[Senate Report 111-274]
[From the U.S. Government Publishing Office]
Calendar No. 544
111th Congress
SENATE
2d Session Report Mo. 111-274
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BONNEVILLE UNIT CLEAN HYDROPOWER
FACILITATION ACT
_______
August 5, 2010.--Ordered to be printed
_______
Mr. Bingaman, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany H.R. 2008]
The Committee on Energy and Natural Resources, to which was
referred the Act (H.R. 2008) to authorize the Secretary of the
Interior to facilitate the development of hydroelectric power
on the Diamond Fork System of the Central Utah Project, having
considered the same, reports favorably thereon without
amendment and recommends that the Act do pass.
PURPOSE
The purpose of H.R. 2008 is to authorize the Secretary of
the Interior to facilitate the development of hydroelectric
power on the Diamond Fork System of the Central Utah Project.
BACKGROUND AND NEED
The Central Utah Project was authorized in 1956 as part of
the Colorado River Storage Project Act. The Bonneville Unit is
the largest unit of the Central Utah Project. The Diamond Fork
System is a completed project within the Bonneville Unit and is
located in Utah County, Utah. Pursuant to the Central Utah
Project Completion Act of 1992 (CUPCA), the Central Utah Water
Conservancy District is responsible for completion of the
Central Utah Project, including the Bonneville Unit.
Hydropower development on Central Utah Project facilities
was authorized as part of the original Colorado River Storage
Project Act of 1956. The 2004 Supplement to the 1988 Definite
Plan Report for the Bonneville Unit and the 2004 Utah Lake
Drainage Basin Water Delivery System Final Environmental Impact
Statement detail the proposed power facilities that could be
developed within the Diamond Fork System, which include two
hydroelectric power plants. It is estimated that the Diamond
Fork project has the capability to generate up to 50 megawatts
of hydroelectric power.
The Colorado River Storage Project Act requires that
project costs be allocated for repayment by power generation
and, as a result, any non-federal developer of power within the
Diamond Fork system would be responsible for payment of those
costs prior to initiation of power production. H.R. 2008
provides that the project costs would be permanently deferred
under the same terms as certain municipal and industrial costs
are allowed to be deferred under section 211 of CUPCA so long
as the Central Utah Water Conservancy District complies with
certain water management requirements.
LEGISLATIVE HISTORY
H.R. 2008, sponsored by Representative Matheson, passed the
House of Representatives by voice vote on June 8, 2010.
Companion legislation, S. 1758, was introduced by Senator
Bennett on October 6, 2009. The Subcommittee on Water and Power
held a hearing on S. 1758 on November 5, 2009 (S. Hrg. 111-
339). The Committee on Energy and Natural Resources considered
H.R. 2008 at its business meeting on June 16, 2010, and ordered
it favorably reported without amendment at its business meeting
on June 21, 2010.
COMMITTEE RECOMMENDATION
The Committee on Energy and Natural Resources, in open
business session on June 21, 2010, by voice vote of a quorum
present, recommends that the Senate pass H.R. 2008.
SECTION-BY-SECTION ANALYSIS
Section 1 identifies the short title of the bill as the
Bonneville Unit Clean Hydropower Facilitation Act.
Section 2 defines the Diamond Fork System as the facilities
described in chapter 4 of the October 2004 Supplement to the
1988 Definite Plan Report for the Bonneville Unit.
Section 3 provides that the current amount of reimbursable
costs allocated to project power for the Diamond Fork System
shall be the final costs.
Section 4 provides that nothing in the Act shall obligate
the Western Area Power Administration to purchase or market any
of the power produced by the Diamond Fork power plant and that
none of the costs associated with development of transmission
facilities to transmit power from the Diamond Fork power plant
shall be assigned to power for the purpose of Colorado River
Storage Project ratemaking.
Section 5 prohibits the use of tax-exempt financing to fund
any facility for the generation or transmission of
hydroelectric power on the Diamond Fork System.
Section 6 requires the Secretary of Interior to report to
the Committee on Natural Resources of the House of
Representatives and the Committee on Energy and Natural
Resources of the Senate if hydropower production on the Diamond
Fork System has not commenced within twenty-four months after
the date of enactment and to supply a detailed timeline for
future hydropower production.
Section 7 contains language complying with the Statutory
Pay-As-You-Go Act of 2010.
Section 8 provides that the authority under the provisions
of section 301 of the Hoover Power Plant Act of 1984 (P.L. 98-
381; 42 U.S.C. 16421a) shall not be used to fund any study or
construction of transmission facilities developed as a result
of the bill.
COST AND BUDGETARY CONSIDERATIONS
The following estimate of costs of this measure has been
provided by the Congressional Budget Office:
H.R. 2008--Bonneville Unit Clean Hydropower Facilitation Act
Summary: CBO expects that enacting H.R. 2008 would lead to
the development of hydropower facilities at the Diamond Fork
Project in Utah by a nonfederal entity within a few years,
sooner than expected under current law. As a result, CBO
estimates that the government would receive payments from the
hydropower developer of about $2 million over the 2011-2020
period. Pay-as-you-go procedures apply to this legislation
because it would increase offsetting receipts (a credit against
direct spending).
