S 1365 - 6.18.15

Statement of
Dionne Thompson

Deputy Commissioner for External and Intergovernmental Affairs

Bureau of Reclamation

U.S. Department of the Interior

Before the

Committee on Energy and Natural Resources

Subcommittee on Water and Power

United States Senate

on S. 1365

A Bill to authorize the Secretary of the interior to use designated funding to pay for Construction of authorized rural water projects, and for other purposes

June 18, 2015

Chairman and Members of the Subcommittee, I am Dionne Thompson, Deputy Commissioner for External and Intergovernmental Affairs at the Bureau of Reclamation (Reclamation). I am pleased to be here to provide the views of the Department of the Interior (Department) on S. 1365, a bill to authorize the Secretary of the Interior to use designated funding to pay for construction of authorized rural water projects and for implementation of Indian water rights settlements. My statement today will draw upon testimony delivered before this Committee regarding S. 715 in the 113^th Congress and S. 3385 during the 112th Congress.

Like the sponsors of the legislation being considered today, the Department supports the goals of encouraging vibrant rural economies and ensuring safe, reliable sources of drinking water for rural residents. Rural water projects help to build strong, secure rural communities and are important to our non-federal sponsors, which is why the President's FY 2016 Budget includes $36.6 million for Reclamation's rural water projects. Likewise, the importance of rural water has led Congress in recent years to increase appropriations for the construction of authorized projects. Since 2012, approximately $88 million in additional appropriations have been included for rural water construction projects. The Administration also recognizes that water is a sacred and valuable resource for Indian people and therefore has reaffirmed the Federal Government's commitment to addressing the water needs of Native American communities through Indian water rights settlements.

The Department has a solid history of supporting Reclamation's rural water program, allocating almost $450 million of funding between FY 2010 and FY 2015 to construct, operate, and maintain authorized rural water projects. This is in addition to $232 million provided for these projects in the American Recovery and Reinvestment Act (Recovery Act). Still, as important as the rural water program is, it must compete with a long list of other priorities within the Budget, including aging infrastructure, environmental compliance and restoration actions, and other activities needed to address future water- and energy-related needs, including the shifting challenges associated with the effects of climate change. Notwithstanding the importance of rural water projects, current budgetary constraints have limited the ability to make federal investments that match on-the-ground capabilities.

Despite such constraints Reclamation has worked diligently to promote sustainability and resiliency for water users in the West and to support the basic drinking water needs of rural communities – tribal and nontribal – as directed by the Congress.

S. 1365 would create the Reclamation Rural Water Construction and Settlement Implementation Fund. In contrast to S. 715 and S. 3385 from the previous two Congresses, which would have established a single account receiving $80 million annually for 20 years to address rural water needs, S. 1365 would establish two accounts with deposits totaling $115 million annually for 20 years.

In the first account, S. 1365 aims to provide a constant level of mandatory funding to support the construction of authorized rural water projects to deliver water to smaller, isolated communities. Similarly, the second account would be structured to provide a constant level of mandatory funds to underwrite implementation of authorized Indian water rights settlements, including planning, design and construction of water projects.

Regarding the first account, it is the Department's belief that federal investments in such projects must recognize the current fiscal constraints and the need to make tough choices in prioritizing those investments. The Administration supports the goals embodied by S. 1365 of advancing the economic security of Americans living in rural areas and on tribal lands. Constructing basic water infrastructure projects will not only help to provide the economic and health benefits associated with clean, reliable, drinking water systems that many Americans take for granted, but it would also assist in creating jobs in the short-term through ongoing construction,but the Administration supports discretionary funding for these projects.

Since the 1980s, Congress has authorized Reclamation to undertake the design and construction of specific projects intended to deliver potable water supplies to rural communities located in North Dakota, South Dakota, Montana, New Mexico and the non-Reclamation states of Minnesota and Iowa. These authorized projects exist in communities that have long experienced urgent needs for water due to poor quality of the existing supply or the lack of a secure, reliable supply. For example, in rural Montana, some communities have, from time-to-time, been subject to “boil water” orders due to the unsafe conditions of the existing drinking water supplies. In Eastern New Mexico, the communities currently rely on the diminishing Ogallala Aquifer and the current drinking water systems are projected to be depleted within 40 years. The rural water supply projects authorized for Reclamation's involvement provide a resource to these rural communities, and the Congress has authorized federal assistance to meet those needs.

In 2006, the Rural Water Supply Act (P.L. 109-451) authorized Reclamation to establish a program to work with rural communities – including tribes – in the 17 Western States to assess rural water supply needs and conduct appraisal and feasibility studies without individual acts of Congress. Pursuant to the Rural Water Supply Act, Reclamation created a program to enable coordinated examination of the various options to address rural communities' water supply needs through a cost-effective, priority-based process.

