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[Senate Hearing 108-539]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 108-539




                               before the


                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION


                           S. 1085                               S. 1727

                           S. 1732                               S. 1791

                           S. 2218



                             MARCH 25, 2004

                       Printed for the use of the
               Committee on Energy and Natural Resources


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                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel

                    Subcommittee on Water and Power

                    LISA MURKOWSKI, Alaska, Chairman
            BEN NIGHTHORSE CAMPBELL, Colorado Vice Chairman
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Carolina
JON KYL, Arizona                     BOB GRAHAM, Florida
LARRY E. CRAIG, Idaho                RON WYDEN, Oregon
JAMES M. TALENT, Missouri            TIM JOHNSON, South Dakota
JIM BUNNING, Kentucky                DIANNE FEINSTEIN, California
CRAIG THOMAS, Wyoming                CHARLES E. SCHUMER, New York
                                     MARIA CANTWELL, Washington

   Pete V. Domenici and Jeff Bingaman are Ex Officio Members of the 

                         Shelly Randel, Counsel
                Patty Beneke, Democratic Senior Counsel

                            C O N T E N T S




Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     3
Domenici, Hon. Pete V., U.S. Senator From New Mexico.............     2
Dorgan, Hon. Byron L., U.S. Senator From North Dakota............    13
Keegan, Mike, Appearing on Behalf of Jim T. Dunlap, Board Member, 
  the National Rural Water Association...........................    18
Keys, John W., III, Commissioner, Bureau of Reclamation, 
  Department of the Interior.....................................     3
Koland, David, Manager, Garrison Diversion Conservancy District, 
  Carrington, ND.................................................    25
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     1


Additional material submitted for the record.....................    39



                        THURSDAY, MARCH 25, 2004

                               U.S. Senate,
                   Subcommittee on Water and Power,
                 Committee on Energy and Natural Resources.
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:30 p.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Lisa 
Murkowski presiding.

                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Good afternoon, and welcome to the Water 
and Power Subcommittee. It's my pleasure to welcome all of you 
here this afternoon.
    There are five bills before the Subcommittee today. Three 
of the bills address the authority of the Bureau of Reclamation 
with respect to the planning, design, and construction of rural 
water supply systems. The fourth bill would raise the 
authorization ceiling on the Bureau of Reclamation's Safety of 
Dams Program. And the final bill would amend the Lease Lot 
Conveyance Act of 2002, which would clarify the disposition of 
certain proceeds obtained pursuant to the act.
    We've got a relatively ambitious schedule before us this 
afternoon. We do have a vote that is scheduled to take place, 
to begin at 2:45, so we will try to get a little bit of the 
testimony, and take a break, as needed.
    But we do have several parties with different interests 
pertaining to rural water. We'd like to get through them as 
quickly as possible.
    I'd like to welcome Commissioner Keys, from the Bureau of 
Reclamation, who will be presenting the administration's 
testimony on all five bills. Commissioner, we're looking 
forward to hearing from you and the rest of our witnesses.
    Before we hear from the Commissioner, are there any opening 
statements, Senator Bingaman, that you would like to make at 
this moment?
    [The prepared statement of Senator Domenici follows:]

       Prepared Statement of Hon. Pete V. Domenici, U.S. Senator 
                            From New Mexico

    Madam Chairman, thank you for holding this subcommittee hearing 
    Rural Water is the main topic of today's discussion and originally, 
Mr. Jim Dunlap from New Mexico was supposed to provide testimony with 
regard to the rural water bills on behalf of the National Rural Water 
Association. Unfortunately, his plane was cancelled this morning in 
Albuquerque and so he is not able to be here. However, Mike Keegan from 
the National Rural Water Association will be testifying on his behalf.
    I am excited by the prospect of providing clean and affordable 
water for our rural communities. The needs of these communities are 
astronomical and it is time for the Federal Government to step up its 
    The State of New Mexico Finance Authority has provided me with a 
list of over 100 rural communities in New Mexico that don't have 
sufficient water supply and water treatment facilities. These 
communities are poor, they are dry and they are pleading with the 
Federal Government for help. I cannot stand by and let this deplorable 
situation continue.
    Every state in the west has the same desperate problem. The U.S. 
Census Bureau estimates that 27% of the US Population lives in rural 
communities. EPA surveys have estimated that the funding needed to 
bring these community water and waste disposal systems up to safe 
drinking water levels could be over $50 billion.\1\ There are estimates 
that over 700,000 households in the United States have insufficient 
water supplies and 370,000 rural households are forced to haul water. 
These communities are hardest hit by our current drought and often have 
the highest incidences of water contamination. The EPA has determined 
that, on average, over 10% of rural communities in the 17 Reclamation 
states have contaminated water supplies. I challenge my colleagues to 
step up to this task How do we supply safe water for our rural 
    \1\ EPA 1997 Estimate that small community (< 3,300 people) systems 
would require $37.2 billion for water supply through the year 2014 and 
small communities (< 10,000 people) would need $13.8 billion for waste 
water treatment.
    The U.S. Department of Agriculture, HUD, and the Environmental 
Protection Agency work to address these issues, I applaud their 
efforts, but they can't do it alone. I am convinced that all agencies 
with responsibility to manage water resources must be engaged.
    There are two keys to the solution--better technology and 
appropriate funding.
    I am working to improve technology for such water treatment needs 
as arsenic, desalination and reuse . We will hold a hearing on these 
topics later this spring.
    Today is our chance to investigate ways for the Department of 
Interior to engage in solving rural water problems--to provide a 
program and the funding needed to help solve this national problem.
    My colleague Senator Bingaman has introduced rural water 
legislation (S. 1085). I have a separate version (S. 1732) and the 
administration has provided a third proposal (S. 2218). All of these 
bills would create a standing authority within the Bureau of 
Reclamation to address rural community water needs. There are, however, 
significant differences in the way each bill addresses actual 
construction, sharing costs, implementation of Tribal programs and the 
methods for prioritizing which communities get funded.
    Given that we are all anxious to improve the living and working 
conditions in rural communities in New Mexico and throughout the West, 
I am confident that we can work together to further develop legislation 
that takes the best of these three proposals.
    On another topic that will receive a bit less time, but which is 
equally important, I have introduced S. 1727 which authorizes 
additional appropriations for the Reclamation Safety of Dams Program. 
The Bureau of Reclamation has a very well documented need to maintain 
dams for their short and long-term safety. Reclamation has assessed the 
needs of our dams and I has found that the current authorization is not 
enough to meet the projected need. We must move quickly to authorize 
the additional $540 million dollars needed by this critical program.
    Finally, we will discuss S. 1791 which I jointly introduced with my 
colleague Senator Bingaman. We worked together on the original Lease 
Lot legislation last Congress, which I note passed the House and Senate 
unanimously. The Lease Lot Conveyance Act of 2002 directed-the 
Secretary of the Interior to convey property comprising 403 cabin sites 
(located along the western portion of the reservoirs in Elephant Butte 
State Park and Caballo State Park, New Mexico) under the administrative 
jurisdiction of the Bureau of Reclamation to the Elephant Butte/Caballo 
Leaseholders Association, Inc., for fair market value. The bill passed 
by Congress in 2002, however, was vague with regard to the disposition 
of proceeds collected from the sale of the lands.
    The purpose of S. 1791 is to amend the original act directing the 
Secretary of the Interior to deposit the proceeds into the Reclamation 
Fund for the benefit of the Elephant Butte Irrigation District.
    Madam Chairman, I thank you for holding this hearing which 
encompasses so many of the issues I care about.

                        FROM NEW MEXICO

    Senator Bingaman. Madam Chair, I would just thank you for 
having the hearing, and indicate my strong belief that this is 
an important issue. It's critical that we do have an active 
Federal program to address these rural water needs throughout 
the West, and we've got three bills that aim in that direction. 
There are some differences we need to discuss and decide which 
course to follow, but I think this is an important piece of 
legislation. I hope we can move ahead on the profitable version 
of this, which, of course, I now believe is the one that I 
introduced. But it's possible that I'll be persuaded that we 
need to make changes there.
    So thank you for having the hearing.
    Senator Murkowski. Thank you, Senator Bingaman.
    And with that, Commissioner Keys, we invite your testimony, 


    Mr. Keys. Madam Chairman, it's my absolute pleasure to be 
here to talk with you about these current bills this afternoon.
    I am pleased to present the administration's position on 
rural water issues in the Western United States. We must find a 
cost-effective and innovative solution to unmet water-supply 
needs in rural communities throughout the West. Of all of the 
challenges that we have, that's one of the greatest ones facing 
us right now.
    I would tell you that we absolutely have great appreciation 
for the work that we have been able to do with Senator Domenici 
and Senator Bingaman, for their leadership on the rural water 
issues. Their staffs have been a great help in us trying to put 
together this proposed legislation. And we appreciate the 
Committee's help in focusing on this West-wide issue that's 
before us all.
    Senator Domenici's bill, S. 1732, Senator Bingaman's bill, 
S. 1085, and the administration's bill, S. 2218, share the same 
goal, meeting Western rural water supply needs in a more 
systematic fashion. My comments today will focus on S. 2218, as 
this bill represents the administration's views.
    S. 2218 contains the following elements that we think 
comprise a complete legislative package to address rural water.
    The first is the needs assessment. The bill requires the 
Secretary to develop programmatic criteria and guidelines to 
guide Reclamation in rural communities for a predictable and 
fair process for evaluating rural water needs.
    The second is project evaluation, because each rural water 
project has been authorized individually. And because of the 
lack of general programmatic authority for Reclamation, we're 
limited in our ability to evaluate them against consistent 
criteria. As a result, rural water projects have not fared well 
during the budget process. S. 2218 will create more realistic 
expectations for project sponsors in this process.
    The third point is equity in cost sharing. S. 2218 would 
apply a well-established methodology identifying the capability 
to pay of rural communities to determine appropriate levels of 
local contribution with a 35 percent minimum non-Federal cost-
share. Capability to pay applies to trial projects, as well. 
But S. 2218 recognizes their unique circumstances and trust 
relationship with the Secretary of the Interior. Therefore, S. 
2218 allows the Secretary to reduce travel contributions for 
studies and project construction based upon an analysis, and to 
seek appropriations to assist tribes in paying for the 
difference between annual operation, maintenance and 
replacement costs, and their capability to pay those costs. As 
the projects generate economic benefits for tribes, the need 
for this Federal assistance with operation, maintenance and 
replacement costs should decline, facilitating greater self-
sufficiency for the tribal communities.
    The fourth point is identifying best project options. In 
the past, projects authorized have not looked at the full range 
of options available to the individual communities. As a 
result, even though a better or more cost-efficient solution is 
identified after authorization, the project cannot be changed 
without subsequent legislation. S. 2218 propose that 
Reclamation get involved early in the process in appraisal and 
feasibility study phases, and look at a full range of options 
for each project.
    The fifth is realistic schedules and cost ceilings. Early 
involvement of Reclamation will yield more attainable 
completion schedules and cost ceilings, avoiding later 
legislative fixes.
    The sixth point is coordination with other Federal rural 
water programs. All of the agencies with formal rural water 
programs--the Department of Agriculture, HUD, the Environmental 
Protection Agency--signed a joint memorandum to foster 
cooperation and encourage efficient use of funds. Due to our 
need for a formal program, Reclamation has not been able to 
formally participate, though we do work closely with these 
agencies at the field level. S. 2218 requires Reclamation to 
coordinate with Federal and State rural water programs to 
determine the most appropriate agency to undertake a given 
project and otherwise facilitate the development of the most 
efficient and effective solution to meeting the water needs of 
Western rural communities.
    Enactment of S. 2218 will provide authority to create a 
structured program that will enable Reclamation and the 
Department to establish criteria and make the process more 
consistent, equitable, and transparent. Establishment of a 
structured program will provide a desperately needed and 
demanded service to rural communities in the West that have 
previously been unserved.
    Again, I would like to thank Chairman Domenici for 
introducing S. 2218, and to Senator Bingaman for working very 
closely with us, and this committee for working with us on this 
legislation. Certainly, we would look forward to working with 
you as we go forward on these bills.
    The second bill that I would talk about today is S. 1727, 
our Safety of Dams Program. Madam Chairman, the administration 
strongly supports S. 1727, to increase the cost ceiling for the 
Safety of Dams Act by $540 million. This is needed because we 
anticipate that fiscal year 2004 and 2005 commitments will 
reach the currently-enacted ceiling.
    Madam Chairman, we can't take dam safety for granted. Half 
of our dams were built between 1900 and 1950; and 90 percent 
before current state-of-the-art design and construction 
practices evolved. Monitoring, facility, review, analysis, 
investigations, and emergency management are critical parts of 
our dam safety program.
    We're proud of our Safety of Dams Program. In 1997, the 
Association of Dams Safety officials reported that Reclamation 
has an effective dam safety program overseen by highly 
competent staff using state-of-the-art technology, standards, 
and expertise. Communication with water users is crucial to 
ensuring that any upgrades take into account economic impacts 
as safety-improvement alternatives are developed, selected, and 
implemented. Our policy and directives formalize this 
requirement, and we have enjoyed satisfactory results to date.
    Also, we support the legislation increasing the contract 
cost threshold from 750,000 to $1,250,000 for Reclamation to 
send a Safety of Dams Modification Report to Congress for 
review. This change is basically an adjustment for inflation 
since 1984.
    Madam Chairman, the last bill that I would talk about is S. 
1791, the Elephant Butte Lease Lot Conveyance bill. Madam 
Chairman, it is not possible for the Reclamation or the 
Department to support S. 1791. The issue is not new to 
Reclamation. When Congress enacted the Least Lot Conveyance Act 
of 2002, it considered, but wisely did not include, a provision 
to require proceeds from the lot sales to be deposited in the 
Reclamation fund on behalf of the Rio Grande Project, and made 
immediately available to the subject irrigation districts. 
Current law deposits proceeds from the sale of lands withdrawn 
from the public domain as a general credit to the Reclamation 
fund, and deposits sale proceeds from acquired lands as a 
credit to the project for which the lands were acquired. S. 
1791 would instead transfer the funds directly to the 
irrigation districts, circumventing the appropriate process.
    This battle has been fought in court, and the Tenth Circuit 
has reinforced the Department's position. The Department 
supported, and the President signed, the original Lease Lot 
Conveyance Act of 2002 because it did not include the language 
of S. 1791.
    Madam Chairman, that concludes my oral testimony. I would 
certainly try to answer any questions that you might have on 
any of these.
    [The prepared statements of Mr. Keys follow:]

   Prepared Statement of John W. Keys, III, Commissioner, Bureau of 
 Reclamation, Department of the Interior, on S. 1732, S. 1085, and S. 

    Madam Chairman, I am John W. Keys, III, Commissioner of the Bureau 
of Reclamation. It is my pleasure to present the Administration's 
position on rural water issues in the Western United States and on the 
following bills pending before the Committee:

   S. 1732, the Reclamation Rural Water Supply Act of 2003;
   S. 1085, the Reclamation Rural and Small Community Water 
        Enhancement Act; and
   S. 2218 the Reclamation Rural Water Supply Act of 2004, 
        which was introduced by request on behalf of the 

    The three rural water bills before this Committee launch the 
discussion of designing a programmatic integrated approach to meeting 
needs for clean and healthy water supplies in rural communities in the 
Reclamation States. The Administration agrees that we must find cost-
effective and innovative solutions to rural water needs. We applaud 
Chairman Domenici and Senator Bingaman for their leadership on this 
matter, and the whole Committee for focusing on this issue.
    The three bills have much in common. However, we think S. 2218, the 
legislation proposed by the Department, is the most comprehensive 
approach to addressing this issue. While S. 1732 establishes similar 
criteria and guidelines, it lacks important provisions related to the 
needs facing many Native American communities. S. 1085 is limited to 
authorizing studies, does not appear to address the Secretary's project 
development activities, and would seriously hamper Interiors ability to 
apply its professional expertise and oversight to project development.
    We appreciate Chairman Domenici's courtesy in introducing S. 2218. 
I would like to focus the Committee's attention today on S. 2218, first 
by describing the situation that Reclamation and the Department face 
with rural water issues, by explaining how S. 2218 addresses those 


    S. 2218 would establish a rural water supply program within the 
Department of the Interior and authorize Reclamation to develop 
programmatic criteria and guidelines that would guide Reclamation and 
rural communities through a predictable and fair process for evaluating 
the water supply needs in rural communities. Further, S. 2218 
establishes a programmatic framework for managing and prioritizing the 
development and construction of rural water supply projects for the 
benefit of communities, both Indian and non-Indian.

                         HISTORICAL BACKGROUND

    Since the early 1980's, Congress has authorized thirteen separate 
single purpose Reclamation projects for municipal and industrial water 
supply in rural communities in Reclamation States. The total federal 
budget authorization for those projects is over $2.3 billion. These 
have all come at a time when security and law enforcement costs, 
operation and maintenance costs, dam safety costs, and other program 
obligations continue to grow, competing for scarce budget resources.

                      NEED FOR RURAL WATER SUPPLY

    Millions of Americans still live without safe drinking water, a 
basic necessity of life. A 1995 needs assessment conducted by the U. S. 
Department of Agriculture's Rural Development State Offices estimated 
that over 1 million people in the United States had no water piped into 
their homes, and more than 2.4 million had critical drinking water 
needs. Recently released Environmental Protection Agency (EPA) data 
revealed $31 billion in total funding needs for small systems serving 
populations of 3,300 or less. Many rural residents carry heavy 
containers of water from cisterns, purchase bottled water at distant 
stores, or pay a water hauling service for these potable water needs.


