Mr. President, I rise today to speak about the Drought Resiliency and Water Supply Improvement Act, which Senator Cory Gardner (R-CO) introduced today. I am the lead Democratic sponsor on the bill, and Senators Martha McSally (R-AZ) and…
Mr. President, I rise today to speak about the Drought Resiliency and Water Supply Improvement Act, which Senator Cory Gardner (R-CO) introduced today. I am the lead Democratic sponsor on the bill, and Senators Martha McSally (R-AZ) and Kyrsten Sinema (D-AZ) are also original cosponsors.
Drought--increasingly severe and prolonged drought--is a stark reality for California and the West. Climate change presents a triple threat to our water supply:
Higher temperatures causing a dwindling snowpack, increased evaporation and other effects that will reduce our natural storage and runoff. This could decrease flow in the Colorado River by 20% or more by mid-century and as much as 40% by the end of the century.
Longer and more severe droughts, including perhaps as much as an 80% chance of a megadrought of 20 to 50 years' duration in the Colorado Basin during this century.
Although this is more uncertain, the possibility of reduced overall precipitation, perhaps 10-15% less in California's Sierra Nevada mountains within the next 20-30 years.
We must respond to this challenge. The bill we are introducing today does so in three fundamental ways:
It significantly increases funding for an ``all-of-the above'' solution to improve our water supply, including surface and groundwater storage, conveyance, water recycling and desalination;
It reforms the Bureau of Reclamation's outdated project delivery system to more quickly approve and more cost-effectively fund new projects; and
It significantly invests not only in water supply projects, but also in environmental restoration to help imperiled species adapt to climate change as well.
Climate Change and Drought: I would like to say more about the effects of climate change on two critical areas for California: the Sierra Nevada Mountains, and the Colorado River Basin.
Lawrence Berkeley National Laboratory scientists project that climate change will cause a 54 percent drop in the Sierras' snowpack within the next 20 to 40 years and a 79 percent drop by the end of the century. This change alone could be devastating for California, because we absolutely depend on this snowpack. The Sierra snowpack provides 30% of our water supply and is our biggest reservoir. We need to start now to provide substitute ways for storing precipitation in the Sierras, whether through surface storage, groundwater storage, or improved infrastructure to transport floodwaters to the best recharge areas.
This enhanced storage in its many forms will be helpful not only for water users but also to maintain enough cold water for salmon. Cold water reserves are critical to prevent salmon runs from being wiped out during years of devastating droughts.
The outlook for the Colorado Basin is perhaps even more challenging. The Colorado River provides a critical part of the water supply for 19 million people in southern California, but that water supply is diminishing. Already in 2019 the water demands on the Colorado River exceed average inflows to the river by 1.2 million to 1.5 million acre feet each year.
That is a huge gap, and the Drought Contingency Plan that was just negotiated among the 7 Colorado River Basin states represents just the beginning of efforts needed to close even the existing gap. With climate change, far more needs to be done, especially with warmer temperatures and greatly increased evaporation in the Basin and with the considerable odds of a megadrought of 20 to 50 years' duration.
The bill we are introducing today provides the Colorado River Basin States with the tools to begin investing in a wide range of water supply projects to meet this challenge. I believe this bill will be critical for helping reach agreement in the next round of negotiations for Colorado River drought contingency plans due to be completed by 2026.
Funding Authorizations in the Bill: In response to the water supply challenges presented by climate change, the bill we are introducing today significantly increases funding authorizations for a wide variety of water supply and environmental restoration projects.
The proposed legislation builds on and doubles the 5-year funding authorizations in the 2016 Water Infrastructure Improvements for the Nation (WIIN) Act. The bill authorizes the following funding over the next 5 years:
$670 million for surface and groundwater storage projects, and supporting conveyance;
$100 million for water recycling projects; and
$60 million for desalination projects.
In addition, the bill authorizes $140 million for environmental restoration and compliance projects. These projects include forest, meadow and watershed restoration projects with water benefits and projects to help restore threatened and endangered species affected by Bureau of Reclamation water projects.
Low-Interest Loans for Water Supply Projects: The bill creates a new loan program at 30-year Treasury rates (currently about 2.6%) for water supply projects known as the Reclamation Infrastructure Finance and Innovation Act (RIFIA). The loans would use existing criteria under the successful WIFIA program (the Water Infrastructure Finance and Innovation Act).
The Office of Management and the Budget (OMB) has approved loans of $2.3 billion for WIFIA in fiscal year 2018 backed by appropriations of just over 1% of that amount or $25 million in budget authority. OMB was able to approve loans backed by just 1% of the loan amount because there is a virtually non-existent default rate for water projects. Only 4 in a thousand water infrastructure projects default, based on a study conducted by the Fitch credit rating agency.
Given OMB's experience that Federal outlays need only cover 1% of the loan cost for water projects, the $125 million in authorized Federal spending in the draft bill likely could support $12.5 billion in water project lending authority.
