District's present water supply contract with 
Reclamation does not allow OID to participate in ``Conserved Water 
Projects'' under Oregon law. Under the terms of its contract, water 
allocated to OID can only be used for irrigation purposes.
    Since these contracts were signed, the State of Oregon has enacted 
laws to encourage water users to conserve water. The Oregon Conserved 
Water statute (ORS 537.455 et seq.) is one such program. This statute 
requires at least 25 percent of any water saved by a conservation 
project to be left instream and protected with an instream water right. 
Because OID's contract with Reclamation does not allow water to be 
dedicated to instream uses, OID cannot participate in this program. S. 
3483 would remove this barrier to water conservation by amending OID's 
underlying contract so it can conserve water consistent with Oregon law 
and return a portion of the savings to instream uses, forever.
    S. 3483 makes a second amendment to OID's contact. This change will 
enable District landowners to voluntarily repay their respective share 
of construction costs associated with Bowman Dam and the Crooked River 
Project earlier than their present repayment schedule allows. These 
farmers and ranchers are prohibited from paying off their obligations 
to the United States before the contract repayment date of 2023. This 
change is important because it will enable District landowners to 
purchase additional lands inside OID while still using water from 
Bowman Dam. Larger holdings can promote greater efficiencies, economies 
of scale, and a more dynamic business climate.
    Collectively, these amendments to OID's contract would allow for 
greater flexibility and creativity in land use decisions and water 
management, benefitting the economy and environment. They would 
facilitate conservation efforts, instream leasing, and more dynamic 
business practices. Congress has previously approved similar provisions 
for Oregon irrigation districts (see P. L. 110-229, Section 509(d); and 
P.L. 109-138).

                               CONCLUSION

    S. 3483 will, if enacted, accelerate real, meaningful social, 
economic, and environmental benefits for the people of Prineville, 
Crook County, and all of Central Oregon. I encourage the Subcommittee 
to act quickly on this legislation.
               attachment.--letter of governor kitzhaber
                                           State of Oregon,
                                         Salem, OR, August 1, 2012.
Hon. Jeff Merkley,
U.S. Senate, 313 Hart Senate Office Building, Washington, DC.
Hon. Ron Wyden,
U.S. Senate, 221 Dirksen Building, Washington, DC.
Re: Draft legislation regarding Oregon's Crooked River basin

