4 Testimony of Thomas N. Clark, General Manager, Kern County Water Agency, Before the Water and Power Subcommittee of the House of Representatives Resources Committee, June 28, 2003, Tulare, California.

The California legislature established the California Bay-Delta Authority as a new governance structure to oversee the Program and the CALFED agencies. Collectively these agencies have allocated nearly $2 billion for local projects to expand groundwater storage, ensure efficient water use, increase water recycling, stabilize levees and restore ecosystems2. Now in its fourth year of implementation, CALFED claims it is delivering on its promise to break through years of gridlock and litigation by providing a balanced, collaborative approach to the state’s most challenging water issues. However, while fish populations appear to be improving, agricultural and urban water users question whether water supplies are actually becoming more dependable. When CALFED was in its infancy, water users supported the program because they believed the concept of "balance" to be critical to a successful CALFED. Unfortunately, critical water supply storage and conveyance projects have lagged behind environmental restoration efforts, and many water users believe that these necessary infrastructure works may never be completed.

While all of the planning and actions associated with CALFED contemplate an integrated approach toward water management, regulatory agencies continue to adhere to a rigid application of Clean Water Act – driven alternatives analysis. This requires one to view each of the CALFED potential solutions not as an integrated whole, but rather as alternatives, one to the other. As a consequence, the ability to maximize benefits through integrated water management is lost in favor of rigid analyses developed to deal with situations dissimilar to CALFED3.

At its outset, CALFED held out the promise of mutually beneficial improvements in the Sacramento-San Joaquin Delta system as a mechanism for improving the ecosystems of the Delta, water supply and water quality. While many ecosystem improvements have been realized, and scientific understanding of the Delta has improved, these improvements have not been effectively communicated within the federal and state regulatory agencies. This has resulted in delaying scheduled enhancements and improvements to water supply and Delta water quality.

Critics of CALFED believe that the science – supported linkages between completed ecosystem improvements and the scheduled water supply and quality improvements must be effectively communicated to regulatory agencies4. Water users believe that mutually beneficial agreements for the coordination of capacity and storage hold the most immediate promise for improvement in California´s water crisis. CALFED must improve its ability to communicate its policy and science successes to the regulatory agencies that participate in it. Absent that improvement, stakeholders may be forced to pursue their objectives outside its framework.. Finally, CALFED and similar programs must not be allowed to degenerate into an endless series of studies at ever-increasing costs.

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KLAMATH RIVER WATERSHED

In the last 13 years in the Klamath River watershed, biological opinions rendered by the U.S. Fish and Wildlife Service (for two species of sucker fish) and NOAA Fisheries (for coho salmon), have increasingly emphasized the reallocation of Klamath Project (Project) water as the sole means of avoiding jeopardizing these fish. The net result of these restrictions on local water users was fully realized on April 6, 2001, when the U.S. Bureau of Reclamation (Reclamation) announced that – for the first time in Project’s 95-year history - no water would be available from Upper Klamath Lake to supply Project irrigators.

The resulting impacts to the local community were immediate and far-reaching. Thousands of acres of valuable farmland were left without water, which, in addition to harming those property owners, managers, and workers, also imparted an economic "ripple" effect through the broader community. The wildlife benefits provided by those farms – particularly the food provided for area waterfowl – were also lost with the water. The local farming community is still reeling from the April 6, 2001 decision, and severe business losses echoed the hardship endured by farmers and farm employees.

In 2001, congressional representatives serving the Upper Klamath Basin requested that an independent, unbiased peer review be conducted of the science and decision-making that led to the 2001 curtailment. The decision to reallocate stored water originally intended for irrigation purposes to the alleged needs of three fish species protected under the Endangered Species Act (ESA) was questioned by many in the Upper Basin, who felt that their input was ignored, and that relevant observed empirical information was discarded by agency biologists. The National Research Council (NRC) convened a multidisciplinary panel of experts to review the 2001 decision, and to develop long-term recommendations to address the fishery challenges of the Klamath River watershed.

