Reclaiming the Nation's Water Act Statement of Larry Todd Deputy Commissioner, Bureau of Reclamation U.S. Department of the Interior Before the Senate Energy and Natural Resources Committee Subcommittee on Water and Power S. 3639 Reclaiming the Nation’s Water Act July 27, 2006 Madam Chairwoman and members of the Subcommittee, I am Larry Todd, Deputy Commissioner of the Bureau of Reclamation. I am pleased to be here today to give the Department’s views on S. 3639, a bill that makes amendments to Title XVI of the Reclamation Projects Authorization and Adjustment Act of 1992. We applaud both you and Senator Feinstein for recognizing the need for legislation that would reformulate the Bureau of Reclamation’s Title XVI Water Reclamation and Reuse Program. The Department believes that this bill proposes improvements that would enable Reclamation to better administer the program. Because we believe that additional adjustments to the legislation are necessary to ensure that project assessment and authorization is prioritized to focus on areas of greatest need, the Administration cannot support S. 3639 at this time. We appreciate the commitment you have made to this issue and look forward to the opportunity to work with the Subcommittee to improve the legislation and find common ground on the necessary reforms to the Title XVI program. We believe that the Administration and Congress are of like minds in the need to reform this program, and are confident that we can work out our remaining differences to develop reform legislation that addresses our mutual concerns. In 1992, Congress adopted, and the President signed, the Reclamation Projects Authorization and Adjustment Act (Public Law 102-575). Title XVI of this Act, the Reclamation Wastewater and Groundwater Study and Facilities Act, authorized the Secretary to participate in the planning, design and construction of five water reclamation and reuse projects. The Secretary was also authorized to undertake a program to identify other water recycling opportunities throughout the 17 western states, and to conduct appraisal level and feasibility level studies to determine if those opportunities are worthy of implementation. The Bureau of Reclamation has been administering a program to fund these Title XVI projects since 1994. The funds are passed through from Reclamation to the project sponsor; Reclamation is in essence providing a grant to the project sponsoring entities for design and construction work. In 1996, Public Law 104-266, the Reclamation Recycling and Water Conservation Act, was enacted. This law amended Title XVI and authorized the Secretary to participate in the planning, design and construction of 18 additional projects, including two desalination research and development projects. Since 1996, Title XVI has been amended several times, and now there are 32 projects authorized for construction in nine states. With regard to the already existing authorizations, of the 32 specific projects authorized to date, 21 have received funding. Of these, nine have been included in the President’s budget request. Including anticipated expenditures during FY 2006, approximately $325 million will have been expended by Reclamation on these authorized projects by the end of the current fiscal year. It is estimated that as much as $340 million could still be required in order to complete the Federal funding for all 21 projects, and another $220 million in Federal funding could be needed to complete the remaining 11 authorized projects that have yet to receive funding. As we stated in testimony before this Committee on February 28, 2006, Title XVI projects have demonstrated that water recycling can be a viable water supply alternative in water short urban areas of the West. However, we have also noted that we believe the Title XVI program has outgrown its original purpose of demonstrating new technology, and that fundamental reform is needed to ensure that the program produces meaningful results for the current water needs of the West. We believe that before projects are authorized for construction, their appraisal and feasibility studies should be completed, reviewed, and approved by the Department and the Office of Management and Budget and submitted to Congress. We also believe that as projects progress through appraisal and, if warranted, feasibility study phases, they should be rated against ranking criteria that would help Reclamation, Congress and the Administration prioritize projects. Such ranking criteria would address whether the project actually alleviates significant water conflict or shortage and whether it would add water supply in one of the likely crisis areas that we have focused on in efforts like the Water 2025 program. Additionally, we believe there is a need to clarify the research and demonstration project provisions of Title XVI. Given tight budget constraints it is particularly important that the Administration and the Congress have all the information necessary to identify the projects most worthy of federal investment. We would welcome the opportunity to work with the Committee to develop mutually acceptable language. S. 3639 would direct the Secretary of the Interior to provide a technical and financial review of any water recycling project proposal submitted for consideration by a non-Federal project proponent. The purpose of the review would be to determine if the proposed project is “technically and financially viable.” If the Secretary finds that the project is “technically and financially viable,” the Secretary would then be required – with 180 days -- to submit his findings to Congress along with a recommendation as to whether the project should be authorized for construction. We support the bill sponsors’ intention to have the Administration conduct a formal review and assessment of a proposed project prior to acting on legislation to authorize additional Title XVI projects. If project authorizations cease to precede the formal review and assessment of a proposed project, this would be an important improvement to the manner in which the Title XVI program has been administered to date. However, we are concerned that this bill weakens the level of review that Title XVI projects will go through prior to the Secretary