    In 1995. the General Accounting Office reported that eight Federal 
agencies had 17 programs designed specifically for rural areas to 
construct or improve water and wastewater facilities. These programs 
are managed in the Departments of Agriculture, Commerce, Health and 
Human Services, Interior and the Environmental Protection Agency. Of 
these programs, 11 are small grant programs, one is a loan program, 3 
provide a combination of grants and loans, one provides ``direct 
payment for specified uses'' and one provides Federal surplus property 
and goods.
    In general, assistance through these programs is available based 
upon specific eligibility criteria relating to the missions and 
authorities of the agencies and programs. In contrast, Reclamation has 
had no structured program for developing or funding rural water 
projects and therefore has no established eligibility criteria.
    The other Federal rural water programs that exist today offer a 
combination of grants and loans for each project. The main difference 
between those projects and the ones Congress directs Reclamation to 
undertake is the scope of Federal involvement and the size of the 
projects. Projects that the other Federal programs support tend to be 
small. In contrast, the majority of the projects that Reclamation has 
been involved in tend to be large, often including more than one local 
entity, covering a large geographic area, and serving multiple local 
utilities. They cost from $20 million for the Perkins County Project in 
South Dakota to $417 million for the Mni Wiconi Project in South 
Dakota. Further, they tend to take five to ten years to plan, design, 
and construct and usually involve a significant amount of technical 
assistance from Reclamation employees and some longer-term design, 
construction, and contract management oversight.
    Over the past fifteen years, numerous rural communities have 
approached Reclamation either with a proposed project in hand or asking 
for assistance in developing a project, based upon the model of 
previous projects that have already been authorized for Reclamation's 
involvement. What we have learned from these communities is that they 
do not seem to meet the criteria for the established Federal programs: 
their communities are too small or too large, too sparsely or too 
densely populated, or they cannot afford either the up-front local cost 
share requirements or the continuing operations, maintenance and 
replacement (OM&R) costs that are required. In some cases, they come to 
Reclamation because other Federal programs did not give their projects 
priority for funding.


    As I noted above, thirteen communities have secured legislation 
authorizing Reclamation projects. These represent a major Reclamation 
obligation for developing and providing rural water supplies without an 
integrated rural water program.
    Because Reclamation lacks generic authority to plan, design, and 
construct rural water projects, it has limited ability to set 
priorities and criteria for project development, and to budget 


    In 2002, as part of the President's budget and performance 
integration initiative. Reclamation's rural water activities were 
assessed under two lenses: the Program Assessment Rating Tool (PART) 
and Common Measures. Under PART exercise our rural water program was 
rated ``Results Not Demonstrated,'' despite the fact that Reclamation's 
rural water projects were meeting authorized project purposes. Further, 
the assessment concluded that stronger controls for project development 
were needed and ``lack of agency involvement during project development 
mats result in a project that is not in the best Federal interest.''
    As a result of the PART exercise, the Administration suggested 
legislation should be developed to establish a Reclamation rural water 
program with adequate controls and guidelines. S. 2218 is our response 
to that good-government recommendation. The Administration urges its 


    The process of evaluating our rural water activities, both for the 
PART analysis and in crafting S. 2218, has helped us identify the 
following challenges that restrain our ability to effectively serve our 
customers and help Western rural communities meet their water needs. 
Addressing these challenges is the purpose of S. 2218.
Need for Quality Control
    Because each rural water project has been authorized individually, 
and because of a lack of general programmatic authority, Reclamation 
and the Department have been limited in their ability to budget for 
projects effectively or establish relative priorities either within our 
budget for rural water activities or within Reclamation's overall 
budget. As a result, the rural water projects have not fared well 
during the budget process. Establishing an integrated rural water 
program as proposed in S. 2218 will improve budgeting and other 
priorities. It will also allow for more realistic planning so that 
rural water projects are not proposed in a vacuum, but are, as part of 
the program's budgeting and planning process, compared to a set of 
eligibility criteria as well as to other rural water related activities 
all within an overall cost ceiling established by the program. This 
approach will foster some competition, will allow for the development 
of priorities, and could create more realistic expectations when a 
project is authorized for construction that it will actually be 

Cost Share Requirements Not Based Upon Capability to Pay
    The non-Federal cost shares for each of the currently authorized 
projects range from zero for the Indian portion of the Mni Wiconi 
Project in South Dakota to 25 percent for the non-Indian Dry Prairie 
Rural Water System connected to the Fort Peck Reservation Rural Water 
System in Montana. Most recently, it appears that non-Federal cost 
share levels have been based upon the precedent created by previously 
authorized projects rather than by an actual assessment of the 
capability of the communities to pay for the capital costs. In the 
absence of a formal program, Reclamation has had limited input leading 
up to authorization of projects or to setting a reasonable cost share 
for local sponsors.
    In contrast, capital investment costs associated with traditional 
Reclamation projects or portions of projects authorized for municipal 
and industrial (M&I) use must be fully repaid with interest. Further, 
traditional Reclamation irrigation projects require that repayment of 
costs be based upon a project sponsor's ability to pay, as determined 
through the study of both the projects sponsor's financials (cash flow) 
and the project's economic (cost/benefit) feasibility.
    For these reasons, S. 2218 includes a well-established Reclamation 
methodology identifying the ``capability to pay'' of rural communities 
for determining the appropriate level of their contribution for 
development and construction costs and would establish a 35% minimum 
non-Federal contribution.

Mismatch Between Current Authority and Sponsors' Expectations
    Current Reclamation law and policy do not satisfy expectations of 
rural water users. Current Reclamation law and policy requires project 
specific authority for feasibility studies and construction and that 
municipal water projects repay all allocated construction costs with 
interest. Although we can temper the impact of this requirement with 
long-term, low-interest-rate contracts, full repayment can be an 
unrealistic requirement in areas with low population densities and 
large construction costs.
    Over the past several years, Reclamation has opposed every piece of 
legislation authorizing rural water projects--citing inadequate 
repayment requirements. However, through 2003, Congress has authorized 
thirteen rural water projects for Reclamation's involvement, each of 
which has included repayment terms proposed by the project proponents. 
This has resulted in relatively low non-Federal cost-share levels for 
authorized projects.
    The legislative template for authorizing individual rural water 
systems has come as a result of negotiations mostly between the 
sponsors and Congress, with limited Reclamation or Administration 
involvement. As a result, many of these projects do not meet basic 
planning guidelines and are treated as earmarks in the development of 
the President's budget.
    In response, S. 2218 proposes to establish a new structure and 
method for consideration of rural water projects. The bill 
distinguishes these rural M&I projects from traditional M&I projects 
which require 100% repayment of construction costs plus interest. S. 
2218 proposes to establish rural water-specific guidelines and criteria 
for evaluating prospective projects as well as the development of cost 
share requirements based upon a technical analysis of the capability of 
the non-Federal entities to pay the appropriate share of the costs.

100% Reimbursability an Impediment For Tribes
    Traditional Reclamation M&I projects requiring 100% reimbursement 
of construction and operation and maintenance costs, with interest, 
have proven particularly difficult for Tribes. S. 2218 recognizes the 
distinct circumstances and conditions faced by many Tribes. First, the 
Administration bill would allow the Secretary to reduce the Tribal 
contribution for studies and project construction based upon a 
capability-to-pay analysis. Further, while the legislation makes OM&R 
the responsibility of the non-Federal project entities, S. 2218 would 
allow the Secretary to seek appropriations to assist Tribes in paying 
for the difference between the actual OM&R costs and the projected 
revenues from water sales to project beneficiaries. As the projects 
generate economic development, Tribes will have a greater capability to 
pay for their OM&R costs and the need for this assistance will decline, 
facilitating greater self-sufficiency for the Tribal communities.

Project Design and Financial Precedent
    Following the precedent of the Mni Wiconi Project in South Dakota, 
most recent projects (both tribal and mixed tribal and non-tribal) have 
had similar design configurations and cost-share requirements. The 
usual approach has been to build pump stations, water treatment 
facilities and pipelines to dispersed communities. While this model 
works for many communities, Reclamation would like to use its expertise 
and knowledge to look at these and other alternatives to effectively 
and efficiently meet the water supply needs of other more rural 
communities. For example, local desalination or water reuse and 
recycling facilities could be more cost-effective approaches for some 
communities, especially as new technology is developed. Making 
institutional changes to facilitate the creation or expansion of water 
markets could also offer opportunities to address, in a more efficient 
and quick manner, the water supply challenges of some communities.
    This is a key reason why the Administration wants to establish a 
structured rural water program with a consistent process by which 
Reclamation and the other appropriate Federal and state agencies will 
work with the local communities to identify their water supply needs 
and develop a proposal that is both appropriate to those needs and cost 

Current Studies May Not Fully Explore all the Options and are Completed 
        Without Reclamation's Involvement
    Because Reclamation does not have an integrated rural water 
program, communities in need of technical expertise do not have the 
ability to seek and receive assistance from Reclamation to identify 
their needs and explore all the alternatives. Instead, many follow the 
precedents of previously authorized projects and initiate studies that 
have been reviewed by Reclamation and are not prepared in accordance 
with current Federal planning and engineering standards. As a result, 
while these plans become the basis for legislation, some are not a good 
basis for decision-making, may not have explored all the options, and 
must be redeveloped once the project is authorized. Meanwhile, the 
basic project mandated by legislation cannot be changed without further 
legislation, even if it turns out not to be the most effective option.
    Reclamation's current role is primarily as banker, administrator, 
and post-authorization overseer to monitor the Federal investment. In 
most cases, Reclamation has had no involvement in the early scoping or 
project evaluation process, despite its expertise in the planning, 
design, and construction of major civil works projects. Since most of 
the funds provided for rural water projects are Federal, it would be 
prudent to have early Federal involvement in their development and 
design as well as on-going administrative oversight sufficient to 
protect the Federal investment and to minimize escalating project 
    The rural water program proposed in S. 2218 will allow communities 
to approach Reclamation for assistance early in the process and, more 
importantly, will allow Reclamation to participate in the appraisal and 
feasibility study processes for rural water projects in the Western 
United States. This early involvement will allow Reclamation to engage 
in the early stages of scoping to evaluate the comprehensive needs of 
the Communities.
Inadequate Cost Ceilings
    Because Reclamation was not involved in pre-authorization planning 
for most of the currently authorized rural water projects, the cost 
ceilings and completion schedules that we are asked to follow often do 
not meet Reclamation's or the project's needs. For example, in the 
107th Congress, the completion sunset date for the Mni Wiconi Project 
had to be extended and the Federal cost ceiling had to be increased by 
an additional $58 million.
    Establishment of the rural water program proposed in S. 2218 allows 
Reclamation to be involved in the development of rural water systems 
from the very beginning, rather than after the project is already 
authorized. This will enable Reclamation to work with the non-Federal 
entities to prepare appropriate cost estimates as well as realistic 
completion schedules and hopefully avoid the need for such follow up 
legislation in the future.

O&M Obligations for Native American Projects
    The legislation authorizing the Mni Wiconi Project and the Gamson 
Project each directed the Secretary to operate and maintain project 
facilities constructed to serve the Indian reservations. As 
construction of these Indian rural water projects are completed, the 
associated O&M costs consume an increasing percentage of Reclamation's 
budget with no prospect of declining. If the trend toward non-
reimbursable O&M costs for the tribal systems continues, current and 
future budget targets will become totally consumed by tribal O&M 
obligations to the exclusion of other budget priorities and activities. 
Further, these ongoing obligations will have increasingly significant 
budget impacts without any consideration for the improvements to the 
tribes' financial situation or to their improved capability to pay for 
these O&M costs due to the improved water supply systems.
    S. 2218 proposes to address this issue by allowing Reclamation to 
assist Tribes in meeting their OM&R needs, but does so in such a manner 
as to recognize and account for the positive economic impacts that the 
rural water delivery projects will have in these communities. It will 
also encourage greater tribal self-sufficiency, conservation, and the 
development of the technical and financial expertise needed to 
efficiently manage these water systems themselves. In contrast to 
current practice of subsidizing all the OM&R costs associated with 
Indian rural water facilities, S. 2218 allows the Secretary to seek 
appropriations to assist Tribes to pay for the difference between the 
actual OM&R costs and the projected revenues from water sales to 
project beneficiaries. We anticipate that as project benefits spur 
economic development, Tribes will have a greater capability to pay for 
their OM&R costs and the need for this assistance will decline.

Lack of Coordination with Other Federal Rural Water Programs
    In an effort to expand coordination and cooperation, USDA, HUD, and 
EPA signed a Joint Memorandum to foster cooperation, encourage more 
efficient use of funds, and reduce administrative inefficiencies among 
the various organizations that administer water programs at the 
Federal, state, and local level. Lacking a formal rural water program, 
Reclamation has not been able to formally participate, though we do 
work closely with these agencies at the field level.
    By establishing a formal rural water program in Reclamation, S. 
2218 would empower Reclamation to coordinate with other Federal and 
state rural water programs to determine the most appropriate agency to 
undertake a given project and otherwise facilitate the development of 
the most efficient and effective solution to meeting the water needs of 
western rural communities. Thus, S. 2218 will enable the rural water 
supply programs in the various Federal and state agencies to maximize 
the use of the limited Federal and state resources identified for this 


    In conclusion, Madam Chairman, Reclamation has been involved in 
rural water projects for a long time. In fact we were founded as an 
agency to deal with rural water issues, primarily related to 
irrigation, in the Western United States. Enactment of S. 2218 will 
provide authority that is critically needed to create a structured 
program that will enable Reclamation and the Department to set 
priorities and make the process more equitable and transparent by 
establishing a consistent set of criteria and guidelines. In so doing, 
the establishment of this structured program will enable us to provide 
service to rural communities in the West that have previously been 
    Madam Chairman, let me conclude by reiterating my appreciation to 
you, Chairman Domenici and Senator Bingaman for your leadership on this 
issue. We look forward to working closely with you and your staffs to 
make this program a reality. I am pleased to answer any questions.

    Prepared Statement of John W. Keys, III, Commissioner Bureau of 
          Reclamation, Department of the Interior, on S. 1727

    Madam Chairman, I am John W. Keys, III, Commissioner of the Bureau 
of Reclamation. Thank you for the opportunity to provide the 
Department's views on S. 1727, to increase the authorized cost ceiling 
for the Reclamation Safety of Dams Act administered by the Bureau of 
Reclamation's Dam Safety Program by $540 million, and adjust the 
reporting threshold for inflation. The Administration strongly supports 
this bill.
    Since the passage of the Reclamation Safety of Dams Act of 1978, 
the Bureau of Reclamation has developed a model dam safety program to 
implement the Federal Guidelines for Dam Safety and to modify dams in 
accordance with the, act. In 1996, an independent review team comprised 
of representatives from the Association of Dam Safety Officials was 
assembled to assess the Department of the Interior's Dam Safety 
Program. It was the first outside review of Reclamation's program in 
two decades. In 1997, the team released a comprehensive and independent 
report. The report found that the Bureau of Reclamation has ``an 
effective Dam Safety Program'' overseen by ``highly competent'' staff 
using ``state-of-the-art technical standards and expertise.'' 
Reclamation's ability to respond to dam safety issues and to take 
preventative, corrective actions to reduce the public risks under the 
authority of the Reclamation Safety of Dams Act was a critical 
component of this favorable peer review. The team made a number of 
recommendations in Reclamation's program, and we have taken steps to 
implement them. Among them, we now have an officer who audits and 
oversees the dam safety program, but is independent of the dam safety 
program staff. Outside experts annually review Reclamation's dam safety 
activities to ensure that the program has adequate policies and 
procedures in place to address public safety issues.


    Public Law 95-578 and Public Law 98-404, along with Federal 
Guidelines for Dam Safety and the Department manual, guide 
Reclamation's dam safety efforts. In this regard, Reclamation's top 
priorities are to deliver water to and generate power for its customers 
without disruption, while protecting public safety.
    There are 369 high hazard dams and dikes located at 250 water 
projects in Reclamation's inventory. The dam safety program helps to 
ensure the safety and reliability of these facilities. Approximately 50 
percent of Reclamation's dams were built between 1900 and 1950 and 
approximately 90 percent of the dams were built before current state-
of-the-art design and construction practices. Considering the age of 
Reclamation dams, the ongoing monitoring, facility reviews, analysis, 
investigations, and emergency management are critical components of the 
dam safety program. We are proud of our dam safety work but we also 
realize we cannot take safety for granted.
    In its 100 year history, Reclamation has only had one dam failure--
Teton Dam--that resulted in loss of life and damage to property. Teton 
Dam toppled in 1976 during initial filling due to a design and 
construction deficiency.
    After Teton, Reclamation instituted a dam safety program. Congress 
enacted the Reclamation Safety of Dams Act in 1978 (Public Law 95-578) 
to preserve the structural safety of Reclamation dams and facilities. 
In 1984, Congress adopted amendments (Public Law 98-404) instituting a 
15 percent non-Federal cost share requirement for modifications made as 
a result of new hydrologic or seismic information or changes in the 
state-of-the-art technology. Public Law 95-578 authorized $100 million 
and Public Law 98-404 increased the authorized cost ceiling an 
additional $650 million, indexed for inflation. The 1984 Amendments 
also directed Reclamation to submit to Congress, prior to taking 
corrective actions, a report on any modifications expected to exceed 
$750,000 in actual construction costs. In Fiscal Years 2001 and 2002, 
Congress adopted amendments to increase the authorized cost ceiling by 
$95 million (Public Law 106-377) and by $32 million (Public Law 107-
117) respectively.
    Recognizing the importance of our relationships with the end users 
of the water and power from Reclamation projects, we have adopted a 
policy and directives that formalize requirements for communicating the 
need for modifications in a timely fashion. The policy and directives 
also require the development of a plan in cooperation with our water 
and power contractors to assure continued communication and involvement 
during the development of alternatives, selection of a preferred 
alternative, and implementation of the actions required to reduce risk.
    As of September 30, 2003, approximately $159 million remained in 
budget authority for the dam safety program. Reclamation anticipates 
that entire remaining authorization ceiling will be committed in fiscal 
years 2004 and 2005 to fund new and ongoing projects.

                           EFFECT OF S. 1727

    S. 1727 would make two primary changes in the existing program.
    First, the bill would increase by $540 million (indexed for 
inflation) the authorized cost ceiling for the Reclamation Safety of 
Dams Act. Reclamation anticipates that this funding level will provide 
Reclamation with authority to carry out safety of dams activities 
through approximately Fiscal Years 2012-2014, based on current 
projected funding needs for safety of dams modifications. If annual 
obligations are required at a faster rate to meet identified needs, the 
ceiling would be expended sooner.
    Second, the bill would increase from $750,000 to $1.25 million the 
contract cost threshold amount for the Bureau of Reclamation to send a 
safety of dams modification report to Congress for review. This change 
would adjust the threshold for inflation since 1984, and thus allow 
Reclamation to independently initiate the modifications of the size and 
scope contemplated in the 1984 amendments.


