S.1225 - Water and Power Bills

Statement of Grayford F. Payne, Deputy Commissioner for Policy,

Administration and Budget

Bureau of Reclamation

U.S. Department of Interior

Before the

Committee on Energy and Natural Resources

Subcommittee on Water and Power

United States Senate

S. 1225 - Fort Sumner Project Title Conveyance Act

June 23, 2011

Madam Chairman and members of the Subcommittee, I am Grayford Payne, Deputy Commissioner for Policy, Administration and Budget at the Bureau of Reclamation (Reclamation). I am pleased to provide the views of the Department of the Interior (Department) regarding S. 1225, which would authorize the Secretary of the Interior to convey title to all of the works of the Fort Sumner Project (including the diversion dam, easements, ditches, laterals, canals, drains, and other rights) to the Fort Sumner Irrigation District (FSID).

Reclamation was able to work from draft versions of this bill to formulate testimony in the days leading up to this hearing. Because the language has only recently been finalized for introduction this past week as S. 1225, this statement will speak to the major provisions, while some of the bill's language is still being analyzed. At this time, the Department believes consideration or enactment of S. 1225 is premature.

The FSID has been a good partner in assisting Reclamation with difficult Endangered Species Act (ESA) issues on the Pecos River. Although the Department supports the potential transfer of this facility in the future, it cannot presently support this legislation as it is written due to many unresolved issues involved in such a transfer, as described below. Reclamation and the FSID are in the midst of a collaborative process to ensure that we identify and address all of the operational, fiscal, environmental, and other issues that arise. However, at this time, that process is not complete and thus title transfer of these facilities should not move forward until completion of that process.

Title Transfer Process

Over the past ten plus years, the Bureau of Reclamation has had an opportunity to work on a number of title transfer proposals. It has been our experience that the more on-the-ground coordination and work we accomplish before the legislative process, and the more issues that we can resolve in advance, the faster the legislative process will go and as importantly, the faster we can successfully implement the legislation to get the lands and facilities transferred. While some have thought that moving to the legislative phase quickly would speed up the process, it has been our experience that we are more effective when we scope out, identify, and reach agreement on all issues prior to initiating the legislative process.

In this case, while we have taken some steps toward that collaborative process, we have several steps to go and it is our hope that Reclamation, together with the FSID and other stakeholders (such as the State of New Mexico and potentially other water users in the Pecos River system) can work through that process.

Currently, there are two Reclamation projects on the Pecos River: the Carlsbad and Fort Sumner Projects. The Fort Sumner Project was developed by private interests at the turn of the last century. It was reconstructed and rehabilitated by Reclamation in the 1950s. Reclamation and the FSID executed a contract in 1948 to provide for the repayment of construction costs to rehabilitate the project. The FSID has an annual repayment obligation of about $54,500 with an outstanding balance of approximately $652,000.

The FSID holds a senior water right for not more than 100 cubic feet per second from the natural flow of the Pecos River. Reclamation must bypass the FSID's water through Sumner Reservoir prior to storing water for the Carlsbad Project. Over the past ten years, Reclamation has consulted with the U.S. Fish and Wildlife Service (Service) to ensure that Federal actions are not jeopardizing the existence of the Pecos bluntnose shiner or adversely modifying its critical habitat located below FSID's diversion dam. In these consultations, Reclamation has committed to the Service to keep the Pecos River from becoming intermittent. A significant cause of drying on the Pecos is due to the FSID diverting its senior water right. The only way Reclamation has been able to keep the Pecos River flowing is by purchasing water from willing sellers and by paying the FSID not to divert water through a forbearance agreement.

In August 2009, Reclamation and FSID entered into a mutually beneficial agreement whereby FSID would forbear the diversion of up to 2,500 acre-feet of water annually for ten years when they would otherwise be in priority. Instead, this water goes into Sumner Lake reservoir where it is stored and delivered for Reclamation to prevent intermittency of flows on the Pecos River in compliance with the 2006 biological opinion. Reclamation pays FSID $60,000 annually plus $20 per acre-foot for the water. In addition to the forbearance of this water, FSID agreed to pursue ESA Section 10 consultation with the Service and Reclamation agreed to assist them in this process. Also in this agreement, FSID indicated their desire to take title to the facilities and Reclamation agreed to work with them on that process. The forbearance agreement further provides that the annual payments of $60,000 from Reclamation to FSID will cease upon passage of title transfer legislation. To date, this has been a mutually beneficial agreement. The forbearance water has afforded Reclamation with an additional tool to meet the biological opinion to ensure that the Pecos River does not run dry.

Therefore, initiating title transfer and the completion of the Section 10 process with the Service are closely interconnected processes. It is the Department's view that we cannot complete the title transfer without completing the Section 10 process.

As currently drafted, S. 1225 makes limited reference to the scoring or valuation issues that are important issues in title transfers. Section 5 requires the forgiveness of FSID's repayment obligation to the United States that was agreed upon by contract when the construction and rehabilitation of the facilities were undertaken. Consequently, as currently crafted, this would result in a financial loss to the U.S. Treasury. We note that this would trigger the need for consideration of fiscal impacts under the Statutory Pay-As-You-Go Act of 2010.

While Reclamation and the FSID have had some initial discussions about how to address this issue in an equitable manner, there has been no resolution and a significant amount of work needs to be done on this issue. One of the key unresolved issues is the terms of the ESA Section 10 agreement to be developed between FSID and the U.S. Fish and Wildlife Service. This agreement will have a bearing on the valuation, whether we would need to have a forbearance agreement after the title transfer, and whether we would need to buy water to meet the current ESA obligations on the Pecos River.

Because Reclamation has not yet had the opportunity to complete a public process to determine whether other interested citizens of New Mexico have concerns or interests in the proposal, we cannot with any certainty say that the title transfer proposed by S. 1225 would have either negative or positive impacts on other stakeholders. As part of the National Environmental Policy Act process, Reclamation would typically undertake a public scoping or outreach process to solicit the views of the public. It is our hope that we will have the opportunity to complete that process before the legislation is enacted so that Reclamation and FSID can collaboratively address any concerns up front or in the terms and conditions of the title transfer.

Before agreeing to title transfer, the FSID and the Service need to enter into a habitat conservation plan under Section 10 of the ESA. Reclamation can assist in this process and facilitate a plan and an agreement between the FSID and Service; but after completing Section 10 compliance, Reclamation will need to re-consult with the Service on its continued operations on the Pecos. This and other environmental compliance measures need to be completed before finalizing title transfer.

Lastly, Reclamation is unsure of the intent behind the language in Section 7 which references "future benefits from the Reclamation Fund." We are interested in discussing this language further with the Subcommittee.

Currently, while the Department views the Fort Sumner Project as a good candidate for title transfer, legislation should await completion of the crucial and interconnected steps summarized above. To make determinations of the fiscal impact to the United States, the benefit to the public, and the responsibilities for environmental compliance, FSID and the Service, with Reclamation's support, need to complete the process outlined in Section 10 of the ESA before title transfer occurs. Once we complete that process, we will have a better understanding of the necessary and appropriate terms and conditions associated with this title transfer. However, at this time, the Department believes this legislation is premature and would raise concerns about impacts on the U.S. Treasury as discussed above.

That concludes my written statement. I am pleased to respond to answer questions the Subcommittee may have.

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