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                                                     Calendar No. 663
115th Congress       }                        {               Report
                                 SENATE
 2d Session          }                        {               115-377

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



 
    BUREAU OF RECLAMATION PUMPED STORAGE HYDROPOWER DEVELOPMENT ACT

                                _______
                                

               November 26, 2018.--Ordered to be printed

                                _______
                                

  Ms. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 1967]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (H.R. 1967) to amend the Reclamation Project 
Act of 1939 to authorize pumped storage hydropower development 
utilizing multiple Bureau of Reclamation reservoirs, having 
considered the same, reports favorably thereon with an 
amendment in the nature of a substitute, and recommends that 
the bill, as amended, do pass.
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Bureau of Reclamation Pumped Storage 
Hydropower Development Act''.

SEC. 2. AUTHORITY FOR PUMPED STORAGE HYDROPOWER DEVELOPMENT USING 
                    MULTIPLE BUREAU OF RECLAMATION RESERVOIRS.

    Section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 
485h(c)) is amended--
          (1) in paragraph (1), in the fourth sentence, by striking ``, 
        including small conduit hydropower development'' and inserting 
        ``and reserve to the Secretary the exclusive authority to 
        develop small conduit hydropower using Bureau of Reclamation 
        facilities and pumped storage hydropower exclusively using 
        Bureau of Reclamation reservoirs''; and
          (2) in paragraph (8), by striking ``has been filed with the 
        Federal Energy Regulatory Commission as of August 9, 2013'' and 
        inserting ``was filed with the Federal Energy Regulatory 
        Commission before August 9, 2013, and is still pending''.

SEC. 3. LIMITATIONS ON ISSUANCE OF CERTAIN LEASES OF POWER PRIVILEGE.

