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[Senate Report 115-373]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 659
                                                       
115th Congress    }                                          {   Report
                                 SENATE
 2d Session       }                                          {  115-373

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

 
                 CLEAN WATER FOR RURAL COMMUNITIES ACT

                                _______
                                

               November 15, 2018.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 685]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 685) to authorize the Dry-Redwater 
Regional Water Authority System and the Musselshell-Judith 
Rural Water System in the States of Montana and North Dakota, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment in the nature of a 
substitute and an amendment to the title, and recommends that 
the bill, as amended, do pass.
    The amendments are as follows:
    1. Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Water for Rural Communities 
Act''.

SEC. 2. PURPOSE.

    The purpose of this Act is to ensure a safe and adequate municipal, 
rural, and industrial water supply for the citizens of--
          (1) Dawson, Garfield, McCone, Prairie, Richland, Judith 
        Basin, Wheatland, Golden Valley, Fergus, Yellowstone, and 
        Musselshell Counties in the State of Montana; and
          (2) McKenzie County, North Dakota.

SEC. 3. DEFINITIONS.

    In this Act:
          (1) Authority.--The term ``Authority'' means--
                  (A) the Central Montana Regional Water Authority, a 
                publicly owned nonprofit water authority formed in 
                accordance with Mont. Code Ann. Sec. 75-6-302 (2007); 
                and
                  (B) any nonprofit successor entity to the Authority 
                described in subparagraph (A).
          (2) Musselshell-judith rural water system.--The term 
        ``Musselshell-Judith Rural Water System'' means the 
        Musselshell-Judith Rural Water System authorized under section 
        4(a), with a project service area that includes--
                  (A) Judith Basin, Wheatland, Golden Valley, and 
                Musselshell Counties in the State;
                  (B) the portion of Yellowstone County in the State 
                within 2 miles of State Highway 3 and within 4 miles of 
                the county line between Golden Valley and Yellowstone 
                Counties in the State, inclusive of the Town of 
                Broadview, Montana; and
                  (C) the portion of Fergus County in the State within 
                2 miles of U.S. Highway 87 and within 4 miles of the 
                county line between Fergus and Judith Basin Counties in 
                the State, inclusive of the Town of Moore, Montana.
          (3) Secretary.--The term ``Secretary'' means the Secretary of 
        the Interior.
          (4) State.--The term ``State'' means the State of Montana.

SEC. 4. MUSSELSHELL-JUDITH RURAL WATER SYSTEM.

    (a) Authorization.--The Secretary may carry out the planning, 
design, and construction of the Musselshell-Judith Rural Water System 
in a manner that is substantially in accordance with the feasibility 
report entitled ``Musselshell-Judith Rural Water System Feasibility 
Report'' (including any and all revisions of the report).
    (b) Cooperative Agreement.--The Secretary shall enter into a 
cooperative agreement with the Authority to provide Federal assistance 
for the planning, design, and construction of the Musselshell-Judith 
Rural Water System.
    (c) Cost-sharing Requirement.--
          (1) Federal share.--
                  (A) In general.--The Federal share of the costs 
                relating to the planning, design, and construction of 
                the Musselshell-Judith Rural Water System shall not 
                exceed 65 percent of the total cost of the Musselshell-
                Judith Rural Water System.
                  (B) Limitation.--Amounts made available under 
                subparagraph (A) shall not be returnable or 
                reimbursable under the reclamation laws.
          (2) Use of federal funds.--
                  (A) General uses.--Subject to subparagraph (B), the 
                Musselshell-Judith Rural Water System may use Federal 
                funds made available to carry out this section for--
                          (i) facilities relating to--
                                  (I) water pumping;
                                  (II) water treatment;
                                  (III) water storage;
                                  (IV) water supply wells;
                                  (V) distribution pipelines; and
                                  (VI) control systems;
                          (ii) transmission pipelines;
                          (iii) pumping stations;
                          (iv) appurtenant buildings, maintenance 
                        equipment, and access roads;
                          (v) any interconnection facility that 
                        connects a pipeline of the Musselshell-Judith 
                        Rural Water System to a pipeline of a public 
                        water system;
                          (vi) electrical power transmission and 
                        distribution facilities required for the 
                        operation and maintenance of the Musselshell-
                        Judith Rural Water System;
                          (vii) any other facility or service required 
                        for the development of a rural water 
                        distribution system, as determined by the 
                        Secretary; and
                          (viii) any property or property right 
                        required for the construction or operation of a 
                        facility described in this subsection.
                  (B) Limitation.--Federal funds made available to 
                carry out this section shall not be used for the 
                operation, maintenance, or replacement of the 
                Musselshell-Judith Rural Water System.
                  (C) Title.--Title to the Musselshell-Judith Rural 
                Water System shall be held by the Authority.

