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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
                        H.R. 1985 AND H.R. 2404
=======================================================================

                          LEGISLATIVE HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                             July 26, 2001
                               __________

                           Serial No. 107-53
                               __________

           Printed for the use of the Committee on Resources

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
         Committee address: http://resourcescommittee.house.gov

                    U.S. GOVERNMENT PRINTING OFFICE
                             WASHINGTON : 2002
____________________________________________________________________________
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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                       Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana     Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON WATER AND POWER

                   KEN CALVERT, California, Chairman
            ADAM SMITH, Washington, Ranking Democrat Member

 Richard W. Pombo, California        George Miller, California
George Radanovich, California        Peter A. DeFazio, Oregon
Greg Walden, Oregon,                 Calvin M. Dooley, California
  Vice Chairman                      Grace F. Napolitano, California
Michael K. Simpson, Idaho            James P. McGovern, Massachusetts
J.D. Hayworth, Arizona               Hilda L. Solis, California
C.L. ``Butch'' Otter, Idaho          Brad Carson, Oklahoma
Tom Osborne, Nebraska
Jeff Flake, Arizona
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 26, 2001....................................     1

Statement of Members:
    Calvert, Hon. Ken, a Representative in Congress from the 
      State of California........................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Carlson, Peter, President, Will & Carlson, Inc...............    59
        Prepared statement of....................................    70
    Gastelum, Ronald R., CEO, Metropolitan Water District of 
      Southern California........................................    35
        Prepared statement of....................................    37
    Guy, David J., Executive Director, Northern California Water 
      Association................................................    44
        Prepared statement of....................................    46
    Hannigan, Thomas M., Director, California Department of Water 
      Resources..................................................    16
        Prepared statement of....................................    18
    Koehler, Cynthia L., Legal Director, Save San Francisco Bay 
      Association................................................    40
        Prepared statement of....................................    42
    Luddy, William G., Director, Labor Management Education and 
      Development Fund, United Brotherhood of Carpenters and 
      Joiners of America.........................................    51
        Prepared statement of....................................    52
    Norton, Hon. Gale, Secretary, U.S. Department of the Interior     5
        Prepared statement of....................................     8
    Schulz, Clifford W., Special Water Counsel, Kern County Water 
      Agency.....................................................    72
        Prepared statement of....................................    74
    Sunding Dr. David L., Director, Center for Sustainable 
      Resource Development, University of California at Berkeley.    54
        Prepared statement of....................................    55

  HEARING ON H.R. 1985, FUNDING FOR IMPLEMENTATION OF A COMPREHENSIVE 
      PROGRAM IN CALIFORNIA TO ACHIEVE INCREASED WATER YIELD AND 
 ENVIRONMENTAL BENEFITS, AS WELL AS IMPROVED WATER SYSTEM RELIABILITY, 
   WATER QUALITY, WATER USE EFFICIENCY, WATERSHED MANAGEMENT, WATER 
 TRANSFERS, AND LEVEE PROTECTIONH.R. 2404, TO AUTHORIZE FEDERAL AGENCY 
    PARTICIPATION FOR THE PURPOSES OF INCREASING DELIVERABLE WATER 
   SUPPLIES, CONSERVING WATER AND ENERGY, RESTORING ECOSYSTEMS, AND 
       ENHANCING ENVIRONMENTAL QUALITY IN THE STATE OF CALIFORNIA

                              ----------                              

                        Thursday, July 26, 2001
                       House of Representatives,
                    Subcommittee on Water and Power,
                        Committee on Resources,
                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 2 p.m., in Room 
1324, Longworth House Office Building, Hon. Ken Calvert 
[Chairman of the Subcommittee] presiding.

  STATEMENT OF THE HONORABLE KEN CALVERT, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Calvert. Good afternoon, Madam Secretary. This hearing 
will come to order. An adequate supply of high quality water is 
vital to the people of this Nation, especially in the west. We 
must provide for the environment, enhance ecosystems, while 
also supplying high-quality drinking water to businesses and 
millions of residents.
    Furthermore, we need to abide by the commitment laid down 
in the CALFED record of decision to deliver to existing 
agricultural users south of the Delta. We can achieve all these 
goals and carefully balance the use of existing water through 
conservation, water recycling, and the development of new water 
yield and supply. That is at the heart of what I believe, and 
it is embodied in HR 1985, the solution to improve our water 
security.
    H.R. 1985, which I introduced along with more than half of 
my California colleagues from throughout the State of 
California, is a broad-based solution which addresses all 
aspects of putting water security on a more solid foundation in 
California and the west.
    H.R. 1985 authorizes and supports the CALFED record of 
decision and associated programs, and further addresses our 
water security needs throughout the west. As you are aware, I 
chose not to authorize any specific projects in this 
legislation. I did this to ensure that a fair process can be 
developed to meet all the competing demands of water users. I 
also recognize it is time we stop pitting one interest group 
against another.
    I certainly would have liked to specifically authorize the 
development of new water yield in the State because there are a 
number of worthy projects that would create new water and 
efficiently reuse existing water supplies; however, we need to 
assure that all competing water users rise and fall together, 
and not to leave anyone behind has been done so frequently in 
the past with Federal water policy in California.
    H.R. 1985 calls on State and Federal agencies working in 
close consultation with the public and local stakeholders to 
develop a governance structure that will assure proper balance 
among competing water interests. Parallels between the power 
crises and water have been drawn, and for good cause. Over the 
last decade, the demand for electricity in California grew by 
25 percent, while new power protection grew by only 6 percent. 
The results: Wholesale energy prices that averaged $30 a 
megawatt hour last year averaged $330 in January of 2001, and 
ultimately adequate electricity was not available, and people 
went without as blackouts rolled across California.
    What will be the reaction if we allow the water situation 
to escalate to the same proportions? Remember when managing 
water, we're dealing with a finite supply, electricity can be 
created but not stored while water can be stored but not 
created. We do not have the power to make the skies open upon 
request and produce rain. Today we are looking for ways to make 
more water available for the ecosystem. We are facing 
agriculture water supplies that continue to diminish. Business 
in California are concerned about water security, and at the 
same time, we must reduce our dependance on the Colorado River 
by 15 percent in the next 15 years. In those same 15 years, 
California's population is projected to grow by 30 percent.
    The message is clear. Inaction will inevitably lead to a 
serious water crisis, much worse than the electricity crisis 
today. This debate cannot afford to have any spectators. Water 
is essential to every person, every day, in every facet of 
life. From the dot com companies in Northern California to the 
farming operations in the Central Valley, to the tens of 
millions of consumers in Southern California, all Californians 
need to be proactive supporters of measures that will 
responsibly manage and improve our water supplies.
    I, along with 100 cities, have a big book here of counties, 
associations, elected officials, including the Association of 
California Water agencies, Orange County Water District, Ducks 
Unlimited, Long Beach Water Department, California Women for 
Agriculture--the list goes on, of concerned folks looking for 
people to come up with solutions and who all support H.R. 1985.
    I certainly appreciate the level of detailed engagement 
from the Department of Interior, which is the fruit of many 
meetings I have had with the Secretary and staff.
    Madam Secretary, I appreciate your personal engagement on 
this issue and will carefully evaluate all of your constructive 
comments. This exchange now gives us the opportunity to move 
forward with a balanced approach in order to improve the water 
situation in California, and certainly in the entire west. I 
believe the only viable solution to water issues in the west 
will be found in the compromise between H.R. 1985, Senator 
Feinstein's legislation, certainly the Bush administration's 
proposals, along with consulting with many others. These three 
positions define the parameters, what is responsible and more 
importantly what is possible.
    With that, I will now recognize the ranking member, Adam 
Smith.
    [The prepared statement of Mr. Calvert follows:]

  Statement of Ken Calvert, Chairman, Subcommittee on Water and Power

    An adequate supply of high quality water is vital to the people of 
this Nation. We must provide for the environment and enhance 
ecosystems, while also providing high quality drinking water to 
businesses and more than 33 million residence. Furthermore, we need to 
abide by the commitment, laid down in the CALFED Record of Decision, 
that water deliveries to existing agricultural users south of the delta 
be 70% of their contracted amounts in a normal water year. We can 
achieve all these goals, and carefully balance the use of existing 
water, through conservation, water recycling, and the development of 
new water yield and supply. That is at the heart of what I believe, and 
it is embodied in H.R. 1985, the solution to improve our water 
security. This bill, introduced by more than half of my California 
colleagues from throughout the State, is a broad-based solution of 
working on all aspects of putting water security on more solid 
foundations in California and the West. The ``Western Water Security 
Enhancement Act'', authorizes and supports the CALFED Record of 
Decision and associated programs, and further addresses our water 
security needs throughout the west.
    As you are all aware I chose not to authorize any specific 
projects. I did this to ensure that a fair process can be developed to 
meet all the competing demands of water users. Even though I chose this 
direction, I wish I could have specifically authorized the development 
of new water yield in the State. But I also recognize it is time we 
stop pitting one interest group against another. We need to assure that 
all competing water users grow together, and not leave anybody behind, 
as has been done so frequently in the past with Federal water policy in 
California. The bill calls on State and Federal agencies, working in 
close consultation with the public and local stakeholders, to develop a 
governance structure that will assure proper balance among competing 
water interests.
    Parallels between the power crisis and water have been drawn, and 
for good cause. Over the last decade, the demand for electricity in 
California grew by 25%, while new power production grew by only 6%. The 
results--
     Lwholesale energy prices that averaged $30 per megawatt 
hour last year averaged $330 in January of 2001.
     LAnd, ultimately, adequate electricity was not available 
and people went without it as blackouts rolled across California.
    What will the reaction be if we allow the water situation to 
escalate to the same proportions?
    Today we are looking for ways to make more water available for the 
ecosystem...
    Today we face agricultural water supplies that continue to 
diminish, and other businesses in California are stating concern about 
water security--while we have not built any noteworthy water supply 
projects in 25 years.
    Over the next 15 years, while we must reduce our dependance on the 
Colorado River by 15%, the population in California is projected to 
grow by 30%!
    The message is clear--Inaction means letting the crisis come to 
full affect. Groups that sit idle on the sidelines because they don't 
see this process impacting them should measure carefully the long-term 
risk of failure.
    It is imperative that we move forward a balanced approach to 
improve the water situation in California by authorizing CALFED and 
increasing supply throughout the state.
                                 ______
                                 
    Mr. Smith. Thank you, Mr. Chairman. I will actually yield 
my time to Mr. Miller. I'm not from California. I'm here to 
learn.
    Mr. Miller. You can send us your water, though, you know.
    Thank you very much. And Madam Secretary, welcome and 
Director Hannigan, welcome and thank you for taking your time 
to share your testimony and thoughts on this matter. And Mr. 
Chairman, thank you for this hearing and for the previous 
hearings that you have held, and I think it's important, as you 
have stated, that we give prompt consideration to this 
legislation and to continuing our efforts under the CALFED 
process.
    I have believed for a long time, and continue to believe, 
that the CALFED really is our best opportunity, that we were 
able to bring people together and to provide stakeholders an 
opportunity, which historically may not have always been 
provided in California, but out of doing that and during that 
process, I think we have reached a consensus, a near consensus 
on what needs to be done. We are arguing a little bit about who 
goes first and where we go and the rest of that, but I think 
there is a commitment within the delegation that we hold that 
process together.
    Last week we had our hearing over in the Senate on Senator 
Feinstein's legislation and Madam Secretary, you testified, and 
others did and as a result of that hearing, discussions are 
continuing about how we bring together and reconcile our 
differences. The Senator stated that was an open process, and 
Chairman Calvert has made it very clear to members of this 
Committee that he seeks to work with all of us to try and 
resolve our differences, because it is very clear no matter how 
much support we have in California, we have to sell that to our 
colleagues in the United States Senate and to the U.S. House of 
Representatives, and this is not an inexpensive piece of 
legislation, and the competition is rather dramatic, and unless 
we have a great deal of unity, I think our chances of success 
are greatly diminished.
    And I think that is what hopefully this hearing is about, 
and the ongoing consultations with Chairman Calvert and the 
others will be about minimizing those differences.
    My outlook on water I think is fairly known to the players 
in California. So I won't go back through that, but I want to, 
again, say to Chairman Calvert, I appreciate your talking on 
this effort. I sat where you sat, and I know that this is a 
very difficult and controversial job, but it needs to be done 
for the benefit of our State.
    Let me just state a couple of points that I made in the 
testimony in the Senate, and that is, I continue to be troubled 
by the so-called South of Delta Water Assurances that I think 
dramatically alters the position of water rights holders in the 
State of California, and I do not think that that was the 
purpose or the outcome of the ROD, and I do not believe that we 
necessarily can do that, or we cannot do that in this 
legislation and alter the status of those historical parties.
    And I also mentioned over there and I continue to express 
that concern here with this legislation on this Committee, also 
the question of how we go about getting the approval of these 
projects. I disagreed with the approach that Senator Feinstein 
sought to take in the sense that I think we have got to make 
sure that everybody in the State understands that this 
process--while we may want to expedite it and I don't have a 
problem with doing that, we have got to make sure that people 
have a fair and open opportunity to be involved in that process 
in terms of amendments.
    The suggestion that somehow we would take feasibility 
studies sight unseen and then the question would only be up or 
down on that, I think doesn't enhance our opportunities for 
success, it diminishes our opportunities for success.
    And I think, again, when you look at all the other projects 
in this country and the question of whether or not California 
gets to go in this expedited fashion, it better be a process 
that treats all of the stake holders in a fair fashion. Those 
are matters for continued discussion and negotiations, and I 
hope that we can resolve them, and I again give the caveat that 
in one case, maybe one of the premier projects in this loss of 
Carol's Reservoir, we will have to go, as a matter of law, to a 
local referendum on that matter, and we have got to make sure 
that all parties to that decision feel like this was a fair or 
an open process, so they had an opportunity to be heard so that 
we can get the vote required to proceed with that project.
    So thank you very much, Mr. Chairman, and I look forward to 
the testimony.
    Mr. Calvert. I thank the gentleman. Our first--we are 
pleased and honored to have the Secretary of the Department of 
Interior, the Honorable Gale Norton, and Mr. Thomas Hannigan, 
the director of California Department of Water Resources, who 
is accompanied by Mr. Patrick Wright, director of the CALFED 
Bay-Delta program. And with that we are pleased to recognize 
Secretary Norton for any time you may consume.

 STATEMENT OF HON. GALE NORTON, SECRETARY, U.S. DEPARTMENT OF 
                          THE INTERIOR

    Secretary Norton. Thank you, Mr. Chairman, members of the 
Committee. I am pleased to join you today to provide the 
Department's testimony on H.R. 1985, the Western Water 
Enhancement Security Act, and H.R. 2404, the California Water 
Quality & Reliability Act of 2001. Mr. Chairman, I ask 
permission to submit my full remarks for the record and 
summarize the Department's position here.
    Title I of H.R. 1985 and H.R. 2404 both address 
implementation of the CALFED Bay-Delta program, a comprehensive 
balanced and timely water management environmental restoration 
program in California. The stakes could not be higher because 
the Bay-Delta is an area of critical environmental importance 
as well as the hub of the State's water supply system, 
providing drinking water for more than 22 million Californians, 
important habitat for over 750 plant and animal species, 
irrigation water for the most of the $27 billion agricultural 
sector, and water essential to the manufacturing and commercial 
sectors of the State.
    Early in my term as Secretary, I visited California and had 
the opportunity to fly around and see all of the projects that 
are a part of the existing Central Valley Project and other 
aspects of CALFED. It's very important, and I take seriously, 
our responsibility to understand and to play our role within 
this process. The administration supports CALFED's goals of 
increasing water yield, protecting the environment, improving 
water system supply reliability and water quality, and 
providing watershed management, levee protection, water 
transfers, storage, and conveyance.
    As this Committee can well appreciate, our new 
administration faced a substantial number of major resource 
issues of high priority. In the area of water, virtually every 
western State has issues of concern and controversy demanding 
our attention. With the recent confirmation of assistant 
Secretary for Water and Science, Bennett Raley, and John Keys, 
the new commissioner for the Bureau of Reclamation, we are able 
to begin dealing substantially with many of these issues.
    In addition, we anticipate having Craig Manson join us as 
Assistant Secretary for Fish, Wildlife, and Parks. He is from 
California and used to be general counsel for the California 
Department of Fish and Game, as well as Steve Williams as 
director of the Fish and Wildlife Service. All of them will 
play an important role on the Department of Interior's work on 
CALFED.
    In the Columbia River, the Colorado River and in the 
Central Valley of California, among others, we are beginning 
our examination of multi-year, multimillion dollar planning and 
negotiation efforts. On all of the matters before us, one 
conclusion is uniformly applicable. We will continue to work 
toward solutions, and we will make decisions that reflect the 
President's commitment to the balanced and sensible resolution 
of resource issues across our Nation.
    In the case of CALFED, we support the comprehensive and 
integrated nature of the proposed actions and the commitment to 
a credible science program to support the decision-making 
process. The manner in which Federal and State administrators 
have worked together is a model that we hope to employ 
throughout the west. Clearly significant progress has been made 
in the dedication of State and Federal moneys for ecosystem 
improvements in the Sacramento San Joaquin Delta and the San 
Francisco Bay.
    On the Federal side, Congress has appropriated nearly $500 
million in total for CALFED-related efforts for Central Valley 
Project Improvement Act and CALFED initiatives. Outstanding 
issues still need resolution and we are committed to finding 
those solutions with this Committee, with Congress, with 
Governor Davis, and with the stakeholders who have been 
actively involved.
    Let me now turn to some of the specific issues. With regard 
to Title I of H.R. 1985, which would authorize funding through 
the Secretary of Interior as well as governance and management 
authorities for the implementation of CALFED, we support the 
purposes and many provisions of the bill. We also have a number 
of concerns with the bill as written, and we believe some 
modifications are needed.
    Mr. Chairman, we recognize your efforts to embody the 
balanced approach that is at the heart of the CALFED process, 
and we appreciate the opportunity to work with you on that. As 
detailed in my written testimony, in the case of water delivery 
assurances, the proposed legislation sets a floor on the water 
delivery commitment made in the record of decision for south of 
Delta's Central Valley project agricultural service 
contractors. No analysis has currently been completed to 
demonstrate what level would be possible when CALFED is 
implemented. We look forward to working with you to find ways 
of providing predictability for water users.
    In addition, we would like to work with the Committee on 
broader allocation of appropriations among affected agencies, 
on language regarding the successful operation of the 
environmental water account to reduce conflicts between 
fisheries and water project operators and other provisions of 
Title I.
    For my testimony of Title II on H.R. 1985, which would 
authorize small reclamation projects funded through grants and 
loans, my written testimony provides more details. This Title 
raises some budget implementation and administrative questions 
for the Bureau of Reclamation. We generally support efforts to 
provide assistance to small nonFederal water users in 
constructing and rehabilitating their irrigation projects and 
in carrying out restoration activities. This is often 
preferable to having the Federal Government take on the 
responsibility for constructing and for fully operating 
projects. The administration, at this time, withholds our full 
support for Title II. But we want to work with the Subcommittee 
and others on this proposal.
    With regard to H.R. 2404, like Title I of the other bill, 
this would authorize the CALFED program for implementation. The 
bill provides important benefits by striving to increase the 
reliability of water supplies and providing governance and 
coordination authority; however, our concerns with this bill 
include that it focuses only on the Department of the Interior 
and should better recognize the roles of nonInterior agencies 
and the importance of the Federal/State partnership. We believe 
it needs a more comprehensive approach to increasing water 
supply reliability.
    Although regional solutions are important, they alone will 
not be able to accomplish the larger scale objectives of the 
record of decision. The language on pumping reductions from the 
Harvey Bank's Pumping Plant seems to impose overriding Federal 
policy on a State plant. Reductions at that plant and at Tracy 
Pumping Plant conflict with CALFED water supply reliability 
objectives.
    Returning to the big picture, the history of the settlement 
of California and the ensuing development of water resources is 
full of political and legal battles. Although agreement on 
water management may not be immediate, the CALFED program is a 
step in reaching a common vision. CALFED represents a new 
approach to an old problem. By combining the interests of State 
and Federal agencies with regulatory power over the Bay-Delta 
and with those of urban, environmental, and agricultural users, 
the CALFED program is moving California toward more equitable 
and efficient water and ecosystem management.
    Continued implementation of CALFED offers the opportunity 
for a long-term solution to the critical problems confronting 
the Bay-Delta. Specifically, the Department will continue to 
operate the Central Valley project in accordance with the 
provisions of the State's water quality control plan, the 
Central Valley Project Improvement Act, the Endangered Species 
Act, and other applicable statutes. The Department is aware of 
the importance of meeting its environmental commitments and the 
importance to water users of adequate water supply reliability. 
For these reasons, the Department will continue to work through 
the CALFED process to improve the environment and to increase 
the system's water management flexibility. We believe the 
Subcommittee is seeking to offer a balanced approach toward 
implementing the record of decisions commitments and to 
facilitate the Federal Government's continued participation in 
the CALFED program. We look forward to working with the 
Committee and others in Congress to address the 
administration's concerns. Thank you very much.
    [The prepared statement of Secretary Norton follows:]

  Statement of Hon. Gale A. Norton, Secretary, U.S. Department of the 
                                Interior

