[Senate Report 110-323]
[From the U.S. Government Publishing Office]
Calendar No. 675
110th Congress Report
SENATE
2d Session 110-323
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BUREAU OF RECLAMATION SITE SECURITY COSTS ACT OF 2007
_______
April 10, 2008.--Ordered to be printed
_______
Mr. Bingaman, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany H.R.1662]
The Committee on Energy and Natural Resources, to which was
referred the Act (H.R. 1662) to authorize the Secretary of the
Interior to seek limited reimbursement for site security
activities, and for other purposes, having considered the same,
reports favorably thereon without amendment and recommends that
the Act do pass.
PURPOSE OF THE MEASURE
The purpose of H.R. 1662 is to amend the Reclamation Safety
of Dams Act of 1978 to authorize improvements for the security
of dams and other facilities.
BACKGROUND AND NEED
In the aftermath of the terrorist attacks on September 11,
2001, the Bureau of Reclamation embarked on a program of site
security measures at multi-purpose federal dams. These measures
involved both facility fortifications and increased use of
guards and patrols. Since implemented, there has been an
ongoing issue related to whether Reclamation or the
beneficiaries of Reclamation projects should pay for site
security measures.
Reclamation distinguishes security-related capital costs
for facility fortifications from operation & maintenance (O&M)
costs associated with increased guards and patrols. Since
implementing its enhanced site security measures, Reclamation
has treated its capital investments as nonreimbursable since
the fortifications are responding to risks not anticipated when
the projects were authorized and constructed. With respect to
security-related O&M costs, Reclamation initially classified
these costs as non-reimbursable to allow water and power
customers time to plan for increased costs in their budgets.
Now, however, Reclamation views these costs as fully
reimbursable based on project cost allocations.
Notwithstanding Reclamation's position, Congress
subsequently intervened and limited Reclamation's ability to
seek reimbursement for security-related O&M costs. In FY 2005,
Congress instructed Reclamation not to begin the reimbursement
process. In FY 2006, at Congress' request, Reclamation limited
reimbursement to approximately 50% of overall O&M costs. In its
FY 2007 budget request, Reclamation proposed reimbursement of
$18.9 million by water and power customers of security-related
O&M costs. H.R. 1662 would resolve the issue of repayment for
site security costs by expressly allocating specific costs for
reimbursement while classifying other costs as non-
reimbursable.
LEGISLATIVE HISTORY
H.R. 1662 was introduced on March 23, 2007 by
Representative Grace Napolitano and referred to the Committee
on Natural Resources. Representatives Jim Costa, Barbara Cubin,
Trent Franks, Raul Grijalva, Doc Hastings, Wally Herger, Cathy
McMorris Rodgers, George Radanovich, and Rick Renzi are co-
sponsors. Under suspension of the rules, H.R. 1662 passed the
House of Representatives on December 4, 2007, and was referred
to the Committee on Energy and Natural Resources in the Senate.
A companion measure, S. 1258, was introduced by Senator
Cantwell on May 1, 2007, and referred to the Committee on
Energy and Natural Resources. Senators Hatch, Wyden, Allard,
and Smith are co-sponsors. The Subcommittee on Water and Power
held a hearing on S. 1258 on July 26, 2007. (S. Hrg. 110-152.)
At its business meeting on January 30, 2008, the Committee on
Energy and Natural Resources ordered H.R. 1662 favorably
reported.
COMMITTEE RECOMMENDATION
The Committee on Energy and Natural Resources, in open
business session on January 30, 2008, by voice vote of a quorum
present, recommends that the Senate pass H.R. 1662.
SECTION-BY-SECTION ANALYSIS
Section 1 provides the short title of the Act.
Section 2 provides that the capital costs for physical
fortifications to address security needs at Bureau of
Reclamation facilities shall be non-reimbursable.
Section 3(a) limits the Secretary of the Interior to
allocating $18,900,000 annually (indexed for inflation) as site
security-related reimbursable operation and maintenance costs
under Reclamation law.
Section 3(b) specifies how reimbursable site security costs
allocated as part of the Central Valley Project of California
shall be collected by the Secretary.