    Since 1978, when Congress first created the Safety of Dams program, 
we have carried out 64 risk reduction corrective actions and 4 more are 
currently underway. Reclamation has implemented these corrective 
actions to protect public safety at the lowest cost possible.
    S. 1727 would provide the additional budget authority for this 
effort to continue into the future. While the Administration supports 
the increase of appropriations ceiling, we will continue to evaluate 
this program for potential changes to improve planning and operations, 
better serve the taxpayer, and protect the safety of the people and 
businesses that rely on the soundness and integrity of Reclamation 
    In conclusion, Madam Chairman, the Administration strongly supports 
S. 1727, and I would be pleased to answer any questions you may have.

    Prepared Statement of John W. Keys, III, Commissioner Bureau of 
          Reclamation, Department of the Interior, on S. 1791

    Madam Chairman and Members of the Subcommittee, I am John W. Keys, 
III, Commissioner of the U.S. Bureau of Reclamation (Reclamation). I am 
pleased to be here today to present the views of the Department of the 
Interior on S. 1791, a bill to amend the Lease Lot Conveyance Act of 
2002 to provide that the amounts received by the United States under 
that act shall be deposited in the Reclamation Fund.
    On December 16, 2002, the President signed into law the Lease Lot 
Conveyance Act of 2002 (P.L. 107-335) which provides for the conveyance 
of 403 lease lots at Elephant Butte and Caballo Reservoirs to the 
Elephant Butte/Caballo Leaseholders Association, Inc. (Association). 
Reclamation has been working closely with the Association to carry out 
the objectives of P.L. 107-335.
    Madam Chairman, the Department cannot support S. 1791. In previous 
testimony on H.R. 706, the Lease Lot Conveyance Act of 2002, I spoke in 
opposition to a similar provision in that legislation which would have 
required the proceeds derived from the sale of the lots to ``be 
deposited in the Reclamation Fund on behalf of the Rio Grande Project 
and made immediately available to the subject Irrigation Districts 
under subsection I of the Fact Finders Act.'' The bill was subsequently 
amended, remaining silent on the issue and leaving in place existing 
law as to the general disposition of the funds derived from the sale of 
the leased lots.
    Existing law provides that the proceeds from the sale of lands 
withdrawn from the public domain be deposited as a general credit to 
the Reclamation Fund and that proceeds from the sale of acquired lands 
be deposited into the Reclamation Fund as a credit to the project for 
which those lands were acquired.
    The proposed amendment would direct all funds, from both acquired 
lands and withdrawn public lands, to be deposited in the Reclamation 
Fund as a credit to the project and immediately made available to the 
irrigation districts. The Department believes the proceeds from the 
sale of the leased lots should be disposed of consistent with existing 
    In continuing litigation during the past 13 years, Reclamation has 
contended that these revenues, as well as other similar project 
revenues, are not of the types of revenues covered by Subsection 4(i) 
of the Fact Finder's Act. The 10th Circuit Court of appeals has ruled 
that Subsection 4(i), as amended by the Haden-O'Mahoney amendment (43 
U.S.C. Sec. Sec. 391a-1, 392a), provides credits for revenues derived 
from only two specific sources: leasing of project grazing and farm 
lands; and the sale or use of town sites. Revenue from the sale of 
these lots does not derive from either of these specific sources, 
insomuch as the lease lots are being sold not leased. and ``town 
sites'' is a legal term of art applying only to town sites which were 
created under the Town Sites and Power Development Act of 1906 (34 
Stat.116; 43 U.S.C. Sec. 561, et seq.). The Districts are not currently 
entitled to receive Subsection 4(i) benefits from any sources other 
than those two specific sources listed above. In addition to amending 
the Conveyance Act, Section 1(2)(B) of the proposed bill would amend 
Subsection 4(i) of the Fact Finders Act to provide these Districts with 
a unique benefit. We are concerned that the amendment would set a 
precedent and encourage other districts to seek benefits under the Fact 
Finders Act that are otherwise not provided.
    Also important to this case is that a small portion of the lease 
lots are located on public land that was withdrawn from the public 
domain for the project by Reclamation. As such, the Districts have 
never paid anything toward acquisition cost for these lands. The 
remainder of the lots are located on lands acquired out of private 
ownership by Reclamation for construction of the Project. Originally, 
the Districts cost of purchasing these lands was included in the 
Districts' repayment obligation. However, in 1937 the Districts were 
relieved of their obligation to repay any portion of the cost of these 
acquired lands and the cost of constructing Elephant Butte Dam and 
Reservoir. All payments made by the Districts prior to that time were 
returned to them as credits toward their remaining repayment 
obligation. All costs of constructing Caballo Dam and Reservoir were 
deemed non-reimbursable by the Districts and charged to flood control. 
In light of this history, the proposed amendment would make available 
to the respective irrigation districts funds from the sale of lands to 
which they have no legal right, and where the federal government has 
borne all the associated costs.
    In summary, while the Department supported the original Lease Lot 
Conveyance Act of 2002 as it was passed and signed into law, we cannot 
support passage of S. 1791 for the reasons stated above.
    That concludes my testimony, Madam Chairman. I would be happy to 
answer any questions the Subcommittee may have.

    Senator Murkowski. Thank you, Commissioner.
    Senator Dorgan, we've just heard the testimony from 
Commissioner Keys. I don't know whether you had any comments 
you wanted to put into the record prior to us beginning our 
questions. I've indicated we're probably going to take a break 
for a vote here pretty quickly, but if you wanted to make an 
opening statement, you could do that.

                       FROM NORTH DAKOTA

    Senator Dorgan. Thank you, Madam Chairman. I've been in an 
Agriculture Appropriations Subcommittee hearing downstairs on 
the first floor, so I regret I was delayed, but I appreciate 
your starting the hearing.
    Senator Murkowski. Thank you, Senator.
    Commissioner, you talked about the coordination with other 
agencies, and recognize that this is a substantial issue, and 
complementary efforts with these agencies are critical. It also 
seems logical to utilize, to the maximum extent practicable, 
existing infrastructure that could complement greater efforts 
in many of the smaller communities. Will connection to existing 
Bureau of Reclamation infrastructure aid in truly bringing 
water to the rural communities?
    Mr. Keys. Madam Chairman, connection to existing 
Reclamation facilities would be possible under any of the 
alternatives that we consider for rural water. What we're 
trying to do in the administration's bill is make available, to 
those communities, the engineering expertise that we have and a 
programmatic approach to evaluating the needs, evaluating the 
proposed solutions, picking the best solution, and then 
implementing it, rather than it just being kind of a hit-or-
miss-type operation now.
    But your question is, Would connection to Reclamation 
facilities be there? It would be there under any of those 
    Senator Murkowski. We recognize, in Alaska, that when we're 
talking about water, and clean, potable water, we've got some 
very, very serious issues. Our Indian Health Service estimates 
that approximately 20,000 households in American Indian 
communities and in Alaska native villages lack potable water 
supplies. Alaska and Hawaii clearly have some challenges, when 
it comes to their water supplies in rural areas, that I would 
suggest are equal to those in the Southwest. Given this need, 
why should we target water-supply development subsidies to only 
certain rural and small communities instead of opening up 
funding to other communities, such as those in Alaska and 
    Mr. Keys. Madam Chairman, the 1902 Reclamation Act only 
authorized Reclamation to work in the 17 Western States, and 
those other States that we have addressed with this 
legislation--certainly if your committee--subcommittee or the 
committee or Congress would like us to work with the other two 
States you mentioned, we would be more than happy to do that.
    Senator Murkowski. I guess I would note that Alaska and 
Hawaii weren't yet States when we had the Reclamation Act, but 
you wouldn't be averse to considering such efforts in 
additional States if that was appropriate?
    Mr. Keys. Madam Chairman, we would not. I would hasten to 
add that you would need to put that language in there to 
authorize us to do it, because currently we don't have that 
    Senator Murkowski. I understand. Do you have a sense of the 
magnitude of the need for infrastructure rehabilitation, 
modernization, and development necessary to support the rural 
communities in the designated Reclamation States?
    Mr. Keys. The only measure that I have right now are the 
number of projects that we are working on at the direction of 
Congress and those that have asked for help. Currently, we are 
working on 16 of those projects--I'm sorry, 17--and we have had 
requests for aid in looking at others--from 33 or 34 other 
small communities. The large majority of those are Indian 
communities in the Western United States, so I think that's an 
indication that there's a large number of them out there that 
need that sort of help.
    Senator Murkowski. So you just identify them by a specific 
project, then?
    Mr. Keys. Yes.
    Senator Murkowski. OK. As far as the dam safety issue, I 
understand that the administration recently made some policy 
decisions related to dam safety issues in an effort to provide 
for more local participation in the process, and I think we 
would all agree that local involvement in decision-making is a 
good thing. Can you explain the specific changes that were made 
with respect to allowing for local involvement? And can you 
address how these changes will allow for--just exactly that, 
for more local involvement and participation in the process?
    Mr. Keys. Madam Chairman, in the past, it was almost like 
we had a black box, and we would go in there and decide what 
was the right thing to do with the dam, and come out and say, 
``This is what it is. And just give us your money, and we'll 
build it.'' Over the past year, we've developed a process so 
that the irrigation district or the entity that is involved in 
the repayment for that project is able to come in and attend 
the sessions where the different alternatives are discussed, 
and see different alternatives that could be implemented for 
the Safety of Dams fix. It does not mean that we give up the 
authority to decide which one is the right one to do, because 
ultimately the liability and responsibility is with 
Reclamation. But we can walk those project sponsors through the 
whole design and construction process so that they can see how 
much of their money it will take, how it will be used--in other 
words, how every penny of it will be spent, and then how the 
project will be operated after it's done.
    I understand that Mr. Smith is going to propose an 
amendment, and we support that. There is a couple of issues 
that we're trying to work through in trying to make this whole 
process transparent. The one issue is security. In other words, 
looking at some of the portions of those facilities that 
probably should not be in the public eye. The second part of it 
is trying to be sure that we don't get into a dueling 
consultants situation where a district might hire a consultant 
to look at the fix, and come in and say, ``We think it should 
be something different.'' Those are two that we're still trying 
to work through.
    But the ultimate goal in all that we're doing there is to 
make that process transparent so that the project sponsors can 
see how the process operated, what is being proposed, what the 
alternatives are, and have the questions answered of why the 
final alternative was selected.
    Senator Murkowski. Senator Bingaman.
    Senator Bingaman. Thank you very much.
    Commissioner, one of the key differences in the three bills 
that give the Bureau of Reclamation this new authority is that 
the bill Senator Dorgan and I and Senators Baucus and Daschle 
have proposed authorizes the Bureau to undertake appraisal 
level and feasibility studies. It does not, then, also say that 
the Bureau can go ahead and construct projects, absent a 
separate authorization by Congress. I think what we were trying 
to do was to follow what I understand has always been the 
practice, and that is that each individual rural water project 
would have to be authorized by legislation out of the Congress 
so that it wouldn't be totally up to the appropriators which 
efforts were pursued. Is that a big difference between what we 
are proposing and what you believe ought to happen? If so, how 
do you explain your position on that?
    Mr. Keys. Mr. Bingaman, that is not different than what we 
are proposing. We're proposing the same thing, that we work 
with the local folks on appraisal-level studies and 
feasibility-level studies. And then once we have decided with 
them on what approach to take, we come back to this committee 
for--or to the Appropriations Committee--we come back here for 
authorization, and then we go to the Appropriations Committee 
for funding.
    Senator Bingaman. So you're in agreement with what we are 
trying to accomplish on that particular issue.
    Mr. Keys. On that particular issue, we absolutely agree.
    Senator Bingaman. OK, that's very helpful.
    Madam Chairwoman, let me put in a statement that the Navajo 
Nation has provided to us, if we could just include that in the 
record related to this hearing.
    Senator Murkowski. That will be included.
    Senator Bingaman. Let me also ask, very briefly, about 
another bill that you testified on here that is a subject of 
the hearing. This is more a statement than it is a question, 
but in your testimony on S. 1791, you referenced this ongoing 
litigation that exists between the Bureau of Reclamation and 
the Elephant Butte irrigation district. Your assessment of the 
decisions that have been rendered by the District Court and the 
Tenth Circuit Court differ from what my staff tells me we 
understand those opinions to hold. So what I'm going to do is 
to develop some questions that I can submit to you for the 
record, and maybe get clarification as to exactly how we do 
disagree on this, and see if there is a way to resolve that.
    Mr. Keys. Mr. Bingaman, we would be more than happy to do 
that. I would tell you that it's a long and complicated history 
there, and we would certainly try to work with your questions 
to work through that to answer them.
    Senator Bingaman. OK. Well, thank you very much. I think it 
is important that we try to clarify if we do have a real 
disagreement about what those decisions decided.
    Thank you very much, Madam Chairman.
    Senator Murkowski. Senator Dorgan.
    Senator Dorgan. Commissioner, based on your answer to 
Senator Bingaman, I assume, then, you would not object to our 
adding to S. 2218 a provision of the type that exists in our 
legislation S. 1085 requiring the Secretary to develop a plan 
to ensure that the already authorized projects are completed 
within the timeframe set forth in the authorizing legislation. 
The reason I ask that question is this. If we're going to talk 
about new projects, we have eight rural water projects in North 
Dakota underway. The NAWS Project, for example, which scores 84 
on the so-called ``PART analysis,'' has been recommended for no 
funding last year, not enough funding this year. You've got a 
crease in your loafers, I think, from the shovel that--didn't 
you wield a shovel in Minot 1 day when we shoveled some dirt to 
have the groundbreaking for this wonderful NAWS Project? You 
did pretty well with a shovel, by the way, but we did the 
groundbreaking. It is a great project, by all accounts. Then we 
get no funding recommended last year. We had to add it here in 
Congress, and less-than-adequate funding this year.
    The proposition that Senator Bingaman asked you about is 
very important. Do you believe that we ought to proceed with 
the authorized projects that are good projects, and complete 
them? And if so, would you object to our putting a provision 
into S. 2218 that is similar to the provision we have in our 
bill, S. 1085?
    Mr. Keys. Mr. Dorgan, S. 2218 does not affect those that 
are already authorized. This is a way for us to deal with the 
needs in the future. Those that are already authorized----
    Senator Dorgan. I understand that. That's not my question.
    Mr. Keys. I understand. Those that are authorized, we are 
working diligently to get them done as quickly as possible with 
the funding and the means that we have. Certainly, we're 
willing to work with you on this kind of provision. I could not 
speak--let me just say that we will work with you on a 
provision to do what you're trying to get done.
    Senator Dorgan. Well, Mr. Commissioner, I would intend to 
offer an amendment when we mark up this legislation to do just 
that. The people in the city of Minot are paying a 1-percent 
sales tax for the purpose of developing the local cost-share 
for NAWS. We've got people paying up to a $750-per on a hookup 
charge, waiting for water from NAWS. And then, last year, we 
opened the President's budget, and he says, ``Oh, by the way, 
that project for which Commissioner Keys shoveled the dirt at 
the groundbreaking, we recommend zero funding.'' And I asked 
why. Well, they've got this goofy thing called PART, and 
everyone understands that this project would pass every test--
and, of course, it has--under PART. So you can understand my 
frustration and the frustration of the people of North Dakota. 
Mr. Koland is going to represent that in his testimony, and he 
has every right to be frustrated and upset by this spending 
pattern, or the pattern of underfunding that which we have been 
    So I really hope you will support our putting an amendment 
on S. 2218 that does exactly what we want to do in our bill.
    Mr. Keys. Mr. Dorgan, we'd be glad to work with you.
    Senator Dorgan. Let me just mention briefly--you know that 
with the problem of both a drought and then also the 
mismanagement of the Missouri River by the Corps of Engineers, 
we've threatened to lose water for the city of Parshall in 
February. Your agency was very involved in extending the line. 
We actually lost water for 8,000 people down in the Fort Yates 
area. And I introduced a piece of legislation that would take 
the management of the Missouri River system away from the Corps 
of Engineers and give it to the Bureau of Reclamation. And it 
had nothing to do with my abiding affection for the Bureau. I 
have plenty of problems with the Bureau. But I was just trying 
to send a message to the Corps of Engineers that, ``If you 
continue this mismanagement, you ought not be managing this 
river system.''
    So that's a long way of saying thank you for what you've 
done. I should say to you that your men and women of the 
Bureau, down in Fort Yates, did a heroic job. Working, 
incidentally, over the Thanksgiving break. I was down there. 
These are terrific employees, and they deserve, I'm sure you've 
probably given them, a real big pat on the back. But your 
agency did terrific work in Fort Yates, and you did terrific 
work to help get a water supply assured so that Parshall 
wouldn't lose it in February.
    But that's a mouthful simply to say we've got a lot of 
problems out there, and we really need your agency to work with 
us. We had this interminable delay on the studies on the Red 
River Valley water supply. I mean, we're 3, 4 years late on 
that, as you know.
    So, Mr. Commissioner, thanks for being here. Work with us 
on these issues. Let's get these water projects funded. If 
we're going to authorize them, if they're good projects, and if 
we're going to shovel some dirt for the groundbreaking, let's 
build them and get them done.
    Mr. Keys. Mr. Dorgan, I absolutely agree with you, there's 
a lot of problems out there. Those projects that are already 
authorized mount up to about $2.3 billion. And certainly we'll 
work with you on a way to try to get there. The PART exercise 
again demonstrated the need for a systematic approach to those 
that need help in the future, and that is what S. 2218 is 
trying to address.
    Senator Dorgan. Madam Chairman, I guess we have 6 minutes 
left in this vote. If you intend to recess----
    Senator Murkowski. I think what we would like to do at this 
point--Commissioner, thank you for your testimony this 
afternoon, and for fielding the few questions. We will take a 
brief break here from the record, and will come back to the 
second panel.
    So give us a few minutes here, and we'll be back to join 
you. Thank you.
    Senator Murkowski. Let's go back on the record, please.
    Our second panel this afternoon will be speaking about the 
three water bills, and presenting views on a comprehensive 
program. We were originally supposed to have Mr. Jim Dunlap, 
from New Mexico, who was representing the National Rural Water 
Association, but we were notified that his plane was canceled 
in Albuquerque this morning, so he's not able to be with us 
today. But we have Mr. Mike Keegan, with the National Rural 
Water Association, presenting comments on behalf of Mr. Dunlap. 
And I would also like to welcome Mr. David Koland, manager of 
the Garrison Diversion Conservancy District, in North Dakota.
    So, gentlemen, welcome. And, Mr. Keegan, if you would like 
to begin with your testimony, please.