    I am pleased to appear before this Subcommittee to provide the 
Department's testimony on H.R. 1985, the Western Water Enhancement 
Security Act, and H.R. 2404 the California Water Quality and 
Reliability Act of 2001.
    Title I of H.R. 1985 would authorize funding through the Secretary 
of the Interior, as well as governance and management authorities, for 
the implementation of a comprehensive, balanced, and timely water 
management and environmental restoration program in California commonly 
referred to as the CALFED Bay-Delta Program, as reflected in the 
Federal Record of Decision (ROD) issued August 28, 2000. The purpose of 
the program is to increase water yield and environmental benefits, as 
well as improved water system reliability, water quality, water use 
efficiency, watershed management, and levee protection, water 
transfers, storage, and conveyance.
    H.R. 2404 also addresses the implementation of CALFED. My comments 
on this bill follow my comments on Title I of H.R. 1985.
    Title II of H.R. 1985 would authorize small reclamation projects 
funded through grants and loans, including loans guaranteed by the 
United States government. My comments on title II of H.R. 1985 follow 
my comments on H.R. 2404. We note that both titles of H.R. 1985 would 
be quite expensive, as would other CALFED legislation before the 
Congress.
                     TITLE I OF H.R. 1985 - CALFED
    Mr. Chairman, I would like to express my deep appreciation to the 
Committee for your obvious commitment to making significant progress 
with the CALFED program. I also appreciate the consistent concerns 
demonstrated by this Committee that progress be made and for your 
efforts in developing the bill being considered today. Your continued 
willingness to work with the Department and the Administration on this 
matter is of real and continuing importance to us.
    As the Committee can imagine, our new Administration faced a 
substantial number of major resource issues of high priority upon 
assuming office. In the area of water, virtually every western state 
has issues of concern and controversy demanding our attention. With the 
confirmation of Assistant Secretary for Water and Science Bennett Raley 
and Commissioner of Reclamation John Keys we are able to begin dealing 
substantively with many of the issues before us. We await the 
nomination and confirmation of Craig Manson as Assistant Secretary for 
Fish and Wildlife and Parks and Steve Williams as Director for the Fish 
and Wildlife Service to further assist interagency efforts.
    On the Columbia River, the Colorado River and in the Central Valley 
of California, among others, we are beginning our examination of the 
results of multi-year, multi-million dollar planning and negotiation 
efforts. We are looking not only at the results of these enormous work 
efforts but also at the process used, both internal and external, and 
the information that was relied upon to make decisions. In addition we 
are examining the data which provided insight on the biological and 
socio-economic consequences of these major resource initiatives.
    On all of the matters before us, one conclusion is uniformly 
applicable: we will continue to work toward solutions and we will make 
decisions that reflect the President's commitment to the balanced and 
sensible resolution of resource issues across our Nation.
    In the case of CALFED, we find that the comprehensive and 
integrated nature of actions proposed and the commitment to the 
development of a credible science program in support of the decision 
making process are all laudable. The manner in which federal and state 
administrations have worked may be considered a model for solutions to 
resource management problems.
    Likewise, we feel that we can secure similar success in achieving 
the goals of CALFED in the context of our responsibilities in all 
western states.
    Clearly, significant progress has been made in the dedication of 
state and federal monies for ecosystem improvements in the watersheds 
that constitute the Sacramento-San Joaquin Delta and the San Francisco 
Bay. On the Federal side, Congress has appropriated nearly $500 million 
for CALFED related efforts, for Central Valley Project Improvement Act 
and CALFED initiatives focused on improving the aquatic and terrestrial 
habitats of the CALFED solution area.
    A Record of Decision is in place that captures years of planning on 
all program elements of ecosystem restoration, levee system integrity 
and improvement, water supply and reliability improvements, water 
quality improvement, improved water use and efficiency, improvements to 
the upper watersheds, water transfers, storage, and conveyance.
    Congress needs to authorize the CALFED program so we can proceed 
with balanced progress on all resource fronts. The Department also 
recognizes that outstanding issues are still in need of resolution and 
we are committed to finding those solutions expeditiously and in 
concert with this Committee, with the Congress, the administration of 
Governor Davis and the stakeholders who have been so actively and 
constructively involved.
    H.R. 1985 is an important step forward. Clearly, additional 
authorizing legislation would be required to proceed with the complete 
program. We support the purposes and many of the provisions of the 
bill. However, we also have a number of concerns with the bill as 
written, and we believe some modifications are necessary. We would like 
to continue working with the Committee to achieve a bill we can fully 
support and which will implement the CALFED.
    The results of the CALFED planning process reflect an attempt to 
balance competing needs and interests. The CALFED planning process 
brought together agricultural, urban, environmental and business 
stakeholders with the state and federal agencies in an effort to build 
agreements on the approaches to managing California's complex water and 
natural resource issues. We recognize that solutions to any set of 
problems as large and interconnected as those facing California will be 
complex. However, all interests must respect the needs and concerns of 
others. The CALFED ROD attempts to recognize the core interests of all 
the parties and build a solution that reduces the conflicts in the 
existing and long-established system and to balance competing interests 
for comprehensive progress. In addition, consideration should be given 
to analysis of impacts of the ROD on tribal trust assets, as discussed 
in the ROD. With the support of Congress and the State of California, 
CALFED can lead the way in a collaborative process that includes 
extensive participation of all stakeholders to provide many long-term 
solutions to California's water management and infrastructure 
improvement needs.
    The ``Fed'' side of the CALFED Program demonstrates a cooperative 
planning and coordination effort among ten Federal agencies, including 
U.S. Fish and Wildlife Service, the U.S. Bureau of Reclamation, the 
U.S. Geological Survey, and the Bureau of Land Management, within the 
Department of the Interior, as well as the U.S. Environmental 
Protection Agency, National Marine Fisheries Service, U.S. Forest 
Service, Natural Resources Conservation Service, within the Department 
of Agriculture, U.S. Army Corps of Engineers, and Western Area Power 
Administration.
                     CALFED history and background
    The CALFED Bay-Delta Program is a response to the water management 
and ecosystem problems that came so clearly into focus in the drought 
of 1987 to 1992 experienced within the Bay-Delta system. Furthermore, 
the historic and ongoing conflicts between water management for supply 
and fishery protection give rise to the urgency of the CALFED program. 
The waters of Sacramento and San Joaquin Rivers converge in the 
Sacramento-San Joaquin Delta, which is the largest estuary in the West 
Coast, and discharges into the San Francisco Bay and to the Pacific 
Ocean. The Bay-Delta is a maze of waterways and channels that carry 
over 40 percent of the State's total runoff to the Bay and provides 
drinking water for more than 22 million Californians, important habitat 
for over 750 plant and animal species, irrigation water for most of the 
$27 billion agricultural sector, and water essential to the 
manufacturing and commercial sectors of the State. Over the past 
decades, California has witnessed declines in water quality, fish, 
wildlife and associated habitat, and the reliability of water supplies. 
The goals of CALFED, which the Administration fully support, are to 
reverse all these trends.
    In December 1994, the State and Federal governments signed the Bay-
Delta Accord, which signaled a new approach to managing the Delta and 
finding solutions to longstanding problems in California. In 1995, 
CALFED was initiated as a cooperative, interagency effort to reduce 
conflicts in the Bay-Delta, modernize water management and 
infrastructure, and to make investments aimed at reducing stressors for 
species and improving the habitat. The CALFED Program has been 
envisioned as a three-phase process:
     LPhase I objectives were to identify and define the 
problems confronting the Bay-Delta System and develop a mission 
statement, program objectives, and alternative actions for further 
study. During Phase I CALFED concluded that each program alternative 
would include a significant set of program actions which were grouped 
into elements to address problems associated with the ecosystem and 
water management infrastructure.
     LPhase II objectives were to develop a preferred program 
alternative, conduct a comprehensive programmatic environmental review 
process, and develop an implementation plan focusing on the first 7 
years (Stage 1 of implementation). Phase II objectives were achieved 
through issuance of the Final Programmatic Environmental Impact 
Statement/Environmental Impact Report (IS/EIR) in July 2000 and a 
Record of Decision signed on August 28, 2000.
     LCALFED is currently in Phase III, a long-term process 
implementing specific actions to achieve the goals of the CALFED 
program. Phase III objectives are to implement the plan selected in the 
IS/EIR over the next 25 to 30 years. Stage 1 of implementation, for the 
first 7 years, is underway. Site-specific, detailed environmental 
review and feasibility level analysis will occur during Stage 1 prior 
to implementation of each proposed action.
                     CALFED Program Accomplishments
    In the past several years substantial progress has been made on a 
number of complex water and natural resource issues through the 
combined efforts of the public and state and federal agencies working 
together as CALFED. The greatest accomplishment of the CALFED effort so 
far is bringing all the State and Federal agencies together to produce 
the CALFED Record of Decision, signed on August 28, 2000, which 
documents the comprehensive plan for improving California's water 
supply and water quality, as well as restoring ecological health in the 
Bay Delta. This Committee has received copies of the most recent annual 
report of accomplishments which details progress in many CALFED program 
areas. We particularly would like to bring your attention to the many 
creative approaches to addressing historic areas of conflict such as 
the Environmental Water Account.
    Also of interest is the CALFED Science Program. We expect this 
program to provide peer review of the science and information 
underlying all elements of the CALFED program from adaptive management, 
to ecosystem improvement projects, to project operations and beyond, we 
expect CALFED to be supported by a strong and credible science program.
    Public workshops have been and are being undertaken by the program 
on scientific components of public controversies and are clarifying the 
state of scientific knowledge, thereby reducing the level of 
controversy. In the near term, these workshops include issues 
associated with Delta Cross channel operations, effectiveness of the 
Environmental Water Account for salmon and Delta smelt, salinity 
effects of levee breaches, and the use of scientific adaptive 
management. Additional workshops will be undertaken as topics are 
identified.
                             CALFED Funding
    From fiscal year 1998 to fiscal year 2000, Congress appropriated 
$190 million for the CALFED Ecosystem Restoration Program and an 
additional $30 million for other program elements, including projects 
to improve water supply reliability. These funds were provided through 
an account in the Bureau of Reclamation budget, but funding for 
specific projects or programs has been transferred to participating 
Federal agencies based on plans developed by CALFED. As noted above, 
CALFED agencies have used these and other funds to screen water 
diversions for the benefit of fish and farmers, restore degraded 
habitat, establish an environmental water program, develop conjunctive 
use projects and develop a state and federal water operations plan. No 
funds were provided for this account in fiscal year 2001, largely 
because the appropriations committees deferred to the authorizing 
committees to review the Program and develop any needed legislation.
    The ROD outlines a partnership of State, Federal, and private 
funding, and estimated that a total of $8.7 billion from state, 
federal, and private sources would be needed for the Program's 
implementation. According to Governor Davis, the State is moving 
forward to finance and implement actions called for in the ROD. In 
order to support the Federal side of this unique partnership, it is 
important that appropriate legislation be enacted to authorize Federal 
Government participation as contemplated by the ROD.
                         Benefits of H.R. 1985
    The Bay Delta is the hub of the State's water supply system and an 
area of unsurpassed ecological importance. Single-purpose efforts to 
solve problems in the past have failed to adequately address the 
comprehensive nature of the Bay-Delta resources and problems and the 
conflicts between supply and demand. H.R. 1985 would provide 
authorization for continued Federal participation in the CALFED Bay-
Delta Program and to meet Record of Decision commitments. As such, the 
Administration supports many elements of this bill, recognizing that 
some modifying language may be needed.
    In particular we are supportive of several primary principles 
outlined in the bill.
    Authorization of Federal Funding for CALFED - As discussed above, 
we support the authorization of federal funds and continued federal 
participation for CALFED to meet Record of Decision commitments as an 
important part of the continuing partnership.
    Increased Storage and Water Supply Reliability - The authorizing 
language provides a commitment to the programmatic finding of the need 
for additional storage. Increased storage may reduce conflicts and 
increase system flexibility and can be used to benefit all CALFED 
program areas. Storage will allow water to be captured during periods 
of excess flow and used to reduce diversions during fish sensitive 
periods or when water quality in the Delta is poor. In particular, the 
legislation would provide or affirm Reclamation's authorization to 
conduct feasibility level studies at Shasta Dam, Los Vaqueros 
Reservoir, Upper San Joaquin River, Sites Reservoir, San Luis Bypass 
and In-Delta Storage.
    Environmental Water Account - The legislation provides for the 
continued implementation of the Environmental Water Account (EWA). The 
EWA will improve the responsible management of water supplies for all 
purposes. Water generated with an EWA will benefit all areas by 
increasing the flexibility of the water system. However, we have 
concerns over some EWA language in the bill, noted below, and we would 
like to work with the Committee to address this.
    Governance and Coordination Authority - The CALFED process today is 
simply an advisory group to the Federal government as it implements 
federal statutes. This legislation will make state, local and federal 
agencies participating in CALFED full and vested partners with the 
Governance Board having decision making authority. Measures also need 
to be taken to bring federally recognized tribes with interests in the 
water into the partnership. The Governance Board as outlined in the 
legislation will provide for a stronger coordination and oversight 
role, integrated and coordinated application of federal and state 
regulations, and greater program accountability. We believe, however, 
that the provision as drafted may raise Constitutional issues in terms 
of non-federal authority over federal management functions and 
budgeting. We believe this potential defect may have a relatively 
simple solution, and we will work with you and the Justice Department 
to resolve it. In addition, target dates for establishing governance 
authority may be unrealistic; we are particularly concerned that 
funding may be interrupted if governance provisions are not established 
in the time provided by the bill.
                        Concerns with H.R. 1985
    Although there are a number of provisions we support in the bill, 
the Administration has some basic concerns, relative to Title I of the 
legislation before the Subcommittee today, in addition to the matters 
noted above, which I would like to describe further. In addition to the 
major concerns noted below, we would like to work with the Committee to 
address technical and other changes as it considers this legislation.
    The CALFED development process involved many interests and the ROD 
struck a delicate balance among them, and we urge a careful 
consideration of elements in the bill that may upset that delicate 
balance.
    Water Deliveries - Legislative language in section 103(a)(3) states 
that ``In accordance with the record of decision, the Secretary shall 
operate the Central Valley Project in a manner that will in a normal 
year make available to south-of-Delta Central Valley Project 
agricultural water service contractors at least 70 percent of their 
existing contract.'' However, the ROD states that ``It is anticipated 
that implementation of ...actions (some of which may require further 
specific environmental review) will result in normal years in an 
increase to CVP south-of-Delta agricultural water service contractors 
of 15 percent (or greater) of existing contract totals to 65 to 70 
percent.'' The Department must raise several issues regarding the 
commitment of specific water supplies in this legislation:
    (1) The CALFED ROD uses the phrase ``It is anticipated...'' because 
there has not been an analysis completed which demonstrates the 
delivery capability of the CVP and other projects with implementation 
of the actions provided pursuant to the ROD. Such analysis, in 
combination with actual operating experience with implementation of the 
actions, is necessary to identify achievable water supply benefits.
    (2) The commitment of specific water supplies may place the 
Secretary in a position in which other Acts of Congress such as the 
CVPIA, Clean Water Act, and ESA may be violated to achieve this 
commitment. The analysis of delivery capability will assist in exposing 
potential conflicts and reaching solutions that best meet the competing 
demands on California water resources.
    (3) The legislation increases the water delivery commitment from 
the ROD's ``65 to 70 percent'' value to ``at least 70 percent.'' To 
justify such an increase full analysis and operating experience are 
necessary. At this time the Department supports operating the CVP in a 
manner intended to achieve at least 65 percent to 70 percent of their 
existing contract; however, this may not be possible unless land is 
retired and future water supplies are developed.
    (4) Also, this bill establishes a bad precedent of Congress 
interfering in a state water system by legislating water deliveries to 
one set of water users who may hold junior rights in the state water 
system.
    Environmental Water Account (EWA): The establishment and successful 
operation of EWA will be one of the most significant accomplishments of 
CALFED in reducing the conflicts between fisheries and water project 
operators. However, we point out that the definition for the EWA, and 
other restrictions in the bill to the EWA, to avoid water supply and 
quality impacts as well as effects on water rights holders, is 
different and more restrictive than intended as the account was 
originally set up. We look forward to working with the Committee to 
assure that the emphasis of the EWA in the bill is consistent with the 
goals of the ROD, the Multi-Species Conservation Strategy Conservation 
Agreement, and the Endangered Species Act.
    We note that the Ecosystem Restoration Program (ERP) is mentioned 
in connection with the Environmental Water Account and the water supply 
provisions, in terms of maximizing water supply benefits and meeting 
water supply assurances. While we recognize the comprehensive and 
integrated nature of the CALFED program, this characterization of ERP 
in the bill is different than the ROD. The Ecosystem Restoration 
Program is established to focus on improving aquatic and terrestrial 
habitats and natural processes to support stable populations of 
valuable plant and animal species. We would like to work with the 
Committee to clarify these issues.
    CALFED Projects - The Bill may not provide sufficient authority to 
meet the ROD commitments and maintain environmental assurances in a 
timely fashion. For instance, H.R.1985 limits appropriations for fiscal 
year 2002 to authorized studies, environmental review, design, and 
other preconstruction and pre-acquisition activities. Finally, while 
there are some existing authorities for restoration work, the potential 
funding limitation placed on the Environmental Restoration Program and 
the EWA in the bill, for instance, may limit the ability of fisheries 
agencies to provide assurances to the projects.
    Cost Sharing - One of the central components of the ROD is the 
notion of 'beneficiary pays', whereby users who benefit from 
investments in the infrastructure should pay for those benefits. H.R. 
1985 does not explicitly mention this important principle. The ROD 
contemplated the Federal Government, the State, and project 
beneficiaries each sharing roughly one- third of the costs of 
implementation. H.R. 1985 generally establishes a maximum Federal cost-
share of the lesser of $50 million or 35% for each project or activity, 
but does not otherwise indicate how the cost-share should be 
determined. We do not object to the 35%/$50 million ceiling, however, 
we believe that the cost-sharing should otherwise be consistent with 
current law or policies. Depending on the project purpose, under 
current law local sponsors are required to provide up to 100 percent of 
a project's cost (e.g., for costs allocated to municipal and industrial 
water supply projects). We wish to stress the importance of clarifying 
and integrating cost-sharing measures into the program. We would also 
like to clarify that assignment of operation and maintenance costs will 
be consistent with general policies, which in most instances means that 
project beneficiaries will be responsible for operation and maintenance 
expenses.
    Project Authorizations and Congressional Oversight - We are also 
concerned about provisions of the bill that authorize construction of 
projects before they have completed the normal Administration review of 
economic and environmental feasibility. Some language also circumvents 
Congressional oversight of individual projects. Consistent with 
longstanding policies, we believe that authorization for construction 
should be provided only after the Administration and Congress have 
completed a full and favorable review of a project's economic and 
environmental feasibility. In addition, the Department of Justice has 
informed me that the provision for committee approval of project 
proposals may raise constitutionaldifficulties insofar as it could be 
construed to empower congressional committees to alter the meaningof 
lawfully enacted appropriations legislation. We would like to discuss 
possible thresholds and processes for Congressional approval.
    Implementation of the Record of Decision - Section 104(a)(1) of the 
bill is unclear as to its purpose and meaning, and needs to be 
clarified. It appears that it could provide an exemption from Clean 
Water Act (CWA) Section 404. There is an existing statutory mechanism; 
CWA Section 404(r) which is an established and well-understood 
mechanism for providing Section 404 exemptions, where appropriate.
    The Record of Decision states that the CALFED agencies will fulfill 
their respective legal responsibilities for environmental analysis, 
documentation and permitting pursuant to NEPA, and other environmental 
laws, and will complete the necessary programmatic and project-specific 
analysis. Section 104(a)(1) would potentially compromise this procedure 
by restricting the range of alternatives that the agencies could 
consider in implementation on the ROD.
    Funds authorized only to the Secretary - We note that all funds are 
authorized to be appropriated to the Secretary of the Interior. Since 
there are a number of federal agencies involved in the effort, such as 
the EPA, the Army Corps of Engineers, and others mentioned earlier, 
this may limit the efficiency of their participation; we would like to 
work with the Committee on language for broader allocation of 
appropriations among the affected agencies.
    Hydro power - Under Reclamation Law, whenever irrigation users are 
unable to repay the costs associated with the construction of project 
features, the responsibility for these costs are reassigned to the 
power users for repayment. A precept of the ROD was to avoid 
``redirected impacts'' stemming from implementation. It is possible 
that implementation of certain measures under the auspices of CALFED 
may decrease the total Hydro power generation available, raising costs 
to power users. This would be a burden added to any reassigned costs 
and arguably a redirected impact. This potential impact is not 
addressed by the bill. We would like to see greater clarification of 
this issue of redirected impacts, keeping in mind that the principle of 
'beneficiary pays' still applies. An effort to avoid redirected impacts 
should generally not result in the Federal government paying for the 
shortfall.
    Competitive Grant Program - We are concerned about the overall 
funding authorized for this program, which greatly exceeds commitments 
currently envisioned.
    H.R. 2404 (California Water Quality and Reliability Act of 2001)
    H.R. 2404, introduced by Mr. Miller, also seeks to authorize CALFED 
programs for implementation. We have a few observations about that 
bill.
                         benefits of h.r. 2404
    Increased Water Supply Reliability - The bill attempts to support 
the CALFED commitment for increased water supply reliability.
    Governance and Coordination Authority - The authorizing language 
provides for continued Federal participation in the CALFED Bay-Delta 
Program while requiring the Secretary, in conjunction with the State of 
California and other federal agencies, to develop jointly and submit to 
Congress a proposal for long-term governance empowering a Governance 
Board with decision-making authority and management oversight as 
outlined in the CALFED Record of Decision (ROD).
    Energy Consumption - H.R. 2404 specifically states that an 
objective of the Water Supply Program will be to identify seasonal and 
annual estimations of project energy costs. In light of the energy 
crisis within the State, specific recognition of the required analysis 
is important.
    Concerns with H.R. 2404 - Below are some of our concerns with the 
bill.
    Focus only on Interior - H.R. 2404 should more inclusively 
recognize the roles of non-Interior agencies participating in CALFED. 
The partnership of federal and state agencies is a major strength of 
CALFED.
    CALFED Projects - The bill tries to address some, but not all, site 
specific water supply infrastructure feasibility studies relative to 
Stage I of the ROD. The bill's language seems to imply that regional 
solutions will be the primary method of increasing water supply 
reliability, and while they will be important elements, they alone will 
not be able to accomplish the larger scale objectives of the ROD. We 
would like to work with you on a comprehensive approach.
    Cost Sharing - H.R. 2404 is vague on cost-sharing requirements. 
There is no mention of the principal of 'beneficiary pays', although 
Sec. 201 (h) does mention a cap of 50% of the Federal share of 
feasability and environmental studies. It does not, however, mention 
how the final cost-sharing arrangement will be determined, up to the 
50% ceiling. Specific project authorizations mention Federal ceilings 
of 25% for particular projects, but it is not clear whether this policy 
of 25% should be broadly applied to other CALFED projects. We wish to 
stress the importance of clarifying and integrating cost-sharing 
measures into the program.
    We are pleased to see that the bill states, in accordance with 
general policy and with respect to specific project authorizations, 
that the Federal government will not be responsible for funding 
operation and maintenance costs of completed projects.
    Pumping Reductions - The authorizing language establishes as a 
matter of Federal Policy, the objective of reducing, by the year 2020, 
the maximum annual quantity of water pumped each year for consumptive 
uses from the Harvey O. Banks and Tracy Pumping Plants. It must be 
noted that the Harvey O. Banks Pumping Plant is a State facility, the 
language essentially provides overriding Federal policy to a State 
facility. The objective of reducing by 2020 the maximum annual quantity 
from Banks and Tracy pumping Plants seems to conflict with water supply 
reliability objectives in the CALFED ROD. Conjunctive use projects 
which provide supplies for the EWA as well as water users rely on 
exports at some point in time. The goal is to export water when the 
environmental impacts are minimized rather than simply reduce annual 
exports.
    Environmental Water Account - H.R. 2404 seems to authorize the 
Environmental Water Account (EWA) as a long-term program; however, in 
the CALFED ROD it was outlined as a 4-year pilot study to be used in 
effect until such time as increased water supply flexibility was 
secured and such increased supply could be used specifically for the 
purposes of the EWA .
    Water Recycling and Reuse - The bill would provide authority for an 
extensive list of new projects for which the Department requires 
further detailed justification. For this reason, we must withhold our 
support at this time.
    Environmental Restoration Program - The authorizing language 
specifically states, AThe Secretary shall carry out the environmental 
restoration program in a manner that will meet performance objectives 
for attaining self-sustaining fish and wildlife populations within 
watersheds of the Sacramento and San Joaquin Rivers within 10 years 
after the date of the enactment of this Act. This objective may not be 
attainable within the mandated timeframe.
       Conclusion - CALFED (Title I of H.R. 1985, and H.R. 2404)
    The history of the settlement of California and the ensuing 
development of its water resources is replete with political and legal 
battles. Although agreement on water management may not be immediately 
achievable, the CALFED Program is a step in reaching a common vision of 
actions needed for progress. CALFED represents a new approach to an old 
problem by combining the interests of state and federal agencies with 
regulatory power over the Bay-Delta together with urban, environmental, 
and agricultural users, who each have a vested interest in the 
maintenance and improvement of the Bay-Delta. The CALFED Program has 
shown water managers, policy makers and the public how to move 
California toward more equitable and efficient water and ecosystem 
management. Continued implementation of the CALFED plan offers the 
opportunity for a long-term solution to the critical problems 
confronting the Bay-Delta. Specifically, the Department will continue 
to operate the Central Valley Project in accordance with the provisions 
of the State's Water Quality Control Plan, Central Valley Project 
Improvement Act, the Endangered Species Act, and other applicable 
statutes. The Department is aware of the importance of meeting its 
environmental commitments, and the importance to the water users of 
adequate water supply reliability. For these reasons, the Department 
will continue to work through the CALFED process to improve the 
environment, and increase the system's water management flexibility.
    We believe that the bill attempts to offer a balanced approach 
toward implementing the ROD commitments and would allow the Federal 
government sufficient authority to continue to participate in the 
CALFED program. We look forward to working with the Committee and 
others in Congress to address the Administration's concerns. Mr. 
Chairman, I would like to reiterate my appreciation to the Committee 
and others for continuing to work with the Department to address the 
significant water and environmental issues facing the West.
 TITLE II OF H.R. 1985 - THE SMALL RECLAMATION WATER RESOURCES ACT OF 
                                 2001.
    Title II of H.R. 1985, comprises the Small Reclamation Water 
Resources Act of 2001 (SRWRA). While the Administration supports 
efforts to provide assistance to small non-Federal water users in 
constructing and rehabilitating their irrigation water projects and in 
carrying out restoration efforts, H.R. 1985 as introduced raises many 
budget, implementation, and administration questions for both the 
Bureau of Reclamation (Reclamation) and the Department of the Interior. 
The Administration cannot support the bill at this time, but wants to 
work with this subcommittee and others in Congress on these issues.
                               Background
    Public Law 84-984 established the Small Reclamation Projects Act 
loan and grant program. Authorized in 1956 when the Bureau of 
Reclamation was actively engaged in the construction of large 
irrigation projects, the program was designed to supplement Federal 
Reclamation law by providing grants and interest-free loans to non-
Federal organizations to develop small irrigation projects costing less 
than $10 million. The Act has been amended several times. In 1986, 
Public Law 99-546 broadened the purposes beyond irrigation to encourage 
the development of multi-purpose projects including, water and energy 
conservation, environmental enhancement and water quality projects. 
Public Law 99-546 also increased the authorized cost ceiling from $600 
million to $1.2 billion.
    The program has provided about $807 million in loans and grants to 
non-Federal organizations for about 134 projects. Non-Federal entities 
have contributed an additional $200 million in up-front financing.
                  Concerns with Title II of H.R. 1985
    Title II of H.R. 1985, (SRWRA), would amend the Small Reclamation 
Projects Act to authorize $1.3 billion for three new programs--a 
revised and expanded grant and loan program within the Bureau of 
Reclamation, a Small Reclamation Water Resources Management Partnership 
Program, and a loan guarantee demonstration program.
    As indicated by its support of ongoing environmental restoration 
programs, as well as water reclamation and reuse under Title XVI, this 
Administration is interested in workable and effective ways to protect 
water quality and supply and water habitats. However, a number of 
specific matters in Title II of H.R. 1985 would need to be addressed 
before this Administration could provide its support of a specific 
proposal. The following points are raised for discussion purposes, but 
they do not constitute an exhaustive list of concerns.
    SRWRA is very costly and will compete with other Department of the 
Interior programs for funds, thereby raising questions of fiscal 
priorities. In addition, existing Federal programs may address project 
purposes of concern in this bill.
    SRWRA would expand Reclamation's work outside of the 17 Western 
states it traditionally covers. (We note that Hawaii was added to the 
jurisdiction of the program in 1960, but this bill extends jurisdiction 
further.) This raises budgetary concerns in undertaking new 
responsibilities while staffing new offices.
    SRWRA would need to be modified to be consistent with the Federal 
Credit Reform Act and Federal credit policy. Also, there is concern 
about the Secretary of the Interior setting interest rates on loans, 
where customary practice has been to have interest rates for direct 
loan programs set by reference to a benchmark interest rate on 
marketable Treasury securities with a similar maturity to the direct 
loans being made.
    More generally, the bill's time frames do not mesh with budget 
procedures. The time frames are too tight and should provide more 
flexibility.
    Under the proposed grant and loan program, an applicant would be 
required to include in a proposal a plan and estimate of costs 
comparable to those included in preauthorization reports for 
Reclamation projects. At a minimum, this section should require an 
economic assessment of the project to aid in evaluating the proposal 
within the one year time period.
    There is a problem with the bill in that the new grant and loan 
program does not specify terms and conditions. The program should 
specify terms and conditions to accurately reflect Federal credit 
program standards and principles as promulgated in OMB Circular No. A-
129, ``Policies for Federal Credit Programs and Non-Tax Receivables.''
    Title III of the SRWRA would establish a six-year-long loan 
guarantee demonstration program within the Bureau of Reclamation for 
projects receiving or eligible to receive loans or grants under either 
of the two new programs in Title I or Title II of the Act. Title III 
would put Reclamation in the role of a commercial loan officer for 
developers of a project, a role Interior's Inspector General criticized 
in its 1991 audit report. This could also require Reclamation to 
develop substantial capability to assess the credit-worthiness of water 
districts, oversee the activities of outside lenders, and take 
appropriate actions in case of a default.
    At the very least, such a new bureaucratic infrastructure within 
Reclamation would require new and significant funding and resources. 
This expenditure must be assessed in the context of the Department's 
priorities and existing statutory and contractual mandates.
    The Administration also has a number of technical concerns with 
Title II of H.R.1985.
    Conclusion - the Small Reclamation Water Resources Act of 2001.
    The Administration looks forward to working with the subcommittee 
on these and other matters raised by the Small Reclamation Water 
Resources Act of 2001.
    Thank you for the opportunity to present the Administration's views 
on H.R. 1985. I would be pleased to answer any questions you may have.
                                 ______
                                 
    Mr. Calvert. I thank the Secretary.
    Mr. Calvert. Mr. Hannigan, director of California 
Department of Water Resources, you are recognized.

     STATEMENT OF THOMAS M. HANNIGAN, DIRECTOR, CALIFORNIA 
 DEPARTMENT OF WATER RESOURCES, ACCOMPANIED BY PATRICK WRIGHT, 
               DIRECTOR, CALFED BAY-DELTA PROGRAM

    Mr. Hannigan. Mr. Chairman and members, I want to thank you 
for the opportunity to testify on legislation that would 
reauthorize the CALFED Bay-Delta program. I want to especially 
commend the Chair for his leadership and his authorship of one 
of the bills that we are discussing today. I ask to submit 
detailed written comments to the Subcommittee, if I may. In 
addition to that, I have a letter to the Secretary from the 
Governor that I would like to have submitted to the record as 
well.
    Mr. Calvert. Without objection.
    Mr. Hannigan. Thank you. I will quickly summarize the high 
points of my testimony. Now is the time to secure a stronger 
commitment for Federal participation in CALFED. Governor Davis 
and the California legislature have secured over $1 billion in 
funding support for CALFED through the State's current budget 
and our new budget that was just approved this month. CALFED 
has been and must continue to be a close working partnership 
between Federal and State agencies. Federal agencies play a 
critical role in implementing the CALFED plan. I'd like to 
offer some comments on both your bill, Mr. Chairman, and on Mr. 
Miller's bill. While different, they both represent an effort 
to move CALFED forward. With respect to H.R. 1985, we support 
the overall objective of the bill, its solid framework for 
reauthorization.
    At the same time we have numerous concerns with various 
aspects of the bill as originally introduced. As you know, we 
have suggested technical and substantive amendments, many of 
which you have already agreed to consider. As such, we believe 
the bill, while still a work in progress, should move forward 
while we work to ensure that it is fully consistent with the 
ROD. Some of the areas in which we have concerns, language 
concerning operation of the environmental water account, 
development of a government structure and State land 
acquisition, are a few examples where the bill Federalizes the 
State's participation in various CALFED programs.
    The scope of H.R. 1985 should be limited to Federal 
agencies and its spending. Of course, we are mindful that 
CALFED will not succeed without continued aggressive support 
from the State of California, and we are committed to 
continuing this effort. H.R. 1985 requires the Secretary of the 
Interior to deliver 70 percent of the contract amount to CVP 
contractors in a normal year. This approach is inconsistent 
with the ROD and could precipitate a direct conflict with the 
Endangered Species Act and existing water rights.
    All parties need to recognize that the commitment embodied 
in the ROD is clear. We have recommended language that is 
consistent with the ROD and unambiguously directs Interior and 
CALFED agencies to implement the tools necessary to carry out 
these provisions. As I previously mentioned, your legislation 
provides a solid framework for reauthorization of the program. 
I am heartened by your willingness to consider many of our 
suggested changes. In the weeks ahead, we look forward to 
continuing the dialogue with you and your colleagues in order 
to reach agreement on legislation that is consistent with the 
ROD and broadly supported by the stakeholders.
    H.R. 2402 extends current spending authority for CALFED 
through the year 2006 and provides the Secretary of the 
Interior with broad authority to implement stage one of the 
Bay-Delta program. The bill emphasizes feasibility studies for 
surface water storage projects, promotes groundwater storage 
and management, and expands the Bureau of Reclamations Title 
XVI Water Recycling Program. While the bill has some 
advantages, we have several areas of concern. Section 201 
creates the California Water Supply Program. One of the stated 
purposes of this program is to reduce by the year 2020 the 
maximum annual quantity of water pumped each year for 
consumptive uses from State and Federal pumps. Such language 
goes beyond the ROD and appears to be inconsistent with the 
water supply goals of the ROD. Section 201(e) prohibits Federal 
funds from being spent on project construction until the 
Secretary finds that adequate measures are, in effect, to 
conserve surface and groundwater supplies and to manage and 
control the pumping of groundwater within the surface area of 
the project.
    What works best in California is cooperative planning and 
implementation with local entities, and our recent history of 
development of voluntary groundwater management plans is a more 
implementable approach which would be foreclosed by the bill's 
provisions. New regulatory mandates are likely to kill these 
kinds of programs. Section 203 authorizes several specific 
water recycling, water reuse, and water desalination 
demonstration projects. While we strongly support the goals of 
these projects, I am concerned that none of them have been 
thoroughly reviewed by the State and Federal agencies. I urge 
the Committee to provide in H.R. 1985, your bill, Mr. Chairman, 
funding for these and other projects through a competitive 
grants process and to ensure that Federal funds are spent only 
on the highest quality, peer reviewed and cost-effective 
projects. I thank you for your patience and I appreciate the 
opportunity to speak.
    Mr. Calvert. I thank the gentleman.
    [The prepared statement of Mr. Hannigan follows:]

    Statement of Thomas M. Hannigan, Director, Department of Water 
                     Resources, State of California

