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Idaho Water Users Association

Remarks Delivered By:
Michael L. Connor, Commissioner

Summer Water Law and Resource Issues Seminar
Sun Valley Idaho

June 28, 2011

I guess in this crowd, with its mix of lawyers and water managers, so I guess I get cut a little bit more slack for the fact that I am a lawyer. Usually I try to X out that on bio and focus on the engineering aspect. It holds me in a little better stead with the Reclamation crowd.

The title of my talk, I don't know if we gave this to you all or you gave me the title of my talk, but anyway, it's entitled "Regulatory and Legal Developments." So what I'm going to do is what I usually do, whether it's my staff assigning me a title or others, I'm going to talk about what it is I think you might want to hear. And I can promise you that as part of that, there will be regulatory and legal aspects of it, and hopefully that will fulfill the title.

So I will talk to you a little bit, being the resident Washington, D.C.-type here today, maybe about some of the things that are going on in D.C.; where it is that Interior's agenda is under Secretary Salazar; Reclamation's agenda associated with that as we try and carry out our priorities, as well as address the Secretary's priorities for the overall department; and I'll try and also convey the relevance of that agenda to Idaho. And then hopefully that will not take up all of our allotted time, and we can have enough time for an active Q&A session.

I heard you all worked over the EPA person pretty hard yesterday. So I'll look to similar or better treatment. Better treatment is okay. I'll go with that, too.

So overall, I'd have to say that the Secretary's goal is to balance the conservation mission of the Department of Interior with the ongoing priority of the overall Administration to sustain economic activity and promote job growth in this country. And I think both of those are really key.

We have a very active agenda with respect to renewable energy resources. If you look into our website or are one of the addressees on our newsclips, you can see almost on a weekly basis, if not several times a week, we have something going on in the renewable energy area.

But for Reclamation, a lot of what we want to do and need to do is sustain the economic activity that's developed around our projects and our water supply mission and our power generation mission, too. So I think that's equally as important to keep in the minds of folks, that sustaining economic activity that has grown and prospered as a result of Reclamation's projects is part and parcel of our overall goal.

So in the area of economics, the department released an economic report last week. This is the second we've done. We also did one in December of 2009. And it demonstrates that overall in 2010 the department's activities, programs, et cetera, supported 2.2 million jobs in this country and contributed $363 billion in economic activity. And this is in the recreation/tourism sector of the economy. It's in the energy and renewable development activities, what we're doing in the area of renewable energy development, onshore, offshore, as well as traditional energy development in oil and natural gas and other resources. And then the water, timber, and forage elements of our mission, with respect to Reclamation. Obviously, the water and power generation items are there, as well as permitting processes on public lands and what that entails as far as economic activity.

The Reclamation piece of that overall departmental economic output was the value, the pure value of the water that we deliver, whether it be in the agriculture sector or the energy sector, the power that we generate or the base value of recreational activities we support through our facilities is $19.6 billion. That's what it was calculated out to in 2010. The kind of secondary economic benefits and economic activity that that water, power, recreation supports is estimated to be in this report about $55 billion in economic activity that Reclamation's programs are supporting, and that entailed approximately 416,000 jobs that were supported through our efforts.

So $55 billion, 416,000 jobs for an agency that's in the neighborhood of $1 billion per year as far as the budget is pretty good from my perspective. But it's something that I think we can continue to advocate as an important part of our mission and it's something that we'll continue to build upon.

So overall, I think those numbers and those figures and that diversity of mission just highlights that which is my continuing mantra of our fundamental goals at the Bureau of Reclamation, which is to promote certainty and sustainability with respect to the use of water resources. That certainty and sustainability agenda is critical if we're going to keep supporting the kind of economic activities associated with what we do.

Notwithstanding that, we are in an era today that is pretty starkly different than what I walked into just two years ago from a budget perspective - and that's, as you all know, one of the primary issues being addressed in Washington, D.C. I think it is probably the primary issue that is being addressed with respect to the overall deficit situation in this country, the overall view of federal budgets as we move forward, and the need to address that is the next step of our economic recovery in this country.

Two years ago when I stepped into this position, it was such a drastic time with respect to the economy. And I know there are differing perspectives, but this Administration's perspective was the need to stimulate, to promote job growth activity, to try to invest in priority areas as a way to spur economic development. And from that standpoint, it was managing, from my perspective, large amounts of money that Reclamation hadn't seen before.

So in 2009 and 2010, we had a very robust budget. I think 2010 might have been the largest budget that Reclamation had, because overall our discretionary budget was $1.05 billion that year, and that was on top of the $950 million of stimulus money that Reclamation had.

