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                                                       Calendar No. 558
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-315

======================================================================



 
              IRRIGATION DISTRICTS REPAYMENT REVISIONS ACT

                                _______
                                

                 July 31, 2006.--Ordered to be printed

                                _______
                                

   Mr. Domenici, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4000]

    The Committee on Energy and Natural Resources, to which was 
referred the Act (H.R. 4000) to authorize the Secretary of the 
Interior to revise certain repayment contracts with the 
Bostwick Irrigation District in Nebraska, the Kansas Bostwick 
Irrigation District No. 2, the Frenchman-Cambridge Irrigation 
District, and the Webster Irrigation District No. 4, all a part 
of the Pick-Sloan Missouri Basin Program, and for other 
purposes, having considered the same, reports favorably thereon 
without amendment and recommends that the Act do pass.

                         PURPOSE OF THE MEASURE

    H.R. 4000 would authorize the Secretary of the Interior to 
revise distribution works repayment contracts with the Bostwick 
Irrigation District in Nebraska, the Kansas Bostwick Irrigation 
District No. 2, the Frenchman-Cambridge Irrigation District, 
and the Webster Irrigation District No. 4.

                          BACKGROUND AND NEED

    The Bostwick Irrigation District in Nebraska, the Kansas 
Bostwick Irrigation District No. 2, the Frenchman-Cambridge 
Irrigation District, and the Webster Irrigation District No. 4 
are irrigation districts served by the Pick-Sloan Missouri 
Basin Program, a Reclamation Project. All of the irrigation 
districts are located in the Republican River basin except for 
Webster Irrigation District No. 4, which is located in the 
Solomon River basin.
    The four districts recently renewed a portion of their 
water supply works repayment contracts to include a repayment 
term of 40 years. All districts renewed their contract in 2000 
except for Webster Irrigation District No. 4, which renewed its 
contract in 2002. The districts' repayment obligations for 
construction costs associated with distribution works were not 
included in the renewal of the water supply works contracts.
    Currently, repayment of construction costs associated with 
distribution works must be completed between 2009 and 2015, 
depending on the particular district. Within five years of the 
fulfillment of the districts' distribution works construction 
cost obligation, deposits into the distribution works reserve 
fund and the district water supply reserve fund are scheduled 
to increase significantly. In their testimony before the House 
Resources Committee on H.R. 4000, both Reclamation and U.S. 
Congressman Jerry Moran testified that the districts would be 
unable to meet the current reserve fund obligations.

                          LEGISLATIVE HISTORY

    H.R. 4000 was introduced by Representative Moran for 
himself and Representative Osborn and referred to the Committee 
on Resources. The House Resources Committee Water and Power 
Subcommittee held hearings on the measure on December 7, 2005. 
H.R. 4000 was discharged from the House Resources Committee, 
passed the House of Representatives and was received by the 
Senate on December 19, 2005. A similar measure, S. 1962 was 
introduced on November 4, 2005, by Senator Roberts for himself 
and Senators Brownback, Hagel and Nelson and referred to the 
Committee on Energy and Natural Resources. The Subcommittee on 
Water and Power held a hearing on March 30, 2006. The Senate 
Committee on Energy and Natural Resources ordered H.R. 4000 
favorably reported on May 24, 2006.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on May 24, 2006, by a unanimous voice vote of 
a quorum present, recommends that the Senate pass H.R. 4000.

                      SECTION-BY-SECTION ANALYSIS

    Section 1 authorizes the Secretary of the Interior to 
revise the repayment contract with the Bostwick Irrigation 
District in Nebraska (009D6B0121) by equalizing the total 
annual repayment obligation for the distribution works 
construction charge and the water supply repayment obligation. 
The section also authorizes the Secretary of the Interior to 
extend the date for adjusting the annual deposits into the 
distribution works reserve fund and the district water supply 
reserve fund for an additional 10 years.
    Section 2 authorizes the Secretary of the Interior to 
revise the repayment contract with the Kansas Bostwick 
Irrigation District No. 2 (009D6B0120) by equalizing the total 
annual repayment obligation for the distribution works 
construction charge and the water supply repayment obligation. 
The section also authorizes the Secretary of the Interior to 
extend the date for adjusting the annual deposits into the 
distribution works reserve fund and the district water supply 
reserve fund for an additional 10 years.
    Section 3 authorizes the Secretary of the Interior to 
revise the repayment contract with the Frenchman-Cambridge 
Irrigation District (009D6B0122) by equalizing the total annual 
repayment obligation for the distribution works construction 
charge and the water supply repayment obligation. The section 
also authorizes the Secretary of the Interior to extend the 
date for adjusting the annual deposits into the distribution 
works reserve fund and the district water supply reserve fund 
for an additional 10 years.
    Section 4 authorizes the Secretary of the Interior to 
revise the repayment contract with the Webster Irrigation 
District (009D6B0002) by equalizing the total annual repayment 
obligation for the distribution works construction charge and 
the water supply repayment obligation. The section also 
authorizes the Secretary of the Interior to extend the date for 
adjusting the annual deposits into the distribution works 
reserve fund and the district water supply reserve fund for an 
additional 10 years.