    Mr. Chairman and Members, thank you for the opportunity to testify 
on legislation to reauthorize the CALFED Bay-Delta Program.
    I want to begin by commending you, Mr. Chairman, for your 
leadership on this important issue. Since you assumed the chairmanship 
of this Subcommittee, you have spent many hours immersing yourself in 
the wide range of complex issues surrounding CALFED. You began this 
process with an open mind and a desire to fully understand and 
appreciate the needs of all stakeholders. I believe that your personal 
involvement, and the approach you have taken, is a healthy and 
productive one.
    It has been just over a year since Governor Davis and the Secretary 
of Interior announced the CALFED Plan--the largest and most 
comprehensive water management plan in the nation. The Plan is a 
balanced approach to reduce conflicts over our limited supplies, and to 
address the state's long-term water supply reliability and quality 
needs. It calls for one of the nation's largest ecosystem restoration 
programs, and provides specific deadlines for developing over 6 million 
acre-feet of new water storage projects--the biggest investment in the 
state's water infrastructure in 40 years.
    The Central Valley of California includes over 80 percent of all 
irrigable land in our State and provides up to 50 percent of the 
Nation's fruits, nuts, and vegetables. Providing a consistent water 
supply to California farmers is clearly a matter of national economic 
importance. In addition, our commercial fisheries required a healthy 
river and Delta ecosystem. Central Valley salmon provide more than 50 
percent of the harvest from the California, Oregon, and Washington 
coasts. Finally, Silicon Valley--a major engine of the national 
economy--requires a firm and high quality water supply.
    With the release of the ``Framework for Action'' and Record of 
Decision (ROD) last summer, CALFED has shifted gears in a big way. 
Planning has now taken a back seat to of implementing an ambitious, 
far-reaching set of projects and programs aimed at improving water 
management and restoring ecological health in the Bay-Delta system.
    Given this major transition, I want to emphasize that California 
alone cannot carry out the CALFED plan. Governor Gray Davis and the 
California Legislature have secured over $1 billion in funding support 
for CALFED through the State's budget last year and our new budget 
approved this month. CALFED has been--and must continue to be--a close 
working partnership between Federal and State agencies. Federal 
agencies play critical roles in implementing the CALFED plan. And 
federal funding is imperative for continued coordination and to 
maintain the forward movement towards solving California's water 
issues.
    Towards this end, there are two pieces of legislation now before 
you--H.R. 1985, the ``Western Water Enhancement Security Act'', 
sponsored by the chairman and other members of this Subcommittee, and 
H.R. 2404, the ``California Water Quality and Reliability Act of 
2001'', offered by Representative Miller. Both bills, while clearly 
different in scope, nevertheless represent an effort to move CALFED 
forward as we move into this second year of the seven-year Stage I of 
CALFED's ROD.
    With respect to the Calvert bill, I want to applaud you and your 
staff, Mr. Chairman, for your hard work in developing this measure. We 
support the overall objective of H.R. 1985 and believe this legislation 
provides a solid framework for reauthorization of the Program. At the 
same time, we have numerous concerns with various aspects of the bill 
as originally introduced. As you know, we have suggested technical and 
substantive amendments, many of which you have already agreed to 
consider. As such, we believe the bill, while still a work in progress, 
should move forward while we work to ensure that it is fully consistent 
with the ROD.
    I would like to briefly highlight several areas of concern:
    Federalization of State agency actions, programs and projects--
There are numerous provisions in H.R. 1985 that appear to constrain 
State agencies, limit State control over the State Water Project, and 
abrogate the State sovereign immunity to suit in federal court. 
Language concerning operation of the Environmental Water Account, 
development of a governance structure and state land acquisition are a 
few examples where the bill federalizes the State's participation in 
various CALFED programs.
    Because the ROD describes CALFED as a federal-state collaboration 
based on voluntary cooperation and consensus, there are major policy 
and legal implications to federalizing State authority over land and 
water policy, which traditionally are core elements of State 
sovereignty. Therefore, the scope of H.R. 1985 should be limited to 
federal agencies and spending. By saying this, we are mindful that 
CALFED will not succeed without continued aggressive support from the 
State of California and we are committed to continuing this support.
    Guaranteed delivery to south of Delta CVP contractors--H.R. 1985 
requires the Secretary of the Interior to deliver 70% of the contract 
amount to CVP contractors in a normal year. In contrast, the ROD 
commits CALFED agencies to take several actions to improve water supply 
reliability for CVP contractors south of the Delta with the explicit 
objective of increasing deliveries by 15% (up to 65-70% of contract 
amounts) in a normal year. The Calvert bill would convert this estimate 
to a mandate that could precipitate a direct conflict with the 
Endangered Species Act and existing water rights.
    While it may be tempting to mandate this target, we believe that 
legislating a specific outcome with respect to water delivery will 
immediately invite more litigation and gridlock. In short, the language 
contained in H.R. 1985 is inconsistent with the ROD.
    Having said that, let me emphasize that the delivery target in the 
ROD is more than simply a provision addressing a particular group of 
water users. This issue has come to represent CALFED's commitment to a 
balanced program that considers the needs of all stakeholders.
    All parties need to recognize that the commitment embodied in the 
ROD is clear. The challenge for CALFED is carrying out that commitment. 
We have recommended language that is consistent with the ROD and 
unambiguously directs the Department of the Interior and the CALFED 
agencies to implement the tools necessary to carry out those 
provisions. It is our strong hope that the Subcommittee will take steps 
to resolve this critical issue by revising the assurance section of the 
Calvert bill in a manner that reflects the language of the ROD.
    Mr. Chairman, consistency with the ROD represents the underlying 
principle for the State of California in terms of federal authorizing 
legislation. A balanced approach to implementation, where all aspects 
of the program are interrelated and interdependent, is a cornerstone of 
the ROD. Ecosystem restoration is dependent upon supply and 
conservation. Supply is dependent upon water use and efficiency and 
consistency in regulation. Water quality is dependent upon improved 
conveyance, levee stability and healthy watersheds. The success of all 
the elements depends on expanded and more strategically managed 
storage.
    At the same time, we fully realize that other elements that 
transcend the ROD have been incorporated in pending legislation. Such 
provisions will be examined on the basis of whether they help achieve 
implementation of CALFED and whether they are consistent with the 
spirit and letter of the ROD.
    As I previously mentioned, your legislation provides a solid 
framework for reauthorization of the Program. I am heartened by your 
willingness to consider many of our suggested changes. In the weeks 
ahead, we look forward to continuing the dialogue with you and your 
colleagues in order to reach agreement on legislation that is 
consistent with the ROD and broadly supported by stakeholders.
    Let me now turn briefly to the Miller bill (H.R. 2404). This 
measure extends the current spending authority for CALFED through 2006 
and provides the Secretary of the Interior with broad authority to 
implement Stage I of the Bay-Delta Program. H.R. 2404 emphasizes 
feasibility studies for surface water storage projects, promotes 
groundwater storage and management and expands the Bureau of 
Reclamation's Title XVI water recycling program.
    In general, the Miller bill avoids federalizing State actions and 
provides maximum flexibility to federal agencies and the State of 
California in designing an appropriate long-term governance structure. 
On the other hand, H.R. 2404 raises several issues of concern to the 
State, including the following:
    California Water Supply Program--Section 201 creates the 
``California Water Supply Program''. The scope of the program includes 
studies for surface storage projects, research and development of water 
recycling, water reuse and desalination demonstration projects, and 
groundwater storage and banking demonstration projects.
    One of the stated purposes of this program is to reduce, by the 
year 2020, the maximum annual quantity of water pumped each year for 
consumptive uses from State and federal Delta pumps. Such language goes 
beyond the ROD and appears to be inconsistent with the water supply 
goals of the ROD.
    Restriction on expenditures for construction--Section 201(e) 
prohibits federal funds from being spent on project construction until 
the Secretary finds that adequate measures are in effect to conserve 
surface and groundwater supplies and to manage and control the pumping 
of groundwater within the service area of the project.
    Although the ROD supports groundwater management at the sub-basin 
level and provides incentives for curtailments on pumping, it does not 
require State or Federal regulation of groundwater management. The ROD 
stresses locally and regionally developed groundwater management plans 
to build broad-based support for the program without imposing new 
regulatory constraints. The bottom line is that this provision could 
eliminate federal funding of groundwater projects or water use 
efficiency projects, thereby preventing helpful projects from being 
implemented in the short term.
    Miscellaneous New Authorizations--Section 203 authorizes several 
specific water recycling, water reuse, and water desalination 
demonstration projects. While we strongly support the goals of these 
projects, I am concerned that none of them have been thoroughly 
reviewed by the State and Federal agencies. I urge the Committee, as 
provided in H.R. 1985 (Calvert bill), to provide funding for these and 
other projects through a competitive grants process to ensure that 
Federal funds are spent only on the highest quality, peer-reviewed, and 
cost-effective projects.
    Over the next few weeks and months, this Subcommittee will be in a 
pivotal position to determine the future of the CALFED Program. I look 
forward to working with you, your colleagues and the stakeholder 
community in a cooperative and constructive fashion to produce a 
legislative proposal that does three things: 1) provides consistency 
with the ROD, 2) propels the CALFED Program forward in a balanced, 
comprehensive manner, and 3) provides the necessary financial and 
administrative tools for Federal agencies to play a strong partnership 
role with the State of California in carrying out the Program.
    Thank you, Mr. Chairman. I would be pleased to answer any questions 
you may have.
                                 ______
                                 
    Mr. Calvert. Secretary Norton, again thank you for coming 
out today. And obviously, we have a little bit of a water 
crisis, not a little bit, a substantial water crisis already in 
California and Southern Oregon in Klamath, and some of us are 
looking at that as the canary in the mine as far as the west is 
concerned and water. Do you think there is a correlation 
between what is happening there and what can occur without 
implementation of H.R. 1985?
    Secretary Norton. Mr. Chairman, I think there are a number 
of unfortunate correlations that are possible. First of all, I 
think with the Klamath area, we had some problems in terms of 
facing a situation without enough time to really do the advance 
work that needs to be done. I think with these kinds of long-
term things, with these kinds of problems, with water problems 
generally, we need to do a lot of long-term planning. We have 
to stretch the water and find ways of meeting the environmental 
needs as well as the agricultural needs. I appreciate the 
opportunity to work with Congressman Walden a lot on trying to 
find ways to resolve this problem, but we don't want to end up 
in these kinds of crises in the future, and I think what this 
shows is that throughout the west we have the potential of 
these kinds of problems occurring as we have more and more 
demand for finite water supplies.
    Mr. Calvert. I recently came back--one of the hearings we 
had was in Salt Lake City and Grace was there, and a number of 
Members were there to talk to our friends in the upper basin 
States and States that are served by the Colorado River, and 
every one of them, every one of them, said that the biggest 
need is to get California to work within its 4.4 million acre 
allocation that we, in their mind, overdraft the Colorado 
River, and we need to do that based upon our agreement within 
15 years. And as you already know, the city of Los Angeles has 
met court challenges in the Owens Valley and others in Mono 
Lake.
    We have lot some additional water in the Trinity River 
decision, and so we see water supplies not what we would like 
them to be, and part of this legislation moves toward trying to 
get Federal participation in building additional water supplies 
in California, in all of California through a governance 
mechanism, which I am going to go into with Mr. Hannigan. But 
are you supportive of that and do you believe you can work with 
us to get these projects moving to add to California's water 
security which, by the way, is the entire western United States 
water security?
    Secretary Norton. As a former elected official in Colorado, 
I am certainly familiar with the Colorado River issues and the 
difficulties we have in trying to meet the needs of all of the 
western States, and I think whatever we can do within each of 
those States to try to look at wise use of water, to try to 
make sure that water resources are allocated in a way that we 
can serve the needs of the States makes a lot of sense.
    Mr. Calvert. Well, we are certainly going to need your help 
in doing that, and certainly the administration, in moving this 
legislation and those types of water projects forward. I don't 
see anybody who objects to that even on this dais as far as 
that section of the bill. But certainly, these are necessary in 
order for us to meet future water security.
    Mr. Hannigan, you mentioned how these projects are going to 
be funded and which projects are going to be funded. We have a 
process, a governance process, as you read in the bill, that 
would be approved within a year. We don't exactly state what 
that process is going to be. We want to work with the State of 
California, the elected officials, the stakeholders, certainly 
this Committee, to work out a fair methodology to put together 
a governance Committee which would, in fact, be able to pick 
these projects in a fair and equitable way. Are you supportive 
of that type of process?
    Mr. Hannigan. We are supportive, Mr. Chairman. I might 
comment that we came close to having a governance resolved a 
year ago at the end of the legislative session, and for a 
variety of small issues, we didn't succeed. Recently in the 
State Senate, Senator Jim Costa, who has been very active in 
these issues, has held at least one hearing and intends to hold 
additional hearings, and the goal is to provide a government 
solution in California this time next year.
    Mr. Calvert. I met with the Senator and hope to met meet 
with him again soon to talk about that subject.
    Mr. Hannigan. Good.
    Mr. Calvert. Mr. Miller?
    Mr. Miller. Thank you very much and thank you both for your 
testimony. I stand corrected on the Harvey Bank's Pumping 
Station. We won't federalize that, Tom and Madam Secretary.
    On the issue of cost sharing, I want to comment, Madam 
Secretary, that you are upholding the idea of the beneficiary 
page as does the ROD and this was obviously a matter of great 
contention through this entire process. Again, it's something 
that I think is very important and has to be applied because 
once again, not only at the end of the feasibility study, 
certainly on the surface storage, at some point we are going to 
have to figure out how we allocate that, and there are 
obviously many options.
    Whether it is to the benefit of the full project or whether 
it is to Fish and Wildlife or to specific beneficiaries, at 
some point, I think those costs have to be allocated, and I 
think it's an important component if we are going to again go 
to the--to our colleagues in the Congress and tell them that we 
need a couple of billion dollars to do this. We are going to 
show them that, in fact, people are going to be prepared to pay 
for those benefits.
    So I appreciate your position on that. And to both of you, 
I appreciate your position on the water assurances. Because I 
think it is--certainly I have crossed this and I think it is an 
important part of the ROD, the question of whether or not we 
are going to try to fill the commitments to the agricultural 
water users as specified in the ROD, and that is the goal in 
this process, but to lock that in in a statutory fashion, as 
you point out, can quickly throw us into noncompliance on 
another part of this puzzle we are trying to work out, which 
obviously deals with clean water and endangered species, and 
whether or not we can build a flexibility in the system to meet 
that on an annual basis not knowing the rainfall and snow pack 
and demands are going to be from year to year.
    I think there are analogous situations with Klamath. I 
mean, this is a system where the big guys got there first based 
upon political considerations that were perfectly legitimate at 
the time. We are now spending billions of dollars trying to 
reconfigure this project so it can meet the needs of a modern 
California, and those obviously today are different 
stakeholders and were present in the days of the creation of 
these projects, but that is true of the Central Arizona 
Project, of the Central Utah project, of the Garrison--all of 
these had to be reconfigured because the first takings were 
taken based upon political power. We didn't have the Endangered 
Species Act, we didn't have NEPA, we didn't have an 
environmental movement in the country in those times, and so 
you went with political power and you took the river and 
controlled it.
    Now we are in the process of going back and redoing that. 
And so these components, this flexibility--and we should not 
repeat the mistakes of the past which is then now to lock in 
water that we may or may not be able to meet and then end up 
with some kind of financial burden or litigation or all of 
these things combined together, when, in fact, what we do know 
we need is we need to try to meet the multifaceted components 
of the California economy and its environment, and I think that 
is the commitment of the ROD.
    I think that is the commitment of the parties to the CALFED 
process, and I think that is hopefully what we can work out, 
but I think your comments have been very helpful in the sense 
that those are big hurdles to the integrity of the ROD and we 
should not be dipping in here on a statutory basis to pick out 
winners or losers of people who disagree with the ROD. We have 
a near consensus on the ROD. We always will have some dissent, 
but it is what has enabled us to come to the Congress in the 
name of the State and try to secure the funding for these 
programs.
    So I think that your remarks have been very helpful. And, 
Tom, if I might just ask you one question on groundwater 
management, you disagree sort of with what we do, and I 
appreciate the controversy in the State about this, but at some 
point, we have got to have a credible groundwater management 
program.
    Mr. Hannigan. As you know, we have currently a voluntary 
groundwater management program and more and more areas of the 
State are utilizing that effort because they recognize that 
modern water management strategies depend a lot on groundwater, 
storage, you know, where basins have been overdrafted need to 
be corrected, and I don't think we are at a mandatory 
groundwater management statewide program, but we are moving in 
that direction.
    Good water management, resource management, suggests some 
fashion of that. The strategy, political will of California has 
been for ground--if you will, ground up rather than top down, 
and I don't know when, but the time will come when it is time 
to make that last step and do it statewide, but it is not in 
the short run.
    Mr. Miller. Okay.
    Mr. Hannigan. Well, we all can count and--.
    Mr. Miller. No. And I appreciate that, but again, we are 
talking about a system that you could argue that the system is 
completely oversubscribed, or you can argue that system can put 
into place management systems that may allow us to get some 
additional yield, and knowing what you have done in 
groundwater, what you are capable of doing and who is putting 
it in and who is taking it out is going to become an increasing 
dynamics of whether or not there really is that flexibility, 
because obviously the water has got to come from some other 
place, and you are right. We can all count, but I don't think 
we ought to give up on the notion that this is going to have to 
become part of this system if we are going to really squeeze 
the yield out that we all think is going to be necessary, and 
you have been working this hard on the regional at the--at the 
regional basis--.
    Mr. Hannigan. We have some great examples. I mean Kern 
Water Bank is one of the best examples. It has some critics, 
but, in fact, it functions and it functions well, and when the 
State tried to put that water bank together, they couldn't 
succeed. When it was turned over to the locals, they put it 
together and have made it work for a lot of reasons, some of 
them political, and some of them, maybe the sources of the 
water had something to do with it.
    Mr. Miller. If I could make one request of the Secretary. 
Madam Secretary, the Department has Southern California 
Recycling Study underway, or I think it is complete. But do you 
know if it is complete, and if it is complete, is there an 
opportunity to get it to us, because obviously it is part of a 
discussion around this legislation.
    Secretary Norton. It is currently being reviewed within the 
Department. I understand we are fairly far along in that 
process; so we will look at that and track it down and try to 
expedite that.
    Mr. Miller. Because obviously that is part of this 
legislative package is a discussion of some of those efforts in 
the southern part of the State to deal with it. So that would 
be helpful to us. Thank you very much.
    Mr. Calvert. Thank you.
    Mr. Radonovich.
    Mr. Radonovich. Thank you, Mr. Chairman. I want to speak to 
the assurance language that is in the bill and have some 
questions regarding that. My original intention for the 
assurance language was to prioritize human uses of the 
California water, those for agriculture and urban over the 
newly added environmental priorities, at least until we have 
new water storage available in California so that we can indeed 
have a balanced approach for our water. But somehow it has 
turned into a little bit more of that, but I am very supportive 
of and very concerned about the assurance language, and feel 
that it is not morally correct to prioritize environment over 
human needs, ag and urban needs, in a situation like this. So I 
have some real problems with the priorities that are in the 
California water policy so far. And I hope to see the assurance 
language in effect.
    Now it was mentioned--Mr. Hannigan, you had mentioned that 
it is so difficult to do without jeopardizing existing water 
rights or the Endangered Species Act. So I guess my question 
will go to the flexibility that you may have, or that the 
Department of Interior may have, in the implementation of the 
Endangered Species Act in order to correct what I see is a flaw 
in this, and at least give ag and urban water use a priority 
until we can increase water storage.
    And before you answer that, I want to cite an incidence 
that happened here in Washington, which kind of speaks to the 
uneven application of this law and the subjective nature of the 
Endangered Species Act. It has come to my attention that on 
this project on the Wilson Bridge which is the connecting of 
the Beltway that crosses the Potomac, the bridge is in 
desperate need of repair, in their biological surveys and 
assessments of this thing, there is an endangered sturgeon 
there that they have come to the conclusion that if they would 
just blow up the clambeds, which are the feeding areas of the 
sturgeon, that that will make sure that the sturgeon is not 
there when they are constructing the bridge.
    Now, my friend from Oregon would love that kind of 
assessment of the Endangered Species Act in project 
development. There is also another project on the Washington 
Aqueduct. This is where the group that clarifies the drinking 
water for the city of Washington, the water we drink here. They 
dumped alum in there, which is a fining agent and then, because 
over the protests of some members who didn't want the byproduct 
of that, which is a sludge trucked out of their neighborhoods 
in dump trucks, they've chosen to dump it into the Potomac 
River, which is right in the breeding grounds of this 
endangered sturgeon.
    Now, if you can have variation from the Endangered Species 
Act in a case like this. It seems to me that at least in 
California, until we have increased water supply, you can 
certainly make some variation of the Endangered Species Act to 
make sure there is an assurance of deliveries for human needs 
until we get more supply, and I would like to get a response 
from that.
    Secretary Norton. I am not familiar with those situations. 
It is our intention to have a uniformed application of the 
Endangered Species Act across the country, and it is an Act 
that does not allow very much flexibility as we well know.
    Mr. Radonovich. And I would love for you to become familiar 
with both of those projects, because it is in lawsuit and in 
court right now, and they are very solid cases. The evidence 
they have for both of these things is very apparent which seems 
to me that you can choose to apply the Endangered Species Act 
pretty much where you want to, and if it is good enough for the 
people on the Potomac and here in Georgetown, I want that 
flexibility for the people in California and I think if we have 
examples like that in this country, then I would demand that 
you take care of the human needs before the environmental 
needs, and I just think it is morally the right thing to do in 
California.
    Secretary Norton. What we are trying to do is find ways of 
achieving flexibility of having long-term planning so that we 
can meet the needs of both the environment and the human side.
    Mr. Radonovich. On a long term--.
    Secretary Norton. That is definite what we want to try to 
do, both through CALFED and other--.
    Mr. Radonovich. Let me ask the question this way, because 
if there is the assurance language in there that basically 
states no water will be taken from any other water agency in 
California, that puts the burden on the environmental water 
supply, do think there is then flexibility in the Endangered 
Species Act and the laws that implement those in California to 
make sure that the assurance language is upheld and no water 
comes from water agencies? And I would like to ask that of both 
of you, if I may.
    Secretary Norton. I would have to look at this more 
closely. The Endangered Species Act is one that is always 
subject to litigation, and it is something where we would need 
to look very closely at this. It is important that we preserve 
the endangered species and that we take the action necessary 
for that. What we would like to do is to see that this process 
would allow us to have the flexibility to meet all of the 
needs.
    Mr. Radonovich. Okay. Mr. Hannigan.
    Mr. Hannigan. Yes, Mr. Radonovich. I think the ROD 
represents a more positive solution to this conflict between 
the ESA and water uses. The environmental water account is 
structured for that reason. It's a 4-year experiment. It 
acquires water paid for by both State and Federal funds to 
replace what would otherwise be regulatory takes.
    Mr. Radonovich. I am not sure you are answering the 
question. I want to say the question again, and that is, if the 
assurance language is included in the bill, do you believe that 
there is enough flexibility within the administration and 
Endangered Species Act to make sure that does not come from 
water agencies, rather it comes from the--.
    Mr. Hannigan. The EWA is how you mitigate the water not 
coming from the water agencies.
    Mr. Radonovich. So you are saying yes--.
    Mr. Hannigan. What would otherwise be a take under a 
biological opinion, the Environmental Water Account resources 
or assets pay for that take. It worked this year. It has got 1 
year under its belt. We didn't experience any takes on the 
State project, neither did the Central Valley project. As long 
as we provided the water and, you know, it is an--.
    Mr. Radonovich. The answer would be yes, that you could 
assure if the assurance language is in--.
    Mr. Hannigan. As long as we provide the assets, as long as 
the State and Federal Government provides the EWA assets, that 
is what the ROD is all about.
    Mr. Radonovich. So the answer to my question then is yes?
    Mr. Hannigan. Yes.
    Mr. Calvert. We have a vote, one vote on the rule, but we 
can probably have some time--Mrs. Napolitano, you were the next 
person in the room. We can ask a round of questions and recess 
for a few minutes and come right back. You were here first, but 
I can ask Mr. DeFazio--.
    Mr. DeFazio. Thank you, because I think the Californians 
will hang in longer than I will.
    Madam Secretary, I am certain Mr. Walden will follow up on 
his questions. But you are obviously familiar with the 
situation in the Klamath and recently we found some additional 
water that you released or is being released at this moment. So 
far we have had Representative Walden introduce legislation 
last year to study additional storage in the area, which I 
supported. He has introduced legislation in this Congress to 
study a removal of a dam in the Lower Sprague River which could 
provide for enhanced habitat for spawning for the sucker fish 
and water quality in upper Klamath Lake.
    Greg just shared with me something that Mike Thompson is 
proposing as part of the agriculture bill, which would go to 
some enhanced use of the Conservation Reserve Program for the 
farmers in that area to provide some relief. We have some 
emergency relief which has been in the supplemental for the 
farmers in that area.
    We also have the Bureau of Indian Affairs involved because 
we have substantial claims by the tribes to water rights. We 
have got the State water rights adjudication issue that is 
problematic in Oregon. The Bureau of Reclamation is obviously a 
principal; is your Department or someone else in the 
administration going to take the lead, try to draw all these 
strings together and come forward with a proactive approach? 
Because I don't think there is any one big solution out there, 
one simple thing we can look at other than making it rain and 
snow that is going to resolve this issue. Is there discussion 
of that? Is there discussion of that, some prospect of that 
forthcoming?
    Secretary Norton. We have been discussing it on a daily 
basis, and even an hourly basis at times. Within my Department, 
we have within my immediate office, we are directly involved as 
well as within the Bureaus. The Department of Agriculture, I 
have talked with Secretary Veneman. She has top level people 
who are involved in that, and so we are working through a 
mediation process right now to put on the table a variety of 
different options to work with the locals, to work among the 
Federal agencies trying to find creative solutions to it. We 
are also talking with private sector organizations. So we are 
really trying to look across the board at what can be done 
creatively in the short term and the long term to deal with the 
problems in that area.
    Secretary Norton. So we are really trying to look across 
the board at what can be done creatively in the short term and 
the long term to deal with the problems in that area.
    Mr. DeFazio. Private sector in terms of a possibility for 
some buying of land or buyouts.
    Secretary Norton. Yes.
    Mr. DeFazio. Well, I guess my observation would be--I think 
Representatives doing yeoman's work, we want to agree on 
possibly all the solutions. I just think this is so big and it 
involves different parts of Federal Government jurisdiction and 
tribal issues and State issues, that there needs to be almost 
like a task force formally set up within the administration to 
come forward perhaps with a comprehensive proposal. And it is 
probably going to cost money and hopefully we can find that. So 
anything you can do to enhance that, I appreciate it.
    Secretary Norton. Sue Ellen Wooldridge is my deputy chief 
of staff. She is from California and she has been working on 
this project for several months and spending a lot of time 
there and in negotiation sessions. She is going to be working 
with each of the individuals, assistant secretaries and bureau 
heads, that are involved in the Department of Agriculture. I 
believe it is the deputy secretary who is now becoming 
personally involved in this. And so at very high levels of our 
Department, we are working to really try to find some 
comprehensive approaches for solutions there.
    Mr. DeFazio. Thank you.
    Mr. Calvert. We will be in for a few minutes. And be 
patient with us, we will be right back.
    [Recess.]
    Mr. Calvert. Meeting will come to order. We expect several 
members here shortly, but in the meantime I have one or two 
questions. During Senator Feinstein's hearing last week, she 
had asked that some of the water users, I think specifically 
Frye and Westland, sit down with the State and try to work out 
some accommodation on language. And I think she asked for an 
abbreviated time frame of 48 hours. I was wondering what was 
the outcome, if any, of that.
    Mr. Hannigan. Mr. Chairman, I am going to let Director 
Wright respond to that, because he was directly involved in 
that effort.
    Mr. Wright. Thank you, I think. Yes, the Senator did ask us 
to see if we could reach agreement on the so-called West Side 
Assurances issue. We did have several meetings and discussions 
with the folks on the West Side, the environmental community, 
and we were not able to reach a consensus. It is one of these 
issues where to try and craft language apart from the entirety 
of the ROD, that suggests the kind of intent, strong 
commitment, et cetera, that the plan tried to emphasize without 
making it a legal commitment was very, very difficult. So we 
were not entirely successful in that.
    In the meanwhile, the State side has redoubled its efforts. 
And I am hearing similar expressions of interest on the Federal 
side to begin working even more seriously on this issue 
administratively. In fact, the Governor sent a letter, I 
understand, to Secretary Norton, urging her leadership and the 
Department of Interior's leadership in working with the State 
to increase the confidence level of the stakeholders and the 
agencies that the CALFED program and agencies fully intend to 
meet that ROD commitment, to do everything we can to hopefully 
reduce the level of anxiety that exists out there over the 
program's commitment to move forward.
    Mr. Calvert. And that is the point, Madam Secretary, that 
obviously from testimony today you have heard that one of the 
sticking points in all of this with many members, and certainly 
that region, is that very issue. Any assistance that you can 
give us in resolving that would be very much appreciated. Any 
comments?
    Secretary Norton. I would be happy to work on that. I 
understand we are starting with a situation where we had 
contracted for 100 percent, and for a long time we are 
supplying very high levels of water, and that things have 
changed and that we are now trying to meet the needs of some of 
those agricultural areas.
    And so we want to work to see what we can do to provide 
assurances, but we do not want to make empty promises. We want 
to make sure whatever we commit to is what we really can 
deliver.
    Mr. Calvert. One last question to you, Madam Secretary. The 
whole issue of the drain there in the Westlands, I know that 
your assistant Sue Ellen has been working on that. I was 
wondering if that is coming any closer to some successful 
resolution.
    Secretary Norton. We are still in the process of working 
through settlement negotiations. Those do seem to be going well 
and it seems to be hopeful, but we do not have anything 
resolved at this point.
    Mr. Calvert. As you know, we intend to do a Subcommittee 
mark on H.R. 1985 when we return from the August recess and 
full Committee mark in the same week or shortly thereafter. So 
any resolution to any of these issues would be very helpful.
    Mr. Hannigan. Mr. Chairman, before you recessed, I was 
asked by Mr. Radanovich about assurances if there were ESA 
guarantees--I forget exactly how it was phrased. Would I be 
supportive of assurances? And I think I have provided some 
confusion. The assurances I referred to were the assurances 
that there wouldn't be takes from the projects for biological 
opinions. I think what you were referring to were assurances of 
the 65 to 70 percent water deliveries, which could not be 
linked to that effort.
    Mr. Radanovich. My question was if the assurance language 
was in the bill and it became law, could you assure me, then, 
that any water demand generated from that would not come from 
any other agencies--any other water agencies?
    Mr. Hannigan. The assurance language in what respect?
    Mr. Radanovich. In the assurance language that is in this 
bill, 1985.
    Mr. Hannigan. Assurances of the 65 to 70 percent?
    Mr. Radanovich. Right. If that was in the bill and became 
law and you were responsible for administering that law, if a 
shortage came up, could you assure me that it would not come 
from any other water agency? Because that is the basis of the 
assurance language, is the guarantee of 65 percent to Westlands 
without taking any water from any other water agency.
    Mr. Hannigan. If that were the law? I wouldn't have any 
choice, but it would be very difficult.
    Mr. Calvert. One thing in this issue is the environmental 
water account. And that has been brought up on occasion. And 
there seems to be different perceptions on what that means. By 
many people's perceptions, it means that the environmental 
water account would be prioritized for endangered species. And 
other people believe it is for any number of remedies. Could 
you, maybe both you and the Secretary, define what you believe 
that the priority for the environmental water account should 
be?
    Secretary Norton. Well, I generally was very pleased to 
learn about the idea of the environmental water accounts. And I 
am speaking more at the conceptual level. Maybe some other 
people could provide you information on it and the details of 
it and we can provide that later if you like.
    I think the approach is basically to have a thought process 
go into environmental water releases in the same way that we 
have a thought process that goes into agricultural and 
municipal uses of water, which is that you need to think about 
the timing of your use of water. You need to think what are the 
priorities. The person who is in charge of administering the 
environmental water account needs to think about what within 
the environmental area are the most important needs. And so it 
provides predictability for everyone else within the system and 
helps us avoid some of the conflicts that really cause problems 
within endangered species and so forth.
    In terms of whether it is just avoiding jeopardy or whether 
it is for broader uses, we would like to get ahead of the curve 
and not have species always endangered so that we have to kick 
into the gear that we saw in Klamath. We would like to recover 
species and to actually have the species recover so that we no 
longer have to be operating within the framework of the 
Endangered Species Act.
    Mr. Calvert. The only reason I bring that up is because 
many people that I have talked to that were in the negotiation 
in the environmental water account believe, and still believe, 
that the intent of that was--its first and only priority was 
endangered species; to protect those species and not be used 
for a variety of remedies which allegedly that account is being 
used for. And so that would divert water from other purposes 
that we are discussing here that puts farmers, obviously, in a 
worse position than they are already in. So it is something 
that we need to continue to work on as we move this 
legislation.
    Mr. Radanovich. If I may add, the way that the assurance 
language is written in the bill, again would require that to 
provide that assurance for any water agency in the State that 
it can't be taken from any other water agency in the State, 
which puts the burden on how you administer the Endangered 
Species Act and the CVPIA in order to fulfill that role. The 
water is going to have to come from the environment to fit that 
need. And what I want to make sure is to be able to hear from 
you that you feel that you have enough flexibility 
administratively to make that happen.
    Secretary Norton. And let me get back to you with some more 
clarification on that.
    Mr. Radanovich. If you could, that would be excellent. I 
would appreciate that from Mr. Hannigan as well.
    Mr. Hannigan. The assurance language in the bill currently 
I believe is not consistent with the ROD. And you know, if that 
were to become law, we would have a real dilemma because the 
way you frame the question, it is the endangered species that 
would take the hit, if you will. No other water agency can take 
the hit--.
    Mr. Radanovich. But there is a lot of administrative 
flexibility that you have. So my question is, can you make up 
that difference with the administrative flexibility that you 
have under that law? I mean, those are the choices you have to 
make if this assurance--the language becomes law.
    Mr. Hannigan. I don't know. I don't think so as it is 
drafted currently.
    Mr. Calvert. Continuing conversation. Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair. And it is nice to 
see my colleague Tom Hannigan working with us on a real 
important issue. And Mr. Chair, thank you allowing me to attend 
your three hearings which are very informative and very 
helpful.
    Being from southern California, we found during my 
legislative years that we ended up being on the lower end of 
the totem pole when it came to water allocations. And it always 
frustrated me because it was something that--and it was kind of 
good because it forced the Californians to go into new 
methodology such as water recycling and some other areas.
    I am thankful for your testimony because it tells me that 
your administration is very key in helping resolve some of 
those issues and engaging Californians in water issues. 
Agencies have spent million of dollars in the past decade in 
promoting effective recycling, groundwater recovery, and other 
conservative methods. And I certainly would want to extend an 
invitation for you to come and visit some of our facilities to 
see what we have done, and hopefully be able to get some 
additional input from you and us working together on those 
areas. I am hoping that the administration is prepared to work 
with us to continue some of these very important programs, 
because some of my colleagues in hearings have alluded to the 
fact that we have invented the wheel, and do not want to have 
to reinvent it so they can replicate some of those conservation 
programs in their own States.
    So it is really very effective for us, very important, 
since we have kind of taken the lead in many of those areas. 
But I certainly would like to extend the invitation on behalf 
of the California delegation.
    And I have long been of the opinion that while my 
colleagues focus a lot on the technical aspect, the policy 
aspects, I am more concerned with the municipal areas; how they 
can get assistance in being able to deal with the issues. That 
means giving them the assistance, whether technical, financial 
or otherwise, so they can either expand their water 
infrastructure for recycled water, to be able to not use as 
much water, but be able to fill in some of the commercial/
industrial increased need, because it just keeps growing.
    Somehow we don't focus on assisting the local 
municipalities to be able to deal with our own issues and help 
them come up with solutions so that we were then able to cut 
the use of water and be able to use more of the recycled. And I 
think part of that goes to EPA's recent request of sanitation 
districts. And I don't know, Tom, if you are aware that 
sanitation districts must now give a fourth treatment to 
tertiary water before it is released into the ocean or utilized 
for commercial/industrial and watering purposes. Well, that is 
billions of dollars' worth of a new plant for that fourth 
treatment.
    And I don't know what quite brought that decision for EPA 
to demand this unfunded mandate of sanitation districts. And I 
think it is worth looking into because if that is the case, 
then we need help for municipalities to be able to do this. 
This is not just California. This will be nationwide that this 
unfunded mandate will be applied to.
    So if we are looking at the overall picture, we want to be 
sure that we also deal with the local impact. Part of what I 
have seen in some of my municipalities, which are old 
municipalities, is that they have got wells that have been 
contaminated and there is no way to flush them and put them 
back into operation. And somehow--Ken was gracious enough to 
allow us to input into the bill language that will assist in 
developing assistance for the local municipalities, whatever 
their local need happens to be. That is of major importance to 
me.
    And I am just wondering if you might have any comment of 
how you would foresee the assistance coming to the local 
municipalities, the users--the end users.
    Secretary Norton. First of all, I appreciate the invitation 
to come and learn some more about it and to see some more of 
what it is that you are already doing.
    One of the aspects of CALFED that makes sense is trying to 
look at a comprehensive approach and try to look at both the 
conservation side of things as well as the supply side. And so 
I applaud the State of California for trying to get all the 
California interests together to decide what makes sense for 
all of your interests. So I don't know the specifics on the 
programs you are talking about, but I generally think we need 
to look at both conservation and supply in solving these 
problems for the long term.
    Mrs. Napolitano. Because most of the conservation you talk 
about is major. I am talking about municipalities establishing 
their own storage areas.
    Mr. Hannigan. Well, Ms. Napolitano, you are absolutely 
right when you focus on the local water agencies, cities and 
their local needs. And the State is trying to respond to that. 
There were moneys in Prop. 13, the $2 billion water bonds that 
are put out on competitive bids to local municipalities and 
water agencies to do exactly what you are interested in. And 
probably the best example, the most sterling effort regionally 
is by your Metropolitan Water District of southern California. 
They are in the forefront, as you well know, on virtually every 
effort to conserve and to find other means to provide more 
reliability to their water needs to serve southern California, 
and they assist as well as the State. They assist local 
agencies in those efforts.
    Mrs. Napolitano. I was looking at the Federal picture, 
besides the State picture.
    Thank you, Mr. Chair. I would like another round.
    Mr. Calvert. Mr. Walden.
    Mr. Walden. Thank you, Mr. Chair. I wanted to share with 
the Secretary the headline in the Herald and News. I think one 
word says it all: ``water. Norton Grants Relief for Farmers.'' 
I commend you for the decision that you made and your staff 
made in releasing the 75,000 acre feet of water. As I said, it 
is the first drop of good news we have had. And it has meant a 
great deal to the people in the Klamath Basin. And I know how 
much time you have put in, and your staff, in trying to find 
solutions to this problem.
    Secretary Norton. Well, we really appreciate being able to 
work with you and with Senator Smith on this.
    Mr. Walden. How closely parallel to what is going on with 
this CALFED proposal to what we need to do in the Klamath 
Basin? I admit at the outset, I spent more time on Klamath than 
CALFED.
    Secretary Norton. One of the things that I think is 
attractive about CALFED is having brought together all of the 
various interests, the local, State, Federal, agricultural, 
environmental, to talk about solutions and to put together a 
package of a balanced approach with various solutions in it. 
And I think that type of negotiated approach is something that 
makes a lot of sense.
    Mr. Walden. And in doing this, do they have some sort of 
long-range management plan that allows them some flexibility 
under ESA or under some of these other laws? I know they got 
like until 2015 to continue their offer to appropriate out of 
the Colorado River, or at least California does.
    Secretary Norton. The Colorado River is really an agreement 
among the States and working through the Department of Interior 
under the Colorado River Compact. So that is entirely separate. 
That is not an endangered species issue.
    The Endangered Species Act, as you know, is one that really 
is not intended to have a lot of flexibility. It is intended to 
change--it was intended to change the way in which the 
government and private interests made decisions that affected 
endangered species.
    And so when something gets to the point of jeopardy for an 
endangered species, there is not a lot of flexibility. The 
biological opinions that are written are supposed to evaluate 
each species and each situation independently to see how much 
flexibility the biology allows. But once the biology says that 
there has to be a specific line drawn, then the law itself 
doesn't provide much flexibility. It is a question of what the 
biology and the biological opinions lay out.
    Mr. Walden. I think it will be interesting to see how these 
lawsuits come out that my colleague Mr. Radanovich mentioned, 
following the Wilson Bridge and the discharge of toxic waste 
into America's first, I believe, heritage river, the Potomac. 
And it has always troubled me that there is somewhat in the 
order of 3 billion gallons of runoff, sewerage that flows into 
the Anacostia and Potomac Rivers each year when it rains.
    Same thing happens in Portland, 2 billion gallons of 
sewerage and overflow. And yet they seem to have a decade or 
more to deal with those issues. And yet my folks here in the 
Klamath Basin, it is overnight, no water in order to comply 
with ESA. I realize new biological opinions and so forth, but 
there seems to be a disparity in the amount of time some areas 
are given to work on some of these problems because it might 
cost them a lot, which is the case in the Portland metropolitan 
area. It would be expensive to fix it, and yet we allow the 
discharge of that sewerage when it rains and overflows their 
system. We allow it in the Potomac and the Anacostia. And yet 
there are endangered species in both rivers.
    And I am not putting this at your doorstep, but it is a 
frustration that people in the Klamath Basin feel very 
strongly, as you know, and something that I think we need to 
pursue very aggressively in this Congress and in our agencies 
to make sure there is one standard. And I don't believe you are 
going to see a change in ESA until the urban areas are affected 
like the rural areas have been sacrificed. Thank you.
    Mr. Calvert. Mr. Otter.
    Mr. Otter. Thank you very much, Mr. Chairman. I would like 
to continue. Along with that, I do have a question that I think 
I will eventually arrive at here. Coming from the West--I am 
from Idaho--so coming from the West, especially the Basin West, 
it does seem as though the Environmental Protection Agency and 
the Army Corps of Engineers and all other manner of Federal 
agency has declared martial law on the environment, and as a 
result can suspend all manner of private property protection 
and constitutional limitations to the government, because there 
are lots of horror stories--and I am not going to bother you 
with them, other than to note one very important thing.
    And I, under the Government Reform Committee, which I also 
serve on, and a couple of Subcommittees there--I too ran into 
the same information that my colleagues mentioned earlier about 
government polluting themselves, the Army Corps of Engineers 
pumping those sumps out so that they could build the bridge 
abutments, and when they were caught and eventually told not 
to, they had to go to court and EPA took them to court.
    The thing that really should amaze us all, and nobody 
seemed to be as alarmed as much as I, was nobody went to jail. 
Nobody was fined. And, in fact, to the best of the knowledge 
that I have received yet, nobody lost their job.
    However, I have got a big, big envelope full of stories 
where some corporation, some farmer, some developer, violated 
one of the laws with probably much less impact than the Army 
Corps of Engineers is doing to the Potomac. Nobody went to 
jail, except the farmer went to jail and the CEO went to jail 
or was fined substantially. In fact, the reason why I am so 
sensitive to this is I myself have been fined by the 
Environmental Protection Agency and I never got to go to court. 
So when I say martial law, the EPA decided who broke the law, 
what the penalty was, and whether or not I was guilty. King 
George, III never had it so good.
    So now, having said all of that--now that I vented, Mr. 
Hannigan, I noticed a year ago, you got the Record of Decision 
on CALFED. You have gone forward with it. And between not only 
your comments and the Record of Decision, but also some 
comments that Mr. Miller made, it seems to me that everything 
is referred to as 30 years. We have got a long-term plan, and 
this is the first 7 years--this Record of Decision only was the 
first. And in Mr. Miller's comments, there was some mention 
made about user pay, which I am a big advocate of.
    Is the funding for the bonding for CALFED for the entire 
project a supply security? Is that under a 30-year payment 
schedule? If you have to bond it--if the users or 
beneficiaries--will that be 30-year bonding; because I notice 
the project is for 30 years.
    Mr. Hannigan. If there is a project under CALFED where 
beneficiaries exist and you work out an agreement where 
beneficiaries pay, the bonding structure can be a 30-year, 
could be longer than 30 years. It is what the market at that 
point will--.
    Mr. Otter. Is that what you would suggest? Would it be 15 
years maybe, 20 years?
    Mr. Hannigan. I think it depends on the financial structure 
and on the wherewithal of the users who are willing to pay for 
the benefits. There may be beneficiaries who find another way 
to finance it. There is nothing that locks in bonds.
    Mr. Otter. But it is fair to say, then, in your 
deliberations on the potential package that you may have to put 
together, a great deal of concern is put on the beneficiaries 
and those that are going to have to pay.
    Mr. Hannigan. Only where there are projects where there are 
benefits, water-supplied benefits. Projects that are ecosystem 
restoration are not envisioned to be user-pay projects, for 
example.
    Mr. Otter. But in user pay projects, that would be the 
philosophy?
    Mr. Hannigan. That is the goal.
    Mr. Otter. That brings me to a question to you, Madam 
Secretary. And I appreciate very much the job you have done--
your 6 months on the job. And I have seen more of you in Idaho 
than I wanted to see of your predecessor, but I very much 
appreciate that.
    The reason I bring this up is that we have a project in 
Idaho, and it is called the Arrow Rock Dam. And the Bureau of 
Reclamation has said it is going to take about 15 million bucks 
to replace these valves in the bottom of the dam. And they 
started the process about 3 years ago. They started collecting 
the money from the beneficiaries, from the irrigators, from the 
farmers, about 3 years ago. And they are a little less than 
halfway there.
    So far, out of the 15 million they think is going to be 
required, they are at $6.9 million, because they were put on a 
short leash, if you will. Fortunately, my colleague and Senator 
from Idaho, Larry Craig, the senior Senator from Idaho, got a 
stipulation on a bill to allow--and I can't even think what 
bill it is now--but anyway, to allow for a 15-year-pay because 
the farmers are, like farmers everywhere out West, in pretty 
dire straits. If they have water to have crops, the crops 
aren't bringing very much money. So anyway, he has put that on 
the bill.
    And I guess what I am asking is I hope I can get the 
commitment from your Agency to work with us to--well, the 
energy and water appropriations is where it is. And we still 
pay--the farmers still pay, but they have got 15 years to pay 
instead of that considerably shortened period of time. We are 
still willing to pay our way, but we just need more time to do 
it.
    And I am hoping and I guess that is what my question is to 
you, can I count on your folks to help us support this effort 
and give us a little more time--because those valves are going 
to last for a long time. And if you ever need to repossess 
them, you are sure welcome to them.
    Secretary Norton. I don't think we are quite ready to do 
any repossessing. We are aware of that situation. We know that 
there is language in the Senate appropriations bill, and not in 
the House, so we need to look at it in the conference 
Committee. We would be very happy to work with you. There are 
some technical problems and some issues that we need to work 
through. We would be happy to do that with you. And I know that 
John Keys, our new head of the Bureau of Reclamation, is very 
familiar with that issue.
    Mr. Otter. Thank you, Mr. Chairman.
    Mr. Calvert. Thank you. I want to thank this panel for your 
patience and diligence through all this. And I appreciate the 
panel coming back, and please come back again. We would love to 
have you.
    I would like to start introducing the second panel. So 
start moving toward the table when you are able.
    Second panel, we are joined by Mr. Ronald Gastelum, the CEO 
of Metropolitan Water District; Ms. Cynthia L. Koehler, the 
Legal Director for Save The Bay; Mr. David Guy, the Executive 
Director of the Northern California Water Association; Mr. 
William G. Luddy, Director of Labor Management, Education and 
Development Fund of the United Brotherhood of Carpenters; Dr. 
David L. Sunding, Director of Sustainable Resource Development 
at the University of California, Berkeley; Mr. Peter Carlson, 
Partner, Will & Carlson, Incorporated; Mr. Clifford W. Schulz, 
Special Water Counsel for the Kern County Water Agency. All 
take your seats.
    Before we begin testimony, let me explain our little light 
system here. We would like to limit the testimony to 5 
minutes--this is a large panel--before we can get into 
questions. The yellow light will come up when you have 1 minute 
remaining in your testimony, and then please wrap up your 
testimony. And with that, Mr. Gastelum, you are recognized for 
5 minutes.

