Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Duane Smith

Vice-Chairman, Western States Water Council


presented before the

Senate Energy and Natural Resources Committee

regarding S. 895

the Rural Water Supply Act of 2005



Duane A. Smith

Executive Director

Oklahoma Water Resources Board


Western States Water Council



May 11, 2005




Dear Mr. Chairman and Members of the Committee:


            My name is Duane Smith and I am the Executive Director of the Oklahoma Water Resources Board.  I am also testifying as Vice-Chairman of the Western States Water Council, representing the Council.  I have also been authorized to provide this testimony on behalf of the Western Governors’ Association, with which the Council is closely affiliated.  The Council is an organization of representatives appointed by the Governors of eighteen states.  The Council is an advisory body made up of experts in water law and policy, water rights administration, water conservation, water quality and water supply.  Rural water issues are important to our members and states, and we applaud you, Mr. Chairman and those that have cosponsored this bill, as a means to address some of the most pressing needs of water users in the West.  Much of the West is characterized by its aridity, and the current drought highlights the fact that water availability continues to define and circumscribe our economic and environmental well being and quality of life.  This is particularly true in many small rural communities.


            In a letter last year dated July 16, 2004, we commented on S. 2218, S. 1732 and S. 1085, introduced respectively by Chairman Domenici and Senator Bingaman.  We strongly support federal legislation to provide technical and financial assistance for small rural communities. 

We appreciate your efforts in this regard, and hope to see appropriate legislation enacted to create a systematic, integrated approach to investigating, authorizing and constructing projects to meet rural western water demands in close cooperation with State, local and regional entities, as well as tribes.  We hope we can work together to ease the burden and improve the lot of many of our rural citizens struggling to ensure that their water supplies meet minimal standards for public health and safety, and are sufficient to carry them through shortages, such as the current drought. 


May I add here, Mr. Chairman, that we also strongly support enactment of S. 802, the National Drought Preparedness Act of 2005 which would establish a National Drought Council, develop a drought preparedness policy, improve the National Integrated Drought Information System (NIDIS) and establish a Drought Assistance Fund.  The bill would provide small rural communities additional technical and financial assistance.


            Many of the issues we raised in our July 16 letter have been addressed in S. 895, but we would offer a few additional suggestions.  There is one overriding issue that the Congress must still address, and that is the chronic lack of adequate funding for past and present programs designed to achieve a reasonable degree of security for our water supplies, as it relates to quantity and quality, particularly in the West. 


EPA’s 1999 Drinking Water Infrastructure Needs Survey estimated the total national need for a 20-year period to be $150.9 billion, including $74.5 billion for systems serving less than 50,000 people and another $2.2 billion for American Indian and Alaska Native Village Water Systems.  EPA’s September 2002 Gap Analysis and Needs Survey estimated the 20-year funding gap for Drinking Water (capital and operation and maintenance), given current spending levels, to be $263 billion.  The Safe Drinking Water Act Amendments of 1996 authorized Drinking Water SRF appropriations of $9.6 billion, but actual appropriations through Fiscal Year 2001 totaled $4.4 billion.  The House Appropriations Interior Subcommittee approved $850 million for FY2006, on May 4, which is $7 million more than actually appropriated for FY2005.  The Drinking Water SRF is a principal source of federal assistance for many rural communities.       


            Existing authorities and past appropriations are not sufficient to meet the needs of the West and small rural communities, which are facing serious obstacles in securing the resources necessary to ensure an adequate and reliable water supply for their future.  S. 895 could become an important addition to the “tool box” available to rural water users, but the bill provides no new authority, assistance or funding for the construction of projects.  Any future construction assistance would require authorization and the appropriation of funds or application of the new federal loan guarantees.  The authority to provide federal loan guarantees is an important new tool.  However, S. 895 cannot replace adequate appropriations for the current SRF programs, which the Congress and the Administration must continue to support. 


Nor will S. 895 make up for the Congress’ diversion of Reclamation Fund revenues for other unrelated government purposes.  New authority and significant new funding is essential to meeting future western rural water needs.  The Council suggested recently during the Committee’s Water Conference last month that it is past time to consider seriously the use of the unobligated amounts in the Reclamation Fund to support western water supply needs, which would include those of small rural communities. 


            That said, there is much to recommend S. 895.  The draft bill would provide for a general assessment of rural water supply needs, existing programs and any gaps.  This assessment would be undertaken in cooperation with various federal agencies.  It should be noted that there are many existing state programs and information compiled by the states that should not be overlooked as part of any assessment.  Examples from several states are included herein.  The bill provides for project appraisal investigations, feasibility reports and recommendations for construction authority (but no construction authority).  It also requires the Secretary to identify what funding sources are available for a proposed project, and the availability of loan guarantees (authorized under Title II).  The Secretary is also to recommend what grants, loan guarantees or combination of both should be used to provide the federal share of project costs. 


