[Senate Report 111-143]
[From the U.S. Government Publishing Office]
Calendar No. 293
111th Congress Report
SENATE
2d Session 111-143
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PREPAYMENT OF REPAYMENT CONTRACT BETWEEN THE UNITED STATES AND THE
UINTAH WATER CONSERVANCY DISTRICT
_______
March 2, 2010.--Ordered to be printed
_______
Mr. Bingaman, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany S. 1757]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 1757) to provide for the prepayment of a
repayment contract between the United States and the Uintah
Water Conservancy District, and for other purposes, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
PURPOSE
The purpose of S. 1757 is to provide for the prepayment of
a repayment contract between the United States and the Uintah
Water Conservancy District in the State of Utah.
BACKGROUND AND NEED
The Uintah Water Conservancy District operates and
maintains the Vernal and Jensen Units of the Central Utah
Project, which was authorized as part of the Colorado River
Storage Project Act of 1956. The district entered into a
repayment contract dated June 3, 1976, requiring the repayment
of the costs associated with the construction of the Jensen
Unit. In 1992, the contract was amended to reduce the project
water supply from 18,000 acre-feet per year to 2,000 acre-feet
per year. S. 1757 is necessary in order to allow prepayment of
the repayment obligations in the amended contract. According to
the district, prepayment of the contract will substantially
reduce the cost of water to the district. S. 1757 requires
certain conditions to be met, including that the Bureau of
Reclamation must receive the present value of the full amount
that would be due without any early repayment and that the
total repayment must by made by September 30, 2019.
LEGISLATIVE HISTORY
Senator Bennett introduced S. 1757 on October 6, 2009. The
subcommittee on Water and Power held a hearing on S. 1757 on
November 5, 2009. At its business meeting on December 16, 2009,
the Committee on Energy and Natural Resources ordered S. 1757
favorably reported without amendment. On September 29, 2009,
the companion measure, H.R. 2950, sponsored by Representative
Matheson, passed the House by voice vote.
COMMITTEE RECOMMENDATION
The Committee on Energy and Natural Resources, in open
business session on December 16, 2009, by voice vote of a
quorum present, recommends that the Senate pass S. 1757.
SECTION-BY-SECTION ANALYSIS
Section 1 authorizes the Secretary of the Interior to allow
for prepayment of the repayment contract no. 6-05-01-00143
between the United States and the Uintah Water Conservancy
District dated June 3, 1976, as supplemented and amended, under
terms and conditions similar to those used in implementing
section 210 of the Central Utah Project Completion Act (Public
Law 102-575), as amended, and identifies certain additional
conditions that must be met.
COST AND BUDGETARY CONSIDERATIONS
The following estimate of costs of this measure has been
provided by the Congressional Budget Office:
S. 1757--To provide for the prepayment of a repayment contract between
the United States and the Uintah Water Conservancy District,
and for other purposes
S. 1757 would authorize the Uintah Water Conservancy
District in Utah to prepay the net present value of certain
amounts the district owes to the U.S. Treasury for its share of
the cost to build the Jensen Unit of the Central Utah Project.
Under current law, the district is expected to make annual
payments totaling about $5 million over the 2010-2020 period
and about $12 million more after 2020.
Based on information from the Bureau of Reclamation, CBO
estimates that enacting S. 1757 would result in two payments
from the district of about $4 million in 2010 and $6 million in
2016. Following those payments, the district would no longer
make annual payments to the Treasury. The net effect of those
changes would be an increase in offsetting receipts (a credit
against direct spending) totaling $2 million over the 2010-2015
period and $4 million over the 2010-2020 period.\1\ Over the
2010-2037 period the bill would result in a net loss in
offsetting receipts totaling about $7 million. Enacting the
legislation would not affect revenues.
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\1\The time periods for enforcing pay-as-you-go rules under the
current budget resolution are different. CBO estimates that enacting S.
1757 would reduce direct spending by $2 million over the 2010-2014
period and would reduce direct spending by $5 million over the 2010-
2019 period.
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For this estimate, CBO assumes that S. 1757 will be enacted
near the middle of fiscal year 2010. The bill would allow the
district to repay the costs by the end of fiscal year 2019 but
requires payment of costs currently allocated to the project as
well as those expected to be included in the project's final
cost allocation. Based on information from the district, CBO
expects that the district would make one payment after
enactment of the bill for costs already allocated to the
project and another payment in 2016 when the final cost
allocation is expected to be completed. For this estimate, CBO
used its projection of the 30-year Treasury rate for the
discount rate to calculate the district's estimated payment in
2010 (4.68 percent) and in 2016 (5.79 percent).
