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Department of Interior

Recommendations and Actions

DOI12: Create a New Mission for the Bureau of Reclamation

BACKGROUND

The original mission of the Bureau of Reclamation (BOR), to develop water resources and provide for economic development in the West, is almost complete. BOR has completed currently planned capital construction on all major water projects except the central Arizona and Utah projects. It is anticipated that all ongoing construction projects will be completed in the next five to eight years. BOR has federal oversight responsibility for 355 storage dams and reservoirs, 52 hydroelectric power plants, 240 pumping plants, 300 recreation sites, 15,853 miles of canals, and 17,002 miles of drains composing 238 projects.

The projects were constructed either for single- purpose usage, such as irrigation water delivery, or for multiple-purpose usage, such as hydroelectric power, municipal and industrial water deliveries, flood control, recreation, and fish and wildlife purposes. BOR operates and maintains 25 multipurpose projects and shares responsibility with local water districts or agencies for 39 other projects. Local water districts have full responsibility for operation and maintenance of the remaining 174 projects.

The original mission of BOR was amended by passage of the Rehabilitation and Betterment Act (R&B) in 1949; the Distribution System Loan Act in 1955; and the Small Reclamation Projects Act (SRPA) of 1956. Programs established under these acts permit local water users to finance the construction or rehabilitation of water supply and storage systems without obtaining individual project authorization.[Endnote 1] They provide subsidies to irrigators via no-interest loans in addition to those provided by the Department of Agriculture (USDA).

The 1986 amendment to the SRPA program places emphasis on modernization of existing projects and on water and energy conservation, environment enhancement, and water quality improvement. The 1992 Central Valley Project Improvement Act provides significant governance changes in the BOR project and provides guidance and opportunities to engage in a number of new activities, such as facilitating water transfer, strengthening conservation activities, and restoring damaged ecosystems. The Act should serve as a model for reforms to other BOR projects.

Many BOR multipurpose projects provide water for municipal and industrial (M&I) as well as irrigation purposes. The existing program requires BOR to administer contracts and agreements in which interest on facilities serving M&I purposes is collected while those serving irrigation purposes are interest free. Recent Inspector General reports identified changed water use from irrigation to M&I where associated revenues had not been collected.[Endnote 2] Also, delayed collections of revenues on the Central Arizona Project and cost allocation and repayment based on irrigation benefits and power revenues are reducing income to the federal government.

As BOR's traditional construction mission ends, BOR must clarify its proper federal role in water management and devolve secondary support functions to state and local authorities. To do this, BOR developed a strategic plan with 25 elements but did not establish a single, clear mission or establish priorities for implementation of identified elements.[Endnote 3] This plan calls for an in-depth development of each element which could result in an expanded role in water and power operations, water conservation, drought management, project development, energy, investing in rural America, land resources, recreation, and research and technology transfer. This undertaking could result in an expanded role in some areas where a federal presence already exists. This ambitious undertaking would be better focused on environmental restoration and wise use of this nation's water.

Alternatives to continuing with the current strategic plan are transferring all responsibilities to other federal agencies and eliminating BOR or defining a smaller, more focused mission. Eliminating BOR would require legislation to transfer project responsibility to another agency such as the Army Corps of Engineers. Projects which affect only a single state could be devolved to the state or a legal local entity such as an irrigation district. Such an effort could result in opposition from congressional representatives of western states.

Although the traditional BOR construction mission is ending, a significant federal role in water management remains. BOR must assist in defining the federal policy for water management in the West and continuing a role of leadership in installed projects. The future of BOR must foster organizational changes that are flexible and able to respond to climatic conditions and public values. BOR must address environmental issues associated with water use in the installed projects.

ACTIONS

1. By the beginning of fiscal year 1995, BOR should develop a new mission which assumes a leadership role in western water policy and focuses on water management functions.

To assume this role BOR should make its primary mission to increase the flexibility of the existing western water supply infrastructure. Priority should be given to:

--improved water management (water transfers, conservation, more efficient use, pricing incentives, and so on);

--operation and maintenance of the existing multipurpose facilities; and

--environmental restoration and enhancement.

2. BOR should complete construction of approved projects, review personnel needs, and reduce full- time equivalents (FTE) and/or redirect skilled personnel to other DOI priorities.

Approved project construction work could be completed by local districts with agreements with BOR. Reduction in construction personnel should be accomplished by attrition or reassignment to other positions.

3. BOR should develop legislation to sell or transfer title of all distribution and drainage facilities to state or local water user organizational entities (such as irrigation districts).

BOR should continue to collect repayment of BOR's capital investment payback in existing facilities until contract obligations are discharged by water users. Technical assistance to landowners for water management and conservation on irrigated cropland should be provided through USDA authorities.