In addition to authorizing appraisal investigations and feasibility studies, Section 104 of the Rural Water Supply Act required that the Secretary of the Interior – in consultation with the Secretary of Agriculture, the Administrator of the Environmental Protection Agency, the Director of the Indian Health Service, the Secretary of Housing and Urban Development and the Secretary of the Army – develop a comprehensive assessment of the status of the existing, authorized rural water projects. Section 104 also directed Reclamation to describe its plans for completing the design and construction of the authorized rural water projects.

In response to Section 104, Reclamation conducted a review and, in 2014, issued a report titled “Assessment of Reclamation's Rural Water Activities and Other Federal Programs that Provide Support on Potable Water Supplies to Rural Water Communities in the Western United States“ which is posted on Reclamation's website (www.usbr.gov/ruralwater/docs/Rural-Water-Assessment-Report-and-Funding.pdf). It should be noted that the assessment was open to public comment and that the comments – from rural water project sponsors, water districts, Indian Tribes, and other interested parties – were carefully reviewed and resulted in modifications to the assessment and the criteria used to allocate project funding.

In addition to providing a report on the status of the existing authorized rural water projects, the assessment report describes how Reclamation's Rural Water Supply Program will be carried out and coordinated with other Federal programs that support the development and management of water supplies in rural communities in the western states while maximizing efficiency of the various programs by leveraging Federal and non-Federal funding to meet the shared goals of the programs.

As described in the assessment report, each of the Acts of Congress authorizing Reclamation's involvement in the rural water supply projects required that the cost ceilings included in the original authorizing legislation be indexed to adjust for inflation, estimated to be 4% annually. The result of these indexing requirements is that the overall cost of the authorized rural water projects has risen and continues to rise, such that the total estimated funding that would be required to complete these projects is as of 2014 approximately $2.4 billion, which is substantially higher than the original authorization amounts, which totaled $2.0 billion.

Reclamation has recognized the need to make meaningful progress in constructing authorized rural water projects, even amid severe pressure on Reclamation's budget across nearly all program areas. At the levels provided in the 2016 budget, and without additional non-federal funding, progress would be made toward project completion, but some of the currently authorized projects would be completed much later, perhaps not until well after 2063, despite close to $4.0 billion being invested by that time. In fact, it is estimated that, as of 2063, an outstanding balance of approximately $1.1 billion would remain to complete construction of currently authorized projects.

Across the country, state, local, and Tribal governments are taking a greater leadership role in water resources investments, including financing projects the federal government would have in the past. Constrained federal budgets do not preclude the ability of non-federal parties to move forward with important investments in water resources infrastructure and the Department stands ready to support that effort, even with the additional resources made available through S. 1365.

S. 1365 would create a dedicated Reclamation Rural Water Construction and Settlement Implementation Fund in the United States Treasury comprised of monies that would otherwise be deposited into the Reclamation Fund established by the first section of the Act of June 17, 1902 (32 Stat. 388, chapter 1093). This funding source would afford earlier completion of authorized water projects and would enable the payment of compensation associated with authorized Indian water rights settlements. Section 103(c) of the bill provides that the bill's cost would be offset so as to not increase the deficit. The Department supports such language. However, even if an equivalent and acceptable offset is identified, use of those funds must be weighed against other priorities across the federal government, including deficit reduction.

Section 103 of S. 1365 provides that, for each fiscal year from 2015 through 2035, $115,000,000 per year will be deposited into the Fund in addition to interest earned on invested money that is available in the Fund but not utilized for the current withdrawal. Section 104(c) of S. 1365 limits expenditures from fiscal year 2015 through 2035 from the Fund to not more than $115,000,000 in addition to interest accrued in that same fiscal year, with an allowance for the use of funds carried over from prior years. The bill further divides the total figure of $115 million between the two accounts – $80 million for the Rural Water Project Account, and $35 million for the Reclamation Infrastructure and Settlement Implementation Account.

Specific to the Rural Water Project Account, S. 1365 provides that if a feasibility study has been submitted to the Secretary by February 27, 2015, and those rural water projects are subsequently authorized by Congress, they may be eligible to receive funding through the Reclamation Rural Water Project Account. S. 1365 directs the Secretary of the Interior to develop programmatic goals enabling the expeditious completion of construction of the existing rural water projects and to establish prioritization criteria for the distribution of funds, a requirement addressed through the completion of Reclamation's assessment report.

With respect to its rural water program, Reclamation's first goal is to advance the construction of rural water projects that meet the most urgent water supply needs in the shortest amount of time, given our current budget constraints. The second goal is to give priority to rural water projects that address Indian and tribal water supply needs.