                   COST AND BUDGETARY CONSIDERATIONS

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office:



    H.R. 4000--An act to authorize the Secretary of the 
Interior to revise certain repayment contracts with the 
Bostwick Irrigation District in Nebraska, the Kansas Bostwick 
Irrigation District No. 2, the Frenchman-Cambridge Irrigation 
District, and the Webster Irrigation District No. 4, all a part 
of the Pick-Sloan Missouri Basin Program, and for other 
purposes.
    Summary: H.R. 4000 would authorize the Secretary of the 
Interior to revise certain repayment contracts with several 
irrigation districts that are a part of the Pick-Sloan Missouri 
Basin Program. The repayment contracts are for reimbursable 
construction costs. This act would amend the current schedule 
of repayments by equalizing the amount of annual payments over 
the remaining life of the contracts.
    Under the legislation, the irrigation districts would make 
smaller payments to the federal government during the first 10 
years after enactment and larger payments in the later years of 
their contracts, compared with the payments due under current 
law. Those payments are recorded in the budget as offsetting 
receipts (that is, offsets to outlays). Because the act would 
reduce the amount of offsetting receipts collected by the 
government over the next 10 years, CBO estimates that enacting 
H.R. 4000 would increase direct spending by almost $35 million 
over the 2006-2016 period. Over the next 35 years, aggregate 
receipts to the government would be unchanged, assuming H.R. 
4000 is enacted before the end of 2006.
    H.R. 4000 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandate Reform Act.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4000 is shown in the following table. 
The costs of this legislation fall within budget function 300 
(water resources). For this estimate, CBO assumes that H.R. 
4000 will be enacted before the end of fiscal year 2006.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By fiscal year, in millions of dollars--
                                                                 ---------------------------------------------------------------------------------------
                                                                   2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority......................................       1       1       1       1       *       *       *       *       *       *       *
Estimated Outlays...............................................       1       1       1       1       *       *       *       *       *       *       *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = less than $500,000.

    Intergovernmental and private-sector impact: H.R. 4000 
contains no intergovernmental or private-sector mandates. The 
act would benefit some water districts by authorizing the 
Secretary of the Interior to revise their repayment contracts 
for construction and water supply projects, shifting some 
payments into later years.
    Estimate prepared by: Federal spending: Gregory Waring; 
Impact on state, local, and tribal governments: Lisa Ramirez-
Branum; Impact on the private sector: Fatimot Ladipo.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                      REGULATORY IMPACT EVALUATION

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out H.R. 4000. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant responsibilities on private individuals and 
businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of H.R. 4000.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by the Bureau of Reclamation at the 
Water and Power Subcommittee hearing on S. 1962, the Senate 
counterpart to H.R. 4000, in the 109th Congress follows:

Statement of John Keys III, Commissioner of Reclamation, Department of 
                              the Interior