H.R. 2008 would reduce the amounts that developers of
hydropower resources at the Diamond Fork Project would have to
pay to the U.S. Treasury for certain reimbursable expenses.
(Reimbursable expenses are the portion of a project's costs
that are repaid to the federal government by other entities.)
Under current law, a sponsor of this project would have to pay
about $5.3 million annually for a period of 50 years following
the start of electricity production. H.R. 2008 would
effectively eliminate that potential obligation. Instead, under
H.R. 2008, sponsors would be required to pay certain annual
fees, which are estimated to total about $400,000 a years,
adjusted for inflation, beginning in 2016.
H.R. 2008 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The costs of this
legislation fall within budget function 300 (natural resources
and environment). CBO estimates that enacting H.R. 2008 would
increase offsetting receipts by $400,000 a year over the 2016-
2020 period, or a total collection of $2 million.
Basis of estimate: Based on information from the Bureau of
Reclamation, CBO expects that the federal government is
unlikely--under current law--to develop the hydropower
resources of the Diamond Fork project for at least the next 10
years. Although there are no formal development proposals
currently being considered by the bureau, two nonfederal
entities--the Central Utah Water Conservancy District and the
Strawberry Water Users' Association--have expressed interest in
developing those resources since at least 1995. Whether one of
those entities or another nonfederal developer will propose a
hydroelectric project at Diamond Fork under current law over
the next decade is unclear. Among the issues that have delayed
development of the site is a requirement to pay the Treasury
for the federal government's power-related investments in the
water project. According to the bureau, such payments would
begin after the hydroelectric facilities go into service and
would average $5.3 million a year for 50 years.
CBO expects that eliminating the required annual payment to
the Treasury would encourage nonfederal entities to pursue
development of the hydropower resources at Diamond Fork.
Assuming that H.R. 2008 is enacted near the end of 2010, we
expect that the Bureau of Reclamation would receive a proposal
to develop the hydroelectric resources within a year or two and
that such a project could be completed by 2016. In that case,
the government would collect annual fees from the project
developer totaling about $400,000 a year (adjusted for
inflation) for the life of the project.
Pay-as-you-go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. H.R. 2008 would increase offsetting receipts (a
credit against direct spending) beginning in 2016. The
budgetary changes that are subject to pay-as-you-go procedures
are shown in the following table.
CBO ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS FOR H.R. 2008, THE BONNEVILLE UNIT CLEAN HYDROPOWER FACILITATION ACT, AS ORDERED REPORTED BY THE
SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES ON JUNE 21, 2010
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By fiscal year, in millions of dollars--
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010-2015 2010-2020
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NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact............ 0 0 0 0 0 0 0 0 0 0 0 0 -2
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Intergovernmental and private-sector impact: H.R. 2008
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Previous CBO estimate: On September 23, 2009, CBO
transmitted a cost estimate for H.R. 2008 as ordered reported
by the House Committee on Natural Resources on September 10,
2009. The two pieces of legislation are identical, and the
estimated costs are the same.
Estimate prepared by: Federal Costs: Aurora Swanson; Impact
on State, Local, and Tribal Governments: Melissa Merrell;
Impact on the Private Sector: Amy Petz.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
REGULATORY IMPACT EVALUATION
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out H.R. 2008.
The bill is not a regulatory measure in the sense of
imposing Government-established standards or significant
economic responsibilities on private individuals and
businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of H.R. 2008, as ordered reported.
CONGRESSIONALLY DIRECTED SPENDING
H.R. 2008, as ordered reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined in rule XLIV of the
Standing Rules of the Senate.
EXECUTIVE COMMUNICATIONS
Statement of Michael L. Connor, Commissioner, Bureau of Reclamation,
Department of the Interior
Madam Chairwoman and members of the Committee, I am Michael
Connor, Commissioner of the Bureau of Reclamation. I am pleased
to be here today on behalf of the Assistant Secretary for Water
and Science who oversees the Central Utah Project Completion
Act activities to present the Administration's views on S.
1758, the Bonneville Unit Clean Hydropower Facilitation Act.
The proposed legislation is associated with development of
hydropower on the Diamond Fork System, Bonneville Unit, Central
Utah Project.
The Central Utah Project Completion Act (CUPCA) provides
for the completion of the construction of the Central Utah
Project (CUP) by the Central Utah Water Conservancy District
(CUWCD). CUPCA also authorizes programs for fish, wildlife, and
recreation mitigation and conservation; establishes an account
in the Treasury for deposit of appropriations and other
contributions; establishes the Utah Reclamation Mitigation and
Conservation Commission to coordinate mitigation and
conversation activities; and provides for the Ute Indian Water
Rights Settlement.