SEC. 5. DRY-REDWATER FEASIBILITY STUDY.

    (a) Definitions.--In this section:
          (1) Dry-redwater regional water authority.--The term ``Dry-
        Redwater Regional Water Authority'' means--
                  (A) the Dry-Redwater Regional Water Authority, a 
                publicly owned nonprofit water authority formed in 
                accordance with Mont. Code Ann. 75-6-302 (2007); and
                  (B) any nonprofit successor entity to the Authority 
                described in subparagraph (A).
          (2) Dry-redwater regional water authority system.--The term 
        ``Dry-Redwater Regional Water Authority System'' means the 
        project entitled the ``Dry-Redwater Regional Water Authority 
        System'', with a project service area that includes--
                  (A) Garfield and McCone Counties in the State;
                  (B) the area west of the Yellowstone River in Dawson 
                and Richland Counties in the State;
                  (C) T. 15 N. (including the area north of the 
                Township) in Prairie County in the State; and
                  (D) the portion of McKenzie County, North Dakota, 
                that includes all land that is located west of the 
                Yellowstone River in the State of North Dakota.
          (3) Reclamation feasibility standards.--The term 
        ``reclamation feasibility standards'' means the eligibility 
        criteria and feasibility study requirements described in 
        section 106 of the Reclamation Rural Water Supply Act of 2006 
        (43 U.S.C. 2405) (as in effect on September 29, 2016).
          (4) Submitted feasibility study.--The term ``submitted 
        feasibility study'' means the feasibility study entitled ``Dry-
        Redwater Regional Water System Feasibility Study'' (including 
        revisions of the study), which received funding from the Bureau 
        of Reclamation on September 1, 2010.
    (b) Study.--
          (1) In general.--The Secretary, in consultation with the Dry-
        Redwater Regional Water Authority, may undertake a study, 
        including a review of the submitted feasibility study, to 
        determine the feasibility of constructing the Dry-Redwater 
        Regional Water System.
          (2) Requirement.--The study under paragraph (1) shall comply 
        with the reclamation feasibility standards.
    (c) Cooperative Agreement.--If the Secretary determines that the 
study under subsection (b) does not comply with the reclamation 
feasibility standards, the Secretary may enter into a cooperative 
agreement with the Dry-Redwater Regional Water Authority to complete 
additional work to ensure that the study complies with the reclamation 
feasibility standards.
    (d) Authorization of Appropriations.--There is authorized to be 
appropriated to the Secretary $5,000,000 to carry out this section.
    (e) Termination.--The authority provided by this section shall 
expire on the date that is 5 years after the date of enactment of this 
Act.

SEC. 6. WATER RIGHTS.

    Nothing in this Act--
          (1) preempts or affects any State water law; or
          (2) affects any authority of a State, as in effect on the 
        date of enactment of this Act, to manage water resources within 
        that State.

SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

    (a) Authorization.--There is authorized to be appropriated to carry 
out the planning, design, and construction of the Musselshell-Judith 
Rural Water System, substantially in accordance with the cost estimate 
set forth in the feasibility report described in section 4(a), 
$56,650,000.
    (b) Cost Indexing.--The amount authorized to be appropriated under 
subsection (a) may be increased or decreased in accordance with 
ordinary fluctuations in development costs incurred after November 1, 
2014, as indicated by any available engineering cost indices applicable 
to construction activities that are similar to the construction of the 
Musselshell-Judith Rural Water System.

    2. Amend the title so as to read: ``A bill to authorize the 
construction of the Musselshell-Judith Rural Water System and 
study of the Dry-Redwater Regional Water Authority System in 
the States of Montana and North Dakota, and for other 
purposes.''.

                                PURPOSE

    The purpose of S. 685 is to authorize the construction of 
the Musselshell-Judith Rural Water System and study of the Dry-
Redwater Regional Water Authority System in the States of 
Montana and North Dakota.