   STATEMENT OF RONALD R. GASTELUM, CEO, METROPOLITAN WATER 
                DISTRICT OF SOUTHERN CALIFORNIA

    Mr. Gastelum. Good afternoon. Thank you, Mr. Chairman, and 
members of the Committee. I am pleased to be here on behalf of 
the Metropolitan Water District of Southern California. I am 
the Chief Executive Officer. I have submitted written testimony 
for the record and, with the Chairman's permission, I would 
like to submit that here.
    Mr. Calvert. Without objection, so ordered.
    Mr. Gastelum. I will make some brief comments. I would like 
to make it clear that we are here in support of H.R. 1985 and 
particularly the water quality improvements it will bring for 
22 million Californians. Metropolitan Water District is a 
public agency, formed in 1928. We are a regional wholesaler of 
drinking water to 26 member public agencies. We are primarily 
funded by local property taxes and water sales. We serve urban 
southern California from the Mexican border on up to Ventura. 
About a third of the water consumed in our service area is 
local groundwater and recycling, about a third from the 
Colorado River through a contract with the Bureau of 
Reclamation, and about a third from the State water project 
through a contract with the Department of Water Resources.
    But we are more than an importer. We store water. We treat 
water. We finance major conservation and recycling projects 
with our member public agencies. We have spent or are 
spending--and it is over the next 10 years--about $8 billion in 
storage projects, conveyance projects, conservation projects, 
recycling projects. We have what we call our integrated 
resources plan, a diverse portfolio of investments in 
conservation recycling, imported water, desalination, 
groundwater conjunctive use. As a consequence, we are using a 
comparable amount of imported water today as we did in the 
1970's; yet we have added 5 million people over that time. We 
are doing this through conservation, recycling and conjunctive 
use.
    Our basic strategy is to import water up to our full 
entitlement when it is available in surplus years and be 
prepared to back off in dry years. That means backing off on 
the Colorado River supply and/or backing off on the State water 
supply. In order to do that, we have to have the conservation 
programs in place, the conveyance systems in place, the storage 
in place. These are the investments that I alluded to with the 
$8 million. But that is our basic strategy. We think that is a 
sound public policy for urban southern California.
    We also believe that that policy is very complimentary of 
CALFED and of the Record of Decision. We think that the CALFED 
and Record of Decision consensus process is the model for the 
future. We can look at models throughout the early 1900's. In 
particular, we can see successes throughout the West.
    But today, as we enter this new century, we need a 
different model. We are up against limitations, such as the 
Endangered Species Act we talked about today. We have the 
specter of global warming and the impact on our weather 
patterns, that we need to be prepared for these challenges. And 
so with these consensus processes and the kind of investments 
you are talking about with us in CALFED, we believe that we 
will be well prepared for that future.
    H.R. 1985 best supports the intent of the Record of 
Decision and the consensus process that made it possible.
    I would also argue, for the benefit of members from outside 
of California, that there are distinct benefits to other States 
by CALFED. Certainly, as a user of Colorado River water from 
the Colorado River, and dependent upon Colorado River water, we 
are able to reduce that dependence and moderate our dependence 
in proportion to our ability to rely upon the State water 
project. And as we cut back on our dependence over the next 15 
years, it is absolutely essential that we have CALFED projects 
in place to help us make that transition.
    I would close by pointing to an article that I read in USA 
Today a couple of weeks ago. The headline was ``water Works.'' 
I fully expected to read about the Klamath situation, but 
instead I read about Georgia. Georgia is going through 
tremendous population increases. You have got upstream and 
downstream water users who are arguing. And the tag on this is 
that they recognize that the way they are going to get through 
that problem is to do exactly what we are doing here in 
California: building consensus, going through the scientific 
analysis, and arriving at a plan that will provide regional 
benefits.
    So, Mr. Chairman, again, we are very much in support of 
H.R. 1985 and appreciate the opportunity to be here today.
    Mr. Calvert. Thank you.
    [The prepared statement of Mr. Gastelum follows:]

  Statement of Ronald Gastelum, Chief Executive Officer, Metropolitan 
                 Water District Of Southern California

