To direct the Secretary of the Interior to allow for prepayment of repayment obligations under Repayment Contracts between the United States and the Weber Basin Water Conservancy District
Deputy Commissioner for External and Intergovernmental Affairs
Bureau of Reclamation
U.S. Department of the Interior
Committee on Natural Resources
Subcommittee on Water, Power and Oceans
U.S. House of Representatives
Authorizing Prepayment of Weber Basin Project Repayment Obligations
June 23, 2016
Chairman Fleming and members of the Subcommittee, I am Dionne Thompson, Deputy Commissioner for External and Intergovernmental Affairs for the Bureau of Reclamation (Reclamation) at the U.S. Department of the Interior (Department). Thank you for the opportunity to provide the views of the Department on HR 5468, which would authorize prepayment of the outstanding irrigation and municipal and industrial repayment obligations associated with the Weber Basin Project in Utah. The Department supports this bill.
The Weber Basin Project
The Weber Basin Project is one of 14 Reclamation projects in Utah. It is also one of Reclamation’s more complex projects in the state. It was authorized in 1949 and was designed to operate conjunctively with three earlier Reclamation projects—the Weber River Project, the Ogden River Project and the Provo River Project. The project is comprised of seven storage dams, three diversion dams, 11 pumping plants, two power plants, 122 miles of canals, three miles of tunnels, 143 miles of pipelines, and 35 miles of drains. The project was designed to provide irrigation water to over 1,000 farms (potentially irrigating up to 42,000 acres) and to provide municipal and industrial water to well over 500,000 people.
In accordance with Reclamation law, Reclamation contracted with the Weber Basin Water Conservancy District to operate and maintain the project. Over the years, Reclamation and the District have developed a cooperative and collaborative relationship.
Because the purpose of HR 5468 is to authorize the District to prepay its repayment obligation to the United States, it is important to review Reclamation law with respect to repayment.
Under Reclamation law, Reclamation contracts with water users organizations that receive irrigation and municipal and industrial water from Reclamation projects. These organizations may be water conservancy districts, water users associations, or irrigation companies. Under these contracts, a water users organization agrees to repay to the United States all or part of the cost of constructing the facilities that comprise a Reclamation project. Generally, a water users organization is only obligated to repay that portion of construction costs allocated to irrigation and municipal and industrial purposes; costs allocated to fish and wildlife functions and certain other purposes are not reimbursed by water users under Reclamation law. Reclamation law typically authorizes repayment to be spread over 40 or 50 years—with municipal and industrial users repaying with interest, and irrigation users repaying their share at no interest per the law.
Prepayment, as would be authorized by HR 5468, is early payment that takes into account the time value of money. Under prepayment, a water user organization’s stream of future payments is discounted based on the application of good economic practice. In other words, under prepayment the United States receives the present value of the stream of payments. Under prepayment, the United States is kept whole and the amount paid by the water users organization today is the economic equivalent of paying the stream of payments over time.
Under Reclamation law, there is no general authorization for prepayment of irrigation or municipal and industrial payments; prepayment requires specific legislative authority. Prepayment can be an effective financial management tool, allowing a water users organization to eliminate long-term debt in order to restructure its financial assets. The purpose of HR 5468 is to secure for the District the benefits associated with operating a paid-out Reclamation project including flexibility in converting water from irrigation to municipal and industrial use and relief from compliance with the Reclamation Reform Act (RRA).
Reclamation Reform Act Compliance
The Reclamation Reform Act of 1982 (P.L. 97-293) raised the acreage limitation on lands irrigated with water supplied by Reclamation and established and required full-cost rates for land receiving water above the acreage limit. In the early years of RRA, administration of the the law was described as burdensome for Reclamation and water users, but today compliance is substantially less costly and much more efficient. However, the Weber Basin Project is an exception, making HR 5468 desirable for the project’s water users.
From its inception, the Weber Basin Project provided irrigation water to small tracts through the Project’s secondary irrigation systems. Implementation of the requirements of RRA for some of these small tracts has led to businesses that irrigate small plots of purely decorative landscaping being required to file RRA forms and be subject to penalties for failing to do so. In some cases, penalties have been levied and large amounts of paperwork have been required in order to ensure compliance with the RRA. To avoid the complications associated with RRA administration for these small parcels, the District is seeking prepayment as a means of reducing their compliance burden. This is possible because paid-out Reclamation projects are not subject to RRA.
Conversion from Irrigation to Municipal and Industrial Use
Water users organizations associated with paid-out projects also have flexibility in how to allocate the use and pricing of Project water that they may choose to convert from irrigation to municipal and industrial use. The District may use that flexibility in conversion after prepayment. Prepayment itself is an administrative action without environmental impacts and would likely require minimal environmental compliance under the National Environmental Policy Act (NEPA). Reclamation completed NEPA compliance for conversion of Weber Basin Project water some years ago and capacity for additional conversion remains under that Environmental Impact Statement and Record of Decision. Conversion of beyond that remaining amount may require additional NEPA, Endangered Species Act, and other environmental and cultural resource compliance, however those issues are not a part of this analysis of HR 5468.
HR 5468 refers to Section 210 of the Central Utah Project Completion Act of 1992. Section 210 authorized the Central Utah Water Conservancy District to prepay municipal and industrial obligations associated with the Bonneville Unit of the Central Utah Project. As a result, the Department has, over the years, successfully completed several prepayments. Based upon this experience, Reclamation believes that the language in Section 1 of HR 5468 requiring that the early repayment be "under terms and conditions similar to those used in implementing the prepayment provisions in section 210 of the Central Utah Project Completion Act (Public Law 102-575), as amended, for prepayment of Central Utah Project, Bonneville Unit repayment obligations" is intended to require that the United States follow the Bonneville Unit precedent and, in doing so, keeping the United States whole. We interpret this to mean that the Bureau of Reclamation would collect the present value of the whole amount that would be due without early repayment.
As a result, the Department supports HR 5468. This concludes my statement. I would be pleased to answer questions at the appropriate time.