            Various considerations are listed for appraisal and/or feasibility reports, including whether water rights exist to supply the project.  The availability of water rights and conservation measures are considerations specifically listed.  States must have a say in determining the availability of water rights to support project development and actual water delivery, as well as appropriate water conservation measures.  The states are primarily responsible for water allocation, and the Council appreciates the inclusion of language explicitly stating that nothing in the bill is intended to nor shall be construed to affect any state granted water rights.  The bill states: “Nothing in this title preempts or affects State water law or an interstate compact governing water.”  Further, “The Secretary shall comply with State water laws in carrying out this title.”  The same language is included in Title II.


            Numerous other considerations are listed.  The states should have a key role in the development and establishment of guidelines and criteria for determining program eligibility and in selecting project priorities.  There is no apparent provision for establishing priorities among eligible projects in the bill.  Each state has a formula for establishing priorities for allocating SRF money.


            It is important to note that rehabilitation and replacement of existing sub-standard rural water supply systems must be an important part of the program.  Some areas depend on water systems that fail to meet Safe Drinking Water Act standards.  The bill directs the Secretary to recommend whether a project should be authorized (with a minimum 25% non-federal cost share).  It also provides for federal loan guarantees or insurance for up to 90% of project costs.  Project operation, maintenance and replacement costs are to be 100% non-federally financed.  The Secretary is to assess the financial capability of each non-federal entity to pay for its share of various study and construction costs as part of the feasibility report – including whether the non-federal entity has an O&M and replacement plan and necessary rates and fees.  Upgrading and replacing antiquated and inadequate systems may require finding new water supplies, which could entail acquiring adequate water rights and building the necessary infrastructure.  But the bill does not authorize construction of any project.  Further, the bill specifically excludes construction of “major impoundment structures” or projects for “commercial” irrigation or livestock watering, although it addresses opportunities to use low-quality water supplies.  There is no discussion of the use of funds to acquire water rights. 


            The Council believes any program must be implemented in cooperation with other federal and non-federal programs, including coordinating actions with state and local watershed groups.   The needs and resources assessment is to be undertaken in consultation with other federal agencies, but states and other entities are not mentioned.  Appraisal investigations are to be undertaken in consultation and cooperation with appropriate state, tribal, regional and local authorities.  A project feasibility report is to include the extent to which it involves partnerships with other state, local, tribal and federal government entities (which are also to be consulted during the conduct and development of reports).


            Cost sharing and repayment requirements and “capability-to-pay” measures should recognize the potential hardship some rural communities face, and the Secretary should have the flexibility to make appropriate adjustments.  In this regard, the bill is to be commended in providing that the Secretary, in evaluating a proposed project, “shall” consider an entity’s financial capability to pay the capital construction costs and recommend an “appropriate” federal cost share, taking into account a number of listed factors.  In cases of financial hardship, the Secretary may also adjust the federal cost share for feasibility studies. 


            It is also important that non-Federal entities retain title to projects.  Importantly, the bill states: “Nothing...authorizes the transfer of pre-existing facilities or...components of any water system from Federal to private ownership or from private to Federal ownership.”  Title to ownership of new facilities is to be held by the non-federal entity.


            In determining and allocating project costs among beneficiaries, which federal costs are or are not reimbursable should be clearly defined.  Federal oversight or overhead costs, which are beyond the control of non-Federal project sponsors, should be non-reimbursable.  The bill provides that the first $200,000 of the appraisal investigations would be paid by the federal government, with any additional costs shared on a 50%-50% basis.  Further, the Secretary should be allowed to accept appropriate non-Federal in-kind contributions as part of cost-sharing requirements.  The bill provides that the Secretary may accept in-kind services determined to contribute substantially toward the conduct and completion of feasibility studies.


            The balance of this statement underscores the need to address rural water supply needs, and highlights state programs striving to address these needs.


            According to EPA’s 1999 Needs Assessment, approximately 45,000 of the Nation’s 55,000 community water systems serve fewer than 3,300 people.  Regardless of their size and configuration, small water systems face many unique challenges in providing safe drinking

water to consumers.  The substantial capital investments required to rehabilitate, upgrade, or install infrastructure represent one such challenge.  The per-household costs borne by small systems are significantly higher than those of larger systems.  The per-household costs for infrastructure improvements is almost 4-fold higher for small systems than for large systems. Small systems lack the economies of scale that allow larger systems to spread the costs of capital improvements among their many consumers.