The final 2003 NRC report recommends a watershed-wide approach to species recovery – one that addresses all the stressors to fish – as essential to improving the environment and saving the local economy. The NRC report’s vision is one where increased knowledge, improved management, and cohesive community action will promote recovery of the fishes. In addition to calling for oversight of current federal agency management, the report recommends that the management structure for ecosystem restoration needs to involve local groups and private landowners in the design of restoration activities and investments. The report urges federal management agencies to recognize the nature of incentives in the ESA for private landowners to participate in ecosystem recovery. The report confirms observations of many landowners in the Upper Klamath Basin: the regulatory approach of implementing the ESA, as opposed to the use of incentives that would encourage landowners to promote the welfare of species, is viewed by landowners as more stick than carrot.

Momentum behind such an approach was bolstered by the October 2004 signing of the "Klamath River Watershed Coordination Agreement". The agreement – signed by California Governor Arnold Schwarzenegger, Oregon Governor Ted Kulongoski, and four of President Bush’s cabinet level secretaries – underscores the commitment of these parties to solve the fisheries challenges of the Klamath River on a watershed – wide basis.

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The movement away from focusing on federal actions and towards a more holistic watershed wide-approach to problem solving is a very slow process in the Klamath Basin. The chief advocates of this process –including the Bureau of Reclamation and local water users – are hopeful that such an approach can be achieved and can replicate the success enjoyed via a similar Colorado River process upon which it is modeled, as discussed below.

UPPER COLORADO RIVER BASIN

In the early 1980's there was potential for massive institutional and legal conflict involving protection of habitat for four endangered fish species and continued water development in accordance with Interstate Compacts and State water law in the Upper Colorado River Basin. After four years of negotiation, a Recovery Program was established in 1988 to assist in alleviating those conflicts. Participants in the Program include United States Fish and Wildlife Service, Bureau of Reclamation, Western Area Power Administration, the States of Colorado, Wyoming, and Utah, Upper Basin water users, environmental organizations, and the Colorado River Energy Distributors Association.

The fundamental objectives of the Recovery Program are to recover endangered fish species while water development proceeds. Protection of instream flows for endangered fish species is to be accomplished under State law, thus providing recognition for all other water rights. Approximately 670,000 acre feet of existing and new depletions involving over 200 Endangered Species Act Section 7 consultations have been approved by Fish and Wildlife Service, and no lawsuits have been filed on any consultation conducted under the Recovery Program - all while proceeding in compliance with State law. While the long-term viability of this Program is not certain, its success to date in fostering cooperation instead of litigation validates the continued use of an approach that works within State law.

What lessons can be learned from these and other models for water supply coordination and water resources management?

Former Assistant Interior Secretary Bennett Raley recently addressed this topic in a speech he delivered in Tucson. According to Raley, large-scale multi-disciplinary/multi agency programmatic approaches to resource challenges can provide great opportunities for progress. However, great care must be taken in the formulation and management of programs like this, as there is no "one size that fits all" and each of these approaches have elements of both success and failure. There are, however, several issues that Raley has observed to be common among the various approaches and disparate locations:

1. • There is a growing sense among Western water users, particularly farmers, ranchers, and municipalities that the federal government no longer considers itself accountable for policy and operational decisions which adversely affect the operations of others. Many issues might be addressed more effectively if the regulators had a greater appreciation of the impacts caused by regulatory actions.
2. • There is a need for management of the science that is used in the program. Funds must be managed so that the science is focused on issues that are likely to be priorities for the program instead of being focused on the expertise and interests of the agency scientists that happen to be in place.

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1. • There is a need to manage expectations, both in the formulation and in the implementation stage. For example, the CALFED consensus was formed by essentially promising everyone everything they wanted. Difficult issues were resolved with promises of money. If funds are available in infinite quantities, this is a great approach, and consensus can be achieved. Until very recently, CALFED planning was based on the assumption that all of the previously promised money would in fact be available. However, recent fiscal reality has been traumatic for CALFED, and it remains to be seen whether it will survive in the long term.
2. • A third common element is the struggle to avoid decision paralysis. Without leadership and the identification of specific, realistic goals, these efforts tend to drift off into massive study programs at the expense of doing things on the ground that can actually result in progress.

What role should the federal government play in this area?