    (a) Definitions.--In this section:
          (1) Commission.--The term ``Commission'' means the Federal 
        Energy Regulatory Commission.
          (2) Director.--The term ``Director'' means the Director of 
        the Office of Hearings and Appeals.
          (3) Office of hearings and appeals.--The term ``Office of 
        Hearings and Appeals'' means the Office of Hearings and Appeals 
        of the Department of the Interior.
          (4) Party.--The term ``party'', with respect to a study plan 
        agreement, means each of the following parties to the study 
        plan agreement:
                  (A) The proposed lessee.
                  (B) The Tribes.
          (5) Project.--The term ``project'' means a proposed pumped 
        storage facility that--
                  (A) would use multiple Bureau of Reclamation 
                reservoirs; and
                  (B) as of June 1, 2017, was subject to a preliminary 
                permit issued by the Commission pursuant to section 
                4(f) of the Federal Power Act (16 U.S.C. 797(f)).
          (6) Proposed lessee.--The term ``proposed lessee'' means the 
        proposed lessee of a project.
          (7) Secretary.--The term ``Secretary'' means the Secretary of 
        the Interior.
          (8) Study plan.--The term ``study plan'' means the plan 
        described in subsection (d)(1).
          (9) Study plan agreement.--The term ``study plan agreement'' 
        means an agreement entered into under subsection (b)(1) and 
        described in subsection (c).
          (10) Tribes.--The term ``Tribes'' means--
                  (A) the Confederated Tribes of the Colville 
                Reservation; and
                  (B) the Spokane Tribe of Indians of the Spokane 
                Reservation.
    (b) Requirement for Issuance of Leases of Power Privilege.--The 
Secretary shall not issue a lease of power privilege pursuant to 
section 9(c)(1) of the Reclamation Project Act of 1939 (43 U.S.C. 
485h(c)(1)) (as amended by section 2) for a project unless--
          (1) the proposed lessee and the Tribes have entered into a 
        study plan agreement; or
          (2) the Secretary or the Director, as applicable, makes a 
        final determination for--
                  (A) a study plan agreement under subsection (c)(2); 
                or
                  (B) a study plan under subsection (d).
    (c) Study Plan Agreement Requirements.--
          (1) In general.--A study plan agreement shall--
                  (A) establish the deadlines for the proposed lessee 
                to formally respond in writing to comments and study 
                requests about the project previously submitted to the 
                Commission;
                  (B) allow for the parties to submit additional 
                comments and study requests if any aspect of the 
                project, as proposed, differs from an aspect of the 
                project, as described in a preapplication document 
                provided to the Commission;
                  (C) except as expressly agreed to by the parties or 
                as provided in paragraph (2) or subsection (d), require 
                that the proposed lessee conduct each study described 
                in--
                          (i) a study request about the project 
                        previously submitted to the Commission; or
                          (ii) any additional study request submitted 
                        in accordance with the study plan agreement;
                  (D) require that the proposed lessee study any 
                potential adverse economic effects of the project on 
                the Tribes, including effects on--
                          (i) annual payments to the Confederated 
                        Tribes of the Colville Reservation under 
                        section 5(b) of the Confederated Tribes of the 
                        Colville Reservation Grand Coulee Dam 
                        Settlement Act (Public Law 103-436; 108 Stat. 
                        4579); and
                          (ii) annual payments to the Spokane Tribe of 
                        Indians of the Spokane Reservation authorized 
                        after the date of enactment of this Act, the 
                        amount of which derives from the annual 
                        payments described in clause (i);
                  (E) establish a protocol for communication and 
                consultation between the parties;
                  (F) provide mechanisms for resolving disputes between 
                the parties regarding implementation and enforcement of 
                the study plan agreement; and
                  (G) contain other provisions determined to be 
                appropriate by the parties.
          (2) Disputes.--
                  (A) In general.--If the parties cannot agree to the 
                terms of a study plan agreement or implementation of 
                those terms, the parties shall submit to the Director, 
                for final determination on the terms or implementation 
                of the study plan agreement, notice of the dispute, 
                consistent with paragraph (1)(F), to the extent the 
                parties have agreed to a study plan agreement.
                  (B) Inclusion.--A dispute covered by subparagraph (A) 
                may include the view of a proposed lessee that an 
                additional study request submitted in accordance with 
                paragraph (1)(B) is not reasonably calculated to assist 
                the Secretary in evaluating the potential impacts of 
                the project.
                  (C) Timing.--The Director shall issue a determination 
                regarding a dispute under subparagraph (A) not later 
                than 120 days after the date on which the Director 
                receives notice of the dispute under that subparagraph.
    (d) Study Plan.--
          (1) In general.--The proposed lessee shall submit to the 
        Secretary for approval a study plan that details the proposed 
        methodology for performing each of the studies--
                  (A) identified in the study plan agreement of the 
                proposed lessee; or
                  (B) determined by the Director in a final 
                determination regarding a dispute under subsection 
                (c)(2).
          (2) Initial determination.--Not later than 60 days after the 
        date on which the Secretary receives the study plan under 
        paragraph (1), the Secretary shall make an initial 
        determination that--
                  (A) approves the study plan;
                  (B) rejects the study plan on the grounds that the 
                study plan--
                          (i) lacks sufficient detail on a proposed 
                        methodology for a study identified in the study 
                        plan agreement; or
                          (ii) is inconsistent with the study plan 
                        agreement; or
                  (C) imposes additional study plan requirements that 
                the Secretary determines are necessary to adequately 
                define the potential effects of the project on--
                          (i) the exercise of the paramount hunting, 
                        fishing, and boating rights of the Tribes 
                        reserved pursuant the Act of June 29, 1940 (54 
                        Stat. 703, chapter 460; 16 U.S.C. 835d et 
                        seq.);
                          (ii) the annual payments described in clauses 
                        (i) and (ii) of subsection (c)(1)(D);
                          (iii) the Columbia Basin project (as defined 