                    RURAL WATER ASSOCIATION

    Mr. Keegan. Thank you, Madam Chairwoman.
    My name is Mike Keegan. I'm an analyst with the National 
Rural Water Association, a nonprofit association with over 
23,000 small rural water suppliers. All of these communities 
join me in thanking you and the committee for the support 
you've given us and our efforts to improve and protect our 
drinking water.
    As you mentioned, I'm here because our past president of 
the association, Jim Dunlap, had his flight canceled in 
Albuquerque early this morning. Thank you for allowing me to 
pinch hit for Jim, and I'll summarize the key points of Jim's 
prepared testimony.
    Rural and small communities strongly support both bills S. 
1085 and S. 1732 and their objective of having the Bureau of 
Reclamation fund more rural water development. We believe the 
bills rightly expand the Bureau's historical mission to 
accomplish more rural water development for drinking water 
supplies. The key points we would like to make today with 
regard to the bills are--there is a great need in the West.
    The nexus of the following three realities is resulting in 
a problem that merits additional Federal water development 
assistance. These realities include the fact that many U.S. 
rural households don't have decent, if any, water service. This 
number is estimated from two to five million households.
    Second, unfunded mandates disproportionately impact rural 
households, and these mandates are increasing. I have handed 
out this map that shows this trend, with EPA's recent Arsenic 
Drinking Water role. This map shows approximately 15 percent of 
the counties had water supplies that violate the EPA standard. 
The green counties have a medium household income above the 
national median. The red ones have incomes below the national 
median. The map indicates that most of these communities facing 
compliance costs will be rural for arsenic, most will be in the 
West, and most will be comparably lower-income counties. In the 
coming years, EPA will begin to enforce the arsenic rule, the 
uranium rule, the disinfection byproducts rule, the radon rule, 
the groundwater rule, and many others that will cause 
tremendous strain on local communities.
    The third reality is quantity, the fact that many rural 
areas in the West have never had adequate water supplies. With 
regard to funding, we believe that any enterprise needs 
adequate annual funding, and we are suggesting an annual amount 
similar to the Department of Agriculture or the EPA's water 
funding appropriations, which are routinely funded at 
approximately $600 to $900 million annually. Currently, these 
two efforts are not meeting demand. We can conclude this 
because only communities that meet a strict economic and 
public-health need assessment can qualify for a USDA grant. And 
even with this limited factor, USDA currently has over $2 
billion backlog in eligible funding.
    I handed each of you a list of communities in your State--
it's the red-covered document--that received USDA water funding 
last year. And Alaska is on the front page. So you can see how 
far a $700 million national program goes when disbursed among 
the states.
    Our last key point on the bill is, we would like to 
acknowledge that water development under the Bureau is unique 
in nature. Bureau development has tended to be large and 
regional, allowing communities to share one central supply, 
treatment, and distribution system. No other Federal agency has 
this unique mission or the Bureau's history and experience with 
western water issues.
    I will close and, once again, thank you, Madam Chair and 
the committee, for its continued assistance. It is appreciated. 
Thank you very much.
    [The prepared statement of Mr. Dunlap follows:]

 Prepared Statement of Jim Dunlap, Board Member, Upper La Plata Water 
 District, New Mexico Rural Water Association, and the National Rural 
                           Water Association

    Mr. Chairman, my name is Jim Dunlap and I am a Board Member of the 
Upper La Plata Water District, the New Mexico Rural Water Association, 
and the National Rural Water Association. I am a rancher, a farm 
equipment store owner, and I am currently the Chairman of the 
Interstate Stream Commission for the State of New Mexico. All of these 
organizations and every state rural water association join me in 
thanking you and this Committee for the support you have given our 
rural and small communities in our efforts to improve and protect our 
drinking water. We also appreciate the opportunity to testify before 
the Committee on the Senate bills to assist rural families to enhance 
water supplies through the Bureau of Reclamation (S. 1085 and S. 1732).
    I cannot tell you how happy I am to have two Senators, with 
separate party affiliations, each with original legislation, holding 
the chair and ranking positions on this committee--working to better 
rural America's water--and looking at the Bureau as an agency to do it. 
I may be out of my league on how to successfully heap praise and 
appreciation on both of you simultaneously and just want to make it 
clear that if there are any disagreements between the Senators from New 
Mexico on how to craft this legislation--I agree with both of you.
    Mr. Chairman, I strongly support the objective of having the Bureau 
fund more rural water development. The six key points I want to make 
today with regards to S. 1732 and S. 1085 are:

    1. There is a great need of public health, economic viability, and 
compliance for additional financial resources for rural water 
    2. In certain circumstances, it is more cost-effective to develop 
large region water supplies as opposed to multiple local supplies.
    3. The Bureau of Reclamation should get into rural water 
development as they have a unique mission not accomplished by other 
federal agencies (namely the U.S. Department of Agriculture and the 
U.S. Environmental Protection Agency).
    4. The unique situation of rural communities should make them the 
priority for federal assistance for drinking water.
    5. Please consider a local or independent process that could 
determine cost, feasibility, coordination and planning in the 
    6. Due to the unique federal mission proposed in the bills, any new 
water initiative within the Bureau of Reclamation should include 
significant annual appropriations--comparable to EPA's approximately 
$800 million state revolving fund and USDA's approximately $700 million 
loan and grant effort.

There is a great need for public health, economic viability, and 
        compliance for additional financial resources for rural water 
    The nexus of federal unfunded mandates, the fact that many rural 
areas have never had adequate water supplies, the shortage of local 
water supplies in the west, and need for a reliable water supply to 
attract and maintain any rural economic health reflects a great need 
for additional rural water development.
    According to the USDA at least 2.2 million rural Americans live 
with critical quality and accessibility problems with their drinking 
water, including an estimated 730,000 people who have no running water 
in their homes (USDA study available on the internet at 
www.ruralwater.org/water2000.pdf). About five million more rural 
residents are affected by less critical, but still significant, water 
problems, as defined by the federal Safe Drinking Water Act. These 
problems include undersized or poorly protected water sources, a lack 
of adequate storage facilities, and antiquated distribution systems. 
Today, many rural families are still hauling water to their homes and 
farms. In La Plata County, Colorado--an area near my home that we are 
trying to organize in to a rural water district, lack of water is 
forcing hundreds of families to haul water for their home use and their 
livestock. Their wells and springs are drying up due to the drought.
    Rural Americans have been living with inadequate water conditions 
that large communities could never imagine. For example: the Village of 
Hatch, New Mexico is located on the west side of the Rio Grande River 
in Dona Ana County. The County is in southern New Mexico borders both 
the State of Texas and the Republic of Mexico. Hatch is in northern 
Dona Ana County approximately 40 miles north of Las Cruces, the county 
seat and a community of over 130,000. The large metropolitan area of El 
Paso, TX--Juarez, Mexico lies 80 miles to the south.
    Hatch is an incorporated community with a population of 1 136 per 
the 1990 census, however, the current estimated 1997 Village population 
is 1550. Due to the seasonal nature of agriculture, the main economic 
base, the population fluctuates as migrant laborers move in and out. 
The Village operates a community water system serving the Village and 
outlying rural areas including approximately 799 residents residing in 
the two ``Colonias'' known as Rodey and Placitas. The total population 
served by the water system is estimated at 2500. Over 75% of the 
population consists of minorities, primarily Hispanics. Projected 
population in the service area by the year 2010 is 3570.
    There is one health clinic, funded by the former Farmers Home 
Administration, two grocery stores, seven restaurants, a post office, 
two bank branch offices, two convenience stores, one motel, one public 
laundry, and several other retail and service-related businesses. 
Average income is extremely low as the 1990 census shows a Median 
Household Income (MHI) of 512,975 well below the National Poverty Line 
of 516,050. The New Mexico Statewide Non-Metropolitan MHI is $21,656.
    Rural Utilities Service (RUS) recently funded a water system 
improvements project to add additional storage capacity and run 
transmission lines directly from the storage tanks site to Placitas and 
Rodev. Before this project. water ran from the tanks to Hatch's 
distribution system, and then back uphill to the two Colonias. During 
summer peak usage, the Colonias experienced zero water pressure. The 
RUS project corrected this situation. Hatch, along with the Colonias, 
received the direct benefit of the additional storage.
    Small communities are often in the greatest need, lacking the 
technical resources to comply with federal mandates because of their 
limited economies of scale and lack of technical expertise. Of the 
approximately 54,000 community water systems in the country, more than 
50,000 serve populations under 10,000.

                                U.S. COMMUNITY WATER SYSTEMS SIZE BY POPULATIONS
                                               [Source: U.S. EPA]
                                                          500  or   501 to  3,301 to     to       Over    Total
                                                            less    3,300    10,000    100,000  100,000
No. of systems..........................................   31,262   14,241   4,498     3,432      350     53,783
Percentage of Systems...................................       58       26       8         6        1        100

    Due to a lack of economies of scale, small-town consumers often pay 
high water and sewer rates. Water bills of more than $50 per month are 
not uncommon in rural areas. At the same time, the rural areas have a 
greater percentage of poverty and lower median household income. This 
results in a very high compliance cost per household in rural systems 
coupled with an increased inability to pay.
    Each year the list of regulations grows and the burden increases on 
small communities. Next year, we are facing new regulations on arsenic 
(92 Federal Register pages), radon (134 Federal Register pages), and an 
expanded ground water treatment rule (82 Federal Register pages) in 
addition to the over 80 regulations (40 CFR parts 141-42) that are 
currently on the books.
    Drinking water regulatory requirements affecting small drinking 
water systems have steadily increased since enactment of the Safe 
Drinking Water Act (SDWA) in 1974. Not only has the number of regulated 
contaminants increased, but also regulations have also increased in 
complexity. As each new regulation is implemented by EPA small water 
systems face a compounding effect. That is, compliance with one 
particular regulation may be much more difficult as a result of one or 
more prior regulations, or one or more future regulations. Currently, 
National Primary Drinking Water Regulations (NPDWRs) are set for 92 
contaminants. These include turbidity, 8 microbials or indicator 
organisms, 4 radionuclides, 19 inorganic contaminants, and 60 organic 
contaminants. Maximum contaminant levels (MCLs) have been set for 83 
contaminants and 9 contaminants have treatment technique requirements. 
USEPA's Office of Ground Water and Drinking Water (OGWDW) is currently 
in the process of developing new regulations as required by the SDWA. 
Future rules intended to control microbial risks include:

   Long-Term 1 Enhanced Surface Water Treatment Rule (LT 
   Long-Term 2 ESWTR
   Ground Water Rule (GWR)

    Future rules intended to control chemical risks include:

   Stage 2 Disinfection Byproducts (DBPs)
   NPDWR Revisions
   Drinking Water Candidate Contaminant List (DWCCL)

    The EPA list of communities that are likely to be out of compliance 
with the arsenic rule can be found on the internet at: 

In certain circumstances, it is more cost-effective to develop large 
        region water supplies as opposed to multiple local supplies.
    The reason--that over 9 out of every 10 U.S. water supplies serve 
populations under 10,000 people--it has historically been more 
economical to build smaller utilities than expand larger ones. The cost 
of running main lines a few miles can be cost prohibitive. However, in 
certain circumstances, it is more cost effective (especially over the 
long-term) to build larger or region water supplies. The factors that 
are used in making these complex discussions include future regulations 
which may require centralized treatment, the need to share one supply 
that may be far from many of the communities, the need for a 
distribution system to share water rights, projected growth, economic 
planning, etc.
    For example, the regional Rocky Boys rural water supply, authorized 
by Congress for Bureau construction will allow many smaller communities 
to comply with the EPA's Surface Water Treatment Rule which they can't 
afford on their own, it will ensure long-term supply to numerous 
communities that currently lack quality supplies, it: will provide an 
economy of scale for future regulations like disinfection by-products, 
and it will ensure the need infrastructure for those local economies.
    Another example is the Navajo-Gallup pipeline project in New 
Mexico. This is a project to supply much needed drinking water to the 
Navajo Reservation, parts of the Jicarilla Apache Indian Reservation 
and to the city of Gallup. This will involve 41 Chapters in New Mexico 
and two Chapters in Arizona (a Chapter is similar to county 
government). It will involve a population of some 98,000 people 
utilizing 38,000 acre--feet of surface water and 4,000 acre feet of 
ground water. The project will start from Farmington, NM with a 48-inch 
pipeline and extend to the community called Yah Ta Hey, which is 
adjacent to the City of Gallup. This pipeline %will be approximately 
520,000 feet with laterals to Window Rock, Arizona and Crownpoint, New 
Mexico, with lateral extensions of 388,000 feet. There will be a 
separate lateral extending from Cutter Dam to Pueblo Contado and Ojo 
Encino. This lateral will be approximately 400,000 feet in length.
    In my own experience, we are currently organizing a variety of 
regional interests with water supply problems that can only be solved 
through a regional system. This ad hoc effort is looking at a solution 

   The City of Durango, Colorado, which has supply issues and 
        is growing rapidly.
   An unincorporated area in La Plata County, Colorado where 
        families up on the Red Mesa are hauling water to their houses
   The Animas La Plata Conservancy which includes homes that 
        need domestic water and has domestic water rights they cannot 
        use because of a lack of a distribution system
   The Upper La Plata Rural Water District that has 564 homes 
        and needs additional supply.
   In New Mexico, the La Plata Conservancy District has M&I 
        water that can only be used for that purpose.

    Due to the complexity and variety of the problems in each of these 
communities--the only real solution is a regional cooperative effort. 
In this example, it is critical to note that the unused municipal and 
industrial water rights held by the conservancy could be used by the 
other communities if there was a large distribution system to move the 
drinking water.

The Bureau of Reclamation should get into rural water development as 
        they have a unique mission not accomplished by other federal 
        agencies (namely the U.S. 
        Department of Agriculture and the U.S. Environmental Protection 
    In the New Mexico-Colorado example provided in the previous 
section, there is no federal or state agency with the mission of 
looking at this type of project. We are organizing the parties as an ad 
hoc project and using local funds to do the planning. This project 
includes two states, multiple communities, conservancy districts, and 
unincorporated areas. Such a project does not fall within the USDA's 
rural water program guidelines for area and density of users. The list 
of communities funded last year by USDA is available on the internet at 
www.ruralwater.org/report2003. This program is truly the most 
successful rural public health and economic development program in the 
country. It was the reason piped water came to my community in 1966. It 
needs to be continued and funding needs to be increased, however, it 
has its own mission and it currently cannot meet the demands of the 
communities that fit into its guidelines.
    I believe your bills create a new federal agency mission to assess 
and fund the type of project needed in New Mexico-Colorado and the rest 
of the western states. If projects would better fit in the USDA program 
or the EPA program then they should be referred to those agencies. 
However, it is clear to us working in the western states that there 
currently is no program to meet many of these pressing water problems.

The unique situation of rural communities should make them the priority 
        for federal assistance for drinking water.
    Many water organizations have been petitioning Congress for 
additional water infrastructure funding through increased 
authorizations and appropriations in EPA and the Bureau. However, rural 
communities face greater economic and often greater public health need 
than most of these organizations. No large community consumer pays 
$100.00 a month for drinking water service. However, in the western 
states, this is not uncommon in rural districts.
    Also, compliance costs are typically much higher in smaller 
utilities. For example, Desert Sands water district in Anthony, New 
Mexico formed a water association more than two decades ago that 
finally provided clear water. However, to comply with the new arsenic 
rule, their estimates show customers' monthly water bills would at 
least triple under the new standard. The average bill last July was 
$32.18 per household. An Associated Press article (www.ruralwater.org/
desartsands.htm) showed that one of the district's wells contained 
arsenic at 10.4 ppb and that ``many Desert Sands customers are factory 
or farm workers who live in wind-beaten mobile homes or modest frame 
houses on small, sandy, treeless lots separated by rickety metal 
fences. The sand that blows across the flat desert is deep enough in 
some of the area's unpaved roads for cars to get stuck.'' Affording a 
rate increase of three fold will be dramatic to say the least.
    We believe both bills recognize this unique situation of rural 
America and the cost of providing safe water service. We are grateful 
for this recognition and the bills' attempt to ameliorate this 

Please consider a local or independent process that could determine 
        cost, feasibility, coordination and planning in the 
    Both bills represent a significant step forward in addressing the 
enhancement of rural drinking water supplies. Both bills provide for a 
new authorization for the Bureau to study opportunities to construct 
rural water projects and report back to Congress on feasible projects 
for funding--through the Congressional appropriations process. We think 
this is the proper way to try to identity feasible projects. However, 
we would urge the Committee to include an additional process that would 
act as an incentive for the Bureau to develop cost-effective projects 
in a timely manner. Please consider allowing for the submission of 
studies and feasible projects to Congress (through the Bureau) 
published by the local organization to Congress at any time. This 
option for local advocacy would serve as an incentive for the Bureau to 
work cooperatively with the locals. If the local organizations and the 
Bureau had different options on which projects were feasible and how 
they should be designed, Congress would be provided both options--and 
the Bureau would be able to comment on any local plan/study submitted 
to Congress. This would also serve as an incentive to move projects 
through the process in a timely manner. It appears that there is no 
limit to the time the Bureau could take on studying and analyzing 
various projects. We would also urge you to allow for the option of 
having the local organizations do the up front work on planning, 
financing, cost sharing, and feasibility of projects. Perhaps small 
planning grants could be made to local organizations to plan and study 
projects to determine feasibility and submissions of projects back to 
Congress. Such grants could be made by the Bureau utilizing a 
discretionary amount of program money--or they could be made to 
individuals through the appropriations process. In such cases, the 
Bureau would be intimately involved in the studies through their 
oversight authorities, but the locals could control more of the scope 
and process of the studies to promote timeliness and economic 

Any new initiative within the Bureau of Reclamation should include 
        annual appropriations.
    Thank you Senator Domenici and Senator Bingaman for introducing 
these two bills. Rural America is grateful. I appreciate the details 
and thought that went into both bills that seek to find the best ways 
to divide up the intergovernmental responsibilities to plan, design, 
build, and fund public drinking water supplies under the federal 
umbrella. I have over 30 years experience dealing with the various 
levels of government and the various federal funding agencies. I have 
learned that it can be a long, complicated and bureaucratic process. 
Rural communities sincerely appreciate the thought that went into both 
bills to design the most efficient process, balanced with need for 
adequate oversight to ensure funds are well spent. We support the 
effort to craft legislation that will allow the Bureau to fund the 
water supplies that evolve from the studies and assessments. The main 
ingredient in a successful Bureau of Reclamation drinking water 
initiative will be a commitment from the federal government to a 
significant amount of annual appropriations. When communities see 
funding available to solve their compliance, supply, and rural public 
health needs--they will put it to sound use immediately. The agency 
will come to be known as a solution to immediate and long-term water 
challenges. We will see dramatic public health improvements; farm 
families receiving clean water for the first time, entire regions that 
have been out of compliance for years developing solutions, and 
intractable western water arguments being settle with communities 
moving forward. This has happen under the Bureau's direction in ad hoc 
manners in some western states. We encourage the committee to change 
this and make the Bureau a permanent and recognized solution to some 
the county's most challenging water issue by establishing an 
authorization for annual funding comparable to the USDA and EPA.