Wherever possible, meaningful delegation of decision-making authority and responsibility should be transferred to the local level, with less federal intrusion in basin issues. This philosophy drives the principles that we believe should guide the federal government's role in water resource issues during the 21st century:

1. 1. The overriding goal of federal water policy must be to provide certainty to all water users; agricultural, tribal, municipal, industrial and environmental, who are dependent on commitments made by the government.

1. 2. When water laws and environmental laws conflict, balanced solutions that respect treaty and contractual obligations must be the goal.

1. 3. State laws and institutions must be given deference in issues relating to water resource allocation, use, control and transfer. The best decisions happen at the state and local level.

1. 4. Renewed and continued support for the development of new, environmentally sound, sources of water supply is essential. New water supplies must be developed if we want to solve environmental problems, allow for growth and protect the economic vitality of the West.

The federal government has played a pivotal role in the development and subsequent regulation of water resources in the West over the past century. However, this involvement has grown exponentially over the past several decades through legislative enactments such as the Endangered Species Act and the Clean Water Act. Implementation of these and other laws has challenged traditional notions about continued control of water resources by the States. The increased control exerted by federal agencies through a variety of means has increasingly led to gridlock in the management of water supplies in the West.

The federal role in this area must be re-examined to determine if a reorganization or consolidation of water management agencies would allow processes to move forward and create solutions acceptable to all stakeholders. The roles of federal agencies should be narrowly defined so as to preclude intrusion upon state allocation procedures. Rather than impose objectives for water quality, listed species and land management by fiat, the federal government should actively engage with state governments to integrate those objectives into existing state systems in a manner which does not unnecessarily or unreasonably impact vested rights.

SENATE ENERGY AND NATURAL RESOURCES COMMITTEE

APRIL 2005 WATER CONFERENCE

RESPONSE BY DAN KEPPEN, FAMILY FARM ALLIANCE

TOPIC #2: Role of the Bureau of Reclamation in the 21st Century.

What should the future role of the Bureau of Reclamation be in the West? Should the Bureau undertake water supply or supply augmentation activities which are designed primarily for municipal and industrial purposes, such as the Title XVI Program? Please also include comments on potential financing mechanisms such as grants or loan guarantees. What role should the Bureau play with respect to addressing: the West’s future water needs; drought and flood planning and response; water infrastructure, including dam safety and site security; facility operation and maintenance; rural water needs, including in Indian country; hydroelectric power; recreation; watershed restoration; and water use efficiency?

The Family Farm Alliance strongly supports the focus of the Bureau of Reclamation (Reclamation) on fulfilling its core mission of delivering water and power in accordance with applicable contracts, water rights, interstate compacts, and other requirements of state and federal law. Inherent in this definition of core mission is the need to prioritize the expenditure of federal funds and other resources of the Department of the Interior. Water 2025, so long as it continues to recognize that transfers and the use of market mechanisms must be voluntary and pursuant to state law, provides a strong foundation for defining the role of the Bureau in meeting future water needs of the West.

As is recognized by Secretary Norton’s Water 2025 Initiative, it is imperative that Reclamation provide for the operation, maintenance, and modernization of existing water supply infrastructure. Many Reclamation facilities are approaching the end of or are past the design life of the facilities. In addition, many of these facilities also need to be replaced with modern designs that provide for greater water management efficiency. Sound business practices dictate that this existing infrastructure, and the water supply provided by these facilities, be protected and preserved prior to the dedication of scarce funds to the development of new supplies. With respect to the specific question regarding the role of the Title XVI Program, the Family Farm Alliance observes that many of the existing and potential recipients of these funds are entities that have the financial capacity to fully fund the development of alternative water supplies. The Title XVI Program should not be funded at the expense of taking care of existing infrastructure and protecting important agricultural communities that do not have the same financial capabilities.

