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                                                       Calendar No. 272
112th Congress                                                   Report
                                 SENATE
 2d Session                                                     112-110

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



 
           BONNEVILLE UNIT CLEAN HYDROPOWER FACILITATION ACT

                                _______
                                

                January 13, 2012.--Ordered to be printed

 Filed, under authority of the order of the Senate of December 17, 2011

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 499]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 499) to authorize the Secretary of the 
Interior to facilitate the development of hydroelectric power 
on the Diamond Fork System of the General Utah Project, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                PURPOSE

    The purpose of S. 499 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) (Public Law 102-575), 
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 (Public Law 84-485). 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. S. 499 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

    Senator Hatch introduced S. 499 on March 7, 2011. The bill 
is co-sponsored by Senator Lee. The Subcommittee on Water and 
Power of the Committee on Energy and Natural Resources held a 
hearing on S. 499 on May 19, 2011 (S. Hrg. 112-63). The 
Committee on Energy and Natural Resources ordered S. 499 
favorably reported without amendment at its business meeting on 
November 10, 2011.
    The Committee on Energy and Natural Resources considered 
similar legislation during the 111th Congress, S. 1758, 
sponsored by Senators Bennett and Hatch, and H.R. 2008, 
sponsored by Representative Matheson, which passed the House of 
Representatives by voice vote on June 8, 2010. 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 the bill favorably reported without 
amendment at its business meeting on June 21, 2010.

                        COMMITTEE RECOMMENDATION

    The Senate Committee on Energy and Natural Resources, in 
open business session on November 10, 2011, by a voice vote of 
a quorum present, recommends that the Senate pass S. 499.

                      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 the 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 (Public 
Law 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 Congressional Budget Office estimate of the costs of 
this measure has been requested but was not received at the 
time the report was filed. When the Congressional Budget Office 
completes its cost estimate, it will be posted on the Internet 
at www.cbo.gov.

                      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 S. 499.
    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 S. 499, as ordered reported.

                   CONGRESSIONALLY DIRECTED SPENDING

    S. 499, 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 U.S. Department of the 
Interior, Bureau of Reclamation at the May 19, 2011 
Subcommittee hearing on S. 499 follows:

Statement of David Murillo, Deputy Commissioner, Operations, Bureau of 
                Reclamation, Department of the Interior

    Madam Chairwoman and members of the Committee, I am David 
Murillo, Deputy Commissioner for Operations 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. 499, 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 
conservation 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 were 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 for 
Strawberry Valley Project water users.
    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 plant 
construction costs, the costs of conveyance facilities upstream 
of Diamond Fork System that are allocated to power would have 
to be repaid. 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. 499 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 Federal 
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. 499 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.
    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 S. 499, as ordered 
reported.