[House Report 111-308]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 111-308
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BONNEVILLE UNIT CLEAN HYDROPOWER FACILITATION ACT
_______
October 21, 2009.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Rahall, from the Committee on Natural Resources, submitted the
following
R E P O R T
[To accompany H.R. 2008]
[Including cost estimate of the Congressional Budget Office]
The Committee on Natural Resources, to whom was referred the
bill (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, report favorably thereon with an amendment
and recommend 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 ``Bonneville Unit Clean Hydropower
Facilitation Act''.
SEC. 2. DIAMOND FORK SYSTEM DEFINED.
For the purposes of this Act, the term ``Diamond Fork System'' means
the facilities described in chapter 4 of the October 2004 Supplement to
the 1988 Definite Plan Report for the Bonneville Unit.
SEC. 3. COST ALLOCATIONS.
Notwithstanding any other provision of law, in order to facilitate
hydropower development on the Diamond Fork System, the amount of
reimbursable costs allocated to project power in Chapter 6 of the Power
Appendix in the October 2004 Supplement to the 1988 Bonneville Unit
Definite Plan Report, with regard to power development within the
Diamond Fork System, shall be considered final costs as well as costs
in excess of the total maximum repayment obligation as defined in
section 211 of the Central Utah Project Completion Act of 1992 (Public
Law 102-575), and shall be subject to the same terms and conditions.
SEC. 4. NO PURCHASE OR MARKET OBLIGATION; NO COSTS ASSIGNED TO POWER.
Nothing in this Act shall obligate the Western Area Power
Administration to purchase or market any of the power produced by the
Diamond Fork power plant and 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.
SEC. 5. PROHIBITION ON TAX-EXEMPT FINANCING.
No facility for the generation or transmission of hydroelectric power
on the Diamond Fork System may be financed or refinanced, in whole or
in part, with proceeds of any obligation--
(1) the interest on which is exempt from the tax imposed
under chapter 1 of the Internal Revenue Code of 1986, or
(2) with respect to which credit is allowable under subpart I
or J of part IV of subchapter A of chapter 1 of such Code.
SEC. 6. REPORTING REQUIREMENT.
If, 24 months after the date of the enactment of this Act,
hydropower production on the Diamond Fork System has not commenced, the
Secretary of the Interior shall submit a report to the Committee on
Natural Resources of the House of Representatives and the Committee on
Energy and Natural Resources of the Senate stating this fact, the
reasons such production has not yet commenced, and a detailed timeline
for future hydropower production.
PURPOSE OF THE BILL
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 FOR LEGISLATION
Under current law, the costs of constructing Bureau of
Reclamation projects that serve multiple purposes are allocated
among the project purposes and participants. Some project
purposes are reimbursable, including irrigation, hydroelectric
power production, and municipal and industrial water use. The
reimbursable costs of Bureau of Reclamation projects are borne
by the project beneficiaries and are paid based on contracts
into which the beneficiaries enter. Depending on the type of
project use, however, the beneficiaries may pay substantially
different portions of the project cost.
Water users repay the capital cost of a project based on
whether the water is used for municipal and industrial purposes
(M&I) or instead used for irrigating agricultural lands. M&I
contractors are responsible for repaying the cost of a project
that is allocated to them plus interest that accrues during the
repayment period. Irrigators repay their allocated share of a
project cost without interest. The irrigators' repayment,
however, is typically subsidized by hydroelectric power
production under a feature of current law called ``ability to
pay,'' also referred to as ``irrigation assistance.''
Hydroelectric power beneficiaries must repay their share of
the construction costs of a project, with interest, over a set
repayment period by recovering those costs through electricity
rates. They also pay any amount of the irrigators' costs of a
project that irrigators do not have the ability to pay. Any of
the subsidized costs of a project shifted to hydroelectric
power beneficiaries under irrigation assistance are paid over
the repayment period, but without interest.
The Diamond Fork System is a completed feature of the
Bonneville Unit and is located in Utah County, Utah. It has the
capacity to generate up to 50 megawatts of hydroelectric power.
The Colorado River Storage Project Act of 1956 authorized power
as a project purpose and required that project costs be
allocated for repayment by power generation. These projects
costs have increased over the decades of construction of the
Bonneville Unit and now make hydroelectric power generation at
two plants on the Diamond Fork System financially unfeasible.
Under current law, approximately $161 million would be
allocated to power beneficiaries if they install turbines at
the two plants.
H.R. 2008 would declare as final the allocation of $161
million to hydroelectric power generation on the Diamond Fork
System and would defer those costs indefinitely in accordance
with section 211 of the Central Utah Project Completion Act of
1992. The effect of this deferment is that any power developed
on the Diamond Fork System would not be burdened with the $161
million of debt or with any other reallocation of costs once
the Bonneville Unit is substantially complete. Enacting the
legislation would help facilitate the development of 50
megawatts of clean hydroelectric power while generating revenue
for the government for the use of its water facilities.
