Statement of John W. Keys III

Commissioner

Bureau of Reclamation

Before The Subcommittee on Water and Power

of the Committee on Resources

U.S. House of Representatives

on

H.R. 5039, Humboldt Project Conveyance Act

July 9, 2002

First, let me commend the District for the extensive amount of work that they have done to develop some very important and complicated agreements between different parties. However, while the Department supports enacting legislation to enable these agreements to be implemented, we cannot support H.R. 5039 as introduced.

Background

The Humboldt Project is located in northwestern Nevada on the Humboldt River and was authorized in 1933. Construction of Rye Patch Dam, the centerpiece of the Humboldt project was completed in 1936. In 1976, it was raised to 78 feet high which expanded its capacity to 213,000 acre feet of water. Rye Patch Reservoir is 21 miles long stretching from Rye Patch dam north to the Callahan Bridge near the town of Imlay. The Pershing County Water Conservation District assumed full operations and maintenance responsibility for the project in 1941 and they have managed it ever since.

H.R. 5039

The Humboldt Project Conveyance Act proposes to transfer title to all the lands and facilities associated with the Humboldt Project in Nevada. The terms, conditions and details of the transfer are spelled out in a series of agreements including a Memorandum of Agreement (MOA) between the District and Lander County; a Conceptual Agreement between the District and the State; and a Letter of Agreement between the District and Pershing County. In addition, the legislation references a MOA between the District and Reclamation, which is not yet completed and is still being finalized. This MOA will articulate the respective roles and responsibilities for completing all the necessary or required steps including responsibilities for compliance with the National Environmental Policy Act (NEPA) and other applicable Federal and state laws, and responsibilities for other activities necessary to complete the transfer.

The agreements referenced in H.R. 5039, if authorized for implementation, would transfer the Dam, reservoir, and all acquired lands under and adjacent to the dam and reservoir and all acquired lands below the high water mark to the District. In addition, the District will maintain a 3,000 acre foot minimum pool in Rye Patch Reservoir for maintenance and fisheries protection.

Withdrawn lands above the high water mark in the vicinity of the reservoir would be transferred to the State of Nevada to be managed for recreation, wildlife habitat, wetlands and resource conservation.

Approximately 23,000 acres of land in the Battle Mountain Community Pasture (BMCP) will be transferred to the District, while approximately 1,100 acres of BMCP land in the vicinity of the town of Battle Mountain will be transferred to Lander County. Finally, one and one-half sections of land around Derby Airport, which Pershing County has leased from Reclamation, will be transferred to the County.

Concerns with H.R. 5039

While we support implementation of the terms and conditions of the transfer, as embodied in the various agreements summarized above, there are a number of problems with H.R. 5039, as presently drafted.

Cost Limitations

While H.R. 5039 clearly addresses many of the cost-related issues, there are two areas of significant concern on this matter:

1) Section 4(f) limits the amount of administrative costs and costs associated with compliance with the National Environmental Policy Act (NEPA). Under this section, the District, Lander County and Pershing County costs are limited to $40,000. The $40,000 figure is not based upon any estimate of costs that we are aware of for this project. The entities receiving title to the lands and facilities of the Humboldt Project are receiving the benefits of title and should share in the actual costs associated with the transfer. In order to address this concern, I recommend that any cost limitation should reflect that the United States pays no more than 50 percent of the total costs.

2) Section 4(g) states that the State of Nevada shall not be responsible for any payments or costs under this section. This would include payment for the withdrawn lands (Section 4(b)), and, if a value is determined by an appraisal -- administrative costs (Section 4(c)), costs associated with compliance with NEPA (Section 4(d)), and real estate costs, such as the cost of boundary surveys (Section 4(e)).

The Department has three concerns associated with Section 4(g). First, since the State of Nevada is receiving title to withdrawn lands, it is appropriate they be expected to pay for these lands. These are public domain lands that were withdrawn for the construction and operation of the Project whose value was not incorporated into the District's repayment obligation, and thus, have never been paid for. It is Reclamation's policy, that such lands be professionally appraised pursuant to Federal standards of appraisals, and should reflect fair market value. While in many cases lands that are below the water mark, underneath dams and other facilities, and those reserved for recreation, wetlands, and wildlife management are appraised at no or little value, they are still subject to an independent appraisal. It is important that such an appraisal take place to protect the financial interests of the United States.

Second, since the State is receiving these lands, they should share equally in the NEPA and administrative costs and should bear the real estate costs associated with these lands as is proposed for all the other recipients of lands and facilities in this bill.