    Dear Senators: My administration is very appreciative of your work 
to advance legislation to improve the environment and economy of 
central Oregon. The Crooked River basin encompasses one of Oregon's 
truly special places. It presents many challenges and opportunities, 
especially with respect to the issue of water associated with 
Prineville Reservoir and the Bowman Darn. I want to personally commend 
all of the stakeholders--including the Confederated Tribes of the Warm 
Springs of Oregon, the Ochoco and North Unit Irrigation Districts, 
Crook County, the City of Prineville, Portland General Electric, and 
several conservation groups--for their years of effort, collaboration, 
and leadership in reaching common ground around this historic 
legislation.
    My understanding is that the legislation would result in numerous 
benefits. For the City of Prineville, the legislation provides releases 
of Prineville Reservoir water, allowing the City to acquire new 
groundwater rights needed for economic development and the associated 
instream mitigation credits required by Oregon law. The legislation 
also slightly modifies an existing Wild and Scenic River boundary to 
enable development of hydroelectric energy at the existing Bowman Dam. 
In addition, the legislation would provide needed certainty for Ochoco 
Irrigation District and the other 15 U.S. Bureau of Reclamation 
contract holders to ensure in-igation water will continue to be put to 
productive agricultural use. Finally, I understand that all remaining 
un-contracted reservoir water, which in some years could amount to 
upwards of 80,000 acre feet, will be dedicated to the primary benefit 
of downstream fish and wildlife, with the Confederated Tribes of Warm 
Springs and the State of Oregon entering a new chapter of partnership 
to help guide the Bureau of Reclamation's release of this water. This 
water provides unprecedented opportunities for steelhead and other 
species of concern in the Crooked River as well as the larger Deschutes 
River system. The legislation envisions exactly the sort of mutual win 
that Oregonians expect for the economy, the environment, and 
communities.
    I want to underscore one issue with you that is separate from the 
specific legislative language itself but, should it be enacted into 
law, related to implementation of the legislation's direction of water 
releases for downstream fish and wildlife. This issue centers on Oregon 
state water law and water rights. One of my longstanding principles 
throughout the development of the legislation has been that conditions 
for fish and wildlife in the Crooked River can and should be improved, 
but not at the expense of existing legal use of water from the Crooked 
River. I understand that this legislation's approach to addressing the 
stakeholder's collective interests in Crooked River water will likely 
require a new water management regime for Prineville Reservoir, along 
with increased care around water use accounting and collaboration 
around dry-year planning. With that in mind, I want to ensure the above 
principle is not undercut.
    It is my expectation that, following the enactment of the proposed 
legislation, the U.S. Department of Interior through the Bureau of 
Reclamation will apply for or authorize an application to the State to 
protect releases of stored, un-contracted Prineville Reservoir water 
with a state-issued flow augmentation water right or some other form of 
instream water right. In advancing such an application, my expectation 
is the Bureau will support an approach that ensures existing holders of 
Crooked River primary surface flow water rights below Bowman Dam who do 
not also hold storage right--supplemental or otherwise--have legal 
access to water consistent with current levels of legal water use. 
These users include the North Unit Irrigation District and a number of 
smaller family irrigators. For water right holders who currently have 
access to stored water, whether through contracts or otherwise, my 
expectation is that they would utilize water identified in the ``first 
fill'' provisions of the legislation to satisfy their existing levels 
of legal water use.
    Based on this, T ask for your assistance in ensuring that any 
Bureau of Reclamation application for flow augmentation or instream 
water rights is conditioned on this outcome, and I foresee any such 
state-based flow augmentation or instream water right carrying forward 
the requested condition to protect existing levels of legal water use 
as described above, while still advancing a level of meaningful 
instream flow protection for fish and wildlife benefit.
    I understand the North Unit irrigation District is currently 
working on potential changes to its system of water management and 
water source. Providing the above protection is not intended to 
undennine or artificially enhance that effort with a right to water 
that at some point may not be needed. To be clear, the ``do no harm'' 
concept as conceived above would only apply to existing legal levels of 
use tied to existing water rights, and not to full paper water rights 
or future uses under future water rights. In addition, during dry years 
when water scarcity is an elevated concern, this concept is not 
intended to undermine the value of uncontracted water releases for 
downstream fish benefit or restrict efforts by irrigators and others to 
collaborate over voluntary dry-year management solutions that benefit 
fish. It would simply and importantly mean that existing irrigators 
have available to them the same access to the legal use of water as 
before the legislation takes effect. I support and am committed to 
working with the relevant parties to enter into a Memorandum of 
Understanding to memorialize this approach.
    In addition, the legislation's direction for managing uncontracted 
Prineville Reservoir water for the benefit of downstream fish and 
wildlife may affect seasonal reservoir levels and associated reservoir 
recreation. I expect that as a practical matter, the State, Tribes, and 
Bureau will collaborate with other relevant interests to assess and 
consider ways to address potential recreation, cultural resource, and 
safety impacts while still serving and achieving primary downstream 
fisheries benefits. If impacts to state investments in boat access and 
associated infrastructure will foreseeably occur on a repetitive basis, 
I expect the State, Bureau, our congressional delegation and others 
will work together on investments to mitigate these effects.
    Again, I commend you, your staff, and all the parties for their 
leadership and continued collaboration, and I look forward to working 
with you to advance the legislation in the final days of this Congress.
            Sincerely,
                                   John A. Kitzhaber, M.D.,
                                                          Governor.
                                 ______
                                 
  Statement of Stanley ``Buck'' Smith, Chairman, Tribal Council, the 
     Confederated Tribes of the Warm Springs Reservation of Oregon