                          BACKGROUND AND NEED

    The Rural Water Supply Act (43 U.S.C. 2405) was enacted in 
2006 to authorize the Secretary of the Interior (Secretary), 
acting through the Bureau of Reclamation (BOR or Bureau), to 
work with rural communities and tribes to assess potable water 
supply needs, identify options to address those needs through 
investigations and studies, and recommend if a project should 
be authorized for construction. Further Congressional 
authorization is required for BOR to participate in or provide 
funding for the design and construction of a rural water 
project.
    Project sponsors have been working through the Bureau's 
rural water program to assess the feasibility of the Dry-
Redwater and Musselshell-Judith Rural Water Projects. The 
Musselshell-Judith Rural Water System is designed to provide 
drinking water to about 6,500 residents through the Central 
Montana Regional Water Authority. The population served by this 
project currently relies on low quality groundwater, drought-
sensitive surface supplies and, in some cases, hauled water. 
Water quality is also poor in the service area and 
concentrations of total dissolved solids, sulfates, iron, and 
manganese exceed secondary drinking water standards.
    The proposed Musselshell-Judith project would include a 
well field, four new buried water storage tanks, a pumping 
station, and distribution system. Over $3 million in Federal, 
State, and local funds have been spent on studies and planning, 
and in January 10, 2017, the Bureau of Reclamation Commissioner 
notified the Office of Management and Budget that the final 
feasibility report found the project to be feasible and met the 
criteria set forth in the Rural Water Supply Act.
    The Dry-Red Water Authority System would treat and deliver 
water to communities in Eastern Montana and North Dakota. 
Currently, individual municipal water systems, reliant on 
groundwater that is high in sodium, sulfates, and fluoride, 
serve residents in these communities and often do not meet 
primary drinking water standards without expensive treatment. 
At least one of these systems is also out of compliance with 
the Clean Water Act due to high levels of sodium and dissolved 
solids.
    The Dry-Redwater Regional Water Authority submitted a 
feasibility study to BOR for the Dry-Redwater Regional Water 
Authority System in 2012, but the Bureau found that the 
proposal did not meet economic feasibility requirements. That 
project would deliver water from the Fort Peck Reservoir and 
require construction of storage tanks, pump stations, and 
pipelines.
    The Dry-Redwater Regional Water Authority has been working 
to revise initial plans for the system since that time, but a 
project meeting BOR's feasibility criteria has not been 
reviewed or approved at this time. Because the Rural Water 
Supply Act has expired, further authorization is necessary for 
BOR to continue working with the Dry-Redwater Regional Water 
Authority to find a feasible project.

                          LEGISLATIVE HISTORY

    Senators Daines introduced S. 685 on March 21, 2017. The 
Subcommittee on Water and Power held a hearing on S. 685 on 
June 14, 2017.
    Representative Gianforte introduced companion legislation, 
H.R. 5073, in the House of Representatives on February 20, 
2017, which was referred to the Natural Resources Committee.
    In the 114th Congress, Senator Daines introduced similar 
legislation, S. 1552, on June 11, 2015. The Subcommittee on 
Water and Power held a hearing on the bill on June 18, 2015.
    The measure was also included in Title III of S. 2902, 
legislation introduced by Senators Flake, Barrasso, Daines, 
Heller, McCain, and Risch on May 9, 2016. The Subcommittee on 
Water and Power held a hearing on S. 2902 on June 18, 2016. The 
Committee on Energy and Natural Resources met in open business 
session on July 13, 2016, and ordered S. 2902 favorably 
reported as amended.
    Representative Zinke introduced companion legislation, H.R. 
3867, in the House of Representatives on October 29, 2015, 
which was referred to the Natural Resources Committee.
    The Senate Committee on Energy and Natural Resources met in 
an open business session on October 2, 2018, and ordered S. 685 
favorably reported, as amended.

                        COMMITTEE RECOMMENDATION

    The Senate Committee on Energy and Natural Resources, in 
open business session on October 2, 2018, by a majority voice 
vote of a quorum present, recommends that the Senate pass S. 
685, if amended as described herein. Senator Lee asked to be 
recorded as voting no.

