Testimony of Dave Sabo Bureau of Reclamation, Upper Colorado Region U.S. Department of the Interior Before the Senate Energy and Natural Resources Committee On the Eastern New Mexico Rural Water Project and the implementation of PL 109-451 August 14, 2007 Mr. Chairman and Members of the Committee, my name is Dave Sabo, and I am the Assistant Regional Director of the Bureau of Reclamation's Upper Colorado Region. I am pleased to be here today on behalf of the Department of the Interior to discuss both the status of the Eastern New Mexico Rural Water Project, and separately, Reclamation's implementation of Public Law 109-451, the Rural Water Supply Act of 2006. Reclamation has been working with the state of New Mexico and local parties on developing concepts for the Eastern New Mexico Rural Water Project since Congress authorized feasibility studies in 1966. Reclamation has participated in a number of studies on this evolving project over the years. Since 1998, Congress has provided $1,763,000 for planning and technical assistance, of which more than $1.2 million has been transferred directly to the City of Clovis, acting as the fiscal agent for the local communities, for work on the project. The proposed Eastern New Mexico Rural Water Project would provide a sustainable water supply for the eastern New Mexico municipalities of Clovis, Elida, Grady, Melrose, Portales, and Texico, as well as Curry and Roosevelt counties and Cannon Air Force Base. The area currently depends entirely on a groundwater source that is diminishing in both quantity and quality. The currently envisioned project would supply 16,400 acre-feet of water per year through a pipeline from Ute Reservoir, which was built by the State of New Mexico in 1963 as a water supply source for eastern New Mexico In 2004, Reclamation testified on legislation (HR 4623) to authorize construction of the Eastern New Mexico Rural Water Supply Project. During that hearing, Reclamation cited concerns with the adequacy of the Conceptual Design Report to support authorization and identified some critical questions that needed to be answered before construction should proceed, such as whether all economically viable alternatives had been considered, whether design and construction costs were consistent with comparable projects, and whether the communities that would be sharing project costs had an accurate estimate of how much those costs might be. Reclamation also expressed concerns with the proposed cost sharing formula, which assumed an 80% federal share for construction of the project. Since that time, a Reclamation “Oversight Committee” has been assisting the Eastern New Mexico Rural Water Authority (Authority) and their consultants in developing a more complete and thorough feasibility report. A “Preliminary Engineering Report” prepared for the Authority by their consultant that was submitted in December 2006 represents significant progress toward a feasibility-level analysis. Reclamation is continuing to work with the Authority as they further develop the proposed project's design, cost estimates, financing plan, and environmental analysis. The Authority is working with their consultant to take the design and associated cost estimate to the feasibility level. Feasibility-level cost estimates are based on information and data which is sufficient to permit the preparation of preliminary layouts and designs used to estimate each kind, type, or class of material, equipment, and labor necessary to complete a project. A second consultant has been selected by the Authority to work on National Environmental Policy Act compliance. A third consultant for the Authority is working on a detailed plan for financing the project. The most recent cost estimate for construction, prepared last year by the Authority's consultant, is $436 million, with an estimated annual operation and maintenance cost of $8.2 million. The local communities are planning to pay about 10% of capital costs with state and federal shares being 15% and 75% respectively. The local communities would pay 100% of the operation, maintenance, and replacement costs. Because this hearing is not focused on specific project-authorization legislation, Reclamation cannot provide a statement on the relative merits of the project from a policy standpoint. However, we are working with the Authority and the State to bring the project to a point where a feasibility determination is possible. At this point, I would like to comment and, as requested by the Committee, provide a status report on Reclamation's implementation of Title I of Public Law 109-451, the Rural Water Supply Act of 2006, and briefly consider how this new program may be applicable to the Eastern New Mexico Rural Water Project. In December 2006, Congress and the President enacted the Rural Water Supply Act of 2006. Title I authorizes the Secretary of the Interior to create a rural water supply program (Program) to address rural water needs in the 17 Western United States. We are enthusiastic about this Program, as its intent is to enable Reclamation to work cooperatively with rural communities across the West in a consistent manner to identify rural water supply needs and cost effective options for addressing that need. Prior to the enactment of legislation authorizing this Program, Reclamation has had no authority to get involved -- early in the process -- in the analysis and development of solutions for meeting the potable water supply needs of rural communities in the West. To summarize, Title I of the Act requires Reclamation to: (1) develop programmatic criteria for prioritizing requests for assistance under the Program and for determining eligibility for non-Federal entities to participate in the Program; (2) develop criteria for what must be included in both the appraisal studies and the feasibility studies that are to be completed under the Program, in terms of data, alternatives, and level of analysis; (3) complete an assessment of the rural water programs that exist in other agencies to ensure that we are filling an unmet niche and to ensure that we coordinate and leverage resources, as well as evaluate the status of rural water projects that are already authorized; and (4) complete an annual report of Reclamation's staff costs for carrying out the Act. We expect there to be great interest in this program and given the budget realities, we will not be able to get involved in every worthy project. Furthermore, it is important to note that the Act does not authorize project construction. Instead,the focus of the Program is on ensuring thorough analysis of rural water needs and options through the completion of appraisal and feasibility studies that meet program criteria. At the end of the process, Reclamation is required to submit a feasibility study to Congress. In the report that accompanies each study, the Secretary (through Reclamation) will make a recommendation to Congress as to whether the project is technically and economically feasible, and whether it is in the Federal interest. The report must make a recommendation on whether Congress should authorize Federal involvement in construction of the rural water supply project that is identified, as well as the appropriate non-Federal share of construction costs, which must be at least 25% of the total construction costs for the proposed project and determined based on an analysis of the non-Federal entities' capability-to-pay. Before the Rural Water Program can be implemented, P.L. 109-451 requires that the Secretary (through Reclamation) promulgate and publish the program's rules and criteria in the Federal Register. This is being done through a rulemaking process in accordance with the Administrative Procedure Act (APA) which provides opportunities for public review, involvement and comment. A team comprised of Reclamation employees from all five regions and the Commissioner's office is leading the effort to develop the rules and criteria for the rural water program. Because of the Act's specific timelines and deadlines for the development of the criteria, Reclamation has set an ambitious time-frame for the rulemaking. We expect to publish proposed and then final Criteria in the Federal Register in the next year. Reclamation is aware of significant interest on the part of rural communities in the West in this program. We have held conversations with various stakeholder groups and plan to hold dialogues with Native American Tribes. We will continue that outreach and dialogue throughout the process of implementing this new program. As I stated earlier, we are enthusiastic about this program, which will provide a clearly defined process for Reclamation and rural communities throughout the West to work together to identify options for meeting potable water supply needs in a technically feasible, environmentally responsible, and cost effective manner. P.L. 109-451 gives Reclamation authority to review, evaluate, and make recommendations to the Congress regarding the feasibility of proposed rural water projects such as the Eastern New Mexico Rural Water Project. With all of this work underway, we look forward to finalizing the relevant rules and criteria that will underlie this program, and working closely with the large base of stakeholders on implementation. Thank you for the opportunity to appear today. This concludes my statement, and I am happy to answer any questions the Committee may have.