    Chairman Calvert and Members of the Subcommittee, thank you for 
this opportunity to testify regarding the authorization legislation for 
the California CALFED Bay-Delta Program. My name is Ronald Gastelum. I 
serve as the Chief Executive Officer of the Metropolitan Water District 
of Southern California. Metropolitan provides supplemental water to the 
17 million Southern Californians who rely on reliable, high quality 
water supplies for their quality of life and the health of the $750 
billion regional economy.
    From Metropolitan's perspective, the legislation before you today 
is the most important federal legislation affecting the management of 
the western states environment and economy in a generation. It 
implements a program that assures comprehensive achievement of regional 
health, economic and environmental program objectives. It helps 
preserve the largest estuary on the west coasts of North and South 
America, the central stopover location for migrating waterfowl on the 
Pacific Flyway and the home to 80 percent of the nation's salmon 
fisheries. This legislation also ensures necessary infrastructure to 
maintain high quality and reliable water supplies for our residents, 
farms, and high-tech industries. These industries are the key to the 
future of the west coast as America's gateway to the Pacific Rim.
    Today, we are at a crossroad in the legislative process. This 
subcommittee must decide which path CALFED authorizing legislation will 
follow. After careful consideration of the two bills before you--
H.R.1985, the Western Water Enhancement Security Act introduced by 
Chairman Calvert, and H.R.2404, the California Water Quality and 
Reliability Act of 2001 introduced by Congressman George Miller--
Metropolitan urges the Subcommittee to approve H.R.1985 and advance it 
through the legislative process. We do not support the advancement of 
H.R.2404.
    This conclusion is based on a comparative assessment of how these 
proposed bills address three key types of provisions: first, governance 
and the process required for further authorization and appropriation; 
second, water quality provisions; and third, water supply reliability 
provisions.
                governance and the authorization process
    The CALFED Bay-Delta Program represents a fundamental and desirable 
change in the direction of water resource management in California. We 
believe it provides an example for the resolution of conflicts in 
similar, complex management challenges of natural resources throughout 
the nation. For the first time, the CALFED Program establishes a 
comprehensive, statewide approach to improve, on an equal priority 
basis, ecosystem restoration and water quality and water supply. The 
program creates a historically unprecedented ecosystem restoration 
effort. It relies heavily on coordinated actions by local jurisdictions 
throughout California to invest in local resource development, 
including aggressive water conservation and reclamation efforts and 
locally driven storage projects. And, the CALFED Program necessarily 
includes major investments in surface and groundwater storage and 
conveyance systems to improve the flexibility of the water management 
system to meet environmental and economic needs.
    Central to the success of this complex undertaking is the 
maintenance of linkages among program elements that assure all affected 
interests ``get better together.'' When state and federal political 
leaders introduced the CALFED Program, they stressed that all 
stakeholder interest groups must be prepared to accept the package as a 
whole. To be successful, the Program could not advance the interest of 
one group at the expense of others. All stakeholders found elements in 
the package they would not have included unilaterally, but if the 
package could be moved forward as a whole the interests of all would be 
advanced. In this sense, the CALFED Program represents a consensus 
package in its outcomes, but it was decidedly not the outcome of 
consensus negotiations among the stakeholders. Instead, the program 
required political leaders of both parties who were willing to make 
tough choices, develop a fair package, and challenge the stakeholders 
to come along. Mr. Chairman, we believe you are providing and must 
continue to provide that kind of leadership in the Congress.
    The fundamental test of governance and the authorization process 
for CALFED-related actions must be the preservation of these linkages 
and the ability to assure the success of the entire CALFED package. 
``Cherry-Picking''--the propensity of some stakeholders and their 
political champions to promote the elements of the package they like 
and erect barriers to the elements they don't like--must be avoided at 
all costs. Only H.R.1985 meets this fundamental test.
    All three CALFED bills (including S.976 introduced by Senator 
Feinstein) contain provisions requiring the establishment of a 
permanent CALFED governance body. However, governance plays a key, 
positive role in the authorization and appropriations process created 
by H.R.1985. In H.R.1985, the state government in California must 
create a broad-based Governance Board, which in turn must be approved 
by the Congress before funds can be appropriated for fiscal year 2004. 
The Governance Board has the responsibility to shape linked packages in 
California to meet the goals of the CALFED Program and these packages 
(or ``reports'') provide the basic funding vehicle in H.R.1985. 
Projects seeking funding must be included by the Governance Board in 
these comprehensive packages. Most of the funding in H.R.1985 goes 
through a competitive grant process administered by the Governance 
Board to help assure that all projects are cost-effective and 
coordinated with the Program as a whole. To preserve the integrity of 
the package, when the Governance Board reports return for final 
authorization, the Authorizing Committees may strike, but cannot add 
projects to the reports.
    This type of approach is essential for the success of the CALFED 
Program and is lacking in H.R.2404. Some environmental interests have 
attacked S.976 because it ``preauthorizes'' selected surface storage 
projects. We believe these concerns are valid--it makes little sense in 
this legislation to fund projects independent of their relation to the 
package as a whole and irrespective of whether feasibility and 
environmental studies and financial arrangements are in place. However, 
H.R.2404 is fundamentally a preauthorization bill. It selects for 
special preauthorization all environmental restoration projects ``as 
generally outlined in the Record of Decision'' and a long list of 
selected local projects at a total federal cost of nearly $700 million. 
Many of these projects have merit and would receive funding under the 
more careful, competitive process of H.R.1985.
    However, the selective nature of the preauthorization process in 
H.R.2404 will inevitably promote the success of certain projects at the 
expense of others. The vast majority of projects not favored in the 
preauthorization list must go through the full Congressional 
authorizing and appropriations process on a ``stand alone basis 
1.'' Thus, under the preauthorization approach of H.R.2404, 
some projects are certain to be approved for funding, while others face 
a daunting future.
---------------------------------------------------------------------------
    \1\ Section 104 of H.R.2404 provides authorization of $100 million 
``for activities required to be conducted by federal agencies under the 
Record of Decision that are not expressly authorized by this Act''. 
These funds could presumably be used for non-preauthorized activities, 
but would provide only a tiny fraction of the funds needed to fully 
implement the CALFED package.
---------------------------------------------------------------------------
    Preauthorization--whether to promote storage or environmental 
restoration and water reclamation--is contrary to the spirit of the 
CALFED Program and will undermine its success. Only H.R.1985 avoids 
preauthorization. H.R.1985 provides the Governance Board with the 
ability to maintain essential linkages in the CALFED Program and it 
requires all projects to complete feasibility and environmental 
studies, and cost sharing and financial arrangements before authorizing 
funds for construction. On the basis of governance alone, H.R.1985 is 
the ``key linkage'' to ensuring a collaborative effort among urban, 
agricultural and environmental interest groups and should be the 
legislative vehicle that moves forward to authorize the CALFED Program.
                             water quality
    Assuring actions to substantially improve water quality is the 
highest priority of Metropolitan related to CALFED authorization 
legislation. As a recent Natural Heritage Institute report stated, the 
intake of the State Water Project (SWP) is located at the sump of the 
Central Valley and the gateway to the Pacific Ocean. The result: 
agricultural drainage and seawater intrusion has resulted in source 
water with the highest potential for creating carcinogenic 
disinfection-by-products in the country. Yet, 22 million Californians--
17 million of them in our service area--rely on the SWP and its Delta 
intake for drinking water supplies. To protect public health and assure 
that California's urban water agencies can meet future drinking water 
standards at a reasonable cost, source water quality in the Bay-Delta 
system must be improved.
    Metropolitan also relies on the Colorado River--the saltiest 
surface supply used by any urban agency in the state. Despite the 
inherent high salinity of the Colorado River, Metropolitan is fully 
committed to maintaining a full Colorado River Aqueduct, while we 
assure that California lives within its 4.4 million acre-feet allotment 
of Colorado River water. To do this, Southern California water managers 
must continue to aggressively implement, among other actions, water 
reclamation and groundwater conjunctive use projects. Both of these 
initiatives require low-salinity water. Neither can be successful 
without lowering the salinity of water received through the SWP. From 
the perspective of Southern California, reducing the salinity of 
supplies from the Bay-Delta watershed must be a high CALFED priority.
    Fortunately, CALFED represents another breakthrough because of its 
commitment to water quality improvements as an equal priority to 
improvements in the ecosystem and water supply reliability. The CALFED 
Program includes a statewide, integrated approach to improve water 
quality. Existing and new surface storage reservoirs and through-Delta 
conveyance improvements are to be operated, in part, to maintain and 
improve water quality. Substantial investments in source protection are 
intended to keep contaminants out of water supplies before they are 
introduced. The program contains commitments to help pay for new, 
advanced water treatment technologies in urban areas. It promotes 
innovative water exchange partnerships between urban and agricultural 
areas intended to improve agricultural water supply reliability, help 
restore fisheries, and significantly improve source water quality for 
the urban partners. Metropolitan is actively pursuing several of these 
partnerships and they hold the promise, in combination with other 
actions, of meeting our water quality requirements in the CALFED 
Program.
    Recent proposed amendments to H.R.1985 would significantly 
strengthen the bill's ability to assure improved water quality for all 
Californians. Both H.R.1985 and S.976 expressly authorize so-called 
``complementary actions''--that is, actions that are included in the 
CALFED Program and the Record of Decision, but were not covered by the 
programmatic environmental documentation. This is important for urban 
water quality, because many of the complementary programs are primarily 
intended to improve water quality, including the Bay-Area Blending 
Program, the San Luis Bypass Project, and exchanges to improve water 
quality for Southern California.
    Ironically, while H.R.2404 includes the term water quality in its 
title, the bill itself contains very few provisions that would 
accomplish water quality improvements. H.R.2404 does not authorize 
complementary actions intended to improve water quality, threatening 
their success. Moreover, since no water quality improvement projects 
are on the list of favored preauthorized projects, many of the 
innovative approaches to improve water quality included in the Record 
of Decision will face an uphill battle in obtaining adequate funds for 
their implementation.
    Once again, on the basis of water quality provisions, Metropolitan 
urges the subcommittee to approve H.R.1985.
                        water supply reliability
    While Metropolitan's primary interest is water quality, we are 
obviously keenly interested in provisions to assure the reliability of 
adequate supplies for the future health of the state's economy. 
Southern California is unsurpassed in its vigorous and far-reaching 
programs to better manage local supplies. We have invested more than $8 
billion in aggressive water conservation and reclamation programs and 
surface and groundwater storage projects. These local and regional 
storage projects are central to the CALFED strategy of making water 
available for storage south-of-the-Delta when natural runoff is 
plentiful to enable water managers to use less and provide higher flows 
for the environment during critically dry years. Together, these local 
and regional actions have allowed us to significantly reduce 
requirements for imported water from both the SWP and the Colorado 
River during dry years. But, these investments must be accompanied by a 
commitment to assure the reliability of those supply amounts upon which 
we will continue to rely.
    Metropolitan strongly supports those provisions of H.R.1985 that 
respect the supply assurances central to the CALFED linkages. H.R.1985 
protects supply reliability for the SWP, reinforces key regulatory 
assurances related to the Endangered Species Act, and assures increased 
access to the system during wet years to replenish south-of-the-Delta 
surface and groundwater storage. Such provisions take a big step toward 
assuring that California and the national economy will not face a water 
crisis that would likely dwarf the current energy crisis.
    In contrast, H.R.2404 contains provisions that assault the water 
supply reliability of the majority of the California economy. H.R.2404 
raises additional barriers to the implementation of storage projects 
and improvements in conveyance. It would establish federal policy to 
reduce rather than increase available supplies for the Southern 
California urban economy and the San Joaquin Valley agricultural 
economy. Further, H.R.2404 would require the Secretary to manage (i.e. 
reduce) exports from the Delta ``to minimize the entrainment of and 
harm to'' fish as determined solely by the Fish and Wildlife Service, 
National Marine Fisheries Service, and the California Department of 
Fish and Game. Taken to its logical conclusion, such a provision would 
require severe reductions in supply and abandons the CALFED commitment 
to sound science. The water supply provisions of H.R.2404 almost seem 
mean-spirited. It fosters north-south conflict and would destroy the 
interregional partnerships being fostered by CALFED to promote a 
statewide comprehensive water management program.
                               conclusion
    Mr. Chairman, Members of the Subcommittee, I can hardly overstate 
the importance of the task before you for California's environment and 
its economy, as well as the nation. To achieve the ambitious objectives 
of this much-needed program, we urge you to be bold and bipartisan. Mr. 
Chairman, you are to be heartily commended for the bipartisan and far-
sighted manner in which you have progressed this legislation thus far. 
Metropolitan strongly supports moving H.R.1985 forward to set the stage 
for the passage of legislation of historic importance to California and 
the nation.
                                 ______
                                 
    Mr. Calvert. Next, Ms. Cynthia Koehler, the Legal Director 
for Save The Bay. You are recognized for 5 minutes.

 STATEMENT OF CYNTHIA L. KOEHLER, LEGAL DIRECTOR, SAVE THE BAY

    Ms. Koehler. Thank you, Mr. Chairman. Mr. Chairman and 
members of the Committee, thank you for convening today's 
hearing and for inviting me to testify on H.R. 2402 and 1985. 
Thanks in particular to you, Chairman Calvert, and to 
Congressman Miller for your leadership in introducing these 
bills to support the Bay-Delta Program. We look forward to 
working with the Congress, the State, and our colleagues in the 
stakeholder communities as these bills move forward.
    Save The Bay is a nonprofit membership organization 
dedicated to the restoration and protection of the San 
Francisco Bay, Delta Estuary and its watershed from the Sierra 
tributaries out to the Farallones. Save The Bay has worked for 
over four decades to protect this extraordinary national 
resource and its native species and habitats.
    Save The Bay is committed to the CALFED premise of solving 
California's water supply and ecosystem problems in an 
integrated fashion. We strongly support the objective of 
providing more reliable supplies for our farms and cities. And 
we believe it is critical as well to ensure that the ecosystem 
restoration program developed in CALFED is effective and able 
to achieve its objective of self-sustaining fisheries and 
wildlife populations.
    A review of the Bay-Delta bills pending before this 
Committee raises several issues:
    First, we recommend greater emphasis in the legislation on 
the ecosystem restoration element of the Record of Decision. We 
have recently completed a study entitled, ``putting It Back 
Together: Making Ecosystem Restoration Work.'' we have in that 
study looked at various large-scale ecosystem restoration 
projects around the Nation, projects that this Committee is 
very familiar with--the Chesapeake, the Everglades, the Great 
Lakes, and the Columbia River. And we have found that these 
efforts have significant lessons for the Bay-Delta Program. In 
particular, it is clear that authorizing legislation needs to 
be focused not only on funding and process, but on achieving 
results on the ground.
    The National Academy of Sciences has recently concluded a 
study of wetlands mitigation, and similarly found that efforts 
to achieve mitigation of wetlands restoration has failed to 
meet their goals, for a variety of reasons. Specifically, what 
we can learn from these experiences is that legislation can 
make an enormous difference as we move forward in CALFED. We 
can take from these experiences the positive things that have 
come out of these programs and apply them to Bay-Delta Program 
in several ways.
    Specifically, we recommend that the legislation should be 
expanded to include at least the following elements. These are 
summarized in my written testimony and I will only go over them 
very briefly:
    A requirement that the restoration objectives be met within 
a time certain.
    Dedicated-base funding.
    Assurances for the environmental water identified in the 
Record of Decision.
    Water supply benefits linked to achievement of restoration 
objectives.
    And, an independent science program to ground all aspects 
of the program.
    H.R. 2404 and H.R. 1985 each contain several of these 
elements. And they are beginning. To ensure that we are 
achieving the biological bang for our investment, additional 
focus on these programs is necessary.
    Second, we recommend expanding legislation to specifically 
authorize the Water Use Efficiency Program discussed in the 
CALFED Record of Decision. The ROD calls for a 500-million 
commitment to this program over the first 4 years through a 
competitive loan program not unlike that included in 1985. 
Expansion of this legislation to include this program would 
provide the most immediate and valuable water supply 
reliability benefits to many communities, particularly 
economically disadvantaged communities.
    Finally, I will touch briefly on several of the issues that 
have been raised in this Committee previously. We do support 
provisions in H.R. 2404 giving effect to the ROD's principle 
that beneficiaries should pay for major facilities from which 
they receive direct benefits.
    Second, with regard to the guaranteed south of the Delta 
that have been discussed today, we are concerned about 
elevating what is described as an anticipation in the Record of 
Decision to a legally enforceable entitlement. It is not clear, 
as has been pointed out, exactly where this water will come 
from. And there has been pressure to reopen the Department of 
Interior's decision on implementing CVPIA Section 3406(b)(2), 
the 800,000-acre-foot dedication of the environment. This water 
is a key part of the baseline for the Bay-Delta Program and 
should remain available to the environment.
    And finally, with regard to the streamline process for 
1985, the Record of Decision provides that the decisions to 
construct major storage projects are predicated on compliance 
with environmental review and other permit requirements. We 
feel that this is an appropriate condition and should be 
honored in the legislation.
    That concludes my summary of my written testimony. I have 
provided copies to the Committee, Mr. Chairman. And if 
appropriate, I would like that to be submitted for the record.
    Mr. Calvert. Without objection, so ordered.
    Ms. Koehler. Mr. Chairman, this concludes my remarks, and 
thank you for the opportunity to provide these comments before 
you today. And I would be happy to answer any of your 
questions.
    Mr. Calvert. Thank you.
    [The prepared statement of Ms. Koehler follows:]

 Statement of Cynthia Koehler, Legal Director, Save San Francisco Bay 
                              Association

    Mr. Chairman and Members, thank you for convening today's hearing 
and for inviting me to testify on H.R. 1985, the Western Water 
Enhancement Security Act, and H.R. 2402, the California Water Quality 
and Reliability Act. Thanks in particular to Congressman Calvert and 
Congressman Miller for their leadership in introducing bills to support 
the Bay-Delta Program. We look forward to working with the Congress, 
the State and our colleagues in the stakeholder community as these 
bills move forward.
    Save The Bay is a non-profit membership organization dedicated to 
the restoration and protection of the San Francisco Bay, Delta Estuary 
and its watershed from Sierra tributaries to the Farallones. Save The 
Bay has worked for over four decades to protect this extraordinary 
national resource and its native species and habitats.
                    The Bay-Delta Program in Context
    For the last six years, Save The Bay and our colleagues in the 
environmental community and fishing industries have been very active in 
the CALFED Bay-Delta Program. We made this investment of time and 
resources primarily because we are convinced that California must 
address its ecological, water supply and water quality problems in an 
integrated manner.
    The CALFED Program has had a crucial advantage over prior problem 
solving efforts in that it began by asking the correct questions: How 
do we make water supply more reliable for farmers and cities while at 
the same time restoring our key fish, wildlife and habitats? What 
integrated solutions will break the cycle of crisis management by 
putting our fisheries on a self-sustaining basis? What options will 
provide long-term supply reliability to agriculture and cities without 
debilitating conflicts with ecological health? Save The Bay remains 
convinced that fully integrated solutions that put our water management 
system on a compatible basis with long-term maintenance of the 
ecological health of the Bay and Estuary is not only feasible, but 
essential.
    As you know, the Bay-Delta Program grew in part out of the December 
1994 ``Bay-Delta Accord'' which represented a short-term agreement on 
water quality standards and some restoration funding in order to allow 
a larger and more long-term program to be developed that would provide 
long-term stability for all sectors.
    The Record of Decision issued last August that capped the CALFED 
process was a compromise. While Save The Bay, like many others in the 
environmental community, had significant reservations about the Record 
of Decision, we supported it because we believe strongly that it is 
time to move forward and that the ROD represented the best opportunity 
to do so. However, the Record of Decision is not a wholly self-
executing document. While much of the Bay-Delta Program can, and is 
being implemented by the federal and state agencies without legislative 
action, many of the ROD provisions require Congressional direction and 
authorization. For this reason, we support the efforts of this 
Committee, and Senator Feinstein, in moving forward with Bay-Delta 
legislation. However, it is essential that such legislation be 
consistent with the overall promise of the Bay-Delta Program to ensure 
that water supply reliability is compatible with the co-equal goal of 
restoring the ecological health of the San Francisco Bay and Delta 
Estuary.
                Ecosystem Restoration Around The Nation
    Appropriately, much of the discussion around the pending bills, 
H.R. 1985 and H.R. 2404, has focused on the water supply reliability 
aspect of the Bay-Delta Program. However, Save The Bay and others in 
the environmental community are concerned that far less attention has 
been devoted to the objective of restoring the ecological health of the 
San Francisco Bay and Delta Estuary. There appears to be a widely held 
view that the ecological side of the equation can be fully addressed by 
generally authorizing the Ecosystem Restoration Program (ERP). However, 
experience indicates that this is unlikely to be the case.
    While the Bay-Delta Program is among the most ambitious, there have 
been a number of other efforts to address very large scale watershed 
level ecological problems. Save The Bay has recently concluded a review 
entitled, Putting It Back Together: Making Ecosystem Restoration Work, 
which examines several well known restoration efforts including the 
Chesapeake Bay, the Columbia River, the Great Lakes, the Everglades and 
others. Our goal was to determine whether these older efforts had 
relevant lessons for the CALFED process.
    Strikingly, the objectives for these other efforts are very similar 
to CALFED's--not to return to a pre-development state of nature, but to 
the contrary, to attain a modest level of sustainability for valuable 
fish and wildlife and habitats in order to avoid debilitating 
conflicts.
    What we found, in brief, is that many people are working diligently 
to solve these problems and while there have been notable successes, 
many of these programs are having difficulty attaining their basic 
restoration objectives. This is due to various factors discussed in our 
review, but the primary issue appears to be that most of the 
legislation establishing these programs was not specifically oriented 
toward achieving on-the-ground results--they tend to emphasize instead 
spending and process. Without question, authorization of the 
restoration program is crucial; but the key seems to be long-term and 
reliable funding in combination with other legislative direction. In 
general, merely authorizing the restoration component of a program 
without greater legislative direction is unlikely to produce the 
desired restoration results on the ground, particularly with regard to 
long-term sustainability of species at risk.
    Based on these case studies, Save The Bay has developed a list of 
the critical elements that should be included in Bay-Delta legislation 
in order to ensure that the ERP objectives are in fact achieved. This 
proposal has been endorsed by a number of environmental groups 
including Environmental Defense and the Sierra Club. Key elements 
include:
     LRequirement that the restoration objectives be met within 
a certain time;
     LDedicated base funding for the ecosystem restoration 
program;
     LAssurances regarding water needed to achieve the 
restoration objectives;
     LWater supply benefits linked to achievement of 
restoration objectives;
     LIndependent science and economics to ground all aspects 
of the program.
    We have provided copies of Putting It Back Together to the 
Subcommittee staff and have had an opportunity to talk with them about 
some of these issues. We are hopeful that as the bills move forward, 
they will more fully incorporate the elements necessary to ensure that 
the restoration element of the Bay-Delta Program has the full 
legislative support necessary to ensure that the restoration objectives 
so widely shared are actually realized on the ground.
                          Water Use Efficiency
    Another central aspect of the Bay-Delta Program that requires 
additional legislative support is the water use efficiency program. The 
ROD proposes a $500 million competitive grants program for water use 
efficiency measures. If implemented, such a program could have almost 
immediate benefits for farmers and cities and provide much needed 
relief on supplies. While there is some controversy over many other 
water supply reliability tools, there appears to be a strong consensus 
that such a program would provide the fastest, and the most cost-
effective, water supply benefits for a large number of people.
    Such a program is particularly important in its ability to also 
provide significant benefits to lower income communities by providing 
the resources needed to retrofit homes and small businesses with water 
efficient technologies, not only lowering demand, but lowering costs as 
well.
    Save The Bay strongly supports the inclusion of a water use 
efficiency grants program in the Bay-Delta Program authorizing 
legislation.
                             Other Concerns
    Save The Bay and thirty other environmental and fishing 
organizations have previously forwarded a list of our concerns with 
regard to the current version of H.R. 1985 to Members of this 
Committee. These issues include:
     LPre-approval process for major new water development 
facilities.
     LAbsence of a requirement that beneficiaries pay for 
facilities.
     LNew water delivery guarantees to certain water districts.
    This last issue is of particular concern in light of recent 
developments indicating that these water deliveries are likely to come 
at the expense of water that is supposed to be set aside under the 
Central Valley Improvement Act (CVPIA) for the restoration of fish, 
wildlife and habitat that is to serve as the basis for the Bay-Delta 
restoration effort.
    This underscores that it is critical for Bay-Delta legislation to 
ensure that the restoration program is able to meet its objectives and, 
in particular, that there are appropriate guarantees of water for the 
environment. Water diversions in the past have had unintended but 
devastating impacts on California's ecosystem and fisheries. The 1955 
Act authorizing the Trinity Dam, for example, expressly directed the 
Department of the Interior to ``[A]dopt appropriate measures to insure 
the preservation and propagation of fish and wildlife...'' P.L. 86-386. 
Indeed, proponents maintained at the time that the ``Trinity Project 
does not contemplate the diversion of one bucketful of water which is 
necessary in this watershed.'' Trinity Journal (Feb. 23, 1952). Despite 
these assurances, substantial water needed to maintain the ecosystem 
was in fact diverted out of the watershed and the Trinity River's 
historic fisheries were decimated as a result; salmon and steelhead 
populations have been reduced by 70-90% over the last thirty-five 
years.
    The best way to avoid such situations, and the inevitable conflict, 
is to ensure the success of the restoration program and to put water 
management on a sustainable path for agriculture and cities compatible 
with ecological health. This is the great promise of the CALFED Bay-
Delta Program and we believe it is one that can still be met.
    Mr. Chairman, this concludes my remarks. Thank you again for the 
opportunity to provide these comments. I would be happy to answer any 
questions that the Committee may have.
                                 ______
                                 
    Mr. Calvert. Mr. David Guy, Executive Director of the 
Northern California Water Association.

STATEMENT OF DAVID GUY, EXECUTIVE DIRECTOR, NORTHERN CALIFORNIA 
                       WATER ASSOCIATION

    Mr. Guy. Thank you, Chairman Calvert, members of the 
Subcommittee. My name is David Guy. I am the Executive Director 
for the Northern California Water Association. Like others, I 
have submitted written testimony and I would like to make that 
part of the record before this Subcommittee.
    Mr. Calvert. Without objection, so ordered.
    Mr. Guy. The Northern California Water Association 
represents nearly 70 water suppliers in the Sacramento Valley, 
which, of course, is the upper or northern part of the Great 
Central Valley in California. The Sacramento River and the 
Feather River run through the heart of the Sacramento Valley 
and, of course, are the cornerstones for both the State and 
Federal projects.
    The water suppliers in the Sacramento Valley rely largely 
upon senior water rights and also value very much the watershed 
and other area-of-origin protections that have been put in law 
over the years to assure that they will have reliable water 
supplies.
    With that said, even this year after nearly 6 consecutive 
wet years in California, there have been some folks in the 
Sacramento Valley that have faced water curtailments and they 
are only receiving 60 percent of their supplies.
    We strongly support H.R. 1985, Chairman Calvert, and want 
to work with you to advance that as quickly as possible. The 
primary reason for that is we believe that H.R. 1985 really 
gives rise to a lot of the things that we are trying to do in 
the Sacramento Valley. Most notably, what we have been doing is 
developing an integrated water resources program, much like 
what Mr. Gastelum suggested for the southern California area. 
In this integrated water management program, the goal is quite 
simply to meet the needs within the area, watershed and county-
of-origin needs in the Sacramento Valley. And we believe that 
if we can do that, we can then help meet the needs of the 
environment and help meet the needs of the water users in the 
rest of the State.
    We can assist in that process, and I believe that H.R. 1985 
does a good job of trying to do that. It wasn't many years ago, 
of course, that we were having North versus South battles. And 
we were saying we weren't going to work together. I think you 
see a very different tenor, and we appreciate your leadership 
in trying to bring us together in that manner. I think the bill 
really advances that type of an effort.
    More specifically, as far as the things that we believe 
H.R. 1985 does to further the integrated program that we have 
talked about, the Statewide water supply issues and 
environmental needs that we talked about, we really need to 
support and empower the regional solutions. And again, we have 
offered one regional solution.
    I think you will see there are a lot of regional solutions 
that you have been offered up and have been well developed 
throughout the State. I think we have typically seen in the 
past that when you try to put a one-size-fits-all prescription 
over the State of California, it has usually led to failure; 
and we believe your efforts are starting to empower our 
regional solutions, and we believe that is how we are going to 
see water supply security in the State of California.
    The second important part that we believe is the need to 
provide for infrastructure needs, of course, throughout 
California. And that is something that we have been negligent, 
in my view, in the State in advancing, particularly with 
respect to water. Every area, of course, has their 
infrastructure needs that they need, and these regional 
solutions will help to determine the infrastructure needs in 
each part of the State.
    In the Sacramento Valley, we have some infrastructure 
needs, whether it be groundwater management or more visible 
things such as Sites Reservoir. In our view, Sites Reservoir is 
a very critical part of this integrated water management 
program. And Sites will be a new type of a water project where 
the Federal and State agencies will work with local partners up 
in the Sacramento Valley to manage the water in this integrated 
fashion and to make the system much more flexible for all of 
the needs that we have talked about. We believe that Sites 
Reservoir is a critical piece and needs to be part of the mix. 
It was called out in the Record of Decision, and we would like 
to see it fully advanced and studied and evaluated over the 
next several years.
    And then finally, there is the need to streamline the 
regulatory process. And, of course, that is really what CALFED 
is all about, was to try to bring disparate agencies of all 
different kinds, Federal and State, and to bring them together 
in a way where you can get some things done and that you can 
focus on a venue where you can actually make some progress. And 
we believe that the CALFED process makes some strides in that 
direction and we believe the bill also moves in that direction.
    With that said, again, I think there are some real benefits 
to H.R. 1985. And it is very important in my view for the 
Sacramento Valley and the water supply and environmental needs 
in the Sacramento Valley. But more importantly, it really looks 
at the Statewide benefits and brings people in the State 
together, I believe, in a way that has not happened in the 
past.
    We very much look forward to working with you, Chairman 
Calvert, and with Senator Feinstein and her efforts to make 
this bill and her companion bill a success. Thank you.
    [The prepared statement of Mr. Guy follows:]

  Statement of David J. Guy, Executive Director, Northern California 
                           Water Association

    Mr. Chairman and members of the Subcommittee, my name is David Guy. 
I am the Executive Director of the Northern California Water 
Association (NCWA). NCWA supports H.R 1985 and strongly believes that 
this legislation will help provide water and environmental security for 
Northern California and the rest of the state.
    NCWA is a geographically diverse organization, extending from 
California's Coast Range to the Sierra Nevada foothills, and nearly 180 
miles from Redding to Sacramento. Our members rely on the waters of the 
Sacramento, Feather, Yuba and American Rivers, smaller tributaries and 
groundwater to irrigate nearly 850,000 acres that produce every type of 
food and fiber grown in the region. Many of our members also provide 
water supplies to state and federal wildlife refuges, and much of this 
land serves as important seasonal wetlands for migrating waterfowl, 
shorebirds and other wildlife.
    We welcome the opportunity to provide the Northern California 
perspective on water security and to present both the opportunities and 
challenges we now face. The Subcommittee's interest in California water 
security is appropriate and very timely given the importance of a 
successful resolution to the environmental and water supply problems in 
the Sacramento San Joaquin River Delta and San Francisco Bay (Bay-
Delta). The Bay-Delta is a tremendous economic and environmental 
resource to California and the nation, and there is much at stake in 
how we implement the numerous ecosystem restoration and water 
management actions.
    For many years, the Sacramento Valley (the northern part of the 
Great Central Valley) has been targeted as the primary source of water 
to meet California's burgeoning demands. Water users and landowners in 
the Sacramento Valley have also faced restrictions under the Endangered 
Species Act (ESA), the Central Valley Project Improvement Act (CVPIA) 
and other environmental restrictions. These actions have posed many 
challenges for Northern California water users and their ability to 
provide secure water supplies for the farms, cities and wildlife 
refuges in Northern California. Rather than focus on these challenges 
(which we have done and could do in painstaking detail), we believe it 
is more constructive to focus on the exciting solutions that are 
currently being advanced by and from within the Sacramento Valley. 
These projects or programs, which will be greatly assisted by H.R. 
1985, will go a long way to provide water security not only for 
Northern California, but for other regions in California as well.
    I would like to emphasize our keen interest in developing and then 
implementing water management solutions to meet both environmental and 
human needs in the Sacramento Valley and throughout California. Before 
the Klamath farmers were denied water this year because of species 
concerns, one of our members, the Glenn-Colusa Irrigation District 
(GCID), faced a similar situation in the early 1990's when it was 
ordered to cease diversions through a faulty fish screen. We now have 
an opportunity to avoid and prevent future water crisisses'' through 
this legislation. We therefore strongly support Chairman Calvert's and 
Senator Feinstein's efforts to craft legislation to implement a 
feasible and sustainable CALFED Program. In contrast, H.R. 2404 does 
not have the necessary balance and comprehensive scope necessary to 
achieve the objectives set forth in the CALFED process and the Record 
of Decision (ROD).
 AN INTEGRATED WATER MANAGEMENT PROGRAM FOR THE SACRAMENTO VALLEY WILL 
             IMPROVE WATER SUPPLY, QUALITY AND RELIABILITY
    Northern California water users have committed to help improve 
water supply reliability, water quality and environmental benefits. The 
Sacramento Valley's initiative and effort to help protect salmon and 
other aquatic species is unprecedented and is now recognized as one of 
the most exciting and progressive voluntary salmon restoration efforts 
in the United States. Today, more than a dozen NCWA members, 
representing over 500,000 acres of irrigable land, have either 
completed or are in various stages of developing screens to prevent 
fish entrainment at their diversions. Many NCWA members have also 
initiated far-reaching efforts to refurbish fish ladders, construct 
siphons, remove dams, create habitat conservation plans and implement 
other habitat improvement projects to enhance the environment, while at 
the same time improving water supply reliability.
    Additionally, NCWA and the Northern California water users have 
embarked on an integrated water management program that has broad 
support from water suppliers and local governments throughout the 
Sacramento Valley. This integrated program includes these fish passage 
improvements (fish screens and siphons), groundwater management, 
evaluation of the Sites off-stream reservoir, flood protection, water 
use efficiency programs, potential expanded storage in Lake Shasta, 
intra-regional water transfers and exchanges, and watershed management. 
(See attached map.)
    During the past year this integrated program led to an 
unprecedented water rights settlement among water users throughout 
California. This settlement, now known as the Sacramento Valley Water 
Management Agreement, and the ensuing integrated water management 
program, avoided the extremely contentious Phase 8 Bay-Delta water 
rights proceedings before the State Water Resources Control Board. The 
parties to the agreement include NCWA, the Bureau of Reclamation (BOR), 
the Department of Water Resources (DWR), the federal contractors in the 
San Luis and Delta-Mendota Water Authority, the State Water 
Contractors, and the Contra Costa Water District. This proceeding would 
have pitted these parties from throughout the state against each other. 
This integrated program will now serve as the heart of a regional 
strategy for the Sacramento Valley.
    The Sacramento Valley Water Management Agreement and integrated 
water management program focus on meeting 100% of the water supply 
demands within the Sacramento Valley during all year types, both now 
and into the future. Northern California water users believe that, once 
the full demands within the Sacramento Valley are met, this integrated 
program will help make water supplies available for use in and beyond 
the Bay-Delta to meet water quality standards, and provide for export 
water users in the San Joaquin Valley, Southern California, the Central 
Coast, and as assets for the Environmental Water Account (EWA) and 
other environmental programs.
    The parties to the agreement will, during the next five months, 
prepare a joint work plan for short-term Sacramento Valley water 
management projects to implement the agreement that will describe this 
integrated program in more detail. Work plans on longer-term projects 
will follow.
SIGNIFICANT EFFORTS ARE NOW NECESSARY TO IMPROVE WATER SECURITY FOR THE 
                   SACRAMENTO VALLEY AND CALIFORNIA.
    To improve water security for the Sacramento Valley, leadership is 
now critical to empower regional solutions, provide for infrastructure 
throughout California and streamline and reform the regulatory process 
to accomplish these goals. These efforts are essential and are 
addressed in H.R. 1985. Simply put, this forms the basis for our 
support of H.R. 1985.

