S. 685

Statement of Scott Cameron 
Acting Assistant Secretary – Water and Science
U.S. Department of the Interior
Before the
Committee on Energy and Natural Resources 
Water and Power Subcommittee
On 
S. 685, a bill to authorize the Dry-Redwater Regional Water Authority System and the Musselshell-Judith Rural Water System in the States of Montana and North Dakota, and for other purposes.
June 14, 2017

Chairman Flake, Ranking Member King, and members of the Subcommittee, I am Scott Cameron, Acting Assistant Secretary for Water and Science at the Department of the Interior.  Thank you for the opportunity to provide the views of the Department of the Interior (Department) on S. 685, the Clean Water for Rural Communities Act, which would authorize construction of the Dry­Redwater Regional Water Authority System and the Musselshell­Judith Rural Water System in the States of Montana and North Dakota.

In the 114th Congress, Reclamation provided testimony on S. 2902 and S. 1552, which contained language identical to S. 685. My testimony today will update Reclamation’s previous statements on these projects to include recent events; however, the Department’s position overall on funding has not changed from these earlier testimonies.

Like the sponsors of this legislation, the Department supports the goals of encouraging a vibrant rural economy and ensuring safe, reliable sources of drinking water in Montana and North Dakota. Rural water projects help build strong, secure communities and are important to supporting the livelihood of local economies.  Public Law 109­451, which expired September 30, 2016, authorized Reclamation to establish a Rural Water Supply Program to help rural communities and Tribes in the western United States analyze and develop options for meeting water supply needs through the completion of appraisal investigations and feasibility studies.

While the Department acknowledges the important functions rural water projects offer to communities across the West, we have concerns with S. 685 as currently written. We request the opportunity to work with the Committee to adequately address our concerns, as identified below.

The legislation authorizes construction of two separate projects and my statement will speak to each of those projects separately.

Dry­-Redwater

Section 4(a)(1) of S. 685 applies to the planning, design, and construction of the regional Dry­Redwater Rural Water Authority System in eastern Montana and a small service area in northwest North Dakota, and would authorize the Federal Government to provide up to 75 percent of the System’s overall construction cost.  Reclamation estimates that this authorization would amount to Federal appropriations of at least $200 million dollars.  The Department last testified before this Subcommittee on legislation related to the Dry­Redwater Project in May of 2016, and prior to that, in June 2015, May 2011, and July of 2009.  Since 2016, two things have occurred; the Dry­Redwater Regional Water Authority (Authority) changed their project plans from that provided in the initial study by adding the cities of Sidney and Glendive, Montana, to the Authority’s service area which changed the population served from 15,000 to over 26,500; and secondly, Reclamation’s authority to continue work on rural water appraisal and feasibilities studies under P.L. 109-451 expired.  Reclamation did not receive a feasibility study that was evaluated and determined to be economically feasible for the new project envisioned by the Authority.

The Department is concerned about language in the legislation authorizing a project for construction without a complete Feasibility Study.  Specifically, 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 Pick­Sloan Missouri Basin Program (P­SMBP) for non­irrigation purposes are a problematic issues.

In 2012, the Authority submitted a Feasibility Study to Reclamation for review.  Upon initial review of the Feasibility Study, Reclamation was unable to identify a technically viable water supply alternative that presented a National Economic Development (NED) plan with net positive benefits to the nation.  Reclamation informed the Authority that the Feasibility Study could not be supported as being financially or economically feasible under the requirements of Reclamation’s Rural Water Supply Program.  Consequently, there are significant review findings and recommendations that must be addressed to bring the Feasibility Study up to Reclamation’s standards.  Since project costs have not been fully developed by the Sponsor and reviewed by Reclamation, there is also the potential for this project to be financially unsustainable for the project sponsors.

Because of the importance of this issue, a Reclamation Design, Cost Estimating, and Construction (DEC) review further evaluated the Feasibility Study in 2012 in order to provide an independent analysis.  The estimated cost to address the DEC Report Findings and Recommendations in 2012 was in excess of $5.5 million.  Neither Reclamation nor the Authority had sufficient funding to revise the Feasibility Study to address the DEC Report Findings.  The authority for Reclamation to further review the feasibility study expired in 2016.  In order to maintain their original service area and related project benefits, the Authority ruled out a scaled down approach.

As a result of this decision, Reclamation entered into a Memorandum of Understanding (MOU) with the Authority on April 27, 2015, with the objective of completing a summary report that documented the current status of the draft Feasibility Study and identified the additional level of effort needed to revise the Feasibility Study technically in order to meet the requirements of Reclamation’s Rural Water Supply Program.  However, before a final summary report could be completed, Reclamation’s authority under the program expired and Reclamation was required to generate a Feasibility Study Concluding Report (Concluding Report) since the Feasibility Study was not completed.  The Concluding Report was completed in September 2016 and provided an overview of the Feasibility Study up to the point of concluding it, and identified the reasons for ending the Feasibility Study.  The Concluding Report provided findings that primarily due to the economics of the proposed alternative and the incomplete level of the Feasibility Study, Reclamation is not in a position to support the project as financially viable or able to verify that the total project cost estimate is economically sound.