Within the context of the above goals, Reclamation recognizes that current and projected funding levels may not be sufficient to expeditiously complete the federal funding portion of every project and that it must prioritize the allocation of available funding. The assessment report outlines prioritization criteria to guide Reclamation's decision-making to maximize the agency's ability to meet its programmatic goals, to maximize water deliveries to rural communities in as short a period as possible, and to reflect the diverse needs and circumstances facing each individual project. The water construction prioritization criteria identified by Reclamation, and also reflected in Section 202(b)(2) of S. 1365, take into account the following:

• Is there an urgent and compelling need for potable water supplies in the affected communities?
• How close is the Project to being?
• What are the financial needs of the affected communities?
• What are the potential economic benefits of the expenditures on job creation and general economic development in the affected communities?
• What is the ability of the Project to address regional and watershed level water supply needs?
• Does the project minimize water and energy consumption and encourage the development of renewable energy resources such as wind, solar, hydropower elements?
• Does the project address the needs of tribal communities, tribal members, and the other community needs or interests?

The criteria would also take into account “such other factors as the Secretary determines to be appropriate to prioritize the use of available funds.” Regarding the second account, for Indian water rights settlements, Title III of S. 1365 further defines the Reclamation Infrastructure and Settlement Implementation Account, stipulating that no less than $35 million, plus accrued interest, be expended to provide compensation to resolve congressionally authorized Indian water rights settlements and to complete planning, design and construction of authorized water projects associated with those settlements. Creating a mandatory fund for Indian Water Settlements would foster certainty in water rights and boost economic growth in Indian Country.

The Administration is proud of its record on Indian water rights settlements, and we continue to be committed to settlements as an important way to address the water needs of Native American communities. Indian water rights settlements areconsistent with the general Federal trust responsibility to American Indians and with Federal policy promotingtribal sovereignty, self-determination, and economic self-sufficiency. Water settlements notonly secure tribal water rights but also help fulfill the United States' promise to tribes that Indian reservations would provide their people with permanent homelands. These settlements resolve what has often been decades of controversy and contention among tribes and neighboring communities over water, replacing those conflicts with certainty, which fosters cooperation in the management of water resources and promotes healthy economies. As drought and climate change intensifies, it is all the more urgent to plan for settlement costs, enable the timely resolution of tribes' rights, and provide water to Native Americans nationwide.

Since 2009, the Administration has supported and Congress has enacted six Indian water rights settlements for nine tribes at a total Federal cost of slightly more than $2 billion. All told, these settlements resolved disputes and litigation spanning well over a century. Most recently, the Administration was pleased to support two smaller and less comprehensive water rights settlements involving Tribes, in the 113^th Congress: the Pyramid Lake Paiute Tribe-Fish Springs Ranch Settlement Act and Bill Williams River Water Rights Settlement Act of 2014. The Administration is working with all of the affected tribes now to implement these settlements.

This Administration's active involvement in settlement negotiations has resulted in both significant improvements in the terms of the settlements and substantial reduction in their Federal costs, which ultimately led to our support for these six Indian water rights settlements. We stand ready to support Indian water settlements that result from negotiations with all stakeholders, including the Federal government, and that represent a good use of taxpayer dollars and good cost share contributions from states and other benefitting parties.

To date, Congress has enacted 29 Indian water settlements, a good start in addressing the need for reliable water supplies in Indian country. There are 277 federally recognized tribes in the West alone (excluding Alaska), and we are seeing increased interest in Indian water rights settlements east of the 100^th Meridian. Many of these tribes are in need of: clean, reliable drinking water; repairs to dilapidated irrigation projects; and the development of other water infrastructure necessary to bring economic development to reservations.

Once a settlement is enacted by Congress, and appropriations are authorized to implement it, primary funding responsibilities fall to Reclamation and the Bureau of Indian Affairs (BIA), although other agencies can and do contribute based on the particular terms of a settlement. To support these efforts, the President's FY 2016 Budget requests $244.5 million for Indian water rights settlements ($40.8 million for negotiation and legal support and $203.7 million for implementation, including $136 million for Reclamation and $67.7 million for the Bureau of Indian Affairs).

With some notable recent exceptions, such as the $180.0 million in mandatory funding authorized by P.L. 111-291 and directed to the Navajo-Gallup Water Supply Project between the fiscal years of 2012-2014, water rights settlements generally have been funded through the Department's discretionary appropriations. Work to be performed under the settlements by Reclamation has come out of Reclamation's budget, and trust funds and other settlement costs generally have come out of the BIA's budget, but all Departmental agencies have been asked from time to time to expend discretionary funds from their budgets on implementation of these water settlements. In all of these cases, the Administration has worked successfully with Congress to secure funds to continue to implement and complete signed settlements. The Administration will certainly need to continue to work with Congress on these issues.

In conclusion, I want to underscore the importance of these settlements to this Administration. Indian water rights settlements can resolve uncertainty, produce critical benefits for tribes and bring together communities to improve water management practices in some of the most stressed water basins in the country. The Administration believes that discretionary funding is the appropriate avenue for addressing water rights settlements'while remaining cognizant of and responsive to the many competing needs for limited budgetary resources, particularly given widespread drought throughout much of the West.

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