     LEmpower a Regional Solution For the Sacramento Valley

    California history has shown that solutions to water problems in 
the state have typically been successful at the local and regional 
level. Very few solutions fit every part of our extremely diverse 
state. Put differently, there have been few instances when a top-down, 
one-size-fits all, bureaucratic policy or law has helped the state or 
has been implemented. Instead, California water users are now poised to 
advance a series of regional solutions and local partnerships that will 
serve California's needs for many years to come. The integrated program 
described above is an exciting example of a regional solution for the 
Sacramento Valley, but it can only be implemented with state and 
federal leadership empowering local interests to take the actions 
necessary for these programs to succeed. Any bureaucratic efforts to 
impose top-down solutions, like past efforts, are doomed to failure and 
have the potential to destroy the tremendous progress that has been 
made on these regional solutions.
    Like the Sacramento Valley integrated program described above, 
every regional strategy will include the appropriate mix of 
infrastructure needs, storage, conveyance, water transfers and 
exchanges, fish passage improvements, water conservation and 
efficiency, groundwater management, flood protection, watershed 
management and environmental improvements. To fully empower these 
regional solutions requires state and federal funding and the 
regulatory streamlining necessary to implement these programs.

     LProvide for Infrastructure Needs in California

    The California Business Roundtable has estimated that California 
must invest $90 billion on infrastructure over the next ten years in 
order to meet the demands of a state growing by nearly 600,000 people a 
year. Perhaps the most critical infrastructure elements include the 
ability to store, convey and better manage our water resources on 
behalf of cities, farms, and fish and wildlife.
    To provide for these water infrastructure needs will require an 
aggressive funding program to facilitate and fully empower regional 
solutions. There is an important role for both Congress and the state 
legislature to ensure that appropriate funding is allocated in a manner 
that achieves noticeable results. It is also important that the 
regional and local entities are accountable for using these funds to 
implement the regional solutions in an effective and cost-efficient 
manner.
    H.R. 1985 recognizes the need for study and assessment of the off 
stream Sites reservoir in Northern California by August 2004 as 
described in the CALFED ROD. This, of course, is a positive and 
essential element of H.R. 1985. It is generally recognized that the 
fundamental water supply and environmental problems that currently face 
California cannot be properly addressed without the addition of surface 
water storage. In this context, Sites Reservoir was identified in the 
CALFED ROD as a critical element which should be pursued, along with 
local partners within Northern California, and that final decisions 
with respect to its feasibility and authorization should be made not 
later than 2004.
    Sites Reservoir, when constructed, will not only add generally to 
the overall state water supply but, operated in an integrated fashion, 
will allow Northern California, the CVP and State Water Project to 
better maximize the ability to fully utilize the full water resource 
made available to them. In this context, Northern California water 
users, the BOR, the DWR and other state and federal agencies executed, 
as provided for in the ROD, a Memorandum of Understanding to proceed 
with analysis and environmental review of the Sites Reservoir in order 
to allow for decisions on final authorization by 2004.

     LStreamline and Reform the Regulatory Process

    With nearly 18 federal and state agencies under the respective 
executive branches that dictate California water policy, it is critical 
to coordinate and ultimately streamline the plethora of agencies with 
jurisdiction over water resources in California.
    The framework to create CALFED in June 1994 called for cooperation 
and collaboration between the federal and state agencies that oversee 
water in California. It is essential that these agencies continue to 
work together in this manner. Over the past 7 years, CALFED has evolved 
from a concept to streamline agency efforts to a massive bureaucratic 
program. For CALFED to be successful as it transitions from a planning 
program to an implementation agency, it must move from a top-down 
bureaucratic organization to an organization that facilitates and 
fosters a series of regional strategies with local control and 
governance. Most notably, it must streamline the regulatory process to 
assure that these programs will be implemented. Specific examples 
include the facilitation of intra-regional water transfers and 
exchanges and expedited permitting by the U.S. Army Corps of Engineers 
and Environmental Protection Agency.
    Significantly, this means that CALFED and its member agencies will 
serve in a more limited, albeit more effective, role to advance water 
and environmental policy in the state. It is also means that CALFED 
will serve a critical role to coordinate regional strategies to ensure 
that they fit together in a manner that provides statewide benefits, 
and also provide a broad-based governance strategy and oversight 
capability to ensure appropriate and efficient implementation of all 
CALFED program elements.
    Much work was done by CALFED during the last seven years in terms 
of intensive environmental and engineering evaluation and in 
preparation of the ROD. That progress should not be lost. As a 
consequence, H.R. 1985 should clarify that the project alternative 
screening process provided for in the ROD will be adhered to and that 
one CALFED program element will not be treated as an alternative to 
another CALFED program element. Again, among other things, this will 
allow the full integration of all water supply alternatives, maximizing 
the full utilization of the water resources available within the 
Sacramento Valley.
                                 ______
                                 
    [An attachment to Mr. Guy's statement follows:]
    [GRAPHIC] [TIFF OMITTED] T4153.001
    
    Mr. Calvert. Mr. Luddy.

  STATEMENT OF WILLIAM G. LUDDY, DIRECTOR, LABOR MANAGEMENT, 
     EDUCATION AND DEVELOPMENT FUND, UNITED BROTHERHOOD OF 
                           CARPENTERS

    Mr. Luddy. Thank you, Mr. Chairman and members. My name is 
Bill Luddy, and I am the Director of the Labor Management 
Education and Development Fund for the United Brotherhood of 
Carpenters and Joiners of America. I am also the Executive 
Director of Carpenters/Contractors Cooperation Committee, which 
is a joint labor management Committee in southern California. I 
serve on the board of the California Council for Economic and 
Environmental Balance, a civic business and labor coalition 
working on strategies for water and other resource issues. And 
I serve as vice chair of the Metropolitan Water District of 
southern California where I represent the city of Los Angeles 
on the metropolitan board.
    First I would like to express appreciation for the 
leadership and good work that Chairman Calvert has done on this 
Committee. We are grateful for the Congressman's long-term 
commitment to the details of water issues. I also want to 
express my appreciation for the work of Representative Miller.
    From my vantage point, I have concluded that most working 
people in California have begun to regain confidence in the 
State's economy when the electricity crisis shook their faith 
in the system. We do not want to see that experience repeated 
with water. I would hate to see a situation where conflicts 
similar to what we have seen in the Klamath River Basin spread 
across the western United States. And we do not want to see 
working people in southern California lose jobs because those 
of us in positions of leadership were unable to foster 
consensus on water issues.
    To avoid that, we need to foster self-sufficiency backed up 
by an environmentally sensitive plan that thinks in terms of 
decades, not years. Without that, millions of southern 
California workers will be thrust into a situation of long-term 
uncertainty about their economic future.
    As you can imagine, my background has given me ample 
experience with negotiating balanced solutions to contentious 
issues. And in any negotiation, you are trying to get that 
handshake across the table. You can't have a situation where 
one party gets a written guarantee for what it wants while the 
other party is told to hope and wait for the best. Both parties 
are at the table, negotiating in good faith for their 
legitimate interests, and both parties need their assurances 
clearly spelled out.
    In reviewing the bills before us today, it has been our 
conclusion that the legislation Representative Calvert has 
proposed appears to be the most comprehensive and encourages 
more projects to be built both in California and the rest of 
the western region, projects which we believe will lead to more 
jobs and greater long-term economic stability for our State and 
our region.
    That is why we support the guarantees of a reliable and 
safe water supply for future generations. Some would say this 
is a choice between the environment and the economy. There is 
much more consensus here than people realize. Metropolitan 
Water District and the working men and women are interested in 
water quality, which is also one of the key issues of the 
environmental community. When working parents are struggling to 
put food on the table, they should be able to walk to the 
faucet and get a clean drink of water without worrying how to 
pay for it.
    When we protect the source waters of the Delta, it also 
reduces treatment costs, improves health, and allows working 
people to get far more usable water out of the same supply. 
When we clean up southern California's underground water 
supplies, it reduces dependence on northern California. When we 
invest in desalinization research, it allows us to tackle 
direct salinity problems that drive up costs for southern 
California employers, money that could otherwise go toward 
improved wages and working conditions.
    Over the long run, this research points the way to 
affordable ocean water desalinization. CALFED needs to 
recognize the importance of water transfers that can provide 
high-quality Sierra water that will reduce Metropolitan's 
dependence on the Bay-Delta.
    Southern California believes in water conservation and 
reuse. In partnership with Metropolitan, the city of Los 
Angeles has invested nearly a quarter billion dollars in 
conservation programs over the past decade. One key program, 
replacing water waste in toilets, has already locked in enough 
lifetime savings to supply more than 3-1/2 million families for 
a year.
    In 1980, the population in our 6-county service area--since 
1980 the population has grown from less than 12 million to 16-
1/2 million people, an increase of more than 35 percent, yet 
our water deliveries have remained unchanged. We have made huge 
investments in water storage. During the 1990's, we doubled our 
own water storage capacity, including constructing a major 
Austrian reservoir that has also produced a major nature 
preserve. Those local investments did more than bring good-
paying jobs to southern California, They are a major reason why 
we have been spared some of the cutbacks affecting other parts 
of the West.
    CALFED needs the same balanced approach. We can argue about 
the virtues of specific projects, but there is water to meet 
California's needs provided we can store sufficient water south 
of the Delta during wet years so that we are able to better 
make it through the dry years. Southern California needs a 
commitment that water storage projects will be expanded and not 
abandoned sometime down the road. I remind you that the failure 
to solve the Bay-Delta problem will affect everyday Americans 
throughout the Southwest, because we have the same situation 
and the same source of supplies. We do not want to face this 
crisis, and we now have an opportunity to deal with this 
through this legislation.
    Mr. Chairman, thank you.
    Mr. Calvert. Thank you for your testimony.
    [The prepared statement of Mr. Luddy follows:]

    Statement of William G. Luddy, Director of the Labor Management 
Education and Development Fund of the United Brotherhood of Carpenters 
    and Joiners of America and Executive Director of the Carpenters/
                   contractors Cooperation Committee

    Mr. Chairman and committee members:
    Thank you for having me here today. My name is Bill Luddy. I am 
director of the Labor Management Education and Development Fund of the 
United Brotherhood of Carpenters and Joiners of America, and also the 
executive director of the Carpenters/Contractors Cooperation Committee, 
a joint labor-management committee in Southern California. I also serve 
on the board for the California Council for Environmental and Economic 
Balance, a civic/business/labor coalition that develops strategies for 
water and other issues.
    I am also vice chair for the Metropolitan Water District of 
Southern California, a water wholesaler that serves nearly 17 million 
people. I represent the city of Los Angeles on the Metropolitan Board 
of Directors
    First, I would like to express appreciation for the leadership and 
good work that Representative Calvert has done as chair of this 
committee. We are grateful for the congressman's long-term commitment 
to the details of water issues, and I also appreciate the leadership 
that Representative Miller provides.
    From my vantage point, I've concluded that most working people in 
California had begun to regain confidence in the state's economy when 
the electricity crisis badly shook their faith in the system.
    I do not want to see that experience repeated with water.
    I would hate to see a situation where conflicts similar to what we 
see in Klamath River basin spread across the western United States. I 
don't want to see working people in Southern California lose their jobs 
because those of us in positions of leadership were unable to foster 
consensus on water issues.
    To avoid that, we need to foster self-sufficiency, backed up by an 
environmentally sensitive plan that thinks in terms of decades, not 
years.
    Without that, millions of Southern California workers will be 
thrust into a situation of long-term uncertainty about their economic 
future.
    As you can imagine, my background has given me ample experience 
with negotiating balanced solutions to contentious issues.
    And in any negotiation, if you are trying to get that handshake 
across the table, you can't have a situation where one party gets 
written guarantees for what it wants, while the other party is 
basically told to wait and hope for the best.
    Both parties are at the table negotiating in good faith for their 
legitimate interests, and both parties need their assurances clearly 
spelled out.
    In reviewing both of the bills before us today, it has been our 
conclusion that the legislation that Mr. Calvert has proposed appears 
to be more comprehensive and encourages more projects to be built, both 
in California and the rest of the western region.
    Projects, which we believe, will lead to more jobs and greater 
long-term economic stability for our state and our region. That's why 
we support guarantees of a reliable and safe water supply for future 
generations.
    Some would frame this as a choice between the environment and the 
economy.
    There is much more consensus here than people realize.
    Metropolitan Water District and working men and women are 
interested in water quality, which is also one of the key issues of the 
environmental community.
    When working parents are struggling to put food on the table, they 
should be able to walk to the faucet and get a clean drink of water 
without worrying about how to pay for it.
    When we protect the source waters of the delta, it also reduces 
treatment costs, improves health and allows them to get far more 
useable water out of the same supply.
    When we clean up Southern California underground water supplies, it 
reduces dependence on Northern California. When we invest in 
desalination research, it allows us to tackle vexing salinity problems 
that drive up costs for Southern California employers--money that could 
otherwise go toward improved wages and working conditions. Over the 
long run, this research points the way toward affordable ocean water 
desalination.
    CALFED needs to recognize the importance of water transfers that 
can provide high-quality Sierra water that reduce Metropolitan's 
dependence on the Bay Delta.
    Southern California believes in water conservation and reuse. In 
partnership with Metropolitan, the city of Los Angeles has invested 
nearly a quarter-billion dollars in conservation programs over the past 
decade. One key program--replacing water-wasting toilets--has already 
locked in enough lifetime savings to supply more than 3.5 million 
families for a year.
    Since 1980, the population in our six-county service area has grown 
from less than 12 million to 16.6 million people--an increase of more 
than 35 percent. Yet our water deliveries have remained unchanged.
    We've also made huge investments in water storage. During the 
1990s, we doubled our own storage capacity--including a major off-
stream reservoir that also produced a major nature preserve. Those 
local investments did more than bring good-paying jobs to Southern 
California. They're also a major reason why we've been spared some of 
the cutbacks that prevail in other parts of the west.
    CALFED needs the same, balanced approach.
    We can argue about the virtues of specific projects. But there is 
plenty of water to meet California's needs, provided we can store 
sufficient water south of the delta during wet years so that we are 
better able to make it through the dry years.
    Southern California needs a commitment that some water storage 
projects will be expanded, and not simply ambushed down the road.
    To those who might take a secret pleasure in California's travails, 
I would remind them that the failure to solve the Bay-Delta problems 
will affect everyday Americans throughout the southwest, because it 
will reduce California's ability to reduce its dependence on the 
Colorado River over the next 15 years.
    Californians don't want another crisis. It is a state of varied 
regions and interests, but they're interdependent, in the same way that 
California and the rest of the nation are interdependent. We all need 
to move forward together.
                                 ______
                                 
    Mr. Calvert. Mr. Sunding.

 STATEMENT OF DAVID L. SUNDING, DIRECTOR, SUSTAINABLE RESOURCE 
       DEVELOPMENT, UNIVERSITY OF CALIFORNIA AT BERKELEY

    Mr. Sunding. Mr. Chairman, and members of the Subcommittee, 
I would like to thank you for the opportunity to speak with you 
today about the economics of California water supply 
reliability and related water management issues. My name is 
David Sunding, and I am an economist at the University of 
California at Berkeley where I am the Director of the 
University Center for Sustainable Resource Development.
    For the past 10 years, I have studied the economics of 
water management in California and have worked extensively with 
farmers in water districts, particularly those in the western 
San Joaquin Valley.
    As a threshold comment, I would like to make it clear that 
I am not here today as an advocate for any particular group. In 
fact, I have enjoyed solid working relationships with many of 
the major interests involved in the CALFED process--
agricultural, urban, and environmental water interests--and my 
strong hope is that these relationships continue. My aim today 
is, rather, to provide some information on the economics of 
water supply reliability in California. And in particular, I 
would like to offer my perspective on two aspects of H.R. 1985, 
the cost effectiveness of investments in additional surface 
water storage in the State and the issue of the economics of 
agricultural water supply assurances.
    There is very broad agreement within the CALFED process, 
and this agreement is expressed quite well in the Record of 
Decision, that new projects should be feasible. One element of 
feasibility which is also expressed in the ROD is economic 
feasibility, which I would define as simply the principle that 
the benefits of the project, the environmental and economic 
benefits, should exceed the costs to taxpayers and to users. 
Surface storage has been suggested as a way to meet current and 
future water needs, and H.R. 1985 would preauthorize a number 
of these projects.
    As an economist, I feel like I need to tell you at this 
point in time, it is uncertain in my opinion, which additional 
surface storage facilities in California would pass the cost-
benefit test.
    To begin, I would like to refer you to the CALFED program's 
economic evaluation of water management alternatives published 
in October 1989. I would like to commend the CALFED staff. From 
my vantage point, this is a landmark document in water resource 
economics. The CALFED team conducted a reconnaissance-level 
study looking at a number of different supply alternatives, and 
to see the detailed list, you can look at the report.
    The authors concluded that the least expensive means of 
increasing water supply in California are efficiency 
improvements, recycling, canal lining, groundwater 
desalinization, and local conjunctive use projects.
    Next, the report concluded that land fallowing--which is 
essentially equivalent to transfers or related to transfers--
and surface storage projects laid in the next range in terms of 
cost feasibility. The authors of the CALFED report concluded 
that the supply curve for water is flat in this range, meaning 
that given current information, it is difficult to argue for 
the economic cost-effectiveness of one alternative versus 
another.
    I think there is substantial uncertainty about whether or 
not future economic analysis of these projects is going to 
conclude that they are cost effective, even beginning with this 
position of essential indifference.
    There are several elements that bear on the cost, the unit 
cost of water from resurface storage projects. These elements 
include cost allocation, yield, construction costs, O&M costs. 
I think there is substantial uncertainty at this point in time 
exactly how we are going to come to more definitive answers 
about each of these elements. And, in particular, the CALFED 
process has not tackled the cost allocation question in a 
serious way, although I know this intends to.
    Mr. Sunding. With regard to the costs and benefits of 
agricultural water supply assurances, I would like to make just 
a couple of brief points; and I have more detailed testimony 
that I have submitted to the Committee in writing.
    The first point is that the size of the subsidiary 
incorporated in the assurances language is quite large. If we 
look on a per farmer basis in Westland's water district, 
providing 70 percent of water supply to this area results in a 
subsidy of roughly a million dollars per farmer; and if water 
costs are $400 in the Delta, which is entirely reasonable given 
the current ranges of costs, then the subsidiary increases to 
$2 million per farmer. So this is a very large subsidiary.
    Second, given the information provided in the CALFED 
economics report, there is little evidence that farmers are 
willing to pay for what it would cost to provide the water to 
them.
    I will end my oral remarks there. I have these written 
comments that I would like to have submitted into the record.
    Mr. Calvert. I thank the gentleman.
    [The prepared statement of Mr. Sunding follows:]

  Statement of Dr. David L. Sunding, Director, Center for Sustainable 
       Resource Development, University of California at Berkeley

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to speak with you today regarding California water supply 
reliability and related water management issues. My name is David 
Sunding and I am a natural resource economist and Director of the UC 
Berkeley Center for Sustainable Resource Development. For the past 10 
years, I have studied the economics of water management in California, 
and have worked extensively with farmers and water districts in the 
western San Joaquin Valley. I have received funding from the CALFED 
Bay-Delta Program to study the economic impact of changes in 
agricultural water supply reliability, and have worked with the CALFED 
economics team regarding their analysis of water management 
alternatives. I am also the President-elect of the International Water 
Resource Economics Consortium, a group of over 100 economists and water 
policy analysts from research universities in arid countries, 
especially the United States, Australia, Israel and Spain.
    I would like to make it clear that I am not here today as an 
advocate for any particular group. In fact, I have enjoyed solid 
working relationships with agricultural, urban and environmental water 
interests in California, and my hope is that these relationships will 
continue. My aim today is to provide some insights on the economics of 
California water supply reliability. In particular, I would like to 
offer my perspective on the cost-effectiveness of investments in 
additional surface water storage in California. Then, I would like to 
speak to the issue of the costs and benefits of water supply assurances 
for San Joaquin Valley agriculture.
Background
    The San Francisco Bay/Delta estuary is the largest estuary on the 
Pacific Coast. It is the home to over 750 species, and drains over 40% 
of the state's land area. In a pre-development condition, roughly 30 
million acre-feet (MAF) passes through the Bay/Delta and out to the 
ocean. Presently, two large public projects, the Central Valley Project 
(CVP) and the State Water Project (SWP) divert water from the Central 
Valley to serve farms and cities. In addition, a large number of 
private and local projects draw on the Bay/Delta.
    In an average year, roughly 60% of the water draining from the 
Central Valley is diverted, 7 MAF by the CVP, 2.5 MAF by the SWP and 8 
MAF by private and local projects. Not surprisingly, the diversion of 
over half of all available water from the Bay/Delta system has lead to 
serious environmental consequences, including the decline of the 
state's salmon fishery among other effects.
    Agriculture is by a wide measure the largest user of water in 
California, accounting for 80% of all applied water use. The figure 
below gives an idea of the scale of agricultural water use relative to 
urban use. The quantity of water used to irrigate three of the most 
widely planted crops in California dwarfs the amount of water used by 
large cities such as San Francisco and Los Angeles. California farmers 
irrigate a variety of crops, and the state is a world leader in a 
number of agricultural markets.
[GRAPHIC] [TIFF OMITTED] T4153.002

    While urban demand is a small share of total water consumption at 
present, it is expected to grow significantly. The state is expected to 
grow from 35 to 50 million people by the year 2015. Ensuring that these 
future residents, and businesses, have adequate water is one of the 
main reasons we are here today.
The Cost-Effectiveness of Surface Storage is Unknown
    Surface storage has been suggested as a way to meet current and 
future water needs, and H.R. 1985 would pre-authorize a number of these 
projects. At this point in time, it is uncertain which additional 
surface storage facilities in California would pass a cost-benefit 
test, if any. The CALFED Program's Economic Analysis of Water 
Management Alternatives published in October 1999 was unable to show 
that surface storage is cost-effective. This reconnaissance-level 
report assesses a wide array of supply alternatives, including
     LUrban water use efficiency improvements
     LAgricultural water use efficiency improvements
     LUrban recycling
     LLand fallowing
     LConjunctive use
     LSurface storage
     LOther (primarily South Delta improvements and local 
projects)
    The authors conclude that the least expensive means of increasing 
water supply in California are efficiency improvements, recycling, 
canal lining, groundwater desalination and local conjunctive use 
projects. A total of 866 TAF of new supply is available in this range 
at a cost of less than $800 per acre-foot to urban end users.
    Next, the report concludes that almost 2 MAF of new water supply is 
available in the cost range of $800 to $1,200 per acre-foot. 
Alternatives in this range include land fallowing and surface storage. 
The authors of the CALFED report conclude that the supply curve is 
``flat'' in this range, meaning that, given current information, it is 
difficult to argue for the cost-effectiveness of one alternative versus 
another. In particular, the CALFED analysis concludes that the cost of 
surface storage is similar to the cost of land fallowing, and that 
neither alternative should be ruled out at this stage. Based on this 
conclusion alone, it seems unwise to put surface storage projects in a 
superior position with regard to Congressional authorization.
    Uncertainties surrounding the cost-effectiveness of surface storage 
are compounded by a lack of basic information. The per-unit cost of 
water from dams and other facilities is determined by a combination of 
construction costs, operating costs, yields, and cost allocation. Each 
of these elements is highly uncertain at present, making it difficult 
to pin down the exact cost of water from new surface storage 
facilities. Construction costs are notoriously difficult to estimate ex 
ante, and are frequently higher than original assessments. Yields 
depend on the whole suite of projects finally constructed in the state 
and are also difficult to estimate at present. Surface storage 
facilities often serve multiple purposes, and the allocation of 
construction and operating costs has a strong influence on unit costs. 
To date, CALFED has not tackled the cost allocation question in a 
serious way.
    The CALFED Economic Analysis of Water Management Alternatives is a 
significant document in water resource economics as it represents one 
of the first large-scale and official attempts to incorporate basic 
supply-demand analysis into water resource planning. It is based on a 
clear-headed notion of cost-effectiveness. Essentially, a particular 
supply alternative is said to be cost-effective if it passes a two-
pronged test:
     Lit must produce water at the least cost
     Lusers must be willing to pay for it
    These concepts are straightforward, but it is striking how 
infrequently they are invoked in water resource planning.
    While the CALFED economic analysis is important and based on sound 
basic principles, it is not perfect. There are reasons to suspect that 
further economic analysis will demonstrate that surface storage is less 
cost-effective than the authors concluded. In particular, the case for 
some of the surface storage facilities identified in H.R. 1985 as 
candidates for pre-authorization may be much weaker than CALFED's 
preliminary economic analysis points out.
    The CALFED economic analysis concludes that water use efficiency 
improvements are among the least expensive sources of new supply 
available in California. However, the analysis is predicated on a 
strong (if common) assumption, namely that conservation only produces 
new supply in areas with unusable groundwater and near the coast. The 
reason is that if deep percolation is unusable, then increasing 
efficiency reduces waste. If applied water percolates to the 
groundwater table, however, the assumption is that efficiency 
improvements have no value because they simply reduce the stock of 
usable groundwater by the same amount as the conserved surface water.
    The assumption that conservation only has benefit in areas with 
usable groundwater is increasingly controversial in the water sciences, 
particularly with regard to agriculture. Many agronomists and 
economists now believe that conservation measures such as the adoption 
of drip irrigation can increase crop output per acre in many settings. 
If true, then agricultural water conservation allows farmers to earn 
the same level of profit while consuming less water in the long-run. 
Further research on this issue (which is underway at UC Davis, the USDA 
and elsewhere) may result in much more water supply being produced by 
conservation than CALFED's analysis has indicated.
    Another issue that warrants further investigation is the cost of 
land fallowing. CALFED's economists have measured the cost of this 
alternative by first measuring the price that would compensate farmers 
for their lost profits resulting from fallowing. Then, a ``market 
incentive payment,'' or load factor of 100 percent is added to obtain 
the final cost. This load factor effectively doubles the cost of land 
fallowing and is not supported by economic theory. A more complete 
analysis of fallowing would determine the market price of water in 
various planning scenarios and use this measure to compare the cost of 
fallowing to the cost of surface storage. This market-based analysis 
would almost certainly result in fallowing and subsequent water 
transfers being a larger part of the cost-effective mix of policies 
than is indicated in the CALFED analysis.
Costs and Benefits of Agricultural Water Supply Assurances
    The assurances proposal contained in H.R. 1985 would bestow a 
large, direct subsidy on a group of farmers in the western San Joaquin 
Valley, south of the Bay/Delta estuary--the so-called ``agricultural 
water service contractors --especially if these users obtain the water 
at current CVP rates. To calculate the rough magnitude of the subsidy, 
suppose that under current rules in a normal year, agricultural service 
contractors would receive 55% of their 2 MAF maximum allocation from 
the CVP, or 1.1 MAF (2 MAF maximum * 0.55 = 1.1 MAF). A 70% allocation 
amounts to 1.4 MAF, or an additional 300 TAF of water.
    Suppose that the cost of this water to the government is $200 per 
acre-foot and that it is resold to farmers at current rates of roughly 
$60 per acre-foot. Then this policy amounts to a subsidy of $42 million 
per year ($140 * 300 TAF = $42 million). In reality, the subsidy may be 
larger since the cost of the water may well exceed $200. If the 
additional water costs the government $400 per acre-foot (which is well 
within the range of unit water costs from Sites Reservoir), then the 
subsidy reaches $84 million annually.
    To gain another perspective on the magnitude of this subsidy, 
consider the case of Westlands Water District, which is part of the San 
Luis Unit. Providing a 70% allocation in a normal year amounts to an 
annual subsidy of over $24 million for this district alone if the cost 
of water is only $200 per acre-foot (Westlands'' maximum allocation is 
1.15 MAF annually). Westlands is comprised of close to 350 separate 
corporate entities (the number of water user accounts is much higher). 
Thus, the present value of the subsidy to Westlands alone is nearly $1 
million per farmer. If the additional water to Westlands costs the 
federal government $400 per acre-foot, then the subsidy increases to $2 
million per farmer.
    It is also likely that the cost of new supply to San Joaquin Valley 
agriculture is well above the willingness of these farmers to pay for 
it. The authors of the CALFED economic study came to the same 
conclusion:
        There is little willingness-to- pay (less than $200 per acre-
        foot) for new agricultural water supply. In the Unconstrained 
        scenario there are few water supply measures available at that 
        cost. No (or minimal) new supplies were identified for the 
        Sacramento River and San Joaquin River regions.
        Source: CALFED Bay-Delta Program, Economic Evaluation of Water 
        Management Alternatives: Screening Analysis and Scenario 
        Development, October 1999, at 1-4.
    One of the goals of the CALFED program is to bring California's 
water system into economic balance. This balance is achieved when users 
are willing to pay the cost of the water they consume. This principle 
is simply the ``beneficiary pays'' concept restated. Economists have 
argued that it helps ensure that users are given the correct incentives 
about how much to consume, and that the burden of reconciling competing 
demands for water is not shifted to other groups. Providing 
agricultural water supply assurances without requiring farmers to pay 
the true marginal cost of water (i.e., without reforming retail water 
rates) would violate this principle.
    Let me make it clear that I am not advocating that farmers in 
Westlands and other districts in the region should not seek additional 
water supplies. To the contrary, I have worked in the region for a 
number of years to help establish water markets that would facilitate 
the process of transferring water into agricultural areas where there 
is unmet demand. But it is important that farmers be given the correct 
price incentives about the value of water in other, competing uses. 
Subsidies fail this test, while water trading passes it, as does retail 
pricing by water districts that sets marginal rates at the cost of 
additional supply.
    The assurances proposal outlined in H.R. 1985 has indirect economic 
implications for other water users in California. Assuring water 
supplies to farmers may well increase the cost of water to other users. 
Providing additional water to a subset of farmers decreases the amount 
available to other consumers and to the environment, and forces these 
users to resort to more expensive supply measures. This indirect impact 
is in addition to the cost to the government (and ultimately taxpayers) 
of providing a direct subsidy to agriculture.
    With regard to the benefits of water supply assurances to 
agriculture, it is helpful to consider how farmers cope with 
fluctuations in water supply. Briefly, farmers, including those in the 
western San Joaquin Valley, can deal with reductions in water supply 
reliability by
     LPurchasing water from willing sellers
     LInvesting in conservation technology
     LCollecting and using weather and soil quality information
     LChanging their crop mix
     LFallowing
     LSubstituting groundwater
     LPurchasing land in areas with more reliable water 
supplies
    Farmers in the western San Joaquin Valley have proven to be 
remarkably adept at responding to changes in water supply availability 
and have demonstrated that entrepreneurship and capital can substitute 
for disruptions in water supply.
    Significantly, farmers in Westlands and other districts have access 
to local and statewide water markets that have proven so useful in the 
past. Indeed, Westlands has purchased over 1.6 MAF of water since 1990 
for use by its members, and has streamlined water transfers within its 
boundaries to promote efficient use. Its internal water market has been 
written about extensively, and serves as a model that is emulated in 
other dry areas of the world. Strengthening all of these California 
water markets will enhance the ability of the CVP agricultural service 
contractors to deal with future fluctuations in water deliveries.
    I appreciate the opportunity to speak with you today, and I hope 
that I can be of further assistance as you craft legislation to address 
water supply reliability issues in California.
                                 ______
                                 