Section 4(a) authorizes the Secretary to develop policies
and procedures to provide for payment of reimbursable site
security costs.
Section 4(b) directs the Secretary, upon identifying the
need for a site security measure, to provide project
beneficiaries with written notice of the need and requirements
associated with the measure.
Section 4(c) requires the Secretary to consult with project
beneficiaries regarding project-specific site security
measures.
Section 4(d) requires the Secretary to consider cost
containment measures recommended by project beneficiaries.
Section 4(e) requires the Secretary to report annually to
Congress on current and future site security actions.
Section 5 specifies that the level of project-specific
Reclamation security costs that existed prior to September 11,
2001, shall remain reimbursable.
COST AND BUDGETARY CONSIDERATIONS
The following estimate of costs of this measure has been
provided by the Congressional Budget Office:
H.R. 1662--Bureau of Reclamation Site Security Costs Act of 2007
Since the terrorist attacks of September 11, 2001, the
Bureau of Reclamation has enhanced security at its dams and
associated facilities. The costs of those security measures
fall into two general categories: capital costs, including
improvements to physical infrastructure, and operation and
maintenance (O&M) costs, such as increasing the number of
guards and patrols at the dams and facilities. Under current
law, entities that purchase water and hydroelectric power
associated with the operation of those dams and facilities must
reimburse the bureau for a portion of its O&M costs.
H.R. 1662 would limit the total amount of security-related
O&M costs that such entities would pay to $18.9 million a year,
adjusted annually for inflation. The bureau expects to charge
the entities no more than that amount, adjusted for inflation,
over the next 10 years under current law. Thus, CBO estimates
that enacting the legislation would have no significant impact
on the budget.
H.R. 1662 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Tyler Kruzich.
This estimate was approved by Teresa Gullo, Deputy Assistant
Director for Budget Analysis.
REGULATORY IMPACT EVALUATION
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out H.R. 1662. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of H.R. 1662, as ordered reported.
CONGRESSIONALLY DIRECTED SPENDING
H.R. 1662, as reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined in rule XLIV of the
Standing Rules of the Senate.
EXECUTIVE COMMUNICATIONS
The testimony provided by the Bureau of Reclamation at the
Subcommittee hearing on July 26, 2007 on companion measure, S.
1258 follows:
Statement of Larry Todd, Deputy Commissioner, Policy, Administration
and Budget, Bureau of Reclamation, Department of the Interior
Mr. Chairman and Members of the Subcommittee, I am Larry
Todd, Deputy Commissioner of the Bureau of Reclamation. I am
pleased to be here today to present the Department of the
Interior's views on S. 1258, legislation to amend the
Reclamation Safety of Dams Act and redirect reimbursable costs
for dam safety activities. The Department opposes S. 1258, as
introduced.
S. 1258 would make major changes to the process and
revenues used by Reclamation to secure its facilities resulting
in a loss of receipts to the Treasury. This proposed
legislation addresses two components of Reclamation's site
security program: 1. capital investment (mainly facility
fortification) and 2. operation and maintenance (O&M), which
consists mainly of guards and patrol functions. Currently,
Reclamation treats security-related capital investment as non-
reimbursable costs, and security-related O&M expenses as
project costs subject to reimbursement based on project cost
allocation. S. 1258 would change this methodology, eliminating
the distinction between capital investment and O&M costs so
that Reclamation would be required to treat 85% of the capital
investment and O&M security costs as non-reimbursable, while
the remaining 15% would be recovered from the reimbursable
project purposes.
Reclamation understands that the impetus for this
legislation is concern over increased security related costs
incurred for all Federal facilities after September 11, 2001.
However, our agency has been and remains committed to working
with our customers and with Congress to ensure fair, consistent
and efficient policies related to the treatment of these costs.
The Department does not believe that the changes instituted
under S. 1258 would be a positive step in this direction.
As explained in reports submitted by Reclamation to
Congress in May 2005 and February 2006, Reclamation
distinguishes capital costs of security-related fortifications
from security-related O&M costs. Since the beginning of
increased security levels in fiscal year 2002, Reclamation has
treated security-related capital investment as non-
reimbursable. From fiscal year 2002 through the end of fiscal
year 2007, for example, Reclamation will have funded over $66
million in fortification costs, none of which has been passed
on to customers.