            In 1996 and 1997, the Council compiled information on states’ views regarding their water problems for the Western Water Policy Review Advisory Commission – created by this Committee.  One of the questions addressed the problems of rural communities related to water supply, potable water treatment and wastewater treatment.  The results were published in a report, Water in the West Today: A States’ Perspective (February 1997), together with appendices detailing individual state responses.  I would like to summarize some of the findings related to a few states, including my state of Oklahoma.


            There are a number of state and federal programs that provide some type of technical and/or financial assistance to rural communities in Oklahoma.  The primary source of state financing for water and wastewater programs is the Statewide Water Development Revolving Fund (SWDRF).  The state legislature created the SWDRF in 1979 and the state reaffirmed that action by a popular vote in 1984.  The corpus of the SWDRF provides a reserve for bonds issued by the Oklahoma Water Resources Board (OWRB), on behalf of small borrowers, at lower interest rates than they could otherwise obtain.  Interest earned on the SWDRF provides money for emergency grants.  OWRB also administers the Statewide Rural Energy and Water Conservation Program, which is designed to identify and eliminate energy and water losses from rural systems.  The Oklahoma Rural Water Association coordinates leak detection audits, which has found water losses of up to 51%, and helped finance remedial measures.  The Oklahoma Department of Commerce may also provide grants to communities under 50,000 people.  However, these are very small programs compared to the state and federally capitalized Clean Water and Safe Drinking Water revolving funds, which continue to be the largest source of money for meeting rural water needs in Oklahoma.


            In Alaska, reportedly some 40% of rural households lacked safe drinking water and indoor bathrooms.  Water is hauled by hand from a central community spigot, tapping shallow ground water, or walk to and from a nearby river or stream.  Some use an outhouse as a restroom, or many people use a bucket as a toilet and human waste is disposed of directly on the ground outside homes or in unlined sewage pits, allowing wastes to leach into ground water and surface streams – causing public health and safety problems – and contributing to an alarming rate of waterborne disease such as meningitis and Hepatitis A, which is considered endemic in several rural regions.  The state of Alaska provides grants and technical assistance, as well as managerial training to try to help rural communities and utilities meet their public health needs.


            Most of California’s small rural communities rely on ground water, and their existing supplies are often limited by the local hydrogeology – such as low-yield wells tapping fractured rock aquifers or small coastal aquifers affected by seawater intrusion.  They are also threatened by increasing population pressures.  Many of California’s fastest growing counties are located along the Sierra Nevada foothills, and rely on limited water supplies.  Further, the scattered pattern of development also limits their ability to join regional consolidated water and wastewater systems.  The state has historically provided financial assistance in the form of various loans and grants, backed by the sale of general obligation bonds – without significant federal assistance.  In its 2000 Critical Water Shortage Contingency Plan, the Governor’s Advisory Drought Planning Panel singled out the unreliability of small, rural water systems as an issue requiring special attention, noting that “small water users bore the brunt of the actual public health and safety impacts – lack of water for basic domestic, sanitation, and firefighting purposes – felt during recent droughts”.


            Water quantity and water quality problems afflict several rural areas in Colorado.  Drought has accentuated supply problems that are growing with rural populations.  Nitrates and dissolved solids affect surface and ground waters, which are also impacted by naturally occurring uranium, radon, arsenic, salinity and heavy metals.  The Safe Drinking Water Act (SDWA) and its testing and treatment requirements are too costly for many rural communities.  Further, they face an additional financial burden related to replacing aging infrastructure and filtration systems.  Many will not be able to make the improvements needed without assistance.  The state provides technical assistance and provides some loans, grants or a combination of both.


            In Idaho, the drought has highlighted the interconnected nature of the state’s surface and ground water resources, particularly across the Eastern Snake Plain Aquifer.  Ground water pumping is having a serious impact on surface flows, and the state is struggling to balance the impact on rural water supplies and rural economies.  Many supply problems also involve water quality and treatment requirements.  Many rural communities lack the financial resources and technical expertise to address their problems in an acceptable fashion.  There are a number of state programs that provide some planning and financial assistance, including loans and grants.


            Montana faces many challenges in meeting competing demands for consumptive uses and instream flows, particularly during drought, when surface waters are low.  Rural communities with inadequate infrastructure face poor water quality in some areas, and expensive changes to bring their drinking water systems up to SDWA compliance standards.  The costs often exceed the water users’ ability to pay.