making a recommendation to Congress. S. 3639 only requires that a project proponent demonstrate that its project is “technically and financially viable.” The bill defines a project as “technically and financially viable” if it “meets generally acceptable engineering, public health, and environmental standards,” can obtain all necessary permits, and has a project sponsor that is capable of providing its share of the costs. Using the viability standard contained in this bill removes any requirement that the project be evaluated as to its technical and economic feasibility. A feasibility analysis, as described in Reclamation’s “Guidelines for Preparing, Reviewing, and Processing Water Reclamation and Reuse Project Proposals Under Title XVI of Public Law 102-575,” is necessary in order to develop accurate and well defined cost estimates. This level of cost definition is required to demonstrate the degree to which the water recycling project alternative is cost-effective relative to other water supply alternatives that could be implemented by the local project sponsor. It is also necessary to determine the economic benefits that are to be realized after project implementation. The Department believes that it would not be sustainable to make decisions on future project authorizations that would commit limited Federal funds to construct additional water recycling projects based on whether or not a project is simply capable of being constructed. The Department believes, as we think the sponsors of the bill do, that a new model of reviewing project proposals is needed, provided that a new model enhances the Administration and Congress’s ability to prioritize federal investment and does not exacerbate the problem of project authorizations preceding proper review and analysis. An important need that S. 3639 does not sufficiently address is in the area of project eligibility criteria and funding prioritization. S. 3639 would require the Secretary to review any and all project proposals that are received, rather than a select group of proposals for projects that meet minimum standards. In the testimony we presented during the February 28, 2006, hearing before this committee, we stated that any restructuring of the Title XVI program should aim to create a framework under which Title XVI projects will be screened to ensure they complement Reclamation’s mission, rather than diminishing Reclamation’s ongoing core programs. S. 3639 does not include such a framework. A meaningful reform bill must authorize Reclamation to use uniform assessment criteria to identify the best projects for funding. The practice of project authorization prior to the completion and approval of a study demonstrating that a project is technically and economically practical is a poor practice and has led to the backlog noted previously. The Department is also concerned about the provisions in S. 3639 that would eliminate the Secretary’s authority to identify and investigate new water recycling opportunities. Under the existing planning authorities of Title XVI, Reclamation has provided financial and technical assistance to local agencies to conduct over a dozen appraisal or feasibility studies for projects not yet authorized for construction. The cities of Austin and Brownsville, Texas, Santa Fe, New Mexico, and Desert Hot Springs, California, are just a few of the many communities that have benefited from the general planning authorities afforded Reclamation under Title XVI. The elimination of the Secretary’s authority to conduct such studies effectively reduces the Secretary’s range of involvement to that of simple participation in the project review process, and only if that participation is requested by a non-Federal project sponsor. Over the past several years, Administration witnesses have consistently testified against authorization of new Title XVI projects. This is not because we do not recognize the value of water reuse and recycling to local communities. Rather, this steadfast opposition has its origins in several issues that any reform legislation must address for this to be a viable, useful program that the Administration can support: Water reuse and recycling is fundamentally a responsibility of state and local interests. Federal involvement should be used to facilitate these projects in high priority areas where the federal funds can have the greatest impact on addressing our long-term water challenges. The program currently has inadequate controls on project development to allow a reviewer to ascertain whether the preferred alternative for a project is in the best interest of the taxpayer. A proliferation of authorized projects, without adequate criteria to judge them, makes it difficult or even impossible to assess how any one project can contribute to meeting Reclamation’s long-term goals. The Department, the Office of Management and Budget, and the Congress all need to have a consistent, useful suite of performance-oriented metrics to help prioritize projects for funding. The project development and review process must be workable for all parties – meaning that it must have clear standards, criteria, and processes for project sponsors, that Reclamation, the Department, and the Office of Management and Budget must have sufficient time and tools to evaluate proposed projects, and that Congress needs a clear assessment of the merits and recommendations regarding each project. Madam Chairwoman, the Department supports efforts to increase local water supplies in the West through the implementation of water recycling projects. However, the Department believes that Title XVI needs to be a focused program that will produce results consistent with Reclamation's mission of diversifying water supplies and proactively addressing water-related crises in the Reclamation States. We believe that the proposed legislation moves us in the direction of satisfactorily addressing the five issues highlighted above, but that the changes proposed by S. 3639 are not quite sufficient. However, we would be pleased to work with the Committee to reach common ground to improve Title XVI. Madam Chairwoman, this concludes my testimony. Thank you for the opportunity to comment on S. 3639. I would be happy to answer any questions at this time.