    On behalf of the Tribal Council of the Confederated Tribes of the 
Warm Springs Reservation of Oregon, I am writing to express our strong 
support for S. 3483, Crooked River Collaborative Water Security Act--
introduced by Senators Merkley and Wyden.
    In short, this legislation is the result of countless hours of 
deliberation of a diverse group of local stakeholders. It helps resolve 
a decades-long question of how to balance water interests between 
municipal and irrigation users, while also ensuring the recovery of 
salmon, trout and steelhead in the Crooked River.
    Specifically, the Confederated Tribes believe that the ``first 
fill'' provision for irrigators is firmly balanced by the dedication of 
un-allocated water for downstream fish and wildlife. For both 
provisions to work and for the policy to be defensible in the future, 
we also believe the ESA provisions are appropriately and narrowly 
crafted. This will allow the collaborative management process to 
achieve ecological results with all stakeholders at the table.
    Thank you for scheduling a hearing on this landmark legislation.
                                 ______
                                 
Status Report on Mni Wiconi Project Sponsors' Negotiations With Bureau 
                       of Reclamation, on S. 3464

    This status report has been developed conjunctively and is offered 
on behalf of the Oglala Sioux Tribe, West River/Lyman-Jones, Inc., the 
Rosebud Sioux Tribe and the Lower Brule Sioux Tribe, the four 
beneficiaries and sponsors of the Mni Wiconi Rural Water Supply System 
in southwestern South Dakota (See Supplemental Testimony Dated 
September 2012).
    The Oglala and Rosebud Sioux Tribes sought good-faith resolution of 
conflicts between our positions and those of the Bureau of Reclamation 
on funding required to complete the remaining components of the Project 
and on community system rehabilitation where the testimony of the 
Sponsors and the Bureau of Reclamation was different. Documentation of 
the subjects presented in those discussions is provided in Attachments 
A, B, C: our position paper presented to the Bureau of Reclamation by 
letter dated October 29, 2012, the response of Commissioner Connor 
dated November 14, 2012, and our response to the Commissioner's letter 
dated November 21, 2012.
    In exchange for Reclamation support for the funding ($14.308 
million in October 2011 dollars) needed to complete the drinking water 
parts of the Oglala Sioux Rural Water Supply System (OSRWSS) and 
Rosebud Rural Water Supply System (RRWS) and for support to transfer 
40-plus Indian communities into the Project and to fund the operation, 
maintenance and replacement of those systems thereafter, as always 
intended, we offered to eliminate the following from S. 3464:

   Section 6 Mitigation of Fish and Wildlife Losses associated 
        with Pick Sloan dams,
   Section 7 (b)(1) related to reimbursement of the City of 
        White River for the Rosebud Sioux Tribe or members,
   Section 8 Wastewater Disposal Systems,
   Section 9 and Title II, Mni Wiconi Project Emergency 
        Assistance Planning Act.

    We were unsuccessful in changing Reclamation's opposition despite 
the facts that Reclamation has:

          1. spent, in part, and proposes to spend, in part, over 20% 
        (Attachment C, p. 2, paragraph 4) of the $14.308 million needed 
        to complete the drinking water systems on the Pine Ridge and 
        Rosebud Indian Reservations on its office building and 
        exorbitant oversight, both of which are outside the scope of 
        the project,
          2. failed to account for overhead costs between 2007 and 2013 
        in its Final Cost Containment Report that will consume $14.86 
        million funds that otherwise could have been used by OSRWSS to 
        complete its project and fund part of the community system 
        upgrades from construction and $8.71 million that could have 
        been used for the same purposes by RRWS,
          3. placed the greatest hardship of inadequate budgeting by 
        the Administration and appropriations from Congress on OSRWSS 
        due to its geographical location at the end of the project and 
        Reclamation policy that would not permit OSRWSS to build 
        concurrently with rural water systems closer to the Missouri 
        River and has placed a similar hardship on RRWS,
          4. created artificially high costs ($25 million) of community 
        system rehabilitation on 40-plus Indian communities to transfer 
        to OSRWSS, RRWS and LBRWS, as a pre-requisite for their 
        transfer and eligibility for operation, maintenance and 
        replacement (OMR) funds, and
          5. required unworkable provisions that (a) other federal 
        agencies fund the $25 million in rehabilitation costs or (b) 
        the Indian Sponsors use Reclamation construction funds to 
        rehabilitate community systems knowing that other federal 
        agencies are resisting participation and the funds are not 
        available from the authorized construction ceiling for Mni 
        Wiconi.