And I think we made some good decisions, a very diversified set of activities that we supported with the stimulus program in the area of infrastructure rehabilitation; in the area of water supply development projects, which was the primary investment we made -- over $400 million in fundamental investments in water delivery infrastructure; ecosystem restoration, which I think was in the area of about $240 million; and the aging infrastructure rehabilitation, I think we did $165 million.

So those were ways to address some pent-up priorities that had been unable to be addressed through federal resources. And from that standpoint, I think we've made some good inroads into some long-standing needs in the West.

That started to change with respect to those kinds of numbers in 2011. And one thing I would say is that as things have gotten tighter with respect to budgets, I feel incredibly lucky to be working for the folks that I do, starting with Anne Castle, the Assistant Secretary for Water and Science; David Hayes, the Deputy Secretary, who many of you know who has a long history with water resource issues; and then Secretary Salazar, who is a farmer, a rancher, who also has his own long-standing professional history as a natural resources and water lawyer in Colorado. They understand these issues. They are very supportive of the Bureau of Reclamation. They are very supportive as we have tried to, in the midst of declining budgets, advocate for Reclamation's proper role in investment in this budget atmosphere. And so we've been strongly supported. So I think even though what I'm going to tell you now reflects a budget picture that is declining, I can tell you just frankly that it could be a lot worse if we didn't have such strong advocates in the department.

So going from that $950 million stimulus and $1.05 billion budget in 2010 -- that was the enacted level that Congress provided -- if you go to the 2011 budget, which were operating under right now, it was at $1.01 billion budget that came out of the Administration, which reflected, from our perspective, getting back to what I just said about the support within the Administration, we were actually 3 percent up in our budget from the President than we were in 2010 when Congress had significantly increased the 2010 enacted level. But we're about 3.6 percent down from the 2010 enacted level of appropriations.

So once again, that wasn't too bad in the scheme of things, because in the 2011 budget, some agencies started taking major hits, double-digit reductions. And then the 2012 budget came out and that's where we're seeing some very stark and significant reductions.

So the President's budget dipped well below the $1 billion mark. So we were down to $966 million in the discretionary accounts in the President's budget. This was 5 percent below the 2011 budget, and it was 8 percent below the 2010 enacted level.

The House of Representatives, the Energy and Water Subcommittee, put together its version of our bill for 2012, and it recently passed the full Appropriations Committee last week. They took our budget down to $918 million, which is 12.5 percent below where we were in 2010, and that's another 5 percent below the cut we already took in the President's budget in 2012.

So you can see where this is heading. I mention that merely because we do have a very active agenda. We have a lot of water resource issues. They cut across the board in all the areas of water supply, power generation, ecosystem and environmental needs. And we're having to address those increasing number of challenges in a budget environment that needs to be there right now, with respect to decreases across the federal budget. But it's going to collectively make all of our jobs a little bit harder. And that's just the reality of the situation.

I would note, though, in advocating, it's not as if I believe that the Bureau of Reclamation should have an increasing budget while the rest of the federal government is decreasing. But I do note that I think we fit into a fundamental category of power generation, water supply, supporting economic activity that we do have to strategically keep investing in Bureau of Reclamation programs and activities. And I do think that that's critical for the future of the West, and I would just point out that we are less than .1 percent of overall discretionary budget.

So when the budget situation and the debt limit issue get addressed, it's going to be hard to do it just by looking at the Bureau of Reclamation.

So what is our agenda? Notwithstanding the budget picture of where we end up, we've been able to implement a large part of that agenda over the last several years given the resources that we had. And we're going to continue to do that over the next couple of years.

So it's a balanced agenda, as I keep pointing out. And I think that's very important. We're not focused on any one mission area. The water supply mission is incredibly important, the power generation mission as well as the environmental protection issues that we have to address in association with that water delivery and power generation infrastructure.

So I'm going to talk about this in the context of how I presented our budget to the folks on Capitol Hill. And fortunately, I'm out of the season where I had to do three or four hearings in front of committees presenting our budget, which is the least fun aspect of my job. But how I frame the budget when I talk to them will give you an idea, and I'll try to highlight how I think Idaho fits in there.

The first thing I talk about when presenting our budget is our need and continuous priority to address aging infrastructure; 51 percent of our water-related resources in the budget for 2012 is related to our aging infrastructure. That equates to $407 million. That includes our site security programs, our fortification things that we're doing.

It certainly includes our dam safety program, which has hovered in the area of $90 million to $100 million over the last couple years. It's down to $84 million in 2012, primarily because we used some of the stimulus money to invest in Folsom Dam, which has been our high priority for several years in the dam safety area. So we're not cutting back on dam safety. We just got a little bit more flexibility in our budget because of the Recovery Act resources.

