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                                                       Calendar No. 675
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-323

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



 
         BUREAU OF RECLAMATION SITE SECURITY COSTS ACT OF 2007

                                _______
                                

                 April 10, 2008.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R.1662]

    The Committee on Energy and Natural Resources, to which was 
referred the Act (H.R. 1662) to authorize the Secretary of the 
Interior to seek limited reimbursement for site security 
activities, and for other purposes, having considered the same, 
reports favorably thereon without amendment and recommends that 
the Act do pass.

                         PURPOSE OF THE MEASURE

    The purpose of H.R. 1662 is to amend the Reclamation Safety 
of Dams Act of 1978 to authorize improvements for the security 
of dams and other facilities.

                          BACKGROUND AND NEED

    In the aftermath of the terrorist attacks on September 11, 
2001, the Bureau of Reclamation embarked on a program of site 
security measures at multi-purpose federal dams. These measures 
involved both facility fortifications and increased use of 
guards and patrols. Since implemented, there has been an 
ongoing issue related to whether Reclamation or the 
beneficiaries of Reclamation projects should pay for site 
security measures.
    Reclamation distinguishes security-related capital costs 
for facility fortifications from operation & maintenance (O&M) 
costs associated with increased guards and patrols. Since 
implementing its enhanced site security measures, Reclamation 
has treated its capital investments as nonreimbursable since 
the fortifications are responding to risks not anticipated when 
the projects were authorized and constructed. With respect to 
security-related O&M costs, Reclamation initially classified 
these costs as non-reimbursable to allow water and power 
customers time to plan for increased costs in their budgets. 
Now, however, Reclamation views these costs as fully 
reimbursable based on project cost allocations.
    Notwithstanding Reclamation's position, Congress 
subsequently intervened and limited Reclamation's ability to 
seek reimbursement for security-related O&M costs. In FY 2005, 
Congress instructed Reclamation not to begin the reimbursement 
process. In FY 2006, at Congress' request, Reclamation limited 
reimbursement to approximately 50% of overall O&M costs. In its 
FY 2007 budget request, Reclamation proposed reimbursement of 
$18.9 million by water and power customers of security-related 
O&M costs. H.R. 1662 would resolve the issue of repayment for 
site security costs by expressly allocating specific costs for 
reimbursement while classifying other costs as non-
reimbursable.

                          LEGISLATIVE HISTORY

    H.R. 1662 was introduced on March 23, 2007 by 
Representative Grace Napolitano and referred to the Committee 
on Natural Resources. Representatives Jim Costa, Barbara Cubin, 
Trent Franks, Raul Grijalva, Doc Hastings, Wally Herger, Cathy 
McMorris Rodgers, George Radanovich, and Rick Renzi are co-
sponsors. Under suspension of the rules, H.R. 1662 passed the 
House of Representatives on December 4, 2007, and was referred 
to the Committee on Energy and Natural Resources in the Senate.
    A companion measure, S. 1258, was introduced by Senator 
Cantwell on May 1, 2007, and referred to the Committee on 
Energy and Natural Resources. Senators Hatch, Wyden, Allard, 
and Smith are co-sponsors. The Subcommittee on Water and Power 
held a hearing on S. 1258 on July 26, 2007. (S. Hrg. 110-152.) 
At its business meeting on January 30, 2008, the Committee on 
Energy and Natural Resources ordered H.R. 1662 favorably 
reported.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on January 30, 2008, by voice vote of a quorum 
present, recommends that the Senate pass H.R. 1662.

