Statement of Grayford F. Payne, Deputy Commissioner for Policy, Administration and Budget
U.S. Department of the Interior
Energy and Natural Resources Committee
Subcommittee on Water and Power
South Utah Valley Electric Conveyance Act
June 23, 2011
Madam Chairman and Members of the Subcommittee, I am Grayford Payne, Deputy Commissioner for Policy, Administration and Budget at the Bureau of Reclamation (Reclamation). I am pleased to provide the views of the Department of the Interior (Department) regarding S. 500, legislation authorizing the transfer of the Federal portion of the Strawberry Valley Project Electric Distribution System to the South Utah Valley Electric Service District (District). Reclamation supports the title transfer contemplated by this bill and recommends revisions be made to the bill, which I describe below.
The Strawberry Valley Project (Project) is one of Reclamation's earliest projects, and all Federal obligations associated with the Project are fully repaid. Reclamation developed hydropower generation from the beginning because electricity was required to build the Project. Early in the Project's history, Reclamation transferred the operation and maintenance of most of the Project, including the Power System, to the Strawberry Water Users Association (Association).
The Strawberry Valley Project Power System has three parts: the powerplants are the Generation System, the high-voltage lines running from the powerplants to the substations are the Transmission System, and the low-voltage lines running from the substations to the customers are the Distribution System.
In 1986, the Association spun off the District creating an independent service district with the capability to operate and maintain the Transmission and Distribution Systems. At the same time, the Association proposed selling the Distribution System to the District. Reclamation approved the proposed sale on the condition that the Association not transfer any Federal facilities. At the time, Reclamation required that the sale be limited to those portions of the Distribution System owned by the Association those parts that were not completed as part of the original Strawberry Valley Project; constructed with Strawberry Valley Project revenues; and constructed on Federal lands or interests in lands. The District paid approximately $2.7 million for the non-Federal portions of the Distribution System. Reclamation approved the sale.
In 1986, Reclamation, the Association, and the District believed that most of the Distribution System was non-Federal. Later, it was determined that this was not accurate.
The 1940 Repayment Contract between the United States and the Association states clearly that all additions to the Power System are Federal facilities; little or none of the Distribution System was owned by the Association. The District is chagrined at having paid the Association for facilities it did not receive. The purpose of this Act is to convey to the District what all parties believed the District acquired in 1986.
The Act would likely have little effect on operation of the Strawberry Valley Project. The District would receive fee interest in those Federal lands on which the Distribution System is the only Federal feature. On Federal lands sharing both Distribution System and other Strawberry Valley Project facilities, the legislation grants the District an easement for access to perform maintenance on the Distribution System fixtures. This provision preserves the interest of the United States and the public in the other Strawberry Valley Project facilities. As for the rest of the Project, the organizations would remain responsible for operating and maintaining the Generation System and the Transmission System on behalf of the United States.
Because the Strawberry Valley Project is a paid-out Reclamation project, there is no outstanding repayment obligation associated with it. For this reason, the Act does not require any payment from the District in exchange for title to the Distribution facilities. In addition, the Act eliminates Reclamation's obligations to oversee the maintenance of the Distribution System and to administer the associated lands. The result may be a slight reduction in Reclamation expenditures.
The change in ownership under the bill will be relatively invisible to the public. Because the District has been operating and maintaining the Distribution System for several years, the public will witness a change in ownership but should not experience any change in operation. The Act will eliminate uncertainty about ownership and obligations associated with the Distribution System which will likely lead to more efficient and effective operation of the Distribution System.
The Department recognizes that there are benefits to be achieved by the proposed title transfer and has worked closely and cooperatively with the interested parties. Before the Department can support S. 500, we recommend two revisions: First, Section 3(a), directing that "the Secretary&shall convey and assign" the facilities to be transferred, should be changed to "the Secretary&is authorized to convey and assign", thereby allowing for completion of the necessary public input and scoping pursuant to the National Environmental Policy Act (NEPA). And second, language should be added to state that the District shall hold the United States harmless for any claim arising from the 1986 sale of the Distribution System and from actions under this legislation.
In recent days, we have had discussions with the District about accelerating the NEPA process and making modifications to the legislation to address the concerns described in this testimony. As such, I am confident that we can work with the District, Senator Hatch, Representative Chaffetz, and the Subcommittee to reach our goal of supporting this legislation and transferring title to these facilities in a timely manner. This concludes my written statement. I am pleased to answer any questions.