                        in section 1 of the Act of May 27, 1937 (50 
                        Stat. 208, chapter 269; 57 Stat. 14, chapter 
                        14; 16 U.S.C. 835));
                          (iv) historic properties and cultural or 
                        spiritually significant resources; and
                          (v) the environment.
          (3) Objections.--
                  (A) In general.--Not later than 30 days after the 
                date on which the Secretary makes an initial 
                determination under paragraph (2), the Tribes or the 
                proposed lessee may submit to the Director an objection 
                to the initial determination.
                  (B) Final determination.--Not later than 120 days 
                after the date on which the Director receives an 
                objection under subparagraph (A), the Director shall--
                          (i) hold a hearing on the record regarding 
                        the objection; and
                          (ii) make a final determination that 
                        establishes the study plan, including a 
                        description of studies the proposed lessee is 
                        required to perform.
          (4) No objections.--If no objections are submitted by the 
        deadline described in paragraph (3)(A), the initial 
        determination of the Secretary under paragraph (2) shall be 
        final.
    (e) Conditions of Lease.--
          (1) Consistency with rights of tribes; protection, 
        mitigation, and enhancement of fish and wildlife.--
                  (A) In general.--Any lease of power privilege issued 
                by the Secretary for a project under subsection (b) 
                shall contain conditions--
                          (i) to ensure that the project is consistent 
                        with, and will not interfere with, the exercise 
                        of the paramount hunting, fishing, and boating 
                        rights of the Tribes reserved pursuant to the 
                        Act of June 29, 1940 (54 Stat. 703, chapter 
                        460; 16 U.S.C. 835d et seq.); and
                          (ii) to adequately and equitably protect, 
                        mitigate damages to, and enhance fish and 
                        wildlife, including related spawning grounds 
                        and habitat, affected by the development, 
                        operation, and management of the project.
                  (B) Recommendations of the tribes.--The conditions 
                required under subparagraph (A) shall be based on joint 
                recommendations of the Tribes.
                  (C) Resolving inconsistencies.--
                          (i) In general.--If the Secretary determines 
                        that any recommendation of the Tribes under 
                        subparagraph (B) is not reasonably calculated 
                        to ensure the project is consistent with 
                        subparagraph (A) or is inconsistent with the 
                        requirements of the Reclamation Project Act of 
                        1939 (43 U.S.C. 485 et seq.), the Secretary 
                        shall attempt to resolve any such inconsistency 
                        with the Tribes, giving due weight to the 
                        recommendations and expertise of the Tribes.
                          (ii) Publication of findings.--If, after an 
                        attempt to resolve an inconsistency under 
                        clause (i), the Secretary does not adopt in 
                        whole or in part a recommendation of the Tribes 
                        under subparagraph (B), the Secretary shall 
                        issue each of the following findings, including 
                        a statement of the basis for each of the 
                        findings:
                                  (I) A finding that adoption of the 
                                recommendation is inconsistent with the 
                                requirements of the Reclamation Project 
                                Act of 1939 (43 U.S.C. 485 et seq.).
                                  (II) A finding that the conditions 
                                selected by the Secretary to be 
                                contained in the lease of power 
                                privilege under subparagraph (A) comply 
                                with the requirements of clauses (i) 
                                and (ii) of that subparagraph.
          (2) Annual charges payable by licensee.--
                  (A) In general.--Subject to subparagraph (B), any 
                lease of power privilege issued by the Secretary for a 
                project under subsection (b) shall contain conditions 
                that require the lessee of the project to make direct 
                payments to the Tribes through reasonable annual 
                charges in an amount that recompenses the Tribes for 
                any adverse economic effect of the project identified 
                in a study performed pursuant to the study plan 
                agreement for the project.
                  (B) Agreement.--
                          (i) In general.--The amount of the annual 
                        charges described in subparagraph (A) shall be 
                        established through agreement between the 
                        proposed lessee and the Tribes.
                          (ii) Condition.--The agreement under clause 
                        (i), including any modification of the 
                        agreement, shall be deemed to be a condition to 
                        the lease of power privilege issued by the 
                        Secretary for a project under subsection (b).
                  (C) Dispute resolution.--
                          (i) In general.--If the proposed lessee and 
                        the Tribes cannot agree to the terms of an 
                        agreement under subparagraph (B)(i), the 
                        proposed lessee and the Tribes shall submit 
                        notice of the dispute to the Director.
                          (ii) Resolution.--The Director shall resolve 
                        the dispute described in clause (i) not later 
                        than 180 days after the date on which the 
                        Director receives notice of the dispute under 
                        that clause.
          (3) Additional conditions.--The Secretary may include in any 
        lease of power privilege issued by the Secretary for a project 
        under subsection (b) other conditions determined appropriate by 
        the Secretary, on the condition that the conditions shall be 
        consistent with the Reclamation Project Act of 1939 (43 U.S.C. 
        485 et seq.).
          (4) Consultation.--In establishing conditions under this 
        subsection, the Secretary shall consult with the Tribes.
    (f) Deadlines.--The Secretary or any officer of the Office of 
Hearing and Appeals before whom a proceeding is pending under this 
section may extend any deadline or enlarge any timeframe described in 
this section--
          (1) at the discretion of the Secretary or the officer; or
          (2) on a showing of good cause by any party.
    (g) Judicial Review.--Any final action of the Secretary or the 
Director made pursuant to this section shall be subject to judicial 
review in accordance with chapter 7 of title 5, United States Code.
    (h) Effect on Other Projects.--Nothing in this section establishes 
any precedent or is binding on any Bureau of Reclamation lease of power 
privilege, other than for a project.