                      SECTION-BY-SECTION ANALYSIS

    Section 1 provides the short title of the Act.
    Section 2 provides that the capital costs for physical 
fortifications to address security needs at Bureau of 
Reclamation facilities shall be non-reimbursable.
    Section 3(a) limits the Secretary of the Interior to 
allocating $18,900,000 annually (indexed for inflation) as site 
security-related reimbursable operation and maintenance costs 
under Reclamation law.
    Section 3(b) specifies how reimbursable site security costs 
allocated as part of the Central Valley Project of California 
shall be collected by the Secretary.
    Section 4(a) authorizes the Secretary to develop policies 
and procedures to provide for payment of reimbursable site 
security costs.
    Section 4(b) directs the Secretary, upon identifying the 
need for a site security measure, to provide project 
beneficiaries with written notice of the need and requirements 
associated with the measure.
    Section 4(c) requires the Secretary to consult with project 
beneficiaries regarding project-specific site security 
measures.
    Section 4(d) requires the Secretary to consider cost 
containment measures recommended by project beneficiaries.
    Section 4(e) requires the Secretary to report annually to 
Congress on current and future site security actions.
    Section 5 specifies that the level of project-specific 
Reclamation security costs that existed prior to September 11, 
2001, shall remain reimbursable.

                   COST AND BUDGETARY CONSIDERATIONS

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

H.R. 1662--Bureau of Reclamation Site Security Costs Act of 2007

    Since the terrorist attacks of September 11, 2001, the 
Bureau of Reclamation has enhanced security at its dams and 
associated facilities. The costs of those security measures 
fall into two general categories: capital costs, including 
improvements to physical infrastructure, and operation and 
maintenance (O&M) costs, such as increasing the number of 
guards and patrols at the dams and facilities. Under current 
law, entities that purchase water and hydroelectric power 
associated with the operation of those dams and facilities must 
reimburse the bureau for a portion of its O&M costs.
    H.R. 1662 would limit the total amount of security-related 
O&M costs that such entities would pay to $18.9 million a year, 
adjusted annually for inflation. The bureau expects to charge 
the entities no more than that amount, adjusted for inflation, 
over the next 10 years under current law. Thus, CBO estimates 
that enacting the legislation would have no significant impact 
on the budget.
    H.R. 1662 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Tyler Kruzich. 
This estimate was approved by Teresa Gullo, Deputy 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. 1662. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic 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. 1662, as ordered reported.

                   CONGRESSIONALLY DIRECTED SPENDING

    H.R. 1662, as reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by the Bureau of Reclamation at the 
Subcommittee hearing on July 26, 2007 on companion measure, S. 
1258 follows:

 Statement of Larry Todd, Deputy Commissioner, Policy, Administration 
     and Budget, Bureau of Reclamation, Department of the Interior