Needless to say, $12.5 billion is a meaningful amount of Federal low- interest lending assistance for new water supply projects. And, because RIFIA is limited to no more than 49 percent of total project costs, that same $125 million in RIFIA budget authority will support no less than $25.5 billion in new water infrastructure investments throughout the west.
Need to Improve Reclamation's Project Delivery System: The bill not only increases funding for drought resiliency projects, it expedites their approvals and assists them more cost-effectively, stretching taxpayer dollars further.
The traditional Bureau of Reclamation model for approving and funding new water supply projects has involved the following:
Reclamation studies new projects in detail, which can take a decade or more for major projects:
Once Reclamation's studies are complete, Congress authorizes projects individually, which can take another 3-5 years or more in many cases; and
Congress then funds 100% of the project construction cost over many years of incremental appropriations, with project sponsors paying back the federal government over 50 years at little to no interest.
One can quickly see that this model can end up taking decades to construct significant new water supply projects. This is especially the case given the limitations of Federal budgets and the increasing cost of major projects in recent years. Given the tremendous challenge posed by climate change to Western water supply, we need a nimbler and more responsive model.
Mike Connor, the Deputy Secretary of the Interior during the Obama Administration, testified in support of a new model during an October 8, 2015 hearing before the Senate Committee on Energy and Natural Resources. Deputy Secretary Connor stated:
The traditional Reclamation business model, in which
feasibility studies, consistent with the 1983 Principles and
Guidelines for Water and Related Resources Development, are
first authorized, funded, and submitted to Congress, and then
construction is authorized and funded, does not always
address the needs of project sponsors at the State and local
levels. Moreover, given budget limitations and the
availability of other available financing mechanisms, the
historic federal role in financing water storage projects
through the Bureau of Reclamation must be revisited with a
greater emphasis on non-federal financing.
Changes to Traditional Model: In response to the concerns articulated by Deputy Secretary Connor and others, the bill we are introducing today, building on the WIIN Act, makes five significant changes to the traditional Reclamation model. These changes expedite project approvals and make more cost-effective use of available federal funding.
1) Congressional authorization no longer required:
First, the bill eliminates the need for Congress to authorize individual projects. It can take 3-5 years for projects to get legislatively approved or longer. In fact, zero new water recycling projects have been authorized since 2009 due to the Federal earmark ban.
While Congressional authorizations are no longer required, Congress retains full veto authority over which projects get built through the appropriations process. Unless Congress approves funding for the study and construction of individual projects, Reclamation cannot proceed with them.
The advantage of the appropriations process as an alternative mechanism for Congressional approval is that it occurs every year. So rather than waiting 3-5 years or longer for Congressional approval under the traditional model, Congress decides each year whether or not to fund proposed projects.
2) Non-Federal funding is required upfront:
Second, the bill no longer requires 100% federal funding upfront as was necessary under the traditional Reclamation model. Instead, the bill allows a maximum of 50% Federal funding for Federally-owned projects, and a maximum of 25% federal funding for non-federal projects that are built by States, water districts, or Indian tribes.
Federal dollars can be stretched further by the partnerships with States and water districts that will be fostered under the bill. For example, the proposed expansion of Los Vaqueros Reservoir in California would be funded 50% by the State of California, which has already conditionally awarded funding, in addition to potentially 10-25% by the federal government and the remaining 25-40% by water users.
Multi-partner projects like the Los Vaqueros expansion will frequently have multiple benefits. For example, much of the State and Federal funding for the Los Vaqueros expansion would go to augment the water supply of wildlife refuges that provide essential water for migratory birds on the Pacific flyway. These benefits would complement the project's water supply benefits for many Bay Area water districts.
3) Feasibility studies are expedited:
Third, for the non-Federal projects authorized by the bill, the federal study process would be significantly expedited, and it does so without waiving any environmental protection requirements. The bill makes clear that federal environmental laws must be fully and strictly followed.
Existing law, however, already addresses study procedures in parallel circumstances when the nonfederal entities are building a project and the federal government is only responsible for a minority of the project cost, no more than 25%. In these circumstances, the Federal government can and should expeditiously approve feasibility and other preliminary studies. There is existing precedent for such projects in the guidelines adopted by the Bureau of Reclamation for feasibility studies for water recycling projects under the Title XVI program. Like all the non-federal projects in this bill, these water recycling projects are built by non-federal entities with a maximum 25% federal cost-share.
The bill we are introducing today would direct Reclamation to model its feasibility study standards for all non-federal projects based on the Title XVI example. This will reduce delays in project approval and get these projects built faster.
4) The new loan program is cost-effective:
Fourth, the low-interest loan program created by the bill is an exceptionally cost-effective program. As I mentioned above, OMB has validated that low-interest water project loans need to be backed by Federal appropriations totaling only 1% of the project loan amount.
Federal funding of 1% of the loan amount will typically return 10-25% savings in the repayment cost of the loans for the water districts funding the projects. The total savings can be about 10% for AAA rated districts, and 20-25% for AA-rated districts.