                                Purpose

    The purpose of H.R. 1967 is to amend the Reclamation 
Project Act of 1939 to authorize pumped storage hydropower 
development utilizing multiple Bureau of Reclamation (BOR or 
Reclamation) reservoirs.

                          Background and Need

    Pumped storage hydropower projects generate electricity by 
moving water between an upper and lower reservoir based on 
electricity prices and demand, and other operational 
considerations. Under current law, and pursuant to two 
Memorandum of Understanding agreements between the BOR and the 
Federal Energy Regulatory Commission (FERC) dated 1981 and 
1992, Reclamation has jurisdiction over hydropower development 
at its projects when hydropower is an authorized project 
purpose. For those BOR facilities where hydropower is not an 
authorized purpose, FERC has jurisdiction over hydropower 
development. BOR asserts its permitting authority through a 
Lease of Power Privilege (LOPP) program under the Reclamation 
Project Act of 1939 (43 U.S.C. 485h(c)), while FERC is 
authorized by the Federal Power Act to issue hydropower 
licenses (16 U.S.C. 797).
    Given this framework, a pumped storage project using two 
Reclamation dams may require both a FERC license and a BOR LOPP 
where one reservoir is authorized for hydropower development 
but the other is not. Concerns have been raised that requiring 
two separate Federal permitting processes for a single project 
is inefficient and may serve as a disincentive for future 
pumped storage development. H.R. 1967 clarifies that BOR has 
exclusive authority to permit the development of non-Federal 
pumped storage hydropower if the project uses two BOR-owned 
facilities.
    At the time of this legislation's consideration, the only 
active non-Federal pumped storage hydropower project now facing 
these dual processes is located in Washington State. The 
proposed project seeks to use Banks Lake and Lake Roosevelt, 
both of which are owned and operated by Reclamation. Developers 
are currently seeking a FERC license for Banks Lake (the upper 
reservoir), and will also be required to obtain a LOPP from BOR 
for Lake Roosevelt (the lower reservoir).
    This specific project is unique in that the project 
developer initiated a FERC licensing process prior to the 
introduction of H.R. 1967 and the Confederated Tribes of the 
Colville Reservation and the Spokane Tribe of Indians of the 
Spokane Reservation (Tribes), with reservations located on Lake 
Roosevelt, have formally engaged on a number of issues through 
that process. Additionally, these Tribes maintain that they 
have dedicated significant resources to the process with the 
expectation that FERC's dispute resolution process for study 
requests, the Federal Power Act's mandatory conditioning 
authority for the Department of the Interior, and State and 
Federal fish and wildlife recommendations, would be available. 
As such, a detailed process to address this single project that 
was already seeking a FERC license has been included in H.R. 
1967 as amended, but will not apply to any future pumped 
storage projects employing two Reclamation facilities.