    Each state rural water association membership is comprised of small 
non-profit water systems and small towns. All members have water supply 
operation as their primary daily activity. Membership averages about 
400-500 communities per state, with systems from all geographic areas 
of each state. These are active members--who continuously participate 
in the training and technical assistance program in an effort to 
improve their drinking water. This program actively assists all small 
water systems whether they are members of the state association or not. 
With a significant turnover in water operators and board members--and 
the ever-increasing regulatory burden--the need for training and 
technical assistance remains constant. The problem with delivering safe 
drinking water is that improving drinking water in small communities is 
more of a RESOURCE problem than a REGULATORY problem. Every community 
wants to provide safe water and meet all drinking water standards. 
After all, local water systems are operated by people whose families 
drink the water every day, who are locally elected by their community, 
and who know, first-hand, how much their community can afford. Without 
the support of local people, regulations alone won't protect drinking 
water. Many small communities rely on volunteers or part-time 
administrators to operate their local water-supplies.
    In my personal experience, two teachers, four farmers, one banker, 
and a group of kids from the Future Farmers of America acted locally to 
bring the first piped drinking water to my part of San Juan County in 
1966. I was one of the two teachers. The community had been relying on 
ground water from individual shallow wells contaminated with minerals, 
oil, and methane gas for their farms and some household uses. Safe 
water used for drinking needed to be hauled in from town. We organized 
the 175 families in the area to incorporate a small rural water system 
and accept responsibility for repaying a 420 thousand-dollar start up 
loan from the U.S. Department of Agriculture's Farmers' Home 
Administration. At that time we did not have enough people to meet the 
threshold for population density to repay a loan, so a few of us 
accepted more than one water meter on our property. It was all the 
community could do to make the payments on the loans and the operations 
and maintenance of the systems was taken care of by community 
volunteers. Today, we have over 2,500 families on the system that has 
allowed for economic development in the area with over 100 new taxable 


    Please provide relief to small and rural communities and their low-
income citizens from overly burdensome EPA drinking water regulations. 
Specifically, we urge you to include a prohibition on enforcement and 
implementation of EPA drinking water rules for naturally occurring 
substances regulated for long-term exposure for small communities (less 
than 10,000 population) until EPA identifies a reasonably affordable 
treatment process for small communities. This probation could be 
limited to only the communities that EPA is not providing the funding 
necessary to comply. EPA is authorized to allow small communities to 
utilize a special ``affordable'' technology to comply with EPA 
standards because they are determined by what is economically 
``feasible'' for a large community. This use of a comparably affordable 
technology for small communities seems only fair for standards based on 
the feasibility of large communities. However, to date, EPA has not 
allowed any small community the opportunity to use affordable variance 
technology because EPA adopted a policy that rural and small community 
families can afford annual water rates of 2.5% of median household 
income (MHI) or $1,000 per household. We do not think rural families, 
especially low-income populations, can afford up to 51,000 a year in 
water rates. Consumer advocates see such precipitous rate increases 
resulting in families being forced to choose between paying for medical 
care, food, heat or other necessities that directly impact public 
    The 1996 Safe Drinking Water Act (SDWA) mandated that EPA start to 
regulate these naturally occurring chronic substances (including radon, 
radionuclides, uranium, arsenic, disinfection by-products, etc.). This 
was a new direction from EPA's historical focus on contaminants that 
are introduced to drinking water supplies through pollution like 
manufacturing solvents and pesticides. EPA, either by questionable 
agencies decision or an unclear authorizing statue, is promulgating 
inflexible regulations for these substances that the communities do not 
support and believe result in a misallocation of their limited public 
health budgets. The way EPA wrote the arsenic rule, a small low-income 
community with an arsenic level just above the 10 parts per billion 
standard (i.e. 10.5 parts per billion) is treated the same as a large 
wealthy community with an arsenic level four times the standard (40 
parts per billion). Treatment for small communities could triple water 
rates for an arsenic level that is not appreciably more risky than 
EPA's standard.
    In the last few months, PBS, the New York Times, National Public 
Radio, and 60 Minutes all did exposes on the plight of low-income 
populations in the U.S. These features covered the reality of the 
difficulty of these economically sensitive subpopulations to afford 
housing, food, medical care and obtaining employment. They also brought 
to light real people and families in dire economic situations. The 
documentaries highlighted increasing rates of unemployment in minority 
populations, housing expenses increasing at uncontrollable rates, and 
families avoiding medical care to pay for other expenses necessary for 
    The occurrence of these naturally occurring substances has been 
with us (and the populations regulated) since time immemorial. Many of 
the communities think these issues are local acceptable conditions and 
would never chose to spend the compliance cost if they were given the 
local choice. Also, no travelers among the states would be put at any 
increased risk for two very important reasons; (1) this has been the 
condition of the country for the eternity of all of our lives, and (2) 
these substances are only being regulated as a matter of chronic health 
effects which means the possible effects of massive daily ingestion of 
water over a 70-year period. The levels have no relationship to 
temporary ingestions that any traveler would experience.
    Many interest groups petition this Congress to authorize more and 
more, ever-stringent federal unfunded mandates on small communities 
with the intention of improving public health on the communities' 
behalf. Unfortunately, this does not work and things are not that 
simple. The key to long-term improvement is local support, local 
education and available resources. We continually ask for the list of 
the small communities that need to improve their drinking water and are 
not willing to take the steps to do it. Such a list does not exist. The 
problem has been that small communities do not support most of these 
policies at the local level because they waste limited resources on 
non-priority projects.
    In addition to EPA's lack of understanding to the realities of 
rural community economics, we are seeing a disturbing pattern in the 
evolution of science on the health effects of arsenic in drinking 
water. The NAS's National Research Council study of arsenic health 
effects that EPA based its decision to regulate arsenic called for 
additional health effects studies to clear up the uncertainty of the 
health effects of lower levels of arsenic exposure in drinking water. 
Since that conclusion, the following four studies have been published 
in peer-reviewed scientific journals. All four studies reached 
conclusions contrary to the EPA's determined health risk from arsenic 
in drinking water. All four rely on data from U.S. populations and low 
levels of arsenic exposure--similar to the levels found in U.S. 
drinking water supplies. Two of the studies seem to reject the 
conclusions in the two core studies (Argentina and SW Taiwan Studies) 
that EPA relied on to decided on the current standard. The study that 
seems to reject the original Argentina study, that EPA relied on to 
call for lowering the standard, is by the same author/scientists--Dr. 
Allan Smith. In his new recent study (No. 4 below), Dr. Smith, et al., 
found, ``no evidence of association with exposure estimates based on 
arsenic concentrations in drinking water.''

    1. Bladder Cancer and Arsenic Exposure: Southwest Taiwan, Lamm, 
Byrd, Kruse, Feinleib, and Lai--Biomedical and Environmental Sciences 
    2. Arsenic in Drinking Water and Bladder Cancer Mortality in the 
U.S., Lamm, Engel, Kruse, Feinleib, Byrd, Lai, Wilson, & Phil--Journal 
of Occupational and Environmental Medicine (2004)
    3. Case-Control Study of Bladder Cancer and Drinking Water Arsenic 
in the Western United States, Steinmaus, Yuan, Bates, and Smith--
American Journal of Epidemiology (2003)
    4. Case-Control Study of Bladder Cancer and Exposure to Arsenic in 
Argentina, Bates, Rev, Biggs, Hopenhayn, Moore, Kalman, Steinmaus, and 
Smith--American Journal of Epidemiology

    As a small community elected official in charge of leading the 
public health interests of my community, I find it hard to tell people 
they need to spend their limited dollars on risks that we are learning 
are not as dangerous as portrayed. How can we are responsible local 
leaders, morally let this happen?

    Senator Murkowski. Thank you, Mr. Keegan.
    Mr. Koland, your testimony, please?


    Mr. Koland. Madam Chairman, members of the subcommittee, 
thank you for the opportunity to testify on the rural water 
bills being considered by your committee.
    My name is Dave Koland. I'm the manager of Garrison 
Diversion Conservancy District, headquartered in Carrington, 
North Dakota.
    The provision of a high-quality reliable water supply has 
been changing the face or rural America. A reliable, safe 
drinking-water supply has helped stabilize the population of 
rural counties, afforded additional opportunities for economic 
development, and provided a better quality of life for our 
citizens. We have learned much during the last 30 years, as the 
concept of a rural water system has evolved, from providing 
safe drinking water for single-family rural households, to 
sophisticated regional water systems.
    A Federal policy that guides the orderly development and 
timely construction of this rural infrastructure will benefit 
all our citizens. That policy should provide that the currently 
authorized projects be completed without further costly delays. 
A sound Federal policy must honor the commitments that were 
made to the tribes and the States, such as North Dakota, that 
have endured a 50-year flood to provide flood protection to 
downstream States. That Federal policy should acknowledge that 
many projects and program have already undergone extensive 
study and review, and should not be required to duplicate those 
efforts or embark on additional studies. A Federal policy 
should also provide that the required reports can be developed 
by entities other than the Bureau of Reclamation, to aid in 
reducing the timeframe within which the project can meet the 
needs of the local sponsor. A sound Federal policy should be 
able to accommodate State policy when establishing eligibility 
criteria for developing a rural water infrastructure. A Federal 
policy should not encourage the displacement of agricultural 
use to the detriment of the economic base of rural communities 
by offering additional incentives for the conversion of water 
rights from irrigated agriculture to municipal water use.
    In my written testimony, I summarize the steps outlined 
that are practiced by the State of North Dakota in 
administering a statewide municipal, rural, and industrial 
program. This partnership between the Federal Government, State 
government, and the local sponsor has resulted in an astounding 
success story. Thousands of rural North Dakota citizens now 
have a reliable supply of safe drinking water. Every single 
rural water system built in North Dakota is still operating, 
paying their debts, maintaining their systems, and providing 
for additional growth with internally generated revenue.
    Let me direct your attention to some specific questions 
regarding the legislation being considered.
    What is the expectation of this new process for projects 
currently under construction? It is our view that North 
Dakota's MR&I program is outside the new process that is being 
contemplated by Congress. Section 3 of S. 2218 makes no mention 
of currently authorized projects or how this legislation would 
impact the current rural water projects. In my view, the 
legislation should clearly state that the currently authorized 
projects should be completed, or a reasonable and prudent 
timetable for completion endorsed, before construction on any 
new projects is allowed to commence. Section 3 should also 
reference the Federal trust responsibility to Indian tribes 
that were forced to move when the Pick-Sloan dams were 
constructed on the Missouri River.
    In section 5, what is the definition of an appropriate 
water conservation measure that would be applied to a family 
that is hauling every drop of water that is used for drinking, 
bathing, washing clothes, and other household uses? Section 5 
of S. 2218 seems to preclude the blending the various forms of 
project financing that are available to communities now.
    Section 6 is also unclear, in that it establishes the 
responsibility of oversight by the Federal Government be paid 
by the local sponsor. Section 6 could be enhanced by providing 
that revenue from the sale of water off the reservation could 
be used for the operation and maintenance and replacement costs 
that are now borne by the Bureau. The challenge we jointly face 
is how to streamline the process of providing water where it is 
needed before the people we intend to serve must move 
    The North Dakota MR&I program is a successful model that 
has worked for North Dakota. The cost-effective partnership of 
local control, statewide guidance, and Federal support has 
combined to provide safe, clean water to hundreds of 
communities and thousands of homes all across North Dakota.
    Thank you.
    [The prepared statement of Mr. Koland follows:]

  Prepared Statement of David J. Koland, Manager, Garrison Diversion 
         Conservancy District, on S. 1085, S. 1732, and S. 2218

