S.419 - Water and Power Bills

Statement of David Murillo, Deputy Commissioner, Operations

Bureau of Reclamation

U.S. Department of the Interior

Before the

Subcommittee on Water and Power

Committee on Energy and Natural Resources

U.S. Senate

S. 419 – Dry-Redwater Regional Water Authority System Act of 2011

May 19, 2011

Madam Chairman and Members of the Subcommittee, I am David Murillo, Deputy Commissioner for Operations at the Bureau of Reclamation (Reclamation). I am pleased to provide the views of the Department of the Interior (Department) on S. 419, legislation authorizing construction of the Dry-Redwater Regional Water Authority System (System) in the State of Montana. We recognize that changes have been made to the language of this bill since the last Congress, however, the Administration still has concerns with this bill that we want to work with Congress to address.

S. 419 would authorize the planning, design, and construction of the System in eastern Montana and would authorize appropriations of at least $115 million for the System. The bill would require that the Federal government provide up to 75 percent of the project's overall cost.

The Department concurs in the need for a safe and reliable water supply for the citizens of eastern Montana, and earlier this year, Reclamation began providing financial assistance to complete a feasibility study of this project in accordance with Title I of the Rural Water Supply Act of 2006 (Public Law 109-451), as described below. However, we have concerns with the legislation as currently written. In particular, the Department is concerned about the process issues raised by this legislation authorizing a project for construction before the feasibility study is complete even while other rural water projects are being studied, the potential strain on Reclamation's budget that could come about from this authorization, the cost share requirement proposed in the bill, and the proposed use of power from the Pick-Sloan Missouri Basin Program (P-SMBP) for non-irrigation purposes.

Of Reclamation's seven currently authorized rural water projects being constructed or funded at some level today, five are in Reclamation's Great Plains (GP) region and are currently being constructed in the Dakotas and Montana^[1]. All of these projects pre-date Public Law 109-451, which authorized the Secretary of the Interior to create a rural water supply program to address rural water needs in the 17 western States. Within the GP region, more than 224,926 people are presently being served by the six partially completed projects (approximately 45,860 on Indian reservations and 179,066 off reservations). The fiscal year (FY) 2012 rural water project request was $35.5 million. This includes $15.3 million for the operation and maintenance of tribal systems and $20.2 million for construction. In addition, the American Recovery and Reinvestment Act of 2009 provided approximately $232 million to these rural water projects. The remaining construction ceiling for these six projects totals approximately $1 billion. The Department of the Interior (Bureau of Reclamation) prioritizes funding for these ongoing authorized projects based on (1) the required O&M component; (2) projects nearest completion; and (3) projects that serve on-reservation needs.

In view of these existing authorizations, the Department is concerned about the non-Federal cost share for the System. S. 419 contemplates that the United States would fund 75 percent of the cost of constructing the System for the benefit of Montana citizens of Dawson, Garfield, McCone, Prairie, and Richland Counties, and North Dakota citizens of McKenzie County. While this has been the cost share level proposed in other rural water projects enacted into law, it represents the very maximum Federal cost share allowed under the Rural Water Supply Act of 2006, which includes a requirement for a Feasibility Report that includes an analysis of the sponsor's capability-to-pay and identifies an appropriate contribution by the local sponsors.

The Dry-Redwater Regional Water Authority (Authority) prepared a study that was accepted by Reclamation as an appraisal study in June 2010. The Authority then submitted a proposal to Reclamation for financial assistance to complete a feasibility study in accordance with Title I of the Rural Water Supply Act of 2006. Reclamation approved the request and provided cost-share funding in the amount of $120,500 in direct contributions. Reclamation also agreed to provide technical assistance valued at $119,500 using its own resources, resulting in a total Federal contribution of $240,000, which is 50 percent of the total study cost of $480,000. This cooperative agreement was executed in January 2011 and the feasibility study is scheduled for completion in September 2012. Reclamation will continue to work with the Authority to prepare the feasibility study and prepare a feasibility report to verify the accuracy of the cost estimates and provide information on what the sponsor's capability-to-pay would be which helps determine the appropriate non-Federal cost share.

Section 5 of S. 419 authorizes the delivery of 1.5 megawatts P-SMBP pumping power to be used and delivered between May 1 and October 31 for the benefit of this System at the firm power rate. Section 5(b)(2) of the bill requires that the System be operated on a “not-for-profit basis” in order to be eligible to receive power under those terms. Reclamation is not certain of the impact the bill's requirements could have on Western Area Power Administration's existing contractual power obligations.

In addition to those concerns mentioned above, we have yet to verify whether or not water rights issues associated with the System have been adequately addressed. Without an opportunity to thoroughly review the proposed System at feasibility study level, we are not in a position to verify that other technical issues do not also exist. We would like to suggest that the System sponsors continue working with Reclamation's GP Regional Office and the Montana Area Office to complete feasibility-level studies consistent with the Rural Water Supply Act of 2006.

That concludes my statement. I am pleased to answer any questions.