The Department is also concerned about the non­Federal cost share for the System.  As stated above, S. 685 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, 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 maximum Federal cost share previously allowed under Title I of the Rural Water Supply Act of 2006 (PL 109­451, now expired), which included a requirement for a Feasibility Report that comprised an analysis of the sponsor’s capability­to­pay and identified an appropriate contribution by the local sponsors.

Section 5 of S. 685 authorizes the delivery of 1.5 megawatts of P­SMBP 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)(A) of the bill requires that the System be operated on a “not­for­profit 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.

Reclamation’s authority to continue work on rural water appraisal and feasibilities studies has expired.  At this time, there is no general programmatic authority for continued work by Reclamation on rural water appraisal and feasibility studies.  Reclamation’s review of Dry--Redwater Authority’s proposed system was conducted under the authority of the Rural Water Supply Act of 2006 (Title I of Public Law 109-451) and this authority expired on September 30, 2016.  Reclamation generated a Concluding Report which provided an overview of the Feasibility Study up to the point of concluding it and identified the reasons for ending the study.

If legislative authority is granted, we suggest System sponsors work with Reclamation to evaluate the System for scale and economic viability in an effort to refine the National Economic Development accounting such that the ratio of total benefits exceeds costs.  The System should meet appropriate guidelines and be updated to include new infrastructure required to accommodate the large increase in population served.  S.685 allows the Authority to acquire property and existing systems.  Details of these systems should be fully identified and incorporated into the new evaluation and the evaluation should incorporate recommendations from the DEC review or, if necessary, require a new DEC review be conducted.  It should address all federal environmental compliance activities.  There are substantial costs believed to be in the millions of dollars associated with these efforts that are outside of any costs projections previously considered.  We also recommend that they work with the Western Area Power Administration and their contractors on the issues related to the System’s pumping power needs.

Musselshell-­Judith

Section 4(a)(2) of S. 685 would authorize the planning, design, and construction of the Musselshell­Judith Rural Water System in central Montana and would authorize appropriations of 75 percent of total project costs.  Since the total estimated construction cost of the project is $87,102,000, Reclamation estimates that the total Federal contribution of 75 percent would equate to $65,327,000 (2014 dollars).  While a 75 percent cost share level has been proposed in other rural water projects enacted into law, this represents the maximum Federal cost share previously allowed under the Rural Water Supply Act of 2006.

In 2015, the Central Montana Rural Water Authority’s (Authority) Musselshell­Judith Rural Water System Feasibility Study (Feasibility Study) was submitted to Reclamation for technical review under Public Law 109­451.  The Department  found the proposed project to be feasible and to meet the broad criteria of the program, however, the Department is concerned about our ability to fund even currently authorized rural water projects, and does not want to unreasonably raise expectations that new authorized projects would receive the desired federal funding.

Common ­- Both Water Systems

Section 7(b) of S.685 addresses the cost indexing for the authorization of appropriations.  As previously testified, Reclamation is not aware of a specific rationale for the differing indexing dates prescribed in the legislation.  For the Dry­Redwater System, appropriations are to be indexed to January 1, 2008.  For the Musselshell­Judith, the appropriations are to be indexed to November 1, 2014.

Authorized rural water projects compete with a number of priorities within Reclamation’s Budget, including aging infrastructure, Indian water rights settlements, environmental compliance, restoration actions, developing sustainable water supply strategies, and other priorities intended to address future water and energy related challenges.

The Department has concerns about adding to the backlog of Reclamation’s authorized rural water projects seeking Federal construction funding.  Discretionary rural water funding has enabled Reclamation to make progress in promoting certainty, sustainability, and resiliency in support of basic drinking water needs of rural western communities.  However, Reclamation’s ability to make Federal investments that match on­the­ground capabilities has its limitations.  Of Reclamation’s six currently authorized rural water projects under construction or funded at some level today, all of the projects pre­date Title I of the Rural Water Supply Act of 2006 (now expired).  Authorizing additional rural water projects may delay rural water projects that are already under construction.

Conclusion

The Department recognizes that the people who would be served by S. 685 have legitimate needs for better quality drinking water.  We are concerned, given the past history and future prospects of funding for the rural water program, not to raise unreasonable expectations for future federal funding should this bill become law.

That concludes my written statement.  I am pleased to answer questions at the appropriate time