    Madam Chairman, members of the subcommittee, thank you for the 
opportunity to testify on the rural water bills being considered by 
your committee.
    The provision of a high quality, reliable water supply has been 
changing the face of rural America. A reliable, safe drinking water 
supply has helped stabilize the population of rural counties, afforded 
additional opportunities for economic development, and provided a 
better quality of life for our citizens.
    We have accomplished much in constructing a rural infrastructure in 
America, but much remains to be done. Increasingly, state and Federal 
incentives are provided to direct the relocation of jobs to rural areas 
without any provisions for providing the basic necessities of a quality 
living environment for the expected workforce.
    We have learned much during the last 30 years as the concept of a 
rural water system has evolved from providing safe drinking water for 
single-family rural farmsteads to a sophisticated regional water supply 
system for multi-family rural communities. Complying with the 
increasingly complex Safe Drinking Water Act regulations is no longer 
possible or economically feasible for many small communities. A 
regional water system serving numerous communities can provide the 
benefits of safe drinking water to both urban and surrounding rural 
    The inclusion of a large community as a core component of the 
regional system is often necessary to make a regional system viable. 
The larger the community the further the penetration into the 
surrounding area and, hence, the greater attainment of the policy 
objective of providing service to the greatest number of people who 
would otherwise be unable to afford a reliable safe water supply.
    A Federal policy that guides the orderly development and timely 
construction of this rural infrastructure will benefit all our 
citizens. That Federal policy should provide that the currently 
authorized projects be completed without further costly delays. A 
provision that accomplishes that objective is found in section 4(b)(2) 
of S. 1085. A provision addressing this issue needs to be added to S. 
2218. Such a provision would greatly assist us in completing the Dakota 
Water Resources Act (DWRA).
    The present policy of denying adequate funding to currently 
authorized projects is a travesty. This treatment of people on the 
verge of realizing the dream of finally having a reliable water supply 
is not justified under any circumstances. A government policy that 
promises, authorizes, studies, designs, and begins construction with 
one hand and then blithely and blindly curtails construction with the 
other hand must not be perpetuated one day longer.
    A sound Federal policy must honor the commitments that were made to 
tribes and states, such as North Dakota, that have endured a 50-year 
flood to provide flood protection to downstream states. That 
unfulfilled Federal promise has been reformulated, reneged on and 
finally renewed in the Dakota Water Resources Act of 2000 only to have 
the funding severely reduced in the budget on the faulty premise of an 
OMB Program Assessment Rating Tool (PART) analysis.
    When the PART is applied to the North Dakota MR&I program, it 
reveals a program with a weighted score of 84%. Where is the justice in 
reducing funding for such a highly rated program or for any authorized 
project while the Federal government attempts to set a policy for 
future projects? We are grateful that Congress stepped forward and 
provided funding for our projects in FY04. (Appendix A OMB PART as 
modified by North Dakota)*
    * Appendixes A and B have been retained in subcommittee files.
    In North Dakota, we have eight MR&I projects under construction, 
including the Northwest Area Water Supply Project (NAWS) that are 
critical to meeting the water needs of our citizens. Nearly 1500 people 
have paid a ``sign-up'' fee as high as $750 while they wait for the 
pipeline to reach their home. The people living in the NAWS service 
area, including the 36,567 citizens of Minot, are paying a 1% sales tax 
to finance the 35% local share of the NAWS project.
    The Federal policy should acknowledge, as section 6(e) of S. 1085 
does, that many projects and programs have already undergone extensive 
study and review and should not be required to duplicate those efforts 
or embark on additional studies.
    A Federal policy should also provide that the required reports can 
be developed by entities other than the Bureau of Reclamation to aid in 
reducing the time frame within which the project can meet the needs of 
the local sponsor. Section 6(c) of S. 1085 captures this concept.
    A sound Federal policy should be able to accommodate state policy 
when establishing eligibility criteria for developing a rural water 
infrastructure. The state water plan should play a significant role in 
developing the considerations outlined in section 3(b)(2) of S. 1732.
    A forward-looking Federal policy will focus efforts on providing 
access to rural water in areas that do not have a reliable supply of 
quality water now. The policy should encourage the inception of 
projects at the local level. Projects that are driven by a local need 
will be better able to sustain themselves through the already too long 
gestation period from the recognition of a need to the completion of 
    A Federal policy should not encourage the displacement of 
agricultural use to the detriment of the economic base of rural 
communities by offering additional incentives for the conversion of 
water rights from irrigated agriculture to municipal water use. In 
developing priorities, a Federal policy needs to look beyond economic 
considerations and examine if the project also meets environmental or 
social policy objectives.
    A Federal policy should deal with providing solutions for entire 
regions by directing Federal resources towards implementing projects 
that provide solutions dealing with both present and reasonable 
foreseeable future needs.
    When the transfer of water from one basin to another basin can best 
serve the national interest and be accomplished in a safe and prudent 
manner, it should be encouraged.
    Before I talk about specific issues, let me briefly describe a 
process and a program that has enjoyed tremendous success in providing 
high quality, affordable drinking water to thousands of North Dakota 
citizens who had been without a reliable supply of safe drinking water.
    The goal of the North Dakota Municipal, Rural and Industrial (MR&I) 
program is to provide a high quality, affordable supply of safe 
drinking water to people who do not have water now or have an unsafe 
supply of water. (Appendix B, Rural Water: A Program that works for 
North Dakota)
    We recognize the need for a process that focuses our efforts on 
providing water to the greatest number of people who would have no 
other way to obtain clean, safe drinking water without the assistance 
of our MR&I grant program.
    The process begins at the local level with the preparation of a 
Preliminary Engineering Report. Then a Feasibility Study is conducted 
by a professional engineering firm, followed by appropriate 
environmental studies performed by the Bureau of Reclamation. The 
Bureau of Reclamation also reviews the final design of the project 
before construction can begin.
    Projects are approved for funding by a joint committee of the State 
Water Commission and Garrison Diversion Conservancy District. Projects 
are prioritized based on the state water plan, inadequate current 
supply, the affordability of the water supply, quality of current 
supply, and local support.
    The MR&I program was authorized by Congress in 1986. In North 
Dakota, the program is jointly administered by the State Water 
Commission and the Garrison Diversion Conservancy District. A state-
wide water plan is updated annually and works with a five-year 
projected project funding schedule.
    Step One is the submission of an application to the MR&I program.
    Step Two is the completion of a Preliminary Engineering Report. 
This report is normally paid for by the local sponsor of the project. 
The local sponsor may be a community or a rural water system. If the 
local sponsor is a rural water system, they have collected an 
``interest fee'' from people interested in seeing if a system could be 
built in their area. The interest fee usually is from $50 to $100 and 
is used to hire an engineering firm to help design the project.
    Step Three is the Feasibility Study conducted by the engineer to 
determine who can be served and how the system would be constructed. In 
order to determine who is really willing to hook up to the water 
system, a sign-up campaign is conducted. The sign-up fee is from $300 
to $800 and is used to fund the local share of the Feasibility Study. 
The MR&I program will provide a 65% cost share, . provided they feel 
funding will be available when the project is ready for construction. 
The firm hired to assist the local sponsor typically will not be able 
to recover all their costs unless the project goes to construction.
    Step Four involves the Bureau of Reclamation in the environmental 
studies and approval of the final design before construction can begin. 
Funding for construction is currently provided on a 70/30 matching 
basis. The local share of a project is usually borrowed from a Federal 
or state source such as, Rural Development, and repayment is funded by 
a monthly payment from each water service customer. The O&M expenses 
for the local system are funded in the same manner. The lender normally 
requires that reserve accounts be established to provide for both 
expected and unexpected future O&M expenses.
    This partnership between the Federal government, state government, 
and the local sponsor has resulted in an astounding success story.
    Thousands of rural North Dakota citizens now have a reliable supply 
of safe drinking water. Hundreds of communities can now provide 
affordable, safe drinking water to all their citizens. Every single 
rural water system built in North Dakota is still operating, paying 
their debts, maintaining their systems and providing for additional 
growth with internally generated revenue. North Dakota is building a 
strategic regional water supply system. And, most importantly, the 
Federal interest is served by compliance with the environmental laws, 
the natural selection of the most cost-effective solution, the built-in 
need to apply appropriate water conservation measures, and the 
provision for future O&M expenses by the local sponsor.
    Let me direct your attention to some specific questions regarding 
the legislation being considered.
    What is the expectation of this new process for projects currently 
under construction? Should we be viewed as models for this new process 
or outside the process? It is our view that North Dakota's MR&I program 
is outside the new process that is being contemplated by Congress.
    Section 2(8) of S. 2218 addressing rural water infrastructure 
definitions should include closed storage structures such as water 
towers and/or underground reservoirs and canals that have been 
converted to water supply use.
    Section 3 of S. 2218 makes no mention of currently authorized 
projects or how this legislation would impact the current rural water 
projects. In my view the legislation should clearly state that the 
currently authorized projects should be completed or a reasonable and 
prudent timetable for completion endorsed before construction on any 
new projects is allowed to commence. A key element of this section 
should be the extent to which a project complements or enhances an 
existing State Water Plan.
    Section 3(d)(4) of S. 2218 does not clearly define what integrated 
resources management approach means or what type of entities are 
envisioned to be partners in a rural water supply project. Does this 
refer to military bases, urban areas, energy companies, tribal 
governments, counties, water resource districts, grazing authorities, 
Federal agencies, and State agencies? In North Dakota all of these 
entities have been partners in building rural water systems.
    Section 3(e)(1) of S. 2218 introduces a new term ``capability-to-
pay'' that needs to be clearly defined.
    Section 3(e)(2) of S. 2218 should also reference the Federal trust 
responsibility to Indian tribes that were forced to move when the Pick 
Sloan dams were constructed on the Missouri River.
    Section 5(a) of S. 2218 should provide that feasibility reports 
from other sources such as professional engineering firms should be 
utilized to reduce the time spent in duplicating studies of proposed 
projects. What is the definition of ``appropriate water conservation 
measures'' that would be applied to a family that is hauling every drop 
of water that is used for drinking, bathing, washing clothes and other 
household uses?
    Line 18 and 19 speak to market-based mechanisms that imply that 
converting agricultural water to urban use is sound policy for all 
situations. In my view a sound policy would encourage the continued 
existence of a solid agricultural base coupled with the continued 
growth of the urban core. In North Dakota agriculture forms the core 
basis of a major portion of our economy.
    Section 5(c)(9) of S. 2218 seems to preclude blending various forms 
of project financing that are available now. We have built projects 
with combinations of different loans from various agencies which 
leverage the advantage of each to construct an affordable project. The 
net effect is to reduce the amount of grant money that is needed by the 
    Section 5(d)(3) of S. 2218 raises some very troubling issues in my 
view. If a tribe has decided to provide water to its members and 
constructs a delivery system to do so should it pass by the house that 
has non-tribal members living in it only to have to return and add the 
house to the system if a tribal member moves or marries into that 
household? If non-tribal members are working in a hospital on tribal 
lands will the hospital be required to purchase water on a different 
rate structure for each class of employees and/or patients?
    Section 6(a)(4) of S. 2218 is unclear. We are only going to 
construct projects that can pay their own way in the future but we will 
always get to pay the Federal government a fee to provide oversight? 
Our experience in North Dakota has been that when projects are 
controlled at the local level they have prospered and grown. See 
Appendix B, Rural Water: A Program that works for North Dakota.
    Section 6(a)(5) of S. 2218 could provide that revenue from the sale 
of water off the reservation could be used for operation, maintenance, 
and replacement costs.
    Section 8(b) of S. 2218 seems to be more one-sided than it would 
need to be. There should be some requirement to consult, review or 
discuss with the non-Federal entity on these issues.
    Section 9 of S. 2218 does not address projects that are already 
authorized by Congress. By the time you go through the process outlined 
in this bill the people who need water will have moved. Is this a 
``competitive program'' to submit project requests to Congress?
    Section 5(c)(2)(C) of S. 1732 seems to require that each proposed 
project must be authorized by Congress before construction can begin. 
Section 5(d) would appear to set priorities for funding the 
construction of proposed projects.
    The challenge we jointly face is how to streamline the process of 
providing water where it is needed before the people we intend to serve 
must move elsewhere.
    S. 1085, S. 1732 and S. 2218 are important steps in working towards 
a process for future rural water project authorizations. I would 
suggest that it is important that some thought be given first to having 
a National Rural Water policy. A National Policy would help drive the 
process and focus the program on whether you presently have water or 
not and further ensure that proposed projects are consistent with a 
state's water plan for developing its water infrastructure.
    It is also important to have time frames for completion of the 
appraisal investigations and feasibility studies and be able to give 
the sponsor some realistic idea of how long it is going to take before 
the project is complete and the needs met. We can not tolerate a never-
ending regimen of studies.
    The North Dakota MR&I program is a successful model that has worked 
for North Dakota. This cost-effective partnership of local control, 
state-wide guidance and federal support has combined to provide safe, 
clean, potable water to hundreds of communities and thousands of homes 
all across North Dakota. Garrison Diversion is committed to assisting 
you in whatever way we can as you move forward.
    Thank You.

    Senator Murkowski. Thank you.
    We appreciate the testimony from both of you this 
    I'm sure you heard the question that I posed to 
Commissioner Keys about perhaps some expansion to States, such 
as Alaska and Hawaii, that experience similar problems and 
issues, challenges, as it relates to their water.
    I would throw the same question out to both of you. Should 
we target water-supply development subsidies to certain rural 
and small communities instead of opening up funding to other 
communities with similar needs? What do you think?
    Mr. Keegan.
    Mr. Keegan. I'm not so sure you could stop it at Hawaii and 
Alaska if you opened it up, but I think the principle is 
exactly right. It should be based on need. And the one thing 
the Bureau of Reclamation does seem to have is a unique mission 
that satisfies western needs. And I think Alaska would probably 
be similar to that, too. And I'm sure some people would talk 
about the eastern states. But it does seem primarily targeted 
to the West and its unique problems. But I agree, if it's going 
to be a Federal subsidy, it should be based on needs across all 
the states.
    Mr. Koland. Madam Chairman?
    Senator Murkowski. Mr. Koland.
    Mr. Koland. I agree, the focus of the MR&I program in North 
Dakota has not been to spend all the money where we get the 
biggest bang for the buck, if you were to look at the program. 
It's to provide water to people that could not afford to have 
water on their own, and that serves a broader economic policy 
issue for the state of North Dakota if we can shore up the 
rural communities and provide an infrastructure there so that 
people will live there, support the quality of life. And we've 
found that economic benefits follow, that the economic benefits 
follow a good water supply.
    Senator Murkowski. Just talking about the challenges that 
rural communities face, they've got a smaller financial base 
from which to generate their funding for their capital 
projects, and essentially pay for them. They've also got few 
operation and maintenance resources, meaning basically the 
knowledgeable people and the equipment. In your experience, 
what are the typical water rates in--say, for instance, in 
western rural communities--in your part of the country, Mr. 
Koland--for both the community systems and wells? And are 
these, then, higher than what you would find in the larger 
    Mr. Koland. Madam Chairman, across North Dakota, we are 
trying to provide water, 6,000 gallons a month for a family 
household, at about $35 to $50 a month for that family, and 
we're trying to keep that comparable to a lot of communities. 
Communities charge water on a different base because it's part 
of their real estate taxes. Normally the infrastructure has 
been built. And we've found that the way that we can most 
efficiently do that is by building a regional water system, and 
that calls for some hard decisions for small communities. Small 
communities are reluctant to give up the water plant, to run 
the water plant themselves, even though they think they can do 
it. But in a regional system, we've been able to accomplish and 
build strong systems by providing water to these smaller 
communities at a reasonable rate and continue to increase that 
    I could give you an example. A water system that started 
with 700 members in the late 1970's is--now has about 2,300 
members that--they started with just chlorination and iron and 
manganese removal. They now operate a reverse-osmosis plant, 
one of the latest technologies, and they're able to do that by 
generating funds internally and by growing in their community, 
without additional Federal help.
    Senator Murkowski. So you don't have the disparity, then, 
so much, between the rural communities and the larger urban 
centers that one would think, through this regional planning 
    Mr. Koland. Madam Chairman, what has happened is, our core 
communities--Bismark, North Dakota, is about 50,000 people--the 
rural water system that was started in the rural area around 
Bismark now buys all of its water from Bismark, North Dakota. 
They drink exactly the same water that that community drinks, 
very high-caliber Missouri River water, some of the finest in 
the country. And that is a social policy objective of the State 
of North Dakota, and it's one of the reasons, I think, any 
policy or bill has to look to the State to set a policy of how 
they want to build this infrastructure and what policy 
objectives they want to meet with their water infrastructure 
    Senator Murkowski. I'm assuming that we still have, in 
many, many areas, the model of the domestic wells, the local 
wells, local ownership of their rural water projects in these 
smaller community systems. Can this type of a model, can this 
type of a system, continue to work? Or do we move toward 
consolidation, of sorts, in order to find greater efficiencies?
    Mr. Koland. Madam Chairman, I think the movement will there 
internally. North Dakota water districts--they started out as 
cooperatives or nonprofit corporations--have moved to a water-
district model, a governmental model. But the key is, the board 
of directors are users of the water system, and they make the 
best decisions. There are people that are using the water. When 
they raise the rates, they're raising their own rates. When 
they make improvements, they're improving the system for 
themselves. So it's been an excellent model.
    They need to get larger, and they have. They've combined 
management of systems in the southeast part of our State. There 
are three separate systems. They have three boards right now, 
but they will eventually have one board of directors. They have 
one manager that oversees all of them, and they moved that way 
    Senator Murkowski. Mr. Keegan, did you want to add anything 
to what----
    Mr. Keegan. Thanks. I agree with what Dave has to say. 
Consolidation is a very sensitive word in rural communities--
and consolidation or regionalizing, you just have to look at it 
ad hoc and--with the community's consent. And they will do it 
when it makes sense, but it's really a solution for certain 
problems. It is not a solution for small water supply. And as 
long as you can make that--distinguish that before taking a 
look at any problems, things can work themselves out.
    The other thing I would mention to your previous question, 
is that there's never been a really good study on comparing 
municipal or urban water rates, versus rural communities. No 
nationwide study I'm familiar with. I think, anecdotally, 
everybody kind of assumes that, and they've seen it, but 
there's another trend, too, which is the ability to pay the 
water is often lower in the rural areas and small communities, 
too. So you have these things working, complementing each 
other, to make it more and more difficult.
    Senator Murkowski. Thank you.
    Senator Bingaman.
    Senator Bingaman. Thank you very much.
    Mr. Keegan, in your testimony you site the USDA study which 
states that 730,000 people have no running water in their 
homes. This testimony that we received from the Navajo nation 
has a statement in it between 20 and 50 percent of Navajo 
households rely solely on water hauling to meet daily water 
needs. I guess I would ask you, first, whether you know if that 
is 730,000 homes, or 730,000 people, that you're referring to 
in your testimony? Do we know where those people live? If we 
set out to solve that problem first, because that may be the 
most severe problem facing any of our citizens, would we know 
where to put the resources and how to do it?
    Mr. Keegan. I haven't seen it accumulated so you have the 
list of 730,000 households, but what it is is a State-by-State 
assessment, and that was done by the Department of Agriculture. 
So they actually relatively looked, county-by-county, 
addressing needs. So I think within USDA there probably is a 
list. And there were some attempts--this was back in 2000 when 
they put this report together--to go after an initiative that 
would hook all those 730,000 homes up to water. And they 
    Senator Bingaman. You don't know what happened to that?
    Mr. Keegan. Well, it's incrementally been funded. There's 
never been enough funding to actually satisfy that.
    Senator Bingaman. I see.
    Mr. Keegan. But it probably--I know if you asked USDA, they 
would have a list of communities that did make some 
improvements on that list.
    Senator Bingaman. One of the difficult issues involved if 
we're trying to set up a Bureau of Reclamation rural water 
project, or legislation to fund rural water projects, is to 
funding rural water projects. In our bill, the one Senator 
Dorgan and I put in, we've said that that could include 
communities with populations up to 40,000. Is that the right 
place to draw the line? Is that too big? Is that too small? 
Should there be prioritizing? I mean, are we really talking 
about dealing with rural communities? Are we talking about--a 
40,000 person community in my state, is--you know, there aren't 
that many of them. Do either of you have an idea as to what the 
right size is for rural?
    Mr. Koland. Well, Madam Chairman, Senator Bingaman, that is 
a difficult question. We have the same thing. We don't have 
many communities that are that large. But, at the same time, 
one of the core things that we've found we can do is, if we can 
buy water from a large municipality, we can construct a lot 
more rural infrastructure around that community to provide--and 
sometimes that's the most cost-effective solution. So I would 
hesitate to preclude Fargo, North Dakota, which is a population 
of 90,000, if that, in fact, would be our cheapest source of 
water. And certainly--Bismark, North Dakota, is 52,000 people; 
our rural water system that serves about 2500 customers, hook-
ups, buys all its water from that community, and that's a good 
partnership for both the municipality and the rural water 
    Senator Bingaman. Let me ask either one of you if you have 
an opinion as to what the appropriate cost-share ought to be. 
That's obviously another big issue in this legislation. To what 
extent should we settle on a particular cost-share and put that 
in law? Or should we remain flexible about that, depending upon 
the circumstances involved with each project? What do you think 
the right cost-share should be?
    Mr. Koland. Senator, I think--in North Dakota, we had the 
authority to do a 75 percent/25 percent cost-share for the 
program started in 1986. For 10, 11, 12 years, we looked at it, 
and said, let's make the cost-share 65/35, and our Federal 
money will go farther. And we did that. But in the last few 
years, with the increasing cost of building water systems, we 
had to change that to 70/30 cost-share in order to get as much 
penetration as we could into the rural area. I think you have 
to allow some flexibility, because as a system, as each one is 
individual designed, will more or less determine the water 
rate, it's difficult to set it based on a top water rate, but 
the cost you're going to pay for water decided by the local 
people, they'll tell you when they've reached--how much they 
can afford to pay. And we have to design a system so that the 
widow living on social security can afford to hook up to the 
    Now, that seems like a strange statement, but what we've 
found is, a home with rural water has greater value than one 
without, because that home can be resold or sold when it comes 
on the market. Someone will buy it and move into it. Young 
people will not tolerate the same water quality as an older 
person will tolerate.
    Senator Bingaman. Thank you very much.
    Senator Murkowski. Senator Dorgan.
    Senator Dorgan. Madam Chairperson, thank you very much.
    Mr. Keegan, thank you for your testimony. And, Mr. Koland, 
thank you for being here. I was just sitting here thinking it 
may be good to mention Warren Jamison. This, as you know, my 
colleagues know, Warren Jamison was one who testified here on 
behalf of the Garrison Conservancy District and on behalf of 
the Garrison Project for many, many, many years. And he died of 
cancer some months ago. And when you talk about water policy in 
North Dakota, it would be hard to talk about achievements in 
water policy without giving recognition to his wonderful work, 
and I want to do that.
    Mr. Koland, your work is similarly extraordinarily 
beneficial to our State. I think it might be useful for me just 
to ask a couple of leading questions, if I might. And before I 
do, let me compliment you. I think in many ways what you've 
described, with respect to regional efforts, describes a model 
that we have created in North Dakota that would be very, very 
useful as we construct public policy here, because the regional 
approach to development, for the development of rural water 
systems, has, I think, been very attractive, cost effective, 
and very helpful to bring water to a larger number of people 
than otherwise might have been the case.
    But you, too, I believe, were at the groundbreaking in 
Minot of the NAWS Project, and the commissioner was there, and 
we all smiled. And all that was missing was suspenders and 
cigars for a bunch of politicians to, you know, break ground on 
a new project. And then last year it was zeroed out. This year, 
it's funded at less than what it should be funded at.
    Describe to me what the impact of these projects are, 
including the NAWS Projects, when we have these fits and starts 
in funding.
    Mr. Koland. Madam Chairman, Senator, thank you so much for 
the kind comments, and I'm sure Warren--as I walked by The 
Dubliner, we all thought of him.
    It is, in a way, unconscionable that we would start a 
Federal project, promise people water--the people north of 
Minot, where this project is going to help with water, they're 
out of water. When the drought hits, they go to water 
rationing, et cetera. But the money that we are wasting if we 
do not properly fund this project, we have no defense for.
    We have started a project that we should construct in 5 
years. If we don't do that, the warranties will expire. We 
won't be able to test the water line to see if we can't--the 
people north of Minot are convinced that we're never going to 
go any further than Minot with this project. And as much as we 
promise them, they just look and see the news out of 
Washington, the fund levels that we're achieving.
    We were averaging $10 million before the Dakota Water 
Resources Act appropriated to the MR&I Program in North Dakota 
and--not an unreasonable amount, given the slowness of it. We 
have $600 million more of authorization in the Dakota Water 
Resources Act. We met with the tribes. And as you well know, 
the relationship sometimes between Tribes and State is tenuous. 
But we struck an agreement to share the MR&I money 50/50, 
because we promised them that would be the best way that we 
could get their projects built. And we come to Congress, and we 
go home with $2\1/2\ million each, and we can't hardly design 
the project for $2\1/2\ million, much less do any construction.
    Now, North Dakota, as you well know, will do all we can to 
keep these projects under construction, but it is a daunting 
task without the help of Congress.
    Senator Dorgan. Well, you know, we have very serious fiscal 
policy problems here in the Congress that we have to grapple 
with, but having said that, it really is a matter of making the 
right choices. And the question that I asked the commissioners 
about, Don't we have an obligation to complete and move forward 
and finish projects that are underway before we begin trying to 
draw new ones in? I think that is a very important concept.
    One other question, because I think your regional model is 
really successful, and I've seen it in all parts of our State. 
Are there things that you believe we could do--incentives, 
perhaps, or other devices, or other policy approaches--that 
would enhance that regional approach in the rest of the 
    Mr. Koland. Madam Chairman, Senator, I have to go back, 
that if you're going to deal with the water-infrastructure 
problems of the State, it should be guided by State policy, and 
a State policy is driven by the local need. In North Dakota, 
it's driven by the local need. We're successful. The southwest 
pipeline that the State had the foresight to construct and size 
to meet the eventual needs of that State, has proven to be very 
successful. Every community--communities that said no when we 
were planning the pipeline, have come and said, ``Hey, we need 
that water.'' We've had communities that said, ``We'll take 
half our water from there,'' were on the water for but a short 
time and they said, ``We want all our water from this 
pipeline.'' So we have a lot of experience as to what happens 
when you build a project the correct way.
    Senator Dorgan. But, in many respects, that's a function of 
what it ultimately cost to deliver that water, and that's a 
function of what we fund and what the local match is. I know, 
having visited with people from communities, who have said, 
``You know, we know there's a rural water system nearby, but we 
really think we ought to develop our own municipal water supply 
and dig a new well and create a new system.'' As they think 
through that, however, cost becomes something that drives it--
the citizens of that community, to take a look it and say, 
``Well, you know, if we have good, fresh water coming nearby in 
a pipeline, what does it cost for us to punch into that, as 
opposed to building and completing a new water system for our 
town?'' So cost is very important. As you think of these 
incentives to help develop a more regional strategy nationally, 
let us know what you think good policy might be in those areas.
    Again, I always appreciate your testimony. I think this 
project, whose origin was mid-1940's, and authorization in the 
mid-1960's, and reauthorization or a change in authorization in 
the mid-1980's, and then a final change just a couple of years 
ago. This is a long and tortured trail that we've been on, and 
the chairperson of this committee is new to this committee, and 
so she doesn't know the history. But I will not take all 
afternoon to recite it, except to say this. We now have a one-
half-million acre flood that came and stayed in our State, not 
because we asked for it, but because the Federal Government 
asked us to host a permanent flood, and they said, ``If you do 
that, we'll give you something return.'' So we did it, we have 
the cost, but we haven't gotten all the benefits. And that's 
why we struggle. And I think Alaska, perhaps more than any 
other State, understands that struggle, the struggle to try to 
make things better and try to improve things in your State.
    So I want to thank you very much. Mr. Keegan, thank you for 
testifying. Dave Koland, thank you for your work. And thank the 
board, of course, for the work they have done. We're going to 
keep working on these policies to see if we can't continue to 
improve them. Thank you very much.
    Madam Chairman, thank you.
    Senator Murkowski. Thank you.
    And you are correct, Senator Dorgan, I don't have all of 
the history, but the more that I learn about the water 
situation in the various parts of the state, and compare them 
to the situations we have in Alaska, the battles that we have 
for our resources, there's an awful lot of commonality, I 
think, that we do share.
    Gentlemen, I would just like to ask you one more question. 
And this follows on the comments from Senator Dorgan and 
Senator Bingaman, in terms of how much is enough. Every year, 
Congress is trying to provide a few billion dollars for rural 
community water-system development. These are through EPA, 
State revolving funds, Department of Ag., the rural utility 
services, all of these other pots and programs. It's apparent 
that we need a larger investment to really begin to meet the 
needs of the rural communities as it relates to the water.
    So the question to you is, How big? How much? What does it 
have to be? You know, in your particular areas, the needs. We 
heard from Commissioner Keys. He had identified the various 
projects out there. But what is it that we really need?
    Mr. Koland. Well, Madam Chairman, Senator Dorgan talked 
about the permanent flood. When we built the dams in North 
Dakota, the Federal Government said, ``You can have a million 
acres of irrigation.'' And through the reformulation, we don't 
have that million acres of irrigation. Instead, as a State, we 
said we'd settle for the $600 million, plus the $200 million 
that was paid before, and we would call it square. So, in my 
view, the Federal Government owes the State of North Dakota 
that compensation.
    And the State of North Dakota decided that the best way we 
can spend that money is to spend it on a water infrastructure 
in our State for our tribes and for our communities. And that 
was a decision that the State made. And what I'm offering is 
that that model of regional construction, the partnership that 
we have with the Bureau of Reclamation that are involved in the 
design of the projects, they're involved in their environmental 
studies of the project, from the very first step they're 
involved in this.
    So there is a way that a Federal partnership and a State 
partnership and a local control can work. It works in our 
State; I believe it can work in other States. Maybe not all the 
    The amount of money is contingent upon how much the Federal 
Government wants to ensure that there will be other places to 
live in this country, other than metropolitan, urban areas. And 
that's a policy decision that they have to come to grips with. 
We can look at places in western North Dakota or Western United 
States, Los Angeles, Denver, Las Vegas. All of the metropolitan 
areas are going to reach some type of capacity, if not physical 
capacity, at least mental capacity, that not everyone wants to 
live in that type of environment. And I know we're finding 
people come to our State and want to live there just to get 
away from that environment. And as our country grows and 
continues to grow, we have to do something to provide that 
people will naturally spread out to those areas, if you will, 
or we're going to face some horrendous problems in those urban 
    So from a Federal policy area, it's the matter of the will 
of what kind of quality of life are we going to provide for our 
people, what kind of environment are we going to have for 
people to leave those urban areas and come and visit or live?
    Senator Murkowski. Closing comments, Mr. Keegan?
    Mr. Keegan. Thank you. In my testimony, I mentioned the 
fund levels and the other major Federal water efforts, EPA and 
USDA and, to some large extent, HUD. But I would take a look at 
those as maybe a floor rather than a ceiling. And all of those 
programs are funded at a fraction of their authorized level, 
and they have seemed to have, kind of, routinely been funded at 
right around the billion-dollar level per agency. USDA and 
EPA--and EPA actually has water and waste water, so--and they 
actually do contribute a lot to solutions out there every year. 
So I think that's kind of a vague, rough idea of a place to 
    Senator Murkowski. That does give us a starting point.
    Well, I appreciate the testimony from both of you this 
afternoon. Thank you for joining the subcommittee and for 
helping us as we address these issues that are of great concern 
to our rural communities across the West.
    So thank you. And, with that, we stand adjourned.
    [Whereupon, at 3:50 p.m., the hearing was adjourned.]