    Mr. Carlson. Mr. Carlson.

   STATEMENT OF PETER CARLSON, PARTNER, WILL & CARLSON, INC.

    Mr. Carlson. Mr. Chairman, members of the Subcommittee, my 
name is Peter Carlson; and I am appearing today on behalf of 
the National Urban Agriculture Council, the Western Coalition 
of Arid States, Oregon Water Resources Congress, and the 
Eastern Municipal Water District of Southern California.
    At the outset, let me state our strong support for Title II 
of H.R. 1985, the Small Reclamation Water Resources Project Act 
of 2001. The proposed amendments represent a 7-year effort to 
restructure the program and provide western water users with 
new options for addressing their needs.
    The Act was last amended in 1986. The changes proposed by 
your amendments build on what we the water users have learned 
since that time and will make this an even better program from 
an environmental, business, and socioeconomic standpoint.
    According to the Western Water Policy Review Commission 
Report from 1998, ``Once the outpost of a young nation, today's 
West is home to nearly one-third of the American population. 
The region has experienced rapid population growth in recent 
years. Western states grew by about 32 percent in the past 25 
years. By the year 2025, the West will add another 28 million 
residents.'' .
    This westward growth is why your legislation is so vitally 
important. From our perspective, Title II would bring a number 
of important changes to the existing program. There is 
presently not in place a program such as you are proposing to 
help western water users address the various needs, whether 
they be water supply, system rehabilitation, water 
conservation, water quality, environmental, or social purposes. 
There is currently a program gap between the larger reclamation 
project that is typically before your Subcommittee and the 
smaller programs that Reclamation offers such as technical 
assistance. H.R. 1985 will close that gap.
    The amendments contained in H.R. 1985 address these issues 
in the following manner:
    No longer requiring irrigation as a project purpose in the 
program will allow for the development of projects in the 
urban-rural crossover setting that are more economically and 
environmentally sound.
    Providing additional definition of the activities which can 
be undertaken through the program will help address aging 
infrastructure problems as well as developing new opportunities 
to make better use of existing supplies.
    The streamlining of the proposal process and the 
establishment of a definite time frame will give water users 
greater program confidence and certainty where project sponsors 
will no longer have to wait for an answer on whether there is a 
Federal interest.
    The establishment of a partnership program under Title II 
of the SRPA amendments and the activities that can be carried 
out under the program will facilitate problem solving in a 
manner that gets the work done sooner before more problems 
develop.
    Reduction of the repayment period for Title I projects from 
40 years to 25 years will also bring the program in line with 
current business practices in the private sector.
    Some have questioned whether the Bureau's budget will be 
able to accommodate this program. Given the construction 
schedules associated with the program and the decision-making 
process that is built into the legislation, we see this as a 40 
to 60 million dollar a year program. We believe the Bureau of 
Reclamation can accommodate such a level in their budget.
    We appreciate your decision to increase the cost ceiling in 
the program to $1.3 billion. At the end of the last 
congressional session we conducted an electronic survey to 
assess the interest in the programs that would be developed 
under your legislation. Historically, 14 of the 17 Western 
States had used this program. We received responses to our 
survey from water users in 12 of the 17 States, indicating a 
strong interest in using both Title I and Title II of your 
proposed amendments. Since that time I have also received 
responses to an idea of setting aside up to 20 percent of the 
proposed ceiling in the program for Indian tribes and 
economically disadvantaged communities, an amendment that we 
would support.
    The loan guarantee section of your amendments opens the 
door for a new, innovative approach to assist in funding 
projects, given the past decline in the Bureau's budget. I 
would like to provide for the record a table of the Bureau's 
budget for the past 10 years that illustrates this point.
    In addition, I would like to submit a report that I did 
earlier this year that makes the case for increasing the 
Bureau's overall budget for these and other programs.
    Mr. Calvert. Without objection.
    [The information referred to follows:]
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    Mr. Carlson.  The continuation of the Bureau's Small 
Reclamation Loan Program with the changes made by your bill is 
the most important and appropriate course to take at this time. 
There is strong interest out there and a belief that the small 
loan program is the best vehicle to accomplish the work. 
Investing in the West through your proposed amendments to the 
program will be the best step forward in the 21st century for 
helping the rural, urban, Indian population, and the water and 
environmental resources of the West.
    Thank you for the opportunity to appear here today. I will 
be pleased to answer any questions.
    Mr. Calvert. Thank the gentleman.
    [The prepared statement of Mr. Carlson follows:]

 Statement of Peter Carlson, President, Will & Carlson, Inc. on behalf 
  of The National Urban Agriculture Council, The Western Coalition of 
Arid States, The Oregon Water Resources Congress, The Eastern Municipal 
                      Water District (California)

    Mr. Chairman, Members of the Subcommittee, my name is Peter 
Carlson, I am President of the firm Will & Carlson, Inc., a Washington, 
D.C. governmental relations firm specializing in natural resource 
issues. I am appearing today as Vice President of the Board of the 
National Urban Agriculture Council (NUAC), and also as the Washington, 
D.C. representative for the Western Coalition of Arid States (WESTCAS), 
the Oregon Water Resources Congress (OWRC) and the Eastern Municipal 
Water District in Southern California (EMWD).
    My comments today are directed at Title II of H.R. 1985, the 
Western Water Enhancement Security Act of 2001, and the amendments 
proposed to the Bureau of Reclamation's Small Reclamation Loan Program. 
At the outset, let me state our strong support for Title II of 
H.R.1985, the Small Reclamation Water Resources Project Act of 2001. 
The proposed amendments represent a seven year effort to restructure 
the program and provide western water users with new options for 
addressing their needs.
    The Small Reclamation Program Act was last amended in 1986, and the 
amendments were appropriate for that time. The changes proposed by your 
amendments build on what we, the water users, have learned since that 
time and will make this an even better program from an environmental, 
business and socio-economic standpoint..
    According to the Western Water Policy Review Commission report from 
1998 ``Once the outpost of a young nation, today's West is home to 
nearly one-third of the American population. The region has experienced 
rapid population growth in recent years: western states grew by about 
32 percent in the past 25 years, compared with a 19-percent rate in the 
rest of the nation. By the year 2025, the West will add another 28 
million residents.''
    A more recent report from the University of Colorado's Center of 
the America West, of 11 Western states (California, New Mexico, 
Wyoming, Washington, Idaho, Utah, Arizona, Oregon, Colorado, Montana, 
Nevada), indicated that the 2000 census counted 61.4 million people in 
the Western states - a 21 percent increase from 1990. By 2050, 109 
million people will live in the Western States, the study estimates.
    This Westward growth is why your legislation, is so vitally 
important. From our perspective, Title II of H.R. 1985 would bring a 
number of important changes to the existing program that would help 
address these needs. This decision, amending the Small Reclamation Loan 
Program, is an important step in investing in the West and putting in 
place a program that can serve as the foundation for a giant leap 
forward. There is presently not in place a program such as your 
proposing, to help western water users address the various needs 
associated with growth, whether they be water supply, water 
conservation, water quality, environmental or social purposes. There is 
currently a program gap between the larger Reclamation project that is 
typically before your Subcommittee and the smaller programs that 
Reclamation offers such as technical assistance. The Small Reclamation 
Water Resources Project Act of 2001 will close that gap.
    The amendments contained in H.R. 1985 address these issues in the 
following manner:
    1. LNo longer requiring irrigation as a project purpose in the 
program will allow for the development of projects in the urban-rural 
crossover setting that are more economically and environmentally sound. 
This is precisely the area of greatest need for support in development 
of small projects.
    2. LProviding additional definition of the activities which can be 
undertaken through the program, especially in the area of 
rehabilitation and betterment and in the area of water quality 
improvements. This will help address aging infrastructure problems as 
well as developing new opportunities to make better use of existing 
supplies, without the need to create new water supply structures.
    3. LThe streamlining of the proposal process, and the establishment 
of a definite schedule for proposal processing will give water users 
greater program confidence and certainty. Proposals will no longer 
languish in the bowels of the bureaucracy only to then have to wait 
years for an answer on whether there is a Federal interest in the 
proposed work.
    4. LThe establishing of a partnership program under Title II of the 
SRPA amendments, and the activities that can be carried out under the 
program. This will facilitate problem solving in a manner that gets the 
work done sooner before more problems develop and through the work 
being carried out by the project sponsor within 18 months and a 
shortened repayment period.
    5. LThe reduction of the repayment period for Title I projects from 
40 years to 25 years will also bring the program in line with current 
business practices in the private sector.
    6. LConnecting the proposed work to organizations that have legal 
authority and responsibility for such work on their projects, and 
making sure that work is consistent with applicable State water law 
will keep the program from being abused by interests that might have 
other agenda's.
    As part of the discussions with the organizations I represent, 
which helped in the development of the ideas embodied in your 
legislation, some have questioned whether the Bureau's Budget would be 
able to accommodate this program. Western water user organizations have 
been working successfully on the Energy and Water Appropriations bill 
through our ``Invest In the West'' campaign to increase the allocation 
for the Bureau of Reclamation's Water and Related Resources program. 
Given the construction schedules associated with the program and the 
decision-making process that is built into the legislation, we see this 
as a $40 to $60 million a year program. We believe the Bureau of 
Reclamation should be able to accommodate such a level, given the 
changes to the program proposed by your amendments.
    We appreciate your decision to increase the cost-ceiling in the 
program from $359 million to $1.3 billion in order to accommodate the 
interest out in the West for the program. At the end of the last 
Congressional session we conducted an electronic survey, based on your 
legislation in the last Congress (H.R. 5120), to assess the interest in 
the programs that would be developed under your legislation. 
Historically 14 of the 17 Western states had used this program. We 
received responses to our survey from water users in 12 of the 17 
states indicating a strong interest in using both Title I and Title II 
of your proposed amendments. Since that time I have also received 
responses to an idea of setting aside 20% of the proposed ceiling for 
Indian Tribes and economically disadvantaged communities, an amendment 
that we would support to your proposed amendments.
    Another 1998 recommendation of the Western Water Policy Review 
Commission in was ``Given the declining federal budgets, innovative 
sources of funding and investment, including public and private 
partnerships, must be found for the management and restoration of 
western rivers.'' Part of the reason for including a section in this 
bill on guaranteed loans is to explore the initiation of a new loan 
guarantee section under the Act. The Federal Government has 
approximately forty guaranteed loan programs listed in the Federal 
Budget.
    The Loan Guarantee section of these amendments is to open the door 
for a new, innovative approach to assist in funding projects given the 
continuing decline in the Bureau's Budget. I have attached a table of 
the Bureau's Budget for the past ten years as recently provided by the 
former Commissioner during testimony in the House of Representatives 
that illustrates this concern. In addition, I would like to submit a 
report that I did earlier this year comparing the Bureau's Budget with 
other agencies at the Department of the Interior from fiscal year 96-
FY2000 that makes a better case for the need to increase the Bureau's 
Budget.
    I understand that for Budget scoring purposes for a Loan Guarantee, 
the ratio would be on a 10-1 basis. What this means is for the $100 
million provided in title three of your bill, the Federal government 
will produced $1 billion worth of constructed project benefits. It is 
nice for everyone to talk about what to do with Budget Surpluses, but I 
don't believe the Reclamation program will benefit from them any time 
soon unless we continue to be successful with the ``Invest In the 
West'' campaign. There is a need for the Bureau of Reclamation's long 
term budget to be addressed, and increased, given the work that needs 
funded in their program. The Bureau could, however, explore and make 
use of this new effort that could benefit the water users in the West 
in a more timely manner than waiting on such surpluses to appear in 
their program.
    I would like to address the issue of whether the Bureau of 
Reclamation should or shouldn't be in the loan business. Why is it that 
almost every Federal agency has a loan program, to assist in carrying 
out their activities, yet the Bureau of Reclamation claims ``the 
current loan process (at Reclamation) suffers from a lack of trained 
credit officers to monitor loans as well as assist in determining 
economic feasibility, repayment terms, maturity dates, and interest 
rates.....Reclamation would continue to be in the business of 
developing repayment contracts and engaging in loan collection 
activities, two tasks for which the private sector is better suited 
than the Federal Government.'' The former Administration made great 
claims about Reinventing Government. Why can't Reclamation learn from 
the best of what other Federal agencies do with their loan programs and 
in turn benefit the public from a reinvention in their loan program?
    Some would like Reclamation would just like to be in the grant 
business. We don't believe that would be a good idea. From fiscal year 
91 to fiscal year 99 Reclamation provided approximately 4,600 grants 
worth about $750 million. Unless you tie the grants down like H.R. 1985 
would do through the amendments to the program and also make the other 
changes embodied by your amendments I believe that a grant only program 
would be a recipe for waste and abuse. If they have such experience 
with grants, which I have been told are more burdensome to administer, 
and have so few loans, it would seem like they can figure out how to 
make a loan program work better from an administrative standpoint.
CONCLUSION
    The continuation of the Bureau of Reclamation's Small Reclamation 
Loan Program, with the changes made by your bill is the most important 
and appropriate course to take at this time. Based on the details in 
the Western Water Policy Review Commission report, our survey and 
meetings and conversations with water users in the West, there is a 
strong interest out there for a program that can help address the needs 
of the West, and a belief that the Small Reclamation Loan Program is 
the best vehicle to accomplish the work. Investing in the West through 
your proposed amendments to the program will be the best step forward 
into the 21st Century for helping the rural, urban, Indian population 
and the water and environmental resources of the West.
                                 ______
                                 
    Mr. Calvert. Mr. Schulz, Special Water Counsel, Kern County 
Water Agency.

 STATEMENT OF CLIFFORD W. SCHULZ, SPECIAL WATER COUNSEL, KERN 
                      COUNTY WATER AGENCY

    Mr. Schulz. Thank you, Mr. Chairman.
    I am Cliff Schulz. For more than 30 years I have acted as 
counsel to the Kern County Water Agency on matters involving 
the State Water Project and the Sacramento-San Joaquin Delta. 
In that capacity for the past 7 years I have worked with a 
large coalition of urban and agricultural water agencies 
throughout California, commonly known as the AgUrban Group, to 
develop and support common goals for the CALFED Bay-Delta 
program.
    I have provided written testimony which I would like to 
submit for the record, and then I will summarize my testimony.
    Mr. Calvert. Without objection.
    Mr. Schulz. From the point of view of the agricultural and 
urban water users, the most important aspect of the legislation 
that is pending before the Committee is that it implement the 
fundamental policy that underlies the entire CALFED program. 
That philosophy is balanced implementation in all CALFED 
program elements.
    California water policy has been stalemated for decades. 
While the population increased, the deadlock resulted in 
virtually no new infrastructure, a condition to that which 
preceded our electricity crises. CALFED overcame this stalemate 
by essentially telling all stakeholders that if they wanted to 
accomplish what was important to them, they had to allow others 
to accomplish their goals and meet their needs.
    This is a very important concept to the legislation that is 
pending, and I just want to read a short quote from the 
framework agreement. That was a document signed by then 
Secretary Babbitt and Governor Davis that really broke the 
logjam on what CALFED was going to look like. They stated:
    ``all aspects of the CALFED program are interrelated and 
interdependent. Ecosystem restoration is dependent upon supply 
and conservation. Supply is dependent upon water use and 
efficiency and consistency in regulation. Water quality is 
dependent upon improved conveyance, levee stability and healthy 
watersheds. The success of all of the elements is dependent 
upon expanded and more strategically managed storage.'' .
    It went on to say, expenditure of those funds for CALFED 
must be based on accountability and measurable progress being 
made on all elements of the program.
    The AgUrban Group urges that the Federal legislation adhere 
to this fundamental policy which is often referred to as 
``balanced progress in all CALFED program areas.'' thus, for 
example, we strongly support implementation of the CALFED 
Ecosystem Restoration Program not only because we know it is 
needed but also because there can be no CALFED progress in 
water supply and water quality without progress on ecosystem 
improvements. Conversely, we only support legislation 
authorizing the ecosystem actions if there is legislative 
language authorizing water supply and water quality programs on 
an equal footing. This is the fundamental precept of CALFED.
    There is broad support within the AgUrban Group for H.R. 
1985 because the bill adheres to the CALFED principle of 
balanced progress in all program areas. The bill, consistent 
with the ROD, also authorizes appropriations for the full, 
long-term CALFED program, thereby opening the way for funding 
needed to move forward with water supply, water quality and 
ecosystem projects simultaneously.
    For the reasons that there is support for H.R. 1985, there 
is not broad support within the AgUrban Group for H.R. 2404. 
The legislation does not contain the kind of language that 
provides assurances to us that there will be balanced progress 
in all CALFED program areas.
    We also support the competitive grants program as it 
provides funds for regional water supply and water quality 
improvements; and we believe that a competitive grants program, 
rather than earmarking or immediately identifying projects, 
provides the flexibility needed to select and fund the most 
cost and operationally effective water infrastructure projects.
    I would now like to turn to what many consider to be the 
most important pending issue with respect to the CALFED 
legislation, namely authorization and funding procedures. 
Unfortunately, the term ``preauthorized'' has been coined to 
characterize the issue, even though the term does not capture 
the real substance of the debate.
    CALFED is a program to address serious water problems. 
Within the program is a series of projects. We are asking for 
an authorization of the program which then makes--the question 
is, what type of congressional oversight do you need in order 
to implement the individual projects that are parts of the 
program? We all seem to agree that studies should be carried 
out just in a fairly normal process, but we seem to part 
company when it comes to how funds should be authorized for 
construction.
    We understand that there are possibly technical or 
parliamentary issues with the way the bill is now written, and 
we are willing to work to overcome any of those kinds of 
issues. But for us there are two keys to success. First, we 
need an expedited process. None of us want, for the next 20 
years or more, to find ourselves participating in annual 
authorization exercises. Second, whatever expedited process is 
approved for environmental projects should be applied to water 
supply and water quality projects. Uneven treatment of the 
various CALFED elements would be unacceptable to us as it would 
make balanced progress almost impossible.
    In summary, it is our highest priority to help develop a 
Federal legislative package to authorize balanced 
implementation. This approach is the only way to avoid a water 
supply disaster equal to that now being felt in the energy 
field. We pledge to work with this Committee and its staff to 
bring about final passage and a presidential signature on fair 
and workable CALFED legislation.
    Thank you.
    Mr. Calvert. I thank the gentleman.
    [The prepared statement of Mr. Schulz follows:]

  Statement of Clifford W. Schulz, Special Water Counsel, Kern County 
                              Water Agency