                          COMMITTEE AMENDMENTS

    During its consideration of S. 685, the Committee adopted 
an amendment in the nature of a substitute and an amendment to 
the title. The substitute amendment lowered the federal cost 
share for the design and construction of the Musselshell-Judith 
project from 75 percent to 65 percent and changed the 
authorization of appropriations from ``such sums as are 
necessary'' to $56,650,000. The amendment also deleted the 
design and construction authorization for the Dry-Redwater 
Project and replaced it with an authorization to complete a 
feasibility study, and an authorization for appropriations for 
that action. The substitute amendment also made conforming and 
technical changes and is further described in the section-by-
section analysis. The amendment to the title reflects the 
change in the authorization of the Dry-Redwater Project made by 
the substitute amendment.

                      SECTION-BY-SECTION ANALYSIS

Sec. 1. Short title

    Section 1 sets forth the short title.

Sec. 2. Purpose

    Section 2 states the bill's purpose.

Sec. 3. Definitions

    Section 3 defines key terms.

Sec. 4. Musselshell-Judith Rural Water System

    Subsection (a) authorizes the Secretary to plan, design and 
construct the Musselshell-Judith Rural Water System in 
substantial accordance with the Musselshell-Judith Rural Water 
System Feasibility Report.
    Subsection (b) directs the Secretary to enter into a 
cooperative agreement with the Central Montana Regional Water 
Authority to provide Federal assistance in furtherance of 
subsection (a).
    Subsection (c) limits the Federal cost share to 65 percent 
of the total project cost and makes clear that such Federal 
cost share funds shall not be returnable or reimbursable. The 
subsection further outlines the allowable uses for Federal 
funds, prohibits Federal funding for the operation, 
maintenance, and replacement of the Musselshell-Judith Rural 
Water System, and specifies that title to the Musselshell-
Judith Rural Water System shall be held by the Central Montana 
Regional Water Authority.

Sec. 5. Dry-Redwater feasibility study

    Subsection (a) defines key terms for the section.
    Subsection (b) authorizes the Secretary, in consultation 
with the Dry-Redwater Regional Water Authority, to study the 
feasibility of constructing the Dry-Redwater Regional Water 
System. This subsection further states that the study must 
comply with reclamation feasibility standards.
    Subsection (c) authorizes the Secretary to enter into a 
cooperative agreement with the Dry-Redwater Regional Water 
Authority to complete additional work to ensure that the study 
complies with reclamation feasibility standards.
    Subsection (d) authorizes $5 million to carry out this 
section.
    Subsection (e) terminates the authority provided under this 
section five years after the date of enactment.

Sec. 6. Water rights

    Section 6 states that nothing in the Act preempts state 
water law or affects a State's authority to manage its water 
resources.

Sec. 7. Authorization of appropriations

    Section 7 authorizes $56,650,000 to be appropriated for the 
planning, design and construction of the Musselshell-Judith 
Rural Water System and authorizes the indexing of the 
authorized amount based on cost fluctuations after November 1, 
2014.

