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109th Congress                                            Rept. 109-380
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================
 
       DESALINATION WATER SUPPLY SHORTAGE PREVENTION ACT OF 2005

                                _______
                                

 February 28, 2006.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Pombo, from the Committee on Resources, submitted the following

                              R E P O R T

                        [To accompany H.R. 1071]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 1071) to direct the Secretary of Energy to make incentive 
payments to the owners or operators of qualified desalination 
facilities to partially offset the cost of electrical energy 
required to operate such facilities, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Desalination Water Supply Shortage 
Prevention Act of 2005''.

SEC. 2. DEFINITIONS.

  (a) Qualified Desalination Facility.--The term ``qualified 
desalination facility'' means a facility that--
          (1) produces for sale to domestic customers desalinated 
        seawater, brackish groundwater, or surface water whose source 
        water is greater than 1000 parts per million total dissolved 
        solids; and
          (2) is owned or operated by--
                  (A) a State or any political subdivision, agency, 
                authority, or instrumentality of a State;
                  (B) an Indian tribe; or
                  (C) a corporation responsible for providing municipal 
                water service pursuant to State or tribal law;
          (3) is first used to produce commercial desalinated water for 
        sale during the 10-year period beginning on October 1 of the 
        first fiscal year occurring after the date of the enactment of 
        this Act; and
          (4) uses the best available technology as determined by the 
        Secretary.
  (b) Indian Tribe.--The term ``Indian Tribe'' means with respect to 
the contiguous 48 states, any federally recognized Indian tribe, 
organized band, pueblo, or community and with respect to Alaska, the 
Metlakatla Indian Community.
  (c) Secretary.--The term ``Secretary '' means the Secretary of 
Energy.
  (d) State.--The term ``State'' means the several States, the District 
of Columbia, Puerto Rico, American Samoa, the Virgin Islands, Guam, and 
the Northern Mariana Islands.

SEC. 3. DESALINATED WATER PRODUCTION INCENTIVE PAYMENTS.

  (a) Incentive Payments.--The Secretary shall make incentive payments 
in an amount determined under subsection (d) to the owners or operators 
of qualified desalination facilities to partially offset the cost of 
electrical energy required to operate such facilities.
  (b) Agreement; Deadline.--The Secretary may not make any payment to 
the owner or operator of a qualified desalination facility under this 
section, unless, not later than the end of fiscal year 2016, the 
Secretary enters into a written agreement with the owner or operator to 
make such payment.
  (c) Payment Period.--The Secretary may make payments to the owner or 
operator of a qualified desalination facility under this section for a 
period not to exceed 10 years--
          (1) beginning on the date on which the facility is first used 
        to produce desalinated water; and
          (2) ending not later than September 30, 2026.
  (d) Amount of Payment.--
          (1) In general.--Payments made by the Secretary under this 
        section to the owner or operator of any qualified desalination 
        facility shall be based on the amount of desalinated water 
        produced by the facility during the payment period described in 
        subsection (c). For any facility, the amount of such payment 
        shall be 62 cents for every thousand gallons of desalinated 
        water produced and sold, adjusted as provided in paragraph (2).
          (2) Adjustments.--The amount of the payment made to any 
        person under this subsection as provided in paragraph (1) shall 
        be adjusted for inflation for each fiscal year beginning after 
        calendar year 2006 in the same manner as provided in the 
        provisions of section 29(d)(2)(B) of the Internal Revenue Code 
        of 1986 (26 U.S.C. 29(d)(2)(B)), except that in applying such 
        provisions the calendar year 2006 shall be substituted for 
        calendar year 1979.
  (e) Application.--The Secretary may not make a grant to the owner or 
operator of a qualified desalination facility under this section unless 
the facility submits an application to the Secretary in such form, at 
such time, and containing such information and assurances as the 
Secretary may require.
  (f) Limitation.--In any fiscal year not more than 60 percent of the 
funds made available by the Secretary under this section shall be made 
available to the owners or operators of qualified desalination 
facilities that obtain source water directly from the sea, an estuary, 
or from in-bank extraction wells that are of seawater origin
  (g) Priority.--In awarding incentive payments under this section, the 
Secretary shall give priority to any application for a project that--
          (1) uses innovative technologies to reduce the energy demand 
        of the project;
          (2) uses renewable energy supplies in the desalination 
        process;
          (3) provides regional water supply benefits;
          (4) provides a secure source of new water supplies for 
        national defense activities;
          (5) reduces the threat of a water supply disruption as a 
        result of a natural disaster or acts of terrorism;
          (6) uses technologies that minimize the damage to marine 
        life; or
          (7) provides significant water quality benefits.
  (h) Budget Act Compliance.--The authority provided by this section 
may be exercised only in such amounts or to such extent as provided in 
advance in appropriations Acts.
  (i) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary $200,000,000 to carry out this section 
from fiscal year 2006 through fiscal year 2016.