                          Legislative History

    H.R. 1967 was introduced by Congressman Lamborn in the 
House of Representatives on March 6, 2017. The bill was 
favorably reported, as amended, by the Committee on Natural 
Resources on March 27, 2017, and passed the House of 
Representatives by voice vote on June 27, 2017.
    The Water and Power Subcommittee held a hearing on H.R. 
1967 on June 13, 2018.
    The Senate Committee on Energy and Natural Resources met in 
an open business session on October 2, 2018, and ordered H.R. 
1967 favorably reported, as amended.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on October 2, 2018, by a majority voice 
vote of a quorum present, recommends that the Senate pass H.R. 
1967, if amended as described herein.

                          Committee Amendment

    During its consideration of H.R. 1967, the Committee 
adopted an amendment in the nature of a substitute. The 
substitute amendment made several technical changes to section 
2 and added a section 3 that sets forth a detailed process for 
the only active project that would be impacted by the Act. The 
amendment is further described in the section-by-section 
analysis.

                      Section-by-Section Analysis


Sec. 1. Short title

    Section 1 provides a short title.

Sec. 2. Authority for pumped storage hydropower development using 
        multiple bureau of reclamation reservoirs

    Section 2 amends the Reclamation Project Act of 1939 (43 
U.S.C. 485h(c)) to provide the Secretary of the Interior 
(Secretary) with the sole authority for development of pumped 
storage hydropower exclusively using Reclamation reservoirs.

Sec. 3. Limitations of issuance of certain leases of power privilege

    Subsection (a) defines key terms for section 3.
    Subsection (b) prohibits the Secretary from issuing a LOPP 
for the project unless the proposed lessee and the Tribes have 
entered into a study plan agreement or the Secretary or the 
Director of the Office of Hearings and Appeals (Director), as 
applicable, make a final determination on a study plan 
agreement or a study plan.
    Subsection (c) specifies the requirements of a study plan 
agreement, including allowing the parties to submit additional 
comments and study requests, and requiring the proposed lessee 
to study any potential adverse economic effects of the project 
on the Tribes, including on annual payments to the Tribes as 
part of the Grand Coulee Dam Settlement (Public Law 103-436). 
This subsection also sets forth a protocol for communication 
and consultation between the parties, and dispute resolution 
procedures in the event the parties cannot resolve the study 
plan agreement terms or implementation.
    Subsection (d) requires the project developer to submit the 
study plan to the Secretary for approval. The subsection also 
requires the Secretary to make an initial determination to 
approve, reject, or impose additional requirements on the study 
plan within 60 days of submittal. This subsection further 
allows the Tribes or the project lessee to submit to the 
Director an objection to the Secretary's initial determination, 
and requires the Director to hold a hearing on the record 
regarding the objection and make a final determination within 
120 days of receiving an objection.
    Subsection (e)(1) requires the Secretary to include 
conditions on the LOPP for the project, to be based on joint 
recommendation of the Tribes, to ensure that the Tribes' 
paramount hunting, fishing and boating rights are not 
interfered with, that the project is consistent with those 
rights, and that fish and wildlife are adequately and equitably 
protected. This subsection also directs the Secretary to 
attempt to resolve any inconsistency with the Tribes' 
recommendations, and requires the Secretary to publish 
findings, including a statement of the basis for each of the 
findings.
    Subsection (e)(2) directs the Secretary to condition the 
LOPP to require the lessee to make direct payments to the 
Tribes through reasonable annual charges for adverse economic 
effects, and sets forth a process to determine the payment 
amount and the settlement of disputes.
    Subsection (e)(3) authorizes the Secretary to impose 
additional conditions on the project consistent with the 
Reclamation Project Act of 1939.
    Subsection (f) allows the Secretary or any officer of the 
Office of Hearing and Appeals to extend deadlines set by the 
Act.
    Subsection (g) states that final actions made pursuant to 
this section remain subject to judicial review.
    Subsection (h) states that nothing in section 3 is 
precedential or binding on any future project.