    Mr. Chairman and Members of the Subcommittee, I am Larry 
Todd, Deputy Commissioner of the Bureau of Reclamation. I am 
pleased to be here today to present the Department of the 
Interior's views on S. 1258, legislation to amend the 
Reclamation Safety of Dams Act and redirect reimbursable costs 
for dam safety activities. The Department opposes S. 1258, as 
introduced.
    S. 1258 would make major changes to the process and 
revenues used by Reclamation to secure its facilities resulting 
in a loss of receipts to the Treasury. This proposed 
legislation addresses two components of Reclamation's site 
security program: 1. capital investment (mainly facility 
fortification) and 2. operation and maintenance (O&M), which 
consists mainly of guards and patrol functions. Currently, 
Reclamation treats security-related capital investment as non-
reimbursable costs, and security-related O&M expenses as 
project costs subject to reimbursement based on project cost 
allocation. S. 1258 would change this methodology, eliminating 
the distinction between capital investment and O&M costs so 
that Reclamation would be required to treat 85% of the capital 
investment and O&M security costs as non-reimbursable, while 
the remaining 15% would be recovered from the reimbursable 
project purposes.
    Reclamation understands that the impetus for this 
legislation is concern over increased security related costs 
incurred for all Federal facilities after September 11, 2001. 
However, our agency has been and remains committed to working 
with our customers and with Congress to ensure fair, consistent 
and efficient policies related to the treatment of these costs. 
The Department does not believe that the changes instituted 
under S. 1258 would be a positive step in this direction.
    As explained in reports submitted by Reclamation to 
Congress in May 2005 and February 2006, Reclamation 
distinguishes capital costs of security-related fortifications 
from security-related O&M costs. Since the beginning of 
increased security levels in fiscal year 2002, Reclamation has 
treated security-related capital investment as non-
reimbursable. From fiscal year 2002 through the end of fiscal 
year 2007, for example, Reclamation will have funded over $66 
million in fortification costs, none of which has been passed 
on to customers.
    Treatment of post-9/11 O&M (guard and patrol) costs has 
been different, however. Early on, when security was increased 
at Reclamation facilities immediately after 9/11, Reclamation 
took the position that while these are clearly O&M costs, until 
a stable budget pattern emerged, and until customers had 
sufficient time to make the necessary adjustments to their 
planning and budgets, these costs should be non-reimbursable. 
Therefore, from FY 2002 through FY 2004, Reclamation's budget 
proposals called for post-9/11 security-related O&M costs to be 
treated as nonreimbursable.
    However, in its FY 2005 and all subsequent budget 
proposals, Reclamation returned to the pre-9/11 practice of 
treating security-related O&M costs as reimbursable by project 
allocation. Report language which accompanies the FY 2005 
Energy and Water Development Appropriation, however, directed 
Reclamation not to begin reimbursement in FY 2005, and 
additionally, provide a report to Congress on the delineation 
of planned reimbursable costs. Later, Congress' FY 2006 
appropriations report language limited security-related O&M 
reimbursement to $10 million out of total costs of $20.9 
million in FY 2006.
    Reclamation's FY 2007 budget proposal anticipated total 
security-related O&M guard costs of $20.9 million. Of that 
amount, $2 million is allocated to non-reimbursable project 
purposes and requires appropriations. Reclamation anticipated 
full reimbursement of the remaining $18.9 million, of which 
approximately $11.6 million is in up-front funding not 
requiring appropriations, and approximately $7.3 million would 
be repaid to the Treasury and requires appropriations. However, 
because a Continuing Resolution in FY 2007 left unanswered the 
reimbursement amounts for the current fiscal year, Reclamation 
has moved to collect $14.5 million as a mid-point between the 
$10 million cap in FY 2006 and the full $18.9 million we expect 
to be reimbursable in FY 2008.
    Under S. 1258, instead of the $18.9 million future annual 
reimbursement Reclamation currently anticipates, Reclamation 
would instead receive only 15% of roughly $33.1 million in 
total security-related O&M guard and fortification costs, or at 
most, about $5 million each year depending upon the structure 
of repayment. This would result in an additional financial 
burden to the United States of about $13.9 million per year in 
reduced reimbursement. Up-front funding would be reduced by 
approximately $9.7 million annually and Reclamation would need 
additional appropriations in order to carry out planned 
security activities.
    Reclamation believes this legislation could bring 
unintended results for Reclamation water and power customers. 
While the change to 15% reimbursement of security-related O&M 
costs would benefit some customers, the change to 15% 
reimbursement of currently non-reimbursable security-related 
capital costs would work to the detriment of customers in 
projects where future capital fortification expenditures are 
planned. Water and power customers of projects whose security 
fortifications were lower in priority and therefore not 
completed prior to the bill's enactment would be particularly 
disadvantaged. Furthermore, Reclamation would be required to 
collect these costs under multiple repayment contracts that 
could extend as long as 50 years.
    Indeed, what is less certain are the future costs for 
facility fortifications that Reclamation's water and power 
customers would absorb as reimbursable. The total cost of 
internally-approved fortifications for FY 2007 and future years 
is $35.4 million ($78.8 million minus the $43.4 million that 
was spent through FY 2006), and this figure does not include 
potentially significant additional fortification activities 
still under study. Under S. 1258, 15% of these fortification 
costs would become reimbursable by customers.
    Reclamation has met with its customers frequently in the 
past several years on this issue, and we understand and share 
our contractors' desire for stable, predictable security 
assessments. We recognize that certainty, accountability, and 
transparency are important in the financing of this program. 
However, we believe that the site security program is now 
sufficiently established, and the benefits to contractors is 
sufficiently clear, so that reimbursable costs for our 
customers are adequately quantified, fairly allocated and 
understood in the ratepaying community.
    Reclamation is interested in working with the subcommittee 
to address its customers' concerns in the administration of the 
security program. However, S. 1258 does not provide a workable 
solution to address those concerns. Mr. Chairman, this 
concludes my testimony. I am pleased to answer any questions 
the subcommittee may have.

                        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 bill H.R. 1662, as 
ordered reported.