    Madam. Chairman and Members of the Subcommittee, I am John 
Keys, Commissioner of the Bureau of Reclamation. I am pleased 
to be here today to give the Administration's view on S. 1962, 
a bill to revise certain repayment contracts of four irrigation 
districts that are part of the Pick-Sloan Missouri Basin 
Program.
    The Irrigation Projects Reauthorization Council (IPRC) 
represents four member irrigation districts in support of this 
legislation. The districts--the Kansas Bostwick Irrigation 
District No. 2 and the Webster Irrigation District No. 4, both 
in Kansas, and the Bostwick Irrigation District in Nebraska and 
the Frenchman-Cambridge Irrigation District (also in Nebraska), 
are served by Reclamation projects built as part of the Pick-
Sloan Missouri Basin Program. Webster Irrigation District No. 4 
is located in the Solomon River basin; the others are in the 
Republican River basin, both tributaries to the Kansas River.
    The districts recently renewed their contracts with 
Reclamation. The contract renewal addressed repayment of a 
portion of the water supply works construction cost over a 40 
year term. Webster Irrigation District No. 4 renewed its 
contract in 2002; the others renewed their contracts in 2000. 
However, each District's repayment of the distribution works 
construction cost obligation remained unchanged during contract 
renewal. Thus, the remaining term for repayment of the 
distribution works is, in each case, significantly less than 
that remaining for the water supply works. Under Reclamation 
law, the irrigation districts repay irrigation capital costs 
without interest charges.
    As discussed above, currently each of these districts' 
contracts has two different repayment periods: a water supply 
works repayment term which extends until 2040 or 2042 (40 years 
from when the respective district's contract was renewed) and a 
distribution works repayment period which extends 40 years from 
their first payment for the distribution works (to sometime 
between 2009 and 2015 depending on the particular district). 
This legislation would allow the repayment periods for the 
distribution works to be extended to match the repayment period 
for the water supply works, and allow for equal annual payments 
over that period. Additionally, reserve fund payments were 
slated to increase significantly in about 5 years, following 
scheduled completion of repayment of the distribution works 
construction costs obligation. Anticipating that this time 
horizon is too short for the districts to ensure financial 
recovery sufficient to make the increased reserve fund 
payments, this bill delays these increases for an additional 10 
years.
    Drought conditions in southwest Nebraska and northwest 
Kansas have significantly impacted inflows to reservoirs 
providing a water supply to Kansas Bostwick Irrigation 
District, Bostwick Irrigation District in Nebraska, Frenchman-
Cambridge Irrigation District and Webster Irrigation District. 
Annual inflow into reservoirs providing these districts' water 
supplies has reached new historical lows in the last three 
years. Four of the five canals in the Bostwick Irrigation 
District in Nebraska did not divert water the past two years. 
The Kansas Bostwick Irrigation District has not delivered a 
substantial amount of water to acres above Lovewell Reservoir 
the past two years. Three of the four canals in the Frenchman-
Cambridge Irrigation District have not diverted any water the 
past three years. The Webster Irrigation District did not 
divert water into Osborne Canal this past year.
    Despite the declining water supply available to these 
Projects, the districts' contracts require that they pay a 
portion of annual operation and maintenance costs for the water 
supply works and repay construction cost obligations to the 
United States. This payment obligation to Reclamation is in 
addition to the districts' responsibility for 100 percent of 
the operation and maintenance costs of the distribution works 
and those water supply works that have been transferred to the 
districts. Even with no water or a diminished supply, the need 
for maintenance of these facilities continues.
    The districts assess their irrigators in order to pay the 
districts' annual expenses and repayment obligations. These 
irrigators have received a diminished or no supply in recent 
years. For the last couple of years most of these districts 
have sought and been granted annual deferments to their 
payments under Reclamation law (the Act of September 21, 1959, 
73 Stat. 584). In order to grant a deferment, Reclamation 
requires a determination that payment of the installments will 
cause an undue burden on the water users and that there is no 
alternative source of funds available to pay the installments. 
When an annual payment is deferred, it is rescheduled to be 
repaid as quickly as possible within the remaining term of the 
contract. The deferments have helped the districts to weather 
the drought in the short run, but have also caused the annual 
distribution works payments to be substantially larger over 
their remaining repayment period, because deferments do not 
extend the total time period allowed for repayment.
    For example, Kansas-Bostwick Irrigation District #2 would, 
after execution of the annual deferment currently being 
processed, have annual distribution works payments of $421,353 
due through 2015, with annual water supply works payments of 
$21,841 through 2015, increasing to $96,512 for 2016 and 2017, 
then decreasing to $85,591 from 2018 through 2040. This results 
in an annual repayment total for this district of $443,194 
through 2015 when the distribution works are scheduled to pay 
out in the absence of this legislation. If S. 1962 becomes law, 
the district will have consistent annual payments of $188,387 
from 2006 through 2040, thus providing relief to help the 
district through the current financial crisis.
    The total repayment obligation for the distribution works 
and water supply works for all four districts together is 
$12,442,447. This legislation does not change the dollar amount 
of this repayment obligation. However, because Reclamation law 
provides that irrigators do not pay interest on capital costs, 
this bill would reduce the present value of expected Treasury 
receipts. The difference between the present value of the 
payout stream of the contracts as they currently exist and as 
they would be amended by this bill is $1,620,637. This assumes 
that, in the absence of this legislation, the districts would 
pay the minimum payments due on time over the life of these 
contracts.
    The IPRC and the participating districts have done an 
exemplary job of communicating with Reclamation as they sought 
this legislation. They contacted us in early 2005 to explore 
what opportunities were available to them under existing law to 
address their financial concerns. Other than the deferments 
discussed above, none existed. Reclamation also very much 
appreciates the manner by which IPRC has kept us informed and 
worked with us to identify issues. They addressed the possible 
effect to power repayments through ``aid to irrigation'' early 
on by working closely with Midwest Electric Consumers 
Association and with Reclamation. It is our understanding that 
``aid to irrigation'' is not affected by this legislation.
    The legislation would provide needed financial relief to 
the districts by rescheduling their financial obligations to 
the United States. Extension of the repayment period will not 
be a permanent solution to the water scarcity facing these 
districts. However, taking this action will provide needed 
relief for the districts and increase the likelihood that they 
will be able to attain long-term financial viability and 
fulfill their repayment obligation to the United States. 
Therefore, the Department supports this legislation.
    I am happy to respond to any questions.

                        CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the Act H.R. 4000, as 
ordered reported.