To authorize the construction of the Arkansas Valley Conduit in the Senate of Colorado Statement for the RecordBureau of ReclamationU.S. Department of the InteriorBefore theSubcommittee on Water and PowerCommittee on Natural ResourcesU.S. House of RepresentativesH.R. 317 March 13, 2008 Madam Chairwoman, the U.S. Department of the Interior appreciates this opportunity to provide its views on H.R. 317, legislation to authorize the construction of the Arkansas Valley Conduit in the State of Colorado. The Administration cannot support H.R. 317. The Conduit is an authorized feature of the 1962 Frying-Arkansas Project (Fry-Ark Project) but was never constructed. 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 a point near Lamar, Colorado. The Lower Arkansas River Basin is comprised of rural communities, with the largest town, Lamar, having a population of approximately 8,600. The population anticipated to be served by the Conduit is approximately 68,000.This proposed rural water project would tap into an existing reservoir and provide municipal, residential, and industrial water via 160 miles of pipeline to a series of small towns and surrounding rural areas; one option would also include a water treatment plant. Total project costs are roughly estimated at between $265 million and $340 million, depending on the particular project features. While the project is technically do-able, the project sponsors have not identified where they would get all of the water identified as needed for the project, and the financial capabilities of the project sponsors are unclear. The Fryingpan-Arkansas Project Act (P.L. 87-590) required that municipal water supply works either be constructed by communities themselves or, if infeasible, by the Secretary, with repayment of actual costs and interest within 50 years. During development of the original 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. 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 need for 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. In the last few sessions of Congress, Reclamation has provided testimony on several different versions of this legislation, and H.R. 317 is identical to legislation that was introduced in the 109th Congress. While Reclamation notes that efforts have been made to address a number of the concerns raised about prior versions of this legislation, including clarification that the cost for operation, maintenance and replacement of the Conduit will not be borne by the Federal Government, the Administration does not support this legislation. The current bill, as introduced, again contains a Federal and a Non-Federal cost share. The legislation states that the Federal share of total costs of the planning, design, and construction of the Conduit shall be 80 percent. This is contrary to the original Fry-Ark authorizing legislation, general Reclamation law, and current policy, in that generally municipal and industrial beneficiaries pay 100 percent, plus interest, of M&I project costs. The legislation as drafted is also inconsistent with the 35 percent local cost share set forth in the Administration's proposed rural water legislation that was transmitted to Congress on March 3, 2004. For these reasons, the Administration does not support the bill. At the request of Otero County Water Works Committee, and with funding provided in fiscal years 2003 and 2004 appropriations bills, Reclamation prepared a Re-evaluation Statement on the feasibility and viability of the Conduit. The Statement assesses if the construction of the Conduit would be responsive to current needs and are consistent with the Principles and Guidelines; and the National Environmental Policy Act. The Re-evaluation statement contains updated implementation costs for construction and O&M, and provides an assessment of the Conduit sponsors' ability to pay. The final Statement incorporates comments received from direct beneficiaries and includes a revised draft cost estimate, which compares favorably with the cost estimate prepared by Black & Veatch, under a contract with Conduit proponents. In addition, Reclamation has a concern about language in the current legislation requiring the Federal Government to pay the entire cost of fundamental design changes conducted at the request of any person other than the lead non-Federal entity. This language leaves open the possibility that design changes recommended by the direct beneficiaries become the sole financial responsibility of the Federal Government. This provision is not in the best interest of the taxpayer. Furthermore, we are concerned about the implications this has to restrict the ability of Reclamation's engineers to exercise their professional judgment in designing projects. The legislation as written could create undue pressure to avoid changes to the original project, even if those changes would be in the best public interest. I would like to note that stakeholders have been engaged in discussions with our regional office on alternative ways to accomplish the goals of this legislation. Reclamation is open to continuing this dialogue with the various stakeholder groups in the hope that an approach can be identified that is consistent with Reclamation policy as well as regional water management goals. In conclusion, Madam Chairwoman, the Administration cannot support a bill with a Federal cost share that is inconsistent with Fry-Ark legislation, general Reclamation law, and current policy. There are also many uncertainties regarding project water supply and the financial capability of the project sponsors to go forward with project authorization. I would like to emphasize that the existing Fry-Ark Project authorization appropriately address the responsibility of the beneficiaries to pay for associated reimbursable costs. Finally, if authorized, this project would need to compete with other, ongoing rural water projects for funds. Although we cannot support this bill, the Administration recognizes the water quality issues facing the Arkansas River Valley and we are open to working with the project sponsors and members of the Committee to explore other options. Thank you, Madam Chairwoman, for providing the Department with the opportunity to present this statement.