The Family Farm Alliance supports the Water 2025 matching grant program, and suggests that it be expanded to provide additional opportunities for the investment in water conservation and efficiency measures. However, because this program is unlikely to meet all

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of the needs for funding the repair and modernization of existing facilities, additional funding mechanisms must be developed. Alternatives include a return to the Small Project Loan Program, or the development of federally backed loan guarantees that will enable water users to access alternative sources of capital in order to repair and modernize existing infrastructure. With respect to financing projects, the historical use of zero interest loans already authorized by Reclamation law still has some merit; especially when it has been conclusively shown that many projects have returned their construction costs to the Treasury many times over from tax revenues directly related to the project benefits. Even in areas of less intensive irrigation and population, benefits from the various projects have more than returned their cost, especially when all of the project benefits, including those not originally authorized and assigned costs, are considered.

Another possibility would be to allow entities with annual repayment obligations to shift those obligations to operation, maintenance and replacement reserve accounts. Although this does have an impact to the return to the Treasury, it could reduce the potential need for future assistance for major rehabilitation. Also, it would seem appropriate for Congress to allow for the capitalization of OM&R. Many of the infrastructure problems on old Reclamation facilities could have already been addressed if capitalization of OM&R had been authorized.

A number of years ago the Family Farm Alliance took the lead in an effort to provide for cost containment and accountability for work by the Bureau of Reclamation that was either funded in advance by water users or subject to repayment obligations. With the cooperation of the Bureau of Reclamation in general, and Jack Garner in particular, great progress was made in this regard. However, given that federal, state, local, and private funds will be scarce, it is imperative that these efforts continue.

Recent events on several fronts that are related to this issue have been a source of concern to the Family Farm Alliance. First, the unfortunate experience with the cost overrun on the Animas-La Plata Project provided a warning signal that additional work was needed to ensure that Reclamation continues to focus on cost containment and accountability for projects funded through the Reclamation Program. Second, a number of our members have dealt with situations where cost estimates for work that would be done by the Bureau of Reclamation were substantially over the cost of having the work done by the local district itself or under contract with private consultants. There appear to be at least two reasons for the divergence in the cost estimates – excess staffing by Reclamation for work, with attendant increases in costs, and the requirement of design standards that are excessive or unjustifiable. Third, the Family Farm Alliance is deeply concerned to hear that at least one district has been forced to use Reclamation staff for design work and was not given the option of doing the work itself or having it performed by qualified consultants. This incident is of great concern because it is contrary to the practice elsewhere in Reclamation, where contractors who are paying for the work have had the option to have the work performed by Reclamation or by qualified consultants.

In light of the fact that neither Reclamation nor water users can afford to waste money through over-staffing or noncompetitive practices, the Family Farm Alliance encourages the Committee to take a very hard look at the policies and practices of Reclamation with regard to

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the involvement of the Reclamation programs located at the Denver Federal Center. The Family Farm Alliance also plans to provide input to the ongoing review of these aspects of Reclamation by the National Academy of Engineering, which appears to be focusing on the question of what capabilities Reclamation should maintain within the agency and what work or functions can and should be performed by others. However, regardless of the outcome of this review, fundamental fairness requires that when a water user is paying for work in advance or through repayment mechanisms, that water user should have the option to have the work executed in the manner that provides the most return for the investment.

These concerns regarding cost containment and accountability do not, in general, implicate the work done at the Regional and Area Reclamation Offices. The Family Farm Alliance is proud of its partnership with Reclamation, and believes that Reclamation has much to be proud of in its service to water users and the public.

RESPONSE BY DAN KEPPEN, FAMILY FARM ALLIANCE

The term "Federal Reserved Water Rights" encompasses a wide range of concepts. The perfection of tribal rights is an ongoing process with significant implications for future planning. The dramatic confluence of drought and growth, leading to diminished supply has led to "a perfect storm". This conjuncture coincides with increased contemplation of transfers and restrictions on irrigated systems. The potential is for disruption to agricultural production and to the health of rural communities. The goal of the federal process should be to verify commitments to irrigators and to maintain a productive balance among all water users and the environment.