              Additional Material Submitted for the Record


                                      Family Farm Alliance,
                                         Salem, OR, March 23, 2004.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Chairman Domenici: I'm writing on behalf of the members of the 
Family Farm Alliance to strongly urge that the Committee support an 
amendment by Senator Gordon Smith of Oregon that would give the 
beneficiaries of Bureau of Reclamation projects a voice in the 
planning, construction and management of dam safety improvements at 
Bureau facilities.
    We believe that Senator Smith's proposed amendment (S.A. 2218) to 
your Safety of Dams funding authorization bill (S. 1727) will ensure 
more efficient and effective dam safety projects while producing 
significant cost savings for the federal treasury and local irrigation 
and water districts.
    The Family Farm Alliance is a grass-roots organization representing 
irrigated farmers, ranchers, water managers and local agricultural 
groups in 16 Western states. We are the Bureau of Reclamation's 
    The safety of Bureau dams is especially important to those of us 
who live in the shadow of these facilities and depend upon them for our 
livelihoods. The Alliance supports increasing the appropriation 
authorization for the Bureau's Safety of Dams Program and we have no 
desire to delay the allocation of badly needed resources.
    However, the need to adjust the authorization ceiling presents 
Congress with an opportunity to improve how the Safety of Dams Program 
is implemented. Senator Smith's amendment is an improvement that makes 
good sense for both the Bureau and its customers.
    In 1984, Congress amended the Safety of Dams Act of 1978 to require 
that 15 percent of the costs of dam safety modifications must be 
allocated to the irrigation purposes of the project and repaid by the 
project beneficiaries. The requirement applies to modifications that 
are necessary as a result of new hydrologic or seismic data or changes 
in state-of-the-art safety criteria.
    The cost of individual modifications carried out under the Safety 
of Dams Act has ranged from a few hundred thousand dollars to hundreds 
of millions of dollars. Some larger irrigation districts have been able 
to shoulder their share of these costs, while some small districts are 
burdened with debt service that nearly exceeds their annual operating 
budgets. Other districts simply can't afford to pay their share.
    In all cases, the local districts have a strong incentive to 
minimize the cost of dam safety improvements but only a few of them 
have a real opportunity to affect those costs.
    Project beneficiates have no formal role in designing or 
controlling the costs of Bureau dam safety modifications, for which the 
law requires them to help pay. In most cases, the Bureau alone 
determines the scope, design and cost of dam safety work. Some 
irrigation districts have received little more than a letter from the 
Bureau telling them what they owe for a safety modification they had no 
part in selecting.
    The practice of excluding local authorities from meaningful 
participation in dam safety design and management is contrary to both 
Bureau policy and experience.
    For more than a decade, the Bureau has followed a policy of 
encouraging beneficiaries to take on a larger role in the day-to-day 
operation and maintenance of its facilities. Some of Bureau's biggest 
projects and project features are now operated entirely by local 
authorities. Further, working in partnership with local interests is 
one of the basic tenets of the Interior Department's Water 2025 
    Most importantly, experience demonstrates that when local 
authorities become actively involved the design, operation or 
maintenance of Bureau projects, costs virtually always go down. 
Examples can be readily found in the Central Valley Project in 
California, the Central Utah Project and at smaller facilities 
throughout the West where cost-conscience local stakeholders have 
helped the Bureau figure out better ways to spend their operation and 
maintenance fees.
    To involve local interests is in Safety of Dams projects is nothing 
new. The Bureau has successfully worked in partnership with several 
local authorities on dam safety modifications.
    One of the first and the largest dam safety projects in the history 
of the program was the modification of five dams in Arizona's Salt 
River Project (SRP). Begun in the late 1980s and completed in 1996, 
this highly complex project cost hundreds of millions of dollars. The 
Bureau and SRP beneficiaries worked closely together on all aspects of 
the project, including estimating costs, designing the project and day-
to-day construction management.
    The SRP-Bureau collaboration was very positive and productive. But 
it is not the norm in the Safety of Dams Program. The Family Farm 
Alliance believes that Senator Smith's amendment would make the SRP 
experience the rule rather than the exception.

                            SMITH AMENDMENT

    The amendment requires the Bureau to invite project beneficiaries 
to participate in the ``joint oversight'' of a dam safety modification. 
This includes planning, design, value-engineering review, cost-
containment, procurement, construction and management.
    If the project beneficiaries agree to participate in the joint 
oversight, they would enter into an agreement with the Bureau and any 
reasonable costs associated with local participation could be credited 
toward the non-federal repayment obligation.
    If a participating project beneficiary were to submit an 
alternative idea to the Bureau for implementing the safety 
modification, the Bureau would be obliged to consider the 
recommendation. If the Bureau rejected the local alternative, it would 
have to provide the local beneficiary with a written explanation for 
the rejection. The explanation also would become part of the Bureau's 
final project report to Congress.
    The Bureau would not be obligated to consider or respond to 
recommendations made by project beneficiaries (or other parties) that 
had not elected to participate in the joint oversight of the dam safety 
modification. However, the Bureau would have to provide detailed status 
reports on the modification to all project beneficiaries regardless of 
whether they had elected to participate in the joint oversight of the 
    A provision very similar to Senator Smith's amendment was approved 
by the House in 2000 as part of a Safety of Dams Program authorization 
increase (H.R. 3595). The measure also required the Bureau to give a 
formal role to local authorities in the management of dam safety 
modifications. It had strong bipartisan support.
    The Senate did not act on H.R. 3595, but held a hearing on the 
Safety of Dams program in May, 2000. A short-term increase in the 
programs' appropriations authorization was approved later that year in 
the Energy and Water Development Appropriations bill.
    The Family Farm Alliance has worked closely and successfully with 
the Bureau on a number of issues, and we and other interest groups 
could assist the Bureau in developing a Safety of Dams joint oversight 
program that would cut costs, minimize conflicts and improve 
performance. However, we do not believe that can happen without 
statutory direction from Congress. Senator Smith's amendment would 
provide that very necessary direction.
    Finally, a word on cost-sharing: The Alliance is adamantly opposed 
to increasing the current 15 percent non-federal cost-share for dam 
safety modification. Most irrigation districts can ill afford the 
current level of cost-sharing, and increasing it would only delay or 
impede work necessary to protect the public health and safety.
    A far more effective and sustainable approach to reducing federal 
dam safety expenditures is to give project beneficiaries a formal role 
in managing those expenditures. Their self-interest will lead them to 
work with the Bureau to cut costs.
    The Family Farm Alliance commends Senator Smith for introducing his 
amendment, and we urge you and Members of the Committee to give it your 
full support.
                                        William D. Kennedy,
            Prepared Statement of Charles J. Baroch, Mayor, 
                     City of Golden, CO, on S. 2180

    Chairman Craig & Members of the Subcommittee, my name is Charles J. 
Baroch, and I am the Mayor of the City of Golden, Colorado. I appear 
before you today to testify in favor of S. 2180, and to request that it 
be processed into law at the earliest possible date. I will explain 
    As I'm sure all of you are aware, Colorado has been experiencing a 
very severe drought over the past few years, and although things 
improved in 2003, snowfall has been sparse this year, and the current 
snowpack in the South Platte River drainage, where most of Golden's 
water supply is located, is right now at only 67% of normal. So, our 
City desperately needs to augment our water supply and storage 
    To achieve that goal, in December the City of Golden completed 
construction of a new reservoir, called the Guanella Reservoir, which 
is shown in this photo taken in February. Unfortunately, as you can 
see, the reservoir is sitting almost empty! Why? Because we need 
authority to complete a 140 foot stretch of pipeline across National 
Forest land to connect the new reservoir with the West * Fork of Clear 
Creek, where we have water withdrawal rights. Currently, the pipeline 
is complete up to the Forest boundary.
    Last year, when we approached the Forest Service about the 
pipeline, we were told that it could take several years to authorize 
the pipeline to cross the Forest Service land, and we agreed with the 
Forest Service to seek an expedited authority from Congress via a small 
legislated land exchange. Legislation to grant that authority passed 
the House last fall, but there was not time to take it up in the 
Senate. Thankfully, Senators Campbell and Allard have introduced S. 
2180, and we hope it can be passed immediately.
    In the exchange set forth in S. 2180, the City of Golden would 
receive a 9.84 acre parcel of land from the Forest Service, where the 
pipeline would be completed, and where we already own a diversion dam 
and headgate. In return, we would give the Forest Service up to 80 
acres of land which they desire to acquire in the Cub Creek drainage 
near Evergreen, Colorado. And, we would donate approximately 55 acres 
to the Forest Service along the Continental Divide in Clear Creek and 
Summit Counties. The 55 acres are traversed by the Continental Divide 
National Scenic Trail, and also include an access route to the Trail. 
Donating the land will save scarce trail acquisition funds for other 
portions of the Trail.
    If for some reason, the land exchange cannot be consummated, S. 
2180 directs the Forest Service to sell us the 9.84 acre parcel at full 
fair market value.
    Finally--and this is the most critical provision for us right now--
S. 2180 authorizes us to immediately construct the pipeline across the 
140 feet of National Forest land upon the bill's enactment. Mr. 
Chairman, I cannot emphasize enough how important it is to our City to 
see the pipeline completed as quickly as possible. We would have liked 
to start filling Guanella reservoir in January, and it is now already 
late March, and we need to have it filled before the peak summer demand 
    Lastly, I note that the land exchange directed by S. 2180 has been 
endorsed by the Clear Creek County, Summit County and Park County 
Boards of County Commissioners, and by many others, including the non 
profit Continental Divide Trail Alliance, which is interested in seeing 
the land along the Trail acquired by the Forest Service.
    I would like to again thank Senators Campbell and Allard for 
introducing S. 2180, and especially applaud Senator Campbell for 
arranging to have this hearing so quickly. This land exchange is very 
important to the City of Golden, and we are deeply appreciative of your 
efforts to help us augment our municipal water supply.
    That concludes my testimony. I would be happy to answer any 
questions you or other members of the Subcommittee might have.