            For many rural communities in New Mexico, limited ground water and surface water resources are or will become a problem.  Often the infrastructure necessary to tap distant water supplies is too costly for rural communities.  Two examples are the Eastern New Mexico Pipeline serving communities from Ute Lake, and the proposed Navajo-Gallup pipeline, included in the recent Navajo Water Settlement, to serve both Indian and non-Indian communities.  The state provides some assistance in the form of grants for improving water supply or wastewater treatment facilities, and the state legislature has on occasion directly appropriated money for communities to improve their systems and/or buy water rights.  New Mexico has also received federal assistance from a variety of sources in an attempt to meet its rural water needs, including the needs of a number of Indian tribes and pueblos.  The Bureau of Reclamation has helped in assessing the needs of rural water users in eastern, southwest and northwest New Mexico and is working with state and local water agencies to develop plans to bring renewable surface water supplies to rural areas, including the large Navajo reservation.  The state and federal government are also working together to clean up Superfund sites that threaten wells in a rural area south of Albuquerque.


            Rural communities in North Dakota find it increasingly difficult to comply with Environmental Protection Agency (EPA) drinking water standards for fluoride, nitrates, lead and copper.  Many communities have had to change their treatment processes in order to comply with the Surface Water Treatment Rule and requirements for ground water sources that require they be evaluated to determine if the ground water is directly influenced by surface water.  State resources are limited, and are not sufficient to undertake the projects required to provide adequate and safe drinking water for North Dakota’s rural communities.  The Congress recognized this, and its prior promises in authorizing the Garrison Project, when it created a program to provide municipal and industrial water (in lieu of irrigation) for North Dakota and authorized the Southwest Pipeline Project and Northwest Area Water Supply Project to bring Missouri River water to scores of rural communities.


            In Oregon there are some 800 small community water systems that serve less than 3,300 people, and most of these are in rural areas.  The Oregon Water Resources Department offers limited technical assistance to these communities, which face the duel challenge of growing demands due to an increasing population, while their aging infrastructure can no longer be maintained in a manner to ensure water is delivered efficiently.  Further, rural communities face significant expenses for monitoring and treatment of their water supplies.


            South Dakota has found that the quality of ground water in rural areas typically meets state and federal drinking water requirements, but its high mineral content often makes it undesirable for drinking and other household uses.  With the exception of the Missouri River, finding adequate quantities of both surface and groundwater can be a struggle in many parts of the state.  Most rural communities have limited financial resources or lack the expertise necessary to maintain and improve their infrastructure adequately.  South Dakota provides some help through the state’s dedicated water funding program which awards state grants and loans to small communities.  However, the state relies heavily on federal grants such as EPA’s Drinking Water Revolving Fund grants to capitalize the state’s Drinking Water State Revolving Fund (SRF) Program.  The federal SRF programs are the primary source of funding for many small communities’ water and wastewater needs.


            The Utah Board of Water Resources administers three small revolving loan programs that provide low cost financing for water development and water treatment facilities and technical assistance, including special studies and investigations.  Project sponsors are required to develop and implement a water management and conservation plan.  The Utah Department of Environmental Quality’s Division of Drinking Water also provides some technical and financial assistance to rural communities through its State Drinking Water Program, including limited money for infrastructure repairs and upgrades.  The Rural Water Association of Utah also provides training and other managerial assistance to small water systems.  Often, in rural areas, the operator of the water system may also have to operate the wastewater system and maintain the cemetery, etc.   Since 1972, EPA’s Construction Grants Program and subsequently the Clean Water and Safe Drinking Water SRFs have been invaluable in assisting small rural communities meet minimum public health and safety requirements. 


            Washington State has nearly 20,000 small water systems and the vast majority serve fewer than 15 hookups and generally lack the professional expertise and financial resources to adequately monitor water quality and maintain their systems in compliance with state and federal requirements.  The state has taken some important steps to require operator certification, deny proliferation of small systems where an existing system is viable, and clarify receivership for failing systems.  Still major challenges remain, not the least of which is the current drought that is straining surface and ground water supplies.


            Expensive water supply and treatment facilities are often beyond the reach of many of Wyoming’s small rural communities.  Fortunately, there are many high quality supplies available to small towns.  Unfortunately, federal regulations sometimes force treatment requirements upon communities in a one-size-fits-all fashion.  Many rural communities also lack the resources to employ a full-time system operator, water testing laboratories can be far away and monitoring can be expensive.  Towns are sometimes frustrated when they are required to test for contaminants that are unlikely to be found in their area.  Water and wastewater assistance is available from the Water Development Commission, the Farm Loan Board and Wyoming Association of Rural Water Systems.  These provide technical and some financial assistance, including well-head protection advice on recognizing activities that could potentially put their water supplies at risk.  The Department of Environmental Quality administers the federal SRF grants to help communities build and upgrade treatment facilities.


            I appreciate the opportunity to testify on behalf of the Western Governors’ Association and the Western States Water Council and we hope to be able to work with the Committee as it strives to find ways to assist rural areas meet their growing water demands.