                   COST AND BUDGETARY CONSIDERATIONS

    The following estimate of the costs of this measure has 
been provided by the Congressional Budget Office:
    Summary: S. 685 would authorize the Bureau of Reclamation 
(BOR) to study, plan, and construct projects to secure water 
supplies in rural areas in Montana and North Dakota. Using 
information from BOR, CBO estimates that implementing the bill 
would cost $52 million over the 2019-2023 period, assuming 
appropriation of the authorized and necessary amounts.
    Enacting S. 685 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 685 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 685 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 685 is shown in the following table. The 
costs of the legislation fall within budget function 300 
(natural resources and environment).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                              --------------------------------------------------
                                                                2019    2020    2021    2022    2023   2019-2023
----------------------------------------------------------------------------------------------------------------
                                 INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Musselshell-Judith Rural Water System:
    Estimated Authorization Level............................       5      12      12      13      13        55
    Estimated Outlays........................................       3       8      11      12      13        47
Dry-Redwater Feasibility Study:
    Estimated Authorization Level............................       2       2       1       0       0         5
    Estimated Outlays........................................       1       2       1       1       0         5
    Total:
        Estimated Authorization Level........................       7      14      13      13      13        60
        1Estimated Outlays...................................       4      10      12      13      13        52
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that S. 
685 will be enacted in 2019. The bill would authorize the 
appropriation of specific amounts but does not specify in which 
year the appropriation should be provided. CBO has estimated 
how much would need to be provided each year based on 
historical patterns. Estimated outlays are based on historical 
spending patterns for similar programs. CBO estimates that 
implementing the bill would cost $52 million over the 2019-2023 
period, assuming appropriation of the authorized and necessary 
amounts.
    S. 685 would authorize BOR to construct the Musselshell-
Judith Rural Water Project in central Montana. The project 
would include planning, designing, and constructing groundwater 
wells and distribution facilities to deliver water to rural 
communities. The federal share (65 percent) of costs to 
construct the project would total about $57 million; the 
project could be completed in about six years. Including 
adjustments for anticipated inflation as authorized by the 
bill, CBO estimates that the federal cost to implement those 
provisions would total $47 million over the 2019-2023 period; 
the remainder of the federal costs would occur after 2023.
    The bill also would authorize BOR to study the feasibility 
of constructing the Dry-Redwater Rural Water Project in 
Montana. The project would provide water treatment and 
distribution facilities to deliver water to existing storage 
tanks in rural communities in eastern Montana and in 
northwestern North Dakota. CBO estimates that completing the 
study would cost $5 million over the 2019-2023 period, assuming 
the appropriation of the specified amount.
    Pay-As-You-Go considerations: None.
    Increase in long-term direct spending and deficits: CBO 
estimates that enacting S. 685 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2029.
    S. 685 contains no intergovernmental or private-sector 
mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Aurora Swanson; 
Mandates: Zachary Byrum.
    Estimate reviewed by: Kim P. Cawley, Chief, Natural and 
Physical Resources Cost Estimates Unit; H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                      REGULATORY IMPACT EVALUATION

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 685. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 685, as ordered reported.

                   CONGRESSIONALLY DIRECTED SPENDING

    S. 685, as ordered reported, authorizes $56,650,000 to be 
appropriated for the planning, design, and construction of the 
Musselshell-Judith Rural Water System in the State of Montana.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by the Department of the Interior at 
the June 14, 2017, hearing on S. 685 follows:

   Statement of Scott Cameron, Acting Assistant Secretary--Water and 
                Science, U.S. Department of the Interior