Nowhere is the federal government’s failure to honor its commitments to water users more apparent than in the case of its treatment of Indian Tribes. It is clear that additional water storage and delivery facilities are necessary for Tribes to be able to receive and benefit from the federal water rights which are held in trust by the federal government. Notwithstanding this reality, federal agencies have failed to proceed with water projects that are required in order for the federal government to fulfill its trust responsibility. Instead of offering physical solutions, such as emphasizing infrastructure and storage to solve Tribal water rights issues and allocations, the current trend appears to be simply transferring existing rights to the tribes, thus pitting of one interest against another with the federal government as referee. This reallocation approach will exacerbate already inflamed emotions, lead to inevitable litigation, and leave the tribes without water or solutions for years to come.

Everyone agrees that the best relations and the most constructive associations are those that develop between local communities. The federal government can help facilitate discussions between tribes and their respective communities and states. Beyond that – they should stay out of the way.

RESPONSE BY DAN KEPPEN, FAMILY FARM ALLIANCE

Water allocation battles are increasingly being caused because we are forced to make false choices. In most areas of the West, water resources are available and waiting to be developed. However, the policies of the federal government make development of that water nearly impossible. Water wars are being fought throughout the West simply because we have not had the vision to develop new, environmentally sound, sources of water. The following response details the Family Farm Alliance’s position on supply enhancement, new technologies, conservation, and water marketing / transfers.

The retention of existing water supplies and the development of critically needed new supplies are of the utmost importance throughout the West. Supplies are already inadequate for the growing demands, but very few plans exist to develop supplies to meet increasing needs. At the federal level, we are told that the dam-building era is over. This is a short-sighted philosophy. The fact that additional storage and other water development projects are necessary in order to meet anticipated needs is a simple reality, mandated by population and demographic information, which cannot be ignored.

The federal government must adopt a policy of supporting new projects to enhance water supplies while encouraging state and local interests to take the lead in the implementation of those projects.

The existing procedures for developing additional supplies should also be revised to make project approval less burdensome. By the time project applicants approach federal agencies for authorization to construct multi-million dollar projects, they have already invested extensive resources toward analyzing project alternatives to determine which project is best suited to their budgetary constraints. However, current procedure dictates that federal agencies formulate another list of project alternatives which the applicant must assess, comparing potential impacts

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with the preferred alternative. These alternatives often conflict with state law. Opportunities should be explored to expedite this process and reduce the costs to the project applicant.

In addition, the current mitigation procedure for federal agencies should be reviewed to determine the feasibility of clarifying and standardizing mitigation requirements. Currently, requirements for one project become the standard for all subsequent projects. Since no two projects are the same, federal agencies tend to impose increasingly severe mitigation requirements on new projects. The end result is that applicants end up spending tremendous amounts of money for potentially uncertain mitigation.

Another possible solution is the creation of mitigation banking. Under such an approach, applicants faced with excessive mitigation costs would be allowed to pay a reasonable sum per acre to a regional mitigation bank or set aside mitigation lands as a condition to implementation of their project. The federal government should encourage the creation and use of public and private mitigation banks.

Various private entities, academic institutions, and state and federal agencies are engaged in research that could be better coordinated and focused. Recent reports to Congress on potential projects, along with a water desalination research roadmap now under review by the National Research Council, should guide research. Reducing desalination costs, for instance, could enable the cost-effective treatment of brackish groundwater in traditionally water-short areas. In some rural communities and Indian reservations, this salty groundwater is unusable for human consumption, limiting growth and prosperity. Although one alternative is to pipe fresh water from rivers and reservoirs miles away to these water short areas, desalination could offer less expensive and drought-proof alternative while providing reliable and high quality water supplies to these communities1.

One key aspect of desalination operations that requires special emphasis is the management of the solids and salts that remain after clean water is extracted. The federal government should encourage partnerships between academia and the private sector to make the management and disposal of salts a priority.

We believe that the federal government should encourage Western water managers to seek input from, and coordinate with, their counterparts in the petroleum industry, especially relative to developing innovative ways to enhance and utilize tainted groundwater. Opportunities exist to apply techniques used in oil and gas drilling and production – where large quantities of subsurface connate or saline waters are often encountered – to water resources development.

We support the Department of Interior’s intent to facilitate the implementation of desalination and advanced water treatment through improved interagency coordination of research and focused investments to areas most needing planning support. Past collaboration and dissemination of information has led to great technological advances. The Bureau of