It also includes our RAX program, Rehabilitation, Additions and Extraordinary Maintenance. In our 2012 budget, that's to the tune of about $41 million; 25 percent or $10.2 million of that I'm very happy to say was allocated in our budget for the Minidoka spillway replacement project. That had been something that we have been struggling with, both folks locally as well as in our budget of how to fund folks locally to move forward with respect to their ability to bond for their share of the resources. And we were able to budget so that we can get going with that project, and it will be a priority for the next several years.

Also in the area of aging infrastructure, in addition to these base investments that we're trying to make, we're also trying to make use of some new tools that we've got. We've got the new loan authority program that was passed by Congress and signed by President Obama in March 2009, Public Law 111-11. This is the extraordinary maintenance program we have fought for years about whether or not major rehabilitation could be repaid over a multi-year period, as opposed to the year in which the maintenance was done. And finally Congress answered that question for us and we got that new authority.

The Bureau of Reclamation is now putting together its directive and standards to implement a program. And I believe that we will be making an announcement of our first use of that base PL 111-11 authority in the next month or so.

Also, we have the continuing issue about the loan guarantee authority that we've got. It's an ongoing dialogue that we have with the Office of Management and Budget.

For those of you who have been following this, this has been going on since the rural water program bill was passed at the end of 2006, which authorized this loan guarantee program. It's not been favorably worked out so that it could be implemented in a way that will make sense from a budget perspective. We're renewing this conversation with the Office of Management and Budget. That will continue during this budget season, so hopefully we will have some progress being made as we head into the end of the year about how we can use that loan guarantee authority.

A secondary priority that I talk about when presenting our budget is our WaterSMART program, and this is our program that constitutes many different smaller programs. WaterSMART is about expanding and stretching the limited water resources that we have in the West. It's about conservation, efficiency, system optimization.

It's also about not only matching investments on the local level, but smoothing over potential conflicts to yield more water. It's also about understanding the challenges that we face in the future. So our WaterSMART grant program, our water efficiency and energy efficiency grants, are part of WaterSMART. Our Basin Studies Program is part of that, where we are investing with stakeholders in a number of river basins across the West to better analyze the supply and demand imbalances that exist, to look out into the future and see how it might change due to climate change and other means, population increases, environmental needs of the basin, and better plan for the future.

And it's also been a core program that we have used to try to do some of our preliminary climate change assessments West-wide that will inform some of those basin-wide basin study programs.

Once again, I think Idaho has been very active in making use of the WaterSMART set of tools. In 2011, we chose five projects in Idaho to receive our WaterSMART grants to the tune of about $1.55 million. We're going to be investing in WaterSMART projects this year matched up at a minimum 50 percent, in most cases by much more with the local resources that you all have.

Of those five projects, I'm going to say one of them integrates the renewable energy component in addition to water conservation, and two others deal with salmon habitat needs and in-stream flows, as well as the wider conservation needs of the local irrigation district. So I think it's a tool that's being well used in Idaho, and we're happy to keep supporting that.

Also the Basin Studies Program, this is something that's really taken off. In 2009, we initiated three basin studies. In 2010, six more studies, including the Henry's Fork Basin of the Snake River overall system was chosen for a basin study. And that program, once again, is proceeding and that study is preceding using federal resources as well as state and local resources.

So once again, I think these tools are being more widely used, more in demand. And the WaterSMART grant programs, we've typically had anywhere from $18 million in our 2012 budget to $25 million in grants that we just announced. But that only addresses a part of the needs.

We're getting requests for somewhere in the neighborhood of an $80 million to $100 million in grant requests as part of those programs when we to our funding opportunity announcements. So they're in wide demand, and there's a lot of great thinking going on out there on how to improve water management across the West.

And finally, as I noted, WaterSMART is a fundamental aspect of our overall climate change program. In our climate change program, fortunately, I don't have to get into the debate about what to do about climate change, about cap and trade, and everything associated with that.

I think one from Reclamation's perspective and many of the water users across the West, it's more fundamental. Temperatures are rising. We're already seeing changes on the ground with respect to water resources. We're seeing earlier runoff, lower late-season flows. Those things are already taking place, and it's already impacting water management.

Our job, from my perspective, is to better understand those changes, to work with the scientific community to better project how it might play out over the future, and then to work with you all and state water resource officials to figure out how we might have to shift our management strategies in the future to deal with those changes.

Recently we released our first phase report of SECURE Water Act, which was also part of Public Law 11111, which requires us to go out to assess the climate change impacts, what we knew about climate change and what we could project based on the best available science for the eight major river basins.