Hydropower development on CUP facilities was authorized as
part of the Colorado River Storage Project Act (CRSPA) under
which the Central Utah Project is a participating project. The
development of hydropower on the Diamond Fork System has been
contemplated since the early days of the CUP. The 1984
Environmental Impact Statement on the Diamond Fork System
described the construction of five hydropower plants with a
combined capacity of 166 MW of power.
However, these hydropower plants were never constructed and
the 1999 Environmental Impact Statement on the Diamond Fork
System presented a plan which specifically excluded the
development of hydropower, stating ``. . . there are no
definite plans or designs, and it is not known if or by whom
they may be developed.''
Although hydropower development was not included,
construction of pipelines and tunnels for the Diamond Fork
System was completed and put into operation in July 2004. Under
full operation the Diamond Fork system will annually convey
101,900 acre-feet of CUP Water and 61,500 acre-feet of
Strawberry Valley Project Water.
In 2002 CUPCA was amended to authorize development of
federal project power on CUP facilities. With this new
amendment plans for hydropower development at Diamond Fork were
included in the 2004 Utah Lake System Environmental Impact
Statement and the 2004 Supplement to the Definite Plan Report
for the Bonneville Unit (DPR). These documents describe the
construction of two hydropower plants on the existing Diamond
Fork System for a total generating capacity of 50 MW.
Section 208 of CUPCA included provisions that power on CUP
features would be developed and operated in accordance with
CRSPA and CUP water diverted out of the Colorado River Basin
for power purposes would be incidental to other project
purposes.
There are two options for hydropower development on the
Diamond Fork System: (1) federal project development or (2)
private development under a Lease of Power Privilege contract
with the United States.
Under the first option the CUWCD would construct the
Diamond Fork hydropower plants under contract with the United
States and contribute an upfront local cost share of 35 percent
of the construction costs. In addition to the hydropower
construction costs, the costs associated with conveyance
facilities upstream of the Diamond Fork would have to be repaid
by the non-Federal project sponsors.
The DPR allocates costs of the CUP according to project
purposes. The reimbursable costs allocated to power are $161
million based upon the costs of developed features upstream of
the Diamond Fork System. It is anticipated that under this
option, these allocated costs would be repaid through an
arrangement among Interior, CUWCD, and the Western Area Power
Administration (WAPA).
Under the second option, private hydropower could be
developed. Although the DPR and 1999 EIS describe federal
hydropower development, they also provide the option for a
Lease of Power Privilege arrangement with the United States.
Under this arrangement Interior would implement a competitive
process to select a lessee for private development of
hydropower at Diamond Fork. The lease arrangement would require
repayment of the $161 million of upstream costs plus annual
payments to the United States for the use of the federal
facilities, amounting to at least a 3 mil rate paid by the
lessee to the United States.
S. 1758 does not preclude federal development of
hydropower, but it does increase the likelihood of private
development. If enacted, this bill would indefinitely defer the
$161 million in costs allocated to power development in the
Diamond Fork System under section 211 of CUPCA, thus reducing
the cost of hydropower development at this site. This bill
would increase the likelihood that a private developer would
pursue a Lease of Power Privilege arrangement because the
private developer would not, under this legislation, be
required to repay the $161 million of construction costs that
were allocated to power as would be required under existing
law.
We understand and appreciate the goal of this legislation
of facilitating the development of hydroelectric power on the
Diamond Fork System.
However, the Administration has serious concerns about
losing our ability to recoup the Federal investment made in
these facilities as set forth in this legislation. The Fedearl
government may benefit in the medium term from the annual
payments for the use of Federal facilities that would be paid
if a lessee entered into a Lease of Power Privilege arrangement
for production of hydroelectric power on the Diamond Fork
System. Assuming only a summer water supply as under current
deliveries, these payments are estimated at about $400,000 a
year starting the year that the project is completed and
continuing for the life of the project. However, because
payment of $161 million of allocated power costs would be
postponed indefinitely, it is unclear what the long-term fiscal
implications of enactment of this legislation would be and how
the United States Treasury would be made whole. This
legislation would potentially permanently postpone anticipated
receipts to the U.S. Treasury at the expense of the Federal
taxpayer. While it is not clear at this time whether a
nonfederal developer would propose a hydroelectric project at
Diamond Fork under current law, if this were to occur,
repayment of the allocated power costs would begin after the
hydroelectric project is completed and average $5.3 million a
year for 50 years.
Section 5 of S. 1758 would prohibit the use of tax-exempt
financing to develop any facility for the generation or
transmission of hydroelectric power on the Diamond Fork System.
This provision was added to the bill to prevent any loss of
revenue to the federal government as a result of the financing
mechanism used for development of hydropower at this site.
Further analysis would help to determine whether this
legislation to facilitate private development of hydropower at
Diamond Fork would provide sufficient benefits to justify the
costs.
This concludes my testimony. I am happy to answer any
questions.
CHANGES IN EXISTING LAW
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee notes that no
changes in existing law are made by H.R. 2008, as ordered
reported.