                   Cost and Budgetary Considerations

    The following estimate of the costs of this measure has 
been provided by the Congressional Budget Office:
    Under current law, nonfederal entities that propose to 
develop hydropower at reservoirs administered by the Bureau of 
Reclamation (BOR) must enter into a lease contract with BOR or 
obtain a license from the Federal Energy Regulatory Commission 
(FERC). The regulatory jurisdiction of each reservoir was 
previously negotiated by the agencies to ensure than nonfederal 
entities seeking to develop hydropower at a BOR reservoir would 
be subject to only one permitting process.
    At least one project proposed by a nonfederal entity to 
develop pumped storage hydropower within BOR's Colombia Basin 
Project (CBP) in the state of Washington would need to seek 
permits from both agencies because it would be constructed on 
two reservoirs; Banks Lake would require a BOR lease contract 
and Lake Roosevelt reservoir would require a FERC license. 
(Pumped storage hydropower is a type of storage for 
hydroelectric energy used by electric power systems for load 
balancing.) Enacting H.R. 1967 would simplify the regulatory 
process by making BOR the sole regulatory authority for pumped 
storage developers that are currently subject to regulation by 
both BOR and FERC.
    The bill also would require a nonfederal developer to 
negotiate an agreement with the Confederated Tribes of Colville 
Reservation and the Spokane Tribe of Indians of the Spokane 
Reservation as a condition for a BOR lease contract on CBP 
facilities. The agreement would establish the terms for 
interactions between the developer and tribes. The plan would 
involve preparing studies to analyze the potential adverse 
effects of the project on annual payments due to the tribes 
under their respective settlements; on hunting, fishing, and 
boating rights of the Tribes; and on the environment. The bulk 
of the costs for that work would be incurred by the developer 
and any cost incurred by BOR would be paid to BOR by the 
developer in advance.
    Enacting H.R. 1967 would increase offsetting receipts 
(which are recorded as reductions in direct spending) from 
payments the project developer would make to BOR for additional 
staff hours to negotiate lease agreements and to facilitate 
development of the planned studies and agreement between the 
developer and tribes. Using information from BOR, CBO estimates 
that those offsetting receipts would total about $500,000 over 
the 2019-2028 period; however, because BOR would spend those 
amounts over the same period, the net effect on direct spending 
would be negligible. Because enacting the bill would affect 
direct spending, pay-as-you-go procedures apply. Enacting the 
bill would not affect revenues.
    In addition, FERC recovers 100 percent of its costs, which 
are controlled by annual appropriations through user fees. Thus 
any reduction in FERC's cost resulting from shifting its 
licensing responsibilities to BOR would be offset by an equal 
change in fees, resulting in no net change in discretionary 
spending.
    CBO estimates that enacting H.R. 1967 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 1967 contains no intergovernmental or private-sector 
mandates as defined in Unfunded Mandates Reform Act.
    On May 31, 2017, CBO transmitted a cost estimate for H.R. 
1967, the Bureau of Reclamation Pumped Storage Hydropower 
Development Act, as ordered reported by the House Committee on 
Natural Resources on April 27, 2017. CBO's estimates of the 
budgetary effects of implementing either piece of legislation 
are similar; however, CBO estimates the Senate version would 
affect direct spending.
    The CBO staff contact for this estimate is Aurora Swanson. 
The estimate was reviewed by H. Samuel Papenfuss, 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. 1967. The Act 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. 1967, as ordered reported.

                   Congressionally Directed Spending

    H.R. 1967, 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

    The testimony provided by the Department of the Interior at 
the June 13, 2018, hearing on H.R. 1967 follows:

Statement of Timothy R. Petty, Ph.D., Assistant Secretary for Water and 
                Science, U.S. Department of the Interior