SEC. 4. NOVEL DESALINATION TECHNOLOGY.

  (a) In General.--The Secretary shall support research and development 
of promising novel technology approaches for the cost-effective 
desalination of water.
  (b) Authorization of Appropriation.--There are authorized to be 
appropriated to the Secretary for carrying out this section $10,000,000 
from fiscal year 2006 through fiscal year 2016.

                          PURPOSE OF THE BILL

    The purpose of H.R. 1071 is to direct the Secretary of 
Energy to make incentive payments to the owners or operators of 
qualified desalination facilities to partially offset the cost 
of electrical energy required to operate such facilities, and 
for other purposes.

                  BACKGROUND AND NEED FOR LEGISLATION

    As water supplies become more scarce, communities are 
increasingly looking to desalination as a way to create new 
potable water. The Federal Government first recognized the 
potential benefits desalination could bring with passage of the 
Saline Water Act of 1952, and since that time has continued to 
fund research and development into new technologies. 
Desalination, which is accomplished through various methods, 
separates the water into two parts: fresh water and brine 
(water with high concentrations of salts). There are over 1,000 
desalination plants in operation nationwide; most are small and 
designed to treat brackish water. In light of growing regional 
water scarcity, large scale desalination of seawater and 
brackish water is being developed in California, Texas, and 
Florida.
    Major hurdles in the widespread use of desalinated water 
include, but are not limited to, high energy costs, federal and 
state permitting procedures and disposal of salt by-products. 
Total desalination costs can vary considerably from one site to 
another based on a number of factors, such as the amount of 
salts to be removed, capacity of the desalting plant, treatment 
process, brine disposal, land costs, permitting procedures, and 
water conveyance. Over the past twenty years, costs associated 
with desalination have dropped due to improved membrane 
efficiencies, but energy costs still continue to be the largest 
component of desalination's total water costs (sometimes over 
40%). This legislation addresses high energy costs.
    H.R. 1071 authorizes the Secretary of Energy to make 
incentive payments to the owners and operators of qualified 
desalination facilities that are built after the bill's 
enactment. These facilities can be owned or operated by any 
state, municipal agency, Indian tribe, or private corporation 
responsible for providing municipal water service. The payments 
would partially offset the cost of electrical energy required 
for operation. The facility has up to ten years after enactment 
to submit an application to the Secretary for incentive 
payments. These incentive payments will then be available up to 
ten years after the written agreement is finalized.
    In many situations, development of large-scale desalinated 
water supplies has been cost prohibitive when compared to other 
sources of water. The energy payments in this bill could be an 
incentive for water providers to construct more desalination 
plants and use future economies of scale to bring the costs 
down to the level of other water sources. The bill authorizes 
$200 million to carry out this program. Under H.R. 1071, 
incentive payments from the Secretary of Energy to qualified 
facilities would be $0.62 per thousand gallons (or 
approximately $200 per acre foot) of desalinated water 
produced.

                            COMMITTEE ACTION

    H.R. 1071 was introduced on March 3, 2005, by Congressman 
Jim Davis (D-FL). The bill was referred to the Committee on 
Resources, and within the Committee to the Subcommittee on 
Water and Power. On May 24, 2005, the Subcommittee held a 
hearing on the bill. On November 16, 2005, the Full Resources 
Committee met to consider the bill (Printed Hearing 109-14). 
The Subcommittee on Water and Power was discharged from further 
consideration of the bill by unanimous consent. Congressman 
George Radanovich (R-CA) offered an amendment in the nature of 
a substitute to change the short title of the bill and add 
provisions involving definitions and grant priority criteria. 
The amendment was adopted by unanimous consent. The bill, as 
amended, was then ordered favorably reported to the House of 
Representatives by unanimous consent.

      SECTION-BY-SECTION ANALYSIS OF THE BILL AS ORDERED REPORTED

Section 1. Short title

    This section cites the short title as the ``Desalination 
Water Supply Shortage Prevention Act of 2005.''

Section 2. Definitions

    This section defines various terms in the bill.

Section 3. Desalinated water production incentive payments

    This section authorizes a total of $200 million to be 
appropriated through fiscal year 2016 for the Secretary of 
Energy to make incentive payments to owners or operators of 
qualified desalination facilities to partially offset the cost 
of electrical energy required to produce desalinated water. The 
qualified facilities shall receive 62 cents for every thousand 
gallons of desalinated water produced. Each facility will have 
ten years to apply to the Secretary and enter into a written 
agreement, then have up to ten years to collect those payments. 
This section places a limitation on how much funding will go to 
particular types of desalination facilities, while also giving 
the Secretary discretion to prioritize how those incentive 
payments will be disbursed. The Congressional Research Service 
has indicated that the Secretary has considerable discretion on 
the implementation of this section, as set forth in Sections 
3(e) and 3(g) of the bill. Since this legislation primarily 
impacts electricity payments provided after construction of a 
qualified desalination facility, it is generally expected that 
most federal and state permits required for construction will 
cover many of the analyses required under applicable federal 
environmental laws.