Most applicable to you, the section on the Columbia River Basin, some of the core findings, and I think all of us will have to grapple with, better understand, take down to a basin-by-basin perspective to really understand how to react and adapt to those changes. Already in the 20th century, there was a 2°F average increase in temperature West -- during the 21st century, the model -- and this is where there's not a lot of disagreement in the modeling across the U.S., there'll be a 6°F to 7°F increase in average temperatures in the Columbia River Basin over the 21st century.

You're in a little different situation than folks in the Southwest. The average annual precipitation is estimated to increase by 4 to 6.2 percent by 2050. That's going to translate to a mean annual runoff increase of 1.2 percent to 3.7 percent by 2050 in the Columbia River. I think this is projected -- but at the same time, because of those increases in temperature, the projection is for a decreased snowpack, higher wintertime runoff, and lower, decreased summer runoff.

And those will be, particularly given flat storage in the Columbia River Basin relative to a system like Colorado River Basin, that is something that is going to impact water users up in the Pacific Northwest that we're going to have to figure out how to deal with.

The third priority that I mention in the budget presentation is ecosystem restoration. Twenty percent to 25 percent of Reclamation's budget goes to ecosystem restoration. This includes our ESA recovery programs, which also includes the $18 million program that we have for the Columbia River and the Snake River; biological opinions, another $9 million that we're investing both in the 2012 budget -- but that's kind of an average number in the Yakima River Basin water enhancement project, which will improve the salmon situation in the river basin.

And I would just say that I talk about ecosystem restoration, environmental protection, river restoration, because I believe it's a fundamental part of Reclamation's mission. It's a fundamental part, because our role is key in addressing the impacts of our projects. It's the right thing to do. It's got a lot of support West-wide from all sectors, about the need to balance water use with healthy rivers in the recreational and commercial fisheries aspects that come associated with that. And quite frankly, if we don't invest a lot of dollars, a lot of resources, time and effort into these ecosystem restoration goals and priorities and needs, then we can't deliver water and we can't generate power in the way we have historically done in the West. And you can see that, you've experienced that at times in the Columbia River Basin.

We're still having disagreements about the current biological opinions and how to move forward with respect to that. We're supporting those biological opinions and investing in them. And we believe that's the right approach from this Administration's standpoint.

But in the California Bay Delta, the situation is highly unresolved as the Endangered Species Act priorities come into conflict with water use priorities right there.

So if we can get ahead of it or if we can stay ahead of it, we can keep addressing the water needs with the certainty and sustainability that we all hope to have.

I would just note as a little bit of an aside, I don't talk about this as a priority of the Bureau of Reclamation, but you've probably heard of America's Great Outdoors Initiative the Obama Administration has been highlighting over the last year.

River restoration is one of the priorities that the Secretary has as part of America's Great Outdoors Initiative. It is a river restoration, greater parks, protecting and conserving the rural landscapes, protecting and increasing access to the federal parklands, and a youth in the outdoors initiative. So those are his five priorities.

And I just mention that because that agenda, America's Great Outdoors and our role, particularly from the river restoration standpoint, has broad bipartisan or nonpartisan support across all sectors. The Secretary recently enlisted about six of us to hit the road with him to go meet with all 50 governors across the country over about a six-week period to discuss America's Great Outdoors, to get the priorities from the states' perspectives.

Some of those meetings were really good. Some of those meetings were about everything but America's Great Outdoors. The Secretary came out and met with Governor Otter here, and he characterized it as one of the highlights of his tour and meetings. They had a lot of common ground that they wanted to move forward with, with respect to different river restoration greenways. I know it's an important part of the priorities for Idaho. And from that standpoint, it just reflects the broad support that exists out there.

And even in tight budget times, working hand-in-hand between the federal government with some of the projects and priorities that are already underway on the ground in Idaho, as well as some other states, is going to be an ongoing priority, certainly for the Secretary.

A fourth area of priority I'll mention is renewable energy. We have an investment agenda we signed and MOU with the Corps of Engineers and the Department of Energy back in March 2010, which we're aggressively implementing to try and develop a way to keep hydropower development on the forefront of what we're trying to accomplish overall as far as the renewable energy agenda.

Recently we, as a result of that MOU, issued a hydropower assessment. We call it a phase 1 report. It was looking at our existing facilities, seeing if we could add new units, do efficiency projects at those existing facilities. The bottom line in this phase 1 report is that we identified about 530 facilities and Kerry McCalman, our power manager, is laughing because I'm stealing his thunder of what he is going to talk about later, but I'll just touch on this.