    Chairman Flake, Ranking Member King, and members of the 
Subcommittee, I am Scott Cameron, Acting Assistant Secretary 
for Water and Science at the Department of the Interior. Thank 
you for the opportunity to provide the views of the Department 
of the Interior (Department) on S. 685, the Clean Water for 
Rural Communities Act, which would authorize construction of 
the Dry-Redwater Regional Water Authority System and the 
Musselshell-Judith Rural Water System in the States of Montana 
and North Dakota.
    In the 114th Congress, Reclamation provided testimony on S. 
2902 and S. 1552, which contained language identical to S. 685. 
My testimony today will update Reclamation's previous 
statements on these projects to include recent events; however, 
the Department's position overall on funding has not changed 
from these earlier testimonies.
    Like the sponsors of this legislation, the Department 
supports the goals of encouraging a vibrant rural economy and 
ensuring safe, reliable sources of drinking water in Montana 
and North Dakota. Rural water projects help build strong, 
secure communities and are important to supporting the 
livelihood of local economies. Public Law 109-451, which 
expired September 30, 2016, authorized Reclamation to establish 
a Rural Water Supply Program to help rural communities and 
Tribes in the western United States analyze and develop options 
for meeting water supply needs through the completion of 
appraisal investigations and feasibility studies.
    While the Department acknowledges the important functions 
rural water projects offer to communities across the West, we 
have concerns with S. 685 as currently written. We request the 
opportunity to work with the Committee to adequately address 
our concerns, as identified below.
    The legislation authorizes construction of two separate 
projects and my statement will speak to each of those projects 
separately.
Dry-Redwater
    Section 4(a)(1) of S. 685 applies to the planning, design, 
and construction of the regional Dry-Redwater Rural Water 
Authority System in eastern Montana and a small service area in 
northwest North Dakota, and would authorize the Federal 
Government to provide up to 75 percent of the System's overall 
construction cost. Reclamation estimates that this 
authorization would amount to Federal appropriations of at 
least $200 million dollars. The Department last testified 
before this Subcommittee on legislation related to the Dry-
Redwater Project in May of 2016, and prior to that, in June 
2015, May 2011, and July of 2009. Since 2016, two things have 
occurred; the Dry-Redwater Regional Water Authority (Authority) 
changed their project plans from that provided in the initial 
study by adding the cities of Sidney and Glendive, Montana, to 
the Authority's service area which changed the population 
served from 15,000 to over 26,500; and secondly, Reclamation's 
authority to continue work on rural water appraisal and 
feasibilities studies under P.L. 109-451 expired. Reclamation 
did not receive a feasibility study that was evaluated and 
determined to be economically feasible for the new project 
envisioned by the Authority.
    The Department is concerned about language in the 
legislation authorizing a project for construction without a 
complete Feasibility Study. Specifically, the potential strain 
on Reclamation's budget that could come about from this 
authorization, the cost share requirement proposed in the bill, 
and the proposed use of power from the Pick-Sloan Missouri 
Basin Program (P-SMBP) for non-irrigation purposes are a 
problematic issues.
    In 2012, the Authority submitted a Feasibility Study to 
Reclamation for review. Upon initial review of the Feasibility 
Study, Reclamation was unable to identify a technically viable 
water supply alternative that presented a National Economic 
Development (NED) plan with net positive benefits to the 
nation. Reclamation informed the Authority that the Feasibility 
Study could not be supported as being financially or 
economically feasible under the requirements of Reclamation's 
Rural Water Supply Program. Consequently, there are significant 
review findings and recommendations that must be addressed to 
bring the Feasibility Study up to Reclamation's standards. 
Since project costs have not been fully developed by the 
Sponsor and reviewed by Reclamation, there is also the 
potential for this project to be financially unsustainable for 
the project sponsors.
    Because of the importance of this issue, a Reclamation 
Design, Cost Estimating, and Construction (DEC) review further 
evaluated the Feasibility Study in 2012 in order to provide an 
independent analysis. The estimated cost to address the DEC 
Report Findings and Recommendations in 2012 was in excess of 
$5.5 million. Neither Reclamation nor the Authority had 
sufficient funding to revise the Feasibility Study to address 
the DEC Report Findings. The authority for Reclamation to 
further review the feasibility study expired in 2016. In order 
to maintain their original service area and related project 
benefits, the Authority ruled out a scaled down approach.
    As a result of this decision, Reclamation entered into a 
Memorandum of Understanding (MOU) with the Authority on April 
27, 2015, with the objective of completing a summary report 
that documented the current status of the draft Feasibility 
Study and identified the additional level of effort needed to 
revise the Feasibility Study technically in order to meet the 
requirements of Reclamation's Rural Water Supply Program. 
However, before a final summary report could be completed, 
Reclamation's authority under the program expired and 
Reclamation was required to generate a Feasibility Study 
Concluding Report (Concluding Report) since the Feasibility 
Study was not completed. The Concluding Report was completed in 
September 2016 and provided an overview of the Feasibility 
Study up to the point of concluding it, and identified the 
reasons for ending the Feasibility Study. The Concluding Report 
provided findings that primarily due to the economics of the 
proposed alternative and the incomplete level of the 
Feasibility Study, Reclamation is not in a position to support 
the project as financially viable or able to verify that the 
total project cost estimate is economically sound.
    The Department is also concerned about the non-Federal cost 
share for the System. As stated above, S. 685 contemplates that 