    We remain willing to work with the Bureau of Reclamation but must 
advise the Committee that S. 3464 is essential to complete our drinking 
water systems and transfer existing communities to the Indian rural 
water systems despite the inflexibility of the Bureau of Reclamation to 
alter its opposition.
                                 ______
                                 
                                                 November 21, 2012.

Michael Connor,
Commissioner, Bureau of Reclamation, U.S. Department of the Interior, 
        1849 C Street, NW, Room 7657, Washington, DC.
Re: Mni Wiconi Project

    Dear Commissioner Connor: Our meeting in San Diego on November 1, 
2012, with Deputy Commissioner Murillo was a pleasure. He received us 
graciously and listened attentively to our position on S 3464, the 
final amendment, if successful, of the Mni Wiconi Project Act. At the 
end of the meeting, he was very clear that the Department does not 
support S 3464, and he promised a letter from the Bureau of Reclamation 
in response to the position paper that we presented. While we were 
disappointed in the outcome, it was a very cordial meeting thanks to 
Deputy Murillo.
    Your response letter dated November 14, 2012, has been received and 
reviewed. The position of Reclamation was expected but highly 
disappointing. On behalf of the Oglala Sioux Rural Water Supply System 
(OSRWSS) and the Rosebud Rural Water System (RRWS) and with the support 
of the other sponsors, we would like to address the opposition of the 
Department to S. 3464.
    As our position paper presented, we are willing to remove the 
following provisions and associated costs from S. 3464:

   Section 6 Mitigation of Fish and Wildlife Losses associated 
        with Pick Sloan dams,
   Section 7 (b)(1) related to reimbursement of the City of 
        White River for the Rosebud Sioux Tribe or members,
   Section 8 Wastewater Disposal Systems,
   Section 9 and Title II, Mni Wiconi Project Emergency 
        Assistance Planning Act.