S. 1757 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.
On September 28, 2009, CBO transmitted a cost estimate for
H.R. 2950, a bill to allow prepayment of certain repayment
contracts between the United States and the Uintah Water
Conservancy District, as ordered reported by the House
Committee on Natural Resources on September 10, 2009. The two
pieces of legislation are the same.
However, CBO's cost estimate for S. 1757 differs from the
estimate prepared for H.R. 2950 because new information from
the Bureau of Reclamation indicates that the final cost
allocation for the Uintah project will not be completed until
2015 instead of 2010, as assumed in the CBO cost estimate for
H.R. 2950.
The CBO staff contact for this estimate is Aurora Swanson.
The estimate was approved by Theresa 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 S. 1757.
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. 1757, as ordered reported.
CONGRESSIONALLY DIRECTED SPENDING
S. 1757, as ordered reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined in rule XLIV of the
Standing Rules of the Senate.
EXECUTIVE COMMUNICATIONS
Statement of Michael L. Connor, Commissioner, Bureau of Reclamation,
Department of the Interior
Madam Chairwoman and members of the Subcommittee, I am Mike
Connor, Commissioner of the Bureau of Reclamation. Thank you
for the opportunity to provide the Department of the Interior's
views on S. 1757. The legislation allows for prepayment of the
current and future repayment contract obligations of the Uintah
Water Conservancy District (District) of the costs allocated to
their municipal and industrial water (M&I) supply on the Jensen
Unit of the Central Utah Project (CUP) and provides that the
prepayment must result in the United States recovering the net
present value of all repayment streams that would have been
payable to the United States if S. 1757 were not enacted. S.
1757 would amend current law to change the date of repayment to
2019 from 2037. The legislation would also allow repayment to
be provided in several installments and requires that the
repayment be adjusted to conform to a final cost allocation.
The Department supports S. 1757.
The District entered into a repayment contract dated June
3, 1976, in which they agreed to repay all reimbursable costs
associated with the Jensen Unit of the CUP. However, pursuant
to Section 203(g) of the Central Utah Project Completion Act of
1992 (P.L. 102-575) the District's contract was amended in 1992
to reduce the project M&I supply under repayment to 2,000 acre-
feet annually and to temporarily fix repayment for this supply
based upon an interim allocation developed for an uncompleted
project. The 1992 contract required the District to repay about
$5.545 million through the year 2037 at the project interest
rate of 3.222% with annual payments of $226,585. The net
present value of the amount remaining from this income stream
starting in 2009 is $4,028,443.\1\
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\1\All net present value figures cited in this testimony were
calculated by discounting the payment stream to the year 2009 using the
rate from 30-year Treasury constant maturities for the week ending
October 9, 2009. The exact net present value will fluctuate based on
the date of the calculation and the Treasury rate.
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However, the costs allocated to the contracted M&I supply,
and the M&I supply available through additional contract
amendments, may be significantly revised in the future upon
project completion and Final Cost Allocation. An additional
currently unallocated cost of $7,419,513 is expected to be
allocated to the contracted 2,000 acre-feet.\2\ These are the
costs that paragraph 3 of S. 1757 requires to be included in
the prepayment. Assuming that the costs allocated to the
contracted 2,000 acre-feet will be increased by $7,419,513 with
the reallocation in 2019, the net present value of the stream
of benefits from this reallocation is $4,924,701. Therefore,
under Reclamation's assumptions, the net present value of the
total stream of benefits anticipated under this contract is
$4,924,701 plus $4,028,443, or $8,953,144. The contracted M&I
amount is $4.1 million and the adjustment amount is $7.4
million. In total non-discounted dollars, the Conservancy
District owes the Federal government $11.6 million.
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\2\This allocation will be subject to revision should there be
additions to the project.
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Under Reclamation law, water districts are not authorized
to prepay their M&I repayment obligation based upon a
discounted value of their remaining annual payments.
This legislation would authorize early repayment by the
Uintah Conservancy District to the Federal government. Because
there is an interest component to the M&I repayment streams to
be repaid early, early repayment without an adjustment for
interest would result in lower overall repayment to the United
States. To keep the United States whole, the Bureau of
Reclamation would collect the present value of the whole amount
that would be due without early repayment. Thus, given
Reclamation's assumptions the present value of the payments
collected under this legislation will be at least $8,953,144,
although the legislation allows some flexibility in the timing
of the repayment and under some scenarios the total amount due
could be higher.
The language in S. 1757 has been amended from the language
contained in an earlier version of this legislation, H.R. 2950.
The amended language clarifies that this legislation requires
that the Federal government be paid what it is owed by the
Conservancy District. Because the United States supports the
goals of providing for early repayment under this contract, and
S. 1757 clearly establishes that early repayment under this
legislation must be of an amount equal to the net present value
of the foregone revenue stream, the Department supports this
legislation.
This concludes my testimony. I will be pleased 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. 1757, as ordered
reported.