the United States would fund 75 percent of the cost of 
constructing the System for the benefit of Montana citizens of 
Dawson, Garfield, McCone, Prairie, Richland Counties, and North 
Dakota citizens of McKenzie County. While this has been the 
cost share level proposed in other rural water projects enacted 
into law, it represents the maximum Federal cost share 
previously allowed under Title I of the Rural Water Supply Act 
of 2006 (P.L. 109-451, now expired), which included a 
requirement for a Feasibility Report that comprised an analysis 
of the sponsor's capability-to-pay and identified an 
appropriate contribution by the local sponsors.
    Section 5 of S. 685 authorizes the delivery of 1.5 
megawatts of P-SMBP pumping power to be used and delivered 
between May 1 and October 31 for the benefit of this System at 
the firm power rate. Section 5(b)(2)(A) of the bill requires 
that the System be operated on a ``not-for-profit basis'' in 
order to be eligible to receive power under those terms. 
Reclamation is not certain of the impact the bill's 
requirements could have on Western Area Power Administration's 
existing contractual power obligations. In addition to those 
concerns mentioned above, we have yet to verify whether or not 
water rights issues associated with the System have been 
adequately addressed.
    Reclamation's authority to continue work on rural water 
appraisal and feasibilities studies has expired. At this time, 
there is no general programmatic authority for continued work 
by Reclamation on rural water appraisal and feasibility 
studies. Reclamation's review of Dry-Redwater Authority's 
proposed system was conducted under the authority of the Rural 
Water Supply Act of 2006 (Title I of Public Law 109-451) and 
this authority expired on September 30, 2016. Reclamation 
generated a Concluding Report which provided an overview of the 
Feasibility Study up to the point of concluding it and 
identified the reasons for ending the study.
    If legislative authority is granted, we suggest System 
sponsors work with Reclamation to evaluate the System for scale 
and economic viability in an effort to refine the National 
Economic Development accounting such that the ratio of total 
benefits exceeds costs. The System should meet appropriate 
guidelines and be updated to include new infrastructure 
required to accommodate the large increase in population 
served. S. 685 allows the Authority to acquire property and 
existing systems. Details of these systems should be fully 
identified and incorporated into the new evaluation and the 
evaluation should incorporate recommendations from the DEC 
review or, if necessary, require a new DEC review be conducted. 
It should address all federal environmental compliance 
activities. There are substantial costs believed to be in the 
millions of dollars associated with these efforts that are 
outside of any costs projections previously considered. We also 
recommend that they work with the Western Area Power 
Administration and their contractors on the issues related to 
the System's pumping power needs.
Musselshell-Judith
    Section 4(a)(2) of S. 685 would authorize the planning, 
design, and construction of the Musselshell-Judith Rural Water 
System in central Montana and would authorize appropriations of 
75 percent of total project costs. Since the total estimated 
construction cost of the project is $87,102,000, Reclamation 
estimates that the total Federal contribution of 75 percent 
would equate to $65,327,000 (2014 dollars). While a 75 percent 
cost share level has been proposed in other rural water 
projects enacted into law, this represents the maximum Federal 
cost share previously allowed under the Rural Water Supply Act 
of 2006.
    In 2015, the Central Montana Rural Water Authority's 
(Authority) Musselshell-Judith Rural Water System Feasibility 
Study (Feasibility Study) was submitted to Reclamation for 
technical review under Public Law 109-451. The Department found 
the proposed project to be feasible and to meet the broad 
criteria of the program, however, the Department is concerned 
about our ability to fund even currently authorized rural water 
projects, and does not want to unreasonably raise expectations 
that new authorized projects would receive the desired federal 
funding.
Common Both Water Systems
    Section 7(b) of S. 685 addresses the cost indexing for the 
authorization of appropriations. As previously testified, 
Reclamation is not aware of a specific rationale for the 
differing indexing dates prescribed in the legislation. For the 
Dry-Redwater System, appropriations are to be indexed to 
January 1, 2008. For the Musselshell-Judith, the appropriations 
are to be indexed to November 1, 2014.
    Authorized rural water projects compete with a number of 
priorities within Reclamation's Budget, including aging 
infrastructure, Indian water rights settlements, environmental 
compliance, restoration actions, developing sustainable water 
supply strategies, and other priorities intended to address 
future water and energy related challenges.
    The Department has concerns about adding to the backlog of 
Reclamation's authorized rural water projects seeking Federal 
construction funding. Discretionary rural water funding has 
enabled Reclamation to make progress in promoting certainty, 
sustainability, and resiliency in support of basic drinking 
water needs of rural western communities. However, 
Reclamation's ability to make Federal investments that match 
on-the-ground capabilities has its limitations. Of 
Reclamation's six currently authorized rural water projects 
under construction or funded at some level today, all of the 
projects pre-date Title I of the Rural Water Supply Act of 2006 
(now expired). Authorizing additional rural water projects may 
delay rural water projects that are already under construction.
Conclusion
    The Department recognizes that the people who would be 
served by S. 685 have legitimate needs for better quality 
drinking water. We are concerned, given the past history and 
future prospects of funding for the rural water program, not to 
raise unreasonable expectations for future federal funding 
should this bill become law.
    That concludes my written statement. I am pleased to answer 
questions at the appropriate time.

                        CHANGES IN EXISTING LAW

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