               Mni Sose Intertribal Water Rights Coalition,
                                     Rapid City, SD, April 7, 2004.
Hon. Lisa Murkowski,
Chairperson, Subcommittee on Water and Power, Energy and Natural 
        Resources Committee, U.S. Senate, Washington, DC.
Re: S. 2218--The Reclamation Rural Water Supply Act of 2004

    Dear Madam Chairwoman Murkowski: The Mni Sose Intertribal Water 
Rights Coalition respectfully submits comments on Senate Bill 2218--The 
Reclamation Rural Water Supply Act of 2004, for the Committee's review. 
The Mni Sose Intertribal Water Rights Coalition, comprised of 24 
Missouri River Basin Tribes, strongly recommends the passage of this 
    The legislation addresses many of the issues confronting American 
Indian Tribes in building adequate, safe water supply infrastructures 
for Indian communities. Tribes have been hampered by inadequate, aging 
water treatment and distribution systems since the 1950s. Tribal 
leaders have been attempting to attract new businesses and building 
tribal enterprises on tribal lands without success since water and 
power sources are not available. The Act would assist Tribes by putting 
in place sound infrastructure for business development.
    The Act also addresses the need for expanded housing and community 
facilities in tribal communities. The construction of housing and 
community facilities has seriously been curtailed since utility 
infrastructures, including water systems, are not available to serve 
new homes. The development of water treatment and distribution systems 
with capabilities for expansion of housing will accommodate the inward 
migration of tribal members back to the reservations and will meet the 
population increases projected in the next 40 to 50 years.
    The Act also recognizes that Indian Tribes and communities are 
experiencing all aspects of poverty, with unemployment rates of over 
50% common for most reservations. The ability to pay by these 
beneficiaries is very limited. Without special consideration, Indian 
Tribes are not able to participate in this program.
    Thank you for consideration of these comments. For additional 
comments, please contact Mr. Woody Corbine, Executive Director of Mni 
Sose, at the address listed below or call 1-800-243-9166.
                                              Gary Collins,
  Prepared Statement of Gary Collins, President, Mni Sose Intertribal 
                Water Rights Coalition, Inc., on S. 2218

    The Mni Sose Intertribal Water Rights Coalition, comprised of 24 
Missouri River Basin Tribes, submits the following comments for your 
consideration on Senate Bill 2218, The Reclamation Rural Water Supply 
Act of 2004. The Reclamation Rural Water Supply Act of 2004 addresses 
an important barrier to American Indian Tribes for economic development 
on Tribal Homelands.
    Presently, a Federal process does not exist for American Indian 
Tribes to build new water infrastructures in tribal communities. 
Inadequate tribal water treatment and distribution systems have impeded 
the development of new businesses and enterprises on reservation lands. 
The systems, constructed in the 1950s and 1960s, were designed to serve 
the Indian population at that time and did not provide for increased 
capacity and expansion.
    American Indian communities are extremely poor, and reservation 
unemployment rates of 50% or more are common throughout the nation. The 
cost-share component of The Reclamation Rural Water Supply Act of 2004 
is very fair. However, this requirement may prevent many Tribes from 
benefiting from the Act. The Coalition recommends the Bureau of 
Reclamation be given authority to utilize formulas and processes that 
take into account a Tribe's ability to pay. Reclamation should be given 
authority to utilize ``in-kind'' contributions from Tribes to permit 
the Tribes to receive the full benefits of the Act.
    Due to the limited financial ability of Tribes to participate in 
the Act, the Mni Sose Coalition recommends the establishment, within 
the U.S. Treasury, of an interest-bearing account called ``The 
Reclamation Rural Water Supply Act of 2004 Operation and Maintenance 
Account.'' At the time funds are appropriated for construction of a 
project, appropriations in amounts necessary for the operation and 
maintenance of the project shall be deposited into such account and 
designated for the project. Such funds may be expended by the Secretary 
for the project's operation and maintenance costs without further 
appropriations from Congress.
    The Mni Sose Coalition recommends The Reclamation Rural Water 
Supply Act of 2004 include provisions of the Indian Self-Determination 
Act (Public Law 93-638; 25 U.S.C. 450 et seq.) to aid in partnership 
building as required by the Act. The planning, design, construction, 
and operation of The Reclamation Rural Water Supply Act projects shall 
be subject to the provisions of the Indian Self-Determination Act.
    Thank you for your consideration of the Mni Sose Intertribal Water 
Rights Coalition's recommendations to The Reclamation Rural Water 
Supply Act of 2004.
   Prepared Statement of Electors Concerned About Animas Water (CAW)

    While we are concerned that no witnesses with objections to the 
proposed Rural Water Supply Legislation, S. 1085, S. 1732, S. 2218 
[``Bills''], were invited to appear before the Subcommittee to testify, 
``electors concerned about Animas Water''--CAW--intend to take full 
advantage of this opportunity to provide testimony to be entered into 
the public record
    The legislation proposed by Republican Chairman Domenici and 
Democratic Ranking Member Bingaman is essentially redundant in its 
intents and purpose--as Bureau of Reclamation [``BOR''] Commissioner 
Keys has specifically pointed out in his testimony, eight Federal 
agencies already operate seventeen established programs offering 
generous Federal assistance to individuals choosing to live in areas of 
the dry and remote West, far removed from conventional domestic water 
supply systems. Discounts, credits, loans and direct grants are 
routinely made available to address the specific needs of those 
Americans who experience unique challenges providing safe drinking 
water for their families.
    Clcarly, Senator Campbell's State of Colorado has no need for such 
duplicative legislation. The Colorado:) Water Resources and Power 
Development Authority [``CWRPDA''] has a hug: bank account, flush with 
Federal and State water development funds. The CWRPDA has authority to 
make loans of up to $500 million. without legislative oversight.
    The Colorado River Basin States are down to our last drops of water 
in the Colorado River. Therefore, it is of paramount importance that 
the Federal Government not intrude on or interfere with the rights of 
these States to determine the allocation, appropriation, adjudication 
and use of their most important and limited resource. The Bills will 
only encroach on the State's sovereign powers to prioritize and manage 
future water use within their borders. Implicit in the Bills is a 
Federal intrusion into States' rights matters running directly counter 
to) the McCarran Amendment.
    There is no escaping the reality that the BOR's abysmal record of 
profligacy, project mismanagement, and deceptive construction cost 
estimation make it unworthy of any serious Congressional consideration 
for substantially increased funding or expanded authority. Just last 
month, the BOR revealed to witness Jim. Dunlap, Chairman of New 
Mexico's Interstate Stream Commission, that the Navajo-Gallup pipeline 
project Dunlap touts in his testimony is expected to cost Federal 
taxpayers at least $150 million more than originally estimated. 
Similarly, the BOR recently confirmed costly mistakes characterized by 
Mr. Campbell as ``malfeasance'' in the Animas-La Plata Project [``ALP 
Project'']. These critical errors in the ALP Project (in effect lies 
told to Congress and the American people) have resulted in skyrocketing 
construction cost increases of more than $162 million.
    Last week, Chairman Domenici's Appropriations Committee conducted 
an Oversight Hearing into the BOR's bogus ALP Project cost estimates, 
but the testimony raised larger, more disturbing questions about 
circumstances surrounding the mistakes. The Senators from New Memo and 
Colorado would be well-advised to demand an independent GAO audit of 
the ALP Project--with an investigation into fraud, corruption, and 
malfeasance--before moving any further to push their Bills and solicit 
billions of dollars of additional appropriations for the purpose of 
extending the BOR's reach. Senator Domenici should pause to carefully 
consider his own assessment of the BOR's dismal performance reported 
last week in the Durum Herald as follows:

        ``Domenici, whose subcommittee is an offshoot of the Senate 
        Appropriations Committee, said he has been a longtime supporter 
        of expanding the bureau to take on more duties, but is having 
        second thoughts about supporting that expansion because of the 
        A-LP cost overruns, ``I am not very impressed, and I'm not 
        going to continue down that path,'' Domenici told [DOI 
        Assistant Secretary Bennet] Raley. ``I don't know if the bureau 
        is going to be growing. If they can't do this, I'm going with 
        the Corps of Engineers. I won't look for projects of this 
        magnitude going to the bureau for a while.''

    At the same time, Chairman Domenici said in a press release that 
Federal taxpayers will need to ante up ``more than a few billion 
dollars in a revolving fund'' for rural water supplies because ``we can 
no longer get by with programs that are too miniscule to do any good.'' 
Obviously, the Senator's Bills would involve significant, long-term 
annual appropriations to the BOR for the planning construction., 
operation and maintenance of projects involving a substantial amount of 
infrastructure. Needless to spry, the Bills would only complicate the 
challenge of reducing the escalating Federal budget deficit.
    The Bills fly squarely in the face of the Senate's laudable 
commitment to fiscal responsibility as evidenced by the brave and wise 
initiative known as ``pay-as-you-go''. We may once have had reason to 
believe that Chairman Domenici could exercise restraint in the 
expenditure of public funds, but no more. Efforts by the Federal 
Government--such as those in the Domenici Bills--to freely fund 
regional rural domestic water supply distribution systems in low 
density areas is idiocy that encourages rampant sprawl. The blight of 
sprawl is well-recognized as one of the most pressing public concerns 
in the Rocky Mountain States. Runaway growth, is jeopardizing quality 
of life, while posing a. dire threat to the environment. Provisions in 
the Bills would make it more difficult--not easier--to control sprawl 
and would inhibit the States' powers to take necessary steps to 
regulate and limit growth within their borders.
    Language in the Bills opens wide a whole new arena of subsidy--
namely Municipal & Industrial [``M&I''] water. Again, the ALP Project 
provides a case study in the costly, appalling pitfalls faced by 
Federal taxpayers when the Federal Government gets into the business of 
providing enormous subsidies for M&I water supplies. The Bills actually 
allow for the costs of planning and constructing projects for rural 
water treatment and distribution systems to be 100% non-reimbursable to 
the Federal Government. That is to say that, at the discretion of the 
Secretary of the Interior, project participants could be released from 
all, obligations to share in any costs associated with their benefits.
    In fact, the proposed legislation seems to us to be no more than a 
backdoor ploy to subsidize water to developers looking for the ways and 
means to underwrite rural water distribution systems and divvy up 
marginal, high-desert farmland in southwest Colorado and Northwest New 
Mexico into 35-acre subdivisions for trophy homes, McMansions, 
ranchettes, and the like, Unfortunately, the testimony which Mr. 
Dunlap's presented to you does not speak directly to any personal 
interest he may have in the BOR's spending $72 million to construe: an 
unauthorized, feature of the original ALP boondoggle with a water 
treatment plant in Colorado and hundreds of miles of Dry Side piping 
for the delivery of industrial-use water to the La Plata Conservancy 
District of New Mexico [LPCD]. That LPCD water, contrary to Mr. 
Dunlap's assertion, is neither adjudicated nor under contract,
    Our Four Corners Area has been aptly characterized in the press as 
a National Sacrifice Area, and the Bills--if enacted--would only 
exacerbate this deteriorating situation.

                                                Steve Cone,
                     For ``electors concerned about Animas Water''.
    Prepared Statement of Anita Winkler, Executive Director, Oregon 
                        Water Resources Congress

Re: S. 2218, S. 1085, S. 1732 and S. 993--RURAL WATER DEVELOPMENT

    As Executive Director for the Oregon Water Resources Congress 
(OWRC), I appreciate this opportunity to discuss rural water issues. 
The OWRC represents organized agricultural interests in the State of 
Oregon. Its members include irrigation districts, water control 
districts, drainage districts, ports, cities, individual farmers, and 
agribusiness associates. With our broad base of representation around 
the State, OWRC has the experience and expertise to comment on this 
    The Oregon Water Resources Congress supports Bureau of Reclamation 
involvement in issues that affect the Arid West. The Bureau of 
Reclamation has a proven ability to plan, construct and provide 
contract management for large scale projects serving multiple 
    While OWRC supports the Bureau's efforts as evidenced in S. 2218 
and S. 1085 and the testimony of John W. Keys, III, Commissioner of the 
Bureau of Reclamation, we are concerned that a core component of rural 
water is left off the table by not addressing the needs of agricultural 
water. For a program to fully address rural water needs, it should 
include solutions to water issues that address the full range of 
concerns facing rural communities, agriculture, and tribes. For that 
reason, we ask the committee to consider S. 993, the Small Reclamation 
Loan Program, as a supporting piece of legislation to S. 2218, S. 1732 
and S. 1085.
    As Oregon moves to address its rural water issues, we've done so in 
a comprehensive approach. Environmental issues, water quality issues, 
and water supply issues are all integrated management and delivery of 
rural water in Oregon whether it be for domestic use, agricultural use 
or a combination of uses. As most rural communities have an 
agricultural base, any effort to address rural water needs must include 
agricultural needs along with M&I needs. Safe drinking water issues are 
important, but agricultural interests have a need to access funding and 
development as well in order to assure the sustainability of the rural 
    OWRC sees S. 2218, S. 1085, S. 1732 and S. 993 as a real 
opportunity to link rural communities together in a partnership program 
if the concepts in each bill can be formulated into a more 
comprehensive program. Reclamation's expertise can assist rural 
communities by addressing the full range of interests and facilitate a 
program that will have real benefit to the rural communities and tribes 
of Oregon.
    S. 993 is an amendment to the Small Reclamation Projects Act of 
1956. OWRC strongly supports S. 993 as it assists our members with 
funding of the rehabilitation of aging infrastructure of existing water 
deliver systems, development and implementation of water conservation 
projects, and development of new projects to meet rural water needs. 
The bill will enable entities to construct water quality, drought, and 
ESA related projects as well as make improvements for public safety.
    Examples of partnership programs that can be developed are:

   Existing reservoirs providing wholesale untreated water to 
        communities and tribes for multiple use:

     many reservoirs provide untreated water now
     others have space as irrigation water is conserved

   Water conservation projects providing conserved water to 
   Joint projects between agriculture, Tribes and communities 

     water quality
     water supply
     fisheries needs
     drought needs

    OWRC agrees that cost to the benefiting entities should be 
apportioned on the ability to pay. This is an important component of 
any project being considered by a rural community. S. 2218 speaks to 
this issue quite adequately, with a 35% minimum. S. 993 has a 25% 
minimum with a 25-year payback. These terms will enable the benefactors 
to address their long-term problems and maintain their economic 
    For these reasons, OWRC supports S. 993 and certain concepts in S. 
2218, S. 1732 and S. 1085, when considered together as a package. The 
three bills jointly provide resources which will enable rural 
communities to meet water needs, allow the renovation of existing 
projects, and facilitate water improvement programs. S. 2218, S. 1732 
and S. 1085, on the merits of the individual bills, do not by 
themselves provide the necessary tools to encompass rural water 
    S. 993 establishes a process and a timeframe for considering 
proposals, processes and timeframes for things to be considered that 
are left out of the other bills. This is part of a necessary framework 
that should be considered as the package of bills moves forward. Thank 
you for this opportunity to comment.

      Prepared Statement of National Congress of American Indians


    Chairman Domenici, Senator Bingaman, and members of the Committee, 
please consider the following comments on two bills before your 
committee: S. 1085, the ``Reclamation Rural and Small Community Water 
Enhancement Act'' and S. 1732, ``The Reclamation Rural Water Supply Act 
of 2003''.


    In Indian country, nearly 7% of tribal homes continue to lack 
running water, a figure that is 14 times higher than the national 
average. In EPA Region 9 alone, which encompasses the westernmost 
Indian tribes, an estimated 68,000 tribal homes lack access to safe 
drinking water (including 40% of the families on the Navajo Nation that 
must haul or otherwise obtain their drinking water from unregulated 
sources), and there is only a 50% certainty that a tap turned on in a 
tribal home will consistently produce water in compliance with 
bacteriological monitoring and testing requirements. Based on the EPA 
Needs Survey, it is estimated that drinking water system construction 
and rehabilitation and upgrade needs in Indian Country have been 
estimated to be approximately $350-$550 million.
    Lack of funding for operations and maintenance for the continuing 
health and welfare of the tribal public water system is also a major 
concern for Indian tribes. To make this problem worse, the western 
drought puts pressure on resources available to public water systems, 
thus implicating the funding for tribal water infrastructure needs. 
Routine water quality monitoring and operation and maintenance 
activities are absolutely essential to ensure the continued safety of 
drinking water in Indian country. Additionally, the absence of 
financial, managerial, and technical capacity often results in 
violations of the Safe Drinking Water Act and puts the public health at 
    New federal requirements for drinking water protection, solid waste 
control, non-point source pollution abatement, and hazardous waste have 
affected Indian reservations. Tribes have been charged with 
implementing these legislative regulations and rules with inadequate 
federal funding. The tribes stand ready to take the lead in the 
development of these codes and regulations, but need the critical 
skills to carry out these programs pursuant to federal laws. Such 
skills include sound technical capabilities and administration, policy, 
and managerial skills.
    In short, we welcome bills such as S. 1085 and S. 1732 to provide 
for tribal water supply programs. Please consider the following 
comments and recommendations on each bill.

                           ENHANCEMENT ACT''

    In the purposes section of the bill, we believe you should include 
``Indian tribes'' among the entities that the program is designated to 
    In Section 5(b) and 6(b), the considerations for appraisal 
investigations and feasibility studies should include consideration of 
cultural and historic resources, such as Native American sacred rites.
  senate bill 1732: ``the reclamation rural water supply act of 2003''
    In Section 3(c), we believe that the bill should provide a waiver 
for federally recognized Indian tribes for the cost-sharing 
requirements. Although tribes sometimes voluntarily agree to assist in 
the costs of water projects, the federal government has treaty and 
trust responsibilities to provide for the water needs of Indian tribes, 
and cost-sharing requirements are inappropriate. This combines with the 
fact that nearly all rural western tribes for whom this legislation is 
intended are not in a position to provide cost-sharing. We are 
concerned that the cost-sharing requirement could become a way of 
discriminating against tribal projects.
    In Section 5(b), considerations for feasibility studies should 
include consideration of impacts on cultural and historic resources, 
such as Native American sacred sites.
    In Section 5(c)(1), the Secretary's report should describe how her 
recommendation takes into consideration the views expressed during 
consultation with appropriate Federal, state, tribal, regional, and 
local authorities during the conduct of the leasability study.


    Thank you for this opportunity to provide these comments and 
recommendations on the bills. Please feel free to contact the National 
Congress of American Indians if you need further information. We look 
forward to working with your Committee in the future.