    Mr. Chairman, members of the subcommittee, my name is Clifford 
Schulz. For more than 30 years I have acted as special counsel to the 
Kern County Water Agency on matters related to the State Water Project. 
Much of my work has focused on issues surrounding the health of water 
project operations in the Sacramento-San Joaquin River Delta. In that 
capacity, for the past seven years, I have worked with a large 
coalition of urban and agricultural water agencies throughout 
California (the AgUrban Group) to develop and support common goals for 
the joint Federal-State CALFED Bay-Delta Program.
    CALFED was launched in 1995 to address competing needs for water. 
An exhaustive nearly six-year planning process culminated in the 
release last year of a comprehensive, 30-year plan to restore the 
health of the San Francisco Bay-Delta ecosystem and improve the 
reliability and quality of California's water supplies.
    The plan was initially announced on June 9, 2000, in a joint 
``Framework for Action'' issued by then Secretary of Interior Bruce 
Babbitt and California Governor Gray Davis. It was finalized in the 
September 2000 Record of Decision (ROD). Both documents identify 
numerous projects--from ecosystem restoration, to surface and 
groundwater storage, to water quality improvements. The ROD is the 
product of extensive input from stakeholders and the public; it is 
scientifically sound, and reflects a commitment to move ahead 
simultaneously on environmental, water supply and water quality 
objectives.
    California voters have approved two bond issues and the California 
legislature has appropriated general fund monies that provide over two 
billion dollars for the CALFED effort and to meet California's long-
term water challenge. It is now vital that federal legislation and 
appropriations follow these investments or the unprecedented 
collaborative effort that led to the CALFED Program ROD may come to 
naught. I, therefore, appreciate this opportunity to provide input on 
the pending legislation related to the CALFED Program, HR 1985 and HR 
2404.
    More important to the legislation pending before this committee 
than the list of projects spelled out in the Framework and the ROD is 
the fundamental philosophy that underlies the CALFED Program and 
stakeholder support. California water policy has been stalemated for 
decades. While the population has risen, a deadlock among water project 
proponents and the environmental community has resulted in virtually no 
new infrastructure being built in decades--a condition similar to that 
which preceded the electric energy crisis. CALFED first encountered and 
then overcame this stalemate by essentially telling all stakeholders 
that if they wanted to accomplish what was important to them they had 
to allow others to accomplish their goals and meet their needs.
    The Framework agreement best stated this concept as follows:
        All aspects of the CALFED Program are interrelated and 
        interdependent. Ecosystem restoration is dependent upon supply 
        and conservation. Supply is dependent upon water use and 
        efficiency and consistency in regulation. Water quality is 
        dependent upon improved conveyance, levee stability and healthy 
        watersheds. The success of all of the elements is dependent 
        upon expanded and more strategically managed storage.
        California taxpayers, stakeholders and the federal government 
        will be called on to invest billions of dollars over the next 
        decade on CALFED programs. Expenditure of those funds must be 
        based upon accountability and measurable progress being made on 
        all elements of the program.
    (Framework for Action, p. 2-3; italics added.)
    The ROD echoes this concept in several places, one being:
        The CALFED Program takes a broad approach to addressing the 
        four problem areas of water quality, ecosystem quality, water 
        supply reliability and levee system integrity, recognizing that 
        many of the problems and solutions in the Bay-Delta system are 
        interrelated. Problems in any one program-area cannot be solved 
        effectively without addressing problems in all four areas at 
        once. This greatly increases the scope of efforts but will 
        ultimately result in progress toward a lasting solution.
        Thus, the single most important difference between the CALFED 
        Bay-Delta Program and past efforts to solve the problems of the 
        Bay-Delta is the comprehensive nature of CALFED's interrelated 
        resource management strategies. A comprehensive CALFED solution 
        will also be supported by governance mechanisms that overcome 
        problem-specific or resource-specific limitations of previous, 
        more narrowly focused, approaches.
    (ROD, p. 10)
    The AgUrban Group urges that federal legislation adhere to this 
fundamental principle, which is often referred to as ``balanced 
progress in all CALFED Program areas.'' Thus, we strongly support 
implementation of the CALFED ecosystem restoration program, not only 
because we know it is badly needed, but also because there can be no 
CALFED progress on water supply and quality without progress on 
ecosystem improvements. Conversely, we only support legislation 
authorizing the ecosystem actions if there is legislative language 
authorizing water supply and water quality programs on an equal 
footing. That is the fundamental precept of CALFED, and it is with an 
eye to that precept that we have reviewed the pending bills and offer 
our comments today.
    There is broad support within the AgUrban Group for HR 1985. A 
major reason for our support is the bill's adherence to the CALFED 
principle of balanced progress in all program areas. Both sections 
101(b)(2) and 103(a)(1) mandate that a balanced and timely program to 
implement all aspects of the CALFED program be developed. HR 1985, 
consistent with the ROD, also authorizes appropriations for the full, 
long-term CALFED Program, thereby opening the way for the funding 
needed to move forward with water supply, water quality and ecosystem 
projects simultaneously. The bill would allow projects to proceed, 
following feasibility and environmental studies, with Congressional 
oversight.
    For the same reasons there is support for HR 1985, there is not 
broad support within the AgUrban Group for HR 2404. This legislation 
would fundamentally change the CALFED program by authorizing only 
select elements of the ROD. The bill seems to be premised on the 
assumption that the state's water needs can be met exclusively with 
conservation and water recycling programs, even though, after over five 
years of study, the unanimous consensus of all the CALFED agencies was 
to the contrary. HR 2404 relegates any new water storage projects to 
permanent ``study'' status, and would effectively set aside five years 
of public planning and input.
    We also support HR 1985's competitive grants program to provide 
funds for regional water supply and quality improvement projects. A 
competitive grants program provides the flexibility needed to select 
and fund the most cost and operationally effective water infrastructure 
projects. For a state as diverse and changing as California, 
attempting, in advance, to legislatively predict what infrastructure 
projects should be funded over the next 10 or so years is sure to miss 
some of the best.
    HR 1985 includes water supply assurances for all water users, 
particularly those most impacted by recent regulatory actions. The 
AgUrban Group is working with the author and others to craft 
legislative language that best accomplishes this goal consistent with 
CALFED's principles, including the principle of not redirecting 
impacts.
    In contrast, HR 2404 establishes federal policy that will have the 
effect of further reducing water supplies to this area and to the 
service area of the State Water Project. Section 201(b)(5) establishes, 
as a matter of federal policy:
        the objective of reducing, by the year 2020, the maximum annual 
        quantity of water pumped each year for consumptive uses from 
        the Harvey O. Banks and Tracy Pumping Plants.
    This provision, in addition to undoing the CALFED goal of improving 
water supply reliability for federal contractors, takes the highly 
unusual step of instructing a federal official to proceed in a manner 
that would adversely impact a California owned and operated intra-state 
water facility that is regulated under State law. It also instructs the 
official to take actions that could very well impact the flow of funds 
that are the ways and means of repaying State issued general obligation 
bonds. This is the antithesis of Federal/State cooperation envisioned 
by CALFED.
    HR 2404 also departs from the ROD in the way it proposes to 
regulate water facilities operations in the Delta. Section 304 
instructs the Secretary to manage the timing and quantities of water 
exports from the Delta to minimize harm to fish in accordance with 
determinations by representatives of the United States Fish and 
Wildlife Service, the National Marine Fisheries Service, and the 
California Department of Fish and Game. California law and existing 
federal law, as interpreted by the United States Supreme Court, require 
that water projects be operated as prescribed by California's State 
Water Resources Control Board--not as prescribed by three fisheries 
agencies that have no duty to balance competing needs for water within 
the State. We strongly object to this federal substitute for 
established State laws which regulate water rights in the public 
interest.
    I would now like to turn to what many consider the most important 
pending issue with respect to CALFED authorization and funding. 
Unfortunately, the term ``preauthorized'' has been coined to 
characterize this issue, even though the term does not capture the real 
substance of the debate. In reality, the term preauthorization never 
seems to be applied to a project one favors. But if one opposes a 
CALFED project and wants to have a second bite at opposing its 
implementation, then one loudly cries that the pending legislation 
should not ``preauthorize'' that project.
    CALFED and the CALFED ROD call for implementation of an integrated 
``program'' to address California's serious water problems. This 
overall program is then subdivided into sub-Programs, such as watershed 
improvements, ecosystem restoration, and water quality improvements. 
Within each sub-Program area, there are a myriad of ``projects'' that 
are designed to meet the sub-Program and overall CALFED Program 
objectives. What the federal legislation should authorize is funding of 
the overall CALFED Program. Authorizing funding for all aspects of the 
Program, in a balanced manner, should be a focal point of this 
legislation. While HR 1985 contains language to this end, AgUrban has 
recommended additional language for section 104(a) that would ensure 
that all CALFED programs are authorized for appropriations.
    The issues surrounding the authorization/appropriations process is, 
therefore, best articulated by asking: Once the CALFED Program is 
authorized, what is the best means for assuring appropriate oversight 
before program elements or projects are commenced? For the AgUrban 
Group, the correct answer to this question must ensure that all CALFED 
sub-Programs have to surmount equal hurdles. Otherwise, balanced 
implementation, as that concept is articulated in the ROD and Framework 
Agreement, will not be possible.
    All stakeholder groups seem to agree that funds for studies, 
environmental impact analyses, other preconstruction activities, and 
CALFED administrative costs should be handled through the standard 
appropriation process. Each year the CALFED governance board would 
provide a report to Congress outlining the projects within each sub-
Program area for which funding is being requested. That report would 
describe how implementation and use of the requested funds would 
maintain required balance among all program areas. This initial report 
is a critical aspect of the process, as the CALFED governance body must 
maintain initial responsibility for assembling a balanced program.
    HR 1985, in section 105(c)(2), allows the appropriations committees 
to strike projects from the report as part of its appropriation 
process. AgUrban understands why this right to strike has been 
included, however AgUrban has recommended amendments to the bill that 
would ensure that the balance struck though the CALFED governance 
process is not impacted.
    The ``preauthorization'' debate seems to focus on what process 
should be followed before funds can be appropriated for construction of 
CALFED projects. We support the approach contained in HR 1985, which we 
call a check-back. Before construction money can be appropriated, a 
detailed report on the particular construction project, whether it be 
an environmental project or a water supply or water quality project, 
must sit before the original authorizing committees for consideration. 
In the absence of objection from the authorizing committees, the 
appropriations committees may place those construction projects into 
the normal appropriation process.
    We understand that there may be parliamentary issues with respect 
to this process, and we look forward to working with committee staff to 
resolve them. Our key to success in resolving these parliamentary 
issues is twofold. First, an expedited process for approving 
construction projects must be developed. None of us want, for the next 
20 or more years, to find ourselves participating in an annual project 
authorization exercise. Second, whatever expedited process is approved 
for environmental projects should also be applied to water supply and 
water quality projects. Some stakeholders have suggested that all 
CALFED water supply projects should have to come back for full 
congressional authorization, while other CALFED projects do not have to 
obtain authorization. Such uneven treatment of the various CALFED 
elements would be unacceptable, as meeting the balanced progress 
requirement would be rendered impossible and the entire CALFED Program 
would be jeopardized.
    In summary, AgUrban's highest priority is to help develop a federal 
legislative package that will fully authorize balanced implementation 
of the overall CALFED program, and will ensure that the promises made 
to all stakeholder groups in the Framework and the ROD are met. This 
approach is the only way to avoid a water supply disaster equal to that 
now being felt in the energy field. We pledge to work with this 
committee and its staff to bring about final passage and a presidential 
signature on fair and workable CALFED legislation.
                                 ______
                                 
    Mr. Calvert. I appreciate the word ``balanced.'' I have 
been working through this for some time with many of the 
members on this Committee and talked to many of you on the 
panel, and we have had a number of hearings throughout the 
state of California, outside of California, and certainly 
today, and I have heard about preauthorization on numerous 
occasions, but obviously any project needs to go through the 
State and Federal process as well as vetted by all the 
interested stakeholders. So I think that word is probably being 
overused as far as a process.
    If anything, I wish I could preauthorize things, but in 
today's environment that is not possible.
    Mr. Sunding, you kind of got my attention on something when 
you got into cost benefit and the rest of it, because I have 
been working on that and other issues in the past when I used 
to Chair other Committees. But one thing that I have always 
found is that there is the other side of that, too, when you 
get into cost benefit. Farmers today are obviously impacted by 
Federal actions, whether it is the Clean Water Act, whether it 
is the Endangered Species Act or other Federal law which they 
must comply with; and there is a cost to that, regulatory cost. 
And also there is another cost. There is a human cost.
    When we mention fallowing land as a secondary course of 
action, there is--it is not just making that statement. As I 
found out in going through rural communities actually 
throughout the United States, water transfer is an easy thing 
to say, but when you go to the communities and you look at 
those people in the eye, the people that own the dry cleaners 
or the guy who has got the corner gas station or the community 
themselves, it is not that simple. So I think the Federal 
Government does have an obligation to participate in these 
water projects.
    And the beneficiary does pay, but to some degree the 
Federal Government has an obligation since we have also put 
costs upon farmers and everyday Californians through Federal 
actions here.
    So my question really is to Mr. Gastelum because, 
obviously, a big part of this legislation is also to build 
water projects, water reclamation--and I have heard no 
objections to that--groundwater management, conjunctive use, 
all of these things. There may be some argument about, 
ironically, whether or not the Federal Government should 
participate by some people on this panel. What is your answer 
to that?
    Mr. Gastelum. Mr. Chairman, the Federal Government clearly 
is participating now, has for many, many years, is a part of, 
if I may say, the problem as well as part of the solution. So 
we look forward to the partnership that has been forged here 
with the ROD and would be carried forward with your 
legislation.
    Obviously, the Federal Government is not going to shoulder 
the full burden. A fair portion of it would be all that anybody 
is asking. And beyond maybe some of the traditional things that 
you have done, there is tremendous opportunity in conservation 
recycling programs, as we have talked about today.
    Mr. Calvert. And, by the way, we are talking about a third 
of the project being paid for by the Federal Government and 
two-thirds being paid for by State and local interests, which 
leverages the authorization within that bill significantly for 
water projects. The more I got involved in this, the more I 
realized that the issue at hand for some of these projects, 
which may not today make financial sense--I am an old business 
guy and I understand that real well, but if we don't pursue 
some of these projects and we go through a process of 
governance to find out what is the most cost-effective way of 
reclaiming water or getting additional water supplies on line 
that we won't have the luxury of making a better decision later 
on because we will be in a crisis mode, which we may be in 
already.
    But I make that point because, when I hear the issue of 
cost benefit, I think of other things other than just the cost 
of--and the benefit that may be in that community as far as 
what can happen to those people there in the Central Valley and 
what can happen in Imperial County and the rest.
    With that, Ms. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chair.
    It is interesting to hear the commonality from all the 
panelists in regard to the issue of water which has become 
really a topic of conversation in my own communities.
    Mr. Gastelum, I was reading--caught me reading part of your 
remarks, but I was also interested in a reference you made, I 
believe, to water quality experts out of the Delta, and can you 
kind of explain the importance of Southern California water 
providers to improve the quality of water coming out of the 
Delta pumping plant--actually, the Harvey Banks. I heard Mr. 
Miller make reference to that, and that kind of peaked my 
curiosity.
    Mr. Gastelum. Yes. I would be pleased to respond.
    The issue is really most directly focused on salinity. We 
have a high degree of salinity, as you know from your work on 
the Colorado River, Congresswoman, from our Colorado River 
supply. We are able to reduce the impact on Southern California 
water users by blending water from the Delta which has lower 
natural salinity in most years. There are years, dry years, and 
other conditions where the salinity actually rises in the Delta 
as well because of infiltration from the ocean water as a 
result of conditions in the Delta.
    The other situation that we face is, because the Delta is a 
confluence of rivers, of various water practices, wastewater 
treatment, effluent, you have any number of contaminants that 
we can find in our source water, and ultimately they end up in 
Southern California or in communities in Santa Clara and other 
urban communities.
    So how do we best deal with that water quality issue? We 
think it is by some projects. In fact, there are projects that 
are in the works now that produce better water quality at the 
source. So our focus, then, is making sure that our water 
quality projects are well coordinated with the water supply 
projects, the ecosystem projects and, as I think Ms. Koehler 
said, we get the best value for the dollar. Certainly one of 
the major tenants of CALFED is to integrate those water quality 
benefits into those decisions.
    Mrs. Napolitano. Thank you.
    Which brings me to the other question, salinity that you 
touched upon, which is a great big issue out of the Colorado 
River, but maybe you might be able to touch upon the 
relationship between CALFED and California's ability to limit 
its use of the Colorado River water, in other words, staying 
within the 4.4 between now and the year 2015.
    I can tell you I still have bruises from that meeting, 
Chairman Calvert, in Salt Lake City. California--the other six 
States ganged up on us and--saying we are going to be watching 
you to reduce your water, which goes into finding ways of being 
more productive in how we recycled water and how we are able 
then to deal with the EPA mandate, how we are able to help 
municipalities continue to advocate conservation methodology. 
All of those things have a part of in it.
    Again, I want to know if you have any comments on the 
relationship between the CALFED and the Colorado River.
    Mr. Gastelum. The basic fact is that California has an 
entitlement of 4.4 million acre feet. Metropolitan and the 
urban water users on the urban plain, the 17 million consumers, 
really only have an entitlement to 550,000 acre feet of that 
4.4. We have traditionally only taken about 1.2 million acre 
feet because our aqueduct allows us to take that, and because 
there have been surpluses on the river we have been able in 
most years to be able to take 1.2 million acre feet.
    The upper basin and lower basin, the other States, have 
served notice, as did the Secretary of the Interior, that it is 
time that we talk about Southern California going on a diet. So 
now over the next 15 years our job is to be able to live within 
that 550,000 acre foot entitlement when surpluses are not 
available. That means we have to forge the water transfer 
agreements, face the very difficult third-party impacts that 
the Chairman was alluding to.
    We announced an agreement that we are going forward with an 
agreement with the Palos Verdes Irrigation District. They have 
the best rights on the river, and our plan there is a fallowing 
program. We have had previous experience with that irrigation 
district, a successful one. We think that by including some of 
the previous models that we have used and adding payments for 
potential third-party impacts in that agreement we will be able 
to create a model that should work elsewhere. So it will take 
upwards of 15 years to be able to compensate for that loss.
    We are clearly not focusing on the State Water Project to 
make up that loss. We have got to be able to do it in a 
coordinated fashion on the Colorado River and the State Water 
Project, but if we are not able to get CALFED to at least take 
care of our existing demands and some projected future, we 
would have a double whammy, reduction in the Colorado River, 
reduction in the State Water Project and in no way can we make 
that up with conservation and recycling alone. We are going to 
need both programs.
    Mrs. Napolitano. Mr. Chairman, with your indulgence, I know 
I have overextended my time, but given the fact that we may be 
facing another drought year, I think it is incumbent upon us to 
make sure that we do seriously work on passing the CALFED this 
year. Otherwise, we are going to be in deep trouble. Not only 
will we be facing water shortages in the western arid States 
but also have to look forward to cutting our rations, so to 
speak.
    Thank you.
    Mr. Calvert. I thank the gentlelady.
    By the way, I want to emphasize I support water transfer. 
It is just that we need to add additional supply and the other 
projects we outline in H.R. 1985 which we agree upon that it is 
all so necessary in order to meet future demand.
    And with that, Ms. Solis, you are recognized.
    Ms. Solis. I apologize for stepping out, also.
    I guess my concern also is that, while we are trying to 
meet the demands in Southern California with a growing 
population, we understand the need for storage and building up 
that storage and looking at different sources for regenerating, 
things of that nature. But while we realize that there is a 
need to construct these facilities, I am also very mindful of 
how we use these tax-paying dollars and how efficiently they 
can be used, and I would like to hear from anyone what kinds of 
ideas you might have about giving incentives for those projects 
that do well in terms of meeting our goal, efficient clean 
water and the production and concentration and storage of that 
water. That is one.
    And the other is this whole issue of trying to keep an 
equilibrium here in terms of our ecosystems, environmentally 
sound programs and realizing that we do have natural habitat 
that we also want to protect, in my case, in Southern 
California, I know as well as up north. But I would like to 
hear you talk a little bit about that.
    Communities that I represent and I know Grace--we are very 
concerned about access for smaller minority, low-income 
communities and having the ability to have programs that will 
provide incentives for recycling and things of that nature. So 
I would like to hear a little bit about that. Anyone?
    Ms. Koehler. I can maybe start the discussion, 
Congresswoman.
    As I mentioned in my testimony, I think the best 
opportunity to respond to the concern you have raised is for 
the legislation that is now pending to be expanded specifically 
to authorize the water use efficiency program. It is generally 
authorized in the bill now, and I understand from talking to 
staff that there wasn't the intent to leave it out either in 
H.R. 2402 or 1985. But that program I think if given greater 
prominence, if it is specifically called out the way some of 
the other CALFED elements are in the bill, has the greatest 
potential to provide the largest benefits to lower income 
communities in the shortest time frame because that goes to 
efficiency technologies and conservation technologies, and 
there is a range of views about the extent to which such 
technologies will address the problem.
    Acknowledging that range of view, there is, I would say, a 
fairly strong consensus that those technologies do have 
considerable merit and should move forward.
    The ROD has very strong language supporting moving forward 
with those kinds of programs immediately; and, as I mentioned, 
it calls for $500 million on the Federal side with matching 
funds on the State and local side in the first 4 years. So I 
think that is sort of the shortest, quickest answer to your 
response. That is the most immediate thing that I can see can 
be done to--in response to the concern that you have raised for 
the kinds of communities that you and Congresswoman Napolitano 
represent.
    Mr. Gastelum. If I may add, Congresswoman, I am familiar 
with your district; and I know that water quality is one of the 
major concerns in your district. And by assuring that water 
quality is one of the purposes that people can apply for 
projects and assuring that it is a competitive process, that 
anybody with a good project has an equal shot, I think goes a 
long way toward addressing the concerns that you may have in 
your district.
    Ms. Solis. There is concern about testing models that 
actually work. On the one hand, you certainly want to encourage 
new development and innovation. On the other, you want to make 
sure you are funding projects that are actually going to meet 
or have some kind of experience. That is the part I think that 
I am a little troubled about. Because, on the one hand, we want 
to see new projects and, on the other hand, are they foolproof 
or will they be foolproof and how do we go about making sure 
there is accountability? And if they do work, how do we give 
them incentives to go on and hopefully expand those projects 
that really do the job? I don't know how we get around that, I 
guess.
    Mr. Calvert. Well, if you are asking me that question, vote 
for H.R. 1985.
    Mr. Schulz. May I respond briefly to that question?
    Mr. Calvert. The gentleman is recognized.
    Mr. Schulz. One of the features of CALFED that I think will 
help answer your question is the governance structure that is 
proposed to be set up and also the science program. Because I 
have never viewed the science program as only being limited to 
the science of ecosystem. I consider it to be also dealing with 
the science of water supply, conservation and all elements of 
the CALFED program.
    So we think that the structure that is set up having a 
joint State-Federal governance process backed by a strong 
science program will give us the ability to answer those ``what 
if'' questions and ``will they work'' types of questions. And 
we would not expect the CALFED governance structure to bring a 
project forward for appropriations for construction until there 
was some real strong backing in that regard.
    Mr. Calvert. I was going to add to that that the governance 
process--in putting together a governance process with the 
participation of the governor, the State legislature, certainly 
the members of this panel, the stakeholders I don't think would 
allow really for projects that don't qualify and are well peer-
reviewed and that are worth pursuing. So I believe that this 
legislation will move us in the right direction.
    Ms. Koehler, many of the environmental programs that we 
pursue today are extremely expensive, and some members are 
concerned about costs, especially indirect costs, and sometimes 
they believe that they disproportionately fall on agriculture. 
How can funding for some of the conservation programs be 
distributed more fairly among the beneficiaries, including the 
environmental community?
    Ms. Koehler. Mr. Chairman, let me make sure I understand 
your question. Are you asking how funding for the restoration 
program can be distributed or are you asking me about--.
    Mr. Calvert. That is correct.
    Ms. Koehler. My understanding is that at this point 
CALFED's proposal for financing the restoration program is that 
it will come largely out of public funds. Other than the $35 
million user fee that is proposed on the State side, it is not 
my understanding that there is a financing mechanism that is 
being discussed to place that burden on the water users.
    Mr. Calvert. Farmers believe that they lose water. Water is 
being dedicated for environmental purposes so that is a cost, 
so that is a cost that is being put upon them. So I guess the 
question would be, do you believe that that is a fair cost or 
do you believe that--what other methodology can be used to more 
fairly distribute those costs?
    Ms. Koehler. Let me try to answer that in two ways.
    First, the water that is being contemplated for the 
environment in CALFED is--CALFED has been very sensitive to 
that issue, and I think appropriately so. There has been, 
obviously, a lot of anxiety and concern about perceived or 
actual reallocations of water. Therefore, the water that is 
being proposed to go to the environment--and it is a relatively 
small amount, 100,000 acre feet by the end of the 7 years--my 
understanding of that proposal is that that would come only--
that is a program that would come only from willing sellers and 
transfers that fully respected existing water rights. So there 
is expected to be no impact to agricultural water users as a 
result of that program.
    Looking--the second way I will respond to your question is 
that, looking at prior, preCALFED efforts, I think there has 
been concern with regard particularly to the 800,000 foot 
dedication under CDPIA and that there has been controversy 
around that. As far as how to allocate the burdens of that, I 
think CALFED has taken a major step with the environmental 
water account.
    I know there is some confusion about that. My understanding 
is the way the Environmental Water Accountis supposed to work 
is that it is basically a publicly funded account of water to 
cap the water impacts to water users and farmers in particular 
of complying with preexisting regulatory requirements, 
particularly, as you mentioned earlier, under the Endangered 
Species Act. So I think that is an innovative approach in 
CALFED to take some of the financial burden of complying with 
the Endangered Species Act in particular and shifting that to 
the public; and we have at Save the Bay and throughout the 
environmental community supported that innovation.
    Mr. Calvert. I would say that if the farming community 
believed that they could cap the cost at 100,000 acre feet of 
water, I suspect they would take that deal right now, but I 
suspect that that may not be the deal.
    Mr. Luddy, obviously in your capacity you work with a 
significant group in our State that are very concerned about 
the economy, obviously. I can't think of an industry that 
probably suffers the most when we go into a recession as far as 
a construction issue, something I used to be in in my previous 
life. We read in the paper, for instance, about Federal judges 
now implementing or causing larger developments to cease and 
desist unless they can prove water supplies.
    If this crisis continues or gets worse, how would that 
affect your industry?
    Mr. Luddy. Frankly, I think it would be difficult to 
overestimate the impact on the industry. If we continue to go 
through--if you were to take what is happening in the Klamath 
Bay and to take what has been happening in energy deregulation 
and the electrical crisis in Southern California and play that 
out into a water issue, which I think in many ways is far more 
serious, the impact would be devastating. Projects would stop 
in their tracks. Investment in the region would stop. People 
will not come and invest in Southern California if they 
perceive it as someplace where they will not have reliable 
water.
    Mr. Calvert. What are the costs of something like that? 
Obviously, we were talking about human costs earlier. When you 
have a significant event like that happening to people and 
families within in that industry that you represent, does that 
cost the government a significant amount of money?
    Mr. Luddy. It costs in payroll taxes. It costs in that 
people would be on public relief at some point if it extended 
long enough. Our members, they have their health and welfare 
benefits paid based on hours contributed to health trust funds; 
and after a certain period of time, their benefits run out. 
They have to look elsewhere for those things. So all of those 
impacts would hit on the State, local, and it would have 
Federal impact.
    Mr. Calvert. Ms. Napolitano.
    Mrs. Napolitano. Thank you.
    Mr. Luddy, wouldn't it also affect businesses because their 
purchasing power would be diminished?
    Mr. Luddy. Absolutely. The Congressman mentioned the dry 
cleaner in the small town. Our workers earn a good wage. They 
have a good benefit, health care. They take that money and 
spend it in town. The multiplier effect on construction dollars 
is substantial. I believe it is 1.8--is the factor. If they are 
not working, they are not going to the dry cleaner, not going 
to the restaurant. They are not going to the ball game, taking 
their family out on the weekend. The ripple impact on 
construction slowdowns is very significant, small community or 
large.
    Mrs. Napolitano. One of the events that I had great 
pleasure in attending was the opening of the Diamond Valley 
Lake with Congressman Calvert and other Members who invited me; 
and it was great to hear that not only did that project get 
built under the time frame it was scheduled for, at least that 
was my understanding, but also that there were very few change 
orders and that it was labor that brought it across that way, 
that the partnership was just outstanding. And I have to say I 
was very pleased to hear that because we have long said that if 
you want to save money in the end, you have to go to the 
experts, and that would be our labor brothers and sisters that 
have been trained to do the job well.
    That is just a commentary, but I tell you that I find the 
ability for us to understand how we are impacted when we have a 
major crisis and everybody suffers, it isn't just business. It 
is the working class, the families, the seniors. It is just a 
reverberating effect. So I am very concerned that we do plan 
together, and I am glad to see that labor is involved in this 
issue, because to me that signifies that we are working 
together for one end and that is to get this issue resolved.
    I look forward to working with our Northern California 
folks as well as the Central Valley folks and the folks below 
us down in the San Diego area, because I think all of us are in 
the same boat. If our coalition remains unified, we will be 
able to get this through; and I am hoping we get the support 
from you and the assistance of the other Members of Congress, 
the calls to signify how important this project really is for 
all of California, not just for Central or Northern or Southern 
but to all of California.
    Thank you, Mr. Chair.
    Mr. Calvert. Ms. Solis.
    Ms. Solis. Actually just a comment, not really a question, 
regarding the growth in Southern California population and the 
need for more water.
    We definitely have to keep that balance with making sure 
that as we do build, especially in our area where we are 
heavily populated and looking for opportunities to provide 
homes for some of these laborers and folks that work in the 
construction industry, also is that we keep in mind how are we 
going to keep those communities going if we don't have water 
that is available? And I understand that we still have a lot of 
discussion to go on this bill and others in terms of how water 
is transported and how we do a better job of making sure that 
when we provide for developments wherever they are, but most 
importantly in areas like Riverside, San Bernardino, and parts 
of my district, that we really plan ahead and work in 
partnership so developers as well as the construction industry 
and the communities that are going to be there--and I am 
thinking about the problems we are facing right now with some 
of our local schools, the fact that we create development 
projects but we are not providing enough infrastructure dollars 
as well to meet that demand, and we are seeing it happen over 
and over again.
    I just want to raise that as just a word of caution, that 
we have to also keep that balance in mind. We have so many 
priorities, you know, on our plate; and I just wish we could 
work together to better understand what problems the folks in 
the north, farmers face, and the folks down south where the 
population is who also demand clean water and are consumers and 
are paying, hopefully, for some good water to be in place for 
their families and future generations.
    That is my comment.
    Mr. Calvert. Thank you.
    Ms. Napolitano.
    Mrs. Napolitano. Just something that I almost skipped over, 
and that was salinity. That has been a major issue for my water 
agencies. How do we become more aware of how government lands, 
that normal runoff, does contribute to salinity, especially the 
Colorado River and, of course, the Delta, but how do we address 
it? Ken has made a great effort and has allowed us to bring 
that heavily into the picture, but I think it bears a lot more 
discussion, if you will, to see how much of that cost should be 
borne by the Federal agencies whose lands are actually 
providing that salinity in the area and get them to contribute 
or participate in having that salinity cleaned up. Because I 
know my water agencies pay millions of dollars to clean the 
salt out of the water before it is delivered to the clients, 
and that is a big concern because that money could be used to 
expand other projects that will be helpful to the communities.
    So we must not lose sight of that, specifically on how it 
impacts the water agencies' abilities ability to perform. And 
then, of course, there is Mexico.
    Thank you.
    Mr. Calvert. Thank you.
    Mr. Schulz, I wanted to get a follow-up question to Ms. 
Koehler's comments. How much water has been reallocated from 
water use to the environment, from your perspective?
    Mr. Schulz. Our estimate is in excess of 2 million acre 
feet. You sort of have to go through an historical addition and 
subtraction, and some things overlap. So it is hard to come up 
with an exact number, but certainly there was 800,000 acre feet 
under the CDPIA. There has been several hundred thousand acre 
feet from the Trinity. Over the years, the water quality 
control plant standards have become more stringent and required 
more outflow which has reduced yield; and the process we went 
through to get into CALFED whereby there was negotiations and 
the December 15, 1994, accord resulted in the CDP and SWP 
providing approximately a million acre feet to maintain the 
fishery in some state of health while the CALFED process was 
being developed. As I said, some of those overlapped like CDPIA 
and quality control plant standards.
    You have got to be careful that you don't double count, but 
we are convinced that we have lost in excess of 2 million acre 
feet during the time when the State was growing by about 10 
million people.
    Mr. Calvert. I just wanted to get that on the record.
    Does that include some of the other court decisions, for 
instance, that the Department of Water and Power has been 
involved in?
    Mr. Schulz. No. That does not--the impacts of, say, the 
Mono Lake decision, the determinations on pumping in Inyo or 
the Colorado River. This is just what has happened in the Bay-
Delta that we are dealing with in the CALFED program.
    Mr. Calvert. Thank you. I am going to wrap this up because 
we are getting toward the end of the day here and we have to go 
back to the floor. I want to thank this panel.
    Obviously, we have a significant problem in California and 
throughout the West. As I said in my opening testimony, that 
electricity certainly is something that we read about and live 
with every day, but water is something we certainly can't live 
without, and we have a problem. We face diminishing supplies in 
the Colorado River if we meet our obligations under the 4.4 
plan that has been negotiated, and I don't think we have a lot 
of choices there to meet that obligations.
    My friends in the upper basin States will make sure we meet 
that obligation. As Ms. Napolitano was in Salt Lake City and 
heard loud and clear, that is their demand.
    We have diminishing water for various reasons. So it is 
important that we work together, all of us, to pass legislation 
that will move CALFED forward and to build water projects in 
the State of California that will allow the State of California 
to continue to prosper and to continue to be the golden State 
that we all live in and love and want to continue to have as a 
place that people want to be at and be associated with.
    So, again, I want to thank you for your testimony in 
answering our questions; and this hearing is adjourned.
    [Whereupon, at 5:05 p.m., the Subcommittee was adjourned.]

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