Treatment of post-9/11 O&M (guard and patrol) costs has
been different, however. Early on, when security was increased
at Reclamation facilities immediately after 9/11, Reclamation
took the position that while these are clearly O&M costs, until
a stable budget pattern emerged, and until customers had
sufficient time to make the necessary adjustments to their
planning and budgets, these costs should be non-reimbursable.
Therefore, from FY 2002 through FY 2004, Reclamation's budget
proposals called for post-9/11 security-related O&M costs to be
treated as nonreimbursable.
However, in its FY 2005 and all subsequent budget
proposals, Reclamation returned to the pre-9/11 practice of
treating security-related O&M costs as reimbursable by project
allocation. Report language which accompanies the FY 2005
Energy and Water Development Appropriation, however, directed
Reclamation not to begin reimbursement in FY 2005, and
additionally, provide a report to Congress on the delineation
of planned reimbursable costs. Later, Congress' FY 2006
appropriations report language limited security-related O&M
reimbursement to $10 million out of total costs of $20.9
million in FY 2006.
Reclamation's FY 2007 budget proposal anticipated total
security-related O&M guard costs of $20.9 million. Of that
amount, $2 million is allocated to non-reimbursable project
purposes and requires appropriations. Reclamation anticipated
full reimbursement of the remaining $18.9 million, of which
approximately $11.6 million is in up-front funding not
requiring appropriations, and approximately $7.3 million would
be repaid to the Treasury and requires appropriations. However,
because a Continuing Resolution in FY 2007 left unanswered the
reimbursement amounts for the current fiscal year, Reclamation
has moved to collect $14.5 million as a mid-point between the
$10 million cap in FY 2006 and the full $18.9 million we expect
to be reimbursable in FY 2008.
Under S. 1258, instead of the $18.9 million future annual
reimbursement Reclamation currently anticipates, Reclamation
would instead receive only 15% of roughly $33.1 million in
total security-related O&M guard and fortification costs, or at
most, about $5 million each year depending upon the structure
of repayment. This would result in an additional financial
burden to the United States of about $13.9 million per year in
reduced reimbursement. Up-front funding would be reduced by
approximately $9.7 million annually and Reclamation would need
additional appropriations in order to carry out planned
security activities.
Reclamation believes this legislation could bring
unintended results for Reclamation water and power customers.
While the change to 15% reimbursement of security-related O&M
costs would benefit some customers, the change to 15%
reimbursement of currently non-reimbursable security-related
capital costs would work to the detriment of customers in
projects where future capital fortification expenditures are
planned. Water and power customers of projects whose security
fortifications were lower in priority and therefore not
completed prior to the bill's enactment would be particularly
disadvantaged. Furthermore, Reclamation would be required to
collect these costs under multiple repayment contracts that
could extend as long as 50 years.
Indeed, what is less certain are the future costs for
facility fortifications that Reclamation's water and power
customers would absorb as reimbursable. The total cost of
internally-approved fortifications for FY 2007 and future years
is $35.4 million ($78.8 million minus the $43.4 million that
was spent through FY 2006), and this figure does not include
potentially significant additional fortification activities
still under study. Under S. 1258, 15% of these fortification
costs would become reimbursable by customers.
Reclamation has met with its customers frequently in the
past several years on this issue, and we understand and share
our contractors' desire for stable, predictable security
assessments. We recognize that certainty, accountability, and
transparency are important in the financing of this program.
However, we believe that the site security program is now
sufficiently established, and the benefits to contractors is
sufficiently clear, so that reimbursable costs for our
customers are adequately quantified, fairly allocated and
understood in the ratepaying community.
Reclamation is interested in working with the subcommittee
to address its customers' concerns in the administration of the
security program. However, S. 1258 does not provide a workable
solution to address those concerns. Mr. Chairman, this
concludes my testimony. I am pleased to answer any questions
the subcommittee may have.
CHANGES IN EXISTING LAW
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee notes that no
changes in existing law are made by the bill H.R. 1662, as
ordered reported.