4. The existing Rehabilitation and Betterment Act and Distribution System Loan Act should be repealed and the SRPA amended to eliminate the provision making irrigation a required project component.

BOR should revise its policies in order to reduce subsidies on SRPA loans. Reductions in subsidies could be in the form of increased interest rates, decreased repayment periods, and/or limited grants in lieu of subsidized loans. The remaining subsidies would be offered as incentives to water users to pursue environmental enhancement and restoration projects.

5. BOR should implement internal controls to ensure the federal government recovers an equitable share of its financing cost for water use transferred from irrigation to municipal and industrial purposes.

BOR should revise its guidelines to ensure that an equitable share of its financing costs are recovered during the repayment period, based on the proportionate water use for irrigation and M&I purposes. BOR should conduct detailed reviews of each project receiving miscellaneous revenue to determine whether current crediting practices are in accordance with applicable legislation.

IMPLICATIONS

The redirection of BOR would provide for continued federal interest in reservoirs which impound 245 million acre-feet of water for 28 million people and about 10 million acres of irrigated lands. However, it would eliminate BOR involvement in single-purpose diversion, water delivery, and water drainage facilities. It would also provide a well-qualified work force in contracting and construction which could address environmental problems.

Savings associated with the sale or transfer of title to single-purpose facilities are minor since the cost of project operations and maintenance are already borne by the water users. However, transfer of title would eliminate the federal responsibility for operational oversight, managing outgrants (i.e., crossing agreements and leases), and future R&B loans. In the short run, additional outlays will be required to comply with the National Environmental Policy Act and for additional legal and other costs associated with transferring title. In the long-term, these additional costs could be more than offset by the savings resulting from the transfer of title.

Western water associations will be concerned about the loss of support to irrigated agriculture and the decrease in major construction projects. This concern will be voiced by the associations and individuals to their congressional delegations. Opposition to proposed legislation should be anticipated.

FISCAL IMPACT

Downsizing BOR will result from completing construction of currently funded water supply development projects and eliminating the traditional civil works program. The anticipated reduction in the construction budget will come from a 4 to 6 percent decrease in personnel by the end of fiscal year 1995, and from a reduction in construction activities (which are contracted out to private firms). Upon adoption of the revised mission in 1995, an additional personnel reduction of 14 percent is anticipated. A 6 percent decrease in personnel in construction activity provides an estimated annual savings of $28 million. A 14 percent reduction, due to change of mission, is estimated to save an additional $59 million annually. Total downsizing savings at the end of the restructuring are estimated at $87 million annually.

BOR could sell or transfer title on single-purpose projects. There are currently 39 projects which could be transferred. If 21 projects are transferred over the next six-year period, estimated transfer costs would be $25 million. These costs should be paid by the receiving government unit. There would be no savings; however, long-term liability to the government would be reduced.

Eliminating the R&B loan program would prevent approval of 11 proposed projects with a cost of $132 million. Seven million dollars was requested for fiscal year 1994 for this loan program. After eliminating the program, current R&B loan applicants could apply for SRPA loans and, therefore, these cost savings have not been included.

Reforming the SRPA loan program could reduce federal subsidies by about 50 percent. The current subsidy averages 44 percent per dollar loaned. Increasing interest rates on the irrigation component from zero to 3 to 5 percent would reduce the subsidy to 15 to 20 percent. Applied to the existing eight proposed loans, a reduction of the subsidy to 20 percent would result in a savings of $13 million.

The total from all three initiatives --reduced construction and new mission, transfer of titles, and reduction of loan subsidies--would result in the savings summarized below.

 
       Budget Authority (BA) and Outlays 
	     (Dollars in Millions) 
 
 Fiscal Year
 
      1994   1995   1996   1997   1998   1999    Total
 
 BA*
	0.0   -8.2     -23.2  -38.3   -52.8  -61.6   -184.1
 
 Outlays
	0.0   -6.4     -20.8  -35.9   -50.5  -60.2   -173.8
 
 Change in FTEs
	0      -93      -344   -595   -837   -983     -983

*Note: There would be an additional $28 million revenue increase due to repayment collections of unauthorized annual credits and monitoring of water use change of irrigation to M&I.[Endnote 4]

ENDNOTES

1. U.S. Department of the Interior (DOI), Bureau of Reclamation, A Review and Evaluation of the Bureau of Reclamation's Loan Program (Washington, D.C., December 1992), pp 1-2.

2. U.S. Department of the Interior, Office of Inspector General, Audit Reports, No. 92-I-887 and No. 92-I-1128 (Washington, D.C., undated).

3. U.S. Department of the Interior, Bureau of Reclamation, A Long Term Framework for Water Resource Management, Development, and Protection (Washington, D.C., June 1992).

4. DOI, Audit Reports.

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