For example, the water users who are supporting the proposed Sites Reservoir in northern California have estimated that the loans authorized by this bill would allow them to pay only $512/acre-foot for water delivered by the project instead of $682/acre-foot. This is a 25% reduction in their costs.
Thus, the Federal government can provide a loan at 1% of the loan amount and save the project sponsors 10-25% of the project cost. That is an exceptionally cost-effective federal investment.
There are at least three significant reasons that the loans are so beneficial for the project sponsors:
The sponsors pay about a 2.6% interest rate on their loans based on today's rates, versus 4% or greater rates for the alternative of municipal bond financing.
The districts would not need to start loan repayments until 5 years after substantial completion of the project, a substantial cost saver.
Loans are for 35 rather than 30 years, lowering annual debt service costs.
Significantly, the loans include all the taxpayer protections from the successful WIFIA and TIFIA (Transportation Infrastructure Finance and Innovation Act) programs. In particular, the RIFIA loans would be limited to 49% of the project cost, and the federal loans would have senior status in the event of any default. These provisions ensure the taxpayer won't be harmed in any default where the project retains at least 50% of its value, which is extremely likely for ratepayer backed water supply projects.
5) Federal grants and loans work together:
Fifth, the combination of low-interest loans and Federal grants of up to 25% of project costs for non-Federal projects can allow water users to make up the difference where the Federal government is no longer funding 100% of project costs up front. Many rural communities, and in particular agricultural communities, are not able to pay 100% of the cost of new water supply projects.
Under the bill we are introducing today, these communities will still have to provide a significant cost-share for improving their water supplies, and new water projects will have to be cost-effective enough to justify that investment. However, the Federal government can help build the best and most effective projects in increasing drought resiliency by providing assistance through both grants and loans.
Environmental Benefits: The longer and more severe droughts coming with climate change will adversely affect not just farms and cities, but also the natural environment. The bill includes provisions to improve species' drought resiliency as well.
The significant funding authorization of $140 million for environmental restoration can be used to benefit many different species, including fish, migratory birds, and forest species. Some of the authorized uses of this funding include:
Improved habitat for salmon, Delta smelt and other fish species adversely affected by the Bureau of Reclamation's water projects;
Additional water for wildlife refuges hosting migratory birds along the Pacific flyway;
Improved stream gauges, monitoring and science to better understand how to restore species and to operate Reclamation water projects with reduced environmental impacts;
Assistance in implementing water-related settlements with State agencies and state water quality laws; and
Forest, meadow and watershed restoration efforts that improve the quality, timing, or other attributes of runoff to reservoirs or groundwater storage facilities.
I want to say a little more about the new authorization for forest, meadow and watershed restoration projects with water benefits. Wildfire and drought are two of our biggest challenges in California, and we need new tools to respond to them.
There are national forest lands and meadows upstream of many reservoirs
in California that are at serious risk of catastrophic fire.
If treatments of these lands restore healthier ecological conditions, it will improve water runoff into the downstream reservoirs and reduce the risk of large sedimentation dumps into the reservoirs from catastrophic fires.
Restoration of these lands may not be a top priority for the Forest Service because that agency's mission does not emphasize water benefits.
The bill being introduced today would authorize the Bureau of Reclamation to contribute a portion of the cost of these projects. The new funding source will in turn make these multi-benefit projects more likely to be implemented.
I believe it is critical that we develop new tools like this one for reducing the risk of catastrophic wildfires, and improving our drought resiliency.
I and the other cosponsors of today's bill are also looking for additional ways to increase the natural environment's resiliency to droughts in our states. We have circulated language for discussion and potential inclusion in the bill that would provide additional funding for ``natural water storage projects.''
These projects would help restore stream and river channels with natural materials like wetlands. Like many other projects prioritized by the bill, these projects could have multiple benefits, including increased groundwater recharge, improved flood protection, and increased floodplain habitat to benefit salmon and other species.
We look forward to receiving comments on ways to prioritize multi- benefit projects like natural water storage projects as we move forward with the bill.
In addition, the bill makes clear that it must be implemented consistently with all federal environmental laws, including the Endangered Species Act, the National Environmental Policy Act, the Clean Water Act and all other environmental laws. All applicable state laws must also be followed.
Offsets: Finally, the bill includes two provisions offsetting the new spending authorizations within it:
It extends the existing WIIN Act provisions allowing water districts to prepay their outstanding capital debts and convert to indefinite length water supply contracts. These provisions are expected to bring in additional revenue within the 10-year scoring window.
It sets up a process to deauthorize inactive water recycling project authorizations.
Conclusion: California is home to more than 40 million people, but our major state-wide water infrastructure hasn't significantly changed in the past 50 years, when we had only 16 million people.
We must modernize the system or we risk becoming a desert state.
I believe that this bill will place California on a long-term path to drought resiliency. Critically, this means putting in place infrastructure to allow our cities, our farmers, and our natural communities to withstand the severe droughts that we are projected to face due to climate change.
I hope my Western colleagues will join me and the others who have introduced this bill, because drought is a serious threat for all of our states. Thank you, Mr. President, and I yield the floor.