Statement of Gale A. Norton
Secretary
U.S. Department of the Interior
before the
Subcommittee on Water and Power
Committee on Resources
U.S. House of Representatives
Concerning H.R. 1985, the
"Western Water Enhancement Security Act"
and H.R. 2404, the
"California Water Quality and Reliability Act of 2001"
July 26, 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:
• Phase 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.
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 FY 1998 to FY 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 FY 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 FY 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 Aas 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.