Third, the language of Section 4(g) is very unclear as to how the State's share of the costs associated with this Section would otherwise be distributed since sections 4(c) and 4(e) require payment in equal shares and Section 4(d) requires payment of the real estate transaction costs by the "entity receiving title." Given this language, several important questions arise. Are the State's share of otherwise equally shared costs distributed to all of the remaining parties, or are these costs to be absorbed by Reclamation? Either interpretation results in an inequitable distribution of costs and will create confusion, controversy, and inevitably a delay in implementation.

Public Benefits or Windfall Profits

As presently drafted, Section 4(g) requires that the State manage the lands transferred to them for recreation, wildlife habitat, wetlands or resource conservation. However, it goes on to suggest that the State could change that use and then make the "payments pursuant to the Act" or the lands could revert to the District who could then change the use as it sees fit. The Department maintains the legislation should ensure that the public benefits are preserved regardless of whether they are managed by the State, as currently envisioned in H.R. 5039 and in the Letter of Conceptual Agreement between the County and the State. However, if ownership of the lands is sold by the State or reverts to the District and is then sold, the United States should share in any financial windfall that is received. We further note that the legislation in its current form appears to contemplate the preparation of a NEPA analysis of title transfer, the suggestion in Section 4(g) that the use of lands could change after transfer greatly complicates the preparation of an analysis of potential environmental impacts (beneficial or adverse) under NEPA, and may invite legal challenge to such an analysis.

In order to address the above concerns, we recommend that Section 4(g) be deleted.

Conveyance Deadlines and Report

The next area of concern is related to the arbitrary and somewhat confusing deadlines proposed in H.R. 5039.

Section 3(a) requires the Secretary to convey title to the lands and facilities no later than two years after enactment. While it is our hope that all of the steps and agreements required under this legislation are completed in that time, two years is an arbitrary and potentially unrealistic timeframe.

In most cases where title transfer has been completed quickly, a good deal of the necessary work for the transfer - such as preparation of the environmental documentation (NEPA compliance), cultural resources, hazardous materials and boundary surveys, preparation of legal documentation or other actions that are required, had been completed, or at least was initiated, prior to the legislative process. While the District has made a great deal of progress in completing the MOAs and other agreements, additional steps necessary have not yet begun, nor have there been extensive discussions about what might be required. This timetable, together with the funding limitations previously mentioned, could also create significant obstacles to the preparation of a NEPA analysis, and may also invite further legal challenges. This makes it difficult to meet the proposed two-year goal.

Further, Section 3(c) requires that Secretary submit a report to Congress within 18 months of enactment if the conveyance has not been completed. This time frame also seems arbitrary and could actually delay the transfer, since resources needed to complete the transfer would be drawn away to prepare the report.

To address our concerns, I suggest the legislation be modified to require the transfer be completed "as soon as practicable after the date of enactment" and then require a report to Congress as to the status of the conveyance, any obstacles to completion of conveyance and the anticipated date of conveyance, if the transfer is not completed in two years. This has been the language successfully used in other authorized title transfers to both ensure accountability and to keep Reclamation and the other entities moving forward in a positive manner.

Future Obligations and Benefits

The Department is also concerned that the legislation does not clearly articulate the obligations and benefits that will exist and be available after the transfer.

One of the primary benefits to the entities receiving title is the ability to operate independently of Reclamation law. Conversely, one of the primary benefits of title transfer to Reclamation is to limit its liability and any financial exposure as it relates to the projects to be transferred. In most of the transfers that have been enacted into law, there has been a provision clearly articulating that the project being transferred is no longer a Federal project, that the recipients of title are no longer subject to Reclamation law and that they are no longer eligible for Reclamation programs that are available to Federal contractors.

Such a provision should be added to H.R. 5039 to clarify this separation and to clearly articulate the understanding of both parties as to what is expected in the future in this regard.

In addition, Section 8 of the bill provides that any conveyance would not abrogate any provision of any contract executed by the United States relating to any person's right to use water. This raises a significant issue that may require additional clarification: If the right of water users to use Humboldt Project water is based on water right contracts entered into with the United States, the obligations of the United States vis-à-vis the delivery of project water will need to be clarified in light of the proposed de-federalization of the Project. Reclamation cannot reasonably be required to maintain its obligations to deliver project water once title, management, and operation of Humboldt Project facilities passes out of federal ownership and control.

Conclusion

In closing, Mr. Chairman, let me commend the District, Lander County, Pershing County, and the State for their hard work to come to agreement on terms of the transfer that are embodied in the agreements referenced in the legislation. With the technical modification mentioned above, I believe the Department could support passage of this legislation.

That concludes my statement. I would be happy to answer any questions.