    Chairman Flake, Ranking Member Cortez Masto and members of 
the Subcommittee, I am Dr. Tim Petty, Assistant Secretary for 
Water and Science at the U.S. Department of the Interior 
(Department). Thank you for the opportunity to provide the 
views of the Department on H.R. 1967, the Bureau of Reclamation 
Pumped Storage Hydropower Development Act. For the reasons I 
will discuss below, the Department supports this bill.
    H.R. 1967 aims to streamline the development and permitting 
of non-federal pumped-storage hydroelectric projects on 
Reclamation reservoirs. As noted in previous hearings, the 
Department has an aggressive sustainable hydropower agenda, 
which we continue to implement under existing authorities.
    Pumped-storage can be a premiere, utility-scale energy 
storage solution, able to provide both firm power and ancillary 
services--to support the transmission of capacity and energy in 
a safe, reliable manner. With that said, pumped-storage 
deployment requires both significant, up-front capital 
investment and specific topographical features. Therefore, we 
see this bill as providing opportunities to streamline the 
permitting process which may encourage the development of these 
projects.
    Reclamation is the second largest producer of hydroelectric 
power in the United States, operating 53 hydroelectric power 
facilities, comprising 14,730 megawatts of capacity. Each year, 
Reclamation generates approximately 40 million megawatt-hours 
of electricity (the equivalent demand of approximately 3.5 
million U.S. homes) and producing over one billion dollars in 
Federal revenue.
    In 2010, the Department of the Interior, Department of 
Energy, and Department of the Army (through the US Army Corps 
of Engineers) entered a Memorandum of Understanding (MoU) for 
Hydropower. The MoU advances reliable, low-cost, and 
environmentally sustainable hydropower through a collaborative, 
interagency framework, prioritizing like-goals and aligning 
ongoing and future renewable energy development efforts. 
Interior's MoU participation is administered through 
Reclamation, given our mission and authorities in hydropower 
generation.
    In 2011 and 2012, Reclamation coordinated with MoU partners 
to publish two resource assessment reports identifying 
technical hydropower potential at non-powered Reclamation dams 
and conduits. At this time, seven assessment sites, comprising 
over 21 megawatts have been developed by non-federal entities--
with an additional nineteen assessment sites, comprising 
approximately 74 megawatts in some stage of development.
    Reclamation has also coordinated with MoU partners to 
assess pumped-storage potential at existing Reclamation 
reservoirs and associated projects. Specifically, the 
assessment reports (one completed in 2013 and the other in 
2014) evaluated the technical, environmental, and economic 
merits of over 200 unique pumped-storage configurations at 60 
Reclamation reservoirs that passed topography and storage 
screening criteria. Reclamation is using these assessment 
results to inform further study should sufficient customer 
interest exists.
    Reclamation would be happy to discuss with the Committee 
these, and other MoU products. All MoU documents are available 
on the Reclamation hydropower program webpage: https://
www.usbr.gov/power/.
    In terms of non-federal development--both Reclamation and 
the Federal Energy Regulatory Commission (FERC) are authorized 
to permit the use of Reclamation dams and reservoirs to non-
federal entities for the purposes of hydropower development--
Reclamation via a Lease of Power Privilege (LOPP) contract or 
FERC via a License.1 Per the Bureau of Reclamation Small 
Conduit Hydropower Development and Rural Jobs Act of 2013 
(Public Law 113-24), permitting authority on Reclamation 
conduits is reserved, exclusively to Reclamation via a LOPP.
    Reclamation is committed to facilitating the development of 
non-federal hydropower on our existing assets--through either 
Reclamation's or FERC's permitting processes. Acting on this 
commitment, Reclamation has worked diligently with our customer 
and stakeholder groups to define our LOPP permitting process, 
detailed in Reclamation Manual Directive and Standard (D&S) 
Lease of Power Privilege (LOPP) Processes, Responsibilities, 
Timelines, and Charges (FAC 04-08). Reclamation has conducted 
ongoing outreach to communicate and update LOPP permitting 
process requirements and revised LOPP materials to ensure 
consistent LOPP program administration. Current LOPP process 
requirements implement Public Law 113-24 authorities related to 
non-federal development on Reclamation conduits.
    It is important to note that any non-federal hydroelectric 
project developed on a Reclamation asset must not impair the 
efficiency of any Reclamation generated power or water 
deliveries, jeopardize public safety, or negatively affect any 
other Reclamation project purpose. For these reasons, project 
oversight is necessary--either through the LOPP contract or 
FERC License conditioning requirements. In addition, 
Reclamation would review any pumped storage application under 
this authority to ensure the proposed LOPP does not conflict 
with the statutory obligations of the Power Marketing 
Administrations (PMAs). Consistent with Reclamation's existing 
directives and standards, Reclamation would contact the 
respective PMA when a non-federal developer approaches 
Reclamation to develop a non-federal hydroelectric project, and 
will work with the respective PMA on any necessary right of 
first refusal or other agreement that preserves the PMA's 
statutory responsibilities.
    In total, 13 LOPP facilities currently operate on 
Reclamation assets, comprising 46 megawatts. Nine of the 13 
facilities were brought online since 2009, with three of the 13 
online facilities initiated following the passage of Public Law 
113-24. Likewise, 52 FERC facilities currently operate on 
Reclamation assets, comprising 466 megawatts of capacity. 
Approximately 50 non-federal projects--through either the LOPP 
or FERC processes--are currently in some stage of active 
development on Reclamation assets.
    Based on feedback we have received from our customers and 
operating partners, industry, and other stakeholders, 
Reclamation, with this Committee's support, has been successful 
in administering our leasing authorities.
    Under current law, both Reclamation and FERC are authorized 
to permit the use of Reclamation assets to non-federal entities 
for the purposes of hydropower development. Reclamation and 
FERC have entered two MoUs (one in 1981 and one in 1992) to 
define jurisdictional boundaries and responsibilities. Per 
those MoUs, each Reclamation asset is subject to one--and only 
one--permitting process, meaning that non-federal entities 
seeking to utilize a Reclamation asset for the purposes of 
hydropower development would be required to obtain either a 
Reclamation LOPP or FERC License--but not both.
    The problem the bill addresses relates to non-federal 
pumped storage projects utilizing multiple Reclamation 
reservoirs which may, under the current regulatory framework, 
require both a LOPP and FERC License in the circumstance that 
one reservoir is within Reclamation's jurisdiction and the 
other reservoir is within FERC's jurisdiction. Whereas both 
agencies are acting within their respective authorities, the 
result is a fragmented, cumbersome permitting process. The 
legislation as drafted would minimize the regulatory burden in 
these circumstances by requiring only a single LOPP approval.
    The general premise of the MoU agreements is that, unless 
otherwise specified in law, Reclamation assets reserved 
exclusively for Federal power development under Federal 
Reclamation law require a LOPP, and all other Reclamation 
assets require a FERC License. An exception is for Reclamation 
conduits, which were reserved for LOPP development by Public 
Law 113-24.
    Section 2 of the bill would specifically authorize 
Reclamation to enter into LOPP contracts that permit the 
development of non-federal pumped-storage hydropower utilizing 
multiple Reclamation reservoirs. Reclamation interprets this 
LOPP authorization to encompass all project works associated 
with the non-federal pumped-storage project sited on multiple 
Reclamation reservoirs. This language would streamline 
permitting requirements and development of affected projects.
    We interpret Section 2 as containing the same protections 
for authorized, existing uses of Reclamation assets as exist in 
any LOPP context. The LOPP authorization, for example, does not 
affect existing contracts for the use of power and 
miscellaneous revenues of a project for the benefit of users of 
water from such project, and LOPP contracts cannot, in the 
judgement of the Secretary, impair the efficiency of the 
project for irrigation purposes. In practice, these protections 
have meant that LOPP contracts generally do not modify the 
existing project operations that project users have come to 
rely on. To protect existing project users, Reclamation's 
policy to implement LOPP contracts requires extensive 
consultation among existing project users and the non-federal 
LOPP applicant.
    Reclamation is aware of one, active non-federal pumped-
storage project that would benefit from the proposed 
legislation--sited on Banks Lake and Lake Roosevelt reservoirs, 
which are part of Reclamation's Columbia Basin Project in 
Washington State. Given the current regulatory framework, non-
federal project works sited on Banks Lake would proceed through 
a FERC License--and those works sited on Lake Roosevelt would 
proceed through a Reclamation LOPP. This legislation would 
streamline the permitting from two distinct processes to one.
    The bill's language would not affect non-federal pumped-
storage projects utilizing one Reclamation reservoir and a 
second non-Reclamation reservoir (private or otherwise) outside 
Reclamation jurisdiction. Such projects would be required to 
obtain appropriate authorization to develop the Reclamation 
reservoir (either LOPP or FERC License, dependent upon the 
authorized reservoir purpose(s)), in addition to appropriate 
authorization from the non-Reclamation regulator (likely FERC) 
to develop the non-Reclamation reservoir. Reclamation would be 
happy to work with the Committee--and FERC--to discuss 
opportunities to streamline permitting and project development 
in this instance.
    In conclusion, as stated at previous hearings on 
hydropower-related issues before this subcommittee, Reclamation 
will continue to review and assess potential new hydropower 
projects that provide a high economic return for the nation, 
are both clean and energy efficient, and can be accomplished in 
accordance with protections for fish and wildlife, the 
environment, and recreation. As the nation's second largest 
hydropower producer, Reclamation strongly believes in the past, 
present and bright future of this important electricity 
resource.
    The Department is pleased to support this legislation.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
H.R. 1967, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                    RECLAMATION PROJECTS ACT OF 1939