So 530 facilities. We identified 70 where the economics appear to make sense and warrant further investigation. All told, it's about 225 MW of capacity that we think can be developed at our existing facilities -- 1 billion MWh, 85,000 households. That's a lot of potential out there, and with cost-benefit ratios that are pretty significantly higher at many of those facilities. So they make good economic sense to develop that hydropower resource.

We're going to follow that with a phase 2 report at the end of this year to look at the low head Hydro opportunities. And we're currently going through that assessment and developing that information.

The bottom line of all this is that we wanted to look at our role as facilitators, that we have access to information and some expertise to kind of identify as a threshold matter some opportunities to work with the private sector, develop some clean energy resources, and to move forward in a way that makes sense from an economic perspective for the private sector as well as facilitate our goal and the President's goal of increasing the available renewable energy in this country.

A big priority is supporting tribal nations. I mention that because of our ongoing role here in Idaho. We continue to support the Snake River settlement for the Nez Perce, and continue to support the biological opinion associated with that.

A lot of what we do on river restoration activities are also associated with treaty and tribal treaty rights. We're investing a lot of dollars in that as part of our budget and investing a lot of dollars off-budget, too. I think in our 2012 budget we had $51 million identified for implementing pending water rights settlements from our discretionary funds. Plus we had access to some mandatory funds, budget funds to implement those programs. So that doesn't take away from our core budget to address these other priorities that I talked about.

There are other actions that I know you all are very interested in. I'm getting ready to wrap up here and open myself up to the Q&A section.

I know the R&D, research and development, activities that we're doing associated with invasives is very important to Idaho. Idaho has been in the forefront of trying to deal with those issues, and we want to be very supportive of that.

So overall, I would just hope that this gives you a sense of our priorities and our agenda at the department and at the Bureau of Reclamation and how I think Idaho fits in. I hope that you see that there is some symmetry there between what we're trying to accomplish and what you're trying to accomplish here on the ground.

I would like to note that passed to me yesterday before I left D.C. was at June 17 letter that the Idaho Water Users Association sent to your senators expressing concern about the nomination of Rebecca Wodder to be Assistant Secretary for Fish, Wildlife and Parks. And I would just say that that's one area where we will respectfully disagree. I think she would do a terrific job. I've worked with her on some other matters.

But I don't raise that to raise an area of disagreement. I raise it because I wanted to talk about it. I was very impressed in the letter about your commitment to compromise and consensus as a means to deal with water issues across the West, and I think that's very important. That's certainly my perspective, because I think the long-lasting solutions to some of the water challenges that we need to address in the West require broad support.

So solutions that are from one entity's perspective, one, probably won't get put into place. And even if they do, they'll unravel, and they won't be long-lasting.

So I think your approach and the way that you solve problems and issues in the past in Idaho is certainly a model for the West, and certainly for the ways I want to approach my vision of Reclamation to work with you and be partners in that whole effort.

And I would just contrast that -- and I just throw this out as kind of a little bit of an alarm. I think there is a mood in some quarters on Capitol Hill to use raw political power to solve water issues, and I'm particularly talking about the situations in California. I'm talking about bill H.R. 1837, which I testified about a couple weeks ago.

It had three aspects that really troubled me. It expressly undermined an existing broad settlement in the San Joaquin River Basin, so it undermines an agreement carefully crafted among many diverse stakeholders -- environmentalists, water users, the State of California. And I think that's a dangerous path to take, to be unraveling agreements that have been carefully crafted. We have resources in place right now. We'll have to get more in that agreement.

But I don't think that that's a productive use of Congress's time, to undermine existing agreements.

It also tramples on state sovereignty. It has a broad preemption of state water rights, which I think is very dangerous precedent.

In this situation, it may be warranted from one set of perspectives, but it could easily be done from the other side, from another entity's perspective.

The political power in Washington, D.C., if I've learned nothing else, shifts from left to right. It's constantly evolving.

So it's just a dangerous precedent for whoever is in power, to feel like trampling on state sovereignty in state water law is an appropriate way to address water conflicts in the West.

And finally, they also use outdated science, 20-year-old science to try to implement auditing parameters, ignoring the last 20 years of study in that area. And the continued use of sound science that's been vetted out in a transparent way amongst a diverse array of scientific experts I think is the proper way to make decisions. And I think that's the approach that we will be supportive of going forward.

I mention that because I think that it's a shift in federal water policy that's not appropriate. At the end of the day, I mention it for no reason at all, because it's not going to be enacted in any way, shape or form.

But I also mention it because I don't think that's what's going on in Idaho. I think you all have been doing it right for quite a while. And from that standpoint, the Bureau of Reclamation wants to stand with you and be supportive of your efforts.