Section 4. Novel desalination technology

    This section authorizes a total of $10 million through 
fiscal year 2016 for the Secretary of Energy to support 
research and development of promising novel technology for the 
cost-effective desalination of water.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Article I, section 8 of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that Rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill is to direct the Secretary of Energy to 
make incentive payments to the owners or operators of qualified 
desalination facilities to partially offset the cost of 
electrical energy required to operate such facilities.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

H.R. 1071--Desalination Water Supply Shortage Prevention Act

    Summary: H.R. 1071 would authorize the appropriation of up 
to $200 million over the 2006-2016 period for the Department of 
Energy (DOE) to subsidize the operating costs of new water 
desalination projects. Under this bill, DOE would make payments 
of 62 cents (adjusted annually for inflation) per thousand 
gallons of desalinated water produced and sold from eligible 
projects for a period of 10 years. The bill also would 
authorize the appropriation of a total of $10 million over the 
2006-2016 period for DOE research and development (R&D;) on 
desalination technologies.
    Assuming appropriation of the authorized amounts, CBO 
estimates that implementing this bill would cost $8 million 
over the 2006-2010 period and a total of $201 million after 
2010. Enacting H.R. 1071 would have no effect on direct 
spending or revenues.
    H.R. 1071 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments. The bill would benefit water agencies that produce 
desalinated water by authorizing incentive payments that 
partially offset their operating costs. Any costs those 
agencies might face would be incurred voluntarily.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1071 is shown in the following table. 
The costs of this legislation fall within budget function 270 
(energy).

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2006    2007    2008    2009    2010
------------------------------------------------------------------------
              CHANGES IN SPENDING SUBJECT TO APPROPRIATlON

Subsidy for Desalination Plants
 a:
    Estimated Authorization            0       0      50      50      50
     Level......................
    Estimated Outlays...........       0       0       0       0       5
Research and Development:
    Estimated Authorization            0       1       1       1       1
     Level......................
    Estimated Outlays...........       0       *       1       1       1
Total Changes:
    Estimated Authorization            0      51      51      51      51
     Level......................
    Estimated Outlays...........       0       *       1       1       6
------------------------------------------------------------------------
a. Most of the authorized cost for this activity would occur after 2010.

Note: * = Less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted in fiscal year 2006 and that the 
authorized amounts will be appropriated as necessary to 
implement the subsidy and R&D; programs. The cost estimate 
assumes that the $10 million authorized for R&D; by DOE would be 
spread evenly over the 2007-2016 period.
    CBO expects that the subsidies authorized by the bill would 
facilitate the financing of desalination projects. Thus, we 
anticipate that DOE would obligate funds for the subsidies when 
a project's financing is arranged, which is likely to occur 
after sponsors complete the planning and permitting process but 
before the facility is built. Although several projects are on 
the drawing boards in California, Florida, Texas, and other 
states, it is unclear how many projects would secure financing 
by 2010. Given the lead times needed for planning and 
permitting a desalination project, CBO expects that DOE would 
not begin obligating funds for the subsidies until 2008.
    Most of the projects currently under consideration would 
range in size from about 10 million to 25 million gallons per 
day, with output likely range from 50 percent to 90 percent of 
the design capacity. At 62 cents per thousand gallons (adjusted 
annually for inflation), CBO estimates the cost of subsidizing 
a project with a daily capacity of 25 million gallons for 10 
years would total about $50 million. For this estimate, CBO 
assumes that three such projects would be approved over the 
2008-2010 period, one in each of those fiscal years. CBO 
estimates that the remaining $50 million in subsidies would be 
obligated after 2010.
    DOE would not make any payments from this subsidy program 
until a plant actually produced and sold desalinated water. 
Because the construction and initial testing of such facilities 
typically takes two or three years, most of the outlays for 
this program would occur after 2010.
    Intergovernmental and private-sector impact: H.R. 1071 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments. The bill would benefit water agencies that 
produce desalinated water by authorizing incentive payments 
that partially offset their operating costs. Any costs those 
agencies might face would be incurred voluntarily.
    Estimate prepared by: Federal Costs: Kathleen Gramp. Impact 
on State, Local, and Tribal Governments: Lisa Ramirez-Branum. 
Impact on the Private Sector: Craig Cammarata.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.