   Act of August 4, 1939 (53 Stat. 1187; 43 U.S.C. 495 et seq.), as 
                                amended


                                 AN ACT

    To provide a feasible and comprehensive plan for the 
variable payment of construction charges on United States 
reclamation projects, to protect the investment of the United 
States in such projects, and for other purposes.

           *       *       *       *       *       *       *

    Sec. 9. (a) * * *

           *       *       *       *       *       *       *

    (c)(1) The Secretary is authorized to enter into contracts 
to furnish water for municipal water supply or miscellaneous 
purposes: Provided, That any such contract either (A) shall 
require repayment to the United States, over a period of not to 
exceed forty years from the year in which water is first 
delivered for the use of the contracting party, with interest 
not exceeding the rate of 3\1/2\ per centum per annum if the 
Secretary determines an interest charge to be proper, of an 
appropriate share as determined by the Secretary of that part 
of the construction costs allocated by him to municipal water 
supply or other miscellaneous purposes; or (B) shall be for 
such periods, not to exceed forty years, and at such rates as 
in the Secretary's judgment will produce revenues at least 
sufficient to cover an appropriate share of the annual 
operation and maintenance cost and an appropriate share of such 
fixed charges as the Secretary deems proper, and shall require 
the payment of said rates each year in advance of delivery of 
water for said year. Any sale of electric power or lease of 
power privileges, made by the Secretary in connection with the 
operation of any project or division of a project, shall be for 
such periods, not to exceed forty years, and at such rates as 
in his judgment will produce power revenues at least sufficient 
to cover an appropriate share of the annual operation and 
maintenance cost, interest on an appropriate share of the 
construction investment at not less than 3 per centum per 
annum, and such other fixed charges as the Secretary deems 
proper: Provided further, That in said sales or leases 
preference shall be given to municipalities and other public 
corporations or agencies; and also to cooperatives and other 
nonprofit organizations financed in whole or in part by loans 
made pursuant to the Rural Electrification Act of 1936. Nothing 
in this subsection shall be applicable to provisions in 
existing contracts, made pursuant to law, for the use of power 
and miscellaneous revenues of a project for the benefit of 
users of water from such project. The provisions of this 
subsection respecting the sales of electric power and leases of 
power privileges shall be an authorization in addition to and 
alternative to any authority in existing laws related to 
particular projects [, including small conduit hydropower 
development] and reserve to the Secretary the exclusive 
authority to develop small conduit hydropower using Bureau of 
Reclamation facilities and pumped storage hydropower 
exclusively using Bureau of Reclamation reservoirs. No contract 
relating to municipal water supply or miscellaneous purposes or 
to electric power or power privileges shall be made unless, in 
the judgment of the Secretary, it will not impair the 
efficiency of the project for irrigation purposes.
    (2)(A) When carrying out this subsection, the Secretary 
shall first offer the lease of power privilege to an irrigation 
district or water users association operating the applicable 
transferred conduit, or to the irrigation district or water 
users association receiving water from the applicable reserved 
conduit. The Secretary shall determine a reasonable time frame 
for the irrigation district or water users association to 
accept or reject a lease of power privilege offer for a small 
conduit hydropower project.
    (B) If the irrigation district or water users association 
elects not accept a lease of power privilege offer under 
subparagraph (A), the Secretary shall offer the lease of power 
privilege to other parties in accordance with this subsection.
    (3) The Bureau of Reclamation shall apply its categorical 
exclusion process under the National Environmental Policy Act 
of 1969 (42 U.S.C. 4321 et seq.) to small conduit hydropower 
development under this subsection, excluding siting of 
associated transmission facilities on Federal lands.
    (4) The Power Resources Office of the Bureau of Reclamation 
shall be the lead office of small conduit hydropower policy and 
procedure-setting activities conducted under this subsection.
    (5) Nothing in this subsection shall obligate the Western 
Area Power Administration, the Bonneville Power Administration, 
or the Southwestern Power Administration to purchase or market 
any of the power produced by the facilities covered under this 
subsection and none of the costs associated with production or 
delivery of such power shall be assigned to project purposes 
for inclusion in project rates.
    (6) Nothing in this subsection shall alter or impede the 
delivery and management of water by Bureau of Reclamation 
facilities, as water used for conduit hydropower generation 
shall be deemed incidental to use of water for the original 
project purposes. Lease of power privilege shall be made only 
when, in the judgment of the Secretary, the exercise of the 
lease will not be incompatible with the purposes of the project 
or division involved, nor shall it create any unmitigated 
financial or physical impacts to the project or division 
involved. The Secretary shall notify and consult with the 
irrigation district or water users association operating the 
transferred conduit before offering the lease of power 
privilege and shall prescribe terms and conditions that will 
adequately protect the planning, design, construction, 
operation, maintenance, and other interests of the United 
States and the project or division involved.
    (7) Nothing in this subsection shall alter or affect any 
existing agreements for the development of conduit hydropower 
projects or disposition of revenues.
    (8) Nothing in this subsection shall alter or affect any 
existing preliminary permit, license, or exemption issued by 
the Federal Energy Regulatory Commission under Part I of the 
Federal Power Act (16 U.S.C. 792 et seq.) or any project for 
which an application [has been filed with the Federal Energy 
Regulatory Commission as of August 9, 2013] was filed with the 
Federal Energy Regulatory Commission before August 9, 2013, and 
is still pending.
    (9) In this subsection:
    (A) Conduit.--The term ``conduit'' means any Bureau of 
Reclamation tunnel, canal, pipeline, aqueduct, flume, ditch, or 
similar manmade water conveyance that is operated for the 
distribution of water for agricultural, municipal, or 
industrial consumption and not primarily for the generation of 
electricity.
    (B) Irrigation district.--The term ``irrigation district'' 
means any irrigation, water conservation or conservancy, 
multicounty water conservation or conservancy district, or any 
separate public entity composed of two or more such districts 
and jointly exercising powers of its member districts.
    (C) Reserved conduit.--The term ``reserved conduit'' means 
any conduit that is included in project works the care, 
operation, and maintenance of which has been reserved by the 
Secretary, through the Commissioner of the Bureau of 
Reclamation.
    (D) Transferred conduit.--The term ``transferred conduit'' 
means any conduit that is included in project works the care, 
operation, and maintenance of which has been transferred to a 
legally organized water users association or irrigation 
district.
    (E) Small conduit hydropower.--The term ``small conduit 
hydropower'' means a facility capable of producing 5 megawatts 
or less of electric capacity.

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