    The hope was that Reclamation would be willing to compromise if the 
Oglala and Rosebud Sioux Tribes were willing to compromise and 
significantly reduce the costs of S. 3464. We cannot understand why 
Reclamation cannot compromise on this extremely important project, even 
though the level of funding required to complete the project is limited 
to 3% of the total cost.
    As the basis for the decision that the Department cannot support S. 
3464, you expressed concern about adding to the scope of an existing 
project that is nearly complete.
    Nearly complete is not sufficient. Pursuant to Section 2(a)(5) of 
the Mni Wiconi Project Act the United States has a trust responsibility 
to ensure that adequate and safe water supplies are available to meet 
the economic, environmental, water supply and public health needs of 
the reservations. For the benefit of the members of the Oglala Sioux 
Tribe and the Rosebud Sioux Tribe, the drinking water project must be 
completed, and the current funding authority is inadequate. An 
additional $9.29 million is required to complete OSRWSS and an 
additional $5.68 million is required to complete RRWS, a total $14:96 
million in October 2012 dollars. This is not an addition to the scope 
of the project. It is the restoration of funding diverted for other 
purposes that is now needed to complete the scope of the project 
related to drinking water while foregoing additional funds to complete 
the scope of the project for livestock.
    Before you became Commissioner, the Bureau of Reclamation used $1.5 
million of our funding authority to build an office building in Pierre 
that was not contemplated in the Final Engineering Report (FER) of 
1994. This was a unilateral scope change in the project by Reclamation 
that diminished our ability to complete the drinking water project. 
Reclamation proposes an additional $1.5 million in costs to oversee the 
project in FY 2013 and FY 2014 even though the current funding 
authority extends only through FY 2013. The $3 million in the new 
office building and the oversight over the next 2 years accounts for 
approximately 20% of our need for additional funding to complete the 
project.
    The additional construction funds proposed in S. 3464, are not an 
expansion of the scope of the project. All facilities proposed in the 
additional construction funding are for purposes contemplated in the 
FER, unlike Reclamation's new office building in Pierre, which was an 
expansion of the existing project and not included in the FER. Our 
opposition to the expenditure on the office building only arises 
because Reclamation has opted not to support the additional 
construction funding needed to complete OSRWSS and RRWS. We are 
required to show the inconsistency of action and support from 
Reclamation.
    As presented throughout this, the overhead costs of administering 
the project after FY 2007 and community system upgrades were unbudgeted 
in Bureau of Reclamation's Final Cost Containment Report prepared in 
1999 that contemplated project completion in 2007. The extension of the 
project beyond 2007 due to inadequate budgeting by Reclamation and 
inadequate appropriations by Congress strung out the project through at 
least 2013 without amendment and through 2014 with amendment and has 
required all sponsors to divert funds needed for drinking water 
construction to cover unbudgeted overhead.
    The burden of extending the time to complete the project has fallen 
most sharply on OSRWSS and RRWS. West River/Lyman-Jones and the Lower 
Brule rural water systems were able to complete their projects earlier 
due to the construction sequence required by Reclamation between the 
Missouri River and the Pine Ridge Indian Reservation. Earlier 
completion reduced the years of unbudgeted overhead costs by those 
sponsors, and the last projects to complete construction (OSRWSS and 
RRWS) necessarily have experienced greater diversion of funds to 
overhead at the expense of project completion.
    On the Pine Ridge Indian Reservation, particularly, the entreaties 
of OSRWSS to allow construction of pipelines concurrently with other 
sponsors, even though those pipelines would be dry until the OSRWSS 
core system could be constructed from the Missouri River to the 
Reservation, were met with Reclamation disapproval. When the OSRWSS 
core system reached the northeast corner of the Pine Ridge Indian 
Reservation in 2009, only 40% of the distribution system, all dependent 
on groundwater, had been constructed. The Lower Brule Rural Water 
System was complete, the West River/Lyman-Jones Rural Water System was 
nearly complete, and the Rosebud Rural Water System was 70% complete: 
Whether Reclamation policy on construction sequence was appropriate or 
not, the effect on OSRWSS was that the burden of completing the project 
was the greatest as was the deduction of overhead costs from the funds 
available for construction. This was the fear our tribal members 
expressed in 1992 when they rejected the Mni Wiconi Project by 
referendum on the basis that the United States could not be trusted to 
finish the project on the Pine Ridge Indian Reservation after the non-
Indian service areas had been completed.
    S. 3464 addresses the inequity of completing the project last for 
both the OSRWSS and RRWS systems.
    Transfer of existing community systems to the Indian rural water 
systems for operation, maintenance and replacement funding eligibility 
was a cornerstone of the original project. Recently, and without 
previous identification as a need in the Reclamation's Final Cost 
Containment Report prepared in 1999, Reclamation has identified $25 
million in upgrades as a pre-requisite for transfer to the respective 
Indian rural water systems: OSRWSS, RRWS and LBRWS. This has the effect 
of withholding project OMR funds from over 40 community systems.
    Your letter makes transfer virtually impossible by conditioning 
support of S. 3464 on funding from other federal agencies to 
``rehabilitate'' those systems to ``reasonable standards.'' 
Alternatively, your letter would approve the use of Reclamation 
construction funds within the project ceiling but opposes an increase 
in the construction funding ceiling. Either option is unworkable.
    We are committed to working with you to obtain funds from other 
agencies for community system rehabilitation but not as a pre-requisite 
to transfer and project OMR funding. It is unthinkable that Congress 
would invest $460 million in the Mni Wiconi Project and allow 40 plus 
Indian community systems to fall into disrepair because Reclamation is 
unwilling to transfer systems in good, workable condition into the 
project and to fund future OMR unless (1) other federal agencies bring 
existing community systems to a ``Cadillac'' condition by expending $25 
million or (2) Reclamation construction funds in the amount of $25 
million are used, which are outside the construction ceiling and which 
Reclamation opposes as an addition to the ``scope'' of funding for the 
project.
    The $25 million in ``rehabilitation'' of community systems is not 
within the realm of reasonable expectation of funding from other 
federal agencies. Reclamation posture seems to be a clever innovation 
to frustrate transfer and the eligibility of the community systems for 
Reclamation OMR budgeting and funding. Each of the 40 plus community 
systems is currently a functional system and is in such a state of 
repair to successfully distribute water received from the new 
Reclamation rural water systems. We feel the systems should be 
transferred in their current state of repair, which would make them 
eligible for OMR funding.
    Thank you, and please do not hesitate to contact me if you have any 
questions or would like additional information.
            Sincerely,
                                               Frank Means,
                                                   OSRWSS Director.

                                    
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