COMMITTEE ACTION
H.R. 2008 was introduced on April 21, 2009, by Rep. Jim
Matheson (D-UT). The bill was referred to the Committee on
Natural Resources, and within the Committee to the Subcommittee
on Water and Power. On May 14, 2009, the Subcommittee held a
hearing on the bill.
On September 10, 2009, the Subcommittee was discharged from
further consideration of H.R. 2008 and the full Natural
Resources Committee met to consider the bill. Subcommittee
Chairwoman Grace Napolitano (D-CA) offered an amendment in the
nature of a substitute to the bill, which adds an explicit
definition of the Diamond Fork System, prohibits the use of
tax-exempt financing to construct hydroelectric power
facilities, and requires the Administration to report to the
Congress on hydroelectric power development on the system 24
months after the date of enactment of the legislation. The
amendment in the nature of a substitute was adopted by
unanimous consent. The bill, as amended, was then ordered
favorably reported to the House of Representatives by unanimous
consent.
SECTION-BY-SECTION ANALYSIS
Section 1. Short title
Section 1 provides that this Act may be cited as the
``Bonneville Unit Clean Hydropower Facilitation Act.''
Section 2. Diamond Fork System defined
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. Cost allocations
Section 3 declares the reimbursable costs allocated to
project power on the Diamond Fork System as final, as well as
in excess of the total maximum repayment obligation as defined
in section 211 of the Central Utah Project Completion Act of
1992 (Public Law 102-575).
Section 4. No purchase or market obligation; no costs assigned to power
Section 4 allows the Western Area Power Administration to
decline to purchase power that is developed on the Diamond Fork
System. Section 4 also clarifies that none of the costs of
transmission development on the Diamond Fork System will be
assigned to power for the purpose of Colorado River Storage
Project ratemaking.
Section 5. Prohibition on tax-exempt financing
Section 5 prohibits entities from using tax-exempt
financing to fund any portion of the development of
hydroelectric power or transmission on the Diamond Fork System.
Section 6. Reporting requirement
Section 6 requires the Secretary of the Interior to report
on the status of hydroelectric power development on the Diamond
Fork System if, after 24 months, hydroelectric power production
has not commenced.
COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
Regarding clause 2(b)(1) of Rule X and clause 3(c)(1) of
rule XIII of the Rules of the House of Representatives, the
Committee on Natural Resources' oversight findings and
recommendations are reflected in the body of this report.
CONSTITUTIONAL AUTHORITY STATEMENT
Article I, section 8 of the Constitution of the United
States grants Congress the authority to enact this bill.
COMPLIANCE WITH HOUSE RULE XIII
1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the
Rules of the House of Representatives requires an estimate and
a comparison by the Committee of the costs which would be
incurred in carrying out this bill. However, clause 3(d)(3)(B)
of that rule provides that this requirement does not apply when
the Committee has included in its report a timely submitted
cost estimate of the bill prepared by the Director of the
Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974.
2. Congressional Budget Act. As required by clause 3(c)(2)
of rule XIII of the Rules of the House of Representatives and
section 308(a) of the Congressional Budget Act of 1974, this
bill does not contain any new budget authority, spending
authority, credit authority, or an increase or decrease in
revenues or tax expenditures.
3. General Performance Goals and Objectives. As required by
clause 3(c)(4) of rule XIII, the general performance goal or
objective of this bill 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.
4. Congressional Budget Office Cost Estimate. Under clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 403 of the Congressional Budget Act
of 1974, the Committee has received the following cost estimate
for this bill from the Director of the Congressional Budget
Office:
H.R. 2008--Bonneville Unit Clean Hydropower Facilitation Act
Summary: H.R. 2008 would reduce the amounts that developers
of hydropower resources at the Diamond Fork project in Utah
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 obligation. Instead, sponsors
would be required to pay certain annual fees, which are
estimated to total about $400,000 a year, adjusted for
inflation, beginning in 2015.
CBO expects that enactment of H.R. 2008 would lead to the
development of hydropower facilities by a nonfederal entity
within a few years, sooner than expected under current law. In
addition, CBO estimates that the government would receive
payments from the hydropower developer of about $2 million over
the 2010-2019 period.
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 this bill would
increase offsetting receipts (a credit against direct spending)
by $400,000 a year over the 2015-2019 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 2009, 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 2015. 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.
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 June 22, 2009, CBO transmitted a
cost estimate for H.R. 2008 as introduced in the House of
Representatives on April 21, 2009. While the two versions of
the bill are similar, in the cost estimate for the introduced
bill, the Joint Committee on Taxation estimated that the use of
tax-exempt financing to develop the Diamond Fork project would
result in a loss of $9 million in federal revenues over the
2010-2019 period. The version of H.R. 2008 that was ordered
reported by the House Committee on Natural Resources would
prohibit the use of tax-exempt financing to develop this
project.
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: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
COMPLIANCE WITH PUBLIC LAW 104-4
This bill contains no unfunded mandates.
EARMARK STATEMENT
H.R. 2489 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
PREEMPTION OF STATE, LOCAL OR TRIBAL LAW
This bill is not intended to preempt any State, local or
tribal law.
CHANGES IN EXISTING LAW
If enacted, this bill would make no changes in existing
law.