Statement of John W. Keys, III

Commissioner

U.S. Department of the Interior
Bureau of Reclamation

On
S. 1058
before the
Senate Energy and Natural Resources Committee

Water and Power Subcommittee

October 15, 2003

My name is John Keys and I am Commissioner of the Bureau of Reclamation.  I appreciate the opportunity to provide the Administration’s views on S. 1058, legislation to provide a cost sharing requirement for the construction of the Arkansas Valley Conduit (Conduit) in the State of Colorado. 

S. 1058, as introduced, states that the non-Federal share of the total costs of construction shall not be more than 25 percent.  This language would allow the Federal share to be up to 100 percent.  The legislation further authorizes to be appropriated such sums as necessary to pay the Federal share of the Conduit construction costs, and directs the Federal share to be nonreimbursable.  This is contrary to the Fryingpan-Arkansas Project Act and current Reclamation law and policy.  Therefore, the Administration cannot support S. 1058, as introduced, because it is contrary to existing Reclamation law which calls for inclusion of the Fryingpan-Arkansas Project Act of August 16, 1962 (which already authorizes the Conduit) requiring  municipal and industrial project beneficiaries to repay 100 percent of appropriate project costs.  

The Administration is aware of the interest Arkansas River Valley residents have in seeking alternative means of obtaining safe and clean water supplies.  We understand that the beneficiaries are looking for Federal financing for the Conduit, given that some of the communities in the Arkansas River Valley may be facing considerable expense to comply with federally-mandated water quality standards.  The need for a pipeline was recognized back in 1962 when Congress authorized the Conduit. 

The Conduit is an authorized, but never built, feature of the Fryingpan-Arkansas Project (Project).  The 1962  Fryingpan-Arkansas Project (Fry-Ark) Act, which authorized the Project, required that municipal water supply works either be constructed by communities themselves, or, if that is infeasible, by the Secretary, with repayment of actual costs and interest within 50 years.

During development of the Project, Reclamation found the Conduit to be economically feasible, but the beneficiaries lacked the bonding capability to construct the works themselves.  The beneficiaries of the Conduit found that it also was financially infeasible to repay Reclamation within 50 years if Reclamation were to construct the Conduit.  It was agreed at that time to reconsider construction of the Conduit in the future if proposals with viable support were forthcoming. 

Increased water treatment costs, due to the poor quality of locally available groundwater, and requirements of the Safe Drinking Water Act have renewed local interest in the Conduit.  The Conduit would transport water from Pueblo Dam, a feature of the Fry-Ark Project, to communities along the Arkansas River, extending about 110 miles to near Lamar, Colorado.   The Lower Arkansas River Basin is comprised of rural communities, with the largest town, Lamar, having an estimated population of 8,600.  

The legislation permits inclusion of Fiscal Year 2002 and subsequent year’s costs related to constructing the Conduit.  However, the definition of “construction” is not clear and would need to include all project activities including planning activities, if 2002 and 2003 costs are to qualify. 

Additionally, the cost share and appropriations language in the bill imply that the sponsor’s contributions will be provided at rates and times that support the project’s funding requirements, much like activities funded under a cooperative agreement.  However, apparently the intent of the legislation is that the sponsors enter into a contract with Reclamation for repayment of 25 percent of total project costs and that this repayment be treated like other Reclamation repayment processes.  If this is the case then the project would be funded 100 percent from appropriations and the sponsor’s 25 percent share repaid over many years following completion of construction.  We emphasize again, that this bill is precedent setting for Reclamation in that current beneficiaries across the 17 Western States projects pay 100 percent.  We note that the Senate Energy and Water Appropriation Subcommittee recognized this by inclusion of the following in the Fiscal Year 2004 Committee report language (S. RPT. 108-105):  “The Committee has included an additional $200,000 to continue the reevaluation report.  The committee supports these efforts but believes that the project needs appropriate review by the authorizing committee, in particular, the Committee notes that the project, if authorized, should follow the standard Reclamation policy of an M&I project of the beneficiaries paying 100 percent of the allocated costs.”

In addition, this legislation does not address the payment for operation, maintenance and replacement of the Conduit.  It is Reclamation’s position that such costs should be paid by the Conduit beneficiaries.  Also, should any legislation proceed, it should be clarified to assure that the cost ceiling for the Fryingpan-Arkansas Project is increased to accommodate Conduit construction costs.

In conclusion, Mr. Chairman, the Administration can not support S. 1058 with a Federal cost share that is contrary to existing Reclamation law.  I would like to emphasize that the existing Fry-Ark Project authorization appropriately addresses the responsibility of the beneficiaries to pay for the direct benefits they would receive, as is the case at all Reclamation projects across the west.

The Administration recognizes the water quality issues facing the Arkansas River Valley and is open to working with the project sponsors, Senator Allard, and members of the Committee to address the concerns we have raised with S. 1058 or to explore other legislative alternatives.

This concludes my statement; I would be pleased to answer any questions.